FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to _______
Commission File Number 1-985
INGERSOLL-RAND COMPANY
Exact name of registrant as specified in its charter
New Jersey 13-5156640
State of incorporation I.R.S. Employer Identification No.
Woodcliff Lake, New Jersey 07675
Address of principal executive offices Zip Code
(201) 573-0123
Telephone number of principal executive offices
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes . X . No . . .
The number of shares of common stock outstanding as of July 31, 1998 was
165,099,536.
INGERSOLL-RAND COMPANY
FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheet at June 30, 1999 and
December 31, 1998
Condensed Consolidated Income Statement for the three and
six months ended June 30, 1999 and 1998
Condensed Consolidated Statement of Cash Flows for the six
months ended June 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II. OTHER INFORMATION
Item 1 - Legal Proceedings
Item 4 - Submission of Matters to a Vote of Security Holders
SIGNATURES
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
ASSETS
June 30, December 31,
1999 1998
Current assets:
Cash and cash equivalents $ 79.3 $ 71.9
Marketable securities 3.7 5.7
Accounts and notes receivable, net of
allowance for doubtful accounts 1,293.0 1,177.1
Inventories 905.8 940.8
Prepaid expenses and assets held for sale 166.8 88.7
Deferred income taxes 146.8 143.4
Total current assets 2,595.4 2,427.6
Investments in and advances with
partially-owned equity affiliates 328.3 344.7
Property, plant and equipment, at cost 2,448.2 2,416.3
Less - accumulated depreciation 1,106.9 1,068.7
Net property, plant and equipment 1,341.3 1,347.6
Intangible assets, net 3,800.8 3,774.3
Deferred income taxes 216.1 235.9
Other assets 184.3 179.4
Total assets $8,466.2 $8,309.5
LIABILITIES AND EQUITY
Current liabilities:
Loans payable $ 298.0 $ 318.7
Accounts payable and accruals 1,494.1 1,501.9
Income taxes 20.2 28.2
Total current liabilities 1,812.3 1,848.8
Long-term debt 2,185.9 2,166.0
Postemployment liabilities 898.7 897.1
Minority interests 121.8 133.6
Other liabilities 161.2 154.0
$5,179.9 $5,199.5
Company obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely debentures of the Company 402.5 402.5
Shareholders' equity:
Common stock 342.1 337.8
Other shareholders' equity 2,757.2 2,522.8
Accumulated other comprehensive income (215.5) (153.1)
Total shareholders' equity 2,883.8 2,707.5
Total liabilities and equity $8,466.2 $8,309.5
See accompanying notes to condensed consolidated financial statements.
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED INCOME STATEMENT
(in millions except per share figures)
<TABLE>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $2,249.3 $2,186.2 $4,332.6 $4,189.1
Cost of goods sold 1,617.7 1,596.7 3,154.1 3,080.8
Administrative, selling and service
engineering expenses 312.3 303.2 612.5 608.4
Operating income 319.3 286.3 566.0 499.9
Interest expense (53.5) (58.0) (106.4) (120.3)
Other income (expense), net (3.8) (8.1) (7.5) (8.3)
Equity in earnings of partially-owned
affiliates 8.3 13.3 14.9 20.1
Minority interests (12.0) (15.1) (21.0) (19.3)
Earnings before income taxes 258.3 218.4 446.0 372.1
Provision for income taxes 91.8 77.5 158.4 132.1
Net earnings $ 166.5 $ 140.9 $ 287.6 $ 240.0
Basic earnings per common share $ 1.01 $ 0.86 $ 1.75 $ 1.46
Diluted earnings per common share $ 0.99 $ 0.85 $ 1.73 $ 1.45
Dividends per common share $ 0.15 $ 0.15 $ 0.30 $ 0.30
</TABLE>
See accompanying notes to condensed consolidated financial statements.
