12
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 No. 1-985
INGERSOLL-RAND COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 13-5156640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Woodcliff Lake, New Jersey 07675
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(201)573-0123
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Series A Preference
Stock Purchase Rights New York, London and Amsterdam
Common Stock, $2 par value New York, London and Amsterdam
Income PRIDES New York
Growth PRIDES New York
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
The aggregate market value of common stock held by nonaffiliates
on February 29, 2000 was $6,205,708,872 based on the closing
price of such stock on the New York Stock Exchange. This
includes the shares owned by the Registrant's Leveraged Employee
Stock Ownership Plan.
The number of shares of common stock outstanding as of February
29, 2000 was 162,210,632.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareholders for fiscal year ended December
31, 1999. With the exception of those portions which are
incorporated by reference into Parts I, II and IV of this Form
10-K Annual Report, the 1999 Annual Report to Shareholders is not
to be deemed filed as part of this report.
Proxy Statement for Annual Meeting of Shareholders to be held
on May 3, 2000. See Part III of this Form 10-K Annual Report for
portions incorporated by reference. (A definitive proxy
statement has been filed with the Commission since the close of
the fiscal year).
PART I
Item 1. BUSINESS
Ingersoll-Rand Company (the company) was organized in 1905 under
the laws of the State of New Jersey as a consolidation of
Ingersoll-Sergeant Drill Company and the Rand Drill Company,
whose businesses were established in the early 1870's. Over the
years, the company has supplemented its original business, which
consisted primarily of the manufacture and sale of rock drilling
equipment, with additional products which have been developed
internally or obtained through acquisition.
On August 12, 1999, the company announced its intention to
dispose of its interest in Dresser-Rand Company (D-R), a joint
venture involved in the reciprocating compressor and turbo
machinery business, and Ingersoll-Dresser Pump Company (IDP), a
joint venture involved in the pump equipment business. On
October 5, 1999, the joint venture partner, as permitted under
the joint venture agreements, elected to sell its share of the
joint ventures to the company. Effective December 31, 1999, the
company completed the purchase of the joint venture partner's 49%
share of IDP for a net purchase price of approximately $377
million payable by the issuance of a promissory note, which was
redeemed On January 14, 2000. The acquisition of the joint
venture partner's 51% share of D-R was completed on February 2,
2000 and is estimated at a net purchase price of approximately
$536 million. The net assets have been reported as assets held
for sale in the company's financial statements. Historically,
IDP had been reported as part of the Engineered Products Segment,
while D-R had been reported as equity in earnings of partially-
owned affiliates.
On February 10, 2000, the company agreed to sell its IDP unit to
the Flowserve Corporation for $775 million in cash. The
transaction is subject to regulatory approval and is expected to
close during the second quarter of 2000. The company intends to
divest D-R in the near future.
On March 30, 1999, the company completed the acquisition of
Harrow Industries, Inc. (Harrow), a leading manufacturer of
access control technologies, architectural hardware, and
decorative bath fittings and accessories. The purchase price was
approximately $160 million, which included the assumption of
certain debt. The acquisition has been accounted for as a
purchase and, accordingly, the purchase price was allocated to
the acquired assets and assumed liabilities based on their
estimated fair values.
During the third quarter, the company received proceeds of $47.0
million, which approximated book value on the sale of a portion of
the Harrow assets. In December 1999, the company also sold certain
net assets of the Automation Division. The transaction resulted
in a net gain of approximately $4.4 million. The company also
made several minor dispositions during 1999.
Products
The company manufactures and sells primarily nonelectrical
machinery and equipment. Principal products include the
following:
Air balancers Hoists
Air compressors & Hydraulic breakers
accessories Lubrication equipment
Air dryers Micro turbines
Air logic controls Material handling equipment
Air motors Mining equipment
Air and electric tools Needle roller bearings
Architectural columns Paving equipment
Asphalt compactors Piston pumps
Asphalt pavers Pneumatic breakers
Automated dispensing systems Pneumatic cylinders
Automatic doors Pneumatic valves
Automotive components Portable compressors
Ball bearings Portable generators
Bath fittings and accessories Portable light towers
Blasthole drills Road-building machinery
Blowers Rock drills
Compact hydraulic excavators Rock stabilizers
Construction equipment Roller bearings
Diaphragm pumps Rotary drills
Door closers and controls Rough-terrain material handlers
Door locks, latches & Skid-steer loaders
locksets Soil compactors
Door and door frames (steel) Spray-coating systems
Drilling equipment and accessories Submersible pumps
Electrical security products Telescopic material handlers
Engine-starting systems Transport temperature control
Exit devices systems
Extrusion pump systems Utility vehicles
Fastener-tightening Waterjet-cutting
systems systems
Fluid-handling equipment Water-well drills
Golf cars Winches
These products are sold primarily under the company's name and
also under other names including ABG, Blaw-Knox, Bobcat, Charles
Maire, Club Car, Dixie-Pacific, Dor-O-Matic, Ecoair, Fafnir,
Falcon, Glynn-Johnson, Johnstone, LCN, Legge, Monarch, Montabert,
Normbau, Schlage, Steelcraft, Thermo King, Torrington, Von Duprin
and Zimmerman.
During the past three years, the division of the company's sales
between capital goods and expendables has been in the approximate
ratio of 63 percent and 37 percent, respectively. The company
generally defines as expendables those products which are not
capitalized by the ultimate user. Examples of such products are
parts sold for replacement purposes, power tools and needle
bearings.
Additional information on the company's business and financial
information about industry segments is presented in Note 18 to
the Consolidated Financial Statements included in the company's
Annual Report to Shareholders for 1999, incorporated by reference
in this Form 10-K Annual Report.
Distribution
The company's products are distributed by a number of methods
which the company believes are appropriate to the type of
product. Sales are made domestically through branch sales
offices and through distributorships and dealers across the
United States. International sales are made through
approximately 75 subsidiary sales and service companies with a
supporting chain of distributors in over 100 countries.
Working Capital
The products manufactured by the company must usually be readily
available to meet rapid delivery requirements. Such working
capital requirements are not, however, in the opinion of
management, materially different from those experienced by the
company's major competitors.
Customers
No material part of the company's business is dependent upon a
single customer or very few customers, the loss of any one of
which would have a material adverse effect on the company's
operations.
Competitive Conditions
The company's products are sold in highly competitive markets
throughout the world against products produced by both foreign
and domestic corporations. The principal methods of competition
in these markets relate to price, quality and service. The
company believes that it is one of the leading manufacturers in
the world of a broad line of air compression systems, anti-
friction bearings, construction equipment, transport temperature
control products, air tools, golf cars and utility vehicles. In
addition, the company believes it is a leading supplier in
domestic markets for locks, other door hardware products, skid-
steer loaders and asphalt paving equipment.
International Operations
Sales to customers outside the United States accounted for
approximately 34 percent of the consolidated net sales in 1999.
Sales outside of the United States are made in more than 100
countries; therefore, the attendant risks of manufacturing or
selling in a particular country, such as nationalization and
establishment of common markets, would not have a significant
effect on the company's international operations.
Raw Materials
The company manufactures many of the components included in its
products. The principal raw materials required for the
manufacture of the company's products are purchased from numerous
suppliers, and the company believes that available sources of
supply will generally be sufficient for its needs for the
foreseeable future.
Backlog
The company's approximate backlog of orders at December 31, 1999,
believed by it to be firm, was $210 million for the Specialty
Vehicles Segment, $310 million for the Air & Temperature Control
Segment, $132 million for the Hardware & Tools Segment and $296
million for the Engineered Products Segment as compared to $248
million, $304 million, $189 million and $345 million,
respectively, at December 31, 1998. These backlog figures are
based on orders received. While the major portion of the
company's products are built in advance of order and either
shipped or assembled from stock, orders for specialized machinery
or specific customer application are submitted with extensive
lead time and are often subject to revision, deferral,
cancellation or termination. The company estimates that
approximately 90 percent of the backlog will be shipped during
the next twelve months.
Research and Development
The company maintains extensive research and development
facilities for experimenting, testing and developing high quality
products. The company employs approximately 1,763 professional
employees for its research and development activities. The
company spent $186.2 million in 1999, $169.6 million in 1998 and
$138.2 million in 1997 on research and development.
Patents and Licenses
The company owns numerous patents and patent applications and is
licensed under others. While it considers that in the aggregate
its patents and licenses are valuable, it does not believe that
its business is materially dependent on its patents or licenses
or any group of them. In the company's opinion, engineering and
production skills, and experience are more responsible for its
market position than patents or licenses.
Environmental Matters
The company has been and continues to be dedicated to an
environmental program to reduce the utilization and generation of
hazardous materials during the manufacturing process and to
remediate identified environmental concerns. As to the latter,
the company currently is engaged in site investigations and
remedial activities to address environmental cleanup from past
operations at current and former manufacturing facilities.
During 1999, the company spent approximately $8 million on
capital projects for pollution abatement and control and an
additional $6 million for environmental remediation expenditures
at sites presently or formerly owned or leased by the company.
It should be noted that these amounts are difficult to estimate
because environmental improvement costs are generally a part of
the overall improvement costs at a particular plant, and the
accurate estimate of which portion of an improvement or a capital
expenditure relates to an environmental improvement is difficult
to ascertain. The company believes that these expenditure levels
will continue and may increase over time. Given the evolving
nature of environmental laws, regulations and technology, the
ultimate cost of future compliance is uncertain.
The company is a party to environmental lawsuits and claims, and
has received notices of potential violations of environmental
laws and regulations from the Environmental Protection Agency and
similar state authorities. It is identified as a potentially
responsible party (PRP) for cleanup costs associated with off-
site waste disposal at approximately 30 federal Superfund and
state remediations sites, excluding sites as to which the
company's records disclose no involvement or as to which the
company's liability has been fully determined. For all sites
there are other PRPs and in most instances, the company's site
involvement is minimal. In estimating its liability, the company
has assumed it will not bear the entire cost of remediation of
any site to the exclusion of other PRPs who may be jointly and
severally liable. The ability of other PRPs to participate has
been taken into account, based generally on the parties'
financial condition and probable contribution on a per site
basis. Additional lawsuits and claims involving environmental
matters are likely to arise from time to time in the future.
Although uncertainties regarding environmental technology, state
and federal laws and regulations and individual site information
make estimating the liability difficult, management believes that
the total liability for the cost of remediation and environmental
lawsuits and claims will not have a material effect on the
financial condition, results of operations, liquidity or cash
flows of the company for any year. It should be noted that when
the company estimates its liability for environmental matters,
such estimates are based on current technologies and the company
does not discount its liability or assume any insurance
recoveries.
Employees
There are approximately 46,000 employees of the company
throughout the world, of whom approximately 29,000 work in the
United States and 17,000 in foreign countries. The company
believes relations with its employees are good.
Item 2. PROPERTIES
The company's executive offices are located at Woodcliff Lake,
New Jersey. Manufacturing and assembly operations are conducted
in 53 plants in the United States; 4 plants in Canada; 29 plants
in Europe; 13 plants in Asia, and 4 plants in Latin America. The
company also maintains various warehouses, offices and repair
centers throughout the world.
Substantially all plant facilities are owned by the company and
the remainder are under long-term lease. The company believes
that its plants and equipment have been well maintained and are
generally in good condition.
The reportable segments for which the facilities are primarily
used are described below. Facilities under long-term lease are
included below and are not significant to each operating
segment's total number of plants or square footage.
