Employee Benefit Plans (Tables)
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12 Months Ended |
Dec. 31, 2020 |
Retirement Benefits [Abstract] |
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Changes in Projected Benefit Obligations, Fair Value of Plan Assets, and Funded Status of Plan |
| | | | | | | | | | | | (dollars in millions) | 2020 | | 2019 | Change in benefit obligation: | | | | Beginning balance | $ | 1,092 | | | $ | 869 | | Service cost | 40 | | | 33 | | Interest cost | 16 | | | 21 | | Actuarial (gain) loss | 40 | | | 81 | | Benefits paid | (28) | | | (30) | | Net settlement, curtailment and special termination benefits | (26) | | | (23) | | Other | 91 | | | 141 | | Ending balance | $ | 1,225 | | | $ | 1,092 | | | | | | Change in plan assets: | | | | Beginning balance | $ | 622 | | | $ | 444 | | Actual return on plan assets | 24 | | | 76 | | Employer contributions | 64 | | | 32 | | Benefits paid | (28) | | | (30) | | Settlements | (26) | | | (23) | | Other | 47 | | | 123 | | Ending balance | $ | 703 | | | $ | 622 | | | | | | Funded status: | | | | Fair value of plan assets | $ | 703 | | | $ | 622 | | Benefit obligations | (1,225) | | | (1,092) | | Funded status of plan | $ | (522) | | | $ | (470) | | | | | | Amounts recognized in the Consolidated Balance Sheets consist of: | | | | Noncurrent assets | $ | 87 | | | $ | 83 | | Current liability | (21) | | | (20) | | Noncurrent liability | (588) | | | (533) | | Net amount recognized | $ | (522) | | | $ | (470) | | | | | | Amounts recognized in Accumulated other comprehensive loss consist of: | | | | Net actuarial loss | $ | 280 | | | $ | 236 | | Prior service credit | (1) | | | (2) | | Net amount recognized | $ | 279 | | | $ | 234 | |
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Plans with Accumulated Benefit Obligation in Excess of Plan Assets |
Information for pension plans with accumulated benefit obligations in excess of plan assets:
| | | | | | | | | | | | (dollars in millions) | 2020 | | 2019 | Projected benefit obligation | $ | 787 | | | $ | 697 | | Accumulated benefit obligation | 685 | | | 609 | | Fair value of plan assets | 205 | | | 157 | |
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Plans with Projected Benefit Obligation in Excess of Plan Assets |
Information for pension plans with projected benefit obligations in excess of plan assets:
| | | | | | | | | | | | (dollars in millions) | 2020 | | 2019 | Projected benefit obligation | $ | 991 | | | $ | 966 | | Accumulated benefit obligation | 846 | | | 846 | | Fair value of plan assets | 383 | | | 413 | |
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Schedule of Net Periodic Pension Costs |
The components of the net periodic pension cost are as follows:
| | | | | | | | | | | | | | | | | | (dollars in millions) | 2020 | | 2019 | | 2018 | Pension benefits: | | | | | | Service cost | $ | 40 | | | $ | 33 | | | $ | 33 | | Interest cost | 16 | | | 21 | | | 21 | | Expected return on plan assets | (25) | | | (24) | | | (23) | | Amortization of prior service credit | (1) | | | (1) | | | (1) | | Recognized actuarial net loss | 16 | | | 10 | | | 12 | | Net settlement, curtailment and special termination benefits loss (gain) | 5 | | | 2 | | | (3) | | Net periodic pension cost – employer | $ | 51 | | | $ | 41 | | | $ | 39 | |
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Schedule of Defined Benefit Plan Amounts Recognized in Other Comprehensive Income (Loss) |
Other changes in plan assets and benefit obligations recognized in other comprehensive loss are as follows:
