FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-985
INGERSOLL-RAND COMPANY
Exact name of registrant as specified in its charter
New Jersey 13-5156640
State of incorporation I.R.S. Employer Identification No.
Woodcliff Lake, New Jersey 07675
Address of principal executive offices Zip Code
(201) 573-0123
Telephone number of principal executive offices
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes . X . No . . .
The number of shares of common stock outstanding as of April 30, 1996 was
109,080,032.<PAGE>
INGERSOLL-RAND COMPANY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
Condensed Consolidated Balance Sheet at
March 31, 1996 and December 31, 1995 3
Condensed Consolidated Income Statement for
the three months ended March 31, 1996 and 1995 4
Condensed Consolidated Statement of Cash Flows
for the three months ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-17
Exhibit 11 - Computations of Primary and
Fully Diluted Earnings Per Share 18-19
SIGNATURES 20
2<PAGE>
PART I. FINANCIAL INFORMATION
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
ASSETS
MARCH 31, DECEMBER 31,
1996 1995
Current assets:
Cash and cash equivalents $ 85.2 $ 137.3
Marketable securities 7.8 9.3
Accounts and notes receivable, net of
allowance for doubtful accounts 1,127.4 1,109.9
Inventories 987.0 912.6
Prepaid expenses and deferred taxes 203.9 176.5
Total current assets 2,411.3 2,345.6
Investments and advances:
Dresser-Rand Company 107.7 93.9
Partially-owned equity companies 219.3 223.3
327.0 317.2
Property, plant and equipment, at cost 2,215.6 2,205.2
Less - accumulated depreciation 939.4 926.8
Net property, plant and equipment 1,276.2 1,278.4
Intangible assets, net 1,299.0 1,253.6
Deferred income taxes 134.8 134.8
Other assets 219.6 233.7
Total assets $5,667.9 $5,563.3
LIABILITIES AND EQUITY
Current liabilities:
Loans payable $ 143.7 $ 155.4
Accounts payable and accruals 1,279.5 1,173.8
Total current liabilities 1,423.2 1,329.2
Long-term debt 1,303.7 1,304.4
Postemployment liabilities 834.4 832.1
Ingersoll-Dresser Pump Company minority interest 120.2 170.8
Other liabilities 143.9 131.3
Shareowners' equity:
Common stock 219.7 219.4
Other shareowners' equity 1,622.8 1,576.1
Total shareowners' equity 1,842.5 1,795.5
Total liabilities and equity $5,667.9 $5,563.3
See accompanying notes to condensed consolidated financial statements.
3<PAGE>
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED INCOME STATEMENT
(in millions except per share figures)
Three Months Ended
March 31,
1996 1995
NET SALES $1,604.9 $1,185.6
Cost of goods sold 1,208.8 893.1
Administrative, selling and service
engineering expenses 245.5 203.3
Operating income 150.6 89.2
Interest expense (31.3) (9.0)
Other income (expense), net (1.4) (6.0)
Dresser-Rand income .5 .3
Ingersoll-Dresser Pump minority interest (.1) (2.2)
Earnings before income taxes 118.3 72.3
Provision for income taxes 43.8 26.0
Net earnings $ 74.5 $ 46.3
Average number of common
shares outstanding 107.1 105.6
Net earnings per common share $ 0.70 $ 0.44
Dividends per common share $0.185 $0.185
See accompanying notes to condensed consolidated financial
statements.
