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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 June 30, 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
____________________________________ 

https://cdn.kscope.io/f2d0566da3b7930e2d2f16ca7de75acf-otis-20220630_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
0.000% Notes due 2023OTIS/23New York Stock Exchange
0.318% Notes due 2026OTIS/26New York Stock Exchange
0.934% Notes due 2031OTIS/31New 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 July 15, 2022 there were 420,231,614 shares of Common Stock outstanding.
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OTIS WORLDWIDE CORPORATION
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Quarter Ended June 30, 2022
 
 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 June 30,
(amounts in millions, except per share amounts)20222021
Net sales:
Product sales$1,534 $1,727 
Service sales1,954 1,974 
3,488 3,701 
Costs and expenses:
Cost of products sold1,291 1,418 
Cost of services sold1,214 1,208 
Research and development38 39 
Selling, general and administrative439 484 
2,982 3,149 
Other income (expense), net(19)9 
Operating profit487 561 
Non-service pension cost (benefit)1 2 
Interest expense (income), net35 27 
Net income before income taxes451 532 
Income tax expense103 153 
Net income348 379 
Less: Noncontrolling interest in subsidiaries' earnings27 53 
Net income attributable to Otis Worldwide Corporation$321 $326 
Earnings per share (Note 2):
Basic$0.76 $0.76 
Diluted$0.76 $0.76 
Weighted average number of shares outstanding
     Basic shares421.4427.9
     Diluted shares424.2431.6

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

 Six Months Ended June 30,
(amounts in millions, except per share amounts)20222021
Net sales:
Product sales$2,956 $3,185 
Service sales3,946 3,924 
6,902 7,109 
Costs and expenses:
Cost of products sold2,481 2,605 
Cost of services sold2,432 2,410 
Research and development75 74 
Selling, general and administrative898 966 
5,886 6,055 
Other income (expense), net(3)16 
Operating profit1,013 1,070 
Non-service pension cost (benefit)1 4 
Interest expense (income), net72 59 
Net income before income taxes940 1,007 
Income tax expense239 276 
Net income701 731 
Less: Noncontrolling interest in subsidiaries' earnings69 97 
Net income attributable to Otis Worldwide Corporation$632 $634 
Earnings per share (Note 2):
Basic$1.49 $1.48 
Diluted$1.48 $1.47 
Weighted average number of shares outstanding
Basic shares422.8429.8
Diluted shares425.9432.7

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

Quarter Ended June 30,Six Months Ended June 30,
(dollars in millions)2022202120222021
Net income$348 $379 $701 $731 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments(95)20 (95)(2)
Pension and postretirement benefit plan adjustments2 3 4 7 
Change in unrealized cash flow hedging 1  (3)
Other comprehensive income (loss), net of tax(93)24 (91)2 
Comprehensive income (loss), net of tax255 403 610 733 
Less: Comprehensive (income) loss attributable to noncontrolling interest14 (57)37 (87)
Comprehensive income attributable to Otis Worldwide Corporation$269 $346 $647 $646 

See accompanying Notes to Condensed Consolidated Financial Statements.
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

