Ingersoll-Rand plc (NYSE:IR), a world leader in creating comfortable,
sustainable and efficient environments, today reported diluted earnings
per share (EPS) from continuing operations of $1.93 for the fourth
quarter of 2017. Adjusted continuing EPS of $1.02 excludes primarily
non-cash tax-related benefits of $241.2 million ($0.95) related to
United States tax legislation*** and other discrete items and
restructuring costs of $13.6 million ($0.04).
***See footnote
regarding accounting for the tax effects of The Tax Cuts and Jobs Act on
page 8.
Fourth-Quarter 2017 Results
Financial Comparisons – Fourth-Quarter Continuing Operations |
||||||||||||
$, millions except EPS | Q4 2017 | Q4 2016** | Y-O-Y Change |
Organic Y-O-Y Change |
||||||||
Bookings |
$3,559 |
$3,235 | 10% | 8% | ||||||||
Net Revenues | $3,618 | $3,359 | 8% | 6% | ||||||||
Operating Income | $387 | $353 | 10% | |||||||||
Operating Margin | 10.7% | 10.5% | 0.2 PPts | |||||||||
Adjusted Operating Income* | $400 | $367 | 9% | |||||||||
Adjusted Operating Margin* | 11.1% | 10.9% | 0.2 PPts | |||||||||
Continuing EPS | $1.93 | $0.76 | 154% | |||||||||
Adjusted Continuing EPS | $1.02 | $0.84 | 21% | |||||||||
Restructuring Cost | ($13.6) | ($14.7) | $1.1 | |||||||||
** Restated for adoption of ASU 2017-07. See tables in news release for additional information. |
“The Ingersoll Rand team has delivered another year of solid execution and financial results, including generating further growth in revenues, operating income and adjusted EPS,” said Michael W. Lamach, chairman and chief executive officer. “In 2017, we exceeded the top end of our original earnings per share guidance range, grew market share in key businesses and delivered strong free cash flow of 118 percent of adjusted net income. We executed well on our dynamic capital allocation plans, raised dividends by 12.5 percent, committed $460 million to strategic acquisitions and deployed $1 billion to share repurchases. My thanks to our global team members for serving our customers and generating solid results.
“In 2018 our strategy remains consistent,” he said. “We have healthy markets and leading brands that are well positioned for growth. We expect our business operating system to deliver strong operating leverage and powerful free cash flow. We will execute a balanced capital allocation strategy that best uses our cash to drive long-term sustainable value for shareholders.”
Highlights from the Fourth-Quarter of 2017 (all comparisons against the fourth quarter of 2016 unless otherwise noted)
Fourth-Quarter Business Review (all comparisons against the fourth quarter of 2016 unless otherwise noted)
Climate Segment: delivers energy-efficient products and innovative energy services. The segment includes Trane® and American Standard® Heating & Air Conditioning which provide heating, ventilation and air conditioning (HVAC) systems, and commercial and residential building services, parts, support and controls; energy services and building automation through Trane Building Advantage™ and Nexia™; and Thermo King® transport temperature control solutions.
$, millions | Q4 2017 | Q4 2016** | Y-O-Y Change |
Organic Y-O-Y Change |
||||||||
Bookings | $2,725 | $2,509 | 9% | 7% | ||||||||
Net Revenues | $2,760 | $2,559 | 8% | 6% | ||||||||
Operating Income | $348.2 | $348.8 | 0% | |||||||||
Operating Margin | 12.6% | 13.6% | (1.0) PPts | |||||||||
Adjusted Operating Income | $355.3 | $349.7 | 2% | |||||||||
Adjusted Operating Margin | 12.9% | 13.7% | (0.8) PPts | |||||||||
** Restated for adoption of ASU 2017-07. See tables in news release for additional information. |
Commercial HVAC
Residential HVAC
Transport Refrigeration
Industrial Segment: delivers products and services that enhance energy efficiency, productivity and operations. The segment includes compressed air and gas systems and services, power tools, material handling systems, ARO® fluid management equipment, as well as Club Car® golf, utility and consumer low-speed vehicles.
$, millions | Q4 2017 | Q4 2016** | Y-O-Y Change |
Organic Y-O-Y Change |
||||||||
Bookings | $834 | $726 | 15% | 12% | ||||||||
Net Revenues | $858 | $800 | 7% | 5% | ||||||||
Operating Income | $110.6 | $85.4 | 30% | |||||||||
Operating Margin | 12.9% | 10.7% | 2.2 PPts | |||||||||
Adjusted Operating Income | $113.2 | $92.8 | 22% | |||||||||
Adjusted Operating Margin | 13.2% | 11.6% | 1.6 PPts | |||||||||
** Restated for adoption of ASU 2017-07. See tables in news release for additional information. |
Compression Technologies
Industrial Products
Small Electric Vehicles (Club Car)
Full-Year 2017 Results
Financial Comparisons – Full-Year Continuing Operations |
||||||||||||
$, millions except EPS | 2017 | 2016** | Y-O-Y Change | Organic Y-O-Y | ||||||||
Bookings | $14,490 | $13,673 | 6% | 6% | ||||||||
Net Revenues | $14,198 | $13,509 | 5% | 5% | ||||||||
Operating Income | $1,665 | $1,603 | 4% | |||||||||
Operating Margin | 11.7% | 11.9% | (0.2) PPts | |||||||||
Adjusted Operating Income | $1,727 | $1,639 | 5% | |||||||||
Adjusted Operating Margin | 12.2% | 12.1% | 0.1 PPts | |||||||||
Continuing EPS | $5.14 | $5.52 | (7%) | |||||||||
Adjusted Continuing EPS | $4.51 | $4.13 | 9% | |||||||||
** Restated for adoption of ASU 2017-07. See tables in news release for additional information. |
Balance Sheet and Cash Flow |
|||||||||
$, millions | Q4 2017 | Q4 2016** | Y-O-Y Change | ||||||
Cash From Operating Activities (Y-T-D) | $1,524 | $1,522 | 2 | ||||||
Free Cash Flow (Y-T-D) | $1,340 | $1,367 | (27) | ||||||
Working Capital/Revenue* | 3.3% | 3.4% | 10 bps improvement | ||||||
Cash Balance 31 December | $1,549 | $1,715 | (166) | ||||||
Debt Balance 31 December | $4,064 | $4,070 | (6) | ||||||
** Restated for adoption of ASU 2016-09. |
Capital Allocation
Full-Year 2018 Guidance
This news release 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 capital allocation strategy including projected acquisitions; our projected 2018 full-year financial performance and targets including assumptions regarding our effective tax rate and other factors described in our guidance. 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 and interpretations. Additional factors that could cause such differences can be found in our Form 10-K for the year ended December 31, 2016, 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 news release 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 this news release.
