Carrier Global Corporation (NYSE:CARR) Q2 2023 Earnings Conference Call July 27, 2023 7:30 AM ET Company Participants Sam Pearlstein - Vice President of Investor Relations David Gitlin - Chairman and Chief Executive Officer Patrick Goris - Chief Financial Officer Conference Call Participants Jeffrey Sprague - Vertical Research Partners Steve Tusa - JPMorgan Julian Mitchell - Barclays Deane Dray - RBC Capital Markets Nigel Coe - Wolfe Research Joe Ritchie - Goldman Sachs Josh Pokrzywinski - Morgan Stanley No ...

See "Use and Definitions of Non-GAAP Financial Measures" for additional information regarding non-GAAP measures (Unaudited) (Unaudited) 2023 Adjusted Operating Profit Reconciliation 22 See "Use and Definitions of Non-GAAP Financial Measures" for additional information regarding non-GAAP measures 23 See "Use and Definitions of Non-GAAP Financial Measures" for additional information regarding non-GAAP measures Q2 2022 EPS Reconciliation 25 See "Use and Definitions of Non-GAAP Financial Measures" for additiona ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents Carrier Global Corporation's unaudited condensed consolidated financial statements for Q2 and H1 2023 and 2022, covering operations, balance sheet, and cash flows [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Details accounting policies and significant events, including the planned Viessmann acquisition, divestitures, KFI deconsolidation, TCC acquisition, and AFFF litigation - Announced a major portfolio transformation: acquiring Viessmann's climate solutions business for **~€12 billion** and planning to exit the Fire & Security and Commercial Refrigeration businesses in 2024[140](index=140&type=chunk)[231](index=231&type=chunk)[259](index=259&type=chunk) - Kidde-Fenwal, Inc. (KFI), a subsidiary, filed for Chapter 11 bankruptcy on May 14, 2023, leading to its deconsolidation from Carrier's financial statements and a recognized loss of **$293 million**[141](index=141&type=chunk)[227](index=227&type=chunk)[287](index=287&type=chunk) - The acquisition of a majority stake in Toshiba Carrier Corporation (TCC) was completed on August 1, 2022, and its results are now consolidated within the HVAC segment[142](index=142&type=chunk)[99](index=99&type=chunk)[288](index=288&type=chunk) Segment Sales Breakdown (Six Months Ended June 30) | Segment | 2023 Sales (in millions) | 2022 Sales (in millions) | | :--- | :--- | :--- | | HVAC | $7,838 | $6,358 | | Refrigeration | $1,870 | $2,017 | | Fire & Security | $1,801 | $1,705 | - The company is involved in significant litigation related to Aqueous Film Forming Foam (AFFF), with over 5,000 lawsuits consolidated in MDL proceedings, and is unable to estimate a range of possible loss at this time[272](index=272&type=chunk)[226](index=226&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=29&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Discusses financial performance, highlighting Q2 2023 sales growth driven by HVAC, impact of KFI deconsolidation, planned portfolio transformation, and solid liquidity [Results of Operations - Three Months Ended June 30, 2023](index=33&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20June%2030%2C%202023) Net sales increased 15% to $6.0 billion in Q2 2023, but operating profit and net income significantly declined due to KFI deconsolidation and hedging losses Q2 2023 vs Q2 2022 Financial Performance | Metric | Q2 2023 (in millions) | Q2 2022 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $5,992 | $5,211 | +15% | | Gross Margin | $1,755 | $1,447 | +21% | | Operating Profit | $489 | $819 | -40% | | Net Income (to common shareowners) | $199 | $573 | -65% | | Diluted EPS | $0.23 | $0.67 | -66% | Q2 2023 Net Sales Growth Components | Component | % Change | | :--- | :--- | | Organic | 6% | | Foreign currency translation | 0% | | Acquisitions and divestitures, net | 9% | | **Total % change** | **15%** | - Operating profit was significantly impacted by a **$293 million** loss from the deconsolidation of KFI and a **$111 million** mark-to-market loss on forward contracts for the proposed VCS Business acquisition[7](index=7&type=chunk) [Results of Operations - Six Months Ended June 30, 2023](index=36&type=section&id=Results%20of%20Operations%20-%20Six%20Months%20Ended%20June%2030%2C%202023) Net sales grew 14% to $11.3 billion in H1 2023, but operating profit and net income significantly declined due to the absence of the Chubb sale gain and current period losses H1 2023 vs H1 2022 Financial Performance | Metric | H1 2023 (in millions) | H1 2022 (in millions) | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $11,265 | $9,865 | +14% | | Gross Margin | $3,133 | $2,740 | +14% | | Operating Profit | $1,044 | $2,556 | -59% | | Net Income (to common shareowners) | $572 | $1,952 | -71% | | Diluted EPS | $0.67 | $2.25 | -70% | H1 2023 Net Sales Growth Components | Component | % Change | | :--- | :--- | | Organic | 5% | | Foreign currency translation | -1% | | Acquisitions and divestitures, net | 10% | | **Total % change** | **14%** | - The significant year-over-year decrease in operating profit and net income was primarily due to the absence of the **$1.1 billion** gain from the Chubb sale recognized in H1 2022, coupled with the **$293 million** KFI deconsolidation loss and **$111 million** hedging loss in H1 2023[15](index=15&type=chunk) [Segment Review](index=39&type=section&id=Segment%20Review) Reviews Q2 and H1 2023 segment performance, highlighting strong HVAC growth, Refrigeration declines, and Fire & Security operating profit heavily impacted by the KFI deconsolidation and prior year's Chubb sale Q2 2023 Segment Performance vs Q2 2022 | Segment | Net Sales (in millions) | % Change | Organic % Change | Operating Profit (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | HVAC | $4,216 | +24% | +9% | $742 | +27% | | Refrigeration | $972 | -7% | -6% | $112 | -24% | | Fire & Security | $932 | +5% | +9% | ($157) | -217% | H1 2023 Segment Performance vs H1 2022 | Segment | Net Sales (in millions) | % Change | Organic % Change | Operating Profit (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | | HVAC | $7,838 | +23% | +7% | $1,177 | +12% | | Refrigeration | $1,870 | -7% | -5% | $220 | -13% | | Fire & Security | $1,801 | +6% | +9% | ($64) | -105% | - The Fire & Security segment's operating profit for Q2 and H1 2023 was severely impacted by a **$293 million** loss on the deconsolidation of KFI, and the H1 2022 comparison also includes a **$1.1 billion** gain from the Chubb sale[54](index=54&type=chunk)[29](index=29&type=chunk)[358](index=358&type=chunk) [Liquidity and Financial Condition](index=44&type=section&id=LIQUIDITY%20AND%20FINANCIAL%20CONDITION) Details the company's liquidity as of June 30, 2023, including cash, debt, credit facilities, and cash flow from operations, highlighting improved operating cash flow Key Financial Condition Metrics (as of June 30, 2023) | Metric | Amount (in millions) | | :--- | :--- | | Cash and cash equivalents | $3,209 | | Total debt | $8,789 | | Net debt | $5,580 | | Total equity | $8,288 | Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2023 (in millions) | 2022 (in millions) | | :--- | :--- | :--- | | Operating | $504 | ($170) | | Investing | ($296) | $2,645 | | Financing | ($506) | ($2,434) | - The year-over-year increase in operating cash flow was primarily driven by a more moderate increase in working capital balances compared to the prior period, which was affected by higher safety stock and supply chain constraints[35](index=35&type=chunk)[61](index=61&type=chunk) - During H1 2023, the company used **$62 million** for share repurchases and **$309 million** for dividend payments[36](index=36&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Reports no significant change in the company's exposure to market risk during the first half of 2023, referring to the 2022 Form 10-K for details - There has been no significant change in the company's exposure to market risk during the first half of 2023[62](index=62&type=chunk) [Controls and Procedures](index=47&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls over financial reporting - The company's CEO and CFO concluded that as of June 30, 2023, disclosure controls and procedures were effective[37](index=37&type=chunk) - No material changes were made to internal controls over financial reporting during the quarter ended June 30, 2023[350](index=350&type=chunk) [PART II – OTHER INFORMATION](index=48&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=48&type=section&id=Item%201.%20Legal%20Proceedings) Reports no material developments in legal proceedings, directing readers to Note 19 of the financial statements for detailed information - There have been no material changes or developments in legal proceedings, and for detailed information, refer to Note 19 in the financial statements[64](index=64&type=chunk)[352](index=352&type=chunk) [Risk Factors](index=48&type=section&id=Item%201A.%20Risk%20Factors) Reports no material changes to the company's risk factors from those disclosed in the 2022 Form 10-K - There have been no material changes in the Company's risk factors from those disclosed in the 2022 Form 10-K[40](index=40&type=chunk) [Issuer Purchases of Equity Securities](index=48&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports no common stock repurchases during Q2 2023, with approximately $2.1 billion remaining authorized for future repurchases - No shares of common stock were repurchased during the three-month period from April to June 2023[375](index=375&type=chunk) - As of June 30, 2023, approximately **$2.1 billion** remained authorized for share repurchases under the current program[368](index=368&type=chunk)[375](index=375&type=chunk) [Exhibits](index=49&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with the Form 10-Q, including agreements for the Viessmann acquisition, credit facilities, and officer certifications - Lists various agreements and certifications filed as exhibits, including the Share Purchase Agreement for the VCS Business and new credit facilities[354](index=354&type=chunk)

