UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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 No. 1-985
INGERSOLL-RAND COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 13-5156640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Woodcliff Lake, New Jersey 07675
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)573-0123
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Series A Preference New York, London and
Stock Purchase Rights Amsterdam Stock Exchanges
Common Stock, $2 par value New York, London and
Amsterdam Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X ]
1<PAGE>
The aggregate market value of common stock held by nonaffiliates
on March 13, 1996 was $4,521,289,143 based on the closing price
of such stock on the New York Stock Exchange. This includes the
shares owned by the Registrant's Leveraged Employee Stock
Ownership Plan.
The number of shares of common stock outstanding as of March 13,
1996 was 109,064,532.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareowners for fiscal year ended December 31,
1995. With the exception of those portions which are
incorporated by reference into Parts I, II and IV of this Form
10-K Annual Report, the 1995 Annual Report to Shareowners is not
to be deemed filed as part of this report.
Proxy Statement for Annual Meeting of Shareholders to be held
on April 26, 1996. See Part III of this Form 10-K Annual Report
for portions incorporated by reference. (A definitive proxy
statement has been filed with the Commission since the close of
the fiscal year).
PART I
Item 1. BUSINESS
Ingersoll-Rand Company (the company) was organized in
1905 under the laws of the State of New Jersey as a consolidation
of Ingersoll-Sergeant Drill Company and the Rand Drill Company,
whose businesses were established in the early 1870's. Over the
years, the company has supplemented its original business, which
consisted primarily of the manufacture and sale of rock drilling
equipment, with additional products which have been developed
internally or obtained through acquisition.
The following acquisitions have been accounted for as
purchases and, accordingly, each purchase price was allocated to
the acquired assets and assumed liabilities based on their
estimated fair values. The results of operations since the dates
of acquisition are included in the consolidated financial
statements.
o In August 1993, the company acquired the Kunsebeck, Germany,
needle and cylindrical bearing business of FAG Kugelfischer
Georg Schafer AG of Schweinfurt, Germany, for $42.5 million in
cash.
o In April 1994, the company acquired full ownership of the ball
bearing joint venture with GMN Georg Mueller of America, Inc.
for $4.9 million in cash.
2<PAGE>
o In June 1994, the company acquired Montabert S.A., a French
manufacturer of hydraulic rock-breaking and drilling equipment
for $18.4 million in cash plus assumption of liabilities.
o In August 1994, the company acquired the Ecoair air compressor
product line from MAN Gutehoffnungshutte AG (MAN GHH) for
$10.6 million in cash. The company also entered into a 50/50
joint venture, GHH-RAND Schraubenkompressoren GmbH & Co. KG
(GHH-RAND) with MAN GHH to manufacture airends. The company
invested approximately $17.6 million in GHH-RAND.
o In May 1995, the company acquired Clark Equipment Company (Clark)
for approximately $1.5 billion in cash. Clark's business is the
design, manufacture and sale of skid-steer loaders, compact
excavators, agricultural equipment, asphalt paving equipment,
transmissions for off-highway equipment, golf cars and light
utility vehicles.
o On January 31, 1996, the company acquired the Steelcraft
Division of MascoTech, Inc. Steelcraft manufactures a wide
range of cold-rolled and galvanized steel doors for use
primarily in nonresidential construction.
Dispositions that the company has made in recent years
are as follows:
o The company sold the assets of several small business units in
1993, as well as substantially all of the assets of its coal-
mining machinery and aerospace bearings businesses for $55.5
million in cash.
o In 1994, the assets of the Ingersoll-Dresser Pump Company (IDP)
Australian operations were sold in return for shares of the
purchaser. The company and Dresser Industries sold IRI
International Corporation, a 50/50 joint venture that is a
manufacturer of mobile drilling rigs, to a third party.
o In May 1995, the company sold the domestic paving equipment
business to Champion Road Machinery Limited of Canada. The
sale was a preacquisition requirement, in order to satisfy
concerns of the United States Justice Department, prior to the
Clark acquisition. The company incurred a $7.1 million pretax
loss associated with this sale.
o On March 27, 1996, the company sold the assets of the Pulp
Machinery Division to Beloit Corporation, a subsidiary of
Harnischfeger Industries, Inc. The sales price is in excess
of the book value of the assets.
3<PAGE>
Products
The company manufactures and sells primarily
nonelectrical machinery and equipment. Principal products
include the following:
Abrasive blasting and recovery Foundation drills
systems Golf cars
Agricultural sprayers Hoists
Air compressors Industrial pumps
Air dryers Lubrication equipment
Air logic controls Material handling equipment
Air motors Monitoring drills
Air tools Needle roller bearings
Architectural hardware trim Paving equipment
Asphalt compactors Pellet mills
Automated-parts finishing Pneumatic cylinders
systems Pneumatic valves
Automated production systems Portable compressors
Automotive components Portable generators
Axles Portable light towers
Ball bearings Road-building machinery
Blasthole drills Rock drills
Compact hydraulic excavators Roller bearings
Construction equipment Rotary drills
Diaphragm pumps Rough-terrain forklifts
Door closers Skid-steer loaders
Door hardware Soil compactors
Door locks Spray-coating systems
Emergency exit devices Transmissions
Engineered pumps Utility vehicles
Engine-starting systems Waterjet-cutting systems
Extrusion systems Water well drills
Fluid-handling equipment Winches
Feed-processing equipment
These products are sold primarily under the company's
name and also under other names including Torrington, Fafnir,
Klemm, Schlage, CPM, LCN Closers, Von Duprin, Aro, ABG,
Ingersoll-Dresser Pumps, Pacific, Worthington, Jeumont-Schneider
Pumps, Pleuger, Blaw-Knox, Melroe, Club Car and Clark-Hurth.
During the past three years, the division of the
company's sales between capital goods and expendables has been in
the approximate ratio of 55 percent and 45 percent, respectively.
The company generally defines as expendables those products which
are not capitalized by the ultimate user. Examples of such
products are parts sold for replacement purposes, power tools and
needle bearings.
4<PAGE>
Club Car's peak sales of golf cars occur during the
months of February through June when units are shipped to golf
clubs at the beginning of their golf season. Warm weather
states, such as California and Florida, have golf seasons
beginning in the fall which stimulate fleet and retail sales
during the fall. Sales of Club Car's utility vehicle products
occur year-round but are heavier in the spring.
Additional information on the company's business and
financial information about industry segments is presented in
footnote 15 to the Consolidated Financial Statements of the
company included in the company's Annual Report to Shareowners
for 1995, incorporated by reference in this Form 10-K Annual Report.
Distribution
The company's products are distributed by a number of
methods which the company believes are appropriate to the type of
product. Sales are made domestically through branch sales
offices and through distributorships and dealers across the
United States. International sales are made through
approximately 60 subsidiary sales and service companies with a
supporting chain of distributors in over 100 countries.
Working Capital
The working capital requirements of the company vary with
respect to the many products and industries in which it is
involved. In general, the requirements of its Engineered
Equipment Segment, which manufactures machinery for specialized
customer needs, involve a relatively long lead time and, at
times, more significant company investment with respect to the
particular product or order. Historically, these orders are
generally covered by progress payments, which reduce the
company's investment in the amount of inventory maintained by
this segment. The products manufactured by the company's
Standard Machinery and Bearings, Locks and Tools segments are
more in the nature of standard equipment. Consequently, a wider
variety must usually be more readily available to meet rapid
delivery requirements. Such working capital requirements are
not, however, in the opinion of management, materially different
from those experienced by the company's major competitors.
Customers
No material part of the company's business is dependent
upon a single customer or very few customers, the loss of any one
of which would have a material adverse effect on the company's
operations.
5<PAGE>
Competitive Conditions
The company's products are sold in highly competitive
markets throughout the world against products produced by both
foreign and domestic corporations. The principal methods of
competition in these markets relate to price, quality and
service. The company believes that it is one of the leading
manufacturers in the world of a broad line of air compression
systems, anti-friction bearings, construction equipment, air
tools, pumps (through the IDP joint venture), golf cars and
utility vehicles. In addition, the company believes it is a
leading supplier in domestic markets for locks, other door
hardware products, skid-steer loaders and asphalt paving
equipment.
International Operations
Sales to customers outside the United States, including
domestic sales for export, accounted for approximately 44 percent
of the consolidated net sales in 1995. Information as to
operating income by geographic area is set forth in footnote 15
to the Consolidated Financial Statements of the company included
in the company's Annual Report to Shareowners for 1995,
incorporated by reference in this Form 10-K Annual Report. Sales
outside of the United States are made in more than 100 countries;
therefore, the attendant risks of manufacturing or selling in a
particular country, such as nationalization and establishment of
common markets, would not have a significant effect on the company's
international operations.
Raw Materials
The company manufactures many of the components included
in its products. The principal raw materials required for the
manufacture of the company's products are purchased from numerous
suppliers, and the company believes that available sources of
supply will generally be sufficient for its needs for the
foreseeable future.
Backlog
The company's approximate backlog of orders at December
31, 1995, believed by it to be firm, was $389 million for the
Standard Machinery Segment, $636 million for the Engineered
Equipment Segment and $564 million for the Bearings, Locks and
Tools Segment as compared to $176 million, $395 million and $438
million, respectively, at December 31, 1994. These backlog
figures are based on orders received. While the major portion of
the company's products are built in advance of order and either
shipped or assembled from stock, orders for specialized machinery
or specific customer application are submitted with extensive
lead time and are often subject to revision, deferral,
cancellation or termination. The company estimates that
approximately 90 percent of the backlog will be shipped during
the next twelve months.
6<PAGE>
Research, Engineering and Development
The company maintains extensive research, engineering and
development facilities for experimenting, testing and developing
high quality products. The company employs approximately 1,700
professional employees for its research, engineering and
development activities. The company spent $190 million in 1995,
$155 million in 1994 and $150 million in 1993 on research,
engineering and development.
Patents and Licenses
The company owns numerous patents and patent applications
and is licensed under others. While it considers that in the
aggregate its patents and licenses are valuable, it does not
believe that its business is materially dependent on its patents
or licenses or any group of them. In the company's opinion,
engineering and production skills, and experience are more
responsible for its market position than patents or licenses.
Environmental Matters
The company is subject to extensive environmental laws
and regulations. We believe that the company, as well as
industry in general, will be faced with increasingly stringent
laws and regulations in the future. As a result, the company has
been and continues to be dedicated to an environmental program to
reduce the utilization and generation of hazardous materials
during the manufacturing process and to remediate identified
environmental concerns. As to the latter, the company currently
is engaged in site investigations and remedial activities to
address environmental cleanup from past operations at current and
former manufacturing facilities, including the facilities added
through the Clark acquisition.
During 1995, the company spent approximately $6 million
on capital projects for pollution abatement and control and an
additional $8 million for environmental remediation expenditures,
including operation and maintenance of existing environmental
programs. It should be noted that these amounts are difficult to
estimate because environmental improvements are generally
intertwined with the overall improvement costs at a particular
plant, and the accurate estimate of which portion of an
improvement or a capital expenditure relates to an environmental
improvement is difficult to ascertain. The company believes that
these expenditure levels will continue and may increase over
time. Given the evolving nature of environmental laws,
regulations and technology, the ultimate cost of future
compliance is uncertain.
7<PAGE>
The company is a party to environmental lawsuits and
claims. It has received notices of potential violations of
environmental laws and regulations from the Environmental
Protection Agency and similar state authorities, and is
identified as a potentially responsible party (PRP) for cleanup
costs at approximately 41 federal Superfund and state remediation
sites (including Clark-acquired PRP locations). For all sites
there are other PRPs and in most instances, the company's site
involvement is minimal. While all PRPs may be jointly and
severally liable to pay all site investigation and remediation
costs, to date there is no indication the company will be liable
for more than the costs of its own percentage of responsibility
at any site. Additional lawsuits and claims involving
environmental matters are likely to arise from time to time in
the future.
Although uncertainties regarding environmental
technology, state and federal laws and regulations and individual
site information make estimating the liability difficult,
management believes that the total liability for the cost of
remediation and environmental lawsuits and claims will not have a
material effect on the financial condition, results of
operations, liquidity or cash flows of the company for any year.
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.
Employees
There are approximately 41,100 employees of the company
throughout the world, of whom approximately 28,600 work in the
United States and 12,500 in foreign countries. Approximately 32
percent of the company's United States production and maintenance
employees, who work in 11 plants, are represented by 5 unions.
The company believes relations with its employees are satisfactory.
Item 2. PROPERTIES
The company's executive offices are located at Woodcliff
Lake, New Jersey. Manufacturing and assembly operations are
conducted in 51 plants in the United States; 6 plants in Canada;
32 plants in Europe; 7 plants in Asia; 5 plants in Latin
America and 1 plant in Africa. The company also maintains various
warehouses, offices and repair centers in the United States,
Canada and abroad.
8<PAGE>
Substantially all plant facilities are owned by the
company and the remainder are under long-term lease. The company
believes that its plants and equipment have been well-maintained
and are generally in good condition. The company has several
closed facilities that it is actively marketing with the intent
of selling them at their net realizable value.
The operating segments for which the facilities are
primarily used are as described below. Facilities that produce
products in several operating segments are classified by the
products which they primarily manufacture. Facilities under
long-term lease are included below and are not significant to
each operating segment's total number of plants or square
footage.
Standard Machinery
This segment's products include machinery regularly used
in general manufacturing and in industries such as mining and
construction. Products range from blasthole drills used in
mining and construction, small air compressors found worldwide in
auto service stations, skid-steer loaders and golf cars. The
segment is aligned into five operating groups: Air Compressor,
Construction and Mining, Melroe, Club Car and Mining Machinery
(which was sold in 1993). The segment's manufacturing locations
are as follows:
Approximate
Number of Plants Square Footage
Domestic 11 3,321,000
International 13 2,338,000
Total 24 5,659,000
Engineered Equipment
The products manufactured by this segment are
predominantly designed for specific customer applications. The
segment's diverse product line includes pumps, liquid/solid
separation, densification machinery and axles and transmissions
for off-highway vehicles. The segment is organized into three
operating groups: Pump, Process Systems (a portion of which was
sold in 1996) and Clark-Hurth. The segment's manufacturing
facilities are as follows:
Approximate
Number of Plants Square Footage
Domestic 12 2,969,000
International 23 3,081,000
Total 35 6,050,000
9<PAGE>
Bearings, Locks and Tools
This segment primarily serves the automotive, capital
goods, energy and construction industries. Products in this
segment include bearings for specialized and industrial
application, locks and door hardware for residential and
commercial buildings, air tools for industrial use, air winches,
hoists and engine starting systems, and automated production
systems for transportation equipment manufacturers. There are
three operating groups in this segment: Bearings and Components
Group, Production Equipment Group and Architectural Hardware
Group (formerly known as Door Hardware Group). The segment's
manufacturing facilities are as follows:
Approximate
Number of Plants Square Footage
Domestic 28 6,288,000
International 15 1,683,000
Total 43 7,971,000
Item 3. LEGAL PROCEEDINGS
In the normal course of business, the company is involved
in a variety of lawsuits, claims and legal proceedings, including
proceedings for the cleanup of approximately 41 waste sites under
federal Superfund and similar state laws. In the opinion of the
company, pending legal matters, including the one discussed
below, are not expected to have a material adverse affect on the
results of operations, financial condition, liquidity or cash
flows.
On October 5, 1992, the United States Environmental
Protection Agency (EPA) issued a Finding of Violation and Order
for Compliance (Order) which alleges that Clark has failed to
comply with the pretreatment regulations promulgated pursuant to
Section 306 and 307 of the Clean Water Act. The Order alleges
that certain metal finishing wastewaters generated at the Clark
Melroe facility in Gwinner, North Dakota were discharged into the
Publicly Owned Treatment Works (POTW) operated by the City of
Gwinner in violation of the applicable pretreatment regulations.
The Order also alleges that Clark failed to comply with the
discharge limitations for metal finishing wastewater and all
related reporting requirements. Clark has taken all actions
required of it under the Order.
10<PAGE>
On April 29, 1994, in United States of America v. Clark
Equipment Company d/b/a Melroe Company, the U.S. filed suit
against Clark in the United States District Court for the
District of North Dakota. The complaint seeks (i) to permanently
enjoin Clark to comply fully with all applicable requirements of
the Act and Regulations and (ii) civil penalties against Clark of
up to $25,000 per day for each violation for (a) alleged
discharges of pollutants in violations of the effluent
limitations contained in the pretreatment regulations, (b) a
failure to submit timely and complete reports and (c) a failure
to sample and analyze its regulated wastewater prior to discharge
into the POTW. This case is now awaiting trial.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the company's
security holders during the last quarter of its fiscal year ended
December 31, 1995.
11<PAGE>
The following information is included in accordance with the
provision of Part III, Item 10.
Date of
Service as Principal Occupation and
an Executive Other Information
Name and Age Officer for Past Five Years
James E. Perrella(60) 5/4/77 Chairman of the Board,
President and Chief
Executive Officer,
Director (President and
Director, 1992 - 1993;
Executive Vice President,
1982 - 1992)
J. Frank Travis(60) 2/7/90 Executive Vice President
(Executive Vice President
and President of the
Production Equipment
Group, 1993 - 1995; Vice
President and President
of the Bearings and
Components Group, 1992 -
1993; President of the Air
Compressor Group, 1989 -
1992)
Thomas F. McBride(60) 9/5/79 Senior Vice President and
Chief Financial Officer
(Senior Vice President
and Comptroller, 1992 -
1993; Vice President and
Comptroller, 1981 - 1992)
William J. Armstrong(54) 8/3/83 Vice President and Treasurer
Paul L. Bergren(46) 12/2/92 Vice President, President
of the Air Compressor
Group, and President of
Ingersoll-Rand Europe
(Vice President and
General Manager -
Centrifugal Compressor
Division, 1989 - 1992)
Frederick W. Hadfield(59) 8/1/79 Vice President and President
of IDP (Vice President,
1979 - 1994)
Brian D. Jellison(50) 2/7/96 Vice President and President
of the Architectural
Hardware Group (President
of the Door Hardware
Group, 1994 - 1995;
President, Von Duprin,
1988 - 1994)
12<PAGE>
Date of
Service as Principal Occupation and
an Executive Other Information
Name and Age Officer for Past Five Years
Daniel E. Kletter(57) 2/7/90 Vice President (Vice
President and President of
the Construction and
Mining Group, 1989 - 1994)
Patricia Nachtigal(49) 11/2/88 Vice President and General
Counsel (Secretary and
Managing Attorney, 1988 -
1991)
Allen M. Nixon(55) 2/1/95 Vice President and President
of Bearing and Components
Group (Vice President and
General Manager Torrington
Needle Bearings Division,
1983 - 1994)
James R. O'Dell(57) 12/3/88 Vice President
Nicholas J. Pishotti(55) 4/10/95 Vice President and Vice
President Strategic
Sourcing (General Manager,
Aircraft Engine Sourcing
Department, General
Electric Company, 1988 -
1995)
Larry H. Pitsch(55) 2/7/90 Vice President and President
of the Process Systems
Group
Donald H. Rice(51) 2/1/95 Vice President (Executive
Director - Human Resources
1994; Vice President,
Human Resources - Bearings
and Components Group, 1988
- 1993)
Gerald E. Swimmer(51) 5/1/82 Vice President
R. Barry Uber(50) 2/7/90 Vice President and President
of the Construction and
Mining Group (Vice
President and President of
the Production Equipment
Group, 1990 - 1994)
Ronald G. Heller(49) 2/6/91 Secretary and Assistant
General Counsel (Assistant
General Counsel, 1988 -
1991)
No family relationship exists between any of the above-listed
executive officers of the company. All officers are elected to
hold office for one year or until their successors are elected
and qualify.
13<PAGE>
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding the principal market for the
company's common stock and related stockholder matters are as
follows:
Quarterly share prices and dividends for the common stock are
shown in the following tabulation. The common shares are listed
on the New York Stock Exchange and also on the London and
Amsterdam exchanges.
Common Stock
High Low Dividend
1995
First quarter $34 $28 3/8 $.185
Second quarter 39 3/8 32 5/8 .185
Third quarter 42 3/8 35 5/8 .185
Fourth quarter 38 5/8 33 5/8 .185
High Low Dividend
1994
First quarter $41 5/8 $34 5/8 $.175
Second quarter 38 7/8 32 3/4 .175
Third quarter 38 3/4 34 3/8 .185
Fourth quarter 36 1/4 29 1/2 .185
The Bank of New York (Church Street Station, P.O. Box
11258, New York, NY 10286-1258, (800)524-4458) is the transfer
agent, registrar and dividend reinvestment agent.
There are no significant restrictions on the payment of
dividends. The approximate number of record holders of common
stock as of March 13, 1996 was 13,706.
14<PAGE>
<TABLE>
Item 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December
31, 1995, is as follows (in millions except per share amounts):
December 31 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales $5,729.0 $4,507.5 $4,021.1 $3,783.8 $3,586.2
Net earnings (loss) 270.3 211.1 142.5 (234.4) 150.6
Total assets 5,563.3 3,596.9 3,375.3 3,387.6 2,979.6
Long-term debt 1,304.4 315.9 314.1 355.6 375.8
Shareowners' equity 1,795.5 1,531.3 1,349.8 1,293.4 1,633.1
Earnings (loss) per
common share $2.55 $2.00 $1.36 $(2.25) $1.45
Dividends per
common share 0.74 0.72 0.70 0.69 0.66
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial
condition and results of operations is included as Financial
Review and Management Analysis in Exhibit 13 - the Annual Report
to Shareowners for 1995 and is incorporated by reference in this
Form 10-K Annual Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary
financial information included in the accompanying Annual Report
to Shareowners for 1995 are incorporated by reference in this
Form 10-K Annual Report:
(a) The consolidated financial statements and the report
thereon of Price Waterhouse LLP dated February 6, 1996, are
included as Exhibit 13 - the Annual Report to Shareowners
(excluding the Financial Review and Management Analysis) for
1995.
15<PAGE>
(b) The unaudited quarterly financial data for the
two-year period ended December 31, 1995, is as follows (in
millions except per share amounts):
Earnings
per
Net Cost of Operating Net common
1995 sales goods sold income earnings share
First quarter $1,185.6 $ 893.1 $ 89.2 $ 46.3 $0.44
Second quarter 1,392.1 1,051.0 118.7 66.6 0.63
Third quarter 1,521.3 1,163.2 119.1 61.8 0.58
Fourth quarter 1,630.0 1,202.9 170.0 95.6 0.90
Year 1995 $5,729.0 $4,310.2 $497.0 $270.3 $2.55
1994
First quarter $1,010.3 $ 775.9 $ 60.1 $ 33.0 $0.31
Second quarter 1,143.8 866.0 91.8 51.5 0.49
Third quarter 1,113.7 840.2 89.0 48.4 0.46
Fourth quarter 1,239.7 895.0 136.1 78.2 0.74
Year 1994 $4,507.5 $3,377.1 $377.0 $211.1 $2.00
o The reductions in LIFO inventory quantities increased net
earnings per share by $0.02 in the fourth quarter of 1995 and
$0.01 and $0.06 in the third and fourth quarters of 1994,
respectively.
o The second, third and fourth quarters of 1995 include the
results of Clark Equipment Company (see Note 2 of the
Consolidated Financial Statements).
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
16<PAGE>
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is (i) incorporated
by reference in this Form 10-K Annual Report from pages 1 through
6 of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 26, 1996, and (ii)
included in Part I on pages 12 and 13 of this Form 10-K Annual
Report.
Item 11. EXECUTIVE COMPENSATION
Information on executive compensation is incorporated by
reference in this Form 10-K Annual Report from pages 6 through 15
of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 26, 1996.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information on security ownership of directors and
nominees, directors and officers as a group and certain
beneficial owners is incorporated by reference in this Form 10-K
Annual Report on pages 4 and 5 of the company's definitive proxy
statement for the Annual Meeting of Shareholders to be held on
April 26, 1996.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is incorporated by
reference in this Form 10-K Annual Report from page 15 of the
company's definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 26, 1996.
17<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. and 2. Financial statements and financial statement
schedules
The financial statements, together with the
report thereon of Price Waterhouse LLP dated
February 6, 1996, included as Exhibit 13
(excluding Financial Review and Management
Analysis) and the unaudited quarterly financial
data included in Part II Item 8(b) are
incorporated by reference in this Form 10-K
Annual Report. The financial statement schedule
listed in the accompanying index should be read
in conjunction with the financial statements in
such Annual Report to Shareowners for 1995.
Separate financial statements for all 50
percent or less owned companies, accounted for
by the equity method have been omitted because
no individual entity constitutes a significant
subsidiary.
3. Exhibits
The exhibits listed on the accompanying
index to exhibits are filed as part of this Form
10-K Annual Report.
(b) Reports on Form 8-K
None.
18<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a) 1 and 2)
Form
10-K
Consolidated Financial Statements:
Report of independent accountants . . . . . . . . . . *
Consolidated balance sheet at
December 31, 1995 and 1994 . . . . . . . . . . . . *
For the years ended December 31, 1995, 1994
and 1993:
Consolidated statement of income . . . . . . . . . *
Consolidated statement of shareowners'
equity . . . . . . . . . . . . . . . . . . . . . *
Consolidated statement of cash flows . . . . . . . *
Notes to consolidated financial statements . . . . . *
Selected unaudited quarterly financial data . . . . . . 16
Financial Statement Schedule:
Report of independent accountants on
financial statement schedule . . . . . . . . . . . 20
Consolidated schedule for the years ended
December 31, 1995, 1994 and 1993:
Schedule II -- Valuation and Qualifying
Accounts . . . . . . . . . . . . . . . . . . . . 21
* See Exhibit 13 - Ingersoll-Rand Company Annual Report to
Shareowners for 1995.
Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
Financial statements of the company's 50 percent or less owned
companies, are omitted because individually they do not meet the
significant subsidiary test of Rule 3-09 of Regulation S-X.
19<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Ingersoll-Rand Company:
Our audits of the consolidated financial statements referred to
in our report dated February 6, 1996 included as part of Exhibit
13 - the Annual Report to Shareowners for 1995 of Ingersoll-Rand
Company, (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed
in Item 14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Morristown, New Jersey
February 6, 1996
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statement on
Form S-3 (No. 33-60249) and to the incorporation by reference in
the Registration Statements on Form S-8 (No. 333-00829, No. 33-
35229, No. 2-98258 and Post-Effective Amendment No. 4 to No.
2-64708) of Ingersoll-Rand Company of our report dated February
6, 1996 included as part of Exhibit 13 - the Annual Report to
Shareowners for 1995, which is incorporated in this Annual Report
on Form 10-K. We also consent to the incorporation by reference
of our report on the Financial Statement Schedule, which appears
on this page.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Morristown, New Jersey
March 29, 1996
20<PAGE>
SCHEDULE II
INGERSOLL-RAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(Amounts in millions)
Additions
charged to
Balance at costs and Balance
beginning expenses Deductions at end
Description of year (*) (**) of year
1995
Doubtful accounts $25.9 $17.8 $ 5.4 $38.3
1994
Doubtful accounts $22.1 $12.6 $ 8.8 $25.9
1993
Doubtful accounts $23.1 $10.2 $11.2 $22.1
(*) "Additions" include foreign currency translation.
(**) "Deductions" include accounts and advances written off,
less recoveries.
21<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
Description Page
2 Agreement and Plan of Merger, dated as of April 9,
1995 by and among Ingersoll-Rand Company, CEC
Acquisition Corp. and Clark Equipment Company
(Incorporated by reference from Amendment No. 2 to
Schedule 14D-1 with respect to the tender offer by
CEC Acquisition Corp., a wholly-owned subsidiary
of Ingersoll-Rand Company, for shares of Clark
Equipment Company.) -
3 (i) Amendment to Restated Certificate of Incorporation
of Ingersoll-Rand Company filed May 28, 1992.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for Fiscal Year Ended December 31, 1993. (See
pages 30-32 of the 1993 Form 10-K). -
3 (ii) Restated Certificate of Incorporation of
Ingersoll-Rand Company as amended through May 28, 1992.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for Fiscal Year Ended December 31, 1993. (See
pages 33-60 of the 1993 Form 10-K). -
3 (iii) By-Laws of Ingersoll-Rand Company, as amended
through January 1, 1996. 28-42
4 (i) Rights Agreement, dated as of December 7, 1988, as
amended by Amendment No. 1 thereto dated as of December 7,
1994. Incorporated by reference from Form 8-A of Ingersoll-
Rand Company filed on December 12, 1988, and Form 8-A/A
of Ingersoll-Rand Company filed December 15, 1994. -
4 (ii) Indenture, dated as of August 1, 1986 between
Ingersoll-Rand Company and the Bank of New York, as
Trustee, as supplemented. (Incorporated by reference to
Exhibits 4.1, 4.2 and 4.3 of the company's Form S-3
Registration Statement No. 33-39474). -
22<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
(Continued)
Description Page
4 (iii) Ingersoll-Rand Company is a party to several
long-term debt instruments under which in each case the
total amount of securities authorized does not exceed
10% of the total assets of Ingersoll-Rand Company and
its subsidiaries on a consolidated basis. Pursuant to
paragraph 4(iii)(A) of Item 601(b) of Regulation S-K,
Ingersoll-Rand Company agrees to furnish a copy of such
instruments to the Securities and Exchange Commission
upon request. -
10 (iii) The following exhibits constitute management
contracts or compensatory plans or arrangements required
by Item 601 of Regulation S-K.
10 (iii) (a) Management Incentive Unit Plan of Ingersoll-
Rand Company. Amendment to the Management Incentive Unit
Plan, effective January 1, 1982. Amendment to the
Management Incentive Unit Plan, effective January 1, 1987.
Amendment to the Management Incentive Unit Plan, effective
June 3, 1987. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended December 31,
1993. (See pages 78-92 of the 1993 Form 10-K). -
10 (iii) (b) Description of Ingersoll-Rand Company
Retirement Plan for Non-employees Directors.
Incorporated by reference to Form 10-K of Ingersoll-
Rand Company for Fiscal Year Ended December 31, 1994.
(See pages 39-47 of the 1994 Form 10-K). -
10 (iii) (c) Form of Contingent Compensation Agreements
with Executive Vice Presidents and Group Presidents of
Ingersoll-Rand Company. 43-47
10 (iii) (d) Description of Bonus Arrangements for
Chairman, President and Staff Officers. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See page 100
of the 1993 Form 10-K). -
10 (iii) (e) Form of Change of Control Agreement with
Chairman and Chief Executive Officer of Ingersoll-Rand
Company. 48-64
23<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
(Continued)
Description Page
10 (iii) (f) Form of Change of Control Agreement
with selected executive officers other than
Chairman of Ingersoll-Rand Company. 65-84
10 (iii) (g) Executive Supplementary Retirement
Agreement for selected executive officers.
Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended
December 31, 1993. (See pages 127-132 of the
1993 Form 10-K). -
10 (iii) (h) Incentive Stock Plan of 1985 of Ingersoll-
Rand Company. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended December
31, 1993. (See pages 133-151 of the 1993 Form 10-K). -
10 (iii) (i) Forms of insurance and related letter
agreements with certain executive officers.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for Fiscal Year Ended December 31, 1993. (See
pages 152-160 of the 1993 Form 10-K). -
10 (iii) (j) Incentive Stock Plan of 1990 of Ingersoll-
Rand Company. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended December
31, 1993. (See pages 161-182 of the 1993 Form 10-K). -
10 (iii) (k) Restated Supplemental Pension Plan. 85-91
10 (iii) (l) Supplemental Stock and Savings Investment
Plan effective as of January 1, 1989. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See pages 189-198
of the 1993 Form 10-K). -
10 (iii) (m) Supplemental Retirement Account Plan
effective as of January 1, 1989. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See pages
199-206 of the 1993 Form 10-K). -
24<PAGE>
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
(Continued)
Description Page
10 (iii) (n) Incentive Stock Plan of 1995 of Ingersoll-
Rand Company. Incorporated by reference to the Notice
of 1995 Annual Meeting of Shareholders and Proxy
Statement dated March 15, 1995. (See Appendix A of the
Proxy Statement dated March 15, 1995). -
10 (iii) (o) Senior Executive Performance Plan.
Incorporated by reference to the Notice of 1995
Annual Meeting of Shareholders and Proxy Statement
dated March 15, 1995. (See Appendix B of the Proxy
Statement dated March 15, 1995). -
10 (iii) (p) Elected Officers Supplemental Plan. 92-108
10 (iii) (q) Selected Executive Officer Employment
Agreement. 109-111
11 (i) Computation of Primary Earnings Per Share. 112
11 (ii) Computation of Fully Diluted Earnings Per Share. 113-114
12 Computations of Ratios of Earnings to Fixed Charges. 115
13 Ingersoll-Rand Company Annual Report to
Shareowners for 1995. (Not deemed to be filed as
part of this report except to the extent incorporated
by reference). 116-175
18 Letter dated August 11, 1995 from Price Waterhouse
LLP regarding change in accounting method. Incorporated
by reference to Form 10-Q of Ingersoll-Rand Company for
the quarterly period ended June 30, 1995 reported under
Item 6, Exhibits.
21 List of Subsidiaries of Ingersoll-Rand Company. 176-178
27 Financial Data Schedule. 179
25<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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)
By /S/ Thomas F. McBride
Thomas F. McBride
Senior Vice President and
Chief Financial Officer
Date March 29, 1996
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
Chairman, President,
Chief Executive Officer
and Director (Principal
/S/ James E. Perrella Executive Officer) March 29, 1996
(James E. Perrella)
Senior Vice President
Chief Financial Officer
(Principal Financial
/S/ Thomas F. McBride Officer) March 29, 1996
(Thomas F. McBride)
Controller -
Accounting and Reporting
(Principal Accounting
/S/ Richard A. Spohn Officer) March 29, 1996
(Richard A. Spohn)
/S/ Theodore H. Black Director March 29, 1996
(Theodore H. Black)
26<PAGE>
Signature Title Date
/S/ Brendan T. Byrne Director March 29, 1996
(Brendan T. Byrne)
/S/ Joseph P. Flannery Director March 29, 1996
(Joseph P. Flannery)
/S/ Constance J. Horner Director March 29, 1996
(Constance J. Horner)
/S/ H. William Lichtenberger Director March 29, 1996
(H. William Lichtenberger)
/S/ John E. Phipps Director March 29, 1996
(John E. Phipps)
/S/ Cedric E. Ritchie Director March 29, 1996
(Cedric E. Ritchie)
/S/ Orin R. Smith Director March 29, 1996
(Orin R. Smith)
/S/ Richard J. Swift Director March 29, 1996
(Richard J. Swift)
27<PAGE>
EXHIBIT 3 (iii)
Page 1 of 15
BY-LAWS
of
INGERSOLL-RAND COMPANY
As amended through January 1, 1996
28<PAGE>
EXHIBIT 3 (iii)
Page 2 of 15
BY-LAWS
of
INGERSOLL-RAND COMPANY
ARTICLE I.
