INGERSOLL-RAND PLC, 10-K filed on 2/12/2019
Annual Report
v3.10.0.1
Document and Entity Information Document - USD ($)
12 Months Ended
Dec. 31, 2018
Feb. 01, 2019
Jun. 30, 2018
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, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   242,168,631  
Entity Well-known Seasoned Issuer Yes    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Small Business false    
Entity Shell Company false    
Entity Emerging Growth Company false    
Entity Public Float     $ 21,926,638,212
v3.10.0.1
Consolidated Statements of Comprehensive Income - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Other comprehensive income (loss)      
Net revenues $ 15,668.2 $ 14,197.6 $ 13,508.9
Cost of goods sold (10,847.6) (9,811.6) (9,307.9)
Selling and administrative expenses (2,903.2) (2,720.7) (2,597.8)
Gain (loss) on sale/asset impairment 0.0 (8.4) 0.0
Operating income (loss) 1,917.4 1,665.3 1,603.2
Interest expense (220.7) (215.8) (221.5)
Other, net (36.4) (31.6) 359.6
Earnings (loss) before income taxes 1,660.3 1,417.9 1,741.3
Benefit (provision) for income taxes (281.3) (80.2) (281.5)
Earnings (loss) from continuing operations 1,379.0 1,337.7 1,459.8
Discontinued operations, net of tax (21.5) (25.4) 32.9
Net earnings 1,357.5 1,312.3 1,492.7
Less: Net earnings attributable to noncontrolling interests (19.9) (9.7) (16.5)
Net earnings (loss) attributable to Ingersoll-Rand plc 1,337.6 1,302.6 1,476.2
Amounts attributable to Ingersoll-Rand plc ordinary shareholders:      
Continuing operations 1,359.1 1,328.0 1,443.3
Discontinued operations (21.5) (25.4) 32.9
Net earnings (loss) attributable to Ingersoll-Rand plc $ 1,337.6 $ 1,302.6 $ 1,476.2
Basic:      
Continuing operations $ 5.50 $ 5.21 $ 5.57
Discontinued operations (0.09) (0.10) 0.13
Net earnings 5.41 5.11 5.70
Diluted:      
Continuing operations 5.43 5.14 5.52
Discontinued operations (0.08) (0.09) 0.13
Net earnings $ 5.35 $ 5.05 $ 5.65
Statements of Comprehensive Income      
Net earnings $ 1,357.5 $ 1,312.3 $ 1,492.7
Currency translation (230.6) 450.3 (233.8)
Cash flow hedges and marketable securities unrealized net gains (losses) arising during period 1.2 (1.8) 2.2
Cash flow hedges and marketable securities net gains (losses) reclassified into earnings 0.9 3.6 (4.8)
Cash flow hedges and marketable securities tax (expense) benefit (0.1) 0.0 0.4
Total cash flow hedges and marketable securities net of tax 2.0 1.8 (2.2)
Pension and OPEB adjustments prior service gains (costs) for the period (16.0) (3.8) (6.2)
Pension and OPEB adjustments net actuarial gains (losses) for the period 12.8 39.6 23.6
Pension and OPEB adjustments amortization reclassified to earnings 50.7 52.1 57.5
Pension and OPEB adjustments settlements and curtailments reclassified to earnings 2.5 7.7 2.1
Pension and OPEB adjustments currency translation and other 7.5 (15.4) 22.5
Pension and OPEB adjustments tax (expense) benefit (17.2) (20.1) (23.5)
Total pension and OPEB adjustments, net of tax 40.3 60.1 76.0
Other comprehensive income (loss), net of tax (188.3) 512.2 (160.0)
Total comprehensive income (loss), net of tax 1,169.2 1,824.5 1,332.7
Total comprehensive (income) loss attributable to noncontrolling interests (16.9) (10.2) (26.1)
Total comprehensive income (loss) attributable to Ingersoll-Rand plc $ 1,152.3 $ 1,814.3 $ 1,306.6
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Millions
Dec. 31, 2018
Dec. 31, 2017
ASSETS    
Cash and cash equivalents $ 903.4 $ 1,549.4
Accounts and notes receivable, net 2,679.2 2,477.4
Inventories 1,677.8 1,555.4
Other current assets 471.6 536.9
Total current assets 5,732.0 6,119.1
Property, plant and equipment, net 1,730.8 1,551.3
Goodwill 5,959.5 5,935.7
Intangible Assets, Net (Excluding Goodwill) 3,634.7 3,742.9
Other noncurrent assets 857.9 824.3
Total assets 17,914.9 18,173.3
LIABILITIES AND EQUITY    
Accounts payable 1,705.3 1,556.1
Accrued compensation and benefits 531.6 509.7
Accrued expenses and other current liabilities 1,728.2 1,655.2
Short-term borrowings and current maturities of long-term debt 350.6 1,107.0
Total current liabilities 4,315.7 4,828.0
Long-term debt 3,740.7 2,957.0
Postemployment and other benefit liabilities 1,192.9 1,285.3
Deferred and noncurrent income taxes 538.4 757.5
Other noncurrent liabilities 1,062.4 1,138.6
Total liabilities 10,850.1 10,966.4
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) 266.4 274.0
Treasury Stock, Value (1,719.4) (1,719.4)
Capital in excess of par value 0.0 461.3
Retained earnings 9,439.8 8,903.2
Accumulated other comprehensive income (loss) (964.1) (778.8)
Total Ingersoll-Rand plc shareholders' equity 7,022.7 7,140.3
Noncontrolling interest 42.1 66.6
Total equity 7,064.8 7,206.9
Total liabilities and equity $ 17,914.9 $ 18,173.3
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2018
Dec. 31, 2017
Ordinary shares, par value, in dollars or euros per share, as stated $ 1.00 $ 1.00
Ordinary shares issued 0 273,980,824
Ordinary shares owned by subsidiary 0 24,501,667
v3.10.0.1
Consolidated Statements of Equity - USD ($)
shares in Millions, $ in Millions
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]
Treasury Stock, Value               $ (452.6)
Beginning balance, value at Dec. 31, 2015 $ 5,879.2 $ 269.0 $ 223.3 $ 6,897.9 $ (1,120.9) $ 62.5    
Beginning balance, shares at Dec. 31, 2015   269.0            
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net earnings 1,492.7 $ 0.0 0.0 1,476.2 0.0 16.5    
Other comprehensive income (loss), net of tax (160.0) 0.0 0.0 0.0 (169.6) 9.6    
