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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
 ____________________________________ 
FORM 10-Q
____________________________________ 
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020March 31, 2021
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-39220
____________________________________ 
CARRIER GLOBAL CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware 83-4051582
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
13995 Pasteur Boulevard, Palm Beach Gardens, Florida 33418
(Address of principal executive offices, including zip code)
(561) 365-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)CARRNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒.    No   ☐.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒.    No  ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☐
Accelerated filer☐
Non-accelerated filer☒Smaller reporting company☐
Emerging growth company☐

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐.    No  ☒.
At June 30, 2020,As of April 21, 2021, there were 866,164,968868,998,500 shares of Common Stock outstanding.
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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Three and Six Months Ended June 30, 2020March 31, 2021

Page
3
Item 1. Financial Statements:
3
Condensed ConsolidatedConsolidated Statement of Operations (Unaudited)
3
Condensed Consolidated Statement of Comprehensive Income Comprehensive Income(Loss) (Unaudited)
4
Condensed Consolidated Balance Sheet (Unaudited)
5
Condensed Consolidated Statement of Changes in Equity (Unaudited)
6
Condensed ConsolidatedConsolidated Statement of Cash Flows (Unaudited)
7
Notes to Condensed ConsolidatedConsolidated Financial Statements (Unaudited)
8
Report of Independent Registered Public Accounting Firm
2923
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
3024
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4633
Item 4. Controls and Procedures
4633
4835
Item 1. Legal Proceedings
4835
Item 1A. Risk Factors
4835
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
36
Item 5. Other Information
49
Item 6. Exhibits
5037
5338

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









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PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements

CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in millions)2020201920202019
Net sales
Product sales (Note 5)$3,275  $4,139  $6,422  $7,705  
Service sales697  823  1,438  1,580  
3,972  4,962  7,860  9,285  
Costs and expenses
Cost of products sold (Note 5)2,343  2,906  4,580  5,471  
Cost of services sold488  582  1,017  1,114  
Research and development94  103  192  200  
Selling, general and administrative637  680  1,329  1,364  
3,562  4,271  7,118  8,149  
Equity method investment net earnings57  80  86  120  
Other (expense) income, net(25) 34  (71) 49  
Operating profit442  805  757  1,305  
Non-service pension benefit14  38  31  77  
Interest (expense) income, net(81) 16  (118) 20  
Income from operations before income taxes375  859  670  1,402  
Income tax expense106  65  299  205  
Net income from operations269  794  371  1,197  
Less: Non-controlling interest in subsidiaries' earnings from operations8  10  14  13  
Net income attributable to common shareowners$261  $784  $357  $1,184  
Earnings per share (Note 3)
Basic$0.30  $0.91  $0.41  $1.37  
Diluted$0.30  $0.91  $0.41  $1.37  
Weighted average number of shares outstanding (Note 3)
Basic866.2  866.2  866.2  866.2  
Diluted870.9  866.2  870.9  866.2  


For the Three Months Ended March 31,
(In millions, except per share amounts)20212020
Net sales
Product sales$3,864 $3,147 
Service sales835 741 
Total Net sales4,699 3,888 
Costs and expenses
Cost of products sold(2,724)(2,237)
Cost of services sold(581)(529)
Research and development(121)(98)
Selling, general and administrative(743)(692)
Total Costs and expenses(4,169)(3,556)
Equity method investment net earnings38 29 
Other income (expense), net3 (46)
Operating profit571 315 
Non-service pension (expense) benefit18 17 
Interest (expense) income, net(93)(37)
Income from operations before income taxes496 295 
Income tax (expense) benefit(104)(193)
Net income from operations392 102 
Less: Non-controlling interest in subsidiaries' earnings from operations8 6 
Net income attributable to common shareowners$384 $96 
Earnings per share
Basic$0.44 $0.11 
Diluted$0.43 $0.11 
Weighted-average number of shares outstanding
Basic869.3 866.2 
Diluted889.8 866.2 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
For the Three Months Ended June 30,For the Six Months Ended June 30,For the Three Months Ended March 31,
(dollars in millions)2020201920202019
(In millions)(In millions)20212020
Net income from operationsNet income from operations$269  $794  $371  $1,197  Net income from operations$392 $102 
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax
Foreign currency translation adjustments arising during periodForeign currency translation adjustments arising during period251  (81) (239) 15  Foreign currency translation adjustments arising during period(121)(490)
Pension and post-retirement benefit plan adjustmentsPension and post-retirement benefit plan adjustments7  4  12  9  Pension and post-retirement benefit plan adjustments7 5 
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax258  (77) (227) 24  Other comprehensive income (loss), net of tax(114)(485)
Comprehensive income527  717  144  1,221  
Less: Comprehensive income attributable to non-controlling interest(9) (7) (13) (15) 
Comprehensive income attributable to common shareowners$518  $710  $131  $1,206  
Comprehensive income (loss)Comprehensive income (loss)278 (383)
Less: Comprehensive income (loss) attributable to non-controlling interestLess: Comprehensive income (loss) attributable to non-controlling interest8 4 
Comprehensive income (loss) attributable to common shareownersComprehensive income (loss) attributable to common shareowners$270 $(387)
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(dollars in millions)June 30, 2020December 31, 2019
As of
(In millions)(In millions)March 31, 2021December 31, 2020
AssetsAssetsAssets
Cash and cash equivalentsCash and cash equivalents$2,704  $952  Cash and cash equivalents$2,599 $3,115 
Accounts receivable, net (Note 5 and Note 6)2,665  2,726  
Accounts receivable, netAccounts receivable, net2,831 2,781 
Contract assets, currentContract assets, current761  622  Contract assets, current694 656 
Inventories, netInventories, net1,639  1,332  Inventories, net1,854 1,629 
Other assets, currentOther assets, current284  327  Other assets, current350 343 
Total current assetsTotal current assets8,053  5,959  Total current assets8,328 8,524 
Future income tax benefitsFuture income tax benefits419  500  Future income tax benefits461 449 
Fixed assets, netFixed assets, net1,651  1,663  Fixed assets, net1,777 1,810 
Operating lease right-of-use assetsOperating lease right-of-use assets843  832  Operating lease right-of-use assets770 788 
Intangible assets, netIntangible assets, net1,024  1,083  Intangible assets, net1,002 1,037 
GoodwillGoodwill9,735  9,884  Goodwill10,077 10,139 
Pension and post-retirement assetsPension and post-retirement assets521  490  Pension and post-retirement assets607 554 
Equity method investmentsEquity method investments1,697  1,739  Equity method investments1,530 1,513 
Other assetsOther assets233  256  Other assets316 279 
Total AssetsTotal Assets$24,176  $22,406  Total Assets$24,868 $25,093 
Liabilities and EquityLiabilities and EquityLiabilities and Equity
Accounts payable (Note 5)$1,765  $1,701  
Accrued liabilities (Note 5)2,246  2,088  
Accounts payableAccounts payable$2,175 $1,936 
Accrued liabilitiesAccrued liabilities2,265 2,471 
Contract liabilities, currentContract liabilities, current477  443  Contract liabilities, current545 512 
Current portion of long-term debtCurrent portion of long-term debt301  237  Current portion of long-term debt153 191 
Total current liabilitiesTotal current liabilities4,789  4,469  Total current liabilities5,138 5,110 
Long-term debtLong-term debt11,728  82  Long-term debt9,577 10,036 
Future pension and post-retirement obligationsFuture pension and post-retirement obligations462  456  Future pension and post-retirement obligations507 524 
Future income tax obligations (Note 5 and Note 14)445  1,099  
Future income tax obligationsFuture income tax obligations477 479 
Operating lease liabilitiesOperating lease liabilities688  682  Operating lease liabilities621 642 
Other long-term liabilities (Note 5)1,698  1,183  
Other long-term liabilitiesOther long-term liabilities1,730 1,724 
Total LiabilitiesTotal Liabilities19,810  7,971  Total Liabilities18,050 18,515 
Commitments and contingent liabilities (Note 18)
Commitments and contingent liabilities (Note 16)Commitments and contingent liabilities (Note 16)00
EquityEquityEquity
UTC Net investment—  15,355  
Common stock, par value $0.01; 4,000,000,000 shares authorized; 866,164,968 shares issued and outstanding as of June 30, 20209  —  
Common stockCommon stock9 9 
Treasury stockTreasury stock(38)0 
Additional paid-in capitalAdditional paid-in capital5,307  —  Additional paid-in capital5,350 5,345 
Retained earningsRetained earnings191  —  Retained earnings2,027 1,643 
Accumulated other comprehensive lossAccumulated other comprehensive loss(1,479) (1,253) Accumulated other comprehensive loss(859)(745)
Non-controlling interestNon-controlling interest338  333  Non-controlling interest329 326 
Total EquityTotal Equity4,366  14,435  Total Equity6,818 6,578 
Total Liabilities and EquityTotal Liabilities and Equity$24,176  $22,406  Total Liabilities and Equity$24,868 $25,093 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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

(dollars in millions)UTC Net InvestmentAccumulated Other Comprehensive LossCommon StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance at January 1, 2019$15,132  $(1,215) $—  $—  $—  $352  $14,269  
Net income400  —  —  —  —  3  403  
Other comprehensive income, net of tax—  96  —  —  —  5  101  
Dividends attributable to non-controlling interest—  —  —  —  —  (2) (2) 
Net transfers to UTC(81) —  —  —  —  —  (81) 
Adoption impact of ASU 2018-029  (9) —  —  —  —  —  
Balance at March 31, 201915,460  (1,128) —  —  —  358  14,690  
Net income784  —  —  —  —  10  794  
Other comprehensive loss, net of tax—  (74) —  —  —  (3) (77) 
Dividends attributable to non-controlling interest—  —  —  —  —  (2) (2) 
Net transfers to UTC(445) —  —  —  —  —  (445) 
Balance at June 30, 2019$15,799  $(1,202) $—  $—  $—  $363  $14,960  
Balance at January 1, 2020$15,355  $(1,253) $—  $—  $—  $333  $14,435  
Net income96  —  —  —  —  6  102  
Other comprehensive loss, net of tax—  (483) —  —  —  (2) (485) 
Dividends attributable to non-controlling interest—  —  —  —  —  (8) (8) 
Net transfers to UTC(11,014) —  —  —  —  —  (11,014) 
Adoption impact of ASU 2016-13(4) —  —  —  —  —  (4) 
Balance at March 31, 20204,433  (1,736) —  —  —  329  3,026  
Net income—  —  —  —  261  8  269  
Other comprehensive income, net of tax—  257  —  —  —  1  258  
Dividends declared on Common Stock ($0.08 per share)—  —  —  —  (70) —  (70) 
Common stock issued under employee plans—  —  —  24  —  —  24  
Net transfers from UTC859  —  —  —  —  —  859  
Reclassification of UTC Net Investment to Common stock and Additional paid-in capital(5,292) —  9  5,283  —  —  —  
Balance as of June 30, 2020$—  $(1,479) $9  $5,307  $191  $338  $4,366  

(In millions)UTC Net InvestmentAccumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2019$15,355 $(1,253)$0 $0 $0 $0 $333 $14,435 
Net income96 — — — — — 6 102 
Other comprehensive income (loss), net of tax— (483)— — — — (2)(485)
Dividends attributable to non-controlling interest— — — — — — (8)(8)
Net transfers to UTC(11,014)— — — — — — (11,014)
Adoption impact of ASU 2016-13(4)— — — — — — (4)
Balance as of March 31, 2020$4,433 $(1,736)$0 $0 $0 $0 $329 $3,026 
(In millions)UTC Net InvestmentAccumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2020$0 $(745)$9 $0 $5,345 $1,643 $326 $6,578 
Net income— — — — — 384 8 392 
Other comprehensive income (loss), net of tax— (114)— — — — — (114)
Shares issued under incentive plans, net— — — — (14)— — (14)
Stock-based compensation— — — — 19 — — 19 
Dividends attributable to non-controlling interest— — — — — — (5)(5)
Treasury stock repurchase— — — (38)— — — (38)
Balance as of March 31, 2021$0 $(859)$9 $(38)$5,350 $2,027 $329 $6,818 


The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30, For the Three Months Ended March 31,
(dollars in millions)20202019
(In millions)(In millions)20212020
Operating ActivitiesOperating ActivitiesOperating Activities
Net income from operationsNet income from operations$371  $1,197  Net income from operations$392 $102 
Adjustments to reconcile net income from operations to net cash flows provided by operating activities, net of acquisitions and dispositions
Adjustments to reconcile net income to net cash flows from operating activities:Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortizationDepreciation and amortization159  167  Depreciation and amortization83 81 
Deferred income tax provisionDeferred income tax provision135  (57) Deferred income tax provision(2)135 
Stock compensation costs35  22  
Stock-based compensation costsStock-based compensation costs19 13 
Equity method investment net earningsEquity method investment net earnings(86) (120) Equity method investment net earnings(38)(29)
Distributions from equity method investmentsDistributions from equity method investments49  46  Distributions from equity method investments12 10 
Impairment charge on minority-owned joint venture investmentsImpairment charge on minority-owned joint venture investments72  —  Impairment charge on minority-owned joint venture investments0 71 
Changes in operating assets and liabilitiesChanges in operating assets and liabilitiesChanges in operating assets and liabilities
Accounts receivable, netAccounts receivable, net27  (206) Accounts receivable, net(83)(19)
Contract assets, currentContract assets, current(140) (43) Contract assets, current(44)(39)
Inventories, netInventories, net(325) (340) Inventories, net(248)(264)
Other assets, currentOther assets, current32  16  Other assets, current(23)(10)
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities152  (173) Accounts payable and accrued liabilities151 (24)
Contract liabilities, currentContract liabilities, current37  (16) Contract liabilities, current39 51 
Pension contributions(27) (27) 
Defined benefit plan contributionsDefined benefit plan contributions(24)(25)
Other operating activities, netOther operating activities, net65  (95) Other operating activities, net(50)(6)
Net cash flows provided by operating activities556  371  
Net cash flows provided by (used in) operating activitiesNet cash flows provided by (used in) operating activities184 47 
Investing ActivitiesInvesting ActivitiesInvesting Activities
Capital expendituresCapital expenditures(94) (89) Capital expenditures(53)(48)
Investment in businesses, net of cash acquiredInvestment in businesses, net of cash acquired(6)0 
(Payment) receipt from settlement of derivative contracts(23) 1  
Settlement of derivative contracts, netSettlement of derivative contracts, net8 (95)
Other investing activities, netOther investing activities, net14  8  Other investing activities, net2 15 
Net cash flows used in investing activities(103) (80) 
Net cash flows provided by (used in) investing activitiesNet cash flows provided by (used in) investing activities(49)(128)
Financing ActivitiesFinancing ActivitiesFinancing Activities
(Decrease) increase in short-term borrowings, net(17) 45  
Increase (decrease) in short-term borrowings, netIncrease (decrease) in short-term borrowings, net28 (44)
Issuance of long-term debtIssuance of long-term debt11,734  77  Issuance of long-term debt51 10,961 
Repayment of long-term debtRepayment of long-term debt(36) (37) Repayment of long-term debt(570)(34)
Repurchases of common stockRepurchases of common stock(36)0 
Dividends paid on common stockDividends paid on common stock(104)0 
Dividends paid to non-controlling interestDividends paid to non-controlling interest(8) (3) Dividends paid to non-controlling interest(5)(8)
Net transfers to UTCNet transfers to UTC(10,359) (548) Net transfers to UTC0 (10,948)
Other financing activities, netOther financing activities, net1  (26) Other financing activities, net(7)(3)
Net cash flows provided by (used in) financing activitiesNet cash flows provided by (used in) financing activities1,315  (492) Net cash flows provided by (used in) financing activities(643)(76)
Effect of foreign exchange rate changes on cash and cash equivalentsEffect of foreign exchange rate changes on cash and cash equivalents(17) 7  Effect of foreign exchange rate changes on cash and cash equivalents(9)(28)
Net increase (decrease) in cash and cash equivalents and restricted cashNet increase (decrease) in cash and cash equivalents and restricted cash1,751  (194) Net increase (decrease) in cash and cash equivalents and restricted cash(517)(185)
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period957  1,134  Cash, cash equivalents and restricted cash, beginning of period3,120 957 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period2,708  940  Cash, cash equivalents and restricted cash, end of period2,603 772 
Less: restricted cashLess: restricted cash4  4  Less: restricted cash4 4 
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$2,704  $936  Cash and cash equivalents, end of period$2,599 $768 

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

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

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

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


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NOTE 1: DESCRIPTION OF THE BUSINESS

Carrier Global Corporation is a leading global provider of heating, ventilating, air conditioning ("HVAC"), refrigeration and fire and security solutions. CarrierThe Company also provides a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring. Carrier’sIn the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position, results of operations are classified into 3 segments: HVAC, Refrigeration, and Fire & Security. The HVACcash flows for the periods presented. Certain information and Refrigeration segments sell their productsfootnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been omitted pursuant to the rules and solutions directly, including to building contractorsregulations of the United States Securities and owners, transportation companiesExchange Commission (the "SEC"). These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and retail stores, or indirectly through joint venture and other minority-owned investments, independent sales representatives, distributors, wholesalers, dealers and retail outlets. These products and services are sold undernotes thereto included in the Carrier name and other brand names including Automated Logic, Bryant, CIAT, Day & Night, Heil, NORESCO, Riello, Carrier Commercial Refrigeration, Carrier Transicold, Sensitech and others. The Fire & Security segment sells its products directly to customers, or indirectly through manufacturers’ representatives, distributors, dealers, value-added resellers and retailers. Fire & Security’s products and services are used by governments, financial institutions, architects, building owners and developers, security and fire consultants, homeowners and other end-users requiring a high level of security and fire protectionCompany's Annual Report on Form 10-K for their businesses and residences. These products and services are sold under brand names including Autronica, Chubb, Det-Tronics, Edwards, Fireye, GST, Kidde, LenelS2, Marioff, Onity, Supra and others.2020 filed with the SEC on February 9, 2021 (the "2020 Form 10-K").

On November 26, 2018,April 3, 2020, (the "Distribution Date"), United Technologies Corporation, since renamed Raytheon Technologies Corporation ("UTC"), announced its intention to spin off Carrier, onecompleted the spin-off of UTC's reportable segments,the Company into a separatean independent, publicly traded company (the "Separation"). On April 3, 2020, UTC completed the Separation through a pro-rata distribution (the "Distribution") on a 1-for-one basis of all of the outstanding shares of common stock of the Company to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date forof the Distribution. UTC distributed 866,158,910 shares of Carrier common stock in the Distribution, which was effective at 12:01 a.m., Eastern Time, on April 3, 2020 (the "Effective Time"). As a result of the Distribution, Carrier became an independent public company and our common stock is listed under the symbol "CARR" on the New York Stock Exchange. In connection with the Separation, Carrierthe Company issued an aggregate principal balance of $11.0 billion of debt and transferred approximately $10.9 billion of cash to UTC on February 27, 2020 and March 27, 2020. On April 1, 2020 and April 2, 2020, Carrier received cash contributions totaling $590 million from UTC related to the Separation. See Note 10 –
Borrowings and Lines of Credit and Note 3 – Earnings Per Share for additional information.
In connection with the Separation, Carrierthe Company entered into several agreements with UTC and Otis Worldwide Corporation ("Otis"), including a separation and distribution agreement that sets forth certain agreements with UTC and Otis regarding the principal actions to be taken in connection with the Separation, including identifying the assets transferred, the liabilities assumed and the contracts transferred to each of UTC, Otis and Carrier as partgovern various aspects of the Separation, and when and how these transfers and assumptions occurred. Other agreements we entered into that govern aspects of our relationship withbetween the Company, UTC and Otis following the Separation include:
Transition Services Agreement. We entered intoand the Distribution, including a Transition Services Agreement (the "TSA") with UTC and Otis in connection with the Separation pursuant to which UTC provides us with certaintransition services and we provide certain services to UTC foragreement ("TSA"), a limited time to help ensure an orderly transition following the Separation. The services we receive include, but are not limited to, information technology services, technical and engineering support, application support for operations, legal, payroll, finance, tax and accounting, general administrative services and other support services. Because costs for these services historically were included in our operating results based on allocations from UTC, we do not expect the costs associated with the TSA to be materially different and, therefore, we do not expect such costs to materially affect our results of operations or cash flows after we became an independent publicly traded company nor do we expect such costs to be materially different when these services are transitioned from UTC to Carrier.
Tax Matters Agreement. We entered into a Tax Matters Agreement (the "TMA") with UTC and Otis that governs the parties’ respective rights, responsibilities and obligations with respect to tax matters (including responsibility for taxes, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other tax matters). Subject to certain exceptions set forth in the TMA, Carrier generally is responsible for federal, state and foreign taxes imposed on a separate return basis upon Carrier (or any of its subsidiaries) with respect to taxable periods (or portions thereof) that ended on or prior to the date of the Distribution. The TMA provides special rules that allocate responsibility for tax liabilities arising from a failure of the Separation transactions to qualify for tax-free treatment based on the reasons for such failure. The TMA also imposes restrictions on each of Carrier and Otis during the two-year period following the Distribution that are intended to prevent certain transactions from failing to qualify as transactions that are generally tax-free.
Employee Matters Agreement and Intellectual Property Agreement. We entered intoagreement ("TMA"), an employee matters agreement and an intellectual property agreement that cover services such as information technology, tax, finance and human resources. In addition, the Company incurred separation-related costs including employee-related costs, costs to establish certain stand-alone functions, information technology systems, professional service fees and other costs associated with UTCbecoming an independent, publicly traded company. These costs are primarily recorded in Selling, general and Otis administrative in connectionthe Unaudited Condensed Consolidated Statement of Operations and totaled $16 million and $45 million for the three months ended March 31, 2021 and 2020, respectively. The TSA expired on March 31, 2021.

