Ingersoll Rand Inc. - Quarter Report: 2021 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________to___________

Commission File Number: 001-38095

____________________________

Ingersoll Rand Inc.

(Exact Name of Registrant as Specified in Its Charter)

____________________________


Delaware			46-2393770
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

800-A Beaty Street

Davidson, North Carolina 28036

(Address of Principal Executive Offices) (Zip Code)

(704) 655-4000

(Registrant’s Telephone Number, Including Area Code)

____________________________

Securities Registered Pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, $0.01 Par Value per share	IR	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The registrant had outstanding 407,584,625 shares of Common Stock, par value $0.01 per share, as of October 29, 2021.

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INGERSOLL RAND INC. AND SUBSIDIARIES

FORM 10-Q

INDEX


			Page No.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements			6
Condensed Consolidated Statements of Operations (Unaudited)			6
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)			7
Condensed Consolidated Balance Sheets (Unaudited)			8
Condensed Consolidated Statements of Stockholders' Equity (Unaudited)			10
Condensed Consolidated Statements of Cash Flows (Unaudited)			11
Note 1. Basis of Presentation and Recent Accounting Pronouncements			12
Note 2. Discontinued Operations			13
Note 3. Business Combinations			15
Note 4. Restructuring			19
Note 5. Inventories			19
Note 6. Goodwill and Other Intangible Assets			20
Note 7. Accrued Liabilities			21
Note 8. Benefit Plans			22
Note 9. Debt			23
Note 10. Stock-Based Compensation Plan			24
Note 11. Accumulated Other Comprehensive Income (Loss)			26
Note 12. Hedging Activities, Derivative Instruments and Fair Value Measurements			28
Note 13. Revenue from Contracts with Customers			31
Note 14. Income Taxes			35
Note 15. Other Operating Expense, Net			36
Note 16. Contingencies			36
Note 17. Segment Results			37
Note 18. Related Party Transactions			39
Note 19. Earnings (Loss) Per Share			39
Note 20. Subsequent Events			39
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			41
Item 3. Quantitative and Qualitative Disclosures About Market Risk			60
Item 4. Controls and Procedures			61
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			62
Item 1A. Risk Factors			62
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			62
Item 3. Defaults Upon Senior Securities			62
Item 4. Mine Safety Disclosures			62
Item 5. Other Information			62
Item 6. Exhibits			63
SIGNATURES			64

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In addition to historical information, this Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor” created by those sections. All statements, other than statements of historical facts included in this Form 10-Q, including statements concerning our plans, objectives, goals, beliefs, business strategies, future events, business conditions, results of operations, financial position, business outlook, business trends and other information, may be forward-looking statements. Words such as “estimates,” “expects,” “contemplates,” “will,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts,” “may,” “should” and variations of such words or similar expressions are intended to identify forward-looking statements. The forward-looking statements are not historical facts, and are based upon our current expectations, beliefs, estimates and projections, and various assumptions, many of which, by their nature, are inherently uncertain and beyond our control. Our expectations, beliefs, estimates and projections are expressed in good faith and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, estimates and projections will result or be achieved and actual results may vary materially from what is expressed in or indicated by the forward-looking statements.

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as such risk factors may be updated from time to time in our periodic filings with the SEC, and are accessible on the SEC’s website at www.sec.gov, and also include the following:

•The anticipated benefits of our acquisition of the Ingersoll Rand Industrial business may not be realized fully or at all, may take longer to realize than expected and the integration process will be complex, costly and time-consuming, which could adversely affect our business, financial results and financial condition.

•The COVID-19 pandemic has adversely affected our business and results of operations, and could have a material and adverse effect on our business, results of operations and financial condition in the future.

•We have exposure to the risks associated with instability in the global economy and financial markets, which may negatively impact our revenues, liquidity, suppliers and customers.

•More than half of our sales and operations are in non-U.S. jurisdictions and we are subject to the economic, political, regulatory and other risks of international operations.

•Shareholder and customer emphasis on environmental, social, and governance responsibility may impose additional costs on us or expose us to new risks.

•Our results of operations are subject to exchange rate and other currency risks. A significant movement in exchange rates could adversely impact our results of operations and cash flows.

•We face competition in the markets we serve, which could materially and adversely affect our operating results.

•Large or rapid increases in the cost of raw materials and component parts, substantial decreases in their availability or our dependence on particular suppliers of raw materials and component parts could materially and adversely affect our operating results.

•Our operating results could be adversely affected by a loss or reduction of business with key customers or consolidation or the vertical integration of our customer base.

•Credit and counterparty risks could harm our business.

•Acquisitions and integrating such acquisitions create certain risks and may affect our operating results.

•Dispositions create certain risks and may affect our operating results.

•Income generated by one of our equity method investments depends on the level of activity in the energy industry, which is significantly affected by volatile oil and gas prices.

•The loss of, or disruption in, our distribution network could have a negative impact on our abilities to ship products, meet customer demand and otherwise operate our business.

•Our ongoing and expected restructuring plans and other cost savings initiatives may not be as effective as we anticipate, and we may fail to realize the cost savings and increased efficiencies that we expect to result from these actions. Our operating results could be negatively affected by our inability to effectively implement such restructuring plans and other cost savings initiatives.

•Our success depends on our executive management and other key personnel and our ability to attract and retain top talent throughout the Company.

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•If we are unable to develop new products and technologies, our competitive position may be impaired, which could materially and adversely affect our sales and market share.

•Cost overruns, delays, penalties or liquidated damages could negatively impact our results, particularly with respect to fixed-price contracts for custom engineered products.

•The risk of non-compliance with U.S. and foreign laws and regulations applicable to our international operations could have a significant impact on our results of operations, financial condition or strategic objectives.

•Changes in tax or other laws, regulations, or adverse determinations by taxing or other governmental authorities could increase our effective tax rate and cash taxes paid or otherwise affect our financial condition or operating results.

•A significant portion of our assets consists of goodwill and other intangible assets, the value of which may be reduced if we determine that those assets are impaired.

•Our business could suffer if we experience employee work stoppages, union and work council campaigns or other labor difficulties.

•We are a defendant in certain asbestos and silica-related personal injury lawsuits, which could adversely affect our financial condition.

•A natural disaster, catastrophe, pandemic or other event could adversely affect our operations.

•Information systems failure may disrupt our business and result in financial loss and liability to our customers.

•The nature of our products creates the possibility of significant product liability and warranty claims, which could harm our business.

•Environmental compliance costs and liabilities could adversely affect our financial condition.

•Third parties may infringe upon our intellectual property or may claim we have infringed their intellectual property, and we may expend significant resources enforcing or defending our rights or suffer competitive injury.

•We face risks associated with our pension and other postretirement benefit obligations.

•Our substantial indebtedness could have important adverse consequences and adversely affect our financial condition.

•We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

•Despite our level of indebtedness, we and our subsidiaries may still be able to incur substantially more debt, including off-balance sheet financing, contractual obligations and general and commercial liabilities. This could further exacerbate the risks to our financial condition described above.

•The terms of the credit agreement governing the Senior Secured Credit Facilities may restrict our current and future operations, particularly our ability to respond to changes or to take certain actions.

•Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

•When we utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness, we will be exposed to risks related to counterparty credit worthiness or non-performance of these instruments.

•If the financial institutions that are part of the syndicate of our Revolving Credit Facility fail to extend credit under our facility or reduce the borrowing base under our Revolving Credit Facility, our liquidity and results of operations may be adversely affected.

•The Company may face risk associated with the discontinuation of and transition from currently used financial reference rates.

We caution you that the risks, uncertainties and other factors referenced above may not contain all of the risks, uncertainties and other factors that are important to you. In addition, we cannot assure you that we will realize the results, benefits or developments that we expect or anticipate or, even if substantially realized, that they will result in the consequences or affect us or our business in the way expected. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct or (iv) our strategy, which is based in part on this analysis, will be successful. All forward-looking statements in this report apply only as of the date of this report or as of the date they were made and, except as required by applicable law, we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise.

All references to “we,” “us,” “our,” the “Company” or “Ingersoll Rand” in this Quarterly Report on Form 10-Q mean Ingersoll Rand Inc. and its subsidiaries, unless the context otherwise requires.

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Website Disclosure

We use our website www.irco.com as a channel of distribution of Company information. Financial and other important information regarding us is routinely accessible through and posted on our website. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings and public conference calls and webcasts. In addition, you may automatically receive e-mail alerts and other information about Ingersoll Rand Inc. when you enroll your email address by visiting the “Email Alerts” section of our website at investors.irco.com. The contents of our website are not, however, a part of this Quarterly Report on Form 10-Q.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED 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,
	2021		2020		2021		2020
Revenues	$	1,325.0	$	1,112.5	$	3,733.6	$	2,754.7
Cost of sales	810.7		682.5		2,254.5		1,812.8
Gross Profit	514.3		430.0		1,479.1		941.9
Selling and administrative expenses	252.6		218.6		772.1		567.1
Amortization of intangible assets	80.3		97.0		244.8		240.1
Impairment of intangible assets	—		19.9		—		19.9
Other operating expense, net	17.5		25.5		36.9		170.1
Operating Income (Loss)	163.9		69.0		425.3		(55.3)
Interest expense	22.5		28.8		68.3		86.7
Loss on extinguishment of debt	9.0		—		9.0		2.0
Other income, net	(3.5)		(2.6)		(40.1)		(5.1)
Income (Loss) from Continuing Operations Before Income Taxes	135.9		42.8		388.1		(138.9)
Provision for income taxes	2.7		12.8		25.8		24.3
Loss on equity method investments	(2.2)		—		(2.9)		—
Income (Loss) from Continuing Operations	131.0		30.0		359.4		(163.2)
Loss from discontinued operations, net of tax	(4.2)		(0.1)		(88.1)		(20.3)
Net Income (Loss)	126.8		29.9		271.3		(183.5)
Less: Net income attributable to noncontrolling interests	0.8		0.4		1.8		1.4
Net Income (Loss) Attributable to Ingersoll Rand Inc.	$	126.0	$	29.5	$	269.5	$	(184.9)

Amounts attributable to Ingersoll Rand Inc. common stockholders:
Income (loss) from continuing operations, net of tax	$	130.2	$	29.6	$	357.6	$	(164.6)
Loss from discontinued operations, net of tax	(4.2)		(0.1)		(88.1)		(20.3)
Net income (loss) attributable to Ingersoll Rand Inc.	$	126.0	$	29.5	$	269.5	$	(184.9)

