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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, 2024, 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 continue to progress our ambitious 2030 Sustainability Commitments, including our Gigaton Challenge to reduce customers' carbon emissions by a billion metric tons through sustainable products and services. We are also Leading by Example as we work toward carbon-neutral operations, zero waste-to-landfill and net positive water use in water-stressed locations. We also committed to reducing embodied carbon in our products by 40%, while also designing products for circularity. Our 2030 emissions reduction targets have been validated by the Science Based Targets Initiative (SBTi), and we are one of very few companies worldwide with validated 2050 net-zero targets. Finally, our Opportunity for All commitment focuses on investing in our people and our uplifting and inclusive culture, and broadening access to Science, Technology, Engineering and Math (STEM) education and careers in our communities.
Recent Acquisitions
On January 2, 2025, we completed the acquisition of BrainBox AI Inc., a building management platform for HVAC optimization, using advanced artificial intelligence technologies. The results of the acquisition are reported within the Americas segment and are included in our consolidated financial statements from the date of the acquisition.
In the first half of 2025, we also acquired multiple distributors with sales and service businesses in Europe that are reported in the EMEA segment from the dates of acquisition.
Significant Matters
Reorganization of Aldrich and Murray
See the discussion in Note 18, "Commitments and Contingencies," 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 geopolitical, environmental and social factors wherever we operate or do business. Our geographic diversity and the breadth of our products 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 the 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 serve to proactively detect trends and to adapt our strategies accordingly, including potential triggers and actions to be taken under recessionary and other macroeconomic scenarios. In addition, we believe our backlog and order levels are indicative of future revenue and thus are a key measure of anticipated performance.
Conditions remain mixed across our served end markets and geographies. Overall Commercial HVAC markets in Americas and EMEA remain strong due to demand for our differentiated customer driven solutions and the benefits of installing energy efficient products and decarbonizing the built environment. In Asia, markets remain dynamic with mixed macro-economic conditions across the region. Transport refrigeration markets continue to experience weaker demand, particularly in the United States. Residential markets have weakened considerably throughout 2025 due to navigating a regulatory refrigerant transition, softer consumer demand and elevated channel inventory, while uncertainties remain from economic risks and higher interest rates.
Our performance may be impacted by future developments that are uncertain. Geopolitical risks and macroeconomic developments, including changes in global trade policies, tariffs and other measures could cause disruptions to operations, supply chains, end markets, financial markets and overall economic conditions which could negatively impact our business.
We continue to monitor macroeconomic indicators and uncertainties resulting from the tariffs announced and implemented by the United States in 2025, as well as the tariffs imposed by other countries in response. These global trade policy changes continue to be dynamic, and as a result, we may experience supply chain challenges, commodity cost volatility, and consumer and economic uncertainty. We believe our business operating system, our in-region for region strategy, and strength in execution will enable us to navigate potential risks stemming from these recent events.
We believe we have a solid foundation of global brands that are highly differentiated in all of our major product lines. Our geographic mix, our diverse portfolio, and our large installed product base, provide growth opportunities from replacement demand and within our service revenue streams. Additionally, we are investing substantial resources to innovate and develop new products and services which we expect to drive future growth.
Results of Operations
Non-GAAP Financial Measures
Organic Revenue
We define organic revenue as net revenues adjusted for the impact of currency, acquisitions and divestitures. Organic revenue is not defined under U.S. Generally Accepted Accounting Principles (GAAP) and may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for revenue as determined in accordance with GAAP. Selected references are made to revenue growth on an organic basis so that certain financial results can be viewed without the impacts of fluctuations in foreign currency rates and acquisitions, thereby providing comparisons of operating performance from period to period of the business that we have owned during both periods presented. We believe organic revenue growth provides investors with useful supplemental information about our revenues in both periods presented.
