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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 March 31, 2022

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) 674-3000

(Registrant's telephone number, including area code)

____________________________________ 

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

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock ($0.01 par value)			OTIS			New York Stock Exchange
0.000% Notes due 2023			OTIS/23			New York Stock Exchange
0.318% Notes due 2026			OTIS/26			New York Stock Exchange
0.934% Notes due 2031			OTIS/31			New 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 Filer			ý			Accelerated Filer			¨
Non-accelerated Filer			¨			Smaller Reporting Company			☐
						Emerging Growth Company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ¨

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

At April 15, 2022 there were 422,794,427 shares of Common Stock outstanding.

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OTIS WORLDWIDE CORPORATION

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Quarter Ended March 31, 2022

 

			Page
PART I – FINANCIAL INFORMATION			4
Item 1. Unaudited Financial Statements:			4
Condensed Consolidated Statements of Operations for the quarters ended March 31, 2022 and 2021			4
Condensed Consolidated Statements of Comprehensive Income for the quarters ended March 31, 2022 and 2021			5
Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021			6
Condensed Consolidated Statements of Changes in Equity for the quarters ended March 31, 2022 and 2021			7
Condensed Consolidated Statements of Cash Flows for the quarters ended March 31, 2022 and 2021			8
Notes to Condensed Consolidated Financial Statements			9
Report of Independent Registered Public Accounting Firm			25
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			26
Item 3. Quantitative and Qualitative Disclosures About Market Risk			38
Item 4. Controls and Procedures			38
PART II – OTHER INFORMATION			41
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			41
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			41
Item 6. Exhibits			42
SIGNATURES			43

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 March 31,
(amounts in millions, except per share amounts)						2022						2021
Net sales:
Product sales						$	1,422					$	1,458
Service sales						1,992						1,950
						3,414						3,408
Costs and expenses:
Cost of products sold						1,190						1,187
Cost of services sold						1,218						1,202
Research and development						37						35
Selling, general and administrative						459						482
						2,904						2,906
Other income (expense), net						16						7
Operating profit						526						509
Non-service pension cost (benefit)						—						2
Interest expense (income), net						37						32
Net income before income taxes						489						475
Income tax expense						136						123
Net income						353						352
Less: Noncontrolling interest in subsidiaries' earnings						42						44
Net income attributable to Otis Worldwide Corporation						$	311					$	308
Earnings per share (Note 2):
Basic						$	0.73					$	0.71
Diluted						$	0.73					$	0.71
Weighted average number of shares outstanding
Basic shares						424.2						431.6
Diluted shares						427.7						433.7

See accompanying Notes to Condensed Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

						Quarter Ended March 31,
(dollars in millions)						2022						2021
Net income						$	353					$	352
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments						—						(22)
Pension and postretirement benefit plan adjustments						2						4
Change in unrealized cash flow hedging						—						(4)
Other comprehensive income (loss), net of tax						2						(22)
Comprehensive income (loss), net of tax						355						330
Less: Comprehensive (income) loss attributable to noncontrolling interest						23						(30)
Comprehensive income attributable to Otis Worldwide Corporation						$	378					$	300

