CARR - Earnings call transcript Q1 2020 | Carrier Global Corporation

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Operator

Good morning and welcome to Carrier's First Quarter 2020 Earnings Conference Call. This call is being carried live on the internet and there is a presentation available to download from Carrier's website at ir.carrier.com.

I would like to introduce your host for today's conference call Sam Pearlstein, Vice President of Investor Relations. Please go ahead, sir.

Sam Pearlstein

Thank you, operator. to quarter welcome call. earnings and morning Carrier's XXXX first conference Good Chief me Gitlin, McLevish, and and Dave today Executive Officer. and President With are Officer; President here Chief Executive Vice Financial Tim

flow the Except subject restructuring reminds significant and/or and items. as in excluding other expectations nonoperational company as often and and that otherwise will speaking the to from call costs a to of the items forward-looking also to other referred other The listeners statements and be earnings significant nature uncertainties. risks company operations, results nonrecurring cash any management noted, by provided are

results SEC filings, those anticipated differ the reports provide our and materially forward-looking Carrier's and in X-K statements. Carrier's actual including details on on that to Form-XX Forms factors XX-Q statement from on important registration cause could

This our morning, opened the could scenarios, questions, of to ask questions time the to XXXX, of first give we up like for what opportunity for one and under yourself quarter you results participate. XXXX call everyone the that caller is a Once few to the per remainder leave the look we'll share question limit for financial we'll end. review at

yourself You permits. may further into questions the reinserting ask queue, time if by

With President the that, I'd Gitlin. call like to our CEO, and turn Dave over to

Dave Gitlin

are you, Sam and healthy all safe. families that hope your Thank Okay. and and good I morning, you everyone.

of these they way phenomenal Carrier, been go impressed our products the team. which pandemic. up at a thoughts the affected have I Our and and with couldn't proud services our recognize this our like profound this during challenging I workers times. thanks also to of continued have employees, incredible entire to everyone who essential go so I out fighting would more truly to to frontline stepped has in crisis be XX,XXX efforts are and to team this by our deliver customers

February. since Therefore, to we as you last our we comments has spoke in follows. going structure to lot a changed Clearly, are

on our our these on. to as first I'll the First, And then on through you detail provide approach how liquidity, addressing XXXX. of managing through Tim more sheet. take and remainder head run cash our business COVID-XX is and provide more will you our then quarter financials, I’ll we having as well on are impact balance color that the dynamics

that X, Slide into response with priorities established gear started COVID-XX, We four we and our in jumped making. have aggressively. that Starting meetings early decision we continue to daily leadership and today team guided

is first our the safety employees. Our priority of

are are largely gone to our workplace critical working customers, lengths office employees protocols, while the to employees nature our of we practices factories, to safe an personnel offices our tremendous by range generally and we our office have extensive factory applying In our have as best and back safety remotely the begin Our we the our those products to to implementing keep continued of services. people now to given in transition support workplace.

other maintain to XX and our XX, local manufacturers, of from our our close X,XXX Our to did couple temporary about weeks output past and our and our some within Like we has business the China to products has of New suppliers were essential of after In the second XXX% our we been February all sites operational Lunar month. suppliers, And continuity for a services priority the after Year. sites reopening from experience customers. to in factories nine where closures have deliver been factories.

occasional the job and of We closures done length have Mexico, customers. in Malaysia, India, the site has had factory superb of our and the EU, the but supporting team short-term closures U.S., minimizing our a

issues experience to has as team these chain challenges, managing been supply continue our episodic supplier we they While arise.

Between costs our be early preserve increased manage topic expectations overdrive with this is and We through our $XXX actions, results. Our Carrier approach more with together savings Tim for accelerated in but is effectively will XXX, cash. proactive pleased in our year, Carrier over on and I'm this $XXX cover to cost third in and detail, plan eliminate other priority to costs driving actions year. onetime XXX three we our million cost this years. will million which

suspended and implemented of leadership senior For for we reduced Director about a XX Board pay, by day example, our We're we our cut down instituted managing aggressively company costs driving expected are the $XX including spend. discretionary for the incremental myself, furlough, have year, XX% merit team, increases. a public pay million

growth million reducing aggressively initial million. are containing critical areas from be also $XXX spend, mid-single in levels. to million will invest our to our all sustain digit including million digital, to CapEx growth to our are continue Though, critical we R&D, agenda our we $XXX to We $XXX $XXX plan get strategy sales to of to that and to core

position. side, year. a with started with in cash free liquidity confident on we On billion X, to ability $X flow comfortable in more We are generate billion the cash than we our our April are cash and $X.X in this

to have revolver have so if a access $X needed, we carefully and it. position strong billion We managing are cash a

our we on of Finally, on accelerating you give by to pandemic imperatives. from has implementation that I'll our this slide. emerge fourth that next priority strategic been color And the more ensure stronger,

lays values, it Way, behaviors. with how Slide is a with Starting vision, turning Carrier organization internally and very we're it a feel out and different focus highlights new our So positioning both recently our for the We’ve Carrier X, this success. and truly externally. to values Carrier culture, to which long-term launched

empowerment. winning, is agility, customers, and focused on innovation growth, culture Our

drive great more long-term enable world-class of empowering down breaking we both are our hires and people and team barriers have promotions externally to focused, internal We to them leadership people, our progress be a agenda. assembling growth On to in external talent. with made

to our of innovative down not fight only on also launched own communities our ESG the our doubling which commitment are but And operating and with on against system, we've We factories, the focus this that the laser supplemented efficient through by Carrier a focus products. we our both pandemic. discipline. commitments environment, in nimble more new our with on the our is part needs support the playing environment initiatives And energy

new negative hospitals we produced designed a in prototype early air machine the units example, few and our optically our positive. on from just For weeks. is And very feedback

and strategy our these to Turning growth remain unchanged. pillars,

top our one first or priorities well-positioned continue our deliver growing market against within the by two Carrier In of building remain positions. three of our XXX. We strategic number line core, pillar, our we off each to funded segments

