Highlights (fourth-quarter 2023 versus fourth-quarter 2022,
unless otherwise noted):
- Reported revenues of $4.4 billion, up 9 percent; organic
revenues* up 6 percent
- GAAP operating margin up 120 bps; adjusted operating margin*
up 190 bps
- Organic bookings* up 12 percent, with growth in all
segments
- Adjusted EBITDA margin* of 17.2 percent, up 150 bps
- GAAP continuing EPS of $2.23; adjusted continuing EPS* of
$2.17, up 19 percent
- $6.9 billion backlog, well positioned for growth in
2024
Highlights (full-year 2023 versus full-year 2022, unless
otherwise noted):
- Reported revenues of $17.7 billion, up 11 percent; organic
revenues up 9 percent
- GAAP operating margin up 130 bps; adjusted operating margin
up 140 bps
- Adjusted EBITDA margin of 18 percent, up 120 bps
- GAAP continuing EPS of $8.89; adjusted continuing EPS of
$9.04, up 23 percent
- Strong free cash flow conversion* of 103 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 $2.23 for the fourth quarter of 2023. Adjusted
continuing EPS was $2.17, up 19 percent.
Fourth-Quarter 2023 Results
Financial Comparisons - Fourth-Quarter Continuing
Operations
$, millions except EPS
Q4 2023
Q4 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$4,534
$3,998
13%
12%
Net Revenues
$4,424
$4,074
9%
6%
GAAP Operating Income
$688
$581
18%
GAAP Operating Margin
15.5%
14.3%
120 bps
Adjusted Operating Income*
$688
$558
23%
Adjusted Operating Margin
15.6%
13.7%
190 bps
Adjusted EBITDA*
$761
$638
19%
Adjusted EBITDA Margin*
17.2%
15.7%
150 bps
GAAP Continuing EPS
$2.23
$1.91
17%
Adjusted Continuing EPS
$2.17
$1.82
19%
Pre-tax Non-GAAP Adjustments,
net**
$0.7
($22.5)
$23.2
**For details see tables 2 and 3 of the
news release.
“Trane Technologies delivered another year of top quartile
financial performance in 2023 powered by our purpose-driven
strategy, uplifting culture and talented team,” said Dave Regnery,
chair and CEO, Trane Technologies. “We achieved record financial
results with strong organic revenue growth, powerful free cash flow
conversion of 103% and our third consecutive year of adjusted
earnings per share growth of 20% or more.
“Since 2020, we have delivered compound annual revenue growth of
12 percent, adjusted EBITDA margin expansion of 260 basis points
and average free cash flow as a percentage of adjusted net
earnings* of approximately 100 percent, while deploying
approximately $9 billion of capital. With our focused
sustainability strategy, proven business operating system, and
relentless investment in future growth and innovation, we are well
positioned to continue delivering differentiated shareholder
returns over the long term.”
Highlights from the Fourth Quarter of 2023 (all comparisons
against fourth-quarter 2022 unless otherwise noted):
- Delivered strong fourth-quarter revenue, operating income,
EBITDA and EPS growth.
- Strong bookings of $4.5 billion; organic bookings were up 12
percent.
- Enterprise reported revenues were up 9 percent, including 2
percentage points related to acquisitions and 1 percentage point of
positive foreign exchange impact. Organic revenues were up 6
percent.
- GAAP operating margin was up 120 basis points, adjusted
operating margin was up 190 basis points and adjusted EBITDA margin
was up 150 basis points.
- Strong volume growth, positive price realization and
productivity more than offset inflation. The Company also continued
high levels of business reinvestment.
Fourth-Quarter Business Review (all comparisons against
fourth-quarter 2022 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 solutions, energy services and solutions, residential
heating and cooling; and transport refrigeration systems and
solutions.
$, millions
Q4 2023
Q4 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$3,625.2
$3,184.5
14%
13%
Net Revenues
$3,390.3
$3,139.9
8%
7%
GAAP Operating Income
$566.8
$486.5
17%
GAAP Operating Margin
16.7%
15.5%
120 bps
Adjusted Operating Income
$562.6
$458.9
23%
Adjusted Operating Margin
16.6%
14.6%
200 bps
Adjusted EBITDA
$613.5
$520.8
18%
Adjusted EBITDA Margin
18.1%
16.6%
150 bps
- Strong bookings of $3.6 billion.