STOCKHOLDERS' MEETINGS
Section 1. Annual Meeting: The annual meeting of the
Stockholders of the Company shall be held on the fourth Thursday
of April, in each year, or such other date as the Board of
Directors may determine, at such hour and at such place within or
without the State of New Jersey as may be fixed by the Board of
Directors and stated in the notice of the meeting, for the
election of Directors of the Company and for the transaction of
such other business as may come before it in accordance with the
provisions of these By-Laws.
At any such annual meeting of Stockholders, only such business
shall be conducted as shall have been brought before the meeting
(a) by or at the direction of the Board of Directors, or (b) by
any Stockholder entitled to vote at such meeting who complies
with the procedures set forth in this Section 1. Any Stockholder
entitled to vote at such meeting may propose business to be
included in the agenda of such meeting only if written notice of
such Stockholder's intent is given to the Secretary of the
Company, either by personal delivery or by United States mail,
postage prepaid, not later than 90 days in advance of the
anniversary of the immediately preceding annual meeting or if the
date of the annual meeting of Stockholders occurs more than 30
days before or 60 days after the anniversary of such immediately
preceding annual meeting, not later than the close of business on
the seventh day following the date on which notice of such
meeting is given to Stockholders. A Stockholder's notice to the
Secretary shall set forth in writing as to each matter such
29<PAGE>
EXHIBIT 3 (iii)
Page 3 of 15
Stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they
appear on the Company's books, of the Stockholder proposing such
business, (c) the class and number of shares of the Company which
are beneficially owned by the Stockholder and (d) any material
interest of the Stockholder in such business. Notwithstanding
anything in these By-Laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the
procedures set forth in this Section 1. The officer of the
Company or other person presiding at the annual meeting shall, if
the facts so warrant, determine and declare to the meeting that
business was not properly brought before the meeting in
accordance with the provisions of this Section 1, and, if such
officer or other person should so determine, he or she shall so
declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
Section 2. Special Meetings: Special meetings of the
Stockholders may be held at the principal office of the Company
in the State of New Jersey or at such other place within or
without said State as may from time to time be designated by the
Board of Directors and stated in the notice of the meeting,
whenever called in writing by the Chairman of the Board, the
Vice-Chairman or the President or by vote of a majority of the
Board of Directors. At any special meeting of the Stockholders,
only such business shall be conducted as shall have been brought
before the meeting by or at the direction of the Board of
Directors and such business shall be confined to the object or
objects stated in the notice thereof.
Section 3. Quorum: Unless otherwise provided in the Certificate
of Incorporation of this Company or by statute, the presence in
person or by proxy of the holders of record of the shares
entitled to cast a majority of the votes at any meeting of the
Stockholders shall constitute a quorum at such meeting. Whenever
the holders of any class or series of shares are entitled to vote
separately on a specified item of business, the presence in
person or by proxy of the holders of record of the shares of such
class or series entitled to cast a majority of the votes thereon
shall constitute a quorum for the transaction of such specified
item of business.
30<PAGE>
EXHIBIT 3 (iii)
Page 4 of 15
If the holders of the amount of stock necessary to constitute a
quorum shall fail to attend in person or by proxy at the time and
place fixed by these By-Laws for an annual meeting, or as fixed
by notice, as above provided for a special meeting, a majority in
interest of the Stockholders present, in person or by proxy, may
adjourn from time to time without notice other than announcement
at the meeting until the holders of the amount of stock requisite
to constitute a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as
originally notified.
Section 4. Organization: The Chairman of the Board shall call
meetings of the Stockholders to order and shall act as Chairman
of such meetings. In the absence of the Chairman of the Board,
the Vice-Chairman or the President, or in his absence an
Executive Vice President shall preside: and in the absence of
any of the foregoing officers, the Stockholders present, or
the Board of Directors, may appoint any Stockholder to act as
Chairman of any meeting.
The Secretary of the Company shall act as Secretary of all
meetings of the Stockholders. In the absence of the Secretary at
any meeting of the Stockholders, the presiding officer may
appoint any person to act as Secretary of the Meeting.
Section 5. Voting: At each meeting of the Stockholders, every
Stockholder shall be entitled to vote in person or by proxy
appointed by instrument in writing subscribed by such Stockholder
or by his duly authorized attorney and delivered to the
inspectors at the meeting. The votes for Directors and, upon
demand of any Stockholder, the votes upon any question before the
meeting shall be by ballot.
Section 6. Inspectors: At each annual stated meeting of the
Stockholders for the election of Directors, the presiding officer
of such meeting shall appoint two persons to act as inspectors,
who shall be sworn to perform their duties in accordance with the
laws of the State of New Jersey, and who shall return a formal
certificate.
31<PAGE>
EXHIBIT 3 (iii)
Page 5 of 15
Section 7. Nominations of Directors: Nominations for the
election of Directors may be made by the Board of Directors or
any Stockholder entitled to vote for the election of Directors.
Any Stockholder entitled to vote for the election of Directors at
a meeting or to express a consent in writing without a meeting
may nominate a person or persons for election as a Director only
if written notice of such Stockholder's intent to make such
nomination is given to the Secretary of the Company, either by
personal delivery or United States mail, postage prepaid, not
later than (a) with respect to an election to be held at an
annual meeting of Stockholders, 90 days in advance of the
anniversary of the immediately preceding annual meeting or if the
date of the annual meeting of Stockholders occurs more than 30
days before or 60 days after the anniversary of such immediately
preceding annual meeting, not later than the close of business on
the seventh day following the date on which notice of such
meeting is given to Stockholders and (b) in the case of any
Stockholder who wishes to nominate a person or persons for
election as a Director pursuant to consents in writing by
Stockholders without a meeting (to the extent election by such
consents is permitted under applicable law and the Company's
Certificate of Incorporation), 60 days in advance of the date on
which materials soliciting such consents are first mailed to
Stockholders or, if no such materials are required to be mailed
under applicable law, 60 days in advance of the date on which the
first such consent in writing is executed. Each such notice
shall set forth the name and address of the Stockholder who
intends to make the nomination and of the person or persons to be
nominated for election as a Director, a representation that the
Stockholder is a holder of record of stock of the Company
entitled to vote at such meeting or to express such consent in
writing and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice
or to execute such a consent in writing to elect such person or
persons as a Director, a description of all arrangements or
understandings between the Stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations for election as a Director
are to be made by the Stockholder, such other information
regarding each nominee proposed by such Stockholder as would have
been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission if
such nominee had been nominated, or was intended to be nominated,
for election as a Director by the Board of Directors, and the
consent of each nominee to serve as a Director of the Company if
so elected. The Board of Directors may refuse to acknowledge the
nomination of any person not made in compliance with the
foregoing procedures.
32<PAGE>
EXHIBIT 3 (iii)
Page 6 of 15
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Number and Election: The business and property of the
Company shall be managed by a Board of ten Directors. The number
of Directors may be altered from time to time by the alteration
of these By-Laws, provided that, as required by the Restated
Certificate of Incorporation, the Board shall never consist of
less than eight members.
As provided in the Restated Certificate of Incorporation, the
Board of Directors shall be divided into three classes, two
consisting of three Directors each and the remaining consisting
of four Directors. At each annual election, the successors to
the Directors of the class whose terms shall expire in that year
shall be elected to hold office for a term of three years, so
that the term of office of one class of Directors shall expire in
each year. Each Director shall serve for the term for which such
Director shall have been elected and until such Director's
successor shall have been duly elected.
Notwithstanding the foregoing provisions of this Section 1, if
and as long as the Restated Certificate of Incorporation provides
for the election of additional Directors by class or classes of
stock, such additional Directors shall be elected in the manner
and for the term provided in the Restated Certificate of
Incorporation.
Section 2. Vacancies: Subject to any requirements of the
Certificate of Incorporation with respect to the filling of
vacancies among additional Directors elected by a class or
classes of stock, if the office of any Director becomes vacant,
the remaining Directors may, by a majority vote, elect a
successor who shall hold office until the next succeeding annual
meeting of the Stockholders and until his successor shall have
been elected and qualified.
Section 3. Place of Meetings: The Directors may hold their
meetings and may have an office and keep the books of the Company
(except as otherwise may be provided for by law) in such place or
places in the State of New Jersey or outside of the State of New
Jersey as the Board from time to time may determine.
33<PAGE>
EXHIBIT 3 (iii)
Page 7 of 15
Section 4. Regular Meetings: Regular meetings of the Board of
Directors shall be held at such times and intervals as the Board
may from time to time determine. It shall be the duty of the
Secretary to send a notice to each of the Directors at his
address as it appears on the books of the Company at least two
(2) days before the holding of each regular meeting, but a
failure of the Secretary to send such notice shall not invalidate
any proceedings of the said Board.
Section 5. Special Meetings: Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the
Board or the Vice-Chairman or the President, or by one-third
(1/3) of the Directors for the time being in office.
The Secretary shall give notice of each special meeting by
mailing the same at least two (2) days before the meeting, or by
telegraphing the same at least one (1) day before the meeting to
each Director, but such notice may be waived by any Director. At
any meeting at which every Director shall be present, even
without notice, any business may be transacted.
Section 6. Quorum: Six (6) members of the Board of Directors,
but not less than one-third (1/3) of the entire Board, shall
constitute a quorum for the transaction of business; but if at
any meeting of the Board there be less than a quorum present,
those present may adjourn the meeting from time to time. At
meetings of the Board of Directors, business shall be transacted
in such order as from time to time the Board may determine.
Section 7. Director Emeritus: The Board of Directors may
appoint a person who has served with distinction and who has
retired from the Board upon reaching mandatory retirement as
provided herein to the position of Director Emeritus. A Director
Emeritus shall be invited to attend all meetings of the Board and
shall receive the same compensation as that paid to outside
Directors. While serving as a Director Emeritus, he shall not be
considered a retired director for pension benefit purposes;
however, any pension benefits to which he may be entitled will
commence upon his cessation of service as a Director Emeritus.
34<PAGE>
EXHIBIT 3 (iii)
Page 8 of 15
He shall be appointed by the Board for a one-year term and may be
reappointed from time to time by action of the Board. While the
presence of a Director Emeritus at a Board meeting will not be
considered for quorum or voting purposes, nevertheless, his
advice and counsel on all matters to come before the Board is
invited.
ARTICLE III.
COMMITTEES
The Board of Directors may appoint from their number such
standing committees as they deem best and to the extent permitted
by statute may invest them with such of their own powers as they
may deem advisable, subject to such conditions as they may
prescribe.
ARTICLE IV.
OFFICERS
Section 1. Officers: The executive officers of the Company
shall include a Chairman of the Board of Directors, President,
Treasurer and Secretary and may also include one or more
Vice-Chairmen, Executive Vice Presidents, Senior Vice Presidents,
Vice Presidents, and such other officers as the Board of
Directors shall deem necessary or otherwise appropriate to elect.
The Chief Executive Officer may hold the title of Chairman of the
Board, or President, or both titles.
The Board of Directors may appoint such other officers and
advisory boards as they shall deem necessary, who shall have such
authority and who shall perform such duties as from time to time
may be prescribed by the Board of Directors.
Any executive officer elected by the Board of Directors may be
removed at any time with or without cause by the affirmative vote
of two-thirds (2/3) of the entire Board of Directors.
35<PAGE>
EXHIBIT 3 (iii)
Page 9 of 15
Any other appointed or elected officer, agent, employee or member
of an advisory board may be removed at any time with or without
cause by affirmative vote of the Directors or by the Committee or
superior officer upon whom such power of removal may be
conferred.
Section 2. Powers and Duties: The Chairman of the Board shall
preside at all meetings of the Board of Directors and
Stockholders. Subject to designation by the Board of Directors
he shall be the Chief Executive Officer of the Company, and he
shall have responsibility for the active management of the
business of the Company. He may sign and execute contracts and
agreements authorized by the Board, delegate other officers to do
so and may, from time to time, require from other officers and
from employees of the Company opinions, reports or information
upon any matter specified by him or generally upon the interests
or affairs of the Company under the supervision of such officers
or employees respectively. He may appoint and remove assistant
officers and other employees and agents. He may exercise any
other powers conferred upon him by the Board of Directors.
Other officers shall have all the usual and customary powers and
shall perform all the usual and customary duties incident to
their respective offices and, in addition thereto and to any
duties specifically prescribed by any subsequent provisions of
these By-Laws, they shall respectively perform such other general
or special duties as may from time to time be assigned to them by
the Board of Directors or the Chief Executive Officer.
The Board of Directors may appoint an officer to act as Chief
Financial Officer of the Company, who shall have responsibility
for the financial affairs of the Company. He will be responsible
for the preparation of the financial statements of the Company,
and such other duties as from time to time may be assigned to him
by the Board of Directors or the Chief Executive Officer. The
Board of Directors may appoint an officer to act as General
Counsel of the Company, who shall have responsibility for the
legal affairs of the Company. The Board of Directors may appoint
the Comptroller to be the principal accounting and financial
control officer of the Company.
Securities of other corporations or interests in other entities
held by the Company may be voted by the Chairman of the Board or
by any other person designated by the Board of Directors or Chief
Executive Officer.
36<PAGE>
EXHIBIT 3 (iii)
Page 10 of 15
Section 3. Term: The executive officers elected by the Board of
Directors shall hold office for one year or until their
successors are elected and qualify. The Chairman, and any
Vice-Chairman, shall be elected by the Directors from among their
own number. One person may hold more than one office.
ARTICLE V.
BILLS, NOTES, AND CHECKS
All bills, notes, checks or other negotiable instruments of the
Company shall be made in the name of the Company and shall be
signed by two executive officers or by any two persons duly
authorized by the Board of Directors. No officers or agents of
the Company, either singly or together shall have power to make
any bill, note or check or other negotiable instrument in the
name of the Company to bind the Company thereby, except as in
this Article prescribed and provided.
No officer or agent of this Company shall have power to endorse
in the name, for or in behalf of the Company, any note, bill of
exchange, draft, check or other written instrument for the
payment of money, save only for purposes of the discount or the
collection of the said instrument, unless thereunto duly and
specially authorized by the vote of the Directors of this Company
entered on the minutes of said Board.
ARTICLE VI.
CAPITAL STOCK
Section 1. Certificates for Shares: The certificates for shares
of the capital stock of the Company shall be in such form not
inconsistent with the Certificate of Incorporation as shall be
prepared or be approved by the Board of Directors. The
certificates shall be signed by or bear thereon the facsimile
37<PAGE>
EXHIBIT 3 (iii)
Page 11 of 15
signature of the Chairman, the Vice-Chairman, President, or an
Executive Vice President, or a Vice President, and also be signed
by or bear thereon the facsimile signature of the Treasurer or an
Assistant Treasurer. The certificates shall be consecutively
numbered. The name of the person owning the shares represented
thereby, with the number of such shares and the date of issue,
shall be entered in the Company's books.
Section 2. Transfers: Shares of the capital stock of the
Company shall be transferred only on the books of the Company by
the holder thereof in person or by his attorney, upon surrender
of the certificate or certificates properly endorsed. The Board
of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of
the capital stock of the Company. The Board of Directors may
appoint Transfer Agents and Stock Registrars and may require all
stock certificates to bear the signatures of such a Transfer
Agent and of such a Registrar of Transfers, or any of them.
The stock transfer books may be closed for such period next
preceding any Stockholders' meeting, or the payment of dividends
as the Board of Directors may from time to time determine, and
during such period no stock shall be transferable.
The Board of Directors may also fix in advance a date not more
than 60 nor less than 10 days preceding the date of any meeting
of Stockholders, nor more than 60 days preceding the date for the
payment of any dividend on the Common Stock or any series of
Preference Stock, or the date for allotment of rights, or the
date when any change or conversion or exchange of capital stock
shall go into effect, as a record date for the determination of
the Stockholders entitled to notice of and to vote at any such
meeting, or entitled to receive payment of any such dividend, or
any such allotment of rights, or to exercise the rights in
respect to any such change, conversion or exchange of capital
stock. In such cases only Stockholders of record on the date so
fixed shall be entitled to such notice of and vote at such
meeting, or to receive payment of such dividend, or allotment of
rights, or to exercise such rights, as the case may be, and
notwithstanding any transfer of any stock on the books of the
Company after any such record date fixed as aforesaid.
38<PAGE>
EXHIBIT 3 (iii)
Page 12 of 15
Section 3. Lost Stock Certificates: In case any stock
certificate shall be lost, the Board of Directors may order a new
certificate to be issued in its place upon receiving such proof
of loss and such security therefor as may be satisfactory to it.
ARTICLE VII.
THE CORPORATE SEAL
The Corporate Seal of the Company shall consist of a circle
formed by the words "Ingersoll-Rand Company" and the letters "N.
J." with the words "Corporate Seal" and the figures "1905" in the
center.
The Seal shall be attested by the signature of the Secretary or
the Assistant Secretary or of the Treasurer or the Assistant
Treasurer.
When authorized by the Board of Directors, the Secretary shall
affix the Seal, or cause it to be affixed, to all documents
executed on behalf of the Company. The Board of Directors may
also specifically or generally authorize other persons to affix
the Seal.
ARTICLE VIII.
REACQUIRED SHARES
When shares of the Company are reacquired by the Company by
purchase, by redemption or by their conversion into other shares
of the Company, such shares shall be treated by the Company as
treasury shares, unless and to the extent the Board of Directors
determines at any time that any such shares shall be cancelled.
39<PAGE>
EXHIBIT 3 (iii)
Page 13 of 15
ARTICLE IX.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 1. Right to Indemnification: Each person who was or is
made a party or is threatened to be made a party to or is
involved in any pending, threatened or completed civil, criminal,
administrative or arbitrative action, suit or proceeding, or any
appeal therein or any inquiry or investigation which could lead
to such action, suit or proceeding ("proceeding"), by reason of
his or her being or having been a Director or officer of the
Company or of any constituent corporation absorbed by the Company
in a consolidation or merger, or by reason of his or her being or
having been a Director, officer, trustee, employee or agent of
any other corporation (domestic or foreign) or of any
partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise (whether or not for profit),
serving as such at the request of the Company or of any such
constituent corporation, or the legal representative of any such
Director, officer, trustee, employee or agent, shall be
indemnified and held harmless by the Company to the fullest
extent permitted by the New Jersey Business Corporation Act, as
the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights
than said Act permitted prior to such amendment), from and
against any and all reasonable costs, disbursements and
attorneys' fees, and any and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties,
incurred or suffered in connection with any such proceeding, and
such indemnification shall continue as to a person who has ceased
to be a Director, officer, trustee, employee or agent and shall
inure to the benefit of his or her heirs, executors,
administrators and assigns; provided, however, that there shall
be no indemnification hereunder with respect to any settlement or
other nonadjudicated disposition of any proceeding unless the
Company has given its prior consent to such settlement or
disposition. The right to indemnification conferred in this
Section 1 shall be a contract right and shall include the right
to be paid by the Company the expenses incurred in connection
with any proceeding in advance of the final disposition of such
proceeding as authorized by the Board of Directors; provided,
40<PAGE>
EXHIBIT 3 (iii)
Page 14 of 15
however, that, if the New Jersey Business Corporation Act so
requires, the payment of such expenses incurred by a Director or
officer in his or her capacity as a Director or officer in
advance of the final disposition of a proceeding shall be made
only upon receipt by the Company of an undertaking, by or on
behalf of such Director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such Director
or officer is not entitled to be indemnified under this Section 1
or otherwise. The Company may, by action of its Board of
Directors, provide for indemnification and advancement of
expenses to employees and agents of the Company with the same
scope and effect as the foregoing indemnification of Directors
and officers.
Section 2. Right of Claimant to Bring Suit: If a claim under
Section 1 of this Article IX is not paid in full by the Company
within thirty days after a written request has been received by
the Company, the claimant may at any time thereafter apply to a
court for an award of indemnification by the Company for the
unpaid amount of the claim and, if successful on the merits or
otherwise in connection with any proceeding, or in the defense of
any claim, issue or matter therein, the claimant shall be
entitled also to be paid by the Company any and all expenses
incurred or suffered in connection with such proceeding. It
shall be a defense to any such action (other than an action
brought to enforce a claim for the advancement of expenses
incurred in connection with any proceeding where the required
undertaking, if any, has been tendered to the Company) that the
claimant has not met the standard of conduct which makes it
permissible under the New Jersey Business Corporation Act for the
Company to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Company. Neither
the failure of the Company (including its Board of Directors,
independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such proceeding that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the New Jersey Business Corporation Act, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant
has not met such applicable standard of conduct, nor the
termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
41<PAGE>
EXHIBIT 3 (iii)
Page 15 of 15
Section 3. Non-Exclusivity of Rights: The right to
indemnification and advancement of expenses provided by or
granted pursuant to this Article IX shall not exclude or be
exclusive of any other rights, including the right to be
indemnified against any and all reasonable costs, disbursements
and attorneys' fees, and any and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties
incurred or suffered in proceedings by or in the right of the
Company, to which any person may be entitled under a certificate
of incorporation, by-law, agreement, vote of stockholders, or
otherwise, provided that no indemnification shall be made to or
on behalf of any person if a judgment or other final adjudication
adverse to such person establishes that such person has
not met the applicable standard of conduct required to be met
under the New Jersey Business Corporation Act.
ARTICLE X.
AMENDMENTS
The Board of Directors may, by a majority vote of the entire
Board, make By-Laws and from time to time alter, amend or repeal
any By-Law, but any By-Law made by the Board of Directors may be
altered or repealed by the Stockholders at any annual or special
meeting. Notice of such proposed alteration, amendment or repeal
of any By-Law shall be included in the notice of the meeting of
the Directors or Stockholders.
ARTICLE XI.
AUDITORS
The Board of Directors may appoint a firm of certified public
accountants to audit the books and accounts of the Company for
the calendar year in which such appointment is made.
42<PAGE>
EXHIBIT 10(iii)(c)
Page 1 of 5
TO: EXECUTIVE VICE PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1996
The bonus plan applying to you for 1996 is outlined herein.
Your bonus potential for 1996 will be divided into two parts.
% of salary will be based on Group Operating results and % of
salary will be based on the bonus awarded to the Chairman's
Office.
GROUP OPERATIONS CONTRACT (applies to % of salary)
1. Should your Operations Groups attain worldwide operating
income of $ , you will receive a bonus of % of
% of your annual salary rate in effect on December 31,
1996.
2a. For each $ by which your worldwide operating
income exceeds $ up to $ , you will
receive % of % of your salary. For each $
over $ , you will receive % of % of your
salary.
2b. If you achieve a productivity improvement of %, you will
receive an additional % of % of your salary.
3. If you attain % accounts receivable and inventory as a
percent of sales, you will receive % of % of your
salary. For each % reduction thereafter, you will
receive an additional % of % of your salary.
4. You may receive an additional discretionary award of up to
% of % of your salary. The award will be based upon
your individual achievements and the accomplishments of
your Groups. The award will also be determined on the
basis of performance in process reengineering and in our
company-wide procurement initiative. Any award also will
be dependent upon the Company's overall performance.
43<PAGE>
EXHIBIT 10(iii)(c)
Page 2 of 5
BONUS CONTRACT FOR 1996 - EXECUTIVE VICE PRESIDENT
5. The maximum bonus award on the sum of paragraphs (1) and
(2) will be limited to % of % of your salary. The
maximum bonus award on paragraph (3) will be limited to
% of % of your salary. The maximum bonus award on
paragraph (4) will be limited to % of % of your
salary.
6. Should the Company achieve or exceed Earnings Per Share of
$ , the total bonus percentage earned by you under
paragraphs (1) through (5) will be increased in accordance
with the following schedule:
BONUS EARNED PAR. 1-5
E.P.S. ACHIEVED INCREASED BY
$ 10%
$ 15%
$ 20%
$ 25%
CORPORATE CONTRACT (applies to % of salary)
7. You also will receive a bonus based upon the percentage
bonus awarded to the Chairman's office which will apply to
% of your salary. For example, if the bonus awarded to
the Chairman's office is % of salary, your bonus award
under this paragraph (7) would be % of % of salary.
8. The maximum bonus award for paragraphs (1) through (7)
will be limited to % of your total annual salary rate
in effect on December 31, 1996.
9. Acquisitions, divestitures, changes in assignment, changes
in accounting procedures or tax law, abnormal deviations
to plan in other income and expenses in your financial
income statements, and/or corrections in historical data
during 1996 may necessitate pro rata adjustments in the
above goals and/or actual operating results. Any such
changes will be advised to you in a timely manner.
44<PAGE>
EXHIBIT 10(iii)(c)
Page 3 of 5
BONUS CONTRACT FOR 1996 - EXECUTIVE VICE PRESIDENT
10. The results will be tabulated by the Corporate
Controller's Office and reflected on Operating Income and
Accounts Receivable and Inventory Reports.
11. It is the present intention of the Company to decide the
amount of bonus for 1996 in February 1997. If the above
objectives are not attained, any bonus award will be made
at the sole discretion of the Company.
12. The Company will be the final arbiter of interpretation of
the above arrangements.
/S/ J. E. Perrella
J. E. Perrella
Chairman
45<PAGE>
EXHIBIT 10(iii)(c)
Page 4 of 5
TO: GROUP PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1996
The bonus plan applying to you for 1996 is outlined below:
1. Should your operating group attain worldwide operating
income of $ , you will receive a bonus of % of
your annual salary rate in effect on December 31, 1996.
2a. For each $ by which your worldwide operating
income exceeds $ , you will receive % of your
salary.
2b. If you achieve a productivity improvement of %, you will
receive an additional % of your salary.
3. If you attain % accounts receivable and inventory as a
percent of sales, you will receive % of your salary.
For each % reduction thereafter, you will receive an
additional % of your salary.
4. You may receive an additional discretionary award of up to
% of your salary. The award will be based upon your
individual achievements and the accomplishments of your
Group. Your performance related to reengineering of
business processes will be a major factor in determining
the amount of bonus awarded under this paragraph
especially in our company-wide procurement initiative.
Any award also will be dependent upon the Company's
overall performance.
5. The maximum bonus award on the sum of paragraphs (1) and
(2) will be limited to % of your salary. The maximum
bonus award on paragraph (3) will be % of salary. The
maximum bonus award on paragraph (4) will be % of
salary. The maximum award on the sum of paragraphs (1)
through (4) will be limited to % of salary.
46<PAGE>
EXHIBIT 10(iii)(c)
Page 5 of 5
BONUS CONTRACT FOR 1996 - GROUP PRESIDENT
6. Should the Company achieve or exceed Earnings Per Share of
$ , the total bonus percentage earned by you under
paragraphs (1) through (5) will be increased in accordance
with the following schedule:
EARNINGS PER
SHARE BONUS % EARNED PAR.1-5
ATTAINED INCREASED BY
$ 10%
$ 15%
$ 20%
$ 25%
7. The maximum bonus award for paragraphs (1) through (6)
will be limited to % of your annual salary rate in
effect on December 31, 1996.
8. Acquisitions, divestitures, changes in assignment, changes
in accounting procedures or tax law, abnormal deviations
to plan in other income and expenses in your financial
income statements, and/or corrections in historical data
during 1996 may necessitate pro rata adjustments in the
above goals and/or actual operating results. Any such
changes will be advised as soon as possible.
9. The results will be tabulated by the Corporate
Controller's Office and reflected on Operating Income and
Accounts Receivable and Inventory Reports.
10. It is the present intention of the Company to decide the
amount of bonus for 1996 in February 1997. If the above
objectives are not attained, any bonus award made will be
at the sole discretion of the Company.
11. The Company will be the final arbiter of interpretation of
the above arrangements.
/S/ J. E. Perrella
J. E. Perrella
Chairman
47<PAGE>
EXHIBIT 10(iii)(e)
Page 1 of 17
CHANGE OF CONTROL AGREEMENT
WITH CHAIRMAN AND CHIEF EXECUTIVE OFFICER
AGREEMENT made as of January 1, 1996, between
INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"),
and ________________ (the "Employee"). Unless otherwise
indicated, terms used herein and defined in Schedule A hereto
shall have the meanings assigned to them in said Schedule.
The Company and the Employee agree as follows:
1. OPERATION OF AGREEMENT.
This Agreement shall be effective immediately upon its
execution and shall continue thereafter from year to year prior
to a Change of Control Event unless terminated as of any
anniversary of the date hereof by either party upon written
notice to the other party given at least 60 days, but not more
than 90 days, prior to such anniversary date. Notwithstanding
the foregoing, this Agreement may not be terminated after the
occurrence of a Change of Control Event.
2. AGREEMENT TERM.
The term of this Agreement shall begin on the date
hereof and, unless terminated pursuant to paragraph 1 prior to a
Change of Control Event, shall end on the fifth anniversary of
the occurrence of a Change of Control Event.
3. EMPLOYEE'S POSITION AND RESPONSIBILITIES.
(a) The Employee will continue to serve the Company
upon the occurrence of a Change of Control Event as the Chief
Executive Officer of the Company. In addition, the Company
shall, upon the occurrence of such event, make its best efforts
to insure the election and retention of the Employee as Chairman
of the Board of the Company and any successor or parent company.
(b) During the term of this Agreement the Employee
shall devote his entire business time and attention exclusively
to the business and affairs of the Company and shall use his best
efforts to promote the interests of the Company. The
participation of the Employee in outside directorships and civic
activities not otherwise inconsistent with Company policy and the
management of the Employee's personal investments in public
companies in which the Employee holdings do not exceed 5% of the
voting power or value of such companies shall not be deemed a
violation of this paragraph 3.
48<PAGE>
EXHIBIT 10(iii)(e)
Page 2 of 17
4. COMPENSATION AND OTHER BENEFITS UPON CHANGE OF
CONTROL EVENT.
The Company and the Employee agree that, upon the
occurrence of any Change of Control Event, the Employee shall
receive basic annual salary, bonus and fringe and other benefits
as follows:
(a) Basic Annual Salary and Bonus. The
Employee's basic annual salary shall be at a rate not less
than the rate of annual salary, which has been paid to the
Employee immediately prior to the Change of Control Event,
with such annual increases (but not decreases) equal to the
greater of (i) salary increases as may be contemplated by
any salary adjustment programs of the Company in effect
immediately prior to the Change of Control Event and
applicable to the Employee and such further increases as
shall be determined from time to time by the Board or (ii) a
percentage equal to the percentage increase (if any) in the
"Consumer Price Index for All Urban Consumers" published by
the United States Department of Labor's Bureau of Labor
Statistics for the then most recently ended 12-month period.
In addition, the Employee shall be entitled to receive an
annual bonus in an amount not less than the highest annual
bonus received by, or accrued on behalf of, the Employee
during the lesser of (i) the five full Fiscal Years
immediately preceding the Change of Control Event, or (ii)
the number of full Fiscal Years immediately preceding the
Change of Control Event during which the Employee has been
employed by the Company.
(b) Fringe Benefits; Business Expenses. The
Employee shall be entitled to receive benefits, including
but not limited to pension (and supplemental pension),
savings and stock investment plan (and supplemental savings
and stock investment plan), stock award, stock option, and
insurance (including life insurance, medical and disability
income insurance and accident and personal liability
insurance) plans on terms no less favorable than those in
effect under each such plan immediately prior to the Change
of Control Event, and at no less than the same benefit
levels (and no more than the same employee contribution
levels) then in effect under each such plan and to receive
all other fringe benefits and perquisites (or their
equivalent) from time to time in effect for the benefit of
any executive, management or administrative group for which
the employment position then held by the Employee entitles
the Employee to participate. The Company shall provide for
the payment of, or reimburse the Employee for, all travel
and other out-of-pocket expenses reasonably incurred by him
in the performance of his duties hereunder.
49<PAGE>
EXHIBIT 10(iii)(e)
Page 3 of 17
(c) Management Incentive Unit Award Plan. The
Company and the Employee further agree that immediately upon
the occurrence of any Change of Control Event, all amounts
theretofore credited to the Employee under the Company's
Management Incentive Unit Award Plan, as amended (the "MIU
Plan"), shall become fully vested and all such amounts
thereafter credited shall become fully vested immediately
upon such crediting.
5. PAYMENTS AND BENEFITS UPON TERMINATION.
The Employee shall be entitled to the following
payments and benefits upon Termination:
(a) Salary and Bonus. The Company shall pay to
the Employee, in a cash lump sum on the Termination Date, an
amount equal to the sum of (i) the basic annual salary and
any annual bonus in respect of a completed fiscal year,
which have not yet been paid to, the Employee through the
Termination Date; (ii) an amount equal to the last annual
bonus received by, or awarded to, the Employee for the full
Fiscal Year immediately preceding the Termination Date
multiplied by a fraction the numerator of which shall be the
number of full months the Employee was employed by the
Company during the Fiscal Year containing the Employee's
Termination Date and the denominator of which shall be 12;
and (iii) an amount equal to the number of unused vacation
days to which the Employee is entitled as of the Termination
Date and any other amounts normally paid to an employee by
the Company upon termination of employment. For these
purposes, any partial month during which the Employee is
employed shall be deemed a full month.
(b) Severance. The Company shall pay to the
Employee, in a cash lump sum not more than 30 days following
the Termination Date, an amount equal to three times the sum
of (i) the highest basic annual salary in effect at any time
during the period beginning immediately prior to the Change
of Control Event and ending on the Termination Date; and
(ii) the highest annual bonus received by, or accrued on
behalf of, the Employee during the period beginning five
full Fiscal Years immediately preceding the Change of
Control Event and ending on the Termination Date.
(c) Employee Benefit Plans. For the three-year
period following the Termination Date (or, if sooner, until
the Employee is covered under a comparable plan offered by a
subsequent employer), the Company shall continue to cover
the Employee under those employee welfare benefit plans and
programs (including, but not limited to, life, medical,
50<PAGE>
EXHIBIT 10(iii)(e)
Page 4 of 17
prescription drugs, dental, accidental death and travel
accident and disability coverage, but not including any
severance pay plan or program other than that provided
pursuant to this Agreement or any pension plan) applicable
to the Employee on the Termination Date at the same benefit
levels then in effect (or shall provide their equivalent);
provided, however, that if the Employee becomes employed by
a new employer that maintains any welfare plan that either
(i) does not cover the Employee with respect to a pre-
existing condition which was covered under the applicable
Company welfare plan, or (ii) does not cover the Employee
for a designated waiting period, the Employee's coverage
hereunder under the applicable Company welfare plan (or the
equivalent) shall continue (but shall be limited in the
event of noncoverage due to a preexisting condition, to the
preexisting condition itself) until the earlier of the end
of the applicable period of noncoverage under the new
employer's plan or the third anniversary of the Termination
Date.
