UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

 ____________________________________ 

FORM 10-Q

____________________________________ 

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

For the quarterly period ended June 30, 2022

OR

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

Commission file number 001-39220

____________________________________ 

CARRIER GLOBAL CORPORATION

(Exact name of registrant as specified in its charter)

____________________________________ 

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

13995 Pasteur Boulevard, Palm Beach Gardens, Florida 33418

(Address of principal executive offices, including zip code)

(561) 365-2000

(Registrant's telephone number, including area code)

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	CARR	New York Stock Exchange

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

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

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐	Emerging growth company	☐

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

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

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

1

CARRIER GLOBAL CORPORATION

CONTENTS OF QUARTERLY REPORT ON FORM 10-Q

Three and Six Months Ended June 30, 2022

	Page
PART I – FINANCIAL INFORMATION	3
Item 1. Financial Statements:	3
Condensed Consolidated Statement of Operations (Unaudited)	3
Condensed Consolidated Statement of Comprehensive Income (Loss) (Unaudited)	4
Condensed Consolidated Balance Sheet (Unaudited)	5
Condensed Consolidated Statement of Changes in Equity (Unaudited)	6
Condensed Consolidated Statement of Cash Flows (Unaudited)	7
Notes to Condensed Consolidated Financial Statements (Unaudited)	8
Report of Independent Registered Public Accounting Firm	25
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	41
Item 4. Controls and Procedures	41
PART II – OTHER INFORMATION	41
Item 1. Legal Proceedings	41
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 6. Exhibits	44
SIGNATURES	45

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

2

PART I – FINANCIAL INFORMATION

Item 1.    Financial Statements

CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions, except per share amounts)	2022		2021		2022		2021
Net sales
Product sales	$	4,662	$	4,584	$	8,832	$	8,448
Service sales	549		856		1,033		1,691
Total Net sales	5,211		5,440		9,865		10,139
Costs and expenses
Cost of products sold	(3,363)		(3,235)		(6,361)		(5,959)
Cost of services sold	(401)		(586)		(764)		(1,167)
Research and development	(122)		(125)		(247)		(246)
Selling, general and administrative	(614)		(813)		(1,215)		(1,556)
Total Costs and expenses	(4,500)		(4,759)		(8,587)		(8,928)
Equity method investment net earnings	101		87		159		125
Other income (expense), net	7		15		1,119		18
Operating profit	819		783		2,556		1,354
Non-service pension (expense) benefit	(1)		19		(2)		37
Interest (expense) income, net	(61)		(71)		(109)		(164)
Income from operations before income taxes	757		731		2,445		1,227
Income tax (expense) benefit	(170)		(234)		(471)		(338)
Net income from operations	587		497		1,974		889
Less: Non-controlling interest in subsidiaries' earnings from operations	14		10		22		18
Net income attributable to common shareowners	$	573	$	487	$	1,952	$	871
Earnings per share
Basic	$	0.68	$	0.56	$	2.30	$	1.00
Diluted	$	0.67	$	0.55	$	2.25	$	0.98
Weighted-average number of shares outstanding
Basic	845.7		868.7		849.5		869.0
Diluted	862.7		890.9		868.4		890.4

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

3

CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Net income from operations	$	587	$	497	$	1,974	$	889
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments arising during period	(489)		59		(550)		(62)
Pension and post-retirement benefit plan adjustments	2		6		—		13
Chubb divestiture	—		—		(245)		—
Other comprehensive income (loss), net of tax	(487)		65		(795)		(49)
Comprehensive income (loss)	100		562		1,179		840
Less: Comprehensive income (loss) attributable to non-controlling interest	5		10		13		18
Comprehensive income (loss) attributable to common shareowners	$	95	$	552	$	1,166	$	822

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

4

CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

	As of
(In millions)	June 30, 2022		December 31, 2021
Assets
Cash and cash equivalents	$	3,017	$	2,987
Accounts receivable, net	2,823		2,403
Contract assets, current	712		503
Inventories, net	2,350		1,970
Assets held for sale	—		3,168
Other assets, current	374		376
Total current assets	9,276		11,407
Future income tax benefits	566		563
Fixed assets, net	1,805		1,826
Operating lease right-of-use assets	595		640
Intangible assets, net	458		509
Goodwill	9,067		9,349
Pension and post-retirement assets	31		43
Equity method investments	1,671		1,593
Other assets	193		242
Total Assets	$	23,662	$	26,172
Liabilities and Equity
Accounts payable	$	2,403	$	2,334
Accrued liabilities	2,430		2,561
Contract liabilities, current	444		415
Liabilities held for sale	—		1,134
Current portion of long-term debt	269		183
Total current liabilities	5,546		6,627
Long-term debt	8,298		9,513
Future pension and post-retirement obligations	366		380
Future income tax obligations	335		354
Operating lease liabilities	490		527
Other long-term liabilities	1,635		1,677
Total Liabilities	16,670		19,078
Commitments and contingent liabilities (Note 19)
Equity
Common stock	9		9
Treasury stock	(1,543)		(529)
Additional paid-in capital	5,441		5,411
Retained earnings	4,564		2,865
Accumulated other comprehensive loss	(1,775)		(989)
Non-controlling interest	296		327
Total Equity	6,992		7,094
Total Liabilities and Equity	$	23,662	$	26,172

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

5

CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

(Unaudited)

(In millions)	Accumulated Other Comprehensive Income (Loss)		Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings		Non-Controlling Interest		Total Equity
Balance as of December 31, 2021	$	(989)	$	9	$	(529)	$	5,411	$	2,865	$	327	$	7,094
Net income	—		—		—		—		1,379		8		1,387
Other comprehensive income (loss), net of tax	(308)		—		—		—		—		—		(308)
Shares issued under incentive plans, net	—		—		—		(17)		—		—		(17)
Stock-based compensation	—		—		—		21		—		—		21
Dividends attributable to non-controlling interest	—		—		—		—		—		(1)		(1)
Sale of non-controlling interest	—		—		—		—		—		(5)		(5)
Treasury stock repurchase	—		—		(741)		—		—		—		(741)
Balance as of March 31, 2022	$	(1,297)	$	9	$	(1,270)	$	5,415	$	4,244	$	329	$	7,430
Net income	—		—		—		—		573		14		587
Other comprehensive income (loss), net of tax	(478)		—		—		—		—		(9)		(487)
Dividends declared on common stock (1)	—		—		—		—		(253)		—		(253)
Conversion of cash settled awards	—		—		—		6		—		—		6
Stock-based compensation	—		—		—		20		—		—		20
Dividends attributable to non-controlling interest	—		—		—		—		—		(38)		(38)
Treasury stock repurchase	—		—		(273)		—		—		—		(273)
Balance as of June 30, 2022	$	(1,775)	$	9	$	(1,543)	$	5,441	$	4,564	$	296	$	6,992
(In millions)	Accumulated Other Comprehensive Income (Loss)		Common Stock		Treasury Stock		Additional Paid-In Capital		Retained Earnings		Non-Controlling Interest		Total Equity
Balance as of December 31, 2020	$	(745)	$	9	$	—	$	5,345	$	1,643	$	326	$	6,578
Net income	—		—		—		—		384		8		392
Other comprehensive income (loss), net of tax	(114)		—		—		—		—		—		(114)
Shares issued under incentive plans, net	—		—		—		(14)		—		—		(14)
Stock-based compensation	—		—		—		19		—		—		19
Dividends attributable to non-controlling interest	—		—		—		—		—		(5)		(5)
Treasury stock repurchase	—		—		(38)		—		—		—		(38)
Balance as of March 31, 2021	$	(859)	$	9	$	(38)	$	5,350	$	2,027	$	329	$	6,818
Net income	—		—		—		—		487		10		497
Other comprehensive income (loss), net of tax	65		—		—		—		—		—		65
Dividends declared on common stock (2)	—		—		—		—		(209)		—		(209)
Shares issued under incentive plans, net	—		—		—		(4)		—		—		(4)
Stock-based compensation	—		—		—		20		—		—		20
Dividends attributable to non-controlling interest	—		—		—		—		—		(21)		(21)
Acquisition of non-controlling interest	—		—		—		—		—		46		46
Treasury stock repurchase	—		—		(92)		—		—		—		(92)
Balance as of June 30, 2021	$	(794)	$	9	$	(130)	$	5,366	$	2,305	$	364	$	7,120
(1) Cash dividends declared were $0.30 per share for the three months ended June 30, 2022.
(2) Cash dividends declared were $0.24 per share for the three months ended June 30, 2021

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

6

CARRIER GLOBAL CORPORATION

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
(In millions)	2022		2021
Operating Activities
Net income from operations	$	1,974	$	889
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization	155		168
Deferred income tax provision	(17)		33
Stock-based compensation costs	41		40
Equity method investment net earnings	(159)		(125)
(Gain) loss on extinguishment of debt	(36)		—
(Gain) loss on sale of investments	(1,119)		—
Changes in operating assets and liabilities
Accounts receivable, net	(483)		(288)
Contract assets, current	(224)		(41)
Inventories, net	(435)		(210)
Other assets, current	(37)		(27)
Accounts payable and accrued liabilities	79		368
Contract liabilities, current	42		42
Defined benefit plan contributions	(6)		(27)
Distributions from equity method investments	15		42
Other operating activities, net	40		(119)
Net cash flows provided by (used in) operating activities	(170)		745
Investing Activities
Capital expenditures	(122)		(132)
Investment in businesses, net of cash acquired	(38)		(167)
Dispositions of businesses	2,944		1
Settlement of derivative contracts, net	(123)		(6)
Other investing activities, net	(16)		3
Net cash flows provided by (used in) investing activities	2,645		(301)
Financing Activities
Increase (decrease) in short-term borrowings, net	(22)		(13)
Issuance of long-term debt	21		74
Repayment of long-term debt	(1,127)		(605)
Repurchases of common stock	(1,014)		(130)
Dividends paid on common stock	(257)		(209)
Dividends paid to non-controlling interest	(22)		(30)
Other financing activities, net	(13)		15
Net cash flows provided by (used in) financing activities	(2,434)		(898)
Effect of foreign exchange rate changes on cash and cash equivalents	(41)		(2)
Net increase (decrease) in cash and cash equivalents and restricted cash	—		(456)
Cash, cash equivalents and restricted cash, beginning of period	3,025		3,120
Cash, cash equivalents and restricted cash, end of period	3,025		2,664
Less: restricted cash	8		34
Cash and cash equivalents, end of period	$	3,017	$	2,630

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

7

CARRIER GLOBAL CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1: DESCRIPTION OF THE BUSINESS

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

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

Impact of the COVID-19 Pandemic

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

NOTE 2: BASIS OF PRESENTATION

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

Sale of Chubb Fire & Security Business

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

Separation from United Technologies

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

8

Recently Issued and Adopted Accounting Pronouncements

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

NOTE 3: INVENTORIES, NET

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

Inventories, net consisted of the following:

(In millions)	June 30, 2022		December 31, 2021
Raw materials	$	701	$	559
Work-in-process	243		197
Finished goods	1,406		1,214
Inventories, net	$	2,350	$	1,970

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

NOTE 4: GOODWILL AND INTANGIBLE ASSETS

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

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

(In millions)	HVAC		Refrigeration		Fire & Security		Total
Balance as of December 31, 2021	$	5,658	$	1,228	$	2,463	$	9,349
Goodwill resulting from business combinations (1)	15		—		1		16
Foreign currency translation	(162)		(39)		(97)		(298)
Balance as of June 30, 2022	$	5,511	$	1,189	$	2,367	$	9,067

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

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

9

Identifiable intangible assets consisted of the following:

