01—Abstract
Summary
Summary of the 10-K filed February 26, 2021. Cited figures are marked; the original filing is the authoritative source.
Ingersoll Rand Inc. (formerly Gardner Denver Holdings, Inc.) completed its merger with the Industrial business of Ingersoll-Rand plc on February 29, 2020, which transformed the company's scale: 2020 revenues were $4,910.2 milliona, up from $2,451.9 million in 2019, while the company reported a net loss attributable to Ingersoll Rand Inc. of $33.3 million, compared with net income of $159.1 million in 2019.
Operating income fell to $85.7 millionb from $275.3 million, largely reflecting $395.8 million of intangible amortization, $217.2 million of other operating expense (including $92.9 million of restructuring charges), and $111.1 million of interest expense. Adjusted EBITDA rose to $1,017.6 million from $561.7 million, and cash flow from operations was $914.3 million, giving free cash flow of $865.6 million. Balance sheet changes were significant.
Total assets reached $16,058.6 millionc and total debt was $3,899.5 million at year-end 2020, against cash of $1,750.9 million. Goodwill and other intangible assets represented $11.0 billion, or 69%, of total assets, which the filing flags as an impairment risk; the company recorded a $19.9 million tradename impairment in 2020. The company did not pay dividends in 2020 or 2019 and does not intend to pay cash dividends in the foreseeable future.
Subsequent events matter for investors. On February 14, 2021, the company agreed to sell its High Pressure Solutions business to American Industrial Partners for $300 milliond in cash at close while retaining a 45% ownership interest, with the company expecting to recognize a loss of between $195 million and $235 million upon classification as held for sale. The company also completed the acquisition of Tuthill Vacuum and Blower Systems for approximately $184 million on January 31, 2021.
02—Key points
Key Highlights
- Revenues of $4,910.2 million in 2020, up from $2,451.9 million in 2019, driven primarily by the Ingersoll Rand Industrial acquisition, which contributed $2,934.9 million of the increase.
- Net loss attributable to Ingersoll Rand Inc. of $33.3 million in 2020, versus net income of $159.1 million in 2019; diluted loss per share was $(0.09).
- Adjusted EBITDA of $1,017.6 million (20.7% of revenues) versus $561.7 million (22.9%) in 2019, and free cash flow of $865.6 million versus $300.1 million.
- Total debt of $3,899.5 million at December 31, 2020, with cash and cash equivalents of $1,750.9 million and $998.1 million of unused revolving credit availability.
- Goodwill and other intangible assets totaled $11.0 billion, or 69% of total assets, and the company recognized a $19.9 million impairment of two tradenames in 2020.
- Agreement announced February 14, 2021 to sell the High Pressure Solutions business to American Industrial Partners for $300 million at close, retaining a 45% interest; a loss of $195 million to $235 million is expected upon held-for-sale classification.
- Restructuring charges of $92.9 million in 2020 under a 2020 Plan expected to total approximately $350.0 million through 2022 and to deliver about $300.0 million in annualized cost synergies by the end of 2022.
03—One dollar
Follow one dollar
For each $1.00 of revenue in FY2020, Ingersoll Rand lost $0.01.
- Revenue$3.97B100.0%
- Cost of revenue−$2.57B64.6%
- Gross profit$1.40B35.4%
- Operating costs−$1.35B33.9%
- Operating income$59.6M1.5%
- Interest, other & tax−$92.9M2.3%
- Net income−$33.3M0.8%
Where FY2020 revenue went
$3.97B- Cost of revenue: $2.57B, 65% of revenue
- SG&A: $789.3M, 20% of revenue
- Other operating costs: $498.0M, 13% of revenue
- Operating income: $59.6M, 1.5% of revenue
- R&D: $58.0M, 1.5% of revenue
Kept 1.5% as operating incomeOperating income $59.6M · 1.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 26, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $3.97B$2.02B | +96.9% |
| Cost of Revenue | $2.57B$1.24B | +107.3% |
| Gross Profit | $1.40B$778.30M | +80.5% |
| R&D Expenses | $58.00M$22.00M | +163.6% |
| SG&A Expenses | $789.30M$409.60M | +92.7% |
| Operating Income | $59.60M$194.10M | −69.3% |
| Interest Expense | $111.10M$88.40M | +25.7% |
| Net Income | -$33.30M$159.10M | −120.9% |
| EPS (Basic) | $-0.09$0.78 | −111.5% |
| EPS (Diluted) | $-0.09$0.76 | −111.8% |
| Shares Outstanding (Basic) | 382.80M203.50M | +88.1% |
| Shares Outstanding (Diluted) | 382.80M208.90M | +83.2% |
05—Questions
Frequently Asked Questions
Why did net income swing from a profit in 2019 to a loss in 2020?
The filing attributes the decrease primarily to higher selling and administrative expenses ($894.8 million vs. $436.4 million), higher amortization of intangible assets ($395.8 million vs. $124.3 million), increased other operating expense, net ($217.2 million vs. $75.7 million), and higher interest expense ($111.1 million vs. $88.9 million), partially offset by higher gross profit on increased revenues. The effective tax rate was (67.0)%.
What is the company's exposure to debt and interest rate changes?
As of December 31, 2020, variable rate debt outstanding was $3,933.1 million at a weighted average interest rate of approximately 2.0%, mostly under the Senior Secured Credit Facility. A hypothetical 100 basis point increase in market interest rates would have increased 2020 interest expense by $35.1 million. The company had no outstanding revolver borrowings at year-end and was in compliance with its debt covenants.
Will the company pay dividends to shareholders?
No. The company did not declare or pay dividends in 2020 or 2019 and does not intend to pay cash dividends on its common stock in the foreseeable future. Any future dividend decision will be at the discretion of the board and will depend on results, cash requirements, financing restrictions and other factors.
How significant is the High Pressure Solutions divestiture?
The company will receive $300 million in cash at close for its majority interest in High Pressure Solutions and retain a 45% ownership stake. The sale is expected to close in the first half of 2021, subject to regulatory approvals and customary conditions. High Pressure Solutions revenue fell to $195.6 million in 2020 from $434.4 million in 2019, and its Segment Adjusted EBITDA fell to $12.1 million from $117.0 million.
What are the main risks tied to the company's large intangible and goodwill balances?
Goodwill and other intangible assets were $11.0 billion, or 69% of total assets, at December 31, 2020. The filing states that impairments could have a material adverse effect on financial position or results of operations. Two reporting units had goodwill fair value exceeding carrying value by only 4% to 6%, and the company notes continued COVID-19 impacts could require future impairment charges.
06—Continue