Impact of the COVID-19 Pandemic
In early 2020, the World Health Organization declared the outbreak of a respiratory disease known as COVID-19 as a global pandemic. In response, many countries implemented containment and mitigation measures to combat the outbreak, which severely restricted the level of economic activity and caused a significant contraction in the global economy. As a result, the Company temporarily closed or reduced production at manufacturing facilities across the globe to ensure employee safety and instructed non-essential employees to work from home. In addition, the Company took several preemptive actions during the year to manage liquidity as demand for its products decreased. Despite the continued adverse impacts of the pandemic on the Company’s results since the first quarter of 2020, manufacturing operations resumed and several restorative actions were completed during 2020, including the reinstatement of annual merit-based salary increases and continued investment to support the Company's core strategy.

The Company continues to focus its efforts on preserving the health and safety of its employees and customers as well as maintaining the continuity of its operations. In addition, the Company continues to actively monitor its liquidity position and working capital needs and believes that its overall capital resources and liquidity position are adequate. The preparation of financial statements requires management to use judgments in making estimates and assumptions based on the relevant information available at the end of each period which can have a significant effect on reported amounts. However, due to significant uncertainty surrounding the pandemic, management's judgments could change. While the Company's results of operations, cash flows and financial condition could be negatively impacted, the extent of the impact cannot be estimated with the Separation.certainty at this time.


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NOTE 2: BASIS OF PRESENTATION

The Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all accounts of the informationCompany and notes required by GAAP for complete financial statements.its wholly-owned and majority-owned subsidiaries in which it has control. All significant intra-company accounts and transactions have been eliminated in the preparation of the Unaudited Condensed Consolidated Financial Statements.eliminated. Related party transactions between the Company and its equity method investees have not been eliminated.
Non-controlling interest represents a non-controlling investor's interests in the results of subsidiaries that we controlthe Company controls and consolidate.
consolidates. Certain immaterialprior year amounts presented in the Information Statement have been reclassified to conform to the current period presentation, including the reclassification of the Current portion of long-term debt from Accrued liabilities for 2019 on the accompanying Unaudited Condensed Consolidated Balance Sheet.presentation.

The Company's financial statements for periods prior to the Separation and the Distribution are prepared on a "carve-out" basis as described below. The Company's financial statements for the period from April 3, 2020 through June 30, 2020 are consolidated financial statements based on the reported results of Carrier as a stand-alone company.
Basis of Presentation Prior to the Separation and the Distribution
Prior to the Separation and the Distribution, the Unaudited Condensed Consolidated Financial Statements reflect the financial position, results of operations and cash flows of the Company for the periods presented as historically managed within UTC. For those periods prior to the Separation and the Distribution, the Unaudited Condensed Consolidated Financial Statements are derived from the consolidated financial statements and accounting records of UTC.

The Unaudited Condensed Consolidated Statement of Operations includesinclude all revenues and costsamounts directly attributable to Carrier,the Company. Net cash transfers and other property transferred between UTC and the Company, including costs for facilities, functionsrelated party receivables and services used by Carrier. Priorpayables between the Company and other UTC affiliates, are presented as Net transfers to UTC. In addition, the Separation, costs for certain functions and services performed by UTC were directly charged to Carrier based on specific identification when possible or based on a reasonable allocation driver such as net sales, headcount, proportionate usage or other allocation methods. The results of operationsfinancial statements include allocations of costs for administrative functions and services performed on behalf of Carrierthe Company by centralized groups within UTC and certain pension and other post-retirement benefit costs (see Note 5 – Related Parties for a description of the allocation methodologies).UTC. All charges and allocations for facilities, functions and services performed by UTC have been deemed settled in cash by Carrier to UTC in the period in which the cost was recorded in the Unaudited Condensed Consolidated Statement of Operations.
Prior to the Separation, UTC used a centralized approach to cash management and financing its operations. Accordingly, none of the cash, third party debt or related interest expense of UTC has been allocated to Carrier in the Unaudited Condensed Consolidated Financial Statements for the period prior to the Separation. However, cash balances primarily associated with certain foreign entities that did not participate in UTC’s cash management program have been included in the Unaudited Condensed Consolidated Financial Statements for periods prior to the Separation. Transactions between UTC and Carrier are deemed settled immediately through UTC’s Net investment, other than those transactions which have historically been cash-settled and which are reflected in the Unaudited Condensed Consolidated Balance Sheet within Accounts receivable, net and Accounts payable. The net effect of the deemed settled transactions is reflected in the Unaudited Condensed Consolidated Statement of Cash Flows as Net transfers to UTC within financing activities and in the Unaudited Condensed Consolidated Balance Sheet as UTC’s Net investment (see Note 5 – Related Parties for additional information).
All of the allocations and estimates in the Unaudited Condensed Consolidated Financial Statements are based on assumptions that management believes are reasonable. However,The Company's financial statements for the periods priorsubsequent to April 3, 2020 are consolidated financial statements based on the reported results of Carrier as a stand-alone company.

Recently Adopted Accounting Pronouncements

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

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12"), which simplifies certain aspects of income tax accounting guidance in ASC 740, reducing the complexity of its application while maintaining or improving the usefulness of the financial position, resultsinformation required to be reported. The ASU eliminates certain exceptions from ASC 740 including: intra-period tax allocation, deferred tax liabilities related to outside basis differences and year-to-date loss in interim periods, among others. ASU 2019-12 was effective for periods beginning after December 15, 2020, including interim periods therein with early adoption permitted. The Company adopted this ASU on January 1, 2021 with no material impact on the Unaudited Condensed Consolidated Financial Statements.

NOTE 3: INVENTORIES, NET

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

The major classes of inventory are as follows:
(In millions)March 31, 2021December 31, 2020
Raw materials$407 $363 
Work-in-process171 143 
Finished goods1,276 1,123 
Inventories, net$1,854 $1,629 

The Company performs periodic assessments to determine the existence of excess and cash flowsobsolete inventory and records necessary provisions to reduce such inventories to estimated realizable value. Raw materials, work-in-process and finished goods are net of the Company in the future, or if the Company had been a separate, stand-alone entity during the periods presented.valuation reserves of $182 million and $183 million as of March 31, 2021 and December 31, 2020, respectively.
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Recently Adopted Accounting Pronouncements
NOTE 4: GOODWILL AND INTANGIBLE ASSETS
In June 2016,
The Company records goodwill as the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurementexcess of Credit Losses on Financial Instruments. This ASUthe purchase price over the fair value of the net assets acquired in a business combination. Goodwill is tested and its related amendments (collectively,reviewed annually for impairment during the "Credit Loss Standard") modified the credit loss model to utilize an expected loss methodologythird quarter or whenever there is a material change in place of an incurred loss methodology for financial instruments, including trade receivables, contract assets, long term receivables and off-balance sheet credit exposures. The Credit Loss Standard requires consideration of a broader range of information to estimate expected credit losses, including historical information, current conditions and a reasonable forecast period. This ASU requiresevents or circumstances that indicates that the statementfair value of operations reflect the measurementreporting unit may be less than its carrying value.

The changes in the carrying amount of credit lossesgoodwill are as follows:
(In millions)HVACRefrigerationFire & SecurityTotal
Balance as of December 31, 2020$5,489 $1,251 $3,399 $10,139 
Goodwill resulting from business combinations5 0 0 5 
Foreign currency translation(37)(8)(22)(67)
Balance as of March 31, 2021$5,457 $1,243 $3,377 $10,077 

Indefinite-lived intangible assets are tested and reviewed annually for newly recognized financial assets as well as an expected increase or decrease of expected credit losses that have taken placeimpairment during the period, whichthird quarter or whenever there is a material change in events or circumstances that indicates that the fair value of the asset may result in earlier recognition. The Company adopted the Credit Loss Standard effective January 1, 2020, utilizing a modified retrospective approach and its adoption did not have a significant impact on the Company's Unaudited Condensed Consolidated Financial Statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies how an entity is required to test goodwill for impairment by eliminating Step 2 from the goodwill impairment test. Under this ASU, a goodwill impairment is calculated as the difference betweenbe less than the carrying amount of the reporting unit and its fair value, but not to exceed the carrying amount of the goodwill allocated to that reporting unit. Additionally, this ASU requires the same impairment testing methodology for all reporting units, even thoseasset. All other intangible assets with finite useful lives are amortized on a zero or negative carrying amount, and requires an entity to disclose the amount of goodwill allocated to each reporting unit with a zero or negative carrying amount. The Company adopted this ASU effective January 1, 2020 and its adoption did not have a significant impact on the Company's Unaudited Condensed Consolidated Financial Statements.straight-line basis over their estimated useful lives.

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

Recently Issued Accounting Pronouncements
March 31, 2021December 31, 2020
(In millions)Gross AmountAccumulated AmortizationGross AmountAccumulated Amortization
Amortized:
Customer relationships$1,538 $(1,284)$1,558 $(1,285)
Patents and trademarks298 (222)301 (222)
Monitoring lines71 (60)71 (59)
Service portfolios and other638 (541)644 (542)
2,545 (2,107)2,574 (2,108)
Unamortized:
Trademarks and other564 — 571 — 
Intangible assets, net$3,109 $(2,107)$3,145 $(2,108)

In May 2020, the SEC issued Final Rule Release No. 33-10786, which amends the financial statement requirementsAmortization of Intangible assets was $24 million and $25 million for acquisitions and dispositions of businesses and related pro forma financial information required under SEC Regulation S-X, Rule 3-05. The final rule modifies the significance test required in SEC Regulation S-X, Rule 1-02(w) by raising the significance threshold for reporting dispositions of a business from 10% to 20% and by modifying the calculation of the investment and income tests. In accordance with Rules 3-09 or 4-08(g), the revised income test will apply to the evaluation of equity method investments for significance. The Company is currently evaluating the impact of these modifications which are effective for fiscal years starting after December 31, 2020.

NOTE 3: EARNINGS PER SHARE
On April 3, 2020, the date of the Distribution (the "Distribution Date"), 866,158,910 shares of the Company’s common stock, par value $0.01 per share, were distributed to UTC shareowners of record as of March 19, 2020. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Separation and such shares are treated as issued and outstanding for purposes of calculating historical earnings per share. For periods prior to the Separation, it is assumed that there are no dilutive equity instruments as there were no Carrier stock-based awards outstanding prior to the Separation.
Diluted earnings per share is computed by giving effect to all potentially dilutive stock awards that are outstanding. For periods subsequent to the Separation, the computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards, including stock appreciation rights and stock options, when the effect of the potential exercise would be anti-dilutive. The weighted-average number of common shares outstanding for basic and diluted earnings per share for the three and six months ended June 30, 2020 was based on the weighted-average number of common shares outstanding for the period beginning after the Distribution Date. For the three months ended June 30,March 31, 2021 and 2020, the number of stock awards excluded from the computation of diluted earnings per share due to their anti-dilutive effect was approximately 31 million.respectively.
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Three Months Ended June 30,Six Months Ended June 30,
(dollars in millions, except per share amounts; shares in millions)2020201920202019
Net income attributable to common shareowners$261  $784  $357  $1,184  
Basic weighted-average number of shares outstanding866.2  866.2  866.2  866.2  
Stock awards and equity units (share equivalent)4.7  —  4.7  —  
Diluted weighted-average number of shares outstanding870.9  866.2  870.9  866.2  
Earnings Per Share
Basic$0.30  $0.91  $0.41  $1.37  
Diluted$0.30  $0.91  $0.41  $1.37  

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

Long-term debt consisted of the following:
Equity Method Investments
(In millions, except percentages)March 31, 2021December 31, 2020
1.923% Notes due February 15, 2023$0 (1)$500 
2.242% Notes due February 15, 20252,000 2,000 
2.493% Notes due February 15, 20271,250 1,250 
2.722% Notes due February 15, 20302,000 2,000 
2.700% Notes due February 15, 2031750 750 
3.377% Notes due April 5, 20401,500 1,500 
3.577% Notes due April 5, 20502,000 2,000 
Other (including project financing obligations and finance leases)307 308 
Total principal long-term debt9,807 10,308 
Other (discounts and debt issuance costs) (1)
(77)(81)
Total debt9,730 10,227 
Less: current portion of long-term debt153 191 
Long-term debt, net of current portion$9,577 $10,036 

(1) In February 2021, the Company prepaid the 1.923% Notes due in February 2023 and incurred a $17 million make-whole premium upon prepayment and wrote-off $2 million of the remaining unamortized deferred financing costs.

Carrier sells products
Revolving Credit Facility

On February 10, 2020, the Company entered into a revolving credit agreement with various banks permitting aggregate borrowings of up to $2.0 billion pursuant to an unsecured, unsubordinated revolving credit facility that matures on April 3, 2025 (the "Revolving Credit Facility"). The Revolving Credit Facility supports the Company's commercial paper program and purchases products from unconsolidated entities accounted forcash requirements of the Company. A commitment fee of 0.125% is charged on the unused commitments under the equity method,Revolving Credit Facility. Borrowings under the Revolving Credit Facility are available in U.S. Dollars, Euros and therefore, these entities are considered related parties. DuringPounds Sterling and bear interest at a variable interest rate based on LIBOR plus a ratings-based margin, which was 125 basis points as of March 31, 2021. As of March 31, 2021, there were 0 borrowings outstanding under the Revolving Credit Facility.

Commercial Paper Program

As of March 31, 2021, the Company had a $2.0 billion unsecured, unsubordinated commercial paper program, which can be used for general corporate purposes, including the funding of working capital and potential acquisitions. As of March 31, 2021, there were 0 borrowings outstanding under the commercial paper program.

Project Financing Arrangements

The Company is involved in several long-term construction contracts in which it arranges project financing with certain customers. As a result, the Company issued $46 million and $40 million of debt during the three months ended June 30,March 31, 2021 and 2020, and 2019, Product sales in the Unaudited Condensed Consolidated Statement of Operations included sales to equity method investees of $434 million and $546 million, respectively. DuringLong-term debt repayments associated with these financing arrangements during the three months ended March 31, 2021 and 2020 were $53 million and $34 million, respectively.

Debt Covenants

The Revolving Credit Facility and the indenture for the long-term notes contain affirmative and negative covenants customary for financings of these types, which among other things, limit the Company's ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. On June 2, 2020, the Company entered into an amendment of the Revolving Credit Facility, under which certain terms of the facility were amended for a period beginning on June 2, 2020 and ending on December 30, 2021 (the "Covenant Modification Period"). The Company may terminate the Covenant Modification Period prior to December 30, 2021, subject to the satisfaction of certain conditions. The amendment
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defers testing of the Company's consolidated total net leverage ratio financial covenant until June 30, 20202021 and 2019, Costincreases the consolidated total net leverage ratio limit until December 31, 2021. The amendment also requires the Company to maintain liquidity at a certain level until the earlier of products(1) June 29, 2021 and (2) the last day of the Covenant Modification Period. Additionally, during the Covenant Modification Period, the Company is subject to: (a) limitations on the incurrence of subsidiary indebtedness, (b) limitations on the making of restricted payments, including purchases by the Company of shares of its common stock and the amount of dividends the Company may pay and (c) a "most favored nations" provision related to certain terms of any committed credit facility in an amount greater than $100 million. As of March 31, 2021, the Company was in compliance with the covenants under the agreements governing its outstanding indebtedness.

NOTE 6: FAIR VALUE MEASUREMENTS

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

•Level 1: Observable inputs such as quoted prices in active markets;
•Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
•Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

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

The Company invests a portion of its Cash and cash equivalents in money market mutual funds with original maturities of three months or less. Foreign currency transaction exposures are managed through operational strategies and the use of foreign currency hedging contracts. The following tables provide the valuation hierarchy classification of assets and liabilities that are recorded at fair value and measured on a recurring basis in the Company's Unaudited Condensed Consolidated StatementBalance Sheet:

(In millions)TotalLevel 1Level 2Level 3
March 31, 2021
Recurring fair value measurement:
Money market mutual funds$38 (1)$0 $38 $0 
Derivative assets$6 (2)$0 $6 $0 
Derivative liabilities$(20)(3)$0 $(20)$0 
December 31, 2020
Recurring fair value measurement:
Money market mutual funds$38 (1)$0 $38 $0 
Derivative assets$17 (2)$0 $17 $0 
Derivative liabilities$(5)(3)$0 $(5)$0 

(1) Included in Cash and cash equivalents on the accompanying Unaudited Condensed Consolidated Balance Sheet
(2) Included in Other assets, current on the accompanying Unaudited Condensed Consolidated Balance Sheet
(3) Included in Accrued liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet

The following table provides the carrying amounts and fair values of Operations included purchases from equity method investees of $66 million and $101 million, respectively.financial instruments that are not recorded at fair value in the Company's Unaudited Condensed Consolidated Balance Sheet:

March 31, 2021December 31, 2020
(In millions)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Current and long-term debt (excluding finance leases)$9,720 $9,884 $10,221 $11,115 

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

The changes in the allowance for expected credit losses related to Accounts receivable, net are as follows:
March 31, 2021
(In millions)TotalLevel 1Level 2Level 3
Current and long-term debt (excluding finance leases)$9,884 $9,587 $0 $297 

December 31, 2020
(In millions)TotalLevel 1Level 2Level 3
Current and long-term debt (excluding finance leases)$11,115 $10,811 $0 $304 

Valuation Techniques

The Company's derivative assets and liabilities are measured at fair value using internal models based on observable market inputs, such as forward, interest, contract and discount rates. As of March 31, 2021 and 2020, the project financing obligations included in Long-term debt approximate fair value.
(dollars in millions)
Balance as of January 1, 2020$45 
Current period provision for expected credit losses27 
Write-offs charged against the allowance for expected credit losses(1)
Other (including impact of adoption of ASU 2016-13)5 
Balance as of June 30, 2020$76 

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

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

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

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

Amortization of Intangible assets was $25 million and $27 million for the three months ended June 30, 2020 and 2019, respectively, and $50 million and $58 million for the six months ended June 30, 2020 and 2019, respectively.
NOTE 10:BORROWINGS AND LINES OF CREDIT
On February 10, 2020, we entered into a revolving credit agreement with various banks permitting aggregate borrowings of up to $2.0 billion pursuant to an unsecured, unsubordinated revolving credit facility that matures on April 3, 2025 (the "revolving credit facility"). The revolving credit facility supports our commercial paper program and cash requirements. A commitment fee of 0.125% is charged on the unused commitments. Borrowings under the revolving credit facility are available in U.S. Dollars, Euros and Pounds Sterling and bear interest at a variable interest rate based on LIBOR plus a ratings-based margin, which was 125 basis points as of June 30, 2020. As of June 30, 2020, there were 0 borrowings on the revolving credit facility.
On February 10, 2020, we entered into a $1.75 billion term loan credit agreement that provides an unsecured, unsubordinated term loan credit facility which matures on February 10, 2023 (the "term loan credit facility"). Borrowings under the term loan credit facility are subject to a variable interest rate based on LIBOR plus a ratings-based margin, which was 112.5 basis points as of June 30, 2020.
On February 27, 2020, Carrier issued $9.25 billion of unsecured, unsubordinated long-term notes in 6 series with maturity dates ranging from 2023 through 2050. The notes were issued pursuant to an indenture between the Company and The Bank of New York Mellon Trust Company, N.A., as trustee.
On March 27, 2020, Carrier drew $1.75 billion on the term loan credit facility. The proceeds from the notes and the term loan credit facility were used to distribute $10.9 billion to UTC in connection with the Separation.
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The revolving credit agreement, term loan credit agreement and indenture contain affirmative and negative covenants customary for financings of this type, that among other things, limit Carrier and its subsidiaries' ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. On June 2, 2020, the Company entered into amendments to both the revolving credit agreement and the term loan credit agreement. Pursuant to the amendments, certain terms of the revolving credit facility and the term loan credit facility were amended for a period beginning on June 2, 2020 and ending on December 30, 2021 (the "Covenant Modification Period"). The Company may terminate the Covenant Modification Period prior to December 30, 2021 subject to the satisfaction of certain conditions. The amendments defer testing of our consolidated total net leverage ratio financial covenant until June 30, 2021 and increases the consolidated total net leverage ratio limit until December 31, 2021. The amendments also require us to maintain liquidity at a certain level until the earlier of (1) June 29, 2021 and (2) the last day of the Covenant Modification Period. Additionally, during the Covenant Modification Period, the Company is subject to (a) limitations on the incurrence of subsidiary indebtedness, (b) limitations on the making of restricted payments, including purchases by the Company of its ordinary shares and the amount of dividends the Company may pay, and (c) a "most favored nations" provision related to certain terms of any committed credit facility in an amount greater than $100 million. As of June 30, 2020, we were compliant with our covenants under the agreements governing our outstanding indebtedness.
On June 19, 2020, we issued $750 million of unsecured, unsubordinated 2.700% Notes due 2031. These notes rank equally with our existing unsecured, unsubordinated obligations. We expect to use the net proceeds from the sale of the notes, which further enhance our liquidity and financial flexibility during the ongoing COVID-19 pandemic, for general corporate purposes.
As of June 30, 2020, we have a $2.0 billion unsecured, unsubordinated commercial paper program which we plan to use for general corporate purposes, including the funding of working capital and potential acquisitions. As of June 30, 2020, there were 0 borrowings outstanding under the commercial paper program.
Long-term debt, all of which was issued during the six months ended June 30, 2020 except for Other long-term debt, consisted of the following:
(dollars in millions)
Debt DescriptionInterest RateJune 30, 2020December 31, 2019
3-Year Term Loan Credit Facility due February 10, 20232.195 %1$1,750  2$—  
1.923% Notes due February 15, 20231.923 %500  2—  
2.242% Notes due February 15, 20252.242 %2,000  2—  
2.493% Notes due February 15, 20272.493 %1,250  2—  
2.722% Notes due February 15, 20302.722 %2,000  2—  
2.700% Notes due February 15, 20312.700 %750  —  
3.377% Notes due April 05, 20403.377 %1,500  2—  
3.577% Notes due April 05, 20503.577 %2,000  2—  
Other (including project financing obligations and finance leases)367  319  
Total principal long-term debt12,117  319  
Other (discounts and debt issuance costs)(88) —  
Total debt12,029  319  
Less: current portion of long-term debt301  237  
Long-term debt, net of current portion$11,728  $82  
1 The interest rate on the term loan is variable based on six month LIBOR of 1.07% plus 112.5 basis points.
2 The net proceeds of the financing arrangements were used to distribute cash to UTC.


