Highlights (third-quarter 2022 versus third-quarter 2021,
unless otherwise noted):
- Reported bookings of $4.5 billion, up 6 percent; organic
bookings* up 8 percent
- Reported revenues of $4.4 billion, up 18 percent; organic
revenues* up 19 percent
- GAAP operating margin up 120 bps; adjusted operating margin*
up 60 bps
- GAAP continuing EPS of $2.38; adjusted continuing EPS* of
$2.27, up 26 percent
- Strong backlog of $6.4 billion, up 28 percent; well
positioned for 2022 and 2023
*This news release contains non-GAAP financial measures.
Definitions of the non-GAAP financial measures can be found in the
footnotes of this news release. See attached tables for additional
details and reconciliations.
Trane Technologies plc (NYSE:TT), a global climate innovator,
today reported diluted earnings per share (EPS) from continuing
operations of $2.38 for the third quarter of 2022. Adjusted
continuing EPS was $2.27, up 26 percent, and was lower than
reported diluted EPS by $0.11 due to the exclusion of a discrete
tax benefit and a favorable insurance settlement in the third
quarter, partially offset by other adjustments.
Third-Quarter 2022 Results
Financial Comparisons - Third-Quarter Continuing
Operations
$, millions except EPS
Q3 2022
Q3 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$4,493
$4,254
6%
8%
Net Revenues
$4,372
$3,720
18%
19%
GAAP Operating Income
$740
$583
27%
GAAP Operating Margin
16.9%
15.7%
120 bps
Adjusted Operating Income*
$729
$598
22%
Adjusted Operating Margin*
16.7%
16.1%
60 bps
Adjusted EBITDA*
$809
$670
21%
Adjusted EBITDA Margin*
18.5%
18.0%
50 bps
GAAP Continuing EPS
$2.38
$1.73
38%
Adjusted Continuing EPS
$2.27
$1.80
26%
Restructuring and Transformation
Costs**
($4.3)
($21.5)
$17.2
**For details see table 2 of the news
release.
“Trane Technologies delivered strong financial performance again
in the third quarter, with 8 percent organic bookings growth, 19
percent organic revenue growth and 26 percent adjusted EPS growth,”
said Dave Regnery, chair and CEO of Trane Technologies.
“We continue to see high levels of customer demand for our
innovative, sustainable solutions, with broad-based organic revenue
growth in every region and across our resilient portfolio of
products and services. With our purpose-driven strategy, the power
of our global team and the strength of our business operating
system, we are confident raising our full-year guidance for revenue
and EPS. Our financial strength, unprecedented backlog, and leading
innovation position us well to deliver differentiated financial
performance and shareholder returns in 2022 and over the
long-term."
Highlights from the Third Quarter of 2022 (all comparisons
against third quarter of 2021 unless otherwise noted)
- Delivered strong third-quarter revenue, operating income, and
EPS growth.
- Robust bookings drove a book-to-bill ratio of 103 percent and a
continued strong backlog of approximately $6.4 billion.
- Enterprise reported and organic bookings were up 6 percent and
8 percent, respectively.
- Enterprise reported revenues were up 18 percent including
approximately 3 percentage points of negative foreign exchange
impact. Organic revenues were up 19 percent.
- GAAP operating margin was up 120 basis points, adjusted
operating and adjusted EBITDA margins were up 60 basis points and
50 basis points, respectively.
- Strong volume growth and positive price realization were
partially offset by material and other inflation related to supply
chain challenges and higher costs to serve customers, including
spot buys and expedited freight. The Company also continued high
levels of business reinvestment.
Third-Quarter Business Review (all comparisons against third
quarter of 2021 unless otherwise noted)
Americas Segment: innovates for customers in the North
America and Latin America regions. The Americas segment encompasses
commercial heating and cooling systems, building controls, and
energy services and solutions; residential heating and cooling; and
transport refrigeration systems and solutions.
$, millions
Q3 2022
Q3 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$3,680.5
$3,307.4
11%
11%
Net Revenues
$3,481.4
$2,910.3
20%
19%
GAAP Operating Income
$652.4
$506.7
29%
GAAP Operating Margin
18.7%
17.4%
130 bps
Adjusted Operating Income
$630.0
$507.5
24%
Adjusted Operating Margin
18.1%
17.4%
70 bps
Adjusted EBITDA
$697.7
$566.9
23%
Adjusted EBITDA Margin
20.0%
19.5%
50 bps
- Reported and organic bookings were both up 11 percent.