| | | | | | | | | | | | | | | | | | (dollars in millions) | 2020 | | 2019 | | 2018 | Current year actuarial loss | $ | 41 | | | $ | 28 | | | $ | 37 | | Prior service credit arising during period | — | | | — | | | (1) | | Amortization of actuarial loss | (16) | | | (10) | | | (12) | | Amortization of prior service credit | 1 | | | 1 | | | 1 | | Net settlement and curtailment (loss) gain | (5) | | | (2) | | | 3 | | Other | 24 | | | 27 | | | (8) | | Total recognized in other comprehensive loss | $ | 45 | | | $ | 44 | | | $ | 20 | | Net recognized in net periodic pension cost and other comprehensive loss | $ | 96 | | | $ | 85 | | | $ | 59 | |
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Defined Benefit Plan, Assumptions |
Major assumptions used in determining the benefit obligation and net cost for pension plans are presented in the following table as weighted-averages:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Benefit Obligation | | Net Cost | (dollars in millions) | 2020 | | 2019 | | 2020 | | 2019 | | 2018 | Discount rate: | | | | | | | | | | Projected benefit obligation | 1.1 | % | | 1.5 | % | | 1.5 | % | | 2.5 | % | | 2.4 | % | Salary scale | 3.0 | % | | 3.1 | % | | 3.1 | % | | 3.3 | % | | 3.3 | % | Expected return on plan assets | — | | | — | | | 4.5 | % | | 5.2 | % | | 5.2 | % | Interest crediting rate | 0.6 | % | | 0.7 | % | | 0.7 | % | | 1.5 | % | | 1.5 | % |
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Schedule of Plan Assets |
The fair values of pension plan assets at December 31, 2020 and 2019 by asset category are as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (dollars in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Not Subject to Leveling | | Total | Asset category | | | | | | | | | | Public equities: | | | | | | | | | | Global Equity Commingled Funds (1) | $ | 52 | | | $ | 39 | | | $ | — | | | $ | — | | | $ | 91 | | Global Equity Funds at net asset value (5) | — | | | — | | | — | | | 154 | | | 154 | | Fixed income securities: | | | | | | | | | | Governments | 20 | | | 41 | | | — | | | — | | | 61 | | Corporate Bonds | 49 | | | 4 | | | — | | | — | | | 53 | | Fixed income securities at net asset value (5) | — | | | — | | | — | | | 90 | | | 90 | | Real estate (2) (5) | 12 | | | 6 | | | — | | | 12 | | | 30 | | Other (3) (5) | 2 | | | 129 | | | — | | | 25 | | | 156 | | Cash and cash equivalents (4) (5) | 6 | | | 1 | | | — | | | 41 | | | 48 | | Total | $ | 141 | | | $ | 220 | | | $ | — | | | $ | 322 | | | 683 | | Other assets and liabilities (6) | | | | | | | | | 20 | | Total at December 31, 2020 | | | | | | | | | $ | 703 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (dollars in millions) | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) | | Not Subject to Leveling | | Total | Asset category | | | | | | | | | | Public equities: | | | | | | | | | | Global Equity Commingled Funds (1) | $ | — | | | $ | 183 | | | $ | — | | | $ | — | | | $ | 183 | | Global Equity Funds at net asset value (5) | — | | | — | | | — | | | 78 | | | 78 | | Fixed income securities: | | | | | | | | | | Governments | — | | | 54 | | | — | | | — | | | 54 | | Corporate Bonds | — | | | 87 | | | — | | | — | | | 87 | | Fixed income securities at net asset value (5) | — | | | — | | | — | | | 47 | | | 47 | | Real estate(2) (5) | — | | | 26 | | | — | | | 1 | | | 27 | | Other (3) | — | | | 138 | | | — | | | — | | | 138 | | Cash and cash equivalents (4)(5) | — | | | 8 | | | — | | | — | | | 8 | | Total at December 31, 2019 | $ | — | | | $ | 496 | | | $ | — | | | $ | 126 | | | $ | 622 | |
(1) Represents investments in mutual funds and investments in commingled funds that invest primarily in common stocks. (2) Represents investments in real estate including commingled funds and directly-held properties. (3) Represents insurance contracts and global-balanced-risk commingled funds consisting mainly of equity, bonds and some commodities. (4) Represents short-term commercial paper, bonds and other cash or cash-like instruments. (5) In accordance with FASB ASU 2015-07, Fair Value Measurement (Topic 820), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets. (6) Represents trust receivables and payables that are not leveled.
