Document
   



Filed pursuant to Rule 424(b)(3)
File No. 333-237157
Prospectus Supplement No. 2
to Prospectus Dated March 13, 2020
Carrier Global Corporation

This prospectus supplement supplements information contained in the prospectus dated March 13, 2020, as previously supplemented (the "Prospectus"), relating to the acquisition of up to 10,000,000 shares of the common stock of Carrier Global Corporation, a Delaware corporation (“Carrier”) by participants in the Carrier Global Corporation 2020 Long-Term Incentive Plan (the “Plan”), upon exercise of certain options to purchase shares of, and stock appreciation rights with respect to, the common stock of Carrier and upon vesting of certain restricted stock units and performance-based restricted stock units issued pursuant to the Plan. This prospectus supplement should be read in conjunction with, and may not be delivered or utilized without, the Prospectus. This prospectus supplement is qualified by reference to the Prospectus, except to the extent that the information in this prospectus supplement supersedes the information contained in the Prospectus.
This prospectus supplement includes our attached Quarterly Report on Form 10-Q dated July 31, 2020.
The securities offered hereby involve risks and uncertainties. These risks are described under the caption “Risk Factors” beginning on page 15 of the Prospectus, as the same may be updated in prospectus supplements.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus supplement is July 31, 2020.


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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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)CARRNew 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 filerSmaller 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.
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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Three and Six Months Ended June 30, 2020

Page
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 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)2020201920202019
Net sales
Product sales (Note 5)$3,275  $4,139  $6,422  $7,705  
Service sales697  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 sold488  582  1,017  1,114  
Research and development94  103  192  200  
Selling, general and administrative637  680  1,329  1,364  
3,562  4,271  7,118  8,149  
Equity method investment net earnings57  80  86  120  
Other (expense) income, net(25) 34  (71) 49  
Operating profit442  805  757  1,305  
Non-service pension benefit14  38  31  77  
Interest (expense) income, net(81) 16  (118) 20  
Income from operations before income taxes375  859  670  1,402  
Income tax expense106  65  299  205  
Net income from operations269  794  371  1,197  
Less: Non-controlling interest in subsidiaries' earnings from operations 10  14  13  
Net income attributable to common shareowners$261  $784  $357  $1,184  
Earnings per share (Note 3)
Basic$0.30  $0.91  $0.41  $1.37  
Diluted $0.30  $0.91  $0.41  $1.37  
Weighted average number of shares outstanding (Note 3)
Basic866.2  866.2  866.2  866.2  
Diluted870.9  866.2  870.9  866.2  


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

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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)2020201920202019
Net income from operations$269  $794  $371  $1,197  
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments arising during period251  (81) (239) 15  
Pension and post-retirement benefit plan adjustments  12   
Other comprehensive income (loss), net of tax258  (77) (227) 24  
Comprehensive income527  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.

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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(dollars in millions)June 30, 2020December 31, 2019
Assets
Cash and cash equivalents$2,704  $952  
Accounts receivable, net (Note 5 and Note 6)2,665  2,726  
Contract assets, current761  622  
Inventories, net1,639  1,332  
Other assets, current284  327  
Total current assets8,053  5,959  
Future income tax benefits419  500  
Fixed assets, net1,651  1,663  
Operating lease right-of-use assets843  832  
Intangible assets, net1,024  1,083  
Goodwill9,735  9,884  
Pension and post-retirement assets521  490  
Equity method investments1,697  1,739  
Other assets233  256  
Total Assets$24,176  $22,406  
Liabilities and Equity
Accounts payable (Note 5)$1,765  $1,701  
Accrued liabilities (Note 5)2,246  2,088  
Contract liabilities, current477  443  
Current portion of long-term debt301  237  
Total current liabilities4,789  4,469  
Long-term debt11,728  82  
Future pension and post-retirement obligations462  456  
Future income tax obligations (Note 5 and Note 14)445  1,099  
Operating lease liabilities688  682  
Other long-term liabilities (Note 5)1,698  1,183  
Total Liabilities19,810  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  —  
Additional paid-in capital5,307  —  
Retained earnings191  —  
Accumulated other comprehensive loss(1,479) (1,253) 
Non-controlling interest338  333  
Total Equity4,366  14,435  
Total Liabilities and Equity$24,176  $22,406  
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)

(dollars in millions)UTC Net InvestmentAccumulated Other Comprehensive LossCommon StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance at January 1, 2019$15,132  $(1,215) $—  $—  $—  $352  $14,269  
Net income400  —  —  —  —   403  
Other comprehensive income, net of tax—  96  —  —  —   101  
Dividends attributable to non-controlling interest—  —  —  —  —  (2) (2) 
Net transfers to UTC(81) —  —  —  —  —  (81) 
Adoption impact of ASU 2018-02 (9) —  —  —  —  —  
Balance at March 31, 201915,460  (1,128) —  —  —  358  14,690  
Net income784  —  —  —  —  10  794  
Other comprehensive loss, net of tax—  (74) —  —  —  (3) (77) 
Dividends attributable to non-controlling interest—  —  —  —  —  (2) (2) 
Net transfers to UTC(445) —  —  —  —  —  (445) 
Balance at June 30, 2019$15,799  $(1,202) $—  $—  $—  $363  $14,960  
Balance at January 1, 2020$15,355  $(1,253) $—  $—  $—  $333  $14,435  
Net income96  —  —  —  —   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) 
Balance at March 31, 20204,433(1,736)3293,026
Net income—  —  —  —  261   269  
Other comprehensive income, net of tax—  257  —  —  —   258  
Dividends declared on Common Stock ($0.08 per share)—  —  —  —  (70) —  (70) 
Common stock issued under employee plans—  —  —  24  —  —  24  
Net transfers from UTC859  —  —  —  —  —  859  
Reclassification of UTC Net Investment to Common stock and Additional paid-in capital(5,292) —   5,283  —  —  —  
Balance as of June 30, 2020$—  $(1,479) $ $5,307  $191  $338  $4,366  