- Reported and organic revenues were up 20 percent and 19
percent, respectively.
- Americas exited the third quarter of 2022 with backlog more
than 2 times historical norms.
- GAAP operating margin was up 130 basis points, adjusted
operating margin was up 70 basis points and adjusted EBITDA margin
was up 50 basis points. Strong volume growth and positive price
realization were partially offset by material and other inflation
related to supply chain challenges and higher costs to serve
customers, including spot buys and expedited freight. The Company
also continued high levels of business reinvestment.
Europe, Middle East and Africa (EMEA) Segment: innovates
for customers in the Europe, Middle East and Africa region. The
EMEA segment encompasses heating and cooling systems, services and
solutions for commercial buildings, and transport refrigeration
systems and solutions.
$, millions
Q3 2022
Q3 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$453.6
$574.4
(21)%
(10)%
Net Revenues
$513.1
$495.0
4%
18%
GAAP Operating Income
$80.1
$90.7
(12)%
GAAP Operating Margin
15.6%
18.3%
(270 bps)
Adjusted Operating Income
$86.3
$91.8
(6)%
Adjusted Operating Margin
16.8%
18.5%
(170 bps)
Adjusted EBITDA
$94.7
$99.4
(5)%
Adjusted EBITDA Margin
18.5%
20.1%
(160 bps)
- Reported and organic bookings were down 21 percent and 10
percent, respectively, driven by tough prior year comps in
Transport. Commercial HVAC organic bookings were up low-teens.
- Reported revenues were up 4 percent, including approximately 14
percentage points of negative foreign exchange impact.
- EMEA exited the third quarter of 2022 with backlog
approximately 40 percent more than historical norms.
- GAAP operating margin was down 270 basis points, adjusted
operating margin was down 170 basis points and adjusted EBITDA
margin was down 160 basis points. Strong volume growth and positive
price realization were more than offset by foreign exchange,
material and other inflation related to supply chain challenges and
higher costs to serve customers, including spot buys and expedited
freight. The Company also continued high levels of business
reinvestment.
Asia Pacific Segment: innovates for customers throughout
the Asia Pacific region. The Asia Pacific segment encompasses
heating and cooling systems, services and solutions for commercial
buildings and transport refrigeration systems and solutions.
$, millions
Q3 2022
Q3 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$358.8
$372.1
(4)%
3%
Net Revenues
$377.4
$314.5
20%
28%
GAAP Operating Income
$75.6
$52.3
45%
GAAP Operating Margin
20.0%
16.6%
340 bps
Adjusted Operating Income
$76.1
$53.7
42%
Adjusted Operating Margin
20.2%
17.1%
310 bps
Adjusted EBITDA
$81.8
$57.3
43%
Adjusted EBITDA Margin
21.7%
18.2%
350 bps
- Reported bookings were down 4 percent while organic bookings
were up 3 percent.
- Reported revenues were up 20 percent including approximately 8
percentage points of negative foreign exchange impact. Organic
revenues were up 28 percent.
- Asia Pacific exited the third quarter of 2022 with backlog
approximately 50 percent more than historical norms.
- GAAP operating margin was up 340 basis points, adjusted
operating margin was up 310 basis points and EBITDA margin was up
350 basis points, driven by higher volumes in the quarter. Strong
volume growth and positive price realization were partially offset
by foreign exchange, material and other inflation. The Company also
continued high levels of business reinvestment.
Balance Sheet and Cash Flow
$, millions
Q3 2022
Q3 2021
Y-O-Y Change
Cash From Continuing Operating
Activities Y-T-D
$933
$1,163
($230)
Free Cash Flow Y-T-D*
$891
$1,082
($191)
Working Capital/Revenue*
4.1%
1.8%
230 bps increase
Cash Balance 30 September
$1,080
$2,739
($1,659)
Debt Balance 30 September
$4,837
$4,841
($4)
- Through September 30, 2022, the Company had cash flow from
continuing operating activities of $933 million and generated free
cash flow of $891 million.
- During the third quarter, the Company deployed $156 million in
dividends and $250 million in share repurchases. Year-to-date
through October, the Company has deployed $900 million for share
repurchases, $467 million for dividends, and approximately $250
million for M&A, including the acquisition of AL-KO Air
Technology on October 31, 2022. The Company has approximately $3.5
billion remaining under current share repurchase
authorizations.
- The Company expects to continue to pay a competitive and
growing dividend and to deploy 100 percent of excess cash to
shareholders over time.