Shares issued under incentive stock plans, value 60.4 $ 2.7 57.7 0.0 0.0 0.0    
Shares issued under incentive stock plans, shares   2.7            
Repurchase of ordinary shares (250.1) $ 0.0 0.0 0.0 0.0 0.0    
Repurchase of ordinary shares   0.0            
Repurchase of ordinary shares (250.1)              
Share-based compensation 61.6 $ 0.0 66.0 (4.4) 0.0 0.0    
Dividends to noncontrolling interests (14.1) 0.0 0.0 0.0 0.0 (14.1)    
Cash dividends, declared (351.0) 0.0 0.0 (351.0) 0.0 0.0    
Other (0.4) 0.0 (0.5) 0.1 0.0 0.0   0.0
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   271.7            
Treasury Stock, Value               (702.7)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net earnings 1,312.3 $ 0.0 0.0 1,302.6 0.0 9.7    
Other comprehensive income (loss), net of tax 512.2 0.0 0.0 0.0 511.7 0.5    
Shares issued under incentive stock plans, value 51.2 $ 2.3 48.9 0.0 0.0 0.0    
Shares issued under incentive stock plans, shares   2.3            
Repurchase of ordinary shares (1,016.9) $ 0.0 0.0 0.0 0.0 0.0    
Repurchase of ordinary shares   0.0            
Repurchase of ordinary shares (1,016.9)             (1,016.9)
Share-based compensation 67.9 $ 0.0 70.8 (2.9) 0.0 0.0    
Dividends to noncontrolling interests (15.8) 0.0 0.0 0.0 0.0 (15.8)    
Cash dividends, declared (430.2) 0.0 0.0 (430.2) 0.0 0.0    
Other 0.1   0.1 (0.2)     $ 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   274.0            
Treasury Stock, Value (1,719.4)             (1,719.4)
Increase (Decrease) in Stockholders' Equity [Roll Forward]                
Net earnings 1,357.5 $ 0.0 0.0 1,337.6 0.0 19.9    
Other comprehensive income (loss), net of tax (188.3) 0.0 0.0 0.0 (185.3) (3.0)    
Shares issued under incentive stock plans, value 43.1 $ 2.1 41.0 0.0 0.0 0.0    
Shares issued under incentive stock plans, shares   2.1            
Repurchase of ordinary shares (900.2) $ (9.7) (581.2) (309.3) 0.0 0.0    
Repurchase of ordinary shares   9.7            
Repurchase of ordinary shares (900.2)             0.0
Share-based compensation 74.7 $ 0.0 78.8 (4.1) 0.0 0.0    
Dividends to noncontrolling interests (41.4) 0.0 0.0 0.0 0.0 (41.4)    
Cash dividends, declared (480.8) 0.0 0.0 (480.8) 0.0 0.0    
Other 0.0 0.0 0.1 (0.1) 0.0 0.0    
Ending balance, value at Dec. 31, 2018 7,064.8 $ 266.4 $ 0.0 $ 9,439.8 $ (964.1) $ 42.1    
Ending balance, shares at Dec. 31, 2018   266.4            
Treasury Stock, Value $ (1,719.4)             $ (1,719.4)
v3.10.0.1
Consolidated Statements of Equity (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash dividends, declared, in dollars per share $ 0 $ 1.16
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Dec. 31, 2016
Cash flows from operating activities:      
Net earnings $ 1,357.5 $ 1,312.3 $ 1,492.7
(Income) loss from discontinued operations, net of tax 21.5 25.4 (32.9)
Adjustments to arrive at net cash provided by (used in) operating activities:      
Gain (loss) on sale/asset impairment 0.0 8.4 0.0
Depreciation and amortization 361.5 353.3 352.2
Gain on sale of Hussmann equity investment 0.0 0.0 (397.8)
Deferred income taxes (143.8) (117.4) (33.8)
Other items (78.5) (55.8) 35.6
Changes in other assets and liabilities      
Accounts and notes receivable (236.0) (156.7) (101.3)
Inventories (169.9) (112.4) 26.8
Other current and noncurrent assets 35.3 (206.8) (24.5)
Accounts payable 120.7 167.2 103.6
Other current and noncurrent liabilities 62.4 228.2 (21.4)
Net cash (used in) provided by continuing operating activities 1,474.5 1,561.6 1,433.0
Net cash (used in) provided by discontinued operating activities (66.7) (38.1) 88.9
Net cash provided by (used in) operating activities 1,407.8 1,523.5 1,521.9
Cash flows from investing activities:      
Capital expenditures (365.6) (221.3) (182.7)
Acquisition of businesses, net of cash acquired (285.2) (157.6) (9.2)
Proceeds from sale of property, plant and equipment 22.1 1.5 9.5
Proceeds from business dispositions, net of cash sold 0.0 0.0 422.5
Proceeds from Divestiture of Interest in Joint Venture (0.7)    
Net cash (used in) provided by continuing investing activities (629.4) (374.7)  
Net cash provided by (used in) investing activities (629.4) (374.7) 240.1
Cash flows from financing activities:      
Other short-term borrowings (net) (6.4) (4.0) (150.7)
Proceeds from long-term debt 1,147.0 0.0 0.0
Payments of long-term debt (1,123.0) (7.7) 0.0
Net proceeds (repayments) in debt 17.6 (11.7) (150.7)
Debt issuance costs (12.0) (0.2) (2.1)
Dividends paid to ordinary shareholders (479.5) (430.1) (348.6)
Dividends paid to noncontrolling interests (41.4) (15.8) (14.1)
Payments to Noncontrolling Interests 0.0 6.8 0.0
Proceeds shares issued under incentive plans 68.9 76.7 62.9
Repurchase of ordinary shares (900.2) (1,016.9) (250.1)
Other, net (32.2) (27.7) (24.2)
Net cash (used in) provided by continuing financing activities (1,378.8) (1,432.5) (726.9)
Net Cash Provided by (Used in) Financing Activities (1,378.8) (1,432.5) (726.9)
Effect of exchange rate changes on cash and cash equivalents (45.6) 118.4 (57.2)
Net increase (decrease) in cash and cash equivalents (646.0) (165.3) 977.9
Cash and cash equivalents - beginning of period 1,549.4 1,714.7 736.8
Cash and cash equivalents - end of period 903.4 1,549.4 1,714.7
Cash paid during the year for:      
Interest, net of amounts capitalized 200.6 210.0 209.3
Income taxes, net of refunds $ 375.4 $ 286.7 $ 334.3
v3.10.0.1
Description of Company
