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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, 2023March 31, 2024
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
4.375% Notes due 2025CARR25New York Stock Exchange
4.125% Notes due 2028CARR28New York Stock Exchange
4.500% Notes due 2032CARR32New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of July 17, 2023,April 15, 2024, there were 837,627,926901,012,491 shares of Common Stock outstanding.
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CARRIER GLOBAL CORPORATION
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Three and Six Months Ended June 30, 2023March 31, 2024
Page

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









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PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements

CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions, except per share amounts)
(In millions, except per share amounts)
(In millions, except per share amounts)(In millions, except per share amounts)2023202220232022
Net salesNet sales
Net sales
Net sales
Product sales
Product sales
Product salesProduct sales$5,355 $4,662 $10,041 $8,832 
Service salesService sales637 549 1,224 1,033 
Service sales
Service sales
Total Net sales
Total Net sales
Total Net salesTotal Net sales5,992 5,211 11,265 9,865 
Costs and expensesCosts and expenses
Costs and expenses
Costs and expenses
Cost of products sold
Cost of products sold
Cost of products soldCost of products sold(3,769)(3,363)(7,227)(6,361)
Cost of services soldCost of services sold(468)(401)(905)(764)
Cost of services sold
Cost of services sold
Research and development
Research and development
Research and developmentResearch and development(151)(122)(290)(247)
Selling, general and administrativeSelling, general and administrative(784)(614)(1,505)(1,215)
Selling, general and administrative
Selling, general and administrative
Total Costs and expenses
Total Costs and expenses
Total Costs and expensesTotal Costs and expenses(5,172)(4,500)(9,927)(8,587)
Equity method investment net earningsEquity method investment net earnings52 101 96 159 
Equity method investment net earnings
Equity method investment net earnings
Other income (expense), net
Other income (expense), net
Other income (expense), netOther income (expense), net(383)(390)1,119 
Operating profitOperating profit489 819 1,044 2,556 
Non-service pension (expense) benefit— (1)— (2)
Operating profit
Operating profit
Interest (expense) income, net
Interest (expense) income, net
Interest (expense) income, netInterest (expense) income, net(67)(61)(113)(109)
Income from operations before income taxesIncome from operations before income taxes422 757 931 2,445 
Income from operations before income taxes
Income from operations before income taxes
Income tax (expense) benefit
Income tax (expense) benefit
Income tax (expense) benefitIncome tax (expense) benefit(189)(170)(311)(471)
Net income from operationsNet income from operations233 587 620 1,974 
Net income from operations
Net income from operations
Less: Non-controlling interest in subsidiaries' earnings from operations
Less: Non-controlling interest in subsidiaries' earnings from operations
Less: Non-controlling interest in subsidiaries' earnings from operationsLess: Non-controlling interest in subsidiaries' earnings from operations34 14 48 22 
Net income attributable to common shareownersNet income attributable to common shareowners$199 $573 $572 $1,952 
Net income attributable to common shareowners
Net income attributable to common shareowners
Earnings per share
Earnings per share
Earnings per shareEarnings per share
BasicBasic$0.24 $0.68 $0.68 $2.30 
Basic
Basic
Diluted
Diluted
DilutedDiluted$0.23 $0.67 $0.67 $2.25 
Weighted-average number of shares outstandingWeighted-average number of shares outstanding
Weighted-average number of shares outstanding
Weighted-average number of shares outstanding
Basic
Basic
BasicBasic836.0 845.7 835.5 849.5 
DilutedDiluted850.9 862.7 851.5 868.4 
Diluted
Diluted
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)(In millions)2023202220232022
(In millions)
(In millions)
Net income from operations
Net income from operations
Net income from operationsNet income from operations$233 $587 $620 $1,974 
Other comprehensive income (loss), net of tax:Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax:
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments arising during period
Foreign currency translation adjustments arising during period
Foreign currency translation adjustments arising during periodForeign currency translation adjustments arising during period(63)(489)(9)(550)
Pension and post-retirement benefit plan adjustments— — — 
Chubb divestiture— — — (245)
Amortization of unrealized cash flow hedging gain (loss)
Amortization of unrealized cash flow hedging gain (loss)
Amortization of unrealized cash flow hedging gain (loss)
Other comprehensive income (loss), net of tax
Other comprehensive income (loss), net of tax
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax(63)(487)(9)(795)
Comprehensive income (loss)Comprehensive income (loss)170 100 611 1,179 
Comprehensive income (loss)
Comprehensive income (loss)
Less: Comprehensive income (loss) attributable to non-controlling interest
Less: Comprehensive income (loss) attributable to non-controlling interest
Less: Comprehensive income (loss) attributable to non-controlling interestLess: Comprehensive income (loss) attributable to non-controlling interest26 42 13 
Comprehensive income (loss) attributable to common shareownersComprehensive income (loss) attributable to common shareowners$144 $95 $569 $1,166 
Comprehensive income (loss) attributable to common shareowners
Comprehensive income (loss) attributable to common shareowners
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
As of
As ofAs of
(In millions)(In millions)June 30,
2023
December 31,
2022
(In millions)March 31,
2024
December 31,
2023
AssetsAssets
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalentsCash and cash equivalents$3,209 $3,520 
Accounts receivable, netAccounts receivable, net3,212 2,833 
Contract assets, currentContract assets, current578 537 
Inventories, netInventories, net2,699 2,640 
Assets held for sale, current
Other assets, currentOther assets, current443 349 
Total current assetsTotal current assets10,141 9,879 
Future income tax benefitsFuture income tax benefits690 612 
Fixed assets, netFixed assets, net2,262 2,241 
Operating lease right-of-use assetsOperating lease right-of-use assets600 642 
Intangible assets, netIntangible assets, net1,181 1,342 
GoodwillGoodwill9,927 9,977 
Pension and post-retirement assetsPension and post-retirement assets32 26 
Equity method investmentsEquity method investments1,139 1,148 
Other assetsOther assets312 219 
Other assets
Other assets
Total AssetsTotal Assets$26,284 $26,086 
Liabilities and EquityLiabilities and Equity
Liabilities and Equity
Liabilities and Equity
Accounts payable
Accounts payable
Accounts payableAccounts payable$2,956 $2,833 
Accrued liabilitiesAccrued liabilities2,661 2,610 
Contract liabilities, currentContract liabilities, current483 449 
Liabilities held for sale, current
Current portion of long-term debtCurrent portion of long-term debt134 140 
Total current liabilitiesTotal current liabilities6,234 6,032 
Long-term debtLong-term debt8,655 8,702 
Future pension and post-retirement obligationsFuture pension and post-retirement obligations350 349 
Future income tax obligationsFuture income tax obligations560 568 
Operating lease liabilitiesOperating lease liabilities485 529 
Other long-term liabilitiesOther long-term liabilities1,712 1,830 
Other long-term liabilities
Other long-term liabilities
Total LiabilitiesTotal Liabilities17,996 18,010 
Commitments and contingent liabilities (Note 19)Commitments and contingent liabilities (Note 19)Commitments and contingent liabilities (Note 19)
EquityEquity
Common stock
Common stock
Common stockCommon stock
Treasury stockTreasury stock(1,972)(1,910)
Additional paid-in capitalAdditional paid-in capital5,494 5,481 
Retained earningsRetained earnings6,129 5,866 
Accumulated other comprehensive lossAccumulated other comprehensive loss(1,691)(1,688)
Non-controlling interestNon-controlling interest319 318 
Total EquityTotal Equity8,288 8,076 
Total Liabilities and EquityTotal Liabilities and Equity$26,284 $26,086 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)

(In millions)(In millions)Accumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2022$(1,688)$$(1,910)$5,481 $5,866 $318 $8,076 
(In millions)
(In millions)Accumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2023
Net incomeNet income— — — — 373 14 387 
Other comprehensive income (loss), net of taxOther comprehensive income (loss), net of tax52 — — — — 54 
Shares issued under incentive plans, net
Shares issued under incentive plans, net
Shares issued under incentive plans, netShares issued under incentive plans, net— — — (9)— — (9)
Stock-based compensationStock-based compensation— — — 22 — — 22 
Treasury stock repurchase— — (62)— — — (62)
Acquisition of VCS Business
Balance as of March 31, 2023$(1,636)$9 $(1,972)$5,494 $6,239 $334 $8,468 
Net income19934233
Other comprehensive income (loss), net of tax(55)(8)(63)
Dividends declared on common stock (1)
(309)(309)
Shares issued under incentive plans, net(18)(18)
Stock-based compensation18 18
Acquisition of VCS Business
Dividends attributable to non-controlling interest(41)(41)
Acquisition of VCS Business
Balance as of March 31, 2024
Balance as of March 31, 2024
Balance as of March 31, 2024
Balance as of June 30, 2023$(1,691)$9 $(1,972)$5,494 $6,129 $319 $8,288 
(In millions)(In millions)Accumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2021$(989)$$(529)$5,411 $2,865 $327 $7,094 
Net income— — — — 1,379 1,387 
Other comprehensive income (loss), net of tax(308)— — — — — (308)
Shares issued under incentive plans, net— — — (17)— — (17)
Stock-based compensation— — — 21 — — 21 
Dividends attributable to non-controlling interest— — — — — (1)(1)
Sale of non-controlling interest— — — — — (5)(5)
Treasury stock repurchase— — (741)— — — (741)
Balance as of March 31, 2022$(1,297)$9 $(1,270)$5,415 $4,244 $329 $7,430 
Net income— — — — 573 14 587 
Other comprehensive income (loss), net of tax(478)— — — — (9)(487)
Dividends declared on common stock (2)
— — — — (253)— (253)
Conversion of cash settled awards— — — — — 
Stock-based compensation— — — 20 — — 20 
Dividends attributable to non-controlling interest— — — — — (38)(38)
Treasury stock repurchase— — (273)— — — (273)
Balance as of June 30, 2022$(1,775)$9 $(1,543)$5,441 $4,564 $296 $6,992 
(1) Cash dividends declared were $0.38 per share for the three months ended June 30, 2023
(2) Cash dividends declared were $0.30 per share for the three months ended June 30, 2022
(In millions)
(In millions)Accumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2022
Net income
Other comprehensive income (loss), net of tax
Shares issued under incentive plans, net
Shares issued under incentive plans, net
Shares issued under incentive plans, net
Stock-based compensation
Treasury stock repurchase
Treasury stock repurchase
Treasury stock repurchase
Balance as of March 31, 2023

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended June 30, Three Months Ended March 31,
(In millions)(In millions)20232022(In millions)20242023
Operating ActivitiesOperating Activities
Net income from operationsNet income from operations$620 $1,974 
Net income from operations
Net income from operations
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 amortization
Depreciation and amortization
Depreciation and amortizationDepreciation and amortization273 155 
Deferred income tax provisionDeferred income tax provision(110)(17)
Stock-based compensation costsStock-based compensation costs40 41 
Equity method investment net earningsEquity method investment net earnings(96)(159)
(Gain) loss on extinguishment of debt— (36)
(Gain) loss on sale of investments / deconsolidation
(Gain) loss on sale of investments / deconsolidation
(Gain) loss on sale of investments / deconsolidation(Gain) loss on sale of investments / deconsolidation276 (1,119)
Changes in operating assets and liabilitiesChanges in operating assets and liabilities
Changes in operating assets and liabilities
Changes in operating assets and liabilities
Accounts receivable, net
Accounts receivable, net
Accounts receivable, netAccounts receivable, net(406)(483)
Contract assets, currentContract assets, current(40)(224)
Inventories, netInventories, net(59)(435)
Other assets, currentOther assets, current(105)(37)
Accounts payable and accrued liabilitiesAccounts payable and accrued liabilities120 79 
Contract liabilities, currentContract liabilities, current37 42 
Defined benefit plan contributionsDefined benefit plan contributions(11)(6)
Distributions from equity method investmentsDistributions from equity method investments10 15 
Other operating activities, netOther operating activities, net(45)40 
Net cash flows provided by (used in) operating activitiesNet cash flows provided by (used in) operating activities504 (170)
Investing ActivitiesInvesting Activities
Investing Activities
Investing Activities
Capital expenditures
Capital expenditures
Capital expendituresCapital expenditures(144)(122)
Investment in businesses, net of cash acquiredInvestment in businesses, net of cash acquired(56)(38)
Dispositions of businessesDispositions of businesses36 2,944 
Settlement of derivative contracts, netSettlement of derivative contracts, net(14)(123)
Kidde-Fenwal, Inc. deconsolidation(134)— 
Settlement of derivative contracts, net
Settlement of derivative contracts, net
Other investing activities, net
Other investing activities, net
Other investing activities, netOther investing activities, net16 (16)
Net cash flows provided by (used in) investing activitiesNet cash flows provided by (used in) investing activities(296)2,645 
Financing ActivitiesFinancing Activities
Financing Activities
Financing Activities
Increase (decrease) in short-term borrowings, net
Increase (decrease) in short-term borrowings, net
Increase (decrease) in short-term borrowings, netIncrease (decrease) in short-term borrowings, net(19)(22)
Issuance of long-term debtIssuance of long-term debt21 
Repayment of long-term debtRepayment of long-term debt(12)(1,127)
Repurchases of common stockRepurchases of common stock(62)(1,014)
Dividends paid on common stockDividends paid on common stock(309)(257)
Dividends paid to non-controlling interestDividends paid to non-controlling interest(41)(22)
Other financing activities, netOther financing activities, net(69)(13)
Other financing activities, net
Other financing activities, net
Net cash flows provided by (used in) financing activitiesNet cash flows provided by (used in) financing activities(506)(2,434)
Effect of foreign exchange rate changes on cash and cash equivalentsEffect of foreign exchange rate changes on cash and cash equivalents(13)(41)
Effect of foreign exchange rate changes on cash and cash equivalents
Effect of foreign exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents and restricted cash, including cash classified in current assets held for sale
Less: Change in cash balances classified as assets held for sale
Net increase (decrease) in cash and cash equivalents and restricted cashNet increase (decrease) in cash and cash equivalents and restricted cash(311)— 
Cash, cash equivalents and restricted cash, beginning of periodCash, cash equivalents and restricted cash, beginning of period3,527 3,025 
Cash, cash equivalents and restricted cash, end of periodCash, cash equivalents and restricted cash, end of period3,216 3,025 
Less: restricted cashLess: restricted cash
Cash and cash equivalents, end of periodCash and cash equivalents, end of period$3,209 $3,017 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1: DESCRIPTION OF THE BUSINESS

Carrier Global Corporation (the "Company") is a global leader in intelligent climate and energy solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to its customers. The Company's portfolio includes industry-leading brands such as Carrier, Viessmann, Toshiba, Automated Logic, Carrier Transicold, Kidde, Edwards and LenelS2 that offer innovative heating, ventilating, air conditioning ("HVAC"), refrigeration, fire, security and building automation technologies to help make the world safer and more comfortable. The Company also provides a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring. The Company's operations are classified into three segments: HVAC, Refrigeration and Fire & Security.

In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for 20222023 filed with the SEC on February 7, 20236, 2024 (the "2022"2023 Form 10-K").

NOTE 2: BASIS OF PRESENTATION

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

Planned Portfolio TransformationAcquisition of Viessmann Climate Solutions

On April 25, 2023, the Company announced that it entered into a Share Purchase Agreement (the “Agreement”) to acquire the climate solutions business (the "VCS Business") of Viessmann Group GmbH & Co. KG (“Viessmann”), a privately-held company, for approximately €12 billion.company. The VCS Business develops intelligent, integrated and sustainable technologies, including heat pumps, boilers, photovoltaic systems, home battery storage and digital solutions, primarily for residential customers in Europe. The transaction is expected to close aroundacquisition was completed on January 2, 2024. As a result, the endassets, liabilities and results of 2023, subject to customary closing conditionsoperations of the VCS Business are consolidated in the accompanying Unaudited Condensed Consolidated Financial Statements as of the date of acquisition and regulatory approvals. In addition,reported within the Company’s HVAC segment. See Note 15 Acquisitions for additional information.

Portfolio Transformation

On April 25, 2023, the Company also announced plans to exit its Fire & Security and Commercial Refrigeration businesses over the course of 2024. On December 7, 2023, the Company entered into a stock purchase agreement to sell its Access Solutions business ("Access Solutions") to Honeywell International Inc. for an enterprise value of approximately $4.95 billion. Access Solutions, historically reported in the Company's Fire & Security segment, is a global supplier of physical security and digital access solutions supporting the hospitality, commercial, education and military markets. On December 12, 2023, the Company entered into a stock purchase agreement to sell its Commercial Refrigeration business ("CCR") to Haier Group Corporation for an enterprise value of approximately $775 million. CCR, historically reported in the Company's Refrigeration segment, is a global supplier of turnkey solutions for commercial refrigeration systems and services, with a primary focus on serving food retail customers, cold storage facilities and warehouses. As a result, the assets and liabilities of each business are presented as held for sale in the accompanying Unaudited Condensed Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023, and recorded at the lower of their carrying value or fair value less estimated cost to sell. See Note 15 Acquisitions and Note 16 - Divestitures for additional information.

