Good day, ladies and gentlemen, and welcome to the Ingersoll Rand Fourth Quarter 2015 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Ms. Janet Pfeffer. Ma'am, you may begin.

Thank you, Crystal. Good morning, everyone, and welcome to Ingersoll Rand's Fourth Quarter 2015 Conference Call. We released earnings this morning at 6:30, and the release is posted on our website. We'll be broadcasting, in addition to this phone call, through our website at ingersollrand.com, where you'll also find a slide presentation that we'll be using this morning. If you please go to Slide 2. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to safe harbor provisions of federal securities law. Please see our SEC filings for a description of some of the factors that may cause actual results to vary from anticipated. We are also using non-GAAP measures in this call, and they are explained in the financial tables attached to our news release. So now to introduce the participants in this morning's call: Mike Lamach, Chairman and CEO; Sue Carter, Senior Vice President and CFO; and Joe Fimbianti, Director of Investor Relations. With that, please go to Slide 3. And I'll turn it over to Mike.

Great. Thanks, Janet. Good morning, and thanks for joining us on today's call. This morning, I'll spend a few minutes recapping our full year 2015 results and our progress on the transformation we've been working on in the company since 2010. Then, Sue will take you through the fourth quarter results, and I'll end up with our outlook for 2016 before we open it up to your questions. So starting with full year 2015. It was a year that I could characterize best by one word, and that word is volatility: volatility in energy markets, in foreign exchange rates, in industrial markets, in emerging markets and, of course, in the stock market. During this period of volatility, while the individual pieces might not each have ended exactly how we had forecast some 12 months ago, our headlines results were essentially right in the forecast we gave you a year ago. The 2015 forecast we gave you a year ago was for 4% to 5% organic growth, and we came in at 5%. Our adjusted EPS forecast was a midpoint of $3.74 or actuals $3.73. that performance was significantly more FX headwind. We had included a $0.17 earnings headwind in currency and guidance and ended up being over $0.30. Our free cash flow forecast was $950 million to $1 billion, and we delivered $985 million. We focused on executing within our business operating system and on the things that we can control, while doing our best to anticipate the things that we couldn't control, and we made adjustments accordingly. 2015 demonstrated continued progress in the implementation of our multiyear strategy for growth, operational excellence and shareholder value. We invested in core businesses, matured in key strategic capabilities and delivered on our financial commitments, all while navigating shifts and challenges in global…

Thank you, Mike. Please go to Slide 6. At the summary level, our organic bookings for the quarter were up 2% and organic revenues were up 3%. Residential and commercial HVAC organic revenues were each up 5-plus percent. Adjusted earnings per share for the fourth quarter were $0.94, up 15% versus last year. Consistent with Mike's commentary, for the full year, the fourth quarter was in line with our earnings guidance. A slightly lower tax rate was offset by slightly higher compensation and benefit costs. Our adjusted operating margins were up 50 basis points. Operating leverage in the quarter was excellent at 34% on an adjusted basis and 55% on an organic basis. Climate margins increased 70 basis points in the quarter. Adjusted Industrial margins were down 200 basis points but were only slightly down on 2% lower organic revenues, when excluding the impact of currency and a rolling in the first year of Cameron Centrifugal operating income and amortization. Finally, as Mike mentioned, given the impending closing of the sale of our Hussmann stake expected on April 1 and to take advantage of market volatility, we repurchased 4.9 million shares in January 2016 for $250 million. Please go to Slide 7. Orders for the fourth quarter of 2015 were up 1% on a reported basis and up 4%, excluding currency. Organic orders were up 2%. Climate orders were up 5% organically. Organic global commercial HVAC bookings were up low single digits, with a high single-digit increase in North America and declines in Asia and Europe. Organic transport orders were up low single digits with increases in global trailer, truck and auxiliary power units, partially offset by lower marine container orders. Orders in the Industrial segment were down 4% on a reported basis and down 7% organically. We saw high…

