10-Q 1 tt-20220331.htm 10-Q tt-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
_______________________________
FORM 10-Q
_______________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number 001-34400
_____________________________ 
TRANE TECHNOLOGIES PLC
(Exact name of registrant as specified in its charter)
_______________________________
Ireland98-0626632
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
170/175 Lakeview Dr.
Airside Business Park
Swords Co. Dublin
Ireland
(Address of principal executive offices, including zip code)
+(353) (0) 18707400
(Registrant’s telephone number, including area code)
_______________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Ordinary Shares, Par Value $1.00 per ShareTTNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x   No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerxAccelerated filer¨Emerging growth company
Non-accelerated filer¨Smaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  x
The number of ordinary shares outstanding of Trane Technologies plc as of April 22, 2022 was 233,860,393.


TRANE TECHNOLOGIES PLC
FORM 10-Q
INDEX

Item 1 -
Item 2 -
Item 3 -
Item 4 -
Item 1 -
Item 1A -
Item 2 -
Item 6 -



PART I - FINANCIAL INFORMATION

Item 1.Financial Statements
TRANE TECHNOLOGIES PLC
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three months ended
 March 31,
In millions, except per share amounts20222021
Net revenues$3,355.5 $3,017.6 
Cost of goods sold(2,366.5)(2,064.4)
Selling and administrative expenses(600.8)(600.0)
Operating income388.2 353.2 
Interest expense(56.0)(60.7)
Other income/(expense), net(0.7)(7.2)
Earnings before income taxes331.5 285.3 
Provision for income taxes(61.1)(48.4)
Earnings from continuing operations270.4 236.9 
Discontinued operations, net of tax(7.0)0.9 
Net earnings263.4 237.8 
Less: Net earnings from continuing operations attributable to noncontrolling interests(3.2)(2.6)
Net earnings attributable to Trane Technologies plc$260.2 $235.2 
Amounts attributable to Trane Technologies plc ordinary shareholders:
Continuing operations$267.2 $234.3 
Discontinued operations(7.0)0.9 
Net earnings$260.2 $235.2 
Earnings (loss) per share attributable to Trane Technologies plc ordinary shareholders:
Basic:
Continuing operations$1.14 $0.98 
Discontinued operations(0.03) 
Net earnings$1.11 $0.98 
Diluted:
Continuing operations$1.13 $0.96 
Discontinued operations(0.03)0.01 
Net earnings$1.10 $0.97 
Weighted-average shares outstanding:
Basic234.6 239.4 
Diluted237.1 243.1 
See accompanying notes to Condensed Consolidated Financial Statements.

1

TRANE TECHNOLOGIES PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three months ended
March 31,
In millions20222021
Net earnings$263.4 $237.8 
Other comprehensive income (loss):
Currency translation(17.1)(82.5)
Cash flow hedges:
Unrealized net gains (losses) arising during period12.5 (4.6)
Net (gains) losses reclassified into earnings(0.6)0.9 
Tax (expense) benefit(3.1)0.3 
Total cash flow hedges, net of tax8.8 (3.4)
Pension and OPEB adjustments:
Amortization reclassified into earnings5.5 9.7 
Net curtailment and settlement (gains) losses reclassified to earnings 6.9 
Currency translation and other2.6 3.0 
Tax (expense) benefit(1.2)(4.4)
Total pension and OPEB adjustments, net of tax6.9 15.2 
Other comprehensive income (loss), net of tax(1.4)(70.7)
Comprehensive income, net of tax$262.0 $167.1 
Less: Comprehensive income attributable to noncontrolling interests(3.2)(0.2)
Comprehensive income attributable to Trane Technologies plc$258.8 $166.9 
See accompanying notes to Condensed Consolidated Financial Statements.



