Carrier (CARR) - 2023 Q3 - Quarterly Report

FORM 10-Q Filing Information Carrier Global Corporation's Form 10-Q filing details, including registrant information and SEC compliance status Registrant Information This section provides Carrier Global Corporation's basic identification details and SEC filing status - Carrier Global Corporation is incorporated in Delaware with its principal executive offices in Palm Beach Gardens, Florida[2] - The company's common stock (CARR) is registered on the New York Stock Exchange[10] - Carrier Global Corporation is a large accelerated filer and has filed all required reports during the preceding 12 months[2] Shares of Common Stock Outstanding | Metric | Value | | :-------------------------------------- | :------------ | | Shares of Common Stock Outstanding (as of Oct 16, 2023) | 839,046,579 | PART I – FINANCIAL INFORMATION This part presents Carrier Global Corporation's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Financial Statements This section presents Carrier Global Corporation's unaudited condensed consolidated financial statements and related notes Condensed Consolidated Statement of Operations This statement details Carrier Global Corporation's net sales, operating profit, and net income for the reported periods Key Financial Highlights (Three Months Ended September 30) | Metric | 2023 ($M) | 2022 ($M) | YoY Change (%) | | :-------------------------------------- | :-------- | :-------- | :------------- | | Net sales | 5,731 | 5,451 | 5% | | Operating profit | 645 | 1,526 | (58)% | | Net income attributable to common shareowners | 357 | 1,312 | (73)% | | Basic EPS | 0.43 | 1.56 | (72)% | | Diluted EPS | 0.42 | 1.53 | (73)% | Key Financial Highlights (Nine Months Ended September 30) | Metric | 2023 ($M) | 2022 ($M) | YoY Change (%) | | :-------------------------------------- | :-------- | :-------- | :------------- | | Net sales | 16,996 | 15,316 | 11% | | Operating profit | 1,689 | 4,082 | (59)% | | Net income attributable to common shareowners | 929 | 3,264 | (72)% | | Basic EPS | 1.11 | 3.86 | (71)% | | Diluted EPS | 1.09 | 3.78 | (71)% | Condensed Consolidated Statement of Comprehensive Income (Loss) This statement presents Carrier Global Corporation's net income and other comprehensive income (loss) components Comprehensive Income (Loss) (Three Months Ended September 30) | Metric | 2023 ($M) | 2022 ($M) | | :-------------------------------------- | :-------- | :-------- | | Net income from operations | 381 | 1,332 | | Other comprehensive income (loss), net of tax | (166) | (643) | | Comprehensive income (loss) | 215 | 689 | | Comprehensive income (loss) attributable to common shareowners | 192 | 682 | Comprehensive Income (Loss) (Nine Months Ended September 30) | Metric | 2023 ($M) | 2022 ($M) | | :-------------------------------------- | :-------- | :-------- | | Net income from operations | 1,001 | 3,306 | | Other comprehensive income (loss), net of tax | (175) | (1,438) | | Comprehensive income (loss) | 826 | 1,868 | | Comprehensive income (loss) attributable to common shareowners | 761 | 1,848 | Condensed Consolidated Balance Sheet This statement provides Carrier Global Corporation's financial position, including assets, liabilities, and equity Key Balance Sheet Items (in millions) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $3,902 | $3,520 | | Total current assets | $10,511 | $9,879 | | Goodwill | $9,825 | $9,977 | | Total Assets | $26,544 | $26,086 | | Total current liabilities | $6,349 | $6,032 | | Long-term debt | $8,651 | $8,702 | | Total Liabilities | $18,042 | $18,010 | | Total Equity | $8,502 | $8,076 | Condensed Consolidated Statement of Changes in Equity This statement outlines changes in Carrier Global Corporation's total equity over the reporting periods Changes in Total Equity (in millions) | Period | Balance as of Dec 31, 2022 | Balance as of Sep 30, 2023 | | :-------------------------------------- | :------------------------- | :------------------------- | | Total Equity | $8,076 | $8,502 | - Net income attributable to common shareowners for the three months ended September 30, 2023, was $357 million[19] - Accumulated Other Comprehensive Loss increased from $(1,688) million as of December 31, 2022, to $(1,856) million as of September 30, 2023[19][81] Condensed Consolidated Statement of Cash Flows This statement summarizes Carrier Global Corporation's cash inflows and outflows from