EX-99.4 7 ef20016935_ex99-4.htm EXHIBIT 99.4
Exhibit 99.4
Disclaimer
 
Ernst & Young LLP (EY) prepared the attached Report only for Carrier Global Corporation (the "Client") pursuant to an agreement solely between EY and Client. EY did not perform its services on behalf of or to serve the needs of any other person or entity. Accordingly, EY expressly disclaims any duties or obligations to any other person or entity based on its use of the attached Report. Any other person or entity must perform its own due diligence inquiries and procedures for all purposes, including, but not limited to, satisfying itself as to the financial condition and control environment of Client, as well as the appropriateness of the accounting for any particular situation addressed by the Report.
 
EY did not perform an audit, review, examination or other form of attestation (as those terms are identified by the American Institute of Certified Public Accountants or by the Public Company Accounting Oversight Board) of Client’s financial statements. Accordingly, EY did not express any form of assurance on Client’s accounting matters, financial statements, any financial or other information or internal controls. EY did not conclude on the appropriate accounting treatment based on specific facts or recommend which accounting policy/treatment Client should select or adopt.
 
The observations relating to accounting matters that EY provided to Client were designed to assist Client in reaching its own conclusions and do not constitute our concurrence with or support of Client’s accounting or reporting. Client alone is responsible for the preparation of its financial statements, including all of the judgments inherent in preparing them.
 
This information is not intended or written to be used, and it may not be used, for the purpose of avoiding penalties that may be imposed on a taxpayer.
 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
The following unaudited pro forma condensed combined financial information of Carrier Global Corporation (the “Company”, “Carrier”) and the climate solutions business (the “VCS Business”) of Viessmann Group GmbH & Co. KG (“Viessmann”) as of and for the nine months ended September 30, 2023 and for the twelve months ended December 31, 2022 has been prepared in accordance with Article 11 of Regulation S-X and is derived from Carrier’s historical consolidated financial statements which are included in the September 30, 2023 Quarterly Report on Form 10-Q and the 2022 Annual Report on Form 10-K, respectively, and the VCS Business’s combined financial statements, which have been prepared specifically for the purpose of Carrier’s previously announced acquisition of the VCS Business (the “Acquisition”) and which are included elsewhere in this Form 8-K.
 
The historical financial statements of Carrier and the VCS Business have been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events which are necessary to account for the transactions (the “Transactions”1), in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The pro forma adjustments are based upon available information and certain estimates and assumptions that management believes are reasonable under the circumstances.
 
The Acquisition will be accounted for as a business combination using the acquisition method with Carrier as the accounting acquirer in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”). Under this method of accounting, the total consideration will be allocated to the VCS Business’s assets acquired and liabilities assumed based upon their estimated fair values, with limited exceptions, as of the closing date of the Acquisition. The process of valuing the net assets of the VCS Business at the expected closing date of the Acquisition, as well as evaluating accounting policies for conformity, is preliminary. Any differences between the fair value of the consideration transferred and the fair value of the assets acquired, and liabilities assumed will be recorded as goodwill. Accordingly, the purchase price allocation reflected in this unaudited pro forma condensed combined financial information is preliminary and subject to revision based on a final determination of fair value.
 
The unaudited pro forma condensed combined financial information is based on the preliminary information available as of the date of the Current Report on Form 8-K (“Form 8-K”) and management’s preliminary valuation of the fair value of tangible and intangible assets acquired and liabilities assumed. The Company will finalize the accounting for the Acquisition as soon as practicable within the measurement period in accordance with ASC 805, but in no event later than one year from the Acquisition. Accordingly, the final purchase accounting assessment may vary based on final analyses of the valuation of assets to be acquired and liabilities to be assumed, particularly in regard to definite-lived intangible assets and deferred tax assets and liabilities, which could be material.
 
The unaudited pro forma condensed combined financial information and related notes are provided for informational purposes only and do not purport to represent what the combined company’s actual results of operations or financial position would have been had the Acquisition been completed on the dates indicated, nor are they necessarily indicative of the combined company’s future results of operations or financial position for any future period. The unaudited pro forma condensed combined financial information is based on information and assumptions, which are described in the accompanying notes. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein. The results and balances reflected herein are not intended to be a projection of future financial position or results of operations of Carrier following the completion of the Transactions, which may vary materially from the results reflected because of various factors. The unaudited pro forma condensed combined balance sheet is presented as if the Transactions had occurred on September 30, 2023, and the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2023 and for the twelve months ended December 31, 2022 are presented as if the Transactions had occurred on January 1, 2022. The unaudited pro forma condensed combined financial information presented herein has been derived from:
 

1 We refer to the closing of the Acquisition, the Company’s issuance and sale of U.S. dollar and euro denominated notes (the “Notes”) and the Company’s incurrence of borrowings under the Company’s term loan credit agreement (the “Term Loan Credit Agreement”) and bridge facility (the “Bridge Facility”) to fund a portion of the cash purchase price of the Acquisition, and the application of the proceeds of such borrowings, collectively as the “Transactions”.


 •
Carrier’s historical unaudited consolidated financial statements and accompanying notes as of and for the nine months ended September 30, 2023 and the audited consolidated financial statements and accompanying notes for the twelve months ended December 31, 2022, included in the 2023 Quarterly Report on Form 10-Q and the 2022 Annual Report on Form 10-K; and
 

 •
The VCS Business’s unaudited combined financial statements as of and for the nine months ended September 30, 2023 and the audited combined financial statements for the twelve months ended December 31, 2022 prepared specifically for the purpose of the Acquisition, and which are included elsewhere in this Form 8-K.
 
The following unaudited pro forma condensed combined financial information gives effect to the Transactions, which includes adjustments for the following:
 

 •
Conversion adjustments to convert the VCS Business’s combined financial statements from German GAAP to Carrier’s accounting policies in accordance with U.S. GAAP;
 

 •
Application of the acquisition method of accounting under the provisions of ASC 805 and to reflect estimated consideration of approximately $ 14.2 billion (€ 12.9 billion);
 

 •
The proceeds and uses of the financing arrangements entered into in connection with the Acquisition; and
 

 •
Non-recurring costs incurred and expected to be incurred in connection with the Acquisition.
 