4<PAGE>
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Three Months Ended
March 31,
1996 1995
Cash flows from operating activities:
Net earnings $ 74.5 $ 46.3
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 52.0 36.7
Realignment of operations 30.4 --
Gain on sale of business (45.0) --
Net equity earnings/losses, net of dividends 4.8 (5.6)
Minority interests in earnings 0.5 2.5
Other noncash items (1.0) (9.2)
Changes in other assets and
liabilities, net (110.8) (76.1)
Net cash provided by (used in)
operating activities 5.4 (5.4)
Cash flows from investing activities:
Capital expenditures (47.2) (43.9)
Proceeds from sales of property, plant
and equipment 11.0 2.0
Acquisitions, net of cash (95.4) (17.3)
Proceeds from business dispositions 122.3 --
(Increase) decrease in marketable
securities (3.1) (.1)
Cash advances (to) from equity companies (22.2) 21.6
Net cash used in investing
activities (34.6) (37.7)
Cash flows from financing activities:
(Decrease) increase in short-term borrowings (10.3) 85.9
Proceeds from long-term debt .1 2.0
Payments of long-term debt (1.0) (1.2)
Net change in debt (11.2) 86.7
Dividends paid (19.8) (19.5)
Other 3.6 .9
Net cash (used in) provided by financing
activities (27.4) 68.1
Effect of exchange rate changes
on cash and cash equivalents 4.5 13.2
Net (decrease) increase in cash and
cash equivalents (52.1) 38.2
Cash and cash equivalents -
beginning of period 137.3 207.0
Cash and cash equivalents - end of period $ 85.2 $245.2
See accompanying notes to condensed consolidated financial
statements.
5<PAGE>
INGERSOLL-RAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments
(including normal recurring accruals) necessary to present
fairly the consolidated unaudited financial position and
results of operations for the three months ended March 31,
1996 and 1995.
Note 2 - In late May 1995, the company acquired Clark Equipment
Company (Clark). Clark's business is the design,
manufacture and sale of compact construction machinery,
asphalt paving equipment, axles and transmissions for off-
highway equipment, and golf cars and utility vehicles. The
total purchase price for Clark was approximately $1.5
billion. The acquisition was accounted for as a purchase.
The purchase price was allocated to the acquired assets and
liabilities based on estimated fair values. The company has
classified as goodwill the costs in excess of the fair value
of net assets acquired. Such excess costs are being
amortized on a straight line basis over forty years.
Intangible assets also represent costs allocated to patents
and trademarks and other specifically identifiable assets
arising from business acquisitions. These assets are being
amortized over their estimated useful lives.
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 three months ended March 31, 1995, reflect
the acquisition as though it occurred at the beginning of
the respective period after adjustments for the impact of
interest on acquisition debt, depreciation and amortization
of assets, including goodwill, to reflect the preliminary
purchase price allocation, and the elimination of Clark's
income from discontinued operations related to its
disposition of its investment in VME Group N.V. (in millions
except per share amounts):
For the three months ended March 31 1995
Sales $1,547.5
Net earnings 45.5
Earnings per share $.43
It should be noted that 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 period. Further, the pro forma
results are not intended to be a projection of future
results of the combined companies, as it should be noted
that the Club Car portion of the Clark acquisition tends to
concentrate the majority of its yearly operating profit
6<PAGE>
INGERSOLL-RAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Note 2 - Continued:
during the first half of the year.
Note 3 - On January 31, 1996, the company acquired for $95.4 million
of cash and the assumption of certain liabilities, the
Steelcraft Division of MascoTech, Inc. Steelcraft
manufactures a wide range of cold-rolled and galvanized
steel doors for use primarily in nonresidential
construction. The acquisition was accounted for as a
purchase with Steelcraft results included since the
acquisition date. Pro forma results assuming Steelcraft had
been acquired at the beginning of the year would not have
been significantly different than those reported.
Note 4 - In the first quarter of 1996, the company accrued for the
realignment of its foreign operations, principally in
Europe. These accruals were primarily for severance
payments and pension benefits associated with work force
reductions. Also in the first quarter, accruals were
established for the exit or abandonment of selected European
product lines and the closing of an IDP steel foundry. These
accruals totalled approximately $30.4 million and were
charged to operating income.
Note 5 - On March 26, 1996, the company sold most of the assets of
the Pulp Machinery Division for approximately $122.3 million
to Beloit Corporation, a subsidiary of Harnischfeger
Industries, Inc., realizing a pretax gain of $45 million.
