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Ingersoll Rand Reports Third-Quarter 2020 Results

Important note: On February 29, 2020, Gardner Denver Holdings, Inc. closed on the acquisition of Ingersoll-Rand plc’s Industrial segment (“the Transaction”) and assumed the name Ingersoll Rand Inc. “Reported results” reflect the respective contributions from each company based on the close of the Transaction. For comparative purposes, management has also presented herein Supplemental Financial Information as if the Transaction was completed on January 1, 2018. All comparisons provided are on a year-over-year basis unless otherwise noted.


  • Reported revenues of $1.3 billion
  • Reported net income attributable to Ingersoll Rand Inc. of $30 million, or earnings of $0.07 per share, including $177 million of pre-tax amortization, restructuring and related business transformation costs, acquisition-related expenses and other adjustments
    • Adjusted Net Income of $168 million, or $0.40 per share
  • Adjusted EBITDA of $284 million with a margin of 21.3%
  • Reported operating cash flow of $187 million and free cash flow of $179 million, both including Transaction-related outflows of $26 million
  • Liquidity of $2.3 billion as of September 30, 2020, including $1.3 billion of cash on hand and undrawn capacity of $1.0 billion under available credit facilities
  • Strong margin improvement fueled by the Ingersoll Rand Execution Excellence Process (IRX) to drive daily management execution of synergy and productivity initiatives; executed a total of approximately $150 million of annualized cost synergies, including approximately $100 million of in-year savings, and on track to deliver total cost synergies of $250 million by the end of year three after the completion of the Transaction1
  • Awarded $150 million equity grant to global workforce with value equal to 20% of an employee’s annual base cash compensation; bolsters our ownership culture where employees can benefit from creating value as they contribute to net working capital improvement across the enterprise2

DAVIDSON, N.C.--(BUSINESS WIRE)--Ingersoll Rand Inc. (NYSE: IR) reported third-quarter revenues of $1.3 billion up 124% versus prior year as reported revenues, due primarily to the Transaction. Compared to supplemental adjusted revenues of $1.5 billion in 2019, reported revenues declined 10%. Reported net income attributable to Ingersoll Rand Inc. in the quarter was $30 million, or earnings of $0.07 per share, based on share count of 422 million, compared to prior year as reported net income attributable to Ingersoll Rand Inc. of $41 million, or $0.20 per share, based on share count of 209 million. Adjusted Net Income was $168 million, or $0.40 per share, based on share count of 422 million, compared to prior year Supplemental Further Adjusted Net Income of $169 million, or $0.39 per share, based on share count of 420 million. Adjusted EBITDA was $284 million, down 3% from prior year Supplemental Adjusted EBITDA of $294 million and Adjusted EBITDA as a percentage of revenues was 21.3%.

Our third-quarter performance demonstrates the strength of our employees to drive the integration with rigor around IRX, resulting in accelerated growth and margin expansion,” said Vicente Reynal, Chief Executive Officer. “I am pleased with our continued sequential improvement across all of our segments, especially given the challenging macro-environment. We continue to deliver strong free cash flow and improve our liquidity position which will support our investments in future organic and inorganic growth activities. With all our employees recently becoming owners of the company, we now have approximately 16,000 people driving in a common direction to deliver value as shareholders. Looking ahead, I am very excited for the future of Ingersoll Rand as we embark on a multi-year transformation to help make life better for our employees, customers and communities.”

Third-Quarter 2020 Segment Review

(All comparisons against the third quarter of 2019 unless otherwise noted.)

Industrial Technologies and Services Segment: broad range of compressor, vacuum and blower solutions as well as fluid transfer equipment, loading systems, power tools and lifting equipment

  • Reported Revenues of $903 million, up 117% as compared to prior year reported revenues primarily due to the Transaction, and down 8% (9% excluding the impact of FX) as compared to prior year supplemental adjusted revenues due to the impact of COVID-19
  • Reported Orders of $902 million, up 124% as compared to prior year reported orders primarily due to the Transaction and down 7% (8% excluding the impact of FX) as compared to prior year supplemental adjusted orders
  • Reported Segment Adjusted EBITDA of $217 million, up 128% as compared to prior year reported segment Adjusted EBITDA primarily due to the Transaction and up 9% as compared to prior year supplemental segment Adjusted EBITDA
  • Reported Segment Adjusted EBITDA Margin of 24.0%, up 110 basis points as compared to prior year reported segment Adjusted EBITDA margin and up 370 basis points as compared to prior year supplemental segment Adjusted EBITDA margin, fueled by the use of IRX to drive execution and realization of Transaction synergies
  • Core industrial end markets saw gradual sequential improvements, particularly in the Americas and EMEIA, with orders and revenue up 14% and 9%, respectively, as compared to the second quarter. Revenue for total compressor offerings (including oil free, oil lubricated, reciprocating and centrifugal products), which represents approximately 65% of the total segment, was down low-single digits as compared to prior year. Revenue in Power Tools and Lifting performed in line with expectations, down slightly more than 25%.

