Gardner Denver Holdings Earnings 2020-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

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 March 31, 2020

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

For the transition period from ___________to___________

Commission File Number: 001-38095

Ingersoll Rand Inc.

(Exact Name of Registrant as Specified in Its Charter)

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

800-A Beaty Street

Davidson, North Carolina 28036

(704) 655-4000

(Address, including zip code, of principal executive offices and registrant’s telephone number, including area code)

Gardner Denver Holdings, Inc.

222 East Erie Street, Suite 500

Milwaukee, Wisconsin 53202

(704) 655-4000

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐

Emerging growth Company	☐

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

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

The registrant had outstanding 416,592,698 shares of Common Stock, par value $0.01 per share, as of May 13, 2020.

Table of Contents

INGERSOLL RAND INC. AND SUBSIDIARIES

FORM 10-Q

INDEX

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	43
Item 3. Quantitative and Qualitative Disclosures About Market Risk	60
Item 4. Controls and Procedures	61
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	61
Item 1A. Risk Factors	61
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	63
Item 3. Defaults Upon Senior Securities	63
Item 4. Mine Safety Disclosures	63
Item 5. Other Information	63
Item 6. Exhibits	64
SIGNATURES	66

Index

EXPLANATORY NOTE

Ingersoll Rand, Inc. (the “Company”) is relying on the “Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions: From the Reporting and Proxy Delivery Requirements for Public Companies” dated March 25, 2020 (Release No. 34-88465) issued by the Securities and Exchange Commission (the “SEC”) to file this Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (the “Form 10-Q”) on the date hereof, which is after the original May 11, 2020 filing deadline, due to circumstances related to coronavirus disease 2019 (“COVID-19”).

At the end of the day on February 29, 2020, the Company completed its transformative merger with the Industrial business of Ingersoll-Rand PLC, making this Form 10-Q the combined Company’s first periodic report. As expected, this resulted in a longer and more complex quarterly close process. In addition, in response to the COVID-19 pandemic and the various governmental shelter-in-place orders issued in relation to it, the Company moved quickly to a work-at-home policy for all employees whose jobs were not critical to operations and service support, which included all employees responsible for the preparation of the Company’s quarterly financial statements and this Form 10-Q. This further slowed an already complex close process and caused completion of the process to be briefly delayed.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

There are a number of risks, uncertainties and other important factors, many of which are beyond our control, that could cause our actual results to differ materially from the forward-looking statements contained in this Form 10-Q. Such risks, uncertainties and other important factors that could cause actual results to differ include, among others, the risks, uncertainties and factors set forth under “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, and “Part II. Item 1A. Risk Factors” 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:

•

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

•

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

•

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

•

Our revenues and operating results, especially in the High Pressure Solutions segment, depend on the level of activity in the energy industry, which is significantly affected by volatile oil and gas prices.

•

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.

•

Potential governmental regulations restricting the use, and increased public attention to and litigation regarding the impacts, of hydraulic fracturing or other processes on which it relies could reduce demand for our products.

Index

•

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

•

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

•

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

•

Credit and counterparty risks could harm our business.

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

Index

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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 fail to extend credit under our facility or reduce the borrowing base under our Revolving Credit Facility, our liquidity and results of operations may be adversely affected.

•

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

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

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

Website Disclosure

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

Index

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in millions, except per share amounts)

	For the Three Month Period Ended March 31,
	2020			2019
Revenues	$	799.9		$	620.3
Cost of sales		555.4			389.8
Gross Profit		244.5			230.5
Selling and administrative expenses		155.4			117.0
Amortization of intangible assets		55.2			31.4
Other operating expense, net		100.7			1.9
Operating (Loss) Income		(66.8	)		80.2
Interest expense		27.1			22.4
Loss on extinguishment of debt		2.0			—
Other income, net		(0.2	)		(1.3	)
(Loss) Income Before Income Taxes		(95.7	)		59.1
(Benefit) provision for income taxes		(58.9	)		12.0
Net (Loss) Income		(36.8	)		47.1
Less: Net loss attributable to noncontrolling interests		—			—
Net (Loss) Income Attributable to Ingersoll Rand Inc.	$	(36.8	)	$	47.1
Basic (loss) earnings per share	$	(0.13	)	$	0.23
Diluted (loss) earnings per share	$	(0.13	)	$	0.23

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

Index

INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

(Dollars in millions)



	For the Three Month Period Ended March 31,
	2020			2019
Comprehensive (Loss) Income Attributable to Ingersoll Rand Inc.
Net (loss) income attributable to Ingersoll Rand Inc.	$	(36.8	)	$	47.1
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments, net		(92.2	)		(0.1	)
Unrecognized gains on cash flow hedges, net		1.2			1.9
Pension and other postretirement prior service cost and gain or loss, net		2.9			0.2
Total other comprehensive (loss) income, net of tax		(88.1	)		2.0
Comprehensive (loss) income attributable to Ingersoll Rand Inc.		(124.9	)		49.1
Comprehensive Loss Attributable to Noncontrolling Interests
Net loss attributable to noncontrolling interests	$	—		$	—
Other comprehensive loss, net of tax
Foreign currency translation adjustments, net		(4.0	)		—
Total other comprehensive loss, net of tax		(4.0	)		—
Comprehensive loss attributable to noncontrolling interests		(4.0	)		—
Total Comprehensive (Loss) Income	$	(128.9	)	$	49.1

