UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
Date of Report (Date of earliest event reported) October 31, 1997
INGERSOLL-RAND COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 1-985 13-5156640
(State of incorporation) (Commission (I.R.S. Employer
File Number) Identification
No.)
Woodcliff Lake, New Jersey 07675
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 573-0123
INGERSOLL-RAND COMPANY
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 31, 1997, Ingersoll-Rand Company (the
company), purchased all of the outstanding shares of
capital stock of Thermo King Corporation (Thermo King)
together with other equity interests and assets related
to Thermo King, from Westinghouse Electric Corporation,
for an aggregate purchase price of approximately $2.56
billion. Thermo King designs, manufactures and
distributes transport temperature control systems and
service parts for a variety of mobile applications,
including trailers, truck bodies, sea-going containers,
buses and light rail cars.
Thermo King is headquartered in Minneapolis, Minnesota
and has six manufacturing/assembly facilities in North
America, and international facilities located in Ireland,
Brazil, Germany, the Czech Republic, Denmark and, through
majority-owned joint ventures, in Spain and China.
Thermo King employs more than 4,700 people and
distributes its products through a world-wide network of
more than 850 dealers.
The initial funds used to consummate the acquisition
were obtained from the issuance of commercial paper and
the use of approximately $100 million of available cash.
Over the next few months, the company expects to reduce
the outstanding commercial paper with the proceeds from
the issuance of approximately $1.6 billion of medium-term
debt (with maturities ranging from three to ten years)
and $600 million of company obligated mandatorily
redeemable preference securities of a subsidiary holding
solely debentures of the company (an equity-linked
security).
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements and pro forma
information are hereby filed as part of this report:
1.) Audited Combined Balance Sheets of Thermo King at
December 31, 1996 and 1995 and the audited Combined
Statements of Income and Cash Flows for the years ended
December 31, 1996, 1995 and 1994.
2.) An introduction to the pro forma financial statements
is attached.
3.) A pro forma balance sheet at December 31, 1996, which
combines the balance sheet of the company and the balance
sheet of Thermo King, along with a description of all pro
forma adjustments.
4.) A pro forma income statement which combines the results
of the company and the results of Thermo King, for the
year ended December 31, 1996, along with a description of
all pro forma adjustments.
5.) A pro forma balance sheet at June 30, 1997, which
combines the balance sheet of the company and the balance
sheet of Thermo King, along with a description of all pro
forma adjustments.
6.) A pro forma income statement which combines the results
of the company and the results of Thermo King, for the
six months ended June 30, 1997, along with a description
of all pro forma adjustments.
7.) Pro forma computations of ratios of earnings to fixed
charges for the year ended December 31, 1996 and for the
six months ended June 30, 1997.
EXHIBITS
See attached Exhibit Index.
THERMO KING
(a Unit of Westinghouse Electric Corporation)
Financial Statements
December 31, 1996, 1995, and 1994
Independent Auditors' Report
To the Board of Directors of
Westinghouse Electric Corporation:
We have audited the accompanying combined balance sheets of Thermo
King (a unit of Westinghouse Electric Corporation) as of December
31, 1996 and 1995, and the related combined statements of income
and cash flows for each of the years in the three-year period ended
December 31, 1996. These combined financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these combined financial statements based
on our audits. We did not audit the financial statements of certain
combined entities, which statements reflect total assets
constituting 57% in 1995 and total revenues constituting 59% and
54% in 1995 and 1994, respectively, of the related combined totals.
Those statements were audited by other auditors whose reports have
been furnished to us, and our opinion, insofar as it relates to the
amounts included for these entities, is based solely on the reports
of other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards 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. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentations. We believe that our audits and
the reports of the other auditors provide a reasonable basis for
our opinion.
In our opinion, based on our audits and the reports of other
auditors, the combined financial statements referred to above
present fairly, in all material respects, the financial position of
Thermo King as of December 31, 1996 and 1995, and the results of
its operations and cash flows for each of the years in the three-
year period ended December 31, 1996, in conformity with generally
accepted accounting principles.
Minneapolis, Minnesota
January 29, 1997 /S/ KPMG Peat Marwick LLP
THERMO KING
Combined Statements of Income
Years ended December 31, 1996, 1995, and 1994
(in thousands)
1996 1995 1994
Revenues $995,536 1,039,425 851,275
Cost of goods sold (note 3) (705,542) (769,462) (635,182)
Restructuring (note 14) (5,587) 0 0
Marketing, administrative,
and general
expenses (note 3) (102,066) (90,135) (75,753)
Operating profit 182,341 179,828 140,340
Other expenses, net (920) (2,018) (975)
Interest expense (1,343) (2,335) (1,822)
Income before income taxes
and minority interest in
income of consolidated
subsidiaries 180,078 175,475 137,543
Income tax expense (note 5) (37,419) (35,589) (24,227)
Minority interest in (income)
loss of consolidated
subsidiaries (1,829) (921) 88
Net income $140,830 138,965 113,404
The notes to the financial statements are an integral part of these
financial statements.
THERMO KING
Combined Balance Sheets
December 31, 1996 and 1995
(in thousands)
Assets 1996 1995
Cash and cash equivalents(note 2) $ 3,297 6,001
Customer receivables, net of
allowances of $1,440 in 1996
and $1,244 in 1995 134,274 132,598
Inventories (note 6) 118,177 126,821
Deferred income taxes (note 5) 7,556 6,142
Prepaid and other current assets 14,297 7,609
277,601 279,171
Plant and equipment, net (note 7) 97,867 88,056
Intangibles and other
noncurrent assets (note 8) 32,253 27,516
Total assets $407,721 394,743
Liabilities and Invested Equity
Accounts payable 70,558 68,538
Short-term debt (note 9) 6,458 12,056
Current maturities of long-term debt 226 391
Progress payments from customers 2,599 3,398
Other current liabilities (note 10) 89,390 87,845
Total current liabilities 169,231 172,228
Long-term debt 1,937 195
Employee benefit
obligations (notes 4 and 10) 53,701 76,718
Other noncurrent liabilities 2,349 2,371
Total liabilities 227,218 251,512
Commitments and contingencies (note 12)
Minority interest in equity
of consolidated subsidiaries 2,983 1,917
Invested equity: (note 11)
Minimum pension liability
adjustment (note 4) (13,736) (30,286)
Cumulative foreign currency
translation adjustments 14,153 5,140
Invested equity 177,103 166,460
Total invested equity 177,520 141,314
Total liabilities and invested equity $407,721 394,743
The notes to the financial statements are an integral part of these
financial statements.