12 Months Ended
Dec. 31, 2018
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®.
v3.10.0.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
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 Company has revised its supplemental cash flow information in prior years to properly reflect cash paid during the year for interest.
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.
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 $32.7 million and $26.9 million for doubtful accounts as of December 31, 2018 and 2017, respectively.
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, 2018 and 2017, approximately 56% and 51%, respectively, of all inventory utilized the LIFO method.
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 a business combination. 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.
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.
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.
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.
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 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.
Revenue Recognition:  Revenue is recognized when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. A majority of the Company's revenues are recognized at a point-in-time as control is transferred at a distinct point in time per the terms of a contract. However, a portion of the Company's revenues are recognized over time as the customer simultaneously receives control as the Company performs work under a contract. See Note 11 to the Consolidated Financial Statements for additional information regarding revenue recognition.
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, 2018, 2017 and 2016, these expenditures amounted to $228.7 million, $210.8 million and $207.9 million, respectively.
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 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 adopted this standard on October 1, 2018 with no material impact to the financial statements.
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 removed 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. As a result, the income tax consequences of an intra-entity transfer of assets other than inventory will be recognized in the current period income statement rather than being deferred until the assets leave the consolidated group. The Company applied ASU 2016-16 on a modified retrospective basis through a cumulative-effect adjustment which reduced Retained earnings by $9.1 million as of January 1, 2018.
In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" (ASC 606), which created 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 ASC 606, 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. The Company adopted this standard on January 1, 2018 using the modified retrospective approach and recorded a cumulative effect adjustment to increase Retained earnings by $2.4 million with related amounts not materially impacting the Balance Sheet. Refer to Note 11, “Revenue,” for a further discussion on the adoption of ASC 606.
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.
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 was retrospectively adjusted to present $21.7 million of excess tax benefits as an operating activity rather than a financing activity.
Recently Issued Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract" (ASU 2018-15), which aligns the requirements for capitalizing implementation costs in a cloud-computing arrangement service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. In addition, the guidance also clarifies the presentation requirements for reporting such costs in the financial statements. ASU 2018-15 is effective for annual reporting periods beginning after December 15, 2019 with early adoption permitted. The Company is currently assessing the impact of the ASU on its financial statements.
In February 2018, the FASB issued ASU 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income" (ASU 2018-02), which allows companies to reclassify stranded tax effects in Accumulated other comprehensive income (loss) that have been caused by the Tax Cuts and Jobs Act of 2017 (the Act) to Retained earnings for each period in which the effect of the change in the U.S. federal corporate income tax rate is recorded. ASU 2018-02 is effective for annual reporting periods beginning after December 15, 2018 with early adoption permitted. However, the FASB has made the reclassification optional. As a result, the Company assessed the impact of the ASU on its financial statements and will not exercise the option to reclassify the stranded tax effects caused by the Act.
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 FASB allows the option to adopt the standard using a modified retrospective approach through a cumulative-effect adjustment to retained earnings applied either to the beginning of the earliest period presented or the beginning of the period of adoption. The Company will adopt the new guidance effective January 1, 2019 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption. The Company expects the estimated right-of-use asset and related lease liability recognized on the Balance Sheet to approximate $500 million. However, the Company does not expect the adoption to have a material impact to its Statement of Cash Flows or Statement of Comprehensive Income.
v3.10.0.1
Inventories
12 Months Ended
Dec. 31, 2018
Inventory, Net [Abstract]  
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
 
