Item 1. Financial Statements

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Item 1. Financial Statements


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

	Three months ended				Nine months ended
	September 30,				September 30,
In millions, except per share amounts	2021		2020		2021		2020
Net revenues	$	3,719.8	$	3,495.5	$	10,567.1	$	9,275.6
Cost of goods sold	(2,515.6)		(2,360.8)		(7,139.0)		(6,420.1)
Selling and administrative expenses	(620.8)		(567.8)		(1,840.5)		(1,710.7)
Operating income	583.4		566.9		1,587.6		1,144.8
Interest expense	(57.7)		(62.4)		(177.7)		(186.8)
Other income/(expense), net	(6.9)		(4.5)		(13.8)		7.6
Earnings before income taxes	518.8		500.0		1,396.1		965.6
Benefit (provision) for income taxes	(96.8)		(89.9)		(268.0)		(224.4)
Earnings from continuing operations	422.0		410.1		1,128.1		741.2
Discontinued operations, net of tax	(13.3)		(5.5)		(12.6)		(120.4)
Net earnings	408.7		404.6		1,115.5		620.8
Less: Net earnings from continuing operations attributable to noncontrolling interests	(3.0)		(4.0)		(9.9)		(9.7)
Less: Net earnings from discontinuing operations attributable to noncontrolling interests	—		—		—		(0.9)
Net earnings attributable to Trane Technologies plc	$	405.7	$	400.6	$	1,105.6	$	610.2

Amounts attributable to Trane Technologies plc ordinary shareholders:
Continuing operations	$	419.0	$	406.1	$	1,118.2	$	731.5
Discontinued operations	(13.3)		(5.5)		(12.6)		(121.3)
Net earnings	$	405.7	$	400.6	$	1,105.6	$	610.2
Earnings (loss) per share attributable to Trane Technologies plc ordinary shareholders:
Basic:
Continuing operations	$	1.76	$	1.69	$	4.68	$	3.05
Discontinued operations	(0.06)		(0.02)		(0.06)		(0.51)
Net earnings	$	1.70	$	1.67	$	4.62	$	2.54
Diluted:
Continuing operations	$	1.73	$	1.67	$	4.61	$	3.01
Discontinued operations	(0.05)		(0.03)		(0.06)		(0.50)
Net earnings	$	1.68	$	1.64	$	4.55	$	2.51
Weighted-average shares outstanding:
Basic	238.2		240.4		239.2		240.0
Diluted	241.7		243.7		242.8		242.7

See accompanying notes to Condensed Consolidated Financial Statements.

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

	Three months ended				Nine months ended
	September 30,				September 30,
In millions	2021		2020		2021		2020
Net earnings	$	408.7	$	404.6	$	1,115.5	$	620.8
Other comprehensive income (loss):
Currency translation	(67.7)		111.3		(101.4)		107.4
Cash flow hedges:
Unrealized net gains (losses) arising during period	5.1		1.5		1.3		1.7
Net (gains) losses reclassified into earnings	(7.9)		0.7		(5.1)		1.1
Tax (expense) benefit	0.5		(0.4)		1.9		0.4
Total cash flow hedges, net of tax	(2.3)		1.8		(1.9)		3.2
Pension and OPEB adjustments:

Net actuarial gains (losses) for the period	—		—		—		(21.3)
Amortization reclassified into earnings	9.7		10.5		29.1		32.7
Net curtailment and settlement (gains) losses reclassified to earnings	—		(0.1)		6.9		(3.7)
Currency translation and other	4.6		(6.6)		4.9		(3.0)
Tax (expense) benefit	(2.4)		(1.9)		(17.1)		(6.9)
Total pension and OPEB adjustments, net of tax	11.9		1.9		23.8		(2.2)
Other comprehensive income (loss), net of tax	(58.1)		115.0		(79.5)		108.4
Comprehensive income, net of tax	$	350.6	$	519.6	$	1,036.0	$	729.2
Less: Comprehensive income attributable to noncontrolling interests	(1.9)		(3.9)		(8.1)		(12.7)
Comprehensive income attributable to Trane Technologies plc	$	348.7	$	515.7	$	1,027.9	$	716.5

See accompanying notes to Condensed Consolidated Financial Statements.

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TRANE TECHNOLOGIES PLC

CONDENSED CONSOLIDATED BALANCE SHEETS


	(Unaudited)
In millions	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	2,738.8	$	3,289.9
Accounts and notes receivable, net	2,432.3		2,202.1
Inventories	1,482.8		1,189.2
Other current assets	337.5		224.4
Total current assets	6,991.4		6,905.6
Property, plant and equipment, net	1,336.7		1,349.5
Goodwill	5,310.1		5,342.8
Intangible assets, net	3,198.4		3,286.4
Other noncurrent assets	1,365.6		1,272.4
Total assets	$	18,202.2	$	18,156.7
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,757.8	$	1,520.2
Accrued compensation and benefits	462.4		451.1
Accrued expenses and other current liabilities	1,742.9		1,592.0
Short-term borrowings and current maturities of long-term debt	350.4		775.6
Total current liabilities	4,313.5		4,338.9
Long-term debt	4,490.7		4,496.5
Postemployment and other benefit liabilities	977.1		1,024.6
Deferred and noncurrent income taxes	598.9		578.5
Other noncurrent liabilities	1,334.3		1,291.1
Total liabilities	11,714.5		11,729.6
Equity:
Trane Technologies plc shareholders’ equity:
Ordinary shares	262.0		263.3
Ordinary shares held in treasury, at cost	(1,719.4)		(1,719.4)
Capital in excess of par value	15.2		—
Retained earnings	8,626.5		8,495.3
Accumulated other comprehensive income (loss)	(709.2)		(631.5)
Total Trane Technologies plc shareholders’ equity	6,475.1		6,407.7
Noncontrolling interests	12.6		19.4
Total equity	6,487.7		6,427.1
Total liabilities and equity	$	18,202.2	$	18,156.7

See accompanying notes to Condensed Consolidated Financial Statements.

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TRANE TECHNOLOGIES PLC

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)


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
	Amount at par value		Shares
Balance at December 31, 2020	$	6,427.1	$	263.3	263.3	$	(1,719.4)	$	—	$	8,495.3	$	(631.5)	$	19.4
Net earnings	237.8		—		—	—		—		235.2		—		2.6
Other comprehensive income (loss)	(70.7)		—		—	—		—		—		(68.3)		(2.4)
Shares issued under incentive stock plans	(7.0)		1.0		1.0	—		(8.0)		—		—		—
Repurchase of ordinary shares	(104.2)		(0.7)		(0.7)	—		(16.7)		(86.8)		—		—
Share-based compensation	24.2		—		—	—		24.7		(0.5)		—		—
Dividends declared to noncontrolling interest	(3.5)		—		—	—		—		—		—		(3.5)
Cash dividends declared	(141.0)		—		—	—		—		(141.0)		—		—
Separation of Ingersoll Rand Industrial	(49.9)		—		—	—		—		(49.9)		—		—

Balance at March 31, 2021	$	6,312.8	$	263.6	263.6	$	(1,719.4)	$	—	$	8,452.3	$	(699.8)	$	16.1
Net earnings	469.0		—		—	—		—		464.7		—		4.3
Other comprehensive income (loss)	49.3		—		—	—		—		—		47.6		1.7
Shares issued under incentive stock plans	25.7		0.5		0.5	—		25.2		—		—		—
Repurchase of ordinary shares	(250.0)		(1.4)		(1.4)	—		(40.0)		(208.6)		—		—
Share-based compensation	13.9		—		—	—		14.8		(0.9)		—		—
Dividends declared to noncontrolling interest	(6.7)		—		—	—		—		—		—		(6.7)
Cash dividends declared	(281.4)		—		—	—		—		(281.4)		—		—


Balance at June 30, 2021	$	6,332.6	$	262.7	262.7	$	(1,719.4)	$	—	$	8,426.1	$	(652.2)	$	15.4
Net earnings	408.7		—		—	—		—		405.7		—		3.0
Other comprehensive income (loss)	(58.1)		—		—	—		—		—		(57.0)		(1.1)
Shares issued under incentive stock plans	43.1		0.6		0.6	—		42.5		—		—		—
Repurchase of ordinary shares	(246.0)		(1.3)		(1.3)	—		(40.0)		(204.7)		—		—
Share-based compensation	11.9		—		—	—		12.6		(0.7)		—		—
Dividends declared to noncontrolling interest	(4.7)		—		—	—		—		—		—		(4.7)



Other	0.2		—		—	—		0.1		0.1		—		—
Balance at September 30, 2021	$	6,487.7	$	262.0	262.0	$	(1,719.4)	$	15.2	$	8,626.5	$	(709.2)	$	12.6

See accompanying notes to Condensed Consolidated Financial Statements.