THERMO KING
Combined Statements of Cash Flows
Years ended December 31, 1996, 1995, and 1994
(in thousands)
1996 1995 1994
Cash flows from operating activities:
Net income $140,830 138,965 113,404
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 13,251 13,190 12,813
Noncash restructuring charges 1,331 0 0
Changes in assets and liabilities,
net of effects of acquisitions
of businesses:
Customer receivables 4,457 (8,875) (19,875)
Inventories 22,131 (13,049) (28,366)
Accounts payable (3,207) 9,675 20,326
Product warranty (3,318) 8,028 14,455
Pension liability 1,644 (2,790) 2,804
Deferred income taxes (1,057) 4,861 (4,040)
Other assets and liabilities (3,938) 10,723 865
Cash provided by operating
activities 172,124 160,728 112,386
Cash flows from investing activities:
Business acquisitions (15,115) 0 0
Capital expenditures (19,835) (22,585) (18,686)
Cash used by investing
activities (34,950) (22,585) (18,686)
Cash flows from financing activities:
Net (reduction) increase in
short-term debt (5,598) (1,041) 3,538
Repayments of long-term debt (4,093) (369) (1,005)
Disbursements to parent company, net
of direct charges and allocations (130,187) (136,371) (90,839)
Cash used by financing
activities (139,878) (137,781) (88,306)
(Decrease) increase in cash
and cash equivalents (2,704) 362 5,394
Cash and cash equivalents at
beginning of year 6,001 5,639 245
Cash and cash equivalents at
end of year $ 3,297 6,001 5,639
Supplemental disclosure of cash flow information:
Interest paid $ 1,275 2,454 1,753
The notes to the financial statements are an integral part of these financial
statements.
THERMO KING
Notes to the Financial Statements
December 31, 1996, 1995, and 1994
(1) Description of Business
Thermo King (the Company), a unit of Westinghouse Electric
Corporation (Westinghouse), designs, manufactures, and
distributes a broad line of transport temperature control
equipment, including units and associated service parts for
trucks, trailers, seagoing containers, buses and rail cars.
The Company serves its customers through 14 manufacturing
operations and a network of approximately 400 full sales and
service dealers throughout the world, as well as more than 400
authorized service locations. International manufacturing
facilities are located in Ireland, Brazil, Germany, the Czech
Republic, Denmark and, through majority-owned joint ventures,
in Spain and the People's Republic of China. In 1996,
approximately 46% of the Company's revenue was generated from
sales in North America and approximately 54% internationally
(including exports).
(2) Summary Of Significant Accounting Policies
Basis of Presentation
The combined financial statements of the Company include the
accounts of Thermo King Corporation (an indirect wholly owned
subsidiary of Westinghouse) and certain other Westinghouse
affiliates. During the fourth quarter of 1996, the Company
acquired Sabroe Reefer Cool, a Danish manufacturer of
container refrigeration units for $11 million and the
assumption of debt, and Thermal, a German manufacturer of air
conditioning units for buses for $4 million. Both of these
acquisitions were accounted for under the purchase method of
accounting and the results of their operations have been
included in the Company's results of operations since their
acquisition.
Unless otherwise indicated, all dollar amounts in these
financial statements are presented in thousands. All material
intercompany accounts and transactions have been eliminated in
combination.
Revenue Recognition
Sales are recognized primarily as products are shipped and
services are rendered.
Amortization of Intangible Assets
Goodwill and other acquired intangible assets are amortized
using the straight-line method over their estimated lives but
not in excess of 40 years for assets acquired prior to January
1, 1994, and not in excess of 15 years for assets acquired
after December 31, 1993.
Income Taxes
Historically, the results of the Company's domestic operations
have been included in the consolidated United States income
tax return of Westinghouse. The results of the Company's
foreign operations have been reported in their respective
taxing jurisdiction along with the operations of other
Westinghouse affiliates. The income tax-related information in
these financial statements is presented as if the Company had
not been eligible to be included in the consolidated tax
returns of Westinghouse or other affiliates (i.e. the Company
on a stand-alone basis). The recognition and measurement of
income tax expense and deferred income taxes requires certain
assumptions, allocations and significant estimates, which
management believes are reasonable to measure the tax
consequences as if the Company were a stand-alone taxpayer.
The Company's income tax expense is determined in accordance
with the asset and liability method of accounting for income
taxes.
For purposes of these financial statements, any current income
tax liabilities are considered to have been paid by
Westinghouse and are recorded through the invested equity
account with Westinghouse.
Cash and Cash Equivalents
The Company considers all investment securities with a
maturity of three months or less when acquired to be cash
equivalents. All cash and temporary investments are placed
with high credit quality financial institutions, and the
amount of credit exposure to any one financial institution is
limited.
Inventories
Inventories are stated at the lower of cost, which
approximates actual cost on a first-in, first-out (FIFO)
basis, or market, measured in the aggregate. The elements of
cost included in inventories are direct labor, direct
material, and certain overheads including factory
depreciation.
Plant and Equipment
Plant and equipment assets are recorded at cost and
depreciated over their estimated useful lives. Depreciation is
generally computed on the straight-line method based on useful
lives of 27.5 to 60 years for buildings, 20 years for land
improvements, 3 to 10 years for office equipment, and 3 to 12
years for machinery and transportation equipment. Leasehold
improvements are amortized over the terms of the respective
leases. Expenditures for additions and improvements are
capitalized, and costs for repairs and maintenance are charged
to operations as incurred.
Foreign Exchange
A substantial portion of the Company's international sales are
denominated in foreign currencies (primarily those of Western
Europe). In order to manage foreign currency risks, the
Company evaluates its procurement opportunities in local
currency and enters into average rate basket options to cover
the net exposure on anticipated cash flows. Realized and
unrealized gains and losses on these contracts are included in
the determination of net income. The notional value of these
contracts at December 31, 1996, was $22 million. No contracts
existed at December 31, 1995.
As discussed in note 12, the Company purchases a significant
component of its trailer and certain of its truck products
from vendors in Japan. The exchange rate on the purchase
commitments from one of these vendors is set at the time the
Company enters into the purchase commitment.
Assets and liabilities of foreign operations are translated at
the rate of exchange in effect on the balance sheet date;
revenue and expenses are translated at the average exchange
rates in effect during the year. The resulting translation
adjustments are reflected in the cumulative foreign currency
translation adjustments in invested equity. Financial results
of foreign operations in countries with highly inflationary
economies are translated using a combination of current and
historical exchange rates and any translation adjustments are
included in earnings along with transaction gains and losses
for the period.
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates. On an ongoing basis, management reviews its
estimates, including those related to product warranty,
pensions, and income taxes, based on currently available
information. Changes in facts and circumstances may result in
revised estimates.
Impairment of Long-lived Assets and Long-lived Assets to be
Disposed Of
During the first quarter of 1996, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 121
Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of. The adoption of SFAS 121
did not have a material effect on the results of operations.
Subsequent to the acquisition of an intangible or other long-
lived asset, the Company continually evaluates whether later
events and circumstances indicate the remaining estimated
useful life of that asset may warrant revision or that the
remaining carrying value of such an asset may not be
recoverable. If definitive cash flows are not available for a
specific intangible or other long-lived asset, the Company
evaluates recoverability of the specific business to which the
asset relates. When factors indicate that an intangible or
other long-lived asset should be evaluated for possible
impairment, the Company uses an estimate of the related
asset's undiscounted future cash flows over the remaining life
of that asset in measuring recoverability. If such an analysis
indicates that impairment has in fact occurred, the Company
writes down the book value of the intangible or other long-
lived asset to its fair value.
