Working Together for Enduring Results 2015 ANNUAL REPORT 2016 NOTICE AND PROXY STATEMENT 2015 ANNUAL REPORT | PAGE 1 DRAFT5-UpdatedApril14-7pm.indd 1 4/14/16 8:35 PM This is Ingersoll Rand Vision A world of sustainable progress and enduring results. Purpose We advance the quality of life by creating comfortable, sustainable and effi cient environments. Values INTEGRITY: We act with the highest ethical and legal standards in everything we do. RESPECT: We respect and value the worth of all people, cultures, viewpoints and backgrounds. TEAMWORK: We work together and share resources to provide greater value to our customers, employees, business partners and shareholders. INNOVATION: We use our diverse skills, talents and ideas to develop customer-driven, innovative and imaginative solutions. COURAGE: We speak up for what we believe is right and take measured risks to create progress. Contents 1 THIS IS INGERSOLL RAND 2 LETTER TO SHAREHOLDERS 5 CREATING VALUE 7 INNOVATING FOR THE FUTURE 10 DELIVERING ON OUR COMMITMENTS 13 BUILDING A BETTER WORLD 16 LEADERSHIP PAGE 2 | INGERSOLL RAND DRAFT5-UpdatedApril14-7pm.indd 2 4/14/16 8:35 PM Achieving Premier Performance – Our Strategy Growth Excellence. We use analytics to make clear, strategic choices on what markets to pursue and how to succeed by introducing productive, energy- effi cient and reliable products and services to deliver on our customers’ needs. Operational Excellence. We pursue continuous improvement that drives This is Ingersoll Rand growth, creates value, fosters employee engagement and enhances quality to make the customer experience better. Vision A world of sustainable progress and enduring results. Winning Culture. We engage our employees and develop a workforce with We advance the quality of life by creating comfortable, sustainable and effi cient environments. diverse backgrounds and skills to foster an environment of innovation that Purpose leads to products and services that are better for our customers, society and the environment. Values INTEGRITY: We act with the highest ethical and legal standards in everything we do. RESPECT: We respect and value the worth of all people, cultures, viewpoints and backgrounds. Ingersoll Rand (NYSE: IR) creates comfortable, sustainable and effi cient environments that advance the quality of life across the globe. We heat, cool and automate homes and buildings, enhance commercial and industrial TEAMWORK: productivity, and keep transported food safe and fresh. Diversity, engagement and teamwork drive innovation at We work together and share resources to provide greater value to our customers, employees, Ingersoll Rand and fuel our passion for exceeding our customers’ expectations. Together with principled leadership business partners and shareholders. and ethical business practices, our high-engagement culture drives enduring results that lead to a better world. INNOVATION: We use our diverse skills, talents and ideas to develop customer-driven, innovative and Working Together for Enduring Results imaginative solutions. Teamwork for continuous improvement is fundamental to what we do at Ingersoll Rand. Staying close to our customers, we create products, services and solutions that deliver greater reliability and a better customer COURAGE: experience. Guided by our business operating system, we believe employee engagement is the best way to We speak up for what we believe is right and take measured risks to create progress. improve our business processes, reduce complexity, and ultimately deliver growth and margin enhancement. Through our businesses and as volunteers in our communities, we work to improve the quality of life and advance sustainability across the globe. Global Market-leading Brands Our people and family of brands – including Ingersoll Rand®, Club Car®, Trane® and Thermo King® – work together to create value for customers in global commercial, industrial and residential markets. Contents 1 THIS IS INGERSOLL RAND LETTER TO SHAREHOLDERS Enhances operational Recognized as industry Ensures homeowners and Enhances the quality of 2 effi ciency, saves energy leaders in effi ciency and commercial building owners life through temperature and improves productivity long-lasting value of maximize the comfort and management in global 5 CREATING VALUE through innovative products, golf, utility and personal energy effi ciency potential of transportation. services and solutions. transportation vehicles. their home or facility. 