01—Abstract
Summary
Summary of the 10-Q filed May 11, 2020. Cited figures are marked; the original filing is the authoritative source.
Carrier Global Corporation (CARR) reported its first quarterly results as an independent public company for the period ending March 31, 2020.
The company experienced a significant year-over-year decline in net sales, down 10% to $3.89 billiona from $4.32 billion in the prior year's quarter. This decline was attributed primarily to organic sales decreases across all three segments (HVAC, Refrigeration, and Fire & Security), exacerbated by the emerging COVID-19 pandemic which disrupted global supply chains, reduced demand, and led to temporary facility closures. Net income attributable to common shareholders fell sharply to $96 million ($0.11 per diluted share) from $400 million ($0.46 per diluted share) in the first quarter of 2019.
This decrease was impacted by lower sales volumes, a non-cash impairment charge of $71 millionb on a joint venture investment, and significant separation-related costs. Despite these challenges, Carrier emphasized its proactive measures to preserve liquidity and manage cash flows, believing it has sufficient liquidity to withstand the expected impact of COVID-19. The company also completed substantial debt financing during the quarter in preparation for its separation from United Technologies Corporation.
02—Key points
Key Highlights
- Net sales decreased by 10% to $3.89 billion in Q1 2020 compared to $4.32 billion in Q1 2019, largely due to the impact of COVID-19 and weaker demand.
- Net income attributable to common shareholders significantly declined to $96 million ($0.11 EPS) from $400 million ($0.46 EPS) year-over-year.
- The company incurred a $71 million non-cash impairment charge on a minority-owned joint venture investment.
- Carrier completed significant financing activities, issuing $9.25 billion in notes and drawing $1.75 billion on a term loan, primarily to fund a $10.9 billion distribution to UTC in connection with its separation.
- The company implemented measures to preserve liquidity and manage cash flow in response to the COVID-19 pandemic, including cost reductions and assessing dividends.
- Gross margin improved slightly to 28.9% from 28.4% year-over-year, driven by favorable material productivity and commodities, despite lower volumes.
- The Separation from UTC incurred $45 million in pre-Separation costs during the quarter, impacting SG&A expenses.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed May 11, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $3.89B$4.32B | −10.1% |
| R&D Expenses | $98.00M$97.00M | +1.0% |
| SG&A Expenses | $692.00M$684.00M | +1.2% |
| Operating Expenses | $3.56B$3.88B | −8.3% |
| Operating Income | $315.00M$500.00M | −37.0% |
| Interest Expense | $31.00M— | — |
| Net Income | $102.00M$400.00M | −74.5% |
| EPS (Basic) | $0.11$0.46 | −76.1% |
| EPS (Diluted) | $0.11$0.46 | −76.1% |
| Shares Outstanding (Basic) | 866.20M866.00M | 0.0% |
| Shares Outstanding (Diluted) | 866.20M866.00M | 0.0% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in net sales?
The primary driver for the 10% decrease in net sales was the impact of the COVID-19 pandemic, which disrupted global supply chains, reduced customer demand, and led to temporary facility closures. This resulted in organic sales decreases across all three business segments: HVAC, Refrigeration, and Fire & Security.
How did the COVID-19 pandemic affect the company's financial performance?
The COVID-19 pandemic had a significant negative impact, leading to lower sales volumes, temporary production halts at manufacturing facilities, and reduced demand for products and services. The company also experienced varied impacts across its businesses, leading to an assessment of goodwill and intangible asset valuations and proactive measures to preserve liquidity.
What is the significance of the debt issuance and cash distribution to UTC?
In preparation for its separation from United Technologies Corporation (UTC), Carrier issued $9.25 billion in long-term notes and drew $1.75 billion on a term loan. The net proceeds of approximately $10.9 billion were distributed to UTC. This financing was crucial for Carrier's financial independence as a standalone entity.
What is the company's outlook and liquidity position given the ongoing pandemic?
Carrier is focused on preserving liquidity and managing cash flows through cost-saving measures. The company believes it has sufficient liquidity to withstand the expected impact of COVID-19 and anticipates future operating cash flows and access to capital markets will support its needs. However, the full extent of the pandemic's impact remains uncertain and depends on future developments.
06—Continue