Highlights (fourth-quarter 2022 versus fourth-quarter 2021,
unless otherwise noted):
- Reported revenues of $4.1 billion, up 14 percent; organic
revenues* up 16 percent
- GAAP continuing EPS of $1.91; adjusted continuing EPS* of
$1.82, up 34 percent
- GAAP operating margin up 210 bps; adjusted operating margin*
up 120 bps
- Reported bookings of $4.0 billion, down 2 percent; organic
bookings* flat
- Strong backlog of $6.9 billion, up 27 percent
year-over-year; positioned well for 2023
Highlights (full-year 2022 versus full-year 2021, unless
otherwise noted):
- Reported revenues of $16.0 billion, up 13 percent; organic
revenues up 15 percent
- GAAP continuing EPS of $7.57; adjusted continuing EPS of
$7.36, up 21 percent
- GAAP operating margin up 80 bps; adjusted operating margin
up 30 bps
- Reported bookings of $17.5 billion, up 4 percent; organic
bookings up 5 percent
*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 $1.91 for the fourth quarter of 2022. Adjusted
continuing EPS was $1.82, up 34 percent, which excludes $22.5
million of net favorable pre-tax non-GAAP adjustments.
Fourth-Quarter 2022 Results
Financial Comparisons - Fourth-Quarter Continuing
Operations
$, millions except EPS
Q4 2022
Q4 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$3,998
$4,060
(2)%
flat
Net Revenues
$4,074
$3,569
14%
16%
GAAP Operating Income
$581
$436
33%
GAAP Operating Margin
14.3%
12.2%
210 bps
Adjusted Operating Income*
$558
$447
25%
Adjusted Operating Margin
13.7%
12.5%
120 bps
Adjusted EBITDA*
$638
$525
22%
Adjusted EBITDA Margin*
15.7%
14.7%
100 bps
GAAP Continuing EPS
$1.91
$1.35
41%
Adjusted Continuing EPS
$1.82
$1.36
34%
Pre-tax Non-GAAP Adjustments,
net**
($22.5)
$11.2
($33.7)
**For details see table 2 of the news
release.
"2022 marked another year of top quartile financial performance
for Trane Technologies,” said Dave Regnery, chair and CEO. “With
focused execution of our purpose-driven strategy, we delivered
record bookings, revenue, operating margins and earnings per share,
while successfully navigating inflationary, supply chain and
macroeconomic challenges. While the macroenvironment remains
dynamic, we continue to see high levels of demand for our
sustainable products and services, with the tailwinds underpinning
our end markets only growing stronger.
Over the last five years, we have delivered compound annual
revenue growth of 7 percent, adjusted EBITDA margin expansion of
250 basis points and free cash flow as a percentage of adjusted net
earnings* of 105 percent, while deploying $11.5 billion of capital.
With our focused strategy, ongoing reinvestment in business
innovation and uplifting culture, we are well positioned to
continue delivering differentiated shareholder returns over the
long term."
Highlights from the Fourth Quarter of 2022 (all comparisons
against fourth-quarter 2021 unless otherwise noted):
- Delivered strong fourth-quarter revenue, operating income,
EBITDA and EPS growth.
- Enterprise reported bookings were down 2 percent; organic
bookings were flat, driven by tough prior- year comps.
- Enterprise reported revenues were up 14 percent, including
approximately 1 percentage point of acquisitions offset by
approximately 3 percentage points of negative foreign exchange
impact. Organic revenues were up 16 percent.
- GAAP operating margin was up 210 basis points, adjusted
operating margin was up 120 basis points and adjusted EBITDA margin
was up 100 basis points.
- Strong volume growth, positive price realization and
productivity more than offset material and other inflation related
to supply chain challenges and higher costs to serve customers. The
Company also continued high levels of business reinvestment.
Fourth-Quarter Business Review (all comparisons against
fourth-quarter 2021 unless otherwise noted)
Americas Segment: innovates for customers in the North
America and Latin America regions. The Americas segment encompasses
commercial heating, cooling and ventilation systems, building
controls, and energy services and solutions; residential heating
and cooling; and transport refrigeration systems and solutions.
