INGERSOLL-RAND PLC, 10-K filed on 2/12/2018
Annual Report
Document and Entity Information Document (USD $)
12 Months Ended
Dec. 31, 2017
Feb. 1, 2018
Jun. 30, 2017
Entity Information [Line Items]
 
 
 
Entity Registrant Name
INGERSOLL-RAND PLC 
 
 
Entity Central Index Key
0001466258 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Document Type
10-K 
 
 
Document Period End Date
Dec. 31, 2017 
 
 
Document Fiscal Year Focus
2017 
 
 
Document Fiscal Period Focus
FY 
 
 
Amendment Flag
false 
 
 
Entity Common Stock, Shares Outstanding
 
249,889,299 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 23,122,311,923 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Net revenues
$ 14,197.6 
$ 13,508.9 
$ 13,300.7 
Cost of goods sold
(9,811.6)
(9,307.9)
(9,277.4)
Selling and administrative expenses
(2,720.7)
(2,597.8)
(2,531.6)
Gain (loss) on sale/asset impairment
(8.4)
Operating income (loss)
1,665.3 
1,603.2 
1,491.7 
Interest expense
(215.8)
(221.5)
(223.0)
Other, net
(31.6)
359.6 
(20.8)
Earnings (loss) before income taxes
1,417.9 
1,741.3 
1,247.9 
Benefit (provision) for income taxes
(80.2)
(281.5)
(540.8)
Earnings (loss) from continuing operations
1,337.7 
1,459.8 
707.1 
Discontinued operations, net of tax
(25.4)
32.9 
(24.3)
Net earnings
1,312.3 
1,492.7 
682.8 
Less: Net earnings attributable to noncontrolling interests
(9.7)
(16.5)
(18.2)
Net earnings (loss) attributable to Ingersoll-Rand plc
1,302.6 
1,476.2 
664.6 
Amounts attributable to Ingersoll-Rand plc ordinary shareholders:
 
 
 
Continuing operations
1,328.0 
1,443.3 
688.9 
Discontinued operations
(25.4)
32.9 
(24.3)
Net earnings (loss) attributable to Ingersoll-Rand plc
1,302.6 
1,476.2 
664.6 
Basic:
 
 
 
Continuing operations
$ 5.21 
$ 5.57 
$ 2.60 
Discontinued operations
$ (0.10)
$ 0.13 
$ (0.09)
Net earnings
$ 5.11 
$ 5.70 
$ 2.51 
Diluted:
 
 
 
Continuing operations
$ 5.14 
$ 5.52 
$ 2.57 
Discontinued operations
$ (0.09)
$ 0.13 
$ (0.09)
Net earnings
$ 5.05 
$ 5.65 
$ 2.48 
Statements of Comprehensive Income
 
 
 
Net earnings
1,312.3 
1,492.7 
682.8 
Currency translation
450.3 
(233.8)
(447.6)
Cash flow hedges and marketable securities unrealized net gains (losses) arising during period
(1.8)
2.2 
1.2 
Cash flow hedges and marketable securities net gains (losses) reclassified into earnings
3.6 
(4.8)
2.6 
Cash flow hedges and marketable securities tax (expense) benefit
0.4 
(1.8)
Total cash flow hedges and marketable securities net of tax
1.8 
(2.2)
2.0 
Pension and OPEB adjustments prior service gains (costs) for the period
(3.8)
(6.2)
(6.8)
Pension and OPEB adjustments net actuarial gains (losses) for the period
39.6 
23.6 
1.8 
Pension and OPEB adjustments amortization reclassified to earnings
52.1 
57.5 
55.1 
Pension and OPEB adjustments settlements and curtailments reclassified to earnings
7.7 
2.1 
0.7 
Pension and OPEB adjustments currency translation and other
(15.4)
22.5 
15.9 
Pension and OPEB adjustments tax (expense) benefit
(20.1)
(23.5)
(32.0)
Total pension and OPEB adjustments, net of tax
60.1 
76.0 
34.7 
Other comprehensive income (loss), net of tax
512.2 
(160.0)
(410.9)
Total comprehensive income (loss), net of tax
1,824.5 
1,332.7 
271.9 
Total comprehensive (income) loss attributable to noncontrolling interests
(10.2)
(26.1)
(13.9)
Total comprehensive income (loss) attributable to Ingersoll-Rand plc
$ 1,814.3 
$ 1,306.6 
$ 258.0 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2017
Dec. 31, 2016
ASSETS
 
 
Cash and cash equivalents
$ 1,549.4 
$ 1,714.7 
Accounts and notes receivable, net
2,477.4 
2,223.0 
Inventories
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 (Excluding Goodwill)
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 compensation and benefits
509.7 
469.8 
Accrued expenses and other current liabilities
1,655.2 
1,425.7 
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 
Postemployment and other benefit liabilities
1,285.3 
1,356.5 
Deferred and noncurrent income taxes
757.5 
884.9 
Other noncurrent liabilities
1,138.6 
1,138.0 
Total liabilities
10,966.4 
10,679.1 
Equity:
 
 
Ingersoll-Rand plc shareholders' equity Ordinary shares, $1 par value (266,271,978 and 282,700,041 shares issued at December 31, 2014 and 2013, respectively)
274.0 
271.7 
Treasury Stock, Value
(1,719.4)
(702.7)
Capital in excess of par value
461.3 
346.5 
Retained earnings
8,903.2 
8,018.8 
Accumulated other comprehensive income (loss)
(778.8)
(1,290.5)
Total Ingersoll-Rand plc shareholders' equity
7,140.3 
6,643.8 
Noncontrolling interest
66.6 
74.5 
Total equity
7,206.9 
6,718.3 
Total liabilities and equity
$ 18,173.3 
$ 17,397.4 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2017
Dec. 31, 2016
Ordinary shares, par value, in dollars or euros per share, as stated
$ 1.00 
$ 1.00 
Ordinary shares issued
273,980,824 
271,673,124 
Ordinary shares owned by subsidiary
24,501,667 
12,666,804 
Consolidated Statements of Equity (USD $)
In Millions, except Share data, unless otherwise specified
Total
Ordinary shares [Member]
Capital in excess of par value [Member]
Retained earnings [Member]
Accumulated other comprehensive income (loss) [Member]
Noncontrolling interest [Member]
Other, net [Member]
Treasury Stock [Member]
Beginning balance, value at Dec. 31, 2014
$ 6,045.4 
$ 266.3 
$ 97.1 
$ 6,540.8 
$ (714.3)
$ 58.0 
 
 
Beginning balance, shares at Dec. 31, 2014
 
266,300,000 
 
 
 
 
 
 
Treasury Stock, Value
 
 
 
 
 
 
 
(452.6)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Net earnings
682.8 
664.6 
18.2 
 
 
Other comprehensive income (loss), net of tax
(410.9)
(406.6)
(4.3)
 
 
Shares issued under incentive stock plans, value
65.9 
2.7 
63.2 
 
 
Shares issued under incentive stock plans, shares
 
2,700,000 
 
 
 
 
 
 
Repurchase of ordinary shares
(250.1)
 
 
Repurchase of ordinary shares
 
 
 
 
 
 
 
Repurchase of ordinary shares
(250.1)
 
 
 
 
 
 
 
Share-based compensation
61.8 
63.0 
(1.2)
 
 
Dividends to noncontrolling interests
(9.4)
(9.4)
 
 
Cash dividends, declared
(305.6)
(305.6)
 
 
Other
(0.7)
(0.7)
 
Ending balance, value at Dec. 31, 2015
5,879.2 
269.0 
223.3 
6,897.9 
(1,120.9)
62.5 
 
 
Ending balance, shares at Dec. 31, 2015
 
269,000,000 
 
 
 
 
 
 
Treasury Stock, Value
(702.7)
 
 
 
 
 
 
(702.7)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Net earnings
1,492.7 
1,476.2 
16.5 
 
 
Other comprehensive income (loss), net of tax
(160.0)
(169.6)
9.6 
 
 
Shares issued under incentive stock plans, value
60.4 
2.7 
57.7 
 
 
Shares issued under incentive stock plans, shares
 
2,700,000 
 
 
 
 
 
 
Repurchase of ordinary shares
(250.1)
 
 
Repurchase of ordinary shares
 
   
 
 
 
 
 
 
Repurchase of ordinary shares
(250.1)
 
 
 
 
 
 
(250.1)
Share-based compensation
61.6 
66.0 
(4.4)
 
 
Dividends to noncontrolling interests
(14.1)
(14.1)
 
 
Cash dividends, declared
(351.0)
(351.0)
 
 
Other
(0.4)
 
(0.5)
0.1 
 
 
 
Ending balance, value at Dec. 31, 2016
6,718.3 
271.7 
346.5 
8,018.8 
(1,290.5)
74.5 
 