Disclosure about Fair Value of Financial Instruments
The carrying amount of the Company's financial instruments, consisting
of cash and cash equivalents, short-term and long-term debt, approximate
fair value due to their short maturity and variable interest rate
features. The fair value of foreign exchange contracts is based on
quoted market prices to terminate the contracts. At December 31, 1996
and 1995, the unrealized gain on these contracts was $440 and zero,
respectively.
(3) Related Party Transactions
The Company is charged directly for the cost of certain
services that Westinghouse provides to its business units and
subsidiaries. These services can include information systems
support and certain accounting functions, such as transaction
processing, legal services, environmental affairs and human
resources. Westinghouse centrally develops, negotiates, and
administers the Company's insurance programs. The insurance
includes broad all-risk coverage for real and personal
property and third-party liability coverage, employer's
liability coverage, automobile liability, general product
liability, and other standard liability coverage. Westinghouse
also maintains a program of self-insurance for workers'
compensation in the U.S. Westinghouse charges its business
units for all of the centrally administered insurance programs
based in part on claims history. Specific liabilities for
general and product liability, automobile and workers'
compensation claims are included in the Company's financial
statements.
All of the charges for the corporate services described above
are based on costs which directly relate to the Company or on
a pro rata portion of Westinghouse's total costs for the
services provided, on a basis that management believes is
reasonable. However, management believes it is possible that
the costs of these transactions may differ from those that
would result from transactions among unrelated parties. For
the years ended December 31, 1996, 1995, and 1994, charges for
such services were approximately $14,300, $13,900, and
$13,700, respectively.
Employees of the Company also participate in various
Westinghouse-sponsored employee benefit plans (see note 4).
Westinghouse does not charge its divisions for the carrying
costs related to its investment in such units (invested
equity). Therefore, the Company's results of operations for
each of the periods presented do not include any allocated
interest charges from Westinghouse, and no portion of
Westinghouse's debt is specifically related to the operations
of the Company.
(4) Employee Benefit Plans
Substantially all the Company's employees are covered by
defined benefit pension plans sponsored by the Company and
Westinghouse. Most plan benefits are based on either years of
service and compensation levels at the time of retirement or a
formula based on career earnings. Pension benefits are paid
primarily from trusts funded by Westinghouse and employee
contributions. Westinghouse funds its qualified U.S. pension
plans at amounts equal to or greater than the minimum funding
requirements of the Employee Retirement Income Security Act
(ERISA) of 1974. Substantially all plan assets are invested in
equity and fixed income securities.
Included in the following tables are the net periodic pension
costs and funded status of the plans covering current and
former employees of the Company. For purposes of preparing
these financial statements, estimates were made of the assets
and pension obligations for Company employees who participated
in plans sponsored by Westinghouse. The plan assets have been
allocated on a method that management believes would be in
accordance with applicable ERISA requirements.
Year ended December 31
1996 1995 1994
Service cost $ 3,107 2,996 4,267
Interest cost on
projected benefit
obligation 7,757 8,501 8,339
Amortization of
unrecognized net
obligation 163 175 175
Amortization of
unrecognized prior
service benefit (89) (87) (87)
Amortization of
unrecognized net loss 2,399 1,093 2,365
13,337 12,678 15,059
Return on plan assets:
Actual return on plan
assets (7,431) (11,022) 2,017
Deferred gain (loss) 2,088 5,879 (8,310)
Recognized return on
plan assets (5,343) (5,143) (6,293)
Net periodic pension
cost $ 7,994 7,535 8,766
Significant pension plan assumptions:
1996 1995 1994
Discount rate:
Periodic pension cost 6.75% 8.50% 7.25%
Pension benefit obligation 7.75% 6.75% 8.50%
Compensation increase rate 4.00% 4.00% 4.00%
Long-term rate of return
on plan assets 9.50% 9.75% 9.75%
Based on the requirements of SFAS No. 87, Employers'
Accounting for Pensions, the Company adjusts the discount rate
to reflect current and expected-to-be available interest rates
on high quality fixed income investments at the end of each
year.
The following table sets forth the funded status of the
defined benefit plans and amounts recognized in the Company's
balance sheet at December 31, 1996 and 1995:
At December 31
1996 1995
Actuarial present value of
benefit obligations:
Vested $ (99,408) $ (111,626)
Nonvested (6,535) (8,190)
Accumulated benefit
obligation (105,943) (119,816)
Effect of projected
future compensation
levels (8,990) (14,291)
Projected benefit
obligation for service
rendered to date (114,933) (134,107)
Plan assets at fair value 64,342 54,398
Projected benefit
obligation in excess
of plan assets (50,591) (79,709)
Unrecognized net loss 31,105 61,547
Prior service benefit not
yet recognized in net
periodic pension cost (4,111) (5,162)
Unrecognized net obligation 3,128 4,499
Accrued pension cost (20,469) (18,825)
Minimum pension liability (21,132) (46,593)
Pension liability included
in combined balance sheet $ (41,601) (65,418)
The Company participates in a Westinghouse-sponsored non-
qualified supplemental pension plan that provides additional
benefits to certain executives. For financial reporting
purposes, this plan is treated as a non-funded pension plan.
The unfunded accumulated benefit obligation under this plan
included in the table above at December 31, 1996 and 1995, was
$5,500 and $6,300, respectively.
For financial reporting purposes, a pension plan is considered
unfunded when the fair value of plan assets is less than the
accumulated benefit obligation. When that is the case, a
minimum pension liability is recognized for the sum of the
unfunded amount plus any prepaid pension cost. In recognizing
such a liability, an intangible asset is usually recorded up
to the sum of the prior service cost not yet recognized and
the unrecognized transition obligation. When the liability to
be recognized is greater than the intangible asset limit, a
charge is made to shareholders' equity for the difference, net
of any tax effects.
At December 31, 1996, a minimum pension liability of $21,132
was recognized for the sum of the unfunded amount of $41,601
less the accrued pension cost of $20,469. A charge to invested
equity of $21,132 was reduced to $13,736 due to deferred tax
effects of $7,396. As a result of the year-end 1996
remeasurement, invested equity was increased by $16,550 from
December 31, 1995.
At December 31, 1995, a minimum pension liability of $46,593
was recognized for the sum of the unfunded amount of $65,418
less the accrued pension cost of $18,825. A charge to invested
equity of $46,593 was reduced to $30,286 due to deferred tax
effects of $16,307. As a result of the year-end 1995
remeasurement, invested equity was decreased by $7,371 from
December 31, 1994.
The Company also participates in a Westinghouse-sponsored
postretirement plan that provides defined medical, dental, and
life insurance benefits for eligible retirees and dependents.
Included in the following tables are the net periodic
postretirement benefit costs and funded status of the plans
covering current and former employees of the Company. For
purposes of preparing these financial statements, estimates
were made of the plan obligations of Company employees who
participated in the Westinghouse-sponsored plan.
