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, 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 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 [ ]
The aggregate market value of common stock held by nonaffiliates
on March 10, 1997 was $5,220,602,952 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 10,
1997 was 109,786,546.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareowners for fiscal year ended December 31,
1996. 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 1996 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 25, 1997. 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 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.
o 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 manufactures a wide
range of cold-rolled and galvanized steel doors for use
primarily in nonresidential construction.
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
(subsequently sold), golf cars and light utility vehicles.
Dispositions that the company has made in recent years
are as follows:
o On February 14, 1997, the company sold Clark-Hurth Components
Group to Dana Corporation. At December 31, 1996, the net
assets subject to sale totalled $265.7 million and have been
classified as current assets on the Consolidated Balance
Sheet. Clark-Hurth Components had been reported as part of
the Engineered Equipment Segment.
o In August 1996, the company agreed to sell the remaining
assets of the Process Systems Group to Gencor Industries,Inc.
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.
o On March 26, 1996, the company sold the assets of the Pulp
Machinery Division (the largest unit in the Process Systems
Group) 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 for a gain of $4.8 million.
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.
During March 1997, the company was notified by regulatory
authorities involved with the company's January 27, 1997,
offer to acquire Newman Tonks Group PLC (Newman Tonks), that
they would not challenge the proposed acquisition, valued at
approximately $376 million (230 million pounds sterling). The
company expects to complete its acquisition of Newman Tonks in
April 1997.
Products
The company manufactures and sells primarily
nonelectrical machinery and equipment. Principal products
include the following:
Agricultural sprayers Foundation drills
Air balancers Golf cars
Air compressors & accessories Hoists
Air dryers Industrial pumps
Air logic controls Lubrication equipment
Air motors Material handling equipment
Air tools Monitoring drills
Architectural hardware trim Needle roller bearings
Asphalt compactors Paving equipment
Automated-parts washing Pneumatic cylinders
systems Pneumatic valves
Automated production systems Portable compressors
Automotive components Portable generators
Ball bearings Portable light towers
Blasthole drills Road-building machinery
Compact hydraulic excavators Rock drills
Construction equipment Rock stabilizers
Diaphragm pumps Roller bearings
Door closers Rotary drills
Door hardware Rough-terrain forklifts
Door locks Skid-steer loaders
Engineered pumps Soil compactors
Engine-starting systems Spray-coating systems
Exit devices Utility vehicles
Extrusion pump systems Waterjet-cutting systems
Fastener-tightening systems Water well drills
Fluid-handling equipment Winches
These products are sold primarily under the company's
name and also under other names including ABG, Aro, Blaw-Knox,
Bobcat, Centac, Charles Maire, Club Car, Ecoair, Fafnir,
Ingersoll-Dresser Pumps, Jeumont-Schneider Pumps, Klemm, LCN,
McCartney, Melroe, Montabert, NREC, Pacific, Pleuger, Schlage,
Spra-Coupe, Steelcraft, Torrington, Von Duprin, Worthington and
Zimmerman.
During the past three years, the division of the
company's sales between capital goods and expendables has been in
the approximate ratio of 58 percent and 42 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.
Additional information on the company's business and
financial information about industry segments is presented in
Note 15 to the Consolidated Financial Statements included in the
company's Annual Report to Shareowners for 1996, 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.
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 41 percent
of the consolidated net sales in 1996. Information as to
operating income by geographic area is set forth in Note 15 to
the Consolidated Financial Statements included in the company's
Annual Report to Shareowners for 1996, 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, 1996, believed by it to be firm, was $335 million for the
Standard Machinery Segment, $369 million for the Engineered
Equipment Segment and $638 million for the Bearings, Locks and
Tools Segment as compared to $389 million, $636 million and $564
million, respectively, at December 31, 1995. 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.
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 2,000
professional employees for its research, engineering and
development activities. The company spent $209 million in 1996,
$190 million in 1995 and $155 million in 1994 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 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 1996, the company spent approximately $8 million
on capital projects for pollution abatement and control and an
additional $6 million for environmental remediation expenditures
at sites presently or formerly owned or leased by the company.
It should be noted that these amounts are difficult to estimate
because environmental improvement costs are generally a part of
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, 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 39
federal Superfund and state remediations sites (including Clark-
acquired PRP locations), 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 not assumed it will 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 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 40,100 employees of the company
throughout the world, of whom approximately 26,300 work in the
United States and 13,800 in foreign countries. Approximately 29
percent of the company's United States production and maintenance
employees, who work in 12 plants, are represented by 7 unions.
The company believes relations with its employees are good.
Item 2. PROPERTIES
The company's executive offices are located at Woodcliff
Lake, New Jersey. Manufacturing and assembly operations are
conducted in 49 plants in the United States; 5 plants in Canada;
25 plants in Europe; 7 plants in Asia; 6 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.
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 remaining manufacturing
locations are as follows:
Approximate
Number of Plants Square Footage
Domestic 11 3,321,000
International 11 2,003,000
Total 22 5,324,000
Engineered Equipment
This segment is organized into three operating groups: Pump,
Process Systems (which was sold in 1996) and Clark-Hurth (sold
February 1997). The remaining products manufactured by this
segment are predominantly pumps for diversified industrial use
and specialty pumps for process, power generation and marine
applications. The segment's remaining manufacturing facilities
are as follows:
Approximate
Number of Plants Square Footage
Domestic 7 1,682,000
International 15 1,883,000
Total 22 3,565,000
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 architectural 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 31 6,743,000
International 18 2,437,000
Total 49 9,180,000
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 off-site waste disposal cleanup of approximately
39 sites under federal Superfund and similar state laws. In the
opinion of the company, pending legal matters are not expected to
have a material adverse affect on the results of operations,
financial condition, liquidity or cash flows.
See also the discussion under Item 1 - Environmental
Matters.
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, 1996.
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(61) 5/4/77 Chairman of the Board,
President and Chief
Executive Officer,
Director (President and
Director, 1992 - 1993)
J. Frank Travis(61) 2/7/90 Vice Chairman of the Board,
(Executive Vice President
1993-1996; Executive
Vice President and
President of the
Production Equipment
Group, 1994 - 1995; Vice
President and President
of the Bearings and
Components Group, 1992 -
1993)
Frank B. O'Brien (50) 3/10/97 Senior Vice President and
Chief Financial Officer,
(Nacco Industries, Inc.;
Senior Vice President -
Corporate Development and
Chief Financial Officer,
1994 - 1997; Senior Vice
President - Corporate
Development, 1993 - 1994;
Vice President - Corporate
Development 1987 - 1993)
William J. Armstrong(55) 8/3/83 Vice President and Treasurer
Paul L. Bergren(47) 12/2/92 Vice President, President
of the Air Compressor
Group, (President of
Ingersoll-Rand Europe,
1994 - 1997; Vice
President and General
Manager - Centrifugal Compressor
Division, 1989 - 1992)
Gerard V. Geraghty (46) 5/2/96 Vice President and
Comptroller (Controller -
Operations, 1993 - 1996;
Assistant Controller
1988 - 1993)
Frederick W. Hadfield(60) 8/1/79 Vice President and President
of Ingersoll Dresser Pump
Company (Vice President,
1979 - 1994)
Brian D. Jellison(51) 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)
Daniel E. Kletter(58) 2/7/90 Vice President (Vice
President and President of
the Construction and
Mining Group, 1989 - 1994)
Steven T. Martin (55) 5/2/96 Vice President and President
of Production Equipment
Group (President of
Production Equipment Group
1995 - 1996; Vice
President and General
Manager Fafnir Bearings
Division of Torrington,
1986 - 1995)
Patricia Nachtigal(50) 11/2/88 Vice President and General
Counsel
Allen M. Nixon(56) 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(58) 12/3/88 Vice President
Nicholas J. Pishotti(56) 4/10/95 Vice President - Strategic
Sourcing (General Manager,
Aircraft Engine Sourcing
Department, General
Electric Company, 1988 -
1995)
Donald H. Rice(52) 2/1/95 Vice President (Executive
Director - Human Resources
1994; Vice President,
Human Resources - Bearings
and Components Group, 1988
- 1993)
Gerald E. Swimmer(52) 5/1/82 Vice President
R. Barry Uber(51) 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(50) 2/6/91 Secretary and Assistant
General Counsel
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.
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
1996
First quarter $42 7/8 $35 1/8 $.185
Second quarter 44 3/8 37 1/4 .185
Third quarter 47 1/2 37 7/8 .205
Fourth quarter 47 5/8 40 5/8 .205
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
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 10, 1997 was 13,000.
Item 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31,
1996, is as follows (in millions except per share amounts):
December 31 1996 1995 1994 1993 1992
Net sales $6,702.9 $5,729.0 $4,507.5 $4,021.1 $3,783.8
Net earnings (loss) 358.0 270.3 211.1 142.5 (234.4)
Total assets 5,621.6 5,563.3 3,596.9 3,375.3 3,387.6
Long-term debt 1,163.8 1,304.4 315.9 314.1 355.6
Shareowners' equity 2,090.8 1,795.5 1,531.3 1,349.8 1,293.4
Earnings (loss) per
common share $3.33 $2.55 $2.00 $1.36 $(2.25)
Dividends per
common share 0.78 0.74 0.72 0.70 0.69
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 1996 and is incorporated by reference in this
Form 10-K Annual Report.
Safe Harbor Statement
Information provided by the company in this 1996 Annual
Report on Form 10-K, in other such reports, in press releases and
in statements made by employees in oral discussions may
constitute or contain "forward-looking statements" as that term
is defined in the Private Securities Litigation Reform Act of
1995 or by the Securities and Exchange Commission in its rules,
regulations and releases. Forward-looking statements by their
nature involve risk and uncertainty.
The company cautions investors that forward-looking
statements are not guarantees of future performance. A variety
of factors could cause business conditions and actual results to
differ materially from expected results contained in forward-
looking statements. The company includes among those factors the
following: changes in the rate of economic growth in the United
States and in other major international economies, such as
Germany; impacts of unusual items resulting from ongoing
evaluations of organizational structures, business strategies and
acquisitions and dispositions; 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; performance issues with
key suppliers and subcontractors; failure to achieve the
company's productivity targets; costs and effects of
unanticipated legal and administrative proceedings; and,
competitor actions, such as unanticipated pricing actions or
product and cost reduction strategies.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary
financial information included in the accompanying Annual Report
to Shareowners for 1996 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 4, 1997, are
included as Exhibit 13 - the Annual Report to Shareowners
(excluding the Financial Review and Management Analysis) for
1996.
(b) The unaudited quarterly financial data for the
two-year period ended December 31, 1996, is as follows (in
millions except per share amounts):
Earnings
per
Net Cost of Operating Net common
1996 sales goods sold income earnings share
First quarter $1,604.9 $1,208.8 $150.6 $ 74.5 $0.70
Second quarter 1,761.9 1,338.0 176.3 92.3 0.86
Third quarter 1,595.8 1,206.7 148.7 81.9 0.76
Fourth quarter 1,740.3 1,276.4 207.9 109.3 1.01
Year 1996 $6,702.9 $5,029.9 $683.5 $358.0 $3.33
1995
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
o The reductions in LIFO inventory quantities increased net
earnings per share by $0.01 and $0.02 in the second and
fourth quarters of 1996, respectively, and $0.02 in the
fourth quarter of 1995.
o The first quarter of 1995 does not include the results of
Clark Equipment Company (see Note 2 to the Consolidated
Financial Statements included in the company's Annual Report
to Shareowners for 1996, incorporated by reference in this
Form 10-K Annual Report).
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
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
5, 17 and 18 of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 25, 1997, and (ii)
included after Item 4 in Part I 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 7 through 17
of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 25, 1997.
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 25, 1997.
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 17 of the
company's definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 25, 1997.
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 4, 1997, 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 1996.
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.
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, 1996 and 1995 *
For the years ended December 31, 1996, 1995
and 1994:
Consolidated statement of income *
Consolidated statement of shareowners'
equity *
Consolidated statement of cash flows *
Notes to consolidated financial statements *
Selected unaudited quarterly financial data **
Financial Statement Schedule:
Report of independent accountants on
financial statement schedule See below
Consolidated schedule for the years ended
December 31, 1996, 1995 and 1994:
Schedule II -- Valuation and Qualifying
Accounts See below
* See Exhibit 13 - Ingersoll-Rand Company Annual Report to
Shareowners for 1996.
** See Item 8 - Financial Statements and Supplementary Data.
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.
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 4, 1997, which is included as part
of Exhibit 13 - the Annual Report to Shareowners for 1996 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 4, 1997
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. 333-19445, 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 4, 1997, which is included as part of Exhibit 13 - the
Annual Report to Shareowners for 1996, 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 26, 1997
SCHEDULE II
INGERSOLL-RAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 and 1994
(Amounts in millions)
Additions
charged to
Balance at costs and Balance
beginning expenses Deductions at end
Description of year (*) (**) of year
1996
Doubtful accounts $38.3 $ 8.6 $12.6 $34.3
1995
Doubtful accounts $25.9 $17.8 $ 5.4 $38.3
1994
Doubtful accounts $22.1 $12.6 $ 8.8 $25.9
(*) "Additions" include foreign currency translation.
(**) "Deductions" include accounts and advances written off,
less recoveries.
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
Description
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 September 4, 1996. (Filed herewith).
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, 1996 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).
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) Ingersoll-Rand Company Directors Deferred
Compensation and Stock Award Plan. (Filed herewith).
10 (iii) (c) Forms of Contingent Compensation Agreements
with Vice Presidents and/or Group Presidents of
Ingersoll-Rand Company. (Filed herewith).
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. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended
December 31, 1995. (See pages 48-64 of the 1995
Form 10-K).
10 (iii) (f) Form of Change of Control Agreement
with selected executive officers other than
Chairman of Ingersoll-Rand Company. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1995. (See pages
65-84 of the 1995 Form 10-K).
10 (iii) (g) (1) 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) (g) (2) Executive Supplementary Retirement
Agreement for selected executive officers. (Filed
herewith).
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.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for Fiscal Year Ended December 31, 1995.
(See pages 85-91 of the 1995 Form 10-K).
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).
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.
Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended
December 31, 1995. (See pages 92-108 of the 1995
Form 10-K).
10 (iii) (q) Selected Executive Officer Employment
Agreement. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended
December 31, 1995. (See pages 109-111 of the 1995
Form 10-K).
10 (iii) (r) Executive Deferred Compensation and Stock
Award Plan. (Filed herewith).
10 (iii) (s) Senior Vice President and Chief Financial
Officer Employment Agreement. (Filed herewith).
11 (i) Computation of Primary Earnings Per Share.
(Filed herewith).
11 (ii) Computation of Fully Diluted Earnings Per Share.
(Filed herewith).
12 Computations of Ratios of Earnings to Fixed Charges.
(Filed herewith).
13 Ingersoll-Rand Company Annual Report to
Shareowners for 1996. (Not deemed to be filed as
part of this report except to the extent incorporated
by reference).(Filed herewith).
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.
(Filed herewith).