7 INNOVATING FOR THE FUTURE Ingersoll Rand industrial The Club Car product Trane safely and effi ciently Thermo King manufactures products range from portfolio includes golf cars, optimizes indoor environments transport temperature control DELIVERING ON OUR COMMITMENTS complete compressed air a mobile golf information with a broad portfolio of systems for a variety of 10 and gas systems and system, turf and commercial heating, ventilation and air mobile applications, including services, to power tools, utility vehicles, multi- conditioning systems, building trailers, truck bodies, buses, 13 BUILDING A BETTER WORLD fl uid management and passenger shuttle vehicles, and energy services, parts shipboard containers and material handling systems. rough-terrain utility vehicles, support and advanced building railway cars. and street-legal, low- automation controls. LEADERSHIP 16 speed vehicles. 2015 ANNUAL REPORT | PAGE 1 PAGE 2 | INGERSOLL RAND DRAFT5-UpdatedApril14-7pm.indd 2 4/14/16 8:35 PMDRAFT5-UpdatedApril14-7pm.indd 1 4/14/16 8:35 PM Dear Shareholder “The company’s top-quartile performance in 2015 demonstrates our formula is working well. It is a testament to the power of strategy, discipline, innovation and, above all, the commitment of our employees around the world to the vision, purpose and values of Ingersoll Rand.” - MICHAEL W. LAMACH, CHAIRMAN AND CEO I was recently asked In an extremely volatile year, 2015 was further proof to describe what the that our strategy, culture and business operating system world will need from deliver superior results. It was an exceptionally unstable Ingersoll Rand. The period in the energy sectors, in foreign exchange rates, answer is clear: it is in emerging markets and in the stock market. Our the combination of our industrial customers were particularly aff ected. people, technology, science, and products We managed through this volatility by focusing on our and services capabilities customers’ needs and on the elements of our business unleashed to reduce within our control, while anticipating the issues beyond energy demand in buildings, transport and industrial our control. Although some end markets were soft er systems in a reliable manner. Our core strengths – than expected, our full-year results came in on target. energy effi ciency and reliability – help control the Ingersoll Rand extended its multi-year record of top- world’s carbon footprint and enhance productivity. quartile, diversifi ed industrial peer group performance as measured by organic revenue and earnings growth, With the population expected to expand by 2.4 billion incremental margins and total shareholder return. people, or nearly 33 percent, by 2050, the pressure to cut energy demand and greenhouse gas emissions will For 2015 specifi cally, net revenue grew 3 percent only increase. Our employees and customers expect from 2014 on a reported basis and 5 percent organically. Ingersoll Rand to help meet this challenge and that is Adjusted operating margin increased 40 basis points exactly what we are doing. to 11.4 percent, and adjusted earnings per share (EPS) were up 12 percent to $3.73. Our organic operating More than 90 percent of our product portfolio directly leverage, which excludes the impact of foreign exchange addresses demands for greater energy effi ciency with and mergers and acquisitions, was 35 percent – well lower greenhouse gas emissions in buildings, homes, above our target range of 25 percent to 30 percent. industrial spaces and transport markets around the Adjusted free cash fl ow increased 22 percent year- world. This portfolio allows us to deliver meaningful over-year to $985 million – 101 percent of adjusted change in the world, as well as strong fi nancial results. net income. Executing on our capital allocation strategy in 2015, we increased the company’s dividend 16 percent, and repurchased 4.4 million Ingersoll Rand shares for $250 million. During the past fi ve years, and including 2016, our dividend has grown at a compound average annual rate of 24 percent, amounting to approximately one- third of our strong free cash fl ow. Early in 2015 we purchased FRIGOBLOCK, which became part of our Thermo King business, as well as the assets of Cameron International Corporation’s Centrifugal Compression division, which became part of our Compression Technologies and Services business. Despite challenging conditions in their respective PAGE 2 | INGERSOLL RAND PAGE 2 | INGERSOLL RAND DRAFT5-UpdatedApril14-7pm.indd 2 4/14/16 8:35 PM markets, both businesses were effectively integrated and accretive to adjusted EPS on a cash basis in 2015. We will remain disciplined and continue to prioritize acquisition opportunities with the potential to be accretive in the short term and value-creating for our shareholders over the long term. Dear Shareholder In December 2015 we announced an agreement to sell our remaining stake in Hussmann, which we closed in April 2016. The company’s portfolio transactions over “The company’s top-quartile performance in 2015 demonstrates our formula is working