On December 1, 2013, Ingersoll Rand completed the spinoff of its security businesses named Allegion to its shareholders. All historical financial data excludes the results of the security businesses.
Swords, Ireland, February 11, 2014 - Ingersoll-Rand plc (NYSE:IR), a world leader in creating comfortable, sustainable and efficient environments, today reported diluted earnings per share (EPS) from continuing operations of $0.26 for the fourth quarter of 2013.
The company reported net earnings of $47.6 million, or EPS of $0.16, for the fourth quarter of 2013. Fourth-quarter net earnings included $77.7 million, or EPS of $0.26 from continuing operations, as well as $(30.1) million, or a loss per share of $(0.10) from discontinued operations. This compares with net earnings of $235.6 million, or EPS of $0.78, for the 2012 fourth quarter. Fourth quarter 2012 net earnings included $162.1 million, or EPS of $0.53 from continuing operations and $73.5 million, or EPS of $0.25 from discontinued operations. Results for the fourth quarter of 2013 included $102.2 million, or $(0.35) per share from restructuring and one-time charges related to the spinoff of the Allegion security business. Excluding these items, fourth-quarter 2013 adjusted EPS from continuing operations were $0.61. (see attached tables for additional details)
Full-year 2013 net revenues were $12,351 million, an increase of 3 percent when compared with reported net revenues of $11,988 million in 2012. Operating income for 2013 totaled $1,105 million compared with $1,072 million for 2012. Results for full-year 2013 included $83 million of restructuring costs. The prior year included $31 million of restructuring costs and other one-time items. Excluding these items, full-year 2013 adjusted operating margins were 9.6 percent, an increase of 40 basis points when compared with adjusted 2012 operating margins. (see attached tables for additional details)
The company reported full-year 2013 EPS of $2.07. EPS from continuing operations were $2.08 with $(0.01) of losses from discontinued operations. The EPS from continuing operations included $177 million of after-tax cost, or EPS of $(0.59) related to restructuring, the one-time charge from the spinoff of the security business and the redemption premium expense for early debt retirement. The prior year included $25 million of after-tax costs related to restructuring, equal to $(0.08) per share. Before these items, 2013 adjusted EPS from continuing operations were $2.67 per share and 2012 EPS were $2.57. (see attached tables for additional details)
"Our 2013 financial results demonstrate our consistent focus on delivering shareholder value and continuous improvement in our operating performance through the deliberate deployment of our business operating system," said Michael W. Lamach, chairman and chief executive officer. "2013 was a strong year with revenue growth, adjusted earnings per share and cash flow at the top of our guidance range, which we accomplished while completing the on-time spinoff of Allegion. Our recent 19 percent dividend increase and new share repurchase program continues our balanced capital allocation strategy focused on optimizing returns to shareholders. Our improving financial performance and solid financial strategy have created significant shareholder value and we have delivered a 378 percent total shareholder return since 2009 - almost triple the return of the S&P 500."
Additional Highlights from the 2013 Fourth Quarter
Revenues: The company's reported revenues increased 6 percent to $3,099 million, compared with revenues of $2,924 million for the 2012 fourth quarter. Total U.S. revenues were up 6 percent compared to 2012, and revenues from international operations also increased 6 percent (up 6 percent excluding the impact of currency).
Operating Margin: The fourth-quarter operating margin was 7 percent compared with 8.5 percent in 2012. Adjusted for restructuring and one-time charges, the operating margin for fourth-quarter 2013 was 8.5 percent, flat on a comparable basis with 2012. Increased volume and productivity savings were offset by inflation and an increase in investment spending.
Interest Expense and Other Income/Expense: Interest expense of $53 million for the fourth quarter declined by $8 million compared with the same quarter last year. Other expense totaled $(1) million for the fourth quarter of 2013, compared with $4 million of income for the 2012 fourth quarter primarily due to higher currency losses in 2013.
Taxes: Excluding restructuring and one-time items, the company had an effective tax rate of 11 percent for the fourth quarter of 2013. The comparable effective rate for the fourth quarter of 2012 was 15 percent.
Fourth-Quarter Business Review
[Note: The company realigned its reporting segments on December 1, 2013, after the spinoff of the Allegion security business. Adjusted margins for 2012 and 2013 exclude restructuring and other one-time costs - see attached tables for additional details]
The Climate Segment delivers energy-efficient solutions globally and includes Trane® and American Standard® Heating and Air Conditioning which provide heating, ventilation and air conditioning (HVAC) systems and commercial and residential building services, parts, support and controls; and Thermo King®, the leader in transport temperature control solutions. Revenues for the fourth quarter of 2013 were $2,328 million, an increase of 8 percent compared with the fourth quarter of 2012. Bookings increased 6 percent year-over-year.
On a year-over-year basis, total commercial HVAC revenues increased by a mid-single digit percentage with a mid-single digit percentage increase in equipment revenues and a high-single digit increase in revenues for parts, service and solutions. Commercial HVAC revenues increased by a mid-single digit percentage in the Americas and Europe and by a low-teens percentage in Asia during the quarter compared with last year. Fourth-quarter 2013 HVAC bookings reflect a low-single digit increase compared with last year.
