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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements. Factors that might cause a difference include, but are not limited to, those discussed under Part I, Item 1A – Risk Factors in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as updated by any disclosures under Part II, Item 1A - Risk Factors in our Quarterly Reports on Form 10-Q. The following section is qualified in its entirety by the more detailed information, including our financial statements and the notes thereto, which appears elsewhere in this Quarterly Report.
Overview
Organizational
Trane Technologies plc is a global climate innovator. We bring sustainable and efficient solutions to buildings, homes and transportation through our strategic brands, Trane® and Thermo King®, and our environmentally responsible portfolio of products, services and connected intelligent controls.
2030 Sustainability Commitments
Our commitment to sustainability extends to the environmental and social impacts of our people, operations, products and services. We have announced ambitious sustainability commitments with a goal of achieving these commitments by 2030 (2030 Sustainability Commitments), including our Gigaton Challenge to reduce customers' carbon emissions by a billion metric tons. We are one of a handful of companies whose emissions reductions targets have been validated three times by the Science Based Targets Initiative (SBTi), and one of the very few companies worldwide whose net-zero targets have also been validated. We are Leading by Example as we make progress toward carbon-neutral operations and zero waste-to-landfill across our global footprint and net positive water use in water-stressed locations. Our Opportunity for All commitment focuses on gender parity in leadership, workforce diversity reflective of our communities, and a citizenship strategy that helps underserved communities through enhanced learning environments and pathways to green and Science, Technology, Engineering and Math (STEM) careers.
Significant Events
Coronavirus Disease 2019 (COVID-19) Global Pandemic
Since early 2020, we have closely monitored the impact of the COVID-19 global pandemic on all aspects of our business and geographies, including how it has and will impact our customers, team members, suppliers, vendors, business partners and distribution channels. Our main priority from the onset of the COVID-19 global pandemic has been, and will continue to be, the health and safety of our employees and customers around the world. In addition, we remain focused on selling, installing and servicing our products, investing in our businesses, developing and launching new products and delivering innovative customer solutions for low-carbon, highly efficient heating, cooling and transport, healthy and efficient indoor environmental quality, and precise temperature control along the full cold chain for food and medicines.
During the six months ended June 30, 2022, overall end market demand remained healthy as we continued to proactively manage global supply chain and resource constraints by working closely with our suppliers, customers and logistics providers to mitigate the impacts on our business as we continue to sell, install and service our products. However, localized shutdowns in China negatively impacted volumes within our Asia Pacific segment.
We will continue to monitor the ongoing COVID-19 global pandemic as it evolves and will assess any potential impacts to our business and financial statements as necessary.
Channel Acquisition
On April 1, 2022, we completed a channel acquisition of a Commercial HVAC independent dealer to support our ongoing strategy to expand our distribution network and service area. The results of the channel acquisition are reported within the Americas segment.
Reorganization of Aldrich and Murray
On June 18, 2020 (Petition Date), our indirect wholly-owned subsidiaries, Aldrich and Murray each filed a voluntary petition for reorganization 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 in Charlotte (the Bankruptcy Court). 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 goal of these Chapter 11 filings is to resolve equitably and permanently all current and future asbestos-related claims in a manner beneficial to claimants and to Aldrich and Murray through court approval of a plan of reorganization that would create a trust pursuant to section 524(g) of the Bankruptcy Code, establish claims resolution procedures for all current and future asbestos-related claims against Aldrich and Murray and channel such claims to the trust for resolution in accordance with those procedures.
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 our Condensed Consolidated Financial Statements.
During the third quarter of 2021, in connection with the agreement in principle reached by Aldrich and Murray with the court-appointed legal representative of future asbestos claimants (the FCR) and the motion to create a $270.0 million trust intended to constitute a "qualified settlement fund" within the meaning of the Treasury Regulations under Section 468B of the Internal Revenue Code (QSF), we recorded a charge of $21.2 million to increase our 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.
On January 27, 2022, the Bankruptcy Court granted the request to fund the QSF, which was funded on March 2, 2022, resulting in an operating cash outflow of $270.0 million in our Condensed Consolidated Statements of Cash Flows, of which $91.8 million was allocated to continuing operations and $178.2 million was allocated to discontinued operations for the six months ended June 30, 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 a plan of reorganization (the Plan), what the extent of the asbestos liability will be or how long the Chapter 11 cases will last. The Chapter 11 cases remain pending as of August 3, 2022.
See also the discussion in Note 18 to the Condensed Consolidated Financial Statements.
Trends and Economic Events
We are a global corporation with worldwide operations. As a global business, our operations are affected by worldwide, regional and industry-specific economic factors as well as political and social factors wherever we operate or do business. These factors include urbanization, resource constraints, climate change, workforce dynamics, indoor environmental quality and digital connectedness. As part of our long‑term sustainability strategy, we innovate to provide solutions for our customers to address the impacts of these factors. Our geographic diversity and the breadth of our product and services portfolios have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results.
Given our broad range of products manufactured and geographic markets served, management uses a variety of factors to predict the outlook for our company. We monitor key competitors and customers in order to gauge relative performance and the outlook for the future. We regularly perform detailed evaluations of the different market segments we are serving to proactively detect trends and to adapt our strategies accordingly. In addition, we believe our order rates are indicative of future revenue and thus are a key measure of anticipated performance.
Current economic conditions remain mixed across our end markets. The COVID-19 global pandemic continues to impact both the global Heating, Ventilation and Air Conditioning (HVAC) and Transport end markets as global supply chain and resource constraints exist as well as localized lockdowns in China. We expect market conditions to remain mixed across the geographies where we serve our customers as the impact from COVID-19 decreases; however, macroeconomic events including the possibility of sustained high inflation and tightening financial conditions, including the potential for higher interest rates, could increase the likelihood of deteriorating economic conditions which could have a negative impact on our business.
