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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, 2020
OR
| | | | | |
| ☐ | 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 and post such files). Yes ☒. No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 ☒.
At June 30, 2020, there were 866,164,968 shares of Common Stock outstanding.
CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Three and Six Months Ended June 30, 2020
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.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | | | For the Six Months Ended June 30, | | |
| (dollars in millions, except per share amounts; shares in millions) | 2020 | | 2019 | | 2020 | | 2019 |
| Net sales | | | | | | | |
| Product sales (Note 5) | $ | 3,275 | | | $ | 4,139 | | | $ | 6,422 | | | $ | 7,705 | |
| Service sales | 697 | | | 823 | | | 1,438 | | | 1,580 | |
| 3,972 | | | 4,962 | | | 7,860 | | | 9,285 | |
| Costs and expenses | | | | | | | |
| Cost of products sold (Note 5) | 2,343 | | | 2,906 | | | 4,580 | | | 5,471 | |
| Cost of services sold | 488 | | | 582 | | | 1,017 | | | 1,114 | |
| Research and development | 94 | | | 103 | | | 192 | | | 200 | |
| Selling, general and administrative | 637 | | | 680 | | | 1,329 | | | 1,364 | |
| 3,562 | | | 4,271 | | | 7,118 | | | 8,149 | |
| Equity method investment net earnings | 57 | | | 80 | | | 86 | | | 120 | |
| Other (expense) income, net | (25) | | | 34 | | | (71) | | | 49 | |
| Operating profit | 442 | | | 805 | | | 757 | | | 1,305 | |
| Non-service pension benefit | 14 | | | 38 | | | 31 | | | 77 | |
| Interest (expense) income, net | (81) | | | 16 | | | (118) | | | 20 | |
| Income from operations before income taxes | 375 | | | 859 | | | 670 | | | 1,402 | |
| Income tax expense | 106 | | | 65 | | | 299 | | | 205 | |
| Net income from operations | 269 | | | 794 | | | 371 | | | 1,197 | |
| Less: Non-controlling interest in subsidiaries' earnings from operations | 8 | | | 10 | | | 14 | | | 13 | |
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| Net income attributable to common shareowners | $ | 261 | | | $ | 784 | | | $ | 357 | | | $ | 1,184 | |
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| Earnings per share (Note 3) | | | | | | | |
| Basic | $ | 0.30 | | | $ | 0.91 | | | $ | 0.41 | | | $ | 1.37 | |
| Diluted | $ | 0.30 | | | $ | 0.91 | | | $ | 0.41 | | | $ | 1.37 | |
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| Weighted average number of shares outstanding (Note 3) | | | | | | | |
| Basic | 866.2 | | | 866.2 | | | 866.2 | | | 866.2 | |
| Diluted | 870.9 | | | 866.2 | | | 870.9 | | | 866.2 | |
| | | | | | | |
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, | | | | For the Six Months Ended June 30, | | |
| (dollars in millions) | 2020 | | 2019 | | 2020 | | 2019 |
| Net income from operations | $ | 269 | | | $ | 794 | | | $ | 371 | | | $ | 1,197 | |
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| Other comprehensive income (loss), net of tax | | | | | | | |
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| Foreign currency translation adjustments arising during period | 251 | | | (81) | | | (239) | | | 15 | |
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| Pension and post-retirement benefit plan adjustments | 7 | | | 4 | | | 12 | | | 9 | |
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| Other comprehensive income (loss), net of tax | 258 | | | (77) | | | (227) | | | 24 | |
| Comprehensive income | 527 | | | 717 | | | 144 | | | 1,221 | |
| Less: Comprehensive income attributable to non-controlling interest | (9) | | | (7) | | | (13) | | | (15) | |
| Comprehensive income attributable to common shareowners | $ | 518 | | | $ | 710 | | | $ | 131 | | | $ | 1,206 | |
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
| | | | | | | | | | | |
| (dollars in millions) | June 30, 2020 | | December 31, 2019 |
| Assets | | | |
| Cash and cash equivalents | $ | 2,704 | | | $ | 952 | |
| Accounts receivable, net (Note 5 and Note 6) | 2,665 | | | 2,726 | |
| Contract assets, current | 761 | | | 622 | |
