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What changed in Carrier Global's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Carrier Global's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+350 added−349 removedSource: 10-K (2024-02-06) vs 10-K (2023-02-07)

Top changes in Carrier Global's 2023 10-K

350 paragraphs added · 349 removed · 260 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

48 edited+9 added−14 removed28 unchanged
Biggest changeFor 2022, our total recordable incident rate ("TRIR"), based upon the number of injuries per 200,000 hours worked for our employees was 0.31 and our lost time incident rate ("LTIR") was 0.12. 8 Table of Contents In response to COVID-19, we implemented various measures to protect the health and safety of our employees and customers including work-from-home requirements (where practical), social distancing and deep cleaning protocols at all of our facilities as well as travel restrictions, among other measures, which comply with applicable governmental regulations and guidance.
Biggest changeFor 2023, our total recordable incident rate ("TRIR"), based upon the number of employee injuries per 200,000 hours worked, was 0.30 and our lost time incident rate ("LTIR") was 0.10, both of which improved compared with 2022. 8 Table of Contents Competitive Pay, Benefits and Total Rewards and Practices.
Products and solutions are sold directly to building contractors and owners and indirectly through joint ventures, independent sales representatives, distributors, wholesalers, dealers and retail outlets. Refrigeration. The Refrigeration segment provides a healthier, safer, more sustainable and more intelligent cold chain through the reliable transport and preservation of food, medicine and other perishable cargo.
Products and solutions are sold directly to building contractors and owners and indirectly through joint ventures, independent sales representatives, distributors, wholesalers, dealers and retail outlets. The Refrigeration segment provides a healthier, safer, more sustainable and more intelligent cold chain through the reliable transport and preservation of food, medicine and other perishable cargo.
Our Environmental, Health and Safety program is focused on eliminating the risk of serious injuries, illness and fatalities to employees, contractors and customers during manufacturing, installation, servicing and other business activities. We apply rigorous standards, controls, inspections and audits to help ensure that our operations and premises comply with national and local regulations and Carrier incident reporting requirements.
Our Environmental, Health and Safety program is focused on eliminating the risk of serious injuries, illness and fatalities to employees, contractors and customers during manufacturing, installation, servicing and other business activities. We apply rigorous standards, controls, inspections and audits to help ensure that our operations and premises comply with national and local regulations and our incident reporting requirements.
Products and services are sold under established brand names, including Carrier Commercial Refrigeration, Carrier Transicold and Sensitech. Our refrigeration and monitoring products, services and digital solutions, which form Carrier's Connected Cold Chain offering, strengthen the connected cold chain and are designed for trucks, trailers, shipping containers, intermodal applications, food retail and warehouse cooling.
Products and services are sold under established brand names, including Carrier Commercial Refrigeration, Carrier Transicold and Sensitech. Our refrigeration and monitoring products, services and digital solutions, which form our Connected Cold Chain offering, strengthen the connected cold chain and are designed for trucks, trailers, shipping containers, intermodal applications, food retail and warehouse cooling.
Our fire and security products and solutions, also part of Carrier's Healthy Homes and Healthy Buildings Programs, are sold directly to end customers as well as through manufacturers’ representatives, distributors, dealers, value-added resellers and retail distribution.
Our fire and security products and solutions, also part of our Healthy Homes and Healthy Buildings Programs, are sold directly to end customers as well as through manufacturers’ representatives, distributors, dealers, value-added resellers and retail distribution.
Our Chairman and Chief Executive Officer ("CEO") has signed the CEO Action for Diversity & Inclusion TM pledge joining more than 2,000 CEOs to underscore our commitment to ensure inclusion is core to our business culture.
Our Chairman and Chief Executive Officer ("CEO") signed the CEO Action for Diversity & Inclusion TM pledge joining more than 2,000 CEOs to underscore our commitment to ensure inclusion is core to our business culture.
Our Lynx digital platform, developed in collaboration with Amazon Web Services (“AWS”), allows customers to leverage data to enhance visibility, resiliency, agility and efficiency in the cold chain to reduce loss and support real-time decisions. In addition, our product teams are deriving insights from data by employing AWS for connectivity, artificial intelligence and machine learning.
Our Lynx digital platform, developed in collaboration with Amazon Web Services (“AWS”), allows customers to leverage data to enhance visibility, resiliency, agility and efficiency in the cold chain to reduce losses and support real-time decisions. In addition, our product teams are deriving insights from data by employing AWS for connectivity, artificial intelligence and machine learning.
Commercial refrigeration solutions include refrigerated cabinets, freezers, systems and controls which incorporate next-generation technologies to preserve freshness, ensure safety and enhance the appearance of food and beverages sold by retailers. Products and services are sold directly to transportation companies and retail stores and indirectly through joint ventures, independent sales representatives, distributors, wholesalers and dealers. Fire & Security.
Commercial refrigeration solutions include refrigerated cabinets, freezers, systems and controls which incorporate next-generation technologies to preserve freshness, ensure safety and enhance the appearance of food and beverages sold by retailers. Products and services are sold directly to transportation companies and retail stores and indirectly through joint ventures, independent sales representatives, distributors, wholesalers and dealers.
Our industry-leading global brands and track record of innovation form the foundation of our business strategy. This strategy is fueled by our position at the epicenter of important secular trends, including an emphasis on health and wellness, a growing focus on sustainability and increasing digitalization.
Our industry-leading global brands and track record of innovation form the foundation of our business strategy. This strategy is fueled by our position at the epicenter of important secular trends, including an emphasis on health and wellness, a growing focus on sustainability, increasing digitalization and energy transition.
Intellectual Property We maintain a broad portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to our business to protect our research and development investments and to maintain our competitive advantages. We hold approximately 9,000 active patents and pending patent applications worldwide.
Intellectual Property We maintain a broad portfolio of patents, trademarks, copyrights, trade secrets, licenses and franchises related to our business to protect our research and development investments and to maintain our competitive advantages. We hold approximately 14,000 active patents and pending patent applications worldwide.
Some of these products are part of Carrier’s Healthy Buildings Program, which offers a suite of targeted solutions that are focused on improving and optimizing indoor air quality in buildings and homes to enhance human health, safety and productivity.
Some of these products are part of our Healthy Buildings Program, which offers a suite of targeted solutions that are focused on improving and optimizing indoor air quality in buildings and homes to enhance human health, safety and productivity.
We continuously evaluate, modify and enhance our recruitment and retention strategies, objectives and measures as part of the overall management of our business. These strategies, objectives and measures form the pillars of our human capital management framework and are advanced through the following programs, policies and initiatives. Health & Safety.
We continuously evaluate, modify and enhance our recruitment and retention strategies as part of the overall management of our business. These strategies form the pillars of our human capital management framework and are advanced through the following programs, policies and initiatives. Health & Safety.
Most recently, we signed a multi-year, strategic collaboration 5 Table of Contents agreement with AWS to offer additional Software-as-a-Service ("SaaS") solutions in the areas of HVAC performance, sustainability and safety and security. The collaboration is part of our growing investment in digitally-enabled lifecycle solutions designed to inspire confidence in the health and safety of indoor environments.
Most recently, we signed a multi-year, strategic collaboration agreement with AWS to offer additional Software-as-a-Service ("SaaS") solutions in the areas of HVAC performance, sustainability and safety and security. The collaboration is part of our growing investment in digitally-enabled lifecycle solutions designed to inspire confidence in the health and safety of indoor environments.
Abound is a cloud-based building platform that unlocks and unites building data to create more healthy, safe, sustainable and intelligent solutions for indoor spaces. It gathers data from disparate systems, sensors and sources; identifies opportunities to optimize performance; and works with healthy building solutions to improve occupant experiences.
For example, Abound is a cloud-based building platform that unlocks and unites building data to create healthy, sustainable and intelligent solutions for indoor spaces. It gathers data from disparate systems, sensors and sources; identifies opportunities to optimize performance; and works with healthy building solutions to improve occupant experiences.
The results are reviewed by our senior leadership and shared with our managers and other employees who collaborate to act on identified areas of improvement. 9 Table of Contents Corporate Information Carrier was incorporated in Delaware in connection with the Separation on March 15, 2019.
The results are reviewed by senior leadership and shared with our managers and other employees who collaborate to act on identified areas of improvement. Corporate Information Carrier was incorporated in Delaware in connection with the Separation on March 15, 2019.
Our principal executive offices are located at 13995 Pasteur Boulevard, Palm Beach Gardens, Florida 33418, and our telephone number is (561) 365-2000. We maintain an Internet website at www.corporate.carrier.com .
Our principal executive offices are located at 13995 Pasteur Boulevard, Palm Beach Gardens, Florida 33418, and our telephone number is (561) 365-2000. We maintain an Internet website at www.corporate.carrier.com . 9 Table of Contents
We also have developed various talent development programs, such as internships, early career rotational programs and a suite of development programs for current and future leaders during the three critical stages of their careers – early career, mid-career and senior leadership. Three-times per year we conduct a confidential online survey in local languages to solicit feedback from our employees.
We also offer various talent development programs including internships, early career rotational programs and a suite of development programs for current and future leaders during the three critical stages of their careers – early career, mid-career and senior leadership. Three-times per year we conduct a confidential online survey in local languages to solicit feedback from our employees.
In the European Union, approximately 12,000 employees are represented by two European Works Councils and, at national and local levels, we inform and consult with 46 local works councils and with unions representing employees at approximately 40 sites. We believe that our relations with our labor unions and works councils are generally good.
In Europe, approximately 11,000 employees are represented by two European Works Councils and, at national and local levels, we inform and consult with 46 local works councils and with unions representing employees at approximately 40 sites. We believe that our relations with our labor unions and works councils are generally good.
In addition, we entered into several agreements with UTC and Otis Worldwide Corporation ("Otis") that govern various aspects of the relationship among us, UTC and Otis following the Separation and the Distribution. As of December 31, 2022, only the Tax Matters Agreement ("TMA") remains in effect.
In addition, we entered into several agreements with UTC and Otis Worldwide Corporation ("Otis") that govern various aspects of the relationship among us, UTC and Otis following the Separation and Distribution. As of December 31, 2023, only certain portions of the Tax Matters Agreement ("TMA") remain in effect.
We also offer a tuition assistance program that is discussed in more detail below (see Talent Development and Employee Engagement ). Inclusion & Diversity. As of December 31, 2022, approximately 29% of our employees and 30% of our executives globally were women.
We also offer a tuition assistance program, the Employee Scholar Program, that is discussed in more detail below (see Talent Development and Employee Engagement ). Inclusion & Diversity. As of December 31, 2023, approximately 30% of our employees and 32% of our executives globally were women.
Carrier also participated for the first time in the Human Rights Campaign Foundation’s 2022 Corporate Equality Index in Mexico and achieved a perfect score being recognized as Best Place to Work for LGBTQ Equality in Mexico. Talent Development and Employee Engagement. We are committed to the continued development and engagement of our people.
We also participated in the Human Rights Campaign Foundation’s Corporate Equality Index in Mexico and achieved a perfect score being recognized as Best Place to Work for LGBTQ Equality in Mexico for the second year in a row. Talent Development and Employee Engagement. We are committed to the continued development and engagement of our people.
Separation from United Technologies Corporation On April 3, 2020 (the "Distribution Date"), United Technologies Corporation, since renamed Raytheon Technologies Corporation ("UTC") completed the spin-off of Carrier 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 Carrier to UTC shareowners.
Separation from United Technologies Corporation On April 3, 2020 (the "Distribution Date"), United Technologies Corporation, ("UTC"), since renamed RTX Corporation ("Raytheon Technologies Corporation" or "RTX") completed the spin-off of Carrier 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 Carrier 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.
Joint Ventures and Strategic Relationships Our joint ventures and strategic relationships are an important part of our business. We hold direct ownership interests in approximately 47 joint ventures, the financial results of which are accounted for by the equity method of accounting or the cost basis of accounting, of which 99% of such investments are in our HVAC segment.
We hold direct ownership interests in approximately 47 joint ventures, the financial results of which are accounted for by the equity method of accounting or the cost basis of accounting, of which 97% of such investments are in our HVAC segment.
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.
Each respective segment's major products, services and distribution methods are as follows: 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.
In addition, we offer a company-paid assistance program to help employees and their families with mental health and other life challenges. In coordination with each country’s social welfare system, and in addition to any required local health care participation, we may provide additional health and welfare benefits depending on, among other things, the market competitiveness in that country.
In coordination with each country’s social welfare system, and in addition to any required local health care participation, we may provide additional health and welfare benefits depending on, among other things, the market competitiveness in that country.
Our strategy involves driving organic growth in part by maintaining our proven track record of innovation, which is focused on designing smarter, more connected and more sustainable systems and solutions.
In order to execute our business strategy, we are focused on three pillars of growth: Strengthen and Grow our Core Our strategy involves driving organic growth in part by maintaining our proven track record of innovation, which is focused on designing smarter, more connected and more sustainable systems and solutions.
Human Capital Management As of December 31, 2022, Carrier had approximately 52,000 employees worldwide, of which 39% are located in the Americas, 25% are located in EMEA and 36% are located in Asia.
Human Capital Management As of December 31, 2023, we had approximately 53,000 employees worldwide, of which 39% are located in the Americas, 23% are located in EMEA and 38% are located in Asia.
Our senior management has also signed the Hispanic Promise, joining other Fortune 500 companies in the pledge to hire, retain and develop Hispanics in the workplace. Additionally, we continue to provide our global workforce with inclusion and diversity training with a focus on unconscious bias, micro-aggression and allyship.
Our senior management has also signed the Hispanic Promise, joining other Fortune 500 companies in the pledge to hire, retain and develop Hispanics in the workplace. Additionally, we offer our global workforce the opportunity to participate in annual inclusion and diversity training.
Raw Materials and Supplies We rely on suppliers and commodity markets to secure components and raw materials such as copper, aluminum and steel. In addition, we also use semi-conductors and other electronic components in the manufacture of our products.
We believe that the loss of any individual contract or customer would not have a material adverse effect on our results. Raw Materials and Supplies We rely on suppliers and commodity markets to secure components and raw materials such as copper, aluminum and steel. In addition, we also use semi-conductors and other electronic components in the manufacture of our products.
As of December 31, 2022, in the U.S., approximately 66% of Carrier's approximately 5,000 production and maintenance employees were covered under six collective bargaining agreements that have expiration dates ranging from 2023 to 2026.
As of December 31, 2023, in the U.S., 75% of our approximately 4,300 production and maintenance employees were covered under six collective bargaining agreements with expiration dates ranging from 2024 to 2027.
However, it is our opinion that the costs related to compliance requirements for environmental or other government regulations will not have a material adverse effect on our capital expenditures, financial results or competitive position.
However, it is our opinion that the costs related to compliance requirements for environmental or other government regulations will not have a material adverse effect on our capital expenditures, financial results or competitive position. Environmental Goals As a global leader in intelligent climate and energy solutions, we are committed to making the world safer, sustainable and more comfortable.
ITEM 1. BUSINESS General Carrier Global Corporation is the leading global provider of healthy, safe, sustainable and intelligent building and cold chain solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to our customers.
ITEM 1. BUSINESS General Carrier Global Corporation ("we" or "our" or the "Company") is a global leader in intelligent climate and energy solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to our customers.
Our Supplier Excellence program is intended to apply these same operating principles to our supply base and we continue to focus on strategic cost reductions through operational efficiency, digitalization, automation and supply chain productivity. These efforts have helped reduce the impact of inflationary pressures experienced during 2022 and 2021.
Our Supplier Excellence program is intended to apply these same operating principles to our supply base and we continue to focus on strategic cost reductions through operational efficiency, digitalization, automation and supply chain productivity. Joint Ventures and Strategic Relationships Our joint ventures and strategic relationships are an important part of our business.