 
Ending balance, shares at Dec. 31, 2016
 
271,700,000 
 
 
 
 
 
 
Treasury Stock, Value
(1,719.4)
 
 
 
 
 
 
(1,719.4)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
 
Net earnings
1,312.3 
1,302.6 
9.7 
 
 
Other comprehensive income (loss), net of tax
512.2 
511.7 
0.5 
 
 
Shares issued under incentive stock plans, value
51.2 
2.3 
48.9 
 
 
Shares issued under incentive stock plans, shares
 
2,300,000 
 
 
 
 
 
 
Repurchase of ordinary shares
(1,016.9)
   
 
 
Repurchase of ordinary shares
 
 
 
 
 
 
 
Repurchase of ordinary shares
(1,016.9)
 
 
 
 
 
 
(1,016.9)
Share-based compensation
67.9 
70.8 
(2.9)
 
 
Dividends to noncontrolling interests
(15.8)
(15.8)
 
 
Cash dividends, declared
(430.2)
(430.2)
 
 
Other
0.1 
0.1 
(0.2)
 
 
Ending balance, value at Dec. 31, 2017
$ 7,206.9 
$ 274.0 
$ 461.3 
$ 8,903.2 
$ (778.8)
$ 66.6 
 
 
Ending balance, shares at Dec. 31, 2017
 
274,000,000 
 
 
 
 
 
 
Consolidated Statements of Equity (Parenthetical)
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash dividends, declared, in dollars per share
$ 0 
    
$ 1.16 
Consolidated Statements of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2017
Dec. 31, 2016
Dec. 31, 2015
Cash flows from operating activities:
 
 
 
Net earnings
$ 1,312.3 
$ 1,492.7 
$ 682.8 
(Income) loss from discontinued operations, net of tax
25.4 
(32.9)
24.3 
Adjustments to arrive at net cash provided by (used in) operating activities:
 
 
 
Gain (loss) on sale/asset impairment
8.4 
Depreciation and amortization
353.3 
352.2 
364.1 
Gain on sale of Hussmann equity investment
(397.8)
Deferred income taxes
(117.4)
(33.8)
107.8 
Other items
(55.8)
35.6 
157.7 
Changes in other assets and liabilities
 
 
 
Accounts and notes receivable
(156.7)
(101.3)
(79.8)
Inventories
(112.4)
26.8 
(6.3)
Other current and noncurrent assets
(206.8)
(24.5)
248.8 
Accounts payable
167.2 
103.6 
(41.0)
Other current and noncurrent liabilities
228.2 
(21.4)
(427.1)
Net cash (used in) provided by continuing operating activities
1,561.6 
1,433.0 
923.5 
Net cash (used in) provided by discontinued operating activities
(38.1)
88.9 
(35.1)
Net cash provided by (used in) operating activities
1,523.5 
1,521.9 
888.4 
Cash flows from investing activities:
 
 
 
Capital expenditures
(221.3)
(182.7)
(249.6)
Acquisition of businesses, net of cash acquired
(157.6)
(9.2)
(961.8)
Proceeds from sale of property, plant and equipment
1.5 
9.5 
18.5 
Proceeds from business dispositions, net of cash sold
422.5 
Proceeds from Divestiture of Interest in Joint Venture
2.7 
Net cash (used in) provided by continuing investing activities
(374.7)
240.1 
 
Net cash provided by (used in) investing activities
(374.7)
240.1 
(1,192.9)
Cash flows from financing activities:
 
 
 
Other short-term borrowings (net)
(11.7)
(150.7)
30.3 
Payments of long-term debt
(23.9)
Net proceeds (repayments) in debt
(11.7)
(150.7)
6.4 
Debt issuance costs
(0.2)
(2.1)
Dividends paid to ordinary shareholders
(430.1)
(348.6)
(303.3)
Dividends paid to noncontrolling interests
(15.8)
(14.1)
(9.3)
Payments to Noncontrolling Interests
6.8 
Proceeds shares issued under incentive plans
76.7 
62.9 
61.3 
Repurchase of ordinary shares
(1,016.9)
(250.1)
(250.1)
Other, net
(27.7)
(24.2)
(32.6)
Net cash (used in) provided by continuing financing activities
(1,432.5)
(726.9)
(527.6)
Net Cash Provided by (Used in) Financing Activities
(1,432.5)
(726.9)
(527.6)
Effect of exchange rate changes on cash and cash equivalents
118.4 
(57.2)
(136.3)
Net increase (decrease) in cash and cash equivalents
(165.3)
977.9 
(968.4)
Cash and cash equivalents - beginning of period
1,714.7 
736.8 
1,705.2 
Cash and cash equivalents - end of period
1,549.4 
1,714.7 
736.8 
Cash paid during the year for:
 
 
 
Interest, net of amounts capitalized
170.4 
169.7 
172.4 
Income taxes, net of refunds
$ 286.7 
$ 334.3 
$ 408.6 
Description of Company
Description of Company
ESCRIPTION OF COMPANY
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. The Company's business segments consist of Climate and Industrial, both with strong brands and highly differentiated products within their respective markets. The Company generates 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 Ingersoll-Rand®, Trane®, Thermo King®, American Standard®, ARO®, and Club Car®.
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of significant accounting policies used in the preparation of the accompanying Consolidated Financial Statements follows:
Basis of Presentation:  The accompanying Consolidated Financial Statements reflect the consolidated operations of the Company and have been prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP) as defined by the Financial Accounting Standards Board (FASB) within the FASB Accounting Standards Codification (ASC). Intercompany accounts and transactions have been eliminated. The assets, liabilities, results of operations and cash flows of all discontinued operations have been separately reported as discontinued operations for all periods presented. Certain reclassifications of amounts reported in prior periods have been made to conform with the current period presentation.
The Consolidated Financial Statements include all majority-owned subsidiaries of the Company. A noncontrolling interest in a subsidiary is considered an ownership interest in a majority-owned subsidiary that is not attributable to the parent. The Company includes Noncontrolling interest as a component of Total equity in the Consolidated Balance Sheet and the Net earnings attributable to noncontrolling interests are presented as an adjustment from Net earnings used to arrive at Net earnings attributable to Ingersoll-Rand plc in the Consolidated Statement of Comprehensive Income. Partially-owned equity affiliates represent 20-50% ownership interests in investments where the Company demonstrates significant influence, but does not have a controlling financial interest. Partially-owned equity affiliates are accounted for under the equity method.
Use of Estimates:  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Estimates are based on several factors including the facts and circumstances available at the time the estimates are made, historical experience, risk of loss, general economic conditions and trends, and the assessment of the probable future outcome. Actual results could differ from those estimates. Estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the statement of operations in the period that they are determined.
Currency Translation:  Assets and liabilities of non-U.S. subsidiaries, where the functional currency is not the U.S. dollar, have been translated at year-end exchange rates, and income and expense accounts have been translated using average exchange rates throughout the year. Adjustments resulting from the process of translating an entity’s financial statements into the U.S. dollar have been recorded in the equity section of the Consolidated Balance Sheet within Accumulated other comprehensive income (loss). Transactions that are denominated in a currency other than an entity’s functional currency are subject to changes in exchange rates with the resulting gains and losses recorded within Net earnings.
Cash and Cash Equivalents:  Cash and cash equivalents include cash on hand, demand deposits and all highly liquid investments with original maturities at the time of purchase of three months or less. The Company maintains amounts on deposit at various financial institutions, which may at times exceed federally insured limits. However, management periodically evaluates the credit-worthiness of those institutions and has not experienced any losses on such deposits.
Inventories:  Depending on the business, U.S. inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method or the lower of cost or market using the first-in, first-out (FIFO) method. Non-U.S. inventories are primarily stated at the lower of cost or market using the FIFO method. At both December 31, 2017 and 2016, approximately 51% of all inventory utilized the LIFO method.
Allowance for Doubtful Accounts:  The Company maintains an allowance for doubtful accounts receivable which represents the best estimate of probable loss inherent in the Company's accounts receivable portfolio. This estimate is based upon a two-step policy that results in the total recorded allowance for doubtful accounts. The first step is to record a portfolio reserve based on the aging of the outstanding accounts receivable portfolio and the Company's historical experience with the Company's end markets, customer base and products. The second step is to create a specific reserve for significant accounts as to which the customer's ability to satisfy their financial obligation to the Company is in doubt due to circumstances such as bankruptcy, deteriorating operating results or financial position. In these circumstances, management uses its judgment to record an allowance based on the best estimate of probable loss, factoring in such considerations as the market value of collateral, if applicable. Actual results could differ from those estimates. These estimates and assumptions are reviewed periodically, and the effects of changes, if any, are reflected in the Consolidated Statement of Comprehensive Income in the period that they are determined. The Company reserved $26.9 million and $26.0 million for doubtful accounts as of December 31, 2017 and 2016, respectively.
Property, Plant and Equipment:  Property, plant and equipment are stated at cost, less accumulated depreciation. Assets placed in service are recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset except for leasehold improvements, which are depreciated over the shorter of their economic useful life or their lease term. The range of useful lives used to depreciate property, plant and equipment is as follows:
Buildings
10
to
50
years
Machinery and equipment
2
to
12
years
Software
2
to
7
years
Major expenditures for replacements and significant improvements that increase asset values and extend useful lives are also capitalized. Capitalized costs are amortized over their estimated useful lives using the straight-line method. Repairs and maintenance expenditures that do not extend the useful life of the asset are charged to expense as incurred. The carrying amounts of assets that are sold or retired and the related accumulated depreciation are removed from the accounts in the year of disposal, and any resulting gain or loss is reflected within current earnings.
Per ASC 360, "Property, Plant, and Equipment," (ASC 360) the Company assesses the recoverability of the carrying value of its property, plant and equipment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset group to the future net undiscounted cash flows expected to be generated by the asset group. If the undiscounted cash flows are less than the carrying amount of the asset group, an impairment loss is recognized for the amount by which the carrying value of the asset group exceeds the fair value of the asset group.
Goodwill and Intangible Assets:  The Company records as goodwill the excess of the purchase price over the fair value of the net assets acquired. In accordance with ASC 350, "Intangibles-Goodwill and Other," (ASC 350) goodwill and other indefinite-lived intangible assets are tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset is more likely than not less than the carrying amount of the asset.
Impairment of goodwill is assessed at the reporting unit level and begins with an optional qualitative assessment to determine if it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the goodwill impairment test under ASC 350. For those reporting units that bypass or fail the qualitative assessment, the test compares the carrying amount of the reporting unit to its estimated fair value. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired. To the extent that the carrying value of the reporting unit exceeds its estimated fair value, an impairment loss will be recognized for the amount by which the reporting unit's carrying amount exceeds its fair value, not to exceed the carrying amount of goodwill in that reporting unit.
Intangible assets such as patents, customer-related intangible assets and other intangible assets with finite useful lives are amortized on a straight-line basis over their estimated economic lives. The weighted-average useful lives approximate the following:
Customer relationships
20
years
Completed technology/patents
10
years
Other
20
years

