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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
 ____________________________________ 
FORM 10-Q
____________________________________ 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 001-39220
____________________________________ 
CARRIER GLOBAL CORPORATION
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware 83-4051582
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
13995 Pasteur Boulevard, Palm Beach Gardens, Florida 33418
(Address of principal executive offices, including zip code)
(561) 365-2000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock ($0.01 par value)CARRNew York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No   
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting companyEmerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of October 16, 2023, there were 839,046,579 shares of Common Stock outstanding.
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CARRIER GLOBAL CORPORATION
CONTENTS OF QUARTERLY REPORT ON FORM 10-Q
Three and Nine Months Ended September 30, 2023
Page

Carrier Global Corporation and its subsidiaries' names, abbreviations thereof, logos and product and service designators are all either the registered or unregistered trademarks or trade names of Carrier Global Corporation and its subsidiaries. Names, abbreviations of names, logos and products and service designators of other companies are either the registered or unregistered trademarks or trade names of their respective owners. As used herein, the terms "we," "us," "our," "the Company" or "Carrier," unless the context otherwise requires, mean Carrier Global Corporation and its subsidiaries. References to internet websites in this Form 10-Q are provided for convenience only. Information available through these websites is not incorporated by reference into this Form 10-Q.








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PART I – FINANCIAL INFORMATION
Item 1.    Financial Statements

CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

 Three Months Ended September 30,Nine Months Ended September 30,
(In millions, except per share amounts)2023202220232022
Net sales
Product sales$5,081 $4,891 $15,122 $13,723 
Service sales650 560 1,874 1,593 
Total Net sales5,731 5,451 16,996 15,316 
Costs and expenses
Cost of products sold(3,428)(3,569)(10,655)(9,930)
Cost of services sold(487)(405)(1,392)(1,169)
Research and development(157)(143)(447)(390)
Selling, general and administrative(831)(624)(2,336)(1,839)
Total Costs and expenses(4,903)(4,741)(14,830)(13,328)
Equity method investment net earnings75 63 171 222 
Other income (expense), net(258)753 (648)1,872 
Operating profit645 1,526 1,689 4,082 
Non-service pension (expense) benefit   (2)
Interest (expense) income, net(51)(56)(164)(165)
Income from operations before income taxes594 1,470 1,525 3,915 
Income tax (expense) benefit(213)(138)(524)(609)
Net income from operations381 1,332 1,001 3,306 
Less: Non-controlling interest in subsidiaries' earnings from operations24 20 72 42 
Net income attributable to common shareowners$357 $1,312 $929 $3,264 
Earnings per share
Basic$0.43 $1.56 $1.11 $3.86 
Diluted $0.42 $1.53 $1.09 $3.78 
Weighted-average number of shares outstanding
Basic838.7 839.6 836.6 846.1 
Diluted854.7 856.5 852.7 864.3 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2023202220232022
Net income from operations$381 $1,332 $1,001 $3,306 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments arising during period(246)(645)(255)(1,195)
Pension and post-retirement benefit plan adjustments 2  2 
Unrealized cash flow hedging gain (loss) arising during period80  80  
Chubb divestiture   (245)
Other comprehensive income (loss), net of tax(166)(643)(175)(1,438)
Comprehensive income (loss)215 689 826 1,868 
Less: Comprehensive income (loss) attributable to non-controlling interest23 7 65 20 
Comprehensive income (loss) attributable to common shareowners$192 $682 $761 $1,848 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.