INGERSOLL-RAND COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
Six months ended
June 30,
1999 1998
Cash flows from operating activities:
Net earnings $ 287.6 $ 240.0
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 147.8 143.5
Gain on sale of property, plant and equipment (0.4) (5.5)
Equity earnings/loss, net of dividends (10.4) (16.5)
Minority interests in earnings, net of
dividends 6.7 11.6
Deferred income taxes 12.5 11.3
Other items 22.9 9.0
Changes in other assets and liabilities, net (196.2) (9.1)
Net cash provided by operating activities 270.5 384.3
Cash flows from investing activities:
Capital expenditures (90.4) (119.8)
Proceeds from sales of property, plant
and equipment 15.3 20.6
Acquisitions, net of cash (159.8) (35.0)
Proceeds from business dispositions -- 19.5
Decrease/(increase) in marketable securities 1.5 (3.9)
Cash advances from/(to) equity companies 22.5 (3.7)
Net cash used in investing activities (210.9) (122.3)
Cash flows from financing activities:
Decrease in short-term borrowings (16.3) (566.2)
Proceeds from long-term debt 21.0 --
Payments of long-term debt (0.9) (0.6)
Net change in debt 3.8 (566.8)
Net proceeds from issuance of equity-linked
securities -- 390.2
Purchase of treasury stock (82.0) (51.8)
Dividends paid (49.5) (49.2)
Proceeds from exercise of stock options 66.6 20.7
Net cash used in financing activities (61.1) (256.9)
Effect of exchange rate changes
on cash and cash equivalents 8.9 (1.5)
Net increase in cash and cash equivalents 7.4 3.6
Cash and cash equivalents - beginning of period 71.9 104.9
Cash and cash equivalents - end of period $ 79.3 $ 108.5
See accompanying notes to condensed consolidated financial statements.
INGERSOLL-RAND COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - In the opinion of management, the accompanying condensed
consolidated financial statements contain all adjustments (including
normal recurring accruals) necessary to present fairly the consolidated
unaudited financial position and results of operations for the three
and six months ended June 30, 1999 and 1998. Certain amounts in the
consolidated financial statements have been reclassified in order to
conform with current year presentation.
NOTE 2 - On March 30, 1999 the company completed the acquisition of
Harrow Industries Inc., a leading manufacturer of access control
technologies, architectural hardware, and decorative bath fittings and
accessories. The purchase price was approximately $160 million, which
includes the assumption and immediate repayment of certain debt. This
transaction has been accounted for as a purchase with the results
included in the second quarter financial statements.
NOTE 3 - Inventories of domestically manufactured standard products
are valued on the last-in, first-out (LIFO) method and all other
inventories are valued using the first-in, first-out (FIFO)
method. The composition of inventories for the balance sheets
presented were as follows (in millions):
June 30, December 31,
1999 1998
Raw materials and supplies $ 182.6 $ 186.2
Work-in-process 252.0 246.5
Finished goods 620.6 653.5
1,055.2 1,086.2
Less - LIFO reserve 149.4 145.4
Total $ 905.8 $ 940.8
Work-in-process inventories are stated after deducting customer
progress payments of $19.1 million at June 30, 1999 and $17.8 million
at December 31, 1998.
NOTE 4 - The Company adopted SFAS No. 131 "Disclosures about Segments
of an Enterprise and Related Information" effective January 1, 1998.
The statement requires companies to report financial and descriptive
information about its operating segments in financial statements for
interim and annual periods.
A summary of operations by reportable segment for the three and six
months ended June 30, is as follows:
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
Sales
Specialty Vehicles $ 679.7 $ 610.5 $1,262.1 $1,149.7
Air & Temperature Control 574.5 587.1 1,104.7 1,125.2
Hardware & Tools 469.8 433.8 920.9 849.1
Engineered Products 525.3 554.8 1,044.9 1,065.1
Total $2,249.3 $2,186.2 $4,332.6 $4,189.1
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
Operating Income
Specialty Vehicles $ 129.3 $ 101.9 $ 222.8 $ 173.4
Air & Temperature Control 78.8 74.7 141.7 135.4
Hardware & Tools 74.5 70.6 144.0 130.0
Engineered Products 50.8 52.5 86.6 87.7
Unallocated corporate
expense (14.1) (13.4) (29.1) (26.6)
Total $ 319.3 $ 286.3 $ 566.0 $ 499.9
No significant changes in segment assets have occurred since December
31, 1998.
