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Discontinued Operations and Disposal Groups | 9 Months Ended
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Sep. 30, 2020
Discontinued Operations and Disposal Groups [Abstract] |
Disposal Groups, Including Discontinued Operations, Disclosure | Discontinued Operations As discussed above, on April 2, 2020, Carrier and Otis entered into a Separation and Distribution Agreement with UTC (since renamed Raytheon Technologies Corporation), pursuant to which, among other things, UTC agreed to separate into three independent, publicly traded companies – UTC, Otis and Carrier and distribute all of the outstanding common stock of Carrier and Otis to UTC shareowners who held shares of UTC common stock as of the close of business on March 19, 2020. The Separation Transactions were completed on April 3, 2020. In the nine months ended September 30, 2020, a total of $1,335 million of costs have been incurred related to the Separation Transactions and recorded in the following financial statement line items: $958 million in Income from discontinued operations, $81 million of benefit in Income tax expense from discontinued operations, $39 million in Income from continuing operations and $419 million in Income tax expense. Carrier and Otis are presented as discontinued operations and, as such, have been excluded from both continuing operations and segment results for all periods presented. Income (loss) from discontinued operations is as follows:
| Quarter Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
(dollars, in millions) | 2020 |  | 2019 |  | 2020 |  | 2019
Otis | $ | — |  |  | $ | 277 |  |  | $ | 187 |  |  | $ | 799 |
Carrier | — |  |  | 418 |  |  | 196 |  | 1,334 |
Separation related transactions (1) | 113 |  |  | (505) |  |  | (782) |  |  | (592) |
Income (loss) from discontinued operations | $ | 113 |  |  | $ | 190 |  |  | $ | (399) |  |  | $ | 1,541 |
(1) Reflects debt extinguishment costs related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges and benefits related to separation activities. The following summarized financial information related to discontinued operations has been reclassified from Income from continuing operations and included in Income (loss) from discontinued operations:
| Quarter Ended September 30, |  |  |  | Nine Months Ended September 30, |  |
(dollars, in millions) | 2020 |  | 2019 |  | 2020 |  | 2019
Otis |  |  |  |  |  |  |
Product sales | $ | — |  |  | $ | 1,449 |  |  | $ | 1,123 |  |  | $ | 4,240 |
Service sales | — |  |  | 1,858 |  |  | 1,843 |  |  | 5,511 |
Cost of products sold | — |  |  | 1,185 |  |  | 913 |  |  | 3,471 |
Cost of services sold | — |  |  | 1,146 |  |  | 1,157 |  |  | 3,430 |
Research and development | — |  |  | 39 |  |  | 38 |  |  | 118 |
Selling, general and administrative expense | — |  |  | 468 |  |  | 450 |  |  | 1,381 |
Other income (expense), net | — |  |  | (11) |  |  | (65) |  |  | (36) |
Non-operating (income) expense, net | — |  |  | (3) |  |  | 3 |  |  | 5 |
Income from discontinued operations, before income taxes | — |  |  | 461 |  |  | 340 |  |  | 1,310 |
Income tax expense | — |  |  | 140 |  |  | 116 |  |  | 396 |
Income from discontinued operations | — |  |  | 321 |  |  | 224 |  |  | 914 |
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations | — |  |  | 44 |  |  | 37 |  |  | 115 |
Income from discontinued operations attributable to common shareowners | $ | — |  |  | $ | 277 |  |  | $ | 187 |  |  | $ | 799 |
Carrier |  |  |  |  |  |  |
Product sales | $ | — |  |  | $ | 3,991 |  |  | $ | 3,143 |  |  | $ | 11,684 |
Service sales | — |  |  | 825 |  |  | 741 |  |  | 2,405 |
Cost of products sold | — |  |  | 2,778 |  |  | 2,239 |  |  | 8,242 |
Cost of services sold | — |  |  | 593 |  |  | 527 |  |  | 1,706 |
Research and development | — |  |  | 101 |  |  | 98 |  |  | 301 |
Selling, general and administrative expense | — |  |  | 731 |  |  | 669 |  |  | 2,151 |
Other income (expense), net | — |  |  | (12) |  |  | (30) |  |  | 156 |
Non-operating (income) expense, net | — |  |  | (12) |  |  | 17 |  |  | (33) |
Income from discontinued operations, before income taxes | — |  |  | 613 |  |  | 304 |  |  | 1,878 |
Income tax expense | — |  |  | 183 |  |  | 102 |  |  | 519 |
Income from discontinued operations | — |  |  | 430 |  |  | 202 |  |  | 1,359 |
Less: Noncontrolling interest in subsidiaries earnings from discontinued operations | — |  |  | 12 |  |  | 6 |  |  | 25 |
Income from discontinued operations attributable to common shareowners | $ | — |  |  | $ | 418 |  |  | $ | 196 |  |  | $ | 1,334 |
