Good day, ladies and gentlemen, and welcome to the Ingersoll Rand Fourth Quarter 2014 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, Janet Pfeffer, Vice President, Treasury and Investor Relation. Please go ahead.

Thank you, Kate, and good morning, everyone. Welcome to our Fourth Quarter 2014 Conference Call. We released earnings at 7 this morning, 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 will find the slide presentation that we'll be using. The call will be recorded and archived on our website. If you'd please go to Slide 2. Statements made in today's call that are not historical facts are considered forward-looking statements and are pursuant to the safe harbor provisions of federal securities laws. Please see our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. This release also includes non-GAAP measures, which are explained in the financial tables to our news release. Now I'd like to introduce the participants on 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. Thank you, Janet. Good morning, and thanks for joining us for today's call. This morning, I'll spend a few minutes recapping our full year 2014 and our progress on the transformation that we've been working on in the company for the past few years. Then Sue will take you through the fourth quarter results, and I'll end with our outlook for 2015 before we open it up to your questions. So starting with full year 2014. The past year demonstrated continued progress in the implementation of our multiyear strategy for growth, operational excellence and shareholder value. We invested in our core businesses, maturing key strategic capabilities and delivered excellent financial results, all while navigating shifts and changes in global markets. For the year, our revenues were up 4%. Markets were uneven around the globe. Our growth in Europe, Middle East and Africa was double digits, where I believe we outpaced the market in most or all of our businesses. Growth in North America was mid-single digits, while revenues in Latin America and Asia were lower for the full year due to market and currency headwinds. Adjusted earnings per share were $3.33, a year-over-year increase of 25%. Sue will take you through the bridge in a few minutes, so I'll leave that for Sue. On the quarter, there'll be some puts and takes, but the short answer is that volume and operational leverage were better than guidance, particularly in the Climate segment. We grew adjusted operating margins 140 basis points in 2014. Our Lean focus again showed significant results in the implemented value streams, and we continued to invest in the future of the business by funding significant new product development, investing in IT platforms and building our channel, services footprint and product management capabilities. We generated $810 million of…

Thank you, Mike. Let's go to Slide 6, please. At the high level, our bookings for the quarter were up 5%. Revenues were also up 5%. Foreign exchange was 2 percentage points of headwind to both. So excluding foreign exchange, both orders and revenues were up 7%. Our operating margins without restructuring were up 230 basis points, and operating leverage in the quarter was excellent at 61%. Adjusted earnings per share for the fourth quarter were $0.82, up 34% versus last year. And consistent with Mike's commentary for the full year, the fourth quarter was a very strong quarter, particularly in terms of margin expansion and earnings performance. Let me start by taking you through a bridge to our guidance for the quarter. Let's go to Slide 7. As you'll recall, we updated our guidance on October 24 to reflect the incremental interest expense from the bond issuance and early retirement of our 2015 notes. So our starting point, on a reported basis, is a range of $0.63 to $0.67 or a midpoint of $0.65. I'll take it all the way to an adjusted basis since that seems to be where most of you are tracking. Volume and operational performance, particularly in Climate, delivered $0.11 incremental to guidance. Our financial statements continue to reflect the official rate in Venezuela, and therefore, we did not book the $0.03 charge which was included in our guidance. Movements in currencies, including the euro, Asian and Latin American currencies, resulted in a $0.04 negative versus guidance, and there were $0.04 of other positive items mainly in other income. That brings us to $0.79 of reported earnings per share. There were $0.03 of add-back in the quarter to bring you to the $0.82 on an adjusted basis. So with that, let's go to Slide 8,…