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TRANE TECHNOLOGIES PLC

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (CONTINUED)

(Unaudited)


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
	Amount at par value		Shares
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
Net earnings	242.1		—		—	—		—		238.8		—		3.3
Other comprehensive income (loss)	52.0		—		—	—		—		—		49.9		2.1
Shares issued under incentive stock plans	3.7		0.1		0.1	—		3.6		—		—		—
Share-based compensation	16.0		—		—	—		16.5		(0.5)		—		—
Cash dividends declared	(254.0)		—		—	—		—		(254.0)		—		—
Separation of Ingersoll Rand Industrial	(17.2)		—		—	—		—		(17.2)		—		—
Balance at June 30, 2020	$	5,832.4	$	263.8	263.8	$	(1,719.4)	$	46.5	$	8,095.0	$	(876.1)	$	22.6
Net earnings	404.6		—		—	—		—		400.6		—		4.0
Other comprehensive income (loss)	115.0		—		—	—		—		—		115.1		(0.1)
Shares issued under incentive stock plans	35.5		0.7		0.7	—		34.8		—		—		—

Share-based compensation	11.6		—		—	—		12.0		(0.4)		—		—
Dividends declared to noncontrolling interest	(12.2)		—		—	—		—		—		—		(12.2)

Separation of Ingersoll Rand Industrial	(5.9)		—		—	—		—		(5.9)		—		—

Balance at September 30, 2020	$	6,381.0	$	264.5	264.5	$	(1,719.4)	$	93.3	$	8,489.3	$	(761.0)	$	14.3

See accompanying notes to Condensed Consolidated Financial Statements.

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TRANE TECHNOLOGIES PLC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine months ended
	September 30,
In millions	2021		2020
Cash flows from operating activities:
Net earnings	$	1,115.5	$	620.8
Discontinued operations, net of tax	12.6		120.4
Adjustments for non-cash transactions:
Depreciation and amortization	223.0		223.7
Pension and other postretirement benefits	40.4		49.6
Stock settled share-based compensation	52.2		57.5
Changes in assets and liabilities, net of the effects of acquisitions	(258.9)		49.4
Other non-cash items, net	(22.2)		11.5
Net cash provided by (used in) continuing operating activities	1,162.6		1,132.9
Net cash provided by (used in) discontinued operating activities	(1.4)		(324.8)
Net cash provided by (used in) operating activities	1,161.2		808.1
Cash flows from investing activities:
Capital expenditures	(121.6)		(89.1)
Acquisitions of businesses, net of cash acquired	(18.0)		(2.5)



Deconsolidation of certain entities under Chapter 11	—		(10.8)
Other investing activities, net	(69.2)		1.3
Net cash provided by (used in) continuing investing activities	(208.8)		(101.1)
Net cash provided by (used in) discontinued investing activities	—		(37.7)
Net cash provided by (used in) investing activities	(208.8)		(138.8)
Cash flows from financing activities:


Payments of long-term debt	(432.5)		(307.5)

Debt issuance costs	(2.6)		(3.6)
Dividends paid to ordinary shareholders	(421.9)		(380.3)
Dividends paid to noncontrolling interests	(14.9)		(18.3)

Proceeds (payments) from shares issued under incentive plans, net	61.8		33.6
Repurchase of ordinary shares	(600.2)		—
Receipt of / (Settlement related to) special cash payment	(49.5)		1,900.0
Other financing activities, net	(5.2)		7.0


Net cash provided by (used in) continuing financing activities	(1,465.0)		1,230.9
Effect of exchange rate changes on cash and cash equivalents	(38.5)		11.3
Net increase (decrease) in cash and cash equivalents	(551.1)		1,911.5
Cash and cash equivalents - beginning of period	3,289.9		1,278.6
Cash and cash equivalents - end of period	$	2,738.8	$	3,190.1

See accompanying notes to Condensed Consolidated Financial Statements.

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TRANE TECHNOLOGIES PLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

Trane Technologies plc, a public limited company incorporated in Ireland in 2009, and its consolidated subsidiaries (collectively, the Company), is a global climate innovator that brings efficient and sustainable climate solutions to buildings, homes and transportation driven by strategic brands Trane® and Thermo King® and an environmentally responsible portfolio of products and services. The accompanying unaudited Condensed Consolidated Financial Statements of Trane Technologies plc reflects the consolidated operations of the Company and have been prepared in accordance with United States Securities and Exchange Commission (SEC) interim reporting requirements. Accordingly, the accompanying Condensed Consolidated Financial Statements do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP) for full financial statements and should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2020. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, which include only normal recurring adjustments, necessary to fairly state the condensed consolidated results for the interim periods presented.

Reorganization of Aldrich and Murray

On May 1, 2020, certain subsidiaries of the Company underwent an internal corporate restructuring that was effectuated through a series of transactions (2020 Corporate Restructuring). As a result, Aldrich Pump LLC (Aldrich) and Murray Boiler LLC (Murray), indirect wholly-owned subsidiaries of Trane Technologies plc, became solely responsible for the asbestos-related liabilities, and the beneficiaries of the asbestos-related insurance assets, of Trane Technologies Company LLC and Trane U.S. Inc, respectively. On a consolidated basis, the 2020 Corporate Restructuring did not have an impact on the Condensed Consolidated Financial Statements. However, in connection with the 2020 Corporate Restructuring, certain subsidiaries of the Company entered into funding agreements with Aldrich and Murray (collectively the Funding Agreements), pursuant to which those subsidiaries are obligated, among other things, to pay the costs and expenses of Aldrich and Murray during the pendency of the Chapter 11 cases to the extent distributions from their respective subsidiaries are insufficient to do so and to provide an amount for the funding for a trust established pursuant to section 524(g) of the Bankruptcy Code, to the extent that the other assets of Aldrich and Murray are insufficient to provide the requisite trust funding.

On June 18, 2020 (Petition Date), Aldrich and Murray filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Western District of North Carolina (the Bankruptcy Court) to resolve equitably and permanently all current and future asbestos related claims in a manner beneficial to claimants, Aldrich and Murray. As a result of the Chapter 11 filings, all asbestos-related lawsuits against Aldrich and Murray have been stayed due to the imposition of a statutory automatic stay applicable in Chapter 11 bankruptcy cases. Only Aldrich and Murray have filed for Chapter 11 relief. Neither Aldrich's wholly-owned subsidiary, 200 Park, Inc. (200 Park), Murray's wholly-owned subsidiary, ClimateLabs LLC (ClimateLabs), Trane Technologies plc nor its other subsidiaries (the Trane Companies) are part of the Chapter 11 filings. The Trane Companies are expected to continue to operate as usual, with no disruption to their employees, suppliers, or customers globally. However, as of the Petition Date, Aldrich and its wholly-owned subsidiary 200 Park and Murray and its wholly-owned subsidiary ClimateLabs were deconsolidated and their respective assets and liabilities were derecognized from the Company's Condensed Consolidated Financial Statements. Refer to Note 20, "Commitments and Contingencies," for more information regarding the status of Chapter 11 bankruptcy and asbestos-related matters.

Revision for Correction of an Error in Previously Issued Interim Financial Statements

Cash dividends declared for the three months ended June 30, 2021, June 30, 2020 and September 30, 2020 have been revised by $140.1 million (from $141.3 million to $281.4 million), by $127.1 million (from $126.9 million to $254.0 million) and by $127.1 million (from $127.1 million to $0), respectively, in the Condensed Consolidated Statements of Equity to correct the accounting for cash dividends declared on June 3, 2021 and June 5, 2020 and paid on September 30, 2021 and 2020.

The revision had no impact on the Company’s Condensed Consolidated Statements of Cash Flows for any period and the revision had no impact on the ending Retained Earnings balance as of September 30, 2021 and September 30, 2020.

Note 2. Completion of Reverse Morris Trust Transaction

On February 29, 2020 (Distribution Date), the Company completed its Reverse Morris Trust transaction (the Transaction) with Gardner Denver Holdings, Inc. (Gardner Denver) whereby the Company separated its former Industrial segment (Ingersoll Rand Industrial) through a pro rata distribution to shareholders of record as of February 24, 2020. Ingersoll Rand Industrial then merged into a wholly-owned subsidiary of Gardner Denver, which changed its name to Ingersoll Rand Inc. (Ingersoll Rand). Upon close of the Transaction, the Company’s existing shareholders received 50.1% of the shares of Ingersoll Rand common stock on a fully-diluted basis and Gardner Denver stockholders retained 49.9% of the shares of Ingersoll Rand on a fully diluted basis. As a result, the Company’s shareholders received .8824 shares of Ingersoll Rand common stock with respect to each share owned as of February 24, 2020. In connection with the Transaction, 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 (Term Loan), the proceeds of which were used to make a special cash payment of $1.9 billion to a subsidiary of the Company. The obligations under the Term Loan were retained by Ingersoll-Rand Services Company, which following the Transaction is a wholly-owned subsidiary of Ingersoll Rand.

During the nine months ended September 30, 2021, the Company paid Ingersoll Rand $49.5 million to settle certain items related to the Transaction. The Company recorded the $49.5 million settlement as a reduction to Retained earnings during the first quarter of 2021. This payment was related to working capital, cash and indebtedness amounts as of the Distribution Date, as well as funding levels related to pension plans, non-qualified deferred compensation plans and retiree health benefits.

Discontinued Operations

After the Distribution Date, the Company does not beneficially own any Ingersoll Rand Industrial shares of common stock and no longer consolidates Ingersoll Rand Industrial in its financial statements. In accordance with GAAP, the historical results of Ingersoll Rand Industrial are presented as a discontinued operation in the Condensed Consolidated Statements of Income (Loss) and Condensed Consolidated Statements of Cash Flows.

Note 3. Recent Accounting Pronouncements

The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU's. ASU's not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Condensed Consolidated Financial Statements.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" (ASU 2019-12), which simplifies certain aspects of income tax accounting guidance in ASC 740, reducing the complexity of its application. Certain exceptions to ASC 740 presented within the ASU include: intraperiod tax allocation, deferred tax liabilities related to outside basis differences and year-to-date loss in interim periods, among others. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020 including interim periods therein with early adoption permitted. The Company adopted this standard on January 1, 2021 with no material impact on its financial statements.

