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) March 9, 1998
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 7. FINANCIAL STATEMENTS AND EXHIBITS
The following financial statements and pro forma
information are hereby filed as supplemental
information to the financial information included in
the Form 8-K filed on November 5, 1997:
1.) An introduction to the pro forma financial statements is
attached.
2.) A pro forma income statement which combines the results of
the company for the year ended December 31, 1997 with the
unaudited results of Thermo King for the ten months ended October
31, 1997, along with a description of the pro forma adjustments.
3.) Unaudited interim financial statements of Thermo King for
the nine month periods ended September 30, 1997 and 1996.
<TABLE>
INGERSOLL-RAND COMPANY
Unaudited Pro Forma Statement of Income
For the year ended December 31, 1997
(In millions 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 $7,103.3 $862.1 $ -- $ -- $7,965.4
Cost of goods sold 5,263.7 610.9 53.4 (1,2,4) 5,928.0
Administrative, selling and
service engineering
expenses 1,079.3 89.4 0.4 (4) -- 1,169.1
Operating income 760.3 161.8 (53.8) -- 868.3
Interest expense (136.6) (0.9) (118.7)(3,6) -- (256.2)
Other income (expense), net (2.1) (2.9) (11.8)(5) -- (16.8)
Dresser-Rand income 9.4 -- -- -- 9.4
Minority interests (17.3) (1.4) -- -- (18.7)
Earnings before income taxes 613.7 156.6 (184.3) -- 586.0
Provision for income taxes 233.2 28.0 -- 65.3(7) 195.9
Net earnings $ 380.5 $128.6 $(184.3) $65.3 $ 390.1
Basic earnings per common share $2.33 $2.39
Diluted earnings per common share $2.31 $2.37
Average number of common shares
outstanding for basic EPS 163.2 163.2
Average number of common shares
outstanding for diluted EPS 164.8 164.8
</TABLE>
INGERSOLL-RAND COMPANY
THERMO KING CORPORATION
NOTES TO PRO FORMA INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1997
NOTES: GENERAL COMMENT: The pro forma income statement for the year
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. The company acquired
Thermo King on October 31, 1997, and the results of Thermo
King for the last two months of 1997, together with the
effect of estimated purchase accounting adjustments for that
two month period, have been included in the company's
historical results for 1997.
(1) Reflects the additional depreciation on the fixed asset
write-up to fair value and the additional amortization of
other identifiable intangible assets.
(2) Reflects the amortization of the goodwill from the
Thermo King acquisition over its estimated life of 40 years
for book purposes.
(3) Reflects the amortization of the debt issuance costs
for the Thermo King acquisition.
(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 approximately $300
million of funds used by the company for the Thermo King
acquisition.
(6) Reflects the additional estimated 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 by using a combination of both short-
term and long-term debt which was outstanding for various
periods of time for 1997 at actual or estimated interest
rates which was then reduced by interest expense for the
last two months of the year, in connection with the Thermo
King acquisition.
(7) The tax benefits related to the pro forma adjustments
included:
o $45.9 million associated with interest expense,
o $13.1 million with the deductible portion of
goodwill,and
o $6.3 million associated with the remainder of the
pro forma adjustments, for the period.
THERMO KING
Financial Statements
As at and for the nine month periods ended
September 30, 1997 and 1996
(Unaudited)
Thermo King
Combined Statement of Income
(In thousands)
(Unaudited)
For the nine months
ended September 30 1997 1996
Revenues $768,406 $746,332
Cost of goods sold (note 1) (539,709) (530,911)
Marketing, administration
and general
expenses (note 1) (79,737) (76,801)
Operating profit 148,960 138,620
Other income(expense),net (2,887) (683)
Interest expense (785) (779)
Income before income taxes
and minority interest in
income of consolidated
subsidiaries 145,288 137,158
Income tax expense (28,767) (28,529)
Minority interest in income
of consolidated subsidiaries (1,319) (1,174)
Net income $115,202 $107,455
Thermo King
Combined Balance Sheet
(In thousands)
(Unaudited)
September 30 1997 1996
ASSETS
Cash and cash equivalents $ 9,905 $ 4,392
Customer receivables, net of
allowances of $1,459 in
1997 and $1,391 in 1996 163,429 132,951
Inventories (note 2) 115,374 106,083
Deferred income taxes 7,477 7,601
Prepaid and other current assets 9,402 13,376
Total current assets 305,587 264,403
Plant and equipment,net (note 3) 95,602 88,558
Intangible and other
noncurrent assets (note 4) 29,841 23,294
Total assets $431,030 $376,255
LIABILITIES AND INVESTED EQUITY
Accounts payable $ 73,227 $ 65,906
Short-term debt 5,207 4,635
Current maturities of long-term debt 29 195
Progress payments from customers 1,051 3,105
Product warranty 27,130 25,461
Other current liabilities (note 5) 70,262 63,399
Total current liabilities 176,906 162,701
Long-term debt 1,657 -
Employee benefit obligations (note 1) 46,475 72,077
Other noncurrent liabilities 2,392 2,174
Total liabilities 227,430 236,952
Commitments and contingencies (note 7)
Minority interest in equity of
consolidated subsidiaries 1,970 2,203
Invested equity (note 6):
Minimum pension liability
adjustment (note 1) (7,211) (24,860)
Cumulative foreign currency
translation adjustments 8,864 4,268
Invested equity 199,977 157,692
Total invested equity 201,630 137,100
Total liabilities and
investment equity $431,030 $376,255
Thermo King
Combined Statement of Cash Flows
(In thousands)
(Unaudited)
For the nine months
ended September 30 1997 1996
Cash flows from operating activities:
Net income $115,202 $107,455
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 11,402 9,938
Changes in assets and liabilities
Customer receivables (29,155) (353)
Inventories 2,803 20,738
Accounts payable 2,669 (2,632)
Product warranty 881 (4,106)
Pension liability (7,226) (4,641)
Deferred income taxes 3,593 2,123
Other assets and liabilities 15,368 8,780
Cash provided by operating
activities 115,537 137,302
Cash flows from investing activities:
Capital expenditures (14,874) (14,876)
Cash used by investing activities (14,874) (14,876)
Cash flows from financing activities:
Net decrease in short-term debt (1,251) (7,421)
Repayments of long-term debt (476) (391)
Disbursements to parent company, net
of direct charges and allocations (92,328) (116,223)
Cash used by financing activities (94,055) (124,035)
Increase (decrease) in cash
and cash equivalents 6,608 (1,609)
Cash and cash equivalents-
beginning of period 3,297 6,001
Cash and cash equivalents-
end of period $ 9,905 $ 4,392
Supplemental disclosure of
cash flow information:
Interest paid $ 785 $ 779
THERMO KING
NOTES TO FINANCIAL STATEMENTS
(In thousands)
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
Thermo King (the Company), a unit of CBS Corporation (CBS),
formerly Westinghouse Electric Corporation, 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 combined financial statements of the Company include the
accounts of Thermo King Corporation (an indirect wholly owned
subsidiary of CBS) and certain other CBS affiliates. 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.