NOTE 5 - Information on basic and diluted earnings per share is as
follows (in millions except per shares figures):
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
Net earnings $166.5 $140.9 $287.6 $240.0
Average number of basic
shares 164.5 163.9 164.1 163.9
Shares issuable assuming
exercise under incentive
stock plans 2.5 2.0 2.0 2.1
Shares issuable in connection
with equity-linked
securities 0.7 -- -- --
Average number of diluted
shares 167.7 165.9 166.1 166.0
Basic earnings per shares $1.01 $ 0.86 $ 1.75 $ 1.46
Diluted earnings per share $0.99 $ 0.85 $ 1.73 $ 1.45
The components of comprehensive income are as follows (in millions):
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
Net income $166.5 $140.9 $287.6 $240.0
Other comprehensive income -
Foreign currency equity
adjustment (22.9) (8.9) (62.4) (27.8)
Comprehensive income $143.6 $132.0 $225.2 $212.2
NOTE 6 -SFAS No. 133 "Accounting for Derivative Instruments and
Hedging Activities" requires companies to record derivatives on the
balance sheet as assets or liabilities, measured at fair value. The
FASB recently delayed the required adoption to fiscal years beginning
after June 15, 2000. The company will adopt SFAS No. 133 by January
1, 2001, and is currently evaluating the impact this statement may
have on the company's financial position and results of operations.
INGERSOLL-RAND COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The company's results for the second quarter of the year established a
new record. Sales totalled $2,249.3 million, operating income was
$319.3 million and net earnings reached $166.5 million ($0.99 diluted
earnings per share). For the second quarter of 1998, the company
reported sales of $2,186.2 million, operating income of $286.3 million
and net earnings of $140.9 million ($0.85 diluted earnings per share).
A comparison of key income statement amounts between the quarters,
is as follows:
Net sales for the second quarter of 1999 increased three percent
over last year's comparable quarter.
The ratio of cost of goods sold to sales for the second quarter of
1999 was 71.9 percent and reflected an improvement over the
reported 1998 second quarter ratio of 73.0 percent. The benefits
of cost reduction and efficiency programs on our strategic
sourcing contributed to this improvement.
The ratio of administrative, selling and service engineering
expenses to sales was 13.9 percent for the three months ended June
30, 1999 and equalled last year's ratio for the three months ended
June 30, 1998, and emphasized the company's continued commitment
to cost containment.
Operating income for the second quarter of 1999 totalled $319.3
million, an increase of $33 million (or 11.5 percent) over the
$286.3 million reported for last year's second quarter. The ratio
of operating income to sales in the second quarter increased to
14.2 percent, as compared to 13.1 percent in 1998's second
quarter.
Interest expense for the second quarter of 1999 was $53.5 million
as compared to $58.0 million for the second quarter of 1998. The
reduction is attributed to lower average outstanding debt balances
in 1999.
Other income (expense), net, aggregated $3.8 million of expense
for the three months ended June 30, 1999, as compared to $8.1
million of net expense in the second quarter of 1998. This $4.3
million favorable change is primarily attributable to foreign
exchange activity, which generated a net gain for the
second quarter of 1999, as compared to a net loss for the
comparable quarter of the prior year.
The company's equity interest in the earnings of its partially-
owned equity companies totalled $8.3 million for the second
quarter of 1999, versus $13.3 million for the comparable 1998
quarter. This reduction is primarily attributable to lower profits
during the quarter from its 49-percent interest in Dresser-Rand
Company. Dresser-Rand experienced decreased profitability due to
lower order levels.
The company's charges for minority interests are composed of
interests of less than 50 percent owners in a consolidated unit of
the company and charges associated with the company's equity-
linked securities (issued in March 1998). The charge for minority
interests totalled $12.0 million for the three months ended June
30, 1999 versus $15.1 million in 1998. This change is primarily
attributed to lower net earnings from Ingersoll-Dresser Pump
Company (IDP), in 1999.
The company's effective tax rate for the second quarters of both
1999 and 1998 was 35.5 percent. The current year's estimated
effective tax rate for the full year 1999 is 35.5 percent, which
equalled last year's effective rate.
The consolidated results for the second quarter of the year
benefitted from the combination of business improvements in a number of
the company's domestic and selected foreign markets and a continued
emphasis on the company's productivity-improvement programs. Incoming
orders for the second quarter of the year totalled $2.1 billion, which
equalled last year's second quarter total. The company's backlog of
orders at June 30, 1999, believed by it to be firm, was $1.5 billion,
which approximated the backlog at December 31, 1998. The company
estimates that approximately 90 percent of the backlog will be shipped
during the next twelve months.
