Ingersoll Rand Inc

Previous wording

Ingersoll Rand is a global market leader with a broad range of innovative and mission-critical air, fluid, clean energy and medical technologies, providing services and solutions to increase industrial productivity and efficiency. We manufacture one of the broadest and most complete ranges of compressor, pump, vacuum and blower products in our markets, which, when combined with our global geographic footprint and application expertise, allows us to provide differentiated product and service offerings to our customers. Our products are sold under a collection of premier, market-leading brands, including Ingersoll Rand, Gardner Denver, Nash, CompAir, Thomas, Milton Roy, Seepex, Elmo Rietschle, ARO, Robuschi, Emco Wheaton and Runtech Systems, which we believe are globally recognized in their respective end-markets and known for product quality, reliability, efficiency and superior customer service.

Current wording

Ingersoll Rand is a global market leader with a broad range of innovative and mission-critical air, fluid, clean energy and medical technologies, providing services and solutions to increase industrial productivity and efficiency. We manufacture one of the broadest and most complete ranges of compressor, pump, vacuum and blower products in our markets, which, when combined with our global geographic footprint and application expertise, allows us to provide differentiated product and service offerings to our customers. Our products are sold under a collection of premier, market-leading brands, including Ingersoll Rand, Gardner Denver, Nash, CompAir, Thomas, Milton Roy, Seepex, Elmo Rietschle, ARO, Robuschi, ILC Dover, Emco Wheaton and Runtech Systems, which we believe are globally recognized in their respective end-markets and known for product quality, reliability, efficiency and superior customer service.

Previous wording

Our products and services are critical to the processes and systems in which they are utilized, which are often complex and function in harsh conditions where the cost of failure or downtime is high. However, our products and services typically represent only a small portion of the costs of the overall systems or functions that they support. As a result, our customers place a high value on our application expertise, product reliability and the responsiveness of our service. To support our customers and market presence, we maintain significant global scale with over 60 key manufacturing facilities, and over 40 complementary service and repair centers across six continents and over 18,000 employees worldwide as of December 31, 2023.

Current wording

Our products and services are critical to the processes and systems in which they are utilized, which are often complex and function in harsh conditions where the cost of failure or downtime is high. However, our products and services typically represent only a small portion of the costs of the overall systems or functions that they support. As a result, our customers place a high value on our application expertise, product reliability and the responsiveness of our service. To support our customers and market presence, we maintain significant global scale with over 60 key manufacturing facilities, and over 40 complementary service and repair centers across six continents and over 21,000 employees worldwide as of December 31, 2024.

Previous wording

The process-critical nature of our product applications, coupled with the standard wear and tear replacement cycles associated with the usage of our products, generates opportunities to support customers with our broad portfolio of aftermarket parts, consumables and services. Customers place a high value on minimizing any time their operations are offline. As a result, the availability of replacement parts, consumables and our repair and support services are key components of our value proposition. Our large installed base of products provides a recurring revenue stream through our aftermarket parts, consumables and services offerings. As a result, our aftermarket revenue is significant, representing 35.8% of total Company revenue in 2023.

Current wording

The process-critical nature of our product applications, coupled with the standard wear and tear replacement cycles associated with the usage of our products, generates opportunities to support customers with our broad portfolio of aftermarket parts, consumables and services. Customers place a high value on minimizing any time their operations are offline. As a result, the availability of replacement parts, consumables and our repair and support services are key components of our value proposition. Our large installed base of products provides a recurring revenue stream through our aftermarket parts, consumables and services offerings. As a result, our aftermarket revenue is significant, representing 36.4% of total Company revenue in 2024.

Previous wording

The provision or benefit for income taxes includes U.S. federal, state and local income taxes and all non-U.S. income taxes. We are subject to income tax in 49 jurisdictions outside of the United States. Because we conduct operations on a global basis, our effective tax rate depends, and will continue to depend, on the geographic distribution of our pre-tax earnings among several different taxing jurisdictions. Our effective tax rate can also vary based on changes in the tax rates of the different jurisdictions, the availability of tax credits and non-deductible items.

Current wording

The provision or benefit for income taxes includes U.S. federal, state and local income taxes and all non-U.S. income taxes. We are subject to income tax in 48 jurisdictions outside of the United States. Because we conduct operations on a global basis, our effective tax rate depends, and will continue to depend, on the geographic distribution of our pre-tax earnings among several different taxing jurisdictions. Our effective tax rate can also vary based on changes in the tax rates of the different jurisdictions, the availability of tax credits and non-deductible items.