Specialty Vehicles
The Specialty Vehicle Segment designs, manufactures and markets
powered vehicles that play a niche role in such fields as
infrastructure development, commercial construction and material
movement. This segment's products include machinery regularly
used in general manufacturing and in industries such as mining
and construction. This segment's branded products include Bobcat
skid-steer loaders and compact hydraulic excavators, Club Car
golf cars and industrial vehicles, Blaw-Knox and ABG pavers, and
Ingersoll-Rand compactors, drilling equipment and rough-terrain
material handlers. The segment's manufacturing locations are as
follows:
Approximate
Number of Plants Square Footage
Domestic 7 2,906,000
International 4 604,000
Total 11 3,510,000
Air & Temperature Control
The Air and Temperature Control Segment focuses on markets
requiring air and refrigerant-gas compression technology and
services. This segment's branded products include Thermo King
transport temperature-control equipment, and Ingersoll-Rand air
compressors. The segment's manufacturing facilities are as
follows:
Approximate
Number of Plants Square Footage
Domestic 10 2,398,000
International 17 2,179,000
Total 27 4,577,000
Hardware and Tools
The Hardware and Tools Segment concentrates on manufacturing,
marketing, and managing the distribution channels required to
reach end user customers seeking products that enhance
productivity and security in the industrial, construction, and do-
it-yourself markets. This segment includes architectural
hardware products, such as Schlage locks, Von Duprin exit
devices, door-control hardware, steel doors, power operated doors
and architectural columns, and tools and related industrial-
production equipment. The segment's manufacturing facilities are
as follows:
Approximate
Number of Plants Square Footage
Domestic 21 3,611,000
International 20 2,118,000
Total 41 5,729,000
Engineered Products
The Engineered Products Segment is comprised of highly engineered
application products that are sold on a specific contract design
basis. Plants of IDP are no longer included as it has been
designated as discontinued operations. This segment's products
include Torrington and Fafnir bearings and components The
segment's manufacturing facilities are as follows:
Approximate
Number of Plants Square Footage
Domestic 15 3,544,000
International 9 1,719,000
Total 24 5,263,000
Item 3. LEGAL PROCEEDINGS
In the normal course of business, the company is involved in a
variety of lawsuits, claims and legal proceedings, including
proceedings for off-site waste disposal cleanup of approximately
30 sites under federal Superfund and similar state laws. In the
opinion of the company, pending legal matters, are not expected
to have a material adverse effect on the results of operations,
financial condition, liquidity or cash flows.
See also the discussion under Item 1 - Environmental Matters.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the company's security
holders during the last quarter of its fiscal year ended December
31, 1999.
The following information is included in accordance with the
provision of Part III, Item 10.
Date of
Service as Principal Occupation and
an Executive Other Information
Name and Age Officer for Past Five Years
James E. Perrella(64) 5/4/77 Chairman of the Board and
Director (President 1993-
April 1999, and Chief
Executive Officer
1993-October 1999)
Herbert L. Henkel(51) 4/5/99 Chief Executive Officer
(since October 1999),
President and Director
(since April 1999)
(Chief Operating Officer
April 1999 - October 1999;
Textron President, February
1999 - March 1999 and Chief
Operating Officer, 1998 -
March 1999; President of
Textron's Industrial
Products Segment 1994-
1998)
Brian D. Jellison(54) 2/7/96 Executive Vice President
(Vice President and
President of the
Architectural Hardware
Group, 1995 - 1998)
Steven T. Martin(59) 5/2/96 Executive Vice President
(Vice President, 1996-1998
and President of Production
Equipment Group, 1995-1998)
David W. Devonshire(54) 1/12/98 Executive Vice President
(since January 2000)
and Chief Financial
Officer, (Senior Vice
President and Chief
Financial Officer 1998 -
January 2000, Senior Vice
President and Chief
Financial Officer,
Owens Corning 1993 -
1997)
Patricia Nachtigal(53) 11/2/88 Vice President and General
Counsel
Nicholas J. Pishotti(59) 4/10/95 Vice President, Strategic
Technologies (General
Manager, Aircraft Engine
Sourcing Department,
General Electric Company,
1988-1995)
Steven R. Shawley(47) 6/1/98 Vice President and
Controller (Controller
June 1998-July 1999, Thermo
King Business Unit
Controller 1994-1998)
No family relationship exists between any of the above-listed
executive officers of the company. All officers are elected to
hold office for one year or until their successors are elected
and qualify.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Information regarding the principal market for the company's
common stock and related stockholder matters are as follows:
Quarterly share prices and dividends for the common stock are
shown in the following tabulation. The common shares are listed
on the New York Stock Exchange and also on the London and
Amsterdam exchanges.
Common Stock
High Low Dividend
1999
First quarter $52 7/16 $44 5/8 $.15
Second quarter 73 13/16 49 7/8 .15
Third quarter 67 11/16 53 .17
Fourth quarter 58 1/2 44 7/8 .17
High Low Dividend
1998
First quarter $49 1/4 $36 1/2 $.15
Second quarter 54 41 .15
Third quarter 47 5/8 34 7/8 .15
Fourth quarter 52 1/8 34 .15
The Bank of New York (Church Street Station, P.O. Box 11258, New
York, NY 10286-1258, (800)524-4458) is the transfer agent,
registrar and dividend reinvestment agent.
There are no significant restrictions on the payment of
dividends. The approximate number of record holders of common
stock as of February 29, 2000 was 11,510.
On February 11, 2000 the company completed the acquisition of
substantially all the assets of Neal Manufacturing Company in
exchange for 145,000 shares of the company's common stock.
These shares were previously held as treasury stock and had not
been registered.
Item 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December 31,
1999, is as follows (in millions except per share amounts):
December 31 1999 1998 1997 1996 1995
Net sales $7,666.7 $7,384.7 $6,239.1 $5,846.9 $4,936.1
Earnings from continuing
operations 544.9 455.5 358.6 324.7 243.8
Total assets 8,400.2 7,926.4 8,033.8 5,232.2 5,132.2
Long-term debt 2,113.3 2,166.0 2,528.0 1,163.8 1,304.4
Shareholders' equity 3,083.0 2,730.1 2,364.8 2,109.9 1,801.5
Basic earnings per share
Continuing operations $3.33 $2.78 $2.20 $2.01 $1.53
Discontinued operations 0.28 0.33 0.13 0.21 0.17
Diluted earnings per share
Continuing operations $3.29 $2.75 $2.18 $2.00 $1.52
Discontinued operations 0.28 0.33 0.13 0.21 0.17
Dividends per common
Share 0.64 0.60 0.57 0.52 0.49
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Background: In August 1999, the company notified Dresser
Industries (a wholly owned subsidiary of Halliburton Company) of
its desire to terminate their two joint ventures. The ventures
are Dresser-Rand Company (D-R), a producer of reciprocating
compressors and turbomachinery products, and Ingersoll-Dresser
Pump Company (IDP) a manufacturer of pumps used in industrial,
commercial and municipal applications. In accordance with the
terms of the joint venture agreements, the company gave notice
that it wanted to sell its 49% interest in D-R and its 51%
interest in IDP to Dresser Industries. Under the governing
agreements, Dresser Industries had the option to either buy one
or both of the joint ventures from or sell one or both of the
joint ventures to Ingersoll-Rand. However, the company also
announced that if Dresser Industries elected to sell its shares
in these joint ventures back to Ingersoll-Rand, the company would
divest of these units as soon as practical.
On October 5, 1999, the company was notified by Dresser
Industries that it had elected to sell its interests in the joint
ventures to the company. In accordance with the company's
decision to sell these units, as soon as practical, after they
were purchased from Dresser Industries, their results (and
related activity) have been reclassified as "Discontinued
operations (net of tax)" in the accompanying Consolidated
Statement of Income for the three years ended December 31, 1999.
In addition, the net assets of these units have been reclassified
as "Assets held for sale" on the accompanying Consolidated
Balance Sheet. Unless otherwise noted, amounts, percentages and
ratios discussed in this financial review and management analysis
do not include discontinued operations.
On February 9, 2000 the company agreed to sell IDP to Flowserve
Corporation for $775.0 million in cash.
1999 Compared to 1998
The company reported another year of record earnings in 1999.
These achievements were the result of a strong domestic economy,
moderate economic growth in selected international markets, and
continued success of the company's asset-management, strategic-
sourcing and productivity-improvement programs.
Sales for 1999 totalled $7.7 billion, which generated $1,099.3
million of operating income and $544.9 million of net earnings
from continuing operations ($3.29 diluted earnings per share).
Net earnings from discontinued operations totalled $46.2 million
($0.28 diluted earnings per share).
For 1998, sales were $7.4 billion, which generated $969.1
million of operating income and produced net earnings from
continuing operations for the year of $455.5 million ($2.75
diluted earnings per share). In 1998, net earnings from
discontinued operations totalled $53.6 million ($0.33 diluted
earnings per share).
A comparison of key financial data between 1999 and 1998 follows:
o Net sales in 1999 amounted to $7.7 billion, reflecting 3.8%
improvement over the 1998 total of $7.4 billion.
o Cost of goods sold in 1999 was 71.9% of sales, compared to
73.0% in 1998. The ratio of cost of goods sold to sales
reflected a marked improvement in 1999 compared to 1998 based
on the continued success of the company's asset-management,
strategic-sourcing and productivity-improvement programs.
o Administrative, selling and service engineering expenses were
13.7% of sales in 1999, compared to 13.9% for 1998. This
decrease is attributable to the company's cost-containment
programs.
o Operating income for the year totalled $1,099.3 million, a
13.4% increase over 1998 operating income of $969.1 million.
The ratio of operating income to sales in 1999 was 14.3%,
compared to 13.1% for the prior year. This improvement was
the combined effect of the company's aggressive productivity-
improvement and procurement programs, and the continued
stability of domestic markets.
o Interest expense for the year totalled $203.1 million versus
$224.1 million for 1998. The reduction in interest expense
totalled $21.0 million principally due to lower average
outstanding debt balances during 1999 when compared to the
prior year.
o Other income (expense), net, is the sum of foreign exchange
activities, equity in earnings of partially owned affiliates, and
other miscellaneous income and expense items. In 1999, these
activities resulted in a net expense of $22.3 million, an
unfavorable change of $7.0 million compared to the 1998 net other
expense of $15.3 million. This change was caused by lower earnings
from partially owned affiliate companies, lower miscellaneous
income and higher miscellaneous expenses, which were offset by a
favorable change in foreign currency activity in 1999 when compared
to the prior year.
o The company's charges for minority interests are composed of
two items: (1) charges associated with the company's equity-
linked securities (issued during the first quarter of 1998),
which totalled $25.6 million in 1999 and $19.7 million in 1998;
and (2) interests of minority owners (less than 50 %) in a
consolidated unit of the company, which totalled $3.5 million
in 1999 and $3.8 million in 1998.
o The company's effective tax rate for both 1999 and 1998 was
35.5%. The variance from the 35.0% statutory rate primarily was
due to lower tax rates associated with foreign earnings, the
foreign sales corporation, favorable tax benefits associated
with income earned in Puerto Rico, offset by the effect of state
and local taxes and the nondeductibility of a portion of
goodwill.
o Discontinued operations (net of tax) for 1999 amounted to $46.2
million, which was $7.4 million lower than the $53.6 million for
the year ended December 31, 1998. This category represents the
company's 49% interest in the earnings of D-R and the company's
51% interest in IDP, net of appropriate taxes. As previously
announced, the company intends to divest these businesses;
therefore, their net operating results have been classified as
"discontinued operations." The partnership earnings in 1999 were
both approximately 20% below their 1998 levels. Additional
information on discontinued operations is contained throughout
this report and in Note 2 to the Consolidated Financial
Statements.
At December 31, 1999, employment totalled 46,062. This
represents a slight decrease from last year's level of 46,525.
Outlook
The company's outlook for 2000 is for continued strong
improvement in operating results based on a scenario of
moderate worldwide growth. Most of the company's end markets
including car production, housing, commercial construction and
road paving, have a positive outlook. These expectations will
be supported by aggressive asset-management, strategic-sourcing
and productivity-improvement programs.
Review of Business Segments
Specialty Vehicles
Specialty Vehicles Segment sales were $2.3 billion, an increase
of 7.7% over the $2.2 billion reported for 1998. Operating
income for 1999 totalled $405.3 million, representing an increase
of 21.6% over last year's total of $333.3 million. All major
product lines reported improvements in sales, operating income
and operating margins for the year.
Air and Temperature Control
The Air and Temperature Control Segment reported sales of
$2.2 billion, which almost equalled last year's level.
However, operating income for 1999 totalled $286.7 million,
reflecting a 9.2% improvement over the $262.5 million
reported for 1998. Thermo King's sales in 1999 reflected a
modest increase over 1998's level, but operating income
increased by approximately 5%. The air compressor business
reported a modest decrease in sales for the year; however,
operating income increased by more than 15%.
Hardware and Tools
The Hardware and Tools Segment sales increased by 8.7% to $1.9
billion. Operating income for the year was $320.3 million, an
increase of $32.0 million from $288.3 million reported for 1998.
