Delaware | | | 3585 | | | 83-4051582 |
(State or other jurisdiction of incorporation or organization) | | | (Primary Standard Industrial Classification Code Number) | | | (IRS Employer Identification Number) |
Large accelerated filer ☐ | | | Accelerated filer ☐ |
Non-accelerated filer ☒ | | | Smaller reporting company ☐ |
| | Emerging growth company ☐ |
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) | | | ☐ |
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) | | | ☐ |
Title of Each Class of Securities to Be Registered | | | Amount to Be Registered | | | Proposed Maximum Offering Price Per Unit | | | Proposed Maximum Aggregate Offering Price | | | Amount of Registration Fee(1) |
1.923% NOTES DUE 2023 | | | $500,000,000 | | | 100% | | | $500,000,000 | | | $54,550 |
2.242% NOTES DUE 2025 | | | $2,000,000,000 | | | 100% | | | $2,000,000,000 | | | $218,200 |
2.493% NOTES DUE 2027 | | | $1,250,000,000 | | | 100% | | | $1,250,000,000 | | | $136,375 |
2.722% NOTES DUE 2030 | | | $2,000,000,000 | | | 100% | | | $2,000,000,000 | | | $218,200 |
2.700% NOTES DUE 2031 | | | $750,000,000 | | | 100% | | | $750,000,000 | | | $81,825 |
3.377% NOTES DUE 2040 | | | $1,500,000,000 | | | 100% | | | $1,500,000,000 | | | $163,650 |
3.577% NOTES DUE 2050 | | | $2,000,000,000 | | | 100% | | | $2,000,000,000 | | | $218,200 |
TOTAL | | | $10,000,000,000 | | | 100% | | | $10,000,000,000 | | | $1,091,000 |
(1) | Calculated pursuant to Rule 457(f) under the Securities Act of 1933, as amended. |
| New Notes | | | Old Notes | |
| $500,000,000 1.923% NOTES DUE 2023 (CUSIP 14448C AM6) | | | $500,000,000 1.923% NOTES DUE 2023 (CUSIP 14448C AD6 AND U1453P AD3) | |
| $2,000,000,000 2.242% NOTES DUE 2025 (CUSIP 14448C AN4) | | | $2,000,000,000 2.242% NOTES DUE 2025 (CUSIP 14448C AF1 AND U1453P AE1) | |
| $1,250,000,000 2.493% NOTES DUE 2027 (CUSIP 14448C AP9) | | | $1,250,000,000 2.493% NOTES DUE 2027 (CUSIP 14448C AH7 AND U1453P AF8) | |
| $2,000,000,000 2.722% NOTES DUE 2030 (CUSIP 14448C AQ7) | | | $2,000,000,000 2.722% NOTES DUE 2030 (CUSIP 14448C AA2 AND U1453P AA9) | |
| $750,000,000 2.700% NOTES DUE 2031 (CUSIP 14448C AL8) | | | $750,000,000 2.700% NOTES DUE 2031 (CUSIP 14448C AK0 AND U1453P AG6) | |
| $1,500,000,000 3.377% NOTES DUE 2040 (CUSIP 14448C AR5) | | | $1,500,000,000 3.377% NOTES DUE 2040 (CUSIP 14448C AB0 AND U1453P AB7) | |
| $2,000,000,000 3.577% NOTES DUE 2050 (CUSIP 14448C AS3) | | | $2,000,000,000 3.577% NOTES DUE 2050 (CUSIP 14448C AC8 AND U1453P AC5) | |
(1) | up to $500,000,000 1.923% Notes due 2023 (the “Old 3-Year Notes”) for a like principal amount of 1.923% Notes due 2023, the offer of which has been registered under the Securities Act of 1933, as amended (the “Securities Act”) (the “Exchange 3-Year Notes”); |
(2) | up to $2,000,000,000 2.242% Notes due 2025 (the “Old 5-Year Notes”) for a like principal amount of 2.242% Notes due 2025, the offer of which has been registered under the Securities Act (the “Exchange 5-Year Notes”); |
(3) | up to $1,250,000,000 2.493% Notes due 2027 (the “Old 7-Year Notes”) for a like principal amount of 2.493% Notes due 2027, the offer of which has been registered under the Securities Act (the “Exchange 7-Year Notes”); |
(4) | up to $2,000,000,000 2.722% Notes due 2030 (the “Old 10-Year Notes”) for a like principal amount of 2.722% Notes due 2030, the offer of which has been registered under the Securities Act (the “Exchange 10-Year Notes”); |
(5) | up to $750,000,000 2.700% Notes due 2031 (the “Old 11-Year Notes”) for a like principal amount of 2.700% Notes due 2031, the offer of which has been registered under the Securities Act (the “Exchange 11-Year Notes”); |
(6) | up to $1,500,000,000 3.377% Notes due 2040 (the “Old 20-Year Notes”) for a like principal amount of 3.377% Notes due 2040, the offer of which has been registered under the Securities Act (the “Exchange 20-Year Notes”); and |
(7) | up to $2,000,000,000 3.577% Notes due 2050 (the “Old 30-Year Notes,” and together with the Old 3-Year Notes, the Old 5-Year Notes, the Old 7-Year Notes, the Old 10-Year Notes, the Old 11-Year Notes and the Old 20-Year Notes, the “Old Notes”) for a like principal amount of 3.577% Notes due 2050, the offer of which has been registered under the Securities Act (the “Exchange 30-Year Notes” and together with the Exchange 3-Year Notes, the Exchange 5-Year Notes, the Exchange 7-Year Notes, the Exchange 10-Year Notes, the Exchange 11-Year Notes and the Exchange 20-Year Notes, the “Exchange Notes” and together with the Old Notes and any additional notes that Carrier may issue from time to time under the Indenture (as defined below), the “Notes”). |
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• | The information included in this prospectus about Carrier, including the audited historical combined financial statements of Carrier, assumes the completion of all of the transactions referred to in this prospectus in connection with the separation and distribution (each as defined below). |
• | References in this prospectus to “Carrier,” “we,” “us,” “our,” “our company” and “the company” refer to Carrier Global Corporation, a Delaware corporation, and its subsidiaries. |
• | References in this prospectus to “Otis” refer to Otis Worldwide Corporation, a Delaware corporation, and its subsidiaries. |
• | References in this prospectus to “UTC” refer to United Technologies Corporation (since renamed Raytheon Technologies Corporation), a Delaware corporation, and its subsidiaries. |
• | References in this prospectus to the “Carrier Business” refer to UTC’s pre-separation Carrier operating segment, covering heating, ventilating, air conditioning (“HVAC”), refrigeration, fire and security solutions. |
• | References in this prospectus to the “Otis Business” refer to UTC’s pre-separation Otis operating segment, covering elevator and escalator manufacturing, installation and service businesses. |
• | References in this prospectus to the “UTC Aerospace Businesses” refer to both UTC’s pre-separation Pratt & Whitney operating segment, covering the supply of aircraft engines and aftermarket services for the commercial, military, business jet and general aviation markets, and its Collins Aerospace Systems segment, covering the provision of technologically advanced aerospace products and aftermarket service solutions for aircraft manufacturers, airlines, regional, business and general aviation markets, military, space and undersea operations. |
• | References in this prospectus to the “separation” refer to the separation of the Carrier Business and the Otis Business from UTC’s other businesses and the creation, as a result of the distributions, of an independent, publicly traded company, Carrier, and an independent, publicly traded company, Otis, to hold the assets and liabilities associated with the Carrier Business, and the assets and liabilities associated with the Otis Business, respectively, after the distributions. |
• | References in this prospectus to the “distribution” or the “Carrier distribution” refer to the pro rata distribution, effective at 12:01 a.m., New York City time, on April 3, 2020 (the “distribution date”), of all of Carrier’s issued and outstanding shares of common stock to UTC shareowners as of the close of business on March 19, 2020 (the “record date”). |
• | References in this prospectus to the “Otis distribution” refer to the pro rata distribution, effective at 12:01 a.m., New York City time, on April 3, 2020, of all of Otis’ issued and outstanding shares of common stock to UTC shareowners as of the close of business on the record date. |
• | References in this prospectus to the “distributions” refer to, collectively, the Carrier distribution and the Otis distribution. |
• | References in this prospectus to the “Form 10” refer to the registration statement on Form 10-12B filed by Carrier with the SEC, as amended or supplemented. |
• | References in this prospectus to the “Carrier information statement” refer to the information statement made available to UTC shareowners in connection with the Carrier distribution, as amended or supplemented from time to time prior to the Carrier distribution. |
• | References in this prospectus to the “Otis information statement” refer to the information statement made available to UTC shareowners in connection with the Otis distribution, as amended or supplemented from time to time prior to the Otis distribution. |
• | References in this prospectus to Carrier’s historical assets, liabilities, products, businesses or activities prior to the separation generally refer to the historical assets, liabilities, products, businesses or activities of the Carrier Business as the business was conducted as part of UTC prior to the separation. |
• | References in this prospectus to the “IRS ruling” refer to the private letter ruling from the Internal Revenue Service (the “IRS”) regarding certain U.S. federal income tax matters relating to the separation and the distribution. |
• | References in this prospectus to “separation agreement” refer to the Separation and Distribution Agreement, dated as of April 2, 2020, among UTC, Carrier and Otis, which effected the separation and provides a framework for the relationship among UTC, Carrier and Otis after the separation. |
• | References in this prospectus to the “Raytheon merger agreement” refer to the Agreement and Plan of Merger, dated as of June 9, 2019, by and among UTC, Light Merger Sub Corp. (“Merger Sub”), a wholly owned subsidiary of UTC, and Raytheon Company (“Raytheon”), which provided for, among other things, the combination of the UTC Aerospace Business and Raytheon in a merger of equals transaction, completed on April 3, 2020, through the merger of Merger Sub with and into Raytheon (the “Raytheon merger”), with Raytheon surviving the Raytheon merger as a wholly-owned subsidiary of UTC. |
• | the effect of economic conditions in the industries and markets in which Carrier and its businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions, pandemic health issues (including the coronavirus disease (“COVID-19”) and its effects, among other things, on production and on global supply, demand, and distribution disruptions as the outbreak continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations), natural disasters and the financial condition of our customers and suppliers; |
• | challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; |
• | future levels of indebtedness, capital spending and research and development spending; |
• | future availability of credit and factors that may affect such availability, including credit market conditions and Carrier’s capital structure and credit ratings; |
• | the timing and scope of future repurchases of Carrier’s common stock, including market conditions and the level of other investing activities and uses of cash; |
• | delays and disruption in the delivery of materials and services from suppliers; |
• | cost reduction efforts and restructuring costs and savings and other consequences thereof; |
• | new business and investment opportunities; |
• | risks resulting from a less diversified business model and balance of operations across product lines, regions and industries due to the separation; |
• | the outcome of legal proceedings, investigations and other contingencies; |
• | the impact of pension plan assumptions on future cash contributions and earnings; |
• | the impact of the negotiation of collective bargaining agreements and labor disputes; |
• | the effect of changes in political conditions in the U.S. and other countries in which Carrier and its businesses operate, including the effect of changes in U.S. trade policies or the United Kingdom’s withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; |
• | the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we and our businesses operate; |
• | the ability of Carrier to retain and hire key personnel; |
• | the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; |
• | the expected benefits of the separation; |
• | a determination by the IRS and other tax authorities that the distribution or certain related transactions should be treated as taxable transactions; |
• | risks associated with indebtedness, including that incurred as a result of financing transactions undertaken in connection with the separation, as well as our ability to reduce indebtedness and the timing thereof; |
• | the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the separation will exceed Carrier’s estimates; and |
• | the impact of the separation on Carrier’s business and Carrier’s resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties. |
• | the unregistered Old 3-Year Notes for a like principal amount of the Exchange 3-Year Notes; |
• | the unregistered Old 5-Year Notes for a like principal amount of the Exchange 5-Year Notes; |
• | the unregistered Old 7-Year Notes for a like principal amount of the Exchange 7-Year Notes; |
• | the unregistered Old 10-Year Notes for a like principal amount of the Exchange 10-Year Notes; |
• | the unregistered Old 11-Year Notes for a like principal amount of the Exchange 11-Year Notes; |
• | the unregistered Old 20-Year Notes for a like principal amount of the Exchange 20-Year Notes; and |
• | the unregistered Old 30-Year Notes for a like principal amount of the Exchange 30-Year Notes. |
• | are acquiring the Exchange Notes in the ordinary course of business; |
• | have not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in a distribution of the Exchange Notes; and |
• | are not an “affiliate” of Carrier, as defined in Rule 405 of the Securities Act. |
• | is an affiliate of Carrier; |
• | does not acquire the Exchange Notes in the ordinary course of its business; or |
• | cannot rely on the position of the staff of the SEC expressed in Exxon Capital Holdings Corporation, Morgan Stanley & Co. Incorporated or similar no-action letters; |
• | the exchange offers do not violate applicable law or applicable interpretations of the staff of the SEC; and |
• | there is no action or proceeding instituted or threatened in any court or by any governmental agency with respect to the exchange offers, which, in Carrier’s judgment, could reasonably be expected to impair Carrier’s ability to proceed with the exchange offers. |
• | any Exchange Notes that you receive will be acquired in the ordinary course of your business; |
• | you have no arrangement or understanding with any person or entity to participate in the distribution of the Exchange Notes; |
• | if you are a broker-dealer that will receive Exchange Notes for your own account in exchange for Old Notes that were acquired as a result of market-making activities, you will deliver a prospectus, as required by law, in connection with any resale of the Exchange Notes; and |
• | you are not an “affiliate” of Carrier as defined in Rule 405 under the Securities Act. |
• | rank equally in right of payment with all of our existing and future unsecured and unsubordinated indebtedness, liabilities and other obligations; |
• | rank senior in right of payment to all of our future indebtedness that is subordinated to the Exchange Notes; |
• | be effectively subordinated in right of payment to all of our future secured indebtedness, to the |
• | be structurally subordinated in right of payment to all existing and future indebtedness, liabilities and other obligations of each of our subsidiaries. |
• | Generally, our working capital requirements and capital for our general corporate purposes, including capital expenditures and acquisitions, were historically satisfied through UTC’s corporate-wide cash management practices. Now that the separation has been completed, our results of operations and cash flows may be more volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly. |
• | Prior to the separation, our business was operated by UTC as part of its broader corporate organization, rather than as an independent company. UTC or one of its affiliates performed or helped perform various corporate functions for us, such as accounting, auditing, tax, legal, human resources, investor relations, risk management, treasury and other general and administrative functions. Our historical financial results reflect allocations of corporate expenses from UTC for such functions, which are likely to be less than the expenses we would have incurred had we operated as a separate publicly traded company. |
• | Historically, we shared economies of scale in costs, employees, vendor relationships and customer relationships, which enabled us to procure more advantageous arrangements with respect to, among other things, information technology, logistics, raw materials, facility management, travel services, fleet and professional services. As a stand-alone company, we may be unable to obtain similar arrangements to the same extent as UTC did, or on terms as favorable as those UTC obtained, prior to the completion of the separation. |
• | The cost of capital for our business may be higher than UTC’s cost of capital prior to the separation. |
• | Our historical financial information for the periods prior to April 3, 2020 does not reflect the debt that we incurred as part of the separation. |
• | As an independent public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934 (the “Exchange Act”), the Sarbanes-Oxley Act (“Sarbanes-Oxley”) and the Dodd-Frank Act and are required to prepare our stand-alone financial statements according to the rules |
• | (1) was insolvent, was rendered insolvent by reason of the separation, or had remaining assets constituting unreasonably small capital, and (2) received less than fair consideration in exchange for the distribution; or |
• | intended to incur, or believed it would incur, debts beyond its ability to pay these debts as they matured, |
• | our credit ratings with major credit rating agencies; |
• | the prevailing interest rates being paid by other companies similar to us; |
• | our financial condition, financial performance, operating results, cash flows and future prospects; and |
• | the overall condition of the financial markets. |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2016 (Unaudited) | | | 2015 (Unaudited) |
For The Year | | | | | | | | | | | |||||
Net sales | | | $18,608 | | | $18,914 | | | $17,814 | | | $16,853 | | | $16,709 |
Research and development | | | 401 | | | 400 | | | 364 | | | 351 | | | 325 |
Restructuring costs | | | 126 | | | 80 | | | 111 | | | 65 | | | 108 |
Operating profit(1) | | | 2,491 | | | 3,637 | | | 3,030 | | | 2,760 | | | 2,563 |
Net income(2) | | | 2,155 | | | 2,769 | | | 1,267 | | | 1,900 | | | 1,837 |
Net income attributable to Carrier Global Corporation | | | 2,116 | | | 2,734 | | | 1,227 | | | 1,854 | | | 1,782 |
Capital expenditures | | | $243 | | | 263 | | | 326 | | | 340 | | | 261 |
(1) | 2019 operating profit includes a charge of $108 million related to the impairment of an equity investment. 2018 operating profit includes a $799 million pre-tax gain on the sale of the Taylor business, and 2017 operating profit includes a $379 million pre-tax gain on the sale of our investment in Watsco, Inc. |
(2) | 2019 net income includes a tax benefit of $149 million as a result of the filing by a subsidiary of Carrier to participate in an amnesty program offered by the Italian Tax Authority and conclusion of a U.S. income tax audit. 2018 net income includes a charge of $102 million related to future non-U.S. taxes associated with anticipated future repatriation of non-U.S. earnings. 2017 net income includes unfavorable net tax charges of approximately $799 million related to U.S. tax reform legislation enacted in December 2017. |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2016 (Unaudited) | | | 2015 (Unaudited) |
At Year End | | | | | | | | | | | |||||
Working capital(3) | | | $1,490 | | | $1,643 | | | $1,750 | | | $1,693 | | | $1,749 |
Total assets(4) | | | 22,406 | | | 21,737 | | | 21,985 | | | 20,981 | | | 20,693 |
Total liabilities(4) | | | 7,971 | | | 7,468 | | | 7,201 | | | 5,844 | | | 5,745 |
Number of employees | | | 52,635 | | | 54,384 | | | 54,998 | | | 56,475 | | | 55,058 |
(3) | Working capital is defined as current assets less current liabilities. |
(4) | The increase in total assets and total liabilities in 2019 primarily relates to the adoption of ASU No. 2016-02—Leases (Topic 842), which Carrier adopted as of January 1, 2019. |
| | 2020 Quarters | | | 2019 Quarters | ||||||||||||||||
(dollars in millions, except per share amounts) | | | First | | | Second | | | Third | | | First | | | Second | | | Third | | | Fourth |
Net sales | | | $3,888 | | | $3,972 | | | $5,002 | | | $4,323 | | | $4,962 | | | $4,822 | | | $4,501 |
Gross margin | | | 1,122 | | | 1,141 | | | 1,561 | | | 1,226 | | | 1,474 | | | 1,446 | | | 1,273 |
Operating profit(1) | | | 315 | | | 442 | | | 1,081 | | | 500 | | | 805 | | | 629 | | | 557 |
Net income from operations(2) | | | 102 | | | 269 | | | 748 | | | 403 | | | 794 | | | 504 | | | 454 |
Net income attributable to common shareowners | | | 96 | | | 261 | | | 741 | | | 400 | | | 784 | | | 492 | | | 440 |
Earnings per share attributable to common shareowners: | | | | | | | | | | | | | | | |||||||
Basic | | | $0.11 | | | $0.30 | | | $0.86 | | | $0.46 | | | $0.91 | | | $0.57 | | | $0.50 |
Diluted | | | $0.11 | | | $0.30 | | | $0.84 | | | $0.46 | | | $0.91 | | | $0.57 | | | $0.50 |
(1) | Operating profit for the third quarter of 2020 includes a $252 million pre-tax gain related to the sale of 9.25 million B shares of Beijer Ref AB (“Beijer”) which represented 19.7% of Carrier’s holdings in Beijer which Carrier accounts for as an equity method investment. Operating profit for the third quarter of 2019 includes a charge of $108 million related to the impairment of an equity investment. |
(2) | Net income for the second quarter of 2019 includes a tax benefit of $149 million as a result of the filing by a subsidiary of Carrier to participate in an amnesty program offered by the Italian Tax Authority and conclusion of a U.S. income tax audit. |
• | the elimination of non-recurring costs included within our historical results which were driven by separation activities; |
• | the incurrence of interest and amortization of issuance costs related to indebtedness incurred in connection with the separation and the distribution; |
• | the elimination of the non-service pension benefit historically allocated to us for a UTC-sponsored defined-benefit pension plan; and |
• | the impact of the separation agreements and the provisions contained therein. |
(Dollars in millions, except per share amounts; shares in millions) | | | Historical | | | Pro Forma Adjustments (Note 2) | | | | | Pro Forma Year Ended December 31, 2019 | |
Net sales: | | | | | | | | | ||||
Product sales | | | $15,360 | | | $— | | | | | $15,360 | |
Service sales | | | 3,248 | | | — | | | | | 3,248 | |
| | 18,608 | | | — | | | | | 18,608 | ||
Costs and expenses: | | | | | | | | | ||||
Cost of products sold | | | 10,890 | | | — | | | | | 10,890 | |
Cost of services sold | | | 2,299 | | | — | | | | | 2,299 | |
Research and development | | | 401 | | | — | | | | | 401 | |
Selling, general and administrative | | | 2,761 | | | (46) | | | (A) (F) | | | 2,715 |
| | 16,351 | | | (46) | | | | | 16,305 | ||
Equity method investment net earnings | | | 236 | | | — | | | | | 236 | |
Other (expense) income, net | | | (2) | | | 5 | | | (A) | | | 3 |
Operating profit | | | 2,491 | | | 51 | | | | | 2,542 | |
Non-service pension benefit | | | (154) | | | 81 | | | (H) | | | (73) |
Interest (income) expense, net | | | (27) | | | 372 | | | (E) (G) | | | 345 |
Income from operations before income taxes | | | 2,672 | | | (402) | | | | | 2,270 | |
Income tax expense | | | 517 | | | (62) | | | (B) | | | 455 |
Net income | | | $2,155 | | | $(340) | | | | | $1,815 | |
Less: Noncontrolling interest in subsidiaries’ earnings | | | 39 | | | — | | | | | 39 | |
Net income attributable to Carrier Global Corporation | | | $2,116 | | | $(340) | | | | | $1,776 | |
| | | | | | | | |||||
Earnings per common share | | | | | | | | | ||||
Basic | | | | | | | (C) | | | $2.05 | ||
Diluted | | | | | | | (D) | | | $2.03 | ||
Weighted-average common shares outstanding | | | | | | | | | ||||
Basic | | | | | | | (C) | | | 866.2 | ||
Diluted | | | | | | | (D) | | | 872.8 |
(Dollars in millions, except per share amounts; shares in millions) | | | Historical | | | Pro Forma Adjustments (Note 2) | | | | | Pro Forma Nine Months Ended September 30, 2020 | |
Net sales: | | | | | | | | | ||||
Product sales | | | $10,615 | | | $— | | | | | $10,615 | |
Service sales | | | 2,247 | | | — | | | | | 2,247 | |
| | 12,862 | | | — | | | | | 12,862 | ||
Costs and expenses: | | | | | | | | | ||||
Cost of products sold | | | 7,464 | | | — | | | | | 7,464 | |
Cost of services sold | | | 1,574 | | | — | | | | | 1,574 | |
Research and development | | | 292 | | | — | | | | | 292 | |
Selling, general and administrative | | | 2,010 | | | (92) | | | (A) | | | 1,918 |
| | 11,340 | | | (92) | | | | | 11,248 | ||
Equity method investment net earnings | | | 148 | | | — | | | | | 148 | |
Other income (expense), net | | | 168 | | | — | | | | | 168 | |
Operating profit | | | 1,838 | | | 92 | | | | | 1,930 | |
Non-service pension benefit | | | 47 | | | — | | | | | 47 | |
Interest (expense) income, net | | | (206) | | | (51) | | | (E) | | | (257) |
Income from operations before income taxes | | | 1,679 | | | 41 | | | | | 1,720 | |
Income tax expense | | | 560 | | | (41) | | | (B) | | | 519 |
Net income from operations | | | $1,119 | | | $82 | | | | | $1,201 | |
Less: Non-controlling interest in subsidiaries’ earnings from operations | | | 21 | | | — | | | | | 21 | |
Net income attributable to common shareowners | | | $1,098 | | | $82 | | | | | $1,180 | |
| | | | | | | | |||||
Earnings per share | | | | | | | | | ||||
Basic | | | $1.27 | | | | | (C) | | | $1.36 | |
Diluted | | | $1.25 | | | | | (D) | | | $1.35 | |
Weighted-average number of shares outstanding | | | | | | | | | ||||
Basic | | | 866.3 | | | | | (C) | | | 866.3 | |
Diluted | | | 876.2 | | | | | (D) | | | 876.2 |
• | accounting, tax and other professional service costs pertaining to the separation and our establishment as a stand-alone public company; |
• | facility relocation costs; |
• | costs to separate information systems; and |
• | costs of retention bonuses. |
(1) | Excluding inter-segment eliminations. |
| | 2019 | | | 2018 | | | 2017 | | |
HVAC | | | 51% | | | 50% | | | 50% | |
Refrigeration | | | 20% | | | 21% | | | 21% | |
Fire & Security | | | 29% | | | 29% | | | 29% | |
| | 100% | | | 100% | | | 100% | |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Net sales | | | $5,002 | | | $4,822 | | | $12,862 | | | $14,107 |
Percentage change | | | 4% | | | | | (9)% | | |
| | For the Three Months Ended September 30, 2020 | | | For the Nine Months Ended September 30, 2020 | |
Organic / Operational | | | 3% | | | (8)% |
Foreign currency translation | | | 1% | | | (1)% |
Total % change | | | 4% | | | (9)% |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Total cost of products and services sold | | | $3,441 | | | $3,376 | | | $9,038 | | | $9,961 |
Percentage change year-over-year | | | 2% | | | | | (9)% | | |
| | For the Three Months Ended September 30, 2020 | | | For the Nine Months Ended September 30, 2020 | |
Organic / Operational | | | 1% | | | (8)% |
Foreign currency translation | | | 1% | | | (1)% |
Total % change | | | 2% | | | (9)% |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Gross margin | | | $1,561 | | | $1,446 | | | $3,824 | | | $4,146 |
Percentage of net sales | | | 31.2% | | | 30.0% | | | 29.7% | | | 29.4% |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Research and development | | | $100 | | | $102 | | | $292 | | | $302 |
Percentage of net sales | | | 2.0% | | | 2.1% | | | 2.3% | | | 2.1% |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Selling, general and administrative expenses | | | $681 | | | $702 | | | $2,010 | | | $2,066 |
Percentage of net sales | | | 13.6% | | | 14.6% | | | 15.6% | | | 14.6% |
| | For the Nine Months Ended September 30, | ||||
(dollars in millions) | | | 2020 | | | 2019 |
Cost of sales | | | $5 | | | $27 |
Selling, general and administrative | | | 14 | | | 70 |
Total restructuring costs | | | $19 | | | $97 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Equity method investment net earnings | | | $62 | | | $78 | | | $148 | | | $198 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Other income (expense), net | | | $239 | | | $(91) | | | $168 | | | $(42) |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Interest expense | | | $(90) | | | $(20) | | | $(213) | | | $(55) |
Interest income | | | 2 | | | 23 | | | 7 | | | 78 |
Interest (expense) income, net | | | $(88) | | | $3 | | | $(206) | | | $23 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
| | 2020 | | | 2019 | | | 2020 | | | 2019 | |
Effective tax rate | | | 25.9% | | | 25.8% | | | 33.4% | | | 18.3% |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Net income attributable to common shareowners | | | $741 | | | $492 | | | $1,098 | | | $1,676 |
• | a pre-tax $252 million ($194 million, net of tax) gain on the sale of 9.25 million Beijer shares in the three months ended September 30, 2020; |
• | an $11 million charge in the three months ended September 30, 2020 from a litigation matter that was not tax deductible; |
• | a $12 million deferred tax charge resulting from a United Kingdom legislative change recorded in the three months ended September 30, 2020; |
• | a $71 million impairment charge recorded in the three months ended March 31, 2020 on a minority-owned joint venture investment that was not tax deductible; |