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

Index

INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in millions, except share and per share amounts)

	March 31, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	555.7		$	505.5
Accounts receivable, net of allowance for doubtful accounts of $49.1 and $18.4, respectively		1,027.5			459.1
Inventories		1,088.1			502.5
Other current assets		258.1			76.8
Total current assets		2,929.4		$	1,543.9
Property, plant and equipment, net of accumulated depreciation of $310.1 and $298.4, respectively		829.0			326.6
Goodwill		5,503.4			1,287.7
Other intangible assets, net		5,679.7			1,255.0
Deferred tax assets		34.7			3.0
Other assets		382.1			212.2
Total assets	$	15,358.3		$	4,628.4
Liabilities and Stockholders’ Equity
Current liabilities
Short-term borrowings and current maturities of long-term debt	$	35.7		$	7.6
Accounts payable		764.6			322.9
Accrued liabilities		589.7			244.1
Total current liabilities		1,390.0			574.6
Long-term debt, less current maturities		3,427.1			1,603.8
Pensions and other postretirement benefits		269.3			99.7
Deferred income taxes		1,111.1			251.0
Other liabilities		405.3			229.4
Total liabilities	$	6,602.8		$	2,758.5
Commitments and contingencies (Note 15)
Stockholders’ equity
Common stock, $0.01 par value; 1,000,000,000 shares authorized; 418,217,918 and 206,767,529 shares issued as of March 31, 2020 and December 31, 2019, respectively		4.2			2.1
Capital in excess of par value		9,241.5			2,302.0
Accumulated deficit		(179.2	)		(141.4	)
Accumulated other comprehensive loss		(344.1	)		(256.0	)
Treasury stock at cost; 1,659,263 and 1,701,785 shares as of March 31, 2020 and December 31, 2019, respectively		(36.2	)		(36.8	)
Total Ingersoll Rand Inc stockholders’ equity	$	8,686.2		$	1,869.9
Noncontrolling interests		69.3			—
Total stockholders’ equity	$	8,755.5		$	1,869.9
Total liabilities and stockholders’ equity	$	15,358.3		$	4,628.4

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

Index

INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

(Dollars in millions)

	For the Three Month
	Period Ended
	March 31,
	2020			2019
Number of Common Shares Issued (in millions)
Balance at beginning of period		206.8			201.1
Issuance of common stock for stock-based compensation plans		0.4			2.2
Shares issued to acquire Ingersoll Rand Industrial		211.0			—
Balance at end of period		418.2			203.3
Common Stock
Balance at beginning of period	$	2.1		$	2.0
Issuance of common stock for stock-based compensation plans		—			—
Shares issued to acquire Ingersoll Rand Industrial		2.1			—
Balance at end of period	$	4.2		$	2.0
Capital in Excess of Par Value
Balance at beginning of period	$	2,302.0		$	2,282.7
Issuance of common stock for stock-based compensation plans		2.2			12.9
Issuance of treasury stock for stock-based compensation plans		(1.0	)		(9.2	)
Shares issued for Ingersoll Rand Industrial acquisition		6,917.4			—
Fair value attributable to pre-merger service for replacement equity awards		8.6			—
Fair value attributable to pre-merger service for deferred compensation plan		8.9			—
Cost incurred to issue shares for Ingersoll Rand Industrial acquisition		(1.0	)		—
Stock-based compensation		4.4			2.9
Balance at end of period	$	9,241.5		$	2,289.3
Accumulated Deficit
Balance at beginning of period	$	(141.4	)	$	(308.7	)
Net (loss) income attributable to Ingersoll Rand Inc.		(36.8	)		47.1
Cumulative-effect adjustment upon adoption of new accounting standard (ASU 2018-02)		—			8.2
Cumulative-effect adjustment upon adoption of new accounting standard (ASU 2016-13)		(1.0	)		—
Balance at end of period	$	(179.2	)	$	(253.4	)
Accumulated Other Comprehensive Loss
Balance at beginning of period	$	(256.0	)	$	(247.0	)
Foreign currency translation adjustments, net		(92.2	)		(0.1	)
Unrecognized gains on cash flow hedges, net		1.2			1.9
Pension and other postretirement prior service cost and gain or loss, net		2.9			0.2
Cumulative-effect adjustment upon adoption of new accounting standard (ASU 2018-02)		—			(8.2	)
Balance at end of period	$	(344.1	)	$	(253.2	)
Treasury Stock
Balance at beginning of period	$	(36.8	)	$	(53.0	)
Purchases of treasury stock		(0.8	)		(8.5	)
Issuance of treasury stock for stock-based compensation plans		1.4			14.5
Balance at end of period	$	(36.2	)	$	(47.0	)
Total Ingersoll Rand Inc. Stockholders’ Equity	$	8,686.2		$	1,737.7
Noncontrolling Interests
Balance at beginning of period	$	—		$	—
Net (loss) income		—			—
Noncontrolling interest from acquisition of Ingersoll Rand Industrial		73.3			—
Foreign currency translation adjustments, net		(4.0	)		—
Balance at end of period	$	69.3		$	—
Total Stockholders’ Equity	$	8,755.5		$	1,737.7