1
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 2023
(U.S. Dollars in millions)
 
   
Carrier Global
Corporation
(Historical)
    
VCS Business
Adjusted
(Note 2)
    
Transaction
Accounting
Adjustments
(Note 3)
        
Financing
Adjustments
(Note 3)
        
Pro Forma
Combined
  
                                       
Assets
                                      
Cash and cash equivalents
    
3,902
      
189
      
(11,165
)
    
3A
    
8,451
      
3H
    
1,373
  
                     
(46
)
    
3E
    
-
                
                     
42
      
3F
    
-
                
Accounts receivable, net
    
3,030
      
608
      
-
            
-
            
3,638
  
Contract assets, current
    
605
      
-
      
-
            
-
            
605
  
Inventories, net
    
2,562
      
1,018
      
180
      
3D
    
-
            
3,760
  
Other assets, current
    
412
      
222
      
(111
)
    
3F
    
-
            
523
  
Total current assets
    
10,511
      
2,037
      
(11,100
)
          
8,451
            
9,899
  
Future income tax benefits
    
712
      
117
      
(117
)
    
3G
    
-
            
712
  
Fixed assets, net
    
2,210
       555       203      
3B
    
-
            
2,968
  
Operating lease right-of-use assets
    
577
      
98
      
-
            
-
            
675
  
Intangible assets, net
    
1,100
      
8
      
4,619
      
3C
    
-
            
5,727
  
Goodwill
    
9,825
      
3
      
14,171
      
3A
    
-
            
18,942
  
                     
(203
)
    
3B
    
-
                
                     
(4,619
)
    
3C
    
-
                
                     
(180
)
    
3D
    
-
                
                     
1,407
      
3G
    
-
                
                     
(1,462
)
    
3I
    
-
                
Pension and post-retirement assets
    
29
      
-
      
-
            
-
            
29
  
Equity method investments
    
1,166
      
-
      
-
            
-
            
1,166
  
Other assets
    
414
       28      
-
            
-
            
442
  
Total Assets
    
26,544
      
2,846
      
2,719
            
8,451
            
40,560
  
Liabilities and Equity
                                                    
Accounts payable
    
2,887
      
251
      
-
            
-
            
3,138
  
Accrued liabilities
    
2,832
      
689
      
(69
)
    
3F
    
-
            
3,452
  
Contract liabilities, current
    
496
      
94
      
-
            
-
            
590
  
Current portion of long-term debt
    
134
      
10
      
-
            
475
      
3H
    
619
  
Total current liabilities
    
6,349
      
1,044
      
(69
)
          
475
            
7,799
  
Long-term debt
    
8,651
      
20
      
-
            
7,995
      
3H
    
16,666
  

2
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 2023
(U.S. Dollars in millions)

   
Carrier Global
Corporation
(Historical)
    
VCS Business
Adjusted
(Note 2)
    
Transaction
Accounting
Adjustments
(Note 3)
          
Financing
Adjustments
(Note 3)
          
Pro Forma
Combined
  
Future pension and post-retirement obligations
    
337
      
74
      
-
            
-
            
411
  
Future income tax obligations
    
553
      
161
      
1,290
      
3G
      
-
            
2,004
  
Operating lease liabilities
    
465
      
74
      
-
              
-
            
539
  
Other long-term liabilities
    
1,687
      
11
      
-
              
-
            
1,698
  
Total Liabilities
    
18,042
      
1,384
      
1,221
              
8,470
            
29,117
  
Equity
                                                      
Common stock
    
9
      
-
      
1
      
3A
      
-
            
10
  
Treasury stock
    
(1,972
)
    
-
      
-
              
-
            
(1,972
)
Additional paid-in capital
    
5,517
      
1,462
      
3,005
      
3A
      
-
            
8,522
  
 
                    
(1,462
)
    
3I
      
-
                
Retained earnings
    
6,486
      
-
      
(46
)
    
3E
      
(19
)
    
3H
      
6,421
  
Accumulated other comprehensive income (loss)
    
(1,856
)
    
-
      
-
              
-
              
(1,856
)
Non-controlling interest
    
318
      
-
      
-
              
-
              
318
  
Total Equity
    
8,502
      
1,462
      
1,498
              
(19
)
            
11,443
  
Total Liabilities and Equity
    
26,544
      
2,846
      
2,719
              
8,451
              
40,560
  

See accompanying notes to unaudited pro forma condensed combined financial information.

3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the nine months ended September 30, 2023
(U.S. Dollars in millions, except per share amount)

   
Carrier Global
Corporation
(Historical)
    
VCS Business
Adjusted
(Note 2)
    
Transaction
Accounting
Adjustments
(Note 3)
      
Financing
Adjustments (Note 3)
      
Pro Forma
Combined
  
                                   
Net sales
                                  
Product sales
    
15,122
      
2,870
      
-
        
-
        
17,992
  
Service sales
    
1,874
      
333
      
-
        
-
        
2,207
  
 
    
16,996
      
3,203
      
-
        
-
        
20,199
  
Costs and expenses
                                            
Cost of products sold
    
(10,655
)
    
(1,576
)
    
(6
)
 3AA
    
-
        
(12,569
)
 
                    
(332
)
 3BB
    
-
            
Cost of services sold
    
(1,392
)
    
(178
)
    
(37
)
 3BB
    
-
        
(1,607
)
Research and development
    
(447
)
    
(140
)
    
-
        
-
        
(587
)
Selling, general and administrative
    
(2,336
)
    
(816
)
    
(2
)
 3AA
    
-
        
(3,124
)
 
                    
40
  
 3FF
    
-
            
 
                    
(10
)
 3GG
    
-
            
 
    
(14,830
)
    
(2,710
)
    
(347
)
      
-
        
(17,887
)
Equity method investment net earnings
    
171
      
-
      
-
        
-
        
171
  
Other income (expense), net
    
(648
)
    
(16
)
    
-
        
-
        
(664
)
Operating profit
    
1,689
      
477
      
(347
)
      
-
        
1,819
  
Non-service pension benefit (expense)
    
-
      
(1
)
    
-
        
-
        
(1
)
Interest (expense) income, net
    
(164
)
    
(8
)
    
9
  
 3EE
    
(319
)
3HH
    
(482
)
Income from operations before income taxes
    
1,525
      
468
      
(338
)
      
(319
)
      
1,336
  
Income tax (expense) benefit
    
(524
)
    
(140
)
    
95
  
 3II
    
65
  
3KK
    
(504
)
Net income from operations
    
1,001
      
328
      
(243
)
      
(254
)
      
832
  
Less: Non-controlling interest in subsidiaries' earnings from operations
    
72
      
-
      
-
        
-
        
72
  
Net income attributable to common shareowners
    
929
      
328
      
(243
)
      
(254
)
      
760
  
Earnings per share
                                            
Basic
  
$
1.11
              
-
        
-
      
$
0.85
  
Diluted
  
$
1.09
                                            
$
0.83
  
Weighted-average number of shares outstanding
                                            
Basic
    
837
                                  
896
  
Diluted
    
853
                                  
912
  
 
See accompanying notes to unaudited pro forma condensed combined financial information.