• | a $51 million tax charge related to a valuation allowance recorded against a United Kingdom tax loss and credit carryforward as a result of separation-related activities recorded in the three months ended March 31, 2020; |
• | a $46 million tax charge resulting from Carrier’s decision to no longer permanently reinvest certain pre-2018 unremitted non-U.S. earnings that was recorded in the three months ended March 31, 2020; and |
• | a $24 million pre-tax ($18 million, net of tax benefit) charge and a $92 million pre-tax ($69 million, net of tax benefit) charge that were recorded in the three and nine months ended September 30, 2020, respectively, for separation-related costs. |
• | a $108 million impairment of an equity method investment that was not tax deductible in the three months ended September 30, 2019; |
• | a $13 million pre-tax ($10 million, net of tax benefit) charge in the three months ended September 30, 2019, for separation-related costs; |
• | a $34 million pre-tax ($25 million, net of tax benefit) consultant contract termination charge in the three months ended September 30, 2019; |
• | a $19 million deferred tax adjustment relating to the announcement to separate Carrier as a stand-alone public company from UTC in the three months ended September 30, 2019; |
• | a $13 million pre-tax ($10 million, net of tax) gain and $21 million pre-tax ($16 million, net of tax) gain from the sale of investments in the three months ended March 31, 2019 and June 30, 2019, respectively; and |
• | a $149 million benefit resulting from the filing by a Carrier subsidiary to participate in an amnesty program offered by the Italian Tax Authority and the conclusion of an audit by the IRS for UTC tax years 2014, 2015 and 2016 in the three months ended June 30, 2019. |
| | Net Sales | | | Operating Profit | | | Operating Profit Margin | ||||||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
HVAC | | | $2,892 | | | $2,602 | | | $839 | | | $404 | | | 29.0% | | | 15.5% |
Refrigeration | | | 876 | | | 922 | | | 103 | | | 125 | | | 11.8% | | | 13.6% |
Fire & Security | | | 1,324 | | | 1,402 | | | 200 | | | 205 | | | 15.1% | | | 14.6% |
Total segment | | | 5,092 | | | 4,926 | | | 1,142 | | | 734 | | | 22.4% | | | 14.9% |
Eliminations and other | | | (90) | | | (104) | | | (31) | | | (63) | | | 34.4% | | | 60.6% |
General corporate expenses | | | — | | | — | | | (30) | | | (42) | | | —% | | | —% |
Consolidated | | | $5,002 | | | $4,822 | | | $1,081 | | | $629 | | | 21.6% | | | 13.0% |
| | Net Sales | | | Operating Profit | | | Operating Profit Margin | ||||||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
HVAC | | | $7,142 | | | $7,505 | | | $1,364 | | | $1,242 | | | 19.1% | | | 16.5% |
Refrigeration | | | 2,384 | | | 2,839 | | | 263 | | | 373 | | | 11.0% | | | 13.1% |
Fire & Security | | | 3,587 | | | 4,078 | | | 426 | | | 521 | | | 11.9% | | | 12.8% |
Total segment | | | 13,113 | | | 14,422 | | | 2,053 | | | 2,136 | | | 15.7% | | | 14.8% |
Eliminations and other | | | (251) | | | (315) | | | (122) | | | (95) | | | 48.6% | | | 30.2% |
General corporate expenses | | | — | | | — | | | (93) | | | (107) | | | —% | | | —% |
Consolidated | | | $12,862 | | | $14,107 | | | $1,838 | | | $1,934 | | | 14.3% | | | 13.7% |
(dollars in millions) | | | 2020 | | | 2019 | | | Increase (Decrease) | | | % Increase (Decrease) |
Net sales | | | $2,892 | | | $2,602 | | | $290 | | | 11% |
Operating profit | | | $839 | | | $404 | | | $435 | | | 108% |
| | Net Sales | | | Operating Profit | |
Organic / Operational | | | 11% | | | 20% |
Foreign currency translation | | | —% | | | (1)% |
Restructuring | | | —% | | | 3% |
Other | | | —% | | | 86% |
Total % change | | | 11% | | | 108% |
(dollars in millions) | | | 2020 | | | 2019 | | | Increase (Decrease) | | | % Increase (Decrease) |
Net sales | | | $7,142 | | | $7,505 | | | $(363) | | | (5)% |
Operating profit | | | $1,364 | | | $1,242 | | | $122 | | | 10% |
| | Net sales | | | Operating profit | |
Organic / Operational | | | (4)% | | | (13)% |
Foreign currency translation | | | (1)% | | | (1)% |
Restructuring | | | —% | | | 4% |
Other | | | —% | | | 20% |
Total % change | | | (5)% | | | 10% |
(dollars in millions) | | | 2020 | | | 2019 | | | Increase (Decrease) | | | % Increase (Decrease) |
Net sales | | | $876 | | | $922 | | | $(46) | | | (5)% |
Operating profit | | | $103 | | | $125 | | | $(22) | | | (18)% |
| | Net Sales | | | Operating Profit | |
Organic / Operational | | | (6)% | | | (26)% |
Foreign currency translation | | | 2% | | | 2% |
Acquisitions and divestitures, net | | | (1)% | | | —% |
Restructuring | | | —% | | | 6% |
Total % change | | | (5)% | | | (18)% |
(dollars in millions) | | | 2020 | | | 2019 | | | Increase (Decrease) | | | % Increase (Decrease) |
Net sales | | | $2,384 | | | $2,839 | | | $(455) | | | (16)% |
Operating profit | | | $263 | | | $373 | | | $(110) | | | (29)% |
| | Net sales | | | Operating profit | |
Organic / Operational | | | (15)% | | | (33)% |
Foreign currency translation | | | (1)% | | | —% |
Restructuring | | | —% | | | 4% |
Total % change | | | (16)% | | | (29)% |
(dollars in millions) | | | 2020 | | | 2019 | | | Increase (Decrease) | | | % Increase (Decrease) |
Net sales | | | $1,324 | | | $1,402 | | | $(78) | | | (6)% |
Operating profit | | | $200 | | | $205 | | | $(5) | | | (2)% |
| | Net Sales | | | Operating Profit | |
Organic / Operational | | | (7)% | | | (9)% |
Foreign currency translation | | | 1% | | | 1% |
Restructuring | | | —% | | | 5% |
Other | | | —% | | | 1% |
Total % change | | | (6)% | | | (2)% |
(dollars in millions) | | | 2020 | | | 2019 | | | Increase (Decrease) | | | % Increase (Decrease) |
Net sales | | | $3,587 | | | $4,078 | | | $(491) | | | (12)% |
Operating profit | | | $426 | | | $521 | | | $(95) | | | (18)% |
| | Net Sales | | | Operating Profit | |
Organic / Operational | | | (11)% | | | (24)% |
Foreign currency translation | | | (1)% | | | —% |
Restructuring | | | —% | | | 4% |
Other | | | —% | | | 2% |
Total % change | | | (12)% | | | (18)% |
| | Net Sales | | | Operating Profit | |||||||
| | For the Three Months Ended September 30, | | | For the Three Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Eliminations and other | | | $(90) | | | $(104) | | | $(31) | | | $(63) |
General corporate expenses | | | $— | | | $— | | | $(30) | | | $(42) |
| | Net Sales | | | Operating Profit | |||||||
| | For the Nine Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Eliminations and other | | | $(251) | | | $(315) | | | $(122) | | | $(95) |
General corporate expenses | | | $— | | | $— | | | $(93) | | | $(107) |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net sales | | | $18,608 | | | $18,914 | | | $17,814 |
Percentage change year-over-year | | | (2)% | | | 6% | | |
(dollars in millions) | | | 2019 | | | 2018 |
Organic / operational | | | 1% | | | 6% |
Foreign currency translation | | | (2)% | | | 1% |
Acquisitions and divestitures, net | | | (1)% | | | (1)% |
Total % change | | | (2)% | | | 6% |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Total cost of products and services sold | | | $13,189 | | | $13,345 | | | $12,629 |
Percentage change year-over-year | | | (1)% | | | 6% | | |
(dollars in millions) | | | 2019 | | | 2018 |
Organic / operational | | | 2% | | | 6% |
Foreign currency translation | | | (2)% | | | 1% |
Acquisitions and divestitures, net | | | (1)% | | | (1)% |
Total % change | | | (1)% | | | 6% |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Gross margin | | | $5,419 | | | $5,569 | | | $5,185 |
Percentage of net sales | | | 29.1% | | | 29.4% | | | 29.1% |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Research and development expense | | | $401 | | | $400 | | | $364 |
Percentage of net sales | | | 2.2% | | | 2.1% | | | 2.0% |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Selling, general and administrative | | | $2,761 | | | $2,689 | | | $2,584 |
Percentage of net sales | | | 14.8% | | | 14.2% | | | 14.5% |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Cost of sales | | | $36 | | | $36 | | | $48 |
Selling, general and administrative | | | $90 | | | $44 | | | $63 |
Total restructuring costs | | | $126 | | | $80 | | | $111 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Equity method investment net earnings | | | $236 | | | $220 | | | $218 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Other income (expense), net | | | $(2) | | | $937 | | | $575 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Interest expense | | | $75 | | | $84 | | | $219 |
Interest income | | | $(102) | | | $(121) | | | $(104) |
Interest (income) expense, net | | | $(27) | | | $(37) | | | $115 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Effective income tax rate | | | 19.4% | | | 27.9% | | | 58.5% |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net income from continuing operations attributable to Carrier | | | $2,116 | | | $2,734 | | | $1,227 |
| | Net sales | | | Operating profit | | | Operating profit margin | |||||||||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 | | | 2018 | | | 2017 | | | 2019 | | | 2018 | | | 2017 |
HVAC | | | $9,712 | | | $9,713 | | | $9,045 | | | $1,563 | | | $1,720 | | | $2,001 | | | 16% | | | 18% | | | 22% |
Refrigeration | | | 3,792 | | | 4,095 | | | 3,823 | | | 532 | | | 1,353 | | | 562 | | | 14% | | | 33% | | | 15% |
Fire & Security | | | 5,500 | | | 5,531 | | | 5,324 | | | 708 | | | 726 | | | 639 | | | 13% | | | 13% | | | 12% |
Total Segment | | | 19,004 | | | 19,339 | | | 18,192 | | | 2,803 | | | 3,799 | | | 3,202 | | | 15% | | | 20% | | | 18% |
Eliminations and other | | | (396) | | | (425) | | | (378) | | | (156) | | | (24) | | | (32) | | | 39% | | | 6% | | | 8% |
General corporate expenses | | | — | | | — | | | — | | | (156) | | | (138) | | | (140) | | | 0% | | | 0% | | | 0% |
Combined | | | $18,608 | | | $18,914 | | | $17,814 | | | $2,491 | | | $3,637 | | | $3,030 | | | 13% | | | 19% | | | 17% |
| | | | | | | | Total Increase (Decrease) Year-Over-Year for: | |||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 Compared with 2018 | | | 2018 Compared with 2017 | ||||||
Net sales | | | $9,712 | | | $9,713 | | | $9,045 | | | $(1) | | | —% | | | $668 | | | 7% |
Operating profit | | | 1,563 | | | 1,720 | | | 2,001 | | | (157) | | | (9)% | | | (281) | | | (14)% |
| | 2019 | | | 2018 | |||||||
| | Net sales | | | Operating profit | | | Net sales | | | Operating profit | |
Organic/Operational | | | 1% | | | —% | | | 7% | | | 5% |
Foreign currency translation | | | (1)% | | | (1)% | | | —% | | | 1% |
Restructuring costs | | | —% | | | (2)% | | | —% | | | 1% |
Other | | | —% | | | (6)% | | | —% | | | (21)% |
Total % change | | | —% | | | (9)% | | | 7% | | | (14)% |
• | favorable impact of pricing and productivity net of unfavorable commodities and tariffs (7%, combined); and |
• | higher income from equity method investments (1%). |
• | lower unit volume and unfavorable mix (3%); |
• | the absence of a prior year favorable contract adjustment related to a large commercial project combined with the unfavorable year-over-year impact resulting from the revaluation of certain long-term liabilities (3%, combined); and |
• | higher selling, general and administrative expenses (2%). |
• | the year-over-year impact of a contract adjustment related to a large commercial project (5%); |
• | profit contribution from the higher sales volumes, net of mix (4%); and |
• | favorable pricing, net of commodities (4%). |
• | higher logistics costs (3%); |
• | higher selling, general and administrative and research and development costs (3%); and |
• | higher warranty costs (2%). |
| | | | | | | | Total Increase (Decrease) Year-Over-Year for: | |||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 Compared with 2018 | | | 2018 Compared with 2017 | ||||||
Net sales | | | $3,792 | | | $4,095 | | | $3,823 | | | $(303) | | | (7)% | | | $272 | | | 7% |
Operating profit | | | 532 | | | 1,353 | | | 562 | | | (821) | | | (61)% | | | 791 | | | 141% |
| | 2019 | | | 2018 | |||||||
| | Net sales | | | Operating profit | | | Net sales | | | Operating profit | |
Organic/Operational | | | (1)% | | | —% | | | 9% | | | 5% |
Foreign currency translation | | | (3)% | | | (1)% | | | 2% | | | 1% |
Acquisitions and divestitures, net | | | (3)% | | | (2)% | | | (4)% | | | (5)% |
Restructuring costs | | | —% | | | —% | | | —% | | | (2)% |
Other | | | —% | | | (58)% | | | —% | | | 142% |
Total % change | | | (7)% | | | (61)% | | | 7% | | | 141% |
• | favorable pricing, cost and productivity (3%, combined). |
• | lower unit volume and unfavorable mix (3%). |
• | profit contribution from higher sales volumes, net of mix (11%). |
• | higher selling, general and administrative costs and research and development costs (5%); and |
• | higher commodities, net of price (1%). |
| | | | | | | | Total Increase (Decrease) Year-Over-Year for: | |||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 Compared with 2018 | | | 2018 Compared with 2017 | ||||||
Net sales | | | $5,500 | | | $5,531 | | | $5,324 | | | $(31) | | | (1)% | | | $207 | | | 4% |
Operating profit | | | 708 | | | 726 | | | 639 | | | (18) | | | (2)% | | | 87 | | | 14% |
| | 2019 | | | 2018 | |||||||
| | Net sales | | | Operating profit | | | Net sales | | | Operating profit | |
Organic/Operational | | | 1% | | | (2)% | | | 2% | | | 3% |
Foreign currency translation | | | (3)% | | | (2)% | | | 2% | | | 2% |
Acquisitions and divestitures, net | | | 1% | | | 2% | | | —% | | | —% |
Restructuring costs | | | —% | | | (2)% | | | —% | | | 4% |
Other | | | —% | | | 2% | | | —% | | | 5% |
Total % change | | | (1)% | | | (2)% | | | 4% | | | 14% |
• | unfavorable mix, net of higher volume (2%); |
• | investments in research and development (2%); |
• | higher inventory obsolescence reserves associated with a business closure (1%); and |
• | unfavorable impact of a service contract adjustment (1%). |
• | favorable pricing, cost and productivity (5%, combined). |
• | profit contribution from higher sales volumes, net of mix (7%). |
• | higher selling, general and administrative costs and research and development costs (3%); and |
• | higher commodities, net of price (1%). |
| | Net Sales | | | Operating Profit | |||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 | | | 2018 | | | 2017 |
Eliminations and other | | | $(396) | | | (425) | | | (378) | | | $(156) | | | (24) | | | (32) |
General corporate expenses | | | — | | | — | | | — | | | (156) | | | (138) | | | (140) |
(dollars in millions) | | | September 30, 2020 | | | December 31, 2019 |
Cash and cash equivalents | | | $3,848 | | | $952 |
Total debt | | | $11,974 | | | $319 |
Net debt (total debt less cash and cash equivalents) | | | $8,126 | | | $(633) |
Total equity | | | $5,437 | | | $14,435 |
Total capitalization (total debt plus total equity) | | | $17,411 | | | $14,754 |
Net capitalization (total debt plus total equity less cash and cash equivalents) | | | $13,563 | | | $13,802 |
Total debt to total capitalization | | | 69% | | | NM |
Net debt to net capitalization | | | 60% | | | NM |
Rating Agency | | | Long-term Rating1 | | | Short-term Rating | | | Outlook2 |
Standards & Poor’s (“S&P”) | | | BBB | | | A2 | | | Negative |
Moody's Investor Services, Inc. (“Moody’s”) | | | Baa3 | | | P3 | | | Stable |
Fitch Ratings (“Fitch”) | | | BBB- | | | F3 | | | Stable |
1 | The long-term rating for S&P was affirmed on June 15, 2020, and for Moody's on June 16, 2020. Fitch's long-term rating was issued on June 11, 2020. |
2 | S&P revised its outlook to negative from stable on June 15, 2020. |
(dollars in millions) | | | | | | | |||
Debt Description | | | Interest Rate | | | September 30, 2020 | | | December 31, 2019 |
3-Year Term Loan Credit Facility due February 10, 2023 | | | 1.275%1 | | | $1,7502 | | | $— |
1.923% Notes due February 15, 2023 | | | 1.923% | | | 5002 | | | — |
2.242% Notes due February 15, 2025 | | | 2.242% | | | 2,0002 | | | — |
2.493% Notes due February 15, 2027 | | | 2.493% | | | 1,2502 | | | — |
2.722% Notes due February 15, 2030 | | | 2.722% | | | 2,0002 | | | — |
2.700% Notes due February 15, 2031 | | | 2.700% | | | 750 | | | — |
3.377% Notes due April 5, 2040 | | | 3.377% | | | 1,5002 | | | — |
3.577% Notes due April 5, 2050 | | | 3.577% | | | 2,0002 | | | — |
Other (including project financing obligations and finance leases) | | | | | 309 | | | 319 | |
Total principal long-term debt | | | | | 12,059 | | | 319 | |
Other (discounts and debt issuance costs) | | | | | (85) | | | — | |
Total debt | | | | | 11,974 | | | 319 | |
Less: current portion of long-term debt | | | | | 223 | | | 237 | |
Long-term debt, net of current portion | | | | | $11,751 | | | $82 |
1 | The interest rate on the term loan as of September 30, 2020 was 1.275%, which is a variable rate based on one-month LIBOR plus 112.5 basis points. |
2 | The net proceeds of the financing arrangements were used to distribute cash to UTC. |
| | For the Nine Months Ended September 30, | ||||
(dollars in millions) | | | 2020 | | | 2019 |
Net cash flows provided by operating activities | | | $1,493 | | | $989 |
| | For the Nine Months Ended September 30, | ||||
(dollars in millions) | | | 2020 | | | 2019 |
Net cash flows provided by (used in) investing activities | | | $230 | | | $(150) |
| | For the Nine Months Ended September 30, | ||||
(dollars in millions) | | | 2020 | | | 2019 |
Net cash flows provided by (used in) financing activities | | | $1,173 | | | $(1,095) |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net cash flows provided by operating activities | | | $2,002 | | | $2,055 | | | $2,098 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net cash flows provided by (used in) investing activities | | | $(213) | | | $415 | | | $271 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net cash flows used in financing activities | | | $(1,967) | | | $(2,627) | | | $(2,193) |
(dollars in millions) | | | Increase in Discount Rate of 25 bps | | | Decrease in Discount Rate of 25 bps |
Pension plans | | | | | ||
Projected benefit obligation | | | $(104.0) | | | $110.0 |
Net periodic pension (benefit) cost | | | (2.1) | | | 3.1 |
Other postretirement benefit plans* | | | | | ||
Accumulated postretirement benefit obligation | | | (0.3) | | | 0.3 |
* | The impact on net periodic postretirement (benefit) cost is less than $0.1 million. |
| | Payments Due by Period | |||||||||||||
(dollars in millions) | | | Total | | | 2020 | | | 2021-2022 | | | 2023-2024 | | | Thereafter |
Operating leases | | | $939 | | | $182 | | | $272 | | | $170 | | | $315 |
Purchase obligations | | | 1,346 | | | 1,076 | | | 211 | | | 59 | | | — |
Other long-term liabilities | | | 764 | | | 219 | | | 217 | | | 121 | | | 207 |
Total contractual obligations | | | $3,049 | | | $1,477 | | | $700 | | | $350 | | | $522 |
• | Principal amount of indebtedness incurred in connection with the separation and distribution and associated interest payments. See “Description of Other Material Indebtedness” for additional discussion. |
• | Unrecognized tax benefits of $166 million, the timing of which is uncertain to become payable. See Note 14 – Income Taxes to the Combined Financial Statements for additional discussion on unrecognized tax benefits. |
• | Carrier’s obligations pursuant to the tax matters agreement to settle with UTC the net remaining tax liability of $481 million under the TCJA mandatory transition tax attributable to Carrier. This amount will be settled with UTC in six annual installments, beginning in April of 2021. |
Name | | | Age | | | Position |
John V. Faraci | | | 70 | | | Executive Chairman |
David Gitlin | | | 51 | | | President and Chief Executive Officer |
Ajay Agrawal | | | 57 | | | Senior Vice President, Strategy & Services |
David Appel | | | 64 | | | President, Refrigeration |
Kyle Crockett | | | 46 | | | Vice President, Controller |
Timothy McLevish | | | 65 | | | Senior Vice President, Chief Financial Officer |
Christopher Nelson | | | 50 | | | President, HVAC |
Kevin O’Connor | | | 53 | | | Senior Vice President, Chief Legal Officer |
Jurgen Timperman | | | 47 | | | President, Fire & Security |
Nadia Villeneuve | | | 48 | | | Senior Vice President, Chief Human Resources Officer |
Name | | | Age | | | Position |
John V. Faraci | | | 70 | | | Executive Chairman |
Jean-Pierre Garnier | | | 72 | | | Director |
David Gitlin | | | 51 | | | Director |
John J. Greisch | | | 65 | | | Director |
Charles M. Holley, Jr. | | | 64 | | | Director |
Michael M. McNamara | | | 63 | | | Director |
Michael A. Todman | | | 63 | | | Director |
Virginia M. (Gina) Wilson | | | 66 | | | Director |
| Audit | | ||||||
| Charles M. Holley. Jr. (Chair) Michael M. McNamara Michael A. Todman Virginia M. (Gina) Wilson | | | • | | | Assists the Board in overseeing: the integrity of Carrier’s financial statements; the independence, qualifications and performance of Carrier’s internal and external auditors; Carrier’s compliance with its policies and procedures, internal controls, Code of Ethics, and applicable laws and regulations; and policies and procedures relating to risk assessment and management | |
| | | • | | | Nominates, for appointment by shareowners, an accounting firm to serve as Carrier’s independent auditor and maintains responsibility for compensation, retention and oversight of the auditor | | |
| | | • | | | Pre-approves all audit services and permitted non-audit services to be performed for Carrier by its independent auditor | | |
| | | • | | | Reviews and approves the appointment and replacement of the senior Internal Audit executive | | |
| | | • | | | Reviews and assists the Board in overseeing the management of Carrier’s financial resources and financial risks | |
| Audit | | ||||||
| | | • | | | Reviews and assists the Board in overseeing policies and programs relating to the management of foreign exchange exposure, interest rates; raw materials prices; investment of pension assets; and insurance and risk management | | |
| | | • | | | Reviews and assists the Board in overseeing strategies and plans for certain acquisitions and divestitures, including discussion of possible transactions and their financial impact | |
| Governance | | ||||||
| Jean-Pierre Garnier (Chair) John J. Greisch Michael M. McNamara Virginia M. (Gina) Wilson | | | • | | | Identifies and recommends qualified candidates for election to the Board | |
| • | | | Develops and recommends appropriate corporate governance guidelines | | |||
| • | | | Oversees the design and conduct of the annual self-evaluation of the Board, its committees and individual directors | | |||
| • | | | Recommends appropriate compensation of directors | | |||
| • | | | Submits to the Board recommendations for committee assignments | | |||
| • | | | Reviews and monitors the orientation of new Board members and the continuing education of all directors | | |||
| • | | | Reviews and oversees Carrier’s positions on significant public issues and corporate social responsibility, including diversity, the environment and safety | |
| Compensation | | ||||||
| John J. Greisch (Chair) Jean-Pierre Garnier Charles M. Holley, Jr. Michael A. Todman | | | • | | | Reviews Carrier’s executive compensation policies and practices to ensure that they adequately and appropriately align executive and shareowner interests | |
| • | | | Reviews and approves the design of and sets performance goals for the annual bonus and long-term incentive awards for executives | | |||
| • | | | Evaluates the performance of Carrier and its Named Executive Officers relative to the pre-established performance goals set by the Committee for the annual and long-term incentive programs | | |||
| • | | | Approves compensation levels for Executive Leadership Group (“ELG”) members and executive officers | | |||
| • | | | Reviews a risk assessment of Carrier’s compensation policies, plans and practices | |
• | Corporate Governance Guidelines; |
• | Board Committee Charters; |
• | Certificate of Incorporation and Bylaws; |
• | Code of Ethics; |
• | Director Independence Policy; |
• | Related Person Transactions Policy; |
• | Share ownership requirements; |
• | Information about our anonymous reporting program, which allows Carrier’s employees and other stakeholders to identify potential instances of non-compliance or unethical practices confidentially and outside the usual management channels; and |
• | Information about how to communicate concerns to the Board and management. |
• | Objectivity and independence in making informed business decisions; |
• | Extensive knowledge, experience and judgment; |
• | The highest integrity; |
• | Diversity of perspective; |
• | A willingness to devote the extensive time necessary to fulfill a director’s duties; |
• | An appreciation for the role of the corporation in society; and |
• | Loyalty to the interests of Carrier and its shareowners. |
• | Financial. Leadership of a financial firm, management of an enterprise’s finance function or of a large profit and loss statement, resulting in proficiency in complex financial management, financial reporting processes, capital allocation, capital markets and mergers and acquisitions, representing the importance we place on accurate financial reporting and robust financial controls and compliance. |
• | International. Carrier has operations around the world. Directors with international experience thus provide valuable business and cultural perspectives. |
• | Knowledge of Company / Industry. Knowledge of or experience in Carrier’s industries and markets, whether acquired through service as a senior leader in one of these industries or markets, a related industry or market or through prior service on the UTC Board of Directors. |
• | Risk Management / Oversight. This experience is critical to the Board’s role in overseeing and understanding major risk exposures, including significant financial, operational, compliance, reputational, strategic, international and cybersecurity risks. |
• | Senior Leadership. Extensive leadership experience with a significant enterprise, resulting in a practical understanding of organizations, processes and strategic planning, along with demonstrated strengths in developing talent, succession planning and driving change and long-term growth. |
• | Technology and Innovation. Experience in research and development, engineering, science, digital or technology. This translates into an understanding of Carrier’s technological innovations, development and marketing challenges, how to anticipate technological trends and how to generate disruptive innovation, all of which help us to execute our business objectives and strategy. |
• | Board roles; |
• | Opportunities to increase the Board’s effectiveness, including the addition of new skills and expertise; |
• | Refreshment objectives, including composition and diversity; and |
• | Succession planning. |
| Full Board of Directors | | | Audit Committee | | | Governance Committee | | | Compensation Committee | |
| • Risk management program • Major strategies and business objectives • Most significant risks, such as major litigation • Succession planning • Government relations | | | • Financial • Operational • Compliance • Reputational • Strategic • Cybersecurity | | | • Corporate governance • Director candidate review • Conflicts of interest • Director independence • Environment • Safety • Equal employment opportunity • Public policy issues | | | • Compensation and benefits policies, practices and plans • Incentive plan performance metrics and goals • Compensation levels for senior leaders • Compensation plan design • Executive retention | |
• | Emphasis on Long-Term Performance. Long-term incentives are the cornerstone of Carrier’s executive compensation program. Our long-term incentive program incorporates long-term financial performance metrics which align executive and shareowner interests. |
• | Rigorous Share Ownership Requirements. Carrier maintains significant share ownership requirements for our senior executives and directors. These requirements are intended to reduce risk by aligning the economic interests of executives and directors with those of our shareowners. A significant stake in future performance discourages the pursuit of short-term opportunities that can create excessive risk. |
• | Prohibition on Short Sales, Pledging and Hedging of Carrier Securities. Carrier prohibits directors, officers and employees from entering into transactions involving short sales of our securities. Further, directors and executive officers are prohibited from pledging or assigning an interest in Carrier stock, stock options or other equity interests as collateral for a loan. Transactions in put options, call options or other derivative securities that have the effect of hedging the value of Carrier securities are prohibited, whether the securities were granted to or otherwise acquired or held, directly or indirectly, by the applicable director or executive. |
• | Comprehensive Clawback Policy. Carrier maintains a comprehensive policy on recoupment that applies to both annual and long-term incentive compensation. The policy allows Carrier to claw back compensation in a number of circumstances, including, but not limited to, financial restatements, compensation earned as a result of financial miscalculations, violations of Carrier’s Code of Ethics and violations of post-employment restrictive covenants. |
• | Post-Employment Covenants. ELG members are restricted in engaging in post-employment activities detrimental to Carrier, such as disclosing proprietary information, soliciting Carrier employees or engaging in competitive activities. |