The Company assesses the recoverability of the carrying value of its intangible assets with finite useful lives whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. Recoverability is measured by a comparison of the carrying amount of an asset group to the future net undiscounted cash flows expected to be generated by the asset group. If the undiscounted cash flows are less than the carrying amount of the asset group, an impairment loss is recognized for the amount by which the carrying value of the asset group exceeds the fair value of the asset group.
Income Taxes:  Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. The Company recognizes future tax benefits, such as net operating losses and non-U.S. tax credits, to the extent that realizing these benefits is considered in its judgment to be more likely than not. The Company regularly reviews the recoverability of its deferred tax assets considering its historic profitability, projected future taxable income, timing of the reversals of existing temporary differences and the feasibility of its tax planning strategies. Where appropriate, the Company records a valuation allowance with respect to a future tax benefit.
Product Warranties:  Standard product warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience. The Company assesses the adequacy of its liabilities and will make adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available. The Company's extended warranty liability represents the deferred revenue associated with its extended warranty contracts and is amortized into Revenue on a straight-line basis over the life of the contract, unless another method is more representative of the costs incurred. The Company assesses the adequacy of its liability by evaluating the expected costs under its existing contracts to ensure these expected costs do not exceed the extended warranty liability.
Treasury Stock:  The Parent Company has repurchased its common shares from time to time as authorized by the Board of Directors. These repurchases are at the discretion of management subject to market conditions, regulatory requirements and other considerations. Amounts are recorded at cost and included within the Equity section of the Consolidated Balance Sheet.
Revenue Recognition:  Revenue is recognized and earned when all of the following criteria are satisfied: (a) persuasive evidence of a sales arrangement exists; (b) the price is fixed or determinable; (c) collectability is reasonably assured; and (d) delivery has occurred or service has been rendered. Delivery generally occurs when the title and the risks and rewards of ownership have substantially transferred to the customer. Both the persuasive evidence of a sales arrangement and fixed or determinable price criteria are deemed to be satisfied upon receipt of an executed and legally binding sales agreement or contract that clearly defines the terms and conditions of the transaction including the respective obligations of the parties. If the defined terms and conditions allow variability in all or a component of the price, revenue is not recognized until such time that the price becomes fixed or determinable. At the point of sale, the Company validates that existence of an enforceable claim that requires payment within a reasonable amount of time and assesses the collectability of that claim. If collectability is not deemed to be reasonably assured, then revenue recognition is deferred until such time that collectability becomes probable or cash is received. Delivery is not considered to have occurred until the customer has taken title and assumed the risks and rewards of ownership. Service and installation revenue are recognized when earned. In some instances, customer acceptance provisions are included in sales arrangements to give the buyer the ability to ensure the delivered product or service meets the criteria established in the order. In these instances, revenue recognition is deferred until the acceptance terms specified in the arrangement are fulfilled through customer acceptance or a demonstration that established criteria have been satisfied. If uncertainty exists about customer acceptance, revenue is not recognized until acceptance has occurred.
The Company offers various sales incentive programs to customers, dealers, and distributors. Sales incentive programs do not preclude revenue recognition, but do require an accrual for the Company's best estimate of expected activity. Examples of the sales incentives that are accrued for as a contra receivable and sales deduction at the point of sale include, but are not limited to, discounts (i.e., net 30 type), coupons, and rebates where the customer does not have to provide any additional requirements to receive the discount. Sales returns and customer disputes involving a question of quantity or price are also accounted for as a reduction in revenue and a contra receivable. At December 31, 2017 and 2016, the Company had a customer claim accrual (contra receivable) of $3.2 million and $3.7 million, respectively. All other incentives or incentive programs where the customer is required to reach a certain sales level, remain a customer for a certain period of time, provide a rebate form or is subject to additional requirements are accounted for as a reduction of revenue and establishment of a liability. At December 31, 2017 and 2016, the Company had a sales incentive accrual of $107.3 million and $87.5 million, respectively. Each of these accruals represents the best estimate the Company expects to pay related to previously sold units. These estimates are reviewed regularly for appropriateness. If updated information or actual amounts are different from previous estimates, the revisions are included in the results for the period in which they become known. Historically, the aggregate differences, if any, between the Company's estimates and actual amounts in any year have not had a material impact on the Consolidated Financial Statements.
The Company enters into maintenance and extended warranty contracts with customers. Revenue related to these services is recognized on a straight-line basis over the life of the contract, unless sufficient historical evidence indicates that the cost of providing these services is incurred on an other than straight-line basis. In these circumstances, revenue is recognized over the contract period in proportion to the costs expected to be incurred in performing the service.
The Company, primarily through its Climate segment, enters into construction-type contracts to design, deliver and build integrated HVAC solutions to meet customer specifications. The term of these types of contracts is typically less than one year, but can be as long as three years. Revenues related to these contracts are recognized using the percentage-of-completion method in accordance with GAAP. This measure of progress toward completion, utilized to recognize sales and profits, is based on the proportion of actual cost incurred to date as compared to the total estimate of contract costs at completion. The timing of revenue recognition often differs from the invoicing schedule to the customer, with revenue recognition in advance of customer invoicing recorded to unbilled accounts receivable and invoicing in advance of revenue recognition recorded to deferred revenue. At December 31, 2017, all recorded receivables (billed and unbilled) are due within one year. The Company re-evaluates its contract estimates periodically and reflects changes in estimates in the current period using the cumulative catch-up method. These periodic reviews have not historically resulted in significant adjustments. If estimated contract costs are in excess of contract revenues, then the excess costs are accrued.
The Company enters into sales arrangements that contain multiple elements, such as equipment, installation and service revenue. For multiple element arrangements, each element is evaluated to determine the separate units of accounting. The total arrangement consideration is then allocated to the separate units of accounting based on their relative selling price at the inception of the arrangement. The relative selling price is determined using vendor specific objective evidence (VSOE) of selling price, if it exists; otherwise, third-party evidence (TPE) of selling price is used. If neither VSOE nor TPE of selling price exists for a deliverable, a best estimate of the selling price is developed for that deliverable. The Company primarily utilizes VSOE to determine its relative selling price. The Company recognizes revenue for delivered elements when the delivered item has stand-alone value to the customer, the basic revenue recognition criteria have been met, and only customary refund or return rights related to the delivered elements exist.
Environmental Costs:  The Company is subject to laws and regulations relating to protecting the environment. Environmental expenditures relating to current operations are expensed or capitalized as appropriate. Expenditures relating to existing conditions caused by past operations, which do not contribute to current or future revenues, are expensed. Liabilities for remediation costs are recorded when they are probable and can be reasonably estimated, generally no later than the completion of feasibility studies or the Company’s commitment to a plan of action. The assessment of this liability, which is calculated based on existing technology, does not reflect any offset for possible recoveries from insurance companies, and is not discounted.
Asbestos Matters:  Certain of the Company's wholly-owned subsidiaries and former companies are named as defendants in asbestos-related lawsuits in state and federal courts. The Company records a liability for actual and anticipated future claims as well as an asset for anticipated insurance settlements. Asbestos related defense costs are excluded from the asbestos claims liability and are recorded separately as services are incurred. None of the Company's existing or previously-owned businesses were a producer or manufacturer of asbestos. The Company records certain income and expenses associated with asbestos liabilities and corresponding insurance recoveries within discontinued operations, net of tax, as they relate to previously divested businesses, except for amounts associated with Trane U.S. Inc.’s asbestos liabilities and corresponding insurance recoveries which are recorded within continuing operations.
Research and Development Costs:  The Company conducts research and development activities for the purpose of developing and improving new products and services. These expenditures are expensed when incurred. For the years ended December 31, 2017, 2016 and 2015, these expenditures amounted to approximately $210.8 million, $207.9 million and $205.9 million, respectively.
Software Costs:  The Company capitalizes certain qualified internal-use software costs during the application development stage and subsequently amortizes those costs over the software's useful life, which ranges from 2 to 7 years. The Company capitalizes costs, including interest, incurred to develop or acquire internal-use software. These costs are capitalized subsequent to the preliminary project stage once specific criteria are met. Costs incurred in the preliminary project planning stage are expensed. Other costs, such as maintenance and training, are also expensed as incurred. Capitalized costs are amortized over their estimated useful lives using the straight-line method.
Employee Benefit Plans: The Company provides a range of benefits, including pensions, postretirement and postemployment benefits to eligible current and former employees. Determining the cost associated with such benefits is dependent on various actuarial assumptions, including discount rates, expected return on plan assets, compensation increases, mortality, turnover rates, and healthcare cost trend rates. Actuaries perform the required calculations to determine expense in accordance with GAAP. Actual results may differ from the actuarial assumptions and are generally accumulated into Accumulated other comprehensive income (loss) and amortized into Net earnings over future periods. The Company reviews its actuarial assumptions at each measurement date and makes modifications to the assumptions based on current rates and trends, if appropriate.