(dollars in millions)June 30, 2022December 31, 2021
Assets
Cash and cash equivalents$1,218 $1,565 
Restricted cash12 1,910 
Accounts receivable (net of allowance for expected credit losses of $166 and $175)
3,189 3,232 
Contract assets608 550 
Inventories596 622 
Other current assets527 382 
Total Current Assets6,150 8,261 
Future income tax benefits306 335 
Fixed assets (net of accumulated depreciation of $1,141 and $1,156)
724 774 
Operating lease right-of-use assets512 526 
Intangible assets, net385 419 
Goodwill1,550 1,667 
Other assets286 297 
Total Assets$9,913 $12,279 
Liabilities and Equity (Deficit)
Short-term borrowings$81 $24 
Accounts payable1,616 1,556 
Accrued liabilities1,903 1,993 
Contract liabilities2,738 2,674 
Total Current Liabilities6,338 6,247 
Long-term debt6,602 7,249 
Future pension and postretirement benefit obligations531 558 
Operating lease liabilities359 336 
Future income tax obligations 251 267 
Other long-term liabilities584 606 
Total Liabilities14,665 15,263 
Commitments and contingent liabilities (Note 16)
Redeemable noncontrolling interest136 160 
Shareholders' Equity (Deficit):
Common Stock and additional paid-in capital121 119 
Treasury Stock(1,125)(725)
Accumulated deficit(3,245)(2,256)
Accumulated other comprehensive income (loss)(748)(763)
Total Shareholders' Equity (Deficit)(4,997)(3,625)
Noncontrolling interest109 481 
Total Equity (Deficit)(4,888)(3,144)
Total Liabilities and Equity (Deficit)$9,913 $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 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 June 30, 2022
Balance as of March 31, 2022$121 $(925)$(3,529)$(696)$(5,029)$107 $(4,922)$1,572 
Net income  321  321 25 346 2 
Other comprehensive income (loss), net of tax, and foreign currency reclassifications (Note 10)   (52)(52)(7)(59)(34)
Stock-based compensation and Common Stock issued under employee plans14  (1) 13  13  
Cash dividends declared ($0.29 per Common Share)
  (122) (122) (122) 
Repurchase of Common Shares (200)  (200) (200) 
Dividends attributable to noncontrolling interest     (9)(9)(1)
Acquisitions, disposals and other changes(14) 86  72 (7)65 (1,403)
Balance as of June 30, 2022$121 $(1,125)$(3,245)$(748)$(4,997)$109 $(4,888)$136 
Quarter Ended June 30, 2021
Balance as of March 31, 2021$68 $(300)$(2,885)$(823)$(3,940)$491 $(3,449)$163 
Net income— — 326 — 326 51 377 2 
Other comprehensive income (loss), net of tax— — — 20 20 4 24 — 
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— (206)— — (206)— (206)— 
Dividends attributable to noncontrolling interest— — — — — (75)(75)(1)
Acquisition, disposal and other changes— — — — — (3)(3)(1)
Balance as of June 30, 2021$86 $(506)$(2,662)$(803)$(3,885)$468 $(3,417)$163 

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)
Six Months Ended June 30, 2022
Balance December 31, 2021$119 $(725)$(2,256)$(763)$(3,625)$481 $(3,144)$160 
Net income  632  632 58 690 11 
Other comprehensive income (loss), net of tax, and foreign currency reclassifications (Note 10)   15 15 (8)7 (98)
Stock-based compensation and Common Stock issued under employee plans19  (1) 18  18  
Cash dividends declared ($0.53 per common share)
  (224) (224) (224) 
Repurchase of Common Shares (400)  (400) (400) 
Dividends attributable to noncontrolling interest     (12)(12)(11)
Reclassification of noncontrolling interest to forward purchase agreement and redeemable noncontrolling interest (Note 1)  (1,482) (1,482)(403)(1,885)1,476 
Acquisitions, disposals and other changes in noncontrolling interest(17) 86  69 (7)62 (1,402)
Balance at June 30, 2022$121 $(1,125)$(3,245)$(748)$(4,997)$109 $(4,888)$136 
Six Months Ended June 30, 2021
Balance December 31, 2020$59 $ $(3,106)$(815)$(3,862)$467 $(3,395)$194 
Net income— — 634 — 634 92 726 5 
Other comprehensive income (loss), net of tax— — — 12 12 (3)9 (7)
Stock-based compensation and Common Stock issued under employee plans27 — (1)— 26 — 26 — 
Cash dividends declared ($0.44 per common share)
— — (189)— (189)— (189)— 
Repurchase of Common Shares— (506)— — (506)— (506)— 
Dividends attributable to noncontrolling interest— — — — — (97)(97)(11)
Acquisitions, disposals and other changes— — — — — 9 9 (18)
Balance at June 30, 2021$86 $(506)$(2,662)$(803)$(3,885)$468 $(3,417)$163 