Role | | | Cash ($) | | | Deferred Stock Units ($) | | | Total ($) |
All Directors (base retainer) | | | $124,000 | | | $186,000 | | | $310,000 |
Incremental Amount Above Base Retainer* | | | | | | | |||
Lead Director | | | $14,000 | | | $21,000 | | | $35,000 |
Audit Committee Chair | | | $10,000 | | | $15,000 | | | $25,000 |
Audit Committee Member | | | $6,000 | | | $9,000 | | | $15,000 |
Compensation Committee Chair | | | $8,000 | | | $12,000 | | | $20,000 |
Governance Committee Chair | | | $8,000 | | | $12,000 | | | $20,000 |
* | Directors receive incremental compensation for each role. |
• | David Gitlin, President and Chief Executive Officer |
• | Timothy McLevish, Senior Vice President and Chief Financial Officer |
• | Christopher Nelson, President, HVAC* |
• | Jurgen Timperman, President, Fire & Security |
• | Matthew Pine, President, HVAC – Residential** |
* | Mr. Nelson was appointed as President, HVAC on March 4, 2020. Prior to such appointment, Mr. Nelson served as President, HVAC – Commercial. |
** | Mr. Pine ceased serving as President, HVAC – Residential on March 4, 2020 in connection with his resignation from Carrier, which became effective on March 13, 2020. |
Competitiveness | | | Long-Term Focus | | | Balance |
Total compensation should be sufficiently competitive to attract, retain and motivate a leadership team capable of maximizing UTC’s performance. Each element should be benchmarked relative to peers. | | | For UTC’s most senior executives, long-term, stock-based compensation opportunities should significantly outweigh short-term, cash-based opportunities. Annual objectives should complement sustainable, long-term performance. | | | The portion of total compensation contingent on performance should increase with an executive’s level of responsibility. Annual and long-term incentive opportunities should reward the appropriate balance of short-, medium- and long-term financial, strategic and operational business results. |
Pay-for-Performance | | | Responsibility | | | Shareowner Alignment |
A substantial portion of compensation should be variable, contingent and directly linked to individual, company and business unit performance. | | | A complete commitment to ethical and corporate responsibility is a fundamental principle incorporated into all aspects of UTC’s compensation program. Compensation should take into account each executive’s responsibility to act at all times in accordance with UTC’s Code of Ethics and its environmental, health and safety objectives. Financial, strategic and operational performance must not compromise these values. | | | The financial interests of executives should be aligned with the long-term interests of UTC’s shareowners through stock-based compensation and performance metrics that correlate with long-term shareowner value. |
UTC Compensation Committee | | | Chief Executive Officer | ||||||
• | | | Oversees UTC’s executive compensation programs. | | | • | | | Provides selective input to the UTC Compensation Committee. |
• | | | Sets financial, strategic and operational goals and objectives for UTC, the business units and UTC’s Chief Executive Officer, as they relate to the annual and long-term incentive programs. | | | • | | | Considers the performance of each UTC ELG member/UTC executive officer, his or her business unit and/or function, market benchmarks, internal equity and retention risk when determining pay recommendations. |
• | | | Assesses UTC, business unit and UTC named executive officer performance relative to the pre-established goals and objectives set for the year. | | | • | | | Presents the UTC Compensation Committee with recommendations for each principal element of compensation for UTC ELG members (including the other UTC named executive officers) and UTC executive officers. |
UTC Compensation Committee | | | Chief Executive Officer | ||||||
• | | | Approves UTC’s Chief Executive Officer pay adjustments based on its assessment of UTC’s Chief Executive Officer performance. | | | • | | | Does not have any role in the UTC Compensation Committee’s determination of his own compensation. |
• | | | Reviews the UTC’s Chief Executive Officer’s recommendations for pay changes for UTC Executive Leadership Group (“UTC ELG”) members and UTC executive officers, and makes adjustments as appropriate. | | | | | ||
• | | | Evaluates the competitiveness of the compensation packages for UTC ELG members and UTC executive officers. | | | | | ||
• | | | Approves all UTC executive compensation program design changes, including severance, change-in-control and supplemental benefit arrangements. | | | | | ||
• | | | Reviews risk assessments of UTC’s compensation plans, policies and practices. | | | | | ||
• | | | Considers UTC shareowner input regarding UTC’s executive compensation decisions and policies. | | | | | ||
• | | | All decisions are subject to review by the other independent directors. | | | | |
UTC Management and the Independent Consultant | | | UTC Shareowners | ||||||
• | | | Provide insight and assistance. | | | • | | | Provide feedback on UTC’s programs. |
• | | | UTC’s Executive Vice President & Chief Human Resources Officer, along with UTC’s Human Resources staff and the independent compensation consultant, provide insights on UTC’s program design and compensation market data to assist the UTC Compensation Committee with its decisions. UTC management also has been delegated oversight responsibility over UTC executive compensation plan administration. | | | • | | | In assessing UTC’s program each year, the UTC Compensation Committee reviews the feedback received from UTC’s shareowners. This feedback, along with other factors, helps the UTC Compensation Committee in its decisions and its ongoing assessment of the effectiveness of UTC’s program. |
Named Executive Officer | | | Base Salary as of December 31, 2019 |
David Gitlin, President and Chief Executive Officer | | | $1,000,000 |
Timothy McLevish, Senior Vice President and Chief Financial Officer | | | $800,000 |
Christopher Nelson, President, HVAC | | | $600,000 |
Jurgen Timperman, President, Fire & Security | | | $500,000 |
Matthew Pine, President, HVAC – Residential | | | $410,000 |
• | Sets financial performance goals that are consistent with the UTC Compensation Committee’s assessment of the opportunities and risks for the upcoming year, as communicated to investors. |
• | Establishes challenging but achievable performance goals for UTC’s executives. |
• | Provides incentive opportunities that are market competitive. |
• | Allows the UTC Compensation Committee to make discretionary adjustments if it determines that measured performance does not fully align with its assessment of overall performance. |
• | Material, unforeseen circumstances beyond UTC management’s control that affected financial performance results relative to the established goals or certain non-recurring charges or credits unrelated to operating performance; |
• | Tax or accounting rule adjustments that positively or negatively impact performance; |
• | Changes to UTC’s capital structure; |
• | An executive’s performance relative to specific individual annual objectives; or |
• | An executive’s failure to adhere to UTC’s Code of Ethics, Enterprise Risk Management program or other UTC policies. |
Named Executive Officer | | | Target Bonus | | | Actual Bonus Payout(1) |
David Gitlin, President and Chief Executive Officer | | | 125% | | | 120% |
Timothy McLevish, Senior Vice President and Chief Financial Officer | | | 100% | | | 21% |
Christopher Nelson, President, HVAC | | | 80% | | | 58% |
Jurgen Timperman, President, Fire & Security | | | 80% | | | 60% |
Matthew Pine, President, HVAC – Residential | | | 60% | | | 51% |
(1) | Actual payout for Mr. Gitlin reflects blended target bonus in light of a target bonus increase provided in 2019 and also takes into account his time worked in his prior UTC role before transitioning to Carrier and the associated UTC actual payout factor. Actual payout for Mr. Pine reflects blended target bonus in light of a target bonus increase provided in 2019. Actual payout for Mr. McLevish was prorated to reflect time worked during 2019. |
Metrics | | | Bonus Performance Goal | | | Bonus Payout Factor (as a % of target) | | | Bonus Performance Result | | | Bonus Actual Payout Factor | | | Total Carrier Bonus Performance Multiplier |
EBIT | | | | | | | | | | | 69% | ||||
Threshold | | | $2.845 billion | | | 50% | | | | | | | |||
Target | | | $3.160 billion | | | 100% | | | $2.963 billion | | | 69% | | | |
Maximum | | | $3.475 billion | | | 200% | | | | | | | |||
FCF | | | | | | | | | | | |||||
Threshold | | | $1.695 billion | | | 50% | | | | | | | |||
Target | | | $2.260 billion | | | 100% | | | $1.921 billion | | | 70% | | | |
Maximum | | | $2.825 billion | | | 200% | | | | | | |
Named Executive Officer | | | 2019 Annual LTI Award |
David Gitlin, President and Chief Executive Officer(1) | | | $4,100,000 |
Timothy McLevish, Senior Vice President and Chief Financial Officer(2) | | | N/A |
Christopher Nelson, President, HVAC(1) | | | $1,600,000 |
Jurgen Timperman, President, Fire & Security(1) | | | $1,050,000 |
Matthew Pine, President, HVAC – Residential(3) | | | $500,000 |
(1) | Reflects annual LTI awards in the form of 50% UTC PSUs and 50% UTC SARs, which are subject to UTC’s standard schedule of terms, including a three-year vesting requirement. |
(2) | Mr. McLevish joined Carrier in September 2019 and therefore did not receive any 2019 annual LTI awards. |
(3) | Reflects annual LTI awards in the form of 50% UTC SARs, 30% UTC PSUs and 20% UTC RSUs, which are subject to UTC’s standard schedule of terms, including a three-year vesting requirement. |
• | Mr. McLevish received a sign-on equity award with a target value of $4,000,000, in the form of 25% RSUs and 75% SARs, which are subject to UTC’s standard schedule of terms, including a three-year vesting requirement, except that the awards also vest upon a termination of Mr. McLevish’s employment without cause or Mr. McLevish’s retirement (defined as termination of employment on or after age 65) on or after October 31, 2021. |
• | Messrs. Nelson, Timperman and Pine each received a one-time equity award with a target grant date value of $3,000,000, with 50% in the form of UTC RSUs and 50% in the form of UTC SARs, which will vest three years from the grant date. |
Plan | | | Description |
UTC Pension Plan | | | A tax-qualified defined benefit pension plan that provides retirement benefits to employees hired prior to January 1, 2010. Effective December 31, 2014, participants hired prior to July 1, 2002, who had been covered by a final average earnings formula of this plan transitioned to a cash balance formula, which was already in effect for participants hired on or after July 1, 2002. Under the cash balance formula, participants earn two types of credits—pay credits and interest credits. Effective December 31, 2019, this plan was frozen, other than with respect to interest credits on cash balance accounts in the plan and active participants who were previously eligible for cash balance benefits under this plan became eligible for equivalent age-based contributions under the UTC Employee Savings Plan. |
| | ||
UTC Pension Preservation Plan | | | An unfunded, nonqualified defined benefit pension plan that mirrors the benefit formula, compensation recognition, retirement eligibility and vesting provisions of the tax-qualified UTC Pension Plan. For employees hired prior to January 1, 2010, it provides pension benefits not provided under the tax-qualified pension plan because of Internal Revenue Code limits. Effective December 31, 2019, this plan was frozen, other than with respect to interest credits on cash balance accounts in the plan and active participants who were previously eligible for cash balance benefits became eligible for equivalent age-based contributions under the UTC Company Automatic Contribution Excess Plan. |
| | ||
UTC Employee Savings Plan | | | A tax-qualified defined contribution plan where employees receive a matching contribution in the form of UTC stock units with a value equal to 60% of the first 6% of pay (consisting of base salary plus annual bonus) contributed by the employee. Salaried employees hired on or after January 1, 2010, receive an additional age-based company contribution (ranging from 3% to 5.5% of earnings) to their UTC Employee Savings Plan account. Effective January 1, 2020, salaried employees hired prior to January 1, 2010, who previously participated in the UTC Pension Plan now receive additional age-based Company contributions (ranging from 3% to 8% of earnings), an amount equivalent to the cash balance benefits previously provided under UTC’s pension plans. |
| | ||
UTC Savings Restoration Plan | | | An unfunded, nonqualified plan that permits eligible employees to defer up to 6% of their compensation to the extent such compensation exceeds the Internal Revenue Code compensation limit applicable to the qualified UTC Employee Savings Plan. UTC provides matching contributions in the form of UTC stock units at the same rate (60% of the 6% of pay) that would have been provided in the UTC Employee Savings Plan, if not for Internal Revenue Code limits. |
| | ||
UTC Company Automatic Contribution Excess Plan | | | An unfunded, nonqualified plan in which eligible employees may receive an age-based company automatic contribution for amounts above the Internal Revenue Code limits applicable to the qualified UTC Employee Savings Plan. For employees hired on or after January 1, 2010, these age-based contributions range from 3% to 5.5% of |
Plan | | | Description |
| | earnings. Beginning January 1, 2020, employees hired prior to January 1, 2010, who previously participated in UTC’s pension plans, now receive company contributions ranging from 3% to 8% of earnings. The plan also provides missed matching contributions for employees whose contributions to the UTC Employee Savings Plan are limited by the Internal Revenue Code’s contribution limits. | |
| | ||
UTC Deferred Compensation Plan | | | An unfunded, nonqualified, deferred compensation plan that allows UTC executives the opportunity to defer up to 50% of base salary and up to 70% of annual bonus. |
| | ||
UTC PSU Deferral Plan | | | An unfunded, nonqualified, deferred compensation plan that allows UTC executives to defer between 10% and 100% of their vested PSU awards. Upon vesting, the deferred portion of each UTC PSU award is converted into UTC deferred stock units that accrue dividend equivalents. |
Perquisite/Benefits | | | Description |
UTC ELG Life Insurance | | | UTC ELG members appointed prior to January 31, 2015, may receive company-funded life insurance coverage up to three times their base salary at age 62 (projected or actual). This benefit is not available to any of the Carrier named executive officers other than Mr. Gitlin. |
| | ||
UTC ELG Long-Term Disability | | | The UTC ELG long-term disability program provides an annual benefit upon disability that is equal to 80% of base salary plus target annual bonus. |
| | ||
Healthcare | | | UTC ELG members are eligible to participate in the same health benefit program offered to other employees. |
| | ||
Executive Physical | | | UTC ELG members are eligible for a comprehensive annual executive physical. |
| | ||
Executive Leased Vehicle | | | UTC provides UTC ELG members with an annual allowance toward the costs of a leased vehicle. For UTC ELG members, the value of the allowance varies by UTC ELG appointment date. Any costs above the annual allowance are generally paid directly by the UTC executive. |
| | ||
Financial Planning | | | UTC ELG members are eligible to receive an annual financial planning benefit. |
• | a lump sum cash severance payment equal to three times (for the Chief Executive Officer) or two times (for the other named executive officers) the sum of (a) the officer’s annual base salary and (b) the officer’s target annual bonus; |
• | a prorated target annual bonus for the year of termination (reduced by any annual bonus payment to which the named executive officer is entitled for the same period of service); |
• | up to 12 months of healthcare benefit coverage continuation at no premium cost to the officer; |
• | outplacement services for 12 months; and |
• | continued financial planning services for 12 months. |
Named Executive Officer | | | Year | | | Salary ($) | | | Bonus ($)(1) | | | Stock Awards ($)(2) | | | Option Awards ($)(3) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) | | | Total Without Change in Pension Value ($) |
David Gitlin, President and Chief Executive Officer | | | 2019 | | | 966,667 | | | 1,200,000 | | | 2,150,799 | | | 2,066,540 | | | 969,211 | | | 386,063 | | | 7,739,280 | | | 6,770,069 |
| 2018 | | | 900,000 | | | 1,300,000 | | | 2,950,834 | | | 1,051,810 | | | — | | | 239,548 | | | 6,442,192 | | | 6,442,192 | ||
| 2017 | | | 812,500 | | | 1,100,000 | | | 6,855,052 | | | 943,250 | | | 385,996 | | | 181,970 | | | 10,278,768 | | | 9,892,772 | ||
Timothy McLevish, Senior Vice President and Chief Financial Officer | | | 2019 | | | 203,030 | | | 165,000 | | | 1,000,080 | | | 2,793,945 | | | — | | | 18,275 | | | 4,180,330 | | | 4,180,330 |
Named Executive Officer | | | Year | | | Salary ($) | | | Bonus ($)(1) | | | Stock Awards ($)(2) | | | Option Awards ($)(3) | | | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(4) | | | All Other Compensation ($)(5) | | | Total ($) | | | Total Without Change in Pension Value ($) |
Christopher Nelson, President, HVAC* | | | 2019 | | | 593,750 | | | 350,000 | | | 2,346,684 | | | 2,202,364 | | | 205,153 | | | 98,531 | | | 5,796,482 | | | 5,591,329 |
Jurgen Timperman, President, Fire & Security | | | 2019 | | | 492,500 | | | 300,000 | | | 2,052,859 | | | 1,927,504 | | | — | | | 271,144 | | | 5,044,007 | | | 5,044,007 |
Matthew Pine, President, HVAC – Residential** | | | 2019 | | | 405,417 | | | 210,000 | | | 1,901,672 | | | 1,524,376 | | | — | | | 86,239 | | | 4,127,704 | | | 4,127,704 |
* | Mr. Nelson was appointed as President, HVAC on March 4, 2020. Prior to such appointment, Mr. Nelson served as President, HVAC – Commercial. |
** | Mr. Pine ceased serving as President, HVAC – Residential on March 4, 2020 in connection with his resignation from Carrier, which becomes effective on March 13, 2020. |
(1) | Bonus. Cash bonuses provided under the UTC Annual Executive Incentive Compensation Plan. Payments are primarily based on the achievement of pre-established goals. However, the UTC Compensation Committee retains discretion to adjust annual bonus amounts based on its assessment of overall performance. Consequently, annual bonuses are reported in the Bonus column rather than in the Non-Equity Incentive Plan Compensation column. For Mr. McLevish, the amount shown reflects a prorated bonus paid for the period between his date of hire (September 30, 2019) and the end of the calendar year. |
(2) | Stock Awards. Grant date fair value of UTC PSUs and UTC RSUs, calculated in accordance with the FASB ASC Topic 718, but excluding the effect of estimated forfeitures. The assumptions made in calculating the fair value of these awards are set forth in Note 12 – Employee Benefit Plans to the Combined Financial Statements. PSU awards are discussed in footnote 2 of the Grants of Plan-Based Awards table. The grant date fair values shown for PSU awards granted in 2019 to our named executive officers assume target-level performance. If the highest level of performance is achieved, the grant date fair values would be: Mr. Gitlin, $3,588,722; Mr. Nelson, $1,411,956; Mr. Timperman, $921,694; and Mr. Pine, $262,781. |
(3) | Option Awards. Grant date fair value of UTC SARs, calculated in accordance with the FASB ASC Topic 718, but excluding the effect of estimated forfeitures. The assumptions made in the valuation of these awards are set forth in Note 12 – Employee Benefit Plans to the Combined Financial Statements. |
(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings. The amounts in this column reflect the change, if any, in the year-over-year actuarial present value of each executive’s accrued benefit under UTC’s defined benefit plans. Actuarial value computations are based on the assumptions disclosed in the Pension Benefits table. |
(5) | All Other Compensation. The 2019 amounts in this column consist of the following items: |
Named Executive Officer | | | Leased Vehicle Payments(a) ($) | | | Insurance Premiums(b) ($) | | | 401(k) Plan Company Match(c) ($) | | | Company Contributions to Nonqualified Deferred Compensation Plans(d) ($) | | | Relocation Benefits(e) ($) | | | Financial Planning(f) ($) | | | Healthcare Benefits(g) ($) | | | Miscellaneous ($) | | | Total ($) |
D. Gitlin | | | 33,289 | | | 63,604 | | | 10,080 | | | 71,520 | | | 168,289 | | | 16,000 | | | 22,278 | | | 1,003 | | | 386,063 |
T. McLevish | | | — | | | — | | | 2,750 | | | 3,667 | | | 5,085 | | | 3,567 | | | 3,206 | | | — | | | 18,275 |
C. Nelson | | | 21,933 | | | — | | | 10,080 | | | 30,015 | | | — | | | 16,000 | | | 18,632 | | | 1,871 | | | 98,531 |
J. Timperman | | | 22,720 | | | — | | | 24,080 | | | 52,675 | | | 139,868 | | | 12,956 | | | 18,388 | | | 457 | | | 271,144 |
M. Pine | | | 21,438 | | | — | | | 24,080 | | | 20,520 | | | — | | | — | | | 20,201 | | | — | | | 86,239 |
(a) | Annual costs incurred by UTC in connection with a leased vehicle provided to the executive. |
(b) | Premiums paid on behalf of the executive under the ELG life insurance program. This benefit was eliminated for ELG members appointed after January 31, 2015, thereby excluding all but Mr. Gitlin. Under this plan, UTC pays the premiums on a cash value life insurance contract owned by the executive. Life insurance benefits equal up to three times the executive’s actual or projected base salary at age 62. Once vested (age 55 or older with three years of service as an ELG member), UTC funds the policy to maintain coverage following retirement. |
(c) | Dollar value of company matching contributions made into the UTC Employee Savings Plan, which includes an additional company automatic contribution for employees hired on or after January 1, 2010 (e.g., Messrs. McLevish, Timperman and Pine) who do not participate in UTC’s pension plans, which were closed to new participants. |
(d) | Dollar value of company contributions to the UTC Savings Restoration Plan (“SRP”) and the UTC Company Automatic Contribution Excess Plan (“CACEP”). Under the SRP, participants are credited with a benefit equal to the company matching contribution that the |
(e) | Costs associated with relocation expenses, which includes a tax reimbursement payment of $47,264 for Mr. Gitlin and a tax equalization payment of $116,668 for Mr. Timperman. |
(f) | Costs associated with a financial planning benefit available to ELG members. |
(g) | Costs incurred by the company associated with annual executive physicals and broad-based company-covered healthcare benefits. |
| | | | Estimated Future Payouts under Equity Incentive Plan Awards(2) | | |||||||||||||||||||
Named Executive Officer | | | Grant Date(1) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(3) | | | All Other Option Awards: Number of Securities Underlying Options (#)(4) | | | Exercise or Base Price of Option Awards ($/Sh)(5) | | | Grant Date Fair Value of Stock and Option Awards(6) ($) |
D. Gitlin | | | 2/5/2019 | | | 1,464 | | | 18,300 | | | 36,600 | | | — | | | — | | | — | | | 2,150,799 |
| 2/5/2019 | | | — | | | — | | | — | | | — | | | 101,500 | | | 120.77 | | | 2,066,540 | ||
T. McLevish | | | 10/1/2019(7) | | | — | | | — | | | — | | | 7,475 | | | — | | | — | | | 1,000,080 |
| 10/1/2019(7) | | | — | | | — | | | — | | | — | | | 123,900 | | | 133.79 | | | 2,793,945 | ||
C. Nelson | | | 2/5/2019 | | | 576 | | | 7,200 | | | 14,400 | | | — | | | — | | | — | | | 846,216 |
| 6/14/2019(8) | | | — | | | — | | | — | | | 11,975 | | | — | | | — | | | 1,500,468 | ||
| 2/5/2019 | | | — | | | — | | | — | | | — | | | 39,500 | | | 120.77 | | | 804,220 | ||
| 6/14/2019(8) | | | — | | | — | | | — | | | — | | | 66,200 | | | 125.30 | | | 1,398,144 | ||
J. Timperman | | | 2/5/2019 | | | 376 | | | 4,700 | | | 9,400 | | | — | | | — | | | — | | | 552,391 |
| 6/14/2019(8) | | | — | | | — | | | — | | | 11,975 | | | — | | | — | | | 1,500,468 | ||
| 2/5/2019 | | | — | | | — | | | — | | | — | | | 26,000 | | | 120.77 | | | 529,360 | ||
| 6/14/2019(8) | | | — | | | — | | | — | | | — | | | 66,200 | | | 125.30 | | | 1,398,144 | ||
M. Pine | | | 2/5/2019 | | | 107 | | | 1,340 | | | 2,680 | | | — | | | — | | | — | | | 157,490 |
| 2/5/2019 | | | — | | | — | | | — | | | 2,018 | | | — | | | — | | | 243,714 | ||
| 6/14/2019(8) | | | — | | | — | | | — | | | 11,975 | | | — | | | — | | | 1,500,468 | ||
| 2/5/2019 | | | — | | | — | | | — | | | — | | | 6,200 | | | 120.77 | | | 126,232 | ||
| 6/14/2019(8) | | | — | | | — | | | — | | | — | | | 66,200 | | | 125.30 | | | 1,398,144 |
(1) | The UTC Compensation Committee approved the 2019 annual LTI awards at its February 1, 2019 meeting, specifying the February 5, 2019 grant date. |
(2) | Number of UTC PSUs, which were scheduled to vest based on performance relative to three-year EPS growth and ROIC goals (each weighted at 35%) and a three-year relative TSR goal (weighted at 30%). Vesting ranged from a payout of 8% of target if threshold performance was achieved for the least weighted metric (relative TSR) to a maximum payout of 200% if maximum performance was achieved for all three metrics. If UTC’s three-year TSR was negative, the payout for the TSR portion of the award was capped at 100% regardless of UTC’s relative TSR performance versus the companies within the S&P 500. Each PSU corresponded to one share of UTC common stock. Unvested PSUs did not accrue dividend equivalents. Vested PSUs were settled in unrestricted shares of UTC common stock at the end of the performance period following the UTC Compensation Committee’s review and approval of performance achievement levels. |
(3) | Number of UTC RSUs, which vest three years from the grant date, subject to continued service with the company except in certain limited circumstances described in the footnotes to the Potential Payments on Termination or Change-in-Control table. Each UTC RSU corresponds to one share of UTC common stock. When UTC pays a dividend to shareholders, UTC RSUs earn dividend equivalents during the vesting period that are reinvested as additional UTC RSUs. The reinvested UTC RSUs vest on the same date as the underlying UTC RSUs. |
(4) | Number of UTC SARs, which vest and become exercisable three years from the grant date, subject to continued service with the company except in certain limited circumstances described in the footnotes to the Potential Payments on Termination or Change-in-Control table. |
(5) | The UTC SAR exercise price equals the closing price of UTC common stock on the grant date. |
(6) | Grant date fair value of awards granted in 2019, with vesting assumed at 100% of target for performance-based awards. Values are calculated in accordance with the FASB ASC Topic 718, but excluding the effect of estimated forfeitures. |
(7) | In connection with his hire, Mr. McLevish received UTC RSU and UTC SAR awards on October 1, 2019. These awards vest three years from the grant date, subject to continued service with the company except in certain limited circumstances described in the footnotes to the Potential Payments on Termination or Change-in-Control table. RSUs earn dividend equivalents during the vesting period that are reinvested as additional UTC RSUs each time UTC pays a dividend to shareowners. The reinvested UTC RSUs vest on the same date as the underlying UTC RSUs. |
(8) | Messrs. Nelson, Pine and Timperman each received retention UTC RSU and SAR awards on June 14, 2019, which vest three years from the grant date subject to the executive’s continued employment, except in certain limited circumstances described in the footnotes to the Potential Payments on Termination or Change-in-Control table. UTC RSUs earn dividend equivalents during the vesting period that are reinvested as additional UTC RSUs each time UTC pays a dividend to shareowners. The reinvested UTC RSUs vest on the same date as the underlying UTC RSUs. |
| | Option Awards | | | Stock Awards | |||||||||||||||||||||||||
Named Executive Officer | | | Grant Date | | | Number of Securities Underlying Unexercised Options (#) Exercisable | | | Number of Securities Underlying Unexercised Options (#) Unexercisable | | | Number of Securities Underlying Unexercised Unearned Options (#) | | | Option Exercise Price ($)(1) | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested (#)(2) | | | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5) |
D. Gitlin | | | 2/5/2019 | | | — | | | 101,500(6) | | | — | | | 120.77 | | | 2/4/2029 | | | — | | | — | | | 36,600 | | | 5,481,216 |
| 1/2/2018 | | | — | | | 53,500(7) | | | — | | | 128.16 | | | 1/1/2028 | | | 6,793(10) | | | 1,017,320 | | | 32,200 | | | 4,822,272 | ||
| 10/11/2017 | | | — | | | — | | | — | | | — | | | — | | | 35,737(13) | | | 5,351,973 | | | — | | | — | ||
| 1/3/2017 | | | — | | | 55,000(8) | | | — | | | 110.83 | | | 1/2/2027 | | | 7,917(11) | | | 1,185,650 | | | 20,862 | | | 3,124,293 | ||
| 1/4/2016 | | | 79,000 | | | — | | | — | | | 95.57 | | | 1/3/2026 | | | — | | | — | | | — | | | — | ||
| 1/2/2015 | | | 46,000 | | | — | | | — | | | 115.04 | | | 1/1/2025 | | | — | | | — | | | — | | | — | ||
| 1/2/2014 | | | 24,500 | | | — | | | — | | | 112.49 | | | 1/1/2024 | | | — | | | — | | | — | | | — | ||
| 11/12/2013 | | | — | | | — | | | — | | | — | | | — | | | 16,104(12) | | | 2,411,735 | | | — | | | |||