| Inventories, net | 1,639 | | | 1,332 | |
| Other assets, current | 284 | | | 327 | |
| Total current assets | 8,053 | | | 5,959 | |
| Future income tax benefits | 419 | | | 500 | |
| Fixed assets, net | 1,651 | | | 1,663 | |
| Operating lease right-of-use assets | 843 | | | 832 | |
| Intangible assets, net | 1,024 | | | 1,083 | |
| Goodwill | 9,735 | | | 9,884 | |
| Pension and post-retirement assets | 521 | | | 490 | |
| Equity method investments | 1,697 | | | 1,739 | |
| Other assets | 233 | | | 256 | |
| Total Assets | $ | 24,176 | | | $ | 22,406 | |
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| Liabilities and Equity | | | |
| Accounts payable (Note 5) | $ | 1,765 | | | $ | 1,701 | |
| Accrued liabilities (Note 5) | 2,246 | | | 2,088 | |
| Contract liabilities, current | 477 | | | 443 | |
| Current portion of long-term debt | 301 | | | 237 | |
| Total current liabilities | 4,789 | | | 4,469 | |
| Long-term debt | 11,728 | | | 82 | |
| Future pension and post-retirement obligations | 462 | | | 456 | |
| Future income tax obligations (Note 5 and Note 14) | 445 | | | 1,099 | |
| Operating lease liabilities | 688 | | | 682 | |
| Other long-term liabilities (Note 5) | 1,698 | | | 1,183 | |
| Total Liabilities | 19,810 | | | 7,971 | |
| Commitments and contingent liabilities (Note 18) | | | |
| Equity | | | |
| UTC Net investment | — | | | 15,355 | |
Common stock, par value $0.01; 4,000,000,000 shares authorized; 866,164,968 shares issued and outstanding as of June 30, 2020 | 9 | | | — | |
| Additional paid-in capital | 5,307 | | | — | |
| Retained earnings | 191 | | | — | |
| Accumulated other comprehensive loss | (1,479) | | | (1,253) | |
| Non-controlling interest | 338 | | | 333 | |
| Total Equity | 4,366 | | | 14,435 | |
| Total Liabilities and Equity | $ | 24,176 | | | $ | 22,406 | |
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (dollars in millions) | | UTC Net Investment | | Accumulated Other Comprehensive Loss | | | | Common Stock | | Additional Paid-In Capital | | Retained Earnings | | Non-Controlling Interest | | Total Equity |
| Balance at January 1, 2019 | | $ | 15,132 | | | $ | (1,215) | | | | | $ | — | | | $ | — | | | $ | — | | | $ | 352 | | | $ | 14,269 | |
| Net income | | 400 | | | — | | | | | — | | | — | | | — | | | 3 | | | 403 | |
| Other comprehensive income, net of tax | | — | | | 96 | | | | | — | | | — | | | — | | | 5 | | | 101 | |
| Dividends attributable to non-controlling interest | | — | | | — | | | | | — | | | — | | | — | | | (2) | | | (2) | |
| Net transfers to UTC | | (81) | | | — | | | | | — | | | — | | | — | | | — | | | (81) | |
| Adoption impact of ASU 2018-02 | | 9 | | | (9) | | | | | — | | | — | | | — | | | — | | | — | |
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| Balance at March 31, 2019 | | 15,460 | | | (1,128) | | | | | — | | | — | | | — | | | 358 | | | 14,690 | |
| | | | | | | | | | | | | | | | |
| Net income | | 784 | | | — | | | | | — | | | — | | | — | | | 10 | | | 794 | |
| Other comprehensive loss, net of tax | | — | | | (74) | | | | | — | | | — | | | — | | | (3) | | | (77) | |
| Dividends attributable to non-controlling interest | | — | | | — | | | | | — | | | — | | | — | | | (2) | | | (2) | |
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| Net transfers to UTC | | (445) | | | — | | | | | — | | | — | | | — | | | — | | | (445) | |
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| Balance at June 30, 2019 | | $ | 15,799 | | | $ | (1,202) | | | | | $ | — | | | $ | — | | | $ | — | | | $ | 363 | | | $ | 14,960 | |
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| Balance at January 1, 2020 | | $ | 15,355 | | | $ | (1,253) | | | | | $ | — | | | $ | — | | | $ | — | | | $ | 333 | | | $ | 14,435 | |
| Net income | | 96 | | | — | | | | | — | | | — | | | — | | | 6 | | | 102 | |
| Other comprehensive loss, net of tax | | — | | | (483) | | | | | — | | | — | | | — | | | (2) | | | (485) | |
| Dividends attributable to non-controlling interest | | — | | | — | | | | | — | | | — | | | — | | | (8) | | | (8) | |
