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 June 30, 1997
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 July 25, 1997 was
110,614,296.
INGERSOLL-RAND COMPANY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet at
June 30, 1997 and December 31, 1996
Condensed Consolidated Income Statement for the
three and six months ended June 30, 1997 and 1996
Condensed Consolidated Statement of Cash Flows
for the six months ended June 30, 1997 and 1996
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Exhibit 11 - Computations of Primary and
Fully Diluted Earnings Per Share
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security
Holders
Item 6 - Exhibits and Reports on Form 8K
(a) Exhibits
Exhibit 12 - Ratio of Earnings to Fixed Charges
(b) Reports on Form 8K
None
SIGNATURES
PART I. FINANCIAL INFORMATION
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
ASSETS
JUNE 30, DECEMBER 31,
1997 1996
Current assets:
Cash and cash equivalents $ 173.4 $ 184.1
Marketable securities 7.3 8.0
Accounts and notes receivable, net of
allowance for doubtful accounts 1,216.8 1,066.2
Inventories 811.7 775.1
Deferred taxes and prepaid expenses 309.3 236.5
Assets held for sale 18.9 265.7
Total current assets 2,537.4 2,535.6
Investments and advances:
Dresser-Rand Company 153.0 152.6
Partially-owned equity companies 212.5 223.6
365.5 376.2
Property, plant and equipment, at cost 2,146.7 2,103.7
Less - accumulated depreciation 983.4 958.3
Net property, plant and equipment 1,163.3 1,145.4
Intangible assets, net 1,470.0 1,178.0
Deferred income taxes 146.2 162.6
Other assets 221.3 223.8
Total assets $5,903.7 $5,621.6
LIABILITIES AND EQUITY
Current liabilities:
Loans payable $ 167.8 $ 162.3
Accounts payable and accruals 1,268.5 1,127.9
Total current liabilities 1,436.3 1,290.2
Long-term debt 1,164.9 1,163.8
Postemployment liabilities 825.8 814.7
Ingersoll-Dresser Pump Company minority interest 108.0 113.4
Other liabilities 136.9 148.7
Shareowners' equity:
Common stock 222.7 220.6
Other shareowners' equity 2,009.1 1,870.2
Total shareowners' equity 2,231.8 2,090.8
Total liabilities and equity $5,903.7 $5,621.6
See accompanying notes to condensed consolidated financial statements.
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED INCOME STATEMENT
(in millions except per share figures)
<TABLE>
<S> <S>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $1,837.4 $1,761.9 $3,476.8 $3,366.7
Cost of goods sold 1,355.5 1,338.0 2,583.9 2,546.7
Administrative, selling and service
engineering expenses 272.3 247.6 516.7 493.1
Operating income 209.6 176.3 376.2 326.9
Interest expense (29.1) (32.1) (57.0) (63.4)
Other income (expense), net (1.5) (0.5) (7.5) (1.9)
Dresser-Rand income 8.0 7.0 9.5 7.5
Ingersoll-Dresser Pump
minority interest (7.1) (4.2) (9.7) (4.3)
Earnings before income taxes 179.9 146.5 311.5 264.8
Provision for income taxes 68.3 54.2 122.1 98.0
Net earnings $ 111.6 $ 92.3 $ 189.4 $ 166.8
Average number of common
shares outstanding 108.7 107.4 108.5 107.2
Net earnings per common share $ 1.03 $ 0.86 $1.75 $1.56
Dividends per common share $0.205 $0.185 $0.41 $0.37
See accompanying notes to condensed consolidated financial statements.