Furthermore, since Russia invaded Ukraine in February 2022, we have halted new orders and shipments into and out of Russia and Belarus. After careful consideration, we have decided to suspend all business activities indefinitely. We are following due process to exit these markets, which will take place over the coming periods. As of June 30, 2022, there has been no material impact on our operations; however, the situation may impact other risks the company faces. Refer to Part II, Item 1A - Risk Factors within our Form 10-Q for the period ended March 31, 2022 for additional information.
We believe we have a solid foundation of global brands that are highly differentiated in all of our major product lines. Our geographic and product diversity coupled with our large installed product base provides growth opportunities within our service, parts and replacement revenue streams. In addition, we are investing substantial resources to innovate and develop new products and services which we expect will drive our future growth.
Results of Operations
Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021 - Consolidated Results
| Dollar amounts in millions | 2022 | 2021 | Period Change | 2022 % of revenues | 2021 % of revenues | ||||||||||||||||||||||||
| Net revenues | $ | 4,190.4 | $ | 3,829.7 | $ | 360.7 | |||||||||||||||||||||||
| Cost of goods sold | (2,867.0) | (2,559.0) | (308.0) | 68.4 | % | 66.8 | % | ||||||||||||||||||||||
| Gross profit | 1,323.4 | 1,270.7 | 52.7 | 31.6 | % | 33.2 | % | ||||||||||||||||||||||
| Selling and administrative expenses | (612.8) | (619.7) | 6.9 | 14.6 | % | 16.2 | % | ||||||||||||||||||||||
| Operating income | 710.6 | 651.0 | 59.6 | 17.0 | % | 17.0 | % | ||||||||||||||||||||||
| Interest expense | (55.9) | (59.3) | 3.4 | ||||||||||||||||||||||||||
| Other income/(expense), net | (1.6) | 0.3 | (1.9) | ||||||||||||||||||||||||||
| Earnings before income taxes | 653.1 | 592.0 | 61.1 | ||||||||||||||||||||||||||
| Provision for income taxes | (136.6) | (122.8) | (13.8) | ||||||||||||||||||||||||||
| Earnings from continuing operations | 516.5 | 469.2 | 47.3 | ||||||||||||||||||||||||||
| Discontinued operations, net of tax | (1.6) | (0.2) | (1.4) | ||||||||||||||||||||||||||
| Net earnings | $ | 514.9 | $ | 469.0 | $ | 45.9 |
Net Revenues
Net revenues for the three months ended June 30, 2022 increased by 9.4%, or $360.7 million, compared with the same period in 2021, which resulted from the following:
| Pricing | 10.4 | % | |||
| Volume | 0.3 | % | |||
| Acquisitions | 0.7 | % | |||
| Currency translation | (2.0) | % | |||
| Total | 9.4 | % |
The increase in Net revenues was primarily driven by inflation-based price increases, incremental revenues from acquisitions and slightly higher volumes, partially offset by an unfavorable impact from foreign currency translation. Refer to the “Results by Segment” below for a discussion of Net revenues by segment.
Gross Profit Margin
Gross profit margin for the three months ended June 30, 2022 decreased 160 basis points to 31.6% compared to 33.2% for the same period of 2021 primarily due to significant direct material and freight inflation as well as unfavorable product mix, partially offset by inflation-based price increases.
Selling and Administrative Expenses
Selling and administrative expenses for the three months ended June 30, 2022 decreased by 1.1%, or $6.9 million compared with the same period of 2021. The decrease in Selling and administrative expenses was primarily driven by lower marketing costs and a non-cash adjustment for contingent consideration, partially offset by an increase in amortization due to acquisitions. Selling and administrative expenses as a percentage of Net revenues for the three months ended June 30, 2022 decreased 160 basis points from 16.2% to 14.6% primarily due to higher revenues during the period.
Interest Expense
Interest expense for the three months ended June 30, 2022 decreased by 5.7%, or $3.4 million compared with the same period of 2021 primarily due to the repayment of $125.0 million of 9.000% Debentures in August 2021.
Other Income/(Expense), Net
The components of Other income/(expense), net for the three months ended June 30 were as follows:
| In millions | 2022 | 2021 | |||||||||
| Interest income | $ | 1.5 | $ | 1.1 | |||||||
| Foreign currency exchange loss | (4.0) | (3.0) | |||||||||
| Other components of net periodic benefit credit/(cost) | 1.1 | 1.2 | |||||||||
| Other activity, net | (0.2) | 1.0 | |||||||||
| Other income/(expense), net | $ | (1.6) | $ | 0.3 |
Other income/(expense), net includes the results from activities other than core 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, we include 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 of Murray.
Provision for Income Taxes
For the three months ended June 30, 2022, our effective tax rate was 20.9% which was slightly lower than the U.S. statutory rate of 21% primarily due to earnings in non-U.S. jurisdictions, which in aggregate have a lower effective tax rate, partially offset by U.S. state and local taxes. For the three months ended June 30, 2021 our effective tax rate was 20.7% which 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 the remeasurement of deferred taxes as a result of law changes in certain non-U.S. tax jurisdictions, primarily in the United Kingdom and India, and U.S. state and local taxes.
