Carrier (CARR) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The company's Q2 2025 financial statements report a 3% net sales increase and strong operating profit growth, offset by a net earnings decrease due to a prior-year discontinued operations gain, alongside increased assets and improved operating cash flow Condensed Consolidated Statement of Operations Q2 2025 net sales increased 3% to $6.11 billion, with operating profit up 25% to $903 million, though net earnings attributable to common shareowners significantly decreased due to a prior-year gain from discontinued operations Consolidated Statement of Operations Highlights (Q2 & H1 2025 vs 2024) | Metric (In millions, except EPS) | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Net Sales | $6,113 | $5,934 | +3.0% | $11,331 | $11,354 | -0.2% | | Operating Profit | $903 | $724 | +24.7% | $1,532 | $1,109 | +38.1% | | Earnings from Continuing Operations | $650 | $447 | +45.4% | $1,087 | $644 | +68.8% | | Net Earnings Attributable to Common Shareowners | $591 | $2,337 | -74.7% | $1,003 | $2,606 | -61.5% | | Diluted EPS (Continuing Operations) | $0.70 | $0.45 | +55.6% | $1.17 | $0.65 | +80.0% | | Diluted EPS (Net Earnings) | $0.68 | $2.55 | -73.3% | $1.15 | $2.85 | -59.6% | Condensed Consolidated Balance Sheet As of June 30, 2025, total assets grew to $38.49 billion driven by goodwill, while cash and cash equivalents decreased significantly, and total equity increased to $15.01 billion Balance Sheet Summary (As of June 30, 2025 vs. Dec 31, 2024) | Account (In millions) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,797 | $3,969 | | Goodwill | $15,672 | $14,601 | | Total Assets | $38,493 | $37,403 | | Long-term debt | $11,336 | $11,026 | | Total Liabilities | $23,479 | $23,008 | | Total Equity | $15,014 | $14,395 | Condensed Consolidated Statement of Cash Flows For H1 2025, net cash from continuing operating activities increased to $752 million, while investing activities used significantly less cash, and financing activities saw increased outflows due to share repurchases and debt repayments Cash Flow Summary (Six Months Ended June 30) | Cash Flow Category (In millions) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from continuing operating activities | $752 | $609 | | Net cash from continuing investing activities | $(113) | $(11,147) | | Net cash from continuing financing activities | $(3,294) | $(1,391) | | Net (decrease) in cash and cash equivalents | $(2,172) | $(7,095) | Notes to Condensed Consolidated Financial Statements The notes detail the company's 2024 portfolio transformation, including the VCS acquisition and segment reorganization, alongside information on goodwill, debt, new segment revenues, restructuring, and AFFF litigation settlement - Completed a major portfolio transformation in 2024, acquiring the Viessmann Climate Solutions (VCS) Business and divesting the Fire & Security and Commercial Refrigeration businesses to become a pure-play climate and energy solutions provider[20] - Revised its reportable segments in Q1 2025 to Climate Solutions Americas, Climate Solutions Europe, Climate Solutions Asia Pacific, Middle East & Africa, and Climate Solutions Transportation to reflect the new business strategy[21] - Goodwill increased to $15.67 billion as of June 30, 2025, up from $14.60 billion at year-end 2024, primarily due to foreign currency translation effects[30] - Entered into a settlement agreement related to Aqueous Film Forming Foam (AFFF) litigation, recording a liability of $565 million in Q3 2024, in addition to a $50 million liability from the deconsolidation of its subsidiary KFI[106] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transformation into a pure-play climate and energy solutions provider, highlighting Q2 2025 net sales growth of 3% (6% organic), improved gross margin, increased adjusted operating profit, active portfolio management, and strong liquidity Results of Operations Q2 2025 net sales increased 3% to $6.1 billion (6% organic), with gross margin expanding to 28.9% and operating profit rising 25% to $903 million, while H1 2025 operating profit grew 38% Q2 2025 vs Q2 2024 Performance | Metric (In millions) | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $6,113 | $5,934 | 3% | | Gross margin | $1,769 | $1,575 | 12% | | Operating profit | $903 | $724 | 25% | | Adjusted operating profit | $1,166 | $1,056 | 10.4% | Net Sales Change Breakdown (Q2 2025) | Component | % Change | | :--- | :--- | | Organic | 6% | | Foreign currency translation | 1% | | Acquisitions and divestitures, net | (4)% | | Total % change | 3% | Segment Review In Q2 2025, Climate Solutions Americas led with 14% organic sales growth and 23% profit increase, while Europe saw flat organic sales, Asia Pacific/MEA declined, and Transportation's organic sales dipped 1% Segment Performance (Q2 2025 vs Q2 2024) | Segment | Net Sales (M) | YoY Change | Organic Change | Segment Operating Profit (M) | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Climate Solutions Americas | $3,252 | +14% | +14% | $879 | +23% | | Climate Solutions Europe | $1,253 | +5% | 0% | $99 | +6% | | Climate Solutions Asia Pacific, MEA | $882 | -2% | -4% | $135 | -14% | | Climate Solutions Transportation | $726 | -25% | -1% | $128 | -7% | Liquidity and Financial Condition The company maintains strong liquidity with $1.8 billion cash and a $2.5 billion credit facility, while total debt is $11.4 billion, and $1.9 billion in common stock was repurchased in H1 2025 Key Financial Condition Metrics | Metric (In millions) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,797 | $3,969 | | Total debt | $11,443 | $12,278 | | Net debt | $9,646 | $8,309 | | Total debt to total capitalization | 43% | 46% | - Repurchased 28.8 million shares of common stock for an aggregate price of $1.9 billion during the six months ended June 30, 2025[185] - Maintains a $2.5 billion revolving credit facility and a $2.0 billion commercial paper program, with no borrowings outstanding under either as of June 30, 2025[179] Quantitative and Qualitative Disclosures About Market Risk The company reports no significant changes in its market risk exposure during the first six months of 2025, referring to its 2024 Form 10-K for detailed discussion - There has been no significant change in the company's exposure to market risk during the three and six months ended June 30, 2025[191] Controls and Procedures As of June 30, 2025, the CEO and CFO concluded the company's disclosure controls and procedures were effective, with no material changes to internal control over financial reporting in Q2 2025 - Management, including the CEO and CFO, concluded that as of June 30, 2025, the company's disclosure controls and procedures were effective[192] - No changes in internal control over financial reporting occurred during Q2 2025 that have materially affected, or are reasonably likely to materially affect, these controls[193] PART II – OTHER INFORMATION Legal Proceedings The company refers to Note 19 for legal proceedings information, reporting no other material developments since its 2024 Form 10-K filing - For information regarding legal proceedings, the company directs readers to Note 19 – Commitments and Contingent Liabilities in the financial statements[198] Risk Factors The company reports no material changes to its risk factors from those disclosed in its 2024 Annual Report on Form 10-K - There have been no material changes in the Company's risk factors from those disclosed in the 2024 Form 10-K[199] Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2025, the company repurchased 9.834 million shares of common stock at an average price of $64.15 per share, as part of a board-authorized program Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased (in 000's) | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | 5,438 | $59.18 | | May 2025 | 129 | $70.23 | | June 2025 | 4,267 | $70.30 | | Total | 9,834 | $64.15 | Other Information No director or Section 16 officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during Q2 2025 - No director or Section 16 officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[202] Exhibits This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The exhibits filed with this report include CEO and CFO certifications as required by the Sarbanes-Oxley Act and interactive data files in XBRL format[203]