Trane Technologies plc

Previous wording

Our commitment to sustainability extends to the environmental and social impacts of our people, operations, products and services. We have announced ambitious 2030 Sustainability Commitments, including our Gigaton Challenge to reduce customers' carbon emissions by a billion metric tons. We are one of a handful of companies whose emissions reductions targets have been validated three times by the SBTi, and one of the very few companies worldwide and first in our industry whose net-zero targets have also been validated. Our emissions reduction commitments align with the Paris Climate Accord net-zero targets, consistent with limiting global temperature rise to no more than 1.5 °C. Our 2030 Sustainability Commitments for scopes 1, 2, and 3 will guide our emissions reduction efforts through 2030, with an emphasis on reducing our largest source: the emissions generated from customer use of our products. We are Leading by Example as we make progress toward carbon-neutral operations and zero waste-to-landfill across our global footprint and net positive water use in water-stressed locations. Our Opportunity for All commitment focuses on gender parity in leadership, workforce diversity reflective of our communities, and a citizenship strategy that helps underserved communities through enhanced learning environments and pathways to green and Science, Technology, Engineering and Math (STEM) careers.

Current wording

Our commitment to sustainability extends to the environmental and social impacts of our people, operations, products and services. We have announced ambitious 2030 Sustainability Commitments, including our Gigaton Challenge to reduce customers' carbon emissions by a billion metric tons through sustainable products and services. We are also Leading by Example as we work toward carbon-neutral operations, zero waste-to-landfill and net positive water use in water-stressed locations. We also committed to reducing embodied carbon in our products by 40%, while also designing products for circularity. Our 2030 emissions reduction targets have been validated by the Science Based Targets Initiative (SBTi), and we are one of very few companies worldwide with validated 2050 net-zero targets. Finally, our Opportunity for All commitment focuses on investing in our people and our uplifting and inclusive culture, and broadening access to Science, Technology, Engineering and Math (STEM) education and careers in our communities.

Previous wording

On April 6, 2023, certain individual claimants filed a motion to dismiss the Chapter 11 cases. Subsequently, on May 15, 2023, the committee representing current asbestos claimants (the ACC) filed its own motion to dismiss the Chapter 11 cases. Aldrich, Murray and the FCR filed responses in opposition to each of these motions, and the Company filed papers joining in Aldrich and Murray's opposition. A hearing on the motions to dismiss was held on July 14, 2023. On December 28, 2023, the Bankruptcy Court entered an order denying the motions to dismiss the Chapter 11 cases. On January 11, 2024, the ACC and the individual claimants filed motions seeking leave to appeal the order denying the motions to dismiss and to certify the appeals directly to the Court of Appeals for the Fourth Circuit. Aldrich and Murray filed responses in opposition to these motions on January 31, 2024. It is not possible to predict how the Bankruptcy Court will rule on these pending motions, whether an appellate court will affirm or reverse the Bankruptcy Court order denying the motions to dismiss, whether the Bankruptcy Court will approve the terms of the Plan, what the extent of the asbestos liability will be or how long the Chapter 11 cases will last. The Chapter 11 cases remain pending as of February 8, 2024.

Current wording

On April 6, 2023, certain individual claimants filed a motion to dismiss the Chapter 11 cases (Claimant Motion to Dismiss). Subsequently, on May 15, 2023, the committee representing current asbestos claimants (the ACC) filed its own motion to dismiss the Chapter 11 cases (ACC Motion to Dismiss, and, together with the Claimant Motion to Dismiss, the Motions to Dismiss). Aldrich, Murray and the FCR filed responses in opposition to the Motions to Dismiss, and the Company filed papers joining in Aldrich and Murray's opposition. A hearing on the Motions to Dismiss was held on July 14, 2023. On December 28, 2023, the Bankruptcy Court entered an order denying the Motions to Dismiss. On January 11, 2024, the ACC and the individual claimants filed motions with the United States District Court for the District of North Carolina (the District Court) seeking leave to appeal the order denying the Motions to Dismiss (Motions for Leave to Appeal) and to certify the appeals directly to the Court of Appeals for the Fourth Circuit. At a hearing on February 9, 2024, the Bankruptcy Court granted the motions to certify direct appeals to the Fourth Circuit. On April 17, 2024, the Fourth Circuit entered an order denying the petitions for direct appeal. On May 1, 2024, the ACC and the individual claimants filed petitions with the Fourth Circuit seeking rehearingen banc. Aldrich and Murray opposed the petitions and the Fourth Circuit denied the petitions by order dated May 15, 2024. On May 28, 2024, Aldrich and Murray filed their response with the District Court in opposition to the Motions for Leave to Appeal. The FCR filed its response to the Motions for Leave to Appeal on May 29, 2024. The ACC and the individual claimants filed their replies in support of the Motions for Leave to Appeal on June 11, 2024.

Previous wording

For detailed information on the bankruptcy cases of Aldrich and Murray, see Part I, Item 1, "Business - Asbestos-Related Matters," Part I, Item 1A, "Risk Factors - Risks Related to Litigation," Part I, Item 3, "Legal Proceedings," and Part II, Item 8, Consolidated Financial Statements, Note 1, "Description of Company," and Note 20, "Commitments and Contingencies."

Current wording

For detailed information on the bankruptcy cases of Aldrich and Murray, see Part I, Item 1, "Business - Asbestos-Related Matters," Part I, Item 1A, "Risk Factors - Risks Related to Litigation," Part I, Item 3, "Legal Proceedings," and Part II, Item 8, Consolidated Financial Statements, and Note 20, "Commitments and Contingencies."

Previous wording

We are a global corporation with worldwide operations. As a global business, our operations are affected by worldwide, regional and industry-specific economic factors as well as political and social factors wherever we operate or do business. Our geographic diversity and the breadth of our product and services portfolios have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results.