See accompanying Notes to Condensed Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in millions)						March 31, 2022						December 31, 2021
Assets
Cash and cash equivalents						$	1,235					$	1,565
Restricted cash						1,841						1,910
Accounts receivable (net of allowance for expected credit losses of $188 and $175)						3,262						3,232
Contract assets						538						550
Inventories, net						626						622
Other current assets						342						382
Total Current Assets						7,844						8,261
Future income tax benefits						311						335
Fixed assets (net of accumulated depreciation of $1,144 and $1,156)						757						774
Operating lease right-of-use assets						542						526
Intangible assets, net						397						419
Goodwill						1,636						1,667
Other assets						308						297
Total Assets						$	11,795					$	12,279
Liabilities and Equity (Deficit)
Short-term borrowings						$	51					$	24
Accounts payable						1,507						1,556
Accrued liabilities						1,754						1,993
Contract liabilities						2,930						2,674
Total Current Liabilities						6,242						6,247
Long-term debt						6,694						7,249
Future pension and postretirement benefit obligations						547						558
Operating lease liabilities						386						336
Future income tax obligations						261						267
Other long-term liabilities						606						606
Total Liabilities						14,736						15,263
Commitments and contingent liabilities (Note 16)
Redeemable noncontrolling interest						1,981						160
Shareholders' Equity (Deficit):
Common Stock and additional paid-in capital						121						119
Treasury Stock						(925)						(725)
Accumulated deficit						(3,529)						(2,256)
Accumulated other comprehensive income (loss)						(696)						(763)
Total Shareholders' Equity (Deficit)						(5,029)						(3,625)
Noncontrolling interest						107						481
Total Equity (Deficit)						(4,922)						(3,144)
Total Liabilities and Equity (Deficit)						$	11,795					$	12,279

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 Capital						Treasury Stock						Accumulated Deficit												Accumulated Other Comprehensive Income (Loss)						Total Shareholders' (Deficit) Equity						Noncontrolling Interest						Total (Deficit) Equity						Redeemable Noncontrolling Interest
(dollars in millions, except per share amounts)
Quarter Ended March 31, 2022
Balance as of December 31, 2021																		$	119					$	(725)					$	(2,256)											$	(763)					$	(3,625)					$	481					$	(3,144)					$	160
Net income																		—						—						311												—						311						33						344						9
Other comprehensive income (loss), net of tax																		—						—						—												67						67						(1)						66						(64)
Stock-based compensation and Common Stock issued under employee plans																		5						—						—												—						5						—						5						—
Cash dividends declared ($0.24 per Common Share)																		—						—						(102)												—						(102)						—						(102)						—
Repurchase of Common Shares																		—						(200)						—												—						(200)						—						(200)						—
Dividends attributable to noncontrolling interest																		—						—						—												—						—						(3)						(3)						(10)
Reclassification of noncontrolling interest to redeemable noncontrolling interest (Note 1)																		—						—						(1,482)												—						(1,482)						(403)						(1,885)						1,885
Acquisitions, disposals and other changes																		(3)						—						—												—						(3)						—						(3)						1
Balance as of March 31, 2022																		$	121					$	(925)					$	(3,529)											$	(696)					$	(5,029)					$	107					$	(4,922)					$	1,981
Quarter Ended March 31, 2021
Balance as of December 31, 2020																		$	59					$	—					$	(3,106)											$	(815)					$	(3,862)					$	467					$	(3,395)					$	194
Net income																		—						—						308												—						308						41						349						3
Other comprehensive income (loss), net of tax																		—						—						—												(8)						(8)						(7)						(15)						(7)
Stock-based compensation and Common Stock issued under employee plans																		9						—						—												—						9						—						9						—
Cash dividends declared ($0.20 per Common Share)																		—						—						(87)												—						(87)												(87)						—
Repurchase of Common Shares																		—						(300)						—												—						(300)						—						(300)						—
Dividends attributable to noncontrolling interest																		—						—						—												—						—						(22)						(22)						(10)
Acquisition, disposal and other changes																		—						—						—												—						—						12						12						(17)
Balance as of March 31, 2021																		$	68					$	(300)					$	(2,885)											$	(823)					$	(3,940)					$	491					$	(3,449)					$	163

See accompanying Notes to Condensed Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