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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
As of
(In millions)September 30,
2023
December 31,
2022
Assets
Cash and cash equivalents$3,902 $3,520 
Accounts receivable, net3,030 2,833 
Contract assets, current605 537 
Inventories, net2,562 2,640 
Other assets, current412 349 
Total current assets10,511 9,879 
Future income tax benefits712 612 
Fixed assets, net2,210 2,241 
Operating lease right-of-use assets577 642 
Intangible assets, net1,100 1,342 
Goodwill9,825 9,977 
Pension and post-retirement assets29 26 
Equity method investments1,166 1,148 
Other assets414 219 
Total Assets$26,544 $26,086 
Liabilities and Equity
Accounts payable$2,887 $2,833 
Accrued liabilities2,832 2,610 
Contract liabilities, current496 449 
Current portion of long-term debt134 140 
Total current liabilities6,349 6,032 
Long-term debt8,651 8,702 
Future pension and post-retirement obligations337 349 
Future income tax obligations553 568 
Operating lease liabilities465 529 
Other long-term liabilities1,687 1,830 
Total Liabilities18,042 18,010 
Commitments and contingent liabilities (Note 19)
Equity
Common stock9 9 
Treasury stock(1,972)(1,910)
Additional paid-in capital5,517 5,481 
Retained earnings6,486 5,866 
Accumulated other comprehensive loss(1,856)(1,688)
Non-controlling interest318 318 
Total Equity8,502 8,076 
Total Liabilities and Equity$26,544 $26,086 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)

(In millions)Accumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2022$(1,688)$9 $(1,910)$5,481 $5,866 $318 $8,076 
Net income— — — — 373 14 387 
Other comprehensive income (loss), net of tax52 — — — — 2 54 
Shares issued under incentive plans, net— — — (9)— — (9)
Stock-based compensation— — — 22 — — 22 
Treasury stock repurchase— — (62)— — — (62)
Balance as of March 31, 2023$(1,636)$9 $(1,972)$5,494 $6,239 $334 $8,468 
Net income19934233
Other comprehensive income (loss), net of tax(55)(8)(63)
Dividends declared on common stock (1)
(309)(309)
Shares issued under incentive plans, net(18)(18)
Stock-based compensation18 18
Dividends attributable to non-controlling interest(41)(41)
Balance as of June 30, 2023$(1,691)$9 $(1,972)$5,494 $6,129 $319 $8,288 
Net income— — — — 357 24 381 
Other comprehensive income (loss), net of tax(165)— — — — (1)(166)
Stock-based compensation— — — 23 — — 23 
Dividends attributable to non-controlling interest— — — — — (2)(2)
Sale of non-controlling interest— — — — — (22)(22)
Balance as of September 30, 2023$(1,856)$9 $(1,972)$5,517 $6,486 $318 $8,502 
(1) Cash dividends declared were $0.37 per share for the three months ended June 30, 2023.
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
(Unaudited)
(In millions)Accumulated Other Comprehensive Income (Loss)Common StockTreasury StockAdditional Paid-In CapitalRetained EarningsNon-Controlling InterestTotal Equity
Balance as of December 31, 2021$(989)$9 $(529)$5,411 $2,865 $327 $7,094 
Net income— — — — 1,379 8 1,387 
Other comprehensive income (loss), net of tax(308)— — — — — (308)
Shares issued under incentive plans, net— — — (17)— — (17)
Stock-based compensation— — — 21 — — 21 
Dividends attributable to non-controlling interest— — — — — (1)(1)
Sale of non-controlling interest— — — — — (5)(5)
Treasury stock repurchase— — (741)— — — (741)
Balance as of March 31, 2022$(1,297)$9 $(1,270)$5,415 $4,244 $329 $7,430 
Net income— — — — 573 14 587 
Other comprehensive income (loss), net of tax(478)— — — — (9)(487)
Dividends declared on common stock (1)
— — — — (253)— (253)
Conversion of cash settled awards— — — 6 — — 6 
Stock-based compensation— — — 20 — — 20 
Dividends attributable to non-controlling interest— — — — — (38)(38)
Treasury stock repurchase— — (273)— — — (273)
Balance as of June 30, 2022$(1,775)$9 $(1,543)$5,441 $4,564 $296 $6,992 
Net income— — — — 1,312 20 1,332 
Other comprehensive income (loss), net of tax(630)— — — — (13)(643)
Stock-based compensation— — — 17 — — 17 
Dividends attributable to non-controlling interest— — — — — (1)(1)
Acquisition of non-controlling interest— — — 5 — 22 27 
Sale of non-controlling interest— — — — — (13)(13)
Treasury stock repurchase— — (248)— — — (248)
Balance as of September 30, 2022$(2,405)$9 $(1,791)$5,463 $5,876 $311 $7,463 
(1) Cash dividends declared were $0.30 per share for the three months ended June 30, 2022.

