10-QPeriod: Q2 FY2012

Trane Technologies plc Quarterly Report for Q2 Ended Jun 30, 2012

Filed July 26, 2012For Securities:TT

Summary

Trane Technologies plc (formerly Ingersoll-Rand plc) reported its second-quarter 2012 financial results. For the three months ended June 30, 2012, net revenues decreased by 6.6% to $3.82 billion compared to the prior year, primarily due to the absence of the divested Hussmann business. However, operating income significantly improved, driven by better pricing, productivity gains, and a substantial decrease in impairment charges compared to the prior year. Diluted earnings per share from continuing operations were $1.14, up from $0.35 in the prior year. The six-month period also showed a revenue decline of 5.3% to $6.97 billion, largely attributable to the Hussmann divestiture. Similar to the quarterly results, operating income saw a substantial increase due to reduced impairment charges and operational efficiencies. Diluted earnings per share from continuing operations for the six months were $1.45, up from $0.15 in the prior year. The company also highlighted progress in managing its debt levels and a strong liquidity position with $903.4 million in cash and cash equivalents.

Financial Highlights

53 data points
Beta

Revenue

$3.82B

30.8% Gross Margin

Net Income

$365.80M

9.6% Net Margin

EPS (Diluted)

$1.16

Total Assets

$18.74B

Cash & Equivalents

$903.40M

Free Cash Flow

$228.30M

Financial Statements
Beta
Revenue$3.82B
Cost of Revenue$2.64B
Gross Profit$1.18B
SG&A Expenses$703.60M
Operating Income$477.90M
Interest Expense$62.10M
Net Income$365.80M
EPS (Basic)$1.18
EPS (Diluted)$1.16
Shares Outstanding (Basic)309.20M
Shares Outstanding (Diluted)314.40M

Key Highlights

  • 1Net revenues for the three months ended June 30, 2012, decreased by 6.6% year-over-year to $3.82 billion, largely impacted by the absence of the divested Hussmann business.
  • 2Operating income for the three months increased significantly to $477.9 million, a substantial improvement from $298.7 million in the prior year, driven by better pricing, productivity, and reduced impairment charges.
  • 3Diluted earnings per share from continuing operations for the quarter were $1.14, a significant increase from $0.35 in the same period last year.
  • 4For the six months ended June 30, 2012, net revenues declined by 5.3% to $6.97 billion, mainly due to the Hussmann divestiture.
  • 5Operating income for the six months improved to $689.9 million from $340.5 million in the prior year, benefiting from cost controls and lower impairment charges.
  • 6The company reported strong liquidity with $903.4 million in cash and cash equivalents as of June 30, 2012.
  • 7The company settled its remaining outstanding Exchangeable Senior Notes in the second quarter of 2012, paying $357.0 million in cash and issuing 10.8 million ordinary shares.

Frequently Asked Questions

The primary driver for the decrease in net revenues for both the three and six-month periods ended June 30, 2012, was the absence of revenue from the divested Hussmann business, which was a significant contributor in the prior year periods.

Profitability improved significantly. Operating income and diluted earnings per share from continuing operations saw substantial increases year-over-year for both the quarterly and year-to-date periods. This improvement was largely due to better pricing, productivity gains, and a significant reduction in asset impairment charges compared to the prior year.

The company's total debt decreased to $3.29 billion as of June 30, 2012, from $3.64 billion at the end of 2011. During the second quarter of 2012, the company fully settled its outstanding Exchangeable Senior Notes, which contributed to the debt reduction and involved both cash payment and share issuance.

The company is involved in various legal proceedings, including tax-related matters with the IRS concerning intercompany debt from its Bermuda reincorporation. While the company is contesting the IRS's position, it believes it is adequately reserved and does not expect a material adverse impact, although it acknowledges potential risks if the IRS's position is sustained. Additionally, the company is addressing a material weakness in its internal controls related to accounting for deferred tax balances, with remediation efforts underway.