Letter to Shareholders 

Dear Shareholder,

In 2018, we continued along our path of premier performance, delivering on the global business strategy that has defined Ingersoll Rand over the past decade, underpinning our financial results and creating lasting value for our people, customers and shareholders. 

Our strategy is linked to attractive end markets supported by global megatrends – climate change, urbanization, resource scarcity and digital connectedness. As the world becomes warmer and cities more populated, access to safe food and clean water is at risk. We are at the nexus of environmental sustainability and impact, excelling at enhancing the energy efficiency of buildings, transportation and industrial processes, lowering greenhouse gas (GHG) emissions, reducing food waste and generating productivity for customers.

Our business portfolio creates a platform to consistently grow above average global economic conditions. It is anchored by a business operating system designed to generate strong top-line growth, expand operating margins, and generate powerful cash flow, and our balanced and dynamic capital allocation strategy enables us to consistently deploy capital where it earns the best returns. Our experienced management team, highly engaged workforce and winning culture make our performance sustainable. The result is a differentiated business model that drives strong shareholder returns. 

Financial Performance

Our focus and consistent execution resulted in another year of robust financial performance. We delivered top quartile adjusted continuing EPS growth of 24%;* record organic bookings* and revenue growth at 13% and 9% respectively; significant adjusted operating margin expansion* of 60 basis points; and healthy free cash flow.

Despite significant challenges from persistent inflation and tariffs, we applied our business operating system to execute a combination of pricing actions and operational excellence initiatives to offset these costs effectively, driving improved leverage and margin expansion throughout the year.

At the same time, we continued to build a stronger, more resilient company through robust, high-return investments in product and service innovation, and saw services growth of over 10%. We further delivered on our commitment to dynamic capital allocation with a strong and growing dividend, share repurchases, and strategic technology and channel acquisitions aimed at further improving long-term shareholder returns. In 2018, we returned nearly $1.4 billion to shareholders, consisting

of $480 million in dividends and $900 million in share repurchases. We raised the quarterly dividend by 18% during the year to $0.53 per share, exiting 2018 at $2.12 annualized per share. Our total shareholder return of 63% over the past five years exceeds the S&P 500 Industrials Index by nearly double. 

Strategic Growth and Innovation Investments

We are always evaluating opportunities where we can extend our leadership in solving environmental and industrial challenges through strategic acquisitions. During the year, we acquired ICS Cool Energy, a rental equipment provider of high-performance temperature control systems and services, which is a strong fit with our HVAC business and expands our sales and service channel in key Western European markets. 

We also entered a joint venture with Mitsubishi Electric that includes marketing, sales and distribution support of ductless and variable refrigerant flow heating and air conditioning in the U.S. and select Latin American countries. The ductless market is expected to grow rapidly in the coming years. This venture helps to ensure we have the right product for the right applications to meet the needs of our customers.

Through the ongoing work of our product growth teams, we launched more than 90 major new products and services in 2018, strengthening our digital and services expertise, and continuing to demonstrate our commitment to being environmentally responsible and productive at the same time. 

For example, we introduced several new innovations to our EcoWiseTM portfolio – products designed to lower environmental impact with next generation, low global warming potential (GWP) refrigerants and high-efficiency operation. Affirming our increasing investment in this portfolio, customers see EcoWise as a game-changing solution that provides more sustainable product choices and enables them to achieve their own sustainability goals.

In addition, global services growth remained strong in 2018. This reflects our ongoing focus on expanding our recurring revenue streams through building management and remote monitoring, fleet monitoring, HVAC and compressor equipment servicing and other initiatives. These capabilities help ensure we remain close to our customers through the life of their building, transportation, and industrial assets.

As a company at the forefront of sustainability, we apply our own innovation to make our business more sustainable. As part of our climate commitment, in 2014 we committed to a 35% reduction in our GHG footprint from our own operations by 2020. We achieved the goal two years ahead of schedule, applying the same energy saving strategies we offer to our customers. 

Winning Culture

Over the years, we’ve built an experienced management team and a winning culture that makes our performance sustainable and the company a great place to work. Our more than 44,000** people worldwide are the engine that makes our achievements possible. We respect and value diverse cultures, backgrounds, and perspectives, and understand our people must feel connected and empowered to consistently achieve premier performance. Our annual employee engagement scores remain at top-tier levels in our industry.

Two years ago, we were the first in our industry to enter the Paradigm for Parity and CEO Action for Diversity & Inclusion to bring gender parity and cultivate diversity and inclusion in the workplace. In 2018, we implemented new programs and practices designed to eliminate unconscious biases in the workplace. A learning experience called Courageous Inclusion reached the top three levels of management in 2018, and the remainder will complete the program by June of this year.

We also continued to accelerate our efforts through differentiated investments in training and development. Our Women’s Leadership Program (WLP), aimed at advancing our highly talented women leaders, has graduated 140 women since its inception in 2012. The success of WLP has led to the launch of two new career development programs for women that will begin this year. We increased the number of women in leadership roles in 2018 and expect to accelerate that progress this year. In addition, nearly 900 individuals from across the globe have graduated from our Team Leader Development Program, which provides production associates with operational excellence and leadership skills to grow into manufacturing supervisors and beyond. 

"Sustainability is more than something we do; it’s everything we do."

Performance With Purpose

Our 2018 performance underscores the long-term strength and earnings power of our business model. By continually reinvesting in our business, we have built a differentiated company with deep domain expertise and sustainable products and services that keep us on the forefront of addressing global challenges and enhancing the quality of life.

Sustainability is more than something we do; it’s everything we do. Sustainability is embedded into our brand promise and our core strategies of growth excellence, operational excellence, winning culture and dynamic capital allocation. It is the enabling force behind us growing faster than the global economy and it differentiates our business model, allowing us to drive strong shareholder returns over the long term.

As a global company, we know that sustainability fuels our broader aim: to perform in a way that creates lasting value for our stakeholders and has a positive influence on the world. In short, performance with purpose.


Michael W. Lamach


**Number of employees, excluding contractors