Current wording

We are a global corporation with worldwide operations. As a global business, our operations are affected by worldwide, regional and industry-specific economic factors as well as geopolitical, environmental and social factors wherever we operate or do business. Our geographic diversity and the breadth of our products and services portfolios have helped mitigate the impact of any one industry or the economy of any single country on our consolidated operating results.

Previous wording

Given our broad range of products manufactured and geographic markets served, management uses a variety of factors to predict the outlook for the Company. We monitor key competitors and customers in order to gauge relative performance and the outlook for the future. We regularly perform detailed evaluations of the different market segments we are serving to proactively detect trends and to adapt our strategies accordingly, including potential triggers and actions to be taken under recessionary scenarios. In addition, we believe our backlog and order levels are indicative of future revenue and thus are a key measure of anticipated performance.

Current wording

Given our broad range of products manufactured and geographic markets served, management uses a variety of factors to predict the outlook for the Company. We monitor key competitors and customers in order to gauge relative performance and the outlook for the future. We regularly perform detailed evaluations of the different market segments we serve to proactively detect trends and to adapt our strategies accordingly, including potential triggers and actions to be taken under recessionary scenarios. In addition, we believe our backlog and order levels are indicative of future revenue and thus are a key measure of anticipated performance.

Previous wording

We expect market conditions to remain mixed across our end markets and geographies where we serve customers. Overall Commercial HVAC markets remain strong due to demand for our differentiated customer driven solutions and the benefits of installing energy efficient products and decarbonizing the built environment, aided by supportive policies and regulations especially in the United States and Europe. Transport refrigeration markets are experiencing lower demand as customers adjust to lower freight rates. Residential markets have been normalizing as lead times return to normal and distributors adjust inventory levels.

Current wording

We expect conditions to remain mixed across our served end markets and geographies. Overall Commercial HVAC markets in Americas and EMEA remain strong due to demand for our differentiated customer driven solutions and the benefits of installing energy efficient products and decarbonizing the built environment. In Asia, markets are more dynamic, with weak macro-economic conditions driving soft demand in China and more stable macro-economic conditions driving modest demand in the rest of Asia. Transport refrigeration markets are experiencing lower demand as freight rates remain low, particularly in the United States. Residential markets in the United States have improved in 2024 but are undergoing a regulatory transition which could bring short-term variation in demand, and uncertainties remain from economic risks and higher interest rates.

Previous wording

We continue to see material, wage and energy inflation impact our cost structure. However, disruptions in the global supply chain and resource constraints have improved throughout the year. Our performance may be impacted by future developments that are uncertain. Geopolitical risks and macroeconomic events could cause disruptions to operations, supply chains and end markets, tightening credit conditions, higher interest rates, global banking uncertainty and the possibility of deteriorating overall economic conditions which could negatively impact our business.

Current wording

We continue to see material and wage inflation impact our cost structure. Our performance may be impacted by future developments that are uncertain. Geopolitical risks and macroeconomic events could cause disruptions to operations, supply chains, end markets, financial markets and overall economic conditions which could negatively impact our business.

Previous wording

We believe we have a solid foundation of global brands that are highly differentiated in all of our major product lines. Our geographic mix and the diversity of our portfolio, coupled with our large installed product base, provides growth opportunities from replacement demand and within our service revenue stream. In addition, we are investing substantial resources to innovate and develop new products and services which we expect to drive future growth.

Current wording

We believe we have a solid foundation of global brands that are highly differentiated in all of our major product lines. Our geographic mix, diversity of our portfolio, and our large installed product base, provide growth opportunities from replacement demand and within our service revenue streams. Additionally, we are investing substantial resources to innovate and develop new products and services which we expect to drive future growth.

Previous wording

We define organic revenue as net revenues adjusted for the impact of currency, acquisitions and divestitures. Organic revenue is not defined under generally accepted accounting principles in the United States of America (GAAP) and may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for revenue as determined in accordance with GAAP. Selected references are made to revenue growth on an organic basis so that certain financial results can be viewed without the impact of fluctuations in foreign currency rates and with the impacts of acquisitions, thereby providing comparisons of operation performance from period to period of the business that we have owned during both periods presented. We believe organic revenue growth provides investors with useful supplemental information about our revenues in both periods presented.

Current wording

We define organic revenue as net revenues adjusted for the impact of currency, acquisitions and divestitures. Organic revenue is not defined under U.S. Generally Accepted Accounting Principles (GAAP) and may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for revenue as determined in accordance with GAAP. Selected references are made to revenue growth on an organic basis so that certain financial results can be viewed without the impacts of fluctuations in foreign currency rates and acquisitions, thereby providing comparisons of operating performance from period to period of the business that we have owned during both periods presented. We believe organic revenue growth provides investors with useful supplemental information about our revenues in both periods presented.

Previous wording

Management measures segment operating performance based on net earnings excluding interest expense, income taxes, depreciation and amortization, restructuring, non-cash adjustment for contingent consideration, insurance settlements on property claims, merger and acquisition related costs, impairment of an equity investment, unallocated corporate expenses and discontinued operations (Segment Adjusted EBITDA). Segment Adjusted EBITDA is not defined under GAAP and may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for net earnings or other results reported in accordance with GAAP. We believe Segment Adjusted EBITDA provides the most relevant measure of profitability as well as earnings power and the ability to generate cash. This measure is a useful financial metric to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business and we use this measure for business planning purposes. Segment Adjusted EBITDA also provides a useful tool for assessing the comparability between periods and our ability to generate cash, service debt and undertake capital expenditures because it eliminates non-cash charges such as depreciation and amortization expense.

