Goldman Sachs Industrials & Materials Conference May 15, 2019 - - PowerPoint PPT Presentation

Goldman Sachs Industrials & Materials Conference May 15, 2019

Safe Harbor

This presentation includes “forward-looking statements” which are statements that are not historical facts, including statements that relate to the proposed transaction between Gardner Denver Holdings, Inc. and the Company; 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 capital allocation strategy including projected acquisitions; restructuring activity; supplier disruption and our expectations for resolving the disruption; our projected 2019 full-year financial performance and our projected 2017 to 2020 financial performance and targets including assumptions regarding our effective tax rate and other factors described in our guidance. These forward-looking statements are based

• n 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, the factors outlined in our presentation and webcast regarding the proposed transaction, global economic conditions, the outcome of any litigation, demand for our products and services, and tax law changes and interpretations. Additional factors that could cause such differences can be found in our Form 10-K for the year ended December 31, 2018, as well as our subsequent reports on Form 10-Q 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 are included as an appendix in our presentation and reconciliations can be found in our earnings releases for the relevant periods located on our website at www.ingersollrand.com. All data beyond the first quarter of 2019 are estimates.

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A Global Leader in Energy Efficiency and Productivity

3

Two Segments

(Revenues 2018)

Key Metrics

Manufacturing locations worldwide

52

Employees

~49,000

Market cap

~$25B

Industrial Climate

$12.4B $3.3B

# of countries we sell products

100+

Diversified Business With High Aftermarket Mix

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$15.7B

68% 15% 13% 4% North America Asia Pacific Europe, Middle East, Africa Latin America 67% 33% Equipment Parts and Services Industrial

Segment Distribution Regional Mix Revenue Streams

Climate

All figures are FY 2018.

Leading Brands and Market Positions

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• World leader in HVAC
• Leader in heating and air

conditioning solutions

• World leader in refrigerated

transportation

Commercial HVAC Residential HVAC Transport Refrigeration Industrial and Process Fluid Handling Golf and Utility Vehicles

• A world leader in small

electric vehicles

• Leader in compression

technologies, specialty tools & material handling

• World leader in reliable fluid

handling equipment

Climate Segment: Diversified and Resilient Performance

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$12.4B

71% 15% 10% 4% North America Asia Pacific Europe, Middle East, Africa Latin America 68% 32% Equipment Parts and Services

Commercial HVAC Equipment Transport Refrigeration Residential HVAC

Segment Mix Regional Mix Revenue Streams

• High and growing recurring revenue streams – services / parts
• Balanced mix of services, energy services, connected buildings, residential and transport solutions

Commercial HVAC Service Parts & Contracting

All figures are FY 2018.

Industrial Segment: Diversified and Resilient Performance

• 1. Industrial Products includes Power Tools, Fluid Management, and Material Handling. All figures are FY 2018.

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$3.3B

55% 21% 17% 4% 3% North America Asia Pacific Europe, ME, Africa Latin America 61% 39% Equipment Parts and Service Compression Technologies & Services Small Electric Vehicles Industrial Products1 India

Industrial Comp. Engineered Comp. Parts & Service

Regional Mix Revenue Streams Business Units

Robust Financial Model Drives Powerful Cash Flow (2014 – 2018)

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• 1. Attractive, diversified

end markets

• 2. Leading brands, market positions

– outgrowing market rates

• 3. Focused on margin

expansion (growth /

• p. excellence)
• 5. Investing for growth

and profitability

• 4. Delivering powerful

free cash flow

$5.7 billion

free cash flow over the last 5 years

* Includes certain Non-GAAP financial measures. See the company’s website for additional details and reconciliations.

Driving Sustained Growth and Operating Margin Improvement

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$10 $11 $12 $13 $14 $15 $16 2014 2015 2016 2017 2018

In Billions

$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00 2014 2015 2016 2017 2018

$0.8 $1.8 $3.1 $4.5 $5.7

$- $1 $2 $3 $4 $5 $6 2014 2015 2016 2017 2018 8% 10% 12% 14% 2014 2015 2016 2017 2018

Adjusted Operating Margin Cumulative Free Cash Flow

+1.8

Ppts

14%

CAGR

Adjusted Continuing EPS Revenue

5%

CAGR

* 2016 Adj Op Margin retrospectively restated for the adoption of accounting standard ASU 2017-07 on January 1, 2017. Non-service pension costs that were previously reported in COGS and SG&A expense are now reported in other income/expense, net. This has no net impact to EPS. 2014 and 2015 Adj Op Margin was not restated. * Includes certain Non-GAAP financial measures. See the company’s website for additional details and reconciliations.

