CARRIER GLOBAL CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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COMPANY OVERVIEW

Company Summary

Carrier is the leading global provider of healthy, safe, sustainable and
intelligent building and cold chain solutions. Our portfolio includes
industry-leading brands such as Carrier, Automated Logic, Carrier Transicold,
Kidde, Edwards and LenelS2 that offer innovative HVAC, refrigeration, fire,
security and building automation technologies to help make the world safer and
more comfortable. We also provide a broad array of related building services,
including audit, design, installation, system integration, repair, maintenance
and monitoring. Our operations are classified into three segments: HVAC,
Refrigeration and Fire & Security.

Our worldwide operations are affected by global and regional industrial,
economic and political factors and trends. These include the mega-trends of
urbanization, climate change and increasing requirements for food safety driven
by the food needs of our growing global population and the rising standards of
living in emerging markets. We believe that our business segments are well
positioned to benefit from favorable secular trends, including these mega-trends
and from the strength of our industry-leading brands and track record of
innovation. In addition, we regularly review our end markets to proactively
identify trends and adapt our strategies accordingly.

Our business is also affected by changes in the general level of economic
activity, such as changes in business and consumer spending, construction and
shipping activity as well as short-term economic factors such as currency
fluctuations, commodity price volatility and supply disruptions. We continue to
invest in our business, take pricing actions to mitigate supply chain and
inflationary pressures, develop new products and services in order to remain
competitive in our markets and use risk management strategies to mitigate
various exposures. We believe that we have industry-leading global brands, which
form the foundation of our business strategy. Coupled with our focus on growth,
innovation and operational efficiency, we expect to drive long-term future
growth and increased value for our shareowners.

RECENT DEVELOPMENTS

The acquisition of Toshiba Carrier Corporation

On February 6, 2022, we entered into a binding agreement to acquire a majority
ownership interest in TCC, a VRF and light commercial HVAC joint venture between
Carrier and Toshiba Corporation. TCC designs and manufactures flexible,
energy-efficient and high-performance VRF and light commercial HVAC systems as
well as commercial products, compressors and heat pumps. The acquisition
included all of TCC's advanced research and development centers and global
manufacturing operations, product pipeline and the long-term use of Toshiba's
iconic brand. The acquisition was completed on August 1, 2022, subject to
customary closing conditions. As a result, the assets, liabilities and results
of operations of TCC are consolidated in the accompanying Unaudited Condensed
Consolidated Financial Statements as of the date of acquisition and reported
within our HVAC segment. Upon closing, Toshiba Corporation retained a 5%
ownership interest in TCC.

Russia invasion of Ukraine

In February 2022, Russian forces initiated a military action against Ukraine. As
a result, the European Union, United States, the United Kingdom and other
countries have imposed sanctions that have increased global economic and
political uncertainty. We operated in Russia through a Russia-based subsidiary
and a joint venture which represents less than 1% of our total assets and
revenue. On March 10, 2022, we announced that we were suspending business
operations in Russia, honoring existing contractual obligations in a manner that
fully complies with all sanctions and trade controls imposed. As of September
30, 2022, we remain on track to cease all operations in Russia this year. While
neither Russia nor Ukraine constitute a material portion of our business, the
conflict could lead to disruption, instability and volatility in global markets
and industries that could negatively impact our results of operations. We
continue to monitor the evolving impacts of this conflict and its effect on the
global economy and geopolitical landscape.

Supply chain challenges

The ongoing global economic recovery from the COVID-19 pandemic has caused
significant challenges for global supply chains resulting in inflationary cost
pressures, component shortages and transportation delays. As a result, we have
incurred incremental costs for commodities and components used in our products
as well as component shortages that have negatively
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impacted our sales and operating results. We expect these challenges to continue to impact our business for the foreseeable future.

We continue to take proactive steps to limit the impact of these challenges and
are working closely with our suppliers to ensure availability of products and
implement other cost savings initiatives. In addition, we continue to invest in
our supply chain to improve its resilience with a focus on automation, dual
sourcing of critical components and localized manufacturing when feasible. To
date, there has been limited disruption to the availability of our products,
though it is possible that more significant disruptions could occur if these
supply chain challenges continue.

Sales of chick fire & Security

On January 3, 2022, we completed the Chubb Sale for net proceeds of $2.9
billion. Chubb, which was reported within our Fire & Security segment, delivered
essential fire safety and security solutions from design and installation to
monitoring, service and maintenance across more than 17 countries around the
globe. During the three months ended March 31, 2022, we recognized a gain on the
sale of $1.1 billion. The sale agreement included several customary provisions
to settle working capital and other transaction-related items as of the date of
sale. During the three months ended September 30, 2022, the parties finalized
these amounts in accordance with the terms of the sale agreement.

Impact of the COVID-19 pandemic

In early 2020, the World Health Organization declared the outbreak of a
respiratory disease known as COVID-19 as a global pandemic. In response, many
countries implemented containment and mitigation measures to combat the
outbreak, which severely restricted the level of economic activity and caused a
significant contraction in the global economy. As a result, we took several
preemptive actions to manage liquidity, preserve the health and safety of our
employees and customers as well as maintain the continuity of our operations.
The preparation of financial statements requires management to use judgments in
making estimates and assumptions based on the relevant information available at
the end of each period, which can have a significant effect on reported amounts.
However, due to significant uncertainty surrounding the pandemic, including a
resurgence in cases and the spread of COVID-19 variants, management's judgments
could change. While our results of operations, cash flows and financial
condition could be negatively impacted, the extent of any continuing impact
cannot be estimated with certainty at this time.

                         CRITICAL ACCOUNTING ESTIMATES

Preparation of our financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, sales
and expenses. We believe that the most complex and sensitive judgments, because
of their potential significance to the accompanying Unaudited Condensed
Consolidated Financial Statements, result primarily from the need to make
estimates about the effects of matters that are inherently uncertain. In
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of our 2021 Form 10-K, we describe the significant accounting
estimates and policies used in the preparation of the accompanying Unaudited
Condensed Consolidated Financial Statements. There have been no significant
changes in our critical accounting estimates.