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In addition, the net assets of the Company’s Industrial Fire business ("Industrial Fire") met the criteria to be classified as held for sale during the fourth quarter of 2023. Industrial Fire, historically reported in the Company's Fire & Security segment, is a leading manufacturer of a full spectrum of fire detection and suppression solutions and services in critical high-hazard environments, including oil and gas, power generation, marine and offshore facilities, automotive, data centers and aircraft hangars. As a result, the assets and liabilities of the business are presented as held for sale in the accompanying Unaudited Condensed Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023, and recorded at the lower of their carrying value or fair value less estimated cost to sell. On March 5, 2024, the Company entered into a stock purchase agreement to sell Industrial Fire to Sentinel Capital Partners for an enterprise value of approximately $1.425 billion. See Note 16 - Divestitures for additional information.

Deconsolidation of Kidde-Fenwal, Inc.

On May 14, 2023, Kidde-Fenwal, Inc. ("KFI"), an indirect wholly-owned subsidiary of the Company, filed a petition for voluntary reorganization under Chapter 11 of the United States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for the District of Delaware. KFI, an industrial fire detection and suppression business and an indirect wholly-owned subsidiary ofhistorically reported in the Company,Company's Fire & Security segment, has indicated that it intends to use the bankruptcy process to explore strategic alternatives, including the sale of KFI as a going concern. KFI has further stated that, during the Chapter 11 process, KFI expects that there will be no significant interruptions to its business operations. As of the petition date, KFI was deconsolidated and its respective assets and liabilities were derecognized from the Company's Unaudited Condensed Consolidated Financial Statements. See Note 19 - Commitments and Contingent Liabilities for additional information.

Acquisition of Toshiba Carrier Corporation

On February 6, 2022, the Company entered into a binding agreement to acquire a majority ownership interest in Toshiba Carrier Corporation (“TCC”), a variable refrigerant flow ("VRF") and light commercial HVAC joint venture between Carrier and Toshiba Corporation. The acquisition was completed on August 1, 2022. As a result, the assets, liabilities and results of operations of TCC are consolidated in the accompanying Unaudited Condensed Consolidated Financial Statements as of the
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date of acquisition and reported within the Company’s HVAC segment. Upon closing, Toshiba Corporation retained a 5% ownership interest in TCC. See Note 15 Acquisitions for additional information.

Sale of Chubb Fire & Security Business

On July 26, 2021, the Company entered into a stock purchase agreement to sell its Chubb Fire and Security business ("Chubb") to APi Group Corporation ("APi"). Chubb, which was reported within the Company’s Fire & Security segment, delivered essential fire safety and security solutions from design and installation to monitoring, service and maintenance across more than 17 countries around the globe. The sale of Chubb was completed on January 3, 2022 (the "Chubb Sale"). See Note 16 - Divestitures for additional information.

Separation from United Technologies

On April 3, 2020 (the Distribution Date"), United Technologies Corporation ("UTC"), since renamed RTX Corporation ("Raytheon Technologies Corporation" or "RTX"), completed the spin-off of Carrier into an independent, publicly traded company (the "Separation") through a pro-rata distribution (the "Distribution") on a one-for-one basis of all of the outstanding shares of common stock of Carrier to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date of the Distribution. In connection withFollowing the Separation and Distribution, the Company issued an aggregate principal balanceentered into several agreements with UTC and Otis Worldwide Corporation ("Otis") that govern various aspects 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,the relationship among the Company, received cash contributions totaling $590 million from UTC related toand Otis. As of March 31, 2024, only certain portions of the Separation.Tax Matters Agreement ("TMA") remain in effect.

Recently Issued and Adopted Accounting Pronouncements

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

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose information about their reportable segments’ significant expenses on an interim and annual basis. In addition, the amendments clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment and contain other disclosure requirements. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of this ASU on its financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires public entities to disclose disaggregated information about their effective tax rate reconciliation as well as information on income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact of this ASU on its financial statements.
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On March 6, 2024, the SEC adopted new rules designed to enhance public company disclosures related to the risks and impacts of climate-related matters. The rules amend the provisions of both Regulation S-K and Regulation S-X and will be required in annual reports and registration statements. Amendments to Regulation S-K require disclosure of climate-related risks, transition plans, targets and goals, risk management and governance. Amendments to Regulation S-X require disclosure of the financial effects of severe weather events and other natural conditions as well as the use of carbon offsets or renewable energy credits. Disclosure requirements will begin phasing in for fiscal years beginning on or after January 1, 2025, subject to legal challenges and the SEC's voluntary stay of the disclosure requirements. The Company will continue to assess the impact of these new rules on its financial statements while the stay is in place.

NOTE 3: INVENTORIES, NET

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

Inventories, net consisted of the following:
(In millions)(In millions)June 30,
2023
December 31,
2022
(In millions)March 31,
2024
December 31,
2023
Raw materialsRaw materials$841 $884 
Work-in-processWork-in-process291 230 
Finished goodsFinished goods1,567 1,526 
Inventories, netInventories, net$2,699 $2,640 
Inventories, net
Inventories, net

The Company performs periodic assessments utilizing customer demand, production requirements and historical usage rates to determine the existence of excess and obsolete inventory and records necessary provisions to reduce such inventories to the lower of cost or estimated net realizable value. Raw materials, work-in-process and finished goods are net of valuation reserves of $241$260 million and $190$223 million as of June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively.

NOTE 4: GOODWILL AND INTANGIBLE ASSETS

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

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

(In millions)HVACRefrigerationFire & SecurityTotal
Balance as of December 31, 2022$6,392 $1,197 $2,388 $9,977 
Acquisitions / divestitures(11)(4)— (15)
Foreign currency translation(22)(4)(9)(35)
Balance as of June 30, 2023$6,359 $1,189 $2,379 $9,927 
(In millions)HVACRefrigerationFire & SecurityTotal
Balance as of December 31, 2023$6,407 $1,124 $458 $7,989 
Acquisitions (1)
7,576 — — 7,576 
Reclassified to held for sale (2)
— — 25 25 
Foreign currency translation(253)(22)51 (224)
Balance as of March 31, 2024$13,730 $1,102 $534 $15,366 
(1) See Note 15 - Acquisitions for additional information.
(2) See Note 16 - Divestitures for additional information.

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

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Identifiable intangible assets consisted of the following:

June 30, 2023December 31, 2022
March 31, 2024March 31, 2024December 31, 2023
(In millions)(In millions)Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount(In millions)Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Amortized:Amortized:
Customer relationships
Customer relationships
Customer relationshipsCustomer relationships$1,408 $(754)$654 $1,431 $(720)$711 
Patents and trademarksPatents and trademarks388 (202)186 401 (191)210 
Service portfolios and otherService portfolios and other932 (655)277 953 (595)358 
2,728 (1,611)1,117 2,785 (1,506)1,279 
Service portfolios and other
Service portfolios and other
8,753
Unamortized:Unamortized:
Trademarks and otherTrademarks and other64 — 64 63 — 63 
Trademarks and other
Trademarks and other
Intangible assets, netIntangible assets, net$2,792 $(1,611)$1,181 $2,848 $(1,506)$1,342 

Amortization of intangible assets was as follows:

 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)
(In millions)
(In millions)(In millions)2023202220232022
Amortization expense of Intangible assetsAmortization expense of Intangible assets$61 $20 $125 $41 
Amortization expense of Intangible assets
Amortization expense of Intangible assets

Impairment Assessment

On January 1, 2024, the Company reorganized its HVAC segment reporting units due to the VCS Business acquisition. As a result, the Company performed a quantitative goodwill impairment test on its legacy Commercial HVAC, North America residential and light commercial and Global Comfort solutions reporting units prior to the reorganization which did not result in a goodwill impairment. The Company then reassigned goodwill among its new regional reporting units using a relative fair value approach and performed a goodwill impairment assessment which did not result in a goodwill impairment.

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NOTE 5: BORROWINGS AND LINES OF CREDIT

Long-term debt consisted of the following:

(In millions)June 30,
2023
December 31,
2022
2.242% Notes due February 15, 2025$1,200 $1,200 
2.493% Notes due February 15, 2027900 900 
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 
Total long-term notes8,350 8,350 
Japanese Term Loan Facility374 404 
Other debt (including project financing obligations and finance leases)146 149 
Discounts and debt issuance costs(81)(61)
Total debt8,789 8,842 
Less: current portion of long-term debt134 140 
Long-term debt, net of current portion$8,655 $8,702 
(In millions)March 31,
2024
December 31,
2023
2.242% Notes due 2025 (1)
$1,200 $1,200 
4.375% Notes due 2025812 830 
5.800% Notes due 20251,000 1,000 
2.493% Notes due 2027900 900 
4.125% Notes due 2028812 830 
2.722% Notes due 20302,000 2,000 
2.700% Notes due 2031750 750 
4.500% Notes due 2032921 941 
5.900% Notes due 20341,000 1,000 
3.377% Notes due 20401,500 1,500 
3.577% Notes due 20502,000 2,000 
6.200% Notes due 20541,000 1,000 
Total long-term notes13,895 13,951 
Delayed Draw Facility2,536 — 
Japanese Term Loan Facility357 379 
Other debt (including project financing obligations and finance leases)213 74 
Discounts and debt issuance costs(106)(111)
Total debt16,895 14,293 
Less: current portion of long-term debt1,248 51 
Long-term debt, net of current portion$15,647 $14,242 
(1) 2.242% Notes due February 15, 2025; reclassified to Current portion of long-term debt.

Acquisition Funding

On January 2, 2024, the Company completed the acquisition of the VCS Business for total consideration of $14.2 billion. Under the terms of the Agreement, 20% of the purchase price was paid in Carrier common stock, issued directly to Viessmann and subject to certain lock up provisions and 80% was paid in cash, subject to working capital and other adjustments. In order to fund the Euro-denominated cash portion of the purchase price, the Company used cash on hand, debt financing and various term loan facilities.

Debt Issuance

In November 2023, the Company issued $3.0 billion principal amount of USD-denominated notes in three tranches. The tranches consisted of $1.0 billion aggregate principal amount of 5.8% notes due 2025, $1.0 billion aggregate principal amount of 5.90% notes due 2034 and $1.0 billion aggregate principal amount of 6.2% notes due 2054 (collectively, the “USD Notes”). In addition, the Company issued €2.35 billion principal amount of Euro-denominated notes in three tranches. The tranches consisted of €750 million aggregate principal amount of 4.375% notes due 2025, €750 million aggregate principal amount of 4.125% notes due 2028 and €850 million aggregate principal amount of 4.5% notes due 2032 (collectively, the “Euro Notes”). The Company capitalized $51 million of deferred financing costs which are being amortized over the term of their related notes. The notes are subject to certain customary covenants and the Company has the option to redeem the notes in whole or in part at any time, prior to their stated maturity date at the redemption price set forth in the indenture agreements.

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Bridge Loan

On April 25, 2023, the Company entered into commitment letters with JPMorgan Chase Bank, N.A., BofA Securities, Inc. and Bank of America, N.A. to provide a €8.2 billion aggregate principal, senior unsecured bridge term loan facility (the “Bridge Loan”). Euro-denominated borrowings bore interest at the EURIBOR Rate plus a ratings-based margin, USD-denominated borrowings bore interest at either a Term SOFR Rate plus 0.10% and a ratings-based margin or, alternatively, at a base rate plus a ratings-based margin. The Company capitalized $48 million of deferred financing costs associated with the Bridge Loan which were amortized over the commitment period. Upon entering into a senior unsecured delayed draw term loan facility and issuing the USD Notes and the Euro Notes, the Company reduced the Bridge Loan by €7.7 billion and accelerated the amortization on $25 million of deferred financing costs in Interest expense during 2023. On January 2, 2024, the Company entered into a 60-day senior unsecured term loan agreement consisting of a Euro-denominated tranche in an aggregate amount of €113 million and a USD-denominated tranche in an aggregate amount of $349 million (the “60-day Loan”). Upon entering into the 60-day Loan, the Company reduced the final portion of the Bridge Loan by €500 million and subsequently terminated the agreement. As of March 31, 2024, borrowings under the 60-day Loan have been fully repaid.

Delayed Draw Facility

On May 19, 2023, the Company entered into a senior unsecured delayed draw term loan credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders that permits aggregate borrowings of up to €2.3 billion (the "Delayed Draw Facility"). The facility consists of an 18-month, Euro-denominated tranche in an aggregate amount of €1.15 billion and a 3-year, Euro-denominated tranche in an aggregate amount of €1.15 billion. Euro-denominated borrowings bear interest at the EURIBOR Rate plus a ratings-based margin, USD-denominated borrowings bear interest at either a Term SOFR Rate plus 0.10% and a ratings-based margin or, alternatively, at a base rate plus a ratings-based margin. The Company capitalized $4 million of deferred financing costs which will be amortized over the respective term of the tranches. On January 2, 2024, the Company borrowed the full amount available under the Delayed Draw Facility in U.S. Dollars.

364 Day Revolver

On May 19, 2023, the Company entered into a 364-day, $500 million, senior unsecured revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders (the “Revolver”), the proceeds of which became available upon closing of the acquisition of the VCS Business. Borrowings bear interest at either a Term SOFR Rate plus 0.10% and a ratings-based margin or, alternatively, at a base rate plus a ratings-based margin. As of March 31, 2024, there were no borrowings outstanding under the Revolver.

Japanese Term Loan Facility

On July 15, 2022, the Company entered into a five-year, JPY 54 billion (approximately $400 million) senior unsecured term loan facility with MUFG Bank Ltd., as administrative agent and lender, and certain other lenders (the "Japanese Term Loan Facility"). Borrowings under the Japanese Term Loan Facility bear interest at a rate equal to the Tokyo Term Risk Free Rate plus 0.75%. In addition, the Japanese Term Loan Facility is subject to customary covenants including a covenant to maintain a maximum consolidated leverage ratio. The Company capitalized $2 million of deferred financing costs which are being amortized over its term. On July 25, 2022, the Company borrowed JPY 54 billion under the Japanese Term Loan Facility and used the proceeds to fund a portion of the TCC acquisitionYen-denominated purchase price of Toshiba Carrier Corporation ("TCC") and to pay related fees and expenses.

Revolving Credit Facility

On May 19, 2023, the Company entered into a revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and certain other lenders, permitting aggregate borrowings of up to $2.0 billion pursuant to an unsecured, unsubordinated revolving credit facility that matures in May 2028 (the "Revolving Credit Facility"). The Revolving Credit Facility supports the Company's commercial paper program and can be used for other general corporate purposes. Borrowings are available in U.S. Dollars and Euros. U.S. Dollar borrowings can bear interest at either a Term SOFR Rate plus 0.10% and a rating-basedratings-based margin or, alternatively, at an alternate base rate plus a ratings-based margin. Euro borrowings bear interest at an adjusted EURIBOR rate plus a ratings-based margin. A ratings-based commitment fee is charged on unused commitments. Upon entering into the agreement, the Company terminated its existing revolving credit facility that was set to mature in April 2025. In addition, the Company capitalized $2 million of deferred financing costs which are being amortized over its term. As of June 30, 2023,March 31, 2024, there were no borrowings outstanding under the Revolving Credit Facility.

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Commercial Paper Program

The Company has 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 June 30, 2023,March 31, 2024, there were no borrowings outstanding under the commercial paper program.

Project Financing Arrangements

The Company is involved in long-term construction contracts in which it arranges project financing with certain customers. As a result, the Company issued $6$10 million and $21$5 million of debt during the sixthree months ended June 30,March 31, 2024 and 2023, and 2022, respectively. Long-term debt repayments associated with these financing arrangements during the sixthree months ended June 30,March 31, 2024 and 2023 and 2022 were $12$5 million and $12$2 million, respectively.
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Debt Covenants

The Revolving Credit Facility, Revolver, the indenture for the long-term notes and the Japanese Term Loan Facility contain affirmative and negative covenants customary for financings of these types, which, among other things, limit the Company's ability to incur additionalcertain liens, to make certain fundamental changes and to enter into sale and leaseback transactions. As of June 30, 2023,March 31, 2024, the Company was in compliance with the covenants under the agreements governing its outstanding indebtedness.

Tender Offers

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

NOTE 6: FAIR VALUE MEASUREMENTS

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

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

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

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

In connection with the TCC acquisition,During 2022, the Company fundedentered into cross currency swaps with various financial institutions to fund a portion of the Yen-denominated purchase price with cash on hand by entering into cross currency swaps with SMBC Capital Markets, Inc., as syndication swap arranger, and certain other financial institutions.of TCC. The cross currency swaps are measured at fair value on a recurring basis using observable market inputs, such as forward, discount and interest rates as well as credit default swap spreads. The Company designated the cross currency swaps as a partial hedge of its investment in certain subsidiaries whose functional currency is the Japanese Yen in order to manage foreign currency translation risk. As a result, changes in the fair value of the swaps are recorded in Equity in the accompanying Unaudited Condensed Consolidated Balance Sheet. From time to time, the Company settles and enters into new cross currency swaps with the same purpose and characteristics as initially established.

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The remaining portion of the Yen-denominated purchase price was funded by the Japanese Term Loan Facility. The carrying value of the facility is translated on a recurring basis using the exchange rate at the end of the applicable period and approximates its fair value. The Company designated the Japanese Term Loan Facility as a partial hedge of its investment in certain subsidiaries whose functional currency is the Japanese Yen in order to manage foreign currency translation risk. As a result, changes in the carrying value of the Japanese Term Loan Facility associated with foreign exchange rate movements are recorded in Equity in the Unaudited Condensed Consolidated Balance Sheet.