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

Index

INGERSOLL RAND INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in millions)

	For the			For the
	Three Month			Three Month
	Period Ended			Period Ended
	March 31,			March 31,
	2020			2019
Cash Flows From Operating Activities
Net (loss) income	$	(36.8	)	$	47.1
Adjustments to reconcile net (loss) income to net cash provided by operating activities
Amortization of intangible assets		55.2			31.4
Depreciation in cost of sales		15.0			11.8
Depreciation in selling and administrative expenses		2.1			2.3
Stock-based compensation expense		3.5			7.5
Foreign currency transaction losses, net		2.6			3.1
Net loss on asset dispositions		—			0.1
Loss on extinguishment of debt		2.0			—
Deferred income taxes		(1.1	)		(5.1	)
Changes in assets and liabilities
Receivables		(4.1	)		5.4
Inventories		(23.6	)		(33.5	)
Accounts payable		105.6			8.8
Accrued liabilities		(79.1	)		15.5
Other assets and liabilities, net		27.1			(25.6	)
Net cash provided by operating activities		68.4			68.8
Cash Flows From Investing Activities
Capital expenditures		(8.3	)		(14.1	)
Net cash acquired (paid) in business combinations		41.3			(0.5	)
Disposals of property, plant and equipment		0.1			(0.1	)
Net cash provided by (used) in investing activities		33.1			(14.7	)
Cash Flows From Financing Activities
Principal payments on long-term debt		(1,590.6	)		(26.9	)
Proceeds from long-term debt		1,586.0			—
Purchases of treasury stock		(0.8	)		(8.5	)
Proceeds from stock option exercises		2.7			18.1
Payments of contingent consideration		(0.7	)		—
Payments of debt issuance costs		(37.5	)		—
Payments of costs incurred to issue shares for Ingersoll Rand Industrial acquisition		(1.0	)		—
Net cash used in financing activities		(41.9	)		(17.3	)
Effect of exchange rate changes on cash and cash equivalents		(9.4	)		5.7
Net increase in cash and cash equivalents		50.2			42.5
Cash and cash equivalents, beginning of period		505.5			221.2
Cash and cash equivalents, end of period	$	555.7		$	263.7
Supplemental Cash Flow Information
Cash paid for income taxes	$	12.4		$	13.5
Cash paid for interest	$	25.9		$	21.1
Debt issuance costs in accounts payable	$	4.3		$	—
Debt issuance costs in accrued liabilities	$	0.4		$	—
Leased assets obtained in exchange for new operating lease liabilities	$	1.0		$	1.7
Capital expenditures in accounts payable	$	4.4		$	4.5

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

Index

INGERSOLL RAND INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(Amounts in millions, except share and per share amounts)

Note 1. Basis of Presentation and Recent Accounting Pronouncements

Basis of Presentation

On February 29, 2020, Ingersoll Rand Inc. (formerly known as Gardner Denver Holdings, Inc.) completed the acquisition of the Ingersoll Rand Industrial business (“Ingersoll Rand Industrial”) by way of merger and changed its name from Gardner Denver Holdings, Inc. to Ingersoll Rand Inc. The condensed consolidated financial statements as of and for the three month period ended March 31, 2020 include the financial results of Ingersoll Rand Industrial from the date of acquisition.

Ingersoll Rand Inc. is a holding company whose operating subsidiaries are Gardner Denver, Inc. and Ingersoll Rand Industrial U.S., Inc, and certain of Gardner Denver, Inc’s. and Ingersoll Rand Industrial U.S., Inc’s subsidiaries. Ingersoll Rand Inc. is a diversified, global manufacturer of highly engineered, application-critical flow control products and provider of related aftermarket parts and services. The accompanying condensed consolidated financial statements include the accounts of Ingersoll Rand Inc. and its majority-owned subsidiaries (collectively referred to herein as “Ingersoll Rand” or the “Company”).

The financial information presented as of any date other than December 31, 2019 has been prepared from the books and records of the Company without audit. The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements include all adjustments, consisting of adjustments associated with acquisition accounting and normal recurring adjustments, necessary for the fair presentation of such financial statements. All intercompany transactions and accounts have been eliminated in consolidation.

The Company’s unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, filed with the Securities and Exchange Commission (“SEC”).

The results of operations for the three month period ended March 31, 2020 is not necessarily indicative of the results to be expected for the full year. The recent outbreak of the novel Coronavirus (“COVID-19”) is a rapidly developing situation around the globe that has negatively impacted and could continue to negatively impact the global economy. The Company’s operating results will be subject to fluctuations based on general economic conditions, and the extent to which COVID-19 may ultimately impact its business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate extent of the spread of the disease and the duration of the outbreak and business closures or business disruptions for the Company, suppliers and customers.

The balance sheet as of December 31, 2019 has been derived from the Company’s audited financial statements as of that date but does not include all of the information and notes required by GAAP for complete financial statements.