	June 30, 2022						December 31, 2021
(In millions)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Amortized:
Customer relationships	$	919	$	(701)	$	218	$	945	$	(699)	$	246
Patents and trademarks	224		(180)		44		232		(182)		50
Service portfolios and other	672		(540)		132		688		(539)		149
	1,815		(1,421)		394		1,865		(1,420)		445
Unamortized:
Trademarks and other	64		—		64		64		—		64
Intangible assets, net	$	1,879	$	(1,421)	$	458	$	1,929	$	(1,420)	$	509

Amortization of intangible assets was as follows:

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

NOTE 5: BORROWINGS AND LINES OF CREDIT

Long-term debt consisted of the following:

(In millions)	June 30, 2022		December 31, 2021
2.242% Notes due February 15, 2025	$	1,200	$	2,000
2.493% Notes due February 15, 2027	900		1,250
2.722% Notes due February 15, 2030	2,000		2,000
2.700% Notes due February 15, 2031	750		750
3.377% Notes due April 5, 2040	1,500		1,500
3.577% Notes due April 5, 2050	2,000		2,000
Total long-term Notes	8,350		9,500
Other debt (including project financing obligations and finance leases)	279		267
Discounts and debt issuance costs	(62)		(71)
Total debt	8,567		9,696
Less: current portion of long-term debt	269		183
Long-term debt, net of current portion	$	8,298	$	9,513

Revolving Credit Facility

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

Commercial Paper Program

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

10

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

Project Financing Arrangements

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

Debt Covenants

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

Tender Offers

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

NOTE 6: FAIR VALUE MEASUREMENTS

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

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

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

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

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

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

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

11

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

(In millions)	Total		Level 1		Level 2		Level 3
June 30, 2022
Derivative assets (1)	$	3	$	—	$	3	$	—
Derivative liabilities (2)	$	(9)	$	—	$	(9)	$	—
December 31, 2021
Derivative assets (1)	$	8	$	—	$	8	$	—
Derivative liabilities (2)	$	(35)	$	—	$	(35)	$	—

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

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

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

	June 30, 2022				December 31, 2021
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Total long-term Notes (1)	$	8,350	$	7,040	$	9,500	$	9,842

(1) Excludes debt discount and issuance costs.

The fair value of the Company's long-term debt is measured based on observable market inputs which are considered Level 1 within the fair value hierarchy. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings approximate fair value due to the short-term nature of these accounts and would be classified as Level 1 in the fair value hierarchy. The Company's financing leases and project financing obligations, included in Long-term debt and Current portion of long-term debt on the accompanying Unaudited Condensed Consolidated Balance Sheet, approximate fair value and are classified as Level 3 in the fair value hierarchy.

NOTE 7: EMPLOYEE BENEFIT PLANS

The Company sponsors both funded and unfunded domestic and international defined benefit pension and defined contribution plans. In addition, the Company contributes to various domestic and international multi-employer pension plans.

Contributions to the plans were as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022 (1)		2021		2022 (1)		2021
Defined benefit plans	$	2	$	3	$	6	$	27
Defined contribution plans	$	28	$	30	$	66	$	67
Multi-employer pension plans	$	3	$	7	$	6	$	12

(1) See Note 16 - Divestitures for additional information.

12

The components of net periodic pension expense (benefit) for the defined benefit pension plans are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022 (1)		2021		2022 (1)		2021
Service cost	$	4	$	7	$	9	$	14
Interest cost	4		10		8		19
Expected return on plan assets	(6)		(37)		(13)		(73)
Amortization of prior service credit	—		—		1		1
Recognized actuarial net (gain) loss	3		8		5		16
Net periodic pension expense (benefit)	$	5	$	(12)	$	10	$	(23)

(1) See Note 16 - Divestitures for additional information.

NOTE 8: STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation plans in accordance with ASC 718, Compensation - Stock Compensation, which requires a fair-value based method for measuring the value of stock-based compensation. Fair value is measured at the date of grant and is generally not adjusted for subsequent changes. The Company's stock-based compensation plans include programs for stock appreciation rights, restricted stock units and performance share units.

Stock-based compensation expense, net of estimated forfeitures, is included in Cost of products sold, Selling, general and administrative and Research and development in the accompanying Unaudited Condensed Consolidated Statements of Operations.

Stock-based compensation cost by award type was as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Equity compensation costs - equity settled	$	20	$	21	$	41	$	40
Equity compensation costs - cash settled (1)	(11)		6		(17)		10
Total stock-based compensation expense	$	9	$	27	$	24	$	50

(1) The cash settled awards are classified as liability awards and are measured at fair value at each balance sheet date.

NOTE 9: PRODUCT WARRANTIES

In the ordinary course of business, the Company provides standard warranty coverage on its products. Provisions for these amounts are established at the time of sale and estimated primarily based on product warranty terms and historical claims experience. In addition, the Company incurs discretionary costs to service its products in connection with specific product performance issues. Provisions for these amounts are established when they are known and estimable. The Company assesses the adequacy of its initial provisions and will make adjustments as necessary based on known or anticipated claims or as new information becomes available that suggests it is probable that future costs will be different than estimated amounts. Amounts associated with these provisions are classified on the accompanying Unaudited Condensed Consolidated Balance Sheet as Accrued liabilities or Other long-term liabilities based on their anticipated settlement date.

The changes in the carrying amount of warranty related provisions are as follows:

	For the Six Months Ended June 30,
(In millions)	2022		2021
Balance as of January 1,	$	524	$	514
Warranties, performance guarantees issued and changes in estimated liability	84		89
Settlements made	(78)		(80)
Other	(5)		—
Balance as of June 30,	$	525	$	523

13

NOTE 10: EQUITY

The authorized number of shares of common stock of Carrier is 4,000,000,000 shares of $0.01 par value. As of June 30, 2022 and December 31, 2021, 874,951,424 and 873,064,219 shares of common stock were issued, respectively, which includes 33,114,977 and 10,375,654 shares of treasury stock, respectively.

Share Repurchase Program

The Company may repurchase its outstanding common stock from time to time subject to market conditions and at the Company's discretion in the open market or through one or more other public or private transactions and subject to compliance with the Company's obligations under certain tax agreements. Shares acquired are recognized at cost and presented separately on the balance sheet as a reduction to Equity. In July 2021, the Company's Board of Directors approved a $1.75 billion increase to the Company's existing $350 million share repurchase program authorizing the repurchase of up to $2.1 billion of the Company's outstanding common stock. During 2021, the Company repurchased 10.4 million shares of common stock for an aggregate purchase price of $529 million.

On December 14, 2021, the Company entered into an accelerated share repurchase agreement ("ASR Agreement") to repurchase $500 million of its common stock pursuant to the Company's existing share repurchase program. In accordance with the ASR Agreement, the Company received initial delivery of 7.6 million shares on January 4, 2022, representing approximately 80% of the expected share repurchases. The final number of shares under the ASR Agreement was based on the daily average of the volume-weighted average share price of the Company's common stock over the term of the ASR Agreement. Upon final settlement, the Company received an additional 2.7 million shares on February 8, 2022 and recognized $500 million in Treasury stock as a reduction in equity.

During the six months ended June 30, 2022, the Company repurchased 22.7 million shares of common stock for an aggregate purchase price of $1.0 billion, which includes shares repurchased under the ASR Agreement. As of June 30, 2022, the Company has approximately $557 million remaining under the current authorization.

Accumulated Other Comprehensive Income (Loss)

A summary of changes in the components of Accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022 and 2021 is as follows:

(In millions)	Foreign Currency Translation		Defined Benefit Pension and Post-retirement Plans		Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2021	$	(505)	$	(484)	$	(989)
Other comprehensive income (loss) before reclassifications, net	(61)		(4)		(65)
Amounts reclassified, pre-tax	—		3		3
Tax expense (benefit) reclassified	—		(1)		(1)
Divestitures, net	(574)		329		(245)
Balance as of March 31, 2022	$	(1,140)	$	(157)	$	(1,297)
Other comprehensive income (loss) before reclassifications, net	(480)		—		(480)
Amounts reclassified, pre-tax	—		3		3
Tax expense (benefit) reclassified	—		(1)		(1)
Balance as of June 30, 2022	$	(1,620)	$	(155)	$	(1,775)

14

(In millions)	Foreign Currency Translation		Defined Benefit Pension and Post-retirement Plans		Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2020	$	(191)	$	(554)	$	(745)
Other comprehensive income (loss) before reclassifications, net	(121)		—		(121)
Amounts reclassified, pre-tax	—		9		9
Tax expense (benefit) reclassified	—		(2)		(2)
Balance as of March 31, 2021	$	(312)	$	(547)	$	(859)
Other comprehensive income (loss) before reclassifications, net	59		—		59
Amounts reclassified, pre-tax	—		8		8
Tax expense (benefit) reclassified	—		(2)		(2)
Balance as of June 30, 2021	$	(253)	$	(541)	$	(794)

NOTE 11: REVENUE RECOGNITION

The Company accounts for revenue in accordance with ASC 606: Revenue from Contracts with Customers. Revenue is recognized when control of a good or service promised in a contract (i.e. performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. A significant portion of the Company's performance obligations are recognized at a point-in-time when control of the product transfers to the customer, which is generally at the time of shipment. The remaining portion of the Company’s performance obligations are recognized over time as the customer simultaneously obtains control as the Company performs work under a contract, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment.

Sales disaggregated by product and service are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Sales Type
Product	$	3,005	$	2,757	$	5,644	$	4,904
Service	383		363		714		702
HVAC sales	3,388		3,120		6,358		5,606
Product	925		915		1,792		1,807
Service	116		106		225		219
Refrigeration sales	1,041		1,021		2,017		2,026
Product	838		1,012		1,609		1,931
Service	49		391		96		776
Fire & Security sales	887		1,403		1,705		2,707
Total segment sales	5,316		5,544		10,080		10,339
Eliminations and other	(105)		(104)		(215)		(200)
Net sales	$	5,211	$	5,440	$	9,865	$	10,139

15

Contract Balances

Total contract assets and contract liabilities consisted of the following:

(In millions)	June 30, 2022		December 31, 2021
Contract assets, current	$	712	$	503
Contract assets, non-current (included within Other assets)	6		70
Total contract assets	718		573
Contract liabilities, current	(444)		(415)
Contract liabilities, non-current (included within Other long-term liabilities)	(169)		(165)
Total contract liabilities	(613)		(580)
Net contract assets	$	105	$	(7)

The timing of revenue recognition, billings and cash collections results in contract assets and contract liabilities. Contract assets relate to the conditional right to consideration for any completed performance under a contract when costs are incurred in excess of billings under the percentage-of-completion methodology. Contract liabilities relate to payments received in advance of performance under a contract or when the Company has a right to consideration that is conditioned upon transfer of a good or service to a customer. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract.

The Company recognized revenue of $221 million during the six months ended June 30, 2022 that related to contract liabilities as of January 1, 2022. The Company expects a majority of its current contract liabilities at the end of the period to be recognized as revenue in the next 12 months.

NOTE 12: RESTRUCTURING COSTS

The Company incurs costs associated with restructuring initiatives intended to improve operating performance, profitability and working capital levels. Actions associated with these initiatives may include improving productivity, workforce reductions and the consolidation of facilities.

The Company recorded net pre-tax restructuring costs for new and ongoing restructuring initiatives as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
HVAC	$	2	$	7	$	6	$	11
Refrigeration	6		3		6		5
Fire & Security	3		9		9		20
Total Segment	11		19		21		36
General corporate expenses	2		2		2		3
Total restructuring costs	$	13	$	21	$	23	$	39
Cost of sales	$	5	$	6	$	7	$	11
Selling, general and administrative	8		15		16		28
Total restructuring costs	$	13	$	21	$	23	$	39

The following table summarizes the reserve and charges relating to the restructuring reserve, included in Accrued liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet:

16

	For the Six Months Ended June 30,
(In millions)	2022		2021
Balance as of January 1,	$	54	$	49
Net pre-tax restructuring costs	23		39
Utilization, foreign exchange and other	(34)		(40)
Balance as of June 30,	$	43	$	48

During the six months ended June 30, 2022 and 2021, charges associated with restructuring initiatives related to cost reduction efforts. Amounts recognized primarily related to severance due to workforce reductions and exit costs due to the consolidation of field operations. As of June 30, 2022, the Company had $43 million accrued for costs associated with its announced restructuring initiatives, all of which is expected to be paid within one year.

