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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
 ____________________________________ 
FORM 10-Q
____________________________________ 
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission file number 001-39221
____________________________________ 
OTIS WORLDWIDE CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware 83-3789412
(State or other jurisdiction of incorporation)(I.R.S. Employer Identification No.)
One Carrier Place, Farmington, Connecticut 06032
(Address of principal executive offices, including zip code)

(860) 233-6847
(Registrant's telephone number, including area code)
____________________________________ 
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange
on which registered
Common Stock ($0.01 par value)OTISNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý.    No  ¨.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý.    No  ¨.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerýAccelerated Filer¨
Non-accelerated Filer¨Smaller Reporting Company☐
Emerging Growth Company☐
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐.    No  ý.

At September 30, 2020 there were 433,194,734 shares of Common Stock outstanding.
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OTIS WORLDWIDE CORPORATION
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended September 30, 2020
 
 Page

Otis Worldwide Corporation and its subsidiaries' names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of Otis Worldwide Corporation and its subsidiaries. Names, abbreviations of names, logos, and products and service designators of other companies are either the registered or unregistered trademarks or tradenames of their respective owners. As used herein, the terms "we," "us," "our," "the Company" "the Business," or "Otis," unless the context otherwise requires, mean Otis Worldwide Corporation and its subsidiaries. References to internet websites in this Form 10-Q are provided for convenience only. Information available through these websites is not incorporated by reference into this Form 10-Q.
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PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements

OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) 
 Quarter Ended September 30,
(dollars in millions, except per share amounts)20202019
Net sales:
Product sales$1,423 $1,450 
Service sales1,845 1,863 
3,268 3,313 
Costs and expenses:
Cost of products sold1,172 1,184 
Cost of services sold1,117 1,154 
Research and development37 39 
Selling, general and administrative481 444 
2,807 2,821 
Other income (expense), net(7)(10)
Operating profit454 482 
Non-service pension cost (benefit)2 (16)
Interest expense (income), net39 (6)
Net income before income taxes413 504 
Income tax expense103 143 
Net income310 361 
Less: Noncontrolling interest in subsidiaries' earnings44 44 
Net income attributable to common shareholders$266 $317 
Earnings per share (Note 3):
Basic$0.61 $0.73 
Diluted$0.61 $0.73 

See accompanying Notes to Condensed Consolidated Financial Statements
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) 
 Nine Months Ended September 30,
(dollars in millions, except per share amounts)20202019
Net sales:
Product sales$3,840 $4,221 
Service sales5,423 5,544 
9,263 9,765 
Costs and expenses:
Cost of products sold3,158 3,453 
Cost of services sold3,338 3,452 
Research and development112 118 
Selling, general and administrative1,387 1,329 
7,995 8,352 
Other income (expense), net(69)(35)
Operating profit1,199 1,378 
Non-service pension cost (benefit)— (38)
Interest expense (income), net85 (8)
Net income before income taxes1,114 1,424 
Income tax expense337 411 
Net income777 1,013 
Less: Noncontrolling interest in subsidiaries' earnings122 115 
Net income attributable to common shareholders$655 $898 
Earnings per share (Note 3):
Basic$1.51 $2.07 
Diluted$1.51 $2.07 

See accompanying Notes to Condensed Consolidated Financial Statements
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

Quarter Ended September 30,Nine Months Ended September 30,
(dollars in millions)2020201920202019
Net income$310 $361 $777 $1,013 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments28 (91)(56)(96)
Pension and postretirement benefit plan adjustments3 2 7 (17)
Change in unrealized cash flow hedging6 (3)5 (5)
Other comprehensive income (loss), net of tax37 (92)(44)(118)
Comprehensive income347 269 733 895 
Less: Comprehensive income attributable to noncontrolling interest(57)(31)(139)(102)
Comprehensive income attributable to common shareholders$290 $238 $594 $793 