</TABLE>
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Six Months Ended
June 30,
1997 1996
Cash flows from operating activities:
Net earnings $ 189.4 $ 166.8
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 100.2 101.7
(Gain)/loss on sale of businesses (5.8) (45.1)
Realignment of operations - 30.4
Equity earnings/loss, net of dividends (12.6) (6.1)
Minority interest in earnings 14.4 5.8
Deferred income taxes 4.2 (3.7)
Other noncash items 14.5 2.7
Changes in other assets and
liabilities, net (123.3) (171.5)
Net cash provided by operating activities 181.0 81.0
Cash flows from investing activities:
Capital expenditures (75.3) (99.7)
Proceeds from sales of property, plant
and equipment 13.9 15.5
Acquisitions, net of cash (328.9) (96.3)
Proceeds from business dispositions 244.2 122.6
Increase in marketable securities (0.7) (4.5)
Cash advances (to) from equity companies 4.7 (27.2)
Net cash used in investing activities (142.1) (89.6)
Cash flows from financing activities:
Decrease in short-term borrowings (52.7) (8.0)
Proceeds from long-term debt 2.0 0.1
Payments of long-term debt (1.0) (24.1)
Net change in debt (51.7) (32.0)
Dividends paid (44.5) (39.7)
Other 34.1 9.0
Net cash used in financing activities (62.1) (62.7)
Effect of exchange rate changes
on cash and cash equivalents 12.5 7.6
Net decrease in cash and cash equivalents (10.7) (63.7)
Cash and cash equivalents -
beginning of period 184.1 137.3
Cash and cash equivalents - end of period $ 173.4 $ 73.6
See accompanying notes to condensed consolidated financial statements.
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 and six months ended June 30, 1997 and
1996.
Note 2 - On April 3, 1997, the company completed the acquisition of Newman
Tonks Group PLC (Newman Tonks), a United Kingdom-based producer
of architectural hardware, for approximately $370 million.
Newman Tonks, headquartered in Birmingham, England, is a leading
manufacturer, specifier and supplier of branded architectural
hardware products with 1996 sales of approximately $425 million.
This transaction has been accounted for as a purchase, with the
results included since its acquisition date. Pro forma results
assuming Newman Tonks had been acquired at the beginning of the
year would not materially impact the results of the company.
Note 3 - On February 14, 1997, the company sold the Clark-Hurth Group to
Dana Corporation. At December 31, 1996, the net assets held for
sale totalled $265.7 million and were classified as current assets
on the Consolidated Balance Sheet. Clark-Hurth results have been
reported as part of the Engineered Equipment Segment. This
group's 1997 results inclusive of the sale transaction, produced
operating income for the first quarter of approximately $2.7
million, but on an after-tax basis, reduced net earnings by
approximately $3.6 million.
Note 4 - On January 31, 1996, the company acquired for $95.4 million in
cash and the assumption of certain liabilities, the Steelcraft
Division of MascoTech, Inc. (Steelcraft). Steelcraft manufactures
a wide range of cold-rolled and galvanized steel doors for use
primarily in nonresidential construction. On August 27, 1996, the
company acquired for $34.3 million in cash and the assumption of
certain liabilities, substantially all of the assets of Zimmerman
International Corp. (Zimmerman). Zimmerman manufactures equipment
and systems that assist in handling or lifting tools, components
and materials for a variety of industrial operations. These
transactions have been accounted for as purchases, with the
results included since their respective acquisition dates. Pro
forma results assuming the acquisitions had occurred at the
beginning of the year would not have been materially different
than those reported.
Note 5 - 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 1996
first quarter, accruals were established for the exit or
abandonment of selected European product lines and the closing of
a steel foundry. These accruals totalled approximately $30.4
million and were charged to operating income.
Note 6 - 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 7 - In August 1996, the company agreed to sell the remaining assets of
the Process Systems Group to Gencor Industries, Inc., subject to
certain closing conditions. The sale was completed during the
fourth quarter of 1996 at a price of approximately $58 million in
cash for a pretax gain of approximately $10 million. The Process
Systems Group had been reported as part of the Engineered
Equipment Segment.
