FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-985
INGERSOLL-RAND COMPANY
Exact name of registrant as specified in its charter
New Jersey 13-5156640
State of incorporation I.R.S. Employer Identification No.
Woodcliff Lake, New Jersey 07675
Address of principal executive offices Zip Code
(201) 573-0123
Telephone number of principal executive offices
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes . X . No . . .
The number of shares of common stock outstanding as of April 28, 1995 was
105,628,901.<PAGE>
INGERSOLL-RAND COMPANY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
Condensed Consolidated Balance Sheet at
March 31, 1995 and December 31, 1994 3
Condensed Consolidated Income Statement for
the three months ended March 31, 1995 and 1994 4
Condensed Consolidated Statement of Cash Flows
for the three months ended March 31, 1995 and 1994 5
Notes to Condensed Consolidated Financial Statements 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-13
Exhibit 11 - Computations of Primary and
Fully Diluted Earnings Per Share 14-15
SIGNATURES 16
2<PAGE>
PART I. FINANCIAL INFORMATION
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
ASSETS
MARCH 31, DECEMBER 31,
1995 1994
Current assets:
Cash and cash equivalents $ 245,178 $ 207,023
Marketable securities 4,540 4,231
Accounts and notes receivable, net of
allowance for doubtful accounts 986,027 949,392
Inventories 755,820 679,308
Prepaid expenses and deferred taxes 169,063 162,933
Total current assets 2,160,628 2,002,887
Investments and advances:
Dresser-Rand Company 75,102 90,705
Partially-owned equity companies 193,751 173,871
268,853 264,576
Property, plant and equipment, at cost 1,873,575 1,818,564
Less - accumulated depreciation 892,937 859,273
Net property, plant and equipment 980,638 959,291
Intangible assets, net 130,356 124,487
Deferred income taxes 72,616 74,480
Other assets 185,522 171,200
Total assets $3,798,613 $3,596,921
LIABILITIES AND EQUITY
Current liabilities:
Loans payable $ 214,357 $ 117,249
Accounts payable and accruals 930,834 922,828
Total current liabilities 1,145,191 1,040,077
Long-term debt 318,226 315,850
Postemployment liabilities 519,294 518,297
Ingersoll-Dresser Pump Company minority interest 159,589 154,069
Other liabilities 51,604 37,286
Shareowners' equity:
Common stock 218,529 218,338
Other shareowners' equity 1,386,180 1,313,004
Total shareowners' equity 1,604,709 1,531,342
Total liabilities and equity $3,798,613 $3,596,921
See accompanying notes to condensed consolidated financial statements.
3<PAGE>
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED INCOME STATEMENT
(in thousands except per share figures)
Three Months Ended
March 31,
1995 1994
NET SALES $1,185,585 $1,010,308
Cost of goods sold 893,111 775,924
Administrative, selling and service
engineering expenses 203,277 174,257
Operating income 89,197 60,127
Interest expense (8,964) (11,871)
Other income (expense), net (5,996) (2,153)
Dresser-Rand income 300 5,700
Ingersoll-Dresser Pump Company
minority interest (2,245) 184
Earnings before income taxes 72,292 51,987
Provision for income taxes 26,025 18,975
Net earnings $ 46,267 $ 33,012
Average number of common
shares outstanding 105,566 105,402
Net earnings per common share $ 0.44 $ 0.31
Dividends per common share $0.185 $0.175
See accompanying notes to condensed consolidated financial
statements.
