Ingersoll Rand Inc. — 2023 Form 10-K Summary
Business context and reporting period. Ingersoll Rand is a global manufacturer and servicer of compressors, pumps, vacuum and blower equipment, and related flow technologies. Its two reportable segments are Industrial Technologies and Services (ITS) and Precision and Science Technologies (PST). The 10-K covers the fiscal year ended December 31, 2023; it also presents unaudited quarterly results, including Q4 2023. Figures below are in millions of dollars unless noted.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $6,876.1 | $5,916.3 | +16.2% |
| Gross profit / margin | $2,882.2 / 41.9% | $2,325.6 / 39.3% | Margin +260 bps |
| Operating income / margin | $1,164.3 / 16.9% | $817.3 / 13.8% | Margin +310 bps |
| Net income attributable to Ingersoll Rand | $778.7 | $604.7 | +28.8% |
| Diluted EPS | $1.90 | $1.47 | +29.3% |
| Adjusted EBITDA (non-GAAP) | $1,786.8 / 26.0% of revenue | $1,434.8 / 24.3% | +24.5%; margin +170 bps |
| Operating cash flow | $1,377.4 | $865.4 | +$512.0 |
| Free cash flow (non-GAAP) | $1,272.0 | $770.8 | +$501.2 |
- Q4 2023: Revenue was $1,821.4, versus $1,623.7 in Q4 2022; operating income was $333.2 versus $272.9; net income was $231.5 versus $218.7; diluted EPS was $0.56 versus $0.53; and Adjusted EBITDA was $500.5 versus $420.2.
- Revenue drivers: Full-year growth reflected higher pricing of $397.0, acquisitions of $375.1, and higher organic volumes of $213.3, partly offset by $25.6 of unfavorable foreign-currency effects. Aftermarket revenue was 35.8% of total revenue, compared with 35.2% in 2022.
- Segments: ITS revenue rose 19.7% to $5,632.8 and segment Adjusted EBITDA margin increased to 28.2% from 25.8%. PST revenue rose 2.7% to $1,243.3, despite lower organic volume and orders; its segment margin increased to 30.0% from 28.7%.
- Profit and costs: Pricing, volume and acquisitions supported growth and margin expansion. Higher selling and administrative costs, cost inflation and product mix were offsets. Interest expense rose to $156.7 from $103.2; the weighted-average interest rate including derivatives was approximately 5.3%, versus 3.2% in 2022. The effective tax rate rose to 23.3% from 20.2%.
Debt, liquidity and capital allocation
- Year-end cash and cash equivalents were $1,595.5; total debt was $2,723.6, down from $2,752.6 in 2022. The company reported no borrowings or letters of credit under its $2,000.0 revolving credit facility and stated it was compliant with debt covenants.
- Cash flow from investing activities was negative $1,060.5, including $963.0 of net acquisition spending and $105.4 of capital expenditures. Financing cash use was $337.5, including $263.0 of treasury-stock purchases, $32.4 of dividends and $27.6 of net debt repayments.
- The company issued $1,500.0 of senior notes in 2023: $500.0 at 5.400% due 2028 and $1,000.0 at 5.700% due 2033, using proceeds partly to repay secured debt. Variable-rate debt was $1,240.7 at year-end; the company had interest-rate swaps covering $528.5 of borrowings.
- Management said cash from operations and revolver availability should fund current obligations, working capital, debt service and capital spending for the foreseeable future. It expects 2024 capital expenditures of approximately 2% of revenue. No full-year revenue or earnings guidance is provided in the filing.
Material changes, outlook and risks
- Acquisitions: 2023 acquisitions included SPX FLOW’s Air Treatment business for $519.0 and Howden Roots for $292.5, alongside other smaller acquisitions. The company paid $963.0 net for acquisitions during the year. On February 1, 2024, it acquired Friulair for an upfront €135 million.
- Cybersecurity incident: An incident detected April 27, 2023 disrupted several IT systems. The company reported no material effect on 2023 continuing-operations results or cash flows, did not expect a material future impact, and said it was unaware of confidential customer information being exfiltrated. Cybersecurity incident costs of $2.3 were included as an adjustment in its non-GAAP reconciliation.
- Contingencies: The company recorded a $126.9 asbestos-related litigation reserve and a $157.7 receivable for probable insurance recoveries at year-end. Recovery depends in part on ongoing insurer litigation, including the Adams County Case. Environmental liabilities were $16.7. Management did not expect these matters to have a material adverse effect, but noted that outcomes and recoveries remain uncertain.
- Other key risks: Global economic and industrial-demand weakness; international, currency and geopolitical exposures; raw-material and supplier disruptions; competition; acquisition integration; variable interest rates and debt obligations; cybersecurity and systems disruption; environmental compliance; and product liability. Goodwill and other intangible assets totaled $10.2 billion, about 66% of total assets; no impairment was recorded in 2023.
- Restructuring charges were $19.9 in 2023, down from $29.3 in 2022. The auditor issued an unqualified opinion on the financial statements and internal control over financial reporting; its critical audit matter was the asbestos/silica liability and related insurance recovery estimate. Internal-control assessment excluded certain 2023 acquisitions representing approximately 4% of consolidated revenue.
Most important facts for investors to verify
- How much of revenue and Adjusted EBITDA growth reflects sustainable organic demand and pricing, versus acquisitions and other adjustments—particularly given PST’s lower orders and organic volumes.
- Whether margins and cash conversion remain strong as pricing, inflation, product mix and working-capital movements change; review the company’s non-GAAP reconciliations alongside GAAP results.
- Debt-service exposure to variable rates, refinancing needs and the effect of the 2023 debt issuance; confirm actual 2024 capital spending against the approximately 2% outlook.
- Integration performance and returns from Air Treatment, Roots and subsequent acquisitions, including Friulair.
- Progress in asbestos litigation and collectability of the $157.7 insurance receivable, as well as developments in cybersecurity and environmental matters.