A comparison of key income statement amounts between the first
half of both years, is as follows:
Net sales for the first half of 1999 totalled $4,332.6 million, an
increase of 3.4 percent over last year's six month total.
The ratio of cost of goods sold to sales for the first six months
of 1999 was 72.8 percent and reflected an improvement over the
reported first half of 1998 ratio of 73.5 percent. The benefits
of cost reduction and efficiency programs on our strategic
sourcing contributed to this improvement.
The ratio of administrative, selling and service engineering
expenses to sales was 14.1 percent for the six months ended June
30, 1999 and reflected an improvement over the 14.5 percent ratio
reported for the comparable 1998 period.
Operating income for the first half of 1999 totalled $566.0
million, an increase of $66.1 million (or 13.2 percent) over the
$499.9 million reported for last year's six month total. The ratio
of operating income to sales in the period increased to 13.1
percent, as compared to 11.9 percent in 1998's first half.
Interest expense for the first half of 1999 was $106.4 million as
compared to $120.3 million for the first two quarters of 1998. The
reduction is attributed to lower outstanding debt balances during
the comparable periods.
Other income (expense), net, aggregated $7.5 million of expense
for the six months ended June 30, 1999, as compared to $8.3
million of net expense for the first two quarters of 1998. This
$0.8 million net favorable change is primarily attributed to
changes from foreign exchange activity (which produced an $8.6
million favorable comparison during the periods), reduced by lower
gains on the sale of excess assets.
The company's equity interest in the earnings of its partially-
owned equity companies totalled $14.9 million for the first half
of 1999, versus $20.1 million for the comparable 1998 period. This
reduction is split between lower profits from the company's 49-
percent interest in Dresser-Rand Company, and overall lower
operating results from the company's other partially-owned
entities, during the comparable periods.
The company's charges for minority interests are composed of
interests of less than 50 percent owners in a consolidated unit of
the company and charges associated with the company's equity-
linked securities (issued in March 1998). The charge for minority
interests totalled $21.0 million for the six months ended June 30,
1999 versus $19.3 million in 1998. This change is attributed to
the fact the equity-linked securities were outstanding for the
full six months in 1999 and lower net earnings from Ingersoll-
Dresser Pump Company (IDP), during the comparable periods.
The company's effective tax rate for the six months ended June 30,
1999 was 35.5 percent which equalled 1998's rate for the
comparable period.
Liquidity and Capital Resources
During the first half of 1999 the company experienced improvements
in its overall financial position. The company's working capital
increased by $204.3 million to $783.1 million at June 30, 1999, from
the December 31, 1998 balance of $578.8 million. The current ratio
increased to 1.4 to 1.0 at the end of the first six months from the 1.3
to 1.0 at the end of 1998. The company's debt-to-total capital ratio
at June 30, 1998, totalled 42 percent, which reflects an improvement
from the 43 percent reported at December 31, 1998. This improvement is
even more significant after considering the company's March 30, 1999
acquisition of Harrow Industries, Inc. for approximately $160 million
(see Note 2).
The company's cash and cash equivalents totalled $79.3 million at
June 30, 1999, up slightly from the $71.9 million at December 31, 1998.
In evaluating the net change in cash and cash equivalents, cash flows
from operating, investing and financing activities, and the effect of
exchange rate movements must be considered. Cash flows from operating
activities provided $270.5 million, investing activities used $210.9
million and financing activities used $61.1 million. Exchange rate
changes during the first six months of 1999 increased cash and cash
equivalents by $8.9 million.
Receivables totalled $1.3 billion at June 30, 1999, which
represents a $115.9 million increase over the amount reported at
December 31, 1998. The increase was attributed to strong sales for the
first six months of the year and the effect of an acquisition, which
were partially offset by the effects of foreign currency translation of
$45.4 million.
Inventories totalled $905.8 million at June 30, 1999, which
represents a decrease of $35.0 million from the year-end balance of
$940.8 million. The change is almost exclusively attributed to the
effects of foreign currency translation, because acquisition activity
offset the company's inventory reduction program.
Intangible assets increased by a net amount of approximately $26.5
million during the first six months of 1999. Intangibles increased by
approximately $102 from acquisitions and were reduced by amortization
and the effects of foreign currency translation.