Carrier Global Corporation Conference Call Summary Company Overview - **Company**: Carrier Global Corporation (NYSE:CARR) - **Event**: Bernstein's 39th Annual Strategic Decisions Conference 2023 - **Date**: June 1, 2023 - **Participants**: David Gitlin (CEO and Chairman), Brendan Luecke (Bernstein Analyst) Key Points Industry and Market Position - Carrier is focused on becoming a leader in intelligent climate and energy solutions, emphasizing energy efficiency and climate-friendly technologies [14][15] - The company is integrating with Viessmann Climate Solutions, which is positioned in the fastest-growing market globally for home energy management solutions [3][4] Financial Performance and Strategy - Aftermarket sales increased in the high teens during Q1 2023, with expectations for price/cost benefits to improve in Q2 [2] - The company aims to achieve strong productivity to fund growth investments [2] - Carrier's net debt has decreased from $10 billion at the time of its spin-off to $5 billion, with a target leverage ratio of under 2 within a couple of years post-Viessmann acquisition [11][12] Business Exits - Carrier plans to exit its fire and security and commercial refrigeration businesses, which generated approximately $3.1 billion and $1.1 billion in sales, respectively [5][6] - The company has received significant interest from potential buyers, indicating confidence in achieving favorable multiples [4][6] Acquisition of Viessmann - The acquisition of Viessmann is expected to close by the end of 2023, enhancing Carrier's position in the residential heating market in Europe [17][18] - Viessmann is recognized for its direct-to-installer channel and comprehensive product portfolio, which complements Carrier's existing offerings [48] Market Trends and Growth Opportunities - The transition from fossil fuel heating to electric heating (heat pumps) is driving significant growth in Europe, with a projected increase in heat pump installations from 1 million to 10 million by 2030 [35][36] - Carrier anticipates a compound annual growth rate (CAGR) of around 20% for heat pumps in Europe, driven by regulatory changes banning fossil fuel heating [35][36] Digital Transformation and Services - Carrier is investing in digital tools like Abound, which provides real-time monitoring of carbon emissions and energy efficiency for commercial buildings [86][87] - The company aims to grow aftermarket sales from $4.5 billion to $7 billion by 2026, leveraging its existing installed base and improving attachment rates [40][81] Challenges and Risks - The North American residential HVAC market is experiencing a downturn, with expectations of flat sales and a high single-digit volume decline for 2023 [66] - Regulatory changes in Europe may impact growth, but the overarching trend towards electrification is expected to continue [41][43] Conclusion - Carrier is strategically positioning itself for future growth through acquisitions, divestments, and a focus on digital solutions and energy efficiency, while navigating current market challenges and regulatory landscapes [19][53]

Carrier Global Corporation Conference Call Summary Company Overview - **Company**: Carrier Global Corporation (NYSE:CARR) - **Event**: Wolfe Research 16th Annual Global Transportation & Industrials Conference - **Date**: May 23, 2023 Key Points Industry and Market Context - The macro trading environment is being closely monitored, particularly in relation to the acquisition of Wiesmann, which is seen as a strategic move to enhance Carrier's portfolio in the residential heating and cooling market in Europe [1][2] - The company is experiencing mixed performance across its portfolio, with commercial HVAC and North American truck and trailer segments performing well, while the container and commercial refrigeration businesses are facing challenges [39][40] Acquisition of Wiesmann - The acquisition of Wiesmann is expected to provide immediate access to a faster-growing residential heating and cooling market in Europe, where Carrier has had limited exposure [2] - Regulatory hurdles for the acquisition are standard and manageable, with a timeline for closure by the end of the year [3][5] - Wiesmann's management team will continue to lead the business post-acquisition, leveraging their expertise and existing channels to enhance Carrier's product offerings [6] Investment and Capacity Expansion - Wiesmann has made significant investments to transition from boilers to heat pumps, with this year being a peak for capital expenditures [8] - The company does not anticipate a significant impact on free cash flow conversion due to these investments, as Wiesmann has historically maintained a high free cash flow conversion rate of 90% to 95% [9] Product Transition and Market Dynamics - The