Increasing Full-Year 2022 Revenue and EPS Guidance
- The Company expects full-year reported revenue growth of
approximately 11 percent to 12 percent; organic revenue growth of
approximately 13 percent to 14 percent versus full-year 2021.
- The Company expects GAAP continuing EPS for full-year 2022 of
$7.24 to $7.29. This includes EPS of $0.09 for a discrete tax
benefit and a favorable insurance settlement in Q3 2022 partially
offset by other adjustments. The Company expects adjusted
continuing EPS for full-year 2022 of $7.15 to $7.20.
- Additional information regarding the Company's 2022 guidance is
included in the Company's earnings presentation found at
www.tranetechnologies.com in the Investor Relations section.
This news release includes “forward-looking statements,” which
are statements that are not historical facts, including statements
that relate to our future financial performance and targets,
including revenue, EPS and operating income; our business
operations; demand for our products and services, including
bookings and backlog; capital deployment, including the amount and
timing of our dividends, our share repurchase program, including
the amount of shares to be repurchased and the timing of such
repurchases and our capital allocation strategy, including
acquisitions, if any; our projected free cash flow and usage of
such cash; our available liquidity; performance of the markets in
which we operate; restructuring activity and cost savings
associated with such activity; and our effective tax rate.
These forward-looking statements are based on our current
expectations and are subject to risks and uncertainties, which may
cause actual results to differ materially from our current
expectations. Such factors include, but are not limited to, the
impact of the global COVID-19 pandemic on our business, our
suppliers and our customers; global economic conditions, including
recessions and economic downturns, inflation, volatility in
interest rates and foreign exchange; changing energy prices; the
Russia-Ukraine conflict; climate change and our sustainability
strategies and goals; commodity shortages; supply chain constraints
and price increases; government regulation; restructurings activity
and cost savings associated with such activity; secular trends
toward decarbonization, energy efficiency and internal air quality,
the outcome of any litigation, including the risks and
uncertainties associated with the Chapter 11 proceedings for our
deconsolidated subsidiaries Aldrich Pump LLC and Murray Boiler LLC;
cybersecurity risks; and tax audits and tax law changes and
interpretations. Additional factors that could cause such
differences can be found in our Form 10-K for the year ended
December 31, 2021, as well as our subsequent reports on Form 10-Q
and other SEC filings. We assume no obligation to update these
forward-looking statements.
This news release also includes non-GAAP financial information,
which should be considered supplemental to, not a substitute for,
or superior to, the financial measure calculated in accordance with
GAAP. The definitions of our non-GAAP financial information and
reconciliation to GAAP are attached to this news release.
All amounts reported within the earnings release above related
to net earnings (loss), earnings (loss) from continuing operations,
earnings (loss) from discontinued operations, adjusted EBITDA and
per share amounts are attributed to Trane Technologies' ordinary
shareholders.
Trane Technologies (NYSE:TT) is a global climate innovator.
Through our strategic brands Trane® and Thermo King®, and our
portfolio of environmentally responsible products and services, we
bring efficient and sustainable climate solutions to buildings,
homes and transportation. For more information, visit
tranetechnologies.com.
# # #
11/2/22
(See Accompanying Tables)
- Table 1: Condensed Consolidated Income Statement
- Tables 2 - 5: Reconciliation of GAAP to Non-GAAP
- Table 6: Condensed Consolidated Balance Sheets
- Table 7: Condensed Consolidated Statement of Cash Flows
- Table 8: Balance Sheet Metrics and Free Cash Flow
*Q3 Non-GAAP measures definitions
Adjusted operating income in 2022 is defined as GAAP
operating income adjusted for restructuring costs, transformation
costs, M&A transaction costs, non-cash adjustments for
contingent consideration, a settlement charge for a compensation
related payment to a retired executive, and an insurance settlement
on a property claim in Q3 2022. Adjusted operating income in 2021
is defined as GAAP operating income adjusted for restructuring
costs, transformation costs and M&A transaction costs. Please
refer to the reconciliation of GAAP to non-GAAP measures on tables
2, 3 and 4 of the news release.
Adjusted operating margin is defined as the ratio of
adjusted operating income divided by net revenues.