Six Months Ended June 30, 2022 Compared to the Six Months Ended June 30, 2021 - Consolidated Results
| Dollar amounts in millions | 2022 | 2021 | Period Change | 2022 % of revenues | 2021 % of revenues | ||||||||||||||||||||||||
| Net revenues | $ | 7,545.9 | $ | 6,847.3 | $ | 698.6 | |||||||||||||||||||||||
| Cost of goods sold | (5,233.5) | (4,623.4) | (610.1) | 69.4 | % | 67.5 | % | ||||||||||||||||||||||
| Gross profit | 2,312.4 | 2,223.9 | 88.5 | 30.6 | % | 32.5 | % | ||||||||||||||||||||||
| Selling and administrative expenses | (1,213.6) | (1,219.7) | 6.1 | 16.1 | % | 17.8 | % | ||||||||||||||||||||||
| Operating income | 1,098.8 | 1,004.2 | 94.6 | 14.6 | % | 14.7 | % | ||||||||||||||||||||||
| Interest expense | (111.9) | (120.0) | 8.1 | ||||||||||||||||||||||||||
| Other income/(expense), net | (2.3) | (6.9) | 4.6 | ||||||||||||||||||||||||||
| Earnings before income taxes | 984.6 | 877.3 | 107.3 | ||||||||||||||||||||||||||
| Provision for income taxes | (197.7) | (171.2) | (26.5) | ||||||||||||||||||||||||||
| Earnings from continuing operations | 786.9 | 706.1 | 80.8 | ||||||||||||||||||||||||||
| Discontinued operations, net of tax | (8.6) | 0.7 | (9.3) | ||||||||||||||||||||||||||
| Net earnings | $ | 778.3 | $ | 706.8 | $ | 71.5 |
Net Revenues
Net revenues for the six months ended June 30, 2022 increased by 10.2%, or $698.6 million, compared with the same period in 2021, which resulted from the following:
| Pricing | 9.1 | % | |||
| Volume | 2.4 | % | |||
| Acquisitions | 0.4 | % | |||
| Currency translation | (1.7) | % | |||
| Total | 10.2 | % |
The increase in Net revenues was primarily driven by inflation-based price increases, higher volumes and incremental revenues from acquisitions, partially offset by an unfavorable impact from foreign currency translation. Refer to the “Results by Segment” below for a discussion of Net revenues by segment.
Gross Profit Margin
Gross profit margin for the six months ended June 30, 2022 decreased 190 basis points to 30.6% compared to 32.5% for the same period of 2021 primarily due to significant direct material and freight inflation and an unfavorable product mix, partially offset by inflation-based price increases.
Selling and Administrative Expenses
Selling and administrative expenses for the six months ended June 30, 2022 decreased by $6.1 million, or 0.5%, compared with the same period of 2021. The decrease in Selling and administrative expenses was primarily driven by a non-cash adjustment for contingent consideration and lower marketing costs, partially offset by an increase in labor costs and amortization due to acquisitions. Selling and administrative expenses as a percentage of Net revenues for the six months ended June 30, 2022 decreased 170 basis points from 17.8% to 16.1% primarily due to higher revenues during the period.
Interest Expense
Interest expense for the six months ended June 30, 2022 decreased by 6.8% or $8.1 million compared with the same period of 2021 primarily due to the repayments of $125.0 million of 9.000% Debentures in August 2021 and $300.0 million of 2.900% Senior notes in February 2021.
Other Income/(Expense), Net
The components of Other income/(expense), net for the six months ended June 30 are as follows:
| In millions | 2022 | 2021 | |||||||||
| Interest income | $ | 2.8 | $ | 2.2 | |||||||
| Foreign currency exchange loss | (7.6) | (6.7) | |||||||||
| Other components of net periodic benefit credit/(cost) | 2.3 | (4.5) | |||||||||
| Other activity, net | 0.2 | 2.1 | |||||||||
| Other income/(expense), net | $ | (2.3) | $ | (6.9) |
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, we include 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 of Murray.
Provision for Income Taxes
For the six months ended June 30, 2022, our effective tax rate was 20.1% which 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 six months ended June 30, 2021 was 19.5% which 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 the remeasurement of deferred taxes as a result of law changes in certain non-U.S. tax jurisdictions, primarily in the United Kingdom and India, and U.S. state and local taxes.
Three Months Ended June 30, 2022 Compared to the Three Months Ended June 30, 2021 - Segment Results
We operate under four regional operating segments designed to create deep customer focus and relevance in markets around the world. We determined that our two EMEA operating segments meet the aggregation criteria based on similar operating and economic characteristics, resulting in one reportable segment. Therefore, we have three regional reportable segments, Americas, EMEA and Asia Pacific.
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Our Americas segment innovates for customers in North America and Latin America. 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.
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Our 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.
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Our 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, non-cash adjustments for contingent consideration, unallocated corporate expenses and discontinued operations (Segment Adjusted EBITDA). Segment Adjusted EBITDA is not defined under accounting principles generally accepted in the United States of America (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. We believe 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 our operating performance from period to period by excluding certain items that we believe are not representative of our core business and we use this measure for business planning purposes. Segment Adjusted EBITDA also provides a useful tool for assessing the comparability between periods and our 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.
The following discussion compares our results for each of our three reportable segments for the three months ended June 30, 2022 compared to the three months ended June 30, 2021.
| In millions | 2022 | 2021 | % change | ||||||||||||||
| Americas | |||||||||||||||||
| Net revenues | $ | 3,386.3 | $ | 2,971.6 | 14.0 | % | |||||||||||
| Segment Adjusted EBITDA | 702.2 | 621.0 | 13.1 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 20.7 | % | 20.9 | % | |||||||||||||
| EMEA | |||||||||||||||||
| Net revenues | $ | 521.6 | $ | 523.2 | (0.3) | % | |||||||||||
| Segment Adjusted EBITDA | 92.4 | 107.3 | (13.9) | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 17.7 | % | 20.5 | % | |||||||||||||
| Asia Pacific | |||||||||||||||||
| Net revenues | $ | 282.5 | $ | 334.9 | (15.6) | % | |||||||||||
| Segment Adjusted EBITDA | 43.2 | 63.0 | (31.4) | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 15.3 | % | 18.8 | % | |||||||||||||
| Total Net revenues | $ | 4,190.4 | $ | 3,829.7 | 9.4 | % | |||||||||||
| Total Segment Adjusted EBITDA | 837.8 | 791.3 | 5.9 | % |
Americas
Net revenues for the three months ended June 30, 2022 increased by 14.0% or $414.7 million, compared with the same period of 2021. The components of the period change were as follows:
| Pricing | 11.8 | % | |||
| Volume | 1.5 | % | |||
| Acquisitions | 0.9 | % | |||
| Currency translation | (0.2) | % | |||
| Total | 14.0 | % |
The increase in Net revenues was primarily driven by inflation-based price increases, higher volumes driven by increased end-customer demand and incremental revenues from acquisitions.