boiler business is expected to decline in Europe, while heat pumps are projected to grow at strong double-digit rates, with heat pumps priced significantly higher than boilers [11][12] - The transition to heat pumps is seen as an opportunity for revenue growth, with the potential for significant margin retention [12] Portfolio Optimization and Divestitures - Carrier is actively working on divesting non-core assets, including foreign security and commercial refrigeration segments, with a focus on achieving a clean exit and maximizing proceeds [16][22] - The company is optimistic about the interest in its fire and security businesses, which are considered high-margin and low-capital requirements [23] Aftermarket and Service Revenue Growth - Carrier is focusing on expanding its aftermarket services, which currently represent about 20% to 25% of the total available market for its installed base [49] - The company has implemented strategies to enhance service revenues, which have been growing at strong double-digit rates [49] Market Performance and Outlook - The residential segment is expected to see a decline in volume but offset by pricing and mix improvements, with revenues projected to remain flat year-over-year [55] - The company anticipates a recovery in the container business in the second half of the year, following a downturn that began in Q3 of the previous year [52] Pricing Strategy - Carrier expects to achieve approximately $500 million in pricing actions for the year, which equates to a 2% to 3% increase overall [57] - Pricing for new units is holding steady, with a 10% to 15% increase in SEER units [56] Additional Insights - The installer network for Wiesmann is considered critical for maintaining competitive advantage, as there is a shortage of trained installers in the market [35][36] - The company is well-positioned to leverage its existing facilities and synergies from previous acquisitions to support growth in the heat pump market [9][12] This summary encapsulates the key discussions and insights from the conference call, highlighting Carrier's strategic initiatives, market dynamics, and financial outlook.

Carrier Global Corporation Conference Call Summary Company Overview - **Company**: Carrier Global Corporation (NYSE:CARR) - **Date**: May 10, 2023 - **Participants**: David Gitlin (Chairman and CEO), Sam Pearlstein (VP of Investor Relations), Joe Ritchie (Goldman Sachs) Key Themes and Core Points Transformation Strategy - Carrier is focused on "performing while transforming" to become the leading climate and energy solutions provider in the industry [3][4] - The acquisition of Viessmann is pivotal, positioning Carrier as a "Global Climate Champion" with integrated solutions in solar PV, battery, heat pumps, and energy management [3][4] - The company plans to exit the Fire & Security and stationary Refrigeration businesses to concentrate on higher growth and margin opportunities [3][4] Financial Performance - First quarter EPS exceeded expectations, reinforcing confidence in achieving the high end of the full-year guidance [4] - Productivity initiatives are projected to yield $300 million in savings, with an additional $200 million from positive price-cost dynamics [4] - Free cash flow is anticipated to reach $1.9 billion for the full year, equating to net income [4] Market Opportunities - The European market presents a "once in a generation opportunity" due to regulatory shifts from gas and oil boilers to electric heat pumps, with a projected growth rate of 20% [6][12] - Viessmann holds a strong market position with approximately 20% share in Europe and a premium brand reputation [10][12] - The company has a robust installer network with 75,000 direct relationships, providing a competitive moat [7][10] Product and Technology Insights - Viessmann's technology includes integrated solutions that create a digital ecosystem for installers and homeowners, enhancing customer engagement [8][10] - The transition from traditional gas boilers to heat pumps is expected to drive significant growth, with a target of increasing heat pump sales from 1 million to 10 million units annually by 2030 [12] Divestiture Plans - Carrier is actively seeking buyers for its Fire & Security and Commercial Refrigeration segments, with strong interest from both strategic and private equity buyers [19][20] - The divestiture of Commercial Refrigeration will occur separately from Fire & Security, with a focus on maximizing value and ensuring a clean exit [22] Supply Chain and Productivity - The company is enhancing productivity through a structured approach, utilizing a common digital tool to track initiatives across all operations [28][29] - Supply chain issues are improving, allowing for reduced lead times and better order fulfillment [35] Market Segments Performance - Light commercial HVAC orders grew over 30%, while residential orders are expected to stabilize as the year progresses [38][39] - The company is