Our international operations, including U.S. export sales, represented approximately 45% of our net sales for 2022. During the same period, new equipment comprised 77% and parts and service comprised 23% of our net sales. Sales by Segment * Net Sales by Region Sales by Type * Segment sales include inter-company sales.
During the same period, new equipment comprised 76% and parts and service comprised 24% of our net sales. Sales by Segment * Net Sales by Region Sales by Type * Segment sales include inter-company sales.
Competitive Pay, Benefits and Total Rewards and Practices. Carrier's total rewards philosophy is designed to align the compensation of our employees with individual and Company performance, and to provide the appropriate market-competitive incentives to attract, retain and motivate employees to achieve superior results.
Our total rewards philosophy is designed to align the compensation of our employees with individual and company performance, and to provide the appropriate market-competitive incentives to attract, retain and motivate employees to achieve superior results. In addition, we offer a company-paid employee assistance program to help employees and their families with mental health and other life challenges.
In addition, we continue to invest in our operations and 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 moderate disruption to the availability of our products, though it is possible that more significant disruptions could occur if these supply chain challenges continue.
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.
As of December 31, 2022, people of color represented approximately 31% of our U.S. executive and 26% of our professional employees in the U.S. Our greatest strength is the diversity of our people and their ideas and experiences; inclusion and diversity are the cornerstones of our values and we believe that it is a source of innovation.
As of December 31, 2023, people of color represented approximately 33% of our U.S. executive and 27% of our professional employees in the U.S. Our greatest strength is the global diversity of our people and inclusion is one of our core company values. We believe both are critical to employee engagement and ultimately, an important source of innovation.
Our strategy is focused on digital capabilities to drive the evolution of our hardware in order to enable cloud connectivity, modernize legacy software and launch new platforms, products and services. We expect that these solutions will increase our total available market opportunity, enhance our predictive service and maintenance capabilities, strengthen our customer intimacy as well as fuel our aftermarket growth.
Grow Aftermarket, Digital and Customer-Back Solutions Our strategy is focused on offering a comprehensive and differentiated suite of sustainable technologies and services. We expect that these solutions will increase our total available market opportunity, enhance our predictive service and maintenance capabilities, strengthen our customer intimacy and fuel aftermarket growth.
In 2021, Carrier participated for the first time in the Human Rights Campaign Foundation's 2021 Corporate Equality Index and achieved a perfect score being recognized Best Place to Work for LGBTQ Equality. Carrier earned the same recognition in 2022.
We are proud of the strides we have made and the recognition we have received in furthering our inclusion and diversity strategy. For example, in 2023, we participated in the Human Rights Campaign Foundation's Corporate Equality Index and achieved a perfect score for the third time, being recognized as a Best Place to Work for LGBTQ Equality.
In addition, we launched Carrier Ventures, a global venture capital group which focuses on investments to accelerate the development of sustainable innovations and disruptive technologies to transform future building and cold chain management.
In addition, Carrier Ventures, our global venture capital wholly-owned subsidiary, focuses on investments to accelerate the development of sustainable innovations and disruptive technologies to transform future building and cold chain management. It engages in strategic partnerships with high growth organizations as they invest in the development of technologies to innovate and commercialize the next generation of integrated renewable offerings.
Other Matters Relating to Our Business as a Whole Competitive Conditions Each of our businesses is subject to significant competition from a number of companies throughout the world. Due to the nature of our products and services and the markets we serve, our competition can vary from regional or specialized companies to larger public or private companies.
Due to the nature of our products and services and the markets we serve, our competition can vary from regional or specialized companies to larger public or private companies. The most significant competitive factors we face are technology differentiation, product performance, service, delivery schedule and price.
The most significant competitive factors we face are technology differentiation, product performance, service, delivery schedule and price. Brand reputation, service to customers and quality are also important competitive factors for our products and services.
Brand reputation, service to customers and quality are also important competitive factors for our products and services. While our competitive position varies among our products and services, we are a significant competitor with respect to each of our major product and service offerings.
Our operations are classified into three segments: HVAC, Refrigeration and Fire & Security. For the year ended December 31, 2022, our net sales were $20.4 billion and our operating profit was $4.5 billion. Our net sales for 2022 were derived from the Americas (60%), Europe, Middle East and Africa ("EMEA") (23%) and Asia-Pacific (17%).
For the year ended December 31, 2023, our net sales were $22.1 billion and our operating profit was $2.3 billion. Our net sales for 2023 were derived from the Americas (58%), Europe, Middle East and Africa ("EMEA") (22%) and Asia-Pacific (20%). Our international operations, including U.S. export sales, represented approximately 48% of our net sales for 2023.
These ERGs operate with a formal leadership structure, a steering committee, senior leadership sponsorship and a defined mission statement that is aligned with supporting Carrier’s business strategy. We also have established multi-year relationships with two historically Black colleges and universities to create programs to help students develop skills for the future and provide career and recruitment initiatives.
We have established relationships with colleges and universities in the United States, including two historically black colleges and universities, to create programs to help students develop skills for the future and provide career and recruitment initiatives.
We believe our strategy is supported by a variety of favorable secular trends, including health and wellness, sustainability, digitalization and a growing middle class. In order to execute our business strategy, we are focused on three pillars of growth: Strengthen and Grow our Core.
Business Strategy Our business strategy is to be a global leader in intelligent climate and energy solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to our customers. We believe our strategy is supported by a variety of 5 Table of Contents favorable secular trends, including health and wellness, sustainability, digitalization, decarbonization, energy transition and a growing middle class.
To this end, we continue to promote _belong , our inclusion and diversity philosophy and brand as well as an inclusion and diversity strategy that consists of four tenets – Reduce the Gap, Develop & Sponsor, Drive Inclusion and Lean Forward – which include a focus on recruitment, development and mentoring activities.
To this end, we continue to promote _belong as our inclusion and diversity philosophy which includes a focus on attracting, developing and mentoring the best talent.
To maximize our buying effectiveness and leverage our scale, we have a central strategic sourcing group that consolidates purchases of certain materials and components across our business segments. 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.
To maximize our buying effectiveness and leverage our scale, we have a central strategic sourcing group that consolidates purchases of certain materials and components across our business segments. We work closely with our suppliers to ensure availability of products and implement other cost savings initiatives.
On April 1, 2020 and April 2, 2020, we received cash contributions totaling $590 million from UTC related to the Separation. Business Strategy Our business strategy is to be the world leader in healthy, safe, sustainable and intelligent building and cold chain solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to our customers.
On April 1, 2020 and April 2, 2020, we received cash contributions totaling $590 million from UTC related to the Separation. 4 Table of Contents Business Segments We globally manage our business operations through three segments: HVAC, Refrigeration and Fire & Security.
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Acquisition of Toshiba Carrier Corporation On February 6, 2022, we entered into a binding agreement to acquire a majority ownership interest in Toshiba Carrier Corporation (“TCC”), a variable refrigerant flow ("VRF") and light commercial HVAC joint venture between Carrier and Toshiba Corporation.
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Planned Portfolio Transformation On April 25, 2023, we announced that we entered into a Share Purchase Agreement (the “Agreement”) to acquire the climate solutions business (the "VCS Business") of Viessmann Group GmbH & Co. KG (“Viessmann”), a privately-held company.
Removed
TCC 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 included 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.
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The VCS Business develops intelligent, integrated and sustainable technologies, including heat pumps, boilers, photovoltaic systems, home battery storage and digital solutions, primarily for residential customers in Europe. The acquisition was completed on January 2, 2024 for total consideration of $14.2 billion.
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The acquisition was completed on August 1, 2022 and reported within our HVAC segment.
Added
On April 25, 2023, we announced plans to exit our Fire & Security and Commercial Refrigeration businesses over the course of 2024. On December 7, 2023, we entered into a stock purchase agreement to sell our Fire & Security Access Solutions business to Honeywell International Inc. for an enterprise value of approximately $4.95 billion.
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Upon closing, Toshiba Corporation retained a 5% ownership interest in TCC. 4 Table of Contents Sale of Chubb Fire and Security Business On July 26, 2021, we entered into a stock purchase agreement to sell our Chubb Fire and Security business ("Chubb") to APi Group Corporation ("APi").
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On December 12, 2023, we entered into a stock purchase agreement to sell our Commercial Refrigeration business ("CCR") to Haier Group Corporation for an enterprise value of approximately $775 million. Both transactions are expected to close in 2024 and are subject to customary closing conditions.
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Chubb, which was reported within our 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.
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As power grids and transport infrastructure shift from fossil fuels to renewables, we will continue to position ourselves as a leader in innovative electrified solutions that reduce emissions and energy consumption and promote grid stability.
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On January 3, 2022, we completed the sale of Chubb (the "Chubb Sale") for net proceeds of $2.9 billion and recognized a gain on the sale of $1.1 billion during the year ended December 31, 2022.
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Our solutions range from residential home energy management to sustainable solutions for commercial and industrial buildings to optimized low noise and low greenhouse gas emission transport solutions.
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The group engages in strategic partnerships with high growth organizations as they invest in the development of technologies to innovate and commercialize the next generation of differentiated net zero solutions. Grow Aftermarket and Digital.
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With the addition of the VCS Business on January 2, 2024, we are strongly positioned to provide renewable and complete energy solutions globally, with a portfolio that includes low global warming potential high temperature heat pumps for use in industrial and commercial applications, natural refrigerant heat pumps for residential buildings and a connected ecosystem of offerings for an electric home, such as solar PV, batteries, and a differentiated digital platform, all supported by extensive service and aftermarket offerings.
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Coupled with our focus on growth, innovation and operational efficiency, we expect to drive long-term growth and increased value for our shareowners. Business Segments We globally manage our business operations through three segments: HVAC, Refrigeration and Fire & Security. Each respective segment's major products, services and distribution methods are as follows: HVAC.
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Coupled with our focus on growth, innovation and operational efficiency, we expect to drive long-term growth and increased value. 6 Table of Contents Other Matters Relating to Our Business as a Whole Competitive Conditions Each of our businesses is subject to significant competition from a number of companies throughout the world.
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While our competitive position varies among our products and services, we are a significant competitor with respect to 6 Table of Contents each of our major product and service offerings. We believe that the loss of any individual contract or customer would not have a material adverse effect on our results.
Added
These ERGs have an open membership to all employees, operate with a formal leadership structure, a steering committee, senior leadership sponsorship and a defined mission statement that is aligned with supporting our business strategy.
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As a result, we have incurred incremental costs for commodities and components used in our products as well as component shortages and higher freight costs 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.
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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.
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Environmental Goals As a leading global provider of healthy, safe, sustainable and intelligent buildings and cold chain solutions, we are committed to making the world safer, sustainable and more comfortable.
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We continue to take steps to expand our role as an employer that champions inclusion, diversity and equality of opportunity. Carrier has pledged to achieve gender parity in senior leadership roles by 2030.
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While we recognize more work needs to be done, we are proud of the strides we have made and the recognition we have received in furthering our inclusion and diversity strategy.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+34 added−26 removed127 unchanged
Biggest changeCarrier’s amended and restated bylaws provide that unless Carrier’s Board of Directors otherwise determines, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Carrier, any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer or other employee of Carrier to Carrier or to Carrier shareowners, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against Carrier or any current or former director or officer or other employee of Carrier arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”) or our amended and restated certificate of incorporation or amended and restated bylaws, any action asserting a claim relating to or involving Carrier governed by the internal affairs doctrine, or any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL.
Biggest changeOur amended and restated bylaws provide that unless our Board of Directors otherwise determines, the state courts within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware) will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Carrier, any action asserting a claim for or based on a breach of a fiduciary duty owed by any current or former director or officer or other employee of Carrier to Carrier or to Carrier shareowners, including a claim alleging the aiding and abetting of such a breach of fiduciary duty, any action asserting a claim against Carrier or any current or former director or officer or other employee of Carrier arising pursuant to any provision of the Delaware General Corporation Law (“DGCL”) or our amended and restated certificate of incorporation or amended and restated bylaws, any action asserting a claim relating to or involving Carrier governed by the internal affairs doctrine, or any action asserting an “internal corporate claim” as that term is defined in Section 115 of the DGCL. 23 Table of Contents To the fullest extent permitted by law, this exclusive forum provision applies to state and federal law claims, including claims under the federal securities laws, including the Securities Act of 1933, as amended ("Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), although Carrier shareowners will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder.
If we are required to pay UTC and/or Otis under these indemnities, our financial results could be negatively impacted.
If we are required to pay UTC and/or Otis under these indemnities, our financial results could be negatively impacted.
Risks Related to Our Common Stock • The market price and trading volume of our common stock may fluctuate significantly. • Shareowner's percentage of ownership in Carrier's common stock may be diluted in the future. • Quarterly cash dividends may be discontinued or modified, are subject to a number of uncertainties and may affect the price of our common stock. • Our amended and restated bylaws designate the courts within the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareowners, which could discourage lawsuits against Carrier and our directors and officers. • Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our shareowners.
Risks Related to Our Common Stock • The market price and trading volume of our common stock may fluctuate significantly. • Shareowner's percentage of ownership in our common stock may be diluted in the future. • Quarterly cash dividends may be discontinued or modified, are subject to a number of uncertainties and may affect the price of our common stock. • Our amended and restated bylaws designate the courts within the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareowners, which could discourage lawsuits against Carrier and our directors and officers. • Anti-takeover provisions could enable our Board of Directors to resist a takeover attempt by a third party and limit the power of our shareowners.
These provisions include, among others: (1) the ability of our remaining directors to fill vacancies on Carrier’s Board of Directors (except in an instance where a director is removed by shareowners and the resulting vacancy is filled by shareowners); (2) limitations on shareowners’ ability to call a special shareowner meeting; (3) rules regarding how shareowners may present proposals or nominate directors for election at shareowner meetings; and (4) the right of Carrier’s Board of Directors to issue preferred stock without shareowner approval.
These provisions include, among others: (1) the ability of our remaining directors to fill vacancies on our Board of Directors (except in an instance where a director is removed by shareowners and the resulting vacancy is filled by shareowners); (2) limitations on shareowners’ ability to call a special shareowner meeting; (3) rules regarding how shareowners may present proposals or nominate directors for election at shareowner meetings; and (4) the right of our Board of Directors to issue preferred stock without shareowner approval.
Any litigation of this type brought against us could result in substantial costs and a diversion of our management’s attention and resources, which could harm our business, operating results and financial condition. Shareowner's percentage of ownership in Carrier's common stock may be diluted in the future.
Any litigation of this type brought against us could result in substantial costs and a diversion of our management’s attention and resources, which could harm our business, operating results and financial condition. Shareowner's percentage of ownership in our common stock may be diluted in the future.
Our business has been and may again in the future be impacted by disruptions to our or third-party IT infrastructure, which have resulted and could in the future result from (among other causes) cyber-attacks, infrastructure failures or compromises to our physical security.
Our business has been and may again in the future be impacted by disruptions to our or third-party providers’ IT infrastructure, which have resulted and could in the future result from (among other causes) cyber-attacks, infrastructure failures or compromises to our physical security.
We use a variety of raw materials, supplier-provided parts, and third-party service providers in our business. The ability of suppliers to deliver parts, components and manufacturing equipment to our manufacturing facilities, and our ability to manufacture without disruption, could affect our business performance.
We use a variety of raw materials, supplier-provided parts, and third-party service providers in our business. The ability of suppliers to deliver material parts, components and manufacturing equipment to our manufacturing facilities, and our ability to manufacture without disruption, could affect our business performance.
Under the TMA, Carrier is generally required to indemnify UTC and Otis for any taxes resulting from the Separation (and any related costs and other damages) to the extent such amounts resulted from: (1) an acquisition of all or a portion of the equity securities or assets of Carrier, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (2) other actions or failures to act by Carrier or (3) certain of Carrier’s representations, covenants or undertakings contained in any of the Separation-related agreements and documents or in any documents relating to the IRS ruling and/or the opinion of counsel being incorrect or violated.