Long term debt, including current maturities, at June 30, 1999,
totalled $2.4 billion. The company's debt-to-total capital ratio was
42 percent at June 30, 1999, which represented a reduction from the 43
percent reported at December 31, 1998.
During the first six months of 1999, foreign currency translation
adjustments resulted in a net decrease of approximately $62.4 million
in shareowners' equity, caused by the strengthening of the U.S. dollar
against other currencies. Currency changes in Belgium, Brazil, France,
Germany, Ireland, Italy, Spain, and the United Kingdom accounted for
most of this change.
Computer Systems and the Year 2000
The company has in place a year 2000 compliance program to address the
issues raised by computer date programs using the last two digits of a
year. Pursuant to its year 2000 program, the company reviewed its
computer information systems, computer hardware and embedded technology
used in the company's products and processes. This review was designed
to identify which computer systems and embedded technology might fail
to correctly process the year 2000. Based upon this review, which is
now complete, the company is replacing, modifying and/or upgrading
certain computer systems and embedded technology with the objective
being that no significant systems or devices will malfunction as the
result of failing to correctly process the year 2000. The company,
through the use of both internal resources and outside consultants, has
actively engaged in this replacement, modification and upgrading and
had substantially completed its remediation program and testing by the
end of 1998. The review of company products revealed that all products
currently being produced are year 2000 compliant.
The total cost of the year 2000 compliance program since 1997, is
approximately $60 million. Although the company had incurred expenses
prior to 1997, these costs were not separately identified. Management
estimates that as of June 30, 1999, substantially all of the costs
have been incurred and were funded through operating cash flow.
Approximately 45 percent of these expenses were internal costs of the
company. The company believes that all internal systems will be
completed before the end of the third quarter.
In addition to its internal review process, the company has contacted
suppliers and distributors on the year 2000 issue to minimize problems
in its supply and distribution chains. Most major suppliers have given
assurances that their ability to supply the company will not be
affected by the year 2000 issue; however, the company cannot assure
timely compliance of third parties and may be adversely affected by
failure of a significant third party to become year 2000 compliant.
The company believes that the costs to address the issues raised by the
year 2000 problem will not have a material impact on the company's
financial condition, results of operations, liquidity or cash flows for
any period. The schedule for successful completion of the year 2000
program and the estimated costs are based upon certain assumptions by
management on future events, including the continued availability of
qualified resources to implement the program and current costs for such
resources.
If the company fails to successfully complete a significant portion of
its year 2000 compliance program, such failure may have a material
adverse impact on the company's financial condition. Currently
management does not consider the possibility of such a failure to be
reasonably likely; however, in the event management's assessment
changes an appropriate contingency plan is being developed.
Euro Conversion
On January 1, 1999, eleven of the fifteen member countries of the
European Union established fixed conversion rates between their
existing sovereign currencies and the euro. The participating
countries agreed to adopt the euro as their common legal currency on
that date.
The company continues to identify and address all euro conversion
compliance issues. At this time, the company has not experienced
significant difficulties, but cannot predict the impact of the euro
conversion because of the numerous uncertainties associated with
noncompliance by third parties and the effect in the market place on
pricing due to currency transparency.
Environmental Matters
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 29 federal Superfund and state remediation sites,
excluding sites as to which the company's records disclose no
involvement or as to which the company's liability has been fully
determined. For all sites, there are other PRPs and in most instances,
the company's site involvement is minimal. In estimating its
liability, the company has not assumed that 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.
Acquisitions
On March 30, 1999, the company completed the acquisition of Harrow
Industries, Inc., a leading manufacturer of access control
technologies, architectural hardware, and decorative bath fittings and
accessories. The purchase price was approximately $160 million, which
includes the assumption and immediate repayment of certain debt. In
connection which this acquisition, the company has designated
approximately $57 million as assets held for sale.
Second-quarter Business Segment Review
The Specialty Vehicles Segment includes Bobcat skid-steer loaders and
compact hydraulic excavators; Club Car golf cars; Blaw-Knox pavers;
and Ingersoll-Rand compactors, drilling equipment and rough-terrain
material handlers. This segment's sales totaled $679.7 million for the
second quarter of 1999, an 11-percent increase over 1998 second-quarter
sales. Operating income of $129.3 million increased by 27 percent
compared to last year. The Road Machinery, Bobcat and Club Car product
lines achieved double-digit sales growth and improved operating
margins.