2

TRANE TECHNOLOGIES PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
In millionsMarch 31,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents$1,348.4 $2,159.2 
Accounts and notes receivable, net2,429.8 2,429.4 
Inventories1,872.3 1,530.8 
Other current assets380.0 351.5 
Total current assets6,030.5 6,470.9 
Property, plant and equipment, net1,422.2 1,398.8 
Goodwill5,496.4 5,504.8 
Intangible assets, net3,271.3 3,305.6 
Other noncurrent assets1,416.5 1,379.7 
Total assets$17,636.9 $18,059.8 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable$1,931.6 $1,787.3 
Accrued compensation and benefits405.1 544.8 
Accrued expenses and other current liabilities1,907.3 2,069.9 
Short-term borrowings and current maturities of long-term debt350.4 350.4 
Total current liabilities4,594.4 4,752.4 
Long-term debt4,492.6 4,491.7 
Postemployment and other benefit liabilities780.9 810.9 
Deferred and noncurrent income taxes586.7 581.5 
Other noncurrent liabilities1,165.8 1,150.2 
Total liabilities11,620.4 11,786.7 
Equity:
Trane Technologies plc shareholders’ equity:
Ordinary shares258.3 259.7 
Ordinary shares held in treasury, at cost(1,719.4)(1,719.4)
Retained earnings8,098.7 8,353.2 
Accumulated other comprehensive income (loss)(639.0)(637.6)
Total Trane Technologies plc shareholders’ equity5,998.6 6,255.9 
Noncontrolling interests17.9 17.2 
Total equity6,016.5 6,273.1 
Total liabilities and equity$17,636.9 $18,059.8 
See accompanying notes to Condensed Consolidated Financial Statements.

3


TRANE TECHNOLOGIES PLC
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
In millions, except per share amountsTotal
equity
Ordinary sharesOrdinary shares held
 in treasury,
at cost
Capital in
excess of
par value
Retained
earnings
Accumulated  other
comprehensive
income (loss)
Noncontrolling Interests
Amount at par valueShares
Balance at December 31, 2021$6,273.1 $259.7 259.7 $(1,719.4)$ $8,353.2 $(637.6)$17.2 
Net earnings263.4 — — — — 260.2 — 3.2 
Other comprehensive income (loss)(1.4)— — — — — (1.4) 
Shares issued under incentive stock plans(24.2)0.5 0.5 — (24.7)— — — 
Repurchase of ordinary shares(350.0)(1.9)(1.9)— 3.3 (351.4)— — 
Share-based compensation21.4 — — — 21.3 0.1 — — 
Dividends declared to noncontrolling interest(2.5)— — — — — — (2.5)
Dividends declared to common shareholders(156.7)— — — — (156.7)— — 
Separation of Ingersoll Rand Industrial(6.7)— — — — (6.7)  
Other0.1 — — — 0.1 — — — 
Balance at March 31, 2022$6,016.5 $258.3 258.3 $(1,719.4)$ $8,098.7 $(639.0)$17.9 

In millions, except per share amountsTotal
equity
Ordinary sharesOrdinary shares held
 in treasury,
at cost
Capital in
excess of
par value
Retained
earnings
Accumulated  other
comprehensive
income (loss)
Noncontrolling Interests
Amount at par valueShares
December 31, 2020$6,427.1 $263.3 263.3 $(1,719.4)$ $8,495.3 $(631.5)$19.4 
Net earnings237.8 — — — — 235.2 — 2.6 
Other comprehensive income (loss)(70.7)— — — — — (68.3)(2.4)
Shares issued under incentive stock plans(7.0)1.0 1.0 — (8.0)— — — 
Repurchase of ordinary shares(104.2)(0.7)(0.7)— (16.7)(86.8)— — 
Share-based compensation24.2 — — — 24.7 (0.5)— — 
Dividends declared to noncontrolling interest(3.5)— — — — — — (3.5)
Dividends declared to common shareholders(141.0)— — — — (141.0)— — 
Separation of Ingersoll Rand Industrial(49.9)— — — — (49.9)  
Balance at March 31, 2021$6,312.8 $263.6 263.6 $(1,719.4)$ $8,452.3 $(699.8)$16.1 
See accompanying notes to Condensed Consolidated Financial Statements.