• Avg. FCF % of Adj. NI = 102%

In Billions

• ~$1.3B Capex
• ~$1.8B dividends paid
• ~20% CAGR dividend

per share

• Long history of

growing dividend

• $3.8B
• ~54 million shares

repurchased

• ~$1.4B on 22

acquisitions

Capital Expenditures

Dynamic and Balanced Capital Deployment Focused on Maximizing Shareholder Value (2014 – 2018)

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$8.3 Billion

Dividends Share Buyback Mergers & Acquisitions

Year-End 2017 to 2020 Targets

Ingersoll Rand 2020 Targets*

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* Information from May 2017 Ingersoll Rand Analyst Day --- NOT AN UPDATE OR REAFFIRMATION

Revenue Growth ~4% to ~4.5% CAGR Adjusted Operating Margins ~14.5% to ~15% in 2020 Adjusted Continuing EPS Growth ~11% to ~13% CAGR

Based on ~22% tax rate

Free Cash Flow (% Net Income) >=1.0 times Balanced Cap Deployment of Excess Cash ~100% of FCF on avg.

• Competitive and Growing Dividend
• Share buyback
• M&A

* Includes certain Non-GAAP financial measures. See the company’s website for additional details and reconciliations.

Consistent Strategy Execution Delivers Profitable Growth and Powerful Cash Flow

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Margin improvement and powerful cash flow Reinvestment, dividends, share repurchase and acquisitions Commitment to integrity, ingenuity and engagement

Sustainable growth above GDP Powerful cash flow and balanced capital allocation Strong operating system and sustainable culture

Stable and recurring free cash flow: $5.7B past 5 Years

Nexus of sustainability and energy efficiency global megatrends

* Includes certain Non-GAAP financial measures. See the company’s website for additional details and reconciliations.

Global Mega Trends Play to Our Strengths

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Global Mega Trends

• Climate change
• Urbanization
• Natural resource scarcity
• Digital connectedness and

technologies

Our Strengths

• Reduce energy demand and

greenhouse gas emissions

• Improve efficiency in:

– Buildings – Industrial processes – Transportation

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Business Investments

2014 2018 ~20% CAGR

Key Examples

• ~90 major new products / services

throughout the world in 2018

• New low-global warming potential

refrigerants

• Digital / controls / wireless technology
• Channel expansion
• Parts and services capabilities / offerings
• Sales and services capabilities
• Operational excellence initiatives

Significant Ongoing Business Investments Support Growth and Profitability

Growth and Profitability Opportunities from Ongoing Business Investments

Industrial

Engineered to Order Personal Transportation Compression Tech Services Industrial Products

~$40M Operating Income ~$100M ~$175M ~$90M

Climate

Variable Refrigerant Flow Energy Services Digital Customer Experience Auxiliary Power Unit

~$200M ~$400M ~$300M ~$100M

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* Information from May 2017 Ingersoll Rand Analyst Day --- NOT AN UPDATE OR REAFFIRMATION

Subset of Incremental Opportunities Contributing to 2020 Targets*

1 2 3 4

Business Operating System Delivers Results

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Committed to sustainability and energy efficiency Proven & unique system to accelerate profitable growth Drive innovation and productivity Focus on employee engagement

Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement

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2018 Dow Jones Sustainability World and North America for 8th consecutive year

Sustainability

FTSE4Good Index Series for 5th consecutive year Global 100 Most Sustainable Corporations 2nd consecutive year 1st in our Industry to sign onto Paradigm for Parity Fortune World’s Most Admired list for 7th year

Citizenship Diversity and Inclusion Employee Engagement

Top Quartile in Manufacturing Industry for 5th consecutive year U.S Chamber of Commerce 2018 Corporate Citizenship Award Winner for Best Environmental Stewardship

First-Quarter 2019 Results

April 30, 2019

Executing a Consistent Strategy that Delivers Profitable Growth

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Nexus of sustainability and energy efficiency global megatrends

Sustained Growth 1.

