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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, 2021
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
____________________________________ 

https://cdn.kscope.io/39e29742b17367f612ef616a7d52bb62-otis-20210930_g1.jpg
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) 674-3000
(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  ¨.
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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
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 October 15, 2021 there were 424,768,965 shares of Common Stock outstanding.
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OTIS WORLDWIDE CORPORATION
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended September 30, 2021
 
 Page

Otis Worldwide Corporation's and its subsidiaries' names, abbreviations thereof, logos, and product and service designators are all either the registered or unregistered trademarks or tradenames of Otis Worldwide Corporation and its subsidiaries. Names, abbreviations of names, logos, and 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" 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,
(amounts in millions, except per share amounts)20212020
Net sales:
Product sales$1,681 $1,423 
Service sales1,939 1,845 
3,620 3,268 
Costs and expenses:
Cost of products sold1,381 1,172 
Cost of services sold1,179 1,117 
Research and development39 37 
Selling, general and administrative479 481 
3,078 2,807 
Other income (expense), net (7)
Operating profit542 454 
Non-service pension cost (benefit)2 2 
Interest expense (income), net33 39 
Net income before income taxes507 413 
Income tax expense128 103 
Net income379 310 
Less: Noncontrolling interest in subsidiaries' earnings48 44 
Net income attributable to common shareholders$331 $266 
Earnings per share (Note 3):
Basic$0.78 $0.61 
Diluted$0.77 $0.61 
Weighted average number of shares outstanding
     Basic shares425.8433.2
     Diluted shares430.6435.1

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,
(amounts in millions, except per share amounts)20212020
Net sales:
Product sales$4,866 $3,840 
Service sales5,863 5,423 
10,729 9,263 
Costs and expenses:
Cost of products sold3,986 3,158 
Cost of services sold3,589 3,338 
Research and development113 112 
Selling, general and administrative1,445 1,387 
9,133 7,995 
Other income (expense), net16 (69)
Operating profit1,612 1,199 
Non-service pension cost (benefit)6  
Interest expense (income), net92 85 
Net income before income taxes1,514 1,114 
Income tax expense404 337 
Net income1,110 777 
Less: Noncontrolling interest in subsidiaries' earnings145 122 
Net income attributable to common shareholders$965 $655 
Earnings per share (Note 3):
Basic$2.25 $1.51 
Diluted$2.23 $1.51 
Weighted average number of shares outstanding
Basic shares428.5433.1
Diluted shares432.0434.1

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)2021202020212020
Net income$379 $310 $1,110 $777 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(37)28 (39)(56)
Pension and postretirement benefit plan adjustments4 3 11 7 
Change in unrealized cash flow hedging4 6 1 5 
Other comprehensive income (loss), net of tax(29)37 (27)(44)
Comprehensive income (loss), net of tax350 347 1,083 733 
Less: Comprehensive income attributable to noncontrolling interest(43)(57)(130)(139)
Comprehensive income attributable to common shareholders$307 $290 $953 $594 

See accompanying Notes to Condensed Consolidated Financial Statements.
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(dollars in millions)September 30, 2021December 31, 2020
Assets
Cash and cash equivalents$1,553 $1,782 
Accounts receivable (net of allowance for expected credit losses of $177 and $161)
3,217 3,148 
Contract assets536 458 
Inventories, net628 659 
Other current assets441 446 
Total Current Assets6,375 6,493 
Future income tax benefits352 334 
Fixed assets (net of accumulated depreciation of $1,173 and $1,197)
775 774 
Operating lease right-of-use assets553 542 
Intangible assets, net434 484 
Goodwill1,702 1,773 
Other assets281 310 
Total Assets$10,472 $10,710 
Liabilities and (Deficit) Equity
Short-term borrowings$38 $701 
Accounts payable1,662 1,453 
Accrued liabilities1,905 1,977 
Contract liabilities2,758 2,542 
Total Current Liabilities6,363 6,673 
Long-term debt5,458 5,262 
Future pension and postretirement benefit obligations635 654 
Operating lease liabilities364 367 
Future income tax obligations 274 321 
Other long-term liabilities611 634 
Total Liabilities13,705 13,911 
Commitments and contingent liabilities (Note 18)
Redeemable noncontrolling interest62 83 
Shareholders' (Deficit) Equity:
Common Stock and additional paid-in capital102 59 
Treasury Stock(725) 
Accumulated deficit(2,404)(3,076)
Accumulated other comprehensive income (loss)(827)(815)
Total Shareholders' (Deficit) Equity(3,854)(3,832)
Noncontrolling interest559 548 
Total (Deficit) Equity(3,295)(3,284)
Total Liabilities and (Deficit) Equity$10,472 $10,710 