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 millions):
June 30, December 31,
1997 1996
Raw materials and supplies $ 170.4 $ 156.2
Work-in-process 307.9 238.7
Finished goods 492.8 538.1
971.1 933.0
Less - LIFO reserve 159.4 157.9
Total $ 811.7 $ 775.1
Work-in-process inventories are stated after deducting customer
progress payments of $19.3 million at June 30, 1997 and $24.9
million at December 31, 1996.
Note 9 - The company's investment in the Dresser-Rand partnership at June
30, 1997 and December 31, 1996 was $155.0 million and $149.4
million, respectively. The company owed Dresser-Rand $2.0 million
at June 30, 1997 and Dresser-Rand owed the company $3.2 million at
December 31, 1996. During the first six months of 1996, Dresser-
Rand approved and distributed $115.7 million of capital to its
partners of which $56.7 million was distributed to the company.
Net sales of Dresser-Rand were $563.0 million for the six months
ended June 30, 1997 and $488.5 million for the six months ended
June 30, 1996; and gross profit was $107.9 million and $104.4
million, respectively. Dresser-Rand's net income for the six
months ended June 30, 1997 was $19.4 million, as compared to $15.3
million for the six months ended June 30, 1996.
The summarized financial position of Dresser-Rand was as follows
(in millions):
June 30, December 31,
1997 1996
Current assets $415.0 $496.5
Property, plant and
equipment, net 251.7 262.5
Other assets and investments 73.9 49.8
740.6 808.8
Deduct:
Current liabilities 260.6 306.4
Noncurrent liabilities 185.3 204.4
445.9 510.8
Net partners' equity
and advances $294.7 $298.0
Note 10 -Earnings per share is computed based on the average number of
common shares outstanding (108.7 million and 108.5 million for the
three and six months ended June 30, 1997,respectively, and 107.4
million and 107.2 million for the three and six months ended June
30, 1996, respectively). The Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings per Share" in February 1997, which is required to be
adopted on December 31, 1997. The impact of SFAS No. 128 on the
calculation of earnings per share for the three and six months
ended June 30, 1997 and 1996 is not material.
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net sales for the second quarter of 1997 totaled $1.8 billion,
representing a 4.3-percent increase over last year's second
quarter. However, sales comparisons between the two quarters
have to be adjusted to reflect the following:
o The second quarter of 1997 includes the full quarter's
results from the April 3, 1997 acquisition of the Newman Tonks
Group PLC (Newman Tonks), a U.K.-based producer of architectural
hardware. Newman Tonks generated approximately $84 million of
bookings and sales since its acquisition date. This unit also
contributed approximately $1 million of operating income for the
second quarter of the year, after the effect of estimated
purchase accounting adjustments.
o The second quarter of 1996 included the results of the Clark-
Hurth Components Group, which was sold on February 14, 1997, and
the Process Systems Unit, which was sold effective September 30,
1996. These operations reported combined bookings of
approximately $101 million for the second quarter of 1996. Their
combined 1996 second quarter sales totaled approximately $117
million, which generated approximately $2.3 million of operating
income for the three months ended June 30, 1996.
Operating income for the three months ended June 30, 1997
totaled $209.6 million (an 11.4 percent operating margin), and
represents an 18.9-percent improvement over the $176.3 million
reported for the second quarter of 1996. In addition, the second
quarter of 1997 also includes an $8.0 million charge to operating
income for the writedown of certain assets which are being held
for sale.
Ingersoll-Rand reported second quarter net earnings of
$111.6 million, or $1.03 per common share, versus $92.3 million,
or 86 cents per common share for the three months ended June 30,
1996, reflecting an improvement of approximately 20 percent.
Ingersoll-Rand Company's second-quarter performance established a
new second-quarter record for the company. The company's record
second quarter results were based on a strong domestic economy
supplemented by the continued benefits of the company's focus on
productivity.
A partial liquidation of LIFO (last in, first out)
inventories during the second quarter of 1997 lowered cost of
goods sold by $1.4 million (approximately $0.9 million after-tax
or one cent per share). This compares to a second quarter of
1996 liquidation which benefited cost of goods sold by $2.3
million (approximately $1.4 million after-tax or one cent per
share). Foreign exchange losses for the second quarter of 1997
decreased net earnings by approximately $0.7 million, less than
one cent per common share versus losses of $1.3 million, or one
cent per share for the comparable 1996 quarter.