Note 4. Inventories

Depending on the business, U.S. inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method or the lower of cost and net realizable value (NRV) using the first-in, first-out (FIFO) method. Non-U.S. inventories are primarily stated at the lower of cost and NRV using the FIFO method.

The major classes of inventory were as follows:


In millions	September 30, 2021		December 31, 2020
Raw materials	$	417.2	$	305.0
Work-in-process	204.8		163.9
Finished goods	913.1		761.4
	1,535.1		1,230.3
LIFO reserve	(52.3)		(41.1)
Total	$	1,482.8	$	1,189.2

The Company performs periodic assessments to determine the existence of obsolete, slow-moving and non-saleable inventories and records necessary provisions to reduce such inventories to NRV. Reserve balances, primarily related to obsolete and slow-moving inventories, were $85.4 million and $85.6 million at September 30, 2021 and December 31, 2020, respectively.

Note 5. Goodwill

The changes in the carrying amount of goodwill for the nine months ended September 30, 2021 were as follows:


In millions	Americas		EMEA		Asia Pacific		Total
Net balance as of December 31, 2020	$	3,980.0	$	793.5	$	569.3	$	5,342.8
Acquisitions	2.7		4.2		—		6.9

Currency translation	(0.7)		(41.4)		2.5		(39.6)
Net balance as of September 30, 2021	$	3,982.0	$	756.3	$	571.8	$	5,310.1

The net goodwill balances at September 30, 2021 and December 31, 2020 include $2,496.0 million of accumulated impairment, primarily related to the Americas segment. The accumulated impairment relates entirely to a charge recorded in 2008.

Note 6. Intangible Assets

The gross amount of the Company’s intangible assets and related accumulated amortization were as follows:


	September 30, 2021						December 31, 2020
In millions	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Customer relationships	$	2,007.2	$	(1,446.1)	$	561.1	$	2,010.2	$	(1,362.4)	$	647.8
Other	210.7		(199.7)		11.0		210.7		(199.4)		11.3
Total finite-lived intangible assets	2,217.9		(1,645.8)		572.1		2,220.9		(1,561.8)		659.1
Trademarks (indefinite-lived)	2,626.3		—		2,626.3		2,627.3		—		2,627.3
Total	$	4,844.2	$	(1,645.8)	$	3,198.4	$	4,848.2	$	(1,561.8)	$	3,286.4

Intangible asset amortization expense was $29.0 million and $29.9 million for the three months ended September 30, 2021 and 2020, respectively. Intangible asset amortization expense was $90.7 million and $89.8 million for the nine months ended September 30, 2021 and 2020, respectively.

Note 7. Debt and Credit Facilities

Short-term borrowings and current maturities of long-term debt consisted of the following:


In millions	September 30, 2021		December 31, 2020
Debentures with put feature	$	342.9	$	342.9
2.900% Senior notes due 2021 (1)	—		299.9
9.000% Debentures due 2021 (2)	—		125.0

Other current maturities of long-term debt	7.5		7.8

Total	$	350.4	$	775.6

(1) The 2.900% Senior notes were repaid in February 2021.

(2) The 9.000% Debentures were repaid in August 2021.

Commercial Paper Program

The Company uses borrowings under its commercial paper program for general corporate purposes. The maximum aggregate amount of unsecured commercial paper notes available to be issued, on a private placement basis, under the commercial paper program is $2.0 billion. The Company had no outstanding balance under its commercial paper program as of September 30, 2021 and December 31, 2020.

Debentures with Put Feature

At September 30, 2021 and December 31, 2020, the Company had $342.9 million of fixed rate debentures outstanding which contain a put feature that the holders may exercise on each anniversary of the issuance date. If exercised, the Company is obligated to repay in whole or in part, at the holder’s option, the outstanding principal amount of the debentures plus accrued interest. If these options are not exercised, the final contractual maturity dates would range between 2027 and 2028. Holders of these debentures had the option to exercise the put feature on $37.2 million of the outstanding debentures in February 2021, subject to the notice requirement. No exercises were made.

Long-term debt, excluding current maturities, consisted of the following:


In millions	September 30, 2021		December 31, 2020
4.250% Senior notes due 2023	$	698.9	$	698.4
7.200% Debentures due 2021-2025	22.4		29.9
3.550% Senior notes due 2024	497.8		497.3
6.480% Debentures due 2025	149.7		149.7
3.500% Senior notes due 2026	397.7		397.3
3.750% Senior notes due 2028	546.1		545.6
3.800% Senior notes due 2029	744.9		744.4
5.750% Senior notes due 2043	494.9		494.7
4.650% Senior notes due 2044	296.2		296.1
4.300% Senior notes due 2048	296.3		296.2
4.500% Senior notes due 2049	345.8		345.7
Other loans and notes	—		1.2
Total	$	4,490.7	$	4,496.5

Other Credit Facilities

On June 18, 2021, the Company entered into a new $1.0 billion senior unsecured revolving credit facility which matures in June 2026 (2026 Credit Facility) and terminated its $1.0 billion facility set to expire in March 2022. On September 24, 2021, the Company amended its other $1.0 billion senior unsecured revolving credit facility which matures in April 2023 (2023 Credit Facility) primarily to conform the interest rate provisions in the 2023 Credit Facility to the terms included in the 2026 Credit Facility. As a result, the Company maintains two $1.0 billion senior unsecured revolving credit facilities (collectively, the Facilities) through its wholly-owned subsidiaries, Trane Technologies HoldCo Inc., Trane Technologies Global Holding Company Limited and Trane Technologies Financing Limited (collectively, the Borrowers). The covenants under the 2026 Credit Facility are substantially the same as the covenants under the 2023 Credit Facility. The terms of the 2026 Credit Facility include Environmental, Social, and Governance (ESG) metrics related to two of the Company’s sustainability commitments: a reduction in greenhouse gas intensity and an increase in the percentage of women in management. The Company's annual performance against these ESG metrics may result in price adjustments to the commitment fee and applicable interest rate.

Each senior unsecured credit facility provides support for the Company's commercial paper program and can be used for working capital and other general corporate purposes. Trane Technologies plc, Trane Technologies Irish Holdings Unlimited Company, Trane Technologies Lux International Holding Company S.à.r.l. and Trane Technologies Company LLC each provide irrevocable and unconditional guarantees for these Facilities. In addition, each Borrower will guarantee the obligations under the Facilities of the other Borrowers. Total commitments of $2.0 billion were unused at September 30, 2021 and December 31, 2020.

Fair Value of Debt

The fair value of the Company's debt instruments at September 30, 2021 and December 31, 2020 was $5.7 billion and $6.3 billion, respectively. The Company measures the fair value of its long-term debt instruments for disclosure purposes based upon observable market prices quoted on public exchanges for similar assets. These fair value inputs are considered Level 2 within the fair value hierarchy.

Note 8. Financial Instruments

In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. These fluctuations can increase the cost of financing, investing and operating the business. The Company uses various financial instruments, including derivative instruments, to manage the risks associated with interest rate, commodity price and foreign currency exposures. These financial instruments are not used for trading or speculative purposes. The Company recognizes all derivatives in the Condensed Consolidated Balance Sheets at their fair value as either assets or liabilities.

On the date a derivative contract is entered into, the Company designates the derivative instrument as a cash flow hedge of a forecasted transaction or as an undesignated derivative. The Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.

The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are highly effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be a highly effective hedge, the fair market value changes of the instrument are recorded to Accumulated other comprehensive income (loss) (AOCI). If the hedging relationship ceases to be highly effective, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in Net earnings.

The fair values of derivative instruments included within the Condensed Consolidated Balance Sheets were as follows:


	Derivative assets				Derivative liabilities
In millions	September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020
Derivatives designated as hedges:
Currency derivatives	$	0.1	$	0.7	$	2.2	$	1.7
Commodity derivatives	6.6		—		0.1		—

Derivatives not designated as hedges:
Currency derivatives	9.0		1.5		10.2		4.8

Total derivatives	$	15.7	$	2.2	$	12.5	$	6.5

Asset and liability derivatives included in the table above are recorded within Other current assets and Accrued expenses and other current liabilities, respectively.

Currency Derivative Instruments

The notional amount of the Company’s currency derivatives was $0.5 billion at both September 30, 2021 and December 31, 2020. At September 30, 2021 and December 31, 2020, a net loss of $1.8 million and $0.7 million, net of tax, respectively, was included in AOCI related to the fair value of the Company’s currency derivatives designated as accounting hedges. The amount expected to be reclassified into Net earnings over the next twelve months is a net loss of $1.8 million. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. Gains and losses associated with the Company’s currency derivatives not designated as hedges are recorded in Net earnings as changes in fair value occur. At September 30, 2021, the maximum term of the Company’s currency derivatives was approximately 12 months.

Commodity Derivative Instruments

At September 30, 2021, a net gain of $4.9 million, net of tax, was included in AOCI related to the fair market value of the Company's commodity derivatives designated as accounting hedges. A change in fair value of commodity derivative instruments deemed highly effective is included in AOCI and is reclassified to Cost of Goods Sold in the period the sale of the finished goods inventory containing the commodity impacts Net earnings. The amount expected to be reclassified into Net earnings over the next twelve months is a net gain of $4.9 million. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. At September 30, 2021, the Company has commodity contracts to hedge certain forecasted purchases through June 2022.