Great. Thanks, Sue, and please go to Slide 15. It's certainly an interesting time to try to predict exactly what will happen over the next 11 months in order to give you guidance. In the past few months, the world has experienced discontinuities in oil markets and in foreign exchange rates. So I will give you the best view of what we see in our markets sitting here today and some more color on how we could be impacted from further movements in foreign exchange. Starting with North American nonresidential. We anticipate the first positive year in institutional markets since 2008, albeit in a more moderate pace than the current Dodge forecast. We have started to see some positive signs in our quoting pipelines, particularly in K-12 education. We continue to see growth in commercial and industrial, and based on this, we expect mid-single-digit growth for 2015 in North American commercial HVAC markets. We expect Latin American, Asian, European and Middle East HVAC equipment markets in the aggregate to be up low to mid-single digits at constant currency but flat to down after considering currency. We expect North American transport market to be up mid-single digits in 2015 and European markets to be down including FX. We expect residential HVAC industry motor-bearing unit shipments for the year to up low single digits in 2015. The revenue should be up mid-single digits due to favorable mix. We expect industrial markets to be up low to mid-single digits, and golf markets are expected to be up low single digits. Aggregating those market backdrops, we'd expect our full -- revenues for the full year to be up 4% to 5% versus 2014. Overall, foreign exchange will be a headwind of about 3 percentage points. We'll report the Cameron's centrifugal business for the entire…

[Operator Instructions] Our first question comes from the line of Josh Pokrzywinski with Buckingham Research.

Mike, you talked a little bit about the differences between institutional and commercial and in some of the momentum you're seeing in K-12. Can you put that in terms of applied versus unitary for the year? I guess, maybe starting off with what bookings were for each in the quarter and then how you're thinking about the difference between the 2 businesses.

Well, the unitary markets globally worldwide and in North America were very strong, low double-digit teens type growth there. So we're seeing that in commercial, industrial. And obviously, some of that's happening in smaller institutional projects where unitary would be applied. You might see more unitary in sort of the lower schools, K through 6, maybe some smaller middle schools. You'll tend to see in bigger high schools, perhaps more applied. So it was a time on the mix of K-12 that happens. But we've worked hard over the last 5-plus years that we've got relative parity in margins between the applied and unitary, and we've got good utilization and capacity left for whatever that mix would swing. So I think that from a company point of view, we feel good about the contribution margin of applied or unitary, and we feel good about the capacity upside that we've got in our facilities to build out at -- if we were potentially surprised by better markets, we would have the ability to work against that -- execute against that.

Do you think the unitary still outpaces applied in 2015?

Yes, I do. I actually do. I think that applied, you probably look at something more like a mid-single-digit growth rate. I do think that, that will sustain itself over a multiyear period. If you just look at what's required from an institutional infrastructure perspective, it would make sense that, that would be the case. So as you get further out into that multiyear view, you may see a mix change where unitary comes back into a more normalized, low to mid-single-digit type growth pattern that it could sustain that way for a while.

Our next question comes from the line of Andy Casey with Wells Fargo Securities.

In the quarter, it looked like productivity benefit really accelerated versus last quarter, and it was against a little bit easier comp, but that doesn't, by itself, explain it. Could you give a little bit more detail on what drove that and kind of what you expect going forward?

So Andy, when you think about what happened in the fourth quarter overall, first of all, we talked about that the revenue side was up and the revenues that came through were good revenues that provided some additional leverage. And when you look at the pieces of the business, we got some good productivity out of our cost base. We got some good productivity out of the direct material inflation and from some of our other components of cost, whether it be something like warranty or other items. So really, when you take and you look in the quarter and all of the pieces, everything was just better than the way that we had looked at it. Because people in our businesses did a great job of not only executing on the revenue side, but they also did a great job of executing on the cost side, which, like I say, across the board in all of the different categories, gave us additional productivity. So there's not really one big thing that you can look at, but...

Andy, one thing maybe to emphasize Sue's point is we would look normally at every quarter on a really detailed risk and opportunity assessment in the quarter, and we'll update that through the last minute of the quarter end. And it was a case -- and I want to say hats off to the team, the whole team, sort of the business team and functional team, because it was a function of executing all the opportunities and managing all the risks in a way where you get the best net out of that that's possible, and it's just like that.

Okay. And just a quick follow-up on that. So based on your description of a lot of things going right, it seems like that should be sustainable at least for the short term. Is that accurate?