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Schedule of Multiemployer Plans |
Our participation in these plans for the annual periods ended December 31 is outlined in the table below. Unless otherwise noted, the most recent Pension Protection Act (“PPA”) zone status available in 2020 and 2019 is for the plan’s year-end at June 30, 2019 and June 30, 2018, respectively. The zone status is based on information that we received from the plan and is certified by the plan’s actuary. Our significant plan is in the green zone which represents a plan that is at least 80% funded and does not require a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”). An extended amortization provision of ten years was utilized to recognize investment gains or losses for our significant plan through June 30, 2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (dollars in millions) | | | PPA Zone Status | | FIP/RP Status | | Contributions | | Surcharge Imposed | | Expiration Date of Collective-Bargaining Agreement | Pension Fund | EIN/Pension Plan Number | | 2020 | | 2019 | | Pending/Implemented | | 2020 | | 2019 | | 2018 | | | National Elevator Industry Pension Plan | 23-2694291 | | Green | | Green | | No | | $ | 131 | | $ | 127 | | | $ | 120 | | | No | | 7/8/2022 | Other funds | | | | | | | | | 7 | | 9 | | | 8 | | | | | | | | | | | | | | | $ | 138 | | $ | 136 | | | $ | 128 | | | | | |
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Schedule of Net Periodic Pension Cost |
The amounts for pension and postretirement expenses for the years ended December 31 were as follows: | | | | | | | | | | | | | | | | | | (dollars in millions) | 2020 | | 2019 | | 2018 | Service cost | $ | 1 | | | $ | 15 | | | $ | 18 | | Non-service pension benefit | (5) | | | (42) | | | (49) | | | $ | (4) | | | $ | (27) | | | $ | (31) | |
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Stock-based Compensation Expense and Resulting Tax Benefits |
Stock-based compensation expense and the resulting tax benefits were as follows:
| | | | | | | | | | | | | | | | | | | Year Ended | (dollars in millions) | 2020 | | 2019 | | 2018 | Stock-based compensation expense (Share-based) | $ | 63 | | | $ | 37 | | | $ | 38 | | Stock-based compensation expense (Cash-based) | (4) | | | 10 | | | (1) | | Total gross stock-based compensation expense | $ | 59 | | | $ | 47 | | | $ | 37 | | Less: future tax benefit | 7 | | | 5 | | | 4 | | Stock-based compensation expense, net of tax | $ | 52 | | | $ | 42 | | | $ | 33 | |
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Share-based Payment Arrangement, Activity |
A summary of the transactions under the new Otis Plan for the year ended December 31, 2020 follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock Appreciation Rights | | Restricted Share Units | | Performance Share Units | | Stock Options | (shares in thousands) | Shares | | Average Price* | | Shares | | Average Price** | | Shares | | Average Price** | | Shares | | Average Price** | Outstanding at: | | | | | | | | | | | | | | | | December 31, 2019 | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | | — | | | $ | — | | Converted from UTC (1) | 12,782 | | | 60.16 | | 1,376 | | | 68.14 | | 38 | | | 67.53 | | 520 | | | 53.99 | Granted (2) | 179 | | | 53.25 | | 607 | | | 54.21 | | 5 | | | 65.45 | | — | | | — | Exercised / Earned (2) | (609) | | | 45.19 | | (201) | | | 61.89 | | (43) | | | 67.29 | | (57) | | | 45.39 | Cancelled | (175) | | | 72.82 | | (72) | | | 67.56 | | — | | | 69.79 | | (9) | | | 41.42 | | | | | | | | | | | | | | | | | December 31, 2020 | 12,177 | | | $ | 60.63 | | | 1,710 | | | $ | 63.94 | | | — | | | $ | — | | | 454 | | | $ | 55.31 | |
* Weighted-average grant price ** Weighted-average grant fair value (1) Converted shares as of April 3, 2020 include Carrier and Legacy UTC employees receiving Otis awards on Separation (2) Includes annual retainer awards issued to the Board of Directors