The Company had the following outstanding contracts to hedge forecasted commodity purchases (in metric tons):


	Volume outstanding as of
Commodity	September 30, 2021	December 31, 2020
Aluminum	12,741	—

Other Derivative Instruments

Prior to 2015, the Company utilized forward-starting interest rate swaps and interest rate locks to manage interest rate exposure in periods prior to the anticipated issuance of certain fixed-rate debt. These instruments were designated as cash flow hedges and had a notional amount of $1.3 billion. Consequently, when the contracts were settled upon the issuance of the underlying debt, any realized gains or losses in the fair values of the instruments were deferred into AOCI. These deferred gains or losses are subsequently recognized in Interest expense over the term of the related notes. The net unrecognized gain in AOCI was $4.8 million at September 30, 2021 and $5.3 million at December 31, 2020. The net deferred gain at September 30, 2021 will continue to be amortized over the term of notes with maturities ranging from 2023 to 2044. The amount expected to be amortized over the next twelve months is a net gain of $0.7 million. The Company has no forward-starting interest rate swaps or interest rate lock contracts outstanding at September 30, 2021 or December 31, 2020.

The following table represents the amounts associated with derivatives designated as hedges affecting Net earnings and AOCI for the three months ended September 30:


	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	2021		2020			2021			2020
Currency derivatives designated as hedges (1)	$	(0.9)	$	1.5	Cost of goods sold		$	7.5		$	(0.9)
Commodity derivatives designated as hedges	6.0		—		Cost of goods sold		0.2			—
Interest rate swaps & locks	—		—		Interest expense		0.2			0.2
Total	$	5.1	$	1.5			$	7.9		$	(0.7)

(1) Amounts excluded from effectiveness testing and recognized into Cost of goods sold based on changes in fair value and amortization was a gain of $0.9 million and loss of $0.5 million for the three months ended September 30, 2021 and 2020, respectively.

The following table represents the amounts associated with derivatives not designated as hedges affecting Net earnings for the three months ended September 30:


		Location of gain (loss) recognized in Net earnings		Amount of gain (loss) recognized in Net earnings
In millions	2021		2020
Currency derivatives - continuing		Other income (expense), net		$	0.9	$	1.6


Total				$	0.9	$	1.6

The following table represents the amounts associated with derivatives designated as hedges affecting Net earnings and AOCI for the nine months ended September 30:


	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	2021		2020			2021			2020
Currency derivatives designated as hedges (1)	$	(6.2)	$	1.7	Cost of goods sold		$	4.4		$	(1.6)
Commodity derivatives designated as hedges	7.5		—		Cost of goods sold		0.2			—
Interest rate swaps & locks	—		—		Interest expense		0.5			0.5
Total	$	1.3	$	1.7			$	5.1		$	(1.1)

(1) Amounts excluded from effectiveness testing and recognized into Cost of goods sold based on changes in fair value and amortization was a loss of $0.7 million and $1.6 million for the nine months ended September 30, 2021 and 2020, respectively.

The following table represents the amounts associated with derivatives not designated as hedges affecting Other income/(expense), net for the nine months ended September 30:


	Location of gain (loss) recognized in Net earnings	Amount of gain (loss) recognized in Net earnings
In millions	2021	2020
Currency derivatives - continuing	Other income (expense), net	$	(5.0)	$	8.4
Currency derivatives - discontinued	Discontinued operations	—		(0.4)

Total		$	(5.0)	$	8.0

The gains and losses associated with the Company’s undesignated currency derivatives are materially offset in Net earnings by changes in the fair value of the underlying transactions.

Concentration of Credit Risk

The counterparties to the Company’s forward contracts consist of a number of investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.

Note 9. Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability is as follows:

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

Observable market data is required to be used in making fair value measurements when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2021:


In millions	Fair Value		Fair value measurements
	Level 1		Level 2		Level 3

Assets:
Derivative instruments	$	15.7	$	—	$	15.7	$	—

Liabilities:
Derivative instruments	$	12.5	$	—	$	12.5	$	—

The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:


In millions	Fair Value		Fair value measurements
	Level 1		Level 2		Level 3

Assets:
Derivative instruments	$	2.2	$	—	$	2.2	$	—

Liabilities:
Derivative instruments	$	6.5	$	—	$	6.5	$	—

Derivative instruments include forward foreign currency contracts and instruments related to non-functional currency balance sheet exposures and commodity swaps. The fair value of the foreign exchange derivatives is determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable. The fair value of the commodity derivatives is valued under a market approach using published prices, where applicable, or dealer quotes.

The carrying values of cash and cash equivalents, accounts receivable, and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. There have been no transfers between levels of the fair value hierarchy.

Note 10. Pensions and Postretirement Benefits Other than Pensions

The Company sponsors several U.S. defined benefit and defined contribution plans covering substantially all of the Company's U.S. employees. Additionally, the Company has many non-U.S. defined benefit and defined contribution plans covering eligible non-U.S. employees. Postretirement benefits other than pensions (OPEB) provide healthcare benefits, and in some instances, life insurance benefits for certain eligible employees.

Pension Plans

The noncontributory defined benefit pension plans covering non-collectively bargained U.S. employees provide benefits on a final average pay formula while plans for most collectively bargained U.S. employees provide benefits on a flat dollar benefit formula or a percentage of pay formula. The non-U.S. pension plans generally provide benefits based on earnings and years of service. The Company also maintains additional other supplemental plans for officers and other key or highly compensated employees.

The components of the Company’s net periodic pension benefit cost for the three and nine months ended September 30 were as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Service cost	$	12.6	$	10.3	$	38.2	$	44.0
Interest cost	14.7		20.2		44.0		63.2
Expected return on plan assets	(26.5)		(29.8)		(79.7)		(91.3)
Net amortization of:
Prior service costs	1.3		1.3		3.8		4.0
Net actuarial (gains) losses	8.9		11.4		26.8		33.0
Net periodic pension benefit cost	$	11.0	$	13.4	$	33.1	$	52.9
Net curtailment and settlement (gains) losses	—		(0.1)		6.9		(3.7)
Net periodic pension benefit cost after net curtailment and settlement (gains) losses	$	11.0	$	13.3	$	40.0	$	49.2
Amounts recorded in continuing operations:
Operating income	$	11.8	$	9.2	$	35.5	$	38.7
Other income/(expense), net	(1.8)		3.7		1.4		6.8
Amounts recorded in discontinued operations	1.0		0.4		3.1		3.7
Total	$	11.0	$	13.3	$	40.0	$	49.2

The Company made contributions to its defined benefit pension plans of $47.1 million and $90.5 million during the nine months ended September 30, 2021 and 2020, respectively. The 2020 contribution included $24.4 million to fund Ingersoll Rand Industrial plans prior to the completion of the Transaction which was included within Net cash provided by (used in) discontinued operating activities on the Condensed Consolidated Statements of Cash Flows. The Company currently projects that it will contribute a total of approximately $57 million to its enterprise plans worldwide in 2021.

Postretirement Benefits Other Than Pensions

The Company sponsors several postretirement plans that provide for healthcare benefits, and in some instances, life insurance benefits that cover certain eligible employees. These plans are unfunded and have no plan assets, but are instead funded by the Company on a pay-as-you-go basis in the form of direct benefit payments. Generally, postretirement health benefits are contributory with contributions adjusted annually. Life insurance plans for retirees are primarily noncontributory.

The components of net periodic postretirement benefit cost for the three and nine months ended September 30 were as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Service cost	$	0.6	$	0.7	$	1.6	$	1.8
Interest cost	1.3		2.4		4.1		7.4


Net amortization of net actuarial (gains) losses	(0.5)		(2.2)		(1.5)		(4.3)
Net periodic postretirement benefit cost	$	1.4	$	0.9	$	4.2	$	4.9
Amounts recorded in continuing operations:
Operating income	$	0.6	$	0.7	$	1.6	$	1.8
Other income/(expense), net	0.6		0.3		1.9		2.3
Amounts recorded in discontinued operations	0.2		(0.1)		0.7		0.8
Total	$	1.4	$	0.9	$	4.2	$	4.9

Note 11. Equity

The authorized share capital of Trane Technologies plc is 1,185,040,000 shares, consisting of (1) 1,175,000,000 ordinary shares, par value $1.00 per share, (2) 40,000 ordinary shares, par value EUR 1.00 and (3) 10,000,000 preference shares, par value $0.001 per share. There were no Euro-denominated ordinary shares or preference shares outstanding at September 30, 2021 or December 31, 2020.

Changes in ordinary shares and treasury shares for the nine months ended September 30, 2021 were as follows:


In millions	Ordinary shares issued	Ordinary shares held in treasury
December 31, 2020	263.3	24.5
Shares issued under incentive plans, net	2.1	—

Repurchase of ordinary shares	(3.4)	—
September 30, 2021	262.0	24.5

Share repurchases are made from time to time in accordance with management's capital allocation strategy, subject to market conditions and regulatory requirements. Shares acquired and canceled upon repurchase are accounted for as a reduction of Ordinary Shares and Capital in excess of par value, or Retained earnings to the extent Capital in excess of par value is exhausted. Shares acquired and held in treasury are presented separately on the balance sheet as a reduction to Equity and recognized at cost. In October 2018, the Company's Board of Directors authorized the repurchase of up to $1.5 billion of its ordinary shares under a share repurchase program (2018 Authorization). In February 2021, the Company's Board of Directors authorized the repurchase of up to $2.0 billion of its ordinary shares under a new share repurchase program (2021 Authorization) upon completion of the 2018 Authorization. During the nine months ended September 30, 2021, the Company repurchased and canceled $600.2 million of its ordinary shares thus completing the 2018 Authorization and initiating repurchases under the 2021 Authorization of $100.2 million of its ordinary shares leaving approximately $1.9 billion remaining under the 2021 Authorization.