The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 Nine Months Ended September 30,
(In millions)20232022
Operating Activities
Net income from operations$1,001 $3,306 
Adjustments to reconcile net income to net cash flows from operating activities:
Depreciation and amortization407 257 
Deferred income tax provision(151)(107)
Stock-based compensation costs63 58 
Equity method investment net earnings(171)(222)
(Gain) loss on extinguishment of debt (36)
(Gain) loss on sale of investments / deconsolidation278 (1,844)
Changes in operating assets and liabilities
Accounts receivable, net(297)(433)
Contract assets, current(74)(201)
Inventories, net7 (492)
Other assets, current(75)(3)
Accounts payable and accrued liabilities491 180 
Contract liabilities, current55 34 
Defined benefit plan contributions(17)(10)
Distributions from equity method investments45 55 
Other operating activities, net(17)78 
Net cash flows provided by (used in) operating activities1,545 620 
Investing Activities
Capital expenditures(236)(213)
Investment in businesses, net of cash acquired(69)(472)
Dispositions of businesses54 2,944 
Settlement of derivative contracts, net(66)(202)
Kidde-Fenwal, Inc. deconsolidation(134) 
Other investing activities, net20 (12)
Net cash flows provided by (used in) investing activities(431)2,045 
Financing Activities
Increase (decrease) in short-term borrowings, net(35)(125)
Issuance of long-term debt14 421 
Repayment of long-term debt(15)(1,185)
Repurchases of common stock(62)(1,261)
Dividends paid on common stock(465)(384)
Dividends paid to non-controlling interest(46)(22)
Other financing activities, net(79)(28)
Net cash flows provided by (used in) financing activities(688)(2,584)
Effect of foreign exchange rate changes on cash and cash equivalents(45)(115)
Net increase (decrease) in cash and cash equivalents and restricted cash381 (34)
Cash, cash equivalents and restricted cash, beginning of period3,527 3,025 
Cash, cash equivalents and restricted cash, end of period3,908 2,991 
Less: restricted cash6 6 
Cash and cash equivalents, end of period$3,902 $2,985 
The accompanying notes are an integral part of the Unaudited Condensed Consolidated Financial Statements.
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CARRIER GLOBAL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1: DESCRIPTION OF THE BUSINESS

Carrier Global Corporation (the "Company") is a global leader in intelligent climate and energy solutions with a focus on providing differentiated, digitally-enabled lifecycle solutions to its customers. The Company's portfolio includes industry-leading brands such as Carrier, Toshiba, Automated Logic, Carrier Transicold, Kidde, Edwards and LenelS2 that offer innovative heating, ventilating, air conditioning ("HVAC"), refrigeration, fire, security and building automation technologies to help make the world safer and more comfortable. The Company also provides a broad array of related building services, including audit, design, installation, system integration, repair, maintenance and monitoring. The Company's operations are classified into three segments: HVAC, Refrigeration and Fire & Security.

In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements contain all adjustments (which include normal recurring adjustments) necessary to state fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (the "SEC"). The accompanying Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's Annual Report on Form 10-K for 2022 filed with the SEC on February 7, 2023 (the "2022 Form 10-K").

NOTE 2: BASIS OF PRESENTATION

The Unaudited Condensed Consolidated Financial Statements include all accounts of the Company and its wholly-owned and majority-owned subsidiaries in which it has control. Inter-company accounts and transactions have been eliminated. Related party transactions between the Company and its equity method investees have not been eliminated. Non-controlling interest represents a non-controlling investor's interests in the results of subsidiaries that the Company controls and consolidates.