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                             RESULTS OF OPERATIONS

As a result of the Chubb Sale, we do not have any remaining ownership interest
in Chubb and no longer consolidate Chubb in our financial statements as of
January 3, 2022. Therefore, this Management's Discussion and Analysis of
Financial Condition and Results of Operations only includes the financial
results of Chubb in periods prior to the date of sale. As a result, prior period
results may not be comparable to the current period. See Note 16 - Divestitures
in the Notes to the accompanying Unaudited Condensed Consolidated Financial
Statements for additional information.

The results of operations of TCC are included in our consolidated results since
the acquisition date of August 1, 2022. Prior to the acquisition, we previously
accounted for our minority ownership in TCC under the equity method of
accounting and recognized our portion of earnings within Equity method
investment in net earnings as part of operating expenses. As a result, prior
period results may not be comparable to the current period. See Note 15 -
Acquisitions in the Notes to the accompanying Unaudited Condensed Consolidated
Financial Statements for additional information.

Three months completed September 30, 2022 Compared to the three months ended

                               September 30, 2021

The following represents our consolidated net sales and results of operations:

                                                                               Three Months Ended September 30,
(In millions)                                               2022                2021            Period Change             % Change
Net sales                                              $      5,451          $ 5,341          $          110                      2  %
Cost of products and services sold                           (3,974)          (3,740)                   (234)                     6  %
Gross margin                                                  1,477            1,601                    (124)                    (8) %
Operating expenses                                               49             (773)                    822                   (106) %
Operating profit                                              1,526              828                     698                     84  %
Non-operating income (expenses), net                            (56)             (60)                      4                     (7) %
Income from operations before income taxes                    1,470              768                     702                     91  %
Income tax expense                                             (138)            (288)                    150                    (52) %
Net income from operations                                    1,332              480                     852                    178  %
Less: Non-controlling interest in subsidiaries'
earnings from operations                                         20               11                       9                     82  %

Net income attributable to common shareholders $1,312

 $   469          $          843                    180  %



Net Sales

For the three months ended September 30, 2022Net sales were $5.5 billionan increase of 2% compared to the same period of 2021. The components of the year-over-year variation are as follows:

                                         Three Months Ended September 30, 

2022

Organic                                                                    8  %
Foreign currency translation                                              (4) %
Acquisitions and divestitures, net                                        (2) %

Total % change                                                             2  %



Organic sales for the three months ended September 30, 2022 increased by 8%
compared with the same period of 2021. We continue to benefit from the demand
for energy-efficient, digital products and healthy building solutions. In
addition, pricing improvements more than offset inflationary impacts in each of
our segments. The organic increase was primarily driven by our HVAC segment due
to pricing improvements in our North America residential and light commercial
business and improved global end-markets in our Commercial HVAC business. Our
Refrigeration segment benefited from pricing improvements, but continued supply
chain and logistic constraints as well as weakness in Europe impacted results.
Pricing improvements in our Fire & Security segment were the primary driver of
growth compared with the prior year while supply chain and logistic constraints
continue to be challenging. Refer to "Segment Review" below for a discussion of
Net sales by segment.

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Gross margin

For the three months ended September 30, 2022the gross margin was $1.5 billioni.e. a decrease of 8% compared to the same period of 2021. The components are as follows:

                                                                       Three Months Ended September 30,
(In millions)                                                              2022                2021
Net sales                                                             $    5,451            $  5,341
Cost of products and services sold                                        (3,974)             (3,740)
Gross margin                                                          $    1,477            $  1,601
Percentage of net sales                                                     27.1    %           30.0  %



Gross margin decreased by $124 million compared with the three months ended
September 30, 2021. A main driver of the decrease related to the incremental
costs of products and services sold associated with TCC since the date of
acquisition, which included inventory step-up, backlog amortization and
intangible asset amortization resulting from the recognition of acquired assets
at fair value. These costs had a 100 basis point impact on gross margin as a
percentage of Net sales. In addition, each of our segments continue to be
impacted by the higher cost of commodities and components used in our products,
certain supply chain constraints and higher freight costs. However, these
impacts were more than offset by ongoing customer demand, pricing improvements
and our continued focus on productivity initiatives. Although pricing
improvements more than offset inflationary impacts and supply chain challenges,
gross margin as a percentage of Net sales decreased by 290 basis points compared
with the same period of 2021 including the impact of the TCC acquisition.

Operating Expenses
For the three months ended September 30, 2022, operating expenses, including
Equity method investment net earnings, were $49 million, a 106% decrease
compared with the same period of 2021. The components were as follows:

                                                                            Three Months Ended September 30,
(In millions)                                                                    2022                  2021
Selling, general and administrative                                      $          (624)           $   (748)
Research and development                                                            (143)               (123)
Equity method investment net earnings                                                 63                  76
Other income (expense), net                                                          753                  22
Total operating expenses                                                 $            49            $   (773)
Percentage of net sales                                                             (0.9)   %           14.5  %



For the three months ended September 30, 2022, Selling, general and
administrative expenses were $624 million, a 17% decrease compared with the same
period of 2021. The decrease is primarily due to the Chubb Sale on January 3,
2022. In addition, lower restructuring charges and the benefit provided by
changes in the fair value of cash-settled equity awards further contributed to
the decrease. These amounts were partially offset by incremental selling,
general and administrative expenses associated with TCC since the date of
acquisition and $15 million of acquisition-related costs. The three months ended
September 30, 2021 included $14 million of costs related to the Chubb Sale.

Research and development costs relate to the development of new products and technological innovation. Due to the variable nature of program development schedules, expenditure levels from year to year may fluctuate. In addition, we continue to invest to prepare for future changes in energy efficiency and refrigerant regulations and in digital control technologies.