NOTE 13: INCOME TAXES

The Company accounts for income tax expense in accordance with ASC 740, Income Taxes ("ASC 740"), which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate was 22.5% for the three months ended June 30, 2022 compared with 32.0% for the three months ended June 30, 2021. The year-over-year decrease was primarily driven by a combined tax benefit of $15 million related to re-organizations in Australia, Canada and the United Kingdom recorded during the three months ended June 30, 2022 as well as the absence of a $43 million deferred tax charge recorded during the three months ended June 30, 2021 associated with a tax rate increase in the United Kingdom enacted on June 10, 2021 with an effective date of April 2023.

The effective tax rate was 19.3% for the six months ended June 30, 2022 compared with 27.5% for the six months ended June 30, 2021. The year-over-year decrease was primarily driven by a lower effective tax rate on the Chubb gain compared with the Company's U.S. statutory rate and a favorable tax adjustment of $32 million associated with foreign tax credits generated and expected to be utilized in the current year. The six months ended June 30, 2021 included a $43 million deferred tax charge associated with a tax rate increase in the United Kingdom enacted on June 10, 2021 with an effective date of April 2023, partially offset by the recognition of a favorable tax adjustment of $21 million resulting from the re-organization of a German subsidiary.

The Company assesses the realizability of its deferred tax assets on a quarterly basis through an analysis of potential sources of future taxable income, including prior year taxable income that may be available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine whether valuation allowances against deferred tax assets are required. The Company maintains valuation allowances against certain deferred tax assets.

The Company conducts business globally and files income tax returns in U.S. federal, state and foreign jurisdictions. In certain jurisdictions, the Company's operations were included in UTC's combined tax returns for the periods through the Distribution. The U.S. Internal Revenue Service ("IRS") is currently auditing UTC's tax years 2017 and 2018. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including Australia, Belgium, Canada, China, Czech Republic, France, Germany, Hong Kong, India, Italy, Mexico, the Netherlands, Singapore, the United Kingdom and the United States. The Company is no longer subject to U.S. federal income tax examination for years prior to 2017 and, with few exceptions, is no longer subject to state, local and foreign income tax examinations for tax years prior to 2013.

In the ordinary course of business, there is inherent uncertainty in quantifying the Company's income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. The Company believes that it is reasonably possible that a net decrease in unrecognized tax benefits of $10 million to $65 million may occur within 12 months as a result of additional uncertain tax positions, the Separation, the revaluation of uncertain tax positions arising from examinations, appeals, court decisions and/or the expiration of tax statutes.

17

NOTE 14: EARNINGS PER SHARE

Earnings per share is computed by dividing Net income attributable to common shareowners by the weighted-average number of shares of common stock outstanding during the period (excluding treasury stock). Diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards, including stock appreciation rights and stock options, when the effect of the potential exercise would be anti-dilutive.

The following table summarizes the weighted-average number of shares of common stock outstanding for basic and diluted earnings per share calculations:

	Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions, except per share amounts)	2022		2021		2022		2021
Net income attributable to common shareowners	$	573	$	487	$	1,952	$	871
Basic weighted-average number of shares outstanding	845.7		868.7		849.5		869.0
Stock awards and equity units (share equivalent)	17.0		22.2		18.9		21.4
Diluted weighted-average number of shares outstanding	862.7		890.9		868.4		890.4
Antidilutive shares excluded from computation of diluted earnings per share	4.5		3.1		2.9		3.1
Earnings Per Share
Basic	$	0.68	$	0.56	$	2.30	$	1.00
Diluted	$	0.67	$	0.55	$	2.25	$	0.98

NOTE 15: ACQUISITIONS

During the six months ended June 30, 2022, the Company acquired consolidated businesses and minority-owned businesses. The aggregate cash paid, net of cash acquired, totaled $38 million and was funded through cash on hand. Acquisitions are recorded using the acquisition method of accounting in accordance with ASC 805, Business Combinations. As a result, the aggregate purchase price has been allocated to assets acquired and liabilities assumed based on the estimate of fair market value of such assets and liabilities at the date of acquisition. The excess purchase price over the estimated fair value of net assets acquired during the six months ended June 30, 2022 was recognized as goodwill and totaled $16 million.

Toshiba Carrier Corporation Acquisition Agreement

On February 6, 2022, the Company entered into a binding agreement to acquire a majority ownership interest in Toshiba Carrier Corporation (“TCC”) for approximately $900 million. TCC, a variable refrigerant flow ("VRF") and light commercial HVAC joint venture between Carrier and Toshiba Corporation, designs and manufactures flexible, energy-efficient and high-performance VRF and light commercial HVAC systems as well as commercial products, compressors and heat pumps. The acquisition will include all of TCC’s advanced research and development centers and global manufacturing operations, product pipeline and the long-term use of Toshiba’s iconic brand. The transaction is expected to close in early August, subject to customary closing conditions, including regulatory approvals. Upon closing, Toshiba Corporation will retain a 5% ownership interest in TCC.

NOTE 16: DIVESTITURES

Sale of Chubb Fire & Security Business

On January 3, 2022, the Company completed the Chubb Sale for net proceeds of $2.9 billion. Chubb, which was reported within the Company’s Fire & Security segment, delivered essential fire safety and security solutions from design and installation to monitoring, service and maintenance across more than 17 countries around the globe. During the three months ended March 31, 2022, the Company recognized a net gain on the sale of $1.1 billion, which is included in Other income (expense), net on the accompanying Unaudited Condensed Consolidated Statement of Operations.

18

The following table summarizes Chubb's assets and liabilities classified as held for sale:

(In millions)	December 31, 2021
Cash and cash equivalents	$	60
Accounts receivable, net	445
Inventories, net	73
Contract assets, current	184
Other assets, current	27
Fixed assets, net	67
Intangible assets, net	545
Goodwill	940
Operating lease right-of-use assets	193
Pension and post-retirement assets	614
Other assets	20
Total assets disposed	$	3,168
Accounts payable	$	(190)
Accrued liabilities	(248)
Contract liabilities, current	(162)
Future pension and post-retirement obligations	(69)
Future income tax obligations	(273)
Operating lease liabilities	(175)
Other long-term liabilities	(17)
Total liabilities disposed	$	(1,134)

The sale agreement included several customary provisions to settle working capital and other transaction-related items as of the date of sale. As of June 30, 2022, APi and the Company are in the process of finalizing these amounts in accordance with the terms of the sale agreement. Upon finalization, any adjustments will be recognized within Other income (expense), net on the accompanying Unaudited Condensed Consolidated Statement of Operations.

NOTE 17: SEGMENT FINANCIAL DATA

The Company conducts its operations through three reportable operating segments: HVAC, Refrigeration and Fire & Security. In accordance with ASC 280 - Segment Reporting, the Company's segments maintain separate financial information for which results of operations are evaluated on a regular basis by the Company's Chief Operating Decision Maker in deciding how to allocate resources and in assessing performance.

•The HVAC segment provides products, controls, services and solutions to meet the heating, cooling and ventilation needs of residential and commercial customers while enhancing building performance, health, energy efficiency and sustainability.

•The Refrigeration segment includes transport refrigeration and monitoring products, services and digital solutions for trucks, trailers, shipping containers, intermodal and rail, as well as commercial refrigeration products.

•The Fire & Security segment provides a wide range of residential, commercial and industrial technologies designed to help protect people and property.

The Company's customers are in both the public and private sectors and its businesses reflect extensive geographic diversification. Inter-company sales between segments are immaterial.

19

Net sales and Operating profit by segment are as follows:

	Net Sales				Operating Profit
	For the Three Months Ended June 30,				For the Three Months Ended June 30,
(In millions)	2022		2021		2022		2021
HVAC	$	3,388	$	3,120	$	585	$	573
Refrigeration	1,041		1,021		147		123
Fire & Security	887		1,403		134		148
Total segment	5,316		5,544		866		844
Eliminations and other	(105)		(104)		(16)		(23)
General corporate expenses	—		—		(31)		(38)
Total Consolidated	$	5,211	$	5,440	$	819	$	783

	Net Sales				Operating Profit
	For the Six Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
HVAC	$	6,358	$	5,606	$	1,055	$	938
Refrigeration	2,017		2,026		254		250
Fire & Security	1,705		2,707		1,352		298
Total segment	10,080		10,339		2,661		1,486
Eliminations and other	(215)		(200)		(40)		(63)
General corporate expenses	—		—		(65)		(69)
Total Consolidated	$	9,865	$	10,139	$	2,556	$	1,354

Geographic external sales are attributed to the geographic regions based on their location of origin. With the exception of the U.S. presented in the table below, there were no individually significant countries with sales exceeding 10% of total sales during the six months ended June 30, 2022 and 2021.

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
United States	$	3,171	$	2,848	$	5,955	$	5,201
International:
Europe	1,119		1,459		2,164		2,857
Asia Pacific	713		907		1,365		1,649
Other	208		226		381		432
Net sales	$	5,211	$	5,440	$	9,865	$	10,139

20

NOTE 18: RELATED PARTIES

Equity Method Investments

The Company sells products to and purchases products from unconsolidated entities accounted for under the equity method and, therefore, these entities are considered to be related parties. Amounts attributable to equity method investees are as follows:

	For the Three Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021
Sales to equity method investees included in Product sales	$	787	$	652	$	1,411	$	1,120
Purchases from equity method investees included in Cost of products sold	$	91	$	98	$	201	$	174

The Company had receivables from and payables to equity method investees as follows:

(In millions)	June 30, 2022		December 31, 2021
Receivables from equity method investees included in Accounts receivable, net	$	315	$	150
Payables to equity method investees included in Accounts payable	$	57	$	51

NOTE 19: COMMITMENTS AND CONTINGENT LIABILITIES

The Company is involved in various litigation, claims and administrative proceedings, including those related to environmental (including asbestos) and legal matters. In accordance with ASC 450, Contingencies, the Company records accruals for loss contingencies when it is probable that a liability will be incurred and the amount of the loss can be reasonably estimated. These accruals are generally based upon a range of possible outcomes. If no amount within the range is a better estimate than any other, the Company accrues the minimum amount. In addition, these estimates are reviewed periodically and adjusted to reflect additional information when it becomes available. The Company is unable to predict the final outcome of the following matters based on the information currently available, except as otherwise noted. However, the Company does not believe that the resolution of any of these matters will have a material adverse effect upon the Company's competitive position, results of operations, cash flows or financial condition.

Environmental Matters

The Company’s operations are subject to environmental regulation by various authorities. The Company has accrued for the costs of environmental remediation activities, including but not limited to investigatory, remediation, operating and maintenance costs and performance guarantees. The most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to individual sites, including technology required to remediate, current laws and regulations and prior remediation experience.

The outstanding liabilities for environmental obligations are as follows:

(In millions)	June 30, 2022		December 31, 2021
Environmental reserves included in Accrued liabilities	$	29	$	29
Environmental reserves included in Other long-term liabilities	187		191
Total Environmental reserves	$	216	$	220

For sites with multiple responsible parties, the Company considers its likely proportionate share of the anticipated remediation costs and the ability of other parties to fulfill their obligations in establishing a provision for these costs. Accrued environmental liabilities are not reduced by potential insurance reimbursements and are undiscounted.