Previous wording

Revenues for 2023 were $6,876.1 million, an increase of $959.8 million, or 16.2%, compared to $5,916.3 million in 2022. The increase in revenues was primarily due to higher pricing of $397.0 million, acquisitions of $375.1 million, and higher organic volumes of $213.3 million, partially offset by unfavorable impact of foreign currencies of $25.6 million. The percentage of consolidated revenues derived from aftermarket parts and services was 35.8% in 2023 compared to 35.2% in 2022.

Current wording

Revenues for 2024 were $7,235.0 million, an increase of $358.9 million, or 5.2%, compared to $6,876.1 million in 2023. The increase in revenues was primarily due to acquisitions of $471.2 million and higher pricing of $153.3 million, partially offset by lower organic volumes of $241.9 million and unfavorable impact of foreign currencies of $23.7 million. The percentage of consolidated revenues derived from aftermarket parts and services was 36.4% in 2024 compared to 35.8% in 2023.

Previous wording

Gross profit in 2023 was $2,882.2 million, an increase of $556.6 million, or 23.9%, compared to $2,325.6 million in 2022, and as a percentage of revenues was 41.9% in 2023 and 39.3% in 2022. The increase in gross profit is primarily due to higher pricing, acquisitions, and higher organic volumes discussed above. The increase in gross profit as a percentage of revenues is primarily due to the benefits of pricing changes in excess of inflation in material and labor costs.

Current wording

Gross profit in 2024 was $3,170.0 million, an increase of $287.8 million, or 10.0%, compared to $2,882.2 million in 2023, and as a percentage of revenues was 43.8% in 2024 and 41.9% in 2023. The increase in gross profit is primarily due to higher pricing and acquisitions discussed above. The increase in gross profit as a percentage of revenues is primarily due to increased price and input cost productivity improvements.

Previous wording

Selling and administrative expenses were $1,272.7 million in 2023, an increase of $176.9 million, or 16.1%, compared to $1,095.8 million in 2022. The increase in selling and administrative expenses was mainly from businesses acquired in the second half of 2022 and in 2023, as well as higher incentive compensation expense. Selling and administrative expenses as a percentage of revenues was 18.5% in both 2023 and 2022.

Current wording

Selling and administrative expenses were $1,344.4 million in 2024, an increase of $71.7 million, or 5.6%, compared to $1,272.7 million in 2023. The increase in selling and administrative expenses was mainly from businesses acquired in the second half of 2023 and in 2024, partially offset by lower incentive compensation expense. Selling and administrative expenses as a percentage of revenues was 18.6% in 2024 and 18.5% in 2023.

Previous wording

Amortization of intangible assets was $367.5 million in 2023, an increase of $19.9 million compared to $347.6 million in 2022. The increase was primarily attributable to amortization of intangible assets recognized for acquisitions completed in 2023, most notably the Air Treatment and Roots acquisitions.

Current wording

Amortization of intangible assets was $373.0 million in 2024, an increase of $5.5 million compared to $367.5 million in 2023. The increase was primarily attributable to amortization of intangible assets recognized for acquisitions completed in the second half of 2023 and in 2024, partially offset by certain intangible assets becoming fully amortized during the period.

Previous wording

Other operating expense, net was $77.7 million in 2023, an increase of $12.8 million compared to $64.9 million in 2022. The increase was primarily due to higher acquisition and other transaction related expenses of $13.5 million and higher foreign currency transaction losses, net of $11.0 million, partially offset by lower restructuring charges of $9.4 million.

Current wording

Other operating expense, net was $138.6 million in 2024, an increase of $60.9 million compared to $77.7 million in 2023. The increase was primarily due to the loss on asbestos sale of $58.8 million and higher restructuring charges of $11.3 million, partially offset by lower acquisition and other transaction related expenses of $5.1 million and lower foreign currency transaction losses, net of $1.9 million.

Previous wording

Interest expense was $156.7 million in 2023, an increase of $53.5 million, compared to $103.2 million in 2022. The increase was primarily due to an increase in the weighted-average interest rate of variable rate indebtedness, partially offset by the interest rate derivative contracts discussed in Note 19 “Hedging Activities, Derivative Instruments and Credit Risk” to our consolidated financial statements included elsewhere in this Form 10-K. The weighted average interest rate, including the impact of the interest rate derivative contracts, was approximately 5.3% in 2023 and 3.2% in 2022.