Great. Thanks, Sue. And please go to Slide 15. As always our intention is to give you our best view of what we're seeing in our end markets sitting here today and how that translates to our revenue outlook for 2016. We've broken it down by major end markets and geographies. And as you can see by the variation of colors and symbols, our end markets are seeing a wide variation in trends. North American commercial HVAC and residential HVAC, as well as transport and commercial HVAC markets in Europe are generally positive while global industrial markets remain weak. Transport markets in the Americas will be down -- flat to down, as lower trailer volumes will be largely offset by higher auxiliary power units, small truck refrigeration and other products. The Asian HVAC markets are expected to be flat down, and industrial markets in the Asia remain under pressure. Golf and utility vehicle markets are generally flat to slightly up. All the growth forecasts shown are on an organic basis. We're forecasting low single-digit growth in commercial HVAC in total, mid-single-digit growth in residential HVAC, which is essentially an all North American business for us, and flat revenues in Transport. We expect Air and Industrial products, which includes our compression technologies, Power Tools, Material Handling and fluid management SBUs to be down low single digits, and we expect Club Car to be up low single digits. Please go to Slide 16. Aggregating those market backdrops, we expect our reported revenues for full year 2016 to be flat, up 2% versus 2015. Overall, foreign exchange will be a headwind of about 2 percentage points as we've now completed a full year of Cameron centrifugal compressor division and our results organic revenue growth and excluding FX are the same in this forecast.…

[Operator Instructions] And our first question comes from Steve Tusa from JPMorgan.

Just a couple of questions. On the first quarter dynamics, you have a decent organic growth rate, but it doesn't look like there's much contribution from operations on EPS. What's going on there?

So Steve, good morning first of all. As we start to look at the first quarter bridge that you can actually see in the slides, what we're looking at is we've got restructuring costs that are in the first quarter. Our operating results are really going to be in the range of, and this includes the restructuring, negative $0.01 to a positive $0.04. We've got a little bit of lower share count. But when you think about what's happening in the headwinds, the first quarter is going to be part of that currency headwind that we talked about, particularly on the Industrial business. And the revenues we expect in the first quarter and margins for Industrial, we expect to be even lower than where we ended the year. So in other words, we're looking at a low revenue base. We're looking at headwinds from currency. And so I think the first quarter is just going to be tough compares, and then I think we get better as we go through the remainder of the year.

Okay. So Industrial. That makes a bit of sense. On this gain, you guys are going to take -- Mike, given the environment has clearly gotten worse over the course of the last year, you guys are doing some degree of restructuring, but -- and you don't typically do this over time, like other companies, but any thoughts to may be using this gain to perhaps take a bigger swipe at things and get out in front of some restructuring that you may have planned for a couple of years into the future, just to kind of solidify that ability to kind of execute and deliver, like you've been doing over the last year? Is there a bigger restructuring out there, I guess, potential for that?

Yes. I think, Steve, when you can go back to '09, we've been really consistent about particularly the factory footprint. And that's at a place right now where I think is very productive. It's well utilized. And when we look at ideas around that's coming to 2016, paybacks are in the range of, say, 5 to 8 years, which is just outside the range of what we thought in this environment was doable. That being said, when you look at areas of business, particularly around compression technology, there is restructuring taking place there and largely it's the areas of headcount and things that we can do on a non-qualified way. So tremendous focus on both corporate and costs within each of the businesses. So there is a sort of a drumbeat over time of doing that but it's an effective, efficient -- relatively effective and efficient footprint. One of the things that we find is the better we've gotten that in Lean, that further we've gotten into that, the longer and harder is to get a payback on a closure, which is a good thing. So we remain, I think, open-minded, Steve. If, in fact, things deteriorated further, if, in fact, we saw an opportunity, we certainly will look at that. We'll keep an open mind on that. But rather than putting a big placeholder out there with no specifics, we wanted to just keep it to the known actions and the announcements that we made internally inside the company to this point.

Our next question comes from Nigel Coe from Morgan Stanley.