						Quarter Ended March 31,
(dollars in millions)						2022						2021
Operating Activities:
Net income						$	353					$	352
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions:
Depreciation and amortization						48						51
Deferred income tax expense (benefit)						17						(28)
Stock compensation cost						13						14
Change in operating assets and liabilities:
Accounts receivable, net						(51)						(14)
Contract assets and liabilities, current						278						328
Inventories, net						(14)						(39)
Other current assets						56						61
Accounts payable						(36)						29
Accrued liabilities						(178)						(160)
Pension contributions						(12)						(13)
Other operating activities, net						30						4
Net cash flows provided by operating activities						504						585
Investing Activities:
Capital expenditures						(30)						(44)
Investments in businesses and intangible assets, net of cash acquired (Note 6)						(8)						(24)
Proceeds from the sale of (investments in) marketable securities						(7)						(18)
Receipts (payments) on settlements of derivative contracts						28						8
Other investing activities, net						—						28
Net cash flows used in investing activities						(17)						(50)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)						26						(244)
Proceeds from borrowings (maturities longer than 90 days)						—						152
Repayments of borrowings (maturities longer than 90 days)						—						(250)
Proceeds from issuance of long-term debt						—						199
Payment of debt issuance costs						—						(2)
Repayment of long-term debt						(500)						—
Dividends paid on Common Stock						(102)						(87)
Repurchases of Common Stock						(200)						(300)
Dividends paid to noncontrolling interest						(33)						(32)
Other financing activities, net						(14)						(10)
Net cash flows provided by (used in) financing activities						(823)						(574)
Effect of foreign exchange rate changes on cash and cash equivalents						(63)						(17)
Net increase (decrease) in cash, cash equivalents and restricted cash						(399)						(56)
Cash, cash equivalents and restricted cash, beginning of year						3,477						1,801
Cash, cash equivalents and restricted cash, end of period						3,078						1,745
Less: Restricted cash						1,843						20
Cash and cash equivalents, end of period						$	1,235					$	1,725

See accompanying Notes to Condensed Consolidated Financial Statements.

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OTIS WORLDWIDE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1: General

The Condensed Consolidated Financial Statements as of March 31, 2022 and for the quarters ended March 31, 2022 and 2021 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 as of December 31, 2021 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 on Form 10-K for fiscal year 2021 ("2021 Form 10-K" or "Form 10-K").

There have been no changes to the Company's significant accounting policies described in the Company's Form 10-K that have a material impact on the Company's Condensed Consolidated Financial Statements and the related notes. The Company adjusted a missclassification between noncontrolling interest and redeemable noncontrolling interest in the Condensed Consolidated Balance sheet as of March 31, 2021, resulting in an increase to Redeemable noncontrolling interest of $98 million, a decrease to Noncontrolling interest of $68 million and a decrease to Accumulated deficit of $30 million. Refer to Note 2 of the Company’s audited consolidated financial statements and notes thereto included in the our 2021 Form 10-K.

On April 3, 2020, the Company became an independent publicly-traded company (the "Separation") through a pro-rata distribution of 0.5 shares of Common Stock for every share of United Technologies Corporation, subsequently renamed to Raytheon Technologies Corporation ("UTC" or "RTX", as applicable), common stock held at the close of business on the record date of March 19, 2020. 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 Otis Worldwide Corporation and its subsidiaries.

Zardoya Otis Tender Offer

The Company previously 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 in cash (the "Tender Offer"), and its intention to delist the shares of Zardoya Otis from the Spanish stock exchanges subsequent to the Tender Offer. The price per share of the Tender Offer was €7.07 in cash as of March 31, 2022, after adjustments for dividends paid. The Tender Offer was approved by the Spanish regulator on February 28, 2022. As a result of the Tender Offer approval, the issued and outstanding shares of Zardoya Otis not owned by the Company were deemed redeemable at the option of the other shareholders and were reclassified from Noncontrolling interest to Redeemable noncontrolling interest on our Condensed Consolidated Balance Sheet, with the difference between the historical noncontrolling interest carrying value in the balance sheet and the fair value of the Tender Offer recorded to Accumulated deficit. The value of the issued and outstanding shares of Zardoya Otis not owned by the Company as of March 31, 2022 is €1.66 billion based on the adjusted tender price of €7.07 per share. See Note 19, "Subsequent Events" for additional information regarding the outcome of the Tender Offer.