Adjusted earnings from continuing operations attributable to
Trane Technologies plc (Adjusted net earnings) in 2022 is
defined as GAAP earnings from continuing operations attributable to
Trane Technologies plc adjusted for net of tax impacts of
restructuring costs, transformation costs, M&A transaction
costs, non-cash adjustments for contingent consideration, a
settlement charge for a retired executive, a insurance settlement
on a property claim in Q3 2022, and a U.S. discrete non-cash tax
adjustment. Adjusted net earnings in 2021 is defined as GAAP
earnings from continuing operations attributable to Trane
Technologies plc adjusted for net of tax impacts of restructuring
costs, transformation costs, M&A transaction costs and charges
related to certain entities deconsolidated under Chapter 11. Please
refer to the reconciliation of GAAP to non-GAAP measures on tables
2 and 3 of the news release.
Adjusted continuing EPS in 2022 is defined as GAAP
continuing EPS adjusted for net of tax impacts of restructuring
costs, transformation costs, M&A transaction costs, non-cash
adjustments for contingent consideration, a settlement charge for a
retired executive, an insurance settlement on a property claim in
Q3 2022, and a U.S. discrete non-cash tax adjustment. Adjusted
continuing EPS in 2021 is defined as GAAP continuing EPS adjusted
for net of tax impacts of restructuring costs, transformation
costs, M&A transaction costs and charges related to certain
entities deconsolidated under Chapter 11. Please refer to the
reconciliation of GAAP to non-GAAP measures on tables 2 and 3 of
the news release.
Adjusted EBITDA in 2022 is defined as adjusted operating
income adjusted for depreciation and amortization expense, other
income / (expense), net, and a settlement charge for a retired
executive. Adjusted EBITDA in 2021 is defined as adjusted operating
income adjusted for depreciation and amortization expense, other
income / (expense), net, and charges related to certain entities
deconsolidated under Chapter 11. Please refer to the reconciliation
of GAAP to non-GAAP measures on tables 4 and 5 of the news
release.
Adjusted EBITDA margin is defined as the ratio of
adjusted EBITDA divided by net revenues.
Adjusted effective tax rate for 2022 is defined as the
ratio of income tax expense adjusted for the net tax effect of
adjustments for restructuring costs, transformation costs, non-cash
adjustments for contingent consideration, settlement charge for a
retired executive, an insurance settlement in Q3 2022 on a property
claim, and a U.S. discrete non-cash tax adjustment divided by
adjusted net earnings. Adjusted effective tax rate for 2021 is
defined as the ratio of income tax expense adjusted for the net tax
effect of adjustments for restructuring costs, transformation
costs, M&A transaction costs and charges related to certain
entities deconsolidated under Chapter 11 divided by adjusted net
earnings. This measure allows for a direct comparison of the
effective tax rate between periods.
Free cash flow in 2022 is defined as net cash provided by
(used in) continuing operating activities adjusted for capital
expenditures, cash payments for restructuring costs, transformation
costs, the continuing operations component of the qualified
settlement fund (QSF) funding, a payout for a retired executive,
and an insurance settlement in Q3 2022 on a property claim. Free
cash flow in 2021 is defined as net cash provided by (used in)
continuing operating activities adjusted for capital expenditures,
cash payments for restructuring costs and transformation costs.
Please refer to the free cash flow reconciliation on table 8 of the
news release.
Operating leverage is defined as the ratio of the change
in adjusted operating income for the current period (e.g. Q3 2022)
less the prior period (e.g. Q3 2021), divided by the change in net
revenues for the current period less the prior period.
Organic revenue is defined as GAAP net revenues adjusted
for the impact of currency and acquisitions. Organic
bookings is defined as reported orders in the current period
adjusted for the impact of currency and acquisitions.
Working capital measures a firm’s operating liquidity
position and its overall effectiveness in managing the enterprise's
current accounts.
- Working capital is calculated by adding net accounts and
notes receivables and inventories and subtracting total current
liabilities that exclude short-term debt, dividend payable and
income tax payables.
- Working capital as a percent of revenue is calculated by
dividing the working capital balance (e.g. as of September 30) by
the annualized revenue for the period (e.g. reported revenues for
the three months ended September 30 multiplied by 4 to annualize
for a full year).
The Company reports its financial results in accordance with
generally accepted accounting principles in the United States
(GAAP). The following schedules provide non-GAAP financial
information and a quantitative reconciliation of the difference
between the non-GAAP financial measures and the financial measures
calculated and reported in accordance with GAAP.
The non-GAAP financial measures should be considered
supplemental to, not a substitute for or superior to, financial
measures calculated in accordance with GAAP. They have limitations
in that they do not reflect all of the costs associated with the
operations of our businesses as determined in accordance with GAAP.
In addition, these measures may not be comparable to non-GAAP
financial measures reported by other companies.
