Item 1. BUSINESS

Overview

Ingersoll-Rand plc (Plc or Parent Company), a public limited company incorporated in Ireland in 2009, and its consolidated subsidiaries (collectively, we, our, the Company) is a diversified, global company that provides products, services and solutions to enhance the quality, energy efficiency and comfort of air in homes and buildings, transport and protect food and perishables and increase industrial productivity and efficiency. Our business segments consist of Climate and Industrial, both with strong brands and highly differentiated products within their respective markets. We generate revenue and cash primarily through the design, manufacture, sale and service of a diverse portfolio of industrial and commercial products that include well-recognized, premium brand names such as American Standard®, ARO®, Club Car®, Ingersoll-Rand®, Thermo King® and Trane®.

To achieve our mission of being a world leader in creating comfortable, sustainable and efficient environments, we continue to focus on growth by increasing our recurring revenue stream from parts, services, controls, used equipment and rentals; and to continuously improve the efficiencies and capabilities of the products and services of our businesses. We also continue to focus on operational excellence strategies as a central theme to improving our earnings and cash flow.

Business Segments

Our business segments provide products, services and solutions used to increase the efficiency and productivity of both industrial and commercial operations and homes, as well as improve the health and comfort of people around the world.

Our business segments are as follows:

Climate

Our Climate segment delivers energy-efficient products and innovative energy services. It 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 AdvantageTM and NexiaTM; and Thermo King® transport temperature control solutions. This segment had 2019 net revenues of $13,075.9 million.

Industrial

Our Industrial segment delivers products and services that enhance energy efficiency, productivity and operations. It includes compressed air and gas systems and services, power tools, material handling systems, fluid management systems, as well as Club Car ® golf, utility and consumer low-speed vehicles. This segment had 2019 net revenues of $3,523.0 million.

Products and Services

Our principal products and services by business segment include the following:

Climate
Aftermarket and OEM parts and supplies		Indoor air quality
Air conditioners		Industrial refrigeration
Air exchangers		Installation contracting
Air handlers		Large commercial unitary
Airside and terminal devices		Light commercial unitary
Auxiliary power units		Motor replacements
Building management systems		Multi-pipe HVAC systems
Bus and rail HVAC systems		Package heating and cooling systems
Chillers		Performance contracting
Coils and condensers		Rail refrigeration systems
Container refrigeration systems and gensets		Refrigerant reclamation
Control systems		Repair and maintenance services
Cryogenic refrigeration systems		Rental services
Diesel-powered refrigeration systems		Self-powered truck refrigeration systems
Ductless systems		Service agreements
Energy management services		Temporary heating and cooling systems
Facility management services		Thermostats/controls
Furnaces		Trailer refrigeration systems
Geothermal systems		Transport heater products
Heat pumps		Unitary systems (light and large)
Home automation		Variable Refrigerant Flow
Humidifiers		Vehicle-powered truck refrigeration systems
Hybrid and non-diesel transport refrigeration solutions		Water source heat pumps
Ice energy storage solutions

Industrial
Air compressors (centrifugal, reciprocating and rotary)		Hydrogen compression, dispensing and refueling systems
Air-operated pumps (diaphragm and piston)		Installation contracting
Air treatment and air separation systems		Liquid and gas sampling systems
Aftermarket and OEM parts and supplies		Maintenance and repair services
Airends		Metering and process pumps, skids and systems
Blowers		Mixers
Controllers and control systems dryers		Odorant injection systems
Digital Systems Monitoring		Power tools (pneumatic, cordless and electric)
Engine starting systems		Precision fastening tools, software and systems
Ergonomic material handling systems		Rental services
Filters, regulators and lubricators		Rough terrain (AWD) vehicles
Fluid power components		Service agreements
Gas boosters and high-pressure valves		Utility and consumer low-speed vehicles
Gas compressors		Mobile golf information systems
Golf vehicles		Water-powered dosing pumps
Hoists (pneumatic, hydraulic, electric and manual)		Winches (pneumatic, hydraulic and electric)

These products are sold primarily under our name and under other names including American Standard®, ARO®, Club Car®, Ingersoll-Rand®, Thermo King® and Trane®.

Separation of Industrial Segment Businesses

In April 2019, Ingersoll-Rand plc and Gardner Denver Holdings, Inc. (GDI) announced that they entered into definitive agreements pursuant to which we will separate our Industrial segment businesses (IR Industrial) by way of spin-off to our shareholders and then combine with GDI to create a new company focused on flow creation and industrial technologies. This business is expected to be renamed Ingersoll-Rand, Inc. Our remaining HVAC and transport refrigeration businesses, reported under the Climate segment, will focus on climate control solutions for buildings, homes and transportation and be renamed Trane Technologies plc. The transaction is expected to close by early 2020, subject to approval by GDI’s shareholders, regulatory approvals and customary closing conditions.