Under the TMA, we are generally required to indemnify UTC and Otis for any taxes resulting from the Separation (and any related costs and other damages) to the extent such amounts resulted from: (1) an acquisition of all or a portion of the equity securities or assets of Carrier, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (2) other actions or failures to act by Carrier or (3) certain of Carrier’s representations, covenants or undertakings contained in any of the Separation-related agreements and documents or in any documents relating to the IRS ruling and/or the opinion of counsel being incorrect or violated.
We believe these provisions will protect our shareowners from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with Carrier’s Board of Directors and by providing Carrier’s Board of Directors with more time to assess any acquisition proposal.
We believe these provisions will protect our shareowners from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with our Board of Directors and by providing our Board of Directors with more time to assess any acquisition proposal.
As a result, we could potentially experience: (i) production downtimes; (ii) operational delays or other detrimental impacts on our operations; (iii) destruction or corruption of data (our or third party); (iv) security breaches; (v) manipulation or improper use of our or third-party systems, networks or products; and (vi) financial losses from remedial actions, loss of business, liability, penalties, fines and/or damage to our reputation—any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
As a result, we could potentially experience: (i) production downtimes; (ii) operational delays or other detrimental impacts on our operations; (iii) destruction or corruption of our data (or data at or third-party providers); (iv) security breaches; (v) manipulation or improper use of our or third-party systems, networks or products; and (vi) financial losses from remedial actions, loss of business, liability, penalties, fines and/or damage to our reputation, any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
The court could then require our shareowners to return to UTC some or all of the shares of Carrier common stock issued in the Distribution, or require UTC or Carrier, as the case may be, to fund liabilities of the other company for the benefit of creditors.
The court could then require our shareowners to return to UTC some or all of the shares of Carrier common stock issued in the Distribution, or require UTC or us, as the case may be, to fund liabilities of the other company for the benefit of creditors.
In addition, other issues with suppliers (such as capacity constraints, quality issues, consolidations, closings or bankruptcies), price increases, raw material shortages, or the decreased availability of trucks and other delivery services could also have a material adverse effect on our ability to meet our commitments to customers or increase our operating costs.
In addition, other issues with suppliers (such as capacity constraints, quality issues, consolidations, closings or bankruptcies), price increases, raw material shortages, regulatory limitations, or the decreased availability of trucks and other delivery services could also have a material adverse effect on our ability to meet our commitments to customers or increase our operating costs.
Carrier’s amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with Carrier’s Board of Directors rather than to attempt a hostile takeover.
Our amended and restated certificate of incorporation and amended and restated bylaws contain, and Delaware law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with our Board of Directors rather than to attempt a hostile takeover.
These provisions are not intended to make Carrier immune from takeovers; however, these provisions will apply even if the offer may be considered beneficial by some shareowners and could delay or prevent an acquisition that Carrier’s Board of Directors determines is not in the best interests of Carrier and our shareowners.
These provisions are not intended to make us immune from takeovers; however, these provisions will apply even if the offer may be considered beneficial by some shareowners and could delay or prevent an acquisition that our Board of Directors determines is not in the best interests of Carrier and our shareowners.
General Risks • Natural disasters, epidemics or other unexpected events may disrupt our operations, adversely affect our results of operations, cash flows or financial condition, and may not be fully covered by insurance. • We may be affected by global economic, capital market and political conditions, and conditions in the construction, transportation and infrastructure industries in particular. • Our business success depends on attracting and retaining qualified personnel. • Additional tax expense or additional tax exposures could affect our future profitability. • Failure to maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect us. 11 Table of Contents RISK FACTORS Our business, financial condition, operating results and cash flows can be impacted by the factors set forth subsequently, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results.
General Risks • Natural disasters, epidemics or other unexpected events (including those related to COVID-19) may disrupt our operations, adversely affect our results of operations, cash flows or financial condition, and may not be fully covered by insurance. • We may be affected by global economic, capital market and political conditions, and conditions in the construction, transportation and infrastructure industries in particular. • Our business success depends on attracting and retaining qualified personnel. • Additional tax expense or additional tax exposures could affect our future profitability. • Failure to maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect us. 11 Table of Contents RISK FACTORS Our business, financial condition, operating results and cash flows can be impacted by the factors set forth subsequently, any one of which could cause our actual results to vary materially from recent results or from our anticipated future results.
We are subject to a variety of litigation, legal and compliance risks including, without limitation, claims, lawsuits and/or regulatory enforcement actions relating to breach of contract, cybersecurity and data privacy, employment and labor, environmental and employee health and safety matters, global chemical compliance, intellectual property rights, personal injury, product safety and taxes as well as anti-corruption, competition and securities laws and other laws governing improper business practices.
We are subject to a variety of litigation, legal and compliance risks including, without limitation, claims, lawsuits and/or regulatory enforcement actions relating to breach of contract, cybersecurity and data privacy, employment and labor, environmental and employee health and safety matters, global chemical compliance, intellectual property rights, personal injury, product safety and taxes as well as anti-corruption, competition and securities laws and other laws governing improper 19 Table of Contents business practices.
Any amounts we are required to pay pursuant to such indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business. 21 Table of Contents Moreover, even if we ultimately succeed in recovering from UTC or Otis, as applicable, we may be temporarily required to bear these losses.
Any amounts we are required to pay pursuant to such indemnification obligations and other liabilities could require us to divert cash that would otherwise have been used in furtherance of our operating business. Moreover, even if we ultimately succeed in recovering from UTC or Otis, as applicable, we may be temporarily required to bear these losses.
As described in Note 7 – Borrowings and Lines of Credit in the accompanying Notes to the Consolidated Financial Statements and "Liquidity and Financial Condition" the terms of our indebtedness contain covenants restricting our financial flexibility in a number of ways, including, among other things, restrictions on our ability and the ability of certain of our subsidiaries to incur liens, to make certain fundamental changes and to enter into sale and leaseback transactions.
As described in Note 7 – Borrowings and Lines of Credit in the accompanying Notes to the Consolidated Financial Statements and "Liquidity and Financial Condition," the agreements governing our indebtedness contain covenants restricting our financial flexibility in a number of ways, including, among other things, restrictions on our ability and the ability of certain of our subsidiaries to incur liens, to make certain fundamental changes and to enter into sale and leaseback transactions.
Risks Related to the Separation from UTC • After the Separation and the Distribution, certain members of management, directors and shareowners own stock in UTC, Carrier and Otis and as a result may face actual or potential conflicts of interest. • In connection with the Separation into three independent public companies, each of UTC, Carrier and Otis has agreed to indemnify the other parties for certain liabilities.
Risks Related to the Separation from UTC • After the Separation and the Distribution, certain members of management, directors and shareowners own stock in UTC, Carrier and Otis and as a result may face actual or potential conflicts of interest. 10 Table of Contents • In connection with the Separation into three independent public companies, each of UTC, Carrier and Otis has agreed to indemnify the other parties for certain liabilities.
No assurance can be given as to what standard a court would apply to determine insolvency or that a court would determine that Carrier or any of our subsidiaries were solvent at the time of or after giving effect to the Distribution.
No assurance can be given as to what standard a court would apply to determine insolvency or that a court would determine that we or any of our subsidiaries were solvent at the time of or after giving effect to the Distribution.
Our divestitures may result in continued financial exposure to the divested businesses, such as through guarantees, other financial arrangements, continued supply and services arrangements or through the retention of liabilities, such as for environmental and product liability claims.
These and other divestitures may result in continued financial exposure to the divested businesses, such as through guarantees, other financial arrangements, continued supply and services arrangements or through the retention of liabilities, such as for environmental and product liability claims.
See Note 1 – Description of the Business in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information on these agreements. In connection with the Separation into three independent public companies, each of UTC, Carrier and Otis has agreed to indemnify the other parties for certain liabilities.
See Note 1 – Description of the Business in the accompanying Notes to the Consolidated Financial Statements in this Annual Report for additional information on these agreements. In connection with the Separation into three independent public companies, each of UTC, Carrier and Otis has agreed to indemnify the other parties for certain liabilities.
The percentage ownership of shareowners in Carrier's common stock may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we grant to our directors, officers and employees. Our employees have, and will receive from Carrier, stock-based awards that correspond to shares of our common stock.
The percentage ownership of shareowners in our common stock may be diluted because of equity issuances for acquisitions, capital market transactions or otherwise, including any equity awards that we grant to our directors, officers and employees. Our employees have, and will receive from us, stock-based awards that correspond to shares of our common stock.
Any disruption to our business arising from such issues, or an increase in our costs to cover these issues that is greater than what we have anticipated, could have an adverse effect on our reputation, competitive position, results of operations, cash flows or financial condition.
Any disruption to our business arising from such issues, 14 Table of Contents or an increase in our costs to cover these issues that is greater than what we have anticipated, could have an adverse effect on our reputation, competitive position, results of operations, cash flows or financial condition.
Any such work stoppages (or potential work stoppages) or labor shortages could have a material adverse effect on our reputation, productivity, financial condition, cash flows and results of operations. Our defined benefit pension plans are subject to financial market risks that could adversely affect our results.
Any such work stoppages (or potential work stoppages) 18 Table of Contents or labor shortages could have a material adverse effect on our reputation, productivity, financial condition, cash flows and results of operations. Our defined benefit pension plans are subject to financial market risks that could adversely affect our results.
If certain of our product and service offerings do not meet applicable safety standards – which has been the case – or our customers’ expectations regarding safety or quality, we can and have experienced lost sales and increased costs and we can and have been exposed to legal, financial and reputational risks.
If certain of our product and service offerings do not meet applicable safety standards – which has been the case – or our customers’ expectations regarding safety or quality, we can experience and have experienced previously, lost sales and increased costs and we can be exposed, and have previously been exposed, to legal, financial and reputational risks.
For example, potential conflicts of interest could arise in connection with the resolution of any dispute regarding the terms of the agreements governing the Separation and Carrier’s relationship with UTC and Otis thereafter.
For example, potential conflicts of interest could arise in connection with the resolution of any dispute regarding the terms of the agreements governing the Separation and our relationship with UTC and Otis thereafter.
Such investigations often take years to complete and could result in administrative, civil or criminal liabilities, including repayments, fines, treble and other damages, forfeitures, restitution or penalties, or could lead to suspension or debarment of U.S. government contracting or of export privileges.
Such investigations often take years to complete and could result in administrative, civil or criminal liabilities, including repayments, fines, treble and other damages, forfeitures, restitution or 20 Table of Contents penalties, or could lead to suspension or debarment of U.S. government contracting or of export privileges.
The occurrence of any of these events could also increase our insurance and other operating costs or harm our sales. We may be affected by global economic, capital market and political conditions, and conditions in the construction, transportation and infrastructure industries in particular.
The occurrence of any of these events could also increase our insurance and other operating costs or harm our sales. 24 Table of Contents We may be affected by global economic, capital market and political conditions, and conditions in the construction, transportation and infrastructure industries in particular.
Carrier has been issued an investment grade credit rating by each of Moody’s Investors Services, Inc. ("Moody's"), Standard & Poor’s ("S&P") and Fitch Ratings Inc. ("Fitch Ratings"). Nonetheless, any future downgrades could increase our borrowing costs, reduce market capacity for our commercial paper or require the posting of collateral under our derivative contracts.
We have been issued an investment grade credit rating by each of Moody’s Investors Services, Inc. ("Moody's"), Standard & Poor’s ("S&P") and Fitch Ratings Inc. ("Fitch Ratings"). Nonetheless, any future downgrades could increase our borrowing costs, reduce market capacity for our commercial paper or require the posting of collateral under our derivative contracts.
Any such indemnity obligations could be material. See Note 1 – Description of the Business in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information. Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and results of operations.
Any such indemnity obligations could be material. See Note 1 – Description of the Business in the accompanying Notes to the Consolidated Financial Statements in this Annual Report for additional information. Potential liabilities may arise due to fraudulent transfer considerations, which would adversely affect our financial condition and results of operations.
This exclusive forum provision may limit the ability of our shareowners to bring a claim in a judicial forum that such shareowners find favorable for disputes with Carrier or our directors or officers, which may discourage such lawsuits against 23 Table of Contents Carrier and our directors and officers.
This exclusive forum provision may limit the ability of our shareowners to bring a claim in a judicial forum that such shareowners find favorable for disputes with Carrier or our directors or officers, which may discourage such lawsuits against Carrier and our directors and officers.
For a description of material legal proceedings and regulatory matters, see the section entitled "Legal Proceedings" and Note 23 – Commitments and Contingent Liabilities in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K. We are subject to risks arising from doing business with the U.S. government.
For a description of material legal proceedings and regulatory matters, see the section entitled "Legal Proceedings" and Note 23 – Commitments and Contingent Liabilities in the accompanying Notes to the Consolidated Financial Statements in this Annual Report. We are subject to risks arising from doing business with the U.S. government.
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 rate fluctuations, inflation, recession, 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. 24 Table of Contents These economic and political conditions affect our business in a number of ways.
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 rate fluctuations, inflation, recession, 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.
The indemnities from UTC and Otis for our benefit may not be sufficient to protect us against the full amount of such liabilities, and UTC and/or Otis may not be able to fully satisfy their respective indemnification obligations.
The indemnities from 21 Table of Contents UTC and Otis for our benefit may not be sufficient to protect us against the full amount of such liabilities, and UTC and/or Otis may not be able to fully satisfy their respective indemnification obligations.
We use various tactical and strategic actions to mitigate our raw material and supply chain risks and challenges, including consolidating commodity purchases, locking in prices of expected purchases of certain raw materials, proactive engagement with suppliers and our workforce and dynamic management of freight costs and availability.
We use various tactical and strategic actions to mitigate our raw material and supply chain risks and challenges, including consolidating commodity purchases, locking in prices of expected purchases of certain raw materials, dual sourcing, increasing regionalization, proactive engagement with suppliers and our workforce and dynamic management of freight costs and availability.
We also rely on nondisclosure agreements, IT security systems and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. Our efforts to protect such intellectual property and proprietary information may not be sufficient, however.
We also rely on nondisclosure 16 Table of Contents agreements, IT security systems and other measures to protect certain customer and supplier information and intellectual property that we have in our possession or to which we have access. Our efforts to protect such intellectual property and proprietary information may not be sufficient, however.
We cannot provide assurance that our internal controls over financial reporting will be effective in the future or that a material weakness 25 Table of Contents will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective.
We cannot provide assurance that our internal controls over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective.
These provisions may also prevent or discourage attempts to remove and replace incumbent directors. General Risks Natural disasters, epidemics or other unexpected events may disrupt our operations, adversely affect our results of operations, cash flows or financial condition and may not be fully covered by insurance.
These provisions may also prevent or discourage attempts to remove and replace incumbent directors. General Risks Natural disasters, epidemics or other unexpected events (including those related to COVID-19) may disrupt our operations, adversely affect our results of operations, cash flows or financial condition and may not be fully covered by insurance.
See Note 10 – Employee Benefit Plans to the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional discussion on pension plans and related obligations and contingencies. 17 Table of Contents We may not realize expected benefits from our cost reduction and restructuring efforts, and our profitability or our business otherwise might be adversely affected.
See Note 10 – Employee Benefit Plans to the accompanying Notes to the Consolidated Financial Statements in this Annual Report for additional discussion on pension plans and related obligations and contingencies. We may not realize expected benefits from our cost reduction and restructuring efforts, and our profitability or our business otherwise might be adversely affected.
Our operations and those of our suppliers are subject to disruption for a variety of reasons, including COVID-19-related supplier plant shutdowns or slowdowns, transportation delays, work stoppages, labor relations, governmental regulatory and enforcement actions, intellectual property claims against suppliers, financial issues such as supplier bankruptcy, IT failure and hazards such as fire, earthquakes, flooding or other natural disasters.