All amounts reported within the earnings release above related to net earnings (loss), earnings (loss) from continuing operations, earnings (loss) from discontinued operations, and per share amounts are attributed to Ingersoll Rand’s ordinary shareholders.
Ingersoll Rand (NYSE:IR) advances the quality of life by creating comfortable, sustainable and efficient environments. Our people and our family of brands — including Club Car®, Ingersoll Rand®, Thermo King® and Trane® — work together to enhance the quality and comfort of air in homes and buildings; transport and protect food and perishables; and increase industrial productivity and efficiency. We are a $14 billion global business committed to a world of sustainable progress and enduring results. For more information, visit ingersollrand.com.
(See Accompanying Tables)
*Non-GAAP measures definitions
Organic bookings is defined as reported orders closed/completed 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 expenses in 2017 and 2016. Please refer to the reconciliation of GAAP to non-GAAP measures on tables 3 and 4 of the news release.
Adjusted operating margin is defined as the ratio of adjusted operating income divided by net revenues.
In 2017 Adjusted continuing EPS is defined as GAAP continuing EPS plus restructuring expenses, net of tax impacts, plus the discrete non-cash tax adjustment in Latin America less U.S. tax legislation and other discrete items. In 2016 Adjusted continuing EPS is defined as GAAP continuing EPS plus restructuring expenses and a legal settlement, less the gain from the sale of the company’s remaining interest in Hussmann, net of tax impacts. Please refer to the reconciliation of GAAP to non-GAAP measures on tables 3 and 4 of the news release.
Cash flow return on invested capital (“Cash flow ROIC”) is defined as annual free cash flow divided by the sum of gross fixed assets, receivables and inventory less accounts payables.
Free cash flow in 2017 and 2016 is defined as net cash provided by operating activities, less capital expenditures, plus cash payments for restructuring. 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.
Adjusted effective tax rate for 2017 is defined as the ratio of income tax expense, plus or minus the tax effect of adjustments for restructuring costs and the discrete non-cash tax adjustment in Latin America, U.S. tax legislation and other discrete items, divided by earnings from continuing operations before income taxes plus restructuring expenses. Adjusted effective tax rate for 2016 is defined as the ratio of income tax expense, plus or minus the tax effect of adjustments for restructuring costs, a legal settlement and the gain on sale of Hussmann interest, divided by earnings from continuing operations before income taxes less the gain on sale of Hussmann interest plus restructuring expenses and a legal settlement. This measure allows for a direct comparison of the effective tax rate between periods.
*** Accounting for the Tax Effects of The Tax Cuts and Jobs Act
The Company has not completed the accounting for the tax effects of The Tax Cuts and Jobs Act (the Act); however, in accordance with Staff Accounting Bulletin No. 118 (“SAB 118”), the Company has made reasonable estimates of the effects the Act has on existing deferred tax balances, the tax owed on the one-time transition tax and the change in permanent reinvestment assertion related to unremitted earnings of certain foreign subsidiaries. In the aggregate, the Company recognized a provisional tax benefit for the above items of $21.0 million, which is included as a component of income tax expense from continuing operations. Any changes to these provisional amounts will be reported in the period in which the proper accounting under ASC 740 is complete but in no case will that period be longer than the one year measurement period from the enactment date of the Act as required by SAB 118.