Andy, I always say that you have to leave room for breakage, okay? I mean, that was a perfect quarter for us. Most companies, when they tell you, or they don't tell you, things aren't perfect. You allow room for breakage. So we'll continue to look at things on a risk-adjusted basis, and I would suggest that that's pretty good leverage that we have in the quarter. And I dial you back on something that looks a lot more like the gross margin of the business for us, okay, because that's over a very long period of time, which is what we've done over 5 years and going multiyears into the future. If you're able to leverage that at your gross margins, it's phenomenal, it means there's no fixed cost investment, very hard to sustain. Lean is a key part of doing that, but that would be a fantastic 10-year sort of view. That's the essence of the operating system that we're building as we have had 5 good years of that. We'd like to have least 5 more before we call that something sustainable.

Our next question comes from the line of Nigel Coe with Morgan Stanley.

So just -- maybe just to -- obviously, conversations are on closing Cameron. And maybe just -- if you can talk, Mike, about sensitivity of Cameron to the oil price and how the operating plans for Cameron has changed, if at all, since you announced the deal.

So Nigel, I will get Sue to give you a first crack at that. She's been very close, very, very close to that team and particularly with sensitivity of oil and gas.

All right. So Nigel, the way that I would start looking at that piece of the business is you divide it really into sort of 4 almost equal categories or pieces of the business. So you've got the engineered air piece of the business, which is largely the air separation and pieces; you've got the plant air piece. Those 2 pieces -- so again, let's call each of the pieces 25% of the business for the sake of argument. Those 2 pieces of the business are really going to flex with just the ITR industrial indices. So those are not going to be as exposed. You've got the processed gas piece of the business again, and another 25% of the business, and that has some exposure that comes to the oil and gas side. But that piece of the business is going to look at a lot of things that are hydrocarbon. So while you have an impact from the oil and gas pricing, you also have the piece that says that there's some just power generation. So conversion from, say, a coal to a lower natural gas price, which is a good thing and something that, around the globe, that business has sold product into, which is not necessarily seeing as much impact; as well as petrochemicals which have been strong. So that's another 25% of the business, and then, of course, the other side is the aftermarket. So again, when you think about the business, the exposure directly to oil and gas is really in that one piece, but it's not the entire piece of the business, and it's not just a negative. And one of the things that you had asked, Nigel, was impacts since we actually signed up the transaction. And so what we'll see, if…

That was really helpful. I mean, we've been definitely thinking, you're more of a winner than a loser from the low oil price. And then just a follow-on on -- the investor spending was a hurt to Industrial margins in '14. And I'm wondering, what is the investment outlook for '15 overall for Ingersoll Rand? What sort of rate has that grown at? And to what extent did some investment spending get pull forward into '14?

So again, Nigel, when I think about the investment spending and I think about 2015, so our incremental spending is going to be up on a year-over-year basis. It goes from something like $64 million up to sort of an $82 million number with the investments for 2015. And so here's how I would look at those actual investments is when we start to look at them and we look at where we're investing money, so about 50% of the investment dollars in 2015 are going to be in product and product-related type of areas. So -- and that would include any go-to-market type of pieces out of the investment spend. And then you're going to have the other pieces, which are going to be the business operating systems, so call that another 25% and then the IT systems. And so when you think about sort of that breakdown and think about it in terms of our overall strategy, we want to continue to grow the investments in our product and how we go to market with the product. We certainly want to continue to invest in the business operating system per the strategy, and those things are really paying off for us. So we think that those numbers in 2015 are good investments and something that is really going to be helpful for us.

Nigel, maybe to add, the remaining piece was the IT systems and infrastructure piece, and we did the beef up some of infrastructure piece particularly as it relates to the security and some -- and making sure that we're doing that. And largely from a headquarters’ basis, it's the best way to spend that as opposed to every business unit making a different decision about that. So that's the source of the other piece of the investment. We'd probably flatten out here from an IT perspective through about 2018, and then we begin to sort of roll off a lot of that depreciation in 2019. So that piece of it, as Sue mentioned, I think kind of flattens out here in 2015.