See accompanying Notes to Condensed Consolidated Financial Statements.
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

Common Stock and Additional Paid-In CapitalTreasury StockAccumulated DeficitAccumulated Other Comprehensive Income (Loss)Total Shareholders'
(Deficit) Equity
Noncontrolling InterestTotal (Deficit) EquityRedeemable Noncontrolling Interest
(dollars in millions, except per share amounts)
Quarter Ended September 30, 2021
Balance June 30, 2021$86 $(506)$(2,633)$(803)$(3,856)$539 $(3,317)$63 
Net income  331  331 48 379  
Other comprehensive income (loss), net of tax   (24)(24)(5)(29) 
Stock-based compensation and Common Stock issued under employee plans18  (1) 17  17  
Cash dividends declared ($0.24 per common share)
  (102) (102) (102) 
Repurchase of Common Shares (219)  (219) (219) 
Dividends attributable to noncontrolling interest     (24)(24) 
Acquisitions, disposals and other changes(2) 1  (1)1  (1)
Balance at September 30, 2021$102 $(725)$(2,404)$(827)$(3,854)$559 $(3,295)$62 
Quarter Ended September 30, 2020
Balance June 30, 2020$19 $— $(3,418)$(843)$(4,242)$570 $(3,672)$96 
Net income— — 266 — 266 44 310 — 
Other comprehensive income (loss), net of tax— — — 24 24 14 38 (1)
Stock-based compensation17 — — — 17 — 17 — 
Cash dividends declared ($0.20 per common share)
— — (86)— (86)— (86)— 
Dividends attributable to noncontrolling interest— — — — — (84)(84)— 
Acquisitions, disposals and other changes— — (3)— (3)(1)(4)3 
Balance at September 30, 2020$36 $— $(3,241)$(819)$(4,024)$543 $(3,481)$98 

See accompanying Notes to Condensed Consolidated Financial Statements.
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(Unaudited)

Common Stock and Additional Paid-In CapitalTreasury StockAccumulated DeficitUTC Net Investment (Deficit)Accumulated Other Comprehensive Income (Loss)Total Shareholders'
(Deficit) Equity
Noncontrolling InterestTotal (Deficit) EquityRedeemable Noncontrolling Interest
(dollars in millions, except per share amounts)
Nine Months Ended September 30, 2021
Balance December 31, 2020$59 $ $(3,076)$ $(815)$(3,832)$548 $(3,284)$83 
Net income  965   965 145 1,110  
Other comprehensive income (loss), net of tax    (12)(12)(13)(25)(2)
Stock-based compensation and Common Stock issued under employee plans45  (2)  43  43  
Cash dividends declared ($0.68 per common share)
  (291)  (291) (291) 
Repurchase of Common Shares (725)   (725) (725) 
Dividends attributable to noncontrolling interest      (131)(131)(1)
Acquisitions, disposals and other changes(2)    (2)10 8 (18)
Balance at September 30, 2021$102 $(725)$(2,404)$ $(827)$(3,854)$559 $(3,295)$62 
Nine Months Ended September 30, 2020
Balance December 31, 2019$ $— $ $2,458 $(758)$1,700 $531 $2,231 $95 
Net transfers (to) from UTC— — — (6,150)— (6,150)— (6,150)— 
Issuance of common stock and reclassification of deficit4 — (3,556)3,552 — — —  — 
Net income— — 490 165 — 655 122 777 — 
Other comprehensive income (loss), net of tax— — — — (61)(61)21 (40)(4)
Stock-based compensation32 — — — — 32 — 32 — 
Cash dividends declared ($0.40 per common share)
— — (173)— — (173)— (173)— 
Dividends attributable to noncontrolling interest— — — — — — (123)(123)— 
Acquisitions, disposals and other changes— — (2)— — (2)(8)(10)7 
Adoption of credit loss standard, net of tax (Note 6)— — — (25)— (25)— (25)— 
Balance at September 30, 2020$36 $— $(3,241)$ $(819)$(4,024)$543 $(3,481)$98 