Current wording

We define Segment Adjusted EBITDA as net earnings excluding interest expense, income taxes, depreciation and amortization, restructuring, non-cash adjustments for contingent consideration, merger and acquisition-related costs, unallocated corporate expenses, discontinued operations and other non-recurring items. Segment Adjusted EBITDA, and ratios based on it, are used in the development of annual operating plans, including capital expenditure and operational budgets, and in measuring performance against targets for purposes of incentive compensation. Segment Adjusted EBITDA also provides a useful tool for assessing the operating performance and comparability between periods and our ability to generate cash because it excludes the impact of certain non-cash or non-recurring items that can vary significantly from period to period. Segment Adjusted EBITDA is not defined under GAAP and may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for net earnings or other results as determined in accordance with GAAP.

Previous wording

The increase in Net revenues was primarily driven by realization of inflation-based price increases, higher volumes driven by increased end-customer demand within all our reportable segments and incremental revenue from acquisitions, partially offset by an unfavorable impact from foreign currency translation. Refer to “Results by Segment” below for a discussion of Net revenues by segment.

Current wording

The increase in Net revenues was primarily driven by higher volumes as a result of stronger end-customer demand within our Americas and EMEA segments, realization of price increases and incremental revenue from acquisitions, partially offset by an unfavorable impact from foreign currency translation. Refer to "Results by Segment" below for a discussion of Net revenues by segment.

Previous wording

Selling and administrative expensesfor the year ended December 31, 2023 increased by 16.4%, or $417.3 million, compared with the same period of 2022. The increase in Selling and administrative expenses was primarily driven by an increase in human capital costs related to investing in our people, higher sales commissions and merger and acquisition costs, including additional headcount, amortization of intangibles and transaction driven costs. Selling and administrative expenses as a percentage of Net revenues for the year ended December 31, 2023 increased 80 basis points from 15.9% to 16.7%.

Current wording

Selling and administrative expensesfor the year ended December 31, 2024 increased by 20.8%, or $617.2 million, compared with the same period of 2023. The increase in Selling and administrative expenses was primarily driven by an increase in human capital costs related to investing in our people, higher sales commissions, incremental selling and administrative expenses of acquired businesses and higher levels of business reinvestment. Additionally, non-cash adjustments to contingent consideration reduced Selling and administrative expensesfor the years ended December 31, 2024 and December 31, 2023 by $25.0 million and $49.3 million, respectively. Selling and administrative expenses as a percentage of Net revenues for the year ended December 31, 2024 increased 140 basis points from 16.7% to 18.1%.

Previous wording

Interest expense for the year ended December 31, 2023 increased by 4.9% or $11.0 million compared with the same period of 2022 primarily due to the issuance of $700.0 million of 5.250% senior notes due March 2033 and interest costs associated with commercial paper issued during the period, partially offset by the redemption of $700.0 million of 4.250% senior notes due June 2023. We had no commercial paper outstanding as of December 31, 2023.

Current wording

Interest expense for the year ended December 31, 2024 increased by 1.7% or $3.9 million compared with the same period of 2023 primarily due to the issuance of $500 million of 5.100% Senior Notes due in 2034. The increase in interest expense was partially offset by an increase in interest income from short-term investments purchased with proceeds from the debt issuance, which is reported in Other (income)/expense, net. We had no commercial paper outstanding as of December 31, 2024.

Previous wording

The 2022 effective tax rate was 17.3% which was lower than the U.S. Statutory rate of 21% due to a $48.2 million reduction in valuation allowances primarily related to certain net state deferred tax assets resulting from U.S. legal entity restructurings and deferred tax assets associated with foreign tax credits as a result of an increase in the current year amount of creditable foreign source income. Additional tax benefits included in the 2022 effective rate are $12.4 million, net related to the effects of a prepayment of an intercompany obligation in 2021, excess tax benefits from employee share-based payments and earnings in non-U.S. jurisdictions, which in aggregate have a lower effective tax rate. These amounts were partially offset by U.S. state and local taxes and certain non-deductible employee expenses. Revenues from non-U.S. jurisdictions accounted for approximately 28% of our total 2022 revenues, such that a material portion of our pretax income was earned and taxed outside the U.S. at rates ranging from 0% to 38%.

Current wording

The 2024 effective tax rate was 19.4% which was lower than the U.S. Statutory rate of 21% due to excess tax benefits from employee share-based payments and earnings in non-U.S. jurisdictions, which, in aggregate have a lower effective tax rate, and includes the impact of the Organisation for Economic Co-operation and Development (OECD) tax reform initiative (Pillar Two), partially offset by U.S. state and local taxes. Revenues from non-U.S. jurisdictions accounted for approximately 26% of our total 2024 revenues, such that a material portion of our pretax income was earned and taxed outside the U.S. at rates up to 38%. When comparing the results of multiple reporting periods, among other factors, the mix of earnings between U.S. and foreign jurisdictions can cause variability in our overall effective tax rate.

Previous wording

The 2023 effective tax rate was 19.4% which was lower than the U.S. Statutory rate of 21% due to a net $30.3 million reduction in valuation allowances primarily related to deferred tax assets associated with both foreign tax credits and operations of international subsidiaries. Additional items that impact the effective tax rate are excess tax benefits from employee share-based payments and earnings in non-U.S. jurisdictions, which in aggregate have a lower effective tax rate offset by an impairment of an equity investment, which is currently nondeductible, and U.S. state and local taxes. Revenues from non-U.S. jurisdictions accounted for approximately 28% of our total 2023 revenues, such that a material portion of our pretax income was earned and taxed outside the U.S. at rates ranging from 0% to 38%. When comparing the results of multiple reporting periods, among other factors, the mix of earnings between U.S. and foreign jurisdictions can cause variability in our overall effective tax rate.