Segment Adjusted EBITDA
We define Segment Adjusted EBITDA as net earnings excluding interest expense, income taxes, depreciation and amortization, restructuring, non-cash adjustments for contingent consideration, merger and acquisition transaction costs, unallocated corporate expenses, discontinued operations and other non-recurring items. Segment Adjusted EBITDA, and ratios based on it, are used in the development of annual operating plans, including capital expenditure and operational budgets, and in measuring performance against targets for purposes of incentive compensation. Segment Adjusted EBITDA also provides a useful tool for assessing the operating performance and comparability between periods and our ability to generate cash because it excludes the impact of certain non-cash or non-recurring items that can vary significantly from period to period. 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 as determined in accordance with GAAP.
Segment Adjusted Operating Income
We define Segment Adjusted Operating Income as operating income adjusted to exclude restructuring costs, merger and acquisition transaction costs, non-cash adjustments for contingent consideration and other non-recurring items. Segment Adjusted Operating Income, and ratios based on it, are used to provide a comprehensive view of segment profitability and evaluate efficient returns on assets. Segment Adjusted Operating Income also provides a useful tool for assessing the comparability between periods because it eliminates non-recurring items that can vary from period to period. Segment Adjusted Operating Income 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 as determined in accordance with GAAP.
Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024 - Consolidated Results
| Dollar amounts in millions | 2025 | 2024 | Period Change | 2025 % of revenues | 2024 % of revenues | ||||||||||||||||||||||||
| Net revenues | $ | 5,742.5 | $ | 5,441.2 | $ | 301.3 | |||||||||||||||||||||||
| Cost of goods sold | (3,624.3) | (3,466.8) | (157.5) | 63.1 | % | 63.7 | % | ||||||||||||||||||||||
| Gross profit | 2,118.2 | 1,974.4 | 143.8 | 36.9 | % | 36.3 | % | ||||||||||||||||||||||
| Selling and administrative expenses | (952.9) | (949.8) | (3.1) | 16.6 | % | 17.5 | % | ||||||||||||||||||||||
| Operating income | 1,165.3 | 1,024.6 | 140.7 | 20.3 | % | 18.8 | % | ||||||||||||||||||||||
| Interest expense | (55.6) | (63.0) | 7.4 | ||||||||||||||||||||||||||
| Other income/(expense), net | (18.0) | 6.3 | (24.3) | ||||||||||||||||||||||||||
| Earnings before income taxes | 1,091.7 | 967.9 | 123.8 | ||||||||||||||||||||||||||
| Provision for income taxes | (231.5) | (181.1) | (50.4) | ||||||||||||||||||||||||||
| Earnings from continuing operations | 860.2 | 786.8 | 73.4 | ||||||||||||||||||||||||||
| Discontinued operations, net of tax | (9.4) | (8.9) | (0.5) | ||||||||||||||||||||||||||
| Net earnings | $ | 850.8 | $ | 777.9 | $ | 72.9 |
Net Revenues
Net revenues for the three months ended September 30, 2025 increased by 5.5%, or $301.3 million, compared with the same period in 2024, which resulted from the following:
| Volume | 0.7 | % | |||
| Pricing | 3.3 | % | |||
| Organic revenue (1) | 4.0 | % | |||
| Acquisitions | 0.9 | % | |||
| Currency translation | 0.6 | % | |||
| Total | 5.5 | % |
(1) Represents a non-GAAP measure. For more information, see "Non-GAAP Financial Measures."
The increase in Net revenues was primarily driven by realization of price increases, higher volumes within our EMEA and Asia segments, and incremental revenue from acquisitions. 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 September 30, 2025 increased 60 basis points to 36.9% compared to 36.3% for the same period of 2024 primarily due to gross productivity and price realization, partially offset by inflation.
Selling and Administrative Expenses
Selling and administrative expenses for the three months ended September 30, 2025 increased by 0.3%, or $3.1 million, compared with the same period of 2024.
Provision for Income Taxes
For the three months ended September 30, 2025 and September 30, 2024 our effective tax rate was 21.2% and 18.7%, respectively. The effective tax rate for the three months ended September 30, 2025 was slightly higher than the U.S. statutory rate of 21.0% primarily due to U.S. state and local taxes and the effects related to the enactment of OBBBA, offset by a discrete tax benefit associated with the filing of the U.S. federal income tax return, and earnings in non-U.S. jurisdictions, which in aggregate, have a lower effective tax rate. The effective tax rate for the three months ended September 30, 2024 was lower than the U.S. statutory rate of 21.0% primarily due to excess tax benefits from employee share-based payments, a discrete tax benefit related to the filing of the U.S. federal income tax return, and earnings in non-U.S. jurisdictions, which in aggregate, have a lower effective tax rate.
Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024 - Segment Results
We operate under three reportable segments designed to create deep customer focus and relevance in markets around the world. Intercompany sales between segments are immaterial.
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Our Americas segment innovates for customers in North America and Latin America. The Americas segment encompasses commercial heating, cooling and ventilation systems, building controls and solutions, 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, cooling and ventilation 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, cooling and ventilation systems, services and solutions for commercial buildings and transport refrigeration systems and solutions.
The following discussion compares our results for each of our three reportable segments for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.
| In millions | 2025 | 2024 | % change | ||||||||||||||
| Americas | |||||||||||||||||
| Net revenues | $ | 4,663.3 | $ | 4,474.9 | 4.2 | % | |||||||||||
| Segment Adjusted EBITDA | 1,077.4 | 993.9 | 8.4 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 23.1 | % | 22.2 | % | |||||||||||||
| EMEA | |||||||||||||||||
| Net revenues | $ | 749.6 | $ | 667.8 | 12.2 | % | |||||||||||
| Segment Adjusted EBITDA | 157.4 | 144.3 | 9.1 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 21.0 | % | 21.6 | % | |||||||||||||
| Asia Pacific | |||||||||||||||||
| Net revenues | $ | 329.6 | $ | 298.5 | 10.4 | % | |||||||||||
| Segment Adjusted EBITDA | 76.8 | 62.7 | 22.5 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 23.3 | % | 21.0 | % | |||||||||||||
| Total Net revenues | $ | 5,742.5 | $ | 5,441.2 | 5.5 | % | |||||||||||
| Total Segment Adjusted EBITDA | 1,311.6 | 1,200.9 | 9.2 | % | |||||||||||||
| Total Segment Adjusted EBITDA as a percentage of net revenues | 22.8 | % | 22.1 | % |
Americas
Net revenues for the three months ended September 30, 2025 increased by 4.2% or $188.4 million, compared with the same period of 2024.
The components of the period change were as follows:
| Volume | (0.3) | % | |||
| Pricing | 4.0 | % | |||
| Organic revenue (1) | 3.7 | % | |||
| Acquisitions | 0.6 | % | |||
| Currency translation | (0.1) | % | |||
| Total | 4.2 | % |
The increase in organic revenue was primarily driven by realization of price increases. Stronger volumes in our Commercial HVAC business were offset by weaker volumes in our Residential business.
The increase in revenue from acquisitions primarily relates to a channel acquisition completed in the third quarter of 2024 and acquisitions completed in the first quarter of 2025.
Segment Adjusted EBITDA margin for the three months ended September 30, 2025 increased by 90 basis points to 23.1% compared to 22.2% for the same period in 2024 primarily due to price realization and gross productivity, partially offset by inflation and continued business reinvestment.
EMEA
Net revenues for the three months ended September 30, 2025 increased by 12.2% or $81.8 million, compared with the same period of 2024.
The components of the period change were as follows:
| Volume | 3.4 | % | |||
| Pricing | — | % | |||
| Organic revenue (1) | 3.4 | % | |||
| Acquisitions | 3.4 | % | |||
| Currency translation | 5.4 | % | |||
| Total | 12.2 | % |
The increase in organic revenue was driven by higher volumes within our Commercial HVAC and Transport refrigeration businesses.
The increase in revenue from acquisitions primarily relates to acquisitions completed in the first half of 2025.
Segment Adjusted EBITDA margin for the three months ended September 30, 2025 decreased by 60 basis points to 21.0% compared to 21.6% for the same period of 2024, primarily due to integration costs related to acquisitions, continued business reinvestment and inflation, partially offset by favorable productivity and higher volume.
Asia Pacific
Net revenues for the three months ended September 30, 2025 increased by 10.4% or $31.1 million, compared with the same period of 2024.