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In connection with the proposed acquisition of the VCS Business,During 2023, the Company entered into window forward contracts with Bank of America N.A. and JPMorgan Chase Bank N.A. to mitigate the foreign currency risk of the expected cash outflows associated with the Euro-denominated purchase price.price of the VCS Business. The instruments havehad an aggregate notional amount of €7 billion and a settlement window between November 28, 2023 and February 27, 2024. The window forward contracts arewere measured at fair value on a recurring basis using observable market inputs, such as forward, discount and interest rates with changes in fair value reported in Other income (expense), net in the accompanying Unaudited Condensed Consolidated Statement of Operations. During the three months ended June 30, 2023,March 31, 2024, the Company recognized a $111$86 million loss on the mark-to-market valuation of its window forward contracts. The Company settled the window forward contracts on January 2, 2024 upon the acquisition of the VCS Business.

During 2023, the Company entered into several interest rate swap contracts to mitigate interest rate exposure on the forecasted issuance of long-term debt. The contracts had an aggregate notional amount of $1.525 billion and were designated as cash flow hedges with changes in fair value reported in Equity in the accompanying Unaudited Condensed Consolidated Balance Sheet. Fair value was measured on a recurring basis using observable market inputs, such as forward, discount and interest rates. In November 2023, the contracts were settled upon the issuance of the underlying debt. As a result, the Company deferred a net unrecognized gain of $58 million in Equity which will be subsequently recognized in Interest expense over the term of the related notes which range from 2034 to 2044. The amount expected to be amortized during 2024 is a net gain of $5 million.

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 accompanying Unaudited Condensed Consolidated Balance Sheet:

(In millions)(In millions)TotalLevel 1Level 2Level 3(In millions)TotalLevel 1Level 2Level 3
June 30, 2023
March 31, 2024
Derivative assets (1)(3)
Derivative assets (1)(3)
Derivative assets (1)(3)
Derivative assets (1)(3)
$18 $— $18 $— 
Derivative liabilities (2)(3)
Derivative liabilities (2)(3)
$(176)$— $(176)$— 
December 31, 2022
December 31, 2023
December 31, 2023
December 31, 2023
Derivative assets (1) (3)
Derivative assets (1) (3)
Derivative assets (1) (3)
Derivative assets (1) (3)
$28 $— $28 $— 
Derivative liabilities (2) (3)
Derivative liabilities (2) (3)
$(48)$— $(48)$— 
(1) Included in Other assets, current and Other assets on the accompanying Unaudited Condensed Consolidated Balance Sheet.
(2) Included in Accrued liabilities and Other long-term liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet.
(3)Includes cross currency swaps and window forward contracts.contracts (which were settled on January 2, 2024).

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

June 30, 2023December 31, 2022
March 31, 2024
(In millions)
(In millions)
(In millions)(In millions)Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Total long-term Notes (1)
Total long-term Notes (1)
$8,350 $6,943 $8,350 $6,832 
Total long-term Notes (1)
Total long-term Notes (1)
(1) Excludes debt discount and issuance costs.

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

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NOTE 7: EMPLOYEE BENEFIT PLANS

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

Contributions to the plans were as follows:

 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)
(In millions)
(In millions)(In millions)2023202220232022
Defined benefit plansDefined benefit plans$$$11 $
Defined benefit plans
Defined benefit plans
Defined contribution plans
Defined contribution plans
Defined contribution plansDefined contribution plans$29 $28 $66 $66 
Multi-employer pension plansMulti-employer pension plans$$$$
Multi-employer pension plans
Multi-employer pension plans

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

Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)
(In millions)
(In millions)
Service cost
Service cost
Service cost
Interest cost
Interest cost
Interest cost
Expected return on plan assets
Expected return on plan assets
Expected return on plan assets
 Three Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
Service cost$$$$
Interest cost16 
Expected return on plan assets(8)(6)(16)(13)
Amortization of prior service credit— 
Recognized actuarial net (gain) loss(1)(1)
Net periodic pension expense (benefit)Net periodic pension expense (benefit)$4 $5 $8 $10 
Net periodic pension expense (benefit)
Net periodic pension expense (benefit)

NOTE 8: STOCK-BASED COMPENSATION

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

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

Stock-based compensation cost by award type was as follows:
 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)
(In millions)
(In millions)(In millions)2023202220232022
Equity compensation costs - equity settledEquity compensation costs - equity settled$18 $20 $40 $41 
Equity compensation costs - equity settled
Equity compensation costs - equity settled
Equity compensation costs - cash settled (1)
Equity compensation costs - cash settled (1)
Equity compensation costs - cash settled (1)
Equity compensation costs - cash settled (1)
(11)(17)
Total stock-based compensation expenseTotal stock-based compensation expense$19 $9 $42 $24 
Total stock-based compensation expense
Total stock-based compensation expense
(1) The cash settled awards are classified as liability awards and are measured at fair value at each balance sheet date.

NOTE 9: PRODUCT WARRANTIES

In the ordinary course of business, the Company provides standard warranty coverage on its products. Provisions for these amounts are established at the time of sale and estimated primarily based on product warranty terms and historical claims experience. In addition, the Company incurs discretionary costs to service its products in connection with specific product performance issues. Provisions for these amounts are established when they are known and estimable. The Company assesses the adequacy of its initial provisions and will make adjustments as necessary based on known or anticipated claims or as new information becomes available that suggests it is probable that future costs will be different than estimated amounts. Amounts associated with these provisions are classified on the accompanying Unaudited Condensed Consolidated Balance Sheet as Accrued liabilities or Other long-term liabilities based on their anticipated settlement date.
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The changes in the carrying amount of warranty related provisions are as follows:
Six Months Ended June 30,
Three Months Ended March 31,Three Months Ended March 31,
(In millions)(In millions)20232022(In millions)20242023
Balance as of January 1,Balance as of January 1,$552 $524 
Warranties, performance guarantees issued and changes in estimated liabilityWarranties, performance guarantees issued and changes in estimated liability117 84 
Settlements madeSettlements made(92)(78)
OtherOther(2)(5)
Balance as of June 30,$575 $525 
Acquisitions (1)
Balance as of March 31,
Balance as of March 31,
Balance as of March 31,

(1)
See Note 15 - Acquisitions for additional information.
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NOTE 10: EQUITY

The authorized number of shares of common stock of Carrier is 4,000,000,000 shares of $0.01 par value. As of June 30, 2023March 31, 2024 and December 31, 2022, 880,570,3712023, 944,433,341 and 876,487,480883,068,393 shares of common stock were issued, respectively, which includes 43,490,981 and 42,103,995 shares of treasury stock, for both periods respectively.

Share Repurchase Program

The Company may repurchase its outstanding common stock from time to time subject to market conditions and at the Company's discretion. Repurchases occur in the open market or through one or more other public or private transactions pursuant to plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act. Shares acquired are recognized at cost and presented separately on the balance sheet as a reduction to Equity. Since the initial authorization in February 2021, the Company's Board of Directors authorized the repurchase of up to $4.1 billion of the Company's outstanding common stock.

As of December 31, 2022,2023, the Company repurchased 42.143.5 million shares of common stock for an aggregate purchase price of $1.9$2.0 billion, including shares repurchased under an accelerated share repurchase agreement. As a result, the Company had approximately $2.2$2.1 billion remaining under the current authorization at December 31, 2022.

During2023. Upon announcement of the six months ended June 30, 2023,proposed acquisition of the VCS Business, the Company repurchased 1.4 million shares of common stock for an aggregate purchase price of $62 million.temporarily paused its share repurchase program in order to advance its capital allocation strategy. As a result, there is no share repurchase activity during the Company has approximately $2.1 billion remaining under the current authorization at June 30, 2023.three months ended March 31, 2024.

Accumulated Other Comprehensive Income (Loss)

A summary of changes in the components of Accumulated other comprehensive income (loss) for the three and six months ended June 30, 2023March 31, 2024 is as follows:
(In millions)(In millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2022$(1,604)$(84)$(1,688)
(In millions)
(In millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansUnrealized Hedging Gains (Losses)Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2023
Other comprehensive income (loss) before reclassifications, netOther comprehensive income (loss) before reclassifications, net52 — 52 
Amounts reclassified, pre-taxAmounts reclassified, pre-tax— — — 
Tax expense (benefit) reclassified— — — 
Balance as of March 31, 2023$(1,552)$(84)$(1,636)
Other comprehensive income (loss) before reclassifications, net(55)— (55)
Amounts reclassified, pre-tax— — — 
Tax expense (benefit) reclassified— — — 
Balance as of June 30, 2023$(1,607)$(84)$(1,691)
Balance as of March 31, 2024
Balance as of March 31, 2024
Balance as of March 31, 2024

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A summary of changes in the components of Accumulated other comprehensive income (loss) for the three and six months ended June 30, 2022March 31, 2023 is as follows:
(In millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansAccumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2021$(505)$(484)$(989)
Other comprehensive income (loss) before reclassifications, net(61)(4)(65)
Amounts reclassified, pre-tax— 
Tax expense (benefit) reclassified— (1)(1)
Chubb divestiture(574)329 (245)
Balance as of March 31, 2022$(1,140)$(157)$(1,297)
Other comprehensive income (loss) before reclassifications, net(480)— (480)
Amounts reclassified, pre-tax— 
Tax expense (benefit) reclassified— (1)(1)
Balance as of June 30, 2022$(1,620)$(155)$(1,775)
(In millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansUnrealized Hedging Gains (Losses)Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2022$(1,604)$(84)$— $(1,688)
Other comprehensive income (loss) before reclassifications, net52 — — 52 
Balance as of March 31, 2023$(1,552)$(84)$ $(1,636)

NOTE 11: REVENUE RECOGNITION

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

Sales disaggregated by product and service are as follows:

Three Months Ended March 31,
 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)
(In millions)
(In millions)(In millions)2023202220232022
Sales TypeSales Type
Sales Type
Sales Type
Product
Product
ProductProduct$3,754 $3,005 $6,955 $5,644 
ServiceService462 383 883 714 
Service
Service
HVAC sales
HVAC sales
HVAC salesHVAC sales4,216 3,388 7,838 6,358 
ProductProduct858 925 1,645 1,792 
Product
Product
ServiceService114 116 225 225 
Service
Service
Refrigeration sales
Refrigeration sales
Refrigeration salesRefrigeration sales972 1,041 1,870 2,017 
ProductProduct869 838 1,682 1,609 
Product
Product
ServiceService63 49 119 96 
Service
Service
Fire & Security sales
Fire & Security sales
Fire & Security salesFire & Security sales932 887 1,801 1,705 
Total segment salesTotal segment sales6,120 5,316 11,509 10,080 
Total segment sales
Total segment sales
Eliminations and other
Eliminations and other
Eliminations and otherEliminations and other(128)(105)(244)(215)
Net salesNet sales$5,992 $5,211 $11,265 $9,865 
Net sales
Net sales

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Contract Balances

Total contract assets and contract liabilities consisted of the following:

(In millions)(In millions)June 30,
2023
December 31,
2022
(In millions)March 31,
2024
December 31,
2023
Contract assets, currentContract assets, current$578 $537 
Contract assets, non-current (included within Other assets)
Contract assets, non-current (included within Other assets)
Total contract assetsTotal contract assets586 543 
Contract liabilities, currentContract liabilities, current(483)(449)
Contract liabilities, current
Contract liabilities, current
Contract liabilities, non-current (included within Other long-term liabilities)
Contract liabilities, non-current (included within Other long-term liabilities)
(170)(174)
Total contract liabilitiesTotal contract liabilities(653)(623)
Net contract assets (liabilities)Net contract assets (liabilities)$(67)$(80)

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

The Company recognized revenue of $264$345 million during the sixthree months ended June 30, 2023March 31, 2024 that related to contract liabilities as of January 1, 2023.2024. The Company expects a majority of its current contract liabilities at the end of the period to be recognized as revenue in the next 12 months.

NOTE 12: RESTRUCTURING COSTS

The Company incurs costs associated with restructuring initiatives intended to improve operating performance, profitability and working capital levels. Actions associated with these initiatives may include improving productivity, workforce reductions and the consolidation of facilities. Due to the size, nature and frequency of these discrete plans, they are fundamentally different from the Company's ongoing productivity actions.

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

 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)
(In millions)
(In millions)(In millions)2023202220232022
HVACHVAC$$$$
HVAC
HVAC
Refrigeration
Refrigeration
RefrigerationRefrigeration10 
Fire & SecurityFire & Security(1)12 
Fire & Security
Fire & Security
Total Segment
Total Segment
Total SegmentTotal Segment11 24 21 
General corporate expensesGeneral corporate expenses— 
Total restructuring costs$9 $13 $26 $23 
General corporate expenses
General corporate expenses
Total restructuring costs (1)
Total restructuring costs (1)
Total restructuring costs (1)
Cost of sales
Cost of sales
Cost of salesCost of sales$$$$
Selling, general and administrativeSelling, general and administrative17 16 
Selling, general and administrative
Selling, general and administrative
Total restructuring costs$9 $13 $26 $23 
Total restructuring costs (1)
Total restructuring costs (1)
Total restructuring costs (1)

(1)

2024 restructuring costs include period related charges.

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

Six Months Ended June 30,
Three Months Ended March 31,Three Months Ended March 31,
(In millions)(In millions)20232022(In millions)20242023
Balance as of January 1,Balance as of January 1,$24 $54 
Net pre-tax restructuring costsNet pre-tax restructuring costs26 23 
Acquisitions (1)
Utilization, foreign exchange and otherUtilization, foreign exchange and other(19)(34)
Balance as of June 30,$31 $43 
Balance as of March 31,
(1) See Note 15 - Acquisitions for additional information.

During the six months ended June 30, 2023 and 2022, charges associated with restructuring initiatives related to cost reduction efforts. Amounts recognized primarily related to severance due to workforce reductions and exit costs due to the consolidation of field operations. As of June 30, 2023,March 31, 2024, the Company had $31$51 million accrued for costs associated with its announced restructuring initiatives, allinitiatives. The balance relates to cost reduction efforts, primarily severance related across each of which is expectedthe Company's segments, along with reserves associated with the Company's planned portfolio transformation. The Company expects a majority of the balance to be paidutilized within one year.

NOTE 13: INCOME TAXES

The Company accounts for income tax expense in accordance with ASC 740, Income Taxes ("ASC 740"), which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate was 44.8%13.7% for the three months ended June 30, 2023March 31, 2024 compared with 22.5%24.0% for the three months ended June 30, 2022.March 31, 2023. The year-over-year increasedecrease was primarily driven by the non-deductible lossesa tax benefit of $293$21 million on the deconsolidation of KFI due to its Chapter 11 filing and the $111 million loss on the mark-to-market valuation of the Company's window forward contracts associated with the expected cash outflowsTMA and UTC's conclusion of certain income tax matters from their 2017 and 2018 tax audit with the U.S. Internal Revenue Service ("IRS"), a net tax benefit of $19 million related to adjustments to basis differences in certain companies presented as held-for-sale and a net tax benefit of $16 million related to the re-organization and disentanglement of certain Fire & Security industrial businesses in advance of the Euro-denominated purchase priceplanned divestitures. These amounts were partially offset by a tax charge of the VCS Business.

The effective tax rate was 33.4% for the six months ended June 30, 2023 compared with 19.3% for the six months ended June 30, 2022. The year-over-year increase was primarily driven by the non-deductible losses$15 million related to a reduction of $293 million on the deconsolidation of KFI due to its Chapter 11 filing and the $111 million loss on the mark-to-market valuation of the Company's window forward contracts associated with the expected cash outflows of the Euro-denominated purchase price of the VCS Business. In addition, the six months ended June 30, 2022 includeda lower effective tax rate on the $1.1 billion Chubb gain compared with the Company's U.S. statutory rate and a favorable tax adjustment of $32 million associated withutilizable foreign tax credits generated and utilized in the prior year.credits.

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

The Company conducts business globally and files income tax returns in U.S. federal, state and foreign jurisdictions. In certain jurisdictions, the Company's operations were included in UTC's combined tax returns for the periods through the Distribution. The U.S. Internal Revenue Service ("IRS") is currently auditingIRS has completed its audit of UTC's 2017 and 2018 tax years and this audit could conclude within the next twelve months.years. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including Australia, Belgium, Canada, China, Czech Republic, France, Germany, Hong Kong, India, Italy, Mexico, the Netherlands, Singapore, the United Kingdom and the United States. The Company is no longer subject to U.S. federal income tax examination for years prior to 20172020 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 $55$30 million to $70$45 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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NOTE 14: EARNINGS PER SHARE

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

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

Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions, except per share amounts)(In millions, except per share amounts)2023202220232022
(In millions, except per share amounts)
(In millions, except per share amounts)
Net income attributable to common shareowners
Net income attributable to common shareowners
Net income attributable to common shareownersNet income attributable to common shareowners$199 $573 $572 $1,952 
Basic weighted-average number of shares outstandingBasic weighted-average number of shares outstanding836.0 845.7 835.5 849.5 
Basic weighted-average number of shares outstanding
Basic weighted-average number of shares outstanding
Stock awards and equity units (share equivalent)Stock awards and equity units (share equivalent)14.9 17.0 16.0 18.9 
Stock awards and equity units (share equivalent)
Stock awards and equity units (share equivalent)
Diluted weighted-average number of shares outstanding
Diluted weighted-average number of shares outstanding
Diluted weighted-average number of shares outstandingDiluted weighted-average number of shares outstanding850.9 862.7 851.5 868.4 
Antidilutive shares excluded from computation of diluted earnings per shareAntidilutive shares excluded from computation of diluted earnings per share5.9 4.5 5.6 2.9 
Antidilutive shares excluded from computation of diluted earnings per share
Antidilutive shares excluded from computation of diluted earnings per share
Earnings Per Share
Earnings Per Share
Earnings Per ShareEarnings Per Share
BasicBasic$0.24 $0.68 $0.68 $2.30 
Basic
Basic
DilutedDiluted$0.23 $0.67 $0.67 $2.25 
Diluted
Diluted

NOTE 15: ACQUISITIONS

Acquisitions are recorded using the acquisition method of accounting in accordance with ASC 805, Business Combinations. As a result, the aggregate purchase price has been allocated to assets acquired and liabilities assumed based on the estimate of fair market value of such assets and liabilities at the date of acquisition.