27 Financial Data Schedule.
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/ Frank B. O'Brien
Date March 26, 1997
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 26, 1997
(James E. Perrella)
Senior Vice President
Chief Financial Officer
(Principal Financial
/S/ Frank B. O'Brien Officer) March 26, 1997
(Frank B. O'Brien)
Vice President and
Comptroller
(Principal Accounting
/S/ Gerard V. Geraghty Officer) March 26, 1997
(Gerard V. Geraghty)
/S/ Theodore H. Black Director March 26, 1997
(Theodore H. Black)
/S/ Joseph P. Flannery Director March 26, 1997
(Joseph P. Flannery)
/S/ Constance J. Horner Director March 26, 1997
(Constance J. Horner)
/S/ H. William Lichtenberger Director March 26, 1997
(H. William Lichtenberger)
/S/ Theodore E. Martin Director March 26, 1997
(Theodore E. Martin)
/S/ Cedric E. Ritchie Director March 26, 1997
(Cedric E. Ritchie)
/S/ Orin R. Smith Director March 26, 1997
(Orin R. Smith)
/S/ Richard J. Swift Director March 26, 1997
(Richard J. Swift)
/S/ Frank Travis Director March 26, 1997
(J. Frank Travis)
/S/ Tony L. White Director March 26, 1997
(Tony L. White)
EXHIBIT 3(iii)
Page 1 of 17
BY-LAWS
of
INGERSOLL-RAND COMPANY
As amended through September 4, 1996
Page 2 of 17
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
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
Page 3 of 17
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.
Page 4 of 17
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.
Page 5 of 17
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
Page 6 of 17
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.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Number and Election: The business and property of the
Company shall be managed by a Board of eleven 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 four Directors each and the remaining consisting of
three 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.
Page 7 of 17
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.
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.
Page 8 of 17
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.
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.
Page 9 of 17
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.
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
Page 10 of 17
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.
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.
Page 11 of 17
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
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.
Page 12 of 17
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.
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.
Page 13 of 17
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.
Page 14 of 17
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
Page 15 of 17
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,
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
Page 16 of 17
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.
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.
Page 17 of 17
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.
EXHIBIT 10(iii)(b)
Page 1 of 9
Ingersoll-Rand Company
Directors Deferred Compensation and Stock Award Plan
ARTICLE I. Purpose
Ingersoll-Rand Company ("I-R") has established the Directors
Deferred Compensation and Stock Award Plan (the "Plan") to enable
members of the Board of Directors (the "Board") who are not then
I-R employees ("Non-employee Directors") to defer receipt of
compensation for their services as Non-employee Directors to
later years and to provide part of the compensation for their
services as Non-employee Directors in shares of I-R Common Stock
("Shares") which will be deferred.
ARTICLE II. Maintenance of Records
I-R shall maintain a Deferred Compensation Account for each Non-
employee Director, which shall be credited in accordance with the
terms of this Plan and the elections of each Non-employee
Director pursuant to this Plan.
ARTICLE III. Deferral of Stock Awards and Deferral of Fees
(A) Deferred Stock Award Amount
Each Non-employee Director shall receive an annual
award on the date of the first Board of Directors
meeting after each annual meeting of shareholders in
the form of a promise by I-R to deliver 400 Shares
("Share Units"), or such other amount as may from time
to time be established by resolution of the Board.
Annual awards of Share Units shall be credited to the
Deferred Compensation Account of each Non-employee
Director and Shares in respect of such Share Units
shall be delivered in accordance with the provisions of
Article VII hereof. The issuance and delivery of
Shares in respect of such Share Units shall be deferred
until the Non-employee Director ceases to be a member
of the Board.
Page 2 of 9
(B) Deferred Amounts Upon Termination of the Retirement Plan
The Shares in respect of Share Units credited to the
Deferred Compensation Accounts of the Non-employee
Directors pursuant to the resolutions adopted by the
Board on November 6, 1996, with respect to the
elimination of retirement payments to Non-employee
Directors shall be delivered in accordance with the
provisions of Article VII hereof. The issuance and
delivery of such Shares shall be deferred until the Non-
employee Director ceases to be a member of the Board.
(C) Election to Defer Fees in Share Units
Any Non-employee Director may elect to defer receipt of
all or any portion of the retainer and meeting fees
("Fees") to be earned by such Non-employee Director by
indicating his or her election to the Secretary of I-R
on an election form supplied by the Secretary
("Deferral Election"). The Director's election must
specify (i) the portion of such Fees to be deferred,
(ii) the period for which Fee payments are to be
deferred pursuant to such Deferral Election, up to the
date a director ceases to be a member of the Board
("Deferral Period") and (iii) the time(s) of payment
or delivery. Each Deferral Election is irrevocable
with respect to the compensation payable for the
Deferral Period to which it applies, except in the
event a director ceases to be a member of the Board.
(D) Credit for Deferred Fees and Company Supplemental
Contributions
(1) The Deferred Compensation Account will be credited
with the number of Share Units equal to the number of
Shares, including fractions, which could have been
purchased had the amount of the Fees accrued during a
Deferral Period, plus Company supplemental
contributions equal to 20 percent of the Fees accrued
during such Deferral Period, been used to purchase
Shares on the date such Fees would have been paid had
they not been deferred, at a price equal to the Share
Fair Market Value, as defined below, on such date.
Page 3 of 9
(2) "Share Fair Market Value" shall be the mean of the
high and low prices of Shares on the New York Stock
Exchange - Composite Tape on the date in question,
provided that if no sales of Shares were made on the
Exchange on that date, the mean of the high and low
prices reported for the preceding day on which sales of
Shares were made on the Exchange.
(E) Vesting of Company Matching Contributions
Company supplemental contributions shall vest upon the
earlier of either five years from the date of grant or
cessation of service on the Board by reason of normal
retirement or death.
(F) Advance Notice of Election
Any Deferral Election with respect to Fees to be earned
during a calendar year shall be delivered to the
Secretary of I-R prior to the beginning of any calendar
year or, with respect to a new Director, before the
effective date of his or her election to the Board.
Each Non-employee Director who does not provide notice
to the Secretary of a Deferral Election in accordance
with the preceding sentence will be deemed not to have
elected to defer receipt of any Fees (other than
amounts automatically deferred).
(G) Duration of Election
A Deferral Election may be made annually for the
succeeding calendar year or, at the Non-employee
Director's direction, it may continue from year to year
unless a written request to modify or terminate that
election for a subsequent period is submitted to the
Secretary of I-R on or before the date 15 days prior to
the beginning of the subsequent calendar year.
Page 4 of 9
ARTICLE IV. VOTING RIGHTS
Share Units shall not have voting rights.
ARTICLE V. Dividends, Distributions and Adjustments
Whenever a cash dividend or any other distribution is paid
with respect to Shares, the Deferred Compensation Account of
each Non-employee Director shall be credited with an
additional number of Share Units, equal to the number of
Shares, including fractional Shares, that could have been
purchased had such dividend or other distribution been paid
on each Share Unit in the Deferred Compensation Account (on
the record date for such dividend or distribution) and the
amount of such dividend or value of such other distribution
been used to acquire additional Shares at the Share Fair
Market Value on the date such dividend or other distribution
is paid. The value of any such other distribution on or
related to Shares shall, at the option of the Board (or an
authorized Committee of the Board), be either determined by
the Board or independently established.
The number of Share Units shall be fully adjusted upon the
occurrence of any stock split, stock dividend,
recapitalization, merger or similar event, and shall be
appropriately adjusted for the value (determined in the
manner provided above with respect to distributions) of any
right, privilege or opportunity provided or offered by I-R
to holders of Shares.
ARTICLE VI. Conversion of Deferred Compensation Account
Balances
A Non-employee Director's cash balance in the deferred
compensation program as of December 31, 1996 will be
transferred to an equivalent balance in the Director's
Deferred Compensation Account as of January 1, 1997. The
Deferred Compensation Account shall be credited with the
number of Share Units equal to the number of Shares,
including fractions, which could have been purchased with
such cash account balance on January 2, 1997, at Share Fair
Market Value on such date.
Page 5 of 9
ARTICLE VII. Delivery
Delivery of Shares equal to the number of Share Units
credited to the Deferred Compensation Account will be made
to a Non-employee Director in accordance with his or her
applicable Deferral Elections or, if no election applies,
promptly after the date on which the Non-employee Director
ceases to be a member of the Board.
In the case of Shares to be delivered pursuant to a Deferral
Election, Shares shall be delivered on the delivery date
specified in the Deferral Election. In the case of Shares
to be delivered promptly after the date on which a Director
ceases to be a member of the Board, Shares shall be
delivered as soon as practicable after such date. In any
case when Shares are delivered, a cash payment will be made
in lieu of delivering a fractional share.
In the event of a Non-employee Director's death, the Shares
in respect of Share Units credited to his or her Deferred
Compensation Account shall be delivered to the Non-employee
Director's estate or beneficiary, as appropriate.
ARTICLE VIII. Authorization and Source of Shares
Shares necessary to meet the obligations of the Plan have
been reserved and authorized pursuant to resolutions adopted
by the Board on November 6, 1996, and additional Shares
shall be reserved and authorized for delivery under the Plan
from time to time. These Shares may be provided from newly-
issued or treasury Shares.
ARTICLE IX. Alienability
Prior to delivery of Shares by I-R pursuant to Article VII,
no Non-employee Director shall have any right to sell,
pledge, transfer, assign or hypothecate any Share Units or
Shares, or any right to receive any Share Units or Shares,
credited to him under this Plan and such Share Units or
Shares shall not be subject to execution, attachment,
garnishment or similar process.
Page 6 of 9
ARTICLE X. Non-Employee Director's Rights Unsecured
The right of a Non-employee Director to receive any Shares
hereunder shall rank as an unsecured claim against I-R.
Assets that may be set aside for I-R's convenience with
respect to the Plan shall not in any way be held in trust
for, or be subject to any prior claim by, a Non-Employee
Director or beneficiary.
ARTICLE XI. Change of Control
(A) For purposes hereof,
(1) "Affiliate" shall mean, when used to indicate a
relationship with a specified person, a person that
directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is
under common control with, such specified person.
(2) "Associate" shall mean, when used to indicate a
relationship with a specified person, (a) any
corporation, partnership, or other organization of
which such specified person is an officer or partner,
(b) 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, (c) 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 (d) 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.
(3) "Beneficial Owner" shall have the same meaning as
such term is defined by Rule 13d-3 under the Securities
Exchange Act of 1934 (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
Page 7 of 9
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.
(4) "Change in Control" shall mean the occurrence of
either of the following:
(a) 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 percent 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, for
purposes of this Plan, a Change in Control has not
occurred;
(b) the Continuing Directors shall at any time
fail to constitute a majority of the members of the
Board of Directors; or
(c) 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.
(5) "Continuing Director" shall mean a Director who
either was a member of the Board of Directors on
January 1, 1997 or who became a member of the Board of
Directors subsequent to such date and whose election,
Page 8 of 9
or nomination for election by the Company's
shareholders, was Duly Approved by the Continuing
Directors of the Board of Directors 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 of Directors in which such
person is named as a nominee for Director, without due
objection to such nomination.
(6) "Duly Approved by the Continuing Directors" shall
mean an action approved by the vote of at least a
majority of the Continuing Directors then on the Board
of Directors, except, if the votes of such Continuing
Directors in favor of such action would be insufficient
to constitute an act of the Board of Directors 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 of Directors so long as there are at least three
Continuing Directors on the Board of Directors at the
time of such unanimous vote.
(B) Upon the occurrence of a Change of Control, all
deferrals pursuant to the Plan shall immediately
terminate and Deferred Compensation Account amounts
shall become immediately payable whether or not
otherwise vested. Each Non-employee Director's
Deferred Compensation Account shall be converted to
cash in an amount equal to the highest Fair Market
Value of one Share during the 60 days preceding the
date on which the Change in Control occurs multiplied
by the number of Share Units in the account. Deferred
Compensation Account cash amounts shall be delivered to
each director within thirty days of the Change of
Control.
ARTICLE XII. Effective Date
The Plan is effective January 1, 1997.
Page 9 of 9
ARTICLE XIII. Amendment and Termination
The Board (or an authorized Committee of the Board) may at
any time terminate, and may at any time and from time to
time and in any respect amend, the Plan for any reason
provided, however, that no amendment or termination of the
Plan shall impair the right of any Director to receive
amounts which have been credited to his or her Deferred
Compensation Account pursuant to Articles III, V and VI
prior to such amendment or termination.
EXHIBIT 10(iii)(c)
Page 1 of 4
TO: GROUP PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1997
The bonus plan applying to you for 1997 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, 1997.
2a. For each $_________ by which your worldwide operating
income exceeds $___________ up to $___________, you will
receive __% of your salary. For each $_________ over
$___________, 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.
Page 2 of 4
BONUS CONTRACT FOR 1997 - 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, 1997.
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
1997 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 1997 in February 1998. 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 /S/ J. F. Travis
J. E. Perrella J. F. Travis
Chairman Vice Chairman
Page 3 of 4
TO: VICE PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1997
The bonus plan applying to you for 1997 is outlined below:
1. Should a net reduction in direct purchase cost of
$__________ be attained, you will receive a bonus of __%
of your annual salary rate in effect on December 31, 1997.
2. For each additional $_________ in net reduction in direct
purchase cost over $__________, you will receive ___% of
your salary.
3. You will receive a bonus for the average months' supply of
inventory on hand for the entire company determined in
accordance with the following: For average months' supply
of inventory on hand of ___ months, you will receive _% of
your salary. For each ___ months' reduction below ___
months, you will receive _% of your salary.
4. You may receive an additional discretionary award of up to
__% of your salary. The award will be based upon your
implementing the strategic sourcing process throughout the
company, the establishment of the organization structure
and the success in gaining the support of the operating
divisions and groups.
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.
Page 4 of 4
BONUS CONTRACT FOR 1997 - VICE 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, 1997.
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
1997 may necessitate pro rata adjustments in the above
goals and/or actual results. Any such changes will be
advised as soon as possible.
9. The results will be tabulated by the Corporate Controller's
Office.
10. It is the present intention of the Company to decide the
amount of bonus for 1997 in February 1998. 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 /S/ J. F. Travis
J. E. Perrella J. F. Travis
Chairman Vice Chairman
EXHIBIT 10(iii)(g)(2)
Page 1 of 7
INGERSOLL-RAND COMPANY
Executive Supplementary Retirement Agreement
THIS AGREEMENT, effective as of the ___ day of __________, 19__,
is by and between the Ingersoll-Rand Company of Woodcliff Lake,
New Jersey, hereinafter called the Company, and _____________,
hereinafter called the Employee (certain other definitions are
defined in Schedule A, incorporated herein by reference).
WHEREAS, the Company values the efforts, abilities and
accomplishments of the Employee as an important member of
management and recognizes that his future services are vital to
its continued growth and profits, and the Company in order to
retain the services of the Employee is willing to provide
benefits for him or for his designated beneficiary as set out
below,
WHEREAS, the Employee in the past was eligible to purchase life
insurance coverage equal to two and one-half times his current
salary and average incentive compensation for the most recent
five years under the Company's existing life insurance plan, and
his eligibility thereunder has been changed to two times said
salary and incentive compensation base, as a result of being a
corporate officer and determined by the Board of Directors to be
a participant in the Executive Supplementary Retirement
Agreement,
NOW, THEREFORE, it is mutually agreed that:
1. Subject to paragraph 5 hereof, the Company shall, unless the
Employee's employment has been terminated for "Cause", pay the
Employee (or in the event of the Employee's death, to his
beneficiary) the sum of $_________ in 120 equal monthly
installments. Such payments shall commence as of the first day
of the month following the month when the Employee attains normal
retirement age, or if later, upon termination of his employment.
2. If the Employee dies prior to commencement of payments
hereunder, the Company shall pay the sum of $__________ in 120
equal monthly installments to the beneficiary of the Employee.