Current wording

Interest expense was $213.2 million in 2024, an increase of $56.5 million, compared to $156.7 million in 2023. The increase was primarily due to an increase in long term debt, partially offset by the interest rate derivative contracts discussed in Note 20 “Hedging Activities, Derivative Instruments and Credit Risk” to our audited consolidated financial statements included elsewhere in this Form 10-K. The weighted average interest rate, including the impact of the interest rate derivative contracts, was approximately 5.2% in 2024 and 5.3% in 2023.

Previous wording

Loss on extinguishment of debt was $13.5 million in 2023, which was primarily related to the partial payoff of the Dollar Term Loan B. Loss on extinguishment of debt was $1.1 million in 2022, which was related to the payoff of the Euro Term Loan. See Note 11 “Debt” to our audited consolidated financial statements included elsewhere in this Form 10-K for further details.

Current wording

Loss on extinguishment of debt was $3.0 million in 2024, which was related to the payoff of the Dollar Term Loan B and Dollar Term Loan. Loss on extinguishment of debt was $13.5 million in 2023, which was primarily related to the partial payoff of the Dollar Term Loan B. See Note 12 “Debt” to our audited consolidated financial statements included elsewhere in this Form 10-K for further details.

Previous wording

Other income, net, was $37.0 million in 2023, an increase of $7.8 million compared to $29.2 million in 2022. The increase was primarily due to an increase in interest income from holdings of cash and cash equivalents.

Current wording

Other income, net, was $48.9 million in 2024, an increase of $11.9 million compared to $37.0 million in 2023. The increase was primarily due to an increase in interest income from holdings of cash and cash equivalents.

Previous wording

The provision for income taxes was $240.0 million resulting in a 23.3% effective tax rate in 2023 compared to a provision for income taxes of $149.6 million resulting in a 20.2% effective tax provision rate in 2022. The increase in the tax provision and the change in the effective tax rate is primarily due to an increase in the pre-tax book income in jurisdictions with higher effective tax rates combined with lower earnings in jurisdictions with lower tax rates. In addition, there was an increase in valuation allowance against interest carried forward and a change in tax law guidance causing additional increases in tax cost.

Current wording

The provision for income taxes was $262.5 million resulting in a 23.2% effective tax rate in 2024 compared to a provision for income taxes of $240.0 million resulting in a 23.3% effective tax provision rate in 2023. The increase in the tax provision is primarily due to an increase in pre-tax book income. The effective tax rate in 2024 is consistent with the effective tax rate in 2023.

Previous wording

Adjusted EBITDA increased $352.0 million to $1,786.8 million in 2023 compared to $1,434.8 million in 2022. Adjusted EBITDA as a percentage of revenues increased 170 basis points to 26.0% in 2023 from 24.3% in 2022. The increase in Adjusted EBITDA was primarily due to higher pricing of $397.0 million and higher organic sales volume of $79.3 million, partially offset by higher selling and administrative costs of $115.3 million, unfavorable cost inflation and product mix of $88.5 million, and the unfavorable impact of foreign currencies of $9.4 million. The increase in Adjusted EBITDA as a percentage of revenues is primarily attributable to higher pricing and volume, partially offset by unfavorable cost inflation and product mix.

Current wording

Adjusted EBITDA increased $231.3 million to $2,018.1 million in 2024 compared to $1,786.8 million in 2023. Adjusted EBITDA as a percentage of revenues increased 190 basis points to 27.9% in 2024 from 26.0% in 2023. The increase in Adjusted EBITDA was primarily due to higher pricing of $153.3 million, acquisitions of $105.6 million, favorable cost productivity and product mix of $60.4 million, and lower selling and administrative costs of $22.5 million, partially offset by lower organic sales volume of $104.5 million and the unfavorable impact of foreign currencies of $5.2 million. The increase in Adjusted EBITDA as a percentage of revenues is primarily attributable to higher pricing, input cost productivity improvements, and product mix.

Previous wording

Adjusted Net Income increased $244.1 million to $1,215.8 million in 2023 compared to $971.7 million in 2022. The increase was primarily due to increased Adjusted EBITDA, partially offset by higher income tax provision, as adjusted and higher interest expense.

Current wording

Adjusted Net Income increased $133.5 million to $1,349.3 million in 2024 compared to $1,215.8 million in 2023. The increase was primarily due to increased Adjusted EBITDA, partially offset by higher interest expense and higher income tax provision, as adjusted.

Previous wording

(a)Depreciation expense excludes $3.7 million and $3.4 million of depreciation of rental equipment for the years ended December 31, 2023 and 2022, respectively.

Current wording

(a)Depreciation expense excludes $4.0 million and $3.7 million of depreciation of rental equipment for the years ended December 31, 2024 and 2023, respectively.

