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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

____________________________________

FORM 10-Q

____________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-39220

____________________________________

CARRIER GLOBAL CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________


Delaware						83-4051582
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

13995 Pasteur Boulevard, Palm Beach Gardens, Florida 33418

(Address of principal executive offices, including zip code)

(561) 365-2000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock ($0.01 par value)

CARR

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 15, 2022, there were 841,583,456 shares of Common Stock outstanding.

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CARRIER GLOBAL CORPORATION

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Three and Six Months Ended June 30, 2022


			Page

PART I – FINANCIAL INFORMATION			3

Item 1. Financial Statements:			3

Condensed Consolidated Statement of Operations (Unaudited)			3



Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited)			4

Condensed Consolidated Balance Sheet (Unaudited)			5

Condensed Consolidated Statement of Changes in Equity (Unaudited)			6

Condensed Consolidated Statement of Cash Flows (Unaudited)			7

Notes to Condensed Consolidated Financial Statements (Unaudited)			8

Report of Independent Registered Public Accounting Firm			25

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			26

Item 3. Quantitative and Qualitative Disclosures About Market Risk			41

Item 4. Controls and Procedures			41

PART II – OTHER INFORMATION			41

Item 1. Legal Proceedings			41

Item 1A. Risk Factors			42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43



Item 6. Exhibits			44

SIGNATURES			45

Carrier Global Corporation and its subsidiaries' names, abbreviations thereof, logos and product and service designators are all either the registered or unregistered trademarks or trade names of Carrier Global Corporation and its subsidiaries. Names, abbreviations of names, logos and products and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners. As used herein, the terms "we," "us," "our," "the Company" or "Carrier," unless the context otherwise requires, mean Carrier Global Corporation and its subsidiaries. References to internet websites in this Form 10-Q are provided for convenience only. Information available through these websites is not incorporated by reference into this Form 10-Q.

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions, except per share amounts)	2022		2021		2022		2021
Net sales
Product sales	$	4,662	$	4,584	$	8,832	$	8,448
Service sales	549		856		1,033		1,691
Total Net sales	5,211		5,440		9,865		10,139
Costs and expenses
Cost of products sold	(3,363)		(3,235)		(6,361)		(5,959)
Cost of services sold	(401)		(586)		(764)		(1,167)
Research and development	(122)		(125)		(247)		(246)
Selling, general and administrative	(614)		(813)		(1,215)		(1,556)
Total Costs and expenses	(4,500)		(4,759)		(8,587)		(8,928)
Equity method investment net earnings	101		87		159		125
Other income (expense), net	7		15		1,119		18
Operating profit	819		783		2,556		1,354
Non-service pension (expense) benefit	(1)		19		(2)		37
Interest (expense) income, net	(61)		(71)		(109)		(164)
Income from operations before income taxes	757		731		2,445		1,227
Income tax (expense) benefit	(170)		(234)		(471)		(338)
Net income from operations	587		497		1,974		889
Less: Non-controlling interest in subsidiaries' earnings from operations	14		10		22		18









Net income attributable to common shareowners	$	573	$	487	$	1,952	$	871

Earnings per share
Basic	$	0.68	$	0.56	$	2.30	$	1.00
Diluted	$	0.67	$	0.55	$	2.25	$	0.98

Weighted-average number of shares outstanding
Basic	845.7		868.7		849.5		869.0
Diluted	862.7		890.9		868.4		890.4

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Net income from operations	$	587	$	497	$	1,974	$	889


Other comprehensive income (loss), net of tax:




Foreign currency translation adjustments arising during period	(489)		59		(550)		(62)









Pension and post-retirement benefit plan adjustments	2		6		—		13
Chubb divestiture	—		—		(245)		—












Other comprehensive income (loss), net of tax	(487)		65		(795)		(49)
Comprehensive income (loss)	100		562		1,179		840
Less: Comprehensive income (loss) attributable to non-controlling interest	5		10		13		18
Comprehensive income (loss) attributable to common shareowners	$	95	$	552	$	1,166	$	822

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)