2018
 
2017
Raw materials
 
$
550.5

 
$
502.8

Work-in-process
 
182.0

 
180.5

Finished goods
 
1,028.8

 
941.0

 
 
1,761.3

 
1,624.3

LIFO reserve
 
(83.5
)
 
(68.9
)
Total
 
$
1,677.8

 
$
1,555.4


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 $119.9 million and $120.3 million at December 31, 2018 and December 31, 2017, respectively.
v3.10.0.1
Property, Plant and Equipment
12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
PROPERTY, PLANT AND EQUIPMENT
At December 31, the major classes of property, plant and equipment were as follows:
In millions
 
2018
 
2017
Land
 
$
53.2

 
$
52.0

Buildings
 
870.7

 
770.1

Machinery and equipment
 
2,079.9

 
2,019.5

Software
 
831.4

 
822.7

 
 
3,835.2

 
3,664.3

Accumulated depreciation
 
(2,104.4
)
 
(2,113.0
)
Total
 
$
1,730.8

 
$
1,551.3


Depreciation expense for the years ended December 31, 2018, 2017 and 2016 was $217.4 million, $217.3 million and $216.7 million, which include amounts for software amortization of $25.7 million, $28.6 million and $35.9 million, respectively.
v3.10.0.1
Goodwill
12 Months Ended
Dec. 31, 2018
Goodwill Abstract  
Goodwill
GOODWILL
The Company records as goodwill the excess of the purchase price over the fair value of the net assets acquired in a business combination. 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, 2016
 
