DEF 14A: Carrier Global Focuses on Climate and Energy Solutions with Portfolio Transformation

Carrier Global is streamlining its business to concentrate on intelligent climate and energy solutions through strategic acquisitions and divestitures.

Summary

• Carrier Global Corporation is transforming into a pure-play global leader in intelligent climate and energy solutions.
• In 2023, Carrier acquired Viessmann Climate Solutions and planned to exit its Fire & Security segment and commercial refrigeration business.
• The acquisition of Viessmann Climate Solutions was completed on January 2, 2024.
• Net sales increased 8% year-over-year, with organic sales growth of 3% due to strong price realization.
• Carrier gained share in all major segments and grew aftermarket by double digits for a third consecutive year.
• Cash from operating activities increased 50% versus the prior year.
• The company is committed to achieving net-zero greenhouse gas emissions across its value chain by 2050.
• The Board recommends shareowners vote for the election of directors, the advisory vote on executive compensation, and the ratification of the independent auditor.
• The Board recommends shareowners vote against the shareowner proposal on transparency in lobbying.

Sentiment

Score: 8

Explanation: The document conveys a positive outlook due to the company's strategic transformation, strong financial performance, and commitment to sustainability. The acquisition of Viessmann Climate Solutions and the planned exits of other businesses are expected to drive higher growth and shareowner value.

Positives

• Carrier is strategically transforming its portfolio to focus on high-growth areas.
• The acquisition of Viessmann Climate Solutions strengthens Carrier's position in the European residential and light commercial space.
• The company delivered strong financial results in 2023, including increased net sales and cash flow.
• Carrier is committed to sustainability and has set ambitious ESG goals.
• The Board has taken steps to enhance corporate governance, including strengthening cybersecurity oversight and aligning management's interests with shareowner interests.

Negatives

• GAAP operating profit and operating margin decreased compared to 2022 due to portfolio transformation-related activities.
• The company faces risks related to climate impacts, cybersecurity, and supply chain disruptions.
• The company's lobbying activities may contradict its public positions on climate change.

Risks

• Carrier encounters an extensive range of risks, including compliance, financial, geopolitical, legal, operational, regulatory, and strategic.
• Specific risks include climate impacts, cybersecurity, the competitive landscape, human capital management, logistics and supply chain, and the impact of disruptive events.
• The company's lobbying activities may contradict its public positions on climate change, leading to reputational damage.

Future Outlook

Carrier expects to become a more focused, higher-growth business, further strengthening the company's global leadership position in intelligent climate and energy solutions.

Management Comments

• The Carrier Board shares the management teams vision of performing while transforming and is pleased to welcome Maximilian (Max) Viessmann as our newest director following the successful acquisition of Viessmann Climate Solutions.
• Carriers transformation is not just about adapting to change; its about embracing it.
• The Carrier Board will continue to help guide Carrier to sustainable, long-term value creation and engage with you, our shareowners, along the way.

Industry Context

Carrier is positioning itself to capitalize on secular trends such as a growing middle class, climate change, energy security and stability, and digitalization.

Comparison to Industry Standards

• The Compensation Peer Group includes companies such as 3M Co., Caterpillar Inc., Cummins Inc., Deere & Company, Eaton Corporation plc, Emerson Electric Co., Honeywell International Inc., Illinois Tool Works Inc., Johnson Controls International plc, Otis Worldwide Corporation, Parker Hannifin Corporation, Stanley Black & Decker, Inc., TE Connectivity Ltd., Trane Technologies plc, and Whirlpool Corporation.
• The Performance Peer Group for PSU awards granted in 2023 included 29 companies in the industries most closely linked to Carrier, including those in the following industries: Building Products, Construction Machinery & Heavy Trucks, Electrical Components & Equipment, Industrial Conglomerates, and Industrial Machinery.

Corporate Governance

Related Party Transactions

• Upon the completion of the acquisition, Max Viessmann was appointed as a member of the Board.
• In light of Mr. Viessmanns current service as Chief Executive Officer and a member of the Executive Board of Viessmann Group, and the ownership by Mr. Viessmann, together with other members of the Viessmann family, of a majority of the capital stock of Viessmann Group, Viessmann Group became a related party of Carrier.
• Since the beginning of our last fiscal year until on or about February 20, 2024, the amount of our payments to Viessmann Group in connection with the agreements described below have amounted to approximately $11.3 billion, excluding 58,608,959 shares of our common stock paid as partial consideration for the acquisition.
• In connection with the acquisition, Carrier has entered into the following agreements with Viessmann Group: Share Purchase Agreement, Investor Rights Agreement, License Agreement, Transitional Services Agreement, and Additional Agreements.

Stakeholder Impact

• Shareowners: The transformation is expected to deliver higher growth and superior value.
• Employees: The company is committed to the continued development and engagement of its people through programs like the Employee Scholar Program.
• Customers: The company is advancing solutions for customers by creating visionary breakthroughs and building intelligent, connected ecosystems.
• Communities: Carrier supports organizations that promote the planet, people, and communities.
• Planet: Carrier is committed to achieving net-zero greenhouse gas emissions across its value chain by 2050.

Next Steps

• Complete the planned exits of the Fire & Security segment and commercial refrigeration business.
• Integrate Viessmann Climate Solutions into Carrier's existing portfolio.
• Continue to invest in research and development to create visionary breakthroughs.
• Advance toward the goal of helping customers avoid more than 1 gigaton of greenhouse gas emissions by 2030.

Key Dates

Keywords

climate solutions, energy solutions, portfolio transformation, Viessmann, sustainability, corporate governance, executive compensation, financial performance, lobbying, ESG