Current wording

The 2023 effective tax rate was 19.4% which was lower than the U.S. Statutory rate of 21% due to a $30.3 million reduction in valuation allowances primarily related to deferred tax assets associated with both foreign tax credits and operations of international subsidiaries. Additional items that impact the effective tax rate are excess tax benefits from employee share-based payments and earnings in non-U.S. jurisdictions, which in aggregate have a lower effective tax rate offset by an impairment of an equity investment, and U.S. state and local taxes. Revenues from non-U.S. jurisdictions accounted for approximately 28% of our total 2023 revenues, such that a material portion of our pretax income was earned and taxed outside the U.S. at rates up to 38%. When comparing the results of multiple reporting periods, among other factors, the mix of earnings between U.S. and foreign jurisdictions can cause variability in our overall effective tax rate.

Previous wording

We operate under four regional operating segments designed to create deep customer focus and relevance in markets around the world. The Company determined that its two Europe, Middle East and Africa (EMEA) operating segments meet the aggregation criteria based on similar operating and economic characteristics, resulting in one reportable segment. Therefore, the Company has three regional reportable segments, Americas, EMEA and Asia Pacific. In January 2024, we aligned our operating segments with our three regional reportable segments.

Current wording

We operate under three reportable segments designed to create deep customer focus and relevance in markets around the world. Intercompany sales between segments are immaterial.

Previous wording

The increase inorganic revenue was primarily driven by the realization of inflation-based price increases and higher volumes led by strong demand for both equipment and services within our Commercial HVAC business, partially offset by the normalization of markets within our Residential business and the softening of transport markets.

Current wording

The increase inorganic revenue was primarily driven by higher volumes led by strong demand within both our Commercial HVAC and Residential HVAC businesses and realization of price increases for both equipment and services within our Commercial HVAC business, partially offset by softer transport markets.

Previous wording

Segment Adjusted EBITDA margin for the year ended December 31, 2023 increased by 280 basis points to 19.4% compared to 16.6% for the same period of 2022 primarily due to price realization, gross productivity and higher volumes, partially offset by inflation, lower margin attribution from recent acquisitions, inclusive of integration costs, and continued business reinvestment.

Current wording

Segment Adjusted EBITDA margin for the year ended December 31, 2024 increased by 160 basis points to 20.9% compared to 19.3% for the same period of 2023 primarily due to price realization, gross productivity and higher volumes, partially offset by inflation and continued business reinvestment.

Previous wording

The increase inorganic revenuewas primarily driven by the realization of inflation-based price increases and higher volumes led by strong demand for both equipment and services within our Commercial HVAC business.

Current wording

The increase inorganic revenuewas primarily driven by strong customer demand within our Commercial HVAC business and realization of price increases within both our Commercial HVAC and Transport Refrigeration businesses.

Previous wording

As of December 31, 2023, we had $1,095.3 million of cash and cash equivalents on hand, of which $949.0 million was held by non-U.S. subsidiaries. Cash and cash equivalents held by our non-U.S. subsidiaries are generally available for use in our U.S. operations via intercompany loans, equity infusions or via distributions from direct or indirectly owned non-U.S. subsidiaries for which we do not assert permanent reinvestment. As a result of the Tax Cuts and Jobs Act in 2017, additional repatriation opportunities to access cash and cash equivalents held by non-U.S. subsidiaries have been created. In general, repatriation of cash to the U.S. can be completed with no significant incremental U.S. tax. However, to the extent that we repatriate funds from non-U.S. subsidiaries for which we assert permanent reinvestment to fund our U.S. operations, we would be required to accrue and pay applicable non-U.S. taxes. As of December 31, 2023, we currently have no plans to repatriate funds from subsidiaries for which we assert permanent reinvestment.

Current wording

As of December 31, 2024, we had $1,590.1 million of cash and cash equivalents on hand, of which $1,423.0 million was held by non-U.S. subsidiaries. Cash and cash equivalents held by our non-U.S. subsidiaries are generally available for use in our U.S. operations via intercompany loans, equity infusions or via distributions from direct or indirectly owned non-U.S. subsidiaries for which we do not assert permanent reinvestment. In general, repatriation of cash to the U.S. can be completed with no significant incremental U.S. tax. However, to the extent that we repatriate funds from non-U.S. subsidiaries for which we assert permanent reinvestment to fund our U.S. operations, we would be required to accrue and pay applicable non-U.S. taxes. As of December 31, 2024, we currently have no plans to repatriate funds from subsidiaries for which we assert permanent reinvestment.

Previous wording

Share repurchases are made from time to time in accordance with management's balanced capital allocation strategy, subject to market conditions and regulatory requirements. In February 2022, our Board of Directors authorized the repurchase of up to $3.0 billion of our ordinary shares (2022 Authorization) upon the completion of our $2.0 billion ordinary share repurchase program authorized in 2021 (2021 Authorization). During the year ended December 31, 2023, we repurchased and canceled approximately $669 million of ordinary shares, completing the 2021 Authorization and initiating repurchases under the 2022 Authorization of approximately $469 million of our ordinary shares, leaving $2.5 billion remaining under the 2022 Authorization. Additionally, through January 31, 2024, we repurchased approximately $81 million of our ordinary shares under the 2022 Authorization.

Current wording

Share repurchases are made in accordance with our balanced capital allocation strategy, subject to market conditions and regulatory requirements. In February 2022, our Board of Directors authorized the repurchase of up to $3.0 billion of our ordinary shares (2022 Authorization) and in December 2024, our Board of Directors authorized the repurchase of up to an additional $5.0 billion of our ordinary shares (2024 Authorization) upon the conclusion of the 2022 Authorization. During the year ended December 31, 2024, we repurchased and canceled approximately $1.3 billion of ordinary shares, leaving $1.2 billion remaining under the 2022 Authorization and $5.0 billion remaining under the 2024 Authorization. Additionally, during the period after December 31, 2024 through January 31, 2025, we repurchased approximately $100 million of our ordinary shares under the 2022 Authorization.