Investments over which we do not exercise control, but have significant
influence, are accounted for using the equity method of accounting. For the
three months ended September 30, 2022, Equity method investment net earnings
were $63 million, a 17% decrease compared with the same period of 2021. The
decrease was primarily associated with the increase in our ownership interest in
TCC on August 1, 2022. As a result, TCC is no longer accounted for under the
equity method of accounting since the date of acquisition.
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Other income (expense), net primarily includes the impact of gains and losses
related to the sale of businesses or interests in our equity method investments,
foreign currency gains and losses on transactions that are denominated in a
currency other than an entity's functional currency and hedging-related
activities. In connection with the TCC acquisition, the carrying value of our
previously held TCC equity investments were recognized at fair value at the date
of acquisition. As a result, we recognized a $732 million non-cash gain
associated with the increase in our ownership interest. In addition, we
recognized a $7 million charge resulting from the settlement of working capital
and other transaction-related items associated with the Chubb Sale during the
three months ended September 30, 2022.

Net non-operating income (expenses)

For the three months ended September 30, 2022, Non-operating income (expenses),
net was $56 million, a 7% decrease compared with the same period of 2021. The
components were as follows:

                                                                               Three Months Ended
                                                                                 September 30,
(In millions)                                                                2022               2021
Non-service pension (expense) benefit                                   $         -          $     14

Interest expense                                                        $       (71)         $    (76)
Interest income                                                                  15                 2
Interest (expense) income, net                                          $   

(56) $ (74)

Non-operating income (expenses), net                                    $   

(56) $ (60)



Non-operating income (expenses), net includes the results from activities other
than normal business operations such as interest expense, interest income and
the non-service components of pension and post-retirement obligations. For the
three months ended September 30, 2022, Interest expense was $71 million, a 7%
decrease compared with the same period of 2021. The decrease was primarily
driven by the repayment of $1.15 billion aggregate principal 2.242% Notes due
2025 and 2.493% Notes due 2027 during the three months ended March 31, 2022.

Income Taxes

                               Three Months Ended September 30,
                                       2022                     2021
Effective tax rate                                  9.4  %     37.5  %



We account for income tax expense in accordance with ASC 740, which requires an
estimate of the annual effective income tax rate for the full year to be applied
to the respective interim period, taking into account year-to-date amounts and
projected results for the full year. The effective tax rate was 9.4% for the
three months ended September 30, 2022 compared with 37.5% for the three months
ended September 30, 2021. The year-over-year decrease was primarily driven by a
lower effective tax rate on a $732 million non-cash gain resulting from the
recognition of our previously held TCC equity investments at fair value upon
acquisition of TCC compared with our U.S. statutory tax rate. In addition, the
prior year included a net tax charge $136 million primarily relating to the
re-organizations and disentanglement of certain Chubb subsidiaries executed in
advance of the planned divestiture of Chubb business.
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Nine month period ended September 30, 2022 Compared to the nine months ended

                               September 30, 2021

The following represents our consolidated net sales and results of operations:

Nine month period ended September 30,

                                                                                                  Period
(In millions)                                                2022                2021             Change             % Change
Net sales                                               $     15,316          $ 15,480          $   (164)                   (1) %
Cost of products and services sold                           (11,099)          (10,866)             (233)                    2  %
Gross margin                                                   4,217             4,614              (397)                   (9) %
Operating expenses                                              (135)           (2,432)            2,297                   (94) %
Operating profit                                               4,082             2,182             1,900                    87  %
Non-operating income (expenses), net                            (167)             (187)               20                   (11) %
Income from operations before income taxes                     3,915             1,995             1,920                    96  %
Income tax expense                                              (609)             (626)               17                    (3) %
Net income from operations                                     3,306             1,369             1,937                   141  %
Less: Non-controlling interest in subsidiaries'
earnings from operations                                          42                29                13                    45  %
Net income attributable to common shareowners           $      3,264          $  1,340          $  1,924                   144  %



Net Sales

For the nine months ended September 30, 2022Net sales were $15.3 billiona decrease of 1% compared to the same period of 2021. The components of the year-over-year variation are as follows:

                                               Nine Months Ended September 30, 2022
Organic                                                                         9  %
Foreign currency translation                                                   (3) %
Acquisitions and divestitures, net                                             (7) %

Total % change                                                                 (1) %



Organic sales for the nine months ended September 30, 2022 increased by 9%
compared with the same period of 2021. We continue to benefit from the demand
for energy-efficient, digital products and healthy building solutions. In
addition, pricing improvements more than offset inflationary impacts in each of
our segments. The organic increase was primarily driven by our HVAC segment due
to pricing improvements in our North America residential and light commercial
business and improved global end-markets in our Commercial HVAC business.
Refrigeration results benefited from pricing improvements which more than offset
ongoing supply chain and logistic constraints. Pricing improvements in our Fire
& Security segment were the primary driver of growth compared with the prior
year while supply chain and logistic constraints continue to be challenging.
Refer to "Segment Review" below for a discussion of Net sales by segment.

Gross margin

For the nine months ended September 30, 2022the gross margin was $4.2 billiona decrease of 9% compared to the same period

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of 2021. The components were as follows:

                                                    Nine Months Ended September 30,
(In millions)                                                                  2022           2021
Net sales                                                                   $ 15,316       $ 15,480
Cost of products and services sold                                           (11,099)       (10,866)
Gross margin                                                                $  4,217       $  4,614
Percentage of net sales                                                         27.5  %        29.8  %



Gross margin decreased by $397 million compared with the nine months ended
September 30, 2021. A main driver of the decrease related to incremental costs
of products and services sold associated with TCC since the date of acquisition,
which included inventory step-up, backlog amortization and intangible asset
amortization resulting from the recognition of acquired assets at fair value.
These costs had a 40 basis point impact on gross margin as a percentage of Net
sales. In addition, each of our segments continue to be impacted by the higher
cost of commodities and components used in our products, certain supply chain
constraints and higher freight costs. However, these impacts were more than
offset by ongoing customer demand, pricing improvements and our continued focus
on productivity initiatives. Although pricing improvements more than offset
inflationary impacts and supply chain challenges, gross margin as a percentage
of Net sales decreased by 230 basis points compared with the same period of
2021.

