Basis of Presentation and Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2020

Basis of Presentation and Recent Accounting Pronouncements [Abstract]

Basis of Presentation and Recent Accounting Pronouncements

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.

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.