Loss Contingencies:  Liabilities are recorded for various contingencies arising in the normal course of business, including litigation and administrative proceedings, environmental matters, product liability, product warranty, worker’s compensation and other claims. The Company has recorded reserves in the financial statements related to these matters, which are developed using input derived from actuarial estimates and historical and anticipated experience data depending on the nature of the reserve, and in certain instances with consultation of legal counsel, internal and external consultants and engineers. Subject to the uncertainties inherent in estimating future costs for these types of liabilities, the Company believes its estimated reserves are reasonable and does not believe the final determination of the liabilities with respect to these matters would have a material effect on the financial condition, results of operations, liquidity or cash flows of the Company for any year.
Derivative Instruments:  The Company periodically enters into cash flow and other derivative transactions to specifically hedge exposure to various risks related to interest rates and currency rates. The Company recognizes all derivatives on the Consolidated Balance Sheet at their fair value as either assets or liabilities. For cash flow designated hedges, the effective portion of the changes in fair value of the derivative contract are recorded in Accumulated other comprehensive income (loss), net of taxes, and are recognized in Net earnings at the time earnings are affected by the hedged transaction. For other derivative transactions, the changes in the fair value of the derivative contract are immediately recognized in Net earnings.
Recent Accounting Pronouncements
The FASB ASC is the sole source of authoritative GAAP other than the Securities and Exchange Commission (SEC) issued rules and regulations that apply only to SEC registrants. The FASB issues an Accounting Standards Update (ASU) to communicate changes to the codification. The Company considers the applicability and impact of all ASU's. ASU's not listed below were assessed and determined to be either not applicable or are not expected to have a material impact on the consolidated financial statements.
Recently Adopted Accounting Pronouncements
In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" (ASU 2017-07) which changes the way employers that sponsor defined benefit pension and/or postretirement benefit plans reflect net periodic benefit costs in the income statement. Under the previous standard, the multiple components of net periodic benefit costs are aggregated and reported within the operating section of the income statement or capitalized into assets when appropriate. The new standard requires a company to present the service cost component of net periodic benefit cost in the same income statement line as other employee compensation costs with the remaining components of net periodic benefit cost presented separately from the service cost component and outside of any subtotal of operating income, if one is presented. In addition, only the service cost component will be eligible for capitalization in assets. The Company adopted this standard on January 1, 2017 applying the presentation requirements retrospectively. Refer to Note 10, "Pensions and Postretirement Benefits Other than Pensions" and Note 14, "Other Income/ (Expense), net" for additional information.
In January 2017, the FASB issued ASU 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” (ASU 2017-04) which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test which requires a hypothetical purchase price allocation to measure goodwill impairment. Under the new standard, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 does not change the guidance on completing Step 1 of the goodwill impairment test and still allows a company to perform the optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. The Company adopted this standard on January 1, 2017 and will apply its guidance on future impairment assessments.
In November 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" (ASU 2016-18). This standard requires restricted cash and restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period amounts shown on the statements of cash flows. In addition, the standard requires disclosure of the nature of restrictions on cash balances and how the statement of cash flows reconciles to the balance sheet in any situation in which the balance sheet includes more that one line item of cash, cash equivalents and restricted cash. The Company adopted this standard on October 1, 2017 with no impact to its financial statements.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (ASU 2016-15). This standard clarifies how certain cash receipts and cash payments are classified on the statement of cash flows. The following eight specific cash flow issues are addressed: debt prepayment or debt extinguishment costs; settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance policies (including bank-owned life insurance policies); distributions received from equity method investees; beneficial interests in securitization transactions and separately identifiable cash flows. In addition, the standard clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. The Company adopted this standard on October 1, 2017 with no impact to its financial statements.
In March 2016, the FASB issued ASU No. 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" (ASU 2016-09) which simplifies several aspects of the accounting for employee share-based payment transactions. The standard makes several modifications to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. In addition, ASU 2016-09 clarifies the statement of cash flows presentation for certain components of share-based awards. The Company adopted this standard on January 1, 2017 and prospectively presented any excess tax benefits or deficiencies in the income statement as a component of Provision for income taxes rather than in the Equity section of the Balance Sheet. As part of the adoption, the Company reclassified $15.1 million of excess tax benefits previously unrecognized on a modified retrospective basis through a cumulative-effect adjustment to increase Retained earnings as of January 1, 2017. In addition, the statement of cash flows for the twelve months ended December 31, 2016 and December 31, 2015 was retrospectively adjusted to present $21.7 million and $37.3 million, respectively, of excess tax benefits as an operating activity rather than a financing activity.
Recently Issued Accounting Pronouncements
In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted improvements to accounting for hedging activities" (ASU 2017-12). This standard more closely aligns the results of cash flow and fair value hedge accounting with risk management activities through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results in the financial statements. This standard also addresses specific limitations in current GAAP by expanding hedge accounting for both nonfinancial and financial risk components and by refining the measurement of hedge results to better reflect an entity’s hedging strategies. Additionally, by aligning the timing of recognition of hedge results with the earnings effect of the hedged item for cash flow and net investment hedges, and by including the earnings effect of the hedging instrument in the same income statement line item in which the earnings effect of the hedged item is presented, the results of an entity’s hedging program and the cost of executing that program will be more visible to users of financial statements. ASU 2017-12 is effective for annual reporting periods beginning after December 15, 2018 with early adoption permitted. The Company is currently assessing the impact of this ASU on its financial statements and does not expect its adoption to have a material impact.
In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory” (ASU 2016-16) which removes the prohibition in Topic 740 against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted. The amendments are to be applied on a modified retrospective basis through a cumulative-effect adjustment directly to Retained earnings as of the beginning of the period of adoption. The Company adopted this standard on January 1, 2018 and expects to record approximately $10 million as a cumulative-effect adjustment.
In February 2016, the FASB issued ASU 2016-02, "Leases" (ASU 2016-02) which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The standard also requires additional disclosures by lessees and contains targeted changes to accounting by lessors. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The standard is required to be adopted at the earliest period presented using a modified retrospective approach. The Company is currently developing an implementation plan and gathering data to further assess the impact of the ASU on its financial statements. The adoption on January 1, 2019 is anticipated to have a material impact on assets and liabilities due to the recognition of lease rights and obligations on the Balance Sheet. However, the Company does not expect the adoption to have a material impact to its Statements of Cash Flows or Statements of Comprehensive Income beginning in 2019.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (ASC 606), which creates a comprehensive, five-step model for revenue recognition that requires a company to recognize revenue to depict the transfer of promised goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. Under the new standard, a company will be required to use more judgment and make more estimates when considering contract terms as well as relevant facts and circumstances when identifying performance obligations, estimating the amount of variable consideration in the transaction price and allocating the transaction price to each separate performance obligation. In addition, ASC 606 enhances disclosures about revenue, provides guidance for transactions that were not previously addressed comprehensively and improves guidance for multiple-element arrangements. ASC 606 is effective for annual reporting periods beginning after December 15, 2017 and is required to be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying it recognized at the date of initial application. Early adoption is permitted, but not before the original effective date of the standard.
In 2014, the Company began to assess the impact of adopting ASC 606 on its revenue recognition practices. Utilizing working sessions and document reviews with each of its reporting units as well as with appropriate functions such as legal and tax, the Company identified potential differences that would result from applying the requirements of the new standard to the Company's revenue contracts. During 2015, the Company drafted preliminary accounting positions addressing identified potential differences and later determined that certain highly engineered products sold to customers within the Industrial segment for which revenue is currently recognized at a point in time, would meet the criteria of a performance obligation satisfied over time under the new standard. The Company will apply the guidance by recognizing the cumulative effect of initially applying the standard as an opening balance sheet adjustment to retained earnings in the period of initial adoption. The Company refined the estimate of the cumulative effect adjustment to retained earnings to be recognized on January 1, 2018 and determined the impact to be approximately $2 million with related amounts not materially impacting Net revenuesOperating income or the Balance Sheet.
Inventories
Inventories
INVENTORIES
Depending on the business, U.S. inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method or the lower of cost or market using the first-in, first-out (FIFO) method. Non-U.S. inventories are primarily stated at the lower of cost or market using the FIFO method.
At December 31, the major classes of inventory were as follows:
In millions
 