- Organic bookings were up 13 percent, led by Commercial HVAC
which was up mid-teens year-over-year and up more than 50 percent
on a 3-year stack.
- Reported revenues were up 8 percent, including 1 percentage
point related to acquisitions. Organic revenues were up 7
percent.
- GAAP operating margin was up 120 basis points, adjusted
operating margin was up 200 basis points and adjusted EBITDA margin
was up 150 basis points.
- Strong volume growth, positive price realization, and
productivity more than offset inflation. 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 2023
Q4 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$570.2
$483.7
18%
10%
Net Revenues
$654.6
$558.5
17%
8%
GAAP Operating Income
$111.7
$85.3
31%
GAAP Operating Margin
17.1%
15.3%
180 bps
Adjusted Operating Income
$111.7
$86.3
29%
Adjusted Operating Margin
17.1%
15.5%
160 bps
Adjusted EBITDA
$122.4
$91.9
33%
Adjusted EBITDA Margin
18.7%
16.5%
220 bps
- Bookings were up 18 percent; organic bookings were up 10
percent.
- Reported revenues were up 17 percent, including approximately 6
percentage points related to acquisitions and approximately 3
percentage points of positive foreign exchange impact. Organic
revenues were up 8 percent.
- GAAP operating margin was up 180 basis points, adjusted
operating margin was up 160 basis points and adjusted EBITDA margin
was up 220 basis points.
- Strong volume growth, positive price realization, and
productivity more than offset inflation. 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 2023
Q4 2022
Y-O-Y Change
Organic Y-O-Y Change
Bookings
$339.1
$330.2
3%
2%
Net Revenues
$379.2
$375.5
1%
flat
GAAP Operating Income
$85.7
$75.9
13%
GAAP Operating Margin
22.6%
20.2%
240 bps
Adjusted Operating Income
$84.9
$76.5
11%
Adjusted Operating Margin
22.4%
20.4%
200 bps
Adjusted EBITDA
$89.7
$79.7
13%
Adjusted EBITDA Margin
23.7%
21.2%
250 bps
- Bookings were up 3 percent; organic bookings were up 2
percent.
- Reported revenues were up 1 percent including approximately 1
percentage point related to acquisitions. Organic revenues were
flat versus prior-year, which was up 19 percent.
- GAAP operating margin was up 240 basis points, adjusted
operating margin was up 200 basis points and adjusted EBITDA margin
was up 250 basis points.
- Strong positive price realization and productivity more than
offset inflation. The Company also continued high levels of
business reinvestment.
Full-Year 2023 Results (all comparisons against full-year
2022 unless otherwise noted)
Financial Comparisons - Full-year Continuing
Operations
$, millions except EPS
2023
2022
Y-O-Y Change
Organic Y-O-Y
Bookings
$18,281
$17,472
5%
3%
Net Revenues
$17,678
$15,992
11%
9%
GAAP Operating Income
$2,894
$2,419
20%
GAAP Operating Margin
16.4%
15.1%
130 bps
Adjusted Operating Income
$2,888
$2,379
21%
Adjusted Operating Margin
16.3%
14.9%
140 bps
Adjusted EBITDA
$3,184
$2,694
18%
Adjusted EBITDA Margin
18.0%
16.8%
120 bps
GAAP Continuing EPS
$8.89
$7.57
17%
Adjusted Continuing EPS
$9.04
$7.36
23%
- Bookings were up 5 percent; organic bookings were up 3
percent.
- Reported revenues were up 11 percent, including approximately 2
percentage points related to acquisitions. Organic revenues were up
9 percent.
- GAAP operating margin was up 130 basis points, adjusted
operating margin was up 140 basis points, and adjusted EBITDA
margin was up 120 basis points.
- Strong volume, positive price realization and productivity more
than offset inflation. The Company also continued high levels of
business reinvestment.