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)20212020
Operating Activities:
Net income$1,110 $777 
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions:
Depreciation and amortization152 140 
Deferred income tax expense (benefit)(72)(51)
Stock compensation cost48 44 
Loss on fixed asset impairment 55 
Change in operating assets and liabilities:
Accounts receivable, net(107)(79)
Contract assets and liabilities, current140 277 
Inventories, net18 (101)
Other current assets12 57 
Accounts payable230 19 
Accrued liabilities(29)(81)
Pension contributions(23)(28)
Other operating activities, net(6)142 
Net cash flows provided by operating activities1,473 1,171 
Investing Activities:
Capital expenditures(115)(112)
Investments in businesses and intangible assets, net of cash acquired (Note 8)(59)(50)
Investments in equity securities(18)(51)
Proceeds from sale of equity securities58  
Receipts (payments) on settlements of derivative contracts35 (63)
Other investing activities, net30 (13)
Net cash flows used in investing activities(69)(289)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)(294)510 
Proceeds from borrowings (maturities longer than 90 days)152  
Repayments of borrowings (maturities longer than 90 days)(503) 
Proceeds from issuance of long-term debt199 6,300 
Payment of debt issuance costs(11)(43)
Repayment of long-term debt (750)
Net transfers to UTC (6,330)
Dividends paid on Common Stock(291)(173)
Repurchases of Common Stock(725) 
Dividends paid to noncontrolling interest(130)(125)
Other financing activities, net(18)22 
Net cash flows used in financing activities(1,621)(589)
Effect of foreign exchange rate changes on cash and cash equivalents(11) 
Net increase (decrease) in cash and cash equivalents(228)293 
Cash, cash equivalents and restricted cash, beginning of year1,801 1,459 
Cash, cash equivalents and restricted cash, end of period1,573 1,752 
Less: Restricted cash20 19 
Cash and cash equivalents, end of period$1,553 $1,733 
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, 2021 and for the quarters and nine months ended September 30, 2021 and 2020 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, 2020 was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles ("GAAP") in the United States ("U.S."). 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 Company's annual consolidated financial statements and accompanying notes included in our Annual Report to Shareholders ("2020 Annual Report") incorporated by reference in our Annual Report on Form 10-K for fiscal year 2020 ("2020 Form 10-K" or "Form 10-K").

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

Otis (as defined below) is the world’s leading 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 September 23, 2021, the Company announced a tender offer to acquire all of the issued and outstanding shares of Zardoya Otis, S.A. ("Zardoya Otis") not owned by the Company at a price of €7.00 per share in cash (the "Tender Offer"), and its intention to delist the shares of Zardoya Otis from the Madrid, Barcelona, Bilbao and Valencia stock exchanges subsequent to the Tender Offer. The price per share to be paid in the Tender Offer was adjusted to €6.93 as a result of the dividend paid by Zardoya Otis on October 11, 2021. The Tender Offer is subject to approval by the Comisión Nacional del Mercado de Valores (the "CNMV"), which is responsible for the regulation of Spanish securities markets. The value of the issued and outstanding shares of Zardoya Otis not owned by the Company is €1.63 billion based on the tender price of €6.93 after the adjustment for dividends paid on October 11, 2021. The Company owned a controlling interest and had operational control of Zardoya Otis as of and for the periods ended September 30, 2021 and 2020, and therefore its financial results are included in our Condensed Consolidated Financial Statements. As of September 30, 2021, the Company owned 50.02% of Zardoya Otis. See Note 9, "Borrowings and Lines of Credit" and Note 17, "Guarantees" for additional information regarding financing and guarantee agreements entered into by the Company in connection with the Tender Offer.