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

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

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

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

NOTE 11:7: EMPLOYEE BENEFIT PLANS
Pension Plans.
The Company sponsors both funded and unfunded domestic and international defined benefit pension and defined contribution plans as well as other post-retirement benefit plans, and defined contribution plans. Additionally,In addition, the Company contributes to various domestic and international multi-employer defined benefit pension and other post-retirement benefit plans.

Contributions to the plans were as follows:
For the Three Months Ended June 30,For the Six Months Ended June 30,For the Three Months Ended March 31,
(dollars in millions)2020201920202019
(In millions)(In millions)20212020
Defined benefit plansDefined benefit plans$2  $5  $27  $27  Defined benefit plans$24 $25 
Defined contribution plansDefined contribution plans$25  $24  $55  $49  Defined contribution plans$37 $30 
Multi-employer pension plansMulti-employer pension plans$5  $5  $10  $10  Multi-employer pension plans$5 $5 

The following table illustrates the components of net periodic pension benefits for ourthe defined benefit pension and post-retirement benefit plans:
For the Three Months Ended June 30,For the Six Months Ended June 30,For the Three Months Ended March 31,
(dollars in millions)2020201920202019
(In millions)(In millions)20212020
Service costService cost$7  $8  $15  $16  Service cost$7 $8 
Interest costInterest cost13  16  26  33  Interest cost9 13 
Expected return on plan assetsExpected return on plan assets(34) (39) (69) (78) Expected return on plan assets(36)(35)
Amortization of prior service creditAmortization of prior service credit—  —  1  1  Amortization of prior service credit1 1 
Recognized actuarial net loss5  3  10  5  
Net settlement, curtailment and special termination benefit loss—  1  1  1  
Net periodic pension benefit$(9) $(11) $(16) $(22) 
Recognized actuarial net (gain) lossRecognized actuarial net (gain) loss8 5 
Net settlement, curtailment and special termination benefit (gain) lossNet settlement, curtailment and special termination benefit (gain) loss0 1 
Net periodic pension expense (benefit)Net periodic pension expense (benefit)$(11)$(7)

UTC Sponsored Defined Benefit Plans. Defined benefit pension and post-retirement benefit plans sponsored by UTC have been accounted for as multi-employer plans in the Unaudited Condensed Consolidated Financial Statements, in accordance with ASC Topic 715-30: Defined Benefit Plans – Pension and ASC Topic 715-60: Defined Benefit Plans – Other Post-retirement. ASC Topic 715: Compensation-Retirement Benefits, which provides that an employer that participates in a multi-employer defined benefit plan is not required to report a liability beyond the contributions currently due and unpaid to the
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plan. Therefore, no assets or liabilities related to these plans have been included in the Unaudited Condensed Consolidated Balance Sheet.NOTE 8: GUARANTEES

The expenses associated with these UTC plans were allocated toCompany provides service and warranty coverage on its products and extends performance and operating cost guarantees beyond normal service and warranty coverage on certain products. In addition, the Company incurs discretionary costs to service its products in connection with specific product performance issues. Liabilities for performance and reportedoperating cost guarantees are based upon future product performance and durability and are largely estimated based upon historical experience. Adjustments are recorded to accruals based on claims data and historical experience. The changes in Costthe carrying amount of products sold, Cost of services sold, Selling, generalservice and administrativeproduct warranties and Non-service pension benefitproduct performance guarantees, included in Accrued liabilities on the accompanying Unaudited Condensed Consolidated Statement of Operations. The Company's participation in these defined benefit pension and post-retirement benefits plans sponsored by UTC has concluded in conjunction with the Separation. The pension and post-retirement expenses were as follows:
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Service cost$—  $5  $—  $9  
Non-service pension benefit—  (19) (2) (39) 
Total net periodic benefit$—  $(14) $(2) $(30) 

NOTE 12: STOCK-BASED COMPENSATION

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

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

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

We measure the cost of stock-based compensation, including stock options, at fair value on the grant date net of expected forfeitures and recognized $22 million and $14 million of such costs for the three months ended June 30, 2020 and 2019 and $35 million and $22 million for the six months ended June 30, 2020 and 2019, respectively. The stock-based compensation expenseBalance Sheet, for the three months ended March 31, 2021 and 2020 are as follows:
For the Three Months Ended March 31,
(In millions)20212020
Balance as of January 1,$514 $488 
Warranties, performance guarantees issued and changes in estimated liability39 35 
Settlements made(38)(39)
Other(1)(3)
Balance as of March 31,$514 $481 

NOTE 9: EQUITY

The authorized number of shares of common stock of Carrier is 4,000,000,000 shares of $0.01 par value. As of March 31, 2021, 869,789,967 shares of common stock were issued, which includes 976,374 shares of treasury stock.

Share Repurchase Program

On February 4, 2021, the Company's Board of Directors approved a stock repurchase program authorizing the repurchase of up to $350 million of the Company's outstanding common stock. The Company may repurchase shares from time to time subject to market conditions and at the Company's discretion in the open market or through one or more other public or private transactions, subject to compliance with the Company's obligations under the TMA and the sixRevolving Credit Facility. The Company records repurchases under the cost method whereby the entire cost of the acquired stock is recorded as Treasury stock as a reduction to equity. The reissuance of treasury stock uses the first-in, first-out method of accounting.

For the three months ended June 30, 2019 representMarch 31, 2021, the amounts allocated to us from UTC related to our direct employees.Company repurchased 976,374 shares of common stock for an aggregate purchase price of $38 million, which are held in Treasury stock as of March 31, 2021 as reflected on its Unaudited Condensed Consolidated Balance Sheet.

Accumulated Other Comprehensive Income (Loss)

A summary of the changes in each component of Accumulated other comprehensive income (loss), net of tax is as follows:

(In millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2020$(191)$(554)$(745)
Other comprehensive income (loss) before reclassifications, net(121)— (121)
Amounts reclassified, pre-tax— 9 9 
Tax expense (benefit) reclassified— (2)(2)
Balance as of March 31, 2021$(312)$(547)$(859)

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At June 30, 2020, there was $124 million
(In millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2019$(780)$(473)$(1,253)
Other comprehensive income (loss) before reclassifications, net(488)— (488)
Amounts reclassified, pre-tax— 6 6 
Tax expense (benefit) reclassified— (1)(1)
Balance as of March 31, 2020$(1,268)$(468)$(1,736)


NOTE 10: REVENUE RECOGNITION

The Company recognizes revenue when control of unrecognized stock-based compensation costs relateda good or service promised in a contract (i.e., performance obligation) is transferred to non-vested awards granteda customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefit from that good or service. A significant portion of the Company's performance obligations are recognized at a point-in-time when control of the product transfers to the customer, which is generally at the time of shipment. The remaining portion of the Company's performance obligations are recognized over time as the customer simultaneously obtains control as the Company performs work under a contract, or if the Carrier LTIP, which will be recognized ratably over a weighted-average period of 2.3 years.
Carrier LTIP activityproduct being produced for the three months ended June 30, 2020 wascustomer has no alternative use and the Company has a contractual right to payment.

Sales disaggregated by product and service are as follows:

Stock Options and Stock Appreciation RightsPerformance Share UnitsRestricted Stock Units
AverageAverageAverage
(shares and units in thousands)Shares
Price 1
Units
Price 2
Units
Price 2
Outstanding as of April 3, 2020 3
36,015  $19.90  68  $21.23  5,622  $21.37  
Granted3,735  16.59  728  18.23  290  16.66  
Forfeited/Cancelled(79) 23.73  —  —  (13) 23.93  
Outstanding as of June 30, 202039,671  $19.60  796  $18.49  5,899  $21.15  
1 Weighted-average exercise price
2 Weighted-average grant date fair value
3 Effective date of conversion upon the Separation and the Distribution
For the Three Months Ended March 31,
(In millions)20212020
Sales Type
Product$2,147 $1,657 
Service339 302 
HVAC sales2,486 1,959 
Product892 713 
Service113 95 
Refrigeration sales1,005 808 
Product919 860 
Service385 346 
Fire & Security sales1,304 1,206 
Total segment sales4,795 3,973 
Eliminations and other(96)(85)
Net sales$4,699 $3,888 

The weighted-average fair value of stock appreciation rights granted during the three months ended June 30, 2020 was $4.35. The weighted-average fair value of performance share units granted during the three months ended June 30, 2020 was $18.23. There were 0 stock options granted during the three months ended June 30, 2020. NaN performance share units or restricted stock units vested during the three months ended June 30, 2020.

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

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

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

(dollars in millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Loss
Three Months Ended June 30, 2020
Balance as of March 31, 2020$(1,268) $(468) $(1,736) 
Other comprehensive income before reclassifications, net250  2  252  
Amounts reclassified, pre-tax—  6  6  
Tax benefit reclassified—  (1) (1) 
Balance as of June 30, 2020$(1,018) $(461) $(1,479) 
Six Months Ended June 30, 2020
Balance as of January 1, 2020$(780) $(473) $(1,253) 
Other comprehensive (loss) income before reclassifications, net(238) 2  (236) 
Amounts reclassified, pre-tax—  12  12  
Tax benefit reclassified—  (2) (2) 
Balance as of June 30, 2020$(1,018) $(461) $(1,479) 

(dollars in millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Loss
Three Months Ended June 30, 2019
Balance as of March 31, 2019$(743) $(385) $(1,128) 
Other comprehensive loss before reclassifications, net(78) —  (78) 
Amounts reclassified, pre-tax—  4  4  
Balance as of June 30, 2019$(821) $(381) $(1,202) 
Six Months Ended June 30, 2019
Balance as of January 1, 2019$(834) $(381) $(1,215) 
Other comprehensive income before reclassifications, net13  2  15  
Amounts reclassified, pre-tax—  7  7  
ASU 2018-02 adoption impact—  (9) (9) 
Balance as of June 30, 2019$(821) $(381) $(1,202) 

Amounts reclassified related to defined benefit pension and post-retirement plans include amortization of prior service costs and recognized actuarial net losses. These costs are recorded as components of net periodic pension cost for each period presented (see Note 11 – Employee Benefit Plans for additional details).
NOTE 14: INCOME TAXES
The effective tax rate for the three and six months ended June 30, 2020 was 28.2% and 44.6%, respectively, compared with 7.6% and 14.6%, respectively, for the three and six months ended June 30, 2019.
The increase in the effective tax rate for the three months ended June 30, 2020 is primarily due to the absence of a prior year combined tax benefit of $149 million resulting from the filing by a Carrier subsidiary to participate in an amnesty program
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offered by the Italian Tax AuthorityContract Balances
Total contract assets and the conclusion of an audit by the Internal Revenue Service (the "IRS") for UTC's 2014, 2015 and 2016 tax years.liabilities arising from contracts with customers are as follows:
(In millions)March 31, 2021December 31, 2020
Contract assets, current$694 $656 
Contract assets, non-current (included within Other assets)137 98 
Total contract assets831 754 
Contract liabilities, current(545)(512)
Contract liabilities, non-current (included within Other long-term liabilities)(170)(165)
Total contract liabilities(715)(677)
Net contract assets$116 $77 

The increasetiming of revenue recognition, billings and cash collections results in the effective tax rate for the six months ended June 30, 2020 is primarily duecontract assets and contract liabilities. Contract assets relate to the items described above andconditional right to consideration for any completed performance under a $51 million charge relatedcontract when costs are incurred in excess of billings under the percentage-of-completion methodology. Contract liabilities relate to payments received in advance of performance under the contract or when the Company has a valuation allowance recorded againstright to consideration that is unconditional before it transfers a United Kingdom tax loss and a credit carry forward as a result of activities relatedgood or service to the Separation, a charge of $46 million resulting from Carrier's decision to no longer permanently reinvest certain pre-2018 unremitted non-U.S. earnings, andcustomer. Contract liabilities are recognized as revenue as (or when) the impact of a non-deductible impairment charge of $71 million on a minority-owned joint venture investment, all of which were recorded inCompany performs under the six months ended June 30, 2020.

contract. The Company assesses the realizabilityrecognized revenue of its deferred tax assets on a quarterly basis through an analysis of potential sources of future taxable income, including prior year taxable income available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine if valuation allowances against deferred tax assets are required. The Company maintains valuation allowances against certain non-U.S. deferred tax assets. We will continue to evaluate the impact that COVID-19 and other economic impacts may have on the future realizability of a portion of the remaining non-U.S. deferred tax assets.
Carrier conducts business globally and, as a result, files income tax returns in U.S. federal and various state and foreign jurisdictions. In certain jurisdictions, Carrier's operations were included in UTC's combined tax returns for the periods through the Separation. The IRS commenced an audit of UTC's tax years 2017 and 2018 in the second quarter of 2020. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including Australia, Belgium, Canada, China, Czech Republic, France, Germany, Hong Kong, India, Italy, Mexico, Netherlands, Singapore, the United Kingdom and the United States. Carrier is no longer subject to U.S. federal income tax examination for years prior to 2017 and, with few exceptions, is no longer subject to state and local and foreign income tax examinations for tax years before 2010.

Income taxes through March 31, 2020 were recorded based on a "carve-out" and separate company basis. Prior to the Separation, the Company’s portion of income taxes for domestic and certain foreign jurisdictions were deemed settled in the period the related tax expense was recorded. After the Separation, the Company’s income taxes are prepared on a stand-alone basis.

Pursuant to the TMA, Carrier is required to make payments to UTC representing Carrier's portion of UTC's remaining net tax liability attributable to U.S. income tax on previously undistributed earnings of Carrier's international subsidiaries resulting from the passage of the Tax Cuts and Jobs Act of 2017 (the "TCJA"). The balances computed on a separate company basis of approximately $68$189 million recorded within Accrued liabilities and $701 million recorded within Future income tax obligations were adjusted through UTC Net investment upon the Separation resulting in a future stand-alone obligation of $453 million recorded within Other long-term liabilities and $6 million within Accrued liabilities. This obligation is expected to be settled in 6 annual installments, beginning April 15, 2021.

After the Separation, Carrier is entitled to unrecognized tax benefits to the extent the item relates exclusively to Carrier in accordance with the TMA. The change from a separate company to stand-alone basis resulted in a decrease of $37 million to Future income tax obligations and $27 million to Future income tax benefits, both of which were recorded through UTC Net investment induring the three months ended June 30, 2020.
InMarch 31, 2021 that related to the ordinary coursecontract liabilities balance as of business, there is inherent uncertainty in quantifying our income tax positions. We assess our income tax positions and record tax benefits for all years subject to examination based upon management’s evaluationJanuary 1, 2021. The Company expects a majority of its contract liability balance at the end of the facts, circumstances, and information available atperiod to be recognized as revenue in the reporting date. The Company believes that it is reasonably possible that a net decrease in unrecognized tax benefits of up to $15 million may occur withinnext 12 months as a result of additional worldwide uncertain tax positions, the revaluation of uncertain tax positions arising from examinations, appeals, court decisions, or the closure of tax statutes and the Separation.months.
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NOTE 15:11: RESTRUCTURING COSTS
During
The Company incurs costs associated with restructuring initiatives intended to improve operating performance, profitability and working capital levels. Actions associated with these initiatives may include improving productivity, workforce reductions and the three and six months ended June 30, 2020 and 2019, weconsolidation of facilities.

The Company recorded net pre-tax restructuring costs for new and ongoing restructuring actionsinitiatives as follows:
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
HVAC$1  $18  $3  $35  
Refrigeration3  4  3  7  
Fire & Security6  8  9  21  
Eliminations and other1  —  1  —  
Total restructuring costs$11  $30  $16  $63  

Restructuring charges incurred during the six months ended June 30, 2020 and 2019 primarily relate to actions initiated during 2020 and 2019, and were recorded as follows:
For the Three Months Ended June 30,For the Six Months Ended June 30,For the Three Months Ended March 31,
(dollars in millions)2020201920202019
(In millions)(In millions)20212020
HVACHVAC$4 $2 
RefrigerationRefrigeration2 0 
Fire & SecurityFire & Security11 3 
Total SegmentTotal Segment17 5 
General corporate expensesGeneral corporate expenses1 0 
Total restructuring costsTotal restructuring costs$18 $5 
Cost of salesCost of sales$5  $8  $6  $13  Cost of sales$5 $1 
Selling, general and administrativeSelling, general and administrative6  22  10  50  Selling, general and administrative13 4 
Total restructuring costsTotal restructuring costs$11  $30  $16  $63  Total restructuring costs$18 $5 

2020 Actions. During the six months ended June 30, 2020, we recorded net pre-tax restructuring costs of $13 million for restructuring actions initiated in 2020, consisting of $5 million in Cost of products sold and Cost of services sold and $8 million in Selling, general and administrative. The 2020 actions relate to ongoing cost reduction efforts, including workforce reductions and the consolidation of field operations. We are targeting to complete the majority of the remaining actions in 2021.
The following table summarizes the accrual balance and utilization for the 2020 restructuring actions:
(dollars in millions)SeveranceFacility Exit,
Lease Termination
and Other Costs		Total
For the Three Months Ended June 30, 2020
Restructuring accrual as of March 31, 2020$2  $—  $2  
Net pre-tax restructuring costs10  1  11  
Utilization, foreign exchange and other costs(4) —  (4) 
Balance as of June 30, 2020$8  $1  $9  
For the Six Months Ended June 30, 2020
Restructuring accrual as of January 1, 2020$—  $—  $—  
Net pre-tax restructuring costs12  1  13  
Utilization, foreign exchange and other costs(4) —  (4) 
Balance as of June 30, 2020$8  $1  $9  
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The following table summarizes expected, incurred and remaining costs for the 2020 restructuring actions by segment:
(dollars in millions)Expected CostsCosts Incurred - Three Months Ended March 31, 2020Costs Incurred - Three Months Ended June 30, 2020Remaining Costs at June 30, 2020
HVAC$5  $(1) $(2) $2  
Refrigeration5  —  (3) 2  
Fire & Security8  (1) (5) 2  
Eliminations and other2  —  (1) 1  
Total$20  $(2) $(11) $7  

2019 Actions. During the six months ended June 30, 2020 and 2019, we recorded net pre-tax restructuring costs totaling $3 million and $49 million, respectively, for restructuring actions initiated in 2019, consisting of $1 million and $8 million in Cost of products sold and Cost of services sold and $2 million and $41 million in Selling, general and administrative, respectively. The 2019 actions relate to ongoing cost reduction efforts, including workforce reductions and consolidation of field operations. The following table summarizes the accrual balancesreserves and utilization for the 2019charges related to restructuring actions:
(dollars in millions)SeveranceFacility Exit,
Lease Termination
and Other Costs		Total
For the Three Months Ended June 30, 2020
Restructuring accrual as of March 31, 2020$32  $—  $32  
Net pre-tax restructuring costs—  —  —  
Utilization, foreign exchange and other costs(5) —  (5) 
Balance as of June 30, 2020$27  $—  $27  
For the Six Months Ended June 30, 2020
Restructuring accrual as of January 1, 2020$43  $1  $44  
Net pre-tax restructuring costs3  —  3  
Utilization, foreign exchange and other costs(19) (1) (20) 
Balance as of June 30, 2020$27  $—  $27  

The following table summarizes expected, incurred and remaining costs for the 2019 restructuring actions by segment:
(dollars in millions)Expected
Costs		Costs Incurred in 2019Costs Incurred - Three Months Ended March 31, 2020Costs Incurred - Three Months Ended June 30, 2020Remaining Costs at June 30, 2020
HVAC$53  $(51) $(1) $2  $3  
Refrigeration16  (14) —  (1) 1  
Fire & Security49  (43) (2) (1) 3  
Eliminations and other2  (2) —  —  —  
Total$120  $(110) $(3) $—  $7  
For the Three Months Ended March 31,
(In millions)20212020
Balance as of January 1,$49 $66 
Net pre-tax restructuring costs18 5 
Utilization, foreign exchange and other costs(18)(24)
Balance as of March 31,$49 $47 

2018 and Prior Actions.During the sixthree months ended June 30, 2020March 31, 2021, charges associated with restructuring initiatives related to cost reduction efforts. Amounts recognized primarily related to severance due to workforce reductions and 2019, we recorded net pre-tax restructuringexit costs totaling $0 million and $14 million, respectively, for restructuring actions initiated in 2018 and prior, consistingdue to the consolidation of $0 million and $5 million in Cost of products sold and Cost of services sold and $0 million and $9 million in Selling, general and administrative, respectively.field operations. As of June 30, 2020 and 2019, weMarch 31, 2021, the Company had approximately $11$49 million and $37 million, respectively,accrued for costs associated with its announced restructuring initiatives, all of accrual balances remaining relatedwhich is expected to 2018 and prior actions.be paid within one year.