The components of the period change were as follows:
| Volume | 8.4 | % | |||
| Pricing | 0.9 | % | |||
| Organic revenue (1) | 9.3 | % | |||
| Currency translation | 1.1 | % | |||
| Total | 10.4 | % |
The increase in organic revenue was primarily driven by higher volumes in our Commercial HVAC business.
Segment Adjusted EBITDA margin for the three months ended September 30, 2025 increased by 230 basis points to 23.3% compared to 21.0% for the same period of 2024 primarily due to gross productivity and higher volumes, partially offset by inflation and continued business reinvestment.
Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024 - Consolidated Results
| Dollar amounts in millions | 2025 | 2024 | Period Change | 2025 % of revenues | 2024 % of revenues | ||||||||||||||||||||||||
| Net revenues | $ | 16,177.4 | $ | 14,964.2 | $ | 1,213.2 | |||||||||||||||||||||||
| Cost of goods sold | (10,221.1) | (9,594.5) | (626.6) | 63.2 | % | 64.1 | % | ||||||||||||||||||||||
| Gross profit | 5,956.3 | 5,369.7 | 586.6 | 36.8 | % | 35.9 | % | ||||||||||||||||||||||
| Selling and administrative expenses | (2,807.9) | (2,677.2) | (130.7) | 17.3 | % | 17.9 | % | ||||||||||||||||||||||
| Operating income | 3,148.4 | 2,692.5 | 455.9 | 19.5 | % | 18.0 | % | ||||||||||||||||||||||
| Interest expense | (171.1) | (178.5) | 7.4 | ||||||||||||||||||||||||||
| Other income/(expense), net | (40.0) | (22.8) | (17.2) | ||||||||||||||||||||||||||
| Earnings before income taxes | 2,937.3 | 2,491.2 | 446.1 | ||||||||||||||||||||||||||
| Provision for income taxes | (583.1) | (492.3) | (90.8) | ||||||||||||||||||||||||||
| Earnings from continuing operations | 2,354.2 | 1,998.9 | 355.3 | ||||||||||||||||||||||||||
| Discontinued operations, net of tax | (15.4) | (21.3) | 5.9 | ||||||||||||||||||||||||||
| Net earnings | $ | 2,338.8 | $ | 1,977.6 | $ | 361.2 |
Net Revenues
Net revenues for the nine months ended September 30, 2025 increased by 8.1%, or $1,213.2 million, compared with the same period in 2024, which resulted from the following:
| Volume | 3.6 | % | |||
| Pricing | 3.3 | % | |||
| Organic revenue (1) | 6.9 | % | |||
| Acquisitions | 1.0 | % | |||
| Currency translation | 0.2 | % | |||
| Total | 8.1 | % |
(1) Represents a non-GAAP measure. For more information, see "Non-GAAP Financial Measures."
The increase in Net revenues was primarily driven by higher volumes as a result of stronger end-customer demand within our Americas and EMEA segments, realization of price increases and incremental revenue from acquisitions. Refer to the "Results by Segment" below for a discussion of Net revenues by segment.
Gross Profit Margin
Gross profit margin for the nine months ended September 30, 2025 increased 90 basis points to 36.8% compared to 35.9% for the same period of 2024 primarily due to gross productivity and price realization, partially offset by inflation.
Selling and Administrative Expenses
Selling and administrative expenses for the nine months ended September 30, 2025 increased by 4.9%, or $130.7 million, compared with the same period of 2024. The increase in Selling and administrative expenses was primarily driven by an increase in human capital costs related to investing in our people, higher sales commissions, incremental selling and administrative expenses of acquired businesses and higher levels of business reinvestment. Additionally, a non-cash adjustment to contingent consideration reduced Selling and administrative expenses for the nine months ended September 30, 2025 by $61.2 million. Selling and administrative expenses as a percentage of Net revenues for the nine months ended September 30, 2025 decreased 60 basis points from 17.9% to 17.3%. Excluding the effect of the contingent consideration adjustment, Selling and administrative expenses were 17.7% of Net revenues for the nine months ended September 30, 2025.