Precision and Science Technologies Segment: highly specialized gas, fluid management systems, liquid and precision syringe pumps and compressors

  • Reported Revenues of $210 million, up 158% as compared to prior year reported revenues primarily due to the Transaction, and up 1% (down 1% excluding the impact of FX) as compared to prior year supplemental adjusted revenues
  • Reported Orders of $194 million, up 151% as compared to prior year reported orders primarily due to the Transaction and down 7% (9% excluding the impact of FX) as compared to prior year supplemental adjusted orders
  • Reported Segment Adjusted EBITDA of $65 million, up 155% as compared to prior year reported segment Adjusted EBITDA primarily due to the Transaction and up 14% as compared to prior year supplemental segment Adjusted EBITDA
  • Reported Segment Adjusted EBITDA Margin of 30.7%, down 40 basis points as compared to prior year reported segment Adjusted EBITDA margin and up 350 basis points as compared to prior year supplemental segment Adjusted EBITDA margin, driven by stabilizing revenue base coupled with IRX execution to deliver synergies and productivity improvements
  • Segment revenue increased 1% driven primarily by strong double-digit growth from both medical pumps as well as the Dosatron product line, which serves niche end markets such as animal health, water treatment and food sanitation, partially offset by expected declines for products in general industrial end markets
  • During the quarter, the company completed the acquisition of Albin Pump SAS, a leading manufacturer of electric peristaltic pumps, serving strategic niche end markets such as water, chemical processing and food and beverage

Specialty Vehicle Technologies Segment: Club Car® golf, utility and consumer low-speed vehicles

  • Reported Revenues3 of $191 million, up 1% with minimal FX impact, as compared to prior year supplemental adjusted revenues
  • Reported Orders3 of $247 million, up 30% (29% excluding the impact of FX), as compared to prior year supplemental adjusted orders
  • Reported Segment Adjusted EBITDA of $38 million, up 36% as compared to prior year supplemental segment Adjusted EBITDA of $28 million
  • Reported Segment Adjusted EBITDA Margin was 19.7%, up 510 basis points as compared to prior year supplemental segment Adjusted EBITDA margin, driven by favorable product mix and the use of IRX to accelerate productivity initiatives
  • Strong orders momentum, driven by record demand for consumer vehicles as well as growth in golf and aftermarket product offerings, was partially offset by expected declines in commercial vehicles

High Pressure Solutions Segment: diverse range of positive displacement pumps, integrated systems, consumables and associated aftermarket parts and services largely for use in the upstream oil and gas market

  • Reported Revenues of $32 million, down 68% with minimal impact from FX
  • Reported Orders of $20 million, down 81% with minimal impact from FX
  • Reported Segment Adjusted EBITDA of $1 million, down 95%
  • Reported Segment Adjusted EBITDA Margin was 4.1%, down 23.0 percentage points as compared to prior year segment Adjusted EBITDA margin and down 22.8 percentage points as compared to prior year supplemental segment Adjusted EBITDA margin
  • Despite ongoing end market challenges in the upstream oil and gas market, orders and revenue were up 58% and 47% sequentially from the second quarter, respectively; delivered positive Adjusted EBITDA in the quarter due to ongoing productivity improvements and proactive restructuring efforts

Transaction Integration Update

As part of the company’s ongoing strategy to drive increased engagement and an ownership mindset across the entire employee base, Ingersoll Rand announced its all employee equity grant on September 21. The grant totaled to $150 million dollars and was distributed to nearly 16,000 employees worldwide. The company will be deploying ownership training in the fourth quarter with the goal of educating our employee-shareholders on how to drive net working capital improvement across the enterprise.