See accompanying Notes to Condensed Consolidated Financial Statements
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in millions, except par value)September 30, 2020December 31, 2019
Assets
Cash and cash equivalents$1,733 $1,446 
Accounts receivable (net of allowance for expected credit losses of $156 and $83)
2,958 2,861 
Contract assets481 529 
Inventories, net667 571 
Other current assets432 251 
Total Current Assets6,271 5,658 
Future income tax benefits456 373 
Fixed assets (net of accumulated depreciation of $1,154 and $1,082)
721 721 
Operating lease right-of-use assets548 535 
Intangible assets, net489 490 
Goodwill1,700 1,647 
Other assets288 263 
Total Assets$10,473 $9,687 
Liabilities and (Deficit) Equity
Short-term borrowings$538 $34 
Accounts payable1,392 1,331 
Accrued liabilities1,858 1,739 
Contract liabilities2,503 2,270 
Total Current Liabilities6,291 5,374 
Long-term debt5,512 5 
Future pension and postretirement benefit obligations601 590 
Operating lease liabilities375 386 
Future income tax obligations 448 695 
Other long-term liabilities629 311 
Total Liabilities13,856 7,361 
Commitments and contingent liabilities (Note 17)
Redeemable noncontrolling interest98 95 
Shareholders' (Deficit) Equity:
Preferred Stock, $0.01 par value, 125 shares authorized; None issued or outstanding
— — 
Common Stock, $0.01 par value, 2,000 shares authorized; 433.2 shares issued and outstanding
4 — 
Additional paid-in capital32 — 
Accumulated deficit(3,241)— 
UTC Net Investment— 2,458 
Accumulated other comprehensive income (loss)(819)(758)
Total Shareholders' (Deficit) Equity(4,024)1,700 
Noncontrolling interest543 531 
Total (Deficit) Equity(3,481)2,231 
Total Liabilities and (Deficit) Equity$10,473 $9,687 
See accompanying Notes to Condensed Consolidated Financial Statements
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Common StockAdditional Paid-In CapitalAccumulated DeficitUTC Net (Deficit) InvestmentAccumulated Other Comprehensive Income (Loss)Total Shareholders'
(Deficit) Equity		Noncontrolling InterestTotal (Deficit) EquityRedeemable Noncontrolling Interest
(amounts in millions)SharesAmount
Quarter Ended September 30, 2020
Balance July 1, 2020433 $4 $15 $(3,418)$— $(843)$(4,242)$570 $(3,672)$96 
Net income— — — 266 — — 266 44 310 — 
Stock-based compensation— — 17 — — — 17 — 17 — 
Other comprehensive income (loss), net of tax— — — — — 24 24 14 38 (1)
Cash dividends declared ($0.20 per common share)
— — — (86)— — (86)— (86)— 
Dividends attributable to noncontrolling interest— — — — — — — (84)(84)— 
Acquisitions, disposals and other changes in noncontrolling interest— — — — — — — (1)(1)— 
Changes in redeemable noncontrolling interest redemption value— — — (3)— — (3)— (3)3 
Balance at September 30, 2020433 $4 $32 $(3,241)$— $(819)$(4,024)$543 $(3,481)$98 
Quarter Ended September 30, 2019
Balance July 1, 2019— $— $— $— $2,545 $(734)$1,811 $513 $2,324 $109 
Net transfers to UTC— — — — (255)— (255)— (255)— 
Net income— — — — 317 — 317 44 361 — 
Redeemable noncontrolling interest in subsidiaries' earnings— — — — — — — 1 1 (1)
Other comprehensive income (loss), net of tax— — — — — (79)(79)(13)(92)— 
Purchase of subsidiary shares from noncontrolling interest— — — — — — — (2)(2)— 
Dividends attributable to noncontrolling interest— — — — — — — (23)(23)— 
Acquisition, disposal and other changes in noncontrolling interest— — — — — — — 2 2 — 
Changes in redeemable noncontrolling interest redemption value— — — — — — — — — (1)
Balance at September 30, 2019— $— $— $— $2,607 $(813)$1,794 $522 $2,316 $107 