Provision for Income Taxes
For the nine months ended September 30, 2025 and September 30, 2024 our effective tax rate was 19.9% and 19.8%, respectively. The effective tax rate for the nine months ended September 30, 2025 and 2024 was lower than the U.S. statutory rate of 21.0% 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.
Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024 - Segment Results
The following discussion compares our results for each of our three reportable segments for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.
| In millions | 2025 | 2024 | % change | ||||||||||||||
| Americas | |||||||||||||||||
| Net revenues | $ | 13,156.3 | $ | 12,100.7 | 8.7 | % | |||||||||||
| Segment Adjusted EBITDA | 2,956.1 | 2,576.9 | 14.7 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 22.5 | % | 21.3 | % | |||||||||||||
| EMEA | |||||||||||||||||
| Net revenues | $ | 2,031.0 | $ | 1,866.5 | 8.8 | % | |||||||||||
| Segment Adjusted EBITDA | 378.8 | 374.7 | 1.1 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 18.7 | % | 20.1 | % | |||||||||||||
| Asia Pacific | |||||||||||||||||
| Net revenues | $ | 990.1 | $ | 997.0 | (0.7) | % | |||||||||||
| Segment Adjusted EBITDA | 228.6 | 228.4 | 0.1 | % | |||||||||||||
| Segment Adjusted EBITDA as a percentage of net revenues | 23.1 | % | 22.9 | % | |||||||||||||
| Total Net revenues | $ | 16,177.4 | $ | 14,964.2 | 8.1 | % | |||||||||||
| Total Segment Adjusted EBITDA | 3,563.5 | 3,180.0 | 12.1 | % | |||||||||||||
| Total Segment Adjusted EBITDA as a percentage of net revenues | 22.0 | % | 21.3 | % |
Americas
Net revenues for the nine months ended September 30, 2025 increased by 8.7% or $1,055.6 million, compared with the same period of 2024.
The components of the period change were as follows:
| Volume | 3.9 | % | |||
| Pricing | 4.2 | % | |||
| Organic revenue (1) | 8.1 | % | |||
| Acquisitions | 0.8 | % | |||
| Currency translation | (0.2) | % | |||
| Total | 8.7 | % |
The increase in organic revenues was primarily driven by realization of price increases and higher volumes led by strong demand within our Commercial HVAC business, which was partially offset by weaker volume in our Residential business.
The increase in revenue from acquisitions primarily relates to a channel acquisition completed in the third quarter of 2024 and acquisitions completed in the first quarter of 2025.
Segment Adjusted EBITDA margin for the nine months ended September 30, 2025 increased by 120 basis points to 22.5% compared to 21.3% for the same period in 2024 primarily due to price realization and gross productivity, partially offset by inflation and continued business reinvestment.
EMEA
Net revenues for the nine months ended September 30, 2025 increased by 8.8% or $164.5 million, compared with the same period of 2024.
The components of the period change were as follows:
| Volume | 4.3 | % | |||
| Pricing | (0.4) | % | |||
| Organic revenue (1) | 3.9 | % | |||
| Acquisitions | 2.3 | % | |||
| Currency translation | 2.6 | % | |||
| Total | 8.8 | % |
The increase in organic revenues was driven by higher volumes within our Commercial HVAC and Transport refrigeration businesses.
The increase in revenue from acquisitions primarily relates to acquisitions completed in the first half of 2025.
Segment Adjusted EBITDA margin for the nine months ended September 30, 2025 decreased by 140 basis points to 18.7% compared to 20.1% for the same period of 2024 primarily due to integration costs related to acquisitions, continued business reinvestment and inflation, partially offset by favorable productivity and higher volume.
Asia Pacific
Net revenues for the nine months ended September 30, 2025 decreased by 0.7% or $6.9 million, compared with the same period of 2024.
The components of the period change were as follows:
| Volume | (1.6) | % | |||
| Pricing | 0.4 | % | |||
| Organic revenue (1) | (1.2) | % | |||
| Currency translation | 0.5 | % | |||
| Total | (0.7) | % |
The decrease in organic revenues was primarily driven by lower volumes in China, partially offset by higher volumes in the rest of Asia.