Architectural hardware products reported increases of 15.5% in
sales and 13.3% in operating income. Industrial production
equipment reported lower sales in 1999, but a 4% increase in
operating income.
Engineered Products
The Engineered Products Segment only includes the results of the
company's bearings and components products. The results for IDP,
which were formerly included in this segment, have been
reclassified to discontinued operations. Sales for bearings and
components in 1999 reflect a 1% decrease from the prior year, but
operating income increased by 5%, when compared to 1998, due to
continued cost improvement programs.
Liquidity and Capital Resources
During 1999, the company continued to make progress in improving
its liquidity and capital resources through its aggressive asset
management programs and the ability to generate $836.5 million of
cash flow from its operations. These actions contributed to the
company's reduction in its debt-to-total capital ratio from 44%
at the end of last year to 42% at December 31, 1999. In addition,
adjusting the December 31, 1999, short-term liability for the
purchase of the remaining interest in IDP lowers the debt-to-
total capital ratio 38%.
The following table contains several key measures used by
management to gauge the company's financial performance:
1999 1998 1997
Working capital (in millions) $1,129 $737 $342
Current ratio 1.6 1.5 1.2
Debt-to-total capital ratio 42% 44% 59%
Average working capital
to net sales 11.8% 10.7% 16.6%
Average days outstanding
in receivables 46.2 48.8 53.5
Average months' supply
of inventory 2.4 2.4 2.5
Note: Working capital includes assets held for sale.
The company maintains significant operations in foreign
countries; therefore, the movement of the U.S. dollar against
foreign currencies has an impact on the company's financial
position. Generally, the functional currency of the company's
foreign subsidiaries is their local currency. The company
manages exposure to changes in foreign currency exchange rates
through its normal operating and financing activities, as well as
through the use of forward exchange contracts and options. The
company attempts, through its hedging activities, to mitigate the
impact on income of changes in foreign exchange rates.
Additionally, the company maintains operations in countries where
the company transacts business in U.S. dollars. The functional
currency of these operations is the U.S. dollar. (Additional
information on the company's use of financial instruments can be
found in Note 8 to the Consolidated Financial Statements.)
The following points highlight the financial results and
financial condition of the company's operations with the impact
of foreign currency translation where appropriate:
o Cash and cash equivalents totalled $222.9 million at December
31, 1999, a $179.4 million increase from the prior year-end
balance of $43.5 million. Cash flows from operating activities
provided $836.5 million, investing activities used $237.0
million and financing activities used $445.1 million. Exchange
rate changes during 1999 decreased cash and cash equivalents by
$7.8 million.
o Receivables totalled $988.5 million at December 31, 1999,
compared to $963.7 million at the prior year end, a net
increase of $24.8 million. The increase is attributable to
higher sales activity during the later part of the fourth
quarter and acquisitions, which were offset by reductions
caused by exchange rate changes during 1999. The company
focuses on decreasing its receivables base through its asset-
management program, which produced a reduction in the average
days outstanding in receivables to 46.2 days from the 1998
level of 48.8 days.
o Inventories amounted to $742.1 million at December 31, 1999, a
decrease of $82.7 million from last year's level of $824.8
million. The net reduction to inventories during 1999 is the
net result of the reduction caused by exchange rate changes
during the year of $31.5 million, the company's effort to
reduce inventories, and the net effect of reductions caused by
dispositions exceeding increases from acquisitions.
o Prepaid expenses totalled $60.7 million at the end of the year,
$5.0 million higher than the balance at December 31, 1998. The
increase is associated with a general increase in prepaid
expense accounts from acquired companies during the year.
o Assets held for sale totalled $799.7 million. This reflects an
increase of $399.6 million over the December 31, 1998, balance
of $400.1 million. The account balance at the end of 1998
primarily represents the company's investments in their
ventures in IDP and D-R, which are now identified as
discontinued operations. (See Note 2 to the Consolidated
Financial Statements.) During the current year, this account
was increased by the operating results of the joint ventures
and the December 31, 1999, purchase of the remaining 49%
interest in IDP for $377.0 million as well as the net change in
the assets and liabilities of IDP. On February 2, 2000, the
company purchased the remaining 51% interest in D-R that it did
not previously own for an additional payment of $536.0 million.
o Deferred income taxes (current) of $53.9 million at December
31, 1999, represented the deferred tax benefit of the
difference between the book and tax values of various current
assets and liabilities. The components of the balance are
included in Note 15 to the Consolidated Financial Statements.
o Investments in and advances with partially owned equity
affiliates at December 31, 1999, totalled $198.2 million, an
increase of $14.6 million over the 1998 balance of $183.6
million. This category includes the company's investments in
partially owned equity affiliates (i.e. 50% or less ownership).
Income and dividends from the investments in partially owned
equity affiliates were $9.5 million and $6.4 million,
respectively, in 1999. Amounts due to these units increased
$1.5 million from December 31, 1998. Currency movements were
the primary cause of the remaining change in the account
balance.
o Net property, plant and equipment increased by $3.5 million in
1999 to a year-end balance of $1,240.2 million. Capital
expenditures in 1999 totalled $190.5 million, and acquisitions
(net of dispositions) added $2.7 million. Foreign exchange
fluctuations decreased net fixed assets by approximately $21.2
million. The remaining net decrease was the result of
depreciation and sales and retirements.
o Intangible assets, net, totalled $3,726.3 million at December
31, 1999, as compared to $3,765.8 million at December 31, 1998,
for a net decrease of $39.5 million. The amortization expense
for the current year was $112.8 million. Acquisition activity
and the effects of foreign currency translation accounted for
the balance of the change.
o Deferred income taxes (noncurrent) totalled $158.0 million at
December 31, 1999, an amount that was $48.0 million lower than
the 1998 balance. The components comprising the balance at
December 31, 1999, can be found in Note 15 to the Consolidated
Financial Statements.
o Other assets totalled $209.2 million at year end, an increase
of $33.5 million from the 1998 balance, primarily due to an
increase in prepaid pensions of $32.0 million.
o Accounts payable and accruals totalled $1,224.4 million at
December 31, 1999, a decrease of $60.0 million from last year's
balance of $1,284.4 million. Reduced inventory levels at year
end and acquisitions, net of dispositions, along with the
timing of payrolls and benefits accounted for the reduction in
1999.
o Loans payable including current maturities of long-term debt,
were $495.5 million at the end of 1999, which reflects a $177.5
million increase from the $318.0 million level at December 31,
1998. Approximately $252.2 million of current maturities of
long-term debt were repaid in 1999. The balance at the end of
1999 included a $377.0 million note payable issued in
connection with the company's purchase of the remaining
interest in the IDP joint venture. Excluding this item, loans
payable would have reflected a reduction from the 1998 year-end
balance of approximately $200.0 million. The effect of
translation activity during 1999 had a minimal effect on the
account balance during the year.
o Long-term debt, excluding current maturities, totalled $2,113.3
million, a reduction of approximately $52.7 million from the
prior year's balance of $2,166.0 million. Reductions in long-
term debt of $73.1 million represent the reclassification of
the current maturities of long-term debt to loans payable. Long-
term financings for plant and office expansions accounted for
the modest increase in debt activity for the year. Foreign
exchange activity had a minimal effect on the account balance
during the year.
o Postemployment and other benefit liabilities at December 31,
1999, totalled $805.0 million, a decrease of $15.5 million from
the December 31, 1998, balance. Postemployment liabilities
include medical and life insurance postretirement benefits,
long-term pension and other noncurrent benefit accruals. (See
Notes 16 and 17 to the Consolidated Financial Statements for
additional information.)
o Minority interest liabilities at December 31, 1999, totalled
$95.7 million, which represents a net increase of $62.1 million
over the balance at the end of the prior year. This liability
represents the ownership interests of other entities in certain
consolidated subsidiaries of the company. The increase for 1999
primarily represents an equity interest purchase by a vendor in
an entity controlled by the company.
o Other liabilities (noncurrent) at December 31, 1999, totalled
$161.8 million, an increase of $9.3 million over the balance at
December 31, 1998. The increase is associated with acquisitions
during 1999. These obligations are not expected to be paid in
the next year. Generally, these accruals cover environmental,
insurance, legal and other long-term contractual obligations.
Other information concerning the company's financial resources,
commitments and plans is as follows:
The average short-term borrowings outstanding, excluding current
maturities of long-term debt, was $104.8 million in 1999,
compared to $314.8 million in 1998. The weighted average
interest rate during 1999 was 6.6%, compared to 6.3% during the
previous year. The maximum amounts outstanding during 1999 and
1998 were $422.4 million and $794.1 million, respectively.
The company had $1.3 billion in domestic short-term credit lines
and $750.0 million in long-term credit lines at December 31, 1999
all of which were unused. Additionally, $599.8 million of
foreign credit lines were available for working capital purposes,
$527.3 million of which was used at the end of the year. These
facilities exceed projected requirements for 2000 and provide
direct support for commercial paper and indirect support for
other financial instruments, such as letters of credit and
comfort letters.
In 1999, foreign currency translation adjustments decreased
shareholders' equity by $46.5 million. This change was due to
the strengthening of the U.S. dollar against other currencies in
countries where the company has significant operations. Currency
changes in the euro, euro-linked currencies and the British pound
accounted for nearly all of the change.
The company utilizes two wholly owned special purpose subsidiaries
to purchase accounts and notes receivable at a discount from the
company on a continuous basis. These special purpose subsidiaries
simultaneously sell an undivided interest in these accounts and
notes receivable to a financial institution up to a maximum of
$170.0 million. The agreements between the special purpose
corporations and the financial institution are renewable annually.
The company intends to renew these agreements at their expiration
dates with either the current or another financial institution. The
company is retained as the servicer of the pooled receivables. At
December 31, 1999 and 1998, $170.0 million of such receivables
remained uncollected.
Capital expenditures were $190.5 million and $200.9 million in
1999 and 1998, respectively. The company continues investing to
improve manufacturing productivity, reduce costs, and provide
environmental enhancements and advanced technologies for existing
facilities. The capital expenditure program for 2000 is
estimated at approximately $210.0 million, including amounts
approved in prior periods. There are no planned projects, either
individually or in the aggregate, that represent a material
commitment for the company. Many of these projects are subject
to review and cancellation at the option of the company without
incurring substantial charges.
Financial Market Risk
The company generates foreign currency exposures in the normal
course of business. To mitigate the risk from foreign currency
exchange rate fluctuations, the company will generally enter into
forward currency exchange contracts for the purchase or sale of a
currency in accordance with the company's policies and
procedures. The company applies sensitivity analysis and value at
risk (VAR) techniques when measuring the company's exposure to
currency fluctuations. VAR is a measurement of the estimated
loss in fair value until currency positions can be neutralized,
recessed or liquidated and assumes a 95% confidence level with
normal market conditions. The potential one-day loss, as of
December 31, 1999, was $1.1 million and it is considered
insignificant in relation to the company's results of operations
and shareholders' equity.
With regard to interest rate risk, the effect of a hypothetical
1% increase in interest rates, across all maturities, would
decrease the estimated fair value of the company's long-term debt
at December 31, 1999, from $2,083.9 million to an estimated fair
value of $2,004.1 million.
Environmental Matters
The company continues to be dedicated to an environmental program
to reduce the utilization and generation of hazardous materials
during the manufacturing process and to remediate identified
environmental concerns. As to the latter, the company currently
is engaged in site investigations and remedial activities to
address environmental cleanup from past operations at current and
former manufacturing facilities.
During 1999, the company spent approximately $8.0 million on
capital projects for pollution abatement and control, and an
additional $6.0 million for environmental remediation
expenditures at sites presently or formerly owned or leased by
the company. It should be noted that these amounts are difficult
to estimate because environmental improvement costs are generally
a part of the overall improvement costs at a particular plant.
Therefore, the accurate estimate of which portion of an
improvement or a capital expenditure relates to an environmental
improvement is difficult to ascertain. The company believes that
these expenditure levels will continue and may increase over
time. Given the evolving nature of environmental laws,
regulations and technology, the ultimate cost of future
compliance is uncertain.