4

TRANE TECHNOLOGIES PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
 March 31,
In millions20222021
Cash flows from operating activities:
Net earnings$263.4 $237.8 
Discontinued operations, net of tax7.0 (0.9)
Adjustments for non-cash transactions:
Depreciation and amortization77.3 76.0 
Pension and other postretirement benefits10.3 17.4 
Stock settled share-based compensation21.4 24.7 
Changes in assets and liabilities, net of the effects of acquisitions(370.3)(104.6)
Other non-cash items, net(13.0)12.5 
Net cash provided by (used in) continuing operating activities(3.9)262.9 
Net cash provided by (used in) discontinued operating activities(184.3)(2.8)
Net cash provided by (used in) operating activities(188.2)260.1 
Cash flows from investing activities:
Capital expenditures(74.8)(43.9)
Acquisitions of businesses, net of cash acquired0.4 (12.8)
Other investing activities, net(8.3)(57.0)
Net cash provided by (used in) continuing investing activities(82.7)(113.7)
Net cash provided by (used in) discontinued investing activities(0.6) 
Net cash provided by (used in) investing activities(83.3)(113.7)
Cash flows from financing activities:
Payments of long-term debt (300.0)
Dividends paid to ordinary shareholders(155.9)(140.2)
Dividends paid to noncontrolling interests(2.5)(3.5)
Proceeds (payments) from shares issued under incentive plans, net(24.2)(7.0)
Repurchase of ordinary shares(350.0)(104.2)
Other financing activities, net(2.0) 
Net cash provided by (used in) financing activities(534.6)(554.9)
Effect of exchange rate changes on cash and cash equivalents(4.7)(43.4)
Net increase (decrease) in cash and cash equivalents(810.8)(451.9)
Cash and cash equivalents - beginning of period2,159.2 3,289.9 
Cash and cash equivalents - end of period$1,348.4 $2,838.0 
See accompanying notes to Condensed Consolidated Financial Statements.
5

TRANE TECHNOLOGIES PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
Trane Technologies plc, a public limited company, incorporated in Ireland in 2009, and its consolidated subsidiaries (collectively, we, our, the Company or Trane Technologies), is a global climate innovator. The Company brings sustainable and efficient solutions to buildings, homes and transportation through the Company's strategic brands, Trane® and Thermo King®, and its environmentally responsible portfolio of products, services and connected intelligent controls. The Company generates revenue and cash primarily through the design, manufacture, sale and service of solutions for Heating, Ventilation and Air Conditioning (HVAC) and transport refrigeration. As an industry leader with an extensive global install base, the Company’s growth strategy includes expanding recurring revenue through services and rental options. The Company’s unique business operating system, uplifting culture and highly engaged team around the world are also central to its earnings and cash flow growth.
The accompanying unaudited Condensed Consolidated Financial Statements of Trane Technologies plc reflects the consolidated operations of the Company and have been prepared in accordance with United States Securities and Exchange Commission (SEC) interim reporting requirements. Accordingly, the accompanying Condensed Consolidated Financial Statements do not include all disclosures required by accounting principles generally accepted in the United States of America (GAAP) for full financial statements and should be read in conjunction with the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In the opinion of management, the accompanying Condensed Consolidated Financial Statements contain all adjustments, which include only normal recurring adjustments, necessary to fairly state the condensed consolidated results for the interim periods presented.
Reorganization of Aldrich and Murray
On May 1, 2020, certain subsidiaries of the Company underwent an internal corporate restructuring that was effectuated through a series of transactions (2020 Corporate Restructuring). As a result, Aldrich Pump LLC (Aldrich) and Murray Boiler LLC (Murray), indirect wholly-owned subsidiaries of Trane Technologies plc, became solely responsible for the asbestos-related liabilities, and the beneficiaries of the asbestos-related insurance assets, of Trane Technologies Company LLC and Trane U.S. Inc, respectively. On a consolidated basis, the 2020 Corporate Restructuring did not have an impact on the Condensed Consolidated Financial Statements. In connection with the 2020 Corporate Restructuring, certain subsidiaries of the Company entered into funding agreements with Aldrich and Murray (collectively the Funding Agreements), pursuant to which those subsidiaries are obligated, among other things, to pay the costs and expenses of Aldrich and Murray during the pendency of the Chapter 11 cases to the extent distributions from their respective subsidiaries are insufficient to do so and to provide an amount for the funding for a trust established pursuant to section 524(g) of the Bankruptcy Code, to the extent that the other assets of Aldrich and Murray are insufficient to provide the requisite trust funding.
On June 18, 2020 (Petition Date), Aldrich and Murray filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code) in the United States Bankruptcy Court for the Western District of North Carolina (the Bankruptcy Court) to resolve equitably and permanently all current and future asbestos related claims in a manner beneficial to claimants and to Aldrich and Murray. As a result of the Chapter 11 filings, all asbestos-related lawsuits against Aldrich and Murray have been stayed due to the imposition of a statutory automatic stay applicable in Chapter 11 bankruptcy cases. Only Aldrich and Murray have filed for Chapter 11 relief. Neither Aldrich's wholly-owned subsidiary, 200 Park, Inc. (200 Park), Murray's wholly-owned subsidiary, ClimateLabs LLC (ClimateLabs), Trane Technologies plc nor its other subsidiaries (the Trane Companies) are part of the Chapter 11 filings. The Trane Companies are expected to continue to operate as usual, with no disruption to their employees, suppliers, or customers globally. As of the Petition Date, Aldrich and its wholly-owned subsidiary 200 Park and Murray and its wholly-owned subsidiary ClimateLabs were deconsolidated and their respective assets and liabilities were derecognized from the Company's Condensed Consolidated Financial Statements. Refer to Note 17, "Commitments and Contingencies," for more information regarding the status of Chapter 11 bankruptcy and asbestos-related matters.
6