Our next question comes from the line of Joe Ritchie with Goldman Sachs.

My first question is on price/cost. Mike, we did go to the AHR show earlier this week, and it seems like you're getting really good pricing on your commercial HVAC products with all the new products that you auctioned. And clearly, there is a cost tailwind as well this year. And so I'm just trying to understand what's embedded in your guidance in terms of the price/cost tailwind that you should see in 2015.

So Joe, let me try that one on and then Mike can add some color if he chooses at the end. So the way that I would think about our pricing versus the direct material inflation, which is how we talk about it, is we look to have a positive spread in sort of the 20 to 30 basis point revenue. So it looks a lot like 2014. So we've built that capability in, in the pricing with our ability to anticipate and react. So we're focused on maintaining net spread regardless of sort of what's happening on the commodity side. Now having said that, we're fully aware that copper has come down in price. Now the impact to an Ingersoll Rand based on the way that we buy copper is really going to be more in the back half of the year. So we go into the front half of the year being -- we've bought 70% of the copper that we're going to buy. So you're not going to have a direct impact in the earlier part of the year based on that commodity spend. And then we also have exposure on the aluminum and the steel side, which are more in the flattish. So overall, in 2015, again, you've got the piece that you know of with the benefit coming out of copper, but we still think that, in total, direct material is going to be a slight headwind for us. And again, we think we're going to have pricing that's 20 to 30 basis points above that direct material inflation overall.

Joe, so that spread is an important concept there because we look at scenarios that are kind of 40 basis points of deflation, 40 of inflation. I would lean more towards the deflationary story than inflationary story. But again, I was just really testing ourselves around the ability to react on the spread. The only place where it's been difficult in the quarter for us was really China, where you've got just a lot of mainly local competitors, pricing lower on anticipated cost. And so that was one the place where we didn't catch up with ourselves, but -- and actually, it was quite close. It wasn't like we really missed it out there. So I think net-net, 20-, 30-basis-points positive spread, pick your number on inflation, and that's what we would hope to do during the year.

That's really helpful color, guys. And I guess, maybe my one follow-up question here is really on the applied markets. Mike, you mentioned earlier that your expectation is below where Dodge is for '15. And when I take a look at your order trends for this quarter, it looked like you declined. So I'm just curious like what are you seeing in that market today? What gives you the confidence that we will get some growth as we head into '15? Because it does look like municipal spending has gotten better. I'm just curious to hear what you're thinking.

Well, actually, total applied were actually up in bookings a little bit in the quarter low single digits, but they were up. And then as we're talking to our people around the globe and we have the ability, of course, to see further a little bit out with pipeline that we would look at in our sales pipeline. And that's more positive, reflecting some of the K-12 activity that I mentioned, which I think that will translate into bookings in the year. Being that K-12 school is generally a little bit smaller and typically have a lot of activity between April and September, a possibility there that we would see some of that come through toward the middle or early fall in the year and that would be a good indication for us that we're seeing momentum there. Our view about being a little bit lighter than Dodge has been our view now for a long time, but particularly in the last year around how institutional recovery would really take shape. And it has a lot to do with industry capacity of tradespeople, about how funding flows through to municipalities and states and just the ability to construct as much infrastructure. Frankly, it's not going to snap back at that double-digit-rate. It's our belief that you'll see a more sustained mid-single-digit curve going forward.

Our next question comes from the line of Julian Mitchell with Crédit Suisse.

Just a question on the Industrial guidance because your sales and margins have been flat there for about 4 years. Your guidance today for '15, you've got a decent organic growth rate of 4% to 5% dialed in. And I also think you're looking at, what, close to 40% incremental margins on the incremental business x Cameron. So maybe talk a bit about the confidence on the organic growth step-up. I see you had one good quarter of orders and also why the incrementals underlying suddenly take off.