Asbestos Matters

The Company has been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos allegedly integrated into certain Carrier products or business premises. While the Company has never manufactured asbestos and no longer incorporates it into any currently-manufactured products, certain products that the Company no longer manufactures

21

contained components incorporating asbestos. A substantial majority of these asbestos-related claims have been dismissed without payment or have been covered in full or in part by insurance or other forms of indemnity. Additional cases were litigated and settled without any insurance reimbursement. The amounts involved in asbestos-related claims were not material individually or in the aggregate in any period.

The Company had asbestos liabilities and related insurance recoveries as follows:

(In millions)	June 30, 2022		December 31, 2021
Asbestos liabilities included in Accrued liabilities	$	17	$	17
Asbestos liabilities included in Other long-term liabilities	215		220
Total Asbestos liabilities	$	232	$	237
Asbestos-related recoveries included in Other assets, current	$	5	$	5
Asbestos-related recoveries included in Other assets	92		93
Total Asbestos-related recoveries	$	97	$	98

The amounts recorded for asbestos-related liabilities are based on currently available information and assumptions that the Company believes are reasonable and are made with input from outside actuarial experts. These amounts are undiscounted and exclude the Company’s legal fees to defend the asbestos claims, which are expensed as incurred. In addition, the Company has recorded insurance recovery receivables for probable asbestos-related recoveries.

UTC Equity Awards Conversion Litigation

On August 12, 2020, several former employees of UTC or its subsidiaries filed a putative class action complaint (the "Complaint") in the United States District Court for the District of Connecticut against Raytheon Technologies Corporation, Carrier, Otis, the former members of the UTC Board of Directors and the members of the Carrier and Otis Boards of Directors (Geraud Darnis, et al. v. Raytheon Technologies Corporation, et al.). The Complaint challenges the method by which UTC equity awards were converted to UTC, Carrier and Otis equity awards following the Separation and the Distribution. Defendants moved to dismiss the Complaint. Plaintiffs amended their Complaint on September 13, 2021 (the "Amended Complaint"). The Amended Complaint, now with Raytheon, Carrier and Otis as the only defendants, asserts that the defendants are liable for breach of certain equity compensation plans and for breach of the implied covenant of good faith and fair dealing. The Amended Complaint also seeks specific performance. Carrier believes that the claims against the Company are without merit. Defendants moved to dismiss the Amended Complaint on October 13, 2021. The motion to dismiss was fully briefed as of December 3, 2021 and the court held oral argument on the motion on July 14, 2022.

Aqueous Film Forming Foam Litigation

As of June 30, 2022, the Company has been named as a defendant in more than 2,400 lawsuits filed by individuals in or removed to the federal courts of the United States alleging that the historic use of Aqueous Film Forming Foam ("AFFF") caused personal injuries and/or property damage. The Company has also been named as a defendant in more than 200 lawsuits filed by several U.S. states, municipalities and water utilities in or removed to U.S. federal courts alleging that the historic use of AFFF caused contamination of property and water supplies. In December 2018, the U.S. Judicial Panel on Multidistrict Litigation transferred and consolidated all AFFF cases pending in the U.S. federal courts against the Company and others to the U.S. District Court for the District of South Carolina ("MDL Court") for pre-trial proceedings ("MDL Proceedings"). The individual plaintiffs in the MDL Proceedings generally seek damages for alleged personal injuries, medical monitoring and diminution in property value and injunctive relief to remediate alleged contamination of water supplies. The U.S. state, municipal and water utility plaintiffs in the MDL Proceedings generally seek damages and costs related to the remediation of public property and water supplies.

AFFF is a firefighting foam, developed beginning in the late 1960s pursuant to U.S. military specification, used to extinguish certain types of hydrocarbon-fueled fires primarily at military bases and airports. AFFF was manufactured by several companies, including National Foam and Angus Fire. UTC first entered the AFFF business with the acquisition of National Foam and Angus Fire in 2005 as part of the acquisition of Kidde. In 2013, Kidde divested the National Foam and Angus Fire businesses to a third party. The Company acquired Kidde as part of its separation from UTC in April 2020. During the eight-year period of its operation by Kidde, National Foam manufactured AFFF for sale to government (including the U.S. federal government) and non-government customers in the U.S. at a single facility located in West Chester, Pennsylvania

22

("Pennsylvania Site"). During the same period, Angus Fire manufactured AFFF for sale outside the United States at a single facility located in Bentham, England.

The key components of AFFF that contribute to its fire-extinguishing capabilities are known as fluorosurfactants. National Foam and Angus Fire did not manufacture fluorosurfactants but instead purchased these substances from unrelated third parties. Plaintiffs in the MDL Proceedings allege that the fluorosurfactants used by various manufacturers in producing AFFF contained, or over time degraded into, compounds known as perflourooctane sulfonate ("PFOS") and/or perflourooctane acid ("PFOA"). Plaintiffs further allege that, as a result of the use of AFFF, PFOS and PFOA were released into the environment and, in some instances, ultimately reached drinking water supplies.

Plaintiffs in the MDL Proceedings allege that PFOS and PFOA contamination has resulted from the use of AFFF containing fluorosurfactants manufactured using a process known as ECF. They also allege that PFOA contamination has resulted from the use of AFFF containing fluorosurfactants manufactured using a different process, known as telomerization. Plaintiffs further allege that 3M was the only AFFF manufacturer that used fluorosurfactants relying on the ECF process and that all other foam manufacturers (including National Foam and Angus Fire) relied solely on fluorosurfactants produced via telomerization. Compounds containing PFOS and PFOA (as well as many other per- and polyfluoroalkyl substances known collectively as "PFAS") have also been used for decades by many third parties in a number of different industries to manufacture carpets, clothing, fabrics, cookware, food packaging, personal care products, cleaning products, paints, varnishes and other consumer and industrial products.

Plaintiffs in the MDL Proceedings have named multiple defendants, including four suppliers of chemicals and raw materials used to manufacture fluorosurfactants, four fluorosurfactant manufacturers, two toll manufacturers of fluorosurfactants and seven current (including National Foam and Angus Fire) and former (including the Company) AFFF manufacturers.

General liability discovery in the MDL Proceedings continues. Preliminary stage discovery in ten "bellwether" water provider cases was concluded and three of these cases were selected for tier two site-specific discovery. That discovery is ongoing. The MDL Court previously established a briefing schedule with respect to certain aspects of the government contractor defense, potentially applicable to AFFF sold to or used by the U.S. government or other customers requiring product manufactured to meet military specification, with briefing to conclude at the end of January 2022 with a hearing to follow in late March. In late March, the MDL Court postponed the planned hearing and called for briefing on additional elements of the government contractor defense. Briefing was completed as of July 1, 2022. An oral argument is now scheduled on August 19, 2022.

Outside of the MDL Proceedings, the Company and other defendants are also party to six lawsuits in U.S. state courts brought by oil refining companies alleging product liability claims related to legacy sales of AFFF and seeking damages for the costs to replace the product and for property damage. In addition, the Company and other defendants are party to two actions related to the Pennsylvania Site in which the plaintiff water utility company seeks remediation costs related to the alleged contamination of the local water supply.

The Company believes that it has meritorious defenses to the claims in the MDL Proceedings and the other AFFF lawsuits. Based on the 2013 agreement for the sale of National Foam and Angus Fire, the Company is pursuing indemnification against these claims from the purchaser and current owner of National Foam and Angus Fire. The Company also is pursuing insurance coverage for these claims. At this time, however, given the numerous factual, scientific and legal issues to be resolved relating to these claims, the Company is unable to assess the probability of liability or to reasonably estimate the damages, if any, to be allocated to the Company, if one or more plaintiffs were to prevail in these cases. There can be no assurance that any such future exposure will not be material in any period.

Income Taxes

Under the Tax Matters Agreement relating to the Separation, the Company is responsible to UTC for its share of the Tax Cuts and Jobs Act ("TCJA") transition tax associated with foreign undistributed earnings as of December 31, 2017. As a result, liabilities of $34 million and $383 million are included within the accompanying Unaudited Condensed Consolidated Balance Sheet within Accrued Liabilities and Other Long-Term Liabilities as of June 30, 2022, respectively. This obligation is expected to be settled in annual installments ending in April 2026 with the next installment of $34 million due in 2023. The Company believes that the likelihood of incurring losses materially in excess of this amount is remote.

Other

The Company has other commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising in the ordinary course of business. The Company accrues for contingencies generally based upon a range of

23

possible outcomes. If no amount within the range is a better estimate than any other, the Company accrues the minimum amount.

In the ordinary course of business, the Company is also routinely a defendant in, party to or otherwise subject to many pending and threatened legal actions, claims, disputes and proceedings. These matters are often based on alleged violations of contract, product liability, warranty, regulatory, environmental, health and safety, employment, intellectual property, tax and other laws. In some of these proceedings, claims for substantial monetary damages are asserted against the Company and could result in fines, penalties, compensatory or treble damages or non-monetary relief. The Company does not believe that these matters will have a material adverse effect upon its competitive position, results of operations, cash flows or financial condition.

NOTE 20: SUBSEQUENT EVENTS

On July 15, 2022, the Company entered into a five-year, JPY 54 billion (approximately $400 million) senior unsecured term loan facility with MUFG Bank Ltd., as administrative agent and lender, and certain other lenders (the "Japanese Term Loan Facility"). Borrowings under the Japanese Term Loan Facility bear interest at a rate equal to the Tokyo Term Risk Free Rate plus 0.75%. In addition, the Japanese Term Loan Facility is subject to customary covenants including a covenant to maintain a maximum consolidated leverage ratio during its term. The Company expects to designate the Japanese Term Loan Facility as a partial hedge of its investment in certain Yen-functional currency subsidiaries in order to manage foreign currency translation risk. As a result, changes in the fair value of the Japanese Term Loan Facility associated with foreign exchange rate movements will be recorded in Equity in the Unaudited Condensed Consolidated Balance Sheet.

On July 25, 2022, the Company borrowed JPY 54 billion under the Japanese Term Loan Facility and intends to use the proceeds to fund a portion of the planned acquisition of TCC and to pay related fees and expenses. The Company expects to fund the remaining portion of the Yen denominated purchase price for the planned acquisition of TCC with cash on hand by entering into cross currency swaps with SMBC Capital Markets, Inc. as syndication swap arranger, and certain other financial institutions. The Company expects to designate the cross currency swaps as a partial hedge of its investment in certain Yen-functional currency subsidiaries in order to manage foreign currency translation risk. As a result, changes in the fair value of the swaps will be recorded in Equity in the Unaudited Condensed Consolidated Balance Sheet.

24

With respect to the Unaudited Condensed Consolidated Financial Statements of Carrier for the three and six months ended June 30, 2022 and 2021, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated July 28, 2022, appearing below, states that the firm did not audit and does not express an opinion on the Unaudited Condensed Consolidated Financial Statements. PricewaterhouseCoopers has not carried out any significant or additional audit tests beyond those that would have been necessary if their report had not been included. Accordingly, the degree of reliance on its report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Securities Act"), for its report on the Unaudited Condensed Consolidated Financial Statements because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11 of the Securities Act.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareowners of Carrier Global Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Carrier Global Corporation and its subsidiaries (the “Company”) as of June 30, 2022, and the related condensed consolidated statements of operations, of comprehensive income (loss), of changes in equity for the three-month and six-month periods ended June 30, 2022 and 2021 and the condensed consolidated statement of cash flows for the six-month periods ended June 30, 2022 and 2021, including the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 8, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2021 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our review in accordance with the standards of the PCAOB. A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ PricewaterhouseCoopers LLP

Hallandale Beach, Florida

July 28, 2022

25

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

BUSINESS OVERVIEW

Business Summary

Carrier is the leading global provider of healthy, safe, sustainable and intelligent building and cold chain solutions. Our portfolio includes industry-leading brands such as Carrier, Automated Logic, Carrier Transicold, Kidde, Edwards and LenelS2 that offer innovative HVAC, refrigeration, fire, security and building automation technologies to help make the world safer and more comfortable. We also provide a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring. Our operations are classified into three segments: HVAC, Refrigeration and Fire & Security.