Indonesia, while across key wins make XXDV investments. including digital We We've R&D order exclusive Fischer resi F&S strategic portfolios. and data are of centers refrigeration to wins very in with ever also significant we adding had XXX our net and for deal Homes the long-term employees portfolio across continue the significant largest and in U.S. chillers sales our and

pillar, second geographic coverage. our products our In extending and

As X,XXX cooling confidence Olympic heat technology rink. a condensing we the we for a Apartments units. refrigeration, that for provide Beijing China, VRF were enter in [ph] to COX Olympics Village vote in of ice X,XXX to and the the for our selected pumps we're using Sanyo warehouse And win secured

digital, end indicated of we'd offerings and to And we in in We driving to year, forward this so needs, that have we aftermarket digital get XX% monitoring, on to and team year. in customized do diagnostics by structured next track third differentiator a pillar, rolling rate We're are customers' out as and through commercial on and prognostics. we a remote tiered place. dedicated leaned have the the aftermarket conversion a HVAC

International had X,XXX XX Airport We've a XX wins, year some agreement is key next buildings, XX Hong for chillers across to operations service that aftermarket over for and the Hortons chiller support the stores scale including years. to Kong Tim four projected with China

the hospitals slide, of air And role and society. proud this right of and and our on the we're systems essential food pharmaceuticals the world. side nursing conditioning homes, around support of in We and very delivery safely vital in

economies to role society, Looking we anticipating countries preparing regions a ahead, normal. are the the play around as reopen and creating to intend and critical new in and world

a critical. to be the and example, size the putting world, We're systems will buildings. microscopic HVAC around be VVAC filter in buildings sick For in quality can contaminants. leader Carrier unique our air indoor healthy electrostatic from will transitioning

be points very contact future. new solution, touchless the and Diamond tremendous will in normal an touchless in whole enabling been instead. typical employees our traceability thematic will and by And safety solutions. progress we then With chain their be paramount, Blue the making phones XX% on of cell our and building, can security business, to we have holistic use office eliminate food Addressing and fire

I'll Tim? best over cash me that, let discuss sense back and with cost So XXXX. turn come to XQ, Tim and to discuss our to of it

Tim McLevish

fully through United you turn Thank to as from you, point where some but becoming that not a not But Technologies, independent adjusted company, we want I X, will some our I The results. that I numbers we out for have circumstances, walk Please perfect start, before all. morning. to a in Form-XX being Slide QX Dave. division year's. with comparison to carve of out last move a will report of public statements the Good

it the remainder try be and those so a help with to will for explanations, messy but bit of year. to will non-comparables may you continue We understand be the

a started from how had first the X% caveat, significant let we Despite for XX% down about of which start to last solid organically, With a X% of reflected were macroeconomic expected back-half jump our headwinds for year, results the quarter. the $X.X that the into Sales it headwind. year. FX and me in quarter, adjusts out billion

our regulation. In high strong HVAC, due we that to FER of results Investor season reported ahead a of shipments We reflected an difficult Day year segments. in abnormally our three furnace new year-on-year comparisons each residential face a last

and decline wound a business, XXXX. QX year. trailer creating North a our came refrigeration, in F&S, And down peak off year-on-year In in in last we truck our America residential business cyclical intrusion

our furnace warm came for softness resulting pressure sales. accounted QX in this These Additional about year from of items residential and half the decline. winter

The sales rest business. part that material hit We China's effect latter XX%. from remainder China, This disruption our where with had global about without revenues through our of did the approximately a resulted managed good derived. sources and the addition, come COVID-XX of domestic of down or from however, China. first on of our a in production It world of on material impact And supply in the billion are our business quarter. $X.X detrimental a chain X% part impact factory

Europe then on But our in pandemic about This for the then, west the quarter, revenue the moved Americas. the of accounted $XXX million in and later quarter. virus to into decline

factories around Our to the productive and world. have serve so. tirelessly they do keep continue And to operational worked to our teams customers

operating last number operating down this was million was P&L, $XXX of from is GAAP Moving down adjusted comparable. the still XX% not profit But profit million. $XXX Adjusted year.