The death benefit paid pursuant to this paragraph 2 shall
commence as of the first day of the month following the
Employee's date of death.
Page 2 of 7
3. If the Employee becomes "Disabled" while employed by the
Company prior to commencement of payments hereunder, the Company
shall pay the sum of $____________ in 120 equal monthly
installments to the Employee (or in the event of the Employee's
death, to his beneficiary). Such payments shall terminate if the
Employee recovers from such disability, and following such
recovery, any eligibility for benefits which he might then or
subsequently have under paragraph 1 or 2 of this Agreement shall
be subject to the limitation contained in paragraph 4 below. The
disability benefit paid pursuant to this paragraph 3 shall
commence as of the first day of the month in which the Employee
becomes Disabled.
4. In no event shall the Employee, if he becomes eligible for a
benefit under paragraph 3, receive any benefit under paragraphs 1
or 2 of the Agreement while a benefit is being paid under
paragraph 3. In no event shall the total payments made by the
Company to the Employee (and his beneficiary) under paragraphs 1,
2, and 3 of this Agreement exceed the sum of $____________.
5. In the event that an Employee who voluntarily terminated
employment with the Company (other than for "Good Reason")
engages in "Competition" with the Company within three years
after such termination of employment, no further benefits shall
be payable hereunder. In the event that the Employee retires from
the Company before attaining age 62 (other than for "Good Reason"
or because he becomes "Disabled"), no benefits shall be payable
hereunder.
6. The Employee may designate a beneficiary in writing to
receive the benefits payable pursuant to this Agreement. Such
beneficiary may be changed by the Employee from time to time by
written notice delivered by the Employee to the Company. If no
designated beneficiary survives the Employee, any payments
pursuant to this Agreement made subsequent to the Employee's
death shall be made to the Employee's estate.
7. Neither the Employee nor any designated beneficiary shall
have any right to sell, assign, transfer or otherwise convey the
right to receive any payments hereunder.
Page 3 of 7
8. Any payments under this Agreement shall be independent of,
and in addition to, those under any other plan, program or
agreement which may be in effect between the parties hereto, or
any other compensation payable to the Employee by the Company.
This Agreement shall not be construed as a contract of employment
nor does it restrict the right of the Company to discharge the
Employee or the right of the Employee to terminate employment.
9. The Company shall be under no obligation whatsoever to
purchase or maintain any contract, policy, or other asset to
provide the benefits under this Agreement. Furthermore, any
contract, policy or other asset which the Company may utilize to
assure itself of the funds to provide the benefits hereunder
shall not serve in any way as security to the Employee for the
Company's performance under this Agreement. The rights accruing
to the Employee or his designated beneficiary shall be solely
those of an unsecured creditor of the Company. The law of the
State of New Jersey shall govern this Agreement.
10. The Company agrees that it will not merge, consolidate, or
combine with any other business entity unless and until the
succeeding or continuing corporation or business entity expressly
assumes and confirms in writing the obligations of the Company to
the Employee under this Agreement.
11. This Agreement cancels and supersedes all previous Executive
Supplementary Retirement Agreements, specifically including the
Agreement dated ____________________.
12. This Agreement may not be amended except by a written
agreement signed by the Company and the Employee.
13. Where appropriate in this Agreement, words used in the
singular shall include the plural and words used in the masculine
shall include the feminine.
Page 4 of 7
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first hereinabove
written.
Ingersoll-Rand Company
By
Chairman
Employee
Page 5 of 7
Schedule A
Certain Definitions
As used in this Agreement, the following terms have the meanings
indicated:
"Cause" shall be limited to (a) action by the Employee involving
willful criminal misconduct, or (b) the Employee being convicted
of a felony, in each case having a material adverse effect on the
Company.
"Competition" shall mean performance, without the prior written
consent of the Company, of services as an officer, employee,
agent or consultant in a business that is directly competitive
with any business of the Company with respect to which the
Employee had responsibility while he was employed by the Company.
"Disabled" as applied to the Employee, means that (a) he has been
totally incapacitated by bodily injury or disease so as to be
prevented thereby from engaging in any occupation or employment
for remuneration or profit, (b) such total incapacity shall have
continued for a period of six consecutive months and (c) such
total incapacity will, in the opinion of a qualified physician,
be permanent and continuous during the remainder of the
Employee's life.
"Good Reason" shall mean any of the following (without the
Employee's express prior written consent):
(i) The assignment to the Employee by the Company of duties
inconsistent with the Employee's positions immediately prior to
such assignment, duties, responsibilities, titles or offices or
any removal of the Employee from or any failure to re-elect the
Employee to any of such positions, except in connection with the
termination of the Employee's employment for Cause, Disability,
or as a result of the Employee's death or by the Employee other
than for Good Reason;
Page 6 of 7
(ii) A reduction by the Company of the Employee's base salary as
in effect at the date hereof or as the same may have been
increased prior to such reduction;
(iii) A failure by the Company to continue any bonus plans in
which the Employee may be entitled to participate during
employment (the "Bonus Plans") (provided that such plans may be
modified from time to time but shall be deemed terminated if they
do not remain substantially in the forms in effect when such
plans are adopted) or plans providing the Employee with
substantially similar benefits ("Substitute Plans"), or a failure
by the Company to continue the Employee as a participant in the
Bonus Plans or the Substitute Plans on at least the same basis as
the Employee participates at the dates of adoption of the Bonus
Plans or Substitute Plans, respectively;
(iv) A relocation of the Company's principal executive offices
to a location that is more than 35 miles farther from the
Employee's residence at the date hereof or the Company's
requiring the Employee to be based anywhere other than the
location at which the Employee at the date hereof performs the
Employee's duties, except for required travel on the Company's
business to an extent substantially consistent with the
Employee's business travel obligations at the date hereof or any
adverse change in the office assignment or secretarial and other
support accorded to the Employee at the date hereof;
(v) A failure by the Company to continue in effect any benefit
or compensation plan or stock option plan (including any pension,
profit sharing, bonus, life insurance, health, accidental death
or dismemberment or disability plan) in which the Employee is
participating at the date hereof (or in the case of plans adopted
after the date hereof and providing a type of benefit not
provided by the Company at the date hereof, at the respective
dates of adoption of such plans) or plans providing the Employee
with substantially similar benefits or the taking of any action
by the Company which would adversely affect the Employee's
participation in or reduce the Employee's benefits under any of
such plans;
Page 7 of 7
(vi) The taking of any action of the Company which would deprive
the Employee of any material fringe benefit enjoyed by the
Employee at the date hereof (or in the case of a fringe benefit
not provided by the Company on date hereof, at the respective
dates of adoption of such plans first providing such fringe
benefits) or the failure by the Company to provide the Employee
with the number of paid vacation days to which the Employee is
entitled in accordance with the Company's practices at the date
hereof;
(vii) The failure by the Company to obtain the specific
assumption of this Agreement by a successor or assignee of the
Company or any person acquiring substantially all of the
Company's assets.
EXHIBIT 10(iii)(r)
Page 1 of 14
INGERSOLL-RAND COMPANY
EXECUTIVE DEFERRED COMPENSATION AND STOCK BONUS PLAN
1. Statement of Purpose
The purpose of the Ingersoll-Rand Company Executive Deferred
Compensation and Stock Bonus Plan (the "Plan") is to further
increase the mutuality of interest between Ingersoll-Rand
(the "Company"), the employees and stockholders by providing
certain of the Company's highly compensated employees the
opportunity to elect to defer receipt of cash compensation,
and to have the deferred amounts treated as if invested in
Company stock.
2. Definitions
2.1 Beneficiary - "Beneficiary" means the person or
persons designated as such in accordance with Section
8.
2.2 Change in Control - "Change in Control" shall have
the same meaning as a "change in 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
or change of control arrangement between the Company
and a Participant, in which event such definition shall
apply.
2.3 Class Year - "Class Year" means such calendar year
for which Compensation may be deferred pursuant to the
Plan.
2.4 Committee - "Committee" means the Compensation and
Nominating Committee of the Board of Directors of the
Company, which will administer the Plan pursuant to the
provisions of Section 3 of the Plan.
2.5 Compensation - "Compensation" means the
Participant's annual cash bonus award.
Page 2 of 14
2.6 Declining Balance Installments - "Declining
Balance Installments" means a series of annual payments
such that each payment is determined by taking the
number of units in the Participant's Deferred
Compensation Account as of the Distribution Date and
dividing by the number of years of distributions
remaining.
2.7 Deferral Amount - "Deferral Amount" means the
amount of Elective Deferred Compensation actually
deferred by the Participant.
2.8 Deferred Compensation Account - "Deferred
Compensation Account" means the account maintained on
the books of account of the Company for each
Participant pursuant to Section 6.
2.9 Disability - "Disability" means the Participant is
eligible to receive benefits under a long term
disability plan maintained by the Company.
2.10 Distribution Date - "Distribution Date" means the
date on which the Company makes distributions from the
Participant's Deferred Compensation Account.
2.11 Election Form - "Election Form" means the form or
forms attached to this Plan and filed with the
Committee by the Participant in order to participate in
the Plan. The terms and conditions specified in the
Election Form(s) are incorporated by reference herein
and form a part of the Plan.
2.12 Eligible Employee - "Eligible Employee" means
Elected Officers of the Company, Division General
Managers, and those other employees of the Company who
have been selected by the Chief Executive Officer of
the Company.
2.13 IR Stock - "IR Stock" means the common stock of
Ingersoll-Rand Company.
2.14 Normal Retirement - "Normal Retirement" means
termination of employment by a Participant after he/she
has attained age 65 (62 for Elected Officers).
Page 3 of 14
2.15 Participant - "Participant" means an Eligible
Employee participating in the Plan in accordance with
the provisions of Section 4.
2.16 Supplemental Contribution - "Supplemental
Contribution" means an additional amount to be credited
to a Participant's Deferred Compensation Account equal
to twenty percent (20%) of the Participant's Deferral
Amount for a Class Year.
2.17 Valuation Date - "Valuation Date" means the date
on which the value of a Participant's Deferred
Compensation Account for each Class Year is determined
as provided in Section 6 hereof.
3. Administration of the Plan
This Plan 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 Plan for the exclusive benefit of the
Participants and their Beneficiaries, subject to the
specific terms of the Plan. The Committee shall administer
the Plan 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 Plan.
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 Plan by a
Participant or Beneficiary shall be stated in writing by the
Committee and delivered or mailed to the Participant 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
Participant or Beneficiary whose claim for benefits has been
denied for a review of the decision denying this claim.
Page 4 of 14
4. Participation
Any Eligible Employee may elect to participate in the Plan
for a given Class Year by filing a completed Election Form
for the Class Year with the Committee. The Election Form
must specify the percentage or dollar amount of any
Compensation otherwise payable during such Class Year that
will be deferred under the Plan. The minimum dollar amount
that a Participant may defer under the Plan for any Class
Year is $5,000. Any election to defer compensation is
irrevocable upon the filing of the Election Form with the
Committee, and must be completed and returned to the
Committee no later than the December 31 immediately
preceding such Class Year, or such earlier date as the
Committee may specify. If an Eligible Employee fails to
sign and return a properly completed Election Form by such
date, the executive will be ineligible to defer Compensation
under the Plan for the following Class Year.
5. Vesting of Deferred Compensation Account
5.1. Deferral Amount. A Participant shall vest
immediately in the portion of his/her Deferred
Compensation Account attributable to the Participant's
Deferral Amount and any dividend equivalents credited
thereto.
5.2. Supplemental Contribution. A Participant shall
vest in the portion of his/her Deferred Compensation
attributable to any Supplemental Contributions and any
dividend equivalents credited thereto on the earliest
of: (1) the fifth anniversary of the date the
Supplemental Contribution is credited to the
Participant's Deferred Compensation Account; (2) the
date of the Participant's Normal Retirement; (3) the
Participant's death; (4) a Change in Control; or (5) a
termination of the Plan pursuant to Section 9.2.
Page 5 of 14
6. Accounts and Valuations
6.1 Deferred Compensation Accounts. The Committee
shall establish and maintain a separate Deferred
Compensation Account for each Participant for each
Class Year. All Deferral Amounts shall be credited to
the Participant's Deferred Compensation Account on the
date when the Compensation is approved by the Company's
Board of Directors.
6.2 Account Valuation. The value of each Deferred
Compensation Account shall be based upon the value of
IR Stock. All Deferral Amounts and related
Supplemental Contributions shall be credited to a
Participant's Deferred Compensation Account in units,
or fractional units, with each unit having a value
equivalent to one share of IR Stock. The number of
such credited units shall be determined by dividing the
value of the Participant's Deferral Amount (or
Supplemental Contributions) by the mean of the high and
low prices of one share of IR Stock on the New York
Stock Exchange-Composite Tape on the date the
Compensation is credited to the Participant's Deferred
Compensation Account. Dividends paid on IR Stock shall
be reflected in a Participant's Deferred Compensation
Account by the crediting of additional units or
fractional units, equal to the value of the dividends
and based upon the mean of the high and low prices of
one share of IR Stock on the New York Stock Exchange-
Composite Tape on the date such dividends are paid.
6.3 Valuation in Event of Change in Control. In the
event of a Change in Control, the value of each
Deferred Compensation Account shall be determined by
multiplying the number of units by the Fair Market
Value of one share of Common Stock as provided in
Section 10(b) of the Company's Incentive Stock Plan of
1995 or, for those Participants with change in control
arrangements, the Company Stock Value as defined
thereunder.
Page 6 of 14
6.4 Changes in Capitalization. If there is any change
in the number or class of shares of IR Stock through
the declaration of a stock dividend or other
extraordinary dividends, or recapitalization resulting
in stock splits, or combinations or exchanges of such
shares or in the event of similar corporate
transactions, the units in each Participant's Deferred
Compensation Account shall be equitably adjusted to
reflect any such change in the number or class of
issued shares of IR Stock or to reflect such similar
corporate transaction.
7. Distribution of Accounts
7.1 Normal Retirement Benefits. For Participants who
terminate as a result of Normal Retirement, all
Deferred Compensation Account balances shall be
distributed in a lump sum on the later of (i) the first
business day of the sixth month following the
Participant's Normal Retirement, or (ii) the first
business day of the calendar year following the
Participant's Normal Retirement. Notwithstanding the
foregoing, the Participant may elect in writing (at
least twelve months prior to Normal Retirement) to
receive the Deferred Compensation Account balances in:
(a) a lump sum in January of the year specified by the
Participant (but no later than five years following the
Participant's Normal Retirement); or (b) in up to five
annual installments payable each January commencing
with the year following Normal Retirement. Annual
installments shall be paid in Declining Balance
Installments.
7.2 Termination of Employment Prior to Normal
Retirement. If employment with the Company terminates
prior to Normal Retirement, then the vested portion of
the Participant's Deferred Compensation Accounts shall
be distributed in a lump sum as soon as practicable
following the Participant's termination of employment,
unless the Committee, at their sole discretion, agrees
to permit distribution alternatives such as those
described in paragraph 7.l above. For purposes of this
Plan, Disability shall be deemed not to be a
termination of employment.
Page 7 of 14
7.3 Change in Control. In the event of a Change in
Control, all Deferred Compensation Account balances
shall be valued pursuant to Section 6.3, and shall be
distributed in cash in a lump sum within thirty (30)
days following Normal Retirement, unless the
Participant elects in writing (at least twelve months
prior to Normal Retirement) to receive the Deferred
Compensation Account balance in: (a) a lump sum in
January of the year specified by the Participant (but
no later than five years following the Participant's
Normal Retirement); or (b) in up to five annual
installments payable each January commencing with the
year following Normal Retirement. Annual installments
shall be paid in Declining Balance Installments.the
Change in Control.