	As of
(In millions)	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	3,017	$	2,987
Accounts receivable, net	2,823		2,403
Contract assets, current	712		503
Inventories, net	2,350		1,970
Assets held for sale	—		3,168
Other assets, current	374		376
Total current assets	9,276		11,407
Future income tax benefits	566		563
Fixed assets, net	1,805		1,826
Operating lease right-of-use assets	595		640
Intangible assets, net	458		509
Goodwill	9,067		9,349
Pension and post-retirement assets	31		43
Equity method investments	1,671		1,593

Other assets	193		242
Total Assets	$	23,662	$	26,172

Liabilities and Equity
Accounts payable	$	2,403	$	2,334
Accrued liabilities	2,430		2,561
Contract liabilities, current	444		415
Liabilities held for sale	—		1,134
Current portion of long-term debt	269		183
Total current liabilities	5,546		6,627
Long-term debt	8,298		9,513
Future pension and post-retirement obligations	366		380
Future income tax obligations	335		354
Operating lease liabilities	490		527

Other long-term liabilities	1,635		1,677
Total Liabilities	16,670		19,078
Commitments and contingent liabilities (Note 19)
Equity
Common stock	9		9
Treasury stock	(1,543)		(529)
Additional paid-in capital	5,441		5,411
Retained earnings	4,564		2,865
Accumulated other comprehensive loss	(1,775)		(989)
Non-controlling interest	296		327
Total Equity	6,992		7,094
Total Liabilities and Equity	$	23,662	$	26,172

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)


(In millions)	Accumulated Other Comprehensive Income (Loss)		Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings		Non-Controlling Interest		Total Equity
Balance as of December 31, 2021	$	(989)	$	9	$	(529)	$	5,411	$	2,865	$	327	$	7,094
Net income	—		—		—		—		1,379		8		1,387
Other comprehensive income (loss), net of tax	(308)		—		—		—		—		—		(308)

Shares issued under incentive plans, net	—		—		—		(17)		—		—		(17)
Stock-based compensation	—		—		—		21		—		—		21
Dividends attributable to non-controlling interest	—		—		—		—		—		(1)		(1)

Sale of non-controlling interest	—		—		—		—		—		(5)		(5)
Treasury stock repurchase	—		—		(741)		—		—		—		(741)


Balance as of March 31, 2022	$	(1,297)	$	9	$	(1,270)	$	5,415	$	4,244	$	329	$	7,430

Net income	—		—		—		—		573		14		587
Other comprehensive income (loss), net of tax	(478)		—		—		—		—		(9)		(487)
Dividends declared on common stock (1)	—		—		—		—		(253)		—		(253)
Conversion of cash settled awards	—		—		—		6		—		—		6
Stock-based compensation	—		—		—		20		—		—		20

Dividends attributable to non-controlling interest	—		—		—		—		—		(38)		(38)


Treasury stock repurchase	—		—		(273)		—		—		—		(273)

Balance as of June 30, 2022	$	(1,775)	$	9	$	(1,543)	$	5,441	$	4,564	$	296	$	6,992






























































(In millions)	Accumulated Other Comprehensive Income (Loss)		Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings		Non-Controlling Interest		Total Equity
Balance as of December 31, 2020	$	(745)	$	9	$	—	$	5,345	$	1,643	$	326	$	6,578
Net income	—		—		—		—		384		8		392
Other comprehensive income (loss), net of tax	(114)		—		—		—		—		—		(114)

Shares issued under incentive plans, net	—		—		—		(14)		—		—		(14)
Stock-based compensation	—		—		—		19		—		—		19
Dividends attributable to non-controlling interest	—		—		—		—		—		(5)		(5)



Treasury stock repurchase	—		—		(38)		—		—		—		(38)
Balance as of March 31, 2021	$	(859)	$	9	$	(38)	$	5,350	$	2,027	$	329	$	6,818

Net income	—		—		—		—		487		10		497
Other comprehensive income (loss), net of tax	65		—		—		—		—		—		65
Dividends declared on common stock (2)	—		—		—		—		(209)		—		(209)
Shares issued under incentive plans, net	—		—		—		(4)		—		—		(4)
Stock-based compensation	—		—		—		20		—		—		20
Dividends attributable to non-controlling interest	—		—		—		—		—		(21)		(21)

Acquisition of non-controlling interest	—		—		—		—		—		46		46



Treasury stock repurchase	—		—		(92)		—		—		—		(92)
Balance as of June 30, 2021	$	(794)	$	9	$	(130)	$	5,366	$	2,305	$	364	$	7,120















(1) Cash dividends declared were $0.30 per share for the three months ended June 30, 2022.