company public included XX%. by in the And COVID-XX. XXXX. of that impact million Our impacted was Absent QX it decline heavily comparable was $XX included that, costs quarter were of of about of course, the the same not year-on-year

we're lot here, of typical not shows comparable margin. our profits, X% happy negative versus XX% largely signs offset we a to were a decline about adjusted decline able While operating the in revenues, preserving operating organic a the detrimentals, for

by EPS typically income of reflected were and aided over in was is Our not things the year was the our net year-over-year are cash, so some mitigation flat was All company a was QX tax working public a to by solid I'm capital QX meaningful. first favorable start bring with solid comparisons we $X.XX Since results offset and last deferred EPS by flow $X.XX. in quarter million. payments. to very considered, was to seasonal a almost environment. in our of good The the free not $XXX performance GAAP report adjusted year. that user more difficult than cash of year, it pleased decline a EPS favorable last

warm Slide look furnace half Let's decline this half other slow it winter. X% driven to XX% shipments, five. due Please the the performed. the at to shipments done the accelerated was organically, how organically. was America North segments with last gas and roughly due residential year Within unseasonably to down turn now to FER HVAC year's

was year-over-year. NORESCO. a The down commercial offset and strengthen by only in ALC decline X% a Overall weakness partially were business decline in and China down furnace business in commercial driven by sales as XX% applied, that X% organically, flattish and Europe, XX% was and services light

trailer XX% down America North trailer XX%, around truck and the XX%, down quarter down to I as A earlier, did comparison Europe truck as expected, organically, sales X%. around Refrigeration mentioned container truck down difficult for close the trailer but results quarter the were progressed. with deteriorate was

was down and solutions. in organically. Europe water and to but delays gas XX% fire and security in business both organically, longer was in Asia shutdowns also businesses, with Commercial refrigeration X% access was suppression, was by growth products X% down growth with Europe, down and cycle Asia. our and weakness organically, segment partially offset in The projects and attributable This COVID-related mist global the

field X% organically, aggressive Hong-Kong, in to this weakness The particular on actions. lockdowns includes we're France. controllables, business cost down due In with world the of regions, was containment uncertainty, that Australasia markets across focused and and controlling

we million growth provides support you programs. that February, business a our The our that $XXX this we're our $XXX savings priorities, of cost cost to in our of improvement and reduce are containment implementing told cost one $XXX invest Carrier into breakdown preserve this XXX, of X, investment to million yet to including million back actions would year, year, initiatives. cost Slide we In expected critical to aggressive expected Carrier of aggressively shift generate we The to and accelerating taking that current achieve program. investments reducing planned environment from our that XXX strategies. is the of

expect total $XXX of we additional million. First, accelerate $XX and to Carrier will an for million XXXX, deliver in a XXX

we year very a in investments in have by million Second, surgical manner. $XX back our the scaled

We critical strategy as investments we are are we this and ensure most preserving crisis. the our well-positioned initiatives that are to exit to growth

a XXXX. initiated have $XXX program containment We for also cost million

employees. the by million actions laid from savings net like million also Lastly, our absorption, we affected chain more and safety up inefficiencies $XXX other and costs, million year margins, a this Investor February. of while and impact, $XXX drop The and than our precautions in caused our disruption, of through of nonrecurring on for base. supply of COVID-XX at things factories factory out of the cost We're $XX volume anticipating the million, this headwind offsets expediting our it $XXX cost are Day areas disrupts

walk top in a which I Slide X that that that. to we've Dave user cash. XXXX, mentioned from earlier to and typically cash of one you for priorities standpoint mentioned maintain a a ample of I'll our turn Please flow is liquidity. well performed quarter big through is

better usually spikes selling tightly the capital it for planned year as $XXX season. than working cash start We QX, seasonally in spring-summer million. managed building we delivered Our by this and over

We resulted financing us balance started $XXX of million and activities, a small cash And the neutral with at of other it of million with free a cash. position the from and $XXX million. $XXX This including flow of UTC quarter million a and approximately and debt a from returned ended the cash $XXX exchange. investing use repayment, effective foreign spin,

opening So X. our on balance with billion over just April sheet $X.X started

$XXX intensify include we base, to It our liquidity. and will of continue budget year us. the this our originally our deep is XX% QX. we all the done components From XX%. by now capital, focus to and working million down the and $XXX million, managing efforts from available will in a $XXX levers We've had it to This cut preserve we our to We'll million tightly planned. enhance million program scrub and also the to CapEx for on $XXX driving expanding began

back, And our have we payback. growth, projects have paring prioritized high-returns priorities projects and those strategic those it for which a and quick targeted

We will amount timing a of the and also dividend. assess

much appropriate the was a but that Our different environment we was face then. is dividend possible Form-XX identified at it what today the time, scenario from

we and this available expect add and free foundation, good for our the actions, flow With will to it these year cash. cash

debt until credit strong I And to maturities agreement we have undrawn That our to a you will that remains revolver available position, cash we fully a billion have Bank XXXX. revolving no addition remind finally, In us. $X and Group. with

the weather our quite are grow we and So we need access the confident and good we operate storm liquidity to have feel capital to about to this and business.

back With that, how over let about we're it turn the of discuss year. balance Dave to to thinking the me

Dave Gitlin

Thanks, Tim.

in our we thinking. this So year? frame for key scenario to what For our economy, looked planning at indicators our mean does expectations for full the three uncertain global this

like First, GDP. macroeconomic projections

more third directly starts. And like order indicators new to trends. business Second, tied our housing

guidepost GDP, for quarter, for in QX are growth XXXX accelerates similar. full assume to current with XX% shows Europe the We assume China there. X% macro GDP U.S. declines the for XX% our about Expectations from second a and level, and in At starting year.