The company's results for the first six months of the year
reflected improvement over the comparable period last year. Net
sales totaled $3.5 billion, a 3.3-percent increase over 1996's
six-month total. Operating income amounted to $376.2 million for
an improvement of 15.1 percent over the $326.9 million total for
the first half of the prior year. Net earnings for the period
amounted to $189.4 million (or $1.75 per common share) which is
13.5 percent greater than last year's six-month total of $166.8
million (or $1.56 per common share).
The improvement for the first half of the year is even more
impressive after the elimination of the following noncomparable
items from both periods:
a. the first quarter of 1997 contains operating income of $2.7
million from the Clark-Hurth Group (sold on February 14,
1997) from the results of the group and the sale
transaction. However, due to the differences between the
book and tax basis of the net assets sold, this resulted in
a net after-tax loss of approximately $3.6 million, or three
cents per share;
b. the second quarter of 1997 includes the results of Newman
Tonks which reported sales of approximately $84 million and
operating income of approximately $1 million (after the
effect of estimated purchase accounting adjustments);
c. the second quarter of 1997 also includes a charge of $8.0
million for the writedown of certain assets being held for
sale;
d. the first six months of 1996 included the following:
o an operating income benefit of approximately
$45 million from the sale of the Pulp Machinery
Division, which increased net earnings by
approximately $28 million (or 26 cents per share);
o a charge to operating income of approximately
$25 million for the realignment of the company's
foreign operations and for the abandonment of
selected European product lines. These actions
reduced net earnings by approximately $15.5
million (or 15 cents per share);
o a charge to operating income of $5.4 million
by Ingersoll-Dresser Pump Company (IDP) for the
closing of a steel foundry, which reduced net
earnings by approximately $2 million (or two cents
per share);
o sales during the first six months of 1996 for
the Clark-Hurth Group (which was sold on February
14, 1997) totaled approximately $184 million and
contributed approximately $3.4 million of
operating income to the company;
o the Process Systems Group was sold in two
pieces during 1996. The Pulp Machinery Division
was sold at the end of the first quarter last year
and the remaining units were sold effective
September 30, 1996. This group generated
approximately $67 million of product sales during
the first half of 1996 which resulted in
approximately $3.6 million in operating income for
the company; and
o a gain on the sale of an investment which
benefited other income by $4.8 million ($3.0
million after-tax or three cents per share).
A comparison of key income statement amounts between the
first half of both years is as follows:
o Net sales for the first half of 1997 were $110.1 million
above last year's first half. Excluding noncomparable units from
both periods, adjusted sales for the first six months of 1997
increased approximately seven percent over last year's adjusted
first half total.
o The ratio of cost of goods sold to sales for the first two
quarters of 1997 reflected an improvement over the reported 1996
six month ratio. Excluding noncomparable items from both
periods, the adjusted ratio of cost of goods sold to sales
reflected a marked improvement in 1997, when compared to 1996.
o Partial liquidation of LIFO (last in, first out) inventories
during the first half of 1997 lowered cost of goods sold by $1.4
million compared to reductions of $2.3 million during the first
six months of 1996.
o The ratio of administrative, selling and service engineering
expenses to sales was 14.9 percent for the first six months of
1997, as compared to 14.6 percent for the first half of 1996.