We believe the non-GAAP financial information provides important
supplemental information to both management and investors regarding
financial and business trends used in assessing our financial
condition and results of operations.
Non-GAAP financial measures assist investors with analyzing our
business results as well as with predicting future performance. In
addition, these non-GAAP financial measures are also reviewed by
management in order to evaluate the financial performance of each
segment. Presentation of these non-GAAP financial measures helps
investors and management to assess the operating performance of the
Company.
As a result, one should not consider these measures in isolation
or as a substitute for our results reported under GAAP. We
compensate for these limitations by analyzing results on a GAAP
basis as well as a non-GAAP basis, prominently disclosing GAAP
results and providing reconciliations from GAAP results to non-GAAP
results.
Table 1
TRANE TECHNOLOGIES PLC
Condensed Consolidated Income
Statement
(In millions, except per share
amounts)
UNAUDITED
For the quarter
For the year ended
ended September 30,
ended September 30,
2022
2021
2022
2021
Net revenues
$
4,371.9
$
3,719.8
$
11,917.9
$
10,567.1
Cost of goods sold
(2,939.1
)
(2,515.6
)
(8,172.6
)
(7,139.0
)
Selling and administrative expenses
(693.3
)
(620.8
)
(1,907.0
)
(1,840.5
)
Operating income
739.5
583.4
1,838.3
1,587.6
Interest expense
(55.8
)
(57.7
)
(167.6
)
(177.7
)
Other income/(expense), net
(18.7
)
(6.9
)
(21.0
)
(13.8
)
Earnings before income taxes
665.0
518.8
1,649.7
1,396.1
Provision for income taxes
(104.7
)
(96.8
)
(302.4
)
(268.0
)
Earnings from continuing operations
560.3
422.0
1,347.3
1,128.1
Discontinued operations, net of tax
(7.9
)
(13.3
)
(16.6
)
(12.6
)
Net earnings
552.4
408.7
1,330.7
1,115.5
Less: Net earnings from continuing
operations attributable to noncontrolling interests
(4.5
)
(3.0
)
(13.3
)
(9.9
)
Net earnings attributable to Trane
Technologies plc
$
547.9
$
405.7
$
1,317.4
$
1,105.6
Amounts attributable
to Trane Technologies plc ordinary shareholders:
Continuing operations
$
555.8
$
419.0
$
1,334.0
$
1,118.2
Discontinued operations
(7.9
)
(13.3
)
(16.6
)
(12.6
)
Net earnings
$
547.9
$
405.7
$
1,317.4
$
1,105.6
Diluted earnings
(loss) per share attributable to Trane Technologies plc ordinary
shareholders:
Continuing operations
$
2.38
$
1.73
$
5.66
$
4.61
Discontinued operations
(0.04
)
(0.05
)
(0.07
)
(0.06
)
Net earnings
$
2.34
$
1.68
$
5.59
$
4.55
Weighted-average number of common shares
outstanding:
Diluted
234.0
241.7
235.7
242.8
Table 2
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions, except per share
amounts)
UNAUDITED
For the quarter ended September
30, 2022
For the year ended September 30,
2022
As
As
As
As
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Net revenues
$
4,371.9
$
—
$
4,371.9
$
11,917.9
$
—
$
11,917.9
Operating income
739.5
(10.7
)
(a,b,c,d,e,f)
728.8
1,838.3
(17.3
)
(a,b,c,d,e,f)
1,821.0
Operating margin
16.9
%
16.7
%
15.4
%
15.3
%
Earnings from continuing operations before
income taxes
665.0
4.3
(a,b,c,d,e,f)
669.3
1,649.7
(2.3
)
(a,b,c,d,e,f)
1,647.4
Provision for income taxes
$
(104.7
)
(27.8
)
(g,h)
(132.5
)
(302.4
)
(25.9
)
(g,h)
(328.3
)
Tax rate
15.7
%
19.8
%
18.3
%
19.9
%
Earnings from continuing operations
attributable to Trane Technologies plc
$
555.8
$
(23.5
)
(i)
$
532.3
$
1,334.0
$
(28.2
)
(i)
$
1,305.8
Diluted earnings per
common share
Continuing operations
$
2.38
$
(0.11
)
$
2.27
$
5.66
$
(0.12
)
$
5.54
Weighted-average
number of common shares outstanding:
Diluted
234.0