Previous wording

(b)Represents $357.5 million and $328.8 million of amortization of intangible assets arising from acquisitions (customer relationships, technology, tradenames and backlog) and $10.0 million and $18.8 million of amortization of non-acquisition related intangible assets, in each case for the years ended December 31, 2023 and 2022, respectively.

Current wording

(b)Represents $364.3 million and $357.5 million of amortization of intangible assets arising from acquisitions (customer relationships, technology, tradenames and backlog) and $8.7 million and $10.0 million of amortization of non-acquisition related intangible assets, in each case for the years ended December 31, 2024 and 2023, respectively.

Previous wording

(f)Includes (i) effects of the amortization of prior service costs and amortization of losses in pension and other postemployment (“OPEB”) expense, (ii) interest income on cash and cash equivalents and (iii) other miscellaneous adjustments.

Current wording

(f)Includes (i) effects of the amortization of prior service costs and amortization of losses in pension and other postemployment (“OPEB”) expense and (ii) other miscellaneous adjustments.

Previous wording

Segment Orders for 2023 were $1,203.5 million, a decrease of $44.0 million, or 3.5%, compared to $1,247.5 in 2022. The decrease in Segment Orders was primarily due to lower organic orders of $61.2 million or 4.9% and the unfavorable impact of foreign currencies of $3.1 million or 0.2%, partially offset by acquisitions of $20.3 million or 1.6%.

Current wording

Segment Orders for 2024 were $5,706.6 million, an increase of $87.7 million, or 1.6%, compared to $5,618.9 million in 2023. The increase in Segment Orders was primarily due to acquisitions of $253.7 million or 4.5%, partially offset by organic decline of $141.1 million or 2.5% and the unfavorable impact of foreign currencies of $24.9 million or 0.4%.

Previous wording

Our investment resources include cash on hand, cash generated from operations and borrowings under our Revolving Credit Facility. We also have the ability to seek additional secured and unsecured borrowings, subject to Credit Agreement restrictions.

Current wording

Our investment resources include cash on hand, cash generated from operations and borrowings under our New Revolving Credit Facility and Commercial Paper Program. We also have the ability to seek additional borrowings, subject to credit agreement restrictions.

Previous wording

As of December 31, 2023, we had no outstanding borrowings, no outstanding letters of credit under the New Revolving Credit Facility and unused availability of $2,000.0 million.

Current wording

As of December 31, 2024, we had $2,600.0 million of unused availability under both the New Revolving Credit Facility and Commercial Paper Program.

Previous wording

We can increase the borrowing availability under the Senior Secured Credit Facilities by up to $1,600.0 million in the form of additional commitments under the Revolving Credit Facility and/or incremental term loans plus an additional amount so long as we do not exceed a specified senior secured leverage ratio. We can incur additional secured indebtedness under the Senior Secured Credit Facilities if certain specified conditions are met under the credit agreement governing the Senior Secured Credit Facilities. Our liquidity requirements are significant primarily due to debt service requirements. See Note 11 “Debt” to our audited consolidated financial statements included elsewhere in this Form 10-K for further details.

Current wording

We can increase the borrowing availability under the New Revolving Credit Facility by up to $1,000.0 million in the form of additional commitments on the terms set forth in the New Revolving Credit Facility. Our liquidity requirements are significant primarily due to debt service requirements. See Note 12 “Debt” to our audited consolidated financial statements included elsewhere in this Form 10-K for further details.

Previous wording

Our principal sources of liquidity have been existing cash and cash equivalents, cash generated from operations and borrowings under the Senior Notes and Senior Secured Credit Facilities. Our principal uses of cash will be to provide working capital; finance strategic plans, including possible acquisitions; meet debt service requirements; fund capital expenditures; and return capital to shareholders, through share repurchases and dividend payments. We may also seek to finance capital expenditures under capital leases or other debt arrangements that provide liquidity or favorable borrowing terms. We continue to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. In the event that suitable businesses are available for acquisition upon acceptable terms, we may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings. As market conditions warrant, we may from time to time, seek to repay loans that we have borrowed, including the borrowings under the Senior Notes and Senior Secured Credit Facilities. Based on our current level of operations and available cash, we believe our cash flow from operations, together with availability under the Revolving Credit Facility, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and capital spending requirements for the foreseeable future. Our business may not generate sufficient cash flows from operations or future borrowings may not be available to us under our Revolving Credit Facility in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. Our ability to do so depends on, among other factors, prevailing economic conditions, many of which are beyond our control. In addition, upon the occurrence of certain events, such as a change in control, we could be required to repay or refinance our indebtedness. We may not be able to refinance any of our indebtedness, including the Senior Notes and Senior Secured Credit Facilities, on commercially reasonable terms or at all. Any future acquisitions, joint ventures, or other similar transactions may require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms or at all.