INGERSOLL-RAND PLC | |||||||||||||||||||||
Condensed Consolidated Income Statement | |||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||
UNAUDITED |
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For the quarter | For the year | ||||||||||||||||||||
ended December 31, | ended December 31, | ||||||||||||||||||||
2017 | 2016* | 2017 | 2016* | ||||||||||||||||||
Net revenues | $ | 3,618.1 | $ | 3,358.8 | $ | 14,197.6 | $ | 13,508.9 | |||||||||||||
Cost of goods sold | (2,542.4 | ) | (2,347.3 | ) | (9,811.6 | ) | (9,307.9 | ) | |||||||||||||
Selling & administrative expenses | (689.0 | ) | (658.7 | ) | (2,720.7 | ) | (2,597.8 | ) | |||||||||||||
Operating income | 386.7 | 352.8 | 1,665.3 | 1,603.2 | |||||||||||||||||
Interest expense | (53.9 | ) | (53.8 | ) | (215.8 | ) | (221.5 | ) | |||||||||||||
Other income/(expense), net | (7.8 | ) | (30.9 | ) | (31.6 | ) | 359.6 | ||||||||||||||
Earnings before income taxes | 325.0 | 268.1 | 1,417.9 | 1,741.3 | |||||||||||||||||
Benefit (provision) for income taxes | 163.0 | (63.9 | ) | (80.2 | ) | (281.5 | ) | ||||||||||||||
Earnings from continuing operations | 488.0 | 204.2 | 1,337.7 | 1,459.8 | |||||||||||||||||
Discontinued operations, net of tax | (30.8 | ) | (1.4 | ) | (25.4 | ) | 32.9 | ||||||||||||||
Net earnings | 457.2 | 202.8 | 1,312.3 | 1,492.7 | |||||||||||||||||
Less: Net earnings attributable to noncontrolling interests | 2.7 | (4.0 | ) | (9.7 | ) | (16.5 | ) | ||||||||||||||
Net earnings attributable to Ingersoll-Rand plc | $ | 459.9 | $ | 198.8 | $ | 1,302.6 | $ | 1,476.2 | |||||||||||||
Amounts attributable to Ingersoll-Rand plc |
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ordinary shareholders: |
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Continuing operations | $ | 490.7 | $ | 200.2 | $ | 1,328.0 | $ | 1,443.3 | |||||||||||||
Discontinued operations | (30.8 | ) | (1.4 | ) | (25.4 | ) | 32.9 | ||||||||||||||
Net earnings | $ | 459.9 | $ | 198.8 | $ | 1,302.6 | $ | 1,476.2 | |||||||||||||
Diluted earnings per share attributable to |
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Ingersoll-Rand plc ordinary shareholders: |
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Continuing operations | $ | 1.93 | $ | 0.76 | $ | 5.14 | $ | 5.52 | |||||||||||||
Discontinued operations | (0.12 | ) | (0.01 | ) | (0.09 | ) | 0.13 | ||||||||||||||
$ | 1.81 | $ | 0.75 | $ | 5.05 | $ | 5.65 | ||||||||||||||
Weighted-average number of common | |||||||||||||||||||||
shares outstanding: | |||||||||||||||||||||
Diluted | 253.9 | 262.6 | 258.1 | 261.7 | |||||||||||||||||
* Retrospectively restated for adoption of ASU 2017-07, see Table 10 for additional information. |
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INGERSOLL-RAND PLC | |||||||||||||||||||||
Business Review | |||||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||
UNAUDITED |
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For the quarter | For the year | ||||||||||||||||||||
ended December 31, | ended December 31, | ||||||||||||||||||||
2017 | 2016** | 2017 | 2016** | ||||||||||||||||||
Climate |
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Net revenues | $ | 2,760.2 | $ | 2,558.6 | $ | 11,167.5 | $ | 10,545.0 | |||||||||||||
Segment operating income * | 348.2 | 348.8 | 1,572.7 | 1,537.5 | |||||||||||||||||
and as a % of Net revenues | 12.6 | % | 13.6 | % | 14.1 | % | 14.6 | % | |||||||||||||
Industrial |
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Net revenues | 857.9 | 800.2 | 3,030.1 | 2,963.9 | |||||||||||||||||
Segment operating income * | 110.6 | 85.4 | 357.6 | 300.3 | |||||||||||||||||
and as a % of Net revenues | 12.9 | % | 10.7 | % | 11.8 | % | 10.1 | % | |||||||||||||
Unallocated corporate expense | (72.1 | ) | (81.4 | ) | (265.0 | ) | (234.6 | ) | |||||||||||||
Total |
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Net revenues | $ | 3,618.1 | $ | 3,358.8 | $ | 14,197.6 | $ | 13,508.9 | |||||||||||||
Consolidated operating income | $ | 386.7 | $ | 352.8 | $ | 1,665.3 | $ | 1,603.2 | |||||||||||||
and as a % of Net revenues | 10.7 | % | 10.5 | % | 11.7 | % | 11.9 | % | |||||||||||||
* Segment operating income is the measure of profit and loss that the Company uses to evaluate the financial performance of the business and as the basis for performance reviews, compensation and resource allocation. For these reasons, the Company believes that Segment operating income represents the most relevant measure of segment profit and loss. | |||||||||||||||||||||
** Retrospectively restated for adoption of ASU 2017-07, see Table 10 for additional information. | |||||||||||||||||||||
INGERSOLL-RAND PLC | ||||||||||||||||||||||||||||||||||
Reconciliation of GAAP to non-GAAP | ||||||||||||||||||||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||||||||||||||||||||
UNAUDITED |
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For the quarter ended December 31, 2017 | For the year ended December 31, 2017 | |||||||||||||||||||||||||||||||||
As | As | As | As | |||||||||||||||||||||||||||||||
Reported | Adjustments | Adjusted | Reported | Adjustments | Adjusted | |||||||||||||||||||||||||||||
Net revenues | $ | 3,618.1 | $ | - | $ | 3,618.1 | $ | 14,197.6 | $ | - | $ | 14,197.6 | ||||||||||||||||||||||
Operating income | 386.7 | 13.6 | (a) | 400.3 | 1,665.3 | 61.7 | (a) | 1,727.0 | ||||||||||||||||||||||||||
Operating margin | 10.7 | % | 11.1 | % | 11.7 | % | 12.2 | % | ||||||||||||||||||||||||||
Earnings from continuing operations | ||||||||||||||||||||||||||||||||||
before income taxes | 325.0 | 13.6 | (a) | 338.6 | 1,417.9 | 61.7 | (a) | 1,479.6 | ||||||||||||||||||||||||||
Benefit (provision) for income taxes | 163.0 | (236.7 | ) | (b,d) | (73.7 | ) | (80.2 | ) | (218.4 | ) | (b,c,d) | (298.6 | ) | |||||||||||||||||||||
Tax rate | -50.2 | % | 21.8 | % | 5.7 | % | 20.2 | % | ||||||||||||||||||||||||||
Earnings from continuing operations | ||||||||||||||||||||||||||||||||||