Balance Sheet and Cash Flow
$, millions
2023
2022
Y-O-Y Change
Cash From Continuing Operating
Activities Y-T-D
$2,427
$1,699
$728
Free Cash Flow Y-T-D*
$2,151
$1,566
$585
Working Capital/Revenue*
3.0%
3.3%
30 bps decrease
Cash Balance 31 December
$1,095
$1,221
($126)
Debt Balance 31 December
$4,780
$4,836
($56)
- Full-year 2023, cash flow from continuing operating activities
was $2.4 billion.
- Full-year 2023, free cash flow was $2.2 billion, 103 percent of
adjusted net earnings.
- For full-year 2023, the Company deployed or committed
approximately $2.4 billion including $684 million for dividends,
approximately $900 million for M&A, $750 million for share
repurchases (including activity in January 2024) and $46 million
for debt retirement.
- 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 2024 Guidance
- The Company expects full-year 2024 reported revenue growth of
approximately 7 percent to 8 percent; organic revenue growth of
approximately 6 percent to 7 percent versus full-year 2023.
- The Company expects GAAP continuing EPS for full-year 2024 of
$9.90 to $10.20. This includes EPS of $0.10 for non-GAAP
adjustments. The Company expects adjusted continuing EPS for
full-year 2024 of $10.00 to $10.30.
- Additional information regarding the Company's 2024 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 within
the meaning of securities laws, which are statements that are not
historical facts, including statements that relate to our future
financial performance and targets, including revenue, EPS, and
earnings; 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, anticipated capital commitments for M&A
activity, and our capital allocation strategy; our available
liquidity; our anticipated revenue growth, and the performance of
the markets in which we operate.
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; worldwide geopolitical conflict; financial
institution disruptions; climate change and our sustainability
strategies and goals; future health care emergencies on our
business, our suppliers and our customers; commodity shortages;
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, 2022, as well as
our subsequent reports on Form 10-Q and other SEC filings. New
risks and uncertainties arise from time to time, and it is
impossible for us to predict these events and how they may affect
the Company. 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.
# # #
2/1/24
(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 Year-to-date Non-GAAP measures definitions
Adjusted operating income in 2023 is defined as GAAP
operating income adjusted for restructuring costs, transformation
costs, merger and acquisition related costs, non-cash adjustment
for contingent consideration and an insurance settlement on a
property claim. 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. 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 2023 is
defined as GAAP earnings from continuing operations attributable to
Trane Technologies plc adjusted for an impairment of an equity
investment and the net of tax impacts of restructuring costs,
transformation costs, merger and acquisition related costs, a
non-cash adjustment for contingent consideration, an insurance
settlement on a property claim and a Brazil valuation allowance.
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, a
non-cash adjustment for contingent consideration, a settlement
charge for a retired executive, an insurance settlement on a
property claim and a U.S. discrete non-cash tax adjustment. Please
refer to the reconciliation of GAAP to non-GAAP measures on tables
2 and 3 of the news release.
Adjusted continuing EPS in 2023 is defined as GAAP
continuing EPS adjusted for an impairment of an equity investment
and the net of tax impacts of restructuring costs, transformation
costs, merger and acquisition related costs, a non-cash adjustment
for contingent consideration, an insurance settlement on a property
claim and a Brazil valuation allowance. 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, a non-cash adjustment for contingent
consideration, a settlement charge for a retired executive, an
insurance settlement on a property claim and a U.S. discrete
non-cash tax adjustment. Please refer to the reconciliation of GAAP
to non-GAAP measures on tables 2 and 3 of the news release.
Adjusted EBITDA in 2023 is defined as adjusted operating
income adjusted for depreciation and amortization expense, and
other income / (expense), net, and an impairment of an equity
investment. 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. 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 2023 is defined as the
ratio of income tax expense adjusted for the net tax effect of
adjustments restructuring costs, transformation costs, merger and
acquisition related costs, a non-cash adjustment for contingent
consideration, an insurance settlement on a property claim and a
Brazil valuation allowance divided by adjusted net earnings.