Segment Adjusted EBITDA margin for the three months ended June 30, 2022 decreased by 20 basis points to 20.7% compared to 20.9% for the same period in 2021 primarily due to inflation and unfavorable productivity arising from supply chain, freight and logistics challenges, partially offset by inflation-based price increases.
EMEA
Net revenues for the three months ended June 30, 2022 decreased by 0.3% or $1.6 million, compared with the same period of 2021. The components of the period change were as follows:
| Pricing | 6.9 | % | |||
| Volume | 3.9 | % | |||
| Currency translation | (11.1) | % | |||
| Total | (0.3) | % |
The decrease in Net revenues was driven by an unfavorable impact from foreign currency translation. Excluding the impact of foreign currency translation, Net revenues increased by 10.8% driven by inflation-based price increases and higher volumes of products shipped.
Segment Adjusted EBITDA margin for the three months ended June 30, 2022 decreased by 280 basis points to 17.7% compared to 20.5% for the same period of 2021, primarily due to inflation and unfavorable productivity arising from supply chain, freight and logistics challenges and an unfavorable impact from foreign currency translation, partially offset by inflation-based price increases.
Asia Pacific
Net revenues for the three months ended June 30, 2022 decreased by 15.6% or $52.4 million, compared with the same period of 2021. The components of the period change were as follows:
| Pricing | 4.0 | % | |||
| Volume | (16.1) | % | |||
| Currency translation | (3.5) | % | |||
| Total | (15.6) | % |
The decrease in Net revenues was primarily driven by lower volumes as a result of localized shutdowns in China and an unfavorable impact from foreign currency translation, partially offset by inflation-based price increases.
Segment Adjusted EBITDA margin for the three months ended June 30, 2022 decreased by 350 basis points to 15.3% compared to 18.8% for the same period of 2021 primarily due to inflation and unfavorable productivity arising from supply chain, freight and logistics challenges, lower volumes as a result of localized shutdowns in China and an unfavorable impact from foreign currency translation, partially offset by inflation-based price increases.
Six Months Ended June 30, 2022 Compared to the Six months ended June 30, 2021 - Segment Results
The following discussion compares our results for each of our three reportable segments for the six months ended June 30, 2022, compared to the six months ended June 30, 2021.
| In millions | 2022 | 2021 | % change | ||||||||||||||
| Americas | |||||||||||||||||
| Net revenues | $ | 6,019.5 | $ | 5,297.3 | 13.6 | % | |||||||||||
| Segment Adjusted EBITDA | 1,107.8 | 1,004.8 | 10.3 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 18.4 | % | 19.0 | % | |||||||||||||
| EMEA | |||||||||||||||||
| Net revenues | $ | 962.9 | $ | 967.1 | (0.4) | % | |||||||||||
| Segment Adjusted EBITDA | 151.5 | 184.0 | (17.7) | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 15.7 | % | 19.0 | % | |||||||||||||
| Asia Pacific | |||||||||||||||||
| Net revenues | $ | 563.5 | $ | 582.9 | (3.3) | % | |||||||||||
| Segment Adjusted EBITDA | 86.7 | 106.5 | (18.6) | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 15.4 | % | 18.3 | % | |||||||||||||
| Total net revenues | $ | 7,545.9 | $ | 6,847.3 | 10.2 | % | |||||||||||
| Total Segment Adjusted EBITDA | 1,346.0 | 1,295.3 | 3.9 | % |
Americas
Net revenues for the six months ended June 30, 2022 increased by 13.6% or $722.2 million, compared with the same period of 2021. The components of the period change were as follows:
| Pricing | 10.3 | % | |||
| Volume | 2.9 | % | |||
| Acquisitions | 0.5 | % | |||
| Currency translation | (0.1) | % | |||
| Total | 13.6 | % |
The increase in Net revenues was primarily driven by inflation-based price increases, higher volumes driven by increased end-customer demand and incremental revenues from acquisitions.
Segment Adjusted EBITDA margin for the six months ended June 30, 2022 decreased by 60 basis points to 18.4% compared to 19.0% for the same period of 2021 primarily due to inflation and unfavorable productivity arising from supply chain, freight and logistics challenges and an unfavorable product mix, partially offset by inflation-based price increases.
EMEA
Net revenues for the six months ended June 30, 2022 decreased by 0.4% or $4.2 million, compared with the same period of 2021. The components of the period change were as follows:
| Pricing | 5.5 | % | |||
| Volume | 3.2 | % | |||
| Currency translation | (9.1) | % | |||
| Total | (0.4) | % |
The decrease in Net revenues was primarily driven by an unfavorable impact from foreign currency translation. Excluding the impact of foreign currency translation, Net revenues increased by 8.7% driven by inflation-based price increases and higher volumes of products shipped.
Segment Adjusted EBITDA margin for the six months ended June 30, 2022 decreased by 330 basis points to 15.7% compared to 19.0% for the same period of 2021 primarily due to inflation and unfavorable productivity arising from supply chain, freight and logistics challenges and an unfavorable impact from foreign currency translation, partially offset by inflation-based price increases.
Asia Pacific
Net revenues for the six months ended June 30, 2022 decreased by 3.3% or $19.4 million, compared with the same period of 2021. The components of the period change were as follows:
| Pricing | 3.5 | % | |||
| Volume | (4.1) | % | |||
| Currency translation | (2.7) | % | |||
| Total | (3.3) | % |
The decrease in Net revenues was primarily driven by lower volumes as a result of localized shutdowns in China and an unfavorable impact from foreign currency translation, partially offset by inflation-based price increases.
