OTISOtis Worldwide

Our international sales and operations are subject to risks associated with changes in local government laws, regulations and policies, including those related to investments and limitations on foreign ownership of businesses, taxation, foreign exchange controls, capital controls, local manufacturing, product content or supplier requirements, employment regulations and the repatriation of earnings. Government policies on international trade and investments such as import quotas, capital controls, punitive taxes or tariffs or similar trade barriers, whether imposed by individual governments or regional trade blocs, can affect demand for our products and services, impact the competitive position of our products or services, or encumber our ability to manufacture or sell products in certain countries. The implementation International transactions also involve increased financial and legal risks due to differing legal systems and customs in foreign countries, which could result in increased costs, risk of more restrictive trade policies, including the imposition of further tariffs in connection with the new administration in the U.S. and retaliatory tariffs in response thereto, fines or the renegotiation of existing trade agreements with the U.S. or countries where we sell large quantities of products and services, procure materials incorporated into our products, manufacture products or recruit and employ employees (see discussion on China below), could have a material adverse effect on our business, results of operations and financial condition, including our ability to recruit and retain employees or deploy certain employees to the geographies where their skills are best utilized. penalties as well as reputational harm. Our international sales and operations are also sensitive to changes in foreign nations’ priorities, including government budgets, as well as to political and economic instability. International transactions may involve increased financial and legal risks due to differing legal systems and customs in foreign countries.

Any The recoveries related to this matter would be are allocated between RTX and the Company pursuant to the terms of the TMA with our former parent, UTC, by way of indemnification payments. Based on its understanding of the facts and contractual provisions as of this date, and taking into account its limited access to information held by RTX to support the calculation, the The Company has estimated the additional established an indemnity payable to RTX, which is intended to cover RTX’s tax and interest payable to be paid the IRS. Interest on RTX’s liability to the IRS will continue to accrue until RTX's tax liability is paid. The Company and RTX as a result of this recovery to be $194 million and has recorded this amount in its financial statements. The parties are still in process of resolving disagree about both the scope of the indemnity obligation payable to RTX and the final indemnity amount. Company’s liability for interest accruing on amounts already paid to RTX. The Company expects this dispute to be resolved pursuant to the dispute resolution procedures of the TMA.

In October 2021, May 2025, the FASB issued ASU 2021-08, 2025-03, Business Combinations (Topic 805): 805) and Consolidation (Topic 810): Determining the Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. This ASU clarifies Acquirer in the Acquisition of a Variable Interest Entity. The amendments in this update require an entity involved in an acquisition transaction effected primarily by exchanging equity interests when the legal acquiree is a VIE that an acquirer meets the definition of a business should recognize and measure contract assets and contract liabilities to consider the factors in a business combination the ASU to determine which entity is the accounting acquirer. The amendments in accordance with Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers. ASU 2021-08 is 2025-03 are effective for fiscal years beginning after December 15, 2022, with early application 2026. Early adoption is permitted. The Company adopted ASU 2021-08 effective January 1, 2023. The adoption We are currently evaluating the impact of this ASU did standard, however; we do not expect it to have a material impact on our Consolidated Financial Statements.

During 2023, 2024, net cash provided by operating activities was $1.6 billion. The primary driver Net income of the inflow related to $1.5 $1.7 billion includes approximately $185 million of net income tax benefits and an increase in Accounts payable. These were approximately $200 million of interest income, partially offset by an increase $194 million of indemnification expense resulting from the outcome of the German tax litigation during the third quarter of 2024, none of which resulted in cash flow activity during 2024. A decrease in Accounts receivable, net, due to the volume and timing of billings. billings and collections is mostly offset by an increase in Accounts payable due to the timing of payments to suppliers. For additional discussion of the German tax litigation, see "Note 1: Business Overview" and "Note 20: Contingent Liabilities" to the Consolidated Financial Statements in Item 8 of this Form 10-K.