4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the twelve months ended December 31, 2022
(U.S. Dollars in millions, except per share amount)

   
Carrier Global
Corporation
(Historical)
    
VCS Business
Adjusted
(Note 2)
    
Transaction
Accounting
Adjustments
(Note 3)
      
Financing
Adjustments (Note 3)
      
Pro Forma
Combined
  
Net sales
                                  
Product sales
    
18,250
      
3,161
      
-
        
-
        
21,411
  
Service sales
    
2,171
      
419
      
-
        
-
        
2,590
  
     
20,421
      
3,580
      
-
        
-
        
24,001
  
Costs and expenses
                                            
Cost of products sold
    
(13,337
)
    
(2,013
)
    
(8
)
 3AA
    
-
        
(16,029
)
                     
(493
)
 3BB
    
-
            
                     
(178
)
 3CC
    
-
            
Cost of services sold
    
(1,620
)
    
(173
)
    
(39
)
 3BB
    
-
        
(1,832
)
Research and development
    
(539
)
    
(165
)
    
-
        
-
        
(704
)
Selling, general and administrative
    
(2,512
)
    
(794
)
    
(3
)
 3AA
    
(19
)
 3JJ
    
(3,342
)
                     
(46
)
 3DD
    
-
            
                     
45
  
 3FF
    
-
            
                     
(13
)
 3GG
    
-
            
     
(18,008
)
    
(3,145
)
    
(735
)
      
(19
)
      
(21,907
)
Equity method investment net earnings
    
262
      
-
      
-
        
-
        
262
  
Other income (expense), net
    
1,840
      
33
      
-
        
-
        
1,873
  
Operating profit
    
4,515
      
468
      
(735
)
      
(19
)
      
4,229
  
Non-service pension benefit (expense)
    
(4
)
    
(2
)
    
-
        
-
        
(6
)
Interest (expense) income, net
    
(219
)
    
(8
)
    
8
  
 3EE
    
(472
)
3HH
    
(691
)
Income from operations before income taxes
    
4,292
      
458
      
(727
)
      
(491
)
      
3,532
  
Income tax (expense) benefit
    
(708
)
    
(134
)
    
198
  
 3II
    
115
  
3KK
    
(529
)
Net income from operations
    
3,584
      
324
      
(529
)
      
(376
)
      
3,003
  
Less: Non-controlling interest in subsidiaries' earnings from operations
    
50
      
-
      
-
        
-
        
50
  
Net income attributable to common shareowners
    
3,534
      
324
      
(529
)
      
(376
)
      
2,953
  
Earnings per share
                                            
Basic
  
$
4.19
              
-
        
-
      
$
3.27
  
Diluted
  
$
4.10
                                    
$
3.21
  
Weighted-average number of shares outstanding
                                            
Basic
    
843
                                  
902
  
Diluted
    
861
                                  
920
  

See accompanying notes to unaudited pro forma condensed combined financial information.

5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
Note 1. Basis of Presentation
 
The historical consolidated financial statements for Carrier and combined financial statements for the VCS Business have been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are directly attributable to the Transactions and are factually supportable.
 
Carrier’s historical consolidated financial statements were prepared in accordance with U.S. GAAP and presented in USD, and the VCS Business’s combined financial statements were prepared in accordance with German GAAP and presented in EUR. For purposes of the unaudited pro forma condensed combined financial information, the financial information of the VCS Business has been converted from German GAAP to the accounting policies of Carrier in accordance with U.S. GAAP, translated from EUR to USD and reclassified to conform with Carrier’s financial statement presentation.
 
The unaudited pro forma condensed combined financial information was prepared using the acquisition method of accounting in accordance with ASC 805, with Carrier determined to be the accounting acquirer based on preliminary analysis of the Share Purchase Agreement, dated as of Apri1 25, 2023, among the Company, Viessmann and Johann Purchaser GmbH (f/k/a Blitz F23-620 GmbH), a wholly owned indirect subsidiary of Carrier, governing the Acquisition (the “Share Purchase Agreement”), and based on the historical consolidated financial statements of Carrier and the combined financial statements of the VCS Business. Under ASC 805, assets acquired and liabilities assumed in a business combination are recognized and measured at their assumed acquisition date fair value, while transaction costs associated with a business combination are expensed as incurred. The excess of acquisition consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.
 
    The unaudited pro forma condensed combined balance sheet is presented as if the Acquisition had occurred on September 30, 2023, and the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2023 and for the twelve months ended December 31, 2022 are presented as if the Acquisition had occurred on January 1, 2022.
 
The unaudited pro forma condensed combined financial information does not reflect any anticipated synergies or dis-synergies, operating efficiencies or cost savings that may result from the Acquisition and integration costs that may be incurred. The pro forma adjustments represent Carrier’s best estimates and are based upon currently available information and certain adjustments, assumptions and estimates that Carrier believes are reasonable under the circumstances.
 
There were no material transactions between Carrier and the VCS Business during the period presented. Accordingly, adjustments to eliminate transactions between Carrier and the VCS Business have not been reflected in the unaudited pro forma condensed combined financial information presented herein.
 
