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Discontinued Operations and Disposal Groups
 6 Months Ended
Jun. 30, 2020
Discontinued Operations and Disposal Groups [Abstract]  
Disposal Groups, Including Discontinued Operations, Disclosure Discontinued Operations
As discussed above, on April 2, 2020, Carrier and Otis entered into a Separation and Distribution Agreement with UTC (since renamed Raytheon Technologies Corporation), pursuant to which, among other things, UTC agreed to separate into three independent, publicly traded companies – UTC, Otis and Carrier and distribute all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020. The Separation Transactions were completed on April 3, 2020. In the six months ended June 30, 2020, a total of $1,345 million of costs have been incurred related to the Separation Transactions and recorded in the following financial statement line items: $876 million in Income from discontinued operations, $19 million in Income tax expense from discontinued operations, $35 million in Income from continuing operations and $415 million in Income tax expense.
Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Income (loss) from discontinued operations is as follows:
Quarter Ended June 30,Six Months Ended June 30,
(dollars, in millions)2020201920202019
Otis$—  $260  $187  $522  
Carrier—  544  196  916  
Separation related transactions (1)
9  (87) (895) (87) 
Income (loss) from discontinued operations (2)
$9  $717  $(512) $1,351  
(1) Reflects debt extinguishment costs related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the
Separation Transactions and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges related to separation activities.
(2) Net income for Otis and Carrier for the quarter ended June 30, 2020 prior to the Separation Transactions were not material.
The following summarized financial information related to discontinued operations has been reclassified from Income from continuing operations and included in Income (loss) from discontinued operations:
Quarter Ended June 30,Six Months Ended June 30,
(dollars, in millions)2020201920202019
Otis
Net sales$—  $3,348  $2,966  $6,444  
Cost of products sold—  1,224  913  2,286  
Cost of services sold—  1,150  1,157  2,284  
Research and development—  35  38  79  
Selling, general and administrative expense—  471  450  913  
Other expense, net—  (19) (65) (25) 
Non-operating expense, net—  4  3  8  
Income from discontinued operations, before income taxes—  445  340  849  
Income tax expense—  140  116  256  
Income from discontinued operations—  305  224  593  
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations—  45  37  71  
Income from discontinued operations attributable to common shareowners$—  $260  $187  $522  
Carrier
Net sales$—  $4,956  $3,884  $9,273  
Cost of products sold—  2,901  2,239  5,463  
Cost of services sold—  582  527  1,114  
Research and development—  103  98  200  
Selling, general and administrative expense—  735  669  1,420  
Other income (expense), net—  115  (30) 170  
Non-operating (income) expense, net—  (12) 17  (22) 
Income from discontinued operations, before income taxes—  762  304  1,268  
Income tax expense—  209  102  339  
Income from discontinued operations—  553  202  929  
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations—  9  6  13  
Income from discontinued operations attributable to common shareowners$—  $544  $196  $916  
Separation related transactions (1)
Selling, general and administrative expense$13  $—  167  $—  
Non-operating expense, net43  —  709  —  
Loss from discontinued operations, before income taxes(56) —  (876) —  
Income tax (benefit) expense(65) 87  19  87  
Income (loss) from discontinued operations, net of tax (2)
9  (87) (895) (87) 
Total Income (loss) from discontinued operations attributable to common shareowners$9  $717  $(512) $1,351  
(1) Reflects debt extinguishment costs related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges related to separation activities.
(2) Net income for Otis and Carrier for the quarter ended June 30, 2020 prior to the Separation Transactions were not material.
Selected financial information related to cash flows from discontinued operations is as follows:
Six Months Ended June 30,
(dollars, in millions)20202019
Net cash (used in) provided by operating activities$(661) $841  
Net cash used in investing activities(241) (114) 
Net cash used in financing activities(1,481) (698) 
Net cash (used in) provided by operating activities includes the net operating cash flows of Otis and Carrier prior to the separation, as well as costs incurred by the Company primarily related to professional services costs pertaining to the separation and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges related to separation activities. Net cash used in financing activities primarily consists of cash distributed by the Company to Otis and Carrier upon separation.
The major components of assets and liabilities related to discontinued operations at December 31, 2019 are provided below:
(dollars, in millions)OtisCarrierTotal
Assets
Cash and cash equivalents$1,446  $995  $2,441  
Accounts receivable, net2,899  2,728  5,627  
Contract assets, current530  679  1,209  
Inventories and contracts in progress, net571  1,332  1,903  
Other assets, current213  221  434  
Future income tax benefits355  370  725  
Fixed assets, net747  1,686  2,433  
Operating lease right-of-use assets529  818  1,347  
Goodwill1,647  9,807  11,454  
Intangible assets, net490  1,083  1,573  
Other assets220  2,457  2,677  
Total assets related to discontinued operations$9,647  $22,176  $31,823  
Liabilities and Redeemable Noncontrolling Interest
Short-term borrowings$33  $38  $71  
Accounts payable1,321  1,682  3,003  
Accrued liabilities1,651  2,889  4,540  
Contract liabilities, current2,288  611  2,899  
Long-term debt, currently due1  237  238  
Long-term debt5  82  87  
Future pension and postretirement benefit obligations560  455  1,015  
Operating lease liabilities383  668  1,051  
Other long-term liabilities (1)
514  1,025  1,539  
Total liabilities related to discontinued operations$6,756  $7,687  $14,443  
(1) Amounts include a deferred tax jurisdictional netting adjustment of $145 million.
The Separation of Carrier was treated as a return on capital and recorded as a reduction to retained earnings, as it was in a net asset position, while the Separation of Otis was treated as a return of capital and recorded as an adjustment to Common stock, as it was in a net liability position. The remaining assets and liabilities related to discontinued operations at June 30, 2020 primarily relate to trailing tax assets and liabilities of the Company related to the Separation Transactions, including indemnification obligations.