NOTE 16: GUARANTEES12: INCOME TAXES

The Company accounts for Income tax expense in accordance with ASC 740, Income Taxes, which requires that an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate for the three months ended March 31, 2021 was 21.0% compared with 65.4% for the three months ended March 31, 2020. The year-over-year decrease is primarily due to the recognition of a favorable tax adjustment of $21 million resulting from a re-organization in our German subsidiaries and the absence of a prior year charge of $51 million related to a valuation allowance recorded against a United Kingdom tax loss and credit carryforward and a $46 million charge resulting from the Company's decision to no longer permanently reinvest certain pre-2018 unremitted non-U.S. earnings.

Income taxes through March 31, 2020 were recorded based on a "carve-out" and separate company basis. Prior to the Separation and the Distribution, the Company’s portion of income taxes for domestic and certain foreign jurisdictions were deemed settled in the period the related tax expense was recorded. After the Separation and the Distribution, the Company’s income taxes are prepared on a stand-alone basis.

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

The Company conducts business globally and files income tax returns in U.S. federal, state and foreign jurisdictions. In addition,certain jurisdictions, the Company's operations were included in UTC's combined tax returns for the periods through the Distribution. The U.S. Internal Revenue Service ("IRS") commenced an audit of UTC's tax years 2017 and 2018 in the second quarter of 2020. In the normal course of business, the Company incursis subject to examination by taxing authorities throughout the world, including Australia, Belgium, Canada, China, Czech Republic, France, Germany, Hong Kong, India, Italy, Mexico, Netherlands, Singapore, the United Kingdom and the United States. The Company is no longer subject to U.S. federal income tax examination for years prior to 2017 and, with few exceptions, is no longer subject to state, local and foreign income tax examinations for tax years prior to 2013.

In the ordinary course of business, there is inherent uncertainty in quantifying the Company's income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. The Company believes that it is reasonably possible that a net decrease in unrecognized tax benefits of between $15 million and $40 million may occur within 12 months as a result of additional uncertain tax positions, the Separation, the revaluation of uncertain tax positions arising from examinations, appeals, court decisions and/or the expiration of tax statutes.

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discretionary costs to service its products in connection with specific product performance issues. Liabilities for performance and operating cost guarantees are based upon future product performance and durability, and are largely estimated based upon historical experience. Adjustments are recorded to accruals based on claims data and historical experience. The changes in the carrying amount of service and product warranties and product performance guarantees, included in Accrued liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet, for the six months ended June 30, 2020 and 2019 are as follows:
For the Six Months Ended June 30,
(dollars in millions)20202019
Balance as of January 1$488  $473  
Warranties, performance guarantees issued and changes in estimated liability105  93  
Settlements made(92) (76) 
Balance as of June 30$501  $490  

NOTE 1713: EARNINGS PER SHARE: FAIR VALUE MEASUREMENTS

We invest a portionEarnings per share is computed by dividing Net income attributable to common shareowners by the weighted-average number of our Cash and cash equivalents in money market mutual funds with original maturitiesshares of less than three months. We attemptcommon stock outstanding during the period (excluding treasury stock). Diluted earnings per share is computed by giving effect to manage foreign currency transaction exposures through operational strategies and the use of foreign currency hedging contracts. In accordance with the provisions of ASC Topic 820: Fair Value Measurement, the following tables provide the valuation hierarchy classification of assets and liabilitiesall potentially dilutive stock awards that are recorded at fair valueoutstanding. The computation of diluted earnings per share excludes the effect of the potential exercise of stock-based awards, including stock appreciation rights and measured on a recurring basis in our Unaudited Condensed Consolidated Balance Sheet:stock options, when the effect of the potential exercise would be anti-dilutive.
Three Months Ended March 31,
(In millions, except per share amounts)20212020
Net income attributable to common shareowners$384 $96 
Basic weighted-average number of shares outstanding869.3 866.2 
Stock awards and equity units (share equivalent)20.5 0 
Diluted weighted-average number of shares outstanding889.8 866.2 
Antidilutive shares excluded from computation of diluted earnings per share3.3 0 
Earnings Per Share
Basic$0.44 $0.11 
Diluted$0.43 $0.11 

June 30, 2020
(dollars in millions)TotalLevel 1Level 2Level 3
Recurring fair value measurement:
Money market mutual funds$38  1$—  $38  $—  
Derivative assets$3  2$—  $3  $—  
Derivative liabilities$(5) 3$—  $(5) $—  
1 Included in Cash and cash equivalents onOn the accompanying Unaudited Condensed Consolidated Balance Sheet
2 Included in Other assets, current onDistribution Date, 866,158,910 shares of the accompanying Unaudited Condensed Consolidated Balance Sheet
3 Included in Accrued liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet

Valuation Techniques. Our derivative assets and liabilities are measured at fairCompany’s common stock, par value using internal models based on observable market inputs, such as forward, interest, contract and discount rates.

The following table provides the carrying amounts and fair values$0.01 per share, were distributed to UTC shareowners of financial instruments that are not recorded at fair value in our Unaudited Condensed Consolidated Balance Sheet:
June 30, 2020December 31, 2019
(dollars in millions)Carrying
Amount		Fair
Value		Carrying
Amount		Fair
Value
Current and long-term debt (excluding finance leases)$12,023  $12,116  $313  $313  

The following tables provide the valuation hierarchy classification of assets and liabilities that are not carried at fair value in our Unaudited Condensed Consolidated Balance Sheet:

June 30, 2020
(dollars in millions)TotalLevel 1Level 2Level 3
Current and long-term debt (excluding finance leases)$12,116  $10,004  $—  $2,112  

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December 31, 2019
(dollars in millions)TotalLevel 1Level 2Level 3
Current and long-term debt (excluding finance leases)$313  $—  $—  $313  

Valuation Techniques.Based on the information availablerecord as of June 30, 2020,March 19, 2020. This share amount is utilized for the fair valuecalculation of basic and diluted earnings per share for all periods presented prior to the term loan credit facility was estimated onSeparation and the basisDistribution and such shares are treated as issued and outstanding for purposes of calculating historical earnings per share. It is assumed that there are 0 dilutive equity instruments for the present value ofperiods prior to the expected future cash flows contractually due in accordance with the terms of the term loan credit agreement, a Level 3 measurement. The cash flows were discounted using the LIBOR rate at the valuation date based on the terms of the term loan credit agreementSeparation and adjusted for any change in credit risk premium. At June 30, 2020, the project financing obligations included in Long-term debt approximate their fair value. During the three months ended June 30, 2020 and 2019,Distribution because there were no transfers in or out of levels 1, 2 or 3.
The following table presents changes duringCarrier stock-based awards outstanding prior to the six months ended June 30, 2020Separation and 2019 in Level 3 liabilities not measured at fair value on a recurring basis:
For the Six Months Ended June 30,
(dollars in millions)20202019
Fair value as of January 1$313  $291  
Issuances, including interest on project financing obligations1,835  85  
Settlements(36) (37) 
Fair value as of June 30$2,112  $339  
the Distribution.

NOTE 18:14: SEGMENT FINANCIAL DATA

The Company has 3 operating segments:

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

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

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

Our customers are in both the public and private sectors and our businesses reflect extensive geographic diversification. Inter-company sales between segments are immaterial.
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Net sales and Operating profit by segment are as follows:

Net SalesOperating Profit
For the Three Months Ended March 31,For the Three Months Ended March 31,
(In millions)2021202020212020
HVAC$2,486 $1,959 $365 $167 
Refrigeration1,005 808 127 99 
Fire & Security1,304 1,206 150 120 
Total segment4,795 3,973 642 386 
Eliminations and other(96)(85)(40)(35)
General corporate expenses0 0 (31)(36)
Total Consolidated$4,699 $3,888 $571 $315 

Geographic external sales are attributed to the geographic regions based on their location of origin. With the exception of the U.S. presented in the table below, there were no individually significant countries with sales exceeding 10% of total sales during the three months ended March 31, 2021 and 2020.

For the Three Months Ended March 31,
(In millions)20212020
United States$2,353 $2,011 
International:
Europe1,398 1,179 
Asia Pacific742 519 
Other206 179 
Net sales$4,699 $3,888 


NOTE 15: RELATED PARTIES

Equity Method Investments

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

Three Months Ended March 31,
(In millions)20212020
Sales to equity method investees included in Product sales
$468 $344 
Purchases from equity method investees included in Cost of products sold
$75 $77 

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

(In millions)March 31, 2021December 31, 2020
Receivables from equity method investees included in Accounts receivable, net
$197 $161 
Payables to equity method investees included in Accounts payable
$45 $38 

The Company periodically reviews the carrying value of its equity method investments to determine if there has been an other-than-temporary decline in fair value. A variety of factors are considered when determining if a decline in carrying value is
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other-than-temporary, including, among other factors, the financial condition and business prospects of the investee, as well as the Company's intent with regard to the investment. During the three months ended March 31, 2020, the Company determined that indicators of impairment existed for a minority owned joint venture investment. The Company performed a valuation of this investment, which was based on the income approach using the discounted cash flow method. The Company determined that the loss in value was other-than-temporary due to a reduction in sales and earnings that were driven by a deterioration in the oil and gas industry (the joint venture's primary market) and by the impact of the COVID-19 pandemic, among other factors. As a result, the Company recorded a non-cash, other-than-temporary impairment charge of $71 million on this investment during the three months ended March 31, 2020, which is included in Other income (expense), net on the accompanying Unaudited Condensed Consolidated Statement of Operations.

NOTE 16: COMMITMENTS AND CONTINGENT LIABILITIES

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

The Company’s operations are subject to environmental regulation by various authorities. We haveThe Company has accrued for the costs of environmental remediation activities, including but not limited to investigatory, remediation, operating and maintenance costs and performance guarantees and wethe Company periodically reassessreassesses these amounts. Management believes that the likelihood of incurring losses materially in excess of the amounts accrued is remote. As of June 30, 2020 and December 31, 2019, theThe outstanding liabilityliabilities for environmental obligations was $230 million and $217 million, respectively, of which $13 million and $14 million, respectively, is included in Accrued liabilities and $217 million and $203 million, respectively, is included in Other long-term liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet.are as follows:

(In millions)March 31, 2021December 31, 2020
Environmental reserves included in Accrued liabilities
$25 $26 
Environmental reserves included in Other long-term liabilities
210 213 
Total Environmental reserves$235 $239 
Legal Proceedings.
Asbestos Matters

 –
The Company and its consolidated subsidiaries have been named as defendants in lawsuits alleging personal injury as a result of exposure to asbestos allegedly integrated into certain Carrier products or business premises. While the Company has never manufactured asbestos and no longer incorporates it into any currently-manufactured products, certain products that Carrierthe Company no longer manufactures contained components incorporating asbestos. A substantial majority of these asbestos-related claims have been dismissed without payment or werehave been covered in full or in part by insurance or other forms of indemnity. Additional cases were litigated and settled without any insurance reimbursement. The amounts involved in asbestos-related claims were not material individually or in the aggregate in any period.

20

The Company had asbestos liabilities and related recoveries as follows:

(In millions)March 31, 2021December 31, 2020
Asbestos liabilities included in Accrued liabilities
$18 $17 
Asbestos liabilities included in Other long-term liabilities
225 228 
Total Asbestos liabilities$243 $245 
Asbestos-related recoveries included in Other assets, current
$6 $6 
Asbestos-related recoveries included in Other assets
96 97 
Total Asbestos-related recoveries$102 $103 

The amounts recorded for asbestos-related liabilities are based on currently available information and assumptions that we believethe Company believes are reasonable and are made with input from outside actuarial experts. As of June 30, 2020, the estimated range of liability to resolve all pending and unasserted potential future asbestos claims through 2059 is approximately $251 million to $290 million. Where no amount within a range of estimates is more likely, the minimum is accrued. We have recorded the minimum amount of $251 million and $255 million, which is principally recorded in Other long-term liabilities on the Unaudited Condensed Consolidated Balance Sheet as of June 30, 2020 and December 31, 2019, respectively. These amounts are undiscounted and exclude the Company’s legal fees to defend the asbestos claims, which are expensed as incurred. In addition, the Company has recorded an insurance recovery receivable for probable asbestos-related recoveriesrecoveries.

UTC Equity Awards Conversion Litigation

On August 12, 2020, several former employees of approximatelyUTC 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 ( $104 million, Geraud Darnis, et al. v. Raytheon Technologies Corporation, et al.). The Complaint challenges the method by which UTC equity awards were converted to UTC, Carrier and Otis equity awards following the Separation and the Distribution. The Complaint asserted that the defendants are liable for breach of certain equity compensation plans and for breach of fiduciary duty and also asserted claims under certain provisions of the Employee Retirement Income Security Act of 1974, as amended. Plaintiffs recently withdrew, with prejudice, their claims against Otis's and Carrier's current Boards of Directors. Carrier believes that the remaining claims against the Company are without merit.

Aqueous Film Forming Foam Litigation

Aqueous Film Forming Foam ("AFFF") is includeda firefighting foam developed in the 1970s pursuant to U.S. military specification and used to extinguish certain types of fires primarily at airports and military bases. AFFF was manufactured by several companies, including National Foam and Angus Fire. UTC acquired the National Foam and Angus Fire businesses in Other assets2005 as part of the acquisition of Kidde, which had been operated by Carrier. In 2013, UTC divested the National Foam and Angus Fire businesses to a third party.

The Company and many other parties, including the third-party buyer of the National Foam and Angus Fire businesses, have been named as defendants in over 900 cases, including putative class actions and other lawsuits, alleging that the historic use of AFFF caused personal injuries and property damage. Additionally, several state, municipal and water utility plaintiffs have commenced litigation against the same defendants to recover remediation costs related to historic use of AFFF. In December 2018, the U.S. Judicial Panel on Multidistrict Litigation ("MDL") transferred and consolidated all of the Unaudited Condensed Consolidated Balance SheetAFFF cases pending in the federal courts to the U.S. District Court for the District of South Carolina for pre-trial proceedings.

Plaintiffs in the MDL allege that a chemical ingredient in AFFF contains, or breaks down into, compounds known as perflourooctane sulfonate ("PFOS") and perflourooctane acid ("PFOA") that were released into the environment and, in some instances, ultimately leached into drinking water supplies. National Foam and Angus Fire purchased these perflourinated chemical ingredients from third-party chemical manufacturers to manufacture AFFF. Chemicals containing PFOS and PFOA (or their precursors) have also been used for decades by many third parties to manufacture carpets, clothing, fabrics, cookware and other consumer products. The individual plaintiffs in the MDL generally seek compensatory damages for alleged personal injuries, medical monitoring and diminution in property value and injunctive relief to remediate alleged contamination of June 30, 2020water supplies. The U.S., state, municipal and December 31, 2019.water utility plaintiffs in the MDL generally seek damages and costs related to the remediation of public property and water supplies.

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Income Taxes. As describedThe Company and other defendants are also party to fewer than 10 cases in Note 1 – state court brought by oil refining companies in the U.S. alleging product liability claims related to legacy sales of AFFF and seeking damages for the costs to replace the product and for property damage.

Description
The Company and other defendants are also party to an action related to the AFFF manufacturing facility that was operated by National Foam and Angus Fire in which the plaintiff water utility seeks remediation costs related to the alleged contamination of the Business, local water supply.

The Company believes that it has meritorious defenses to these claims and the Company is also seeking insurance coverage for these claims. At this time, however, given the numerous factual, scientific and legal issues to be resolved relating to these claims, the Company is unable to assess the probability of liability or reasonably estimate the damages, if any, to be allocated to the Company, if one or more plaintiffs were to prevail in these cases, and there can be no assurance that any such future exposure will not be material in any period.

Income Taxes

Under the TMA, provides special rules that allocate responsibility for tax liabilities arising from a failure of the Separation transactions to qualify for tax-free treatment based on the reasons for such failure. Further, the Company is responsible to UTC for its share of the TCJATax Cuts and Jobs Act ("TCJA") transition tax associated with foreign undistributed earnings as of December 31, 2017. As of June 30, 2020,March 31, 2021, a liability of $72 million, primarily related to ourthe Company's share of the TCJA transition tax associated with foreign undistributed earnings is included within Other long-term liabilitiesliabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet. We believeThe Company believes that the likelihood of incurring losses materially in excess of this amount is remote.

Other. As described in Note 16 – Guarantees, the Company extends performance and operating cost guarantees beyond the normal warranty and service policies for extended periods on some of its products. The Company typically accrues its estimate of the liability that may result under these guarantees and for service costs that are probable and can be reasonably estimated.Other

The Company has other commitments and contingent liabilities related to legal proceedings, self-insurance programs and matters arising in the ordinary course of business. The Company accrues for contingencies generally based upon a range of possible outcomes. If no amount within the range is a better estimate than any other, the Company accrues the minimum amount.

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

NOTE 19: SEGMENT FINANCIAL DATA
Carrier’s operations are classified into 3 segments: HVAC, Refrigeration and Fire & Security.
HVAC provides products, controls, services and solutions to meet the heating and cooling needs of residential and commercial customers, while enhancing building performance, energy efficiency and sustainability.17: SUBSEQUENT EVENTS

Refrigeration is comprisedOn April 19, 2021, the Board of transport refrigeration and commercial refrigeration products and solutions. Transport refrigeration products and services include refrigeration and monitoring systems for trucks, trailers, shipping containers, intermodal and rail.Directors declared a dividend of $0.12 per share of common stock payable on May 24, 2021 to shareowners of record at the close of business on May 3, 2021.

Fire & Security includesOn April 19, 2021, the Company announced that it signed agreements to acquire a wide rangecontrolling stake in Guangdong Giwee Group and its subsidiaries ("Giwee"). Giwee is a China-based manufacturer of residentialHVAC products, offering a portfolio of products including variable refrigerant flow, modular chillers and building systems products and solutions,light commercial air conditioners. The Company expects to close its acquisition of a controlling stake of Giwee in the second quarter of 2021 (with the remainder expected to close in the third quarter of 2021), subject to customary closing conditions, including fire, flame, gas, smoke and carbon monoxide detection; portable fire extinguishers; fire suppression systems; intruder alarms; access control systems and video management systems. Other fire and security service offerings include audit, design, installation and system integration, as well as aftermarket maintenance and repair and monitoring services.
Segment Information. Segment information for the periods presented are as follows:
Net SalesOperating Profit
For the Three Months Ended June 30,For the Three Months Ended June 30,
(dollars in millions)2020201920202019
HVAC$2,291  $2,735  $358  $545  
Refrigeration700  955  61  121  
Fire & Security1,057  1,386  106  184  
Total segment4,048  5,076  525  850  
Eliminations and other(76) (114) (56) (15) 
General corporate expenses—  —  (27) (30) 
Consolidated$3,972  $4,962  $442  $805  

regulatory approvals.