4<PAGE>
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net earnings $ 46,267 $ 33,012
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 36,700 31,811
Net equity earnings, net of dividends (5,623) (5,846)
Minority interests in earnings 2,534 17
Deferred income taxes 1,889 6,943
Other noncash items (11,098) 99
Changes in other assets and
liabilities, net (76,110) (57,396)
Net cash (used in) provided by
operating activities (5,441) 8,640
Cash flows from investing activities:
Capital expenditures (43,915) (36,204)
Proceeds from sales of property, plant
and equipment 1,986 2,268
Acquisitions, net of cash (17,262) --
(Increase) decrease in marketable
securities (148) 796
Net cash advances from equity companies 21,610 9,717
Net cash used in investing
activities (37,729) (23,423)
Cash flows from financing activities:
Increase in short-term borrowings 85,856 27,990
Proceeds from long-term debt 2,015 1,769
Payments of long-term debt (1,169) (1,035)
Net change in debt 86,702 28,724
Dividends paid (19,534) (18,453)
Other 950 2,284
Net cash provided by financing
activities 68,118 12,555
Effect of exchange rate changes
on cash and cash equivalents 13,207 1,641
Net increase (decrease) in cash and
cash equivalents 38,155 (587)
Cash and cash equivalents -
beginning of period 207,023 227,993
Cash and cash equivalents - end of period $245,178 $227,406
See accompanying notes to condensed consolidated financial
statements.
5<PAGE>
INGERSOLL-RAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments
(consisting only of normal recurring accruals) necessary to
present fairly the consolidated unaudited financial position
and results of operations for the three months ended March
31, 1995 and 1994.
Note 2 - Inventories of appropriate domestic manufactured standard
products are valued on the last-in, first-out (LIFO) method
and all other inventories are valued using the first-in,
first-out (FIFO) method. The composition of inventories for
the balance sheets presented were as follows (in thousands):
March 31, December 31,
1995 1994
Raw materials and supplies $ 139,167 $ 117,613
Work-in-process 317,690 293,023
Finished goods 462,602 429,655
919,459 840,291
Less - LIFO reserve 163,639 160,983
Total $ 755,820 $ 679,308
Work-in-process inventories are stated after deducting
customer progress payments of $25,422,000 at March 31, 1995
and $27,242,000 at December 31, 1994.
Note 3 - The company's investment in the Dresser-Rand partnership at
March 31, 1995 and December 31, 1994 was $165,724,000 and
$160,832,000, respectively. The company owed Dresser-Rand
$90,622,000 at March 31, 1995 and $70,127,000 at December
31, 1994.
Net sales of Dresser-Rand were $204.4 million for the three
months ended March 31, 1995 and $310.3 million for the three
months ended March 31, 1994; and gross profit was $41.2
million and $49.1 million, respectively. Dresser-Rand's net
income for the three months ended March 31, 1995 was $0.6
million, as compared to $11.6 million for the three months
ended March 31, 1994.
6<PAGE>
INGERSOLL-RAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Note 3 - Continued:
The summarized financial position of Dresser-Rand was as
follows (in thousands):
March 31, December 31,
1995 1994
Current assets $ 433,774 $ 440,539
Property, plant and
equipment, net 199,878 197,797
Other assets and investments 18,998 18,445
652,650 656,781
Deduct:
Current liabilities 321,706 295,048
Noncurrent liabilities 196,086 188,937
517,792 483,985
Net partners' equity
and advances $ 134,858 $ 172,796
Note 4 - On April 10, 1995, the company and Clark Equipment Company
(Clark) announced an agreement for the company to acquire
Clark in a cash merger transaction for $86 per outstanding
share of Clark common stock. During the first quarter, the
company had purchased 274,200 shares of Clark's outstanding
stock for approximately $15 million.
7<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
First quarter 1995 net sales totalled $1.2 billion, 17.3 percent
higher than the amount reported for the first three months of 1994.
Operating income for the first quarter totalled $89.2 million and
represents a significant increase over the $60.1 million reported for
the comparable 1994 quarter.
The company reported net earnings of $46.3 million, or 44 cents
per common share, for the first quarter of 1995. Net earnings for
the first three months of 1994, totalled $33.0 million, or 31 cents
per common share.
The ratio of cost of goods sold to sales for the first quarter of
1995 reflects a marked improvement over 1994's first quarter ratio
primarily due to the benefits of higher production rates during the
two periods. The ratio of administrative, selling and service
engineering expenses to sales during the first three months of the
year reflects a slight improvement over last year's ratio, the result
of the company's continued efforts from cost-containment programs and
increased sales.
There were no LIFO (last-in, first-out) inventory liquidations
during the first quarters of 1995 and 1994.