The components of net periodic postretirement benefit cost
follow:
Year ended
December 31
1996 1995 1994
Service cost $ 600 800 1,300
Interest cost on accumulated
postretirement benefit
obligation 1,800 2,100 1,900
Amortization of unrecognized
net (gain) loss 0 (300) 100
Net periodic postretirement
benefit cost $ 2,400 2,600 3,300
The assumptions used to develop the net periodic
postretirement benefit cost and the present value of benefit
obligations are shown below:
At December 31
1996 1995 1994
Discount rate 7.75% 6.75% 8.50%
Health care cost trend rates 10.00%* 10.50%* 11.00%*
Compensation increase rate 4.00% 4.00% 4.00%
Long-term rate of return
on plan assets 7.00% 7.00% 7.00%
*At December 31, 1996, the rate was assumed to decrease
ratably to 6% in 2004, decrease to 5.75% in 2005 and
remain at that level thereafter. At December 31, 1995,
the rate was assumed to decrease ratably to 5% in 2006,
decrease to 4.75% in 2007 and remain at that level
thereafter. At December 31, 1994, the rate was assumed
to decrease ratably to 6.5% in 2003, and remain at that
level thereafter.
Net periodic postretirement benefit cost is determined using
the assumptions as of the beginning of the year. The funded
status is determined using the assumptions as of the end of
the year.
The funded status and amounts recognized in the Company's
balance sheet at December 31, 1996 and 1995, were as follows:
At December 31
1996 1995
Accumulated postretirement
benefit obligation:
Retirees $ (10,600) (12,100)
Fully eligible, active plan
participants (1,500) (1,700)
Other active plan participants (13,900) (15,800)
Total accumulated postretirement
benefit obligation (26,000) (29,600)
Unrecognized net loss 3,900 9,000
Unrecognized prior service
benefit (2,300) (2,900)
Plan assets at fair value 300 200
Accrued postretirement
benefit cost $ (24,100) (23,300)
The funded assets consist primarily of interest-bearing
securities. The effect of a 1% annual increase in the assumed
health care cost trend rates would increase the accumulated
postretirement benefit obligation by approximately $572 and
would increase net periodic postretirement benefit cost by
approximately $79.
Certain of the Company's non-U.S. subsidiaries have private
and government-sponsored plans for postretirement benefits.
The cost for these plans is not significant to the Company.
The Company provides certain postemployment benefits to former
or inactive employees and their dependents during the time
period following employment but before retirement. At December
31, 1996 and 1995, the Company's liability for postemployment
benefits totaled $1,000.
(5) Income Taxes
Thermo King is included in the consolidated federal income tax
return of Westinghouse Electric Corporation. Income taxes are
provided as if the Company had filed its return on a separate
company basis. Valuation allowances related to deferred tax
assets are evaluated based on management's assessment of the
recoverability of the deferred tax assets on a separate
company basis. It is the opinion of management that no
valuation allowance is necessary at December 31, 1996 and
1995, related to the deferred tax assets of the Company.
The components of income tax expense (benefit) at December 31,
1996, 1995 and 1994 are as follows:
Year ended December 31
1996 1995 1994
Current:
Federal $ 27,081 21,288 20,785
State 3,559 2,770 2,422
Foreign 7,836 6,670 5,060
Total current income
tax expense 38,476 30,728 28,267
Deferred:
Federal (932) 4,284 (3,561)
State (125) 577 (479)
Total deferred income
tax expense (benefit) (1,057) 4,861 (4,040)
Total income tax
expense $ 37,419 35,589 24,227
The foreign portion of income before taxes was $65,308,
$58,997, and $35,990, respectively, for 1996, 1995, and 1994.
This income resulted from profits and losses generated from
foreign operations. At December 31, 1996, cumulative
undistributed earnings from foreign subsidiaries were $195
million. These undistributed foreign earnings are deemed to be
permanently reinvested and, therefore, no deferred taxes have
been recognized. It is not practical to estimate the amount of
taxes that may become payable if such earnings were remitted.
A substantial portion of the foreign income before taxes is
generated through manufacturing operations in Ireland. Under
Irish tax laws, the Company receives permanent tax relief
afforded to Irish manufacturers.
Income before taxes includes income of certain manufacturing
operations in Puerto Rico, which are eligible for tax credits
against U.S. federal income tax and partially exempt from
Puerto Rican income tax under grants of industrial tax
exemptions. These tax exemptions provided net tax benefits of
$13,161 in 1996, $14,588 in 1995, and $14,361 in 1994. The
exemptions expire at various dates from 2002 through 2007.
Deferred income taxes result from U.S. temporary differences
in the financial bases and tax bases of assets and
liabilities. The types of differences that give rise to
significant portions of deferred income tax liabilities are
shown in the following table:
At December 31
1996 1995
Deferred tax assets:
Provisions for expenses and
losses $ 8,391 6,980
Employee benefit obligations 16,915 25,523
Total deferred tax assets 25,306 32,503
Deferred tax liabilities:
Plant and equipment (4,577) (3,920)
Leasing activities (104) (104)
Other (730) (730)
Total deferred tax
liabilities (5,411) (4,754)
Deferred income taxes $ 19,895 27,749
The following table reconciles the expected income tax
expense, based upon a 35% statutory income tax rate, to the
actual income tax expenses for each year:
Year ended December 31
1996 1995 1994
Federal income tax expense at
statutory rate 35.0% 35.0% 35.0%
Increase (decrease) in tax
resulting from:
State income tax, net of
federal effect 1.2 1.2 0.9
Lower tax on Puerto Rican
operations (7.3) (8.3) (10.4)
Foreign rate differential (8.3) (8.0) (5.5)
Other differences, net 0.2 0.4 (2.4)
Income tax expense 20.8% 20.3% 17.6%
(6) Inventories
At December 31
1996 1995
Raw materials $ 3,175 4,752
Work in process 63,233 70,049
Finished goods 50,186 50,537
116,594 125,338
Recoverable engineering
and other 1,583 1,483
Inventories $ 118,177 126,821
(7) Plant and Equipment
At December 31
1996 1995
Land and buildings $ 41,018 38,489
Machinery and equipment 153,638 132,952
Construction in progress 14,007 19,018
Plant and equipment, at cost 208,663 190,459
Accumulated depreciation (110,796) (102,403)
Plant and equipment, net $ 97,867 88,056
For the years ended December 31, 1996, 1995, and 1994,
depreciation expense totaled $12,175, $12,064, and $11,258,
respectively.
(8) Intangible and Other Noncurrent Assets
At December 31
1996 1995
Goodwill $ 17,208 2,726
Deferred tax assets 12,339 21,607
Other intangible assets 2,413 2,741
Other 293 442
Intangible and other
noncurrent assets $ 32,253 27,516
Goodwill and other acquired intangible assets are shown net of
accumulated amortization of $4,732 at December 31, 1996, and
$3,656 at December 31, 1995. The increase in goodwill in 1996
is primarily attributable to the acquisitions of Sabroe Reefer
Cool and Thermal (see note 2).
