Name: Trane Technologies plc (NYSE:TT) | Cash Flow Statement
Creator: Stock Analysis on Net

Cash Flow Statement

The cash flow statement provides information about a company cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on the company balance sheet.

The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities.

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Trane Technologies plc, consolidated cash flow statement

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net earnings	1,774,700)	1,436,600)	870,000)	1,428,500)	1,357,500)
Discontinued operations, net of tax	21,500)	20,600)	121,400)	(40,600)	21,500)
Depreciation and amortization	323,600)	299,400)	294,300)	397,400)	361,500)
Pension and other postretirement benefits	55,600)	50,800)	68,800)	110,200)	104,200)
Stock settled share-based compensation	56,300)	66,500)	69,500)	66,400)	78,800)
Other non-cash items, net	17,100)	(36,400)	(1,500)	54,000)	(129,200)
Accounts and notes receivable	(345,400)	(265,400)	5,900)	(53,200)	(236,000)
Inventories	(466,700)	(348,800)	109,000)	18,400)	(169,900)
Other current and noncurrent assets	(116,800)	(153,800)	29,700)	(229,500)	35,300)
Accounts payable	317,900)	275,300)	75,800)	80,600)	120,700)
Other current and noncurrent liabilities	60,900)	249,600)	123,300)	124,100)	(69,900)
Changes in other assets and liabilities, net of the effects of acquisitions	(550,100)	(243,100)	343,700)	(59,600)	(319,800)
Adjustments for non-cash transactions	(97,500)	137,200)	774,800)	568,400)	95,500)
Net cash provided by operating activities	1,698,700)	1,594,400)	1,766,200)	1,956,300)	1,474,500)
Capital expenditures	(291,800)	(223,000)	(146,200)	(254,100)	(365,600)
Acquisitions and equity method investments, net of cash acquired	(234,700)	(269,200)	(182,800)	(1,539,700)	(285,200)
Proceeds from sale of property, plant and equipment	9,700)	15,100)	100)	3,800)	22,100)
Deconsolidation of certain entities under Chapter 11	—)	—)	(10,800)	—)	—)
Other investing activities, net	(23,000)	(68,600)	1,200)	10,000)	(700)
Net cash used in investing activities	(539,800)	(545,700)	(338,500)	(1,780,000)	(629,400)
Short-term payments, net	—)	—)	—)	—)	(6,400)
Proceeds from long-term debt	—)	—)	—)	1,497,900)	1,147,000)
Payments of long-term debt	(9,600)	(432,500)	(307,500)	(7,500)	(1,123,000)
Net proceeds from (payments of) debt	(9,600)	(432,500)	(307,500)	1,490,400)	17,600)
Debt issuance costs	(2,100)	(2,700)	(3,600)	(13,100)	(12,000)
Dividends paid to ordinary shareholders	(620,200)	(561,100)	(507,300)	(510,100)	(479,500)
Dividends paid to noncontrolling interests	(14,500)	(14,900)	(18,300)	(15,800)	(41,400)
Proceeds from shares issued under incentive plans	2,600)	78,300)	64,500)	116,800)	68,900)
Repurchase of ordinary shares	(1,200,200)	(1,100,300)	(250,000)	(750,100)	(900,200)
Receipt of (settlement related to) special cash payment	(6,200)	(49,500)	1,900,000)	—)	—)
Other financing activities, net	(2,000)	(44,900)	6,500)	(47,600)	(32,200)
Net cash provided by (used in) financing activities	(1,852,200)	(2,127,600)	884,300)	270,500)	(1,378,800)
Net cash used in discontinued operating activities	(194,700)	(6,100)	(331,200)	(36,800)	(66,700)
Net cash used in discontinued investing activities	(600)	—)	(37,700)	—)	—)
Net cash used in discontinued activities	(195,300)	(6,100)	(368,900)	(36,800)	(66,700)
Effect of exchange rate changes on cash and cash equivalents	(50,100)	(45,700)	68,200)	(9,800)	(45,600)
Net increase (decrease) in cash and cash equivalents	(938,700)	(1,130,700)	2,011,300)	400,200)	(646,000)
Cash and cash equivalents, beginning of period	2,159,200)	3,289,900)	1,278,600)	903,400)	1,549,400)
Cash and cash equivalents, end of period	1,220,500)	2,159,200)	3,289,900)	1,303,600)	903,400)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

Trane Technologies exhibited a generally stable capacity to generate cash from operations between 2018 and 2022, although the quality of these cash flows shifted in the latter years due to significant working capital requirements. Net earnings showed a recovery and growth trend following a contraction in 2020, reaching a peak of 1.77 billion USD in 2022. However, net cash provided by operating activities did not follow this linear growth, remaining relatively flat across the five-year period, with a peak of 1.96 billion USD in 2019 and a close of 1.70 billion USD in 2022.

Operating Cash Flow and Working Capital: A notable divergence between net earnings and operating cash flow is observed in 2021 and 2022. This is primarily driven by an increase in working capital assets; inventories saw a substantial cash outflow of 348.8 million USD in 2021 and 466.7 million USD in 2022. Similarly, accounts and notes receivable resulted in outflows of 265.4 million USD and 345.4 million USD in those same years. These trends suggest a significant build-up of inventory and credit extensions to customers, which offset the gains made in net earnings.
Investment Activities and Capital Expenditure: Investing activities were dominated by a major acquisition event in 2019, which required 1.54 billion USD. Outside of this event, capital expenditures remained relatively consistent, ranging from 146.2 million USD in 2020 to 365.6 million USD in 2018, with a recent uptick to 291.8 million USD in 2022. This indicates a steady commitment to maintaining and upgrading productive assets alongside strategic inorganic growth.
Financing and Capital Allocation: The financing strategy shifted from capital accumulation to aggressive shareholder returns. In 2018 and 2019, the organization relied heavily on long-term debt issuance, totaling approximately 2.64 billion USD. By 2021 and 2022, the focus transitioned toward returning capital to shareholders. Dividends paid to ordinary shareholders grew steadily from 479.5 million USD in 2018 to 620.2 million USD in 2022. Share repurchases accelerated sharply in the final two years, exceeding 1.1 billion USD annually in both 2021 and 2022.
Liquidity and Cash Position: Cash and cash equivalents experienced high volatility, peaking at 3.29 billion USD at the end of 2020, largely due to a special cash payment receipt of 1.9 billion USD. Following this peak, the cash balance declined steadily to 1.22 billion USD by the end of 2022. This decline is attributed to the combination of increased share repurchases, dividend growth, and the aforementioned absorption of cash into working capital.

Overall, the financial trajectory reflects a transition from a period of expansion and debt-funded acquisition (2018-2019) to a phase of operational recovery and aggressive capital return (2021-2022). While profitability is increasing, the increasing drag from receivables and inventories warrants monitoring to ensure operating efficiency matches earnings growth.

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