See accompanying Notes to Condensed Consolidated Financial Statements.
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OTIS WORLDWIDE CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Six Months Ended June 30,
(dollars in millions)20222021
Operating Activities:
Net income$701 $731 
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions:
Depreciation and amortization97 102 
Deferred income tax expense (benefit)6 (39)
Stock compensation cost28 31 
Change in operating assets and liabilities:
Accounts receivable, net(104)(54)
Contract assets and liabilities, current134 225 
Inventories(39)(17)
Other current assets 55 
Accounts payable135 124 
Accrued liabilities(140)(23)
Pension contributions(21)(18)
Other operating activities, net60 1 
Net cash flows provided by operating activities857 1,118 
Investing Activities:
Capital expenditures(57)(84)
Investments in businesses and intangible assets, net of cash acquired (Note 6)(28)(51)
Proceeds from the sale of (investments in) marketable securities(7)40 
Receipts (payments) on settlements of derivative contracts78 17 
Other investing activities, net4 11 
Net cash flows used in investing activities(10)(67)
Financing Activities:
Net proceeds from (repayments of) borrowings (maturities of 90 days or less)57 (70)
Proceeds from borrowings (maturities longer than 90 days) 152 
Repayments of borrowings (maturities longer than 90 days) (427)
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(224)(189)
Repurchases of Common Stock(400)(506)
Dividends paid to noncontrolling interest(41)(55)
Acquisition of Zardoya Otis shares (Note 1)(1,802) 
Other financing activities, net(27)(18)
Net cash flows provided by (used in) financing activities(2,937)(916)
Effect of foreign exchange rate changes on cash and cash equivalents(122)8 
Net increase (decrease) in cash, cash equivalents and restricted cash(2,212)143 
Cash, cash equivalents and restricted cash, beginning of year3,477 1,801 
Cash, cash equivalents and restricted cash, end of period1,265 1,944 
Less: Restricted cash13 21 
Less: Cash and cash equivalents held for sale included in Other current assets (Note 6)34  
Cash and cash equivalents, end of period$1,218 $1,923 

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 June 30, 2022 and for the quarters and six months ended June 30, 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.

Revisions

The Company adjusted a misclassification between noncontrolling interest and redeemable noncontrolling interest in the Condensed Consolidated Statements of Changes in Equity as of June 30, 2021, resulting in an increase to Redeemable noncontrolling interest of $100 million, a decrease to Noncontrolling interest of $71 million and a decrease to Accumulated deficit of $29 million. Refer to Note 2 of the Company’s audited consolidated financial statements and notes thereto included in our 2021 Form 10-K.

Additionally, following the filing of the Company’s Form 10-Q for the quarterly period ended March 31, 2022, we identified an error in the presentation of the shares of Zardoya Otis, S.A. ("Zardoya Otis") owned by Euro Syns, S.A. As noted in the Form 10-Q for the quarterly period ended March 31, 2022 and herein, the Company previously announced a tender offer to acquire all of the issued and outstanding shares of Zardoya Otis not owned by the Company for cash (the "Tender Offer") in September 2021 and the Tender Offer received regulatory approval on February 28, 2022. As noted in the 2021 Form 10-K, the Company reached an agreement in December 2021 for Euro Syns S.A. to irrevocably tender its Zardoya Otis shares in the Tender Offer. Upon revisiting the accounting for the shares as of March 31, 2022, considering all the relevant facts and circumstances and upon review of the relevant accounting guidance, the Company has determined that upon regulatory approval of the Tender Offer, the shares owned by Euro Syns, S.A. and subject to the agreement reached between the parties that were recorded in Redeemable non-controlling interest for $409 million should have been classified in Forward purchase agreement (a separate new financial statement line item within current liabilities), resulting in a net decrease in Redeemable noncontrolling interest of $409 million. Please refer to the table below for a summary of the impacts to each relevant financial statement line item of the Condensed Consolidated Balance Sheet as of March 31, 2022 to reflect the correct accounting. The effects of these corrections are reflected in these Condensed Consolidated Financial Statements for the quarter and six months ended June 30, 2022, including in the Condensed Consolidated Statement of Changes in Equity, and will be reflected in future filings, as applicable.

As of March 31, 2022
(dollars in millions)As Previously ReportedCorrection of ErrorAs Revised
Liabilities and Equity (Deficit)
Forward purchase agreement$ $409 $409 
Total Current Liabilities6,242 409 6,651 
Total Liabilities14,736 409 15,145 
Redeemable noncontrolling interest1,981 (409)1,572 
Total Liabilities and Equity (Deficit)$11,795 $ $11,795 

There was no impact of this error on the Condensed Consolidated Statement of Operations, Comprehensive Income or the Statement of Cash Flows for the quarter ended March 31, 2022.
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Separation

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 its Tender Offer to acquire all of the issued and outstanding shares of Zardoya Otis not owned by the Company in cash, 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 owned by Euro Syns, S.A. were reclassified to current liabilities as Forward purchase agreement, and the remaining shares 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 Sheets. The difference between the historical noncontrolling interest carrying value in the balance sheet and the fair value of the Tender Offer was recorded to Accumulated deficit.

