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Ingersoll Rand Inc. - Quarter Report: 2023 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, 2023
or
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)
____________________________
Delaware46-2393770
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)
525 Harbour Place Drive, Suite 600
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 ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common Stock, $0.01 Par Value per shareIRNew 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 filerýAccelerated filer
Non-accelerated filerSmaller 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 404,796,976 shares of Common Stock, par value $0.01 per share, as of October 27, 2023.



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INGERSOLL RAND INC. AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
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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 the “safe harbor provisions” of the Private Securities Litigation Reform Act of 1995. 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 “Part I Item 1A. Risk Factors” and “Part II Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “2022 Annual Report”) and under “Part I Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q, 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:
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.
The COVID-19 pandemic could have a material and adverse effect on our business, results of operations and financial condition in the future.
Information systems failure or disruption, due to cyber terrorism or other actions, may adversely impact our business and result in financial loss to the Company or liability to our 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.
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.
We face competition in the markets we serve, which could materially and adversely affect our operating results.
Shareholder and customer emphasis on environmental, social, and governance responsibility may impose additional costs on us or expose us to new risks.
Acquisitions and integrating such acquisitions create certain risks and may affect our operating results.
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.
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.
Our success depends on our executive management and other key personnel and our ability to attract and retain top talent throughout the Company.
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.
Our business could suffer if we experience employee work stoppages, union and work council campaigns or other labor difficulties.
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.
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.
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
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operating results could be negatively affected by our inability to effectively implement such restructuring plans and other cost savings initiatives.
Cost overruns, delays, penalties or liquidated damages could negatively impact our results, particularly with respect to fixed-price contracts for custom engineered products.
A natural disaster, catastrophe, pandemic, geopolitical tensions or other event could adversely affect our operations.
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.
We may not realize all of the expected benefits of the acquisition of and merger with the Industrial business of Ingersoll-Rand plc. (the “Merger”).
Dispositions create certain risks and may affect our operating results.
We are a defendant in certain asbestos and silica-related personal injury lawsuits, which could adversely affect our financial condition.
The nature of our products creates the possibility of significant product liability and warranty claims, which could harm our business.
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.
Environmental compliance costs and liabilities could adversely affect our financial condition.
We face risks associated with our pension and other postretirement benefit obligations.
Our 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.
The terms of the credit agreement governing the Senior Secured Credit Facilities (as amended, the “Credit Agreement”) 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.
We utilize derivative financial instruments to reduce our exposure to market risks from changes in interest rates on our variable rate indebtedness and 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 (as defined herein) fail to extend credit under our Revolving Credit Facility, our liquidity and results of operations may be adversely affected.
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.
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 “Investor 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,
2023202220232022
Revenues$1,738.9 $1,515.7 $5,054.7 $4,292.6 
Cost of sales999.6 940.4 2,953.7 2,621.4 
Gross Profit739.3 575.3 2,101.0 1,671.2 
Selling and administrative expenses315.2 278.7 941.9 819.8 
Amortization of intangible assets92.2 93.8 274.3 263.6 
Other operating expense, net13.5 12.8 53.7 43.4 
Operating Income318.4 190.0 831.1 544.4 
Interest expense39.6 26.6 119.3 68.8 
Loss on extinguishment of debt12.6 — 13.5 1.1 
Other income, net(7.6)(9.8)(25.4)(21.8)
Income from Continuing Operations Before Income Taxes273.8 173.2 723.7 496.3 
Provision for income taxes60.3 30.3 168.9 104.6 
Income (loss) on equity method investments(3.9)2.6 (1.2)(2.5)
Income from Continuing Operations209.6 145.5 553.6 389.2 
Income from discontinued operations, net of tax— 0.5 — 0.6 
Net Income209.6 146.0 553.6 389.8 
Less: Net income attributable to noncontrolling interests1.3 0.9 4.7 2.5 
Net Income Attributable to Ingersoll Rand Inc.$208.3 $145.1 $548.9 $387.3 
Amounts attributable to Ingersoll Rand Inc. common stockholders:
Income from continuing operations, net of tax$208.3 $144.6 $548.9 $386.7 
Income from discontinued operations, net of tax— 0.5 — 0.6 
Net income attributable to Ingersoll Rand Inc.$208.3 $145.1 $548.9 $387.3 
Basic earnings per share of common stock:
Earnings from continuing operations$0.51 $0.36 $1.36 $0.95 
Earnings from discontinued operations— — — — 
Net earnings0.51 0.36 1.36 0.96 
Diluted earnings per share of common stock:
Earnings from continuing operations$0.51 $0.35 $1.34 $0.94 
Earnings from discontinued operations— — — — 
Net earnings0.51 0.36 1.34 0.94 
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,
2023202220232022
Comprehensive Income (Loss) Attributable to Ingersoll Rand Inc.
Net income attributable to Ingersoll Rand Inc.$208.3 $145.1 $548.9 $387.3 
Other comprehensive loss, net of tax:
Foreign currency translation adjustments, net(75.3)(207.9)(91.1)(448.8)
Unrecognized gain (loss) on cash flow hedges(2.5)19.6 3.1 14.2 
Pension and other postretirement prior service cost and gain (loss), net(0.6)5.3 (1.9)2.2 
Total other comprehensive loss, net of tax(78.4)(183.0)(89.9)(432.4)
Comprehensive income (loss) attributable to Ingersoll Rand Inc.$129.9 $(37.9)$459.0 $(45.1)
Comprehensive Income (Loss) Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests$1.3 $0.9 $4.7 $2.5 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net0.8 (1.9)1.6 (6.1)
Total other comprehensive income (loss), net of tax0.8 (1.9)1.6 (6.1)
Comprehensive income (loss) attributable to noncontrolling interests2.1 (1.0)6.3 (3.6)
Total Comprehensive Income (Loss)$132.0 $(38.9)$465.3 $(48.7)
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, 2023December 31, 2022
Assets
Current assets:
Cash and cash equivalents$1,197.5 $1,613.0 
Accounts receivable, net of allowance for credit losses of $53.1 and $47.2, respectively
1,216.1 1,122.0 
Inventories1,082.9 1,025.4 
Other current assets236.9 206.9 
Total current assets3,733.4 3,967.3 
Property, plant and equipment, net of accumulated depreciation of $472.7 and $417.4, respectively
685.8 624.4 
Goodwill6,489.8 6,064.2 
Other intangible assets, net3,673.0 3,578.6 
Deferred tax assets22.3 22.3 
Other assets549.7 509.1 
Total assets$15,154.0 $14,765.9 
Liabilities and Stockholders’ Equity
Current liabilities:
Short-term borrowings and current maturities of long-term debt$33.9 $36.5 
Accounts payable663.1 778.7 
Accrued liabilities957.7 858.8 
Total current liabilities1,654.7 1,674.0 
Long-term debt, less current maturities2,699.3 2,716.1 
Pensions and other postretirement benefits145.0 147.2 
Deferred income taxes630.1 610.6 
Other liabilities405.1 360.8 
Total liabilities$5,534.2 $5,508.7 
Commitments and contingencies (Note 18)
— — 
Stockholders’ equity
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 428,208,898 and 426,327,805 shares issued as of September 30, 2023 and December 31, 2022, respectively
4.3 4.3 
Capital in excess of par value9,527.1 9,476.8 
Retained earnings1,475.5 950.9 
Accumulated other comprehensive loss(341.6)(251.7)
Treasury stock at cost; 23,412,443 and 21,210,095 shares as of September 30, 2023 and December 31, 2022, respectively
(1,111.3)(984.5)
Total Ingersoll Rand Inc. stockholders’ equity$9,554.0 $9,195.8 
Noncontrolling interests65.8 61.4 
Total stockholders’ equity$9,619.8 $9,257.2 
Total liabilities and stockholders’ equity$15,154.0 $14,765.9 
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