operating, investing, and financing activities Cash Flow Summary (Nine Months Ended September 30, in millions) | Activity | 2023 ($M) | 2022 ($M) | YoY Change ($M) | | :-------------------------------------- | :-------- | :-------- | :-------------- | | Operating Activities | 1,545 | 620 | 925 | | Investing Activities | (431) | 2,045 | (2,476) | | Financing Activities | (688) | (2,584) | 1,896 | | Effect of foreign exchange rate changes | (45) | (115) | 70 | | Net increase (decrease) in cash | 381 | (34) | 415 | - Net cash provided by operating activities significantly increased due to improved working capital management, including better inventory management and higher accounts payable balances[372] - Net cash used in investing activities shifted from a net inflow in 2022 to a net outflow in 2023, primarily due to capital expenditures and the deconsolidation of Kidde-Fenwal, Inc., partially offset by the prior year's Chubb Sale proceeds[373] Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and disclosures supporting the condensed consolidated financial statements NOTE 1: DESCRIPTION OF THE BUSINESS This note describes Carrier Global Corporation's business, including its global leadership in climate and energy solutions and operating segments - Carrier Global Corporation is a global leader in intelligent climate and energy solutions, providing HVAC, refrigeration, fire, security, and building automation technologies[27] - The company's operations are classified into three segments: HVAC, Refrigeration, and Fire & Security[27] NOTE 2: BASIS OF PRESENTATION This note outlines the accounting policies and significant events impacting the financial statement presentation, including acquisitions and deconsolidations - The company announced plans to acquire Viessmann's climate solutions business for approximately €12 billion and to exit its Fire & Security and Commercial Refrigeration businesses over 2024[56] - Kidde-Fenwal, Inc. (KFI) was deconsolidated on May 14, 2023, following its Chapter 11 bankruptcy filing, leading to derecognition of its assets and liabilities[57] - Carrier acquired a majority ownership interest in Toshiba Carrier Corporation (TCC) on August 1, 2022, consolidating TCC's results within the HVAC segment[58][83] NOTE 3: INVENTORIES, NET This note details Carrier Global Corporation's inventory valuation methods and composition, including raw materials, work-in-process, and finished goods - Inventories are stated at the lower of cost or estimated net realizable value, primarily using FIFO or average cost methods[34] Inventories, Net (in millions) | Category | Sep 30, 2023 | Dec 31, 2022 | | :---------------- | :----------- | :----------- | | Raw materials | $782 | $884 | | Work-in-process | $260 | $230 | | Finished goods | $1,520 | $1,526 | | Total | $2,562 | $2,640 | - Valuation reserves for excess and obsolete inventory increased to $230 million as of September 30, 2023, from $190 million as of December 31, 2022[62] NOTE 4: GOODWILL AND INTANGIBLE ASSETS This note provides information on Carrier Global Corporation's goodwill and intangible assets, including impairment testing and amortization expense - Goodwill and indefinite-lived intangible assets are tested annually for impairment on July 1[37][87][89] Goodwill by Segment (in millions) | Segment | Dec 31, 2022 | Sep 30, 2023 | Change ($M) | | :---------------- | :----------- | :----------- | :---------- | | HVAC | $6,392 | $6,301 | $(91) | | Refrigeration | $1,197 | $1,177 | $(20) | | Fire & Security | $2,388 | $2,347 | $(41) | | Total Goodwill| $9,977 | $9,825 | $(152) | Amortization Expense of Intangible Assets (in millions) | Period | 2023 | 2022 | | :----------------------------------- | :--- | :--- | | Three Months Ended September 30, | $60 | $38 | | Nine Months Ended September 30, | $185 | $79 | NOTE 5: BORROWINGS AND LINES OF CREDIT This note details Carrier Global Corporation's debt structure, including long-term notes, credit facilities, and compliance with covenants Long-term Debt (in millions) | Category | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------------------------ | :----------- | :----------- | | Total long-term notes | $8,350 | $8,350 | | Japanese Term Loan Facility | $362 | $404 | | Other debt | $154 | $149 | | Discounts and debt issuance costs | $(81) | $(61) | | Total debt | $8,785 | $8,842 | | Less: current portion of long-term debt | $(134) | $(140) | | Long-term debt, net