As confidentially submitted to the Securities and Exchange Commission on August 9, 2019.
This draft registration statement has not been publicly filed with the Securities and Exchange Commission and all information herein remains strictly confidential.

File No. 001-     

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934

OTIS WORLDWIDE CORPORATION
(Exact name of Registrant as specified in its charter)

Delaware
Otis Worldwide Corporation – 83-3789412
(State or other jurisdiction of
incorporation or organization)
(I.R.S. employer
identification number)
   
 
One Carrier Place
Farmington, Connecticut
06032
(Address of principal executive offices)
(Zip code)

(860) 674-3000
(Registrant’s telephone number, including area code)

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

Title of Each Class
to be so Registered
Name of Each Exchange on which
Each Class is to be Registered
Common Stock, par value $1.00 per share
[         ]

Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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. (Check one):

Large accelerated filer
o
Accelerated filer
o
 
 
 
 
Non-accelerated filer
Smaller reporting company
o
 
 
Emerging growth company
o

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. o

OTIS WORLDWIDE CORPORATION

INFORMATION REQUIRED IN REGISTRATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10

Certain information required to be included herein is incorporated by reference to specifically identified portions of the body of the information statement filed herewith as Exhibit 99.1. None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.

Item 1.Business.

The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements,” “The Separation and Distribution,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business,” “Certain Relationships and Related Party Transactions” and “Where You Can Find More Information.” Those sections are incorporated herein by reference.

Item 1A.Risk Factors.

The information required by this item is contained under the section of the information statement entitled “Risk Factors.” That section is incorporated herein by reference.

Item 2.Financial Information.

The information required by this item is contained under the sections of the information statement entitled “Capitalization,” “Selected Historical Combined Financial Data of Otis,” “Unaudited Pro Forma Combined Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Index to Combined Financial Statements” and the financial statements referenced therein. Those sections are incorporated herein by reference.

Item 3.Properties.

The information required by this item is contained under the section of the information statement entitled “Business.” That section is incorporated herein by reference.

Item 4.Security Ownership of Certain Beneficial Owners and Management.

The information required by this item is contained under the section of the information statement entitled “Security Ownership of Certain Beneficial Owners and Management.” That section is incorporated herein by reference.

Item 5.Directors and Executive Officers.

The information required by this item is contained under the sections of the information statement entitled “Management” and “Directors.” Those sections are incorporated herein by reference.

Item 6.Executive Compensation.

The information required by this item is contained under the sections of the information statement entitled “Director Compensation” and “Executive Compensation.” Those sections are incorporated herein by reference.

Item 7.Certain Relationships and Related Transactions.

The information required by this item is contained under the sections of the information statement entitled “Management,” “Directors” and “Certain Relationships and Related Party Transactions.” Those sections are incorporated herein by reference.

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Item 8.Legal Proceedings.

The information required by this item is contained under the section of the information statement entitled “Business—Legal Proceedings.” That section is incorporated herein by reference.

Item 9.Market Price of, and Dividends on, the Registrant’s Common Equity and Related Shareowner Matters.

The information required by this item is contained under the sections of the information statement entitled “The Separation and Distribution,” “Dividend Policy,” “Capitalization” and “Description of Otis Capital Stock.” Those sections are incorporated herein by reference.

Item 10.Recent Sales of Unregistered Securities.

The information required by this item is contained under the sections of the information statement entitled “Description of Material Indebtedness” and “Description of Otis Capital Stock—Sale of Unregistered Securities.” Those sections are incorporated herein by reference.

Item 11.Description of Registrant’s Securities to be Registered.

The information required by this item is contained under the sections of the information statement entitled “The Separation and Distribution,” “Dividend Policy” and “Description of Otis Capital Stock.” Those sections are incorporated herein by reference.

Item 12.Indemnification of Directors and Officers.

The information required by this item is contained under the section of the information statement entitled “Description of Otis Capital Stock—Charter and Bylaw Provisions.” That section is incorporated herein by reference.

Item 13.Financial Statements and Supplementary Data.

The information required by this item is contained under the section of the information statement entitled “Index to Combined Financial Statements” and the financial statements referenced therein. That section is incorporated herein by reference.

Item 14.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

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Item 15.Financial Statements and Exhibits.
(a)Financial Statements

The information required by this item is contained under the sections of the information statement entitled “Unaudited Pro Forma Combined Financial Information” and “Index to Combined Financial Statements” and the financial statements referenced therein. Those sections are incorporated herein by reference.

(b)Exhibits

The following documents are filed as exhibits hereto:

Exhibit Number
Exhibit Description
2.1
Form of Separation and Distribution Agreement by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation*
2.2
Agreement and Plan of Merger, dated as of June 9, 2019, by and among United Technologies Corporation, Light Merger Sub Corp. and Raytheon Company, incorporated by reference to United Technologies Corporation’s Current Report on Form 8-K (Commission file number 1-812) filed with the SEC on June 10, 2019
3.1
Form of Amended and Restated Certificate of Incorporation of Otis Worldwide Corporation*
3.2
Form of Amended and Restated Bylaws of Otis Worldwide Corporation*
10.1
Form of Transition Services Agreement by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation*
10.2
Form of Tax Matters Agreement by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation*
10.3
Form of Employee Matters Agreement by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation*
10.4
Form of Intellectual Property Agreement by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation*
10.5
Form of Otis Worldwide Corporation Long-Term Incentive Plan*
21.1
List of Subsidiaries*
99.1
Information Statement of Otis Worldwide Corporation, preliminary and subject to completion, dated August 9, 2019
*To be filed by amendment.

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SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

 
OTIS WORLDWIDE CORPORATION
 
 
 
 
 
By:
 
 
 
Name:
Judith F. Marks
 
 
Title:
President and Chief Executive Officer

Date: [      ], 20[   ]

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Exhibit 99.1


[         ], 20[    ]

Dear United Technologies Shareowner:

In November 2018, we announced our plan to separate United Technologies Corporation (“UTC”) into three independent, publicly traded companies: (1) UTC, a preeminent aerospace company comprised of the Collins Aerospace and Pratt & Whitney businesses; (2) Otis Worldwide Corporation (“Otis”), the world’s largest elevator and escalator manufacturing, installation and service company; and (3) Carrier Global Corporation (“Carrier”), a leading global provider of heating, ventilating and air conditioning (HVAC), refrigeration, fire and security solutions. The separation will occur through two spin-offs, pursuant to which we will distribute to UTC shareowners all of the outstanding shares of common stock of Otis and Carrier.

In June 2019, we also entered into a merger agreement with Raytheon Company (“Raytheon”) pursuant to which the UTC aerospace businesses and Raytheon will combine in a merger of equals. Following the completion of the spin-offs of Otis and Carrier and the Raytheon merger, UTC’s common stock will remain outstanding and UTC will be renamed “Raytheon Technologies Corporation.”

I encourage you to read the attached information statement, which describes the Otis spin-off in detail and contains important business and financial information about Otis. The Otis spin-off is expected to create an industry-leading, independent public company with a distinct product and service portfolio and corporate strategy. Otis will have a strong financial profile and greater focus and enhanced operational agility, which will enable Otis to more effectively pursue its own strategic goals and capture opportunities in its industry. As an independent company, Otis will be better positioned to allocate resources and deploy capital consistent with its growth priorities.

For U.S. federal income tax purposes, the Otis spin-off is intended to be generally tax-free to UTC shareowners. No vote of UTC shareowners is required for the distribution of Otis shares in the Otis spin-off.

UTC is making available a separate information statement that will help you understand the Carrier spin-off and how it will affect your post-separation ownership in UTC and Carrier.

We believe the separation provides tremendous opportunities for our businesses as we work to continue to build long-term value. We appreciate your continuing support of UTC and look forward to your future support of Otis.

Sincerely,
   
[                        ]
   
Gregory J. Hayes
Chairman and Chief Executive Officer
United Technologies Corporation

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[         ], 20[    ]

Dear Future Otis Shareowner:

I am excited to welcome you as a future shareowner of Otis Worldwide Corporation (“Otis”).

At Otis, we give people freedom to connect and thrive in a taller, faster and smarter world. Our founder, Elisha Graves Otis, invented the safety brake that made elevators safe for passengers, enabling modern cities to rise to previously unthinkable heights. Today, we continue to build on this legacy of leadership in urban mobility with an objective of sustainable long-term growth in the markets we serve. Our global operations are centered around a core mission—to be a world-class, customer-centric and service-oriented company. In pursuit of our objective, our employees are guided by our commitment to our absolutes: Safety, Ethics and Quality. As an independent, publicly traded company, we believe our enhanced ability to make resource and capital allocation decisions will allow us to execute our key strategies to:

Sustain new equipment growth through continuous innovation;
Accelerate service portfolio growth and customer satisfaction by combining operational and service excellence throughout the product life cycle;
Advance the digitalization of Otis to enhance the passenger experience, while improving productivity; and
Continue to focus and empower our workforce to drive better results for shareowners, customers and employees.

Our ability to execute these strategies successfully will allow Otis to generate superior outcomes for our investors.

We are eager to take this step toward independence recognizing that our history gives us a strong foundation. Otis is already the world’s largest elevator and escalator manufacturing, installation and service company. With more than two million elevators under maintenance, the largest service portfolio of any company in the industry, we are well positioned to sustain profitability through economic cycles. As an industry leader, we seek to continue to take our industry to new heights, raise the bar on safety for the benefit of our employees and the more than two billion passengers who touch our products every day, embrace best-in-class ethical and sustainability standards and attract the best, most diverse talent in the industry. As a customer-centric, service-oriented business, we strive to ensure operational excellence and seek to redefine how quality is measured and customers are served in both our new equipment and services businesses.

We invite you to learn more about Otis by reviewing the enclosed information statement. As we prepare to become an independent, publicly traded company, we look to build upon our iconic brand and legacy, define the future for our industry and give rise to smart, modern cities. We are delighted to have you with us on this journey.

Sincerely,
   
[                     ]
   
Judith F. Marks
President and Chief Executive Officer
Otis Worldwide Corporation

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Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been confidentially submitted to the United States Securities and Exchange Commission under the United States Securities Exchange Act of 1934, as amended.

Preliminary and Subject to Completion, Dated [         ]

INFORMATION STATEMENT

OTIS WORLDWIDE CORPORATION

This information statement is being furnished in connection with the spin-off by United Technologies Corporation (“UTC”) of its wholly owned subsidiary, Otis Worldwide Corporation (“Otis”). To implement the spin-off of Otis from UTC, UTC currently plans to distribute all of the shares of Otis common stock on a pro rata basis to UTC shareowners in a distribution that is intended to qualify as generally tax-free to UTC shareowners for U.S. federal income tax purposes.

For every share of common stock of UTC held of record by you as of the close of business on [      ], 20[   ], which is the record date for the distribution, you will receive [ ] shares of Otis common stock. You will receive cash in lieu of any fractional shares of Otis common stock that you would have received after application of the above ratio. As discussed under “The Separation and Distribution—Trading Between the Record Date and Distribution Date,” if you sell your shares of UTC common stock in the “regular-way” market after the record date and on or before the distribution date, you also will be selling your right to receive shares of Otis common stock in connection with the distribution. We expect the shares of Otis common stock to be distributed by UTC to you at [      ], Eastern Time, on [      ], 20[ ]. We refer to the distribution of Otis common stock as the “distribution” and the date of the distribution as the “distribution date.”

In June 2019, UTC and Raytheon Company (“Raytheon”) entered into an Agreement and Plan of Merger (the “Raytheon merger agreement”), which provides for the combination of the UTC Aerospace Businesses (as defined below) and Raytheon in a merger of equals transaction with Raytheon surviving as a wholly owned subsidiary of UTC. The Raytheon merger is conditioned on, among other things, the consummation of the distribution. However, the distribution is not conditioned on the consummation of the Raytheon merger and, accordingly, the distribution may occur even if the Raytheon merger agreement is terminated or the Raytheon merger will otherwise not be consummated. For more information, see “Certain Relationships and Related Party Transactions—Raytheon Merger Agreement.”

Until the separation occurs, Otis will continue to be a wholly owned subsidiary of UTC. Consequently, subject to UTC’s agreement to consummate the distribution pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement, UTC will have the sole and absolute discretion to determine and change the terms of the separation (or to terminate the separation), including the establishment of the record date for the distribution and the distribution date, as well as to modify the number of outstanding shares of common stock of Otis that it will retain, if any, following the distribution.

UTC shareowners are not required to vote on the distribution. Therefore, you are not being asked for a proxy and you are not required to send a proxy to UTC. You do not need to pay any consideration, exchange or surrender your existing shares of UTC common stock or take any other action to receive your shares of Otis common stock. Separately, a vote of UTC shareowners is required to approve the issuance of UTC common stock to holders of Raytheon common stock in connection with the Raytheon merger. UTC has separately made available to UTC shareowners a registration statement on Form S-4 and a joint proxy statement/prospectus in connection with the vote and the issuance of shares of UTC common stock in the Raytheon merger.

There is no current trading market for Otis common stock, although we expect that a limited market, commonly known as a “when-issued” trading market, will develop on or shortly before the record date for the distribution, and we expect “regular-way” trading of Otis common stock to begin on the first trading day after the distribution is completed. For more information regarding the trading of Otis common stock, see “The Separation and Distribution—Trading Between the Record Date and Distribution Date.” Otis intends to list its common stock on the [      ] under the symbol “[      ].” Following the distribution, UTC will continue to trade on the New York Stock Exchange (the “NYSE”) under the symbol “UTX”; however, if the Raytheon merger is completed, UTC will change its name to Raytheon Technologies Corporation and trade on the NYSE under the symbol “RTX.”

In reviewing this information statement, you should carefully consider the matters described under “Risk Factors.”

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.

This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.

The date of this information statement is [         ].

This information statement was first made available to UTC shareowners on or about [         ].

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Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Presentation of Information

Unless the context otherwise requires:

The information included in this information statement about Otis, including the audited historical combined financial statements of Otis, which primarily comprise the assets and liabilities of UTC’s elevator and escalator manufacturing, installation and service businesses, assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution.
References in this information statement to “Otis,” “we,” “us,” “our,” “our company” and “the company” refer to Otis Worldwide Corporation, a Delaware corporation, and its subsidiaries.
References in this information statement to “Carrier,” refer to Carrier Global Corporation, a Delaware corporation, and its subsidiaries.
References in this information statement to “UTC” refer to United Technologies Corporation, a Delaware corporation, and its consolidated subsidiaries, including the Otis Business and the Carrier Business, prior to completion of the separation, unless the context otherwise requires or unless otherwise specified.
References in this information statement to the “Otis Business” refer to UTC’s Otis operating segment, covering elevator and escalator manufacturing, installation and service businesses.
References in this information statement to the “Carrier Business” refer to UTC’s Carrier operating segment, covering heating, ventilation and air conditioning (“HVAC”), refrigeration, fire and security solutions businesses.
References in this information statement to the “UTC Aerospace Businesses” refer to both UTC’s Pratt & Whitney operating segment, which supplies aircraft engines and aftermarket services for the commercial, military, business jet and general aviation markets, and its Collins Aerospace Systems segment, which provides technologically advanced aerospace products and aftermarket service solutions for aircraft manufacturers, airlines, regional, business and general aviation markets, military, space and undersea operations.

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References in this information statement to the “separation” refer to the separation of the Otis Business and the Carrier Business from UTC’s other businesses and the creation, as a result of the distributions, of an independent, publicly traded company, Otis, and an independent, publicly traded company, Carrier, to hold the assets and liabilities associated with the Otis Business, and the assets and liabilities associated with the Carrier Business, respectively, after the distributions.
References in this information statement to the “distribution” or the “Otis distribution” refer to the distribution of all of Otis’ issued and outstanding shares of common stock to UTC shareowners as of the close of business on the record date for the distribution (which we refer to as the “record date”).
References in this information statement to the “Carrier distribution” refer to the distribution of all of Carrier’s issued and outstanding shares of common stock to UTC shareowners as of the close of business on the record date for such distribution.
References in this information statement to the “distributions” refer to, collectively, the Otis distribution and the Carrier distribution.
References in this information statement to Otis’ per share data assume a distribution ratio of [   ] shares of Otis common stock for every share of UTC common stock.
References in this information statement to Otis’ historical assets, liabilities, products, businesses or activities generally refer to the historical assets, liabilities, products, businesses or activities of the Otis Business as the business was conducted as part of UTC prior to the separation.
References in this information statement to the “separation agreement” refer to the Separation and Distribution Agreement that UTC, Otis and Carrier will enter into to effect the separation and provide a framework for the relationship among UTC, Otis and Carrier after the separation.
References in this information statement to an “IRS ruling” refer to a private letter ruling from the Internal Revenue Service (which we refer to as the “IRS”) regarding certain U.S. federal income tax matters relating to the separation and the distribution.
References in this information statement to the “Raytheon merger agreement” refer to the Agreement and Plan of Merger, dated as of June 9, 2019, by and among UTC, Light Merger Sub Corp. (“Merger Sub”), a wholly owned subsidiary of UTC, and Raytheon, which provides for, among other things and subject to the satisfaction or waiver of specified conditions, the combination of the UTC Aerospace Businesses and Raytheon in a merger of equals transaction through the merger of Merger Sub with and into Raytheon (the “Raytheon merger”), with Raytheon surviving the Raytheon merger as a wholly owned subsidiary of UTC.

Trademarks and Trade Names

Among the trademarks that Otis and its subsidiaries own or have rights to use that appear in this information statement are the names “Compass,” “eCall,” “eView,” “Gen2,” “Otis,” “OTIS ONE,” “OtisLine,” “ReGen,” “SkyBuild,” “SkyRise” and “SuperGroup.” Otis and its subsidiaries’ names, abbreviations thereof, logos and product and service designators are all either the registered or unregistered trademarks or trade names of Otis and its subsidiaries. Names, abbreviations of names, logos and product and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners.

Industry Information

Unless indicated otherwise, the information concerning the industries in which Otis participates contained in this information statement is based on Otis’ general knowledge of and expectations concerning the industry. Otis’ position, share and industry size are based on estimates using publicly available information, Otis’ internal data and estimates, based on data from various industry analyses, our internal research and adjustments and assumptions that we believe to be reasonable. Otis has not independently verified data from publicly available information or industry analyses and cannot guarantee their accuracy or completeness. In addition, Otis believes that data regarding the industry, share and its position within such industry provide general guidance but are inherently imprecise. Further, Otis’ estimates and assumptions involve risks and uncertainties and are subject to change based on various factors, including those discussed in the “Risk Factors” section. These and other factors could cause results to differ materially from those expressed in the estimates and assumptions.

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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

What are Otis and Carrier, and why is UTC separating the Otis Business and the Carrier Business and distributing Otis and Carrier common stock?
Otis and Carrier, which are currently wholly owned subsidiaries of UTC, were formed to own and operate UTC’s Otis Business and Carrier Business, respectively. The separation of Otis and Carrier from UTC is intended, among other things, to better position the management of each of Otis and Carrier to pursue opportunities for long-term growth and profitability unique to each company’s business and to allow each business to more effectively implement its own distinct capital structure and capital allocation strategies. UTC expects that the separation will result in enhanced long-term performance of each of Otis and Carrier for the reasons discussed in “The Separation and Distribution—Reasons for the Separation.”
 
 
 
 
This document relates only to the Otis distribution.
 
 
 
Why am I receiving this document?
UTC is making this document available to you because you are a holder of shares of UTC common stock. If you are a holder of shares of UTC common stock as of the close of business on [          ], 20[    ], the record date, you will be entitled to receive [       ] shares of Otis common stock for every share of UTC common stock that you hold as of the record date. This document will help you understand how the separation and distribution will affect your post-separation ownership in UTC and Otis.
 
