In the summer of 2008, I started accumulating shares of
Ingersoll-Rand (
NYSE:IR). At that time, American economy had shown plenty of uneasy signs, while I identified IR as one of the stocks with the potential to thrive through the possible upcoming downturn. I had three reasons to back up my beliefs:
1) Warren Buffet's stake in the company;
2) IR's move to acquire Trane; and
3) its global footprint - the Asian market would provide immense growth opportunities.
Then the unfolding of the financial turmoil later the same year proved my timing was not right. IR was hit way harder than I had figured, primarily due to their exposure to the construction (both commercial and residential) market, and the increased debt level - as a result of Trane's acquisition. However, I held onto my positions and haven't changed my long-term views on the company. Now we started seeing some positive signs of the economic trend, and I think it is a good time to revisit my thoughts on IR.
A Company in Transition
First of all, a simple description of IR's business from their 10K.
"Ingersoll-Rand Company Limited (IR-Limited), a Bermuda company, and its consolidated subsidiaries (we, our, the Company) is a diversified, global company that provides products, services and solutions to enhance the quality and comfort of air in homes and buildings, transport and protect food and perishables, secure homes and commercial properties, and increase industrial productivity and efficiency. Our business segments consist of Air Conditioning Systems and Services, Climate Control Technologies, Industrial Technologies and Security Technologies, each with strong brands and leading positions within their respective markets. We generate revenue and cash primarily through the design, manufacture, sale and service of a diverse portfolio of industrial and commercial products that include well recognized, premium brand names such as Club Car, Hussmann, Ingersoll-Rand, Schlage, Thermo King and Trane."
Here are some key points from their 10K, 10Q and other financial presentations.
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On June 5, 2008, for $9.6 billion, IR completed the acquisition of Trane Inc, one of the top HVAC (heating, ventilation and air conditioning) companies, previously known as American Standard Companies Inc.
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On November 30, 2007, IR completed the sale of Bobcat, Utility Equipment and Attachments business units (collectively, Compact Equipment) to Doosan Infracore for cash proceeds of approximately $4.9 billion.
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On April 30, 2007, IR completed the sale of the Road Development business unit to AB Volvo for cash proceeds of approximately $1.3 billion.
- The international share of IR's revenue has been growing at fast pace, and the trend will continue. For example, for Climate Control, in 2001, 39% of the revenue is from outside North America, and in 2008, it was 47%. Overall in 2008, 34% of its revenue is from outside North America.
- IR's revenue is across multiple markets, including Parts & Service (25%), Commercial Construction (23%), Residential Construction (12%), International Construction (11%), Industrial/Process (9%), Supermarkets – Cases / Install (8%), Truck and Trailer (6%), Bus, Container & Other (3%), Golf & Utility Vehicles (3%).