Segment Adjusted EBITDA margin for the nine months ended September 30, 2025 increased by 20 basis points to 23.1% compared to 22.9% for the same period of 2024 primarily due to gross productivity, partially offset by lower volumes, inflation and continued business reinvestment.
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 flows 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 we had no outstanding balance as of September 30, 2025.
As of September 30, 2025, we had $1,125.8 million of cash and cash equivalents on hand, of which $984.8 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 September 30, 2025, we currently have no plans to repatriate funds from subsidiaries for which we assert permanent reinvestment.
Share repurchases are made in accordance with our balanced capital allocation strategy, subject to market conditions and regulatory requirements. In February 2022, our Board of Directors authorized the repurchase of up to $3.0 billion of our ordinary shares (2022 Authorization) and in December 2024, our Board of Directors authorized the repurchase of up to an additional $5.0 billion of our ordinary shares (2024 Authorization) upon the conclusion of the 2022 Authorization. During the nine months ended September 30, 2025, we repurchased and canceled $1.2 billion of our ordinary shares, which exhausted the 2022 Authorization and left $5.0 billion remaining under the 2024 Authorization. Additionally, during the period after September 30, 2025 through October 30, 2025, we repurchased approximately $120 million of our ordinary shares under the 2024 Authorization.
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 77%, from $0.53 to $0.94 per ordinary share, or $2.12 to $3.76 per share annualized. The first, second, and third quarter 2025 dividends were declared and paid during the nine months ended September 30, 2025.
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. Each year, we make investments in new product development and new technology innovation as they are key factors in achieving our strategic objectives as a leader in the climate sector. In addition, we make investments in technology and business for our operational sustainability programs. Our research and development and sustaining costs account for approximately two percent of annual Net revenues.
In pursuing our business strategy, we routinely conduct discussions, evaluate targets and enter into agreements regarding possible acquisitions, divestitures, joint ventures and equity investments. We have acquired several businesses, entered into joint ventures and invested in companies that complement existing products and services further enhancing our product portfolio. We paid approximately $277 million in cash for acquisitions completed during the nine months ended September 30, 2025.
We incur 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. We believe that our existing cash balances, anticipated cash flow from operations, 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 (the Section 524(g) Trust), 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 qualified settlement fund (QSF). The funds held in the QSF would be available to provide funding for the Section 524(g) Trust upon effectiveness of the agreed-to plan of reorganization. On January 27, 2022, the Bankruptcy Court granted the request to fund the QSF, which was funded on March 2, 2022.
Liquidity
The following table contains several key measures of our financial condition and liquidity at the period ended:
| In millions | September 30, 2025 | December 31, 2024 | |||||||||
| Cash and cash equivalents | $ | 1,125.8 | $ | 1,590.1 | |||||||
| Short-term borrowings and current maturities of long-term debt | 694.7 | 452.2 | |||||||||
| Long-term debt | 3,921.2 | 4,318.1 | |||||||||
| Total debt | 4,615.9 | 4,770.3 | |||||||||
| Total Trane Technologies plc shareholders' equity | 8,326.3 | 7,457.4 | |||||||||
| Total equity | 8,346.3 | 7,486.9 | |||||||||
| Debt-to-total capital ratio | 35.6 | % | 38.9 | % |
Debt and Credit Facilities
As of September 30, 2025, our short-term obligations of $694.7 million primarily consist of current maturities of $399.7 million that mature in March 2026 and $295.0 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. In accordance with notice requirements as specified in the offering documents, holders had the option to exercise puts up to $37.2 million for settlement in February 2025 but did not exercise such option. In accordance with notice requirements as specified in the offering documents, holders had the option to elect to exercise puts up to $257.8 million for settlement in November 2025. As of October 30, 2025, no material amount of puts were elected to be exercised. 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 commercial paper outstanding at September 30, 2025 and December 31, 2024. See Note 6, "Debt and Credit Facilities," 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 2027 and 2049. In addition, we maintain two $1.0 billion senior unsecured revolving credit facilities, one of which matures in April 2027 and the other which matures in May 2030. 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 September 30, 2025 and December 31, 2024. See Note 6, "Debt and Credit Facilities," 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 nine months ended September 30. For additional details, see the Condensed Consolidated Statements of Cash Flows in the Condensed Consolidated Financial Statements.