 
 
 
UTC is making available a separate information statement that will help you understand the Carrier distribution and how it will affect your post-separation ownership in UTC and Carrier. UTC has also separately made available to UTC shareowners a registration statement on Form S-4 and a joint proxy statement/prospectus in connection with the issuance of UTC common stock to holders of Raytheon common stock in the Raytheon merger and the vote of UTC shareowners to approve such issuance.
 
 
 
How will the separation of Otis and Carrier from UTC work?
As part of the separation, and prior to completion of the Otis distribution or the Carrier distribution, UTC and its subsidiaries expect to complete an internal reorganization (which we refer to as the “internal reorganization”) in order to transfer the Otis Business to Otis, and the Carrier Business to Carrier. To accomplish the separation, UTC will distribute all of the outstanding shares of Otis common stock to UTC shareowners, and will separately distribute all of the outstanding shares of Carrier common stock to UTC shareowners, in each case on a pro rata basis in distributions intended to be generally tax-free for U.S. federal income tax purposes. Following the separation, the number of shares of UTC common stock you own will not change as a result of the separation.
 
 
 
What is the record date for the distribution?
The record date will be [          ], 20[   ].
 
 
 
When will the distribution occur?
We expect that all of the outstanding shares of Otis common stock will be distributed by UTC at [       ], Eastern Time, on [          ], 20[   ], to holders of record of shares of UTC common stock at the close of business on [          ], 20[   ], the record date. We currently

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expect the Carrier distribution to occur on or around the date of the Otis distribution, unless otherwise determined by the UTC Board of Directors in its sole and absolute discretion, but subject to UTC’s agreement to consummate each of the Otis distribution and the Carrier distribution as required pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement. There is no assurance that the Otis distribution and the Carrier distribution will occur on or around the same date or that either distribution will occur at all.
 
 
 
What do shareowners need to do to participate in the distribution?
Shareowners of UTC as of the record date will not be required to take any action to receive Otis common stock in the distribution, but you are urged to read this entire information statement carefully. No shareowner approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing shares of UTC common stock or take any other action to receive your shares of Otis common stock. Please do not send in your UTC stock certificates. The distribution will not affect the number of outstanding shares of UTC common stock or any rights of UTC shareowners, although, as described under “Will the Otis distribution and the Carrier distribution affect the market price of my UTC common stock?”, it will affect the market price of each outstanding share of UTC common stock.
 
 
 
How will shares of Otis common stock be issued?
You will receive shares of Otis common stock through the same channels that you currently use to hold or trade shares of UTC common stock, whether through a brokerage account, 401(k) plan or other channel. Receipt of Otis shares will be documented for you in the same manner that you typically receive shareowner updates, such as monthly broker statements and 401(k) statements.
 
 
 
 
If you own shares of UTC common stock as of the close of business on the record date, including shares held in certificated form, UTC, with the assistance of Computershare Trust Company, N.A., the distribution agent (“Computershare”), will electronically distribute shares of Otis common stock to you or to your brokerage firm on your behalf in book-entry form. Computershare will mail you a book-entry account statement that reflects your shares of Otis common stock, or your bank or brokerage firm will credit your account for the shares.
 
 
 
How many shares of Otis common stock will I receive in the distribution?
UTC will distribute to you on the distribution date [       ] shares of Otis common stock for every share of UTC common stock held by you as of close of business on the record date. Based on approximately [       ] shares of UTC common stock outstanding as of [          ], 20[   ], a total of approximately [       ] shares of Otis common stock will be distributed to UTC’s shareowners. For additional information on the distribution, see “The Separation and Distribution.”
 
 
 
Will Otis issue fractional shares of its common stock in the distribution?
No. Otis will not issue fractional shares of its common stock in the distribution. Fractional shares that UTC shareowners would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent. The net cash proceeds of

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these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those shareowners who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts paid in lieu of fractional shares.
 
 
 
What are the conditions to the distribution?
The distribution is subject to the satisfaction (or waiver by UTC in its sole and absolute discretion) of the following conditions, subject to UTC’s agreement to consummate the Otis distribution pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement:
 
 
 
 
the U.S. Securities and Exchange Commission (the “SEC”) declaring effective the registration statement of which this information statement forms a part and such registration statement not being the subject of any stop order or any legal, administrative, arbitral or other action, suit, investigation, proceeding, indictment or litigation by the SEC seeking a stop order;
 
 
 
 
this information statement having been made available to UTC shareowners;
 
 
 
 
the receipt by UTC and continuing validity of (1) an IRS ruling satisfactory to the UTC Board of Directors and (2) an opinion of outside counsel, satisfactory to the UTC Board of Directors, regarding the qualification of certain elements of the distribution under Section 355 of the Internal Revenue Code of 1986, as amended (the “Code”);
 
 
 
 
the internal reorganization having been completed and the transfer of assets and liabilities of the Otis Business from UTC and its affiliates to Otis and its affiliates and the Carrier Business from UTC and its affiliates to Carrier and its affiliates, and the transfer of assets and liabilities of the UTC Aerospace Businesses from Otis and its affiliates and Carrier and its affiliates to UTC and its affiliates (other than Otis, Carrier and their respective affiliates), as set forth in the separation agreement, having been completed in all material respects;
 
 
 
 
the receipt by the UTC Board of Directors of one or more opinions (which have not been withdrawn or adversely modified) in customary form from one or more nationally recognized valuation or accounting firms or investment banks as to (1) the adequacy of surplus under Delaware law with respect to Otis to effect the distribution from Otis to UTC of certain proceeds from the financing arrangements described under “Description of Material Indebtedness” prior to the effective time of the distribution, and with respect to UTC to effect the distribution, and (2) the solvency of each of UTC and Otis after the completion of the distribution;

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all actions or filings necessary or appropriate under applicable U.S. federal, state or other securities or blue sky laws and the rules and regulations thereunder having been taken and, where applicable, having become effective or been accepted by the applicable governmental entity;
 
 
 
 
the execution of the transition services agreement, the tax matters agreement, the employee matters agreement and the intellectual property agreement contemplated by the separation agreement;
 
 
 
 
no governmental entity of competent jurisdiction having issued or entered any injunction or other decree, order, judgment, writ, stipulation, award or temporary restraining order, and no applicable law having been enacted or promulgated, in each case that (whether temporary or permanent) has the effect of enjoining or otherwise prohibiting the consummation of the separation, the distribution or any of the related transactions;
 
 
 
 
the shares of Otis common stock to be distributed having been approved for listing on the [   ], subject to official notice of distribution;
 
 
 
 
UTC having received certain proceeds from the financing arrangements described under “Description of Material Indebtedness” and being satisfied in its sole and absolute discretion that it will have no liability under such arrangements as of the effective time of the distribution; and
 
 
 
 
no other event or development existing or having occurred that, in the judgment of UTC’s Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and the other related transactions.
 
 
 
 
UTC and Otis cannot assure you that any or all of these conditions will be met, or that the distribution will be consummated even if all of the conditions are met. UTC can decline at any time to go forward with the Otis distribution. However, under the Raytheon merger agreement, UTC has agreed with Raytheon that, subject to the terms and conditions of the Raytheon merger agreement, UTC will consummate the separation and each of the Otis distribution and the Carrier distribution. In addition, the completion of the separation and each of the Otis distribution and the Carrier distribution is a condition to the Raytheon merger under the Raytheon merger agreement. Accordingly, the Raytheon merger will not be completed unless and until the separation and each of the Otis distribution and Carrier distribution are completed.
 
 
 
 
The completion of the Raytheon merger is not a condition to the completion of the Otis distribution and the Carrier distribution. Therefore, UTC may complete the Otis distribution even if the conditions to the Raytheon merger under the Raytheon merger agreement have not been satisfied or waived, the Raytheon merger agreement has been terminated or the Raytheon merger will

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otherwise not be consummated. Additionally, UTC may still go forward with the Otis distribution even if the Carrier distribution does not occur or may go forward with the Carrier distribution even if the Otis distribution does not occur.
 
 
 
 
For a complete discussion of all of the conditions to the distribution, see “The Separation and Distribution—Conditions to the Distribution.”
 
 
 
When is the separation expected to be completed?
The completion and timing of the separation are dependent upon a number of conditions. We expect that the shares of Otis common stock will be distributed by UTC at [       ], Eastern Time, on [          ], 20[  ], to the holders of record of shares of UTC common stock at the close of business on [          ], 20[  ], the record date. We currently expect the Carrier distribution to occur on or around the date of the Otis distribution, unless otherwise determined by the UTC Board of Directors in its sole and absolute discretion, but subject to UTC’s agreement to consummate each of the Otis distribution and the Carrier distribution as required pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement. There is no assurance that the Otis distribution and the Carrier distribution will occur on or around the same date or that either distribution will occur at all.
 
 
 
Can UTC decide to cancel the distribution even if all the conditions have been met?
Yes. Until the distribution has occurred, the UTC Board of Directors has the right to terminate the distribution, even if all of the conditions are satisfied, subject to UTC’s agreement to consummate the distribution pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement.
 
 
 
What if I want to sell my UTC common stock or my Otis common stock?
You should consult with your financial advisors, such as your broker, bank or tax advisor. If you sell your shares of UTC common stock in the “regular-way” market after the record date and on or before the distribution date, you will also be selling your right to receive shares of Otis common stock in connection with the distribution.
 
 
 
What is “regular-way” and “ex-distribution” trading of UTC common stock?
Beginning on or shortly before the record date and continuing up to and through the distribution date, we expect that there will be two markets in UTC common stock: a “regular-way” market and an “ex-distribution” market. UTC common stock that trades in the “regular-way” market will trade with an entitlement to receive shares of Otis common stock pursuant to the distribution. Shares that trade in the “ex-distribution” market will trade without an entitlement to receive Otis common stock pursuant to the distribution. If you decide to sell any shares of UTC common stock before the distribution date, you should make sure your broker, bank or other nominee understands whether you want to sell your UTC common stock with or without your entitlement to Otis common stock pursuant to the distribution. For more information regarding the trading of Otis common stock, see “The Separation and Distribution—Trading Between the Record Date and Distribution Date.”
   
 
Where will I be able to trade shares of Otis common stock?
Otis intends to list its common stock on the [   ] under the symbol “[   ].” Otis expects that trading in shares of its common stock will begin on a “when-issued” basis on or shortly before the record date and will continue up to and through the distribution date, and that “regular-way” trading in Otis common stock will begin on the first

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trading day after the distribution is completed. If trading begins on a “when-issued” basis, you may purchase or sell Otis common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. For more information regarding the trading of Otis common stock, see “The Separation and Distribution—Trading Between the Record Date and Distribution Date.” Otis cannot predict the trading prices for its common stock before, on or after the distribution date.
 
 
 
What will happen to the listing of UTC common stock?
UTC common stock will continue to trade on the NYSE after the distribution. If the Raytheon merger is completed, the symbol under which UTC common stock trades on the NYSE will change from “UTX” to “RTX” effective upon the completion of the Raytheon merger.
 
 
 
Will the number of shares of UTC common stock that I own change as a result of the distribution?
No. The number of shares of UTC common stock that you own will not change as a result of the distribution.
 
 
 
Will the Otis distribution and the Carrier distribution affect the market price of my UTC common stock?
Yes. As a result of the Otis distribution and the Carrier distribution, it is expected that the trading price of shares of UTC common stock immediately following the Otis distribution and the Carrier distribution will be different from the “regular-way” trading price of such shares immediately prior to the distributions because the trading price will no longer reflect the value of the Otis Business and the Carrier Business. There can be no assurance whether the aggregate market value of the UTC common stock, the Otis common stock and the Carrier common stock following the distributions will be the same as or higher or lower than the market value of UTC common stock had the distributions not occurred. This means, for example, that the combined trading prices after the Otis distribution and the Carrier distribution of [      ] shares of Otis common stock, the number of shares of Carrier common stock to be distributed per share of UTC common stock in the Carrier distribution and one share of UTC common stock, may be equal to, greater than or less than the trading price of one share of UTC common stock before the distributions.
 
 
 
What are the material U.S. federal income tax consequences of the separation and the distribution?
The distribution is conditioned on the receipt by UTC and continued validity of (1) an IRS ruling satisfactory to the UTC Board of Directors and (2) an opinion of outside counsel, satisfactory to the UTC Board of Directors, regarding the qualification of certain elements of the distribution under Section 355 of the Code. Accordingly, it is expected that you will not recognize any gain or loss, and no amount will be included in your income, upon your receipt of Otis common stock pursuant to the distribution for U.S. federal income tax purposes. You will, however, recognize gain or loss for U.S. federal income tax purposes with respect to cash received in lieu of a fractional share of Otis common stock. You should consult your own tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local tax laws, as well as foreign tax laws. For more information regarding the material U.S. federal income tax consequences of the distribution, see “Material U.S. Federal Income Tax Consequences.”

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What will Otis’ relationship be with UTC and Carrier following the separation?
After the separation, UTC, Otis and Carrier will be separate companies with separate management teams and separate boards of directors. Otis will enter into a separation agreement with UTC and Carrier to effect the separation and to provide a framework for the relationship among UTC, Otis and Carrier after the separation, and will enter into certain other agreements, including a transition services agreement, a tax matters agreement, an employee matters agreement and an intellectual property agreement. These agreements will allocate among Otis, Carrier and UTC the assets, employees, liabilities and obligations (including, among others, investments, property and employee benefits and tax-related assets and liabilities) of UTC and its subsidiaries attributable to periods prior to, at and after the separation, provide for certain services to be delivered on a transitional basis and govern the relationship among Otis, Carrier and UTC following the separation. These agreements will not be impacted by the completion of the Raytheon merger. For additional information regarding the separation agreement and other transaction agreements, see “Risk Factors—Risks Related to the Distribution” and “Certain Relationships and Related Party Transactions.”
 
 
 
Who will manage Otis after the separation?
Otis will benefit from an experienced management team. Led by Judith F. Marks, who will be Otis’ President and Chief Executive Officer, and Christopher J. Kearney, who will be Otis’ Executive Chairman, Otis’ management team will possess deep industry expertise and include executives who have had significant exposure to other complementary industries, including technology and construction. For more information regarding Otis’ directors and management, see “Directors” and “Management.”
 
 
 
Are there risks associated with owning Otis common stock?
Yes. Ownership of Otis common stock is subject to both general and specific risks relating to Otis’ business, the industry in which it operates, its ongoing contractual relationships with UTC and Carrier and its status as a separate, publicly traded company. Ownership of Otis common stock is also subject to risks relating to the separation. Certain of these risks are described in the “Risk Factors” section of this information statement. We encourage you to read that section carefully.
 
 
 
Does Otis plan to pay dividends?
Following the distribution, we expect that Otis will initially pay a cash dividend on a quarterly basis at an annual rate of $[       ] per share. However, the timing, declaration, amount of, and payment of any dividends will be within the discretion of Otis’ Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by Otis’ Board of Directors. Moreover, if as expected we determine to initially pay a dividend following the distribution, there can be no assurance that we will continue to pay dividends in the same amounts or at all thereafter. See “Dividend Policy.”
   
 
Will Otis incur any debt prior to or at the time of the distribution?
Yes. Otis expects to complete one or more financing transactions before the distribution is completed, with approximately $[       ] of the proceeds of such financings expected to be used to distribute cash to UTC. As a result of such transactions, Otis anticipates having

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approximately $[       ] of indebtedness upon completion of the distribution. On the distribution date, Otis anticipates that the debt will consist of a combination of long-term notes and bank term loans. See “Description of Material Indebtedness” and “Risk Factors.”
 
 
 
Who will be the distribution agent for the distribution and transfer agent and registrar for Otis common stock?
The distribution agent, transfer agent and registrar for the Otis common stock will be Computershare. For questions relating to the transfer or mechanics of the stock distribution, you should contact Computershare toll-free at [       ] or from outside the U.S. at [       ].
 
 
 
Where can I find more information about UTC and Otis?
Before the distribution, if you have any questions relating to UTC or UTC’s business performance, you should contact:
 
 
 
 
United Technologies Corporation
10 Farm Springs Road
Farmington, CT 06032
Attention: Investor Relations Department
Phone: (860) 728-7608
Email: InvRelations@corphq.utc.com
 
 
 
 
After the distribution, Otis shareowners who have any questions relating to Otis or Otis’ business performance should contact Otis at:
 
 
 
 
Otis Worldwide Corporation
One Carrier Place
Farmington, CT 06032
Attention: Investor Relations Department
 
 
 
 
Otis’ investor relations website (www.[          ].com) will be operational on or around [          ], 20[   ]. The Otis website and the information contained therein or connected thereto are not incorporated into this information statement or the registration statement of which this information statement forms a part, or in any other filings with, or any information furnished or submitted to, the SEC.

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INFORMATION STATEMENT SUMMARY

The following is a summary of selected information discussed in this information statement. This summary may not contain all of the details concerning the separation or other information that may be important to you. To better understand the separation and our business and financial position, you should carefully review this entire information statement. Unless the context otherwise requires, the information included in this information statement about Otis, including the combined financial statements, assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution, including the Carrier distribution. Unless the context otherwise requires, or when otherwise specified, references in this information statement to “Otis,” “we,” “us,” “our,” “our company” and “the company” refer to Otis Worldwide Corporation, a Delaware corporation, and its subsidiaries. Unless the context otherwise requires, references in this information statement to “UTC” refer to United Technologies Corporation, a Delaware corporation, and its consolidated subsidiaries, including the Otis Business and the Carrier Business prior to completion of the separation.

Unless the context otherwise requires, or when otherwise specified, references in this information statement to our historical assets, liabilities, products, businesses or activities of our businesses are generally intended to refer to the historical assets, liabilities, products, businesses or activities of the Otis Business of UTC as it was conducted as part of UTC prior to the separation.

Our Company

Otis is the world’s largest elevator and escalator manufacturing, installation and service company. At Otis, we give people freedom to connect and thrive in a taller, faster and smarter world. Our founder, Elisha Graves Otis, invented the safety brake that made elevators safe for passengers, enabling modern cities to rise to previously unthinkable heights. Today, we continue to build on this legacy of leadership in urban mobility with an objective of long-term, sustainable growth. Our global operations are centered around a core mission—to be a world-class, customer-centric and service-oriented company. In pursuit of our objective, our employees are guided by our commitment to our absolutes: Safety, Ethics and Quality.

The Otis brand is recognized across the globe and our products are installed in some of the world’s most recognizable buildings. Our elevators and escalators move more than two billion people every day. We have a network of more than 68,500 employees, including over 1,400 engineers, 4,200 sales employees and 40,000 field technicians. We serve customers in over 200 countries and territories and support over two million maintenance units under contract.

We are a leader in the approximately $74 billion global elevator and escalator industry. We expect the overall industry to grow in line with gross domestic product (“GDP”), with the service-related segment outperforming the rest of the industry. We believe that growth in our industry is supported by favorable trends, including increasing urbanization and continued emergence of global middle classes. We believe that we are well positioned to benefit from these long-term trends as a result of the strength of our brand, our track record for innovation and our global maintenance footprint.

Innovation is a fundamental characteristic of our history and is central to our strategy to address the needs of passengers today and the connected customers and passengers of tomorrow. We have accelerated our investment in innovation, increasing our research and development (“R&D”) spend 46 percent over the last five years. Our focus on innovation stretches beyond traditional R&D with an increased focus on our digital initiatives designed to provide an unmatched user experience to our customers. In support of these efforts, we are adding engineers and computer scientists focused on software, design, data and user interface. We currently hold more than 2,500 active patents globally and have filed approximately 2,500 additional patent applications globally over the last three years. Our R&D centers and factories, including major locations in China, India, France, Spain and the United States, are strategically located close to customers to enable efficient development of engineering solutions and adapt quickly and efficiently to local customer needs and local demographic and construction trends.

For the year ended December 31, 2018, our net sales and our operating profit were approximately
$12.9 billion and $1.8 billion, respectively. Our international operations represented approximately 73 percent of our net sales for the year ended December 31, 2018.