Functionnary costs

For the nine months ended September 30, 2022operating expenses, including net income from investments using the equity method, have been $135 milliona decrease of 94% compared to the same period of 2021. The components are as follows:

                                                     Nine Months Ended September 30,
(In millions)                                                                   2022           2021
Selling, general and administrative                                          $ (1,839)      $ (2,304)
Research and development                                                         (390)          (369)
Equity method investment net earnings                                             222            201
Other income (expense), net                                                     1,872             40
Total operating expenses                                                     $   (135)      $ (2,432)
Percentage of net sales                                                           0.9  %        15.7  %



For the nine months ended September 30, 2022, Selling, general and
administrative expenses were $1.8 billion, a 20% decrease compared with the same
period of 2021. The decrease is primarily due to the Chubb Sale on January 3,
2022. In addition, lower restructuring charges and the benefit provided by
changes in the fair value of cash-settled equity awards further contributed to
the decrease. These amounts were partially offset by incremental selling,
general and administrative expenses associated with TCC since the date of
acquisition and $28 million of acquisition-related costs. The nine months ended
September 30, 2021 included $29 million of costs related to the Chubb Sale and
$19 million of costs related to the Separation.

Research and development costs relate to the development of new products and technological innovation. Due to the variable nature of program development schedules, expenditure levels from year to year may fluctuate. In addition, we continue to invest to prepare for future changes in energy efficiency and refrigerant regulations and in digital control technologies.

Investments over which we do not exercise control, but have significant
influence, are accounted for using the equity method of accounting. For the nine
months ended September 30, 2022, Equity method investment net earnings were $222
million, a 10% increase compared with the same period of 2021. The increase was
primarily related to a $27 million gain on the sale of two minority owned
subsidiaries by one of our joint ventures. In addition, higher earnings in HVAC
joint ventures in Asia and North America further benefited earnings. These
amounts were partially offset by the increase in our ownership interest in TCC
on August 1, 2022. As a result, TCC is no longer accounted for under the equity
method of accounting since the date of acquisition.

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Other income (expense), net primarily includes the impact of gains and losses
related to the sale of businesses or interests in our equity method investments,
foreign currency gains and losses on transactions that are denominated in a
currency other than an entity's functional currency and hedging-related
activities. In connection with the TCC acquisition, the carrying value of our
previously held TCC equity investments were recognized at fair value at the date
of acquisition. As a result, we recognized a $732 million non-cash gain
associated with the increase in our ownership interest. In addition, we
completed the Chubb Sale and recognized a net gain on the sale of $1.1 billion
during the nine months ended September 30, 2022.

Net non-operating income (expenses)

For the nine months ended September 30, 2022, Non-operating income (expenses),
net was $167 million, an 11% increase compared with the same period of 2021. The
components were as follows:

                                                       Nine Months Ended September 30,
(In millions)                                                                       2022        2021
Non-service pension (expense) benefit                                             $   (2)     $   51

Interest expense                                                                  $ (226)     $ (247)
Interest income                                                                       61           9
Interest (expense) income, net                                              

$(165) ($238)

Non-operating income (expenses), net                                        

$ (167) ($187)



Non-operating income (expenses), net includes the results from activities other
than normal business operations such as interest expense, interest income and
the non-service components of pension and post-retirement obligations. For the
nine months ended September 30, 2022, Interest expense was $226 million, a 9%
decrease compared with the same period of 2021. During the nine months ended
September 30, 2022, we completed tender offers to repurchase approximately $1.15
billion aggregate principal of our 2.242% Notes due 2025 and 2.493% Notes due
2027. Upon settlement, we wrote off $5 million of unamortized deferred financing
costs in Interest expense and recognized a net gain of $33 million in Interest
income. During the nine months ended September 30, 2021, we incurred a
make-whole premium of $17 million and wrote-off $2 million of unamortized
deferred financing costs in Interest expense as a result of the redemption of
our $500 million 1.923% Notes originally due in February 2023.

Income Taxes

                                 Nine Months Ended September 30,
                                                                 2022        2021
Effective tax rate                                              15.6  %     31.4  %



We account for income tax expense in accordance with ASC 740, which requires an
estimate of the annual effective income tax rate for the full year to be applied
to the respective interim period, taking into account year-to-date amounts and
projected results for the full year. The effective tax rate was 15.6% for the
nine months ended September 30, 2022 compared with 31.4% for the nine months
ended September 30, 2021. The year-over-year decrease was primarily driven by a
lower effective tax rate on a $732 million non-cash gain resulting from the
recognition of our previously held TCC equity investments at fair value upon
acquisition of TCC and the $1.1 billion Chubb gain compared with the Company's
U.S. statutory rate. The nine months ended September 30, 2021 included a net tax
charge of $136 million primarily relating to the re-organizations and
disentanglement of certain Chubb subsidiaries executed in advance of the planned
divestiture of our Chubb business and a $43 million deferred tax charge
associated with a tax rate increase in the United Kingdom enacted on June 10,
2021 with an effective date of April 2023. These amounts were partially offset
by the recognition of a favorable tax adjustment of $21 million resulting from
the re-organization of a German subsidiary.

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SECTOR REVIEW

We have three operating segments:

•The HVAC segment provides products, controls, services and solutions to meet
the heating, cooling and ventilation needs of residential and commercial
customers while enhancing building performance, health, energy efficiency and
sustainability.

•The Refrigeration segment includes transportation refrigeration and monitoring products, services and digital solutions for trucks, trailers, shipping containers, intermodal and rail, and commercial refrigeration products.

•The Fire & Security segment provides a wide range of residential, commercial and industrial technologies designed to help protect people and property.