$, millions
Q4 2022
Q4 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$3,184.5
$3,172.2
flat
flat
Net Revenues
$3,139.9
$2,749.5
14%
14%
GAAP Operating Income
$486.5
$371.1
31%
GAAP Operating Margin
15.5%
13.5%
200 bps
Adjusted Operating Income
$458.9
$374.0
23%
Adjusted Operating Margin
14.6%
13.6%
100 bps
Adjusted EBITDA
$520.8
$437.1
19%
Adjusted EBITDA Margin
16.6%
15.9%
70 bps
- Reported and organic bookings were both flat, driven by tough
prior-year comps.
- Reported and organic revenues were both up 14 percent.
- Americas Segment exited the fourth quarter of 2022 with backlog
3 times historical norms.
- GAAP operating margin was up 200 basis points, adjusted
operating margin was up 100 basis points and adjusted EBITDA margin
was up 70 basis points.
- Strong volume growth, positive price realization and
productivity more than offset material and other inflation related
to supply chain challenges and higher costs to serve customers. 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, cooling and ventilation systems,
services and solutions for commercial buildings and transport
refrigeration systems and solutions.
$, millions
Q4 2022
Q4 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$483.7
$510.3
(5)%
2%
Net Revenues
$558.5
$482.8
16%
23%
GAAP Operating Income
$85.3
$67.2
27%
GAAP Operating Margin
15.3%
13.9%
140 bps
Adjusted Operating Income
$86.3
$67.6
28%
Adjusted Operating Margin
15.5%
14.0%
150 bps
Adjusted EBITDA
$91.9
$75.8
21%
Adjusted EBITDA Margin
16.5%
15.7%
80 bps
- Reported bookings were down 5 percent; organic bookings were up
2 percent. Commercial HVAC organic bookings were up low-teens.
- Reported revenues were up 16 percent, including approximately 5
percentage points of acquisitions offset by approximately 12
percentage points of negative foreign exchange impact. Organic
revenues were up 23 percent.
- EMEA Segment exited the fourth quarter of 2022 with backlog
approximately 40 percent more than historical norms.
- GAAP operating margin was up 140 basis points, adjusted
operating margin was up 150 basis points and adjusted EBITDA margin
was up 80 basis points.
- Strong volume growth, positive price realization and
productivity more than offset material and other inflation related
to supply chain challenges and higher costs to serve customers. 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, cooling and ventilation systems, services and solutions
for commercial buildings and transport refrigeration systems and
solutions.
$, millions
Q4 2022
Q4 2021
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$330.2
$377.1
(12)%
(6)%
Net Revenues
$375.5
$337.0
11%
19%
GAAP Operating Income
$75.9
$60.3
26%
GAAP Operating Margin
20.2%
17.9%
230 bps
Adjusted Operating Income
$76.5
$60.5
26%
Adjusted Operating Margin
20.4%
18.0%
240 bps
Adjusted EBITDA
$79.7
$64.7
23%
Adjusted EBITDA Margin
21.2%
19.2%
200 bps
- Reported bookings were down 12 percent; organic bookings were
down 6 percent, driven by tough prior-year comps.
- Reported revenues were up 11 percent, including approximately 3
percentage points of acquisitions offset by approximately 11
percentage points of negative foreign exchange impact. Organic
revenues were up 19 percent.
- Asia Pacific Segment exited the fourth quarter of 2022 with
backlog approximately 50 percent more than historical norms.
- GAAP operating margin was up 230 basis points, adjusted
operating margin was up 240 basis points, and adjusted EBITDA
margin was up 200 basis points.
- Strong volume growth, positive price realization and
productivity more than offset material and other inflation related
to supply chain challenges and higher costs to serve customers. The
Company also continued high levels of business reinvestment.
Full-Year 2022 Results (all comparisons against full-year
2021 unless otherwise noted)
Financial Comparisons - Full-year Continuing
Operations
$, millions except EPS
2022
2021
Y-O-Y Change
Organic Y-O-Y
Bookings
$17,472
$16,829
4%
5%
Net Revenues
$15,992
$14,136
13%
15%
GAAP Operating Income
$2,419
$2,023
20%
GAAP Operating Margin
15.1%
14.3%
80 bps
Adjusted Operating Income
$2,379
$2,069
15%
Adjusted Operating Margin
14.9%
14.6%
30 bps
Adjusted EBITDA
$2,694
$2,364
14%
Adjusted EBITDA Margin
16.8%
16.7%
10 bps
GAAP Continuing EPS
$7.57
$5.96
27%
Adjusted Continuing EPS
$7.36
$6.09
21%
- Reported bookings were up 4 percent; organic bookings were up 5
percent.