Previous wording

We expect to pay a competitive and growing dividend. Since the launch of Trane Technologies in March 2020, we have increased our quarterly share dividend by 42%, from $0.53 to $0.75 per ordinary share, or $2.12 to $3.00 per share annualized. All four 2023 quarterly dividends were paid during the year ended December 31, 2023. In February 2024, our Board of Directors declared an increase in our quarterly share dividend by 12%, from $0.75 to $0.84 per ordinary share, or $3.00 to $3.36 per share annualized starting in the first quarter of 2024.

Current wording

We expect to pay a competitive and growing dividend. Since the launch of Trane Technologies in March 2020, we have increased our quarterly dividend per share by 58%, from $0.53 to $0.84 per ordinary share, or $2.12 to $3.36 per share annualized. All four 2024 quarterly dividends were paid during the year ended December 31, 2024. In February 2025, our Board of Directors declared an increase in our quarterly share dividend by 12%, from $0.84 to $0.94 per ordinary share, or $3.36 to $3.76 per share annualized starting in the first quarter of 2025.

Previous wording

We continue to actively manage and strengthen our business portfolio to meet the current and future needs of our customers. We achieve this partly through engaging in research and development and sustaining activities and partly through acquisitions. Sustaining activities include costs incurred to reduce production costs, improve existing products, create custom solutions for customers and provide support to our manufacturing facilities. Our research and development and sustaining costs account for approximately two percent of annual Net revenues. Each year, we make investments in new product development and new technology innovation as they are key factors in achieving our strategic objectives as a leader in the climate sector. In addition, we make investments in technology and business for our operational sustainability programs.

Current wording

We continue to actively manage and strengthen our business portfolio to meet the current and future needs of our customers. We achieve this partly through engaging in research and development and sustaining activities and partly through acquisitions. Sustaining activities include costs incurred to reduce production costs, improve existing products, create custom solutions for customers and provide support to our manufacturing facilities. Each year, we make investments in new product development and new technology innovation as they are key factors in achieving our strategic objectives as a leader in the climate sector. In addition, we make investments in technology and business for our operational sustainability programs. Our research and development and sustaining costs account for approximately 2% of annual Net revenues.

Previous wording

In pursuing our business strategy, we routinely conduct discussions, evaluate targets and enter into agreements regarding possible acquisitions, divestitures, joint ventures and equity investments. Since 2020, we acquired several businesses, entered into joint ventures and invested in companies that complement existing products and services further enhancing our product portfolio. During the years ended December 31, 2023 and December 31, 2022, we deployed capital of approximately $881 million and $256 million, respectively, attributable to acquisitions and equity investments.

Current wording

In pursuing our business strategy, we routinely conduct discussions, evaluate targets and enter into agreements regarding possible acquisitions, divestitures, joint ventures and equity investments. We have acquired several businesses, entered into joint ventures and invested in companies that complement existing products and services further enhancing our product portfolio. We deployed capital of approximately $197 million and $881 million to acquisitions and equity investments completed during the years ended December 31, 2024 and December 31, 2023, respectively. In 2024, we committed capital of approximately $470 million attributable to acquisitions and equity investments that were signed in 2024 and were closed in 2024 or in January 2025.

Previous wording

We incur costs associated with restructuring initiatives intended to result in improved operating performance, profitability and working capital levels. Actions associated with these initiatives may include workforce reductions, improving manufacturing productivity, realignment of management structures and rationalizing certain assets. Post separation, we have exceeded our goal of $300 million in total annual savings under our transformation initiatives through December 31, 2023. In order to achieve these cost savings, we incurred approximately $134 million of costs cumulatively through December 31, 2023. We believe that our existing cash flow, committed credit lines and access to the capital markets will be sufficient to fund share repurchases, dividends, research and development, sustaining activities, business portfolio changes and ongoing restructuring actions.

Current wording

We incur costs associated with restructuring initiatives intended to result in improved operating performance, profitability and working capital levels. Actions associated with these initiatives may include workforce reductions, improving manufacturing productivity, realignment of management structures and rationalizing certain assets. We believe that our existing cash balances, anticipated cash flow from operations, committed credit lines and access to the capital markets will be sufficient to fund share repurchases, dividends, research and development, sustaining activities, business portfolio changes and ongoing restructuring actions.

Previous wording

Certain of our subsidiaries entered into Funding Agreements with Aldrich and Murray 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. During the third quarter of 2021, Aldrich and Murray filed a motion with the Bankruptcy Court to create a $270.0 million QSF. The funds held in the QSF would be available to provide funding for the Section 524(g) Trust upon effectiveness of the Plan. On January 27, 2022, the Bankruptcy Court granted the request to fund the QSF, which was funded on March 2, 2022.

Current wording

Certain of our subsidiaries entered into Funding Agreements with Aldrich and Murray 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. During the third quarter of 2021, Aldrich and Murray filed a motion with the Bankruptcy Court to create a $270.0 million qualified settlement fund (QSF). The funds held in the QSF would be available to provide funding for the Section 524(g) Trust upon effectiveness of the Plan. On January 27, 2022, the Bankruptcy Court granted the request to fund the QSF, which was funded on March 2, 2022.