In addition in March 1996, the company sold an investment
for a gain of $4.8 million.
Note 6 - 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 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 the second quarter of
1995.
Note 7 - On September 28, 1995, the company sold 2,878,008 shares of
its Common Stock held in treasury to the Clark Equipment
Company Leveraged Employee Stock Ownership Plan (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 approximately $104.3 million.
At March 31, 1996, approximately 1.8 million of these shares
remain unallocated and the amount paid by the LESOP for
those unallocated shares is classified as a reduction of
shareowners' equity pending allocation to participants. The
unallocated shares will be allocated to participants in the
LESOP (which now includes employees of the company as well
as those of Clark) as provided under its terms.
7<PAGE>
INGERSOLL-RAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
Note 8 - Inventories of appropriate domestic manufactured standard
products are valued on the last-in, first-out (LIFO) method
and all other inventories are valued using the first-in,
first-out (FIFO) method. The composition of inventories for
the balance sheets presented were as follows (in thousands):
March 31, December 31,
1996 1995
Raw materials and supplies $ 220.3 $ 211.8
Work-in-process 303.3 326.1
Finished goods 629.0 538.5
1,152.6 1,076.4
Less - LIFO reserve 165.6 163.8
Total $ 987.0 $ 912.6
Work-in-process inventories are stated after deducting
customer progress payments of $19.0 million at March 31,
1996 and $38.8 million at December 31, 1995.
Note 9 - The company's investment in the Dresser-Rand partnership at
March 31, 1996 and December 31, 1995 was $126.1 million and
$182.8 million, respectively. The company owed Dresser-Rand
$18.4 million at March 31, 1996 and $88.9 million at
December 31, 1995. During the first quarter of 1996,
Dresser-Rand distributed $100 million proportionally to its
partners (the company's share was $49 million) which was
offset against its advances to the partners.
Net sales of Dresser-Rand were $245.4 million for the three
months ended March 31, 1996 and $204.4 million for the three
months ended March 31, 1995; and gross profit was $44.2
million and $41.2 million, respectively. Dresser-Rand's net
income for the three months ended March 31, 1996 was $1.0
million, as compared to $0.6 million for the three months
ended March 31, 1995.
The summarized financial position of Dresser-Rand was as
follows (in thousands):
March 31, December 31,
1996 1995
Current assets $422.8 $457.2
Property, plant and
equipment, net 246.2 239.3
Other assets and investments 25.2 27.2
694.2 723.7
Deduct:
Current liabilities 262.8 341.4
Noncurrent liabilities 182.5 200.8
445.3 542.2
Net partners' equity
and advances $248.9 $181.5
8<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The company's results for the first quarter of 1996, both
before and after considering noncomparable items, reflected
improvement over last year's first quarter. Overall, first quarter
net earnings for the company totalled $74.5 million, or 70 cents per
share, as compared to 1995's first quarter earnings of $46.3 million,
or 44 cents per share.
The following noncomparable items affected the company's
first quarter results:
(a) net earnings associated with the May 31, 1995 acquisition of
Clark Equipment Company (Clark) totalled approximately $8.5
million (or eight cents per share) for the quarter;
(b) the net gain on the sale of the Pulp Machinery Division
generated net earnings during the first quarter of the year
of approximately $28 million (or 26 cents per share);
(c) the charge to operating income for the realignment of the
company's foreign operations (principally in Europe)
totalled approximately $18 million. These charges are
primarily for severance payments and pension enrichment
benefits associated with a work force reduction. This
charge reduced net earnings for the quarter by approximately
$11 million (or 11 cents per share);
(d) charges associated with the exit or abandonment of selected
European product lines reduced operating income during the
first quarter by approximately $7 million. The after-tax
charge for this item reduced net earnings by approximately
$4.5 million (or four cents per share);
(e) charges incurred by Ingersoll-Dresser Pump Company (IDP) for
closing a steel foundry, reduced operating income by
approximately $5.4 million. This item affected the
company's net earnings by approximately $2 million (or two
cents per share); and
(f) a gain on the sale of an investment benefitted the first
quarter's results by $4.8 million ($3.0 million after-tax,
or three cents per share).