(d) Savings and Retirement Account Plans. As
soon as practicable following the determination thereof (but
in any event no later than 30 days following the Termination
Date), the Company shall pay the Employee an amount (in one
lump sum cash payment) equal to the value (measured as of
the last day of the month containing the Employee's
Termination Date) of the sum of: (i) the number of Common
Stock equivalents credited to the Employee's account under
the Supplemental Savings and Stock Investment Plan at the
Termination Date multiplied by the Company Stock Value (as
defined in Section 5(g) below); (ii) the amount credited to
the Employee's account under the Supplemental Retirement
Account Plan at the Termination Date; (iii) all
contributions to, or amounts credited to, the Company's
Savings and Stock Investment Plan, Supplemental Savings and
Stock Investment Plan, Retirement Account Plan and
Supplemental Retirement Account Plan (and earnings and
appreciation attributable thereto) that theretofore were
made by the Company on behalf of the Employee and are
forfeited as a result of the Employee's Termination; and
(iv) three percent of the aggregate amount payable pursuant
to subparagraphs 5(a) and 5(b) for each of the Savings and
Stock Investment Plan and the Supplemental Savings and Stock
Investment Plan and two percent for each of the Retirement
Account and the Supplemental Retirement Account Plan.
51<PAGE>
EXHIBIT 10(iii)(e)
Page 5 of 17
(e) Pension Benefits.
(i) No later than 30 days following the
Termination Date, the Company shall pay the Employee an
amount (in one lump sum cash payment) equal to the Present
Value of the sum of the pension benefits the Employee is
entitled to receive under (A) the Restated Ingersoll-Rand
Company Supplemental Pension Plan (the "Section 415 Excess
Plan"), (B) the Ingersoll-Rand Company Elected Officers
Supplemental Program (the "Sixty-five Percent Program" or
the "Program"), and (C) the Executive Supplementary
Retirement Agreement (the "Ten Year Annuity"), all as in
effect immediately prior to the Change of Control Event
(collectively the "Pension Benefit").
(ii) In calculating the portion of the
Pension Benefit under section 1.1 of the Section 415 Excess
Plan the Company shall credit the Employee with five
additional years of Credited Service (within the meaning of
the Plan and including wage, vesting and age credit) and
five additional years of age for purposes of the Section 415
Excess Plan but not the Qualified Pension Plan. (If, after
crediting five years of age, the Employee is less than
fifty-five years old, it will be assumed that the benefit
commencement age is fifty-five).
(iii) In calculating the portion of the
Pension Benefit under the Sixty-five Percent Program, the
Company shall: (A) credit the Employee with an additional
five Years of Service and an additional five years of age
for purposes of computing the amount of the Pension Benefit;
(B) reduce age 65 to age 62 in Section 5.1 (b) (i) of the
Program; (C) define "Final Average Salary" in Section 1.8 of
the Program as 1/3 of the severance amount determined
pursuant to Section 5(b) of this Agreement; and (D) for
purposes of benefit offset determinations compute retirement
account amounts invested in Company stock and the account
balance from employer matching contributions made in Company
stock in Appendix A, paragraph (a)(2) and (3) of the Program
using the lowest closing sale price of the Company stock on
the New York Stock Exchange during the twelve months
preceding the Change in Control Event.
(iv) In calculating the portion of the
Pension Benefit under the Ten-Year Annuity the Company shall
credit the Employee with five additional years of age but to
an age no greater than 65.
52<PAGE>
EXHIBIT 10(iii)(e)
Page 6 of 17
(v) The Present Value of the Pension Benefit
and the annuity value of the offsets referred to in
paragraph (e) (iii)(D) above shall be calculated using (A)
an interest rate equal to the product of (I) the 10-year
Treasury Note rate as used in the Sixty-five Percent
Program's definition of Actuarial Equivalent and (II) 1
minus the federal income tax rate at the highest bracket of
income for individuals in effect for the year containing the
date of payment, (B) the mortality rate used to determine
lump sum values in the Sixty-five Percent Program, and (C)
actual age without the five year addition to age except that
the Ten-Year Annuity Present Value shall be calculated using
no mortality assumption and actual age plus the additional
five years.
(vi) Calculation of all pension benefits
amounts hereunder shall be made, at the expense of the
Company, by the Wellesley Hills, Massachusetts office of
Watson Wyatt (or the Company's then actuary immediately
prior to the change of Control Event).
(f) Retiree Welfare Benefits. For purposes of
determining the Employee's eligibility for post-retirement
benefits under any welfare benefit plan (as defined in
section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended) maintained by the Company prior to the
occurrence of a Change of Control Event, the Employee shall
be credited with an additional five years of service and
five years of age (or any combination of years of service
and age not exceeding 10 years, to the extent necessary to
qualify for benefits). If, after taking into account such
additional age and service, the Employee is eligible for the
Company's post-retirement welfare benefits (or would have
been eligible under the terms of such plans as in effect
prior to the occurrence of the Change of Control Event), the
Employee shall receive, commencing on the third anniversary
of the Termination Date, post-retirement welfare benefits no
less favorable than the benefits the Employee would have
received under the terms and conditions of the applicable
plans in effect immediately prior to the occurrence of the
Change of Control Event.
(g) Employee Stock Awards, Options, SARs and
MIUs. No later than 30 days following the Termination Date,
the Company shall pay the Employee an amount (in one lump
sum cash payment) equal to the aggregate Company Stock Value
(defined below) of 100% of the Employee's then outstanding
and unpaid stock and stock based awards under the Company's
Incentive Stock Plan of 1990, the Incentive Stock Plan of
1995, the MIU Plan and any similar plans of the Company (or
53<PAGE>
EXHIBIT 10(iii)(e)
Page 7 of 17
any other company) hereafter adopted (at which time such
stock and stock based awards shall be cancelled and be of no
further force or effect). In addition, all options to
purchase shares of Common Stock of the Company (or the stock
of any company in respect of which options have been granted
to the Employee) ("Company Stock") and all stock
appreciation rights held by the Employee immediately prior
to Termination shall become exercisable at any time on and
after the Termination Date, whether or not otherwise
exercisable in accordance with the terms of the employee
benefit plans pursuant to which such options and stock
appreciation rights were granted. For purposes of this
Agreement, Company Stock Value shall be deemed to be the
highest of: (i) the closing sale price of the Company Stock
on the New York Stock Exchange on the Change of Control
Event; (ii) the closing sale price of the Company Stock on
the New York Stock Exchange on the Termination Date; and
(iii) the highest closing sale price of the Company Stock on
the New York Stock Exchange during the 30 trading days
immediately preceding the acquisition of more than 50% of
the outstanding Company Stock by any person or group
(including affiliates of such person or group). If, as of
any valuation date, the Company Stock is not traded on the
New York Stock Exchange, the Company Stock Value shall be
the closing sale price of the Company Stock on the principal
national securities exchange on which the Common Stock is
traded or, if the Common Stock is not traded on any national
securities exchange, the closing bid price of the Common
Stock in the over-the-counter market.
(h) Valuation of Common Stock Equivalents. The
Employee's Common Stock Equivalents under the MIU Plan
shall, for purposes of payments pursuant thereto, be valued
at the Company Stock Value.
(i) Outplacement Expenses. For the three year
period following the Termination Date, the Company shall
reimburse the Employee for all reasonable expenses (up to a
maximum of $15,000 per 12 month period) incurred by the
Employee for professional outplacement services by qualified
consultants selected by the Employee.
(6) PARACHUTE EXCISE TAX GROSS-UP.
(a) If, as a result of any payment or benefit
provided under this Agreement, either alone or together with
other payments and benefits which the Employee receives or
is then entitled to receive from the Company, the Employee
becomes subject to the excise tax imposed under Section 4999
of the Internal Revenue Code of 1986, as amended (the
54<PAGE>
EXHIBIT 10(iii)(e)
Page 8 of 17
"Code"), (together with any income, employment or other
taxes, interest and penalties thereon an "Excise Tax"), the
Company shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the Employee in the same
after-tax financial position that he would have been in if
he had not incurred any tax liability under Section 4999 of
the Code. For purposes of determining whether the Employee
is subject to an Excise Tax, (i) any payments or benefits
received by the Employee (whether pursuant to the terms
hereof or pursuant to any plan, arrangement or other
agreement with the Company or any entity affiliated with the
Company) which payments ("Contingent Payments") are deemed
to be contingent on a change described in Section
280G(b)(2)(A)(i) of the Code shall be taken into account,
(ii) the amount of payments or benefits under this Agreement
treated as subject to the Excise Tax shall be equal to the
lesser of (A) the total amount of all such payments and
benefits hereunder as are Contingent Payments and (B) the
amount of excess parachute payments within the meaning of
280G(b)(1) of the Code payable to the Employee, and (iii)
the Employee shall be deemed to pay the taxes at the highest
marginal applicable rates of such taxation for the calendar
year in which the Gross-Up Payment is to be made, net of the
maximum deduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
(b) The determination of whether the Employee is
subject to Excise Tax and the amounts of such Excise Tax and
Gross-Up Payment, as well as other calculations hereunder,
shall be made at the expense of the Company by the
independent auditors of the Company immediately prior to the
Change of Control Event, which shall provide the Employee
with prompt written notice (the "Company Notice") setting
forth their determinations and calculations. Within 30 days
following the receipt by the Employee of the Company Notice,
the Employee may notify the Company in writing (the
"Employee Notice") if the Employee disagrees with such
determinations or calculations, setting forth the reasons
for any such disagreement. If the Company and the Employee
do not resolve such disagreement within 10 business days
following receipt by the Company of the Employee Notice, the
Company and the Employee shall agree upon a nationally
recognized accounting or compensation firm (the "Resolving
Firm") to make a determination with respect to such
disagreement. If the Employee and the Company are unable to
agree upon the Resolving Firm within 20 business days
following the Employee Notice, the New York office of
Towers, Perrin shall be the Resolving Firm. Within 30
business days following the Employee Notice, if the
disagreement is not resolved by such time, each of the
55<PAGE>
EXHIBIT 10(iii)(e)
Page 9 of 17
Employee and the Company shall submit its position to the
Resolving Firm, which shall make a determination as to all
such disagreements within 30 days following the last of such
submissions, which determination shall be binding upon the
Employee and the Company. The Company shall pay all
reasonable expenses incurred by either party in connection
with the determinations, calculations, disagreements or
resolutions pursuant to this paragraph, including, but not
limited to, reasonable legal, consulting or other similar
fees.
(c) The Employee shall notify the Company in
writing of any claim by the Internal Revenue Service that,
if successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30
day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
(i) give the Company any information
reasonably requested by the Company relating to such claim;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including, without
limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company
and reasonably satisfactory to the Employee;
(iii) cooperate with the Company in good
faith in order to effectively contest such claim; and
(iv) permit the Company to participate in
any proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including, but not limited
to, additional interest and penalties and related consulting
or other similar fees) incurred in connection with such
contest and shall indemnify and hold the Employee harmless,
on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses.
56<PAGE>
EXHIBIT 10(iii)(e)
Page 10 of 17
(d) The Company shall control all proceedings
taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its
sole option, either direct the Employee to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Employee agrees to prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine;
provided, however, that if the Company directs the Employee
to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Employee on an
interest-free basis, and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise
Tax or other tax (including interest or penalties with
respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to such
advance; and provided, further, that if the Employee is
required to extend the statute of limitations to enable the
Company to contest such claim, the Employee may limit this
extension solely to such contested amount. The Company's
control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable
hereunder and the Employee shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority. In
addition, no position may be taken nor any final resolution
be agreed to by the Company without the Employee's consent
if such position or resolution could reasonably be expected
to adversely affect the Employee (including any other tax
position of the Employee unrelated to the matters covered
hereby).
(e) As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Company or the Resolving Firm
hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies and the Employee thereafter is
required to pay to the Internal Revenue Service an
additional amount in respect of any Excise Tax, the Company
or the Resolving Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall promptly be paid by the Company to or for the benefit
of the Employee.
57<PAGE>
EXHIBIT 10(iii)(e)
Page 11 of 17
(f) If, after the receipt by Employee of an
amount advanced by the Company in connection with the
contest of Excise Tax claim, the Employee becomes entitled
to receive any refund with respect to such claim, the
Employee shall promptly pay to the Company the amount of
such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Company
in connection with an Excise Tax claim, a determination is
made that Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Employee in writing of its intent to contest the denial of
such refund prior to the expiration of 30 days after such
determination, such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance
shall be offset, to the extent thereof, by the amount of the
Gross-Up Payment.
7. EFFECT ON OTHER ARRANGEMENTS.
Except to the extent expressly provided herein, no
provision of this Agreement shall affect or limit any interests
or rights vested in the Employee under any other agreement or
arrangement with the Employee or under any pension, profit-
sharing, medical or other insurance or other benefit plans of the
Company which may be in effect and in which the Employee may be
participating at any time.
8. CONFIDENTIALITY.
The Employee agrees to hold in confidence any and all
confidential information known to him concerning the Company and
its businesses so long as such information is not otherwise
publicly disclosed.
9. MISCELLANEOUS.
(a) Legal Expenses. The Company shall pay all
costs and expenses, including attorneys' fees, of the
Company and, at least quarterly, the Employee, in connection
with any legal proceedings, whether or not instituted by the
Company, relating to the interpretation or enforcement of
this Agreement. In the event that the provisions of this
paragraph shall be determined to be invalid or unenforceable
in any respect, such declaration shall not affect the
remaining provisions of this Agreement, which shall continue
in full force and effect.
58<PAGE>
EXHIBIT 10(iii)(e)
Page 12 of 17
(b) Mitigation. All payments or benefits
required by the terms of this Agreement shall be made or
provided without offset, deduction, or mitigation on account
of income the Employee may receive from other employment or
otherwise and the Employee shall not have any obligation or
duty to seek any other employment or otherwise earn any
amounts to reduce or mitigate any payments required
hereunder.
(c) Death of the Employee. In the event of the
Employee's death subsequent to Termination, all payments
called for hereunder shall be paid to the Employee's
designated beneficiary or beneficiaries, or to his estate if
he has not designated a beneficiary or beneficiaries.
(d) Notices. Any notice or other communication
provided for in this Agreement or contemplated hereby shall
be sufficiently given if given in writing and delivered by
certified mail, return receipt requested, and addressed, in
the case of the Company, to the Company at:
200 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07675
Attention: Chairman of the Board
of Directors
and, in the case of the Employee, to the Employee at:
Either party may designate a different address by giving
notice of change of address in the manner provided above.
(e) Waiver. No waiver or modification in whole
or in part of this Agreement, or any term or condition
hereof, shall be effective against any party unless in
writing and duly signed by the party sought to be bound.
Any waiver of any breach of any provision hereof or any
right or power by any party on one occasion shall not be
construed as a waiver of, or a bar to, the exercise of such
right or power on any other occasion or as a waiver of any
subsequent breach.
(f) Binding Effect; Successors. This Agreement
shall be binding upon and shall inure to the benefit of the
Company and the Employee and their respective heirs, legal
representatives, successors and assigns. If the Company
shall be merged into or consolidated with another entity,
the provisions of this Agreement shall be binding upon and
59<PAGE>
EXHIBIT 10(iii)(e)
Page 13 of 17
inure to the benefit of the entity surviving such merger or
resulting from such consolidation. The Company will require
any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially
all of the business or assets of the Company, by agreement
in form and substance satisfactory to the Employee, to
expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be
required to perform it if no such succession had taken
place. The provisions of this paragraph shall continue to
apply to each subsequent employer of the Employee hereunder
in the event of any subsequent merger, consolidation or
transfer of assets of such subsequent employer.
(g) Plan Limitations. In the event the Company
is unable to provide any benefit required to be provided
under this Agreement through a plan sponsored by the Company
or its Affiliates, the Company shall, at its own cost and
expense, take appropriate actions to insure that alternative
arrangements are made so that equivalent benefits can be
provided to the Employee, including to the extent
appropriate purchasing for the benefit of the Employee (and
if applicable the Employee's dependents) individual policies
of insurance providing benefits, which on an after-tax
basis, are equivalent to the benefits required to be
provided hereunder.
(h) Controlling Law. This Agreement shall be
governed by and construed in accordance with the laws of the
State of New Jersey applicable to contracts made and to be
performed therein.
10. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding
between the parties hereto and supersedes in all respects any
prior employment or severance agreement or understanding between
the Company (or any affiliate thereof) and the Employee.
IN WITNESS WHEREOF, the Company and the Employee have
executed this Agreement as of the day and year first above
written.
INGERSOLL-RAND COMPANY
By
60<PAGE>
EXHIBIT 10(iii)(e)
Page 14 of 17
Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context
requires a different meaning, the following terms have the
meanings indicated:
"Affiliate", used to indicate a relationship with a
specified person, means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, such a specified person.
"Associate", used to indicate a relationship with a
specified person, means (i) any corporation, partnership, or
other organization of which such specified person is an officer
or partner; (ii) any trust or other estate in which such
specified person has a substantial beneficial interest or as to
which such specified person serves as trustee or in a similar
fiduciary capacity; (iii) any relative or spouse of such
specified person, or any relative of such spouse who has the same
home as such specified person, or who is a director or officer of
the Company or any of its parents or subsidiaries; and (iv) any
person who is a director, officer, or partner of such specified
person or of any corporation (other than the Company or any
wholly-owned subsidiary of the Company), partnership or other
entity which is an Affiliate of such specified person.
"Beneficial Owner" means the same as such term is
defined by Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (or any successor provision at the time in effect);
provided, however, that any individual, corporation, partnership,
group, association, or other person or entity which has the right
to acquire any of the Company's outstanding securities entitled
to vote generally in the election of directors at any time in the
future, whether such right is contingent or absolute, pursuant to
any agreement, arrangement, or understanding or upon exercise of
conversion rights, warrants or options, or otherwise, shall be
deemed the Beneficial Owner of such securities.
"Board" means the Board of Directors of the Company
(or, if the Company is then a subsidiary of any other company, of
the ultimate parent company).
61<PAGE>
EXHIBIT 10(iii)(e)
Page 15 of 17
"Cause" means (i) any action by the Employee involving
willful malfeasance or willful gross misconduct having a
demonstrable adverse effect on the Company; (ii) substantial and
continuing refusal by the Employee in willful breach of this
Agreement to perform his employment duties hereunder; or
(iii) the Employee being convicted of a felony under the laws of
the United States or any state.
Termination of the Employee for Cause shall be
communicated by a Notice of Termination given within one year
after the Board (i) has knowledge of conduct or an event
allegedly constituting Cause; and (ii) has reason to believe that
such conduct or event could be grounds for Cause. For purposes
of this Agreement a "Notice of Termination" shall mean delivery
to the Employee of a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Company's Board at a meeting of that Board
called and held for the purpose (after reasonable notice to the
Employee ("Preliminary Notice") and reasonable opportunity for
the Employee, together with the Employee's counsel, to be heard
before the Board prior to such vote) of finding, in the good
faith opinion of the Board, that the Employee has engaged in the
conduct constituting Cause and specifying the particulars thereof
in detail. Upon the receipt of the Preliminary Notice, the
Employee shall have 30 days in which to appear with counsel or
take such other action as he desires on his behalf, and such 30-
day period is hereby agreed to by the parties as a reasonable
opportunity for the Employee to be heard. The Board shall no
later than 45 days after the receipt of the Preliminary Notice by
the Employee communicate its findings to Employee. A failure by
the Board to make its finding of Cause or to communicate its
conclusion within such 45-day period shall be deemed to be a
finding that the Employee has not engaged in the conduct
described herein. Any termination of the Employee's employment
(other than by death or Permanent Disability) within 45 days
after the date that the Preliminary Notice has been given to the
Employee shall be deemed to be a termination for Cause; provided,
however, that if during such period the Employee voluntarily
terminates other than for Good Reason or the Company terminates
the Employee other than for Cause, and the Employee is found (or
is deemed to be found) not to have engaged in the conduct
described herein, such termination shall not be deemed to be for
Cause.
"Change of Control Event" means the date (i) any
individual, corporation, partnership, group, association or other
person or entity, together with its Affiliates and Associates
(other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company), is or becomes the
Beneficial Owner of securities of the Company representing 20% or
62<PAGE>
EXHIBIT 10(iii)(e)
Page 16 of 17
more of the combined voting power of the Company's then
outstanding securities entitled to vote generally in the election
of directors, unless a majority of the Continuing Directors
determines in their sole discretion that a Change of Control
Event has not occurred; (ii) the Continuing Directors fail to
constitute a majority of the members of the Board; (iii) of any
sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of
the assets of the Company, other than any sale, lease, exchange
or other transfer to any person or entity where the Company owns,
directly or indirectly, at least 80 percent of the outstanding
voting securities of such person or entity after any such
transfer.
"Continuing Director" means a director who either was a
member of the Board on the date hereof or who became a member of
the Board subsequent to such date and whose election, or
nomination for election by the Company's shareholders, was Duly
Approved by the Continuing Directors on the Board at the time of
such nomination or election, either by a specific vote or by
approval of the proxy statement issued by the Company on behalf
of the Board in which such person is named as nominee for
director, without due objection to such nomination.
"Duly Approved by the Continuing Directors" means an
action approved by the vote of at least a majority of the
Continuing Directors then on the Board, except, if the votes of
such Continuing Directors in favor of such action would be
insufficient to constitute an act of the Board if a vote by all
of its members were to have been taken, then such term shall mean
an action approved by the unanimous vote of the Continuing
Directors then on the Board so long as there are at least three
Continuing Directors on the Board at the time of such unanimous
vote.
"Fiscal Year" means the fiscal year of the Company.
"Good Reason" means (i) a material adverse change in
the Employee's job responsibilities, title or status from those
in effect prior to the Change of Control Event which change
continues for a period of at least 15 days after written notice
from the Employee; (ii) a reduction of the Employee's base salary
or target bonus, the failure to pay Employee's salary or bonus
when due, or the failure to maintain on behalf of the Employee
(and his or her dependents) benefits which are at least as
favorable in the aggregate to those provided for in paragraph
4(b); (iii) the relocation of the principal place of the
Employee's employment to a location that is more than 35 miles
further from the Employee's residence than such principal place
of employment immediately prior to the Change of Control Event,
63<PAGE>
EXHIBIT 10(iii)(e)
Page 17 of 17
or the imposition of travel requirements on the Employee not
substantially consistent with such travel requirements existing
immediately prior to the Change of Control Event; (iv) the
failure of the Company to obtain the assumption of, and the
agreement to perform, this Agreement by any successor as
contemplated in paragraph 8(f); (v) any voluntary resignation of
Employee's employment following a Change of Control Event or (vi)
the failure of the Company to perform any of its other material
obligations under this Agreement and the continuation of such
failure for a period of 15 days after written notice from the
Employee.
"Permanent Disability", as applied to the Employee,
means that (i) he has been totally incapacitated by bodily injury
or disease so as to be prevented thereby from performing his
duties hereunder; (ii) such total incapacity shall have continued
for a period of six consecutive months; and (iii) such total
incapacity will, in the opinion of a qualified physician, be
permanent and continuous during the remainder of the Employee's
life.
"Termination" means (i) following the occurrence of a
Change of Control Event, (A) the termination of the Employee's
employment without Cause or (B) the resignation by an Employee
for Good Reason upon ten days' prior written notice (or such
shorter period as may be agreed upon between the Employee and the
Company), and (ii) prior to the occurrence of a Change of Control
Event, the termination of the Employee's employment or a material
adverse change in the Employee's job responsibilities, title or
status at the request of any individual or entity acquiring
ownership and control of the Company; provided, that such term
shall not include any termination of employment for Cause, any
resignation without Good Reason, or any termination of employment
on account of an Employee's death or Permanent Disability.
"Termination Date" shall mean the effective date of an
Employee's Termination; provided, that with respect to a
Termination that occurs prior to a Change of Control Event, the
effective date of such Termination shall be deemed to be the date
immediately following the Change of Control Event.
64<PAGE>
EXHIBIT 10(iii)(f)
Page 1 of 20
CHANGE OF CONTROL AGREEMENT WITH
SELECTED EXECUTIVE OFFICERS OTHER THAN CHAIRMAN
AGREEMENT made as of January 1, 1996, between
INGERSOLL-RAND COMPANY, a New Jersey corporation (the "Company"),
and _______________ (the "Employee"). Unless otherwise
indicated, terms used herein and defined in Schedule A hereto
shall have the meanings assigned to them in said Schedule.
The Company and the Employee agree as follows:
1. OPERATION OF AGREEMENT.
This Agreement shall be effective immediately upon its
execution and shall continue thereafter from year to year prior
to a Change of Control Event unless terminated as of any
anniversary of the date hereof by either party upon written
notice to the other party given at least 60 days, but not more
than 90 days, prior to such anniversary date. Notwithstanding
the foregoing, this Agreement may not be terminated after the
occurrence of a Change in Control Event.
2. AGREEMENT TERM.
The term of this Agreement shall begin on the date
hereof and, unless terminated pursuant to paragraph 1 prior to a
Change of Control Event, shall end on the fifth anniversary of
the occurrence of a Change of Control Event.
3. EMPLOYEE'S POSITION AND RESPONSIBILITIES.
(a) The Employee will continue to serve the Company
upon the occurrence of a Change of Control Event in the same
capacity as he serves the Company immediately prior thereto, or
in such other comparable executive, administrative or management
capacities, requiring substantially equivalent expertise and
responsibility, as the Board or Chief Executive Officer of the
Company shall determine and deem suitable and in the best
interests of the Company in accordance with the Employee's
experience, expertise and capabilities.
65<PAGE>
EXHIBIT 10(iii)(f)
Page 2 of 20
(b) During the term of this Agreement the Employee
shall devote his entire business time and attention exclusively
to the business and affairs of the Company and shall use his best
efforts to promote the interests of the Company. The
participation of the Employee in outside directorships and civic
activities not otherwise inconsistent with Company policy and the
management of the Employee's personal investments in public
companies in which the Employee holdings do not exceed 5% of the
voting power or value of such companies shall not be deemed a
violation of this paragraph 3.
4. COMPENSATION AND OTHER BENEFITS UPON CHANGE OF
CONTROL EVENT.
The Company and the Employee agree that, upon the
occurrence of any Change of Control Event, the Employee shall
receive basic annual salary, bonus and fringe and other benefits
as follows:
(a) Basic Annual Salary and Bonus. The Employee's
basic annual salary shall be at a rate not less than the
rate of annual salary, which has been paid to the Employee
immediately prior to the Change of Control Event, with such
annual increases (but not decreases) equal to the greater of
(i) salary increases as may be contemplated by any salary
adjustment programs of the Company in effect immediately
prior to the Change of Control Event and applicable to the
Employee and such further increases as shall be determined
from time to time by the Board or (ii) a percentage equal to
the percentage increase (if any) in the "Consumer Price
Index for All Urban Consumers" published by the United
States Department of Labor's Bureau of Labor Statistics for
the then most recently ended 12-month period. In addition,
the Employee shall be entitled to receive an annual bonus in
an amount not less than the highest annual bonus received
by, or accrued on behalf of, the Employee during the lesser
of (i) the five full Fiscal Years immediately preceding the
Change of Control Event, or (ii) the number of full Fiscal
Years immediately preceding the Change in Control Event
during which the Employee has been employed by the Company.
66<PAGE>
EXHIBIT 10(iii)(f)
Page 3 of 20
(b) Fringe Benefits; Business Expenses. The Employee
shall be entitled to receive benefits, including but not
limited to pension (and supplemental pension), savings and
stock investment plan (and supplemental savings and stock
investment plan), stock award, stock option, welfare benefit
plans and programs including, but not limited to, life,
medical, prescription drugs, dental, disability, and
accidental death and travel accident coverage plans on terms
no less favorable than those in effect under each such plan
immediately prior to the Change of Control Event, and at no
less than the same benefit levels (and no more than the same
employee contribution levels) then in effect under each such
plan and to receive all other fringe benefits and
perquisites (or their equivalent) from time to time in
effect for the benefit of any executive, management or
administrative group for which the employment position then
held by the Employee entitles the Employee to participate.
The Company shall provide for the payment of, or reimburse
the Employee for, all travel and other out-of-pocket
expenses reasonably incurred by him in the performance of
his duties hereunder.
(c) Management Incentive Unit Award Plan. The Company
and the Employee further agree that immediately upon the
occurrence of any Change of Control Event, all amounts
theretofore credited to the Employee under the Company's
Management Incentive Unit Award Plan, as amended (the "MIU
Plan"), shall become fully vested and all such amounts
thereafter credited shall become fully vested immediately
upon such crediting.
5. PAYMENTS AND BENEFITS UPON TERMINATION.
The Employee shall be entitled to the following
payments and benefits upon Termination:
(a) Salary and Bonus. The Company shall pay to the
Employee, in a cash lump sum on the Termination Date, an
amount equal to the sum of (i) the basic annual salary and
any annual bonus in respect of a completed fiscal year,
which have not yet been paid to, the Employee through the
Termination Date; (ii) an amount equal to the last annual
bonus received by, or awarded to, the Employee for the full
Fiscal Year immediately preceding the Termination Date
multiplied by a fraction the numerator of which shall be the
number of full months the Employee was employed by the
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Company during the Fiscal Year containing the Employee's
Termination Date and the denominator of which shall be 12;
and (iii) an amount equal to the number of unused vacation
days to which the Employee is entitled as of the Termination
Date and any other amounts normally paid to an employee by
the Company upon termination of employment. For these
purposes, any partial month during which the Employee is
employed shall be deemed a full month.
(b) Severance. The Company shall pay to the Employee,
in a cash lump sum not more than 30 days following the
Termination Date, an amount equal to three times the sum of
(i) the highest basic annual salary in effect at any time
during the period beginning immediately prior to the Change
in Control Event and ending on the Termination Date; and
(ii) the highest annual bonus received by, or accrued on
behalf of, the Employee during the period beginning five
full Fiscal Years immediately preceding the Change in
Control Event and ending on the Termination Date.
(c) Employee Benefit Plans. For the three-year period
following the Termination Date (or, if sooner,until the
Employee is covered under a comparable plan offered by a
subsequent employer), the Company shall continue to cover
the Employee under those employee welfare benefit plans and
programs (including, but not limited to, life, medical,
prescriptions, dental, accidental death and travel accident
and disability coverage, but not including any severance pay
plan or program other than that provided pursuant to this
Agreement or any pension plan) applicable to the Employee on
the Termination Date at the same benefit levels then in
effect (or shall provide their equivalent); provided,
however, that if the Employee becomes employed by a new
employer that maintains any welfare plan that either (i)
does not cover the Employee with respect to a pre-existing
condition which was covered under the applicable Company
welfare plan, or (ii) does not cover the Employee for a
designated waiting period, the Employee's coverage hereunder
under the applicable Company welfare plan (or the
equivalent) shall continue (but shall be limited in the
event of noncoverage due to a preexisting condition, to the
preexisting condition itself) until the earlier of the end
of the applicable period of noncoverage under the new
employer's plan or the third anniversary of the Termination
Date.
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(d) Savings and Retirement Account Plans. As soon as
practicable following the determination thereof (but in any
event no later than 30 days following the Termination Date),
the Company shall pay the Employee an amount (in one lump
sum cash payment) equal to the value (measured as of the
last day of the month containing the Employee's Termination
Date) of the sum of: (i) the number of Common Stock
equivalents credited to the Employee's account under the
Supplemental Savings and Stock Investment Plan at the
Termination Date multiplied by the Company Stock Value (as
defined in Section 5(g) below); (ii) the amount credited to
the Employee's account under the Supplemental Retirement
Account Plan at the Termination Date; (iii) all
contributions to, or amounts credited to, the Company's
Savings and Stock Investment Plan, Supplemental Savings and
Stock Investment Plan, Retirement Account Plan and
Supplemental Retirement Account Plan (and earnings and
appreciation attributable thereto) that theretofore were
made by the Company on behalf of the Employee and are
forfeited as a result of the Employee's Termination; and
(iv) three percent of the aggregate amount payable pursuant
to subparagraphs 5(a) and 5(b) for each of the Savings and
Stock Investment Plan and the Supplemental Savings and Stock
Investment Plan and two percent for each of the Retirement
Account and the Supplemental Retirement Account Plan.
(e) Pension Benefits.
(i) No later than 30 days following the
Termination Date, the Company shall pay the Employee an
amount (in one lump sum cash payment) equal to the Present
Value of the sum of the pension benefits the Employee is
entitled to receive under (A) the Restated Ingersoll-Rand
Company Supplemental Pension Plan (the "Section 415 Excess
Plan"), (B) the Ingersoll-Rand Company Elected Officers
Supplemental Program (the "Sixty-five Percent Program" or
the "Program"), and (C) the Executive Supplementary
Retirement Agreement (the "Ten Year Annuity), all as in
effect immediately prior to the Change in Control Event
(collectively the "Pension Benefit").
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(ii) In calculating the portion of the Pension
Benefit under section 1.1 of the Section 415 Excess Plan the
Company shall credit the Employee with five additional years
of Credited Service (within the meaning of the Plan and
including wage, vesting and age credit) and five additional
years of age for purposes of the Section 415 Excess Plan but
not the Qualified Pension Plan. (If, after crediting five
years of age, the Employee is less than fifty-five years
old, it will be assumed that the benefit commencement date
is the first date on which the Employee becomes eligible to
begin receiving payment of benefits under the Qualified
Pension Plan).
(iii) In calculating the portion of the Pension
Benefit under the Sixty-five Percent Program, the Company
shall: (A) credit the Employee with an additional five Years
of Service and an additional five years of age for purposes
of computing the amount of the Pension Benefit; (B) reduce
age 65 to age 62 in Section 5.1 (b) (i) of the Program; (C)
define "Final Average Salary" in Section 1.8 of the Program
as 1/3 of the severance amount determined pursuant to
Section 5(b) of this Agreement; and (D) for purposes of
benefit offset determinations compute retirement account
amounts invested in Company stock and the account balance
from employer matching contributions made in Company stock
in Appendix A, paragraph (a)(2) and (3) of the Program using
the lowest closing sale price of the Company stock on the
New York Stock Exchange during the twelve months preceding
the Change in Control Event.
(iv) In calculating the portion of the Pension
Benefit under the Ten-Year Annuity the Company shall credit
the Employee with five additional years of age but to an age
no greater than 65.