See accompanying Notes to Condensed Consolidated Financial Statements
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)
Common StockAdditional Paid-In CapitalAccumulated DeficitUTC Net Investment (Deficit)Accumulated Other Comprehensive Income (Loss)Total Shareholders'
(Deficit) Equity		Noncontrolling InterestTotal (Deficit) EquityRedeemable Noncontrolling Interest
(amounts in millions)SharesAmount
Nine Months Ended September 30, 2020
Balance January 1, 2020— $— $— $— $2,458 $(758)$1,700 $531 $2,231 $95 
Net transfers to UTC and Separation-related transactions— — — — (6,150)— (6,150)— (6,150)— 
Issuance of common stock and reclassification of deficit433 4 — (3,556)3,552 — — — — — 
Net income— — — 490 165 — 655 122 777 — 
Stock-based compensation— — 32 — — — 32 — 32 — 
Other comprehensive income (loss), net of tax— — — — — (61)(61)21 (40)(4)
Cash dividends declared ($0.40 per common share)
— — — (173)— — (173)— (173)— 
Dividends attributable to noncontrolling interest— — — — — — — (123)(123)— 
Acquisitions, disposals and other changes in noncontrolling interest— — — 4 — — 4 (8)(4)— 
Changes in redeemable noncontrolling interest redemption value— — — (6)— — (6)— (6)7 
Adoption of credit loss standard, net of tax (Note 6)— — — — (25)— (25)— (25)— 
Balance at September 30, 2020433 $4 $32 $(3,241)$— $(819)$(4,024)$543 $(3,481)$98 
Nine Months Ended September 30, 2019
Balance January 1, 2019— $— $— $— $2,277 $(708)$1,569 $537 $2,106 $109 
Net transfers to UTC— — — — (568)— (568)— (568)— 
Net income— — — — 898 — 898 115 1,013 — 
Redeemable noncontrolling interest in subsidiaries' earnings— — — — — — — 7 7 (7)
Other comprehensive income (loss), net of tax— — — — — (105)(105)(11)(116)(2)
Purchase of subsidiary shares from noncontrolling interest— — — — — — — (3)(3)— 
Dividends attributable to noncontrolling interest— — — — — — — (129)(129)— 
Acquisitions, disposals and other changes in noncontrolling interest— — — — — — — 6 6 — 
Changes in redeemable noncontrolling interest redemption value— — — — — — — — — 7 
Balance at September 30, 2019— $— $— $— $2,607 $(813)$1,794 $522 $2,316 $107 

See accompanying Notes to Condensed Consolidated Financial Statements
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
(dollars in millions)20202019
Operating Activities:
Net income$777 $1,013 
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions:
Depreciation and amortization140 135 
Deferred income tax benefit(51)(31)
Stock compensation cost44 29 
Loss on fixed asset impairment55 — 
Loss on disposal of business— 19 
Change in:
Accounts receivable, net(79)(153)
Contract assets and liabilities, current277 108 
Inventories, net(101)31 
Other current assets57 2 
Accounts payable19 (42)
Accrued liabilities(81)(94)
Pension contributions(28)(25)
Other operating activities, net142 23 
Net cash flows provided by operating activities1,171 1,015 
Investing Activities:
Capital expenditures(112)(98)
Investments in businesses, net of cash acquired (Note 8)(50)(39)
Investments in equity securities(51)— 
Payments on settlements of derivative contracts(63)(1)
Other investing activities, net(13)(12)
Net cash flows used in investing activities(289)(150)
Financing Activities:
Proceeds from issuance of long-term debt6,300 — 
Payment of long-term debt issuance costs(43)— 
Repayment of long-term debt(750)— 
Increase in short-term borrowings, net510 18 
Net transfers to UTC(6,330)(598)
Dividends paid on Common Stock(173)— 
Dividends paid to noncontrolling interest(125)(132)
Other financing activities, net22 18 
Net cash flows used in financing activities(589)(694)
Effect of foreign exchange rate changes on cash and cash equivalents— (41)
Net increase in cash and cash equivalents293 130 
Cash, cash equivalents and restricted cash, beginning of year1,459 1,346 
Cash, cash equivalents and restricted cash, end of period1,752 1,476 
Less: Restricted cash19 16 
Cash and cash equivalents, end of period$1,733 $1,460 

See accompanying Notes to Condensed Consolidated Financial Statements
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OTIS WORLDWIDE CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

The Condensed Consolidated Financial Statements at September 30, 2020 and for the quarters and nine months ended September 30, 2020 and 2019 are unaudited, but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the results for the interim periods. The Condensed Consolidated Balance Sheet at December 31, 2019 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles ("GAAP") in the United States. The results reported in these Condensed Consolidated Financial Statements should not necessarily be taken as indicative of results that may be expected for the entire year. The financial information included herein should be read in conjunction with the financial statements and notes in our registration statement on Form 10 (File No. 001-39221), initially filed with the Securities and Exchange Commission (“SEC”) on February 7, 2020, as amended by Amendment No. 1 filed on March 11, 2020 ("Form 10").

Note 1: Description of Business and Separation from United Technologies Corporation

Otis (as defined below) is the world’s largest elevator and escalator manufacturing, installation and service company. Our operations are classified into two segments: New Equipment and Service. Through the New Equipment segment, we design, manufacture, sell and install a wide range of passenger and freight elevators, as well as escalators and moving walkways, for residential and commercial building and infrastructure projects. The Service segment provides maintenance and repair services for both our products and those of other manufacturers, and provides modernization services to upgrade elevators and escalators.