$
4,879.1

 
$
779.3

 
$
5,658.4

Acquisitions (1)
 
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

Acquisitions (1)
 
118.1

 
1.8

 
119.9

Currency translation
 
(84.0
)
 
(12.1
)
 
(96.1
)
Net balance as of December 31, 2018
 
5,099.2

 
860.3

 
5,959.5


(1) Refer to Note 17, "Acquisitions and Divestitures" for more information regarding acquisitions.
The net goodwill balances at December 31, 2018, 2017 and 2016 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.
The Company performed its annual goodwill impairment test during the fourth quarter of 2018 and determined that the estimated fair value of each reporting unit exceeded their respective carrying value. As a result, no impairment charges were recorded during the year. However, the Climate Latin America reporting unit is at risk of impairment as its estimated fair value exceeded its carrying value by 1.1%. The reporting unit has approximately $190 million of goodwill as of December 31, 2018. A significant increase in the discount rate, decrease in the long-term growth rate, or substantial reductions in end markets and volume assumptions could have a negative impact on its estimated fair value. With all other assumptions and trends remaining constant for each independent variable, a 0.5% increase in the discount rate combined with a 0.5% decrease in the long-term growth rate would result in an approximate $15 million impairment for this reporting unit.
v3.10.0.1
Intangible Assets
12 Months Ended
Dec. 31, 2018
Intangible Assets Abstract  
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:
 
 
2018
 
2017
In millions
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
 
Gross carrying amount
 
Accumulated amortization
 
Net carrying amount
Completed technologies/patents
 
$
206.6

 
$
(182.0
)
 
$
24.6

 
$
209.4

 
$
(177.3
)
 
$
32.1

Customer relationships
 
2,086.8

 
(1,176.3
)
 
910.5

 
2,068.9

 
(1,056.9
)
 
1,012.0

Other
 
84.5

 
(54.4
)
 
30.1

 
93.9

 
(52.7
)
 
41.2

Total finite-lived intangible assets
 
$
2,377.9

 
$
(1,412.7
)
 
$
965.2

 
$
2,372.2

 
$
(1,286.9
)
 
$
1,085.3

Trademarks (indefinite-lived)
 
2,669.5

 

 
2,669.5

 
2,657.6

 

 
2,657.6

Total
 
$
5,047.4

 
$
(1,412.7
)
 
$
3,634.7

 
$
5,029.8

 
$
(1,286.9
)
 
$
3,742.9


Intangible asset amortization expense for 2018, 2017 and 2016 was $139.3 million, $132.0 million and $132.0 million, respectively. Future estimated amortization expense on existing intangible assets in each of the next five years amounts to approximately $139 million for 2019, $137 million for 2020, $137 million for 2021, $137 million for 2022, and $135 million for 2023.
v3.10.0.1
Debt and Credit Facilities
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
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
 
2018
 
2017
Debentures with put feature
 
$
343.0

 
$
343.0

6.875% Senior notes due 2018 (1)
 

 
749.6

Other current maturities of long-term debt
 
7.6

 
7.7

Short-term borrowings
 

 
6.7

Total
 
$
350.6

 
$
1,107.0


(1) During the first quarter of 2018, the Company redeemed its 6.875% Senior notes due 2018.
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, 2018 and 2017 was 6.3% and 6.7%, 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, 2018. 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. The Company had no outstanding balance under its commercial paper program as of December 31, 2018 and December 31, 2017.
Debentures with Put Feature
At December 31, 2018 and December 31, 2017, 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 2018, subject to the notice requirement. No material exercises were made.
At December 31, long-term debt excluding current maturities consisted of:
In millions
 
2018
 
2017
2.875% Senior notes due 2019 (1)
 
$

 
$
349.4

2.625% Senior notes due 2020
 
299.4

 
298.9

2.900% Senior notes due 2021
 
298.3

 

9.000% Debentures due 2021
 
124.9

 
124.9

4.250% Senior notes due 2023
 
697.1

 
696.5

7.200% Debentures due 2019-2025
 
44.8

 
52.3

3.550% Senior notes due 2024
 
495.9

 
495.2

6.480% Debentures due 2025
 
149.7

 
149.7

3.750% Senior notes due 2028
 
544.5

 

5.750% Senior notes due 2043
 
494.3

 
494.0

4.650% Senior notes due 2044
 
295.8

 
295.6

4.300% Senior notes due 2048
 
295.9

 