Note 2. Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) is the sole source of authoritative GAAP other than SEC issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU's. ASU's not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the Condensed Consolidated Financial Statements.
Recently Adopted Accounting Pronouncements
In November 2021, the FASB issued ASU 2021-10, “Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance” (ASU 2021-10), which requires additional disclosures regarding government grants and cash contributions. The additional disclosures required by this update include information about the nature of the transactions and the related accounting policy used to account for the transaction, the financial statement line items affected by the transactions and the amounts applicable to each financial statement line item and significant terms and conditions of the transactions, including commitments and contingencies. ASU 2021-10 is effective for annual periods beginning after December 15, 2021 with early adoption permitted. The Company adopted this standard on January 1, 2022 with no material impact on its financial statements.
In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers” (ASU 2021-08), which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, “Revenue from Contracts with Customers” (ASC 606). ASU 2021-08 is effective for fiscal years beginning after December 15, 2022 including interim periods therein with early adoption permitted. The Company early adopted this standard during the fourth quarter of 2021 and applied it retrospectively to all business combinations for which the acquisition date occurred on or after January 1, 2021 resulting in no material impact on its financial statements.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (ASU 2019-12), which simplifies certain aspects of income tax accounting guidance in ASC 740, reducing the complexity of its application. Certain exceptions to ASC 740 presented within the ASU include: intraperiod tax allocation, deferred tax liabilities related to outside basis differences and year-to-date loss in interim periods, among others. ASU 2019-12 is effective for annual reporting periods beginning after December 15, 2020 including interim periods therein with early adoption permitted. The Company adopted this standard on January 1, 2021 with no material impact on its financial statements.
Note 3. Inventories
Depending on the business, U.S. inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method or the lower of cost and net realizable value (NRV) using the first-in, first-out (FIFO) method. Non-U.S. inventories are primarily stated at the lower of cost and NRV using the FIFO method.
The major classes of inventory were as follows:
In millionsMarch 31,
2022
December 31,
2021
Raw materials$496.3 $404.6 
Work-in-process270.7 215.9 
Finished goods1,188.7 982.9 
1,955.7 1,603.4 
LIFO reserve(83.4)(72.6)
Total$1,872.3 $1,530.8 
The Company performs periodic assessments to determine the existence of obsolete, slow-moving and non-saleable inventories and records necessary provisions to reduce such inventories to the lower of cost and NRV. Reserve balances, primarily related to obsolete and slow-moving inventories, were $80.6 million and $79.0 million at March 31, 2022 and December 31, 2021, respectively.
7