When headwinds the and non-resi in architectural to continued at segments, America we in indicators from assume look North from leading we starts specific billing our like year unemployment XX% we macro index. starts replacement construction owner see indicators purchases. this down volumes to as lower XX% U.S. impact home Europe, as Housing and softness rates being

and forecast to declines be originally Europe XX%. even to business, be had be to drops be ACT truck truck XX% American North we European trailer far And muted. in forecasted. the truck than likely will year, is forecast trailer refrigeration this are down XX% America North to in and down steeper our more trailer production Container likely

X, Page the down QX on with share being let with orders. XX% you good China on China the with recovery lowest been our some then of were very news, In category positive. the XX%. start year-over-year So We orders experience. down color me month has February

Our then The China levels returned a us, our pre-crisis flat trend, make bit mid-April, its but April a to orders and in doesn't one recovery recovery spotty in has China's both order month daily overall. were were decline been and quite and for rates steep.

the U.S. the be about EU bit decline is be thinking will will but recovery shallower, current longer. that a and Our the

as in U.S. were down Orders the expect Europe, declined in EU the and to X% early QX. were orders down we and Based recovery earlier XQ assumes but versus with levels also XQ XX%. get down into accelerated us, of China, but later U.S. our in we on U.S., XX% more a than For EU U.S. into recovery. the recovery and the in planning and orders the in early XX% in down internal April typical Europe that an slower

we turning X. what frame So does Slide to as all this mean XXXX,

numbers our think We see profit between we look at sales billion. billion of you adjusted scenarios playing free $X.X various billion, to guideposts, cash $XX over $X between the could that globally. $X see as and billion flow out You here as and billion $XX

for F&S the the company, more the the range. think a at that declined you the see a behind refrigeration segment end HVAC bit aligned with fairly bit respect the decline range with percentage to headwind you better with be the and of should about sales Also, facing scenarios here, expected to whole

Given that steepest of declines we sales Europe, improvements U.S. with from occur our the XX% are there. XQ expect in the in and to

we’ve confidence we our the and do for done though this urbanization, So, get that trends very know you and inherently is long-term with are rest uncertain, in best analyze such digitalization through the coming this year global great will of update the I what ourselves new situation normal to for the and continue evolves. shift to climate months as you, for And the over as And fluid our we'll mega change, remain business. will and operating towards crisis. the tailwinds

last me And February will that on results our for that drive you XX confident, the here. XX. out see that We remain page, we this Page on to takes you laid plan game the

which getting topline digit will pillars are growth. traction of on three sustained real propel strategy topline mid-single We the our

capital state digit We margin we enable are to free invest steady improvements to XXX a cash support EPS expansion flow on are focused working driving to in on tenaciously basis. And income. driving Carrier high-single needed and to laser help growth net equal to growth drive

effectiveness. our roadmap executing with conviction, We urgency, on and clear committed plan a success. have remain to We to

we'll for with open questions. And this that up

Operator

comment first Morgan. the Our JP from comes or of from question Instructions] Tusa line [Operator Steve

Your is open. line

Steve Tusa

Hey, morning. good

Dave Gitlin

Good Steve. morning,

Steve Tusa

on a cost year? the guideposts. kind on seeing to bit, Any the you're there on through what price Just color run bridge the for color of what and expect the thanks you out kind of for

Dave Gitlin

Yes.

some coming actually It more of going we're challenges On XXXX. mind, million probably in think going closer off But It be of million. $XXX the the last minor. year. it's was north to the was still $X couple million little years bit we're We a it's overall It's $XX we're there's a price million $X in side, a system, $XXX looking quarter, price full price of overall still sell at Steve, in but for the price. million first Keep in in to of lot tailwind. net tailwind we the tailwind, looking do at going of price but from to year. be range be to

And to then the through Tim be took cost side. We're you going very aggressive.

of of lot upped we our G&A a activity. the some very we and seeing to productivity. supply got where on the tailwind year this million. But headwind but in Carrier on certainly commodity really saw $XXX You also chain pricing, for this aggressiveness lot going $XXX we XXX factory from a side resourcing aggressive, being negotiations We're we're million in especially climate. that And are after from

Steve Tusa

cash. just balance Right. the And then sheet, a little lastly on better bit

positive. may there an think of it Like, should much there's I that? shore any guys willing the out that in still about concerned But than that's a we to just And sheet? hard covenant how other take talk you're you're covenant up some pretty generating end actions what intermediate-term the line cash incremental how balance just to be be? about And Can a with think I you And is? have. that high-leverage. going to you

Tim McLevish

This Tim, Steve. Yes. is

So, revolving I loan. our it's think both agreement our attached the yes. We credit that do Form-XX. have covers term and to a And covenant

scenario with that gets planning, will anticipate it covenant our quarter. says a that projections compliance at covenant you the the You there. do we third in it's we're measured better And And point. only see it of expecting from times that be four that we can in quarter, see that debt end first the According to at to our third that is EBITDA. in our

that we can some liquidity. actions we're about But not ensure ensure assume you have cushions, And we're obviously, that unduly that. that to want to have that. concerned to so We we have we taking access

Steve Tusa

projections? You're wrong do ultimately, you the next if your it Okay. several And in quarters? breach what in

Tim McLevish

No.

I that would going make we don't. sure transaction. going would from and default. agreements. obviously revolving already in guess that problem. assure And we're to I not -- term it it put to us will that access we're preclude Let's in we run credit this to into our loan in mean, We've some say just But

sure taken already not You ourselves we've We're can be that to jeopardy. going precautions. put in

Dave Gitlin

Dave. it’d Steve, Yes.

Xx like its behind And all, the Tim also that it. debt said, scenes of are net multiple. we working First

I think good quite managing So well. we're shape, in we're pretty it

Tim McLevish

Yes. I what outs further exceptions out would Its point are as to carve debt an said. and just EBITDA some there Dave adjusted, as net to it.