For purposes of preparing the unaudited pro forma condensed combined financial information, the historical financial information of the VCS Business and related pro forma adjustments were translated from euro to U.S. Dollars using the following historical exchange rates:
 
Period of Exchange Rate
  
$ /€
Closing exchange rate as of September 30, 2023 for Balance Sheet
  
1.0677
Average exchange rate for the nine months ended September 30, 2023 for Statement of Operations
  
1.0836
Average exchange rate for the twelve months ended December 31, 2022 for Statement of Operations
  
1.0535
 
Note 2. Reclassification and U.S. GAAP Adjustments
 
During the preparation of this unaudited pro forma condensed combined financial information, management performed an analysis of the VCS Business’s financial information to identify differences in the VCS Business’s combined financial statements from German GAAP to Carrier’s accounting policies in accordance with U.S. GAAP, and differences in financial statement presentation compared to the presentation of Carrier. At the time of preparing the unaudited pro forma condensed combined financial information, Carrier is not aware of any other material differences
 
6
Unaudited Condensed Combined Balance Sheet Adjustments
As of September 30, 2023
(Amounts in millions)
 
Carrier Presentation
  
Historical VCS Business Presentation
  
Historical VCS
Business Euro
    
Historical VCS
Business USD
    
Reclassification
Adjustments USD
    
U.S. GAAP
Adjustments USD
  
Notes
  
VCS Business
Adjusted USD
  
Assets
                                    
Cash and cash equivalents
  
Cash on hand and balances at banks
    
182
      
194
            
(5
)
(v)
    
189
  
Accounts receivable, net
  
Trade receivables
    
546
      
583
      
5
       20  
(iv)
    
608
  
Inventories, net
  
Inventories
    
919
      
981
              
10
  
(ii)
    
1,018
  
                                 
4
  
(iii)
        
                                 
(3
)
(vii)
        
                                 
21
  
(xiv)
        
                                 
5
  
(x)
        
Other assets, current
  
Receivables with affiliated companies
    
109
      
116
      
(5
)
              
222
  
   
Other assets
    
78
      
83
      
22
      
5
  
(v)
        
                                 
1
  
(iv)
        
   
Deferred charges and prepaid expenses
    
20
      
22
      
(22
)
    
-
        
-
  
Total current assets
        
1,854
      
1,979
      
-
      
58
        
2,037
  
Future income tax benefits
  
Deferred tax assets
    
28
      
30
      
5
      
32
  
(i)
    
117
  
                                 
(1
)
(iii)
        
                                 
33
  
(vi)
        
                                 
3
  
(vii)
        
                                 
12
  
(xiii)
        
                                 
4
  
(xv)
        
                                 
(1
)
(x)
        
Fixed assets, net
  
Tangible assets
    
514
      
549
              
1
  
(xvi)
    
555
  
                                  5
  
(xii)
        
Operating lease right-of-use assets
                                
98
  
(vi)
    
98
  
Intangible assets, net
  
Intangible assets
    
12
      
13
      
(1
)
    
(4
)
(xii)
    
8
  
                                 
-
  
(xvi)
        
Goodwill
        
-
      
-
      
1
      
2
  
(xii)
    
3
  
Pension and post-retirement assets
        
-
      
-
      
-
      
-
  
(xiii)
    
-
  
Equity method investments
        
-
      
-
      
-
                
-
  
Other assets
                
-
      
3
      
24
  
(vi)
     28  

7
Unaudited Condensed Combined Balance Sheet Adjustments
As of September 30, 2023
(Amounts in millions)

Carrier Presentation
  
Historical VCS
Business
Presentation
  
Historical VCS
Business Euro
  
 Historical VCS
Business USD
  
 Reclassification
Adjustments USD
  
 U.S. GAAP
Adjustments USD
  
Notes
  
 VCS Business
Adjusted USD
   
                
 1
  
(xvi)
    
   
Financial assets
  
 3
  
 3
  
 (3)
            
Total Assets
      
2,411
  
2,574
  
 5
  
 267
      
2,846
Liabilities and Equity
                            
Accounts payable
  
Trade payables
  
 221
  
 236
  
 15
          
 251
Accrued liabilities
  
Other provisions
  
 429
  
 458
  
 (30)
  
 (8)
  
(viii)
  
 689
                   
 (5)
  
(ix)
    
                   
 38
  
(xiii)
    
                   
 1
  
(xvi)
    
   
Liabilities due to affiliated companies
  
 79
  
 84
  
 (15)
            
   
Other liabilities
  
 115
  
 123
      
 25
  
(vi)
    
                   
 10
  
(viii)
    
                   
 3
  
(ix)
    
                   
 2
  
(xii)
    
                   
 4
  
(xiii)
    
                   
 (1)
  
(xvi)
    
Contract liabilities, current
  
Advance payments received on orders
  
 30
  
 32
      
 21
  
(xiv)
  
 94
                   
 1
  
(xvi)
    
   
Deferred income
  
 37
  
 40
                
Current portion of long-term debt
  
Bank loans
  
 5
  
 5
  
 (4)
  
 9
  
(vi)
  
 10
                             
Total current liabilities
      
 916
  
 978
  
 (34)
  
 100
      
1,044
Long-term debt
          
-
  
 4
  
 16
  
(vi)
  
 20
Future pension and post-retirement obligations
  
Pension and similar obligations
  
 49
  
 52
  
 22
          
 74
Future income tax obligations
  
Tax provisions
  
 108
  
 115
  
 5
  
 (1)
  
(i)
  
 161
                   
 1
  
(ii)
    
                   
 33
  
(vi)
    
                   
 2
  
(vii)
    
                   
 1
  
(ix)
    
 
8
Unaudited Condensed Combined Balance Sheet Adjustments
As of September 30, 2023
(Amounts in millions)

Carrier Presentation
  
Historical VCS Business Presentation
  
Historical VCS Business Euro
  
 Historical VCS Business USD
  
 Reclassification
Adjustments USD
  
 U.S. GAAP
Adjustments USD
  
Notes
  
 VCS Business Adjusted USD
                   
5
  
(x)
    
                   
-
  
(xiii)
    
Operating lease liabilities
                  
 74
  
(vi)
  
 74
Other long-term liabilities
  
Special item for investment grants
  
 2
  
 3
  
 8
  
-
  
(xvi)
  
 11
Total Liabilities
      
1,075
  
1,148
  
 5
  
 231
      
1,384
Equity
                          
-
Additional paid-in capital
  
Net investment
  
1,336
  
1,426
  
-
  
 33
  
(i)
  
1,462
                   
 9
  
(ii)
    
                   
 3
  
(iii)
    
                   
 6
  
(iv)
    
                   
 (1)
  
(vi)
    
                   
 (3)
  
(vii)
    
                   
 (1)
  
(viii)
    
                   
 1
  
(ix)
    
                    14  
(x)
    
                   
 (1)
  
(xi)
    
                   
 2
  
(xii)
    
                   
 (30)
  
(xiii)
    
                   
 4
  
(xv)
    
                   
-
  
(xvi)
    
Total Liabilities and Equity
      
2,411
  
2,574
  
 5
  
 267
      
2,846

9
Unaudited Condensed Combined Statement of Operations Adjustments
For Nine Months Ended September 30, 2023
(Amounts in millions)