Note 4. Goodwill
The changes in the carrying amount of goodwill for the three months ended March 31, 2022 were as follows:
In millionsAmericasEMEAAsia PacificTotal
Net balance as of December 31, 2021$4,185.2 $740.8 $578.8 $5,504.8 
Acquisitions (1)
(0.4)  (0.4)
Currency translation3.5 (12.4)0.9 (8.0)
Net balance as of March 31, 2022$4,188.3 $728.4 $579.7 $5,496.4 
(1) Includes measurement period adjustment related to prior year acquisition.
The net goodwill balances at March 31, 2022 and December 31, 2021 include $2,496.0 million of accumulated impairment, primarily related to the Americas segment. The accumulated impairment relates entirely to a charge recorded in 2008.
Note 5. Intangible Assets
The gross amount of the Company’s intangible assets and related accumulated amortization were as follows:
March 31, 2022December 31, 2021
In millionsGross carrying amountAccumulated amortizationNet carrying amountGross carrying amountAccumulated amortizationNet carrying amount
Customer relationships$2,110.4 $(1,506.2)$604.2 $2,110.8 $(1,475.3)$635.5 
Other245.0 (203.4)41.6 245.5 (201.3)44.2 
Total finite-lived intangible assets2,355.4 (1,709.6)645.8 2,356.3 (1,676.6)679.7 
Trademarks (indefinite-lived)2,625.5 — 2,625.5 2,625.9 — 2,625.9 
Total$4,980.9 $(1,709.6)$3,271.3 $4,982.2 $(1,676.6)$3,305.6 
Intangible asset amortization expense was $33.8 million and $30.8 million for the three months ended March 31, 2022 and 2021, respectively.
Note 6. Debt and Credit Facilities
Short-term borrowings and current maturities of long-term debt consisted of the following:
In millionsMarch 31,
2022
December 31,
2021
Debentures with put feature$342.9 $342.9 
Other current maturities of long-term debt7.5 7.5 
Total$350.4 $350.4 
Commercial Paper Program
The Company uses borrowings under its commercial paper program for general corporate purposes. The maximum aggregate amount of unsecured commercial paper notes available to be issued, on a private placement basis, under the commercial paper program is $2.0 billion. The Company had no outstanding balance under its commercial paper program as of March 31, 2022 and December 31, 2021.
Debentures with Put Feature
At March 31, 2022 and December 31, 2021, the Company had $342.9 million of fixed rate debentures outstanding which contain a put feature that the holders may exercise on each anniversary of the issuance date. If exercised, the Company is obligated to repay in whole or in part, at the holder’s option, the outstanding principal amount of the debentures plus accrued interest. If these options are not exercised, the final contractual maturity dates would range between 2027 and 2028. Holders of these debentures had the option to exercise the put feature on $37.2 million of the outstanding debentures in February 2022, subject to the notice requirement. No exercises were made.
8


Long-term debt, excluding current maturities, consisted of the following:
In millionsMarch 31,
2022
December 31,
2021
4.250% Senior notes due 2023 (1)
$699.2 $699.1 
7.200% Debentures due 2022-2025
22.4 22.4 
3.550% Senior notes due 2024
498.2 498.0 
6.480% Debentures due 2025
149.7 149.7 
3.500% Senior notes due 2026
398.0 397.8 
3.750% Senior notes due 2028
546.3 546.2 
3.800% Senior notes due 2029
745.2 745.0 
5.750% Senior notes due 2043
495.0 495.0 
4.650% Senior notes due 2044
296.3 296.3 
4.300% Senior notes due 2048
296.4 296.3 
4.500% Senior notes due 2049
345.9 345.9 
Total$4,492.6 $4,491.7 
(1) The 4.250% Senior notes are due in June 2023.
Other Credit Facilities
As of March 31, 2022, the Company maintained two $1.0 billion senior unsecured revolving credit facilities, one of which was due to mature in April 2023 (2023 Credit Facility) and the other in June 2026 (2026 Credit Facility) through its wholly-owned subsidiaries, Trane Technologies HoldCo Inc., Trane Technologies Global Holding Company Limited and Trane Technologies Financing Limited (collectively, the Borrowers). On April 25, 2022, the Company entered into a new $1.0 billion senior unsecured revolving credit facility which matures in April 2027 (2027 Credit Facility) and terminated its $1.0 billion 2023 Credit Facility. The terms and covenants under the 2027 Credit Facility are substantially the same as the covenants under the 2026 Credit Facility. The terms of both the 2026 and 2027 Credit Facility include Environmental, Social, and Governance (ESG) metrics related to two of the Company’s sustainability commitments: a reduction in greenhouse gas intensity and an increase in the percentage of women in management. The Company's annual performance against these ESG metrics may result in price adjustments to the commitment fee and applicable interest rate.
Each senior unsecured credit facility provides support for the Company’s commercial paper program and can be used for working capital and other general corporate purposes. Trane Technologies plc, Trane Technologies Irish Holdings Unlimited Company, Trane Technologies Lux International Holding Company S.à.r.l. and Trane Technologies Company LLC each provide irrevocable and unconditional guarantees for these Facilities. In addition, each Borrower will guarantee the obligations under the Facilities of the other Borrowers. Total commitments of $2.0 billion were unused at March 31, 2022 and December 31, 2021.
Fair Value of Debt
The fair value of the Company's debt instruments at March 31, 2022 and December 31, 2021 was $5.1 billion and $5.6 billion, respectively. The Company measures the fair value of its long-term debt instruments for disclosure purposes based upon observable market prices quoted on public exchanges for similar assets. These fair value inputs are considered Level 2 within the fair value hierarchy.
9