So Julian, when we think about Industrial and what's happening in those markets, you're right. As we look at 2015, we've got the revenue grows -- growth and on the legacy business where we're looking at that 40% leverage in 2015. We think that the business has got a good line of sight to the market's, to the orders that they were expecting. They've all been their honing their strategies. And again, if you think about what we were doing with the reorganization of the business and going to a business unit structure and focusing on growth, that gives us a lot of confidence that we've got people that are looking at the right things in terms of their products and their revenue growth. They've also been looking and prioritizing some really good payback investments that support the growth. Those include product development, service infrastructure investments for the business and other channel investments. And so when you look at 2015, they're a larger percentage of the investment spend than they are of our revenue profile, but we think that those are -- we think that those are the right things for those businesses to be doing. And so what we think is as you put all of those pieces together with the team is focused on the businesses and growth focused on remaining these focus on remaining markets and the focus on investments to really grow those businesses, that's what gives us confidence that the business will have the 2015 that we're projecting.

Julian, I have to say mechanically too, Club Car last year lost 10 days on an ice storm, and about 10 days it had some system issues that were knock-on effects really right after that. So you don't have that repeating. And so just by having a more normal, low single-digit Club Car business, leveraging at really good margins, which you normally would do, plus not having to repeat last year, let's hope, okay, ice storm again. It happened in February, so let's hope that we don't get one down there again. That ought to snap back even mechanically much better just due to that alone.

And then my follow-up would just be on the Climate's adjusted operating margin. It looks like you are hitting the margin target there 1 year early, assuming you hit the guidance. So looking beyond that, given you are running at such a good rate, where are you targeting sort of medium term the margins in Climate can get to, assuming no major gyration in organic sales outlook?

Yes, Julian, if you recall, our structural view was something in the 14% to 16% range for the Climate business. And so I think clearly, we think there's structural opportunity up into that area. So let's work on that probably next. But we're a ways away from that at this point in time, and I think that they're going to continue to see that. But again, it takes investment -- we're investing heavily into product channel, service footprint all around a long-term view that, that's really the structural opportunity in the business. We're going to update that in May, talk about it at that point in time, but we're really pleased to be where we are at this point. It's great execution by the entire global team, both resi and commercial and the service business. So all cylinders fired there early.

Our your next question comes from the line of Stephen Volkmann with Jefferies.

I'm wondering about your comments about building a little bit of inventory in 2015, and I guess I'm just curious, you're thinking behind that. What areas would that be? And what gives you confidence that, that's sort of a helpful strategy?

What we saw in some of the higher-margin businesses last year was order volatility that could literally be 200% of sort of at historical rates. And so the market volatility that we're seeing in the world is translating into order volatility on stock and semi-assembled product. And we want to make sure is that when that stuff is very quick-turn, somewhat discretionary in terms of you've got the product, you're going to sell it. We don't want to be stingy on that. We want to make sure that we protect it against the possibility of that sort of volatility. And so widening out the con bonds, widening out the stock rates. And we think about there are certain products in the company that we say it's a 0 stock-out product. Literally, we want 100.0% of the time, you want product, you get the product right when you want it. And we really like that when those products -- the contribution is accretive to the overall margins of the company. So margin-accretive to the company is overall margin profile, stock, semi-stock. We want to have product when you want to buy it. And there's no point, with cost of capital being what it is, to be too stingy about that. So it's just straight economics.

And then maybe a quick follow-up. Are there any share changes in any of your product lines that you'd like to call out for us? And I guess, Thermo King continues to look pretty good. And sort of in that vein, are you worried at all about a competition in the compressor business with your competitor having kind of a euro cost base?