| 1/2/2013 | | | 18,900 | | | — | | | — | | | 84.00 | | | 1/1/2023 | | | — | | | — | | | — | | | — | ||
| 8/1/2012 | | | 45,036 | | | — | | | — | | | 74.79 | | | 7/31/2022 | | | — | | | — | | | — | | | — | ||
T. McLevish | | | 10/1/2019 | | | — | | | 123,900(15) | | | — | | | 133.79 | | | 9/30/2029 | | | 7,475(15) | | | 1,119,456 | | | — | | | — |
C. Nelson | | | 6/14/2019 | | | — | | | 66,200(14) | | | — | | | 125.30 | | | 6/13/2029 | | | 12,101(14) | | | 1,812,246 | | | — | | | — |
| 2/5/2019 | | | — | | | 39,500(6) | | | — | | | 120.77 | | | 2/4/2029 | | | — | | | — | | | 14,400 | | | 2,156,544 | ||
| 1/2/2018 | | | — | | | 21,000(7) | | | — | | | 128.16 | | | 1/1/2028 | | | 2,612(10) | | | 391,173 | | | 12,600 | | | 1,886,976 | ||
| 6/15/2017 | | | — | | | — | | | — | | | — | | | 17,522(16) | | | | | 2,624,095 | | | — | | | — | |||
| 1/3/2017 | | | — | | | 21,000(8) | | | — | | | 110.83 | | | 1/2/2027 | | | 2,995(11) | | | 448,531 | | | 7,866 | | | 1,178,012 | ||
| 6/1/2015 | | | — | | | — | | | — | | | — | | | — | | | 9,510(12) | | | 1,424,218 | | | — | | | — | ||
J. Timperman | | | 6/14/2019 | | | — | | | 66,200(14) | | | — | | | 125.30 | | | 6/13/2029 | | | 12,101(14) | | | 1,812,246 | | | — | | | — |
| 2/5/2019 | | | — | | | 26,000(6) | | | — | | | 120.77 | | | 2/4/2029 | | | — | | | — | | | 9,400 | | | 1,407,744 | ||
| 1/2/2018 | | | — | | | 11,500(7) | | | — | | | 128.16 | | | 1/1/2028 | | | 1,463(10) | | | 219,099 | | | 7,000 | | | 1,048,320 | ||
| 10/16/2017 | | | — | | | — | | | — | | | — | | | | | 8,944(12) | | | 1,339,453 | | | — | | | — | |||
| 10/2/2017 | | | — | | | — | | | — | | | — | | | — | | | 4,468(17) | | | 669,128 | | | — | | | — | ||
| 1/3/2017 | | | — | | | 6,400(8) | | | — | | | 110.83 | | | 1/2/2027 | | | 2,444(11) | | | 366,013 | | | 1,756 | | | 262,979 | ||
| 10/1/2013 | | | — | | | — | | | — | | | — | | | — | | | 937(17) | | | 140,325 | | | — | | | — | ||
M. Pine | | | 6/14/2019 | | | — | | | 66,200(14) | | | — | | | 125.30 | | | 6/13/2029 | | | 12,101(14) | | | 1,812,246 | | | — | | | — |
| 2/5/2019 | | | — | | | 6,200(6) | | | — | | | 120.77 | | | 2/4/2029 | | | 2,062(9) | | | 308,805 | | | 2,680 | | | 401,357 | ||
| 1/2/2018 | | | — | | | 4,500(7) | | | — | | | 128.16 | | | 1/1/2028 | | | 1,521(10) | | | 227,785 | | | 1,960 | | | 293,530 | ||
| 1/3/2017 | | | — | | | 2,600(8) | | | — | | | 110.83 | | | 1/2/2027 | | | 1,219(11) | | | 182,557 | | | 479 | | | 71,735 | ||
| 11/1/2016 | | | — | | | — | | | — | | | — | | | | | 1,850(18) | | | 277,056 | | | — | | | — |
(1) | The exercise price of each UTC SAR equaled the closing price of UTC common stock on the grant date. |
(2) | UTC RSUs, which include dividend equivalents (if applicable), earned during the vesting period that are reinvested as additional UTC RSUs each time UTC pays a dividend to shareowners. The reinvested UTC RSUs vest on the same date as the underlying UTC RSUs. |
(3) | Calculated by multiplying the number of unvested UTC RSUs by $149.76, the NYSE closing price of UTC common stock on the last trading day of 2019. |
(4) | UTC PSUs that are subject to vesting contingent on company performance relative to pre-established performance goals measured over a three-year period and the executive’s continued employment, except in certain limited circumstances as detailed in footnotes to the Potential Payments on Termination or Change-In-Control tables. The number of shares shown with respect to UTC PSU awards granted |
(5) | Calculated by multiplying the number of unvested 2019 and 2018 PSUs and the number of vested 2017 PSUs by the NYSE closing price of UTC common stock on the last trading day of 2019. |
(6) | UTC SARs scheduled to vest on February 5, 2022, subject to the executive’s continued employment, except in certain limited circumstances as described the footnotes to the Potential Payments on Termination or Change-in-Control table. |
(7) | UTC SARs scheduled to vest on January 2, 2021, subject to the executive’s continued employment, except in certain limited circumstances as described the footnotes to the Potential Payments on Termination or Change-in-Control table. |
(8) | UTC SARS that vested on January 3, 2020. |
(9) | UTC RSUs scheduled to vest on February 5, 2022, subject to the executive’s continued employment, except in certain limited circumstances described the footnotes to the Potential Payments on Termination or Change-in-Control table. These UTC RSU awards earn dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(10) | UTC RSUs scheduled to vest on January 2, 2021, subject to the executive’s continued employment, except in certain limited circumstances described the footnotes to the Potential Payments on Termination or Change-in-Control table. These UTC RSU awards earn dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(11) | UTC RSUs scheduled to vest on January 3, 2020, subject to the executive’s continued employment, except in certain limited circumstances described the footnotes to the Potential Payments on Termination or Change-in-Control table. These UTC RSU awards earn dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(12) | ELG RSUs granted upon the executive’s appointment to the ELG, which vest in the event of a mutually agreeable separation following three years of ELG service or upon death, disability or qualified termination following a change-in-control. These UTC RSU awards earn dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(13) | Retention RSU award granted to Mr. Gitlin, which were scheduled to vest on October 11, 2020, subject to continued employment or earlier in the case of death, disability or qualifying termination following a change-in-control. This UTC RSU award earned dividend equivalents during the vesting period, which were scheduled to vest at the same time as the underlying UTC RSUs. |
(14) | Special Retention UTC SAR and UTC RSU awards granted to Messrs. Nelson, Timperman and Pine, which will vest on June 14, 2022, subject to continued employment or earlier in the case of death, disability or qualifying termination following a change-in-control. The UTC RSU awards earn dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(15) | UTC SAR and UTC RSU awards granted to Mr. McLevish in connection with his hire, which will vest on October 1, 2022, subject to continued employment or earlier in the case of death, disability, retirement (on or after October 31, 2021), involuntary termination (other than for cause) or qualifying termination after a change-in-control. The UTC RSU award earns dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(16) | Retention UTC RSU award granted to Mr. Nelson, which will vest on June 15, 2021, subject to continued employment or earlier in the case of death, disability or qualifying termination following a change-in-control. This UTC RSU award earns dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(17) | Retention UTC RSU award granted on October 1, 2013 and Chairman’s UTC RSU award granted to Mr. Timperman on October 2, 2017, which will vest on October 1, 2021 and October 2, 2021, respectively, subject to continued employment or earlier in the case of death, disability or qualifying termination following a change-in-control. These UTC RSU awards earn dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
(18) | Chairman’s UTC RSU award granted to Mr. Pine, which will vest on November 1, 2020, subject to continued employment or earlier in the case of death, disability or qualifying termination following a change-in-control. This UTC RSU award earns dividend equivalents during the vesting period, which vest at the same time as the underlying UTC RSUs. |
Named Executive Officer | | | Option Awards(1) | | | Stock Awards(3) | ||||||
| | Number of Shares Acquired on Exercise (#) | | | Value Realized on Exercise ($)(2) | | | Number of Shares Acquired on Vesting (#) | | | Value Realized on Vesting ($)(4) | |
D. Gitlin | | | — | | | — | | | 18,328 | | | 2,249,212 |
T. McLevish | | | — | | | — | | | — | | | — |
C. Nelson | | | 81,906 | | | 2,669,205 | | | 13,556 | | | 1,742,829 |
J. Timperman | | | 13,200 | | | 584,168 | | | 12,704 | | | 1,646,787 |
M. Pine | | | 2,400 | | | 79,334 | | | 4,442 | | | 568,269 |
(1) | UTC SARs exercised during 2019. |
(2) | Calculated by multiplying the number of shares acquired on exercise by the difference between the market price of UTC common stock on the exercise date and the exercise price of the UTC SAR. |
(3) | UTC PSUs and UTC RSUs that converted to shares of UTC common stock on a one-for-one basis upon vesting in 2019. UTC PSUs granted on January 4, 2016 vested at 114% of target on February 11, 2019, based on performance through December 31, 2018. |
(4) | Calculated by multiplying the number of vested UTC PSUs and UTC RSUs by the market price of UTC common stock on the vesting date. |
Named Executive Officer | | | Plan Name | | | Number of Years Credited Service (#) | | | Present Value of Accumulated Benefit ($)(1) | | | Payments During Last Fiscal Year ($) |
D. Gitlin | | | UTC Pension Plan | | | 22 | | | 951,980 | | | — |
| | UTC Pension Preservation Plan | | | 22 | | | 1,957,448 | | | — | |
| | Total | | | — | | | 2,909,428 | | | — | |
T. McLevish(2) | | | UTC Pension Plan | | | — | | | — | | | — |
| | UTC Pension Preservation Plan | | | — | | | — | | | — | |
| | Total | | | — | | | — | | | — | |
C. Nelson(3) | | | UTC Pension Plan | | | 16 | | | 329,721 | | | — |
| | UTC Pension Preservation Plan | | | 16 | | | 443,776 | | | — | |
| | Total | | | — | | | 773,497 | | | — | |
J. Timperman(2) | | | UTC Pension Plan | | | — | | | — | | | — |
| | UTC Pension Preservation Plan | | | — | | | — | | | — | |
| | Total | | | — | | | — | | | — | |
M. Pine(2) | | | UTC Pension Plan | | | — | | | — | | | — |
| | UTC Pension Preservation Plan | | | — | | | — | | | — | |
| | Total | | | — | | | — | | | — |
(1) | The following assumptions were used to determine the present value of the accumulated pension benefit: (i) the named executive officers are assumed to retire at age 62 for the final average earnings benefit and age 65 for the cash balance benefit, which are the earliest dates on which the named executive officers can retire without a reduction of benefits due to age; (ii) projected lump-sum payments under the UTC Pension Preservation Plan (“PPP”) final average earnings benefit are calculated using a lump-sum interest rate of 4.0%; (iii) the amounts shown assume the following form of payment: (a) 70% in a monthly annuity and 30% in a lump-sum payment for benefits earned under the final average earnings formula of the UTC Pension Plan; (b) a lump-sum payment for benefits earned under the cash balance formula of the UTC Pension Plan; and (c) an optional form of payment based on the participant’s elections on file for the PPP. |
(2) | Messrs. McLevish, Timperman and Pine were hired by UTC after January 1, 2010, and therefore do not participate in UTC’s legacy pension plans. |
(3) | Mr. Nelson was hired after July 1, 2002 and therefore, his entire pension benefit is determined based on the cash balance formula. Benefits are available following termination of employment and are paid as a lump sum or as an equivalent monthly annuity. |
Named Executive Officer | | | Plan | | | Executive Contributions in Last FY ($)(1) | | | Registrant Contributions in Last FY ($)(2) | | | Aggregate Earnings in Last FY ($)(3) | | | Aggregate Withdrawals/ Distributions ($) | | | Aggregate Balance at Last FYE ($)(4) |
D. Gitlin | | | UTC Savings Restoration Plan | | | 119,200 | | | 71,520 | | | 297,587 | | | — | | | 1,203,090 |
T. McLevish | | | UTC Deferred Compensation Plan | | | 66,667 | | | 3,667 | | | 1,436 | | | — | | | 71,769 |
C. Nelson | | | UTC Savings Restoration Plan | | | 50,025 | | | 30,015 | | | 201,218 | | | — | | | 788,529 |
J. Timperman | | | UTC Savings Restoration Plan | | | 36,750 | | | 22,050 | | | 15,861 | | | — | | | 108,679 |
| UTC Company Automatic Contribution Excess Plan | | | — | | | 30,625 | | | 1,673 | | | — | | | 60,859 | ||
M. Pine | | | UTC Company Automatic Contribution Excess Plan | | | — | | | 20,520 | | | 1,949 | | | — | | | 65,190 |
(1) | Amounts shown in this column are included in the Salary and Bonus columns of the Summary Compensation Table. |
(2) | Amounts shown in this column are included in the All Other Compensation column of the Summary Compensation Table. |
(3) | Amounts shown reflect hypothetical investment returns to accounts based on fixed income, bond and equity indices selected by the participant. Participants may also elect UTC stock units with dividend reinvestments (except for the CACEP). These returns do not constitute above-market earnings. |
(4) | The sum of contributions (both by the executive and UTC) and credited earnings on those deferrals, less withdrawals. Of these totals, the following amounts have been included in the Summary Compensation Table in prior years: $304,080 (Mr. Gitlin). |
Payment Type | | | D. Gitlin ($) | | | T. McLevish ($) | | | C. Nelson ($) | | | J. Timperman ($) | | | M. Pine ($) |
Termination - Involuntary (For Cause) | | | | | | | | | | | |||||
Cash Payment | | | — | | | — | | | — | | | — | | | — |
Pension Benefit(1) | | | 2,624,780 | | | — | | | 410,524 | | | — | | | — |
Option / SAR Value(2) | | | — | | | — | | | — | | | — | | | — |
Stock Awards Value(2) | | | — | | | — | | | — | | | — | | | — |
Sub-Total | | | 2,624,780 | | | — | | | 410,524 | | | — | | | — |
Less: Vested Pension | | | (2,624,780) | | | — | | | (410,524) | | | — | | | — |
Amount Triggered due to Termination | | | — | | | — | | | — | | | — | | | — |
Termination - Voluntary | | | | | | | | | | | |||||
Cash Payment | | | — | | | — | | | — | | | — | | | — |
Pension Benefit(1) | | | 2,624,780 | | | — | | | 410,524 | | | — | | | — |
Option / SAR Value(3)(4) | | | 14,707,208 | | | — | | | — | | | — | | | — |
Stock Awards Value(3)(4) | | | 8,702,854 | | | — | | | — | | | — | | | — |
Sub-Total | | | 26,034,842 | | | — | | | 410,524 | | | — | | | — |
Less: Vested Pension and Equity | | | (26,034,842) | | | — | | | (410,524) | | | — | | | — |
Amount Triggered due to Termination | | | — | | | — | | | — | | | — | | | — |
Termination - Involuntary (Not for Cause) | | | | | | | | | | | |||||
Cash Payment | | | — | | | — | | | — | | | — | | | — |
Pension Benefit(1) | | | 2,624,780 | | | — | | | 410,524 | | | — | | | — |
Option / SAR Value(3)(5) | | | 14,707,208 | | | 1,978,683 | | | 1,119,930 | | | 414,579 | | | 166,018 |
Stock Awards Value(3)(5)(6) | | | 11,114,589 | | | 1,119,456 | | | 4,192,232 | | | 1,264,423 | | | 543,179 |
Sub-Total | | | 28,446,577 | | | 3,098,139 | | | 5,722,686 | | | 1,679,182 | | | 709,197 |
Less: Vested Pension and Equity | | | (26,034,842) | | | — | | | (410,524) | | | — | | | — |
Amount Triggered due to Termination | | | 2,411,735 | | | 3,098,139 | | | 5,312,162 | | | 1,679,182 | | | 709,197 |
Termination - Change-in-Control | | | | | | | | | | | |||||
Cash Payment(8) | | | — | | | — | | | — | | | — | | | — |
Pension Benefit(1) | | | 2,624,780 | | | — | | | 410,524 | | | — | | | — |
Option / SAR Value(7) | | | 17,649,693 | | | 1,978,683 | | | 4,035,487 | | | 2,870,544 | | | 1,997,408 |
Stock Awards Value(7) | | | 19,037,491 | | | 1,119,456 | | | 10,212,733 | | | 6,241,397 | | | 3,285,824 |
Sub-Total | | | 39,311,964 | | | 3,098,139 | | | 14,658,744 | | | 9,111,941 | | | 5,283,232 |
Less: Vested Pension and Equity | | | (25,070,387) | | | — | | | (410,524) | | | — | | | — |
Amount Triggered due to Termination | | | 14,241,577 | | | 3,098,139 | | | 14,248,220 | | | 9,111,941 | | | 5,283,232 |
(1) | Estimated lump-sum value of the nonqualified portion of the retirement benefits accrued under UTC’s pension plans, assuming retirement or termination on December 31, 2019, payable as of such date or attainment of age 55 (if later) based on the plan’s 2020 lump-sum basis. The present value of benefits payable under the qualified plan are shown in the Pension Benefits table. |
(2) | Outstanding equity awards will be forfeited upon involuntary termination (for cause). |
(3) | Equity awards are valued based on the closing price of UTC common stock on the NYSE ($149.76) on the last trading day of 2019. For the 2019 and 2018 PSU awards, values shown reflect estimated performance as of December 31, 2019. The actual vesting of 114% of target is shown for the 2017 PSU grant. |
(4) | UTC SARs and UTC RSUs awards granted under UTC’s annual LTI program that are outstanding for more than one year will vest in the event of voluntary termination only after attaining qualifying retirement (defined as either: (i) age 65; (ii) age 55 plus 10 years of service; or (iii) “Rule of 65”—age 50 to 54 plus years of service add up to 65 or more). For executives who have attained qualifying retirement status, PSUs outstanding for at least one year will remain eligible to vest at the completion of the performance period to the extent performance targets are achieved. Mr. Gitlin has satisfied the qualifying retirement condition of the Rule of 65. For non-retirement eligible executives who voluntarily terminate, all unvested awards are cancelled and vested UTC SARs may be exercised up to 90 days following separation. With the exception of Mr. McLevish’s 2019 UTC SAR and UTC RSU awards, special out-of-cycle and ELG RSU awards do not have retirement eligibility treatment and, therefore, forfeit upon voluntary termination. Mr. McLevish’s 2019 UTC SAR and UTC RSU awards provide for vesting in the event of his retirement on or after October 31, 2021. |
(5) | UTC SARs and UTC RSUs awards that are outstanding for more than one year will vest and PSUs will remain eligible to vest (to the extent performance targets are achieved) in the event of involuntary termination (not for cause) after an executive qualifies for retirement. For executives who have not yet qualified for retirement, but have held awards for at least one year, in the event of involuntary termination (not for cause) a pro-rata portion of UTC SARs and UTC RSUs will vest and a pro-rata portion of UTC PSUs will remain eligible to vest at the completion of the performance period to the extent performance goals are achieved. Special |
(6) | ELG RSUs will vest in the case of mutually agreeable separation following three years of ELG service. As of December 31, 2019, only Messrs. Gitlin and Nelson have met the service condition. |
(7) | In the event of qualifying termination following a change-in-control, the UTC Long-Term Incentive Plans provide for the accelerated vesting of all outstanding equity awards (including awards outstanding for less than one year, special out-of-cycle and ELG RSU awards). PSUs granted under the original 2005 UTC Long-Term Incentive Plan vest at target performance and PSUs granted under the UTC 2018 Long-Term Incentive Plan vest at the greater of target or actual performance. As a result, amounts shown for the 2018 PSUs assume target performance, and amounts shown for the 2019 PSUs assume the estimated performance as of December 31, 2019. For the 2017 PSUs, actual performance vesting (114% of target) is shown. All values shown reflect the closing price of UTC common stock ($149.76) on the last trading day of 2019. |
(8) | None of the named executive officers are eligible for change-in-control benefits under the UTC Senior Executive Severance Plan, which was closed to participants effective June 2009, and the named executive officers were not otherwise eligible for cash severance in connection with a change-in-control as of December 31, 2019. |
• | certain assets of, or related to, the Carrier Business, which we refer to as the “Carrier Assets,” are retained by or transferred to Carrier or Carrier’s subsidiaries, including: |
• | equity interests of Carrier’s subsidiaries as of immediately after the effective time of the distributions; |
• | assets (other than cash and cash equivalents) that are included on the Carrier unaudited pro forma balance sheet as of December 31, 2019 included in the Carrier information statement, as well as assets that are of a nature or type that would have resulted in such assets being included on a pro forma combined balance sheet of Carrier and Carrier’s subsidiaries; |
• | contracts (or portions thereof) that, subject to limited exceptions, solely or primarily relate to the Carrier Business; |
• | permits used or held for use solely or primarily in the Carrier Business; |
• | certain intellectual property rights and technology used or held for use in the Carrier Business; |
• | information solely or primarily related to the Carrier Assets, the Carrier Liabilities, the Carrier Business or Carrier’s subsidiaries; |
• | cash and cash equivalents held in bank or brokerage accounts owned exclusively by Carrier or Carrier’s subsidiaries as of the effective time; |
• | other assets expressly allocated to Carrier or Carrier’s subsidiaries pursuant to the terms of the separation agreement or the other agreements entered into in connection with the separation; and |
• | subject to limited exceptions, other assets used or held for use solely or primarily in the Carrier Business. |
• | certain liabilities of, or related to, the Carrier Business, which we refer to as the “Carrier Liabilities,” are retained by or transferred to Carrier or Carrier’s subsidiaries, including: |
• | liabilities that are included on the Carrier unaudited pro forma balance sheet as of December 31, 2019 included in the Carrier information statement, as well as liabilities that are of a nature or type that would have resulted in such liabilities being included on a pro forma combined balance sheet of Carrier and Carrier’s subsidiaries; |
• | liabilities relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts, or circumstances to the extent related to, arising out of or resulting from the Carrier Business or the Carrier Assets; |
• | liabilities to the extent relating to, arising out of or resulting from the contracts, intellectual property rights, technology, licenses, permits or financing arrangements that relate to the Carrier Business; |
• | liabilities arising out of litigation or other claims (including in respect of environmental or asbestos-related matters) made by third parties, including directors, officers, stockholders, employees and agents of Carrier, Otis or UTC, or any investigations, sanctions or orders, to the extent the facts underlying the applicable matter relate to, arise out of or result from the Carrier Business, the Carrier Assets or the other Carrier Liabilities; |
• | other liabilities expressly allocated to Carrier or Carrier’s subsidiaries pursuant to the terms of the separation agreement or certain other agreements entered into in connection with the separation; and |
• | subject to limited exceptions, other liabilities to the extent arising out of or relating to the Carrier Business or a Carrier Asset. |
• | certain assets of, or related to, the Otis Business, which we refer to as the “Otis Assets,” are retained by or transferred to Otis or Otis’ subsidiaries, including: |
• | equity interests of Otis’ subsidiaries as of immediately after the effective time of the distributions; |
• | assets (other than cash and cash equivalents) that are included on the Otis unaudited pro forma balance sheet as of December 31, 2019, as well as assets that are of a nature or type that would have resulted in such assets being included on a pro forma combined balance sheet of Otis and Otis’ subsidiaries; |
• | contracts (or portions thereof) that, subject to limited exceptions, solely or primarily relate to the Otis Business; |
• | permits used or held for use solely or primarily in the Otis Business; |
• | certain intellectual property rights and technology used or held for use in the Otis Business; |
• | information solely or primarily related to the Otis Assets, the Otis Liabilities, the Otis Business or Otis’ subsidiaries; |
• | cash and cash equivalents held in bank or brokerage accounts owned exclusively by Otis or Otis’ subsidiaries as of the effective time; |
• | other assets expressly allocated to Otis or Otis’ subsidiaries pursuant to the terms of the separation agreement or the other agreements entered into in connection with the separation; and |
• | subject to limited exceptions, other assets used or held for use solely or primarily in the Otis Business. |
• | certain liabilities of, or related to, the Otis Business, which we refer to as the “Otis Liabilities,” are retained by or transferred to Otis or Otis’ subsidiaries, including: |
• | liabilities that are included on the Otis unaudited pro forma balance sheet as of December 31, 2019, as well as liabilities that are of a nature or type that would have resulted in such liabilities being included on a pro forma combined balance sheet of Otis and Otis’ subsidiaries; |
• | liabilities relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts, or circumstances to the extent related to, arising out of or resulting from the Otis Business or the Otis Assets; |
• | liabilities to the extent relating to, arising out of or resulting from the contracts, intellectual property rights, technology, licenses, permits or financing arrangements that relate to the Otis Business; |
• | liabilities arising out of litigation or other claims (including in respect of environmental or asbestos-related matters) made by third parties, including directors, officers, stockholders, employees and agents of Carrier, Otis or UTC, or any investigations, sanctions or orders, to the extent the facts underlying the applicable matter relate to, arise out of or result from the Otis Business, the Otis Assets or the other Otis Liabilities; |
• | other liabilities expressly allocated to Otis or Otis’ subsidiaries pursuant to the terms of the separation agreement or certain other agreements entered into in connection with the separation; and |
• | subject to limited exceptions, other liabilities to the extent arising out of or relating to the Otis Business or an Otis Asset. |
• | all assets other than the Carrier Assets and the Otis Assets, which we refer to as the “UTC Assets,” are retained by or transferred to UTC or UTC’s subsidiaries, including: |
• | assets expressly allocated to UTC or UTC’s subsidiaries pursuant to the terms of the separation agreement or the other agreements entered into in connection with the separation; |
• | intellectual property rights and technology used or held for use in the UTC Aerospace Businesses; |
• | permits used or held for use solely or primarily in the UTC Aerospace Businesses; |
• | information not solely or primarily related to the Carrier Assets, the Carrier Liabilities, the Carrier Business, Carrier’s subsidiaries, the Otis Assets, the Otis Liabilities, the Otis Business or Otis’ subsidiaries; and |
• | cash and cash equivalents not held in bank or brokerage accounts owned exclusively by Carrier, Otis or their respective subsidiaries as of the effective time. |
• | all liabilities other than the Carrier Liabilities and the Otis Liabilities, which we refer to as the “UTC Liabilities,” are retained by or transferred to UTC or UTC’s subsidiaries, including: |
• | liabilities relating to, arising out of or resulting from the actions, inactions, events, omissions, conditions, facts or circumstances occurring or existing prior to the effective time of the distributions, of UTC or UTC’s subsidiaries, in each case that are not Carrier Liabilities or Otis Liabilities; |
• | liabilities arising out of litigation or other claims (including in respect of environmental or asbestos-related matters) made by third parties, including directors, officers, stockholders, employees and agents of Carrier, Otis or UTC, or any investigations, sanctions or orders, to the extent the facts underlying the applicable matter relate to, arise out of or result from the UTC Aerospace Businesses, UTC Assets or the other UTC Liabilities; and |
• | other liabilities expressly allocated to UTC or UTC’s subsidiaries pursuant to the terms of the separation agreement or certain other agreements entered into in connection with the separation. |
• | the Carrier Liabilities; |
• | Carrier’s failure or the failure of any other person to pay, perform or otherwise promptly discharge any of the Carrier Liabilities, in accordance with their respective terms, whether prior to, at or after the distribution; |
• | except to the extent relating to a UTC Liability or an Otis Liability, any guarantee, indemnification or contribution obligation for the benefit of Carrier by UTC or Otis that survives the distribution; |
• | any breach by Carrier of the separation agreement or any of the ancillary agreements; and |
• | any untrue statement or alleged untrue statement or omission or alleged omission of material fact with respect to (1) all information contained in the Form 10, the Carrier information statement or certain other Carrier disclosure documents other than information relating to Otis or its business, assets or liabilities or the Otis distribution, or statements made explicitly in UTC’s name, and (2) all information in respect of Carrier or its business, assets or liabilities or the Carrier distribution in any UTC |
• | the Otis Liabilities; |
• | Otis’ failure or the failure of any other person to pay, perform or otherwise promptly discharge any of the Otis Liabilities, in accordance with their respective terms, whether prior to, at or after the distribution; |
• | except to the extent relating to a UTC Liability or a Carrier Liability, any guarantee, indemnification or contribution obligation for the benefit of Otis by UTC or Carrier that survives the distribution; |