Margin improvement and powerful cash flow

Operational Excellence 2.

Reinvestment, dividends, share repurchase and acquisitions

Dynamic Capital Allocation 3.

Commitment to integrity, ingenuity and engagement

Winning Culture 4. Sustainable growth above GDP Powerful cash flow and balanced capital allocation Strong operating system and sustainable culture

This morning we announced a transaction to separate our Industrial businesses by way of a spin-off to Ingersoll Rand’s shareholders and then combining it w/ Gardner Denver, creating a leading, global industrial company. Also announced creation of a premier, pure- play climate control business. The related press release, presentation and webcast are available on www.ingersollrand.com.

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

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• Top-tier EPS growth driven by solid execution

−

• Adj. cont. EPS up 27% yoy
• Robust revenue growth led by Climate segment despite tough yoy comps

− Enterprise organic rev up 8% against 8% PY growth; Climate up 10% vs. 8% comp, Industrial up 3% vs. 9% comp

• Strong underlying bookings growth in most major businesses

−

CHVAC N.A., Europe, Res HVAC and Compression Tech N.A. organic bookings all up MSD to HSD

−

105% book to bill drove record backlog in Q1 2019

• Transport bookings significantly lower yoy, as expected, negatively impacting overall Climate / Enterprise bookings

−

2018 was an extraordinary year; 1.5 years of N.A. trailer and 2 years of APU booked in 2018

−

Transport backlog sufficient to meet 2019 targets; booking into 2020

• Effectively managing inflation and tariff headwinds; 90 bps adj. op. margin expansion

−

70 bps positive price versus cost − Operating leverage of 26% in-line with full year expectations

• Europe, China markets largely as expected with trade, Brexit uncertainty

− Continue to closely monitor

• Dynamic Capital Allocation

− ~$380M in dividends and share repurchases

• Exiting the quarter, remain bullish on strategy, end markets and execution

− Increasing EPS guidance to high end of prior range − ~$6.35 from ~$6.15 to ~$6.35

First Quarter 2019 Summary: Strong Start to the Year

* Includes certain Non-GAAP financial measures. See the company’s Q1 2019 earnings release for additional details and reconciliations. Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

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Solid Organic Revenue Growth Continues in Both Segments and Across Business Units; Backlog at Record High

*Organic bookings and organic revenues exclude acquisitions and currency

Q1 Organic* Y-O-Y Change Bookings Revenue Commercial HVAC

• North America
• Latin America
• Europe
• MEA
• Asia

Residential HVAC Transport Climate

• 3%

+ 10% Compression Technologies Industrial Products Small Electric Vehicles Industrial + 1% + 3% Enterprise

• 2%

+ 8%

+ + + + + + + + + + + + + +

• Climate
• Robust, broad based rev growth

against tough yoy comp (+8% Q1 ‘18)

• Strong HVAC bookings growth - N.A.,

Europe and Res; all up MSD to HSD

• Transport bookings down significantly
• n 2018 extraordinary backlog build;

N.A. trailer 1.5x, APU 2x Industrial

• Healthy, balanced rev growth against

tough yoy comp (+9% Q1 ’18)

• Strong N.A. Compression Tech
• rganic order growth, +MSD
• Small Elec. Veh. bookings flat-ish,

Industrial Products soft in Asia

+ + +

Healthy End Markets - No Significant Change to Expectations

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• HSD order growth; LSD revenue growth against tough compares (low-teens) in Q1 ‘18
• Entering cooling season, solid demand outlook led by replacement market
• Economic indicators point to cont’d healthy mkts in Resi in 2019; LSD – MSD mkt growth