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Our Segments

Our company is organized into two segments—New Equipment and Service, which, for the year ended December 31, 2018, contributed 43 percent and 57 percent of our net sales, and 20 percent and 80 percent of our total segment operating profit, respectively.

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 and commercial buildings and infrastructure projects. We sell our New Equipment units directly to customers, as well as through agents and distributors, in over 200 countries and territories. We have developed a range of elevator and escalator solutions to meet the varying needs and objectives of our diverse customers. In 2018, our New Equipment segment had net sales of $5.6 billion.

Service. Through our Service segment, we perform maintenance and repair services for both our products and those of other manufacturers, and provide modernization services to upgrade elevators and escalators. We have a maintenance portfolio of over two million units globally, which includes Otis equipment manufactured and sold by us, as well as equipment from other original equipment manufacturers. We sell our services, through our network of over 2,700 service sales personnel, directly to customers in all significant elevator and escalator end-segments around the world, including in residential and commercial buildings and infrastructure applications. In 2018, our Service segment had net sales of $7.3 billion.

Our Strengths

We have a number of competitive strengths that support our ability to achieve our objectives, including:

Global market leader with iconic brand. We are an industry leader in the global elevator and escalator market. With over 165 years’ experience in elevator and escalator manufacturing, installation and service, our Otis brand is recognized across the globe and our products are installed in some of the world’s most recognizable buildings, including the Empire State Building, the Eiffel Tower, the Lotte World Tower and the Burj Khalifa, the world’s tallest building. The Otis brand is synonymous with quality, safety and reliability. Our brand recognition and industry reputation for delivering outstanding performance encourage key decision makers, such as property developers, architects, industry consultants and general contractors, to look to Otis when assessing their elevator and escalator needs. The Otis brand is also a key factor in our ability to attract and retain the talented engineers, technicians, sales persons and other employees that help us fulfill our mission on a daily basis.
Industry leading maintenance portfolio generating higher margin recurring service revenues. We have the industry’s largest maintenance portfolio, which includes over two million units globally. We generate higher margin recurring revenues by performing maintenance and repair services and modernization of elevator and escalator units in our portfolio. These services are performed based on contractual relationships with our customers. We believe the recurring nature of our Service revenues provides stability that enables us to invest continuously in growing our business. We also benefit from significant visibility to future revenues. As of December 31, 2018, our Remaining Performance Obligations (“RPO”), which is the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied, was approximately $16.4 billion. We expect approximately 87 percent of the RPO will be recognized as net sales over the following 24 months.
Outstanding long-term relationships with customers and distributors. Our New Equipment and Service segments serve customers in over 200 countries and territories around the world. Otis has global scale and local focus, with over 1,400 branches and offices, and a direct physical presence in approximately 80 countries. Through our broad global footprint and track record of local and personal customer service, we have established stable, long-term relationships with customers across the globe, including with large property owners, developers, general contractors and facility managers, enabling us to secure contracts to supply new equipment, convert new equipment sales into maintenance units, retain our industry-leading maintenance portfolio and serve as the provider of choice to a significant number of repeat customers. Throughout the world, and particularly in China, we have developed and maintain strong, enduring relationships with local distributors, who are key to expanding sales in our New Equipment segment.

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Innovative R&D organization that provides customer-centric solutions. We have been a leader in developing and servicing connected elevators for over 30 years, and we have accumulated considerable expertise in remote diagnostics and maintenance and repair services. We leverage our industry experience, our world class engineering work force of over 1,400 engineers and our significant R&D and digitalization spend to invest in innovation to develop the next generation of connected elevators and escalators using the latest Internet of Things (“IoT”) technology. In particular, we have placed significant focus on enhancing user experience through software, design and user interface engineering and delivering environmentally sustainable solutions that enhance our value proposition and meet customers’ sustainability objectives. We believe our innovation heritage and investment in R&D and digitalization position us well to take advantage of attractive industry trends in IoT technology. We have been increasing the number of engineers focused on software, design and user interface and user experience, and charged them with enhancing innovation initiatives to deliver an unmatched user experience to our customers and the passengers riding our escalators and elevators.
Technically skilled and customer-focused workforce. Our global operations leverage our highly experienced workforce, including over 4,200 sales people and over 40,000 field technicians, consisting of approximately 7,000 New Equipment technicians and 33,000 Service technicians across more than 1,400 branches and offices. Our field technicians are also able to supplement their deep expertise in project execution, troubleshooting and problem solving with the collective knowledge of our remote experts through our proprietary digital platform designed to enable virtual consultations while working at customer sites. Our expertise in predictive and proactive maintenance, along with superior planning and execution of scheduled maintenance, minimizes disruption for customers. We provide consistent and efficient customer-centric service across our global operations and throughout the sales, manufacturing, installation and service cycles through our standard operating procedures applied by our global workforce.
Proven track record of executing complex projects. We have an unmatched track record of executing many of the world’s largest and most complex projects in our field. Recent examples include the new equipment installation of elevators at the Lotte Super Tower in Seoul, Korea, the Wilshire Grand in Los Angeles and 30 Hudson Yards in New York City. We have also provided modernization solutions for popular tourist attractions including the Eiffel Tower, the Empire State Building and the Oriental Pearl Tower, where the complexity of execution was heightened by the need to minimize disruption to these active sites. We estimate that global high-rise and major projects represent an approximately $6 billion annual opportunity for the industry within the New Equipment segment. We believe that our project management expertise will continue to allow us to win additional high-rise and major projects and capitalize on demographic and cultural trends that will result in an expansion in the number of complex projects as cities build up rather than out. Our strength in executing complex projects is supported by our customer-centric approach, innovative technology and ability to quickly deploy experienced resources. Execution and schedule risk are major concerns for customers building high-rises or embarking on major projects, and we have developed solutions to address these concerns. For example, our SkyBuild construction elevator solution grows with a building under construction, giving crews access to the highest completed floor, and, once construction is complete, is transitioned into service as a SkyRise elevator. These solutions provide a competitive advantage in jobs where efficiency and time are important to customers. Our proven ability to deliver on large and complex projects enhances our reputation within the industry and helps us win similar additional projects.
Low capital intensity supports strong cash flow generation. The combination of our profitability, low capital intensity and working capital requirements has contributed to our strong track record of cash flow generation. As a result, we maintain, and expect to continue to maintain, a strong balance sheet and stable capital structure while investing in R&D, sustaining New Equipment growth, growing our Service portfolio, further expanding our digital tools to optimize customer experience and investing in human capital.
Experienced and dynamic global leadership team. Our strategy is driven by an experienced global leadership team and implemented by strong New Equipment and Service teams throughout our operational locations. We have key executives located around the world to enhance our relationships with customers in various locations and increase our ability to provide solutions to specific customer

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needs. Our leadership team includes executives who have deep industry expertise, as well as executives who have had significant exposure to other complementary industries and core competencies, including digital technologies, customer service, operations and construction. This blending of industry experience with fresh perspectives supports our ability to successfully implement Otis’ business strategies and apply best practices from complementary industries.

Our Strategies

Our strategies support achieving our vision to give people the freedom to connect and thrive in a taller, faster and smarter world, and deliver sustainable growth and value to our stakeholders. Our strategies include:

Sustain New Equipment growth. Over the last five-year period, revenues in our New Equipment segment have expanded steadily. We plan to continue providing innovative solutions, smarter designs and intelligent and personalized experiences that will enable Otis to win additional New Equipment business, capitalize on increasing urbanization and fuel our growth. To meet the range of needs of our varying New Equipment customers, we focus on creating solutions for problems that are inherent to specific types of residential or commercial buildings, infrastructure locations or industrial settings. From these differentiated platforms, we can further tailor our offerings to meet unique customer needs. Our strategy includes a focus on customer experience through automating and digitalizing our New Equipment sales process and expanding the digital tools that we and our customers can utilize to improve and streamline our customers’ experience. Through our Sales and Installation Process operating model, which is a proven end-to-end process that starts with the sales prospecting phase and ends at the review of the financial close of the contract, guiding employees through each step, we continue to focus on operational excellence and timely execution from lead generation to manufacturing to installation of our equipment.
Accelerate service portfolio growth. Service is our signature, and we will continue to focus on delivering excellent service to our customers. By expanding our differentiated service offerings and empowering our service teams, we provide a more customized approach to better meet the maintenance and service needs of our diverse customer base. We aim to optimize equipment operation to maximize availability and reliability, and to drive enhanced customer satisfaction by combining operational and service excellence throughout the product life cycle. Our investments in IoT technologies incorporate predictive and proactive tools to expand and differentiate our service offerings and improve customer experience.
Advance the digitalization of Otis. Digitalization at Otis touches every aspect of our business, including products, services and customer-facing and internal workflows designed to enhance the user experience and to improve the productivity of our processes and employees. We are creating a streamlined digital experience for our customers, with tools including integrated solution design, configuration, ordering and project execution tracking. We are also investing in enterprise-wide digital and mobility tools that connect field technicians with applications to help complete service functions, run diagnostics and accelerate parts fulfillment. We are developing our Global Service System (“GSS”) to connect our technicians to a global cloud-based system for information sharing with features to enhance technician safety and improve efficiency in assigning routine service and emergency repair tasks. Our digitalization approach will improve the employee experience by reducing pain points and minimizing non-value added activity, thereby enhancing their ability to better serve customers. GSS will also enable a customer-facing platform where customers can check repair status or request a service call. We have deep experience in connected elevators, remote monitoring and diagnostics, which we plan to utilize to execute our IoT-enabled connectivity initiatives, including OTIS ONE, an IoT-based solution that enables units to communicate an increased range of system health and diagnostic information that we can utilize to improve equipment uptime and enhance customer satisfaction. We are also implementing digital solutions to improve our back-office functions, such as robotic process automation to improve and automate our billing systems. We believe digitalization will help enable additional New Equipment sales and increase the attractiveness of our Service offerings.
Empower the organization and focus on the customer. We have a cohesive organization that starts with the leadership team striving to deliver on commitments. We continue to develop and retain a collaborative and highly engaged workforce that is customer-centric and results-oriented. Through

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long-established programs like Otis University, which brings groups of employees from around the world together for management and technical training and collaboration, we aim to build a high-performance culture that seeks to optimize outcomes for all of our stakeholders. We will continue to invest and focus in our strong, long-term customer relationships around the globe, with a responsive approach that has been a driver of our success. We leverage our global scale by standardizing and automating repetitive tasks and sharing skills and competencies that benefit our global organization. We believe that our commitment to safety, ethics and quality throughout the organization will continue to enhance the value of the Otis brand and help us maintain and expand our customer base.

Summary of Risk Factors

An investment in our company is subject to a number of risks, including risks relating to our business, risks related to the distribution and risks related to our common stock. Set forth below is a high-level summary of some, but not all, of these risks. For a more thorough description of these risks, please read the information in “Risk Factors” included elsewhere in this information statement.

Risks Related to Our Business

We may be affected by global economic, capital market and political conditions in general, and conditions in the construction and infrastructure industries in particular;
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, risks associated with government policies on international trade and investments, including import quotas, capital controls, punitive taxes or tariffs or similar trade barriers, and risks associated with emerging markets;
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;
We design, manufacture, install and service products that incorporate advanced technologies. The introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated;
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;
Failure to maintain a satisfactory credit rating could adversely affect our liquidity, capital position, borrowing costs and access to capital markets;
We may need additional financing in the future to meet our capital needs, and such financing may not be available on favorable terms, if at all, and may be dilutive to existing shareowners;
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 are party to joint ventures and other strategic alliances, which may not be successful and may expose us to special risks and restrictions;
We are subject to litigation, product safety and other legal and compliance risks;
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 cyber-attacks on information technology infrastructure and products and other business disruptions;

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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;
Additional tax expense or additional tax exposures could affect our future profitability; and
We may not realize expected benefits from our cost reduction and restructuring efforts, and our profitability may be hurt or our business otherwise might be adversely affected.

Risks Related to the Distribution

We have no recent history of operating as an independent company, and our historical and pro forma financial information is not necessarily indicative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results;
Following the distribution, our financial profile will change and we will be a smaller, less diversified company than UTC prior to the distribution;
We may not achieve some or all of the expected benefits of the separation and distribution, and the separation and distribution may materially adversely affect our business;
UTC’s plan to separate into three independent, publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business;
The combined market value following the Otis distribution and the Carrier distribution of [   ] shares of Otis common stock, the number of shares of Carrier common stock to be distributed per share of UTC common stock in the Carrier distribution and one share of UTC common stock may not equal or exceed the pre-distribution value of one share of UTC common stock;
We expect to incur both one-time and ongoing material costs as a result of the separation, which could adversely affect our profitability;
In connection with the distribution, we expect to incur debt obligations, and we may incur additional debt obligations in the future, which could adversely affect our business and profitability and our ability to meet other obligations;
After the separation, certain members of management, directors and shareowners may own stock in UTC, Otis and Carrier, and as a result may face actual or potential conflicts of interest;
We could experience temporary interruptions in business operations and incur additional costs as we further develop information technology infrastructure and transition our data to our stand-alone systems;
We may not be able to engage in desirable capital-raising or strategic transactions following the separation;
In connection with the separation into three independent public companies, each of UTC, Otis and Carrier will indemnify the other parties for certain liabilities. If we are required to pay under these indemnities to UTC and/or Carrier, our financial results could be negatively impacted. Also, the UTC or Carrier indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which UTC and Carrier will be allocated responsibility, and UTC and/or Carrier may not be able to satisfy their respective indemnification obligations in the future;
UTC or Carrier may fail to perform under various transaction agreements that will be executed as part of the separation, or we may fail to have the necessary systems and services in place when the transition services agreement expires;
The terms we will receive in our agreements with UTC or Carrier could be less beneficial than the terms we may have otherwise received from unaffiliated third parties;
If the distribution, 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

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acquisitions of our stock or the stock of UTC (including pursuant to the Raytheon merger), we, as well as UTC, Carrier and UTC’s shareowners, could be subject to significant tax liabilities, and in certain circumstances, we could be required to indemnify UTC for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement;

The transfer to us by UTC or Carrier of certain contracts, permits and other assets and rights may require the consents or approvals of, or provide other rights to, third parties and governmental authorities. If such consents or approvals are not obtained, we may not be entitled to the benefit of such contracts, permits and other assets and rights, which could increase our expenses or otherwise harm our business and financial performance;
Until the distribution occurs, the UTC Board of Directors may change the terms of the separation in ways that may be unfavorable to us;
No vote of UTC shareowners is required in connection with the distribution. As a result, if the distribution occurs and you do not want to receive our common stock in the distribution, your sole recourse will be to divest yourself of your UTC common stock prior to the record date or in the “regular-way” trading market during the period prior to the distribution;
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect us;
The allocation of intellectual property rights among us, UTC and Carrier as part of the separation could adversely impact our competitive position and our ability to develop and commercialize certain future products and services; and
Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and results of operations.

Risks Related to Our Common Stock

We cannot be certain that an active trading market for our common stock will develop or will be sustained after the distribution and, following the distribution, our stock price may fluctuate significantly;
A significant number of shares of our common stock may be sold following the distribution, which may cause our stock price to decline;
There may be substantial changes in our shareowner base;
Your percentage of ownership in Otis may be diluted in the future;
We cannot guarantee the timing, amount or payment of dividends on 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 shareowners; and
Our amended and restated certificate of incorporation will 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 shareowners, which could discourage lawsuits against Otis and our directors and officers.

The Separation and Distribution

On November 26, 2018, UTC announced its intention to separate the Otis Business and the Carrier Business from the UTC Aerospace Businesses. The separation will occur through pro rata distributions to UTC shareowners of 100 percent of the shares of common stock of Otis and 100 percent of the shares of common stock of Carrier, which were formed to hold UTC’s Otis Business and Carrier Business, respectively.

On June 9, 2019, UTC entered into the Raytheon merger agreement, which provides for the combination of the UTC Aerospace Businesses and Raytheon in a merger of equals transaction with Raytheon surviving as a wholly owned subsidiary of UTC. Under the Raytheon merger agreement, UTC has agreed with Raytheon that, subject to the terms and conditions of the Raytheon merger agreement, UTC will consummate the separation and

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each of the Otis distribution and the Carrier distribution. In addition, the completion of the separation and each of the Otis distribution and the Carrier distribution is a condition to the Raytheon merger under the Raytheon merger agreement. Accordingly, the Raytheon merger will not be completed unless and until the separation and each of the Otis distribution and the Carrier distribution are completed. The completion of the Raytheon merger is not a condition to the completion of the distributions. Therefore, UTC may complete the distribution even if the conditions to the Raytheon merger under the Raytheon merger agreement have not been satisfied or waived, the Raytheon merger agreement has been terminated or the Raytheon merger will otherwise not be consummated. For more information, see “Certain Relationships and Related Party Transactions—Raytheon Merger Agreement.”

On [          ], 20[    ], the UTC Board of Directors approved the distribution of all of Otis’ issued and outstanding shares of common stock on the basis of [       ] shares of Otis common stock for every share of UTC common stock held as of the close of business on [          ], 20[   ], the record date. We currently expect the Carrier distribution to occur on or around the date of the Otis distribution, unless otherwise determined by the UTC Board of Directors in its sole and absolute discretion, but subject to UTC’s agreement to consummate each of the Otis distribution and the Carrier distribution as required pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement. Though UTC has agreed pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement, that UTC will consummate the separation and each of the Otis distribution and the Carrier distribution, there can be no assurance that the Otis distribution and the Carrier distribution will occur on or around the same date or that either distribution will occur at all. UTC is making available a separate information statement relating to the Carrier distribution that contains important additional information regarding the distribution of common stock of Carrier.

Otis’ Post-Separation Relationship with UTC and Carrier

After the separation, UTC, Otis and Carrier will each be separate companies with separate management teams and separate boards of directors. Prior to the separation, UTC, Otis and Carrier will enter into the separation agreement. We will also enter into various other agreements to effect the separation and to provide a framework for our relationship with UTC and Carrier after the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement and an intellectual property agreement. These agreements will allocate among Otis, Carrier and UTC the assets, liabilities and obligations (including, among others, investments, property and employee benefits and tax-related assets and liabilities) of UTC and its subsidiaries attributable to periods prior to, at and after the separation, provide for certain services to be delivered on a transitional basis and govern the relationship among Otis, Carrier and UTC following the separation. These agreements will not be impacted by the completion of the Raytheon merger. For additional information regarding the separation agreement and other transaction agreements, see “Risk Factors—Risks Related to the Distribution” and “Certain Relationships and Related Party Transactions.”

Reasons for the Separation

The UTC Board of Directors believes that the separation of UTC into three independent, publicly traded companies through the separation of its Otis Business and Carrier Business from UTC is in the best interests of UTC and its shareowners for a number of reasons (irrespective of whether or not the Raytheon merger is completed), including:

Greater Focus and Enhanced Operational Agility. The separation will permit each company to more effectively focus on pursuing its own distinct operating priorities and strategies for long-term growth and profitability, and will better position the management teams of each company to focus on strengthening its core businesses. Maintaining a sharper focus on its core businesses and growth opportunities will allow each company to respond better and more quickly to developments in its industry and to customer demands. In addition, the separation is expected to enhance operational agility of the separated companies, which will lead to improved operating discipline and help drive better results.
Strong Financial Profile of Each Company on a Stand-alone Basis. Each of UTC, Otis and Carrier has established itself as a global leader with the scale to be both self-sufficient and to sustain investment through economic cycles. In addition, each of the companies is expected to have an investment grade credit rating and strong financial characteristics to independently drive growth and investment.