The Air and Temperature Control Segment includes Thermo King transport
temperature-control equipment and Ingersoll-Rand air compressors. The
segment's second quarter 1999 sales totaled $574.5 million versus
$587.1 million last year. Operating income for the second quarter of
1999 increased by about five percent to $78.8 million from $74.7
million last year. Air compressor sales declined slightly in the
second quarter; operating margins, however, increased due to continuing
cost reductions. Thermo King sales were comparable to last year's
second quarter but operating earnings improved by nearly 10 percent
because of a better sales mix and cost containment actions.
The Hardware and Tools Segment includes architectural hardware
products, such as Schlage locks, as well as exit devices, door-control
hardware, steel doors and power-operated doors; and Ingersoll-Rand
tools and related industrial-production equipment. For this segment,
second-quarter 1999 sales increased by eight percent to $469.8 million.
Operating income for the quarter totaled $74.5 million, an increase of
six percent over last year's second quarter. Architectural hardware
products reported strong sales gains and a moderate improvement in
operating income. Production Equipment sales declined but operating
income improved through ongoing cost reduction activities.
The Engineered Products Segment includes Torrington and Fafnir
bearings and components, and Ingersoll-Dresser Pump Company (IDP), a
joint venture that produces pumps used in industrial, commercial and
municipal applications. Second-quarter 1999 sales of $525.3 million
decreased by about five percent, and operating income of $50.8 million
declined slightly, compared to last year's second quarter. Bearings
and components sales were down slightly because of continued weakness
in industrial bearings. Operating income and margins improved based on
strong sales from the needle bearings business. IDP's sales for the
second quarter decreased by approximately 10 percent and operating
income declined due to lower demand in the worldwide utility and
hydrocarbon processing industries
Forward-Looking Statements
Information provided by the company in reports such as this report
on Form 10-Q, in press releases and in statements made by employees in
oral discussions 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 represent the
company's expectations concerning future events and, 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; 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;
impact of the year 2000; 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 cost reduction strategies and entry into direct product line
competition.
INGERSOLL-RAND COMPANY
PART II OTHER INFORMATION
Item 1 - 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 29 sites under federal
Superfund and similar state laws. In the opinion of the company,
pending legal matters, including the one discussed below, are not
expected to have a material adverse effect on the results of
operations, financial condition, liquidity or cash flows.
By letter dated February 4, 1999, the Michigan Department of
Environmental Quality ("DEQ") assessed a civil penalty in the amount of
$113,750 on the Company for an alleged violation of a DEQ
Administrative Order on Consent ("AOC"). The AOC governs the Company's
environmental investigation and cleanup obligations related to the
McCoy Creek Industrial Park, Buchanan, Michigan. The Company invoked
the dispute resolution provisions of the AOC and by letter dated June
3, 1999, settled this matter with the DEQ by payment of a mutually
agreed upon amount of $55,000.
Item 4. Submission of Matters to a Vote of Security Holders
At the Annual Meeting of Shareholders of the company held on
May 5, 1999, the shareholders, in addition to electing directors,
ratified the appointment of PricewaterhouseCoopers LLP as independent
accountants of the company for the year ending December 31, 1999.
The shareholders voted as follows on the following matters:
1. Election of directors. The voting result for each nominee is as
follows:
Name Votes For Votes Withheld
Peter C. Godsoe 133,940,043 13,882,191
Herbert L. Henkel 133,055,504 14,766,730
H. William Lichtenberger 133,958,482 13,863,752
James E. Perrella 133,913,936 13,908,298
Tony L. White 133,977,750 13,844,484
Joseph P. Flannery, Constance J. Horner, Theodore E. Martin, Orin
R. Smith, and Richard J. Swift all continue as directors of the
company.
INGERSOLL-RAND COMPANY
PART II OTHER INFORMATION
(continued)
2. The reappointment of the company's independent accountants was
approved by a vote of 147,223,030 votes for, 202,148 votes against,
and 397,056 votes abstaining.
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 August 9, 1999 /S/ D.W. Devonshire
D.W. Devonshire, Senior Vice President
& Chief Financial Officer
Principal Financial Officer
Date August 9, 1999 /S/ S.R. Shawley
S.R. Shawley, Vice President & Controller
Principal Accounting Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE JUNE 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
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<COMMON> 342
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