Planned Portfolio Transformation

On April 25, 2023, the Company announced that it entered into a Share Purchase Agreement (the “Agreement”) to acquire the climate solutions business (the "VCS Business") of Viessmann Group GmbH & Co. KG (“Viessmann”), a privately-held company, for approximately €12 billion. The VCS Business develops intelligent, integrated and sustainable technologies, including heat pumps, boilers, photovoltaic systems, home battery storage and digital solutions, primarily for residential customers in Europe. The transaction is expected to close around the end of 2023, subject to customary closing conditions and regulatory approvals. In addition, the Company also announced plans to exit its Fire & Security and Commercial Refrigeration businesses over the course of 2024. See Note 15 Acquisitions and Note 16 - Divestitures for additional information.

Deconsolidation of Kidde-Fenwal, Inc.

On May 14, 2023, Kidde-Fenwal, Inc. ("KFI"), an indirect wholly-owned subsidiary of the Company, filed a petition for voluntary reorganization under Chapter 11 of the United States Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for the District of Delaware. KFI, an industrial fire detection and suppression business historically reported in the Company's Fire & Security segment, has indicated that it intends to use the bankruptcy process to explore strategic alternatives, including the sale of KFI as a going concern. KFI has further stated that, during the Chapter 11 process, KFI expects that there will be no significant interruptions to its business operations. As of the petition date, KFI was deconsolidated and its respective assets and liabilities were derecognized from the Company's Unaudited Condensed Consolidated Financial Statements. See Note 19 - Commitments and Contingent Liabilities for additional information.

Acquisition of Toshiba Carrier Corporation

On February 6, 2022, the Company entered into a binding agreement to acquire a majority ownership interest in Toshiba Carrier Corporation (“TCC”), a variable refrigerant flow ("VRF") and light commercial HVAC joint venture between Carrier and Toshiba Corporation. The acquisition was completed on August 1, 2022. 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
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date of acquisition and reported within the Company’s HVAC segment. Upon closing, Toshiba Corporation retained a 5% ownership interest in TCC. See Note 15 Acquisitions for additional information.

Sale of Chubb Fire & Security Business

On July 26, 2021, the Company entered into a stock purchase agreement to sell its Chubb Fire and Security business ("Chubb") to APi Group Corporation ("APi"). Chubb, which was reported within the Company’s 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. The sale of Chubb was completed on January 3, 2022 (the "Chubb Sale"). See Note 16 - Divestitures for additional information.

Separation from United Technologies

On April 3, 2020 (the Distribution Date"), United Technologies Corporation ("UTC"), since renamed RTX Corporation ("Raytheon Technologies Corporation" or "RTX"), completed the spin-off of Carrier into an independent, publicly traded company (the "Separation") through a pro-rata distribution (the "Distribution") on a one-for-one basis of all of the outstanding shares of common stock of Carrier to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020, the record date of the Distribution. In connection with the Separation, the Company issued an aggregate principal balance of $11.0 billion of debt and transferred approximately $10.9 billion of cash to UTC on February 27, 2020 and March 27, 2020. On April 1, 2020 and April 2, 2020, the Company received cash contributions totaling $590 million from UTC related to the Separation.

Recently Issued and Adopted Accounting Pronouncements

The Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") is the sole source of authoritative U.S. GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues Accounting Standards Updates ("ASU") to communicate changes to the codification. The Company considers the applicability and impact of all ASUs. ASUs pending adoption were assessed and determined to be either not applicable or are not expected to have a material impact on the accompanying Unaudited Condensed Consolidated Financial Statements.

NOTE 3: INVENTORIES, NET

Inventories are stated at the lower of cost or estimated net realizable value. Cost is primarily determined based on the first-in, first-out inventory method ("FIFO") or average cost methods, which approximates current replacement cost. However, certain subsidiaries use the last-in, first-out inventory method ("LIFO").

Inventories, net consisted of the following:
(In millions)September 30,
2023
December 31,
2022
Raw materials$782 $884 
Work-in-process260 230 
Finished goods1,520 1,526 
Inventories, net$2,562 $2,640 

The Company performs periodic assessments utilizing customer demand, production requirements and historical usage rates to determine the existence of excess and obsolete inventory and records necessary provisions to reduce such inventories to the lower of cost or estimated net realizable value. Raw materials, work-in-process and finished goods are net of valuation reserves of $230 million and $190 million as of September 30, 2023 and December 31, 2022, respectively.