Carrier Presentation
  
Historical VCS
Business
Presentation
  
Historical VCS
Business Euro
  
 Historical VCS
Business USD
  
 Reclassification
Adjustments USD
  
 U.S. GAAP Adjustments
USD
  
Notes
  
 VCS
Business
Adjusted
USD
Net sales
  
Net sales
  
2,951
  
3,198
  
(3,198)
          
-
Product sales
              
2,865
  
 6
  
 (xvi)
  
2,870
                   
(1)
  
(viii)
    
Service sales
              
 333
          
 333
       
2,951
  
3,198
  
-
  
 5
      
3,203
Costs and expenses
                            
Cost of products sold
              
(1,573)
  
 4
  
 (ii)
  
(1,576)
                   
 2
  
 (iii)
    
                   
 (2)
  
 (vii)
    
                   
 (1)
  
 (xiii)
    
                   
(6)
  
(xvi)
    
                             
                             
Cost of services sold
              
 (177)
  
(1)
  
(xiii)
  
 (178)
Research and development
              
 (139)
  
 (1)
  
(xiii)
  
 (140)
Selling, general and administrative
              
 (815)
  
(1)
  
(xiii)
  
 (816)
       
-
  
-
  
(2,704)
  
 (6)
      
(2,710)
   
Change of inventories of finished and unfinished goods
  
 61
  
 66
  
 (66)
          
-
   
Internally produced and capitalized assets
  
 11
  
 12
  
 (12)
          
-
   
Material expenses
  
(1,414)
  
(1,532)
  
1,532
          
-
   
Personnel expenses
  
 (624)
  
 (676)
  
 676
          
-
   
Depreciation and amortization
  
 (42)
  
 (46)
  
 46
          
-
Equity method investment net earnings
              
-
          
-
Other income (expense), net
              
 (6)
  
 4
  
(x)
  
 (16)
                   
 (15)
  
(xvi)
    
                   
1
  
(viii)
    
                             
   
Expenses from profit and loss transfer agreements
  
 (18)
  
 (20)
  
 20
            

10
Unaudited Condensed Combined Statement of Operations Adjustments
For Nine Months Ended September 30, 2023
(Amounts in millions)
 
Carrier Presentation
  
Historical VCS Business
Presentation
  
Historical VCS
Business Euro
  
 Historical VCS
Business USD
  
 Reclassification
Adjustments USD
  
 U.S. GAAP
Adjustments USD
  
Notes
  
 VCS Business
Adjusted USD
   
Other operating income
  
 78
  
 85
  
 (85)
          
-
                             
                             
   
Other operating expenses
  
 (553)
  
 (599)
  
 599
          
-
   
Income from other securities and loans
  
-
  
-
  
-
          
-
   
Depreciation on financial assets
  
-
  
-
  
-
          
-
Operating profit
      
 450
  
 488
  
 -
  
 (11)
      
 477
Non-service pension benefit (expense)
              
-
  
 (1)
  
(xiii)
  
 (1)
Interest (expense) income, net
                          
 (8)
   
Interests and similar income
  
 7
  
 8
  
 (16)
            
   
Interests and similar expenses
  
 (15)
  
 (16)
  
 16
            
Income from operations before income taxes
      
 442
  
 480
  
 -
  
 (12)
      
 468
Income tax expense
  
Taxes on income
  
 (135)
  
 (146)
  
-
  
 6
  
(i)
  
 (140)
                   
 (1)
  
(ii)
    
                   
 1
  
(xiii)
    
                   
 (1)
  
(x)
    
                   
 1
  
(xv)
    
                             
Net income from operations
      
 307
  
 334
  
-
  
 (6)
      
 328
Less: Non-controlling interest in subsidiaries' earnings from operations
                            
Net income attributable to common shareowners
  
Net income
  
 307
  
 334
  
 -
  
 (6)
      
 328

11
Unaudited Condensed Combined Statement of Operations Adjustments
For Twelve Months Ended December 31, 2022
(Amounts in millions)
 
Carrier Presentation
  
Historical VCS Business
Presentation
  
Historical VCS
Business Euro
  
 Historical VCS
Business USD
  
 Reclassification
Adjustments USD
  
 U.S. GAAP
Adjustments USD
  
Notes
  
 VCS Business
Adjusted USD
Net sales
  
Net sales
  
3,402
  
3,584
  
(3,584)
          
-
Product sales
              
3,165
  
 (5)
  
(viii)
  
3,161
                   
 1
  
(ix)
    
Service sales
              
 419
          
 419
       
3,402
  
3,584
  
-
  
 (4)
      
3,580
Costs and expenses
                            
Cost of products sold
              
(2,009)
  
 (3)
  
(vii)
  
(2,013)
                   
 2
  
(ii)
    
                   
 (3)
  
(iii)
    
                   
 (2)
  
(xiii)
    
                   
 2
  
(x)
    
Cost of services sold
              
 (173)
          
 (173)
Research and development
              
 (164)
  
 (1)
  
(xiii)
  
 (165)
Selling, general and administrative
              
 (794)
          
 (794)
       
-
  
-
  
(3,140)
  
 (5)
      
(3,145)
   
Change of inventories of finished and unfinished goods
  
 70
  
 74
  
 (74)
          
-
   
Internally produced and capitalized assets
  
 9
  
 9
  
 (9)
          
-
   
Material expenses
  
(1,655)
  
(1,743)
  
1,743
          
-
   
Personnel expenses
  
 (751)
  
 (791)
  
 791
          
-
   
Depreciation and amortization
  
 (56)
  
 (59)
  
 59
          
-
Equity method investment net earnings
              
-
          
-
Other income (expense), net
                          
 33
               
 29
  
-
        
                   
 4
  
(viii)
    
                   
 (1)
  
(iv)
    
                   
 2
  
(xii)
    
                   
 (1)
  
(ix)
    
   
Expenses from profit and loss transfer agreements
  
 (217)
  
 (229)
  
-
  
 229
  
(xi)
    
   
Other operating income
  
 95
  
 100
  
 (100)
          
-
   
Other operating expenses
  
 (665)
  
 (701)
  
 701
          
-
   
Income from other securities and loans
  
-
  
-
  
-
          
-

12
 
Unaudited Condensed Combined Statement of Operations Adjustments
For Twelve Months Ended December 31, 2022
(Amounts in millions)