The results of the Tender Offer were announced on April 7, 2022, with tenders, including of the Euro Syns, S.A.' shares, of 45.49% of the shares outstanding accepted, resulting in the Company owning 95.51% of Zardoya Otis. The shares tendered to the Company were settled in cash on April 12, 2022 for approximately €1.5 billion from the Company's restricted cash held in escrow. The acquisition and settlement of the remaining issued and outstanding shares of Zardoya Otis not owned by the Company for approximately €150 million occurred in the second quarter, with the automatic delisting of Zardoya Otis shares on May 9, 2022.

The Company owned a controlling interest and had operational control of Zardoya Otis as of and for the periods ended June 30, 2022 and 2021, and therefore its financial results are included in our Condensed Consolidated Financial Statements. As of March 31 and June 30, 2022, the Company owned 50.02% and 100% of Zardoya Otis, respectively.

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 as of June 30, 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 June 30, 2022 and for the quarters and six months ended June 30, 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 June 30, 2022 and for the quarter and six months ended June 30, 2022 resulting from our assessment of these matters. 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. Additionally, the Company determined its business in Russia met the criteria to be classified as held for sale during the quarter ended June 30, 2022, and recorded an impairment loss related to the net assets held for sale. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business. Also see Note 19, "Subsequent Events" for details on the completed sale of our business in Russia in July 2022.

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Note 2: Earnings per Share

 Quarter Ended June 30,Six Months Ended June 30,
(amounts in millions, except per share amounts)2022202120222021
Net income attributable to Otis Worldwide Corporation$321 $326 $632 $634 
Impact of redeemable noncontrolling interest    
Net income attributable to common shareholders$321 $326 $632 $634 
Basic weighted average number of shares outstanding421.4 427.9 422.8 429.8 
Stock awards and equity units (share equivalent)2.8 3.7 3.1 2.9 
Diluted weighted average number of shares outstanding424.2 431.6 425.9 432.7 
Earnings Per Share of Common Stock:
Basic$0.76 $0.76 1.49 1.48 
Diluted$0.76 $0.76 1.48 1.47 

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 2.7 million and 2.1 million of anti-dilutive stock awards excluded from the computation for the quarters ended June 30, 2022 and 2021, respectively, and 2.5 million and 2.1 million for the six months ended June 30, 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.

Total Contract assets and Contract liabilities as of June 30, 2022 and December 31, 2021 are as follows:

(dollars in millions)June 30, 2022December 31, 2021
Contract assets, current$608 $550 
Total contract assets608 550 
Contract liabilities, current2,738 2,674 
Contract liabilities, non-current (included within Other long-term liabilities)48 52 
Total contract liabilities 2,786 2,726 
Net contract liabilities$2,178 $2,176 

Contract assets increased by $58 million during the six months ended June 30, 2022 as a result of the progression of current contracts and timing of billing on customer contracts. Contract liabilities increased by $60 million during the six months ended June 30, 2022 primarily due to contract billings in excess of revenue earned, partially offset by the reclassification of $109 million of contract liabilities, current to liabilities held for sale during the second quarter of 2022. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business.

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In the six months ended June 30, 2022 and 2021, we recognized revenue of $1.6 billion and $1.7 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 June 30, 2022, our total RPO was $17.7 billion, including approximately $200 million for our held for sale business in Russia. See Note 6, "Business Acquisitions, Dispositions, Goodwill and Intangible Assets" for additional information regarding the Company's accounting for its Russia business.

Of the total RPO as of June 30, 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 June 30, 2022 and December 31, 2021:

(dollars in millions)June 30, 2022December 31, 2021
Trade receivables$3,066 $3,117 
Unbilled receivables115 109 
Miscellaneous receivables96 88 
Customer financing notes receivable78 93 
3,355 3,407 
Less: allowance for expected credit losses166 175 
Accounts receivable, net$3,189 $3,232 

The changes in allowance for expected credit losses related to Accounts receivable, net for the quarters and six months ended June 30, 2022 and 2021, respectively, are as follows:

Six Months Ended June 30,
(dollars in millions)20222021
Balance as of January 1$