2017
 
2016
Raw materials
 
$
502.8

 
$
448.5

Work-in-process
 
180.5

 
154.0

Finished goods
 
941.0

 
845.6

 
 
1,624.3

 
1,448.1

LIFO reserve
 
(68.9
)
 
(62.3
)
Total
 
$
1,555.4

 
$
1,385.8


The Company performs periodic assessments to determine the existence of obsolete, slow-moving and non-saleable inventories and records necessary provisions to reduce such inventories to net realizable value. Reserve balances, primarily related to obsolete and slow-moving inventories, were $120.3 million and $111.7 million at December 31, 2017 and December 31, 2016, respectively.
Property, Plant and Equipment
Property, Plant and Equipment
PROPERTY, PLANT AND EQUIPMENT
At December 31, the major classes of property, plant and equipment were as follows:
In millions
 
2017
 
2016
Land
 
$
52.0

 
$
49.2

Buildings
 
770.1

 
708.9

Machinery and equipment
 
2,019.5

 
1,831.1

Software
 
822.7

 
778.5

 
 
3,664.3

 
3,367.7

Accumulated depreciation
 
(2,113.0
)
 
(1,856.7
)
Total
 
$
1,551.3

 
$
1,511.0


Depreciation expense for the years ended December 31, 2017, 2016 and 2015 was $217.3 million, $216.7 million and $209.5 million, which include amounts for software amortization of $28.6 million, $35.9 million and $41.9 million, respectively.
Goodwill
Goodwill
GOODWILL
The Company records as goodwill the excess of the purchase price over the fair value of the net assets acquired in an acquisition. Measurement period adjustments may be recorded once a final valuation has been performed. Goodwill is tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset may be less than the carrying amount of the asset.
The changes in the carrying amount of Goodwill are as follows: 
In millions
 
Climate
 
Industrial
 
Total
Net balance as of December 31, 2015
 
$
4,952.6

 
$
777.6

 
$
5,730.2

Acquisitions (1)
 
0.4

 
12.5

 
12.9

Currency translation
 
(73.9
)
 
(10.8
)
 
(84.7
)
Net balance as of December 31, 2016
 
4,879.1

 
779.3

 
5,658.4

Acquisitions (2)
 
26.3

 
60.5

 
86.8

Currency translation
 
159.7

 
30.8

 
190.5

Net balance as of December 31, 2017
 
5,065.1

 
870.6

 
5,935.7


(1) During 2016, the Company acquired distributors of Industrial products that were previously independently owned. These acquisitions are not considered material for further disclosure.
(2) During 2017, the Company acquired several businesses, including channel acquisitions, that complement existing products and services. Refer to Note 16, "Acquisitions and Divestitures" for more information regarding acquisitions.
The net goodwill balances at December 31, 2017, 2016 and 2015 include $2,496.0 million of accumulated impairment. The accumulated impairment relates entirely to a charge in the fourth quarter of 2008 associated with the Climate segment.
Intangible Assets
Intangible Assets
INTANGIBLE ASSETS
Indefinite-lived intangible assets are tested and reviewed annually for impairment during the fourth quarter or whenever there is a significant change in events or circumstances that indicate that the fair value of the asset may be less than the carrying amount of the asset. All other intangible assets with finite useful lives are being amortized on a straight-line basis over their estimated useful lives.
The following table sets forth the gross amount and related accumulated amortization of the Company’s intangible assets at December 31:
 
 
2017
 
2016
In millions
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
Completed technologies/patents
 
$
209.4

 
$
(177.3
)
 
$
32.1

 
$
203.0

 
$
(165.6
)
 
$
37.4

Customer relationships
 
2,068.9

 
(1,056.9
)
 
1,012.0

 
2,008.9

 
(926.1
)
 
1,082.8

Other
 
93.9

 
(52.7
)
 
41.2

 
61.1

 
(48.5
)
 
12.6

Total finite-lived intangible assets
 
$
2,372.2

 
$
(1,286.9
)
 
$
1,085.3

 
$
2,273.0

 
$
(1,140.2
)
 
$
1,132.8

Trademarks (indefinite-lived)
 
2,657.6

 

 
2,657.6

 
2,652.3

 

 
2,652.3

Total
 
$
5,029.8

 
$
(1,286.9
)
 
$
3,742.9

 
$
4,925.3

 
$
(1,140.2
)
 
$
3,785.1


Intangible asset amortization expense for 2017, 2016 and 2015 was $132.0 million, $132.0 million and $150.2 million, respectively. Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately $133 million for 2018, $132 million for 2019, $130 million for 2020, $129 million for 2021, and $129 million for 2022.
Debt and Credit Facilities
Debt and Credit Facilities
DEBT AND CREDIT FACILITIES
At December 31, Short-term borrowings and current maturities of long-term debt consisted of the following:
In millions
 
2017
 
2016
Debentures with put feature
 
$
343.0

 
$
343.0

6.875% Senior notes due 2018 (1)
 
749.6

 

Other current maturities of long-term debt
 
7.7

 
7.7

Short-term borrowings
 
6.7

 
10.1

Total
 
$
1,107.0

 
$
360.8


(1) During the third quarter of 2017, the Company reclassified its 6.875% Senior notes of $750 million due August 2018 from noncurrent to current.
The Company's short-term obligations primarily consist of current maturities of long-term debt. Other obligations relate to short-term lines of credit used to fund working capital requirements in certain non U.S. countries. The weighted-average interest rate for Short-term borrowings and current maturities of long-term debt at December 31, 2017 and 2016 was 6.7% and 6.4%, respectively.
Commercial Paper Program
The Company uses borrowings under its commercial paper program for general corporate purposes. The maximum aggregate amount of unsecured commercial paper notes available to be issued, on a private placement basis, under the commercial paper program is $2.0 billion as of December 31, 2017. Under the commercial paper program, the Company may issue notes from time to time through Ingersoll-Rand Global Holding Company Limited or Ingersoll-Rand Luxembourg Finance S.A. Each of Ingersoll-Rand plc, Ingersoll-Rand Irish Holdings Unlimited Company, Ingersoll-Rand Lux International Holding Company S.à.r.l., Ingersoll-Rand Global Holding Company Limited and Ingersoll-Rand Company provided irrevocable and unconditional guarantees for any notes issued under the commercial paper program. At December 31, 2017, the Company had no outstanding balance under its commercial paper program.
Debentures with Put Feature
At December 31, 2017 and December 31, 2016, the Company had $343.0 million of fixed rate debentures outstanding which contain a put feature that the holders may exercise on each anniversary of the issuance date.  If exercised, the Company is obligated to repay in whole or in part, at the holder’s option, the outstanding principal amount of the debentures plus accrued interest. If these options are not exercised, the final contractual maturity dates would range between 2027 and 2028. Holders of these debentures had the option to exercise the put feature on each of the outstanding debentures in 2017, subject to the notice requirement. No material exercises were made.
At December 31, long-term debt excluding current maturities consisted of:
In millions
 