Yes, if you've listened to me for long enough, I don't talk about sort of market share one way or the other much because I think that over the long run, if you're growing margins and your growth rate is higher than your peer set, you must be doing a good job. Our approach is to be top-quartile every single year around incremental margins and organic growth. That's what we've done over the last 5 years on margins and last couple, 3 years on our organic growth profile of the company. So that's our formula. And I can tell you that we feel like the investment in product and service is working. And I feel like skewing more of that toward the compressed air side of our business, the tool side of our business and the fluid side of our business on a pro rata, Sue mentioned that, is good for us as well. We see good growth opportunities. We see some pockets of growth and some niche opportunities for the product that we've assessed. So we've done a lot of strategic analytics behind the scenes to support that. So we feel good about that. We're going to poke into those areas. So compressed air, tools, fluids are all big ideas that we've got to kind of grow that disproportionately. The product growth teams around the company, you've heard me talk about that, we've doubled those in 2015. We got outsized growth in share and margin performance in those last years for the 6 that we had and feel like we've got the capacity to take on and do 6 more for it's 12 in total. I'm excited about that going into 2015, eventually really having that match the value stream of the company. In fact, all of those product growth teams are actually value streams in the company anyway. So that was a prerequisite for selecting those. So this is, sort of the next 5 years looking out, I think a really good model to grow the company and focus our strategy.

Our next question comes from the line of Steve Tusa with JPMorgan.

I have one question in 2 parts. On the commodities side, first of all, what are you assuming on price? Was price realization kind of the majority of the 20 basis points this year? Is that the same thing you're assuming on price? And then assuming all other commodities like steel and aluminum are a wash and you just marked copper to where it is today, you said plus-minus 40 basis points, I'm not sure what you were saying, but we know it's been not going to be -- probably not going to be a drag. So what would copper be?

Steve, my comment on the 40 basis points was rather than trying to be so precise in our ability to predict fluctuations in commodities, we've brought in cases to synthesize ourselves toward how quickly can we respond and react by business in different inflationary, deflationary environments and could we sustain 20, 30 basis points of improvement. A big part of that, though, is not just relationship between the cost of commodity and pricing of the current product. It's making sure that there is an economic value estimation of new product that better value prices what it's replacing. And where there's an opportunity to grow margins on the top line relative to that economic value created, that's a big idea. Obviously, that's where we're doing fairly well at this level. So the introduction of new products for us is an enormous opportunity to raise the margin profile of the company even if we were to hold commodity and pricing flat on the legacy product, which is not our goal, of course. It's to get price there, too. But net all that out, that's how we come back to 20, 30 basis point positive for us on multiple scenarios.

So basically, what you're saying is that you are going to use some of the commodity tailwind to drive -- to kind of get these new products out there?

Different thing. The commodity tailwind largely is going to be reflected in competitive pricing at some point in time. And so that's going to take its own, I think, competitive dynamics into consideration. New products that we're launching, when you look at the -- as an example, the energy efficiency or the reliability of product or the total cost of ownership or other serviceability factors that could translate into a value to the customer, that's not something that you see a cost for. You see a margin pricing opportunity. That's the kind of thing that we absolutely want to make sure that we're doing a good job understanding that as we launch products. So there are 2 different thoughts that both show up in the pricing column.

Our next question comes from the line of David Raso with Evercore ISI.

I just want to make sure that -- I want to give Steve another crack here to make sure that we got his question. So if you could just make sure, Steve, if you could tell us we got it, I'll give you one more crack at it if we didn't. If not, well, I will go on.

[Operator Instructions] And our next question comes from the line of David Raso with Evercore ISI.

My question is on Thermo King for 2015. You mentioned mid-single-digit growth in North America as a target. Is there a notable slowdown that you're looking for in the outquarters? I'm just trying to understand. At least the industry data seems to be far stronger than that. So I'm just trying to understand how to read that guidance.

So we're coming off a peak data, and I think that as we look at even some of the changes that have made in terms of driver stops and the ability to create additional driver capacity through a decent number of mandatory stops, helps to create and unlock a little bit of capacity to our customers. Well, that being said, you're coming really off the peak, and so again, lapping -- the new product lapping the old product. It's not that big sort of revenue price differential that we're going to get. Lapping now this year to last year, we'll get some but not much. But early in the year, and again, this is an early read on the full year, you tend to lock in orders early or at least lock in customer intent. And there's a lot of sensitivity to marketing and capacity for these customers. So throughout the year, those intended order rates may change. So that, in particular, David, is a good reason for us to update guidance in April and in July because that number can move around. But right now, that really is our best guess.