(9) Short-term Debt
At December 31, 1996 and 1995, the Company had outstanding
$6,458 and $12,056 in foreign bank borrowings, generally at
interest rates ranging from 5% to 11.5%.
(10) Other Current Liabilities
At December 31
1996 1995
Accrued employee compensation $ 14,352 14,892
Accrued product warranty 26,249 29,567
Accrued for employee benefit
obligations 13,000 13,000
Accrued expenses 27,874 28,432
Accrued restructuring costs 2,701 0
Other 5,214 1,954
Other current liabilities $ 89,390 87,845
(11) Changes in Invested Equity
1996 1995 1994
Balance at beginning
of year $ 141,314 144,177 110,101
Net income 140,830 138,965 113,404
Minimum pension lia-
bility adjustment 16,550 (7,371) 4,992
Cumulative translation
adjustment 9,013 1,914 6,519
Disbursements to
Westinghouse, net (130,187) (136,371) (90,839)
Balance at end of year $ 177,520 141,314 144,177
(12) Commitments and Contingencies
The Company is involved in various litigation matters in the
ordinary course of business. In the opinion of management, the
ultimate resolution of such matters will not result in
judgments which, in the aggregate, would materially affect the
Company's financial position.
In the ordinary course of business, standby letters of credit
and surety bonds are issued on behalf of the Company. At
December 31, 1996, the Company had $8,533 outstanding under
such obligations. Additionally, the Company's commitments for
the purchase of plant and equipment at December 31, 1996,
totaled $2,276.
The Company sources all of the diesel engines that constitute
a significant component of its trailer and certain of its
truck products from two primary vendors in Japan. The products
in which these engines are used account for the majority of
the Company's sales. While the Company believes that it could
locate alternative sources for these components in the event
that its relationship with these suppliers were disrupted, the
delays and costs associated with such a change would have a
short-term adverse impact on the Company's operations.
Historically, the Company has entered into long-term
agreements with these vendors to attempt to ensure a reliable
source of supply. At December 31, 1996, the Company had under
such agreements commitments to purchase $51,854 through
September 1997.
(13) Leases
The Company has commitments under operating leases for certain
machinery and equipment and facilities used in various
operations. Rental expense in 1996, 1995, and 1994 was $4,606,
$4,190, and $3,961, respectively. These amounts include
immaterial amounts for contingent rentals and sublease income.
Minimum rental payments:
Lease
At December 31, 1996 obligations
1997 $ 3,194
1998 2,470
1999 1,816
2000 1,871
2001 1,817
Subsequent years 1,462
Minimum rental payments $ 12,630
(14) Restructuring
In 1996, the Company recorded a charge to operating profit of
$5,587 relating to the closure of a manufacturing facility in
the United Kingdom and exiting the heavy rail business. The
majority of this charge relates to the costs of separating
employees.
The following is a reconciliation of the restructuring
liability:
Provision for restructuring $ 5,587
Cash expenditures (2,014)
Noncash expenditures (872)
Balance at December 31, 1996 $ 2,701
(15) Segment Information
The Company operates principally in one industry segment that
includes the design, manufacture, and distribution of
transport temperature control equipment. The Company does not
derive more than 10% of its total revenue from any single
customer. The following table presents certain financial
information based on the geographic area where the sale
originated:
At or for the year ended
December 31
1996 1995 1994
Revenues:
United States $ 572,802 659,066 591,625
Europe, Africa, and
Middle East 383,278 340,356 238,213
Asia-Pacific 16,585 12,911 7,381
Latin America 22,871 27,092 14,056
$ 995,536 1,039,425 851,275
Operating profit
(loss):
United States $ 114,750 115,826 102,118
Europe, Africa, and
Middle East 68,720 58,737 35,549
Asia-Pacific 2,450 2,067 958
Latin America (3,579) 3,198 1,715
$ 182,341 179,828 140,340
Identifiable assets at
end of year:
United States $ 224,498 220,590 229,499
Europe, Africa, and
Middle East 150,934 140,661 118,587
Asia-Pacific 15,620 14,527 8,264
Latin America 16,669 18,965 9,985
$ 407,721 394,743 366,335
U.S. export sales:
Canada $ 25,816 23,459 27,179
Europe, Africa, and 5,773 6,013 6,019
Middle East
Asia-Pacific 68,465 84,541 69,108
Latin America 12,653 9,127 11,507
$ 112,707 123,140 113,813
(16) Events (Unaudited) Subsequent to the Date of the Report of
the Independent Auditor
On September 15, 1997, Westinghouse signed a definitive
agreement to sell the Company to Ingersoll-Rand Company for
$2.56 billion in cash and the assumption of approximately $42
million in pension liabilities. The transaction is expected to
close during the fourth quarter of 1997 upon receipt of
regulatory approvals.
INGERSOLL-RAND COMPANY
THERMO KING CORPORATION
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
On October 31, 1997, Ingersoll-Rand Company (the
company), purchased all of the outstanding shares of capital
stock of Thermo King Corporation (Thermo King) together with
other equity interests and assets related to Thermo King, from
Westinghouse Electric Corporation, for an aggregate purchase
price of approximately $2.56 billion. Thermo King designs,
manufactures and distributes transport temperature control
systems and service parts for a variety of mobile applications,
including trailers, truck bodies, sea-going containers, buses
and light rail cars.
The purchase price, of approximately $2.56 billion,
for the common stock of Thermo King has been preliminarily
allocated to tangible and identifiable assets and liabilities of
Thermo King based upon estimates of their respective values.
These allocations will be subsequently adjusted based upon
appraisals, valuations and other studies which will be conducted
over the next several months; such final values may differ
substantially from those shown herein.
The pro forma financial statements should be read in
conjunction with the Company's and Thermo King's historical
financial statements. The pro forma information presented is
for informational purposes only and it is not necessarily
indicative of future earnings or financial position or of what
the earnings and financial position would have been had the
Company's acquisition of Thermo King been consummated at the
beginning of the respective periods or as of the date for which
such pro forma financial information is presented.