—
234.0
235.7
—
235.7
Detail of
Adjustments:
(a)
Insurance settlement on property claim in
Q3 2022 (COGS)
$
(25.0
)
$
(25.0
)
(b)
Non-cash adjustments for contingent
consideration (SG&A)
0.7
(15.4
)
(c)
Restructuring costs (COGS &
SG&A)
10.4
15.8
(d)
Transformation costs (SG&A)
0.6
4.7
(e)
M&A transaction costs (SG&A)
1.8
1.8
(f)
Settlement charge for retired executive
(SG&A & OIOE)
15.8
15.8
(g)
U.S. discrete non-cash tax benefit
(28.9
)
(28.9
)
(h)
Tax impact of adjustments
(a,b,c,d,e,f)
1.1
3.0
(i)
Impact of adjustments on earnings from
continuing operations attributable to Trane Technologies plc
$
(23.5
)
$
(28.2
)
Pre-tax impact of adjustments on cost of
goods sold
$
(22.1
)
$
(17.6
)
Pre-tax impact of adjustments on selling
& administrative expenses
11.4
0.3
Pre-tax impact of adjustments on operating
income
$
(10.7
)
$
(17.3
)
Pre-tax impact of adjustments on other,
net
15.0
15.0
Pre-tax impact of adjustments on earnings
from continuing operations
$
4.3
$
(2.3
)
Table 3
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions, except per share
amounts)
UNAUDITED
For the quarter ended September
30, 2021
For the nine months ended
September 30, 2021
As
As
As
As
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Net revenues
$
3,719.8
$
—
$
3,719.8
$
10,567.1
$
—
$
10,567.1
Operating income
583.4
14.3
(a,b,c)
597.7
1,587.6
34.3
(a,b,c)
1,621.9
Operating margin
15.7
%
16.1
%
15.0
%
15.3
%
Earnings from continuing operations before
income taxes
518.8
21.5
(a,b,c,d)
540.3
1,396.1
41.5
(a,b,c,d)
1,437.6
Provision for income taxes
(96.8
)
(5.7
)
(e)
(102.5
)
(268.0
)
(11.1
)
(e)
(279.1
)
Tax rate
18.7
%
19.0
%
19.2
%
19.4
%
Earnings from continuing operations
attributable to Trane Technologies plc
$
419.0
$
15.8
(f)
$
434.8
$
1,118.2
$
30.4
(f)
$
1,148.6
Diluted earnings per
common share
Continuing operations
$
1.73
$
0.07
$
1.80
$
4.61
$
0.12
$
4.73
Weighted-average
number of common shares outstanding:
Diluted
241.7
—
241.7
242.8
—
242.8
Detail of
Adjustments:
(a)
Restructuring costs (COGS &
SG&A)
$
7.9
$
19.7
(b)
Transformation costs (SG&A)
4.6
12.8
(c)
M&A transaction costs (SG&A)
1.8
1.8
(d)
Charges related to certain entities
deconsolidated under Chapter 11
7.2
7.2
(e)
Tax impact of adjustments (a,b,c,d)
(5.7
)
(11.1
)
(f)
Impact of adjustments on earnings from
continuing operations attributable to Trane Technologies plc
$
15.8
$
30.4
Pre-tax impact of adjustments on cost of
goods sold
$
1.0
$
3.6
Pre-tax impact of adjustments on selling
& administrative expenses
13.3
30.7
Pre-tax impact of adjustments on operating
income
$
14.3
$
34.3
Table 4
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter ended September
30, 2022
For the quarter ended September
30, 2021
As Reported
Margin
As Reported
Margin
Americas
Net revenues
$
3,481.4
$
2,910.3
Segment operating income
$
652.4
18.7
%
$
506.7
17.4
%
Restructuring/Other (a)
(22.4
)
(0.6
)%
0.8
0.0
%
Adjusted operating income *
630.0
18.1
%
507.5
17.4
%
Depreciation and amortization
68.3
2.0
%
55.9
1.9
%
Other income/(expense), net
(0.6
)
(0.1
)%
3.5
0.2
%
Adjusted EBITDA *
$
697.7
20.0
%
$
566.9
19.5
%
Europe, Middle
East & Africa
Net revenues
$
513.1
$
495.0
Segment operating income
$
80.1
15.6
%
$
90.7
18.3
%
Restructuring
6.2
1.2
%
1.1
0.2
%
Adjusted operating income
86.3
16.8
%
91.8
18.5
%
Depreciation and amortization
6.0
1.2
%
7.3
1.5
%
Other income/(expense), net
2.4
0.5
%
0.3
0.1
%
Adjusted EBITDA
$
94.7
18.5
%
$
99.4
20.1
%
Asia
Pacific
Net revenues
$
377.4
$
314.5
Segment operating income
$
75.6
20.0
%
$
52.3
16.6
%
Restructuring
0.5
0.2
%
1.4
0.5
%
Adjusted operating income