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, a non-cash adjustment for contingent
consideration, settlement charge for a retired executive, an
insurance settlement on a property claim and a U.S. discrete
non-cash tax adjustment divided by adjusted net earnings. This
measure allows for a direct comparison of the effective tax rate
between periods.
Free cash flow in 2023 is defined as net cash provided by
(used in) continuing operating activities adjusted for capital
expenditures, cash payments for restructuring costs, transformation
costs and merger and acquisition related costs, and an insurance
settlement on a property claim. 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 on a property claim. Please
refer to the free cash flow reconciliation on table 10 of the news
release.
- Free cash flow conversion is defined as the ratio of
free cash flow divided by adjusted net earnings.
Operating leverage is defined as the ratio of the change
in adjusted operating income for the current period (e.g. Q4 2023)
less the prior period (e.g. Q4 2022), 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, acquisitions and divestitures.
Organic bookings is defined as reported orders in the
current period adjusted for the impact of currency, acquisitions
and divestitures.
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,
2023
2022
2023
2022
Net revenues
$
4,424.1
$
4,073.9
$
17,677.6
$
15,991.7
Cost of goods sold
(2,952.8
)
(2,854.4
)
(11,820.4
)
(11,026.9
)
Selling and administrative expenses
(783.6
)
(638.9
)
(2,963.2
)
(2,545.9
)
Operating income
687.7
580.6
2,894.0
2,418.9
Interest expense
(57.3
)
(55.9
)
(234.5
)
(223.5
)
Other income/(expense), net
(15.6
)
(2.3
)
(92.2
)
(23.3
)
Earnings before income taxes
614.8
522.4
2,567.3
2,172.1
Provision for income taxes
(98.2
)
(73.4
)
(498.4
)
(375.9
)
Earnings from continuing operations
516.6
449.0
2,068.9
1,796.2
Discontinued operations, net of tax
(9.0
)
(5.0
)
(27.2
)
(21.5
)
Net earnings
507.6
444.0
2,041.7
1,774.7
Less: Net earnings from continuing
operations attributable to noncontrolling interests
(3.3
)
(4.9
)
(17.8
)
(18.2
)
Net earnings attributable to Trane
Technologies plc
$
504.3
$
439.1
$
2,023.9
$
1,756.5
Amounts attributable
to Trane Technologies plc ordinary shareholders:
Continuing operations
$
513.3
$
444.1
$
2,051.1
$
1,778.0
Discontinued operations
(9.0
)
(5.0
)
(27.2
)
(21.5
)
Net earnings
$
504.3
$
439.1
$
2,023.9
$
1,756.5
Diluted earnings
(loss) per share attributable to Trane Technologies plc ordinary
shareholder:
Continuing operations
$
2.23
$
1.91
$
8.89
$
7.57
Discontinued operations
(0.04
)
(0.02
)
(0.12
)
(0.09
)
Net earnings
$
2.19
$
1.89
$
8.77
$
7.48
Weighted-average number of common shares
outstanding:
Diluted
229.9
232.4
230.7
234.9
Table 2
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions, except per share
amounts)
UNAUDITED
For the quarter ended December
31, 2023
For the year ended December 31,
2023
As
As
As
As
Reported
Adjustments
Adjusted
Reported
Adjustments
Adjusted
Net revenues
$
4,424.1
$
—
$
4,424.1
$
17,677.6
$
—
$
17,677.6
Operating income
687.7
0.7
(a,b,c,d)
688.4
2,894.0
(5.6
)
(a,b,c,d,e,f)
2,888.4
Operating margin
15.5
%
15.6
%
16.4
%
16.3
%
Earnings from continuing operations before
income taxes
614.8
0.7
(a,b,c,d)
615.5
2,567.3
46.6
(a,b,c,d,e,f,g)
2,613.9
Provision for income taxes
(98.2
)
(15.9
)
(h,i)
(114.1
)
(498.4
)
(13.1
)
(h,i)
(511.5
)
Tax rate
16.0
%
18.5
%
19.4
%
19.6
%
Earnings from continuing operations
attributable to Trane Technologies plc