Our operations and those of our suppliers are subject to disruption for a variety of reasons, including COVID-19 or other health-related supplier plant shutdowns or slowdowns, transportation delays, work stoppages, labor relations, changes in laws or regulations, governmental regulatory and enforcement actions, intellectual property claims against suppliers, financial issues such as a supplier bankruptcy, IT failures and hazards such as fire, earthquakes, flooding or other natural disasters.
Cyber-based risks are evolving and include attacks: (i) on our IT infrastructure (ii) targeting the security, integrity and/or availability of hardware and software; (iii) on information installed, stored or transmitted in our products (including after the purchase of those products and when they are installed into third-party products); and (iv) on facilities or similar infrastructure.
Cyber-based risks are evolving and include attacks: (i) on our IT infrastructure; (ii) targeting the security, integrity and/or availability of hardware and software; (iii) exploiting weaknesses or vulnerabilities in our products, or capturing information installed, stored or transmitted in our products (including after the purchase of those products and when they are installed into, or into environments using, third-party products); and (iv) on facilities or similar infrastructure.
We may also incur additional indebtedness in the future. 20 Table of Contents Our debt obligations could potentially have important consequences to us and our debt and equity investors, including: (1) requiring a substantial portion of our cash flows from operations to make interest payments; (2) making it more difficult to satisfy debt service and other obligations; (3) increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; (4) increasing our vulnerability to general adverse economic and industry conditions; (5) reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; (6) limiting our flexibility in planning for, or reacting to, changes in our business and the industry; (7) placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged; and (8) limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares.
Our debt obligations could potentially have important consequences to us and our debt and equity investors, including: (1) requiring a substantial portion of our cash flows from operations to make debt service payments or to refinance our indebtedness as it becomes due, making it more difficult for us to satisfy our other priorities and obligations; (2) resulting in higher interest expenses, (3) increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing; (4) increasing our vulnerability to general adverse economic and industry conditions; (5) reducing the cash flows available to fund capital expenditures and other corporate purposes and to grow our business; (6) limiting our flexibility in pursuing strategic opportunities or planning for, or reacting to, changes in our business and the industry; (7) placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged; and (8) limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase shares.
The factors that could affect our common stock price include among others: (1) industry or general market conditions, including inflation and increasing cost of goods; (2) domestic and international economic factors unrelated to our performance; (3) impact of the COVID-19 pandemic; (4) lawsuits, enforcement actions and other claims by third parties or governmental authorities; (5) changes in our customers’ preferences; (6) new regulatory pronouncements and changes in regulatory guidelines; (7) actual or anticipated fluctuations in our quarterly operating results; (8) changes in securities analysts’ estimates of our financial performance or lack of research coverage and reports by industry analysts; (9) action by institutional shareowners or other large shareowners; (10) failure to meet any financial guidance given by us or any change in any financial guidance given by us, or changes by us in our financial guidance practices; (11) announcements by us of significant impairment charges; (12) speculation in the press or investment community; (13) investor perception of us and our industry; (14) changes in market valuations or earnings of similar companies; (15) announcements by us or our competitors of significant contracts, acquisitions, 22 Table of Contents dispositions or strategic partnerships; (16) war or terrorist acts; (17) any future sales of our common stock or other securities; (18) additions or departures of key personnel and (19) failure to achieve any of our environmental, social or governance goals.
The factors that could affect our common stock price include among others: (1) industry or general market conditions, including inflation and increasing cost of goods; (2) domestic and international economic factors unrelated to our performance; (3) our ability to execute our planned portfolio transformation transactions; (4) lawsuits, enforcement actions and other claims by third parties or governmental authorities; (5) changes in our customers’ preferences; (6) new regulatory pronouncements and changes in regulatory guidelines; (7) actual or anticipated fluctuations in our quarterly operating results; (8) changes in securities 22 Table of Contents analysts’ estimates of our financial performance or lack of research coverage and reports by industry analysts; (9) action by institutional shareowners or other large shareowners; (10) failure to meet any financial guidance given by us or any change in any financial guidance given by us, or changes by us in our financial guidance practices; (11) announcements by us of significant impairment charges; (12) speculation in the press or investment community; (13) investor perception of us and our industry; (14) changes in market valuations or earnings of similar companies; (15) announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships; (16) war or terrorist acts; (17) any future sales of our common stock or other securities; (18) additions or departures of key personnel; (19) failure to achieve any of our environmental, social or governance goals; and (20) other risk factors discussed in this "Risk Factors" section or in our other filings from time to time with the SEC.
This disruption has resulted, and may continue to result, in sufficient inventory not being available in a timely manner or during the appropriate season as well as higher freight and other logistic costs, including increased carrier rates, which could have a material adverse effect on our business.
Periodic disruptions in our supply chains has resulted, and may continue to result, in sufficient inventory not being available in a timely manner or during the appropriate season as well as higher freight and other logistic costs, including increased carrier rates, which could have a material adverse effect on our business.
Pursuant to the separation and distribution agreement and certain other agreements among UTC, Carrier and Otis, each party has agreed to indemnify the other parties for certain liabilities as discussed further in Note 1 – Description of the Business in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
Pursuant to the separation and distribution agreement and certain other agreements among UTC, us and Otis, each party has agreed to indemnify the other parties for certain liabilities as discussed further in Note 1 – Description of the Business in the accompanying Notes to the Consolidated Financial Statements in this Annual Report.
We seek to take proactive steps to mitigate these concerns, including through audits and similar reviews. Joint ventures and strategic relationships inherently involve certain other risks.
We seek to take proactive steps to mitigate these concerns, including through audits and similar reviews. 12 Table of Contents Joint ventures and strategic relationships inherently involve certain other risks.
Risks associated with our international operations could adversely affect our competitive position, results of operations, cash flows or financial condition. Approximately 45% of our net sales for the year ended December 31, 2022 are derived from international operations, including U.S. export sales.
Risks Related to Our Business Risks associated with our international operations could adversely affect our competitive position, results of operations, cash flows or financial condition. Approximately 48% of our net sales for the year ended December 31, 2023 are derived from international operations, including U.S. export sales.
The introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated. • We operate in a competitive environment and our profitability and competitive position depend on our ability to accurately estimate the costs and timing of providing our products and services. • Customers and others may take disruptive actions. • Labor matters may impact our business. • Our defined benefit pension plans are subject to financial market risks that could adversely affect our results. • We may not realize expected benefits from our cost reduction and restructuring efforts, and our profitability or our business otherwise might be adversely affected. • Failure to achieve and maintain a high level of product and service quality could damage our reputation with customers and negatively impact our results. • We are subject to litigation, environmental and other legal and compliance risks. • We are subject to risks arising from doing business with the U.S. government. • We engage in acquisitions and divestitures and may encounter difficulties integrating acquired businesses with, or disposing of businesses from, our current operations; therefore, we may not realize the anticipated benefits of these acquisitions and divestitures. • We may recognize impairment charges for our goodwill and intangible assets. • Failure to maintain a satisfactory credit rating could adversely affect our liquidity, capital position, borrowing costs and access to the capital markets. 10 Table of Contents • We incurred debt obligations, and we may incur additional debt obligations in the future, which could adversely affect our business and profitability and our ability to meet other obligations.
The introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated. • We operate in a competitive environment and our profitability and competitive position depend on our ability to accurately estimate the costs and timing of providing our products and services. • Customers and others may take disruptive actions. • Labor matters may impact our business. • Our defined benefit pension plans are subject to financial market risks that could adversely affect our results. • We may not realize expected benefits from our cost reduction and restructuring efforts, and our profitability or our business otherwise might be adversely affected. • Failure to achieve and maintain a high level of product and service quality could damage our reputation with customers and negatively impact our results. • We are subject to litigation, environmental and other legal and compliance risks. • We are subject to risks arising from doing business with the U.S. government. • We may recognize impairment charges for our goodwill and intangible assets. • Failure to maintain a satisfactory credit rating could adversely affect our liquidity, capital position, borrowing costs and access to the capital markets.
Increased public awareness and concern about climate change will likely continue to: (1) generate more international, regional and/or national requirements to curtail the use of high global warming potential refrigerants (e.g. the Kigali Amendment to the Montreal Protocol and the American Innovation and Manufacturing ("AIM") Act of 2020, which are essential to many of our products); (2) increase building energy and cold chain efficiency; and (3) cause a shift away from the use of fossil fuels as an energy source, including natural gas prohibitions.
Increased public awareness and concern about climate change will likely continue to: (1) generate more international, regional and/or national requirements to curtail the use of high global warming potential refrigerants (e.g. the Kigali Amendment to the Montreal Protocol and the American Innovation and Manufacturing ("AIM") Act of 2020, which are essential to many of our products); (2) increase building energy and cold chain efficiency; (3) cause a shift away from the use of fossil fuels as an energy source, including natural gas prohibitions; and (4) lead to the adoption of additional rules and regulations surrounding public disclosures relating to greenhouse gas emissions, including those recently adopted in California and the European Union.
In addition, accounting requirements relating to business combinations, including the requirement to expense certain acquisition costs as incurred, may cause us to incur greater earnings volatility and generally lower earnings subsequent to periods in which we acquire new businesses. We also make strategic divestitures from time to time.
Additionally, accounting requirements relating to business combinations, including the requirement to expense certain acquisition costs as incurred, may cause us to incur greater earnings volatility and generally lower earnings subsequent to periods in which we acquire new businesses. Any of the foregoing could adversely affect our business and results of operations. We also make strategic divestitures from time to time.
Actual, potential or perceived product safety concerns could expose us to litigation as well as government enforcement actions, which has also occurred in certain instances. In addition, when our products fail to perform as expected, we are exposed to warranty, product liability, personal injury and other claims. We maintain strict quality controls and procedures.
Actual, potential or perceived product safety concerns could expose us to litigation as well as government enforcement actions, which has also occurred in certain instances. In addition, when our products fail to perform as expected, we have been, and may in the future be, exposed to warranty, product liability, personal injury and other claims.
For example, some of our joint ventures or other strategic agreements prohibit us from competing in certain geographic markets or product and services channels, and these restrictions may apply to other products and services we develop or businesses we acquire in the future. Climate change, regulations associated with climate change and mitigation efforts could adversely affect our business.
For example, some of our joint ventures or other strategic agreements prohibit us from competing in certain geographic markets or product and services channels, and these restrictions may apply to other products and services we develop or businesses we acquire in the future.
Product recalls and field corrective actions can be expensive to implement and may damage our reputation, customer relationships and market share. We have conducted product recalls and field corrective actions in the past and may do so again in the future. In many jurisdictions, product liability claims are not limited to any specified amount of recovery.
We have conducted product recalls and field corrective actions in the past and may do so again in the future. In many jurisdictions, product liability claims are not limited to any specified amount of recovery.
Emerging global chemical use restrictions related to protection of human health and the environment as well as climate change directives may require additional investments in product designs, resulting in increased manufacturing and production costs as well as updates to product safety assessments.
Emerging global chemical use restrictions related to protection of human health and the environment as well as climate change directives may require additional investments in product designs, resulting in increased manufacturing and production costs as well as updates to product safety assessments. These restrictions may also increase our legal obligations regarding remediation of its current and legacy operational sites.
The efficient operation of our business requires continued and substantial investments in information technology ("IT") infrastructure systems. The failure to design, develop, maintain and implement IT technology infrastructure systems in an effective and timely manner or to maintain these systems could divert management’s attention and resources.
The failure to design, develop, maintain and implement IT technology infrastructure systems in an effective and timely manner or to maintain these systems could divert management’s attention and resources.
The effects of climate 13 Table of Contents change also may impact our decisions to construct new facilities or maintain existing facilities in the areas most prone to physical risks, which could similarly increase our operating and material costs.
The effects of climate change could disrupt our operations by impacting the availability and cost of materials and by increasing insurance and other operating costs. The effects of climate change also may impact our decisions to construct new facilities or maintain existing facilities in the areas most prone to physical risks, which could similarly increase our operating and material costs.
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.
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.
RISK FACTORS RISK FACTOR SUMMARY Risks Related to Our Business • Our business, financial condition and results of operations have been and may continue to be adversely affected by COVID-19. • Risks associated with our international operations could adversely affect our competitive position, results of operations, cash flows or financial condition. • We are party to joint ventures and other strategic relationships, which may not be successful and may expose us to unique risks and restrictions. • Climate change, regulations associated with climate change and mitigation efforts could adversely affect our business. • Demand for our HVAC products and services is influenced by weather conditions and seasonality. • Our business and financial performance depend on continued and substantial investments in our information technology infrastructure, which may not yield anticipated benefits and which may be vulnerable to cyber-attacks. • Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations. • We depend on our intellectual property and have access to certain intellectual property and information of our customers and suppliers.
RISK FACTORS RISK FACTOR SUMMARY Risks Related to Our Business • Risks associated with our international operations could adversely affect our competitive position, results of operations, cash flows or financial condition. • We are party to joint ventures and other strategic relationships, which may not be successful and may expose us to unique risks and restrictions. • Risks associated with climate change, government, regulations and incentives associated with climate change and mitigation efforts could adversely affect our business. • Demand for our HVAC products and services is influenced by weather conditions and seasonality. • Our business and financial performance depend on continued and substantial investments in our information technology infrastructure, which may not yield anticipated benefits and which may be vulnerable to cyber-attacks. • Cybersecurity incidents could disrupt business operations, result in the loss of critical and confidential information, and adversely impact our reputation and results of operations. • We engage in acquisitions and divestitures and may encounter difficulties integrating acquired businesses with, or disposing of businesses from, our current operations; therefore, we may not realize the anticipated benefits of these acquisitions and divestitures. • We have significant indebtedness, as well as unused borrowing capacity, and we may incur additional debt in the future.
However, we cannot be certain that these controls and procedures will reveal defects in our products or their raw materials, which may not become apparent until after the products have been placed in use in the market. Accordingly, there is a risk that products will have defects, which could require a product recall or field corrective action.
We maintain strict quality controls and procedures. However, we cannot be certain that these controls and procedures will reveal defects in our products or their raw materials, which may not become apparent until after the products have been placed in use in the market.
The regulations applicable to our products, as well as our customers’ product and service needs, change from time to time. Moreover, regulatory changes, inclusive of those aimed at addressing climate change and its impacts, may 16 Table of Contents render our products and technologies non-compliant and may subject us to operational, compliance and reputational risks.
Moreover, regulatory changes, inclusive of those aimed at addressing climate change and its impacts, may render our products and technologies non-compliant and may subject us to operational, compliance and reputational risks.
We cannot be sure that our pending patent applications will result in the issuance of patents, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors, or that these patents will be found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications. 15 Table of Contents In addition, we may be the target of competitor or other third-party patent enforcement actions seeking substantial monetary damages or seeking to prevent the sale and marketing of certain of our products.
We cannot be sure that our pending patent applications will result in the issuance of patents, that patents issued to or licensed by us in the past or in the future will not be challenged or circumvented by competitors, or that these patents will be found to be valid or sufficiently broad to preclude our competitors from introducing technologies similar to those covered by our patents and patent applications.
The Company's intellectual property rights are important to our business and include numerous patents, trademarks, copyrights, trade secrets, proprietary technology, technical data, business processes and other confidential information.
Infringement of or the failure to protect that intellectual property could adversely affect our future growth and success. Our intellectual property rights are important to our business and include numerous patents, trademarks, copyrights, trade secrets, proprietary technology, technical data, business processes and other confidential information.
The success of future acquisitions, divestitures and joint ventures will depend on the satisfaction of conditions precedent to such transactions and the timing of consummation of such transactions, which will depend in part on the ability of the parties to secure any required regulatory approvals in a timely manner, among other things.
The success of future acquisitions, divestitures and joint ventures will depend on the satisfaction of conditions precedent to such transactions, which will depend in part on the ability of the parties to secure any required regulatory approvals in a timely manner, among other things. 15 Table of Contents We have significant indebtedness, as well as unused borrowing capacity, and we may incur additional debt in the future.