Basic earnings (loss) per share of common stock:
Earnings (loss) from continuing operations	$	0.32	$	0.07	$	0.86	$	(0.44)
Loss from discontinued operations	(0.01)		—		(0.21)		(0.05)
Net earnings (loss)	0.31		0.07		0.65		(0.50)

Diluted earnings (loss) per share of common stock:
Earnings (loss) from continuing operations	$	0.31	$	0.07	$	0.84	$	(0.44)
Loss from discontinued operations	(0.01)		—		(0.21)		(0.05)
Net earnings (loss)	0.30		0.07		0.64		(0.50)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited; in millions)


	For the Three Month Period Ended September 30,				For the Nine Month Period Ended September 30,
	2021		2020		2021		2020
Comprehensive Income (Loss) Attributable to Ingersoll Rand Inc.
Net income (loss) attributable to Ingersoll Rand Inc.	$	126.0	$	29.5	$	269.5	$	(184.9)
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net	(47.6)		142.6		(98.3)		95.3
Unrecognized gain on cash flow hedges, net	—		4.2		—		10.9
Pension and other postretirement prior service cost and gain or (loss), net	1.8		(1.0)		4.3		2.4
Total other comprehensive income (loss), net of tax	(45.8)		145.8		(94.0)		108.6
Comprehensive income (loss) Attributable to Ingersoll Rand Inc.	$	80.2	$	175.3	$	175.5	$	(76.3)
Comprehensive Income (Loss) Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests	$	0.8	$	0.4	$	1.8	$	1.4
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments, net	0.2		3.8		(2.1)		(1.6)
Total other comprehensive income (loss), net of tax	0.2		3.8		(2.1)		(1.6)
Comprehensive income (loss) attributable to noncontrolling interests	1.0		4.2		(0.3)		(0.2)
Total Comprehensive Income (Loss)	$	81.2	$	179.5	$	175.2	$	(76.5)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited; in millions, except share amounts)


	September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	2,033.0	$	1,750.9
Accounts receivable, net of allowance for credit losses of $49.9 and $50.9, respectively	927.0		861.8
Inventories	863.6		716.7
Other current assets	179.3		195.3
Assets of discontinued operations - current	28.0		337.4
Total current assets	4,030.9		3,862.1
Property, plant and equipment, net of accumulated depreciation of $343.1 and $291.1, respectively	619.2		609.0
Goodwill	6,100.6		5,582.6
Other intangible assets, net	3,695.8		3,797.2
Deferred tax assets	21.3		15.6
Other assets	455.0		329.3
Assets of discontinued operations - long-term	—		1,862.8
Total assets	$	14,922.8	$	16,058.6
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt	$	40.1	$	40.4
Accounts payable	632.9		536.4
Accrued liabilities	932.4		708.9
Liabilities of discontinued operations - current	27.2		212.9
Total current liabilities	1,632.6		1,498.6
Long-term debt, less current maturities	3,422.2		3,859.1
Pensions and other postretirement benefits	248.0		272.5
Deferred income taxes	596.0		702.4
Other liabilities	301.2		343.7
Liabilities of discontinued operations - long-term	—		192.8
Total liabilities	$	6,200.0	$	6,869.1
Commitments and contingencies (Note 16)	—		—
Stockholders’ equity
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 423,549,003 and 420,123,978 shares issued as of September 30, 2021 and December 31, 2020, respectively	4.2		4.2
Capital in excess of par value	9,386.5		9,310.3
Retained earnings (accumulated deficit)	93.8		(175.7)
Accumulated other comprehensive income (loss)	(81.3)		14.2
Treasury stock at cost; 16,028,078 and 1,496,169 shares as of September 30, 2021 and December 31, 2020, respectively	(749.6)		(33.3)
Total Ingersoll Rand Inc. stockholders’ equity	$	8,653.6	$	9,119.7
Noncontrolling interests	69.2		69.8
Total stockholders’ equity	$	8,722.8	$	9,189.5
Total liabilities and stockholders’ equity	$	14,922.8	$	16,058.6

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited; in millions)


	Three Month Period Ended September 30, 2021
	Common Stock			Capital in Excess of Par Value		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Loss		Treasury Stock		Total Ingersoll Rand Inc. Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares Issued	Par
Balance at beginning of period	421.5	$	4.2	$	9,376.0	$	(32.2)	$	(35.5)	$	(34.6)	$	9,277.9	$	68.5	$	9,346.4
Net income	—	—		—		126.0		—		—		126.0		0.8		126.8
Issuance of common stock for stock-based compensation plans	2.0	—		6.7		—		—		—		6.7		—		6.7
Purchases of treasury stock	—	—		—		—		—		(733.3)		(733.3)		—		(733.3)
Issuance of treasury stock for stock-based compensation plans	—	—		(18.3)		—		—		18.3		—		—		—
Stock-based compensation	—	—		22.1		—		—		—		22.1		—		22.1
Other comprehensive income (loss), net of tax	—	—		—		—		(45.8)		—		(45.8)		0.2		(45.6)

Dividends attributable to noncontrolling interests	—	—		—		—		—		—		—		(0.3)		(0.3)
Balance at end of period	423.5	$	4.2	$	9,386.5	$	93.8	$	(81.3)	$	(749.6)	$	8,653.6	$	69.2	$	8,722.8


	Three Month Period Ended September 30, 2020
	Common Stock			Capital in Excess of Par Value		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Total Ingersoll Rand Inc. Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares Issued	Par
Balance at beginning of period	418.6	$	4.2	$	9,256.5	$	(356.8)	$	(293.2)	$	(35.8)	$	8,574.9	$	66.9	$	8,641.8
Net income	—	—		—		29.5		—		—		29.5		0.4		29.9


Issuance of common stock for stock-based compensation plans	0.6	—		5.5		—		—		—		5.5		—		5.5
Purchases of treasury stock	—	—		—		—		—		(0.1)		(0.1)		—		(0.1)
Issuance of treasury stock for stock-based compensation plans	—	—		(0.7)		—		—		1.1		0.4		—		0.4
Stock-based compensation	—	—		15.7		—		—		—		15.7		—		15.7
Other comprehensive income, net of tax	—	—		—		—		145.8		—		145.8		3.8		149.6

Adjustments for shares tendered in open offer	—	—		—		—		—		—		—		(12.9)		(12.9)
Balance at end of period	419.2	$	4.2	$	9,277.0	$	(327.3)	$	(147.4)	$	(34.8)	$	8,771.7	$	58.2	$	8,829.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (CONTINUED)

(Unaudited; in millions)


	Nine Month Period Ended September 30, 2021
	Common Stock			Capital in Excess of Par Value		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive Income (Loss)		Treasury Stock		Total Ingersoll Rand Inc. Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares Issued	Par
Balance at beginning of period	420.1	$	4.2	$	9,310.3	$	(175.7)	$	14.2	$	(33.3)	$	9,119.7	$	69.8	$	9,189.5
Net income	—	—		—		269.5		—		—		269.5		1.8		271.3
Issuance of common stock for stock-based compensation plans	3.4	—		19.0		—		—		—		19.0		—		19.0
Purchases of treasury stock	—	—		—		—		—		(736.5)		(736.5)		—		(736.5)
Issuance of treasury stock for stock-based compensation plans	—	—		(19.4)		—		—		20.2		0.8		—		0.8
Stock-based compensation	—	—		76.6		—		—		—		76.6		—		76.6
Other comprehensive loss, net of tax	—	—		—		—		(94.0)		—		(94.0)		(2.1)		(96.1)
Divestiture of foreign subsidiaries	—	—		—		—		(1.5)		—		(1.5)		—		(1.5)
Dividends attributable to noncontrolling interests	—	—		—		—		—		—		—		(0.3)		(0.3)
Balance at end of period	423.5	$	4.2	$	9,386.5	$	93.8	$	(81.3)	$	(749.6)	$	8,653.6	$	69.2	$	8,722.8


	Nine Month Period Ended September 30, 2020
	Common Stock			Capital in Excess of Par Value		Accumulated Deficit		Accumulated Other Comprehensive Loss		Treasury Stock		Total Ingersoll Rand Inc. Stockholders' Equity		Noncontrolling Interests		Total Equity
	Shares Issued	Par
Balance at beginning of period	206.8	$	2.1	$	2,302.0	$	(141.4)	$	(256.0)	$	(36.8)	$	1,869.9	$	—	$	1,869.9
Net income (loss)	—	—		—		(184.9)		—		—		(184.9)		1.4		(183.5)
Acquisition of Ingersoll Rand Industrial	211.0	2.1		6,934.9		—		—		—		6,937.0		73.3		7,010.3
Costs of issuing equity securities	—	—		(1.0)		—		—		—		(1.0)		—		(1.0)
Issuance of common stock for stock-based compensation plans	1.4	—		11.4		—		—		—		11.4		—		11.4
Purchases of treasury stock	—	—		—		—		—		(1.4)		(1.4)		—		(1.4)
Issuance of treasury stock for stock-based compensation plans	—	—		(2.2)		—		—		3.4		1.2		—		1.2
Stock-based compensation	—	—		31.9		—		—		—		31.9		—		31.9
Other comprehensive income (loss), net of tax	—	—		—		—		108.6		—		108.6		(1.6)		107.0
Adoption of new accounting standard (ASU 2016-13)	—	—		—		(1.0)		—		—		(1.0)		—		(1.0)
Adjustments for shares tendered in open offer	—	—		—		—		—		—		—		(14.9)		(14.9)
Balance at end of period	419.2	$	4.2	$	9,277.0	$	(327.3)	$	(147.4)	$	(34.8)	$	8,771.7	$	58.2	$	8,829.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited; in millions)


	For the Nine Month Period Ended September 30,
	2021		2020
Cash Flows From Operating Activities From Continuing Operations:
Net income (loss)	$	271.3	$	(183.5)
Loss from discontinued operations, net of tax	(88.1)		(20.3)
Income (loss) from continuing operations	359.4		(163.2)
Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities from continuing operations:
Amortization of intangible assets	244.8		240.1
Depreciation	65.5		56.0

Impairment of intangible assets	—		19.9
Stock-based compensation expense	65.0		27.3
Foreign currency transaction losses (gains), net	(13.6)		12.7