The Company owned a controlling interest and had operational control of Zardoya Otis as of and for the periods ended March 31, 2022 and 2021, and therefore its financial results are included in our Condensed Consolidated Financial Statements. As of March 31, 2022, the Company owned 50.02% of Zardoya Otis.

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.

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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 as of March 31, 2022 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 March 31, 2022 and for the quarters ended March 31, 2022 and 2021, 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.

We also assessed certain accounting matters as they relate to the current crisis in Ukraine and Russia, including, but not limited to our allowance for credit losses, the carrying value of long-lived assets, revenue recognition and the classification of assets. There was not a material impact to our Condensed Consolidated Financial Statements as of March 31, 2022 and for the quarter ended March 31, 2022 resulting from our assessment of this matter. We continue to assess the impact on our results of operations, financial position and overall performance as the situation develops and any broader implications it may have on the global economy.

Note 2: Earnings per Share

						Quarter Ended March 31,
(dollars in millions, except per share amounts; shares in millions)						2022						2021
Net income attributable to Otis Worldwide Corporation						$	311					$	308
Impact of redeemable noncontrolling interest						—						—
Net income attributable to common shareholders						$	311					$	308
Basic weighted average number of shares outstanding						424.2						431.6
Stock awards and equity units (share equivalent)						3.5						2.1
Diluted weighted average number of shares outstanding						427.7						433.7
Earnings Per Share of Common Stock:
Basic						$	0.73					$	0.71
Diluted						$	0.73					$	0.71

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 2.6 million and 5.1 million of anti-dilutive stock awards excluded from the computation for the quarters ended March 31, 2022 and 2021, respectively.

Note 3: Revenue Recognition

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

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 as of March 31, 2022 and December 31, 2021 are as follows:

(dollars in millions)						March 31, 2022						December 31, 2021
Contract assets, current						$	538					$	550
Total contract assets						538						550
Contract liabilities, current						2,930						2,674
Contract liabilities, non-current (included within Other long-term liabilities)						52						52
Total contract liabilities						2,982						2,726
Net contract liabilities						$	2,444					$	2,176

Contract assets decreased by $12 million during the quarter ended March 31, 2022 as a result of the progression of current contracts and timing of billing on customer contracts. Contract liabilities increased by $256 million during the quarter ended March 31, 2022 primarily due to contract billings in excess of revenue earned. In the quarters ended March 31, 2022 and 2021, we recognized revenue of $1.0 billion and $1.1 billion related to contract liabilities as of January 1, 2022 and 2021, respectively.

Remaining Performance Obligations ("RPO"). RPO represents the aggregate amount of total contract transaction price that is unsatisfied or partially unsatisfied. As of March 31, 2022, our total RPO was $17.5 billion. Of the total RPO as of March 31, 2022, we expect 90% will be recognized as sales over the following 24 months.

Note 4: Accounts Receivable, Net

Accounts receivable, net consisted of the following as of March 31, 2022 and December 31, 2021:

(dollars in millions)						March 31, 2022						December 31, 2021
Trade receivables						$	3,140					$	3,117
Unbilled receivables						123						109
Miscellaneous receivables						95						88
Customer financing notes receivable						92						93
						3,450						3,407
Less: allowance for expected credit losses						188						175
Accounts receivable, net						$	3,262					$	3,232

The changes in allowance for expected credit losses related to Accounts receivable, net for the quarters ended March 31, 2022 and 2021, respectively, are as follows:

						Quarter Ended March 31,
(dollars in millions)						2022						2021
Balance as of January 1						$	175					$	161
Provision for expected credit losses						7						16
Write-offs charged against the allowance for expected credit losses						(2)						(2)
Foreign exchange and other						8						(3)
Balance as of March 31						$	188					$	172

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Note 5: Inventories, net

(dollars in millions)						March 31, 2022						December 31, 2021
Raw materials and work-in-process						$	136					$	140
Finished goods						490						482
Total						$	626					$	622

Raw materials, work-in-process and finished goods are net of valuation reserves of $104 million and $99 million as of March 31, 2022 and December 31, 2021, respectively.