9<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
If these items were excluded from the first quarter, the
company's net earnings would have totalled approximately $52 million
(or 50 cents per share) which would be comparable to last year's
first quarter net earnings of $46.3 million (or 44 cents per share).
Overall, international markets (with the exception of Germany)
continued to strengthen and improve on a quarter to quarter basis.
Domestic markets, principally our construction, architectural
hardware, professional tool and general industrial products were
stronger during the first quarter of 1996, when compared to the first
three months of 1995.
A comparison of key income statement categories between the
quarters, is a follows:
o Net sales for the first three months of 1996 totalled $1.6
billion, representing a 35-percent increase over last year's
first quarter. Sales for the quarter, excluding Clark,
approximated $1.2 billion, reflecting a three-percent improvement
over the first quarter of 1995.
o The ratio of cost of goods sold to sales for the first quarter of
1996 was comparable to last year's first quarter ratio, both
including and excluding the noncomparable items (which were
discussed above). The following noncomparable items affected
cost of goods sold during the first quarter of the year:
- Clark's operating results;
- the gain on the sale of the Pulp Machinery Division;
- the charge for the realignment of the company's foreign
operations;
- the cost of closing IDP's steel foundry; and
- the charge associated with the exit or abandonment of
selected European product lines.
It should be noted that the company did not experience any
partial liquidations of LIFO (last-in, first-out) inventories
during the first quarter of either 1996 or 1995.
o The ratio of administrative, selling and service engineering
expenses to sales was 15.3 percent for the first quarter of 1996,
as compared to 17.1 percent for the first three months of 1995.
If the first quarter effect of the Clark acquisition were
excluded from 1996's results, this ratio is comparable to 1995's
first quarter performance.
10<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
o Operating income for the first quarter of the year totalled
$150.6 million, as compared to $89.2 million for 1995's first
quarter. The ratio of operating income to sales in 1996 totalled
9.4 percent, as compared to 7.5 percent for the first three
months of last year. If the non-comparable items (previously
discussed) were excluded, the 1996 operating income to sales
ratio reflects a slight improvement over the 1995 first quarter
ratio.
o Other income (expense), net, aggregated $1.4 million of expense
for the three months ended March 31, 1996, as compared to $6.0
million of expense in the first quarter of 1995. This favorable
change is almost entirely attributed to the $4.8 million gain on
the sale of an investment during the first quarter of 1996.
Reductions in losses from foreign exchange activities in the
first quarter of 1996 versus the first three months of 1995 were
offset by lower earnings from partially-owned equity companies
and an increase in expenses of a miscellaneous nature. The other
income/(expense) activity of Clark was immaterial for the
quarter.
o The company's pretax profits for its 49-percent interest in
Dresser-Rand Company totalled $0.5 million for the first quarter
of the year, as compared to $0.3 million for the first three
months of 1995.
o The IDP minority interest represents Dresser Industries interest
in the operating results of IDP. During the first quarter of
1996, the minority interest charge totalled $0.1 million (which
includes the effect of the foundry closing costs) versus $2.2
million in 1995's first quarter.
o Interest expense for the first three months of the year totalled
$31.3 million, which is an increase of $22.3 million over last
year's first quarter. Interest expense associated with the Clark
acquisition totalled approximately $23 million for the 1996 first
quarter.
o The company's effective tax rate for the first quarter of 1996
was 37 percent versus last year's first quarter effective tax
rate of 36 percent. The company's effective tax rate differs
from the statutory rate of 35 percent mainly due to state income
taxes; nondeductible goodwill and some foreign earnings being
taxed at higher rates. The effective tax rate for the full year
of 1995 was 37 percent.