(v) The Present Value of the Pension Benefit
and the annuity value of the offsets referred to in
(e)(iii)(D) above shall be calculated using (A) an interest
rate equal to the product of (I) the 10-year Treasury Note
rate as used in the Sixty-five Percent Program's definition
of Actuarial Equivalent and (II) 1 minus the federal income
tax rate at the highest bracket of income for individuals in
effect for the year containing the date of payment, (B) the
mortality rate used to determine lump sum values in the
Sixty-five Percent Program, and (C) actual age without the
five year addition to age except that the Ten-Year Annuity
Present Value shall be calculated using no mortality
assumption and actual age plus the additional five years.
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(vi) Calculation of all pension benefits amounts
hereunder shall be made, at the expense of the Company, by
the Wellesley Hills, Massachusetts office of Watson Wyatt
(or the Company's then actuary immediately prior to the
change of Control Event).
(f) Retiree Welfare Benefits. For purposes of
determining the Employee's eligibility for post-retirement
benefits under any welfare benefit plan (as defined in
section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended) maintained by the Company prior to the
occurrence of a Change of Control Event, the Employee shall
be credited with an additional five years of service and
five years of age (or any combination of years of service
and age not exceeding 10 years, to the extent necessary to
qualify for benefits). If, after taking into account such
additional age and service, the Employee is eligible for the
Company's post-retirement welfare benefits (or would have
been eligible under the terms of such plans as in effect
prior to the occurrence of the Change of Control Event), the
Employee shall receive, commencing on the third anniversary
of the Termination Date, post-retirement welfare benefits no
less favorable than the benefits the Employee would have
received under the terms and conditions of the applicable
plans in effect immediately prior to the occurrence of the
Change of Control Event.
(g) Employee Stock Awards, Options, SARs and MIUs. No
later than 30 days following the Termination Date, the
Company shall pay the Employee an amount (in one lump sum
cash payment) equal to the aggregate Company Stock Value
(defined below) of 100% of the Employee's then outstanding
and unpaid stock and stock based awards under the Company's
Incentive Stock Plan of 1990, the Incentive Stock Plan of
1995, the MIU Plan and any similar plans of the Company (or
any other company) hereafter adopted (at which time such
stock and stock based awards shall be cancelled and be of no
further force or effect). In addition, all options to
purchase shares of Common Stock of the Company (or the stock
of any company in respect of which options have been granted
to the Employee) ("Company Stock") and all stock
appreciation rights held by the Employee immediately prior
to Termination shall become exercisable at any time on and
after the Termination Date, whether or not otherwise
exercisable in accordance with the terms of the employee
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benefit plans pursuant to which such options and stock
appreciation rights were granted. For purposes of this
Agreement, Company Stock Value shall be deemed to be the
highest of: (i) the closing sale price of the Company Stock
on the New York Stock Exchange on the Change in Control
Event; (ii) the closing sale price of the Company Stock on
the New York Stock Exchange on the Termination Date; and
(iii) the highest closing sale price of the Company Stock on
the New York Stock Exchange during the 30 trading days
immediately preceding the acquisition of more than 50% of
the outstanding Company Stock by any person or group
(including affiliates of such person or group). If, as of
any valuation date, the Company Stock is not traded on the
New York Stock Exchange, the Company Stock Value shall be
the closing sale price of the Company Stock on the principal
national securities exchange on which the Common Stock is
traded or, if the Common Stock is not traded on any national
securities exchange, the closing bid price of the Common
Stock in the over-the-counter market.
(h) Valuation of Common Stock Equivalents. The
Employee's Common Stock Equivalents under the MIU Plan
shall, for purposes of payments pursuant thereto, be valued
at the Company Stock Value.
(i) Outplacement Expenses. For the three year period
following the Termination Date, the Company shall reimburse
the Employee for all reasonable expenses (up to a maximum of
$15,000 per 12 month period) incurred by the Employee for
professional outplacement services by qualified consultants
selected by the Employee.
6. PARACHUTE EXCISE TAX GROSS-UP.
(a) If, as a result of any payment or benefit provided
under this Agreement, either alone or together with other
payments and benefits which the Employee receives or is then
entitled to receive from the Company, the Employee becomes
subject to the excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"),
(together with any income, employment or other taxes,
interest and penalties thereon an "Excise Tax"), the Company
shall pay the Employee an amount (the "Gross-Up Payment")
sufficient to place the Employee in the same after-tax
financial position that he would have been in if he had not
72<PAGE>
EXHIBIT 10(iii)(f)
Page 9 of 20
incurred any tax liability under Section 4999 of the Code.
For purposes of determining whether the Employee is subject
to an Excise Tax, (i) any payments or benefits received by
the Employee (whether pursuant to the terms hereof or
pursuant to any plan, arrangement or other agreement with
the Company or any entity affiliated with the Company) which
payments ("Contingent Payments") are deemed to be contingent
on a change described in Section 280G(b)(2)(A)(i) of the
Code shall be taken into account, (ii) the amount of
payments or benefits under this Agreement treated as subject
to the Excise Tax shall be equal to the lesser of (A) the
total amount of all such payments and benefits hereunder as
are Contingent Payments and (B) the amount of excess
parachute payments within the meaning of 280G(b)(1) of the
Code payable to the Employee, and (iii) the Employee shall
be deemed to pay the taxes at the highest marginal
applicable rates of such taxation for the calendar year in
which the Gross-Up Payment is to be made, net of the maximum
deduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
(b) The determination of whether the Employee is
subject to Excise Tax and the amounts of such Excise Tax and
Gross-Up Payment, as well as other calculations hereunder,
shall be made at the expense of the Company by the
independent auditors of the Company immediately prior to the
Change of Control Event, which shall provide the Employee
with prompt written notice (the "Company Notice") setting
forth their determinations and calculations. Within 30 days
following the receipt by the Employee of the Company Notice,
the Employee may notify the Company in writing (the
"Employee Notice") if the Employee disagrees with such
determinations or calculations, setting forth the reasons
for any such disagreement. If the Company and the Employee
do not resolve such disagreement within 10 business days
following receipt by the Company of the Employee Notice, the
Company and the Employee shall agree upon a nationally
recognized accounting or compensation firm (the "Resolving
Firm") to make a determination with respect to such
disagreement. If the Employee and the Company are unable to
agree upon the Resolving Firm within 20 business days
following the Employee Notice, the New York office of
Towers, Perrin shall be the Resolving Firm. Within 30
business days following the Employee Notice, if the
disagreement is not resolved by such time, each of the
73<PAGE>
EXHIBIT 10(iii)(f)
Page 10 of 20
Employee and the Company shall submit its position to the
Resolving Firm, which shall make a determination as to all
such disagreements within 30 days following the last of such
submissions, which determination shall be binding upon the
Employee and the Company. The Company shall pay all
reasonable expenses incurred by either party in connection
with the determinations, calculations, disagreements or
resolutions pursuant to this paragraph, including, but not
limited to, reasonable legal, consulting or other similar
fees.
(c) The Employee shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Employee
shall not pay such claim prior to the expiration of the 30
day period following the date on which the Employee gives
such notice to the Company (or such shorter period ending on
the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Employee in
writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company and reasonably satisfactory to
the Employee;
(iii) cooperate with the Company in good faith in
order to effectively contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
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EXHIBIT 10(iii)(f)
Page 11 of 20
provided, however, that the Company shall bear and pay
directly all costs and expenses (including, but not limited
to, additional interest and penalties and related legal,
consulting or other similar fees) incurred in connection
with such contest and shall indemnify and hold the Employee
harmless, on an after-tax basis, for any Excise Tax or other
tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses.
(d) The Company shall control all proceedings taken in
connection with such contest and, at its sole option, may
pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole
option, either direct the Employee to pay the tax claimed
and sue for a refund or contest the claim in any permissible
manner, and the Employee agrees to prosecute such contest to
a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim
and sue for a refund, the Company shall advance the amount
of such payment to the Employee on an interest-free basis,
and shall indemnify and hold the Employee harmless, on an
after-tax basis, from any Excise Tax or other tax (including
interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed
income with respect to such advance; and provided, further,
that if the Employee is required to extend the statute of
limitations to enable the Company to contest such claim, the
Employee may limit this extension solely to such contested
amount. The Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other
taxing authority. In addition, no position may be taken nor
any final resolution be agreed to by the Company without the
Employee's consent if such position or resolution could
reasonably be expected to adversely affect the Employee
(including any other tax position of the Employee unrelated
to the matters covered hereby).
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EXHIBIT 10(iii)(f)
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(e) As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial
determination by the Company or the Resolving Firm
hereunder, it is possible that Gross-Up Payments which will
not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies and the Employee thereafter is
required to pay to the Internal Revenue Service an
additional amount in respect of any Excise Tax, the Company
or the Resolving Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall promptly be paid by the Company to or for the benefit
of the Employee.
(f) If, after the receipt by Employee of an amount
advanced by the Company in connection with the contest of
Excise Tax claim, the Employee becomes entitled to receive
any refund with respect to such claim, the Employee shall
promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company in connection
with an Excise Tax claim, a determination is made that
Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify the Employee in
writing of its intent to contest the denial of such refund
prior to the expiration of 30 days after such determination,
such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall be offset, to
the extent thereof, by the amount of the Gross-Up Payment.
7. EFFECT ON OTHER ARRANGEMENTS.
Except to the extent expressly provided herein, no
provision of this Agreement shall affect or limit any interests
or rights vested in the Employee under any other agreement or
arrangement with the Employee or under any pension, profit-
sharing, medical or other insurance or other benefit plans of the
Company which may be in effect and in which the Employee may be
participating at any time.
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EXHIBIT 10(iii)(f)
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8. CONFIDENTIALITY.
The Employee agrees to hold in confidence any and all
confidential information known to him concerning the Company and
its businesses so long as such information is not otherwise
publicly disclosed.
9. MISCELLANEOUS.
(a) Legal Expenses. The Company shall pay all costs
and expenses, including attorneys' fees, of the Company and, at
least quarterly, the Employee, in connection with any legal
proceedings, whether or not instituted by the Company, relating
to the interpretation or enforcement of this Agreement. In the
event that the provisions of this paragraph shall be determined
to be invalid or unenforceable in any respect, such declaration
shall not affect the remaining provisions of this Agreement,
which shall continue in full force and effect.
(b) Mitigation. All payments or benefits required by
the terms of this Agreement shall be made or provided without
offset, deduction, or mitigation on account of income the
Employee may receive from other employment or otherwise and the
Employee shall not have any obligation or duty to seek any other
employment or otherwise earn any amounts to reduce or mitigate
any payments required hereunder.
(c) Death of the Employee. In the event of the
Employee's death subsequent to Termination, all payments called
for hereunder shall be paid to the Employee's designated
beneficiary or beneficiaries, or to his estate if he has not
designated a beneficiary or beneficiaries.
(d) Notices. Any notice or other communication
provided for in this Agreement or contemplated hereby shall be
sufficiently given if given in writing and delivered by certified
mail, return receipt requested, and addressed, in the case of the
Company, to the Company at:
200 Chestnut Ridge Road
Woodcliff Lake, New Jersey 07675
Attention: Chairman of the Board
of Directors
and, in the case of the Employee, to the Employee at:
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EXHIBIT 10(iii)(f)
Page 14 of 20
Either party may designate a different address by giving notice
of change of address in the manner provided above.
(e) Waiver. No waiver or modification in whole or in
part of this Agreement, or any term or condition hereof, shall be
effective against any party unless in writing and duly signed by
the party sought to be bound. Any waiver of any breach of any
provision hereof or any right or power by any party on one
occasion shall not be construed as a waiver of, or a bar to, the
exercise of such right or power on any other occasion or as a
waiver of any subsequent breach.
(f) Binding Effect; Successors. This Agreement shall
be binding upon and shall inure to the benefit of the Company and
the Employee and their respective heirs, legal representatives,
successors and assigns. If the Company shall be merged into or
consolidated with another entity, the provisions of this
Agreement shall be binding upon and inure to the benefit of the
entity surviving such merger or resulting from such
consolidation. The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets
of the Company, by agreement in form and substance satisfactory
to the Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had
taken place. The provisions of this paragraph shall continue to
apply to each subsequent employer of the Employee hereunder in
the event of any subsequent merger, consolidation or transfer of
assets of such subsequent employer.
(g) Plan Limitations. In the event the Company is
unable to provide any benefit required to be provided under this
Agreement through a plan sponsored by the Company or its
Affiliates, the Company shall, at its own cost and expense, take
appropriate actions to insure that alternative arrangements are
made so that equivalent benefits can be provided to the Employee,
including to the extent appropriate purchasing for the benefit of
the Employee (and if applicable the Employee's dependents)
individual policies of insurance providing benefits, which on an
after-tax basis, are equivalent to the benefits required to be
provided hereunder.
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EXHIBIT 10(iii)(f)
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(h) Controlling Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
Jersey applicable to contracts made and to be performed therein.
10. EFFECT ON PRIOR AGREEMENTS.
This Agreement contains the entire understanding
between the parties hereto and supersedes in all respects any
prior employment or severance agreement or understanding between
the Company (or any affiliate thereof) and the Employee.
IN WITNESS WHEREOF, the Company and the Employee have
executed this Agreement as of the day and year first above
written.
INGERSOLL-RAND COMPANY
By
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Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context
requires a different meaning, the following terms have the
meanings indicated:
"Affiliate", used to indicate a relationship with a
specified person, means a person that directly, or indirectly
through one or more intermediaries, controls, or is controlled
by, or is under common control with, such a specified person.
"Associate", used to indicate a relationship with a
specified person, means (i) any corporation, partnership, or
other organization of which such specified person is an officer
or partner; (ii) any trust or other estate in which such
specified person has a substantial beneficial interest or as to
which such specified person serves as trustee or in a similar
fiduciary capacity; (iii) any relative or spouse of such
specified person, or any relative of such spouse who has the same
home as such specified person, or who is a director or officer of
the Company or any of its parents or subsidiaries; and (iv) any
person who is a director, officer, or partner of such specified
person or of any corporation (other than the Company or any
wholly-owned subsidiary of the Company), partnership or other
entity which is an Affiliate of such specified person.
"Beneficial Owner" means the same as such term is
defined by Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (or any successor provision at the time in effect);
provided, however, that any individual, corporation, partnership,
group, association, or other person or entity which has the right
to acquire any of the Company's outstanding securities entitled
to vote generally in the election of directors at any time in the
future, whether such right is contingent or absolute, pursuant to
any agreement, arrangement, or understanding or upon exercise of
conversion rights, warrants or options, or otherwise, shall be
deemed the Beneficial Owner of such securities.
"Board" means the Board of Directors of the Company
(or, if the Company is then a subsidiary of any other company, of
the ultimate parent company).
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"Cause" means (i) any action by the Employee involving
willful malfeasance or willful gross misconduct having a
demonstrable adverse effect on the Company; (ii) substantial and
continuing refusal by the Employee in willful breach of this
Agreement to perform his employment duties hereunder; or
(iii) the Employee being convicted of a felony under the laws of
the United States or any state.
Termination of the Employee for Cause shall be
communicated by a Notice of Termination given within one year
after the Board (i) has knowledge of conduct or an event
allegedly constituting Cause; and (ii) has reason to believe that
such conduct or event could be grounds for Cause. For purposes
of this Agreement a "Notice of Termination" shall mean delivery
to the Employee of a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire
membership of the Company's Board at a meeting of that Board
called and held for the purpose (after reasonable notice to the
Employee ("Preliminary Notice") and reasonable opportunity for
the Employee, together with the Employee's counsel, to be heard
before the Board prior to such vote) of finding, in the good
faith opinion of the Board, that the Employee has engaged in the
conduct constituting Cause and specifying the particulars thereof
in detail. Upon the receipt of the Preliminary Notice, the
Employee shall have 30 days in which to appear with counsel or
take such other action as he desires on his behalf, and such 30-
day period is hereby agreed to by the parties as a reasonable
opportunity for the Employee to be heard. The Board shall no
later than 45 days after the receipt of the Preliminary Notice by
the Employee communicate its findings to Employee. A failure by
the Board to make its finding of Cause or to communicate its
conclusion within such 45-day period shall be deemed to be a
finding that the Employee has not engaged in the conduct
described herein. Any termination of the Employee's employment
(other than by death or Permanent Disability) within 45 days
after the date that the Preliminary Notice has been given to the
Employee shall be deemed to be a termination for Cause; provided,
however, that if during such period the Employee voluntarily
terminates other than for Good Reason or the Company terminates
the Employee other than for Cause, and the Employee is found (or
is deemed to be found) not to have engaged in the conduct
described herein, such termination shall not be deemed to be for
Cause.
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EXHIBIT 10(iii)(f)
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"Change of Control Event" means the date (i) any
individual, corporation, partnership, group, association or other
person or entity, together with its Affiliates and Associates
(other than a trustee or other fiduciary holding securities under
an employee benefit plan of the Company), is or becomes the
Beneficial Owner of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities entitled to vote generally in the election
of directors, unless a majority of the Continuing Directors
determines in their sole discretion that a Change of Control
Event has not occurred; (ii) the Continuing Directors fail to
constitute a majority of the members of the Board; (iii) of any
sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of
the assets of the Company, other than any sale, lease, exchange
or other transfer to any person or entity where the Company owns,
directly or indirectly, at least 80 percent of the outstanding
voting securities of such person or entity after any such
transfer.
"Continuing Director" means a director who either was a
member of the Board on the date hereof or who became a member of
the Board subsequent to such date and whose election, or
nomination for election by the Company's shareholders, was Duly
Approved by the Continuing Directors on the Board at the time of
such nomination or election, either by a specific vote or by
approval of the proxy statement issued by the Company on behalf
of the Board in which such person is named as nominee for
director, without due objection to such nomination.
"Duly Approved by the Continuing Directors" means an
action approved by the vote of at least a majority of the
Continuing Directors then on the Board, except, if the votes of
such Continuing Directors in favor of such action would be
insufficient to constitute an act of the Board if a vote by all
of its members were to have been taken, then such term shall mean
an action approved by the unanimous vote of the Continuing
Directors then on the Board so long as there are at least three
Continuing Directors on the Board at the time of such unanimous
vote.
"Fiscal Year" means the fiscal year of the Company.
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Page 19 of 20
"Good Reason" means (i) a material adverse change in
the Employee's job responsibilities, title or status from those
in effect prior to the Change of Control Event which change
continues for a period of at least 15 days after written notice
from the Employee; (ii) a reduction of the Employee's base salary
or target bonus, the failure to pay Employee's salary or bonus
when due, or the failure to maintain on behalf of the Employee
(and his or her dependents) benefits which are at least as
favorable in the aggregate to those provided for in paragraph
4(b); (iii) the relocation of the principal place of the
Employee's employment to a location that is more than 35 miles
further from the Employee's residence than such principal place
of employment immediately prior to the Change in Control Event,
or the imposition of travel requirements on the Employee not
substantially consistent with such travel requirements existing
immediately prior to the Change in Control Event; (iv) the
failure of the Company to obtain the assumption of, and the
agreement to perform, this Agreement by any successor as
contemplated in paragraph 8(f); or (v) the failure of the Company
to perform any of its other material obligations under this
Agreement and the continuation of such failure for a period of 15
days after written notice from the Employee.
"Permanent Disability", as applied to the Employee,
means that (i) he has been totally incapacitated by bodily injury
or disease so as to be prevented thereby from performing his
duties hereunder; (ii) such total incapacity shall have continued
for a period of six consecutive months; and (iii) such total
incapacity will, in the opinion of a qualified physician, be
permanent and continuous during the remainder of the Employee's
life.
"Termination" means (i) following the occurrence of a
Change in Control Event, (A) the termination of the Employee's
employment without Cause or (B) the resignation by an Employee
for Good Reason upon ten days' prior written notice (or such
shorter period as may be agreed upon between the Employee and the
Company), and (ii) prior to the occurrence of a Change in Control
Event, the termination of the Employee's employment or a material
adverse change in the Employee's job responsibilities, title or
status at the request of any individual or entity acquiring
ownership and control of the Company; provided, that such term
shall not include any termination of employment for Cause, any
resignation without Good Reason, or any termination of employment
on account of an Employee's death or Permanent Disability.
83<PAGE>
EXHIBIT 10(iii)(f)
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"Termination Date" shall mean the effective date of an
Employee's Termination; provided, that with respect to a
Termination that occurs prior to a Change of Control Event, the
effective date of such Termination shall be deemed to be the date
immediately following the Change of Control Event.
84<PAGE>
EXHIBIT 10(iii)(k)
Page 1 of 7
RESTATED
INGERSOLL-RAND COMPANY
SUPPLEMENTAL PENSION PLAN
INTRODUCTION
Ingersoll-Rand Company (the "Company") maintains one or more
pension plans (the "Qualified Pension Plans") for salaried
employees employed by the Company, and certain subsidiaries and
affiliates of the Company (the "Employees"), under which benefits
are subject to plan qualification limits imposed by the Internal
Revenue Code of 1986, as amended (the "Code").
The Company recognizes that in certain circumstances it is
desirable to provide pension benefits to Employees which are
supplemental to those provided by the Qualified Pension Plans.
The circumstances in which supplemental benefits will be paid
are:
o when the limitation on benefits payable under the
Company's Qualified Pension Plans as specified in
Section 415 of the Code (the "Section 415 Limits")
reduces the benefit otherwise payable under the
Qualified Pension Plans; and
o when, effective for years after 1988, the limitation on
the amount of compensation that may be taken into
accounting in determining benefits under the Company's
Qualified Pension Plans, as specified in Section
401(a)(17) of the Code (the "Section 401 (a)(17)
Limit"), reduces the benefit otherwise payable under
the Qualified Pension Plans.
Accordingly, the Company maintains this Supplemental Pension Plan
to provide a vehicle under which supplemental benefits can be
paid to salaried employees employed by the Company and certain
subsidiaries and affiliates of the Company. The provisions of
this Supplemental Pension Plan shall be applicable to all persons
who retire or otherwise terminate employment on or after June 30,
1995 and shall supersede the provisions of the Company's
Supplemental Pension Plan maintained by the Company prior to June
30, 1995.
85<PAGE>
EXHIBIT 10(iii)(k)
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SECTION 1
SUPPLEMENTAL PLAN BENEFITS
1.1 Excess Pension Benefit. An Employee shall be entitled to a
benefit under this Supplemental Pension Plan if his benefit
determined under the provisions of the Qualified Pension
Plan in which he participates is less than such benefit
would have been if (i) the Section 415 Limits did not apply,
and (ii) the definition of Compensation specified under such
Qualified Pension Plan did not exclude compensation after
1988 in excess of the Section 401(a)(17) Limit.
If an Employee's benefit from the Qualified Pension Plan in
which he participates is reduced as a result of any of the
conditions described in the preceding paragraph, the benefit
to which the Employee shall be entitled under this
Supplemental Pension Plan shall be equal to the excess of
(a) over (b) where:
(a) is the benefit which would have been payable under the
terms of such Qualified Pension Plan, as a single life
annuity with benefits payable monthly, if (i) the
Section 415 Limits did not apply, and (ii) the
definition of Compensation specified under such
Qualified Pension Plan did not exclude compensation
after 1988 in excess of the Section 401 (a)(17) Limit;
and
(b) is the benefit actually payable as a single life
annuity to the Employee under the terms of such
Qualified Pension Plan.
For purposes of this Section 1.1, the single life annuity
payable under the terms of the Qualified Pension Plan shall
be determined as of the Employee's Determination Date. The
Determination Date shall be (a) in the case of separation
from service by reason of retirement, the Employee's
retirement date, and (b) in the case of separation from
service other than by reason of retirement (such as death or
disability), the first date on which the Employee becomes
eligible to begin receiving payment of benefits under the
Qualified Pension Plan.
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EXHIBIT 10(iii)(k)
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Notwithstanding the foregoing, if an Employee elected by the
Board of Directors of the Company as an officer of the
Company has attained age 62 and retires or otherwise
terminates employment, he shall be entitled to receive a
benefit under this Supplemental Pension Plan on or after
attaining age 62 without reduction for receiving such
benefit prior to his Normal Retirement Date.
SECTION 2
VESTING
2.1 Vesting. An Employee shall be vested in the benefit
provided under Section 1.1 of this Supplemental Pension
Plan in accordance with the vesting provisions of the
Qualified Pension Plan.
SECTION 3
DISTRIBUTIONS
3.1 Payment of Benefits. Benefits payable under this
Supplemental Pension Plan shall be made in the event of
retirement, disability or any other termination of
employment. Benefits shall be payable solely in the form of
a lump sum. The lump sum amount, determined as of the
Employee s Determination Date, shall be the Actuarial
Equivalent value of the single life annuity determined under
Section 1.1 hereof. For purposes of this Section 3.1,
Actuarial Equivalent means an amount having equal value when
computed on the basis of the 1983 Group Annuity Mortality
Table (blended) and an interest rate equal to the average of
the monthly rates for ten-year constant maturities for US
Treasury Securities for the twelve-month period immediately
preceding the month prior to the month in which the
Employee s Determination Date occurs, such rate as published
in Federal Reserve statistical release H.15 (519). Such
benefit shall be paid on the Payment Date, together with
interest accrued thereon from the Determination Date, (a) if
the assets are held in trust, then at the interest rate of
the trust, or (b) if the assets are not held in trust, at
the then current earnings rate of the Fixed Income Fund of
the Ingersoll-Rand Company Savings and Stock
87<PAGE>
EXHIBIT 10(iii)(k)
Page 4 of 7
Investment Plan. An Employee s Payment Date shall be the
later of (a) the first business day of the year following
the Determination Date, or (b) the first day of the sixth
month following the Determination Date.
Notwithstanding the foregoing, an Employee who retires under
this Supplemental Pension Plan may elect within the 30-day
period immediately preceding his Determination Date to have
his benefit determined as of his Determination Date using an
alternative interest rate. The alternative interest rate
used to determine the Actuarial Equivalent benefit payable
in a lump sum shall be the interest rate equal to the 10-
Year Treasury Note rate as published in the New York Times
in the Key Rate Table under the Credit Market Section, or,
if such rate is unavailable, as provided by Telerate, in
either case as of the business day immediately preceding the
date payment is made to the Employee. In the event an
Employee elects to have his benefit determined under this
paragraph, no interest will be payable from the Employee's
Determination Date until the Payment Date.
3.2 Payments to Beneficiaries. In the event that an Employee
dies prior to the Payment Date but on or after the
Determination Date, payment shall be made to the beneficiary
designated by the Employee under this Supplemental Pension
Plan. An Employee may designate a beneficiary, or change
the designated beneficiary, without obtaining consent of a
spouse, provided that such designation or change shall be
effective only upon receipt of written notification by the
Compensation and Nominating Committee. In the event of
failure to designate a beneficiary under this Supplemental
Pension Plan, an Employee's beneficiary under this Plan
shall be the same as the beneficiary under the Ingersoll-
Rand Company Savings and Stock Investment Plan.
3.3 Withholding. The Company shall be entitled to withhold from
the payment due under this Supplemental Pension Plan any and
all taxes of any nature required by any government to be
withheld from such payment.
3.4 Loans. No loans to Employees shall be permitted under this
Supplemental Pension Plan.
88<PAGE>
EXHIBIT 10(iii)(k)
Page 5 of 7
SECTION 4
MISCELLANEOUS
4.1 Amendment and Termination. This Supplemental Pension Plan
may, at any time and from time to time, be amended or
terminated, without consent of any Employee or beneficiary,
(a) by the Board of Directors of the Company or (b) in the
case of amendments which do not materially modify the
provisions hereof, the Committee, provided, however, that no
such amendment or termination shall reduce any benefits
accrued under the terms of this Supplemental Pension Plan
prior to the date of termination or amendment.
Notwithstanding the foregoing in the event the Company's
Board of Directors (or any trustee of any trust established
by the Company for purposes of satisfying its obligations
hereunder) determines that a "change of control" of the
Company has occurred, any subsequent amendment modifying or
terminating the Plan shall have no force or effect. For
purposes of this paragraph, a "change of control shall have
the meaning designated in the Ingersoll-Rand Benefit Trust
Agreement, dated as of September 1, 1988, as amended,
between the Company and The Bank of New York, as trustee,
established by the Company for purposes of satisfying
certain obligations to executive employees of the Company.
4.2 No Contract of Employment. The establishment of this
Supplemental Pension Plan or any modification thereof shall
not give any Employee or other person the right to remain in
the service of the Company or any of its subsidiaries, and
all Employees and other persons shall remain subject to
discharge to the same extent as if the Supplemental Pension
Plan had never been adopted.
4.3 Compensation and Nominating Committee. This Supplemental
Pension Plan shall be administered by the Compensation and
Nominating Committee appointed by the Company's Board of
Directors, or any successor committee appointed by the
Company's Board of Directors (the "Committee"). The
Committee shall make all determinations as to the right of
any person to a benefit. Any denial by the Committee
89<PAGE>
EXHIBIT 10(iii)(k)
Page 6 of 7
of the claim for benefits under this Supplemental Pension
Plan by an Employee or beneficiary shall be stated in
writing by the Committee and delivered or mailed to the
Employee or beneficiary. Such notice shall set forth the
specific reasons for the Committee's decision. In addition,
the Committee shall afford a reasonable opportunity to any
Employee or beneficiary whose claim for benefits has been
denied for a review of the decision denying the claim.
4.4 Entire Agreement; Successors. This Supplemental Pension
Plan, including any subsequently adopted amendments, shall
constitute the entire agreement or contract between the
Company and any Employee regarding this Supplemental Pension
Plan. There are no covenants, promises, agreements,
conditions or understandings, either oral or written between
the Company and any Employee relating to the subject matter
hereof, other than those set forth herein. This
Supplemental Pension Plan and any amendment shall be binding
on the Company and the Employee and their respective heirs,
administrators, trustees, successors, and assigns, including
but not limited to, any successors to the Company by merger,
consolidation or otherwise by operation of law, and on all
designated beneficiaries of the Employee.
4.5 Severability. If any provision of this Supplemental Pension
Plan shall to any extent be invalid or unenforceable, the
remainder of the Supplemental Pension Plan shall not be
affected thereby, and each provision of the Supplemental
Pension Plan shall be valid and enforced to the fullest
extent permitted by law.
4.6 Application of Plan Provisions. All relevant provisions of
the Qualified Pension Plans shall apply to the extent
applicable to the contractual obligations of the Company
under this Supplemental Pension Plan. With respect to any
Employee, the applicable provisions shall be those of the
Qualified Pension Plan in which the Employee participates.
Benefits provided under the Supplemental Pension Plan are
independent of, and in addition to, any payments made to
Employees under any other plan, program, or agreement
between the Company and Employees in the Supplemental
Pension Plan, or any other compensation payable to the
Employee by the Company, or by any subsidiary, or affiliate
of the Company.
The laws of the state of New Jersey shall govern this
Supplemental Pension Plan.
90<PAGE>
EXHIBIT 10(iii)(k)
Page 7 of 7
4.7 Participant as General Creditor. The Company shall have the
right to establish a reserve or make any investment for the
purposes of satisfying its obligation hereunder for payment
of benefits at its discretion, provided, however, that no
Employee eligible to participate in this Supplemental
Pension Plan shall have any interest in such investment or
reserve. To the extent that any person acquires a right to
receive benefits under this Supplemental Pension Plan, such
rights shall be no greater than the right of any unsecured
general creditor of the Company.
4.8 Nonassignability. The right of any Employee or any
beneficiary in any benefit hereunder shall not be subject to
attachment or other legal process for the debts of such
Employee or beneficiary, nor shall any such benefit be
subject to anticipation, alienation, sale, transfer,
assignment or encumbrance.
91<PAGE>
EXHIBIT 10(iii)(p)
Page 1 of 17
INGERSOLL-RAND COMPANY
ELECTED OFFICERS
SUPPLEMENTAL PROGRAM
Introduction
Ingersoll-Rand Company (the "Company") desires to adopt the
Ingersoll-Rand Company Elected Officers Supplemental Program (the
"Program") to provide retirement benefits to certain individuals
employed by the Company in addition to the benefits provided from
other qualified and non-qualified plans maintained by the
Company.
It is intended that this Program be treated as a plan which is
unfunded and maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees within the meaning of the Employee
Retirement Income Security Act of 1974, as amended.
This Program shall be effective as of June 30, 1995.
92<PAGE>
EXHIBIT 10(iii)(p)
Page 2 of 17
INGERSOLL-RAND
TABLE OF CONTENTS
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1 - DEFINITIONS
1.1 Actuarial Equivalent . . . . . . . . . . . . . . 4
1.2 Board . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Change of Control . . . . . . . . . . . . . . . . 4
1.4 Company . . . . . . . . . . . . . . . . . . . . . 4
1.5 Committee . . . . . . . . . . . . . . . . . . . . 4
1.6 Elected Officer . . . . . . . . . . . . . . . . . 4
1.7 Employee . . . . . . . . . . . . . . . . . . . . 4
1.8 Final Average Salary . . . . . . . . . . . . . . 4
1.9 Pension Plan . . . . . . . . . . . . . . . . . . 5
1.10 Program . . . . . . . . . . . . . . . . . . . . . 5
1.11 Year of Service . . . . . . . . . . . . . . . . . 5
SECTION 2 - PARTICIPATION
2.1 Commencement of Participation . . . . . . . . . . 5
2.2 Duration of Participation . . . . . . . . . . . . 5
SECTION 3 - AMOUNT OF BENEFIT
3.1 Amount of Benefit . . . . . . . . . . . . . . . . 6
SECTION 4 - VESTING
4.1 Vesting . . . . . . . . . . . . . . . . . . . . . 6
4.2 Forfeiture for Cause . . . . . . . . . . . . . . 6-7
SECTION 5 - DISTRIBUTIONS
5.1 Retirement . . . . . . . . . . . . . . . . . . . 7-8
5.2 Form of Distribution . . . . . . . . . . . . . . 8-9
5.3 Disability . . . . . . . . . . . . . . . . . . . 9
5.4 Death . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Payment of Benefits . . . . . . . . . . . . . . . 10
93<PAGE>
EXHIBIT 10(iii)(p)
Page 3 of 17
INGERSOLL-RAND
TABLE OF CONTENTS (cont.)