Previous wording

As of December 31, 2023, our short-term obligations primarily consist of current maturities of $499.4 million of long-term debt that matures in November 2024 and $295.0 million of fixed rate debentures that contain a put feature that the holders may exercise on each anniversary of the issuance date. If exercised, we are obligated to repay in whole or in part, at the holder’s option, the outstanding principal amount (plus accrued and unpaid interest) of the debentures held by the holder. In November 2023, we paid $45.8 million of principal to holders who elected to exercise their put options. Holders who had the option to exercise puts up to $37.2 million for settlement in February 2024 did not exercise such option. Holders will have the option to exercise puts up to $257.8 million for settlement in November 2024. We also maintain a commercial paper program which is used for general corporate purposes. Under the program, the maximum aggregate amount of unsecured commercial paper notes available to be issued, on a private placement basis, is $2.0 billion as of December 31, 2023. We had no commercial paper outstanding at December 31, 2023 and December 31, 2022. See Note 7, "Debt and Credit Facilities", to the Consolidated Financial Statements for additional information regarding the terms of our short-term obligations.

Current wording

As of December 31, 2024, our short-term obligations primarily consist of current maturities of $157.2 million that mature in June 2025 and $295.0 million of fixed rate debentures that contain a put feature that the holders may exercise on each anniversary of the issuance date. If exercised, we are obligated to repay in whole or in part, at the holder's option, the outstanding principal amount (plus accrued and unpaid interest) of the debentures held by the holder. In accordance with notice requirements as specified in the offering documents, holders had the option to exercise puts up to $37.2 million for settlement in February 2025 but did not exercise such option. In accordance with notice requirements as specified in the offering documents, holders will have the option to exercise puts up to $257.8 million for settlement in November 2025. We also maintain a commercial paper program which is used for general corporate purposes. Under the program, the maximum aggregate amount of unsecured commercial paper notes available to be issued, on a private placement basis, is $2.0 billion as of December 31, 2024. We had no commercial paper outstanding at December 31, 2024 and December 31, 2023. See Note 7, "Debt and Credit Facilities," to the Consolidated Financial Statements for additional information regarding the terms of our short-term obligations.

Previous wording

Net cash provided by continuing operating activities for the year ended December 31, 2023 was $2,426.8 million, of which net income provided $2,499.6 million after adjusting for non-cash transactions. Net cash provided by continuing operating activities for the year ended December 31, 2022 was $1,698.7 million, of which net income provided $2,248.8 million after adjusting for non-cash transactions. The year-over-year increase in net cash from continuing operating activities was primarily due to higher net earnings and improved cash conversion cycle. Additionally, during the year ended December 31, 2022, we funded the continuing operations component of the QSF for $91.8 million and made a compensation related payment to a retired executive.

Current wording

Net cash provided by continuing operating activities for the year ended December 31, 2024 was $3,177.7 million, of which net income provided $2,938.8 million after adjusting for non-cash transactions. Net cash provided by continuing operating activities for the year ended December 31, 2023 was $2,426.8 million, of which net income provided $2,499.6 million after adjusting for non-cash transactions. The year-over-year increase in net cash from continuing operating activities was primarily due to higher net earnings and an improved cash conversion cycle.

Previous wording

Cash flows from investing activities represents inflows and outflows regarding the purchase and sale of assets. Primary activities associated with these items include capital expenditures, proceeds from the sale of property, plant and equipment, acquisitions, investments in joint ventures and divestitures. During the year ended December 31, 2023, net cash used in investing activities from continuing operations was $1,172.2 million. The primary drivers of the usage was attributable to acquisition of businesses, which totaled $862.8 million, net of cash acquired, and capital expenditures of $300.7 million. During the year ended December 31, 2022, net cash used in investing activities from continuing operations was $539.8 million. The primary drivers of the usage was attributable to capital expenditures of $291.8 million and acquisition of businesses, which totaled $234.7 million, net of cash acquired.

Current wording

Cash flows from investing activities represents inflows and outflows regarding the purchase and sale of assets. Primary activities associated with these items include capital expenditures, proceeds from the sale of property, plant and equipment, acquisitions, funding of joint ventures and other equity investments and purchases and sales of short-term investments. During the year ended December 31, 2024, net cash used in investing activities from continuing operations was $562.9 million. The primary drivers of the usage were attributable to capital expenditures of $370.6 million and acquisitions of businesses of $180.3 million, net of cash acquired. During the year ended December 31, 2023, net cash used in investing activities from continuing operations was $1,172.2 million. The primary drivers of the usage was attributable to acquisition of businesses, which totaled $862.8 million, net of cash acquired, and capital expenditures of $300.7 million.

Previous wording

Cash flows from financing activities represent inflows and outflows that account for external activities affecting equity and debt. Primary activities associated with these actions include paying dividends to shareholders, repurchasing our own shares, issuing our stock and debt transactions. During the year ended December 31, 2023, net cash used in financing activities from continuing operations was $1,350.3 million. The primary drivers of the outflow related to dividends paid to ordinary shareholders of $683.7 million and the repurchase of $669.3 million in ordinary shares. In addition, we received $699.1 million in proceeds from the issuance of 5.250% senior notes due March 2033 which was offset by the redemption of $700.0 million of senior notes due June 2023. During the year ended December 31, 2022, net cash used in financing activities from continuing operations was $1,852.2 million. The primary drivers of the outflow related to the repurchase of $1,200.2 million in ordinary shares and dividends paid to ordinary shareholders of $620.2 million.