attributable to Ingersoll-Rand plc | $ | 490.7 | $ | (231.6 | ) | (f) | $ | 259.1 | $ | 1,328.0 | $ | (165.2 | ) | (f) | $ | 1,162.8 | ||||||||||||||||||
Diluted earnings per common share |
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Continuing operations | $ | 1.93 | $ | (0.91 | ) | $ | 1.02 | $ | 5.14 | $ | (0.63 | ) | $ | 4.51 | ||||||||||||||||||||
Weighted-average number of common | ||||||||||||||||||||||||||||||||||
shares outstanding | ||||||||||||||||||||||||||||||||||
Diluted | 253.9 | - | 253.9 | 258.1 | - | 258.1 | ||||||||||||||||||||||||||||
Detail of Adjustments: |
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(a) | Restructuring costs | $ | 13.6 | $ | 61.7 | |||||||||||||||||||||||||||||
(b) | Tax impact of adjustment (a) | (4.0 | ) | (19.0 | ) | |||||||||||||||||||||||||||||
(c) | Latin American discrete non-cash tax adjustment | - | 33.3 | |||||||||||||||||||||||||||||||
(d) | US tax legislation and other discrete items | (232.7 | ) | (232.7 | ) | |||||||||||||||||||||||||||||
(e) | US tax legislation impact on NCI | (8.5 | ) | (8.5 | ) | |||||||||||||||||||||||||||||
(f) | Impact of adjustments on earnings from continuing | |||||||||||||||||||||||||||||||||
operations attributable to Ingersoll-Rand plc | $ | (231.6 | ) | $ | (165.2 | ) | ||||||||||||||||||||||||||||
The Company reports its financial results in accordance with
generally accepted accounting principles in the United States
(GAAP). This supplemental schedule provides non-GAAP financial
information and a quantitative reconciliation of the difference
between the non-GAAP financial measures and the financial measures
calculated and reported in accordance with GAAP.
The non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. They have limitations in that they do not reflect all of the costs associated with the operations of our businesses as determined in accordance with GAAP. In addition, these measures may not be comparable to non-GAAP financial measures reported by other companies.
We believe the non-GAAP financial information provides important supplemental information to both management and investors regarding financial and business trends used in assessing our financial condition and results of operations.
The non-GAAP financial measures associated with operating income and margin, tax rate and EPS assist investors with analyzing our business segment results as well as with predicting future performance. In addition, these non-GAAP financial measures are also reviewed by management in order to evaluate the financial performance of each segment. They are the basis for performance reviews, compensation and resource allocation. We believe that the presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as management.
As a result, one should not consider these measures in isolation or as a substitute for our results reported under GAAP. We compensate for these limitations by analyzing results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results. |
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INGERSOLL-RAND PLC | ||||||||||||||||||||||||||||||||||
Reconciliation of GAAP to non-GAAP | ||||||||||||||||||||||||||||||||||
(In millions, except per share amounts) | ||||||||||||||||||||||||||||||||||
UNAUDITED |
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For the quarter ended December 31, 2016 | For the year ended December 31, 2016 | |||||||||||||||||||||||||||||||||
As | As | As | As | |||||||||||||||||||||||||||||||
Reported* | Adjustments | Adjusted | Reported* | Adjustments | Adjusted | |||||||||||||||||||||||||||||
Net revenues | $ | 3,358.8 | $ | - | $ | 3,358.8 | $ | 13,508.9 | $ | - | $ | 13,508.9 | ||||||||||||||||||||||
Operating income | 352.8 | 14.7 | (a) | 367.5 | 1,603.2 | 35.5 | (a) | 1,638.7 | ||||||||||||||||||||||||||
Operating margin | 10.5 | % | 10.9 | % | 11.9 | % | 12.1 | % | ||||||||||||||||||||||||||
Earnings from continuing operations | ||||||||||||||||||||||||||||||||||
before income taxes | 268.1 | 31.1 | (a,c) | 299.2 | 1,741.3 | (345.9 | ) | (a,b,c) | 1,395.4 | |||||||||||||||||||||||||
Provision for income taxes | (63.9 | ) | (10.7 | ) | (d) | (74.6 | ) | (281.5 | ) | (17.0 | ) | (d) | (298.5 | ) | ||||||||||||||||||||
Tax rate | 23.8 | % | 24.9 | % | 16.2 | % | 21.4 | % | ||||||||||||||||||||||||||
Earnings from continuing operations | ||||||||||||||||||||||||||||||||||
attributable to Ingersoll-Rand plc | $ | 200.2 | $ | 20.4 | (e) | $ | 220.6 | $ | 1,443.3 | $ | (362.9 | ) | (e) | $ | 1,080.4 | |||||||||||||||||||
Diluted earnings per common share |
||||||||||||||||||||||||||||||||||
Continuing operations | $ | 0.76 | $ | 0.08 | $ | 0.84 | $ | 5.52 | $ | (1.39 | ) | $ | 4.13 | |||||||||||||||||||||
Weighted-average number of common | ||||||||||||||||||||||||||||||||||
shares outstanding | ||||||||||||||||||||||||||||||||||
Diluted | 262.6 | - | 262.6 | 261.7 | - | 261.7 | ||||||||||||||||||||||||||||
Detail of Adjustments: |
||||||||||||||||||||||||||||||||||
(a) | Restructuring costs | $ | 14.7 | $ | 35.5 | |||||||||||||||||||||||||||||
(b) | Hussmann Gain | - | (397.8 | ) | ||||||||||||||||||||||||||||||
(c) | Legal Settlement | 16.4 | 16.4 | |||||||||||||||||||||||||||||||
(d) | Tax impact of adjustments a, b and c | (10.7 | ) | (17.0 | ) | |||||||||||||||||||||||||||||
(e) | Impact of adjustments on earnings from continuing | |||||||||||||||||||||||||||||||||
operations attributable to Ingersoll-Rand plc | $ | 20.4 | $ | (362.9 | ) | |||||||||||||||||||||||||||||
* Retrospectively restated for adoption of ASU 2017-07, see Table 10 for additional information. |
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The Company reports its financial results in accordance with
generally accepted accounting principles in the United States
(GAAP). This supplemental schedule provides non-GAAP financial
information and a quantitative reconciliation of the difference
between the non-GAAP financial measures and the financial measures
calculated and reported in accordance with GAAP.