76.1
20.2
%
53.7
17.1
%
Depreciation and amortization
4.3
1.1
%
3.8
1.2
%
Other income/(expense), net
1.4
0.4
%
(0.2
)
(0.1
)%
Adjusted EBITDA
$
81.8
21.7
%
$
57.3
18.2
%
Corporate
Unallocated corporate expense
$
(68.6
)
$
(66.3
)
Restructuring/Other (b)
5.0
11.0
Adjusted corporate expense
(63.6
)
(55.3
)
Depreciation and amortization
5.4
5.2
Other income/(expense), net (c)
(6.9
)
(3.3
)
Adjusted EBITDA
$
(65.1
)
$
(53.4
)
Total
Company
Net revenues
$
4,371.9
$
3,719.8
Operating income
$
739.5
16.9
%
$
583.4
15.7
%
Restructuring/Other (a,b)
(10.7
)
(0.2
)%
14.3
0.4
%
Adjusted operating income
728.8
16.7
%
597.7
16.1
%
Depreciation and amortization
84.0
1.9
%
72.2
1.9
%
Other income/(expense), net(c)
(3.7
)
(0.1
)%
0.3
—
%
Adjusted EBITDA
$
809.1
18.5
%
$
670.2
18.0
%
*Represents a non-GAAP measure, refer to
pages 5-6 in the Earnings Release for definitions.
(a) Other within Americas includes a $25
million insurance settlement on a property claim in Q3 2022 and a
$0.7 million non-cash adjustment for contingent consideration for
2022.
(b) Other within Corporate includes
M&A transaction costs of $1.8 million, a settlement charge for
a retired executive of $0.8 million, and Transformation costs of
$0.6 million for 2022. Other within Corporate includes $4.6 million
of Transformation costs and $1.8 of M&A transaction costs in
2021.
(c) Other income/(expense), net within
Corporate excludes a $15.0 million settlement charge for a retired
executive in 2022 and $7.2 million in charges related to certain
entities deconsolidated under Chapter 11 in 2021.
Management measures operating performance
based on net earnings excluding interest expense, income taxes,
depreciation and amortization, restructuring, non-cash adjustments
for contingent consideration, insurance settlement on property
claim, M&A transaction costs, unallocated corporate expenses
and discontinued operations (Segment Adjusted EBITDA). Segment
Adjusted EBITDA is not defined under GAAP and may not be comparable
to similarly-titled measures used by other companies and should not
be considered a substitute for net earnings or other results
reported in accordance with GAAP. The Company believes Segment
Adjusted EBITDA provides the most relevant measure of profitability
as well as earnings power and the ability to generate cash. This
measure is a useful financial metric to assess the Company's
operating performance from period to period by excluding certain
items that it believes are not representative of its core business
and the Company uses this measure for business planning
purposes.
Table 5
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter
ended September 30,
2022
2021
Total Company
Adjusted EBITDA *
$
809.1
$
670.2
Less: items to reconcile adjusted EBITDA
to net earnings attributable to Trane Technologies plc
Depreciation and amortization
(84.0
)
(72.2
)
Interest expense
(55.8
)
(57.7
)
Provision for income taxes
(104.7
)
(96.8
)
Restructuring
(10.4
)
(7.9
)
Transformation Costs
(0.6
)
(4.6
)
M&A transaction costs
(1.8
)
(1.8
)
Charges related to certain entities
deconsolidated under Chapter 11
—
(7.2
)
Non-cash adjustments for contingent
consideration
(0.7
)
—
Insurance settlement on property claim
25.0
—
Settlement charge for retired
executive
(15.8
)
—
Discontinued operations, net of tax
(7.9
)
(13.3
)
Net earnings from continuing operations
attributable to noncontrolling interests
(4.5
)
(3.0
)
Net earnings attributable to Trane
Technologies plc
$
547.9
$
405.7
*Represents a non-GAAP measure, refer to
pages 5-6 in the Earnings Release for definitions.