The effects of climate change, including increased frequency and intensity of weather conditions and water scarcity, create financial risks to our business.
Risks associated with climate change, government, regulations and incentives associated with climate change and mitigation efforts could adversely affect our business. The effects of climate change, including increased frequency and intensity of extreme weather conditions and water scarcity, create financial risks to our business.
Significant negative industry or economic trends, disruptions to our business, planned or unexpected significant changes in the use of the assets, and sustained market capitalization declines may result in the impairment of goodwill or intangible assets.
Our intangible assets primarily consist of customer relationships, patents, service portfolios and trademarks. We periodically assess these assets to determine if they are impaired. Significant negative industry or economic trends, disruptions to our business, planned or unexpected significant changes in the use of the assets, and sustained market capitalization declines may result in the impairment of goodwill or intangible assets.
Quarterly cash dividends may be discontinued or modified, are subject to a number of uncertainties and may affect the price of our common stock. Quarterly cash dividends are a component of our capital allocation strategy, which we fund with operating cash flows, borrowings and divestitures. However, we are not required to declare dividends.
Quarterly cash dividends are a component of our capital allocation strategy, which we fund with operating cash flows, borrowings and divestitures. However, we are not required to declare dividends. Dividends may be discontinued, accelerated, suspended or delayed at any time without prior notice.
The effects of climate change, including extreme weather events, long-term changes in temperature levels and water availability may exacerbate these risks. Such disruption has in the past and could in the future interrupt our ability to manufacture certain products. Any significant disruption could have a material adverse impact on our competitive position.
Insurance for certain disruptions may not be available, affordable or adequate. The effects of climate change, including extreme weather events, long-term changes in temperature levels and water availability may exacerbate these risks. Such disruption has in the 17 Table of Contents past and could in the future interrupt our ability to manufacture certain products.
In these circumstances, the results of any quarterly period may not be indicative of expected results for a full year, and unusual weather patterns or events could positively or negatively affect our business and impact overall results of operations. 14 Table of Contents Our business and financial performance depend on continued and substantial investments in our information technology infrastructure, which may not yield anticipated benefits and which may be vulnerable to cyber-attacks.
In these circumstances, the results of any quarterly period may not be indicative of expected results for a full year, and unusual weather patterns or events could positively or negatively affect our business and impact overall results of operations.
See "Business Overview" and "Results of Operations—Income Taxes" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 – Summary of Significant Accounting Policies and Note 17 – Income Taxes in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for further discussion on income taxes and related contingencies.
Our competitive position, results of operations, cash flows or financial condition may be affected by the outcome of examinations, proceedings and contingencies that cannot be predicted with certainty. 25 Table of Contents See "Business Overview" and "Results of Operations—Income Taxes" under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 – Summary of Significant Accounting Policies and Note 17 – Income Taxes in the accompanying Notes to the Consolidated Financial Statements in this Annual Report for further discussion on income taxes and related contingencies.
We believe that our supply management and production practices appropriately balance the foreseeable risks and the costs of alternative practices. Nonetheless, these risks may have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Nonetheless, these risks may have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Failure to ensure that we have leadership with the necessary skill sets and experience could impede our ability to deliver our growth objectives, execute our strategic plan and effectively transition our leadership. Additional tax expense or additional tax exposures could affect our future profitability. We are subject to income taxes in the U.S. and various international jurisdictions.
Failure to ensure that we have leadership with the necessary skill sets and experience could impede our ability to deliver our growth objectives, execute our strategic plan and effectively transition our leadership.
We seek to grow through strategic acquisitions in addition to organic growth. In the past several years, we have acquired consolidated and minority-owned businesses in an effort to complement and expand our business. We expect to continue such pursuits in the future.
In the past several years, we have acquired consolidated and minority-owned businesses in an effort to complement and expand our business, including the acquisition of the VCS Business, which we completed on January 2, 2024. We expect to continue such pursuits in the future.
Existing and future asbestos-related claims could adversely affect our financial condition, results of operations and cash flows. Personal injury lawsuits may involve individual and putative class actions alleging that contaminants originating from our current or former products or operating facilities caused or contributed to medical conditions.
Personal injury lawsuits may involve individual and putative class actions alleging that contaminants originating from our current or former products or operating facilities caused or contributed to medical conditions. Property damage lawsuits may involve claims relating to environmental damage or diminution of real estate values.
We design, manufacture and service products that incorporate advanced technologies. The introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated. Our future success depends on designing, developing, producing, selling and supporting innovative products that incorporate advanced technologies.
Any significant disruption could have a material adverse impact on our competitive position. We design, manufacture and service products that incorporate advanced technologies. The introduction of new products and technologies involves risks, and we may not realize the degree or timing of benefits initially anticipated.
The inconsistent international, regional and/or national requirements associated with climate change regulations, such as the U.S. re-entrance into the Paris Climate Agreement, also create economic and regulatory uncertainty. There is also regulatory and budgetary uncertainty associated with government incentives, which, if discontinued, could adversely impact the demand for energy-efficient buildings and could increase costs of compliance.
There is also regulatory and budgetary uncertainty associated with government incentives, which, if discontinued or materially reduced, could adversely impact the demand for energy-efficient buildings and homes and could increase costs of compliance.
As of December 31, 2022, we had approximately $8.8 billion in aggregate principal amount of outstanding indebtedness. See Note 7 – Borrowings and Lines of Credit in the accompanying Notes to the Consolidated Financial Statements and the section entitled "Liquidity and Financial Condition" in this Annual Report on Form 10-K for additional information.
See Note 7 – Borrowings and Lines of Credit and Note 25 – Subsequent Events in the accompanying Notes to the Consolidated Financial Statements and the section entitled "Liquidity and Financial Condition" in this Annual Report for additional information.
Decisions with respect to dividends are subject to the discretion of our Board of Directors and will be based on a variety of factors.
Even if not discontinued, the amount of such dividends may be changed, and the amount, timing and frequency of such dividends may vary from past practice or from our stated expectations. Decisions with respect to dividends are subject to the discretion of our Board of Directors and will be based on a variety of factors.
However, these efforts could cause us to pay higher prices for a commodity when compared with the market price at the time the commodity is actually purchased or delivered. Our suppliers could be subject to tariffs as well as climate change related regulations, compliance with which would increase our costs and the impacts of which are difficult to predict.
However, these efforts may be unsuccessful or could cause us to pay higher prices for a commodity when compared with the market price at the time the commodity is actually purchased or delivered.
We use a wide range of materials and components in the global production of our products, which come from numerous suppliers around the world.
We use a wide range of materials and components in the global production of our products, which come from numerous suppliers around the world. Because some key parts may be available only from a single supplier or a limited group of suppliers, we are subject to supply and pricing risk.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeApproximately 70%, 14% and 13% of these significant properties are associated with our HVAC, Refrigeration and Fire & Security segments, respectively, with approximately 3% not associated with a particular segment. Approximately 33% of these significant properties are leased and the remainder are owned. Approximately 43% of these significant properties are located in the U.S.
Biggest changeApproximately 70%, 15% and 13% of these significant properties are associated with our HVAC, Refrigeration and Fire & Security segments, respectively, with approximately 2% not associated with a particular segment. Approximately 31% of these significant properties are leased and the remainder are owned. Approximately 27% of these significant properties are located in the U.S.
Our fixed assets as of December 31, 2022 include manufacturing facilities and non-manufacturing facilities, such as warehouses and machinery and equipment, most of which is general purpose machinery and equipment that use special jigs, tools and fixtures and that, in many instances, have automatic control features and special adaptations.
Our fixed assets as of December 31, 2023 include manufacturing facilities and non-manufacturing facilities, such as warehouses and machinery and equipment, most of which is general purpose machinery and equipment that use special jigs, tools and fixtures and that, in many instances, have automatic control features and special adaptations.
The facilities, warehouses, machinery and equipment in use as of December 31, 2022 are in good operating condition, are well-maintained and substantially all are in regular use.
The facilities, warehouses, machinery and equipment in use as of December 31, 2023 are in good operating condition, are well-maintained and substantially all are in regular use.
ITEM 2. PROPERTIES We operate approximately 1,100 sites, which comprise approximately 41 million square feet of productive space. Of these, our facilities and key manufacturing sites greater than 100,000 square feet comprise approximately 32 million square feet of productive space.
ITEM 2. PROPERTIES We operate approximately 1,100 sites, which comprise approximately 40 million square feet of productive space. Of these, our facilities and key manufacturing sites greater than 100,000 square feet comprise approximately 31 million square feet of productive space.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe Company acquired KFI and KPL as part of its separation from UTC in April 2020. During the eight-year period of its operation by KFI, 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 ("Pennsylvania Site").
Biggest changeThe National Foam business 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 (the "Pennsylvania Site"). In 2013, KFI divested the AFFF businesses to an unrelated third party. The Company acquired KFI as part of the Separation in April 2020.
The court has not yet outlined details on that process or its timing.
However, the court has not yet outlined details on that process or its timing.
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.
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 RTX, 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.
They also allege that PFOA contamination has resulted from the use of AFFF manufactured using a different process, known as telomerization and that this process was used exclusively by the other AFFF manufacturers (including National Foam and Angus Fire).
They also allege that PFOA contamination has resulted from the use of AFFF manufactured using a different process, known as telomerization, and that this process was used exclusively by the other AFFF manufacturers (including the National Foam business).
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").
Judicial Panel on Multidistrict Litigation transferred and consolidated all AFFF cases pending in the U.S. federal courts against the Company, KFI and others to the U.S. District Court for the District of South Carolina (the "MDL Proceedings").
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 firefighters' protective outerwear, carpets, clothing, fabrics, cookware, food packaging, personal care products, cleaning products, paints, varnishes and other consumer and industrial products.
Compounds containing PFOS and PFOA (as well as many other PFAS) have also been used for decades by many third parties in a number of different industries to manufacture firefighters’ protective outerwear, carpets, clothing, fabrics, cookware, food packaging, personal care products, cleaning products, paints, varnishes and other consumer and industrial products.
The Amended Complaint, with Raytheon, Carrier and Otis as the only defendants, asserted that the defendants are 26 Table of Contents 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 sought specific performance. Carrier believes all plaintiffs' claims against the Company are without merit.
The Amended Complaint, with RTX, Carrier and Otis as the only defendants, asserted 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 sought specific performance. The Company believes all plaintiffs' claims against it are without merit.
A further discussion of our potential regulatory liabilities can be found under the headings "Business" and "Risk Factors" in this Annual Report on Form 10-K. ITEM 4. MINE SAFETY DISCLOSURE Not Applicable. PART II
A further discussion of our potential regulatory liabilities can be found under the headings "Business" and "Risk Factors" in this Annual Report. ITEM 4. MINE SAFETY DISCLOSURE Not Applicable. 30 Table of Contents PART II
The Company and certain of its subsidiaries including KFI, have also been named as a defendant in more than 300 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.
The Company, KFI and others have also been named as defendants in more than 700 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.
The individual plaintiffs in the MDL Proceedings generally seek damages for alleged personal injuries, medical monitoring, 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.
The individual plaintiffs in the MDL Proceedings generally seek damages for alleged personal injuries, medical monitoring, diminution in property value and injunctive relief to remediate alleged contamination of water supplies.
On September 23, 2022, after completion of discovery, the MDL court selected one water provider case, the City of Stuart, FL v. 3M, et al. , for a bellwether trial. That trial is tentatively scheduled for June 2023. The MDL court has ordered that the 27 Table of Contents bellwether process for personal injury cases will begin in 2023.
On September 23, 2022, after completion of discovery, the MDL court selected one water provider case, the City of Stuart, FL v. 3M, et al ., for a bellwether trial. That trial was scheduled to begin in early June 2023 but was postponed indefinitely. The MDL court ordered the bellwether process for personal injury cases to begin in 2023.
("KFI"), have been named as defendants in more than 3,150 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.
Aqueous Film Forming Foam Litigation As of December 31, 2023, the Company, Kidde-Fenwal, Inc. ("KFI") and others have been named as defendants in more than 6,000 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 defendants moved for summary judgment on the government contractor defense, which potentially applies to AFFF sold to or used by the U.S. government. After full briefing and oral argument, on September 16, 2022, the MDL court declined to enter summary judgment for the defendants. The defense, however, remains available at any trial to which it applies.
After full briefing and oral argument, on September 16, 2022, the MDL court declined to enter summary judgment for the defendants. The defense, however, remains available at any trial to which it applies.
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 in the MDL Proceedings allege that the fluorosurfactants used by various manufacturers in producing AFFF contained, or over time degraded into, compounds known as per- and polyfluoroalkyl substances (referred to collectively as "PFAS"), including perflourooctanesulfonic acid ("PFOS") and perflourooctanoic acid ("PFOA").
Defendants moved to dismiss the Amended Complaint. On September 30, 2022, the court dismissed the case against all defendants, with prejudice. Plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit. The briefing process is ongoing.
Defendants moved to dismiss the Amended Complaint. On September 30, 2022, the court dismissed the case against all defendants, with prejudice. Plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit. On August 3, 2023, the Second Circuit Court of Appeals affirmed the district court's ruling. The Second Circuit’s judgment is final and non-appealable.
The Company and its subsidiaries, including KFI, and other defendants are also party to one action in Arizona state court brought by a firefighter claiming that occupational exposure to AFFF has caused him certain personal injuries.
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, KFI and other defendants are also party to one action in Arizona state court brought by a firefighter claiming that occupational exposure to AFFF has caused him certain personal injuries.
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 and its subsidiaries, including KFI, if one or more plaintiffs were to prevail in these cases.
The Company and KFI believe that they have meritorious defenses to the claims in the MDL Proceedings and the other AFFF lawsuits. 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 a range of possible loss at this time.
Neither the Company nor any of its former or current subsidiaries, including National Foam/Angus Fire and KFI/KPL, respecitively, manufactured fluorosurfactants; they instead purchased these substances from unrelated third parties to in turn manufacture AFFF.
The key components that contribute to AFFF's fire-extinguishing capabilities are known as fluorosurfactants. Neither the Company, nor KFI, nor any of the Company's subsidiaries involved in the AFFF litigation manufactured fluorosurfactants. Instead, the National Foam business purchased these substances from unrelated third parties for use in manufacturing AFFF.
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 and KFI) AFFF manufacturers.
Plaintiffs in the MDL Proceedings have named multiple defendants, including suppliers of chemicals and raw materials used to manufacture fluorosurfactants, fluorosurfactant manufacturers and AFFF manufacturers. The defendants in the MDL Proceedings moved for summary judgment on the government contractor defense, which potentially applies to AFFF sold to or used by the U.S. government.
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.
The U.S. 28 Table of Contents 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.
There can be no assurance that any such future exposure will not be material in any period. Other We have commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising out of the ordinary course of business.
All post-deconsolidation activity between the Company and KFI are reported as third-party transactions recorded within the Company's Consolidated Statements of Operations. Since the petition date, there were no material transactions between the Company and KFI. Other We have commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising out of the ordinary course of business.
Removed
Aqueous Film Forming Foam Litigation As of December 31, 2022, the Company and certain of its subsidiaries, including Kidde-Fenwal, Inc.
Added
The lawsuits identified above relate to Kidde Fire Fighting, Inc., which owned the National Foam business. Kidde Fire Fighting, Inc. was acquired by a UTC subsidiary in 2005 and merged into KFI in 2007.
Removed
UTC subsidiaries first entered the AFFF business with their acquisition of National Foam and Angus Fire in 2005 as part of the acquisition of KFI and Kidde Products Limited ("KPL"). In 2013, KFI and KPL divested the National Foam and Angus Fire businesses to a third party.
Added
There can be no assurance that any such future exposure will not be material in any period.
Removed
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.