Note 6: Business Acquisitions, Dispositions, Goodwill and Intangible Assets

Business Acquisitions. Our investments in businesses and intangibles assets, net of cash acquired, totaled $8 million and $24 million in the quarters ended March 31, 2022 and 2021, respectively. The acquisitions and investments consisted of a number of acquisitions primarily in our Service segment. Transaction costs incurred were not considered significant.

Goodwill. Changes in our Goodwill balances during the quarter ended March 31, 2022 were as follows:

(dollars in millions)						Balance as of January 1, 2022						Goodwill Resulting From Business Combinations												Foreign Currency Translation  and Other						Balance as of March 31, 2022
New Equipment						$	336					$	—											$	(7)					$	329
Service						1,331						—												(24)						1,307
Total						$	1,667					$	—											$	(31)					$	1,636

Intangible Assets. Intangible assets cost and accumulated amortization were $2,088 million and $1,691 million, respectively, as of March 31, 2022, and $2,117 million and $1,698 million, respectively, as of December 31, 2021.

Amortization of intangible assets for the quarters ended March 31, 2022 and 2021 was $19 million and $23 million, respectively. Excluding the impact of currency translation adjustments, there were no other significant changes in our Intangible Assets during the quarters ended March 31, 2022 and 2021.

Note 7: Borrowings and Lines of Credit

(dollars in millions)						March 31, 2022						December 31, 2021
Commercial paper						$	22					$	—
Other borrowings						29						24
Total short-term borrowings						$	51					$	24

Commercial Paper. As of March 31, 2022, there were $22 million in borrowings outstanding under the Company's $1.5 billion commercial paper programs. We use our commercial paper borrowings for general corporate purposes including to finance acquisitions, pay dividends, repurchase shares and for debt refinancing. The need for commercial paper borrowings may arise if the use of domestic cash for general corporate purposes exceeds the sum of domestic cash generation and foreign cash repatriated to the U.S.

For details regarding the Company's short-term borrowings activity in 2021, refer to Note 10 of the Company's financial statements as of and for the year ended December 31, 2021.

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Long-term debt. As of March 31, 2022, we have a credit agreement, as amended, with various banks providing for a $1.5 billion unsecured, unsubordinated, 5-year revolving credit facility, with an interest rate of LIBOR plus 125 basis points and a commitment fee rate of 12.5 basis points, that matures in April 2025. As of March 31, 2022, there were no borrowings under the Company's revolving credit facility.

As of March 31, 2022, the Company is in compliance with all covenants in the revolving credit agreement and the indentures governing all outstanding long-term debt. Long-term debt consisted of the following:

(dollars in millions)						March 31, 2022						December 31, 2021
LIBOR plus 45 bps floating rate notes due 2023 1,2,3						$	—					$	500
0.000% notes due 2023 (€500 million principal value) 2						550						565
2.056% notes due 2025 2						1,300						1,300
0.37% notes due 2026 (¥21.5 billion principal value) 2						177						189
0.318% notes due 2026 (€600 million principal value) 2						660						677
2.293% notes due 2027 2						500						500
2.565% notes due 2030 2						1,500						1,500
0.934% notes due 2031 (€500 million principal value) 2						550						565
3.112% notes due 2040 2						750						750
3.362% notes due 2050 2						750						750
Other (including finance leases)						4						4
Total principal long-term debt						6,741						7,300
Other (discounts and debt issuance costs)						(47)						(51)
Total long-term debt						6,694						7,249
Less: current portion						—						—
Long-term debt, net of current portion						$	6,694					$	7,249

1    The three-month LIBOR rate as of December 31, 2021 was approximately 0.21%.

2    We may redeem these notes at our option pursuant to certain terms.

3    The Company redeemed its $500 million floating rate notes due in 2023, at par, using cash on hand in January 2022.

For additional details regarding the Company's debt in 2021, refer to Note 10 of the Company's financial statements as of and for the year ended December 31, 2021.