This minor deterioration is primarily attributed to the inclusion
of the results of Newman Tonks, which traditionally has had a
higher ratio of selling and administration expenses to sales than
the company's historical lines.
o Operating income for the first six months of 1997 was $49.3
million higher than last year's first half total. The ratio of
operating income to sales in 1997 was 10.8 percent, as compared
to 9.7 percent for the first six months of the prior year. After
excluding the noncomparable items (previously discussed) from
both periods, the adjusted 1997 operating income reflects a
marked improvement over the adjusted 1996 figure. This
improvement is the effect of an improved economy and the
company's aggressive productivity improvement programs.
o Other income (expense), net, aggregated $7.5 million of
expense for the six months ended June 30, 1997, as compared to
$1.9 million of expense in the first half of 1996. This
unfavorable 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 during the first six months of 1997 versus the
comparable period of 1996 were offset by lower earnings from
partially-owned equity companies and a minor increase in
miscellaneous expenses.
o The company's pretax profits for its 49 percent interest in
Dresser-Rand Company totaled $9.5 million for the first half of
1997, reflecting an improvement over the $7.5 million reported
for the first six months of 1996.
o The IDP minority interest charge totaled $9.7 million for
the first six months of 1997 versus $4.3 million for last year's
first half, which was after the effect of last year's first
quarter foundry closing costs of approximately $2.0 million.
o Interest expense for the first six months of the year
totaled $57.0 million, which represents a $6.4 million reduction
from the $63.4 million for the first half of last year,
reflecting the lower debt levels in 1997.
o The company's effective tax rate for the first half of 1997
was 39.2 percent. Taxes of $7.2 million relating to the sale of
Clark-Hurth resulted in an effective first-quarter rate of 40.9
percent. The effective tax rate for both the first half and full
year of 1996 was 37 percent. The projected effective tax rate
for the remaining two quarters of 1997 is estimated at 38
percent.
o The consolidated results for the first half of the year
benefited from the combination of business improvements in a
number of the company's domestic markets (including
automotive, construction, and general industrial) and a
continued emphasis on the company's productivity-improvement
programs and prior year restructuring actions. Incoming
orders for the first half of the year totaled $3.6 billion,
which was approximately $114 million (or 3.3 percent) above
last year's six month total.
Bookings for the second quarter excluding noncomparable businesses,
reflected an overall increase of nine percent. Bookings in the
United States were up 11 percent, and international orders were up
six percent from last year, despite an unfavorable currency impact of
approximately five percent. The company's backlog of orders at
June 30, 1997, believed by it to be firm, was $1.4 billion. The
company estimates that approximately 90 percent of the backlog
will be shipped during the next twelve months.
Liquidity and Capital Resources
In the first six months of the year, the company completed
the sale of the Clark-Hurth Group on February 14, 1997, and the
acquisition of Newman Tonks, on April 3, 1997. The cash proceeds
from the Clark-Hurth disposition were approximately $242 million
and the cash cost of the Newman Tonks acquisition was
approximately $370 million. During the first half of 1997, the
company's working capital decreased approximately $144 million to
$1.1 billion from the December 31, 1996 balance. The current
ratio at June 30, 1997 was 1.8 to one, which is lower than the
2.0 to one at the end of last year. These reductions are
primarily attributed to the company's divestitures and
acquisitions program during the first six months of the year.
The company's cash and cash equivalents decreased by $10.7
million during the first six months of 1997 to $173.4 million
from $184.1 million at December 31, 1996. The reduction in cash
and cash equivalents includes the movements due to the company's
acquisitions and dispositions.
In evaluating the net change in cash and cash equivalents,
cash flows from operating, investing and financing activities,
and the effect of exchange rate movements must be considered.
Cash flows from operating activities provided $181.0 million,
investing activities used $142.1 million and financing activities
used $62.1 million. Exchange rate changes during the first six
months of 1997 increased cash and cash equivalents by $12.5
million.
Receivables totaled $1.2 billion at June 30, 1997, which
represents a $150.6 million increase over the amount reported at
December 31, 1996. The increase was attributed to strong second
quarter sales and $63.2 million from the acquisition of Newman
Tonks, partially offset by the effect of foreign currency
translation.
Inventories totaled $811.7 million at June 30, 1997, which
represents an increase of $36.6 million over the year-end balance
of $775.1 million. The net increase is the result of a $68
million increase related to the Newman Tonks acquisition and
reductions due to strong second-quarter sales and the effect of
exchange rates applicable to international inventories.