$
513.3
$
(15.2
)
(j)
$
498.1
$
2,051.1
$
33.5
(j)
$
2,084.6
Diluted earnings per
common share
Continuing operations
$
2.23
$
(0.06
)
$
2.17
$
8.89
$
0.15
$
9.04
Weighted-average number of common shares
outstanding:
Diluted
229.9
—
229.9
230.7
—
230.7
Detail of
Adjustments:
(a)
Insurance settlement on a property claim
(COGS)
$
(10.0
)
$
(10.0
)
(b)
Restructuring costs (COGS &
SG&A)
5.0
15.1
(c)
Transformation costs (SG&A)
1.2
4.7
(d)
M&A transaction costs (SG&A)
4.5
15.4
(e)
Acquisition inventory step-up and backlog
amortization (COGS & SG&A)
—
18.5
(f)
Non-cash adjustments for contingent
consideration (SG&A)
—
(49.3
)
(g)
Impairment of Equity Investment (OIOE)
—
52.2
(h)
International discrete non-cash tax
benefit
(14.9
)
(14.9
)
(i)
Tax impact of adjustments
(a,b,c,d,e,f)
(1.0
)
1.8
(j)
Impact of adjustments on earnings from
continuing operations attributable to Trane Technologies plc
$
(15.2
)
$
33.5
Pre-tax impact of adjustments on cost of
goods sold
$
(5.1
)
$
9.6
Pre-tax impact of adjustments on selling
& administrative expenses
5.8
(15.2
)
Pre-tax impact of adjustments on operating
income
0.7
(5.6
)
Pre-tax impact of adjustments on other,
net
—
52.2
Pre-tax impact of adjustments on earnings
from continuing operations
$
0.7
$
46.6
Table 3
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 a property claim
(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 4
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter ended
December 31, 2023
For the quarter ended
December 31, 2022
As Reported
Margin
As Reported
Margin
Americas
Net revenues
$
3,390.3
$
3,139.9
Segment operating income
$
566.8
16.7
%
$
486.5
15.5
%
Restructuring/Other(a)
(4.2
)
(0.1
)%
(27.6
)
(0.9
)%
Adjusted operating income *
562.6
16.6
%
458.9
14.6
%
Depreciation and amortization
67.7
2.0
%
65.1
2.1
%
Other income/(expense), net
(16.8
)
(0.5
)%
(3.2
)
(0.1
)%
Adjusted EBITDA *
$
613.5
18.1
%
$
520.8
16.6
%
Europe, Middle
East & Africa
Net revenues
$
654.6
$
558.5
Segment operating income
$
111.7
17.1
%
$
85.3
15.3
%
Restructuring/Other(b)
—
—
%
1.0
0.2
%
Adjusted operating income *
111.7
17.1
%
86.3
15.5
%
Depreciation and amortization
10.8
1.6
%
8.1
1.4
%
Other income/(expense), net
(0.1
)
—
%
(2.5
)
(0.4
)%
Adjusted EBITDA *
$
122.4
18.7
%
$
91.9
16.5
%
Asia
Pacific
Net revenues
$
379.2
$
375.5
Segment operating income
$
85.7
22.6
%
$
75.9
20.2
%
Restructuring/Other(c)
(0.8
)
(0.2
)%
0.6
0.2
%
Adjusted operating income *
84.9
22.4
%
76.5
20.4
%
Depreciation and amortization(d)
4.4
1.2
%
4.5
1.2
%
Other income/(expense), net
0.4
0.1
%
(1.3
)
(0.4
)%
Adjusted EBITDA *
$
89.7
23.7
%
$
79.7
21.2
%
Corporate
Unallocated corporate expense
$
(76.5
)
$
(67.1
)
Restructuring/Other (e)
5.7
3.5
Adjusted corporate expense *
(70.8
)
(63.6
)
Depreciation and amortization
5.0
4.3
Other income/(expense), net
0.9
4.7
Adjusted EBITDA *
$
(64.9
)
$
(54.6
)
Total
Company
Net revenues
$
4,424.1
$
4,073.9
Operating income
$
687.7
15.5
%
$
580.6
14.3
%
Restructuring/Other (a,b,c,e)
0.7
0.1
%
(22.5
)
(0.6
)%
Adjusted operating income
688.4
15.6
%
558.1
13.7
%
Depreciation and amortization(d)
87.9
2.0
%
82.0
2.0
%
Other income/(expense), net
(15.6
)
(0.4
)%
(2.3
)
—
%
Adjusted EBITDA *
$
760.7
17.2
%
$
637.8
15.7
%
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
(a) Other within Americas includes a $10
million insurance settlement on a property claim in 2023 and a
$31.5 million non-cash adjustment for contingent consideration 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 in
2022.