7.4 Liquidating Distributions. Notwithstanding any
provisions of the Plan to the contrary, the Company
shall, as soon as practicable (but no later than 30
days) following the receipt of a written request from a
Participant for a Liquidating Distribution, pay to the
Participant the Participant's Liquidating Distribution
Account Balance(s) in a lump sum. "Liquidating
Distribution" shall mean a distribution requested by
the Participant in writing directed to the Committee
and specifically referencing this section and the Class
Year(s) and Deferred Compensation Account(s) to which
it applies. "Liquidating Distribution Account Balance"
means that portion of the Deferred Compensation Account
under the Plan in which the Participant is vested.
Notwithstanding any provision of the Plan or the
Participant's Election Form to the contrary, if the
Participant requesting the Liquidating Distribution is,
at the time of the request, an active employee of the
Company, then for a period of two (2) Class Years
following the year during which the request for the
Liquidating Distribution is made, the Participant shall
be ineligible to participate in the Plan with respect
to any Compensation not yet deferred. In addition, the
Participant shall forfeit any non-vested Supplemental
Contributions in any Deferred Compensation Accounts
distributed pursuant to this provision.
7.5 Hardship Benefit. In the event that the
Committee, upon written petition of the Participant
specifying the Class Year(s) and Deferred Compensation
Account(s) from which payment shall be made, determines
in its sole discretion, that the Participant has
suffered an unforeseeable financial emergency, the
Company may pay to the Participant in cash, as soon as
Page 8 of 14
practicable following such determination, an amount
appropriate under the circumstances, not in excess of
the portion of the Deferred Compensation Account(s) in
which the Participant is vested. The Deferred
Compensation Account(s) of the Participant shall
thereafter be reduced to reflect the payment of a
Hardship Benefit. In addition, the Participant shall
forfeit any non-vested Supplemental Contributions, if
any, attributable to that portion of a Deferred
Compensation Account balance distributed to the
Participant.
7.6 Form of Payments. Except as provided in Sections
7.3, 7.5, and 7.7 Aall benefits payable to a
Participant or Beneficiary under the Plan shall be paid
in IR Stock, with one share distributed for each unit.
All fractional shares shall be payable in cash.
7.7 Taxes; Withholding. To the extent required by
law, the Company shall withhold from payments made
hereunder an amount equal to at least the minimum taxes
required to be withheld by the federal or any state or
local government.
8. Beneficiary Designation
If a Participant dies prior to receiving all Deferred
Compensation Account balances, then the Participant's
Beneficiary shall receive any unpaid amounts. The
Participant's Beneficiary under this Plan shall be the
Participant's beneficiary under the Ingersoll-Rand Company
Savings and Stock Investment Plan, unless the Participant
designates another Beneficiary in writing, and such written
designation has been received by the Committee. A
Participant may change the designated Beneficiary under this
Plan at any time by providing such designation in writing to
the Committee.
If the Company is unable to determine a Participant's
Beneficiary or if any dispute arises concerning a
Participant's Beneficiary, the Company may pay benefits to
the Participant's estate. Upon such payment, the Company
shall have no further liability hereunder.
Page 9 of 14
If any distribution to a Beneficiary is to be made in
installments, and the primary Beneficiary dies before
receiving all installments, the remaining installments, if
any, shall be paid to the estate of the primary Beneficiary.
9. Amendment and Termination of Plan
9.1 Amendment. The Plan may, at any time and from
time to time, be amended without the consent of any
Participant 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 shall reduce any benefits
accrued under the terms of this Plan prior to the date
of amendment.
9.2 Termination of Plan
a. Company's Right to Terminate. The Board
of Directors of the Company may terminate the Plan
at any time and for any reason.
b. Payments Upon Termination. Upon any
termination of the Plan under this section,
Compensation shall prospectively cease to be
deferred and, with respect to Compensation
previously deferred, the Company shall pay to the
Participant, in a lump sum, the value of his/her
Deferred Compensation Accounts.
10. Miscellaneous
10.1 Unsecured General Creditor. Benefits under the
Plan 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
Participant or Beneficiary shall have any interest in
such investment or reserve. To the extent that any
person acquires a right to receive benefits under this
Page 10 of 14
Plan, such rights shall be no greater than the
right of any unsecured general creditor of the Company.
No Participant shall have any of the rights or
privileges of a stockholder of the Company under the
Plan, including as a result of the crediting of units
to a Deferred Compensation Account, except at such time
as IR Stock is actually delivered in settlement of a
Deferred Compensation Account.
10.2 Entire Agreement; Successors. This
Plan, including the Election Form and any subsequently
adopted amendments to the Plan or Election Form, shall
constitute the entire agreement or contract between the
Company and any Participant regarding this Plan. There
are no convenants, promises, agreements, conditions or
understandings, either oral or written, between the
Company and any Participant relating to the subject
matter hereof, other than those set forth herein. This
Plan and any amendment hereof shall be binding on the
Company and the Participants 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.
10.3 Non-Assignability. To the extent permitted by
law, the right of any Participant or any Beneficiary in
any benefit hereunder shall not be subject to
attachment or any other legal process for the debts of
such Participant or Beneficiary; nor shall any such
benefit be subject to anticipation, alienation, sale,
transfer, assignment or encumbrance.
10.4 No Contract of Employment. The establishment of
this Plan or any modification hereof shall not give any
Participant or other person the right to remain in the
service of the Company or any of its subsidiaries, and
all Participants and other persons shall remain subject
to discharge to the same extent as if the Plan had
never been adopted.
Page 11 of 14
10.5 Authorization and Source of Shares. Shares
necessary to meet the obligations of the Plan have been
reserved and authorized pursuant to resolutions adopted
by the Board of Directors of the Company on December 4,
1996, and additional shares shall be reserved and
authorized for delivery under the Plan from time to
time. These shares may be provided from newly-issued
or treasury shares.
10.6 Gender, Singular and Plural. All pronouns and any
variations thereof shall be deemed to refer to the
masculine, feminine, or neuter, as the identity of the
person or persons may require. As the context may
require, the singular may be read as the plural and the
plural as the singular.
10.7 Captions. The captions to the articles, sections,
and paragraphs of this Plan are for convenience only
and shall not control or affect the meaning or
construction of any of its provisions.
10.8 Applicable Law. This Plan shall be governed and
construed in accordance with the laws of the State of
New Jersey.
10.9 Severability. If any provisions of this
Plan shall, to any extent, be invalid or unenforceable,
the remainder of this Plan shall not be affected
thereby, and each provision of this Plan shall be valid
and enforceable to the fullest extent permitted by law.
10.10 Notice. Any notice or filing required or
permitted to be given to the Committee shall be
sufficient if in writing and hand delivered, or sent by
registered or certified mail, to the principal office
of the Company at 200 Chestnut Ridge Road, Woodcliff
Lake, NJ 07675, directed to the attention of the Vice
President, Human Resources. Such notice shall be
deemed given as of the date of delivery or, if delivery
is made by mail, as of the date shown on the postmark
Page 12 of 14
on the receipt for registration or certification.
Any notice to the Participant shall be addressed to the
Participant at the Participant's residence address as
maintained in the Company's records. Any party may change the
address for such party here set forth by giving notice
of such change to the other parties pursuant to this
Section.
Page 13 of 14
INGERSOLL-RAND COMPANY
Executive Deferred Compensation AND Stock Bonus Plan
Election Form
Name: _______________________ Social Security No: __________
Complete Sections A and B of this Form. In order to be effective,
you must submit your completed form to the Company by
_____________, ______.
A. Deferred Compensation
To complete this Section, indicate the total amount you want
to defer (maximum 100%) from your annual cash bonus award
otherwise payable to you in ________.
I elect to defer the following amount from my annual cash
bonus award otherwise payable to me in _______ (select one):
1. [ ] ____________% of my
award otherwise payable to me in _________.
2. [ ] $____________ (minimum $5,000) of the award
otherwise payable to me in _______. If the total
amount payable to me is less than the amount
indicated, the deferral amount will be reduced to
my total award.
3. [ ] I elect to defer that portion of my award that
exceeds $____________. If the deferred amount so
determined is less than $5,000, the deferred portion will be
increased to $5,000.
4. [ ] I elect to defer that portion of my award that
exceeds $____________. If the deferred amount so
determined is less than $5,000, no amount will be
deferred.
If the total annual cash bonus award payable to me is less
than $5,000, no amount will be deferred.
Page 14 of 14
B. Acknowledgment
Sign and date this Section.
I agree to be bound by the terms and conditions of the Plan
and agree that such terms and conditions shall be binding
upon my beneficiaries and personal representatives. I
further acknowledge that the receipt of this election form
is not intended to indicate the amount of any bonus that I
will receive, or that an award will be made. I further
agree, as a condition to participate, to satisfy the
following stock ownership guidelines. (These guidelines
take into account all sources of Company stock, such as
Savings Plan accumulations, as well as stock units under
this Plan, but not unexercised stock options or Management
Incentive Units.)
Time to Achieve
Position Guideline Target Guideline Target
Chairman, CEO 5 Times Salary 5 Years
Vice Chairman, President, 4 Times Salary 5 Years
EVP, SVP
Group Presidents & 3 Times Salary 4 Years
Elected Officers
Other Participants 2 Times Salary 4 Years
________________________ ___________________
Signature of Employee Date
EXHIBIT 10(iii)(s)
Page 1 of 3
January 20, 1997
Mr. Frank B. O'Brien
615 North Main Street
Chagrin Falls, OH 44022
Dear Frank:
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 Senior Vice President
and Chief Financial Officer of Ingersoll-Rand Company, reporting
to me as Chairman and Chief Executive Officer.
The following confirms the terms and conditions of our offer:
1. Your starting base salary will be at an annual rate of
$350,000, paid monthly.
2. You will participate in the Company's annual incentive plan.
You are eligible commencing with 1997, for awards of up to
80% of salary depending on both corporate and individual
performance. For 1997, your minimum bonus will be 40% of
your base salary.
3. Upon joining the Company, you will receive an award of non-
qualified stock options of 20,000 shares under our 1995
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 and potentially higher 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 12,000
shares, also administered under the terms of our 1995
Incentive Stock Plan.
Page 2 of 3
These awards vest in four annual installments, beginning in
March 1997, depending upon the achievement of a
predetermined performance target and your 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. You can be
considered for a larger award at any time based on your own
and the Company's performance.
5. You will receive a benefit under the Executive Supplementary
Retirement Agreement in an amount of $65,000 per year for
ten years subject to your retirement at age 62, and subject
to the provisions of this plan.
In addition, you will be eligible for a pension of 26% of
your final eligible compensation at age 62, assuming you
retire from the Company at that time. If you retire prior to
age 62, your benefit 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 average of your five highest
of your six most recent bonuses. Your 26% benefit will be
calculated taking into account all sources including our
qualified and non-qualified Pension Plan and Retirement
Accounts, the employer portion of Ingersoll-Rand's 40l(k)
Plan contributions, and your Social Security.
6. We will relocate you, your family and household goods to
this area. Your relocation expenses, including shipment of
household goods, real estate commissions and mortgage points
will be reimbursed according to our policy. 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. If, upon our
shared assessment of comparative living costs we identify
significant adverse variances or other relocation issues
Page 3 of 3
which would interfere with your transition to Northern New
Jersey, the Company will make a special allowance to
recognize the impact of such adverse variance, if any. This
amount would not be tax protected.
7. Your medical and life insurance coverage with Ingersoll-Rand
will commence on the first day of the month following 30
days of employment. Therefore, you may want to continue
your coverage with your current employer under COBRA to
avoid any gap in 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 one year of salary plus your last
annual bonus.
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.
Frank, I am personally looking forward to you joining Ingersoll-
Rand. This is a time of challenge and opportunity for our
company. I am confident your experience and leadership will help
us reach our goals and create a mutually rewarding long-term
relationship between us. I understand you plan to join us on
March 10. Welcome!
Sincerely,
/S/ James E. Perrella
James E. Perrella
Chairman
Accepted:
/S/ Frank B. O'Brien
<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,
1996 1995 1994 1993 1992
PRIMARY EARNINGS PER SHARE:
Earnings before effect of
<S> <C> <C> <C> <C> <C>
accounting changes.......... $358.0 $270.3 $211.1 $163.5 $115.6
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............. $358.0 $270.3 $211.1 $142.5 $(234.4)
Average number of common
shares outstanding.......... 107,492,364 106,069,078 105,458,116 104,991,535 104,340,622
Primary earnings per share:
Earnings before effect of
accounting changes.......... $3.33 $2.55 $2.00 $ 1.56 $ 1.11
Effect of accounting changes:
- Postemployment benefits -- -- -- (0.20) --
- Postretirement benefits
other than pensions..... -- -- -- -- (3.19)
- Income taxes............ -- -- -- -- (0.17)
Primary earnings (loss) per
share....................... $3.33 $2.55 $2.00 $ 1.36 $(2.25)
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:
1996 - 798,190; 1995 - 498,456; 1994 - 496,893; 1993 - 600,429; 1992 - 738,149.
</TABLE>
<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,
1996 1995 1994 1993 1992
FULLY DILUTED EARNINGS PER SHARE:
Earnings applicable to common
stock before effect of
<S> <C> <C> <C> <C> <C>
accounting changes........... $358.0 $270.3 $211.1 $163.5 $ 115.6
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.............. $358.0 $270.3 $211.1 $142.5 $(234.4)
Average number of common
shares outstanding........... 107,492,364 106,069,078 105,458,116 104,991,535 104,340,622
Number of common shares
issuable assuming exercise
under incentive stock plans.. 798,190 498,456 496,893 600,429 738,149
Average number of outstanding
shares as adjusted for
fully diluted earnings per
share calculations........... 108,290,554 106,567,534 105,955,009 105,591,964 105,078,771
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,
1996 1995 1994 1993 1992
Fully diluted earnings per share:
Earnings before effect of
accounting changes........... $3.31 $2.54 $1.99 $ 1.55 $ 1.10
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........................ $3.31 $2.54 $1.99 $ 1.35 $(2.23)
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>
<TABLE>
INGERSOLL-RAND COMPANY EXHIBIT 12
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES Page 1 of 2
(Dollar Amounts in Millions)
Years Ended
December 31,
Fixed charges: 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Interest expense........................... $122.4 $ 90.0 $ 46.9 $ 60.2 $ 64.7
Amortization of debt discount and expense.. 1.5 .8 .4 .7 .3
Rentals (one-third of rentals)............. 22.4 21.6 18.8 19.4 20.8
Capitalized interest....................... 4.6 3.6 3.2 3.1 3.5
Total fixed charges.......................... $150.9 $116.0 $ 69.3 $ 83.4 $ 89.3
Net earnings (loss).......................... $358.0 $270.3 $211.1 $142.5 $(234.4)
Add: Minority income (loss) of majority-
owned subsidiaries.................. 18.9 14.5 15.1 13.6 (33.2)
Taxes on income....................... 210.3 158.9 118.8 90.0 67.4
Fixed charges......................... 150.9 116.0 69.3 83.4 89.3
Effect of accounting changes.......... -- -- -- 21.0 350.0
Less: Capitalized interest.................. 4.6 3.6 3.2 3.0 3.4
Undistributed earnings (losses) from
less than 50% owned affiliates...... (23.1) 33.3 33.3 40.0 16.6
Earnings available for fixed charges ........ $756.6 $522.8 $377.8 $307.5 $ 219.1
Ratio of earnings to fixed charges .......... 5.01(1) 4.51 5.46 3.69(2) 2.45(3)
Undistributed earnings (losses) from less
than 50% owned affiliates:
Equity in earnings (losses)................ $ 36.4 $ 36.6 $ 36.6 $ 42.1 $ 17.9
Less: Amounts distributed............... 59.5 3.3 3.3 2.1 1.3
Undistributed earnings (losses) from
less-than 50% owned affiliates........... $(23.1) $ 33.3 $ 33.3 $ 40.0 $ 16.6
(1) The 1996 calculation includes the effect of a $42.4 million pretax charge mainly
relating to the realignment of the company's foreign operations. The 1996 calculation
also includes the $55 million of pretax income relating to the sales of the Process Systems Group.