Intangible assets increased by a net amount of $292 million
during the first six months of 1997 due primarily to the
acquisition of Newman Tonks, reduced by scheduled amortization.
Long term debt, including current maturities, at June 30,
1997, totaled $1.3 billion. The company's debt-to-total capital
ratio improved to 37 percent at June 30, 1997, which represents a
2 percentage point improvement over the 39 percent ratio at
December 31, 1996 despite the effect of the acquisition of Newman
Tonks.
During the first six months of 1997, foreign currency
translation adjustments resulted in a net decrease of
approximately $51.9 million in shareowners' equity, caused by the
strengthening of the U.S. dollar against other currencies.
Currency changes in Belgium, France, Germany, Italy, Japan,
Netherlands, Spain, Switzerland and the United Kingdom, accounted
for almost all of this change. The translation of accounts
receivable and inventories were the principal balance sheet items
affected by the currency fluctuations since year end.
Environmental Matters
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 acquisitions.
The company is a party to environmental lawsuits and claims,
and has received notices of potential violations of environmental
laws and regulations from the Environmental Protection Agency and
similar state authorities. It is identified as a potentially
responsible party (PRP) for cleanup costs associated with off-
site waste disposal at approximately 37 federal Superfund and
state remediation sites, excluding sites as to which the
company's records disclose no involvement or as to which the
company's liability has been fully determined. For all sites,
there are other PRPs and in most instances, the company's site
involvement is minimal. In estimating its liability, the company
has assumed it will not bear the entire cost of remediation of
any site to the exclusion of other PRPs who may be jointly and
severally liable. The ability of other PRPs to participate has
been taken into account, based generally on the parties'
financial condition and probable contribution on a per site
basis. 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 affect
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.
Acquisitions
On April 3, 1997, the company completed the acquisition of
Newman Tonks, a United Kingdom-based producer of architectural
hardware, for approximately $370 million. Newman Tonks,
headquartered in Birmingham, England, is a leading manufacturer,
specifier and supplier of branded architectural hardware products
with 1996 sales of approximately $425 million. This transaction
has been accounted for as a purchase, with the results included
since its acquisition date.
On August 27, 1996, the company acquired the business and
substantially all of the assets of Zimmerman International Corp.,
which manufactures equipment and systems that assist in handling
or lifting tools, components and materials for a variety of
operations. The acquisition was paid for in cash and the
assumption of certain liabilities.
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.
Dispositions
On February 14, 1997, the company sold the Clark-Hurth Group
to Dana Corporation. Clark-Hurth had been reported as part of
the Engineered Equipment Segment. This group's 1997 results
inclusive of the sale transaction produced operating income for
the first quarter of $2.7 million; however, on an after-tax
basis, this reduced net earnings by approximately $3.6 million.
In August 1996, the company agreed to sell the remaining
assets of the Process Systems Group to Gencor Industries, Inc.,
subject to certain closing conditions. The sale was completed
during the fourth quarter of 1996 at a price of approximately $58
million in cash for a pretax gain of approximately $10 million.
On March 26, 1996, the company sold the assets of the Pulp
Machinery Division for approximately $122.3 million to Beloit
Corporation, a subsidiary of Harnischfeger Industries, Inc. for a
pretax gain of $45 million. In addition, in March 1996, the
company sold an investment in CAPCO Automotive Products
Corporation for a pretax gain of $4.8 million.
Share Repurchase
On May 7, 1997, the company announced that its board of
directors has authorized the repurchase of up to 10 million
shares of the company's common stock. Based on market
conditions, the share repurchases will be made from time to time
in the open market and in privately negotiated transactions. The
repurchased shares will be available for general corporate
purposes.