Non-cash adjustments to carrying value of LIFO inventories	—		35.6
Other non-cash adjustments	11.5		2.0
Changes in assets and liabilities:
Receivables	(43.8)		45.5
Inventories	(126.6)		90.3
Accounts payable	83.7		(32.0)
Accrued liabilities	(129.2)		39.2
Other assets and liabilities, net	(135.8)		16.8
Net cash provided by operating activities from continuing operations	380.9		390.2
Cash Flows From Investing Activities From Continuing Operations:
Capital expenditures	(41.2)		(29.1)
Net cash acquired (paid) in business combinations	(809.3)		9.4
Disposals of property, plant and equipment	9.5		1.5
Net cash used in investing activities from continuing operations	(841.0)		(18.2)
Cash Flows From Financing Activities From Continuing Operations:
Principal payments on long-term debt	(425.7)		(1,609.2)
Proceeds from long-term debt	—		1,980.1
Purchases of treasury stock	(736.5)		(1.4)
Proceeds from stock option exercises	20.0		12.7
Payments of contingent consideration	—		(0.7)
Payments of debt issuance costs	—		(47.4)
Payments of costs incurred to issue shares for Ingersoll Rand Industrial acquisition	—		(1.0)
Acquisition of noncontrolling interests	—		(14.9)
Other financing	—		(0.3)
Net cash provided by (used in) financing activities from continuing operations	(1,142.2)		317.9
Cash Flows From Discontinued Operations:
Net cash provided by (used in) operating activities	(0.6)		112.3
Net cash provided by (used in) investing activities	1,902.5		(4.3)

Net cash provided by discontinued operations	1,901.9		108.0
Effect of exchange rate changes on cash and cash equivalents	(17.5)		9.9
Net increase in cash and cash equivalents	282.1		807.8
Cash and cash equivalents, beginning of period	1,750.9		505.5
Cash and cash equivalents, end of period	$	2,033.0	$	1,313.3
Supplemental Cash Flow Information
Cash paid for income taxes	$	381.4	$	73.9
Cash paid for interest	62.5		79.9

The accompanying notes are an integral part of these condensed consolidated financial statements.

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INGERSOLL RAND INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited; in millions, except share and per share amounts)

Note 1. Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation

Ingersoll Rand Inc. is a diversified, global manufacturer of highly engineered, application-critical flow control products and provider of related aftermarket parts and services. The accompanying condensed consolidated financial statements include the accounts of Ingersoll Rand Inc. and its majority-owned subsidiaries (collectively referred to herein as “Ingersoll Rand” or the “Company”).

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial reporting, the instructions for Form 10-Q and Article 10 of the U.S. Securities and Exchange Commission (“SEC”) Regulation S-X. In the Company’s opinion, the condensed consolidated financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for the interim periods presented. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (“2020 Form 10-K”). We have reclassified certain prior year amounts, including the results of discontinued operations, to conform to the current year presentation. Unless otherwise indicated, amounts provided in these Notes pertain to continuing operations. See Note 2 “Discontinued Operations” for information on discontinued operations.

The results of operations for the interim period ended September 30, 2021 are not necessarily indicative of future results. The ongoing novel Coronavirus (“COVID-19”) pandemic is a continuously evolving situation around the globe that has negatively impacted and could continue to negatively impact the global economy. The Company’s operating results will be subject to fluctuations based on general economic conditions, and the extent to which COVID-19 may ultimately impact its business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate extent of the spread of the disease and the duration of the outbreak and business closures or business disruptions for the Company, suppliers and customers.

Recently Adopted Accounting Standard Updates (“ASU”)

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which added an impairment model that is based on expected losses rather than incurred losses and is called the Current Expected Credit Losses (“CECL”) model. This impairment model is applicable to loans, debt securities, trade receivables, net investments in leases, off-balance sheet credit exposures, reinsurance receivables as well as any other financial asset with the contractual right to receive cash. Under the new model, an allowance equal to the estimate of lifetime expected credit losses is recognized which will result in more timely loss recognition. The guidance is intended to reduce complexity by decreasing the number of credit impairment models. The Company adopted this guidance on January 1, 2020, using a modified retrospective transition method. The Company recorded a cumulative-effect adjustment on the adoption date increasing “Accumulated deficit” in the Condensed Consolidated Balance Sheets by $1.0 million and decreasing “Accounts receivable, net of allowance for credit losses” in the Condensed Consolidated Balance Sheets by $1.0 million.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions and amending and clarifying existing guidance. The Company adopted this guidance on January 1, 2021. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-4, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for a limited time to ease the potential burden of accounting for reference rate reform on financial reporting. This guidance applies to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates. The guidance is effective beginning on March 12, 2020 through December 31, 2022. The Company has not utilized any of the optional expedients or exceptions available under this ASU. The Company will continue to assess whether this ASU is applicable throughout the effective period.

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In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which explicitly clarifies which contracts, hedging relationships, and other transactions are within the scope of the optional expedients and exceptions allowed under Topic 848. The Company has not utilized any of the optional expedients or exceptions available under Topic 848. The Company will continue to assess whether this ASU is applicable throughout the effective period, in conjunction with our assessment of ASU 2020-4.

Note 2. Discontinued Operations

Discontinued operations comprise two formerly-owned businesses, Specialty Vehicle Technologies (“SVT” or “Club Car”) and High Pressure Solutions (“HPS”). The results of operations, financial positions and cash flows of these businesses are reported as discontinued operations for all periods presented in these condensed consolidated financial statements.

Specialty Vehicle Technologies

On April 9, 2021, the Company entered into an agreement to sell Club Car to private equity firm Platinum Equity Advisors, LLC (“Platinum Equity”) for $1.68 billion in cash. The sale was substantially completed on June 1, 2021. The transfer of legal ownership of one non-U.S. subsidiary has not yet been completed due to local regulatory and administrative requirements. This transfer is expected to be completed in the fourth quarter of 2021.

SVT has been presented as a discontinued operation and its net assets are classified as held for sale and comparable prior periods are recast to reflect this change.

The Company recognized a pre-tax gain on sale of $252.8 million during the nine month period ended September 30, 2021. The sale proceeds and the related gain on sale are subject to further adjustment upon the finalization customary post-closing steps of the transaction. These steps are expected to be completed by the end of 2021.

High Pressure Solutions

On February 14, 2021, the Company entered into an agreement to sell its majority interest in High Pressure Solutions to private equity firm American Industrial Partners. In exchange for its majority interest of 55%, the Company received net cash proceeds of $278.3 million and retains a 45% common equity interest in the newly-formed entity comprising the HPS business. The Company expects to maintain its minority investment in HPS indefinitely and is unable to estimate when this interest may be disposed. This sale was substantially completed on April 1, 2021. The transfer of legal ownership of one non-U.S. subsidiary has not yet been completed due to local regulatory and administrative requirements. This transfer is expected to be completed in the fourth quarter of 2021.

HPS has been presented as a discontinued operation and its net assets are classified as held for sale and comparable prior periods are recast to reflect this change.

The Company recognized a pre-tax loss on sale of $211.7 million during the nine month period ended September 30, 2021. The sale proceeds and the related loss on sale are subject to further adjustment upon the finalization customary post-closing steps of the transaction. These steps are expected to be completed by the end of 2021.

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Financial information of discontinued operations

The results of operations of SVT and HPS are presented as discontinued operations as summarized below:


	Specialty Vehicle Technologies				High Pressure Solutions				Total
	For the Three Month Period Ended September 30,
	2021		2020		2021		2020		2021		2020
Revenues	$	4.4	$	191.1	$	2.6	$	31.6	$	7.0	$	222.7
Cost of sales	4.2		140.4		2.4		30.3		6.6		170.7
Gross Profit	0.2		50.7		0.2		1.3		0.4		52.0
Selling and administrative expenses	0.3		18.8		0.2		8.2		0.5		27.0
Amortization of intangible assets	—		11.3		—		5.9		—		17.2
Loss on sale	3.9		—		—		—		3.9		—
Other operating expense, net	1.8		0.2		1.8		2.3		3.6		2.5




Income (Loss) from Discontinued Operations Before Income Taxes	(5.8)		20.4		(1.8)		(15.1)		(7.6)		5.3
Provision (benefit) for income taxes	(1.5)		8.2		(1.9)		(2.8)		(3.4)		5.4
Income (Loss) from Discontinued Operations, Net of Tax	$	(4.3)	$	12.2	$	0.1	$	(12.3)	$	(4.2)	$	(0.1)


	Specialty Vehicle Technologies				High Pressure Solutions				Total
	For the Nine Month Period Ended September 30,
	2021		2020		2021		2020		2021		2020
Revenues	$	428.7	$	495.3	$	68.0	$	149.5	$	496.7	$	644.8
Cost of sales	319.1		379.1		56.8		121.1		375.9		500.2
Gross Profit	109.6		116.2		11.2		28.4		120.8		144.6
Selling and administrative expenses	35.6		44.8		5.1		36.8		40.7		81.6
Amortization of intangible assets	10.4		26.2		2.4		17.7		12.8		43.9
Loss (gain) on sale	(252.8)		—		211.7		—		(41.1)		—
Other operating expense, net	18.0		0.9		17.3		7.6		35.3		8.5




Income (Loss) from Discontinued Operations Before Income Taxes	298.4		44.3		(225.3)		(33.7)		73.1		10.6
Provision (benefit) for income taxes	168.2		38.2		(7.0)		(7.3)		161.2		30.9
Income (Loss) from Discontinued Operations, Net of Tax	$	130.2	$	6.1	$	(218.3)	$	(26.4)	$	(88.1)	$	(20.3)

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The carrying amount of major classes of assets and liabilities classified that were included in discontinued operations at September 30, 2021 and December 31, 2020 related to SVT and HPS are shown in the table below. Long-term assets and liabilities as of September 30, 2021 have been reclassified as current in the Condensed Consolidated Balance Sheet.


	September 30, 2021 (1)		December 31, 2020 (2)
Assets
Current assets:
Cash and cash equivalents	$	2.3	$	—
Accounts receivable, net	4.4		104.8
Inventories	19.5		226.9
Other current assets	—		5.7
Total current assets	26.2		337.4
Property, plant and equipment, net	1.3		188.3
Goodwill	0.5		721.0
Other intangible assets, net	—		935.4
Deferred tax assets	—		0.5
Other assets	—		17.6
Total non-current assets	1.8		1,862.8


Total assets	$	28.0	$	2,200.2

Liabilities
Current liabilities:

Accounts payable	$	26.5	$	134.7
Accrued liabilities	0.7		78.2
Total current liabilities	27.2		212.9

Pensions and other postretirement benefits	—		2.5
Deferred income taxes	—		173.3
Other liabilities	—		17.0
Total non-current liabilities	—		192.8
Total liabilities	$	27.2	$	405.7

(1)Primarily relates to non-U.S. subsidiaries for which legal ownership is expected to transfer in the fourth quarter of 2021.