Page
SECTION 6 - FUNDING
6.1 Funding . . . . . . . . . . . . . . . . . . . . . . 10
6.2 Company Obligation . . . . . . . . . . . . . . . . 11
SECTION 7 - CHANGE OF CONTROL
7.1 Contributions to Trust . . . . . . . . . . . . . . 11
7.2 Amendments . . . . . . . . . . . . . . . . . . . . 11
SECTION 8 - MISCELLANEOUS
8.1 Amendment and Termination . . . . . . . . . . . . .11-12
8.2 No Contract of Employment . . . . . . . . . . . . . 12
8.3 Withholding . . . . . . . . . . . . . . . . . . . . 12
8.4 Loans . . . . . . . . . . . . . . . . . . . . . . . 12
8.5 Compensation and Nominating Committee . . . . . . .12-13
8.6 Entire Agreement; Successors . . . . . . . . . . . 13
8.7 Severability . . . . . . . . . . . . . . . . . . . 13
8.8 Governing Law . . . . . . . . . . . . . . . . . . . 13
8.9 Participant as General Creditor . . . . . . . . . . 13
8.10 Nonassignability . . . . . . . . . . . . . . . . . 14
APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . .14-17
94<PAGE>
EXHIBIT 10(iii)(p)
Page 4 of 17
SECTION 1
DEFINITIONS
1.1 "Actuarial Equivalent" means an amount having equal
value when computed on the basis of the 1983 Group
Annuity Mortality Table (blended) and an interest rate
equal to the average of the monthly rates for ten-year
Constant Maturities for US Treasury Securities for the
twelve-month period immediately preceding the month
prior to the month in which a determination of benefit
occurs, such rate as published in Federal Reserve
statistical release H.15(519).
1.2 "Board" means the Board of Directors of Ingersoll-Rand
Company.
1.3 "Change of Control" shall have the same meaning as a
"change of control of the Company" (as set forth in the
Company's Incentive Stock Plan of 1995), unless a different
definition is used for purposes of any severance of
employment agreement between an Employer and an Employee,
in which event such definition shall apply.
1.4 "Company" means Ingersoll-Rand Company, and its successors
or assigns.
1.5 "Committee" means the Compensation and Nominating Committee
of the Board.
1.6 "Elected Officer" means an individual elected by the Board
as an officer of the Company.
1.7 "Employee" means an individual eligible to participate in
the Program as provided in Section 2.1
1.8 "Final Average Salary" means the sum of the following:
(a) the average of each of the five highest bonus
payments made during the six most recent calendar
years including the year during which the Employee's
retirement, death, or disability occurs or a Change
of Control occurs, and
(b) the Employee's annualized base rate of pay in effect
immediately prior to the date of determination.
95<PAGE>
EXHIBIT 10(iii)(p)
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1.9 "Pension Plan" means the Ingersoll-Rand Pension Plan Number
One as in effect on June 30, 1995 and as amended from time
to time.
1.10 "Program" means the Ingersoll-Rand Company Elected Officers
Supplemental Program as stated herein and as may be amended
from time to time.
1.11 "Year of Service" shall be determined in accordance with
the terms of the Pension Plan used to determine Years of
Vesting Service, provided that in the event an Employee
earns one or more hours of service during a calendar year,
he shall be credited with a Year of Service with respect to
such year for purposes of the Program.
Whenever the word "he," "his," or "him" is used in the
Program, such word is intended to embrace within its
purview the word "she" or "her", as may be appropriate.
SECTION 2
PARTICIPATION
2.1 Commencement of Participation
An individual employed by the Company shall commence
participation in the Program upon becoming an Elected
Officer of the Company.
2.2 Duration of Participation
An Employee shall continue to participate in the Program
until the earlier of his termination of employment, death,
or election to waive the benefit provided under the
Program.
96<PAGE>
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SECTION 3
AMOUNT OF BENEFIT
3.1 Amount of Benefit
An Employee shall be entitled to receive a benefit under
the Program equal to (a) minus (b) below:
(a) 65% of his Final Average Salary, multiplied by a
fraction, the numerator of which is his Years of
Service (up to a maximum of 30), and the denominator
of which is 30, minus
(b) the amount set forth in Appendix A attached hereto.
SECTION 4
VESTING
4.1 Vesting
An Employee shall become vested in the benefit provided
under this Program upon the earlier of (i) the attainment
of age 55 and the completion of 15 Years of Service, (ii)
the attainment of age 62, (iii) death, or (iv) a Change of
Control.
4.2 Forfeiture for Cause
All benefits for which an Employee would otherwise be
eligible hereunder may be forfeited, at the discretion of
the Committee, prior to the occurrence of a Change of
Control under the following circumstances:
(a) The Employee is discharged by the Company for cause,
which shall be a breach of the standards set forth in
the Ingersoll-Rand Company Code of Conduct; or
(b) Determination by the Committee no later than 12
months after termination of employment that the
Employee has engaged in serious or willful misconduct
in connection with his employment with the Company;
or
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EXHIBIT 10(iii)(p)
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(c) The Employee (whether while employed or for two years
thereafter) without the written consent of the
Company is employed by, becomes associated with,
renders service to, or owns an interest in any
business that is competitive with the Company or with
any business in which the Company has a substantial
interest as determined by the Committee; provided,
however, that an Employee may own up to 1% of the
publicly traded equity securities of any business,
notwithstanding the foregoing.
SECTION 5
DISTRIBUTIONS
5.1 Retirement
Employee retirement distribution under the Program shall be
as follows:
(a) Normal Retirement - An Employee shall retire and
receive the benefit under Section 3.1 upon attaining
age 62, provided that the Chief Executive Officer of
the Company (or in the case of the Chief Executive
Officer, the Board) may request an Employee to remain
in the employ of the Company after the Employee has
attained age 62.
(b) Early Retirement - An Employee may retire under the
Program at any time after he becomes vested in
accordance with Section 4.1. In the event he retires
before age 62, he will receive a benefit under this
Program in accordance with Section 5.5. Such benefit
shall be equal to the benefit he would have received
at age 62 under Section 3.1, provided however that:
(i) the amount determined under Section 3.1(a)
shall be reduced by .3% for each month that
the benefit commences prior to age 65,
(ii) the benefit offset amount derived from
defined contribution account balances, as
identified in the applicable Appendix,
shall be converted to immediate annuities
using the Actuarial Equivalent as defined
in Section 1.1, and shall be based on the
Employee's age at date of retirement,
98<PAGE>
EXHIBIT 10(iii)(p)
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(iii) the benefit offset amount derived from
defined benefit plans, as identified in
Appendix A and as adjusted for retirement
at the earliest date on which the Employee
may retire and begin receiving a benefit
under such defined benefit plans and as
further adjusted, if necessary, to the
Actuarial Equivalent of the benefit payable
on the date benefits under the Program
commence, shall be as determined under the
applicable plans irrespective of whether
the Employee elects to receive a benefit
under such plans, and
(iv) for years prior to Social Security normal
retirement age, the Social Security Primary
Insurance Amount shall be reduced by the
same factors used by the Social Security
Administration to adjust benefits payable
at age 62 or later, and by .3% for each
month that benefits under the Program
commence prior to age 62.
(c) Late Retirement - If an Employee retires after age 62
as provided under (a) above, he will receive a
benefit equal to the greater of:
(i) the benefit determined under Section 3.1 as
of his date of retirement, or
(ii) the benefit he would have received had he
retired at age 62, credited with interest
from the date he attained age 62 until his
date of retirement. For purposes of this
subsection (ii), the interest used will be
rate will be equal to the rate of return
earned by the Fixed Income Fund of the
Ingersoll-Rand Company Savings and Stock
Investment Plan during such period.
5.2 Form of Distribution
Benefits under this Program shall be payable solely in a
single lump sum. The lump sum amount, determined as of the
Employee's date of retirement, shall be the Actuarial
Equivalent value of a single life annuity of the benefit
under Section 3.1 adjusted, if applicable, to reflect the
99<PAGE>
EXHIBIT 10(iii)(p)
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provisions of Section 5.1. The lump sum distribution
determined under this Section 5.2 shall be credited with
interest at a rate equal to the rate of return earned by
the Fixed Income Fund of the Ingersoll-Rand Company Savings
and Stock Investment Plan from the Employee's date of
retirement until the date of distribution.
Notwithstanding the foregoing, an Employee who retires
under this Program and receives a lump sum payment under
this Section 5.2 may elect within the 30-day period
immediately preceding his date of retirement to have his
benefit determined as of his date of retirement, using an
alternative interest rate. The alternative interest rate
used to determine the Actuarial Equivalent benefit payable
in a lump sum shall be the interest rate equal to the 10-
Year Treasury Note rate as published in The New York Times
in the Key Rate Table under the Credit Market Section, or,
if such rate is unavailable, as provided by Telerate, in
both cases as of the business day immediately preceding the
date payment is made to the Employee. In the event an
Employee elects to have his benefit determined under this
paragraph, no interest will be payable from the Employee s
date of retirement until the date of distribution.
5.3 Disability
In the event that an Employee becomes disabled, he shall
continue to earn benefits under the Program as if he
continued to be employed by the Company at his same
annualized base rate of pay as of the date he became
disabled. Such Employee shall receive an immediate lump
sum payment determined under Section 5.2 of the Program as
of the Employee's 65th birthday. For purposes of
determining his Final Average Salary, the average of each
of the five highest bonus payments made out of the last six
most recent bonuses received by the Employee prior to the
date he became disabled shall be used. If an Employee is
no longer disabled and he does not return to the employ of
the Company or an affiliated company, he shall not be
entitled to continued accrual under this Section for his
period of disability. If an employee is no longer disabled
and he returns to the employ of the Company, he will be
entitled to continued accrual under this Section for the
period of his disability. For purposes of the Program, an
Employee shall be disabled if he is unable to continue to
perform the duties of his position due to a physical or
mental impairment.
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5.4 Death
In the event that an Employee dies prior to retirement, his
beneficiary shall receive a lump sum payment determined
under Section 5.2 of this Program as of the date of the
Employee's death as if the Employee retired on the date of
his death; provided that if the Employee's death occurs
prior to his attainment of age 55, his benefit shall be
reduced by .3% for each month that the benefit commences
before the Employee would have reached age 65. The
Employee's beneficiary under this Program shall be the
beneficiary under the Ingersoll-Rand Company Savings and
Stock Investment Plan unless the Employee designates
another beneficiary in writing, and such written
designation has been received by the Committee prior to the
date of death. An Employee may change the designated
beneficiary under this Program at any time by providing
such designation in writing to the Committee.
5.5 Payment of Benefits
The benefit under the Program shall be paid on the later of
(i) the first business day of the sixth month following the
Employee's retirement or death, or (ii) the first business
day of the calendar year following the Employee's
retirement.
In the event an Employee is disabled in accordance with
Section 5.3, his benefit shall be paid on the first day of
the month following the date that the Employee attains age
65.
SECTION 6
FUNDING
6.1 Funding
Except as provided in Section 8.9 hereof, the Company shall
have no obligation to fund the benefit that an Employee
earns under this Program.
101<PAGE>
EXHIBIT 10(iii)(p)
Page 11 of 17
6.2 Company Obligation
Notwithstanding the provisions of any trust agreement or
similar funding vehicle to the contrary, the Company shall
remain obligated to pay benefits under this Program.
Nothing in this Program or any trust agreement shall
relieve the Company of its liabilities to pay benefits
under this Program except to the extent that such
liabilities are met by the distribution of trust assets.
SECTION 7
CHANGE OF CONTROL
7.1 Contributions to Trust
In the event that a Change of Control has occurred, the
Company shall be obligated to establish a trust and to
contribute to the trust an amount necessary to fund the
accrued benefit earned by the Employee under this Program
(assuming immediate benefit commencement) as of the last
day of the calendar month immediately preceding the date
the Board of Directors determines that a Change of Control
has occurred. If the Employee shall not have attained age
55, his annual benefit shall be determined on the same
basis used to determine his accrued benefit in the case of
death as specified in Section 5.4.
7.2 Amendments
Following a Change of Control of the Company, any amendment
modifying or terminating this Program shall have no force
or effect.
SECTION 8
MISCELLANEOUS
8.1 Amendment and Termination
Except as provided in Section 7.2 hereof, this Program may,
at any time and from time to time, be amended or terminated
without the consent of any Employee or beneficiary, (a) by
the Board of Directors of the Company, or (b) in the case
of amendments which do not materially modify the provisions
102<PAGE>
EXHIBIT 10(iii)(p)
Page 12 of 17
hereof, the Committee or such other committee appointed by
the Board of Directors of the Company; provided, however,
that no such amendment or termination shall reduce any
benefits accrued under the terms of this Program prior to
the date of termination or amendment.
8.2 No Contract of Employment
The establishment of this Program or any modification
hereof shall not give any Employee or other person the
right to remain in the service of the Company or any of its
subsidiaries, and all Employees and other persons shall
remain subject to discharge to the same extent as if the
Program had never been adopted.
8.3 Withholding
The Company shall be entitled to withhold from any payment
due under this Program any and all taxes of any nature
required by any government to be withheld from such
payment.
8.4 Loans
No loans to Employees shall be permitted under this
Program.
8.5 Compensation and Nominating Committee
This Program shall be administered by the Committee (or any
successor committee) of the Board of Directors of the
Company. The primary responsibility of the Committee is to
administer the Program for the exclusive benefit of the
Employees and their beneficiaries, subject to the specific
terms of the Program. The Committee shall administer the
Program in accordance with its terms to the extent
consistent with applicable law, and shall have the power to
determine all questions arising in connection with the
administration, interpretation, and application of the
Program. Any such determination by the Committee shall be
conclusive and binding upon all affected parties. Any
denial by the Committee of a claim for benefits under this
Program by an Employee or beneficiary shall be stated in
writing by the Committee and delivered or mailed to the
Employee or beneficiary. Such notice shall set forth the
specific reasons for the Committee's decision. In addition,
the Committee shall afford a reasonable opportunity to any
103<PAGE>
EXHIBIT 10(iii)(p)
Page 13 of 17
Employee or beneficiary whose claim for benefits has been
denied for a review of the decision denying this claim.
8.6 Entire Agreement; Successors
This Program, including any subsequently adopted
amendments, shall constitute the entire agreement or
contract between the Company and any Employee regarding
this Program. There are no covenants, promises, agreements,
conditions or understandings, either oral or written,
between the Company and any Employee relating to the
subject matter hereof, other than those set forth herein.
This Program and any amendment hereof shall be binding on
the Company and the Employees and their respective heirs,
administrators, trustees, successors and assigns, including
but not limited to, any successors of the Company by
merger, consolidation or otherwise by operation of law, and
on all designated beneficiaries of the Employee.
8.7 Severability
If any provisions of this Program shall, to any extent, be
invalid or unenforceable, the remainder of this Program
shall not be affected thereby, and each provision of this
Program shall be valid and enforceable to the fullest
extent permitted by law.
8.8 Governing Law
The laws of the State of New Jersey shall govern this
Program.
8.9 Participant as General Creditor
Benefits under the Program shall be payable by the Company
out of its general funds. The Company shall have the right
to establish a reserve or make any investment for the
purposes of satisfying its obligations hereunder for
payment of benefits at its discretion, provided, however,
that no Employee eligible to participate in this Program
shall have any interest in such investment or reserve. To
the extent that any person acquires a right to receive
benefits under this Program, such rights shall be no
greater than the right of any unsecured general creditor of
the Company.
104<PAGE>
EXHIBIT 10(iii)(p)
Page 14 of 17
8.10 Nonassignability
To the extent permitted by law, the right of any Employee
or any beneficiary in any benefit hereunder shall not be
subject to attachment or any other legal process for the
debts of such Employee or beneficiary nor shall any such
benefit be subject to anticipation, alienation, sale,
transfer, assignment or encumbrance.
APPENDIX A
Unless otherwise specified in another Appendix attached hereto,
the sum of the following shall be used for purposes of Section
3.1(b) of the Program:
(a) all employer-paid benefits under qualified retirement
plans and associated supplemental plans sponsored by
the Company, Ingersoll-Dresser Pump Company and
Dresser Industries, Inc., provided that the
Employee's intervening employment between Dresser
Industries, Inc. and the Company is solely with
Ingersoll-Dresser Pump Company;
For purposes of determining the benefit under
Section 3.1 of the Program, the following shall
apply:
(1) The Employee's benefit under the Pension Plan,
Ingersoll-Dresser Pump Company Pension Plan,
Ingersoll-Rand Company Supplemental Pension Plan,
and the Ingersoll-Dresser Pump Company
Supplemental Plan, shall be determined as a life
annuity at the date of determination.
(2) The Employee's account balance as of the date of
determination under the Ingersoll-Rand Company
Retirement Account Plan (provided that an
appropriate adjustment shall be made for
grandfathered Employees under such Plan),
Ingersoll-Dresser Pump Company Retirement Account
Plan (provided that an appropriate adjustment
shall be made for grandfathered employees under
such plan), Ingersoll-Rand Company Supplemental
Retirement Account Plan, and the Ingersoll-
Dresser Pump Company Supplemental Retirement
105<PAGE>
EXHIBIT 10(iii)(p)
Page 15 of 17
Account Plan shall be determined as a life
annuity based on the Actuarial Equivalent as of
the date of determination.
(3) The portion of the Employee's account balance
derived from employer matching contributions
under the Ingersoll-Rand Company Savings and
Stock Incentive Plan, the Ingersoll-Dresser Pump
Company Savings Plan, the Ingersoll-Rand Company
Supplemental Savings and Stock Investment Plan,
the Ingersoll-Dresser Pump Company Supplemental
Savings Plan, and any other qualified defined
contribution plan sponsored by the Company or an
affiliated employer shall be determined as a life
annuity based on the Actuarial Equivalent of such
account balance as of the date of determination.
An Employee's account balance shall be the sum of
the following, whichever are applicable:
(A) the Employee's account balance under such
plan as of the date he commenced
participation in this Program, the
Ingersoll-Rand Company Key Management
Supplemental Program or the Ingersoll-
Dresser Pump Company Key Management
Supplemental Program, whichever is earlier,
including appreciation (depreciation) and
dividends, such amount would have earned
until the date of determination,
(B) the benefit the Employee would have derived
from Employer matching contributions had he
contributed the maximum amount permissible
under such plan after the date he commenced
participation in the Program, the
Ingersoll-Rand Company Key Management
Supplemental Program or the Ingersoll-
Dresser Pump Company Key Management
Supplemental Program, whichever is earlier,
until the date of determination, including
appreciation (depreciation) and dividends,
such amount would have earned until the
date of determination, and
106<PAGE>
EXHIBIT 10(iii)(p)
Page 16 of 17
(C) if the Employee has not contributed the
maximum amount permissible under such plan
during the year that the Employee becomes
eligible for the Program, the Ingersoll-
Rand Company Key Management Supplemental
Program or the Ingersoll-Dresser Pump
Company Key Management Supplemental
Program, whichever is earlier, and the five
calendar years prior to participation in
this Program, the benefit he would have
derived from Employer matching
contributions had he contributed the
maximum amount permissible under such plan
minus the actual amount of Employer
matching contributions allocated to his
account during such period, including
appreciation (depreciation), but excluding
dividends that such amount would have
earned until the date of determination, and
(D) the amount of any withdrawal of Employer
matching contributions from such plan for
the five-year period immediately prior to
participation in the Program, the
Ingersoll-Rand Company Key Management
Supplemental Program or the Ingersoll-
Dresser Pump Company Key Management
Supplemental Program, whichever is earlier,
including appreciation (depreciation), but
excluding dividends that such amount would
have earned until the date of
determination.
(b) the Social Security Primary Insurance Amount as
defined in the Pension Plan estimated at age 65,
multiplied by a fraction, the numerator of which is
his Years of Service (up to a maximum of 30), and the
denominator of which is 30.
For purposes of the Program, "Social Security Primary
Insurance Amount" means the amount of the Employee's
annual primary old age insurance determined under the
Social Security Act in effect at the date of
determination and payable in accordance with (i) or
(ii) below.
107<PAGE>
EXHIBIT 10(iii)(p)
Page 17 of 17
(i) For benefits determined on or after age 65,
payable for the year following his date of
retirement.
(ii) For benefits determined before the Employee
attains age 65, payable for the year
following his retirement or death (or which
would be payable when he first would have
become eligible if he were than
unemployed), assuming he will not receive
after retirement (or death) any income that
would be treated as wages for purposes of
the Social Security Act.
For purposes of determining the Social Security
Benefit under paragraphs (i) and (ii) above, an
Employee's covered earnings under said Act for each
calendar year preceding the Employee's first full
calendar year of employment shall be determined by
multiplying his covered earnings subsequent to the
year being determined by the ratio of the average per
worker total wages as reported by the Social Security
Administration for the calendar year being determined
to such average for the calendar year subsequent to
the year being determined.
108<PAGE>
EXHIBIT 10(iii)(q)
Page 1 of 3
SELECTED EXECUTIVE OFFICER EMPLOYMENT AGREEMENT
Mr. N. J. Pishotti
8674 Twighlight Tear Lane
Cincinnati, Ohio 45249
Dear Nick:
On the basis of our discussions and your recent interviews
with members of our management team, I am pleased to extend
this written confirmation of our offer to become Vice
President of Ingersoll-Rand Company, reporting to me as
Chairman and Chief Executive Officer. Your initial
assignment will be the advancement of our strategic sourcing
capabilities, providing leadership and direction to help
position Ingersoll-Rand achieve cost and inventory
reductions, and improved corporate performance.
The following confirms the terms and conditions of our
offer:
1. Your starting base salary will be at an annual rate of
$225,000, paid monthly.
2. Your annual bonus for the award year 1995 will be
guaranteed at a minimum of 50% of base salary.
Otherwise, in subsequent years, you will be eligible
for awards of up to 90% of salary depending on both
corporate and individual performance.
3. Upon joining the Company, you will receive an award of
non-qualified stock options of 18,000 shares with Stock
Appreciation Rights under our 1990 Incentive Stock
Plan. This award is subject to the usual terms and
conditions of awards under the Plan. You will be
considered a full participant, and be eligible to
receive further awards under the Plan in future years
as administered by the Compensation Committee of the
Board.
4. Ingersoll-Rand will provide you with a Stock Award of
10,000 shares, also administered under the terms of our
1990 Incentive Stock Plan.
109<PAGE>
EXHIBIT 10(iii)(q)
Page 2 of 3
These awards vest in three annual installments,
beginning in January, 1996, based on a predetermined
performance target and continued employment. You will
receive an award agreement which explains vesting
requirements and other terms and conditions of your
award. Our stock awards also provide participants with
dividend equivalents, and represent an attractive
additional equity interest in our company.
5. You will receive a benefit under the Executive
Supplementary Retirement Agreement in an amount of
$45,000 per year for ten years beginning at age 65,
subject to the provisions of this plan.
You will be eligible for a full pension based on 65% of
your final eligible compensation at age 62. If you
retire prior to age 62, your retirement would be
subject to the terms and conditions of the company's
qualified retirement plan.
For purposes of retirement benefits, eligible
compensation is your final salary, plus the final five-
year average of annual bonuses received. Your full 65%
benefit will be calculated from all sources including
our qualified and non-qualified Pension Plan and
Retirement Accounts, the employer portion of Ingersoll-
Rand's and your former employer's 401(k) Plan
contributions, and your former employer's retirement
benefits.
These special additional benefits will necessarily be
provided outside the Corporate Retirement Plan of
Ingersoll-Rand, and for the most part will be paid from
the general funds of the company. For purposes of
benefit service, we will consider that you have accrued
a benefit of thirty percentage points of final
compensation upon joining us, and will accrue seven
percentage points per year of credited service, up to a
maximum of 65%.
6. We will relocate you, your family and household goods
to this area, and will pay you a $100,000 special
allowance upon your relocation to cover differences in
housing costs, mortgage interest and any other
disadvantages. Your relocation expenses, including
shipment of household goods, real estate commissions and
mortgage points will be reimbursed according to our
110<PAGE>
EXHIBIT 10(iii)(q)
Page 3 of 3
policy; however, your special allowance will not be
subject to tax protection. Ingersoll-Rand's relocation
policy also provides for equity advances, at company
discretion, to facilitate home purchases prior to sale of
your existing residence. And, our program also includes
the possibility of home purchase should that be necessary
to effect a smooth transition.
7. Your medical and life insurance coverage with
Ingersoll-Rand will commence on the first day of the
month following 30 days of employment. You should
continue your current coverage with your former
employer under COBRA to avoid any gap in your coverage.
8. In the unlikely event that you are involuntarily
terminated by the company other than for cause (i.e.,
violation of law or serious breach of ethics), we will
provide you with a severance payment equal to 3 years
of salary plus your last annual bonus. In anticipation
of your retirement, your severance payment will decline
by one-third for each year of service beginning after
age 59.
9. Our offer is conditioned upon satisfactorily completing
a physical examination, which includes drug testing,
and fulfilling the requirements of the Immigration
Reform and Control Act of 1986.
We at Ingersoll-Rand have given this offer careful
consideration and we view it as an exciting opportunity for
you in your career progression. We are confident that you
have the capabilities to succeed with our company, and that
we will enjoy an important and mutually rewarding long-term
relationship. I hope you find our offer acceptable and will
join us preferably on or before April 3, 1995.
Assuming the foregoing is acceptable to you, please sign and
return a copy of this letter to me by March 10, 1995.
Sincerely,
Accepted: /S/ James E. Perrella
/S/ N. J. Pishotti James E. Perrella
Chairman
March 2, 1995
111<PAGE>
<TABLE>
EXHIBIT 11(i)
INGERSOLL-RAND COMPANY
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(In millions of dollars except for shares and per share amounts)
Years ended December 31,
1995 1994 1993 1992 1991
PRIMARY EARNINGS PER SHARE:
Earnings before effect of
<S> <C> <C> <C> <C> <C>
accounting changes.......... $270.3 $211.1 $163.5 $ 115.6 $150.6
Effect of accounting changes:
- Postemployment benefits -- -- (21.0) -- --
- Postretirement benefits
other than pensions....... -- -- -- (332.0) --
- Income taxes.............. -- -- -- (18.0) --
Net earnings (loss) applicable
to common stock............. $270.3 $211.1 $142.5 $(234.4) $150.6
Average number of common
shares outstanding.......... 106,069,078 105,458,116 104,991,535 104,340,622 103,634,178
Primary earnings per share:
Earnings before effect of
accounting changes.......... $2.55 $2.00 $ 1.56 $ 1.11 $1.45
Effect of accounting changes:
- Postemployment benefits -- -- (0.20) -- --
- Postretirement benefits
other than pensions..... -- -- -- (3.19) --
- Income taxes............ -- -- -- (0.17) --
Primary earnings (loss) per
share....................... $2.55 $2.00 $ 1.36 $(2.25) $1.45
Notes: All common share and per share amounts have been adjusted for the 2-for-1 stock split which
was made in the form of a stock dividend in 1992. 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, as follows: 1995 -
498,456; 1994 - 496,893; 1993 - 600,429; 1992 - 738,149; 1991 - 632,056.<PAGE>
<PAGE>
</TABLE>
112<PAGE>
<TABLE>
EXHIBIT 11(ii)
Page 1 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(In millions of dollars except for shares and per share amounts)
Years ended December 31,
1995 1994 1993 1992 1991
FULLY DILUTED EARNINGS PER SHARE:
Earnings applicable to common
stock before effect of
<S> <C> <C> <C> <C> <C>
accounting changes........... $270.3 $211.1 $163.5 $ 115.6 $150.6
Effect of accounting changes:
- Postemployment benefits -- -- (21.0) -- --
- Postretirement benefits
other than pensions........ -- -- -- (332.0) --
- Income taxes............... -- -- -- (18.0) --
Net earnings (loss) applicable
to common stock.............. $270.3 $211.1 $142.5 $(234.4) $150.6
Average number of common
shares outstanding........... 106,069,078 105,458,116 104,991,535 104,340,622 103,634,178
Number of common shares
issuable assuming exercise
under incentive stock plans.. 498,456 496,893 600,429 738,149 632,056
Average number of outstanding
shares as adjusted for
fully diluted earnings per
share calculations........... 106,567,534 105,955,009 105,591,964 105,078,771 104,266,234
113<PAGE>
EXHIBIT 11(ii)
Page 2 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(In millions of dollars except for shares and per share amounts)
(Continued)
Years ended December 31,
1995 1994 1993 1992 1991
Fully diluted earnings per share:
Earnings before effect of
accounting change............ $2.54 $1.99 $ 1.55 $ 1.10 $1.44
Effect of accounting changes:
- Postemployment benefits -- -- (0.20) -- --
- Postretirement benefits
other than pensions...... -- -- -- (3.16) --
- Income taxes............. -- -- -- (0.17) --
Fully diluted earnings (loss) per
share........................ $2.54 $1.99 $ 1.35 $(2.23) $1.44
Notes: All common share and per share amounts have been adjusted for the 2-for-1 stock split which
was made in the form of a stock dividend in 1992. This calculation is presented in accordance with
the Securities Exchange Act of 1934, although it is not required disclosure under APB Opinion No.
15. 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 incentive stock plans. Employee stock options outstanding
have been included in the calculation of fully diluted earnings per share by applying the "Treasury
Stock" Method quarterly. Such calculations have been made using the higher of the average month-end
market prices or the market prices at the end of the quarter, in order to reflect the maximum
potential dilution.
</TABLE>
114<PAGE>
<TABLE>
EXHIBIT 12
INGERSOLL-RAND COMPANY
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Millions)
(2) Years Ended December 31,
Fixed charges: 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Interest expense........................... $ 90.0 $ 46.9 $ 60.2 $ 64.7 $ 64.5
Amortization of debt discount and expense.. .8 .4 .7 .3 .3
Rentals (one-third of rentals)............. 21.6 18.8 19.4 20.8 21.2
Capitalized interest....................... 3.6 3.2 3.1 3.5 4.6
Total fixed charges.......................... $116.0 $ 69.3 $ 83.4 $ 89.3 $ 90.6
Net earnings (loss).......................... 270.3 $211.1 $142.5 $(234.4) $150.6
Add: Minority income (loss) of majority-
owned subsidiaries.................. 14.5 15.1 13.6 (33.2) 1.9
Taxes on income....................... 158.9 118.8 90.0 67.4 84.6
Fixed charges......................... 116.0 69.3 83.4 89.3 90.6
Effect of accounting changes.......... -- -- 21.0 350.0 --
Less: Capitalized interest.................. 3.6 3.2 3.0 3.4 4.6
Undistributed earnings (losses) from
less than 50% owned affiliates...... 33.3 33.3 40.0 16.6 13.5
Earnings available for fixed charges ........ $522.8 $377.8 $307.5 $ 219.1 $309.6
Ratio of earnings to fixed charges .......... 4.51 5.46 3.69(1) 2.45(3) 3.42(4)
Undistributed earnings (losses) from less
than 50% owned affiliates:
Equity in earnings (losses)................ $ 36.6 $ 36.6 $ 42.1 $ 17.9 $ 14.7
Less: Dividends paid ................... 3.3 3.3 2.1 1.3 1.2
Undistributed earnings (losses) from
less-than 50% owned affiliates........... $ 33.3 $ 33.3 $ 40.0 $ 16.6 $ 13.5
(1) The 1993 calculation includes the effect of the $5 million pretax charge relating to the
restructure of the company's underground mining machinery business. Excluding this amount, the
ratio would have been 3.75.
(2) The company's portion of the earnings and fixed charges of the Dresser-Rand Company are included
through September 30, 1992. Effective October 1, 1992, the company's ownership interest in the
Dresser-Rand Company was reduced from 50% to 49%.
(3) The 1992 calculation includes (i) the effect of the $10 million pretax charge relating to the
restructure of the company's aerospace bearings business and (ii) the full effect of the $70
million pretax restructure of operations charge relating to the Ingersoll-Dresser Pump Company.
Excluding the 1992 restructure charges the ratio would have been 3.35.
(4) The 1991 ratio includes the $7.1 million net pretax benefit from a restructure of operations.
Excluding this amount the ratio would have been 3.34.
</TABLE>
115<PAGE>
EXHIBIT 13
Page 1 of 60
INGERSOLL-RAND
1995
ANNUAL REPORT
TO
SHAREOWNERS
116<PAGE>
EXHIBIT 13
Page 2 of 60
Table of Contents
Financial Review and Management Analysis . . . . . . . . 3-23
Consolidated Statement of Income . . . . . . . . . . . . 24
Consolidated Balance Sheet . . . . . . . . . . . . . . . . 25
Consolidated Statement of Shareowners' Equity . . . . . . 26-27
Consolidated Statement of Cash Flows . . . . . . . . . . 28-29
Notes to Consolidated Financial Statements . . . . . . . 30-58
Report of Management . . . . . . . . . . . . . . . . . . 59
Report of Independent Accountants . . . . . . . . . . . . 60
117<PAGE>
EXHIBIT 13
Page 3 of 60
Ingersoll-Rand Company
Financial Review and Management Analysis
1995 Compared to 1994
1995 will go down in the company's history as a year of
financial records and the year of our largest acquisition. Our
financial achievements in 1995 were the result of a solid and
stable domestic economy for most of our company's products,
moderately growing European markets and the continuing benefits
from asset management and productivity-improvement programs,
which are becoming a daily thought process for more and more of
our employees.
Sales for 1995 exceeded $5.7 billion, which generated $497
million of operating income and $270 million of net earnings
($2.55 per share). These results include our successful
acquisition of Clark Equipment Company (Clark), effective June 1,
1995. Our 1995 results, before considering the positive benefits
from the Clark acquisition, would have also established company
records.
The Clark acquisition (which is described in Note 2 to the
Consolidated Financial Statements) will add more than $1 billion
of sales on an annualized basis to the company's results.
Products include Melroe's Bobcat skid-steer loaders and compact
excavators, Clark-Hurth axles and transmissions, Blaw-Knox pavers
and Club Car golf cars and utility vehicles.
The company's economic outlook for 1996 remains fairly
consistent with last year and calls for a steady improvement in
operating results based on continued stability in our domestic
markets and continuing strength in our international markets.
These expectations are bolstered by aggressive asset management
and productivity-improvement programs, as well as the company's
focus on total quality management and reengineering efforts to
accelerate our efficiency gains.
A comparison of key financial data between 1995 and 1994
follows:
o Net sales in 1995 established a record at $5.7 billion,
reflecting a 27-percent improvement over 1994's total of $4.5
billion. Sales for 1995, excluding Clark, exceeded last
year's total by approximately 10 percent, and also established
a new record.
