Fourth-Quarter 2016 Results February 1, 2017
Safe Harbor This presentation 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 2017 full- year financial performance and targets including 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, global economic conditions, the outcome of any litigation, 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, 2015, Form 10-Q for the quarters ended March 31, 2016, June 30, 2016, and September 30, 2016, and other SEC filings. We assume no obligation to update these forward-looking statements. This presentation also includes 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. The definitions of our non-GAAP financial information and reconciliation to GAAP is attached to the earnings news release that can be found at www.ingersollrand.com and are defined in footnotes at the end of this presentation. All data for beyond the fourth quarter of 2016 are estimates. 2
Strategic Foundation Continues to Underpin Top-Quartile Performance Sustainable and Profitable Growth, Cash Flow and Shareholder Value Cash Flow / Dynamic Sustained Operational Winning Capital Growth Excellence Culture Allocation Well positioned in both Strong, recognized brands Leading market shares geographic and end markets 3
Consistent Progress Against Key Metrics* Full Year 2016 Versus 2015 +2% reported $13,509M Net Revenue +3% organic Operating Margin 11.6% +60 bps Adj. Continuing EPS* $4.13 +11% $1.35B +37% Free Cash Flow* >100% adj. net income • FCF was 121% of adjusted net income* • Full-year operating leverage of 44% • Repurchased ~4.9M shares for $250M in 2016 * Includes certain Non-GAAP financial measures. See the company’s Q4 2016 earnings release for additional details and 4 reconciliations.
Steady Operating Performance Improvement Net Revenue Adjusted EPS In Billions $5.00 $14.0 16% CAGR $4.00 3% CAGR $13.5 $3.00 $13.0 $2.00 $12.5 $1.00 $12.0 $0.00 $11.5 2013 2014 2015 2016 2013 2014 2015 2016 Adjusted Operating Margin Cash Flow ROIC 14% 2.3 Ppts 25% 6 Ppts 12% 20% 10% 8% 15% 6% 10% 4% 5% 2% 0% 0% 2013 2014 2015 2016 5 2013 2014 2015 2016
Key Takeaways Q4 2016 • Continued strong operating results – FCF $353M in Q4; $1.35B 2016 – Combined operating results for segments exceeded guidance • Robust Commercial & Residential performance – Commercial bookings up high-single digits & Residential bookings up low-teens – Margin expansion in both Commercial and Residential • Industrial business steady on recovery path – Revenue up sequentially vs. Q3 • EPS miss vs guidance driven by discrete items 6
Q4 2016 Guidance to Actual Bridge Q4 2016 Adjusted EPS Guidance (at mid-point) $0.91 Operations earnings 0.01 Corporate Costs (0.04) Foreign Exchange Losses (0.01) Higher Tax rate (0.03) Q4 Actual Adjusted EPS $0.84 Highlights • Combined operating results for Climate & Industrial exceeded guidance. • Higher than anticipated corporate costs were driven by stock-based and annual incentive-based compensation and increased IT infrastructure and security investments. • Higher than anticipated profits from high tax jurisdictions caused an increase in the tax rate. 7
Q4 Total Company Performance Operating Margin Adj. OI + D&A % ** Net Revenue -80 bps 14.2% +1% -50 bps 10.8% 13.4% $3,359 $3,326 +2% Organic 10.3% Adj. Operating Margin* 11.3% 10.8% Q4 '15 Q4 '16 Q4 '15 Q4 '16 Q4 '15 Q4 '16 Highlights • Revenue up 1%, +2% organic • Adj. margin 10.8%, down 50 bps Y-O-Y • Adj. EPS of $0.84 , down 11% * Adjusted margin excludes restructuring in 2015 and 2016 8 ** Adjusted operating income + depreciation and amortization divided by revenue
Very Strong Q4 Bookings Led by Commercial and Residential Businesses Y-O-Y Climate C Y-O-Y Change in Organic Bookings % Organic Reported Commercial HVAC + low-teens Change - N. America + low-teens Q1 2015 3% 5% - L. America + low-teens - EMEA + mid-single digits Q2 2% 4% + high-teens - Asia Q3 (2%) 1% + low-teens Residential HVAC Transport + mid-single digits Q4 1% 2% Total + 9%, + 10% Organic Q1 2016 1% 4% Industrial Compression Tech - low-single digits Q2 2% 3% Industrial Products - low-single digits Q3 2% 3% Small Elec. Vehicle + low-single digits Total - 2%, - 1% Organic Q4 6% 7% 9
