Carrier Reports Strong 2022 Results and Announces 2023 Outlook
Fourth Quarter 2022 Highlights
- Sales of $5.1 billion, down 1% compared to 2021 including 5% organic growth
- GAAP EPS of $0.32 and adjusted EPS of $0.40
- Net cash flow from operating activities of $1.1 billion and free cash flow of $983 million
Full Year 2022 Highlights
- Sales of $20.4B, down 1% compared to 2021 including 8% organic growth
- GAAP EPS of $4.10 and adjusted EPS of $2.34
- Net cash flow from operating activities of $1.7 billion and free cash flow of $1.4 billion
Outlook for 2023
- Sales of ~$22 billion with low to mid-single-digit organic* growth
- Adjusted operating margin* of ~14%, includes ~50 bps negative impact from TCC
- Adjusted EPS* of $2.50 - $2.60, up high-single to low-double-digits
- Free cash flow* of ~$1.9 billion
PALM BEACH GARDENS, Fla., Feb. 7, 2023 /PRNewswire/ -- Carrier Global Corporation (NYSE: CARR), the leading global provider of healthy, safe, sustainable and intelligent building and cold chain solutions, today reported strong financial results for the fourth quarter and full year of 2022. The company projects continued organic growth in 2023 and is well-positioned with a strong balance sheet with significant capital to deploy towards continued value creation.
"Our fourth quarter results represent the culmination of a year marked by strong execution and innovation. In 2022, we delivered on our organic sales growth, adjusted operating margin expansion and adjusted EPS growth commitments, in line with our value creation framework amidst an uncertain macro environment," said Carrier Chairman & CEO Dave Gitlin. "I am proud of the strategic progress we made in 2022, including the expansion of our global digital platforms for buildings and cold chain solutions, Abound and Lynx, and the significant portfolio actions we took including the divestiture of Chubb and acquisition of Toshiba Carrier Corporation. We will continue to build on our momentum as we enter 2023 with solid backlog levels and a healthy balance sheet. As the leading climate solutions provider, we are well-positioned to fully realize the benefits from the secular trends transforming our industry and planet."
Fourth Quarter 2022 Results
Carrier's fourth quarter sales of $5.1 billion were down 1% compared to the prior year including organic sales growth of 5%, a 4% headwind from currency translation and a 2% net negative impact from acquisitions and divestitures. Sales remained strong in the HVAC segment with 9% organic growth driven by double digit growth in Commercial HVAC, and strong growth in the North America Residential and Light Commercial business. Organic sales were down 7% for the Refrigeration segment due to significant weakness in container and commercial refrigeration which more than offset double-digit growth in global truck and trailer. Fire & Security sales were up 6% organically driven by growth in commercial and industrial fire and access solutions.
GAAP operating profit in the quarter of $433 million was down 6% from the fourth quarter of 2021. Adjusted operating profit of $516 million was down 1%.
Net income and adjusted net income were $270 million and $340 million, respectively. GAAP EPS of $0.32 and adjusted EPS of $0.40 benefitted from a lower share count due to share repurchases offset by a higher year-over-year adjusted effective tax rate. Net cash flows provided by operating activities for the quarter were $1.1 billion and capital expenditures were $140 million, resulting in free cash flow of $983 million.
Full-Year 2022 Results
Carrier's 2022 sales of $20.4 billion decreased 1% compared to the prior year including organic sales growth of 8%, a 3% headwind from currency translation and a 6% net negative impact from acquisitions and divestitures. GAAP operating profit of $4.5 billion increased 71% and adjusted operating profit increased 3% to $2.9 billion. Adjusted operating profit increased despite lower reported sales due to the Chubb divestiture and persistent supply chain challenges. Strong price realization more than offset unprecedented inflation and productivity savings more than offset strategic incremental investments.
GAAP EPS was $4.10 and adjusted EPS was $2.34. Net income was $3.5 billion, and adjusted net income was $2.0 billion. Net cash flows provided by operating activities were $1.7 billion and capital expenditures were $353 million, resulting in free cash flow of $1.4 billion. 2022 capital deployment included a net decrease of about $750 million in our long-term debt, over $500 million in acquisitions, $509 million in dividend payments and the repurchase of almost $1.4 billion of common stock.