Current wording

Our principal sources of liquidity have been existing cash and cash equivalents, cash generated from operations and borrowings under the Senior Notes and former Senior Secured Credit Facilities. Our principal uses of cash will be to provide working capital; finance strategic plans, including possible acquisitions; meet debt service requirements; fund capital expenditures; and return capital to shareholders, through share repurchases and dividend payments. We may also seek to finance capital expenditures under capital leases or other debt arrangements that provide liquidity or favorable borrowing terms. We continue to consider acquisition opportunities, but the size and timing of any future acquisitions and the related potential capital requirements cannot be predicted. In the event that suitable businesses are available for acquisition upon acceptable terms, we may obtain all or a portion of the necessary financing through the incurrence of additional long-term borrowings. As market conditions warrant, we may from time to time, seek to repay loans that we have borrowed, including the borrowings under the Senior Notes. Based on our current level of operations and available cash, we believe our cash flow from operations, together with availability under the New Revolving Credit Facility and Commercial Paper Program, will provide sufficient liquidity to fund our current obligations, projected working capital requirements, debt service requirements and capital spending requirements for the foreseeable future. Our business may not generate sufficient cash flows from operations or future borrowings may not be available to us under our Revolving Credit Facility or Commercial Paper Program in an amount sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs. Our ability to do so depends on, among other factors, prevailing economic conditions, many of which are beyond our control. In addition, upon the occurrence of certain events, such as a change in control, we could be required to repay or refinance our indebtedness. We may not be able to refinance any of our indebtedness, including the Senior Notes, on commercially reasonable terms or at all. Any future acquisitions, joint ventures, or other similar transactions may require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms or at all.

Previous wording

A substantial portion of our cash is in jurisdictions outside the United States. We do not assert ASC 740-30 (formerly APB 23) indefinite reinvestment of our historical non-U.S. earnings or future non-U.S. earnings. The Company records a deferred foreign tax liability to cover all estimated withholding, state income tax and foreign income tax associated with repatriating all non-U.S. earnings back to the United States. Our deferred income tax liability as of December 31, 2023 is $35.5 million which consists mainly of withholding taxes.

Current wording

A substantial portion of our cash is in jurisdictions outside the United States. We do not assert ASC 740-30 (formerly APB 23) indefinite reinvestment of our historical non-U.S. earnings or future non-U.S. earnings. The Company records a deferred foreign tax liability to cover all estimated withholding, state income tax and foreign income tax associated with repatriating all non-U.S. earnings back to the United States. Our deferred income tax liability as of December 31, 2024 is $41.8 million which consists mainly of withholding taxes.

Previous wording

Net working capital decreased $70.2 million to $2,223.1 million as of December 31, 2023 from $2,293.3 million as of December 31, 2022. Operating working capital increased $66.8 million to $1,261.0 million as of December 31, 2023 from $1,194.2 million as of December 31, 2022. Operating working capital as of December 31, 2023 was 18.3% of 2023 revenues as compared to 20.2% as of December 31, 2022 as a percentage of 2022 revenues. The increase in operating working capital was primarily due to higher accounts receivable and higher contract assets, partially offset by higher contract liabilities, higher accounts payable and lower inventories. The increase in accounts receivable was primarily due to the timing of revenues in the quarter and seasonal changes in collection timing and to acquisitions completed in 2023. The increase in contract liabilities was primarily due to the timing of customer milestone payments for in-process engineered to order contracts. The increase in accounts payable was primarily due to the timing of vendor cash disbursements. The decrease in inventory was primarily attributable to improved inventory management, partially offset by acquisitions completed in 2023.

Current wording

Net working capital increased $121.5 million to $2,344.6 million as of December 31, 2024 from $2,223.1 million as of December 31, 2023. Operating working capital increased $157.6 million to $1,418.6 million as of December 31, 2024 from $1,261.0 million as of December 31, 2023. Operating working capital as of December 31, 2024 was 19.6% of 2024 revenues as compared to 18.3% as of December 31, 2023 as a percentage of 2023 revenues. The increase in operating working capital was primarily due to higher accounts receivable, higher inventories, higher contract assets, and lower contract liabilities, partially offset by higher accounts payable. The increase in accounts receivable was primarily due to the timing of revenues in the quarter and seasonal changes in collection timing and to acquisitions completed in 2024. The increase in contract assets was primarily due to the timing of revenue recognition on percentage of complete jobs in relation to contractual billing milestones and to acquisitions completed in 2024. The increase in inventory was primarily attributable to acquisitions completed in 2024. The increase in accounts payable was primarily due to the timing of vendor cash disbursements and acquisitions completed in 2024. The decrease in contract liabilities was primarily due to the timing of customer milestone payments for in-process engineered to order contracts, partially offset by acquisitions completed in 2024.