(Unaudited; in millions)
Three Month Period Ended September 30, 2023
Common StockCapital in Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Ingersoll Rand Inc. Stockholders’ EquityNoncontrolling InterestsTotal Equity
Shares IssuedPar
Balance at beginning of period427.8 $4.3 $9,510.3 $1,275.3 $(263.2)$(1,111.9)$9,414.8 $65.6 $9,480.4 
Net income— — — 208.3 — — 208.3 1.3 209.6 
Dividends declared— — — (8.1)— — (8.1)— (8.1)
Issuance of common stock for stock-based compensation plans0.4 — 6.1 — — — 6.1 — 6.1 
Purchases of treasury stock— — — — — (0.1)(0.1)— (0.1)
Issuance of treasury stock for stock-based compensation plans— — (0.5)— — 0.7 0.2 — 0.2 
Stock-based compensation— — 11.2 — — — 11.2 — 11.2 
Other comprehensive income (loss), net of tax— — — — (78.4)— (78.4)0.8 (77.6)
Dividends attributable to noncontrolling interests— — — — — — — (1.9)(1.9)
Balance at end of period428.2 $4.3 $9,527.1 $1,475.5 $(341.6)$(1,111.3)$9,554.0 $65.8 $9,619.8 
Three Month Period Ended September 30, 2022
Common StockCapital in Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Ingersoll Rand Inc. Stockholders’ EquityNoncontrolling InterestsTotal Equity
Shares IssuedPar
Balance at beginning of period424.6 $4.3 $9,456.9 $604.6 $(291.0)$(997.9)$8,776.9 $67.1 $8,844.0 
Net income— — — 145.1 — — 145.1 0.9 146.0 
Dividends declared— — — (8.1)— — (8.1)— (8.1)
Issuance of common stock for stock-based compensation plans1.5 — 5.4 — — — 5.4 — 5.4 
Purchases of treasury stock— — — — — (4.1)(4.1)— (4.1)
Issuance of treasury stock for stock-based compensation plans— — (17.5)— — 18.3 0.8 — 0.8 
Stock-based compensation— — 17.9 — — — 17.9 — 17.9 
Other comprehensive loss, net of tax— — — — (183.0)— (183.0)(1.9)(184.9)
Dividends attributable to noncontrolling interests— — — — — — — (2.0)(2.0)
Balance at end of period426.1 $4.3 $9,462.7 $741.6 $(474.0)$(983.7)$8,750.9 $64.1 $8,815.0 
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, 2023
Common StockCapital in Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Ingersoll Rand Inc. Stockholders’ EquityNoncontrolling InterestsTotal Equity
Shares IssuedPar
Balance at beginning of period426.3 $4.3 $9,476.8 $950.9 $(251.7)$(984.5)$9,195.8 $61.4 $9,257.2 
Net income— — — 548.9 — — 548.9 4.7 553.6 
Dividends declared— — — (24.3)— — (24.3)— (24.3)
Issuance of common stock for stock-based compensation plans1.9 — 19.8 — — — 19.8 — 19.8 
Purchases of treasury stock— — — — — (133.3)(133.3)— (133.3)
Issuance of treasury stock for stock-based compensation plans— — (4.1)— — 6.5 2.4 — 2.4 
Stock-based compensation— — 34.6 — — — 34.6 — 34.6 
Other comprehensive income (loss), net of tax— — — — (89.9)— (89.9)1.6 (88.3)
Dividends attributable to noncontrolling interests— — — — — — — (1.9)(1.9)
Balance at end of period428.2 $4.3 $9,527.1 $1,475.5 $(341.6)$(1,111.3)$9,554.0 $65.8 $9,619.8 
Nine Month Period Ended September 30, 2022
Common StockCapital in Excess of Par ValueRetained EarningsAccumulated Other Comprehensive LossTreasury StockTotal Ingersoll Rand Inc. Stockholders’ EquityNoncontrolling InterestsTotal Equity
Shares IssuedPar
Balance at beginning of period423.8 $4.3 $9,408.6 $378.6 $(41.6)$(748.4)$9,001.5 $69.7 $9,071.2 
Net income— — — 387.3 — — 387.3 2.5 389.8 
Dividends declared— — — (24.3)— — (24.3)— (24.3)
Issuance of common stock for stock-based compensation plans2.3 — 13.3 — — — 13.3 — 13.3 
Purchases of treasury stock— — — — — (257.8)(257.8)— (257.8)
Issuance of treasury stock for stock-based compensation plans— — (20.7)— — 22.5 1.8 — 1.8 
Stock-based compensation— — 61.5 — — — 61.5 — 61.5 
Other comprehensive loss, net of tax— — — — (432.4)— (432.4)(6.1)(438.5)
Dividends attributable to noncontrolling interests— — — — — — — (2.0)(2.0)
Balance at end of period426.1 $4.3 $9,462.7 $741.6 $(474.0)$(983.7)$8,750.9 $64.1 $8,815.0 
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,
20232022
Cash Flows From Operating Activities From Continuing Operations:
Net income$553.6 $389.8 
Income from discontinued operations, net of tax— 0.6 
Income from continuing operations553.6 389.2 
Adjustments to reconcile income from continuing operations to net cash provided by operating activities from continuing operations:
Amortization of intangible assets274.3 263.6 
Depreciation67.2 64.4 
Non-cash restructuring charges2.1 6.0 
Stock-based compensation expense35.2 62.3 
Loss on equity method investments1.2 2.5 
Foreign currency transaction losses (gains), net1.0 (12.3)
Non-cash adjustments to carrying value of LIFO inventories14.0 33.0 
Loss on extinguishment of debt13.5 1.1 
Other non-cash adjustments7.4 2.0 
Changes in assets and liabilities:
Receivables(62.2)(160.1)
Inventories10.0 (260.2)
Accounts payable(140.8)76.4 
Accrued liabilities82.1 90.2 
Other assets and liabilities, net(62.6)(47.5)
Net cash provided by operating activities from continuing operations796.0 510.6 
Cash Flows From Investing Activities From Continuing Operations:
Capital expenditures(75.8)(61.1)
Net cash paid in acquisitions(923.8)(62.5)
Disposals of property, plant and equipment7.6 — 
Other investing 0.3 4.1 
Net cash used in investing activities from continuing operations(991.7)(119.5)
Cash Flows From Financing Activities From Continuing Operations:
Principal payments on long-term debt(1,510.8)(647.1)
Proceeds from long-term debt1,490.4 — 
Purchases of treasury stock(132.9)(257.8)
Cash dividends on common shares(24.3)(24.3)
Proceeds from stock option exercises21.9 14.7 
Payments of interest rate cap premiums— (13.4)
Payments of deferred and contingent acquisition consideration(17.4)(4.1)
Payments of debt issuance costs(17.3)— 
Other financing(3.4)(2.8)
Net cash used in financing activities from continuing operations(193.8)(934.8)
Cash Flows From Discontinued Operations:
Net cash used in operating activities— (5.0)
Net cash provided by investing activities— 4.4 
Net cash used in discontinued operations— (0.6)
Effect of exchange rate changes on cash and cash equivalents(26.0)(105.8)
Net decrease in cash and cash equivalents(415.5)(650.1)
Cash and cash equivalents, beginning of period1,613.0 2,109.6 
Cash and cash equivalents, end of period$1,197.5 $1,459.5 
Supplemental Cash Flow Information
Cash paid for income taxes, net of refunds$196.6 $117.1 
Cash paid for interest, net of interest rate derivative settlements84.1 64.2 
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 provider of mission-critical flow creation products and industrial solutions. 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, 2022 (“2022 Annual Report”). 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 three month period ended September 30, 2023 are not necessarily indicative of future results.
Recently Adopted Accounting Standard Updates (“ASU”)
In October 2021, the Financial Accounting Standards Board (the “FASB”) issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires an entity to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The amendments in this update were effective for fiscal years beginning after December 15, 2022 for public companies. The Company adopted this guidance on January 1, 2023 and applies the guidance prospectively to business combinations completed after this date. The adoption did not have a material impact on our condensed consolidated financial statements.
Supply Chain Finance Program
The Company has adopted ASU 2022-04, Liabilities - Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations, which requires the following disclosures about supplier finance programs. This adoption had no impact on the Company’s financial position, results of operations or cash flows.
The Company has entered into an agreement with a financial institution to facilitate a supply chain finance program (the “SCF Program”). Under the SCF Program, qualifying suppliers may elect to sell their receivables from the Company to the financial institution. Participating suppliers negotiate arrangements for sale of their receivables directly with the financial institution, and the terms of the Company’s payment obligations are not impacted by a supplier’s participation in the SCF Program. Once a qualifying supplier elects to participate in the SCF Program and reaches an agreement with the financial institution, the supplier elects which individual Company invoices they sell to the financial institution. However, all of the Company’s payments to participating suppliers are paid to the financial institution on the invoice due date, regardless of whether the individual invoice is sold by the supplier to the financial institution. The Company has not pledged any assets as security or provided other forms of guarantees. All outstanding amounts related to suppliers participating in the SCF Program are recorded within “Accounts payable” in our Condensed Consolidated Balance Sheets, and the associated payments are included in “Net cash provided by operating activities from continuing operations” within our Condensed Consolidated Statements of Cash Flows. Included in “Accounts payable” in the Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022 were $26.5 million and $9.7 million of outstanding payment obligations, respectively, that were sold to the financial institution by participating suppliers.
Note 2. Discontinued Operations
Discontinued operations consists of 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.