Just wanted to -- first of all, congratulations on great second half execution. Certainly, a lot better than many of your so-called high-quality peers. So well done on 3Q, 4Q. Just wanted to pick up on Steve's point about. Very clear answer on the restructuring. But I guess, the 2 areas of pushback for '16 plan would be flat Industrial and maybe flat TK. So I'm wondering if those come in weaker through the year, to what extent do you have contingency plans in place to mitigate the deleverage that you would see if those do come in weaker?

Yes, Nigel, this is again,I'll pick it up at the point of Steve, where -- this is where investments would be metered down. A lot of the investments we're making are not only in product but in channel. And also letting attrition at times work for you. So we would continue to work that down. We certainly have a plan to sustain a lower revenue outlook, if we see that. It's baked within the guidance we've provided, the range that we've provided. And our focus really is on the Industrial segment, and it's fundamentally on the compression technology's piece. Todd's all over it. He's well into several months now into the role. I think he's got his eyes wide open around the opportunity. He's opportunistic around what he's doing. And I've got confidence in Todd and the team that they've got the plants hardwired for lots of different scenarios at this point.

Okay, okay. Well, I'll pick up off-line. And secondly, obviously, you'd be aware that there's a pretty fertile debate about nonresi in North America, given the broader weakness in the industrial complex. The high single-digit growth in bookings during the quarter suggests that you're still seeing relatively fertile end markets, but maybe just pick up on where you stand and perhaps maybe comment on how the fundamentals [ph] are looking right now?

Well, I think the surprise in the fourth quarter, at least to me, was the strength that we had both in Applied and unitary n North America. We had double-digit Applied bookings in the fourth quarter, and we had mid-teens booking in unitary in the fourth quarter. So as a backdrop, going into the first half of the year, it feels like we've at least got enough out there for us to see in terms of visibility to see that. Also, we had really good service growth, kind of high single-digit growth in services. Controls was up nearly double digits there. So it feels like we've -- call it a little bit of a lift in terms of institutional markets. Commercial hasn't turned down fully. That's why we're seeing good unitary, although some unitary spills in through K-12 as well. So that continues. And then, as you'd expect just the investments in the service network and service footprint have been good for us. So it's a pretty good backdrop from the fourth quarter going into the first part of the year.

Our next question comes from Julian Mitchell from Credit Suisse.

Just a question around the Climate margin guidance. It looks like you're guiding for sort of 40-plus incremental margin in Climate for 2016 overall. Maybe looking at Slide 15, you might have some mix headwinds in that segment this year with resi growing so strongly, Thermo King and Trane Asia being flat to down. So just wondered what you're embedding for mix in Climate for the year ahead?

So Julian, as we think about where Climate's going to go in 2016, I think you're right, you hit some of the high points. So we still see the continued trends in what we talked about in terms of commercial HVAC in the Americas being strong and EMEA being up and on the Asia side being down a little bit. We called residential up mid-single digits. You also have the factors of Latin America as part of the business. And while you have some growth in -- those sides, you've also got the Transport revenues being flat in 2016. So I think it's all of those mix pieces could strengthen on the commercial side in North America and Europe, a little down on the Asia side. Flat Transport down on Latin America and good mid-single-digit growth in res.

Okay. So mix is sort of broadly neutral then, '16 versus '15, in Climate?

Yes, Julian, residential, if you look at sort of the peer group, we're right at the top of the pack in terms of profitability. I think it's a point often lost on investors is the amount of margin improvement we had in residential businesses. So good residential growth, it's good for us. It's fine. On the Transport side, if you look at Transport North America trailer, the industry being down 10%, our guidance embeds more of a 15% decline. We look at APUs. We had good growth in the year. We had 16% growth in APUs over the full year. We had good growth in bookings in the fourth quarter. We've got a strategy for a higher attachment rate to non-refrigerated trailers, about a 3:1 ratio. If we sell 3 APUs, it's equal to one North American trailer. So there is, between APU and some of the Air businesses and other businesses that we have within TK, the ability to offset that decline. And then I point you back to the fact that European trailer was up nicely. And as that moves up, that's actually even more helpful to North American trailer. So net-net, we're good. Actually, what's down for us pretty big is container. We had a big year last year in container. Container is soft market in general. We're against a tough comp. But container is an area, where, frankly, less container is helpful on the mix. So net-net, we think we can grow margins.