So again, we're comfortably in again, to make compliance with we it. want But sure.

Steve Tusa

Okay, great. Thanks.

Dave Gitlin

Thank you.

Operator

Thank you.

next comment line of from Nigel the Our Coe Research. from or comes question Wolfe

is open. Your line

Nigel Coe

Thanks. Good morning, guys.

Dave Gitlin

Nigel. morning, Good

Nigel Coe

Yes.

nothing [ph]? CapEx whether the seeing just on some shove maybe this So, we of Can environment investment pushing a the spending you down is the should as to investment And the cut getting we're surprise this that where you a talk opposed right. to back bit in and are and push little a spending more a think about CapEx? of of as

Dave Gitlin

investments automation. of Nigel, Yes. push. shops more say really I keeping running. focused like back probably the on it's We would We're a scale did on

to to industrial in figuring shop, our implement automation ideal automation we timing, did how not the some have spend. So is out engineers push of so

right. We that pushed We to consolidation. are ERP the doing

growth, lot So like discretionary the out. don't have affect that we of a pushed necessarily that actions

affect We've our investments been that growth pretty preserving agenda. at tenacious

open we've the If made the outfielder, an We'll progresses. like cuts that, is agenda. to pushed a to saw came highest we'll year, really right little that have how to are we back was view the happening, out things some the our year forward investments up we that easier run year. to growth out, lengths this were preserve into see than bit, protect We we'll pull the it's what backward. budget. aggressive, investments into gone pull we've we payback great But going next of our to So

Nigel Coe

where down. Right. to housing your about being number you've And view U.S. Thanks, in resi given to What's about the for right gave replacement? And XX% XX%. stuff is? now struggled this environment I down talked replacements how think then replacement about in then you think to David. on unemployment a demands

Dave Gitlin

it. Yes. we Look, in XX% month the pay it's not million or probably mortgages. their There range at X.X as so, down did last Americans were that look

least little replacement. But for So, it's movement tough climate going be a for the while. of bit a few months there's bit at a there little be demand, next more there's demand. to to a parts may by to And where

But going to haven't the think seen We that there's replacement just headwind little be of bit on cycle. actually yet. a do we

But, we'll there. into summer folks employment, come remain right get a of hopefully to the the as and months, see bit traction as reopen, little start now. But we starts extremely we'll course, more if work see to numbers to challenging society back

Nigel Coe

that And then just Or a Is of on some cash quick free flow. one including concept it kind cash? one all in is timers? free free cash Is flow? adjusted that of

Tim McLevish

expenditures or capital cash cash cash flow operating capital No, the less free it's flow, flow mean, expenditures. is -- traditionally operating its plus I free cash GAAP flow,

Nigel Coe

cash. Great. Thanks So, guys. real it's

Dave Gitlin

Thank you.

Operator

Thank you.

comment Sprague line the Our or Research. next from from Jeff question Vertical of comes

line Your is open.

Jeff Sprague

hope Thanks. well. Good morning. everyone's I

first, Just Dave. push on on a couple, CapEx just the the

the actions ERP and not your contain like of underlying was I some doing automation sound So, you're plans it So, between to you're big part you out of does of also right? interplay future on taking but to temporary would this think growth damage the kind any factors? elaborate pushes plans. productivity. But then those productivity a costs just Can good

Dave Gitlin

that productivity, really it just system. another of I automation. comes element look a that at only from key and Jeff, element that is a piece But XXX. is the piece of There's you tell when will carrier was Carrier operating application, a you key Yes. it

on see new end it get normal, is into out this see you're forward year of years. So, going you're future will have a leaning people with more to short-term actually I the going think what as the you impact. to into and automation

of we're as cost numbers. consolidations year end on the overall I think investments our be going we free to going the savings because So next it's We baked year, into to hadn't critical look, really ERP get this our up towards really story. automation to into overall

of the some XXX. that we manual do. to we'll So, up investments catch I year. impacts But have It those and Carrier productivity nature next see don't of what impacting to overall

Jeff Sprague

But $XXX it's Carrier and path a be acceleration of early in talk to million And perhaps is number. different kind $XXX to XXX about like on with that? something the this million

Dave Gitlin

out But Well, as confident, the this Carrier trend. it see in couple XXX we'll But there's early. overdrive to look, to the been always get months room doesn't year. think that confident rest out make I've of how I'm and number, and of A the update it. I we of plays year the is a we'll end

Jeff Sprague

And then finally. just

the should on expect the decks dividend, hold of on you're until we QX clear then you get sure covenant, there? this that's So kind make pass of kind

Tim McLevish

I would be fair, Jeff. think that directionally

You Investor the addressing that Day circumstances. in and in now. million preservation said Obviously, a was circumstance. leverage our is right that we're expect And $XXX normal we and we a thought under dividend not dividend, normal back recall we of high high the priority that competitive that our would cash

that a talked so the deferring still again, something a in anticipate be decision standpoint, we standpoint. reducing same But and in payoff from to Investor But level yield we're consider perhaps mean, and or this likely And we will little competitive amount the environment, will a from to level. we bit future. the about yes, should Day. not likely the that be it's at hear near I you

Jeff Sprague

Thanks. It makes sense. luck. Good

Dave Gitlin

you. Thank

Operator

you. Thank

question or Mitchell Our line Barclays. the of from Julian from next comment comes

line open. Your is

Julian Mitchell

for I'm second. a focusing stick just one question trying rule, Hi, on to good to margins the perhaps morning. Maybe

sales I at mix the year. understand, of you've midpoint refrigeration about XX% scenario transport the how Maybe think the this that within in the just falls year for as us maybe terms? dialed-in XX%, margin fastest one decremental the help relative the you see So, that businesses about got plan probably of