Previous wording

Operating working capital generated cash of $40.4 million in 2023 compared to using cash of $237.2 million in 2022. Changes in account receivables used cash of $48.6 million in 2023 compared to using cash of $195.2 million in 2022. Changes in contract assets used cash of $7.8 million in 2023 compared to using cash of $9.8 million in 2022. Changes in inventory generated cash of $117.3 million in 2023 compared to using cash of $225.6 million in 2022. Changes in accounts payable used cash of $23.9 million in 2023 compared to generating cash of $120.4 million in 2022. Changes in contract liabilities generated cash of $3.4 million in 2023 compared to generating cash of $73.0 million in 2022.

Current wording

Operating working capital used cash of $23.5 million in 2024 compared to generating cash of $40.4 million in 2023. Changes in account receivables used cash of $45.1 million in 2024 compared to using cash of $48.6 million in 2023. Changes in contract assets used cash of $4.8 million in 2024 compared to using cash of $7.8 million in 2023. Changes in inventory generated cash of $39.8 million in 2024 compared to generating cash of $117.3 million in 2023. Changes in accounts payable generated cash of $13.3 million in 2024 compared to using cash of $23.9 million in 2023. Changes in contract liabilities used cash of $26.7 million in 2024 compared to generating cash of $3.4 million in 2023.

Previous wording

Cash flows used in investing activities included capital expenditures of $105.4 million (1.5% of consolidated revenues) and $94.6 million (1.6% of consolidated revenues) in 2023 and 2022, respectively. We expect capital expenditures will be approximately 2% of consolidated revenues in 2024. Net cash paid in acquisitions was $963.0 million and $246.8 million in 2023 and 2022, respectively. Net proceeds from the disposal of property, plant and equipment were $7.6 million in 2023.

Current wording

Cash flows used in investing activities included capital expenditures of $149.1 million (2.1% of consolidated revenues) and $105.4 million (1.5% of consolidated revenues) in 2024 and 2023, respectively. We expect capital expenditures will be approximately 2% of consolidated revenues in 2025. Net cash paid in acquisitions was $2,958.7 million and $963.0 million in 2024 and 2023, respectively. Net proceeds from the disposal of property, plant and equipment were $6.1 million and $7.6 million in 2024 and 2023, respectively.

Previous wording

Cash used in financing activities of $954.0 million in 2022 is primarily due to repayments of long-term debt of $655.6 million, purchases of treasury stock of $261.1 million, and cash dividends on common stock of $32.4 million, partially offset by proceeds from stock option exercises of $19.3 million.

Current wording

Cash provided by financing activities of $1,707.5 million in 2024 is primarily due to net borrowings of long-term debt of $2,054.2 million and proceeds from stock option exercises of $32.2 million, partially offset by purchases of treasury stock of $260.7 million, cash dividends on common stock of $32.3 million, payments of debt issuance costs of $32.3 million, and payments of deferred, contingent acquisition consideration of $23.4 million and payments to settle cross-currency swaps of $19.9 million.

Previous wording

Free cash flow increased $501.2 million to $1,272.0 million in 2023 from $770.8 million in 2022 primarily due to the increase in cash provided by operating activities discussed above.

Current wording

Free cash flow decreased $24.4 million to $1,247.6 million in 2024 from $1,272.0 million in 2023 primarily due to the increase in cash provided by operating activities of $19.3 million discussed above, being more than offset by the increase in capital expenditures of $43.7 million.

Previous wording

Purchase obligations consist primarily of agreements to purchase inventory or services made in the normal course of business to meet operational requirements. As of December 31, 2023, the Company had purchase obligations of $610.2 million, with $557.5 million payable in the next 12 months. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which we are contractually obligated as of December 31, 2023. For this reason, these amounts will not provide a complete and reliable indicator of our expected future cash outflows.

Current wording

Purchase obligations consist primarily of agreements to purchase inventory or services made in the normal course of business to meet operational requirements. As of December 31, 2024, the Company had purchase obligations of $802.8 million, with $733.4 million payable in the next 12 months. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which we are contractually obligated as of December 31, 2024. For this reason, these amounts will not provide a complete and reliable indicator of our expected future cash outflows.