(2) Cash dividends declared were $0.24 per share for the three months ended June 30, 2021

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)


	For the Six Months Ended June 30,
(In millions)	2022		2021
Operating Activities
Net income from operations	$	1,974	$	889
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	155		168
Deferred income tax provision	(17)		33
Stock-based compensation costs	41		40
Equity method investment net earnings	(159)		(125)

(Gain) loss on extinguishment of debt	(36)		—
(Gain) loss on sale of investments	(1,119)		—
Changes in operating assets and liabilities
Accounts receivable, net	(483)		(288)
Contract assets, current	(224)		(41)
Inventories, net	(435)		(210)
Other assets, current	(37)		(27)
Accounts payable and accrued liabilities	79		368
Contract liabilities, current	42		42
Defined benefit plan contributions	(6)		(27)
Distributions from equity method investments	15		42
Other operating activities, net	40		(119)
Net cash flows provided by (used in) operating activities	(170)		745

Investing Activities
Capital expenditures	(122)		(132)
Investment in businesses, net of cash acquired	(38)		(167)
Dispositions of businesses	2,944		1

Settlement of derivative contracts, net	(123)		(6)
Other investing activities, net	(16)		3
Net cash flows provided by (used in) investing activities	2,645		(301)

Financing Activities
Increase (decrease) in short-term borrowings, net	(22)		(13)
Issuance of long-term debt	21		74
Repayment of long-term debt	(1,127)		(605)
Repurchases of common stock	(1,014)		(130)
Dividends paid on common stock	(257)		(209)
Dividends paid to non-controlling interest	(22)		(30)

Other financing activities, net	(13)		15
Net cash flows provided by (used in) financing activities	(2,434)		(898)





Effect of foreign exchange rate changes on cash and cash equivalents	(41)		(2)
Net increase (decrease) in cash and cash equivalents and restricted cash	—		(456)

Cash, cash equivalents and restricted cash, beginning of period	3,025		3,120
Cash, cash equivalents and restricted cash, end of period	3,025		2,664
Less: restricted cash	8		34
Cash and cash equivalents, end of period	$	3,017	$	2,630

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: DESCRIPTION OF THE BUSINESS

Carrier Global Corporation is the leading global provider of healthy, safe, sustainable and intelligent building and cold chain solutions. The Company's portfolio includes industry-leading brands such as Carrier, Automated Logic, Carrier Transicold, Kidde, Edwards and LenelS2 that offer innovative heating, ventilating, air conditioning ("HVAC"), refrigeration, fire, security and building automation technologies to help make the world safer and more comfortable. The Company also provides a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring.

In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for 2021 filed with the SEC on February 8, 2022 (the "2021 Form 10-K").

Impact of the COVID-19 Pandemic

In early 2020, the World Health Organization declared the outbreak of a respiratory disease known as COVID-19 as a global pandemic. In response, many countries implemented containment and mitigation measures to combat the outbreak, which severely restricted the level of economic activity and caused a significant contraction in the global economy. As a result, the Company took several preemptive actions to manage liquidity, preserve the health and safety of its employees and customers as well as maintain the continuity of its operations. The preparation of financial statements requires management to use judgments in making estimates and assumptions based on the relevant information available at the end of each period, which can have a significant effect on reported amounts. However, due to significant uncertainty surrounding the pandemic, including a resurgence in cases and the spread of COVID-19 variants, management's judgments could change. While the Company's results of operations, cash flows and financial condition could be negatively impacted, the extent of any continuing impact cannot be estimated with certainty at this time.

NOTE 2: BASIS OF PRESENTATION

The Unaudited Condensed Consolidated Financial Statements include all accounts of the Company and its wholly-owned and majority-owned subsidiaries in which it has control. All intra-company accounts and transactions have been eliminated. Related party transactions between the Company and its equity method investees have not been eliminated. Non-controlling interest represents a non-controlling investor's interests in the results of subsidiaries that the Company controls and consolidates.