• | any breach by Otis of the separation agreement or any of the ancillary agreements; and |
• | any untrue statement or alleged untrue statement or omission or alleged omission of material fact with respect to (1) all information contained in the Otis Form 10, the Otis information statement or certain other Otis disclosure documents other than information relating to Carrier or its business, assets or liabilities or the Carrier distribution, or statements made explicitly in UTC’s name, and (2) all information in respect of Otis or its business, assets or liabilities or the Otis distribution in any UTC disclosure document in respect of a reporting period beginning prior to the completion of the Otis distribution, or in the Carrier Form 10, the Carrier information statement or certain other Carrier disclosure documents. |
• | the UTC Liabilities; |
• | the failure of UTC or any other person to pay, perform or otherwise promptly discharge any of the UTC Liabilities in accordance with their respective terms whether prior to, at or after the distributions; |
• | except to the extent relating to an Otis Liability or a Carrier Liability, any guarantee, indemnification or contribution obligation for the benefit of UTC by Otis or Carrier, as applicable, that survives the distributions; |
• | any breach by UTC of the separation agreement or any of the ancillary agreements; and |
• | any untrue statement or alleged untrue statement or omission or alleged omission of material fact with respect to (1) statements made explicitly in UTC’s name in the Form 10 or the Otis Form 10, the Carrier information statement or the Otis information statement, or certain other Carrier disclosure documents or Otis disclosure documents and (2) statements in any UTC disclosure document other than information in respect of Carrier or Otis or their respective businesses, assets or liabilities or the distributions, made in any UTC disclosure document in respect of a reporting period beginning prior to the distributions. |
• | to delay accepting for exchange any Old Notes due to an extension of the relevant exchange offer(s); |
• | to extend any of the exchange offers or to terminate any of the exchange offers and to refuse to accept applicable Old Notes not previously accepted if any of the conditions set forth below under “Conditions to the Exchange Offers” have not been satisfied by giving written notice of such extension or termination to the exchange agent; or |
• | subject to the terms of the Registration Rights Agreements, to amend the terms of the exchange offers in any manner. |
• | such exchange offer would violate applicable law or any applicable interpretation of the staff of the SEC; or |
• | any action or proceeding has been instituted or threatened in any court or by any governmental agency with respect to such exchange offer. |
• | transmit a properly completed and duly executed letter of transmittal, including all other documents required by the letter of transmittal, to the exchange agent, at the address listed below under the heading “Exchange Agent;” or |
• | if Old Notes are tendered in accordance with the book-entry procedures described below, the tendering holder must transmit an agent’s message (described below) to the exchange agent. |
• | by a registered holder of the Old Notes that has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the letter of transmittal; or |
• | for the account of an eligible institution. |
• | it is not an affiliate of ours or, if an affiliate of ours, will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable in connection with the resale of the Exchange Notes; |
• | the Exchange Notes will be acquired in the ordinary course of its business; |
• | it is not participating, does not intend to participate, and has no arrangement or understanding with anyone to participate, in the distribution (within the meaning of the Securities Act) of the Exchange Notes; |
• | it is not a broker-dealer that purchased any of the Old Notes from us or any of our affiliates for resale pursuant to Rule 144A or any other available exemption under the Securities Act; and |
• | if such holder is a broker-dealer that will receive Exchange Notes for its own account in exchange for Old Notes that were acquired as a result of market-making activities or other trading activities, that it will deliver a prospectus (or to the extent permitted by law, make available a prospectus to purchasers) in connection with any resale of such Exchange Notes. See “Plan of Distribution.” |
• | a book-entry confirmation of the deposit of the Old Notes into the exchange agent’s account at the book-entry transfer facility; |
• | a properly completed and duly executed letter of transmittal or a transmitted agent’s message; and |
• | all other required documents. |
• | Carrier determines that the exchange offers are not available under applicable law or if applicable interpretations of the staff of the SEC do not permit Carrier to effect the exchange offer; |
• | for any reason, Carrier does not consummate the exchange offers by February 21, 2021, in the case of the Old Notes other than the Old 11-Year Notes, and June 14, 2021, in the case of the Old 11-Year Notes; or |
• | in certain limited circumstances, Carrier receives a written request from any initial purchaser representing that it holds Old Notes that are or were ineligible to be exchanged in any such exchange offers, in which event, Carrier shall use its commercially reasonable efforts to cause to become effective a shelf registration statement providing for the sale of all the registrable securities of such series by the holders thereof. |
• | 100% of the principal amount of the Exchange Notes to be redeemed, and |
• | the sum of the Remaining Scheduled Payments of the Exchange Notes to be redeemed from the redemption date to the Par Call Date of such series of Exchange Notes discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of 12 30-day months) at the applicable Treasury Rate plus the number of basis points set forth below under the heading “Make-Whole Basis Points” across from the name of such series of Exchange Notes, |
Series of Notes | | | Make-Whole Basis Points |
Exchange 3-Year Notes | | | +7.5 basis points |
Exchange 5-Year Notes | | | +12.5 basis points |
Exchange 7-Year Notes | | | +15 basis points |
Exchange 10-Year Notes | | | +20 basis points |
Exchange 11-Year Notes | | | +30 basis points |
Exchange 20-Year Notes | | | +20 basis points |
Exchange 30-Year Notes | | | +25 basis points |
Series of Notes | | | Par Call Date |
Exchange 3-Year Notes | | | January 15, 2023 (one month prior to the stated maturity of such Notes) |
Exchange 5-Year Notes | | | January 15, 2025 (one month prior to the stated maturity of such Notes) |
Exchange 7-Year Notes | | | December 15, 2026 (two months prior to the stated maturity of such Notes) |
Exchange 10-Year Notes | | | November 15, 2029 (three months prior to the stated maturity of such Notes) |
Exchange 11-Year Notes | | | November 15, 2030 (three months prior to the stated maturity of such Notes) |
Exchange 20-Year Notes | | | October 5, 2039 (six months prior to the stated maturity of such Notes) |
Exchange 30-Year Notes | | | October 5, 2049 (six months prior to the stated maturity of such Notes) |
• | accept or cause a third party to accept for payment all the Exchange Notes of the applicable series properly tendered pursuant to the Change of Control Offer; |
• | deposit or cause a third party to deposit with the applicable paying agent an amount equal to the Change of Control Payment in respect of all the Exchange Notes of the applicable series properly tendered; and |
• | deliver or cause to be delivered to the Trustee the Exchange Notes of the applicable series properly accepted together with an officer’s certificate stating the aggregate principal amount of the Exchange Notes of each series being purchased. |
(a) | Liens on any property or assets of the Company or any subsidiary (including equity interests or Debt owned by the Company or any subsidiary) existing as of the date of the Exchange Notes of the applicable series are first issued; |
(b) | Liens on any property or assets of, or on any equity interests or Debt of, any person existing at the time such person becomes a Wholly-Owned Domestic Manufacturing Subsidiary, or arising thereafter (i) otherwise than in connection with the borrowing of money arranged thereafter and (ii) pursuant to contractual commitments entered into prior to and not in contemplation of such person’s becoming a Wholly-Owned Domestic Manufacturing Subsidiary; |
(c) | Liens on any property or assets or equity interests or Debt existing at the time of acquisition thereof (including acquisition through merger or consolidation) or securing the payment of all or any part of the purchase price or construction cost thereof or securing any Debt incurred prior to, at the time of or within 120 days after, the acquisition of such property or assets or equity interests or Debt or the completion of any such construction, whichever is later, for the purpose of financing all or any part of the purchase price or construction cost thereof (provided that such Liens are limited to such equity interests or Debt or such other property or assets, improvements thereon and the land upon which such property, assets and improvements are located and any other property or assets not then constituting a Principal Property); |
(d) | Liens on any property or assets to secure all or any part of the cost of development, operation, construction, alteration, repair or improvement of all or any part of such property or assets, or to secure Debt incurred prior to, at the time of or within 120 days after, the completion of such development, operation, construction, alteration, repair or improvement, whichever is later, for the purpose of financing all or any part of such cost (provided that such Liens are limited to such property or assets, improvements thereon and the land upon which such property, assets and improvements are located and any other property or assets not then constituting a Principal Property); |
(e) | Liens which secure Debt owing by a subsidiary to the Company or to a Wholly-Owned Domestic Manufacturing Subsidiary; |
(f) | Liens arising from the assignment of moneys due and to become due under contracts between the Company or any subsidiary and the United States of America, any State, Commonwealth, Territory or |
(g) | any materialmen’s, carriers’, mechanics’, workmen’s, repairmen’s or other like Liens arising in the ordinary course of business in respect of obligations which are not overdue or which are being contested in good faith by appropriate proceedings; any deposit or pledge as security for the performance of any bid, tender, contract, lease, or undertaking not directly or indirectly in connection with the securing of Debt; any deposit or pledge with any governmental agency required or permitted to qualify the Company or any subsidiary to conduct business, to maintain self-insurance or to obtain the benefits of any law pertaining to workmen’s compensation, unemployment insurance, old age pensions, social security or similar matters, or to obtain any stay or discharge in any legal or administrative proceedings; deposits or pledges to obtain the release of mechanics’, workmen’s, repairmen’s, materialmen’s or warehousemen’s Liens or the release of property in the possession of a common carrier; any security interest created in connection with the sale, discount or guarantee of notes, chattel mortgages, leases, accounts receivable, trade acceptances or other paper, or contingent repurchase obligations, arising out of sales of merchandise in the ordinary course of business; Liens for Taxes levied or imposed upon the Company or any Wholly-Owned Domestic Manufacturing Subsidiary or upon the income, profits or property of the Company or any Wholly-Owned Domestic Manufacturing Subsidiary or Liens on any Principal Property of the Company or any Wholly-Owned Domestic Manufacturing Subsidiary arising from claims from labor, materials or supplies; provided that either such tax is not overdue or that the amount, applicability or validity of such tax or claim is being contested in good faith by appropriate proceedings; or other deposits or pledges similar to those referred to in this subdivision (g); |
(h) | Liens arising by reason of any judgment, decree or order of any court, so long as any appropriate legal proceedings which may have been initiated for the review of such judgment, decree or order shall not have been finally terminated or so long as the period within which such proceedings may be initiated shall not have expired; any deposit or pledge with any surety company or clerk of any court, or in escrow, as collateral in connection with, or in lieu of, any bond on appeal from any judgment or decree against the Company or any subsidiary, or in connection with other proceedings or actions at law or in equity by or against the Company or any subsidiary; and |
(i) | any extension, renewal, substitution or replacement (or successive extensions, renewals, substitutions or replacements), as a whole or in part, of any of the Liens referred to in subdivisions (a) through (h) above or the Debt secured thereby; provided that (i) such extension, renewal, substitution or replacement Lien shall be limited to all or any part of the same property or assets or equity interests or Debt that secured the Lien extended, renewed, substituted or replaced (plus improvements on such property, and plus any other property or assets not then constituting a Principal Property) and (ii) in the case of subdivisions (a) through (c) above, the Debt secured by such Lien at such time is not increased. |
(a) | the Attributable Debt of the Company and its Wholly-Owned Domestic Manufacturing Subsidiaries in respect of such sale and leaseback transaction and all other sale and leaseback transactions entered into after the date the Exchange Notes of the applicable series are first issued (other than such sale and leaseback transactions as are permitted by the provisions described in the following paragraph), plus the aggregate principal amount of Debt secured by Liens on Principal Properties then outstanding (excluding any such Debt secured by Liens covered by the provisions described in subdivisions (a) through (i) of the first paragraph of the covenant described under the caption “Limitation upon Liens”) without equally and ratably securing the Exchange Notes, would not exceed 10% of Consolidated Net Total Assets, or |
(b) | the Company, within 365 days after the sale or transfer, applies or causes a Wholly-Owned Domestic Manufacturing Subsidiary to apply an amount equal to the greater of the net proceeds of such sale or transfer or fair market value of the Principal Property so sold and leased back at the time of entering into such sale and leaseback transaction (in either case as determined by any two of the following: the Chairman, Chief Executive Officer, Chief Financial Officer, the President, any Vice President, the Treasurer and the Controller of the Company) to the retirement of Notes of any series outstanding under the Indenture or other indebtedness of the Company (other than indebtedness subordinated in right of payment to the Exchange Notes) or indebtedness of a Wholly-Owned Domestic Manufacturing Subsidiary, for money borrowed, having a stated maturity more than 12 months from the date of such application or which is extendible at the option of the obligor thereon to a date more than 12 months from the date of such application (and, unless otherwise expressly provided with respect to any one or more series of Notes outstanding under the Indenture, any redemption of securities pursuant to this provision shall not be deemed to constitute a refunding operation or anticipated refunding operation for the purposes of any provision limiting the Company’s right to redeem securities of any one or more such series when such redemption involves a refunding operation or anticipated refunding operation); provided that the amount to be so applied will be reduced by (i) the principal amount of securities outstanding under the Indenture delivered within 120 days after such sale or transfer to the Trustee for retirement and cancellation, and (ii) the principal amount of any such indebtedness of the Company or a Wholly-Owned Domestic Manufacturing Subsidiary, other than such securities, voluntarily retired by the Company or a Wholly-Owned Domestic Manufacturing Subsidiary within 120 days after such sale or transfer. Notwithstanding the foregoing, no retirement referred to in this subdivision (b) may be effected by payment at maturity or pursuant to any mandatory sinking fund payment or any mandatory prepayment provision. |
(a) | the person formed by the consolidation or into which the Company is merged or the person which acquires by conveyance or transfer, or which leases, all or substantially all of the properties and assets of the Company is a person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes, by an indenture supplemental to the Indenture, executed and delivered to the Trustee, the Company’s obligation for the due and punctual payment of the principal of (and premium, if any) and interest on all the Notes and the performance of every covenant of the Indenture on the part of the Company to be performed or observed; |
(b) | immediately after giving effect to such transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing; and |
(c) | the Company has delivered to the Trustee an officer’s certificate and an opinion of counsel, each stating that the consolidation, merger, conveyance, transfer or lease and such supplemental indenture comply with the covenant described in this section. |
(a) | default in the payment of any interest upon any Note of that series when it becomes due and payable, and continuance of the default for a period of 30 days; |
(b) | default in the payment of the principal of (or premium, if any, on) any Note of that series at its Maturity; |
(c) | default in the performance, or breach, of any covenant or warranty of the Company in the Indenture (other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this section specifically dealt with or which has been expressly included in the Indenture for the benefit of one or more series of Notes other than that series), and continuance of that default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of at least 25% in principal amount of all affected Notes of any series issued under the Indenture then outstanding (taking such action as one class) (including any affected series of Exchange Notes) a written notice specifying the default or breach and requiring it to be remedied and stating that the notice is a “Notice of Default” under the Indenture; |
(d) | the entry of a decree or order by a court having jurisdiction in the premises adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state bankruptcy, insolvency, reorganization or similar law, or appointing a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of all or substantially all of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 90 consecutive days; or |
(e) | the institution by the Company of proceedings to be adjudicated a bankrupt or insolvent, or the consent by it to the institution of bankruptcy or insolvency proceedings against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal or state bankruptcy, insolvency, reorganization or other similar law, or the consent by it to the filing of any such petition or to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or all or substantially all of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due. |
(a) | the holder has previously given written notice to the Trustee of a continuing Event of Default with respect to the Exchange Notes of that series; |
(b) | the holders of not less than 25% in principal amount of the outstanding Exchange Notes of that series in the case of any Event of Default described in clause (a) or (b) of the definition of “Event of |
(c) | the holder or holders have offered to the Trustee indemnity satisfactory to the Trustee against the costs, expenses and liabilities to be incurred in compliance with such request; |
(d) | the Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute any such proceeding; and |
(e) | no direction inconsistent with the written request has been given to the Trustee during the 60-day period by the holders of not less than a majority in principal amount of the outstanding Exchange Notes of that series in the case of any Event of Default described in clause (a) or (b) of the definition of “Event of Default,” or, in the case of any Event of Default not described in clause (a) or (b) of the definition of “Event of Default,” by the holders of not less than a majority in principal amount of all affected Notes of any series issued under the Indenture (including any affected series of the Exchange Notes) outstanding (making the direction as one class); |
(a) | to evidence the succession of another person to the Company and provide for the assumption by a successor person of the Company’s obligations under the Indenture and the Notes, in each case in compliance with the provisions thereof; |
(b) | to add to the covenants of the Company or to surrender any right or power conferred upon the Company in the Indenture; |
(c) | to add any additional Events of Default; |
(d) | to add to, change or eliminate any of the provisions of the Indenture; provided that any such addition, change or elimination shall (i) neither (A) apply to any Notes of any series created prior to the execution of such supplemental indenture which is entitled to the benefit of such provision nor (B) modify the rights of the holder of any such Note with respect to such provision or (ii) become effective only when there are no Notes of any series outstanding; |
(e) | to secure the Notes pursuant to the requirements of the covenant described under the caption “Limitation upon Liens” or otherwise; |
(f) | to establish the form or terms of the Notes of any series as permitted under the Indenture; |
(g) | to evidence and provide for the acceptance of appointment under the Indenture by a successor Trustee with respect to the Notes of one or more series and to add to or change any of the provisions of the Indenture as shall be necessary to provide for or facilitate the administration of the trusts thereunder by more than one Trustee, pursuant to the requirements of the Indenture; |
(h) | to cure any ambiguity, to correct or supplement any provision under the Indenture which may be defective or inconsistent with any other provision therein, or to make any other provisions with respect to matters or questions arising under the Indenture; provided such action will not adversely affect the interests of the holders of the Notes of any particular series in any material respect; |
(i) | to supplement any of the provisions of the Indenture to the extent as necessary to permit or facilitate the defeasance and/or discharge of any series of Notes pursuant to the Indenture; provided that any such action does not adversely affect the interests of the holders of the Notes of that series or any other series of Notes in any material respect; |
(j) | to provide for the guarantee by any person of any series of previously issued and outstanding Notes; |
(k) | to add to the Indenture such provisions as may be expressly permitted by the Trust Indenture Act, excluding, however, the provisions referred to in Section 316(a)(2) of the Trust Indenture Act as in effect at the date as of which the Indenture is executed or any corresponding provision in any similar federal statute thereafter enacted; |
(l) | to conform to any mandatory provisions of law and in particular to comply with the requirements of the Commission in connection with the qualification of this Indenture under the Trust Indenture Act; |
(m) | to conform the terms of the Indenture and the Notes to any provision or other description of the Notes, as the case may be, contained in an offering document related thereto; |
(n) | to provide for the issuance of any additional securities under the Indenture; |
(o) | to comply with the rules of any applicable securities depositary; or |
(p) | to make any change in any series of Notes or to add to the Indenture such provisions that do not adversely affect in any material respect the interests of the holders of such Notes. |
(a) | change the stated maturity of the principal of, or any installment of interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon or any premium payable upon the redemption thereof, or reduce the amount of the principal of an original issue discount security that would be due and payable upon a declaration of acceleration of the Maturity thereof pursuant to the Indenture or the amount thereof provable in bankruptcy pursuant to the Indenture, or change any Place of Payment where, or the coin, currency, currencies, currency units or composite currency in which, any Note or any premium or the interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or after the stated maturity thereof (or, in the case of redemption or repayment at the option of the holder, on or after the redemption date or repayment date, as the case may be); |
(b) | reduce the percentage in principal amount of the outstanding Notes of any series, the consent of whose holders is required for any such supplemental indenture, or the consent of whose holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) provided for in the Indenture; or |
(c) | modify (i) the requirements of the section of the Indenture described in this paragraph, (ii) provisions with respect to waiving compliance with specified provisions of the Indenture or (iii) provisions with respect to waiving specified defaults, except to increase any applicable percentage or to provide that other specified provisions of this Indenture cannot be modified or waived without the consent of the holder of each outstanding Note affected thereby; provided that the provisions described in this clause will not be deemed to require the consent of any holder with respect to changes in the references to |
(a) | either: |
(i) | all Notes of the applicable series theretofore authenticated and delivered (other than Notes that have been mutilated, destroyed, lost or stolen and that have been replaced or paid as provided in the Indenture and Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in the Indenture) have been cancelled or delivered to the Trustee for cancellation; or |
(ii) | all Notes of the applicable series not theretofore cancelled or delivered to the Trustee for cancellation: |
(1) | have become due and payable, or |
(2) | will become due and payable at their stated maturity within one year, or |
(3) | are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company, |
(b) | the Company has paid or caused to be paid all other sums payable under the Indenture by the Company in respect of the applicable series of Notes; and |
(c) | the Company has delivered to the Trustee an officer’s certificate and an opinion of counsel (as specified in the Indenture). |
(a) | “defeasance” means that the Company may elect to defease and be discharged from any and all obligations with respect to the applicable Notes except for the obligations to register the transfer or exchange of the applicable Notes, to replace temporary or mutilated, destroyed, lost or stolen debt securities and any related coupons, to maintain an office or agency in respect of the applicable Notes and to hold moneys for payment in trust; |
(b) | “covenant defeasance” means that the Company may elect to be released from its obligations with respect to the applicable Notes that are described under the captions “Consolidation, Merger and Sale of Assets,” “Existence,” “Limitation upon Liens,” “Limitations upon Sales and Leasebacks,” and any omission to comply with these obligations will not constitute a default or an Event of Default with respect to the applicable Notes. |
(1) | the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)(3)of the Exchange Act) other than to the Company or one of its subsidiaries, and other than any such transaction or series of related transactions in which the holders of the Company’s Voting Stock outstanding immediately prior thereto hold Voting Stock of the transferee person representing a majority of the voting power of the transferee person’s Voting Stock immediately after giving effect thereto; |
(2) | the consummation of any transaction (including without limitation, any merger or consolidation) the result of which is that any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) (other than the Company or one of its subsidiaries) becomes the “beneficial owner” (as defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act), directly or indirectly, of the Company’s Voting Stock representing a majority of the voting power of the Company’s outstanding Voting Stock; |
(3) | the Company consolidates with, or merges with or into, any person, or any person consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which any of the Company’s outstanding Voting Stock is converted into or exchanged for cash, securities or other property, other than any such transaction where the Company’s Voting Stock outstanding immediately prior to such transaction constitutes, or is converted into or exchanged for, Voting Stock representing a majority of the voting power of the Voting Stock of the surviving person (or its parent) immediately after giving effect to such transaction; or |