Accumulated Other Comprehensive Income (Loss)

The changes in Accumulated other comprehensive income (loss) for the nine months ended September 30, 2021 were as follows:


In millions	Derivative Instruments		Pension and OPEB		Foreign Currency Translation		Total
Balance at December 31, 2020	$	10.8	$	(416.5)	$	(225.8)	$	(631.5)
Other comprehensive income (loss) attributable to Trane Technologies plc	(1.9)		23.8		(99.6)		(77.7)
Balance at September 30, 2021	$	8.9	$	(392.7)	$	(325.4)	$	(709.2)

The changes in Accumulated other comprehensive income (loss) for the nine months ended September 30, 2020 were as follows:


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) attributable to Trane Technologies plc	3.2		(2.2)		105.3		106.3
Separation of Ingersoll Rand Industrial, net of tax	—		69.1		70.2		139.3
Balance at September 30, 2020	$	8.8	$	(390.5)	$	(379.3)	$	(761.0)

Note 12. Revenue

The Company recognizes revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. A majority of the Company's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract. However, a portion of the Company's revenues are recognized over time as the customer simultaneously receives control as the Company performs work under a contract. For these arrangements, the cost-to-cost input method is used as it best depicts the transfer of control to the customer that occurs as the Company incurs costs.

Disaggregated Revenue

Net revenues by geography and major type of good or service for the three and nine months ended September 30 were as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Americas
Equipment	$	1,878.6	$	1,837.0	$	5,458.0	$	4,893.6
Services and parts	1,031.7		908.8		2,749.6		2,406.4

Total Americas	$	2,910.3	$	2,745.8	$	8,207.6	$	7,300.0
EMEA
Equipment	$	322.7	$	295.6	$	996.7	$	792.6
Services and parts	172.3		149.6		465.4		390.1
Total EMEA	$	495.0	$	445.2	$	1,462.1	$	1,182.7
Asia Pacific
Equipment	$	218.9	$	208.6	$	619.7	$	545.5
Services and parts	95.6		95.9		277.7		247.4
Total Asia Pacific	$	314.5	$	304.5	$	897.4	$	792.9

Total Net revenues	$	3,719.8	$	3,495.5	$	10,567.1	$	9,275.6

Revenue from goods and services transferred to customers at a point in time accounted for approximately 81% of the Company's revenue for both the nine months ended September 30, 2021 and 2020.

Contract Balances

The opening and closing balances of contract assets and contract liabilities arising from contracts with customers for the period ended September 30, 2021 and December 31, 2020 were as follows:


In millions	September 30, 2021		December 31, 2020

Contract assets	$	366.7	$	255.4
Contract liabilities	1,179.0		1,077.0

The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets, and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets. In general, the Company receives payments from customers based on a billing schedule established in its contracts. Contract assets relate to the conditional right to consideration for any completed performance under the contract when costs are incurred in excess of billings under the percentage-of-completion methodology. Accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities relate to payments received in advance of performance under the contract or when the Company has a right to consideration that is unconditional before it transfers a good or service to the customer. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract. During the three and nine months ended September 30, 2021, changes in contract asset and liability balances were not materially impacted by any other factors.

Approximately 9% and 47% of the contract liability balance at December 31, 2020 was recognized as revenue during the three and nine months ended September 30, 2021, respectively. Additionally, approximately 38% of the contract liability balance at September 30, 2021 was classified as noncurrent and not expected to be recognized as revenue in the next 12 months.

Note 13. Share-Based Compensation

The Company accounts for stock-based compensation plans in accordance with ASC 718, "Compensation - Stock Compensation" (ASC 718), which requires a fair-value based method for measuring the value of stock-based compensation. Fair value is measured once at the date of grant and is not adjusted for subsequent changes. The Company’s share-based compensation plans include programs for stock options, restricted stock units (RSUs), performance share units (PSUs) and deferred compensation.

In connection with the completion of the Transaction, the provisions of the Company's existing share-based compensation plans required adjustment to the terms of outstanding awards in order to preserve the intrinsic value of the awards immediately before and after the separation. The outstanding awards continue to vest over the original vesting period, which is generally three years from the grant date. At the Distribution Date, the Company incurred less than $0.1 million of incremental compensation costs related to the preservation of the stock-based compensation intrinsic value post-separation.

Compensation Expense

Share-based compensation expense related to continuing operations is included in Selling and administrative expenses. The expense recognized for the three and nine months ended September 30 was as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Stock options	$	2.9	$	2.6	$	14.7	$	15.7
RSUs	3.6		3.4		19.0		20.6
Performance shares	5.8		5.7		17.4		20.1
Deferred compensation	0.8		1.1		2.4		2.9
Other (1)	(0.7)		2.6		2.4		1.4
Pre-tax expense	12.4		15.4		55.9		60.7
Tax benefit	(3.0)		(3.7)		(13.5)		(14.7)
After-tax expense	$	9.4	$	11.7	$	42.4	$	46.0
Amounts recorded in continuing operations	9.4		11.5		42.4		44.5
Amounts recorded in discontinued operations	—		0.2		—		1.5
Total	$	9.4	$	11.7	$	42.4	$	46.0

(1) Includes certain plans that have a market-based component.

Grants issued during the nine months ended September 30 were as follows:


	2021			2020
	Number granted	Weighted- average fair value per award		Number granted	Weighted- average fair value per award
Stock options	582,657	$	29.55	1,020,535	$	16.75
RSUs	149,214	$	153.53	211,307	$	104.09
Performance shares (1)	283,412	$	181.71	278,468	$	140.72

(1) The number of performance shares represents the maximum award level.

For stock options, RSUs and PSUs granted prior to the completion of the Transaction, the number granted and weighted average fair value reflect historical information.

Stock Options / RSUs

Eligible participants may receive (i) stock options, (ii) RSUs or (iii) a combination of both stock options and RSUs. The fair value of each of the Company’s stock option and RSU awards is expensed on a straight-line basis over the required service period, which is generally the 3-year vesting period. However, for stock options and RSUs granted to retirement eligible employees, the Company recognizes an expense for the entire fair value at the grant date.

The average fair value of the stock options granted is determined using the Black-Scholes option-pricing model. The following assumptions were used during the nine months ended September 30:


	2021		2020
Dividend yield	1.60	%	2.01	%
Volatility	27.90	%	24.33	%
Risk-free rate of return	0.45	%	0.56	%
Expected life in years	4.8		4.8

A description of the significant assumptions used to estimate the fair value of the stock option awards is as follows:

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.

*•*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 in years - 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.

Performance Shares

The Company has a Performance Share Program (PSP) for key employees. The program provides awards in the form of PSUs based on performance against pre-established objectives. The annual target award level is expressed as a number of the Company's ordinary shares based on the fair market value of the Company's stock on the date of grant. All PSUs are settled in the form of ordinary shares.

Beginning with the 2018 grant year, PSU awards are earned based 50% upon a performance condition, measured by relative Cash Flow Return on Invested Capital (CROIC) to the S&P 500 Industrials Index over a 3-year performance period, and 50% upon a market condition, measured by the Company's relative total shareholder return (TSR) as compared to the TSR of the S&P 500 Industrials Index over a 3-year performance period. The fair value of the market condition is estimated using a Monte Carlo Simulation approach in a risk-neutral framework based upon historical volatility, risk-free rates and correlation matrix. Awards granted prior to 2018 were earned based 50% upon a performance condition, measured by relative EPS growth as compared to the industrial group of companies in the S&P 500 Index over a 3-year performance period, and 50% upon a market condition, measured by the Company's relative TSR as compared to the TSR of the industrial group of companies in the S&P 500 Index over a 3-year performance period.

Deferred Compensation

The Company allows key employees to defer a portion of their eligible compensation into a number of investment choices, including its ordinary share equivalents. Any amounts invested in ordinary share equivalents will be settled in ordinary shares of the Company at the time of distribution.

Note 14. Restructuring Activities

The Company incurs costs associated with announced restructuring initiatives intended to result in improved operating performance, profitability and working capital levels. Actions associated with these initiatives may include workforce reduction, improving manufacturing productivity, realignment of management structures and rationalizing certain assets. The following table details restructuring charges recorded during the three and nine months ended September 30:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Americas	$	0.8	$	6.6	$	3.9	$	33.2
EMEA	1.1		0.7		2.2		7.2
Asia Pacific	1.4		0.8		1.2		3.3
Corporate and Other	4.6		0.1		12.4		27.6
Total	$	7.9	$	8.2	$	19.7	$	71.3

Cost of goods sold	$	1.0	$	3.3	$	3.6	$	21.9
Selling and administrative expenses	6.9		4.9		16.1		49.4
Total	$	7.9	$	8.2	$	19.7	$	71.3

The changes in the restructuring reserve for the nine months ended September 30, 2021 were as follows:


In millions	Americas		EMEA		Asia Pacific		Corporate and Other		Total
December 31, 2020	$	12.6	$	4.3	$	2.0	$	10.6	$	29.5
Additions, net of reversals (1)	3.9		1.5		1.2		12.4		19.0
Cash paid/other	(5.5)		(2.2)		(2.0)		(17.7)		(27.4)

September 30, 2021	$	11.0	$	3.6	$	1.2	$	5.3	$	21.1

(1) Excludes the accelerated depreciation on buildings and equipment ($0.7 million).