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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 for $1.68 billion in cash. The sale was substantially completed on June 1, 2021 and concluded in the third quarter of 2022.
High Pressure Solutions
On February 14, 2021, the Company entered into an agreement to sell the majority interest in its High Pressure Solutions business to private equity firm American Industrial Partners. The Company received net cash proceeds of $278.3 million for its majority interest of 55%, and retained a 45% common equity interest in the newly-formed entity comprising the HPS business. The sale was substantially completed on April 1, 2021 and concluded in the fourth quarter of 2021. The Company expects to maintain its minority investment in HPS indefinitely and is unable to estimate when this interest may be disposed.
Financial information of discontinued operations
Income from discontinued operations, net of tax was $0.5 million and $0.6 million for the three and nine month periods ended September 30, 2022, respectively, and consisted primarily of expenses incurred to finalize separation and fulfill transition services.
Note 3. Acquisitions
Acquisitions in 2023
On January 3, 2023, the Company completed the acquisition of SPX FLOW’s Air Treatment business (“Air Treatment”) for cash consideration of $519.0 million. The business is a manufacturer of desiccant and refrigerated dryers, filtration systems and purifiers for dehydration in compressed air. The acquisition is intended to expand the Company’s offerings of compressor system components through globally recognized brands. The Air Treatment business has been reported within the Industrial Technologies and Services segment. The goodwill arising from the acquisition is attributable to revenue and cost synergies, anticipated growth of new and existing customers, and the assembled workforce. Substantially all of this goodwill is not expected to be deductible for tax purposes.
On February 1, 2023, the Company acquired Paragon Tank Truck Equipment (“Paragon”), a provider of solutions used for loading and unloading dry bulk and liquid tanks on and off of trucks, for cash consideration of $42.2 million. Paragon has been reported within the Industrial Technologies and Services segment.
On April 1, 2023, the Company acquired EcoPlant Technological Innovation Ltd. (“EcoPlant”), for initial cash consideration of $29.5 million and contingent consideration of up to $17.0 million. EcoPlant is a provider of a software-as-a-service platform that dynamically controls compressed air systems to optimize performance and resource consumption. EcoPlant has been reported within the Industrial Technologies and Services segment.
On August 18, 2023, the Company completed the acquisition of Howden Roots LLC (“Roots”), for cash consideration of $291.9 million. Roots is a leading manufacturer of engineered rotary and centrifugal blowers with an iconic brand developed over more than 160 years. The acquisition is intended to expand the Company’s blower product portfolio and benefit from Roots’ robust technical capabilities and exposure to growing sustainability-related applications. Roots has been reported within the Industrial Technologies and Services segment. The goodwill arising from the acquisition is attributable to revenue and cost synergies, anticipated growth of new and existing customers, and the assembled workforce. This goodwill is expected to be deductible for tax purposes.
Other acquisitions completed during the nine months ended September 30, 2023 include several sales and service businesses, substantially all of which have been reported within the Industrial Technologies and Services segment. The aggregate consideration for these acquisitions was $43.1 million.
The following table summarizes the allocation of consideration for all businesses acquired in 2023 to the fair values of identifiable assets acquired and liabilities assumed at the acquisition dates. Initial accounting for acquisitions completed in the third quarter, including Roots, is preliminary, and amounts assigned to acquired assets and liabilities assumed are subject to change as information necessary to complete the analysis is obtained. Initial accounting for all other acquisitions completed in 2023,
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including Air Treatment, is substantially complete and any further measurement period adjustments are not expected to be material.
Air TreatmentRootsAll OthersTotal
Accounts receivable$26.1 $12.4 $8.2 $46.7 
Inventories43.9 37.5 16.7 98.1 
Other current assets2.2 4.4 7.0 13.6 
Property, plant and equipment18.4 42.6 3.7 64.7 
Goodwill280.7 100.3 85.9 466.9 
Other intangible assets238.6 120.4 23.7 382.7 
Other assets23.9 28.8 0.6 53.3 
Total current liabilities(35.9)(26.1)(14.8)(76.8)
Deferred tax liabilities(72.0)(26.5)(0.2)(98.7)
Other noncurrent liabilities(6.9)(1.9)(3.2)(12.0)
Total consideration$519.0 $291.9 $127.6 $938.5 
The aggregate revenue and operating income included in the condensed consolidated financial statements for these acquisitions subsequent to the dates of acquisition was $83.1 million and $2.1 million for the three month period ended September 30, 2023, respectively, and $192.1 million and $9.0 million for the nine month period then ended, respectively. The operating income of these acquired businesses includes the effects of acquisition-related accounting adjustments such as amortization of intangible assets and fair value adjustments to acquired inventory.
Acquisitions in 2022
On February 1, 2022, the Company acquired Houdstermaatschappij Jorc B.V. (“Jorc”), a manufacturer of condensate management products, for aggregate cash consideration of $30.2 million. Jorc has been reported in the Industrial Technologies and Services segment from the date of acquisition.
On September 1, 2022, the Company acquired Westwood Technical Limited (“Westwood Technical”), a control and instrumentation specialist based in the United Kingdom with unique Industrial Internet of Things (IIoT) capabilities, for aggregate cash consideration of $8.1 million and contingent consideration of up to $9.3 million. Westwood Technical has been reported in the Precision and Science Technologies segment from the date of acquisition.
On September 1, 2022, the Company acquired Holtec Gas Systems LLC (“Holtec”), a nitrogen generator manufacturer, for cash consideration of $13.0 million. Holtec has been reported in the Industrial Technologies and Services segment from the date of acquisition.
On September 1, 2022, the Company acquired Hydro Prokav Pumps (India) Private Limited (“Hydro Prokav”) for cash consideration of $14.0 million. Hydro Prokav has been reported in the Precision and Science Technologies segment from the date of acquisition.
On October 1, 2022, the Company acquired Dosatron International L.L.C (“Dosatron International”), a technology solutions provider of water powered dosing pumps and systems, for cash consideration of $89.5 million and contingent consideration of up to $14.7 million. Dosatron International has been reported in the Precision and Science Technologies segment from the date of acquisition.
On November 1, 2022, the Company acquired Pedro Gil Construcciones Mecanicas, S.L. (“Pedro Gil”), a manufacturer of positive displacement blowers, pumps and vacuum systems in the Spanish market, for aggregate cash consideration of $18.4 million. Pedro Gil has been reported in the Industrial Technologies and Services segment from the date of acquisition.
On December 1, 2022, the Company acquired Everest Blowers Private Limited and Everest Blower Systems Private Limited (collectively, “Everest Group”), an Indian market leader for customized blower and vacuum pump solutions, for $75.3 million aggregate cash consideration and contingent consideration initially estimated to be $12.1 million. Everest Group has been reported in the Industrial Technologies and Services segment from the date of acquisition.
Other acquisitions completed during the year ended December 31, 2022 include multiple sales and service businesses and a manufacturer in the Industrial Technologies and Services segment. The aggregate consideration for these acquisitions was $19.9 million.
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The following table summarizes the allocation of consideration for all businesses acquired in 2022 to the fair values of identifiable assets acquired and liabilities assumed at the acquisition dates. Initial accounting for all 2022 acquisitions is complete.
Dosatron InternationalAll OthersTotal
Accounts receivable$1.8 $16.2 $18.0 
Inventories6.2 20.4 26.6 
Other current assets0.1 1.3 1.4 
Property, plant and equipment0.3 8.9 9.2 
Goodwill57.4 151.9 209.3 
Other intangible assets41.9 43.0 84.9 
Other assets13.8 0.9 14.7 
Total current liabilities(3.5)(30.7)(34.2)
Deferred tax liabilities(13.8)(9.7)(23.5)
Other noncurrent liabilities— (1.9)(1.9)
Total consideration$104.2 $200.3 $304.5 
The revenues included in the condensed consolidated financial statements for these acquisitions subsequent to their date of acquisition was $28.1 million and $6.8 million for the three month periods ended September 30, 2023 and 2022, respectively, and $92.2 million and $15.9 million for the nine month periods then ended, respectively. The operating income included in the condensed consolidated financial statements for these acquisitions subsequent to their date of acquisition was $5.6 million and $1.0 million for the three month periods ended September 30, 2023 and 2022, respectively, and $14.8 million and $3.0 million for the nine month periods then ended, 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.
Note 4. Restructuring
2023 Actions
The Company continues to undertake restructuring actions to optimize our cost structure. Charges incurred from actions taken in 2023 include workforce restructuring, facility consolidation and other exit and disposal costs. In the nine month period ended September 30, 2023, we recognized expense of $2.5 million within Industrial Technologies and Services and $2.1 million within Precision and Science Technologies related to the 2023 actions.
