8-K
Trane Technologies plc (TT)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________________
FORM 8-K
____________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of The
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) — February 29, 2020
____________________________________________
TRANE TECHNOLOGIES PLC
(Exact name of registrant as specified in its charter)
____________________________________________
| Ireland | 001-34400 | 98-0626632 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (I.R.S. Employer<br><br>Identification No.) |
170/175 Lakeview Drive
Airside Business Park
Swords Co. Dublin
Ireland
(Address of principal executive offices, including zip code)
+(353)(0)18707400
(Registrant’s phone number, including area code)
(Former name or former address, if changed since last report)
____________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the
registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
| Securities registered pursuant to Section 12(b) of the Act: | ||
|---|---|---|
| Title of each class | Trading Symbol | Name of each exchange on which registered |
| Ordinary Shares, Par Value $1.00 per Share | TT | New York Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2):
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
| Item 2.01. | Completion of Acquisition or Disposition of Assets |
|---|
References in this Current Report on Form 8-K to the “Company,” “we” or “our” refer, prior to the name change described below, to Ingersoll-Rand plc and, after the name change, to Trane Technologies plc.
On February 29, 2020 (the "Distribution Date"), we completed the separation of our Industrial segment businesses through a spin-off of Ingersoll-Rand U.S. HoldCo, Inc. ("Ingersoll-Rand Industrial") to our shareholders of record as of February 24, 2020 on a pro rata basis (the "Distribution") and merger of Ingersoll-Rand Industrial with a wholly owned subsidiary of Ingersoll Rand Inc. (formerly known as Gardner Denver Holdings, Inc., "Gardner Denver") in a "Reverse Morris Trust" transaction (the "Transactions"). Following the completion of the Transactions, Gardner Denver was renamed Ingersoll Rand Inc. Subsequent to the closing of the Transactions, Ingersoll-Rand plc changed its name to Trane Technologies plc. Upon close of the Transactions, our existing shareholders received 50.1% of the shares of Gardner Denver on a fully diluted basis. Existing Gardner Denver shareholders retained 49.9% of the shares of Gardner Denver on a fully diluted basis. As a result of the Transactions, our shareholders entitled to receive shares of Ingersoll-Rand Industrial common stock in the Distribution received approximately 0.8824 shares of Gardner Denver common stock for each share of Ingersoll-Rand Industrial common stock they received in the Distribution. This Current Report on Form 8-K is being filed to provide unaudited pro forma consolidated financial statements for Trane Technologies plc for the fiscal years ended December 31, 2019, 2018 and 2017 giving effect to the Transactions.
After the Distribution Date, we do not beneficially own any Ingersoll-Rand Industrial shares of common stock and will no longer consolidate Ingersoll-Rand Industrial into our financial results. Beginning in the first quarter of 2020, Ingersoll-Rand Industrial's historical financial results for periods prior to the Distribution Date will be reflected in our consolidated financial statements as a discontinued operation. The unaudited pro forma consolidated financial statements of the Company giving effect to the Transactions, and the related notes thereto, are attached hereto as Exhibit 99.1.
| Item 7.01. | Regulation FD Disclosure |
|---|
Unaudited Selected Adjusted Non-GAAP Financial Information
We use certain non-GAAP financial information to provide important supplemental information to both management and investors regarding financial and business trends used in assessing our financial condition and results of operations. We have disclosed this non-GAAP financial information in our past quarterly earning releases so that investors have the same financial data that we use to make comparisons with our historical operating results and analyze our underlying performance. The non-GAAP reconciliation in Exhibit 99.2 presents selected adjusted non-GAAP financial information derived from the unaudited pro forma consolidated financial statements presented in Exhibit 99.1, which gives effect to the Transactions, as further adjusted to reflect certain non-GAAP adjustments.
The non-GAAP financial measures have been presented for informational purposes only. The non-GAAP financial measures do not purport to project our results of operations or financial condition for any period subsequent to December 31, 2019.
The information in Item 7.01 in this Current Report on Form 8-K and Exhibit 99.2 attached hereto shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference.
Updated Estimates in Connection with the Transactions
The Company is providing the following estimates for the year ending December 31, 2020. Following the Transactions, the Company estimates that pension-related expenses that are classified within Other income/(expense), net will be approximately $20 million for 2020. The Company does not plan other income/(expense) items outside of pension. These items are truly "other" and not estimable in advance. The full year 2020 adjusted effective tax rate is expected to be between 19% and 20%. The Company is not updating 2020 estimates for any items provided on the Company’s January 29, 2020 earnings conference call at this time.