Other income (expense), net, aggregated $6.0 million of net
expense for the three months ended March 31, 1995. This represents a
$3.8 million unfavorable change from the $2.2 million of net expense
reported for the first quarter of 1994. The principal reasons for
this change are losses from foreign exchange activity (i.e. $7.3
million in the current quarter versus $1.1 million in the comparable
1994 quarter), somewhat offset by an increase in equity earnings from
partially-owned affiliated companies.
The company's pretax profits from its 49 percent interest in
Dresser-Rand Company (a partnership between Dresser Industries, Inc.
and the company) totalled $300,000 for the first quarter of 1995,
compared to $5.7 million for the three months ended March 31, 1994.
The reduction in earnings is attributed to substantially lower sales
by Dresser-Rand for the first quarter of 1995 when compared to the
prior year.
8<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
Ingersoll-Dresser Pump Company (IDP) is a partnership between the
company and Dresser in which the company owns the majority interest.
The IDP minority interest represents Dresser's interest in the
operating results of IDP. The first quarter of 1995 reflects a
charge to the company of $2.2 million, which indicates that this
joint venture generated net income at the partnership level of
approximately $4.6 million during the first three months of 1995.
During the first quarter of 1994, the company recorded a benefit to
pretax earnings of approximately $184,000, which indicated that IDP
produced a net loss at the partnership level of approximately
$375,000 in the comparable 1994 period.
Interest expense for the first three months of the year decreased
by $2.9 million from the $11.9 million incurred during the first
quarter of 1994. This decrease is the composite result of lower
outstanding debt and benefits from the company's continuing asset
management programs.
The company's effective tax rates were 36.0 percent and 36.5
percent for the three months ended March 31, 1995 and 1994,
respectively. These rates represent the company's forecast of its
effective tax position for each year. The company's effective tax
rate differs from the statutory rate of 35 percent mainly due to
state income taxes and some foreign earnings being taxed at higher
rates. The effective tax rate for the full year 1994 was 36.0
percent.
The results for the first quarter of the year benefitted from the
combination of business improvements in virtually all of the
company's domestic markets including auto, construction and general
industrial and a continued emphasis on cost-containment programs
throughout the company. International business has generally
reflected a reasonably strong increase during the first quarter of
1995 when compared to the first three months of last year. Incoming
orders totalled $1,387.6 million and represents an increase of 22.0
percent over the 1994 first quarter total of $1,137.4 million. The
Door Hardware Group was the only operation within the company which
failed to report meaningful increases in first quarter bookings
levels when compared to the first quarter of 1994. The company's
backlog of orders at March 31, 1995, believed by it to be firm, was
approximately $1.3 billion, which reflects an increase of $300
million over the December 31, 1994 balance. The company estimates
that approximately 90 percent of the backlog will be shipped during
the next twelve months.
9<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
Liquidity and Capital Resources
The company's financial position at March 31, 1995 did not change
materially from December 31, 1994. In the first three months of
1995, working capital increased by approximately $52.6 million to
$1,015.4 million at March 31, 1995 from December 31, 1994's balance
of $962.8 million. The current ratio at March 31, 1995 was 1.9 to 1,
which equalled the ratio at December 31, 1994.
The company's cash and cash equivalents increased by $38.2
million during the first three months of 1995 to $245.2 million from
$207.0 million at December 31, 1994. Cash flows used in operating
activities for the first quarter of 1995 totalled $5.4 million,
investing activities used $37.7 million and financing activities
provided $68.1 million. Exchange rates during the first quarter of
1995 increased cash and cash equivalents by $13.2 million.
Marketable securities totalled $4.5 million at March 31, 1995,
$0.3 million more than the balance at December 31, 1994. The
increase is due to a slight increase in marketable securities and an
increase due to currency fluctuations.
Receivables totalled $986.0 million at March 31, 1995, which
represents a $36.6 million increase from the $949.4 million reported
at December 31, 1994. This increase is the net effect of a strong
selling period towards the end of the first quarter and the effect of
foreign currency translation offset by aggressive collection efforts
during the first three months of 1995.
Inventories totalled $755.8 million at March 31, 1995,
approximately $77 million higher than the December 31, 1994 level.