Debt discounts and debt issuance costs are presented as a reduction of debt on the Condensed Consolidated Balance Sheets and are amortized as a component of interest expense over the term of the related debt using the effective interest method. The Condensed Consolidated Statements of Operations for the quarters ended March 31, 2022 and 2021 reflects the following:

						Quarter Ended March 31,
(dollars in millions)						2022						2021
Debt issuance costs amortization						$	3					$	1
Total interest expense on external debt						36						33

The unamortized debt issuance costs as of March 31, 2022 and December 31, 2021 were $47 million and $51 million, respectively.

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The average maturity of our long-term debt as of March 31, 2022 is approximately 9.3 years. The average interest expense rate on our borrowings outstanding as of March 31, 2022 and December 31, 2021 was as follows:

						March 31, 2022						December 31, 2021
Short-term borrowings						0.6		%				—		%
Total long-term debt						1.9		%				1.9		%

The average interest expense rate on our borrowings during the quarters ended March 31, 2022 and 2021 was as follows:

						Quarter Ended March 31,
						2022						2021
Short-term borrowings						0.4		%				(0.3)		%
Total long-term debt						2.0		%				2.4		%

Note 8: Employee Benefit Plans

Pension and Postretirement Plans. The Company sponsors both funded and unfunded domestic and foreign defined benefit pension and other postretirement benefit plans, and defined contribution plans. Contributions to our plans were as follows:

						Quarter Ended March 31,
(dollars in millions)						2022						2021
Defined benefit plans						$	12					$	13
Defined contribution plans						20						19
Multi-employer pension and postretirement plans						23						38

The following table illustrates the components of net periodic benefit cost for the Company's defined benefit pension plans:

						Quarter Ended March 31,
(dollars in millions)						2022						2021
Service cost						$	10					$	11
Interest cost						4						3
Expected return on plan assets						(6)						(6)
Recognized actuarial net loss						3						5
Total net periodic benefit cost						$	11					$	13

Postretirement Benefit Plans. The Company sponsors postretirement benefit plans that provide health benefits to eligible retirees. The postretirement plans are unfunded. The net periodic benefit cost was less than $1 million for the quarters ended March 31, 2022 and 2021, respectively.

Stock-based Compensation. The Company adopted the 2020 Long-Term Incentive Plan (the "Plan") effective April 3, 2020. As of March 31, 2022, approximately 24 million shares remain available for awards under the Plan.

Stock-based Compensation Expense

The Company measures the cost of all share-based payments, including stock options, at fair value on the grant date and recognizes this cost in the Condensed Consolidated Statements of Operations. A forfeiture rate assumption is applied on grant date to adjust the expense recognition for awards that are not expected to vest.

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Stock-based compensation expense and the resulting tax benefits were as follows:

						Quarter Ended March 31,
(dollars in millions)						2022						2021
Stock-based compensation expense (Share Based)						$	13					$	14
Stock-based compensation expense (income) (Liability Awards)						(1)						—
Total gross stock-based compensation expense						12						14
Less: future tax benefit						1						2
Stock-based compensation expense, net of tax						$	11					$	12

As of March 31, 2022, there was approximately $94 million of total unrecognized compensation cost related to non-vested equity awards granted under the Plan. This cost is expected to be recognized ratably over a weighted-average period of 2.2 years.

Note 9: Stock

Preferred Stock. There are 125 million shares of $0.01 par value authorized Preferred Stock, of which none were issued or outstanding as of March 31, 2022 and December 31, 2021.

Common Stock. There are 2 billion shares of $0.01 par value Common Stock authorized. As of March 31, 2022, 435.1 million shares of Common Stock were issued, which includes 12.3 million shares of treasury stock. As of December 31, 2021, 434.7 million shares of Common Stock were issued, which included 9.7 million shares of treasury stock.

Share Repurchase Program. As of December 31, 2021, the Company was authorized by the Board of Directors to purchase up to $1 billion of Common Stock under a share repurchase program, of which $275 million was remaining at such time.