(2)Total assets and total liabilities related to SVT were $1,512.7 million and $354.1 million, respectively, at December 31, 2020.

The significant non-cash operating items and capital expenditures reflected in cash flows of discontinued operations for the nine months periods ended September 30, 2021 and 2020 include the following:


	Specialty Vehicle Technologies				High Pressure Solutions				Total
	For the Nine Month Period Ended September 30,
	2021		2020		2021		2020		2021		2020
Loss (gain) on sale	$	(252.8)	$	—	$	211.7	$	—	$	(41.1)	$	—
Depreciation and amortization	14.8		36.2		4.0		27.3		18.8		63.5
Stock-based compensation expense	8.2		1.1		2.7		0.6		10.9		1.7
Capital expenditures	1.6		1.8		0.3		2.6		1.9		4.4

Note 3. Business Combinations

Acquisitions in 2021

On January 31, 2021, the Company acquired the Vacuum and Blower Systems division of Tuthill Corporation for cash consideration of $184.0 million. The business operates under the tradenames M-D Pneumatics and Kinney Vacuum Pumps and is

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a leader in the design and manufacture of positive displacement blowers, mechanical vacuum pumps, vacuum boosters and engineered blower and vacuum systems. The results of this business are reported within the Industrial Technologies and Services segment from the date of acquisition. The goodwill recognized is attributable to the expected cost synergies, anticipated growth of new and existing customers, and the assembled workforce. The goodwill resulting from this acquisition is expected to be deductible for tax purposes.

On July 30, 2021, the Company acquired Maximus Solutions for cash consideration of $110.5 million, net of cash acquired. The business is a provider of digital controls and Industrial Internet of Things (IIoT) production management systems for the agritech software and controls market. The results of this business are reported within the Precision and Science Technologies segment from the date of acquisition. Due to the timing of the acquisition, the allocation of purchase price is preliminary and will be refined as additional information becomes available. The preliminary goodwill recognized is attributable to synergies expected from combining Maximus’s significant expertise in digital controls and IIoT systems with other brands and channels in the Precision and Science Technologies segment and from anticipated growth from existing and new customers. None of the goodwill resulting from this acquisition is expected to be deductible for tax purposes.

On August 31, 2021, the Company acquired Seepex GmbH (“Seepex”) for cash consideration of $481.5 million, net of cash acquired. The business is a global leader in progressive cavity pump solutions. The results of this business are reported within the Precision and Science Technologies segment from the date of acquisition. The recognition and measurement of assets acquired and liabilities assumed is not complete due to the timing of the acquisition relative to the end of the reporting period. The Company expects to recognize intangible assets for tradenames, developed technology, customer relationships and backlog in the fourth quarter of 2021. The cumulative effect of recognizing amortization expense when these assets are recognized is not expected to be significant to the condensed consolidated financial statements. The preliminary goodwill recognized is attributable to the expected cost synergies, anticipated growth of new and existing customers, and the assembled workforce. None of the goodwill resulting from this acquisition is expected to be deductible for tax purposes.

Also in the nine months ended September 30, 2021, the Company acquired several sales and service businesses in the Industrial Technologies and Services segment and a pump technology business and sales and service business in the Precision and Science Technologies segment. The aggregate consideration for these acquisitions was $33.3 million.

The following table summarizes the preliminary allocation of consideration to the fair values of identifiable assets acquired and liabilities assumed at the acquisition date.


	Seepex		M-D Pneumatics and Kinney Vacuum Pumps		Maximus Solutions		All Others
Accounts receivable	$	24.9	$	4.8	$	4.3	2.9
Inventories	28.2		3.8		3.0		3.1
Other current assets	2.0		0.2		0.2		0.1
Property, plant and equipment	24.7		16.2		2.1		2.5
Goodwill	441.1		80.0		64.1		3.5
Other intangible assets	0.3		82.5		39.3		29.9
Other assets	0.5		—		—		—
Total current liabilities	(33.4)		(3.5)		(2.3)		(2.0)
Total noncurrent liabilities	(6.8)		—		(0.2)		(6.7)
Total consideration	$	481.5	$	184.0	$	110.5	33.3

The revenue and operating income included in the condensed consolidated financial statements for these acquisitions subsequent to their date of acquisition is $69.5 million and $8.3 million, respectively. The operating income of these acquired businesses include the effects of acquisition-related accounting adjustments such as amortization of intangible assets and fair value adjustments to acquired inventory.

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Acquisition of Ingersoll Rand Industrial in 2020

On February 29, 2020, Ingersoll Rand (formerly Gardner Denver Holdings, Inc.) completed the acquisition of and merger with Ingersoll Rand Industrial in exchange for shares of the Company's common stock with a fair value of $6,937.0 million.


Fair value of Ingersoll Rand common stock issued for Ingersoll Rand Industrial outstanding common stock	$	6,919.5
Fair value attributable to pre-merger service for replacement equity awards	8.6
Fair value attributable to pre-merger service for deferred compensation plan	8.9
Total purchase consideration	$	6,937.0

Ingersoll Rand Industrial was separated from Ingersoll Rand plc (subsequently renamed Trane Technologies Plc) through a distribution to shareholders of Trane Technologies and subsequently merged with Gardner Denver Holdings, Inc. This transaction was accounted for as a business combination. The assets and liabilities of Ingersoll Rand Industrial were measured at their fair values as of the date of the merger. The determination of fair values required the Company to make estimates about expected future cash flows, discount rates, royalty rates and other subjective assumptions and future events that are highly uncertain. These measurements were finalized within one year of the closing date of the transaction.

The following table summarizes the allocation of consideration to the fair values of assets acquired and liabilities assumed of Ingersoll Rand Industrial as of February 29, 2020. Included in these amounts are assets and liabilities of SVT, which has been reported as a discontinued operation in these condensed consolidated financial statements. Refer to Note 2 for further information on the sale of SVT.


	Fair value
Cash	$	38.8
Accounts receivable	585.8
Inventories	625.4
Other current assets	87.2
Property, plant and equipment	516.5
Goodwill	4,899.2
Other intangible assets	3,766.6
Other noncurrent assets	270.9
Total current liabilities, including current maturities of long-term debt of $19.0 million	(753.0)
Deferred tax liability	(842.4)
Long-term debt, net of debt issuance costs and an original issue discount	(1,851.7)
Other noncurrent liabilities	(333.0)
Noncontrolling interest	(73.3)
Total consideration	$	6,937.0

The Company incurred $87.3 million of acquisition-related costs, including $42.3 million during the three-month period ended March 31, 2020. The remainder was incurred in 2019. These costs are presented within “Other operating expenses, net” in the Condensed Consolidated Statements of Operations. For additional information, see Note 2 “Business Combinations” of the 2020 Form 10-K.

Results of Ingersoll Rand Industrial Subsequent to the Acquisition

The operating results of Ingersoll Rand Industrial have been included in the Company’s condensed consolidated financial statements since the date of acquisition. The results of Ingersoll Rand Industrial in the year of acquisition are shown below. These amounts include the effects of purchase accounting adjustments, primarily the amortization of intangible assets and the impacts on operating expenses of fair value adjustments to acquired inventory and property, plant and equipment. The amounts below exclude the operating results of SVT, which has been reported as a discontinued operation as a result of the transaction discussed

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in Note 2.


	For the Three Month Period Ended September 30, 2020		For the Nine Month Period Ended September 30, 2020

Revenues	$	662.7	$	1,478.4
Income (Loss) from Continuing Operations Before Income Taxes	25.9		(98.9)

Unaudited Pro Forma Information

The following unaudited pro forma financial information summarizes the combined results of operations for the Company and Ingersoll Rand Industrial as if the acquisition had been completed on January 1, 2019. The pro forma results have been prepared for comparative purposes only and do not necessarily represent what the revenue or results of operations would have been had the acquisition been completed on January 1, 2019. In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved. These amounts include revenue and net income attributable to SVT that are reported within Income (loss) from discontinued operations, net of tax on the Condensed Consolidated Statement of Operations.


	For the Three Month Period Ended September 30, 2020		For the Nine Month Period Ended September 30, 2020
Revenues	$	1,340.8	$	3,882.1
Net Income (Loss)	60.7		67.5

The unaudited pro forma information includes adjustments for the preliminary purchase price allocation (including, but not limited to, amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to stock-based compensation expense, fair value adjustments to acquired inventories, the purchase accounting effect on deferred revenue, interest expense and amortization of debt issuance costs, transaction costs and related tax impacts) and the alignment of accounting policies.

The table below reflects the impact of material and nonrecurring adjustments to the unaudited pro forma results for the three and nine month periods ended September 30, 2020 that are directly attributable to the acquisition.


	For the Three Month Period Ended September 30, 2020		For the Nine Month Period Ended September 30, 2020

Increase to revenue as a result of deferred revenue fair value adjustment, net of tax	$	4.4	$	9.9
Decrease to expense as a result of inventory fair value adjustment, net of tax	—		(89.6)
Decrease to expense as a result of transaction costs, net of tax	—		(38.1)

Settlement of post-acquisition contingencies

The Company and Trane Technologies concluded several post-closing steps of the Ingersoll Rand Industrial transaction in the second quarter of 2021. These steps included determining the final measurements of transferred working capital, indebtedness and retirement plan funding. Upon finalizing these measurements, Trane Technologies agreed to make a net payment of $49.5 million to Ingersoll Rand. This payment was received in the third quarter of 2021 and has been reflected within changes in “Other assets and liabilities, net” on the Condensed Consolidated Statement of Cash Flows. The Company realized a gain of $30.1 million in the second quarter of 2021 to adjust its receivables for these items. This gain is reported within “Other income, net” on the Condensed Consolidated Statement of Operations.

Other Acquisitions in 2020

On September 1, 2020, the Company acquired a manufacturer of electric peristaltic pumps for cash consideration, net of cash acquired, of $15.5 million and deferred consideration of $0.9 million. The results of this business are reported within the Precision and Science Technologies segment from the date of acquisition.