NOTE 4: GOODWILL AND INTANGIBLE ASSETS

The Company records goodwill as the excess of the purchase price over the fair value of the net assets acquired in a business combination. Goodwill is tested and reviewed annually for impairment on July 1 or whenever there is a material change in events or circumstances that indicates that the fair value of the reporting unit may be less than its carrying value.

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The changes in the carrying amount of goodwill were as follows:

(In millions)HVACRefrigerationFire & SecurityTotal
Balance as of December 31, 2022$6,392 $1,197 $2,388 $9,977 
Acquisitions / divestitures (4) (4)
Foreign currency translation(91)(16)(41)(148)
Balance as of September 30, 2023$6,301 $1,177 $2,347 $9,825 

Indefinite-lived intangible assets are tested and reviewed annually for impairment on July 1 or whenever there is a material change in events or circumstances that indicates that the fair value of the asset may be less than the carrying amount of the asset. All other intangible assets with finite useful lives are amortized over their estimated useful lives.

Identifiable intangible assets consisted of the following:

September 30, 2023December 31, 2022
(In millions)Gross AmountAccumulated AmortizationNet AmountGross AmountAccumulated AmortizationNet Amount
Amortized:
Customer relationships$1,387 $(766)$621 $1,431 $(720)$711 
Patents and trademarks375 (201)174 401 (191)210 
Service portfolios and other915 (674)241 953 (595)358 
2,677 (1,641)1,036 2,785 (1,506)1,279 
Unamortized:
Trademarks and other64 — 64 63 — 63 
Intangible assets, net$2,741 $(1,641)$1,100 $2,848 $(1,506)$1,342 

Amortization of intangible assets was as follows:

 Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2023202220232022
Amortization expense of Intangible assets$60 $38 $185 $79 

Annual Impairment Test

The Company tested its goodwill and indefinite-lived intangible assets for impairment on July 1 as part of its annual assessment. For each test, the Company qualitatively assessed all relevant events or circumstances that could impact the estimate of fair value and determined it was more likely than not that the fair value of each reporting unit and indefinite-lived intangible assets exceeded their carrying amount.
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NOTE 5: BORROWINGS AND LINES OF CREDIT

Long-term debt consisted of the following:

(In millions)September 30,
2023
December 31,
2022
2.242% Notes due February 15, 2025
$1,200 $1,200 
2.493% Notes due February 15, 2027
900 900 
2.722% Notes due February 15, 2030
2,000 2,000 
2.700% Notes due February 15, 2031
750 750 
3.377% Notes due April 5, 2040
1,500 1,500 
3.577% Notes due April 5, 2050
2,000 2,000 
Total long-term notes8,350 8,350 
Japanese Term Loan Facility362 404 
Other debt (including project financing obligations and finance leases)154 149 
Discounts and debt issuance costs(81)(61)
Total debt8,785 8,842 
Less: current portion of long-term debt134 140 
Long-term debt, net of current portion$8,651 $8,702 
Japanese Term Loan Facility

On July 15, 2022, the Company entered into a five-year, JPY 54 billion (approximately $400 million) senior unsecured term loan facility with MUFG Bank Ltd., as administrative agent and lender, and certain other lenders (the "Japanese Term Loan Facility"). Borrowings under the Japanese Term Loan Facility bear interest at a rate equal to the Tokyo Term Risk Free Rate plus 0.75%. In addition, the Japanese Term Loan Facility is subject to customary covenants including a covenant to maintain a maximum consolidated leverage ratio. The Company capitalized $2 million of deferred financing costs which are being amortized over its term. On July 25, 2022, the Company 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.