On November 26, 2018, United Technologies Corporation, subsequently renamed to Raytheon Technologies Corporation on April 3, 2020 ("UTC" or "RTX", as applicable), announced its intention to spin-off its Otis reportable segment and its Carrier reportable segment into two separate publicly-traded companies (the "Separation"). On April 3, 2020, the Company became an independent publicly-traded company through a pro-rata distribution of 0.5 shares of 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: 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 prior to the Separation and (ii) Otis Worldwide Corporation and its subsidiaries following the Separation, as applicable. References to "UTC" relate to pre-Separation matters, and references to "RTX" relate to post-Separation matters.

The Separation was completed pursuant to a Separation and Distribution Agreement (the "Separation Agreement") and other agreements with our former parent, 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, "Related Parties".

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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 our former parent, 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.

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 our former parent, 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 our former parent 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 U.S. 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.

Use of Estimates. The preparation of these Condensed Consolidated Financial Statements and accompanying notes in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those 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, 2021 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 September 30, 2021 and for the quarters and nine months ended September 30, 2021 and 2020, respectively, 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.

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

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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 quarter and nine months ended September 30, 2020, these shares are treated as issued and outstanding at January 1, 2020 for purposes of calculating historical basic and diluted earnings per share.

 Quarter Ended September 30,Nine Months Ended September 30,
(dollars in millions, except per share amounts; shares in millions)2021202020212020
Net income attributable to common shareholders$331 $266 $965 $655 
Basic weighted average number of shares outstanding425.8 433.2 428.5 433.1 
Stock awards and equity units (share equivalent)4.8 1.9 3.5 1.0 
Diluted weighted average number of shares outstanding430.6 435.1 432.0 434.1 
Earnings Per Share of Common Stock:
Basic:$0.78 $0.61 $2.25 $1.51 
Diluted:$0.77 $0.61 $2.23 $1.51 

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 0.1 million and 5.0 million of anti-dilutive stock awards excluded from the computation for the quarters ended September 30, 2021 and 2020, respectively, and 0.1 million and 4.8 million for the nine months ended September 30, 2021 and 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, 2021 and December 31, 2020 are as follows:

(dollars in millions)September 30, 2021December 31, 2020
Contract assets, current$536 $458 
Total contract assets536 458 
Contract liabilities, current2,758 2,542 
Contract liabilities, non-current (included within Other long-term liabilities)46 44 
Total contract liabilities 2,804 2,586 
Net contract liabilities$2,268 $2,128 

Contract assets increased by $78 million during the nine months ended September 30, 2021 as a result of the progression of current contracts and timing of billing on customer contracts. Contract liabilities increased by $218 million during the nine months ended September 30, 2021 primarily due to contract billings in excess of revenue earned. In the nine months ended September 30, 2021 and 2020, we recognized revenue of $1.9 billion and $1.5 billion related to contract liabilities as of January 1, 2021 and 2020, respectively.

Remaining Performance Obligations ("RPO"). RPO represents the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. As of September 30, 2021, our total RPO was $17.3 billion. Of the total RPO as of September 30, 2021, we expect 88% will be recognized as sales over the following 24 months.

Note 5: Related Parties

In connection with the Separation as further described in Note 1, the Company entered into several agreements with our former parent, UTC, and Carrier. These agreements include the Separation Agreement that sets forth certain agreements with UTC and Carrier regarding the principal actions to be taken in connection with the Separation, including identifying the assets transferred, the liabilities assumed and the contracts transferred to each of UTC, Carrier and Otis as part of the Separation, and when and how these transfers and assumptions occurred.