Also in the third quarter of 2020, within the Industrial Technologies and Services segment, the Company acquired two sales and service businesses for cash consideration of $15.0 million and deferred consideration of $5.1 million.

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The revenue and operating income for the nine months ended September 30, 2020 included in the financial statements for these acquisitions subsequent to their date of acquisition is $5.3 million and $2.0 million, respectively.

Note 4. Restructuring

Restructuring Program 2020 to 2022

Subsequent to the acquisition of Ingersoll Rand Industrial, the Company announced a restructuring program (“2020 Plan”) to create efficiencies and synergies, reduce the number of facilities and optimize operating margin within the merged Company. The Company expects to incur total expenses of approximately $350.0 million related to workforce reductions, lease termination costs, other facility rationalization costs and other business related transformation costs from 2020 until 2022. The Company continues to evaluate operating efficiencies and anticipates incurring additional costs in the coming years in connection with these activities, but is unable to estimate those amounts at this time as such plans are not yet finalized.

For the three and nine month periods ended September 30, 2021, “Restructuring charges, net” were recognized within “Other operating expense, net” in the Condensed Consolidated Statement of Operations and consisted of the following.


	For the Three Months Ended		For the Nine Months Ended
	September 30, 2021
Industrial Technologies and Services	$	1.0	$	5.2
Precision and Science Technologies	—		0.1
Corporate	0.1		5.0
Restructuring charges, net	$	1.1	$	10.3

Through September 30, 2021, we recognized expense related to the 2020 Plan of $75.5 million, $7.0 million and $11.0 million for Industrial Technologies and Services, Precision and Science Technologies and Corporate, respectively.

The following table summarizes the activity associated with the Company’s restructuring programs for the three and nine month periods ended September 30, 2021.


	For the Three Month Period Ended September 30,				For the Nine Month Period Ended September 30,
	2021		2020		2021		2020
Balance at beginning of period	$	14.7	$	29.0	$	17.5	$	4.8
Charged to expense - termination benefits	0.2		5.4		8.8		70.3
Charged to expense - other (1)	0.9		(1.6)		1.5		0.9
Payments	(3.0)		(12.3)		(14.8)		(53.6)
Currency translation adjustment and other	(0.2)		2.2		(0.4)		0.3
Balance at end of period	$	12.6	$	22.7	$	12.6	$	22.7

(1) Excludes $6.2 million of non-cash charges that impacted restructuring expense but not the restructuring liabilities during the nine month period ended September 30, 2020.

Note 5. Inventories

Inventories as of September 30, 2021 and December 31, 2020 consisted of the following.


	September 30, 2021		December 31, 2020
Raw materials, including parts and subassemblies	$	498.6	$	451.0
Work-in-process	94.7		62.2
Finished goods	261.5		194.7
	854.8		707.9
Excess of LIFO costs over FIFO costs	8.8		8.8
Inventories	$	863.6	$	716.7

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Note 6. Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amount of goodwill attributable to each reportable segment for the nine month period ended September 30, 2021 is presented in the table below.


	Industrial Technologies and Services		Precision and Science Technologies		Total
Balance as of December 31, 2020	$	4,151.2	$	1,431.4	$	5,582.6
Acquisitions	76.6		505.2		581.8
Foreign currency translation	(40.6)		(23.2)		(63.8)
Balance as of September 30, 2021	$	4,187.2	$	1,913.4	$	6,100.6

As of both September 30, 2021 and December 31, 2020, goodwill included accumulated impairment losses of $220.6 million within the Industrial Technologies and Services segment.

Other Intangible Assets, Net

Other intangible assets as of September 30, 2021 and December 31, 2020 consisted of the following.


	September 30, 2021						December 31, 2020
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortized intangible assets
Customer lists and relationships	$	2,871.8	$	(981.7)	$	1,890.1	$	2,835.0	$	(841.3)	$	1,993.7
Technology	322.6		(75.7)		246.9		279.9		(38.1)		241.8
Tradenames	41.0		(19.6)		21.4		41.8		(15.6)		26.2

Other	106.1		(76.0)		30.1		102.8		(58.6)		44.2
Unamortized intangible assets
Tradenames	1,507.3		—		1,507.3		1,491.3		—		1,491.3
Total other intangible assets	$	4,848.8	$	(1,153.0)	$	3,695.8	$	4,750.8	$	(953.6)	$	3,797.2

Intangible Asset Impairment Considerations

As of September 30, 2021, there were no indications that the carrying value of goodwill and other intangible assets may not be recoverable.

During the third quarter of 2020, the Company recognized an impairment of $19.9 million to reduce the carrying value of two tradenames in the Industrial Technologies and Services segment.

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Note 7. Accrued Liabilities

Accrued liabilities as of September 30, 2021 and December 31, 2020 consisted of the following.


	September 30, 2021		December 31, 2020
Salaries, wages and related fringe benefits	$	240.8	$	197.0
Contract liabilities	216.3		164.6
Product warranty	44.5		41.1
Operating lease liabilities	36.7		47.1
Restructuring	12.6		17.5
Taxes	234.7		116.1
Other	146.8		125.5
Total accrued liabilities	$	932.4	$	708.9

A reconciliation of the changes in the accrued product warranty liability for the three and nine month periods ended September 30, 2021 and 2020 are as follows.


	For the Three Month Period Ended September 30,				For the Nine Month Period Ended September 30,
	2021		2020		2021		2020
Balance at beginning of period	$	42.0	$	38.7	$	41.1	$	19.1
Product warranty accruals	4.3		5.4		14.1		13.0
Acquired warranty	1.9		—		2.0		19.8
Settlements	(3.2)		(4.8)		(12.1)		(12.7)
Charged to other accounts(1)	(0.5)		0.5		(0.6)		0.6
Balance at end of period	$	44.5	$	39.8	$	44.5	$	39.8

(1)Primarily consists of the effects of foreign currency translation adjustments

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Note 8. Benefit Plans

Net Periodic Benefit Cost

The following table summarizes the components of net periodic benefit cost for the Company’s defined benefit pension plans and other postretirement benefit plans recognized for the three and nine month periods ended September 30, 2021 and 2020.


	Pension Benefits								Other Postretirement Benefits
	U.S. Plans				Non-U.S. Plans
	For the Three Month Period Ended September 30,
	2021		2020		2021		2020		2021		2020
Service cost	$	1.6	$	1.8	$	1.1	$	1.2	$	—	$	—
Interest cost	2.7		2.8		1.2		1.6		0.1		0.2
Expected return on plan assets	(3.0)		(4.0)		(3.1)		(2.8)		—		—
Recognition of:
Unrecognized prior service cost	—		—		—		—		(0.1)		—
Unrecognized net actuarial loss	—		—		1.2		0.8		0.1		—

Gain on settlement	(0.8)		—		—		—		—		—
	$	0.5	$	0.6	$	0.4	$	0.8	$	0.1	$	0.2


	Pension Benefits								Other Postretirement Benefits
	U.S. Plans				Non-U.S. Plans
	For the Nine Month Period Ended September 30,
	2021		2020		2021		2020		2021		2020
Service cost	$	5.0	$	4.1	$	3.3	$	3.1	$	—	$	—
Interest cost	8.2		6.8		3.5		4.6		0.4		0.5
Expected return on plan assets	(9.2)		(9.5)		(9.2)		(8.2)		—		—
Recognition of:
Unrecognized prior service cost	—		—		0.1		0.1		(0.3)		—
Unrecognized net actuarial loss	—		—		3.7		2.2		0.1		—

Gain on settlement	(0.8)		—		—		—		—		—
	$	3.2	$	1.4	$	1.4	$	1.8	$	0.2	$	0.5

The components of net periodic benefit cost other than the service cost component are included in “Other income, net” in the Condensed Consolidated Statements of Operations.

Note 9. Debt

Debt as of September 30, 2021 and December 31, 2020 is summarized as follows.


	September 30, 2021		December 31, 2020
Short-term borrowings	$	—	$	—
Long-term debt:
Revolving credit facility, due 2025	$	—	$	—

Dollar Term Loan B, due 2027(1)	1,869.7		1,883.7
Dollar Term Loan, due 2027(2)	912.8		919.6
Euro Term Loan, due 2027(3)	685.1		728.0
Dollar Term Loan Series A, due 2027(4)	—		392.4
Finance leases and other long-term debt	26.0		17.2
Unamortized debt issuance costs	(31.3)		(41.4)
Total long-term debt, net, including current maturities	3,462.3		3,899.5
Current maturities of long-term debt	40.1		40.4
Total long-term debt, net	$	3,422.2	$	3,859.1

(1)As of September 30, 2021, this amount is presented net of unamortized discounts of $1.8 million. As of September 30, 2021, the applicable interest rate was approximately 1.83% and the weighted-average interest rate was 1.86% for the nine month period ended September 30, 2021.

(2)As of September 30, 2021, this amount is presented net of unamortized discounts of $0.9 million. As of September 30, 2021, the applicable interest rate was approximately 1.83% and the weighted average interest rate was 1.86% for the nine month period ended September 30, 2021.

(3)As of September 30, 2021, this amount is presented net of unamortized discounts of $0.6 million. As of September 30, 2021, the applicable interest rate was 2.00% and the weighted average interest rate was 2.00% for the nine month period ended September 30, 2021.

(4)The weighted average interest rate was 2.86% for the nine month period ended September 30, 2021.

Senior Secured Credit Facilities

The Senior Secured Credit Facilities provided senior secured financing consisting of (i) a senior secured term loan facility denominated in U.S. dollars (as refinanced and otherwise modified from time to time prior to February 28, 2020, the “Original Dollar Term Loan”), (ii) a senior secured term loan facility denominated in Euros (as refinanced and otherwise modified from time to time prior to February 28, 2020, the “Original Euro Term Loan”) and (iii) a senior secured revolving credit facility (as refinanced and otherwise modified from time to time the “Revolving Credit Facility”). The Revolving Credit Facility is available to be drawn in U.S. dollars (“USD”), Euros (“EUR”), Great British Pounds (“GBP”) and other reasonably accepted foreign currencies, subject to certain sublimits for the foreign currencies.

See Note 10 “Debt” to the consolidated financial statements in the Company’s annual report on Form 10-K for the year ended December 31, 2020 for further information on the Senior Secured Credit Facilities.