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Separate Capital Structures and Allocation Flexibility. The separation will permit each company to allocate its financial resources to meet the unique needs of its own businesses, which will allow each company to intensify its focus on its distinct strategic priorities and individual business risk and return profiles. The separation will also allow each company to more flexibly pursue its own distinct capital structure, capital allocation strategy and capital return policy. In addition, after the separation, the Otis Business will no longer need to compete within UTC with the UTC Aerospace Businesses and the Carrier Business for capital and other corporate resources.
Creation of Independent Equity Currencies and Increased Strategic Opportunities. The separation will afford Otis and Carrier the ability to offer their independent equity securities to the capital markets and enable each stand-alone business to use its own industry-focused stock to pursue portfolio enhancing acquisitions or other strategic opportunities that are more closely aligned with each company’s strategic goals and expected growth opportunities.
Alignment of Management Incentives with Performance. The separation will allow each company to more effectively recruit, retain and motivate employees through the use of stock-based compensation that more closely reflects and aligns management and employee incentives with specific growth objectives, financial goals and business attributes. Following the separation, recruitment and retention is expected to be enhanced by more consistent talent requirements across the businesses, providing recruiters and applicants with greater clarity and understanding of talent needs and opportunities associated with the core business activities, principles and risks of each company.
Broadening of Investor Base. The separation will allow each company to more effectively articulate a clear investment proposition to attract a long-term investor base suited to its businesses, growth profile and capital allocation priorities, and will facilitate each company’s access to capital by providing investors with three distinct investment opportunities. This is expected to attract shareowners with distinct investment preferences.

The UTC Board of Directors also considered a number of potentially negative factors in evaluating the separation, including:

Risk of Failure to Achieve Anticipated Benefits of the Separation. UTC, Otis and Carrier may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating each company’s business; there may be dis-synergy costs related to the separation, including costs of restructuring transactions and other significant costs; and following the separation, each of UTC, Otis and Carrier may be more susceptible to certain economic and market fluctuations, and other adverse events than if Otis and Carrier were still a part of UTC because each business will be less diversified than UTC prior to the separation.
Capital Allocation Efficiency and Flexibility. Following the separation, Otis and Carrier may lose capital allocation efficiency and flexibility, as each company will no longer be able to use cash flow from one of UTC’s other businesses to fund its investments and operations. Additionally, as smaller companies, the cost of capital for each company may be higher than UTC’s cost of capital prior to the separation, and each company may not obtain the same credit rating as UTC prior to the separation.
Loss of Scale and Increased Administrative Costs. As part of UTC, Otis and Carrier benefit from UTC’s scale in procuring certain goods and services. After the separation, as stand-alone companies, Otis and Carrier may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those UTC obtained prior to the separation. In addition, as part of UTC, Otis and Carrier benefit from certain functions performed by UTC, such as accounting, auditing, tax, legal, human resources, investor relations, risk management, treasury and other general and administrative functions. After the separation, UTC will not perform these functions for Otis or Carrier (other than certain functions that will be provided for a limited time pursuant to the transition services agreement) and, because of Otis’ and Carrier’s smaller scale as stand-alone companies, the cost of performing such functions could be higher than the amounts reflected in Otis’ or Carrier’s historical financial statements, which would cause profitability to decrease.

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Disruptions and Costs Related to the Separation. The actions required to separate Otis’, Carrier’s and UTC’s respective businesses could disrupt each company’s operations. In addition, Otis and Carrier will incur substantial costs in connection with the separation and the transition to being a stand-alone public company, which may include tax costs associated with the internal restructuring and costs to separate shared systems, accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel who are new to Otis and Carrier.
Limitations on Strategic Transactions. Under the terms of the tax matters agreement that Otis and Carrier will enter into with UTC, Otis and Carrier will be restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free transactions under applicable law. These restrictions may limit for a period of time Otis’ and Carrier’s ability to pursue certain strategic transactions and equity issuances or engage in other transactions that might increase the value of their business.
Uncertainty Regarding Stock Prices. We cannot predict the effect of the Otis distribution and the Carrier distribution on the trading prices of Otis, Carrier or UTC common stock or know with certainty whether the combined market value of [      ] shares of Otis common stock, the number of shares of Carrier common stock to be distributed per share of UTC common stock in the Carrier distribution and one share of UTC common stock will be less than, equal to or greater than the market value of one share of UTC common stock prior to the distributions. Furthermore, there is the risk of volatility in each company’s stock price following the distributions due to sales by certain shareowners whose investment objectives may not be met by each company’s common stock, and it may take time for each company to attract its optimal shareowner base.

In determining to pursue the separation, the UTC Board of Directors concluded that the potential benefits of the separation outweighed the foregoing factors. See “The Separation and Distribution—Reasons for the Separation” and “Risk Factors” included elsewhere in this information statement.

Corporate Information

Otis was incorporated in Delaware for the purpose of holding the Otis Business in connection with the separation and distribution described herein. Prior to the contribution of the Otis Business to Otis by UTC, which will occur prior to the distribution, Otis will have no operations other than those incidental to its formation and the separation. Our principal executive offices are located at One Carrier Place, Farmington, CT 06032, and our telephone number is (860) 674-3000. We maintain an Internet site at www.otis.com. Our website and the information contained therein or connected thereto are not incorporated into this information statement or the registration statement of which this information statement forms a part, or in any other filings with, or any information furnished or submitted to, the SEC.

Reason for Furnishing this Information Statement

This information statement is being furnished solely to provide information to UTC shareowners who will receive shares of Otis common stock in the distribution. UTC shareowners are not required to vote on the distribution. Therefore, you are not being asked for a proxy and you are not required to send a proxy to UTC. You do not need to pay any consideration, exchange or surrender your existing shares of UTC common stock or take any other action to receive your shares of Otis common stock. This information statement is not and is not to be construed as an inducement or encouragement to buy or sell any of Otis’ securities. The information contained in this information statement is believed by Otis to be accurate as of the date set forth on its cover. Changes may occur after that date, and neither UTC nor Otis will update the information except as may be required in the ordinary course of their respective disclosure obligations and practices.

UTC is making available a separate information statement that will help you understand the Carrier distribution and how it will affect your post-separation ownership in UTC and Carrier. UTC has also separately made available to UTC shareowners a registration statement on Form S-4 and a joint proxy statement/prospectus in connection with the issuance of UTC common stock to holders of Raytheon common stock in the Raytheon merger and the vote of UTC shareowners to approve such issuance.

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SUMMARY OF HISTORICAL AND UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA

The following summary financial data reflects the historical combined operations of Otis. We derived the summary historical combined statements of operations data for the years ended December 31, 2018 and December 31, 2017, and summary historical combined balance sheet data as of December 31, 2018 and December 31, 2017, as set forth below, from Otis’ audited historical combined financial statements (which we refer to as the “combined financial statements”), which are included in the “Index to Combined Financial Statements” section of this information statement. The selected unaudited historical combined financial data as of, and for each of, the years ended December 31, 2016 and December 31, 2015 have been derived from our underlying financial records, which were derived from the financial records of UTC. In management’s opinion, the unaudited combined financial statements have been prepared on substantially the same basis as the audited combined financial statements and include all adjustments, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the selected historical combined financial data for the periods presented. To ensure a full understanding of this summary historical combined financial data, you should read the summary combined financial data presented below in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and accompanying notes included elsewhere in this information statement.

The summary historical combined financial data does not necessarily reflect what our results of operations and financial position would have been if we had operated as a separate publicly traded entity during the periods presented, including changes that will occur in our operations and capitalization as a result of the separation and distribution. Accordingly, the historical results should not be relied upon as an indicator of our future performance.

The summary unaudited pro forma combined financial data for the year ended December 31, 2019 has been prepared to reflect the separation, including the incurrence of indebtedness of approximately $[      ] and the distribution of approximately $[      ] of cash to UTC. The outstanding indebtedness is expected to consist of a combination of long-term notes and bank term loans. The unaudited pro forma combined statement of operations presented for the year ended December 31, 2019 assumes the separation occurred on January 1, 2019. The unaudited pro forma combined balance sheet as of December 31, 2019 assumes the separation occurred on December 31, 2019. The pro forma adjustments give effect to amounts that are directly attributable to the separation and distribution, factually supportable and, with respect to the unaudited pro forma statements of operations, expected to have a continuing impact on Otis. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information and we believe such assumptions are reasonable under the circumstances.

The unaudited pro forma combined financial information is not necessarily indicative of our results of operations or financial condition had the distribution and our anticipated post-separation capital structure been completed on the dates assumed. It may not reflect the results of operations or financial condition that would have resulted had we been operating as an independent, publicly traded company during such period. In addition, it is not necessarily indicative of our future results of operations or financial condition.

You should read this summary financial data together with “Unaudited Pro Forma Combined Financial Information,” “Capitalization,” “Selected Historical Combined Financial Data of Otis,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and accompanying notes included elsewhere in this information statement.

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Summary of Historical and Unaudited Pro Forma Combined Financial Data

 
Pro Forma For the Year
ended December 31,
Years ended December 31,
(dollars in millions)
2019
(Unaudited)
2019
2018
2017
2016
(Unaudited)
2015
(Unaudited)
Results of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
      
 
$
      
 
$
12,915
 
$
12,323
 
$
11,886
 
$
11,980
 
Operating profit
 
 
 
 
 
 
 
1,835
 
 
1,916
 
 
2,037
 
 
2,213
 
Net income(1)
 
 
 
 
 
 
 
1,210
 
 
809
 
 
1,397
 
 
1,469
 
Net income attributable to Otis Worldwide Corporation(1)(2)
 
 
 
 
 
 
 
1,049
 
 
636
 
 
1,197
 
 
1,255
 
New Equipment Orders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Equipment orders(2)
$
 
 
$
 
 
$
6,248
 
$
6,094
 
$
6,080
 
$
6,317
 
 
Pro Forma For the Year
ended December 31,
As of December 31,
(dollars in millions)
2019
(Unaudited)
2019
2018
2017
2016
(Unaudited)
2015
(Unaudited)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
      
 
$
      
 
$
9,135
 
$
9,089
 
$
8,584
 
$
8,525
 
Working capital(3)
 
 
 
 
 
 
 
309
 
 
579
 
 
682
 
 
748
 
Total liabilities
$
 
 
$
 
 
$
6,920
 
$
6,426
 
$
5,584
 
$
5,557
 
(1)2018 amounts include a tax charge of $143 million that will become due when previously reinvested earnings of certain international subsidiaries are remitted. 2017 amounts include a $507 million tax charge, representing the U.S. Tax Cuts and Jobs Act (“TCJA”) related adjustments. These amounts relate to U.S. income tax attributable to previously undistributed earnings of Otis’ international subsidiaries and equity investments and the revaluation of the U.S. deferred income taxes.
(2)New Equipment orders represent the net future sales value of contractual obligations to provide our products (including installation) under purchase orders, contracts, options, long-term agreements or other forms of legally binding contractual arrangements.
(3)The decrease in working capital during the historical period primarily reflects the year-over-year increases in advanced billings on sales contracts and services billing as well as accrued compensation and benefits.

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RISK FACTORS

You should carefully consider the following risks and other information in this information statement in evaluating Otis and Otis common stock. Any of the following risks and uncertainties could materially adversely affect our business, financial condition or results of operations.

Risks Related to Our Business

We may be affected by global economic, capital market and political 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 and geopolitical risks, including global credit market conditions, levels of consumer and business confidence, commodity prices, raw material and energy costs, foreign currency exchange rates, interest rates, labor costs, levels of government spending and deficits, trade policies, tariffs and trade barriers, political conditions, regulatory changes, fluctuations in residential and commercial construction activity, actual or anticipated default on sovereign debt and other challenges that could affect the global economy. These economic and political conditions affect businesses such as ours in a number of ways. For example, the tightening of credit in the capital markets could adversely affect the ability of our customers to obtain financing for significant purchases and operations, which could result in a decrease in or cancellation of orders for our products and services. Similarly, tightening credit may adversely affect our supply base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy, which could impact our ability to fulfill orders on time or at anticipated cost. Our business is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending, construction activity and government investment in infrastructure. A slowdown in building and remodeling activity or decreased public spending on infrastructure projects could adversely affect 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, risks associated with government policies on international trade and investments, including import quotas, capital controls, punitive taxes or tariffs or similar trade barriers, and risks associated with emerging markets.

We conduct our business on a global basis, with approximately 73 percent of our 2018 sales derived from international operations. Changes in local and regional economic conditions, including 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 may also 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 sales are non-U.S. based, a strengthening of the U.S. Dollar against other major foreign currencies could adversely affect our results of operations.

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, 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. The implementation of more restrictive trade policies, including the imposition of tariffs, or the renegotiation of existing trade agreements with the U.S. or countries, such as China and Mexico, where we sell large quantities of products and services, procure materials incorporated into our products, manufacture products or recruit and employ employees, including a further escalation of the trade conflict between the United States and China, and the resulting impact on sentiment relating to U.S. businesses in China, and the U.K.’s pending withdrawal from the EU, could have a material adverse effect on our business, results of operations and financial condition, including our ability to recruit and retain employees or deploy certain employees to the geographies where their skills are best utilized. Our international sales and operations are also sensitive to changes in foreign nations’ priorities,

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including government budgets, as well as to political and economic instability. International transactions may involve increased financial and legal risks due to differing legal systems and customs in foreign countries.

We expect that sales to emerging markets will continue to account for a significant portion of our 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, could 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, Mexico, Poland, Russia, South Africa, Ukraine and 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 cultural differences (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.

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 constraints, production disruptions, quality issues and supplier closings or bankruptcies), price increases or decreased availability of raw materials or commodities could have a material adverse effect on our ability to meet our commitments to customers, or could increase our operating costs, which could have a material adverse effect on our 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 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 digital technologies for the benefit of our New Equipment or Service segment or the development of new products depend 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; achieving cost and production efficiencies; validation of innovative technologies; the level of customer interest in new technologies and products; and customer acceptance of products we manufacture or that incorporate technologies we develop.

Our research and development efforts may not result in innovative products that incorporate new technologies for our New Equipment and Service segments, or products 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 products that incorporate our technologies may not develop or grow as we anticipate. We or our customers, 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 and technologies, our competitors may develop competing technologies that gain market acceptance in advance of or instead of our products or services. The possibility also exists that our competitors might develop new technology or offerings 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.

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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 in 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, 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.

Failure to maintain a satisfactory credit rating could adversely affect our liquidity, capital position, borrowing costs and access to capital markets.

In connection with the distribution, we expect to complete one or more financing transactions on or prior to the completion of the distribution, with approximately $[    ] of the proceeds of such financings expected to be used to distribute a cash dividend to UTC. As a result of these transactions, we anticipate having approximately $[    ] of indebtedness when the distribution is completed. In anticipation of the distribution, Moody’s Investor Services, Inc., Standard & Poor’s and Fitch Ratings, Inc., have assigned to Otis issuer credit ratings of [    ], [    ] and [    ], respectively. Despite these anticipated investment grade credit ratings at the time of the distribution, any future downgrades could increase the cost of borrowing under any indebtedness we may incur in connection with the distribution or otherwise, reduce market capacity for our commercial paper or require the posting of additional collateral under our derivative contracts. There can be no assurance that we will be able to maintain our credit ratings once established, and any additional actual or anticipated changes or downgrades in our credit ratings, including any announcement that our ratings are under review for a downgrade, may have a negative impact on our liquidity, capital position and access to the capital markets.

We may need additional financing in the future to meet our capital needs, and such financing may not be available on favorable terms, if at all, and may be dilutive to existing shareowners.

Upon completion of the distribution, we anticipate having approximately $[    ] of indebtedness. 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 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 in the solvency of our customers, suppliers or distributors or other significantly unfavorable changes in economic conditions. If we fail to obtain or lose an investment grade credit rating or adequate funds are not available on acceptable terms, we may be unable to successfully develop or enhance products, fund our expansion or acquisitions or respond to competitive pressures, any of which could negatively affect our business.

If we raise additional funds through the issuance of equity securities, our shareowners will experience dilution of their ownership interest. And if we raise additional funds by issuing debt, we may be subject to limitations on our operations due to restrictive covenants.

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 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 the U.S. Foreign Corrupt Practices Act (“FCPA”), antitrust, anti-collusion or other anti-corruption laws in non-U.S.

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jurisdictions. 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 also 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. Additionally, we may not realize the degree or timing of benefits we anticipate when we first enter into a transaction. Any of the foregoing could adversely affect our business and results of operations. 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.

For constraints on mergers and acquisition activity after the completion of the distribution, see “Risk Factors—Risks Related to the Distribution.”

We are party to joint ventures and other strategic alliances, which may not be successful and may expose us to special risks and restrictions.

Our business operations depend on various strategic alliances and joint ventures. In certain regions, we operate our business through joint venture relationships or non-wholly owned subsidiaries, including: Otis Electric Elevator Company Limited and Otis Elevator (China) Investment Limited in China; and Zardoya Otis, a publicly traded company whose shares are listed on the Madrid Stock Exchange, in Spain. 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, strategic alliances 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, strategic alliance’s or non-wholly owned subsidiary’s best interests, (3) take action contrary to our policies or objectives with respect to our investments or business 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, strategic alliance or other agreement. There can be no assurance that any particular joint venture or strategic alliance will be beneficial to us.

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

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or sell them at expected profit levels. Uncertainty relating to those laws or regulations may also affect how we operate, structure our investments and enforce our rights.

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, the FCPA and other anti-corruption laws 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, agents or distributors from violating the FCPA or other anti-corruption laws. 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. In the past, UTC, including Otis, has been subject to a formal investigation by the SEC related to alleged violations of anti-corruption laws, which resulted in a Settlement Order in which UTC paid a civil penalty related to certain activities in our business in Russia, China and Kuwait, as well as activities in another UTC business.

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, agents or distributors from violating antitrust or anti-collusion laws.

Violations of FCPA, antitrust or other anti-corruption or anti-collusion 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 United States, these laws include, among others, the Export Administration Regulations administered by the U.S. Department of Commerce and embargoes and sanctions regulations administered by the U.S. 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.

For a description of current material legal proceedings and regulatory matters, see “Business—Legal Proceedings” and Note 18 to the Combined Financial Statements included in the “Index to Combined Financial Statements” section of this information statement.

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 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 confidential or sensitive data of our customers who purchase and use such products either separately or as a part of another product or system. 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, both our internal systems and products may be vulnerable to hacking or other cyber-attacks, material security breaches, theft, programming errors or

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employee errors, which could lead to the compromise of such 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 imaging, 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’ perception of the security and reliability of our services as well as our credibility and reputation, which could result in lost sales. In addition, 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, and government enforcement actions 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, which could result in a material adverse effect on our competitive position, results of operations, cash flows or 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 cyber-attacks on information technology infrastructure and products and other business disruptions.

The efficient operation of our business will require continued substantial investment in technology infrastructure systems, including shifting from VPN-based 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 could 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.

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) cyber-attacks 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 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 cyber-attacks. However, given the unpredictability, nature and scope of cyber-attacks, it is possible that potential vulnerabilities could go undetected for an extended period. As a result of a cyber-attack, 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

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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. Due to the evolving nature of such risks, the impact of any potential incident cannot be predicted. Any disruption to our business due to such issues, or an increase in our costs to cover these issues that is greater than what we have anticipated, could have an adverse effect on our competitive position, results of operations, cash flows or financial condition.

There can be no assurance that our systems will not fail or experience disruptions, and any significant failure or disruption of these systems could prevent us from making sales, ordering supplies, delivering products, providing functional products and otherwise conducting our business.

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, 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.

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,” “Results of Operations—Income Taxes” and “Liquidity and Financial Condition” under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Notes 3 and 14 to the Combined Financial Statements included in the “Index to Combined Financial Statements” section of this information statement for further discussion on income taxes and related contingencies, including our accounting and assessment of the effect of the TCJA.

We may not realize expected benefits from our cost reduction and restructuring efforts, and our profitability may be hurt or our business otherwise might be adversely affected.

