Research and Development Costs

12 Months Ended

Dec. 31, 2018

RESEARCH AND DEVELOPMENT COSTS

The Company's net Research & Development ("R&D") expenditures are included in selling, general and administrative expenses of the Consolidated Statements of Operations. Customer reimbursements are netted against gross R&D expenditures as they are considered a recovery of cost. Customer reimbursements for prototypes are recorded net of prototype costs based on customer contracts, typically either when the prototype is shipped or when it is accepted by the customer. Customer reimbursements for engineering services are recorded when performance obligations are satisfied in accordance with the contract. Financial risks and rewards transfer upon shipment, acceptance of a prototype component by the customer or upon completion of the performance obligation as stated in the respective customer agreement.

The following table presents the Company’s gross and net expenditures on R&D activities:



	Year Ended December 31,
(millions of dollars)	2018			2017			2016
Gross R&D expenditures	$	511.7		$	473.1		$	417.8
Customer reimbursements	(71.6		)	(65.6		)	(74.6		)
Net R&D expenditures	$	440.1		$	407.5		$	343.2

Net R&D expenditures as a percentage of net sales were 4.2%, 4.2% and 3.8% for the years ended December 31, 2018, 2017 and 2016, respectively. None of the Company's R&D related contracts exceeded 5% of net R&D expenditures in any of the years presented.