C O N S O L I D A T E D R E S U L T S Q4 Segment Organic Revenue Change by Region Europe North America Climate Climate Industrial Industrial Middle East/Africa Asia Climate Latin America Climate Industrial Climate Industrial Industrial Q4 Reported Q4 Organic Revenue change Y-O-Y Climate +3% +4% Industrial -4% -3% Total +1% +2% 10
E n t e r p r i s e Lower Q4 Margin Primarily due to Steel Inflation and Higher Than Anticipated Corporate Costs -50 bps (0.4) 10.8% 0.4 (0.2) (0.3) 10.3% (0.2) Investment (0.1) Other/Rest 4Q 2015 Volume / Mix / FX Price/Material Productivity/Other Investment/Other 4Q 2016 Inflation Inflation Highlights • Improvements in material productivity offset by other inflation, including higher than anticipated corporate costs resulted in a 40 bps headwind • Solid operational performance offset by steel inflation • The company continues to invest in products, while expanding channels 11
C L I M A T E S E G M E N T Q4 Strong Commercial and Residential HVAC Offsetting Transport Results Net Revenue Operating Margin Adj. OI + D&A % ** +40 bps +70 bps +3% 15.8% 15.4% $2,559 13.6% +4% $2,492 12.9% Organic Adj. Operating Margin* 12.9% 13.6% Q4 '15 Q4 '16 Q4 '15 Q4 '16 Q4 '15 Q4 '16 Highlights • Strong Commercial and Residential HVAC revenue growth • Strong unitary and aftermarket • Operations performance delivered 70 bps of adjusted operating margin improvement * Adjusted margin excludes restructuring in 2015 and 2016 12 ** Adjusted operating income + depreciation and amortization divided by revenue
I N D U S T R I A L S E G M E N T Q4 Organic Revenues Declined by 3% Net Revenue Operating Margin Adj. OI + D&A % ** -230 bps -4% 15.8% $834 $800 -220 bps -3% 13.5% 12.7% Organic 10.5% Adj. Operating Margin* 13.8% 11.4% Q4 '15 Q4 '16 Q4 '15 Q4 '16 Q4 '15 Q4 '16 Highlights • Q4 performance slightly exceeds revenue and operating margin guidance • Continuing initiatives to drive margin improvements * Adjusted operating margin excludes restructuring in 2015 and 2016 ** Adjusted operating income + depreciation and amortization divided by revenue 13
Strong Balance Sheet and Free Cash Flow $ Millions YE 13 YE 14 YE 15 YE 16 1,937 1,705 737 1,715 Cash Debt 3,521 4,224 4,218 4,070 Net Debt 1,584 2,519 3,481 2,355 1,345** Free Cash Flow $ Millions 1,151* 985** 810 862 $5.14/share Post Security Spin 2013 2014 2015 2016 • 2011 to 2016 avg. FCF % of net income = 100% • 2016 FCF % of adjusted net income = 121% • FCF increase from higher operating results and working capital management * Reported – includes Allegion security business and excludes restructuring and one-time spin costs and refinancing premium **Excludes the impact of the IRS agreement and restructuring in 2015 and excludes restructuring and the proceeds on the sale of 14 Hussmann in 2016
2016 Dynamic Capital Allocation Focused on Delivering High Returns Maintained Strong Competitive Dividend Payout Strategic Business Balance Sheet Investment $1.60 at BBB Metrics $1.36 $1.16 $1.00 $0.84 $0.64 2012 2013 2014 2015 2016 2017F Digital Dividend increased to $1.60 / share No meaningful debt Energy efficiency 20% annual CAGR 2012 to 2017 maturities until 2018 Channel Expansion Share Repurchase – Minimum Offset Building value through acquisitions Dilution from Benefits Program 108 Cumulative share repurchase 103 98 2011 to 2016 --108 million shares 76 55 36 2011 2012 2013 2014 2015 2016 Working on our pipeline of YTD 2016: Repurchased 4.9M shares 15 targets for $250M
Guidance
2017 Forecast for End-Market Performance End Markets Organic Revenue Americas EMEA Asia Guidance Commercial HVAC Up mid-single digits Residential HVAC Up mid-single digits Transport Down low-single digits Compression-related Down low-single digits & Industrial Products Golf / Utility Flat/Up low-single digits 17
2017 Enterprise Guidance FY Guidance Climate ‒ Revenue Reported ~3% ‒ Revenue Organic ~4% Adjusted Operating Margin 14.5% to 15.0% Industrial ‒ Revenue Reported ~-2% ‒ Revenue Organic ~-1% Adjusted Operating Margin 11.0% to 12.0% Total ‒ Revenue Reported ~2% ‒ Revenue Organic ~3% Adjusted Operating Margin 12.2% to 12.6% 18
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