The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 For the Six Months Ended June 30,
(dollars in millions)20202019
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 amortization159  167  
Deferred income tax provision135  (57) 
Stock compensation costs35  22  
Equity method investment net earnings(86) (120) 
Distributions from equity method investments49  46  
Impairment charge on minority-owned joint venture investments72  —  
Changes in operating assets and liabilities
Accounts receivable, net27  (206) 
Contract assets, current(140) (43) 
Inventories, net(325) (340) 
Other assets, current32  16  
Accounts payable and accrued liabilities152  (173) 
Contract liabilities, current37  (16) 
Pension contributions(27) (27) 
Other operating activities, net65  (95) 
Net cash flows provided by operating activities556  371  
Investing Activities
Capital expenditures(94) (89) 
(Payment) receipt from settlement of derivative contracts(23)  
Other investing activities, net14   
Net cash flows used in investing activities(103) (80) 
Financing Activities
(Decrease) increase in short-term borrowings, net(17) 45  
Issuance of long-term debt11,734  77  
Repayment of long-term debt(36) (37) 
Dividends paid to non-controlling interest(8) (3) 
Net transfers to UTC(10,359) (548) 
Other financing activities, net (26) 
Net cash flows provided by (used in) financing activities1,315  (492) 
Effect of foreign exchange rate changes on cash and cash equivalents(17)  
Net increase (decrease) in cash and cash equivalents and restricted cash1,751  (194) 
Cash, cash equivalents and restricted cash, beginning of period957  1,134  
Cash, cash equivalents and restricted cash, end of period2,708  940  
Less: restricted cash  
Cash and cash equivalents, end of period$2,704  $936  
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Condensed Consolidated Financial Statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 are unaudited, and include all adjustments (consisting only of normal recurring adjustments) considered necessary by management to fairly state our results of operations, financial position and cash flows for the interim periods. The results reported in the Unaudited Condensed Consolidated Financial Statements are not necessarily indicative of results that may be expected for any other interim period or the entire year. The financial information included herein should be read in conjunction with the financial statements and notes in the Company's information statement, dated March 16, 2020, which was included as Exhibit 99.1 in our Current Report on Form 8-K filed with the Securities and Exchange Commission ("SEC") on March 16, 2020 (the "Information Statement").
Impact of the COVID-19 pandemic

A novel strain of coronavirus ("COVID-19") surfaced in Wuhan, China in late 2019 and has since spread throughout the rest of the world. In March 2020, COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government. The pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, resulted in significant travel restrictions, mandated facility closures, and shelter-in-place orders.

Carrier is taking all prudent measures to protect the health and safety of our employees and has implemented work from home requirements, where possible, social distancing where working from home is not feasible, including in our manufacturing facilities, deep cleaning protocols at all of our facilities and travel restrictions, among other measures. We have also taken appropriate measures to work with our customers to minimize potential disruption and to support the communities that we serve to address the challenges posed by the pandemic.
The full extent of the impact of the COVID-19 pandemic on the Company's operational and financial performance will depend on future developments, including the duration and spread of the pandemic, as well as any worsening of the pandemic and whether there will be additional outbreaks of the pandemic, and related containment and mitigation actions taken by the U.S., state and local and international governments to prevent disease spread. The extent of the pandemic's impact on Carrier will also depend upon our employees' ability to work safely in our facilities, our customers’ ability to continue to operate or receive our products, the ability of our suppliers to continue to operate, and the level of activity and demand for the ultimate product and services of our customers or their customers.
During the three months ended March 31, 2020, we temporarily closed or reduced production at manufacturing facilities in North America, Asia and Europe for safety reasons and in response to lower demand for our products, however, as of June 30, 2020, our manufacturing facilities (and nearly all of our suppliers) had resumed operations and 95% of our production capacity was available and, where appropriate, we initiated return-to-work protocols at our non-manufacturing facilities where employees were previously working remotely. During the three months ended March 31, 2020, we considered the outbreak and subsequent impacts to be a trigger to reassess our goodwill and intangible asset valuations. In order to evaluate these impacts, we made forecast assumptions regarding future business activity that are subject to a wide range of uncertainties, including those noted in the prior paragraph. Based upon qualitative and, in certain cases, quantitative analyses, we determined that our goodwill and intangible assets were not impaired. For the period ended June 30, 2020, we reviewed the assumptions used in our March 31, 2020 assessment and determined that they remain appropriate.
We continue to focus on navigating the challenges COVID-19 presents by preserving our liquidity and managing our cash flows through preemptive actions to enhance our ability to meet our liquidity needs over the next twelve months. Such actions include, but are not limited to modifying the financial covenants in our revolving and term loan credit agreements and issuing $750 million of unsecured, unsubordinated long-term debt (see Note 10 – Borrowings and Lines of Credit for additional information), reducing our discretionary spending, our capital investments and general and administrative costs by implementing pay freezes and cuts, employee furloughs and the suspension of non-critical hiring, and participation in global COVID-19 relief measures, including the Coronavirus Aid, Relief, and Economic Security ("CARES") Act, which provides for payroll tax deferrals and credits, income tax payment deferrals, and an increase in the income tax interest deduction limitation.


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NOTE 1: DESCRIPTION OF THE BUSINESS

Carrier Global Corporation is a leading global provider of heating, ventilating, air conditioning ("HVAC"), refrigeration, and fire and security solutions. Carrier also provides a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring. Carrier’s operations are classified into three segments: HVAC, Refrigeration, and Fire & Security. The HVAC and Refrigeration segments sell their products and solutions directly, including to building contractors and owners, transportation companies and retail stores, or indirectly through joint venture and other minority-owned investments, independent sales representatives, distributors, wholesalers, dealers and retail outlets. These products and services are sold under the Carrier name and other brand names including Automated Logic, Bryant, CIAT, Day & Night, Heil, NORESCO, Riello, Carrier Commercial Refrigeration, Carrier Transicold, Sensitech and others. The Fire & Security segment sells its products directly to customers, or indirectly through manufacturers’ representatives, distributors, dealers, value-added resellers and retailers. Fire & Security’s products and services are used by governments, financial institutions, architects, building owners and developers, security and fire consultants, homeowners and other end-users requiring a high level of security and fire protection for their businesses and residences. These products and services are sold under brand names including Autronica, Chubb, Det-Tronics, Edwards, Fireye, GST, Kidde, LenelS2, Marioff, Onity, Supra and others.