| Net transfers to UTC | | (11,014) | | | — | | | | | — | | | — | | | — | | | — | | | (11,014) | |
| Adoption impact of ASU 2016-13 | | (4) | | | — | | | | | — | | | — | | | — | | | — | | | (4) | |
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| Balance at March 31, 2020 | | 4,433 | | | (1,736) | | | | | — | | | — | | | — | | | 329 | | | 3,026 | |
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| Net income | | — | | | — | | | | | — | | | — | | | 261 | | | 8 | | | 269 | |
| Other comprehensive income, net of tax | | — | | | 257 | | | | | — | | | — | | | — | | | 1 | | | 258 | |
Dividends declared on Common Stock ($0.08 per share) | | — | | | — | | | | | — | | | — | | | (70) | | | — | | | (70) | |
| Common stock issued under employee plans | | — | | | — | | | | | — | | | 24 | | | — | | | — | | | 24 | |
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| Net transfers from UTC | | 859 | | | — | | | | | — | | | — | | | — | | | — | | | 859 | |
| Reclassification of UTC Net Investment to Common stock and Additional paid-in capital | | (5,292) | | | — | | | | | 9 | | | 5,283 | | | — | | | — | | | — | |
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| Balance as of June 30, 2020 | | $ | — | | | $ | (1,479) | | | | | $ | 9 | | | $ | 5,307 | | | $ | 191 | | | $ | 338 | | | $ | 4,366 | |
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
| | | | | | | | | | | |
| | For the Six Months Ended June 30, | | |
| (dollars in millions) | 2020 | | 2019 |
| Operating Activities | | | |
| Net income from operations | $ | 371 | | | $ | 1,197 | |
| Adjustments to reconcile net income from operations to net cash flows provided by operating activities, net of acquisitions and dispositions | | | |
| Depreciation and amortization | 159 | | | 167 | |
| Deferred income tax provision | 135 | | | (57) | |
| Stock compensation costs | 35 | | | 22 | |
| Equity method investment net earnings | (86) | | | (120) | |
| Distributions from equity method investments | 49 | | | 46 | |
| Impairment charge on minority-owned joint venture investments | 72 | | | — | |
| Changes in operating assets and liabilities | | | |
| Accounts receivable, net | 27 | | | (206) | |
| Contract assets, current | (140) | | | (43) | |
| Inventories, net | (325) | | | (340) | |
| Other assets, current | 32 | | | 16 | |
| Accounts payable and accrued liabilities | 152 | | | (173) | |
| Contract liabilities, current | 37 | | | (16) | |
| Pension contributions | (27) | | | (27) | |
| Other operating activities, net | 65 | | | (95) | |
| Net cash flows provided by operating activities | 556 | | | 371 | |
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| Investing Activities | | | |
| Capital expenditures | (94) | | | (89) | |
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| (Payment) receipt from settlement of derivative contracts | (23) | | | 1 | |
| Other investing activities, net | 14 | | | 8 | |
| Net cash flows used in investing activities | (103) | | | (80) | |
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| Financing Activities | | | |
| (Decrease) increase in short-term borrowings, net | (17) | | | 45 | |
| Issuance of long-term debt | 11,734 | | | 77 | |
| Repayment of long-term debt | (36) | | | (37) | |
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| Dividends paid to non-controlling interest | (8) | | | (3) | |
| Net transfers to UTC | (10,359) | | | (548) | |
| Other financing activities, net | 1 | | | (26) | |
| Net cash flows provided by (used in) financing activities | 1,315 | | | (492) | |
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| Effect of foreign exchange rate changes on cash and cash equivalents | (17) | | | 7 | |
| Net increase (decrease) in cash and cash equivalents and restricted cash | 1,751 | | | (194) | |
| Cash, cash equivalents and restricted cash, beginning of period | 957 | | | 1,134 | |
| Cash, cash equivalents and restricted cash, end of period | 2,708 | | | 940 | |
| Less: restricted cash | 4 | | | 4 | |
| Cash and cash equivalents, end of period | $ | 2,704 | | | $ | 936 | |
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