Added
On May 14, 2023, KFI filed a voluntary petition with the United States Bankruptcy Court for the District of Delaware seeking relief under Chapter 11 of the Bankruptcy Code after the Company determined that it would not provide financial support to KFI going forward, other than ensuring KFI has access to services necessary for the effective operation of its business.
Removed
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.
Added
As a result, all litigation against KFI is automatically stayed. KFI filed an adversary complaint and motion in the Chapter 11 case seeking an order staying or enjoining all AFFF-related litigation against the Company, its other subsidiaries and RTX. That motion was resolved through an agreement that effectively stays the AFFF litigation against these parties.
Removed
The Company and its subsidiaries, including KFI, believe that they have meritorious defenses to the claims in the MDL Proceedings and the other AFFF lawsuits.
Added
KFI has also 29 Table of Contents indicated to the bankruptcy court that it intends to pursue insurance coverage for AFFF-related liabilities and contractual indemnification for AFFF-related liabilities from the third party to which KFI sold National Foam.
Removed
Based on its 2013 agreement for the sale of National Foam and Angus Fire, the Company and its subsidiaries, including KFI are pursuing indemnification against these claims from the purchaser and current owner of National Foam and Angus Fire. The Company and its subsidiaries, including KFI, are also pursuing insurance coverage for these claims.
Added
On November 21, 2023, the bankruptcy court ordered certain parties, including the Company, to participate in a mediation with respect to claims that might be asserted by and against it in the bankruptcy proceedings. The parties have engaged in several mediation sessions and anticipate further sessions in the future.
Added
Deconsolidation Due to Bankruptcy As of May 14, 2023, the Company no longer controlled KFI as their activities are subject to review and oversight by the bankruptcy court. Therefore, KFI was deconsolidated and their respective assets and liabilities were derecognized from the Company’s Consolidated Financial Statements.
Added
Upon deconsolidation, the Company determined the fair value of its retained interest in KFI to be zero and accounted for it prospectively using the cost method. As a result of these actions, the Company recognized a loss of $297 million in its Consolidated Statements of Operations within Other income/(expense), net .
Added
In addition, the deconsolidation resulted in an investing cash outflow of $134 million in the Company's Consolidated Statements of Cash Flows. In connection with the bankruptcy filing, KFI entered into several agreements with subsidiaries of the Company to ensure they have access to services necessary for the effective operation of their business.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

2 edited+0 added−0 removed0 unchanged
Biggest changeFinancial Statements and Supplementary Data 45 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 45 Consolidated Statement of Operations 48 Consolidated Statement of Comprehensive Income (Loss) 49 Consolidated Balance Sheet 50 Consolidated Statement of Changes in Equity 51 Consolidated Statement of Cash Flows 52 Notes to Consolidated Financial Statements 53
Biggest changeFinancial Statements and Supplementary Data 47 Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 47 Consolidated Statement of Operations 49 Consolidated Statement of Comprehensive Income (Loss) 50 Consolidated Balance Sheet 51 Consolidated Statement of Changes in Equity 52 Consolidated Statement of Cash Flows 53 Notes to Consolidated Financial Statements 54
Item 4. Mine Safety Disclosures 28 PART II 28 Item 5. Market for Registrant's Common Equity, Related Shareowner Matters and Issuer Purchases of Equity Securities 28 Item 6. [Reserved] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 30 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44 Item 8.
Item 4. Mine Safety Disclosures 30 PART II 31 Item 5. Market for Registrant's Common Equity, Related Shareowner Matters and Issuer Purchases of Equity Securities 31 Item 6. [Reserved] Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 32 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 45 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−1 removed4 unchanged
Biggest changeIn October 2022, our Board of Directors approved a $2 billion increase to the Company's existing $2.1 billion share repurchase program. Equity Compensation Plan Information See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Shareowner Matters, of this Annual Report on Form 10-K.
Biggest changeSince the initial authorization in February 2021, the Company's Board of Directors authorized the repurchase of up $4.1 billion of the Company's outstanding common stock. Equity Compensation Plan Information See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Shareowner Matters, of this Annual Report.
These figures assume that all dividends paid over the period were reinvested and that the starting value of each index and the investment in Carrier common stock was $100 on April 3, 2020.
These figures assume that all dividends paid over the period were reinvested and that the starting value of each index and the investment in our common stock was $100 on April 3, 2020.
Comparison of Cumulative Total Return The cumulative total returns on Carrier common stock and each index as of each April 3, 2020 through December 31, 2022 plotted in the above graph are as follows: Company / Index April 3, 2020 December 31, 2020 December 31, 2021 December 31, 2022 Carrier Global Corporation $ 100.00 $ 286.66 $ 416.55 $ 316.82 S&P 500 Index $ 100.00 $ 150.59 $ 193.82 $ 154.28 Dow Jones Industrial Index $ 100.00 $ 145.31 $ 175.75 $ 157.45 Issuer Purchases of Equity Securities The following table provides information about our purchases during the three months ended December 31, 2022 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.
Comparison of Cumulative Total Return The cumulative total returns on our common stock and each index as of each April 3, 2020 through December 31, 2023 plotted in the above graph are as follows: Company / Index April 3, 2020 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Carrier Global Corporation $ 100.00 $ 286.66 $ 416.55 $ 316.82 $ 441.24 S&P 500 Index $ 100.00 $ 150.59 $ 193.82 $ 154.28 $ 191.66 Dow Jones Industrial Index $ 100.00 $ 145.31 $ 175.75 $ 157.45 $ 179.03 31 Table of Contents Issuer Purchases of Equity Securities The following table provides information about our purchases during the three months ended December 31, 2023 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.
The following graph presents the cumulative total shareowner 28 Table of Contents return from the Distribution Date through December 31, 2022 for our common stock, as compared with the S&P 500 Index and the Dow Jones Industrial Index. Our common stock is a component of the S&P 500 Index.
The following graph presents the cumulative total shareowner return from the Distribution Date through December 31, 2023 for our common stock, as compared with the S&P 500 Index and the Dow Jones Industrial Index. Our common stock is a component of the S&P 500 Index.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREOWNER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is listed on the NYSE under the ticker symbol "CARR." As of December 31, 2022, the approximate number of common stock shareowners of record was 22,805.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREOWNER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is listed on the NYSE under the ticker symbol "CARR." As of December 31, 2023, the approximate number of common stock shareowners of record was 21,605.
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 October 1 - October 31 751 $36.34 751 $ 2,282 November 1 - November 30 642 $42.53 642 $ 2,255 December 1 - December 31 1,474 $43.46 1,474 $ 2,190 Total 2,867 $41.39 2,867 (1) Excludes broker commissions.
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) 2023 October 1 - October 31 — $— — $ 2,129 November 1 - November 30 — $— — $ 2,129 December 1 - December 31 — $— — $ 2,129 Total — $— — (1) Excludes broker commissions.
Removed
In July 2021, the Company's Board of Directors approved a $1.75 29 Table of Contents 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.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

85 edited+35 added−42 removed47 unchanged
Biggest changeAs a result, TCC is no longer accounted for under the equity method of accounting since the date of acquisition. In addition, productivity initiatives provided further benefits to operational profit. These amounts were partially offset by the higher costs of commodities and components used in our products as well as higher freight and logistics costs.
Biggest changeThese benefits more than offset the higher cost for commodities and components used in our products. Lower earnings from equity method investments impacted operational profit due to the increase in our ownership interest in TCC on August 1, 2022. As a result, TCC is no longer accounted for under the equity method of accounting since the date of acquisition.
An increase or decrease of 25 basis points in the expected return on plan assets would have decreased or increased 2022 pension expense by approximately $1 million. Contingent Liabilities We are involved in various litigation, claims and administrative proceedings, including those related to environmental (including asbestos) and legal matters.
An increase or decrease of 25 basis points in the expected return on plan assets would have decreased or increased 2023 pension expense by approximately $1 million. Contingent Liabilities We are involved in various litigation, claims and administrative proceedings, including those related to environmental (including asbestos) and legal matters.
In addition, to reach our goal to achieve carbon neutrality in our operations by 2030, we expect to incur capital expenditures for climate-related projects including upgrading our facilities, equipment and controls to optimize energy efficiency, transition our energy consumption from a dependency on fossil fuels to renewable energy and expanding the electrification of our fleet vehicles.
In addition, to reach our goal to achieve carbon 42 Table of Contents neutrality in our operations by 2030, we expect to incur capital expenditures for climate-related projects including upgrading our facilities, equipment and controls to optimize energy efficiency, transition our energy consumption from a dependency on fossil fuels to renewable energy and expanding the electrification of our fleet vehicles.
See Note 10 - Employee Benefit Plans, Note 17 - Income Taxes, and Note 23 - Commitments and Contingent Liabilities in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information. CRITICAL ACCOUNTING ESTIMATES Our financial statements are prepared in accordance with accounting principles generally accepted in the United States.
See Note 10 - Employee Benefit Plans, Note 17 - Income Taxes, and Note 23 - Commitments and Contingent Liabilities in the accompanying Notes to the Consolidated Financial Statements in this Annual Report for additional information. CRITICAL ACCOUNTING ESTIMATES Our financial statements are prepared in accordance with accounting principles generally accepted in the United States.
A performance obligation is a distinct good, service or a bundle of goods and services promised in a contract. Some of our contracts with customers contain a single performance obligation, while others contain multiple performance obligations most commonly when a contract spans multiple phases of a product life-cycle such as production, installation, maintenance and support.
A performance obligation is a distinct good, service or a bundle of goods and services promised in a contract. Some of our contracts with customers contain a single performance obligation, while others contain multiple performance obligations most commonly when a contract spans multiple phases of a product life-cycle such as production, installation, maintenance and 43 Table of Contents support.
To the extent that the ultimate results differ from our original or adjusted estimates, the effect will be recorded in the provision for income taxes in the period that the matter is finally resolved. 42 Table of Contents In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions.
To the extent that the ultimate results differ from our original or adjusted estimates, the effect will be recorded in the provision for income taxes in the period that the matter is finally resolved. In the ordinary course of business, there is inherent uncertainty in quantifying our income tax positions.
As described in Note 23 – Commitments and Contingent Liabilities in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K, contractual, regulatory and other matters, including asbestos claims, may arise in the ordinary course of business that subject us to claims or litigation.
As described in Note 23 – Commitments and Contingent Liabilities in the accompanying Notes to the Consolidated Financial Statements in this Annual Report, contractual, regulatory and other matters, including asbestos claims, may arise in the ordinary course of business that subject us to claims or litigation.
The decrease was driven by a lower effective tax rate on the $705 million non-cash gain resulting from the recognition of our previously held TCC equity investments at fair value upon acquisition of TCC, a lower effective tax rate on the $1.1 billion Chubb gain and $45 million of foreign tax credits generated and utilized in the current year.
The decrease was driven by a lower effective tax rate on the $705 million non-cash gain resulting from the recognition of our 36 Table of Contents previously held TCC equity investments at fair value upon acquisition of TCC, a lower effective tax rate on the $1.1 billion Chubb gain and $45 million of foreign tax credits generated and utilized in 2022.
Significant Events Acquisition of Toshiba Carrier Corporation On February 6, 2022, we entered into a binding agreement to acquire a majority ownership interest in TCC, a VRF and light commercial HVAC joint venture between Carrier and Toshiba Corporation.
Acquisition of Toshiba Carrier Corporation On February 6, 2022, we entered into a binding agreement to acquire a majority ownership interest in Toshiba Carrier Corporation ("TCC"), a variable refrigerant flow ("VRF") and light commercial HVAC joint venture between Carrier and Toshiba Corporation.
Primary activities include net income from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities. We define working capital as the assets and liabilities, other than cash, generated through our primary operating activities. The year-over-year decrease in net cash provided by operating activities was driven by higher working capital balances.
Primary activities include net income from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities. We define working capital as the assets and liabilities, other than cash, generated through our primary operating activities. The year-over-year increase in net cash provided by operating activities was primarily driven by a reduction in working capital balances.
Rapid changes in legislation, regulations and government policies, including with respect to regulations intended to combat climate change, affect our operations and business in the countries, regions and localities in which we operate and sell our products. We are committed to comply with these regulations and to environmental stewardship.
Summary of Other Sources and Uses of Cash Rapid changes in legislation, regulations and government policies, including with respect to regulations intended to combat climate change, affect our operations and business in the countries, regions and localities in which we operate and sell our products. We are committed to comply with these regulations and to environmental stewardship.
See the "Risk Factors" section in this Annual Report on Form 10-K for additional information. 43 Table of Contents Recent Accounting Pronouncements See Note 3 – Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for a discussion of recent accounting pronouncements and their effect on our financial statements.
See the "Risk Factors" section in this Annual Report for additional information. Recent Accounting Pronouncements See Note 3 – Summary of Significant Accounting Policies in the accompanying Notes to the Consolidated Financial Statements in this Annual Report for a discussion of recent accounting pronouncements and their effect on our financial statements.
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.
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; (3) the state of the economy; and (4) the restrictions under our debt agreements.
The following table summarizes the estimated sensitivity of our 2022 projected benefit obligation and net periodic pension (benefit) cost to a 25 basis point change in the discount rate: (In millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Projected benefit obligation $ (20) $ 21 Net periodic pension (benefit) cost $ (1) $ 1 Net periodic pension (benefit) cost is also sensitive to changes in the expected return on plan assets.
The following table summarizes the estimated sensitivity of our 2023 projected benefit obligation and net periodic pension (benefit) cost to a 25 basis point change in the discount rate: 44 Table of Contents (In millions) Increase in Discount Rate of 25 bps Decrease in Discount Rate of 25 bps Projected benefit obligation $ (14) $ 14 Net periodic pension (benefit) cost $ — $ — Net periodic pension (benefit) cost is also sensitive to changes in the expected return on plan assets.
Investments over which we do not exercise control, but have significant influence, are accounted for using the equity method of accounting. For the year ended December 31, 2022, Equity method investment net earnings were $262 million, a 5% increase compared with the same period of 2021.
Investments over which we do not exercise control, but have significant influence, are accounted for using the equity method of accounting. For the year ended December 31, 2023, Equity method investment net earnings were $211 million, a 19% decrease compared with the same period of 2022.
The components of the year-over-year change were as follows: 2022 Organic / Operational 8 % Foreign currency translation (3) % Acquisitions and divestitures, net (6) % Total % change (1) % Organic sales for the year ended December 31, 2022 increased by 8% compared with the same period of 2021.
The components of the year-over-year change were as follows: 2023 Organic / Operational 3 % Acquisitions and divestitures, net 5 % Total % change 8 % Organic sales for the year ended December 31, 2023 increased by 3% compared with the same period of 2022.
See Note 7 - Borrowings and Lines of Credit in the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K for additional information regarding the terms of our long-term debt obligations.
See Note 7 - Borrowings and Lines of Credit in the accompanying Notes to the Consolidated Financial Statements for additional information regarding the terms of our long-term debt obligations.
The components were as follows: For the Year Ended December 31, (In millions) 2022 2021 Non-service pension benefit (expense) $ (4) $ 61 Interest expense (302) (319) Interest income 83 13 Interest (expense) income, net (219) (306) Non-operating income (expense), net $ (223) $ (245) Non-operating income (expense), 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.
The components were as follows: For the Year Ended December 31, (In millions) 2023 2022 Non-service pension benefit (expense) $ (1) $ (4) Interest expense (362) (302) Interest income 151 83 Interest (expense) income, net (211) (219) Non-operating income (expense), net $ (212) $ (223) Non-operating income (expense), 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.
Discussion of Cash Flows For the Years Ended December 31, (In millions) 2022 2021 Cash provided by (used in): Operating activities $ 1,743 $ 2,237 Investing activities 1,745 (692) Financing activities (2,931) (1,562) Effect of foreign exchange rate changes on cash and cash equivalents (56) (16) Net increase (decrease) in cash and cash equivalents and restricted cash $ 501 $ (33) Cash flows from operating activities primarily represent inflows and outflows associated with our operations.