Toshiba Carrier CorporationViessmann Climate Solutions

On February 6, 2022,January 2, 2024, the Company entered intocompleted the acquisition of the VCS Business from Viessmann for total consideration of $14.2 billion. The purchase price consisted of (i) $11.2 billion in cash and (ii) 58,608,959 shares of the Company's common stock, subject to certain lock-up provisions and anti-dilution protection. The Company funded the cash portion of the purchase price with a binding agreement to acquire a majority ownership interest in TCC for $920 million. TCC, a VRFcombination of cash on hand, net proceeds from the USD Notes and light commercial HVAC joint venture between CarrierEuro Notes and Toshiba Corporation, designs and manufactures flexible, energy-efficient and high-performance VRF and light commercial HVAC systems as well as commercial products, compressors and heat pumps. The acquisition included all of TCC’s advanced research and development centers and global manufacturing operations, product pipelineborrowings under the Delayed Draw Facility and the long-term use60-day Loan.

The VCS Business develops intelligent, integrated and sustainable technologies, including heat pumps, boilers, photovoltaic systems, home battery storage and digital solutions, primarily for residential customers in Europe. The Company believes that secular trends in these areas will drive significant, sustained future growth. In addition, the Company anticipates realizing significant operational synergies including savings through supplier rationalization and leverage, reduced manufacturing costs and lower general and administrative costs. Longer term, the Company expects to benefit from synergies related to service revenue expansion, leverage of Toshiba’s iconic brand. The acquisition was completed on August 1, 2022distribution channels and funded through the Japanese Term Loan Facility and cash on hand. Upon closing, Toshiba Corporation retained a 5% ownership interest in TCC.cross-selling opportunities.
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The components of the purchase price is as follows:

(In millions)January 2, 2024
Cash$11,156 
Common shares (58,608,959 shares at $51.20 per share)3,001 
Total consideration$14,157

The preliminary allocation of the purchase price is as follows:

(In millions)August 1, 2022January 2, 2024
Cash and cash equivalents$462394 
Accounts receivable426408 
Inventories373948 
Other assets, current5417 
Fixed assets343913 
Intangible assets9656,640 
Goodwill8767,576 
Other assets293284 
Accounts payable(412)(288)
Accrued liabilities(445)
ContractOther liabilities, current(21)(626)
Future income tax obligations(1,825)
Other long-term liabilities(574)(284)
Net assets acquired$2,34014,157 
Less: Fair value of non-controlling interests(22)
Less: Fair value of previously held TCC equity investments(1,398)
Total cash consideration$
920 

The excess purchase price over the estimated fair value of the net identifiable assets acquired was recognized as goodwill and totaled $876 million,$7.6 billion, which is not deductible for tax purposes. Accounts receivable and current liabilities were stated at their historical carrying value, which approximates fair value given the short-term nature of these assets and liabilities. The estimate of fair value for inventory and fixed assets was based on an assessment of the acquired assets' condition as well as an evaluation of the current market value of such assets. The sale agreement included several customary provisions to settle working capital and other transaction-related items as of the date of sale. During 2022, the parties finalized these amounts in accordance with the terms of the sale agreement and the Company paid an additional $41 million to Toshiba Corporation in 2023. In addition, the parties finalized amounts related to pension funding levels during the year which resulted in the Company receiving $12 million from Toshiba Corporation.

The Company recorded intangible assets based on its preliminary estimate of fair value which consisted of the following:

(In millions)(In millions)Estimated Useful Life (in years)Intangible Assets Acquired(In millions)Estimated Useful Life (in years)Intangible Assets Acquired
Customer relationshipsCustomer relationships23$497 
TechnologyTechnology7220 
TrademarkTrademark26180 
BacklogBacklog160 
Land use rights45
Total intangible assets acquiredTotal intangible assets acquired$965 
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The valuation of intangible assets was determined using an income approach methodology including the multi-period excess earnings method and the relief from royalty method. Key assumptions used in estimating future cash flows included projected revenue growth rates, EBITEBITDA margins, discount rates, customer attrition rates and royalty rates among others. The projected future cash flows are discounted to present value using an appropriate discount rate. As of June 30, 2023,March 31, 2024, the Company finalizedis in the process of allocatingcompleting its valuation of tangible, intangible and tax-related assets relating to the VCS Business and the allocation of the purchase price and valuingto the assets acquired assets and liabilities except for certain amounts associated with income taxes.assumed will be completed once the valuation process has been finalized.

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The Company previously accounted for its minority ownership in TCC under the equity method of accounting. In connection with the transaction, the carrying value of the Company's previously held TCC equity investments were recognized at fair value at the date of acquisition using an income approach methodology. As a result, the Company recognized a $696 million non-cash gain within Other income (expense), net on the accompanying Unaudited Condensed Consolidated Statement of Operations. In addition, the assets, liabilities and results of operations of TCCthe VCS Business are consolidated in the accompanying Unaudited Condensed ConsolidatedConsolidated Financial Statements as of the date of acquisition and reported within the Company's HVAC segment. TheFor the period from January 2, 2024 to March 31, 2024, revenues for the VCS Business were $875 million and its net loss was $124 million which included amortization of the step-up to fair value of inventory and backlog of $111 million as well as $139 million of intangible asset amortization.

During the three months ended March 31, 2024, the Company incurred $29$30 million of acquisition-related costs. During 2023, $80 million of acquisition-related costs during 2022,were incurred, of which $13$12 million was recognized during the sixthree months ended June 30, 2022 andMarch 31, 2023 included. These acquisition costs are reflected within Selling, general and administrative onin the accompanying Unaudited Condensed Consolidated Statement of Operations.

Unaudited Pro Forma Financial Information

The Company has not includedfollowing unaudited pro forma financial information required under ASC 805 asis presented to illustrate the pro forma impact was not significant.

Announced Acquisition

On April 25, 2023, the Company announced that it entered into an Agreement to acquire the VCS Business, a privately-held company, for approximately €12 billion. The VCS Business develops intelligent, integrated and sustainable technologies, including heat pumps, boilers, photovoltaic systems, home battery storage and digital solutions, primarily for residential customers in Europe. Under the termsestimated effects of the Agreement, 20% of the purchase price will be paid in Carrier common stock, issued directly to Viessmann and subject to long-term lock-up provisions, and 80% will be paid in cash, subject to working capital and other adjustments. The Company intends to finance the acquisition with a combination of cash on hand and new debt financing and expects the transaction to close around the end of 2023, subject to customary closing conditions and regulatory approvals.

On April 25, 2023, the Company entered into commitment letters with JPMorgan Chase Bank, N.A., BofA Securities, Inc. and Bank of America, N.A. to provide a €8.2 billion aggregate principal, senior unsecured bridge term loan facility (the "Bridge Loan"). Proceeds from the Bridge Loan are expected to be used to fund a portion of the Euro-denominated purchase price of the VCS Business as if other debt financingthe business combination had occurred on January 1, 2023:

 Three Months Ended March 31,
(In millions)20242023
Revenue$6,182 $6,278 
Earnings343 79 

The pro forma amounts include the historical operating results of the Company and the VCS Business prior to the acquisition, with adjustments directly attributable to the acquisition including amortization of the step-up to fair value of inventory and amortization expense of acquired intangible assets. The unaudited pro forma financial information is not secured bynecessarily indicative of the results of operations that actually would have been achieved had the acquisition date. The Company capitalized $36 million of deferred financing coststhe VCS Business been consummated as of the dates indicated, nor is it indicative of any future results. In addition, the unaudited pro forma financial information does not reflect the expected realization of any synergies or cost savings associated with the Bridge Loan which are being amortized over the commitment period. On May 19, 2023, the aggregate principal amount of the Bridge Loan was reduced by €2.3 billion upon entering into a senior unsecured delayed draw term loan credit agreement. As a result, the Company accelerated the amortization on $10 million of deferred financing costs during the period in Interest expense.

On May 19, 2023, the Company entered into a senior unsecured delayed draw term loan credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders that permits aggregate borrowings of up to €2.3 billion (the "Delayed Draw Facility"). Proceeds from the Delayed Draw Facility are expected to be used to fund a portion of the Euro-denominated purchase price of the VCS Business. The Company capitalized $4 million of deferred financing costs associated with the Delayed Draw Facility which will be amortized over the term once the facility is drawn upon. In addition, the Company entered into a 364-day, $500 million, senior unsecured revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders (the "Revolver") on May 19, 2023. Proceeds from the Revolver become available upon closing the purchase of the VCS Business.acquisition.

NOTE 16: DIVESTITURES

Sale of Chubb Fire & Security Business

On January 3, 2022, the Company completed the Chubb Sale for net proceeds of $2.9 billion. Chubb, which was reported within the Company’s Fire & Security segment, delivered essential fire safety and security solutions from design and installation to monitoring, service and maintenance across more than 17 countries around the globe. The sale agreement included several customary provisions to settle working capital and other transaction-related items as of the date of sale. The parties finalized these amounts in accordance with the terms of the sale agreement during 2022. During the six months ended June 30, 2022, the Company recognized a net gain on the sale of $1.1 billion, which is included in Other income (expense), net on the accompanying Unaudited Condensed Consolidated Statement of Operations.

Planned Portfolio Transformation

On April 25, 2023, the Company announced plans to exit its Fire & Security and Commercial Refrigeration businesses over the course of 2024. Carrier expectsOn December 7, 2023, the Company entered into a stock purchase agreement to usesell its Access Solutions business to Honeywell International Inc. for an enterprise value of approximately $4.95 billion. Access Solutions, historically reported in the proceeds from theseCompany's Fire & Security segment, is a global supplier of physical security and digital access solutions supporting the hospitality, commercial, education and military markets. On December 12, 2023, the Company entered into a stock purchase agreement to sell the CCR business to Haier Group Corporation for an enterprise value of approximately $775 million. CCR, historically reported in the Company's Refrigeration segment, is a global supplier of turnkey solutions for commercial refrigeration systems and services, with a primary focus on serving food retail customers, cold storage facilities and warehouses. As a result, the assets and liabilities of both businesses are presented as held for sale in the accompanying Unaudited Condensed Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023, and recorded at the lower of their carrying value or fair value less estimated cost to sell. Both transactions to reduce leverage, advance the Company’s capital allocation priorities and for general corporate purposes. The planned exit is notare expected to impact UTEC,close in 2024 and are subject to customary closing conditions.

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In addition, the net assets of Industrial Fire met the criteria to be classified as held for sale during the fourth quarter of 2023. Industrial Fire, historically reported in the Company's Fire & Security’s controlsSecurity segment, is a leading manufacturer of a full spectrum of fire detection and suppression solutions and services in critical high-hazard environments, including oil and gas, power generation, marine and offshore facilities, automotive, data centers and aircraft hangars. As a result, the assets and liabilities of the business are presented as held for residential HVAC customerssale in the accompanying Unaudited Condensed Consolidated Balance Sheet as of March 31, 2024 and December 31, 2023, and recorded at the lower of their carrying value or fair value less estimated cost to sell. On March 5, 2024, the Sensitech monitoring businesses.Company entered into a stock purchase agreement to sell its Industrial Fire business to Sentinel Capital Partners for an enterprise value of approximately $1.425 billion. The transaction is expected to close in 2024 and is subject to customary closing conditions.

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

March 31, 2024
(In millions)Commercial
 Refrigeration
Access
Solutions
Industrial
Fire
Total
Cash and cash equivalents$107 $10 $11 $128 
Accounts receivable, net189 85 96 370 
Inventories, net93 34 68 195 
Contract assets, current106 49 157 
Other assets, current16 25 
Fixed assets, net77 14 23 114 
Intangible assets, net— 52 54 
Goodwill72 1,479 433 1,984 
Operating lease right-of-use assets49 14 26 89 
Other assets44 53 
Total assets held for sale$753 $1,701 $715 $3,169 
Accounts payable$123 $29 $43 $195 
Accrued liabilities156 20 50 226 
Contract liabilities, current25 57 17 99 
Long-term debt, including current portion— — 
Future pension and post-retirement obligations198 — — 198 
Future income tax obligations— 
Operating lease liabilities38 11 21 70 
Other long-term liabilities12 18 
Total liabilities held for sale$554 $129 $137 $820 
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December 31, 2023
(In millions)Commercial
 Refrigeration
Access
Solutions
Industrial
Fire
Total
Cash and cash equivalents$131 $$20 $157 
Accounts receivable, net274 104 101 479 
Inventories, net84 31 65 180 
Contract assets, current98 42 142 
Other assets, current15 22 
Fixed assets, net78 13 22 113 
Intangible assets, net— 53 55 
Goodwill72 1,498 439 2,009 
Operating lease right-of-use assets49 13 28 90 
Other assets44 10 13 67 
Total assets held for sale$845 $1,733 $736 $3,314 
Accounts payable$129 $20 $39 $188 
Accrued liabilities181 21 55 257 
Contract liabilities, current23 53 22 98 
Long-term debt, including current portion— — 
Future pension and post-retirement obligations203 — 204 
Future income tax obligations
Operating lease liabilities40 11 23 74 
Other long-term liabilities12 24 
Total liabilities held for sale$591 $119 $152 $862 

NOTE 17: SEGMENT FINANCIAL DATA

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

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

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

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

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

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Table of Contents
Net sales and Operating profit by segment are as follows:

Net SalesOperating Profit
 Three Months Ended June 30, Three Months Ended June 30,
Net SalesNet SalesOperating Profit
Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31,
(In millions)(In millions)2023202220232022(In millions)2024202320242023
HVACHVAC$4,216 $3,388 $742 $585 
RefrigerationRefrigeration972 1,041 112 147 
Fire & SecurityFire & Security932 887 (157)134 
Total segmentTotal segment6,120 5,316 697 866 
Eliminations and otherEliminations and other(128)(105)(146)(16)
General corporate expensesGeneral corporate expenses— — (62)(31)
Total ConsolidatedTotal Consolidated$5,992 $5,211 $489 $819 


Net SalesOperating Profit
Six Months Ended June 30,Six Months Ended June 30,
(In millions)2023202220232022
HVAC$7,838 $6,358 $1,177 $1,055 
Refrigeration1,870 2,017 220 254 
Fire & Security1,801 1,705 (64)1,352 
Total segment11,509 10,080 1,333 2,661 
Eliminations and other(244)(215)(184)(40)
General corporate expenses— — (105)(65)
Total Consolidated$11,265 $9,865 $1,044 $2,556 
22

Table of Contents
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 sixthree months ended June 30, 2023March 31, 2024 and 2022.2023.

Three Months Ended March 31,
 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)
(In millions)
(In millions)(In millions)2023202220232022
United StatesUnited States$3,389 $3,171 $6,249 $5,955 
United States
United States
International:
International:
International:International:
EuropeEurope1,205 1,119 2,401 2,164 
Europe
Europe
Asia Pacific
Asia Pacific
Asia PacificAsia Pacific1,194 713 2,227 1,365 
OtherOther204 208 388 381 
Other
Other
Net salesNet sales$5,992 $5,211 $11,265 $9,865 
Net sales
Net sales

NOTE 18: RELATED PARTIES

Equity Method Investments

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

 Three Months Ended June 30,Six Months Ended June 30,
Three Months Ended March 31,
Three Months Ended March 31,
Three Months Ended March 31,
(In millions)(In millions)2023202220232022(In millions)20242023
Sales to equity method investees included in Product sales
Sales to equity method investees included in Product sales
$887 $787 $1,641 $1,411 
Purchases from equity method investees included in Cost of products sold
Purchases from equity method investees included in Cost of products sold
$59 $91 $102 $201 

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

(In millions)(In millions)June 30,
2023
December 31,
2022
(In millions)March 31,
2024
December 31,
2023
Receivables from equity method investees included in Accounts receivable, net
Receivables from equity method investees included in Accounts receivable, net
$364 $154 
Payables to equity method investees included in Accounts payable
Payables to equity method investees included in Accounts payable
$39 $44 

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NOTE 19: COMMITMENTS AND CONTINGENT LIABILITIES

The Company is involved in various litigation, claims and administrative proceedings, including those related to environmental (including asbestos) and legal matters. In accordance with ASC 450, Contingencies, the Company records accruals for loss contingencies when it is probable that a liability has been 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 its results of operations cash flows or financial condition.