| In millions | 2025 | 2024 | |||||||||
| Net cash provided by (used in) continuing operating activities | $ | 2,054.1 | $ | 2,272.2 | |||||||
| Net cash provided by (used in) continuing investing activities | (554.6) | (886.6) | |||||||||
| Net cash provided by (used in) continuing financing activities | (2,057.1) | (990.2) |
Operating Activities
Net cash provided by continuing operating activities for the nine months ended September 30, 2025 was $2,054.1 million, of which Net earnings provided $2,626.1 million after adjusting for non-cash transactions. Net cash provided by continuing operating activities for the nine months ended September 30, 2024 was $2,272.2 million, of which Net earnings provided $2,342.3 million after adjusting for non-cash transactions. The year-over-year decrease in net cash from continuing operating activities was primarily due to increases in inventory and other changes in net working capital.
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, funding of joint ventures and other equity investments. During the nine months ended September 30, 2025, net cash used in investing activities from continuing operations was $554.6 million. The primary drivers of the usage were attributable to capital expenditures of $277.2 million and acquisitions of businesses of $276.0 million, net of cash acquired. During the nine months ended September 30, 2024, net cash used in investing activities from continuing operations was $886.6 million. The primary drivers of the usage were attributable to purchases of short-term investments of $450.0 million as a result of the issuance of 5.100% Senior Notes due 2034, capital expenditures of $245.0 million, and acquisitions of businesses of $179.6 million, net of cash acquired.
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, net proceeds from debt issuances and proceeds from shares issued in connection with incentive plans. During the nine months ended September 30, 2025, net cash used in financing activities from continuing operations was $2,057.1 million. The primary drivers of the outflow related to the repurchase of $1,250.0 million in ordinary shares, dividends paid to ordinary shareholders of $629.1 million, and the repayment of $157.3 million of Debentures that matured in June 2025. During the nine months ended September 30, 2024, net cash used in financing activities from continuing operations was $990.2 million. The primary drivers of the outflow related to the repurchase of $926.1 million in ordinary shares and dividends paid to ordinary shareholders of $568.8 million, partially offset by proceeds from the issuance of 5.100% Senior Notes due 2034 during the period of $498.5 million, which were used to purchase short-term investments of $450.0 million.
Free Cash Flow
Free cash flow is a non-GAAP measure and defined as Net cash provided by (used in) continuing operating activities adjusted for capital expenditures, cash payments for restructuring, legacy legal liability, and merger and acquisition (M&A) transaction costs. 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 nine months ended September 30 is as follows:
| In millions | 2025 | 2024 | |||||||||
| Net cash provided by continuing operating activities | $ | 2,054.1 | $ | 2,272.2 | |||||||
| Capital expenditures | (277.2) | (245.0) | |||||||||
| Cash payments for restructuring | 3.2 | 7.2 | |||||||||
| Legacy legal liability | 0.6 | 2.2 | |||||||||
| M&A transaction costs | 5.3 | 0.9 | |||||||||
| Free cash flow (1) | $ | 1,786.0 | $ | 2,037.5 |
(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 to increase fixed income assets as the plan's funded status improves. We monitor plan funded status and asset allocation regularly in addition to investment manager performance.
In addition, 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 $33 million to our pension plans worldwide in 2025. See Note 9, "Pensions and Postretirement Benefits Other Than Pensions," to the Condensed Consolidated Financial Statements for additional information regarding pensions.
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 September 30, 2025:
| 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 Global Holding II Company (TT Global II) | 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 Americas Holding Corporation (TT Americas) | None | All notes issued by TTFL and TTC HoldCo | ||||||
| Trane Technologies Financing Limited (TTFL) | 3.500% Senior Notes due 2026 3.800% Senior Notes due 2029 5.250% Senior Notes due 2033 5.100% Senior Notes due 2034 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) | 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) | 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 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 September 30, 2025. Our obligor groups as of September 30, 2025 were as follows: Obligor group 1 consists of Plc, TT Holdings, TT Global II, TT International, TT Americas, TTFL, TTC HoldCo and TTC; Obligor group 2 consists of Plc, TTFL and TTC.