11<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
The consolidated results for the first quarter of the year
benefitted from the combination of business improvements in a number
of the company's domestic markets (including auto, construction and
general industrial) and a continued emphasis on cost-containment
programs throughout the company. International business has
generally reflected increases during the first three months of 1996
when compared to the comparable period in 1995. Incoming orders for
the first quarter of the year totalled $1.8 billion, which represents
an increase of 28.3 percent over the 1995 first quarter. New orders
associated with Clark totalled approximately $375 million. The Air
Compressor, Process Systems and Bearings and Components groups were
the only operations within the company which failed to report
meaningful increases in first quarter bookings levels when compared
to the first three months of 1995. The company's backlog of orders
at March 31, 1996, believed by it to be firm, was $1.7 billion, which
reflects an increase of approximately $100 million over the December
31, 1995 balance. The company estimates that approximately 90
percent of the backlog will be shipped during the next twelve months.
Liquidity and Capital Resources
The company's financial position at March 31, 1996 was comparable
to its position at December 31, 1995. In the first three months of
1996, working capital decreased by $28 million to $988 million at
March 31, 1996 from the December 31, 1995 balance of $1,016 million.
The current ratio at March 31, 1996 was 1.7 to 1, down from the 1.8
to 1 ratio at December 31, 1995.
The company's cash and cash equivalents decreased by $52.1
million during the first three months of 1996 to $85.2 million from
$137.3 million at December 31, 1995. 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 provided $5.4
million, investing activities used $34.6 million and financing
activities used $27.4 million. Exchange rate changes during the
first three months of 1996 increased cash and cash equivalents by
$4.5 million.
12<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
Receivables totalled $1.1 billion at March 31, 1996, which
represents a $17.5 million increase from the amount reported at
December 31, 1995. The increase was due to the Steelcraft
acquisition and the effect of strong first quarter sales offset by
the effect of translation and dispositions.
Inventories totalled $987.0 million at March 31, 1996,
approximately $74.4 million higher than the December 31, 1995 level.
The activity during the first quarter of 1996 represents the normal
first quarter inventory build, the net effect of dispositions and
acquisitions, and a decrease due to exchange rates applicable to the
international inventories.
Intangible assets increased approximately $45 million. This net
increase came from the first quarter acquisition of Steelcraft offset
by first quarter amortization.
Long-term debt, including current maturities, at the end of the
first three months of the year, totalled $1.4 billion.
The company's March 31, 1996 debt-to-total capital ratio was 44
percent, which reflects a minor improvement from the 45 percent ratio
at December 31, 1995.
During the first three months of 1996, foreign currency
translation adjustments resulted in a net decrease of approximately
$15.8 million in shareowners' equity, caused by the strengthening of
the U.S. dollar against other currencies. Currency changes in
Belgium, France, Germany, Japan, South Africa and Switzerland,
accounted for over 95 percent of this change. The translation of
accounts receivable and inventories were the principal balance sheet
items affected by the currency fluctuations since year end.
Environmental Matters
Environmental matters at March 31, 1996 remain substantially
unchanged from December 31, 1995. The company has been identified as
a potentially responsible party in environmental proceedings brought
under both the federal Superfund law and state remediation laws,
13<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
involving 39 sites within the United States. For all sites, there
are other potentially responsible parties and in most instances, the
company's involvement is minimal. Although there is a possibility
that a responsible party might have to bear more than its
proportional share of site clean-up costs if other responsible
parties fail to make contributions, the company has not yet had, and
to date there is no indication that it will have, to bear more than
its proportional share of clean-up costs at any site. The company
also is engaged in site investigations and remedial activities to
address environmental cleanup from past operations at current and
former manufacturing facilities. Additionally, Clark is a defendant
in a lawsuit filed by the United States Environmental Protection
Agency that seeks civil penalties for alleged violations of the Clean
Water Act, arising out of the discharge of certain metal finishing
wastewaters generated at a current manufacturing facility. Although
uncertainties regarding environmental technology, state and federal
regulations, insurance coverage and individual site information make
estimating the liability difficult, management believes that the
total liability for the cost of environmental remediation will not
have a material effect on the financial condition, the results of
operations, liquidity or cash flows of the company. It should be
noted that when the company estimates its liability for environmental
matters, such estimates are based on current technologies and the
company does not discount its liability or assume any insurance
recoveries.