monitoring inventory levels closely, particularly in the residential segment, to ensure alignment with market demand [42][43] Aftermarket Growth - Carrier aims for high single-digit to low double-digit growth in its aftermarket business, with a focus on expanding service agreements and digital connectivity [49][50] - The aftermarket segment is expected to yield higher margins compared to original equipment manufacturing (OEM) [49] K-12 Market Insights - The K-12 market in the U.S. has significant funding opportunities, with $190 billion allocated through stimulus packages, though less than $100 billion has been spent [58] - Improved indoor environments in schools are linked to better student performance, highlighting the importance of HVAC investments [59] Additional Insights - The company is committed to addressing corporate costs and streamlining operations post-divestiture [25][26] - Carrier's future portfolio will focus on intelligent climate and energy solutions, moving beyond traditional HVAC definitions [24][25] - The integration of Viessmann is seen as a unique opportunity to impact global climate change efforts [68][69] This summary encapsulates the key points discussed during the conference call, highlighting Carrier's strategic direction, financial performance, market opportunities, and operational insights.

Carrier Global Corporation (NYSE:CARR) Oppenheimer's AT Annual Industrial Growth Conference Call May 9, 2023 3:45 PM ET Company Participants Patrick Goris - SVP & CFO Conference Call Participants Operator Well, good afternoon, everyone. Thanks so much for joining us at day two of Oppenheimer's AT Annual Industrial Growth Conference. The last session of the day for us, and very pleased to be ending it with the management of Carrier. CFO, Patrick Goris, VP of IR, ladies and gentlemen. Welcome. Thanks so much ...

Financial Data and Key Metrics Changes - The company achieved 4% organic growth in Q1 2023, with adjusted EPS of $0.52 exceeding projections and significant year-over-year free cash flow growth [36][38] - Since 2020, the company has grown sales at an 8% CAGR and expanded margins by 150 basis points since 2021, with an adjusted EPS CAGR of 19% [37][38] - The stock price has appreciated 229% since the spin date, compared to a 66% appreciation for the S&P 500 [38] Business Line Data and Key Metrics Changes - Double-digit growth was reported in aftermarket controls, commercial and light commercial HVAC, and global truck trailer segments [36] - The company has introduced over 400 new products over the past three years, contributing to significant productivity growth [37] Market Data and Key Metrics Changes - The EU residential heat pump market is expected to grow revenues by 25% annually, driven by a shift from fossil fuel boilers to heat pumps [43] - Viessmann Climate Solutions is positioned as the number one premium brand in the European heat pump market, with strong market shares in Germany and across Europe [32][44] Company Strategy and Development Direction - The company aims to become a global leader in intelligent climate and energy solutions, focusing on the fastest-growing geographies and sustainable technology [11][12] - The acquisition of Viessmann Climate Solutions is seen as a transformative move to capitalize on the energy transition in Europe, expanding into integrated renewable offerings [42][59] Management's Comments on Operating Environment and Future Outlook - Management highlighted the urgency of transitioning from fossil fuel heating to heat pumps due to regulatory pressures in Europe, creating a unique growth opportunity [150][151] - The company expects to achieve a high single-digit free cash flow yield starting in year five post-acquisition, with adjusted EPS accretive starting in 2025 [56][57] Other Important Information - The enterprise value of the Viessmann acquisition is €12 billion, expected to add over 100 basis points to Carrier's overall revenue and EBITDA growth profile [55][56] - The company plans to quickly deleverage following the transaction, targeting a net leverage of about 2x by 2025 [27][57] Q&A Session All Questions and Answers Question: Can you help us understand Viessmann's market shares in heat pumps? - Viessmann is the number one premium brand in Europe for heat pumps and ranks in the top five for air-to-water heat pumps across Europe [32] Question: How do you view the exit strategy for Fire & Security and Commercial Refrigeration? - The company is evaluating the best exit strategy, whether through sale or spin, and expects to achieve higher multiples than previous divestitures [64] Question: What is the free cash flow profile for Viessmann? - Viessmann has maintained a free cash flow conversion rate of 90% to 95% of net income, with expectations to continue this trend post-acquisition [82] Question: How does the company plan to integrate Viessmann's offerings into North America? - The company is studying how to connect offerings in North America and has been in discussions with solar providers to create a holistic offering [128] Question: What are the unique aspects of Viessmann's direct-to-installer model? - Viessmann's direct-to-installer model allows for customer intimacy and rapid response to demand, which is crucial in the heat pump market [121][126]