118<PAGE>
EXHIBIT 13
Page 4 of 60
o Cost of goods sold in 1995 was 75.2 percent of sales compared
to 74.9 percent in 1994. Partial liquidations of LIFO (last-
in, first-out) inventory lowered 1995 costs by only $3.4
million ($2.1 million after-tax, or two cents per share) as
compared to an $11.6 million ($7.1 million after-tax, or seven
cents per share) liquidation in 1994. Excluding the effects
of the LIFO liquidations, the 1995 cost of goods sold
percentage relationship to sales would have been 75.3 percent
versus 75.2 percent for 1994. The percentage of cost of goods
sold to sales improved approximately one percent, excluding
Clark and the loss on the paving business (a preacquisition
requirement) from the calculation. This reduction represents
the benefits derived from the company's continuing
productivity-improvement and reengineering programs.
o Administrative, selling and service engineering expenses were
16.1 percent of sales in 1995, compared to 16.7 percent for
1994. The marked improvement was due to the continued effect
of the company's efforts from productivity-improvement
programs and the benefit of leverage from the increased sales
volume, which were large enough to offset the effects of
inflation for salaries, services, etc. The effect of the
Clark acquisition did not have a material impact on these
percentages in 1995.
o Operating income for the year totalled $497.0 million, a 32
percent increase over 1994's operating income of $377.0
million. Operating income in 1995, without Clark-related
activities, totalled $435.1 million, reflecting a 15-percent
increase over 1994's level.
o Interest expense for the year totalled $86.6 million, which is
almost double 1994's level. Interest costs associated with
Clark's existing debt and its acquisition totalled $47.7
million. The company's interest expense, without Clark, would
have been $38.9 million, an 11.2-percent reduction from the
company's 1994 interest expense total of $43.8 million. This
is the result of lower interest rates and the company's
aggressive asset management program.
o Other income (expense), net, is essentially the sum of three
activities: (i) foreign exchange, (ii) equity interests in
partially-owned equity companies, and (iii) other
miscellaneous income and expense items. In 1995, this
category netted to an income balance of $9.4 million, a
favorable change of $24.1 million over 1994's net expense of
$14.7 million. A review of the components of this category
shows that:
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o foreign exchange activity for 1995 totalled $6.2 million of
losses, which is comparable to the $6.1 million of losses in
1994;
o earnings from equity interests in partially-owned equity
companies were approximately $12.5 million higher than
1994's level, which included a loss on the sale of a
partially-owned company; and
o other net miscellaneous expense items were approximately
one-half the prior year's level, principally due to higher
gains on the sale of fixed assets, higher royalty earnings
and a favorable benefit from the activities of the Clark
units.
o Dresser-Rand Company (Dresser-Rand) is a partnership between
the company and Dresser Industries, Inc. (Dresser). It
commenced operations on January 1, 1987, and comprises the
worldwide reciprocating compressor and turbomachinery
businesses of the two companies. The company's pretax profits
from its interest in Dresser-Rand for 1995 totalled $22.0
million, as compared to $24.6 million in the prior year. The
reduction is primarily attributed to lower sales volumes in
1995, when compared to 1994. However, Dresser-Rand began 1996
with a backlog in excess of $950 million.
o Ingersoll-Dresser Pump Company (IDP) is another partnership
between the company and Dresser in which the company owns the
majority interest. In 1995, the minority interest charge was
$12.7 million, as compared to the 1994 charge of $13.2
million. This charge reflects the portion of IDP's earnings
that was allocable to our joint venture partner and indicates
that IDP's earnings in 1995 were lower than in the prior year.
o The company's effective tax rate for 1995 was 37.0 percent,
which represents a slight increase over the 36.0 percent
reported for the prior year. The variance from the 35.0
percent statutory rate was due primarily to the higher tax
rates associated with foreign earnings, the effect of state
and local taxes and the nondeductibility of the goodwill
associated with the Clark acquisition.
At December 31, 1995, employment totalled 41,133. This
represents a net increase of 5,201 employees over last year's
level of 35,932. The Clark acquisition added 5,304 new
employees, while employment levels in the company's traditional
businesses declined by 103 people during 1995.
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Liquidity and Capital Resources
The most significant event affecting the company's liquidity
during 1995 was the Clark acquisition, which became effective
June 1, 1995. The total purchase price paid for Clark was
approximately $1.5 billion. After considering the cash on
Clark's books at the acquisition date, the actual cash cost of
the transaction was approximately $1.1 billion. The effects of
this transaction will be discussed throughout this section of our
report and additional information on the acquisition is described
in Note 2 to the Consolidated Financial Statements.
The following table contains several key measures which the
company's management uses to gauge the company's financial
performance:
1995 1994 1993
Working capital (in millions) $1,016 $963 $878
Current ratio 1.8 1.9 1.9
Debt-to-total capital ratio 45% 22% 28%
Average working capital
to net sales 17.3% 20.4% 22.0%
Average days outstanding
in receivables 63.1 64.6 64.1
Average months' supply
of inventory 3.3 3.7 4.4
Ingersoll-Rand, as a large multinational company, maintains
significant operations in foreign countries. The movement of the
U.S. dollar against foreign currencies has a day-to-day impact on
the company's financial position. This impact is not always
apparent since the company reports its consolidated results in
U.S. dollars. Generally, the functional currency of the
company's foreign subsidiaries is their local currency, the
currency in which they transact their business. During 1995,
many foreign currencies strengthened against the U.S. dollar for
most of the year and the effect of these foreign currency
fluctuations was significant. The company manages exposure to
changes in foreign currency exchange rates through its normal
operating and financing activities, as well as through the use of
forward exchange contracts. The company attempts, through its
hedging activities, to mitigate the impact on the income
statement of changes in foreign exchange rates. Additionally,
the company maintains operations in hyperinflationary economies
and in countries, such as Mexico, where the company's operations
transact business in U.S. dollars. The functional currency of
these operations has been and will remain the U.S. dollar.
(additional information on the company's use of financial
instruments can be found in Note 9 to the Consolidated Financial
Statements.)
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The following highlights the financial results and financial
condition of the company's operations, with the impact of
currency variations where appropriate:
o Cash and cash equivalents totalled $137.3 million at December
31, 1995, a $69.7 million decrease from the prior year-end
balance of $207.0 million. In evaluating the net change in
cash and cash equivalents, cash flows from operating,
investing and financing activities, and the effect of exchange
rate changes, should be considered. Cash flows from operating
activities totalled $403.6 million, investing activities used
$1,307.9 million and financing activities generated funds of
$830.2 million. Exchange rate changes during 1995 increased
cash and cash equivalents by approximately $4.4 million.
o Marketable securities totalled $9.3 million at the end of
1995, $5.1 million more than the balance at December 31, 1994.
The increase was due to the investment of excess cash in
various securities by foreign subsidiaries at favorable
interest rates. Foreign marketable securities decreased
slightly during the year due to foreign exchange rate
fluctuations.
o Receivables totalled $1,109.9 million at December 31, 1995,
compared to $949.4 million at the prior year end, for a net
increase of $160.5 million. Currency translation increased
the receivable balance during the year by $16.0 million, and
acquisitions added approximately $193 million during 1995.
However, the company's focus on decreasing its receivable base
through its asset management program produced a $50.9 million
reduction in receivables during the year, in spite of the
heavy sales volume in the fourth quarter of 1995. The average
days outstanding in receivables decreased to 63.1 days from
last year's level of 64.6 days, as benefits from the company's
asset management program are beginning to be realized.
o Inventories amounted to $912.6 million at December 31, 1995,
an increase of $233.3 million over last year's level of $679.3
million. Currency movements accounted for a $10.6 million
increase in inventory for the year, while acquisitions (net of
a contribution to a joint venture) accounted for an additional
$207.5 million increase in inventory. The remaining increase
of $15.2 million reflects a year-end inventory build, to
fulfill new orders during the first few months of the year
based on the company's sales growth and backlog. However, the
company's emphasis on inventory control was reflected in the
reduction of the average months' supply of inventory, which
was 3.3 months at December 31, 1995, compared to 3.7 months at
the prior year end.
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o Prepaid expenses totalled $58.0 million at the end of the
year, $14.2 million higher than the balance at December 31,
1994. Foreign exchange activity had a minimal effect on the
balance in this account, while acquisition activity accounted
for an additional $8.3 million of the increase. The remaining
net increase for the year was due to a general increase in the
company's prepaid expenses.
o Deferred income taxes (current) of $118.5 million at December
31, 1995, represent the deferred tax benefit of the difference
between the book and tax values of various current assets and
liabilities. A schedule of the components for this balance is
in Note 14 to the Consolidated Financial Statements. The
year-end balance represented a decrease of $0.7 million from
the December 31, 1994, level. Changes due to foreign currency
movements had no effect on the year's activity.
o The investment in Dresser-Rand Company totalled $93.9 million
at December 31, 1995. This represented a net increase of
approximately $3.2 million from 1994's balance of $90.7
million. The components of the change for 1995 consisted of
income for the current year of $22.0 million, and an $18.8
million change in the advance account between the entities.
o The investments in partially-owned equity companies at
December 31, 1995, totalled $223.3 million, $49.4 million
higher than the 1994 balance. Income and dividends from
investments in partially-owned equity companies were $26.2
million and $6.7 million, respectively. Amounts due from
these units increased from $3.4 million to $20.4 million at
December 31, 1995. Currency movements relating to partially-
owned equity companies were approximately $1 million in 1995.
During 1995, the company contributed approximately $11 million
of assets for an equity interest in a European joint venture.
These assets were principally inventory and fixed assets.
o Net property, plant and equipment increased by $319.1 million
in 1995 to a year-end balance of $1,278.4 million. Fixed
assets from acquisitions during 1995 added $292.0 million.
Capital expenditures in 1995 totalled $211.7 million, a
33-percent increase over the prior year's level. Foreign
exchange fluctuations increased the net fixed asset values in
U.S. dollars by approximately $12 million. The remaining net
decrease was the result of depreciation, sales and
retirements, and a contribution of assets to a joint venture
company.
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o Intangible assets, net, totalled $1,253.6 million at December
31, 1995, as compared to $124.5 million at December 31, 1994,
for a net increase of $1,129.1 million. Acquisitions added
$1,122.1 million of intangibles, primarily goodwill, during
1995. Goodwill from the Clark acquisition was approximately
$740 million. In addition, Clark had approximately $380
million of goodwill when acquired. Amortization expense
accounted for a reduction of $25.3 million. The remaining net
change was attributable to an increase from currency
fluctuations and an increase in the required pension
intangible asset.
o Deferred income taxes (noncurrent) totalled $134.8 million at
December 31, 1995. This net deferred asset arose in 1992
primarily because of the tax effects related to the adoption
of SFAS No. 106 (Postretirement Benefits Other Than Pensions).
The 1995 balance was $60.4 million higher than the 1994
balance principally due to taxes associated with or assumed as
a result of the Clark acquisition. A listing of the
components which comprised the balance at December 31, 1995,
can be found in Note 14 to the Consolidated Financial
Statements.
o Other assets totalled $233.7 million at year end, an increase
of $62.5 million from the December 31, 1994, balance of $171.2
million. The change in the account balance was primarily due
to an increase in prepaid pensions and other noncurrent assets
of approximately $19 million, with acquisition activity
accounting for the balance of the increase. Foreign exchange
activity in 1995 had a minimal effect on the account balance
during the year.
o Accounts payable and accruals totalled $1,129.8 million at
December 31, 1995, an increase of $246.0 million from last
year's balance of $883.8 million. Acquisition activity during
1995 accounted for $258.9 million of the increase and foreign
exchange activity during the year added an additional $17.9
million. The company's aggressive cash management program
accounted for the balance of the reduction.
o Loans payable were $155.4 million at the end of 1995 and
reflects a $38.2 million increase over the $117.2 million at
December 31, 1994. Current maturities of long-term debt,
included in loans payable, were $102.9 million and $4.2
million at December 31, 1995 and 1994, respectively. The
company's aggressive cash management program accounted for an
$81.5 million reduction in short-term debt for 1995, while
acquisition activity and foreign currency fluctuations
increased short-term debt during 1995 by $15.0 million and
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$5.9 million, respectively. The change in current maturities
of long-term debt included movement to current maturities of
$103.5 million, payments of $17.9 million, acquired debt of
$12.8 million and foreign exchange activity.
o Long-term debt, excluding current maturities, totalled
$1,304.4 million, an increase of $988.5 million over the prior
year's balance of $315.9 million. The acquisition of Clark
resulted in $900 million of long-term debt relating to the
purchase of Clark. The consolidation of Clark added another
$195.4 million of debt to the company's balance sheet.
Foreign currency fluctuations increased this liability by an
additional $0.9 million. Reductions of $109.4 million in
long-term debt were caused by the reclassification of $103.5
million of current maturities to loans payable and the early
payment of an additional $5.9 million of debt during the year.
o Postemployment liabilities at December 31, 1995, totalled
$832.1 million, an increase of $313.8 million over the
December 31, 1994, balance. Postemployment liabilities
include medical and life insurance postretirement benefits,
long-term pension accruals and other noncurrent postemployment
accruals. The increase in the liability during 1995 is almost
exclusively related to the Clark acquisition. Postemployment
liabilities represent the company's noncurrent liabilities in
accordance with SFAS Nos. 87, 106 and 112. (See Notes 16 and
17 to the Consolidated Financial Statements for additional
information.)
o The Ingersoll-Dresser Pump Company (IDP) minority interest,
which represents Dresser's interest in the IDP joint venture,
totalled $170.8 million and $154.1 million at December 31,
1995 and 1994, respectively. Earnings allocable to IDP's
minority interest totalled $12.7 million for 1995, while
increases due to translation adjustments totalled $2.9
million. At December 31, 1995, Dresser had loans payable to
IDP totalling $9.7 million, which was shown as a reduction in
IDP's minority interest.
o Other liabilities (noncurrent) at December 31, 1995, totalled
$131.3 million, which were $94.0 million higher than the
balance at December 31, 1994. The net increase for 1995 is
almost exclusively related to the Clark acquisition. These
obligations are not expected to be paid out in the company's
next business cycle. These accruals generally cover
environmental obligations, legal accruals and other
contractual obligations.
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o At the time of its acquisition by the company, Clark sponsored
a Leveraged Employee Stock Ownership Plan (LESOP) for eligible
employees. In connection with the acquisition, the company
purchased the LESOP's Clark shares for $176.6 million. The
company determined it would continue the LESOP to fund certain
employee benefit plans. At December 31, 1995, approximately
1.9 million shares of the company's common stock were
unallocated and the $70.2 million paid by the LESOP for those
unallocated shares is classified as a reduction of
shareowners' equity pending allocation to participants. (See
Note 12 to the Consolidated Financial Statements for
additional information.)
Other information concerning the company's financial
resources, commitments and plans is as follows:
The average amount of short-term borrowings outstanding,
excluding current maturities of long-term debt, was $156.1
million in 1995, compared to $141.9 million in 1994. The
weighted average interest rate during 1995 was 8.3%, compared to
6.8% during the previous year. The maximum amounts outstanding
during 1995 and 1994 were $222.0 million and $181.6 million,
respectively. The increase in the 1995 average amount of
short-term borrowings outstanding was attributable to short-term
financings related to the Clark acquisition.
The company had $800 million in domestic short-term credit
lines at December 31, 1995, and $676 million of foreign credit
available for working capital purposes, all of which were unused
at the end of the year. These facilities exceed projected
requirements for 1996 and provide direct support for commercial
paper and indirect support for other financial instruments, such
as letters of credit and comfort letters.
At December 31, 1995, the debt-to-total capital ratio was 45
percent, as compared to 22 percent at the prior year end. The
significant change in the ratio at December 31, 1995, was
primarily due to the acquisition of Clark, which initially added
approximately $1.5 billion of debt to the company's balance sheet
generating an initial debt-to-total capital ratio of 55 percent.
Since the acquisition, the company's continuing programs of
inventory reductions and spending controls to generate cash, were
used to reduce the company's overall debt obligations and lower
the debt-to-total capital ratio to the 45-percent relationship at
December 31, 1995.
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In 1995, foreign currency adjustments increased shareowners'
equity by approximately $20.7 million. The change was due to the
weakening of the U.S. dollar against other currencies in
countries where the company has significant operations and the
local currencies are the functional currencies. Currency
fluctuations in France, Germany, Italy, India, Japan, Singapore
and Spain accounted for over 90 percent of the change.
Inventories, accounts receivable, net property, plant and
equipment, accounts payable and loans payable were the principal
accounts affected.
As a result of the Clark acquisition, the company is involved
in certain repurchase arrangements relating to product-
distribution and product-financing activities. As of December
31, 1995, repurchase arrangements relating to product financing
by an independent finance company approximated $102 million. It
is not practicable to determine the additional amount subject to
repurchase solely under dealer distribution agreements. Under
the repurchase arrangements relating to product-distribution and
product-financing activities when dealer terminations do occur, a
newly selected dealer generally acquires the assets of the prior
dealer and assumes any related financial obligation.
Accordingly, the risk of loss to the company is minimal.
Historically, Clark incurred only immaterial losses relating to
these arrangements.
In 1995, the company continued to sell an undivided fractional
ownership interest in designated pools of accounts and notes
receivable up to a maximum of $150 million. Similar agreements
have been in effect since 1987. These agreements expire in one-
and two-year periods based on the particular pool of receivables
sold. The company intends to renew these agreements at their
expiration dates with either the current institution or another
financial institution using the basic terms and conditions of the
existing agreements. At December 31, 1995 and 1994, $150 million
and $125 million, respectively, of such receivables remained
uncollected.
Capital expenditures were $212 million and $159 million in
1995 and 1994, respectively. The company continues investing to
improve manufacturing productivity, reduce costs and provide
environmental enhancements and advanced technologies for existing
facilities. The capital expenditure program for 1996 is
estimated at approximately $225 million, including carryover from
projects approved in prior periods. There are no planned
projects that, either individually or in the aggregate, represent
a material commitment for the company. Many of these projects
are subject to review and cancellation at the option of the
company without incurring substantial charges.
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As a result of high inflationary periods in the 1970s,
experimental disclosure of supplementary information to measure
the effects of inflation on historical financial statements in
terms of the constant dollar and current costs was required.
While the company presented inflation-adjusted data, the
information presented was based on assumptions, estimates and
judgments, which were far from precise indicators of the effects
of inflation on the company. High inflationary trends have
dissipated in recent years and, after a review of the effects of
inflation, the company has determined that such information is
neither material nor meaningful at this time.
Environmental Matters
The company is subject to extensive environmental laws and
regulations. We believe that the company, as well as industry in
general, will be faced with increasingly stringent laws and
regulations in the future. As a result, the company has been and
continues to be dedicated to an environmental program to reduce
the utilization and generation of hazardous materials during the
manufacturing process and to remediate identified environmental
concerns. As to the latter, the company currently is engaged in
site investigations and remedial activities to address
environmental cleanup from past operations at current and former
manufacturing facilities, including the facilities added through
the Clark acquisition.
During 1995, the company spent approximately $6 million on
capital projects for pollution abatement and control and an
additional $8 million for environmental remediation expenditures,
including operation and maintenance of existing environmental
programs. It should be noted that these amounts are difficult to
estimate because environmental improvements are generally
intertwined with the overall improvement costs at a particular
plant, and the accurate estimate of which portion of an
improvement or a capital expenditure relates to an environmental
improvement is difficult to ascertain. The company believes that
these expenditure levels will continue and may increase over
time. Given the evolving nature of environmental laws,
regulations and technology, the ultimate cost of future
compliance is uncertain.
The company is a party to environmental lawsuits and claims.
It has received notices of potential violations of environmental
laws and regulations from the Environmental Protection Agency and
similar state authorities, and is identified as a potentially
responsible party (PRP) for cleanup costs at approximately 37
federal Superfund and state remediation sites (including Clark-
acquired PRP locations). For all sites there are other PRPs and
in most instances, the company's site involvement is minimal.
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While all PRPs may be jointly and severally liable to pay all
site investigation and remediation costs, to date there is no
indication the company will be liable for more than the costs of
its own percentage of responsibility at any site. Additional
lawsuits and claims involving environmental matters are likely to
arise from time to time in the future.
Although uncertainties regarding environmental technology,
state and federal laws and regulations and individual site
information make estimating the liability difficult, management
believes that the total liability for the cost of remediation and
environmental lawsuits and claims will not have a material effect
on the financial condition, results of operations, liquidity or
cash flows of the company for any year. 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.
1994 Compared to 1993
1994 marked a milestone in the company's history. Its 1994
financial performance registered record levels in sales of $4.5
billion and record net earnings of $211.1 million, or $2.00 per
share. 1994 was a year of achievement brought about by strong
domestic markets for most of the company's products, recovering
European markets and continued benefits from asset management and
cost containment programs.
The company's outlook for 1995 was for a steady improvement in
operating results based on continued stability in our domestic
markets and additional recoveries in our international markets.
As outlined in 1993, these expectations are supplemented by our
aggressive cost-containment programs, our commitment to total
quality management and a focus on reengineering our business
processes to accelerate our efficiency gains.
A comparison of key financial data between 1994 and 1993
follows:
o Net sales in 1994 totalled $4.5 billion, representing an
increase of $486 million over 1993 and establishing a new
record high. Net sales reflected strong increases in the
Standard Machinery and Bearings, Locks and Tools segments.
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o Cost of goods sold in 1994 was 74.9 percent of sales, compared
to 75.0 percent in 1993. A partial liquidation of LIFO
(last-in, first-out) inventories lowered 1994 costs by $11.6
million ($7.1 million after-tax, or seven cents per share); a
similar liquidation in 1993 lowered costs by $12.5 million
($7.6 million after-tax, or seven cents per share). Excluding
the benefit of the LIFO liquidations, the 1994 cost of goods
sold percentage relationship to sales would have been 75.2
percent versus 75.3 percent for 1993. This reduction
represented the benefit from the company's continuing programs
of aggressive cost-containment.
o Administrative, selling and service engineering expenses were
16.7 percent of sales in 1994, compared to 17.6 percent for
1993. The marked improvement was due to the continued effect
of the company's efforts from cost-containment programs and
the benefit of leverage from the increased sales volume which
were large enough to offset the effects of inflation for
salaries, services, etc.
o Operating income for the year totalled $377.0 million, an
increase of 27.2 percent over 1993's operating income of
$296.5 million, before the restructure of operations charge.
The 1993 restructure of operations charge totalled $5.0
million and related to the company's decision to sell its
underground coal-mining machinery business during the second
quarter of the year. The sale of this business was finalized
in July 1993. There were no restructuring charges in 1994.
o Interest expense for 1994 was $43.8 million, approximately 16
percent lower than the $52.0 million reported for 1993. The
reduction was due to lower overall outstanding indebtedness,
which was a result of the company's ongoing asset management
program.
o The other income (expense), net, category is essentially the
sum of three activities: (i) foreign exchange, (ii) equity
interests in partially-owned equity companies, and (iii) other
miscellaneous income and expense items. In 1994, this
category totalled a net expense balance of $14.7 million, a
$7.2 million increase in net expense over 1993's level. A
review of the components of this category show that:
o foreign exchange activity for 1994 totalled $6.1 million of
losses, as compared to $6.6 million of losses in 1993;
o earnings from equity interests in partially-owned equity
companies were approximately $2 million lower than 1993's
level, reflecting a 1994 loss on the sale of a partially-
owned company; and
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o other net miscellaneous expense items were approximately
double the 1993 level, principally due to lower gains on the
sale of fixed assets and lower royalty earnings.
o Dresser-Rand Company is a partnership between the company and
Dresser Industries, Inc. (Dresser). It commenced operations
on January 1, 1987, and comprises the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
The company's pretax profits from its interest in Dresser-Rand
for 1994 totalled $24.6 million, as compared to $33.1 million
in 1993. The reduction is attributed to the combination of an
increase in expenses to establish a presence in Eastern
Europe, increased depreciation charges due to the effect of
equipment improvement programs during the past few years and
lower production levels in some businesses.
o Ingersoll-Dresser Pump Company (IDP) is another partnership
between the company and Dresser in which the company owns the
majority interest. In 1994, the minority interest charge was
$13.2 million, as compared to the 1993 charge of $11.6
million. This charge reflects the portion of IDP's earnings
that was allocable to our joint venture partner.
o The company's effective tax rate for 1994 was 36.0 percent,
which was a slight increase over the 35.5 percent reported for
1993. The variance from the 35.0 percent statutory rate was
due primarily to the higher tax rates associated with foreign
earnings and the effect of state and local taxes.
At December 31, 1994, employment totalled 35,932. This
represents a net increase of 789 employees over 1993's level of
35,143. Acquisitions accounted for virtually all of this
increase.
The following highlights the financial results and financial
condition of the company's operations, with the impact of
currency variations where appropriate:
o Cash and cash equivalents totalled $207.0 million at December
31, 1994, a $21.0 million decrease from the December 31, 1993
balance of $228.0 million. In evaluating the net change in
cash and cash equivalents, cash flows from operating,
investing and financing activities, and the effect of exchange
rate changes, should be considered. Cash flows from operating
activities totalled $301.8 million, investing activities used
$141.7 million and financing activities used $187.7 million.
Exchange rate changes during 1994 increased cash and cash
equivalents by approximately $6.6 million.
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o Marketable securities totalled $4.2 million at the end of
1994, $1.9 million less than the balance at December 31, 1993.
Foreign marketable securities increased by approximately $0.9
million during the year due to foreign exchange rate
fluctuations. The remaining reduction was due to the maturity
of the various securities and their liquidation into cash and
cash equivalents.
o Receivables totalled $949.4 million at December 31, 1994,
compared to $797.5 million at December 31, 1993, for a net
increase of $151.9 million. Currency translation increased
the receivable balance during the year by $21.4 million, and
acquisitions added approximately $20 million during 1994. In
addition, heavy sales volume in the 1994 fourth quarter
contributed significantly to the increase. Net sales for the
fourth quarter of 1994 increased 14 percent over 1993's fourth
quarter. The average days outstanding in receivables
increased slightly from 1993's level because of the higher mix
of international receivables, which traditionally carry longer
payment terms than domestic receivables and customers in
certain domestic industries, who have implemented slightly
longer payment terms.
o Inventories amounted to $679.3 million at December 31, 1994,
$34.4 million lower than December 31, 1993's level of $713.7
million. This decrease was a result of the company's
aggressive inventory control programs and record fourth
quarter sales, which reduced inventory levels by approximately
$82 million. Currency movements accounted for a $21.3 million
increase in inventory for the year, while acquisitions
accounted for an additional $25.9 million increase in
inventory. The company's emphasis on inventory control was
reflected in the reduction in the average months' supply of
inventory, which was 3.7 months at December 31, 1994, compared
to 4.4 months at December 31, 1993.
o Prepaid expenses totalled $43.8 million at the end of the
year, $3.9 million higher than the balance at December 31,
1993. Foreign exchange activity had the effect of increasing
the balance in this account by $1.9 million during the year.
The remaining net increase for the year was due to a general
increase in the company's prepaid expenses of $1.3 million,
and acquisitions contributed $0.7 million.
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o Deferred income taxes (current) of $119.2 million at December
31, 1994, represent the deferred tax benefit of the difference
between the book and tax values of various current assets and
liabilities. A schedule of the components for this balance is
in Note 14 to the Consolidated Financial Statements. The
year-end balance represented an increase of approximately $2
million from the December 31, 1993, level. Changes due to
foreign currency movements had an immaterial effect on the
year's activity.
o The investment in Dresser-Rand Company totalled $90.7 million
at December 31, 1994. This represented a net decrease of
approximately $21.9 million from 1993's balance of $112.6
million. The components of the change for 1994 consisted of
income for the current year of $24.6 million, a $48.9 million
change in the advance account between the entities and a $2.4
million increase due to currency fluctuations.
o The investments in partially-owned equity companies at
December 31, 1994, totalled $173.9 million, $15.2 million
higher than the 1993 balance. Income and dividends from
investments in partially-owned equity companies were $15.6
million and $3.8 million, respectively. Amounts due from
these units decreased from $27.6 million to $3.4 million at
December 31, 1994. Currency movements relating to partially-
owned equity companies were approximately $11.1 million in
1994. In 1994, the company acquired full ownership of a ball
bearing joint venture with GMN Mueller of America, Inc. The
company also entered into a 50/50 joint venture, GHH-RAND
Schraubenkompressoren GmbH & Co. KG, to manufacture airends.
Also in 1994, the assets of the IDP Australian operations were
sold in return for shares of the purchaser. The company also
sold its interest in IRI International Corporation, a
manufacturer of mobile drilling rigs.
o Net property, plant and equipment increased by approximately
$84 million in 1994 to a year-end balance of $959.3 million.
Fixed assets from acquisitions during 1994 added $39.8
million. Capital expenditures in 1994 totalled $158.6
million, a 20-percent increase over 1993's level. Foreign
exchange fluctuations increased the net fixed asset values in
U.S. dollars by approximately $16.8 million. The remaining
net decrease was principally due to depreciation expense.
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o Intangible assets, net, totalled $124.5 million at December
31, 1994, as compared to $105.9 million at December 31, 1993,
for a net increase of $18.6 million. Amortization (which was
charged to expense) accounted for a reduction of $6.8 million.
Acquisitions added $27.8 million of intangibles during 1994.
The remaining net change was attributable to an increase from
currency fluctuations and a decrease in the required pension
intangible asset.
o Deferred income taxes (noncurrent) totalled $74.4 million at
December 31, 1994. This net deferred asset arose in 1992
primarily because of the tax effects related to the adoption
of SFAS No. 106 (Postretirement Benefits Other Than Pensions).
The 1994 balance was $16.4 million lower than the 1993
balance. A listing of the components which comprised the
balance at December 31, 1994, can be found in Note 14 to the
Consolidated Financial Statements.
o Other assets totalled $171.2 million at December 31, 1994, an
increase of approximately $41.2 million from the December 31,
1993, balance of $130.0 million. The change in the account
balance was primarily due to an increase in prepaid pensions
and acquisitions. Foreign exchange activity in 1994 had a
minimal effect on the account balance during the year.
o Accounts payable and accruals totalled $883.8 million at
December 31, 1994, an increase of $121.4 million from December
31, 1993's balance of $762.4 million. The increase in the
1994 balance is related to acquisitions, foreign exchange
activity, and a general increase in trade accounts payable.
Acquisitions caused an increase of approximately $50 million
and foreign currency activity added approximately $20 million.
o Loans payable were $117.2 million at the end of 1994, compared
to $206.9 million at December 31, 1993. Current maturities of
long-term debt, included in loans payable, were $4.2 million
and $82 million at December 31, 1994 and 1993, respectively.
Excluding the current maturities of long-term debt, short-term
borrowings decreased by $24.4 million during 1994. This
balance can be attributed to a decrease in foreign short-term
debt offset by increases in the total loans outstanding during
1994 of $11.8 million due to foreign currency fluctuations and
debt assumed from acquisitions.
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o Long-term debt, excluding current maturities, totalled $315.9
million at December 31, 1994, compared to $314.1 million at
December 31, 1993, a net increase of $1.8 million. This net
increase was the result of additions to long-term debt of $2.3
million, additions due to acquisitions of $6.9 million, a $0.4
million increase from foreign currency fluctuations; reduced
by transfers to loans payable for current maturities.
o Postemployment liabilities at December 31, 1994, totalled
$518.3 million, an increase of $2.5 million over the December
31, 1993, balance. Postemployment liabilities include medical
and life insurance postretirement benefits, long-term pension
accruals and other noncurrent postemployment accruals.
Postemployment liabilities represent the company's noncurrent
liabilities in accordance with SFAS Nos. 87, 106 and 112. See
Notes 16 and 17 to the Consolidated Financial Statements for
additional information.
o The Ingersoll-Dresser Pump Company minority interest, which
represents Dresser's interest in the IDP joint venture,
totalled $154.1 million and $146.3 million at December 31,
1994 and 1993, respectively. Earnings allocable to IDP's
minority interest totalled $13.2 million for 1994, while
increases due to translation adjustments totalled $5.4
million. At December 31, 1994, Dresser had loans payable to
IDP totalling $10.8 million which was shown as a reduction in
IDP's minority interest. Earnings allocable to IDP's minority
interest totalled $11.6 million for 1993, which were virtually
offset by translation adjustment and final valuation
modifications.
o Other liabilities (noncurrent) at December 31, 1994, totalled
$37.3 million, which were $12.4 million higher than the
balance at December 31, 1993. The net increase for 1994
represented changes to various accruals primarily due to
acquisitions, which are not expected to be paid out in the
company's next business cycle. These accruals generally cover
environmental obligations, legal accruals, and other
contractual obligations.
Other information concerning the company's financial
resources, commitments and plans is as follows:
135<PAGE>
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The average amount of short-term borrowings outstanding,
excluding current maturities of long-term debt, was $141.9
million in 1994, compared to $159.1 million in 1993. The
weighted average interest rate during 1994 was 6.8%, compared to
7.8% during 1993. The maximum amounts outstanding during 1994
and 1993 were $181.6 million and $184.1 million, respectively.
The decrease in the 1994 average amount of short-term borrowings
outstanding was attributable to the company's foreign operations,
which used short-term debt financings as a hedge against currency
movements.
The company had a $400 million domestic short-term credit line
at December 31, 1994, and $466 million of foreign credit
available for working capital purposes, all of which were unused
at the end of the year. These facilities provide direct support
for commercial paper and indirect support for other financial
instruments, such as letters of credit and comfort letters.
At December 31, 1994, the debt-to-total capital ratio was 22
percent, as compared to 28 percent at December 31, 1993. The
significant improvement in the ratio at December 31, 1994, was
primarily due to the company's continuing programs of inventory
reductions and spending controls to generate cash, which was used
to reduce the company's overall debt obligations.
In 1994, foreign currency adjustments increased shareowners'
equity by $38.4 million. The change was due to the weakening of
the U.S. dollar against other currencies in countries where the
company has significant operations and the local currencies are
the functional currencies. Currency fluctuations in the United
Kingdom, Canada, France, Italy, Germany, Australia, Singapore,
Japan and Spain accounted for approximately 80 percent of the
change. Inventories, accounts receivable, net property, plant
and equipment, accounts payable and loans payable were the
principal accounts affected.
In 1994, the company continued to sell an undivided fractional
ownership interest in designated pools of accounts and notes
receivable up to a maximum of $125 million. Similar agreements
have been in effect since 1987. These agreements expire in one-
and two-year periods based on the particular pool of receivables
sold. The company intends to renew these agreements at their
expiration dates with either the current institution or another
financial institution using the basic terms and conditions of the
existing agreements. At December 31, 1994 and 1993, $125 million
of such receivables remained uncollected.
136<PAGE>
EXHIBIT 13
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REVIEW OF BUSINESS SEGMENTS
Standard Machinery
Standard Machinery Segment sales were $2.3 billion, an increase
of 57 percent over the $1.4 billion reported for 1994. Operating
income for 1995, totalled $222.6 million, representing an
increase of 82 percent over last year's total of $122.4 million.
This segment now includes all of the operations of Clark, except
for Clark-Hurth, effective June 1, 1995. Without the sales from
the Clark units, 1995 sales were $1.7 billion, or $266.9 million
higher than 1994's level. Operating income, without the Clark
units was $157.0 million, an increase of 28 percent over 1994's
results.