Our worldwide operations are affected by global and regional industrial, economic and political factors and trends. These include the mega-trends of urbanization, climate change and increasing requirements for food safety driven by the food needs of our growing global population and the rising standards of living in emerging markets. We believe that our business segments are well positioned to benefit from favorable secular trends, including these mega-trends and from the strength of our industry-leading brands and track record of innovation. In addition, we regularly review our markets to proactively identify trends and adapt our strategies accordingly.

Our business is also affected by changes in the general level of economic activity, such as changes in business and consumer spending, construction and shipping activity as well as short-term economic factors such as currency fluctuations, commodity price volatility and supply disruptions. However, we continue to invest in our business, take pricing actions to mitigate supply chain and inflationary pressures, develop new products and services in order to remain competitive in our markets and use risk management strategies to mitigate various exposures. We believe that we have industry-leading global brands, which form the foundation of our business strategy. Coupled with our focus on growth, innovation and operational efficiency, we expect to drive long-term future growth and increased value for our shareowners.

Recent Developments

Russia's Invasion of Ukraine

In February 2022, Russian forces initiated a military action against Ukraine. As a result, the European Union, United States, the United Kingdom and other countries have imposed sanctions that have increased global economic and political uncertainty. We operate in Russia through a Russia-based subsidiary and a joint venture which represents less than 1% of our total assets and revenue. On March 10, 2022, we announced that we were suspending business operations in Russia, honoring existing contractual obligations in a manner that fully complies with all sanctions and trade controls imposed. As of June 30, 2022, we plan to cease all operations in Russia this year. While neither Russia nor Ukraine constitute a material portion of our business, the conflict could lead to disruption, instability and volatility in global markets and industries that could negatively impact our results of operations. We continue to monitor the evolving impacts of this conflict and its effect on the global economy and geopolitical landscape.

Supply Chain Challenges

The ongoing global economic recovery from the COVID-19 pandemic has caused significant challenges for global supply chains resulting in inflationary cost pressures, component shortages and transportation delays. As a result, we have incurred incremental costs for commodities and components used in our products as well as component shortages that have negatively impacted our sales and results of operations. We expect that these challenges will continue to have an impact on our businesses for the foreseeable future.

We continue to take proactive steps to limit the impact of these challenges and are working closely with our suppliers to ensure availability of products and implement other cost savings initiatives. In addition, we continue to invest in our supply chain to improve its resilience with a focus on automation, dual sourcing of critical components and localized manufacturing when feasible. To date, there has been limited disruption to the availability of our products, though it is possible that more significant disruptions could occur if these supply chain challenges continue.

Sale of Chubb Fire & Security Business

On January 3, 2022, we completed the Chubb Sale for net proceeds of $2.9 billion. Chubb, which was reported within our Fire & Security segment, delivered essential fire safety and security solutions from design and installation to monitoring, service and

26

maintenance across more than 17 countries around the globe. During the three months ended March 31, 2022, we recognized a gain on the sale of $1.1 billion. The sale agreement included several customary provisions to settle working capital and other transaction-related items as of the date of sale. As of June 30, 2022, both parties are in the process of finalizing these amounts in accordance with established timelines.

Impact of the COVID-19 Pandemic

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

CRITICAL ACCOUNTING ESTIMATES

Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses. We believe that the most complex and sensitive judgments, because of their potential significance to the Unaudited Condensed Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. In "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our 2021 Form 10-K, we describe the significant accounting estimates and policies used in the preparation of the Unaudited Condensed Consolidated Financial Statements. There have been no significant changes in our critical accounting estimates.

RESULTS OF OPERATIONS

As a result of the Chubb Sale, we do not own any shares of Chubb common stock and no longer consolidate Chubb in our financial statements as of January 3, 2022. Therefore, this Management’s Discussion and Analysis of Financial Condition and Results of Operations only includes the financial results of Chubb in periods prior to the date of sale. As a result, prior period results may not be comparable to the current period. See Note 16 - Divestitures in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information.

Three Months Ended June 30, 2022 Compared with the Three Months Ended June 30, 2021

The following represents our consolidated net sales and operating results:

	For the Three Months Ended June 30,
(In millions)	2022		2021		Period Change		% Change
Net sales	$	5,211	$	5,440	$	(229)	(4)	%
Cost of products and services sold	(3,764)		(3,821)		57		(1)	%
Gross margin	1,447		1,619		(172)		(11)	%
Operating expenses	(628)		(836)		208		(25)	%
Operating profit	819		783		36		5	%
Non-operating income (expenses), net	(62)		(52)		(10)		19	%
Income from operations before income taxes	757		731		26		4	%
Income tax expense	(170)		(234)		64		(27)	%
Net income from operations	587		497		90		18	%
Less: Non-controlling interest in subsidiaries' earnings from operations	14		10		4		40	%
Net income attributable to common shareowners	$	573	$	487	$	86	18	%

27

Net Sales

For the three months ended June 30, 2022, Net sales were $5.2 billion, a 4% decrease compared with the same period of 2021. The components of the year-over-year change were as follows:

	For the Three Months Ended June 30, 2022
Organic	7	%
Foreign currency translation	(3)	%
Acquisitions and divestitures, net	(8)	%
Total % change	(4)	%

Organic sales for the three months ended June 30, 2022 increased by 7% compared with the same period of 2021. We continue to benefit from strong demand for energy-efficient, digital products and healthy building solutions as well as pricing improvements across each of our segments. The organic increase was primarily driven by our HVAC segment with continued strong demand and pricing improvements in our North America residential and light commercial business and improved global end-markets in our Commercial HVAC business. Strong results in our Refrigeration segment were primarily driven by pricing improvements and higher volumes. Pricing improvements in our Fire & Security segment were the primary driver of growth compared with the prior year while supply chain and logistic constraints continue to be challenging. Refer to "Segment Review" below for a discussion of Net sales by segment.

Gross Margin

For the three months ended June 30, 2022, gross margin was $1.4 billion, an 11% decrease compared with the same period of 2021. The components were as follows:

	For the Three Months Ended June 30,
(In millions)	2022			2021
Net sales	$	5,211		$	5,440
Cost of products and services sold	(3,764)			(3,821)
Gross margin	$	1,447		$	1,619
Percentage of net sales	27.8		%	29.8		%

The decrease in gross margin was primarily driven by the Chubb Sale which contributed $152 million of gross margin during the three months ended June 30, 2021 with a 20 basis point impact on gross margin as a percentage of Net sales. In addition, each of our segments continued to be impacted by the higher cost of commodities and components used in our products, certain supply chain constraints and higher freight costs. However, these impacts were more than offset by strong demand, pricing improvements and our continued focus on productivity initiatives. Although pricing improvements more than offset inflationary impacts and supply chain challenges, gross margin as a percentage of Net sales decreased by 200 basis points compared with the same period of 2021.

Operating Expenses

For the three months ended June 30, 2022, operating expenses, including Equity method investment net earnings, were $628

28

million, a 25% decrease compared with the same period of 2021. The components were as follows:

	For the Three Months Ended June 30,
(In millions)	2022			2021
Selling, general and administrative	$	(614)		$	(813)
Research and development	(122)			(125)
Equity method investment net earnings	101			87
Other income (expense), net	7			15
Total operating expenses	$	(628)		$	(836)
Percentage of net sales	12.1		%	15.4		%

For the three months ended June 30, 2022, Selling, general and administrative expenses were $614 million, a 24% decrease compared with the same period of 2021. The decrease is primarily due to the Chubb Sale on January 3, 2022. In addition, lower restructuring charges and the benefit provided by changes in the fair value of cash-settled equity awards further contributed to the decrease. In addition, the three months ended June 30, 2021 included $3 million of costs related to the Separation and $12 million of costs related to the Chubb Sale.

Research and development costs relate to new product development and new technology innovation. Due to the variable nature of program development schedules, year-over-year spending levels can fluctuate. In addition, we continue to invest to prepare for future energy efficiency and refrigerant regulation changes as well as digital controls technologies.

Investments over which we do not exercise control, but have significant influence, are accounted for using the equity method of accounting. For the three months ended June 30, 2022, Equity method investment net earnings were $101 million, a 16% increase compared with the same period of 2021. The increase was primarily related to a $27 million gain on the sale of two minority owned subsidiaries within one of our joint ventures partially offset by the higher cost of commodities and components.

Other income (expense), net primarily includes the impact of gains and losses related to the sale of businesses or interests in our equity method investments, foreign currency gains and losses on transactions that are denominated in a currency other than an entity's functional currency and hedging-related activities. During the three months ended June 30, 2022, we recognized a $22 million charge resulting from a litigation matter and a $7 million gain on the sale of our interest in a cost method investment reported within our Refrigeration segment.

Non-Operating Income (Expenses), net

For the three months ended June 30, 2022, Non-operating income (expenses), net was $62 million, a 19% increase compared with the same period of 2021. The components were as follows:

	For the Three Months Ended June 30,
(In millions)	2022		2021
Non-service pension (expense) benefit	$	(1)	$	19
Interest expense	$	(68)	$	(75)
Interest income	7		4
Interest (expense) income, net	$	(61)	$	(71)
Non-operating income (expenses), net	$	(62)	$	(52)

Non-operating income (expenses), net includes the results from activities other than normal business operations such as interest expense, interest income and the non-service components of pension and post-retirement obligations. For the three months ended June 30, 2022, Interest expense was $68 million, a 9% decrease compared with the same period of 2021. The decrease

29

was primarily driven by the repayment of $1.15 billion aggregate principal 2.242% Notes due 2025 and 2.493% Notes due 2027 during the three months ended March 31, 2022.

Income Taxes

	For the Three Months Ended June 30,
	2022		2021
Effective tax rate	22.5	%	32.0	%

The Company accounts for income tax expense in accordance with ASC 740, which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate was 22.5% for the three months ended June 30, 2022 compared with 32.0% for the three months ended June 30, 2021. The year-over-year decrease was primarily driven by a combined tax benefit of $15 million related to re-organizations in Australia, Canada and the United Kingdom recorded during the three months ended June 30, 2022 as well as the absence of a $43 million deferred tax charge recorded during the three months ended June 30, 2021 associated with a tax rate increase in the United Kingdom enacted on June 10, 2021 with an effective date of April 2023.

Six Months Ended June 30, 2022 Compared with the Six Months Ended June 30, 2021

The following represents our consolidated net sales and operating results:

	For the Six Months Ended June 30,
(In millions)	2022		2021		Period Change		% Change
Net sales	$	9,865	$	10,139	$	(274)	(3)	%
Cost of products and services sold	(7,125)		(7,126)		1		—	%
Gross margin	2,740		3,013		(273)		(9)	%
Operating expenses	(184)		(1,659)		1,475		(89)	%
Operating profit	2,556		1,354		1,202		89	%
Non-operating income (expenses), net	(111)		(127)		16		(13)	%
Income from operations before income taxes	2,445		1,227		1,218		99	%
Income tax expense	(471)		(338)		(133)		39	%
Net income from operations	1,974		889		1,085		122	%
Less: Non-controlling interest in subsidiaries' earnings from operations	22		18		4		22	%
Net income attributable to common shareowners	$	1,952	$	871	$	1,081	124	%

Net Sales

For the six months ended June 30, 2022, Net sales were $9.9 billion, a 3% decrease compared with the same period of 2021. The components of the year-over-year change were as follows:

	For the Six Months Ended June 30, 2022
Organic	9	%
Foreign currency translation	(3)	%
Acquisitions and divestitures, net	(9)	%
Total % change	(3)	%

Organic sales for the six months ended June 30, 2022 increased by 9% compared with the same period of 2021. We continue to benefit from strong demand for energy-efficient, digital products and healthy building solutions as well as pricing improvements across each of our segments. The organic increase was primarily driven by our HVAC segment with continued

30

strong demand in our North America residential and light commercial business and improved global end-markets in our Commercial HVAC business. Pricing improvements in our Fire & Security segment were the primary driver of growth compared with the prior year while supply chain and logistic constraints continue to be challenging. Refrigeration results were flat as strong second quarter results offset ongoing supply chain and logistic constraints. Refer to "Segment Review" below for a discussion of Net sales by segment.