(1) Amortization of the step-up to fair value of acquired inventory and backlog. (2) The carrying value of our previously held TCC equity investments were recognized at fair value and subsequently adjusted. | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | |------------------------------------------------------|-------|----------------|-------|-------------------|-------|----------------------------------------------------------|-------|---------------------------------|------- ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section provides Carrier's unaudited condensed consolidated financial information for the first quarter of 2023, including statements, notes, and management's discussion [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Carrier's unaudited condensed consolidated financial statements for Q1 2023, showing increased net sales but decreased net income due to the prior year's Chubb divestiture gain, alongside improved operating cash flow [Condensed Consolidated Statement of Operations](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Operations) Net sales increased 13% to $5.27 billion, but operating profit and net income significantly declined to $555 million and $373 million respectively, primarily due to the prior year's Chubb divestiture gain | Financial Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Total Net Sales** | $5,273 million | $4,654 million | | **Operating Profit** | $555 million | $1,737 million | | **Net Income Attributable to Common Shareowners** | $373 million | $1,379 million | | **Diluted Earnings Per Share** | $0.44 | $1.58 | [Condensed Consolidated Balance Sheet](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheet) Total assets slightly increased to $26.41 billion, with inventories and accounts receivable rising, while total liabilities decreased and total equity grew to $8.47 billion | Balance Sheet Item | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $10,158 million | $9,879 million | | **Goodwill** | $9,987 million | $9,977 million | | **Total Assets** | $26,411 million | $26,086 million | | **Total Current Liabilities** | $5,958 million | $6,032 million | | **Long-term Debt** | $8,708 million | $8,702 million | | **Total Liabilities** | $17,943 million | $18,010 million | | **Total Equity** | $8,468 million | $8,076 million | [Condensed Consolidated Statement of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) Operating cash flow improved to a $120 million inflow, while investing activities used $100 million, and financing activities used $213 million, ending with $3.35 billion in cash | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | **Net cash flows from operating activities** | $120 million | ($202) million | | **Net cash flows from investing activities** | ($100) million | $2,820 million | | **Net cash flows from financing activities** | ($213) million | ($2,020) million | | **Net (decrease) increase in cash** | ($173) million | $597 million | | **Cash and cash equivalents, end of period** | $3,347 million | $3,604 million | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Detailed notes cover TCC acquisition, Chubb divestiture, segment performance, AFFF litigation, and subsequent events including the Viessmann acquisition and planned business exits - The company completed the acquisition of a majority ownership interest in **Toshiba Carrier Corporation (TCC)** on August 1, 2022, consolidating its results within the HVAC segment[25](index=25&type=chunk)[105](index=105&type=chunk) - The sale of the **Chubb Fire and Security business** on January 3, 2022, resulted in a net gain of **$1.1 billion** recognized in Q1 2022[26](index=26&type=chunk)[111](index=111&type=chunk) - The company faces over **3,800 federal lawsuits** related to **Aqueous Film Forming Foam (AFFF)**, with an inability to assess liability or estimate potential damages currently[101](index=101&type=chunk)[153](index=153&type=chunk) - Post-quarter, the company announced the acquisition of **Viessmann's climate solutions business** for approximately **€12 billion** and plans to exit its **Fire & Security** and **Commercial Refrigeration** businesses in 2024[172](index=172&type=chunk)[200](index=200&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes Q1 2023 financial results, detailing a 13% net sales increase driven by TCC acquisition and organic growth, segment performance, liquidity, and capital allocation priorities [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Net sales rose 13% to $5.3 billion, with organic sales up 4%, while gross margin percentage decreased by 170 basis points, and operating