On November 26, 2018, United Technologies Corporation, since renamed Raytheon Technologies Corporation ("UTC"), announced its intention to spin off Carrier, one of UTC's reportable segments, into a separate publicly traded company (the "Separation"). On April 3, 2020, UTC completed the Separation through a pro-rata distribution (the "Distribution") of all of the outstanding 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 for the Distribution. UTC distributed 866,158,910 shares of Carrier common stock in the Distribution, which was effective at 12:01 a.m., Eastern Time, on April 3, 2020 (the "Effective Time"). As a result of the Distribution, Carrier became an independent public company and our common stock is listed under the symbol "CARR" on the New York Stock Exchange. In connection with the Separation, Carrier issued an aggregate principal balance of $11.0 billion of debt and transferred approximately $10.9 billion of cash to UTC on February 27, 2020 and March 27, 2020. On April 1, 2020 and April 2, 2020, Carrier received cash contributions totaling $590 million from UTC related to the Separation. See Note 10 – Borrowings and Lines of Credit and Note 3 – Earnings Per Share for additional information.
In connection with the Separation, Carrier entered into several agreements with UTC and Otis Worldwide Corporation ("Otis"), including a separation and distribution agreement that sets forth certain agreements with UTC and Otis regarding the principal actions to be taken in connection with the Separation, including identifying the assets transferred, the liabilities assumed and the contracts transferred to each of UTC, Otis and Carrier as part of the Separation, and when and how these transfers and assumptions occurred. Other agreements we entered into that govern aspects of our relationship with UTC and Otis following the Separation include:
Transition Services Agreement. We entered into a Transition Services Agreement (the "TSA") with UTC and Otis in connection with the Separation pursuant to which UTC provides us with certain services and we provide certain services to UTC for a limited time to help ensure an orderly transition following the Separation. The services we receive include, but are not limited to, information technology services, technical and engineering support, application support for operations, legal, payroll, finance, tax and accounting, general administrative services and other support services. Because costs for these services historically were included in our operating results based on allocations from UTC, we do not expect the costs associated with the TSA to be materially different and, therefore, we do not expect such costs to materially affect our results of operations or cash flows after we became an independent publicly traded company nor do we expect such costs to be materially different when these services are transitioned from UTC to Carrier.
Tax Matters Agreement. We entered into a Tax Matters Agreement (the "TMA") with UTC and Otis that governs the parties’ respective rights, responsibilities and obligations with respect to tax matters (including responsibility for taxes, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other tax matters). Subject to certain exceptions set forth in the TMA, Carrier generally is responsible for federal, state and foreign taxes imposed on a separate return basis upon Carrier (or any of its subsidiaries) with respect to taxable periods (or portions thereof) that ended on or prior to the date of the Distribution. The TMA provides special rules that allocate responsibility for tax liabilities arising from a failure of the Separation transactions to qualify for tax-free treatment based on the reasons for such failure. The TMA also imposes restrictions on each of Carrier and Otis during the two-year period following the Distribution that are intended to prevent certain transactions from failing to qualify as transactions that are generally tax-free.
Employee Matters Agreement and Intellectual Property Agreement. We entered into an employee matters agreement and intellectual property agreement with UTC and Otis in connection with the Separation.
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NOTE 2: BASIS OF PRESENTATION
The Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. All significant intra-company accounts and transactions have been eliminated in the preparation of the Unaudited Condensed Consolidated Financial Statements. 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 we control and consolidate.
Certain immaterial amounts presented in the Information Statement have been reclassified to conform to the current period presentation, including the reclassification of the Current portion of long-term debt from Accrued liabilities for 2019 on the accompanying Unaudited Condensed Consolidated Balance Sheet.
The Company's financial statements for periods prior to the Separation and the Distribution are prepared on a "carve-out" basis, as described below. The Company's financial statements for the period from April 3, 2020 through June 30, 2020 are consolidated financial statements based on the reported results of Carrier as a stand-alone company.
Basis of Presentation Prior to the Separation and the Distribution
Prior to the Separation and the Distribution, the Unaudited Condensed Consolidated Financial Statements reflect the financial position, results of operations and cash flows of the Company for the periods presented as historically managed within UTC. For those periods prior to the Separation and the Distribution, the Unaudited Condensed Consolidated Financial Statements are derived from the consolidated financial statements and accounting records of UTC.

The Unaudited Condensed Consolidated Statement of Operations includes all revenues and costs directly attributable to Carrier, including costs for facilities, functions and services used by Carrier. Prior to the Separation, costs for certain functions and services performed by UTC were directly charged to Carrier based on specific identification when possible or based on a reasonable allocation driver such as net sales, headcount, proportionate usage or other allocation methods. The results of operations include allocations of costs for administrative functions and services performed on behalf of Carrier by centralized groups within UTC and certain pension and other post-retirement benefit costs (see Note 5 – Related Parties for a description of the allocation methodologies). All charges and allocations for facilities, functions and services performed by UTC have been deemed settled in cash by Carrier to UTC in the period in which the cost was recorded in the Unaudited Condensed Consolidated Statement of Operations.
Prior to the Separation, UTC used a centralized approach to cash management and financing its operations. Accordingly, none of the cash, third party debt or related interest expense of UTC has been allocated to Carrier in the Unaudited Condensed Consolidated Financial Statements for the period prior to the Separation. However, cash balances primarily associated with certain foreign entities that did not participate in UTC’s cash management program have been included in the Unaudited Condensed Consolidated Financial Statements for periods prior to the Separation. Transactions between UTC and Carrier are deemed settled immediately through UTC’s Net investment, other than those transactions which have historically been cash-settled and which are reflected in the Unaudited Condensed Consolidated Balance Sheet within Accounts receivable, net and Accounts payable. The net effect of the deemed settled transactions is reflected in the Unaudited Condensed Consolidated Statement of Cash Flows as Net transfers to UTC within financing activities and in the Unaudited Condensed Consolidated Balance Sheet as UTC’s Net investment (see Note 5 – Related Parties for additional information).
All of the allocations and estimates in the Unaudited Condensed Consolidated Financial Statements are based on assumptions that management believes are reasonable. However, for the periods prior to the Separation, the Unaudited Condensed Consolidated Financial Statements included herein may not be indicative of the financial position, results of operations and cash flows of the Company in the future, or if the Company had been a separate, stand-alone entity during the periods presented.
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Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU and its related amendments (collectively, the "Credit Loss Standard") modified the credit loss model to utilize an expected loss methodology in place of an incurred loss methodology for financial instruments, including trade receivables, contract assets, long term receivables and off-balance sheet credit exposures. The Credit Loss Standard requires consideration of a broader range of information to estimate expected credit losses, including historical information, current conditions and a reasonable forecast period. This ASU requires that the statement of operations reflect the measurement of credit losses for newly recognized financial assets as well as an expected increase or decrease of expected credit losses that have taken place during the period, which may result in earlier recognition. The Company adopted the Credit Loss Standard effective January 1, 2020, utilizing a modified retrospective approach and its adoption did not have a significant impact on the Company's Unaudited Condensed Consolidated Financial Statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under this ASU, a goodwill impairment is calculated as the difference between the carrying amount of the reporting unit and its fair value, but not to exceed the carrying amount of the goodwill allocated to that reporting unit. Additionally, this ASU requires the same impairment testing methodology for all reporting units, even those with a zero or negative carrying amount, and requires an entity to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount. The Company adopted this ASU effective January 1, 2020 and its adoption did not have a significant impact on the Company's Unaudited Condensed Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. This ASU removes the disclosure requirements for the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The Company adopted this ASU effective January 1, 2020 and its adoption did not have a significant impact on the Company's Unaudited Condensed Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In May 2020, the SEC issued Final Rule Release No. 33-10786, which amends the financial statement requirements for acquisitions and dispositions of businesses and related pro forma financial information required under SEC Regulation S-X, Rule 3-05. The final rule modifies the significance test required in SEC Regulation S-X, Rule 1-02(w) by raising the significance threshold for reporting dispositions of a business from 10% to 20% and by modifying the calculation of the investment and income tests. In accordance with Rules 3-09 or 4-08(g), the revised income test will apply to the evaluation of equity method investments for significance. The Company is currently evaluating the impact of these modifications which are effective for fiscal years starting after December 31, 2020.