Sale of Chubb Fire & Security Business

On July 26, 2021, the Company entered into a stock purchase agreement to sell its Chubb Fire and Security business ("Chubb") to APi Group Corporation ("APi"). As a result, the assets and liabilities of Chubb are presented as held for sale on the accompanying Unaudited Condensed Consolidated Balance Sheet as of December 31, 2021 and recorded at the lower of their carrying value or fair value less estimated cost to sell. The sale of Chubb was completed on January 3, 2022 (the "Chubb Sale"). See Note 16 - Divestitures for additional information.

Separation from United Technologies

On April 3, 2020, United Technologies Corporation, since renamed Raytheon Technologies Corporation ("UTC"), completed the spin-off of the Company into an independent, publicly traded company (the "Separation") through a pro-rata distribution (the "Distribution") on a one-for-one basis of all of the outstanding shares of common stock of the Company to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date of the Distribution. The Company incurred separation-related costs including employee-related costs, costs to establish certain stand-alone functions, information technology systems, professional service fees and other costs associated with becoming an independent, publicly traded company. These costs are primarily recorded in Selling, general and administrative in the Unaudited Condensed Consolidated Statement of Operations and totaled $3 million and $19 million for the three and six months ended June 30, 2021, respectively.

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Recently Issued and Adopted Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the sole source of authoritative U.S. GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues Accounting Standards Updates ("ASU") to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. ASUs pending adoption were assessed and determined to be either not applicable or not expected to have a material impact on the Unaudited Condensed Consolidated Financial Statements.

NOTE 3: INVENTORIES, NET

Inventories are stated at the lower of cost or estimated net realizable value. Cost is primarily determined based on the first-in, first-out inventory method ("FIFO") or average cost methods, which approximates current replacement cost. However, certain subsidiaries use the last-in, first-out inventory method ("LIFO").

Inventories, net consisted of the following:


(In millions)	June 30, 2022		December 31, 2021
Raw materials	$	701	$	559
Work-in-process	243		197
Finished goods	1,406		1,214

Inventories, net	$	2,350	$	1,970

The Company performs periodic assessments utilizing customer demand, production requirements and historical usage rates to determine the existence of excess and obsolete inventory and records necessary provisions to reduce such inventories to the lower of cost or estimated net realizable value. Raw materials, work-in-process and finished goods are net of valuation reserves of $151 million and $154 million as of June 30, 2022 and December 31, 2021, respectively.

NOTE 4: GOODWILL AND INTANGIBLE ASSETS

The Company records goodwill as the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is tested and reviewed annually for impairment on July 1 or whenever there is a material change in events or circumstances that indicates that the fair value of the reporting unit may be less than its carrying value.

The changes in the carrying amount of goodwill were as follows:


(In millions)	HVAC		Refrigeration		Fire & Security		Total
Balance as of December 31, 2021	$	5,658	$	1,228	$	2,463	$	9,349
Goodwill resulting from business combinations (1)	15		—		1		16

Foreign currency translation	(162)		(39)		(97)		(298)
Balance as of June 30, 2022	$	5,511	$	1,189	$	2,367	$	9,067

(1) See Note 15 - Acquisitions for additional information.

Indefinite-lived intangible assets are tested and reviewed annually for impairment on July 1 or whenever there is a material change in events or circumstances that indicates that the fair value of the asset may be less than the carrying amount of the asset. All other intangible assets with finite useful lives are amortized over their estimated useful lives.

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Identifiable intangible assets consisted of the following:


	June 30, 2022						December 31, 2021
(In millions)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Amortized:
Customer relationships	$	919	$	(701)	$	218	$	945	$	(699)	$	246
Patents and trademarks	224		(180)		44		232		(182)		50

Service portfolios and other	672		(540)		132		688		(539)		149
	1,815		(1,421)		394		1,865		(1,420)		445
Unamortized:
Trademarks and other	64		—		64		64		—		64
Intangible assets, net	$	1,879	$	(1,421)	$	458	$	1,929	$	(1,420)	$	509

Amortization of intangible assets was as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Amortization expense of Intangible assets	$	20	$	25	$	41	$	49

NOTE 5: BORROWINGS AND LINES OF CREDIT

Long-term debt consisted of the following:


(In millions)	June 30, 2022		December 31, 2021


2.242% Notes due February 15, 2025	$	1,200	$	2,000
2.493% Notes due February 15, 2027	900		1,250
2.722% Notes due February 15, 2030	2,000		2,000
2.700% Notes due February 15, 2031	750		750
3.377% Notes due April 5, 2040	1,500		1,500
3.577% Notes due April 5, 2050	2,000		2,000


