Trane Technologies plc 10-Q for FY2020 Q1

Trane Technologies plc (TT)

10-Q 2020-05-05 For: 2020-03-31

Added on April 07, 2026

About this 10-Q

Trane Technologies plc filed this 10-Q on May 5, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $2.64B; down 5.8% from $2.8B a year earlier
Net loss: $29.2M; compared with net income of $199.9M a year earlier
Diluted EPS: -$0.12; compared with $0.82 a year earlier

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Ireland	98-0626632
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)



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



Large Accelerated Filer	x	Accelerated filer	¨	Emerging growth company	☐

Non-accelerated filer	¨	Smaller reporting 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. ¨




PART I FINANCIAL INFORMATION		1

Item 1 -	Financial Statements	1

	Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019	1

	Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019	3

	Condensed Consolidated Statements of Equity for the three months ended March 31, 2020 and 2019	4

	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019	5

	Notes to Condensed Consolidated Financial Statements	6

Item 2 -	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30

Item 3 -	Quantitative and Qualitative Disclosures about Market Risk	42

Item 4 -	Controls and Procedures	42

PART II OTHER INFORMATION		43

Item 1 -	Legal Proceedings	43

Item 1A -	Risk Factors	43

Item 2 -	Unregistered Sales of Equity Securities and Use of Proceeds	44

Item 6 -	Exhibits	44

SIGNATURES		45

TRANE TECHNOLOGIES PLC CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)

	Three months ended
	March 31,
In millions, except per share amounts	2020			2019
Net revenues	$	2,641.3		$	2,803.7
Cost of goods sold	(1,898.8		)	(1,989.2		)
Selling and administrative expenses	(588.1		)	(578.0		)
Operating income	154.4			236.5
Interest expense	(63.1		)	(51.0		)
Other income/(expense), net	12.5			(18.0		)
Earnings before income taxes	103.8			167.5
Benefit (provision) for income taxes	(51.0		)	(20.2		)
Earnings from continuing operations	52.8			147.3
Discontinued operations, net of tax	(78.7		)	56.4
Net earnings (loss)	(25.9		)	203.7
Less: Net earnings from continuing operations attributable to noncontrolling interests	(2.8		)	(3.1		)
Less: Net earnings from discontinuing operations attributable to noncontrolling interests	(0.5		)	(0.7		)
Net earnings (loss) attributable to Trane Technologies plc	$	(29.2	)	$	199.9

Amounts attributable to Trane Technologies plc ordinary shareholders:
Continuing operations	$	50.0		$	144.2
Discontinued operations	(79.2		)	55.7
Net earnings (loss)	$	(29.2	)	$	199.9
Earnings (loss) per share attributable to Trane Technologies plc ordinary shareholders:
Basic:
Continuing operations	$	0.21		$	0.59
Discontinued operations	(0.33		)	0.23
Net earnings (loss)	$	(0.12	)	$	0.82
Diluted:
Continuing operations	$	0.21		$	0.59
Discontinued operations	(0.33		)	0.23
Net earnings (loss)	$	(0.12	)	$	0.82
Weighted-average shares outstanding:
Basic	239.5			242.5
Diluted	242.3			245.2



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934



In millions	March 31, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	2,647.7		$	1,278.6
Accounts and notes receivable, net	2,091.8			2,184.6
Inventories	1,463.7			1,278.6
Other current assets	356.6			344.8
Assets held-for-sale	—			4,207.2
Total current assets	6,559.8			9,293.8
Property, plant and equipment, net	1,326.2			1,352.0
Goodwill	5,082.3			5,125.7
Intangible assets, net	3,289.0			3,323.6
Other noncurrent assets	1,378.3			1,397.2
Total assets	$	17,635.6		$	20,492.3
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,446.7		$	1,381.3
Accrued compensation and benefits	316.0			442.4
Accrued expenses and other current liabilities	1,528.4			1,564.2
Short-term borrowings and current maturities of long-term debt	949.7			650.3
Liabilities held-for-sale	—			1,200.4
Total current liabilities	4,240.8			5,238.6
Long-term debt	4,624.8			4,922.9
Postemployment and other benefit liabilities	1,008.2			1,048.2
Deferred and noncurrent income taxes	561.2			572.0
Other noncurrent liabilities	1,410.8			1,398.2
Total liabilities	11,845.8			13,179.9
Equity:
Trane Technologies plc shareholders’ equity:
Ordinary shares	263.7			262.8
Ordinary shares held in treasury, at cost	(1,719.4		)	(1,719.4		)
Capital in excess of par value	26.4			—
Retained earnings	8,127.9			9,730.8
Accumulated other comprehensive income (loss)	(926.0		)	(1,006.6		)
Total Trane Technologies plc shareholders’ equity	5,772.6			7,267.6
Noncontrolling interests	17.2			44.8
Total equity	5,789.8			7,312.4
Total liabilities and equity	$	17,635.6		$	20,492.3