Carrier Presentation
  
Historical VCS
Business
Presentation
  
Historical VCS
Business Euro
  
 Historical VCS
Business USD
  
 Reclassification
Adjustments USD
  
 U.S. GAAP
Adjustments USD
  
Notes
  
 VCS Business
Adjusted USD
   
Depreciation on financial assets
  
-
  
-
  
-
          
-
Operating profit
      
 232
  
 244
  
-
  
 224
      
 468
Non-service pension benefit (expense)
              
-
  
 (2)
  
(xiii)
  
 (2)
Interest (expense) income, net
              
 (8)
          
 (8)
   
Interests and similar income
  
 5
  
 6
  
 (6)
            
   
Interests and similar expenses
  
 (13)
  
 (14)
  
 14
            
Income from operations before income taxes
      
 224
  
 236
  
-
  
 222
      
 458
Income tax expense
  
Taxes on income
  
 (121)
  
 (127)
  
-
  
 (10)
  
(i)
  
 (134)
                   
 2
  
(xv)
    
                   
 1
  
(iii)
    
                   
 1
  
(vii)
    
                   
 (1)
  
(xiii)
    
Net income from operations
      
 103
  
 109
  
-
  
 215
      
 324
Less: Non-controlling interest in subsidiaries' earnings from operations
                            
Net income attributable to common shareowners
  
Net income
  
 103
  
 109
  
-
  
 215
      
 324

13
Reclassification Adjustments: This column represents the reclassification adjustments that have been applied to the VCS Business’s combined statement of financial position and combined statement of income to conform to Carrier’s financial statements presentation. The VCS Business’s combined statement of income was presented on a total cost basis under German GAAP, whereas Carrier’s historical statement of operations is presented in accordance with U.S. GAAP. The VCS Business's combined financial statements were mapped to Carrier’s financial statement line items and the differences obtained from this were considered as reclassification adjustments.
 
U.S. GAAP Adjustments:
 

 (i)
To record the impact of differences in the calculation of deferred taxes.
 

 (ii)
To adjust for the impact of different inventory write-down methodologies.
 

 (iii)
To record the impact of change in intra-company profit elimination.
 

 (iv)
To record the impact of differences in methodology for provision for doubtful accounts and other credit losses.
 

 (v)
To reduce the historical VCS Business cash by the amount of restricted cash.
 

 (vi)
To record operating and finance leases right of use assets and liabilities calculated in accordance with U.S. GAAP.
 

 (vii)
To record changes due to reclassification of consignment stocks, exhibition style special stocks and tools to fixed assets and related deferred tax impact. The recognized write-down of those stocks in inventory under German GAAP has been reversed. The respective depreciation was recognized in fixed assets.
 

 (viii)
To reverse the recognized revenue and corresponding expense related to customer loyalty programs that are not yet deemed earned under U.S. GAAP and are deferred as a contract liability, and the related deferred tax impact.
 

 (ix)
To record the reclassification of the long-term portion of contingent loss provisions and adjustments to certain provisions given different threshold criteria.
 

 (x)
To record a reversal in depreciation recorded in finished goods inventory of merchandised products, and the related deferred tax impact.
 

 (xi)
To record the elimination of expenses from profit and loss transfer agreement that comprises the portion of the profits transferred to Viessmann remaining after deduction of the income tax expense regulated by tax allocation agreements.
 

 (xii)
To record the reversal of goodwill amortized under German GAAP and separately an unrelated failed sale and leaseback by recording the capitalization and amortization of the related fixed asset.
 

 (xiii)
To record the difference in pension valuation from German GAAP to U.S. GAAP, and corresponding deferred tax adjustment.
 

 (xiv)
To reverse the inventory reduction recorded under German GAAP and record a contract liability for prepayment on customer contracts.
 
 
(xv)
To record an adjustment due to the different treatment of consolidated tax group for income tax purposes.


(xvi)
To record the difference in treatment for accounting for hyperinflationary economies between German GAAP to U.S. GAAP.
 
14
Note 3. Transaction Accounting and Financing Adjustments
 
The Acquisition will be accounted for using the acquisition method of accounting in accordance with ASC 805, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their acquisition date fair values, with any excess of the consideration transferred over the estimated fair values of the identifiable net assets acquired recorded as goodwill.
 
Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet
 
 
(A)
The adjustment reflects the preliminary estimated fair value of consideration transferred comprised of the Cash Consideration and Share Consideration (as each defined in the Share Purchase Agreement). Cash Consideration was translated from euro to U.S. Dollars based on an exchange rate of $1.0962 per €1.
 
In accordance with the Share Purchase Agreement, Carrier is required to settle the outstanding intercompany balance owed by the VCS Business to Viessmann upon consummation of the Acquisition. As of the date of the closing statement, all of the intercompany balances between the VCS Business and Viessmann have been settled.

USD in millions
      
Cash Consideration
  
$
11,165
  
Share Consideration
  
$
3,006
  
Preliminary estimated fair value of consideration transferred
  
$
14,171
  

Share Consideration of approximately $3,006 million is based on 58,608,959 shares to be delivered, the Company’s closing share price of $56.99 on December 19, 2023, and a discount for the issuance of unregistered shares. The fair value of the Share Consideration portion of the purchase price will depend on the market price of the Company’s common shares when the acquisition is consummated. The Company believes that a 10% fluctuation in the market price of its common stock is reasonably possible based on historical volatility, and the potential effect on purchase price would be:
 
   
Carrier’s share price
    
Purchase price
(equity portion)
  
Share price considered
  
$
56.99
    
$
3,006
  
10% Increase
    
62.69
      
3,307
  
10% Decrease
    
51.29
      
2,706
  

The following table summarizes the allocation of preliminary purchase price:
 