- Reported revenues were up 13 percent, including approximately 1
percentage point of acquisitions offset by approximately 3
percentage points of negative foreign exchange impact. Organic
revenues were up 15 percent.
- Exited full-year 2022 with backlog over 2 times historical
norms.
- GAAP operating margin was up 80 basis points, adjusted
operating margin was up 30 basis points, and adjusted EBITDA margin
was up 10 basis points.
- Strong volume growth, positive price realization and
productivity more than offset material and other inflation related
to supply chain challenges and higher costs to serve customers. The
Company also continued high levels of business reinvestment.
Balance Sheet and Cash Flow
$, millions
2022
2021
Y-O-Y Change
Cash From Continuing Operating
Activities Y-T-D
$1,699
$1,594
$105
Free Cash Flow Y-T-D*
$1,566
$1,431
$135
Working Capital/Revenue*
3.3%
1.4%
190 bps
Cash Balance 31 December
$1,221
$2,159
($938)
Debt Balance 31 December
$4,836
$4,842
($6)
- For full-year 2022, the Company had cash flow from continuing
operating activities of $1.7 billion and generated free cash flow
of $1.6 billion.
- For full-year 2022, the Company deployed $2.1 billion including
$620 million for dividends, $1.2 billion for share repurchases and
$256 million for M&A, including the acquisition of AL-KO Air
Technology during the fourth quarter. The Company has approximately
$3.2 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.
Full-Year 2023 Guidance
- The Company expects full-year 2023 reported revenue growth of
approximately 7 percent to 9 percent; organic revenue growth of
approximately 6 percent to 8 percent versus full-year 2022.
- The Company expects GAAP continuing EPS for full-year 2023 of
$8.10 to $8.40. This includes EPS of $0.10 for non-GAAP
adjustments. The Company expects adjusted continuing EPS for
full-year 2023 of $8.20 to $8.50.
- Additional information regarding the Company's 2023 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, global
economic conditions, including recessions and economic downturns,
inflation, volatility in interest rates and foreign exchange;
changing energy prices; the impact of the global COVID-19 pandemic
or future health care emergencies on our business, our suppliers
and our customers; 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.
# # #
2/2/23
(See Accompanying Tables)
- Table 1: Condensed Consolidated Income Statement
- Tables 2 - 7: Reconciliation of GAAP to Non-GAAP
- Table 8: Condensed Consolidated Balance Sheets
- Table 9: Condensed Consolidated Statement of Cash Flows
- Table 10: Balance Sheet Metrics and Free Cash Flow
*Q4 Non-GAAP measures definitions
Adjusted operating income in 2022 is defined as GAAP
operating income adjusted for restructuring costs, transformation
costs, merger and acquisition related 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 merger
and acquisition related 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, merger and acquisition
related 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, merger and acquisition related 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, merger and acquisition related 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, merger and acquisition related 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, merger
and acquisition related 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, merger and
acquisition related 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 10 of
the news release.
Operating leverage is defined as the ratio of the change
in adjusted operating income for the current period (e.g. Q4 2022)
less the prior period (e.g. Q4 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 payables and
income tax payables.
- Working capital as a percent of revenue is calculated by
dividing the working capital balance (e.g. as of December 31) by
the annualized revenue for the period (e.g. reported revenues for
the three months ended December 31 multiplied by 4 to annualize for
a full year).
We discuss non-GAAP measures for prior periods, which can be
found in our year-end earnings releases that have been furnished on
Form 8-Ks previously filed with the SEC.