The activity during the first quarter of 1995 represents the net
effect of the normal first quarter build of domestic inventories, and
higher international inventories due to the weakening of the U.S.
dollar.
Long-term debt, including current maturities, at the end of the
first quarter, totalled $322.0 million, which was approximately $2.0
million higher than the year-end balance.
The company's March 31, 1995 debt-to-capital ratio was 25/75,
which reflects an increase from the 22/78 ratio at December 31, 1994.
10<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
During the first three months of 1995, foreign currency
translation adjustments resulted in a net increase of approximately
$44 million in shareowners' equity, caused by the weakening of the
U.S. dollar against other currencies. Currency changes in Japan,
Germany, France, United Kingdom, Netherlands, Singapore and Spain
accounted for virtually all of this change. The translation of
accounts receivable and inventories were the principal balance sheet
items affected by the currency fluctuations since year-end.
Environmental Matters
Environmental matters at March 31, 1995 remain substantially
unchanged from December 31, 1994. The company has been identified as
a potentially responsible party in environmental proceedings brought
under both the federal Superfund law and state remediation laws,
involving 28 sites within the United States. For all sites, there
are other potentially responsible parties and in most instances, the
company's involvement is minimal. Although there is a possibility
that a responsible party might have to bear more than its
proportional share of site clean-up costs if other responsible
parties fail to make contributions, the company has not yet had, and
to date there is no indication that it will have, to bear more than
its proportional share of clean-up costs at any site. The company
also is engaged in site investigations and remedial activities to
address environmental cleanup from past operations at current and
former manufacturing facilities. Although uncertainties regarding
environmental technology, state and federal regulations and
individual site information make estimating the liability difficult,
management believes that the total liability for the cost of
environmental remediation will not have a material effect on the
financial condition, results of operations, liquidity or cash flows
of the company. It should be noted that when the company estimates
its liability for environmental matters, such estimates are based on
current technologies and the company does not discount its liability
or assume any insurance recoveries.
Clark Equipment Company Acquisition
On March 28, 1995, the company announced that it had made a
proposal to acquire Clark Equipment Company (Clark) in a cash merger
transaction, valued at approximately $1.3 billion (or between $75 and
$77 per Clark share). On April 10, 1995, the company's board of
directors announced a merger agreement between the two companies
pursuant to which the company would make a tender offer for all of
Clark's outstanding common stock at $86 per share for an aggregate
purchase price of approximately $1.5 billion (including related
expenses). On May 4, 1995, the tender offer for the Clark shares
11<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
was extended to the close of business on May 12, 1995 in order to
allow additional time to complete the Justice Department's review of
the transaction. The company has been engaged in discussions with
the Justice Department and is committed to satisfactorily resolving
the antitrust concerns.
As of March 31, 1995 the company had purchased 274,200 shares of
Clark's outstanding stock for approximately $15 million, which is
included in the "other assets" category on the balance sheet and in
acquisitions on the cash flow statement.
Review of Business Segments
The Standard Machinery Segment reported sales of $398.8 million
for the first three months of 1995, an increase of 24.9 percent from
last year's first quarter. The segment's operating income for the
quarter totalled $35.3 million and represents a 54.1-percent increase
over the $22.9 million reported for 1994's first quarter. The
increase in sales is attributed to a double-digit improvement in both
the domestic and international businesses. The Air Compressor and
Construction and Mining groups reported marked improvements in their
operating income margins, the result of improved operations in
virtually all of their markets.
Engineered Equipment Segment's sales for the first quarter of
1995 totalled $232.4 million, up 14.2 percent from the $203.5 million
reported for the first three months of 1994. The segment reported
operating income of $7.6 million for the first three months of 1995.
This represents a significant improvement over the $1.8 million
operating loss that the segment reported for last year's first
quarter. Sales from Ingersoll-Dresser Pump Company for the first
quarter of 1995 exceeded last year's comparable quarter by
approximately 10 percent and operating income improved significantly
over the prior year's level.
Process Systems Group's sales and operating income during the
first three months of 1995 also reflected significant improvement
over the related amounts reported for the first quarter of 1994, as
their pulp and paper markets continue to improve.