In order to operate more efficiently and cost effectively, we may adjust employment, optimize our footprint or undertake other restructuring activities. These activities are complex and may involve or require significant changes to our operations. If we do not successfully manage restructuring activities, expected efficiencies and

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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, adverse effects on employee morale, the failure to meet operational targets due to the loss of employees or work stoppages, 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.

Risks Related to the Distribution

We have no recent history of operating as an independent company, and our historical and pro forma financial information is not necessarily indicative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results.

The historical information about Otis in this information statement refers to the Otis Business as operated by and integrated with UTC. Our historical and pro forma financial information included in this information statement is derived from the combined financial statements and accounting records of UTC. Accordingly, the historical and pro forma financial information included in this information statement does not necessarily reflect the financial condition, results of operations or cash flows that we would have achieved as a separate, publicly traded company during the periods presented or those that we will achieve in the future primarily as a result of the factors described below:

Generally, our working capital requirements and capital for our general corporate purposes, including capital expenditures and acquisitions, have historically been satisfied through UTC’s corporate-wide cash management practices. Following the distribution, our results of operations and cash flows may be volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic alliances or other arrangements, which may or may not be available and may be more costly.
Prior to the distribution, our business has been operated by UTC as part of its broader corporate organization, rather than as an independent company. UTC or one of its affiliates performed or helped perform various corporate functions for us, such as accounting, auditing, tax, legal, human resources, investor relations, risk management, treasury and other general and administrative functions. Our historical and pro forma financial results reflect allocations of corporate expenses from UTC for such functions, which are likely to be less than the expenses we would have incurred had we operated as a separate publicly traded company.
Currently, our business is integrated with the other businesses of UTC. Historically, we have shared economies of scale in costs, employees, vendor relationships and customer relationships, which have enabled us to procure more advantageous arrangements with respect to, among other things, information technology, logistics, raw materials, facility management, travel services, fleet and professional services. After the distribution, as a stand-alone company, we may be unable to obtain similar arrangements to the same extent as UTC did, or on terms as favorable as those UTC obtained, prior to the distribution.
After the distribution, the cost of capital for our business may be higher than UTC’s cost of capital prior to the distribution.
Our historical financial information does not reflect the debt that we will incur as part of the distribution.
As an independent public company, we will separately become subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act (“Sarbanes-Oxley”) and the Dodd-Frank Act and will be required to prepare our stand-alone financial statements according to the rules and regulations required by the SEC. These reporting and other obligations will place significant demands on our management and on administrative and operational resources. Moreover, to comply with these requirements, we anticipate that we will need to migrate our systems, including information technology systems, implement additional financial and management controls, reporting systems and procedures, and hire additional accounting and finance staff. We expect to incur additional annual expenses related to these requirements, and those expenses may be significant. If we are unable to upgrade our financial and

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management controls, reporting systems, information technology and procedures in a timely and effective fashion, our ability to comply with our financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired.

Other significant changes may occur in our cost structure, management, financing and business operations as a result of operating as a company separate from UTC. For additional information about the past financial performance of our business and the basis of presentation of the combined financial statements and the unaudited pro forma combined financial statements of our business, see “Unaudited Pro Forma Combined Financial Information,” “Selected Historical Combined Financial Data of Otis,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical combined financial statements and accompanying notes included elsewhere in this information statement.

Following the distribution, our financial profile will change, and we will be a smaller, less diversified company than UTC prior to the distribution.

Following the distribution, Otis will be a smaller, less diversified company than UTC prior to the distribution. As a result, we may be more vulnerable to changing market conditions, which could have a material adverse effect on our business, financial condition and results of operations. In addition, the diversification of our sales, costs, and cash flows will diminish as a stand-alone company, such that our results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and our ability to fund capital expenditures and investments, pay dividends and service debt may be diminished. Following the distribution, we may also lose capital allocation efficiency and flexibility because we will no longer be able to use cash flow from the UTC Aerospace Businesses or the Carrier Business to fund our investments and operations.

We may not achieve some or all of the expected benefits of the separation and distribution, and the separation and distribution may materially adversely affect our business.

We may not be able to achieve the full strategic and financial benefits expected to result from the separation and distribution, or such benefits may be delayed or not occur at all. The separation and distribution are expected to provide the following benefits, among others: (1) enabling our management to more effectively pursue its own distinct operating priorities and strategies, while also enhancing our operational agility through a more nimble organization; (2) permitting us to allocate our financial resources to meet the unique needs of our businesses, which will allow us to intensify our focus on distinct strategic priorities and to more effectively pursue our own distinct capital structures and capital allocation strategies; (3) affording us the ability to offer an independent equity security to the capital markets and enabling us to more flexibly pursue strategic opportunities more closely aligned with our strategic goals and expected growth opportunities; (4) permitting us to more effectively recruit, retain and motivate employees through the use of stock-based compensation that more closely aligns management and employee incentives with specific business goals and objectives related to our businesses; and (5) allowing us to more effectively articulate a clear investment proposition to attract a long-term investor base suited to our businesses, growth profile and capital allocation priorities.

We may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (1) the distribution will require significant amounts of management’s time and effort, which may divert management’s attention from operating our business; (2) following the distribution, we may lose capital allocation efficiency and flexibility because, for instance, we will no longer be able to use cash flow from one of UTC’s other businesses to fund investments and operations; (3) following the distribution, we may be more susceptible to certain market fluctuations and other adverse events because our businesses will be less diversified than UTC’s businesses prior to the completion of the distribution; (4) after the distribution, as a stand-alone company, we may be unable to obtain certain goods, services and technologies at prices or on terms as favorable as those UTC obtained prior to completion of the distribution; (5) the distribution may require us to incur substantial costs, including accounting, tax, legal and other professional services costs, costs related to retaining and attracting business and operational relationships with customers, suppliers and other counterparties, recruiting and relocation costs associated with hiring key senior management personnel who are new to Otis, costs to retain key management personnel, tax costs, and costs to separate shared systems and other unforeseen dis-synergy costs; (6) under the terms of the tax matters agreement that we will enter into with UTC and Carrier, we will be restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free transactions and these restrictions may limit us for a period of time from pursuing certain

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strategic transactions and equity issuances or engaging in other transactions that might increase the value of our businesses; and (7) potential negative reactions from the financial markets if UTC fails to complete the distribution as currently expected or within the anticipated time frame. If we fail to achieve some or all of the benefits expected to result from the distribution, or if such benefits are delayed, it could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

UTC’s plan to separate into three independent, publicly traded companies is subject to various risks and uncertainties and may not be completed in accordance with the expected plans or anticipated timeline, or at all, and will involve significant time and expense, which could disrupt or adversely affect our business.

On November 26, 2018, UTC announced plans to separate into three independent, publicly traded companies. The separation and distribution are subject to the satisfaction of certain conditions (or waiver by UTC in its sole and absolute discretion), subject to UTC’s agreement to consummate the Otis distribution pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement. The conditions to the separation and distribution include final approval by UTC’s Board of Directors, receipt of tax rulings in certain jurisdictions and/or a tax opinion from external counsel (as applicable), the SEC declaring effective the registration statement of which this information statement forms a part and satisfactory completion of financing. Furthermore, the separation is complex in nature, and unanticipated developments or changes, including changes in the law, the macroeconomic environment, competitive conditions of UTC’s markets, the uncertainty of the financial markets and challenges in executing the separation, could delay or prevent the completion of the proposed separation, or cause the separation to occur on terms or conditions that are different or less favorable than expected. We currently expect the Carrier distribution to occur on or around the date of the Otis distribution, unless otherwise determined by the UTC Board of Directors in its sole and absolute discretion, but subject to UTC’s agreement to consummate each of the Otis distribution and the Carrier distribution as required pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement. Though UTC has agreed pursuant to, and subject to the terms and conditions of the Raytheon merger agreement, that UTC will consummate the separation and each of the Otis distribution and the Carrier distribution, there can be no assurance that the Otis distribution and the Carrier distribution will occur on or around the same date or that either distribution will occur at all.

The process of completing the separation has been and is expected to continue to be time-consuming and involves significant costs. The separation costs may be significantly higher than what we currently anticipate and may not yield a discernible benefit if the separation is not completed or is not well executed, or the expected benefits of the separation are not realized. Executing the proposed separation will also require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing our business. Other challenges associated with effectively executing the separation include attracting, retaining, motivating and training employees, including additional employees that we will need to operate as a stand-alone company; addressing disruptions to our supply chain, manufacturing, sales and distribution, and other operations resulting from separating UTC into three independent public companies; and separating from UTC’s information systems.

The combined market value following the Otis distribution and the Carrier distribution of [   ] shares of Otis common stock, the number of shares of Carrier common stock to be distributed per share of UTC common stock in the Carrier distribution and one share of UTC common stock may not equal or exceed the pre-distribution value of one share of UTC common stock.

There can be no assurance that following the Otis distribution and the Carrier distribution the aggregate market value of [   ] shares of Otis common stock, the number of shares of Carrier common stock to be distributed per share of UTC common stock in the Carrier distribution and one share of UTC common stock will be higher than, lower than or the same as the market value of a share of UTC common stock if the separation did not occur.

We expect to incur both one-time and ongoing material costs as a result of the separation, which could adversely affect our profitability.

We expect to incur, as a result of the separation, both one-time and ongoing costs that are greater than those we currently incur. These increased costs may arise from various factors, including financial reporting, costs associated with complying with federal securities laws (including compliance with the Exchange Act, Sarbanes-Oxley and the Dodd-Frank Act), and costs associated with accounting, auditing, tax, legal, human resources, investor relations, risk management, treasury and other general and administrative related functions, and it is possible that these costs will be material to our business.

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In connection with the distribution, we expect to incur debt obligations, and we may incur additional debt obligations in the future, which could adversely affect our business and profitability and our ability to meet other obligations.

We expect to complete one or more financing transactions before the distribution is completed, with approximately $[    ] of the proceeds of such financings expected to be used to distribute cash to UTC. As a result of such transactions, we anticipate having approximately $[    ] of indebtedness when the distribution is completed. See “Description of Material Indebtedness.” We may also incur additional indebtedness in the future.

This significant amount of debt could potentially have important consequences to us and our debt and equity investors, including (1) requiring a substantial portion of our cash flow from operations to make interest payments; (2) making it more difficult to satisfy debt service and other obligations; (3) increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; (4) increasing our vulnerability to general adverse economic and industry conditions; (5) reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; (6) limiting our flexibility in planning for, or reacting to, changes in our business and the industry; (7) placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt; (8) requiring that we repatriate earnings to the U.S., causing withholding taxes to be applied, which in turn could increase our effective tax rate; and (9) limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares.

To the extent that we incur additional indebtedness, the foregoing risks could increase. In addition, our actual cash requirements in the future may be greater than expected. Our cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt.

After the separation, certain members of management, directors and shareowners may own stock in UTC, Otis and Carrier, and as a result may face actual or potential conflicts of interest.

After the separation, the management and directors of each of UTC, Otis and Carrier may own common stock in all three companies. This ownership overlap could create, or appear to create, potential conflicts of interest when the management and directors of one company face decisions that could have different implications for themselves and the other two companies. For example, potential conflicts of interest could arise in connection with the resolution of any dispute regarding the terms of the agreements governing the separation and Otis’ relationship with UTC and Carrier thereafter. These agreements include the separation agreement, the transition services agreement, the tax matters agreement, the employee matters agreement, the intellectual property agreement and any commercial agreements between the parties or their affiliates. Potential conflicts of interest may also arise out of any commercial arrangements that we or UTC may enter into in the future.

We could experience temporary interruptions in business operations and incur additional costs as we further develop information technology infrastructure and transition our data to our stand-alone systems.

We are in the process of further developing an IT infrastructure and systems to support our critical business functions, including accounting and reporting, in order to replace many of the systems and functions UTC currently provides. We may experience temporary interruptions in business operations if we cannot transition effectively to our own stand-alone systems and functions, which could disrupt our business operations and have a material adverse effect on our profitability. In addition, our costs for the operation of these systems may be higher than the amounts reflected in the combined financial statements.

We may not be able to engage in desirable capital-raising or strategic transactions following the separation.

Under current U.S. federal income tax law, a spin-off that otherwise qualifies for tax-free treatment can be rendered taxable to the parent corporation and its shareowners as a result of certain post-spin-off transactions, including certain acquisitions of shares or assets of the spun-off corporation. To preserve the tax-free treatment of the separation and the distribution, and in addition to Otis’ indemnity obligation described below, the tax matters agreement will restrict us, for the two-year period following the distribution, except in specific circumstances, from (1) entering into any transaction pursuant to which all or a portion of the shares of Otis stock would be acquired, whether by merger or otherwise; (2) issuing equity securities beyond certain thresholds;

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(3) repurchasing shares of Otis stock other than in certain open-market transactions; and (4) ceasing to actively conduct certain of our businesses. The tax matters agreement will also prohibit us from taking or failing to take any other action that would prevent the distribution and certain related transactions from qualifying 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. These restrictions may limit our ability to pursue certain equity issuances, strategic transactions, repurchases or other transactions that we may otherwise believe to be in the best interests of our shareowners or that might increase the value of our business. For more information, see “Certain Relationships and Related Party Transactions—Tax Matters Agreement” and “Material U.S. Federal Income Tax Consequences.”

In connection with the separation into three independent public companies, each of UTC, Otis and Carrier will indemnify the other parties for certain liabilities. If we are required to pay under these indemnities to UTC and/or Carrier, our financial results could be negatively impacted. Also, the UTC or Carrier indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which UTC and Carrier will be allocated responsibility, and UTC and/or Carrier may not be able to satisfy their respective indemnification obligations in the future.

Pursuant to the separation agreement and certain other agreements among UTC, Otis and Carrier, each party will agree to indemnify the other parties for certain liabilities as discussed further in “Certain Relationships and Related Party Transactions.” Indemnities that we may be required to provide UTC 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 UTC and/or Carrier has agreed to retain. The indemnities from UTC and Carrier for our benefit may not be sufficient to protect us against the full amount of such liabilities, and UTC 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 UTC 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.

UTC or Carrier may fail to perform under various transaction agreements that will be executed as part of the separation, or we may fail to have the necessary systems and services in place when the transition services agreement expires.

In connection with the separation and prior to the distribution, Otis, Carrier and UTC will enter into the separation agreement and will also enter into various other agreements, including a transition services agreement, a tax matters agreement, an employee matters agreement, and an intellectual property agreement. These agreements, together with the documents and agreements by which the internal reorganization will be effected, will determine the allocation of assets and liabilities among the companies following the separation and will include any necessary indemnifications related to liabilities and obligations. The transition services agreement will provide for the performance of certain services by UTC for the benefit of Otis and/or Carrier for a period of time after the separation. If UTC or Carrier is unable or unwilling to satisfy its obligations under these agreements, including its indemnification obligations, we could incur operational difficulties and/or losses. We are in the process of creating systems and services to replace many of the systems and services that UTC currently provides to us. However, we may not be successful in implementing these systems and services in a timely manner or at all, we may incur additional costs in connection with, or following, the implementation of these systems and services, and we may not be successful in transitioning data from UTC’s systems to ours.

The terms we will receive in our agreements with UTC or Carrier could be less beneficial than the terms we may have otherwise received from unaffiliated third parties.

The agreements we will enter into with UTC and Carrier in connection with the separation, including the separation agreement, a transition services agreement, a tax matters agreement, an employee matters agreement, and an intellectual property agreement, were prepared in the context of the separation while Otis was still a wholly owned subsidiary of UTC. Accordingly, Otis did not have a board of directors or a management team that were independent of UTC. In addition, certain of the terms in these agreements were provided for in, and were the result of negotiations between UTC and Raytheon in connection with, the Raytheon merger agreement. As a result of these factors, the terms of those agreements may not reflect terms that would have resulted from arm’s-length negotiations between unaffiliated third parties. See “Certain Relationships and Related Party Transactions.”

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If the distribution, 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 UTC (including pursuant to the Raytheon merger), we, as well as UTC, Carrier, and UTC’s shareowners, could be subject to significant tax liabilities, and in certain circumstances, we could be required to indemnify UTC for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.

The distribution is conditioned on, among other things, the receipt by UTC and continued validity of (1) an IRS ruling satisfactory to the UTC Board of Directors and (2) an opinion of outside counsel, satisfactory to the UTC Board of Directors, regarding the qualification of certain elements of the distribution under Section 355 of the Code. The IRS ruling and the opinion of counsel will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of UTC, Otis and Carrier, including those relating to the past and future conduct of UTC, Otis and Carrier. If any of these representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if any of the representations or covenants 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 are inaccurate or not complied with by UTC, Otis, Carrier or any of their respective subsidiaries, the IRS ruling and/or the opinion of counsel may be invalid and the conclusions reached therein could be jeopardized.

Notwithstanding receipt of the IRS ruling and the opinion of counsel, the IRS could determine that the distribution 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 are inaccurate or have not been complied with. In addition, the IRS ruling will not address all of the issues that are relevant to determining whether the distribution, 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 distribution and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes (including by reason of the Raytheon merger) or that a court would not sustain such a challenge. In the event the IRS were to prevail with such challenge, we, as well as UTC, Carrier and UTC’s shareowners, could be subject to significant U.S. federal income tax liability.

If the distribution 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, UTC would recognize a taxable gain as if it had sold the Otis common stock in a taxable sale for its fair market value, and UTC shareowners who receive Otis 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 were to otherwise qualify as a tax-free transaction under Sections 355 and 368(a)(1)(D) of the Code, it may result in taxable gain to UTC (but not its shareowners) under Section 355(e) of the Code if the distribution 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 percent or greater interest (by vote or value) in UTC or Otis. For this purpose, any acquisitions of UTC or Otis shares within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although UTC or Otis may be able to rebut that presumption (including by qualifying for one or more safe harbors under applicable Treasury Regulations). Further, for purposes of this test, even if the Raytheon merger were treated as part of such a plan, the Raytheon merger alone should not cause the distribution to be taxable to UTC under Section 355(e) of the Code because pre-Raytheon merger holders of UTC common stock will own over 50 percent of the UTC common stock immediately following the Raytheon merger. However, if the IRS were to determine that other acquisitions of UTC or Otis stock, either before or after the distribution, were part of a plan or series of related transactions that included the distribution, such determination could result in significant tax liabilities to UTC. For more information, see “Material U.S. Federal Income Tax Consequences.”

In addition, as part of the separation, and prior to the Otis distribution and the Carrier distribution, UTC and its subsidiaries expect to complete the internal reorganization, and UTC, Otis, Carrier and their respective subsidiaries expect to incur certain tax costs in connection with the internal reorganization, including non-U.S. tax costs resulting from transactions in non-U.S. jurisdictions, which may be material. With respect to certain transactions undertaken as part of the internal reorganization, UTC has requested and intends to obtain tax

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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 will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of UTC, Otis, Carrier or their respective subsidiaries. And if any of these representations or statements is, or becomes, inaccurate or incomplete, or if UTC, 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 any such tax rulings and/or opinions cannot be obtained or the relevant taxing authorities prevail with any challenge in respect of any relevant transaction, we, as well as UTC and Carrier could be subject to significant tax liabilities.

Under the tax matters agreement to be entered into among UTC, Otis and Carrier in connection with the separation, Otis generally would be required to indemnify UTC and Carrier for any taxes resulting from the separation (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) any 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 tax matters agreement, we generally would be required to indemnify UTC 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 either of the distributions 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 or (b) arising from an adjustment, pursuant to an audit or other tax proceeding, with respect to any separation transaction that is not intended to qualify as a transaction that is generally tax-free, in each case, to the extent such amounts did not result from a disqualifying action by, or acquisition of equity securities of, Otis, Carrier, or UTC. Any such indemnity obligations could be material. For a more detailed discussion, see “Certain Relationships and Related Party Transactions—Tax Matters Agreement.”