But just so I'm clear, is your current backlog or order trends up that modestly?

Backlog is up a little bit higher than that. Order trends are okay. Europe is slow. So it supports the forecast that we've got.

Okay. Real quick, just a clarification. When you spoke of 40% leverage on organic, that was pre-investment, just so I'm clear. Is that correct, pre-investment?

Is that the 40% organic on industrial?

I think -- I thought it was a total company comment, making sure I understand the organic leverage comment.

Yes.

Yes, David, this is Janet. It's just basically taking the -- taking Cameron out. It's kind of legacy parts of Ingersoll Rand.

But it includes the incremental investments for this year?

What?

It includes the investments figure for this year?

Yes.

It does. Okay.

Your note actually this morning, you're correct. I mean, you're bringing all of Cameron in this year at the beginning of the year. So the math is a little bit different. The true incrementals of the company are closer to 40%, and then Cameron is towards [ph] that, okay, in the 1 year.

Well, I guess, I have it then. The currency drag, what are you assuming on decremental? To be fair, if you're looking for the whole company to have about $145 million of EBIT growth, if you put 40% on organic, I'm already up at $230 million. So how much is the currency drag? I mean, I run the numbers on how you imply $0.17, and it looked that quite the drag is only $60 million.

David, this is Janet again. I think you're misunderstanding how we use our -- legacy is the right word. It's a legacy company. So that is...

So it must be x investments?

[indiscernible] is offset by FX.

But it must be x investments then. Is that what you're saying?

No, it's all-in. [indiscernible]...

We'll do the math offline. I'm just saying you've got $230 million of EBIT growth just from organic growth at a 40% incremental, and the EPS comment on currency would suggest currency drag -- again, the currency decremental must be rather significant.

David, why don't you give Joe or I a call? And we'll take from there.

Our next question comes from the line of Jeff Sprague with Vertical Research.

Just 2 quick ones. Just back to Cameron, it looks like your guide would imply Cameron revenues are something like $360 million for 2015, kind of a 12% off -- to your Industrial base. So that's down 10% or so from what the 2013 revenues were described as. I don't know if that was just some kind of round numbers in the mix there. But are you actually looking for the business to be down that much? And maybe just high -- I mean, your Industrial orders actually look pretty good, right? Up 3 in Q3 and up 6 in Q4. What is it about their business that their orders would have been soft in the second half?

Jeff, when we look about valuing the business since we acquired it, we had given it a 10%, 15% haircut from where it was just based on what we knew then, I'm glad we did, based on what we're seeing. So your math isn't too far off. We're somewhere between $350 million and $360 million in probably how we see that.

Yes, and I think, Jeff, when -- again, as Mike said, your math is right. And when you think about the business being down and we went through all of the different pieces, one of the areas where my assessment is that they've missed on the booking side in the back half of last year was on the normal book-and-bill that goes on in the business. Now what causes that, I don't know, because we weren't in control. But that's something that our team, and as the Cameron team now part of Ingersoll Rand, need to look at for 2015 and really focus on getting that book and bill back in. So I think the issue is it's not a fundamental issue with the business. It's getting it put into our operating system and our management team and focusing on the business and just operating.

Yes, I think the good news, Jeff, is that we've been really able to kind of go back and look at the EBITDA and EBIT numbers and confirm that we've got a line of sight for how to do it based on the business case we've put together which, to your point, already was haircut 10%, 15% as we did a valuation for it.

And I just wondering on investment spending. And coming around to that, the comment that it levels out, was that just the IT piece of it? Can you -- I think it was. Can you just give us a view holistically on investment spend when it might kind of, I don't know, normalize the sales growth or something that is not a meaningful P&L headwind?