(2) 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.
INGERSOLL-RAND COMPANY EXHIBIT 12
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES Page 2 of 2
(Dollar Amounts in Millions)
(3) 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%. 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.
</TABLE>
EXHIBIT 13
Page 1 of 65
INGERSOLL-RAND
1996
ANNUAL REPORT
TO
SHAREOWNERS
Page 2 of 65
Table of Contents
Financial Review and Management Analysis 3-24
Consolidated Statement of Income 25
Consolidated Balance Sheet 26-27
Consolidated Statement of Shareowners' Equity 28-29
Consolidated Statement of Cash Flows 30-31
Notes to the Consolidated Statements 32-63
Report of Management 64
Report of Independent Accountants 65
Page 3 of 65
Ingersoll-Rand Company
Financial Review and Management Analysis
1996 Compared to 1995
A third consecutive year of record sales and earnings was
established in 1996. These financial achievements were the results
of a strong domestic economy, moderate economic growth in selected
international markets and the continued success of the company's
asset-management, strategic-sourcing and productivity-improvement
programs.
Sales for 1996 totalled $6.7 billion, which generated $683.5
million of operating income and $358.0 million of net earnings (or
$3.33 per share). These results include a full year's benefit of
the May 31, 1995, acquisition of Clark Equipment Company (Clark).
The company's 1996 results, excluding the positive effect of the
Clark acquisition, also established company records.
The 1996 year included a net benefit of $12.6 million to the
company's operating income relating to the following items:
- - the sales of the Process Systems Group, which generated $55
million of operating income ($34.7 million after-tax, or 32
cents per share);
- - a charge of $30 million to operating income for the realignment
of the company's foreign operations ($18.9 million after-tax, or
18 cents per share);
- - a charge of $7 million to operating income associated with the
exit or abandonment of selected European product lines ($4.5
million after-tax, or four cents per share); and
- - a $5.4 million charge to operating income to close an Ingersoll-
Dresser Pump Company (IDP) steel foundry (approximately $2.0
million after-tax, or two cents per share).
The company's outlook for 1997 calls for steady improvement in
operating results based on continued stability in our domestic
markets and strengthening in our international markets. These
expectations will be supported by aggressive asset-management,
strategic-sourcing and productivity-improvement programs.
Page 4 of 65
A comparison of key financial data between 1996 and 1995 follows:
o Net sales in 1996 established a record at $6.7 billion,
reflecting a 17-percent improvement over 1995's total of $5.7
billion. Sales for 1996, excluding Clark, exceeded 1995's total
by approximately six percent.
o Cost of goods sold in 1996 was 75.0 percent of sales compared to
75.2 percent in 1995. Partial liquidations of LIFO (last-in,
first-out) inventory lowered 1996 costs by $4.8 million ($2.9
million after-tax, or three cents per share) as compared to a
$3.4 million ($2.1 million after-tax, or two cents per share)
liquidation in 1995. Excluding the effects of the LIFO
liquidations, the 1996 cost of goods sold relationship to sales
would have been 75.1 percent versus 75.3 percent for 1995.
Excluding Clark's results and the effect of the noncomparable
items from 1996 and 1995, the relationship of cost of goods sold
to sales improved slightly in 1996.
o Administrative, selling and service engineering expenses were
14.8 percent of sales in 1996, compared to 16.1 percent for
1995. This marked improvement reflects the net benefit of the
company's cost-containment and productivity-improvement
programs, which more than offset the effects of inflation on
salaries, benefits, materials and other similiar items. The
full year effect of the Clark acquisition did not cause a
disproportionate benefit to the 1996 improvement.
o Operating income for the year totalled $683.5 million, a 37.5-
percent increase over 1995's operating income of $497.0 million.
Excluding Clark's results, operating income in 1996 totalled
$527.9 million, reflecting a 21.3-percent increase over 1995's
level without Clark. In addition, the noncomparable items in
1996 contributed a $12.6-million benefit to operating income.
Excluding these items and Clark's results, operating income for
the year reflected an 18-percent improvement over 1995.
o Interest expense for the year totalled $119.9 million. The
interest expense reported for 1996 was almost evenly divided
between interest expense from the combined operations of
Ingersoll-Rand and Clark, and interest expense associated with
the Clark acquisition. Interest expense for 1995 totalled $86.6
million.
Page 5 of 65
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 1996, these activities resulted in
a net expense of $1.0 million, an unfavorable change of $10.4
million compared to 1995's net other income of $9.4 million. A
review of the components of this category shows that:
o foreign exchange activity for 1996 totalled $4.8 million
of losses, as compared to $6.2 million of losses in 1995;
o earnings from equity interests in partially-owned equity
companies were approximately $8 million lower than 1995's
level; and
o other net miscellaneous expense items were approximately
$3.8 million higher than the prior year's level, principally
due to miscellaneous foreign taxes not based on income.
o Dresser-Rand Company (Dresser-Rand) is a partnership between the
company and Dresser Industries, Inc. (Dresser), which is engaged
worldwide in the reciprocating compressor and turbomachinery
businesses. The company's pretax profits from its interest in
Dresser-Rand for 1996 totalled $23.0 million, a modest
improvement over the $22.0 million in the prior year. Dresser-
Rands's results included a disappointing 1996 fourth quarter,
which was adversely affected by cost overruns on a few major
orders, higher legal expenses and an increase in foreign taxes.
o Ingersoll-Dresser Pump Company is another partnership between
the company and Dresser, in which the company owns the majority
interest. In 1996, the minority interest charge was $17.3
million, as compared to the 1995 charge of $12.7 million. This
charge reflects the portion of IDP's earnings that was allocable
to Dresser and indicates that IDP's earnings in 1996 were
significantly higher than those reported for 1995.
o The company's effective tax rate for 1996 was 37.0 percent,
which is consistent with 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 acquisitions.
Page 6 of 65
At December 31, 1996, employment totalled 41,874. This
represents a net increase of 741 employees over last year's level
of 41,133. This increase is mainly due to the net result of
employees from businesses acquired and sold during the year.
Liquidity and Capital Resources
The company's financial position at December 31, 1996, reflects the
following notable changes from last year:
o the reclassification of $132.5 million of Medium Term
Notes, issued to finance the Clark acquisition, from
long-term debt to current maturities of long-term debt,
because repayment will occur during the third quarter of
1997; and
o the reclassification of the net assets of Clark-Hurth
to assets held for sale, which was sold in Februrary 1997.
Included in these net assets were approximately $200 million
of net assets previously classified as noncurrent.
The following table contains several key measures which the
company's management uses to gauge the company's financial
performance, all of which showed improvement in 1996:
1996 1995 1994
Working capital (in millions) $1,245 $1,016 $963
Current ratio 2.0 1.8 1.9
Debt-to-total capital ratio 39% 45% 22%
Average working capital
to net sales 16.9% 17.3% 20.4%
Average days outstanding
in receivables 56.1 63.1 64.6
Average months' supply
of inventory 3.0 3.3 3.7
Ingersoll-Rand, as a large multinational company, maintains
significant operations in foreign countries. The movement of the
U.S. dollar against foreign currencies has an impact on the
company's financial position. Generally, the functional currency
of the company's foreign subsidiaries is their local currency, the
currency in which they transact their business. 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
Page 7 of 65
attempts, through its hedging activities, to mitigate the impact on
income of changes in foreign exchange rates. Additionally, the
company maintains operations in countries with hyperinflationary
economies and in countries 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.)
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 $184.1 million at December
31, 1996, a $46.8-million increase over the prior year-end
balance of $137.3 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
provided $385.7 million, investing activities used $149.9
million and financing activities used $196.5 million. Exchange
rate changes during 1996 increased cash and cash equivalents by
$7.5 million.
o Marketable securities totalled $8.0 million at the end of 1996,
$1.3 million below the balance at December 31, 1995. The
reduction was due to the maturity of certain securities and
their conversion into cash and cash equivalents and minimal
exchange rate fluctuations.
o Receivables totalled $1,066.2 million at December 31, 1996,
compared to $1,109.9 million at the prior year end, a net
decrease of $43.7 million. Currency translation decreased the
receivable balance during the year by $6.5 million,
acquisitions added approximately $19 million and the
reclassification of the assets held for sale reduced the balance
by approximately $41 million. Dispositions reduced receivables
by $15.9 million. The company's focus on decreasing its
receivable base through its asset-management program produced a
reduction in the average days outstanding in receivables to 56.1
days from 1995's level of 63.1 days.
o Inventories amounted to $775.1 million at December 31, 1996, a
reduction of $137.5 million from last year's level of $912.6
million. Acquisitions accounted for a $13-million increase,
Page 8 of 65
while dispositions reduced inventories by $48 million. The
reclassification of assets held for sale reduced inventories by
approximately $92 million. The remaining net decrease was due
primarily to currency movements. The company's emphasis on
inventory control was demonstrated by the reduction of the
average months' supply of inventory to 3.0 months at December
31, 1996, compared to 3.3 months at the prior year end.
o Prepaid expenses totalled $74.1 million at the end of the year,
$16.1 million higher than the balance at December 31, 1995. The
primary cause for the increase in 1996 was higher deposits
relating to benefit plans. Foreign exchange activity and
acquisitions had minimal effect on prepaid expenses.
o Deferred income taxes (current) of $162.4 million at December
31, 1996, represented 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 $43.9 million from
the December 31, 1995, level. Changes due to foreign currency
movements had minimal effect on the year's activity.
o The investment in Dresser-Rand Company totalled $152.6 million
at December 31, 1996. This represented a net increase of $58.7
million from the prior year balance of $93.9 million. The
components of the change for 1996 consisted of income for the
current year of $23 million, a $92.1 million change in the
advance account between the entities, a minor increase caused by
translation, and a reduction caused by a return of capital of
$56.7 million.
o The investments in partially-owned equity companies at December
31, 1996, totalled $223.6 million, which approximated the 1995
balance of $223.3 million. Income and dividends from
investments in partially-owned equity companies were $19.4
million and $6.8 million, respectively. Amounts due from these
units decreased from $20.4 million to $18.3 million at December
31, 1996. Currency movements primarily relating to partially-
owned equity companies in Japan caused approximately a $10-
million decrease in 1996.
o Net property, plant and equipment decreased by $133 million in
1996 to a year-end balance of $1,145.4 million. Fixed assets
from acquisitions during 1996 added $33.1 million. Capital
Page 9 of 65
expenditures in 1996 totalled $195 million. The
reclassification of the fixed assets associated with Clark-Hurth
reduced the balance by approximately $136 million. Dispositions
reduced the balance by $40.4 million. In addition, foreign
exchange fluctuations decreased the net fixed asset values in
U.S. dollars by approximately $5 million. The remaining net
decrease was the result of depreciation, and sales and
retirements.
o Intangible assets, net, totalled $1,178.0 million at December
31, 1996, as compared to $1,253.6 million at December 31, 1995,
for a net decrease of $75.6 million. Acquisitions added
approximately $81 million of intangibles, primarily goodwill,
during 1996. The reclassification of the intangible assets
relating to the Clark-Hurth sale reduced the balance by
approximately $119 million at December 31, 1996. Amortization
expense accounted for a reduction of $38.0 million.
o Deferred income taxes (noncurrent) totalled $162.6 million at
December 31, 1996, which was $27.8 million higher than the 1995
balance. A listing of the components which comprised the balance
at December 31, 1996, can be found in Note 14 to the
Consolidated Financial Statements.
o Other assets totalled $223.8 million at year end, a decrease of
$9.9 million from the December 31, 1995, balance of $233.7
million. Other assets increased approximately $12 million due
to prepaid pensions, which was more than offset by decreases due
to dispositions and the reclassification of assets held for
sale. Foreign exchange activity in 1996 had a minimal effect on
the account balance during the year.
o Accounts payable and accruals totalled $1,095.4 million at
December 31, 1996, a decrease of $34.4 million from last year's
balance of $1,129.8 million. The reclassification of assets
held for sale and dispositions decreased accounts payable and
accruals by $69.2 million. Restructure of operations added
approximately $37 million. Acquisition activity during 1996
accounted for a $9.4-million increase and foreign exchange
activity during the year resulted in a decrease of $12.6
million.
o Loans payable were $162.3 million at the end of 1996, which
reflects a $6.9-million increase over the $155.4 million at
Page 10 of 65
December 31, 1995. Current maturities of long-term debt,
included in loans payable, were $133.2 million and $102.9
million at December 31, 1996 and 1995, respectively. The
company's aggressive cash-management program decreased short-
term debt,while foreign currency fluctuations increased short-
term debt during 1996 by $4.6 million. The reclassification of
Clark-Hurth debt to assets held for sale totalled $5.7 million.
The change in current maturities of long-term debt included
movement to current maturities of $135.7 million, payments of
$104.4 million and foreign exchange activity.
o Long-term debt, excluding current maturities, totalled $1,163.8
million, a decrease of $140.6 million from the prior year's
balance of $1,304.4 million. Reductions in long-term debt were
the result of the reclassifications of $135.7 million of current
maturities to loans payable and $5.1 million related to Clark-
Hurth debt reclassified to assets held for sale. Foreign
currency fluctuations had a minimal effect.
o Postemployment liabilities at December 31, 1996, totalled $814.7
million, a decrease of $17.4 million from the December 31, 1995,
balance. Postemployment liabilities include medical and life
insurance postretirement benefits, long-term pension and other
noncurrent postemployment accruals. The 1996 activity included
reductions of $22.9 million attributed to units, which were
either sold in 1996 or early 1997. Postemployment liabilities
represent the company's noncurrent liabilities in accordance
with Statement of Financial Accounting Standard(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
$113.4 million and $170.8 million at December 31, 1996 and 1995,
respectively. Earnings allocable to IDP's minority interest
totalled $17.3 million for 1996. At December 31, 1996, Dresser
had advances payable to IDP totalling $85.5 million, which was
shown as a reduction in IDP's minority interest.
o Other liabilities (noncurrent) at December 31, 1996, totalled
$148.7 million, which were $17.4 million higher than the balance
at December 31, 1995. These obligations are not expected to be
paid out in the next year. These accruals generally cover
environmental, insurance, legal and other contractual
obligations.
Page 11 of 65
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, 1996, approximately 1.5
million shares of the company's common stock were unallocated
and the $55.6 million paid by the LESOP for those unallocated
shares was 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 $58.0 million
in 1996, compared to $156.1 million in 1995. The weighted average
interest rate during 1996 was 7.8%, compared to 8.3% during the
previous year. The maximum amounts outstanding during 1996 and
1995, were $181.7 million and $222.0 million, respectively.