On September 30, 2021, the Company elected to prepay the Dollar Term Loan Series A outstanding principal balance of $396.0 million using cash on hand. The prepayment resulted in the write-off of unamortized debt issuance costs and unamortized issuance discount of $9.0 million which was recognized in “Loss on extinguishment of debt” in the Condensed Consolidated Statements of Operations.

As of September 30, 2021, the aggregate amount of commitments under the Revolving Credit Facility was $1,100.0 million and the capacity under the Revolving Credit Facility to issue letters of credit was $400.0 million. As of September 30, 2021, the Company had no outstanding borrowings under the Revolving Credit Facility, outstanding letters of credit under the Revolving Credit Facility of $50.8 million and unused availability under the Revolving Credit Facility of $1,049.2 million.

As of September 30, 2021, we were in compliance with all covenants of our Senior Secured Credit Facilities.

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Note 10. Stock-Based Compensation Plans

The Company has outstanding stock-based compensation awards granted under the 2013 Stock Incentive Plan (“2013 Plan”) and the 2017 Omnibus Incentive Plan (“2017 Plan”) as described in Note 17, “Stock-Based Compensation Plans” to the consolidated financial statements in its 2020 Form 10-K.

The Company’s stock-based compensation awards are typically granted in the first quarter of the year and primarily consist of stock options, restricted stock units and performance share units. Eligible employees were also granted restricted stock units, during the three months ended September 30, 2020, that vest ratably over two years, subject to the passage of time and the employee's continued employment during such period. In some instances, such as death, awards may vest concurrently with or following an employee's termination.

Stock-Based Compensation

Stock-based compensation expense for the nine month periods ended September 30, 2021 and 2020 are included in “Cost of sales” and “Selling and administrative expenses” in the Condensed Consolidated Statements of Operations and are as follows.


	For the Three Month Period Ended September 30,				For the Nine Month Period Ended September 30,
	2021		2020		2021		2020
Stock-based compensation expense - continuing and discontinued operations	$	21.9	$	12.8	$	75.9	$	29.0
Stock-based compensation expense recognized in discontinued operations	—		0.9		10.9		1.7
Stock-based compensation expense recognized in continuing operations	$	21.9	$	11.9	$	65.0	$	27.3

Stock-Based Compensation - Continuing Operations

In the nine month period ended September 30, 2021, the $65.0 million of stock-based compensation expense included expense for equity awards granted under the 2013 and 2017 Plan of $64.5 million and an increase in the liability for stock appreciation rights (“SAR”) of $0.5 million. Of the $64.5 million of expense for equity awards granted under the 2013 Plan and 2017 Plan, $43.1 million related to the $150 million equity grant to nearly 16,000 employees worldwide made in the third quarter of 2020 (“All-Employee Equity Grant”).

As of September 30, 2021, there was $109.1 million of total unrecognized compensation expense related to outstanding stock options, restricted stock unit awards and performance stock unit awards.

Stock-Based Compensation - Discontinued Operations

In the nine month period ended September 30, 2021, the $10.9 million of stock-based compensation expense included expense for modifications of equity awards of $3.8 million and expense for equity awards granted under the 2013 and 2017 Plan of $7.1 million. The modifications allowed for the vesting of the first tranche of the All-Employee Equity Grant awarded to HPS and SVT employees despite their termination due to the divestitures. Of the $7.1 million of expense for equity awards granted under the 2013 Plan and 2017 Plan, $5.4 million related to the All-Employee Equity Grant.

Stock Option Awards

Stock options are granted to employees with an exercise price equal to the fair value of the Company’s per share common stock on the date of grant. Stock option awards typically vest over four or five years and expire ten years from the date of grant.

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A summary of the Company’s stock option (including SARs) activity for the nine month period ended September 30, 2021 is presented in the following table (underlying shares in thousands).


	Shares	Weighted-Average Exercise Price (per share)
Stock options outstanding as of December 31, 2020	7,742	$	18.47

Granted	793	45.75
Exercised or settled	(1,305)	15.97
Forfeited	(231)	30.57
Expired	(6)	13.01
Stock options outstanding as of September 30, 2021	6,993	21.64

Vested as of September 30, 2021	4,551	15.85

The following assumptions were used to estimate the fair value of options granted during the nine month periods ended September 30, 2021 and 2020 using the Black-Scholes option-pricing model.


	For the Nine Month Period Ended September 30,
Assumptions	2021		2020
Expected life of options (in years)	6.3		6.3
Risk-free interest rate	0.9% - 1.1%		0.4% - 1.5%
Assumed volatility	38.9% - 39.4%		24.6% - 41.1%
Expected dividend rate	0.0	%	0.0	%

Restricted Stock Unit Awards

Restricted stock units are granted to employees and non-employee directors based on the market price of the Company’s common stock on the grant date and recognized in compensation expense over the vesting period. A summary of the Company’s restricted stock unit activity for the nine month period ended September 30, 2021 is presented in the following table (underlying shares in thousands).


	Shares	Weighted-Average Grant-Date Fair Value
Non-vested as of December 31, 2020	5,546	$	33.09

Granted	340	45.74
Vested	(2,497)	33.38
Forfeited	(616)	34.21
Non-vested as of September 30, 2021	2,773	34.13

Performance Share Unit Awards

Performance share units are granted to employees and are subject to a three year performance period. The number of shares issued at the end of the performance period is determined by the Company’s total shareholder return percentile rank versus the S&P 500 index for the three year performance period. The grant date fair value of these awards is determined using a Monte Carlo simulation pricing model and compensation cost is recognized straight-line over a three year period.

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A summary of the Company’s performance stock unit activity for the nine month period ended September 30, 2021 is presented in the following table (underlying shares in thousands).


	Shares	Weighted-Average Grant-Date Fair Value
Non-vested as of December 31, 2020	255	$	29.72
Granted	158	55.84
Forfeited	(20)	36.36
Non-vested as of September 30, 2021	393	39.89

The following assumptions were used to estimate the fair value of performance share units granted during the nine month periods ended September 30, 2021 and 2020 using the Monte Carlo simulation pricing model.


	For the Nine Month Period Ended September 30,
Assumptions	2021		2020
Expected term (in years)	2.9		2.8
Risk-free interest rate	0.2	%	0.5	%
Assumed volatility	36.9	%	35.2	%
Expected dividend rate	—	%	—	%

Note 11. Accumulated Other Comprehensive Income (Loss)

The Company’s other comprehensive income (loss) consists of (i) unrealized foreign currency net gains and losses on the translation of the assets and liabilities of its foreign operations; (ii) realized and unrealized foreign currency gains and losses on certain hedges of net investments in foreign operations, net of income taxes; (iii) unrealized gains and losses on cash flow hedges (consisting of interest rate swaps), net of income taxes; and (iv) pension and other postretirement prior service cost and actuarial gains or losses, net of income taxes. See Note 8 “Benefit Plans” and Note 12 “Hedging Activities, Derivative Instruments and Fair Value Measurements.”

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The before tax income (loss) and related income tax effect are as follows.


	For the Three Month Period Ended September 30, 2021						For the Three Month Period Ended September 30, 2020
	Before-Tax Amount		Tax Benefit or (Expense)		Net of Tax Amount		Before-Tax Amount		Tax Benefit or (Expense)		Net of Tax Amount
Foreign currency translation adjustments, net	$	(52.1)	$	4.5	$	(47.6)	$	135.3	$	7.3	$	142.6
Unrecognized gains on cash flow hedges, net	—		—		—		5.5		(1.3)		4.2
Pension and other postretirement benefit prior service cost and gain or loss, net	2.4		(0.6)		1.8		(1.6)		0.6		(1.0)
Other comprehensive income	$	(49.7)	$	3.9	$	(45.8)	$	139.2	$	6.6	$	145.8


	For the Nine Month Period Ended September 30, 2021						For the Nine Month Period Ended September 30, 2020
	Before-Tax Amount		Tax Benefit or (Expense)		Net of Tax Amount		Before-Tax Amount		Tax Benefit or (Expense)		Net of Tax Amount
Foreign currency translation adjustments, net	$	(108.3)	$	10.0	$	(98.3)	$	87.6	$	7.7	$	95.3
Unrecognized gains on cash flow hedges, net	—		—		—		14.3		(3.4)		10.9
Pension and other postretirement benefit prior service cost and gain or loss, net	5.4		(1.1)		4.3		2.3		0.1		2.4
Other comprehensive income	$	(102.9)	$	8.9	$	(94.0)	$	104.2	$	4.4	$	108.6

The tables above include only the other comprehensive income (loss), net of tax, attributable to Ingersoll Rand Inc. Other comprehensive income (loss), net, attributable to noncontrolling interest holders was $0.2 million and $3.8 million for the three month periods ended September 30, 2021 and 2020, respectively, and $(2.1) million and $(1.6) million for the nine month periods ended September 30, 2021 and 2020, respectively, and related entirely to foreign currency translation adjustments.

Changes in accumulated other comprehensive income (loss) by component for the nine month periods ended September 30, 2021 and 2020 are presented in the following table(1).


	Foreign Currency Translation Adjustments, Net		Unrecognized Gains (Losses) on Cash Flow Hedges		Pension and Other Postretirement Benefit Plans		Total
Balance as of December 31, 2020	$	74.6	$	—	$	(60.4)	$	14.2
Other comprehensive income (loss) before reclassifications	(98.3)		—		2.2		(96.1)
Amounts reclassified from accumulated other comprehensive income (loss)	—		—		2.1		2.1
Other comprehensive income (loss)	(98.3)		—		4.3		(94.0)
Divestiture of foreign subsidiaries	(1.5)		—		—		(1.5)
Balance as of September 30, 2021	$	(25.2)	$	—	$	(56.1)	$	(81.3)

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	Foreign Currency Translation Adjustments, Net		Unrecognized Gains (Losses) on Cash Flow Hedges		Pension and Other Postretirement Benefit Plans		Total
Balance as of December 31, 2019	$	(193.6)	$	(10.9)	$	(51.5)	$	(256.0)
Other comprehensive income (loss) before reclassifications	95.3		(3.0)		0.7		93.0
Amounts reclassified from accumulated other comprehensive income (loss)	—		13.9		1.7		15.6
Other comprehensive income	95.3		10.9		2.4		108.6

Balance as of September 30, 2020	$	(98.3)	$	—	$	(49.1)	$	(147.4)

(1)All amounts are net of tax. Amounts in parentheses indicate debits.