Prior Year Actions
Subsequent to the acquisition of and merger with the Industrial business of Ingersoll-Rand plc (“Ingersoll Rand Industrial”) in 2020 (the “Merger”), 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. Through September 30, 2023, we have recognized cumulative expense related to the 2020 Plan of $131.0 million, comprising $104.1 million, $15.4 million and $11.5 million for Industrial Technologies and Services, Precision and Science Technologies and Corporate, respectively. The Company expects to complete all actions by the end of 2023, and does not expect remaining expense under the 2020 Plan to be material.
For the three and nine month periods ended September 30, 2023 and 2022, “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 Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Industrial Technologies and Services$0.9 $5.7 $7.8 $18.0 
Precision and Science Technologies0.9 1.3 1.9 9.4 
Corporate— (0.3)0.2 0.7 
Restructuring charges, net$1.8 $6.7 $9.9 $28.1 
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The following table summarizes the activity associated with the Company’s restructuring programs for the three and nine month periods ended September 30, 2023 and 2022.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Balance at beginning of period$10.5 $18.0 $14.9 $12.3 
Charged to expense - termination benefits0.7 4.1 4.0 16.6 
Charged to expense - other (1)
0.9 1.4 3.8 5.5 
Payments(2.6)(3.9)(13.4)(12.1)
Currency translation adjustment and other(0.3)(1.9)(0.1)(4.6)
Balance at end of period$9.2 $17.7 $9.2 $17.7 
(1)Excludes $0.2 million and $1.2 million of non-cash charges that impacted restructuring expense but not the restructuring liabilities during the three month periods ended September 30, 2023 and 2022, respectively, and $2.1 million and $6.0 million for the nine month periods then ended, respectively.
Note 5. Allowance for Credit Losses
The allowance for credit losses for the three and nine month periods ended September 30, 2023 and 2022 consisted of the following.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Balance at beginning of the period$51.2 $45.2 $47.2 $42.3 
Provision charged to expense3.4 4.6 9.6 11.3 
Write-offs, net of recoveries(0.9)(0.3)(2.6)(1.8)
Foreign currency translation and other(0.6)(1.7)(1.1)(4.0)
Balance at end of the period$53.1 $47.8 $53.1 $47.8 
Note 6. Inventories
Inventories as of September 30, 2023 and December 31, 2022 consisted of the following.
September 30, 2023December 31, 2022
Raw materials, including parts and subassemblies$638.5 $625.0 
Work-in-process129.3 122.2 
Finished goods389.6 338.7 
1,157.4 1,085.9 
LIFO reserve(74.5)(60.5)
Inventories$1,082.9 $1,025.4 
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Note 7. 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, 2023 is presented in the table below.
Industrial Technologies and ServicesPrecision and Science TechnologiesTotal
Balance at beginning of period$4,222.5 $1,841.7 $6,064.2 
Acquisitions464.5 2.4 466.9 
Foreign currency translation and other(1)
(25.4)(15.9)(41.3)
Balance at end of period$4,661.6 $1,828.2 $6,489.8 
(1)Includes measurement period adjustments
As of both September 30, 2023 and December 31, 2022, 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, 2023 and December 31, 2022 consisted of the following.
September 30, 2023December 31, 2022
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortized intangible assets
Customer lists and relationships$3,238.6 $(1,485.5)$1,753.1 $3,029.0 $(1,286.1)$1,742.9 
Technology408.5 (163.7)244.8 360.0 (124.5)235.5 
Tradenames51.1 (26.3)24.8 46.2 (22.7)23.5 
Backlog11.3 (6.8)4.5 1.0 (0.3)0.7 
Other115.4 (101.7)13.7 113.7 (93.2)20.5 
Unamortized intangible assets
Tradenames1,632.1 — 1,632.1 1,555.5 — 1,555.5 
Total other intangible assets$5,457.0 $(1,784.0)$3,673.0 $5,105.4 $(1,526.8)$3,578.6 
Intangible Asset Impairment Considerations
As of September 30, 2023 and December 31, 2022, there were no indications that the carrying value of goodwill and other intangible assets may not be recoverable.
Note 8. Accrued Liabilities
Accrued liabilities as of September 30, 2023 and December 31, 2022 consisted of the following.
September 30, 2023December 31, 2022
Salaries, wages and related fringe benefits$225.9 $223.3 
Contract liabilities343.7 305.6 
Product warranty61.0 46.2 
Operating lease liabilities40.6 39.6 
Restructuring9.2 14.9 
Taxes94.0 63.3 
Other183.3 165.9 
Total accrued liabilities$957.7 $858.8 
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A reconciliation of the changes in the accrued product warranty liability for the three and nine month periods ended September 30, 2023 and 2022 are as follows.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Balance at beginning of period$57.4 $43.1 $46.2 $42.5 
Product warranty accruals11.1 4.9 35.8 14.3 
Acquired warranty0.8 — 2.2 — 
Settlements(7.6)(3.5)(22.5)(10.8)
Foreign currency translation and other(0.7)(1.7)(0.7)(3.2)
Balance at end of period$61.0 $42.8 $61.0 $42.8 
Note 9. 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, 2023 and 2022.
Pension BenefitsOther Postretirement Benefits
U.S. PlansNon-U.S. Plans
For the Three Month Period Ended September 30,
202320222023202220232022
Service cost$0.1 $1.1 $0.6 $0.8 $— $— 
Interest cost3.9 2.8 2.8 1.4 0.2 0.2 
Expected return on plan assets(3.3)(3.3)(2.8)(2.8)— — 
Recognition of:
Unrecognized prior service cost— — — — 0.1 0.1 
Unrecognized net actuarial loss— — (0.4)0.1 (0.2)— 
$0.7 $0.6 $0.2 $(0.5)$0.1 $0.3 
Pension BenefitsOther Postretirement Benefits
U.S. PlansNon-U.S. Plans
For the Nine Month Period Ended September 30,
202320222023202220232022
Service cost$0.1 $3.2 $1.8 $2.5 $— $— 
Interest cost11.8 8.5 8.3 4.5 0.7 0.5 
Expected return on plan assets(10.0)(9.8)(8.2)(9.0)— — 
Recognition of:
Unrecognized prior service cost— — 0.1 0.1 0.1 0.1 
Unrecognized net actuarial loss0.1 — (1.3)0.2 (0.5)— 
2.0 1.9 0.7 (1.7)0.3 0.6 
Gain on settlement(0.6)(0.9)— — — — 
$1.4 $1.0 $0.7 $(1.7)$0.3 $0.6 
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.
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Note 10. Debt
Debt as of September 30, 2023 and December 31, 2022 is summarized as follows.
September 30, 2023December 31, 2022
Short-term borrowings$4.2 $4.5 
Long-term debt:
Dollar Term Loan B, due 2027(1)(2)
352.4 1,846.3 
Dollar Term Loan, due 2027(1)(2)
894.6 901.4 
5.400% Senior Notes, due 2028(1)
498.1 — 
5.700% Senior Notes, due 2033(1)
992.4 — 
Finance leases and other long-term debt15.6 22.2 
Unamortized debt issuance costs(24.1)(21.8)
Total long-term debt, net, including current maturities2,729.0 2,748.1 
Current maturities of long-term debt29.7 32.0 
Total long-term debt, net$2,699.3 $2,716.1 
(1)This amount is net of unamortized discounts. Total unamortized discounts were $10.2 million and $2.1 million as of September 30, 2023 and December 31, 2022, respectively.
(2)As of September 30, 2023, the applicable interest rate was approximately 7.18% and the weighted-average interest rate was 6.76% for the nine month period ended September 30, 2023.
Senior Notes
On August 14, 2023, the Company completed its issuance of $1,500.0 million in aggregate principal amount of senior unsecured notes comprised of $500.0 million aggregate principal amount of 5.400% Senior Notes due August 2028 (the “2028 Notes”) and $1,000.0 million aggregate principal amount of 5.700% Senior Notes due August 2033 (the “2033 Notes” and, together with the 2028 Notes, the “Notes”). The Company used the proceeds of the offering of the Notes to repay a portion of the amounts outstanding under its Senior Secured Credit Facilities. The Notes were issued pursuant to a base indenture, each dated as of August 14, 2023, between the Company and Deutsche Bank Trust Company Americas, as trustee (the “Trustee”), as supplemented by a 2028 Supplemental Indenture No. 1 with respect to the 2028 Notes and a 2033 Notes Supplemental Indenture No. 1 with respect to the 2033 Notes, each dated as of August 14, 2023, between the Company and the Trustee (collectively, the “Indenture”). The interest payment dates for the Notes are February 14 and August 14 of each year, with interest payable in arrears.