During the nine months ended September 30, 2021, costs associated with announced restructuring actions primarily included the following:

costs related to workforce reductions and reorganization of resources to improve the Company's cost structure and functional transformation initiatives;
the plan to close a U.S. manufacturing facility and relocate production to another existing U.S. facility announced in 2018; and
costs related to the reorganization of resources and facilities in response to the completion of the Transaction and separation of Ingersoll Rand Industrial.

Amounts recognized primarily relate to severance and exit costs. In addition, the Company also includes costs that are directly attributable to the restructuring activity but do not fall into the severance, exit or disposal categories. As of September 30, 2021, the Company had $21.1 million accrued for costs associated with its ongoing restructuring actions, of which a majority is expected to be paid within one year.

Note 15. Other Income/(Expense), Net

The components of Other income/(expense), net for the three and nine months ended September 30 were as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Interest income/(loss)	$	0.8	$	1.9	$	3.0	$	3.6
Foreign currency exchange loss	(2.2)		(2.5)		(8.9)		(8.5)
Other components of net periodic benefit credit/(cost)	1.2		(3.9)		(3.3)		(9.0)
Other activity, net	(6.7)		—		(4.6)		21.5
Other income/(expense), net	$	(6.9)	$	(4.5)	$	(13.8)	$	7.6

Other income/(expense), net includes the results from activities other than normal business operations such as interest income and foreign currency gains and losses on transactions that are denominated in a currency other than an entity’s functional currency. In addition, the Company includes the components of net periodic benefit credit/(cost) for pension and post retirement obligations other than the service cost component. Other activity, net primarily includes items associated with certain legal matters, as well as asbestos-related activities. During the three and nine months ended September 30, 2021, the Company recorded a charge of $7.2 million to increase its Funding Agreement liability from asbestos-related activities of Murray within other activity, net. During the nine months ended September 30, 2020, the Company recorded a $17.4 million adjustment to correct an overstatement of a legacy legal liability that originated in prior years and a gain of $0.9 million related to the deconsolidation of Murray and its wholly-owned subsidiary ClimateLabs within other activity, net. Refer to Note 20, "Commitments and Contingencies," for more information regarding asbestos-related matters.

Note 16. Income Taxes

The Company accounts for its Provision for income taxes in accordance with ASC 740, "Income Taxes" (ASC 740), which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. For the nine months ended September 30, 2021 and September 30, 2020, the Company's effective income tax rate was 19.2% and 23.2%, respectively. The effective income tax rate for the nine months ended September 30, 2021 was lower than the U.S. statutory rate of 21% primarily due to excess tax benefits from employee share-based payments and earnings in non-U.S. jurisdictions, which in aggregate have a lower effective tax rate, partially offset by U.S. state and local taxes. The effective tax rate for the nine months ended September 30, 2020 was higher than the U.S. statutory rate of 21% due to a $37.0 million non-cash charge to establish valuation allowances on net deferred tax assets, primarily net operating losses in certain tax jurisdictions as a result of the completion of the Transaction, U.S. state and local taxes and certain non-deductible employee expenses. These amounts were partially offset by excess tax benefits from employee share-based payments, a $3.9 million benefit primarily related to a reduction in valuation allowances on deferred taxes related to net operating losses as a result of a planned restructuring in a non-U.S. tax jurisdiction and earnings in non-U.S. jurisdictions, which in aggregate have a lower effective tax rate. The impact of the changes in the valuation allowances increased the effective tax rate by 3.4%.

Total unrecognized tax benefits as of September 30, 2021 and December 31, 2020 were $66.0 million and $65.4 million, respectively. Although management believes its tax positions and related provisions reflected in the Condensed Consolidated Financial Statements are fully supportable, it recognizes that these tax positions and related provisions may be challenged by various tax authorities. These tax positions and related provisions are reviewed on an ongoing basis and are adjusted as additional facts and information become available, including progress on tax audits, changes in interpretations of tax laws, developments in case law and closing of statute of limitations. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in Provision for income taxes.

The Provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income or deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Belgium, Brazil, Canada, China, France, Germany, Ireland, Italy, Mexico, Spain, the Netherlands, the United Kingdom and the United States. These examinations on their own, or any subsequent litigation related to the examinations, may result in additional taxes or penalties against the Company. If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on the Company’s tax provision. In general, the examination of the Company's U.S. federal tax returns is complete or effectively settled for years prior to 2016. In general, the examination of the Company’s material non-U.S. tax returns is complete or effectively settled for the years prior to 2011, with certain matters prior to 2011 being resolved through appeals and litigation and also unilateral procedures as provided for under double tax treaties.

Note 17. Acquisitions and Divestitures

Acquisitions

On October 15, 2021, the Company acquired 100% of Farrar Scientific Corporation's (Farrar Scientific) assets, including its patented ultra-low temperature control technologies, a development and assembly operation in Marietta, Ohio, and a specialized team of engineers, sales engineers, operators, and technicians. Farrar Scientific is a leader in ultra-low temperature control for biopharmaceutical and other life science applications. The results of Farrar Scientific will be reported within the Americas segment starting in the fourth quarter of 2021.

The Company paid $250.0 million in initial cash consideration and agreed to an additional earnout payment of up to $115.0 million to be paid in 2025, tied to the attainment of key financial targets during the period January 1, 2022 through December 31, 2024. This additional payment, to the extent earned, will be payable in cash. Due to the close proximity of the acquisition date and the Company’s filing of its quarterly report on Form 10-Q for the nine months ended September 30, 2021, the initial accounting for the business combination is still in process, and therefore the Company has not disclosed the information required by ASC 805, Business Combinations. Such information will be included in the Company’s subsequent Form 10-K for the year ended December 31, 2021.

During the fourth quarter of 2020, the Company acquired two independent dealers, reported within the Americas segment, to support the Company's ongoing strategy to expand its distribution network and service area. The aggregate cash paid, net of cash acquired, totaled $182.8 million and was financed through cash on hand. Intangible assets associated with these acquisitions totaled $76.9 million and primarily relate to customer relationships. The excess purchase price over the estimated fair value of net assets acquired was recognized as goodwill and totaled $131.8 million. During the nine months ended September 30, 2021, the Company completed the determination of the final allocation of the purchase price with respect to the assets acquired and liabilities assumed.

The fair values of the customer relationship intangible assets were determined using the multi-period excess earnings method based on discounted projected net cash flows associated with the net earnings attributable to the acquired customer relationships. These projected cash flows are estimated over the remaining economic life of the intangible asset and are considered from a market participant perspective. Key assumptions used in estimating future cash flows included projected revenue growth rates and customer attrition rates. The projected future cash flows are discounted to present value using an appropriate discount rate. The customer relationships had a weighted-average useful life of 16 years.

Divestitures

The components of Discontinued operations, net of tax for the three and nine months ended September 30 were as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Net revenues	$	—	$	—	$	—	$	469.8
Cost of goods sold	—		—		—		(315.8)
Selling and administrative expenses	(1.3)		(0.3)		(0.8)		(234.4)
Operating income (loss)	(1.3)		(0.3)		(0.8)		(80.4)
Other income/ (expense), net	(17.7)		(7.4)		(31.6)		(50.7)
Pre-tax earnings (loss) from discontinued operations	(19.0)		(7.7)		(32.4)		(131.1)
Tax benefit (expense)	5.7		2.2		19.8		10.7
Discontinued operations, net of tax	$	(13.3)	$	(5.5)	$	(12.6)	$	(120.4)

The table above presents the financial statement line items that support amounts included in Discontinued operations, net of tax. For the three and nine months ended September 30, 2021, Other income/(expense), net included a charge of $14.0 million to increase the Company's Funding Agreement liability from asbestos-related activities of Aldrich. For the three and nine months ended September 30, 2020, Selling and administrative expenses included pre-tax Ingersoll Rand Industrial separation costs of $2.3 million and $113.9 million, respectively, which are primarily related to legal, consulting and advisory fees. In addition, for the nine months ended September 30, 2020, Other income/(expense), net included a loss of $23.6 million related to the deconsolidation of Aldrich and its wholly-owned subsidiary 200 Park.

Separation of Industrial Segment Businesses

On February 29, 2020, the Company completed the Transaction with Ingersoll Rand whereby the Company separated Ingersoll Rand Industrial which then merged with a wholly-owned subsidiary of Ingersoll Rand. In accordance with GAAP, the historical results of Ingersoll Rand Industrial are presented as a discontinued operation in the Condensed Consolidated Statements of Income (Loss) and Condensed Consolidated Statements of Cash Flows.

Net revenues and earnings from operations, net of tax of Ingersoll Rand Industrial for the three and nine months ended September 30 were as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Net revenues	$	—	$	—	$	—	$	469.8
Earnings (loss) attributable to Trane Technologies plc	0.3		(0.5)		4.2		(83.0)
Earnings (loss) attributable to noncontrolling interests	—		—		—		0.9
Earnings (loss) from operations, net of tax	$	0.3	$	(0.5)	$	4.2	$	(82.1)

Earnings (loss) attributable to Trane Technologies plc includes Ingersoll Rand Industrial separation costs, net of tax primarily related to legal, consulting and advisory fees of $1.8 million and $95.9 million during the three and nine months ended September 30, 2020, respectively.