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Performance Share Units Outstanding, Vested and Expected to Vest |
The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable at December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity Awards Vested and Expected to Vest | | Equity Awards That Are Exercisable | (shares in thousands; aggregate intrinsic value in millions) | Awards | | Average Price* | | Aggregate Intrinsic Value | | Remaining Term** | | Awards | | Average Price* | | Aggregate Intrinsic Value | | Remaining Term** | Stock Options/Stock Appreciation Rights | 12,506 | | | $ | 60.30 | | | $ | 115 | | | 5.6 years | | 7,964 | | | $ | 54.16 | | | $ | 107 | | | 4.1 years | Performance Share Units/Restricted Stock | 1,639 | | | — | | $ | 111 | | | 1.7 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* Weighted-average grant price per share ** Weighted-average contractual remaining term in years
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Restricted Stock Outstanding, Vested and Expected to Vest |
The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable at December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity Awards Vested and Expected to Vest | | Equity Awards That Are Exercisable | (shares in thousands; aggregate intrinsic value in millions) | Awards | | Average Price* | | Aggregate Intrinsic Value | | Remaining Term** | | Awards | | Average Price* | | Aggregate Intrinsic Value | | Remaining Term** | Stock Options/Stock Appreciation Rights | 12,506 | | | $ | 60.30 | | | $ | 115 | | | 5.6 years | | 7,964 | | | $ | 54.16 | | | $ | 107 | | | 4.1 years | Performance Share Units/Restricted Stock | 1,639 | | | — | | $ | 111 | | | 1.7 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* Weighted-average grant price per share ** Weighted-average contractual remaining term in years
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Stock Options Outstanding, Vested and Expected to Vest |
The following table summarizes information about equity awards outstanding that are vested and expected to vest and equity awards outstanding that are exercisable at December 31, 2020:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity Awards Vested and Expected to Vest | | Equity Awards That Are Exercisable | (shares in thousands; aggregate intrinsic value in millions) | Awards | | Average Price* | | Aggregate Intrinsic Value | | Remaining Term** | | Awards | | Average Price* | | Aggregate Intrinsic Value | | Remaining Term** | Stock Options/Stock Appreciation Rights | 12,506 | | | $ | 60.30 | | | $ | 115 | | | 5.6 years | | 7,964 | | | $ | 54.16 | | | $ | 107 | | | 4.1 years | Performance Share Units/Restricted Stock | 1,639 | | | — | | $ | 111 | | | 1.7 years | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
* Weighted-average grant price per share ** Weighted-average contractual remaining term in years
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Schedule of Valuation Assumptions |
The following table indicates the assumptions used in estimating fair value for the years ended December 31, 2020, 2019 and 2018. For periods prior to the Separation, these assumptions represent those utilized by UTC and are not necessarily indicative of assumptions that would be used by Otis as a standalone company. Lattice-based option models incorporate ranges of assumptions for inputs; those ranges are as follows: | | | | | | | | | | | | | | | | | | | 2020 | | 2019 | | 2018 | Expected volatility | 25.5% | | 18.8% - 19.7% | | 17.5% - 21.1% | Weighted-average volatility | 25.5% | | 19.5% | | 18.0% | Expected term (in years) | 6.8 | | 6.5 - 6.6 | | 6.5 - 6.6 | Expected dividend yield | 1.8% | | 2.4% | | 2.2% | Risk-free rate | 0.5% | | 2.3% - 2.7% | | 1.3% - 2.7% |
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