Residential HVAC

• Major CHVAC markets remain positive – cont’d solid bookings and revenue growth
• N.A. and Europe growth strong, outlook remains healthy
• China demand strengthened throughout qtr, flat-ish growth against tough prior year comps
• 2019 CHVAC global outlook strength continues w/ LSD - MSD mkt growth expected; key

economic indicators remain broadly supportive

Commercial HVAC

• Global Transport business diversified and resilient across trailer, truck, APU, aftermarket
• Transport backlog remains very high; sufficient backlog to meet growth objectives in 2019
• N.A. mkt remains strong; healthy outlook into 2020
• European transport markets soft as expected, closely monitoring; Brexit uncertainty
• LSD - MSD mkt revenue growth expected in 2019

Transport

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Healthy End Markets - No Significant Change to Expectations

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• Global mkts mixed w/ solid Q1 growth in equip / svcs; cont’d strength in N.A. mkts
• EMEA flat-ish, consistent w/ expectations for a softer mkt in 2019
• China flat-ish; demand strengthened throughout qtr; cautiously optimistic outlook for 2019
• Overall, expect LSD - MSD mkt growth in 2019; closely monitoring key markets

Compression Technologies

• Balanced revenue growth across Industrial Products (Fluid Mgmt, Tools, Mat’l Handling) and

Small Electric Vehicles

• 2019 outlook supports sustained growth

Small Electric Vehicles & Industrial Products

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Q1 Results Deliver Strong Start to 2019

• Solid Q1 organic revenue growth in both segments; 105% book to bill

– Broad-based organic revenue growth in Climate, up 10%; Strong HVAC organic bookings led by N.A. / Eur / Res – Industrial organic revenues up 3%, building on 9% growth in Q1 2018 – Healthy demand in most major end-markets driving record backlog – Working capital levels support cont’d expected growth during cooling season; FY 2019 FCF targets unchanged

• Continued balanced capital allocation

– Paid $128M in dividends; annualized dividend payout of $2.12 / share; ~2% dividend yield. – Repurchased $250M or 2.4M shares – PFS offer accepted by seller, regulatory approval expected mid-year 2019

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• Operational excellence delivering 26% leverage and solid margin improvement

– Enterprise adj. operating margins up 90 bps – Cont’d effective mgmt of material / oth. infl. and tariff-related costs; price / cost + 70 bps

• Strong operating results

– Adjusted continuing EPS of $0.89, up 27% year over year driven by strong performance in Climate – Early stages, but confident in raising adj. cont. EPS guidance from $6.15 - $6.35 to ~$6.35

* Includes certain Non-GAAP financial measures. See the company’s Q1 2019 earnings release for additional details and reconciliations. Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

• Adj. Operating Margin*

Net Revenue

8.5% 9.4%

Q1 '18 Q1 '19

$3,385 $3,576

Q1 '18 Q1 '19

$0.70 $0.89

Q1 '18 Q1 '19

+6%

+8%

Organic

+90

bps

• Adj. Continuing EPS*

+27%

• Strong organic revenue growth across all businesses, in virtually all products and geographies
• Adj. operating margins expanded on strong price realization, effectively managing inflation & tariff-related
• headwinds. Achieved Q1 leverage of 26%, in line with full year target
• Revenue growth offset by ~2% negative FX impact

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Highlights

E N T E R P R I S E

Q1 2019 Continued Strong Revenue Growth, Margin Expansion and EPS Growth

* Includes certain Non-GAAP financial measures. See the company’s Q1 2019 earnings release for additional details and reconciliations.

$0.70 ($0.01) $0.03 $0.89

Q1 2018 Climate Industrial Other Share Count Q1 2019

$0.17 $0.00

+$0.19

E N T E R P R I S E

Strong Climate Performance Driving Adj. Cont. EPS +27%

• Strong performance in Climate. Industrial solid w/ margins negatively impacted by a temporary supplier disruption in

Small Electric Vehicles (~$4M); excl. disruption Industrial margins +50 bps. FY 2019 Industrial margin outlook intact

• Other expenses $15M higher primarily due to pension costs and a legal settlement related to a legacy business
• Lower share count driven by $1.15B of share repurchases in 2018 / Q1 2019

Highlights

Adjusted Continuing EPS* Adjusted Continuing EPS* 26

($0.01) Corp Cost ($0.05) Oth Exp $0.02 Interest $0.03 Tax rate

* Includes certain Non-GAAP financial measures. See the company’s Q1 2019 earnings release for additional details and reconciliations. Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

