Carrier Global CARR · USD

SEGMENT FINANCIAL DATAThe Company conducts its operations through four reportable operating segments. In accordance with ASC 280 - Segment Reporting, the Company's segments maintain separate financial information for which results of operations are evaluated on a regular basis by the Company's CODM in deciding how to allocate resources and in assessing performance.•Climate Solutions Americas ("CSA") provides products, controls, services and solutions to meet the heating, cooling and ventilation needs of residential and commercial customers in North and South America while enhancing building performance, health, energy efficiency and sustainability.•Climate Solutions Europe ("CSE") provides products, controls, services and solutions to meet the heating, cooling and ventilation needs of residential and commercial customers in Europe while enhancing building performance, health, energy efficiency and sustainability.•Climate Solutions Asia Pacific, Middle East & Africa ("CSAME") provides products, controls, services and solutions to meet the heating, cooling and ventilation needs of residential and commercial customers in Asia Pacific, the Middle East and Africa while enhancing building performance, health, energy efficiency and sustainability.•Climate Solutions Transportation ("CST") includes global transport refrigeration and monitoring products, services and digital solutions for trucks, trailers, shipping containers, intermodal and rail.The Corporate and other category primarily includes corporate administrative functions such as tax, treasury, internal audit, legal and human resources. A portion of these costs and costs associated with shared service centers that provide transaction processing, accounting and other business support functions are allocated to the reportable segments.Segment operating profit is the measure of profit and loss that the Company’s CODM, the Chief Executive Officer (“CEO”), uses to evaluate the financial performance of the business and as the basis for resource allocation, performance reviews and compensation. It represents operating profit (a GAAP measure) adjusted to exclude restructuring costs, amortization of acquired intangible assets and other significant items of a nonoperational nature. Targets are established on an annual basis and used by the CODM throughout the year to compare with actual results.

REVENUE RECOGNITION The Company accounts for revenue in accordance with ASC 606: Revenue from Contracts with Customers. Revenue is recognized when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. A significant portion of the Company's performance obligations are recognized at a point-in-time when control of the product transfers to the customer, which is generally the time of shipment. The remaining portion of the Company’s performance obligations are recognized over time as the customer simultaneously obtains control as the Company performs work under a contract, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment.Performance ObligationsA performance obligation is a distinct good, service or a bundle of goods and services promised in a contract. Some of the Company's contracts with customers contain a single performance obligation, while others contain multiple performance obligations most commonly when a contract spans multiple phases of a product life-cycle such as production, installation, maintenance and support. The Company identifies performance obligations at the inception of a contract and allocates the transaction price to each distinct performance obligation. Revenue is recognized when or as the performance obligation is satisfied. When there are multiple performance obligations within a contract, the Company allocates the transaction price to each performance obligation based on its relative stand-alone selling price.The Company primarily generates revenue from the sale of products to customers and recognizes revenue at a point in time when control transfers to the customer. Transfer of control is generally based on the shipping terms of the contract. In addition, the Company recognizes revenue on an over-time basis on installation and service contracts. For over-time performance obligations requiring the installation of equipment, revenue is recognized using costs incurred to date relative to total estimated costs at completion to measure progress. Incurred costs represent work performed, which correspond with and best depict transfer of control to the customer.

COMMITMENTS AND CONTINGENT LIABILITIESThe Company is involved in various litigation, claims and administrative proceedings, including those related to environmental (including asbestos) and legal matters. In accordance with ASC 450, Contingencies, the Company records accruals for loss contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These accruals are generally based upon a range of possible outcomes. If no amount within the range is a better estimate than any other, the Company accrues the minimum amount. In addition, these estimates are reviewed periodically and adjusted to reflect additional information when it becomes available. The Company is unable to predict the final outcome of the following matters based on the information currently available, except as otherwise noted. However, the Company does not believe that the resolution of any of these matters will have a material adverse effect upon its results of operations or financial condition.Environmental MattersThe Company’s operations are subject to environmental regulation by various authorities. The Company has accrued for the costs of environmental remediation activities, including but not limited to, investigatory, remediation, operating and maintenance costs and performance guarantees. The most likely cost to be incurred is accrued based on an evaluation of currently available facts with respect to individual sites, including the technology required to remediate, current laws and regulations and prior remediation experience. As of December 31, 2025 and 2024, the outstanding liability for environmental obligations are as follows:(In millions)20252024Environmental reserves included in Accrued liabilities$18 $25 Environmental reserves included in Other long-term liabilities182 185Total environmental reserves$200 $210 For sites with multiple responsible parties, the Company considers its likely proportionate share of the anticipated remediation costs and the ability of other parties to fulfill their obligations in establishing a provision for these costs. Accrued environmental liabilities are not reduced by potential insurance reimbursements and are undiscounted.Asbestos MattersThe Company has been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos allegedly integrated into certain Carrier products or business premises.