Note 7. Financial Instruments
In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. These fluctuations can increase the cost of financing, investing and operating the business. The Company uses various financial instruments, including derivative instruments, to manage the risks associated with interest rate, commodity price and foreign currency exposures. These financial instruments are not used for trading or speculative purposes. The Company recognizes all derivatives in the Condensed Consolidated Balance Sheets at their fair value as either assets or liabilities.
On the date a derivative contract is entered into, the Company designates the derivative instrument as a cash flow hedge of a forecasted transaction or as an undesignated derivative. The Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.
The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are highly effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be a highly effective hedge, the fair market value changes of the instrument are recorded to Accumulated other comprehensive income (loss) (AOCI). If the hedging relationship ceases to be highly effective, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in Net earnings.
The fair values of derivative instruments included within the Condensed Consolidated Balance Sheets were as follows:
 Derivative assetsDerivative liabilities
In millionsMarch 31,
2022
December 31,
2021
March 31,
2022
December 31,
2021
Derivatives designated as hedges:
Currency derivatives$ $0.1 $3.9 $2.7 
Commodity derivatives17.6 4.9  0.2 
Derivatives not designated as hedges:
Currency derivatives16.3 10.5 22.1 14.0 
Total derivatives$33.9 $15.5 $26.0 $16.9 
Asset and liability derivatives included in the table above are recorded within Other current assets and Accrued expenses and other current liabilities, respectively.
Currency Derivative Instruments
The notional amount of the Company’s currency derivatives was $0.6 billion and $0.5 billion at March 31, 2022 and December 31, 2021, respectively. At March 31, 2022 and December 31, 2021, a net loss of $3.6 million and $2.2 million, net of tax, respectively, was included in AOCI related to the fair value of the Company’s currency derivatives designated as accounting hedges. The amount expected to be reclassified into Net earnings over the next twelve months is a net loss of $3.6 million. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. Gains and losses associated with the Company’s currency derivatives not designated as hedges are recorded in Net earnings as changes in fair value occur. At March 31, 2022, the maximum term of the Company’s currency derivatives was approximately 12 months.
Commodity Derivative Instruments
At March 31, 2022 and December 31, 2021, a net gain of $10.6 million and $3.5 million, net of tax, respectively, was included in AOCI related to the fair market value of the Company's commodity derivatives designated as accounting hedges. A change in fair value of commodity derivative instruments deemed highly effective is included in AOCI and is reclassified to Cost of Goods Sold in the period the sale of the finished goods inventory containing the commodity impacts Net earnings. The amount expected to be reclassified into Net earnings over the next twelve months is a net gain of $10.6 million. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. At March 31, 2022, the Company has commodity contracts to hedge certain forecasted purchases over the next 12 months.
10