(4) | the adoption by our shareholders of a plan relating to our liquidation or dissolution. |
• | upon deposit of each global note with DTC’s custodian, DTC will credit portions of the principal amount of the global note to the accounts of the DTC participants designated by the initial purchasers; and |
• | ownership of beneficial interests in each global note will be shown on, and transfer of ownership of those interests will be effected only through, records maintained by DTC (with respect to interests of DTC participants) and the records of DTC participants (with respect to other owners of beneficial interests in the global note). |
• | a limited purpose trust company organized under the laws of the State of New York; |
• | a “banking organization” within the meaning of the New York State Banking Law; |
• | a member of the U.S. Federal Reserve System; |
• | a “clearing corporation” within the meaning of the Uniform Commercial Code; and |
• | a “clearing agency” registered under Section 17A of the Exchange Act. |
• | will not be entitled to have the Notes represented by a global note registered in their names; |
• | will not receive or be entitled to receive physical, certificated notes; and |
• | will not be considered the owners or holders of the Notes under the Indenture for any purpose, including with respect to the giving of any direction, instruction or approval to the Trustee under the Indenture. |
• | DTC notifies us at any time that it is unwilling or unable to continue as depositary for the global notes of such series and a successor depositary is not appointed within 90 days; |
• | DTC ceases to be registered as a clearing agency under the Exchange Act and a successor depositary is not appointed within 90 days; |
• | we, at our option, notify the Trustee that we elect to cause the issuance of certificated notes of such series; or |
• | there shall have occurred and be continuing an Event of Default with respect to Notes of such series and DTC notifies the Trustee of its decision to exchange the global notes of such series for certificated notes of such series. |
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| | For the Years Ended December 31, | |||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net sales: | | | | | | | |||
Product sales (Notes 5 and 16) | | | $15,360 | | | $15,674 | | | $14,775 |
Service sales | | | 3,248 | | | 3,240 | | | 3,039 |
| | 18,608 | | | 18,914 | | | 17,814 | |
Costs and expenses: | | | | | | | |||
Cost of products sold (Notes 5 and 16) | | | 10,890 | | | 11,063 | | | 10,474 |
Cost of services sold | | | 2,299 | | | 2,282 | | | 2,155 |
Research and development | | | 401 | | | 400 | | | 364 |
Selling, general and administrative | | | 2,761 | | | 2,689 | | | 2,584 |
| | 16,351 | | | 16,434 | | | 15,577 | |
Equity method investment net earnings | | | 236 | | | 220 | | | 218 |
Other income (expense), net | | | (2) | | | 937 | | | 575 |
Operating profit | | | 2,491 | | | 3,637 | | | 3,030 |
Non-service pension benefit | | | (154) | | | (168) | | | (139) |
Interest (income) expense, net | | | (27) | | | (37) | | | 115 |
Income from operations before income taxes | | | 2,672 | | | 3,842 | | | 3,054 |
Income tax expense | | | 517 | | | 1,073 | | | 1,787 |
Net income | | | 2,155 | | | 2,769 | | | 1,267 |
Less: Noncontrolling interest in subsidiaries’ earnings | | | 39 | | | 35 | | | 40 |
Net income attributable to Carrier Global Corporation | | | $2,116 | | | $2,734 | | | $1,227 |
| | For the Years Ended December 31, | |||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net income | | | $2,155 | | | $2,769 | | | $1,267 |
Other comprehensive (loss) income, net of tax: | | | | | | | |||
Foreign currency translation adjustments arising during period | | | 48 | | | (449) | | | 771 |
Less: reclassification adjustments for gain on sale of an investment in a foreign entity recognized in Other income (expense), net | | | 2 | | | — | | | — |
| | 50 | | | (449) | | | 771 | |
Pension and postretirement benefit plans: | | | | | | | |||
Net actuarial loss arising during period | | | (112) | | | (221) | | | (13) |
Prior service (cost) credit arising during period | | | — | | | (9) | | | 14 |
Amortization of actuarial loss and prior service cost | | | 11 | | | 17 | | | 16 |
Other | | | 3 | | | 21 | | | (33) |
| | (98) | | | (192) | | | (16) | |
Tax benefit | | | 15 | | | 33 | | | 5 |
| | (83) | | | (159) | | | (11) | |
Unrealized loss on available-for-sale securities: | | | | | | | |||
Unrealized holding loss arising during period | | | — | | | — | | | (31) |
Reclassification adjustments for gain on sale of investment included in Other income (expense), net | | | — | | | — | | | (394) |
| | | | | | ||||
| | — | | | — | | | (425) | |
Tax benefit | | | — | | | — | | | 163 |
| | — | | | — | | | (262) | |
Change in unrealized cash flow hedging: | | | | | | | |||
Unrealized cash flow hedging gain arising during period | | | — | | | — | | | 2 |
Loss reclassified into Product sales | | | — | | | 2 | | | 1 |
| | — | | | 2 | | | 3 | |
Other comprehensive (loss) income, net of tax | | | (33) | | | (606) | | | 501 |
Comprehensive income | | | 2,122 | | | 2,163 | | | 1,768 |
Less: comprehensive income attributable to noncontrolling interest | | | (35) | | | (27) | | | (74) |
Comprehensive income attributable to Carrier Global Corporation | | | $2,087 | | | $2,136 | | | $1,694 |
| | As of December 31, | ||||
(dollars in millions) | | | 2019 | | | 2018 |
Assets | | | | | ||
Cash and cash equivalents | | | $952 | | | $1,129 |
Accounts receivable (net of allowance for doubtful accounts of $45 and $141) (Notes 5 and 16) | | | 2,726 | | | 2,673 |
Contract assets, current | | | 622 | | | 566 |
Inventories, net | | | 1,332 | | | 1,363 |
Other assets, current | | | 327 | | | 378 |
Total Current Assets | | | 5,959 | | | 6,109 |
| | | | |||
Future income tax benefits | | | 500 | | | 398 |
Operating lease right-of-use assets | | | 832 | | | — |
Fixed assets, net | | | 1,663 | | | 1,653 |
Intangible assets, net | | | 1,083 | | | 1,214 |
Goodwill | | | 9,884 | | | 9,849 |
Pension and postretirement assets | | | 490 | | | 441 |
Equity method investments | | | 1,739 | | | 1,770 |
Other assets | | | 256 | | | 303 |
Total Assets | | | $22,406 | | | $21,737 |
| | | | |||
Liabilities and Equity | | | | | ||
Accounts payable (Notes 5 and 16) | | | 1,701 | | | 1,944 |
Accrued liabilities | | | 2,325 | | | 2,074 |
Contract liabilities, current | | | 443 | | | 448 |
Total Current Liabilities | | | 4,469 | | | 4,466 |
Operating lease liabilities | | | 682 | | | — |
Future pension and postretirement benefit obligations | | | 456 | | | 419 |
Future income tax obligations | | | 1,099 | | | 1,280 |
Other long-term liabilities | | | 1,265 | | | 1,303 |
Total Liabilities | | | 7,971 | | | 7,468 |
Commitments and contingent liabilities (Note 20) | | | | | ||
UTC Net Investment: | | | | | ||
UTC Net Investment | | | 15,355 | | | 15,132 |
Accumulated other comprehensive loss | | | (1,253) | | | (1,215) |
Total UTC Net Investment | | | 14,102 | | | 13,917 |
| | | | |||
Noncontrolling interest | | | 333 | | | 352 |
Total Equity | | | 14,435 | | | 14,269 |
Total Liabilities and Equity | | | $22,406 | | | $21,737 |
(dollars in millions) | | | UTC Net Investment | | | Accumulated Other Comprehensive Income (Loss) | | | Total UTC Net Investment | | | Noncontrolling Interest | | | Total Equity | | | Redeemable Noncontrolling Interest |
Balance January 1, 2017 | | | $15,696 | | | $(1,084) | | | $14,612 | | | $348 | | | $14,960 | | | $177 |
Net income | | | 1,227 | | | — | | | 1,227 | | | 40 | | | 1,267 | | | — |
Redeemable noncontrolling interest in subsidiaries’ earnings | | | — | | | — | | | — | | | (9) | | | (9) | | | 9 |
Other comprehensive income, net of tax | | | — | | | 467 | | | 467 | | | 11 | | | 478 | | | 23 |
Sale (purchase) of subsidiary shares from noncontrolling interest | | | 4 | | | — | | | 4 | | | — | | | 4 | | | (286) |
Dividends attributable to noncontrolling interest | | | — | | | — | | | — | | | (31) | | | (31) | | | (4) |
Acquisition of noncontrolling interest | | | — | | | — | | | — | | | 12 | | | 12 | | | — |
Redeemable noncontrolling interest fair value adjustment | | | (81) | | | — | | | (81) | | | — | | | (81) | | | 81 |
Net transfers to UTC | | | (1,816) | | | — | | | (1,816) | | | — | | | (1,816) | | | — |
Balance December 31, 2017 | | | 15,030 | | | (617) | | | 14,413 | | | 371 | | | 14,784 | | | — |
Net income | | | 2,734 | | | — | | | 2,734 | | | 35 | | | 2,769 | | | — |
Other comprehensive loss, net of tax | | | — | | | (598) | | | (598) | | | (8) | | | (606) | | | — |
Dividends attributable to noncontrolling interest | | | — | | | — | | | — | | | (46) | | | (46) | | | — |
Adoption of ASU 2016-16 | | | 9 | | | — | | | 9 | | | — | | | 9 | | | — |
Net transfers to UTC | | | (2,641) | | | — | | | (2,641) | | | — | | | (2,641) | | | — |
Balance December 31, 2018 | | | 15,132 | | | (1,215) | | | 13,917 | | | 352 | | | 14,269 | | | — |
Net income | | | 2,116 | | | — | | | 2,116 | | | 39 | | | 2,155 | | | — |
Other comprehensive loss, net of tax | | | — | | | (29) | | | (29) | | | (4) | | | (33) | | | — |
Dividends attributable to noncontrolling interest | | | — | | | — | | | — | | | (28) | | | (28) | | | — |
Disposition of noncontrolling interest | | | — | | | — | | | — | | | (26) | | | (26) | | | |
Adoption of ASU 2018-02 | | | 9 | | | (9) | | | — | | | — | | | — | | | — |
Net transfers to UTC | | | (1,902) | | | — | | | (1,902) | | | — | | | (1,902) | | | — |
Balance December 31, 2019 | | | $15,355 | | | $(1,253) | | | $14,102 | | | $333 | | | $14,435 | | | $— |
| | For the Years Ended December 31, | |||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Operating Activities: | | | | | | | |||
Net income | | | $2,155 | | | $2,769 | | | $1,267 |
Adjustments to reconcile net income to net cash flows provided by operating activities, net of acquisitions and dispositions: | | | | | | | |||
Depreciation and amortization | | | 335 | | | 357 | | | 372 |
Deferred income tax (benefit) provision | | | (122) | | | 133 | | | 73 |
Impact from U.S. tax reform | | | — | | | — | | | 799 |
Gain on sale of Taylor | | | — | | | (799) | | | — |
Gain on sale of available-for-sale securities | | | — | | | — | | | (418) |
Stock compensation cost | | | 52 | | | 44 | | | 34 |
Equity method investment net earnings | | | (236) | | | (220) | | | (218) |
Distributions from equity method investments | | | 158 | | | 143 | | | 142 |
Impairment of equity method investment | | | 108 | | | — | | | — |
Change in: | | | | | | | |||
Accounts receivable, net | | | (129) | | | (211) | | | 159 |
Contract assets, current | | | 23 | | | (67) | | | — |
Inventories, net | | | (2) | | | (151) | | | (102) |
Other assets, current | | | 17 | | | (7) | | | (21) |
Accounts payable and accrued liabilities | | | (311) | | | 88 | | | 192 |
Contract liabilities, current | | | (18) | | | 24 | | | — |
Pension contributions | | | (36) | | | (45) | | | (44) |
Other operating activities, net | | | 8 | | | (3) | | | (137) |
Net cash flows provided by operating activities | | | 2,002 | | | 2,055 | | | 2,098 |
| | | | | | ||||
Investing Activities: | | | | | | | |||
Capital expenditures | | | (243) | | | (263) | | | (326) |
Investments in businesses, net of cash acquired (Note 9) | | | — | | | (310) | | | (176) |
Dispositions of businesses (Note 9) | | | 6 | | | 1,032 | | | 52 |
Proceeds from sale of investments in Watsco, Inc. | | | — | | | — | | | 596 |
Other investing activities, net | | | 24 | | | (44) | | | 125 |
Net cash flows provided by (used in) investing activities | | | (213) | | | 415 | | | 271 |
| | | | | | ||||
Financing Activities: | | | | | | | |||
Increase (decrease) in short-term borrowings, net | | | 25 | | | 3 | | | (8) |
Issuance of project financing obligations | | | 107 | | | 117 | | | 99 |
Repayment of project financing obligations | | | (138) | | | — | | | (103) |
Purchase of shares from redeemable noncontrolling interest | | | — | | | — | | | (286) |
Dividends paid to noncontrolling interest | | | (28) | | | (46) | | | (31) |
Net transfers to UTC | | | (1,954) | | | (2,685) | | | (1,850) |
Other financing activities, net | | | 21 | | | (16) | | | (14) |
Net cash flows used in financing activities | | | (1,967) | | | (2,627) | | | (2,193) |
| | | | | | ||||
Effect of foreign exchange rates on cash and cash equivalents | | | 1 | | | (39) | | | 64 |
Net (decrease) increase in cash, cash equivalents and restricted cash | | | (177) | | | (196) | | | 240 |
Cash, cash equivalents and restricted cash, beginning of year | | | 1,134 | | | 1,330 | | | 1,090 |
Cash, cash equivalents and restricted cash, end of year | | | 957 | | | 1,134 | | | 1,330 |
Less: Restricted cash | | | 5 | | | 5 | | | 6 |
Cash and cash equivalents, end of year | | | $952 | | | $1,129 | | | $1,324 |
| | | | | | ||||
Supplemental Cash Flow Information: | | | | | | | |||
Interest paid, net of amounts capitalized | | | $28 | | | $16 | | | $14 |
Interest paid - related party | | | 55 | | | 59 | | | 202 |
Income taxes paid - related party | | | 475 | | | 649 | | | 608 |
Income taxes paid, net of refunds | | | $284 | | | $276 | | | $309 |
• | Level I – Quoted prices for identical instruments in active markets. |
• | Level II – Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. |
• | Level III – Instruments whose significant value drivers are unobservable. |
Customer relationships | | | 1-30 years |
Trademarks and trade names | | | 5-30 years |
Service contracts | | | 1-23 years |
Monitoring lines | | | 7-10 years |
Patents | | | 7-8 years |
(dollars in millions) | | | 2019 | | | 2018 |
Contract assets, current | | | $622 | | | $566 |
Contract assets, noncurrent (included within Other assets) | | | 57 | | | 100 |
Total contract assets | | | 679 | | | 666 |
Contract liabilities, current | | | (443) | | | (448) |
Contract liabilities, noncurrent (included within Other long-term liabilities) | | | (168) | | | (164) |
Total contract liabilities | | | (611) | | | (612) |
Net contract assets | | | $68 | | | $54 |
(dollars in millions) | | | 2019 | | | 2018 |
Trade receivables | | | $2,444 | | | $2,549 |
Receivables from affiliates | | | 143 | | | 113 |
Miscellaneous receivables | | | 184 | | | 152 |
| | $2,771 | | | $2,814 | |
Less: Allowance for doubtful accounts | | | (45) | | | (141) |
| | 2,726 | | | 2,673 |
(dollars in millions) | | | 2019 | | | 2018 |
Raw materials | | | $290 | | | $336 |
Work-in-process | | | 120 | | | 102 |
Finished goods | | | 922 | | | 925 |
| | $1,332 | | | 1,363 |
(dollars in millions) | | | Estimated Useful Lives (Years) | | | 2019 | | | 2018 |
Land | | | | | $113 | | | $114 | |
Buildings and improvements | | | 40 | | | 1,138 | | | 1,142 |
Machinery, tools and equipment | | | 3 to 25 | | | 1,924 | | | 1,815 |
Rental assets | | | 3 to 12 | | | 395 | | | 293 |
Other, including assets under construction | | | | | 188 | | | 180 | |
| | | | 3,758 | | | 3,544 | ||
Accumulated depreciation | | | | | (2,095) | | | (1,891) | |
| | | | $1,663 | | | $1,653 |
(dollars in millions) | | | HVAC | | | Refrigeration | | | Fire & Security | | | Total |
Balance as of January 1, 2018 | | | $5,472 | | | $1,417 | | | $3,176 | | | $10,065 |
Goodwill resulting from business combinations | | | — | | | 1 | | | 194 | | | 195 |
Foreign currency translation and other | | | (142) | | | (187) | | | (82) | | | (411) |
Balance as of December 31, 2018 | | | 5,330 | | | 1,231 | | | 3,288 | | | 9,849 |
Foreign currency translation and other | | | 21 | | | (3) | | | 17 | | | 35 |
Balance as of December 31, 2019 | | | $5,351 | | | $1,228 | | | $3,305 | | | $9,884 |
| | 2019 | | | 2018 | |||||||
(dollars in millions) | | | Gross Amount | | | Accumulated Amortization | | | Gross Amount | | | Accumulated Amortization |
Amortized: | | | | | | | | | ||||
Customer relationships | | | $1,479 | | | $(1,154) | | | $1,511 | | | $(1,098) |
Patents and trademarks | | | 287 | | | (201) | | | 292 | | | (189) |
Monitoring lines | | | 67 | | | (52) | | | 64 | | | (46) |
Service portfolios and other | | | 629 | | | (506) | | | 631 | | | (490) |
| | 2,462 | | | (1,913) | | | 2,498 | | | (1,823) | |
Unamortized: | | | | | | | | | ||||
Trademarks and other | | | 534 | | | — | | | 539 | | | — |
Total | | | $2,996 | | | $(1,913) | | | $3,037 | | | $(1,823) |
(dollars in millions) | | | 2020 | | | 2021 | | | 2022 | | | 2023 | | | 2024 |
Future amortization | | | $101 | | | $91 | | | $72 | | | $63 | | | $55 |
(dollars in millions) | | | 2019 | | | 2018 |
Accrued salaries, wages and employee benefits | | | $516 | | | $519 |
Accrued taxes | | | 318 | | | 325 |
Warranty related | | | 200 | | | 190 |
Project financing obligations | | | 234 | | | 150 |
Accrued restructuring | | | 66 | | | 56 |
Accrued legal and environmental reserves | | | 24 | | | 26 |
Customer advances and deferred revenue | | | 26 | | | 24 |
Other | | | 941 | | | 784 |
| | $2,325 | | | $2,074 |
(dollars in millions) | | | 2019 | | | 2018 |
Warranty related | | | $288 | | | $283 |
Environmental reserves | | | 203 | | | 200 |
Project financing obligations | | | 75 | | | 137 |
Asset retirement obligations | | | 74 | | | 73 |
Other | | | 625 | | | 610 |
| | $1,265 | | | $1,303 |
(dollars in millions) | | | 2019 | | | 2018 |
Change in Benefit Obligation | | | | | ||
Beginning balance | | | $2,581 | | | $2,822 |
Service cost | | | 31 | | | 33 |
Interest cost | | | 67 | | | 64 |
Actuarial (gain) loss | | | 351 | | | (110) |
Benefits paid | | | (132) | | | (114) |
Net settlement, curtailment and special termination benefits | | | (38) | | | (8) |
Other | | | 25 | | | (106) |
Ending balance | | | $2,885 | | | $2,581 |
| | | | |||
Change in Plan Assets | | | | | ||
Beginning balance | | | $2,635 | | | $3,000 |
Actual return on plan assets | | | 381 | | | (162) |
Employer contributions | | | 36 | | | 45 |
Benefits paid | | | (132) | | | (114) |
Settlements | | | (14) | | | (7) |
Other | | | 47 | | | (127) |
Ending balance | | | $2,953 | | | $2,635 |
| | | | |||
Funded Status | | | | | ||
Fair value of plan assets | | | $2,953 | | | $2,635 |
Benefit obligations | | | (2,885) | | | (2,581) |
Funded status of plan | | | $68 | | | $54 |
(dollars in millions) | | | 2019 | | | 2018 |
| | | | |||
Amounts Recognized in the Combined Balance Sheets Consist of | | | | | ||
Noncurrent assets | | | $488 | | | $442 |
Current liability | | | (9) | | | (16) |
Noncurrent liability | | | (411) | | | (372) |
Net amount recognized | | | $68 | | | $54 |
| | | | |||
Amounts Recognized in Accumulated Other Comprehensive Loss Consist of | | | | | ||
Net actuarial loss | | | $577 | | | $482 |
Prior service cost | | | 15 | | | 11 |
Net amount recognized | | | $592 | | | $493 |
(dollars in millions) | | | 2019 | | | 2018 |
Projected benefit obligation | | | $549 | | | $501 |
Accumulated benefit obligation | | | 506 | | | 463 |
Fair value of plan assets | | | 137 | | | 125 |
(dollars in millions) | | | 2019 | | | 2018 |
Projected benefit obligation | | | $690 | | | $616 |
Accumulated benefit obligation | | | 630 | | | 564 |
Fair value of plan assets | | | 270 | | | 228 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Pension Benefits: | | | | | | | |||
Service cost | | | $31 | | | $33 | | | $34 |
Interest cost | | | 67 | | | 64 | | | 65 |
Expected return on plan assets | | | (154) | | | (170) | | | (160) |
Amortization of prior service cost | | | 2 | | | 1 | | | 2 |
Recognized actuarial net loss | | | 9 | | | 16 | | | 14 |
Net settlement, curtailment and special termination benefits loss (gain) | | | 4 | | | 1 | | | (3) |
Net periodic pension benefit – employer | | | $(41) | | | $(55) | | | $(48) |
(dollars in millions) | | | 2019 |
Current year actuarial loss | | | $112 |
Amortization of actuarial loss | | | (9) |
Amortization of prior service cost | | | (2) |
Net settlement and curtailment gain | | | (4) |
Other | | | 2 |
Total recognized in other comprehensive loss | | | $99 |
Net recognized in net periodic pension benefit and other comprehensive loss | | | $58 |
(dollars in millions) | | | |
Net actuarial loss | | | $18 |
Prior service cost | | | 1 |
| | $19 |
| | Benefit Obligation | | | Net Cost | ||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2019 | | | 2018 | | | 2017 |
Discount rate | | | | | | | | | | | |||||
Projected benefit obligation | | | 2.0% | | | 2.8% | | | 2.8% | | | 2.5% | | | 2.7% |
Interest cost(1) | | | — | | | — | | | 2.7% | | | 2.4% | | | 2.5% |
Service cost(1) | | | — | | | — | | | 3.2% | | | 2.8% | | | 3.1% |
Salary scale | | | 3.4% | | | 3.0% | | | 3.0% | | | 3.0% | | | 2.6% |
Expected return on plan assets | | | — | | | — | | | 5.6% | | | 6.0% | | | 6.2% |
Note (1) | The 2019 and 2018 discount rates used to measure the service cost and interest cost applies to our significant plans. The projected benefit obligation discount rate is used for the service cost and interest cost measurements for non-significant plans. |
(dollars in millions) | | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | | Significant Observable Inputs (Level 2) | | | Significant Unobservable Inputs (Level 3) | | | Not Subject to Leveling | | | Total |
Asset Category | | | | | | | | | | | |||||
Public Equities: | | | | | | | | | | | |||||
Global Equities | | | $29 | | | $— | | | $— | | | $— | | | $29 |
Global Equity Commingled Funds(1) | | | — | | | 141 | | | — | | | — | | | 141 |
Enhanced Global Equities(2) | | | 3 | | | 3 | | | — | | | — | | | 6 |
Global Equity Funds at net asset value(8) | | | — | | | — | | | — | | | 927 | | | 927 |
Private Equities(3),(8) | | | — | | | — | | | 2 | | | 10 | | | 12 |
Fixed income securities: | | | | | | | | | | | |||||
Governments | | | 8 | | | 35 | | | — | | | — | | | 43 |
Corporate Bonds | | | — | | | 169 | | | — | | | — | | | 169 |
Fixed income securities(8) | | | — | | | — | | | — | | | 1,449 | | | 1,449 |
Real Estate(4),(8) | | | — | | | 3 | | | 12 | | | 6 | | | 21 |
Other(5),(8) | | | — | | | 68 | | | — | | | 23 | | | 91 |
Cash & cash equivalents(6),(8) | | | — | | | 3 | | | — | | | 44 | | | 47 |
Subtotal | | | $40 | | | $422 | | | $14 | | | $2,459 | | | $2,935 |
Other Assets & Liability(7) | | | | | | | | | | | 18 | ||||
Total at December 31, 2019 | | | | | | | | | | | $2,953 | ||||
| | | | | | | | | | ||||||
Public Equities: | | | | | | | | | | | |||||
Global Equities | | | $22 | | | $— | | | $— | | | $— | | | $22 |
Global Equity Commingled Funds(1) | | | 1 | | | 115 | | | — | | | — | | | 116 |
Enhanced Global Equities(2) | | | 1 | | | 4 | | | — | | | — | | | 5 |
Global Equity Funds at net asset value(8) | | | — | | | — | | | — | | | 815 | | | 815 |
Private Equities(3),(8) | | | — | | | — | | | 1 | | | 9 | | | 10 |
Fixed income securities: | | | | | | | | | | | |||||
Governments | | | 13 | | | 28 | | | — | | | — | | | 41 |
Corporate Bonds | | | — | | | 136 | | | — | | | — | | | 136 |
Fixed income securities(8) | | | — | | | — | | | — | | | 1,323 | | | 1,323 |
Real Estate(4),(8) | | | — | | | 3 | | | 10 | | | 13 | | | 26 |
Other(5),(8) | | | — | | | 63 | | | — | | | 18 | | | 81 |
Cash & cash equivalents(6),(8) | | | — | | | 7 | | | — | | | 37 | | | 44 |
Subtotal | | | $37 | | | $356 | | | $11 | | | $2,215 | | | $2,619 |
Other Assets & Liability(7) | | | | | | | | | | | 16 | ||||
Total at December 31, 2018 | | | | | | | | | | | $2,635 |
Note (1) | Represents commingled funds that invest primarily in common stocks. |
Note (2) | Represents enhanced equity separate account and commingled fund portfolios. A portion of the portfolio may include long-short market neutral and relative value strategies that invest in publicly traded, equity and fixed income securities, as well as derivatives of equity and fixed income securities and foreign currency. |
Note (3) | Represents limited partner investments with general partners that primarily invest in debt and equity. |
Note (4) | Represents investments in real estate including commingled funds and directly held properties. |
Note (5) | Represents insurance contracts and global balanced risk commingled funds consisting mainly of equity, bonds and some commodities. |
Note (6) | Represents short-term commercial paper, bonds and other cash or cash-like instruments. |
Note (7) | Represents trust receivables and payables that are not leveled. |
Note (8) | In accordance with ASU 2015-07, Fair Value Measurement (Topic 820), certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented for the total pension benefits plan assets. |
(dollars in millions) | | | EIN/ Pension Plan Number | | | Zone Status | | | FIP/ RP Status Pending/ Implemented | | | Contributions | | | Surcharge Imposed | | | Expiration Date of Collective- Bargaining Agreement | ||||||
Pension Fund | | | | | 2019 | | | 2018 | | | | | 2019 | | | 2018 | | | | | ||||
Metal and technology industry pension plan | | | N/A | | | Green | | | Green | | | No | | | $6 | | | $6 | | | No | | | September 30, 2021 |
Other funds | | | | | | | | | | | 14 | | | 15 | | | | | ||||||
| | | | | | | | | | $20 | | | $21 | | | | |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Service cost | | | $18 | | | $22 | | | $23 |
Non-service pension cost | | | (81) | | | (80) | | | (57) |
| | $(63) | | | $(58) | | | $(34) |
| | Stock Options | | | Stock Appreciation Rights | | | Performance Share Units | | | Other Incentive Shares/ Units | ||||||||||
(shares and units in thousands) | | | Shares | | | Average Price* | | | Shares | | | Average Price* | | | Units | | | Average Price* | | ||
Outstanding at | | | | | | | | | | | | | | | |||||||
December 31, 2018 | | | 71 | | | $85.86 | | | 5,635 | | | $100.16 | | | 289 | | | $110.59 | | | 499 |
Granted | | | 2 | | | 133.19 | | | 1,673 | | | 124.37 | | | 142 | | | 121.79 | | | 219 |
Ancillary** | | | — | | | — | | | — | | | — | | | 18 | | | 95.53 | | | — |
Exercised/earned | | | (35) | | | 87.18 | | | (1,658) | | | 89.30 | | | (155) | | | 95.54 | | | (211) |
Cancelled | | | (1) | | | 110.83 | | | (157) | | | 120.41 | | | (25) | | | 112.39 | | | (35) |
Net Transfers(1) | | | (1) | | | 95.23 | | | 665 | | | 105.29 | | | 93 | | | 108.91 | | | 121 |
December 31, 2019 | | | 36 | | | $91.06 | | | 6,158 | | | $109.71 | | | 362 | | | $120.16 | | | 593 |
* | Weighted-average grant/exercise price |
** | Ancillary shares granted based on actual performance achieved on the 2016 award |
Note (1) | Represents net activity related to employee movement between UTC business units and other miscellaneous adjustments. |
| | Equity Awards Vested and Expected to Vest | | | Equity Awards That Are Exercisable | ||||||||||||||||||||||
(shares in thousands; aggregate intrinsic value in millions) | | | Awards | | | Average Price* | | | Aggregate Intrinsic Value | | | Remaining Term** | | | Awards | | | Average Price* | | | Aggregate Intrinsic Value | | | Remaining Term** | | ||
Stock Options/Stock Appreciation rights | | | 6,083 | | | $109.31 | | | $246 | | | 6.1 years | | | 3,333 | | | $98.4 | | | $171 | | | 4.3 years | | ||
Performance Share Units/ Restricted Stock | | | 1,006 | | | $— | | | $151 | | | 1.7 years | | | | | | | | | |
* | Weighted-average exercise price per share |
** | Weighted-average contractual remaining term in years |
| | 2019 | | | 2018 | | | 2017 | |
Expected volatility | | | 18.8% - 19.7% | | | 17.5% - 21.1% | | | 19% |
Weighted-average volatility | | | 20% | | | 18% | | | 19% |
Expected term (in years) | | | 6.5 - 6.6 | | | 6.5-6.6 | | | 6.5 |
Expected dividend yield | | | 2.4% | | | 2.2% | | | 2.4% |
Risk-free rate | | | 2.3% - 2.7% | | | 1.3% - 2.7% | | | 0.5% - 2.5% |
(dollars in millions) | | | Foreign Currency Translation | | | Defined Benefit Pension and Postretirement Plans | | | Unrealized Gains (Losses) on Available- for-Sale Securities | | | Unrealized Hedging Gains (Losses) | | | Accumulated Other Comprehensive Income (Loss) |
Balance at January 1, 2017 | | | $(1,130) | | | $(211) | | | $262 | | | $(5) | | | $(1,084) |
Other comprehensive income (loss) before reclassifications, net | | | 747 | | | (32) | | | (31) | | | 2 | | | 686 |
Amounts reclassified, pre-tax | | | (10) | | | 16 | | | (394) | | | 1 | | | (387) |
Tax expense reclassified | | | — | | | 5 | | | 163 | | | — | | | 168 |
Balance at December 31, 2017 | | | $(393) | | | $(222) | | | $— | | | $(2) | | | $(617) |
Other comprehensive loss before reclassifications, net | | | (441) | | | (209) | | | — | | | — | | | (650) |
Amounts reclassified, pre-tax | | | — | | | 17 | | | — | | | 2 | | | 19 |
Tax expense reclassified | | | — | | | 33 | | | — | | | — | | | 33 |
Balance at December 31, 2018 | | | $(834) | | | $(381) | | | $— | | | $— | | | $(1,215) |
Other comprehensive loss before reclassifications, net | | | 52 | | | (109) | | | — | | | — | | | (57) |
Amounts reclassified, pre-tax | | | 2 | | | 11 | | | — | | | — | | | 13 |
Tax expense reclassified | | | — | | | 15 | | | — | | | — | | | 15 |
ASU 2018-02 adoption impact | | | — | | | (9) | | | — | | | — | | | (9) |
Balance at December 31, 2019 | | | $(780) | | | $(473) | | | $— | | | $— | | | $(1,253) |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
United States | | | $1,460 | | | $2,360 | | | $1,620 |
Foreign | | | $1,212 | | | $1,482 | | | $1,434 |
Total | | | $2,672 | | | $3,842 | | | $3,054 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Current: | | | | | | | |||
United States: | | | | | | | |||
Federal | | | $262 | | | $479 | | | 1,318 |
State | | | 72 | | | 119 | | | 99 |
Foreign | | | 305 | | | 342 | | | 342 |
| | 639 | | | 940 | | | 1,759 | |
Future: | | | | | | | |||
United States: | | | | | | | |||
Federal | | | (14) | | | (37) | | | 22 |
State | | | (2) | | | 24 | | | 2 |
Foreign | | | (106) | | | 146 | | | 4 |
| | (122) | | | 133 | | | 28 | |