Full-Year 2023 Guidance
Carrier will host a webcast of its earnings conference call today, Tuesday, Feb. 7, 2023, at 8 a.m. ET. To access the webcast, visit the Events & Presentations section of the Carrier Investor Relations site at ir.carrier.com/news-and-events/events-and-presentations or to listen to the earnings call by phone, participants must pre-register at Carrier Earnings Call Registration. All registrants will receive dial-in information and a PIN allowing access to the live call.
This communication contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. These forward-looking statements are intended to provide management's current expectations or plans for Carrier's future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "confident," "scenario" and other words of similar meaning in connection with a discussion of future operating or financial performance. Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax rates and other measures of financial performance or potential future plans, strategies or transactions of Carrier, Carrier's plans with respect to its indebtedness and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see Carrier's reports on Forms 10-K, 10-Q and 8-K filed with or furnished to the U.S. Securities and Exchange Commission from time to time. Any forward-looking statement speaks only as of the date on which it is made, and Carrier assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
SELECTED FINANCIAL DATA, NON-GAAP MEASURES AND DEFINITIONS
Following are tables that present selected financial data of Carrier Global Corporation ("Carrier"). Also included are reconciliations of non-GAAP measures to their most comparable GAAP measures.
Use and Definitions of Non-GAAP Financial Measures
Carrier Global Corporation ("Carrier") reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP"). We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables in this Appendix. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.
Organic sales, adjusted operating profit, adjusted operating margin, incremental margins / earnings conversion, earnings before interest, taxes and depreciation and amortization ("EBITDA"), adjusted EBITDA, adjusted net income, adjusted earnings per share ("EPS"), adjusted interest expense, net, adjusted effective tax rate and net debt are non-GAAP financial measures.
Organic sales represents consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items of a nonoperational nature (hereinafter referred to as "other significant items"). Adjusted operating profit represents operating profit (a GAAP measure), excluding restructuring costs, amortization of acquired intangibles and other significant items. Adjusted operating margin represents adjusted operating profit as a percentage of net sales (a GAAP measure). Incremental margins / earnings conversion represents the year-over-year change in adjusted operating profit divided by the year-over-year change in net sales. EBITDA represents net income attributable to common shareholders (a GAAP measure), adjusted for interest income and expense, income tax expense, and depreciation and amortization. Adjusted EBITDA represents EBITDA, as calculated above, excluding non-service pension benefit, non-controlling interest in subsidiaries' earnings from operations, restructuring costs and other significant items. Adjusted net income represents net income attributable to common shareowners (a GAAP measure), excluding restructuring costs, amortization of acquired intangibles and other significant items. Adjusted EPS represents diluted earnings per share (a GAAP measure), excluding restructuring costs, amortization of acquired intangibles and other significant items. Adjusted interest expense, net represents interest expense (a GAAP measure) and interest income (a GAAP measure), net excluding other significant items. The adjusted effective tax rate represents the effective tax rate (a GAAP measure), excluding restructuring costs, amortization of acquired intangibles and other significant items. Net debt represents long-term debt (a GAAP measure) less cash and cash equivalents (a GAAP measure). For the business segments, when applicable, adjustments of operating profit and operating margins represent operating profit, excluding restructuring, amortization of acquired intangibles and other significant items.
Free cash flow is a non-GAAP financial measure that represents net cash flows provided by operating activities (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing Carrier's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of Carrier's common stock and distribution of earnings to shareowners.
Orders are contractual commitments with customers to provide specified goods or services for an agreed upon price and may not be subject to penalty if cancelled.
When we provide our expectations for organic sales, adjusted operating profit, adjusted operating margin, adjusted interest expense, net, adjusted effective tax rate, incremental margins/earnings conversion, adjusted EPS and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures (expected net sales, operating profit, operating margin, interest expense, effective tax rate, incremental operating margin, diluted EPS and net cash flows provided by operating activities) generally is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, future restructuring costs, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.