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 December 31,
ended December 31,
2022
2021
2022
2021
Net revenues
$
4,073.9
$
3,569.3
$
15,991.7
$
14,136.4
Cost of goods sold
(2,854.4
)
(2,527.8
)
(11,026.9
)
(9,666.8
)
Selling and administrative expenses
(638.9
)
(605.8
)
(2,545.9
)
(2,446.3
)
Operating income
580.6
435.7
2,418.9
2,023.3
Interest expense
(55.9
)
(56.0
)
(223.5
)
(233.7
)
Other income/(expense), net
(2.3
)
14.9
(23.3
)
1.1
Earnings before income taxes
522.4
394.6
2,172.1
1,790.7
Provision for income taxes
(73.4
)
(65.5
)
(375.9
)
(333.5
)
Earnings from continuing operations
449.0
329.1
1,796.2
1,457.2
Discontinued operations, net of tax
(5.0
)
(8.0
)
(21.5
)
(20.6
)
Net earnings
444.0
321.1
1,774.7
1,436.6
Less: Net earnings from continuing
operations attributable to noncontrolling interests
(4.9
)
(3.3
)
(18.2
)
(13.2
)
Net earnings attributable to Trane
Technologies plc
$
439.1
$
317.8
$
1,756.5
$
1,423.4
Amounts attributable
to Trane Technologies plc ordinary shareholders:
Continuing operations
$
444.1
$
325.8
$
1,778.0
$
1,444.0
Discontinued operations
(5.0
)
(8.0
)
(21.5
)
(20.6
)
Net earnings
$
439.1
$
317.8
$
1,756.5
$
1,423.4
Diluted earnings
(loss) per share attributable to Trane Technologies plc ordinary
shareholder:
Continuing operations
$
1.91
$
1.35
$
7.57
$
5.96
Discontinued operations
(0.02
)
(0.03
)
(0.09
)
(0.09
)
Net earnings
$
1.89
$
1.32
$
7.48
$
5.87
Weighted-average number of common shares
outstanding:
Diluted
232.4
240.7
234.9
242.3
Table 2
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions, except per share
amounts)
UNAUDITED
For the quarter ended December
31, 2022
For the year ended December 31,
2022
As
As
As
As
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Net revenues
$
4,073.9
$
—
$
4,073.9
$
15,991.7
$
—
$
15,991.7
Operating income
580.6
(22.5
)
(b,c,d,e,f)
558.1
2,418.9
(39.8
)
(a,b,c,d,e,f,g)
2,379.1
Operating margin
14.3
%
13.7
%
15.1
%
14.9
%
Earnings from continuing operations before
income taxes
522.4
(22.5
)
(b,c,d,e,f)
499.9
2,172.1
(24.8
)
(a,b,c,d,e,f,g)
2,147.3
Benefit (provision) for income taxes
(73.4
)
1.2
(h,i)
(72.2
)
(375.9
)
(24.7
)
(h,i)
(400.6
)
Tax rate
14.1
%
14.4
%
17.3
%
18.7
%
Earnings from continuing operations
attributable to Trane Technologies plc
$
444.1
$
(21.3
)
(j)
$
422.8
$
1,778.0
$
(49.5
)
(j)
$
1,728.5
Diluted earnings per
common share
Continuing operations
$
1.91
$
(0.09
)
$
1.82
$
7.57
$
(0.21
)
$
7.36
Weighted-average number of common shares
outstanding:
Diluted
232.4
—
232.4
234.9
—
234.9
Detail of
Adjustments:
(a)
Insurance settlement on property claim in
Q3 2022 (COGS)
$
—
$
(25.0
)
(b)
Non-cash adjustments for contingent
consideration (SG&A)
(31.5
)
(46.9
)
(c)
Restructuring costs (COGS &
SG&A)
4.8
20.7
(d)
Transformation costs (SG&A)
1.2
5.8
(e)
M&A transaction costs (SG&A)
1.8
3.6
(f)
Acquisition inventory step-up and backlog
amortization (COGS & SG&A)
1.2
1.2
(g)
Settlement charge for retired executive
(SG&A & OIOE)
—
15.8
(h)
U.S. discrete non-cash tax benefit
(4.4
)
(33.3
)
(i)
Tax impact of adjustments
(a,b,c,d,e,f,g)
5.6
8.6
(j)
Impact of adjustments on earnings from
continuing operations attributable to Trane Technologies plc
$
(21.3
)
$
(49.5
)
Pre-tax impact of adjustments on cost of
goods sold
$
5.7
$
(11.8
)
Pre-tax impact of adjustments on selling
& administrative expenses
(28.2
)
(28.0
)
Pre-tax impact of adjustments on operating
income
(22.5
)
(39.8
)
Pre-tax impact of adjustments on other,
net
—
15.0
Pre-tax impact of adjustments on earnings
from continuing operations
$
(22.5
)
$
(24.8
)
Table 3