Summarized Statements of Earnings
| Nine months ended September 30, 2025 | |||||||||||
| In millions | Obligor group 1 | Obligor group 2 | |||||||||
| Net revenues | $ | — | $ | — | |||||||
| Gross profit (loss) | — | — | |||||||||
| Intercompany interest and fees | 2,191.0 | 3,055.1 | |||||||||
| Earnings (loss) from continuing operations | 1,939.2 | 2,740.3 | |||||||||
| Discontinued operations, net of tax | (25.3) | (23.6) | |||||||||
| Net earnings (loss) | 1,913.9 | 2,716.7 | |||||||||
| Less: Net earnings attributable to noncontrolling interests | — | — | |||||||||
| Net earnings (loss) attributable to Trane Technologies plc | $ | 1,913.9 | $ | 2,716.7 |
Summarized Balance Sheets
| September 30, 2025 | |||||||||||
| In millions | Obligor group 1 | Obligor group 2 | |||||||||
| ASSETS | |||||||||||
| Intercompany receivables | $ | 503.6 | $ | 1,372.1 | |||||||
| Current assets | 644.3 | 1,481.2 | |||||||||
| Intercompany notes receivable | 500.0 | 4,900.0 | |||||||||
| Noncurrent assets | 1,005.3 | 5,295.5 | |||||||||
| LIABILITIES | |||||||||||
| Intercompany payables | 6,557.3 | 2,614.2 | |||||||||
| Current liabilities | 7,627.5 | 3,662.0 | |||||||||
| Intercompany notes payable | 4,000.0 | 4,000.0 | |||||||||
| Noncurrent liabilities | 8,394.7 | 7,030.7 |
| December 31, 2024 | |||||||||||
| In millions | Obligor group 1 | Obligor group 2 | |||||||||
| ASSETS | |||||||||||
| Intercompany receivables | $ | 265.6 | $ | 4,363.2 | |||||||
| Current assets | 413.8 | 4,469.0 | |||||||||
| Intercompany notes receivable | 500.0 | 4,900.0 | |||||||||
| Noncurrent assets | 1,320.0 | 5,603.5 | |||||||||
| LIABILITIES | |||||||||||
| Intercompany payables | 5,290.2 | 2,530.3 | |||||||||
| Current liabilities | 6,305.0 | 3,490.0 | |||||||||
| Intercompany notes payable | 4,000.0 | 4,000.0 | |||||||||
| Noncurrent liabilities | 9,014.6 | 7,650.2 |
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, 2024.
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, "Commitments and Contingencies," 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 judgment 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 these estimates. If updated information or actual amounts are different from previous estimates, the revisions are included in our results for the period in which they become known.
Management believes there have been no significant changes during the nine months ended September 30, 2025, 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, 2024.
Recent Accounting Pronouncements
See Note 2, "Recent Accounting Pronouncements," 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," "might," "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; any statements regarding our sustainability and Environmental, Social, and Governance (ESG) commitments; any statements regarding pending litigation 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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overall economic, political and business conditions in the markets in which we operate including recessions, economic downturns, price instability, slow economic growth and social and political instability;
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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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commodity and raw material shortages, supply chain risks and price increases;
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national and international conflict, including war, civil disturbances, terrorist acts, and other geopolitical hostilities and tensions;
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competitive factors in the markets in which we compete;
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the development, commercialization and acceptance of new and enhanced products and services;
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attracting and retaining talent;
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work stoppages, union negotiations, labor disputes and similar issues;
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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 asbestos-related bankruptcy 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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climate change, changes in weather patterns, natural disasters and seasonal fluctuations;
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national, regional and international regulations and policies associated with climate change and the environment;
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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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impacts of global health crises, epidemics, pandemics, or other contagious outbreaks on our business operations, financial results and financial position and on the world economy.
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 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. 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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