Trane Technologies(TT)2024-07-31 18:12Financial Performance - Net revenues for Q2 2024 increased to $5,307.4 million, up 12.8% from $4,704.7 million in Q2 2023[6] - Operating income for Q2 2024 rose to $1,034.2 million, a 16.8% increase from $885.4 million in Q2 2023[6] - Net earnings attributable to Trane Technologies plc for Q2 2024 were $755.3 million, up 28.8% from $586.2 million in Q2 2023[6] - Diluted earnings per share for Q2 2024 increased to $3.30, up 29.4% from $2.55 in Q2 2023[6] - Comprehensive income attributable to Trane Technologies plc for Q2 2024 was $723.2 million, up 33.4% from $542.1 million in Q2 2023[7] - Net earnings for the first half of 2024 reached $1,199.7 million, a significant increase from $901.8 million in 2023[16] - Net revenues for the six months ended June 30, 2024 were $9,523.0 million, up 13.8% from $8,370.6 million in the same period of 2023[51] - Total Segment Adjusted EBITDA for the six months ended June 30, 2024 was $1,979.1 million, a 23.4% increase from $1,603.2 million in 2023[66] - Earnings before income taxes for the six months ended June 30, 2024 were $1,523.3 million, a 31.7% increase from $1,156.2 million in 2023[67] - Gross profit margin improved by 280 basis points to 36.5% in Q2 2024, primarily due to gross productivity and price realization, partially offset by inflation[94] - Selling and administrative expenses increased by 28.9% to $901.3 million in Q2 2024, driven by higher human capital costs, sales commissions, and business reinvestment[95] - Operating income rose by 16.8% to $1.034 billion in Q2 2024, with operating margin increasing to 19.5% from 18.8% in Q2 2023[91] - Interest expense decreased by 6.7% to $57.5 million in Q2 2024 due to lower average balances of commercial paper outstanding[96] - Effective tax rate for Q2 2024 was 21.2%, consistent with the U.S. statutory rate, compared to 22.1% in Q2 2023[97] - Gross profit margin for the six months ended June 30, 2024 increased by 300 basis points to 35.6%, primarily due to gross productivity and price realization[107] - Selling and administrative expenses increased by 24.7% to $1,727.4 million, driven by higher human capital costs and business reinvestment[107] - Net cash provided by continuing operating activities for the six months ended June 30, 2024 was $958.6 million, a significant increase from $548.1 million in the same period in 2023, primarily due to higher net earnings and an improved cash conversion cycle[125] - Free cash flow for the six months ended June 30, 2024 was $810.1 million, compared to $426.9 million in the same period in 2023[130] Balance Sheet and Cash Flow - Total assets as of June 30, 2024, were $20,199.2 million, compared to $19,391.9 million as of December 31, 2023[10] - Cash and cash equivalents decreased to $874.6 million as of June 30, 2024, from $1,095.3 million as of December 31, 2023[10] - Accounts and notes receivable increased to $3,433.3 million as of June 30, 2024, from $2,956.8 million as of December 31, 2023[10] - Long-term debt increased to $4,316.2 million as of June 30, 2024, from $3,977.9 million as of December 31, 2023[10] - Total equity increased to $6,967.6 million as of June 30, 2024, compared to $6,277.2 million in the same period last year[12][13] - Net cash provided by operating activities increased to $943.1 million in the first half of 2024, compared to $532.5 million in 2023[16] - Net cash used in investing activities for the six months ended June 30, 2024 was $626.6 million, driven by $450.0 million in purchases of short-term investments and $156.7 million in capital expenditures[127] - Net cash used in financing activities for the six months ended June 30, 2024 was $504.3 million, primarily due to $624.4 million in share repurchases and $379.4 million in dividends paid, partially offset by $498.5 million from the issuance of Senior Notes[128] - Net earnings provided $1,457.5 million in cash from continuing operating activities for the six months ended June 30, 2024, after adjusting for non-cash transactions[125] - The company issued 5.100% Senior Notes due 2034, raising $498.5 million, which was used to purchase $450.0 million in short-term investments[128] - Capital expenditures for the six months ended June 30, 2024 were $156.7 million, compared to $134.0 million in the same period in 2023[127] - The company repurchased $624.4 million in ordinary shares during the six months ended June 30, 2024, compared to $300.0 million in the same period in 2023[128] - Dividends paid to ordinary shareholders for the six months ended June 30, 2024 were $379.4 million, compared to $341.4 million in the same period in 2023[128] - Total debt increased to $5,268.2 million as of June 30, 2024, with a debt-to-total capital ratio of 43.1%[121] - The company had $874.6 million in cash and cash equivalents as of June 30, 2024, with $668.1 million held by non-U.S. subsidiaries[117] Regional Performance - Americas region accounted for $7,625.8 million of net revenues in the six months ended June 30, 2024, up 16.4% year-over-year[51] - EMEA region net revenues were $1,198.7 million for the six months ended June 30, 2024, a 6.2% increase from the prior year period[51] - Asia Pacific net revenues declined 1.5% to $698.5 million in the six months ended June 30, 2024 compared to the same period in 2023[51] - Americas segment net revenues increased by 16.2% to $4,290.9 million, driven by higher volumes and price realization in Commercial and Residential HVAC businesses[100][101] - EMEA segment net revenues grew by 4.5% to $645.3 million, primarily due to higher volumes and price increases in Commercial HVAC and transport refrigeration businesses[100][103] - Asia Pacific segment net revenues decreased by 5.9% to $371.2 million, mainly due to lower volumes, partially offset by price increases in Commercial HVAC[100][104] - Americas Segment Adjusted EBITDA margin increased by 140 basis points to 22.8%, driven by price realization and higher volumes[101] - EMEA Segment Adjusted EBITDA margin increased by 120 basis points to 20.3%, primarily due to favorable productivity and price[103] - Asia Pacific Segment Adjusted EBITDA margin increased by 360 basis points to 25.5%, driven by gross productivity and price realization[104] - Americas net revenues increased by 16.4% to $7,625.8 million in 2024 compared to $6,553.5 million in 2023, driven by strong demand in Commercial and Residential HVAC businesses[111][113] - EMEA net revenues grew by 6.2% to $1,198.7 million in 2024, with organic revenue growth driven by strong customer demand in Commercial HVAC and transport refrigeration businesses[111][114] - Asia Pacific net revenues increased by 1.4% to $698.5 million in 2024, with organic revenue growth of 5.2% driven by increased customer demand and price realization in Commercial HVAC[111][116] - Americas Segment Adjusted EBITDA margin increased by 180 basis points to 20.8% in 2024, primarily due to price realization, gross productivity, and higher volumes[113] - EMEA Segment Adjusted EBITDA margin increased by 40 basis points to 19.2% in 2024, driven by favorable productivity, volume, and price[114] - Asia Pacific Segment Adjusted EBITDA margin increased by 280 basis points to 23.7% in 2024, primarily due to gross productivity, higher volumes, and price realization[116] Share Repurchases and Dividends - The company repurchased $624.4 million worth of ordinary shares in the first half of 2024, up from $300.0 million in the same period last year[16] - Dividends paid to ordinary shareholders totaled $379.4 million in the first half of 2024, compared to $341.4 million in 2023[16] - Share repurchases under the 2022 Authorization during six months ended June 30, 2024: $624 million[47] - Remaining share repurchase authorization as of June 30, 2024: $1.9 billion[47] - Additional share repurchases in July 2024 under the 2022 Authorization: $107 million[47] - Dividends declared per ordinary share for the six months ended June 30, 2024 were $2.52, compared to $2.25 for the same period in 2023[63] Debt and Financing - The company issued $500 million in 5.100% Senior Notes due 2034 in June 2024, with proceeds used to repay maturing debt and for general corporate purposes[31] - The fair value of the company's debt instruments increased