Subsequent Event
On August 6, 1997, the board of directors approved a 3-for-2
stock split of the company's common stock. The stock split will
be effected in the form of a stock dividend payable on September
2, 1997 to stockholders of record on August 19, 1997. Fractional
shares will be settled in cash.
Review of Business Segments
The Standard Machinery Segment reported sales of $834.5
million during the second quarter of 1997, which represents a 4.5-
percent increase from the $798.8 million for the same quarter
of last year. Operating income for the quarter was $112.2
million and represents an 11.9-percent improvement over the
$100.3 million reported for the three months ended June 30, 1996.
For the first half of 1997, the segment's net sales totaled
$1,572.0 million, which was 5.7 percent above the $1,487.3
million reported for the comparable 1996 period. Operating
income for the first half of the year totaled $195.3 million,
which represents an improvement of 27.7 percent over the $152.9
million reported for the first six months of 1996.
Operating income for the second quarter of 1997 included a
charge of $8.0 million for the writedown of assets being held for
sale. Stronger domestic and international markets helped all of
the major groups within the sector to report improvements in
operating income and operating income margins with the exception
of the Construction and Mining Group, which recorded the second
quarter asset writedown charge.
The Engineered Equipment Segment is comprised solely of IDP
since the February 14, 1997 sale of the Clark-Hurth Group.
IDP's sales for the second quarter of the year totaled $221.2
million, which reflects a modest increase over last year's second
quarter level of $217.5 million. However, operating income for
the quarter totaled $16.4 million, which reflects a marked
improvement over last year's $9.6 million. For the first half of
1997, IDP reported sales of $414.6 million, which was down
slightly from 1996's first half total of $421.4 million.
Operating income for the first six months of the year was $23.7
million, reflecting a significant improvement over the amount
reported for the first two quarters of 1996. The first quarter
of 1996 included a $5.4 million charge to operating income for
the closure of a steel foundry. The significant improvement in
operating income for both the second quarter and first half of
1997 is attributed to the benefits from prior restructuring
charges and cost-containment programs.
The Bearings, Locks and Tools Segment reported sales of
$781.7 million for the three months ended June 30, 1997, a 24.7
percent increase over last year's second-quarter total of $627.1
million. Operating income was $93.3 million, as compared to the
1996 second quarter level of $74.7 million. For the first six
months of 1997, the segment reported net sales of $1.4 billion,
20.4 percent above the amount reported in the comparable period
of 1996. Operating income for the first half of 1997 totaled
$178.5 million compared to $132.1 million reported for the six
months ended June 30, 1996. Since its April 3, 1997 acquisition,
Newman Tonks results are included in this segment.
The Bearings and Components Group's sales in the second
quarter of 1997 were approximately five-percent higher than the
amount reported for last year's second quarter. Operating income
for the quarter increased at a much higher rate. Sales of the
Bearings and Components Group for the six months ended June 30,
1997 increased by approximately eight percent over last year's
first half total, but operating income experienced a much more
dramatic improvement.
The Architectural Hardware Group's results for the second
quarter of 1997 include the operations of Newman Tonks since its
April 3, 1997 acquisition date. For the second quarter of 1997,
Newman Tonks generated approximately $84 million in sales and
contributed approximately $1 million of operating income to the
group's second quarter performance, after the effect of estimated
purchase accounting adjustments. Excluding Newman Tonks, sales
and operating income reported by the Architectural Hardware Group
for both the second quarter and first half of 1997 reflected
marked improvements over the comparable amounts in the prior
year.
The Production Equipment Group's sales for the second
quarter of 1997 were 21 percent above the amounts reported for
the three months ended June 30, 1996 and operating income
improved by a comparable percentage over 1996's second quarter.
Sales of the Production Equipment Group for the six months ended
June 30, 1997 increased by approximately 25 percent over the
amount reported for the first half of 1996. However, operating
income for the first half of 1997 increased by more than 50
percent over last year's total for the six months ended June 30,
1996.