The non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. They have limitations in that they do not reflect all of the costs associated with the operations of our businesses as determined in accordance with GAAP. In addition, these measures may not be comparable to non-GAAP financial measures reported by other companies.
We believe the non-GAAP financial information provides important supplemental information to both management and investors regarding financial and business trends used in assessing our financial condition and results of operations.
The non-GAAP financial measures associated with operating income and margin, tax rate and EPS assist investors with analyzing our business segment results as well as with predicting future performance. In addition, these non-GAAP financial measures are also reviewed by management in order to evaluate the financial performance of each segment. They are the basis for performance reviews, compensation and resource allocation. We believe that the presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as management.
As a result, one should not consider these measures in isolation or as a substitute for our results reported under GAAP. We compensate for these limitations by analyzing results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results. |
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INGERSOLL-RAND PLC | |||||||||||||||||||
Reconciliation of GAAP to non-GAAP | |||||||||||||||||||
(In millions) | |||||||||||||||||||
UNAUDITED |
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For the quarter ended December 31, 2017 | For the quarter ended December 31, 2016* | ||||||||||||||||||
As Reported | Margin | As Reported | Margin | ||||||||||||||||
Climate | |||||||||||||||||||
Net revenues | $ | 2,760.2 | $ | 2,558.6 | |||||||||||||||
Segment operating income | $ | 348.2 | 12.6 | % | $ | 348.8 | 13.6 | % | |||||||||||
Restructuring | 7.1 | 0.3 | % | 0.9 | 0.1 | % | |||||||||||||
Adjusted operating income | 355.3 | 12.9 | % | 349.7 | 13.7 | % | |||||||||||||
Depreciation and amortization | 63.2 | 2.3 | % | 55.9 | 2.2 | % | |||||||||||||
Adjusted OI plus D&A | $ | 418.5 | 15.2 | % | $ | 405.6 | 15.9 | % | |||||||||||
Industrial | |||||||||||||||||||
Net revenues | $ | 857.9 | $ | 800.2 | |||||||||||||||
Segment operating income | $ | 110.6 | 12.9 | % | $ | 85.4 | 10.7 | % | |||||||||||
Restructuring | 2.6 | 0.3 | % | 7.4 | 0.9 | % | |||||||||||||
Adjusted operating income | 113.2 | 13.2 | % | 92.8 | 11.6 | % | |||||||||||||
Depreciation and amortization | 20.5 | 2.4 | % | 16.8 | 2.1 | % | |||||||||||||
Adjusted OI plus D&A | $ | 133.7 | 15.6 | % | $ | 109.6 | 13.7 | % | |||||||||||
Corporate | |||||||||||||||||||
Unallocated corporate expense | $ | (72.1 | ) | $ | (81.4 | ) | |||||||||||||
Restructuring | 3.9 | 6.4 | |||||||||||||||||
Adjusted corporate expense | (68.2 | ) | (75.0 | ) | |||||||||||||||
Depreciation and amortization | 7.7 | 14.8 | |||||||||||||||||
Adjusted corporate expense plus D&A | $ | (60.5 | ) | $ | (60.2 | ) | |||||||||||||
Total Company | |||||||||||||||||||
Net revenues | $ | 3,618.1 | $ | 3,358.8 | |||||||||||||||
Operating income | $ | 386.7 | 10.7 | % | $ | 352.8 | 10.5 | % | |||||||||||
Restructuring | 13.6 | 0.4 | % | 14.7 | 0.4 | % | |||||||||||||
Adjusted operating income | 400.3 | 11.1 | % | 367.5 | 10.9 | % | |||||||||||||
Depreciation and amortization | 91.4 | 2.5 | % | 87.5 | 2.6 | % | |||||||||||||
Adjusted OI plus D&A | $ | 491.7 | 13.6 | % | $ | 455.0 | 13.5 | % | |||||||||||
* Retrospectively restated for adoption of ASU 2017-07, see Table 10 for additional information. |
|||||||||||||||||||
The Company reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). This supplemental schedule provides non-GAAP financial information and a quantitative reconciliation of the difference between the non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. | |||||||||||||||||||
The non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. They have limitations in that they do not reflect all of the costs associated with the operations of our businesses as determined in accordance with GAAP. In addition, these measures may not be comparable to non-GAAP financial measures reported by other companies. | |||||||||||||||||||
We believe the non-GAAP financial information provides important supplemental information to both management and investors regarding financial and business trends used in assessing our financial condition and results of operations. | |||||||||||||||||||
The non-GAAP financial measures of adjusted operating income, plus depreciation and amortization, adjusted corporate expense, plus depreciation and amortization, and related margins assist investors with analyzing our business segment results as well as with predicting future performance. In addition, these non-GAAP financial measures are also reviewed by management in order to evaluate the financial performance of each segment. They are the basis for performance reviews, compensation and resource allocation. We believe that the presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as management. | |||||||||||||||||||