NOTE 3: EARNINGS PER SHARE
On April 3, 2020, the date of the Distribution (the "Distribution Date"), 866,158,910 shares of the Company’s common stock, par value $0.01 per share, were distributed to UTC shareowners of record as of March 19, 2020. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation and such shares are treated as issued and outstanding for purposes of calculating historical earnings per share. For periods prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no Carrier stock-based awards outstanding prior to the Separation.
Diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding. For periods subsequent to the Separation, the computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards, including stock appreciation rights and stock options, when the effect of the potential exercise would be anti-dilutive. The weighted-average number of common shares outstanding for basic and diluted earnings per share for the three and six months ended June 30, 2020 was based on the weighted-average number of common shares outstanding for the period beginning after the Distribution Date. For the three months ended June 30, 2020, the number of stock awards excluded from the computation of diluted earnings per share due to their anti-dilutive effect was approximately 31 million.
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Three Months Ended June 30,Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in millions)2020201920202019
Net income attributable to common shareowners$261  $784  $357  $1,184  
Basic weighted-average number of shares outstanding866.2  866.2  866.2  866.2  
Stock awards and equity units (share equivalent)4.7  —  4.7  —  
Diluted weighted-average number of shares outstanding870.9  866.2  870.9  866.2  
Earnings Per Share
Basic$0.30  $0.91  $0.41  $1.37  
Diluted$0.30  $0.91  $0.41  $1.37  

NOTE 4: REVENUE RECOGNITION
Contract Assets and Liabilities. Total contract assets and liabilities as of June 30, 2020 and December 31, 2019 are as follows:
(dollars in millions)June 30, 2020December 31, 2019
Contract assets, current$761  $622  
Contract assets, non-current (included within Other assets)48  57  
Total contract assets809  679  
Contract liabilities, current(477) (443) 
Contract liabilities, non-current (included within Other long-term liabilities)(166) (168) 
Total contract liabilities (643) (611) 
Net contract assets$166  $68  
Contract assets increased $130 million for the six months ended June 30, 2020, primarily due to the timing of billings on customer contracts and contract completions. Contract liabilities increased $32 million for the six months ended June 30, 2020, primarily due to customer billings in excess of revenue earned.
For the three months ended June 30, 2020 and 2019, we recognized revenue of $89 million and $71 million, respectively, and for the six months ended June 30, 2020 and 2019, we recognized revenue of $233 million and $249 million, respectively, that was related to contract liabilities as of January 1, 2020 and 2019, respectively.
Remaining Performance Obligations ("RPO"). As of June 30, 2020, our total RPO was approximately $5.4 billion compared with $4.7 billion as of December 31, 2019. Of the total RPO as of June 30, 2020, we expect approximately 72% will be recognized as sales over the following 12 months.
(See Note 19 – Segment Financial Data which provides incremental disclosures required by Accounting Standard Codification ("ASC") Topic 606 – Revenue from Contracts with Customers).
NOTE 5: RELATED PARTIES