Safe Harbor Statement
Information provided by the company in reports such as this
report on Form 10-Q, in press releases and in statements made by
employees in oral discussions, to the extent the information is
not historical fact, constitutes "forward looking statements"
within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934. Forward looking statements by
their nature involve risk and uncertainty.
The company cautions that a variety of factors, including
but not limited to the following, could cause business conditions
and results to differ from those expected by the company:
changes in the rate of economic growth in the United States and
in other major international economies; significant
changes in trade, monetary and fiscal policies worldwide;
currency fluctuations among the U.S. dollar and other
currencies; demand for company products; distributor inventory
levels; failure to achieve the company's productivity targets;
and, competitor actions including unanticipated pricing actions
or product and cost reduction strategies.
<TABLE>
<S>
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 Six Months Ended
June 30, June 30,
PRIMARY EARNINGS PER SHARE (NOTE 1): 1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net earnings applicable to common stock $111.6 $ 92.3 $189.4 $166.8
Average number of common shares outstanding 108.7 107.4 108.5 107.2
PRIMARY EARNINGS PER SHARE $1.03 $0.86 $1.75 $1.56
FULLY DILUTED EARNINGS PER SHARE (NOTE 2):(*)
Net earnings for the period $111.6 $ 92.3 $189.4 $166.8
Adjusted shares:
Average number of common shares outstanding 108.7 107.4 108.5 107.2
Number of common shares issuable
assuming exercise under incentive
stock plans 1.8 .6 1.4 .6
Average number of outstanding shares,
as adjusted for fully diluted earnings
per share calculations 110.5 108.0 109.9 107.8
FULLY DILUTED EARNINGS PER SHARE $1.01 $0.86 $1.72 $1.55
(*) 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.
</TABLE>
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.
INGERSOLL-RAND COMPANY
PART II. - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the company held on
April 25, 1997, the shareholders, in addition to electing directors,
ratified the appointment of Price Waterhouse LLP as independent
accountants of the company for the year ending December 31, 1997 (the
vote for such proposal being 95,244,466 shares for, 165,767 shares
against and 415,136 shares abstaining).
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 August 14, 1997 /S/ G.V. Geraghty
G.V. Geraghty, Vice President &
Comptroller
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the June 30,
1997 financial statements and is qualified in its entirety by reference to such
financial statements
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 173
<SECURITIES> 7
<RECEIVABLES> 1,253
<ALLOWANCES> 36
<INVENTORY> 812
<CURRENT-ASSETS> 2,537
<PP&E> 2,147
<DEPRECIATION> 983
<TOTAL-ASSETS> 5,904
<CURRENT-LIABILITIES> 1,436
<BONDS> 1,165
0
0
<COMMON> 223
<OTHER-SE> 2,009
<TOTAL-LIABILITY-AND-EQUITY> 5,904
<SALES> 3,477
<TOTAL-REVENUES> 3,477
<CGS> 2,584
<TOTAL-COSTS> 2,584
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> 311
<INCOME-TAX> 122
<INCOME-CONTINUING> 189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189
<EPS-PRIMARY> 1.75
<EPS-DILUTED> 1.72
</TABLE>
EXHIBIT 12
INGERSOLL-RAND COMPANY
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar amounts in millions)
For the six months ended June 30, 1997
Fixed charges:
Interest expense $58.2
Amortization of debt discount and expense .7
Rentals (one-third of rentals) 12.3
Capitalized interest 1.4
Total fixed charges $72.6
Net earnings $189.4
Add: Minority income (loss of majority-
owned subsidiaries 10.6
Taxes on income 122.1
Fixed charges 72.6
Less: Capitalized interest 1.4
Undistributed earnings(losses) from
less than 50% owned affiliates 11.5
Earnings available for fixed charges $381.8
Ratio of earnings to fixed charges 5.26
Undistributed earnings (losses) from less
than 50% owned affiliates:
Equity in earnings (losses) $14.2
Less: Dividends paid 2.7
Undistributed earnings (losses) from
less-than 50% owned affiliates $11.5