And you're assuming the be related to QX? should decremental Or in the level widest decrementals you. that, expect then pretty second also we margins to quarter? to over that are Thank QX

Tim McLevish

Julian, it's Yes. Tim.

it know, we this a through think benefit a about of part XX%. Usually, that quarter much you from drop was largely As that. about drop talked in think of like of cost. about to cost of reduction actually that That’s the lower we environment, to you lower through. first points call incremental, decremental. the rate million the XX What percentage in a favorable contributed what usually as much saw quarter, $XX we unfortunately we worth in but And decrementals. had to But better because was I

the And to margins and the interestingly, X%. tends lower and by hit about our carry of China we hardest sales ours general benefited China during through in quarter, were

So, that's XX%. why you see the

not that talked for You about full we a actually see first may $XXX of see quarter the XX%. remember, XX%, you standalone see $XX that's the the But a cost, you million million the year. component ultimately may

seen yesterday, difference released have out think profits. I will different. bit are that $XX UTC's from a may million About numbers you also point in little that I

So there's if different them. of you adjust most was from for unusual some it where that things

from a them. at have construed may You XX%

say of likely about the we revenues, the As in the quarter. makes would the again, to Yes, XX%. it the think back to the I drop difficult. it second rest quarter year, hardest deeper hit is going be And

cases, there quarter. closing closing second we're into We pool shifts, the deeper aren't would expect in in be the that just I you down. some we're to go shutting factories. And scaling lines and the cost We're production, back

you the what some be and experience will businesses, higher hit. degradation, mix will of I mean, some HVAC our saw, others residential, reverse of margin We the

and of is year, because think we're or no points simply be though, that the the the rest we’ll reduction. with disruption, about all revenue mix of to JV I anticipating. component hit that, et that earnings is cost our is two drop then the And factory covered cetera, largely in by three other by costs, margin there's decrementals income, How covered offsetting

you couple the points normal projections So XX%, XX%. worse we anticipate, probably the than be about at we’ll look if

Julian Mitchell

Very you. helpful. Thank

Operator

Thank you.

Deane question or the Markets. RBC comes Capital from next Dray line of comment Our from

is Your open. line

Deane Dray

let and sure morning, your that And on Good congrats everyone. say in was all the me also face the appreciate actions not as to quite here. the tough I'm debut. all anyone But environment, taking. you. debut as you've had Thank expecting you're a color

Dave Gitlin

Thanks Deane.

Deane Dray

If this we too just start, will can the we've heard expression pass.

normal some credentials the actually marketing or the were season similar for your these competitors, how and this the could examples on are orders you going ahead, discussions air buildings? are comments are comments heard from Looking giving customers? purification, thoughts? on with expand are forth. We've you How and touchless actually just new this to buildings future of the getting to change? But you close of type these Or earnings about starting so the

Dave Gitlin

Well, it's we've customers, the the new real and in for We're system. absolutely sick whether machines. characteristics negative or thanks out high-number one, our for shockingly We've critical, building progress coming the sick one critical but it's it's OptiClean because There we've discussions air number, there. Deane not of it's society. of Actually, business seen our with underway. Florida of a question. are with this ventilation only out been distributed believe actually the buildings on State for hospitals where the a we is of fast of And gates

room the I'm have changes you they expect at hour, air of in in the changes right XX a there staggered number buildings the of in look the range. certain and And say many number world now, would around to XX don't You have hour. per per

you many at going system to filter returnee level that. You it contaminants a have filtration to filtration micron expect able through system, the at don't a be and are look systems many out as you'd X.X-X.X have in the filtration buildings

buildings. that have filters HEPA We our filters or for in buildings have static electric Many that. commercial homes, don't UAV with

five want You ducts that happen. years to cleaned and your every three doesn't

real, two it's at think center Carrier's very look we be and in And our it's as same the to So to other going buildings, transition healthy segments. that. on I the expect should that you front and

the business, and You Diamond have we a app can security in mentioned touch eliminate points. lot a touchless, already our that of fire Blue

the usually eliminate remarks, to go your like points. the earlier or your that you from building, to can turnstile go office in as open there's I to we XX the be elements. also floor. your with elevator traceability is button going that There's are the your we it HVAC And number eliminate touch that you controls of points can or critical. a adjusted combined to in you And car of or XX% you eight the office Let’s said on say, touch press

want able people an app track in folks, can be So to of that workplace. be with as commingle we workplace to the the in other able to the to have the parts trace employers app

segment the different. chain cold and is we business, to entire the refrigeration going fundamentally have that foundationally And in our be other just

food So a be of in some to today you significant see and going look what in have to on wet like the place for and delivery other Europe. be edge And cold that pharmaceuticals. home going lot and chain. you're and at how believe a goods. we're we cutting to number solutions get we farmer's there's the China. working of markets connect U.S. telematics But to a chain their people markets more in quite is And really cold The critical innovative here entire

a new So real the we we can pivotal play in normal. think role

Deane Dray

color. allocation I your preservation. I grade just And all could, Carrier Tim paying and cash that have to with going The from debt. quick appreciate if to clarification a be you'd with expectation was expectation was just rating regard investment capital that down

So path of the you the discussions of they terms some rating giving in Thanks. Are what's the your outlook the deleveraging? here, agencies? in with leeway

Tim McLevish

conversations intention still the maintain to with been it's Well, We’ve grade. in agencies. investment

uncertainty and short-term our of they As we'll the economy. plan. about regular We've in important the discussions I critically them said, in with just recognized be think that supportive this game are think liquidity crisis I with situation fine. And been I is they’ve

Deane Dray

you. hear. to Great Thank

Operator

you. Thank

Our next or Melius comes of Research. the comment from question line from Carter Copeland

open. is line Your

Carter Copeland

hope you're well. morning Hey, Tim. Dave, I good

Dave Gitlin

Thanks Carter.