Income tax expense | | | 517 | | | 1,073 | | | 1,787 |
Attributable to items credited to UTC Net Investment | | | $(36) | | | $(68) | | | $(168) |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Statutory U.S. federal income tax rate | | | 21.0% | | | 21.0% | | | 35.0% |
State income taxes | | | 2.5% | | | 2.6% | | | 1.8% |
Tax on international activities | | | 2.5% | | | 4.4% | | | (3.4)% |
Tax audit settlements | | | (5.6)% | | | —% | | | (0.4)% |
U.S. tax reform adoption | | | —% | | | —% | | | 26.1% |
Other | | | (1.0)% | | | (0.1)% | | | (0.6)% |
Effective income tax rate | | | 19.4% | | | 27.9% | | | 58.5% |
(dollars in millions) | | | 2019 | | | 2018 |
Future income tax benefits: | | | | | ||
Insurance and employee benefits | | | $76 | | | $76 |
Other asset basis differences | | | 128 | | | 126 |
Other liability basis differences | | | 556 | | | 331 |
Tax loss carryforward | | | 236 | | | 159 |
Tax credit carryforwards | | | 55 | | | 60 |
Valuation allowances | | | (128) | | | (107) |
| | $923 | | | $645 | |
| | | | |||
Future income taxes payable: | | | | | ||
Intangible assets | | | $392 | | | $403 |
Other asset basis differences | | | 297 | | | 165 |
| | $689 | | | $568 |
(dollars in millions) | | | Tax Loss Carryforwards | | | Tax Credit Carryforwards |
Expiration period: | | | | | ||
2020-2024 | | | $52 | | | $8 |
2025-2029 | | | 105 | | | 3 |
2030-2039 | | | 41 | | | 1 |
Indefinite | | | 882 | | | 43 |
Total | | | $ 1,080 | | | $55 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Balance at January 1 | | | $316 | | | $290 | | | $243 |
Additions for tax positions related to the current year | | | 30 | | | 27 | | | 54 |
Additions for tax positions of prior years | | | 14 | | | 3 | | | 17 |
Reductions for tax positions of prior years | | | (19) | | | (4) | | | (20) |
Settlements | | | (175) | | | — | | | (4) |
Balance at December 31 | | | $166 | | | $316 | | | $290 |
Gross interest expense related to unrecognized tax benefits | | | $8 | | | $8 | | | $4 |
Total accrued interest balance at December 31 | | | $25 | | | $33 | | | $24 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
HVAC | | | $56 | | | $20 | | | $36 |
Refrigeration | | | 14 | | | 23 | | | 13 |
Fire & Security | | | 53 | | | 34 | | | 57 |
Eliminations and other | | | 3 | | | 3 | | | 5 |
Total | | | $126 | | | $80 | | | $111 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Cost of sales | | | $36 | | | $36 | | | $48 |
Selling, general, & administrative | | | 90 | | | 44 | | | 63 |
Total | | | $126 | | | $80 | | | $111 |
(dollars in millions) | | | Severance | | | Facility Exit, Lease Termination and Other Costs | | | Total |
Balance at January 1, 2019 | | | $— | | | $— | | | $— |
Net pre-tax restructuring costs | | | 102 | | | 8 | | | 110 |
Utilization, foreign exchange and other costs | | | (60) | | | (7) | | | (67) |
Balance at December 31, 2019 | | | $42 | | | $1 | | | $43 |
(dollars in millions) | | | Expected Costs | | | Costs Incurred During 2019 | | | Remaining Costs at December 31, 2019 |
HVAC | | | $53 | | | $(51) | | | $2 |
Refrigeration | | | 16 | | | (14) | | | 2 |
Fire & Security | | | 49 | | | (43) | | | 6 |
Eliminations and other | | | 2 | | | (2) | | | — |
Total | | | $120 | | | $(110) | | | $10 |
(dollars in millions) | | | Severance | | | Facility Exit, Lease Termination and Other Costs | | | Total |
Balance at January 1, 2018 | | | $— | | | $— | | | $— |
Net pre-tax restructuring costs | | | 57 | | | 6 | | | 63 |
Utilization, foreign exchange and other costs | | | (26) | | | (4) | | | (30) |
Balance at December 31, 2018 | | | $31 | | | $2 | | | $33 |
Net pre-tax restructuring costs | | | 8 | | | 8 | | | 16 |
Utilization, foreign exchange and other costs | | | (30) | | | (9) | | | (39) |
Balance at December 31, 2019 | | | $9 | | | $1 | | | $10 |
(dollars in millions) | | | Expected Costs | | | Costs Incurred During 2018 | | | Costs Incurred During 2019 | | | Remaining Costs at December 31, 2019 |
HVAC | | | $24 | | | $(17) | | | $(7) | | | $— |
Refrigeration | | | 26 | | | (21) | | | — | | | 5 |
Fire & Security | | | 34 | | | (22) | | | (9) | | | 3 |
Eliminations and other | | | 3 | | | (3) | | | — | | | — |
Total | | | $87 | | | $(63) | | | $(16) | | | $8 |
(dollars in millions) | | | Severance | | | Facility Exit, Lease Termination and Other Costs | | | Total |
Balance at January 1, 2017 | | | $— | | | $— | | | $— |
Net pre-tax restructuring costs | | | 74 | | | 2 | | | 76 |
Utilization, foreign exchange and other costs | | | (33) | | | (1) | | | (34) |
Balance at December 31, 2017 | | | 41 | | | 1 | | | 42 |
Net pre-tax restructuring costs | | | (4) | | | 5 | | | 1 |
Utilization, foreign exchange and other costs | | | (26) | | | (1) | | | (27) |
Balance at December 31, 2018 | | | 11 | | | 5 | | | 16 |
Net pre-tax restructuring costs | | | (1) | | | 1 | | | — |
Utilization, foreign exchange and other costs | | | (7) | | | (1) | | | (8) |
Balance at December 31, 2019 | | | $3 | | | $5 | | | $8 |
(dollars in millions) | | | 2019 | | | 2018 |
Current assets | | | $4,324 | | | $4,123 |
Noncurrent assets | | | 2,058 | | | 1,703 |
Total assets | | | 6,382 | | | 5,826 |
Current liabilities | | | 2,310 | | | 2,204 |
Noncurrent liabilities | | | 592 | | | 445 |
Total liabilities | | | 2,902 | | | 2,649 |
Total net equity of investees | | | 3,480 | | | 3,177 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Net sales | | | $9,622 | | | $9,142 | | | $8,697 |
Gross profit | | | 1,741 | | | 1,673 | | | 1,606 |
Income from continuing operations | | | 578 | | | 645 | | | 561 |
Net income | | | 578 | | | 645 | | | 561 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Transaction gains | | | $— | | | $799 | | | $379 |
Impairment of equity method investment (Note 16) | | | (108) | | | — | | | — |
Other | | | 106 | | | 138 | | | 196 |
Total | | | $(2) | | | $937 | | | $575 |
(dollars in millions) | | | 2019 | | | 2018 |
Balance as of January 1 | | | $473 | | | $500 |
Warranties and performance guarantees issued | | | 182 | | | 171 |
Settlement made | | | (164) | | | (191) |
Other | | | (3) | | | (7) |
Balance as of December 31 | | | $488 | | | $473 |
(dollars in millions) | | | Year Ended December 31, 2019 |
Operating cash flows used for the measurement of operating lease liabilities | | | $(201) |
Operating lease right-of-use assets obtained in exchange for operating lease obligations | | | $136 |
(dollars in millions, except lease term and discount rate) | | | December 31, 2019 |
Operating lease right-of-use assets | | | $832 |
Accrued liabilities | | | (163) |
Operating lease liabilities | | | (682) |
Total operating lease liabilities | | | $(845) |
| | December 31, 2019 | |
Weighted-Average Remaining Lease Term (in years) | | | 8.0 |
Weighted-Average Discount Rate | | | 3.6% |
(dollars in millions, except lease term and discount rate) | | | Operating |
2020 | | | $182 |
2021 | | | 151 |
2022 | | | 121 |
2023 | | | 97 |
2024 | | | 73 |
Thereafter | | | 315 |
Total undiscounted lease payments | | | 939 |
Less imputed interest | | | (94) |
Total discounted lease payments | | | $845 |
| | Net sales | | | Operating profit | |||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 | | | 2018 | | | 2017 |
HVAC | | | $9,712 | | | $9,713 | | | $9,045 | | | $1,563 | | | $1,720 | | | $2,001 |
Refrigeration | | | 3,792 | | | 4,095 | | | 3,823 | | | 532 | | | 1,353 | | | 562 |
Fire & Security | | | 5,500 | | | 5,531 | | | 5,324 | | | 708 | | | 726 | | | 639 |
Total Segment | | | 19,004 | | | 19,339 | | | 18,192 | | | 2,803 | | | 3,799 | | | 3,202 |
Eliminations and other | | | (396) | | | (425) | | | (378) | | | (156) | | | (24) | | | (32) |
General corporate expenses | | | — | | | — | | | — | | | (156) | | | (138) | | | (140) |
Combined | | | $18,608 | | | $18,914 | | | $17,814 | | | $2,491 | | | $3,637 | | | $3,030 |
| | Segment Assets | | | Capital Expenditures | | | Depreciation & Amortization | |||||||||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 | | | 2018 | | | 2017 | | | 2019 | | | 2018 | | | 2017 |
HVAC | | | $1,953 | | | $1,844 | | | $1,630 | | | $150 | | | $149 | | | $148 | | | $160 | | | $164 | | | $173 |
Refrigeration | | | 989 | | | 998 | | | 1,017 | | | 30 | | | 40 | | | 36 | | | 34 | | | 36 | | | 33 |
Fire & Security | | | 1,728 | | | 1,764 | | | 1,698 | | | 50 | | | 45 | | | 50 | | | 123 | | | 141 | | | 152 |
Total Segment | | | 4,670 | | | 4,606 | | | 4,345 | | | 230 | | | 234 | | | 234 | | | 317 | | | 341 | | | 358 |
Eliminations and other | | | 10 | | | (4) | | | (10) | | | 13 | | | 29 | | | 92 | | | 18 | | | 16 | | | 14 |
Combined | | | $4,680 | | | $4,602 | | | $4,335 | | | $243 | | | $263 | | | $326 | | | $335 | | | $357 | | | $372 |
Cash and cash equivalents | | | 952 | | | 1,129 | | | 1,324 | | | | | | | | | | | | | ||||||
Other assets, current | | | 327 | | | 378 | | | 341 | | | | | | | | | | | | | ||||||
Total Current Assets | | | $5,959 | | | $6,109 | | | $6,000 | | | | | | | | | | | | |
| | External Net sales | | | Long-Lived Assets | |||||||||||||
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 | | | 2019 | | | 2018 | | | 2017 |
United States Operations | | | $9,594 | | | $9,415 | | | $8,686 | | | $701 | | | $700 | | | $727 |
International Operations: | | | | | | | | | | | | | ||||||
Europe | | | 5,327 | | | 5,711 | | | 5,323 | | | 439 | | | 451 | | | 480 |
Asia Pacific | | | 2,813 | | | 2,853 | | | 2,782 | | | 241 | | | 244 | | | 222 |
Other | | | 874 | | | 935 | | | 1,023 | | | 282 | | | 258 | | | 255 |
| | $18,608 | | | $18,914 | | | $17,814 | | | $1,663 | | | $1,653 | | | $1,684 |
(dollars in millions) | | | 2019 | | | 2018 | | | 2017 |
Sales Type | | | | | | | |||
Product | | | $8,279 | | | $8,395 | | | $7,902 |
Service | | | 1,433 | | | 1,318 | | | 1,143 |
Total HVAC sales | | | 9,712 | | | 9,713 | | | 9,045 |
Product | | | 3,405 | | | 3,665 | | | 3,427 |
Service | | | 387 | | | 430 | | | 396 |
Total Refrigeration sales | | | 3,792 | | | 4,095 | | | 3,823 |
Product | | | 4,072 | | | 4,039 | | | 3,824 |
Service | | | 1,428 | | | 1,492 | | | 1,500 |
Total Fire & Security sales | | | 5,500 | | | 5,531 | | | 5,324 |
Total segment sales | | | 19,004 | | | 19,339 | | | 18,192 |
Eliminations and other | | | (396) | | | (425) | | | (378) |
Combined | | | $18,608 | | | $18,914 | | | $17,814 |
(Dollars in millions) | | | |
Allowances for Doubtful Accounts | | | |
Balance, January 1, 2017 | | | $157 |
Provision charged to income | | | 12 |
Doubtful accounts written off (net) | | | (23) |
Other adjustments | | | 6 |
Balance, December 31, 2017 | | | 152 |
Provision charged to income | | | 20 |
Doubtful accounts written off (net) | | | (22) |
Other adjustments | | | (9) |
Balance, December 31, 2018 | | | 141 |
Provision charged to income | | | 18 |
Doubtful accounts written off (net) | | | (45) |
Other adjustments(1) | | | (69) |
Balance, December 31, 2019 | | | $45 |
(Dollars in millions) | | | |
Future Income Tax Benefits — Valuation allowance | | | |
Balance, January 1, 2017 | | | $104 |
Additions charged to income tax expense | | | 17 |
Reductions credited to income tax expense | | | (11) |
Other adjustments | | | 3 |
Balance, December 31, 2017 | | | 113 |
Additions charged to income tax expense | | | 15 |
Reductions credited to income tax expense | | | (14) |
Other adjustments | | | (7) |
Balance, December 31, 2018 | | | 107 |
Additions charged to income tax expense | | | 41 |
Reductions credited to income tax expense | | | (16) |
Other adjustments | | | (4) |
Balance, December 31, 2019 | | | $128 |
(1) | Includes $61 million of the prior year allowance for doubtful accounts which has been reflected as a direct reduction in Trade receivables. |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions, except per share amounts; shares in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Net sales | | | | | | | | | ||||
Product sales (Note 5) | | | $4,193 | | | $3,998 | | | $10,615 | | | $11,703 |
Service sales | | | 809 | | | 824 | | | 2,247 | | | 2,404 |
| | 5,002 | | | 4,822 | | | 12,862 | | | 14,107 | |
Costs and expenses | | | | | | | | | ||||
Cost of products sold (Note 5) | | | 2,884 | | | 2,784 | | | 7,464 | | | 8,255 |
Cost of services sold | | | 557 | | | 592 | | | 1,574 | | | 1,706 |
Research and development | | | 100 | | | 102 | | | 292 | | | 302 |
Selling, general and administrative | | | 681 | | | 702 | | | 2,010 | | | 2,066 |
| | 4,222 | | | 4,180 | | | 11,340 | | | 12,329 | |
Equity method investment net earnings | | | 62 | | | 78 | | | 148 | | | 198 |
Other income (expense), net | | | 239 | | | (91) | | | 168 | | | (42) |
Operating profit | | | 1,081 | | | 629 | | | 1,838 | | | 1,934 |
Non-service pension benefit | | | 16 | | | 47 | | | 47 | | | 124 |
Interest (expense) income, net | | | (88) | | | 3 | | | (206) | | | 23 |
Income from operations before income taxes | | | 1,009 | | | 679 | | | 1,679 | | | 2,081 |
Income tax expense | | | 261 | | | 175 | | | 560 | | | 380 |
Net income from operations | | | 748 | | | 504 | | | 1,119 | | | 1,701 |
Less: Non-controlling interest in subsidiaries' earnings from operations | | | 7 | | | 12 | | | 21 | | | 25 |
Net income attributable to common shareowners | | | $741 | | | $492 | | | $1,098 | | | $1,676 |
| | | | | | | | |||||
Earnings per share (Note 3) | | | | | | | | | ||||
Basic | | | $0.86 | | | $0.57 | | | $1.27 | | | $1.94 |
Diluted | | | $0.84 | | | $0.57 | | | $1.25 | | | $1.94 |
| | | | | | | | |||||
Weighted-average number of shares outstanding (Note 3) | | | | | | | | | ||||
Basic | | | 866.4 | | | 866.2 | | | 866.3 | | | 866.2 |
Diluted | | | 881.5 | | | 866.2 | | | 876.2 | | | 866.2 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Net income from operations | | | $748 | | | $504 | | | $1,119 | | | $1,701 |
Other comprehensive income (loss), net of tax | | | | | | | | | ||||
Foreign currency translation adjustments arising during period | | | 307 | | | (278) | | | 68 | | | (263) |
Pension and post-retirement benefit plan adjustments | | | 5 | | | 2 | | | 18 | | | 11 |
Other comprehensive income (loss), net of tax | | | 312 | | | (276) | | | 86 | | | (252) |
Comprehensive income | | | 1,060 | | | 228 | | | 1,205 | | | 1,449 |
Less: Comprehensive income attributable to non-controlling interest | | | (12) | | | (8) | | | (25) | | | (23) |
Comprehensive income attributable to common shareowners | | | $1,048 | | | $220 | | | $1,180 | | | $1,426 |
(dollars in millions) | | | September 30, 2020 | | | December 31, 2019 |
Assets | | | | | ||
Cash and cash equivalents | | | $3,848 | | | $952 |
Accounts receivable, net (Note 5 and Note 6) | | | 2,872 | | | 2,726 |
Contract assets, current | | | 753 | | | 622 |
Inventories, net | | | 1,581 | | | 1,332 |
Other assets, current | | | 280 | | | 327 |
Total current assets | | | 9,334 | | | 5,959 |
Future income tax benefits | | | 439 | | | 500 |
Fixed assets, net | | | 1,676 | | | 1,663 |
Operating lease right-of-use assets | | | 823 | | | 832 |
Intangible assets, net | | | 1,024 | | | 1,083 |
Goodwill | | | 9,906 | | | 9,884 |
Pension and post-retirement assets | | | 574 | | | 490 |
Equity method investments | | | 1,696 | | | 1,739 |
Other assets | | | 256 | | | 256 |
Total Assets | | | $25,728 | | | $22,406 |
| | | | |||
Liabilities and Equity | | | | | ||
Accounts payable (Note 5) | | | $2,019 | | | $1,701 |
Accrued liabilities (Note 5) | | | 2,445 | | | 2,088 |
Contract liabilities, current | | | 495 | | | 443 |
Current portion of long-term debt | | | 223 | | | 237 |
Total current liabilities | | | 5,182 | | | 4,469 |
Long-term debt | | | 11,751 | | | 82 |
Future pension and post-retirement obligations | | | 473 | | | 456 |
Future income tax obligations (Note 5 and Note 14) | | | 471 | | | 1,099 |
Operating lease liabilities | | | 676 | | | 682 |
Other long-term liabilities (Note 5) | | | 1,738 | | | 1,183 |
Total Liabilities | | | 20,291 | | | 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; 866,687,269 shares issued and outstanding as of September 30, 2020 | | | 9 | | | — |
Additional paid-in capital | | | 5,327 | | | — |
Retained earnings | | | 932 | | | — |
Accumulated other comprehensive loss | | | (1,172) | | | (1,253) |
Non-controlling interest | | | 341 | | | 333 |
Total Equity | | | 5,437 | | | 14,435 |
Total Liabilities and Equity | | | $25,728 | | | $22,406 |
(dollars in millions) | | | UTC Net Investment | | | Accumulated Other Comprehensive Loss | | | Common Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Non- Controlling Interest | | | Total Equity |
Balance as of 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) | | | — | | | — | | | — | | | — | | | — |
Balance as of 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) |
Net transfers to UTC | | | (445) | | | — | | | — | | | — | | | — | | | — | | | (445) |
Balance as of June 30, 2019 | | | 15,799 | | | (1,202) | | | — | | | — | | | — | | | 363 | | | 14,960 |
Net income | | | 492 | | | — | | | — | | | — | | | — | | | 12 | | | 504 |
Other comprehensive loss, net of tax | | | — | | | (272) | | | — | | | — | | | — | | | (4) | | | (276) |
Net transfers to UTC | | | (544) | | | — | | | — | | | — | | | — | | | — | | | (544) |
Balance as of September 30, 2019 | | | $15,747 | | | $(1,474) | | | $— | | | $— | | | $— | | | $371 | | | $14,644 |
(dollars in millions) | | | UTC Net Investment | | | Accumulated Other Comprehensive Loss | | | Common Stock | | | Additional Paid-In Capital | | | Retained Earnings | | | Non- Controlling Interest | | | Total Equity |
Balance as of 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) |
Balance as of March 31, 2020 | | | 4,433 | | | (1,736) | | | — | | | — | | | — | | | 329 | | | 3,026 |
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 |
Net transfers from UTC | | | 859 | | | — | | | — | | | — | | | — | | | — | | | 859 |
Reclassification of UTC Net Investment to Common stock and Additional paid-in capital | | | (5,292) | | | — | | | 9 | | | 5,283 | | | — | | | — | | | — |
Balance as of June 30, 2020 | | | — | | | (1,479) | | | 9 | | | 5,307 | | | 191 | | | 338 | | | 4,366 |
Net income | | | — | | | — | | | — | | | — | | | 741 | | | 7 | | | 748 |
Other comprehensive income, net of tax | | | — | | | 307 | | | — | | | — | | | — | | | 5 | | | 312 |
Common stock issued under employee plans | | | — | | | — | | | — | | | 20 | | | — | | | — | | | 20 |
Dividends attributable to non-controlling interest | | | — | | | — | | | — | | | — | | | — | | | (9) | | | (9) |
Balance as of September 30, 2020 | | | $— | | | $(1,172) | | | $9 | | | $5,327 | | | $932 | | | $341 | | | $5,437 |
| | For the Nine Months Ended September 30, | ||||
(dollars in millions) | | | 2020 | | | 2019 |
Operating Activities | | | | | ||
Net income from operations | | | $1,119 | | | $1,701 |
Adjustments to reconcile net income from operations to net cash flows provided by operating activities, net of acquisitions and dispositions | | | | | ||
Depreciation and amortization | | | 241 | | | 251 |
Deferred income tax provision | | | 121 | | | (109) |
Stock compensation costs | | | 56 | | | 40 |
Equity method investment net earnings | | | (148) | | | (198) |
Distributions from equity method investments | | | 88 | | | 80 |
Impairment charge on minority-owned joint venture investments | | | 72 | | | 108 |
Gain on sale of investment | | | (252) | | | — |
Changes in operating assets and liabilities | | | | | ||
Accounts receivable, net | | | (117) | | | (205) |
Contract assets, current | | | (120) | | | (50) |
Inventories, net | | | (237) | | | (269) |
Other assets, current | | | 52 | | | 50 |
Accounts payable and accrued liabilities | | | 529 | | | (198) |
Contract liabilities, current | | | 44 | | | (10) |
Defined benefit plan contributions | | | (29) | | | (29) |
Other operating activities, net | | | 74 | | | (173) |
Net cash flows provided by operating activities | | | 1,493 | | | 989 |
| | | | |||
Investing Activities | | | | | ||
Capital expenditures | | | (151) | | | (139) |
Proceeds on sale of investment | | | 300 | | | — |
Receipt from settlement of derivative contracts | | | 67 | | | — |
Other investing activities, net | | | 14 | | | (11) |
Net cash flows provided by (used in) investing activities | | | 230 | | | (150) |
| | | | |||
Financing Activities | | | | | ||
(Decrease) increase in short-term borrowings, net | | | (22) | | | 43 |
Issuance of long-term debt | | | 11,762 | | | 106 |
Repayment of long-term debt | | | (124) | | | (98) |
Dividends paid on common stock | | | (70) | | | — |
Dividends paid to non-controlling interest | | | (17) | | | (4) |
Net transfers to UTC | | | (10,359) | | | (1,111) |
Other financing activities, net | | | 3 | | | (31) |
Net cash flows provided by (used in) financing activities | | | 1,173 | | | (1,095) |
Effect of foreign exchange rate changes on cash and cash equivalents | | | — | | | (12) |
Net increase (decrease) in cash and cash equivalents and restricted cash | | | 2,896 | | | (268) |
Cash, cash equivalents and restricted cash, beginning of period | | | 957 | | | 1,134 |
Cash, cash equivalents and restricted cash, end of period | | | 3,853 | | | 866 |
Less: restricted cash | | | 5 | | | 4 |
Cash and cash equivalents, end of period | | | $3,848 | | | $862 |
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |||||||
(dollars in millions, except per share amounts; shares in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Net income attributable to common shareowners | | | $741 | | | $492 | | | $1,098 | | | $1,676 |
| | | | | | | | |||||
Basic weighted-average number of shares outstanding | | | 866.4 | | | 866.2 | | | 866.3 | | | 866.2 |
Stock awards and equity units (share equivalent) | | | 15.1 | | | — | | | 9.9 | | | — |
Diluted weighted-average number of shares outstanding | | | 881.5 | | | 866.2 | | | 876.2 | | | 866.2 |
| | | | | | | | |||||
Earnings Per Share | | | | | | | | | ||||
Basic | | | $0.86 | | | $0.57 | | | $1.27 | | | $1.94 |
Diluted | | | $0.84 | | | $0.57 | | | $1.25 | | | $1.94 |
(dollars in millions) | | | September 30, 2020 | | | December 31, 2019 |
Contract assets, current | | | $753 | | | $622 |
Contract assets, non-current (included within Other assets) | | | 75 | | | 57 |
Total contract assets | | | 828 | | | 679 |
Contract liabilities, current | | | (495) | | | (443) |
Contract liabilities, non-current (included within Other long-term liabilities) | | | (166) | | | (168) |
Total contract liabilities | | | (661) | | | (611) |
Net contract assets | | | $167 | | | $68 |
(dollars in millions) | | | September 30, 2020 | | | December 31, 2019 |
Trade receivables | | | $2,578 | | | $2,444 |
Receivables from affiliates | | | 213 | | | 143 |
Other receivables | | | 169 | | | 184 |
Accounts receivable | | | 2,960 | | | 2,771 |
Less: Allowance for expected credit losses | | | (88) | | | (45) |
Accounts receivable, net | | | $2,872 | | | $2,726 |
(dollars in millions) | | | |
Balance as of January 1, 2020 | | | $45 |
Provision for expected credit losses | | | 38 |
Write-offs charged against the allowance for expected credit losses | | | (2) |
Other (including impact of adoption of ASU 2016-13) | | | 7 |
Balance as of September 30, 2020 | | | $88 |
(dollars in millions) | | | September 30, 2020 | | | December 31, 2019 |
Raw materials | | | $248 | | | $290 |
Work-in-process | | | 148 | | | 120 |
Finished goods | | | 1,185 | | | 922 |
Inventories, net | | | $1,581 | | | $1,332 |
(dollars in millions) | | | Estimated Useful Lives (Years) | | | September 30, 2020 | | | December 31, 2019 |
Land | | | | | $112 | | | $113 | |
Buildings and improvements | | | 40 | | | 1,129 | | | 1,138 |
Machinery, tools and equipment | | | 3 to 25 | | | 2,047 | | | 1,924 |
Rental assets | | | 3 to 12 | | | 404 | | | 395 |
Other, including assets under construction | | | | | 187 | | | 188 | |
Fixed assets, gross | | | | | 3,879 | | | 3,758 | |
Accumulated depreciation | | | | | (2,203) | | | (2,095) | |
Fixed assets, net | | | | | $1,676 | | | $1,663 |
(dollars in millions) | | | HVAC | | | Refrigeration | | | Fire & Security | | | Total |
Balance as of January 1, 2020 | | | $5,351 | | | $1,228 | | | $3,305 | | | $9,884 |
Foreign currency translation | | | 2 | | | 5 | | | 15 | | | 22 |
Balance as of September 30, 2020 | | | $5,353 | | | $1,233 | | | $3,320 | | | $9,906 |
| | September 30, 2020 | | | December 31, 2019 | |||||||
(dollars in millions) | | | Gross Amount | | | Accumulated Amortization | | | Gross Amount | | | Accumulated Amortization |
Amortized: | | | | | | | | | ||||
Customer relationships | | | $1,506 | | | $(1,223) | | | $1,479 | | | $(1,154) |
Patents and trademarks | | | 293 | | | (213) | | | 287 | | | (201) |
Monitoring lines | | | 67 | | | (55) | | | 67 | | | (52) |
Service portfolios and other | | | 636 | | | (528) | | | 629 | | | (506) |
| | 2,502 | | | (2,019) | | | 2,462 | | | (1,913) | |
Unamortized: | | | | | | | | | ||||
Trademarks and other | | | 541 | | | — | | | 534 | | | — |
Intangible assets, net | | | $3,043 | | | $(2,019) | | | $2,996 | | | $(1,913) |
(dollars in millions) | | | | | | | |||
Debt Description | | | Interest Rate | | | September 30, 2020 | | | December 31, 2019 |
3-Year Term Loan Credit Facility due February 10, 2023 | | | 1.275%1 | | | $1,7502 | | | $— |
1.923% Notes due February 15, 2023 | | | 1.923% | | | 5002 | | | — |
2.242% Notes due February 15, 2025 | | | 2.242% | | | 2,0002 | | | — |
2.493% Notes due February 15, 2027 | | | 2.493% | | | 1,2502 | | | — |
2.722% Notes due February 15, 2030 | | | 2.722% | | | 2,0002 | | | — |
2.700% Notes due February 15, 2031 | | | 2.700% | | | 750 | | | — |
3.377% Notes due April 5, 2040 | | | 3.377% | | | 1,5002 | | | — |
3.577% Notes due April 5, 2050 | | | 3.577% | | | 2,0002 | | | — |
Other (including project financing obligations and finance leases) | | | | | 309 | | | 319 | |
Total principal long-term debt | | | | | 12,059 | | | 319 | |
Other (discounts and debt issuance costs) | | | | | (85) | | | — | |
Total debt | | | | | 11,974 | | | 319 | |
Less: current portion of long-term debt | | | | | 223 | | | 237 | |
Long-term debt, net of current portion | | | | | $11,751 | | | $82 |
1 | The interest rate on the term loan as of September 30, 2020 was 1.275% which is a variable rate based on one-month LIBOR plus 112.5 basis points. |
2 | The net proceeds of the financing arrangements were used to distribute cash to UTC. |
(dollars in millions) | | | |
2020 | | | $223 |
2021 | | | $45 |
2022 | | | $40 |
2023 | | | $2,251 |
2024 | | | $— |
Thereafter | | | $9,500 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Defined benefit plans | | | $1 | | | $2 | | | $29 | | | $29 |
Defined contribution plans | | | $23 | | | $22 | | | $78 | | | $71 |
Multi-employer pension plans | | | $5 | | | $5 | | | $15 | | | $15 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Service cost | | | $7 | | | $7 | | | $22 | | | $23 |
Interest cost | | | 13 | | | 17 | | | 39 | | | 50 |
Expected return on plan assets | | | (35) | | | (37) | | | (104) | | | (115) |
Amortization of prior service credit | | | 1 | | | — | | | 2 | | | 1 |
Recognized actuarial net loss | | | 5 | | | 2 | | | 15 | | | 7 |
Net settlement, curtailment and special termination benefit loss | | | — | | | — | | | 1 | | | 1 |
Net periodic pension benefit | | | $(9) | | | $(11) | | | $(25) | | | $(33) |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Service cost | | | $— | | | $4 | | | $— | | | $13 |
Non-service pension benefit | | | — | | | (20) | | | (2) | | | (59) |
Total net periodic benefit | | | $— | | | $(16) | | | $(2) | | | $(46) |
| | Stock Options and Stock Appreciation Rights | | | Performance Share Units | | | Restricted Share Units | ||||||||||
(shares and units in thousands) | | | Shares | | | Average Price1 | | | Units | | | Average Price2 | | | Units | | | Average Price2 |
Outstanding as of April 3, 20203 | | | 36,015 | | | $19.90 | | | 68 | | | $21.23 | | | 5,622 | | | $21.37 |
Granted | | | 3,753 | | | $16.62 | | | 728 | | | $18.23 | | | 443 | | | $18.98 |
Exercised | | | (984) | | | $15.52 | | | — | | | $— | | | (116) | | | $20.42 |
Forfeited/Cancelled | | | (509) | | | $22.73 | | | (22) | | | $19.25 | | | (108) | | | $22.25 |
Outstanding as of September 30, 2020 | | | 38,275 | | | $19.66 | | | 774 | | | $18.48 | | | 5,841 | | | $21.27 |
1 | Weighted-average exercise price |
2 | Weighted-average grant date fair value |
3 | Effective date of conversion upon the Separation |
| | Equity Awards Vested and Expected to Vest | | | Equity Awards That Are Exercisable | |||||||||||||||||||
(shares and units in thousands; aggregate intrinsic value in dollars in thousands) | | | Awards | | | Average Price1 | | | Aggregate Intrinsic Value | | | Remaining Life2 | | | Awards | | | Average Price1 | | | Aggregate Intrinsic Value | | | Remaining Life2 |
Stock Options/ Stock Appreciation Rights | | | 36,868 | | | $19.61 | | | $403,105 | | | 6.7 | | | 16,173 | | | $16.97 | | | $219,447 | | | 4.2 |
Performance Share Units/ Restricted Stock Units | | | 6,291 | | | $20.96 | | | $192,116 | | | 1.8 | | | | | | | | |
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 |
| | For the Nine Months Ended September 30, 2020 | |
Volatility | | | 35.6% |
Expected life (in years) | | | 7.0 |
Expected dividend yield | | | 2.0% |
Range of risk-free rate | | | 0.1% - 1.0% |
(dollars in millions) | | | Foreign Currency Translation | | | Defined Benefit Pension and Post- retirement Plans | | | Accumulated Other Comprehensive Loss |
Three Months Ended September 30, 2020 | | | | | | | |||
Balance as of June 30, 2020 | | | $(1,018) | | | $(461) | | | $(1,479) |
Other comprehensive income before reclassifications, net | | | 302 | | | — | | | 302 |
Amounts reclassified, pre-tax | | | — | | | 6 | | | 6 |
Tax expense reclassified | | | — | | | (1) | | | (1) |