The Construction and Mining Group's sales for 1995, excluding
the Blaw-Knox unit from Clark, were more than 20 percent higher
than last year's level due to strong domestic markets and
improved conditions in international markets. The group's
operating income and operating income margins improved markedly
over 1994's results. Sales for the Air Compressor Group were
approximately 15 percent higher than 1994's level based on
continued strong demand for its products both domestically and
internationally. The group reported a double-digit increase in
operating income for the year. The operations of the Clark
units, which are now included within this segment (i.e. Melroe
Company, Club Car, Inc. and Blaw-Knox Construction Equipment
Corporation) generated over $500 million in sales and produced
approximately $60 million of operating income since the June 1,
1995, acquisition date. However, it should be noted that the
operations of Club Car and Blaw-Knox are traditionally more
profitable during the first half of the year than in the latter
half.
Engineered Equipment
Engineered Equipment Segment sales for 1995 totalled $1.2
billion, or 31 percent above 1994's level. Operating income was
$49.5 million, representing a 40-percent increase over the 1994
total of $35.3 million. This segment also includes the results
of Clark-Hurth Components Company (Clark-Hurth), effective June
1, 1995. Excluding the sales from Clark-Hurth, 1995 segment
sales were $1,011.3 million, a nine-percent increase over 1994's
level. Operating income, without Clark-Hurth, totalled $41.6
million, representing an 18-percent increase over the amount
reported for the twelve months ended December 31, 1994.
137<PAGE>
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IDP's sales in 1995 reflected a marginal improvement over
1994's level; however, they reported lower operating income in
1995 versus 1994 due to lower margins on some large 1995 orders.
Sales and operating income in the Process Systems Group reflected
significant improvement over 1994 levels due to the continued
strength in the pulp and paper industry. (See Note 18 to the
Consolidated Financial Statements concerning the potential sale
of the Pulp Machinery Division.)
Bearings, Locks and Tools
In 1995, the Bearings, Locks and Tools Segment reported sales of
$2.2 billion, a five-percent increase over the prior year.
Operating income totalled $269.1 million, an increase of more
than $12 million over the $256.6 million reported for 1994.
Bearings and Components Group sales for 1995 exceeded the
prior year's level by more than six percent. A strong domestic
automotive industry and continued benefits from cost-containment
programs generated improved operating income for this group in
1995.
Architectural Hardware Group sales were slightly below 1994's
level. The group's operating income for the year was also below
1994's level by approximately five percent. The decline in sales
and operating income can be attributed to system problems during
the third quarter of the year when a new system failed to meet
expectations, and caused problems, such as shipment delays.
These problems were corrected by the end of the year.
The Production Equipment Group sales and operating income in
1995 reflected improvements over the amounts reported for the
prior year. An improving economy in the European-served area and
stronger domestic markets contributed to the group's improved
results for 1995.
138<PAGE>
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Consolidated Statement of Income
In millions except per share amounts
For the years ended December 31 1995 1994 1993
Net sales $5,729.0 $4,507.5 $4,021.1
Cost of goods sold 4,310.2 3,377.1 3,016.7
Administrative, selling and
service engineering
expenses 921.8 753.4 707.9
Restructure of operations-
charge -- -- (5.0)
Operating income 497.0 377.0 291.5
Interest expense (86.6) (43.8) (52.0)
Other income (expense), net 9.4 (14.7) (7.5)
Dresser-Rand income 22.0 24.6 33.1
Ingersoll-Dresser Pump
minority interest (12.7) (13.2) (11.6)
Earnings before income taxes
and effect of accounting
change 429.1 329.9 253.5
Provision for income taxes 158.8 118.8 90.0
Earnings before effect of
accounting change 270.3 211.1 163.5
Effect of accounting change
for postemployment benefits
(net of tax benefits) -- -- (21.0)
Net earnings $ 270.3 $ 211.1 $ 142.5
Earnings per share of
common stock:
Earnings before effect
of accounting change $2.55 $2.00 $1.56
Effect of accounting change
for postemployment benefits -- -- (0.20)
Net earnings per share $2.55 $2.00 $1.36
See accompanying notes to consolidated financial statements.
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Consolidated Balance Sheet
In millions except share amounts
December 31 1995 1994
Assets
Current assets:
Cash and cash equivalents $ 137.3 $ 207.0
Marketable securities 9.3 4.2
Accounts and notes receivable, less
allowance for doubtful accounts of
$38.3 in 1995 and $25.9 in 1994 1,109.9 949.4
Inventories 912.6 679.3
Prepaid expenses 58.0 43.8
Deferred income taxes 118.5 119.2
2,345.6 2,002.9
Investments and advances:
Dresser-Rand Company 93.9 90.7
Partially-owned equity companies 223.3 173.9
317.2 264.6
Property, plant and equipment, at cost:
Land and buildings 682.9 557.3
Machinery and equipment 1,522.3 1,261.3
2,205.2 1,818.6
Less-accumulated depreciation 926.8 859.3
1,278.4 959.3
Intangible assets, net 1,253.6 124.5
Deferred income taxes 134.8 74.4
Other assets 233.7 171.2
$5,563.3 $3,596.9
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $1,129.8 $ 883.8
Loans payable 155.4 117.2
Customers' advance payments 17.7 16.9
Income taxes 26.3 22.1
1,329.2 1,040.0
Long-term debt 1,304.4 315.9
Postemployment liabilities 832.1 518.3
Ingersoll-Dresser Pump Company
minority interest 170.8 154.1
Other liabilities 131.3 37.3
Shareowners' equity:
Common stock, $2 par value, authorized
400,000,000 shares; issued:
1995-109,704,883; 1994-109,168,872 219.4 218.3
Capital in excess of par value 121.6 42.4
Earnings retained for use in the business 1,595.5 1,403.7
1,936.5 1,664.4
Less:
- Unallocated LESOP shares, at cost 70.2 --
- Treasury stock, at cost 11.5 53.1
- Foreign currency equity adjustment 59.3 80.0
Shareowners' equity 1,795.5 1,531.3
$5,563.3 $3,596.9
See accompanying notes to consolidated financial statements.
140<PAGE>
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Consolidated Statement of Shareowners' Equity
In millions except share data
December 31 1995 1994 1993
Common stock, $2 par value:
Balance at beginning of year $ 218.3 $ 217.9 $ 216.6
Exercise of stock options
and SARs 1.0 .2 1.1
Issuance of shares under
stock plans .1 .2 .2
Balance at end of year 219.4 218.3 217.9
Capital in excess of par value:
Balance at beginning of year 42.4 34.9 17.1
Exercise of stock options and
SARs including tax benefits 14.6 3.3 14.3
Issuance of shares under
stock plans 2.0 4.2 3.5
Sale of treasury shares to LESOP 62.7 -- --
Allocation of LESOP shares to
employees (0.1) -- --
Balance at end of year 121.6 42.4 34.9
Earnings retained for use
in the business:
Balance at beginning of year 1,403.7 1,268.5 1,199.5
Net earnings 270.3 211.1 142.5
Cash dividends (78.5) (75.9) (73.5)
Balance at end of year 1,595.5 1,403.7 1,268.5
Unallocated leveraged employee
stock ownership plan:
Balance at beginning of year -- -- --
Purchase of treasury shares (73.1) -- --
Allocation of shares to employees 2.9 -- --
Balance at end of year (70.2) -- --
Treasury stock-at cost:
Common stock, $2 par value:
Balance at beginning of year (53.1) (53.1) (53.1)
Sale of treasury shares to LESOP 41.6 -- --
Balance at end of year (11.5) (53.1) (53.1)
Foreign currency
equity adjustment:
Balance at beginning of year (80.0) (118.4) (86.7)
Adjustments due to
translation changes 20.7 38.4 (31.7)
Balance at end of year (59.3) (80.0) (118.4)
Total shareowners' equity $1,795.5 $1,531.3 $1,349.8
141<PAGE>
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Shares of Capital Stock
Common stock, $2 par value:
Balance at beginning of year 109,168,872 108,939,462 108,276,462
Exercise of stock options
and SARs 474,250 112,850 547,400
Issuance of shares under
stock plans 61,761 116,560 115,600
Balance at end of year 109,704,883 109,168,872 108,939,462
Unallocated leveraged employee
stock ownership plan:
Common stock, $2 par value:
Balance at beginning of year -- -- --
Purchase of treasury shares 2,878,008 -- --
Allocated to prior Clark
participants (862,680) -- --
LESOP shares allocated to
employees (78,130) -- --
Balance at end of year 1,937,198 -- --
Treasury stock:
Common stock, $2 par value:
Balance at beginning of year 3,672,732 3,672,732 3,672,822
Sale of shares to LESOP (2,878,008) -- --
Disposition of stock -- -- (90)
Balance at end of year 794,724 3,672,732 3,672,732
See accompanying notes to consolidated financial statements.
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EXHIBIT 13
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Consolidated Statement of Cash Flows
In millions
For the years ended December 31 1995 1994 1993
Cash flows from operating activities:
Net earnings $ 270.3 $ 211.1 $ 142.5
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 179.4 132.5 123.5
Gain on sale of assets (3.6) (.1) (5.5)
Loss on disposition of domestic
paving business 7.1 -- --
Minority interests 14.0 13.8 13.6
Equity earnings/losses,
net of dividends (41.5) (36.4) (45.6)
Deferred income taxes 15.1 14.2 (14.8)
Other noncash items 1.4 (10.5) .1
Effect of accounting changes -- -- 21.0
Restructure of operations -- -- 5.0
Changes in assets and liabilities
(Increase) decrease in:
Accounts and notes receivable 50.9 (111.8) (12.0)
Inventories (15.2) 81.6 35.5
Other current and noncurrent
assets (33.1) (14.6) (22.3)
(Decrease) increase in:
Accounts payable and accruals (37.9) 41.5 (73.3)
Other current and noncurrent
liabilities (3.3) (19.5) (2.8)
Net cash provided by operating
activities 403.6 301.8 164.9
Cash flows from investing activities:
Capital expenditures (211.7) (158.6) (132.0)
Proceeds from sales of property,
plant and equipment 26.5 7.3 6.6
Proceeds from business dispositions -- 2.2 55.5
Acquisitions, net of cash* (1,136.5) (37.8) (42.5)
(Increase) decrease in marketable
securities (4.6) 2.8 6.4
Cash (invested in) or advances (to)
from equity companies 18.4 42.4 45.3
Net cash used in investing
activities (1,307.9) (141.7) (60.7)
Cash flows from financing activities:
Decrease in short-term borrowings (81.5) (31.4) (49.5)
Debt issuance costs (6.0) -- --
Proceeds from long-term debt 901.7 2.3 101.8
Payments of long-term debt (23.7) (85.7) (78.0)
Net change in debt 790.5 (114.8) (25.7)
Proceeds from exercise of stock
options and treasury stock sales 118.2 3.0 13.1
Dividends paid (78.5) (75.9) (73.5)
Net cash provided by (used in)
financing activities 830.2 (187.7) (86.1)
143<PAGE>
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Consolidated Statement of Cash Flows (Continued)
In millions
For the years ended December 31 1995 1994 1993
Effect of exchange rate changes on cash
and cash equivalents 4.4 6.6 (6.9)
Net (decrease) increase in cash
and cash equivalents (69.7) (21.0) 11.2
Cash and cash equivalents-
beginning of year 207.0 228.0 216.8
Cash and cash equivalents-end of year $ 137.3 $ 207.0 $ 228.0
*Acquisitions:
Working capital, other than cash $ (161.4) $ 15.9 $ (25.6)
Property, plant and equipment (292.0) (39.8) (25.9)
Intangibles and other assets (1,330.0) (32.6) (2.0)
Long-term debt and other liabilities 646.9 18.7 11.0
Net cash used to acquire businesses $(1,136.5) $ (37.8) $ (42.5)
Cash paid during the year for:
Interest, net of amounts capitalized $ 72.1 $ 47.3 $ 47.4
Income taxes 120.1 119.8 127.0
See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Ingersoll-Rand is a multinational manufacturer of primarily
nonelectrical industrial machinery and equipment. The company's
principal lines of business are air compressors, construction
equipment, automotive parts and components, pumps, tools, door
hardware products, golf cars and utility vehicles. The company's
broad product line has applications in numerous industries
including automotive, construction, mining, utilities, paper,
housing, recreational, as well as the general industrial market.
A summary of significant accounting policies used in the
preparation of the accompanying financial statements follows:
Principles of Consolidation: The consolidated financial
statements include the accounts of all wholly-owned and
majority-owned subsidiaries. Intercompany transactions and
balances have been eliminated. Partially-owned equity companies
are accounted for under the equity method. In conformity with
generally accepted accounting principles, management has used
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities. Actual results could differ
from those estimates.
Cash Equivalents: The company considers all highly liquid
investments, consisting primarily of time deposits and commercial
paper with maturities of three months or less when purchased, to
be cash equivalents. Cash equivalents were $40.0 million and
$108.3 million at December 31, 1995 and 1994, respectively.
Inventories: Inventories are generally stated at cost, which is
not in excess of market. Domestic manufactured inventories of
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.
Property and Depreciation: The company principally uses
accelerated depreciation methods for assets placed in service
prior to December 31, 1994 and the straight-line method for
assets acquired subsequent to that date.
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Intangible Assets: Intangible assets primarily represent the
excess of the purchase price of acquisitions over the fair value
of the net assets acquired. Such excess costs are being
amortized on a straight-line basis over various periods not
exceeding 40 years. Goodwill at December 31, 1995 and 1994, was
$1.2 billion and $114 million, respectively. The carrying value
of goodwill is evaluated periodically in relation to the
operating performance and future undiscounted net cash flows of
the related business. Intangible assets also represent costs
allocated to patents, tradenames and other specifically
identifiable assets arising from business acquisitions. These
assets are amortized on a straight-line basis over their
estimated useful lives. Accumulated amortization at December 31,
1995 and 1994, was $47.0 million and $26.5 million, respectively.
Amortization of intangible assets was $25.3 million, $6.8 million
and $5.9 million in 1995, 1994 and 1993, respectively.
Income Taxes: Deferred taxes are provided on temporary
differences between assets and liabilities for financial
reporting and tax purposes as measured by enacted tax rates
expected to apply when temporary differences are settled or
realized.
Environmental Costs: Environmental expenditures relating to
current operations are expensed or capitalized as appropriate.
Expenditures relating to existing conditions caused by past
operations, which do not contribute to current or future
revenues, are expensed. Costs to prepare environmental site
evaluations and feasibility studies are accrued when the company
commits to perform them. Liabilities for remediation costs are
recorded when they are probable and reasonably estimable,
generally the earlier of completion of feasibility studies or the
company's commitment to a plan of action. The assessment of this
liability is calculated based on existing technology, does not
reflect any offset for possible recoveries from insurance
companies and is not discounted. There were no material changes
in the liability for the periods presented.
Revenue Recognition: Sales of products are recorded for
financial reporting purposes generally when the products are
shipped.
Research, Engineering and Development Costs: Research and
development expenditures, including engineering costs, are
expensed when incurred and amounted to $190.4 million in 1995,
$154.6 million in 1994 and $150.1 million in 1993.
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Foreign Currency: Assets and liabilities of foreign entities,
where the local currency is the functional currency, have been
translated at year-end exchange rates, and income and expenses
have been translated using weighted average-for-the-year exchange
rates. Adjustments resulting from translation have been recorded
in shareowners' equity and are included in net earnings only upon
sale or liquidation of the underlying foreign investment.
For foreign entities where the U.S. dollar is the functional
currency, including those operating in highly inflationary
economies, inventory and property balances and related income
statement accounts have been translated using historical exchange
rates, and resulting gains and losses have been credited or
charged to net earnings.
Foreign currency transactions and translations recorded in the
income statement decreased net earnings by $3.9 million, $5.1
million and $4.7 million in 1995, 1994 and 1993, respectively.
Shareowners' equity was increased in 1995 by $20.7 million,
increased in 1994 by $38.4 million and reduced in 1993 by $31.7
million, due to foreign currency equity adjustments related to
translation.
The company hedges certain foreign currency transactions and
firm foreign currency commitments by entering into forward
exchange contracts (forward contracts). Gains and losses
associated with currency rate changes on forward contracts
hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging firm
foreign currency commitments are deferred off-balance sheet and
included as a component of the related transaction, when
recorded; however, a loss is not deferred if deferral would lead
to the recognition of a loss in future periods.
Cash flows resulting from forward contracts accounted for as
hedges of identifiable transactions or events are classified in
the same category as the cash flows from the items being hedged.
Earnings Per Share: Net earnings per share of common stock are
earnings divided by the average number of common shares
outstanding during the year. The effect of common stock
equivalents on earnings per share was not material.
147<PAGE>
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Accounting Changes: The company principally uses accelerated
depreciation methods for both tax and financial reporting
purposes for assets placed in service prior to December 31, 1994.
The company changed to the straight-line method for financial
reporting purposes for assets acquired on or after January 1,
1995, while continuing to use accelerated depreciation for tax
purposes. The straight-line method is the predominant method
used throughout the industries in which the company operates and
its adoption increases the comparability of the company's results
with those of its competitors. The effect of the change on the
year ended December 31, 1995, increased net earnings by
approximately $6.8 million ($0.06 per share).
The company implemented Statement of Financial Accounting
Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," effective January 1, 1994. Adoption
of this statement had no impact on the financial statements.
Effective January 1, 1993, the company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." SFAS No.
112 requires an accrual for the expected cost of benefits
provided by an employer to former or inactive employees after
employment, but before retirement, such as the continuation of
medical and life insurance benefits for employees on long-term
disability. Previously, these benefits were expensed as
incurred. The effect of the adoption of SFAS No. 112 for the
company totalled $21.0 million ($0.20 per share), net of a $13.5
million tax benefit.
New Accounting Standards: In March 1995, the Financial
Accounting Standards Board (FASB) issued SFAS No. 121 "Accounting
for Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," which became effective on January 1, 1996. The
adoption of SFAS No. 121 is not expected to have a material
impact on the company's consolidated financial statements. Also
in 1995, the FASB issued SFAS No. 123, "Accounting for Stock-
Based Compensation" which requires companies to measure employee
stock compensation plans based on the fair value method of
accounting or to continue to apply APB No. 25, "Accounting for
Stock Issued to Employees" and provide pro forma footnote
disclosures under the fair value method in SFAS No. 123. The
company will continue to apply the principles of APB No. 25 and
provide pro forma fair value disclosures starting in the 1996
Annual Report.
148<PAGE>
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NOTE 2 - ACQUISITIONS OF BUSINESSES: On May 25, 1995, CEC
Acquisition Corp. (CEC), a wholly-owned subsidiary of the
company, acquired 16,553,617 shares of Clark Equipment Company
(Clark), which, together with shares already owned by the
company, represented approximately 98.4 percent of the
outstanding shares, for a cash price of $86 per share pursuant to
an April 12, 1995, amended tender offer. On May 31, 1995, the
company completed the merger of CEC with Clark. Upon
consummation of the merger, Clark became a wholly-owned
subsidiary of the company. The total purchase price for Clark
was approximately $1.5 billion after taking into account amounts
paid in respect of outstanding stock options and certain
transactions. The purchase price exceeded net assets acquired by
approximately $1,120 million, which is being amortized on a
straight-line basis over 40 years. Included among the assets
acquired by the company through the acquisition of Clark are the
Melroe Company (Melroe), Blaw-Knox Construction Equipment
Corporation (Blaw-Knox), Clark-Hurth Components Company (Clark-
Hurth) and Club Car, Inc. (Club Car). Melroe products consist of
skid-steer loaders, compact excavators and a limited line of
agricultural equipment. Blaw-Knox is one of the leading
producers of asphalt paving equipment in the world. The products
of the Clark-Hurth business consist of axles and transmissions
for off-highway equipment. Club Car produces golf cars and light
utility vehicles. The funds to consummate the acquisition came
from borrowings of the company under a credit agreement, which
has been converted into long-term debt with lower interest rates.
The results of Clark's operations have been included in the
consolidated financial statements from the acquisition date. The
following unaudited pro forma consolidated results of operations
for the years ended December 31, 1995 and 1994, reflect the
acquisition as though it occurred at the beginning of the
respective periods after adjustments for the impact of interest
on acquisition debt, depreciation and amortization of assets,
including goodwill, to reflect the purchase price allocation, and
the elimination of Clark's income from discontinued operations
related to its disposition of its investments in VME Group N.V.
and Clark Automotive Products Corporation (in millions except per
share amounts):
(Unaudited)
For the years ended December 31 1995 1994
Sales $6,346.1 $5,689.5
Net earnings 283.5 198.7
Earnings per share $2.67 $1.87
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It should be noted that the company's actual results for 1995
(and the above pro forma amounts) were adversely affected by the
loss on the sale of the company's domestic paving business, which
was a preacquisition requirement to the Clark purchase. The
above pro forma results are not necessarily indicative of what
the actual results would have been had the acquisition occurred
at the beginning of the respective periods. Further, the pro
forma results are not intended to be a projection of future
results of the combined companies.
During 1994, the company made several acquisitions. In April
1994, the company acquired full ownership of the ball bearing
joint venture with GMN Georg Mueller of America, Inc. for $4.9
million in cash. The company previously owned 50% of the joint
venture. The company acquired Montabert S.A., a French
manufacturer of hydraulic rock-breaking and drilling equipment on
June 30, 1994, for approximately $18.4 million, plus assumption
of liabilities. In August 1994, the company acquired the Ecoair
air compressor product line from MAN Gutehoffnungshutte AG (MAN
GHH) for $10.6 million in cash. The company also entered into a
50/50 joint venture, GHH-RAND Schraubenkompressoren GmbH & Co. KG
(GHH-RAND) with MAN GHH to manufacture airends. The company
invested approximately $17.6 million in GHH-RAND. The company
also had several additional purchases of operations during the
year totalling $3.9 million in cash.
In 1993, the company acquired the Kunsebeck, Germany, needle
and cylindrical bearing business of FAG Kugelfischer Georg
Schafer AG of Schweinfurt, Germany, for $42.5 million in cash.
These transactions have been accounted for as purchases and
accordingly, each purchase price was allocated to the acquired
assets and assumed liabilities based on their estimated fair
values. The company has classified as intangible assets the
costs in excess of the fair value of the net assets of companies
acquired. The results of all acquired operations have been
included in the consolidated financial statements from their
respective acquisition dates.
NOTE 3 - DISPOSITIONS AND RESTRUCTURE OF OPERATIONS: On May 15,
1995, the company sold its domestic paving equipment business to
Champion Road Machinery Limited of Canada. The sale was a
preacquisition requirement, in order to satisfy concerns of the
United States Justice Department, prior to the Clark acquisition.
The company incurred a $7.1 million pretax loss associated with
this sale.
In 1994, the assets of the IDP Australian operations were sold
in return for shares of the purchaser. The company and Dresser
Industries sold IRI International Corporation, a 50/50 joint
venture that is a manufacturer of mobile drilling rigs, to a
third party.
150<PAGE>
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The company sold the assets of several small business units in
1993, as well as substantially all of the assets of its coal-
mining machinery and aerospace bearings businesses for $55.5
million in cash. In connection with the sale of the company's
underground coal-mining machinery assets to Long-Airdox Company,
the company recorded a $5.0 million restructure of operations
charge during the second quarter of 1993.
NOTE 4 - INVENTORIES: At December 31, inventories were as
follows:
In millions 1995 1994
Raw materials and supplies $ 211.8 $117.6
Work-in-process 326.1 293.0
Finished goods 538.5 429.7
1,076.4 840.3
Less-LIFO reserve 163.8 161.0
Total $ 912.6 $679.3
Work-in-process inventories are stated after deducting
customer progress payments of $38.8 million in 1995 and $27.2
million in 1994. At December 31, 1995 and 1994, LIFO inventories
comprised approximately 41 percent and 35 percent, respectively,
of consolidated inventories.
During the periods presented, certain inventory quantities
were reduced, resulting in partial liquidations of LIFO layers.
This decreased cost of goods sold by $3.4 million in 1995, $11.6
million in 1994 and $12.5 million in 1993. These liquidations
increased net earnings in 1995, 1994 and 1993 by approximately
$2.1 million ($0.02 per share), $7.1 million ($0.07 per share)
and $7.6 million ($0.07 per share), respectively.
NOTE 5 - INVESTMENTS IN PARTIALLY-OWNED EQUITY COMPANIES: The
company has numerous investments, ranging from 20 percent to 50
percent, in companies which operate in similar lines of business.
The company's investments in and amounts due from partially-
owned equity companies amounted to $202.9 million and $20.4
million, respectively, at December 31, 1995, and $170.5 million
and $3.4 million, respectively, at December 31, 1994.
The company's equity in the net earnings of its
partially-owned equity companies was $26.2 million, $15.6 million
and $15.6 million in 1995, 1994 and 1993, respectively.
The company received dividends based on its equity interests
in these companies of $6.7 million, $3.8 million and $3.1 million
in 1995, 1994 and 1993, respectively.
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Summarized financial information for these partially-owned
equity companies at December 31, and for the years presented was:
In millions 1995 1994
Current assets $ 467.6 $ 388.6
Property, plant and
equipment, net 284.9 264.6
Other assets 30.2 20.3
Total assets $ 782.7 $ 673.5
Current liabilities $ 272.0 $ 250.5
Long-term debt 56.5 50.2
Other liabilities 47.4 30.0
Total shareowners' equity 406.8 342.8
Total liabilities
and equity $ 782.7 $ 673.5
In millions 1995 1994 1993
Net sales $ 872.5 $ 701.0 $ 730.1
Gross profit 180.2 142.0 127.5
Net earnings 55.8 33.7 48.5
NOTE 6 - DRESSER-RAND COMPANY: Dresser-Rand Company is a
partnership between Dresser Industries, Inc. (51 percent), and
the company (49 percent) comprising the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
The company's investment in Dresser-Rand is accounted for using
the equity method of accounting.
Summarized financial information for Dresser-Rand at December
31, and for the years presented was:
In millions 1995 1994
Current assets $ 457.2 $ 440.5
Property, plant and
equipment, net 239.3 197.8
Other assets 27.2 18.5
Total assets 723.7 656.8
Deduct:
Current liabilities 341.4 295.1
Other liabilities 200.8 188.9
542.2 484.0
Net partners' equity
and advances $ 181.5 $ 172.8
In millions 1995 1994 1993
Net sales $1,081.4 $1,219.4 $1,187.3
Gross profit 212.5 203.1 241.9
Net earnings 44.9 50.2 68.1
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The company's investment in Dresser-Rand was $182.8 million
and $160.8 million at December 31, 1995 and 1994, respectively.
The company owed Dresser-Rand $88.9 million at December 31, 1995,
and $70.1 million at December 31, 1994.
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUALS: Accounts payable and
accruals at December 31, were:
In millions 1995 1994
Accounts payable $ 337.5 $ 255.6
Accrued:
Payrolls and benefits 177.4 137.3
Taxes 59.5 48.6
Insurance and claims 110.9 93.7
Postemployment benefits 98.5 74.0
Warranties 52.3 36.8
Interest 33.6 10.8
Other accruals 260.1 227.0
$1,129.8 $ 883.8
NOTE 8 - LONG-TERM DEBT AND CREDIT FACILITIES:
At December 31, long-term debt consisted of:
In millions 1995 1994
6 7/8% Notes Due 2003 $ 100.0 $100.0
9% Debentures Due 2021 125.0 125.0
7.20% Debentures Due 2025 150.0 --
6.48% Debentures Due 2025 150.0 --
Medium Term Notes Due 1997-2004, at
an average rate of 6.57% 600.0 --
9.75% Clark Debentures Due 2001 100.0 --
Clark Medium Term Notes Due 1998-2023,
at an average rate of 7.89% 60.2 --
8 1/4% Notes Due 1996 -- 75.0
Other domestic and foreign
loans and notes, at end-
of-year average interest
rates of 6.53% in 1995
and 6.99% in 1994, maturing
in various amounts to 2025 19.2 15.9
$1,304.4 $315.9
Debt retirements for the next five years are as follows:
$102.9 million in 1996, $135.1 million in 1997, $146.7 million in
1998, $102.9 million in 1999 and $102.4 million in 2000.
153<PAGE>
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In June 1995, the company issued $150.0 million of debentures
at 7.20% per annum, which are not redeemable prior to maturity in
2025 and $150.0 million of debentures at 6.48% per annum due in
2025 which may be repaid at the option of the holder on June 1,
2005. During July and August 1995, the company issued medium
term notes totalling $600.0 million at an average rate of 6.57%
with maturities ranging from 1997 to 2004. The proceeds from
these financings were used to refinance short-term borrowings
related to the acquisition of Clark.
At December 31, 1995, the company had two five-year committed
revolving credit lines totalling $800.2 million, both of which
were unused. These lines provide support for commercial paper
and indirectly provide support for other financial instruments,
such as letters of credit and comfort letters, as required in the
normal course of business. The company compensates banks for
these lines with fees equal to .08% per annum. Available foreign
lines of credit were $733.5 million, of which $676.0 million were
unused at December 31, 1995. No major cash balances were subject
to withdrawal restrictions. At December 31, 1995, the average
rate of interest for loans payable, excluding the current portion
of long-term debt, was 7.78% and related to foreign loans.
Capitalized interest on construction and other capital
projects amounted to $3.5 million, $3.2 million and $2.8 million
in 1995, 1994 and 1993, respectively. Interest income, included
in Other income (expense), net, was $11.5 million, $11.5 million
and $11.7 million in 1995, 1994 and 1993, respectively.
NOTE 9 - FINANCIAL INSTRUMENTS: The company, as a large
multinational company, maintains significant operations in
foreign countries. As a result of these global operating and
financing activities, the company is exposed to changes in
foreign currency exchange rates, which affect the results of
operations and financial condition. The company manages exposure
to changes in foreign currency exchange rates through its normal
operating and financing activities, as well as through the use of
financial instruments. Generally, the only financial instruments
the company utilizes are forward exchange contracts.
The purpose of the company's hedging activities is to mitigate
the impact of changes in foreign exchange rates. The company
attempts to hedge transaction exposures through natural offsets.
To the extent this is not practicable, major exposure areas which
are considered for hedging include, foreign currency denominated
receivables and payables, intercompany loans, firm committed
transactions, anticipated sales and purchases and dividends
relating to foreign subsidiaries. The following table summarizes
by major currency the contractual amounts of the company's
forward contracts in U.S. dollars. Foreign currency amounts are
154<PAGE>
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translated at year-end rates at the respective reporting date.
The "buy" amounts represent the U.S. equivalent of commitments to
purchase foreign currencies, and the "sell" amounts represent the
U.S. equivalent of commitments to sell foreign currencies. Some
of the forward contracts involve the exchange of two foreign
currencies according to local needs in foreign subsidiaries. At
December 31, the contractual amounts were:
In millions 1995 1994
Buy Sell Buy Sell
Austrian schilling $ 9.6 $ 1.6 $ 3.5 $ .3
Belgian francs 3.2 8.3 .3 1.4
Canadian dollars 10.4 6.6 2.4 13.3
Deutsche marks 10.2 135.6 8.4 81.8
Dutch guilders 20.2 7.8 -- 1.3
French francs 24.1 38.5 3.3 10.6
Italian lira 41.1 6.9 34.9 2.3
Japanese yen 19.0 2.0 3.4 19.2
Pounds sterling 25.1 128.8 59.1 55.5
South African rand 3.5 12.8 6.6 14.4
Other 6.5 7.5 8.5 13.4
Total $172.9 $356.5 $130.4 $213.5
Forward contracts for normal operating activities have
maturities of one to 12 months; and forward contracts for
intercompany loans have maturities that range from one month to
36 months.
The company's forward contracts do not subject the company to
risk due to foreign exchange rate movement, since gains and
losses on these contracts generally offset losses and gains on
the assets, liabilities or other transactions being hedged.
The counterparties to the company's forward contracts consist
of a number of major international financial institutions. The
credit ratings and concentration of risk of these financial
institutions are monitored on a continuing basis and present no
significant credit risk to the company.
The carrying value of cash and cash equivalents, marketable
securities (classified as held to maturity), accounts receivable,
short-term borrowings and accounts payable are a reasonable
estimate of their fair value due to the short-term nature of
these instruments. The following table summarizes the estimated
fair value of the company's remaining financial instruments at
December 31:
155<PAGE>
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In millions 1995 1994
Long-term debt:
Carrying value $1,304.4 $315.9
Estimated fair value 1,410.6 312.5
Forward contracts:
Contract (notional) amounts:
Buy contracts $ 172.9 $130.4
Sell contracts 356.5 213.5
Fair (market) values:
Buy contracts 172.9 131.2
Sell contracts 356.8 211.9
Fair value of long-term debt was determined by reference to
the December 31, 1995 and 1994, market values of comparably rated
debt instruments. Fair values of forward contracts are based on
dealer quotes at the respective reporting dates.
NOTE 10 - COMMITMENTS AND CONTINGENCIES: The company is involved
in various litigations, claims and administrative proceedings,
including environmental matters, arising in the normal course of
business. In assessing its potential environmental liability,
the company bases its estimates on current technologies and does
not discount its liability or assume any insurance recoveries.
Amounts recorded for identified contingent liabilities are
estimates, which are reviewed periodically and adjusted to
reflect additional information when it becomes available.
Subject to the uncertainties inherent in estimating future costs
for contingent liabilities, management believes that recovery or
liability with respect to these matters would not have a material
effect on the financial condition, results of operations,
liquidity or cash flows of the company for any year.
In the normal course of business, the company has issued
several direct and indirect guarantees, including performance
letters of credit, totalling approximately $115 million at
December 31, 1995. The company has also guaranteed the residual
value of leased Club Car vehicles in the aggregate amount of
$20.7 million. Management believes these guarantees will not
adversely affect the consolidated financial statements.
156<PAGE>
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As a result of the Clark acquisition, the company is involved
in certain repurchase arrangements relating to product
distribution and product financing activities. As of December
31, 1995, repurchase arrangements relating to product financing
by an independent finance company approximated $101.6 million.
It is not practicable to determine the additional amount subject
to repurchase solely under dealer distribution agreements. Under
the repurchase arrangements relating to product-distribution and
product-financing activities, when dealer terminations do occur,
a newly selected dealer generally acquires the assets of the
prior dealer and assumes any related financial obligation.
Accordingly, the risk of loss to the company is minimal.
Historically, Clark incurred only immaterial losses relating to
these arrangements.
Clark sold Clark Material Handling Company (CMHC), its
forklift truck business, to Terex Corporation (Terex) in 1992.
As part of the sale, Terex and CMHC assumed substantially all of
the obligations for existing and future product liability claims
involving CMHC products. In the event that Terex and CMHC fail
to perform or are unable to discharge any of the assumed
obligations, the company could be required to discharge such
obligations. While the aggregate losses associated with these
obligations could be significant, the company does not believe
they would materially affect the financial condition, the results
of operations, liquidity or cash flows of the company in any one
year.