Other Discontinued Operations

Other discontinued operations, net of tax related to retained obligations from previously sold businesses that primarily include ongoing expenses for postretirement benefits, product liability and legal costs. In addition, the Company includes asbestos-related activities of Aldrich.

The components of Discontinued operations, net of tax for the three and nine months ended September 30 were as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Ingersoll Rand Industrial, net of tax	$	0.3	$	(0.5)	$	4.2	$	(82.1)
Other discontinued operations, net of tax	(13.6)		(5.0)		(16.8)		(38.3)
Discontinued operations, net of tax	$	(13.3)	$	(5.5)	$	(12.6)	$	(120.4)

For the three and nine months ended September 30, 2021, other discontinued operations, net of tax included a charge of $14.0 million related to the increase to its potential liability under the Funding Agreement from asbestos-related activities of Aldrich. In addition, other discontinued operations, net of tax includes a loss of $23.6 million related to the deconsolidation of Aldrich and its wholly-owned subsidiary 200 Park, for the nine months ended September 30, 2020. Refer to Note 20, "Commitments and Contingencies," for more information regarding asbestos-related matters.

Note 18. Earnings Per Share (EPS)

Basic EPS is calculated by dividing Net earnings attributable to Trane Technologies plc by the weighted-average number of ordinary shares outstanding for the applicable period. Diluted EPS is calculated after adjusting the denominator of the basic EPS calculation for the effect of all potentially dilutive ordinary shares, which in the Company’s case, includes shares issuable under share-based compensation plans. The following table summarizes the weighted-average number of ordinary shares outstanding for basic and diluted earnings per share calculations for the three and nine months months ended September 30:


	Three months ended				Nine months ended
In millions, except per share amounts	2021		2020		2021		2020
Weighted-average number of basic shares	238.2		240.4		239.2		240.0
Shares issuable under incentive stock plans	3.5		3.3		3.6		2.7

Weighted-average number of diluted shares	241.7		243.7		242.8		242.7
Anti-dilutive shares	—		0.6		0.3		0.8

Dividends declared per ordinary share	$	—	$	—	$	1.77	$	1.59

Note 19. Business Segment Information

The Company operates under three regional operating segments designed to create deep customer focus and relevance in markets around the world. Intercompany sales between segments are immaterial.

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. The Asia Pacific segment encompasses heating and cooling systems, services and solutions for commercial buildings and transport refrigeration systems and solutions.

Management measures operating performance based on net earnings excluding interest expense, income taxes, depreciation and amortization, restructuring, unallocated corporate expenses and discontinued operations (Segment Adjusted EBITDA). Segment Adjusted EBITDA is not defined under GAAP and may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for net earnings or other results reported in accordance with GAAP. The Company believes Segment Adjusted EBITDA provides the most relevant measure of profitability as well as earnings power and the ability to generate cash. This measure is a useful financial metric to assess the Company's operating performance from period to period by excluding certain items that it believes are not representative of its core business and the Company uses this measure for business planning purposes. Segment Adjusted EBITDA also provides a useful tool for assessing the comparability between periods and the Company's ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures because it eliminates non-cash charges such as depreciation and amortization expense.

A summary of operations by reportable segment for the three and nine months ended September 30 was as follows:


	Three months ended				Nine months ended
In millions	2021		2020		2021		2020
Net revenues
Americas	$	2,910.3	$	2,745.8	$	8,207.6	$	7,300.0
EMEA	495.0		445.2		1,462.1		1,182.7
Asia Pacific	314.5		304.5		897.4		792.9
Total Net revenues	$	3,719.8	$	3,495.5	$	10,567.1	$	9,275.6

Segment Adjusted EBITDA
Americas	$	566.9	$	555.0	$	1,571.7	$	1,287.6
EMEA	99.4		87.6		283.4		190.1
Asia Pacific	57.3		58.5		163.8		129.2
Total Segment Adjusted EBITDA	$	723.6	$	701.1	$	2,018.9	$	1,606.9

Reconciliation of Segment Adjusted EBITDA to earnings before income taxes
Total Segment Adjusted EBITDA	$	723.6	$	701.1	$	2,018.9	$	1,606.9
Interest expense	(57.7)		(62.4)		(177.7)		(186.8)
Depreciation and amortization	(72.2)		(74.5)		(223.0)		(223.7)
Restructuring costs	(7.9)		(8.2)		(19.7)		(71.3)
Unallocated corporate expenses	(67.0)		(56.0)		(202.4)		(159.5)
Earnings before income taxes	$	518.8	$	500.0	$	1,396.1	$	965.6

Note 20. Commitments and Contingencies

The Company is involved in various litigation, claims and administrative proceedings, including those related to the bankruptcy proceedings for Aldrich and Murray and environmental and product liability matters. In accordance with ASC 450, "Contingencies" (ASC 450), the Company records accruals for loss contingencies when it is both probable that a liability will be incurred and the amount of the loss can be reasonably estimated. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, except as expressly set forth in this note, management believes that any liability which may result from these legal matters would not have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.

Asbestos-Related Matters

Certain wholly-owned subsidiaries and former companies of the Company were named as defendants in asbestos-related lawsuits in state and federal courts. In virtually all of the suits, a large number of other companies have also been named as defendants. The vast majority of those claims were filed against predecessors of Aldrich and Murray and generally allege injury caused by exposure to asbestos contained in certain historical products sold by predecessors of Aldrich or Murray, primarily pumps, boilers and railroad brake shoes. None of the Company's existing or previously-owned businesses were a producer or manufacturer of asbestos.

On June 18, 2020, Aldrich and Murray each filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code to resolve equitably and permanently all current and future asbestos related claims in a manner beneficial to claimants, Aldrich and Murray. As a result of the Chapter 11 filings, all asbestos-related lawsuits against Aldrich and Murray have been stayed due to the imposition of a statutory automatic stay applicable in Chapter 11 bankruptcy cases. In addition, in connection with the Chapter 11 filings, at the request of Aldrich and Murray, the Bankruptcy Court entered an order temporarily staying all asbestos-related claims against the Trane Companies that relate to claims against Aldrich or Murray (except for asbestos-related claims for which the exclusive remedy is provided under workers' compensation statutes or similar laws). On August 23, 2021, the Bankruptcy Court entered its findings of facts and conclusions of law and order declaring that the automatic stay applies to certain asbestos related claims against the Trane Companies and enjoining such actions. As a result, all asbestos-related lawsuits against Aldrich, Murray and the Trane Companies remain stayed due to the continuance of the statutory automatic stay applicable in Chapter 11 bankruptcy cases.

The goal of these Chapter 11 filings is an efficient and permanent resolution of all current and future asbestos claims through court approval of a plan of reorganization, which would establish, in accordance with section 524(g) of the Bankruptcy Code, a trust to which all asbestos claims would be channeled for resolution. Further to this goal and as discussed more fully below, Aldrich and Murray have reached an agreement in principle with the court-appointed legal representative of future asbestos claimants (the FCR) on the terms of a plan for the establishment of such a trust.

Prior to the Petition Date, predecessors of each of Aldrich and Murray had been litigating asbestos-related claims brought against them. No such claims have been paid since the Petition Date, and it is not contemplated that any such claims will be paid until the end of the Chapter 11 cases.

From an accounting perspective, the Company no longer has control over Aldrich and Murray as of the Petition Date as their activities are subject to review and oversight by the Bankruptcy Court. Therefore, Aldrich and its wholly-owned subsidiary 200 Park and Murray and its wholly-owned subsidiary ClimateLabs were deconsolidated as of the Petition Date and their respective assets and liabilities were derecognized from the Company's Condensed Consolidated Financial Statements. Amounts derecognized primarily related to the legacy asbestos-related liabilities and asbestos-related insurance recoveries and $41.7 million of cash.

Accounting Treatment Prior to the Petition Date

Historically, the Company performed a detailed analysis and projected an estimated range of the Company’s total liability for pending and unasserted future asbestos-related claims. In accordance with ASC 450, the Company recorded the liability at the low end of the range as it believed that no amount within the range was a better estimate than any other amount. Asbestos-related defense costs were excluded from the liability and were recorded separately as services were incurred. The methodology used to prepare estimates relied upon and included the following factors, among others:

the interpretation of a widely accepted forecast of the population likely to have been occupationally exposed to asbestos;
epidemiological studies estimating the number of people likely to develop asbestos-related diseases such as mesothelioma and lung cancer;
the Company’s historical experience with the filing of non-malignancy claims and claims alleging other types of malignant diseases filed against the Company relative to the number of lung cancer claims filed against the Company;
the analysis of the number of people likely to file an asbestos-related personal injury claim against the Company based on such epidemiological and historical data and the Company’s claims history;
an analysis of the Company’s pending cases, by type of disease claimed and by year filed;
an analysis of the Company’s history to determine the average settlement and resolution value of claims, by type of disease claimed;
an adjustment for inflation in the future average settlement value of claims, at a 2.5% annual inflation rate, adjusted downward to 1.0% to take account of the declining value of claims resulting from the aging of the claimant population; and
an analysis of the period over which the Company has and is likely to resolve asbestos-related claims against it in the future (projected through 2053).

Prior to the Petition Date, over 73 percent of the open and active claims against the Company were non-malignant or unspecified disease claims. In addition, the Company had a number of claims that had been placed on inactive or deferred dockets and were expected to have little or no settlement value against the Company.