This Current Report on Form 8-K and the exhibits hereto include “forward-looking statements,” which are statements that are not historical facts, including statements that relate to the impact of, and transactions contemplated by, agreements entered into in connection with the Transactions. These forward-looking statements are based on the Company’s current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from the Company’s current expectations.
Such factors include, but are not limited to, the Company’s ability to fully realize the expected benefits of the Transactions, global economic conditions, demand for the Company’s products and services and tax law changes. Additional factors that could cause such differences can be found in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and in our other SEC filings. The Company assumes no obligation to update these forward-looking statements.
| Item 9.01. | Financial Statements and Exhibits | |||
|---|---|---|---|---|
| (b) Trane Technologies plc Unaudited Pro Forma Consolidated Financial Statements. | ||||
| We are providing our unaudited pro forma consolidated statement of operations for the fiscal years ended December 31, 2019, 2018 and 2017 and the unaudited pro forma consolidated balance sheet as of December 31, 2019. | ||||
| (d) Exhibits. | Exhibit No. | Description | ||
| --- | --- | |||
| 99.1 | Unaudited Pro Forma Consolidated Financial Statements. | |||
| 99.2 | Unaudited Selected Adjusted Non-GAAP Financial Information - for the year ended December 31, 2019 and 2018. | |||
| 104 | Cover Page Interactive Date File (embedded within the Inline XBRL document). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TRANE TECHNOLOGIES PLC<br><br>(Registrant) | ||
|---|---|---|
| Date: | March 5, 2020 | /s/ Christopher J. Kuehn |
| Christopher J. Kuehn, Senior Vice President<br><br>and Chief Financial Officer |
Document
Exhibit 99.1
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Spin-off of Ingersoll-Rand U.S. HoldCo, Inc.
On February 29, 2020 (the "Distribution Date"), Ingersoll-Rand plc completed the separation of its Industrial segment businesses ("Ingersoll Rand Industrial Business") through a spin-off of Ingersoll-Rand U.S. HoldCo, Inc. ("Ingersoll-Rand Industrial") to Ingersoll-Rand plc's shareholders of record as of February 24, 2020 on a pro-rata basis (the "Distribution") and merger of Ingersoll-Rand Industrial with a wholly owned subsidiary of Ingersoll Rand Inc. (formerly known as Gardner Denver Holdings, Inc., "Gardner Denver") in a "Reverse Morris Trust" transaction (the "Transactions") pursuant to the Agreement and Plan of Merger, dated as of April 30, 2019, by and among Ingersoll-Rand plc, Ingersoll-Rand Industrial, Gardner Denver, and Charm Merger Sub Inc. ("Merger Sub") and the Separation and Distribution Agreement, dated as of April 30, 2019, by and between Ingersoll-Rand plc and Ingersoll-Rand Industrial (collectively with the other related transaction documents, the "Transaction Agreements"). Following the completion of the Transactions, Gardner Denver was renamed Ingersoll Rand Inc. Subsequent to the closing of the Transactions, Ingersoll-Rand plc changed its name to Trane Technologies plc ("Trane Technologies" or the "Company"). Pursuant to the Transaction Agreements, Ingersoll-Rand plc initially conveyed to Ingersoll-Rand Industrial, its wholly owned subsidiary, certain assets and liabilities constituting the Ingersoll Rand Industrial Businesses and caused Ingersoll-Rand Industrial to convey to the Company certain excluded assets and excluded liabilities in order to separate and consolidate the Ingersoll Rand Industrial Business (the "Reorganization"). Prior to the Distribution, in consideration of the transfer to Ingersoll-Rand Industrial of the specified assets and liabilities contemplated by the Reorganization, Ingersoll-Rand Industrial issued to Ingersoll-Rand plc additional shares of Ingersoll-Rand Industrial common stock such that the number of shares of Ingersoll-Rand Industrial common stock then outstanding equaled the number of Ingersoll-Rand Industrial common stock necessary to effect the Distribution. Upon close of the Transactions, Ingersoll-Rand plc’s existing shareholders received 50.1% of the shares of Gardner Denver on a fully diluted basis. Existing Gardner Denver shareholders retained 49.9% of the shares of Gardner Denver on a fully diluted basis. As a result of the Transactions, Ingersoll-Rand plc shareholders entitled to receive shares of Ingersoll-Rand Industrial common stock in the Distribution received approximately 0.8824 shares of Gardner Denver common stock for each share of Ingersoll-Rand Industrial common stock they received in the Distribution.
