01—Abstract
Summary
Summary of the 10-Q filed October 28, 2021. Cited figures are marked; the original filing is the authoritative source.
Carrier Global Corporation's (CARR) Q3 2021 10-Q filing reveals a mixed financial performance for the period ending September 29, 2021.
While total net sales saw a healthy increase of 7%a year-over-year for the quarter and a significant 20% for the nine-month period, driven by organic growth and recovering end-markets, profitability faced headwinds. Net income attributable to common shareholders declined by 37% for the quarter, primarily due to a substantial increase in operating expenses and a higher effective tax rate. The company is navigating ongoing global supply chain challenges, including component shortages and inflationary cost pressures, which are impacting sales and margins.
Despite these challenges, Carrier is strategically divesting its Chubb Fire & Security business to focus on its core HVAC and Refrigeration segments. The company also continues to invest in innovation and operational efficiency, demonstrating a commitment to long-term growth amidst a complex economic environment.
02—Key points
Key Highlights
- Total net sales increased by 7% to $5.34 billion for the third quarter and by 20% to $15.48 billion for the first nine months of 2021, indicating a strong recovery in demand.
- Net income attributable to common shareholders for the quarter decreased by 37% to $469 million ($0.53 per diluted share) compared to the prior year's $741 million ($0.84 per diluted share), largely due to increased operating expenses and taxes.
- Operating profit saw a significant decline of 23% for the quarter, reaching $828 million from $1,081 million in Q3 2020, impacted by higher operating expenses.
- The company is proceeding with the sale of its Chubb Fire & Security business, with assets and liabilities classified as held for sale, indicating a strategic focus on core segments.
- Inventory levels increased by 18.5% sequentially, from $1.63 billion at the end of 2020 to $1.93 billion as of September 30, 2021, potentially reflecting supply chain stocking strategies.
- Goodwill decreased by approximately 9% to $9.24 billion from $10.14 billion at the end of 2020, largely due to the reclassification of goodwill related to the Chubb divestiture.
- The company faces ongoing supply chain challenges and inflationary pressures, which are expected to continue impacting the business.
- Cash and cash equivalents stood at $2.67 billion as of September 30, 2021, a slight decrease from $3.11 billion at the end of 2020.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2021filed October 28, 2021Financial Statements
Q3 FY2021 against Q3 FY2020
| Line item | Q3 FY2021Q3 FY2020 | Change |
|---|---|---|
| Revenue | $5.34B$5.00B | +6.8% |
| R&D Expenses | $123.00M$100.00M | +23.0% |
| SG&A Expenses | $748.00M$681.00M | +9.8% |
| Operating Expenses | $4.61B$4.22B | +9.2% |
| Operating Income | $828.00M$1.08B | −23.4% |
| Net Income | $469.00M$748.00M | −37.3% |
| EPS (Basic) | $0.54$0.86 | −37.2% |
| EPS (Diluted) | $0.53$0.84 | −36.9% |
| Shares Outstanding (Basic) | 867.60M866.40M | +0.1% |
| Shares Outstanding (Diluted) | 892.00M881.50M | +1.2% |
05—Questions
Frequently Asked Questions
What drove the significant decrease in net income for the third quarter of 2021 compared to the prior year?
The decrease in net income for Q3 2021 was primarily driven by a substantial increase in operating expenses, which rose by 61% year-over-year. This was influenced by the return to pre-pandemic spending levels in selling, general, and administrative expenses, restructuring charges, and transaction costs associated with the planned divestiture of the Chubb business. Additionally, the effective tax rate increased to 37.5% from 25.9% in the prior year, largely due to a net tax charge related to the Chubb business reorganization.
How is Carrier Global addressing the ongoing supply chain challenges and inflationary pressures?
Carrier is actively managing supply chain challenges and inflationary pressures by working closely with suppliers, investing in supply chain resilience through automation and dual sourcing of critical components, and implementing localized manufacturing where feasible. The company is also taking pricing actions to mitigate cost increases and is focused on cost containment initiatives to improve operational efficiency.
What is the strategic significance of the planned divestiture of the Chubb Fire & Security business?
The divestiture of the Chubb Fire & Security business is a strategic move to streamline Carrier's portfolio and focus on its core HVAC and Refrigeration segments, which are expected to drive future growth. This allows the company to allocate resources more effectively and enhance its market position in these key areas.
How has the company's debt and equity structure changed in the current period?
Total debt decreased to $9.69 billion from $10.23 billion at the end of 2020, mainly due to debt repayments. Total equity increased to $7.22 billion from $6.58 billion, driven by retained earnings. Net debt to net capitalization improved slightly, indicating a more favorable leverage position.
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