As a result, one should not consider these measures in isolation or as a substitute for our results reported under GAAP. We compensate for these limitations by analyzing results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results. | |||||||||||||||||||
INGERSOLL-RAND PLC | |||||||||||||||||||
Reconciliation of GAAP to non-GAAP | |||||||||||||||||||
(In millions) | |||||||||||||||||||
UNAUDITED |
|||||||||||||||||||
For the year ended December 31, 2017 | For the year ended December 31, 2016* | ||||||||||||||||||
As Reported | Margin | As Reported | Margin | ||||||||||||||||
Climate | |||||||||||||||||||
Net revenues | $ | 11,167.5 | $ | 10,545.0 | |||||||||||||||
Segment operating income | $ | 1,572.7 | 14.1 | % | $ | 1,537.5 | 14.6 | % | |||||||||||
Restructuring | 42.3 | 0.4 | % | 6.2 | 0.0 | % | |||||||||||||
Adjusted operating income | 1,615.0 | 14.5 | % | 1,543.7 | 14.6 | % | |||||||||||||
Depreciation and amortization | 247.6 | 2.2 | % | 225.2 | 2.1 | % | |||||||||||||
Adjusted OI plus D&A | $ | 1,862.6 | 16.7 | % | $ | 1,768.9 | 16.7 | % | |||||||||||
Industrial | |||||||||||||||||||
Net revenues | $ | 3,030.1 | $ | 2,963.9 | |||||||||||||||
Segment operating income | $ | 357.6 | 11.8 | % | $ | 300.3 | 10.1 | % | |||||||||||
Restructuring | 14.5 | 0.5 | % | 20.5 | 0.7 | % | |||||||||||||
Adjusted operating income | 372.1 | 12.3 | % | 320.8 | 10.8 | % | |||||||||||||
Depreciation and amortization | 77.3 | 2.5 | % | 67.2 | 2.3 | % | |||||||||||||
Adjusted OI plus D&A | $ | 449.4 | 14.8 | % | $ | 388.0 | 13.1 | % | |||||||||||
Corporate | |||||||||||||||||||
Unallocated corporate expense | $ | (265.0 | ) | $ | (234.6 | ) | |||||||||||||
Restructuring | 4.9 | 8.8 | |||||||||||||||||
Adjusted corporate expense | (260.1 | ) | (225.8 | ) | |||||||||||||||
Depreciation and amortization | 28.4 | 59.8 | |||||||||||||||||
Adjusted corporate expense plus D&A | $ | (231.7 | ) | $ | (166.0 | ) | |||||||||||||
Total Company | |||||||||||||||||||
Net revenues | $ | 14,197.6 | $ | 13,508.9 | |||||||||||||||
Operating income | $ | 1,665.3 | 11.7 | % | $ | 1,603.2 | 11.9 | % | |||||||||||
Restructuring | 61.7 | 0.5 | % | 35.5 | 0.2 | % | |||||||||||||
Adjusted operating income | 1,727.0 | 12.2 | % | 1,638.7 | 12.1 | % | |||||||||||||
Depreciation and amortization | 353.3 | 2.5 | % | 352.2 | 2.6 | % | |||||||||||||
Adjusted OI plus D&A | $ | 2,080.3 | 14.7 | % | $ | 1,990.9 | 14.7 | % | |||||||||||
* Retrospectively restated for adoption of ASU 2017-07, see Table 10 for additional information. |
|||||||||||||||||||
The Company reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). This supplemental schedule provides non-GAAP financial information and a quantitative reconciliation of the difference between the non-GAAP financial measures and the financial measures calculated and reported in accordance with GAAP. | |||||||||||||||||||
The non-GAAP financial measures should be considered supplemental to, not a substitute for or superior to, financial measures calculated in accordance with GAAP. They have limitations in that they do not reflect all of the costs associated with the operations of our businesses as determined in accordance with GAAP. In addition, these measures may not be comparable to non-GAAP financial measures reported by other companies. | |||||||||||||||||||
We believe the non-GAAP financial information provides important supplemental information to both management and investors regarding financial and business trends used in assessing our financial condition and results of operations. | |||||||||||||||||||
The non-GAAP financial measures of adjusted operating income, plus depreciation and amortization, adjusted corporate expense, plus depreciation and amortization, and related margins assist investors with analyzing our business segment results as well as with predicting future performance. In addition, these non-GAAP financial measures are also reviewed by management in order to evaluate the financial performance of each segment. They are the basis for performance reviews, compensation and resource allocation. We believe that the presentation of these non-GAAP financial measures will permit investors to assess the performance of the Company on the same basis as management. | |||||||||||||||||||
As a result, one should not consider these measures in isolation or as a substitute for our results reported under GAAP. We compensate for these limitations by analyzing results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results. | |||||||||||||||||||
INGERSOLL-RAND PLC | |||||||||||
Condensed Consolidated Balance Sheets | |||||||||||
(In millions) | |||||||||||
December 31, | December 31, | ||||||||||
2017 | 2016 | ||||||||||
ASSETS |
UNAUDITED |
||||||||||
Cash and cash equivalents | $ | 1,549.4 | $ | 1,714.7 | |||||||