The company is a party to environmental lawsuits and claims, and
has received notices of potential violations of environmental
laws and regulations from the Environmental Protection Agency and
similar state authorities. It is identified as a potentially
responsible party (PRP) for cleanup costs associated with off-
site waste disposal at approximately 30 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 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.
Forward-looking Statements
This annual report contains not only historical information, but
also forward-looking statements regarding expectations for future
company performance. Forward-looking statements involve risk and
uncertainty. See the company's 1999 Annual Report on Form 10-K
for a discussion of factors which could cause future results to
differ from current expectations.
1998 Compared to 1997
Sales for 1998 totalled $7.4 billion, which generated $969.1
million of operating income and $455.5 million of net earnings
from continuing operations ($2.75 diluted earnings per share).
Net income from discontinued operations totalled $53.6 million
in 1998 ($0.33 diluted earnings per share). The company's
results for 1998 included a full year's benefit from the October
31, 1997, acquisition of Thermo King Corporation (Thermo King).
Thermo King reported 1998 sales of $1.2 billion with an
operating income contribution of $159.3 million and net earnings
of $24.0 million or 15 cents diluted earnings per share after
the allocation of acquisition interest expense and the related
tax benefit.
The company's results for 1997 were sales of $6.2 billion, which
generated $723.5 million of operating income and produced net
earnings from continuing operations of $358.6 million for the
year ($2.18 diluted earnings per share). In 1997, net income from
discontinued operations was $21.9 million (or $0.13 diluted
earnings per share). Thermo King generated $176.9 million of
sales and produced an operating loss of $0.2 million, after
goodwill amortization and the effect of estimated purchase
accounting adjustments for the last two months of 1997. Thermo
King's net loss for this two-month period was $11.3 million
(seven cents diluted earnings per share) after the allocation of
acquisition interest expense of $27.3 million.
Excluding Thermo King's results from both years, 1998 sales
increased modestly, with an 11.9% increase in operating income
resulting in a significant increase of 17% in net earnings from
continuing operations for 1998 over the adjusted 1997 results.
A comparison of key financial data between 1998 and 1997 follows:
o Net sales in 1998 were $7.4 billion, reflecting an 18.4%
improvement over the 1997 total of $6.2 billion. Excluding
Thermo King's results from both years, adjusted sales for 1998
increased by 2% over the 1997 adjusted total.
o Cost of goods sold in 1998 was 73.0% of sales, compared to
73.9% in 1997. Excluding Thermo King's results from both
years, the adjusted ratio of cost of goods sold to sales
reflected a marked improvement in 1998, compared to 1997.
o Administrative, selling and service engineering expenses were
13.9% of sales in 1998, compared to 14.5% for 1997. This
decrease is primarily attributable to the inclusion of Thermo
King, which traditionally had a lower ratio of selling and
administrative expenses to sales than the company's historical
lines of business.
o Operating income for the year totalled $969.1 million, a
33.9% increase over 1997 operating income of $723.5 million.
The ratio of operating income to sales in 1998 was 13.1%,
compared to 11.6% for the prior year. After excluding Thermo
King's results from both years, adjusted 1998 operating
income still reflects a double-digit improvement over the
adjusted 1997 results. This improvement was the combined
effect of the company's aggressive productivity-improvement
and procurement programs, and the continued stability of
domestic markets.
o Interest expense for the year totalled $224.1 million versus
$135.2 million for 1997. Interest expense associated with the
debt incurred for the Thermo King acquisition totalled
approximately $129.3 million in 1998 (excluding costs related
to the company's equity-linked securities) and $27.3 million
for the last two months of 1997.
o Other income (expense), net, is the sum of foreign exchange
activities, equity in earnings of partially owned affiliates,
and other miscellaneous income and expense items. In 1998,
these activities resulted in a net expense of $15.3 million, an
unfavorable change of $9.0 million compared to the 1997 net
other expense of $6.3 million. This change was caused by lower
earnings from partially owned affiliates and higher foreign
exchange losses of $8.2 million in 1998, offset by lower net
miscellaneous income and expense items.
o The company's charges for minority interests are composed of
two items: (1) $19.7 million of charges associated with the
company's equity-linked securities issued during the first
quarter of 1998; and (2) interests of minority owners (less
than 50%) in a consolidated unit of the company which totalled
$3.8 million in 1998 and $3.6 million in 1997.
o The company's effective tax rate for 1998 was 35.5%, which
improved from the 38.0% reported for the prior year due to a
full-year favorable tax benefit associated with the Thermo King
acquisition. The variance from the 35.0% statutory rate
primarily was due to tax rates associated with foreign earnings,
the foreign sales corporation, favorable tax benefits associated
with the income earned in Puerto Rico, the effect of state and
local taxes and the nondeductibility of a portion of goodwill.
o Discontinued operations (net of tax) for 1998 amounted to
$53.6 million, which was more than double 1997's results of
$21.9 million. This category represents the company's 49%
interest in the earnings of D-R and the company's 51% interest
in IDP reduced by appropriate taxes. As previously announced,
the company intends to divest these units; therefore, their net
operating results have been classified as "discontinued
operations." The net earnings from these partnerships in 1998
were both substantially above their 1997 levels. These
increases were the result of a stronger economic climate for
their products, coupled with the fact that both operations
recorded a total of $60.0 million of restructuring charges
during 1997 to reduce their headcount and to close
underperforming operations. (See Note 2 to the Consolidated
Financial Statements for additional information.)
At December 31, 1998, employment totalled 46,525. This
represents a slight decrease from the prior year's level of
46,567.
During 1998, the company made significant progress in improving
its liquidity and capital resources by (1) completing the
financing of the Thermo King acquisition with the issuance of
$402.5 million of equity-linked securities during the first
quarter of the year, and (2) reducing the company's debt by an
additional $570.9 million, which was generated from the
company's strong cash flow during the year. The proceeds from
the equity-linked securities were used to reduce the company's
short-term borrowings, which were originally issued to satisfy
a portion of the cash requirements for the acquisition of
Thermo King on October 31, 1997. These actions primarily
contributed to the company's reduction in its debt-to-total
capital ratio from 59% at the end of 1997 to 44% at December
31, 1998.
The following points highlight the financial results and
financial condition of the company's operations with the impact
of foreign currency translation where appropriate:
o Cash and cash equivalents totalled $43.5 million at December
31, 1998, a $23.0 million reduction from the prior year-end
balance of $66.5 million. Cash flows from operating activities
provided $859.6 million, investing activities used $161.9
million and financing activities used $741.8 million. Exchange
rate changes during 1998 increased cash and cash equivalents by
$1.0 million.
o Marketable securities totalled $2.0 million at the end of 1998,
$1.8 million below the balance at December 31, 1997. The net
reduction was due to maturity and exchange rate changes.
o Receivables totalled $963.7 million at December 31, 1998,
compared to $1,080.7 million at the end of 1997, a net decrease
of $117.0 million. The decrease is attributable to improved
cash collections and reductions from dispositions. The company
focuses on decreasing its receivables base through its asset-
management program, which produced a reduction in the average
days outstanding in receivables to 48.8 days from the 1997
level of 53.5 days.
o Inventories amounted to $824.8 million at December 31, 1998, an
increase of $84.3 million from 1997's level of $740.5 million.
Inventory increases at year end in anticipation of early 1999
shipments were the primary reason for the increase. The
company's emphasis on inventory control was demonstrated by the
reduction of the average months' supply of inventory to 2.4
months at December 31, 1998, compared to 2.5 months at the
prior year end.
o Prepaid expenses totalled $55.7 million at the end of 1998,
$23.7 million lower than the balance at December 31, 1997.
Changes in prepaid pension assets and a general reduction in
other prepaid assets were the reasons for the reduction in the
account balance.
o Assets held for sale totalled $400.1 million at December 31,
1998, and reflects an increase of $11.0 million over the
December 31, 1997, balance of $389.1 million. The account
balance at the end of both years primarily represents the
company's investments in IDP and D-R, which are now identified
as discontinued operations. (See Note 2 to the Consolidated
Financial Statements.) During 1998, this account was increased
by the operating results of the joint ventures and was reduced
by changes in the net assets. In addition, the account balance
was also reduced by approximately $22.5 million, for other
asset dispositions not involving either IDP or D-R.
o Deferred income taxes (current) of $68.8 million at December
31, 1998, represented the deferred tax benefit of the
difference between the book and tax values of various current
assets and liabilities. The components of the balance are
included in Note 15 to the Consolidated Financial Statements.
o Investments in and advances with partially owned equity
affiliates at December 31, 1998, totalled $183.6 million, $16.1
million below the 1997 balance of $199.7 million. Income and
dividends from partially owned equity affiliates were $13.6
million and $6.7 million, respectively. Amounts due from these
units decreased $12.6 million from December 31, 1997. Currency
movements and acquisitions were the primary cause of the
remaining change in the account balance.
o Net property, plant and equipment increased by $63.0 million in
1998 to a year-end balance of $1,236.7 million. Capital
expenditures in 1998 totalled $200.9 million, and acquisitions
(net of dispositions) added $13.0 million. Foreign exchange
fluctuations increased net fixed assets by approximately $3.6
million. The remaining net decrease was the result of
depreciation and sales and retirements.
o Intangible assets, net, totalled $3,765.8 million at December
31, 1998, as compared to $3,822.4 million at December 31, 1997,
for a net decrease of $56.6 million. The amortization expense
for 1998 was $110.1 million. Acquisition activity and the
effects of foreign currency translation accounted for the
balance of the change.
o Deferred income taxes (noncurrent) totalled $206.0 million at
December 31, 1998. This total was $26.3 million higher than
the 1997 balance. The components comprising the balance at
December 31, 1998, can be found in Note 15 to the Consolidated
Financial Statements.
o Other assets totalled $175.7 million at the end of 1998, a
decrease of $31.6 million from the December 31, 1997, balance
of $207.3 million. Other assets decreased by approximately
$25.0 million due to a decrease in prepaid pensions and a
general reduction in other noncurrent assets. Foreign exchange
activity in 1998 had a minimal effect on the account balance
during the year.
o Accounts payable and accruals totalled $1,284.4 million at
December 31, 1998, an increase of $109.1 million from last
year's balance of $1,175.3 million. Increased inventory levels
at year end and acquisitions, net of dispositions, along with
the timing of payrolls and benefits account for the increase in
1998.
o Loans payable, including current maturities on long-term debt,
were $318.0 million at the end of 1998, which reflects a $605.8
million reduction from the $923.8 million level at December 31,
1997. Proceeds of $389.6 million from the issuance of the
company's equity-linked securities were used to reduce short-
term debt during the year. Current maturities of long-term
debt increased the account balance by an additional $251.8
million. In addition, the company also repaid approximately
$261.2 million of current maturities of long-term debt.
o Long-term debt, excluding current maturities, totalled $2,166.0
million, a reduction of approximately $362.1 million from the
prior year's balance of $2,528.1 million. Reductions in long-
term debt of $251.8 million represent the reclassification of
the current maturities of long-term debt to loans payable. In
addition, the company repaid $110.0 million of long-term
debt with accelerated payments during the year. Foreign
exchange activity had a minimal effect on the account balance
during the year.
o Postemployment and other benefit liabilities at December 31,
1998, totalled $820.5 million, a decrease of $41.6 million from
the December 31, 1997, balance. Postemployment liabilities
include medical and life insurance postretirement benefits,
long-term pension and other noncurrent postemployment accruals.
(See Notes 16 and 17 to the Consolidated Financial Statements
for additional information).
o Minority interest liabilities at December 31, 1998, totalled
$33.6 million, which represents a net increase of $10.1 million
over the balance at the end of the prior year. This liability
represents the ownership interests of other entities in
selected consolidated subsidiaries of the company. The change
in the account balance for 1998 was due to earnings, advances
and changes in ownership participation.
o Other liabilities (noncurrent) at December 31, 1998, totalled
$152.5 million, which reflected an increase of $6.5 million
over the balance at December 31, 1997. These obligations are
not expected to be paid in the next year. Generally, these
accruals cover environmental, insurance, legal and other long-
term contractual obligations.
Other information concerning the company's financial resources,
commitments and plans is as follows:
The average short-term borrowings outstanding, excluding
current maturities of long-term debt, was $314.8 million in
1998, compared to $376.0 million in 1997. The weighted average
interest rate during 1998 was 6.3%, compared to 6.2% during the
previous year. The maximum amounts outstanding during 1998 and
1997, were $794.1 million and $2,433.0 million, respectively.