We determine our segments based on how our Chief Executive Officer, who is the
Chief Operating Decision Maker (the "CODM"), allocates resources, assesses
performance and makes operational decisions. The CODM allocates resources and
evaluates the financial performance of each of our segments based on Net sales
and Operating profit. Adjustments to reconcile segment reporting to the
consolidated results are included in Note 17 - Segment Financial Data.

     Three Months Ended September 30, 2022 Compared with Three Months Ended
                               September 30, 2021

The summary performance for each of our segments is as follows:

                                                           Net Sales                       Operating Profit                      Operating Profit Margin
                                                       Three Months Ended                  Three Months Ended
                                                         September 30,                       September 30,                   Three Months Ended September 30,
(In millions)                                        2022              2021              2022              2021                 2022                   2021
HVAC                                             $   3,734          $ 3,054          $    1,314          $  573                      35.2  %             18.8  %
Refrigeration                                          923            1,011                 116             119                      12.6  %             11.8  %
Fire & Security                                        905            1,377                 142             182                      15.7  %             13.2  %
Total segment                                    $   5,562          $ 5,442          $    1,572          $  874                      28.3  %             16.1  %



HVAC Segment

For the three months ended September 30, 2022, Net sales in our HVAC segment
were $3.7 billion, a 22% increase compared with the same period of 2021. The
components of the year-over-year change were as follows:

                                         Net Sales
Organic                                       13  %
Foreign currency translation                  (3) %
Acquisitions and divestitures, net            12  %

Total % change in Net sales                   22  %



The organic increase in Net sales of 13% was driven by continued strong results
across each of the segment's businesses. Increased sales in our North America
residential and light commercial business (up 12%) were primarily driven by
pricing improvements during the period. Commercial HVAC (up 15%) benefited from
pricing improvements and ongoing customer demand in our end-markets. The
business saw continued growth in North America and strong results in Asia
compared with the prior period. Increased sales in our Global Comfort Solutions
business (up 11%) were primarily driven by pricing improvements. While current
demand remains strong, supply chain and logistics constraints continue to be
challenging, negatively impacting our sales and results of operations.

On August 1, 2022, the Commercial HVAC business acquired a majority ownership
interest in TCC, a VRF and light commercial HVAC joint venture between Carrier
and Toshiba Corporation. The results of TCC have been included in our Unaudited
Condensed Consolidated Financial Statements since the date of acquisition. The
transaction added 12% to Net sales during the three months ended
September 30, 2022 and is included in Acquisitions and divestitures, net.

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For the three months ended September 30, 2022The operating profit of our HVAC segment was $1.3 billionan increase of 129% compared to the same period of 2021. The components of the year-over-year variation are as follows:

                                         Operating Profit
Operational                                           -  %
Foreign currency translation                         (1) %
Acquisitions and divestitures, net                    5  %
Restructuring                                         1  %
Other                                               124  %
Total % change in Operating profit                  129  %



Operational profit was flat compared with the prior year. Pricing improvements,
higher volume and productivity initiatives benefited operational profit during
the period. These amounts were partially offset by the higher costs of
commodities and components used in our products as well as higher freight and
logistic costs compared with the prior year. In addition, lower earnings from
equity method investments further impacted operational profit as TCC is now
included in the segments consolidated results since the date of acquisition.

Acquisitions and divestitures, net primarily related to the results of
operations associated with the acquisition of TCC. The transaction added 5% to
Operating profit during the three months ended September 30, 2022. In connection
with the TCC acquisition, the carrying value of our previously held TCC equity
investments were recognized at fair value at the date of acquisition. As a
result, we recognized a $732 million non-cash gain associated with the increase
in our ownership interest in Other.

Refrigeration segment

For the three months ended September 30, 2022, Net sales in our Refrigeration
segment were $0.9 billion, a 9% decrease compared with the same period of 2021.
The components of the year-over-year change were as follows:
                                     Net Sales
Organic                                   (1) %
Foreign currency translation              (8) %

Total % change in Net sales               (9) %



The organic decrease in Net sales of 1% was driven by lower volumes compared
with the prior year. Commercial refrigeration sales were flat compared with the
prior year, primarily driven by lower volumes in Europe as economic conditions
and inflationary cost pressures impacted end-market demand. These impacts were
partially offset by pricing improvements and growth in Asia. Transport
refrigeration sales (down 1%) decreased primarily due to continued supply chain
constraints impacting component availability. These impacts were partially
offset by pricing improvements, strong growth in North America, the continued
demand for global transportation and COVID-19 vaccine-related cargo monitoring.
While current demand remains strong, supply chain and logistics constraints
continue to be challenging, negatively impacting our sales and results of
operations.

For the three months ended September 30, 2022The operating profit of our Refrigeration segment was $116 milliona decrease of 2% compared to the same period of 2021. The components of the year-over-year change are as follows:

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                                         Operating Profit
Operational                                           5  %
Foreign currency translation                         (7) %

Restructuring                                        (1) %
Other                                                 1  %
Total % change in Operating profit                   (2) %



The increase in operational profit of 5% was primarily attributable to pricing
improvements compared with the prior year. In addition, favorable productivity
initiatives and lower selling, general and administrative costs further
benefited operational profit. These amounts were partially offset by the higher
costs of commodities and components used in our products as well as higher
freight and logistic costs.

Fire & Security Segment

For the three months ended September 30, 2022, Net sales in our Fire & Security
segment were $905 million, a 34% decrease compared with the same period of 2021.
The components of the year-over-year change were as follows:

                                         Net Sales
Organic                                        5  %
Foreign currency translation                  (3) %
Acquisitions and divestitures, net           (36) %

Total % change in Net sales                  (34) %



The organic increase in Net sales of 5% was primarily driven by pricing
improvements compared with the prior year. The segment primarily saw growth in
both residential and commercial sales in the Americas and Europe as sales in
China decreased as a result of current economic conditions and reduced
end-market demand. Global industrial sales also benefited segment results with
pricing improvements and strong demand. While current demand remains strong,
supply chain constraints continue to be challenging, negatively impacting our
sales and results of operations. In addition, results for 2021 reflected a
significant rebound in demand after initial weakness associated with the
COVID-19 pandemic.