The company had $800 million in domestic short-term credit lines
at December 31, 1996, and $491.5 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 1997 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, 1996, the debt-to-total capital ratio was 39
percent, as compared to 45 percent at the prior year end. The
significant improvement in the ratio at December 31, 1996, was
primarily due to the company's continuing focus on cash management
and an increase in the company's equity.
In 1996, foreign currency translation adjustments decreased
shareowners' equity by $16.5 million. Translation adjustments of
$6.3 million relating to the sale of foreign investments were
included in income upon the sale of these businesses. The remaining
change of $10.2 million was due to the strengthening 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 changes in Australia, Belgium, Germany,
Italy, Japan, Singapore, South Africa and the United Kingdom
accounted for nearly all of the change.
Page 12 of 65
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, 1996,
repurchase arrangements relating to product financing by an
independent finance company approximated $106 million. It is not
practicable to determine the additional amount subject to
repurchase solely under dealer distribution agreements. Upon the
termination of a dealer, 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 1996, 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, 1996 and 1995, $150 million
of such receivables remained uncollected.
Capital expenditures were $195 million and $212 million in 1996
and 1995, 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 1997 is estimated at
approximately $200 million, including amounts approved in prior
periods. There are no planned projects, either individually or in
the aggregate, that 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.
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 the Clark acquisition.
Page 13 of 65
During 1996, the company spent approximately $8 million on
capital projects for pollution abatement and control and an
additional $6 million for environmental remediation expenditures at
sites presently or formerly owned or leased by the company. It
should be noted that these amounts are difficult to estimate
because environmental improvement costs are generally a part of 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, 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 39 federal Superfund and state
remediation sites (including Clark-acquired PRP locations),
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 not assumed it will 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 contributions 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 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.
Page 14 of 65
1995 Compared to 1994
1995 went 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 included our successful
acquisition of 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) added more than $1 billion of
sales on an annualized basis to the company's results. Products
included Melroe's Bobcat skid-steer loaders and compact excavators,
Clark-Hurth axles and transmissions (sold February 1997), Blaw-Knox
pavers and Club Car golf cars and utility vehicles.
The company's economic outlook for 1996 was fairly consistent
with 1995 and called for a steady improvement in operating results
based on continued stability in our domestic markets and continued
strength in our international markets. These expectations were
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 ten percent, and also established a new
record.
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
Page 15 of 65
($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 1995 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 1995 totalled $86.6 million, which was
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
was 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:
Page 16 of 65
o foreign exchange activity for 1995 totalled $6.2 million
of losses, as compared 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 1994 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 is a partnership between the company and
Dresser. The company's pretax profits from its interest in
Dresser-Rand for 1995 totalled $22.0 million, as compared to
$24.6 million in 1994. 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 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 1994.
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 1994. 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 1994'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.
The following highlights the financial results and financial
condition of the company's operations, with the impact of currency
variations where appropriate:
Page 17 of 65
o Cash and cash equivalents totalled $137.3 million at December
31, 1995, a $69.7-million decrease from the December 31, 1994,
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 December 31, 1994, for a net
increase of $160.5 million. Currency translation increased the
receivable balance during the year by $16.0 million, while
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 1994's
level of 64.6 days, as benefits from the company's asset-
management program were beginning to be realized.
o Inventories amounted to $912.6 million at December 31, 1995, an
increase of $233.3 million over the December 31, 1994, 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
December 31, 1994.
Page 18 of 65
o Prepaid expenses totalled $58.0 million at the end of 1995,
$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 1994'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.
Page 19 of 65
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 December 31, 1995, 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 December
31, 1994'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 reflect
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
Page 20 of 65
foreign currency fluctuations increased short-term debt during
1995 by $15.0 million and $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 at December 31, 1995, an increase of $988.5 million over
the December 31, 1994, 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 and
other noncurrent postemployment accruals. The increase in the
liability during 1995 was 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 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 was almost
exclusively related to the Clark acquisition. These obligations
were not expected to be paid out in the company's next business
Page 21 of 65
cycle. These accruals generally covered environmental
obligations, legal and other contractual obligations.
o 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 was 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 1994.
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 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 December 31, 1994. 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.
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
Page 22 of 65
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.
REVIEW OF BUSINESS SEGMENTS
Standard Machinery
Standard Machinery Segment sales were $2.9 billion, an increase of
28.3 percent over the $2.3 billion reported for 1995. Operating
income for 1996 totalled $295.5 million, representing an increase
of 32.7 percent over last year's total of $222.6 million. Effective
June 1, 1995, this segment now includes all of the operations of
Clark, except for Clark-Hurth. Excluding the sales from the Clark
operations, 1996 sales were $1.8 billion, or $84.5 million higher
than 1995's level. Operating income, excluding the Clark
operations, was $137.6 million (or 12.4 percent below 1995's
results). This amount included $28 million of charges associated
Page 23 of 65
with the European realignment and exit or abandonment of selected
European product lines.
The Construction and Mining Group's sales for 1996, excluding the
Blaw-Knox unit acquired from Clark, were up slightly over last
year's level due to stronger domestic markets. The group's
operating income and operating income margins were down from 1995's
levels because the majority of the realignment and product exit
costs for 1996 applied to this group. Sales for the Air Compressor
Group were approximately seven percent higher than 1995's level
based on continued strong demand for its products, domestically and
internationally. The group reported improvement in operating
income for the year. The operations of the Clark units, which are
Melroe Company, Club Car, and Blaw-Knox, generated over $1.1
billion in sales and produced over $150 million of operating income
for the first full year of operation under the company's ownership.
Engineered Equipment
Engineered Equipment Segment sales for 1996 totalled $1.3 billion,
or 7.5 percent above 1995's level. Operating income was $108.5
million, which was more than double the 1995 total of $49.5
million. Operating income included noncomparable gains of
approximately $55 million from the sales of the Process Systems
Group during 1996. This segment includes the results of Clark-
Hurth Group (sold February 1997).In addition, it includes the pre-
sale activities of the Pulp Machinery Division (sold during the
first quarter of 1996) and the Process Systems units (sold
effective September 30, 1996). These divisions were collectively
known as the Process Systems Group. Clark-Hurth's sales for 1996
approximated $350 million, which generated a modest amount of
operating income. Clark-Hurth's results for the year were
adversely affected by the depressed German economy and the
company's decision to sell this unit.
IDP's sales for 1996 reflected an eight-percent improvement over
the prior year's level. However, operating income, even after
considering the closing costs for a steel foundry, was up
significantly over 1995's results.
Bearings, Locks and Tools
In 1996, the Bearings, Locks and Tools Segment reported sales of
$2.5 billion, a 10.7-percent increase over the prior year.
Operating income totalled $323.3 million, an increase of more than
$54 million over the $269.1 million reported for 1995.
Page 24 of 65
Bearings and Components Group sales for 1996 exceeded the prior
year's level by more than five percent. A strong domestic
automotive industry and continued benefits from cost-containment
programs generated improved operating income and operating income
margins for this group in 1996.
Architectural Hardware Group sales were significantly higher than
1995's level with approximately two-thirds of the increase
attributed to the January 31, 1996, acquisition of Steelcraft. The
group's operating income for the year was above 1995's level by
approximately 30 percent, with one-third of the increase attributed
to Steelcraft.
The Production Equipment Group sales in 1996 reflected a five-
percent improvement over the amount reported for the prior year.
However, operating income improved over 25 percent above 1995's
level due to a stronger domestic economy, improved markets in the
European-served area and the benefits derived from cost-containment
and productivity-improvement programs.
Page 25 of 65
Consolidated Statement of Income
In millions except per share amounts
For the years ended December 31 1996 1995 1994
Net sales $6,702.9 $5,729.0 $4,507.5
Cost of goods sold 5,029.9 4,310.2 3,377.1
Administrative, selling and
service engineering
expenses 989.5 921.8 753.4
Operating income 683.5 497.0 377.0
Interest expense (119.9) (86.6) (43.8)
Other income (expense), net (1.0) 9.4 (14.7)
Dresser-Rand income 23.0 22.0 24.6
Ingersoll-Dresser Pump
minority interest (17.3) (12.7) (13.2)
Earnings before income taxes 568.3 429.1 329.9
Provision for income taxes 210.3 158.8 118.8
Net earnings $ 358.0 $ 270.3 $ 211.1
Net earnings per share $3.33 $2.55 $2.00
See accompanying Notes to Consolidated Financial Statements.
Page 26 of 65
Consolidated Balance Sheet
In millions except share amounts
December 31 1996 1995
Assets
Current assets:
Cash and cash equivalents $ 184.1 $ 137.3
Marketable securities 8.0 9.3
Accounts and notes receivable, less
allowance for doubtful accounts of
$34.3 in 1996 and $38.3 in 1995 1,066.2 1,109.9
Inventories 775.1 912.6
Prepaid expenses 74.1 58.0
Assets held for sale 265.7 --
Deferred income taxes 162.4 118.5
2,535.6 2,345.6
Investments and advances:
Dresser-Rand Company 152.6 93.9
Partially-owned equity companies 223.6 223.3
376.2 317.2
Property, plant and equipment, at cost:
Land and buildings 637.9 682.9
Machinery and equipment 1,465.8 1,522.3
2,103.7 2,205.2
Less-accumulated depreciation 958.3 926.8
1,145.4 1,278.4
Intangible assets, net 1,178.0 1,253.6
Deferred income taxes 162.6 134.8
Other assets 223.8 233.7
$5,621.6 $5,563.3
Page 27 of 65
Consolidated Balance Sheet (continued)
In millions except share amounts
December 31 1996 1995
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $1,095.4 $1,129.8
Loans payable 162.3 155.4
Customers' advance payments 19.1 17.7
Income taxes 13.4 26.3
1,290.2 1,329.2
Long-term debt 1,163.8 1,304.4
Postemployment liabilities 814.7 832.1
Ingersoll-Dresser Pump Company
minority interest 113.4 170.8
Other liabilities 148.7 131.3
Shareowners' equity:
Common stock, $2 par value, authorized
400,000,000 shares; issued:
1996-110,276,506; 1995-109,704,883 220.6 219.4
Capital in excess of par value 143.5 121.6
Earnings retained for use in the business 1,869.6 1,595.5
2,233.7 1,936.5
Less: Unallocated LESOP shares, at cost 55.6 70.2
Treasury stock, at cost 11.5 11.5
Foreign currency equity adjustment 75.8 59.3
Shareowners' equity 2,090.8 1,795.5
$5,621.6 $5,563.3
See accompanying Notes to Consolidated Financial Statements.
Page 28 of 65
Consolidated Statement of Shareowners' Equity
In millions except share amount
December 31 1996 1995 1994
Common stock, $2 par value:
Balance at beginning of year $ 219.4 $ 218.3 $ 217.9
Exercise of stock options 1.1 1.0 .2
Issuance of shares under
stock plans .1 .1 .2
Balance at end of year 220.6 219.4 218.3
Capital in excess of par value:
Balance at beginning of year 121.6 42.4 34.9
Exercise of stock options
including tax benefits 17.5 14.6 3.3
Issuance of shares under
stock plans 1.8 2.0 4.2
Sale of treasury shares to LESOP -- 62.7 --
Allocation of LESOP shares to
employees 2.6 (.1) --
Balance at end of year 143.5 121.6 42.4
Earnings retained for use
in the business:
Balance at beginning of year 1,595.5 1,403.7 1,268.5
Net earnings 358.0 270.3 211.1
Cash dividends (83.9) (78.5) (75.9)
Balance at end of year 1,869.6 1,595.5 1,403.7
Unallocated leveraged employee
stock ownership plan:
Balance at beginning of year (70.2) -- --
Purchase of treasury shares -- (73.1) --
Allocation of shares to employees 14.6 2.9 --
Balance at end of year (55.6) (70.2) --
Treasury stock-at cost:
Common stock, $2 par value:
Balance at beginning of year (11.5) (53.1) (53.1)
Sale of treasury shares to LESOP -- 41.6 --
Balance at end of year (11.5) (11.5) (53.1)
Foreign currency
equity adjustment:
Balance at beginning of year (59.3) (80.0) (118.4)
Adjustments due to:
Translation changes (10.2) 20.7 38.4
Dispositions (6.3) -- --
Balance at end of year (75.8) (59.3) (80.0)
Page 29 of 65
Consolidated Statement of Shareowners' Equity (continued)
In millions except share amount
December 31 1996 1995 1994
Total shareowners' equity $2,090.8 $1,795.5 $1,531.3
Shares of Capital Stock
Common stock, $2 par value:
Balance at beginning of year 109,704,883 109,168,872 108,939,462
Exercise of stock options 519,550 474,250 112,850
Issuance of shares under
stock plans 52,073 61,761 116,560
Balance at end of year 110,276,506 109,704,883 109,168,872
Unallocated leveraged employee
stock ownership plan:
Common stock, $2 par value:
Balance at beginning of year 1,937,198 -- --
Purchase of treasury shares -- 2,878,008 --
LESOP shares allocated to
employees (403,194) (940,810) --
Balance at end of year 1,534,004 1,937,198 --
Treasury stock:
Common stock, $2 par value:
Balance at beginning of year 794,724 3,672,732 3,672,732
Sale of shares to LESOP -- (2,878,008) --
Balance at end of year 794,724 794,724 3,672,732
See accompanying Notes to Consolidated Financial Statements.
Page 30 of 65
Consolidated Statement of Cash Flows
In millions
For the years ended December 31 1996 1995 1994
Cash flows from operating activities:
Net earnings $ 358.0 $ 270.3 $ 211.1
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 202.6 179.4 132.5
(Gain)/loss on sale of businesses (58.0) 7.1 --
Gain on sale of property, plant
and equipment (10.3) (3.6) (.1)
Minority interests 20.4 14.0 13.8
Equity earnings/losses,
net of dividends (35.6) (41.5) (36.4)
Deferred income taxes (4.5) 15.1 14.2
Other noncash items 12.3 1.4 (10.5)
Restructure of operations 42.4 -- --
Changes in assets and liabilities
(Increase) decrease in:
Accounts and notes receivable (1.0) 50.9 (111.8)
Inventories (5.3) (15.2) 81.6
Other current and noncurrent
assets (36.8) (33.1) (14.6)
(Decrease) increase in:
Accounts payable and accruals (17.8) (37.9) 41.5
Other current and noncurrent
liabilities (80.7) (3.3) (19.5)
Net cash provided by operating
activities 385.7 403.6 301.8
Cash flows from investing activities:
Capital expenditures (195.0) (211.7) (158.6)
Proceeds from sales of property,
plant and equipment 33.3 26.5 7.3
Proceeds from business dispositions 183.8 -- 2.2
Acquisitions, net of cash* (133.5) (1,136.5) (37.8)
(Increase) decrease in marketable
securities (3.6) (4.6) 2.8
Cash (invested in) or advances (to)
from equity companies (34.9) 18.4 42.4
Net cash used in investing
activities (149.9) (1,307.9) (141.7)
Page 31 of 65
Consolidated Statement of Cash Flows (Continued)
In millions
For the years ended December 31 1996 1995 1994
Cash flows from financing activities:
Decrease in short-term borrowings $ (24.3) $ (81.5) $ (31.4)
Debt issuance costs -- (6.0) --
Proceeds from long-term debt .1 901.7 2.3
Payments of long-term debt (104.7) (23.7) (85.7)
Net change in debt (128.9) 790.5 (114.8)
Proceeds from exercise of stock
options and treasury stock sales 16.3 118.2 3.0
Dividends paid (83.9) (78.5) (75.9)
Net cash (used in) provided by
financing activities (196.5) 830.2 (187.7)
Effect of exchange rate changes on cash
and cash equivalents 7.5 4.4 6.6
Net increase (decrease) in cash
and cash equivalents 46.8 (69.7) (21.0)
Cash and cash equivalents-
beginning of year 137.3 207.0 228.0
Cash and cash equivalents-end of year $ 184.1 $ 137.3 $ 207.0
*Acquisitions:
Working capital, other than cash $ (22.1) $ (161.4) $ 15.9
Property, plant and equipment (33.1) (292.0) (39.8)
Intangibles and other assets (81.7) (1,330.0) (32.6)
Long-term debt and other liabilities 3.4 646.9 18.7
Net cash used to acquire businesses $ (133.5) $(1,136.5) $ (37.8)
Cash paid during the year for:
Interest, net of amounts capitalized $ 120.2 $ 72.1 $ 47.3
Income taxes 262.3 120.1 119.8
See accompanying Notes to Consolidated Financial Statements.