And then just a quick follow-up. Price mix -- sorry, price material was a 30 bps tailwind for the quarter and the year in 2015. Are you assuming sort of similar-ish for the year ahead?

We are. So if -- again, you're absolutely right with -- we ended the fourth quarter with 30 basis points and full year 2015 at 30 to 40 basis points. For 2016, we're going to expect a 30 to 40 basis point range for that gap or that spread between price and direct material inflation. You do have higher material deflation numbers. As you'll recall, we had inflation in the first and second quarters of 2015. So you do get a lift out of that. But I think as we think about the push and take between price and direct material inflation, we think all in all it's going to come back to about that the same 30 to 40 basis points range in 2016 as what we saw. One of the other points, and you didn't ask this, but I think it's relevant when we're having the discussion about price and direct material inflation, when we think about the differences between Climate and the Industrial businesses, the largest pieces of the benefit on material deflation do go to the Climate business. There is some, and there's still is a positive spread in the Industrial businesses, but it's much less than what you would see in Climate. And so as you're trying to come year-over-year, you also don't have that nice benefit coming out of commodities and the direct material deflation on the Industrial side.

Our next question comes from David Raso from Evercore ISI.

Couple quick questions. First, acquisition pipeline. Can you give us a little feel for where you're feeling the opportunities are presenting themselves most, be it geographic, end market, however you want to address the question?

Really, David, the strategy for us has been to look at all the SBUs, core businesses across all markets. And so there's a pipeline that would reflect all that from that perspective. There are 2 fundamental areas that we see for investment. One is channel. We continue to see opportunities, whether it's geographically outside of the U.S. for channel or even in the U.S. in terms of buying back commercial distribution. That's a continued emphasis for us. We also find that when we can take a product, it might be a technology that we don't have and sell it through our existing channel, particularly on the Trane Commercial side, we do very, very well with that. So obviously, it's more attractive if we're buying anything that's euro-denominated or predominantly outside the U.S., and so we're pretty actively looking outside the U.S. for a lot of that, which can be then modified and brought into the U.S. with different power requirements and different efficiency ratings, but some of the technologies can be applied. So we're seeing an active pipeline there as well.

And given the balance sheet power and the cash flow, would you care to give us any sense of bigger than a bread basket-type sizing of what kind of size deals are you looking at currently?

Yes, probably David, truthfully that would only get us into trouble, I think, to do any bread basket estimates. I think you can look at where we would end the year in terms of ratios, in terms of EBITDA to debt, we end the year around the 2.4x range. There's obviously some capacity within the current debt rating. We've got the cash. We talked about in the call the $675 million, that's unidentified. So there is an opportunity to do something a little bit larger. But what we're generally seeing are small to mid-size deals that just make great economic sense.

Okay. Couple quick things. Tax rate. With the IRS settlement now behind us, can you give us some guidance on how you think about the tax rate, be it this year, next year? I saw the tax rate guidance. I must admit I was looking for a little lower tax rate in '16, given the IRS settlement. But can you give us some guidelines how to model the next few years?

Sure. So we were probably a little conservative on the 24% to 25% effective tax rate guidance for 2016. I think that when you think about the IRS settlement, what the IRS settlement does is it takes the -- it takes the risk profile off the company, and it puts to bed all of the issues around intercompany debt and any issues that would have been in the 2001, 2002, through 2011 range. But what it really doesn't do is it doesn't really affect the overall effective tax rate. So what you have to do in order to make that tax rate move is you have to continue to refine your strategy. Now having all of those issues off the table certainly does give you an opportunity, and we are certainly involved in looking at that strategy in terms of the different areas that we're looking at. So we have a good trading hub that is in Europe. We're looking at Asia and Panama for trading hubs. We're looking at all of our intercompany debt and making sure that we're as balanced as we go into 2016 as we would like to be. But we do also have a slight headwind, if you will, on tax rates. And that is when you look around the globe and you think about our revenue growth in 2016, the areas that are growing the most are in North America, which does pressure the tax rate. So that's a long way around saying, we absolutely have a goal of looking at every opportunity to bring that rate down. We're still going to be just as conscientious about the items we take on as we've always been. But I do think we'll see some opportunities in 2016. We'll continue to work that strategy and continue to communicate. But like I say, it's also a good thing that we have a little pressure on that rate coming out of the North America growth.