Equity Method Investments

Carrier sells products to and purchases products from unconsolidated entities accounted for under the equity method, and, therefore, these entities are considered related parties. During the three months ended June 30, 2020 and 2019, Product sales in the Unaudited Condensed Consolidated Statement of Operations included sales to equity method investees of $434 million and $546 million, respectively. During the three months ended June 30, 2020 and 2019, Cost of products sold in the Unaudited Condensed Consolidated Statement of Operations included purchases from equity method investees of $66 million and $101 million, respectively.
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During the six months ended June 30, 2020 and 2019, Product sales in the Unaudited Condensed Consolidated Statement of Operations included sales to equity method investees of $778 million and $940 million, respectively. During the six months ended June 30, 2020 and 2019, Cost of products sold in the Unaudited Condensed Consolidated Statement of Operations included purchases from equity method investees of $143 million and $178 million, respectively. Carrier had receivables from equity method investees of $219 million and $137 million at June 30, 2020 and December 31, 2019, respectively. Carrier also had payables to equity method investees of $38 million and $55 million at June 30, 2020 and December 31, 2019, respectively. The receivables and payables are included in Accounts receivable, net and Accounts payable on the Unaudited Condensed Consolidated Balance Sheet.
The Company periodically reviews the carrying value of its equity method investments to determine if there has been an other-than-temporary decline in fair value. A variety of factors are considered when determining if a decline in carrying value is other-than-temporary, including, among other factors, the financial condition and business prospects of the investee, as well as the Company's intent with regard to the investment. During the three months ended March 31, 2020, we determined that indicators of impairment existed for a minority owned joint venture investment in the portfolio. We performed a valuation of this investment, based on the income approach using the discounted cash flow method. We determined that the loss in value was other-than-temporary due to a reduction in sales and earnings that were driven by a deterioration in the oil and gas industry (the joint venture's primary market) and the impact of the COVID-19 pandemic, among other factors. As a result, we recorded a non-cash, other-than-temporary impairment charge of $71 million on this investment during the three months ended March 31, 2020 which is included in Other (expense) income, net on the accompanying Unaudited Condensed Consolidated Statement of Operations. During the three months ended June 30, 2020, there were no significant equity method investment impairment charges.
Related Party with UTC
Prior to the Separation, Carrier had been managed and operated in the normal course of business with other affiliates of UTC. Accordingly, certain shared costs had been allocated to the Company and are reflected as expenses in the Unaudited Condensed Consolidated Financial Statements.
Related Party Sales. During the periods prior to the Separation, the Company sold products and services to UTC and its other affiliates. Product sales in the Unaudited Condensed Consolidated Statement of Operations include sales to UTC and affiliates of UTC other than Carrier of $0 million and $6 million for the three months ended June 30, 2020 and 2019, respectively, and $3 million and $12 million for the six months ended June 30, 2020 and 2019, respectively.
Allocated Centralized Costs. Prior to the Separation, UTC incurred corporate costs for services provided to the Company and to other UTC businesses. These services included treasury, tax, accounting, human resources, internal audit, legal, purchasing, and information technology. The costs associated with these services generally included all payroll and benefit costs as well as related overhead costs. UTC also allocated costs associated with corporate insurance coverage and medical, pension, post-retirement and other health plan costs for employees participating in UTC sponsored plans. UTC corporate costs were either specifically attributed and charged to Carrier, when possible, or allocated to the Company. Allocations were based on direct usage where identifiable and on a number of other utilization measures including headcount, proportionate usage and net sales. All such amounts were deemed incurred and settled by the Company in the period in which the costs were recorded and are included in UTC Net investment.
The allocated centralized costs for the three months ended June 30, 2020 and 2019 were $0 million and $62 million, respectively, and for the six months ended June 30, 2020 and 2019 were $43 million and $116 million, respectively, and are primarily included in Selling, general and administrative in the Unaudited Condensed Consolidated Statement of Operations.
The expense and cost allocations have been determined on a basis considered to be a reasonable reflection of the utilization of services provided to or for the benefit received by the Company prior to the Separation. The amounts that would have been, or will be incurred, on a stand-alone basis could differ from the amounts allocated due to economies of scale, differences in management approach, a need for more or fewer employees, or other factors. In addition, the Company's future results of operations, financial position and cash flows could differ materially from the historical results presented herein.
Separation Costs. In connection with the Separation, we have incurred Separation-related costs of approximately $23 million and $68 million for the three and six months ended June 30, 2020, respectively, primarily recorded in Selling, general and administrative in the Unaudited Condensed Consolidated Statement of Operations, which primarily consist of employee-related costs, costs to establish certain stand-alone functions and information technology systems, professional
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service fees and other transaction-related costs resulting from Carrier’s transition to becoming an independent publicly traded company. Carrier did not incur costs in connection with the Separation for the three and six months ended June 30, 2019.
Cash Management and Financing. Prior to the Separation, the Company participated in UTC’s centralized cash management and financing programs. Cash receipts and disbursements were executed through centralized systems, which were operated by UTC. As cash was received and disbursed by UTC, it was accounted for by the Company through UTC Net investment. The majority of external debt was financed by UTC, and financing decisions for wholly and majority owned subsidiaries were determined by UTC. See Note 1 – Description of the Business for additional information. The Company’s cash that was excluded from UTC's centralized cash management and financing programs is classified as Cash and cash equivalents in the Unaudited Condensed Consolidated Balance Sheet as of December 31, 2019.
During the three and six months ended June 30, 2020, net assets of $859 million and $780 million, respectively, were contributed to the Company by UTC which primarily consisted of cash, deferred tax assets and liabilities, and fixed assets. Included in the net assets received were cash contributions from UTC of $590 million. These contributions of net assets are recorded as Net transfers from UTC on the Unaudited Condensed Consolidated Statement of Changes in Equity through UTC Net investment.
Accounts Receivable and Payable. Certain related party transactions between the Company and UTC were included within UTC Net investment in the Unaudited Condensed Consolidated Balance Sheet as of December 31, 2019 when the related party transactions were not settled in cash. As of December 31, 2019, the UTC Net investment includes related party receivables due from UTC and its affiliates of $16.0 billion and related party payables due to UTC and its affiliates of $3.3 billion. As of June 30, 2020, UTC Net investment has been reclassified to Common stock and Additional paid-in capital.
Prior to the Separation, interest income and expense related to activity with UTC that was historically included in Carrier’s results is presented on a net basis in the Unaudited Condensed Consolidated Statement of Operations. For the three and six months ended June 30, 2019, there was $21 million and $49 million, respectively, of interest income from activity with UTC. For the three and six months ended June 30, 2019, there was $16 million and $32 million, respectively, of interest expense from activity with UTC. The effect of the settlement of these related party transactions is included in financing activity in the Unaudited Condensed Consolidated Statement of Cash Flows. There was no interest income or expense from activity with UTC for the three and six months ended June 30, 2020.
Additionally, certain transactions between Carrier and its subsidiaries, and UTC and its affiliates, were cash-settled and were reflected in Accounts receivable, net and Accounts payable in the Unaudited Condensed Consolidated Balance Sheet as of December 31, 2019 in the amounts of $6 million and $4 million, respectively. As of June 30, 2020, there were no accounts receivable or accounts payable balances with UTC.
NOTE 6: ACCOUNTS RECEIVABLE, NET
The Company is exposed to credit losses primarily through the sale of products and services to commercial customers, which are recorded as Trade receivables. We evaluate a customer’s ability to pay by assessing creditworthiness, historical experience and current conditions. We determine credit ratings for each customer in our portfolio based upon public information and information obtained directly from our customers. We evaluate the reasonableness of the allowance for credit losses on a quarterly basis or when events and circumstances warrant. In addition to credit quality indicators, factors considered in our evaluation of collectability include the underlying value of any collateral or security interests, past due balances, historical losses, existing economic conditions, and country and political risk. In certain circumstances, we may require collateral or prepayment to mitigate credit risk.
We determine receivables are impaired when, based on historical experience, current information and events and a reasonable forecast period, we may be unable to collect amounts due according to the contractual terms of an agreement. Estimated credit losses are written off in the period in which an accounts receivable is determined to no longer be collectible.
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Accounts receivable, net consisted of the following:
(dollars in millions)June 30, 2020December 31, 2019
Trade receivables$2,328  $2,444  
Receivables from affiliates219  143  
Other receivables194  184  
Accounts receivable2,741  2,771  
Less: Allowance for expected credit losses(76) (45) 
Accounts receivable, net$2,665  $2,726  