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Net SalesOperating Profit
For the Six Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
HVAC$4,250  $4,903  $525  $838  
Refrigeration1,508  1,917  160  248  
Fire & Security2,263  2,676  226  316  
Total segment8,021  9,496  911  1,402  
Eliminations and other(161) (211) (91) (32) 
General corporate expenses—  —  (63) (65) 
Consolidated$7,860  $9,285  $757  $1,305  

Geographic External Sales. Geographic external sales and operating profits are attributed to the geographic regions based on their location of origin. With the exception of the U.S. presented in the table below, there were no individually significant countries with sales exceeding 10% of total sales during the six months ended June 30, 2020 and 2019.
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
United States Operations$2,192  $2,713  $4,203  $4,932  
International Operations
Europe969  1,301  2,148  2,593  
Asia Pacific645  738  1,164  1,350  
Other166  210  345  410  
Consolidated$3,972  $4,962  $7,860  $9,285  
Products sales and Service sales. Segment sales disaggregated by product and service are as follows:
For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Sales Type
Product$1,976  $2,370  $3,633  $4,231  
Service315  365  617  672  
HVAC sales2,291  2,735  4,250  4,903  
Product609  861  1,322  1,728  
Service91  94  186  189  
Refrigeration sales700  955  1,508  1,917  
Product762  1,021  1,622  1,956  
Service295  365  641  720  
Fire & Security sales1,057  1,386  2,263  2,676  
Total segment sales4,048  5,076  8,021  9,496  
Eliminations and other(76) (114) (161) (211) 
Consolidated$3,972  $4,962  $7,860  $9,285  

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With respect to the Unaudited Condensed Consolidated Financial Statements of Carrier for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, PricewaterhouseCoopers LLP ("PricewaterhouseCoopers") reported that it has applied limited procedures in accordance with professional standards for a review of such information. However, its report dated July 31, 2020,April 29, 2021, appearing below, states that the firm did not audit and does not express an opinion on the Unaudited Condensed Consolidated Financial Statements. PricewaterhouseCoopers has not carried out any significant or additional audit tests beyond those that would have been necessary if their report had not been included. Accordingly, the degree of reliance on its report on such information should be restricted in light of the limited nature of the review procedures applied. PricewaterhouseCoopers is not subject to the liability provisions of Section 11 of the Securities Act of 1933, as amended (the "Securities Act"), for its report on the Unaudited Condensed Consolidated Financial Statements because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11 of the Securities Act.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareowners of Carrier Global Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheetof Carrier Global Corporation and its subsidiaries (the “Company”) as of June 30, 2020,March 31, 2021, and the related condensed consolidated statements of operations, of comprehensive income and(loss), of changes in equity for the three-month and six-monthperiods ended June 30, 2020 and 2019and the condensed consolidatedstatementof cash flows for thesix-month three-month periods endedJune 30, March 31, 2021 and 2020, and 2019, including the related notes (collectively referred to as the “interim financialinformation”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for itto be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in, the United States of America, the combinedconsolidated balance sheet of the Company as of December 31, 2019,2020, and the related combinedconsolidated statements of operations, of comprehensive income, of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 7, 2020,9, 2021, which included a paragraph describing a change in the manner of accounting for leases in the 2019 financial statements, we expressed an unqualified opinion on those combinedconsolidated financial statements. As discussedIn our opinion, the information set forth in Note 2 to the accompanying condensed consolidated interim financial information, the Company completed its separation, became an independent public company and has reflected the effectsbalance sheet as of the separation, reporting the historical results of the Company as a standalone company. The accompanying December 31, 2019 condensed2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet reflects this change.from which it has been derived.

Basis for Review Results

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



/s/ PricewaterhouseCoopers LLP

Fort Lauderdale,Hallandale Beach, Florida
July 31, 2020April 29, 2021
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW
Separation from United Technologies Corporation

On April 3, 2020, UTC completed the Separation through the Distribution of all of the outstanding common stock of the Company to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date for the Distribution. UTC distributed 866,158,910 shares of Carrier common stock in the Distribution, which was effective at the Effective Time. As a result of the Distribution, UTC shareowners of record received one share of the Company's common stock for every one share of UTC common stock and Carrier became an independent public company and our common stock is listed under the symbol "CARR" on the New York Stock Exchange. In connection with the Separation, Carrier issued an aggregate principal balance of $11.0 billion of debt and transferred approximately $10.9 billion of cash to UTC on February 27, 2020 and March 27, 2020. On April 1, 2020 and April 2, 2020, Carrier received cash contributions totaling $590 million from UTC related to the Separation. See Note 10 – Borrowings and Lines of Credit and Note 3 – Earnings Per Share to the Unaudited Condensed Consolidated Financial Statements for additional information.
These Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and do not include all of the information and notes required by GAAP for complete financial statements. Prior to the Separation, the Unaudited Condensed Consolidated Financial Statements reflect the financial position, results of operations and cash flows of the Company for the periods presented as historically managed within UTC. For the periods prior to the Separation, the Unaudited Condensed Consolidated Financial Statements are derived from the consolidated financial statements and accounting records of UTC and thus are prepared on a "carve-out" basis, as described below. The Company's financial statements for the period from April 3, 2020 through June 30, 2020 are consolidated financial statements based on the reported results of Carrier as a stand-alone company.

The Unaudited Condensed Consolidated Financial Statements include all revenues and costs directly attributable to Carrier, including costs for facilities, functions and services used by Carrier. Prior to the Separation, costs for certain functions and services performed by UTC were directly charged to Carrier based on specific identification when possible or based on a reasonable allocation driver such as net sales, headcount, proportionate usage or other allocation methods. The results of operations include allocations of costs for administrative functions and services performed on behalf of Carrier by centralized groups within UTC.
We entered into the TSA with UTC and Otis in connection with the Separation pursuant to which UTC provides us with certain services and we provide certain services to UTC for a limited time to help ensure an orderly transition following the Separation. The services we receive include, but are not limited to, information technology services, technical and engineering support, application support for operations, legal, payroll, finance, tax and accounting, general administrative services and other support services. Because costs for these services historically were included in our operating results based on allocations from UTC, we do not expect the costs associated with the TSA to be materially different and, therefore, we do not expect such costs to materially affect our results of operations or cash flows after we became an independent publicly traded company nor do we expect such costs to be materially different when these services are transitioned from UTC to Carrier.
Subsequent to the Separation, we have and will continue to incur expenditures consisting primarily of employee-related costs, costs to establish certain stand-alone functions and information technology systems and other transaction-related costs. Additionally, we will incur increased costs as a result of becoming an independent, publicly traded company, primarily from establishing or expanding corporate support for our businesses, including information technology, human resources, treasury, tax, internal audit, risk management, accounting and financial reporting, investor relations, governance, legal, procurement and other services. Our preliminary estimates of these additional recurring costs expected to be incurred annually are approximately $75 million to $95 million greater than the expenses historically allocated to us from UTC, and primarily relate to Selling, general and administrative expenses. We believe our cash flow from operations will be sufficient to fund these additional corporate expenses.
In connection with the Separation, we entered into the TMA with UTC and Otis that governs the parties’ respective rights, responsibilities and obligations with respect to tax matters (including responsibility for taxes, entitlement to refunds, allocation of tax attributes, preparation of tax returns, control of tax contests and other tax matters). Subject to certain exceptions set forth in the TMA, Carrier generally is responsible for federal, state and foreign taxes imposed on a separate return basis upon Carrier (or any of its subsidiaries) with respect to taxable periods (or portions thereof) that ended on or prior to the date of the Distribution. The TMA provides special rules that allocate responsibility for tax liabilities arising from a failure of the
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Separation transactions to qualify for tax-free treatment based on the reasons for such failure. The TMA also imposes restrictions on each of Carrier and Otis during the two-year period following the Distribution that are intended to prevent certain transactions from failing to qualify as transactions that are generally tax-free. For additional discussion, see "Certain Relationships and Related Party Transactions," in the Information Statement.
In connection with the Separation, we also entered into an employee matters agreement and intellectual property agreement with UTC and Otis. These agreements are not expected to have a material impact on the financial results of Carrier. For additional discussion, see "Certain Relationships and Related Party Transactions" in the Information Statement.
Business Summary

Carrier is a leading global provider of healthy, safe and sustainable building and cold chain solutions. We operate three business segments, HVAC, Refrigeration and Fire & Security, each with strong brands and innovative products which we expect to drive future growth. Today, our portfolio includes industry-leading brands such as Carrier, Kidde, Edwards, LenelS2, Carrier Transicold and Automated Logic that offer innovative HVAC, refrigeration, fire, security and security solutions. We also provide a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring. Our innovative solutions promote smarter,automation technologies to help make the world safer and more sustainable buildings and infrastructure, and help to effectively preserve the freshness, quality and safety of perishables across a wide variety of industries. Our comprehensive range of products and services, reputation for quality and innovation and our industry-leading brands make us a trusted provider for our customers’ critical applications in the construction, transportation, security, food, retail, pharmaceutical and other industries.comfortable.

Our worldwide operations are affected by global and regional industrial, economic and political factors on both a regional and global level. This includestrends. These factors and trends include the mega-trends of urbanization, climate change and increasing requirements for food safety driven by the food needs of our growing global population and the rising standards of living and increasing energy and environmental regulation.in emerging markets. We believe that growth in our businesses is supported bybusiness segments are well positioned to benefit from favorable secular trends, including these mega-trends, which underpin growth across our HVAC, Refrigeration and Fire & Security businesses. We also believe that we are well positioned to benefit from these long-term trends as a result of the strength of our industry-leading brands and track record of innovation. In addition, we regularly review our markets to proactively detect trends and adapt our strategies accordingly.

The effects of climate change, such as extreme weather conditions, create financial risks to our business. For example, the demand for our products and services, such as residential air conditioning equipment, may be affected by unseasonable weather conditions. Demand for our HVAC products and services, representing our largest segment by sales, is seasonal and affected by the weather. Cooler than normal summers depress our sales of replacement air conditioning products and services. Similarly, warmer than normal winters have the same effect on our heating products. The results of any quarterly period may not be indicative of the expected results for a full year.

Our business is also affected by changes in the general level of economic activity, such as changes in business and consumer spending, construction activity and shipping activity. A changeactivity as well as short-term economic factors such as currency fluctuations, commodity prices and supply disruptions. We continue to develop and commercialize new products in buildingorder to remain competitive in our markets and remodeling activity also can affect our financial performance.use risk management strategies to mitigate various exposures. In addition, we work with our financial performance may be influenced bysuppliers to ensure inventory levels are sufficient to meet customer demand and use pricing actions as appropriate to help mitigate inflationary pressure on the productioncosts of commodities and utilization of transport equipment, including truck production cyclescomponents used in North America and Europe.our products.

Separation from United Technologies Corporation
On April 3, 2020, UTC completed the Separation of Carrier into an independent, publicly traded company. In connection with the Separation, we issued an aggregate principal balance of $11.0 billion of debt and transferred approximately $10.9 billion of cash to UTC on February 27, 2020 and March 27, 2020.
In connection with the Separation, we entered into several agreements with UTC and Otis that govern various aspects of the relationship between us, UTC and Otis following the Separation and the Distribution including the TSA (which expired on March 31, 2021), the TMA, an employee matters agreement and an intellectual property agreement. Income and expense under these agreements are not material.

Our financial statements for periods prior to the Separation and the Distribution are prepared on a "carve-out" basis and include all amounts directly attributable to Carrier. Net cash transfers and other property transferred between UTC and us, including related party receivables and payables between us and other UTC affiliates, are presented as Net transfers to UTC. In addition, the financial statements include allocations of costs for administrative functions and services performed on our behalf by centralized groups within UTC. All allocations and estimates in the Unaudited Condensed Consolidated Financial Statements are based on assumptions that management believes are reasonable. Our financial statements for the periods subsequent to April 3, 2020 are consolidated financial statements based on the reported results of Carrier as a stand-alone company.
Impact of the COVID-19 pandemicPandemic
COVID-19 surfaced in Wuhan, China in late 2019 and has since spread throughout the rest of the world. In Marchearly 2020, COVID-19 was declared a pandemic by the World Health Organization anddeclared the outbreak of a national emergency by the U.S. Government.The pandemic has negatively affected the U.S. andrespiratory disease known as COVID-19 as a global economies, disrupted global supply chains and financial markets, resulted in significant travel restrictions, mandated facility closures, and shelter-in-place orders.
Carrier is taking all prudent measures to protect the health and safety of our employees and haspandemic. In response, many countries implemented work from home requirements, where possible, social distancing where working from home is not feasible, including in our manufacturing facilities, deep cleaning protocols at all of our facilities and travel restrictions, among other measures. We have also taken appropriate measures to work with our customers to minimize potential disruption and to support the communities that we serve to address the challenges posed by the pandemic.
The full extent of the impact of the COVID-19 pandemic on the Company's operational and financial performance will depend on future developments, including the duration and spread of the pandemic, as well as any worsening of the pandemic and whether there will be additional outbreaks of the pandemic, and related containment and mitigation actions taken bymeasures to combat the U.S., state and local and international governments to prevent disease spread.outbreak which The extent of the pandemic's impact on Carrier will also depend upon our employees' ability to work safely in our facilities, our customers’ ability to continue to operate or receive our products, the ability of our suppliers to continue to operate, andseverely restricted the level of economic activity and demand forcaused a significant contraction in the ultimate product and services of our customers or their customers.
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During the three months ended March 31, 2020,global economy. As a result, we temporarily closed or reduced production at manufacturing facilities in North America, Asiaacross the globe to ensure employee safety and Europe for safety reasons and in responseinstructed non-essential employees to lowerwork from home. In addition, we took several preemptive actions during the year to manage
24

liquidity as demand for our products however, asdecreased. Despite the continued adverse impacts of June 30,the pandemic on our results since the first quarter of 2020, manufacturing operations resumed and several restorative actions were completed during 2020 including the reinstatement of annual merit-based salary increases and continued investment to support our manufacturing facilities (and nearly all of our suppliers) had resumed operations and 95% of our production capacity was available and, where appropriate, we initiated return-to-work protocols at our non-manufacturing facilities where employees were previously working remotely. During the three months ended March 31, 2020, we considered the outbreak and subsequent impacts to be a trigger to reassess our goodwill and intangible asset valuations. In order to evaluate these impacts, we made forecast assumptions regarding future business activity that are subject to a wide range of uncertainties, including those noted in the prior paragraph. Based upon qualitative and, in certain cases, quantitative analyses, we determined that our goodwill and intangible assets were not impaired. For the period ended June 30, 2020, we reviewed the assumptions used in our March 31, 2020 assessment and determined that they remain appropriate.core strategy.

We continue to focus our efforts on navigatingpreserving the challenges COVID-19 presents by preservinghealth and safety of our liquidityemployees and managing our cash flows through preemptive actions to enhance our ability to meet our liquidity needs over the next twelve months. Such actions include, but are not limited to modifying the financial covenants in our revolving and term loan credit agreements and issuing $750 million of unsecured, unsubordinated long-term debt (see Note 10 – Borrowings and Lines of Credit for additional information), reducing our discretionary spending, our capital investments and general and administrative costs by implementing pay freezes and cuts, employee furloughs and the suspension of non-critical hiring, and participation in global COVID-19 relief measures, including the CARES Act, which provides for payroll tax deferrals and credits, income tax payment deferrals, and an increase in the income tax interest deduction limitation.
Business Segments
Our operations are organized into three segments: HVAC, Refrigeration and Fire & Security. Our HVAC segment provides products, controls, services and solutions to meet the heating and cooling needs of residential and commercial customers. Our Refrigeration segment provides refrigeration and monitoring systems for trucks, trailers, shipping containers, intermodal and rail,customers as well as commercial refrigeration products. Our Fire & Security products encompass a wide rangemaintaining the continuity of residentialour operations. In addition, we continue to actively monitor our liquidity position and commercial building systemsworking capital needs and securitybelieve that our overall capital resources and service solutions. Our customersliquidity position are adequate. The preparation of financial statements requires management to use judgments in both the publicmaking estimates and private sectors, and our businesses reflect extensive geographic diversification. See Note 19 –Segment Financial Data to the Unaudited Condensed Consolidated Financial Statements for additional discussion of sales attributed to geographic regions.
Our earnings growth strategy contemplates earnings from organic sales growth, including growth from new product development and product improvements, structural cost reductions, operational improvements and incremental earnings from acquisitions.

Both acquisition and restructuring costs associated with business combinations are expensed as incurred. Dependingassumptions based on the naturerelevant information available at the end of each period which can have a significant effect on reported amounts. However, due to significant uncertainty surrounding the pandemic, management's judgments could change. While our results of operations, cash flows and level of acquisition activity, our earningsfinancial condition could be adverselynegatively impacted, due to acquisition and restructuring actions initiated in connectionthe extent of the impact cannot be estimated with the integration of businesses acquired. For additional discussion of acquisitions and restructuring, see "Liquidity and Financial Condition," "Restructuring Costs," Note 10 –Borrowings and Lines of Credit and Note 15 –Restructuring Costs to the Unaudited Condensed Consolidated Financial Statements.

certainty at this time.
CRITICAL ACCOUNTING ESTIMATES
Preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales and expenses. We believe that the most complex and sensitive judgments, because of their potential significance to the Unaudited Condensed Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. In "Management’s"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of the Information Statement,our 2020 Form 10-K, we describe the significant accounting estimates and policies used in the preparation of the Unaudited Condensed Consolidated Financial Statements. There have been no significant changes in our critical accounting estimates. However, in

RESULTS OF OPERATIONS

Consolidated Results

For the Three Months Ended March 31,
(In millions)20212020Period Change% Change
Net sales$4,699 $3,888 $811 21 %
Cost of products and services sold(3,305)(2,766)(539)19 %
Gross margin1,394 1,122 272 24 %
Operating expenses(823)(807)(16)2 %
Operating profit571 315 256 81 %
Non-operating income (expenses), net(75)(20)(55)275 %
Income from operations before income taxes496 295 201 68 %
Income tax expense(104)(193)89 (46)%
Net income from operations392 102 290 284 %
Less: Non-controlling interest in subsidiaries' earnings from operations8 6 2 33 %
Net income attributable to common shareowners$384 $96 $288 300 %


Net Sales

For the three months ended March 31, 2020, we reassessed our goodwill asset valuations as2021, Net sales were $4.7 billion, a result21% increase compared with the same period of 2020. The components of the impact ofyear-over-year change were as follows:

Organic17 %
Foreign currency translation4 %
Total % change21%

We continue to be impacted by the current economic environment brought about by the COVID-19 pandemic onglobal pandemic. However, strong operational performance and continued improvement in the global economic climate during the quarter increased organic sales by 17%. The organic increase was primarily driven by our operational and financial performance.
We test our reporting units' goodwillHVAC segment with continued strong results for impairment by comparing the estimated fair value of each reporting unit to its carrying amount. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions, estimates and market factors. The financial forecast used to estimate the fair value of our reporting units incorporates assumptions and estimates regarding our future plans, as well as industry, economic and regulatory conditions. The significant assumptions inherent in estimating the fair values include the estimated future annual net cash flows for each reporting unit (including net sales, cost of products and services sold, selling, general and administrative expenses, depreciationNorth
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America residential and amortization, working capitalimproved end-markets in Europe and capital expenditures), income tax rates, long-term growth ratesChina for commercial HVAC. Strong results in both our Refrigeration segment and our Fire & Security segment were also driven by improved global end-markets compared with the prior year period. Refer to "Segment Review" below for a discount rate that appropriately reflects the risks inherent in each future cash flow stream.discussion of Net sales by segment.
In
Gross Margin

For the three months ended March 31, 2020, we qualitatively determined that the goodwill for all but one of our reporting units2021, Gross margin was not impaired. For one reporting unit with goodwill of $966 million, we performed$1.4 billion, a quantitative analysis and selected the assumptions used in the financial forecasts to estimate the reporting unit’s fair value using historical data, supplemented by current and anticipated market conditions, including estimated growth and discount rates, management’s plans and the anticipated impact of the COVID-19 pandemic on the reporting unit’s business and financial performance. Based upon our analysis, we determined that the goodwill was not impaired. However, the fair value of the reporting unit exceeded its underlying carrying value by 20% and a 100 basis-point24% increase in the discount rate used in the financial forecast would result in an impairment of approximately $175 million. For the period ended June 30, 2020, we reviewed the assumptions used in our March 31, 2020 assessment and determined that they remain appropriate. The estimated fair value of the reporting unit would be negatively impacted if future economic conditions are worse than our financial forecast and assumptions or there are substantial reductions in our end markets and volume assumptions relative to our financial forecasts.
RESULTS OF OPERATIONS
Net Sales
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Net sales$3,972  $4,962  $7,860  $9,285  
Percentage change(20)%(15)%

The factors contributing to the total percentage change year-over-year in total net sales are as follows:
For the Three Months Ended June 30, 2020For the Six Months Ended June 30, 2020
Organic / Operational(19)%(14)%
Foreign currency translation(1)%(1)%
Total % change(20)%(15)%

Organic sales declined across all three segments for the three and six months ended June 30, 2020 compared with the same periods of the prior year, reflecting lower volumes driven by the economic slowdowns attributed to the COVID-19 pandemic shutdowns in the first half of the year. The decrease in HVAC reflects lower volumes in commercial and residential HVAC resulting from the difficult economic environment due to the COVID-19 pandemic. The decrease in Refrigeration was driven by a decline in transport refrigeration due to the impact from the COVID-19 pandemic with declines in North America and Europe truck trailer as well as container. The decrease in North America truck trailer sales was also attributed to the cyclical peak experienced in 2019. The decrease in commercial refrigeration was primarily driven by lower volume in Europe combined with various regional shutdowns attributed to the COVID-19 pandemic. Fire & Security decreased organically, reflecting lower sales volumes in both product and field services driven by the impact of the COVID-19 pandemic which primarily impacted the installation and service businesses due to no or limited access to customer sites during the three months ended June 30, 2020. For additional discussion on the segment results for the three and six months ended June 30, 2020, see "Segment Review."
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Cost of Products and Services Sold
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Total cost of products and services sold$2,831  $3,488  $5,597  $6,585  
Percentage change year-over-year(19)%(15)%

The factors contributing to the percentage change year-over-year in total cost of products and services sold are as follows:
For the Three Months Ended June 30, 2020For the Six Months Ended June 30, 2020
Organic / Operational(17)%(14)%
Foreign currency translation(1)%(1)%
Other(1)%— %
Total % change(19)%(15)%

The organic decrease in total cost of products and services sold for the three and six months ended June 30, 2020, as compared with the same period of the prior year, is consistent with the organic sales decline of 19% and 14%, respectively, for the same periods. The organic declines in cost of products and services sold is attributable to the sales volume declines driven by the economic slowdowns related to the COVID-19 pandemic experienced in the first half of the year.
Gross Margin
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Gross margin$1,141  $1,474  $2,263  $2,700  
Percentage of net sales28.7 %29.7 %28.8 %29.1 %
2020.

