Why Ingersoll Rand’s Net Debt Increased in 1Q16
Was 1Q16 Really Such an Outstanding Quarter for Ingersoll Rand?
Ingersoll Rand’s debt and net debt
Ingersoll Rand’s (IR) debt and net debt have increased by 6% and 11%, respectively, over 4Q15. IR’s debt increased in 1Q16 on the back of increases in short-term borrowings and current maturities of long-term debt.
This amount is included under current liabilities. It stood at $758 million in 1Q16, as compared to $504 million in 4Q15. The short-term loan was raised to fulfill the working capital requirement for the quarter. Inventories and other current assets increased by 14% and 39%, respectively. In 1Q16, inventory stood at $1.6 billion, and other current assets stood at $432 million.
As of March 31, 2016, IR had $4.4 billion in debt (long-term debt plus short-term borrowings and current maturities of long-term debt) against equity of $5.8 billion, implying a debt-to-equity ratio of ~0.76x. Its cash stood at $613 million. As of December 31, 2015, IR’s debt-to-equity ratio was 0.72x, and its cash stood at $737 million.
Ingersoll Rand’s liquidity
IR had $613 million in cash and cash equivalents on its balance sheet as of March 31, 2016. Based on the company guidance, it expects to generate cash from operations of about $950 million–$1 billion in 2016, excluding the IRS impact and restructuring in 2016.
IR is a part of the iShares Morningstar Mid-Cap ETF (JKG) and accounts for 1.1% of the fund’s total holdings. Investors in this ETF may benefit if IR continues to deliver and achieves targets set for 2016. Weyerhaeusar (WY), Neilson Holding (NLSN), and NVIDIA (NVDA) are among the top ten holdings of the fund, accounting for 1.65%, 1.29%, and 1.23%, respectively, of JKG’s total holdings. IR is also part of the S&P 500 (SPY).
In the next part, we’ll discuss the Hussmann deal.
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