Current wording

Cash flows from financing activities represent inflows and outflows that account for external activities affecting equity and debt. Primary activities associated with these actions include paying dividends to shareholders, repurchasing our own shares, net proceeds from debt issuances and proceeds from shares issued in connection with incentive plans. During the year ended December 31, 2024, net cash used in financing activities from continuing operations was $2,020.6 million. The primary drivers of the outflow related to the repurchase of $1,280.8 million in ordinary shares and dividends paid to ordinary shareholders of $757.5 million. In addition, we received $498.5 million in proceeds from the issuance of 5.100% Senior Notes due 2034, which was offset by the redemption of $500.0 million of 3.550% Senior Notes that matured in November 2024. During the year ended December 31, 2023, net cash used in financing activities from continuing operations was $1,350.3 million. The primary drivers of the outflow related to dividends paid to ordinary shareholders of $683.7 million and the repurchase of $669.3 million in ordinary shares. In addition, we received $699.1 million in proceeds from the issuance of 5.250% Senior Notes due March 2033 which was offset by the redemption of $700.0 million of Senior Notes due June 2023.

Previous wording

Free cash flow is a non-GAAP measure and defined as Net cash provided by (used in) continuing operating activities adjusted for capital expenditures, cash payments for restructuring, transformation costs, merger and acquisition (M&A) related costs, the continuing operations component of the QSF funding and payout of executive compensation less insurance settlements on property claims. This measure is useful to management and investors because it is consistent with management's assessment of our operating cash flow performance. The most comparable GAAP measure to free cash flow is Net cash provided by (used in) continuing operating activities. Free cash flow may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for Net cash provided by (used in) continuing operating activities in accordance with GAAP.

Current wording

Free cash flow is a non-GAAP measure and defined as Net cash provided by (used in) continuing operating activities adjusted for capital expenditures, cash payments for restructuring, legacy legal liability, transformation costs and merger and acquisition (M&A) related costs less insurance settlements on property claims and an adjustment for our special three-year Outperformance Incentive Program. This measure is useful to management and investors because it is consistent with management's assessment of our operating cash flow performance. The most comparable GAAP measure to free cash flow is Net cash provided by (used in) continuing operating activities. Free cash flow may not be comparable to similarly-titled measures used by other companies and should not be considered a substitute for Net cash provided by (used in) continuing operating activities in accordance with GAAP.

Previous wording

Our investment objective in managing defined benefit plan assets is to ensure that all present and future benefit obligations are met as they come due. We seek to achieve this goal while trying to mitigate volatility in plan funded status, contribution and expense by better matching the characteristics of the plan assets to that of the plan liabilities. Our approach to asset allocation is to increase fixed income assets as the plan's funded status improves. We monitor plan funded status and asset allocation regularly in addition to investment manager performance. In addition, we monitor the impact of market conditions on our defined benefit plans on a regular basis. None of our defined benefit pension plans have experienced a significant impact on their liquidity due to market volatility. See Note 11, "Pension and Postretirement Benefits Other Than Pensions", to the Consolidated Financial Statements for additional information regarding pensions.

Current wording

Our investment objective in managing defined benefit plan assets is to ensure that all present and future benefit obligations are met as they come due. We seek to achieve this goal while trying to mitigate volatility in plan funded status, contribution and expense by better matching the characteristics of the plan assets to that of the plan liabilities. We use a dynamic approach to asset allocation to increase fixed income assets as the plan's funded status improves. We monitor plan funded status and asset allocation regularly in addition to investment manager performance. In addition, we monitor the impact of market conditions on our defined benefit plans on a regular basis. None of our defined benefit pension plans have experienced a significant impact on their liquidity due to market volatility. See Note 11, "Pension and Postretirement Benefits Other Than Pensions," to the Consolidated Financial Statements for additional information regarding pensions.

Previous wording

Capital expenditures were $300.7 million, $291.8 million and $223.0 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our investments continue to improve manufacturing productivity, reduce costs, provide environmental enhancements, upgrade information technology infrastructure and security and advanced technologies for existing facilities. The capital expenditure program for 2024 is estimated to be approximately 2.5% of revenues, including amounts approved in prior periods. Many of these projects are subject to review and cancellation at our option without incurring substantial charges.

Current wording

Capital expenditures were $370.6 million, $300.7 million and $291.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. Our investments continue to improve manufacturing productivity, expand capacity, reduce costs, provide environmental enhancements, upgrade information technology infrastructure and security and advanced technologies for existing facilities. The capital expenditure program for 2025 is estimated to be approximately 2.0% of revenues, including amounts approved in prior periods. Many of these projects are subject to review and cancellation at our option without incurring substantial charges.

Previous wording

Financing rates and conditions associated with future borrowings under our commercial paper program or term debt offerings will be affected by general financing conditions and our credit ratings. On April 4, 2023, Moody's announced that it upgraded our long-term credit rating from Baa2 to Baa1 and put the Company on positive outlook. On August 18, 2023, Standard and Poor's announced that it upgraded our long-term credit rating from BBB to BBB+. As of December 31, 2023, our credit ratings were as follows:

Current wording

Financing rates and conditions associated with future borrowings under our commercial paper program or term debt offerings will be affected by general financing conditions and our credit ratings. On April 10, 2024, Moody's announced that it upgraded our long-term credit rating from Baa1 to A3 and put the Company on positive outlook. On October 31, 2024, Standard and Poor's announced that it revised our long-term credit rating from BBB+ stable to BBB+ positive. As of December 31, 2024, our credit ratings were as follows:

Previous wording

At December 31, 2023, we had outstanding aggregate long-term debt principal payments of $4,809.8 million, with $802.5 million payable within 12 months. The amount payable within 12 months includes $295.0 million of debt redeemable at the option of the holder. The scheduled maturities of these bonds range between 2027 and 2028. Future interest payments on long-term debt total $2,324.5 million, with $218.2 million payable within 12 months. See Note 7, "Debt and Credit Facilities", to the Consolidated Financial Statements for additional information regarding debt.