of current portion | $8,651 | $8,702 | - The company entered into a new $2.0 billion Revolving Credit Facility in May 2023, maturing in May 2028, with no outstanding borrowings as of September 30, 2023[91] - Carrier maintains a $2.0 billion unsecured commercial paper program, with no outstanding borrowings as of September 30, 2023[92] - The company was in compliance with all covenants under its outstanding indebtedness agreements as of September 30, 2023[71] NOTE 6: FAIR VALUE MEASUREMENTS This note explains Carrier Global Corporation's fair value hierarchy and measurements for financial instruments, including derivative assets and liabilities - The company uses a three-level fair value hierarchy (Level 1: quoted prices, Level 2: observable inputs, Level 3: unobservable inputs) for fair value measurements[72][95] - A $257 million loss (Q3 2023) and $368 million loss (YTD Q3 2023) were recognized on the mark-to-market valuation of window forward contracts related to the Viessmann acquisition[75] Derivative Assets and Liabilities (in millions) | Category | Sep 30, 2023 | Dec 31, 2022 | | :---------------------- | :----------- | :----------- | | Derivative assets | $116 | $28 | | Derivative liabilities | $(408) | $(48) | NOTE 7: EMPLOYEE BENEFIT PLANS This note provides details on Carrier Global Corporation's contributions to various employee benefit plans, including defined benefit and contribution plans Contributions to Employee Benefit Plans (in millions) | Plan Type | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :---------------------------- | :------ | :------ | :---------- | :---------- | | Defined benefit plans | $6 | $4 | $17 | $10 | | Defined contribution plans | $30 | $29 | $96 | $95 | | Multi-employer pension plans | $3 | $5 | $11 | $11 | NOTE 8: STOCK-BASED COMPENSATION This note outlines Carrier Global Corporation's stock-based compensation plans and the associated costs recognized - Stock-based compensation plans include stock appreciation rights, restricted stock units, and performance share units, measured at fair value on the grant date[131] Stock-based Compensation Cost (in millions) | Award Type | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :---------------------------------------- | :------ | :------ | :---------- | :---------- | | Equity compensation costs - equity settled| $23 | $17 | $63 | $58 | | Equity compensation costs - cash settled | $1 | $1 | $3 | $(16) | | Total | $24 | $18 | $66 | $42 | NOTE 9: PRODUCT WARRANTIES This note details Carrier Global Corporation's product warranty provisions and changes in related liabilities - Provisions for product warranties are established at the time of sale, based on product terms and historical claims experience[104] Changes in Warranty Related Provisions (in millions) | Item | YTD Q3 2023 | YTD Q3 2022 | | :---------------------------------------------------------------- | :---------- | :---------- | | Balance as of January 1, | $552 | $524 | | Warranties, performance guarantees issued and changes in estimated liability | $186 | $120 | | Settlements made | $(146) | $(116) | | Other | $(15) | $9 | | Balance as of September 30, | $577 | $537 | NOTE 10: EQUITY This note provides information on Carrier Global Corporation's common stock, share repurchases, and accumulated other comprehensive income (loss) - As of September 30, 2023, 882.5 million shares of common stock were issued, including 43.5 million shares of treasury stock[133] - The Board of Directors authorized up to $4.1 billion for common stock repurchases, with approximately $2.1 billion remaining under the current authorization as of September 30, 2023[106][392][393] Accumulated Other Comprehensive Income (Loss) (in millions) | Component | Dec 31, 2022 | Sep 30, 2023 | | :--------------------------------------- | :----------- | :----------- | | Foreign Currency Translation | $(1,604) | $(1,852) | | Pension and Postretirement Plans | $(84) | $(84) | | Unrealized Hedging Gains (Losses) | $0 | $80 | | Total AOCI (Loss) | $(1,688) | $(1,856) | NOTE 11: REVENUE RECOGNITION This note explains Carrier Global Corporation's revenue recognition policies and presents net sales by operating segment - Revenue is recognized when control of a promised good or service is transferred to a customer, either at a point in time (e.g., shipment) or over time[136] Net Sales by Segment (in millions) | Segment | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :---------------- | :------ | :------ | :---------- | :---------- | | HVAC | $4,008 | $3,734 | $11,846 | $10,092 | | Refrigeration | $924 | $923 | $2,794 | $2,940 | | Fire & Security | $923 | $905 | $2,724 | $2,610 | | Total Net Sales | $5,731 | $5,451 | $16,996 | $15,316 | - The company recognized $325 million in revenue during the nine months ended September 30, 2023, related to contract liabilities as of January 1, 2023[111] NOTE 12: RESTRUCTURING COSTS This note details Carrier Global Corporation's restructuring initiatives and associated pre-tax costs - Restructuring initiatives aim to improve operating performance, profitability, and working capital, involving workforce reductions and facility consolidations[113][345] Net Pre-Tax Restructuring Costs (in millions) | Item | YTD Q3 2023 | YTD Q3 2022 | | :---------------------------------- | :---------- | :---------- | | Balance as of January 1, | $24 | $54 | | Net pre-tax restructuring costs | $54 | $29 | | Utilization, foreign exchange and other | $(34) | $(50) | | Balance as of September 30, | $44 | $33 | NOTE 13: INCOME TAXES This note provides information on Carrier Global Corporation's effective tax rate and the factors influencing its year-over-year changes Effective Tax Rate | Period | 2023 | 2022 | | :-------------------------------------- | :------ | :------ | | Three Months Ended September 30, | 35.9% | 9.4% | | Nine Months Ended September 30, | 34.4% | 15.6% | - The year-over-year increase in the effective tax rate was primarily driven by a $297 million non-deductible loss on the deconsolidation of KFI and a $368 million loss on the mark-to-market valuation of window forward contracts for the VCS Business acquisition[115][258] - The nine months ended September 30, 2022, included a lower effective tax rate due to a $732 million non-cash gain from TCC equity investments and a $1.1 billion Chubb gain[116][259] NOTE 14: EARNINGS PER SHARE This note details the calculation of Carrier Global Corporation's basic and diluted earnings per share - Earnings per share is calculated by dividing net income attributable to common shareowners by the weighted-average number of common shares outstanding[118] Earnings Per Share (in millions, except per share amounts) | Item | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :------------------------------------------ | :------ | :------ | :---------- | :---------- | | Net income attributable to common shareowners | $357 | $1,312 | $929 | $3,264 | | Basic EPS | $0.43 | $1.56 | $1.11 | $3.86 | | Diluted EPS | $0.42 | $1.53 | $1.09 | $3.78 | | Basic weighted-average shares outstanding | 838.7 | 839.6 | 836.6 | 846.1 | | Diluted weighted-average shares outstanding | 854.7 | 856.5 | 852.7 | 864.3 | NOTE 15: ACQUISITIONS This note provides details on Carrier Global Corporation's significant acquisitions, including Toshiba Carrier Corporation and the planned Viessmann Climate Solutions Business acquisition - Carrier acquired a majority ownership interest in Toshiba Carrier Corporation (TCC) on August 1, 2022, for $920 million, recognizing $876 million in goodwill and $965 million in intangible assets[119][121][122][341] - The TCC acquisition resulted in a $696 million non-cash gain from recognizing previously held TCC equity investments at fair value[181][327] - Carrier announced an agreement to acquire Viessmann Climate Solutions (VCS) Business for approximately €12 billion, expected to close by the end of 2023, with 20% paid in stock and 80% in cash[56][348] NOTE 16: DIVESTITURES This note outlines Carrier Global Corporation's divestiture activities, including the Chubb Fire & Security business sale and planned exits - The sale of the Chubb Fire & Security business was completed on January 3, 2022, for net proceeds of $2.9 billion, resulting in a $1.1 billion net gain[32][183] - Carrier plans to exit its Fire & Security and Commercial Refrigeration businesses over the course of 2024[56][342] NOTE 17: SEGMENT FINANCIAL DATA This note presents Carrier Global Corporation's net sales and operating profit broken down by its HVAC, Refrigeration, and Fire & Security segments Net Sales by Segment (in millions) | Segment | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :---------------- | :------ | :------ | :---------- | :---------- | | HVAC | $4,008 | $3,734 | $11,846 | $10,092 | | Refrigeration | $924 | $923 | $2,794 | $2,940 | | Fire & Security | $923 | $905 | $2,724 | $2,610 | | Total Segment | $5,855 | $5,562 | $17,364 | $15,642 | Operating Profit by Segment (in millions) | Segment | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :---------------- | :------ | :------ | :---------- | :---------- | | HVAC | $763 | $1,314 | $1,940 | $2,369 | | Refrigeration | $107 | $116 | $327 | $370 | | Fire & Security | $164 | $142 | $100 | $1,494 | | Total Segment | $1,034 | $1,572 | $2,367 | $4,233 | Geographic External Sales (in millions) | Region | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :------------- | :------ | :------ | :---------- | :---------- | | United States | $3,335 | $3,154 | $9,584 | $9,109 | | International | $2,396 | $2,297 | $7,412 | $6,207 | | Net Sales | $5,731 | $5,451 | $16,996 | $15,316 | NOTE 18: RELATED PARTIES This note details Carrier Global Corporation's transactions and balances with equity method investees Transactions with Equity Method Investees (in millions) | Item | Q3 2023 | Q3 2022 | YTD Q3 2023 | YTD Q3 2022 | | :------------------------------------------ | :------ | :------ | :---------- | :---------- | | Sales to equity method investees | $730 | $718 | $2,371 | $2,129 | | Purchases from equity method investees | $57 | $60 | $159 | $261 | Receivables/Payables with Equity Method Investees (in millions) | Item | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------------------ | :----------- | :----------- | | Receivables from equity method investees | $289 | $154 | | Payables to equity method investees | $35 | $44 | NOTE 19: COMMITMENTS AND CONTINGENT LIABILITIES This note discloses Carrier Global Corporation's environmental, asbestos, and other contingent liabilities, including the Kidde-Fenwal, Inc. bankruptcy - Accrued environmental liabilities totaled $220 million as of September 30, 2023, down from $235 million as of December 31, 2022[190] - Total asbestos liabilities were $223 million as of September 30, 2023, with $94 million in related insurance recoveries[330] - Kidde-Fenwal, Inc. (KFI) filed for Chapter 11 bankruptcy on May 14, 2023, leading to its deconsolidation and a $297 million loss, effectively staying AFFF-related litigation against Carrier[168][197] Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP reviewed the interim financial statements, finding no material modifications needed for U.S. GAAP conformity - PricewaterhouseCoopers LLP reviewed the condensed consolidated financial statements for the periods ended September 30, 2023 and 2022[227] - No material modifications were found to be necessary for the interim financial information to be in conformity with U.S. GAAP[227] - The review is substantially less in scope than an audit, and therefore, an audit opinion is not expressed[228] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Carrier Global Corporation's financial condition, operational results, strategic developments, and key performance drivers - Carrier is a global leader in intelligent climate and energy solutions, operating in HVAC, Refrigeration, and Fire & Security segments[204] - The company announced plans to acquire Viessmann Climate Solutions (VCS) Business for approximately €12 billion and to exit its Fire & Security and Commercial Refrigeration businesses by 2024[207] - Global supply chain challenges, inflationary cost pressures, and component shortages continue to affect results, though moderation has begun[179] BUSINESS OVERVIEW This section provides an overview of Carrier Global Corporation's business, strategic developments, and market trends - Carrier is a global leader in intelligent climate and energy solutions, benefiting from secular trends like urbanization, climate change, and increasing food safety requirements[178][204] - Supply chain challenges and inflationary cost pressures continue to impact results, but the company is taking proactive steps to mitigate these, including investments in supply chain resilience[179][206] - Key recent developments include the planned acquisition of Viessmann Climate Solutions Business, the deconsolidation of Kidde-Fenwal, Inc. due to bankruptcy, and the acquisition of Toshiba Carrier Corporation[207][208][209] RESULTS OF OPERATIONS This section analyzes Carrier Global Corporation's financial performance, including net sales, gross margin, and operating expenses - Net sales increased 5% for the three months and 11% for the nine months ended September 30, 2023, driven by organic growth and the Toshiba Carrier