to $5.1 billion as of June 30, 2024, from $4.7 billion at December 31, 2023[33] - Outstanding invoices under supplier financing arrangements increased to $264.9 million as of June 30, 2024, from $246.0 million at December 31, 2023[34] - The company maintains two $1.0 billion senior unsecured revolving credit facilities, with total commitments of $2.0 billion unused as of June 30, 2024 and December 31, 2023[32] - The company issued $500 million aggregate principal amount of 5.100% Senior Notes due 2034[31] - Total long-term debt, excluding current maturities, was $4,316.2 million as of June 30, 2024, compared to $3,977.9 million as of December 31, 2023[29] Pension and Benefits - Net periodic pension benefit cost for six months ended June 30, 2024: $22.7 million[43] - Company contributions to defined benefit pension plans for six months ended June 30, 2024: $19.3 million[44] - Projected contributions to enterprise pension plans worldwide for 2024: Approximately $59 million[44] - Net periodic postretirement benefit cost for the three months ended June 30, 2024 was $0, compared to $0.6 million in 2023, and for the six months ended June 30, 2024, it was $0, compared to $1.2 million in 2023[45] Litigation and Contingencies - The company is involved in various litigation, claims, and administrative proceedings, including asbestos-related lawsuits, but management believes any liability would not have a material adverse effect on the financial condition[68][69] - Aldrich and Murray filed for Chapter 11 bankruptcy on June 18, 2020, with $41.7 million of cash derecognized and an aggregate equity investment of $53.6 million recorded[71] - The company recognized a liability of $248.8 million related to asbestos liabilities and insurance assets upon deconsolidation in 2020[71] - Aldrich and Murray agreed to fund a trust with $545.0 million ($540.0 million in cash and a $5.0 million promissory note) to resolve asbestos claims[73] - The company recorded a charge of $21.2 million to increase its Funding Agreement liability to $270.0 million in 2021[73] - An operating cash outflow of $270.0 million occurred in 2022, with $91.8 million allocated to continuing operations and $178.2 million to discontinued operations[73] - Environmental reserves as of June 30, 2024, were $47.0 million, with $38.8 million related to investigation and remediation of former business sites[75] - Standard product warranty liability increased to $390.4 million as of June 30, 2024, with current reserves at $168.9 million[77] - Extended warranty liability increased to $384.8 million as of June 30, 2024, with current reserves at $131.6 million[78] Innovation and Sustainability - The company aims to reduce customers' carbon emissions by a billion metric tons by 2030 as part of its Gigaton Challenge, with net-zero targets validated by the Science Based Targets Initiative (SBTi)[82] - The company continues to invest in innovation and new product development to drive future growth, leveraging its global brand strength and diversified portfolio[87] Other Financial Metrics - Weighted-average diluted shares outstanding for Q2 2024 were 228.7 million, down from 230.3 million in Q2 2023[6] - Total unrecognized tax benefits for June 30, 2024 and December 31, 2023 were $83.5 million and $84.9 million, respectively[62] - The weighted-average number of basic shares outstanding for the six months ended June 30, 2024 was 227.0 million, with 2.1 million shares issuable under incentive share plans[63] - The company's effective income tax rate for the six months ended June 30, 2024 was 20.4%, lower than the U.S. statutory rate of 21.0% due to excess tax benefits from employee share-based payments and earnings in non-U.S. jurisdictions[62] - Share-based compensation expense was $44.2 million pre-tax for the six months ended June 30, 2024, up from $41.9 million in the prior year period[54] - The company granted 249,579 stock options and 98,948 RSUs during the six months ended June 30, 2024[55] - Other income/(expense), net was $(29.2) million for the six months ended June 30, 2024, compared to $(66.8) million in the prior year period[61]