The Notes are senior unsecured obligations of the Company and rank equally in right of payment with all of the Company’s other senior unsecured indebtedness, senior in right of payment to all of the Company’s subordinated indebtedness, and effectively junior to all of the indebtedness and other liabilities of the Company’s subsidiaries (including the obligations of the Company’s subsidiaries under the Senior Secured Credit Facilities and to all of the Company’s secured indebtedness (including the Company’s obligations under the Senior Secured Credit Facilities) to the extent of the value of the assets securing such secured indebtedness.
Prior to (i) July 14, 2028, in the case of the 2028 Notes, and (ii) May 14, 2033, in the case of the 2033 Notes, the Company may redeem the Notes of a series at its option, in whole or in part, at any time from time to time, at a “make-whole” premium, plus accrued and unpaid interest thereon to, but not including, the redemption date. On or after (i) July 14, 2028, in the case of the 2028 Notes, and (ii) May 14, 2033, in the case of the 2033 Notes, the Company may redeem the Notes of a series at its option, in whole or in part, at any time from time to time, at a price equal to 100% of the principal amount of the Notes of such series to be redeemed, plus accrued and unpaid interest thereon to, but not including, the redemption date. If the Company experiences certain types of change of control transactions, the Company must offer to repurchase the Notes at 101% of the aggregate principal amount of the Notes repurchased (or such higher amount as the Company may determine) plus accrued and unpaid interest thereon to, but not including, the date of repurchase.
The Indenture contains covenants that limit the Company’s (and its subsidiaries’) ability to, among other things: (i) create liens on certain assets; (ii) consolidate, merge, sell or otherwise dispose of all or substantially all of its consolidated assets; and (iii) enter into sale and leaseback transactions with respect to certain assets. The Indenture also contains customary events of default and covenants for an issuer of investment grade debt securities.
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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 U.S. dollars (entered into at the time of the Merger, the “Dollar Term Loan B”), 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. On April 21 2023, the Company entered into Amendment No. 9 to the Credit Agreement, which (a) extended the maturity date for the revolving credit commitments from June 28, 2024 to April 21, 2028, (b) increased the aggregate revolving credit commitments from $1,100.0 million to $2,000.0 million, and (c) made certain other corresponding changes and updates. Other than as modified by Amendment No. 9, the loans under the Credit Agreement continue to have the same terms and the parties to the Credit Agreement continue to have the same obligations set forth in the Credit Agreement. The amendment resulted in the write-off of unamortized debt issuance costs of $0.9 million which was recognized in “Loss on extinguishment of debt” in the Condensed Consolidated Statements of Operations. In August 2023, the Company repaid a portion of the Dollar Term Loan B which resulted in the write-off of unamortized discounts and debt issuance costs of $12.6 million, which was recognized in “Loss on extinguishment of debt” in the Condensed Consolidated Statements of Operations.
See Note 11 “Debt” to the consolidated financial statements in the Company’s 2022 Annual Report for further information on the Senior Secured Credit Facilities.
As of September 30, 2023, the aggregate amount of commitments under the Revolving Credit Facility was $2,000.0 million and the capacity under the Revolving Credit Facility to issue letters of credit was $400.0 million. As of September 30, 2023, the Company had no outstanding borrowings under the Revolving Credit Facility, no outstanding letters of credit under the Revolving Credit Facility and unused availability under the Revolving Credit Facility of $2,000.0 million.
As of September 30, 2023, we were in compliance with all covenants of our Senior Secured Credit Facilities and our Senior Notes.
Fair Value of Debt
The fair value of the Company's debt instruments at September 30, 2023 was $2.7 billion. The Company measures the fair value of its debt instruments for disclosure purposes based upon observable market prices quoted on public exchanges for similar assets. These fair value inputs are considered Level 2 within the fair value hierarchy. See Note 14, “Fair Value Measurements” for information on the fair value hierarchy.
Note 11. 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 (as amended by the First Amendment, dated April 27, 2021, “2017 Plan”) as described in Note 18, “Stock-Based Compensation Plans” to the consolidated financial statements in its 2022 Annual Report.
The Company’s stock-based compensation awards are generally granted in the first quarter of the year and consist of stock options, restricted stock units and performance share units. Eligible employees were also granted restricted stock units, during the three month period 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
For the three month periods ended September 30, 2023 and 2022, the Company recognized stock-based compensation expense of $11.2 million and $20.1 million, respectively, and $35.2 million and $62.3 million for the nine month period then ended, respectively. These costs are included in “Cost of sales” and “Selling and administrative expenses” in the Condensed Consolidated Statements of Operations.
In the nine month period ended September 30, 2023, the $35.2 million of stock-based compensation expense included expense for equity awards granted under the 2013 and 2017 Plan of $34.6 million and an increase in the liability for stock appreciation rights (“SAR”) of $0.6 million.
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As of September 30, 2023, there was $123.7 million of total unrecognized compensation expense related to outstanding stock options, restricted stock unit awards and performance stock unit awards granted to employees and non-employee directors, as well as 400,000 conditional stock options awarded during the third quarter of 2022 to our Chairman and CEO in which the service date precedes the grant date, and will be granted upon achievement of certain performance targets. These 400,000 stock options have not been included in the Stock Option Awards section below since the grant date has not occurred.
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 years or five years and expire ten years from the date of grant.
A summary of the Company’s stock option (including SARs) activity for the nine month period ended September 30, 2023 is presented in the following table (underlying shares in thousands).
SharesWeighted-Average Exercise Price (per share)
Stock options outstanding as of December 31, 20226,383 $25.22 
Granted756 58.04 
Exercised or settled(1,245)17.96 
Forfeited(160)49.91 
Expired(3)34.77 
Stock options outstanding as of September 30, 20235,731 30.43 
Vested as of September 30, 20234,025 22.09 
The following assumptions were used to estimate the fair value of options granted during the nine month periods ended September 30, 2023 and 2022 using the Black-Scholes option-pricing model.
For the Nine Month Period Ended September 30,
Assumptions20232022
Expected life of options (in years)
6.3 - 7.5
6.3
Risk-free interest rate
3.8% - 4.4%
1.9% - 3.1%
Assumed volatility
36.0% - 36.6%
37.1% - 38.3%
Expected dividend rate0.1 %0.2 %
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, 2023 is presented in the following table (underlying shares in thousands).
SharesWeighted-Average Grant-Date Fair Value
Non-vested as of December 31, 20221,005 $43.50 
Granted446 59.15 
Vested(353)37.52 
Forfeited(94)51.31 
Non-vested as of September 30, 20231,004 51.82 
Performance Share Unit (“PSUs”) Awards
Annually, during the first quarter, the Company grants TSR PSUs to certain officers in which 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
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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.
During the third quarter of 2022, the Company granted Special TSR PSUs to its Chairman and CEO that will become earned (but not vested) on the first date during the five year performance period on which the sum of (i) the 60-day volume-weighted average closing price of the Company’s common stock, plus (ii) the cumulative value of any dividends paid during the five year performance period equals or exceeds $81.85. 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 five year period. The Company also granted its Chairman and CEO Special EPS PSUs that are eligible to vest based on the level of compounded annual growth rate of the Company’s Adjusted EPS during the five year performance period. The grant date fair value of these awards is based on the market price of the Company’s common stock on the grant date and recognized as a compensation expense over a 4.3 year period.
A summary of the Company’s performance stock unit activity for the nine month period ended September 30, 2023 is presented in the following table (underlying shares in thousands).
SharesWeighted-Average Grant-Date Fair Value
Non-vested as of December 31, 20221,539 $44.99 
Granted149 75.52 
Change in units based on performance222 29.72 
Vested(444)29.72 
Forfeited(86)64.42 
Non-vested as of September 30, 20231,380 49.53 
The following assumptions were used to estimate the fair value of performance share units granted during the nine month periods ended September 30, 2023 and 2022 using the Monte Carlo simulation pricing model.
For the Nine Month Period Ended September 30,
Assumptions20232022
Expected term (in years)
2.9
2.9
Risk-free interest rate
4.4%
1.7 %
Assumed volatility
31.8%
36.4 %
Expected dividend rate0.1 %0.2 %
Note 12. Accumulated Other Comprehensive Loss
The Company’s other comprehensive income (loss) consists of (i) unrealized foreign currency net gains and losses on the translation of the assets and liabilities of its foreign operations; (ii) realized and unrealized foreign currency gains and losses on certain hedges of net investments in foreign operations, net of income taxes; (iii) unrealized gains and losses on cash flow hedges (consisting of interest rate swap and cap contracts), net of income taxes; and (iv) pension and other postretirement prior service cost and actuarial gains or losses, net of income taxes. See Note 9 “Benefit Plans” and Note 13 “Hedging Activities and Derivative Instruments.”