The company remains on track to deliver $250 million of synergy-related cost savings by the third anniversary of the Transaction. To date, approximately $150 million of annualized cost actions have been executed with expected in-year 2020 savings of approximately $100 million.4

Balance Sheet and Cash Flow

The company remains in a strong financial position with ample liquidity of $2.3 billion, which is an increase of approximately $730 million from the end of the first quarter. Free cash flow continues to increase. On a reported basis, Ingersoll Rand generated $187 million of cash flow from operating activities and invested $8 million in capital expenditures, resulting in free cash flow of $179 million, compared to cash flow from operating activities of $114 million and free cash flow of $105 million in the year-ago period. Operating cash flows in the third quarter of 2020 include outflows of approximately $26 million related to synergy delivery costs and stand-up related outflows. Net debt to Supplemental Adjusted EBITDA leverage was 2.5x for the third quarter, which was a 0.1x improvement as compared to prior quarter.

2020 Outlook

Due to the continued uncertainty of current economic conditions associated with COVID-19 and its impact on end markets, Ingersoll Rand is not providing 2020 guidance at this time. The company will look to provide annual guidance at an appropriate time.

Conference Call

Ingersoll Rand will host a live earnings conference call to discuss the third-quarter results on Tuesday, November 3, 2020 at 10 a.m. (Eastern Time). To participate in the call, please dial 1-833-502-0496, domestically, or 1-778-560-2573, internationally, and use conference ID, 9265953, or ask to be joined into the Ingersoll Rand call. A real-time audio webcast of the presentation can be accessed via the Events and Presentations section of the Ingersoll Rand Investor Relations website (https://investors.irco.com), where related materials will be posted prior to the conference call. A replay of the webcast will be available after conclusion of the conference and can be accessed on the Ingersoll Rand Investor Relations website.

1 The company expects to incur approximately $450 million of expense in connection with both achieving these cost synergies and the associated stand-up of the combined company.
2 All permanent employees in good standing were eligible for the grant except senior management employees who are part of the company’s annual long-term incentive plan and employees in Vietnam and Philippines where local laws make granting equity prohibitive. The grant value was calculated using a price of $34.63/share, which was the closing price on the grant date of August 20, 2020.
3 Prior year comparisons for Specialty Vehicle Technologies Segment not available on a reported basis.
4 The company expects to incur approximately $450 million of expense in connection with both achieving these cost synergies and the associated stand-up of the combined company.

Forward-Looking Statements

This news release contains “forward-looking statements” as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended by the Private Securities Litigation Reform Act of 1995, including statements regarding the completed Transaction (the “Transaction”) between Ingersoll-Rand plc’s Industrial segment (“Ingersoll Rand Industrial”) and the Company (f/k/a Gardner Denver Holdings, Inc. or “Gardner Denver”). These forward-looking statements generally are identified by the words “believe,” “project,” “expect,” “anticipate,” “estimate,” “forecast,” “outlook,” “target,” “endeavor,” “seek,” “predict,” “intend,” “strategy,” “plan,” “may,” “could,” “should,” “will,” “would,” “will be,” “on track to” “will continue,” “will likely result,” or the negative thereof or variations thereon or similar terminology generally intended to identify forward-looking statements. All statements, other than historical facts, including, but not limited to, statements regarding the expected benefits of the Transaction, including future financial and operating results and strategic benefits, the tax consequences of the Transaction, the combined company’s plans, objectives, expectations and intentions, legal, economic and regulatory conditions, the future impact of the ongoing coronavirus (COVID-19) pandemic on the Company’s business and any assumptions underlying any of the foregoing, are forward-looking statements.

These forward-looking statements are based on Ingersoll Rand’s current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from these current expectations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) the impact on the Company’s business, suppliers and customers and global economic conditions of the COVID-19 pandemic (2) unexpected costs, charges or expenses resulting from the Transaction; (3) uncertainty of the expected financial performance of the combined company following completion of the Transaction; (4) failure to realize the anticipated benefits of the Transaction, including as a result of delay in integrating the businesses of Gardner Denver and Ingersoll Rand Industrial; (5) the ability of the combined company to implement its business strategy; (6) difficulties and delays in the combined company achieving revenue and cost synergies; (7) inability of the combined company to retain and hire key personnel; (8) evolving legal, regulatory and tax regimes; (9) changes in general economic and/or industry specific conditions; (10) actions by third parties, including government agencies; and (11) adverse impact on our operations and financial performance due to natural disaster, catastrophe, pandemic or other event events outside of our control. Additional factors that could cause Ingersoll Rand’s results to differ materially from those described in the forward-looking statements can be found under the section entitled “Risk Factors” in its most recent annual report on Form 10-K filed with the Securities and Exchange Commission (“SEC”), as updated in the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020, as such factors may be updated from time to time in its periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. The foregoing list of important factors is not exclusive.