Total Thermo King refrigerated transport revenues increased by a low-teens percentage in the fourth quarter compared with last year, with revenue gains in both the Americas and in Europe, especially in marine equipment and trailers. Bookings increased by a mid-teens percentage in the fourth quarter of 2013, mainly from marine equipment which was up more than 100 percent year-over-year.
Residential HVAC revenues increased by a mid-single digit percentage in the fourth quarter compared with 2012, with volume gains in all major product categories.
Fourth-quarter 2013 segment operating margin was 9 percent (excluding restructuring costs, adjusted operating margin was 10 percent). The adjusted margin improved by 0.6 percentage points on a comparable basis with 2012 due to higher volumes and productivity gains, partially offset by inflation.
The Industrial Segment delivers products and services that enhance energy efficiency, productivity and operations. It includes Ingersoll Rand® compressed air systems and services, power tools, material handling systems, ARO® fluid management equipment, as well as Club Car® golf, utility and rough terrain vehicles. Total revenues in the fourth quarter of 2013 were $771 million and increased by 1 percent compared with the fourth quarter of 2012 due to flat volume in the Americas and Asia, and gains in Europe. Bookings increased by 2 percent compared with 2012.
Revenues for air compressors and industrial products were up slightly overall, with flat year-over-year comparisons in the Americas, a low-single digit percentage decline in Europe and low-single digit percentage gains in Asia.
Club Car revenues increased a low-single digit percentage compared with the fourth quarter of 2012, with gains in both golf car and utility vehicle sales.
Fourth-quarter segment operating margin for Industrial Technologies was 14.9 percent (excluding restructuring costs, adjusted operating margin was 16.1 percent). The adjusted operating margin was flat on a comparable basis with 2012, as the benefits from improved productivity were offset by inflation and investments.
At the end of the fourth quarter, working capital was 2.1 percent of revenues, compared with 2.5 percent in 2012. Cash balances and total debt balances were $1.9 billion and $3.5 billion, respectively.
During the fourth quarter, the company repurchased approximately seven million shares for approximately $420 million as part of a $2 billion program approved by the board of directors in December 2012. The company repurchased approximately 21 million shares for approximately $1.2 billion during full-year 2013 and expects to complete this repurchase program by the end of the first quarter of 2014. The company's board of directors approved a new $1.5 billion share repurchase program on February 5, 2014, which will commence when the current authorization is completed.
Ingersoll Rand's board of directors declared a quarterly dividend on February 5, 2014, of $0.25 per ordinary share, reflecting a 19 percent increase and an annual dividend rate of $1.00 per share.
Spinoff of Commercial and Residential Security Businesses
On December 1, 2013, the company completed the spinoff of its security businesses, named Allegion, to its shareholders. Allegion is now an independent public company trading on the New York Stock Exchange (NYSE:ALLE).
Based on a forecast of slow-to-moderate growth in global industrial and construction markets for the year, the company expects revenues for full-year 2014 to increase in the range of 3 to 4 percent compared with 2013. Full-year adjusted EPS from continuing operations is expected to be in the range of $3.05 to $3.20, with full-year reported EPS expected to be $2.95 to $3.10. The forecast includes an ongoing tax rate of approximately 25 percent for continuing operations and an average diluted share count for the full year of approximately 275 million shares. Free cash flow for full-year 2014 is expected to approximate $900 million.
First-quarter 2014 revenues are expected to increase in the range of 2 to 3 percent compared with 2013. Adjusted EPS from continuing operations for the first quarter of 2014 are expected to be in the range of $0.23 to $0.28, with reported EPS of $0.21 to $0.26, including restructuring costs. The first-quarter forecast reflects an ongoing tax rate of 25 percent for continuing operations and an average diluted share count of approximately 283 million shares.
This news release includes "forward-looking statements," which are statements that are not historical facts, including statements that relate to the mix of and demand for our products, performance of the markets in which we operate, our share repurchase program including the amount of shares to be repurchased and timing of such repurchases, our projected 2014 first quarter and full-year financial performance and assumptions regarding our effective tax rate. These forward-looking statements are based on our current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from our current expectations. Such factors include, but are not limited to, our ability to fully realize the expected benefits of the completed spinoff and restructuring; global economic conditions, demand for our products and services and tax law changes. Additional factors that could cause such differences can be found in our Form 10-K for the year ended December 31, 2012, Form 10-Q for the quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, and in our other SEC filings. We assume no obligation to update these forward-looking statements.
This news release also includes adjusted non-GAAP financial information which should be considered supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. Further information about the adjusted non-GAAP financial tables attached to this news release.
Ingersoll Rand (NYSE:IR) advances the quality of life by creating comfortable, sustainable and efficient environments. Our people and our family of brands-including Club Car®, Ingersoll Rand®, Thermo King® and Trane®-work together to enhance the quality and comfort of air in homes and buildings; transport and protect food and perishables; and increase industrial productivity and efficiency. We are a $12 billion global business committed to a world of sustainable progress and enduring results. For more information, visit ingersollrand.com.
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