Ingersoll Rand Inc. — 2022 Form 10-K
Business context and reporting period. Global supplier of compressors, pumps, vacuum and blower equipment, fluid-transfer systems, and related aftermarket services. The filing covers the fiscal year ended December 31, 2022; amounts are in millions of dollars unless stated otherwise. The two reportable segments are Industrial Technologies and Services (ITS) and Precision and Science Technologies (PST).
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Revenue | $5,916.3 | $5,152.4 |
| Gross profit / margin | $2,325.6 / 39.3% | $1,988.5 / 38.6% |
| Operating income / margin | $817.3 / 13.8% | $565.7 / 11.0% |
| Income from continuing operations | $593.3 | $523.4 |
| Net income attributable to Ingersoll Rand | $604.7 | $562.5 |
| Diluted EPS | $1.47 | $1.34 |
| Adjusted EBITDA / margin | $1,434.8 / 24.3% | $1,191.9 / 23.1% |
| Cash from operating activities | $865.4 | $627.8 |
| Free cash flow | $770.8 | $563.7 |
Fourth quarter: Revenue was $1,623.7, gross profit $654.4, operating income $272.9, continuing-operations income $204.1, net income $218.7 and Adjusted EBITDA $420.2. Diluted EPS was $0.53, including $0.50 from continuing operations. Cash-flow figures are not presented quarterly in the supplied filing text.
Balance sheet at December 31, 2022: Cash and cash equivalents were $1,613.0; total debt was $2,752.6, down from $3,440.6 a year earlier. Net debt was approximately $1,139.6. The company reported $1,100.0 of unused revolving-credit availability and no revolver borrowings or letters of credit outstanding. Current assets were $3,967.3 and current liabilities $1,674.0. Operating working capital rose to $1,194.2 from $975.4.
Changes versus the prior comparable period
- Revenue increased 14.8%. Pricing added $420.7 and organic volume $409.4; acquisitions added $225.5, partly offset by $291.7 of unfavorable currency effects.
- Gross margin rose 70 basis points, which management attributed primarily to pricing exceeding material and labor inflation. Adjusted EBITDA margin improved 120 basis points.
- ITS revenue increased 13.1% to $4,705.1 and segment Adjusted EBITDA margin rose to 25.8% from 24.8%. PST revenue increased 22.2% to $1,211.2, while its segment margin declined to 28.7% from 29.4%.
- Operating cash flow improved by $237.6, but operating working capital used $237.2 of cash, mainly reflecting higher receivables and inventories. Capital expenditures rose to $94.6 from $64.1.
- Income tax expense was $149.6, versus a $21.8 tax benefit in 2021; the prior-year result included one-time tax benefits. Interest expense increased to $103.2, and the weighted-average interest rate rose to approximately 3.2% from 2.0%.
Outlook, commentary, risks and unusual items
- Management stated that operating cash flow and revolver availability were expected to fund current obligations, working-capital needs, debt service and capital spending for the foreseeable future, subject to economic conditions. No specific revenue or earnings guidance is provided in the supplied filing text. The company expected 2023 capital expenditures of approximately 2% of revenue.
- Acquisitions continued: the company completed several 2022 transactions, including Dosatron and Everest Group. It completed the approximately $525 million all-cash acquisition of SPX FLOW’s Air Treatment business on January 3, 2023.
- The company repaid $655.6 of long-term debt, repurchased $261.1 of shares and paid $32.4 in common-stock dividends during 2022. It declared dividends of $0.08 per share for 2022, compared with $0.02 in 2021.
- Key exposures include inflation and availability of steel, aluminum, copper and components; some key inputs have single-source suppliers. Management also cited supply-chain interruptions, including at certain China facilities, and foreign-exchange exposure; approximately 59% of revenue was from customers outside the United States.
- Other material risks include variable-rate debt and interest-rate increases, acquisition integration, cyclical customer investment, cybersecurity and operational disruption, product liability, environmental obligations, and asbestos and silica litigation. The company had $137.9 of asbestos-related reserves and a $154.2 insurance-recovery receivable; recovery depends in part on ongoing insurer litigation, including the Adams County Case.
- Restructuring charges were $29.3 in 2022; cumulative expense under the 2020 restructuring plan was $125.7, with total expected expense of approximately $127–$138. Goodwill and other intangible assets totaled $9.6 billion, or 65% of assets; no 2022 impairment was recorded.
- The auditor issued an unqualified opinion on the financial statements and stated internal control over financial reporting was effective. Management and the auditor excluded certain 2022 acquisitions from the internal-control assessment; those businesses represented less than 1% of consolidated revenue and assets, excluding goodwill and intangibles.
Important facts for investors to verify
- Whether pricing and volume can continue to offset inflation, mix pressure and currency headwinds, and whether PST margins recover.
- How operating working capital, especially inventory and receivables, converts to cash as demand and customer lead times evolve.
- Debt reduction, variable-rate exposure and interest-rate hedge coverage; confirm the impact of rates on interest expense and liquidity.
- Acquisition integration, expected returns and funding for the SPX FLOW Air Treatment purchase and other growth opportunities.
- The assumptions and insurance recoverability supporting asbestos and silica reserves, and any developments in the Adams County Case.