In connection with the Transactions, Ingersoll-Rand Services Company, an affiliate of Ingersoll-Rand Industrial, borrowed an aggregate principal amount of $1.9 billion under a senior secured first lien term loan facility (the "Term Loan"), the proceeds of which were used to make a one-time special cash payment of $1.9 billion to a subsidiary of Trane Technologies. The obligations under the Term Loan were retained by Ingersoll-Rand Services Company, which following the Transactions is a wholly owned subsidiary of Gardner Denver.
For the year ended December 31, 2019, the Company incurred approximately $95 million in costs related to the separation of Ingersoll-Rand Industrial. The Company anticipates to incur costs at the high end of the $150 million to $200 million range related to the separation activities. After the Distribution Date, the Company does not beneficially own any Ingersoll-Rand Industrial shares of common stock and will no longer consolidate Ingersoll-Rand Industrial into its financial results. Beginning in the first quarter of 2020, Ingersoll-Rand Industrial's historical financial results, including separation costs, for periods prior to the Distribution Date will be reflected in the Company's consolidated financial statements as a discontinued operation.
Unaudited Pro Forma Consolidated Financial Statements
The following unaudited pro forma consolidated financial statements were derived from the historical consolidated financial statements of Ingersoll-Rand plc, which the Company prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The unaudited pro forma consolidated statement of operations for the fiscal years ended December 31, 2019, 2018 and 2017, give effect to the Transactions as if they had occurred on January 1, 2017, the first day of fiscal year 2017. The unaudited pro forma consolidated balance sheet as of December 31, 2019 gives effect to the Transactions as if they occurred on that date.
The unaudited pro forma consolidated financial statements include adjustments to reflect the following:
| • | the distribution by the Company to Ingersoll-Rand Industrial, pursuant to the Transactions, of all the assets and liabilities that comprise the Ingersoll Rand Industrial Business; |
|---|---|
| • | costs incurred in connection with the Transactions; |
| --- | --- |
| • | the impact of, and transactions contemplated by, the Separation and Distribution Agreement between the Company and Ingersoll-Rand Industrial and the Tax Matters Agreement among the Company, Ingersoll-Rand Industrial, Gardner Denver and certain other subsidiaries of the Company and Ingersoll-Rand Industrial; and |
| --- | --- |
| • | the one-time special cash payment of $1.9 billion from Ingersoll-Rand Services Company to a subsidiary of the Company from debt incurred by Ingersoll-Rand Services Company prior to the Transactions. |
| --- | --- |
1
The Company believes that the adjustments related to the Transactions presented in the unaudited pro forma consolidated financial statements are consistent with the guidance for discontinued operations under U.S. GAAP. Specifically, income tax related adjustments represent the Company's current estimates on a discontinued operations basis, which could materially change as the Company finalizes its discontinued operations in conjunction with the preparation of its Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and its Annual Report on Form 10-K for the year ended December 31, 2020.
The assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the following unaudited pro forma consolidated financial statements. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information, and the Company believes such assumptions are reasonable under the circumstances.
The following unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements of Ingersoll-Rand plc, the accompanying notes to those financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Ingersoll-Rand plc's Annual Report on Form 10-K for the year ended December 31, 2019 and Ingersoll-Rand Industrial's Registration Statement on Form 10 filed with the Securities and Exchange Commission on January 15, 2020. The unaudited pro forma consolidated financial statements have been presented for informational purposes only. The unaudited pro forma consolidated financial statements do not purport to represent what the Company's results of operations or financial condition would have been had the transactions to which the pro forma adjustments relate actually occurred on the dates indicated, and they do not purport to project the Company's results of operations or financial condition for any future period or as of any future date.