In 1995, the company continued to sell an undivided interest
in designated pools of accounts and notes receivable up to a
maximum of $150.0 million. Similar agreements have been in
effect since 1987. During 1995, 1994 and 1993, such sales
amounted to $533.7 million, $487.8 million and $518.7 million,
respectively. At December 31, 1995 and 1994, $150.0 million and
$125.0 million, respectively, of such sold receivables remained
uncollected. The undivided interest in the designated pool of
receivables was sold with limited recourse. These agreements
expire in one- and two-year periods based on the particular pool
of receivables sold. The company intends to renew these
agreements at their expiration dates with either the current
financial institution, or another financial institution, using
the basic terms and conditions of the existing agreements. For
receivables sold, the company has retained collection and
administrative responsibilities as agent for the purchaser.
Receivables, excluding the designated pools of accounts and
notes receivable, sold during 1995, 1994 and 1993 with recourse,
amounted to $175.9 million, $64.6 million and $39.3 million,
respectively. At December 31, 1995 and 1994, $35.3 million and
$14.7 million, respectively, of such receivables sold remained
uncollected.
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As of December 31, 1995, the company had no significant
concentrations of credit risk in trade receivables due to the
large number of customers which comprise its receivables base and
their dispersion across different industries and countries.
Certain office and warehouse facilities, transportation
vehicles and data processing equipment are leased. Total rental
expense was $64.7 million in 1995, $56.2 million in 1994 and
$57.9 million in 1993. Minimum lease payments required under
noncancellable operating leases with terms in excess of one year
for the next five years and thereafter, are as follows: $38.7
million in 1996, $27.5 million in 1997, $16.7 million in 1998,
$9.0 million in 1999, $6.7 million in 2000 and $17.2 million
thereafter.
NOTE 11 - COMMON STOCK: On December 7, 1988, the board of
directors adopted a Rights Plan (Plan) and declared a dividend
distribution of one right for each then outstanding share of the
company's common stock. As a result of the two-for-one stock
split in 1992, each current outstanding share of the company's
common stock has one-half a right associated with it. In
December 1994, the Plan was amended by the board of directors.
Under the Plan as amended, each right entitles the holder to
purchase 1/100th of a share of Series A preference stock at an
exercise price of $130. The company has reserved 563,000 shares
of Series A preference stock for issuance upon exercise of the
rights. The rights become exercisable in accordance with the
provisions of the Plan on (i) the tenth day following the
acquisition by a person or group of persons of 15 percent or more
of the company's common stock, (ii) the tenth day after the
commencement of a tender or exchange offer for 15 percent or more
of the company's common stock, or (iii) the determination by the
board of directors that a person is an Adverse Person as defined
in the Plan (Distribution Date). Upon either a person's becoming
an Acquiring Person as defined in the Plan, or the board's
determination that a person is an Adverse Person, or the
occurrence of certain other events following the Distribution
Date, each holder of a right shall thereafter have a right to
receive the common stock of the company (or in certain
circumstances, the stock of an acquiring entity) for a price of
approximately half its value. The rights are not exercisable by
any Acquiring Person or Adverse Person. The Plan as amended
provides that the board of directors, at its option any time
after any person becomes an Acquiring Person or an Adverse
Person, may exchange all or part of the outstanding and
exercisable rights for shares of common stock, currently at an
exchange ratio of one right for two shares. The right of the
holders to exercise the rights to purchase shares automatically
158<PAGE>
EXHIBIT 13
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terminates if the board orders an exchange of rights for shares.
The rights may be redeemed by the company for one cent per right
in accordance with the provisions of the Plan. The rights will
expire on December 22, 1998, unless redeemed earlier by the
company.
Shares held in treasury at December 31, 1995, will be used for
employee benefit plans and for other corporate purposes.
NOTE 12 - LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN: At the time
of its acquisition by the company, Clark sponsored a Leveraged
Employee Stock Ownership Plan (LESOP) for eligible employees. In
connection with the acquisition, the company purchased the
LESOP's shares for $176.6 million. The company determined it
would continue the LESOP to fund certain employee benefit plans.
Accordingly, on September 28, 1995, the company sold 2,878,008
shares of its Common Stock held in treasury to the LESOP, for a
price of $36.25 per share (the closing price of the Common Stock
on September 27, 1995, on the New York Stock Exchange) or an
aggregate of $104.3 million. At December 31, 1995, approximately
1.9 million of these shares remain unallocated and the $70.2
million paid by the LESOP for those unallocated shares is
classified as a reduction of shareowners' equity pending
allocation to participants. At December 31, 1995, the LESOP owed
the company $36.8 million repayable in monthly installments
through 2001. Company contributions to the LESOP and dividends
on unallocated shares are used to make loan principal and
interest payments. With each principal and interest payment, the
LESOP allocates a portion of the Common Stock to participating
employees.
NOTE 13 - INCENTIVE STOCK PLANS: Under the company's Incentive
Stock Plans, key employees have been granted options to purchase
common shares at prices not less than the fair market value at
the date of grant. The plans, approved in 1985, 1990 and 1995,
also authorize stock appreciation rights (SARs) and stock awards.
If SARs issued in conjunction with stock options are exercised,
the related stock options are cancelled; conversely, the exercise
of stock options cancels the SARs.
Changes during the year in options outstanding under the plans
were as follows:
Shares subject Option price
to option range per share
January 1, 1995 3,384,300 $10.04-37.19
Granted 988,900 34.75-40.06
Exercised 749,800 10.04-34.94
Cancelled 21,000 34.94
December 31, 1995 3,602,400 $11.95-40.06
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Of the shares subject to option, 1,988,250 were granted with
SARs. There are also 192,500 SARs outstanding with no stock
options. At December 31, 1995, options for 2,628,500 shares were
exercisable and 5,513,210 shares were available for future
awards. In addition, at December 31, 1995, 268,690 shares of
common stock were reserved for future issue, contingent upon
attainment of certain performance goals and future service.
The company also maintains a shareowner-approved Management
Incentive Unit Award Plan. Under the plan, qualifying executives
are awarded incentive units. When dividends are paid on common
stock, dividends are awarded to unit holders, one-half of which
is paid in cash, the remaining half of which is credited to the
participant's account in the form of so-called common stock
equivalents. The fair value of accumulated common stock
equivalents is paid in cash upon the participant's retirement.
The number of common stock equivalents credited to participant's
accounts at December 31, 1995 and 1994, are 288,837 and 284,409,
respectively.
NOTE 14 - INCOME TAXES: Earnings before income taxes and the
effect of accounting changes for the years ended December 31,
were taxed within the following jurisdictions:
In millions 1995 1994 1993
United States $308.0 $279.4 $229.5
Foreign 121.1 50.5 24.0
Total $429.1 $329.9 $253.5
The provision for income taxes before the effect of the
accounting change was as follows:
In millions 1995 1994 1993
Current tax expense:
United States $101.3 $ 69.8 $ 74.9
Foreign 42.7 34.8 30.6
Total current 139.7 104.6 105.5
Deferred tax expense:
United States 10.6 30.3 5.3
Foreign 4.2 (16.1) (20.8)
Total deferred 14.8 14.2 (15.5)
Total provision for
income taxes $158.8 $118.8 $ 90.0
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The provision for income taxes differs from the amount of
income taxes determined by applying the applicable U.S. statutory
income tax rate to pretax income before the effect of the
accounting change, as a result of the following differences:
Percent of pretax income
1995 1994 1993
Statutory U.S. rates 35.0% 35.0% 35.0%
Increase (decrease) in rates
resulting from:
Foreign operations 1.0 0.3 0.6
Effect of changes in statutory
rate on deferred taxes -- -- (2.2)
Earnings/losses of equity
companies (1.8) (0.9) (2.2)
State and local income taxes,
net of U.S. tax 1.3 1.6 1.3
Other 1.5 -- 3.0
Effective tax rates 37.0% 36.0% 35.5%
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<TABLE>
A summary of the deferred tax accounts at December 31, follows:
In millions 1995 1994 1993
Current deferred assets and (liabilities):
Differences between book and tax bases
<S> <C> <C> <C>
of inventories and receivables $ 30.8 $ 36.5 $ 32.6
Differences between book and tax
expense for other employee related
benefits and allowances 35.3 33.9 42.1
Provisions for restructure of
operations and plant closings
not yet deductible for tax purposes 9.4 6.4 5.3
Other reserves and valuation
allowances in excess of tax deductions 53.1 32.5 28.0
Other differences between tax and
financial statement values (10.1) 9.9 8.9
Gross current deferred net tax assets 118.5 119.2 116.9
Noncurrent deferred tax assets and
(liabilities):
Tax items associated with equity
companies 11.1 13.0 31.0
Postretirement and postemployment
benefits other than pensions in
excess of tax deductions 252.5 159.9 159.9
Other reserves in excess of tax expense 65.0 36.3 28.1
Tax depreciation in excess of book
depreciation (85.5) (46.0) (54.8)
Pension contributions in excess of
book expense (51.2) (47.5) (36.6)
Taxes provided for unrepatriated
foreign earnings (28.5) (20.1) (26.3)
Gross noncurrent deferred net tax assets 163.4 95.6 101.3
Less: deferred tax valuation allowances (28.6) (21.2) (10.4)
Total net deferred tax assets $253.3 $193.6 $207.8
</TABLE>
162<PAGE>
EXHIBIT 13
Page 48 of 60
A total of $28.5 million of deferred taxes have been provided
for a portion of the undistributed earnings of subsidiaries
operating outside of the United States. As to the remainder,
these earnings have been, and under current plans will continue
to be reinvested and it is not practicable to estimate the amount
of additional taxes which may be payable upon repatriation.
NOTE 15 - BUSINESS SEGMENT INFORMATION: A description of
business segments and operations by business segment and
geographic area for the three years ended December 31, 1995, were
as follows:
DESCRIPTION OF BUSINESS SEGMENTS
Ingersoll-Rand's operations are organized into three worldwide
business segments: Standard Machinery; Engineered Equipment; and
Bearings, Locks and Tools.
Standard Machinery
The segment's products are categorized into five groups:
Air Compressor - products include portable, reciprocating, rotary
and centrifugal air compressors, vacuum pumps, air drying and
filtering systems and other compressor accessories. The products
are used primarily to supply pressurized air to industrial
plants, refineries, chemical plants, electrical utilities and
service stations.
Construction and Mining - manufactures vibratory compactors,
asphalt pavers, rock drills, blasthole drills, water-well drills,
crawler drills, jumbo drills, jackhammers and rock and roof
stabilizers primarily for the construction, highway maintenance,
metals-mining and well-drilling industries.
Melroe - manufactures skid-steer loaders, compact hydraulic
excavators and self-propelled agricultural sprayers. The
products are used primarily by the construction and agricultural
industries.
Club Car - manufactures golf cars and utility vehicles which are
used primarily in the golf and resort industries.
Mining Machinery(1) - products included continuous and long-wall
mining machines, crushers, coal haulers and mine-service
vehicles, which principally serve the underground coal-mining
industry.
163<PAGE>
EXHIBIT 13
Page 49 of 60
Engineered Equipment
The segment's products are categorized into three groups:
Pump - manufactures centrifugal and reciprocating pumps. These
products serve oil production and refining, chemical process,
marine, agricultural, electric utility and general manufacturing
industries.
Process Systems - consists of pulp and paper processing
equipment, pelleting equipment, filters, aerators and dewatering
systems. This equipment is used in the pulp and paper, food and
agricultural, and minerals-processing industries.
Clark-Hurth - manufactures a broad line of axles and
transmissions for the off-highway vehicle industry.
Bearings, Locks and Tools
The segment's products are categorized into three groups:
Bearings and Components - principal products include needle
bearings, needle roller bearings, needle rollers, thrust
bearings, tapered roller bearings, drawn cup bearings,
high-precision ball bearings, spherical bearings, radial
bearings, universal joints, dowel pins, swagers and precision
components. These products are sold principally to durables-
industry customers primarily in the automotive and aerospace
markets.
Production Equipment - manufactures air-powered tools, hoists and
winches, air motors and air starters, automated assembly and test
systems, air and electric automated fastener tightening systems
and waterjet cutting systems. These products are sold to general
manufacturing industries and to the appliance, aircraft,
construction and automotive industries.
Architectural Hardware(2) - major products include locks, door
closers and exit devices used in commercial and residential
construction and the retail hardware market.
(1)
The Mining Machinery Group was sold during 1993 .
(2)
Prior to January 1, 1996, the Door Hardware Group.
164<PAGE>
EXHIBIT 13
Page 50 of 60
<TABLE>
Operations by Business Segments
Dollar amounts in millions
For the years ended % of % of % of
December 31 1995 total 1994 total 1993 total
Standard Machinery
<S> <C> <C> <C> <C> <C> <C>
Sales $2,270.6 40% $1,445.7 32% $1,250.9 31%
Operating income excluding
restructure of operations 222.6 41% 122.4 30% 89.6 27%
Restructure of operations
(charge) benefit -- -- (5.0)
Operating income from
operations 222.6 41% 122.4 30% 84.6 26%
Operating income as % of sales 9.8% 8.5% 6.8%
Identifiable assets 2,528.0 1,099.6 927.1
Depreciation and amortization 62.7 31.5 27.0
Capital expenditures 56.7 30.9 25.0
Engineered Equipment
Sales 1,216.2 21% 926.4 21% 929.6 23%
Operating income excluding
restructure of operations 49.5 9% 35.3 8% 30.5 9%
Restructure of operations
(charge) benefit -- -- --
Operating income from
operations 49.5 9% 35.3 8% 30.5 9%
Operating income as % of sales 4.1% 3.8% 3.3%
Identifiable assets 1,061.8 634.5 622.3
Depreciation and amortization 40.0 28.8 29.3
Capital expenditures 42.3 30.3 29.0
Bearings, Locks and Tools
Sales 2,242.2 39% 2,135.4 47% 1,840.6 46%
Operating income excluding
restructure of operations 269.1 50% 256.6 62% 210.7 64%
Restructure of operations
(charge) benefit -- -- --
Operating income from
operations 269.1 50% 256.6 62% 210.7 65%
Operating income as % of sales 12.0% 12.0% 11.4%
Identifiable assets 1,208.1 1,185.1 1,102.7
Depreciation and amortization 75.0 70.9 65.5
Capital expenditures 107.9 97.0 77.8
165<PAGE>
EXHIBIT 13
Page 51 of 60
Operations by Business Segments (continued)
Dollar amounts in millions
For the years ended % of % of % of
December 31 1995 total 1994 total 1993 total
Total
Sales 5,729.0 100% 4,507.5 100% 4,021.1 100%
Operating income excluding
restructure of operations 541.2 100% 414.3 100% 330.8 100%
Restructure of operations
(charge) benefit -- -- (5.0)
Operating income from
operations 541.2 100% 414.3 100% 325.8 100%
Operating income as % of sales 9.4% 9.2% 8.1%
Identifiable assets 4,797.9 2,919.2 2,652.1
Depreciation and amortization 177.7 131.2 121.8
Capital expenditures 206.9 158.2 131.8
General corporate expenses
charged to operating income (44.2) (37.3) (34.3)
Operating income 497.0 377.0 291.5
Unallocated
Interest expense (86.6) (43.8) (52.0)
Other income (expense), net 9.4 (14.7) (7.5)
Dresser-Rand income 22.0 24.6 33.1
Ingersoll-Dresser Pump
minority interest (12.7) (13.2) (11.6)
Earnings before income taxes
and effect of accounting
changes 429.1 329.9 253.5
Corporate assets (b) 765.4 677.7 723.2
Total assets $5,563.3 $3,596.9 $3,375.3
(b) Corporate assets consist primarily of cash and cash equivalents, marketable securities,
investments and advances, and other assets not directly associated with the operations of a
business segment.
</TABLE>
166<PAGE>
EXHIBIT 13
Page 52 of 60
<TABLE>
Operations by Geographic Area
In millions
United Other Adjustments/
For the year 1995 States Europe International Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Sales to customers $3,472.8 $1,754.0 $502.2 $ -- $5,729.0
Transfers between geographic
areas 568.5 60.9 42.5 (671.9) --
Total sales and transfers $4,041.3 1,814.9 544.7 (671.9) $5,729.0
Operating income from
operations $ 391.5 97.5 51.7 .5 $ 541.2
General corporate expenses
charged to operating income (44.2)
Operating income $ 497.0
Identifiable assets at
December 31, 1995 $3,183.9 1,305.3 319.8 (11.1) $4,797.9
Corporate assets 765.4
Total assets at
December 31, 1995 $5,563.3
For the year 1994
Sales to customers $2,809.9 1,253.9 443.7 -- $4,507.5
Transfers between geographic
areas 429.7 54.7 34.1 (518.5) --
Total sales and transfers $3,239.6 1,308.6 477.8 (518.5) $4,507.5
Operating income from
operations $ 335.8 43.2 34.5 .8 $ 414.3
General corporate expenses
charged to operating income (37.3)
Operating income $ 377.0
Identifiable assets at
December 31, 1994 $1,684.3 949.0 297.5 (11.6) $2,919.2
Corporate assets 677.7
Total assets at
December 31, 1994 $3,596.9
167<PAGE>
EXHIBIT 13
Page 53 of 60
Operations by Geographic Area (Continued)
United Other Adjustments/
For the year 1993 States Europe International Eliminations Consolidated
Sales to customers $2,526.9 1,071.5 422.7 -- $4,021.1
Transfers between geographic
areas 357.3 53.0 33.0 (443.3) --
Total sales and transfers $2,884.2 1,124.5 455.7 (443.3) $4,021.1
Operating income excluding
restructure of operations $ 260.0 35.5 34.7 .6 $ 330.8
Restructure of operations-
charge (5.0) -- -- -- (5.0)
Operating income from
operations $ 255.0 35.5 34.7 .6 $ 325.8
General corporate expenses
charged to operating income (34.3)
Operating income $ 291.5
Identifiable assets at
December 31, 1993 $1,597.3 780.5 286.7 (12.4) $2,652.1
Corporate assets 723.2
Total assets at
December 31, 1993 $3,375.3
International sales of U.S. manufactured products in millions were $1,028.9 in 1995, $743.3 in 1994, and
$580.7 in 1993.
</TABLE>
168<PAGE>
EXHIBIT 13
Page 54 of 60
NOTE 16 - PENSION PLANS: The company has noncontributory pension
plans covering substantially all domestic employees. In
addition, certain employees in other countries are covered by
pension plans. The company's domestic salaried plans principally
provide benefits based on a career average earnings formula. The
company's hourly pension plans provide benefits under flat
benefit formulas. Foreign plans provide benefits based on
earnings and years of service. Most of the foreign plans require
employee contributions based on the employee's earnings. In
addition, the company maintains other supplemental benefit plans
for officers and other key employees. The company's policy is to
fund an amount which could be in excess of the pension cost
expensed, subject to the limitations imposed by current statutes
or tax regulations. Clark's costs for the seven months ended
December 31, 1995, and the status of its benefit plans at
December 31, 1995, have been consolidated.
The components of the company's pension cost for the years
ended December 31, include the following:
In millions 1995 1994 1993
Benefits earned during the
year $ 32.7 $ 31.7 $ 27.7
Interest cost on projected
benefit obligation 99.7 79.1 72.1
Actual return on plan assets (261.2) 6.3 (124.4)
Net amortization and deferral 157.7 (99.6) 32.7
Net pension cost $ 28.9 $ 17.5 $ 8.1
169<PAGE>
EXHIBIT 13
Page 55 of 60
<TABLE>
The status of employee pension benefit plans at December 31, 1995 and 1994, was as
follows:
1995 1994
Overfunded Underfunded Overfunded Underfunded
In millions plans plans plans plans
Actuarial present value of
projected benefit obligation,
based on employment service to
date and current salary levels:
<S> <C> <C> <C> <C>
Vested employees $(1,101.2) $(310.3) $ (942.5) $(48.4)
Nonvested employees (23.5) (13.8) (5.3) (6.0)
Accumulated benefit obligation (1,124.7) (324.1) (947.8) (54.4)
Additional amount related to
projected salary increases (49.9) (26.4) (48.8) (20.6)
Total projected benefit obligation (1,174.6) (350.5) (996.6) (75.0)
Funded assets at fair value 1,331.7 207.5 1,053.9 12.4
Assets in excess of (less than)
projected benefit obligation 157.1 (143.0) 57.3 (62.6)
Unamortized (net asset) liability
existing at date of adoption (2.5) 19.0 (3.5) 4.5
Unrecognized prior service cost 18.6 11.5 16.6 9.5
Unrecognized net (gain) loss (23.2) (3.4) 41.2 (.5)
Adjustment required to recognize
minimum liability -- (16.4) -- (1.0)
Prepaid (accrued) pension cost $ 150.0 $(132.3) $ 111.6 $(50.1)
Plan investment assets of domestic plans are balanced between equity securities and cash
equivalents or debt securities. Assets of foreign plans are invested principally in
equity securities.
The present value of benefit obligations for domestic plans at December 31, 1995 and
1994, was determined using an assumed discount rate of 7.25% and 8.0%, an assumed rate of
increase in future compensation levels of 4.75% and 5.5%, and an expected long-term rate
of return on assets of 9.0% and 8.5%, respectively. The weighted averages of the
actuarially assumed discount rate, long-term rate of return on assets and the rate for
compensation increases for foreign plans were 8.5%, 9.0% and 6.5% in 1995, and 9.0%, 9.0%
and 6.5% in 1994, respectively.
</TABLE>
170<PAGE>
EXHIBIT 13
Page 56 of 60
Most of the company's domestic employees are covered by
savings and other defined contribution plans. Employer
contributions and costs are determined based on criteria specific
to the individual plans and amounted to approximately $24.9
million, $21.7 million and $20.5 million in 1995, 1994 and 1993,
respectively.
The company's costs relating to foreign defined contribution
plans, insured plans and other foreign benefit plans were
$4.8 million, $4.3 million and $0.3 million in 1995, 1994 and
1993, respectively.
In 1995, 1994 and 1993, the number of employees covered by
multiemployer pension plans, was 210, 217 and 214, respectively.
The amounts charged to pension cost and contributed to
multiemployer plans was $0.5 million in 1995, 1994 and 1993,
respectively.
The existing pension rules require the recognition of a
liability in the amount that the company's unfunded accumulated
benefit obligation exceeds the accrued pension cost, with an
equal amount recognized as an intangible asset. As a result, the
company recorded in 1995 a noncurrent liability of $16.2 million
and a current liability of $0.2 million, and a noncurrent
liability of $1.0 million in 1994. Offsetting intangible assets
were recorded in the Consolidated Balance Sheets.
NOTE 17 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: In
addition to providing pension benefits, the company sponsors
several postretirement plans that cover most domestic employees.
These plans provide for health care benefits and in some
instances, life insurance benefits. Postretirement health plans
are contributory and are adjusted annually. Life insurance plans
are noncontributory. When full-time employees retire from the
company between age 55 and age 65, most are eligible to receive,
at a cost to the retiree, certain health care benefits identical
to those available to active employees. After attaining age 65,
an eligible retiree's health care benefit coverage becomes
coordinated with Medicare. Clark's costs for the seven months
ended December 31, 1995, and the status of its postretirement
plans at December 31, 1995, have been consolidated. The company
funds the benefit costs principally on a pay-as-you-go basis.
171<PAGE>
EXHIBIT 13
Page 57 of 60
Summary information on the company's plans at December 31, was
as follows:
In millions 1995 1994
Financial status of plans:
Accumulated postretirement benefits
obligation (APBO):
Retirees $(462.9) $(251.3)
Active employees (150.0) (120.2)
(612.9) (371.5)
Plan assets at fair value -- --
Unfunded accumulated benefits
obligation in excess of plan assets (612.9) (371.5)
Unrecognized net gain (9.9) (9.7)
Unrecognized prior service benefits (84.8) (90.0)
Accrued postretirement benefits cost $(707.6) $(471.2)
The components of net periodic postretirement benefits cost
for the years ended December 31, were as follows:
In millions 1995 1994 1993
Service cost, benefits attributed to
employee service during the year $ 5.2 $ 8.5 $ 5.7
Interest cost on accumulated
postretirement benefit obligation 37.6 26.9 28.3
Net amortization and deferral (5.6) (5.2) (5.1)
Net periodic postretirement benefits cost $37.2 $30.2 $28.9
The 1994 service cost of net periodic postretirement benefits
cost includes a settlement charge of $3.2 million relating to
retired employees from a closed facility. The discount rates
used in determining the APBO were 7.25% and 8.0% at December 31,
1995 and 1994, respectively. The assumed health care cost trend
rates used in measuring the accumulated postretirement benefits
obligation were 10.35% in 1995 and 12.4% in 1994, respectively,
declining each year to an ultimate rate by 2003 of 4.75% in 1995
and 5.5% in 1994.
Increasing the health care cost trend rate by 1.0% as of
December 31, 1995, would increase the APBO by 10%. The effect of
this change on the sum of the service cost and interest cost
components of net periodic postretirement benefits cost for 1995
would be an increase of 13%. In 1993, the company made several
modifications to the cost-sharing provisions of the
postretirement plans.
172<PAGE>
EXHIBIT 13
Page 58 of 60
NOTE 18 - SUBSEQUENT EVENTS: On January 29, 1996, the company
signed a letter of intent to sell the assets of the Pulp
Machinery Division to Harnischfeger Industries, Inc. The sales
price is in excess of the book value of the assets and the sale
is subject to the execution of a definitive purchase agreement
and the approval by regulatory authorities.
In addition, on January 31, 1996, the company acquired the
Steelcraft Division of MascoTech, Inc. Steelcraft manufactures a
wide range of cold-rolled and galvanized steel doors for use
primarily in nonresidential construction.
173<PAGE>
EXHIBIT 13
Page 59 of 60
Report of Management
The accompanying consolidated financial statements have been
prepared by the company. They conform with generally accepted
accounting principles and reflect judgments and estimates as to
the expected effects of incomplete transactions and events being
accounted for currently. The company believes that the
accounting systems and related controls that it maintains are
sufficient to provide reasonable assurance that assets are
safeguarded, transactions are appropriately authorized and
recorded, and the financial records are reliable for preparing
such financial statements. The concept of reasonable assurance
is based on the recognition that the cost of a system of internal
accounting controls must be related to the benefits derived. The
company maintains an internal audit function that is responsible
for evaluating the adequacy and application of financial and
operating controls and for testing compliance with company
policies and procedures.
The Audit Committee of the board of directors is comprised
entirely of individuals who are not employees of the company.
This committee meets periodically with the independent
accountants, the internal auditors and management to consider
audit results and to discuss significant internal accounting
controls, auditing and financial reporting matters. The Audit
Committee recommends the selection of the independent
accountants, who are then appointed by the board of directors,
subject to ratification by the shareowners.
The independent accountants are engaged to perform an audit
of the consolidated financial statements in accordance with
generally accepted auditing standards. Their report follows.
/S/ Thomas F. McBride
Thomas F. McBride
Senior Vice President and
Chief Financial Officer
174<PAGE>
EXHIBIT 13
Page 60 of 60
Report of Independent Accountants
February 6, 1996
To the Board of Directors and
Shareowners of Ingersoll-Rand Company:
In our opinion, the accompanying consolidated balance sheet
and the related consolidated statements of income, of
shareowners' equity and of cash flows present fairly, in all
material respects, the financial position of Ingersoll-Rand
Company and its subsidiaries at December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of accounting for
postemployment benefits in 1993.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
175<PAGE>
EXHIBIT 21
Page 1 of 3
LIST OF SUBSIDIARIES OF INGERSOLL-RAND COMPANY
The following list represents the principal subsidiaries of
the company all of which (except as otherwise indicated) are
deemed to be 100% owned, directly or indirectly, and whose
financial statements are included in the consolidated statements.
The subsidiaries of Ingersoll-Dresser Pump Company (IDP), a
general partnership owned 51% by the company, are deemed to be
100% owned by IDP directly or indirectly. The names of
particular subsidiaries omitted, if considered in the aggregate
as a single subsidiary, would not constitute a significant
subsidiary.
SUBSIDIARIES OF INGERSOLL-RAND COMPANY
California Pellet Mill Company California
CPM/Europe BV Netherlands
CPM/Europe Limited (Ireland) Ireland
CPM/Europe S.A. France
CPM/Pacific (Private) Limited Singapore
California Pellet Mill Europe Limited England
Clark Equipment Company Delaware
Automotive Products Company Delaware
Blaw-Knox Construction Equipment Corporation Delaware
Clark Equity Company Delaware
Clark Industries Company Delaware
Blaw-Knox Company England
Clark Business Services Corporation Michigan
Celfor Insurance Co., Ltd. Bermuda
Clark Distribution Services Inc. Michigan
CDS Midwest, Inc. Michigan
Clark Equipment Belgium N.V. Belgium
Clark Equipment of Canada Ltd. Canada
Clark Foreign Sales Corporation Barbados
Ingersoll-Rand Italiana S.p.A. Italy
Clark-Hurth Components S.A.R.L. France
Clark-Hurth Components Marketing Company Delaware
Clark-Hurth Components Vertriebs GmbH Germany
Melroe Equipment Limited Canada
Melroe Parts Trading GmbH Germany
Club Car, Inc. Delaware
Club Car International, Inc. Guam
Club Car Limited New Zealand
Ingersoll-Rand China Limited Delaware
Ingersoll-Rand International, Inc. Delaware
Ingersoll-Rand International Sales Inc. Delaware
Ingersoll-Rand International Holding Corporation New Jersey
Ingersoll-Rand S.A. Switzerland
Woodcliff Insurance, Ltd. Bermuda
176
EXHIBIT 21
Page 2 of 3
Ingersoll-Rand Worldwide, Inc. Delaware
Northern Research & Engineering Company Massachusetts
Schlage Lock Company California
Von Duprin, Inc. Indiana
Schlage de Mexico S.A. de C.V. Mexico
Silver Engineering Works, Inc. Colorado
The Torrington Company Delaware
Kilian Manufacturing Corporation Delaware
Torrington Holdings, Inc. Delaware
Industrias del Rodamiento S.A. Spain
Ingersoll-Rand Iberica, S.L. Spain
Compagnie Ingersoll-Rand France
Ingersoll-Rand Equipements de Production S.A. France
Ingersoll-Rand Equipements de Construction France
Establissements Montabert S.A. France
S.A. Charles Maire France
Torrington France, S.A.R.L. France
Ingersoll-Rand (Australia) Ltd. Australia
Ingersoll-Rand S.E. Asia (Private), Limited Singapore
Ingersoll-Rand Benelux Belgium
N.V. Aro S.A. Belgium
Ingersoll-Rand Canada, Inc. Canada
Torrington, Inc. Canada
Torrington Industria e Comercio Ltda. Brazil
Ingersoll-Rand World Trade Ltd. Bermuda
Ingersoll-Rand (Barbados) Corporation Barbados
Torrington Beteiligungs GmbH Germany
Torrington GmbH Germany
Torrington Nadellager GmbH Germany
Ingersoll-Rand GesmbH (Austria) Austria
Ingersoll-Rand Sales Company Limited Delaware
Ingersoll-Rand Holdings Limited England
Ingersoll-Rand Company Limited England
Ingersoll-Rand Company South Africa
(Proprietary) Ltd. South Africa
The Torrington Company Limited England
The Aro Corporation (U.K.) Limited England
Ingersoll-Rand Beteiligungs GmbH Germany
ABG Allgemeine Baumaschinen-Gesellschaft mbH Germany
ABG Verwaltungs GmbH Germany
ABG Werke GmbH Germany
Ingersoll-Rand GmbH Germany
Ingersoll-Rand Beteiligungs und
Grundstucks Verwaltungs GmbH Germany
177
EXHIBIT 21
Page 3 of 3
Ingersoll-Rand (India) Ltd. (74% owned by
the company) India
Ingersoll-Rand Japan Ltd. Japan
Ingersoll-Rand Philippines, Inc. Philippines
Ingersoll-Rand AB Sweden
Ingersoll-Rand Services & Engineering Company Switzerland
Ingersoll-Rand Acceptance Company, S.A. Switzerland
Ingersoll-Rand Investment Company, S.A. Switzerland
G. Klemm Bohrtechnik GmbH Germany
Ingersoll-Rand S.A. de C.V. Mexico
SUBSIDIARIES OF INGERSOLL-DRESSER PUMP COMPANY
Worthington Argentina S.A.I.C. Argentina
Ingersoll-Dresser Pumps (Australia) Pty. Limited Australia
Worthington GmbH Austria
Worthington Industria e Comercio Ltda. Brazil
Ingersoll-Dresser Pump Canada Inc. Canada
Ingersoll-Dresser Pumps de Colombia S.A. Colombia
Worthington Centroamericana Ltda. Costa Rica
Ingersoll-Dresser Pompes France
IDP Pleuger France
IDP International France
Deutsche Ingersoll-Dresser Pumpen GmbH Germany
Ingersoll-Dresser Pumpen GmbH Germany
Pleuger Worthington GmbH Germany
Ingersoll-Dresser Pumps S.p.A. Italy
Worthington S.p.A. Italy
Ingersoll-Dresser Pump (Asia) Pte. Ltd. Singapore
Ingersoll-Dresser Pump S.A. Switzerland
Ingersoll-Dresser Pump Services Sarl Switzerland
ID Pump AG Switzerland
Ingersoll-Dresser Pump Nederland B.V. Netherlands
Ingersoll-Dresser Pumps (UK) Limited England
Ingersoll-Dresser Pumps Newark Limited England
Bombas Ingersoll-Dresser de Venezuela, C.A.
(51% owned by IDP) Venezuela
IDP Alternate Energy Company Delaware
Mascoma Hydro Corporation New Hampshire
Pump Investments, Inc. Delaware
Energy Hydro Inc. Delaware
Compania Ingersoll-Dresser Pump, S.A. Spain
178<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE DECEMBER 31, 1995 FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 137
<SECURITIES> 9
<RECEIVABLES> 1,148
<ALLOWANCES> 38
<INVENTORY> 913
<CURRENT-ASSETS> 2,346
<PP&E> 2,205
<DEPRECIATION> 927
<TOTAL-ASSETS> 5,563
<CURRENT-LIABILITIES> 1,329
<BONDS> 1,304
<COMMON> 219
0
0
<OTHER-SE> 1,576
<TOTAL-LIABILITY-AND-EQUITY> 5,563
<SALES> 5,729
<TOTAL-REVENUES> 5,729
<CGS> 4,310
<TOTAL-COSTS> 4,310
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87
<INCOME-PRETAX> 429
<INCOME-TAX> 159
<INCOME-CONTINUING> 270
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 270
<EPS-PRIMARY> 2.55
<EPS-DILUTED> 2.54
</TABLE>