The Bearings, Locks and Tools Segment reported sales of $554.4
million for the first quarter of 1995, which is 13.7 percent above
last year's first quarter total of $487.6 million. Operating income
totalled $55.2 million, which was 16.5 percent higher than the $47.4
million of operating income reported by the segment for the first
three months of 1994.
12<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
An increase in demand for automotive-related products and for
general industrial products caused higher sales and operating income
in the Bearings and Components Group when compared to last year's
first quarter.
Door Hardware Group's sales and operating performance were
somewhat below last year's strong first quarter results, primarily
due to the negative effect of higher interest rates on the housing
industry.
The Production Equipment Group's sales and operating income
increased by double digits over their prior year levels, based on the
continued strength in both their domestic and international markets.
13<PAGE>
PART I - EXHIBIT 11
Page 1 of 2
INGERSOLL-RAND COMPANY
COMPUTATIONS OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(in thousands except per share figures)
Three Months Ended
March 31,
1995 1994
PRIMARY EARNINGS PER SHARE (NOTE 1):
Net earnings applicable to common stock $ 46,267 $ 33,012
Average number of common shares outstanding 105,566 105,402
PRIMARY EARNINGS PER SHARE $0.44 $ 0.31
FULLY DILUTED EARNINGS PER SHARE (NOTE 2):(*)
Net earnings for the period $ 46,267 $ 33,012
Adjusted shares:
Average number of common shares outstanding 105,566 105,402
Number of common shares issuable
assuming exercise under incentive
stock plans 385 453
Average number of outstanding shares,
as adjusted for fully diluted earnings
per share calculations 105,951 105,855
FULLY DILUTED EARNINGS PER SHARE $0.44 $ 0.31
(*) This calculation is presented in accordance with the Securities
Exchange Act of 1934, although it is not required disclosure
under APB Opinion No. 15.
See accompanying notes to computations of primary and fully diluted
earnings per share.
14<PAGE>
PART I - EXHIBIT 11
Page 2 of 2
INGERSOLL-RAND COMPANY
NOTES TO COMPUTATIONS OF PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE
Note 1 - Shares issuable under outstanding stock plans, applying the
"Treasury Stock" method, have been excluded from the
computation of primary earnings per share since such shares
were less than 1% of common shares outstanding.
2 - Net earnings per share of common stock computed on a fully
diluted basis are based on the average number of common
shares outstanding during each year after adjustment for
individual securities which may be dilutive. Securities
entering into consideration in making this calculation are
common shares issuable under employee stock plans.
Employee stock options outstanding are included in the
calculation of fully diluted earnings per share by applying
the "Treasury Stock" method quarterly. Such calculations
are made using the higher of the average month-end market
prices or the market price at the end of the quarter, in
order to reflect the maximum potential dilution.
15<PAGE>
INGERSOLL-RAND COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
INGERSOLL-RAND COMPANY
(Registrant)
Date May 10, 1995 /S/ T.F. McBride
T.F. McBride, Senior Vice
President & Chief Financial Officer
Principal Financial Officer
Date May 10, 1995 /S/ R.A. Spohn
R.A. Spohn, Controller -
Accounting and Reporting
Principal Accounting Officer
16<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE MARCH 31, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-30-1995
<CASH> 245,178
<SECURITIES> 4,540
<RECEIVABLES> 1,013,402
<ALLOWANCES> 27,375
<INVENTORY> 755,820
<CURRENT-ASSETS> 2,160,628
<PP&E> 1,873,575
<DEPRECIATION> 892,937
<TOTAL-ASSETS> 3,798,613
<CURRENT-LIABILITIES> 1,145,191
<BONDS> 318,226
<COMMON> 218,529
0
0
<OTHER-SE> 1,386,180
<TOTAL-LIABILITY-AND-EQUITY> 3,798,613
<SALES> 1,185,585
<TOTAL-REVENUES> 1,185,585
<CGS> 893,111
<TOTAL-COSTS> 893,111
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,964
<INCOME-PRETAX> 72,292
<INCOME-TAX> 26,025
<INCOME-CONTINUING> 46,267
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<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
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