<TABLE>
INGERSOLL-RAND COMPANY
PRO FORMA BALANCE SHEET
December 31, 1996
(In millions of dollars)
Pro forma Ingersoll-
<S> <S> <S> <S>
Ingersoll- Thermo Adjustments Rand
Rand King Debit Credit Pro forma
Assets
Current assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 184.1 $ 3.3 $ -- $ 80.9 (1) $ 106.5
Marketable securities 8.0 -- -- -- 8.0
Accounts and notes receivable 1,066.2 134.3 -- -- 1,200.5
Inventories 775.1 118.2 19.0 (2) -- 912.3
Prepaid expenses 74.1 14.3 -- -- 88.4
Assets held for sale 265.7 -- -- -- 265.7
Deferred income taxes 162.4 7.5 -- 1.4 (5) 168.5
2,535.6 277.6 19.0 82.3 2,749.9
Investments and advances:
Dresser-Rand Company 152.6 -- -- -- 152.6
Partially-owned equity companies 223.6 -- -- -- 223.6
376.2 -- -- -- 376.2
Investment in Thermo King -- -- 2,550.8 (1) 2,550.8 (6) --
Property, plant and equipment 2,103.7 208.7 43.0 (2) 110.8 (3) 2,244.6
Less-accumulated depreciation 958.3 110.8 110.8 (3) -- 958.3
1,145.4 97.9 153.8 110.8 1,286.3
Intangible assets, net 1,178.0 19.6 2,373.0 (1+4) -- 3,570.6
Deferred income taxes 162.6 12.3 17.7 (5) -- 192.6
Other assets 223.8 0.3 2.0 (2) -- 226.1
$5,621.6 $407.7 $5,116.3 $2,743.9 $8,401.7
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $1,095.4 $159.9 $ -- $ 2.0 (2) $1,257.3
Loans payable 162.3 6.7 -- 303.0 (1) 472.0
Customers' advance payments 19.1 2.6 -- -- 21.7
Income taxes 13.4 -- -- -- 13.4
1,290.2 169.2 -- 305.0 1,764.4
Long-term debt 1,163.8 1.9 -- 1,600.0 (1) 2,765.7
Postemployment liabilities 814.7 53.7 -- 40.0 (3) 908.4
Other liabilities 134.2 2.3 -- 32.2 (1+2) 168.7
Minority interests 127.9 3.0 -- -- 130.9
Obligated mandatorily redeemable
preferred securities of subsidiary
holding solely debentures of I-R -- -- -- 600.0 (1) 600.0
Shareowners' equity:
Common stock 220.6 -- -- -- 220.6
Capital in excess of par value 143.5 -- 2,400.4 (1+6)2,373.2 (2-5) 116.3
Earnings retained for use in
the business 1,869.6 177.1 177.1 (6) -- 1,869.6
2,233.7 177.1 2,577.5 2,373.2 2,206.5
Less: Unallocated LESOP
shares, at cost 55.6 -- -- -- 55.6
Treasury stock,
at cost 11.5 -- -- -- 11.5
Minimum pension
liability adjustment -- 13.7 -- 13.7 (6) --
Foreign currency
equity adjustment 75.8 (14.2) 14.2 (6) -- 75.8
Shareowners' equity 2,090.8 177.6 2,591.7 2,386.9 2,063.6
$5,621.6 $ 407.7 $2,591.7 $4,964.1 $8,401.7
</TABLE>
INGERSOLL-RAND COMPANY
THERMO KING CORPORATION
NOTES TO PRO FORMA BALANCE SHEET
December 31, 1996
NOTES: GENERAL COMMENT: The pro forma balance sheet at December 31,
1996, reflects the pro forma adjustments required to present
the acquisition of Thermo King, as if the acquisition took
place on December 31, 1996.
(1)Reflects the Company's investment in Thermo King for $2.56
billion plus acquisition costs estimated at $9.9 million, and
the related financing thereof (including financing costs
estimated at $33.1 million) which includes the issuance of
$303.0 million in short-term debt, $1.6 billion of medium-
term debt, $600 million of company obligated mandatorily
redeemable preference securities of a subsidiary holding
solely debentures of the company and approximately $100
million of available cash.
(2)Reflects the adjustments to record inventories, property,
plant and equipment and intangible assets at their estimated
fair market value.
(3)Reflects the adjustments to conform Thermo King's accounting
policies to those of the company.
(4)Reflects the appropriate goodwill adjustment relating to the
acquisition of Thermo King.
(5)Reflects the adjustment to record the tax effects related to
the pro forma adjustments.
(6)Reflects the elimination entry by the company for its investment
in Thermo King.
<TABLE>
INGERSOLL-RAND COMPANY
Pro Forma Statement of Income
For the year ended December 31, 1996
(In millions of dollars except per share amounts)
Pro forma Ingersoll-
Ingersoll- Thermo Adjustments Rand
Rand King Debit Credit Pro forma
<S> <C> <C> <C> <C> <C>
Net sales $6,702.9 $995.5 $ -- $ -- $7,698.4
Cost of goods sold 5,029.9 711.1 83.1(1,2,4,5)-- 5,824.1
Administrative, selling and
service engineering
expenses 989.5 102.1 0.5 (5) -- 1,092.1
Operating income 683.5 182.3 (83.6) -- 782.2
Interest expense (119.9) (1.3) (171.9)(3,7) -- (293.1)
Other income (expense), net 0.6 (1.0) (4.0) (6) -- (4.4)
Dresser-Rand income 23.0 -- -- -- 23.0
Minority interests (18.9) (1.8) -- -- (20.7)
Earnings before income taxes 568.3 178.2 (259.5) -- 487.0
Provision for income taxes 210.3 37.4 -- 91.9 (8) 155.8
Net earnings $ 358.0 $140.8 $(259.5) $91.9 $331.2
Net earnings per common share $2.22 $2.05
Outstanding shares 161,238,547 161,238,547
</TABLE>
INGERSOLL-RAND COMPANY
THERMO KING CORPORATION
NOTES TO PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1996
NOTES: GENERAL COMMENT: The pro forma income statement for the
year 1996, reflects the pro forma income statement
adjustments required to present the estimated combined
results of the company and Thermo King, as if the
acquisition of Thermo King took place on January 1, 1996.
(1) Reflects the write-off of the inventory step-up to fair
value over one turn of the inventory.
(2) Reflects the additional depreciation on the fixed asset
write-up to fair value and the additional amortization of
the patents, etc.
(3) Reflects the amortization of the debt issuance cost
for the Thermo King acquisition.
(4) Reflects the amortization of the goodwill from the Thermo King
acquisition, which is being amortized over its estimated life
of 40 years for book purposes.
(5) Reflects the additional postemployment costs for conforming
Thermo King's plans to the actuarial assumptions used by the company.
(6) Reflects the lost interest income on funds used by the company
for the Thermo acquisition.
(7) Reflects the interest expense incurred by the company for the
Thermo King acquisition. The interest expense was calculated for the
first full year on a pro forma basis as follows:
o for a period of 45 days, interest was calculated
at a rate of 6.25% on an outstanding loan balance of
$2.503 billion,
o for a period of 320 days, interest was
calculated at a rate of 6.5% on a loan balance of
$303 million,
o for a period of 320 days, interest was
calculated at a rate of 6.8% on a loan balance of
$1.6 billion, and
o for a period of 320 days, interest was
calculated at a rate of 6.5% on a balance of $600
million.
(8) The tax benefits related to the pro forma adjustments
included:
o $64.3 million associated with interest expense,
o $15.7 million with the deductible portion of
goodwill,
o $7.2 million associated with the write-off of
the inventory step-up, and
o $4.7 million associated with the remainder of
the pro forma adjustments.