2017
 
2016
6.875% Senior notes due 2018
 
$

 
$
748.6

2.875% Senior notes due 2019
 
349.4

 
348.6

2.625% Senior notes due 2020
 
298.9

 
298.5

9.000% Debentures due 2021
 
124.9

 
124.8

4.250% Senior notes due 2023
 
696.5

 
695.6

7.200% Debentures due 2018-2025
 
52.3

 
59.7

3.550% Senior notes due 2024
 
495.2

 
494.5

6.48% Debentures due 2025
 
149.7

 
149.7

5.750% Senior notes due 2043
 
494.0

 
493.6

4.650% Senior notes due 2044
 
295.6

 
295.4

Other loans and notes, at end-of-year average interest rates of 5.71% in 2017 and
6.79% in 2016, maturing in various amounts to 2022
 
0.5

 
0.4

Total
 
$
2,957.0

 
$
3,709.4


Scheduled maturities of long-term debt, including current maturities, as of December 31, 2017 are as follows:
In millions
  
2018
$
1,100.3

2019
357.2

2020
306.6

2021
132.4

2022
7.5

Thereafter
2,153.3

Total
$
4,057.3


Other Credit Facilities
The Company maintains two 5-year, $1.0 billion revolving credit facilities (the Facilities) through its wholly-owned subsidiaries, Ingersoll-Rand Global Holding Company Limited and Ingersoll-Rand Luxembourg Finance S.A. (collectively, the Borrowers). Each senior unsecured credit facility, one of which matures in March 2019 and the other in March 2021, provides support for the Company's commercial paper program and can be used for working capital and other general corporate purposes. Ingersoll-Rand plc, Ingersoll-Rand Irish Holdings Unlimited Company, Ingersoll-Rand Lux International Holding Company S.à.r.l. and Ingersoll-Rand Company each provide irrevocable and unconditional guarantees for these Facilities.  In addition, each Borrower will guarantee the obligations under the Facilities of the other Borrower. Total commitments of $2.0 billion were unused at December 31, 2017 and December 31, 2016.
Fair Value of Debt
The carrying value of the Company's short-term borrowings is a reasonable estimate of fair value due to the short-term nature of the instruments. The fair value of the Company's debt instruments at December 31, 2017 and December 31, 2016 was $4,462.2 million and $4,428.9 million, respectively. The Company measures the fair value of its long-term debt instruments for disclosure purposes based upon observable market prices quoted on public exchanges for similar assets. These fair value inputs are considered Level 2 within the fair value hierarchy. The methodologies used by the Company to determine the fair value of its long-term debt instruments at December 31, 2017 are the same as those used at December 31, 2016.
Guarantees
Along with Ingersoll-Rand plc, certain of the Company's 100% directly or indirectly owned subsidiaries have fully and unconditionally guaranteed, on a joint and several basis, public debt issued by other 100% directly or indirectly owned subsidiaries. Refer to Note 20 for the Company's current guarantor structure.
Financial Instruments
Financial Instruments
FINANCIAL INSTRUMENTS
In the normal course of business, the Company is exposed to certain risks arising from business operations and economic factors. These fluctuations can increase the cost of financing, investing and operating the business. The Company may use various financial instruments, including derivative instruments, to manage the risks associated with interest rate and currency rate exposures. These financial instruments are not used for trading or speculative purposes.
On the date a derivative contract is entered into, the Company designates the derivative instrument as a cash flow hedge of a forecasted transaction or as an undesignated derivative. The Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.
The Company assesses at inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are highly effective in offsetting the changes in the cash flows of the hedged item. To the extent the derivative is deemed to be a highly effective hedge, the fair market value changes of the instrument are recorded to Accumulated other comprehensive income (AOCI). Any ineffective portion of a derivative instrument’s change in fair value is recorded in Net earnings in the period of change. If the hedging relationship ceases to be highly effective, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument will be recorded in Net earnings.
The fair values of derivative instruments included within the Consolidated Balance Sheet as of December 31 were as follows:
 
 
Derivative assets
 
Derivative liabilities
In millions
 
2017
 
2016
 
2017
 
2016
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
Currency derivatives
 
$

 
$
0.3

 
$
1.3

 
$
2.9

Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
Currency derivatives
 
7.2

 
0.3

 
1.2

 
17.9

Total derivatives
 
$
7.2

 
$
0.6

 
$
2.5

 
$
20.8


Asset and liability derivatives included in the table above are recorded within Other current assets and Accrued expenses and other current liabilities, respectively.
Currency Hedging Instruments
The notional amount of the Company’s currency derivatives was $0.7 billion and $1.1 billion at December 31, 2017 and 2016, respectively. At December 31, 2017 and 2016, a net gain of $1.2 million and $2.4 million, net of tax, respectively, was included in AOCI related to the fair value of the Company’s currency derivatives designated as accounting hedges. The amount expected to be reclassified into Net earnings over the next twelve months is a gain of $1.2 million. The actual amounts that will be reclassified to Net earnings may vary from this amount as a result of changes in market conditions. Gains and losses associated with the Company’s currency derivatives not designated as hedges are recorded in Net earnings as changes in fair value occur. At December 31, 2017, the maximum term of the Company’s currency derivatives was approximately 12 months.
Other Derivative Instruments
The Company has utilized forward-starting interest rate swaps and interest rate locks to manage interest rate exposure in periods prior to the anticipated issuance of fixed-rate debt. These instruments were designated as cash flow hedges and had a notional amount of $1.3 billion at December 31, 2017 and 2016. Consequently, when the contracts were settled upon the issuance of the underlying debt, any realized gains or losses in the fair values of the instruments were deferred into Accumulated other comprehensive income. These deferred gains or losses are subsequently recognized into Interest expense over the term of the related notes. The net unrecognized gain in AOCI was $6.6 million and $6.0 million at December 31, 2017 and at December 31, 2016. The deferred gain at December 31, 2017 will be amortized over the term of notes with maturities ranging from 2018 to 2044. The amount expected to be amortized over the next twelve months is a net loss of $0.1 million. The Company has no forward-starting interest rate swaps or interest rate lock contracts outstanding at December 31, 2017 or 2016.
The following table represents the amounts associated with derivatives designated as hedges affecting Net earnings and AOCI for the years ended December 31:
 
 
Amount of gain (loss)
recognized in AOCI
 
Location of gain (loss) reclassified from AOCI and recognized into Net earnings
 
Amount of gain (loss) reclassified from AOCI and recognized into Net earnings
In millions
 
2017
 
2016
 
2015
 
 
2017
 
2016
 
2015
Currency derivatives designated as hedges
 
$
(1.8
)
 
$
2.2

 
$
1.2

 
Cost of goods sold
 
$
(3.1
)
 
$
5.3

 
$
(2.1
)
Interest rate swaps & locks
 

 

 

 
Interest expense
 
(0.5
)
 
(0.5
)
 
(0.5
)
Total
 
$
(1.8
)
 
$
2.2

 
$
1.2

 
 
 
$
(3.6
)
 
$
4.8

 
$
(2.6
)

The following table represents the amounts associated with derivatives not designated as hedges affecting Net earnings for the years ended December 31:
In millions
 
Location of gain (loss) recognized in Net earnings
 
Amount of gain (loss) recognized in Net earnings
2017
 
2016
 
2015
Currency derivatives
 
Other income/(expense), net
 
$
58.0

 
$
(39.2
)
 
$
0.1

Total
 
 
 
$
58.0

 
$
(39.2
)

$
0.1


The gains and losses associated with the Company’s undesignated currency derivatives are materially offset in Other income/(expense), net by changes in the fair value of the underlying transactions.
Concentration of Credit Risk
The counterparties to the Company’s forward contracts consist of a number of investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.
Fair Value Measurements
Fair Value, Measurement Inputs, Disclosure [Text Block]
FAIR VALUE MEASUREMENTS
ASC 820, "Fair Value Measurement," (ASC 820) defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also establishes a three-level fair value hierarchy that prioritizes information used in developing assumptions when pricing an asset or liability as follows:
Level 1: Observable inputs such as quoted prices in active markets;
Level 2: Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and
Level 3: Unobservable inputs where there is little or no market data, which requires the reporting entity to develop its own assumptions.
ASC 820 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.
The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2017:
In Millions
Fair Value
 
Fair value measurements
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Derivative instruments
$
7.2

 
$

 
$
7.2

 
$

Liabilities:
 
 
 
 
 
 
 
Derivative instruments
$
2.5

 
$

 
$
2.5

 
$


The following table presents the Company’s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of December 31, 2016:
In Millions
Fair Value
 
Fair value measurements
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Derivative instruments
$
0.6