Environmental Matters

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

The outstanding liabilities for environmental obligations are as follows:

(In millions)(In millions)June 30,
2023
December 31,
2022
(In millions)March 31,
2024
December 31,
2023
Environmental reserves included in Accrued liabilities
Environmental reserves included in Accrued liabilities
$15 $24 
Environmental reserves included in Other long-term liabilities
Environmental reserves included in Other long-term liabilities
203 211 
Total Environmental reservesTotal Environmental reserves$218 $235 

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

Asbestos Matters

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

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The Company's asbestos liabilities and related insurance recoveries are as follows:

(In millions)(In millions)June 30,
2023
December 31,
2022
(In millions)March 31,
2024
December 31,
2023
Asbestos liabilities included in Accrued liabilities
Asbestos liabilities included in Accrued liabilities
$16 $16 
Asbestos liabilities included in Other long-term liabilities
Asbestos liabilities included in Other long-term liabilities
207 212 
Total Asbestos liabilitiesTotal Asbestos liabilities$223 $228 
Asbestos-related recoveries included in Other assets, current
Asbestos-related recoveries included in Other assets, current
$$
Asbestos-related recoveries included in Other assets, current
Asbestos-related recoveries included in Other assets, current
Asbestos-related recoveries included in Other assets
Asbestos-related recoveries included in Other assets
89 90 
Total Asbestos-related recoveriesTotal Asbestos-related recoveries$94 $95 

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

UTC Equity Awards Conversion Litigation

On August 12, 2020, several former employees of UTC or its subsidiaries filed a putative class action complaint (the "Complaint") in the United States District Court for the District of Connecticut against Raytheon Technologies Corporation, Carrier, Otis Worldwide Corporation ("Otis"), the former members of the UTC Board of Directors and the members of the Carrier and Otis Boards of Directors (Geraud Darnis, et al. v. Raytheon Technologies Corporation, et al.). The Complaint challenged the method by which UTC equity awards were converted to UTC, Carrier and Otis equity awards following the Separation and the Distribution. Defendants moved to dismiss the Complaint. Plaintiffs amended their Complaint on September 13, 2021 (the "Amended Complaint"). The Amended Complaint, with Raytheon Technologies Corporation, Carrier and Otis as the only defendants, asserted that the defendants are liable for breach of certain equity compensation plans and for breach of the implied covenant of good faith and fair dealing. The Amended Complaint also sought specific performance. The Company believes all plaintiffs' claims against it are without merit. Defendants moved to dismiss the Amended Complaint. On September 30, 2022, the court dismissed the case against all defendants, with prejudice. Plaintiffs appealed the dismissal to the United States Court of Appeals for the Second Circuit. Oral arguments on the appeal were held before the Second Circuit on June 29, 2023 and a decision is pending.

Aqueous Film Forming Foam Litigation

As of June 30, 2023,March 31, 2024, the Company, KFI and others have been named as defendants in more than 4,5007,000 lawsuits filed by individuals in or removed to the federal courts of the United States alleging that the historic use of Aqueous Film Forming Foam ("AFFF") caused personal injuries and/or property damage. The Company, KFI and others have also been named as defendants in more than 500800 lawsuits filed by several U.S. states, municipalities and water utilities in or removed to U.S. federal courts alleging that the historic use of AFFF caused contamination of property and water supplies. In December 2018, the U.S. Judicial Panel on Multidistrict Litigation transferred and consolidated all AFFF cases pending in the U.S. federal courts against the Company, KFI and others to the U.S. District Court for the District of South Carolina (the "MDL Proceedings"). The individual plaintiffs in the MDL Proceedings generally seek damages for alleged personal injuries, medical monitoring, diminution in property value and injunctive relief to remediate alleged contamination of water supplies. The U.S. state, municipal and water utility plaintiffs in the MDL Proceedings generally seek damages and costs related to the remediation of public property and water supplies.

AFFF is a firefighting foam, developed beginning in the late 1960s pursuant to U.S. military specification, used to extinguish certain types of hydrocarbon-fueled fires. The lawsuits identified above relate to Kidde Fire Fighting, Inc., which owned the National Foam business. Kidde Fire Fighting, Inc. was acquired by a UTC subsidiary in 2005 and merged into KFI in 2007. The National Foam business manufactured AFFF for sale to government (including the U.S. federal government) and non-government customers in the U.S. at a single facility located in West Chester, Pennsylvania (the "Pennsylvania Site"). In 2013, KFI divested the AFFF businesses to an unrelated third party. The Company acquired KFI as part of the Separation in April 2020.

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The key components that contribute to AFFF's fire-extinguishing capabilities are known as fluorosurfactants. Neither the Company, nor KFI, nor any of the Company's subsidiaries involved in the AFFF litigation manufactured fluorosurfactants. Instead, the National Foam business purchased these substances from unrelated third parties for use in manufacturing AFFF. Plaintiffs in the MDL Proceedings allege that the fluorosurfactants used by various manufacturers in producing AFFF contained, or over time degraded into, compounds known as per- and polyfluoroalkyl substances (referred to collectively as "PFAS"), including perflourooctanesulfonic acid ("PFOS") and perflourooctanoic acid ("PFOA"). Plaintiffs further allege that, as a result of the use of AFFF, PFOS and PFOA were released into the environment and, in some instances, ultimately reached drinking water supplies.

Plaintiffs in the MDL Proceedings allege that PFOS and PFOA contamination has resulted from the use of AFFF manufactured using a process known as ECF, and that this process was used exclusively by 3M. They also allege that PFOA contamination has resulted from the use of AFFF manufactured using a different process, known as telomerization, and that this process was used exclusively by the other AFFF manufacturers (including the National Foam business). Compounds containing PFOS and PFOA (as well as many other PFAS) have also been used for decades by many third parties in a number of different industries to manufacture firefighters’ protective outerwear, carpets, clothing, fabrics, cookware, food packaging, personal care products, cleaning products, paints, varnishes and other consumer and industrial products.
28



Plaintiffs in the MDL Proceedings have named multiple defendants, including suppliers of chemicals and raw materials used to manufacture fluorosurfactants, fluorosurfactant manufacturers and AFFF manufacturers. The defendants in the MDL Proceedings moved for summary judgment on the government contractor defense, which potentially applies to AFFF sold to or used by the U.S. government. After full briefing and oral argument, on September 16, 2022, the MDL court declined to enter summary judgment for the defendants. The defense, however, remains available at any trial to which it applies.

On September 23, 2022, after completion of discovery, the MDL court selected one water provider case, the City of Stuart, FL v. 3M, et al., for a bellwether trial. That trial was scheduled to begin in early June 2023 but was postponed indefinitely. The MDL court ordered that the bellwether process for personal injury cases willto begin in 2023. TheHowever, the court has not yet outlined details on that process or its timing.

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

The Company, KFI and other defendants are also party to one action in Arizona state court brought by a firefighter claiming that occupational exposure to AFFF has caused certain personal injuries.

The Company and KFI believe that they have meritorious defenses to the claims in the MDL Proceedings and the other AFFF lawsuits. Given the numerous factual, scientific and legal issues to be resolved relating to these claims, the Company is unable to assess the probability of liability or to reasonably estimate a range of possible loss at this time. There can be no assurance that any such future exposure will not be material in any period.

On May 14, 2023, KFI filed a voluntary petition with the United States Bankruptcy Court for the District of Delaware seeking relief under Chapter 11 of the Bankruptcy Code after the Company determined that it would not provide financial support to KFI going forward, other than ensuring KFI has access to services necessary for the effective operation of its business. As a result, all litigation against KFI is automatically stayed. KFI filed an adversary complaint and motion in the Chapter 11 case seeking an order staying or enjoining all AFFF-related litigation against the Company, its other subsidiaries and RTX. That motion was resolved through an agreement that effectively stays the AFFF litigation against these parties. KFI has also indicated to the bankruptcy court that it intends to pursue insurance coverage for AFFF-related liabilities and contractual indemnification for AFFF-related liabilities from the third party to which KFI sold National Foam. On November 21, 2023, the bankruptcy court ordered certain parties, including the Company, to participate in a mediation with respect to claims that might be asserted by and against it in the bankruptcy proceedings. The parties have engaged in several mediation sessions and anticipate further sessions in the future. The terms and scope of any potential settlement may be affected by, among other factors, the bankruptcy court’s ability to approve nonconsensual releases of litigation claims against non-debtors, which the United States Supreme Court is expected to decide in Harrington v. Purdue Pharma, L.P.

Deconsolidation Due to Bankruptcy

As of May 14, 2023, the Company no longer controlscontrolled KFI as their activities are subject to review and oversight by the bankruptcy court. Therefore, KFI was deconsolidated and their respective assets and liabilities were derecognized from the Company’s Unaudited Condensed Consolidated Financial Statements. Upon deconsolidation, the Company determined the fair value of its retained interest in KFI to be zero and will account for it prospectively using the cost method. As a result of these actions, the Company recognized a loss of $293$297 million in its Unaudited Condensed Consolidated StatementsStatement of Operations
26


within Other income/(expense), net. In addition, the deconsolidation resulted in an investing cash outflow of $134 million in the Company's Unaudited Condensed Consolidated StatementsStatement of Cash Flows.

In connection with the bankruptcy filing, KFI entered into several agreements with subsidiaries of the Company to ensure they have access to services necessary for the effective operation of their business. All post-deconsolidation activity between the Company and KFI are reported as third-party transactions recorded within the Company's Unaudited Condensed Consolidated StatementsStatement of Operations. Since the petition date, there were no material transactions between the Company and KFI.

On March 15, 2024, the Company and Pacific Avenue Capital Partners entered into certain agreements including a stock and asset purchase agreement whereby Pacific Avenue Capital Partners shall acquire certain assets and operating liabilities of KFI, subject to approval by the bankruptcy court. On April 1, 2024, the bankruptcy court subsequently approved the sale. However, there has been no determination with respect to the allocation of sale proceeds.
29



Income Taxes

Under the Tax Matters AgreementTMA relating to the Separation, the Company is responsible to UTC for its share of the Tax Cuts and Jobs Act transition tax associated with foreign undistributed earnings as of December 31, 2017. AsDuring the three months ended March 31, 2024, the Company recognized a result, liabilities$46 million gain associated with the TMA and UTC's conclusion of $75certain income tax matters from their 2017 and 2018 tax audit with the IRS. Liabilities under the TMA of $96 million and $293$233 million are included within the accompanying Unaudited Condensed Consolidated Balance Sheet within Accrued Liabilities and Other Long-Term Liabilities as of June 30, 2023,March 31, 2024, respectively. This obligation is expected to be settled in annual installments ending in April 2026 with the next installment of $75$96 million due in 2024. The Company believes that the likelihood of incurring losses materially in excess of this amount is remote.

Other

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

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

30

















27


With respect to the accompanying Unaudited Condensed Consolidated Financial Statements for the three and six months ended June 30,March 31, 2024 and 2023, and 2022, 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 27, 2023,April 25, 2024, appearing below, states that the firm did not audit and does not express an opinion on the accompanying 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 accompanying Unaudited Condensed Consolidated Financial Statements because that report is not a "report" or a "part" of a registration statement prepared or certified by PricewaterhouseCoopers within the meaning of Sections 7 and 11 of the Securities Act.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareowners of Carrier Global Corporation

Results of Review of Interim Financial Information

We have reviewed the accompanying condensed consolidated balance sheet of Carrier Global Corporation and its subsidiaries (the “Company”) as of June 30, 2023,March 31, 2024, and the related condensed consolidated statements of operations, of comprehensive income (loss), and of changes in equity for the three-month and six-month periods ended June 30, 2023 and 2022 and the condensed consolidated statement of cash flows for the six-month periodsthree-month period ended June 30,March 31, 2024 and 2023, and 2022, including the related notes (collectively referred to as the “interim financial information”). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for it to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of the Company as of December 31, 2022,2023, and the related consolidated statements of operations, of comprehensive income (loss), of changes in equity and of cash flows for the year then ended (not presented herein), and in our report dated February 7, 2023,6, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 2022,2023, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

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

/s/ PricewaterhouseCoopers LLP

Hallandale Beach,Miami, Florida
July 27, 2023April 25, 2024
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Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

BUSINESS OVERVIEW

Business Summary

Carrier Global Corporation ("we" or "our") is a global leader in intelligent climate and energy solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to our customers. Our portfolio includes industry-leading brands such as Carrier, Viessmann, Toshiba, Automated Logic, Carrier Transicold, Kidde, Edwards and LenelS2 that offer innovative heating, ventilating and air conditioning ("HVAC"), refrigeration, fire, security and building automation technologies to help make the world safer and more comfortable. We also provide a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring. Our operations are classified into three segments: HVAC, Refrigeration and Fire & Security.

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

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

Recent Developments

Supply Chain Challenges

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

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

Planned Portfolio TransformationViessmann Climate Solutions

On April 25, 2023, we announced that we entered into a Share Purchase Agreement (the “Agreement”) to acquire the climate solutions business (the "VCS Business") of Viessmann Group GmbH & Co. KG (“Viessmann”), a privately-held company, for approximately €12 billion.company. The VCS Business develops intelligent, integrated and sustainable technologies, including heat pumps, boilers, photovoltaic systems, home battery storage and digital solutions, primarily for residential customers in Europe. The transaction is expected to close aroundacquisition was completed on January 2, 2024. As a result, the endassets, liabilities and results of operations of the VCS Business are consolidated in the accompanying Unaudited Condensed Consolidated Financial Statements as of the date of acquisition and reported within our HVAC segment.

Portfolio Transformation

On April 25, 2023, subject to customary closing conditions and regulatory approvals. In addition, we also announced plans to exit our Fire & Security and Commercial Refrigeration businesses over the course of 2024.

On December 7, 2023, we entered into a stock purchase agreement to sell our Access Solutions business ("Access Solutions") to Honeywell International Inc. for an enterprise value of approximately $4.95 billion. Access Solutions, historically reported in our Fire & Security segment, is a global supplier of physical security and digital access solutions supporting the hospitality, commercial, education and military markets. On December 12, 2023, we entered into a stock purchase agreement to sell our Commercial Refrigeration business ("CCR") to Haier Group Corporation for an enterprise value of approximately $775 million. CCR, historically reported in our Refrigeration segment, is a global supplier of turnkey solutions for commercial refrigeration systems and services, with a primary focus on serving food retail customers, cold storage facilities and warehouses. On March 5, 2024, we entered into a stock purchase agreement to sell our Industrial Fire business ("Industrial Fire") to Sentinel Capital Partners for an enterprise value of approximately $1.425 billion. Industrial Fire, historically reported in our Fire & Security segment, is a leading manufacturer of a full spectrum of fire detection and suppression solutions and services in critical high-hazard environments, including oil and gas, power generation, marine and offshore facilities, automotive, data centers and aircraft hangars. These transactions are expected to close in 2024.

2932



Deconsolidation of Kidde-Fenwal, Inc.

On May 14, 2023, Kidde-Fenwal, Inc. ("KFI"), an indirect wholly-owned subsidiary of ours, filed a petition for voluntary reorganization under Chapter 11 of the United States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for the District of Delaware. KFI, an industrial fire detection and suppression business and an indirect wholly-owned subsidiary of the Company,historically reported in our Fire & Security segment, has indicated that it intends to use the bankruptcy process to explore strategic alternatives, including the sale of KFI as a going concern. KFI has further stated that, during the Chapter 11 process, KFI expects that there will be no significant interruptions to its business operations. As of the petition date, KFI was deconsolidated and its respective assets and liabilities were derecognized from the Company'sour Unaudited Condensed Consolidated Financial Statements.

Acquisition of Toshiba Carrier Corporation

On February 6, 2022, we entered into a binding agreement to acquire a majority ownership interest in Toshiba Carrier Corporation ("TCC"), a variable refrigerant flow ("VRF") and light commercial HVAC joint venture between Carrier and Toshiba Corporation. TCC designs and manufactures flexible, energy-efficient and high-performance VRF and light commercial HVAC systems as well as commercial products, compressors and heat pumps. The acquisition included all of TCC's advanced research and development centers and global manufacturing operations, product pipeline and the long-term use of Toshiba's iconic brand. The acquisition was completed on August 1, 2022. As a result, the assets, liabilities and results of operations of TCC are consolidated in the accompanying Unaudited Condensed Consolidated Financial Statements as of the date of acquisition and reported within our HVAC segment. Upon closing, Toshiba Corporation retained a 5% ownership interest in TCC.

Sale of Chubb Fire & Security Business

On July 26, 2021, we entered into a stock purchase agreement to sell our Chubb Fire and Security business ("Chubb") to APi Group Corporation ("APi"). Chubb, which was reported within our Fire & Security segment, delivered essential fire safety and security solutions from design and installation to monitoring, service and maintenance across more than 17 countries around the globe. On January 3, 2022, we completed the sale of Chubb (the "Chubb Sale") for net proceeds of $2.9 billion and recognized a gain on the sale of $1.1 billion during the year ended December 31, 2022.


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 accompanying Unaudited Condensed Consolidated Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. In "Management’s Discussion and Analysis of Financial Condition and Results of Operations" of our 20222023 Form 10-K, we describe the significant accounting estimates and policies used in the preparation of the accompanying Unaudited Condensed Consolidated Financial Statements. ThereExcept as noted below, there have been no significant changes in our critical accounting estimates.

30Business Combinations


In accordance with ASC 805, Business Combinations ("ASC 805"), acquisitions that meet the definition of a business are recorded using the acquisition method of accounting. We recognize and measure the identifiable assets acquired, liabilities assumed and any non-controlling interest as of the acquisition date at fair value. The valuation of intangible assets is determined by an income approach methodology, using assumptions such as projected future revenues, customer attrition rates, royalty rates, tax rates and discount rates. The excess, if any, of total consideration transferred in a business combination over the fair value of identifiable assets acquired, liabilities assumed and any non-controlling interest is recognized as goodwill. Costs incurred as a result of a business combination other than costs related to the issuance of debt or equity securities are recorded in the period the costs are incurred.