Immediately prior to the acquisition of Ingersoll Rand Industrial, affiliates of Kohlberg Kravis Roberts & Co. L.P. (“KKR”) owned 70,671,135 shares of common stock of the Company or approximately 34%, of the total outstanding common stock of the Company. Following the acquisition of Ingersoll Rand Industrial, KKR owns 70,671,135 shares of common stock of the Company or approximately 17% of the total outstanding common stock of the Company.

The classification of stock-based compensation expense reported for the three month period ended March 31, 2019 was corrected. As a result, previously reported “Other operating expense, net” was decreased and “Selling and administrative expenses” was increased by $9.3 million for the three month period ended March 31, 2019.

Resegmentation

Subsequent to the acquisition of Ingersoll Rand Industrial, Ingersoll Rand reorganized its reportable segments. As a result, the Company no longer reports under the reportable segments of Industrial, Energy and Medical. Instead, the Company presents financial information for the reportable segments of Industrial Technologies and Services, Precision and Science Technologies, Specialty Vehicle Technologies and High Pressure Solutions. The Company’s Chief Operating Decision Maker regularly reviews financial information to allocate resources and assess performance utilizing these reorganized segments. See Note 5 “Goodwill and Other Intangible Assets” for the allocation of goodwill to the new reportable segments. See Note 16 “Segment Results” for a description of the new reportable segments.

Index

Recently Adopted Accounting Standard Updates (“ASU”)

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40); Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update require implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the noncancelable term of the cloud computing arrangement plus any option renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The Company adopted this guidance prospectively on January 1, 2020. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this update eliminate, add and modify certain disclosure requirements for fair value measurements as part of its disclosure framework project. The Company adopted this guidance on January 1, 2020. The adoption did not have a material impact on the Company’s condensed consolidated financial statements.

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

Recently Issued Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for a limited time to ease the potential burden of accounting for reference rate reform on financial reporting. This guidance applies to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates. The guidance is effective beginning on March 12, 2020 through December 31, 2022. The Company has not utilized any of the optional expedients or exceptions available under this ASU. The Company will continue to assess whether this ASU is applicable throughout the effective period.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update simplify the accounting for income taxes by removing certain exceptions and amending and clarifying existing guidance. The guidance is effective for public companies beginning with the first quarter of 2021. Early adoption is permitted. The Company is currently assessing the impact of this ASU on its condensed consolidated financial statements and evaluating the timing of adoption.

In August 2018, the FASB issued ASU 2018-14, Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans. The amendments in this update eliminate, add and modify certain disclosure requirements for defined benefit pension plans. The guidance is effective for public companies beginning with its annual report for fiscal year 2020. This ASU will have an immaterial impact on the Company’s condensed consolidated financial statements.

Index

Note 2. Business Combinations

Ingersoll Rand Industrial Acquisition

On February 29, 2020, Ingersoll Rand completed the acquisition of Ingersoll Rand Industrial for the total estimated purchase consideration of approximately $6,937.0 million which represents Ingersoll Rand common stock with a fair value of $6,919.5 million and the balance equal to the fair value attributable to pre-acquisition service for replacement equity awards and deferred compensation arrangements settled in shares (or valued by reference to shares) of Ingersoll Rand common stock and reimbursement of retirement funding obligation. Ingersoll Rand Industrial is a global provider of mission-critical flow control and compression equipment and associated aftermarket parts, consumables and services. Ingersoll Rand acquired Ingersoll Rand Industrial to extend and enhance its portfolio of products to address market opportunities in the compressor, blower, pump and other industrial product markets.

Immediately prior to the merger, Trane Technologies plc (formerly known as Ingersoll-Rand plc) (“Old IR” or “Trane Technologies”) completed a spin-off in which it distributed one share of common stock of Ingersoll-Rand Industrial US. Holdco, Inc. (“SpinCo”), par value $0.01 per share, for each share of Old IR, outstanding as of the record date for the spin-off on February 24, 2020. In accordance with the merger agreement by and among Ingersoll Rand, Old IR, SpinCo and Charm Merger Sub Inc, a wholly owned subsidiary of Ingersoll Rand (“Merger Sub”), Merger Sub merged with and into SpinCo (the “acquisition”) and each share of common stock of SpinCo, par value $0.01 per share (“SpinCo common stock”), issued and outstanding immediately prior to the acquisition was converted into the right to receive 0.8824 shares of common stock of Ingersoll Rand, par value $0.01 per share (“Ingersoll Rand common stock”). Immediately after the consummation of the acquisition, approximately 50.1% of the outstanding shares of Ingersoll Rand common stock on a fully-diluted basis was held by SpinCo stockholders and approximately 49.9% of the outstanding shares of the Company common stock on a fully-diluted basis was held by pre-acquisition Ingersoll Rand stockholders. Since Ingersoll Rand (formerly named Gardner Denver Holdings, Inc.) is the accounting acquirer, the fair value of the equity issued by Ingersoll Rand to SpinCo stockholders in the acquisition was determined by reference to the market price of Ingersoll Rand common stock. Accordingly, the purchase consideration below reflects the estimated fair value of the Ingersoll Rand shares issued in exchange for shares of SpinCo common stock in the acquisition, which is based on the final closing price of shares of Ingersoll Rand common stock prior to the effective time of the acquisition on February 28, 2020 of $32.79 per share. The Company incurred approximately $87.3 million in total acquisition-related costs in connection with the acquisition, including approximately $42.3 million in the three month period ended March 31, 2020 recorded to “Other operating expenses, net” in the Condensed Consolidated Statements of Operations. In addition, the Company incurred $1.0 million in registration fees in connection with issuing shares in the acquisition of Ingersoll Rand Industrial. The $1.0 million reduced “Capital in excess of par value” of the Condensed Consolidated Balance Sheets.