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The before tax income (loss) and related income tax effect are as follows.
For the Three Month Period Ended September 30,
20232022
Before-Tax AmountTax Benefit (Expense)Net of Tax AmountBefore-Tax AmountTax Benefit (Expense)Net of Tax Amount
Foreign currency translation adjustments, net$(74.6)$(0.7)$(75.3)$(207.9)$— $(207.9)
Unrecognized gains (losses) on cash flow hedges(3.4)0.9 (2.5)26.1 (6.5)19.6 
Pension and other postretirement benefit prior service cost and gain or loss, net(0.8)0.2 (0.6)7.0 (1.7)5.3 
Other comprehensive loss$(78.8)$0.4 $(78.4)$(174.8)$(8.2)$(183.0)
For the Nine Month Period Ended September 30,
20232022
Before-Tax AmountTax Benefit (Expense)Net of Tax AmountBefore-Tax AmountTax Benefit (Expense)Net of Tax Amount
Foreign currency translation adjustments, net$(75.0)$(16.1)$(91.1)$(413.0)$(35.8)$(448.8)
Unrecognized gains on cash flow hedges4.1 (1.0)3.1 19.8 (5.6)14.2 
Pension and other postretirement benefit prior service cost and gain or loss, net(2.5)0.6 (1.9)2.9 (0.7)2.2 
Other comprehensive loss$(73.4)$(16.5)$(89.9)$(390.3)$(42.1)$(432.4)
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 $0.8 million and $(1.9) million for the three month periods ended September 30, 2023 and 2022, respectively, and $1.6 million and $(6.1) million for the nine month periods ended September 30, 2023 and 2022, respectively, and related entirely to foreign currency translation adjustments.
Changes in accumulated other comprehensive loss by component for the nine month periods ended September 30, 2023 and 2022 are presented in the following table net of tax.
Foreign Currency Translation Adjustments, NetCash Flow HedgesPension and Other Postretirement Benefit PlansTotal
Balance as of December 31, 2022$(282.8)$16.0 $15.1 $(251.7)
Other comprehensive income (loss) before reclassifications(80.1)11.2 (0.3)(69.2)
Amounts reclassified from accumulated other comprehensive loss(11.0)(8.1)(1.6)(20.7)
Other comprehensive income (loss)(91.1)3.1 (1.9)(89.9)
Balance as of September 30, 2023$(373.9)$19.1 $13.2 $(341.6)
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Foreign Currency Translation Adjustments, NetCash Flow HedgesPension and Other Postretirement Benefit PlansTotal
Balance as of December 31, 2021$(29.9)$— $(11.7)$(41.6)
Other comprehensive income (loss) before reclassifications(444.5)12.3 2.6 (429.6)
Amounts reclassified from accumulated other comprehensive loss(4.3)1.9 (0.4)(2.8)
Other comprehensive income (loss)(448.8)14.2 2.2 (432.4)
Balance as of September 30, 2022$(478.7)$14.2 $(9.5)$(474.0)
Reclassifications out of accumulated other comprehensive loss for the nine month periods ended September 30, 2023 and 2022 are presented in the following table.
Amount Reclassified from Accumulated Other Comprehensive Loss
Details about Accumulated Other Comprehensive Loss Components
For the Nine Month Period Ended September 30,Affected Line(s) in the Statement Where Net Income is Presented
20232022
Cash flow hedges (interest rate swaps and caps)$(10.8)$2.5 Interest expense
Provision (benefit) for income taxes2.7 (0.6)Provision for income taxes
Cash flow hedges (interest rate swaps and caps), net of tax$(8.1)$1.9 
Net investment hedges$(14.7)$(5.7)Interest expense
Provision for income taxes3.7 1.4 Provision for income taxes
Net investment hedges, net of tax$(11.0)$(4.3)
Amortization of defined benefit pension and other postretirement benefit items(1)
$(2.1)$(0.5)Cost of sales and Selling and administrative expenses
Provision for income taxes0.5 0.1 Provision for income taxes
Amortization of defined benefit pension and other postretirement benefit items, net of tax$(1.6)$(0.4)
Total reclassifications for the period, net of tax$(20.7)$(2.8)
(1)These components are included in the computation of net periodic benefit cost. See Note 9 “Benefit Plans” for additional details.
Note 13. Hedging Activities and Derivative Instruments
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 cross-currency interest rate swap and foreign currency forward contracts and interest rate swap and cap contracts, 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.
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 interest rate derivatives 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 manages this exposure by having certain U.S. subsidiaries borrow in currencies other than the USD or utilizing cross-currency interest rate swaps as net investment hedges.
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, 2023 and December 31, 2022.
September 30, 2023
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 Designated as Hedging Instruments
Interest rate swap contractsCash flow$528.5 $11.5 $5.4 $— $— 
Cross-currency interest rate swap contractsNet investment1,054.2 16.7 — — 19.5 
Derivatives Not Designated as Hedging Instruments
Foreign currency forwardsFair value$7.3 $— $— $— $— 
December 31, 2022
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 Designated as Hedging Instruments
Interest rate swap contractsCash Flow$528.5 $8.8 $5.3 $— $— 
Interest rate cap contractsCash flow1,000.0 8.3 9.8 — — 
Cross-currency interest rate swap contractsNet investment1,054.2 17.7 — — 28.7 
Derivatives Not Designated as Hedging Instruments
Foreign currency forwardsFair Value$7.3 $— $— $— $— 
Foreign currency forwardsFair Value15.8 — — — — 
(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.
Payments of interest rate cap premiums are classified as financing cash flows in the Condensed Consolidated Statements of Cash Flows. All other cash flows related to derivatives are classified as operating cash flows in the Condensed Consolidated Statements of Cash Flows.
There were no off-balance sheet derivative instruments as of September 30, 2023 or December 31, 2022.
Interest Rate Swap and Cap Contracts Designated as Cash Flow Hedges
As of September 30, 2023, the Company was the fixed rate payor on two interest rate swap contracts that effectively fix the SOFR-based index used to determine the interest rates charged on a total of $528.5 million of the Company’s SOFR-based variable rate borrowings. These contracts carry a fixed rate of 3.2% and expire in 2025. These swap agreements qualify as hedging instruments and have been designated as cash flow hedges of forecasted SOFR-based interest payments. Based on SOFR-based swap yield curves as of September 30, 2023, the Company expects to reclassify gains of $11.5 million out of accumulated other comprehensive income (“AOCI”) into earnings during the next 12 months.
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The Company was previously a party to interest rate cap contracts that effectively limited the SOFR-based interest rates charged on a portion of the Company’s variable rate borrowings to 4.0%. The Company and its counterparties terminated these contracts in August 2023. Prior to their termination, these cap contracts qualified as hedging instruments and were designated as cash flow hedges of forecasted interest payments. These forecasted interest payments are still expected to occur as specified in the Company’s hedge designations; therefore, the unrecognized gain at the time of termination will be reclassified into earnings over the remaining period of original term of the contracts, ending in June 2025. The unrecognized gain remaining in AOCI as of September 30, 2023 was $8.4 million, of which $6.1 million is expected to be reclassified into earnings during the next 12 months.
Gains 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, 2023 and 2022 are as presented in the table below.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Gain recognized in OCI on derivatives$1.4 $23.7 $14.9 $17.1 
Gain (loss) reclassified from AOCI into income (effective portion)(1)
4.8 (2.4)10.8 (2.5)
(1)Gains (losses) on derivatives reclassified from AOCI into income were included within “Interest expense” in the Condensed Consolidated Statements of Operations.
Cross-Currency Interest Rate Swap Contracts Designated as Net Investment Hedges
As of September 30, 2023, the Company was the fixed rate payor on two cross-currency interest rate swap contracts that replace a fixed rate of 3.2% on a total of $528.5 million with a fixed rate of 1.6% on a total of €500.0 million. These contracts expire in 2025. These contracts have been designated as net investment hedges of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity.
As of September 30, 2023, the Company entered into three cross-currency interest rate swap contracts where we receive SOFR on a total of $525.7 million and pay EURIBOR on a total of €500.0 million. These contracts expire in 2025. These contracts have been designated as net investment hedges of our Euro denominated subsidiaries and require an exchange of the notional amounts at maturity.
Gains on derivatives designated as net investment hedges included in the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine month periods ended September 30, 2023 and 2022 are as presented in the table below.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Gain recognized in OCI on derivatives$35.0 $65.9 $22.9 $71.9 
Gain reclassified from AOCI into income (effective portion)(1)
4.5 5.6 14.7 5.7 
(1)Gains on derivatives reclassified from AOCI into income were included within “Interest expense” in the Condensed Consolidated Statements of Operations.
