10-QPeriod: Q3 FY2017

Trane Technologies plc Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 25, 2017For Securities:TT

Summary

Trane Technologies plc (TT), formerly Ingersoll-Rand plc, reported net revenues of $3.67 billion for the third quarter of 2017, a 2.9% increase year-over-year, driven by solid growth in its Climate segment. For the first nine months of 2017, net revenues rose by 4.2% to $10.58 billion, primarily due to volume increases in the Climate segment and improved pricing across both segments. Profitability saw a slight decrease in operating income for the quarter to $506.1 million from $511.7 million in the prior year, with operating margin declining to 13.8% from 14.3%. This was attributed to material inflation outpacing pricing and increased investment spending. However, for the nine-month period, operating income improved to $1.28 billion from $1.25 billion in the prior year, with operating margin slightly decreasing to 12.1% from 12.3%. The company continued its share repurchase program, buying back $911.1 million in shares during the first nine months of 2017, and increased its quarterly dividend. The company's balance sheet remains robust with total assets of $17.72 billion and total equity of $6.84 billion. Liquidity appears strong with $1.26 billion in cash and cash equivalents. The company is managing its debt effectively, with a debt-to-total capital ratio of 37.2%.

Financial Highlights

49 data points
Beta

Revenue

$3.67B

32.2% Gross Margin

Net Income

$367.00M

10.0% Net Margin

EPS (Diluted)

$1.43

Total Assets

$17.72B

Cash & Equivalents

$1.26B

Free Cash Flow

$467.70M

Financial Statements
Beta
Revenue$3.67B
Cost of Revenue$2.49B
Gross Profit$1.18B
SG&A Expenses$674.50M
Operating Income$506.10M
Interest Expense$53.90M
Net Income$367.00M
EPS (Basic)$1.45
EPS (Diluted)$1.43
Shares Outstanding (Basic)253.30M
Shares Outstanding (Diluted)256.70M

Key Highlights

  • 1Revenue growth in Q3 2017 of 2.9% ($102.7 million increase) driven by strong Climate segment performance and favorable currency movements.
  • 2Nine-month revenue growth of 4.2% ($429.4 million increase) led by Climate segment volumes and pricing improvements.
  • 3Q3 operating income slightly decreased to $506.1 million, impacting operating margin to 13.8%, primarily due to material inflation and higher investments.
  • 4Nine-month operating income increased to $1.28 billion, with operating margin at 12.1%.
  • 5Significant share repurchases of $911.1 million in the first nine months of 2017, with approximately $1.0 billion remaining under the current program.
  • 6Quarterly dividend increased to $0.45 per ordinary share.
  • 7Company maintains a strong liquidity position with $1.26 billion in cash and cash equivalents and a debt-to-total capital ratio of 37.2%.

Frequently Asked Questions

The primary driver of revenue growth in the third quarter of 2017 was higher volumes in the Climate segment. Improved pricing and favorable foreign currency exchange rate movements also contributed to the increase.

Operating income slightly decreased to $506.1 million from $511.7 million in the third quarter of 2016, resulting in a decrease in the operating margin from 14.3% to 13.8%. This was mainly due to material inflation exceeding pricing and increased investment spending.

The company repurchased $911.1 million of its ordinary shares in the first nine months of 2017 and has approximately $1.0 billion remaining under its current $1.5 billion share repurchase program authorized in February 2017. Additionally, the company announced an increase in its quarterly share dividend from $0.40 to $0.45 per ordinary share in August 2017.

In the nine-month period of 2016, 'Other Income/(Expense), Net' was significantly impacted by a $397.8 million gain recognized on the sale of the company's remaining equity interest in its Hussmann business to Panasonic Corporation.