Accounts and notes receivable, net | 2,477.4 | 2,223.0 | |||||||||
Inventories, net | 1,555.4 | 1,385.8 | |||||||||
Other current assets | 536.9 | 255.8 | |||||||||
Total current assets | 6,119.1 | 5,579.3 | |||||||||
Property, plant and equipment, net | 1,551.3 | 1,511.0 | |||||||||
Goodwill | 5,935.7 | 5,658.4 | |||||||||
Intangible assets, net | 3,742.9 | 3,785.1 | |||||||||
Other noncurrent assets | 824.3 | 863.6 | |||||||||
Total assets | $ | 18,173.3 | $ | 17,397.4 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Accounts payable | $ | 1,556.1 | $ | 1,334.0 | |||||||
Accrued expenses and other current liabilities |
2,164.9 | 1,895.5 | |||||||||
Short-term borrowings and current maturities of long-term debt | 1,107.0 | 360.8 | |||||||||
Total current liabilities | 4,828.0 | 3,590.3 | |||||||||
Long-term debt | 2,957.0 | 3,709.4 | |||||||||
Other noncurrent liabilities | 3,181.4 | 3,379.4 | |||||||||
Shareholders' Equity | 7,206.9 | 6,718.3 | |||||||||
Total liabilities and equity | $ | 18,173.3 | $ | 17,397.4 | |||||||
INGERSOLL-RAND PLC | ||||||||||||
Condensed Consolidated Statement of Cash Flows | ||||||||||||
(In millions) | ||||||||||||
UNAUDITED |
||||||||||||
For the year | ||||||||||||
ended December 31, | ||||||||||||
2017 | 2016* | |||||||||||
Operating Activities | ||||||||||||
Earnings from continuing operations | $ | 1,337.7 | $ | 1,459.8 | ||||||||
Depreciation and amortization | 353.3 | 352.2 | ||||||||||
Changes in assets and liabilities and other non-cash items | (129.4 | ) | (379.0 | ) | ||||||||
Net cash provided by continuing operating activities | 1,561.6 | 1,433.0 | ||||||||||
Net cash provided by (used in) discontinued operating activities | (38.1 | ) | 88.9 | |||||||||
Net cash provided by operating activities | 1,523.5 | 1,521.9 | ||||||||||
Investing Activities | ||||||||||||
Capital expenditures | (221.3 | ) | (182.7 | ) | ||||||||
Acquisition of businesses, sale of equity investment and other, net | (153.4 | ) | 422.8 | |||||||||
Net cash provided by (used in) investing activities | (374.7 | ) | 240.1 | |||||||||
Financing Activities | ||||||||||||
Short-term borrowings (payments), net | (11.7 | ) | (150.7 | ) | ||||||||
Dividends paid to ordinary shareholders | (430.1 | ) | (348.6 | ) | ||||||||
Repurchase of ordinary shares | (1,016.9 | ) | (250.1 | ) | ||||||||
Other financing activities, net | 26.2 | 22.5 | ||||||||||
Net cash used in financing activities | (1,432.5 | ) | (726.9 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 118.4 | (57.2 | ) | |||||||||
Net increase (decrease) in cash and cash equivalents | (165.3 | ) | 977.9 | |||||||||
Cash and cash equivalents - beginning of period | 1,714.7 | 736.8 | ||||||||||
Cash and cash equivalents - end of period | $ | 1,549.4 | $ | 1,714.7 | ||||||||
* Retrospectively restated for the adoption of ASU 2016-09 on January 1, 2017, the impact of which resulted in an improvement to cash flow provided by operating activities with a corresponding reduction to cash flow used in financing activities of $21.7 million. | ||||||||||||
INGERSOLL-RAND PLC | |||||||||||||||||||||
Balance Sheet Metrics and Free Cash Flow | |||||||||||||||||||||
($ in millions) | |||||||||||||||||||||
UNAUDITED |
|||||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||||
2017 | 2016* | ||||||||||||||||||||
Net Receivables | $ | 2,477 | $ | 2,223 | |||||||||||||||||
Days Sales Outstanding | 62.5 | 60.4 | |||||||||||||||||||
Net Inventory | $ | 1,555 | $ | 1,386 | |||||||||||||||||
Inventory Turns | 6.5 | 6.8 | |||||||||||||||||||
Accounts Payable | $ | 1,556 | $ | 1,334 | |||||||||||||||||
Days Payable Outstanding | 55.8 | 51.9 | |||||||||||||||||||
Forecast (b) |
|
|
|||||||||||||||||||
For the year ending |
Year ended |
Year ended |
|||||||||||||||||||
December 31, 2018 | December 31, 2017 | December 31, 2016** | |||||||||||||||||||
Cash flow provided by operating activities (a) | $ | 1,445.0 | - | $ | 1,545.0 | $ | 1,523.5 | $ | 1,521.9 | ||||||||||||
Capital expenditures | (300.0 | ) | - | (300.0 | ) | (221.3 | ) | (182.7 | ) | ||||||||||||
Cash payment for restructuring | 55.0 | - | 55.0 | 38.1 | 27.5 | ||||||||||||||||
Free cash flow | $ | 1,200.0 | - | $ | 1,300.0 | $ | 1,340.3 | $ | 1,366.7 | ||||||||||||
Adjusted earnings from continuing operations attributable to Ingersoll-Rand plc | $ | 1,162.8 | $ | 1,080.4 | |||||||||||||||||
Discontinued operations, net of tax | (25.4 | ) | 32.9 | ||||||||||||||||||
Adjusted net earnings | $ | 1,137.4 | $ | 1,113.3 | |||||||||||||||||
Free cash flow as a percent of adjusted net earnings | 118 | % | 123 | % | |||||||||||||||||
(a) | Includes both continuing and discontinued operations. | ||||||||||||||||||||
(b) | Amounts are approximate. | ||||||||||||||||||||
* | Retrospectively restated for adoption of ASU 2017-07, see Table 10 for additional information. | ||||||||||||||||||||
** |
Retrospectively restated for the adoption of ASU 2016-09 on January 1, 2017, the impact of which resulted in an improvement to cash flow provided by operating activities of $21.7 million. | ||||||||||||||||||||