In millions, except per share amounts	Total equity			Ordinary shares			Ordinary shares held in treasury, at cost			Capital in excess of par value			Retained earnings			Accumulated other comprehensive income (loss)			Noncontrolling Interests
In millions, except per share amounts	Total equity			Amount		Shares	Ordinary shares held in treasury, at cost			Capital in excess of par value			Retained earnings			Accumulated other comprehensive income (loss)			Noncontrolling Interests
Balance at December 31, 2019	$	7,312.4		$	262.8	262.8	$	(1,719.4	)	$	—		$	9,730.8		$	(1,006.6	)	$	44.8
Net earnings	(25.9		)	—		—	—			—			(29.2		)	—			3.3
Other comprehensive income (loss)	(58.6		)	—		—	—			—			—			(58.7		)	0.1
Shares issued under incentive stock plans	(5.6		)	0.9		0.9	—			(6.5		)	—			—			—
Share-based compensation	27.6			—		—	—			29.0			(1.4		)	—			—
Dividends declared to noncontrolling interest	(6.1		)	—		—	—			—			—			—			(6.1		)
Investment by joint venture partner	7.0			—		—	—			3.9			—			—			3.1
Cash dividends declared	(126.7		)	—		—	—			—			(126.7		)	—			—
Separation of Ingersoll Rand Industrial	(1,334.3		)	—		—	—			—			(1,445.6		)	139.3			(28.0		)
Balance at March 31, 2020	$	5,789.8		$	263.7	263.7	$	(1,719.4	)	$	26.4		$	8,127.9		$	(926.0	)	$	17.2


•	The Company's 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.


•	The Company's 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.


•	The Company's Asia Pacific segment innovates for customers throughout the Asia Pacific region and India. The Asia Pacific segment encompasses heating and cooling systems, services and solutions for commercial buildings and transport refrigeration systems and solutions.



In millions	Americas			EMEA			Asia Pacific			Total
Net balance as of December 31, 2019	$	3,858.8		$	731.1		$	535.8		$	5,125.7
Currency translation	(12.1		)	(24.3		)	(7.0		)	(43.4		)
Net balance as of March 31, 2020	$	3,846.7		$	706.8		$	528.8		$	5,082.3



	March 31, 2020							December 31, 2019
In millions	Gross carrying amount		Accumulated amortization			Net carrying amount		Gross carrying amount		Accumulated amortization			Net carrying amount
Customer relationships	$	1,919.6	$	(1,262.9	)	$	656.7	$	1,928.5	$	(1,239.2	)	$	689.3
Patents	164.4		(162.8		)	1.6		171.8		(169.7		)	2.1
Other	40.3		(34.3		)	6.0		40.4		(33.7		)	6.7
Total finite-lived intangible assets	2,124.3		(1,460.0		)	664.3		2,140.7		(1,442.6		)	698.1
Trademarks (indefinite-lived)	2,624.7		—			2,624.7		2,625.5		—			2,625.5
Total	$	4,749.0	$	(1,460.0	)	$	3,289.0	$	4,766.2	$	(1,442.6	)	$	3,323.6



	Derivative assets				Derivative liabilities
In millions	March 31, 2020		December 31, 2019		March 31, 2020		December 31, 2019
Derivatives designated as hedges:
Currency derivatives	$	0.6	$	0.1	$	4.2	$	3.9
Derivatives not designated as hedges:
Currency derivatives	5.8		1.0		1.8		3.3
Total derivatives	$	6.4	$	1.1	$	6.0	$	7.2