The Company had the following outstanding contracts to hedge forecasted commodity purchases:
 Volume outstanding as of
CommodityMarch 31,
2022
December 31,
2021
Aluminum
21,303 metric tons
16,488 metric tons
Copper
6,824,000 pounds
4,035,000 pounds
Other Derivative Instruments
Prior to 2015, the Company utilized forward-starting interest rate swaps and interest rate locks to manage interest rate exposure in periods prior to the anticipated issuance of certain fixed-rate debt. These instruments were designated as cash flow hedges and had a notional amount of $1.3 billion. Consequently, when the contracts were settled upon the issuance of the underlying debt, any realized gains or losses in the fair values of the instruments were deferred into AOCI. These deferred gains or losses are subsequently recognized in Interest expense over the term of the related notes. The net unrecognized gain in AOCI was $4.5 million at March 31, 2022 and $4.7 million at December 31, 2021. The net deferred gain at March 31, 2022 will continue to be amortized over the term of notes with maturities ranging from 2023 to 2044. The amount expected to be amortized over the next twelve months is a net gain of $0.7 million. The Company has no forward-starting interest rate swaps or interest rate lock contracts outstanding at March 31, 2022 or December 31, 2021.
The following table represents the amounts associated with derivatives designated as hedges affecting Net earnings and AOCI for the three months ended March 31:
  Amount of gain (loss)
recognized in AOCI
Location of gain (loss) reclassified from
AOCI and recognized
into Net earnings
Amount of gain (loss)
reclassified from AOCI and
recognized into Net earnings
In millions2022202120222021
Currency derivatives designated as hedges (1)
$(3.0)$(4.6)Cost of goods sold$(1.1)$(1.1)
Commodity derivatives designated as hedges15.5  Cost of goods sold1.5  
Interest rate swaps & locks  Interest expense0.2 0.2 
Total$12.5 $(4.6)$0.6 $(0.9)
(1) Amounts excluded from effectiveness testing and recognized into Cost of goods sold based on changes in fair value and amortization was a loss of $0.8 million for the three months ended March 31, 2021.
The following table represents the amounts associated with derivatives not designated as hedges affecting Net earnings for the three months ended March 31:
  Location of gain (loss) recognized in Net earningsAmount of gain (loss)
recognized in Net earnings
In millions20222021
Currency derivativesOther income (expense), net$(7.4)$(2.5)
Total$(7.4)$(2.5)
The gains and losses associated with the Company’s undesignated currency derivatives are materially offset in Net earnings by changes in the fair value of the underlying transactions.
Concentration of Credit Risk
The counterparties to the Company’s forward contracts consist of a number of investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.
11


Note 8. Fair Value Measurements
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability is as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.
Observable market data is required to be used in making fair value measurements when available. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31, 2022:
In millionsFair ValueFair value measurements
Level 1Level 2Level 3
Assets:
Derivative instruments$33.9 $ $33.9 $ 
Liabilities:
Derivative instruments$26.0 $ $26.0 $ 
Contingent consideration$89.7   $89.7 
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2021:
In millionsFair ValueFair value measurements
Level 1Level 2Level 3
Assets:
Derivative instruments$15.5 $ $15.5 $ 
Liabilities:
Derivative instruments$16.9 $ $16.9 $ 
Contingent consideration$96.2   $96.2 
Derivative instruments include forward foreign currency contracts and instruments related to non-functional currency balance sheet exposures and commodity swaps. The fair value of the foreign exchange derivatives is determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable. The fair value of the commodity derivatives is valued under a market approach using published prices, where applicable, or dealer quotes.
On October 15, 2021, the Company acquired 100% of Farrar Scientific Corporation's (Farrar Scientific) assets. In connection with the acquisition, the Company agreed to contingent consideration of up to $115.0 million to be paid in 2025, tied to the attainment of key financial targets during the period January 1, 2022 through December 31, 2024. This additional payment, to the extent earned, will be payable in cash. The fair value of the contingent consideration is determined using the Monte Carlo simulation model based on projections of revenues for Farrar Scientific during the period of January 1, 2022 through December 31, 2024, implied revenue volatility and a risk adjusted discount rate. Each quarter the Company is required to remeasure the fair value of the liability as assumptions change and such non-cash adjustments are recorded in Selling and administrative expenses in the Condensed Consolidated Statements of Earnings.
12