The Company reports its financial results in accordance with generally accepted accounting principles in the United States (GAAP). This supplemental schedule provides non-GAAP financial information and a quantitative reconciliation of the difference between the non-GAAP financial measure and the financial measure calculated and reported in accordance with GAAP. | |||||||||||||||||||||
The non-GAAP financial measure should be considered supplemental to, not a substitute for or superior to, the financial measure calculated in accordance with GAAP. It has limitations in that it does not reflect all of the costs associated with the operations of our businesses as determined in accordance with GAAP. In addition, this measure may not be comparable to non-GAAP financial measures reported by other companies. | |||||||||||||||||||||
We believe the non-GAAP financial information provides important supplemental information to both management and investors regarding financial and business trends used in assessing our financial condition and cash flow. | |||||||||||||||||||||
The non-GAAP financial measure of free cash flow assists investors with analyzing our business results as well as with predicting future performance. In addition, this non-GAAP financial measure is reviewed by management in order to evaluate the financial performance of each segment as well as the Company as a whole. It is the basis for performance reviews, compensation and resource allocation. We believe that the presentation of this non-GAAP financial measure will permit investors to assess the performance of the Company on the same basis as management. | |||||||||||||||||||||
As a result, one should not consider this measure in isolation or as a substitute for our results reported under GAAP. We compensate for these limitations by analyzing results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to non-GAAP results. | |||||||||||||||||||||
INGERSOLL-RAND PLC | ||||||||||||||||||||||||||||||||
Impact for the adoption of ASU 2017-07 (1) | ||||||||||||||||||||||||||||||||
(In millions) | ||||||||||||||||||||||||||||||||
UNAUDITED |
||||||||||||||||||||||||||||||||
For the quarter | For the quarter | |||||||||||||||||||||||||||||||
ended December 31, 2017 | ended December 31, 2016 | |||||||||||||||||||||||||||||||
Cost of |
Selling & |
Total |
Cost of |
Selling & |
Total | |||||||||||||||||||||||||||
Climate | (2) | $ | 1.5 | $ | 2.2 | $ | 3.7 | $ | 0.7 | $ | 0.8 | $ | 1.5 | |||||||||||||||||||
Industrial | 0.3 | 0.8 | 1.1 | 0.4 | 0.8 | 1.2 | ||||||||||||||||||||||||||
Unallocated corporate | 3.9 | 0.6 | 4.5 | 2.9 | 0.3 | 3.2 | ||||||||||||||||||||||||||
Operating Income | 5.7 | 3.6 | 9.3 | 4.0 | 1.9 | 5.9 | ||||||||||||||||||||||||||
Other income/(expense), net | (5.7 | ) | (3.6 | ) | (9.3 | ) | (4.0 | ) | (1.9 | ) | (5.9 | ) | ||||||||||||||||||||
Earnings before income taxes | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||
For the year | For the year | |||||||||||||||||||||||||||||||
ended December 31, 2017 | ended December 31, 2016 | |||||||||||||||||||||||||||||||
Cost of |
Selling & |
Total |
Cost of |
Selling & |
Total | |||||||||||||||||||||||||||
Climate | (3) | $ | 7.9 | $ | 5.7 | $ | 13.6 | $ | 6.4 | $ | 3.7 | $ | 10.1 | |||||||||||||||||||
Industrial | 1.4 | 3.3 | 4.7 | 1.9 | 3.5 | 5.4 | ||||||||||||||||||||||||||
Unallocated corporate | 11.4 | 1.3 | 12.7 | 13.1 | 1.5 | 14.6 | ||||||||||||||||||||||||||
Operating Income | 20.7 | 10.3 | 31.0 | 21.4 | 8.7 | 30.1 | ||||||||||||||||||||||||||
Other income/(expense), net | (20.7 | ) | (10.3 | ) | (31.0 | ) | (21.4 | ) | (8.7 | ) | (30.1 | ) | ||||||||||||||||||||
Earnings before income taxes | $ | - | $ | - | $ | - | $ | - | $ | - | $ | - | ||||||||||||||||||||
(1) The Company adopted ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, on January 1, 2017. This adoption requires that components of net periodic pension and postretirement benefit cost other than the service cost component be included in the line item "Other income/(expense), net" in the income statement. | ||||||||||||||||||||||||||||||||
(2) Amounts recorded within the 2017 Selling and Administrative Expense account of Climate contain a settlement loss of $1.1 million associated with lump sum distributions of a non-U.S. defined pension plan. | ||||||||||||||||||||||||||||||||
(3) Amounts recorded within the 2017 Cost of Goods Sold account of Climate contain a non-cash pension curtailment loss of $2.3 million associated with a certain defined benefit plan freeze that is effective January 1, 2022 and a settlement loss of $2.8 million associated with lump sum distributions of a non-U.S. defined pension plan. | ||||||||||||||||||||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20180131005486/en/
Ingersoll-Rand plc
Media:
Perri Richman,
732-652-6943
[email protected]
or
Investors:
Zac
Nagle, 704-990-3001
[email protected]