Table 6
TRANE TECHNOLOGIES PLC
Condensed Consolidated Balance
Sheets
(In millions)
UNAUDITED
September 30,
December 31,
2022
2021
ASSETS
Cash and cash equivalents
$
1,080.2
$
2,159.2
Accounts and notes receivable, net
2,867.4
2,429.4
Inventories
1,949.2
1,530.8
Other current assets
402.3
351.5
Total current assets
6,299.1
6,470.9
Property, plant and equipment, net
1,432.1
1,398.8
Goodwill
5,370.3
5,504.8
Intangible assets, net
3,241.1
3,305.6
Other noncurrent assets
1,397.2
1,379.7
Total assets
$
17,739.8
$
18,059.8
LIABILITIES AND EQUITY
Accounts payable
$
2,061.3
$
1,787.3
Accrued expenses and other current
liabilities
2,434.3
2,614.7
Short-term borrowings and current
maturities of long-term debt
1,049.9
350.4
Total current liabilities
5,545.5
4,752.4
Long-term debt
3,787.5
4,491.7
Other noncurrent liabilities
2,538.4
2,542.6
Shareholders' Equity
5,868.4
6,273.1
Total liabilities and equity
$
17,739.8
$
18,059.8
Table 7
TRANE TECHNOLOGIES PLC
Condensed Consolidated
Statement of Cash Flows
(In millions)
UNAUDITED
For the nine months
ended September 30,
2022
2021
Operating Activities
Earnings from continuing operations
$
1,347.3
$
1,128.1
Depreciation and amortization
241.0
223.0
Changes in assets and liabilities and
other non-cash items
(654.9
)
(188.5
)
Net cash provided by (used in) continuing
operating activities
933.4
1,162.6
Net cash provided by (used in)
discontinued operating activities
(189.7
)
(1.4
)
Net cash provided by (used in) operating
activities
743.7
1,161.2
Investing Activities
Capital expenditures, net
(202.8
)
(121.6
)
Acquisition of businesses, net of cash
acquired
(109.6
)
(18.0
)
Other investing activities, net
(12.8
)
(69.2
)
Net cash provided by (used in) continuing
investing activities
(325.2
)
(208.8
)
Net cash provided by (used in)
discontinued investing activities
(0.6
)
—
Net cash provided by (used in) investing
activities
(325.8
)
(208.8
)
Financing Activities
Payments of long-term debt
(7.5
)
(432.5
)
Dividends paid to ordinary
shareholders
(467.0
)
(421.9
)
Repurchase of ordinary shares
(900.1
)
(600.2
)
Receipt of / (Settlement related to)
special cash payment
(6.2
)
(49.5
)
Other financing activities, net
(32.2
)
39.1
Net cash provided by (used in) financing
activities
(1,413.0
)
(1,465.0
)
Effect of exchange rate changes on cash
and cash equivalents
(83.9
)
(38.5
)
Net increase (decrease) in cash and cash
equivalents
(1,079.0
)
(551.1
)
Cash and cash equivalents - beginning of
period
2,159.2
3,289.9
Cash and cash equivalents - end of
period
$
1,080.2
$
2,738.8
Table 8
TRANE TECHNOLOGIES PLC
Balance Sheet Metrics and Free
Cash Flow
($ in millions)
UNAUDITED
September 30,
September 30,
December 31,
2022
2021
2021
Net Receivables
$
2,867
$
2,432
$
2,429
Days Sales Outstanding
59.8
59.7
62.1
Net Inventory
$
1,949
$
1,483
$
1,531
Inventory Turns
6.1
6.8
6.6
Accounts Payable
$
2,061
$
1,758
$
1,787
Days Payable Outstanding
63.5
63.8
64.5
-------------------------------------------------------------------------------------------------------------------------------------------------------
Nine months ended
Nine months ended
September 30, 2022
September 30, 2021
Cash flow provided by continuing operating
activities
$
933.4
$
1,162.6
Capital expenditures
(202.8
)
(121.6
)
Cash payments for restructuring
20.4
27.1
Transformation costs paid
8.9
13.5
QSF funding (continuing operations
component)1
91.8
—
Compensation related payment to a retired
executive
64.3
—
Insurance settlement on property claim in
Q3 2022
(25.0
)
—
Free cash flow *
$
891.0
$
1,081.6
1 On March 2, 2022, the Company funded
$270.0 million to the qualified settlement fund (QSF), of which
$91.8 million was allocated to continuing operations and $178.2
million was allocated to discontinued operations
*Represents a non-GAAP measure, refer to
pages 5-6 in the Earnings Release for definitions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221102005308/en/
Media: Stephanie Moncada 757-806-8280
stephanie.moncada@tranetechnologies.com
Investors: Zac Nagle 704-990-3913
InvestorRelations@tranetechnologies.com
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