The company had $1.0 billion in domestic short-term credit
lines at December 31, 1998, and $436.2 million of foreign
credit lines available for working capital purposes, $1.4
billion of which was unused at the end of the year.
In 1998, foreign currency translation adjustments increased
shareholders' equity by $2.5 million. This change was due to
the minor weakening of the U.S. dollar against other currencies
in countries where the company has significant operations.
Currency changes in France, Germany, and Japan accounted for
nearly all of the change.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
The information under the caption "Financial Market Risk" in Item
7, Management's Discussion and Analysis of Financial Condition
and Results of Operations is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(a) The consolidated financial statements and the report thereon
of PricewaterhouseCoopers LLP dated February 1, 2000, are
included as Exhibit 13 - the Annual Report to Shareholders for
1998.
(b) The unaudited quarterly financial data for the two-year
period ended December 31, 1999, is as follows (in millions except
per share amounts):
Net Cost of Operating Net
1999 sales goods sold income earnings
First quarter $1,891.1 $1,390.2 $ 238.6 $121.1
Second quarter 2,042.0 1,468.4 304.8 166.6
Third quarter 1,846.1 1,324.7 272.9 137.5
Fourth quarter 1,887.5 1,331.7 283.0
165.9
Year 1999 $7,666.7 $5,515.0 $1,099.3 $591.1
Net Cost of Operating Net
1998 sales goods sold income earnings
First quarter $1,812.7 $1,341.9 $ 206.6 $ 99.1
Second quarter 1,954.4 1,429.5 266.8 140.9
Third quarter 1,802.3 1,320.1 237.0 119.4
Fourth quarter 1,815.3 1,296.3 258.7 149.7
Year 1998 $7,384.7 $5,387.8 $ 969.1 $509.1
All amounts shown have been restated to reflect discontinued operations.
1999 1998
Basic Diluted Basic Diluted
earnings earnings earnings earnings
per per per per
common common common common
share share share share
First quarter $0.74 $0.73 $0.60 $0.60
Second quarter 1.01 0.99 0.86 0.85
Third quarter 0.84 0.83 0.73 0.72
Fourth quarter 1.02 1.01 0.92 0.91
Year $3.61 $3.57 $3.11 $3.08
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is (i) incorporated by
reference in this Form 10-K Annual Report from pages 1 through 5,
and 17 of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on May 3, 2000, and (ii)
included after Item 4 in Part I of this Form 10-K Annual Report.
Item 11. EXECUTIVE COMPENSATION
Information on executive compensation is incorporated by
reference in this Form 10-K Annual Report from pages 7 through 17
of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on May 3, 2000.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information on security ownership of directors and nominees,
directors and officers as a group and certain beneficial owners
is incorporated by reference in this Form 10-K Annual Report on
pages 4 and 5 of the company's definitive proxy statement for the
Annual Meeting of Shareholders to be held on May 3, 2000.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is incorporated by reference in
this Form 10-K Annual Report from page 17 of the company's
definitive proxy statement for the Annual Meeting of Shareholders
to be held on May 3, 2000.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. and 2. Financial statements and financial statement
schedules
The financial statements, together with the
report thereon of PricewaterhouseCoopers LLP
dated February 1, 2000, included as Exhibit 13
and the unaudited quarterly financial data
included in Part II Item 8(b) are incorporated
by reference in this Form 10-K Annual Report.
The financial statement schedule listed in the
accompanying index should be read in conjunction
with the financial statements in such Annual
Report to Shareholders for 1999.
Separate financial statements for all 50 percent
or less owned companies, accounted for by the
equity method have been omitted because no
individual entity constitutes a significant
subsidiary.
(b) Reports on Form 8-K
None
3. Exhibits
The exhibits listed on the accompanying index to
exhibits are filed as part of this Form 10-K
Annual Report.
INGERSOLL-RAND COMPANY
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a) 1 and 2)
Form
10-K
Consolidated Financial Statements:
Report of independent accountants *
Consolidated balance sheet at
December 31, 1999 and 1998 *
For the years ended December 31, 1999, 1998
and 1997:
Consolidated statement of income *
Consolidated statement of shareholders'
equity *
Consolidated statement of cash flows *
Notes to consolidated financial statements *
Selected unaudited quarterly financial data **
Financial Statement Schedule:
Report of independent accountants on
financial statement schedule See below
Consolidated schedule for the years ended
December 31, 1999, 1998 and 1997:
Schedule II -- Valuation and Qualifying
Accounts See below
* See Exhibit 13 - Ingersoll-Rand Company Annual Report to
Shareholders for 1999.
** See Item 8 Financial Statements and Supplementary Data.
Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Ingersoll-Rand Company:
Our audits of the consolidated financial statements referred to
in our report dated February 1, 2000, appearing in the 1999
Annual Report to Shareholders of Ingersoll-Rand Company (which
report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2)
of this Form 10-K. In our opinion, this financial statement
schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
/S/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
February 1, 2000
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-3 (No. 333-38367, No. 333-
37019, and No. 333-34029) and to the incorporation by reference
in the Registration Statements on Form S-8 (No. 333-42133, No.
333-19445, No. 333-67257, No. 333-00829, and No. 33-35229) of
Ingersoll-Rand Company of our report dated February 1, 2000
relating to the financial statements, which appears in the 1999
Annual Report to Shareholders, which is incorporated in this
Annual Report on Form 10-K. We also consent to the incorporation
by reference of our report dated February 1, 2000 relating to the
financial statement schedule, which appears in this Form 10-K.
/S/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Florham Park, New Jersey
March 29, 2000
SCHEDULE II
INGERSOLL-RAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 and 1997
(Amounts in millions)
Additions
charged to
Balance at costs and Balance
beginning expenses Deductions at end
Description of year (*) (**) of year
1999
Doubtful accounts $ 35.4 $ 8.7 $ 10.7 $ 33.4
1998
Doubtful accounts $ 29.4 $ 10.5 $ 4.5 $ 35.4
1997
Doubtful accounts $ 29.8 $ 10.8 $ 11.2 $ 29.4
(*) "Additions" include foreign currency translation.
(**) "Deductions" include accounts and advances written off,
less recoveries.
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
Description
3 (i) Restated Certificate of Incorporation of Ingersoll-Rand
Company, as amended through May 28, 1992. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for the year
ended December 31, 1993, filed March 30, 1994.
3 (ii) Amendment to Restated Certificate of Incorporation of
Ingersoll-Rand Company filed May 28, 1992. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for the year
ended December 31, 1993, filed March 30, 1994.
3 (iii) Amendment to Restated Certificate of Incorporation of
Ingersoll-Rand Company filed August 20, 1997. Incorporated by
reference to Form S-3 filed October 2, 1997.
3 (iv) By-Laws of Ingersoll-Rand Company, as amended through
October 1, 1999. Filed herewith.
4 (i) Rights Agreement, dated as of November 9, 1998.
Incorporated by reference from Form 8-A/A of Ingersoll-
Rand Company filed on November 13, 1998.
4 (ii) Indenture, dated as of August 1, 1986 between Ingersoll-
Rand Company and The Bank of New York, as Trustee, as
supplemented. Incorporated by reference to Exhibits 4.1, 4.2 and
4.3 of the company's Form S-3 Registration Statement
No. 33-39474.
4(iii) Purchase Contract Agreement dated as of March 23, 1998
between Ingersoll-Rand Company and The Bank of New York, as
Purchase Contract Agent. Incorporated by reference to Form 10-K
of Ingersoll-Rand Company for the year ended December 31, 1998,
filed March 30, 1999.
4(iv) Pledge Agreement dated as of March 23, 1998 between
Ingersoll-Rand Company and The Chase Manhattan Bank, as
Collateral Agent, Custodial Agent and Securities Intermediary.
Incorporated by reference to Form 10-K of Ingersoll-Rand Company
for the year ended December 31, 1998, filed March 30, 1999.
4(v) Indenture dated as of March 23, 1998 between Ingersoll-Rand
Company and The Bank of New York, as trustee. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for the year
ended December 31, 1998, filed March 30, 1999.
4(vi) First Supplemental Indenture dated as of March 23, 1998
between Ingersoll-Rand Company and The Bank of New York, as
trustee. Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for the year ended December 31, 1998, filed March 30,
1999.
4(vii) Amended and Restated Declaration of Trust for Ingersoll-
Rand Financing I, a Delaware statutory business trust, dated
March 23, 1998. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for the year ended December 31, 1998,
filed March 30, 1999.
4(viii) Guarantee Agreement dated as of March 23, 1998, between
Ingersoll-Rand Company and The First National Bank of Chicago, as
trustee. Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for the year ended December 31, 1998, filed March 30,
1999.
4 (ix) (a) Ingersoll-Rand Company is a party to several long-term
debt instruments under which in each case the total amount of
securities authorized does not exceed 10% of the total assets of
Ingersoll-Rand Company and its subsidiaries on a consolidated
basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of
Regulation S-K, Ingersoll-Rand Company agrees to furnish a copy
of such instruments to the Securities and Exchange Commission
upon request.
10 (iii) The following exhibits constitute management contracts
or compensatory plans or arrangements required by Item 601 of
Regulation S-K.
10 (iii) (a) Management Incentive Unit Plan of Ingersoll- Rand
Company. Amendment to the Management Incentive Unit Plan,
effective January 1, 1982. Amendment to the Management
Incentive Unit Plan, effective January 1, 1987. Amendment to the
Management Incentive Unit Plan, effective June 3, 1987.
Incorporated by reference to Form 10-K of Ingersoll-Rand Company
for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (b) Ingersoll-Rand Company Directors Deferred
Compensation and Stock Award Plan. Incorporated by reference to
Form 10-K for the year ended December 31, 1996, filed March 26,
1997.
10 (iii) (c) Description of Bonus Arrangement for Executive Vice
Presidents of Ingersoll-Rand Company. Filed herewith.
10 (iii) (d) Description of Bonus Arrangement for Chairman,
President and Staff Officers. Incorporated by reference to Form
10-K of Ingersoll-Rand Company for the year ended December 31,
1993, filed March 30, 1994.
10 (iii) (e) Amended and Restated Form of Change of Control
Agreement as of March 1, 1999 with Chairman of Ingersoll-Rand
Company. Incorporated by reference to Form 10-K of Ingersoll-
Rand Company for the year ended December 31, 1998, filed March
30, 1999.
10 (iii) (f) Amended and Restated Form of Change of Control
Agreement as of March 1, 1999, with selected executive officers
other than Chairman of Ingersoll-Rand Company. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for the year
ended December 31, 1998, filed March 30, 1999.
10 (iii) (g) Executive Supplementary Retirement Agreement for
selected executive officers. Incorporated by reference to Form 10-
K of Ingersoll-Rand Company for the year ended December 31, 1993,
filed March 30, 1994.
10 (iii) (h) Executive Supplementary Retirement Agreement for
selected executive officers. Incorporated by reference to Form 10-
K for the year ended December 31, 1996, filed March 26, 1997.
10 (iii) (i) Forms of insurance and related letter agreements
with certain executive officers. Incorporated by reference to
Form 10-K of Ingersoll-Rand Company for the year ended December
31, 1993, filed March 30, 1994.
10 (iii) (j) Incentive Stock Plan of 1990 of Ingersoll-Rand
Company. Incorporated by reference to Form 10-K of Ingersoll-
Rand Company for the year ended December 31, 1993, filed March
30, 1994.
10 (iii) (k) Restated Supplemental Pension Plan. Incorporated
by reference to Form 10-K of Ingersoll-Rand Company for the year
ended December 31, 1995, filed March 29, 1996.
10 (iii) (l) Supplemental Stock and Savings Investment Plan
effective as of January 1, 1989. Incorporated by reference to
Form 10-K of Ingersoll-Rand Company for the year ended December
31, 1993, filed March 30, 1994.
10 (iii) (m) Supplemental Retirement Account Plan effective
as of January 1, 1989. Incorporated by reference to Form
10-K of Ingersoll-Rand Company for the year ended December 31,
1993, filed March 30, 1994.