Corporation (TCC) acquisition[240][275] - Operating profit decreased significantly by 58% for the three months and 59% for the nine months, primarily due to a large non-cash gain from TCC equity investments in the prior year and current period losses on window forward contracts and KFI deconsolidation[240][275][219][256] - Gross margin as a percentage of net sales increased by 460 basis points for the three months and 160 basis points for the nine months, reflecting pricing improvements and productivity initiatives[243][277] Three Months Ended September 30, 2023 Compared with the Three Months Ended September 30, 2022 This section compares Carrier Global Corporation's financial results for the three months ended September 30, 2023, against the prior year Net Sales Performance (Three Months Ended September 30) | Component | % Change | | :--------------------------------- | :------- | | Organic | 3% | | Foreign currency translation | 1% | | Acquisitions and divestitures, net | 1% | | Total % change | 5% | - Gross margin increased by $339 million (23%) to $1.8 billion, with the percentage of net sales rising to 31.7% from 27.1%, driven by customer demand, pricing, and productivity[216][243] - Operating expenses decreased by 2,490% to $(1.2) billion, primarily due to a $732 million non-cash gain from TCC equity investments in 2022, partially offset by a $257 million loss on window forward contracts in 2023[217][244][246] Nine Months Ended September 30, 2023 Compared with the Nine Months Ended September 30, 2022 This section compares Carrier Global Corporation's financial results for the nine months ended September 30, 2023, against the prior year Net Sales Performance (Nine Months Ended September 30) | Component | % Change | | :--------------------------------- | :------- | | Organic | 4% | | Foreign currency translation | (1)% | | Acquisitions and divestitures, net | 8% | | Total % change | 11% | - Gross margin increased by $732 million (17%) to $4.9 billion, with the percentage of net sales rising to 29.1% from 27.5%, driven by customer demand, pricing, and TCC operating results[253][277] - Operating expenses increased by 2,315% to $(3.3) billion, significantly impacted by a $732 million non-cash gain from TCC equity investments and a $1.1 billion Chubb gain in 2022, and a $368 million loss on window forward contracts and $297 million loss on KFI deconsolidation in 2023[254][256][280] SEGMENT REVIEW This section provides a detailed review of Carrier Global Corporation's performance across its HVAC, Refrigeration, and Fire & Security segments - The HVAC segment saw strong organic net sales growth driven by commercial HVAC and North America residential/light commercial businesses, but operating profit was impacted by prior year's non-cash gains[262][263][308][296] - The Refrigeration segment experienced organic net sales decreases due to volume reductions in commercial refrigeration and container end-markets, leading to a decline in operating profit[291][266][299][311] - The Fire & Security segment achieved organic net sales growth from pricing and volume, but its operating profit was significantly affected by the prior year's Chubb gain and the current year's KFI deconsolidation loss[306][307][313][353] Three Months Ended September 30, 2023 Compared with Three Months Ended September 30, 2022 This section analyzes segment-level net sales and operating profit for the three months ended September 30, 2023, versus the prior year Segment Net Sales Growth (Q3 2023 vs Q3 2022) | Segment | Organic % Change | Acquisitions/Divestitures, net % Change | Total % Change | | :---------------- | :--------------- | :-------------------------------------- | :------------- | | HVAC | 4% | 3% | 7% | | Refrigeration | (3)% | 0% | 0% | | Fire & Security | 6% | (5)% | 2% | Segment Operating Profit Growth (Q3 2023 vs Q3 2022) | Segment | Operational % Change | Other Factors % Change | Total % Change | | :---------------- | :------------------- | :--------------------- | :------------- | | HVAC | 12% | (55)% | (42)% | | Refrigeration | (9)% | 2% | (8)% | | Fire & Security | 17% | (2)% | 15% | - HVAC operating profit decreased 42% due to a $732 million non-cash gain from TCC equity investments in the prior year, despite operational improvements[263][290] Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022 This section analyzes segment-level net sales and operating profit for the nine months