As a result of the increased debt incurred in 2021 to fund the Tender Offer, we temporarily suspended our share repurchases as we focused on deleveraging. During the quarter ended March 31, 2022, we repaid certain debt and resumed our share repurchases. During the quarters ended March 31, 2022 and 2021, the Company repurchased 2.6 million and 4.7 million shares, respectively, for approximately $200 million and $300 million, respectively.

On March 9, 2022, our Board of Directors revoked any remaining share repurchase authority under the prior share repurchase program and approved a new share repurchase program for up to $1 billion of Common Stock, of which none had been utilized as of March 31, 2022.

The Company's share repurchase program does not obligate it to acquire any specific number of shares. Under this program, shares may be purchased in the open market, in privately negotiated transactions, under accelerated share repurchase programs or under plans complying with rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

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Note 10: Accumulated Other Comprehensive Income (Loss)

A summary of the changes in each component of Accumulated other comprehensive income (loss), net of tax, for the quarters ended March 31, 2022 and 2021 is provided below:

(dollars in millions)						Foreign Currency Translation						Defined Benefit Pension and Postretirement Plans												Unrealized Hedging Gains (Losses)						Accumulated Other Comprehensive Income (Loss)
Quarter Ended March 31, 2022
Balance as of December 31, 2021						$	(642)					$	(128)											$	7					$	(763)
Other comprehensive income (loss) before reclassifications, net						65						—												4						69
Amounts reclassified, pre-tax						—						3												(4)						(1)
Tax benefit reclassified						—						(1)												—						(1)
Balance as of March 31, 2022						$	(577)					$	(126)											$	7					$	(696)

(dollars in millions)						Foreign Currency Translation						Defined Benefit Pension and Postretirement Plans												Unrealized Hedging Gains (Losses)						Accumulated Other Comprehensive Income (Loss)
Quarter Ended March 31, 2021
Balance as of December 31, 2020						$	(616)					$	(203)											$	4					$	(815)
Other comprehensive income (loss) before reclassifications, net						(8)						—												(9)						(17)
Amounts reclassified, pre-tax						—						5												5						10
Tax benefit reclassified						—						(1)												—						(1)
Balance as of March 31, 2021						$	(624)					$	(199)											$	—					$	(823)

Amounts reclassified that relate to defined benefit pension and postretirement plans include amortization of prior service costs and actuarial net losses recognized during each period presented. These costs are recorded as components of net periodic pension cost for each period presented. See Note 8, "Employee Benefit Plans" for additional information.

Note 11: Income Taxes

The increase in the effective tax rate for the quarter ended March 31, 2022 is primarily due to the absence of a reduction in the deferred tax liability related to repatriation of foreign earnings recorded in the quarter ended March 31, 2021.

The Company conducts business globally and, as a result, the Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Austria, Belgium, Brazil, Canada, China, France, Germany, Hong Kong, India, Italy, Japan, Mexico, Netherlands, Portugal, Russia, South Korea, Spain, Switzerland, the United Kingdom and the United States. With a few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations for years before 2010.

In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. The evaluation considers any additional worldwide uncertain tax positions, the closure of tax statutes or the re-valuation of current uncertain tax positions arising from the issuance of legislation, regulatory or other guidance or developments in examinations, in appeals, or in the courts. Based on the preceding factors, it is reasonably possible that within the next 12 months unrecognized tax benefits could change within the range of a $20 million increase to a $340 million decrease and associated interest could change within the range of a $5 million increase to a $150 million decrease.

See Note 16, “Contingent Liabilities” for discussion regarding uncertain tax positions, included in the above range, related to pending litigation with respect to certain deductions claimed in Germany.

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Note 12: Restructuring Costs

During the quarters ended March 31, 2022 and 2021, we recorded restructuring costs totaling $14 million and $15 million, respectively, for new and ongoing restructuring actions. We recorded these charges as follows:

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