The changes in the allowance for expected credit losses related to Accounts receivable, net are as follows:

(dollars in millions)
Balance as of January 1, 2020$45  
Current period provision for expected credit losses27  
Write-offs charged against the allowance for expected credit losses(1) 
Other (including impact of adoption of ASU 2016-13) 
Balance as of June 30, 2020$76  

NOTE 7: INVENTORIES, NET
(dollars in millions)June 30, 2020December 31, 2019
Raw materials$242  $290  
Work-in-process157  120  
Finished goods1,240  922  
Inventories, net$1,639  $1,332  

Raw materials, work-in-process and finished goods are net of valuation reserves of $170 million and $152 million as of June 30, 2020 and December 31, 2019, respectively.
NOTE 8: FIXED ASSETS, NET
Fixed assets are recorded at cost and are depreciated on a straight-line basis over their estimated useful lives.
(dollars in millions)Estimated Useful Lives (Years)June 30, 2020December 31, 2019
Land$109  $113  
Buildings and improvements401,112  1,138  
Machinery, tools and equipment3 to 251,970  1,924  
Rental assets3 to 12396  395  
Other, including assets under construction198  188  
Fixed assets, gross3,785  3,758  
Accumulated depreciation(2,134) (2,095) 
Fixed assets, net$1,651  $1,663  
Depreciation expense was $53 million and $55 million for the three months ended June 30, 2020 and 2019, respectively, and $109 million and $109 million for the six months ended June 30, 2020 and 2019, respectively.

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NOTE 9: BUSINESS ACQUISITIONS, DISPOSITIONS, GOODWILL AND INTANGIBLE ASSETS
Business Acquisitions and Dispositions. There were no significant acquisitions or divestitures during the three and six months ended June 30, 2020 and 2019.
Goodwill. The changes in the carrying amount of goodwill are as follows:
(dollars in millions)HVACRefrigerationFire & SecurityTotal
Balance as of January 1, 2020$5,351  $1,228  $3,305  $9,884  
Foreign currency translation(44) (10) (95) (149) 
Balance as of June 30, 2020$5,307  $1,218  $3,210  $9,735  

Intangible Assets, net. Identifiable intangible assets are comprised of the following:
June 30, 2020December 31, 2019
(dollars in millions)Gross AmountAccumulated AmortizationGross AmountAccumulated Amortization
Amortized:
Customer relationships$1,474  $(1,181) $1,479  $(1,154) 
Patents and trademarks287  (206) 287  (201) 
Monitoring lines66  (53) 67  (52) 
Service portfolios and other629  (517) 629  (506) 
2,456  (1,957) 2,462  (1,913) 
Unamortized:
Trademarks and other525  —  534  —  
Intangible assets, net$2,981  $(1,957) $2,996  $(1,913) 

Amortization of Intangible assets was $25 million and $27 million for the three months ended June 30, 2020 and 2019, respectively, and $50 million and $58 million for the six months ended June 30, 2020 and 2019, respectively.
NOTE 10: BORROWINGS AND LINES OF CREDIT
On February 10, 2020, we 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 our commercial paper program and cash requirements. A commitment fee of 0.125% is charged on the 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 based on LIBOR plus a ratings-based margin, which was 125 basis points as of June 30, 2020. As of June 30, 2020, there were no borrowings on the revolving credit facility.
On February 10, 2020, we entered into a $1.75 billion term loan credit agreement that provides an unsecured, unsubordinated term loan credit facility which matures on February 10, 2023 (the "term loan credit facility"). Borrowings under the term loan credit facility are subject to a variable interest rate based on LIBOR plus a ratings-based margin, which was 112.5 basis points as of June 30, 2020.
On February 27, 2020, Carrier issued $9.25 billion of unsecured, unsubordinated long-term notes in six series with maturity dates ranging from 2023 through 2050. The notes were issued pursuant to an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee.
On March 27, 2020, Carrier drew $1.75 billion on the term loan credit facility. The proceeds from the notes and the term loan credit facility were used to distribute $10.9 billion to UTC in connection with the Separation.
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The revolving credit agreement, term loan credit agreement and indenture contain affirmative and negative covenants customary for financings of this type, that among other things, limit Carrier and its subsidiaries' ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. On June 2, 2020, the Company entered into amendments to both the revolving credit agreement and the term loan credit agreement. Pursuant to the amendments, certain terms of the revolving credit facility and the term loan credit facility were amended for a period beginning on June 2, 2020 and ending on December 30, 2021 (the "Covenant Modification Period"). The Company may terminate the Covenant Modification Period prior to December 30, 2021 subject to the satisfaction of certain conditions. The amendments defer testing of our consolidated total net leverage ratio financial covenant until June 30, 2021 and increases the consolidated total net leverage ratio limit until December 31, 2021. The amendments also require us to maintain liquidity at a certain level until the earlier of (1) June 29, 2021 and (2) the last day of the Covenant Modification Period. Additionally, during the Covenant Modification Period, the Company is subject to (a) limitations on the incurrence of subsidiary indebtedness, (b) limitations on the making of restricted payments, including purchases by the Company of its ordinary shares and the amount of dividends the Company may pay, and (c) a "most favored nations" provision related to certain terms of any committed credit facility in an amount greater than $100 million. As of June 30, 2020, we were compliant with our covenants under the agreements governing our outstanding indebtedness.
On June 19, 2020, we issued $750 million of unsecured, unsubordinated 2.700% Notes due 2031. These notes rank equally with our existing unsecured, unsubordinated obligations. We expect to use the net proceeds from the sale of the notes, which further enhance our liquidity and financial flexibility during the ongoing COVID-19 pandemic, for general corporate purposes.
As of June 30, 2020, we have a $2.0 billion unsecured, unsubordinated commercial paper program which we plan to use for general corporate purposes, including the funding of working capital and potential acquisitions. As of June 30, 2020, there were no borrowings outstanding under the commercial paper program.
Long-term debt, all of which was issued during the six months ended June 30, 2020 except for Other long-term debt, consisted of the following:
(dollars in millions)
Debt DescriptionInterest RateJune 30, 2020December 31, 2019
3-Year Term Loan Credit Facility due February 10, 20232.195 %1$1,750  2$—  
1.923% Notes due February 15, 20231.923 %500  2—  
2.242% Notes due February 15, 20252.242 %2,000  2—  
2.493% Notes due February 15, 20272.493 %1,250  2—  
2.722% Notes due February 15, 20302.722 %2,000  2—  
2.700% Notes due February 15, 20312.700 %750  —  
3.377% Notes due April 05, 20403.377 %1,500  2—  
3.577% Notes due April 05, 20503.577 %2,000  2—  
Other (including project financing obligations and finance leases)367  319  
Total principal long-term debt12,117  319  
Other (discounts and debt issuance costs)(88) —  
Total debt12,029  319  
Less: current portion of long-term debt301  237  
Long-term debt, net of current portion$11,728  $82  
1 The interest rate on the term loan is variable based on six month LIBOR of 1.07% plus 112.5 basis points.
2 The net proceeds of the financing arrangements were used to distribute cash to UTC.