Prior to the Petition Date, the costs associated with the settlement and defense of asbestos-related claims, insurance settlements on asbestos-related matters and the revaluation of the Company's liability for potential future claims and recoveries were included in the Condensed Consolidated Statements of Income (Loss) within continuing operations or discontinued operations depending on the business to which they relate. Income and expenses associated with asbestos-related matters of Aldrich and its predecessors were recorded within discontinued operations as they related to previously divested businesses, primarily Ingersoll-Dresser Pump, which was sold by the Company in 2000. Income and expenses associated with asbestos-related matters for Murray and its predecessors were recorded within continuing operations. The nine months ended September 30, 2020 includes a $17.4 million adjustment to correct an overstatement of a legacy legal liability that originated in prior years.

There was no net income (expense) associated with these pre-Petition Date transactions for the three months ended September 30, 2021 and 2020. For the nine months ended September 30, the net income (expense) associated with these pre-Petition Date transactions was as follows:


	Nine months ended
In millions		2021		2020
Continuing operations		$	—	$	14.8
Discontinued operations		—		(11.2)
Total		$	—	$	3.6

The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets were based on the most recently available information. Key assumptions underlying the estimated asbestos-related liabilities included the number of people occupationally exposed and likely to develop asbestos-related diseases such as mesothelioma and lung cancer, the number of people likely to file an asbestos-related personal injury claim against the Company, the average settlement and resolution of each claim and the percentage of claims resolved with no payment. Furthermore, predictions with respect to estimates of the liability were subject to greater uncertainty as the projection period lengthened. Other factors that affected the Company’s liability included uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that might be made by state and federal courts, and the passage of state or federal tort reform legislation.

The aggregate amount of the stated limits in insurance policies available to Aldrich and Murray for asbestos-related claims acquired, over many years and from many different carriers, is substantial. However, as a result of limitations in that coverage, the projected total liability to claimants substantially exceeds the probable insurance recovery.

Accounting Treatment After the Petition Date

Upon deconsolidation, the Company recorded its retained interest in Aldrich and Murray at fair value within Other noncurrent assets in the Condensed Consolidated Balance Sheet. In determining the fair value of its equity investment, the Company used a market-adjusted multiple of earnings valuation technique. As a result, the Company recorded an aggregate equity investment of $53.6 million as of the Petition Date.

Simultaneously, the Company recognized a liability of $248.8 million within Other noncurrent liabilities in the Condensed Consolidated Balance Sheet related to its obligation under the Funding Agreements. The liability was based on asbestos related liabilities and insurance related assets balances previously recorded by the Company prior to the Petition Date.

As a result of the deconsolidation, the Company recognized an aggregate loss of $22.7 million in its Condensed Consolidated Statements of Income (Loss) during the second quarter of 2020. A gain of $0.9 million related to Murray and its wholly-owned subsidiary ClimateLabs was recorded within Other income/ (expense), net and a loss of $23.6 million related to Aldrich and its wholly-owned subsidiary 200 Park was recorded within Discontinued operations, net of tax. Additionally, the deconsolidation resulted in an investing cash outflow of $41.7 million in the Company's Condensed Consolidated Statements of Cash Flows, of which $10.8 million was recorded within continuing operations during the second quarter of 2020.

On August 26, 2021, the Company announced that Aldrich and Murray reached an agreement in principle with the court-appointed legal representative of the FCR in the bankruptcy proceedings. The agreement in principle includes the key terms for the permanent resolution of all current and future asbestos claims against Aldrich and Murray pursuant to a plan of reorganization (the Plan). Under the agreed terms, the Plan would create a trust pursuant to section 524(g) of the Bankruptcy Code and establish claims resolution procedures for all current and future claims against Aldrich and Murray (Asbestos Claims). On the effective date of the Plan, Aldrich and Murray would fund the trust with $545.0 million, comprised of $540.0 million in cash and a promissory note to be issued by Aldrich and Murray to the trust in the principal amount of $5.0 million, and the Asbestos Claims would be channeled to the trust for resolution in accordance with the claims resolution procedures. Following the effective date of the Plan, Aldrich and Murray, would have no further obligations with respect to the Asbestos Claims. The FCR has agreed to support such Plan. The agreement in principle with the FCR is subject to final documentation and is conditioned on arrangements acceptable to Aldrich and Murray with respect to their asbestos insurance assets. It is currently contemplated that the asbestos insurance assets of Aldrich and Murray would be contributed to the trust, and that, in consideration of their cash contribution to the trust, Aldrich and Murray would have the exclusive right to pursue, collect and retain all insurance reimbursements available in connection with the resolution of Asbestos Claims by the trust. The committee representing current asbestos claimants (the ACC) is not a party to the agreement in principle. Any settlement and its implementation in a plan of reorganization is subject to the approval of the Bankruptcy Court, and there can be no assurance that the Bankruptcy Court will approve the agreement on the terms proposed.

On September 24, 2021, Aldrich and Murray filed the Plan with the Bankruptcy Court. The Plan is supported by, and reflects the previously announced agreement in principle reached with the FCR. In connection with the Plan, Aldrich and Murray filed a motion with the Bankruptcy Court to create a $270.0 million trust intended to constitute a Qualified Settlement Fund (QSF Trust). The funds held in the QSF Trust would be available to provide funding for the Section 524(g) Trust upon effectiveness of the Plan. If approved by the Bankruptcy Court and other conditions are satisfied, the QSF Trust is expected to be funded prior to January 31, 2022. At this point in the Chapter 11 cases of Aldrich and Murray, it is not possible to predict whether the Bankruptcy Court will approve the terms of the Plan, what the extent of the asbestos liability will be or how long the Chapter 11 cases will last.

During the three and nine months ended September 30, 2021, in connection with the above noted agreement in principle reached by Aldrich and Murray with the FCR and the motion to create a $270.0 million QSF Trust, the Company recorded a charge of $21.2 million to increase its Funding Agreement liability to $270.0 million. The corresponding charge was bifurcated between Other income/ (expense), net of $7.2 million relating to Murray and discontinued operations of $14.0 million relating to Aldrich.

Furthermore, in connection with the 2020 Corporate Restructuring, Aldrich, Murray and their respective subsidiaries entered into several agreements with subsidiaries of the Company to ensure they each have access to services necessary for the effective operation of their respective businesses and access to capital to address any liquidity needs that arise as a result of working capital requirements or timing issues. In addition, the Company regularly transacts business with Aldrich and its wholly-owned subsidiary 200 Park and Murray and its wholly-owned subsidiary ClimateLabs. As of the Petition Date, these entities are considered related parties and post-deconsolidation activity between the Company and them are reported as third party transactions and are reflected within the Company's Condensed Consolidated Statements of Income (Loss). Since the Petition Date, there were no material transactions between the Company and these entities.

Environmental Matters

The Company continues to be dedicated to environmental and sustainability programs to minimize the use of natural resources, and reduce the utilization and generation of hazardous materials from our manufacturing processes and to remediate identified environmental concerns. As to the latter, the Company is currently engaged in site investigations and remediation activities to address environmental cleanup from past operations at current and former manufacturing facilities.

The Company is sometimes a party to environmental lawsuits and claims and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It has also been identified as a potentially responsible party (PRP) for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites. For all such sites, there are other PRPs and, in most instances, the Company’s involvement is minimal.

In estimating its liability, the Company has assumed it will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based on the Company's understanding of the parties’ financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.

Reserves for environmental matters are classified as Accrued expenses and other current liabilities or Other noncurrent liabilities based on their expected payment date. As of September 30, 2021 and December 31, 2020, the Company has recorded reserves for environmental matters of $39.6 million and $39.9 million, respectively. Of these amounts, $36.5 million and $37.5 million, respectively, relate to remediation of sites previously disposed of by the Company.

Warranty Liability

Standard product warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience. The Company assesses the adequacy of its liabilities and will make adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available.

The changes in the standard product warranty liability for the nine months ended September 30 were as follows:


In millions	2021
Balance at beginning of period	$	282.7
Reductions for payments	(89.8)
Accruals for warranties issued during the current period	100.4

Changes to accruals related to preexisting warranties	1.2
Translation	(1.6)
Balance at end of period	$	292.9

Standard product warranty liabilities are classified as Accrued expenses and other current liabilities or Other noncurrent liabilities based on their expected payment date. The Company's total current standard product warranty reserve at September 30, 2021 and December 31, 2020 was $112.5 million and $127.7 million, respectively.

Warranty Deferred Revenue

The Company's extended warranty liability represents the deferred revenue associated with its extended warranty contracts and is amortized into Net revenues on a straight-line basis over the life of the contract, unless another method is more representative of the costs incurred. The Company assesses the adequacy of its liability by evaluating the expected costs under its existing contracts to ensure these expected costs do not exceed the extended warranty liability.

The changes in the extended warranty liability for the nine months ended September 30 were as follows:


In millions	2021
Balance at beginning of period	$	304.4
Amortization of deferred revenue for the period	(89.8)
Additions for extended warranties issued during the period	88.5
Changes to accruals related to preexisting warranties	9.8
Translation	(0.8)
Balance at end of period	$	312.1

The extended warranty liability is classified as Accrued expenses and other current liabilities or Other noncurrent liabilities based on the timing of when the deferred revenue is expected to be amortized into revenue. The Company's total current extended warranty liability at September 30, 2021 and December 31, 2020 was $107.7 million and $108.6 million, respectively.

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