For the Three Months Ended March 31,
(In millions)20212020
Net sales$4,699 $3,888 
Cost of products and services sold(3,305)(2,766)
Gross margin$1,394 $1,122 
Percentage of net sales29.7 %28.9 %

The 100 basis point decreaseincrease inGross margin was primarily driven by strong operational performance and continued improvement in the global economic climate during the current period. Higher volumes in each of our segments outpaced operational costs due to continued cost containment initiatives as well as improved material and factory productivity actions. These amounts were partially offset by the rising cost for commodities and components used in our products, certain supply chain inefficiencies and freight costs. As a result, gross margin as a percentage of Net sales for increased by 80 basis points compared with the same period of 2020.

Operating Expenses
For the three months ended March 31, 2021, operating expenses, including Equity method investment net earnings, were $823 million, a 2% increase compared with the same period of 2020. The components were as follows:

For the Three Months Ended March 31,
(In millions)20212020
Selling, general and administrative$(743)$(692)
Research and development(121)(98)
Equity method investment net earnings38 29 
Other income (expense), net3 (46)
Total operating expenses$(823)$(807)
Percentage of net sales17.5 %20.8 %

For the three months ended June 30, 2020 reflectsMarch 31, 2021, Selling, general and administrative expenses were $743 million, a 7% increase compared with the effectssame period of lower sales volumes and factory inefficiencies as a result of economic conditions resulting from2020. At the COVID-19 pandemic partly offset by cost containment initiatives.

The 30 basis point decrease in gross margin as a percentage of sales for the six months ended June 30, 2020 was primarily driven by the effects of lower volume largely as a resultonset of the COVID-19 pandemic, lower factorywe initiated various cost containment initiatives in order to help mitigate the impacts on our business, which included reducing discretionary spending and field productivity and unfavorable product mix,temporarily closing or limiting the presence of our workforce in our facilities. These amounts were partially offset by favorable material productivity$45 million of Separation related costs during the three months ended March 31, 2020. As a result, the increase in Selling, general and commodities.
administrativeResearch expense in the current period reflects the gradual return to our operational spending levels prior to the COVID-19 pandemic. In addition, higher compensation and Developmentbenefit charges related to variable compensation, restructuring charges and unfavorable foreign currency movements in the current period further contributed to the year-over-year increase.
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Research and development$94  $103  $192  $200  
Percentage of net sales2.4 %2.1 %2.4 %2.2 %

Research and development spending is subjectcosts relate to new product development and new technology innovation. Due to the variable nature of program development schedules, and, therefore, year-over-year fluctuations in spending levels are expected. Although cost containment initiatives resulted in lower year-over-year researchcan fluctuate. In addition, we continue to invest to prepare for future refrigerant regulation changes and development expenses, the lower sales volumes experienced in the three and six months ended June 30, 2020, as compared with the same period of the prior year, resulted in a 30 basis point and 20 basis point increase, respectively, in expenses as a percentage of net sales.
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Selling, General and Administrative
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Selling, general and administrative expenses$637  $680  $1,329  $1,364  
Percentage of net sales16.0 %13.7 %16.9 %14.7 %
digital controls technologies.

The decrease in Selling, general and administrative expenses for the three months ended June 30, 2020, as compared with the same period of the prior year, was primarily driven by cost containment initiatives taken to mitigate the COVID-19 related decline in sales volume. Such cost containment actions included, but were not limited to, furloughs, lower employee compensation, and reductions in discretionary spending across the businesses. Costs associated with the Separation of $23 million were partially offset by lower restructuring costs of $16 million. As a percentage of sales, the 230 basis point increase was primarily driven by lower sales volumes experienced as a result of the COVID-19 pandemic as noted previously.
The decrease in Selling, general and administrative expenses in the six months ended June 30, 2020 was primarily driven by cost containment initiatives taken to mitigate the COVID-19 related decline in sales volume. Such cost containment actions included, but were not limited to, furloughs, lower employee compensation, and reductions in discretionary spending across the businesses. Costs associated with the Separation of $68 million were partially offset by lower restructuring costs of $40 million and lower costs associated with the wind-down of a residential intrusion business of $13 million. As a percentage of sales, the 220 basis point increase was primarily driven by lower sales volumes experienced as a result of the COVID-19 pandemic as noted previously.
We are continuously evaluating our cost structure and have implemented restructuring actions to keep our cost structure competitive. The amounts reflected previously include the impact of restructuring actions on Selling, general and administrative expenses. For additional discussion, see "Restructuring Costs" and Note 15 –Restructuring Costs to the Unaudited Condensed Consolidated Financial Statements.
Restructuring Costs
 For the Six Months Ended June 30,
(dollars in millions)20202019
Cost of sales$6  $13  
Selling, general and administrative10  50  
Total restructuring costs$16  $63  

Restructuring actions are a component of our operating margin improvement efforts and relate to existing and recently acquired operations. Charges generally arise from severance related to workforce reductions, facility exit and lease termination costs associated with the consolidation of field and manufacturing operations and costs to exit legacy programs. We continue to closely monitor the economic environment and may undertake further restructuring actions to keep our cost structure aligned with the demand for our products and services and prevailing market conditions.
2020 Actions.During the six months ended June 30, 2020, we recorded net pre-tax restructuring charges of $13 million relating to ongoing cost reduction actions initiated in 2020. For actions initiated in 2020, we are targeting to complete the majority of the remaining workforce and facility-related cost reductions in 2021. During the six months ended June 30, 2020, we had $4 million of cash outflows related to the 2020 actions. As of June 30, 2020, we expect to incur additional restructuring and other charges of $7 million to complete these actions.
2019 Actions. During the six months ended June 30, 2020 and 2019, we recorded net pre-tax restructuring charges of $3 million and $49 million, respectively, for actions initiated in 2019. For actions initiated in 2019, we are targeting to complete the majority of the remaining workforce and facility-related cost reductions in 2020. During the six months ended June 30, 2020, we had cash outflows of approximately $20 million related to the 2019 actions.
In addition, during the six months ended June 30, 2020 and 2019, we recorded net pre-tax restructuring costs totaling $0 million and $14 million, respectively, for restructuring actions initiated in 2018 and prior.
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Equity Method Investment Net Earnings
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Equity method investment net earnings$57  $80  $86  $120  

Investments over which we do not exercise control, but have significant influence, are accounted for using the equity method of accounting. Equity in earnings of unconsolidated equity method investments decreased inFor the three and six months ended June 30, 2020 by $23March 31, 2021, Equity method investment net earnings were $38 million, and $34 million, respectively,a 31%
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increase compared with the same period of 2020. The increase was primarily duerelated to lowerhigher earnings from our investments in HVAC joint ventures in Asia and the Middle East primarily due toand North America as end-markets improved compared with the impactprior period. These amounts were partially offset by a change in the estimated cost of a product trouble matter and the COVID-19 pandemic.reduction in earnings resulting from the sale of our investment in Beijer REF AB in 2020.

Other (Expense) Income, Netincome (expense), net
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Other (expense) income, net$(25) $34  $(71) $49  

Other (expense) income, net primarily includes the impact of gains and losses related to the sale of interests in our equity method investments, or infrequently occurring items. The year-over-year change of $59 million forforeign currency gains and losses on transactions that are denominated in a currency other than an entity's functional currency and hedging-related activities. During the three months ended June 30,March 31, 2020 is primarily driven by the absence of, Other income (expense), net included a gain on the sale of an interest in a joint venture of $21$71 million in 2019, the unfavorable impact of a change in the estimate of certain long-term liabilities of $12 million, and higher deferred compensation charges of $8 million. The year-over-year change of $120 million for the six months ended June 30, 2020, is primarily driven by an other-than-temporary impairment charge of $71 millionin 2020 on a minority-owned joint venture investment in 2020, the absence of gains on the sale of investments of $34 million in 2019 and the unfavorable impact of a change in the estimate of certain long-term liabilities of $12 million, partially offset by a gain on the sale of an investment of $9 million.investment.
Interest (Expense)
Non-Operating Income Net
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Interest expense$(85) $(9) $(123) $(35) 
Interest income4  25  5  55  
Interest (expense) income, net$(81) $16  $(118) $20  
(Expenses), net

Prior toFor the Separation, Interest income and Interest expense related primarily to interest on related party activity between Carrier and UTC. See "Liquidity and Financial Condition" in this Item 2 and Note 5 – Related Parties and Note 10 –Borrowings and Lines of Credit to the Unaudited Condensed Consolidated Financial Statements.
Interest (expense) income, net reflects higher year-over-year interest expense for the three and six months ended June 30, 2020March 31, 2021, Non-operating income (expenses), net were $75 million, a 275% increase compared with the threesame period of 2020. The components were as follows:

For the Three Months Ended March 31,
(In millions)20212020
Non-service pension (expense) benefit$18 $17 
Interest expense$(96)$(38)
Interest income3 1 
Interest (expense) income, net$(93)$(37)
Non-operating income (expenses), net$(75)$(20)

Non-operating income (expenses), net include the results from activities other than normal business operations such as interest expense and sixinterest income and the components of net periodic benefit cost for pension and post-retirement obligations.

Interest expense is affected by the amount of debt outstanding and the interest rates on that debt. For the three months ended June 30, 2019 due toMarch 31, 2021 Interest expensewas $96 million, a 153% increase compared with the same period in 2020. In connection with the Separation and the Distribution, we issued $11.0 billion of long-term debt in February 2020. As a result, interest expense during the three months ended March 31, 2020 only included interest expense incurred after the issuance date. In addition, during the three months ended March 31, 2021, we incurred a make-whole premium of $9.25 billion$17 million and wrote-off $2 million of fixed rate notesunamortized deferred financing costs as a result of the redemption of our $500 million 1.923% Notes originally due in February 2020, a $1.75 billion draw on our term loan in March 2020, the issuance of $750 million of fixed rate notes in June 2020 and a decrease in interest income earned on related party receivables due from UTC.2023.

Income Taxes
 For the Three Months Ended June 30,For the Six Months Ended June 30,
 2020201920202019
Effective tax rate28.2 %7.6 %44.6 %14.6 %

 For the Three Months Ended March 31,
 20212020
Effective tax rate21.0 %65.4 %

The increasedecrease in the effective tax rate for the three months ended June 30, 2020 compared with the prior yearMarch 31, 2021 is primarily due to the recognition of a favorable tax adjustment of $21 million resulting from a re-organization in our German subsidiaries and the absence of a prior year combined tax benefitcharge of $149 million resulting from the filing by a Carrier subsidiary to participate in an amnesty program offered by the Italian Tax Authority and conclusion of an audit by the IRS for UTC tax years 2014, 2015 and 2016.
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The increase in the effective tax rate for the six months ended June 30, 2020 as compared with the prior year is primarily due to the items described above as well as the following items which were recorded in the six months ended June 30, 2020: a $51 million adjustment related to a valuation allowance recorded against a United Kingdom tax loss and credit carry forward and a $46 million charge resulting from Separation-related activities, an adjustment of $46 million resulting from Carrier'sour decision to no longer permanently reinvest certain pre-2018 unremitted non-U.S. earnings, and the impact of a non-deductible impairment charge of $71 million on a minority-owned joint venture investment.earnings.

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SEGMENT REVIEW

Three Months Ended March 31, 2021 Compared with Three Months Ended March 31, 2020

We continuehave three operating segments:
•The HVAC segment provides products, controls, services and solutions to monitor potential tax impacts from final regulations issued undermeet the TCJA,heating, cooling and ventilation needs of residential and commercial customers while enhancing building performance, 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 the economic impacts from COVID-19commercial refrigeration products.
•The Fire & Security segment provides a wide range of residential, commercial and related legislative actions.industrial technologies and systems and services solutions to protect people and property.

For additional discussion of income taxes and the effective income tax rate, see Note 14 – Income Taxes to the Unaudited Condensed Consolidated Financial Statements.
Net Income Attributable to Common Shareowners 
 For the Three Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Net income attributable to common shareowners$261  $784  $357  $1,184  

Net income attributable to common shareowners for the three and six months ended June 30, 2020 includes $11 million pre-tax ($8 million, net of tax benefit) and $16 million ($12 million, net of tax benefit) of restructuring charges, respectively. For the six months ended June 30, 2020, Net income attributable to common shareowners also reflects the impact of the following:
•A $71 million impairment charge recorded in the three months ended March 31, 2020 on a minority-owned joint venture investment that was not tax deductible.
•As previously discussed in the "Income Taxes" section, a $97 million tax adjustment recorded in the three months ended March 31, 2020.
•Separation-related costs of $23 million pre-tax ($17 million, net of tax benefit) and $73 million pre-tax ($55 million, net of tax benefit) that were recorded in the three and six months ended June 30, 2020, respectively.
Net income attributable to common shareowners for the three and six months ended June 30, 2019 includes restructuring charges of $30 million pre-tax ($22 million, net of tax benefit) and $63 million ($46 million, net of tax benefit), respectively. Net income attributable to common shareowners also reflects $21 million and $34 million, respectively, for the three and six months ended June 30, 2019 primarily due to the sale of investments and from the combined tax benefit of $149 million resulting from the filing by a Carrier subsidiary to participate in an amnesty program offered by the Italian Tax Authority and the conclusion of an audit by the IRS for UTC tax years 2014, 2015 and 2016.
Segment Review
We determine our segments based on how our Chief Executive Officer, who is the Chief Operating Decision Maker (the "CODM"), allocates resources, assesses performance and makes operational decisions. The CODM allocates resources and evaluates the financial performance of each of our segments HVAC, Refrigeration and Fire & Security based on netNet sales and operating profit.Operating profit. Adjustments to reconcile segment reporting to the consolidated results for the three and six months ended June 30, 2020 and 2019 are included in "Eliminations and other and General corporate expenses."
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Summary performance for each of our segments for the three months ended June 30,March 31, 2021 and 2020 and 2019 is as follows:
 Net SalesOperating ProfitOperating Profit Margin
(dollars in millions)202020192020201920202019
HVAC$2,291  $2,735  $358  $545  15.6 %19.9 %
Refrigeration700  955  61  121  8.7 %12.7 %
Fire & Security1,057  1,386  106  184  10.0 %13.3 %
Total segment4,048  5,076  525  850  13.0 %16.7 %
Eliminations and other(76) (114) (56) (15) 73.7 %13.2 %
General corporate expenses—  —  (27) (30) — %— %
Consolidated$3,972  $4,962  $442  $805  11.1 %16.2 %

Summary performance for each of our segments for the six months ended June 30, 2020 and 2019 is as follows:

Net SalesOperating ProfitOperating Profit Margin Net SalesOperating ProfitOperating Profit Margin
(dollars in millions)202020192020201920202019
For the Three Months Ended March 31,For the Three Months Ended March 31,For the Three Months Ended March 31,
(In millions)(In millions)202120202021202020212020
HVACHVAC$4,250  $4,903  $525  $838  12.4 %17.1 %HVAC$2,486 $1,959 $365 $167 14.7 %8.5 %
RefrigerationRefrigeration1,508  1,917  160  248  10.6 %12.9 %Refrigeration1,005 808 127 99 12.6 %12.3 %
Fire & SecurityFire & Security2,263  2,676  226  316  10.0 %11.8 %Fire & Security1,304 1,206 150 120 11.5 %10.0 %
Total segmentTotal segment8,021  9,496  911  1,402  11.4 %14.8 %Total segment4,795 3,973 642 386 13.4 %9.7 %
Eliminations and otherEliminations and other(161) (211) (91) (32) 56.5 %15.2 %Eliminations and other(96)(85)(40)(35)
General corporate expensesGeneral corporate expenses—  —  (63) (65) — %— %General corporate expenses— — (31)(36)
Consolidated$7,860  $9,285  $757  $1,305  9.6 %14.1 %
Total ConsolidatedTotal Consolidated$4,699 $3,888 $571 $315 12.2 %8.1 %


HVAC Segment

Our HVAC segment provides products, controls, services and solutions to meet the heating and cooling needs of residential and commercial customers, while enhancing building performance, energy efficiency and sustainability. Our established brands include Automated Logic, Bryant, Carrier, CIAT, Day & Night, Heil, NORESCO and Riello. Products include air conditioners, heating systems, controls and aftermarket components, as well as aftermarket repair and maintenance services and building automation solutions. HVAC products and solutions are sold directly, including to building contractors and owners, and indirectly through equity method investees, independent sales representatives, distributors, wholesalers, dealers and retail outlets, and through direct sales offices which sell, in part, to mechanical contractors.
Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019

(dollars in millions)20202019Increase (Decrease)% Increase (Decrease)
Net sales$2,291  $2,735  $(444) (16)%
Operating profit$358  $545  $(187) (34)%

Net SalesOperating Profit
Organic / Operational(15)%(32)%
Foreign currency translation(1)%(1)%
Restructuring— %3 %
Other— %(4)%
Total % change(16)%(34)%

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The organic sales decrease of 15% was driven by declines in commercial HVAC (17%) and residential HVAC (13%) largely driven by the economic slowdowns related to the COVID-19 pandemic. Commercial HVAC declined in North America, Europe and Asia Pacific. An increase in China sales inFor the three months ended June 30, 2020 was more than offset by lowerMarch 31, 2021, Net sales in our HVAC segment were $2.5 billion, a 27% increase compared with the remaindersame period of Asia Pacific, particularly India, which was impacted by a prolonged shutdown. Residential HVAC sales decreased due to lower sales2020. The components of split systems related to the COVID-19 pandemic.year-over-year change were as follows:

The operational profit decrease of 32% was primarily attributable to lower sales volumes and unfavorable mix (28%), lower income from equity method investments (3%) as a result of economic slowdowns related to the COVID-19 pandemic, and the unfavorable impact of a change in the estimate of certain long-term liabilities (4%). These decreases were partially offset by the benefit of cost containment initiatives.

The 4% decrease in Other primarily reflects the absence of a prior year gain on the sale of an investment in a joint venture (4%).


Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

(dollars in millions)20202019Increase (Decrease)% Increase (Decrease)
Net sales$4,250  $4,903  $(653) (13)%
Operating profit$525  $838  $(313) (37)%

Net salesOperating profit
Organic / Operational(13)%(29)%
Foreign currency translation— %(1)%
Restructuring— %4 %
Other— %(11)%
Total % change(13)%(37)%
Net Sales
Organic25 %
Foreign currency translation2 %
Total % change in Net sales27%

The organic increase in Net sales decrease of 13% reflects declines25% was driven by strong results across each of the segment's product lines. Increased sales in our North America residential and light commercial HVAC (13%business (33%) and residential HVAC (12%) and was largelywere driven by new construction, the economic slowdowns related toongoing stay-at-home workforce and higher levels of distributor stocking. Increased sales in our Commercial HVAC business (16%) benefited from the COVID-19 pandemic. Commercial HVAC sales declined across most of its businesses, including light commercial, applied and the services business in North America, Europe and Asia Pacific. Asia Pacific was lowergradual improvement in the six months ended June 30, 2020, primarily in India and China, despite a sales increase in China forglobal economic environment as our end markets continue to improve from the three months ended June 30, 2020. The residential HVAC sales decline primarily was due to lower split systems and gas furnaces sales. In addition to the impactprior year impacts of the COVID-19 pandemic, U.S. residential sales year-over-year were impacted by an increasepandemic. In addition, continued growth in demand for furnacesour business, particularly in Europe and China, supported improved results.
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For the three months ended March 31, 20192021, Operating profit in our HVAC segment was associated$365 million, a 119% increase compared with athe same period of 2020. The components of the year-over-year change in furnace fan efficiency ratings that went into effect in 2019.were as follows:

Operating Profit
Operational84 %
Acquisitions and divestitures, net(4)%
Restructuring(1)%
Other40 %
Total % change in Operating profit119%

The increase in operational profit decrease of 29% was primarily attributedattributable to lowerhigher sales volumes in the North America residential and unfavorable mix (26%), lowerlight commercial HVAC and the commercial HVAC businesses compared with the prior year period. In addition, favorable productivity initiatives benefited logistics and material costs, while higher income from equity method investments (3%), and the unfavorable impact of a change in the estimate of certain long-term liabilities (3%).benefited operational profit. These decreasesamounts were partially offset by lower commodityhigher selling, general and administrative costs favorable material productivity, and cost containment initiatives.research and development activities during the current period.

The 11% decrease in Other primarily reflectsFor the three months ended March 31, 2020, we realized a non-cash other-than-temporary impairment charge of $71 million onrelated to a minority-owned joint venture investment due to a reduction in sales and earnings that wereventure. The charge was driven by a deterioration in the oil and gas industry (the joint venture's primary market) andas well as the impact of the COVID-19 pandemic among other factors. Other also reflects the absence of a prior year gain on the sale of an interest in a joint venture (2%).and was recorded within Other.

Refrigeration Segment

OurFor the three months ended March 31, 2021, Net sales in our Refrigeration segment includes transport refrigeration and monitoring systems for trucks, trailers, shipping containers, intermodal and rail,were $1.0 billion, a 24% increase compared with the same period of 2020. The components of the year-over-year change were as well as commercial refrigeration products. Transport refrigeration products and cold chain monitoring solutions are used to enable the safe and reliable transport of food and beverages, medical supplies and other perishable cargo.
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Commercial refrigeration solutions include refrigerated cabinets, freezers, systems and controls. Our commercial refrigeration equipment solutions incorporate next-generation technologies to preserve freshness, ensure safety and enhance the appearance of food and beverage retail. Our Refrigeration products and services are sold under established brand names, including Carrier Commercial Refrigeration, Carrier Transicold and Sensitech. Refrigeration products and services are sold directly, including to transportation companies and retail stores, and indirectly through equity method investees, independent sales representatives, distributors, wholesalers and dealers.
Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019

(dollars in millions)20202019Increase (Decrease)% Increase (Decrease)
Net sales$700  $955  $(255) (27)%
Operating profit$61  $121  $(60) (50)%
Net Sales
Organic19 %
Foreign currency translation5 %
Total % change in Net sales24%

Net SalesOperating Profit
Organic / Operational(25)%(50)%
Foreign currency translation(2)%(1)%
Restructuring— %1 %
Total % change(27)%(50)%

The organic increase in Net sales decrease of 25%19% was driven by declinesthe gradual improvement in transport refrigeration (27%) and commercial refrigeration (19%). The decline in transport refrigeration sales reflects lower volume in North America and Europe truck trailer and container duethe global economic environment as our end markets continue to economic slowdowns related toimprove from the COVID-19 pandemic. Additionally, North America truck trailer sales were lower due to the cyclical peak experienced in 2019. Commercial refrigeration sales declined in Europe due to lower demand and the closure of new equipment installation sites becauseprior year impacts of the COVID-19 pandemic. Asia PacificTransport refrigeration sales were flat reflecting an increase(22%) benefited from the continued recovery associated with the cyclical decline that began in China, offset by lower saleslate 2019 as well as a rebound in the remainder of Asia Pacific.
The operational profit decrease of 50% was primarily attributeddemand for global transportation and COVID-19 vaccine-related cargo monitoring. Commercial refrigeration sales (12%) also increased due to lower sales volumes and unfavorable mix (61%) that was partially offset by the benefit of favorable material productivity and cost containment initiatives (15%).a rebound in demand.

For the three months ended March 31, 2021, Operating profit in our Refrigeration segment was $127 million, a 28% increase compared with the same period of 2020. The components of the year-over-year change were as follows:
Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019
Operating Profit
Operational26 %
Foreign currency translation5 %
Restructuring(2)%
Other(1)%
Total % change in Operating profit28%


(dollars in millions)20202019Increase (Decrease)% Increase (Decrease)
Net sales$1,508  $1,917  $(409) (21)%
Operating profit$160  $248  $(88) (35)%
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Net salesOperating profit
Organic / Operational(19)%(36)%
Foreign currency translation(2)%(1)%
Restructuring— %2 %
Total % change(21)%(35)%

The organicincrease in operational profit was primarily attributable to higher sales decrease of 19%volumes compared with the prior year period which was drivenheavily impacted by declines in transport refrigeration (21%) and commercial refrigeration (16%). The decline in transport refrigeration sales reflects lower sales volume in North America and Europe truck trailer due to the economic slowdowns related to the COVID-19 pandemic. Additionally, North America truck trailer salesIn addition, favorable productivity initiatives benefited material and factory costs. These amounts were lower due to the cyclical peak experienced in 2019. Commercial refrigeration sales declined primarily due to lower demand and the closure of new equipment installation sites because of the COVID-19 pandemic.
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The operational profit decrease of 36% was primarily attributed to lower sales volumes and unfavorable mix (47%). The impact from the lower sales volume was partially offset by the benefit of lower commodityhigher selling, general and administrative costs favorable productivity, cost containment initiatives (7%) and lower research and development expenses (5%).activities during the current period.

Fire & Security Segment
Our
For the three months ended March 31, 2021, Net sales in our Fire & Security segment provides a wide rangewere $1.3 billion, an 8% increase compared with the same period of residential and building systems, including fire, flame, gas and smoke detection; portable fire extinguishers; fire suppression systems; intruder alarms; access control systems and video management systems. Other Fire & Security service offerings include audit, design, installation and system integration,2020. The components of the year-over-year change were as well as aftermarket, maintenance and repair and monitoring services. Our established brands include Autronica, Chubb, Det-Tronics, Edwards, Fireye, GST, Kidde, LenelS2, Marioff, Onity and Supra. Our Fire & Security products and solutions are sold directly to end customers as well as through manufacturers’ representatives, distributors, dealers, value-added resellers and retail distribution.
Three Months Ended June 30, 2020 Compared with Three Months Ended June 30, 2019follows:

(dollars in millions)20202019Increase (Decrease)% Increase (Decrease)
Net sales$1,057  $1,386  $(329) (24)%
Operating profit$106  $184  $(78) (42)%

 Net SalesOperating Profit
Organic / Operational(22)%(48)%
Foreign currency translation(2)%— %
Restructuring— %1 %
Other— %5 %
Total % change(24)%(42)%

The organic sales decrease of 22% reflects lower product (21%) and field service (23%) sales. The decline in product sales was primarily driven by lower volume in North America and Europe due to the COVID-19 pandemic. The decline in field service sales was due to shutdowns across most regions related to the COVID-19 pandemic, particularly in Europe and Asia. The COVID-19 pandemic primarily impacted the installation and service businesses where there was no or limited access to customer sites during the three months ended June 30, 2020.
The operational profit decrease of 48% was primarily attributed to lower sales volumes and unfavorable mix (63%) as well as higher reserves for customer credit losses (4%). These decreases were partially offset by favorable material productivity and cost containment initiatives (18%).
The 5% increase in Other reflects a favorable adjustment related to a product recall matter.

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Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

(dollars in millions)20202019Increase (Decrease)% Increase (Decrease)
Net sales$2,263  $2,676  $(413) (15)%
Operating profit$226  $316  $(90) (28)%
Net Sales
Organic3 %
Foreign currency translation5 %
Total % change in Net sales8%


Net SalesOperating Profit
Organic / Operational(14)%(33)%
Foreign currency translation(1)%— %
Restructuring— %4 %
Other— %1 %
Total % change(15)%(28)%

The organic increase in Net sales decrease of 14% reflects lower product (13%) and field service (14%) sales. The decline in product sales3% was primarily driven by lower volumethe gradual improvement in North America and Europe duethe global economic environment as our end markets continued to improve from the prior year impacts of the COVID-19 pandemic. Field service sales were down primarily(4%) benefited from improved end-markets in regions heavily impacted by COVID-19 including Europe and Asia reflecting the impact of business shutdowns and project delays as a result of the COVID-19 pandemic.
The operational profit decrease of 33%Asia. An increase in product sales (3%) was primarily attributeddriven by improvements in China, which was impacted by shutdowns related to lowerCOVID-19 in the prior period. In addition, stronger residential and commercial sales volumes and unfavorable mix (44%) and higher reserves for customer credit losses (4%). These decreases were partially offset by favorable material productivitylower demand from the hospitality and cost containment initiatives (16%).oil and gas industries.

For the three months ended March 31, 2021, Operating profit in our Fire & Security segment was $150 million, a 25% increase compared with the same period of 2020. The components of the year-over-year change were as follows:

Operating Profit
Operational28 %
Foreign currency translation4 %
Restructuring(7)%
Total % change in Operating profit25%

The 1% increase in Otheroperational profit was primarily reflects aattributable to higher sales volumes compared with the prior year period which was heavily impacted by the COVID-19 pandemic. In addition, favorable adjustment related to a product recall matter (3%)productivity initiatives benefited material and factory costs. These amounts were partially offset by Separationhigher selling, general and administrative costs (1%).and research and development activities during the current period.

Eliminations and other and General corporate expenses
 Net SalesOperating Profit
For the Three Months Ended June 30,For the Three Months Ended June 30,
(dollars in millions)2020201920202019
Eliminations and other$(76) $(114) $(56) $(15) 
General corporate expenses$—  $—  $(27) $(30) 


Net SalesOperating Profit
For the Six Months Ended June 30,For the Six Months Ended June 30,
(dollars in millions)2020201920202019
Eliminations and other$(161) $(211) $(91) $(32) 
General corporate expenses$—  $—  $(63) $(65) 

Eliminations and other reflects the elimination of sales, other income and operating profit resulting from activity between segments, net hedging and foreign exchange-related gains and losses, as well as other infrequently occurring items, such as acquisition or divestiture transaction costs. In addition, Eliminations and other includes asbestos-related costs and recoveries associated with the settlement and defense of potential future asbestos-related claims, insurance settlements on asbestos-related matters and revisions in the estimated liability for potential future asbestos-related claims. Inter-segment sales eliminations decreased in

General corporate expenses include various costs incurred to operate the organization including human resources, accounting, legal and tax. Prior to the Separation and the Distribution, threeGeneral corporate expenses include the allocation of costs from UTC which are not indicative of our future expenses as a public company.


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The following table presents the impact of Eliminations and sixother and General corporate expenses on Net sales and Operating profit for the three months ended June 30, 2020 asMarch 31, 2021 compared with the three and six months ended June 30, 2019.March 31, 2020:

 Net SalesOperating Profit
For the Three Months Ended March 31,For the Three Months Ended March 31,
(In millions)2021202020212020
Eliminations and other$(96)$(85)$(40)$(35)
General corporate expenses$— $— $(31)$(36)

For the three months ended June 30, 2020,March 31, 2021, the $41 millionimpact of Eliminations and other on Operating Profit was $40 million. The year-over-year decreaseincrease in operating profit in Eliminations and
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other, as compared with the prior year,costs was primarily attributedrelated to $18 million of Separation-relatedhigher research and development costs, an unfavorable impact from the change in the estimate of certain long-term liabilities of $9 million, and higher deferred compensation charges of $8 million. and inter-segment profit elimination, which were partially offset by lower separation-related costs.

For the sixthree months ended June 30, 2020,March 31, 2021, the $59 million decrease year-over-year in operating profit as compared with the prior year, was primarily attributed to $59 millionimpact of Separation-related costs. The benefit from lower year-over-year inter-segment profit eliminations was mostly offset by the unfavorable impact from the change in the estimate of certain long-term liabilities of $9 million.
General corporate expenses remained consistent with the three and six months ended June 30, 2019. General corporate expenses include allocations of corporate expenses from UTC prior on Operating Profit was $31 million. The year-over-year decrease in costs was primarily related to the Separation, which are not necessarily indicativereduction of our future expenses and do not necessarily reflect the results that Carrier may experience as an independent company for the periods presented. Also included within General corporate expenses in both the three and six months ended June 30, 2020 are approximately $4 million of Separation-relatedseparation-related costs.

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. In doing so, we review and analyze our cash on hand and our working capital to ensure that we have adequate liquidity to support our business and strategic initiatives. 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.

(dollars in millions)June 30, 2020December 31, 2019
Cash and cash equivalents$2,704  $952  
Total debt$12,029  $319  
Net debt (total debt less cash and cash equivalents)$9,325  $(633) 
Total Equity$4,366  $14,435  
Total capitalization (total debt plus total equity)$16,395  $14,754  
Net capitalization (total debt plus total equity less cash and cash equivalents)$13,691  $13,802  
Total debt to total capitalization73 %NM
Net debt to net capitalization68 %NM
______________________
NM - PriorAs of March 31, 2021, we had cash and cash equivalents of $2.6 billion, of which approximately 32% was held by our foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds and the cost effectiveness with which we can access funds held by foreign subsidiaries. On occasion, we are required to the Separation, Carrier participatedmaintain cash deposits in UTC's centralized cash management and financing programs; as such, these metrics are neither meaningful nor comparableconnection with contractual obligations related to thoseacquisitions, divestitures or other legal obligations. As of Carrier as a stand-alone company. See Note 5 –March 31, 2021 Related Parties for additional informationand December 31, 2020, the amount of the UTCsuch restricted cash management programs.was approximately $4 million and $4 million, respectively.

Prior to the Separation, Carrier participated in UTC’s centralized cash pooling and financing programs. Historically, we independently generated operating cash flows sufficient to fund our working capital, capital expenditures and financing needs. Following the Separation, the capital structure and sources of liquidity for Carrier has changed as Carrier no longer participates in cash management and financing programs with UTC. Instead, Carrier’s ability to fund our capital requirements depends on our ability to generate cash flow from operations. Additionally, following the Separation, Carrier has access toWe maintain a $2.0 billion revolving credit facilityunsecured, unsubordinated commercial paper program which can be used for general corporate purposes, including working capital and potential acquisitions. In addition, we maintain our $2.0 billion Revolving Credit Facility that matures on April 3, 2025 which supports aour commercial paper borrowing program and anticipates continuingcash requirements. This Revolving Credit Facility has a commitment fee of 0.125% that is charged on unused commitments and borrowings are available in U.S. Dollars, Euros and Pounds Sterling and bear interest at a variable rate based on LIBOR plus a ratings-based margin, which was 125 basis points as of March 31, 2021. As of March 31, 2021, we had no borrowings outstanding under our commercial paper program and our Revolving Credit Facility.

We believe that our available cash and operating cash flows will be sufficient to have meet our future operating cash needs. Our committed credit facilities and access to the debt capital markets. We believe that our future operating cash flows and anticipated access to capital willequity markets provide sufficientadditional sources of liquidity over the next twelve monthsshort-term and long-term capital to meet our commitments, including the negative impact of the COVID-19 pandemic on our business.
From time to time we may need to access the capital markets to obtain financing.fund current operations, debt maturities and future investment opportunities. Although we believe that the arrangements currently in place permit us to finance our operations on acceptable terms and conditions, our access to and the availability of financing on acceptable terms and conditions in the future will be impacted by many factors, includingincluding: (1) our credit ratings or absence of credit ratings, (2) the liquidity of the overall capital markets and (3) the state of the economy, including the impact of the COVID-19 pandemic. There can be no assurance that we will be able to obtain additional financing on terms favorable to us, if at all.
Financing for operational and strategic requirements, not satisfied by operational cash flows, is subject to the availability of external funds through short-term and long-term credit markets. The access to and cost of financing is dependent upon, among other factors, the Company's credit ratings.
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The following table presents our credit ratings and outlook as of June 30, 2020March 31, 2021:.
Rating Agency
Long-term Rating 1(1)
Short-term Rating
Outlook2(2)
Standards & Poor's ("S&P")BBBA2Negative
Moody's Investor Services, Inc. ("Moody's")Baa3P3Stable
Fitch Ratings ("Fitch")BBB-F3Stable
1(1) The long-term rating for S&P was affirmed on June 15, 2020, and for Moody's on June 16, 2020. Fitch's long-term rating was issued on June 11, 2020.
2 (2) S&P revised its outlook to negative from stable on June 15, 2020.

At June 30, 2020, we had cashThe following table contains several key measures of our financial condition and cash equivalents of $2.7 billion, of which approximately 29% was held by Carrier’s foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds and the cost effectiveness with which those funds can be accessed if held by foreign subsidiaries. On occasion, we are required to maintain cash deposits in connection with contractual obligations related to acquisitions or divestitures or other legal obligations. As of liquidity:

June 30, 2020 and December 31, 2019, the amount of such restricted cash was approximately $4 million and $5 million, respectively.
(In millions, except percentages)March 31, 2021December 31, 2020
Cash and cash equivalents$2,599 $3,115 
Total debt$9,730 $10,227 
Total equity$6,818 $6,578 
Net debt (total debt less cash and cash equivalents)$7,131 $7,112 
Total capitalization (total debt plus total equity)$16,548 $16,805 
Net capitalization (total debt plus total equity less cash and cash equivalents)$13,949 $13,690 
Total debt to total capitalization59 %61 %
Net debt to net capitalization51 %52 %

On February 10, 2020, Carrier entered into a revolving credit agreement with various banks permitting aggregate borrowingsOur short-term obligations primarily consist of up to $2.0 billion pursuant to an unsecured, unsubordinated revolving credit facility that matures on April 3, 2025. A commitment feecurrent maturities of 0.125% is charged on the unused commitments. Borrowings under the revolving credit facility are available in U.S. Dollars, Euros and Pounds Sterling and bear interest at a variable interest rate based on LIBOR plus a ratings-based margin, which was 125 basis points aslong-term debt. Our long-term obligations primarily consist of June 30, 2020. The revolving credit facility supports our commercial paper program and cash requirements. As of June 30, 2020, there were no borrowings on the revolving credit facility.
On February 10, 2020, Carrier entered into a term loan credit agreement providing for a $1.75 billion unsecured, unsubordinated 3-year term loan credit facility which matures on February 10, 2023. On March 27, 2020, Carrier drew $1.75 billion on the term loan credit facility which is subject to a variable interest rate based on LIBOR plus a ratings-based margin, which was 112.5 basis points as of June 30, 2020.
On February 27, 2020, Carrier issued $9.25 billion of unsecured, unsubordinated long-term notes in six series with maturitiesfinal maturity dates ranging from 2023 throughbetween 2025 and 2050. Carrier used the proceeds from the notes and term loan credit facility to fund approximately $10.9 billion in distributions to UTC in connection with the Separation.
The revolving credit agreement, term loan credit agreement and indenture contain affirmative and negative covenants customary for financings of this type, that among other things, limit Carrier and its subsidiaries' ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. On June 2, 2020, the Company entered into amendments to both the revolving credit agreement and the term loan credit agreement. Pursuant to the amendments, certain terms of the revolving credit facility and term loan credit facility were amended for a period beginning on June 2, 2020 and ending on December 30, 2021 (the "Covenant Modification Period"). The Company may terminate the Covenant Modification Period prior to December 30, 2021, subject to the satisfaction of certain conditions. The amendments defer testing of our consolidated total net leverage ratio financial covenant until June 30, 2021 and increases the consolidated total net leverage ratio limit until December 31, 2021. The amendments also require us to maintain liquidity at a certain level until the earlier of (1) June 29, 2021 and (2) the last day of the Covenant Modification Period. Additionally, during the Covenant Modification Period, the Company is subject to (a) limitations on the incurrence of subsidiary indebtedness, (b) limitations on the making of restricted payments, including purchases by the Company of its ordinary shares and the amount of dividends the Company may pay, and (c) a "most favored nations" provision related to certain terms of any committed credit facility in an amount greater than $100 million. As of June 30, 2020, we were compliant with our covenants under the agreements governing our outstanding indebtedness.
On June 19, 2020, Carrier issued $750 million of unsecured, unsubordinated 2.700% Notes due in 2031.These notes rank equally with our existing unsecured, unsubordinated obligations.We expect to use the net proceeds from the sale of the notes, which further enhance our liquidity and financial flexibility during the ongoing COVID-19 pandemic, for general corporate purposes.
As of June 30, 2020, we have a $2.0 billion unsecured, unsubordinated commercial paper program which we plan to use for general corporate purposes, including the funding of working capital and potential acquisitions. As of June 30, 2020, there were no borrowings outstanding under the commercial paper program.
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Interest payments related to indebtedness are expected to approximate $340$286 million per year, reflecting an approximate weighted-average interest rate of 2.7%2.8%. BorrowingsAny borrowings from the revolving credit facility and the term loan credit facilityRevolving Credit Facility are subject to variable interest rates.
See Note 5 – Borrowings and Lines of Credit
Long-term in the Notes to the Unaudited Condensed Consolidated Financial Statements for additional information regarding the terms of our long-term debt as of June 30, 2020 consisted of the following:
(dollars in million)
Debt DescriptionInterest RateJune 30, 2020December 31, 2019
3-Year Term Loan Credit Facility due February 10, 20232.195 %1$1,750  2$—  
1.923% Notes due February 15, 20231.923 %500  2—  
2.242% Notes due February 15, 20252.242 %2,000  2—  
2.493% Notes due February 15, 20272.493 %1,250  2—  
2.722% Notes due February 15, 20302.722 %2,000  2—  
2.700% Notes due February 15, 20312.700 %750  —  
3.377% Notes due April 05, 20403.377 %1,500  2—  
3.577% Notes due April 05, 20503.577 %2,000  2—  
Other (including project financing obligations and finance leases)367  319  
Total principal long-term debt12,117  319  
Other (discounts and debt issuance costs)(88) —  
Total debt12,029  319  
Less: current portion of long-term debt301  237  
Long-term debt, net of current portion$11,728  $82  
1 The interest rate on the term loan is variable based on six month LIBOR of 1.07% plus 112.5 basis points.
2 The net proceeds of the financing arrangements were used to distribute cash to UTC.obligations.