	Three months ended
	March 31,
In millions	2020			2019
Cash flows from operating activities:
Net earnings (loss)	$	(25.9	)	$	203.7
Discontinued operations, net of tax	78.7			(56.4		)
Adjustments for non-cash transactions:
Depreciation and amortization	75.0			70.9
Pension and other postretirement benefits	17.1			25.8
Stock settled share-based compensation	29.0			29.7
Changes in assets and liabilities, net of the effects of acquisitions	(295.8		)	(266.2		)
Other non-cash items, net	(7.4		)	4.9
Net cash provided by (used in) continuing operating activities	(129.3		)	12.4
Net cash provided by (used in) discontinued operating activities	(198.3		)	(65.0		)
Net cash provided by (used in) operating activities	(327.6		)	(52.6		)
Cash flows from investing activities:
Capital expenditures	(34.7		)	(49.0		)
Acquisitions of businesses, net of cash acquired	1.0			(22.0		)
Other investing activities, net	—			1.3
Net cash provided by (used in) continuing investing activities	(33.7		)	(69.7		)
Net cash provided by (used in) discontinued investing activities	(6.8		)	(6.7		)
Net cash provided by (used in) investing activities	(40.5		)	(76.4		)
Cash flows from financing activities:
Short-term borrowings (payments), net	—			23.9
Proceeds from long-term debt	—			1,497.9
Net proceeds from (payments of) debt	—			1,521.8
Debt issuance costs	—			(10.6		)
Dividends paid to ordinary shareholders	(125.9		)	(127.7		)
Dividends paid to noncontrolling interests	(6.1		)	(9.3		)
Proceeds from shares issued under incentive plans	(5.6		)	6.3
Repurchase of ordinary shares	—			(250.0		)
Receipt of a special cash payment	1,900.0			—
Other financing activities, net	7.0			—
Net cash provided by (used in) continuing financing activities	1,769.4			1,130.5
Net cash provided by (used in) discontinued financing activities	—			(0.4		)
Net cash provided by (used in) financing activities	1,769.4			1,130.1
Effect of exchange rate changes on cash and cash equivalents	(32.2		)	2.9
Net increase (decrease) in cash and cash equivalents	1,369.1			1,004.0



In millions	March 31, 2020			December 31, 2019
Raw materials	$	348.8		$	333.5
Work-in-process	173.8			173.7
Finished goods	973.4			804.9
	1,496.0			1,312.1
LIFO reserve	(32.3		)	(33.5		)
Total	$	1,463.7		$	1,278.6



In millions	March 31, 2020		December 31, 2019
2.900% Senior notes due 2021 ⁽¹⁾	—		299.1
9.000% Debentures due 2021	124.9		124.9
4.250% Senior notes due 2023	697.9		697.8
7.200% Debentures due 2020-2025	37.3		37.3
3.550% Senior notes due 2024	496.8		496.6
6.480% Debentures due 2025	149.7		149.7
3.500% Senior notes due 2026	396.9		396.8
3.750% Senior notes due 2028	545.2		545.1
3.800% Senior notes due 2029	743.7		743.6
5.750% Senior notes due 2043	494.6		494.5
4.650% Senior notes due 2044	296.0		295.9
4.300% Senior notes due 2048	296.0		296.0
4.500% Senior notes due 2049	345.5		345.5
Other loans and notes	0.3		0.1
Total	$	4,624.8	$	4,922.9


•	Level 1: Observable inputs such as quoted prices in active markets;



	Amount of gain (loss) recognized in AOCI					Location of gain (loss) reclassified from AOCI and recognized into Net earnings	Amount of gain (loss) reclassified from AOCI and recognized into Net earnings
In millions	2020		2019				2020			2019
Currency derivatives designated as hedges	$	0.3	$	(1.4	)	Cost of goods sold	$	(0.5	)	$	(0.3	)
Interest rate swaps & locks	—		—			Interest expense	0.2			0.2
Total	$	0.3	$	(1.4	)		$	(0.3	)	$	(0.1	)



	Amount of gain (loss) recognized in Net earnings
In millions	2020		2019
Currency derivatives not designated as hedges	$	8.3	$	(3.0	)
Total	$	8.3	$	(3.0	)



	Classification and amount of gain (loss) recognized in income on cash flow hedging relationships
	2020						2019
In millions	Cost of goods sold			Interest expense			Cost of goods sold			Interest expense
Total amounts presented in the Consolidated Statements of Comprehensive Income	$	(1,898.8	)	$	(63.1	)	$	(1,989.2	)	$	(51.0	)
Gain (loss) on cash flow hedging relationships
Currency derivatives:
Amount of gain (loss) reclassified from AOCI and recognized into Net earnings	$	(0.5	)	$	—		$	(0.3	)	$	—
Amount excluded from effectiveness testing recognized in net earnings based on changes in fair value and amortization	$	(0.6	)	$	—		$	(0.6	)	$	—
Interest rate swaps & locks:
Amount of gain (loss) reclassified from AOCI and recognized into Net earnings	$	—		$	0.2		$	—		$	0.2


•	Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and


•	Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.