On November 26, 2018, United Technologies Corporation, subsequently renamed to Raytheon Technologies Corporation on April 3, 2020 ("UTC"), announced its intention to spin-off its Otis reportable segment into a separate publicly-traded company (the "Separation"). On April 3, 2020, the Company became an independent publicly-traded company through a pro-rata distribution of 0.5 shares of Otis common stock for every share of UTC common stock held at the close of business on the record date of March 19, 2020 (the "Distribution"). Otis began to trade as a separate public company (New York Stock Exchange ("NYSE"): OTIS) on April 3, 2020.

Unless the context otherwise requires, references to "Otis", "we", "us", "our" and "the Company" refer to (i) Otis Worldwide Corporation's business (the "Business") prior to the Separation and (ii) Otis Worldwide Corporation and its subsidiaries following the Separation, as applicable.

The Separation was completed pursuant to a Separation and Distribution Agreement ("Separation Agreement") and other agreements with UTC related to the Separation, including but not limited to a transition services agreement (the "Transition Service Agreement" or "TSA"), a tax matters agreement (the "Tax Matters Agreement" or "TMA"), an employee matters agreement (the "Employee Matters Agreement" or "EMA") and an intellectual property agreement (the "Intellectual Property Agreement"). For further discussion on these agreements, see Note 5.

Note 2: Basis of Presentation

Prior to the Separation on April 3, 2020, our historical financial statements were prepared on a standalone combined basis and were derived from the consolidated financial statements and accounting records of UTC. For the period subsequent to April 3, 2020, our financial statements are presented on a consolidated basis as the Company became a standalone public company (collectively, the financial statements for all periods presented, including the historical results of the Company prior to April 3, 2020, are now referred to as "Condensed Consolidated Financial Statements" to reflect this change). They have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and accordingly, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted.

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Prior to the Separation on April 3, 2020, the Condensed Consolidated Statements of Operations included all revenues and costs directly attributable to Otis, including costs for facilities, functions and services used by Otis. Costs for certain functions and services performed by centralized UTC organizations were directly charged to Otis based on specific identification when possible or based on a reasonable allocation driver such as net sales, headcount, usage or other allocation methods. All charges and allocations for facilities, functions and services performed by UTC organizations have been deemed settled in cash by Otis to UTC in the period in which the cost was recorded on the Condensed Consolidated Statements of Operations. Current and deferred income taxes were determined based on the standalone results of Otis. However, because the Company was included in UTC’s tax group in certain jurisdictions, the Company's actual tax balances may differ from those reported. The Company's portion of its domestic income taxes and certain income taxes for jurisdictions outside the United States are deemed to have been settled in the period the related tax expense was recorded prior to the Separation.

All significant intracompany accounts and transactions within the Company have been eliminated in the preparation of the Condensed Consolidated Financial Statements. Prior to the Separation, the Condensed Consolidated Financial Statements of the Company include assets and liabilities that have been determined to be specifically or otherwise attributable to the Company.

Certain amounts presented in the Form 10 have been reclassified to conform to the current period presentation, which are immaterial.

Risks and Uncertainties. In March 2020, the World Health Organization declared the outbreak of the novel strain of coronavirus ("COVID-19"), a global pandemic and recommended a number of restrictive measures to contain the spread, which were implemented to different degrees by governments across the world. As the global pandemic continues, the Company continues to closely monitor and manage the impact of the COVID-19 pandemic on its business globally. It is difficult to estimate at this time the duration and extent of the impact of the pandemic on the Company's business, financial position, cash flow and results of operations. The results of our operations and overall financial performance were impacted during the quarter ended and nine months ended September 30, 2020.

Due to existing conditions and uncertainty, the Company believes that COVID-19 will have an impact on its business, cash flow and results of operations at least for the remainder of the year ending December 31, 2020. The extent of the impact will depend largely on future developments, which are highly uncertain, including the emergence of additional information concerning the severity of the outbreak, timing, efficacy and availability of a vaccine, actions taken by government authorities to further contain the outbreak or address its impact and its longer-term impacts on the global economy, among other factors.