The transfer to us by UTC or Carrier of certain contracts, permits and other assets and rights may require the consents or approvals of, or provide other rights to, third parties and governmental authorities. If such consents or approvals are not obtained, we may not be entitled to the benefit of such contracts, permits and other assets and rights, which could increase our expenses or otherwise harm our business and financial performance.

The separation agreement will provide that certain contracts, permits and other assets and rights are to be transferred from UTC, Carrier or their subsidiaries to Otis or its subsidiaries in connection with the separation. The transfer of certain of these contracts, permits and other assets and rights may require consents or approvals of third parties or governmental authorities or provide other rights to third parties. In addition, in some circumstances, Otis and UTC or Carrier are joint beneficiaries of contracts, and we and UTC or Carrier may need the consents of third parties in order to split, separate, replace, novate or replicate the existing contracts or the relevant portion of the existing contracts. While we anticipate entering into new contracts in place of transferring such contracts, we may not be successful in doing so in many instances.

Some parties may use consent requirements or other rights to terminate contracts or obtain more favorable contractual terms from us, which, for example, could take the form of price increases, require us to expend additional resources in order to obtain the services or assets previously provided under the contract, or require us to make arrangements with new third parties or obtain letters of credit or other forms of credit support. If we do not obtain required consents or approvals, we may be unable to obtain the benefits, permits, assets and contractual commitments that are intended to be allocated to us as part of our separation from UTC, and we may be required to seek alternative arrangements to obtain services and assets which may be more costly and/or of lower quality. The termination, modification, replacement or replication of these contracts or permits or the failure to timely complete the transfer or separation of these contracts or permits could negatively impact our business, financial condition, results of operations and cash flows.

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Until the distribution occurs, the UTC Board of Directors may change the terms of the separation in ways that may be unfavorable to us.

Until the distribution occurs, Otis will continue to be a wholly owned subsidiary of UTC. Accordingly, UTC has the discretion to determine and change the terms of the separation, including the establishment of the record date and the distribution date; provided, that any such determination or change will be subject to UTC’s obligations to complete the separation and each of the Otis distribution and the Carrier distribution in accordance with the terms and conditions of the Raytheon merger agreement (including, with respect to certain changes, the requirement that UTC obtain Raytheon’s prior written consent). These changes could be unfavorable to us, and, as a general matter, Raytheon’s consent would not be required to effect changes that are unfavorable to us. In addition, subject to UTC’s obligations under the Raytheon merger agreement, the UTC Board of Directors may decide not to proceed with the distribution at any time prior to the distribution date.

No vote of UTC shareowners is required in connection with the distribution. As a result, if the distribution occurs and you do not want to receive our common stock in the distribution, your sole recourse will be to divest yourself of your UTC common stock prior to the record date or in the “regular-way” trading market during the period prior to the distribution.

No vote of UTC shareowners is required in connection with the distribution. Accordingly, if the distribution occurs and you do not want to receive our common stock in the distribution, your only recourse will be to divest yourself of your UTC common stock prior to the record date or in the “regular-way” trading market during the period prior to the distribution.

Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect us.

As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and will be required to prepare our financial statements according to the rules and regulations required by the SEC. In addition, the Exchange Act requires that we file annual, quarterly and current reports. Our failure to prepare and disclose this information in a timely manner or to otherwise comply with applicable law could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing. In addition, the Sarbanes-Oxley Act requires that, among other things, we establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We cannot assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective. If we are not able to maintain or document effective internal control over financial reporting, our independent registered public accounting firm will not be able to certify as to the effectiveness of our internal control over financial reporting when required. While we have been adhering to these laws and regulations as a subsidiary of UTC, after the distribution we will need to demonstrate our ability to manage our compliance with these laws and regulations as an independent, public company.

Matters affecting our internal controls may cause us to be unable to report our financial information on a timely basis, or may cause us to restate previously issued financial information, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in our company and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm report a material weakness in our internal control over financial reporting. This could have a material and adverse effect on us by, for example, leading to a decline in our share price and impairing our ability to raise additional capital.

The allocation of intellectual property rights among us, UTC and Carrier as part of the separation could adversely impact our competitive position and our ability to develop and commercialize certain future products and services.

In connection with the separation, we are entering into an intellectual property agreement with UTC and Carrier governing, among other things, the allocation of intellectual property rights related to our and their businesses. As a result of the separation and such allocation, we will no longer have an ownership interest in

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certain intellectual property rights, but will become a non-exclusive licensee of such rights. This loss of the ownership of certain intellectual property rights could adversely affect our ability to maintain our competitive position through the enforcement of these rights against third parties that infringe these rights. In addition, we may lose our ability to license these rights to third parties in exchange for a license to such third parties’ rights we may need to operate our business.

The terms of the intellectual property agreement also include cross-licenses among the parties of certain intellectual property rights owned by Otis, Carrier and UTC and needed for the continuation of the operations of the Otis Business, Carrier Business and the UTC Aerospace Businesses, respectively. The licenses granted to us by UTC and Carrier are nonexclusive and, accordingly, UTC and Carrier could license such licensed intellectual property rights to our competitors, which could adversely affect our competitive position in the industry. Moreover, our use of the intellectual property rights licensed to us by UTC and Carrier will be restricted to certain fields of use related to our business. The limited nature of such licenses, and the other rights granted to Otis pursuant to the intellectual property agreement, may not provide us with all the intellectual property rights that UTC or Carrier currently holds or may in the future hold that we may need as our business changes in the future. Accordingly, if we were to expand our business to include new products and services outside of our current fields of use, we may not have the benefit of such licenses for such new products or services. As a result, it may be necessary for us to develop our technology independently of such licensed rights, which could make it more difficult, time consuming and/or expensive for us to develop and commercialize certain new products and services.

Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and results of operations.

In connection with the separation (including the internal reorganization), UTC has undertaken and will undertake several corporate reorganization transactions involving its subsidiaries, which, along with the distribution, may be subject to various fraudulent conveyance and transfer laws. If, under these laws, a court were to determine that, at the time of the separation, any entity involved in these reorganization transactions or the separation:

(1) was insolvent, was rendered insolvent by reason of the separation, or had remaining assets constituting unreasonably small capital, and (2) received less than fair consideration in exchange for the distribution; or
intended to incur, or believed it would incur, debts beyond its ability to pay these debts as they matured,

then the court could void the separation and distribution, in whole or in part, as a fraudulent conveyance or transfer. The court could then require our shareowners to return to UTC some or all of the shares of Otis common stock issued in the distribution, or require UTC or Otis, as the case may be, to fund liabilities of the other company for the benefit of creditors. The measure of insolvency will vary depending upon the jurisdiction and the applicable law. Generally, however, an entity would be considered insolvent if the fair value of its assets was less than the amount of its liabilities (including the probable amount of contingent liabilities), or if it incurred debt beyond its ability to repay the debt as it matures. No assurance can be given as to what standard a court would apply to determine insolvency or that a court would determine that Otis or any of its subsidiaries were solvent at the time of or after giving effect to the distribution.

Risks Related to Our Common Stock

We cannot be certain that an active trading market for our common stock will develop or be sustained after the distribution and, following the distribution, our stock price may fluctuate significantly.

A public market for our common stock does not currently exist. We anticipate that on or prior to the record date, trading of shares of our common stock will begin on a “when-issued” basis and will continue through the distribution date. However, we cannot guarantee that an active trading market will develop or be sustained for our common stock after the distribution, nor can we predict the prices at which shares of our common stock may trade after the distribution. Similarly, we cannot predict the effect of the Otis distribution and the Carrier distribution on the trading prices of our common stock or whether the combined market value of [   ] shares of our common stock, the number of shares of Carrier common stock to be distributed per share of UTC common

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stock in the Carrier distribution and one share of UTC common stock will be less than, equal to or greater than the market value of one share of UTC common stock prior to the distributions.

Until the market has fully evaluated the Otis distribution, the Carrier distribution and the transactions contemplated by the Raytheon merger agreement, including the pendency, completion or termination, as applicable, of the Raytheon merger, the price at which each share of UTC common stock trades may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. Such fluctuations may be due to a variety of factors, including uncertainty as to the expected timing of completion of the Raytheon merger or whether it will be completed at all, the value of UTC’s remaining businesses without Otis and Carrier in the event the Raytheon merger is not completed and investors’ assessment of the likelihood that UTC will realize the expected benefits of the Raytheon merger. The completion of the Raytheon merger is not a condition to the completion of the Otis distribution or the Carrier distribution, and UTC may complete the distributions (in accordance with the terms of the Raytheon merger agreement, to the extent in effect) even if the Raytheon merger agreement has been terminated.

Similarly, until the market has fully evaluated our business as a stand-alone entity, the prices at which shares of Otis common stock trade may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. The increased volatility of our stock price following the distribution may have a material adverse effect on our business, financial condition and results of operations. The market price of our common stock may fluctuate significantly due to a number of factors, some of which may be beyond our control, including (1) actual or anticipated fluctuations in our operating results; (2) changes in earnings estimated by securities analysts or our ability to meet those estimates; (3) the operating and stock price performance of comparable companies; (4) changes to the regulatory and legal environment under which we operate; (5) actual or anticipated fluctuations in commodities prices; and (6) domestic and worldwide economic conditions.

A significant number of shares of our common stock may be sold following the distribution, which may cause our stock price to decline.

Any sales of substantial amounts of our common stock in the public market or the perception that such sales might occur, in connection with the distribution or otherwise, may cause the market price of our common stock to decline. Upon completion of the distribution, we expect that we will have an aggregate of approximately [    ] shares of our common stock issued and outstanding. Shares distributed to UTC shareowners in the separation will generally be freely tradable without restriction or further registration under the U.S. Securities Act of 1933, as amended (the “Securities Act”), except for shares owned by one of our “affiliates,” as that term is defined in Rule 405 under the Securities Act.

We are unable to predict whether large amounts of our common stock will be sold in the open market following the distribution. We are also unable to predict whether a sufficient number of buyers of our common stock to meet the demand to sell shares of our common stock at attractive prices would exist at that time.

There may be substantial changes in our shareowner base.

Investors holding UTC common stock may hold UTC common stock because of a decision to invest in a company with UTC’s profile. Following the distribution, the shares of our common stock held by those investors will represent an investment in a company with a different profile than that of UTC. This change may not match some shareowners’ investment strategies, which could cause them to sell our common stock. As a result, our stock price may decline or experience volatility as our shareowner base changes.

Your percentage of ownership in Otis may be diluted in the future.

In the future, your percentage ownership in Otis may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we will grant to our directors, officers and employees. Our employees will have stock-based awards that correspond to shares of our common stock after the distribution as a result of the conversion of and/or adjustments to their UTC stock-based awards. Such awards will have a dilutive effect on our earnings per share, which could adversely affect the market price of our common stock. From time to time, we will issue additional stock-based awards to our employees under our employee benefits plans.

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We cannot guarantee the timing, amount or payment of dividends on our common stock.

Following the distribution, we expect that Otis will initially pay a cash dividend on a quarterly basis at an annual rate of $[  ] per share. However, the timing, declaration, amount of, and payment of any dividends will be within the discretion of Otis’ Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by Otis’ Board of Directors. Moreover, if as expected we determine to initially pay a dividend following the distribution, there can be no assurance that we will continue to pay dividends in the same amounts or at all thereafter. For more information, see “Dividend Policy.”

Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our shareowners.

Otis’ amended and restated certificate of incorporation and amended and restated bylaws will 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 are expected to include, among others, (1) the ability of our remaining directors to fill vacancies on Otis’ Board of Directors; (2) limitations on shareowners’ ability to call a special shareowner meeting; (3) rules regarding how shareowners may present proposals or nominate directors for election at shareowner meetings; and (4) the right of Otis’ Board of Directors to issue preferred stock without shareowner approval.

In addition, we expect to be subject to Section 203 of the Delaware General Corporation Law (“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 percent 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 percent of the corporation’s outstanding voting stock.

We believe these provisions will protect our shareowners 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 will apply even if the offer may be considered beneficial by some shareowners and could delay or prevent an acquisition that Otis’ Board of Directors determines is not in the best interests of Otis and our shareowners. These provisions may also prevent or discourage attempts to remove and replace incumbent directors. See “Description of Otis Capital Stock—Charter and Bylaw Provisions” and “Description of Otis Capital Stock—Change of Control.”

In addition, an acquisition or further issuance of our stock could trigger the application of Section 355(e) of the Code, causing the distribution to be taxable to UTC. For a discussion of Section 355(e) of the Code, see “Material U.S. Federal Income Tax Consequences.” Under the tax matters agreement, we would be required to indemnify UTC for the resulting tax, and this indemnity obligation might discourage, delay or prevent a change of control that our shareowners may consider favorable.

Our amended and restated certificate of incorporation will 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 shareowners, which could discourage lawsuits against Otis and our directors and officers.

Otis’ amended and restated certificate of incorporation will provide that unless Otis’ Board of Directors determines, the Court of Chancery of the State 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 of Otis to Otis or to Otis shareowners, 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 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

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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. However, if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, the action may be brought in the federal court for the District of Delaware.

Although our amended and restated certificate of incorporation will include this exclusive forum provision, it is possible that a court could rule that this provision is inapplicable or unenforceable. This exclusive forum provision may limit the ability of our shareowners to bring a claim in a judicial forum that such shareowners 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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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This information statement and other materials UTC and Otis have filed or will file with the SEC contain or incorporate by reference 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 our 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,” “confident” and other words of similar meaning in connection with a discussion of future operating or financial performance or the separation. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax rates and other measures of financial performance or potential future plans, strategies or transactions of Otis, Carrier or UTC following UTC’s separation into three independent public companies and/or following completion of the Raytheon merger, the separation, including the expected timing of completion of the separation and estimated costs associated with the separation, the Raytheon merger, including synergies or customer cost savings and the expected timing of the completion of the Raytheon merger, 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, we claim 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 UTC and their respective businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions and natural disasters and the financial condition of our customers and suppliers;
challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services;
future levels of indebtedness, including indebtedness that may be incurred in connection with the separation, and capital spending and research and development spending;
future availability of credit and factors that may affect such availability, including credit market conditions and our capital structure;
the timing and scope of future repurchases of our 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;
delays and disruption in delivery of materials and services from suppliers;
cost reduction efforts and restructuring costs and savings and other consequences thereof;
new business and investment opportunities;
the anticipated benefits of moving away from diversification and balance of operations across product lines, regions and industries;
the outcome of legal proceedings, investigations and other contingencies;
pension plan assumptions and future contributions;
the impact of the negotiation of collective bargaining agreements and labor disputes;
the effect of changes in political conditions in the U.S. and other countries in which Otis and UTC and their respective businesses operate, including the effect of changes in U.S. trade policies or the U.K.’s pending withdrawal from the EU, on general market conditions, global trade policies and currency exchange rates in the near term and beyond;

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the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which Otis and UTC and their respective businesses operate;
the ability of Otis and UTC to retain and hire key personnel;
the scope, nature, impact or timing of the separation and other acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs;
the expected benefits and timing of the separation, and the risk that conditions to the separation will not be satisfied and/or that the separation will not be completed within the expected time frame, on the expected terms or at all;
a determination by the IRS and other tax authorities that the distribution or certain related transactions should be treated as taxable transactions;
the possibility that any consents or approvals required in connection with the separation will not be received or obtained within the expected time frame, on the expected terms or at all;
expected financing transactions undertaken in connection with the separation and risks associated with the additional indebtedness;
the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the separation will exceed Otis’ estimates;
risks associated with the transactions contemplated by the Raytheon merger agreement or the announcement or pendency of such transactions, including disruptions to UTC’s or Otis’ operations and the potential distraction of UTC or Otis management or employees;
UTC’s obligations pursuant to the Raytheon merger agreement to consummate the Otis distribution and the Carrier distribution in accordance with the terms and conditions of the Raytheon merger agreement, including with respect to the timing of the distributions and the requirement that UTC obtain Raytheon’s prior written consent to effect certain changes to the terms of the separation or distributions, and the resulting limitations on UTC’s ability to determine or alter the structure or timing of the internal restructuring, the separation and the distributions or the terms and conditions of the separation agreement or ancillary agreements; and
the impact of the separation on Otis’ business and the risk that the separation may be more difficult, time-consuming or costly than expected, including the impact on Otis’ resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

There can be no assurance that the separation, distribution or any other transaction described above will in fact be consummated in the manner described or at all. The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see the discussions under “Risk Factors.” Any forward-looking statement speaks only as of the date on which it is made, and Otis assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

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THE SEPARATION AND DISTRIBUTION

Overview

On November 26, 2018, UTC announced its intention to separate the Otis Business and the Carrier Business from UTC’s Aerospace Businesses. The separation will occur through pro rata distributions to UTC shareowners of 100 percent of the shares of common stock of Otis and 100 percent of the shares of common stock of Carrier, which were formed to ultimately hold UTC’s Otis Business and Carrier Business, respectively.

In connection with the Otis distribution, we expect that:

UTC will complete the internal reorganization through which Otis will become the parent company of the UTC operations comprising, and the entities that will conduct, the Otis Business;
Otis will incur approximately $[      ] of indebtedness, consisting of a combination of long-term notes and bank term loans; and
using a portion of the proceeds from one or more financing transactions before the distribution is completed, Otis will distribute approximately $[      ] of cash to UTC.

On June 9, 2019, UTC entered into the Raytheon merger agreement, which provides for the combination of the UTC Aerospace Businesses and Raytheon in a merger of equals transaction with Raytheon surviving as a wholly owned subsidiary of UTC. Under the Raytheon merger agreement, UTC has agreed with Raytheon that, subject to the terms and conditions of the Raytheon merger agreement, UTC will consummate the separation and each of the Otis distribution and the Carrier distribution. In addition, the completion of the separation and each of the Otis distribution and the Carrier distribution is a condition to the Raytheon merger pursuant to the Raytheon merger agreement. Accordingly, the Raytheon merger will not be completed unless and until the separation and each of the distributions are completed. The completion of the Raytheon merger is not a condition to the completion of the distributions. Therefore, UTC may complete the distribution even if the conditions to the Raytheon merger under the Raytheon merger agreement have not been satisfied or waived, the Raytheon merger agreement has been terminated or the Raytheon merger will otherwise not be consummated. For additional information, see “Certain Relationships and Related Party Transactions—Raytheon Merger Agreement.”

On [      ], 20[   ], the UTC Board of Directors approved the distribution of all of Otis’ issued and outstanding shares of common stock on the basis of [      ] shares of Otis common stock for every share of UTC common stock held as of the close of business on [      ], 20[   ], the record date.

At [      ], Eastern Time, on [      ], 20[   ], the distribution date, each UTC shareowner will receive [      ] shares of Otis common stock for every share of UTC common stock held at the close of business on the record date, as described below. UTC shareowners will receive cash in lieu of any fractional shares of Otis common stock that they would have received after application of this ratio. Upon completion of the separation, each UTC shareowner as of the record date will continue to own shares of UTC and will receive a proportionate share of the outstanding common stock of Otis to be distributed. You will not be required to make any payment, surrender or exchange your UTC common stock or take any other action to receive your shares of Otis common stock in the distribution. The distribution as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see “—Conditions to the Distribution.” We currently expect the Carrier distribution to occur on or around the date of the Otis distribution, unless otherwise determined by the UTC Board of Directors in its sole and absolute discretion, but subject to UTC’s agreement to consummate each of the Otis distribution and the Carrier distribution as required pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement. Though UTC has agreed pursuant to, and subject to the terms and conditions of the Raytheon merger agreement, that UTC will consummate the separation and each of the Otis distribution and the Carrier distribution, there can be no assurance that the Otis distribution and the Carrier distribution will occur on or around the same date or that either distribution will occur at all.