So correct on the IT spend, Jeff. We're up -- that's the only one that flattens out. And relative to the business investments, it really depends on the pipeline of ideas, and there's an innovation review that we're conducting all the time. There are bulk generation road maps that we're looking at for the product. And we think we've got a pretty good equation here. And again, if we could continue to get the same incremental margins and growth in the business, we would have no reason to tell you that we're going to ever change the investment profile of what we're doing. Now having said that, we don't know beyond about 18 months because it really does depend on what that bulk duration product plan might look like or what acquisitions look like in terms of the footprint that we'll be bringing onboard to serve channel and footprint which is another -- a big part of investment. So we're going to give it to you 1 year at a time, but what you see kind of here is that we're investing in growth of the company and in the OpEx performance of the company at about the same rate, albeit in larger absolute dollars year to year to year.

Our next question comes from the line of Steven Winoker with Bernstein.

You spent $200 million for shares, $3 million to $4 million-ish in the fourth quarter, but you're holding share count flat, I guess, at $270 million through '15. Maybe just -- and what, generating about $1 billion, you mentioned, of free cash flow. Just give us a sense for why you're guiding in that way for the rest of the year and what you're thinking about capital deployment more broadly then.

So Steve, I think the way that we've gone about it and just modeled for you was if you take that $950 million to $1 billion, maybe 1/3 of it goes to our dividend. We said that we would follow our long-term guidance, which is to, at a minimum, keep the dilution from occurring from option exercises and from programs that -- where things are maturing. And so we gave it to you in those 2 pieces and said the remaining, say, 1/3 of the cash flow that we would toggle between M&A and share repurchases. And so we just broke it up that way so that you would say, "Okay, here's the minimum that they're going to do." And then the other piece, if we have good M&A candidates that follow along with our strategy for that, we would do it. And if not, we would look to return the cash to our shareholders.

Steve, I think to your question about share count, and I'll bring in the experts here if I get off-track, but we would be issuing shares in the first part of the year equity program, so we're buying back shares in last part of the year. So you're going to see dilution in the first couple of quarters, and then you're going to see us coming back to neutral in the back half of the year. It's just the way it averages the share count for the full year. So if 270 million is an average share count, it's not a beginning, not an ending -- I'm sorry, it's beginning and an ending, but it certainly has extremes of issuing in the first quarter and doing a lot of buybacks toward the fourth quarter.

Okay. And then, Mike, you talked about risks and opportunities, R and Os before in the fourth quarter and how -- I think you used the word perfect, that was for -- for their performance. Maybe just give us a bigger idea of how the Rs versus Os are? It looked like they're balancing out or what you have to believe? What do you think? What are you most excited about that in that list? And what are you maybe most concerned about it as you think about 2015 results?

So Steve, our philosophy in giving guidance has always been to give sort of the net R&O that we see for guidance and for the quarter. One of the things that you don't see in our numbers now is we haven't put anything in for Venezuela. It just was noisy for us to forecast that, didn't know what was going to happen. At some point, it probably will happen, and we can just update you when something like that actually happens. You also noticed that we didn't spend much really in restructuring last year. Rather than putting noise around that, if we see something that we need to be doing, we're going to do that and update you on that. But probably, we can manage that within the base that we've got. The rest of the items that show up in here are typically commercial puts and takes, win something, lose something. It's all based on pipelines that have typically 4 levels of commitments, everything from -- we've pretty much got it in the bag to pretty much the competition has got it in the bag. Occasionally, you get a swinger where we'll win one, that's a long shot. We'll lose one that we were -- we should have got. So we net those things out. The operational performance of the company is becoming much more predictable in terms of how we're executing against that. And again, this is a big kudos for the bench strength around the company operationally for getting it done quarter-over-quarter for a long time now and managing through that. Because they have their own unique set of R&Os between suppliers that are having floods and fires and suppliers that were switching out, changing line moves, plant moves and running the day to day. So that's the kind of thing we look at on a, at least, monthly basis.

I'd now like to turn the call back over to management for closing remarks.

Thank you. Thank you very much, and everybody have a good day. Joe and I will be around for questions.

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