Acquisitions
On January 31, 1996, the company acquired the Steelcraft Division
of MascoTech, Inc., which manufactures a wide range of cold-rolled
and galvanized steel doors for use primarily in nonresidential
construction. The acquisition was paid for in cash and the
assumption of certain liabilities. Steelcraft is a division of the
Architectural Hardware Group. Steelcraft is the leader in
manufacturing steel doors with honeycomb cores.
On May 25, 1995, CEC Acquisition Corp. (CEC), a wholly-owned
subsidiary of the company, acquired 16,553,617 shares of 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. Clark's business is the design, manufacture and sale of
14<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
compact construction machinery, asphalt paving equipment, axles and
transmissions for off-highway equipment, and golf cars and utility
vehicles. 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 and the shareholders of Clark who did
not tender their shares became entitled to receive $86 per share.
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. Included among the assets
acquired by the company (indirectly through the acquisition of the
shares of Clark) are the Melroe Company, Blaw-Knox Construction
Equipment Company, Clark-Hurth Components and Club Car, Inc. 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 Clark acquisition has been accounted
for as a purchase and Clark's assets have been consolidated into the
financial statements of the company.
Contingencies
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 Clark's 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 the assumed obligations, Clark would 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.
15<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
Review of Business Segments
The Standard Machinery Segment reported sales of $688.5 million
for the first quarter of 1996, an increase of 73 percent over 1995's
first-quarter level of $398.8 million. This segment now includes all
the operations of Clark, except for the Clark-Hurth unit. Excluding
the sales from the Clark units, the first-quarter sales for this
segment totalled $411.0 million. Operating income for the quarter
was $52.5 million, a 49-percent improvement over the $35.3 million
reported for the three months ended March 31, 1995. Excluding the
Clark operations, first-quarter operating income for the segment was
$12.7 million, and it included approximately $16 million of
noncomparable charges due to actions taken by the company during the
first quarter of the year, previously discussed. Sales from the
traditional units in the Construction and Mining Group reported
modest first quarter improvements when compared to last year's first
quarter. However, their operating income and margin ratios declined
slightly from 1995's first quarter level's before considering the
effects of noncomparable items. Air Compressor Group's sales for the
first quarter of 1996 are up slightly from the amount reported for
the first three months of 1995 but operating income was below the
prior year's level due to lower sales of portable compressors, the
effect of poor first quarter weather conditions in the U.S. and
disappointing construction markets in Germany.
Engineered Equipment Segment's sales totalled $340.2 million, 46
percent above last year's first-quarter total of $232.4 million.
This segment's activities now include the operating results of the
Clark-Hurth unit. Excluding the sales of Clark-Hurth, this segment's
first-quarter sales were $247.5 million, representing a $15.1 million
improvement over 1995's first-quarter total. Operating income for
the quarter was $51.5 million, and it included a net gain of
approximately $45 million from the sale of the company's Pulp
Machinery Division, a charge of approximately $5.4 million for the
closure of an IDP steel foundry and $4.0 million from the operating
results of the Clark-Hurth unit. Excluding these items from the
results for the first three months of 1996, operating income for the
quarter was $7.8 million versus $7.6 million for 1995's first
quarter. IDP's first quarter sales reflect a modest increase over
1995's first quarter. Operating income, before considering the
effect of the foundry closing, was essentially level with last year's
first quarter.
16<PAGE>
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
(continued)
Pulp Machinery Division sales approximated $20 million in both
quarters and this unit operated essentially at the break even level.