All right. And speaking quickly on cushions just making sure, the corporate expense, I know there's rounding and you have to give ranges on segments and so forth. But it does seem to be implying your corporate expense goes up 10% to $230 million versus $210 million last year. Is that a rounding issue? Or should we really think the corporate expense is going up that much? Because if you back from the total EBIT, so it's implied by the segments, it is a larger number than I would've assumed.

Well, so it's not really rounding. But as we look at corporate expenses and -- so if you think back to 2015, where we started the year with our guidance, it was about $235 million, it may sound familiar, and we ended the year at $210 million on the corporate side. When we look at 2016, we took a lot of discretionary spend out of 2015. There are some investments that we need to continue to make around our IT infrastructure, around cybersecurity, and we also have on the corporate aside. So we talked about pension in total for Ingersoll Rand being about flat year-over-year. However, with a lot of puts and takes in elements of pension, pension is a little higher on the corporate side in 2016. So it's not just rounding, it's not just putting things back in, but I'll also tell you that we're going to be very conscientious about what that spend is. And looking at not getting ahead of ourselves on any spend before we see what's going to happen in the different markets. So it's a long way of saying that the $230 million, $235 million range is a lot more normal than $210 million, but we're going to watch it closely, and we're going to do everything we can to make sure that the money is spent very well and to the level that we need to.

If you take the run rate plus the pension, you're right, it leaves little bit of a gap there, which we would normally apply to things like IT infrastructure and security that we're on a program to refresh. But look, if the markets turn down, we would just look to pull back, from a discretionary standpoint, in other areas in corporate. So there's a little bit of flex in there that we would take if the markets are a little bit rougher than we think.

[Operator Instructions] Our next question comes from Steven Winoker with Bernstein.

Mike, you've often talked about one of the characteristics distinguishing marks of the new Ingersoll Rand. It's how you hold decrementals when volumes are in the down part of the cycle. So we're obviously witnessing that inside of Industrial or about to. Can you maybe talk about what decrementals you really think you're going to be able to achieve here if things do go a little bit further south? And what's giving you the confidence on just, I guess, down low single digits in Air and Industrial products when it looks like booking are a bit worse than that and the broader environment is also a bit worse?

Yes. And Steve, look, a great example of that was what happened within a compression technology, if we take the legacy business, it ran almost flat on much lower volumes. So a great example of that. That was extraordinary effort by that team to really pull all the stops on productivity and discretionary spending, and really to win in the marketplace. It's a little bit tough to compare comps against competition, particularly denominated in different currencies. But we did fairly well there on the product and services side of the business. So that's a great example. I would say that where we try to leverage in the gross margin range of 25% and 30%, we're certainly looking to deleverage within the gross margin range of not to exceed to 25% to 30%. So that would be sort of the essence of that. It could depend a bit on the business. I mean, TK has fundamentally, I think, more opportunity. It doesn't leverage up nearly as high as people think. It doesn't deleverage nearly as poorly as people think largely because the distribution base of that business is independent. And so we're really turning on and off sort of factory production, and we've got very flexible plants and labor forces that work with us on that. So a great example is TK, where we would look to certainly work inside of normal margins in that business.

And Steve, just to add on to what Mike said on the Industrial side, when I step back and think about Industrial, I kind of think about 3 big buckets that impacted that. Again, no excuses, the decrementals need to be at the same level as the incrementals when we go forward. But Industrial has an outsized impact from foreign exchange. So over 50% of their revenues are impacted or they're non-U.S. and are impacted by foreign exchange. So you have that headwind going against them. We do have the amortization from the accounting on the acquisition of Cameron, again took that on -- knew we took that on, but it does impact what we're looking at in 2015. And then, as I pointed out earlier, when you think about -- they don't get the benefit or the big benefit coming out of direct material deflation with commodity prices because that's just not how that segment works. The Air business gets benefit out of some of that, but the other businesses within the segment do not. And so when I say you've got outsized foreign exchange, less direct material deflation, and we put an acquisition in there with some additional amortization. So I think about that in the total equation, too.