Total long-term Notes	8,350		9,500
Other debt (including project financing obligations and finance leases)	279		267
Discounts and debt issuance costs	(62)		(71)
Total debt	8,567		9,696
Less: current portion of long-term debt	269		183
Long-term debt, net of current portion	$	8,298	$	9,513

Revolving Credit Facility

On February 10, 2020, the Company entered into a revolving credit agreement with various banks permitting aggregate borrowings of up to $2.0 billion pursuant to an unsecured, unsubordinated revolving credit facility that matures on April 3, 2025 (the "Revolving Credit Facility"). The Revolving Credit Facility supports the Company's commercial paper program and cash requirements of the Company. A commitment fee of 0.125% is charged on unused commitments. Borrowings under the Revolving Credit Facility are available in U.S. Dollars, Euros and Pounds Sterling and bear interest at a variable interest rate plus a ratings-based margin, which was 125 basis points as of June 30, 2022. As of June 30, 2022, there were no borrowings outstanding under the Revolving Credit Facility.

Commercial Paper Program

The Company has a $2.0 billion unsecured, unsubordinated commercial paper program, which can be used for general

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corporate purposes, including the funding of working capital and potential acquisitions. As of June 30, 2022, there were no borrowings outstanding under the commercial paper program.

Project Financing Arrangements

The Company is involved in several long-term construction contracts in which it arranges project financing with certain customers. As a result, the Company issued $21 million and $71 million of debt during the six months ended June 30, 2022 and 2021, respectively. Long-term debt repayments associated with these financing arrangements during the six months ended June 30, 2022 and 2021 were $12 million and $83 million, respectively.

Debt Covenants

The Revolving Credit Facility and the indenture for the long-term Notes contain affirmative and negative covenants customary for financings of these types, which, among other things, limit the Company's ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. As of June 30, 2022, the Company was in compliance with the covenants under the agreements governing its outstanding indebtedness.

Tender Offers

On March 15, 2022, the Company commenced tender offers to purchase up to $1.15 billion ("Aggregate Tender Cap") aggregate principal of the Company's 2.242% Notes due 2025 and 2.493% Notes due 2027 (together, the "Senior Notes"). The tender offers included payment of applicable accrued and unpaid interest up to the settlement date, along with a fixed spread for early repayment. Based on participation, the Company elected to settle the tender offers on March 30, 2022. The aggregate principal amount of Senior Notes validly tendered and accepted was approximately $1.15 billion, which included $800 million of Notes due 2025 and $350 million of Notes due 2027. As a result, the Company recognized a net gain of $33 million and wrote off $5 million of unamortized deferred financing costs within Interest (expense) income, net on the accompanying Unaudited Condensed Consolidated Statement of Operations during the three months ended March 31, 2022.

NOTE 6: FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurement ("ASC 820"), defines fair value as the price that would be received if an asset is sold or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

•Level 1: Observable inputs such as quoted prices in active markets;

•Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

•Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors, including foreign currency and commodity price risk. These exposures are managed through operational strategies and the use of undesignated hedging contracts. The Company's derivative assets and liabilities are measured at fair value on a recurring basis using internal models based on observable market inputs, such as forward, interest, contract and discount rates with changes in fair value reported directly in earnings.

The following tables provide the valuation hierarchy classification of assets and liabilities that are recorded at fair value and

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measured on a recurring basis in the Company's Unaudited Condensed Consolidated Balance Sheet:


(In millions)	Total		Level 1		Level 2		Level 3
June 30, 2022


Derivative assets (1)	$	3	$	—	$	3	$	—
Derivative liabilities (2)	$	(9)	$	—	$	(9)	$	—

December 31, 2021


Derivative assets (1)	$	8	$	—	$	8	$	—
Derivative liabilities (2)	$	(35)	$	—	$	(35)	$	—

(1) Included in Other assets, current on the accompanying Unaudited Condensed Consolidated Balance Sheet.

(2) Included in Accrued liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet.

The following table provides the carrying amounts and fair values of the Company's long-term notes that are not recorded at fair value in the Unaudited Condensed Consolidated Balance Sheet:


	June 30, 2022				December 31, 2021
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value



Total long-term Notes (1)	$	8,350	$	7,040	$	9,500	$	9,842