Page 32 of 65
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, architectural
hardware products, automotive parts and components, construction
equipment, golf cars and utility vehicles, pumps and tools. The
company's broad product line has applications in numerous
industries including automotive, construction, mining, utilities,
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 $20.7 million and
$40.0 million at December 31, 1996 and 1995, 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.
Page 33 of 65
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, 1996 and 1995, was
$1.1 billion and $1.2 billion, 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,
1996 and 1995, was $82.3 million and $47.0 million, respectively.
Amortization of intangible assets was $38.0 million, $25.3
million and $6.8 million in 1996, 1995 and 1994, 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 no later than the 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 all 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
Page 34 of 65
expensed when incurred and amounted to $209.3 million in 1996,
$190.4 million in 1995 and $154.6 million in 1994.
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 $3.5 million, $3.9
million and $5.1 million in 1996, 1995 and 1994, respectively.
Shareowners' equity was decreased in 1996 by $16.5 million,
increased in 1995 and 1994 by $20.7 million and $38.4 million,
respectively, due to foreign currency equity adjustments related
to translation and dispositions.
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.
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.
Page 35 of 65
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).
New Accounting Standards: In March 1995, the Financial
Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards (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 did not 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 has provided pro forma fair value
disclosures in Note 13. In June 1996, the FASB issued Statement
No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities." Adoption of this
statement as of January 1, 1997, will have no material impact on
the financial statements.
NOTE 2 - ACQUISITIONS OF BUSINESSES: 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 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.
In May 1995, the company acquired Clark Equipment Company for
approximately $1.5 billion. Clark's business was the design,
Page 36 of 65
manufacture and sale of compact construction machinery, asphalt
paving equipment, axles and transmissions for off-highway
equipment, and golf cars and utility vehicles. Included among
the assets acquired by the company (indirectly through the
acquisition of the shares of Clark) were the Melroe Company, Blaw-
Knox Construction Equipment Company, Clark-Hurth Components and
Club Car, Inc.
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 year ended December 31, 1995, reflect the acquisition as
though it occurred at the beginning of the period 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):
For the year ended December 31, 1995 (Unaudited)
Sales $6,346.1
Net earnings 283.5
Earnings per share $2.67
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 period. 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 percent 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
Page 37 of 65
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.
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: In December
1996, the company announced that it would sell its Clark-Hurth
Group to Dana Corporation. The sale price approximates the net
book value of the assets. At December 31, 1996, the net assets
subject to sale totalled $265.7 million and have been classified
as current assets on the Consolidated Balance Sheet. Clark-Hurth
Components has been reported as part of the Engineered Equipment
Segment.
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 has been reported as part of the Engineered
Equipment Segment.
On March 26, 1996, the company sold the assets of the Pulp
Machinery Division (the largest unit in the Process Systems
Group) 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 for a gain of $4.8 million.
In the first and fourth quarters 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
a steel foundry. These accruals totalled $42.4 million and were
charged to operating income.
Page 38 of 65
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.
NOTE 4 - INVENTORIES: At December 31, inventories were as
follows:
In millions 1996 1995
Raw materials and supplies $156.2 $ 211.8
Work-in-process 238.7 326.1
Finished goods 538.1 538.5
933.0 1,076.4
Less-LIFO reserve 157.9 163.8
Total $775.1 $ 912.6
Work-in-process inventories are stated after deducting customer
progress payments of $24.9 million in 1996 and $38.8 million in
1995. At December 31, 1996 and 1995, LIFO inventories comprised
approximately 43 percent and 41 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 $4.8 million in 1996, $3.4
million in 1995 and $11.6 million in 1994. These liquidations
increased net earnings in 1996, 1995 and 1994 by approximately
$2.9 million ($0.03 per share), $2.1 million ($0.02 per share)
and $7.1 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 that operate in similar lines of business.
The company's investments in and amounts due from partially-
owned equity companies amounted to $205.3 million and $18.3
million, respectively, at December 31, 1996, and $202.9 million
and $20.4 million, respectively, at December 31, 1995.
Page 39 of 65
The company's equity in the net earnings of its partially-owned
equity companies was $19.4 million, $26.2 million and $15.6
million in 1996, 1995 and 1994, respectively.
The company received dividends based on its equity interests in
these companies of $6.8 million, $6.7 million and $3.8 million in
1996, 1995 and 1994, respectively.
Summarized financial information for these partially-owned
equity companies at December 31, and for the years presented was:
In millions 1996 1995
Current assets $ 463.9 $467.6
Property, plant and
equipment, net 279.4 284.9
Other assets 29.7 30.2
Total assets $ 773.0 $782.7
Current liabilities $ 243.7 $272.0
Long-term debt 78.2 56.5
Other liabilities 37.0 47.4
Total shareowners' equity 414.1 406.8
Total liabilities
and equity $ 773.0 $782.7
In millions 1996 1995 1994
Net sales $ 890.5 $ 872.5 $701.0
Gross profit 165.0 180.2 142.0
Net earnings 42.6 55.8 33.7
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.
Page 40 of 65
Summarized financial information for Dresser-Rand at December
31, and for the years presented was:
In millions 1996 1995
Current assets $ 496.5 $ 457.2
Property, plant and
equipment, net 262.5 239.3
Other assets 49.8 27.2
Total assets 808.8 723.7
Deduct:
Current liabilities 306.4 341.4
Other liabilities 204.4 200.8
510.8 542.2
Net partners' equity
and advances $ 298.0 $ 181.5
In millions 1996 1995 1994
Net sales $1,179.9 $1,081.4 $1,219.4
Gross profit 226.7 212.5 203.1
Net earnings 46.9 44.9 50.2
The company's investment in Dresser-Rand was $149.4 million and
$182.8 million at December 31, 1996 and 1995, respectively.
Dresser-Rand owed the company $3.2 million at December 31, 1996,
and the company owed Dresser-Rand $88.9 million at December 31,
1995. During 1996, Dresser-Rand approved and distributed $115.7
million of capital to its partners of which $56.7 million was
distributed to the company.
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUALS: Accounts payable and
accruals at December 31, were:
In millions 1996 1995
Accounts payable $ 295.8 $ 337.5
Accrued:
Payrolls and benefits 184.0 177.4
Taxes 40.4 59.5
Insurance and claims 104.1 110.9
Postemployment benefits 99.4 98.5
Warranties 45.0 52.3
Interest 33.6 33.6
Other accruals 293.1 260.1
$1,095.4 $1,129.8
Page 41 of 65
NOTE 8 - LONG-TERM DEBT AND CREDIT FACILITIES:
At December 31, long-term debt consisted of:
In millions 1996 1995
6 7/8% Notes Due 2003 $ 100.0 $ 100.0
9% Debentures Due 2021 125.0 125.0
7.20% Debentures Due 2025 150.0 150.0
6.48% Redeemable Debentures Due 2025 150.0 150.0
Medium Term Notes Due 1998-2004, at
an average rate of 6.63% 467.5 600.0
9.75% Clark Debentures Due 2001 100.0 100.0
Clark Medium Term Notes Due 1998-2023,
at an average rate of 7.89% 60.2 60.2
Other domestic and foreign
loans and notes, at end-
of-year average interest
rates of 5.53% in 1996
and 6.53% in 1995, maturing
in various amounts to 2025 11.1 19.2
$1,163.8 $1,304.4
Debt retirements for the next five years are as follows:
$133.2 million in 1997, $144.8 million in 1998, $100.9 million in
1999, $101.3 million in 2000 and $101.2 million in 2001.
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, but require annual installments of $7.5 million into a
sinking fund beginning June 1, 2006, 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, 1996, 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 $539.7 million, of which $491.5 million were
unused at December 31, 1996. No major cash balances were subject
to withdrawal restrictions. At December 31, 1996, the average
Page 42 of 65
rate of interest for loans payable, excluding the current portion
of long-term debt, was 10.7% and related primarily to foreign
loans totalling $28.3 million.
Capitalized interest on construction and other capital projects
amounted to $4.6 million, $3.5 million and $3.2 million in 1996,
1995 and 1994, respectively. Interest income, included in other
income (expense), net, was $10.3 million, $11.5 million and $11.5
million in 1996, 1995 and 1994, respectively.
NOTE 9 - FINANCIAL INSTRUMENTS: The company, as a large
multinational company, maintains significant operations in
foreign countries. As a result of these global 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 currency 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 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.
Page 43 of 65
At December 31, the contractual amounts were:
In millions 1996 1995
Buy Sell Buy Sell
Australian dollars $ 9.7 $ 1.8 $ - $ 1.4
Austrian schilling 4.3 - 9.6 1.6
Belgian francs 4.4 .5 3.2 8.3
Canadian dollars 15.2 5.5 10.4 6.6
Deutsche marks 10.9 131.3 10.2 135.6
Dutch guilders - 2.1 20.2 7.8
French francs 4.8 14.1 24.1 38.5
Italian lira 31.7 4.5 41.1 6.9
Japanese yen 13.8 4.4 19.0 2.0
Pounds sterling 54.0 155.5 25.1 128.8
South African rand 1.5 14.8 3.5 12.8
Other 10.2 5.4 6.5 6.2
Total $160.5 $339.9 $172.9 $356.5
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:
Page 44 of 65
In millions 1996 1995
Long-term debt:
Carrying value $1,163.8 $1,304.4
Estimated fair value 1,194.8 1,410.6
Forward contracts:
Contract (notional) amounts:
Buy contracts $ 160.5 $ 172.9
Sell contracts 339.9 356.5
Fair (market) values:
Buy contracts 161.0 172.9
Sell contracts 349.5 356.8
Fair value of long-term debt was determined by reference to the
December 31, 1996 and 1995, 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 1996, the company continued to sell an undivided interest in
designated pools of accounts and notes receivable up to a maximum
of $150 million. Similar agreements have been in effect since
1987. During 1996, 1995 and 1994, such sales amounted to $593.7
million, $533.7 million and $487.8 million, respectively. At
December 31, 1996 and 1995, $150 million 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,
Page 45 of 65
using the basic terms and conditions of the existing agreements.
The company has retained collection and administrative
responsibilities as agent for the purchaser for receivables sold.
Receivables, excluding the designated pool of accounts and
notes receivable, sold during 1996, 1995 and 1994 with recourse,
amounted to $147.4 million, $175.9 million and $64.6 million,
respectively. At December 31, 1996 and 1995, $36.2 million and
$35.3 million, respectively, of such receivables sold remained
uncollected.
As of December 31, 1996, the company had no significant
concentrations of credit risk in trade receivables due to the
large number of customers which comprised its receivables base
and their dispersion across different industries and countries.
In the normal course of business, the company has issued
several direct and indirect guarantees, including performance
letters of credit, totalling approximately $138.4 million at
December 31, 1996. Management believes these guarantees will not
adversely affect the consolidated financial statements.
Additionally, the company has entered into certain repurchase
arrangements relating to product-distribution and product-
financing activities involving the company's continuing
operations. As of December 31, 1996, repurchase arrangements
relating to product financing by an independent finance company
approximate $106 million. It is not practicable to determine the
additional amount subject to repurchase solely under dealer-
distribution agreements. The total exposure to loss on these
repurchase arrangements is subject to a $1 million ultimate net
loss provision. The company has also guaranteed the residual
value of leased product in the aggregate amount of $24.9 million.
Upon the termination of a dealer, 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, and historically, only immaterial losses
have been incurred relating to these arrangements.
Clark sold Clark Material Handling Company (CMHC), its forklift
truck business, to Terex Corporation (Terex) in 1992. In 1996,
Terex sold CMHC to CMHC Acquisition Corp. (CMHCAC). Terex and
CMHCAC assumed substantially all of the obligations for existing
and future product liability claims involving CMHC products. In
the event that Terex and CMHCAC 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,
Page 46 of 65
liquidity or cash flows of the company in any year.
Certain office and warehouse facilities, transportation
vehicles and data processing equipment are leased. Total rental
expense was $66.9 million in 1996, $64.7 million in 1995 and
$56.2 million in 1994. 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: $37.3
million in 1997, $26.8 million in 1998, $15.4 million in 1999,
$8.7 million in 2000, $6.3 million in 2001 and $16.2 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
Page 47 of 65
holders to exercise the rights to purchase shares automatically
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, 1996, 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, 1996, approximately
1.5 million of these shares remain unallocated and the $55.6
million paid by the LESOP for those unallocated shares is
classified as a reduction of shareowners' equity pending
allocation to participants. At December 31, 1996, the LESOP owed
the company $29.9 million payable 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. Options become exercisable one year after the
date of the grant and expire at the end of ten years. 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.
As permitted by SFAS No. 123, "Accounting for Stock Based
Compensation," the company continues to account for its stock
plans in accordance with Accounting Principles Board Opinion No.
Page 48 of 65
25, "Accounting for Stock Issued to Employees," and its related
interpretations. Accordingly, compensation expense has been
recognized for SARs (which were generally settled for cash) and
for stock awards. Had compensation cost for the applicable
provisions of the company's incentive stock plans been determined
based upon the fair value at the grant date for awards issued in
1995 and 1996 in accordance with the methodology prescribed under
SFAS No. 123, the company's net earnings and earnings per share
would have been reduced by approximately $6.7 million (or six
cents per share) in 1996 and $1.6 million (or one cent per share)
in 1995. The 1996 effect on earnings includes approximately $2.9
million (or three cents per share) attributed to the company's
revocation as of December 15, 1996, of 1,839,000 SARs which were
previously attached to stock options. The average fair values of
the options granted during 1996 and 1995 were estimated at $10.97
and $8.65, respectively, on the date of grant, using the Black-
Scholes option-pricing model which included the following
assumptions:
1996 1995
Dividend yield 1.86% 2.04%
Volatility 22.52% 22.69%
Risk-free interest rate 6.17% 6.42%
Forfeiture rate -- --
Expected life 4 years 4 years
Changes 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
Granted 1,266,500 37.44-46.69
Exercised 898,800 11.95-36.25
December 31, 1996 3,970,100 $20.75-46.69
Page 49 of 65
At December 31, 1996, there were also 168,500 SARs outstanding with
no stock options attached. The company has reserved 3,982,345 shares
for future awards at December 31, 1996. In addition, 309,528
shares of common stock were reserved for future issue, contingent
upon attainment of certain performance goals and future service.
