Ingersoll Rand(US:IR)2024-05-03 20:02PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Unaudited condensed consolidated financial statements for Q1 2024 show $1,670.1 million revenue (up 2.5%) and $202.2 million net income (up 25.5%) Condensed Consolidated Statements of Operations (Q1 2024 vs Q1 2023) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Revenues | $1,670.1 million | $1,629.3 million | | Gross Profit | $746.3 million | $664.2 million | | Operating Income | $293.2 million | $240.3 million | | Net Income Attributable to Ingersoll Rand Inc. | $202.2 million | $161.1 million | | Diluted Earnings Per Share | $0.50 | $0.39 | Condensed Consolidated Balance Sheets (as of March 31, 2024) | Metric | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Current Assets | $4,006.8 million | $4,050.4 million | | Total Assets | $15,529.0 million | $15,563.5 million | | Total Current Liabilities | $1,724.6 million | $1,827.3 million | | Total Liabilities | $5,609.3 million | $5,716.8 million | | Total Stockholders' Equity | $9,919.7 million | $9,846.7 million | Condensed Consolidated Statements of Cash Flows (Q1 2024 vs Q1 2023) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $161.6 million | $170.3 million | | Net cash used in investing activities | ($205.6) million | ($581.5) million | | Net cash used in financing activities | ($79.6) million | ($89.3) million | | Net decrease in cash and cash equivalents | ($143.2) million | ($493.7) million | Notes to Condensed Consolidated Financial Statements Detailed notes support financial statements, covering accounting policies, acquisitions, restructuring, debt, and segment results - On February 1, 2024, the Company acquired Friulair S.r.l. for initial cash consideration of $142.2 million, enhancing its air dryer business and adding new chiller production capabilities27 - The Company entered into an agreement to acquire ILC Dover for an upfront all-cash purchase price of approximately $2.325 billion, expected to close in Q2 2024 and be reported in the Precision and Science Technologies segment32 - Restructuring charges for Q1 2024 were $9.7 million, a significant increase from $2.9 million in Q1 2023, primarily driven by actions in the Industrial Technologies and Services and Precision and Science Technologies segments40 Total Debt Summary | Debt Component | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Short-term borrowings and current maturities | $31.3 million | $30.6 million | | Long-term debt | $2,687.0 million | $2,693.0 million | | Total Debt | $2,718.3 million | $2,723.6 million | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MD&A highlights Q1 2024 financial results, with 2.5% revenue growth, expanded gross margin to 44.7%, and improved Adjusted EBITDA margin to 27.5% Results of Operations Q1 2024 revenues grew 2.5% to $1,670.1 million, with gross profit margin at 44.7% and Adjusted EBITDA at $458.5 million (up 14.6%) Key Financial Metrics (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1,670.1 M | $1,629.3 M | +2.5% | | Gross Profit Margin | 44.7% | 40.8% | +390 bps | | Operating Income Margin | 17.6% | 14.7% | +290 bps | | Net Income | $204.5 M | $163.2 M | +25.3% | | Adjusted EBITDA | $458.5 M | $400.1 M | +14.6% | | Adjusted EBITDA Margin | 27.5% | 24.6% | +290 bps | - The increase in gross profit and margin was primarily due to higher pricing and input cost productivity improvements162 - Selling and administrative expenses increased by 8.1% to $336.3 million, mainly due to recent acquisitions163 Segment Results ITS segment revenue increased 4.3% to $1,373.4 million with 29.9% Adjusted EBITDA margin, while PST revenue decreased 4.9% to $296.7 million Industrial Technologies and Services Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Segment Orders | $1,398.4 M | $1,450.3 M | -3.6% | | Segment Revenues | $1,373.4 M | $1,317.2 M | +4.3% | | Segment Adjusted EBITDA | $411.1 M | $345.6 M | +19.0% | | Segment Adjusted EBITDA Margin | 29.9% | 26.2% | +370 bps | Precision and Science Technologies Segment Performance (Q1 2024 vs Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Segment Orders | $309.0 M | $326.5 M | -5.4% | | Segment Revenues | $296.7 M | $312.1 M | -4.9% | | Segment Adjusted EBITDA | $91.4 M | $94.5 M | -3.3% | | Segment Adjusted EBITDA Margin | 30.8% | 30.3% | +50 bps | Liquidity and Capital Resources The company maintained strong liquidity with $1.45 billion cash and $2.0 billion credit availability, despite lower free cash flow of $99.3 million in Q1 2024 - The company had $1,452.3 million in cash and cash equivalents and total debt of $2,718.3 million as of March 31, 2024190 - Free cash flow decreased to $99.3 million in Q1 2024 from $147.9 million in Q1 2023, driven by higher capital expenditures ($62.3 million vs $22.4 million) and slightly lower cash from operations197202 - Operating working capital increased by $166.5 million from year-end 2023, primarily due to lower accounts payable and higher inventories195 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates and foreign currency fluctuations using derivative instruments, with no material changes from the 2023 Annual Report - The company manages interest rate risk on variable-rate borrowings through the use of interest rate swap and cap contracts207 - Foreign currency risks arise from global operations, affecting translation of foreign subsidiary balances and transactions in non-functional currencies, mitigated by cross-currency swaps and forward contracts208209 Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report211 - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls212 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company maintains a $124.7 million litigation reserve for asbestos-related liabilities, offset by a $151.4 million insurance recovery receivable - As of March 31, 2024, the total litigation reserve for potential asbestos-related liability was $124.7 million127 - The company has an insurance recovery receivable for probable asbestos-related recoveries of approximately $151.4 million128 Item 1A. Risk Factors No material changes to risk factors were reported from the 2023 Annual Report on Form 10-K - As of March 31, 2024, no material changes have been made to the risk factors included in the 2023 Annual Report215 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 811,774 shares in Q1 2024, and the Board authorized a $1.0 billion increase to the share repurchase program Share Repurchases in Q1 2024 | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | Jan 2024 | — | — | | Feb 2024 | 444,449 | $88.95 | | Mar 2024 | 367,325 | $90.88 | | Total | 811,774 | N/A | - On April 25, 2024, the Board of Directors authorized a $1.0 billion increase to the company's share repurchase program, which is incremental to the existing authorization217 Item 5. Other Information CEO Vicente Reynal adopted a Rule 10b5-1 trading plan for the potential sale of up to 456,974 shares in early June 2024 - The company's CEO, Vicente Reynal, adopted a 10b5-1 trading plan for the potential sale of up to 456,974 shares in early June 2024219 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL documents