Revolving Credit Facility

On May 19, 2023, the Company entered into a revolving credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, and certain other lenders, permitting aggregate borrowings of up to $2.0 billion pursuant to an unsecured, unsubordinated revolving credit facility that matures in May 2028 (the "Revolving Credit Facility"). The Revolving Credit Facility supports the Company's commercial paper program and can be used for other general corporate purposes. Borrowings are available in U.S. Dollars and Euros. U.S. Dollar borrowings can bear interest at either a Term SOFR Rate plus 0.10% and a ratings-based margin or, alternatively, at an alternate base rate plus a ratings-based margin. Euro borrowings bear interest at an adjusted EURIBOR rate plus a ratings-based margin. A ratings-based commitment fee is charged on unused commitments. Upon entering into the agreement, the Company terminated its existing revolving credit facility that was set to mature in April 2025. In addition, the Company capitalized $2 million of deferred financing costs which are being amortized over its term. As of September 30, 2023, there were no borrowings outstanding under the Revolving Credit Facility.

Commercial Paper Program

The Company has a $2.0 billion unsecured, unsubordinated commercial paper program, which can be used for general corporate purposes, including the funding of working capital and potential acquisitions. As of September 30, 2023, there were no borrowings outstanding under the commercial paper program.

Project Financing Arrangements

The Company is involved in long-term construction contracts in which it arranges project financing with certain customers. As a result, the Company issued $14 million and $27 million of debt during the nine months ended September 30, 2023 and 2022, respectively. Long-term debt repayments associated with these financing arrangements during the nine months ended September 30, 2023 and 2022 were $15 million and $70 million, respectively.
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Debt Covenants

The Revolving Credit Facility, the indenture for the long-term notes and the Japanese Term Loan Facility contain affirmative and negative covenants customary for financings of these types, which, among other things, limit the Company's ability to incur additional liens, to make certain fundamental changes and to enter into sale and leaseback transactions. As of September 30, 2023, the Company was in compliance with the covenants under the agreements governing its outstanding indebtedness.

Tender Offers

On March 15, 2022, the Company commenced tender offers to purchase up to $1.15 billion ("Aggregate Tender Cap") aggregate principal of the Company's 2.242% Notes due 2025 and 2.493% Notes due 2027 (together, the "Senior Notes"). 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, the Company 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, which included $800 million of Notes due 2025 and $350 million of Notes due 2027. As a result, the Company recognized a net gain of $33 million and wrote off $5 million of unamortized deferred financing costs within Interest (expense) income, net on the accompanying Unaudited Condensed Consolidated Statement of Operations during the three months ended March 31, 2022.

NOTE 6: FAIR VALUE MEASUREMENTS

ASC 820, Fair Value Measurement ("ASC 820"), defines fair value as the price that would be received if an asset is sold or the price paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:

Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.

ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors, including foreign currency and commodity price risk. These exposures are managed through operational strategies and the use of undesignated hedging contracts. The Company's derivative assets and liabilities are measured at fair value on a recurring basis using internal models based on observable market inputs, such as forward, interest, contract and discount rates with changes in fair value reported in Other income (expense), net in the accompanying Unaudited Condensed Consolidated Statement of Operations.

In connection with the TCC acquisition, the Company funded a portion of the Yen-denominated purchase price with cash on hand by entering into cross currency swaps with SMBC Capital Markets, Inc., as syndication swap arranger, and certain other financial institutions. The cross currency swaps are measured at fair value on a recurring basis using observable market inputs, such as forward, discount and interest rates as well as credit default swap spreads. The Company designated the cross currency swaps as a partial hedge of its investment in certain subsidiaries whose functional currency is the Japanese Yen in order to manage foreign currency translation risk. As a result, changes in the fair value of the swaps are recorded in Equity in the accompanying Unaudited Condensed Consolidated Balance Sheet.

The remaining portion of the Yen-denominated purchase price was funded by the Japanese Term Loan Facility. The carrying value of the facility is translated on a recurring basis using the exchange rate at the end of the applicable period and approximates its fair value. The Company designated the Japanese Term Loan Facility as a partial hedge of its investment in certain subsidiaries whose functional currency is the Japanese Yen in order to manage foreign currency translation risk. As a result, changes in the carrying value of the Japanese Term Loan Facility associated with foreign exchange rate movements are recorded in Equity in the Unaudited Condensed Consolidated Balance Sheet.