Segment Adjusted EBITDA margin for the six months ended June 30, 2022 decreased by 290 basis points to 15.4% compared to 18.3% for the same period of 2021 primarily due to inflation and unfavorable productivity arising from supply chain, freight and logistics challenges and an unfavorable product mix, partially offset by inflation-based price increases.
Liquidity and Capital Resources
We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. In doing so, we review and analyze our current cash on hand, the number of days our sales are outstanding, inventory turns, capital expenditure commitments and income tax payments. Our cash requirements primarily consist of the following:
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Funding of working capital
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Debt service requirements
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Funding of capital expenditures
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Dividend payments
*•*Funding of acquisitions, joint ventures and equity investments
- Share repurchases
Our primary sources of liquidity include cash balances on hand, cash flow from operations, proceeds from debt offerings, commercial paper, and borrowing availability under our existing credit facilities. We earn a significant amount of our operating income in jurisdictions where it is deemed to be permanently reinvested. Our most prominent jurisdiction of operation is the U.S. We expect existing cash and cash equivalents available to the U.S. operations, the cash generated by our U.S. operations, our committed credit lines as well as our expected ability to access the capital and debt markets will be sufficient to fund our U.S. operating and capital needs for at least the next twelve months and thereafter for the foreseeable future. In addition, we expect existing non-U.S. cash and cash equivalents and the cash generated by our non-U.S. operations will be sufficient to fund our non-U.S. operating and capital needs for at least the next twelve months and thereafter for the foreseeable future. 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, of which the Company had no outstanding balance as of June 30, 2022.
As of June 30, 2022, we had $1,090.2 million of cash and cash equivalents on hand, of which $606.8 million was held by non-U.S. subsidiaries. Cash and cash equivalents held by our non-U.S. subsidiaries are generally available for use in our U.S. operations via intercompany loans, equity infusions or via distributions from direct or indirectly owned non-U.S. subsidiaries for which we do not assert permanent reinvestment. In general, repatriation of cash to the U.S. can be completed with no significant incremental U.S. tax. However, to the extent that we repatriate funds from non-U.S. subsidiaries for which we assert permanent reinvestment to fund our U.S. operations, we would be required to accrue and pay applicable non-U.S. taxes. As of June 30, 2022, we currently have no plans to repatriate funds from subsidiaries for which we assert permanent reinvestment.
We expect to pay a competitive and growing dividend. Since the launch of Trane Technologies in March 2020, we have increased our quarterly share dividend by 26%, from $0.53 to $0.67 per ordinary share, or $2.12 to $2.68 per share annualized. The first and second quarter 2022 dividends were declared and paid during the six months ended June 30, 2022 and the third quarter 2022 dividend was declared in June 2022 to be paid in September 2022.
Share repurchases are made from time to time in accordance with management's capital allocation strategy, subject to market conditions and regulatory requirements. In February 2021, our Board of Directors authorized the repurchase of up to $2.0 billion of our ordinary shares under a share repurchase program (2021 Authorization). During the six months ended June 30, 2022, we repurchased and canceled $650.0 million of our ordinary shares leaving approximately $750 million remaining under the 2021 Authorization. In February 2022, our Board of Directors authorized the repurchase of up to $3.0 billion of our ordinary shares under a new share repurchase program (2022 Authorization) upon completion of the 2021 Authorization.
We continue to actively manage and strengthen our business portfolio to meet the current and future needs of our customers. We achieve this partly through engaging in research and development and sustaining activities and partly through acquisitions. Sustaining activities include costs incurred to reduce production costs, improve existing products, create custom solutions for customers and provide support to our manufacturing facilities. Our research and development and sustaining costs account for approximately two percent of annual Net revenues. Each year, we make investments in new product development, new technology innovation and leaner manufacturing systems as they are key factors in achieving our strategic objectives as a leader in the climate sector. In addition, we make investments in renewable energy production and other carbon performance improvement projects. For example, during the six months ended June 30, 2022, we invested in onsite solar energy generation systems at our Pueblo, Colorado facility and ramped up operations of the onsite solar system at our Zhongshan, China facility. We also transitioned to a next generation refrigerant with low global warming potential (GWP) for transport equipment manufactured at our Arecibo, Puerto Rico facility and are actively working to transition to low GWP refrigerant on our first commercial product at our Pueblo, Colorado factory. These actions represent important steps to reduce our Scope 1 and Scope 2 carbon emissions and improve our customer's carbon performance over the operating life of Trane Technologies' cooling equipment. Furthermore, during the six months ended June 30, 2022, we also completed implementation of processing equipment for our Tyler, Texas facility to fully achieve zero waste to landfill. These Leading by Example successes did not result in material expenditures for the six months ended June 30, 2022.
We continue to look for similar improvement opportunities including, but not limited to, increasing energy efficiency, developing products that allow for use of lower GWP refrigerants, reducing material content in products, and designing products for circularity. All new product development (NPD) programs must complete a Design for Sustainability module within our NPD process to ensure that every program has a positive impact on sustainability. We also focus on partnering with our suppliers and technology providers to align their investment decisions with our technical requirements.
In pursuing our business strategy, we routinely conduct discussions, evaluate targets and enter into agreements regarding possible acquisitions, divestitures, joint ventures and equity investments. Since 2020, we acquired several businesses, entered into joint ventures and invested in companies that complement existing products and services further enhancing our product portfolio.
We incur ongoing costs associated with restructuring initiatives intended to result in improved operating performance, profitability and working capital levels. Actions associated with these initiatives may include workforce reductions, improving manufacturing productivity, realignment of management structures and rationalizing certain assets. On February 29, 2020, we completed our Reverse Morris Trust transaction with Ingersoll Rand Inc., where we separated our former Industrial segment through a pro rata distribution to shareholders of record as of February 24, 2020. Post separation, we achieved savings of $190 million through 2021 and expect to achieve an additional $110 million by 2023 for a total of $300 million in total annual savings under our transformation initiatives. In order to achieve these cost savings, we anticipate to incur costs up to $150 million through 2022. We currently have incurred approximately $128 million cumulatively through June 30, 2022. We believe that our existing cash flow, committed credit lines and access to the capital markets will be sufficient to fund share repurchases, dividends, research and development, sustaining activities, business portfolio changes and ongoing restructuring actions.