10 (iii) (n) Incentive Stock Plan of 1995 of Ingersoll-Rand
Company. Incorporated by reference to the Notice of 1995 Annual
Meeting of Shareholders and Proxy Statement dated March 15, 1995.
See Appendix A of the Proxy Statement dated March 15, 1995.
10 (iii) (o) Senior Executive Performance Plan. Incorporated
by reference to the Notice of 1995 Annual Meeting of Shareholders
and Proxy Statement dated March 15, 1995. See Appendix B of the
Proxy Statement dated March 15, 1995.
10 (iii) (p) Amended and Restated Elected Officers Supplemental
Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for the year ended December 31, 1998, filed March 30,
1999.
10 (iii) (q) Selected Executive Officer Employment Agreement.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for the year ended December 31, 1995, filed
March 29, 1996.
10 (iii) (r) Executive Deferred Compensation and Stock Award
Plan. Incorporated by reference to Form 10-K for the year ended
December 31, 1996, filed March 26, 1997.
10 (iii) (s) Chief Financial Officer Employment Agreement.
Incorporated by reference to Form 10-K for the year ended
December 31, 1997, filed March 6, 1998.
10 (iii) (t) Incentive Stock Plan of 1998 of Ingersoll-Rand
Company. Incorporated by reference to Appendix A to the Notice
of 1998 Annual Meeting of Shareholders and Proxy Statement dated
March 17, 1998.
10 (iii) (u) Composite Employment Agreement with Chief Executive
Officer. Filed herewith.
11 Computation of Earnings Per Share. Filed herewith.
12 Computations of Ratios of Earnings to Fixed Charges.
Filed herewith.
13 Ingersoll-Rand Company Annual Report to Shareholders
for 1999. Not deemed to be filed as part of this report
except to the extent incorporated by reference. Filed herewith.
21 List of Subsidiaries of Ingersoll-Rand Company.
Filed herewith.
27 Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
INGERSOLL-RAND COMPANY
(Registrant)
By /S/ David W. Devonshire
Date March 30, 2000
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
President,Chief
Executive Officer
and Director (Principal
/S/ Herbert L. Henkel Executive Officer) March 30, 2000
(Herbert L. Henkel)
Executive Vice
President,Chief Financial
Officer (Principal
/S/ David W. Devonshire Financial Officer) March 30, 2000
(David W. Devonshire)
Vice President and
Controller (Principal
/S/ Steven R. Shawley Accounting Officer) March 30, 2000
(Steven R. Shawley)
/S/ James E. Perrella Chairman and Director March 30, 2000
(James E. Perrella)
/S/ Joseph P. Flannery Director March 30, 2000
(Joseph P. Flannery)
/S/ Peter C. Godsoe Director March 30, 2000
(Peter C. Godsoe)
/S/ Constance J. Horner Director March 30, 2000
(Constance J. Horner)
/S/ H. William Lichtenberger Director March 30, 2000
(H. William Lichtenberger)
/S/ Theodore E. Martin Director March 30, 2000
(Theodore E. Martin)
/S/ Orin R. Smith Director March 30, 2000
(Orin R. Smith)
/S/ Richard J. Swift Director March 30, 2000
(Richard J. Swift)
/S/ Tony L. White Director March 30, 2000
(Tony L. White)
Exhibit 3 (iv)
BY-LAWS
of
INGERSOLL-RAND COMPANY
As amended through October 1, 1999
BY-LAWS
of
INGERSOLL-RAND COMPANY
ARTICLE I.
STOCKHOLDERS' MEETINGS
Section 1. Annual Meeting: The annual meeting of the
Stockholders of the Company shall be held on the fourth Thursday
of April, in each year, or such other date as the Board of
Directors may determine, at such hour and at such place within or
without the State of New Jersey as may be fixed by the Board of
Directors and stated in the notice of the meeting, for the
election of Directors of the Company and for the transaction of
such other business as may come before it in accordance with the
provisions of these By-Laws.
At any such annual meeting of Stockholders, only such business
shall be conducted as shall have been brought before the meeting
(a) by or at the direction of the Board of Directors, or (b) by
any Stockholder entitled to vote at such meeting who complies
with the procedures set forth in this Section 1. Any Stockholder
entitled to vote at such meeting may propose business to be
included in the agenda of such meeting only if written notice of
such Stockholder's intent is given to the Secretary of the
Company, either by personal delivery or by United States mail,
postage prepaid, not later than 90 days in advance of the
anniversary of the immediately preceding annual meeting or if the
date of the annual meeting of Stockholders occurs more than 30
days before or 60 days after the anniversary of such immediately
preceding annual meeting, not later than the close of business on
the seventh day following the date on which notice of such
meeting is given to Stockholders. A Stockholder's notice to the
Secretary shall set forth in writing as to each matter such
Stockholder proposes to bring before the annual meeting (a) a
brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear
on the Company's books, of the Stockholder proposing such
business, (c) the class and number of shares of the Company which
are beneficially owned by the Stockholder and (d) any material
interest of the Stockholder in such business. Notwithstanding
anything in these By-Laws to the contrary, no business shall be
conducted at an annual meeting except in accordance with the
procedures set forth in this Section 1. The officer of the
Company or other person presiding at the annual meeting shall, if
the facts so warrant, determine and declare to the meeting that
business was not properly brought before the meeting in
accordance with the provisions of this Section 1, and, if such
officer or other person should so determine, he or she shall so
declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
Section 2. Special Meetings: Special meetings of the
Stockholders may be held at the principal office of the Company
in the State of New Jersey or at such other place within or
without said State as may from time to time be designated by the
Board of Directors and stated in the notice of the meeting,
whenever called in writing by the Chairman of the Board, the
Vice-Chairman or the President or by vote of a majority of the
Board of Directors. At any special meeting of the Stockholders,
only such business shall be conducted as shall have been brought
before the meeting by or at the direction of the Board of
Directors and such business shall be confined to the object or
objects stated in the notice thereof.
Section 3. Quorum: Unless otherwise provided in the Certificate
of Incorporation of this Company or by statute, the presence in
person or by proxy of the holders of record of the shares
entitled to cast a majority of the votes at any meeting of the
Stockholders shall constitute a quorum at such meeting. Whenever
the holders of any class or series of shares are entitled to vote
separately on a specified item of business, the presence in
person or by proxy of the holders of record of the shares of such
class or series entitled to cast a majority of the votes thereon
shall constitute a quorum for the transaction of such specified
item of business.
If the holders of the amount of stock necessary to constitute a
quorum shall fail to attend in person or by proxy at the time and
place fixed by these By-Laws for an annual meeting, or as fixed
by notice, as above provided for a special meeting, a majority in
interest of the Stockholders present, in person or by proxy, may
adjourn from time to time without notice other than announcement
at the meeting until the holders of the amount of stock requisite
to constitute a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as
originally notified.
Section 4. Organization: The Chairman of the Board shall call
meetings of the Stockholders to order and shall act as chairman
of such meetings. In the absence of the Chairman of the Board,
or if he so designates, the Chief Executive Officer, or in his
absence, the Vice Chairman, the President, an Executive Vice
President shall preside, and in the absence of any of the
foregoing officers, the Stockholders present, or the Board of
Directors, may appoint any stockholder to act as chairman of any
meeting.
The Secretary of the Company shall act as Secretary of all
meetings of the Stockholders. In the absence of the Secretary at
any meeting of the Stockholders, the presiding officer, may
appoint any person to act as Secretary of the meeting.
Section 5. Voting: At each meeting of the Stockholders, every
Stockholder shall be entitled to vote in person or by proxy
appointed by instrument in writing subscribed by such Stockholder
or by his duly authorized attorney and delivered to the
inspectors at the meeting. The votes for Directors and, upon
demand of any Stockholder, the votes upon any question before the
meeting shall be by ballot.
Section 6. Inspectors: At each annual stated meeting of the
Stockholders for the election of Directors, the presiding officer
of such meeting shall appoint two persons to act as inspectors,
who shall be sworn to perform their duties in accordance with the
laws of the State of New Jersey, and who shall return a formal
certificate.
Section 7. Organization: The Board of Directors shall annually
elect one of its members to be Chairman of the Board and shall
fill any vacancy in the position of Chairman of the Board at such
time and in such manner as the Board of Directors shall
determine.
The Chairman of the Board shall preside at meetings of the Board
of Directors and lead the Board in fulfilling its
responsibilities as defined in Section 1 of this Article II and,
in particular, its responsibilities to oversee the performance of
the Company.
The Board of Directors may also elect one or more of its members
to serve as a Vice Chairman of the Board who shall have such
duties and responsibilities as are provided by these By-Laws or
may be determined by the Board of Directors.
In the absence of the Chairman of the Board, the Chief Executive
Officer, or in his absence, the Vice Chairman of the Board, or in
his absence, a member of the Board selected by the members
present, shall preside at meetings of the Board.
Section 8. Nominations of Directors: Nominations for the
election of Directors may be made by the Board of Directors or
any Stockholder entitled to vote for the election of Directors.
Any Stockholder entitled to vote for the election of Directors at
a meeting or to express a consent in writing without a meeting
may nominate a person or persons for election as a Director only
if written notice of such Stockholder's intent to make such
nomination is given to the Secretary of the Company, either by
personal delivery or United States mail, postage prepaid, not
later than (a) with respect to an election to be held at an
annual meeting of Stockholders, 90 days in advance of the
anniversary of the immediately preceding annual meeting or if the
date of the annual meeting of Stockholders occurs more than 30
days before or 60 days after the anniversary of such immediately
preceding annual meeting, not later than the close of business on
the seventh day following the date on which notice of such
meeting is given to Stockholders and (b) in the case of any
Stockholder who wishes to nominate a person or persons for
election as a Director pursuant to consents in writing by
Stockholders without a meeting (to the extent election by such
consents is permitted under applicable law and the Company's
Certificate of Incorporation), 60 days in advance of the date on
which materials soliciting such consents are first mailed to
Stockholders or, if no such materials are required to be mailed
under applicable law, 60 days in advance of the date on which the
first such consent in writing is executed. Each such notice
shall set forth the name and address of the Stockholder who
intends to make the nomination and of the person or persons to be
nominated for election as a Director, a representation that the
Stockholder is a holder of record of stock of the Company
entitled to vote at such meeting or to express such consent in
writing and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice
or to execute such a consent in writing to elect such person or
persons as a Director, a description of all arrangements or
understandings between the Stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations for election as a Director
are to be made by the Stockholder, such other information
regarding each nominee proposed by such Stockholder as would have
been required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission if
such nominee had been nominated, or was intended to be nominated,
for election as a Director by the Board of Directors, and the
consent of each nominee to serve as a Director of the Company if
so elected. The Board of Directors may refuse to acknowledge the
nomination of any person not made in compliance with the
foregoing procedures.
ARTICLE II.
BOARD OF DIRECTORS
Section 1. Number and Election: The business and property of the
Company shall be managed by a Board of ten Directors. The number
of Directors may be altered from time to time by the alteration
of these By-Laws, provided that, as required by the Restated
Certificate of Incorporation, the Board shall never consist of
less than eight members.
As provided in the Restated Certificate of Incorporation, the
Board of Directors shall be divided into three classes, two
consisting of three Directors each and the remaining consisting
of four Directors. At each annual election, the successors to
the Directors of the class whose terms shall expire in that year
shall be elected to hold office for a term of three years, so
that the term of office of one class of Directors shall expire in
each year. Each Director shall serve for the term for which such
Director shall have been elected and until such Director's
successor shall have been duly elected.
Notwithstanding the foregoing provisions of this Section 1, if
and as long as the Restated Certificate of Incorporation provides
for the election of additional Directors by class or classes of
stock, such additional Directors shall be elected in the manner
and for the term provided in the Restated Certificate of
Incorporation.
Section 2. Vacancies: Subject to any requirements of the
Certificate of Incorporation with respect to the filling of
vacancies among additional Directors elected by a class or
classes of stock, if the office of any Director becomes vacant,
the remaining Directors may, by a majority vote, elect a
successor who shall hold office until the next succeeding annual
meeting of the Stockholders and until his successor shall have
been elected and qualified.
Section 3. Place of Meetings: The Directors may hold their
meetings and may have an office and keep the books of the Company
(except as otherwise may be provided for by law) in such place or
places in the State of New Jersey or outside of the State of New
Jersey as the Board from time to time may determine.