The Bearings, Locks and Tools Segment reported first quarter
sales of $576.2 million, four percent higher than last year's first-
quarter level of $554.4 million. Operating income totalled $57.4
million for the first quarter of 1996 and included noncomparable
charges of approximately $9 million, which were recorded during the
first three months of 1996. In addition, the segment's results for
the first quarter of 1996 reflect a slight benefit from the two month
results from the January 31, 1996 acquisition of the Steelcraft
Division, but the impact of the General Motors strike more than
offset the Steelcraft earnings. Excluding these events, operating
income for the quarter would have been approximately $69.3 million
versus $55.2 million for the first three months of 1995.
The Bearings and Components Group's sales for the first quarter
of 1996 were essentially level with 1995's first quarter. The
group's operating income was also equal to last year's first quarter,
before considering the effect of noncomparable items in 1996.
Architectural Hardware Group's sales for the first three months
of the year are approximately 30 percent higher than last year's
first quarter with approximately one-half of the increase being
attributed to the January 31, 1996 Steelcraft acquisition. The
group's operating income and operating income margins improved over
1995's first quarter figures.
The Production Equipment Group's sales for the first quarter of
1996 were down slightly from 1995's level. However, operating
income, before the effect of noncomparable items, improved over
1995's first quarter.
17<PAGE>
PART I - EXHIBIT 11
Page 1 of 2
INGERSOLL-RAND COMPANY
COMPUTATIONS OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
(in millions except per share figures)
Three Months Ended
March 31,
1996 1995
PRIMARY EARNINGS PER SHARE (NOTE 1):
Net earnings applicable to common stock $ 74.5 $ 46.3
Average number of common shares outstanding 107.1 105.6
PRIMARY EARNINGS PER SHARE $0.70 $ 0.44
FULLY DILUTED EARNINGS PER SHARE (NOTE 2):(*)
Net earnings for the period $ 74.5 $ 46.3
Adjusted shares:
Average number of common shares outstanding 107.1 105.6
Number of common shares issuable
assuming exercise under incentive
stock plans .5 .4
Average number of outstanding shares,
as adjusted for fully diluted earnings
per share calculations 107.6 106.0
FULLY DILUTED EARNINGS PER SHARE $0.69 $ 0.44
(*) This calculation is presented in accordance with the Securities
Exchange Act of 1934, although it is not required disclosure
under APB Opinion No. 15.
See accompanying notes to computations of primary and fully diluted
earnings per share.
18<PAGE>
PART I - EXHIBIT 11
Page 2 of 2
INGERSOLL-RAND COMPANY
NOTES TO COMPUTATIONS OF PRIMARY AND FULLY DILUTED
EARNINGS PER SHARE
Note 1 - Shares issuable under outstanding stock plans, applying the
"Treasury Stock" method, have been excluded from the
computation of primary earnings per share since such shares
were less than 1% of common shares outstanding.
2 - Net earnings per share of common stock computed on a fully
diluted basis are based on the average number of common
shares outstanding during each year after adjustment for
individual securities which may be dilutive. Securities
entering into consideration in making this calculation are
common shares issuable under employee stock plans.
Employee stock options outstanding are included in the
calculation of fully diluted earnings per share by applying
the "Treasury Stock" method quarterly. Such calculations
are made using the higher of the average month-end market
prices or the market price at the end of the quarter, in
order to reflect the maximum potential dilution.
19<PAGE>
INGERSOLL-RAND COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
INGERSOLL-RAND COMPANY
(Registrant)
Date May 14, 1996 /S/ T.F. McBride
T.F. McBride, Senior Vice
President & Chief Financial Officer
Principal Financial Officer
Date May 14, 1996 /S/ R.A. Spohn
R.A. Spohn, Controller -
Accounting and Reporting
Principal Accounting Officer
20<PAGE>
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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REFERENCE TO SUCH FINANCIAL STATEMENTS.
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