Discussion of Cash Flows For the Years Ended December 31, (In millions) 2023 2022 Cash provided by (used in): Operating activities $ 2,607 $ 1,743 Investing activities (660) 1,745 Financing activities 4,612 (2,931) Effect of foreign exchange rate changes on cash and cash equivalents 88 (56) Net increase (decrease) in cash and cash equivalents and restricted cash $ 6,647 $ 501 Cash flows from operating activities primarily represent inflows and outflows associated with our operations.
Interest expense is affected by the amount of debt outstanding and the interest rates on that debt. For the year ended December 31, 2022, interest expense was $302 million, a 5% decrease compared with the same period of 2021.
Interest expense is affected by the amount of debt outstanding and the interest rates on that debt. For the year ended December 31, 2023, interest expense was $362 million, a 20% increase compared with the same period of 2022.
The components were as follows: For the Year Ended December 31, (In millions) 2022 2021 Selling, general and administrative $ (2,512) $ (3,120) Research and development (539) (503) Equity method investment net earnings 262 249 Other income (expense), net 1,840 39 Operating expenses $ (949) $ (3,335) Percentage of net sales 4.6 % 16.2 % For the year ended December 31, 2022, Selling, general and administrative expenses were $2.5 billion, a 19% decrease compared with the same period of 2021.
The components were as follows: For the Year Ended December 31, (In millions) 2023 2022 Selling, general and administrative $ (3,297) $ (2,512) Research and development (617) (539) Equity method investment net earnings 211 262 Other income (expense), net (384) 1,840 Operating expenses $ (4,087) $ (949) Percentage of net sales 18.5 % 4.6 % For the year ended December 31, 2023, Selling, general and administrative expenses were $3.3 billion, a 31% increase compared with the same period of 2022.
Income Taxes 2022 2021 Effective tax rate 16.5 % 29.1 % The effective tax rate for the year ended December 31, 2022 was lower than our statutory U.S. federal income tax rate.
Income Taxes 2023 2022 Effective tax rate 30.9 % 16.5 % The effective tax rate for the year ended December 31, 2023 was higher than our statutory U.S. federal income tax rate.
Summary performance for each of our segments is as follows: Net Sales Operating Profit Operating Margin (In millions) 2022 2021 2022 2021 2022 2021 HVAC $ 13,408 $ 11,390 $ 2,610 $ 1,738 19.5 % 15.3 % Refrigeration 3,883 4,127 483 476 12.4 % 11.5 % Fire & Security 3,570 5,515 1,630 662 45.7 % 12.0 % Total segment $ 20,861 $ 21,032 $ 4,723 $ 2,876 22.6 % 13.7 % HVAC Segment For the year ended December 31, 2022, Net sales in our HVAC segment was $13.4 billion, an 18% increase compared with the same period of 2021.
Summary performance for each of our segments is as follows: Net Sales Operating Profit Operating Margin (In millions) 2023 2022 2023 2022 2023 2022 HVAC $ 15,139 $ 13,408 $ 2,275 $ 2,610 15.0 % 19.5 % Refrigeration 3,818 3,883 428 483 11.2 % 12.4 % Fire & Security 3,633 3,570 209 1,630 5.8 % 45.7 % Total segment $ 22,590 $ 20,861 $ 2,912 $ 4,723 12.9 % 22.6 % HVAC Segment For the year ended December 31, 2023, Net sales in our HVAC segment was $15.1 billion, a 13% increase compared with the same period of 2022.
The components of the year-over-year change were as follows: Net sales Organic / Operational 5 % Foreign currency translation (2) % Acquisitions and divestitures, net (38) % Total % change (35) % The organic increase in Net sales of 5% was primarily driven by pricing improvements compared with the prior year.
The components of the year-over-year change were as follows: Net sales Organic / Operational 6 % Foreign currency translation (1) % KFI deconsolidation (3) % Total % change 2 % The organic increase in Net sales of 6% was primarily driven by pricing improvements and volume growth compared with the prior year.
Fire & Security Segment For the year ended December 31, 2022, Net sales in our Fire & Security segment was $3.6 billion, a 35% decrease compared with the same period of 2021.
Refrigeration Segment For the year ended December 31, 2023, Net sales in our Refrigeration segment was $3.8 billion, a 2% decrease compared with the same period of 2022.
Operating Expenses For the year ended December 31, 2022, operating expenses, including Equity method investment net earnings , was $0.9 billion, a 72% decrease compared with the same period of 2021.
Operating Expenses For the year ended December 31, 2023, operating expenses, including Equity method investment net earnings , was $4.1 billion, a 331% increase compared with the same period of 2022.
The transaction added 1% to Net sales during the year ended December 31, 2022 and is included in Acquisitions and divestitures, net. For the year ended December 31, 2022, Operating profit in our HVAC segment was $2.6 billion, a 50% increase compared with the same period of 2021.
The transaction added 9% to Net sales for the year ended December 31, 2023 and is included in Acquisitions and divestitures, net. 37 Table of Contents For the year ended December 31, 2023, Operating profit in our HVAC segment was $2.3 billion, a 13% decrease compared with the same period of 2022.
As a result, TCC is no longer accounted for under the equity method of accounting since the date of acquisition. 33 Table of Contents Other income (expense), net primarily includes the impact of gains and losses related to the sale of 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.
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 35 Table of Contents entity's functional currency and hedging-related activities.
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.
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.
The components of the year-over-year change were as follows: Net sales Organic / Operational 12 % Foreign currency translation (2) % Acquisitions and divestitures, net 8 % Total % change 18 % The organic increase in Net sales of 12% was driven by continued strong results across each of the segment's businesses.
The components of the year-over-year change were as follows: Net sales Organic / Operational 5 % Foreign currency translation (1) % Acquisitions and divestitures, net 9 % Total % change 13 % The organic increase in Net sales of 5% was driven by continued strong results in the segment.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS OVERVIEW Business Summary Carrier Global Corporation is the leading global provider of healthy, safe, sustainable and intelligent building and cold chain solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to our customers.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS BUSINESS OVERVIEW Business Summary Carrier Global Corporation ("we" or "our") is a global leader in intelligent climate and energy solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to our customers.
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.
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. We believe that our available cash and operating cash flows will be sufficient to meet our future operating cash needs.
During the year ended December 31, 2022, net cash provided by investing activities was $1.7 billion. The primary driver of the inflow related to the net proceeds from the Chubb Sale.
These amounts totaled $84 million, net of cash acquired and were partially offset by the proceeds from the sale of a business during the period. During the year ended December 31, 2022, net cash provided by investing activities was $1.7 billion. The primary driver of the inflow related to the net proceeds from the Chubb Sale.
These amounts were partially offset by a favorable tax adjustment of $70 million due to foreign tax credits generated and expected to be utilized in the current year and $21 million resulting from the re-organization of a German subsidiary. 34 Table of Contents Segment Review We conduct our operations through three reportable 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.
Segment Review We conduct our operations through three reportable 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.
The components of the year-over-year change were as follows: Net sales Organic / Operational — % Foreign currency translation (6) % Total % change (6) % Organic Net sales were flat compared to the prior year as each of the segment's businesses experienced challenges in certain end markets during the second half of the year.
The components of the year-over-year change were as follows: Net sales Organic / Operational (2) % Foreign currency translation 1 % Acquisitions and divestitures, net (1) % Total % change (2) % Organic Net sales decreased 2% compared to the prior year as the segment experienced challenges in certain end-markets during the year.
The components were as follows: (In millions) 2022 2021 Net sales $ 20,421 $ 20,613 Cost of products and services sold (14,957) (14,633) Gross margin $ 5,464 $ 5,980 Percentage of net sales 26.8 % 29.0 % Gross margin decreased by $516 million compared with the year ended December 31, 2021.
The components were as follows: (In millions) 2023 2022 Net sales $ 22,098 $ 20,421 Cost of products and services sold (15,715) (14,957) Gross margin $ 6,383 $ 5,464 Percentage of net sales 28.9 % 26.8 % Gross margin increased by $919 million compared with the year ended December 31, 2022.
Sale of Chubb Fire & Security Business On July 26, 2021, we entered into a stock purchase agreement to sell our Chubb business to APi. Chubb, which was reported within our 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.
Chubb, which was reported within our 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.
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 December 31, 2022 , we had cash and cash equivalents of $3.5 billion, of which approximately 42% was held by our foreign subsidiaries.
In addition, we have access to other sources of capital to finance our strategic initiatives and fund growth. 39 Table of Contents As of December 31, 2023 , we had Cash and cash equivalents of $10.0 billion, of which approximately 48% was held by our foreign subsidiaries.
The following table presents our credit ratings and outlook as of December 31, 2022: Rating Agency Long-term Rating (1) Short-term Rating Outlook (2) S&P BBB A2 Positive Moody's Baa3 P3 Stable Fitch Ratings 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.
Scheduled maturities of long-term debt, excluding amortization of discount, are as follows: (In millions) 2024 $ 51 2025 $ 3,053 2026 $ 4 2027 $ 1,245 2028 $ 832 Thereafter $ 9,191 The following table presents our credit ratings and outlook as of December 31, 2023: Rating Agency Long-term Rating (1) Short-term Rating Outlook (2) S&P BBB A2 Positive Moody's Baa3 P3 Positive Fitch Ratings 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.
Primary activities include debt transactions, paying dividends to shareowners and the repurchase of our common stock. During the year ended December 31, 2022 net cash used in financing activities was $2.9 billion. The primary driver of the outflow related to the payment of $1.4 billion to repurchase shares of our common stock.
Primary activities include debt transactions, paying dividends to shareowners and the repurchase of our common stock. During the year ended December 31, 2023 net cash provided by financing activities was $4.6 billion. The primary driver of the inflow related to the issuance of the USD Notes and the Euro Notes.
Our portfolio includes industry-leading brands such as Carrier, Toshiba, 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 portfolio includes industry-leading brands such as Carrier, Toshiba, Automated Logic, Carrier Transicold, Kidde, Edwards and LenelS2 that offer innovative heating, ventilating and air conditioning ("HVAC"), refrigeration, fire, security and building automation technologies to help make the world safer and more comfortable.
On January 3, 2022, we completed the Chubb Sale for net proceeds of $2.9 billion and recognized a gain on the sale of $1.1 billion during the year ended December 31, 2022. 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.
On January 3, 2022, we completed the sale of Chubb (the "Chubb Sale") for net proceeds of $2.9 billion and recognized a gain on the sale of $1.1 billion during the year ended December 31, 2022.
The results of TCC's operations are included in our consolidated results since the acquisition date of August 1, 2022. Prior to the acquisition, we accounted for our minority ownership in TCC under the equity method of accounting and recognized our portion of earnings within Equity method investment in net earnings as part of operating expenses.
Prior to the acquisition, we previously accounted for our minority ownership in TCC under the equity method of accounting and recognized our portion of earnings within Equity method investment in net earnings as part of operating expenses. As a result, prior period results may not be comparable to the current period.
The primary driver of the outflow related to the acquisition of several businesses and a minority-owned business, which totaled $366 million, net of cash acquired and $344 million of capital expenditures. Cash flows from financing activities primarily represent inflows and outflows associated with equity or borrowings.
This amount was partially offset by the acquisition of TCC and several other businesses and minority-owned businesses, which totaled $506 million, net of cash acquired and $353 million of capital expenditures. Cash flows from financing activities primarily represent inflows and outflows associated with equity or borrowings.
The components of the year-over-year change were as follows: Operating profit Organic / Operational 10 % Foreign currency translation (1) % Acquisitions and divestitures, net (1) % Restructuring 1 % Other 41 % Total % change 50 % The operational profit increase of 10% was primarily attributable to pricing improvements compared with the prior year.
The components of the year-over-year change were as follows: Operating profit Organic / Operational 12 % Acquisitions and divestitures, net 6 % Amortization of acquired intangibles (4) % Restructuring (1) % Other (26) % Total % change (13) % The operational profit increase of 12% was primarily attributable to pricing improvements and ongoing customer demand in certain end-markets compared with the prior year.
The components of the year-over-year change were as follows: Operating profit Organic / Operational 5 % Foreign currency translation (7) % Restructuring 3 % Other 1 % Total % change 2 % The increase in operational profit of 5% was primarily attributable to pricing improvements compared with the prior year.
The components of the year-over-year change were as follows: Operating profit Organic / Operational (14) % Foreign currency translation 1 % Restructuring (3) % Other 5 % Total % change (11) % 38 Table of Contents The decrease in operational profit of 14% was primarily driven by lower volume in certain end-markets compared with the prior year.
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 38 Table of Contents expected to approximate $249 million per year, reflecting an approximate weighted-average interest rate of 2.85%. Any borrowings from the Revolving Credit Facility are subject to variable interest rates.
Interest payments related to long-term Notes are expected to approximate $507 million per year, reflecting an approximate weighted-average interest rate of 3.8%. Any borrowings from the Revolving Credit Facility are subject to variable interest rates.
A detailed discussion of the year ended December 31, 2021 compared with December 31, 2020 is not included herein and can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the Company's 2021 Annual Report on Form 10-K, filed with the SEC on February 8, 2022, under the heading "Results of Operations," which is incorporated herein by reference. 31 Table of Contents Year Ended December 31, 2022 Compared with Year Ended December 31, 2021 As a result of the Chubb Sale, we do not have any remaining ownership interest in Chubb and no longer consolidate Chubb in our financial statements as of January 3, 2022.
A detailed discussion of the year ended December 31, 2022 compared with December 31, 2021 is not included herein and can be found in the Management's Discussion and Analysis of Financial Condition and Results of Operations section in the Company's 2022 Annual Report, filed with the SEC on February 7, 2023, under the heading "Results of Operations," which is incorporated herein by reference. 33 Table of Contents Year Ended December 31, 2023 Compared with Year Ended December 31, 2022 The results of TCC's operations are included in our consolidated results since the acquisition date of August 1, 2022.
Repurchases occur in the open market or through one or more other public or private transactions pursuant to plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act.
Both transactions are expected to close 2024. Share Repurchase Program We may purchase our outstanding common stock from time to time subject to market conditions and at our discretion. Repurchases occur in the open market or through one or more other public or private transactions pursuant to plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act.
In addition, we maintain our $2.0 billion revolving credit agreement with various banks (the "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 the unused commitments. Borrowings under the Revolving Credit Facility are available in U.S.
In addition, we maintain a $2.0 billion revolving credit agreement with various banks (the "Revolving Credit Facility") that matures in May 2028 which supports our commercial paper borrowing program and can be used for general corporate purposes. A ratings-based commitment fee is charged on unused commitments.
Ongoing customer demand and an increase in safety stock led to higher inventory balances. In addition, higher account receivable balances 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.
Prior year working capital balances were higher due to higher safety stock and supply chain constraints. 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.
Results for Commercial refrigeration were flat compared with the prior year, primarily driven by continued supply chain constraints and lower volumes in Europe as economic conditions and inflationary cost pressures impacted end-market demand. In addition, ongoing growth in Asia was more than offset by fourth quarter COVID-19 impacts. These impacts were offset by pricing improvements.
Results for Commercial refrigeration decreased (down 14%) compared with the prior year, primarily driven by lower volumes in Europe as economic conditions and inflationary cost pressures impacted end-market demand. In addition, Asia results were impacted by reduced end-market demand in China.
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.
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.