8.5% 0.2 0.7 0.5 (0.5) 9.4%

Q1 2018 Vol / Mix / FX / Acq Price / Material Inflation Productivity / Other Inflation Investment / Other Q1 2019

+90 bps

E N T E R P R I S E

Strong Price vs Material Inflation, Volume and Productivity vs Other Inflation Spreads Driving 90 bps Margin Expansion

• Strong price & effective mgmt of mat’l inflation & tariff-related costs drove 70 bps margin improvement
• Productivity exceeded other inflation (wages, logistics, etc.) consistent with full year expectations
• Ongoing business reinvestment in growth and operational excellence of ~50 bps

Highlights

Adjusted Operating Margin* Adjusted Operating Margin* 27

* Includes certain Non-GAAP financial measures. See the company’s Q1 2019 earnings release for additional details and reconciliations.

C L I M A T E S E G M E N T

Q1 Continued Strong Revenue Growth and Significant Margin Improvement

• Adj. Operating Margin*

Net Revenue

10.1% 11.4%

Q1 '18 Q1 '19

$2,610 $2,804

Q1 '18 Q1 '19

12.5% 13.2%

Q1 '18 Q1 '19

+7%

+10%

Organic

• Adj. EBITDA %**

+70

bps

• Continued exceptional, broad based organic rev growth across virtually all regions / business units / products
• Strong price realization, volume growth, and productivity driving significant margin expansion
• Adj. EBITDA % partially offset by pension costs, FX and a legal settlement related to a legacy business

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Highlights

+130

bps

* Adjusted operating margin excludes restructuring in 2018 and 2019. See tables in news release for additional information. ** Adjusted EBITDA divided by revenue. This excludes restructuring in 2018 and 2019. See tables in news release for additional information.

I N D U S T R I A L S E G M E N T

Q1 Solid Organic Revenue Growth Against Tough Compares (PY +9%)

• Adj. Operating Margin*

Net Revenue

12.3% 12.3%

Q1 '18 Q1 '19

$775 $772

Q1 '18 Q1 '19

14.9% 14.4%

Q1 '18 Q1 '19

flat

+3%

Organic

flat

• Adj. EBITDA %**
• 50

bps

* Adjusted operating margin excludes restructuring in 2018 and 2019. See tables in news release for additional information. ** Adjusted EBITDA divided by revenue. This excludes restructuring in 2018 and 2019. See tables in news release for additional information.

• Balanced revenue growth across Compression Tech, Industrial Products and Small Electric Vehicles
• Industrial margins negatively impacted by a temporary supplier disruption in Small Elec. Veh. (~$4M); excl.

supplier disruption Industrial margins +50 bps, expect resolution during Q2

• FY 2019 Industrial margin outlook intact w/ footprint optimization benefits ramping in late 2019

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Highlights

Continued Execution of Balanced Capital Allocation Strategy

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Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Topics of Interest

Topics of Interest

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• Transport Order Rates

− Tight trucking capacity, U. S. regulatory changes and U. S. tax law changes drove strong demand for class 8 trailers in each quarter of 2018 − OEM constraints led to significant pre-orders of Trailer refrigerated units and auxiliary power units driving record backlogs for our Transport business at the beginning of 2019 − Backlog conversion expected to drive strong Transport revenue growth in 2019; Transport market outlook remains healthy heading into 2020

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Topics of Interest (cont.)

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• Full Year Price / Cost Outlook of +20 bps to +30 bps

− Q1 price / cost +70 bps driven by carryover of strong PY pricing and 2019 pricing actions − PY pricing comps strengthen beginning in Q2; Full PY pricing laps in Q3 / Q4 − Expect cont’d commodity inflation in Q2 w/ moderating tier 1 & 2 material inflation in 2H − Sec 301 tariff carryover impacts expected in Q2 & Q3; Full PY tariff impacts lap in Q4 − Outlook includes proposed Sec 301 list 3 tariff increase from 10% to 25%; Actions identified to address increase if / when needed − All in, expect to continue to actively, effectively manage inflation and tariffs

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Summary: Expect Cont’d Strong Rev, EPS and Free Cash Flow in 2019