Certain of our subsidiaries entered into Funding Agreements with Aldrich and Murray 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. During the third quarter of 2021, Aldrich and Murray filed a motion with the Bankruptcy Court to create a $270 million QSF. The funds held in the QSF would be available to provide funding for the Section 524(g) Trust upon effectiveness of the Plan. On January 27, 2022, the Bankruptcy Court granted the request to fund the QSF, which was funded on March 2, 2022.
As the COVID-19 global pandemic impacts both the broader economy and our operations, we will continue to assess our liquidity needs and our ability to access capital markets. A continued worldwide disruption could materially affect economies and financial markets worldwide, resulting in an economic downturn that could affect demand for our products, our ability to obtain financing on favorable terms and otherwise adversely impact our business, financial condition and results of operations. See Part I, Item 1A – Risk Factors in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for more information.
Liquidity
The following table contains several key measures of our financial condition and liquidity at the period ended:
| In millions | June 30, 2022 | December 31, 2021 | |||||||||
| Cash and cash equivalents | $ | 1,090.2 | $ | 2,159.2 | |||||||
| Short-term borrowings and current maturities of long-term debt | 1,049.8 | 350.4 | |||||||||
| Long-term debt | 3,786.7 | 4,491.7 | |||||||||
| Total debt | 4,836.5 | 4,842.1 | |||||||||
| Total Trane Technologies plc shareholders’ equity | 5,723.5 | 6,255.9 | |||||||||
| Total equity | 5,739.3 | 6,273.1 | |||||||||
| Debt-to-total capital ratio | 45.7 | % | 43.6 | % |
Debt and Credit Facilities
Our short-term obligations primarily consist of current maturities of long-term debt. We have outstanding $342.9 million of fixed rate debentures that contain a put feature that the holders may exercise on each anniversary of the issuance date. If exercised, we are obligated to repay in whole or in part, at the holder’s option, the outstanding principal amount (plus accrued and unpaid interest) of the debentures held by the holder. We also maintain a commercial paper program which is used for general corporate purposes. Under the program, the maximum aggregate amount of unsecured commercial paper notes available to be issued, on a private placement basis, is $2.0 billion. We had no outstanding balance under our commercial paper program as of June 30, 2022 and December 31, 2021. See Note 6 to the Condensed Consolidated Financial Statements for additional information regarding the terms of our short-term obligations.
Our long-term obligations primarily consist of long-term debt with final maturity dates ranging between 2023 and 2049. In addition, we maintain two $1.0 billion senior unsecured revolving credit facilities, one of which matures in June 2026 and the other which matures in April 2027. The facilities provide support for our commercial paper program and can be used for working capital and other general corporate purposes. Total commitments of $2.0 billion were unused at June 30, 2022 and December 31, 2021. See Note 6 to the Condensed Consolidated Financial Statements and further below in Supplemental Guarantor Financial Information for additional information regarding the terms of our long-term obligations and their related guarantees.
Cash Flows
The following table reflects the major categories of cash flows for the six months ended June 30. For additional details, see the Condensed Consolidated Statements of Cash Flows in the Condensed Consolidated Financial Statements.
| In millions | 2022 | 2021 | |||||||||
| Net cash provided by (used in) continuing operating activities | $ | 417.7 | $ | 751.8 | |||||||
| Net cash provided by (used in) continuing investing activities | (258.1) | (162.1) | |||||||||
| Net cash provided by (used in) continuing financing activities | (1,001.6) | (937.6) |
Operating Activities
Net cash provided by continuing operating activities for the six months ended June 30, 2022 was $417.7 million, of which Net earnings provided $978.1 million after adjusting for non-cash transactions. Net cash provided by continuing operating activities for the six months ended June 30, 2021 was $751.8 million, of which Net earnings provided $919.0 million after adjusting for non-cash transactions. The year-over-year decrease in net cash from continuing operating activities was primarily due to higher working capital balances in the current year and the funding of the continuing operations component of the QSF for $91.8 million, partially offset by higher net earnings.
Investing Activities
Cash flows from investing activities represent inflows and outflows regarding the purchase and sale of assets. Primary activities associated with these items include capital expenditures, proceeds from the sale of property, plant and equipment, acquisitions, investments in joint ventures and complementary businesses and divestitures. During the six months ended June 30, 2022, net cash used in investing activities from continuing operations was $258.1 million. The primary drivers of the usage were attributable to capital expenditures of $143.9 million and acquisition of businesses for $109.6 million, net of cash acquired, primarily within the Americas segment. During the six months ended June 30, 2021 net cash used in investing activities from continuing operations was $162.1 million. The primary drivers of the usage were attributable to capital expenditures of $77.5 million and other investing activities of $71.8 million primarily related to investment in companies that complement existing products and services further enhancing our product portfolio.
Financing Activities
Cash flows from financing activities represent inflows and outflows that account for external activities affecting equity and debt. Primary activities associated with these actions include paying dividends to shareholders, repurchasing our own shares, issuing our own stock and debt transactions. During the six months ended June 30, 2022, net cash used in financing activities from continuing operations was $1,001.6 million. The primary drivers of the outflow related to the repurchase of $650.1 million in ordinary shares and dividends paid to ordinary shareholders of $310.9 million. During the six months ended June 30, 2021, net cash used in financing activities from continuing operations was $937.6 million. The primary drivers of the outflow related to the repurchase of $354.2 million in ordinary shares, the repayment of long-term debt of $307.5 million and dividends paid to ordinary shareholders of $281.6 million.