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Reasons for the Separation

The UTC Board of Directors believes that the separation of UTC into three independent, publicly traded companies through the separation of its Otis Business and Carrier Business is in the best interests of UTC and its shareowners for a number of reasons (irrespective of whether or not the Raytheon merger is completed), including:

Greater Focus and Enhanced Operational Agility. The separation will permit each company to more effectively focus on pursuing its own distinct operating priorities and strategies for long-term growth and profitability, and will better position the management teams of each company to focus on strengthening its core businesses. Maintaining a sharper focus on its core businesses and growth opportunities will allow each company to respond better and more quickly to developments in its industry and to customer demands. In addition, the separation is expected to enhance operational agility of the separated companies, which will lead to improved operating discipline and help drive better results.
Strong Financial Profile of Each Company on a Stand-alone Basis. Each of UTC, Otis and Carrier has established itself as a global leader with the scale to be both self-sufficient and to sustain investment through economic cycles. In addition, each of the companies is expected to have an investment grade credit rating and strong financial characteristics to independently drive growth and investment.
Separate Capital Structures and Allocation Flexibility. The separation will permit each company to allocate its financial resources to meet the unique needs of its own businesses, which will allow each company to intensify its focus on its distinct strategic priorities and individual business risk and return profiles. The separation will also allow each company to more flexibly pursue its own distinct capital structure, capital allocation strategy, and capital return policy. In addition, after the separation, the Otis Business will no longer need to compete within UTC with the UTC Aerospace Businesses and the Carrier Business for capital and other corporate resources.
Creation of Independent Equity Currencies and Increased Strategic Opportunities. The separation will afford Otis and Carrier the ability to offer their independent equity securities to the capital markets and enable each stand-alone business to use its own industry-focused stock to pursue portfolio enhancing acquisitions or other strategic opportunities that are more closely aligned with each company’s strategic goals and expected growth opportunities.
Alignment of Management Incentives with Performance. The separation will allow each company to more effectively recruit, retain and motivate employees through the use of stock-based compensation that more closely reflects and aligns management and employee incentives with specific growth objectives, financial goals and business attributes. Following the separation, recruitment and retention is expected to be enhanced by more consistent talent requirements across the businesses, providing recruiters and applicants with greater clarity and understanding of talent needs and opportunities associated with the core business activities, principles and risks of each company.
Broadening of Investor Base. The separation will allow each company to more effectively articulate a clear investment proposition to attract a long-term investor base suited to its businesses, growth profile and capital allocation priorities, and will facilitate each company’s access to capital by providing investors with three distinct investment opportunities. This is expected to attract shareowners with distinct investment preferences.

The UTC Board of Directors also considered a number of potentially negative factors in evaluating the separation, including:

Risk of Failure to Achieve Anticipated Benefits of the Separation. UTC, Otis and Carrier may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating each company’s business; there may be dis-synergy costs related to the separation, including costs of restructuring transactions and other significant costs; and following the separation, each of UTC, Otis and Carrier may be more susceptible to certain economic and market fluctuations, and other adverse events than if Otis and Carrier were still a part of UTC because each business will be less diversified than UTC prior to the separation.

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Capital Allocation Efficiency and Flexibility. Following the separation, Otis and Carrier may lose capital allocation efficiency and flexibility, as each company will no longer be able to use cash flow from one of UTC’s other businesses to fund its investments and operations. Additionally, as smaller companies, the cost of capital for each company may be higher than UTC’s cost of capital prior to the separation, and each company may not obtain the same credit rating as UTC prior to the separation.
Loss of Scale and Increased Administrative Costs. As part of UTC, Otis and Carrier benefit from UTC’s scale in procuring certain goods and services. After the separation, as stand-alone companies, Otis and Carrier may be unable to obtain these goods, services and technologies at prices or on terms as favorable as those UTC obtained prior to the separation. In addition, as part of UTC, Otis and Carrier benefit from certain functions performed by UTC, such as accounting, auditing, tax, legal, human resources, investor relations, risk management, treasury and other general and administrative functions. After the separation, UTC will not perform these functions for Otis or Carrier (other than certain functions that will be provided for a limited time pursuant to the transition services agreement) and, because of Otis’ and Carrier’s smaller scale as stand-alone companies, the cost of performing such functions could be higher than the amounts reflected in Otis’ or Carrier’s historical financial statements, which would cause profitability to decrease.
Disruptions and Costs Related to the Separation. The actions required to separate Otis’, Carrier’s and UTC’s respective businesses could disrupt each company’s operations. In addition, Otis and Carrier will incur substantial costs in connection with the separation and the transition to being a stand-alone public company, which may include tax costs associated with the internal restructuring and costs to separate shared systems, accounting, tax, legal and other professional services costs, recruiting and relocation costs associated with hiring key senior management personnel who are new to Otis and Carrier.
Limitations on Strategic Transactions. Under the terms of the tax matters agreement that Otis and Carrier will enter into with UTC, Otis and Carrier will be restricted from taking certain actions that could cause the distribution or certain related transactions to fail to qualify as tax-free transactions under applicable law. These restrictions may limit for a period of time Otis’ and Carrier’s ability to pursue certain strategic transactions and equity issuances or engage in other transactions that might increase the value of their business.
Uncertainty Regarding Stock Prices. We cannot predict the effect of the Otis distribution and the Carrier distribution on the trading prices of Otis, Carrier or UTC common stock or know with certainty whether the combined market value of [      ] shares of Otis common stock, the number of shares of Carrier common stock to be distributed per share of UTC common stock in the Carrier distribution and one share of UTC common stock will be less than, equal to or greater than the market value of one share of UTC common stock prior to the distributions. Furthermore, there is the risk of volatility in each company’s stock price following the distribution due to sales by certain shareowners whose investment objectives may not be met by each company’s common stock, and it may take time for each company to attract its optimal shareowner base.

In determining to pursue the separation, the UTC Board of Directors concluded that the potential benefits of the separation outweighed the foregoing factors. For additional information, see “Risk Factors.”

Formation of Otis

Otis was formed in Delaware on March 1, 2019, for the purpose of ultimately holding UTC’s Otis Business. As part of the plan to separate the Otis Business from the remainder of UTC’s businesses, UTC plans to transfer the equity interests of certain entities that are expected to operate the Otis Business and the assets and liabilities of the Otis Business to Otis prior to the distribution. For additional information, see “—Internal Reorganization.”

When and How You Will Receive the Distribution

With the assistance of Computershare, it is expected that UTC will distribute Otis common stock at [      ], Eastern Time, on [      ], 20[   ], the distribution date, to all holders of outstanding UTC common stock as of the close of business on [      ], 20[   ], the record date. Computershare, which currently serves as the transfer agent and registrar for UTC common stock, will serve as the settlement and distribution agent in connection with the distribution and the transfer agent and registrar for Otis common stock.

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If you own UTC common stock as of the close of business on the record date, the Otis common stock that you are entitled to receive in the distribution will be issued electronically, as of the distribution date, to you in book-entry form or to your bank or brokerage firm on your behalf. If you are a registered shareowner of UTC common stock in book-entry form or as physical share certificates, Computershare will mail you a direct registration account statement that reflects your shares of Otis common stock. Book-entry form refers to a method of recording share ownership when no physical share certificates are issued to shareowners, as is the case in this distribution. You will not receive physical share certificates for your shares of Otis common stock.

Most UTC shareowners hold their common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm is said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your UTC common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the Otis common stock that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.

If you sell UTC common stock in the “regular-way” market after the record date and on or before the distribution date, you will be selling your right to receive shares of Otis common stock in the distribution.

Transferability of Shares You Receive

The shares of Otis common stock that will be distributed in connection with the distribution will be transferable without registration under the Securities Act, except for shares received by persons who may be deemed to be our affiliates. Persons who may be deemed to be our affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with us, which may include certain of our executive officers or directors. Securities held by our affiliates will be subject to resale restrictions under the Securities Act. Our affiliates will be permitted to sell shares of our common stock only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.

Number of Shares of Otis Common Stock You Will Receive

For every share of UTC common stock that you own at the close of business on [      ], 20[   ], the record date, you will receive [      ] shares of Otis common stock on the distribution date. UTC will not distribute any fractional shares of Otis common stock to its shareowners. Instead, if you are a registered holder, Computershare will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices and distribute the aggregate cash proceeds (net of discounts and commissions) of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional share in the distribution. If you hold your shares of UTC common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the net cash proceeds of the sales and will electronically credit your account for your share of such proceeds. Computershare, in its sole discretion, without any influence by UTC or Otis, will determine when, how, and through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by Computershare will not be an affiliate of either UTC or Otis, and Computershare is not an affiliate of either UTC or Otis. Neither Otis nor UTC will be able to guarantee any minimum sale price in connection with the sale of these shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts paid in lieu of fractional shares.

The net cash proceeds of these sales of fractional shares will be taxable for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences” for an explanation of certain material U.S. federal income tax consequences of the distribution.

Treatment of Equity-Based Compensation

UTC equity-based compensation awards outstanding as of the distribution date are expected to be adjusted as described below; however, the Compensation Committee of the UTC Board of Directors may alter the treatment of awards in any non-U.S. jurisdiction to the extent that it determines such alteration is necessary or appropriate to avoid adverse tax consequences to the award holders. The description below assumes that the Otis distribution and the Carrier distribution occur on the same day. If the Otis distribution and the Carrier distribution do not occur on the same day, then it is expected that the adjustment methodology described below would be

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appropriately modified by the Compensation Committee of the UTC Board of Directors in a manner that is intended to preserve the aggregate intrinsic value of each award immediately after each of the Otis distribution and the Carrier distribution when compared to the aggregate intrinsic value immediately prior to such distribution (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding.

Because the distribution is expected to be completed prior to the consummation of the Raytheon merger and may occur even if the Raytheon merger agreement is terminated or the Raytheon merger will otherwise not be consummated, the award adjustments described below will occur independent of the Raytheon merger. If the Raytheon merger is consummated, UTC common stock will remain outstanding, and UTC will be renamed “Raytheon Technologies Corporation.” Accordingly, following the Raytheon merger, adjusted equity-based compensation awards relating to UTC common stock will continue to relate to UTC common stock, which will trade on the NYSE under the symbol “RTX.”

Vested Stock Appreciation Right Awards

As of the distribution date, each outstanding and vested UTC stock appreciation right (“SAR”) award will be converted into a SAR award relating to shares of UTC common stock, a SAR award relating to shares of Otis common stock, and a SAR award relating to shares of Carrier common stock. The number of shares subject to each SAR award and the exercise price of each SAR award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC SAR award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted SAR award will be subject to the same terms, post-termination exercise rules and other restrictions that applied to the original UTC SAR award immediately before the distributions.

Unvested Stock Appreciation Right Awards

Awards Held by UTC Employees. As of the distribution date, each outstanding and unvested UTC SAR award held by an employee who is employed by UTC or its subsidiaries (other than Otis and Carrier and their respective subsidiaries) immediately prior to the distributions will remain denominated in shares of UTC common stock, although the number of shares subject to the award and the exercise price of the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC SAR award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted UTC SAR award will be subject to the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original UTC SAR award immediately before the distributions.

Awards Held by Otis Employees. As of the distribution date, each outstanding and unvested UTC SAR award held by an employee who is employed by Otis or one of its subsidiaries immediately prior to the distributions will be converted into an award of SARs relating to Otis common stock, with the number of shares subject to the award and the exercise price of the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC SAR award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Otis SAR award will be subject to the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original UTC SAR award immediately before the distributions.

Awards Held by Carrier Employees. As of the distribution date, each outstanding and unvested UTC SAR award held by an employee who is employed by Carrier or one of its subsidiaries immediately prior to the distributions will be converted into an award of SARs relating to Carrier common stock, with the number of shares subject to the award and the exercise price of the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC SAR award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Carrier SAR award will be subject to the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original UTC SAR award immediately before the distributions.

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Vested Stock Option Awards

As of the distribution date, each outstanding and vested UTC stock option award will be converted into a stock option award denominated in shares of UTC common stock, a stock option award denominated in shares of Otis common stock and a stock option award denominated in shares of Carrier common stock. The number of shares subject to each option award and the exercise price of each option award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC stock option award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted stock option award will be subject to the same terms, post-termination exercise rules and other restrictions that applied to the original UTC stock option award immediately before the distributions.

Unvested Stock Option Awards

Awards Held by UTC Employees. As of the distribution date, each outstanding and unvested UTC stock option award held by an employee who is employed by UTC and its subsidiaries (other than Otis and Carrier and their respective subsidiaries) immediately prior to the distributions will remain denominated in shares of UTC common stock, although the number of shares subject to the award and the exercise price of the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC stock option award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted UTC stock option award will be subject to the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original UTC stock option award immediately before the distributions.

Awards Held by Otis Employees. As of the distribution date, each outstanding and unvested UTC stock option award held by an employee who is employed by Otis or one of its subsidiaries immediately prior to the distributions will be converted into a stock option award denominated in shares of Otis common stock, with the number of shares subject to the award and the exercise price of the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC stock option award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Otis stock option award will be subject to the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original UTC stock option award immediately before the distributions.

Awards Held by Carrier Employees. As of the distribution date, each outstanding and unvested UTC stock option award held by an employee who is employed by Carrier or one of its subsidiaries immediately prior to the distributions will be converted into a stock option award denominated in shares of Carrier common stock, with the number of shares subject to the award and the exercise price of the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC stock option award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Carrier stock option award will be subject to the same terms, vesting conditions, post-termination exercise rules and other restrictions that applied to the original UTC stock option award immediately before the distributions.

Performance Share Unit Awards and Restricted Stock Unit Awards

Conversion of Certain Performance Share Unit Awards into Restricted Stock Unit Awards. Effective as of immediately prior to the distribution date, the level of achievement of the performance goals applicable to outstanding UTC performance share unit awards (other than performance share unit awards with performance goals relating exclusively to the Otis Business or the Carrier Business) will be determined by the Compensation Committee of the UTC Board of Directors and such performance share unit awards will be converted into restricted stock unit awards, which will be subject only to time-based vesting conditions. UTC performance share unit awards with performance goals relating exclusively to the Otis Business or the Carrier Business will remain subject to such performance goals and will continue to constitute performance share unit awards after the adjustments contemplated below.

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Awards Held by UTC Employees and Former UTC Employees. As of the distribution date, each outstanding UTC restricted stock unit award (including each such award that was originally granted as a performance share unit award that was subject to vesting based on UTC performance) held by an employee who is employed by UTC and its subsidiaries (other than Otis and Carrier and their respective subsidiaries) immediately prior to the distributions or a former employee whose last employment was not with Otis or Carrier will remain denominated in shares of UTC common stock, although the number of shares subject to the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC restricted stock unit award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted UTC restricted stock unit award will be subject to the same terms, vesting conditions and other restrictions that applied to the original UTC restricted stock unit award immediately before the distributions.

Awards Held by Otis Employees and Former Otis Employees. As of the distribution date, each outstanding UTC restricted stock unit award (including each such award that was originally granted as a performance share unit award that was subject to vesting based on UTC performance) and each outstanding performance share unit award held by an employee who is employed by Otis or one of its subsidiaries immediately prior to the distributions or a former employee who was last employed by Otis or one of its subsidiaries will be converted into an award of restricted stock units or performance share units, respectively, relating to Otis common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Otis restricted stock unit award and each adjusted Otis performance share unit award will be subject to the same terms, vesting conditions and other restrictions that applied to the original UTC award immediately before the distributions.

Awards Held by Carrier Employees and Former Carrier Employees. As of the distribution date, each outstanding UTC restricted stock unit award (including each such award that was originally granted as a performance share unit award that was subject to vesting based on UTC performance) and each outstanding performance share unit award held by an employee who is employed by Carrier or one of its subsidiaries immediately prior to the distributions or a former employee who was last employed by Carrier or one of its subsidiaries will be converted into an award of restricted stock units or performance share units, respectively, relating to Carrier common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Carrier restricted stock unit award and each adjusted Carrier performance share unit award will be subject to the same terms, vesting conditions and other restrictions that applied to the original UTC award immediately before the distributions.

Vested Director Deferred Stock Unit Awards and Vested Director Deferred Restricted Stock Unit Awards

As of the distribution date, each outstanding and vested UTC deferred stock unit award and vested, deferred UTC restricted stock unit award held by a current or former director of UTC will be converted into an award of deferred stock units or deferred restricted stock units, as applicable, relating to shares of UTC common stock, an award of deferred stock units or deferred restricted stock units, as applicable, relating to shares of Otis common stock and an award of deferred stock units or deferred restricted stock units, as applicable, relating to shares of Carrier common stock. The number of shares subject to each deferred stock unit award or deferred restricted stock unit award, as applicable, will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC deferred stock unit award or deferred restricted stock unit award, as applicable, immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. UTC will retain the liability for adjusted deferred stock unit awards and deferred restricted stock unit awards held by each current director who will serve as a director of UTC after the distributions and each former director, and Otis or Carrier, as applicable, will assume the liability for adjusted deferred stock unit awards and deferred restricted stock unit awards held by each director who will serve as a

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director of Otis or Carrier after the distributions. The adjusted deferred stock unit awards and deferred restricted stock unit awards will be subject to the same terms, payment timing rules and other restrictions that applied to the original UTC deferred stock unit awards or deferred restricted stock unit awards, as applicable, immediately before the distributions, except that (1) for each director who will serve as a director of UTC after the distributions, the adjusted deferred stock unit awards and deferred restricted stock unit awards relating to shares of Otis common stock and shares of Carrier common stock will be cash-settled, (2) for each director who will serve as a director of Otis after the distributions, the adjusted deferred stock unit awards and adjusted deferred restricted stock unit awards relating to shares of UTC common stock and Carrier common stock will be cash-settled and (3) for each director who will serve as a director of Carrier after the distributions, the adjusted deferred stock unit awards and deferred restricted stock unit awards relating to shares of UTC common stock and Otis common stock will be cash-settled.

Unvested Director Deferred Restricted Stock Unit Awards

Awards Held by UTC Directors. As of the distribution date, each outstanding and unvested UTC restricted stock unit award held by a director of UTC who will serve as a director of UTC after the distributions (whether or not such person will also serve as a director of Otis or Carrier) will remain denominated in shares of UTC common stock, although the number of shares subject to the award will be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC restricted stock unit award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted UTC restricted stock unit award will be subject to the same terms, vesting conditions and other restrictions that applied to the original UTC restricted stock unit award immediately before the distributions.

Awards Held by Otis Directors. As of the distribution date, each outstanding and unvested UTC restricted stock unit award held by a director of UTC who will serve as a director of Otis (and not as a director of UTC) after the distributions will be converted into a restricted stock unit award relating to shares of Otis common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC restricted stock unit award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Otis restricted stock unit award will be subject to the same terms, vesting conditions and other restrictions that applied to the original UTC restricted stock unit award immediately before the distributions.

Awards Held by Carrier Directors. As of the distribution date, each outstanding and unvested UTC restricted stock unit award held by a director of UTC who will serve as a director of Carrier (and not as a director of UTC) after the distributions will be converted into a restricted stock unit award relating to shares of Carrier common stock, with the number of shares subject to the award to be adjusted in a manner intended to preserve the aggregate intrinsic value of the original UTC restricted stock unit award immediately after the distributions when compared to the aggregate intrinsic value immediately prior to the distributions (in each case, as calculated based on the applicable stock price measurements specified in the employee matters agreement), subject to rounding. Each adjusted Carrier restricted stock unit award will be subject to the same terms, vesting conditions and other restrictions that applied to the original UTC restricted stock unit award immediately before the distributions.

Internal Reorganization

As part of the separation, and prior to the Otis distribution and the Carrier distribution, it is expected that UTC will complete an internal reorganization in order to transfer: (1) the Otis Business to Otis, which Otis will hold following the separation and (2) the Carrier Business to Carrier, which Carrier will hold following the separation. Among other things and subject to limited exceptions, the internal reorganization is expected to result in Otis and Carrier owning, directly or indirectly, the operations comprising, and the entities that conduct, the Otis Business and the Carrier Business, respectively.