We issued $75 million and $77 million of debt during the six months ended June 30, 2020 and 2019, respectively, relating to project financing arrangements. Long-term debt repayments during the six months ended June 30, 2020 and 2019 were $36 million and $37 million, respectively.

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Scheduled maturities of long-term debt, excluding amortization of discount, are as follows:

(dollars in millions)
2020$263  
2021$44  
2022$46  
2023$2,264  
2024$—  
Thereafter$9,500  

The average maturity of our long-term debt at June 30, 2020 is approximately 12 years and the weighted-average interest rate on our total borrowings for the three months ended June 30, 2020 is approximately 2.7%. Interest expense associated with long-term debt for the three and six months ended June 30, 2020 was $85 million and $126 million, respectively. Included in interest expense on the accompanying Unaudited Condensed Consolidated Statement of Operations is accrued interest of $83 million and amortization of debt issuance costs of $2 million for the three months ended June 30, 2020, and accrued interest of $118 million, debt issuance costs of $5 million and amortization of debt issuance costs of $3 million for the six months ended June 30, 2020.

NOTE 11: EMPLOYEE BENEFIT PLANS
Pension Plans. The Company sponsors both funded and unfunded domestic and international defined benefit pension and other post-retirement benefit plans, and defined contribution plans. Additionally, the Company contributes to various domestic and international multi-employer defined benefit pension and other post-retirement benefit plans.
Contributions to the plans were as follows:
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Defined benefit plans$ $ $27  $27  
Defined contribution plans$25  $24  $55  $49  
Multi-employer pension plans$ $ $10  $10  

The following table illustrates the components of net periodic pension benefits for our defined benefit pension and post-retirement benefit plans:
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Service cost$ $ $15  $16  
Interest cost13  16  26  33  
Expected return on plan assets(34) (39) (69) (78) 
Amortization of prior service credit—  —    
Recognized actuarial net loss  10   
Net settlement, curtailment and special termination benefit loss—     
Net periodic pension benefit $(9) $(11) $(16) $(22) 

UTC Sponsored Defined Benefit Plans. Defined benefit pension and post-retirement benefit plans sponsored by UTC have been accounted for as multi-employer plans in the Unaudited Condensed Consolidated Financial Statements, in accordance with ASC Topic 715-30: Defined Benefit Plans – Pension and ASC Topic 715-60: Defined Benefit Plans – Other Post-retirement. ASC Topic 715: Compensation-Retirement Benefits, which provides that an employer that participates in a multi-employer defined benefit plan is not required to report a liability beyond the contributions currently due and unpaid to the
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plan. Therefore, no assets or liabilities related to these plans have been included in the Unaudited Condensed Consolidated Balance Sheet.

The expenses associated with these UTC plans were allocated to the Company and reported in Cost of products sold, Cost of services sold, Selling, general and administrative and Non-service pension benefit on the accompanying Unaudited Condensed Consolidated Statement of Operations. The Company's participation in these defined benefit pension and post-retirement benefits plans sponsored by UTC has concluded in conjunction with the Separation. The pension and post-retirement expenses were as follows:
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Service cost$—  $ $—  $ 
Non-service pension benefit—  (19) (2) (39) 
Total net periodic benefit $—  $(14) $(2) $(30) 

NOTE 12: STOCK-BASED COMPENSATION

Stock-Based Compensation. Prior to the Separation and Distribution, Carrier participated in UTC’s long-term incentive plans ("LTIP") which authorized various types of market and performance-based incentive awards, including stock options, stock appreciation rights, performance share units and restricted stock units, which were granted to eligible Carrier officers and employees. All awards granted under the UTC LTIP related to UTC common shares.

As a result of the Separation and Distribution, outstanding and vested awards granted to employees under UTC's LTIP were generally converted into Carrier, Otis and UTC stock-based awards. Unvested awards held by Carrier employees and former employees were converted to Carrier stock-based awards. The ratio used to convert the UTC LTIP awards was intended to preserve the aggregate intrinsic value of each award immediately after the Separation and the Distribution when compared to the aggregate intrinsic value immediately prior to the Separation and the Distribution. All performance share units outstanding on the Distribution Date were converted to restricted stock units using payout metrics based on a combination of actual performance through the Distribution Date and the target for the remainder of the performance period. Due to the conversion, we expect to incur $14 million of incremental stock-based compensation expense to be recognized over the awards' remaining 1.5 year vesting period.

Under Carrier's LTIP, the exercise price of awards, if any, is set on the grant date and, on a per share basis, may not be less than the fair market value of Carrier's common stock on that date on a per share basis. Stock appreciation rights and stock options have a term of ten years and a three-year vesting period, subject to limited exceptions. In the event of retirement, stock appreciation rights, stock options and restricted stock units held for more than one year may vest and become exercisable (if applicable), subject to certain terms and conditions. Performance share units vest based on performance relative to pre-established metrics and generally have a minimum three-year vesting period. In the event of retirement, performance share units held for more than one year remain eligible to vest based on actual performance relative to pre-established metrics.