Preliminary Purchase Price Allocation

In accordance with the FASB’s ASC 805 Business Combinations, Ingersoll Rand was determined to be the accounting acquirer. As such, Ingersoll Rand applied the acquisition method of accounting with respect to the identifiable assets and liabilities of Ingersoll Rand Industrial, which have been measured at estimated fair value as of the date of the business combination.

Ingersoll Rand Industrial’s assets and liabilities were measured at estimated fair values at February 29, 2020, primarily using Level 3 inputs except for debt, which was measured using Level 2 inputs and non-controlling interests, which was measured using Level 1 inputs. Estimates of fair value represent management’s best estimate of assumptions about future events and uncertainties, including significant judgments related to future cash flows, discount rates, competitive trends, margin and revenue growth assumptions including royalty rates and customer attrition rates, market comparables and others. Inputs used were generally obtained from historical data supplemented by current and anticipated market conditions and growth rates.

The following table summarizes the preliminary allocation of purchase price to the identifiable assets acquired and liabilities assumed by Ingersoll Rand, with the excess of purchase price over the fair value of Ingersoll Rand Industrial’s net assets recorded as goodwill. Due to the timing of the business combination and the magnitude of and multi-jurisdictional nature of the net assets acquired, at March 31, 2020 the valuation process to determine the fair values is not complete and further adjustments are expected in fiscal year 2020. The Company has estimated the preliminary fair value of net assets acquired based on information currently available and will continue to adjust those estimates as additional information becomes available, including the refinement of market participant assumptions and finalization of tax returns in the pre-acquisition period. As the Company finalizes the fair value of assets acquired and liabilities assumed, as well as finalizes working capital adjustments, additional purchase price allocation adjustments will be recorded during the measurement period, but no later than one year from the date of the acquisition. The Company will reflect measurement period adjustments in the period in which the adjustments are determined.

Index

The aggregate purchase consideration has been preliminarily allocated as follows.

Purchase Price
Fair value of Ingersoll Rand common stock issued for Ingersoll Rand
Industrial outstanding common stock⁽¹⁾	$	6,919.5
Fair value attributable to pre-merger service for replacement equity awards⁽²⁾		8.6
Fair value attributable to pre-merger service for deferred compensation plan⁽³⁾		8.9
Total purchase consideration	$	6,937.0

Purchase Price Allocation
Cash	$	41.3
Accounts receivable		579.9
Inventory		576.2
Other current assets		136.9
Property, plant and equipment		520.0
Goodwill		4,278.2
Intangible assets		4,501.3
Other noncurrent assets		269.8
Total current liabilities, including current maturities of long-term debt of $19.0 million		(830.6	)
Deferred tax liability		(900.6	)
Long-term debt, net of debt issuance costs and an original issue discount		(1,851.7	)
Other noncurrent liabilities		(310.4	)
Noncontrolling interest		(73.3	)
	$	6,937.0

⁽¹⁾

Represents the fair value of 211,023,522 shares of the Company’s common stock issued for Ingersoll Rand Industrial outstanding common stock multiplied by $32.79, the price per share of common stock as of the closing price on February 28, 2020.

⁽²⁾

Represents the fair value of the replacement equity awards to the extent those related to services provided by the employee of Ingersoll Rand Industrial prior to closing. See Note 9 “Stock-Based Compensation Plan” for additional information about the replacement equity awards.

⁽³⁾

Represents the fair value of the deferred compensation plan to be settled in equity. See Note 7 “Benefit Plans” for additional information about the deferred compensation plan.

Summary of Significant Fair Value Methods

The methods used to determine the preliminary fair value of significant identifiable assets and liabilities included in the preliminary allocation of purchase price are discussed below. The final fair value determination may differ from this preliminary determination.

Inventories

Acquired inventory is comprised of finished goods, work in process and raw materials. The preliminary fair value of finished goods was calculated as the estimated selling price, adjusted for costs of the selling effort and a reasonable profit allowance relating to the selling effort. The preliminary fair value of work in process inventory was primarily calculated as the estimated selling price, adjusted for estimated costs to complete the manufacturing, estimated costs of the selling effort, as well as a reasonable profit margin on the remaining manufacturing and selling effort. The preliminary fair value of raw materials and supplies was determined based on replacement cost which approximates historical carrying value. The preliminary fair value step-up of $102.3 million of inventories measured on a First In First Out (“FIFO”) basis is amortized to “Cost of sales” in the condensed consolidated financial statements as the inventory is sold, which is expected to be a period of four months from the acquisition date. For inventories measured on a Last In First Out (“LIFO”) basis, the acquired inventory becomes the LIFO base layer inventory.

Index

Property, Plant and Equipment

The preliminary fair value of property, plant and equipment was primarily calculated using replacement costs adjusted for the age and condition of the asset, with the exception of real property which was calculated using the market approach, and is summarized below.