The internal reorganization is expected to include various restructuring transactions pursuant to which (1) the operations, assets and liabilities of UTC used to conduct the Otis Business and the Carrier Business will be separated from the operations, assets and liabilities of UTC used to conduct the UTC Aerospace Businesses,

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(2) such Otis Business operations, assets and liabilities will be contributed, transferred or otherwise allocated to Otis or one of its direct or indirect subsidiaries and (3) such Carrier Business operations, assets and liabilities will be contributed, transferred or otherwise allocated to Carrier or one of its direct or indirect subsidiaries. These restructuring transactions may take the form of asset or equity transfers, mergers, demergers, distributions, contributions and similar transactions, and will involve the formation of new subsidiaries in U.S. and non-U.S. jurisdictions to own and operate the Otis Business, the Carrier Business or the UTC Aerospace Businesses in such jurisdictions.

Following the completion of the internal reorganization and immediately prior to the distribution: (1) Otis will be the parent company of the entities and assets that are expected to conduct the Otis Business; (2) Carrier will be the parent company of the entities and assets that are expected to conduct the Carrier Business; and (3) UTC will remain the parent company of the entities and assets that are expected to conduct the UTC Aerospace Businesses.

Results of the Distribution

After the distribution, Otis will be an independent, publicly traded company. The actual number of shares to be distributed will be determined at the close of business on [      ], 20[   ], the record date, and will reflect any exercise of UTC options that occurs, and any settlement of performance share unit awards or restricted stock unit awards initiated, between the date the UTC Board of Directors declares the distribution and the record date. The distribution will not affect the number of outstanding shares of UTC common stock or any rights of UTC shareowners. UTC will not distribute any fractional shares of Otis common stock.

We will enter into a separation agreement and other related agreements with UTC and Carrier to effect the separation and to provide a framework for our relationship with UTC and Carrier after the separation, and will enter into certain other agreements, including a transition services agreement, a tax matters agreement, an employee matters agreement and an intellectual property agreement. These agreements will allocate among Otis, Carrier and UTC the assets, employees, liabilities and obligations (including, among others, investments, property and employee benefits and tax-related assets and liabilities) of UTC and its subsidiaries attributable to periods prior to, at and after Otis’ and Carrier’s separation from UTC, provide for certain services to be delivered on a transitional basis and govern the relationship among Otis, Carrier and UTC following the separation. These agreements will not be impacted by the completion of the Raytheon merger. For additional information regarding the separation agreement and other transaction agreements, see “Risk Factors—Risks Related to the Distribution” and “Certain Relationships and Related Party Transactions.”

Market for Otis Common Stock

There is currently no public trading market for Otis common stock. Otis intends to apply to list its common stock on the [      ] under the symbol “[      ].” Otis has not and will not set the initial price of its common stock. The initial price will be established by the public markets.

We cannot predict the price at which Otis common stock will trade after the distribution. In fact, the combined trading prices, after the Otis distribution and the Carrier distribution, of [      ] shares of Otis common stock, the number of shares of Carrier common stock to be distributed per share of UTC common stock in the Carrier distribution and one share of UTC common stock, may not equal the “regular-way” trading price of one share of UTC common stock immediately prior to the distributions. The price at which Otis common stock trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for Otis common stock will be determined in the public markets and may be influenced by many factors. See “Risk Factors—Risks Related to Our Common Stock.”

Incurrence of Debt

Otis expects to complete one or more financing transactions before the distribution is completed, with approximately $[      ] of the proceeds of such financings expected to be used to distribute cash to UTC. As a result of such transactions, Otis anticipates having approximately $[      ] of indebtedness upon completion of the distribution. On the distribution date, Otis anticipates that the debt will consist of a combination of long-term notes and bank term loans. For more information, see “Description of Material Indebtedness.”

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Trading Between the Record Date and Distribution Date

Beginning on or shortly before the record date and continuing up to and including through the distribution date, it is expected that there will be two markets in UTC common stock: a “regular-way” market and an “ex-distribution” market. UTC common stock that trades on the “regular-way” market will trade with an entitlement to Otis common stock distributed in the distribution. UTC common stock that trades on the “ex-distribution” market will trade without an entitlement to Otis common stock distributed in the distribution. Therefore, if you sell shares of UTC common stock in the “regular-way” market up to and including through the distribution date, you will be selling your right to receive shares of Otis common stock in the distribution. If you own UTC common stock at the close of business on the record date and sell those shares on the “ex-distribution” market up to and including through the distribution date, you will receive the shares of Otis common stock that you are entitled to receive pursuant to your ownership of shares of UTC common stock as of the record date.

Furthermore, beginning on or shortly before the record date and continuing up to and including the distribution date, Otis expects that there will be a “when-issued” market in its common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for Otis common stock that will be distributed to holders of UTC common stock on the distribution date. If you owned UTC common stock at the close of business on the record date, you would be entitled to Otis common stock distributed pursuant to the distribution. You may trade this entitlement to shares of Otis common stock, without trading the UTC common stock you own, on the “when-issued” market. On the first trading day after the distribution is completed, “when-issued” trading with respect to Otis common stock will end, and “regular-way” trading with respect to Otis common stock will begin.

Conditions to the Distribution

The distribution will be effective at [      ], Eastern Time, on [      ], 20[   ], which is the distribution date, provided that the conditions set forth in the separation agreement have been satisfied (or waived by UTC in its sole and absolute discretion), subject to UTC’s agreement to consummate the distribution pursuant to, and subject to the terms and conditions of, the Raytheon merger agreement. The conditions set forth in the separation agreement include, among others:

the SEC declaring effective the registration statement of which this information statement forms a part and such registration statement not being the subject of any stop order or any legal, administrative, arbitral or other action, suit, investigation, proceeding, indictment or litigation by the SEC seeking a stop order;
this information statement having been made available to UTC shareowners;
the receipt by UTC and continuing validity of (1) an IRS ruling satisfactory to the UTC Board of Directors and (2) an opinion of outside counsel, satisfactory to the UTC Board of Directors, regarding the qualification of certain elements of the distribution under Section 355 of the Code;
the internal reorganization having been completed and the transfer of assets and liabilities of the Otis Business from UTC and its affiliates to Otis and its affiliates and the Carrier Business from UTC and its affiliates to Carrier and its affiliates, and the transfer of assets and liabilities of the UTC Aerospace Businesses from Otis and its affiliates and Carrier and its affiliates to UTC and its affiliates (other than Otis, Carrier and their respective affiliates), as set forth in the separation agreement, having been completed in all material respects;
the receipt by the UTC Board of Directors of one or more opinions (which have not been withdrawn or adversely modified) in customary form from one or more nationally recognized valuation or accounting firms or investment banks as to (1) the adequacy of surplus under Delaware law with respect to Otis to effect the distribution from Otis to UTC of certain proceeds from the financing arrangements described under “Description of Material Indebtedness” prior to the effective time of the distribution, and with respect to UTC to effect the distribution, and (2) the solvency of each of UTC and Otis after the completion of the distribution;

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all actions or filings necessary or appropriate under applicable U.S. federal, state or other securities or blue sky laws and the rules and regulations thereunder having been taken and, where applicable, having become effective or been accepted by the applicable governmental entity;
the execution of the transition services agreement, the tax matters agreement, the employee matters agreement and the intellectual property agreement contemplated by the separation agreement;
no governmental entity of competent jurisdiction having issued or entered any injunction or other decree, order, judgment, writ, stipulation, award or temporary restraining order, and no applicable law having been enacted or promulgated, in each case that (whether temporary or permanent) has the effect of enjoining or otherwise prohibiting the consummation of the separation, the distribution or any of the related transactions;
the shares of Otis common stock to be distributed having been approved for listing on the [      ], subject to official notice of distribution;
UTC having received certain proceeds from the financing arrangements described under “Description of Material Indebtedness” and being satisfied in its sole and absolute discretion that it will have no liability under such arrangements as of the effective time of the distribution; and
no other event or development existing or having occurred that, in the judgment of UTC’s Board of Directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and the other related transactions.

Until the distribution occurs, UTC will have the discretion to determine (and change) the terms of the distribution and to determine the record date, the distribution date and the distribution ratio; however, any such determination or change will be subject to UTC’s obligations to complete the separation and each of the Otis distribution and the Carrier distribution in accordance with the terms and conditions of the Raytheon merger agreement (including, with respect to certain changes, the requirement that UTC obtain Raytheon’s prior written consent).

UTC may waive any of the conditions to the distribution. UTC can decline at any time to go forward with the distribution, may go forward with the Otis distribution even if the Carrier distribution does not occur or may go forward with the Carrier distribution even if the Otis distribution does not occur.

However, under the Raytheon merger agreement, UTC has agreed with Raytheon that, subject to the terms and conditions of the Raytheon merger agreement, UTC will consummate the separation and each of the Otis distribution and the Carrier distribution. In addition, the completion of the separation and each of the Otis distribution and the Carrier distribution is a condition to the Raytheon merger pursuant to the Raytheon merger agreement. Accordingly, the Raytheon merger will not be completed unless and until the separation and each of the distributions are completed. The completion of the Raytheon merger is not a condition to the completion of the distributions. Therefore, UTC may complete the distribution even if the conditions to the Raytheon merger under the Raytheon merger agreement have not been satisfied or waived, the Raytheon merger agreement has been terminated or the Raytheon merger will otherwise not be consummated.

UTC does not intend to notify its shareowners of any modifications to the terms of the separation or distribution that, in the judgment of its Board of Directors, are not material. For example, the UTC Board of Directors might consider material such matters as significant changes to the distribution ratio and the assets to be contributed or the liabilities to be assumed in the separation. To the extent that the UTC Board of Directors determines that any modifications by UTC materially change the material terms of the distribution, UTC will notify UTC shareowners in a manner reasonably calculated to inform them about the modification as may be required by law, by, for example, publishing a press release, filing a current report on Form 8-K or circulating a supplement to this information statement.

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DIVIDEND POLICY

Following the distribution, we expect that Otis will initially pay a cash dividend on a quarterly basis at an annual rate of $[      ] per share. However, the timing, declaration, amount of, and payment of any dividends will be within the discretion of Otis’ Board of Directors and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by Otis’ Board of Directors. Moreover, if as expected we determine to initially pay a dividend following the distribution, there can be no assurance that we will continue to pay dividends in the same amounts or at all thereafter.

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Capitalization

The following table sets forth our capitalization as of December 31, 2019, on a historical basis and on a pro forma basis to give effect to the pro forma adjustments included in the unaudited pro forma combined financial information included elsewhere in this information statement. The information below is not necessarily indicative of what our capitalization would have been had the separation, distribution and related financing transactions been completed as of December 31, 2019. In addition, it is not indicative of our future capitalization and may not reflect the capitalization or financial condition that would have resulted had we operated as a stand-alone public company as of the applicable dates presented. This table should be read in conjunction with “Unaudited Pro Forma Combined Financial Information,” “Selected Historical Combined Financial Data of Otis,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and notes included in the “Index to Combined Financial Statements” section of this information statement.

 
December 31, 2019
(dollars in millions)
Actual
Pro Forma
Cash
 
 
 
 
 
 
Cash and cash equivalents
$
         
 
$
         
 
 
 
 
 
 
 
 
Capitalization:
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt Outstanding
 
 
 
 
 
 
Short-term borrowings
$
 
 
$
 
 
Long-term debt
 
 
 
 
 
 
Total Indebtedness
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity
 
 
 
 
 
 
Common stock, par value $1.00
$
 
 
$
 
 
Additional paid-in capital
 
 
 
 
 
 
UTC net investment
 
 
 
 
 
 
Accumulated other comprehensive loss
 
 
 
 
 
 
Total UTC Net Investment
 
 
 
 
 
 
Noncontrolling interests
 
 
 
 
 
 
Total Equity
 
 
 
 
 
 
Total Capitalization
$
 
 
$
 
 

Otis has not yet finalized its post-distribution capitalization. Pro forma financial information reflecting Otis’ post-distribution capitalization will be included in an amendment to this information statement.

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Selected Historical Combined Financial Data of Otis

The following selected historical combined financial data reflects the combined operations of Otis. The historical combined statements of operations data for the years ended December 31, 2018 and December 31, 2017 and the related historical combined balance sheet data as of December 31, 2018 and December 31, 2017 have been derived from Otis’ audited combined financial statements and the notes thereto, which are included elsewhere in this information statement. The selected unaudited historical combined financial data as of, and for, each of the years ended December 31, 2016 and December 31, 2015 have been derived from our underlying financial records, which were derived from the financial records of UTC. In management’s opinion, the unaudited combined financial statements have been prepared on substantially the same basis as the audited combined financial statements and include all adjustments, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the selected historical combined financial data for the periods presented.

Our audited historical combined financial statements include certain expenses of UTC that were allocated to us for certain functions, including general corporate expenses related to finance, legal, insurance, compliance, employee benefits and incentives, information technology and human resources services. These expenses have been allocated to us on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis with UTC and Carrier of net sales, headcount or other measures when applicable. We believe the basis on which the expenses have been allocated are a reasonable reflection of the utilization of services provided to or the benefit received by us during the periods presented. Nevertheless, such allocations may not represent the actual expenses that we may have incurred if Otis had been an independent public company during the periods or at the dates presented. As such, the combined financial statements do not necessarily reflect what our financial condition and results of operations would have been had Otis operated as an independent public company during the periods or at the dates presented.

The selected historical financial data below are not necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. This information is only a summary and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the combined financial statements and the notes thereto included elsewhere in this information statement.

 
Years ended December 31,
(dollars in millions)
2019
2018
2017
2016
(Unaudited)
2015
(Unaudited)
Results of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales
$
      
 
$
12,915
 
$
12,323
 
$
11,886
 
$
11,980
 
Operating profit
 
 
 
 
1,835
 
 
1,916
 
 
2,037
 
 
2,213
 
Net income(1)
 
 
 
 
1,210
 
 
809
 
 
1,397
 
 
1,469
 
Net income attributable to Otis Worldwide Corporation(1)(2)
 
 
 
 
1,049
 
 
636
 
 
1,197
 
 
1,255
 
New Equipment Orders:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Equipment orders(2)
$
 
 
$
6,248
 
$
6,094
 
$
6,080
 
$
6,317
 
(1)2018 amounts include a tax charge of $143 million that will become due when previously reinvested earnings of certain international subsidiaries are remitted. 2017 amounts include a $507 million tax charge, representing TCJA related adjustments. These amounts relate to U.S. income tax attributable to previously undistributed earnings of the Otis Business’ international subsidiaries and equity investments and the revaluation of the U.S. deferred income taxes.
(2)New Equipment orders represent the net future sales value of contractual obligations to provide our products (including installation) under purchase orders, contracts, options, long-term agreements or other forms of legally binding contractual arrangements.
 
As of December 31,
(dollars in millions)
2019
2018
2017
2016
(Unaudited)
2015
(Unaudited)
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
      
 
$
9,135
 
$
9,089
 
$
8,584
 
$
8,525
 
Working capital(1)
 
 
 
 
309
 
 
579
 
 
682
 
 
748
 
Total liabilities
$
 
 
$
6,920
 
$
6,426
 
$
5,584
 
$
5,557
 
(1)The decrease in working capital during the historical period primarily reflects the year-over-year increases in advanced billings on sales contracts and services billing as well as accrued compensation and benefits.

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Unaudited Pro Forma Combined FinanciaL Information

The unaudited pro forma combined financial information presented below has been derived from our audited historical combined financial statements included in this information statement. While the historical combined financial statements reflect the past financial results of the Otis Business, this pro forma information gives effect to the separation of that business into an independent, publicly traded company. The pro forma adjustments to reflect the separation and distribution include:

the separation of the assets (including the equity interests of certain subsidiaries) and liabilities related to UTC’s Otis Business from UTC and the transfer of those assets (including the equity interests of certain subsidiaries) and liabilities to Otis;
the distribution of 100 percent of our issued and outstanding common stock by UTC in connection with the separation;
the effect of our anticipated post-separation capital structure, including the incurrence of indebtedness of approximately $[      ] and the distribution of approximately $[      ] of cash to UTC; and
the impact of the separation, distribution and related transactions contemplated by the separation agreement, the transition services agreement, the tax matters agreement, the employee matters agreement and the intellectual property agreement among us, Carrier and UTC, and the provisions contained therein.

We currently estimate that the one-time separation costs we will incur, consisting primarily of employee-related costs such as recruitment and relocation expenses, costs to establish certain stand-alone functions and information technology systems, professional services fees and other transaction-related costs during our transition to being a stand-alone public company, will range from approximately $[      ] to $[      ]. We have not adjusted the accompanying unaudited pro forma combined financial information for these estimated separation costs as the costs are not expected to have an ongoing effect on our operating results.

The pro forma adjustments are based on the available information and assumptions our management believes are reasonable; however, such adjustments are subject to change as the costs of operating as a stand-alone company are determined. In addition, such adjustments are estimates and may not prove to be accurate. The unaudited pro forma combined financial information has been derived from the historical combined financial statements included in this information statement and includes certain adjustments to give effect to events that are (1) directly attributable to the separation, distribution and related transactions, (2) factually supportable and (3) with respect to the statements of operations, expected to have a continuing impact on the combined results of the operations of Otis.

The Unaudited Pro Forma Combined Statement of Operations for the year ended December 31, 2019 has been prepared as though the distribution occurred on January 1, 2019. The Unaudited Pro Forma Combined Balance Sheet as of December 31, 2019 has been prepared as though the distribution occurred on December 31, 2019. The unaudited pro forma combined financial information, which was prepared in accordance with Article 11 of Regulation S-X, is for illustrative purposes only, and does not reflect what our financial position and results of operations would have been had the distribution occurred on the date indicated and is not necessarily indicative of our future financial position and future results of operations. One-time transaction-related costs incurred prior to, or concurrent with, the expected distribution are not included in the pro forma statement of operations. Otis will incur certain nonrecurring third-party costs related to the separation, distribution and related transactions. Such nonrecurring amounts will include financial advisory, information technology, legal, accounting, consulting and other professional advisory fees and other transaction-related costs that will not be capitalized. The pro forma statement of operations does not reflect these nonrecurring expenses. Liabilities associated with such one-time transaction-related costs, however, are accrued and reflected on the “Unaudited Pro Forma Combined Balance Sheet.”

The unaudited pro forma combined financial information should be read in conjunction with our audited historical combined financial statements, “Capitalization” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this information statement. The unaudited pro forma combined financial information constitutes forward-looking information and is subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this information statement.

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Unaudited Pro Forma Combined Statement of Operations
For the Year Ended December 31, 2019

Dollars in millions,
except per share amounts
Historical
Pro Forma
Adjustments
(Note 2)
Pro Forma
Year Ended
December 31,
2019
Net sales
 
 
 
 
 
 
 
 
 
 
 
 
Product sales
$
       
 
$
       
 
 
$
       
 
Service sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs and expenses
 
 
 
 
 
 
 
 
 
 
Cost of products sold
 
 
 
 
 
 
 
 
 
 
Cost of services sold
 
 
 
 
 
 
 
 
 
 
Research and development
 
 
 
 
 
 
 
 
 
 
Selling, general and administrative
 
 
 
 
 
 
 
 
 
 
Transaction costs
 
 
 
 
 
 
(A)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other income (expense), net
 
 
 
 
 
 
 
 
 
 
Operating profit
 
 
 
 
 
 
 
 
 
 
Non-service pension (benefit) cost
 
 
 
 
 
 
 
 
 
 
Interest expense (income), net
 
 
 
 
 
 
(G)
 
 
 
 
 
 
 
 
 
 
(H)
 
 
 
Income (loss) from operations before income taxes
 
 
 
 
 
 
 
 
 
 
Income tax expense (benefit)