2
TRANE TECHNOLOGIES PLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2019
| In millions, except per share amounts | As Reported | Discontinued Operations of Ingersoll-Rand Industrial (a) | Note | Pro Forma Trane Technologies | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net revenues | $ | 16,598.9 | $ | (3,523.0 | ) | $ | 13,075.9 | |||
| Cost of goods sold | (11,451.5 | ) | 2,363.6 | (9,087.9 | ) | |||||
| Selling and administrative expenses | (3,129.8 | ) | 811.9 | (2,317.9 | ) | |||||
| Operating income | 2,017.6 | (347.5 | ) | 1,670.1 | ||||||
| Interest expense | (243.0 | ) | 0.2 | (242.8 | ) | |||||
| Other income/(expense), net | (33.0 | ) | 4.6 | (28.4 | ) | |||||
| Earnings before income taxes | 1,741.6 | (342.7 | ) | 1,398.9 | ||||||
| Benefit (provision) for income taxes | (353.7 | ) | 115.1 | (b) | (238.6 | ) | ||||
| Earnings from continuing operations | 1,387.9 | (227.6 | ) | 1,160.3 | ||||||
| Less: Earnings from continuing operations attributable to noncontrolling interests | (17.6 | ) | 2.4 | (15.2 | ) | |||||
| Net earnings from continuing operations attributable to Trane Technologies plc | $ | 1,370.3 | $ | (225.2 | ) | $ | 1,145.1 | |||
| Earnings per share from continuing operations attributable to Trane Technologies plc ordinary shareholders: | ||||||||||
| Basic | $ | 5.67 | $ | 4.74 | ||||||
| Diluted | $ | 5.61 | $ | 4.69 | ||||||
| Weighted-average number of common shares outstanding: | ||||||||||
| Basic | 241.6 | 241.6 | ||||||||
| Diluted | 244.4 | 244.4 |
See Notes to Unaudited Pro Forma Consolidated Financial Statements
3
TRANE TECHNOLOGIES PLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2018
| In millions, except per share amounts | As Reported | Discontinued Operations of Ingersoll-Rand Industrial (a) | Note | Pro Forma Trane Technologies | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net revenues | $ | 15,668.2 | $ | (3,324.4 | ) | $ | 12,343.8 | |||
| Cost of goods sold | (10,847.6 | ) | 2,265.1 | (8,582.5 | ) | |||||
| Selling and administrative expenses | (2,903.2 | ) | 654.0 | (2,249.2 | ) | |||||
| Operating income | 1,917.4 | (405.3 | ) | 1,512.1 | ||||||
| Interest expense | (220.7 | ) | (0.2 | ) | (220.9 | ) | ||||
| Other income/(expense), net | (36.4 | ) | 3.0 | (33.4 | ) | |||||
| Earnings before income taxes | 1,660.3 | (402.5 | ) | 1,257.8 | ||||||
| Benefit (provision) for income taxes | (281.3 | ) | 46.3 | (b) | (235.0 | ) | ||||
| Earnings from continuing operations | 1,379.0 | (356.2 | ) | 1,022.8 | ||||||
| Less: Earnings from continuing operations attributable to noncontrolling interests | (19.9 | ) | 4.8 | (15.1 | ) | |||||
| Net earnings from continuing operations attributable to Trane Technologies plc | $ | 1,359.1 | $ | (351.4 | ) | $ | 1,007.7 | |||
| Earnings per share from continuing operations attributable to Trane Technologies plc ordinary shareholders: | ||||||||||
| Basic | $ | 5.50 | $ | 4.08 | ||||||
| Diluted | $ | 5.43 | $ | 4.03 | ||||||
| Weighted-average number of common shares outstanding: | ||||||||||
| Basic | 247.2 | 247.2 | ||||||||
| Diluted | 250.1 | 250.1 |
See Notes to Unaudited Pro Forma Consolidated Financial Statements
4
TRANE TECHNOLOGIES PLC
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2017
| In millions, except per share amounts | As Reported | Discontinued Operations of Ingersoll-Rand Industrial (a) | Note | Pro Forma Trane Technologies | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Net revenues | $ | 14,197.6 | $ | (3,030.1 | ) | $ | 11,167.5 | |||
| Cost of goods sold | (9,811.6 | ) | 2,041.9 | (7,769.7 | ) | |||||
| Selling and administrative expenses | (2,720.7 | ) | 630.6 | (2,090.1 | ) | |||||
| Operating income | 1,665.3 | (357.6 | ) | 1,307.7 | ||||||
| Interest expense | (215.8 | ) | (0.2 | ) | (216.0 | ) | ||||
| Other income/(expense), net | (31.6 | ) | (2.3 | ) | (33.9 | ) | ||||
| Earnings before income taxes | 1,417.9 | (360.1 | ) | 1,057.8 | ||||||
| Benefit (provision) for income taxes | (80.2 | ) | 110.0 | (b) | 29.8 | |||||
| Earnings from continuing operations | 1,337.7 | (250.1 | ) | 1,087.6 | ||||||