Reclassifications out of accumulated other comprehensive income (loss) for the nine month periods ended September 30, 2021 and 2020 are presented in the following table.


Amount Reclassified from Accumulated Other Comprehensive Income (Loss)
Details about Accumulated Other Comprehensive Income (Loss) Components	For the Nine Month Period Ended September 30,				Affected Line(s) in the Statement Where Net Income is Presented
	2021		2020
Loss on cash flow hedges (interest rate swaps)	$	—	$	18.5	Interest expense
Benefit for income taxes	—		(4.6)		Benefit for income taxes
Loss on cash flow hedges (interest rate swaps), net of tax	$	—	$	13.9

Amortization of defined benefit pension and other postretirement benefit items(1)	$	2.8	$	2.3	Cost of sales and Selling and administrative expenses
Benefit for income taxes	(0.7)		(0.6)		Benefit for income taxes
Amortization of defined benefit pension and other postretirement benefit items, net of tax	$	2.1	$	1.7

Total reclassifications for the period, net of tax	$	2.1	$	15.6

(1)These components are included in the computation of net periodic benefit cost. See Note 8 “Benefit Plans” for additional details.

Note 12. Hedging Activities, Derivative Instruments and Fair Value Measurements

Hedging Activities

The Company is exposed to certain market risks during the normal course of its business arising from adverse changes in interest rates and foreign currency exchange rates. The Company selectively uses derivative financial instruments (“derivatives”), including foreign currency forward contracts and interest rate swaps, to manage the risks from fluctuations in foreign currency exchange rates and interest rates, respectively. The Company does not purchase or hold derivatives for trading or speculative purposes. Fluctuations in interest rates and foreign currency exchange rates can be volatile, and the Company’s risk management activities do not totally eliminate these risks. Consequently, these fluctuations could have a significant effect on the Company’s financial results.

The Company’s exposure to interest rate risk results primarily from its variable-rate borrowings. The Company manages its debt centrally, considering tax consequences and its overall financing strategies. The Company manages its exposure to interest rate risk by using pay-fixed interest rate swaps, from time to time, as cash flow hedges of variable rate debt in order to adjust the relative fixed and variable proportions.

A substantial portion of the Company’s operations is conducted by its subsidiaries outside of the United States in currencies other than the USD. Almost all of the Company’s non-U.S. subsidiaries conduct their business primarily in their local currencies, which are also their functional currencies. The USD, the EUR, GBP, Chinese Renminbi and Indian rupee are the principal currencies in which the Company and its subsidiaries enter into transactions. The Company is exposed to the impacts of changes in foreign

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currency exchange rates on the translation of its non-U.S. subsidiaries’ assets, liabilities and earnings into USD. The Company has certain U.S. subsidiaries borrow in currencies other than the USD.

The Company and its subsidiaries are also subject to the risk that arises when they, from time to time, enter into transactions in currencies other than their functional currency. To mitigate this risk, the Company and its subsidiaries typically settle intercompany trading balances at least quarterly. The Company also selectively uses forward currency contracts to manage this risk. These contracts for the sale or purchase of European and other currencies generally mature within one year.

Derivative Instruments

The following table summarizes the notional amounts, fair values and classification of the Company’s outstanding derivatives by risk category and instrument type within the Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020.


September 30, 2021
Derivative Classification		Notional Amount(1)		Fair Value(1) Other Current Assets		Fair Value(1) Other Assets		Fair Value(1) Accrued Liabilities		Fair Value(1) Other Liabilities


Derivatives Not Designated as Hedging Instruments
Foreign currency forwards	Fair Value	$	18.9	$	0.1	$	—	$	—	$	—
Foreign currency forwards	Fair Value	21.6				—		0.1		—


December 31, 2020
Derivative Classification		Notional Amount(1)		Fair Value(1) Other Current Assets		Fair Value(1) Other Assets		Fair Value(1) Accrued Liabilities		Fair Value(1) Other Liabilities


Derivatives Not Designated as Hedging Instruments
Foreign currency forwards	Fair Value	$	230.5	$	2.9	$	—	$	—	$	—
Foreign currency forwards	Fair Value	51.2		—		—		0.7		—

(1)Notional amounts represent the gross contract amounts of the outstanding derivatives excluding the total notional amount of positions that have been effectively closed through offsetting positions. The net gains and net losses associated with positions that have been effectively closed through offsetting positions but not yet settled are included in the asset and liability derivatives fair value columns, respectively.

Losses on derivatives designated as cash flow hedges included in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine month periods ended September 30, 2021 and 2020 are as presented in the table below.


	For the Three Month Period Ended September 30,				For the Nine Month Period Ended September 30,
	2021		2020		2021		2020
Interest rate swap contracts
Loss recognized in AOCI on derivatives	$	—	$	(0.1)	$	—	$	(4.4)
Loss reclassified from AOCI into income (effective portion)(1)	—		(5.3)		—		(18.5)

(1)Losses on derivatives reclassified from accumulated other comprehensive income (“AOCI”) into income were included within “Interest expense” in the Condensed Consolidated Statements of Operations.

As of September 30, 2021, the Company has no interest rate swap contracts. Our previous interest rate swap contracts expired during the third quarter of 2020 and the remaining amounts in AOCI were reclassified to Interest expense during the same period. The Company’s LIBOR-based variable rate borrowings outstanding as of September 30, 2021 were $2,785.2 million and €592.1 million.

The Company had four foreign currency forward contracts outstanding as of September 30, 2021 with notional amounts ranging from $7.2 million to $14.4 million. These contracts are used to hedge the change in fair value of recognized foreign currency denominated assets or liabilities caused by changes in currency exchange rates. The changes in the fair value of these contracts generally offset the changes in the fair value of a corresponding amount of the hedged items, both of which are included within “Other operating expense, net” in the Condensed Consolidated Statements of Operations. The Company’s foreign currency forward contracts are subject to master netting arrangements or agreements between the Company and each counterparty for the

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net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract with that certain counterparty. It is the Company’s practice to recognize the gross amounts in the Condensed Consolidated Balance Sheets. The amount available to be netted is not material.

The Company’s gains (losses) on derivative instruments not designated as accounting hedges and total net foreign currency losses for the three and nine month periods ended September 30, 2021 and 2020 were as follows.


	For the Three Month Period Ended September 30,				For the Nine Month Period Ended September 30,
	2021		2020		2021		2020
Foreign currency forward contracts gains (losses)	$	(2.4)	$	9.1	$	(2.5)	$	7.0
Total foreign currency transaction gains (losses), net	(1.1)		(5.8)		13.6		(12.7)

The Company has a significant investment in consolidated subsidiaries with functional currencies other than the USD, particularly the EUR. On August 17, 2017, the Company designated its €615.0 million Original Euro Term Loan as a hedge of the Company’s net investment in subsidiaries with EUR functional currencies until it was extinguished and replaced on February 28, 2020 by a €601.2 million Euro Term Loan, further described in Note 9 “Debt”. As of September 30, 2021, the Euro Term Loan of €592.1 million remained designated.

The Company’s gains (losses), net of income tax, associated with changes in the value of debt for the three and nine month periods ended September 30, 2021 and 2020 were as follows.


	For the Three Month Period Ended September 30,				For the Nine Month Period Ended September 30,
	2021		2020		2021		2020
Gain, net of income tax, recorded through other comprehensive income	$	12.2	$	21.9	$	25.4	$	22.8

The net balance of such gains (losses) included in accumulated other comprehensive income (loss) as of September 30, 2021 and 2020 was $56.2 million and $53.0 million, respectively.

For the periods presented, all cash flows associated with derivatives are classified as operating cash flows in the Condensed Consolidated Statements of Cash Flows.

Fair Value Measurements

A financial instrument is defined as cash or cash equivalents, evidence of an ownership interest in an entity, or a contract that creates a contractual obligation or right to deliver or receive cash or another financial instrument from another party. The Company’s financial instruments consist primarily of cash and cash equivalents, trade accounts receivables, trade accounts payables, deferred compensation assets and obligations, derivatives and debt instruments. The carrying values of cash and cash equivalents, trade accounts receivables, trade accounts payables, and variable rate debt instruments are a reasonable estimate of their respective fair values.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or more advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value as follows.

Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities as of the reporting date.

Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities as of the reporting date.

Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020.


	September 30, 2021
	Level 1		Level 2		Level 3		Total
Financial Assets
Foreign currency forwards(1)	$	—	$	0.1	$	—	$	0.1
Trading securities held in deferred compensation plan(2)	11.4		—		—		11.4
Total	$	11.4	$	0.1	$	—	$	11.5
Financial Liabilities
Foreign currency forwards(1)	$	—	$	0.1	$	—	$	0.1
Deferred compensation plans(2)	24.8		—		—		24.8

Total	$	24.8	$	0.1	$	—	$	24.9


	December 31, 2020
	Level 1		Level 2		Level 3		Total
Financial Assets
Foreign currency forwards(1)	$	—	$	2.9	$	—	$	2.9
Trading securities held in deferred compensation plan(2)	9.1		—		—		9.1
Total	$	9.1	$	2.9	$	—	$	12.0
Financial Liabilities
Foreign currency forwards(1)	$	—	$	0.7	$	—	$	0.7
Deferred compensation plan(2)	25.7		—		—		25.7

Total	$	25.7	$	0.7	$	—	$	26.4

(1)Based on calculations that use readily observable market parameters at their basis, such as spot and forward rates.

(2)Based on the quoted price of publicly traded mutual funds and other equity securities which are classified as trading securities and accounted for using the mark-to-market method.

Goodwill and Other Intangible Assets

Certain of our non-financial assets are subject to impairment analysis, including indefinite-lived intangible assets and goodwill. We review the carrying amounts of such assets whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable or at least annually. Any resulting impairment would require that the asset be recorded at its fair value. At December 31, 2020, we did not have any significant non-financial assets or liabilities that were required to be measured at fair value on a recurring or non-recurring basis. Refer to Note 6 “Goodwill and Other Intangible Assets” for further discussion pertaining to our annual and interim evaluation of goodwill and other intangible assets for impairment.

Note 13. Revenue from Contracts with Customers

Overview

The Company recognizes revenue when the Company has satisfied its obligation and control is transferred to the customer. The amount of revenue recognized includes adjustments for any variable consideration, such as rebates, sales discounts, liquidated damages, etc., which are included in the transaction price, and allocated to each performance obligation. The variable consideration is estimated throughout the course of the contract using the Company’s best estimates.