Foreign Currency Forwards Not Designated as Hedging Instruments
The Company had one foreign currency forward contract outstanding as of September 30, 2023 with a notional amount of $7.3 million. This contract is used to hedge the change in fair value of recognized foreign currency denominated assets or liabilities caused by changes in currency exchange rates. The changes in the fair value of this contract generally offset the changes in the fair value of a corresponding amount of the hedged items, both of which are included within “Other operating expense, net” in the Condensed Consolidated Statements of Operations. The Company’s foreign currency forward contract is subject to master netting arrangements or agreements between the Company and each counterparty for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract with that certain counterparty. It is the Company’s practice to recognize the gross amounts in the Condensed Consolidated Balance Sheets. The amount available to be netted is not material.
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The Company’s gains (losses) on derivative instruments not designated as accounting hedges and total net foreign currency gains (losses) for the three and nine month periods ended September 30, 2023 and 2022 were as follows.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Foreign currency forward contracts gains (losses)$(0.1)$(0.1)$0.1 $3.0 
Total foreign currency transaction gains (losses), net(1.1)6.7 (1.0)12.3 
Foreign Currency Denominated Debt Designated as a Net Investment Hedge
In February 2020, the Company designated its Euro Term Loan, which had a principal balance at that time of €601.2 million, as a hedge of the Company’s net investment in subsidiaries with a functional currency of euro. This loan was repaid in June 2022 and the hedge has been discontinued. The Company’s gains, net of income tax, associated with changes in the value of debt for the nine month period ended September 30, 2022 was $36.4 million.
Note 14. 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, acquisition related contingent consideration 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.
The following tables summarize the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022.
September 30, 2023
Level 1Level 2Level 3Total
Financial Assets
Trading securities held in deferred compensation plan(1)
$15.0 $— $— $15.0 
Interest rate swaps(2)
— 16.9 — 16.9 
Cross-currency interest rate swaps(4)
— 16.7 — 16.7 
Foreign currency forwards(5)
— — — — 
Total$15.0 $33.6 $— $48.6 
Financial Liabilities
Deferred compensation plans(1)
$21.5 $— $— $21.5 
Cross-currency interest rate swaps(4)
— 19.5 — 19.5 
Contingent consideration(6)
— — 42.3 42.3 
Total$21.5 $19.5 $42.3 $83.3 
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December 31, 2022
Level 1Level 2Level 3Total
Financial Assets
Trading securities held in deferred compensation plan(1)
$12.3 $— $— $12.3 
Interest rate swaps(2)
— 14.1 — 14.1 
Interest rate caps(3)
— 18.1 — 18.1 
Cross-currency interest rate swaps(4)
— 17.7 — 17.7 
Foreign currency forwards(5)
— — — — 
Total$12.3 $49.9 $— $62.2 
Financial Liabilities
Deferred compensation plan(1)
$19.6 $— $— $19.6 
Cross-currency interest rate swaps(4)
— 28.7 — 28.7 
Contingent consideration(6)
— — 43.9 43.9 
Foreign currency forwards(5)
— — — — 
Total$19.6 $28.7 $43.9 $92.2 
(1)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.
(2)Measured as the present value of all expected future cash flows based on the SOFR-based swap yield curves as of September 30, 2023. The present value calculation uses discount rates that have been adjusted to reflect the credit quality of the Company and its counterparties.
(3)Measured as the present value of all expected future cash flows that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market volatilities and interest rate curves.
(4)Measured as the present value of all expected future cash flows on each leg of the contracts. The model utilizes inputs of observable market data including interest yield curves and foreign currency exchange rates. The present value calculation uses cross-currency basis-adjusted discount factors that have been adjusted to reflect the credit quality of the Company and its counterparties.
(5)Based on calculations that use readily observable market parameters at their basis, such as spot and forward rates.
(6)Measured as the present value of expected consideration payable for completed acquisitions, generally derived using probability-weighted analysis of achieving projected revenue or EBITDA targets.
Contingent Consideration
Certain of the Company’s acquisitions may result in payments of consideration in future periods that are contingent upon the achievement of certain targets, generally measures of revenue and EBITDA. As part of the initial accounting for the acquisition, a liability is recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair value of the contingent consideration is re-measured at each reporting period, and the change in fair value is recognized within “Other operating expense, net” in the Condensed Consolidated Statements of Operations. This fair value measurement of contingent consideration is categorized within Level 3 of the fair value hierarchy, as the measurement amount is based primarily on significant inputs that are not observable in the market.
The following table provides a reconciliation of the activity for contingent consideration for the three and nine month period ended September 30, 2023.
For the Three Month Period Ended
September 30, 2023
For the Nine Month Period Ended
September 30, 2023
Balance at beginning of the period$62.5 $43.9 
Acquisitions0.7 13.5 
Changes in fair value0.1 8.5 
Payments(20.1)(23.2)
Foreign currency translation(0.9)(0.4)
Balance at end of the period$42.3 $42.3 
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As of September 30, 2023, the contingent consideration included in “Accrued liabilities” and “Other liabilities” on the Condensed Consolidated Balance Sheets were $0.6 million and $41.7 million, respectively.
Note 15. 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 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.
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Disaggregation of Revenue
The following tables provide disaggregated revenue by reportable segment for the three and nine month periods ended September 30, 2023 and 2022.
Industrial Technologies and ServicesPrecision and Science TechnologiesTotal
Three Month Period Ended September 30,
202320222023202220232022
Primary Geographic Markets
United States$590.3 $494.5 $144.8 $140.4 $735.1 $634.9 
Other Americas92.3 83.2 7.6 7.7 99.9 90.9 
Total Americas682.6 577.7 152.4 148.1 835.0 725.8 
EMEIA449.7 347.9 114.6 109.1 564.3 457.0 
Asia Pacific296.1 274.0 43.5 58.9 339.6 332.9 
Total$1,428.4 $1,199.6 $310.5 $316.1 $1,738.9 $1,515.7 
Product Categories
Original equipment$862.7 $723.7 $246.6 $257.0 $1,109.3 $980.7 
Aftermarket565.7 475.9 63.9 59.1 629.6 535.0 
Total$1,428.4 $1,199.6 $310.5 $316.1 $1,738.9 $1,515.7 
Pattern of Revenue Recognition
Revenue recognized at point in time(1)
$1,306.6 $1,099.6 $309.2 $315.1 $1,615.8 $1,414.7 
Revenue recognized over time(2)
121.8 100.0 1.3 1.0 123.1 101.0 
Total$1,428.4 $1,199.6 $310.5 $316.1 $1,738.9 $1,515.7 
Industrial Technologies and ServicesPrecision and Science TechnologiesTotal
Nine Month Period Ended September 30,
202320222023202220232022
Primary Geographic Markets
United States$1,698.3 $1,378.2 $429.8 $410.4 $2,128.1 $1,788.6 
Other Americas271.2 237.5 22.0 23.1 293.2 260.6 
Total Americas1,969.5 1,615.7 451.8 433.5 2,421.3 2,049.2 
EMEIA1,304.2 1,023.0 341.9 324.0 1,646.1 1,347.0 
Asia Pacific850.3 751.0 137.0 145.4 987.3 896.4 
Total$4,124.0 $3,389.7 $930.7 $902.9 $5,054.7 $4,292.6 
Product Categories
Original equipment$2,496.0 $2,035.7 $736.4 $730.2 $3,232.4 $2,765.9 
Aftermarket1,628.0 1,354.0 194.3 172.7 1,822.3 1,526.7 
Total$4,124.0 $3,389.7 $930.7 $902.9 $5,054.7 $4,292.6 
Pattern of Revenue Recognition
Revenue recognized at point in time(1)
$3,793.3 $3,122.1 $926.5 $899.3 $4,719.8 $4,021.4 
Revenue recognized over time(2)
330.7 267.6 4.2 3.6 334.9 271.2 
Total$4,124.0 $3,389.7 $930.7 $902.9 $5,054.7 $4,292.6 
(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.
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Performance Obligations
As of September 30, 2023, 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 $668.6 million in the next twelve months and $628.1 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, 2023 and December 31, 2022 presented in the Condensed Consolidated Balance Sheets.
September 30, 2023December 31, 2022
Accounts receivable, net$1,216.1 $1,122.0 
Contract assets57.0 70.6 
Contract liabilities - current343.7 305.6 
Contract liabilities - noncurrent1.1 1.1 
Note 16. 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, 2023 and 2022.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Income before income taxes$273.8 $173.2 $723.7 $496.3 
Provision for income taxes$60.3 $30.3 $168.9 $104.6 
Effective income tax provision rate22.0 %17.5 %23.3 %21.1 %
The increase in the provision for income taxes and increase in the effective income tax provision rate for the three month period ended September 30, 2023 when compared to the same three month period of 2022 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.