Okay. And then as a follow-up to an earlier question, you talked a lot about the price versus material deflation and range spread, but a little more on the pricing environment itself, absent material. What are you seeing in your big businesses in pricing? What kind of behavior are you seeing?

Well, both businesses in the fourth quarter saw positive price, which is pretty outstanding, frankly, across the board. And that's with pressure in Climate in Asia, and it's, of course, with Industrial pressure all over the world still able to get price in that business. So we are still seeing positive price, albeit it's pretty thin in the quarter. So that's, I think, a good indicator from the pricing power, and just sort of the pricing structure within the industry holds pretty well through tougher times.

And that same would hold for 2016, with both segments projecting positive price for 2016.

Our next question comes from Jeffrey Sprague with the Vertical Research Partners.

Just back to Industrial for a moment, Mike. Just thinking about the margins sequentially, if Cameron hit its targets and with a sequential revenue that you just had seasonally, I would have thought the margins would have been a little been better there. Can you just kind of walk us through that? And then just help reconcile us a little bit how we get comfortable with kind of a flattish Industrial for the year coming off this Q4 order number? Is there something in particular that you see in the pipeline that gives you some confidence in that number?

Jeff, I'll start, and then I'll let Sue finish that. What I think a lot of folks don't recognize when we talk about Industrial is impact that Material Handing and tools would have. Material Handling is really exclusively oil and gas for us. It's 7% of that segment. It's been hit incredibly hard. In fact, the tools business was hit very hard by that business as well, the highest margin businesses in the portfolio. And so when those go down, you feel it. It's a substantial headwind buried inside the segment numbers that's independent of what's happening with Cameron or compression in general. The other thing, if you go back to compression technology specifically is we did very well from a margin perspective historically in Asia and in Latin America. And so from a mix perspective, when those markets are down and they've been absolutely clobbered, we feel that as well from a mix perspective.

Right. And so let's talk about the ECC business for just a little bit. And so I think the overarching point that we wanted to make when we were talking about that business is that it was EBITDA and EPS accretive, which is where we had hoped to go. However, I would say that as you look at that business from the time that we looked at the acquisition until we completed 2015, I would say that, that road map, just like we talked about with the entire company, has a few different components. So if you think about the revenue side of that business, you certainly have the 4 components of the business with the plant air side of the business being really hit by the weakened Industrial market. And so that definitely, that book in term business differently took a downturn in 2015. You also have tough, tough markets with oil prices and so on the processed gas side and on the engineered air side, you've got fewer projects, you've got same number of competitors. And so you've got some tough markets there and then you've got an aftermarket, which is an opportunity. Having said all of that, what we did with the business in 2015 with a top line that wasn't perhaps as strong as what we wanted is, we accelerated some of the synergies in the business and, in fact, overdrove the operating synergies, not revenue synergies, but the operating synergies in the business, and we're going to continue to do that. So the point wasn't that it's operating exactly as we would have called it a year ago, but I think as we look to the business and with what we were going to do with it, we ended up with a pretty good result on the acquisition.

Yes, Jeff, too, you know lost maybe in this is some really strong execution here by the team integrating it. It will turn out that the synergy is going to be about 15% of Cameron's revenues. So it's double the synergies we thought we would have, which is a good thing because obviously, the top line is much weaker, and that's the reason it's still accretive from an EPS -- cash EPS perspective in the year.

Just one housekeeping item. The release says there's $250 million of repo in Q4 and $250 million in January. That $250 million in Q4 is really referring to a full year number, correct? Or is there some settlement issue with or something else that I'm missing there? Looks like you did $233 million through 9 months.

[indiscernible] I think it was October, and we had some settlement in December. So back in October we said we had spent, I think, $233 million to $250 million by the end of October. Did you catch that?

Not completely, no.