 
$

 
$
0.6

 
$

Liabilities:
 
 
 
 
 
 
 
Derivative instruments
$
20.8

 
$

 
$
20.8

 
$


Derivative instruments include forward foreign currency contracts and instruments related to non-functional currency balance sheet exposures. The fair value of the derivative instruments are determined based on a pricing model that uses spot rates and forward prices from actively quoted currency markets that are readily accessible and observable.
The carrying values of cash and cash equivalents, accounts receivable and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments. These methodologies used by the Company to determine the fair value of its financial assets and liabilities at December 31, 2017 are the same as those used at December 31, 2016. There have been no transfers between levels of the fair value hierarchy.
Pensions and Postretirement Benefits Other Than Pensions
Pensions and Postretirement Benefits Other Than Pensions
PENSIONS AND POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company sponsors several U.S. defined benefit and defined contribution plans covering substantially all of the Company's U.S. employees. Additionally, the Company has many non-U.S. defined benefit and defined contribution plans covering eligible non-U.S. employees. Postretirement benefits other than pensions (OPEB) provide healthcare benefits, and in some instances, life insurance benefits for certain eligible employees.
On January 1, 2017, the Company adopted ASU 2017-07 which requires the Company to present the service cost component of net periodic benefit cost in the same income statement line as other employee compensation costs with the remaining components of net periodic benefit cost presented separately from the service cost component and outside of any subtotal of operating income, if one is presented. The Company applied the presentation requirements retrospectively.
Pension Plans
The noncontributory defined benefit pension plans covering non-collectively bargained U.S. employees provide benefits on a final average pay formula while plans for most collectively bargained U.S. employees provide benefits on a flat dollar benefit formula or a percentage of pay formula. The non-U.S. pension plans generally provide benefits based on earnings and years of service. The Company also maintains additional other supplemental plans for officers and other key or highly compensated employees.
The following table details information regarding the Company’s pension plans at December 31:
In millions
 
2017
 
2016
Change in benefit obligations:
 
 
 
 
Benefit obligation at beginning of year
 
$
3,531.9

 
$
3,523.8

Service cost
 
70.8

 
72.1

Interest cost
 
109.0

 
110.2

Employee contributions
 
1.1

 
1.0

Amendments
 
3.8

 
6.2

Actuarial (gains) losses
 
175.8

 
129.6

Benefits paid
 
(194.8
)
 
(203.5
)
Currency translation
 
69.6

 
(89.4
)
Curtailments, settlements and special termination benefits
 
(13.1
)
 
(1.6
)
Other, including expenses paid
 
(11.9
)
 
(16.5
)
Benefit obligation at end of year
 
$
3,742.2

 
$
3,531.9

Change in plan assets:
 
 
 
 
Fair value at beginning of year
 
$
2,797.1

 
$
2,772.0

Actual return on assets
 
326.9

 
274.9

Company contributions
 
101.4

 
56.4

Employee contributions
 
1.1

 
1.0

Benefits paid
 
(194.8
)
 
(203.5
)
Currency translation
 
59.0

 
(85.6
)
Settlements
 
(13.5
)
 
(1.6
)
Other, including expenses paid
 
(14.1
)
 
(16.5
)
Fair value of assets end of year
 
$
3,063.1

 
$
2,797.1

Net unfunded liability
 
$
(679.1
)
 
$
(734.8
)
Amounts included in the balance sheet:
 
 
 
 
Other noncurrent assets
 
$
61.7

 
$
19.2

Accrued compensation and benefits
 
(15.3
)
 
(6.4
)
Postemployment and other benefit liabilities
 
(725.5
)
 
(747.6
)
Net amount recognized
 
$
(679.1
)
 
$
(734.8
)

It is the Company’s objective to contribute to the pension plans to ensure adequate funds, and no less than required by law, are available in the plans to make benefit payments to plan participants and beneficiaries when required. However, certain plans are not or cannot be funded due to either legal, accounting, or tax requirements in certain jurisdictions. As of December 31, 2017, approximately seven percent of the Company's projected benefit obligation relates to plans that cannot be funded.
The pretax amounts recognized in Accumulated other comprehensive income (loss) are as follows:
In millions
 
Prior service benefit (cost)
 
Net actuarial gains (losses)
 
Total
December 31, 2016
 
$
(25.5
)
 
$
(886.8
)
 
$
(912.3
)
Current year changes recorded to AOCI
 
(3.8
)
 
9.4

 
5.6

Amortization reclassified to earnings
 
3.8

 
56.8

 
60.6

Settlements/curtailments reclassified to earnings (1)
 
4.7

 
3.0

 
7.7

Currency translation and other
 
0.6

 
(15.9
)
 
(15.3
)
December 31, 2017
 
$
(20.2
)
 
$
(833.5
)
 
$
(853.7
)

(1) Includes $2.5 million recorded in restructuring charges.
Weighted-average assumptions used to determine the benefit obligation at December 31 are as follows:
 
 
2017
 
2016
Discount rate:
 
 
 
 
U.S. plans
 
3.54
%
 
3.97
%
Non-U.S. plans
 
2.29
%
 
2.40
%
Rate of compensation increase:
 
 
 
 
U.S. plans
 
4.00
%
 
4.00
%
Non-U.S. plans
 
4.00
%
 
4.00
%

The accumulated benefit obligation for all defined benefit pension plans was $3,626.7 million and $3,418.2 million at December 31, 2017 and 2016, respectively. The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for pension plans with accumulated benefit obligations more than plan assets were $3,291.4 million, $3,194.7 million and $2,554.0 million, respectively, as of December 31, 2017, and $3,095.1 million, $3,002.0 million and $2,346.4 million, respectively, as of December 31, 2016.
Pension benefit payments are expected to be paid as follows:
In millions
  
2018
$
215.2

2019
209.0

2020
218.7

2021
218.4

2022
220.7

2023 — 2027
1,136.9



The components of the Company’s net periodic pension benefit costs for the years ended December 31 include the following:
In millions
 
2017
 
2016
 
2015
Service cost
 
$
70.8

 
$
72.1

 
$
75.2

Interest cost
 
109.0

 
110.2

 
129.5

Expected return on plan assets
 
(141.7
)
 
(146.1
)
 
(158.3
)
Net amortization of:
 
 
 
 
 
 
Prior service costs (benefits)
 
3.8

 
4.7

 
3.2

Plan net actuarial (gains) losses
 
56.8

 
61.6

 
60.7

Net periodic pension benefit cost
 
98.7

 
102.5

 
110.3

Net curtailment, settlement, and special termination benefits (gains) losses
 
5.6

 
2.1

 
0.7

Net periodic pension benefit cost after net curtailment and settlement (gains) losses
 
$
104.3

 
$
104.6

 
$
111.0

Amounts recorded in continuing operations:
 
 
 
 
 
 
   Operating income
 
$
68.2

 
$
69.3

 
$
73.6

   Other income/(expense), net
 
25.4

 
25.5

 
27.1

Amounts recorded in discontinued operations
 
10.7

 
9.8

 
10.3

Total
 
$
104.3

 
$
104.6

 
$
111.0


During 2017, the Company recognized a curtailment loss associated with certain defined benefit plan freezes that is effective January 1, 2022. As a result, projected benefit obligations for these plans were remeasured as of January 31, 2017. Also during 2017, the Company recognized settlement losses associated with lump sum distributions of non-U.S. defined benefit plans.
Net periodic pension benefit cost for 2018 is projected to be approximately $86.1 million. The amounts expected to be recognized in net periodic pension benefit cost during the year ended 2018 for prior service cost and plan net actuarial losses are $4.2 million and $49.9 million, respectively.
Weighted-average assumptions used to determine net periodic pension cost for the years ended December 31 are as follows:
 
 
2017
 
2016
 
2015
Discount rate:
 
 
 
 
 
 
U.S. plans
 
 
 
 
 
 
Service cost
 
4.18
%
 
4.25
%
 
3.75
%
Interest cost
 
3.36
%
 
3.29
%
 
3.75
%
Non-U.S. plans
 


 


 


Service cost
 
2.66
%
 
3.05
%
 
3.25
%
Interest cost
 
2.50
%
 
3.18
%
 
3.25
%
Rate of compensation increase:
 
 
 
 
 
 
U.S. plans
 
4.00
%
 
4.00
%
 
4.00
%
Non-U.S. plans
 
4.00
%
 
4.00
%
 
4.00
%
Expected return on plan assets:
 
 
 
 
 