Gross Margin

For the six months ended June 30, 2022, gross margin was $2.7 billion, a 9% decrease compared with the same period of 2021. The components were as follows:

	For the Six Months Ended June 30,
(In millions)	2022			2021
Net sales	$	9,865		$	10,139
Cost of products and services sold	(7,125)			(7,126)
Gross margin	$	2,740		$	3,013
Percentage of net sales	27.8		%	29.7		%

The decrease in gross margin was primarily driven by the Chubb Sale, which contributed $322 million of gross margin during the six months ended June 30, 2021 with a 10 basis point impact on gross margin as a percentage of Net sales. In addition, each of our segments continued to be impacted by the higher cost of commodities and components used in our products, certain supply chain constraints and higher freight costs. However, these impacts were more than offset by strong demand, pricing improvements and our continued focus on productivity initiatives. Although pricing improvements offset inflationary impacts and supply chain challenges, gross margin as a percentage of Net sales decreased by 190 basis points compared with the same period of 2021.

Operating Expenses

For the six months ended June 30, 2022, operating expenses, including Equity method investment net earnings, were $184 million, a 89% decrease compared with the same period of 2021. The components were as follows:

	For the Six Months Ended June 30,
(In millions)	2022			2021
Selling, general and administrative	$	(1,215)		$	(1,556)
Research and development	(247)			(246)
Equity method investment net earnings	159			125
Other income (expense), net	1,119			18
Total operating expenses	$	(184)		$	(1,659)
Percentage of net sales	1.9		%	16.4		%

For the six months ended June 30, 2022, Selling, general and administrative expenses were $1.2 billion, a 22% decrease compared with the same period of 2021. The decrease is primarily due to the Chubb Sale on January 3, 2022. In addition, lower restructuring charges and the benefit provided by changes in the fair value of cash-settled equity awards further contributed to the decrease. In addition, the six months ended June 30, 2021 included $19 million of costs related to the Separation and $15 million of costs related to the Chubb Sale.

Research and development costs relate to new product development and new technology innovation. Due to the variable nature of program development schedules, year-over-year spending levels can fluctuate. In addition, we continue to invest to prepare for future energy efficiency and refrigerant regulation changes as well as digital controls technologies.

Investments over which we do not exercise control, but have significant influence, are accounted for using the equity method of accounting. For the six months ended June 30, 2022, Equity method investment net earnings were $159 million, a 27% increase compared with the same period of 2021. The increase was primarily related to a $27 million gain on the sale of two minority

31

owned subsidiaries within one of our joint ventures. In addition, higher earnings in HVAC joint ventures in Asia and North America further benefited earnings.

Other income (expense), net primarily includes the impact of gains and losses related to the sale of businesses or interests in our equity method investments, foreign currency gains and losses on transactions that are denominated in a currency other than an entity's functional currency and hedging-related activities. During the six months ended June 30, 2022, we completed the Chubb Sale and recognized a net gain on the sale of $1.1 billion. In addition, we recognized a $22 million charge resulting from a litigation matter and a $7 million gain on the sale of our interest in a cost method investment reported within our Refrigeration segment.

Non-Operating Income (Expenses), net

For the six months ended June 30, 2022, Non-operating income (expenses), net was $111 million, a 13% increase compared with the same period of 2021. The components were as follows:

	For the Six Months Ended June 30,
(In millions)	2022		2021
Non-service pension (expense) benefit	$	(2)	$	37
Interest expense	$	(155)	$	(171)
Interest income	46		7
Interest (expense) income, net	$	(109)	$	(164)
Non-operating income (expenses), net	$	(111)	$	(127)

Non-operating income (expenses), net includes the results from activities other than normal business operations such as interest expense, interest income and the non-service components of pension and post-retirement obligations. For the six months ended June 30, 2022, Interest expense was $155 million, a 9% decrease compared with the same period of 2021. During the six months ended June 30, 2022, we completed tender offers to repurchase approximately $1.15 billion aggregate principal of our 2.242% Notes due 2025 and 2.493% Notes due 2027. Upon settlement, we wrote off $5 million of unamortized deferred financing costs in Interest expense and recognized a net gain of $33 million in Interest income. During the six months ended June 30, 2021, we incurred a make-whole premium of $17 million and wrote-off $2 million of unamortized deferred financing costs in Interest expense as a result of the redemption of our $500 million 1.923% Notes originally due in February 2023.

Income Taxes

	For the Six Months Ended June 30,
	2022		2021
Effective tax rate	19.3	%	27.5	%

The Company accounts for income tax expense in accordance with ASC 740, which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate was 19.3% for the six months ended June 30, 2022 compared with 27.5% for the six months ended June 30, 2021. The year-over-year decrease was primarily driven by a lower effective tax rate on the Chubb gain compared with our U.S. statutory rate and a favorable tax adjustment of $32 million associated with foreign tax credits generated and expected to be utilized in the current year. The six months ended June 30, 2021 included a $43 million deferred tax charge associated with a tax rate increase in the United Kingdom enacted on June 10, 2021 with an effective date of April 2023, partially offset by the recognition of a favorable tax adjustment of $21 million resulting from the re-organization of a German subsidiary.

32

SEGMENT REVIEW

We have three operating segments:

•The HVAC segment provides products, controls, services and solutions to meet the heating, cooling and ventilation needs of residential and commercial customers while enhancing building performance, health, energy efficiency and sustainability.

•The Refrigeration segment includes transport refrigeration and monitoring products, services and digital solutions for trucks, trailers, shipping containers, intermodal and rail, as well as commercial refrigeration products.

•The Fire & Security segment provides a wide range of residential, commercial and industrial technologies designed to help protect people and property.

We determine our segments based on how our Chief Executive Officer, who is the Chief Operating Decision Maker (the "CODM"), allocates resources, assesses performance and makes operational decisions. The CODM allocates resources and evaluates the financial performance of each of our segments based on Net sales and Operating profit. Adjustments to reconcile segment reporting to the consolidated results are included in Note 17 - Segment Financial Data.

Three Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021

Summary performance for each of our segments is as follows:

	Net Sales				Operating Profit				Operating Profit Margin
	For the Three Months Ended June 30,				For the Three Months Ended June 30,				For the Three Months Ended June 30,
(In millions)	2022		2021		2022		2021		2022		2021
HVAC	$	3,388	$	3,120	$	585	$	573	17.3	%	18.4	%
Refrigeration	1,041		1,021		147		123		14.1	%	12.0	%
Fire & Security	887		1,403		134		148		15.1	%	10.5	%
Total segment	$	5,316	$	5,544	$	866	$	844	16.3	%	15.2	%

HVAC Segment

For the three months ended June 30, 2022, Net sales in our HVAC segment were $3.4 billion, a 9% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

	Net Sales
Organic	8	%
Foreign currency translation	(1)	%
Acquisitions and divestitures, net	2	%
Total % change in Net sales	9	%

The organic increase in Net sales of 8% was driven by continued strong results across each of the segment's businesses. Increased sales in our North America residential and light commercial business (14%) were primarily driven by pricing improvements during the period. Increased sales in our Commercial HVAC business (2%) benefited from pricing improvements and ongoing customer demand in our end-markets. The business saw growth in each region, although sales in China decreased as a result of a resurgence of COVID-19 cases and additional restrictions imposed. While current demand remains strong, supply chain and logistics constraints continue to be challenging, negatively impacting our sales and results of operations. In addition, results for 2021 reflected a significant rebound in demand after initial weakness associated with the COVID-19 pandemic.

On June 1, 2021, the Commercial HVAC business acquired a 70% controlling interest in Guangdong Giwee Group and its subsidiaries ("Giwee") and subsequently acquired the remaining 30% ownership interest on September 7, 2021. Giwee is a China-based manufacturer offering a portfolio of HVAC products including variable refrigerant flow, modular chillers and light commercial air conditioners. The results of Giwee have been included in our Unaudited Condensed Consolidated Financial

33

Statements since the date of acquisition. The transaction added 2% to Net sales during the three months ended June 30, 2022. Refer to Note 15 - Acquisitions for additional information.

For the three months ended June 30, 2022, Operating profit in our HVAC segment was $585 million, a 2% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

	Operating Profit
Operational	4	%
Foreign currency translation	(1)	%
Acquisitions and divestitures, net	1	%
Restructuring	1	%
Other	(3)	%
Total % change in Operating profit	2	%

The operational profit increase of 4% was primarily driven by pricing improvements compared with the prior year. Higher earnings from equity method investments in North America and Asia also benefited operational profit and included a $27 million gain on the sale of two minority owned subsidiaries within one of our joint ventures. In addition, productivity initiatives and lower selling, general and administrative costs provided further benefits. These amounts were partially offset by the higher costs of commodities and components used in our products and higher freight and logistic costs compared with the prior year.

Acquisitions and divestitures, net primarily related to the acquisition of Giwee. The transaction added 1% to Operating profit during the three months ended June 30, 2022. In addition, amounts reported in Other includes a $22 million charge resulting from a litigation matter.

Refrigeration Segment

For the three months ended June 30, 2022, Net sales in our Refrigeration segment were $1.0 billion, a 2% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

	Net Sales
Organic	9	%
Foreign currency translation	(7)	%
Total % change in Net sales	2	%

The organic increase in Net sales of 9% was driven by strong demand across each of the segment's businesses. Commercial refrigeration sales increased (8%) primarily due to pricing improvements and higher volumes compared with the prior year. These amounts were partially offset by continued supply chain constraints. Transport refrigeration sales increased (9%) primarily due to pricing improvements and higher volumes associated with component availability during the period. The business saw growth in each region, although sales in China decreased as a result of a resurgence of COVID-19 cases and additional restrictions imposed. The three months ended June 30, 2021 reflected a significant rebound in demand associated with the cyclical decline that began in late 2019 as well as the demand for global transportation and COVID-19 vaccine-related cargo monitoring. While current demand remains strong, supply chain and logistics constraints continue to be challenging, negatively impacting our sales and results of operations.

For the three months ended June 30, 2022, Operating profit in our Refrigeration segment was $147 million, a 20% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

34

	Operating Profit
Operational	24	%
Foreign currency translation	(8)	%
Restructuring	(2)	%
Other	6	%
Total % change in Operating profit	20	%

The increase in operational profit of 24% was primarily attributable to pricing improvements compared with the prior year. Higher volumes and favorable productivity initiatives further benefited operational profit. In addition, segment results also reflected lower selling, general and administrative costs during the period. These amounts were partially offset by the higher costs of commodities and components used in our products and higher freight and logistic costs. Amounts reported in Other primarily represent a $7 million gain on the sale of our interest in a cost method investment.

Fire & Security Segment

For the three months ended June 30, 2022, Net sales in our Fire & Security segment were $887 million, a 37% decrease compared with the same period of 2021. The components of the year-over-year change were as follows:

	Net Sales
Organic	3	%
Foreign currency translation	(2)	%
Acquisitions and divestitures, net	(38)	%
Total % change in Net sales	(37)	%

The organic increase in Net sales of 3% was primarily driven by pricing improvements compared with the prior year. The segment primarily saw growth in both residential and commercial sales in the Americas and Europe as sales in China decreased as a result of a resurgence of COVID-19 cases and additional restrictions imposed. Global industrial sales also benefited segment results. While current demand remains strong, supply chain constraints continue to be challenging, negatively impacting our sales and results of operations. In addition, results for 2021 reflected a significant rebound in demand after initial weakness associated with the COVID-19 pandemic.