Sorry. We were talking in other response in the room, and I apologize for that. So we did do the $250 million in the fourth quarter. We talked about that roughly in the third quarter call, and then we had a separate 10b5-1 program that repurchased $250 million in January.

So $250 million quarter 4 and $250 million quarter 1, Jeff.

All right. I'll follow up. It says $233 million in the Q3 10-Q. That's why I'm confused.

That's right. So what happened there, Jeff, and so you're absolutely right. At the time we released earnings for the third quarter, which would've been the third week in of October, we had not settled out the entire $250 million. So there was a little bit of leakage that was over into the remainder. But it was in October -- it was an October event. So in other words, we were announcing that we had gone into the market just like we did -- we are now. We're not talking about the first quarter. But in the first quarter, we've repurchased that $250 million. We had repurchased $233 million in October, and the total was $250 million for the fourth quarter.

Okay. Got it.

Our next question comes from Deane Dray from RBC Capital Markets.

This is Andrew Krill on for Deane. So going back to residential HVAC, I was hoping you can give a little more commentary on the mix of new buying versus repair. And have you seen any change in behavior there? And I guess, any margin implications this might have?

Well, clearly, we're seeing more that's not so much new construction and repairs. It's largely new construction and replacement. And so it's moving back now toward replacement. Replacement is a very good place for us. We've got really good shares as compared to new construction where shares were lower. So when the market moves toward replacement, we generally do much better, and you saw that in high-teens bookings in the fourth quarter, and the overall good performance that we had in 2015 where we had really excellent performance in '15.

Okay. And then just a quick follow-up. I was wondering if you could give little more color on China just by segment, and then also you touch on VRF trends?

Yes, China, it's still rough. We're not seeing great progress in China in either business. Having said that, we're somewhat in a trough, and we did see it dip further in the quarter, in quarter 4. We saw great strength outside of China. So Singapore, Thailand, India really sort of, Hong Kong, kind of made the day for us relative to Asia. So nice to see those markets finally recovering on that front. VRF continues to do very well for us, continues to grow at or above pace of our unitary business. And we continue to have a very high share in North America, parts of South America in the VRF business. And I think, as you know, we don't play a big role outside of those territories. We play small role in China, largely in commercial VRF or in hybrid systems.

Our next question comes from Shannon O'Callaghan from UBS.

Mike, in terms of the acquisitions and the currency impact on Industrial this year, I think it seems like every quarter they've been almost 200 basis points. Maybe Sue can provide us the split of what that was for '15. How much was the acquisition impact? How much was currency? And then next year, I'm assuming the acquisition kind of impact year-over-year goes away, but you still have currency. Maybe help us with how those headwinds change?

It's split about 50-50. And in '15 it was about 1 point above. So translational and transactional would have been about 1 point and acquisitions would have 1 point of headwind.

And for '16?

No acquisition headwind. Everything is based -- based on the calendar, it was all 2015 start and finish. So there's nothing there. On the FX side, it's going to be, again, a pretty tough road to hoe, probably 4 points of headwind coming into revenues, and we'd see sort of normal leverage against that. So it's probably 30, 40 basis points coming at us on that front.

Right. And to your question on the full year of 2015. So the overall operating margins were down 140 basis points. And the math would work out roughly the same if you took out the foreign exchange and the acquisitions that, that would see the majority of what the decrement was in the overall operating margin percentage.

Okay. And then as you think about eventually getting this business will get passed a lot of the focus, obviously, currently on this call about near-term Industrial weakness, but you do have this target you want to eventually get to the '17 and '19, and now Todd's in place the Air business. I mean, what are the -- other than kind of cost takeout to deal with the tougher current volumes, I mean, what are the key things you think you need to clear in order to get this to be a higher-margin business a few years out?