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions, except per share
amounts)
UNAUDITED
For the quarter ended December
31, 2021
For the year ended December 31,
2021
As
As
As
As
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Net revenues
$
3,569.3
$
—
$
3,569.3
$
14,136.4
$
—
$
14,136.4
Operating income
435.7
11.2
(a,b)
446.9
2,023.3
45.5
(a,b,c)
2,068.8
Operating margin
12.2
%
12.5
%
14.3
%
14.6
%
Earnings from continuing operations before
income taxes
394.6
(1.6
)
(a,b,e)
393.0
1,790.7
39.9
(a,b,c,d,e)
1,830.6
Benefit (provision) for income taxes
(65.5
)
2.0
(f)
(63.5
)
(333.5
)
(9.1
)
(f)
(342.6
)
Tax rate
16.6
%
16.2
%
18.6
%
18.7
%
Earnings from continuing operations
attributable to Trane Technologies plc
$
325.8
$
0.4
(g)
$
326.2
$
1,444.0
$
30.8
(g)
$
1,474.8
Diluted earnings per
common share
Continuing operations
$
1.35
$
0.01
$
1.36
$
5.96
$
0.13
$
6.09
Weighted-average number of common shares
outstanding:
Diluted
240.7
—
240.7
242.3
—
242.3
Detail of
Adjustments:
(a)
Restructuring costs (COGS &
SG&A)
$
7.3
$
27.0
(b)
Transformation costs (SG&A)
3.9
16.7
(c)
M&A transaction costs (SG&A)
—
1.8
(d)
Charges related to certain entities
deconsolidated under Chapter 11
—
7.2
(e)
Gain on release of a pension
indemnification liability
(12.8
)
(12.8
)
(f)
Tax impact of adjustments (a,b,c,d,e)
2.0
(9.1
)
(g)
Impact of adjustments on earnings from
continuing operations attributable to Trane Technologies plc
$
0.4
$
30.8
Pre-tax impact of adjustments on cost of
goods sold
$
3.9
$
7.5
Pre-tax impact of adjustments on selling
& administrative expenses
7.3
38.0
Pre-tax impact of adjustments on operating
income
$
11.2
$
45.5
Table 4
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter ended December
31, 2022
For the quarter ended December
31, 2021
As Reported
Margin
As Reported
Margin
Americas
Net revenues
$
3,139.9
$
2,749.5
Segment operating income
$
486.5
15.5
%
$
371.1
13.5
%
Restructuring/Other(a)
(27.6
)
(0.9
)%
2.9
0.1
%
Adjusted operating income *
458.9
14.6
%
374.0
13.6
%
Depreciation and amortization
65.1
2.1
%
59.0
2.1
%
Other income/(expense), net
(3.2
)
(0.1
)%
4.1
0.2
%
Adjusted EBITDA *
$
520.8
16.6
%
$
437.1
15.9
%
Europe, Middle
East & Africa
Net revenues
$
558.5
$
482.8
Segment operating income
$
85.3
15.3
%
$
67.2
13.9
%
Restructuring/Other(b)
1.0
0.2
%
0.4
0.1
%
Adjusted operating income *
86.3
15.5
%
67.6
14.0
%
Depreciation and amortization
8.1
1.4
%
8.0
1.7
%
Other income/(expense), net
(2.5
)
(0.4
)%
0.2
—
%
Adjusted EBITDA *
$
91.9
16.5
%
$
75.8
15.7
%
Asia
Pacific
Net revenues
$
375.5
$
337.0
Segment operating income
$
75.9
20.2
%
$
60.3
17.9
%
Restructuring/Other(c)
0.6
0.2
%
0.2
0.1
%
Adjusted operating income *
76.5
20.4
%
60.5
18.0
%
Depreciation and amortization(d)
4.5
1.2
%
4.1
1.2
%
Other income/(expense), net
(1.3
)
(0.4
)%
0.1
—
%
Adjusted EBITDA *
$
79.7
21.2
%
$
64.7
19.2
%
Corporate
Unallocated corporate expense
$
(67.1
)
$
(62.9
)
Restructuring/Other (e)
3.5
7.7
Adjusted corporate expense *
(63.6
)
(55.2
)
Depreciation and amortization
4.3
5.3
Other income/(expense), net (f)
4.7
(2.3
)
Adjusted EBITDA *
$
(54.6
)
$
(52.2
)
Total
Company
Net revenues
$
4,073.9
$
3,569.3
Operating income
$
580.6
14.3
%
$
435.7
12.2
%
Restructuring/Other (a,b,c,e)
(22.5
)
(0.6
) %
11.2
0.3
%
Adjusted operating income
558.1
13.7
%
446.9
12.5
%
Depreciation and amortization(d)
82.0
2.0
%
76.4
2.1
%
Other income/(expense), net (f)
(2.3
)
—
%
2.1
0.1
%
Adjusted EBITDA *
$
637.8
15.7
%
$
525.4
14.7
%
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
(a) Other within Americas includes a
non-cash adjustment for contingent consideration of $31.5M in
2022.