Acquisitions and divestitures, net primarily relates to the prior year results of our Chubb business, the sale of which was completed on January 3, 2022. During the three months ended June 30, 2021, Net sales in our Fire & Security segment were $1.4 billion, which included $554 million from our Chubb business. Absent the results of Chubb, Net sales increased 4% from $849 million to $887 million.

For the three months ended June 30, 2022, Operating profit in our Fire & Security segment was $134 million, a 9% decrease compared with the same period of 2021. The components of the year-over-year change were as follows:

	Operating Profit
Operational	(7)	%
Foreign currency translation	(2)	%
Acquisitions and divestitures, net	(6)	%
Restructuring	4	%
Other	2	%
Total % change in Operating profit	(9)	%

The decrease in operational profit of 7% was primarily attributable to the higher costs of commodities and components used in our products and higher freight and logistics costs. In addition, unfavorable mix and lower volumes further impacted results compared with the prior year. These amounts were partially offset by pricing improvements.

35

Acquisitions and divestitures, net primarily relates to the prior year results of our Chubb business, the sale of which was completed on January 3, 2022. Amounts reported during the three months ended June 30, 2021 include $12 million of transaction costs associated with the divestiture.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Summary performance for each of our segments is as follows:
	Net Sales				Operating Profit				Operating Profit Margin
	For the Six Months Ended June 30,				For the Six Months Ended June 30,				For the Six Months Ended June 30,
(In millions)	2022		2021		2022		2021		2022		2021
HVAC	$	6,358	$	5,606	$	1,055	$	938	16.6	%	16.7	%
Refrigeration	2,017		2,026		254		250		12.6	%	12.3	%
Fire & Security	1,705		2,707		1,352		298		79.3	%	11.0	%
Total segment	$	10,080	$	10,339	$	2,661	$	1,486	26.4	%	14.4	%

HVAC Segment

For the six months ended June 30, 2022, Net sales in our HVAC segment were $6.4 billion, a 13% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

	Net Sales
Organic	12	%
Foreign currency translation	(1)	%
Acquisitions and divestitures, net	3	%
Other	(1)	%
Total % change in Net sales	13	%

The organic increase in Net sales of 12% was driven by continued strong results across each of the segment's businesses. Increased sales in our North America residential and light commercial business (19%) were driven by pricing improvements and strong end-market demand. Increased sales in our Commercial HVAC business (5%) benefited from pricing improvements and ongoing customer demand in our end-markets. The business saw growth in each region, although sales in China decreased as a result of a resurgence of COVID-19 cases and additional restrictions imposed. While current demand remains strong, supply chain and logistics constraints continue to be challenging, negatively impacting our sales and results of operations. In addition, results for 2021 reflected a significant rebound in demand after initial weakness associated with the COVID-19 pandemic.

On June 1, 2021, the Commercial HVAC business acquired a 70% controlling interest in Giwee and subsequently acquired the remaining 30% ownership interest on September 7, 2021. The results of Giwee have been included in our Unaudited Condensed Consolidated Financial Statements since the date of acquisition. The transaction added 3% to Net sales during the six months ended June 30, 2022. Refer to Note 15 - Acquisitions for additional information.

For the six months ended June 30, 2022, Operating profit in our HVAC segment was $1.1 billion, a 12% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

	Operating Profit
Operational	14	%
Foreign currency translation	(1)	%
Restructuring	1	%
Other	(2)	%
Total % change in Operating profit	12	%

36

The operational profit increase of 14% was primarily attributable to pricing improvements compared with the prior year. Higher earnings from equity method investments in North America and Asia also benefited operational profit and included a $27 million gain on the sale of two minority owned subsidiaries within one of our joint ventures. In addition, productivity initiatives and lower selling, general and administrative costs provided further benefits. These amounts were partially offset by the higher costs of commodities and components used in our products and higher freight and logistic costs. Amounts reported in Other includes a $22 million charge resulting from a litigation matter.

Refrigeration Segment

For the six months ended June 30, 2022, Net sales in our Refrigeration segment were $2.0 billion, no change compared with the same period of 2021. The components of the year-over-year change were as follows:

	Net Sales
Organic	5	%
Foreign currency translation	(5)	%
Total % change in Net sales	—	%

The organic increase in Net sales of 5% was driven by strong demand across each of the segment's businesses. Commercial refrigeration sales increased (6%) primarily due to pricing improvements and strong demand compared with the prior year. These amounts were partially offset by continued supply chain constraints. Transport refrigeration sales increased (4%) primarily due to priceing improvements and higher volumes associated with component availability during the period. The six months ended June 30, 2021 reflected a significant rebound in demand associated with the cyclical decline that began in late 2019 as well as the demand for global transportation and COVID-19 vaccine-related cargo monitoring. While current demand remains strong, supply chain and logistics constraints continue to be challenging, negatively impacting our sales and results of operations.

For the six months ended June 30, 2022, Operating profit in our Refrigeration segment was $254 million, a 2% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

	Operating Profit
Operational	7	%
Foreign currency translation	(6)	%
Other	1	%
Total % change in Operating profit	2	%

The increase in operational profit of 7% was primarily attributable to pricing improvements compared with the prior year. Higher volumes and favorable productivity initiatives further benefited operational profit. In addition, segment results also reflected lower selling, general and administrative costs during the period. These amounts were partially offset by the higher costs of commodities and components used in our products and higher freight and logistic costs. Amounts reported in Other primarily represent a $7 million gain on the sale of our interest in a cost method investment.

Fire & Security Segment

For the six months ended June 30, 2022, Net sales in our Fire & Security segment were $1.7 billion, a 37% decrease compared with the same period of 2021. The components of the year-over-year change were as follows:

	Net Sales
Organic	4	%
Foreign currency translation	(2)	%
Acquisitions and divestitures, net	(39)	%
Total % change in Net sales	(37)	%

The organic increase in Net sales of 4% was primarily driven by pricing improvements compared with the prior year. The segment primarily saw growth in both residential and commercial sales in the Americas and Europe as sales in China decreased as a result of a resurgence of COVID-19 cases and additional restrictions imposed. Global industrial sales also benefited

37

segment results. While current demand remains strong, supply chain constraints continue to be challenging, negatively impacting our sales and results of operations. In addition, results for 2021 reflected a significant rebound in demand after initial weakness associated with the COVID-19 pandemic.

Acquisitions and divestitures, net primarily relates to the prior year results of our Chubb business, the sale of which was completed on January 3, 2022. During the six months ended June 30, 2021, Net sales in our Fire & Security segment were $2.7 billion, which included $1.1 billion from our Chubb business. Absent the results of Chubb, Net sales increased 6% from $1.6 billion to $1.7 billion.

For the six months ended June 30, 2022, Operating profit in our Fire & Security segment was $1.4 billion, a 354% increase compared with the same period of 2021. The components of the year-over-year change were as follows:

	Operating Profit
Operational	(7)	%
Foreign currency translation	(2)	%
Acquisitions and divestitures, net	(15)	%
Restructuring	4	%
Other	374	%
Total % change in Operating profit	354	%

The decrease in operational profit of 7% was primarily attributable to the higher costs of commodities and components used in our products and higher freight and logistics costs. In addition, unfavorable mix and lower volumes further impacted results compared with the prior year. These amounts were partially offset by pricing improvements.

Acquisitions and divestitures, net primarily relates to the prior year results of our Chubb business, the sale of which was completed on January 3, 2022. Amounts reported during the six months ended June 30, 2021 include $15 million of transaction costs associated with the divestiture. Amounts reported in Other represent the net gain on the Chubb Sale of $1.1 billion.

LIQUIDITY AND FINANCIAL CONDITION

We assess liquidity in terms of our ability to generate adequate amounts of cash necessary to fund our current and future cash requirements to support our business and strategic initiatives. In doing so, we review and analyze our cash on hand, working capital, debt service requirements and capital expenditures. We rely on operating cash flows as our primary source of liquidity. In addition, we have access to other sources of capital to finance our strategic initiatives and fund growth.

As of June 30, 2022, we had cash and cash equivalents of $3.0 billion, of which approximately 29% was held by our foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds and the cost effectiveness with which we can access funds held by foreign subsidiaries. On occasion, we are required to maintain cash deposits in connection with contractual obligations related to acquisitions, divestitures or other legal obligations. As of June 30, 2022 and December 31, 2021, the amount of such restricted cash was approximately $8 million and $39 million, respectively.

We maintain a $2.0 billion unsecured, unsubordinated commercial paper program which can be used for general corporate purposes, including working capital and potential acquisitions. In addition, we maintain our $2.0 billion Revolving Credit Facility that matures on April 3, 2025 which supports our commercial paper borrowing program and cash requirements. The Revolving Credit Facility has a commitment fee of 0.125% that is charged on unused commitments. Borrowings under the Revolving Credit Facility are available in U.S. Dollars, Euros and Pounds Sterling and bear interest at a variable interest rate plus a ratings-based margin, which was 125 basis points as of June 30, 2022. As of June 30, 2022, we had no borrowings outstanding under our commercial paper program and our Revolving Credit Facility.

We continue to actively manage and strengthen our business portfolio to meet the current and future needs of our customers. This is accomplished through research and development activities with a focus on new product development and new technology innovation as well as sustaining activities with a focus on improving existing products and reducing production costs. We also pursue potential acquisitions to complement existing products and services to enhance our product portfolio. In addition, we routinely conduct discussions, evaluate targets and enter into agreements regarding possible acquisitions, divestitures, joint ventures and equity investments to manage our business portfolio.

38

We believe that our available cash and operating cash flows will be sufficient to meet our future operating cash needs. Our committed credit facilities and access to the debt and equity markets provide additional sources of short-term and long-term capital to fund current operations, debt maturities and future investment opportunities. Although we believe that the arrangements currently in place permit us to finance our operations on acceptable terms and conditions, our access to and the availability of financing on acceptable terms and conditions in the future will be impacted by many factors, including: (1) our credit ratings or absence of credit ratings, (2) the liquidity of the overall capital markets and (3) the state of the economy, including the impact of the COVID-19 pandemic. There can be no assurance that we will be able to obtain additional financing on terms favorable to us, if at all.

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

The following table presents our credit ratings and outlook as of June 30, 2022:

Rating Agency	Long-term Rating (1)	Short-term Rating	Outlook (2)
Standards & Poor's ("S&P")	BBB	A2	Positive
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 May 14, 2021, and for Moody's on March 30, 2022. Fitch's long-term rating was affirmed on June 3, 2021.

(2) S&P revised its outlook to positive from stable on May 20, 2022.

The following table contains several key measures of our financial condition and liquidity:

(In millions)	June 30, 2022			December 31, 2021
Cash and cash equivalents	$	3,017		$	2,987
Total debt	$	8,567		$	9,696
Total equity	$	6,992		$	7,094
Net debt (total debt less cash and cash equivalents)	$	5,550		$	6,709
Total capitalization (total debt plus total equity)	$	15,559		$	16,790
Net capitalization (total debt plus total equity less cash and cash equivalents)	$	12,542		$	13,803
Total debt to total capitalization	55		%	58		%
Net debt to net capitalization	44		%	49		%

Borrowings and Lines of Credit

Our short-term obligations primarily consist of current maturities of long-term debt. Our long-term obligations primarily consist of long-term notes with maturity dates ranging between 2025 and 2050. Interest payments related to long-term Notes are expected to approximate $247 million per year, reflecting an approximate weighted-average interest rate of 2.95%. Any borrowings from the Revolving Credit Facility are subject to variable interest rates. See Note 5 – Borrowings and Lines of Credit in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information regarding the terms of our long-term debt obligations.

