10-KPeriod: FY2015

Trane Technologies plc Annual Report, Year Ended Dec 31, 2015

Filed February 12, 2016For Securities:TT

Summary

Trane Technologies plc (then Ingersoll-Rand plc) reported 2015 revenues of $13.3 billion, a slight increase from $12.9 billion in 2014, driven primarily by volume growth in the Climate segment and contributions from recent acquisitions. The company operates through two main segments: Climate, focusing on HVAC and transport temperature control solutions, and Industrial, offering compressed air systems, power tools, and utility vehicles. Despite a challenging global economic environment and unfavorable currency impacts, Trane Technologies demonstrated resilience. The company strategically expanded its Industrial segment with the acquisition of Cameron International Corporation's Centrifugal Compression business and strengthened its Climate segment with the acquisition of FRIGOBLOCK, signaling a focus on growth through strategic M&A. Key financial highlights include an operating income of $1.5 billion and a net earnings of $683 million. The company also made progress on its operational excellence initiatives, which contributed to a slight improvement in operating margin. Trane Technologies is committed to returning value to shareholders, as evidenced by a significant share repurchase program and a planned increase in quarterly dividends. The company is also mindful of its environmental impact, setting ambitious goals for reducing greenhouse gas emissions and investing in sustainable solutions. The report also details a resolution with the IRS regarding tax disputes, resulting in a $412 million payment, and an announced sale of its remaining stake in Hussmann for approximately $425 million.

Financial Highlights

56 data points
Beta

Revenue

$13.30B

30.2% Gross Margin

Net Income

$664.60M

5.0% Net Margin

EPS (Diluted)

$2.48

Total Assets

$16.72B

Cash & Equivalents

$736.80M

Free Cash Flow

$638.80M

Financial Statements
Beta
Revenue$13.30B
Cost of Revenue$9.28B
Gross Profit$4.02B
R&D Expenses$205.90M
SG&A Expenses$2.53B
Operating Income$1.49B
Interest Expense$223.00M
Net Income$664.60M
EPS (Basic)$2.51
EPS (Diluted)$2.48
Shares Outstanding (Basic)265.10M
Shares Outstanding (Diluted)267.80M

Key Highlights

  • 12015 Net Revenues reached $13.3 billion, up 3.2% year-over-year, driven by volume and acquisitions.
  • 2Acquisition of Cameron International's Centrifugal Compression business for $850 million and FRIGOBLOCK for $113 million in 2015 to enhance segment offerings.
  • 3Operating income grew to $1.5 billion, with a slight improvement in operating margin to 11.0%.
  • 4Announced sale of remaining equity interest in Hussmann for approximately $425 million, expected to close in the first half of 2016.
  • 5Resolved IRS tax disputes for tax years 2002-2011, resulting in a net cash outflow of $364 million.
  • 6Repurchased 4.4 million shares for $250.1 million in 2015 under a $1.5 billion share repurchase program.
  • 7Announced a 10% increase in quarterly dividend to $0.32 per share, effective March 2016.

Frequently Asked Questions

Revenue growth in 2015 was primarily driven by an increase in sales volume within the Climate segment, particularly in commercial and residential HVAC, and the positive contributions from recent acquisitions, including the Engineered Centrifugal Compression business and FRIGOBLOCK. These factors were partially offset by unfavorable currency translation impacts, mainly from the Euro.

In 2015, Trane Technologies focused on strategic acquisitions to bolster its business segments. It acquired Cameron International Corporation's Centrifugal Compression business for approximately $850 million, strengthening its Industrial segment with centrifugal compression equipment and aftermarket services. Additionally, it acquired FRIGOBLOCK for approximately $113 million, enhancing its Climate segment with transport refrigeration units for trucks and trailers.

Trane Technologies resolved its tax disputes with the IRS for the years 2002 through 2011 through an agreement reached in July 2015. The company agreed to pay withholding tax and interest totaling $412 million for the 2002-2006 period. This resolution resulted in a net cash outflow of approximately $364 million, with no penalties applied. The settlement was finalized in December 2015.

The company anticipates moderate growth in worldwide construction markets and flat to slow growth in industrial markets. Residential and commercial HVAC businesses are positively impacted by moderate growth in new construction in the US, while HVAC equipment replacement and aftermarket services continue steady growth. However, worldwide industrial equipment and aftermarket activity have been slower, with economic pressure noted in Asia and Latin America.