Current wording

At December 31, 2024, we had outstanding aggregate long-term debt principal payments of $4,802.2 million, with $452.2 million payable within 12 months. The amount payable within 12 months includes $295.0 million of debt redeemable at the option of the holder. The scheduled maturities of these bonds range between 2027 and 2028. Future interest payments on long-term debt total $2,348.6 million, with $220.5 million payable within 12 months. See Note 7, "Debt and Credit Facilities," to the Consolidated Financial Statements for additional information regarding debt.

Previous wording

Purchase obligations include commitments under legally enforceable contracts or purchase orders. At December 31, 2023, we had purchase obligations of $1,096.1 million, which are primarily payable within 12 months.

Current wording

Purchase obligations include commitments under legally enforceable contracts or purchase orders. At December 31, 2024, we had purchase obligations of $1,161.2 million, which are primarily payable within 12 months.

Previous wording

It is our objective to contribute to the pension plans to ensure adequate funds are available in the plans to make benefit payments to plan participants and beneficiaries when required. We currently expect that we will contribute approximately $61 million to our enterprise plans worldwide in 2024. The timing and amounts of future contributions are dependent upon the funding status of the plan, which is expected to vary as a result of changes in interest rates, returns on underlying assets, and other factors. See Note 11, "Pensions and Postretirement Benefits Other Than Pensions", to the Consolidated Financial Statements for additional information regarding pensions.

Current wording

It is our objective to contribute to the pension plans to ensure adequate funds are available in the plans to make benefit payments to plan participants and beneficiaries when required. We currently expect that we will contribute approximately $30 million to our enterprise plans worldwide in 2025. The timing and amounts of future contributions are dependent upon the funding status of the plans, which is expected to vary as a result of changes in interest rates, returns on underlying assets, and other factors. See Note 11, "Pensions and Postretirement Benefits Other Than Pensions," to the Consolidated Financial Statements for additional information regarding pensions.

Previous wording

We fund postretirement benefit costs principally on a pay-as-you-go basis as medical costs are incurred by covered retiree populations. Benefit payments, which are net of expected plan participant contributions and Medicare Part D subsidy, are expected to be approximately $30 million in 2024. See Note 11, "Pensions and Postretirement Benefits Other Than Pensions", to the Consolidated Financial Statements for additional information regarding postretirement benefits other than pensions.

Current wording

We fund postretirement benefit costs principally on a pay-as-you-go basis as medical costs are incurred by covered retiree populations. Benefit payments, which are net of expected plan participant contributions and Medicare Part D subsidy, are expected to be approximately $29 million in 2025. See Note 11, "Pensions and Postretirement Benefits Other Than Pensions," to the Consolidated Financial Statements for additional information regarding postretirement benefits other than pensions.

Previous wording

Each subsidiary debt issuer and guarantor is owned 100% directly or indirectly by the Parent Company. Each guarantee is full and unconditional, and provided on a joint and several basis. There are no significant restrictions of the Parent Company, or any guarantor, to obtain funds from its subsidiaries, such as provisions in debt agreements that prohibit dividend payments, loans or advances to the parent by a subsidiary. The following tables present summarized financial information for the Parent Company and subsidiary debt issuers and guarantors on a combined basis (together, "obligor group") after elimination of intercompany transactions and balances based on the Company’s legal entity ownerships and guarantees outstanding at December 31, 2023. Our obligor groups as of December 31, 2023 were as follows: Obligor group 1 consists of Plc, TT Holdings, TT International, TT Global II, TT Americas, TTFL, TTC HoldCo and TTC; Obligor group 2 consists of Plc, TTFL and TTC.

Current wording

Each subsidiary debt issuer and guarantor is owned 100% directly or indirectly by the Parent Company. Each guarantee is full and unconditional, and provided on a joint and several basis. There are no significant restrictions of the Parent Company, or any guarantor, to obtain funds from its subsidiaries, such as provisions in debt agreements that prohibit dividend payments, loans or advances to the parent by a subsidiary. The following tables present summarized financial information for the Parent Company and subsidiary debt issuers and guarantors on a combined basis (together, "obligor group") after elimination of intercompany transactions and balances based on the Company's legal entity ownerships and guarantees outstanding at December 31, 2024. Our obligor groups as of December 31, 2024 were as follows: Obligor group 1 consists of Plc, TT Holdings, TT Global II, TT International, TT Americas, TTFL, TTC HoldCo and TTC; Obligor group 2 consists of Plc, TTFL and TTC.

Previous wording

As quoted market prices are not available for our reporting units, the calculation of their estimated fair value is determined using three valuation techniques: a discounted cash flow model (an income approach), a market-adjusted multiple of earnings and revenues (a market approach), and a similar transactions method (also a market approach). The discounted cash flow approach relies on our estimates of future cash flows and explicitly addresses factors such as timing, growth and margins, with due consideration given to forecasting risk. The multiple of earnings and revenues approach reflects the market's expectations for future growth and risk, with adjustments to account for differences between the guideline publicly traded companies and the subject reporting units. The similar transactions method considers prices paid in transactions that have recently occurred in our industry or in related industries. These valuation techniques are weighted 50%, 40% and 10%, respectively.

Current wording

As quoted market prices are not available for our reporting units, the calculation of their estimated fair value is determined using three valuation techniques: a discounted cash flow model (an income approach), a market-adjusted multiple of earnings or revenues (a market approach), and a similar transactions method (also a market approach). The discounted cash flow approach relies on our estimates of future cash flows and explicitly addresses factors such as timing, revenue growth rates, and margins, with due consideration given to forecasting risk. The market-adjusted multiple of earnings or revenues approach reflects the market's expectations for future growth and risk, with adjustments to account for differences between the guideline publicly traded companies and the subject reporting units. The similar transactions method considers prices paid in transactions that have recently occurred in our industry or in related industries. These valuation techniques are weighted 50%, 40% and 10%, respectively.