Carter Copeland

you appearance you be to have optionality if business you I may that sorts tangentially at how could ways. I at of Investor the crisis talk of whole changing is in these thinking I changes different mentioned around you a something all. a the the Day. about, know long-term, Dave, the I tendency thought the about wondered this sort of businesses that think if about And make discontinuities mean, portfolio. little wondered bit and

David Gitlin

Yes. what Investor we tremendous going just remains feel consistent we doing is what We at tell an to by priority one unleash our were we execution. said Carter, today, you can number that really we that, that do. Day is I’d said very value what on strongly

the we the track overall performance that know And consistently cash As impact and flow mid-single sales we equal we position digit a of range, consistent digit get EPS get get rate Carrier. record strength. valuation from high-single about have at income, or and we're playing net in to a will we then of on significant

our on number priority execution. one focus So is

we number set current doesn't, put very doing would those we've at a Does and thing set course, take the divesting Our our Does specific our priority for portfolio. dispassionate quite time. that we look fit? been about And to current some is we we'll we've it owner? Are that portfolio And a right parts portfolio. ourselves? very criteria rightful two really it of criteria. And the of through do dispassionate for it the financial of meet if that said out be strategically the

there the not are that, we've do will time, parts But something the I meet would is think that criteria to we'll if you of set. be ideal like the the have once you something current right at decide that at look going the environment this don't of you're time we that. the time to portfolio make right to if and like look that course when do decision, decide and

that But not real that deal right priority And transactions, types then category now the second. have strategic We that of category, right our made now. execution portfolio and on peers more we'll SFV. plays our in that category that that of been pure first and of our third focus terms going more is themselves overall, know on of with we've analysis second the is through,

Carter Copeland

or like trends? at maybe Tim, the quick the tell Okay, you the wondered great. what And, us color on look orders container Thanks Can both of I clarification. trailer. April quarter just end a for truck

Dave Gitlin

have orders been Dave. Carter, Yes. Container it's pretty steady. actually

positive, how QX into see Overall, down look and got we overall to months it there's I been play been we a it's was container believe. at couple of out. going April, orders, we're of positive. But it's X%, things negative. was where a been when So, months When couple where

it's probably just So now. balance, digits flat down right low-single on to

Carter Copeland

Thanks, Dave. Great.

Dave Gitlin

Thank Yes. you, Carter.

Operator

you. Thank

from comes comment of the Josh Morgan or question line Stanley. next Pokrzywinski Our from

line open. Your is

Josh Pokrzywinski

Hi, guys. good morning,

Dave Gitlin

Good. Morning.

Josh Pokrzywinski

how being XXX, leverage in So Carrier way to I cost operating appreciate actions we of moving color. talked come about we've above of or ground think we these the lot How lot costs number target some XX% in regards around, some of on a things the just the below do incrementals forward I Tim, pull understand some temporary think the number. covered that of some the about a already guess, back? rate temporary, Obviously, about as target I total. exit out? here you and should of

Tim McLevish

Again, and year came Yes. the impact. from the I as we a costs higher that. to from of again, We kind decrementals the – XXX from decremental higher of took so actions a a with forth. disruption this the these of Carrier lot kind generally that separate would recovery offset is identified

expect this give at So I of a coming back we that take as we be or similar increment up or out should X% would XX% rate X%.

Josh Pokrzywinski

to respect be that, it. guess, related supply the taking supply of everyone's a at interruptions. Got chain with look was then Anything I needs a to to of that Obviously, Carrier And that That's with changes just XXX. their helpful. some harder chain part are reshuffled? today

Tim McLevish

there's of consolidate, supply probably think probably as level. and become big going some And we're component partner talked half. better very you get David able Remember, to X,XXX chain, well. cut better, to we will we going get we're about still it. tracking we that That's And we've meaningful, big, on some chain. terms. in When pricing, about well. supply of more that's it better suppliers XX% No. these It's come from we're And savings said, a

Josh Pokrzywinski

Great. the luck, Best detail. guys. I appreciate of

Dave Gitlin

Josh. Thanks, you. Thank

Operator

you. Thank

Our next comment of question or comes Cowen. Gautam the line from from Khanna

Your line open. is

Gautam Khanna

the guys, and very of at-risk, to some kind or it's backlogs, going and sort us the fire site of when hard have access So, do be first backlog the against? and Any even that quarter. curious, you security perceive give be for the Thanks industries framework you are at when whether Yes. Could hospitality to on look detail that? an congrats you extended perhaps serving have what parts commercial that recession? what you might for I'm by the for on hit of stretch framework you. HVAC period,