Acquisitions and divestitures, net primarily relates to the prior year results
of our Chubb business, the sale of which was completed on January 3, 2022.
During the three months ended September 30, 2021, Net sales in our Fire &
Security segment were $1.4 billion, which included $520 million from our Chubb
business. Absent the results of Chubb, Net sales increased 6% from $857 million
to $905 million.

For the three months ended September 30, 2022, Operating profit in our Fire &
Security segment was $142 million, a 22% decrease compared with the same period
of 2021. The components of the year-over-year change were as follows:

                                         Operating Profit
Operational                                           1  %
Foreign currency translation                         (2) %
Acquisitions and divestitures, net                  (19) %
Restructuring                                         1  %
Other                                                (3) %
Total % change in Operating profit                  (22) %



The increase in operational profit of 1% was primarily attributable to pricing
improvements compared with the prior year. In addition, productivity initiatives
also benefited operational profit. These amounts were partially offset by the
higher costs of commodities and components used in our products as well as
higher freight and logistics costs.

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Acquisitions and divestitures, net primarily relates to the prior year results
of our Chubb business, the sale of which was completed on January 3, 2022.
Amounts reported during the three months ended September 30, 2021 include $13
million of transaction costs associated with the divestiture. In addition,
amounts reported in Other include a $7 million charge resulting from the
settlement of working capital and other transaction-related items associated
with the Chubb Sale.

      Nine Months Ended September 30, 2022 Compared with Nine Months Ended
                               September 30, 2021

The summary performance for each of our segments is as follows:

                                               Net Sales                         Operating Profit                      Operating Profit Margin
                                           Nine Months Ended                    Nine Months Ended
                                             September 30,                        September 30,                    Nine Months Ended September 30,
(In millions)                            2022              2021               2022               2021                 2022                   2021
HVAC                                 $  10,092          $  8,660          $    2,369          $ 1,511                      23.5  %             17.4  %
Refrigeration                            2,940             3,037                 370              369                      12.6  %             12.2  %
Fire & Security                          2,610             4,084               1,494              480                      57.2  %             11.8  %
Total segment                        $  15,642          $ 15,781          $    4,233          $ 2,360                      27.1  %             15.0  %



HVAC Segment

For the nine months ended September 30, 2022Net sales from our HVAC segment were
$10.1 billionan increase of 17% compared to the same period of 2021. The components of the year-over-year variation are as follows:

                                           Net Sales
Organic                                         13  %

Acquisitions and divestitures, net               6  %

Other                                           (2) %
Total % change in Net sales                     17  %



The organic increase in Net sales of 13% was driven by continued strong results
across each of the segment's businesses. Increased sales in our North America
residential and light commercial business (up 16%) were driven by pricing
improvements and end-market demand. Increased sales in our Commercial HVAC
business (up 8%) benefited from pricing improvements and ongoing customer demand
in our end-markets. The business saw growth in each region including Asia as
demand increased after a resurgence of COVID-19 cases and additional
restrictions imposed earlier in the year. While current demand remains strong,
supply chain and logistics constraints continue to be challenging, negatively
impacting our sales and results of operations. In addition, results for 2021
reflected a significant rebound in demand after initial weakness associated with
the COVID-19 pandemic.

On August 1, 2022, the Commercial HVAC business acquired a majority ownership
interest in TCC, a VRF and light commercial HVAC joint venture between Carrier
and Toshiba Corporation. The results of TCC have been included in our Unaudited
Condensed Consolidated Financial Statements since the date of acquisition. The
transaction added 5% to Net sales during the nine months ended September 30,
2022 and is included in Acquisitions and divestitures, net.

On June 1, 2021, the Commercial HVAC business acquired a 70% controlling
interest in Guangdong Giwee Group and its subsidiaries ("Giwee") and
subsequently acquired the remaining 30% ownership interest on September 7, 2021.
Giwee is a China-based manufacturer offering a portfolio of HVAC products
including variable refrigerant flow, modular chillers and light commercial air
conditioners. The results of Giwee have been included in our Unaudited Condensed
Consolidated Financial Statements since the date of acquisition. The transaction
added 1% to Net sales during the nine months ended September 30, 2022 and is
included in Acquisitions and divestitures, net.

For the nine months ended September 30, 2022The operating profit of our HVAC segment was $2.4 billionan increase of 57% compared to the same period of 2021. The components of the year-over-year variation are as follows:

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                                              Operating Profit
Operational                                                8  %

Acquisitions and divestitures, net                        (1) %
Restructuring                                              1  %
Other                                                     49  %
Total % change in Operating profit                        57  %



The operational profit increase of 8% was primarily attributable to pricing
improvements compared with the prior year. Higher earnings from equity method
investments in Asia and North America also benefited operational profit and
included a $27 million gain on the sale of two minority owned subsidiaries by
one of our joint ventures. These amounts were partially offset by the increase
in our ownership interest in TCC on August 1, 2022. As a result, TCC is no
longer accounted for under the equity method of accounting since the date of
acquisition. In addition, productivity initiatives provided further benefits to
operational profit. These amounts were partially offset by the higher costs of
commodities and components used in our products as well as higher freight and
logistic costs.

In connection with the TCC acquisition, the carrying value of our previously
held TCC equity investments were recognized at fair value at the date of
acquisition. As a result, we recognized a $732 million non-cash gain associated
with the increase in our ownership interest in Other. In addition, amounts
reported in Other include a $22 million charge resulting from a litigation
matter recognized during the nine months ended September 30, 2022.