Other agreements that we entered into that govern aspects of our relationship with RTX and Carrier following the Separation include the TSA, TMA, EMA and Intellectual Property Agreement. Under the TSA, which is substantially completed as of September 30, 2021, RTX provided the Company certain services and we provided certain services to RTX. The TMA governs the parties' respective rights, responsibilities and obligations with respect to tax matters, and among other things imposes restrictions on Otis during the two-year period following the Distribution that are intended to prevent certain transactions from failing to qualify as transactions that are generally tax-free. The EMA allocates among Otis, UTC, and Carrier the liabilities and responsibilities relating to employment matters, employee compensation and benefit plans, benefit programs and other related matters.

Net Transfers from (to) UTC and Separation Transactions. In connection with the Separation, certain assets and liabilities were contributed to the Company by our former parent, UTC, leading up to and at the time of the Separation. During the quarter ended March 31, 2020, net liabilities of $43 million were contributed to the Company by our former parent, UTC, primarily consisting of deferred tax assets and liabilities and fixed assets. Prior to the Separation, these non-cash contributions were recorded as Net transfers (to) from UTC on the Condensed Consolidated Statements of Changes in Equity through UTC Net Investment during the quarter ended March 31, 2020.
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Upon Separation, the following were recorded as Net transfers (to) from UTC and Separation-related transactions on the Consolidated Statements of Changes in Equity through UTC Net Investment:

(dollars in millions)
Cash and cash equivalents$220 
Taxes and other187 
Total$407 

Prior to the Separation, our former parent, UTC, paid Otis Cash and cash equivalents of $190 million in connection with the Separation Agreement, and approximately $30 million as settlement of related party receivables due from UTC to Otis as a result of a cash overdraft as of March 31, 2020.

Additionally, the Tax Cuts and Jobs Act (the "TCJA") imposed a non-recurring toll charge, paid in installments over an 8-year period on deemed repatriated earnings of foreign subsidiaries as of December 31, 2017. Under the terms of the TMA, Otis will indemnify RTX for a percentage of the toll charge installment payments due after April 3, 2020. As a result, a portion of Otis' future income tax obligations corresponding to the toll charge was reclassified as a contractual indemnity obligation within Other long-term liabilities on the Condensed Consolidated Balance Sheet. The TMA also provides for RTX to indemnify Otis for certain foreign tax obligations as a result of Otis' inclusion in certain foreign consolidated tax returns prior to the Separation. As a result, Otis has reflected this contractual indemnification asset within Other current assets and the related tax obligations within Accrued liabilities on the Condensed Consolidated Balance Sheet. As a result of the Separation and the provisions of the TMA, Otis' total net tax-related liabilities on April 3, 2020 were reduced by $191 million, comprising the following impacts to the Condensed Consolidated Balance Sheet:

(dollars in millions)Increase (Decrease)
Assets
Other current assets$167 
Total Current Assets167 
Future income tax benefits(4)
Total Assets$163 
Liabilities and (Deficit) Equity
Accrued liabilities$110 
Total Current Liabilities110 
Future income tax obligations(377)
Other long-term liabilities239 
Total Liabilities(28)
Total Shareholders' (Deficit) Equity191 
Total (Deficit) Equity191 
Total Liabilities and (Deficit) Equity$163 

There were also $4 million of Other long-term liabilities recorded upon Separation on the Condensed Consolidated Balance Sheet.

Shared Costs. The Condensed Consolidated Financial Statements have been prepared on a standalone basis for the periods prior to the Separation on April 3, 2020, and for those periods are derived from the consolidated financial statements and accounting records of UTC. Prior to the Separation, the Company had been managed and operated in the normal course of business with other affiliates of UTC, and UTC incurred significant corporate costs such as treasury, tax, accounting, human resources, audit, legal, purchasing, information technology and other such services. The costs associated with these services generally included all payroll and benefit costs, as well as overhead costs related to certain functions. All such amounts have been deemed to have been incurred and settled by the Company in the period in which the costs were recorded.

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Accordingly, for periods prior to the Separation, shared costs of $16 million were allocated to the Company and reflected as expenses in Selling, general and administrative expense on the Condensed Consolidated Statements of Operations for the nine months ended September 30, 2020. There were