The following table summarizes information concerning currently
outstanding and exercisable options:
Options Options
Outstanding Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Outstanding Remaining Exercise Exercisable Exercise
Exercise Price at 12/31/96 Life Price at 12/31/96 Price
$20.75-25.00 257,500 3.6 $22.39 257,500 $22.39
25.01-30.00 194,000 3.6 26.89 194,000 26.89
30.01-35.00 1,382,700 6.6 33.23 1,382,700 33.23
35.01-40.00 2,075,900 8.9 38.03 859,400 36.24
40.01-45.00 51,000 9.4 42.20 10,000 40.06
45.01-46.69 9,000 9.9 46.69 - -
$20.75-46.69 3,970,100 2,703,600
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 participants'
accounts at December 31, 1996 and 1995, are 265,109 and 288,837,
respectively.
NOTE 14 - INCOME TAXES: Earnings before income taxes for the
years ended December 31, were taxed within the following
jurisdictions:
In millions 1996 1995 1994
United States $467.3 $308.0 $279.4
Foreign 101.0 121.1 50.5
Total $568.3 $429.1 $329.9
Page 50 of 65
The provision for income taxes was as follows:
In millions 1996 1995 1994
Current tax expense:
United States $186.6 $101.3 $ 69.8
Foreign 49.5 42.7 34.8
Total current 236.1 144.0 104.6
Deferred tax expense:
United States (16.4) 10.6 30.3
Foreign ( 9.4) 4.2 (16.1)
Total deferred (25.8) 14.8 14.2
Total provision for
income taxes $210.3 $158.8 $118.8
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, as a result of the following
differences:
Percent of pretax income
1996 1995 1994
Statutory U.S. rates 35.0% 35.0% 35.0%
Increase (decrease) in rates
resulting from:
Foreign operations .8 1.0 .3
Earnings/losses of equity
companies (.8) (1.8) (.9)
State and local income taxes,
net of U.S. tax 1.5 1.3 1.6
Other .5 1.5 --
Effective tax rates 37.0% 37.0% 36.0%
Page 51 of 65
A summary of the deferred tax accounts at December 31, follows:
In millions 1996 1995 1994
Current deferred assets and (liabilities):
Differences between book and tax bases
of inventories and receivables $ 37.9 $ 30.8 $ 36.5
Differences between book and tax
expense for other employee related
benefits and allowances 39.3 35.3 33.9
Provisions for restructure of
operations and plant closings
not yet deductible for tax purposes 11.1 9.4 6.4
Other reserves and valuation
allowances in excess of tax deductions 61.6 53.1 32.5
Other differences between tax and
financial statement values 12.5 (10.1) 9.9
Gross current deferred net tax assets 162.4 118.5 119.2
Page 52 of 65
In millions 1996 1995 1994
Noncurrent deferred tax assets and
(liabilities):
Tax items associated with equity
companies 10.7 11.1 13.0
Postretirement and postemployment
benefits other than pensions in
excess of tax deductions 246.7 252.5 159.9
Other reserves in excess of tax expense 80.5 65.0 36.3
Tax depreciation in excess of book
depreciation (60.2) (85.5) (46.0)
Pension contributions in excess of
book expense (52.0) (51.2) (47.5)
Taxes provided for unrepatriated
foreign earnings (28.5) (28.5) (20.1)
Gross noncurrent deferred net tax assets 197.2 163.4 95.6
Less: deferred tax valuation allowances (34.6) (28.6) (21.2)
Total net deferred tax assets $325.0 $253.3 $193.6
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.
Page 53 of 65
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, 1996, 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 served the underground coal-mining
industry.
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
Page 54 of 65
process, marine, agricultural, electric utility and general
manufacturing industries.
Process Systems(2) - consisted of pulp and paper processing
equipment, pelleting equipment, filters, aerators and dewatering
systems. This equipment was used in the pulp and paper, food and
agricultural, and minerals-processing industries.
Clark-Hurth(3) - manufactured 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(4) - major products include locks, steel
doors, 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)
The Process Systems Group was sold during 1996.
(3)
Clark-Hurth was sold in February 1997.
(4)
Prior to January 1, 1996, the Door Hardware Group.
<TABLE>
Operations by Business Segments Page 55 of 65
Dollar amounts in millions
For the years ended % of % of % of
December 31 1996 total 1995 total 1994 total
Standard Machinery
<S> <C> <C> <C> <C> <C> <C>
Sales $2,913.1 43% $2,270.6 40% $1,445.7 32%
Operating income 295.5 41% 222.6 41% 122.4 30%
Operating income as % of sales 10.1% 9.8% 8.5%
Identifiable assets 2,560.2 2,528.0 1,099.6
Depreciation and amortization 81.7 62.7 31.5
Capital expenditures 59.9 56.7 30.9
Engineered Equipment
Sales 1,307.7 20% 1,216.2 21% 926.4 21%
Operating income 108.5 15% 49.5 9% 35.3 8%
Operating income as % of sales 8.3% 4.1% 3.8%
Identifiable assets 904.0 1,061.8 634.5
Depreciation and amortization 44.5 40.0 28.8
Capital expenditures 36.7 42.3 30.3
Bearings, Locks and Tools
Sales 2,482.1 37% 2,242.2 39% 2,135.4 47%
Operating income 323.3 44% 269.1 50% 256.6 62%
Operating income as % of sales 13.0% 12.0% 12.0%
Identifiable assets 1,391.0 1,208.1 1,185.1
Depreciation and amortization 74.0 75.0 70.9
Capital expenditures 97.2 107.9 97.0
Total
Sales 6,702.9 100% 5,729.0 100% 4,507.5 100%
Operating income 727.3 100% 541.2 100% 414.3 100%
Operating income as % of sales 10.9% 9.4% 9.2%
Identifiable assets 4,855.2 4,797.9 2,919.2
Depreciation and amortization 200.2 177.7 131.2
Capital expenditures 193.8 206.9 158.2
General corporate expenses
charged to operating income (43.8) (44.2) (37.3)
Operating income 683.5 497.0 377.0
Page 56 of 65
Operations by Business Segments
(continued)
Dollar amounts in millions
For the years ended % of % of % of
December 31 1996 total 1995 total 1994 total
Unallocated
Interest expense (119.9) (86.6) (43.8)
Other income (expense), net (1.0) 9.4 (14.7)
Dresser-Rand income 23.0 22.0 24.6
IDP minority interest (17.3) (12.7) (13.2)
Earnings before income taxes
and effect of accounting
changes 568.3 429.1 329.9
Corporate assets (a) 766.4 765.4 677.7
Total assets $5,621.6 $5,563.3 $3,596.9
(a) 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>
<TABLE>
Page 57 of 65
Operations by Geographic Area
In millions
United Other Adjustments/
For the year 1996 States Europe International Eliminations Consolidated
<S> <C> <C> <C> <C> <C>
Sales to customers $4,234.5 $1,939.5 $528.9 $ -- $6,702.9
Transfers between geographic
areas 689.0 49.8 43.5 (782.3) --
Total sales and transfers $4,923.5 1,989.3 572.4 (782.3) $6,702.9
Operating income from
operations $ 578.0 92.9 55.1 1.3 $ 727.3
General corporate expenses
charged to operating income (43.8)
Operating income $ 683.5
Identifiable assets at
December 31, 1996 $3,262.1 1,286.6 323.8 (17.3) $4,855.2
Corporate assets 766.4
Total assets at
December 31, 1996 $5,621.6
For the year 1995
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
Page 58 of 65
Operations by Geographic Area (Continued)
United Other Adjustments/
For the year 1994 States Europe International Eliminations Consolidated
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
International sales of U.S. manufactured products in millions were $1,191.9 in
1996, $1,028.9 in 1995 and $743.3 in 1994.
</TABLE>
Page 59 of 65
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.
The components of the company's pension cost for the years ended
December 31, include the following:
In millions 1996 1995 1994
Benefits earned during the
year $ 38.7 $ 32.7 $ 31.7
Interest cost on projected
benefit obligation 113.5 99.7 79.1
Actual return on plan assets (193.8) (261.2) 6.3
Net amortization and deferral 65.9 157.7 (99.6)
Net pension cost $ 24.3 $ 28.9 $ 17.5
<TABLE>
Page 60 of 65
The status of employee pension benefit plans at December 31, 1996 and 1995,
was as follows:
1996 1995
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 $(1,194.1) $(332.8) $(1,101.2) $(310.3)
Nonvested employees (18.1) (14.0) (23.5) (13.8)
Accumulated benefit obligation (1,212.2) (346.8) (1,124.7) (324.1)
Additional amount related to
projected salary increases (36.1) (38.6) (49.9) (26.4)
Total projected benefit obligation (1,248.3) (385.4) (1,174.6) (350.5)
Funded assets at fair value 1,456.6 232.8 1,331.7 207.5
Assets in excess of (less than)
projected benefit obligation 208.3 (152.6) 157.1 (143.0)
Unamortized net (asset) liability
existing at date of adoption (2.5) 17.2 (2.5) 19.0
Unrecognized prior service cost 35.6 12.8 18.6 11.5
Unrecognized net (gain) loss (77.8) 23.9 (23.2) (3.4)
Adjustment required to recognize
minimum liability -- (14.6) -- (16.4)
Prepaid (accrued) pension cost $ 163.6 $(113.3) $ 150.0 $(132.3)
</TABLE>
Page 61 of 65
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, 1996 and 1995, was determined using an assumed
discount rate of 7.25%, an assumed rate of increase in future
compensation levels of 4.75%, and an expected long-term rate of
return on assets of 9.0%. 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 6.0% in 1996, and 8.5%, 9.0% and 6.5% in
1995, respectively.
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 $27.4 million, $24.9 million
and $21.7 million in 1996, 1995 and 1994, respectively.
The company's costs relating to foreign defined contribution
plans, insured plans and other foreign benefit plans were
$8.2 million, $4.8 million and $4.3 million in 1996, 1995 and
1994, 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 1996 a noncurrent liability of $14.6 million,
and a noncurrent liability of $16.2 million and a current
liability of $0.2 million in 1995. 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. The company funds the benefit costs
principally on a pay-as-you-go basis.
Page 62 of 65
Summary information on the company's plans at December 31, was
as follows:
In millions 1996 1995
Financial status of plans:
Accumulated postretirement benefits
obligation (APBO):
Retirees $(436.4) $(462.9)
Active employees (151.9) (150.0)
(588.3) (612.9)
Plan assets at fair value -- --
Unfunded accumulated benefits
obligation in excess of plan assets (588.3) (612.9)
Unrecognized net gain (42.3) (9.9)
Unrecognized prior service benefits (76.9) (84.8)
Accrued postretirement benefits cost $(707.5) $(707.6)
The components of net periodic postretirement benefits cost for
the years ended December 31, were as follows:
In millions 1996 1995 1994
Service cost, benefits attributed to
employee service during the year $ 6.4 $ 5.2 $ 8.5
Interest cost on accumulated
postretirement benefit obligation 40.6 37.6 26.9
Net amortization and deferral (5.7) (5.6) (5.2)
Net periodic postretirement benefits cost $41.3 $37.2 $30.2
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 rate used
in determining the APBO was 7.25% at December 31, 1996 and 1995.
The assumed health care cost trend rates used in measuring the
accumulated postretirement benefits obligation were 9.35% in 1996
and 10.35% in 1995, respectively, declining each year to an
ultimate rate by 2003 of 4.75% in 1996 and 1995.
Increasing the health care cost trend rate by 1.0% as of
December 31, 1996, would increase the APBO by 8%. The effect of
this change on the sum of the service cost and interest cost
components of net periodic postretirement benefits cost for 1996
would be an increase of 7%. In 1993, the company made several
modifications to the cost sharing provisions of the
postretirement plans.
Page 63 of 65
NOTE 18 - SUBSEQUENT EVENT:
On January 27, 1997, the company announced an offer to acquire
Newman Tonks Group PLC (Newman Tonks). The offer values the
issued shares of Newman Tonks at approximately $376 million (230
million pounds sterling). Newman Tonks, whose board of directors
has recommended acceptance of the company's offer, is a leading
manufacturer, specifier and supplier of a wide range of branded
architectural products for use in the building industry.
Page 64 of 65
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/ Gerard V. Geraghty
Gerard V. Geraghty
Vice President and Comptroller
Page 65 of 65
Report of Independent Accountants
Price Waterhouse LLP
4 Headquarters Plaza North
Morristown, NJ 07962
February 4, 1997
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, 1996 and 1995, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, 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.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
EXHIBIT 21
Page 1 of 4
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
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 Foreign Sales Corporation Barbados
Clark-Hurth Components Marketing Company Delaware
Ingersoll-Rand Italiana S.p.A. Italy
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
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 China Investment Company Limited China
Torrington-Wuxi Bearings Company Limited China
(78% owned by the company)
Ingersoll-Rand International, Inc. Delaware
Ingersoll-Rand International Sales Inc. Delaware
Ingersoll-Rand International Holding Corporation New Jersey
Ingersoll-Rand S.A. Switzerland
Page 2 of 4
Ingersoll-Rand Worldwide, Inc. Delaware
NT Acquisition Limited England
Northern Research & Engineering Company Massachusetts
Schlage Lock Company California
Schlage (N.Z.) Limited New Zealand
Von Duprin, Inc. Indiana
Schlage de Mexico S.A. de C.V. Mexico
SEW Holding Corporation Colorado
Woodcliff Insurance, Ltd. Bermuda
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
Etablissements Montabert S.A. France
S.A. Charles Maire France
Torrington France, S.A.R.L. France
Ingersoll-Rand Asia Pacific, Inc. Delaware
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
3324745 Canada, Inc. Canada
Torrington Beteiligungs GmbH Germany
Torrington GmbH Germany
Torrington Nadellager GmbH Germany
Ingersoll-Rand GesmbH (Austria) Austria
Ingersoll-Rand Sales Company Limited Delaware
Ingersoll-Rand European Sales Ltd. England
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
Page 3 of 4
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
Grundstucksverwaltungs GmbH Germany
Ingersoll-Rand Europe France
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 S.A. de C.V. Mexico
Wadco Tools Limited (74% owned by the company) India
SUBSIDIARIES OF INGERSOLL-DRESSER PUMP COMPANY
Ingersoll-Dresser Pumps de Argentina, S.A. Argentina
Ingersoll-Dresser Pumps (Australia) Pty. Limited Australia
Ingersoll-Dresser Pumps GmbH Austria
Ingersoll-Dresser Pumps do Brazil
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 Pump GmbH Germany
Pleuger Worthington GmbH Germany
Deutsche 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
Page 4 of 4
Ingersoll-Dresser Pumps (UK) Limited England
Ingersoll-Dresser Pumps Newark Limited England
IDP Alternate Energy Company Delaware
Pump Investments, Inc. Delaware
Energy Hydro Inc. Delaware
Compania Ingersoll-Dresser Pump, S.A. Spain
Ingersoll-Dresser Pumps (Thailand)Ltd. Thailand
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE DECEMBER 31, 1996 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-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 184
<SECURITIES> 8
<RECEIVABLES> 1,101
<ALLOWANCES> 34
<INVENTORY> 775
<CURRENT-ASSETS> 2,536
<PP&E> 2,104
<DEPRECIATION> 958
<TOTAL-ASSETS> 5,622
<CURRENT-LIABILITIES> 1,290
<BONDS> 1,164
<COMMON> 221
0
0
<OTHER-SE> 1,870
<TOTAL-LIABILITY-AND-EQUITY> 5,622
<SALES> 6,703
<TOTAL-REVENUES> 6,703
<CGS> 5,030
<TOTAL-COSTS> 5,030
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 568
<INCOME-TAX> 210
<INCOME-CONTINUING> 358
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 358
<EPS-PRIMARY> 3.33
<EPS-DILUTED> 3.31
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