USD in millions
      
Cash and cash equivalents
  
$
231
  
Accounts receivable, net
    
608
  
Inventories, net
    
1,198
  
Other assets, current
    
111
  
Future income tax benefits
    
-
  
Fixed assets, net
    
758
  
Operating lease right-of-use assets
    
98
  
Intangible assets, net
    
4,627
  
Pension and post-retirement assets
    
-
  
Other assets
     28  
Total assets
  
$
7,659
  
Accounts payable
    
251
  
Accrued liabilities
    
620
  
Contract liabilities, current
    
94
  
Current portion of long-term debt
    
10
  
Long-term debt
    
20
  
Future pension and post-retirement obligations
    
74
  
Future income tax obligations
    
1,451
  
Operating lease liabilities
    
74
  
Other long-term liabilities
    
11
  
Total liabilities
  
$
2,605
  
Net assets acquired
  
$
5,054
  
Goodwill
    
9,117
  
Preliminary estimated fair value of consideration transferred
  
$
14,171
  

15
The preliminary purchase accounting was based on a benchmarking analysis of similar transactions in the industry and other limited valuation procedures performed in order to identify value allocations of the Acquisition consideration to assets acquired and liabilities assumed, including intangible assets, step-up in the value of inventory, and real and personal property assets. The final purchase consideration allocation will be determined when the Company completes the detailed valuations and necessary calculations and will be completed as soon as practicable within the measurement period in accordance with ASC 805, but in no event later than one year from the Acquisition. The final Acquisition consideration allocation may be materially different than that reflected in the preliminary estimated Acquisition consideration allocation presented herein. Any increase or decrease in fair values of the net assets as compared with the unaudited pro forma condensed combined financial information may change the amount of the total Acquisition consideration allocated to goodwill and other assets and liabilities and may impact the combined company’s statement of operations due to adjustments in the depreciation and amortization of the adjusted assets.
 
 
(B)
Reflects the preliminary estimated fair value adjustment to fixed assets, net acquired in the Acquisition, as shown in the table below. The fair value of fixed assets, net is subject to change.
 
USD in millions
  
Estimated Useful life (in years)
    
Preliminary Estimated
Asset
Fair Value
  
Land
    
n/a
    
$
62
  
Buildings and improvements
  
3 to 22
      
213
  
Machinery, tools and equipment
  
5 to 8
      
320
  
Other, including assets under construction
  
4 to 45
      
163
  
Fixed assets, net
          
$
758
  
Less: VCS Business's Adjusted Fixed assets, net
            
(555
)
Pro Forma adjustment
          
$
203
  

 
(C)
Reflects the preliminary estimated fair value adjustment to the identifiable intangible assets acquired in the Acquisition, as shown in the table below. The fair value of intangible assets is subject to change.
 
USD in millions
  
Estimated Useful life (in
years)
    
Preliminary Estimated
Asset
Fair Value
  
Customer relationships
    
15
    
$
3,256
  
Trademark
    
40
      
715
  
Technology
    
7
      
502
  
Backlog
    
1
      
154
  
Identifiable intangible assets, net
          
$
4,627
  
Less: VCS Business's Adjusted Intangible assets, net
            
(8
)
Pro Forma adjustment
          
$
4,619
  
 
 
(D)
The adjustment reflects a step up in fair value to the VCS Business’s finished goods and work-in process inventory. The calculation of fair value is preliminary and subject to change. The preliminary estimated fair value of inventories, net, was determined based on the estimated selling price of the inventory, less the remaining manufacturing and selling costs and a normal profit margin on those manufacturing and selling efforts, as shown in the table below.
 
USD in millions
      
Inventories
  
$
1,198
  
Less: VCS Business’s Adjusted Inventories, net
    
(1,018
)
Pro Forma adjustment
  
$
180
  

16
 
(E)
To reflect Carrier’s estimated transaction costs of $46 million consisting of advisory, legal, accounting and auditing fees and other professional fees, that have not been recognized and accrued in the historical financial statements of Carrier and the VCS Business. These costs are recorded as a reduction in cash and retained earnings.
 
 
(F)
Reflects (i) the elimination of $111 million of receivables recorded within “Other assets, current” from Viessman; (ii) the elimination of $69 million of payables to Viessman recorded within “Accrued liabilities; and (iii) an increase to “Cash and cash equivalents” of $42 million which represents the net effect of the amounts settled amongst the VCS Business and Viessman on or prior to close of the Acquisition.
 
 
(G)
Reflects estimated deferred taxes related to the purchase price allocation and income tax impact effect related to the pro forma adjustments in the balance sheet resulting from step-up in inventory, fixed assets and intangible assets. These tax-related adjustments are based upon an estimated blended tax rate of 28.1% on adjustments.
 
 
(H)
Reflects the impact of the financing for the Transactions and related debt issuance costs. The impact on other current liabilities and long-term debt have been adjusted for the following:
 
USD in millions
  
Current portion of
long-term debt/
Other current
liabilities
    
Long-term
debt
    
Total
  
Bridge Facility
  
$
475
    
$
-
    
$
475
  
USD Notes
                        
5.8000% notes due 2025
            
1,000
      
1,000
  
5.9000% notes due 2034
            
1,000
      
1,000
  
6.2000% notes due 2054
            
1,000
      
1,000
  
Euro Notes
                        
4.375% notes due 2025
            
801
      
801
  
4.125% notes due 2028
            
801
      
801
  
4.500% notes due 2032
            
907
      
907
  
Term Loan Credit Agreement
            
2,521
      
2,521
  
Total Principal balance from incremental Bridge Facility, Notes and Term Loan Credit Agreement
  
$
475
    
$
8,030
    
$
8,505
  
New deferred debt issuance costs for Term Loan Credit Agreement and other debt
    
-
      
(54
)
    
(54
)
Pro Forma adjustment
  
$
475
    
$
7,976
    
$
8,451
  

The long-term debt is further adjusted by $19 million to expense debt issuance cost which is capitalized in the historical financial statements.
 
 
(I)
To adjust the VCS Business’s historical financial statements to give pro forma effect to events in connection with the Acquisition that include the elimination of the VCS Business’s historical additional paid in capital of $1,462 million.
 
Adjustments to Unaudited Pro Forma Condensed Combined Statement of Operations
 
 
(AA)
Reflects incremental depreciation expense included in cost of products sold of $6 million and $8 million and selling, general, and administrative expenses (“SG&A”) of $2 million and $3 million related to step-up in value of PP&E acquired for the nine months ended September 30, 2023 and twelve months ended December 31, 2022, respectively.
 
USD in millions
  
Estimated
Useful life (in
years)
    
Preliminary
Estimated
Asset
Fair Value
    
Depreciation
for the nine
months ended
September 30,
2023
    
Depreciation
for the twelve
months ended
December 31,
2022
  
Land
    
n/a
    
$
62
      
n/a
      
n/a
  
Buildings and improvements
  
3 to 22
      
213
      
8
      
11
  
Machinery, tools and equipment
  
5 to 8
      
320
      
35
      
45
  
Other, including assets under construction
  
4 to 45
      
163
      
5
      
7
  
Total Depreciation expense on additional Fixed assets, net
                  
$
48
    
$
63
  
Less: VCS Business’s Adjusted Depreciation expense
                    
(40
)
    
(52
)
Pro Forma adjustment
                  
$
8
    
$
11
  

17
 
(BB)
Reflects incremental amortization expense related to the fair value of identifiable intangible assets acquired. The adjustment included in cost of products sold is $332 million and $493 million for the nine months ended September 30, 2023 and twelve months ended December 31, 2022, respectively. The adjustment included in cost of services sold is $37 million and $39 million for the nine months ended September 30, 2023 and twelve months ended December 31, 2022, respectively.
 