We measure the cost of stock-based compensation, including stock options, at fair value on the grant date net of expected forfeitures and recognized $22 million and $14 million of such costs for the three months ended June 30, 2020 and 2019 and $35 million and $22 million for the six months ended June 30, 2020 and 2019, respectively. The stock-based compensation expense for the three months ended March 31, 2020 and the six months ended June 30, 2019 represent the amounts allocated to us from UTC related to our direct employees.
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At June 30, 2020, there was $124 million of unrecognized stock-based compensation costs related to non-vested awards granted under the Carrier LTIP, which will be recognized ratably over a weighted-average period of 2.3 years.
Carrier LTIP activity for the three months ended June 30, 2020 was as follows:

Stock Options and Stock Appreciation RightsPerformance Share UnitsRestricted Stock Units
AverageAverageAverage
(shares and units in thousands)Shares
Price 1
Units
Price 2
Units
Price 2
Outstanding as of April 3, 2020 3
36,015  $19.90  68  $21.23  5,622  $21.37  
Granted3,735  16.59  728  18.23  290  16.66  
Forfeited/Cancelled(79) 23.73  —  —  (13) 23.93  
Outstanding as of June 30, 202039,671  $19.60  796  $18.49  5,899  $21.15  
1 Weighted-average exercise price
2 Weighted-average grant date fair value
3 Effective date of conversion upon the Separation and the Distribution

The weighted-average fair value of stock appreciation rights granted during the three months ended June 30, 2020 was $4.35. The weighted-average fair value of performance share units granted during the three months ended June 30, 2020 was $18.23. There were no stock options granted during the three months ended June 30, 2020. No performance share units or restricted stock units vested during the three months ended June 30, 2020.

The following table summarizes outstanding Carrier LTIP awards that are vested and expected to vest (adjusted for expected forfeitures) and that are exercisable at June 30, 2020:
Equity Awards Vested and Expected to VestEquity Awards That Are Exercisable
(shares and units in thousands; aggregate intrinsic value in dollars in thousands)Awards
Average Price 1
Aggregate Intrinsic Value
Remaining Life 2
Awards
Average Price 1
Aggregate Intrinsic Value
Remaining Life 2
Stock Options/ Stock Appreciation Rights38,060  $19.51  $124,595  6.917,047  $16.86  $91,620  4.3
Performance Share Units/ Restricted Stock Units6,331  $20.91  $140,668  2.0
1 Weighted-average exercise price per share
2 Weighted-average remaining contractual term in years for stock options and stock appreciation rights; weighted-average remaining vesting period in years for performance share units and restricted stock units

The fair value of stock option awards are estimated on the date of grant using a binomial model. The following assumptions were used in the binomial model for the three months ended June 30, 2020:
For the Three Months Ended June 30, 2020
Volatility35.6 %
Expected life (in years)7.0  
Expected dividend yield2.0 %
Range of risk-free rate0.1 %1.0%

Carrier has limited historical trading data and used peer group data to estimate expected volatility. Carrier used historical Carrier employee data, including data prior to the Separation and the Distribution, to estimate expected life. The expected dividend yield is consistent with Carrier's dividend policy on an annualized basis. The risk-free rate is based on the term structure of interest rates at the time the award was granted.
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NOTE 13: ACCUMULATED OTHER COMPREHENSIVE LOSS
A summary of the changes in each component of Accumulated other comprehensive loss, net of tax for the three and six months ended June 30, 2020 and 2019 is as follows:

(dollars in millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Loss
Three Months Ended June 30, 2020
Balance as of March 31, 2020$(1,268) $(468) $(1,736) 
Other comprehensive income before reclassifications, net250   252  
Amounts reclassified, pre-tax—    
Tax benefit reclassified—  (1) (1) 
Balance as of June 30, 2020$(1,018) $(461) $(1,479) 
Six Months Ended June 30, 2020
Balance as of January 1, 2020$(780) $(473) $(1,253) 
Other comprehensive (loss) income before reclassifications, net(238)  (236) 
Amounts reclassified, pre-tax—  12  12  
Tax benefit reclassified—  (2) (2) 
Balance as of June 30, 2020$(1,018) $(461) $(1,479) 

(dollars in millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Loss
Three Months Ended June 30, 2019
Balance as of March 31, 2019$(743) $(385) $(1,128) 
Other comprehensive loss before reclassifications, net(78) —  (78) 
Amounts reclassified, pre-tax—    
Balance as of June 30, 2019$(821) $(381) $(1,202) 
Six Months Ended June 30, 2019
Balance as of January 1, 2019$(834) $(381) $(1,215) 
Other comprehensive income before reclassifications, net13   15  
Amounts reclassified, pre-tax—    
ASU 2018-02 adoption impact—  (9) (9) 
Balance as of June 30, 2019$(821) $(381) $(1,202) 

Amounts reclassified related to defined benefit pension and post-retirement plans include amortization of prior service costs and recognized actuarial net losses. These costs are recorded as components of net periodic pension cost for each period presented (see Note 11 – Employee Benefit Plans for additional details).
NOTE 14: INCOME TAXES
The effective tax rate for the three and six months ended June 30, 2020 was 28.2% and 44.6%, respectively, compared with 7.6% and 14.6%, respectively, for the three and six months ended June 30, 2019.
The increase in the effective tax rate for the three months ended June 30, 2020 is primarily due to the absence of a prior year combined tax benefit of $149 million resulting from the filing by a Carrier subsidiary to participate in an amnesty program
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offered by the Italian Tax Authority and the conclusion of an audit by the Internal Revenue Service (the "IRS") for UTC's 2014, 2015 and 2016 tax years.

The increase in the effective tax rate for the six months ended June 30, 2020 is primarily due to the items described above and a $51 million charge related to a valuation allowance recorded against a United Kingdom tax loss and a credit carry forward as a result of activities related to the Separation, a charge of $46 million resulting from Carrier's decision to no longer permanently reinvest certain pre-2018 unremitted non-U.S. earnings, and the impact of a non-deductible impairment charge of $71 million on a minori