RESULTS OF OPERATIONS

The results of operations of TCC are included in our consolidated results since the acquisition date of August 1, 2022. Prior to the acquisition, we previously accounted for our minority ownership in TCC under the equity method of accounting and recognized our portion of earnings within Equity method investment in net earnings as part of operating expenses. As a result, prior period results may not be comparable to the current period. See Note 15 - Acquisitions in the Notes to the accompanying Unaudited Condensed Consolidated Financial Statements for additional information.

Three Months Ended June 30, 2023March 31, 2024 Compared with the Three Months Ended June 30, 2022March 31, 2023

The following represents our consolidated net sales and operating results:

 Three Months Ended June 30,
Three Months Ended March 31, Three Months Ended March 31,
(In millions)(In millions)20232022Period Change% Change(In millions)20242023Period Change% Change
Net salesNet sales$5,992 $5,211 $781 15 %Net sales$6,182 $$5,273 $$909 17 17 %
Cost of products and services soldCost of products and services sold(4,237)(3,764)(473)13 %Cost of products and services sold(4,477)(3,895)(3,895)(582)(582)15 15 %
Gross marginGross margin1,755 1,447 308 21 %Gross margin1,705 1,378 1,378 327 327 24 24 %
Operating expensesOperating expenses(1,266)(628)(638)102 %Operating expenses(1,205)(823)(823)(382)(382)46 46 %
Operating profitOperating profit489 819 (330)(40)%Operating profit500 555 555 (55)(55)(10)(10)%
Non-operating income (expense), netNon-operating income (expense), net(67)(62)(5)%Non-operating income (expense), net(165)(46)(46)(119)(119)259 259 %
Income from operations before income taxesIncome from operations before income taxes422 757 (335)(44)%Income from operations before income taxes335 509 509 (174)(174)(34)(34)%
Income tax expenseIncome tax expense(189)(170)(19)11 %Income tax expense(46)(122)(122)76 76 (62)(62)%
Net income from operationsNet income from operations233 587 (354)(60)%Net income from operations289 387 387 (98)(98)(25)(25)%
Less: Non-controlling interest in subsidiaries' earnings from operationsLess: Non-controlling interest in subsidiaries' earnings from operations34 14 20 143 %Less: Non-controlling interest in subsidiaries' earnings from operations20 14 14 43 43 %
Net income attributable to common shareownersNet income attributable to common shareowners$199 $573 $(374)(65)%Net income attributable to common shareowners$269 $$373 $$(104)(28)(28)%

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Net Sales

For the three months ended June 30, 2023,March 31, 2024, Net sales were $6.0$6.2 billion, a 15%17% increase compared with the same period of 2022.2023. The components of the year-over-year change were as follows:
Three Months Ended June 30, 2023March 31, 2024
Organic62 %
Foreign currency translation— %
Acquisitions and divestitures, net915 %
Total % change1517 %

Organic sales for the three months ended June 30, 2023March 31, 2024, increased by 6%2% compared with the same period of 2022.2023. The organic increase was primarily driven by our HVAC segment due to improved global end-markets in our Commercial HVAC businessthe Americas, which more than offset reduced end-market demand in EMEA and pricing improvements in our North America residential and light commercial business.Asia. In addition, our Fire & Security segment benefited from volume growth and price improvements in both the Commercial and volume growth in each region.Residential fire and Industrial fire businesses. Refrigeration results decreased as each of the segment's businesses experienced challenges in certain end-markets during the quarter. Refer to "Segment Review" below for a discussion of Net sales by segment.

On August 1, 2022,January 2, 2024, we acquired the Commercial HVAC business acquiredVCS Business, a majority ownership interestleading manufacturer of high efficiency heating and renewable energy systems in TCC, a VRF and light commercial HVAC joint venture between Carrier and Toshiba Corporation.Europe. The results of TCCthe VCS Business have been included in our Unaudited Condensed Consolidated Financial Statements since the date of acquisition. The transaction added 10%16% to Net sales during the three months ended June 30, 2023March 31, 2024, and is included in Acquisitions and divestitures, net.

As of May 14, 2023, we no longer controlcontrolled KFI as their activities are subject to review and oversight by the bankruptcy court. Therefore, KFI was deconsolidated and their respective assets and liabilities were derecognized from our Unaudited Condensed Consolidated Financial Statements. The deconsolidation had a 1% impact on Net sales during the three months ended June 30, 2023March 31, 2024, and is included in Acquisitions and divestitures, net.
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Gross Margin

For the three months ended June 30, 2023,March 31, 2024, gross margin was $1.8$1.7 billion, a 21%24% increase compared with the same period of 2022.2023. The components were as follows:

 Three Months Ended June 30,
Three Months Ended March 31, Three Months Ended March 31,
(In millions)(In millions)20232022(In millions)20242023
Net salesNet sales$5,992 $5,211 
Cost of products and services soldCost of products and services sold(4,237)(3,764)
Gross marginGross margin$1,755 $1,447 
Percentage of net salesPercentage of net sales29.3 %27.8 %Percentage of net sales27.6 %26.1 %

Gross margin increased by $308$327 million compared with the three months ended June 30, 2022.March 31, 2023. The main driver of the increase related to ongoing customer demand, pricing improvements and our continued focus on productivity initiatives. In addition, operatingOperating results associated with TCCthe VCS Business since the date of acquisition further benefited gross margin during the period. These amounts were partially offset by the higher cost of commodities and components used in our products, certain supply chain constraints and freight costs. Although inflationary cost pressures have begun to moderate, they remain elevated and continue to impact the cost of products and services sold in each of our segments. GrossAs a result, gross margin as a percentage of Net sales increased by 150 basis points compared with the same period of 2022.2023. However, the results of the VCS Business included inventory step-up, backlog amortization and intangible asset amortization resulting from the recognition of acquired assets at fair value. These costs had a 250 basis point unfavorable impact on gross margin as a percentage of Net sales.

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Operating Expenses
For the three months ended June 30, 2023,March 31, 2024, operating expenses, including Equity method investment net earnings, were $1.3$1.2 billion, a 102%46% increase compared with the same period of 2022.2023. The components were as follows:

 Three Months Ended June 30,
Three Months Ended March 31, Three Months Ended March 31,
(In millions)(In millions)20232022(In millions)20242023
Selling, general and administrativeSelling, general and administrative$(784)$(614)
Research and developmentResearch and development(151)(122)
Equity method investment net earningsEquity method investment net earnings52 101 
Other income (expense), netOther income (expense), net(383)
Total operating expensesTotal operating expenses$(1,266)$(628)
Percentage of net salesPercentage of net sales21.1 %12.1 %Percentage of net sales19.5 %15.6 %

For the three months ended June 30, 2023,March 31, 2024, Selling, general and administrative expenses were $784$985 million, a 28%37% increase compared with the same period of 2022.2023. The increase is primarily due to higher compensation and other employee-related costs in the current period. In addition, incremental selling, general and administrative expenses associated with TCCthe VCS Business since the date of acquisition and portfolio transformation-related costs further contributed toacquisition. In addition, the increase. The current period also included $14$89 million of acquisition-relatedacquisition and divestiture-related costs compared with $7$12 million during the three months ended June 30, 2022.March 31, 2023.

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

Investments over which we do not exercise control, but have significant influence, are accounted for using the equity method of accounting. For the three months ended June 30, 2023,March 31, 2024, Equity method investment net earnings were $52$31 million, a 49%30% decrease compared with the same period of 2022.2023. The decrease was primarily driven by a $23 million charge associated with the increasedevaluation of U.S. Dollar denominated balances at an HVAC equity investment in our ownership interest in TCC on August 1, 2022. As a result, TCC is no longer accounted for under the equity method of accounting since the date of acquisition. During the three months ended June 30, 2022, pre-acquisition equity earnings of TCC totaled $47 million which included a $27 million gain on the sale of two minority owned subsidiaries.Egypt.

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Other income (expense), net primarily includes the impact of gains and losses related to the sale of businesses or interests in our equity method investments, foreign currency gains and losses on transactions that are denominated in a currency other than an entity's functional currency and hedging-related activities. In connection with the proposed acquisition of the VCS Business, we recognized a $111$86 million loss during the three months ended June 30, 2023March 31, 2024 on the mark-to-market valuation of our window forward contracts associated with the expected cash outflows of the Euro-denominated purchase price for the VCS Business. In addition, we recognized a loss of $293 million on the deconsolidation of KFI due to its Chapter 11 filing. During the three months ended June 30, 2022, we recognized a $22 million charge resulting from a litigation matter and a $7$46 million gain onassociated with our share of United Technologies Corporation's conclusion of certain income tax matters from their 2017 and 2018 tax audit with the sale of our interest in a cost method investment reported within our Refrigeration segment.Internal Revenue Service ("IRS").

Non-Operating Income (Expense), net

For the three months ended June 30, 2023,March 31, 2024, Non-operating income (expense), net was $67$165 million, an 8%a 259% increase compared with the same period of 2022.2023. The components were as follows:

 Three Months Ended June 30,
Three Months Ended March 31, Three Months Ended March 31,
(In millions)(In millions)20232022(In millions)20242023
Non-service pension (expense) benefitNon-service pension (expense) benefit$— $(1)
Interest expense
Interest expense
Interest expenseInterest expense$(94)$(68)
Interest incomeInterest income27 
Interest (expense) income, netInterest (expense) income, net$(67)$(61)
Non-operating income (expense), netNon-operating income (expense), net$(67)$(62)
Non-operating income (expense), net
Non-operating income (expense), net

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Non-operating income (expense), net includes the results from activities other than normal business operations such as interest expense, interest income and the non-service components of pension and post-retirement obligations. Interest expense is affected by the amount of debt outstanding and the interest rates on that debt. For the three months ended June 30, 2023,March 31, 2024, Interest expense was $94$180 million, a 38%154% increase compared with the same period of 2022.2023. In connection with the proposed acquisition of the VCS Business, we entered into several financing arrangements and capitalized $42 millionto fund the cash portion of deferred financing costs in the current period. During the three months ended June 30, 2023, we amortized $21 million of deferred financing costs in Interest expense, of which $19 million related to our senior unsecured bridge term loan facility ("the Bridge Loan").Euro-denominated purchase price.

Income Taxes

  Three Months Ended June 30,
 20232022
Effective tax rate44.8 %22.5 %
  Three Months Ended March 31,
 20242023
Effective tax rate13.7 %24.0 %

We account for income tax expense in accordance with ASC 740, which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate was 44.8%13.7% for the three months ended June 30, 2023March 31, 2024, compared with 22.5%24.0% for the three months ended June 30, 2022.March 31, 2023. The year-over-year increasedecrease was primarily driven by the non-deductible lossesa tax benefit of $293$21 million on the deconsolidation of KFI due to its Chapter 11 filing and the $111 million loss on the mark-to-market valuation of our window forward contracts associated with the expected cash outflowsUnited Technologies Corporation's conclusion of the Euro-denominated purchase price of the VCS Business.
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Six Months Ended June 30, 2023 Comparedcertain income tax matters from their 2017 and 2018 tax audit with the Six Months Ended June 30, 2022

The following represents our consolidatedIRS, a net salestax benefit of $19 million related to adjustments to basis differences in certain companies presented as held-for-sale and operating results:

Six Months Ended June 30,
(In millions)20232022Period Change% Change
Net sales$11,265 $9,865 $1,400 14 %
Cost of products and services sold(8,132)(7,125)(1,007)14 %
Gross margin3,133 2,740 393 14 %
Operating expenses(2,089)(184)(1,905)1,035 %
Operating profit1,044 2,556 (1,512)(59)%
Non-operating income (expense), net(113)(111)(2)%
Income from operations before income taxes931 2,445 (1,514)(62)%
Income tax expense(311)(471)160 (34)%
Net income from operations620 1,974 (1,354)(69)%
Less: Non-controlling interest in subsidiaries' earnings from operations48 22 26 118 %
Net income attributable to common shareowners$572 $1,952 $(1,380)(71)%

Net Sales

Fora net tax benefit of $16 million related to the six months ended June 30, 2023, Net sales were $11.3 billion, a 14% increase compared with the same periodre-organization and disentanglement of 2022. The components of the year-over-year change were as follows:

Six Months Ended June 30, 2023
Organic%
Foreign currency translation(1)%
Acquisitions and divestitures, net10 %
Total % change14%

Organic sales for the six months ended June 30, 2023 increased by 5% compared with the same period of 2022. The organic increase was primarily driven by ourcertain Fire & Security segment due to price improvements and volume growthindustrial businesses in each region. In addition, improved global end-markets in our Commercial HVAC business and pricing improvements in our North America residential and light commercial business further benefited our results. Refrigeration results decreased as eachadvance of the segment's businesses experienced challenges in certain end-markets during the quarter. Refer to "Segment Review" below for a discussion of Net sales by segment.

On August 1, 2022, the Commercial HVAC business acquired a majority ownership interest in TCC, a VRF and light commercial HVAC joint venture between Carrier and Toshiba Corporation. The results of TCC have been included in our Unaudited Condensed Consolidated Financial Statements since the date of acquisition. The transaction added 11% to Net sales during the six months ended June 30, 2023 and is included in Acquisitions and divestitures, net.

As of May 14, 2023, we no longer control KFI as their activities are subject to review and oversight by the bankruptcy court. Therefore, KFI was deconsolidated and their respective assets and liabilities were derecognized from our Unaudited Condensed Consolidated Financial Statements. The deconsolidation had a 1% impact on Net sales during the six months ended June 30, 2023 and is included in Acquisitions and divestitures, net.

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Gross Margin

For the six months ended June 30, 2023, grossmargin was $3.1 billion, a 14% increase compared with the same period of 2022. The components were as follows:

Six Months Ended June 30,
(In millions)20232022
Net sales$11,265 $9,865 
Cost of products and services sold(8,132)(7,125)
Gross margin$3,133 $2,740 
Percentage of net sales27.8 %27.8 %

Gross margin increased by $393 million compared with the six months ended June 30, 2022. The main driver of the increase related to ongoing customer demand, pricing improvements and our continued focus on productivity initiatives. In addition, operating results associated with TCC since the date of acquisition further benefited gross margin during the period.planned divestitures. These amounts were partially offset by the higher costa tax charge of commodities and components used in our products, certain supply chain constraints and freight costs. Although inflationary cost pressures have begun$15 million related to moderate, they remain elevated and continue to impact the costa reduction of products and services sold in each of our segments. While pricing improvements more than offset inflationary impacts and supply chain challenges, gross margin as a percentage of Net sales remained flat compared with the same period of 2022.utilizable foreign tax credits.

Operating Expenses

For the six months ended June 30, 2023, operating expenses, including Equity method investment net earnings, were $2.1 billion, a 1,035% increase compared with the same period of 2022. The components were as follows:

Six Months Ended June 30,
(In millions)20232022
Selling, general and administrative$(1,505)$(1,215)
Research and development(290)(247)
Equity method investment net earnings96 159 
Other income (expense), net(390)1,119 
Total operating expenses$(2,089)$(184)
Percentage of net sales18.5 %1.9 %

For the six months ended June 30, 2023, Selling, general and administrative expenses were $1.5 billion, a 24% increase compared with the same period of 2022. The increase is primarily due to higher compensation and other employee-related costs during the current period. In addition, incremental selling, general and administrative expenses associated with TCC since the date of acquisition and portfolio transformation-related costs further contributed to the increase. The current period also included $26 million of acquisition-related costs compared with $13 million during the six months ended June 30, 2022.

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

Investments over which we do not exercise control, but have significant influence, are accounted for using the equity method of accounting. For the six months ended June 30, 2023, Equity method investment net earnings were $96 million, a 40% decrease compared with the same period of 2022. The decrease was primarily driven by the increase in our ownership interest in TCC on August 1, 2022. As a result, TCC is no longer accounted for under the equity method of accounting since the date of acquisition. During the six months ended June 30, 2022, pre-acquisition equity earnings of TCC totaled $67 million which included a $27 million gain on the sale of two minority owned subsidiaries.

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Other income (expense), net primarily includes the impact of gains and losses related to the sale of businesses or interests in our equity method investments, foreign currency gains and losses on transactions that are denominated in a currency other than an entity's functional currency and hedging-related activities. In connection with the proposed acquisition of the VCS Business, we recognized a $111 million loss during the six months ended June 30, 2023 on the mark-to-market valuation of our window forward contracts associated with the expected cash outflows of the Euro-denominated purchase price. In addition, we recognized a loss of $293 million on the deconsolidation of KFI due to its Chapter 11 filing. During the six months ended June 30, 2022, we completed the Chubb Sale and recognized a net gain on the sale of $1.1 billion. In addition, we recognized a $22 million charge resulting from a litigation matter and a $7 million gain on the sale of our interest in a cost method investment reported within our Refrigeration segment.