(e) Other within Corporate includes
transformation and M&A transaction costs of $1.2M and $4.5M,
respectively, in 2023 and transformation and M&A transaction
costs of $1.2M and $1.8M, respectively, in 2022.
Table 5
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the year ended
December 31, 2023
For the year ended
December 31, 2022
As Reported
Margin
As Reported
Margin
Americas
Net revenues
$
13,832.0
$
12,640.8
Segment operating income
$
2,490.0
18.0
%
$
2,133.4
16.9
%
Restructuring/Other(a)
(44.1
)
(0.3
)%
(64.5
)
(0.5
)%
Adjusted operating income *
2,445.9
17.7
%
2,068.9
16.4
%
Depreciation and amortization(b)
258.8
1.9
%
256.9
2.0
%
Other income/(expense), net(c)
(35.1
)
(0.3
)%
0.5
—
%
Adjusted EBITDA *
$
2,669.6
19.3
%
$
2,326.3
18.4
%
Europe, Middle
East & Africa
Net revenues
$
2,401.2
$
2,034.5
Segment operating income
$
408.3
17.0
%
$
300.0
14.7
%
Restructuring/Other(d)
16.2
0.7
%
10.3
0.6
%
Adjusted operating income *
424.5
17.7
%
310.3
15.3
%
Depreciation and amortization(e)
40.5
1.7
%
28.8
1.4
%
Other income/(expense), net
(0.3
)
—
%
(1.0
)
(0.1
)%
Adjusted EBITDA *
$
464.7
19.4
%
$
338.1
16.6
%
Asia
Pacific
Net revenues
$
1,444.4
$
1,316.4
Segment operating income
$
299.9
20.8
%
$
230.6
17.5
%
Restructuring/Other(f)
0.9
—
%
1.1
0.1
%
Adjusted operating income *
300.8
20.8
%
231.7
17.6
%
Depreciation and amortization(g)
18.3
1.3
%
17.2
1.3
%
Other income/(expense), net
2.2
0.1
%
(0.6
)
—
%
Adjusted EBITDA *
$
321.3
22.2
%
$
248.3
18.9
%
Corporate
Unallocated corporate expense
$
(304.2
)
$
(245.1
)
Restructuring/Other (h)
21.4
13.3
Adjusted corporate expense *
(282.8
)
(231.8
)
Depreciation and amortization
18.4
20.3
Other income/(expense), net(i)
(6.8
)
(7.2
)
Adjusted EBITDA *
$
(271.2
)
$
(218.7
)
Total
Company
Net revenues
$
17,677.6
$
15,991.7
Operating income
$
2,894.0
16.4
%
$
2,418.9
15.1
%
Restructuring/Other (a,d,f,h)
(5.6
)
(0.1
)%
(39.8
)
(0.2
)%
Adjusted operating income
2,888.4
16.3
%
2,379.1
14.9
%
Depreciation and amortization(b,e,g)
336.0
1.9
%
323.2
2.0
%
Other income/(expense), net (c,i)
(40.0
)
(0.2
)%
(8.3
)
(0.1
)%
Adjusted EBITDA *
$
3,184.4
18.0
%
$
2,694.0
16.8
%
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
(a) Other within Americas includes a
$49.3M non cash adjustment for contingent consideration, a $10.0M
insurance settlement on a property claim and $1.2M of acquisition
inventory step-up and backlog amortization in 2023. In 2022, Other
includes a $46.9M non cash adjustment for contingent consideration
and a $25.0M insurance settlement on a property claim.