The following represents our consolidated net sales and operating results: (In millions) 2022 2021 Period Change % Change Net sales $ 20,421 $ 20,613 $ (192) (1) % Cost of products and services sold (14,957) (14,633) (324) 2 % Gross margin 5,464 5,980 (516) (9) % Operating expenses (949) (3,335) 2,386 (72) % Operating profit 4,515 2,645 1,870 71 % Non-operating income (expense), net (223) (245) 22 (9) % Income from operations before income taxes 4,292 2,400 1,892 79 % Income tax expense (708) (699) (9) 1 % Net income from operations 3,584 1,701 1,883 111 % Less: Non-controlling interest in subsidiaries' earnings from operations 50 37 13 35 % Net income attributable to common shareowners $ 3,534 $ 1,664 $ 1,870 112 % Net Sales For the year ended December 31, 2022, Net sales was $20.4 billion, a 1% decrease compared with the same period of 2021.
The following represents our consolidated net sales and operating results: (In millions) 2023 2022 Period Change % Change Net sales $ 22,098 $ 20,421 $ 1,677 8 % Cost of products and services sold (15,715) (14,957) (758) 5 % Gross margin 6,383 5,464 919 17 % Operating expenses (4,087) (949) (3,138) 331 % Operating profit 2,296 4,515 (2,219) (49) % Non-operating income (expense), net (212) (223) 11 (5) % Income from operations before income taxes 2,084 4,292 (2,208) (51) % Income tax expense (644) (708) 64 (9) % Net income from operations 1,440 3,584 (2,144) (60) % Less: Non-controlling interest in subsidiaries' earnings from operations 91 50 41 82 % Net income attributable to common shareowners $ 1,349 $ 3,534 $ (2,185) (62) % Net Sales For the year ended December 31, 2023, Net sales was $22.1 billion, an 8% increase compared with the same period of 2022.
The organic increase was primarily driven by our HVAC segment due to pricing improvements in our North America residential and light commercial business and improved global end-markets in our Commercial HVAC business. Refrigeration results were flat as each of the segment's businesses experienced challenges in certain end markets during the second half of the year.
The organic increase was primarily driven by our HVAC segment due to improved global end-markets in our Commercial HVAC business and pricing improvements in our North America residential and light commercial business. In addition, our Fire & Security segment benefited from price improvements and volume growth in each region.
In addition, we completed the Chubb Sale and recognized a net gain on the sale of $1.1 billion during the twelve months ended December 31, 2022. Non-Operating Income (Expense), net For the year ended December 31, 2022 , Non-operating income (expense), net was $223 million, a 9% decrease co mpared with the same period of 2021.
Non-Operating Income (Expense), net For the year ended December 31, 2023 , Non-operating income (expense), net was $212 million, a 5% decrease co mpared with the same period of 2022.
In addition, amounts reported in Other include a $22 million charge resulting from a litigation matter recognized during the year ended December 31, 2022. Refrigeration Segment For the year ended December 31, 2022, Net sales in our Refrigeration segment was $3.9 billion, a 6% decrease compared with the same period of 2021.
Amounts reported in Other represent a $24 million gain on the sale of a business within Transport refrigeration. Fire & Security Segment For the year ended December 31, 2023, Net sales in our Fire & Security segment was $3.6 billion, a 2% increase compared with the same period of 2022.
In connection with the TCC acquisition, the carrying value of our previously held TCC equity investments were recognized at fair value at the date of acquisition. As a result, we recognized a $705 million non-cash gain associated with the increase in our ownership interest.
In addition, we recognized a loss of $297 million on the deconsolidation of KFI due to its Chapter 11 filing. In connection with the TCC acquisition, the carrying value of our previously held TCC equity investments were recognized at fair value at the date of acquisition.
On December 7, 2022, the Board of Directors declared a dividend of $0.185 per share of common stock which represents a 23% increase over the prior quarterly dividend. It is payable on February 10, 2023 to shareowners of record at the close of business on December 22, 2022.
On December 6, 2023, the Board of Directors declared a dividend of $0.19 per share payable on February 9, 2024 to shareowners of record at the close of business on December 21, 2023.
For each test, we relied on our estimates of future cash flows, long-term growth rates, discount rates and income tax rates and explicitly addressed factors such as timing, growth and margins with due consideration given to forecasting, market and geographic risk. 41 Table of Contents For the remaining goodwill and indefinite-lived intangible assets tests, we elected to perform qualitative step zero assessments to determine if it was more likely than not that the fair values of our reporting units and indefinite-lived intangible assets were below carrying value.
For our 2023 goodwill and indefinite-lived intangible assets impairment tests, we elected to perform qualitative step zero assessments to determine if it was more likely than not that the fair values of our reporting units and indefinite-lived intangible assets were below carrying value.
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.
During the twelve months ended December 31, 2022, we completed the Chubb Sale and recognized a net gain on the 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 addition, we settled our tender offers for $1.15 billion and paid $509 million in dividends to our common shareowners. During the year ended December 31, 2021 net cash used in financing activities was $1.6 billion.
The inflow was partially offset by the payment of $620 million in dividends to our common shareowners and deferred financing costs. In addition, we paid $62 million to repurchase shares of our common stock. During the year ended December 31, 2022 net cash used in financing activities was $2.9 billion.
On August 1, 2022, the Commercial HVAC business acquired a majority ownership interest in TCC, a VRF and light commercial HVAC joint venture between Carrier and Toshiba Corporation. The results of TCC have been included in our Consolidated Financial Statements since the date of acquisition.
Results in our Global Comfort Solutions business (down 2%) were primarily driven by lower demand in certain European end- markets. On August 1, 2022, we acquired a majority ownership interest in TCC, a VRF and light commercial HVAC joint venture between Carrier and Toshiba Corporation.
In addition, favorable productivity initiatives and lower selling, general and administrative costs further benefited operational profit. These amounts were partially offset by the higher costs of commodities and components used in our products and higher freight and logistic costs.
In addition, the higher costs of commodities and components used in our products further impacted segment results. These amounts were partially offset by pricing improvements and favorable productivity initiatives. I nflationary cost pressures have begun to moderate but continue to impact our operating profit.
This discussion should be read in conjunction with Item 8, the Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements in this Annual Report on Form 10-K.
RESULTS OF OPERATIONS This discussion summarizes the significant factors affecting our consolidated results of operations, financial condition and liquidity for the year ended December 31, 2023 compared with December 31, 2022 . This discussion should be read in conjunction with Item 8, the Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements in this Annual Report.
Increased sales in our North America residential and light commercial business (up 14%) were primarily driven by pricing improvements and end market demand. These amounts were partially offset by volume reductions in certain end markets. Increased sales in our Commercial HVAC business (up 9%) benefited from pricing improvements and ongoing customer demand in our end-markets.
Higher sales in our North America residential and light commercial business (up 1%) were primarily driven by pricing improvements and improved mix associated with regulatory changes effective as of the beginning of 2023. These amounts were partially offset by lower volume in North America residential end-markets.
For the year ended December 31, 2022, Operating profit in our Fire & Security segment was $1.6 billion, a 146% increase compared with the same period of 2021.
The segment was impacted by ongoing supply chain constraints for certain components used in our products. For the year ended December 31, 2023, Operating profit in our Fire & Security segment was $209 million, an 87% decrease compared with the same period of 2022.
As of December 31, 2022 and 2021, the amount of such restricted cash was $7 million and $39 million, respectively. We maintain a $2.0 billion unsecured, unsubordinated commercial paper program which we can use for general corporate purposes, including working capital and potential acquisitions.
In addition, proceeds from the Revolver became available upon closing. 40 Table of Contents Borrowings and Lines of Credit We maintain a $2.0 billion unsecured, unsubordinated commercial paper program which we can use for general corporate purposes, including the funding of working capital and potential acquisitions.
If impairment indicators are present after performing step zero, we would perform a quantitative impairment analysis to estimate fair value. For our 2022 impairment test, we elected to perform a quantitative test on our Commercial HVAC reporting unit prior to the TCC acquisition and the subsequent creation of a separate Global Comfort Solutions reporting unit.
If impairment indicators are present after performing step zero, we would perform a quantitative impairment analysis to estimate fair value.
The following table contains several key measures of our financial condition and liquidity: As of December 31, (In millions) 2022 2021 Cash and cash equivalents $ 3,520 $ 2,987 Total debt $ 8,842 $ 9,696 Net debt (total debt less cash and cash equivalents) $ 5,322 $ 6,709 Total equity $ 8,076 $ 7,094 Total capitalization (total debt plus total equity) $ 16,918 $ 16,790 Net capitalization (total debt plus total equity less cash and cash equivalents) $ 13,398 $ 13,803 Total debt to total capitalization 52 % 58 % Net debt to net capitalization 40 % 49 % Borrowings and Lines of Credit Our short-term obligations primarily consist of current maturities of long-term debt.
The following table contains several key measures of our financial condition and liquidity: As of December 31, (In millions) 2023 2022 Cash and cash equivalents $ 10,015 $ 3,520 Total debt $ 14,293 $ 8,842 Net debt (total debt less cash and cash equivalents) $ 4,278 $ 5,322 Total equity $ 9,005 $ 8,076 Total capitalization (total debt plus total equity) $ 23,298 $ 16,918 Net capitalization (total debt plus total equity less cash and cash equivalents) $ 13,283 $ 13,398 Total debt to total capitalization 61 % 52 % Net debt to net capitalization 32 % 40 % Acquisition of Viessmann On April 25, 2023, we announced that we entered into an Agreement to acquire the VCS Business.
The increase was driven by a net tax charge of $157 million primarily relating to the re-organization and disentanglement of certain Chubb subsidiaries executed in advance of the planned divestiture of Chubb and a $43 million deferred tax charge as a result of the tax rate increase from 19% to 25% in the United Kingdom.
The increase was primarily driven by a net tax charge of $90 million relating to the re-organization and disentanglement of CCR and certain Fire & Security industrial businesses in advance of the planned divestitures and a deferred tax charge of $65 million related to basis differences in certain companies presented as held-for-sale.
The components of the year-over-year change were as follows: Operating profit Organic / Operational (5) % Foreign currency translation (2) % Acquisitions and divestitures, net (15) % Restructuring 2 % Other 166 % Total % change 146 % The operational profit decrease of 5% was primarily attributable to the higher costs of commodities and components used in our products and higher freight and logistics costs.
The components of the year-over-year change were as follows: Operating profit Organic / Operational 2 % Acquisitions and divestitures, net (1) % Restructuring (1) % KFI deconsolidation (18) % Chubb gain (68) % Other (1) % Total % change (87) % The operational profit increase of 2% was primarily driven by pricing improvements, volume growth and lower freight and logistics costs compared to 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 current economic conditions and reduced end-market demand. Global industrial sales also benefited segment results with pricing improvements and strong demand.
Sales grew in all three regions including strong commercial results in the Americas. Growth in Europe moderated as economic conditions and inflationary cost pressures impacted end-market demand. Results in Asia normalized after a strong COVID-19 related recovery. Global industrial sales benefited segment results due to pricing improvements and strong demand.
Refer to "Segment Review" below for a discussion of Net sales by segment. 32 Table of Contents Gross Margin For the year ended December 31, 2022, gross margin was $5.5 billion, a 9% decrease compared with the same period of 2021.
The deconsolidation had a 1% impact on Net sales during the year ended December 31, 2023 and is included in Acquisitions and divestitures, net. 34 Table of Contents Gross Margin For the year ended December 31, 2023, gross margin was $6.4 billion, a 17% increase compared with the same period of 2022.
Amounts reported during the year ended December 31, 2021 include $42 million of transaction costs associated with the divestiture. Amounts reported in Other represent the net gain on the Chubb Sale of $1.1 billion.
As a result, we recognized a $705 million non-cash gain associated with the increase in our ownership interest during the year ended December 31, 2022. In addition, we completed the Chubb Sale and recognized a net gain on the sale of $1.1 billion.
Coupled with our focus on growth, innovation and operational efficiency, we expect to drive long-term future growth and increased value for our shareowners.
Coupled with our focus on growth, innovation and operational efficiency, we expect to drive long-term future growth and increased value for our shareowners. 32 Table of Contents Significant Events Planned Portfolio Transformation On April 25, 2023, we announced that we entered into a Share Purchase Agreement (the “Agreement”) to acquire the climate solutions business (the "VCS Business") of Viessmann Group GmbH & Co.
This amount was partially offset by the acquisition of TCC and several other businesses and minority-owned businesses, which totaled $506 million, net of cash acquired and $353 million of capital expenditures. During the year ended December 31, 2021, net cash used in investing activities was $692 million.
During the year ended December 31, 2023, net cash used in investing activities was $660 million. The primary drivers of the outflow related to $469 million of capital expenditures and $134 million related to the deconsolidation of KFI. In addition, we settled working capital and other transaction-related items associated with the acquisition of TCC and invested in several businesses.
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 Consolidated Financial Statements since the date of acquisition.
The results of TCC have been included in our Consolidated Financial Statements since the date of acquisition.
These amounts were partially offset by incremental selling, general and administrative expenses associated with TCC since the date of acquisition and $31 million of acquisition-related costs. The year ended December 31, 2021 included $43 million of costs related to the Chubb Sale and $20 million of costs related to the Separation.
The increase is primarily due to higher compensation, commissions and other employee-related costs during the current period. In addition, incremental selling, general and administrative expenses associated with TCC further contributed to the increase. The current year also included $220 million of acquisition and divestiture-related costs compared with $31 million during the year ended December 31, 2022.
Since inception, we repurchased 42.1 million shares of our common stock for an aggregate purchase price of $1.9 billion. As of December 31, 2022, we have approximately $2.2 billion remaining under the current authorization. Dividends We paid dividends on our common stock of $0.60 per share during the year ended December 31, 2022, totaling $509 million.
Since the initial authorization in February 2021, the Company's Board of Directors authorized the repurchase of up to $4.1 billion of our outstanding common stock. As of December 31, 2023, the Company repurchased 43.5 million shares of common stock for an aggregate purchase price of $2.0 billion, which includes shares repurchased under an accelerated share repurchase agreement.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+3 added−0 removed4 unchanged
Biggest changeIn connection with the TCC acquisition, we entered into cross currency swaps and the Japanese Term Loan Facility to fund the Yen-denominated purchase price. We designated the cross currency swaps and the Japanese Term Loan Facility as a hedge of our investment in certain subsidiaries whose functional currency is the Japanese Yen in order to manage foreign currency translation risk.
Biggest changeWe designated the cross currency swaps and the Japanese Term Loan Facility as a hedge of our investment in certain subsidiaries whose functional currency is the Japanese Yen in order to manage foreign currency translation risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk and Risk Management We are exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices which could impact our results of operations and financial condition. There has been no significant change in our exposure to market risk for the year ended December 31, 2022.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk and Risk Management We are exposed to fluctuations in foreign currency exchange rates, interest rates and commodity prices which could impact our results of operations and financial condition. There has been no significant change in our exposure to market risk for the year ended December 31, 2023.
In addition, we are exposed to fuel costs to ship our products and materials. We do not have commodity hedge contracts in place at December 31, 2022. Interest Rate Exposures. Substantially all of our long-term debt has fixed interest rates.
In addition, we are exposed to fuel costs to ship our products and materials. We do not have commodity hedge contracts in place at December 31, 2023. Interest Rate Exposures. Substantially all of our long-term debt has fixed interest rates.
As a result, any fluctuation in market interest rates is not expected to have a material effect on our results of operations. 44 Table of Contents
As a result, any fluctuation in market interest rates is not expected to have a material effect on our results of operations. 46 Table of Contents
Added
In connection with the acquisition of the VCS Business, 80% of the Euro-denominated purchase price was paid in cash to Viessmann on January 2, 2024. As a result, the purchase price was exposed to exchange rate movements in relation to our reporting currency, the U.S. dollar.
Added
To mitigate the foreign currency risk of the cash outflow, we entered into window forward contracts.
Added
Changes in the fair value of the window forward contracts are reported in Other income (expense), net in the accompanying Consolidated Statement of Operations. 45 Table of Contents In connection with the TCC acquisition, we entered into cross currency swaps and the Japanese Term Loan Facility to fund the Yen-denominated purchase price.

Other CARR 10-K year-over-year comparisons