Any forward-looking statements speak only as of the date of this release. Ingersoll Rand undertakes no obligation to update any forward-looking statements, whether as a result of new information or development, future events or otherwise, except as required by law. Readers are cautioned not to place undue reliance on any of these forward-looking statements.

About Ingersoll Rand Inc.

Ingersoll Rand Inc. (NYSE:IR), driven by an entrepreneurial spirit and ownership mindset, is dedicated to helping make life better for our employees, customers and communities. Customers lean on us for our technology-driven excellence in mission-critical flow creation and industrial solutions across 40+ respected brands where our products and services excel in the most complex and harsh conditions. Our employees develop customers for life through their daily commitment to expertise, productivity and efficiency. For more information, visit www.IRCO.com.

Non-U.S. GAAP Measures of Financial Performance

In addition to consolidated GAAP financial measures, Ingersoll Rand reviews various non-GAAP financial measures, including “Adjusted EBITDA,” “Supplemental Adjusted EBITDA,” “Adjusted Net Income,” “Supplemental Further Adjusted Net Income,” “Supplemental Further Adjusted Diluted EPS,” “Adjusted Diluted EPS,” “Free Cash Flow,” “Supplemental Revenue” and “Incrementals/Decrementals.”

Ingersoll Rand believes Supplemental Revenue, Supplemental Further Adjusted Net Income, Supplemental Further Adjusted Diluted EPS and Supplemental Adjusted EBITDA are helpful supplemental measures to assist management and investors in evaluating the Company’s operating results as they provide supplemental information about the Company’s financial performance on a combined basis as if the Transaction had occurred on January 1, 2018. Ingersoll Rand believes Adjusted EBITDA, Supplemental Adjusted EBITDA, Adjusted Net Income, Supplemental Further Adjusted Net Income, Supplemental Further Adjusted Diluted EPS, Adjusted Diluted EPS and Supplemental Revenue are helpful supplemental measures to assist management and investors in evaluating the Company’s operating results as they exclude certain items that are unusual in nature or whose fluctuation from period to period do not necessarily correspond to changes in the operations of Ingersoll Rand’s business. Adjusted EBITDA represents net income before interest, taxes, depreciation, amortization and certain non-cash, non-recurring and other adjustment items. Supplemental Adjusted EBITDA represents Adjusted EBITDA as if the Transaction had occurred on January 1, 2018. Adjusted Net Income is defined as net income including interest, depreciation and amortization of non-acquisition related intangible assets and excluding other items used to calculate Adjusted EBITDA and further adjusted for the tax effect of these exclusions. Supplemental Further Adjusted Net Income represents Adjusted Net Income as if the Transaction had occurred on January 1, 2018. Ingersoll Rand believes that the adjustments applied in presenting Adjusted EBITDA, Supplemental Adjusted EBITDA, Adjusted Net Income and Supplemental Further Adjusted Net Income are appropriate to provide additional information to investors about certain material non-cash items and about non-recurring items that the Company does not expect to continue at the same level in the future. Adjusted Diluted EPS is defined as Adjusted Net Income divided by Adjusted Diluted Average Shares Outstanding. Supplemental Further Adjusted Diluted EPS is defined as Supplemental Further Adjusted Net Income divided by Adjusted Diluted Average Shares Outstanding as if the Transaction had occurred on January 1, 2018. Supplemental Revenue represents revenue for the Company as if the Transaction had occurred on January 1, 2018. Incrementals/Decrementals are defined as the change in Adjusted EBITDA versus the prior year period divided by the change in revenue versus the prior year period.

Ingersoll Rand uses Free Cash Flow to review the liquidity of its operations. Ingersoll Rand measures Free Cash Flow as cash flows from operating activities less capital expenditures. Ingersoll Rand believes Free Cash Flow is a useful supplemental financial measure for management and investors in assessing the Company’s ability to pursue business opportunities and investments and to service its debt. Free Cash Flow is not a measure of our liquidity under GAAP and should not be considered as an alternative to cash flows from operating activities.