Other loans and notes, at end-of-year average interest rates of 7.0% in 2018 and
5.71% in 2017, maturing in various amounts to 2023
 
0.1

 
0.5

Total
 
$
3,740.7

 
$
2,957.0


(1) During the first quarter of 2018, the Company redeemed its 2.875% Senior notes due 2019.
Scheduled maturities of long-term debt, including current maturities, as of December 31, 2018 are as follows:
In millions
  
2019
$
350.6

2020
307.0

2021
430.7

2022
7.5

2023
704.6

Thereafter
2,290.9

Total
$
4,091.3


Issuance and Redemption of Senior Notes
In February 2018, the Company issued $1.15 billion principal amount of senior notes in three tranches through an indirect, wholly-owned subsidiary. The tranches consist of $300 million aggregate principal amount of 2.900% senior notes due 2021, $550 million aggregate principal amount of 3.750% senior notes due 2028 and $300 million aggregate principal amount of 4.300% senior notes due 2048. The notes are fully and unconditionally guaranteed by each of Ingersoll Rand plc, Ingersoll-Rand Irish Holdings Unlimited Company, Ingersoll-Rand Lux International Holding Company S.à.r.l, Ingersoll-Rand Company and Ingersoll-Rand Luxembourg Finance S.A. The Company has the option to redeem the notes in whole or in part at any time, prior to their stated maturity date at redemption prices set forth in the indenture agreement. The notes are subject to certain customary covenants, however, none of these covenants are considered restrictive to the Company’s operations. In March 2018, the Company used the proceeds to fund the redemption of $750 million aggregate principal amount of 6.875% senior notes due 2018 and $350 million aggregate principal amount of 2.875% senior notes due 2019, with the remainder used for general corporate purposes. As a result of the early redemption, the Company recognized $15.4 million of premium expense and $1.2 million of unamortized costs in Interest expense in 2018.
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 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, 2018 and December 31, 2017. On April 17, 2018, the Company entered into a new 5-year, $1.0 billion senior unsecured credit facility and terminated its 5-year, $1.0 billion facility set to expire in March 2019. As a result, the current maturity dates of the Facilities are March 2021 and April 2023.
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, 2018 and December 31, 2017 was $4,244.0 million and $4,462.2 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, 2018 are the same as those used at December 31, 2017.
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 21 for the Company's current guarantor structure.
v3.10.0.1
Financial Instruments
12 Months Ended
Dec. 31, 2018
Financial Instruments Abstract  
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, commodity price and foreign currency exposures. These financial instruments are not used for trading or speculative purposes. The Company recognizes all derivatives on the Consolidated Balance Sheet at their fair value as either assets or liabilities.
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). 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
 
2018
 
2017
 
2018
 
2017
Derivatives designated as hedges:
 
 
 
 
 
 
 
 
Currency derivatives
 
$
1.3

 
$

 
$
0.7

 
$
1.3

Derivatives not designated as hedges:
 
 
 
 
 
 
 
 
Currency derivatives
 
0.9

 
7.2

 
0.6

 
1.2

Total derivatives
 
$
2.2

 
$
7.2

 
$
1.3

 
$
2.5


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 $0.6 billion and $0.7 billion at December 31, 2018 and 2017, respectively. At December 31, 2018 and 2017, a net gain of $0.5 million and a net loss of $1.2 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 $0.5 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, 2018, the maximum term of the Company’s currency derivatives was approximately 12 months, except for currency derivatives in place related to a certain long-term contract.
Other Derivative Instruments
Prior to 2005, the Company utilized forward-starting interest rate swaps and interest rate locks to manage interest rate exposure in periods prior to the anticipated issuance of certain fixed-rate debt. These instruments were designated as cash flow hedges and had a notional amount of $1.3 billion. 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 AOCI. These deferred gains or losses are subsequently recognized in Interest expense over the term of the related notes. The net unrecognized gain in AOCI was $6.7 million and $6.6 million at December 31, 2018 and at December 31, 2017. The deferred gain at December 31, 2018 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 gain of $0.7 million. The Company has no forward-starting interest rate swaps or interest rate lock contracts outstanding at December 31, 2018 or 2017.
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
 
2018
 
2017
 
2016
 
 
2018
 
2017
 
2016
Currency derivatives designated as hedges
 
$
1.2

 
$
(1.8
)
 
$
2.2

 
Cost of goods sold
 
$
(0.8
)
 
$
(3.1
)
 
$
5.3

Interest rate swaps & locks
 

 