Use of Estimates. We assessed certain accounting matters that generally require consideration of forecasted financial information in the context of the information reasonably available to us and the unknown future impacts of COVID-19 at September 30, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for credit losses, the carrying value of our goodwill and other long-lived assets, financial assets and revenue recognition. While there was not a material impact to our Condensed Consolidated Financial Statements as of and for the quarter and nine months ended September 30, 2020 resulting from our assessments of these matters, future assessment of our current expectations at that time of the magnitude and duration of COVID-19, as well as other factors, could result in material impacts to our Condensed Consolidated Financial Statements in future reporting periods.

Note 3: Earnings per Share

On April 3, 2020, the date of consummation of the Separation, 433,079,455 shares of the Company's common stock, par value $0.01 per share, were distributed to UTC shareholders of record as of March 19, 2020. This share amount is being utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation as all common stock was owned by UTC prior to the Separation. For the 2019 quarter and year to date calculations, these shares are treated as issued and outstanding at January 1, 2019 for purposes of calculating historical basic and diluted earnings per share.

Prior to the Separation, Otis employees participated in UTC's equity incentive plans, pursuant to which they were granted stock options, stock appreciation rights, restricted stock units, and performance-based restricted stock units. All awards granted under these plans related to UTC common shares. Upon Separation, outstanding awards held by Otis employees under UTC's equity incentive plans were converted in accordance with the EMA using the conversion ratios set forth in the EMA. Depending on whether the awards held on the Separation date were in an unvested or vested status, Otis employees either received converted awards solely in Otis based shares (unvested status) or a combination of Otis, UTC and Carrier Global Corporation ("Carrier") share based awards (vested status). Former Otis employees, and current and former legacy UTC and Carrier employees, who on the Separation date were holding outstanding UTC awards in a vested status also received a combination of
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Otis, UTC and Carrier awards post-spin. The conversion methodology used was calculated in accordance with the EMA and with the purpose of maintaining the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value immediately prior to the Separation. See Note 10, for further detail.

For the purpose of the below diluted earnings per share computation, we only included the units associated with the converted Otis share-based awards. These awards were assumed to be outstanding beginning from April 3, 2020, the Separation date.

 Quarter Ended September 30,Nine Months Ended September 30,
(dollars in millions, except per share amounts; shares in millions)2020201920202019
Net income attributable to common shareholders$266 $317 $655 $898 
Basic weighted average number of shares outstanding433.2 433.1 433.1 433.1 
Stock awards and equity units (share equivalent)1.9 — 1.0 — 
Diluted weighted average number of shares outstanding435.1 433.1 434.1 433.1 
Earnings Per Share of Common Stock:
Basic:$0.61 $0.73 $1.51 $2.07 
Diluted:$0.61 $0.73 $1.51 $2.07 

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock appreciation rights and stock options, when the average market price of the common stock is lower than the exercise price of the related stock awards during the period because the effect would be anti-dilutive. In addition, the computation of diluted earnings per share excludes the effect of the potential exercise of stock awards when the awards' assumed proceeds exceed the average market price of the common shares during the period. There were 5.0 million and 4.8 million of anti-dilutive stock awards excluded from the computation for the quarter and nine months ended September 30, 2020, respectively.

Note 4: Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification ("ASC") Topic 606: Revenue from Contracts with Customers.

Performance Obligations. The Company's revenue streams include new equipment, maintenance and repair and modernization (including related installation). New equipment, modernization and repair services revenue is typically recognized over time as we are enhancing an asset the customer controls. Maintenance revenue is recognized on a straight-line basis over the life of the maintenance contract.

For new equipment and modernization transactions, equipment and installation are typically procured in a single contract providing the customer with a complete installed elevator or escalator unit. The combination of equipment and installation are typically a single performance obligation. For repair services, the customer typically contracts for specific short-term services which form a single performance obligation. For these performance obligations, revenue is recognized over time using costs incurred to date relative to total estimated costs at completion in order to measure progress.

For maintenance contracts, given the continuous nature of the maintenance services throughout the year, we recognize revenue on maintenance contracts on a straight-line basis which aligns with the cost profile of these services.

Contract Assets and Liabilities. Contract assets reflect revenue recognized in advance of customer billing. Contract liabilities are recognized when a customer pays consideration, or we have a right to receive an amount of unconditional consideration, in advance of the satisfaction of performance obligations under the contract. We typically receive progress payments from our customers as we perform our work over time.
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Total Contract assets and Contract liabilities at September 30, 2020 and December 31, 2019 are as follows:
(dollars in millions)September 30, 2020December 31, 2019
Contract assets, current$481 $529 
Total contract assets481 529 
Contract liabilities, current2,503