USD in millions
  
Estimated
Useful life (in
years)
    
Preliminary
Estimated Asset
Fair Value
    
Amortization
expense for the
nine months ended
September 30,
2023
    
Amortization
expense for the
twelve months
ended December
31, 2022
  
Customer relationships
    
15
    
$
3,256
    
$
266
    
$
288
  
Trademark
    
40
      
715
      
30
      
35
  
Technology
    
7
      
502
      
78
      
65
  
Backlog
    
1
      
154
      
-
      
152
  
Amortization expense
                  
$
374
    
$
540
  
Less: VCS Business’ Adjusted Amortization expense
                  
$
(5
)
  
$
(8
)
Pro Forma adjustment
                  
$
369
    
$
532
  

The acquired Customer relationships, Trademark and Technology will be amortized based on the pattern in which the economic benefits of the intangible assets are expected to be realized. Based on the assumed acquisition date of September 30, 2023, the expected impact on operating results for the five years following the Acquisition is as follows:
 
   
Twelve months ended December 31,
  
USD in millions
  
2024
    
2025
    
2026
    
2027
    
2028
  
Customer relationships
  
$
380
    
$
358
    
$
317
    
$
281
    
$
245
  
Trademark
    
42
      
43
      
44
      
43
      
42
  
Technology
  
$
117
    
$
106
    
$
81
    
$
44
    
$
13
  
 
 
(CC)
To reflect the amortization of the preliminary estimated increase in fair value of “Inventories, net” of $178 million, as the inventory is expected to be sold within one year of the acquisition date.
 
 
(DD)
To reflect Carrier’s estimated transaction costs of $46 million in the twelve months ended December 31, 2022. This amount consists of advisory, legal, accounting and auditing fees and other professional fees, that have not been recognized and accrued in the historical financial statements of Carrier and the VCS Business. This is a non-recurring item.
 
 
(EE)
To reflect reversal of interest expense related to intercompany financing as per adjustment (F) above.
 
 
(FF)
To record the reversal of the historical royalty fee of $40 million and $45 million paid by the VCS Business to Viessmann recorded in the VCS Business’s combined financial statements for the nine months ended September 30, 2023 and twelve months ended December 31, 2022, respectively.
 
 
(GG)
To record the new royalty fee of $10 million and $13 million pursuant to the License Agreement for use of “Viessmann” trademarks in connection with the VCS Business for the nine months ended September 30, 2023 and twelve months ended December 31, 2022, respectively.
 
 
(HH)
The following adjustments to interest expense reflect the estimated interest expense and financing costs amortization to be incurred by Carrier as a result of the financing and amortization of fees paid for the borrowings under the Term Loan Credit Agreement, the Notes and the Euro Notes:
 
18
USD in millions
  
Interest expense for the
nine months ended
September 30, 2023
    
Interest expense for
the twelve months ended
December 31, 2022
  
Bridge Facility
  
$
-
    
$
5
  
USD Notes
                
5.8000% notes due 2025
    
44
      
58
  
5.9000% notes due 2034
    
44
      
59
  
6.2000% notes due 2054
    
46
      
62
  
Euro Notes
                
4.375% notes due 2025
    
18
      
35
  
4.125% notes due 2028
    
25
      
33
  
4.500% notes due 2032
    
30
      
41
  
Term Loan Credit Agreement
    
104
      
167
  
Total Bridge Facility, Notes and Term Loan Credit Agreement (excluding amortization of debt issuance costs)
  
$
311
    
$
460
  
Amortization of debt issuance costs related to new Bridge Facility, Notes and Term Loan Credit Agreement
    
8
      
12
  
Pro forma adjustment
  
$
319
    
$
472
  

 The Term Loan Credit Agreement above carries a variable rate of interest. The assumed interest rate for this purpose is 6.62%. An increase/decrease of 1/8th percent in the estimated effective interest rate on Term Loan Credit Agreement would change the interest expense by $2 million and $3 million for the nine months ended September 30, 2023 and the twelve months ended December 31, 2022 respectively.
 
 
(II)
Reflects the estimated income tax impact of the pro forma adjustments related to transaction accounting adjustments. For taxable VCS Business’s transaction accounting adjustments, a blended tax rate of 28.1% is used. For Carrier’s taxable transaction accounting adjustments, a blended tax rate of 23.5% is used. The amounts are adjusted for certain non-deductible advisory fees.
 
 
(JJ)
Reflects the one-time cost incurred of $19 million related to the debt issuance cost not capitalized in (HH) above, related to the loans that were ultimately not used to finance the Transactions.
 
 
(KK)
Reflects the estimated income tax impact of the pro forma adjustments related to the issuance of new debt. Tax-related adjustments are based upon a blended tax rate of 23.5%, adjusted for the impact of a reduction in foreign tax credit utilization.
 
Note 4. Earnings Per Share
 
The following tables set forth the computation of pro forma basic and diluted earnings per share for the nine months ended September 30, 2023, and for the twelve months ended December 31, 2022. Weighted average number of common shares outstanding (basic and diluted) include 58,608,959 shares, which are expected to be issued as part of consideration for the Acquisition.
 
USD in millions, except per share amounts
  
Nine months
ended September
30, 2023
    
Twelve months
ended December
31, 2022
  
Numerator (Basic and Diluted):
            
Pro Forma combined net income
  
$
760
    
$
2,953
  
Denominator (in millions):
                
Historical weighted average shares outstanding – Basic
    
837
      
843
  
Pro forma adjustment for shares issued
    
59
      
59
  
Weighted average common shares outstanding – Basic:
    
896
      
902
  
Historical weighted average shares outstanding – Diluted
    
853
      
861
  
Pro forma adjustment for shares issued
    
59
      
59
  
Weighted average common and potential common shares outstanding – Diluted:
    
912
      
920
  
Pro Forma earnings per share:
                
Earnings per share – Basic
  
$
0.85
    
$
3.27
  
Earnings per share – Diluted
  
$
0.83
    
$
3.21
  

 
19