Well, material Handling piece, Shannon, probably hit for 1.5 point, maybe up to 2 points right there. So I think really an underestimation as to what the impact would be across the segment of the Material Handling business. So add 1.5 point there. Figure currency at least stops moving against us at some point and flattens out. That's going to be helpful to us. And then any kind of volume we see there, we'd be leveraging that at 30%, 35% on that front. So there's been very solid productivity in that business, as I mentioned, particularly as it relates to the integration work and the back half work once we saw the revenue outlook deteriorate for 2015. So it's not a productivity issue. It's, again, you look at a business like Material Handling, small business, that sort of an impact. You look at currency, which they get not only translational, but there's a much larger transactional component there where it just doesn't make sense for us to of too many factories at the machining and so on and so forth. So if you're putting in the wrong part of the world, it's hard to move those, and you're going to absorb some of that headwind for a while. Hey, listen, I think that we'll update you when we're together in the Analyst Meeting. Todd will truly be in that seat and give you a point of view on that and then Robert Zafari will clearly tell you kind of the other pieces of this as well, which have a material impact as they are very high margin businesses.

Our next question comes from Robert Barry from Susquehanna.

I think that this has been asked a little bit already but maybe just to put a finer point on some of the earlier questions about the Industrial assumption for flat growth given the orders have been decelerating. Just maybe some color there on what's driving that expectation?

When you look at the 2009 and we saw customers abandoning equipment, shutting plants, we're not seeing that in '15. We're unlikely to see in '16. We're seeing customers that are just reducing CapEx. And so you're not seeing large machines, as an example. Now large machines, both Cameron and existing Ingersoll Rand, we're about 10% of the total business. Now we'll see parts and service probably in the mid- to high single-digit range next year as these older systems need to be maintained and serviced. And we even saw that begin to materialize in the back half of '15. So again, 10% of the compression technology business being big machines, 45-ish percent being services, and then, remember too, you've got Club Car, the tools and the fluid business, which would be a tailwind. However, Material Handling will continue to be a headwind, again, going into '16 there. So net that all out and the best view we have is that, that math works to about negative 1:1.

Got you. That's very helpful. And maybe just kind of a quasi housekeeping question on the Hussmann adjustment. I think you talked about $55 million from Hussmann in asbestos. I think those 2 items through third quarter were just under $30 million. So is there like a big Hussmann 4Q? Or maybe can you just unpack that a little bit? That would be helpful.

No. The Hussmann results in the fourth quarter were fairly normal with what they've been throughout 2015. So that really didn't have an impact. It was right on where we would have guided at the end of October.

We'll look at what you're talking about though and we'll follow back up if there's more to that question.

And our final question comes from Josh Pokrzywinski from Buckingham Research.

A lot of my questions have been answered. So maybe just the first one. On the price-cost spread that you laid out there, Sue, if I think about how that pertains to Climate and throw the majority in there, am I to assume kind of normal volume leverage to that in the mid-20s? Is that what you guys are essentially guiding to? Or am I missing something?

No, I think that would be a good assumption.

Okay. And then just a follow up. I know we've kind of beaten the Industrial mega trend discussion to death. But thinking about Cameron backlog, presumably coming into '16, that's a little bit lower, probably particularly low in the first quarter given that the -- that is more of a 4Q weighted business. Is that something that is contemplated in guidance? How should we think about that as maybe a headwind to the broader reading out of just comps getting easier in some of that resource industries and the service piece being an offset?

Yes, Josh, no doubt we're going to see weaker big machine revenues that's forecast into what we're doing. What we found here and as an operator of the business is that the pricing and margins on that big stuff is not very good. It's really around the service and longevity of those systems over time as opposed to sort of the impact on sale on a quarter and in delivery. So really what we need to make up there in the weakness is service parts. And some of the smaller machines, including oil-free and segments of the market that will continue to grow like pharmaceutical, food and beverage in markets, where it's more consumer-driven, say, than it would be through heavy industry.

And I now like to turn the conference back over to Janet Pfeffer for any closing remarks.

Thank you, operator. One thing I wanted to just clarify, I was a little far away from the mic, and so on share repurchase, we completed the $250 million buy in the fourth quarter, $233 million of it was in -- completed as of the end of September, the remainder completed out and settled in October just so to avoid some of the folks any confusion on that, I wanted to clarify that. And Joe and I will be around for your follow-up questions today. Everybody, have a good day. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.