<TABLE>
INGERSOLL-RAND COMPANY
PRO FORMA BALANCE SHEET
June 30, 1997
(In millions of dollars)
Pro forma Ingersoll-
Ingersoll- Thermo Adjustments Rand
Rand King Debit Credit Pro forma
Assets
Current assets:
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents $ 173.4 $ 5.5 $ -- $ 100.0 (1) $ 78.9
Marketable securities 7.3 -- -- -- 7.3
Accounts and notes receivable 1,216.8 154.9 -- -- 1,371.7
Inventories 811.7 120.1 19.0 (2) -- 950.8
Prepaid expenses 132.6 9.1 -- -- 141.7
Assets held for sale 18.9 -- -- -- 18.9
Deferred income taxes 176.7 7.5 -- 1.4 (5) 182.8
2,537.4 297.1 19.0 101.4 2,752.1
Investments and advances:
Dresser-Rand Company 153.0 -- -- -- 153.0
Partially-owned equity companies 212.5 -- -- -- 212.5
365.5 -- -- -- 365.5
Investment in Thermo King -- -- 2,569.9 (1) 2,569.9 (6) --
Property, plant and equipment 2,146.7 212.1 43.0 (2) 114.9 (3) 2,286.9
Less-accumulated depreciation 983.4 114.9 114.9 (3) -- 983.4
1,163.3 97.2 157.9 114.9 1,303.5
Intangible assets, net 1,470.0 17.1 2,373.0 (1+4) -- 3,860.1
Deferred income taxes 146.2 9.4 17.7 (5) -- 173.3
Other assets 221.3 0.3 2.0 (2) -- 223.6
$5,903.7 $421.1 $5,139.5 $2,786.2 $8,678.1
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $1,236.5 $159.1 $ -- $ 2.0 (2) $1,397.6
Loans payable 167.8 8.9 -- 303.0 (1) 479.7
Customers' advance payments 18.2 1.4 -- -- 19.6
Income taxes 13.8 -- -- -- 13.8
1,436.3 169.4 -- 305.0 1,910.7
Long-term debt 1,164.9 1.7 -- 1,600.0 (1) 2,766.6
Postemployment liabilities 825.8 48.5 -- 40.0 (3) 914.3
Other liabilities 116.8 1.8 -- 32.2 (1+2) 150.8
Minority interests 128.1 3.0 -- -- 131.1
Obligated mandatorily redeemable
preferred securities of subsidiary
holding solely debentures of I-R -- -- -- 600.0 (1) 600.0
Shareowners' equity:
Common stock 222.7 -- -- -- 222.7
Capital in excess of par value 181.2 -- 2,400.4 (1+6) 2,373.2 (2-5) 154.0
Earnings retained for use in
the business 2,014.6 196.0 196.0 (6) -- 2,014.6
2,418.5 196.0 2,596.4 2,373.2 2,391.3
Less: Unallocated LESOP
shares, at cost 47.5 -- -- -- 47.5
Treasury stock,
at cost 11.5 -- -- -- 11.5
Pension liability
adjustment -- 7.3 -- 7.3 (6) --
Foreign currency
equity adjustment 127.7 (8.0) 8.0 (6) -- 127.7
Shareowners'equity 2,231.8 196.7 2,604.4 2,380.5 2,204.6
$5,903.7 $ 421.1 $2,604.4 $4,957.7 $8,678.1
</TABLE>
INGERSOLL-RAND COMPANY
THERMO KING CORPORATION
NOTES TO PRO FORMA BALANCE SHEET
June 30, 1997
NOTES: GENERAL COMMENT: The pro forma balance sheet at June 30,
1997, reflects the pro forma adjustments required to present
the acquisition of Thermo King, as if the acquisition took
place on June 30, 1997.
(1)Reflects the Company's investment in Thermo King for $2.56
billion plus acquisition costs estimated at $9.9 million,
and the related financing thereof (including financing costs
estimated at $33.1 million) which included the issuance of
$303.0 million in short-term debt, $1.6 billion of medium-
term debt, $600 million of company obligated mandatorily
redeemable preference securities of a subsidiary holding
solely debentures of the company and approximately $100
million of available cash.
(2)Reflects the adjustments to record inventories, property,
plant and equipment and intangible assets at their estimated
fair market value.
(3)Reflects the adjustments to conform Thermo King's accounting
policies to those of the company.
(4)Reflects the appropriate goodwill adjustment relating to the
acquisition of Thermo King.
(5)Reflects the adjustment to record the tax effects related to the
pro forma adjustments.
(6)Reflects the elimination entry by the company for its investment
in Thermo King.
<TABLE>
INGERSOLL-RAND COMPANY
Pro Forma Statement of Income
For the six months ended June 30, 1997
(In millions of dollars except per share amounts)
Pro forma Ingersoll-
Ingersoll- Thermo Adjustments Rand
Rand King Debit Credit Pro forma
<S> <C> <C> <C> <C> <C>
Net sales $3,476.8 $506.3 $ -- $ -- $3,983.1
Cost of goods sold 2,583.9 355.8 32.1 (1,2,4) -- 2,971.8
Administrative, selling and
service engineering
expenses 516.7 53.7 0.2 (4) -- 570.6
Operating income 376.2 96.8 (32.3) -- 440.7
Interest expense (57.0) (0.5) (85.4) (3,6) -- (142.9)
Other income (expense), net (6.6) 1.2 (2.0) (5) -- (7.4)
Dresser-Rand income 9.5 -- -- -- 9.5
Minority interests (10.6) (1.0) -- -- (11.6)
Earnings before income taxes 311.5 96.5 (119.7) -- 288.3
Provision for income taxes 122.1 19.3 -- 42.1 (7) 99.3
Net earnings $ 189.4 $ 77.2 $(119.7) $42.1 $189.0
Net earnings per share $1.16 $1.16
Outstanding shares 162,718,226 162,718,226
</TABLE>
INGERSOLL-RAND COMPANY
THERMO KING CORPORATION
NOTES TO PRO FORMA INCOME STATEMENT
FOR THE SIX MONTHS ENDED JUNE 30, 1997
NOTES: GENERAL COMMENT: The pro forma income statement for the first
six months of 1997 reflects the pro forma income statement
adjustments required to present the estimated combined results
of the company and Thermo King, as if the acquisition of Thermo
King took place on January 1, 1997.
(1) Reflects the additional depreciation on the fixed asset
write-up to fair value and the additional amortization of
the patents, etc.
(2) Reflects the amortization of the debt issuance cost for
the Thermo King acquisition.
(3) Reflects the amortization of the goodwill from the Thermo
King acquisition, which is being amortized over its
estimated life of 40 years for book purposes.
(4) Reflects the additional postemployment costs for
conforming Thermo King's plans to the actuarial
assumptions used by the company.
(5) Reflects the lost interest income on funds used by the
company for the Thermo King acquisition.
(6) Reflects the interest expense incurred by the company for
the Thermo King acquisition. The interest expense was
calculated for the first six months of 1997 on a pro forma
basis as follows:
o for a period of six months, interest was
calculated at a rate of 6.5% on a loan balance of
$303 million,
o for a period of six months, interest was
calculated at a rate of 6.8% on a loan balance of
$1.6 billion, and
o for a period of six months, interest was
calculated at a rate of 6.5% on a balance of $600
million.