 
U.S. plans
 
5.50
%
 
5.75
%
 
5.75
%
Non-U.S. plans
 
3.25
%
 
3.75
%
 
4.25
%

The expected long-term rate of return on plan assets reflects the average rate of returns expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The expected long-term rate of return on plan assets is based on what is achievable given the plan’s investment policy, the types of assets held and target asset allocations. The expected long-term rate of return is determined as of the measurement date. The Company reviews each plan and its historical returns and target asset allocations to determine the appropriate expected long-term rate of return on plan assets to be used.
The Company's objective in managing its defined benefit plan assets is to ensure that all present and future benefit obligations are met as they come due. It seeks to achieve this goal while trying to mitigate volatility in plan funded status, contribution, and expense by better matching the characteristics of the plan assets to that of the plan liabilities. The Company utilizes a dynamic approach to asset allocation whereby a plan's allocation to fixed income assets increases as the plan's funded status improves. The Company monitors plan funded status and asset allocation regularly in addition to investment manager performance.
The fair values of the Company’s pension plan assets at December 31, 2017 by asset category are as follows:
 
 
Fair value measurements
 
Net asset value
 
Total
fair value
In millions
 
Level 1
 
Level 2
 
Level 3
 
 
Cash and cash equivalents
 
$
4.8

 
$
35.4

 
$

 
$

 
$
40.2

Equity investments:
 
 
 
 
 
 
 
 
 
 
Registered mutual funds – equity specialty
 

 

 

 
77.6

 
77.6

Commingled funds – equity specialty
 

 

 

 
674.7

 
674.7

 
 

 

 

 
752.3

 
752.3

Fixed income investments:
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 

 
517.5

 

 

 
517.5

Corporate and non-U.S. bonds(a)
 

 
1,336.8

 

 

 
1,336.8

Asset-backed and mortgage-backed securities
 

 
69.0

 

 

 
69.0

Registered mutual funds – fixed income specialty
 

 

 

 
111.0

 
111.0

Commingled funds – fixed income specialty
 

 

 

 
131.8

 
131.8

Other fixed income(b)
 

 

 
26.3

 

 
26.3

 
 

 
1,923.3

 
26.3

 
242.8

 
2,192.4

Derivatives
 

 
(0.3
)
 

 

 
(0.3
)
Real estate(c)
 

 

 
4.9

 

 
4.9

Other(d)
 

 

 
79.0

 

 
79.0

Total assets at fair value
 
$
4.8

 
$
1,958.4

 
$
110.2

 
$
995.1

 
$
3,068.5

Receivables and payables, net
 
 
 
 
 
 
 
 
 
(5.4
)
Net assets available for benefits
 
 
 
 
 
 
 
 
 
$
3,063.1


The fair values of the Company’s pension plan assets at December 31, 2016 by asset category are as follows:
 
 
Fair value measurements
 
Net asset value
 
Total
fair value
In millions
 
Level 1
 
Level 2
 
Level 3
 
Cash and cash equivalents
 
$
11.8

 
$
17.0

 
$

 
$

 
$
28.8

Equity investments:
 
 
 
 
 
 
 
 
 
 
Registered mutual funds – equity specialty
 

 

 

 
73.9

 
73.9

Commingled funds – equity specialty
 

 

 

 
640.8

 
640.8

 
 

 

 

 
714.7

 
714.7

Fixed income investments:
 
 
 
 
 
 
 
 
 
 
U.S. government and agency obligations
 

 
460.0

 

 

 
460.0

Corporate and non-U.S. bonds(a)
 

 
1,178.3

 

 

 
1,178.3

Asset-backed and mortgage-backed securities
 

 
74.0

 

 

 
74.0

Registered mutual funds – fixed income specialty
 

 

 

 
132.4

 
132.4

Commingled funds – fixed income specialty
 

 

 

 
96.0

 
96.0

Other fixed income(b)
 

 

 
25.4

 

 
25.4

 
 

 
1,712.3

 
25.4

 
228.4

 
1,966.1

Derivatives
 

 
(0.9
)
 

 

 
(0.9
)
Real estate(c)
 

 

 
7.3

 

 
7.3

Other(d)
 

 

 
64.3

 

 
64.3

Total assets at fair value
 
$
11.8

 
$
1,728.4

 
$
97.0

 
$
943.1

 
$
2,780.3

Receivables and payables, net
 
 
 
 
 
 
 
 
 
16.8

Net assets available for benefits
 
 
 
 
 
 
 
 
 
$
2,797.1

(a)
This class includes state and municipal bonds.
(b)
This class includes group annuity and guaranteed interest contracts.
(c)
This class includes a private equity fund that invests in real estate.
(d)
This investment comprises the Company's non-significant, non-US pension plan assets. It primarily includes insurance contracts.
Cash equivalents are valued using a market approach with inputs including quoted market prices for either identical or similar instruments. Fixed income securities are valued through a market approach with inputs including, but not limited to, benchmark yields, reported trades, broker quotes and issuer spreads. Commingled funds are valued at their daily net asset value (NAV) per share or the equivalent. NAV per share or the equivalent is used for fair value purposes as a practical expedient. NAVs are calculated by the investment manager or sponsor of the fund. Private real estate fund values are reported by the fund manager and are based on valuation or appraisal of the underlying investments. Refer to Note 9, "Fair Value Measurements" for additional information related to the fair value hierarchy defined by ASC 820. There have been no significant transfers between levels of the fair value hierarchy.
The Company made required and discretionary contributions to its pension plans of $101.4 million in 2017, $56.4 million in 2016, and $35.6 million in 2015 and currently projects that it will contribute approximately $75.2 million to its plans worldwide in 2018. The Company’s policy allows it to fund an amount, which could be in excess of or less than the pension cost expensed, subject to the limitations imposed by current tax regulations. However, the Company anticipates funding the plans in 2018 in accordance with contributions required by funding regulations or the laws of each jurisdiction. In October 2017, the U.S. Internal Revenue Service (IRS) issued final mortality regulations effective for plan years beginning in 2018 with the option to defer recognition for one year under certain exemption criteria. The Company has chosen to defer recognition of new IRS mortality rates for one year.
Most of the Company’s U.S. employees are covered by defined contribution plans. Employer contributions are determined based on criteria specific to the individual plans and amounted to approximately $118.7 million, $108.3 million, and $98.1 million in 2017, 2016 and 2015, respectively. The Company’s contributions relating to non-U.S. defined contribution plans and other non-U.S. benefit plans were $47.7 million, $39.9 million and $30.5 million in 2017, 2016 and 2015, respectively.
Multiemployer Pension Plans
The Company also participates in a number of multiemployer defined benefit pension plans related to collectively bargained U.S. employees of Trane. The Company's contributions, and the administration of the fixed retirement payments, are determined by the terms of the related collective-bargaining agreements. These multiemployer plans pose different risks to the Company than single-employer plans, including:
1.
The Company's contributions to multiemployer plans may be used to provide benefits to all participating employees of the program, including employees of other employers.
2.
In the event that another participating employer ceases contributions to a plan, the Company may be responsible for any unfunded obligations along with the remaining participating employers.
3.
If the Company chooses to withdraw from any of the multiemployer plans, the Company may be required to pay a withdrawal liability, based on the underfunded status of the plan.
As of December 31, 2017, the Company does not participate in any plans that are individually significant, nor is the Company an individually significant participant to any of these plans. Total contributions to multiemployer plans for the years ended December 31 were as follows:
In millions
 
2017
 
2016
 
2015
Total contributions
 
$
9.0

 
$
7.7

 
$
6.7


Contributions to these plans may increase in the event that any of these plans are underfunded.
Postretirement Benefits Other Than Pensions
The Company sponsors several postretirement plans that provide for healthcare benefits, and in some instances, life insurance benefits that cover certain eligible employees. These plans are unfunded and have no plan assets, but are instead funded by the Company on a pay-as-you-go basis in the form of direct benefit payments. Generally, postretirement health benefits are contributory with contributions adjusted annually. Life insurance plans for retirees are primarily noncontributory.

The following table details changes in the Company’s postretirement plan benefit obligations for the years ended December 31:
In millions
 
2017
 
2016
Benefit obligation at beginning of year
 
$
578.6

 
$
624.1

Service cost
 
3.1

 
3.7

Interest cost
 
15.7

 
17.5

Plan participants’ contributions
 
9.8

 
10.2

Actuarial (gains) losses
 
(30.2
)
 
(24.4
)
Benefits paid, net of Medicare Part D subsidy (1)
 
(55.4
)
 
(55.7
)
Special termination benefits recorded in restructuring
 
5.9

 

Other
 
0.5

 
3.2

Benefit obligations at end of year
 
$
528.0

 
$
578.6

(1) Amounts are net of Medicare Part D subsidy of $1.1 million and $2.5 million in 2017 and 2016, respectively

The benefit plan obligations are reflected in the Consolidated Balance Sheets as follows:
In millions
 
December 31, 2017
 
December 31, 2016
Accrued compensation and benefits
 
$
(48.5
)
 
$
(53.3
)
Postemployment and other benefit liabilities
 
(479.5
)