Land	$	38.8
Buildings		177.4
Machinery and equipment		255.9
Office furniture and equipment		13.2
Other		0.9
Construction in progress		33.8
Preliminary fair value of property, plant and equipment	$	520.0

Identifiable Intangible Assets

The estimated preliminary fair value and weighted average useful life of the Ingersoll Rand Industrial identifiable intangible assets are as follows.

	Fair Value		Weighted average useful life (years)
Tradenames⁽¹⁾	$	1,427.0	Indefinite
Developed technology⁽²⁾		145.0		6
Customer relationships⁽³⁾		2,805.0		21
Backlog⁽⁴⁾		90.9	< 1
Other⁽⁵⁾		33.4		4
Preliminary fair value of identfiable intangible assets	$	4,501.3

⁽¹⁾

Tradenames were identified from brands of Ingersoll Rand Industrial. The preliminary fair value of tradenames were determined using a relief from royalty methodology which estimates the cost savings generated by a company related to the ownership of an asset for which it would otherwise have had to pay royalties or license fees on revenues earned through the use of the asset. The discount rate used was determined at the time of measurement based on an analysis of the implied internal rate of return of the transaction, weighted average cost of capital and weighted average return on assets. Tradenames are expected to have an indefinite useful life.

⁽²⁾

Developed technology was identified from the products of Ingersoll Rand Industrial. Preliminary fair values were determined using a relief from royalty methodology with similar methodology and assumptions as described in the tradename description above. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.

⁽³⁾

Customer relationships represent the preliminary fair value of existing relationships with the Ingersoll Rand Industrial customers. Its preliminary fair value was determined using the Multi-Period Excess Earning Method which involves isolating the net earnings attributable to the asset being measured based on present value of the incremental after-tax cash flows (excess earnings) attributable solely to the intangible asset over its remaining useful life. The valuation includes a valuation of the assembled workforce, using the Cost Approach, for purposes of calculating contributory asset charges to be used in the Multi-Period Excess Earning Method valuations. The economic useful life was determined based on historical customer attrition rates.

⁽⁴⁾

Backlog primarily relates to the dollar value of purchase arrangements with customers, effective, as of a given point in time, that are based on mutually agreed terms which, in some cases, may still be subject to completion of written documentation and may be changed or cancelled by the customer, often without penalty. Ingersoll Rand Industrial’s backlog consists of these arrangements with assigned shipment dates expected, in most cases, within three to twelve months. The preliminary fair value was determined using the Multi-Period Excess Earning Method. The economic useful life is based on the time to fulfill the outstanding order backlog obligation.

⁽⁵⁾

Other intangible assets is primarily comprised of software.

Index

The Company believes that the amounts of purchased intangible assets recorded represent the preliminary fair values of and approximates the amounts a market participant would pay for these intangible assets as of the acquisition date.

Leases, including lease liabilities and right-of-use (“ROU”) assets

Lease liabilities, included in “Accrued liabilities” and “Other non-current liabilities” in the Condensed Consolidated Balance Sheets, at the acquisition date, are remeasured at the present value of the future minimum lease payments over the remaining lease term and the incremental borrowing rate of Ingersoll Rand as if the acquired leases were new leases as of the acquisition date. ROU assets included in “Other assets” in the Condensed Consolidated Balance Sheets as of the acquisition date, are equal to the amount of the lease liability at the acquisition date adjusted for any off-market terms of the lease. The remaining lease term is based on the remaining term at the acquisition date plus any renewal or extension options that the Company is reasonably certain will be exercised.

Pension and Other Postretirement Liabilities

Ingersoll Rand recognized a pretax net liability representing the net funded status of Ingersoll Rand Industrial’s defined-benefit pension and other postretirement benefit (“OPEB”) plans. See Note 7 “Benefit Plans” for further information on the pension and OPEB arrangements.

Long-Term Debt

Ingersoll Rand Services Company incurred $1,900.0 million of indebtedness under the Credit Agreement dated as of February 28, 2020 among Ingersoll Rand Services Company, as borrower, Citibank, N.A. as administrative agent and collateral agent and the lenders party thereto (the “Senior Secured Credit Facility”) prior to the closing of the acquisition, and the indebtedness under the Senior Secured Credit Facility will mature February 28, 2027 (or, if such date is not a business day the first business day thereafter). Ingersoll Rand incurred a total of $26.9 million debt issuance costs associated with the $1,900.0 million loan under the Senior Secured Credit Facility. The $1,900.0 million of indebtedness under the Credit Agreement was reduced by a $2.4 million original issue discount.

The fair value for long term debt is determined based on the total indebtedness less debt issuance costs as the debt consummated at the time of closing of the acquisition.

Deferred Income Tax Assets and Liabilities

The acquisition was structured as a merger and therefore, the Company assumed the historical tax basis of Ingersoll Rand Industrial’s assets and liabilities. The deferred income tax assets and liabilities include the expected future federal, state and foreign tax consequences associated with temporary differences between the preliminary fair values of the assets acquired and liabilities assumed and the respective tax bases. Tax rates utilized in calculating deferred income taxes generally represent the enacted statutory tax rates at the effective date of the acquisition in the jurisdictions in which legal title of the underlying asset or liability resides. See Note 13. “Income Taxes” for further information related to income taxes.

