10-QPeriod: Q3 FY2020

CARRIER GLOBAL Corp Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 29, 2020For Securities:CARR

Summary

Carrier Global Corporation reported its third-quarter and year-to-date results for 2020. The company saw a revenue increase of 4% to $5.0 billion for the quarter, driven primarily by an 11% organic sales increase in the HVAC segment, which benefited from strong residential demand due to warmer weather and increased remote work. However, the Refrigeration and Fire & Security segments experienced revenue declines. For the nine-month period, total net sales decreased by 9%, reflecting the broader economic impacts of the COVID-19 pandemic. Profitability showed a significant improvement in the quarter, with net income attributable to common shareholders rising to $741 million from $492 million in the prior year. This was supported by the gain on the sale of Beijer shares and the absence of a significant impairment charge recognized in the prior year. The company also highlighted ongoing cost management initiatives and its strong liquidity position with $3.8 billion in cash and cash equivalents.

Financial Highlights

52 data points
Beta

Revenue

$5.00B

Net Income

$748.00M

15.0% Net Margin

EPS (Diluted)

$0.84

Total Assets

$25.73B

Cash & Equivalents

$3.85B

Free Cash Flow

$937.00M

Financial Statements
Beta
Revenue$5.00B
R&D Expenses$100.00M
SG&A Expenses$681.00M
Operating Expenses$4.22B
Operating Income$1.08B
Interest Expense$90.00M
Net Income$748.00M
EPS (Basic)$0.86
EPS (Diluted)$0.84
Shares Outstanding (Basic)866.40M
Shares Outstanding (Diluted)881.50M

Key Highlights

  • 1For the three months ended September 30, 2020, net sales increased by 4% to $5.0 billion, compared to $4.8 billion in the prior year, driven by a 11% organic sales increase in the HVAC segment.
  • 2Net income attributable to common shareowners surged to $741 million ($0.84 per diluted share) for the third quarter of 2020, up from $492 million ($0.57 per diluted share) in the same period of 2019.
  • 3The company realized a pre-tax gain of $252 million from the sale of Beijer shares during the third quarter.
  • 4Operating profit increased significantly to $1.08 billion for the quarter, driven by strong performance in the HVAC segment and the gain on the Beijer sale, more than offsetting declines in Refrigeration and Fire & Security.
  • 5Cash and cash equivalents stood at $3.8 billion as of September 30, 2020, indicating a strong liquidity position.
  • 6The company generated $1.49 billion in net cash from operating activities for the nine months ended September 30, 2020, a substantial increase from $989 million in the prior year, largely due to working capital management and tax timing.
  • 7Management noted that while the COVID-19 pandemic impacted sales in Refrigeration and Fire & Security segments, the HVAC segment showed resilience, particularly in North America residential markets.

Frequently Asked Questions

The COVID-19 pandemic had a mixed impact. While it led to lower sales in the Refrigeration and Fire & Security segments due to economic slowdowns and operational restrictions, it positively influenced the HVAC segment, particularly in North America residential markets, due to increased demand for replacement units driven by warmer weather and remote work/school activities. The company also implemented cost containment measures to mitigate the pandemic's financial effects.

The significant increase in net income was driven by a combination of factors. These include the strong performance in the HVAC segment, a $252 million pre-tax gain from the sale of Beijer shares, and the absence of a $108 million other-than-temporary impairment charge on a minority joint venture investment that was recorded in the prior year's quarter. Improved operational efficiencies also contributed.

Following its separation from UTC, Carrier significantly increased its long-term debt, issuing approximately $11.0 billion in debt and drawing $1.75 billion on a term loan to fund distributions to UTC. As of September 30, 2020, total debt was $11.97 billion, compared to $319 million at the end of 2019. Despite the increased debt, the company maintained a strong liquidity position with $3.8 billion in cash and cash equivalents and access to a $2.0 billion revolving credit facility.

The outlook appears varied. The HVAC segment showed strength, particularly in residential markets, and is expected to benefit from continued trends like new housing starts and demand for energy-efficient solutions. The Refrigeration and Fire & Security segments faced challenges due to the pandemic's impact on industrial, hospitality, and transportation sectors, but the company is focused on cost management and operational improvements across all segments.