Non-Operating Income (Expense), net

For the six months ended June 30, 2023, Non-operating income (expense), net was $113 million, a 2% increase compared with the same period of 2022. The components were as follows:

Six Months Ended June 30,
(In millions)20232022
Non-service pension (expense) benefit$— $(2)
Interest expense$(165)$(155)
Interest income52 46 
Interest (expense) income, net$(113)$(109)
Non-operating income (expense), net$(113)$(111)

Non-operating income (expense), net includes the results from activities other than normal business operations such as interest expense, interest income and the non-service components of pension and post-retirement obligations. Interest expense is affected by the amount of debt outstanding and the interest rates on that debt. For the six months ended June 30, 2023, Interest expense was $165 million, a 6% increase compared with the same period of 2022. In connection with the proposed acquisition of the VCS Business, we entered into several financing arrangements and capitalized $42 million of deferred financing costs in the current period. During the six months ended June 30, 2023, we amortized $22 million of deferred financing costs in Interest expense, of which $19 million related to our Bridge Loan. During the six months ended June 30, 2022, we completed tender offers to repurchase approximately $1.15 billion aggregate principal of our 2.242% Notes due 2025 and 2.493% Notes due 2027. Upon settlement, we wrote off $5 million of unamortized deferred financing costs in Interest expense and recognizeda net gain of $33 million in Interest income.

Income Taxes

 Six Months Ended June 30,
 20232022
Effective tax rate33.4 %19.3 %

We account for income tax expense in accordance with ASC 740, which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate was 33.4% for the six months ended June 30, 2023 compared with 19.3% for the six months ended June 30, 2022. The year-over-year increase was primarily driven by the non-deductible losses of $293 million on the deconsolidation of KFI due to its Chapter 11 filing and the $111 million loss on the mark-to-market valuation of our window forward contracts associated with the expected cash outflows of the Euro-denominated purchase price of the VCS Business. In addition, the six months ended June 30, 2022 includeda lower effective tax rate on the $1.1 billion Chubb gain compared with our U.S. statutory rate and a favorable tax adjustment of $32 million associated with foreign tax credits generated and utilized in the prior year.

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SEGMENT REVIEW

We have three operating segments:
The HVAC segment provides products, controls, services and solutions to meet the heating, cooling and ventilation needs of residential and commercial customers while enhancing building performance, health, energy efficiency and sustainability.
The Refrigeration segment includes transport refrigeration and monitoring products, services and digital solutions for trucks, trailers, shipping containers, intermodal and rail, as well as commercial refrigeration products.
The Fire & Security segment provides a wide range of residential, commercial and industrial technologies designed to help protect people and property.

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

Three Months Ended June 30, 2023March 31, 2024 Compared with Three Months Ended June 30, 2022March 31, 2023

Summary performance for each of our segments is as follows:

Net SalesOperating ProfitOperating Profit Margin Net SalesOperating ProfitOperating Profit Margin
 Three Months Ended June 30, Three Months Ended June 30, Three Months Ended June 30,
Three Months Ended March 31, Three Months Ended March 31, Three Months Ended March 31,
(In millions)(In millions)202320222023202220232022(In millions)202420232024202320242023
HVACHVAC$4,216 $3,388 $742 $585 17.6 %17.3 %HVAC$4,541 $$3,622 $$429 $$435 9.4 9.4 %12.0 %
RefrigerationRefrigeration972 1,041 112 147 11.5 %14.1 %Refrigeration884 898 898 97 97 108 108 11.0 11.0 %12.0 %
Fire & SecurityFire & Security932 887 (157)134 (16.8)%15.1 %Fire & Security887 869 869 153 153 93 93 17.2 17.2 %10.7 %
Total segmentTotal segment$6,120 $5,316 $697 $866 11.4 %16.3 %Total segment$6,312 $$5,389 $$679 $$636 10.8 10.8 %11.8 %

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HVAC Segment

For the three months ended June 30, 2023,March 31, 2024, Net sales in our HVAC segment were $4.2$4.5 billion, a 24%25% increase compared with the same period of 2022.2023. The components of the year-over-year change were as follows:

Net Sales
Organic92 %
Foreign currency translation(1)%
Acquisitions and divestitures, net1624 %
Total % change in Net sales2425 %

The organic increase in Net sales of 9%2% was driven by continued strong results in the segment. Increased sales in our Commercial HVAC business (up 19%) benefited from pricing improvements and ongoing customer demand in our end-markets. The business saw strong growth in North America and continued improvements in Asia after COVID-19 related lockdowns. Growth in Europe moderated as economic conditions and inflationary cost pressures impacted end-market demand. Higher sales in our North America residential and light commercial businessthe Americas (up 5%6%) were primarily driven by our Commercial and Light commercial businesses which benefited from ongoing customer demand and pricing improvements and improved mix associated with regulatory changes effective as of the beginning of 2023. These amounts wereimprovements. Growth was partially offset by volume reductions in North America residential end-markets. Results in our Global Comfort Solutions businessResidential business. EMEA (down 10%) were primarily drivenwas impacted by lower customer demand in residential markets. The reduction was partially offset by strong ongoing customer demand and pricing improvements in commercial markets. Asia (flat) was impacted by lower demand in certain European end-markets.Japan, offset by improved results in China.

On August 1, 2022,January 2, 2024, we acquired the Commercial HVAC business acquiredVCS Business, a majority ownership interestleading manufacturer of high efficiency heating and renewable energy systems in TCC, a VRF and light commercial HVAC joint venture between Carrier and Toshiba Corporation.Europe. The results of TCCthe VCS Business have been included in our Unaudited Condensed Consolidated Financial Statements since the date of acquisition. The transaction added 16%24% to Net sales during the three months ended June 30, 2023March 31, 2024 and is included in Acquisitions and divestitures, net.
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For the three months ended June 30, 2023,March 31, 2024, Operating profit in our HVAC segment was $0.7 billion,$429 million, a 27% increase1% decrease compared with the same period of 2022.2023. The components of the year-over-year change were as follows:

Operating Profit
Operational1329 %
Acquisitions and divestitures, net163 %
Restructuring(2)%
Amortization of acquired intangibles(5)(31)%
Other%
Total % change in Operating profit27(1)%

The operational profit increase of 13%29% was primarily attributable to pricing improvements and ongoing customer demand and pricing improvements in certain end-markets compared with the prior year. In addition, favorable material and logistics costs drove productivity benefits in the segment. These benefits more than offset the higher costs for commodities and components usedvolume reductions in our products and freight and logistics costs. Lowercertain end-markets. Segment results were also impacted by lower earnings from equity method investments impacted operational profit due towhich included a $23 million charge associated with the increasedevaluation of U.S. Dollar denominated balances at an HVAC equity investment in our ownership interest in TCC on August 1, 2022. As a result, TCC is no longer accounted for under the equity method of accounting since the date of acquisition. Inflationary cost pressures have begun to moderate, but continue to impact our operating profit.Egypt.

Refrigeration Segment

For the three months ended June 30, 2023,March 31, 2024, Net sales in our Refrigeration segment were $972$884 million, a 7%2% decrease compared with the same period of 2022.2023. The components of the year-over-year change were as follows:
Net Sales
Organic(6)(2)%
Foreign currency translation— %
Acquisitions and divestitures, net(1)%
Total % change in Net sales(7)(2)%

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Organic Net sales decrease 6%decreased 2% compared towith the prior year as each of the segment's businessessegment experienced challenges in certain end-markets during the period. Results for Commercial refrigeration decreased (down 19%3%) compared with the prior year, primarily driven by lower volumes in Europe as economic conditions and inflationary cost pressures impacted end-market demand. In addition, lower volumesAsia was impacted by reduced end-market demand in Asia were partially offset by pricing improvements.China. Transport refrigeration sales were flatresults decreased (down 3%) compared to the prior year as pricing improvements and stronglower end-market demand in North America more than offset improved results in Europe and Asia. In addition, the U.S. and Europe wereyear-over-year decrease was partially offset by continued weakness instrong container end-markets.

For the three months ended June 30, 2023,March 31, 2024, Operating profit in our Refrigeration segment was $112$97 million, a 24%10% decrease compared with the same period of 2022.2023. The components of the year-over-year change were as follows:

Operating Profit
Operational(22)12 %
Foreign currency translation— %
Acquisitions and divestitures, net(1)%
Restructuring(1)%
Other(24)%
Total % change in Operating profit(24)(10)%

The decreaseincrease in operational profit of 22%12% was primarily driven by volume reductions in certain end-marketsfavorable productivity initiatives and price improvements compared with the prior year. In addition, volume growth in certain end-markets further benefited the higher costs of commodities and components used in our products further impacted segment results.segment. These amounts were partially offset by pricing improvements and favorable productivity initiatives during the period. Inflationaryvolume reductions in certain end-markets. Inflationary cost pressures have begun to moderate,are moderating but continue to impact our operating profit. Amounts reported in Other represent a $24 million gain on the sale of a business within Transport refrigeration in the prior year.

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Fire & Security Segment

For the three months ended June 30, 2023,March 31, 2024, Net sales in our Fire & Security segment were $932$887 million, a 5%2% increase compared with the same period of 2022.2023. The components of the year-over-year change were as follows:

 Net Sales
Organic97 %
Foreign currency translationKFI deconsolidation(1)(5)%
KFI deconsolidation(3)%
Total % change in Net sales52 %

The organic increase in Net sales of 9%7% was primarily driven by pricing improvements and volume growth and price improvements compared with the prior year. Sales grewIncreased sales in all three regions including strong commercialour Commercial and residential resultsResidential fire business benefited from ongoing customer demand and price improvements in the Americas.Americas and Europe. Growth in Europe moderated as economic conditionsour Global Industrial business was driven by strong end-market demand and inflationary cost pressures impacted end-market demand. Results in Asia normalized after a strong COVID-19 related recovery. Global industrial sales benefited segment results due to pricing improvements and strong demand. The segment continues to be impacted by ongoing supply chain constraints for certain components used in our products.improvements.

For the three months ended June 30, 2023,March 31, 2024, Operating profit in our Fire & Security segment was a loss of $157$153 million, a 217% decrease65% increase compared with the same period of 2022.2023. The components of the year-over-year change were as follows:

 Operating Profit
Operational1075 %
Foreign currency translation(2)%
Restructuring36 %
KFI deconsolidation(228)%
Total % change in Operating profit(217)%

The increase in operational profit of 10% was primarily driven by pricing improvements, volume growth and lower freight and logistics costs compared to the prior year. These amounts were partially offset by the higher costs of commodities and components used in our products. In addition, higher inventory-related reserves resulting from supply chain constraints further impacted segment results. Inflationary cost pressures have moderated, but continue to impact our operating profit.

As of May 14, 2023, we no longer control KFI as their activities are subject to review and oversight by the bankruptcy court. Therefore, KFI was deconsolidated and their respective assets and liabilities were derecognized from our Unaudited Condensed Consolidated Financial Statements. As a result, we recognized a loss on deconsolidation of $293 million during the three months ended June 30, 2023.


Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022

Summary performance for each of our segments is as follows:
Net SalesOperating ProfitOperating Profit Margin
Six Months Ended June 30,Six Months Ended June 30,Six Months Ended June 30,
(In millions)202320222023202220232022
HVAC$7,838 $6,358 $1,177 $1,055 15.0 %16.6 %
Refrigeration1,870 2,017 220 254 11.8 %12.6 %
Fire & Security1,801 1,705 (64)1,352 (3.6)%79.3 %
Total segment$11,509 $10,080 $1,333 $2,661 11.6 %26.4 %
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HVAC Segment

For the six months ended June 30, 2023, Net sales in our HVAC segment were $7.8 billion, a 23% increase compared with the same period of 2022. The components of the year-over-year change were as follows:

Net Sales
Organic%
Foreign currency translation(1)%
Acquisitions and divestitures, net17 %
Total % change in Net sales23%

The organic increase in Net sales of 7% was driven by continued strong results in the segment. Increased sales in our Commercial HVAC business (up 16%) benefited from pricing improvements and ongoing customer demand in our end-markets. The business saw strong growth in all regions including Europe and Asia as current economic conditions and inflationary cost pressures moderated from the prior year. Higher sales in our North America residential and light commercial business (up 2%) were primarily driven by pricing improvements and improved mix associated with regulatory changes effective as of the beginning of 2023. These amounts were partially offset by volume reductions in North America residential end-markets. In addition, increased sales in our Global Comfort Solutions business (up 1%) were primarily driven by growth in Asia partially offset by lower demand in certain European end-markets.

On August 1, 2022, the Commercial HVAC business acquired a majority ownership interest in TCC, a VRF and light commercial HVAC joint venture between Carrier and Toshiba Corporation. The results of TCC have been included in our Unaudited Condensed Consolidated Financial Statements since the date of acquisition. The transaction added 17% to Net sales during the six months ended June 30, 2023 and is included in Acquisitions and divestitures, net.

For the six months ended June 30, 2023, Operating profit in our HVAC segment was $1.2 billion, a 12% increase compared with the same period of 2022. The components of the year-over-year change were as follows:
Operating Profit
Operational%
Foreign currency translation(1)%
Acquisitions and divestitures, net13 %
Amortization of acquired intangibles(6)(14)%
Other(2)%
Total % change in Operating profit1265 %

The operational profit increase of 4% was primarily attributable to pricing improvements and ongoing customer demand in certain end-markets compared with the prior year. These benefits more than offset the higher costs for commodities and components used in our products and freight and logistics costs. Lower earnings from equity method investments impacted operational profit due to the increase in our ownership interest in TCC on August 1, 2022. As a result, TCC is no longer accounted for under the equity method of accounting since the date of acquisition. Inflationary cost pressures have begun to moderate, but continue to impact our operating profit.

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Refrigeration Segment

For the six months ended June 30, 2023, Net sales in our Refrigeration segment were $1.9 billion, a 7% decrease compared with the same period of 2022. The components of the year-over-year change were as follows:

Net Sales
Organic(5)%
Foreign currency translation(1)%
Acquisitions and divestitures, net(1)%
Total % change in Net sales(7)%

Organic Net sales decreased 5% compared to the prior year as each of the segment's businesses experienced challenges in certain end-markets during the period. Results for Commercial refrigeration decreased (down 17%) compared with the prior year, primarily driven by lower volumes in Europe as economic conditions and inflationary cost pressures impacted end-market demand. In addition, lower volumes in Asia were partially offset by pricing improvements. Transport refrigeration sales were flat compared to the prior year as pricing improvements and strong end-market demand in the U.S. and Europe offset continued weakness in container end-markets.

For the six months ended June 30, 2023, Operating profit in our Refrigeration segment was $220 million, a 13% decrease compared with the same period of 2022. The components of the year-over-year change were as follows:

Operating Profit
Operational(20)%
Foreign currency translation(1)%
Restructuring(2)%
Other10 %
Total % change in Operating profit(13)%

The decrease in operational profit of 20% was primarily driven by volume reductions in certain end-markets compared with the prior year. In addition, the higher costs of commodities and components used in our products further impacted segment results. These amounts were partially offset by pricing improvements, favorable productivity initiatives and lower selling, general and administrative costs. Inflationary cost pressures have begun to moderate, but continue to impact our operating profit. Amounts reported in Other represent a $24 million gain on the sale of a business within Transport refrigeration.
Fire & Security Segment

For the six months ended June 30, 2023, Net sales in our Fire & Security segment were $1.8 billion, a 6% increase compared with the same period of 2022. The components of the year-over-year change were as follows:

Net Sales
Organic%
Foreign currency translation(2)%
KFI deconsolidation(1)%
Total % change in Net sales6%

The organic increase in Net sales of 9% was primarily driven by pricing improvements and volume growth compared with the prior year. Sales grew in all three regions including strong commercial and residential results in the Americas. Growth in Europe moderated as economic conditions and inflationary cost pressures impacted end-market demand. Results in Asia normalized after a strong COVID-19 related recovery. Global industrial sales benefited segment results due to pricing improvements and strong demand. The segment continues to be impacted by ongoing supply chain constraints for certain components used in our products.

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For the six months ended June 30, 2023, Operating profit in our Fire & Security segment was a loss of $64 million, a 105% decrease compared with the same period of 2022. The components of the year-over-year change were as follows:

Operating Profit
Operational%
Foreign currency translation(1)%
KFI deconsolidation(23)%
Chubb gain(82)%
Total % change in Operating profit(105)%

The increase in operational profit of 1%75% was primarily driven by pricing improvements, volume growth and lower freightprice improvements compared with the prior year. In addition, favorable material and logistics costs drove productivity benefits during the period. The segment also benefited from lower inventory-related reserves compared towith the prior year.year as supply chain challenges improved. In addition, lower depreciation and amortization, which was ceased on held-for-sale assets in accordance with ASC 360, Property, Plant and Equipment, further benefited operational profit. These amounts were partially offset by the higher costs of commodities and components usedlower volumes in our products. In addition, higher inventory-related reserves resulting from supply chain challenges further impacted segment results. Inflationarycertain end-markets. Inflationary cost pressures have moderated,are moderating but continue to impact our operating profit.profit.

As of May 14, 2023, we no longer control KFI as their activities are subject to review and oversight by the bankruptcy court. Therefore, KFI was deconsolidated and their respective assets and liabilities were derecognized from our Unaudited Condensed Consolidated Financial Statements. As a result, we recognized a loss on deconsolidation of $293 million during the six months ended June 30, 2023.
LIQUIDITY AND FINANCIAL CONDITION

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

As of June 30, 2023,March 31, 2024, we had cash and cash equivalents of $3.2$1.3 billion, of which approximately 45%96% was held by our foreign subsidiaries. We manage our worldwide cash requirements by reviewing available funds and the cost effectiveness with which we can access funds held by foreign subsidiaries. On occasion, we are required to maintain cash deposits in connection with contractual obligations related to acquisitions, divestitures or other legal obligations. As of June 30, 2023March 31, 2024 and December 31, 2022,2023, the amount of such restricted cash was approximately $7$4 million and $39$2 million, respectively.