 

 
Interest expense
 
(0.1
)
 
(0.5
)
 
(0.5
)
Total
 
$
1.2

 
$
(1.8
)
 
$
2.2

 
 
 
$
(0.9
)
 
$
(3.6
)
 
$
4.8


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
2018
 
2017
 
2016
Currency derivatives
 
Other income/(expense), net
 
$
(29.6
)
 
$
58.0

 
$
(39.2
)
Total
 
 
 
$
(29.6
)
 
$
58.0


$
(39.2
)

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.
The following table presents the effects of the Company's designated financial instruments on the associated financial statement line item within the Consolidated Statement of Comprehensive Income where the financial instrument are recorded:
 
 
Classification and amount of gain (loss) recognized in income on cash flow hedging relationships
 
 
2018
In millions
 
Cost of goods sold
 
Interest expense
Total amounts presented in the Consolidated Statements of Comprehensive Income
 
$
(10,847.6
)
 
$
(220.7
)
Gain (loss) on cash flow hedging relationships
 
 
 
 
Currency derivatives:
 
 
 
 
Amount of gain (loss) reclassified from AOCI and recognized into Net earnings
 
$
(0.8
)
 
$

Amount excluded from effectiveness testing recognized in net earnings based on changes in fair value and amortization
 
$
(0.1
)
 
$

Interest rate swaps & locks:
 
 
 
 
Amount of gain (loss) reclassified from AOCI and recognized into Net earnings
 
$

 
$
(0.1
)
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.
v3.10.0.1
Fair Value Measurements
12 Months Ended
Dec. 31, 2018
Fair Value Measurements [Abstract]  
Fair Value Measurement and Measurement Inputs, Recurring and Nonrecurring [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, 2018:
In Millions
Fair Value
 
Fair value measurements
 
Level 1
 
Level 2
 
Level 3
Assets:
 
 
 
 
 
 
 
Derivative instruments
$
2.2

 
$

 
$
2.2

 
$

Liabilities:
 
 
 
 
 
 
 
Derivative instruments
$
1.3

 
$

 
$
1.3

 
$


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

 
$


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, 2018 are the same as those used at December 31, 2017. There have been no transfers between levels of the fair value hierarchy.
v3.10.0.1
Pensions and Postretirement Benefits Other Than Pensions
12 Months Ended
Dec. 31, 2018
Retirement Benefits, Description [Abstract]  
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.
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
 
2018
 
2017
Change in benefit obligations:
 
 
 
 
Benefit obligation at beginning of year
 
$
3,742.2

 
$
3,531.9

Service cost
 
75.0

 
70.8

Interest cost
 
109.7

 
109.0

Employee contributions
 
1.1

 
1.1

Amendments
 
16.1

 
3.8

Actuarial (gains) losses
 
(224.8
)
 
175.8

Benefits paid
 
(218.9
)
 
(194.8
)
Currency translation
 
(34.8
)
 
69.6

Curtailments, settlements and special termination benefits
 
(4.6
)
 
(13.1
)
Other, including expenses paid
 
4.3

 
(11.9
)
Benefit obligation at end of year
 
$
3,465.3

 
$
3,742.2

Change in plan assets:
 
 
 
 
Fair value at beginning of year
 
$
3,063.1

 
$
2,797.1

Actual return on assets
 
(125.9
)
 
326.9

Company contributions
 
86.9

 
101.4

Employee contributions
 
1.1

 
1.1

Benefits paid
 
(218.9
)
 
(194.8
)
Currency translation
 
(32.8
)
 
59.0

Settlements
 
(9.8
)
 
(13.5
)
Other, including expenses paid
 
3.2

 
(14.1
)
Fair value of assets end of year
 
$
2,766.9

 
$
3,063.1

Net unfunded liability
 
$
(698.4
)
 
$
(679.1
)
Amounts included in the balance sheet:
 
 
 
 
Other noncurrent assets
 
$
49.9

 
$
61.7

Accrued compensation and benefits
 
(25.9
)
 
(15.3
)
Postemployment and other benefit liabilities
 
(722.4
)
 
(725.5
)
Net amount recognized
 
$
(698.4
)
 
$
(679.1
)

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, 2018, 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, 2017
 
$
(20.2
)
 
$
(833.5
)
 
$
(853.7
)
Current year changes recorded to AOCI
 
(16.0
)
 
(47.6
)
 
(63.6
)
Amortization reclassified to earnings
 
4.2

 
51.3

 
55.5

Settlements/curtailments reclassified to earnings (1)
 