(b) Depreciation and amortization within
Americas excludes $0.4M of acquisition backlog amortization in 2023
which has been accounted for in the Restructuring/Other line.
(c) Other income/(expense), net with
Americas excludes $52.2 million of an impairment of equity
investment in 2023.
(d) Other within EMEA includes $15.5M of
acquisition inventory step-up and backlog amortization in 2023 and
$0.6M of acquisition inventory step-up in 2022.
(e) Depreciation and amortization within
EMEA excludes $10.9M of acquisition backlog amortization in 2023
which has been accounted for in the Restructuring/Other line.
(f) Other within Asia Pacific includes
$1.8M of acquisition inventory step-up and backlog amortization in
2023 and $0.6M of acquisition inventory step-up and backlog
amortization in 2022.
(g) Depreciation and amortization within
Asia Pacific excludes $0.8M and $0.4M of acquisition backlog
amortization in 2023 and 2022, respectively, which has been
accounted for in the Restructuring/Other line.
(h) Other within Corporate includes
transformation costs and M&A transaction costs of $4.7M and
$15.4M, respectively in 2023 and 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.
(i) Other income/(expense), net within
Corporate includes a $15.0M settlement charge for a retired
executive in 2022.
Table 6
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the quarter
ended December 31,
2023
2022
Total Company
Adjusted EBITDA *
$
760.7
$
637.8
Less: items to reconcile adjusted EBITDA
to net earnings attributable to Trane Technologies plc
Depreciation and amortization
(87.9
)
(82.0
)
Interest expense
(57.3
)
(55.9
)
Provision for income taxes
(98.2
)
(73.4
)
Restructuring
(5.0
)
(4.8
)
Transformation Costs
(1.2
)
(1.2
)
M&A transaction costs
(4.5
)
(1.8
)
Non-cash adjustments for contingent
consideration
—
31.5
Acquisition inventory step-up and backlog
amortization
—
(1.2
)
Insurance settlements on property
claims
10.0
—
Discontinued operations, net of tax
(9.0
)
(5.0
)
Net earnings from continuing operations
attributable to noncontrolling interests
(3.3
)
(4.9
)
Net earnings attributable to Trane
Technologies plc
$
504.3
$
439.1
*Represents a non-GAAP measure, refer to
pages 6-7 in the Earnings Release for definitions.
Table 7
TRANE TECHNOLOGIES PLC
Reconciliation of GAAP to
non-GAAP
(In millions)
UNAUDITED
For the year
ended December 31,
2023
2022
Total Company
Adjusted EBITDA *
$
3,184.4
$
2,694.0
Less: items to reconcile adjusted EBITDA
to net earnings attributable to Trane Technologies plc
Depreciation and amortization(1)
(336.0
)
(323.2
)
Interest expense
(234.5
)
(223.5
)
Provision for income taxes
(498.4
)
(375.9
)
Restructuring
(15.1
)
(20.7
)
Transformation Costs
(4.7
)
(5.8
)
M&A transaction costs
(15.4
)
(3.6
)
Non-cash adjustments for contingent
consideration
49.3
46.9
Acquisition inventory step-up and backlog
amortization
(18.5
)
(1.2
)
Insurance settlements on property
claims
10.0
25.0
Settlement charge for retired
executive
—
(15.8
)
Impairment of equity investment
(52.2
)
—
Discontinued operations, net of tax
(27.2
)
(21.5
)
Net earnings from continuing operations
attributable to noncontrolling interests
(17.8
)
(18.2
)
Net earnings attributable to Trane
Technologies plc
$
2,023.9
$
1,756.5
*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 $12.1 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,
2023
2022
ASSETS
Cash and cash equivalents
$
1,095.3
$
1,220.5
Accounts and notes receivable, net
2,956.8
2,780.1
Inventories
2,152.1
1,993.8
Other current assets
665.7
384.8
Total current assets
6,869.9
6,379.2