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In connection with the proposed acquisition of the VCS Business, the Company entered into window forward contracts with Bank of America N.A. and JPMorgan Chase Bank N.A. to mitigate the foreign currency risk of the expected cash outflows associated with the Euro-denominated purchase price. The instruments have an aggregate notional amount of €7 billion and a settlement window between November 28, 2023 and February 27, 2024. The window forward contracts are measured at fair value on a recurring basis using observable market inputs, such as forward, discount and interest rates with changes in fair value reported in Other income (expense), net in the accompanying Unaudited Condensed Consolidated Statement of Operations. During the three and nine months ended September 30, 2023, the Company recognized a $257 million and $368 million loss on the mark-to-market valuation of its window forward contracts, respectively.

During the three months ended September 30, 2023, the Company entered into several floating-to-fixed interest rate swap contracts to mitigate interest rate exposure on the forecasted issuance of long-term debt. The contracts have an aggregate notional amount of $1.275 billion and were designated as cash flow hedges. The interest rate swap contracts are measured at fair value on a recurring basis using observable market inputs, such as forward, discount and interest rates with changes in fair value reported in Equity in the accompanying Unaudited Condensed Consolidated Balance Sheet. During the three months ended September 30, 2023, the Company recorded an $80 million unrealized gain on the mark-to-market valuation of its interest rate swap contracts.

The following tables provide the valuation hierarchy classification of assets and liabilities that are recorded at fair value and measured on a recurring basis in the accompanying Unaudited Condensed Consolidated Balance Sheet:

(In millions)TotalLevel 1Level 2Level 3
September 30, 2023
Derivative assets (1)(3)
$116 $ $116 $ 
Derivative liabilities (2)(3)
$(408)$ $(408)$ 
December 31, 2022
Derivative assets (1) (3)
$28 $ $28 $ 
Derivative liabilities (2) (3)
$(48)$ $(48)$ 
(1) Included in Other assets, current and Other assets on the accompanying Unaudited Condensed Consolidated Balance Sheet.
(2) Included in Accrued liabilities and Other long-term liabilities on the accompanying Unaudited Condensed Consolidated Balance Sheet.
(3) Includes cross currency swaps, window forward contracts and interest rate swap contracts.

The following table provides the carrying amounts and fair values of the Company's long-term notes that are not recorded at fair value in the accompanying Unaudited Condensed Consolidated Balance Sheet:

September 30, 2023December 31, 2022
(In millions)Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Total long-term Notes (1)
$8,350 $6,653 $8,350 $6,832 
(1) Excludes debt discount and issuance costs.

The fair value of the Company's long-term debt is measured based on observable market inputs which are considered Level 1 within the fair value hierarchy. The carrying value of cash and cash equivalents, accounts receivable, accounts payable and short-term borrowings approximate fair value due to the short-term nature of these accounts and would be classified as Level 1 in the fair value hierarchy. The Company's financing leases and project financing obligations, included in Long-term debt and Current portion of long-term debt on the accompanying Unaudited Condensed Consolidated Balance Sheet, approximate fair value and are classified as Level 3 in the fair value hierarchy.

NOTE 7: EMPLOYEE BENEFIT PLANS

The Company sponsors both funded and unfunded domestic and international defined benefit pension and defined contribution plans. In addition, the Company contributes to various domestic and international multi-employer pension plans.

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Contributions to the plans were as follows:

 Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2023202220232022
Defined benefit plans$6 $4 $17 $10 
Defined contribution plans$30 $29 $96 $95 
Multi-employer pension plans$3 $5 $11 $11 

The components of net periodic pension expense (benefit) for the defined benefit pension plans are as follows:

 Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2023202220232022
Service cost$4 $5 $12 $14 
Interest cost8 5 24 13 
Expected return on plan assets(8)(7)(24)(20)
Amortization of prior service credit1 1 2 2 
Recognized actuarial net (gain) loss(1)2 (2)7 
Net periodic pension expense (benefit)$4 $6 $12 $16 

NOTE 8: STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation plans in accordance with ASC 718, Compensation - Stock Compensation, which requires a fair-value based method for measuring the value of stock-based compensation. Fair value is measured at the date of grant and is generally not adjusted for subsequent changes. The Company's stock-based compensation plans include programs for stock appreciation rights, restricted stock units and performance share units.