Contingent consideration related to acquisitions are measured at fair value each reporting period using Level 3 unobservable inputs. The changes in the fair value of the Company's Level 3 liabilities were as follows:
In millionsMarch 31,
2022
December 31,
2021
Balance at beginning of period$96.2 $ 
Fair value of contingent consideration recorded in connection with acquisition— 98.7 
Change in fair value of contingent consideration (6.5)(2.5)
Balance at end of period$89.7 $96.2 
The fair value of the contingent consideration is measured on a recurring basis at each reporting date. The following inputs and assumptions were used in the Monte Carlo simulation model to estimate the fair value of the contingent consideration:
March 31,
2022
December 31,
2021
Discount rate10.00 %8.00 %
Volatility 20.00 %20.00 %
The carrying values of cash and cash equivalents, accounts receivable, and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. There have been no transfers between levels of the fair value hierarchy.
Note 9. Pensions and Postretirement Benefits Other than Pensions
The Company sponsors several U.S. defined benefit and defined contribution plans covering substantially all of the Company's U.S. employees. Additionally, the Company has many non-U.S. defined benefit and defined contribution plans covering eligible non-U.S. employees. Postretirement benefits other than pensions (OPEB) provide healthcare benefits, and in some instances, life insurance benefits for certain eligible employees.
Pension Plans
The noncontributory defined benefit pension plans covering non-collectively bargained U.S. employees provide benefits on a final average pay formula while plans for most collectively bargained U.S. employees provide benefits on a flat dollar benefit formula or a percentage of pay formula. The non-U.S. pension plans generally provide benefits based on earnings and years of service. The Company also maintains additional other supplemental plans for officers and other key or highly compensated employees.
The components of the Company’s net periodic pension benefit cost for the three months ended March 31 were as follows:
Three months ended
In millions20222021
Service cost$12.0 $12.8 
Interest cost17.8 14.7 
Expected return on plan assets(26.3)(26.6)
Net amortization of:
Prior service costs1.0 1.3 
Net actuarial (gains) losses5.9 8.9 
Net periodic pension benefit cost$10.4 $11.1 
Net curtailment and settlement (gains) losses 6.9 
Net periodic pension benefit cost after net curtailment and settlement (gains) losses$10.4 $18.0 
Amounts recorded in continuing operations:
      Operating income$11.0 $11.9 
      Other income/(expense), net(1.5)5.1 
Amounts recorded in discontinued operations0.9 1.0 
Total$10.4 $18.0 
13


The Company made contributions to its defined benefit pension plans of $4.1 million and $14.5 million during the three months ended March 31, 2022 and 2021, respectively. The Company currently projects that it will contribute a total of approximately $89 million to its enterprise plans worldwide in 2022.
Postretirement Benefits Other Than Pensions
The Company sponsors several postretirement plans that provide for healthcare benefits, and in some instances, life insurance benefits that cover certain eligible employees. These plans are unfunded and have no plan assets, but are instead funded by the Company on a pay-as-you-go basis in the form of direct benefit payments. Generally, postretirement health benefits are contributory with contributions adjusted annually. Life insurance plans for retirees are primarily noncontributory.
The components of net periodic postretirement benefit cost for the three months ended March 31 were as follows:
Three months ended
In millions20222021
Service cost$0.5 $0.5 
Interest cost1.7 1.4 
Net amortization of net actuarial (gains) losses(1.4)(0.5)
Net periodic postretirement benefit cost$0.8 $1.4 
Amounts recorded in continuing operations:
     Operating income$0.5 $0.5 
     Other income/(expense), net0.3 0.6 
Amounts recorded in discontinued operations 0.3 
Total$0.8 $1.4 
Note 10. Equity
The authorized share capital of Trane Technologies plc is 1,185,040,000 shares, consisting of (1) 1,175,000,000 ordinary shares, par value $1.00 per share, (2) 40,000 ordinary shares, par value EUR 1.00 and (3) 10,000,000 preference shares, par value $0.001 per share. There were no Euro-denominated ordinary shares or preference shares outstanding at March 31, 2022 or December 31, 2021.
Changes in ordinary shares and treasury shares for the three months ended March 31, 2022 were as follows:
In millionsOrdinary shares issuedOrdinary shares held in treasury
December 31, 2021259.7 24.5 
Shares issued under incentive plans, net0.5  
Repurchase of ordinary shares(1.9) 
March 31, 2022258.3 24.5 
Share repurchases are made from time to time in accordance with management's capital allocation strategy, subject to market conditions and regulatory requirements. Shares acquired and canceled upon repurchase are accounted for as a reduction of Ordinary Shares and Capital in excess of par value, or Retained earnings to the extent Capital in excess of par value