Noncontrolling Interests

Ingersoll Rand Industrial has a 74% controlling interest in Ingersoll-Rand India Limited. Therefore, there is a 26% non-controlling interest in Ingersoll-Rand India Limited. Ingersoll-Rand India Limited is a public company in India and listed on stock exchanges in India. Ingersoll Rand’s preliminary fair value of non-controlling interest is based on market quote of Indian Rupee 639.2 per share, available on the last trading day on February 28, 2020 prior to the closing date of the acquisition. Considering non-controlling shares of 8.2 million, the preliminary fair value of non-controlling interest is $73.3 million.

Other Assets Acquired and Liabilities Assumed (excluding Goodwill)

The Company utilized the carrying values, net of allowances, to value accounts receivable and accounts payable as well as other current assets and liabilities as it was determined that carrying values represented the fair value of those items at the acquisition date.

Index

Goodwill

The excess of the consideration for the acquisition over the preliminary fair value of net assets acquired was recorded as goodwill. The estimated goodwill recognized is attributable primarily to expected synergies and expanded market opportunities from combining the Company’s operations with those of Ingersoll Rand Industrial. The goodwill created in the acquisition is not expected to be deductible for tax purposes and is subject to material revision as the purchase price allocation is completed. Goodwill arising from the acquisition has been allocated to the Industrial Technologies and Services, High Pressure Solutions, Precision and Science Technologies and Specialty Vehicle Technologies reporting segments. See Note 5. “Goodwill and Other Intangible Assets” for the allocation of goodwill to segments.

Results of Ingersoll Rand Industrial Subsequent to the Acquisition

The operating results of Ingersoll Rand Industrial have been included in the Company’s condensed consolidated financial statements for the three month period ended March 31, 2020 from the acquisition date. The Company’s condensed consolidated statements of operations for the three month period ended March 31, 2020 included revenues of $293.4 million and a net loss of $33.3 million which includes the effects of purchase accounting adjustments, primarily changes in amortization of intangible assets, depreciation of property, plant and equipment and amortization of stepped up inventory.

Unaudited Pro Forma Information

The following unaudited pro forma financial information summarizes the combined results of operations for the Company and Ingersoll Rand Industrial as if the acquisition had been completed on January 1, 2019. The pro forma results have been prepared for comparative purposes only, and do not necessarily represent what the revenue or results of operations would have been had the acquisition been completed on January 1, 2019. In addition, these results are not intended to be a projection of future operating results and do not reflect synergies that might be achieved.

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

The table below reflects the impact of material and nonrecurring adjustments to the unaudited pro forma results for the three month periods ended March 31, 2020 and 2019 that are directly attributable to the acquisition.

	For the Three Month Period Ended March 31,
	2020			2019
(Decrease) increase to expense as a result of inventory fair value adjustment, net of tax		(31.1	)		74.7
(Decrease) increase to expense as a result of transaction costs, net of tax		(38.1	)		78.6

Index

The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of the Company’s condensed consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2019 or of the results of the Company’s future results of operations of the combined businesses.

	For the Three Month Period Ended March 31,
	2020			2019
Revenues	$	1,269.8		$	1,500.0
Net loss		(0.2	)		(110.5	)

Transactions with Trane Technologies

Certain agreements have been entered into between Ingersoll Rand and Trane Technologies plc, including, among others, an Employee Matters Agreement, a Real Estate Matters Agreement, a Tax Matters Agreement, an Intellectual Property Matters Agreement and a Transition Services Agreement each dated February 29, 2020. The Transition Services Agreement has a term of twenty four calendar months. Charges for services under the agreement will be determined on an allocated cost basis, subject to an overall annual aggregate cap. During the three month period ended March 31, 2020, the Company incurred $2.4 million of charges under the Transition Service Agreement.

Acquisition of Air Compressors and Blowers North Limited

On August 19, 2019, the Company acquired Air Compressors and Blowers North Limited (“ACBN”), a provider of vacuum pumps, blowers and compressors. The Company acquired certain assets of ACBN for total consideration of $7.0 million, which consisted of cash payments of $5.9 million and a $1.1 million deferred payment. The deferred payment is expected to be paid by the end of the first quarter of 2021 and is recorded in “Other liabilities” in the Condensed Consolidated Balance Sheets. The revenues and operating income of ACBN are included in the Company’s condensed consolidated financial statements from the acquisition date and are included in the Industrial Technologies and Services segment. The goodwill resulting from this acquisition is deductible for tax purposes.

Acquisition of Oina VV AB

On July 3, 2019, the Company acquired Oina VV AB (“Oina”) which specializes in customized pump solutions for liquid handling processes for use in medical, process and industrial applications. The Company acquired all of the assets and assumed certain liabilities of Oina for total consideration, net of cash acquired, of $10.0 million, which consisted of cash payments of $5.6 million, a $1.6 million holdback, and up to $2.8 million in contingent earn-out provisions. The Company made payments of $0.8 million in the three month period ended March 31, 2020, related to the contingent earn-out provisions. The $1.6 million holdback is expected to be paid by the end of the fourth quarter of 2021 and is recorded in “Other liabilities” in the Condensed Consolidated Balance Sheets. The revenues and operating income of Oina are included in the Company’s condensed consolidated financial statements from the acquisition date and are included in the Precision and Science Technologies segment. None of the goodwill resulting from this acquisition is deductible for tax purposes.

