10-QPeriod: Q2 FY2009

Trane Technologies plc Quarterly Report for Q2 Ended Jun 30, 2009

Filed August 6, 2009For Securities:TT

Summary

Trane Technologies plc (TT), previously Ingersoll-Rand Company Limited, reported its second-quarter 2009 financial results amidst a challenging macroeconomic environment. The company experienced a notable increase in net revenues, largely driven by the acquisition of Trane Inc. completed in June 2008. However, this revenue growth was accompanied by a significant decline in operating income and margins across most segments, attributed to reduced volumes due to weak end-market demand and unfavorable currency exchange rates, partially offset by pricing improvements and ongoing productivity actions. The company also completed a significant reorganization, changing its jurisdiction of incorporation from Bermuda to Ireland, effective July 1, 2009. This move aimed to improve its global tax position. Despite the economic headwinds, Trane Technologies plc maintained a focus on liquidity, completing a comprehensive financing program that enhanced its cash position and extended its debt profile. Management expressed confidence in its ability to meet operational and capital needs.

Financial Highlights

49 data points
Beta

Revenue

$3.45B

27.1% Gross Margin

Net Income

$122.10M

3.5% Net Margin

EPS (Diluted)

$0.38

Total Assets

$20.43B

Cash & Equivalents

$792.90M

Free Cash Flow

$812.80M

Financial Statements
Beta
Revenue$3.45B
Cost of Revenue$2.52B
Gross Profit$936.20M
SG&A Expenses$677.10M
Operating Income$259.10M
Interest Expense$81.80M
Net Income$122.10M
EPS (Basic)$0.38
EPS (Diluted)$0.38
Shares Outstanding (Basic)320.80M
Shares Outstanding (Diluted)325.00M

Key Highlights

  • 1Net revenues increased by 12.8% to $3,473.8 million for the three months ended June 30, 2009, primarily due to the acquisition of Trane Inc.
  • 2Operating income for the second quarter of 2009 decreased by 30.7% to $250.6 million compared to $361.6 million in the prior year, reflecting market weakness and acquisition-related costs.
  • 3The company successfully completed a corporate reorganization, moving its place of incorporation from Bermuda to Ireland, effective July 1, 2009.
  • 4Significant restructuring charges totaling $41.1 million were recorded in the second quarter of 2009, aimed at streamlining operations and reducing costs.
  • 5Diluted earnings per share from continuing operations were $0.41 for the three months ended June 30, 2009, down from $0.90 in the same period of 2008.
  • 6The company's debt-to-total capital ratio improved slightly to 40.9% at June 30, 2009, from 43.1% at December 31, 2008, reflecting efforts to manage its debt structure.
  • 7Cash and cash equivalents increased to $792.9 million at June 30, 2009, from $550.2 million at December 31, 2008, bolstered by financing activities.

Frequently Asked Questions

The acquisition of Trane Inc. significantly boosted Trane Technologies' net revenues, contributing 35.0% to the year-over-year increase in the second quarter of 2009. However, it also increased cost of goods sold and selling & administrative expenses, and the integration process, along with purchase accounting adjustments, put pressure on operating margins.

Trane Technologies plc implemented a comprehensive financing program in early 2009, issuing $1.0 billion in long-term debt to repay its senior unsecured bridge loan facility. The company also expanded its accounts receivable purchase program to enhance liquidity. As of June 30, 2009, cash and cash equivalents stood at $792.9 million, and the debt-to-total capital ratio improved to 40.9%.

The reorganization, effective July 1, 2009, moved Trane Technologies' place of incorporation from Bermuda to Ireland. This strategic move was primarily undertaken to optimize the company's global tax position. The company has also restructured its debt and credit facilities to align with the new corporate structure.

Management expects 2009 to be negatively impacted by declining markets in North America and Western Europe, partially offset by growth in developing economies. The appreciation of the U.S. dollar against other currencies is also anticipated to negatively affect revenues. The company is focusing on cost control, productivity actions, and leveraging its diverse portfolio and installed base to drive service and parts revenue.