(b) Other within EMEA includes $0.6M of
acquisition inventory step-up in 2022.
(c) Other within Asia Pacific includes
$0.6M of acquisition inventory step-up and backlog amortization in
2022.
(d) Depreciation and amortization within
Asia Pacific excludes $0.4M of acquisition backlog amortization
which has been accounted for in the Restructuring/Other line
(e) Other within Corporate includes
transformation and M&A transaction costs of $1.2M and $1.8M,
respectively, in 2022 and transformation costs of $3.9M in
2021.
(f) Other income / (expense), net within
Corporate includes a $12.8M gain on release of a pension
indemnification liability in 2021.
Table 5
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the year ended December 31,
2022
For the year ended December 31,
2021
As Reported
Margin
As Reported
Margin
Americas
Net revenues
$
12,640.8
$
10,957.1
Segment operating income
$
2,133.4
16.9
%
$
1,761.0
16.1
%
Restructuring/Other(a)
(64.5
)
(0.5
)%
6.8
0.0
%
Adjusted operating income *
2,068.9
16.4
%
1,767.8
16.1
%
Depreciation and amortization
256.9
2.0
%
227.6
2.1
%
Other income/(expense), net
0.5
—
%
13.4
0.1
%
Adjusted EBITDA *
$
2,326.3
18.4
%
$
2,008.8
18.3
%
Europe, Middle
East & Africa
Net revenues
$
2,034.5
$
1,944.9
Segment operating income
$
300.0
14.7
%
$
324.2
16.7
%
Restructuring/Other(b)
10.3
0.6
%
2.6
0.1
%
Adjusted operating income *
310.3
15.3
%
326.8
16.8
%
Depreciation and amortization
28.8
1.4
%
33.3
1.7
%
Other income/(expense), net
(1.0
)
(0.1
) %
(0.9
)
—
%
Adjusted EBITDA *
$
338.1
16.6
%
$
359.2
18.5
%
Asia
Pacific
Net revenues
$
1,316.4
$
1,234.4
Segment operating income
$
230.6
17.5
%
$
209.6
17.0
%
Restructuring/Other(c)
1.1
0.1
%
1.4
0.1
%
Adjusted operating income *
231.7
17.6
%
211.0
17.1
%
Depreciation and amortization(d)
17.2
1.3
%
16.5
1.3
%
Other income/(expense), net
(0.6
)
—
%
1.0
0.1
%
Adjusted EBITDA *
$
248.3
18.9
%
$
228.5
18.5
%
Corporate
Unallocated corporate expense
$
(245.1
)
$
(271.5
)
Restructuring/Other (e)
13.3
34.7
Adjusted corporate expense *
(231.8
)
(236.8
)
Depreciation and amortization
20.3
22.0
Other income/(expense), net (f)
(7.2
)
(18.0
)
Adjusted EBITDA *
$
(218.7
)
$
(232.8
)
Total
Company
Net revenues
$
15,991.7
$
14,136.4
Operating income
$
2,418.9
15.1
%
$
2,023.3
14.3
%
Restructuring/Other (a,b,c,e)
(39.8
)
(0.2
)%
45.5
0.3
%
Adjusted operating income
2,379.1
14.9
%
2,068.8
14.6
%
Depreciation and amortization(d)
323.2
2.0
%
299.4
2.1
%
Other income/(expense), net (f)
(8.3
)
(0.1
)%
(4.5
)
—
%
Adjusted EBITDA *
$
2,694.0
16.8
%
$
2,363.7
16.7
%
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
(a) Other within Americas includes a
$46.9M non cash adjustment for contingent consideration and a
$25.0M insurance settlement on property claim in Q3 2022 in
2022.