Separation related transactions (1) |  |  |  |  |  |  |
Selling, general and administrative expense | $ | (13) |  |  | $ | 3 |  |  | 154 |  |  | $ | 3 |
Non-operating expense, net | — |  |  | — |  |  | 709 |  |  | — |
Income (loss) from discontinued operations, before income taxes | 13 |  |  | (3) |  |  | (863) |  |  | (3) |
Income tax (benefit) expense | (100) |  |  | 502 |  |  | (81) |  |  | 589 |
Income (loss) from discontinued operations, net of tax | 113 |  |  | (505) |  |  | (782) |  |  | (592) |
Total Income (loss) from discontinued operations attributable to common shareowners | $ | 113 |  |  | $ | 190 |  |  | $ | (399) |  |  | $ | 1,541 |
(1) Reflects debt extinguishment costs related to the Company’s paydown of debt to not exceed the maximum applicable net indebtedness under the Raytheon Merger Agreement, and unallocable transaction costs incurred by the Company primarily related to professional services costs pertaining to the Separation Transactions and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges and benefits related to separation activities. Selected financial information related to cash flows from discontinued operations is as follows:
| Nine Months Ended September 30, |  |
(dollars, in millions) | 2020 |  | 2019
Net cash (used in) provided by operating activities | $ | (693) |  |  | $ | 1,605 |
Net cash used in investing activities | (241) |  |  | (241) |
Net cash used in financing activities | (1,449) |  |  | (1,410) |
Net cash (used in) provided by operating activities includes the net operating cash flows of Otis and Carrier prior to the separation, as well as costs incurred by the Company primarily related to professional services costs pertaining to the separation and the establishment of Otis and Carrier as stand-alone public companies, facility relocation costs, costs to separate information systems, costs of retention bonuses and tax charges related to separation activities. Net cash used in financing activities for the nine months ended September 30, 2020 primarily consists of cash distributed by the Company to Otis and Carrier upon separation and debt extinguishment costs related to the early repayment of debt, partially offset by net transfer activity. Net cash used in financing activities for the nine months ended September 30, 2019 primarily consists of net transfer activity consisting of cash transfers and distributions. The major components of assets and liabilities related to discontinued operations at December 31, 2019 are provided below:
(dollars, in millions) | Otis | Carrier | Total
Assets |  |  |
Cash and cash equivalents | $ | 1,446 |  | $ | 995 |  | $ | 2,441 |
Accounts receivable, net | 2,899 |  | 2,728 |  | 5,627 |
Contract assets | 530 |  | 679 |  | 1,209 |
Inventory, net | 571 |  | 1,332 |  | 1,903 |
Other assets, current | 213 |  | 221 |  | 434 |
Future income tax benefits | 355 |  | 370 |  | 725 |
Fixed assets, net | 747 |  | 1,686 |  | 2,433 |
Operating lease right-of-use assets | 529 |  | 818 |  | 1,347 |
Goodwill | 1,647 |  | 9,807 |  | 11,454 |
Intangible assets, net | 490 |  | 1,083 |  | 1,573 |
Other assets | 220 |  | 2,457 |  | 2,677 |
Total assets related to discontinued operations | $ | 9,647 |  | $ | 22,176 |  | $ | 31,823 |
Liabilities and Redeemable Noncontrolling Interest |  |  |
Short-term borrowings | $ | 33 |  | $ | 38 |  | $ | 71 |
Accounts payable | 1,321 |  | 1,682 |  | 3,003 |
Accrued liabilities | 1,651 |  | 2,889 |  | 4,540 |
Contract liabilities | 2,288 |  | 611 |  | 2,899 |
Long-term debt currently due | 1 |  | 237 |  | 238 |
Long-term debt | 5 |  | 82 |  | 87 |
Future pension and postretirement benefit obligations | 560 |  | 455 |  | 1,015 |
Operating lease liabilities | 383 |  | 668 |  | 1,051 |
Other long-term liabilities(1) | 514 |  | 1,025 |  | 1,539 |
Total liabilities related to discontinued operations | $ | 6,756 |  | $ | 7,687 |  | $ | 14,443 |
(1) Amounts include a deferred tax jurisdictional netting adjustment of $145 million. The Separation of Carrier was treated as a return on capital and recorded as a reduction to retained earnings, as it was in a net asset position, while the Separation of Otis was treated as a return of capital and recorded as an adjustment to Common stock, as it was in a net liability position. The remaining assets and liabilities related to discontinued operations at September 30, 2020 primarily relate to trailing tax assets and liabilities of the Company related to the Separation Transactions, including indemnification obligations.

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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