Section 4. Regular Meetings: Regular meetings of the Board of
Directors shall be held at such times and intervals as the Board
may from time to time determine. It shall be the duty of the
Secretary to send a notice to each of the Directors at his
address as it appears on the books of the Company at least two
(2) days before the holding of each regular meeting, but a
failure of the Secretary to send such notice shall not invalidate
any proceedings of the said Board.
Section 5. Special Meetings: Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the
Board or the Vice-Chairman or the President, or by one-third
(1/3) of the Directors for the time being in office.
The Secretary shall give notice of each special meeting by
mailing the same at least two (2) days before the meeting, or by
telegraphing the same at least one (1) day before the meeting to
each Director, but such notice may be waived by any Director. At
any meeting at which every Director shall be present, even
without notice, any business may be transacted.
Section 6. Quorum: Six (6) members of the Board of Directors,
but not less than one-third (1/3) of the entire Board, shall
constitute a quorum for the transaction of business; but if at
any meeting of the Board there be less than a quorum present,
those present may adjourn the meeting from time to time. At
meetings of the Board of Directors, business shall be transacted
in such order as from time to time the Board may determine.
Section 7. Director Emeritus: The Board of Directors may
appoint a person who has served with distinction and who has
retired from the Board upon reaching mandatory retirement as
provided herein to the position of Director Emeritus. A Director
Emeritus shall be invited to attend all meetings of the Board and
shall receive the same compensation as that paid to outside
Directors. While serving as a Director Emeritus, he shall not be
considered a retired director for pension benefit purposes;
however, any pension benefits to which he may be entitled will
commence upon his cessation of service as a Director Emeritus.
He shall be appointed by the Board for a one-year term and may be
reappointed from time to time by action of the Board. While the
presence of a Director Emeritus at a Board meeting will not be
considered for quorum or voting purposes, nevertheless, his
advice and counsel on all matters to come before the Board is
invited.
ARTICLE III.
COMMITTEES
The Board of Directors may appoint from their number such
standing committees as they deem best and to the extent permitted
by statute may invest them with such of their own powers as they
may deem advisable, subject to such conditions as they may
prescribe.
ARTICLE IV.
OFFICERS
Section 1. Officers: The officers of the Company to be elected
by the Board of Directors shall include a Chief Executive Officer
(who shall be a member of the Board), President, Treasurer and
Secretary and may also include one or more Vice Chairmen,
Executive Vice Presidents, Senior Vice Presidents, Vice
Presidents, and such other officers as the Board of Directors
shall deem necessary or otherwise appropriate to elect. A person
may hold any number of offices simultaneously.
Any elected officer may be removed at any time with or without
cause by the Board or by the committee or superior officer upon
whom such power of removal may be conferred.
Section 2. Powers and Duties: The Chief Executive Officer of
the Company shall have executive responsibility for the general
conduct of the business and affairs of the Company. He may
appoint and remove assistant officers. He shall exercise such
other powers, authority and responsibilities as the Board of
Directors may determine.
Other officers shall have all the usual and customary powers and
shall perform all the usual and customary duties incident to
their respective offices and, in addition thereto and to any
duties specifically prescribed by any subsequent provisions of
these By-Laws, they shall respectively perform such other general
or special duties as may from time to time be assigned to them by
the Board of Directors or the Chief Executive Officer.
The Board of Directors may appoint an officer to act as Chief
Financial Officer of the Company, who shall have responsibility
for the financial affairs of the Company. He will be responsible
for the preparation of the financial statements of the Company,
and such other duties as from time to time may be assigned to him
by the Board of Directors or the Chief Executive Officer. The
Board of Directors may appoint an officer to act as General
Counsel of the Company, who shall have responsibility for the
legal affairs of the Company. The Board of Directors may appoint
the Controller to be the principal accounting and financial
control officer of the Company.
Securities of other corporations or interests in other entities
held by the Company may be voted by the Chairman of the Board or
by any other person designated by the Board of Directors or Chief
Executive Officer."; and further
Section 3. Term: The executive officers elected by the Board of
Directors shall hold office for one year or until their
successors are elected and qualify. The Chairman, and any
Vice-Chairman, shall be elected by the Directors from among their
own number. One person may hold more than one office.
ARTICLE V.
BILLS, NOTES, AND CHECKS
All bills, notes, checks or other negotiable instruments of the
Company shall be made in the name of the Company and shall be
signed by two executive officers or by any two persons duly
authorized by the Board of Directors. No officers or agents of
the Company, either singly or together shall have power to make
any bill, note or check or other negotiable instrument in the
name of the Company to bind the Company thereby, except as in
this Article prescribed and provided.
No officer or agent of this Company shall have power to endorse
in the name, for or in behalf of the Company, any note, bill of
exchange, draft, check or other written instrument for the
payment of money, save only for purposes of the discount or the
collection of the said instrument, unless thereunto duly and
specially authorized by the vote of the Directors of this Company
entered on the minutes of said Board.
ARTICLE VI.
CAPITAL STOCK
Section 1. Certificates for Shares: The certificates for shares
of the capital stock of the Company shall be in such form not
inconsistent with the Certificate of Incorporation as shall be
prepared or be approved by the Board of Directors. The
certificates shall be signed by or bear thereon the facsimile
signature of the Chairman, the Vice-Chairman, President, or an
Executive Vice President, or a Vice President, and also be signed
by or bear thereon the facsimile signature of the Treasurer or an
Assistant Treasurer. The certificates shall be consecutively
numbered. The name of the person owning the shares represented
thereby, with the number of such shares and the date of issue,
shall be entered in the Company's books.
Section 2. Transfers: Shares of the capital stock of the
Company shall be transferred only on the books of the Company by
the holder thereof in person or by his attorney, upon surrender
of the certificate or certificates properly endorsed. The Board
of Directors shall have power and authority to make all such
rules and regulations as it may deem expedient concerning the
issue, transfer and registration of certificates for shares of
the capital stock of the Company. The Board of Directors may
appoint Transfer Agents and Stock Registrars and may require all
stock certificates to bear the signatures of such a Transfer
Agent and of such a Registrar of Transfers, or any of them.
The stock transfer books may be closed for such period next
preceding any Stockholders' meeting, or the payment of dividends
as the Board of Directors may from time to time determine, and
during such period no stock shall be transferable.
The Board of Directors may also fix in advance a date not more
than 60 nor less than 10 days preceding the date of any meeting
of Stockholders, nor more than 60 days preceding the date for the
payment of any dividend on the Common Stock or any series of
Preference Stock, or the date for allotment of rights, or the
date when any change or conversion or exchange of capital stock
shall go into effect, as a record date for the determination of
the Stockholders entitled to notice of and to vote at any such
meeting, or entitled to receive payment of any such dividend, or
any such allotment of rights, or to exercise the rights in
respect to any such change, conversion or exchange of capital
stock. In such cases only Stockholders of record on the date so
fixed shall be entitled to such notice of and vote at such
meeting, or to receive payment of such dividend, or allotment of
rights, or to exercise such rights, as the case may be, and
notwithstanding any transfer of any stock on the books of the
Company after any such record date fixed as aforesaid.
Section 3. Lost Stock Certificates: In case any stock
certificate shall be lost, the Board of Directors may order a new
certificate to be issued in its place upon receiving such proof
of loss and such security therefor as may be satisfactory to it.
ARTICLE VII.
THE CORPORATE SEAL
The Corporate Seal of the Company shall consist of a circle
formed by the words "Ingersoll-Rand Company" and the letters "N.
J." with the words "Corporate Seal" and the figures "1905" in the
center.
The Seal shall be attested by the signature of the Secretary or
the Assistant Secretary or of the Treasurer or the Assistant
Treasurer.
When authorized by the Board of Directors, the Secretary shall
affix the Seal, or cause it to be affixed, to all documents
executed on behalf of the Company. The Board of Directors may
also specifically or generally authorize other persons to affix
the Seal.
ARTICLE VIII.
REACQUIRED SHARES
When shares of the Company are reacquired by the Company by
purchase, by redemption or by their conversion into other shares
of the Company, such shares shall be treated by the Company as
treasury shares, unless and to the extent the Board of Directors
determines at any time that any such shares shall be cancelled.
ARTICLE IX.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 1. Right to Indemnification: Each person who was or is
made a party or is threatened to be made a party to or is
involved in any pending, threatened or completed civil, criminal,
administrative or arbitrative action, suit or proceeding, or any
appeal therein or any inquiry or investigation which could lead
to such action, suit or proceeding ("proceeding"), by reason of
his or her being or having been a Director or officer of the
Company or of any constituent corporation absorbed by the Company
in a consolidation or merger, or by reason of his or her being or
having been a Director, officer, trustee, employee or agent of
any other corporation (domestic or foreign) or of any
partnership, joint venture, sole proprietorship, trust, employee
benefit plan or other enterprise (whether or not for profit),
serving as such at the request of the Company or of any such
constituent corporation, or the legal representative of any
such Director, officer, trustee, employee or agent, shall be
indemnified and held harmless by the Company to the fullest
extent permitted by the New Jersey Business Corporation Act, as
the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment
permits the Company to provide broader indemnification rights
than said Act permitted prior to such amendment), from and
against any and all reasonable costs, disbursements and
attorneys' fees, and any and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties,
incurred or suffered in connection with any such proceeding, and
such indemnification shall continue as to a person who has ceased
to be a Director, officer, trustee, employee or agent and shall
inure to the benefit of his or her heirs, executors,
administrators and assigns; provided, however, that there shall
be no indemnification hereunder with respect to any settlement or
other nonadjudicated disposition of any proceeding unless the
Company has given its prior consent to such settlement or
disposition. The right to indemnification conferred in this
Section 1 shall be a contract right and shall include the right
to be paid by the Company the expenses incurred in connection
with any proceeding in advance of the final disposition of such
proceeding as authorized by the Board of Directors; provided,
however, that, if the New Jersey Business Corporation Act so
requires, the payment of such expenses incurred by a Director or
officer in his or her capacity as a Director or officer in
advance of the final disposition of a proceeding shall be made
only upon receipt by the Company of an undertaking, by or on
behalf of such Director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such Director
or officer is not entitled to be indemnified under this Section 1
or otherwise. The Company may, by action of its Board of
Directors, provide for indemnification and advancement of
expenses to employees and agents of the Company with the same
scope and effect as the foregoing indemnification of Directors
and officers.
Section 2. Right of Claimant to Bring Suit: If a claim under
Section 1 of this Article IX is not paid in full by the Company
within thirty days after a written request has been received by
the Company, the claimant may at any time thereafter apply to a
court for an award of indemnification by the Company for the
unpaid amount of the claim and, if successful on the merits or
otherwise in connection with any proceeding, or in the defense of
any claim, issue or matter therein, the claimant shall be
entitled also to be paid by the Company any and all expenses
incurred or suffered in connection with such proceeding. It
shall be a defense to any such action (other than an action
brought to enforce a claim for the advancement of expenses
incurred in connection with any proceeding where the required
undertaking, if any, has been tendered to the Company) that the
claimant has not met the standard of conduct which makes it
permissible under the New Jersey Business Corporation Act for the
Company to indemnify the claimant for the amount claimed, but the
burden of proving such defense shall be on the Company. Neither
the failure of the Company (including its Board of Directors,
independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such proceeding that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the New Jersey Business Corporation Act, nor an actual
determination by the Company (including its Board of Directors,
independent legal counsel or its stockholders) that the claimant
has not met such applicable standard of conduct, nor the
termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 3. Non-Exclusivity of Rights: The right to
indemnification and advancement of expenses provided by or
granted pursuant to this Article IX shall not exclude or be
exclusive of any other rights, including the right to be
indemnified against any and all reasonable costs, disbursements
and attorneys' fees, and any and all amounts paid or incurred in
satisfaction of settlements, judgments, fines and penalties
incurred or suffered in proceedings by or in the right of the
Company, to which any person may be entitled under a certificate
of incorporation, by-law, agreement, vote of stockholders, or
otherwise, provided that no indemnification shall be made to or
on behalf of any person if a judgment or other final adjudication
adverse to such person establishes that such person has
not met the applicable standard of conduct required to be met
under the New Jersey Business Corporation Act.
ARTICLE X.