Refrigeration segment

For the nine months ended September 30, 2022, Net sales in our Refrigeration
segment were $2.9 billion, a 3% decrease compared with the same period of 2021.
The components of the year-over-year change were as follows:
                                     Net Sales
Organic                                    3  %
Foreign currency translation              (6) %

Total % change in Net sales               (3) %



The organic increase in Net sales of 3% was driven by strong demand across each
of the segment's businesses. Commercial refrigeration sales increased (up 4%)
primarily due to pricing improvements compared with the prior year. These
amounts were partially offset by continued supply chain constraints. Transport
refrigeration sales increased (up 2%) primarily due to pricing improvements and
higher volumes associated with component availability during the period. The
nine months ended September 30, 2021 reflected a significant rebound in demand
associated with the cyclical decline that began in late 2019 as well as the
demand for global transportation and COVID-19 vaccine-related cargo monitoring.
While current demand remains strong, supply chain and logistics constraints
continue to be challenging, negatively impacting our sales and results of
operations.

For the nine months ended September 30, 2022The operating profit of our Refrigeration segment was $370 millionstable compared to the same period of 2021. The components of the year-on-year change are as follows:

                                            Operating Profit
Operational                                              6  %
Foreign currency translation                            (7) %

Other                                                    1  %
Total % change in Operating profit                       -  %



The increase in operational profit of 6% was primarily attributable to pricing
improvements compared with the prior year. In addition, favorable productivity
initiatives and lower selling, general and administrative costs further
benefited operational profit. These amounts were partially offset by the higher
costs of commodities and components used in our products and higher freight and
logistic costs. Amounts reported in Other primarily represent a $7 million gain
on the sale of our interest in a cost method investment during the nine months
ended September 30, 2022.

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Fire & Security Segment

For the nine months ended September 30, 2022, Net sales in our Fire & Security
segment were $2.6 billion, a 36% decrease compared with the same period of 2021.
The components of the year-over-year change were as follows:

                                         Net Sales
Organic                                        4  %
Foreign currency translation                  (2) %
Acquisitions and divestitures, net           (38) %

Total % change in Net sales                  (36) %



The organic increase in Net sales of 4% was primarily driven by pricing
improvements compared with the prior year. The segment primarily saw growth in
both residential and commercial sales in the Americas and Europe as sales in
China decreased as a result of current economic conditions and reduced
end-market demand. Global industrial sales also benefited segment results with
pricing improvements and strong demand. While current demand remains strong,
supply chain constraints continue to be challenging, negatively impacting our
sales and results of operations. In addition, results for 2021 reflected a
significant rebound in demand after initial weakness associated with the
COVID-19 pandemic.

Acquisitions and divestitures, net primarily relates to the prior year results
of our Chubb business, the sale of which was completed on January 3, 2022.
During the nine months ended September 30, 2021, Net sales in our Fire &
Security segment were $4.1 billion, which included $1.6 billion from our Chubb
business. Absent the results of Chubb, Net sales increased 6% from $2.5 billion
to $2.6 billion.

For the nine months ended September 30, 2022, Operating profit in our Fire &
Security segment was $1.5 billion, a 211% increase compared with the same period
of 2021. The components of the year-over-year change were as follows:


                                            Operating Profit
Operational                                             (5) %
Foreign currency translation                            (2) %
Acquisitions and divestitures, net                     (16) %
Restructuring                                            3  %
Other                                                  231  %
Total % change in Operating profit                     211  %



The decrease in operational profit of 5% was primarily attributable to the
higher costs of commodities and components used in our products and higher
freight and logistics costs. In addition, unfavorable mix and lower volumes
further impacted results compared with the prior year. These amounts were
partially offset by pricing improvements.
Acquisitions and divestitures, net primarily relates to the prior year results
of our Chubb business, the sale of which was completed on January 3, 2022.
Amounts reported during the nine months ended September 30, 2021 include $28
million of transaction costs associated with the divestiture. Amounts reported
in Other represent the net gain on the Chubb Sale of $1.1 billion.

LIQUIDITY AND FINANCIAL SITUATION

We assess liquidity in terms of our ability to generate adequate amounts of cash
necessary to fund our current and future cash requirements to support our
business and strategic initiatives. In doing so, we review and analyze our cash
on hand, working capital, debt service requirements and capital expenditures. We
rely on operating cash flows as our primary source of liquidity. In addition, we
have access to other sources of capital to finance our strategic initiatives and
fund growth.

As of September 30, 2022, we had cash and cash equivalents of $3.0 billion, of
which approximately 38% was held by our foreign subsidiaries. We manage our
worldwide cash requirements by reviewing available funds and the cost
effectiveness with which we can access funds held by foreign subsidiaries. On
occasion, we are required to maintain cash deposits in connection
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with contractual obligations related to acquisitions, disposals or other legal obligations. From September 30, 2022 and December 31, 2021the amount of such restricted cash was approximately $6 million and $39 millionrespectively.

We maintain a $2.0 billion unsecured, unsubordinated commercial paper program
which can be used for general corporate purposes, including working capital and
potential acquisitions. In addition, we maintain our $2.0 billion Revolving
Credit Facility that matures on April 3, 2025 which supports our commercial
paper borrowing program and cash requirements. The Revolving Credit Facility has
a commitment fee of 0.125% that is charged on unused commitments. Borrowings
under the Revolving Credit Facility are available in U.S. Dollars, Euros and
Pounds Sterling and bear interest at a variable interest rate plus a
ratings-based margin, which was 125 basis points as of September 30, 2022. As of
September 30, 2022, we had no borrowings outstanding under our commercial paper
program and our Revolving Credit Facility.

We continue to actively manage and strengthen our business portfolio to meet the
current and future needs of our customers. This is accomplished through research
and development activities with a focus on new product development and new
technology innovation as well as sustaining activities with a focus on improving
existing products and reducing production costs. We also pursue potential
acquisitions to complement existing products and services to enhance our product
portfolio. In addition, we routinely conduct discussions, evaluate targets and
enter into agreements regarding possible acquisitions, divestitures, joint
ventures and equity investments to manage our business portfolio.