INCOME TAXES Income Before Income Taxes The sources of Income from operations before income taxes are as follows:(In millions)202520242023United States$1,536 $1,948 $1,398 Foreign262 326 601 Total$1,798 $2,274 $1,999 Provision for Income TaxesThe income tax expense (benefit) consisted of the following components:(In millions)202520242023Current:United States:Federal $218 $920 $361 State86 120 110 Foreign337 374 293 641 1,414 764 Future:United States:Federal(28)(90)(135)State(10)(13)(28)Foreign(363)(249)(80)(401)(352)(243)Income tax expense$240 $1,062 $521 Reconciliation of Effective Income Tax RateUpon adoption of ASU 2023-09, the reconciliation of taxes at the statutory U.S. federal income tax rate to the Company's effective income tax rate is as follows:(In millions)2025Statutory U.S. federal income tax rate$377 21.0 %State income tax, net of federal income tax effect60 3.4 Foreign tax effects:CanadaStatutory tax rate difference(3)(0.2)Local tax, net of national income tax effect9 0.5 All Other3 0.2 ChinaStatutory tax rate difference4 0.2 Changes in valuation allowance19 1.1 All Other6 0.3 FranceStatutory tax rate difference9 0.5 Changes in valuation allowance(1)(0.1)GermanyStatutory tax rate difference58 3.2 Local tax, net of national income tax effect(78)(4.3)Enactment of new tax laws(130)(7.2)All Other(9)(0.5)IrelandStatutory tax rate difference(13)(0.7)All Other7 0.4 MexicoStatutory tax rate difference10 0.5 All Other12 0.7 Other foreign jurisdictions(1)(0.1)Effect of cross-border tax laws:U.S. tax on outside basis(64)(3.6)Net CFC tested income14 0.8 U.S. tax on deemed dividends(6)(0.4)Foreign tax credits(21)(1.2)Tax credits:R&D tax credits(13)(0.7)Other tax credits(17)(0.9)Changes in valuation allowances65 3.6 Nontaxable or nondeductible items:Equity income from joint ventures(21)(1.2)Stock options(11)(0.6)Other12 0.7 Changes in unrecognized tax benefits4 0.2 All OtherRe-organization tax benefit(43)(2.4)Other2 0.2 Effective income tax rate$240 13.4 %The most significant jurisdictions that comprise the U.S. state income tax, net of federal income tax benefit are Florida, California, New Jersey, Illinois, Georgia, Pennsylvania, New York, and Texas.The differences between the effective income tax rate and the statutory U.S. federal income tax rate, prior to adoption of ASU 2023-09, are as follows:20242023Statutory U.S. federal income tax rate21.0 %21.0 %State income tax2.4 2.4 Taxes on international activities(0.2)4.9 CCR divestiture impact(2.

STOCK-BASED COMPENSATIONThe 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 and performance share units. Stock Options and Appreciation RightsEligible participants may receive stock options or stock appreciation rights as part of the Company's long-term incentive program. The fair value of each instrument is determined as of the date of grant using a binomial lattice model and expensed on a straight-line basis over the required service period, which is generally a three-year vesting period. However, in the event of retirement, awards held for at least one year may vest and become exercisable (if applicable), subject to certain terms and conditions. The following table summarizes fair value information for stock options and stock appreciation rights:2025 (1)2024 (1)2023 (1)Stock options and stock appreciation rights weighted-average fair value per award$17.79 $14.84 $11.64 Assumptions:Volatility31.2% to 33.4%30.6% to 31.7%30.9%Expected term (in years)5.65.6 to 7.85.8Expected dividend yield1.3%1.8%1.8%Range of risk-free rates3.7% to 4.3%4.0% to 4.3%3.6%(1) Carrier has limited historical trading data and used peer group data to estimate expected volatility for the 2025, 2024 and 2023 awards.The Company used historical employee data, including data prior to the Separation and the Distribution, to estimate expected term. The expected dividend yield is consistent with management's expectations. The risk-free rate is based on the term structure of interest rates at the time the awards were granted. Changes in stock options and stock appreciation rights outstanding were as follows: Shares Subject to Option(in thousands)Weighted-Average Exercise PriceAggregate Intrinsic Value (in millions)Weighted- Average Remaining Life (in years)As of December 31, 202230,778 $24.53 Granted 3,494 $46.13 Exercised(8,432)$20.48 Cancelled(769)$42.94 As of December 31, 202325,071 $28.34 Granted4,187 $56.46 Exercised(8,041)$23.21 Cancelled(430)$50.77 As of December 31, 202420,787 $35.52 Granted2,072 $64.99 Exercised(2,785)$26.20 Cancelled(724)$54.40 Outstanding as of December 31, 202519,350 $39.31 $299 5.