Acquisitions and Equity Investments

During 2019, we acquired several businesses that complement existing products and services. In May 2019, we acquired 100% of the outstanding stock of Precision Flow Systems (PFS). PFS, reported in the Industrial segment, is a manufacturer of precision flow control equipment including precision dosing pumps and controls that serve the global water, oil and gas, agriculture, industrial and specialty market segments. Acquisitions within the Climate segment consisted of an independent dealer to support the ongoing strategy to expand our distribution network as well as other businesses that strengthen our product portfolio.

During 2018, we acquired several businesses and entered into a joint venture. In May 2018, we completed our investment of a 50% ownership interest in a joint venture with Mitsubishi Electric Corporation (Mitsubishi). The joint venture, reported within the Climate segment, focuses on marketing, selling and supporting variable refrigerant flow (VRF) and ductless heating and air conditioning systems through Trane, American Standard and Mitsubishi channels in the U.S. and select Latin American countries. In January 2018, we acquired 100% of the outstanding stock of ICS Group Holdings Limited (ICS Cool Energy). The acquired business, reported within the Climate segment, specializes in the temporary rental of energy efficient chillers for commercial and industrial buildings across Europe. It also sells, permanently installs and services high performance temperature control systems for all types of industrial processes.

During 2017, we acquired several businesses, including channel acquisitions, that complement existing products and services. Acquisitions within the Climate segment primarily consisted of independent dealers which support the ongoing strategy to expand our distribution network. Acquisitions within the Industrial segment primarily consisted of a telematics business which builds upon our growing portfolio of connected assets.

Competitive Conditions

Our products and services are sold in highly competitive markets throughout the world. Due to the diversity of these products and services and the variety of markets served, we encounter a wide variety of competitors that vary by product line and services. They include well-established regional or specialized competitors, as well as larger U.S. and non-U.S. corporations or divisions of larger companies.

The principal methods of competition in these markets relate to price, quality, delivery, service and support, technology and innovation. We believe that we are one of the leading manufacturers in the world of HVAC systems and services, air compression systems, transport temperature control products, power tools, and golf, utility and consumer low-speed vehicles.

Distribution

Our products are distributed by a number of methods, which we believe are appropriate to the type of product. U.S. sales are made through branch sales offices, distributors and dealers across the country. Non-U.S. sales are made through numerous subsidiary sales and service companies with a supporting chain of distributors throughout the world.

Operations by Geographic Area

Approximately 34% of our net revenues in 2019 were derived outside the U.S. and we sold products in more than 100 countries. Therefore, the attendant risks of manufacturing or selling in a particular country, such as currency devaluation, nationalization and establishment of common markets, may have an adverse impact on our non-U.S. operations.

Customers

We have no customer that accounted for more than 10% of our consolidated net revenues in 2019, 2018 or 2017. No material part of our business is dependent upon a single customer or a small group of customers; therefore, the loss of any one customer would not have a material adverse effect on our results of operations or cash flows.

Raw Materials

We manufacture many of the components included in our products, which requires us to employ a wide variety of commodities. Principal commodities, such as steel, copper and aluminum, are purchased from a large number of independent sources around the world, primarily within the region where the products are manufactured. We believe that available sources of supply will generally be sufficient for the foreseeable future. There have been no commodity shortages which have had a material adverse effect on our businesses.

Working Capital

We manufacture products that must be readily available to meet our customers’ rapid delivery requirements. Therefore, we maintain an adequate level of working capital to support our business needs and our customers’ requirements. Such working capital requirements are not, however, in the opinion of management, materially different from those experienced by our major competitors. We believe our sales and payment terms are competitive in and appropriate for the markets in which we compete.

Seasonality

Demand for certain of our products and services is influenced by weather conditions. For instance, sales in our commercial and residential HVAC businesses historically tend to be seasonally higher in the second and third quarters of the year because this represents spring and summer in the U.S. and other northern hemisphere markets, which are the peak seasons for sales of air conditioning systems and services. Therefore, results of any quarterly period may not be indicative of expected results for a full year and unusual weather patterns or events could negatively or positively affect certain segments of our business and impact overall results of operations.

Research and Development

We engage in research and development activities in an effort to introduce new products, enhance existing product effectiveness, improve ease of use and reliability as well as expand the various applications for which our products may be appropriate. In addition, we continually evaluate developing technologies in areas that we believe will enhance our business for possible investment or acquisition. We anticipate that we will continue to make significant expenditures for research and development activities as we look to maintain and improve our competitive position.

Patents and Licenses

Our intellectual property rights are important to our business and include numerous patents, trademarks, copyrights, trade secrets, proprietary technology, technical data, business processes, and other confidential information. Although in aggregate we consider our intellectual property rights to be valuable to our operations, we do not believe that our business is materially dependent on a single intellectual property right or any group of them. In our opinion, engineering, production skills and experience are more responsible for our market position than our patents and/or licenses.