Acquisition Revenues and Operating Income

The revenue and operating income of the ACBN and Oina acquisitions for the three month period ended March 31, 2020, was $2.3 million and $0.1 million, respectively.

Pro forma information regarding these acquisitions has not been provided as they did not have a material impact on the Company’s Condensed Consolidated Statements of Operations individually or in the aggregate.

Note 3. Restructuring

Restructuring Program 2018 to 2019

In the third quarter of 2018, the Company announced a restructuring program (“2018 Plan”) that primarily involved workforce reductions and facility consolidation. This restructuring program was substantially completed as of December 31, 2019. Through December 31, 2019, $26.5 million was charged to expense through “Other operating expense, net” in the Consolidated Statements of Operations ($20.4 million for Industrial Technologies and Services, $1.6 million for Precision and Science Technologies, $3.4 million for High Pressure Solutions, and $1.1 million for Corporate).

Additionally, $3.3 million of non-cash asset write-offs in the High Pressure Solutions segment were charged to expense through “Other operating expense, net” in the Consolidated Statements of Operations. The Company does not anticipate any material future expense related to this restructuring program and any remaining liabilities will be paid as contractually obligated.

Index

Restructuring Program 2020 to 2022

Subsequent to the acquisition of Ingersoll Rand Industrial, the Company announced a restructuring program (“2020 Plan”) to drive efficiencies and synergies, reduce the number of facilities and optimize operating margin within the merged Company. The Company expects to incur total expenses of approximately $350.0 million related to workforce reductions, lease termination costs, other facility rationalization costs and other business related transformation costs from 2020 until 2022. The Company expects to realize approximately $250.0 million in annualized cost synergies by the end of 2022. The Company continues to evaluate operating efficiencies and anticipates incurring additional costs in the coming years in connection with these activities, but is unable to estimate those amounts at this time as such plans are not yet finalized.

Through March 31, 2020, $41.6 million was charged to expense through “Other operating expense, net” in the Condensed Consolidated Statements of Operations ($30.0 million for Industrial Technologies and Services, $3.1 million for Precision and Science Technologies, $3.1 million for High Pressure Solutions, $0.5 million for Specialty Vehicle Technologies and $4.9 million for Corporate).

The following table summarizes the activity associated with the Company’s restructuring programs for the three month period ended March 31, 2020.

Total

Price	28.68	EPS	1
Shares	209	P/E	45
MCap	5,994	P/FCF	25
Net Debt	1,195	EBIT	232
TEV	7,189	TEV/EBIT	31
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-03-31	Filed 2020-05-15
10-K	2019-12-31	Filed 2020-02-26
10-Q	2019-09-30	Filed 2019-10-30
10-Q	2019-06-30	Filed 2019-08-02
10-Q	2019-03-31	Filed 2019-04-30
10-K	2018-12-31	Filed 2019-02-27
10-Q	2018-09-30	Filed 2018-10-29
10-Q	2018-06-30	Filed 2018-08-03
S-1	2018-04-30	Public Filing
10-Q	2018-03-31	Filed 2018-04-27
10-K	2017-12-31	Filed 2018-02-16
10-Q	2017-09-30	Filed 2017-10-27
10-Q	2017-06-30	Filed 2017-08-04

8-K	2020-06-29	Enter Agreement, Off-BS Arrangement, Exhibits
8-K	2020-06-16
8-K	2020-06-16
8-K	2020-06-16
8-K	2020-06-12
8-K	2020-06-05
8-K	2020-06-05
8-K	2020-05-12
8-K	2020-05-01
8-K	2020-04-15
8-K	2020-02-28
8-K	2020-02-21
8-K	2020-02-17
8-K	2020-02-13
8-K	2020-01-30
8-K	2020-01-27
8-K	2019-12-12
8-K	2019-10-28
8-K	2019-10-03
8-K	2019-07-31
8-K	2019-06-29
8-K	2019-06-28
8-K	2019-05-09
8-K	2019-04-30
8-K	2019-04-30
8-K	2019-04-30
8-K	2019-02-19
8-K	2018-12-18
8-K	2018-12-13
8-K	2018-11-28
8-K	2018-10-31
8-K	2018-10-25
8-K	2018-10-24
8-K	2018-09-11
8-K	2018-08-01
8-K	2018-05-10
8-K	2018-05-02
8-K	2018-04-26
8-K	2018-02-15
8-K	2018-02-07
8-K	2018-01-05

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EX-10.8	ex10_8.htm
EX-10.9	ex10_9.htm
EX-10.10	ex10_10.htm
EX-10.11	ex10_11.htm
EX-10.13	ex10_13.htm
EX-10.14	ex10_14.htm
EX-10.15	ex10_15.htm
EX-10.16	ex10_16.htm
EX-31.1	ex31_1.htm
EX-31.2	ex31_2.htm
EX-32.1	ex32_1.htm
EX-32.2	ex32_2.htm

GDI 10Q Quarterly Report

Gardner Denver Holdings Earnings 2020-03-31