Stock-based compensation expense, net of estimated forfeitures, is included in Cost of products sold, Selling, general and administrative and Research and development in the accompanying Unaudited Condensed Consolidated Statements of Operations.

Stock-based compensation cost by award type was as follows:
 Three Months Ended September 30,Nine Months Ended September 30,
(In millions)2023202220232022
Equity compensation costs - equity settled$23 $17 $63 $58 
Equity compensation costs - cash settled (1)
1 1 3 (16)
Total stock-based compensation expense$24 $18 $66 $42 
(1) The cash settled awards are classified as liability awards and are measured at fair value at each balance sheet date.

NOTE 9: PRODUCT WARRANTIES

In the ordinary course of business, the Company provides standard warranty coverage on its products. Provisions for these amounts are established at the time of sale and estimated primarily based on product warranty terms and historical claims experience. In addition, the Company incurs discretionary costs to service its products in connection with specific product performance issues. Provisions for these amounts are established when they are known and estimable. The Company assesses the adequacy of its initial provisions and will make adjustments as necessary based on known or anticipated claims or as new information becomes available that suggests it is probable that future costs will be different than estimated amounts. Amounts associated with these provisions are classified on the accompanying Unaudited Condensed Consolidated Balance Sheet as Accrued liabilities or Other long-term liabilities based on their anticipated settlement date.

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The changes in the carrying amount of warranty related provisions are as follows:
Nine Months Ended September 30,
(In millions)20232022
Balance as of January 1,$552 $524 
Warranties, performance guarantees issued and changes in estimated liability186 120 
Settlements made(146)(116)
Other(15)9 
Balance as of September 30,$577 $537 

NOTE 10: EQUITY

The authorized number of shares of common stock of Carrier is 4,000,000,000 shares of $0.01 par value. As of September 30, 2023 and December 31, 2022, 882,497,944 and 876,487,480 shares of common stock were issued, respectively, which includes 43,490,981 and 42,103,995 shares of treasury stock, respectively.

Share Repurchase Program

The Company may repurchase its outstanding common stock from time to time subject to market conditions and at the Company's discretion. Repurchases occur in the open market or through one or more other public or private transactions pursuant to plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act. Shares acquired are recognized at cost and presented separately on the balance sheet as a reduction to Equity. Since the initial authorization in February 2021, the Company's Board of Directors authorized the repurchase of up to $4.1 billion of the Company's outstanding common stock. As of December 31, 2022, the Company repurchased 42.1 million shares of common stock for an aggregate purchase price of $1.9 billion, including shares repurchased under an accelerated share repurchase agreement. As a result, the Company had approximately $2.2 billion remaining under the current authorization at December 31, 2022.

During the nine months ended September 30, 2023, the Company repurchased 1.4 million shares of common stock for an aggregate purchase price of $62 million. As a result, the Company has approximately $2.1 billion remaining under the current authorization at September 30, 2023.

Accumulated Other Comprehensive Income (Loss)

A summary of changes in the components of Accumulated other comprehensive income (loss) for the three and nine months ended September 30, 2023 is as follows:
(In millions)Foreign Currency TranslationDefined Benefit Pension and Post-retirement PlansUnrealized Hedging Gains (Losses)Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2022$(1,604)$(84)$ $(1,688)
Other comprehensive income (loss) before reclassifications, net52   52 
Amounts reclassified, pre-tax    
Tax expense (benefit) reclassified    
Balance as of March 31, 2023$(1,552)$(84)$ $(1,636)
Other comprehensive income (loss) before reclassifications, net(55)  (55)
Amounts reclassified, pre-tax    
Tax expense (benefit) reclassified    
Balance as of June 30, 2023$(1,607)$(84)$ $(1,691)
Other comprehensive income (loss) before reclassifications, net(