We maintain 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. In addition, we maintain a $2.0 billion revolving credit agreement with various banks (the "Revolving Credit Facility") that matures in May 2028 which supports our commercial paper borrowing program and can be used for other general corporate purposes. A ratings-based commitment fee is charged on unused commitments. As of June 30, 2023, we had no borrowings outstanding under our commercial paper program and our Revolving Credit Facility.

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

We believe that our available cash and operating cash flows will be sufficient to meet our future operating cash needs. Our committed credit facilities and access to the debt and equity markets provide additional sources of short-term and long-term capital to fund current operations, debt maturities and future investment opportunities. Although we believe that the arrangements currently in place permit us to finance our operations on acceptable terms and conditions, our access to and the availability of financing on acceptable terms and conditions in the future will be impacted by many factors, including: (1) our credit ratings or absence of credit ratings, (2) the level of our existing indebtedness, (3) the restrictions under our debt agreements, (4) the liquidity of the overall capital markets and (3)(5) the state of the economy. There can be no assurance that we will be able to obtain additional financing on terms favorable to us, if at all.

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

(In millions)(In millions)June 30,
2023
December 31,
2022
(In millions)March 31,
2024
December 31,
2023
Cash and cash equivalentsCash and cash equivalents$3,209 $3,520 
Total debtTotal debt$8,789 $8,842 
Total equityTotal equity$8,288 $8,076 
Net debt (total debt less cash and cash equivalents)Net debt (total debt less cash and cash equivalents)$5,580 $5,322 
Net debt (total debt less cash and cash equivalents)
Net debt (total debt less cash and cash equivalents)
Total capitalization (total debt plus total equity)Total capitalization (total debt plus total equity)$17,077 $16,918 
Net capitalization (total debt plus total equity less cash and cash equivalents)Net capitalization (total debt plus total equity less cash and cash equivalents)$13,868 $13,398 
Total debt to total capitalizationTotal debt to total capitalization51 %52 %Total debt to total capitalization59 %61 %
Net debt to net capitalizationNet debt to net capitalization40 %40 %Net debt to net capitalization57 %32 %

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Acquisition of the VCS Business

On April 25, 2023, we announced that we entered into an Agreement to acquire the VCS Business. Under the terms of the Agreement, 20% of the purchase price was to be paid in Carrier common stock, issued directly to Viessmann and subject to certain lock-up provisions and 80% was to be paid in cash. Simultaneously, we entered into commitment letters with JPMorgan Chase Bank, N.A., BofA Securities, Inc. and Bank of America, N.A. to provide a €8.2 billion senior unsecured bridge term loan facility (the "Bridge Loan") to fund a portion of the Euro-denominated purchase price.

On May 19, 2023, we entered into a 364-day, $500 million, senior unsecured revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders (the "Revolver"). In addition, we entered into a senior unsecured delayed draw term loan credit agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders that permits aggregate borrowings of up to €2.3 billion (the "Delayed Draw Facility"). Upon entering into the Delayed Draw Facility, the aggregate principal amount of the Bridge Loan was reduced by €2.3 billion. In November 2023, we issued $3.0 billion principal amount of USD-denominated notes ("USD Notes") and €2.35 billion principal amount of Euro-denominated notes ("Euro Notes"). Upon issuance, the aggregate principal amount of the Bridge Loan was reduced by €5.4 billion. On January 2, 2024, we entered into a 60-day senior unsecured term loan agreement consisting of a Euro-denominated tranche in an aggregate amount of €113 million and a USD-denominated tranche in an aggregate amount of $349 million (the “60-day Loan”). Upon entering into the 60-day Loan, we reduced the final portion of the Bridge Loan by €500 million and subsequently terminated the agreement.

On January 2, 2024, we completed the acquisition of the VCS Business for $14.2 billion. The cash portion of the purchase price was funded through cash on hand, proceeds from the USD Notes and the Euro Notes and borrowings under the Delayed Draw Facility and the 60-day Loan. In addition, proceeds from the Revolver became available upon closing.

Borrowings and Lines of Credit

We maintain a $2.0 billion unsecured, unsubordinated commercial paper program which we can use for general corporate purposes, including the funding of working capital and potential acquisitions. In addition, we maintain a $2.0 billion revolving credit agreement with various banks (the "Revolving Credit Facility") that matures in May 2028 which supports our commercial paper borrowing program and can be used for general corporate purposes. A ratings-based commitment fee is charged on unused commitments. As of March 31, 2024, we had no borrowings outstanding under our commercial paper program or our Revolving Credit Facility.

Our short-term obligations primarily consist of current maturities of long-term debt. Our long-term obligations primarily consist of long-term notes with maturity dates ranging between 2025 and 2050.2054. Interest payments related to long-term Notes are expected to approximate $249$708 million per year, reflecting an approximate weighted-average interest rate of 2.86%4.22%. Any borrowings from the Revolving Credit Facility are subject to variable interest rates. See Note 5 – Borrowings and Lines of Credit in the Notes to the accompanying Unaudited Condensed Consolidated Financial Statements for additional information regarding the terms of our long-term debt obligations.

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

On July 15, 2022, we entered into a five-year, JPY 54 billion (approximately $400 million) senior unsecured term loan facility with MUFG Bank Ltd., as administrative agent and lender, and certain other lenders (the "Japanese Term Loan Facility"). Borrowings bear interest at a rate equal to the Tokyo Term Risk Free Rate plus 0.75%. In addition, it is subject to customary covenants including a covenant to maintain a maximum consolidated leverage ratio. On July 25, 2022, we borrowed JPY 54 billion under the Japanese Term Loan Facility and used the proceeds to fund a portion of the TCC acquisition and to pay related fees and expenses.

The Revolving Credit Facility, the Japanese Term Loan Facility and the indentures for the long-term notes contain affirmative and negative covenants customary for financings of these types, which among other things, limit our ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. As of June 30, 2023, we were compliant with the covenants under the agreements governing our outstanding indebtedness.

The following table presents our credit ratings and outlook as of June 30, 2023:March 31, 2024:
Rating Agency
Long-term Rating (1)
Short-term Rating
Outlook (2) (3)
Standards & Poor's ("S&P")BBBA2StablePositive
Moody's Investors Service Inc. ("Moody's")Baa3P3Positive
Fitch Ratings ("Fitch")BBB-BBBF3Stable
(1) The long-term rating for S&P was affirmed on May 14, 2021, and for Moody's on March 30, 2022. Fitch's long-term rating was affirmed on June 3, 2021.updated in December 2023.
(2) S&P revised its outlook to positive from stable from positive on April 25,in December 2023.
(3) Moody's Investors Service revised its outlook to positive from stable on February 28, 2023.


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Planned Portfolio Transformation

On April 25, 2023, we announced that we entered into an Agreement to acquire the VCS Business for approximately €12 billion. Under the terms of the Agreement, 20% of the purchase price will be paid in Carrier common stock, issued directly to Viessmann and subject to long-term lock-up provisions, and 80% will be paid in cash. We intend to finance the acquisition with a combination of cash on hand and new debt financing and expect the transaction to close around the end of 2023. In addition, we also announced plans to exit our Fire & Security and Commercial Refrigeration businesses over the course of 2024.

In connection with the planned acquisition, we entered into commitment letters with JPMorgan Chase Bank, N.A., BofA Securities, Inc. and Bank of America, N.A. to provide an €8.2 billion Bridge Loan. Proceeds from the Bridge Loan are expected to be used to fund a portion of the Euro-denominated purchase price of the Business if other debt financing is not secured by the acquisition date. On May 19, 2023, the aggregate principal amount of the Bridge Loan was reduced by €2.3 billion upon entering into a senior unsecured delayed draw term loan credit agreement.

On May 19,December 7, 2023, we entered into a senior unsecured delayed draw term loan creditstock purchase agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders that permits aggregate borrowingsto sell our Fire & Security Access Solutions business to Honeywell International Inc. for an enterprise value of up to €2.3 billion (the "Delayed Draw Facility"). Proceeds from the Delayed Draw Facility are expected to be used to fund a portion of the Euro-denominated purchase price of the Business. In addition,approximately $4.95 billion. On December 12, 2023, we entered into a 364-day, $500 million, senior unsecured revolving creditstock purchase agreement with JPMorgan Chase Bank, N.A., as administrative agent and certain other lenders (the "Revolver") on May 19, 2023. Proceeds from the Revolver become available upon closing theto sell CCR to Haier Group Corporation for an enterprise value of approximately $775 million. On March 5, 2024, we entered into a stock purchase agreement to sell Industrial Fire to Sentinel Capital Partners for an enterprise value of the Business.approximately $1.425 billion. These transactions are expected to close in 2024.

Share Repurchase Program

We may repurchase our outstanding common stock from time to time subject to market conditions and at our discretion. Repurchases occur in the open market or through one or more other public or private transactions pursuant to plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act. Since the initial authorization in February 2021, our Board of Directors authorized the repurchase of up to $4.1 billion of our outstanding common stock. As of December 31, 2022,2023, we repurchased 42.143.5 million shares of common stock for an aggregate purchase price of $1.9$2.0 billion, including shares repurchased under an accelerated share repurchase agreement. As a result, we had approximately $2.2$2.1 billion remaining under the current authorization at December 31, 2022.

During2023. Upon announcement of the three months ended June 30, 2023,acquisition of the VCS Business, we did nottemporarily paused our share repurchase any shares of common stock. During the six months ended June 30, 2023, we repurchased 1.4 million shares of common stock for an aggregate purchase price of $62 million. As a result, we have approximately $2.1 billion remaining under the current authorization at June 30, 2023.program in order to advance our capital allocation strategy.

Dividends

We paid dividends on common stock during the sixthree months ended June 30, 2023,March 31, 2024, totaling $309$159 million. In June 2023,April 2024, the Board of Directors declared a dividend of $0.185$0.19 per share of common stock payable on August 10, 2023May 22, 2024 to shareowners of record at the close of business on June 23, 2023.May 3, 2024.

Discussion of Cash Flows

Six Months Ended June 30,
Three Months Ended March 31,Three Months Ended March 31,
(In millions)(In millions)20232022(In millions)20242023
Net cash flows provided by (used in):Net cash flows provided by (used in):
Operating activities
Operating activities
Operating activitiesOperating activities$504 $(170)
Investing activitiesInvesting activities(296)2,645 
Financing activitiesFinancing activities(506)(2,434)
Effect of foreign exchange rate changes on cash and cash equivalentsEffect of foreign exchange rate changes on cash and cash equivalents(13)(41)
Net increase (decrease) in cash and cash equivalents and restricted cashNet increase (decrease) in cash and cash equivalents and restricted cash$(311)$ 

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 increasedecrease in net cash provided by operating activities was primarily driven by a more moderate
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an increase in working capital balances compared with the prior period. Higher accounts receivable balances due to increased sales and lower account payables impacted working capital. Prior year working capital balances increased due to higher safety stock and supply chain constraints.

Cash flows from investing activities primarily represent inflows and outflows associated with long-term assets. Primary activities include capital expenditures, acquisitions, divestitures and proceeds from the sale of fixed assets. During the sixthree months ended June 30,March 31, 2024, net cash used in investing activities was $11.1 billion. The primary driver of the outflow related to the acquisition of the VCS Business, which totaled $10.8 billion, net of cash acquired. Additional investing outflows include $209 million related to settlement of derivatives and $104 million of capital expenditures. During the three months ended March 31, 2023, net cash used in investing activities was $296$100 million. The primary driversdriver of the outflow related to $144$70 million of capital expenditures and $134 million related to the deconsolidation of KFI.expenditures. In addition, we settled working capital and other transaction-related items associated with the acquisition of TCCToshiba Carrier Corporation and invested in several businesses. These amounts totaled $56$52 million, net of cash acquired and were partially offset by the proceeds from the sale of a business during the period. During the six months ended June 30, 2022, net cash provided by investing activities was $2.6 billion. The primary driver of the inflow related to the net proceeds from the Chubb Sale. This amount was partially offset by the acquisition of several businesses and minority-owned businesses, which totaled $38 million, net of cash acquired and $122 million of capital expenditures.

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Cash flows from financing activities primarily represent inflows and outflows associated with equity or borrowings. During the sixthree months ended June 30,March 31, 2024, net cash provided by financing activities was $2.4 billion. The primary driver of the inflow related to the proceeds of borrowings on the Bridge Loan and Delayed Draw Facility which were used to fund the cash portion of the acquisition of the VCS Business. This amount was partially offset by the outflow related to the payment of $159 million in dividends to our common shareowners. During the three months ended March 31, 2023, net cash used in financing activities was $506$213 million. The primary driver of the outflow related to the payment of $309$154 million in dividends to our common shareowners. In addition, we paid $62 million to repurchase shares of our common stock. During the six months ended June 30, 2022, net cash used in financing activities was $2.4 billion. The primary driver of the outflow related to the settlement of our tender offers for $1.15 billion. In addition, we paid $257 million in dividends to our common shareowners and paid $1.0 billion to repurchase shares of our common stock.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk
There has been no significant change in our exposure to market risk during the three and six months ended June 30, 2023.March 31, 2024. For discussion of our exposure to market risk, refer to the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations Market Risk and Risk Management" in our 20222023 Form 10-K.

Item 4.    Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we carried out an evaluation under the supervision and with the participation of our management, including the Chairman and Chief Executive Officer ("CEO"), the Senior Vice President and Chief Financial Officer ("CFO") and the Vice President, Controller and Chief Accounting Officer ("Controller"CAO") of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2023.March 31, 2024. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based upon our evaluation, our CEO, CFO and ControllerCAO have concluded that, as of June 30, 2023,March 31, 2024, 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,CAO, 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, 2023March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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

Item 1.    Legal Proceedings

See Note 19 – Commitments and Contingent Liabilities in the Notes to the accompanying Unaudited Condensed Consolidated Financial Statements 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 our 20222023 Form 10-K.

Item 1A. Risk Factors
There have been no material changes in the Company’s risk factors from those disclosed in "Risk Factors" in our 20222023 Form 10-K.


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

Issuer Purchases of Equity Securities

The following table provides information about our purchases during the three months ended June 30, 2023March 31, 2024 of equity securities that are registered by us pursuant to Section 12 of the Exchange Act.

Total Number of Shares Purchased
(in 000's)
Average Price Paid per Share (1)
Total Number of Shares Purchased as Part of a Publicly Announced Program
(in 000's)
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program
(in millions)
20232024
AprilJanuary 1 - April 30January 31$— $2,129 
MayFebruary 1 - May 31February 29$— $2,129 
JuneMarch 1 - June 30March 31$— $2,129 
Total$— 
(1) Excludes broker commissions.

We may purchase our outstanding common stock from time to time subject to market conditions and at our discretion. Repurchases occur in the open market or through one or more other public or private transactions pursuant to plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act. In JulySince the initial authorization in February 2021, ourthe Company's Board of Directors approved a $1.75 billion increase to our existing $350 million share repurchase program authorizingauthorized the repurchase of up to $2.1$4.1 billion of ourthe Company's outstanding common stock. In October 2022, our Board of Directors approved a $2 billion increase to our existing $2.1 billion share repurchase program.

On January 2, 2024, the Company completed the acquisition of the VCS Business from Viessmann for total consideration of $14.2 billion. The purchase price consisted of (i) $11.2 billion in cash and (ii) 58,608,959 shares of the Company's common stock, which were issued to Viessmann in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 5. Other Information

During the three months ended March 31, 2024, no director or Section 16 officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
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Item 6. Exhibits
Exhibit
Number
Exhibit Description
2.110.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
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-20220331.xml)
101.SCHXBRL Taxonomy Extension Schema Document.*
(File name: carr-20220331.xsd)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.*
(File name: carr-20220331_cal.xml)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.*
(File name: carr-20220331_def.xml)
101.LABXBRL Taxonomy Extension Label Linkbase Document.*
(File name: carr-20220331_lab.xml)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.*
(File name: carr-20220331_pre.xml)
104Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document and contained in Exhibit 101

Notes to Exhibits List:
*    Filed herewith.
+ Exhibit is a management contract or compensatory plan or arrangement.
** Certain exhibits and schedules to this exhibit have been omitted in accordance with Item 601(a)(5) of Regulation S-K. The registrant agrees to furnish supplementally a copy of all omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
Certain portions of this exhibit have been omitted in accordance with Item 601(b)(2)(ii) of Regulation S-K. The registrant agrees to furnish supplementally an unredacted copy of this exhibit to the Securities and Exchange Commission upon its request.

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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, 2024 and 2023, and 2022, (ii) Condensed Consolidated Statement of Comprehensive Income for the three and six months ended June 30,March 31, 2024 and 2023, and 2022, (iii) Condensed Consolidated Balance Sheet as of June 30, 2023March 31, 2024 and December 31, 2022,2023, (iv) Condensed Consolidated Statement of Cash Flows for the sixthree months ended June 30,March 31, 2024 and 2023, and 2022, (v) Condensed Consolidated Statement of Changes in Equity for the three and six months ended June 30,March 31, 2024 and 2023 and 2022 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 27, 2023April 25, 2024by:/s/PATRICK GORIS
Patrick Goris
Senior Vice President and Chief Financial Officer
(on behalf of the Registrant and as the Registrant's Principal Financial Officer)
Dated:July 27, 2023April 25, 2024by:/s/KYLE CROCKETT
Kyle Crockett
Vice President, Controller and Chief Accounting Officer
(on behalf of the Registrant and as the Registrant's Principal Accounting Officer)

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