Free Cash Flow
Free cash flow is a non-GAAP measure and defined as Net cash provided by (used in) continuing operating activities, less capital expenditures, plus cash payments for restructuring, transformation costs and the continuing operations component of the QSF funding. This measure is useful to management and investors because it is consistent with management's assessment of our operating cash flow performance. The most comparable GAAP measure to free cash flow is Net cash provided by (used in) continuing operating activities. Free cash flow may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for Net cash provided by (used in) continuing operating activities in accordance with GAAP.
A reconciliation of Net cash provided by (used in) continuing operating activities to free cash flow for the six months ended June 30 is as follows:
| In millions | 2022 | 2021 | |||||||||
| Net cash provided by (used in) continuing operating activities | $ | 417.7 | $ | 751.8 | |||||||
| Capital expenditures | (143.9) | (77.5) | |||||||||
| Cash payments for restructuring | 14.2 | 15.7 | |||||||||
| Transformation costs paid | 7.4 | 6.4 | |||||||||
| QSF funding (continuing operations component) | 91.8 | — | |||||||||
| Free cash flow (1) | $ | 387.2 | $ | 696.4 |
(1) Represents a non-GAAP measure.
Pensions
Our investment objective in managing defined benefit plan assets is to ensure that all present and future benefit obligations are met as they come due. We seek to achieve this goal while trying to mitigate volatility in plan funded status, contribution and expense by better matching the characteristics of the plan assets to that of the plan liabilities. We use a dynamic approach to asset allocation whereby a plan's allocation to fixed income assets increases as the plan's funded status improves. We monitor plan funded status and asset allocation regularly in addition to investment manager performance.
We monitor the impact of market conditions on our defined benefit plans on a regular basis. None of our defined benefit pension plans have experienced a significant impact on their liquidity due to market volatility. The Company currently projects that it will contribute a total of approximately $90.0 million to our enterprise plans worldwide in 2022. For further details on pension plan activity, see Note 9 to the Condensed Consolidated Financial Statements.
Supplemental Guarantor Financial Information
Trane Technologies plc (Plc or Parent Company) and certain of its 100% directly or indirectly owned subsidiaries provide guarantees of public debt issued by other 100% directly or indirectly owned subsidiaries of Plc. The following table shows our guarantor relationships as of June 30, 2022:
| Parent, issuer or guarantors | Notes issued | Notes guaranteed | ||||||
| Trane Technologies plc (Plc) | None | All registered notes and debentures | ||||||
| Trane Technologies Irish Holdings Unlimited Company (TT Holdings) | None | All notes issued by TTFL and TTC HoldCo | ||||||
| Trane Technologies Lux International Holding Company S.à.r.l. (TT International) | None | All notes issued by TTFL and TTC HoldCo | ||||||
| Trane Technologies Global Holding Company Limited (TT Global) | None | All notes issued by TTFL and TTC HoldCo | ||||||
| Trane Technologies Financing Limited (TTFL) | 3.550% Senior notes due 2024 3.500% Senior notes due 2026 3.800% Senior notes due 2029 4.650% Senior notes due 2044 4.500% Senior notes due 2049 | All notes and debentures issued by TTC HoldCo and TTC | ||||||
| Trane Technologies HoldCo Inc. (TTC HoldCo) | 4.250% Senior notes due 2023 3.750% Senior notes due 2028 5.750% Senior notes due 2043 4.300% Senior notes due 2048 | All notes issued by TTFL | ||||||
| Trane Technologies Company LLC (TTC) | 7.200% Debentures due 2022-2025 6.480% Debentures due 2025 Puttable debentures due 2027-2028 | All notes issued by TTFL and TTC HoldCo |
Each subsidiary debt issuer and guarantor is owned 100% directly or indirectly by the Parent Company. Each guarantee is full and unconditional, and provided on a joint and several basis. There are no significant restrictions of the Parent Company, or any guarantor, to obtain funds from its subsidiaries, such as provisions in debt agreements that prohibit dividend payments, loans or advances to the Parent Company by a subsidiary. The following tables present summarized financial information for the Parent Company and subsidiary debt issuers and guarantors on a combined basis (together, "obligor group") after elimination of intercompany transactions and balances based on the Company’s legal entity ownerships and guarantees outstanding at June 30, 2022. Our obligor groups as of June 30, 2022 were as follows: obligor group 1 consists of Plc, TT Holdings, TT International, TT Global, TTFL, TTC HoldCo and TTC; obligor group 2 consists of Plc, TTFL and TTC.
Summarized Statements of Earnings
| Six months ended June 30, 2022 | |||||||||||
| In millions | Obligor group 1 | Obligor group 2 | |||||||||
| Net revenues | $ | — | $ | — | |||||||
| Gross profit (loss) | — | — | |||||||||
| Intercompany interest and fees | (22.6) | 99.8 | |||||||||
| Earnings (loss) from continuing operations | (157.7) | 6.6 | |||||||||
| Discontinued operations, net of tax | (8.9) | (9.6) | |||||||||
| Net earnings (loss) | (166.6) | (3.0) | |||||||||
| Less: Net earnings attributable to noncontrolling interests | — | — | |||||||||
| Net earnings (loss) attributable to Trane Technologies plc | $ | (166.6) | $ | (3.0) |
Summarized Balance Sheets
| June 30, 2022 | |||||||||||
| In millions | Obligor group 1 | Obligor group 2 | |||||||||
| ASSETS | |||||||||||
| Intercompany receivables | $ | 120.5 | $ | 574.1 | |||||||
| Current assets | 610.2 | 1,047.2 | |||||||||
| Intercompany notes receivable | 1,831.9 | 5,531.6 | |||||||||
| Noncurrent assets | 2,627.2 | 6,090.0 | |||||||||
| LIABILITIES | |||||||||||
| Intercompany payables | 4,876.8 | 3,117.4 | |||||||||
| Current liabilities | 6,639.6 | 4,073.8 | |||||||||
| Intercompany notes payable | 2,400.0 | 2,400.0 | |||||||||
| Noncurrent liabilities | 6,841.0 | 5,493.6 |
| December 31, 2021 | |||||||||||
| In millions | Obligor group 1 | Obligor group 2 | |||||||||
| ASSETS | |||||||||||
| Intercompany receivables | $ | 128.9 | $ | 494.0 | |||||||
| Current assets | 1,348.3 | 1,623.4 | |||||||||
| Intercompany notes receivable | 1,831.9 | 5,531.6 | |||||||||
| Noncurrent assets | 2,662.9 | 6,135.7 | |||||||||
| LIABILITIES | |||||||||||
| Intercompany payables | 4,160.1 | 2,452.0 | |||||||||
| Current liabilities | 5,045.6 | 3,288.8 | |||||||||
| Intercompany notes payable | 2,400.7 | 2,400.7 | |||||||||
| Noncurrent liabilities | 7,758.7 | 5,712.6 |
For a further discussion of Liquidity and Capital Resources, refer to the discussion under that heading herein and in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contained in our Annual Report on Form 10-K for the period ended December 31, 2021.