Balance as of September 30, 2020 | | | $(716) | | | $(456) | | | $(1,172) |
Nine Months Ended September 30, 2020 | | | | | | | |||
Balance as of January 1, 2020 | | | $(780) | | | $(473) | | | $(1,253) |
Other comprehensive income before reclassifications, net | | | 64 | | | 2 | | | 66 |
Amounts reclassified, pre-tax | | | — | | | 18 | | | 18 |
Tax benefit reclassified | | | — | | | (3) | | | (3) |
Balance as of September 30, 2020 | | | $(716) | | | $(456) | | | $(1,172) |
(dollars in millions) | | | Foreign Currency Translation | | | Defined Benefit Pension and Post- retirement Plans | | | Accumulated Other Comprehensive Loss |
Three Months Ended September 30, 2019 | | | | | | | |||
Balance as of June 30, 2019 | | | $(821) | | | $(381) | | | $(1,202) |
Other comprehensive loss before reclassifications, net | | | (274) | | | — | | | (274) |
Amounts reclassified, pre-tax | | | — | | | 2 | | | 2 |
Balance as of September 30, 2019 | | | $(1,095) | | | $(379) | | | $(1,474) |
Nine Months Ended September 30, 2019 | | | | | | | |||
Balance as of January 1, 2019 | | | $(834) | | | $(381) | | | $(1,215) |
Other comprehensive (loss) income before reclassifications, net | | | (261) | | | 2 | | | (259) |
Amounts reclassified, pre-tax | | | — | | | 9 | | | 9 |
ASU 2018-02 adoption impact | | | — | | | (9) | | | (9) |
Balance as of September 30, 2019 | | | $(1,095) | | | $(379) | | | $(1,474) |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
HVAC | | | $— | | | $12 | | | $3 | | | $47 |
Refrigeration | | | (1) | | | 7 | | | 2 | | | 14 |
Fire & Security | | | 4 | | | 14 | | | 13 | | | 35 |
Eliminations and other | | | — | | | 1 | | | 1 | | | 1 |
Total restructuring costs | | | $3 | | | $34 | | | $19 | | | $97 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Cost of sales | | | $(1) | | | $14 | | | $5 | | | $27 |
Selling, general and administrative | | | 4 | | | 20 | | | 14 | | | 70 |
Total restructuring costs | | | $3 | | | $34 | | | $19 | | | $97 |
(dollars in millions) | | | Severance | | | Facility Exit, Lease Termination and Other Costs | | | Total |
For the Three Months Ended September 30, 2020 | | | | | | | |||
Restructuring accrual as of June 30, 2020 | | | $8 | | | $1 | | | $9 |
Net pre-tax restructuring costs | | | 5 | | | — | | | 5 |
Utilization, foreign exchange and other costs | | | (4) | | | — | | | (4) |
Balance as of September 30, 2020 | | | $9 | | | $1 | | | $10 |
| | | | | | ||||
For the Nine Months Ended September 30, 2020 | | | | | | | |||
Restructuring accrual as of January 1, 2020 | | | $— | | | $— | | | $— |
Net pre-tax restructuring costs | | | 17 | | | 1 | | | 18 |
Utilization, foreign exchange and other costs | | | (8) | | | — | | | (8) |
Balance as of September 30, 2020 | | | $9 | | | $1 | | | $10 |
(dollars in millions) | | | Expected Costs | | | Costs Incurred - Three Months Ended March 31, 2020 | | | Costs Incurred - Three Months Ended June 30, 2020 | | | Costs Incurred - Three Months Ended September 30, 2020 | | | Remaining Costs at September 30, 2020 |
HVAC | | | $5 | | | $(1) | | | $(2) | | | $(1) | | | $1 |
Refrigeration | | | 3 | | | — | | | (3) | | | — | | | — |
Fire & Security | | | 13 | | | (1) | | | (5) | | | (4) | | | 3 |
Eliminations and other | | | 1 | | | — | | | (1) | | | — | | | — |
Total | | | $22 | | | $(2) | | | $(11) | | | $(5) | | | $4 |
(dollars in millions) | | | Severance | | | Facility Exit, Lease Termination and Other Costs | | | Total |
For the Three Months Ended September 30, 2020 | | | | | | | |||
Restructuring accrual as of June 30, 2020 | | | $27 | | | $— | | | $27 |
Net pre-tax restructuring costs | | | — | | | — | | | — |
Utilization, foreign exchange and other costs | | | (5) | | | — | | | (5) |
Balance as of September 30, 2020 | | | $22 | | | $— | | | $22 |
| | | | | | ||||
For the Nine Months Ended September 30, 2020 | | | | | | | |||
Restructuring accrual as of January 1, 2020 | | | $43 | | | $1 | | | $44 |
Net pre-tax restructuring costs | | | 3 | | | — | | | 3 |
Utilization, foreign exchange and other costs | | | (24) | | | (1) | | | (25) |
Balance as of September 30, 2020 | | | 22 | | | $— | | | $22 |
(dollars in millions) | | | Expected Costs | | | Costs Incurred in 2019 | | | Costs Incurred - Three Months Ended March 31, 2020 | | | Costs Incurred - Three Months Ended June 30, 2020 | | | Costs Incurred - Three Months Ended September 30, 2020 | | | Remaining Costs at September 30, 2020 |
HVAC | | | $53 | | | $(51) | | | $(1) | | | $2 | | | $(1) | | | $2 |
Refrigeration | | | 16 | | | (14) | | | — | | | (1) | | | 1 | | | 2 |
Fire & Security | | | 49 | | | (43) | | | (2) | | | (1) | | | — | | | 3 |
Eliminations and other | | | 2 | | | (2) | | | — | | | — | | | — | | | — |
Total | | | $120 | | | $(110) | | | $(3) | | | $— | | | $— | | | $7 |
| | For the Nine Months Ended September 30, | ||||
(dollars in millions) | | | 2020 | | | 2019 |
Balance as of January 1 | | | $488 | | | $473 |
Warranties, performance guarantees issued and changes in estimated liability | | | 131 | | | 133 |
Settlements made | | | (111) | | | (126) |
Other | | | 1 | | | (2) |
Balance as of September 30 | | | $509 | | | $478 |
September 30, 2020 | ||||||||||||
(dollars in millions) | | | Total | | | Level 1 | | | Level 2 | | | Level 3 |
Recurring fair value measurement: | | | | | | | | | ||||
Money market mutual funds | | | $381 | | | $— | | | $38 | | | $— |
Derivative assets | | | $152 | | | $— | | | $15 | | | $— |
Derivative liabilities | | | $(33)3 | | | $— | | | $(33) | | | $— |
1 | Included in Cash and cash equivalents on the accompanying Unaudited Condensed Consolidated Balance Sheet |
2 | Included in Other assets, current on the accompanying Unaudited Condensed Consolidated Balance Sheet |
3 | Included in Accrued liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet |
| | September 30, 2020 | | | December 31, 2019 | |||||||
(dollars in millions) | | | Carrying Amount | | | Fair Value | | | Carrying Amount | | | Fair Value |
Current and long-term debt (excluding finance leases) | | | $11,969 | | | $12,531 | | | $313 | | | $313 |
September 30, 2020 | ||||||||||||
(dollars in millions) | | | Total | | | Level 1 | | | Level 2 | | | Level 3 |
Current and long-term debt (excluding finance leases) | | | $12,531 | | | $10,478 | | | $— | | | $2,053 |
December 31, 2019 | ||||||||||||
(dollars in millions) | | | Total | | | Level 1 | | | Level 2 | | | Level 3 |
Current and long-term debt (excluding finance leases) | | | $313 | | | $— | | | $— | | | $313 |
| | For the Nine Months Ended September 30, | ||||
(dollars in millions) | | | 2020 | | | 2019 |
Fair value as of January 1 | | | $313 | | | $291 |
Issuances, including interest on project financing obligations | | | 1,865 | | | 118 |
Settlements | | | (125) | | | (98) |
Fair value as of September 30 | | | $2,053 | | | $311 |
| | Net Sales | | | Operating Profit | |||||||
| | For the Three Months Ended September 30, | | | For the Three Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
HVAC | | | $2,892 | | | $2,602 | | | $839 | | | $404 |
Refrigeration | | | 876 | | | 922 | | | 103 | | | 125 |
Fire & Security | | | 1,324 | | | 1,402 | | | 200 | | | 205 |
Total segment | | | 5,092 | | | 4,926 | | | 1,142 | | | 734 |
Eliminations and other | | | (90) | | | (104) | | | (31) | | | (63) |
General corporate expenses | | | — | | | — | | | (30) | | | (42) |
Consolidated | | | $5,002 | | | $4,822 | | | $1,081 | | | $629 |
| | Net Sales | | | Operating Profit | |||||||
| | For the Nine Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
HVAC | | | $7,142 | | | $7,505 | | | $1,364 | | | $1,242 |
Refrigeration | | | 2,384 | | | 2,839 | | | 263 | | | 373 |
Fire & Security | | | 3,587 | | | 4,078 | | | 426 | | | 521 |
Total segment | | | 13,113 | | | 14,422 | | | 2,053 | | | 2,136 |
Eliminations and other | | | (251) | | | (315) | | | (122) | | | (95) |
General corporate expenses | | | — | | | — | | | (93) | | | (107) |
Consolidated | | | $12,862 | | | $14,107 | | | $1,838 | | | $1,934 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
United States Operations | | | $2,780 | | | $2,541 | | | $6,983 | | | $7,473 |
International Operations | | | | | | | | | ||||
Europe | | | 1,307 | | | 1,313 | | | 3,455 | | | 3,906 |
Asia Pacific | | | 715 | | | 729 | | | 1,879 | | | 2,079 |
Other | | | 200 | | | 239 | | | 545 | | | 649 |
Consolidated | | | $5,002 | | | $4,822 | | | $12,862 | | | $14,107 |
| | For the Three Months Ended September 30, | | | For the Nine Months Ended September 30, | |||||||
(dollars in millions) | | | 2020 | | | 2019 | | | 2020 | | | 2019 |
Sales Type | | | | | | | | | ||||
Product | | | $2,547 | | | $2,224 | | | $6,180 | | | $6,455 |
Service | | | 345 | | | 378 | | | 962 | | | 1,050 |
HVAC sales | | | 2,892 | | | 2,602 | | | 7,142 | | | 7,505 |
Product | | | 771 | | | 823 | | | 2,093 | | | 2,551 |
Service | | | 105 | | | 99 | | | 291 | | | 288 |
Refrigeration sales | | | 876 | | | 922 | | | 2,384 | | | 2,839 |
Product | | | 965 | | | 1,055 | | | 2,587 | | | 3,011 |
Service | | | 359 | | | 347 | | | 1,000 | | | 1,067 |
Fire & Security sales | | | 1,324 | | | 1,402 | | | 3,587 | | | 4,078 |
Total segment sales | | | 5,092 | | | 4,926 | | | 13,113 | | | 14,422 |
Eliminations and other | | | (90) | | | (104) | | | (251) | | | (315) |
Consolidated | | | $5,002 | | | $4,822 | | | $12,862 | | | $14,107 |
Item 20. | Indemnification of Directors and Officers. |
Item 21. | Exhibits and Financial Statement Schedules. |
Number | | | Description | | | Method of Filing |
| | Separation and Distribution Agreement, dated as of April 2, 2020, by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation | | | Filed by the Registrant as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated herein by reference. | |
| | Amended and Restated Certificate of Incorporation of Carrier Global Corporation | | | Filed by the Registrant as Exhibit 3.1(B) to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated herein by reference. | |
| | Amended and Restated Bylaws of Carrier Global Corporation | | | Filed by the Registrant as Exhibit 3.2 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated herein by reference. | |
| | Indenture, dated February 27, 2020, between Carrier Global Corporation and The Bank of New York Mellon Trust Company, N.A. | | | Filed by the Registrant as Exhibit 4.1 to Amendment No. 1 to the Registration Statement on Form 10 filed with the SEC on March 11, 2020 and incorporated herein by reference. | |
| | Supplemental Indenture No. 1, dated February 27, 2020, between Carrier Global Corporation and The Bank of New York Mellon Trust Company, N.A. | | | Filed by the Registrant as Exhibit 4.2 to Amendment No. 1 to the Registration Statement on Form 10 filed with the SEC on March 11, 2020 and incorporated herein by reference. | |
| | Registration Rights Agreement, dated February 27, 2020, by and among Carrier Global Corporation, United Technologies Corporation and Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC | | | Filed by the Registrant as Exhibit 4.3 to Amendment No. 1 to the Registration Statement on Form 10 filed with the SEC on March 11, 2020 and incorporated herein by reference | |
| | Supplemental Indenture No. 2, dated June 19, 2020 between Carrier Global Corporation and The Bank of New York Mellon Trust Company, N.A. | | | Filed by the Registrant as Exhibit 4.2 to the Current Report on Form 8-K filed with the SEC on June 19, 2020 and incorporated herein by reference |
Number | | | Description | | | Method of Filing |
| | Registration Rights Agreement, dated June 19, 2020, by and among Carrier Global Corporation, J.P. Morgan Securities LLC, BofA Securities, Inc. and Citigroup Global Markets Inc. | | | Filed by the Registrant as Exhibit 4.4 to the Current Report on Form 8-K filed with the SEC on June 19, 2020 and incorporated herein by reference | |
| | Form of 1.923% notes due 2023 | | | Included in Exhibit 4.2 | |
| | Form of 2.242% notes due 2025 | | | Included in Exhibit 4.2 | |
| | Form of 2.493% notes due 2027 | | | Included in Exhibit 4.2 | |
| | Form of 2.722% notes due 2030 | | | Included in Exhibit 4.2 | |
| | Form of 2.700% notes due 2031 | | | Included in Exhibit 4.3 | |
| | Form of 3.377% notes due 2040 | | | Included in Exhibit 4.2 | |
| | Form of 3.577% notes due 2050 | | | Included in Exhibit 4.2 | |
| | Legal Opinion of Wachtell, Lipton, Rosen & Katz | | | Filed herewith | |
| | Transition Services Agreement, dated as of April 2, 2020, by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation | | | Filed by the Registrant as Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Tax Matters Agreement, dated as of April 2, 2020, by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation | | | Filed by the Registrant as Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Employee Matters Agreement, dated as of April 2, 2020, by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation | | | Filed by the Registrant as Exhibit 10.3 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Intellectual Property Agreement, dated as of April 2, 2020, by and among United Technologies Corporation, Otis Worldwide Corporation and Carrier Global Corporation | | | Filed by the Registrant as Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.5 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation Change in Control Severance Plan | | | Filed by the Registrant as Exhibit 10.6 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation Executive Annual Bonus Plan | | | Filed by the Registrant as Exhibit 10.7 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation Deferred Compensation Plan | | | Filed by the Registrant as Exhibit 10.8 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation Company Automatic Contribution Excess Plan | | | Filed by the Registrant as Exhibit 10.9 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation LTIP Performance Share Unit Deferral Plan | | | Filed by the Registrant as Exhibit 10.10 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein |
Number | | | Description | | | Method of Filing |
| | Carrier Global Corporation Pension Preservation Plan | | | Filed by the Registrant as Exhibit 10.11 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation Board of Directors Deferred Stock Unit Plan | | | Filed by the Registrant as Exhibit 10.12 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | French Sub-Plan for Restricted Stock Units Granted Under the Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.13 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Carrier Global Corporation Amended and Restated Savings Restoration Plan | | | Filed by the Registrant as Exhibit 10.14 to the Current Report on Form 8-K filed with the SEC on April 3, 2020 and incorporated by reference herein | |
| | Schedule of Terms for Restricted Stock Unit Awards granted under the Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.8 to the Registration Statement on Form 10 filed with the SEC on February 7, 2020 and incorporated by reference herein | |
| | Schedule of Terms for Restricted Stock Unit Awards (Off-Cycle) granted under the Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.9 to the Registration Statement on Form 10 filed with the SEC on February 7, 2020 and incorporated by reference herein | |
| | Schedule of Terms for Stock Appreciation Right Awards granted under the Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.10 to the Registration Statement on Form 10 filed with the SEC on February 7, 2020 and incorporated by reference herein | |
| | Offer Letter with Timothy McLevish, dated September 6, 2019 | | | Filed by the Registrant as Exhibit 10.23 to the Registration Statement on Form 10 filed with the SEC on February 7, 2020 and incorporated by reference herein | |
| | Revolving Credit Agreement, dated February 10, 2020, among Carrier Global Corporation, the subsidiary borrowers party thereto, the lenders and other parties party thereto and JPMorgan Chase Bank, N.A. | | | Filed by the Registrant as Exhibit 10.24 to Amendment No. 1 to the Registration Statement on Form 10 filed with the SEC on March 11, 2020 and incorporated herein by reference | |
| | Term Loan Credit Agreement, dated February 10, 2020, among Carrier Global Corporation, United Technologies Corporation (prior to the UTC Release Date (as defined therein)), the lenders and other parties party thereto and JPMorgan Chase Bank, N.A. | | | Filed by the Registrant as Exhibit 10.25 to Amendment No. 1 to the Registration Statement on Form 10 filed with the SEC on March 11, 2020 and incorporated herein by reference | |
| | Amendment No. 1 to the Revolving Credit Agreement, dated as of June 2, 2020, by and among Carrier Global Corporation, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent | | | Filed by the Registrant as Exhibit 10.01 to Current Report on Form 8-K filed with the SEC on June 3, 2020 and incorporated herein by reference | |
| | Amendment No. 1 to the Term Loan Credit Agreement, dated as of June 2, 2020, by and among Carrier Global Corporation, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent | | | Filed by the Registrant as Exhibit 10.02 to the Current Report on Form 8-K filed with the SEC on June 3, 2020 and incorporated herein by reference. |
Number | | | Description | | | Method of Filing |
| | Special Addendum to Schedule of Terms for Restricted Stock Unit Award (Off-Cycle) granted to David Appel under the Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.22 to the Quarterly Report on Form 10-Q filed with the SEC on July 31, 2020 and incorporated herein by reference | |
| | Addendum to the Carrier Global Corporation Board of Directors Deferred Stock Unit Plan | | | Filed by the Registrant as Exhibit 10.4 to the Quarterly Report on Form 10-Q filed with the SEC on May 11, 2020 and incorporated by reference herein | |
| | Employment Agreement, dated April 21, 2020, by and between Carrier Global Corporation and John V. Faraci | | | Filed by the Registrant as Exhibit 10.3 to the Quarterly Report on Form 10-Q filed with the SEC on May 11, 2020 and incorporated herein by reference | |
| | Schedule of Terms for Carrier Founders Grant Performance Share Unit Awards granted under the Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.17 to the Quarterly Report on Form 10-Q filed with the SEC on July 31, 2020 and incorporated herein by reference | |
| | Schedule of Terms for Stock Appreciation Right Awards (Founders Grant) granted under the Carrier Global Corporation 2020 Long-Term Incentive Plan | | | Filed by the Registrant as Exhibit 10.18 to the Quarterly Report on Form 10-Q filed with the SEC on July 31, 2020 and incorporated herein by reference | |
| | Awareness Letter of PricewaterhouseCoopers LLP | | | Filed herewith | |
| | Consent of PricewaterhouseCoopers LLP | | | Filed herewith | |
| | Consent of Wachtell, Lipton, Rosen & Katz | | | Included in Exhibit 5.1 | |
| | Power of Attorney (included on signature pages attached hereto) | | | Filed herewith | |
| | Statement of Eligibility of The Bank of New York Mellon Trust Company, N.A., as Trustee with respect to the Indenture | | | Filed herewith | |
| | Form of Letter of Transmittal | | | Filed herewith |
Item 22. | Undertakings. |
(1) | To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) | To include any prospectus required by Section 10(a)(3) of the Securities Act; |
(ii) | To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and |
(iii) | To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) | That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
(4) | That, for purposes of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(5) | That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
(ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
(iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
(iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
(6) | To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. |
(7) | To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. |
(8) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. |
| | CARRIER GLOBAL CORPORATION | ||||
| | | | |||
| | By: | | | /s/ David Gitlin | |
| | | | Name: David Gitlin | ||
| | | | Title: President and Chief Executive Officer |
Signature | | | Title |
| | ||
/s/ David Gitlin | | | Director, President and Chief Executive Officer (Principal Executive Officer) |
David Gitlin | | ||
| | ||
/s/ Timothy McLevish | | | Senior Vice President, Chief Financial Officer (Principal Financial Officer) |
Timothy McLevish | | ||
| | ||
/s/ Kyle Crockett | | | Vice President, Controller (Principal Accounting Officer) |
Kyle Crockett | | ||
| | ||
/s/ John V. Faraci | | | Director |
John V. Faraci | | ||
| | ||
/s/ Jean-Pierre Garnier | | | Director |
Jean-Pierre Garnier | | ||
| | ||
/s/ John J. Greisch | | | Director |
John J. Greisch | | ||
| | ||
/s/ Charles M. Holley, Jr. | | | Director |
Charles M. Holley, Jr. | | ||
| | ||
/s/ Michael M. McNamara | | | Director |
Michael M. McNamara | | ||
| | ||
/s/ Michael A. Todman | | | Director |
Michael A. Todman | | ||
| | ||
/s/ Virginia M. Wilson | | | Director |
Virginia M. Wilson | |
Very truly yours, |
|
/s/ Wachtell, Lipton, Rosen & Katz
|
|
(Jurisdiction of incorporation if not a U.S. national bank) |
95-3571558
(I.R.S. employer identification no.) |
400 South Hope Street
Suite 500 Los Angeles, California
(Address of principal executive offices)
|
90071 (Zip code) |
Delaware
(State or other jurisdiction of incorporation or organization) |
83-4051582
(I.R.S. employer identification no.) |
13995 Pasteur Boulevard
Palm Beach Gardens, Florida
(Address of principal executive offices) |
33418 (Zip code) |
(a) |
Name and address of each examining or supervising authority to which it is subject.
|
Name
|
Address
|
Comptroller of the Currency
United States Department of the Treasury
|
Washington, DC 20219
|
Federal Reserve Bank
|
San Francisco, CA 94105
|
Federal Deposit Insurance Corporation
|
Washington, DC 20429
|
(b) |
Whether it is authorized to exercise corporate trust powers.
|
2. |
Affiliations with Obligor.
|
16. |
List of Exhibits.
|
1. |
A copy of the articles of association of The Bank of New York Mellon Trust Company, N.A., formerly known as The Bank of New York Trust Company, N.A. (Exhibit 1 to Form T-1 filed with
Registration Statement No. 333-121948 and Exhibit 1 to Form T-1 filed with Registration Statement No. 333-152875).
|
2. |
A copy of certificate of authority of the trustee to commence business. (Exhibit 2 to Form T-1 filed with Registration Statement No. 333-121948).
|
3. |
A copy of the authorization of the trustee to exercise corporate trust powers (Exhibit 3 to Form T-1 filed with Registration Statement No. 333-152875).
|
4. |
A copy of the existing by-laws of the trustee (Exhibit 4 to Form T-1 filed with Registration Statement No. 333-229762).
|
6. |
The consent of the trustee required by Section 321(b) of the Act (Exhibit 6 to Form T-1 filed with Registration Statement No. 333-152875).
|
7. |
A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority.
|
|
THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.
|
||
|
|
|
|
|
By: | /s/ Valere Boyd | |
Name: | Valere Boyd | ||
Title: | Vice President |
|
Dollar amounts | |||||||
in thousands
|
||||||||
ASSETS
|
||||||||
Cash and balances due from
|
||||||||
depository institutions:
|
||||||||
Noninterest-bearing balances and currency and coin
|
1,667
|
|||||||
Interest-bearing balances
|
325,776
|
|||||||
Securities:
|
||||||||
Held-to-maturity securities
|
0 |
|||||||
Available-for-sale securities
|
148,395
|
|||||||
Equity securities with readily determinable fair values not held for trading
|
0 |
|||||||
Federal funds sold and securities
|
||||||||
purchased under agreements to resell:
|
||||||||
Federal funds sold in domestic offices
|
0 |
|||||||
Securities purchased under agreements to resell
|
0 |
|||||||
Loans and lease financing receivables:
|
||||||||
Loans and leases held for sale
|
0 |
|||||||
Loans and leases, held for investment
|
0 |
|||||||
LESS: Allowance for loan and
|
||||||||
lease losses
|
0 |
|||||||
Loans and leases held for investment,
|
||||||||
net of allowance | 0 |
|||||||
Trading assets
|
0 |
|||||||
Premises and fixed assets (including capitalized leases)
|
20,997
|
|||||||
Other real estate owned
|
0 |
|||||||
Investments in unconsolidated subsidiaries and associated companies
|
0 |
|||||||
Direct and indirect investments in real estate ventures
|
0 |
|||||||
Intangible assets
|
856,313
|
|||||||
Other assets
|
100,715 | |||||||
Total assets
|
$ | 1,453,863 |
LIABILITIES
|
||||||||
Deposits:
|
||||||||
In domestic offices
|
1,659
|
|||||||
Noninterest-bearing
|
1,659
|
|||||||
Interest-bearing
|
0 |
|||||||
Not applicable
|
||||||||
Federal funds purchased and securities
|
||||||||
sold under agreements to repurchase:
|
||||||||
Federal funds purchased
|
0 | |||||||
Securities sold under agreements to repurchase
|
0 |
|||||||
Trading liabilities
|
0 |
|||||||
Other borrowed money:
|
||||||||
(includes mortgage indebtedness and obligations under capitalized leases)
|
0 |
|||||||
Not applicable
|
||||||||
Not applicable
|
||||||||
Subordinated notes and debentures
|
0 |
|||||||
Other liabilities
|
258,356 | |||||||
Total liabilities
|
260,015 | |||||||
Not applicable
|
||||||||
EQUITY CAPITAL
|
||||||||
Perpetual preferred stock and related surplus
|
0 |
|||||||
Common stock
|
1,000 | |||||||
Surplus (exclude all surplus related to preferred stock)
|
324,174
|
|||||||
Not available
|
||||||||
Retained earnings
|
866,668
|
|||||||
Accumulated other comprehensive income
|
2,006 | |||||||
Other equity capital components
|
0
|
|||||||
Not available
|
||||||||
Total bank equity capital
|
1,193,848
|
|||||||
Noncontrolling (minority) interests in consolidated subsidiaries
|
0
|
|||||||
Total equity capital
|
1,193,848
|
|||||||
Total liabilities and equity capital
|
1,453,863
|
| THE EXCHANGE OFFERS AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON [ ], 2020 (THE “EXPIRATION DATE”) UNLESS EXTENDED. | |
| DESCRIPTION OF OLD NOTES TENDERED HEREWITH | | |||||||||
| Name(s) and Address(es) of Registered Holder(s) (Please fill in) | | | Certificate Number(s)* | | | Aggregate Principal Amount Represented by Old Notes* | | | Principal Amount Tendered** | |
| | | | | | | | ||||
| | | | | | | | ||||
| | | | | | | | ||||
| | | | | | | | ||||
| | | | | | | | ||||
| | | | | | | | ||||
| | | Total: | | | | | |
* | Need not be completed by book-entry holders. |
** | Unless otherwise indicated, the holder will be deemed to have tendered the full aggregate principal amount represented by such Old Notes. See instruction 2. |
☐ | | | CHECK HERE IF EXCHANGE NOTES ARE TO BE ISSUED TO A PERSON OTHER THAN THE PERSON SIGNING THIS LETTER OF TRANSMITTAL: |
| | ||
| | Name: | |
| | ||
| | Address: | |
| | ||
☐ | | | CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO AN ADDRESS DIFFERENT FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL: |
| | ||
| | Name: | |
| | ||
| | Address: | |
| | ||
☐ | | | CHECK HERE IF YOU ARE A BROKER-DEALER THAT ACQUIRED OLD NOTES FOR YOUR OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. |
| | ||
| | Name: | |
| | ||
| | Address: |
| TENDERING HOLDER(S) SIGN HERE (Complete accompanying IRS Form W-9 or IRS Form W-8, as applicable) | | ||||||
| | | | | | |||
| | | Must be signed by registered holder(s) exactly as name(s) appear(s) on certificate(s) for Exchange Notes hereby tendered or in whose name Exchange Notes are registered on the books of DTC or one of its participants, or by any person(s) authorized to become the registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth the full title of such person. See Instruction 3. | | ||||
| | | | | | |||
| | | | | | |||
| | | | | | |||
| | | (Signature(s) of Holder(s)) | | ||||
| | | Date | | | | ||
| | | Name(s) | | | | ||
| | | (Please Print) | | ||||
| | | Capacity (full title) | | | | ||
| | | Address | | | | ||
| | | (Including Zip Code) | | ||||
| | | Daytime Area Code and Telephone No. | | | | ||
| | | Taxpayer Identification No. | | | | ||
| | | | | | |||
| | | GUARANTEE OF SIGNATURE(S) (If Required—See Instruction 3) | | ||||
| | | Authorized Signature | | | | ||
| | | Dated | | | | ||
| | | Name | | | | ||
| | | Title | | | | ||
| | | Name of Firm | | | | ||
| | | Address of Firm | | | | ||
| | | (Include Zip Code) | | ||||
| | | Area Code and Telephone No. | | | | ||
| | | | | |
| SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) (Complete accompanying IRS Form W-9 or IRS Form W-8, as applicable) | | ||||||
| To be completed ONLY if Exchange Notes or Old Notes not tendered are to be issued in the name of someone other than the registered holder of the Old Notes whose name(s) appear(s) above. | | ||||||
| Issue: | | | ☐ | | | Old Notes not tendered to: | |
| | | ☐ | | | Exchange Notes to: | | |
| Name(s); | | | | | | ||
| | | (Please Print) | | ||||
| Address: | | | | | | ||
| | |||||||
| | |||||||
| (Including Zip Code) | | ||||||
| | | | | | |||
| Daytime Area Code and Telephone No. | | ||||||
| | |||||||
| Taxpayer Identification No. | | ||||||
| | | | | |
| SPECIAL DELIVERY INSTRUCTIONS (See Instructions 3 and 4) | | ||||||
| To be completed ONLY if Exchange Notes or Old Notes not tendered are to be delivered to the registered holder(s) at an address other than that shown above. | | ||||||
| Deliver: | | | ☐ | | | Old Notes not tendered to: | |
| | | ☐ | | | Exchange Notes to: | | |
| | | | | | |||
| Name(s): | | | | | | ||
| Address: | | | | | | ||
| | |||||||
| | |||||||
| (Including Zip Code) | | ||||||
| | |||||||
| Daytime Area Code and Telephone No. | | ||||||
| | |||||||
| Taxpayer Identification No. | | ||||||
| |