0.2

 
2.3

 
2.5

Currency translation and other
 
0.6

 
6.9

 
7.5

December 31, 2018
 
$
(31.2
)
 
$
(820.6
)
 
$
(851.8
)

(1) Includes $0.2 million recorded in restructuring charges.
Weighted-average assumptions used to determine the benefit obligation at December 31 are as follows:
 
 
2018
 
2017
Discount rate:
 
 
 
 
U.S. plans
 
4.21
%
 
3.54
%
Non-U.S. plans
 
2.47
%
 
2.29
%
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 $3,364.6 million and $3,626.7 million at December 31, 2018 and 2017, 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 $3,075.2 million, $2,992.0 million and $2,330.4 million, respectively, as of December 31, 2018, and $3,291.4 million, $3,194.7 million and $2,554.0 million, respectively, as of December 31, 2017.
Pension benefit payments are expected to be paid as follows:
In millions
  
2019
$
232.2

2020
220.7

2021
219.6

2022
226.3

2023
229.1

2024 — 2028
1,125.4



The components of the Company’s net periodic pension benefit costs for the years ended December 31 include the following:
In millions
 
2018
 
2017
 
2016
Service cost
 
$
75.0

 
$
70.8

 
$
72.1

Interest cost
 
109.7

 
109.0

 
110.2

Expected return on plan assets
 
(146.6
)
 
(141.7
)
 
(146.1
)
Net amortization of:
 
 
 
 
 
 
Prior service costs (benefits)
 
4.2

 
3.8

 
4.7

Plan net actuarial (gains) losses
 
51.3

 
56.8

 
61.6

Net periodic pension benefit cost
 
93.6

 
98.7

 
102.5

Net curtailment, settlement, and special termination benefits (gains) losses
 
2.3

 
5.6

 
2.1

Net periodic pension benefit cost after net curtailment and settlement (gains) losses
 
$
95.9

 
$
104.3

 
$
104.6

Amounts recorded in continuing operations:
 
 
 
 
 
 
   Operating income
 
$
72.7

 
$
68.2

 
$
69.3

   Other income/(expense), net
 
14.6

 
25.4

 
25.5

Amounts recorded in discontinued operations
 
8.6

 
10.7

 
9.8

Total
 
$
95.9

 
$
104.3

 
$
104.6


Net periodic pension benefit cost for 2019 is projected to be approximately $113 million. The amounts expected to be recognized in net periodic pension benefit cost during 2019 for prior service cost and plan net actuarial losses are approximately $5 million and $54 million, respectively.
Weighted-average assumptions used to determine net periodic pension cost for the years ended December 31 are as follows:
 
 
2018
 
2017
 
2016
Discount rate:
 
 
 
 
 
 
U.S. plans
 
 
 
 
 
 
Service cost
 
3.70
%
 
4.18
%
 
4.25
%
Interest cost
 
3.24
%
 
3.36
%
 
3.29
%
Non-U.S. plans
 


 


 


Service cost
 
2.52
%
 
2.66
%
 
3.05
%
Interest cost
 
2.46
%
 
2.50
%
 
3.18
%
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
%
 
5.50
%
 
5.75
%
Non-U.S. plans
 
3.25
%
 
3.25
%
 
3.75
%

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, 2018 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
 
$
4.0

 
$
26.8

 
$

 
$

 
$
30.8

Equity investments:
 
 
 
 
 
 
 
 
 
 
Registered mutual funds – equity specialty
 

 

 

 
51.1

 
51.1

Commingled funds – equity specialty
 

 

 

 
520.7

 
520.7

 
 

 

 

 
571.8

 
571.8

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

 
476.2

 

 

 
476.2

Corporate and non-U.S. bonds(a)
 

 
1,225.8

 

 

 
1,225.8

Asset-backed and mortgage-backed securities
 

 
67.3

 

 

 
67.3

Registered mutual funds – fixed income specialty
 

 

 

 
135.1

 
135.1

Commingled funds – fixed income specialty
 

 

 

 
117.7

 
117.7

Other fixed income(b)
 

 

 
24.8

 

 
24.8

 
 

 
1,769.3

 
24.8

 
252.8

 
2,046.9

Derivatives
 

 
(0.4
)
 

 

 
(0.4
)
Real estate(c)
 

 

 
4.1

 

 
4.1

Other(d)
 

 

 
101.6

 

 
101.6

Total assets at fair value
 
$
4.0

 
$
1,795.7