In millions	Fair Value		Fair value measurements
In millions	Fair Value		Level 1		Level 2		Level 3
Assets:
Derivative instruments	$	6.4	$	—	$	6.4	$	—
Liabilities:
Derivative instruments	$	6.0	$	—	$	6.0	$	—



In millions (except lease term and discount rate)	Classification	March 31, 2020			December 31, 2019
Assets
Operating lease right-of-use assets ⁽¹⁾	Other noncurrent assets	$	453.7		$	469.4
Liabilities
Operating lease current	Other current liabilities	143.4			145.0
Operating lease noncurrent	Other noncurrent liabilities	315.9			329.9

Weighted average remaining lease term		4.3 years			4.3 years
Weighted average discount rate		3.5		%	3.6		%



In millions	March 31, 2020
Operating leases:
Remaining nine months of 2020	$	121.1
2021	130.2
2022	93.2
2023	64.3
2024	37.5
After 2024	51.6
Total lease payments	$	497.9
Less: Interest	(38.6		)
Present value of lease liabilities	$	459.3



In millions	Ordinary shares issued	Ordinary shares held in treasury
December 31, 2019	262.8	24.5
Shares issued under incentive plans, net	0.9	—
March 31, 2020	263.7	24.5



In millions	Derivative Instruments			Pension and OPEB			Foreign Currency Translation			Total
Balance at December 31, 2019	$	5.6		$	(457.4	)	$	(554.8	)	$	(1,006.6	)
Other comprehensive income (loss) before reclassifications	0.3			(19.7		)	(48.1		)	(67.5		)
Amounts reclassified from AOCI	0.3			11.5			—			11.8
Separation of Ingersoll Rand Industrial, net of tax	—			69.1			70.2			139.3
Benefit (provision) for income taxes	(0.2		)	(2.8		)	—			(3.0		)
Net current period other comprehensive income (loss)	$	0.4		$	58.1		$	22.1		$	80.6
Balance at March 31, 2020	$	6.0		$	(399.3	)	$	(532.7	)	$	(926.0	)


•	Vested stock options - Outstanding stock options that were vested and exercisable at the time of the transaction were converted into vested and exercisable stock options of the Company. The number of underlying shares and exercise price for each award was adjusted to preserve the overall intrinsic value of the awards immediately prior to the separation.


•	Unvested stock options - Unvested stock options held at the time of the transaction were converted into stock options of the participants employer following the separation. The number of underlying shares and exercise price for each award was adjusted to preserve the overall intrinsic value of the awards immediately prior to the separation.


•	Restricted stock units - Outstanding RSUs held at the time of the transaction were converted into RSUs of the participants employer following the separation. The number of underlying shares was adjusted to preserve the overall intrinsic value of the awards immediately prior to the separation.



	2020			2019
	Number granted	Weighted- average fair value per award		Number granted	Weighted- average fair value per award
Stock options	1,020,535	$	16.75	1,259,344	$	17.09
RSUs	189,546	$	104.80	242,104	$	100.70
Performance shares ⁽¹⁾	259,920	$	141.88	306,352	$	110.57



	2020		2019
Dividend yield	2.01	%	2.09	%
Volatility	24.33	%	21.46	%
Risk-free rate of return	0.56	%	2.49	%
Expected life in years	4.8		4.8


•	Volatility - The expected volatility is based on a weighted average of the Company’s implied volatility and the most recent historical volatility of the Company’s stock commensurate with the expected life.


•	Risk-free rate of return - The Company applies a yield curve of continuous risk-free rates based upon the published U.S. Treasury spot rates on the grant date.


•	Expected life - The expected life of the Company’s stock option awards represents the weighted-average of the actual period since the grant date for all exercised or cancelled options and an expected period for all outstanding options.


•	Dividend yield - The Company determines the dividend yield based upon the expected quarterly dividend payments as of the grant date and the current fair market value of the Company’s stock.


•	Forfeiture Rate - The Company analyzes historical data of forfeited options to develop a reasonable expectation of the number of options to forfeit prior to vesting per year. This expected forfeiture rate is applied to the Company’s ongoing compensation expense; however, all expense is adjusted to reflect actual vestings and forfeitures.