Property, plant and equipment, net
1,772.2
1,536.1
Goodwill
6,095.3
5,503.7
Intangible assets, net
3,439.8
3,264.0
Other noncurrent assets
1,214.7
1,398.6
Total assets
$
19,391.9
$
18,081.6
LIABILITIES AND EQUITY
Accounts payable
$
2,025.2
$
2,091.6
Accrued expenses and other current
liabilities
3,226.4
2,547.2
Short-term borrowings and current
maturities of long-term debt
801.9
1,048.0
Total current liabilities
6,053.5
5,686.8
Long-term debt
3,977.9
3,788.3
Other noncurrent liabilities
2,343.5
2,501.3
Shareholders' Equity
7,017.0
6,105.2
Total liabilities and equity
$
19,391.9
$
18,081.6
Table 9
TRANE TECHNOLOGIES PLC
Condensed Consolidated
Statement of Cash Flows
(In millions)
UNAUDITED
For the year
ended December 31,
2023
2022
Operating Activities
Earnings from continuing operations
$
2,068.9
$
1,796.2
Depreciation and amortization
348.1
323.6
Changes in assets and liabilities and
other non-cash items
9.8
(421.1
)
Net cash provided by (used in) continuing
operating activities
2,426.8
1,698.7
Net cash provided by (used in)
discontinued operating activities
(37.2
)
(194.7
)
Net cash provided by (used in) operating
activities
2,389.6
1,504.0
Investing Activities
Capital expenditures, net
(300.7
)
(291.8
)
Acquisition of businesses, net of cash
acquired
(862.8
)
(234.7
)
Other investing activities, net
(8.7
)
(13.3
)
Net cash provided by (used in) continuing
investing activities
(1,172.2
)
(539.8
)
Net cash provided by (used in)
discontinued investing activities
—
(0.6
)
Net cash provided by (used in) investing
activities
(1,172.2
)
(540.4
)
Financing Activities
Net proceeds from (payments of) debt
(57.3
)
(9.6
)
Dividends paid to ordinary
shareholders
(683.7
)
(620.2
)
Repurchase of ordinary shares
(669.3
)
(1,200.2
)
Settlement related to special cash
payment
—
(6.2
)
Other financing activities, net
60.0
(16.0
)
Net cash provided by (used in) financing
activities
(1,350.3
)
(1,852.2
)
Effect of exchange rate changes on cash
and cash equivalents
7.7
(50.1
)
Net increase (decrease) in cash and cash
equivalents
(125.2
)
(938.7
)
Cash and cash equivalents - beginning of
period
1,220.5
2,159.2
Cash and cash equivalents - end of
period
$
1,095.3
$
1,220.5
Table 10
TRANE TECHNOLOGIES PLC
Balance Sheet Metrics and Free
Cash Flow
($ in millions)
UNAUDITED
December 31,
December 31,
2023
2022
Net Receivables
$
2,956.8
$
2,780.1
Days Sales Outstanding
61.0
62.3
Net Inventory
$
2,152.1
$
1,993.8
Inventory Turns
5.5
5.7
Accounts Payable
$
2,025.2
$
2,091.6
Days Payable Outstanding
62.6
66.9
--------------------------------------------------------------------------------------------------------------------------------------------------------------------
Year ended
Year ended
December 31, 2023
December 31, 2022
Cash flow provided by continuing operating
activities
$
2,426.8
$
1,698.7
Capital expenditures
(300.7
)
(291.8
)
Cash payments for restructuring
12.3
17.9
Transformation costs paid
3.9
9.6
M&A transaction costs
18.9
—
Insurance settlements on property
claims
(10.0
)
(25.0
)
QSF funding (continuing operations
component)
—
91.8
Compensation related payment to a retired
executive
—
64.3
Free cash flow*
$
2,151.2
$
1,565.5
Adjusted earnings from continuing
operations attributable to Trane Technologies plc*
$
2,084.6
$
1,728.5
Free cash flow conversion*
103
%
91
%
*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/20240201252958/en/
Media: Travis Bullard 919-802-2593,
Travis.Bullard@tranetechnologies.com
Investors: Zac Nagle 704-990-3913,
InvestorRelations@tranetechnologies.com
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