| Less: Earnings from continuing operations attributable to noncontrolling interests | (9.7 | ) | (5.0 | ) | (14.7 | ) | ||||
| Net earnings from continuing operations attributable to Trane Technologies plc | $ | 1,328.0 | $ | (255.1 | ) | $ | 1,072.9 | |||
| Earnings per share from continuing operations attributable to Trane Technologies plc ordinary shareholders: | ||||||||||
| Basic | $ | 5.21 | $ | 4.21 | ||||||
| Diluted | $ | 5.14 | $ | 4.16 | ||||||
| Weighted-average number of common shares outstanding: | ||||||||||
| Basic | 254.9 | 254.9 | ||||||||
| Diluted | 258.1 | 258.1 |
See Notes to Unaudited Pro Forma Consolidated Financial Statements
5
TRANE TECHNOLOGIES PLC
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 2019
| In millions, except per share amounts | As Reported | Discontinued Operations of Ingersoll-Rand Industrial (a) | Note | Pro Forma Adjustments | Note | Pro Forma Trane Technologies | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ | 1,303.6 | $ | (25.0 | ) | $ | 1,900.0 | (c) | $ | 3,178.6 | ||
| Accounts and notes receivable, net | 2,798.1 | (613.5 | ) | — | 2,184.6 | |||||||
| Inventories | 1,712.2 | (433.7 | ) | — | 1,278.5 | |||||||
| Other current assets | 403.3 | (58.4 | ) | (b) | 11.9 | (d) | 356.8 | |||||
| Total current assets | 6,217.2 | (1,130.6 | ) | 1,911.9 | 6,998.5 | |||||||
| Property, plant and equipment, net | 1,806.2 | (454.3 | ) | — | 1,351.9 | |||||||
| Goodwill | 6,783.1 | (1,657.4 | ) | — | 5,125.7 | |||||||
| Intangible assets, net | 4,148.8 | (825.2 | ) | — | 3,323.6 | |||||||
| Other noncurrent assets | 1,537.0 | (139.7 | ) | (b) | — | 1,397.3 | ||||||
| Total assets | $ | 20,492.3 | $ | (4,207.2 | ) | $ | 1,911.9 | $ | 18,197.0 | |||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ | 1,809.2 | $ | (427.9 | ) | $ | — | $ | 1,381.3 | |||
| Accrued compensation and benefits | 549.2 | (106.9 | ) | — | 442.3 | |||||||
| Accrued expenses and other current liabilities | 1,853.0 | (288.7 | ) | (b) | 125.3 | (d)(e) | 1,689.6 | |||||
| Short-term borrowings and current maturities of long-term debt | 650.5 | (0.2 | ) | — | 650.3 | |||||||
| Total current liabilities | 4,861.9 | (823.7 | ) | 125.3 | 4,163.5 | |||||||
| Long-term debt | 4,922.9 | — | — | 4,922.9 | ||||||||
| Postemployment and other benefit liabilities | 1,221.9 | (173.8 | ) | — | 1,048.1 | |||||||
| Deferred and noncurrent income taxes | 682.0 | (110.0 | ) | (b) | (4.2 | ) | (d)(e) | 567.8 | ||||
| Other noncurrent liabilities | 1,491.2 | (92.9 | ) | — | 1,398.3 | |||||||
| Total liabilities | 13,179.9 | (1,200.4 | ) | 121.1 | 12,100.6 | |||||||
| Equity: | ||||||||||||
| Total equity | 7,312.4 | (3,006.8 | ) | 1,790.8 | (f) | 6,096.4 | ||||||
| Total liabilities and equity | $ | 20,492.3 | $ | (4,207.2 | ) | $ | 1,911.9 | $ | 18,197.0 |
See Notes to Unaudited Pro Forma Consolidated Financial Statements
6
Notes to Unaudited Pro Forma Consolidated Financial Statements
| a. | Reflects the reclassification of the operations, assets and liabilities of Ingersoll-Rand Industrial as a discontinued operation in accordance with Accounting Standards Codification 205 (ASC 205), Presentation of Financial Statements. Amounts for the year ended 2019 also include $94.5 million of separation costs directly related to the Transactions and $12.9 million of costs related to the acquisition of Precision Flow Systems, which have been considered to meet the criteria for presentation as discontinued operations and were previously reported as part of Unallocated corporate costs in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. |
|---|---|
| b. | Income tax related adjustments represent the Company's current estimates on a discontinued operations basis which could materially change as the Company finalizes its discontinued operations accounting to be reported in the Quarterly Report on Form 10-Q for the three months ended March 31, 2020 and the Annual Report on Form 10-K for the year ended December 31, 2020. |
| --- | --- |