profit declined 68% to $555 million due to the prior year's Chubb gain | Net Sales Change Driver | % Change YoY (Q1 2023) | | :--- | :--- | | Organic | 4% | | Foreign currency translation | (2)% | | Acquisitions and divestitures, net | 11% | | **Total % change** | **13%** | - Gross margin as a percentage of net sales decreased by **170 basis points**, with the **TCC acquisition** contributing a **240 basis point** unfavorable impact[189](index=189&type=chunk) - The effective tax rate increased to **24.0%** from **17.8%** in Q1 2022, primarily due to the prior year's lower effective tax rate on the **$1.1 billion Chubb gain**[114](index=114&type=chunk)[246](index=246&type=chunk) [Segment Review](index=32&type=section&id=Segment%20Review) HVAC sales grew 22% to $3.6 billion due to TCC, Refrigeration sales declined 8% to $898 million, and Fire & Security sales increased 6% to $869 million with 9% organic growth | Segment | Net Sales Q1 2023 | Net Sales Q1 2022 | % Change | Operating Profit Q1 2023 | Operating Profit Q1 2022 | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | HVAC | $3,622 M | $2,970 M | 22% | $435 M | $470 M | (7)% | | Refrigeration | $898 M | $976 M | (8)% | $108 M | $107 M | 1% | | Fire & Security | $869 M | $818 M | 6% | $93 M | $1,218 M | (92)% | - **HVAC** net sales grew **22%**, driven by **18%** from acquisitions (TCC), **6%** organic growth, and **-2%** from foreign currency translation[248](index=248&type=chunk) - **Refrigeration** organic net sales decreased **5%**, primarily due to a **15% decline** in commercial refrigeration volumes in Europe[251](index=251&type=chunk) - **Fire & Security** operating profit declined **92%** due to the **$1.1 billion net gain** from the Chubb sale in Q1 2022, with operational profit remaining flat year-over-year[253](index=253&type=chunk)[254](index=254&type=chunk) [Liquidity and Financial Condition](index=34&type=section&id=Liquidity%20and%20Financial%20Condition) Carrier held **$3.3 billion** in cash and **$8.85 billion** in total debt, with undrawn credit facilities, and repurchased **$62 million** in stock while paying **$154 million** in dividends | Metric | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $3,347 million | $3,520 million | | Total debt | $8,850 million | $8,842 million | | Net debt | $5,503 million | $5,322 million | | Total debt to total capitalization | 51% | 52% | - The company maintains a **$2.0 billion revolving credit facility** and a **$2.0 billion commercial paper program**, both undrawn as of March 31, 2023[230](index=230&type=chunk)[231](index=231&type=chunk) - During Q1 2023, **1.4 million shares** were repurchased for **$62 million**, with approximately **$2.1 billion** remaining under the authorization[137](index=137&type=chunk)[237](index=237&type=chunk) - Dividends of **$154 million** were paid on common stock during Q1 2023[238](index=238&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No significant change in market risk exposure occurred during Q1 2023, with further details referenced in the 2022 Form 10-K - No significant change in the company's exposure to market risk occurred during Q1 2023[265](index=265&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2023[281](index=281&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[266](index=266&type=chunk) [PART II – OTHER INFORMATION](index=38&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section provides other information including legal proceedings, risk factors, equity security purchases, and a list of exhibits filed with the Form 10-Q [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) No material developments in legal proceedings occurred, with further details available in Note 19 of the financial statements regarding matters like AFFF litigation - No material developments in legal proceedings occurred, with further details in Note 19 of the financial statements[269](index=269&type=chunk)[283](index=283&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors were reported from those disclosed in the 2022 Form 10-K - No material changes in the company's risk factors from those disclosed in the 2022 Form 10-K[244](index=244&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2023, Carrier repurchased **1.386 million shares** for approximately **$62 million** at an average price of **$44.70** per share | Period (2023) | Total Shares Purchased (in thousands) | Average Price Paid per Share | Approx. Dollar Value Remaining in Program (in millions) | | :--- | :--- | :--- | :--- | | January | 459 | $43.55 | $2,171 | | February | 421 | $45.10 | $2,152 | | March | 506 | $45.40 | $2,129 | | **Total Q1** | **1,386** | **$44.70** | **$2,129** | [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including award agreements, CEO/CFO certifications, and XBRL data files - The report includes exhibits such as management compensation plans, certifications, and XBRL financial data[275](index=275&type=chunk)[276](index=276&type=chunk)