Cash Flow - Operating Activities
 For the Six Months Ended June 30,
(dollars in millions)20202019
Net cash flows provided by operating activities$556  $371  

Net cash provided by operating activities increased $185On February 4, 2021, our Board of Directors approved a stock repurchase program authorizing the repurchase of up to $350 million during the six months ended June 30, 2020 compared with the same period of the prior year primarily attributableour outstanding common stock. Share repurchases may take place from time to the timing of working capitaltime subject to market conditions and tax payments. Cash inflows from working capital contributed $545 million compared with the same period of the prior year. Cash provided by Accounts receivable, net increased $233 million attributable to improved collections and timing of customer payments. Cash provided by Accounts payable and accrued liabilities increased $325 million primarily attributable to income taxes and the timing of vendor payments. Income taxes decreased approximately $200 million compared with the same period of the prior year, primarily reflecting the absence of a deemed TCJA transition tax settlement of approximately $70 million that is not required in 2020 and the timing of federal tax payments related to the Separation that will not come due until the third quarter of 2020.

With respect toat our current working capital position, as a result of the COVID-19 pandemic, the Company is participating in global COVID-19 relief measures, including the CARES Act, which provides for payroll tax deferrals and credits, income tax payment deferrals, and an increasediscretion in the income tax interest deduction limitation.
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Cash Flow - Investing Activities
 For the Six Months Ended June 30,
(dollars in millions)20202019
Net cash flows used in investing activities$(103) $(80) 
Net cash used in investing activities increased $23 million duringopen market or through one or more other public or private transactions, subject to compliance with our obligations under the six months ended June 30, 2020 compared with the prior period primarily due to payments on settlements of foreign exchange hedges of $24 million.
Cash Flow - Financing Activities
 For the Six Months Ended June 30,
(dollars in millions)20202019
Net cash flows provided by (used in) financing activities$1,315  $(492) 
Net cash provided by financing activities increased $1.8 billion during the six months ended June 30, 2020 compared with the prior periodTMA and primarily reflects the issuance of $750 million of long-term debt in June 2020 and a $590 million cash contribution from UTC in connection with the Separation. The remaining net change primarily reflects an increase in project financing obligations, net and short term financing activity. The cash transferred to UTC of $10.9 billion inour Revolving Credit Facility. For the three months ended March 31, 20202021, we repurchased 976,374 shares of our common stock for an aggregate purchase price of $38 million which are held in connection withTreasury stock as of March 31, 2021, as reflected on our Unaudited Condensed Consolidated Balance Sheet.

We paid dividends on common stock of $0.12 per share during the Separation was offset by the issuance of long-term debt of $11.0 billion in the same period.
three months ended March 31, 2021, totaling $104 million. On June 10, 2020, theApril 19, 2021, our Board of Directors declared a dividend of $0.08$0.12 per share of common stock payable July 20, 2020on May 24, 2021 to shareowners of record at the close of business on June 26, 2020.May 3, 2021.

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Cash Flows

The following table reflects the major categories of cash flows. For additional details, see the Unaudited Condensed Consolidated Statement of Cash Flows in the Unaudited Condensed Consolidated Financial Statements.
Three Months Ended March 31,
(In millions)20212020
Net cash flows provided by (used in):
Operating activities$184 $47 
Investing activities(49)(128)
Financing activities(643)(76)
Effect of foreign exchange rate changes on cash and cash equivalents(9)(28)
Net increase (decrease) in cash and cash equivalents and restricted cash$(517)$(185)

Cash flows from operating activities primarily represent inflows and outflows associated with our operations. Primary activities include net income from operations adjusted for non-cash transactions, working capital changes and changes in other assets and liabilities. The year-over-year increase in net cash provided by operating activities was primarily driven by higher net income from operations in the current period and improved working capital balances. Higher outstanding accounts payable balances driven by the timing of raw material purchases and vendor payments more than offset the seasonal increase in inventory and higher accounts receivable balances.

Cash flows from investing activities primarily represent inflows and outflows associated with long-term assets. Primary activities include capital expenditures, acquisitions, divestitures and proceeds from the sale of fixed assets. During the three months ended March 31, 2021, net cash used in investing activities was $49 million. The primary driver of the outflow related to capital expenditures of $53 million. During the three months ended March 31, 2020, net cash used in financing activities was $128 million. The primary driver of the outflow related to the settlement of derivative contracts of $95 million and capital expenditures of $48 million.

Cash flows from financing activities primarily represent inflows and outflows associated with equity or borrowings. Primary activities include debt transactions, paying dividends to shareowners and the repurchase of our common stock. During the three months ended March 31, 2021, net cash used in financing activities was $643 million. The primary driver of the outflow related to the redemption of long-term debt of $500 million. In addition, we paid $104 million in dividends to our common shareowners and paid $36 million to repurchase shares of our common stock. During the three months ended March 31, 2020, net cash used in financing activities was $76 million. The primary driver of the outflow related to the payment of short-term borrowings and long-term debt.

Off-Balance Sheet Arrangements and Contractual Obligations

The section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations – Off-Balance Sheet Arrangements and Contractual Obligations" in the Information Statementour 2020 Form 10-K provided a table summarizing our contractual obligations and commercial commitments at the end of 2019. Other than as discussed previously in "Liquidity and Financial Condition", there2020. There have been no material changes for the three and six months ended June 30, 2020March 31, 2021 to our off-balance sheet arrangements and contractual obligations disclosed in the Information Statement.our 2020 Form 10-K.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk
Other than as discussed previously in "Liquidity and Financial Condition", there
There has been no significant change in our exposure to market risk during the three and six months ended June 30, 2020.March 31, 2021. For discussion of our exposure to market risk, refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations – Marketing Risk and Risk Management" in the Information Statement.our 2020 Form 10-K.

Item 4.    Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we carried out an evaluation under the supervision and with the participation of our management, including the President and Chief Executive Officer ("CEO"), the Senior Vice President and Chief Financial Officer ("CFO") and the Vice President, Controller ("Controller") of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2020.March 31, 2021. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility
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of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, CFO and Controller have concluded that, as of June 30, 2020,March 31, 2021, our disclosure controls and procedures were effective and provide reasonable assurance that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to our management, including our CEO, CFO and Controller, as appropriate, to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the three months ended June 30, 2020March 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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CAUTIONARY NOTE CONCERNING FACTORS THAT MAY AFFECT FUTURE RESULTS

This Form 10-Q contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward-looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management’s current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "confident," "scenario" and other words of similar meaning in connection with a discussion of future operating or financial performance or the Separation. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow,flows, results of operations, uses of cash, share repurchases, tax rates and other measures of financial performance or potential future plans, our strategies or transactions, of Carrier,the estimated costs associated with the Separation, our plans with respect to our indebtedness and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation:

•the effect of economic conditions in the industries and markets in which Carrierwe and itsour businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions, pandemic health issues (including COVID-19 and its effects, among other things, on production and on global supply, demand and distribution disruptions as the outbreak continues and results in an increasinglya prolonged period of travel, commercial and/orand other similar restrictions and limitations), natural disasters and the financial condition of our customers and suppliers;
•challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services;
•future levels of indebtedness, capital spending and research and development spending;
•future availability of credit and factors that may affect such availability, including credit market conditions and Carrier'sour capital structure and credit ratings;
•the timing and scope of future repurchases of Carrier'sour common stock, including market conditions and the level of other investing activities and uses of cash;
•delays and disruption in the delivery of materials and services from suppliers;
•cost reduction efforts and restructuring costs and savings and other consequences thereof;
•new business and investment opportunities;
•risks resulting from being a smaller, less diversified business model and balance of operations across product lines, regions and industries duecompany than prior to the Separation;Separation and the Distribution;
•the outcome of legal proceedings, investigations and other contingencies;
•the impact of pension plan assumptions and on future cash contributions and earnings;
•the impact of the negotiation of collective bargaining agreements and labor disputes;
•the effect of changes in political conditions in the U.S. (including in connection with the new administration in Washington, D.C.) and other countries in which Carrierwe and itsour businesses operate, including the effect of changes in U.S. trade policies or the United Kingdom’s withdrawal from the European Union, on general market conditions,
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global trade policies and currency exchange rates in the near term and beyond;
•the effect of changes (including potentially as a result of the new administration in Washington, D.C.) in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we and our businesses operate;
•theour ability of Carrier to retain and hire key personnel;
•the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs;
•the expected benefits of the Separation;
•a determination by the IRS and other tax authorities that the SeparationDistribution or certain related transactions should be treated as taxable transactions;
•risks associated with indebtedness, including that incurred as a result of financing transactions undertaken in connection with the Separation;Separation, as well as our ability to reduce indebtedness and the timing thereof;
•the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the Separation will exceed Carrier’sour estimates; and
•the impact of the Separation on Carrier’sour business and Carrier’sour resources, systems, procedures and controls, diversion of management’s attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

The above list of factors is not exhaustive or necessarily in order of importance. In addition, this Form 10-Q includes important information as to risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. See "Note 18Note 16 – Commitments and Contingent Liabilities,," in the "Notes to Unaudited Condensed Consolidated Financial Statements" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Business Overview," "Critical Accounting Estimates," "Results of Operations," and "Liquidity and Financial Condition," in this Form 10-Q and the sections titled "Legal Proceedings" and "Risk Factors" in this
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our 2020 Form 10-Q and in the Information Statement.10-K. The forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements is disclosed from time to time in our other filings with the SEC.

PART II – OTHER INFORMATION

Item 1.    Legal Proceedings

See Note 1816 – Commitments and Contingent Liabilities in the Notes to the Unaudited"Unaudited Condensed Consolidated Financial StatementsStatements" for information regarding legal proceedings.

Except as otherwise noted previously, there have been no material developments in legal proceedings. For previously reported information about legal proceedings refer to "Business – Legal Proceedings" in the Information Statement.our 2020 Form 10-K.
 
Item 1A. Risk Factors
Except for the risk factor below, there
There have been no material changes in the Company’s risk factors from those disclosed in “Risk Factors”"Risk Factors" in the Information Statement.
Risks Related to Our Businessour 2020 Form 10-K.

Widespread public health pandemics, including COVID-19, could materially adversely affect our business, financial condition
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Item 2. Unregistered Sales of Equity Securities and resultsUse of operations.Proceeds

Issuer Purchases of Equity Securities

The recent novel strainfollowing table provides information about our purchases during the three months ended March 31, 2021 of COVID-19 has had an adverse effect on our business, financial condition and results of operations. Any future public health pandemics or other disease outbreaks, including the worseningequity securities that are registered by us pursuant to Section 12 of the current COVID-19 pandemic in countries where we, our customers, our suppliers or our distributors operate could have a further material and adverse effect on our business, financial condition and results of operations. Exchange Act.

Total Number of Shares Purchased
(in 000's)
Average Price Paid per Share (1)
Total Number of Shares Purchased as Part of a Publicly Announced Program
(in 000's)		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(in millions)
2021
January 1 - January 31—$——$350.0
February 1 - February 28263$37.04263$340.3
March 1 - March 31713$38.90713$312.5
Total976$38.40976
COVID-19 has resulted in widespread travel restrictions and extended shutdowns of non-essential businesses, including construction and hospitality venues, impacting all of our segments and to various extents our factory operations, new equipment installations and access to units under maintenance.(1) Excludes broker commissions.
As our customers decreased their demand for our products, we temporarily closed or reduced production at manufacturing facilities in North America, Asia and Europe and implemented furloughs or similar workforce reductions.
Although by
Share repurchases under the end of the second quarter our manufacturing facilities (and nearly all of our suppliers) had resumed operations and 95% of our production capacity was available, we cannot predict when all of our manufacturing facilities will be fully operational, any conditions thatprogram may be implementedtake place from time to facilitate a returntime, subject to normal operations, and the effects and costs associated with any suchmarket conditions and whether there will be additional outbreaksat our discretion in the open market or through one or more other public or private transactions and subject to compliance with our obligations under the TMA and our Revolving Credit Facility. On February 4, 2021, our Board of Directors approved a stock repurchase program authorizing the pandemic.Our operating results and financial condition may also be materially adversely affected by laws, regulations, orders or other governmental or regulatory actions addressing the current COVID-19 pandemic that place restrictions on, or require usrepurchase of up to make changes to, our operations.We continue to monitor government actions and the impact$350 million of the pandemic on our customers, suppliers, distributors, employees and other stakeholders, and we anticipate continued temporary reductions in operating levels at many of our manufacturing facilities due to the COVID-19 pandemic.Carrier's outstanding common stock.
As a result of the pandemic and resulting disruption in our customers’ production and operations, our sales globally have been negatively affected particularly in industries like trucking that are delaying capital expenditures. Additionally, because in some instances our suppliers’ operations have been impacted, when we believe necessary to maintain our operations, we have been seeking alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which could adversely affect our results of operations.
The nature and extent of COVID-19’s continuing impact on our business, financial conditions and results of operations is beyond our control, and depends on various uncertain factors, including the duration of the outbreak, the severity and potential mutability of the virus, the ability to develop a vaccine or other preventative measures, and the actions, or perception of actions that may be taken or continued to contain or treat its impact, including quarantine and shelter-in-place orders, business closures, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations.The COVID-19 outbreak has significantly increased economic uncertainty, and the continued impact of the COVID-19 pandemic
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may cause a global recession which could have a material adverse impact on our business, financial condition and results of operations.
As a result of the foregoing, we may be required to raise additional capital in the future and our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our results of operations and prospects and our credit ratings. There is no guarantee that financing will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations.
The foregoing and other continued disruptions to our business as a result of the COVID-19 pandemic could materially adversely affect our business, financial condition and results of operations. Furthermore, the COVID-19 pandemic could heighten the risks summarized in certain of the other risk factors contained in the Information Statement.

Item 5. Other Information

Carrier currently intends to hold its 2021 Annual Meeting of Shareowners on or about April 19, 2021 (the “2021 Annual Meeting”). The time and location of that meeting will be disclosed in the Company’s Notice of 2021 Annual Meeting and Proxy Statement (the “2021 Proxy Statement”).

Shareowners who wish to submit a proposal to be considered for inclusion in the 2021 Proxy Statement pursuant to SEC Rule 14a-8 under the Exchange Act must do so in writing and ensure that such proposal is received by our Corporate Secretary at the Company’s executive offices at 13995 Pasteur Boulevard, Palm Beach Gardens, FL, 33418, no later than November 11, 2020. Such proposal must also comply with the requirements of Rule 14a-8.

In accordance with the advance notice provisions in Carrier's Bylaws, to introduce a proposal for vote at the 2021 Annual Meeting (other than a shareowner proposal included in the 2021 Proxy Statement in accordance with SEC Rule 14a-8), a shareowner must send advance written notice to our Corporate Secretary (at the address noted above) and ensure that such notice is received no earlier than November 11, 2020, and no later than the close of business on December 11, 2020. This notice must include the information specified by Section 1.9 of the Bylaws, a copy of which is available on our website at www.corporate.carrier.com.

Under Carrier’s Bylaws, a shareowner who wishes to nominate a candidate for election as a director at the 2021 Annual Meeting (other than pursuant to the “proxy access” provisions of Section 1.16 of the Bylaws) must send advance written notice to our Corporate Secretary (at the address noted above) and ensure that such notice is received no earlier than November 11, 2020, and no later than the close of business on December 11, 2020. This notice must include the information, documents and agreements specified by Section 1.9 of the Bylaws, a copy of which is available on our website.

An eligible shareowner who wishes to have a nominee of that shareowner included in Carrier’s 2021 Proxy Statement pursuant to the “proxy access” provisions of Section 1.16 of the Bylaws must send advance written notice to our Corporate Secretary (at the address noted above) and ensure that such notice is received no earlier than October 12, 2020, and no later than November 11, 2020. This notice must include the information, documents and agreements specified by Section 1.16 of the Bylaws, a copy of which is available on our website.
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Item 6.    Exhibits
Exhibit
Number		Exhibit Description
2.110.1
3.1
3.2
4.1
4.210.2
4.310.3
10.110.4
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
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10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
15
31.1
31.2
31.3
32
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.*
(File name: carr-20200630.xml)carr-20210331.xml)
101.SCHXBRL Taxonomy Extension Schema Document.*
(File name: carr-20200630.xsd)carr-20210331.xsd)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.*
(File name: carr-20200630_cal.xml)carr-20210331_cal.xml)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.*
(File name: carr-20200630_def.xml)carr-20210331_def.xml)
101.LABXBRL Taxonomy Extension Label Linkbase Document.*
(File name: carr-20200630_lab.xml)carr-20210331_lab.xml)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.*
(File name: carr-20200630_pre.xml)carr-20210331_pre.xml)
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Notes to Exhibits List:
*    Submitted electronically herewith.
Attached as Exhibit 101 to this report are the following formatted in XBRL (Extensible Business Reporting Language): (i) Condensed Consolidated Statement of Operations for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, (ii) Condensed Consolidated Statement of Comprehensive Income for the three and six months ended June 30,March 31, 2021 and 2020, and 2019, (iii) Condensed Consolidated Balance Sheet as of June 30, 2020March 31, 2021 and December 31, 2019,2020, (iv) Condensed Consolidated Statement of Cash Flows for the sixthree months ended June 30,March 31, 2021 and 2020, and 2019, (v) Condensed Consolidated Statement of Changes in Equity for the three and six months ended June 30,March 31, 2021 and 2020 and 2019 and (vi) Notes to Condensed Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
CARRIER GLOBAL CORPORATION
(Registrant)
Dated:July 31, 2020April 29, 2021by:/s/TIMOTHY R. McLEVISHPATRICK GORIS
Timothy R. McLevishPatrick Goris
Senior Vice President and Chief Financial Officer
(on behalf of the Registrant and as the Registrant's Principal Financial Officer)
Dated:July 31, 2020April 29, 2021by:/s/KYLE CROCKETT
Kyle Crockett
Vice President, Controller
(on behalf of the Registrant and as the Registrant's Principal Accounting Officer)

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