The majority of the Company’s revenues are derived from short duration contracts and revenue is recognized at a single point in time when control is transferred to the customer, generally at shipment or when delivery has occurred or services have been rendered.

The Company has certain long duration engineered to order (“ETO”) contracts that require highly engineered solutions designed to customer specific applications. For contracts where the contractual deliverables have no alternative use and the contract termination clauses provide for the recovery of cost plus a reasonable margin, revenue is recognized over time based on the Company’s progress in satisfying the contractual performance obligations, generally measured as the ratio of actual costs incurred to date to the estimated total costs to complete the contract. For contracts with termination provisions that do not provide for

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recovery of cost and a reasonable margin, revenue is recognized at a point in time, generally at shipment or delivery to the customer. Identification of performance obligations, determination of alternative use, assessment of contractual language regarding termination provisions, and estimation of total project costs are all significant judgments required in the application of ASC 606.

Contractual specifications and requirements may be modified. The Company considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. In the event a contract modification is for goods or services that are not distinct in the contract, and therefore, form part of a single performance obligation that is partially satisfied as of the modification date, the effect of the contract modification on the transaction price and the Company’s measure of progress for the performance obligation to which it relates, is recognized on a cumulative catch-up basis.

Taxes assessed by a government authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. Sales commissions are generally due at either collection of payment from customers or recognition of revenue. Applying the practical expedient from ASC 340-40-25-4, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. These costs are included in “Selling and administrative expenses” in the Condensed Consolidated Statements of Operations.

Disaggregation of Revenue

The following tables provide disaggregated revenue by reportable segment for the three month periods ended September 30, 2021 and 2020.


	For the Three Month Period Ended September 30, 2021
	Industrial Technologies and Services		Precision and Science Technologies		Total
Primary Geographic Markets
United States	$	395.0	$	109.0	$	504.0
Other Americas	69.1		6.5		75.6
Total Americas	464.1		115.5		579.6
EMEIA	337.2		93.5		430.7
Asia Pacific	269.4		45.3		314.7
Total	$	1,070.7	$	254.3	$	1,325.0
Product Categories
Original equipment	$	638.4	$	210.2	$	848.6
Aftermarket	432.3		44.1		476.4
Total	$	1,070.7	$	254.3	$	1,325.0
Pattern of Revenue Recognition
Revenue recognized at point in time(1)	$	980.4	$	252.9	$	1,233.3
Revenue recognized over time(2)	90.3		1.4		91.7
Total	$	1,070.7	$	254.3	$	1,325.0

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	For the Three Month Period Ended September 30, 2020
	Industrial Technologies and Services		Precision and Science Technologies		Total
Primary Geographic Markets
United States	$	323.0	$	82.2	$	405.2
Other Americas	80.1		12.5		92.6
Total Americas	403.1		94.7		497.8
EMEIA	277.7		76.7		354.4
Asia Pacific	221.8		38.5		260.3
Total	$	902.6	$	209.9	$	1,112.5
Product Categories
Original equipment	$	528.3	$	179.4	$	707.7
Aftermarket	374.3		30.5		404.8
Total	$	902.6	$	209.9	$	1,112.5
Pattern of Revenue Recognition
Revenue recognized at point in time(1)	$	816.7	$	209.9	$	1,026.6
Revenue recognized over time(2)	85.9		—		85.9
Total	$	902.6	$	209.9	$	1,112.5

(1)Revenues from short and long duration product and service contracts recognized at a point in time when control is transferred to the customer generally when product delivery has occurred and services have been rendered.

(2)Revenues primarily from long duration ETO product contracts and certain contracts for delivery of a significant volume of substantially similar products recognized over time as contractual performance obligations are completed.

The following tables provide disaggregated revenue by reportable segment for the nine month periods ended September 30, 2021 and 2020.


	For the Nine Month Period Ended September 30, 2021
	Industrial Technologies and Services		Precision and Science Technologies		Total
Primary Geographic Markets
United States	$	1,140.0	$	310.2	$	1,450.2
Other Americas	195.9		13.5		209.4
Total Americas	1,335.9		323.7		1,659.6
EMEIA	992.9		256.7		1,249.6
Asia Pacific	703.2		121.2		824.4
Total	$	3,032.0	$	701.6	$	3,733.6
Product Categories
Original equipment	$	1,790.8	$	587.4	$	2,378.2
Aftermarket	1,241.2		114.2		1,355.4
Total	$	3,032.0	$	701.6	$	3,733.6
Pattern of Revenue Recognition
Revenue recognized at point in time(1)	$	2,788.2	$	698.7	$	3,486.9
Revenue recognized over time(2)	243.8		2.9		246.7
Total	$	3,032.0	$	701.6	$	3,733.6

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	For the Nine Month Period Ended September 30, 2020
	Industrial Technologies and Services		Precision and Science Technologies		Total
Primary Geographic Markets
United States	$	789.9	$	215.2	$	1,005.1
Other Americas	195.9		27.3		223.2
Total Americas	985.8		242.5		1,228.3
EMEIA	725.4		181.3		906.7
Asia Pacific	525.0		94.7		619.7
Total	$	2,236.2	$	518.5	$	2,754.7
Product Categories
Original equipment	$	1,333.5	$	447.5	$	1,781.0
Aftermarket	902.7		71.0		973.7
Total	$	2,236.2	$	518.5	$	2,754.7
Pattern of Revenue Recognition
Revenue recognized at point in time(1)	$	2,026.3	$	518.5	$	2,544.8
Revenue recognized over time(2)	209.9		—		209.9
Total	$	2,236.2	$	518.5	$	2,754.7

Performance Obligations

The majority of the Company’s contracts have a single performance obligation as the promise to transfer goods and/or services. For contracts with multiple performance obligations, the Company utilizes observable prices to determine standalone selling price or cost plus margin if a standalone price is not available. The Company has elected to account for shipping and handling activities as fulfillment costs and not a separate performance obligation. If control transfers and related revenue is recognized for the related good before the shipping and handling activities occur, the related costs of those shipping and handling activities are accrued.

The Company’s primary performance obligations include delivering standard or configured to order (“CTO”) goods to customers, designing and manufacturing a broad range of equipment customized to a customer’s specifications in ETO arrangements, rendering of services (maintenance and repair contracts), and certain extended or service type warranties. For incidental items that are immaterial in the context of the contract, costs are expensed as incurred or accrued at delivery.

As of September 30, 2021, for contracts with an original duration greater than one year, the Company expects to recognize revenue in the future related to unsatisfied (or partially satisfied) performance obligations of $447.3 million in the next twelve months and $422.7 million in periods thereafter. The performance obligations that are unsatisfied (or partially satisfied) are primarily related to orders for goods or services that were placed prior to the end of the reporting period and have not been delivered to the customer, on-going work on ETO contracts where revenue is recognized over time and service contracts with an original duration greater than one year.

Contract Balances

The following table provides the contract balances as of September 30, 2021 and December 31, 2020 presented in the Condensed Consolidated Balance Sheets.


	September 30, 2021		December 31, 2020
Accounts receivable, net	$	927.0	$	861.8
Contract assets	59.1		60.4
Contract liabilities	217.5		166.2

Accounts receivable, net – Amounts due where the Company’s right to receive cash is unconditional. Customer receivables are recorded at face amount less an allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts for

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expected losses as a result of customers’ inability to make required payments. Management evaluates the aging of customer receivable balances, the financial condition of its customers, historical trends and the time outstanding of specific balances to estimate the amount of customer receivables that may not be collected in the future and records the appropriate provision.

The allowance for credit losses for the three and nine month periods ended September 30, 2021 consisted of the following.


	For the Three Month Period Ended September 30, 2021		For the Nine Month Period Ended September 30, 2021

Balance at beginning of the period	$	49.3	$	50.9

Provision charged to expense	0.6		2.2
Write-offs, net of recoveries	(0.3)		(3.0)
Foreign currency translation and other	0.3		(0.2)
Balance at end of the period	$	49.9	$	49.9

Contract assets – The Company’s rights to consideration for the satisfaction of performance obligations subject to constraints apart from timing. Contract assets are transferred to receivables when the right to collect consideration becomes unconditional. Contract assets are presented net of progress billings and related advances from customers.

Contract liabilities – Advance payments received from customers for contracts for which revenue is not yet recognized. Contract liability balances are generally recognized in revenue within twelve months.

Contract assets and liabilities are reported in the Condensed Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period. Contract assets and liabilities are presented net on a contract level, where required.

Payments from customers are generally due 30-60 days after invoicing. Invoicing for sales of standard products generally coincides with shipment or delivery of goods. Invoicing for CTO and ETO contracts typically follows a schedule for billing at contractual milestones. Payment milestones normally include down payments upon the contract signing, completion of product design, completion of customer’s preliminary inspection, shipment or delivery, completion of installation, and customer’s on-site inspection. The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and customer advances and deposits (contract liabilities) on the Condensed Consolidated Balance Sheets.

The Company has elected the practical expedient from ASC 606-10-32-18 and does not adjust the transaction price for the effects of a financing component if, at contract inception, the period between when the Company transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

Note 14. Income Taxes

The following table summarizes the Company’s provision for income taxes and effective income tax provision rate for the three and nine month periods ended September 30, 2021 and 2020.


	For the Three Month Period Ended September 30,						For the Nine Month Period Ended September 30,
	2021			2020			2021			2020
Income (loss) before income taxes	$	135.9		$	42.8		$	388.1		$	(138.9)
Provision for income taxes	$	2.7		$	12.8		$	25.8		$	24.3
Effective income tax provision rate	2.0		%	29.9		%	6.6		%	(17.5		%)

The decrease in the provision for income taxes and decrease in the effective income tax provision rate for the three month period ended September 30, 2021 when compared to the same three month period of 2020 is primarily due to the benefits associated with the windfall tax deduction and foreign tax credits recognized during the third quarter of 2021.

The increase in the provision for income taxes and increase in the effective income tax provision rate for the nine month period ended September 30, 2021 when compared to the same nine month period of 2020 is primarily due to an increase in the pretax book income in jurisdictions with higher effective tax rates combined with decreased earnings in jurisdictions with lower tax rates. This rate increase was mitigated by the windfall tax deduction and foreign tax credits recognized during the third quarter of 2021.

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Note 15. Other Operating Expense, Net

The components of “Other operating expense, net” for the three and nine month periods ended September 30, 2021 and 2020 were as follows.