01—Abstract
Summary
Summary of the 10-Q filed July 28, 2022. Cited figures are marked; the original filing is the authoritative source.
Carrier Global Corporation's (CARR) second-quarter 2022 results show a net sales decrease of 4% to $5.21 billiona, primarily impacted by the divestiture of the Chubb Fire & Security business and ongoing supply chain challenges.
Despite this, organic sales grew by 7%, driven by strong demand and pricing improvements across the HVAC and Refrigeration segments. Net income attributable to common shareholders increased by 18% year-over-year to $573 millionb, or $0.67 per diluted share. The company continues to manage costs effectively, with operating expenses down 25% largely due to the Chubb divestiture, and has a solid liquidity position with $3.0 billion in cash and cash equivalents.
The six-month period paints a similar picture, with a 3% decrease in net sales to $9.87 billionc, offset by a 9% organic sales growth. Net income attributable to common shareholders more than doubled to $1.95 billion ($2.25 per diluted share), significantly boosted by a substantial gain from the Chubb divestiture. The company is actively managing its portfolio, including the pending acquisition of a majority stake in Toshiba Carrier Corporation, and is focused on navigating persistent supply chain issues while benefiting from long-term secular trends in its core markets.
02—Key points
Key Highlights
- Total net sales for Q2 2022 decreased by 4% to $5.21 billion compared to Q2 2021, largely due to the Chubb divestiture and supply chain constraints.
- Organic sales grew by 7% in Q2 2022, indicating underlying demand strength, especially in the HVAC and Refrigeration segments.
- Net income attributable to common shareholders rose 18% year-over-year to $573 million in Q2 2022, with diluted EPS at $0.67.
- The company reported a significant net gain of $1.1 billion on the sale of its Chubb Fire & Security business in Q1 2022, which heavily influenced the six-month net income and operating profit.
- Operating expenses decreased by 25% in Q2 2022, primarily due to the absence of Chubb's operational costs and ongoing cost management initiatives.
- Carrier had a strong liquidity position with $3.0 billion in cash and cash equivalents as of June 30, 2022, and no outstanding borrowings under its revolving credit facility or commercial paper program.
- The company is progressing with the acquisition of a majority stake in Toshiba Carrier Corporation (TCC), expected to close in early August 2022.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2022filed July 28, 2022Financial Statements
Q2 FY2022 against Q2 FY2021
| Line item | Q2 FY2022Q2 FY2021 | Change |
|---|---|---|
| Revenue | $5.21B$5.44B | −4.2% |
| R&D Expenses | $122.00M$125.00M | −2.4% |
| SG&A Expenses | $614.00M$813.00M | −24.5% |
| Operating Expenses | $4.50B$4.76B | −5.4% |
| Operating Income | $819.00M$783.00M | +4.6% |
| Net Income | $587.00M$487.00M | +20.5% |
| EPS (Basic) | $0.68$0.56 | +21.4% |
| EPS (Diluted) | $0.67$0.55 | +21.8% |
| Shares Outstanding (Basic) | 845.70M868.70M | −2.6% |
| Shares Outstanding (Diluted) | 862.70M890.90M | −3.2% |
05—Questions
Frequently Asked Questions
What was the impact of the Chubb divestiture on Carrier's financials?
The sale of the Chubb Fire & Security business, completed on January 3, 2022, significantly impacted the financial results. It led to a decrease in reported net sales due to its absence in the current period compared to the prior year. However, it also resulted in a substantial net gain of $1.1 billion recognized in the first half of 2022, boosting net income and contributing to a large decrease in operating expenses and selling, general, and administrative costs.
How is Carrier addressing supply chain challenges and inflationary pressures?
Carrier is implementing several strategies to mitigate supply chain challenges and inflationary pressures. These include working closely with suppliers, investing in supply chain resilience through automation and dual sourcing, implementing pricing actions, and focusing on productivity initiatives. Despite these efforts, these challenges continue to impact sales and profitability.
What is Carrier's outlook regarding future growth and strategic initiatives?
Carrier is focused on long-term growth driven by secular trends such as urbanization and sustainability. Key strategic initiatives include investing in R&D for new products and technologies, particularly in energy-efficient and digital solutions. The company is also actively managing its portfolio, exemplified by the pending acquisition of a majority stake in Toshiba Carrier Corporation, which is expected to strengthen its position in the HVAC market.
How did the company manage its debt and capital during the quarter?
Carrier actively managed its debt during the quarter by completing tender offers to repurchase approximately $1.15 billion of its senior notes. This resulted in a net gain and write-off of deferred financing costs. The company maintained a strong liquidity position with $3.0 billion in cash and cash equivalents and no outstanding borrowings under its credit facilities. The net debt to net capitalization ratio improved.
06—Continue