| c. | Reflects the net cash distribution immediately prior to the Transactions by Ingersoll-Rand Services Company to a subsidiary of the Company, pursuant to the terms of the Separation and Distribution Agreement, of $1.9 billion, representing the one-time special cash payment by Ingersoll-Rand Services Company from the net proceeds of its borrowings. |
| --- | --- |
| d. | Reflects $11.9 million and $32.7 million (of which $19.8 million is included in Accrued expense and other current liabilities and $12.9 million is included in Deferred and noncurrent income taxes) of tax indemnification receivables and liabilities, respectively, related to unresolved tax matters retained by the Company in connection with the separation, as defined by the Tax Matters Agreement. The actual amounts that the Company may receive or may be required to accrue or pay under the Tax Matters Agreement will depend upon a variety of factors, including the outcome of the unresolved tax matters, which may not be resolved for several years. |
| --- | --- |
| e. | Reflects an adjustment of $105.5 million for the accrual of estimated costs related to the separation which were not yet incurred as of December 31, 2019 and the applicable deferred tax effects of $17.1 million (included in Deferred and noncurrent income taxes), using a U.S. blended federal and state income tax rate. The estimate was determined based on the high end of the Company's anticipated range for such costs of $200 million, less $94.5 million of costs that were incurred as of December 31, 2019. The accrued costs primarily relate to non-recurring professional fees directly related to the separation. |
| --- | --- |
| f. | Total equity was adjusted as a result of adjustments (c), (d) and (e). |
| --- | --- |
7
Exhibit
Exhibit 99.2
UNAUDITED SELECTED ADJUSTED NON-GAAP FINANCIAL INFORMATION
The following unaudited selected adjusted non-GAAP financial information of Trane Technologies plc (the "Company", "we" or "our") for the years ended December 31, 2019 and 2018 was derived from the unaudited pro forma consolidated financial statements presented in Exhibit 99.1 to this Current Report on Form 8-K, and further adjusted as described under "Non-GAAP Financial Information" below and the footnotes to the tables. Please refer to Exhibit 99.1 for a complete discussion of the adjustments and assumptions made.
Non-GAAP Financial Information
The Company reports its financial results in accordance with generally accepted accounting principles in the United States ("GAAP"). The unaudited selected adjusted non-GAAP financial information provides adjusted non-GAAP financial information and a quantitative reconciliation of the difference between the non-GAAP financial measures and the pro forma financial measures.
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. We believe that it is meaningful to provide the relative impact of restructuring and financing charges and the corresponding tax impact in order to present a better understanding of our results on a period to period comparative basis.
The non-GAAP financial measures assist investors with analyzing our business results. We believe that the presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as management. 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.
The following unaudited selected adjusted non-GAAP financial information should be read in conjunction with the historical consolidated financial statements of the Company, the accompanying notes to those financial statements and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 and Ingersoll-Rand U.S. Holdco, Inc.'s registration statement on Form 10 filed with the Securities and Exchange Commission on January 15, 2020. The unaudited selected adjusted non-GAAP financial information does not purport to represent what our results of operations or financial condition would have been had the transactions to which the pro forma adjustments relate actually occurred on the dates indicated, and they do not purport to project our results of operations or financial condition for any future period or as of any future date.