Management and Ingersoll Rand’s board of directors regularly use these measures as tools in evaluating the Company’s operating and financial performance and in establishing discretionary annual compensation. Such measures are provided in addition to, and should not be considered to be a substitute for, or superior to, the comparable measures under GAAP. In addition, Ingersoll Rand believes that Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, Incrementals/Decrementals and Free Cash Flow are frequently used by investors and other interested parties in the evaluation of issuers, many of which also present Adjusted EBITDA, Adjusted Net Income, Adjusted Diluted EPS, and Free Cash Flow when reporting their results in an effort to facilitate an understanding of their operating and financial results and liquidity.

Adjusted EBITDA, Supplemental Adjusted EBITDA, Adjusted Net Income, Supplemental Further Adjusted Net Income, Supplemental Further Adjusted Diluted EPS, Adjusted Diluted EPS, Incrementals/Decrementals, Free Cash Flow and Supplemental Revenue should not be considered as alternatives to net income, diluted earnings per share or any other performance measure derived in accordance with GAAP, or as alternatives to cash flow from operating activities as a measure of our liquidity. Adjusted EBITDA, Supplemental Adjusted EBITDA, Adjusted Net Income, Supplemental Further Adjusted Net Income, Supplemental Further Adjusted Diluted EPS, Adjusted Diluted EPS, Free Cash Flow and Supplemental Revenue have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing Ingersoll Rand’s results as reported under GAAP.

Reconciliations of Adjusted EBITDA, Supplemental Adjusted EBITDA, Adjusted Net Income, Supplemental Further Adjusted Net Income, Supplemental Further Adjusted Diluted EPS, Adjusted Diluted EPS, Free Cash Flow and Supplemental Revenue to their most comparable U.S. GAAP financial metrics for historical periods are presented in the tables below.

INGERSOLL RAND INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; in millions, except per share amounts)

 

 

For the Three Month Period
Ended September 30,

 

For the Nine Month Period
Ended September 30,

 

2020

 

2019

 

2020

 

2019

Revenues

$

1,335.2

 

 

$

596.7

 

 

$

3,399.5

 

 

$

1,846.1

 

Cost of sales

853.2

 

 

375.2

 

 

2,313.0

 

 

1,159.7

 

Gross Profit

482.0

 

 

221.5

 

 

1,086.5

 

 

686.4

 

Selling and administrative expenses

245.6

 

 

95.3

 

 

648.7

 

 

323.0

 

Amortization of intangible assets

114.2

 

 

30.4

 

 

284.0

 

 

92.6

 

Impairment of intangible assets

19.9

 

 

 

 

19.9

 

 

 

Other operating expense, net

28.0

 

 

22.9

 

 

178.6

 

 

43.1

 

Operating Income (Loss)

74.3

 

 

72.9

 

 

(44.7

)

 

227.7

 

Interest expense

28.8

 

 

23.2

 

 

86.7

 

 

68.0

 

Loss on extinguishment of debt

 

 

 

 

2.0

 

 

0.2

 

Other income, net

(2.6

)

 

(0.6

)

 

(5.1

)

 

(3.1

)

Income (Loss) Before Income Taxes

48.1

 

 

50.3

 

 

(128.3

)

 

162.6

 

Provision for income taxes

18.2

 

 

9.0

 

 

55.2

 

 

29.2

 

Net Income (Loss)

$

29.9

 

 

$

41.3

 

 

$

(183.5

)

 

$

133.4

 

Less: Net income attributable to noncontrolling interests

0.4

 

 

 

 

1.4

 

 

 

Net Income (Loss) Attributable to Ingersoll Rand Inc.

$

29.5

 

 

$

41.3

 

 

$

(184.9

)

 

$

133.4

 

 

 

 

 

 

 

 

Basic income (loss) per share

$

0.07

 

 

$

0.20

 

 

$

(0.50

)

 

$

0.66

 

Diluted income (loss) per share

$

0.07

 

 

$

0.20

 

 

$

(0.50

)

 

$

0.64

 


Contacts

Media:
Misty Zelent
(704) 896-5324, mzelent@irco.com
 
Investor Relations:
Vikram Kini
(414) 212-4753, vikram.kini@gardnerdenver.com


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