(b) Other within EMEA includes $0.6M of
acquisition inventory step-up in 2022.
(c) Other within Asia Pacific includes
$0.6M of acquisition inventory step-up and backlog amortization in
2022.
(d) Depreciation and amortization within
Asia Pacific excludes $0.4M of acquisition backlog amortization
which has been accounted for in the Restructuring/Other line
(e) Other within Corporate includes
transformation costs, M&A transaction costs and a settlement
charge for a retired executive of $5.8M, $3.6M and $0.8M,
respectively, in 2022 and transformation costs and M&A
transaction costs of $16.7M and $1.8M, respectively, in 2021.
(f) Other income/(expense) net within
Corporate includes a $15.0M settlement charge for a retired
executive in 2022 and $7.2M in charges related to the
deconsolidation of certain entities under Chapter 11 and $12.8M
gain on release of pension indemnification liability in 2021.
Table 6
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter
ended December 31,
2022
2021
Total Company
Adjusted EBITDA *
$
637.8
$
525.4
Less: items to reconcile adjusted EBITDA
to net earnings attributable to Trane Technologies plc
Depreciation and amortization(1)
(82.0
)
(76.4
)
Interest expense
(55.9
)
(56.0
)
Provision for income taxes
(73.4
)
(65.5
)
Restructuring
(4.8
)
(7.3
)
Transformation Costs
(1.2
)
(3.9
)
M&A transaction costs
(1.8
)
—
Non-cash adjustments for contingent
consideration
31.5
—
Acquisition inventory step-up and backlog
amortization
(1.2
)
—
Gain on release of a pension
indemnification liability
—
12.8
Discontinued operations, net of tax
(5.0
)
(8.0
)
Net earnings from continuing operations
attributable to noncontrolling interests
(4.9
)
(3.3
)
Net earnings attributable to Trane
Technologies plc
$
439.1
$
317.8
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
(1) Depreciation and amortization excludes
acquisition backlog amortization of $0.4 million which has been
included in the acquisition inventory step-up and backlog
amortization line.
Table 7
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the year
ended December 31,
2022
2021
Total Company
Adjusted EBITDA *
$
2,694.0
$
2,363.7
Less: items to reconcile adjusted EBITDA
to net earnings attributable to Trane Technologies plc
Depreciation and amortization(1)
(323.2
)
(299.4
)
Interest expense
(223.5
)
(233.7
)
Provision for income taxes
(375.9
)
(333.5
)
Restructuring
(20.7
)
(27.0
)
Transformation Costs
(5.8
)
(16.7
)
M&A transaction costs
(3.6
)
(1.8
)
Non-cash adjustments for contingent
consideration
46.9
—
Acquisition inventory step-up and backlog
amortization
(1.2
)
—
Insurance settlement on property claim
25.0
—
Settlement charge for retired
executive
(15.8
)
—
Charges related to certain entities
deconsolidated under Chapter 11
—
(7.2
)
Gain on release of a pension
indemnification liability
—
12.8
Discontinued operations, net of tax
(21.5
)
(20.6
)
Net earnings from continuing operations
attributable to noncontrolling interests
(18.2
)
(13.2
)
Net earnings attributable to Trane
Technologies plc
$
1,756.5
$
1,423.4
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
(1) Depreciation and amortization excludes
acquisition backlog amortization of $0.4 million which has been
included in the acquisition inventory step-up and backlog
amortization line
Table 8
TRANE TECHNOLOGIES PLC
Condensed Consolidated Balance
Sheets
(In millions)
UNAUDITED
December 31,
December 31,
2022
2021
ASSETS
Cash and cash equivalents
$
1,220.5
$
2,159.2
Accounts and notes receivable, net
2,780.1
2,429.4
Inventories
1,993.8
1,530.8
