10-QPeriod: Q1 FY2020

Trane Technologies plc Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 5, 2020For Securities:TT

Summary

Trane Technologies plc reported a net loss of $29.2 million for the first quarter of 2020, a significant decrease from a net earning of $199.9 million in the prior year period. This decline was largely attributable to the impact of the COVID-19 pandemic, which led to a 5.8% decrease in net revenues to $2,641.3 million. The company also incurred substantial separation costs related to the completion of its Reverse Morris Trust transaction with Gardner Denver, which resulted in the separation of its Industrial segment. Despite the challenging operating environment and the one-time separation costs, the company's core business operations showed resilience, with a focus on ongoing restructuring initiatives and cost management. The company's financial position remains stable, supported by a strong cash balance and available credit facilities, though management acknowledges the ongoing uncertainty posed by the global pandemic.

Financial Highlights

52 data points
Beta

Revenue

$2.64B

28.1% Gross Margin

Net Income

-$29.20M

-1.1% Net Margin

EPS (Diluted)

$-0.12

Total Assets

$17.64B

Cash & Equivalents

$2.65B

Free Cash Flow

-$362.30M

Financial Statements
Beta
Revenue$2.64B
Cost of Revenue$1.90B
Gross Profit$742.50M
SG&A Expenses$588.10M
Operating Income$154.40M
Interest Expense$63.10M
Net Income-$29.20M
EPS (Basic)$-0.12
EPS (Diluted)$-0.12
Shares Outstanding (Basic)239.50M
Shares Outstanding (Diluted)242.30M

Key Highlights

  • 1Net loss of $29.2 million for Q1 2020, compared to net earnings of $199.9 million in Q1 2019, impacted by separation costs and COVID-19.
  • 2Net revenues decreased by 5.8% to $2,641.3 million in Q1 2020, primarily due to lower volumes affected by the COVID-19 pandemic.
  • 3Completed the Reverse Morris Trust transaction on February 29, 2020, separating the Industrial segment (Ingersoll Rand Industrial).
  • 4Incurred $99.1 million in pre-tax separation costs related to the Industrial segment separation.
  • 5Operating income decreased to $154.4 million from $236.5 million in the prior year, reflecting lower revenues and higher restructuring costs.
  • 6Cash and cash equivalents increased to $2,647.7 million as of March 31, 2020, from $1,278.6 million as of December 31, 2019.
  • 7The company suspended its 2020 financial guidance due to the uncertainty caused by the COVID-19 pandemic.

Frequently Asked Questions

The primary driver for the substantial decrease in net earnings was the net loss of $29.2 million in the current quarter, compared to a net earning of $199.9 million in the prior year. This was heavily influenced by the completion of the Reverse Morris Trust transaction which separated the Industrial segment, resulting in significant separation costs. Additionally, the global COVID-19 pandemic negatively impacted revenues and operations.

The COVID-19 pandemic adversely impacted the company's performance in the first quarter of 2020, leading to lower revenue volumes, temporary facility closures (particularly in the Asia Pacific region initially, and then more broadly), supply chain disruptions, and unfavorable foreign currency exchange rate movements. The company suspended its 2020 financial guidance due to the uncertainty caused by the pandemic.

The separation of the Industrial segment (Ingersoll Rand Industrial) on February 29, 2020, through a Reverse Morris Trust transaction, resulted in the historical results of the Industrial segment being presented as 'Discontinued Operations.' The company also incurred $99.1 million in pre-tax separation costs during the quarter, which are primarily included within discontinued operations. Assets and liabilities of the separated segment were reclassified as held-for-sale as of December 31, 2019.

The company's cash and cash equivalents increased significantly to $2,647.7 million as of March 31, 2020, from $1,278.6 million at the end of 2019. The company has access to $2.0 billion in unused revolving credit facilities. Management believes that its current cash, cash flow from operations, and available credit facilities will be sufficient to fund its operating and capital needs for at least the next twelve months and thereafter, despite the ongoing uncertainty from the COVID-19 pandemic.