Dave Gitlin

in news It HVAC piece backlog in that was and and our first Dave. is about up. Gautam. One good is that the about This HVAC. resi X% was in in Thanks, quarter of up two-thirds sequential of third commercial a

improve in quarter. did the the first So backlog position

is from really We to going the it’s extent be there It’s relatively the think right. to to we look -- any at, minor. that left shift

that that to We’re there feel some really are there. they here on We demand. sites come a some back going up pent be and construction once there’s talking month

had orders longer. to And experience migrant Year, on as and the the Our April. our a started line that came quarantine We Basically we workers February was by had ship back the factories, Lunar New were in backlog into from backlog. to you that China, sticking that then were generally sites of What lot was got followed construction followed all that in the of up XX. they was timeframe. folks then after little bit that February backlog factories were China the we and started was they XX, the got this, a allowed open into to new as they receive

here some delivery there, think back it frankly, universities or take places online the opportunity similar start be the month come actually may out this will of but with like they'll education we the accelerate folks or And in some to to U.S. as construction phenomenon out been a backlog. and some a push There the be of has sites Europe, taking construction.

gets it weeks significant. talking So it's going pushed naturally pushed two be some where a or maybe here, will we're is to get some or But month not being accelerated, out. out,

Gautam Khanna

follow-up I in know a opening Tim. said if you that actually just Could structural variable? for remarks. the And don't versus costs disaggregate into $XXX the you million Okay. of

Tim McLevish

Yes.

go to going year Carrier The structural if the million $XX be $XXX that million. just and be $XXX million. enduring. XXX I’d to down was charts we this that So our The will the recall, the a you investment, incremental investment said on be will originally

next million next pushed and pulled $XX before we then it back million go back to $XX to we invested be so out that expected little of in, likely push that bit. We an kind normal. year, out This will will $XXX to scale million incremental year schedule a

not our deferring of on. cutting back cut it was to million one hard it merit, it's was there action, change, up, all time is Obviously, it caught won't supplies, back it was salaried on any reducing most et I wasn't travel structural is come because And a $XXX will but travel furloughing, anyway, services, it be that the That mean likely really employees, wasn't will back. it -- but cetera.

Gautam Khanna

Thank much, guys. you very

Operator

Thank you.

We have final time question. one for

from question of Our [indiscernible] from line Citi be last will the Group.

open. is Your line

Unidentified Analyst

for taking guys. question. morning Thanks my Good

Dave Gitlin

Thanks, Lad.

Unidentified Analyst

driven and should the that the building how regulatory potentially can much about talk what distancing and also in you security be And And you about for therefore requirements? business? Can mean fire more or business, measures is business could of productivity resilient? statutory businesses by restrictions just social access overall in the field talk on within

Dave Gitlin

question. at portfolio. -- the of the We look for a piece thanks there's Yes, fire

think a Products in two look [ph]. And is regulatory about fire's There's portfolio piece XX%, and a is piece. much a at than You nature. security there Chubb there's piece aspects. bigger the piece products of and is the fire Chubb that's We XX%. then the in security fire the about the

during have in is do you regulatory. generally Within especially services pretty this has Europe. timeframe downturn April, some the a And and piece, the see installation piece held and a hit the where up than Chubb, into piece. XX% hard that's the which you installation better March And in services that monitoring got

increases is we parts GST, of regulatory that's like in Edward's held piece that. piece quite we others the have regulatory where business our actually saw because On businesses some Edwards, up there a our China. of product in that side, like and a well, of And growth

is what's our Some But in products to to nature. that a for less demand new see going of of lot starting are normal. there in this interesting the security regulatory some portfolio more critical is be we are

up go about in can how So them the to to going folks number gear where desk, they're start discussions the normal, more applications. [ph] directly of use system, in as touchless bypass we're and new Entity front with type our hotels a room to think with the

with We're our for super estate real brokers business. seeing that

in compelling folks we're key could some of security normal. our in regulatory, as -- of up So, even as though, the some And portfolio quite interesting for customers the some pretty not new gear the new be discussions it's normal. parts

Unidentified Analyst

the Okay. U.S. the I going forward That's very the from order similar helpful. April. I pretty very was were actually and just EMEA And just one last information in guess one me. maybe know you gave then helpful.

go similar for continue sort could So through and in trending expect that directions? the push more of differences year, as U.S. protocols regions? Are to and we COVID-XX responses EMEA do there the in those amongst you the divergence two

Dave Gitlin

to generalize You it's know, it's automotive generalize We say, it's back. quite back Germany Germany. honestly, coming the to been feel coming hard and on hard look about has quite online Europe. we see well. at Recently, even we the hard Europe, because U.S. manufacturers When to good

back weeks Spain operational. have a online coming in to the not still delayed. France in three construction are Italy France and last XX% positive fairly over more sites been is the two way. of

and Germany in others. behind UK states going of as some of at think probably lagging United States, times. different I the be and you're So bit France a a lagging to probably And will online the bag the mixed come see different

the been you generally I compare on down U.S. Europe, way think last far our and that months to weeks behind few is so terms up. the the to way were the experience back on has the over in if four of three two,

Operator

questions I'd in this additional the closing to over to like At management turn remarks. I'm you. no the call any back time, for queue. showing Thank

Dave Gitlin

and us ready your questions. taking time Sam everyone And time that Please to attention the for Well, morning. this for join thank also your I'd to like know today. is we appreciate

you thank So very much.

Operator

Ladies This the in you for today's gentlemen, conference. participating thank and concludes program.

have a may You disconnect. now wonderful day. Everyone

Carrier Global (CARR) 8 May 202020 Q1 Earnings call transcript