Previous wording

We are a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature for a company of our size and in our sector. We believe that such proceedings, lawsuits and administrative actions will not materially adversely affect our operations, financial condition, liquidity or competitive position. We have accrued liabilities and other liabilities on our consolidated balance sheet, including a total litigation reserve of $126.9 million as of December 31, 2023 with respect to potential liability arising from our asbestos-related litigation. Other than our asbestos-related litigation reserves, liabilities on our consolidated balance sheet related to legal proceedings, lawsuits and administrative actions are not significant. A more detailed discussion of certain of these proceedings, lawsuits and administrative actions is set forth in “Item 3. Legal Proceedings.”

Current wording

We are a party to various legal proceedings, lawsuits and administrative actions, which are of an ordinary or routine nature for a company of our size and in our sector. We believe that such proceedings, lawsuits and administrative actions will not materially adversely affect our operations, financial condition, liquidity or competitive position. Liabilities on our consolidated balance sheet related to legal proceedings, lawsuits and administrative actions are not significant. A more detailed discussion of certain of these proceedings, lawsuits and administrative actions is set forth in “Item 3. Legal Proceedings.”

Previous wording

Accounting estimates discussed in this section are those that we consider to be the most critical to an understanding of our consolidated financial statements because they involve significant judgments and uncertainties. These estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effect based on information available as of the date of these consolidated financial statements. If these conditions change from those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in future impairments of goodwill, intangibles and long-lived assets, increases in reserves for contingencies, establishment of valuation allowances on deferred tax assets and increase in tax liabilities, among other effects. Also see Note 1 “Summary of Significant Accounting Policies” to our audited consolidated financial statements included elsewhere in this Form 10-K, which discusses the significant accounting policies that we have selected from acceptable alternatives.

Current wording

Accounting estimates discussed in this section are those that we consider to be the most critical to an understanding of our audited consolidated financial statements because they involve significant judgments and uncertainties. These estimates reflect our best judgment about current, and for some estimates, future economic and market conditions and their effect based on information available as of the date of these audited consolidated financial statements. If these conditions change from those expected, it is reasonably possible that the judgments and estimates described below could change, which may result in future impairments of goodwill, intangibles and long-lived assets, increases in reserves for contingencies, establishment of valuation allowances on deferred tax assets and increase in tax liabilities, among other effects. Also see Note 1 “Summary of Significant Accounting Policies” to our audited consolidated financial statements included elsewhere in this Form 10-K, which discusses the significant accounting policies that we have selected from acceptable alternatives.

Previous wording

Significant judgment is required in estimating the fair value of identifiable intangible assets and in assigning their respective useful lives. The fair value estimates are based on historical information and on future expectations and assumptions deemed reasonable by management, but which are inherently uncertain. See Note 4 “Acquisitions” to our consolidated financial statements included elsewhere in this Form 10-K for further information regarding the fair value determination of each of the classes of identifiable intangible assets. Determining the useful life of an intangible asset also requires judgment. Certain intangibles are expected to have indefinite lives while certain other identifiable intangible assets have determinable lives. The useful lives of identifiable intangibles with determinable useful lives are based on a variety of factors, including but not limited to, the competitive environment, product cycles, order life cycles, historical customer attrition rates, market share, operating plans and the macroeconomic environment. The costs of determinable-lived intangible assets are amortized to expense over the estimated useful life.

Current wording

Significant judgment is required in estimating the fair value of identifiable intangible assets and in assigning their respective useful lives. The fair value estimates are based on historical information and on future expectations and assumptions deemed reasonable by management, but which are inherently uncertain. See Note 4 “Acquisitions” to our audited consolidated financial statements included elsewhere in this Form 10-K for further information regarding the fair value determination of each of the classes of identifiable intangible assets. Determining the useful life of an intangible asset also requires judgment. Certain intangibles are expected to have indefinite lives while certain other identifiable intangible assets have determinable lives. The useful lives of identifiable intangibles with determinable useful lives are based on a variety of factors, including but not limited to, the competitive environment, product cycles, order life cycles, historical customer attrition rates, market share, operating plans and the macroeconomic environment. The costs of determinable-lived intangible assets are amortized to expense over the estimated useful life.

Previous wording

Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our 2023 reporting unit valuations ranged from 9.0% to 9.5%. Additionally, we assumed 3.5% terminal growth rates for all reporting units, except a single reporting unit in which we determined it most appropriate to assume a 2.5% terminal growth rate due to it being closely aligned to the GDP percentage growth rate.