On March 15, 2022, we commenced tender offers to repurchase up to $1.15 billion aggregate principal of our 2.242% Notes due 2025 and 2.493% Notes due 2027. The tender offers included payment of applicable accrued and unpaid interest up to the settlement date, along with a fixed spread for early repayment. Based on participation, we elected to settle the tender offers on March 30, 2022. The aggregate principal amount of Senior Notes validly tendered and accepted was approximately $1.15 billion and included $800 million of Notes due 2025 and $350 million of Notes due 2027. Upon settlement, we recognized a net gain of $33 million and wrote off $5 million of unamortized deferred financing costs during the three months ended March 31, 2022.

39

Acquisitions and Divestitures

On January 3, 2022, we completed the Chubb Sale for net proceeds of $2.9 billion. Consistent with our capital allocation strategy, the net proceeds will be used to fund investments in organic and inorganic growth initiatives and capital returns to shareowners as well as for general corporate purposes. The sale agreement included several customary provisions to settle working capital and other transaction-related items as of the date of sale. As of June 30, 2022, both parties are in the process of finalizing these amounts in accordance with established timelines.

During the three months ended June 30, 2022, we acquired consolidated businesses and minority-owned businesses. The aggregate cash paid for acquisitions, net of cash acquired, totaled $38 million and was funded through cash on hand. See Note 15 – Acquisitions for additional information.

On February 6, 2022, we entered into a binding agreement to acquire a majority ownership interest in TCC for approximately $900 million. The transaction is expected to close in early August, subject to customary closing conditions, including regulatory approvals. Upon closing, Toshiba Corporation will retain a 5% ownership interest in TCC. The acquisition is expected to be funded through a combination of cash on hand and a $400 million Yen denominated term loan.

Share Repurchase Program

We may purchase our outstanding common stock from time to time subject to market conditions and at our discretion in the open market or through one or more other public or private transactions and subject to compliance with our obligations under certain tax agreements. In July 2021, our Board of Directors approved a $1.75 billion increase to our existing $350 million share repurchase program authorizing the repurchase of up to $2.1 billion of our outstanding common stock. During the six months ended June 30, 2022, we repurchased 22.7 million shares of our common stock for an aggregate purchase price of $1.0 billion, which includes shares repurchased under the ASR Agreement. As of June 30, 2022, we have approximately $557 million remaining under the current authorization.

Dividends

We paid dividends on common stock during the six months ended June 30, 2022, totaling $257 million. On June 9, 2022, the Board of Directors declared a dividend of $0.15 per share of common stock payable on August 10, 2022 to shareowners of record at the close of business on June 23, 2022.

Discussion of Cash Flows

	For the Six Months Ended June 30,
(In millions)	2022		2021
Net cash flows provided by (used in):
Operating activities	$	(170)	$	745
Investing activities	2,645		(301)
Financing activities	(2,434)		(898)
Effect of foreign exchange rate changes on cash and cash equivalents	(41)		(2)
Net increase (decrease) in cash and cash equivalents and restricted cash	$	—	$	(456)

Cash flows from operating activities primarily represent inflows and outflows associated with our operations. Primary activities include net income from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities. The year-over-year decrease in net cash provided by operating activities was primarily driven by higher working capital balances during the current period. Continued strong demand and an increase of safety stock due to supply chain constraints led to higher inventory balances. In addition, higher accounts receivable balances due to increased sales more than offset higher accounts payable balances.

Cash flows from investing activities primarily represent inflows and outflows associated with long-term assets. Primary activities include capital expenditures, acquisitions, divestitures and proceeds from the sale of fixed assets. During the six months ended June 30, 2022, net cash provided by investing activities was $2.6 billion. The primary driver of the inflow related to the net proceeds from the Chubb Sale. This amount was partially offset by the acquisition of several businesses and minority-owned businesses, which totaled $38 million, net of cash acquired and $122 million of capital expenditures. During the six months ended June 30, 2021, net cash used in investing activities was $301 million. The primary drivers of the outflow related

40

to the acquisition of several businesses and investment in a joint venture, which totaled $167 million, net of cash acquired and $132 million of capital expenditures.

Cash flows from financing activities primarily represent inflows and outflows associated with equity or borrowings. During the six months ended June 30, 2022, net cash used in financing activities was $2.4 billion. The primary driver of the outflow related to the settlement of our tender offers for $1.15 billion. In addition, we paid $257 million in dividends to our common shareowners and paid $1.0 billion to repurchase shares of our common stock. During the six months ended June 30, 2021, net cash used in financing activities was $898 million. The primary driver of the outflow related to the redemption of long-term notes of $500 million. In addition, we paid $209 million in dividends to our common shareowners and paid $130 million to repurchase shares of our common stock.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

There has been no significant change in our exposure to market risk during the three and six months ended June 30, 2022. For discussion of our exposure to market risk, refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations – Market Risk and Risk Management" in our 2021 Form 10-K.

Item 4.    Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we carried out an evaluation under the supervision and with the participation of our management, including the Chairman and Chief Executive Officer ("CEO"), the Senior Vice President and Chief Financial Officer ("CFO") and the Vice President, Controller ("Controller") of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2022. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, CFO and Controller have concluded that, as of June 30, 2022, our disclosure controls and procedures were effective and provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO, CFO and Controller, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the three months ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This Form 10-Q and other materials Carrier has filed or will file with the SEC contain or incorporate by reference statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "confident," "scenario" and other words of similar meaning in connection with a discussion of future operating or financial performance or the Separation. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. These risks and uncertainties include, but are not limited to, those described above under Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, below under Part II, Item 1A. Risk Factors, and other risks and uncertainties listed from time to time in our filings with the SEC.

PART II – OTHER INFORMATION

Item 1.    Legal Proceedings

See Note 19 – Commitments and Contingent Liabilities in the Notes to the "Unaudited Condensed Consolidated Financial Statements" for information regarding legal proceedings.

41

Except as otherwise noted previously, there have been no material developments in legal proceedings. For previously reported information about legal proceedings refer to "Business – Legal Proceedings" in our 2021 Form 10-K.

Item 1A. Risk Factors

Except as noted below, there have been no material changes in the Company’s risk factors from those disclosed in "Risk Factors" in our 2021 Form 10-K.

We may be affected by global economic, capital market and geopolitical conditions, and conditions in the construction, transportation and infrastructure industries in particular.

Our business, operating results, cash flows and financial condition may be adversely affected by changes in global economic conditions and geopolitical risks and conditions, including credit market conditions, levels of consumer and business confidence, fluctuations in residential, commercial and industrial construction activity, pandemic health issues (including COVID-19 and its effects), natural disasters, commodity prices, energy costs, interest rates, inflation, foreign exchange rates, levels of government spending and deficits, trade policies (including tariffs, boycotts and sanctions), military conflicts, acts of terrorism, regulatory changes, actual or anticipated defaults on sovereign debt and other challenges that could affect the global economy.

These economic and political conditions affect our business in a number of ways. In March 2022, we suspended business operations in Russia by ceasing to pursue new business opportunities while continuing to fulfill existing contracts for equipment, service and parts, where possible, in a manner that fully complies with applicable sanctions and trade controls. Our sales, operations and supply chain in Russia and Ukraine are not material to Carrier. However, the military conflict between the two countries and attendant geopolitical environment may continue to negatively impact the global economy and major financial markets, and may result in additional increases in commodity prices and supply-chain disruptions, including shortages of materials, higher costs for fuel and freight and increased transportation delays. In addition, the extent to which COVID-19 will continue to impact the global economy remains uncertain. This military conflict and COVID-19 and the potential for an increase of their impact on global or regional economies, and the perception that such events may occur, could have a material adverse effect on our business, results of operations, cash flows and financial condition. Furthermore, the tightening of credit in the capital markets could adversely affect the ability of our customers, including individual end-customers and businesses, to obtain financing for significant purchases and operations, which could result in a decrease in or cancellation of orders for our products and services. Similarly, tightening credit may adversely affect our supply base and increase the potential for one or more of our suppliers to experience financial distress or bankruptcy. Additionally, because we have a number of factories and suppliers in foreign countries, the imposition of tariffs or additional sanctions or unusually restrictive border crossing rules could adversely affect our supply chain, operations and overall business.

Our business and financial performance is also adversely affected by decreases in the general level of economic activity, such as decreases in business and consumer spending and construction (both residential and commercial as well as remodeling). In addition, our financial performance may be influenced by the production and utilization of transport equipment, including truck production cycles in North America and Europe.

42

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

Issuer Purchases of Equity Securities

The following table provides information about our purchases during the three months ended June 30, 2022 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.

	Total Number of Shares Purchased (in 000's)	Average Price Paid per Share (1)		Total Number of Shares Purchased as Part of a Publicly Announced Program (in 000's)	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)
2022
April 1 - April 30	637	$	42.35	637	$	803.6
May 1 - May 31	4,393	$	38.41	4,393	$	634.9
June 1 - June 30	2,041	$	38.12	2,041	$	557.1
Total	7,071	$	38.68	7,071

(1) Excludes broker commissions.

In July 2021, our Board of Directors approved a $1.75 billion increase to our existing $350 million share repurchase program authorizing the repurchase of up to $2.1 billion of our outstanding common stock. This program allows us to repurchase shares from time to time, subject to market conditions and at our discretion in the open market or through one or more other public or private transactions and subject to compliance with certain tax agreements.

On December 14, 2021, we entered into the ASR Agreement to repurchase $500 million of our common stock pursuant to our existing share repurchase program. In accordance with the ASR Agreement, we received initial delivery of 7.6 million shares on January 4, 2022, representing approximately 80% of the expected share repurchases. Upon final settlement, we received an additional 2.7 million shares on February 8, 2022.

43

Item 6. Exhibits

Exhibit Number	Exhibit Description
10.1	Carrier Global Corporation Change in Control Severance (Amended and Restated effective as of April 13, 2022)*
10.2	Amendment Number One to the Carrier Global Corporation 2020 Long-Term Incentive Plan*
15	Letter Re: Unaudited Interim Financial Information*
31.1	Rule 13a-14(a)/15d-14(a) Certification*
31.2	Rule 13a-14(a)/15d-14(a) Certification*
31.3	Rule 13a-14(a)/15d-14(a) Certification*
32	Section 1350 Certifications*
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.* (File name: carr-20220331.xml)
101.SCH	XBRL Taxonomy Extension Schema Document.* (File name: carr-20220331.xsd)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.* (File name: carr-20220331_cal.xml)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.* (File name: carr-20220331_def.xml)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.* (File name: carr-20220331_lab.xml)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.* (File name: carr-20220331_pre.xml)
104	Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document and contained in Exhibit 101

Notes to Exhibits List:

*    Submitted electronically herewith.

Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022 and 2021, (ii) Condensed Consolidated Statement of Comprehensive Income for the three and six months ended June 30, 2022 and 2021, (iii) Condensed Consolidated Balance Sheet as of June 30, 2022 and December 31, 2021, (iv) Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2022 and 2021, (v) Condensed Consolidated Statement of Changes in Equity for the three and six months ended June 30, 2022 and 2021 and (vi) Notes to Condensed Consolidated Financial Statements.

44

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 

		CARRIER GLOBAL CORPORATION (Registrant)
Dated:	July 28, 2022	by:	/s/PATRICK GORIS
			Patrick Goris
			Senior Vice President and Chief Financial Officer
			(on behalf of the Registrant and as the Registrant's Principal Financial Officer)
Dated:	July 28, 2022	by:	/s/KYLE CROCKETT
			Kyle Crockett
			Vice President, Controller
			(on behalf of the Registrant and as the Registrant's Principal Accounting Officer)

45