Commitments and Contingencies
We are 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. 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 Note 18 to the Condensed Consolidated Financial Statements, management believes that the liability which may result from these legal matters would not have a material adverse effect on our financial condition, results of operations, liquidity or cash flows.
Critical Accounting Estimates
Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with those accounting principles requires management to use judgments in making estimates and assumptions based on the relevant information available at the end of each period. These estimates and assumptions have a significant effect on reported amounts of assets and liabilities, revenue and expenses, as well as the disclosure of contingent assets and liabilities because they result primarily from the need to make estimates and assumptions on matters that are inherently uncertain. Actual results may differ from estimates.
Management believes there have been no significant changes during the six months ended June 30, 2022, to the items that we disclosed as our critical accounting estimates in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021.
Recent Accounting Pronouncements
See Note 2 to the Condensed Consolidated Financial Statements for a discussion of recent accounting pronouncements.
Safe Harbor Statement
Certain statements in this report, other than purely historical information, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “forecast,” “outlook,” “intend,” “strategy,” “plan,” “may,” “could,” “should,” “will,” “would,” “will be,” “will continue,” “will likely result,” or the negative thereof or variations thereon or similar terminology generally intended to identify forward-looking statements.
Forward-looking statements may relate to such matters as projections of revenue, margins, expenses, tax provisions, earnings, cash flows, benefit obligations, share or debt repurchases or other financial items; any statements of the plans, strategies and objectives of management for future operations, including those relating to any statements concerning expected development, performance or market share relating to our products and services; any statements regarding future economic conditions or our performance including our future performance statements related to the continued impact of the COVID-19 global pandemic; any statements regarding our sustainability commitments; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. These statements are based on currently available information and our current assumptions, expectations and projections about future events. While we believe that our assumptions, expectations and projections are reasonable in view of the currently available information, you are cautioned not to place undue reliance on our forward-looking statements. You are advised to review any further disclosures we make on related subjects in materials we file with or furnish to the SEC. Forward-looking statements speak only as of the date they are made and are not guarantees of future performance. They are subject to future events, risks and uncertainties - many of which are beyond our control - as well as potentially inaccurate assumptions, that could cause actual results to differ materially from our expectations and projections. We do not undertake to update any forward-looking statements.
Factors that might affect our forward-looking statements include, among other things:
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impacts of the COVID-19 global pandemic on our business operations, financial results and financial position and on the world economy;
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overall economic, political and business conditions in the markets in which we operate including recessions, economic downturns, price instability, slowing economic growth and social and political instability;
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commodity shortages, supply chain risks and price increases;
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national and international conflict, including war, civil disturbances and terrorist acts;
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trade protection measures such as import or export restrictions and requirements, the imposition of tariffs and quotas or revocation or material modification of trade agreements;
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competitive factors in the industries in which we compete;
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the development, commercialization and acceptance of new and enhanced products and services;
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other capital market conditions, including availability of funding sources, interest rate fluctuations and other changes in borrowing costs;
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currency exchange rate fluctuations, exchange controls and currency devaluations;
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the outcome of any litigation, governmental investigations, claims or proceedings;
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risks and uncertainties associated with the Chapter 11 proceedings for our deconsolidated subsidiaries Aldrich and Murray;
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the impact of potential information technology system failures, vulnerabilities, data security breaches or other cybersecurity issues;
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evolving data privacy and protection laws;
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intellectual property infringement claims and the inability to protect our intellectual property rights;
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changes in laws and regulations;
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health epidemics or pandemics or other contagious outbreaks;
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climate change, changes in weather patterns, natural disasters and seasonal fluctuations;
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the outcome of any tax audits or settlements;
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the strategic acquisition or divestiture of businesses, product lines and joint ventures;
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impairment of our goodwill, indefinite-lived intangible assets and/or our long-lived assets;
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changes in tax laws and requirements (including tax rate changes, new tax laws, new and/or revised tax law interpretations and any legislation that may limit or eliminate potential tax benefits resulting from our incorporation in a non-U.S. jurisdiction, such as Ireland); and
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work stoppages, union negotiations, labor disputes and similar issues
Some of the significant risks and uncertainties that could cause actual results to differ materially from our expectations and projections are described more fully in the “Risk Factors” section in this Quarterly Report on Form 10-Q, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and as further updated by the risk factors contained in our Form 10-Q for the period ended March 31, 2022. There may also be other factors that have not been anticipated or that are not described in our periodic filings with the SEC, generally because we did not believe them to be significant at the time, which could cause results to differ materially from our expectations.
Available Information
We have used, and intend to continue to use, the homepage, the investor relations and the “News” section of our website (www.tranetechnologies.com), among other sources such as press releases, public conference calls and webcasts, as a means of disclosing additional information, which may include future developments regarding the Company and/or material non-public information. We encourage investors, the media, and others interested in our Company to review the information it makes public in these locations on its website.
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