Other current assets
384.8
351.5
Total current assets
6,379.2
6,470.9
Property, plant and equipment, net
1,536.1
1,398.8
Goodwill
5,503.7
5,504.8
Intangible assets, net
3,264.0
3,305.6
Other noncurrent assets
1,398.6
1,379.7
Total assets
$
18,081.6
$
18,059.8
LIABILITIES AND EQUITY
Accounts payable
$
2,091.6
$
1,787.3
Accrued expenses and other current
liabilities
2,547.2
2,614.7
Short-term borrowings and current
maturities of long-term debt
1,048.0
350.4
Total current liabilities
5,686.8
4,752.4
Long-term debt
3,788.3
4,491.7
Other noncurrent liabilities
2,501.3
2,542.6
Shareholders' Equity
6,105.2
6,273.1
Total liabilities and equity
$
18,081.6
$
18,059.8
Table 9
TRANE TECHNOLOGIES PLC
Condensed Consolidated
Statement of Cash Flows
(In millions)
UNAUDITED
For the year
ended December 31,
2022
2021
Operating Activities
Earnings from continuing operations
$
1,796.2
$
1,457.2
Depreciation and amortization
323.6
299.4
Changes in assets and liabilities and
other non-cash items
(421.1
)
(162.2
)
Net cash provided by (used in) continuing
operating activities
1,698.7
1,594.4
Net cash provided by (used in)
discontinued operating activities
(194.7
)
(6.1
)
Net cash provided by (used in) operating
activities
1,504.0
1,588.3
Investing Activities
Capital expenditures, net
(291.8
)
(223.0
)
Acquisition of businesses, net of cash
acquired
(234.7
)
(269.2
)
Other investing activities, net
(13.3
)
(53.5
)
Net cash provided by (used in) continuing
investing activities
(539.8
)
(545.7
)
Net cash provided by (used in)
discontinued investing activities
(0.6
)
—
Net cash provided by (used in) investing
activities
(540.4
)
(545.7
)
Financing Activities
Payments of long-term debt
(9.6
)
(432.5
)
Dividends paid to ordinary
shareholders
(620.2
)
(561.1
)
Repurchase of ordinary shares
(1,200.2
)
(1,100.3
)
Settlement related to special cash
payment
(6.2
)
(49.5
)
Other financing activities, net
(16.0
)
15.8
Net cash provided by (used in) financing
activities
(1,852.2
)
(2,127.6
)
Effect of exchange rate changes on cash
and cash equivalents
(50.1
)
(45.7
)
Net increase (decrease) in cash and cash
equivalents
(938.7
)
(1,130.7
)
Cash and cash equivalents - beginning of
period
2,159.2
3,289.9
Cash and cash equivalents - end of
period
$
1,220.5
$
2,159.2
Table 10
TRANE TECHNOLOGIES PLC
Balance Sheet Metrics and Free
Cash Flow
($ in millions)
UNAUDITED
December 31,
December 31,
2022
2021
Net Receivables
$
2,780.1
$
2,429.4
Days Sales Outstanding
62.3
62.1
Net Inventory
$
1,993.8
$
1,530.8
Inventory Turns
5.7
6.6
Accounts Payable
$
2,091.6
$
1,787.3
Days Payable Outstanding
66.9
64.5
--------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year ended
Year ended
December 31, 2022
December 31, 2021
Cash flow provided by continuing operating
activities
$
1,698.7
$
1,594.4
Capital expenditures
(291.8
)
(223.0
)
Cash payments for restructuring
17.9
38.1
Transformation costs paid
9.6
21.4
QSF funding (continuing operations
component)
91.8
—
Compensation related payment to a retired
executive
64.3
—
Insurance settlement on property claim in
Q3 2022
(25.0
)
—
Free cash flow*
$
1,565.5
$
1,430.9
Adjusted earnings from continuing
operations attributable to Trane Technologies plc
$
1,728.5
$
1,474.8
Free cash flow as a percent of adjusted
net earnings
91
%
97
%
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230202005212/en/
Media: Stephanie Moncada 757-806-8280,
stephanie.moncada@tranetechnologies.com
Investors: Zac Nagle 704-990-3913,
InvestorRelations@tranetechnologies.com
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