ended September 30, 2023, versus the prior year Segment Net Sales Growth (YTD Q3 2023 vs YTD Q3 2022) | Segment | Organic % Change | Acquisitions/Divestitures, net % Change | Total % Change | | :---------------- | :--------------- | :-------------------------------------- | :------------- | | HVAC | 6% | 12% | 17% | | Refrigeration | (4)% | (1)% | (5)% | | Fire & Security | 8% | (3)% | 4% | Segment Operating Profit Growth (YTD Q3 2023 vs YTD Q3 2022) | Segment | Operational % Change | Other Factors % Change | Total % Change | | :---------------- | :------------------- | :--------------------- | :------------- | | HVAC | 8% | (32)% | (18)% | | Refrigeration | (16)% | 5% | (12)% | | Fire & Security | 2% | (95)% | (93)% | - Fire & Security operating profit decreased 93%, primarily due to the $1.1 billion Chubb gain in the prior year and the $297 million loss on KFI deconsolidation in the current year[353][314] LIQUIDITY AND FINANCIAL CONDITION This section assesses Carrier Global Corporation's liquidity, capital resources, and financial position, including cash flows and debt levels Key Liquidity Measures (in millions) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $3,902 | $3,520 | | Total debt | $8,785 | $8,842 | | Total equity | $8,502 | $8,076 | | Net debt | $4,883 | $5,322 | | Total debt to total capitalization | 51% | 52% | - The company maintains a $2.0 billion commercial paper program and a $2.0 billion revolving credit facility, with no outstanding borrowings as of September 30, 2023[331] - Net cash provided by operating activities increased significantly to $1,545 million (YTD Q3 2023) from $620 million (YTD Q3 2022), driven by improved working capital management[372] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section confirms no significant change in Carrier Global Corporation's market risk exposure compared to the 2022 Form 10-K - No significant change in market risk exposure during the three and nine months ended September 30, 2023[375] Item 4. Controls and Procedures Management concluded Carrier Global Corporation's disclosure controls were effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023[376][378] - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2023[379] PART II – OTHER INFORMATION This part includes Carrier Global Corporation's legal proceedings, risk factors, equity sales, and other required disclosures Item 1. Legal Proceedings This section refers to Note 19 for legal proceedings, confirming no material developments beyond prior reports - Information regarding legal proceedings is detailed in Note 19 – Commitments and Contingent Liabilities[363] - No material developments in legal proceedings have occurred beyond previously reported information[363] Item 1A. Risk Factors This section confirms no material changes in Carrier Global Corporation's risk factors from the 2022 Form 10-K - No material changes in risk factors from those disclosed in the 2022 Form 10-K[380] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details Carrier Global Corporation's share repurchase program, noting no repurchases in Q3 2023 and remaining authorization - No shares of common stock were repurchased during the three months ended September 30, 2023[365][393] - The Board of Directors authorized up to $4.1 billion for share repurchases, with approximately $2.1 billion remaining under the current authorization as of September 30, 2023[367][392][393] Item 5. Other Information This section confirms no Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers in Q3 2023 - No Rule 10b5-1 trading arrangements were adopted or terminated by directors or Section 16 officers during the three months ended September 30, 2023[368] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including plan amendments, certifications, and XBRL documents - Exhibits include amendments to company automatic contribution excess plan, pension preservation plan, and savings restoration plan[370] - Certifications required by Rule 13a-14(a)/15d-14(a) and Section 1350 are included[370] - XBRL instance document and taxonomy extension documents are provided for interactive data filing[357][370] SIGNATURES This section contains the official signatures of Carrier Global Corporation's authorized officers, certifying the Form 10-Q - The report is signed by Patrick Goris, Senior Vice President and Chief Financial Officer, and Kyle Crockett, Vice President, Controller, on October 26, 2023[360]