Backlog

Our approximate backlog of orders, believed to be firm, at December 31, was as follows:

In millions		2019				2018
Climate		$	2,513.3			$	2,914.4
Industrial		622.5				514.8
Total		$	3,135.8			$	3,429.2

These backlog figures are based on orders received. While the major portion of our products are built in advance of order and either shipped or assembled from stock, orders for specialized machinery or specific customer application are submitted with extensive lead times and are often subject to revision and deferral, and to a lesser extent cancellation or termination. We expect to ship a majority of the December 31, 2019 backlog during 2020.

Environmental Matters

We continue to be dedicated to environmental and sustainability programs to minimize the use of natural resources, and reduce the utilization and generation of hazardous materials from our manufacturing processes and to remediate identified environmental concerns. As to the latter, we are currently engaged in site investigations and remediation activities to address environmental cleanup from past operations at current and former manufacturing facilities.

We are sometimes a party to environmental lawsuits and claims and have received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. We have also been identified as a potentially responsible party (PRP) for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites. For all such sites, there are other PRPs and, in most instances, our involvement is minimal.

In estimating our liability, we have assumed that we will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based on our understanding of the parties’ financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.

For a further discussion of our potential environmental liabilities, see Note 22 to the Consolidated Financial Statements.

Asbestos-Related Matters

Certain of our wholly-owned subsidiaries and former companies are named as defendants in asbestos-related lawsuits in state and federal courts. In many of the lawsuits, a large number of other companies have also been named as defendants. The vast majority of those claims allege injury caused by exposure to asbestos contained in certain historical products, primarily pumps, boilers and railroad brake shoes. None of our existing or previously-owned businesses were a producer or manufacturer of asbestos.

See also the discussion under Part I, Item 3, "Legal Proceedings," and Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations," "Contingent Liabilities," as well as further detail in Note 22 to the Consolidated Financial Statements.

Employees

As of December 31, 2019, we employed approximately 50,000 people throughout the world.

Available Information

We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission under the Securities Exchange Act of 1934.

This Annual Report on Form 10-K, as well as our quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to all of the foregoing reports, are made available free of charge on our Internet website (http://www.ingersollrand.com) as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission. The Board of Directors of the Company has also adopted and posted in the Investor Relations section of the Company’s website our Corporate Governance Guidelines and charters for each of the Board’s standing committees. The contents of the Company’s website are not incorporated by reference in this report.

Executive Officers of the Registrant

The following is a list of executive officers of the Company as of February 18, 2020.

Name and Age		Date of Service as an Executive Officer		Principal Occupation and Other Information for Past Five Years
Michael W. Lamach (56)		2/16/2004		Chairman of the Board (since June 2010) and Chief Executive Officer (since February 2010)
Susan K. Carter (61)		10/2/2013		Senior Vice President and Chief Financial Officer (since October 2013) The Company announced on December 10, 2019 that Ms. Carter will retire as Chief Financial Officer of the Company effective upon the close of the Reverse Morris Trust transaction.
David S. Regnery (57)		8/5/2017		President and Chief Operating Officer (since January 1, 2020); Executive Vice President (September 2017 to December 2019); Vice President, President of Commercial HVAC, North America and EMEA (2013 to 2017)
Marcia J. Avedon (58)		2/7/2007		Executive Vice President, Chief Human Resources, Marketing and Communications Officer (since January 1, 2020); Senior Vice President, Human Resources, Communications and Corporate Affairs (June 2013 to December 2019); Senior Vice President, Human Resources and Communications (2007 - 2013)
Paul A. Camuti (58)		8/1/2011		Executive Vice President and Chief Technology and Strategy Officer (since January 1, 2020); Senior Vice President, Innovation and Chief Technology Officer (August 2011 to December 2019)
Evan M. Turtz (51)		4/3/2019		Senior Vice President and General Counsel (since April 2019); Secretary (Since October 2013); Vice President (Since 2008); Deputy General Counsel-Industrial (Since 2016); General Counsel-Compression Technologies and Services (Since July 2016); Deputy General Counsel-Labor and Employment (2008-2016)
Keith A. Sultana (50)		10/12/2015		Senior Vice President, Global Operations and Integrated Supply Chain (since October 2015); Vice President, Global Procurement (January 2015 to October 2015); Vice President, Global Integrated Supply Chain (GISC) for Climate Solutions (May 2010 to December 2014)
Christopher J. Kuehn (47)		6/1/2015		Vice President and Chief Accounting Officer (since June 2015); Vice President, Corporate Controller and Chief Accounting Officer, Whirlpool Corporation (a global manufacturer and marketer of major home appliances), (2012-2015) The Company announced on December 10, 2019 that Mr. Kuehn will succeed Ms. Carter as Chief Financial Officer of the Company effective upon the close of the Reverse Morris Trust transaction.

No family relationship exists between any of the above-listed executive officers of the Company. All officers are elected to hold office for one year or until their successors are elected and qualified.