LEASES The Company enters into operating and finance leases for the use of real estate, vehicles, information technology equipment and certain other equipment. At contract inception, the Company determines a lease exists if the arrangement conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset as well as the right to direct the use of that asset. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments with an offsetting entry to recognize a right-of-use asset.Operating lease right-of-use assets and liabilities are reflected on the Consolidated Balance Sheet as follows:(In millions)20252024Operating lease right-of-use assets$546 $554 Accrued liabilities$(142)$(135)Operating lease liabilities(418)(432)Total operating lease liabilities$(560)$(567)Weighted-Average Remaining Lease Term (in years)6.46.8Weighted-Average Discount Rate4.6 %4.5 %Where applicable, the Company accounts for each separate lease component of a contract and its associated non-lease component as a single lease component.Supplemental cash flow and lease expense information related to operating leases were as follows:(In millions)202520242023Operating cash flows for measurement of operating lease liabilities$179 $173 $135 Operating lease ROU assets obtained in exchange for operating lease obligations$100 $112 $50 Operating lease expense$184 $175 $127 Operating lease expense is recognized on a straight-line basis over the lease term. In addition, the Company has certain leases that contain variable lease payments which are based on an index, a rate referenced in the lease or on the actual usage of the leased asset. These payments are not included in the right-of-use asset or lease liability and are expensed as incurred as variable lease expense.

ACQUISITIONSDuring the year ended December 31, 2025, the Company acquired consolidated and minority-owned businesses. The aggregate cash paid, net of cash acquired, totaled $107 million. Acquisitions are recorded using the acquisition method of accounting in accordance with ASC 805. As a result, the aggregate purchase price has been allocated to assets acquired and liabilities assumed based on the estimate of fair market value of such assets and liabilities at the date of acquisition. The excess purchase price over the estimated fair value of net assets acquired is recognized as goodwill.Viessmann Climate SolutionsOn January 2, 2024, the Company completed the acquisition of the VCS Business from Viessmann for total consideration of $14.2 billion. The purchase price consisted of (i) $11.2 billion in cash and (ii) 58,608,959 shares of the Company's common stock, subject to certain lock-up provisions and anti-dilution protection. The Company funded the cash portion of the purchase price with a combination of cash on hand and proceeds from various borrowing facilities.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 Company believes that secular trends in these areas will drive significant, sustained future growth. In addition, the Company anticipates realizing significant operational synergies including savings through supplier rationalization and leverage, reduced manufacturing costs and lower general and administrative costs. Longer term, the Company expects to benefit from synergies related to service revenue expansion, leverage of distribution channels and cross-selling opportunities.The components of the purchase price are as follows:(In millions)January 2, 2024Cash$11,156 Common shares (58,608,959 shares at $51.

Impact of cybersecurity risks on business strategy, results of operations or financial condition.As discussed under the “Risk Factors” heading in this Annual Report, our business has been and may again in the future be impacted by disruptions to our Technology infrastructure or our third-party providers’ Technology infrastructures from (among other causes) cybersecurity-based risks, including attacks (i) on our Technology infrastructure (ii) targeting the security, integrity and/or availability of hardware and software; (iii) exploiting weaknesses or vulnerabilities in products, or capturing information installed, stored or transmitted in our products (including after the purchase of those products and when they are installed into third-party products); and (iv) on facilities or similar infrastructure. Risk Management and strategyWe mitigate cybersecurity risks (and other material risks) through our enterprise risk management (“ERM”) program, which is a company-wide effort, managed by senior executives and overseen by our Audit Committee and Board of Directors to identify, assess, manage, report and monitor material risks that may affect our ability to achieve our business objectives. In connection with the ERM process, cybersecurity risks, including those relating to risks posed by our use of third-party service providers, are assigned to cross-functional management committees responsible for identifying and classifying the cybersecurity risks in accordance with our ERM risk rating methodology, and developing and administering risk mitigation and incident response plans. These cross-functional management committees regularly meet to review current and emerging cybersecurity risks and maintain policies and procedures governing the evaluation and classification of such risks. Cybersecurity risks deemed to be critical are reviewed by a Critical Threat Committee, which is comprised of members of our senior leadership team including our Executive Vice President, Chief Financial & Strategy Officer; Senior Vice President, Chief Legal Officer; Senior Vice President, Chief Digital Officer; Senior Vice President, Operations; Senior Vice President, Engineering; and Vice President, Controller & Chief Accounting Officer. The Critical Threat Committee reviews the risk and mitigation plan with the applicable cross-functional management team and facilitates notification to the Audit Committee of emerging critical cybersecurity risks.