(7) The tax benefits related to the pro forma adjustments
included:
o $32.0 million associated with interest expense,
o $7.8 million associated with the deductible
portion of goodwill, and
o $2.3 million associated with the remainder of
the pro forma adjustments.
<TABLE>
INGERSOLL-RAND COMPANY
PRO FORMA COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Millions)
For the Year Ended For the Six Months
December 31, 1996 Ended June 30, 1997
Historical Pro forma Historical Pro forma
Fixed charges:
<S> <C> <C> <C> <C> <C>
Interest expense........................... $122.4 $293.2 $ 58.2 $142.7
Amortization of debt discount and expense.. 1.5 4.3 0.7 2.1
Rentals (one-third of rentals)............. 22.4 23.9 12.3 13.1
Capitalized interest....................... 4.6 4.6 1.4 1.4
Total fixed charges.......................... $150.9 $326.0 $ 72.6 $159.3
Net earnings................................. $358.0 $331.2 $189.4 $189.0
Add: Minority income (loss) of majority-
owned subsidiaries.................. 18.9 20.7 10.6 11.6
Taxes on income....................... 210.3 155.8 122.1 99.3
Fixed charges......................... 150.9 326.0 72.6 159.3
Less: Capitalized interest.................. 4.6 4.6 1.4 1.4
Undistributed earnings (losses) from
less than 50% owned affiliates...... (23.1) (23.1) 11.5 11.5
Earnings available for fixed charges ........ $756.6 $852.2 $381.8 $446.3
Ratio of earnings to fixed charges .......... 5.01 2.61 5.26 2.80
Undistributed earnings (losses) from less
than 50% owned affiliates:
Equity in earnings (losses)................ $36.4 $ 36.4 $ 14.2 $ 14.2
Less: Amounts distributed............... 59.5 59.5 2.7 2.7
Undistributed earnings (losses) from
less-than 50% owned affiliates........... $(23.1) $(23.1) $ 11.5 $ 11.5
</TABLE>
Note: The pro forma ratios of earnings to fixed charges for the year
ended December 31, 1996 and for the six months ended June 30,
1997, are based on the pro forma income statements filed herewith.
The pro forma ratios presented are for information purposes only
and they are not necessarily indicative of what the ratios would
have been, had the Company's acquisition of Thermo King Corporation
been consummated at the beginning of the respective periods.
INGERSOLL-RAND COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
INGERSOLL-RAND COMPANY
(Registrant)
Date November 3, 1997 /S/ Gerard V. Geraghty
Gerard V. Geraghty
Vice President and Comptroller
(Principal Financial and
Accounting Officer)
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 7)
Description
(10) Stock Purchase Agreement, dated as of September 12, 1997,
between Westinghouse Electric Corporation and the Registrant.
(Incorporated herein by reference from the Registrant's Form 8-K,
dated September 17, 1997.)
(23) (i)Consent of KPMG Peat Marwick LLP
(23) (ii)Consents of Price Waterhouse
Exhibit 23(i)
Page 1 of 1
Independent Auditors' Consent
The Board of Directors
Westinghouse Electric Corporation:
We consent to the incorporation by reference in the
registration statements on Form S-3 (Nos. 33-60249, 333-34029,
333-37019 and 333-38367) of Ingersoll-Rand Company of our
report dated January 29, 1997, with respect to the combined
balance sheets of Thermo King (a unit of Westinghouse Electric
Corporation) as of December 31, 1996 and 1995 and the related
combined statements of income and cash flows for each of the
years in the three-year period ended December 31, 1996, which
report appears in the Form 8-K of Ingersoll-Rand Company dated
November 3, 1997.
Minneapolis, Minnesota
October 31, 1997 /S/ KPMG Peat Marwick LLP
Exhibit 23(ii)
Page 1 of 7
Consent Of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statements on
Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of
Ingersoll-Rand Company of our report dated 30 September 1996
relating to the financial statements of Westinghouse Electric
Ireland Limited, which appears in the Current Report on Form 8-
K of Ingersoll-Rand Company dated November 3, 1997.
/S/ Price Waterhouse
Price Waterhouse
Limerick, Ireland
October 30, 1997
Exhibit 23(ii)
Page 2 of 7
Report of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements
on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367)
of Ingersoll-Rand Company of our report dated March 15, 1996
relating to the financial statements of Westinghouse de Puerto
Rico, Inc., which appears in the Current Report on Form 8-K of
Ingersoll-Rand Company dated November 3, 1997.
/S/ Price Waterhouse
San Juan, Puerto Rico
October 30, 1997
Exhibit 23(ii)
Page 3 of 7
Report of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements
on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367)
of Ingersoll-Rand Company of our report dated March 31, 1995
relating to the financial statements of Westinghouse de Puerto
Rico, Inc., which appears in the Current Report on Form 8-K of
Ingersoll-Rand Company dated November 3, 1997.
/S/ Price Waterhouse
San Juan, Puerto Rico
October 30, 1997
Exhibit 23(ii)
Page 4 of 7
Consent Of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statement on
Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of
Ingersoll-Rand Company of our report dated 12 May 1995,
relating to the financial statements of Petter Refrigeration
Limited which appears in the Current Report on Form 8-K of
Ingersoll-Rand Company dated November 3, 1997.
/S/ Price Waterhouse
Price Waterhouse
Southampton, England
October 31, 1997
Exhibit 23(ii)
Page 5 of 7
Consent Of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectus constituting part of the Registration Statements on
Form S-3 (No.Nos. 33-60249, 333-34029, 333-37019 and 333-38367)
of Ingersoll-Rand Company of our report dated March 14, 1996
relating to the financial statements of Thermo King Dalian
Transport Refrigeration Company Limited, which appears in the
Current Report on Form 8-K of Ingersoll-Rand Company dated
November 3, 1997.
/S/ Price Waterhouse, Da Hua
Certified Public Accountants
China, October 30, 1997
Exhibit 23(ii)
Page 6 of 7
Consent Of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements
on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367)
of Ingersoll-Rand Company of our report dated March 8, 1996,
relating to the financial statements of Reftrans S.A. as of
November 30, 1995 and 1994 which appears in the Current Report
on Form 8-K of Ingersoll-Rand Company dated November 3, 1997.
/S/ Price Waterhouse
Price Waterhouse Auditores, S.A.
Barcelona, Spain
October 30, 1997
Exhibit 23(ii)
Page 7 of 7
Consent Of Independent Accountants
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements
on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367)
of Ingersoll-Rand Company of our report dated May 30, 1996
relating to the financial statements of Thermo King Czech
Republic, s.r.o., which appears in the Current Report on Form 8-
K of Ingersoll-Rand Company dated November 3, 1997.
/S/ Lindsay R. Dart
Lindsay R. Dart
partner
for and on behalf of BNP - Leasing, spol. s.r.o.
Prague, Czech Republic
October 30, 1997