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, 2023 when compared to the same nine month period of 2022 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 and a change in tax law guidance causing a discrete tax cost in the second quarter.
Note 17. Other Operating Expense, Net
The components of “Other operating expense, net” for the three and nine month periods ended September 30, 2023 and 2022 were as follows.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Foreign currency transaction losses (gains), net$1.1 $(6.7)$1.0 $(12.3)
Restructuring charges, net(1)
1.8 6.7 9.9 28.1 
Acquisition and other transaction related expenses(2)
10.4 12.1 38.4 25.0 
Other, net0.2 0.7 4.4 2.6 
Total other operating expense, net$13.5 $12.8 $53.7 $43.4 
(1)See Note 4 “Restructuring.”
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(2)Represents costs associated with successful and abandoned acquisitions, including third-party expenses and post-closure integration costs.
Note 18. Contingencies
The Company is a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature for a company of its size and sector. The Company believes that such proceedings, lawsuits and administrative actions will not materially adversely affect its operations, financial condition, liquidity or competitive position. For further description of the Company’s contingencies, reference is made to Note 21, “Contingencies” in the notes to consolidated financial statements in the Company’s 2022 Annual Report.
Asbestos and Silica Related Litigation
The Company believes that the pending and future asbestos and silica-related lawsuits are not likely to, in the aggregate, have a material adverse effect on its consolidated financial position, results of operations or liquidity. “Accrued liabilities” and “Other liabilities” of the Condensed Consolidated Balance Sheets include a total litigation reserve of $130.4 million and $137.9 million as of September 30, 2023 and December 31, 2022, respectively, with regards to potential liability arising from the Company’s asbestos-related litigation. Asbestos related defense costs are excluded from the asbestos claims liability and are recorded separately as services are incurred. In the event of unexpected future developments, it is possible that the ultimate resolution of these matters may be material to the Company’s consolidated financial position, results of operation or liquidity.
The Company has entered into a series of agreements with certain of its or its predecessors’ legacy insurers and certain potential indemnitors to secure insurance coverage and/or reimbursement for the costs associated with the asbestos and silica-related lawsuits filed against the Company. The Company has an insurance recovery receivable for probable asbestos related recoveries of approximately $153.9 million and $154.2 million as of September 30, 2023 and December 31, 2022, respectively, which was included in “Other assets” in the Condensed Consolidated Balance Sheets. The amounts recorded by the Company for asbestos-related liabilities and insurance recoveries are based on currently available information and assumptions that the Company believes are reasonable based on an evaluation of relevant factors. The actual liabilities or insurance recoveries could be higher or lower than those recorded if actual results vary significantly from the assumptions.
Environmental Matters
The Company has been identified as a potentially responsible party (“PRP”) with respect to several sites designated for cleanup under U.S. federal “Superfund” or similar state laws that impose liability for cleanup of certain waste sites and for related natural resource damages. The Company has undiscounted accrued liabilities of $14.8 million and $13.5 million as of September 30, 2023 and December 31, 2022, respectively, on its Condensed Consolidated Balance Sheets to the extent costs are known or can be reasonably estimated for its remaining financial obligations in relation to environmental matters and does not anticipate that any of these matters will result in material additional costs beyond amounts accrued. Based upon consideration of currently available information, the Company does not anticipate any material adverse effect on its results of operations, financial condition, liquidity or competitive position as a result of compliance with federal, state, local or foreign environmental laws or regulations, or cleanup costs relating to these matters.
Note 19. Segment Results
A description of the Company’s two reportable segments is presented below.
In the Industrial Technologies and Services segment, the Company designs, manufactures, markets and services a broad range of compression and vacuum equipment as well as fluid transfer equipment, loading systems, power tools and lifting equipment. The Company’s compression and vacuum products are used worldwide in industrial manufacturing, transportation, chemical processing, food and beverage production, energy, environmental and other applications. In addition to equipment sales, the Company offers a broad portfolio of service options tailored to customer needs and complete range of aftermarket parts, air treatment equipment, controls and other accessories. The Company’s engineered loading systems and fluid transfer equipment ensure the safe handling and transfer of crude oil, liquefied natural gas, compressed natural gas, chemicals, and bulk materials. The Company’s power tools and lifting equipment are used by customers in industrial manufacturing, vehicle maintenance, energy and other markets for precision fastening, bolt removal, grinding, sanding, drilling, demolition and the safe and efficient lifting, positioning and movement of loads. The Company sells its products primarily through independent distributors worldwide and also sells directly to the customer.
In the Precision and Science Technologies segment, the Company designs, manufactures and markets a broad range of specialized positive displacement pumps, fluid management equipment and aftermarket parts for medical, laboratory, industrial
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manufacturing, water and wastewater, chemical processing, energy, food and beverage, agriculture and other markets. The Company’s products are used for a diverse set of applications including precision dosing of chemicals and supplements, blood dialysis, oxygen therapy, food processing, fluid transfer and dispensing, spray finishing and coating, mixing, high-pressure air and gas management and others. The Company sells primarily through a broad global network of specialized and national distributors and original equipment manufacturers (“OEM”) who integrate the Company’s products into their devices and systems.
The Chief Operating Decision Maker (“CODM”) evaluates the performance of the Company’s reportable segments based on, among other measures, Segment Adjusted EBITDA. Management closely monitors the Segment Adjusted EBITDA of each reportable segment to evaluate past performance and actions required to improve profitability. Inter-segment sales and transfers are not significant. Administrative expenses related to the Company’s corporate offices and shared service centers in North America and Europe, which includes transaction processing, accounting and other business support functions, are allocated to the business segments. Certain administrative expenses, including senior management compensation, treasury, internal audit, tax compliance, certain information technology, and other corporate functions, are not allocated to the business segments.
The following table provides summarized information about the Company’s operations by reportable segment and reconciles Segment Adjusted EBITDA to Income from Continuing Operations Before Income Taxes for the three and nine month periods ended September 30, 2023 and 2022.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Revenue
Industrial Technologies and Services$1,428.4 $1,199.6 $4,124.0 $3,389.7 
Precision and Science Technologies310.5 316.1 930.7 902.9 
Total Revenue$1,738.9 $1,515.7 $5,054.7 $4,292.6 
Segment Adjusted EBITDA
Industrial Technologies and Services$410.9 $314.0 $1,134.0 $853.4 
Precision and Science Technologies94.2 92.0 278.7 254.8 
Total Segment Adjusted EBITDA$505.1 $406.0 $1,412.7 $1,108.2 
Less items to reconcile Segment Adjusted EBITDA to Income from Continuing Operations Before Income Taxes:
Corporate expenses not allocated to segments$43.6 $29.9 $126.4 $93.6 
Interest expense39.6 26.6 119.3 68.8 
Depreciation and amortization expense (a)
114.6 114.2 338.7 325.4 
Restructuring and related business transformation costs (b)
2.2 7.2 12.4 30.9 
Acquisition and other transaction related expenses and non-cash charges (c)
14.8 12.1 46.6 27.0 
Stock-based compensation (d)
11.2 27.1 35.2 69.3 
Foreign currency transaction losses (gains), net1.1 (6.7)1.0 (12.3)
Loss on extinguishment of debt12.6 — 13.5 1.1 
Adjustments to LIFO inventories(0.3)33.0 14.0 33.0 
Cybersecurity incident costs (e)
0.1 — 2.3 — 
Gain on settlement of post-acquisition contingencies (f)
— (6.2)— (6.2)
Other adjustments (g)
(8.2)(4.4)(20.4)(18.7)
Income from Continuing Operations Before Income Taxes273.8 173.2 723.7 496.3 
Provision for income taxes60.3 30.3 168.9 104.6 
Income (loss) on equity method investments(3.9)2.6 (1.2)(2.5)
Income from Continuing Operations209.6 145.5 553.6 389.2 
Income from discontinued operations, net of tax— 0.5 — 0.6 
Net Income$209.6 $146.0 $553.6 $389.8 
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a)Depreciation and amortization expense excludes $1.1 million and $0.8 million of depreciation of rental equipment for the three month periods ended September 30, 2023 and 2022, respectively, and excludes $2.8 million and $2.6 million for the nine month periods ended September 30, 2023 and 2022, respectively.
b)Restructuring and related business transformation costs consist of the following.
For the Three Month Period Ended September 30,For the Nine Month Period Ended September 30,
2023202220232022
Restructuring charges$1.8 $6.7 $9.9 $28.1 
Facility reorganization, relocation and other costs0.4 0.5 2.5