We believe that our available cash and operating cash flows will be sufficient
to meet our future operating cash needs. Our committed credit facilities and
access to the debt and equity markets provide additional sources of short-term
and long-term capital to fund current operations, debt maturities and future
investment opportunities. Although we believe that the arrangements currently in
place permit us to finance our operations on acceptable terms and conditions,
our access to and the availability of financing on acceptable terms and
conditions in the future will be impacted by many factors, including: (1) our
credit ratings or absence of credit ratings, (2) the liquidity of the overall
capital markets and (3) the state of the economy, including the impact of the
COVID-19 pandemic. There can be no assurance that we will be able to obtain
additional financing on terms favorable to us, if at all.

The Revolving Credit Facility and the indentures for the long-term notes contain
affirmative and negative covenants customary for financings of these types,
which among other things, limit our ability to incur additional liens, to make
certain fundamental changes and to enter into sale and leaseback transactions.
As of September 30, 2022, we were in compliance with the covenants under the
agreements governing our outstanding indebtedness.

The following table presents our credit ratings and outlook as of September 30,
2022:
Rating Agency                                 Long-term Rating (1)                Short-term Rating                  Outlook (2)
Standards & Poor's ("S&P")                            BBB                                A2                           Positive
Moody's Investor Services, Inc.
("Moody's")                                           Baa3                               P3                            Stable
Fitch Ratings ("Fitch")                               BBB-                               F3                            Stable

(1) S&P’s long-term rating was confirmed on May 14, 2021and for Moody’s on March 30, 2022. Fitch’s long-term rating was confirmed on June 3, 2021. (2) S&P revised its outlook from stable to positive May 20, 2022.

The following table contains several key measures of our financial condition and
liquidity:

                                                                        September 30,          December 31,
(In millions)                                                                2022                  2021
Cash and cash equivalents                                              $       2,985          $      2,987
Total debt                                                             $       8,889          $      9,696
Total equity                                                           $       7,463          $      7,094

Net debt (total debt less cash and cash equivalents)                   $       5,904          $      6,709
Total capitalization (total debt plus total equity)                    $    

16,352 $16,790
Net capitalization (total debt plus total equity less cash and cash equivalents)

                                                      $      13,367          $     13,803
Total debt to total capitalization                                                54  %                 58  %
Net debt to net capitalization                                                    44  %                 49  %


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Loans and lines of credit

Our short-term obligations primarily consist of current maturities of long-term
debt. Our long-term obligations primarily consist of long-term notes with
maturity dates ranging between 2025 and 2050. Interest payments related to
long-term Notes are expected to approximate $247 million per year, reflecting an
approximate weighted-average interest rate of 2.95%. Any borrowings from the
Revolving Credit Facility are subject to variable interest rates. See Note 5 -
Borrowings and Lines of Credit in the Notes to the accompanying Unaudited
Condensed Consolidated Financial Statements for additional information regarding
the terms of our long-term debt obligations.

On March 15, 2022, we commenced tender offers to repurchase up to $1.15 billion
aggregate principal of our 2.242% Notes due 2025 and 2.493% Notes due 2027. The
tender offers included payment of applicable accrued and unpaid interest up to
the settlement date, along with a fixed spread for early repayment. Based on
participation, we elected to settle the tender offers on March 30, 2022. The
aggregate principal amount of Senior Notes validly tendered and accepted was
approximately $1.15 billion and included $800 million of Notes due 2025 and $350
million of Notes due 2027. Upon settlement, we recognized a net gain of $33
million and wrote off $5 million of unamortized deferred financing costs during
the three months ended March 31, 2022.

On July 15, 2022, we entered into a five-year, JPY 54 billion (approximately
$400 million) Japanese Term Loan Facility. Borrowings bear interest at a rate
equal to the Tokyo Term Risk Free Rate plus 0.75%. In addition, it is subject to
customary covenants including a covenant to maintain a maximum consolidated
leverage ratio. On July 25, 2022, we borrowed JPY 54 billion under the Japanese
Term Loan Facility and used the proceeds to fund a portion of the TCC
acquisition and to pay related fees and expenses.

Acquisitions and disposals

On January 3, 2022, we completed the Chubb Sale for net proceeds of $2.9
billion. Consistent with our capital allocation strategy, the net proceeds will
be used to fund investments in organic and inorganic growth initiatives and
capital returns to shareowners as well as for general corporate purposes. The
sale agreement included several customary provisions to settle working capital
and other transaction-related items as of the date of sale. During the three
months ended September 30, 2022, the parties finalized these amounts in
accordance with the terms of the sale agreement. See Note 16 - Divestitures for
additional information.

On February 6, 2022, we entered into a binding agreement to acquire a majority
ownership interest in TCC for $891 million. The transaction was completed on
August 1, 2022, subject to customary closing conditions and funded through the
Japanese Term Loan Facility as well as with cash on hand. Upon closing, Toshiba
Corporation retained a 5% ownership interest in TCC. In addition, during the
nine months ended September 30, 2022, we acquired other consolidated businesses
and minority-owned businesses. The aggregate cash paid for acquisitions, net of
cash acquired, totaled $43 million and was funded through cash on hand. See Note
15 - Acquisitions for additional information.

Share buyback program

We may purchase our outstanding common stock from time to time subject to market
conditions and at our discretion in the open market or through one or more other
public or private transactions and subject to compliance with our obligations
under certain tax agreements. In July 2021, our Board of Directors approved a
$1.75 billion increase to our existing $350 million share repurchase program
authorizing the repurchase of up to $2.1 billion of our outstanding common
stock. During the nine months ended September 30, 2022, we repurchased 28.9
million shares of our common stock for an aggregate purchase price of $1.3
billion, which includes shares repurchased under the ASR Agreement. As of
September 30, 2022, we have approximately $309 million remaining under the
current authorization. In October 2022, our Board of Directors approved a $2.0
billion increase to our existing share repurchase program.

Dividends

We paid dividends on common stock during the nine months ended September 30,
2022, totaling $384 million. In October 2022, the Board of Directors declared a
dividend of $0.15 per share of common stock payable on November 21, 2022 to
shareowners of record at the close of business on October 28, 2022.

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