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• Strategy tied to attractive end markets supported by global mega trends
• Franchise brands and businesses with leadership market positions
• Sustained business investments delivering innovation and growth,
• perating excellence and improving margins
• Experienced management and high performing team culture
• Operating model delivers powerful cash flow
• Capital allocation priorities deliver strong shareholder returns

Strategy Brands Innovation Performance Cash Flow Capital Allocation

Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION

Appendix

Q1 Organic Revenue Up 8% Year-Over-Year Organic Bookings Down 2% Against Tough Comparison

Organic* Bookings 2017 2018 2019 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Climate

6% 3% 5% 7% 5% 11% 17% 12% 20% 15%

• 3%

Industrial

9% 5% 5% 12% 8% 5% 8% 7% 6% 6% 1%

Total

7% 4% 5% 8% 6% 9% 15% 11% 17% 13%

• 2%

2013 Organic* Revenue 2017 2018 2019 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Climate

6% 8% 3% 6% 6% 8% 9% 10% 9% 9% 10%

Industrial

1% 2% (1%) 5% 2% 9% 9% 9% 6% 8% 3%

Total

4% 7% 2% 6% 5% 8% 9% 10% 8% 9% 8%

*Organic revenues and bookings exclude acquisitions and currency 36

Q1 Non-GAAP Measures Definitions

Organic bookings is defined as reported orders in the current period adjusted for the impact of currency and acquisitions. Organic revenue is defined as GAAP net revenues adjusted for the impact of currency and acquisitions.

• Currency impacts on net revenues and bookings are measured by applying the prior year’s foreign currency exchange rates to the

current period’s net revenues and bookings reported in local currency. This measure allows for a direct comparison of operating results excluding the year-over-year impact of foreign currency translation. Adjusted operating income is defined as GAAP operating income plus restructuring costs and acquisition related transaction costs in

• 2019. Adjusted operating income in 2018 is defined as GAAP operating income plus restructuring costs.

Adjusted operating margin is defined as the ratio of adjusted operating income divided by net revenues. Adjusted continuing EPS in 2019 is defined as GAAP continuing EPS plus restructuring costs and acquisition related transaction costs, net of tax impacts. Adjusted continuing EPS in 2018 is defined as GAAP continuing EPS plus restructuring costs and debt redemption premium and related charges, net of tax impacts. Adjusted EBITDA is defined as adjusted operating income plus depreciation and amortization expense plus or minus other income / (expense), net. Book to bill is defined as reported orders in the current period divided by GAAP net revenues.

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Q1 Non-GAAP Measures Definitions

Free cash flow in 2019 and 2018 is defined as net cash provided by (used in) continuing operating activities, less capital expenditures, plus cash payments for restructuring. In 2018, the Company updated its definition of free cash flow to exclude the impacts of discontinued operations. Please refer to the free cash flow reconciliation on table 9 of the news release. Working capital measures a firm’s operating liquidity position and its overall effectiveness in managing the enterprises’ current accounts.

• Working capital is calculated by adding net accounts and notes receivables and inventories and subtracting total current

liabilities that exclude short term debt, dividend payables and income tax payables.

• Working capital as a percent of revenue is calculated by dividing the working capital balance (e.g. as of March 31) by the

annualized revenue for the period (e.g. reported revenues for the three months ended March 31) multiplied by 4 to annualize for a full year. Adjusted effective tax rate for 2019 is defined as the ratio of income tax expense, plus or minus the tax effect of adjustments for restructuring costs and acquisition related transaction costs, divided by earnings from continuing operations before income taxes plus restructuring costs and acquisition related transaction costs. Adjusted effective tax rate for 2018 is defined as the ratio of income tax expense, plus or minus the tax effect of adjustments for restructuring costs and debt redemption premium and related charges, divided by earnings from continuing operations before income taxes plus restructuring costs and debt redemption premium and related charges. This measure allows for a direct comparison of the effective tax rate between periods. Operating leverage is defined as the ratio of the change in adjusted operating income for the current period (e.g. Q1 2019) less the prior period (e.g. Q1 2018), divided by the change in net revenues for the current period less the prior period.

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