When reading the financial information contained in these interim
financial statements, reference should be made to the financial
statements and notes contained in the Company's financial
statements for the year ended December 31, 1996.
Historically, the results of the Company's domestic operations
have been included in the consolidated United States income tax
return of CBS. The results of the Company's foreign operations
have been reported in their respective taxing jurisdiction along
with the operations of other CBS 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 CBS 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 undistributed foreign earnings are deemed to be
permanently reinvested and, therefore, no deferred taxes have
been recognized. 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 CBS and are
recorded through the invested equity account with CBS.
The Company is charged directly for the cost of certain services
that CBS 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. CBS
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.
CBS also maintains a program of self-insurance for workers'
compensation in the U.S. CBS 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 CBS's total costs of 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 nine months ended
September 30, 1997, charges for such services were approximately
$14,219.
CBS 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 CBS,
and no portion of CBS's debt is specifically related to the
operations of the Company.
Employees of the Company also participate in various CBS-
sponsored employee benefit plans. As of September 30, 1997, the
Company's minimum pension liability for certain non-Thermo King
employees located in Puerto Rico was transferred to CBS. This
transfer reduced the Company's employee benefit obligation and
noncurrent deferred tax asset by $2,838 and $1,076, respectively,
and increased invested equity by $1,762.
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
on going basis, management reviews its estimates based on
currently available information. Changes in facts and
circumstances may result in revised estimates. In the opinion of
management, the combined financial statements include all
material adjustments necessary to present fairly the Company's
financial position, results of operations, and cash flows. Such
adjustments are of a normal recurring nature. The results for
this interim period are not necessarily indicative of results for
the entire year or any other interim period.
NOTE 2: INVENTORIES
At September 30, 1997 1996
Raw materials $ 10,663 $ 9,321
Work in process 43,528 42,631
Finished goods 61,131 52,235
115,322 104,187
Recoverable engineering and other 52 1,896
Inventories $115,374 $106,083
NOTE 3: PLANT AND EQUIPMENT
At September 30, 1997 1996
Land and buildings $ 39,323 $ 37,533
Machinery and equipment 158,571 139,491
Construction in progress 14,626 20,584
Plant and equipment, at cost 212,520 197,608
Accumulated depreciation (116,918) (109,050)
Plant and equipment, net $ 95,602 $ 88,558
For the nine months ended September 30, 1997 and 1996,
depreciation expense totaled $8,733 and $9,053, respectively.
NOTE 4: INTANGIBLE AND OTHER NONCURRENT ASSETS
At September 30, 1997 1996
Goodwill $18,734 $ 2,764
Deferred tax assets 8,825 18,025
Other intangible assets 1,859 2,101
Other 423 404
Intangible and other noncurrent assets $29,841 $23,294
Goodwill and other intangible assets are shown net of accumulated
amortization of $7,044 at September 30, 1997 and $4,273 at
September 30, 1996.
NOTE 5: OTHER CURRENT LIABILITIES
At September 30, 1997 1996
Accrued employee compensation $14,139 $10,740
Accrued employee benefit obligations 13,000 13,000
Accrued expenses 43,123 39,659
Other current liabilities $70,262 $63,399
NOTE 6: INVESTED EQUITY
Changes in Invested Equity
At September 30, 1997 1996
Balance at beginning of period $177,520 $141,314
Net income 115,202 107,455
Minimum pension liability adjustment 6,525 5,426
Cumulative translation adjustment (5,289) (872)
Disbursements to CBS, net (92,328) (116,223)
Balance at end of period $201,630 $137,100
NOTE 7: 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 September
30, 1997, the Company had $6,643 outstanding under such
obligations.
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 September
30, 1997, the Company had under such agreements commitments to
purchase $16,900 of engines through December of 1997.
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 March 9, 1998 /S/ David W. Devonshire
David W. Devonshire
Senior Vice President
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