Current wording

Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business. Actual results may differ from those assumed in our forecasts. We derive our discount rates using a capital asset pricing model and analyzing published rates for industries relevant to our reporting units to estimate the cost of equity financing. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses and in our internally developed forecasts. Discount rates used in our 2024 reporting unit valuations ranged from 7.5% to 14.5% and terminal growth rates ranged from 2.5% to 3.5%.

Previous wording

We test intangible assets with indefinite lives for impairment annually utilizing a discounted cash flow valuation referred to as the relief from royalty method. We estimated forecasted revenues for a period of five years with discount rates ranging from 9.5% to 10.0%, terminal growth rates of 2.5% to 3.5%, and royalty rates ranging from 0.5% to 4.0%. There were no impairments identified or recognized during the year ended December 31, 2023.

Current wording

We test intangible assets with indefinite lives for impairment annually utilizing a discounted cash flow valuation referred to as the relief from royalty method. We estimated forecasted revenues for a period of five years with discount rates ranging from 8.0% to 10.5%, terminal growth rates of 2.5% to 3.5%, and royalty rates ranging from 0.5% to 4.0%. There were no impairments identified or recognized during the year ended December 31, 2024. An indefinite lived intangible held in the Precision and Science Technologies segment and recently acquired in the ILC Dover acquisition, with a carrying value of approximately $208 million had a cushion of approximately 6%. Changes in forecasted revenues or any of the other assumptions mentioned above could result in a material non-cash impairment charge in a future period.

Previous wording

Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company has determined that it will follow the period cost method (option 1 above). The Company recorded a tax expense of $7.2 million in 2023 for the GILTI provisions of the Tax Act.

Current wording

Under U.S. GAAP, the Company is allowed to make an accounting policy choice of either (1) treating taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into a company’s measurement of its deferred taxes (the “deferred method”). The Company has determined that it will follow the period cost method (option 1 above). The Company recorded a tax expense of $4.6 million in 2024 for the GILTI provisions of the Tax Act.

Previous wording

Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. Amounts recorded for deferred tax assets related to tax attribute carryforwards, net of valuation allowances, were $27.8 million and $58.9 million as of December 31, 2023 and 2022, respectively, with the decrease due to the utilization of attributes in the current year.

Current wording

Deferred income tax assets represent amounts available to reduce income taxes payable on taxable income in future years. Such assets arise because of temporary differences between the financial reporting and tax bases of assets and liabilities, as well as from net operating loss and tax credit carryforwards. We evaluate the recoverability of these future tax deductions and credits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These sources of income rely heavily on estimates. To the extent we do not consider it more likely than not that a deferred tax asset will be recovered, a valuation allowance is established. Amounts recorded for deferred tax assets related to tax attribute carryforwards, net of valuation allowances, were $43.0 million and $27.8 million as of December 31, 2024 and 2023, respectively, with the increase due to the utilization of attributes in the current year.

Previous wording

Loss contingencies are uncertain and unresolved matters that arise in the ordinary course of business and result from events or actions by others that have the potential to result in a future loss. Such contingencies include, but are not limited to, asbestos and silica related litigation, environmental obligations and losses resulting from other events and developments.

Current wording

Loss contingencies are uncertain and unresolved matters that arise in the ordinary course of business and result from events or actions by others that have the potential to result in a future loss. Such contingencies include, but are not limited to environmental obligations and losses resulting from other events and developments.

Previous wording

When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low-end of such range. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. In particular, as it relates to estimating asbestos and silica contingencies, there are a number of key variables and assumptions including the number and type of new claims to be filed each year, the resolution or outcome of these claims, the average cost of resolution of each new claim, the amount of insurance available, allocation methodologies, the contractual terms with each insurer with whom we have reached settlements, the resolution of coverage issues with other excess insurance carriers with whom we have not yet achieved settlements and the solvency risk with respect to our insurance carriers. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be made, disclosure is provided.

Current wording

When a loss is considered probable and reasonably estimable, we record a liability in the amount of our best estimate for the ultimate loss. When there appears to be a range of possible costs with equal likelihood, liabilities are based on the low-end of such range. However, the likelihood of a loss with respect to a particular contingency is often difficult to predict and determining a meaningful estimate of the loss or a range of loss may not be practicable based on the information available and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. Moreover, it is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information must be continuously evaluated to determine both the likelihood of potential loss and whether it is possible to reasonably estimate a range of possible loss. When a loss is probable but a reasonable estimate cannot be made, disclosure is provided.