1
TRANE TECHNOLOGIES PLC
UNAUDITED SELECTED ADJUSTED NON-GAAP FINANCIAL INFORMATION
For the Year Ended December 31, 2019
| For the year ended December 31, 2019 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions, except per share amounts | Pro Forma Trane Technologies | Non-GAAP Adjustments (a) | Note | As Adjusted | |||||||
| Net revenues | $ | 13,075.9 | $ | — | $ | 13,075.9 | |||||
| Operating income^(1)(2)^ | 1,670.1 | 52.6 | (b) | 1,722.7 | |||||||
| Operating margin | 12.8 | % | 13.2 | % | |||||||
| Earnings from continuing operations before income taxes | 1,398.9 | 52.6 | (b) | 1,451.5 | |||||||
| Provision for income taxes | (238.6 | ) | (9.0 | ) | (d)(e) | (247.6 | ) | ||||
| Tax rate | 17.1 | % | 17.1 | % | |||||||
| Net earnings from continuing operations attributable to Trane Technologies plc | $ | 1,145.1 | $ | 43.6 | (h) | $ | 1,188.7 | ||||
| Diluted earnings per common share | |||||||||||
| Continuing operations attributable to Trane Technologies plc | $ | 4.69 | $ | 0.17 | $ | 4.86 | |||||
| Weighted-average number of common shares outstanding | |||||||||||
| Diluted | 244.4 | — | 244.4 |
(1) Included within Operating income is unallocated corporate expense of $238.4 million. As Adjusted, unallocated corporate expense is $236.6 million.
(2) Operating income includes depreciation and amortization expense of $288.8 million.
See Notes to Unaudited Selected Adjusted Non-GAAP Financial Information
2
TRANE TECHNOLOGIES PLC
UNAUDITED SELECTED ADJUSTED NON-GAAP FINANCIAL INFORMATION
For the year ended December 31, 2018
| For the year ended December 31, 2018 | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| In millions, except per share amounts | Pro Forma Trane Technologies | Non-GAAP Adjustments (a) | Note | As Adjusted | |||||||
| Net revenues | $ | 12,343.8 | $ | — | $ | 12,343.8 | |||||
| Operating income^(1)(2)^ | 1,512.1 | 43.5 | (b) | 1,555.6 | |||||||
| Operating margin | 12.2 | % | 12.6 | % | |||||||
| Earnings from continuing operations before income taxes | 1,257.8 | 60.1 | (b)(c) | 1,317.9 | |||||||
| Provision for income taxes | (235.0 | ) | (29.7 | ) | (d)(f)(g) | (264.7 | ) | ||||
| Tax rate | 18.7 | % | 20.1 | % | |||||||
| Net earnings from continuing operations attributable to Trane Technologies plc | $ | 1,007.7 | $ | 30.4 | (h) | $ | 1,038.1 | ||||
| Diluted earnings per common share | |||||||||||
| Continuing operations attributable to Trane Technologies plc | $ | 4.03 | $ | 0.12 | $ | 4.15 | |||||
| Weighted-average number of common shares outstanding | |||||||||||
| Diluted | 250.1 | — | 250.1 |
(1) Included within Operating income is unallocated corporate expense of $254.1 million. As Adjusted, unallocated corporate expense is $244.7 million.
(2) Operating income includes depreciation and amortization expense of $282.3 million.
See Notes to Unaudited Selected Adjusted Non-GAAP Financial Information
3
Trane Technologies plc
Notes to Unaudited Selected Adjusted Non-GAAP Financial Information
| (a) | Non-GAAP adjustments to reconcile pro forma financial information to non-GAAP financial information: | |||||||
|---|---|---|---|---|---|---|---|---|
| In millions | For the year ended December 31, | |||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Detail of Non-GAAP Adjustments: | 2019 | 2018 | ||||||
| (b) | Restructuring costs | $ | 52.6 | $ | 43.5 | |||
| (c) | Debt redemption premium and related charges | — | 16.6 | |||||
| (d) | Tax impact of adjustments (b,c) | (9.6 | ) | (13.4 | ) | |||
| (e) | Separation related tax costs | 0.6 | — | |||||
| (f) | Tax Reform non-cash measurement period adjustments | — | (9.0 | ) | ||||
| (g) | U.S. discrete non-cash tax adjustment | — | (7.3 | ) | ||||
| (h) | Impact of adjustments on earnings from continuing operations attributable to Trane Technologies plc | $ | 43.6 | $ | 30.4 |
The non-GAAP adjustments above exclude Ingersoll-Rand Industrial related impacts as they will be classified as discontinued operations in future filings.
4