AMENDMENTS
The Board of Directors may, by a majority vote of the entire
Board, make By-Laws and from time to time alter, amend or repeal
any By-Law, but any By-Law made by the Board of Directors may be
altered or repealed by the Stockholders at any annual or special
meeting. Notice of such proposed alteration, amendment or repeal
of any By-Law shall be included in the notice of the meeting of
the Directors or Stockholders.
ARTICLE XI.
AUDITORS
The Board of Directors may appoint a firm of certified public
accountants to audit the books and accounts of the Company for
the calendar year in which such appointment is made.
Exhibit 10(iii) (c)
DESCRIPTION OF BONUS ARRANGEMENT
FOR EXECUTIVE VICE PRESIDENTS OF
INGERSOLL-RAND COMPANY
There is no formal document setting forth this
arrangement. However, as set forth in the Company's 2000
Proxy Statement, subject to the approval of the Board of
Directors which approves the amount of each award, the
Compensation and Benefits Committee will approve bonus
arrangements for the Executive Vice Presidents. These
officers may receive bonuses attributable to 2000 dependent
upon the Company's attainment of predetermined earnings per
share goals. The amount of such bonus is discretionary and
is subject to general guidelines. Discretionary bonuses may
be paid in the event that corporate goals are not met.
Exhibit 10 (iii)(u)
COMPOSITE EMPLOYMENT AGREEMENT
WITH CHIEF EXECUTIVE OFFICER
Mr. Herbert L. Henkel
4 Spinney Lane
North Kingstown, RI 02852
Dear Herb:
On behalf of Chairman Jim Perrella and Ingersoll-Rand's
Board of Directors, I am pleased to confirm our
invitation to you to become Chief Operating Officer,
Chief Executive Officer-designate and a member of our
Board of Directors. (Note: Your formal election will
be May 4, 1999 at our next Board meeting.) Our Board
is delighted you will join Ingersoll-Rand and looks
forward to your leadership as we continue to grow our
company for the benefit of customers, employees and
shareholders.
The following confirms the terms and conditions of our
offer:
Salary
Your starting salary as Chief Operating Officer will be
at an annual rate of $750,000 paid monthly. When you
are promoted to Chief Executive Officer on October 1,
1999, your salary will be increased to $850,000.
Annual Incentive
Your minimum annual incentive bonus for 1999 will be
$725,000. Annual bonuses are typically paid in
February following Board approval. Ingersoll-Rand does
not have a "target" incentive plan for its COO, CEO or
Chairman. Rather, the Board considers individual
contributions to operating results achieved. Recent
awards, based on achievement of the company's earnings
goal, have been in the range of 100% of salary and
higher.
Stock Options
You will be granted a special 200,000 share initial
stock option award which will be priced on the trading
day immediately preceding the public announcement of
your appointment. This special award will vest 100% on
January 1, 2004. In all other respects, the terms of
the company's incentive stock plan will apply. (See
Attachment A - Stock Option Award)
Your first regular award under the company's incentive
stock plan will be 100,000 shares priced in the same
fashion as described above for the special initial
stock option award. You will receive a subsequent
award of 50,000 shares on October 1, 1999. These two
awards vest one-third per year over three years.
Thereafter, additional awards could be made in February
(or our normal option time) or at the point of further
promotion.
Stock Grants
You will receive an initial grant of 43,000 shares of
restricted stock under the company's long term
incentive plan. Of this grant, 18,000 pertain to
company performance in 1999 and 25,000 pertain to
company performance in 2000. Under the plan, the
company must achieve annual earnings per share growth
over the period 1998 through 2000 of 12% per year
compounded. If the company achieves $3.16 earnings per
share in 1999, you will receive 18,000 shares of stock
in February 2000. You will be eligible for an
additional 25,000 shares for 2000 based on the company
achieving either 12% earnings per share growth in 2000,
or a total of 12% per year compounded over the 1998-
2000 period. Thereafter, a new three-year long-term
incentive plan will be adopted subject to approval of
our Board of Directors. (See Attachment B - Stock
Grant Agreement - Sample)
Issues Relating to Non-Vested Textron Options and
Restricted Stock
Options
You will receive 6,300 shares of restricted
stock, 3,000 of which will vest in July 1999 and
3,300 of which will vest in June 2000. These
shares are intended to reflect the value of
Textron options which will not be vested during
Textron employment.
Retention Grant
You will receive a grant of 60,000 shares of
restricted stock effective on your employment as
replacement for 30,000 shares of Textron stock
which required you to remain with Textron until
2002. This new grant will vest on January 1,
2003.
Pension Plan
You will participate in the company's Qualified Defined
Pension Plan (See Attachment C) and the Elected
Officers' Supplemental Program (See Attachment D).
Your benefit under these plans, assuming retirement at
age 62 the normal retirement age for officers, will be
65% of your base salary, plus the average of your five
highest out of your last six annual incentive bonuses.
Your Textron service and vested terminated Textron
pension benefit will be taken into account in
determining the value of your pension.
Your pension benefit accrual will be as follows:
Retirement
Replacement
Points
o 1.90 points per year for each year of
Textron service 22.8 pt. (12x1.90)
o 5.78 points per year for each of the
first five years with Ingersoll-Rand 28.9 pt. (5x5.78)
o 1.90 points per year for each of the
subsequent years of service with
Ingersoll-Rand, up to age 62 13.3 pt. (7x1.90)
Totaling 65% at age 62 65.0 pt.
If you work past age 62, you will get an additional
1.9 points per year of service.
Ten Year Annuity
An important part of retirement income for Ingersoll-
Rand officers is the company's ten-year annuity
program. In your case this benefit, commencing at age
62, is $125,000 per year for the ten-year period. In
the event of your death, the benefit is payable to your
beneficiary to the extent not already paid. You will
be enrolled in this program upon your completion of
enrollment procedures, including a physical
examination, the sole purpose of which is to establish
the cost of the underlying insurance product associated
with this benefit.
Employee Benefits
The enclosed summaries describe many of our benefit
programs. Please note that medical and dental coverage
commences on the first day of the month following 30
days of employment. Therefore, you may wish to
temporarily maintain your Textron coverage in force
through COBRA to assure full continuity of coverage.
(See Attachment E - Connect to Select 99)
Life Insurance
You will be entitled to purchase supplemental life
insurance of up to 4x your annual earnings. This four
times limit may be provided through Northwestern Mutual
Life (up to 1x pay) and CIGNA (the additional 3x pay).
If you enroll for at least 1x annual earnings (the
Northwestern Mutual piece), you will be able to carry
1x final annual earnings into retirement. The cost at
your age is from 42 to 50 cents per thousand.
Long Term Disability Insurance
The company offers a special LTD plan to its officers.
The plan is employee-paid and the benefit tax-free).
Your benefit would be $20,000 per month maximum with
offsets for income from other company-funded sources
including Social Security and Workers' Compensation.
The cost is about $1.20 per $100 of covered
compensation.
Relocation
You will receive the full benefits of the company's
relocation program for transferring homeowners. A
complete description of this plan is in the attached
document. (See Attachment F) In connection with your
relocation, Cendant, our relocation service supplier,
will purchase your home for $870,000. You will receive
$150,000 for expense reimbursement in excess of that
normally provided under our regular policy. You may
also engage interim housing for up to one year for you
and your family in the process of relocating to
Northern New Jersey.
Vacation
You will be entitled to paid vacation in accordance
with company policy but in no event less than four
weeks per calendar year.
Personal Use of Company Aircraft
You will be entitled to use time on the company's
aircraft lease contract for your personal travel. Such
use will incur imputed income to the extent required
under Internal Revenue Service regulation and company
policy. Generally, this means you will be charged
first class airfare for yourself and accompanying
dependents for personal use of company aircraft.
Country Club
You will have corporate membership in your name or that
of the company in country clubs required for business.
As we indicated, Ingersoll-Rand does not provide a
personal country club membership for any of its
officers.
Automobile
You will have the use of a company-provided automobile
under the terms of the company's executive automobile
program. Broadly, this means you can select from any
US-made sedan or a Jaguar.
Tax, Estate and Financial Planning
You are eligible for the company's Tax, Estate and
Financial Planning service provided by the Ayco
Corporation to officers.
Severance
In the unlikely event you are involuntarily terminated
by the Company without cause or you terminate because
you are not made CEO or Chairman, you will receive
severance pay equal to two times your annual base
salary plus your last (or committed) bonus, i.e.,
2(salary+bonus). In addition, under these
circumstances, you will receive the stock grants
related to your non-vested Textron options and
retention shares, i.e., 6,300 shares and 60,000
respectively, totaling 66,300 shares of Ingersoll-Rand
common stock
Change in Control
Ingersoll-Rand's change-in-control as described on Page
16 of the 1998 proxy applies to you. (See Attachment G
- - 1998 Proxy Statement) Severance and Change-in-
control are non-duplicative benefits.
Official Company Plan Documents
Descriptions of compensation and benefit plans in this
letter are necessarily summaries. In case of conflict,
the official company plan documents are the final
authority.
Drug Test
Our offer is contingent upon satisfactorily passing a
drug test and fulfilling the requirements of the
Immigration Reform and Control Act of 1986.
Herb, I know I speak for Jim Perrella and our entire
Board of Directors when I say we are extremely pleased
you will join our company and we will enjoy an
important and mutually rewarding long-term
relationship.
Please confirm your acceptance of our offer with your
signature on a return copy to me.
Best regards,
/S/Donald H. Rice
Donald H. Rice
Vice President
ACCEPTED:
/S/Herbert L. Henkel
Herbert L. Henkel
Attachments
A. 10 (iii) (t) Incentive Stock Plan of 1998 of
Ingersoll-Rand Company. Incorporated by reference to
Appendix A to the Notice of 1998 Annual Meeting of
Shareholders and Proxy Statement dated March 17, 1998.
B. 10 (iii) (t) Incentive Stock Plan of 1998 of
Ingersoll-Rand Company. Incorporated by reference to
Appendix A to the Notice of 1998 Annual Meeting of
Shareholders and Proxy Statement dated March 17, 1998.
C. Pension Plan Number One
D. 10 (iii)(h) Executive Supplementary Retirement
Agreement for selected executive officers. Incorporated
by reference to Form 10-K for the year ended December
31, 1996, filed March 26, 1997.
E. Connect to Select 99 - Basic Employee Benefits
F. Ingersoll-Rand Transferred Homeowner Relocation
Policy
G. 10 (iii)(f) Amended and Restated Form of Change of
Control Agreement as of March 1, 1999 with Chief
Executive Officer of Ingersoll-Rand Company.
Incorporated by reference to Form 10-K of Ingersoll-
Rand Company for the year ended December 31, 1998,
filed March 30, 1999.
<TABLE>
Exhibit 11
INGERSOLL-RAND COMPANY
COMPUTATION OF EARNINGS PER SHARE
(In millions of dollars except for shares and per share amounts)
<S>
Years ended December 31,
<C> <C> <C> <C> <C>
1999 1998 1997 1996 1995
Earnings from continuing operations
<S> <C> <C> <C> <C> <C>
applicable to common stock $544.9 $455.5 $358.6 $324.7 $243.8
Earnings from discontinued operations
applicable to common stock $ 46.2 $ 53.6 $ 21.9 $ 33.3 $ 26.5
Net earnings applicable
to common stock............. $591.1 $509.1 $380.5 $358.0 $270.3
Average number of common
shares outstanding.......... 163,644,073 163,669,777 163,206,932 161,238,547 159,103,617
Number of common shares
issuable assuming exercise
under incentive stock plans.. 2,108,724 1,812,035 1,617,803 1,031,137 495,479
Average number of outstanding
shares for diluted
earnings per
share calculations.......... 165,752,797 165,481,812 164,824,735 162,269,684 159,599,096
Basic earnings per share from
continuing operations $3.33 $2.78 $2.20 $2.01 $1.53
Basic earnings per share from
discontinued operations $0.28 $0.33 $0.13 $0.21 $0.17
Basic earnings per
share....................... $3.61 $3.11 $2.33 $2.22 $1.70
Diluted earnings per share from
continuing operations $3.29 $2.75 $2.18 $2.00 $1.52
Diluted earnings per share from
discontinued operations $0.28 $0.33 $0.13 $0.21 $0.17
Diluted earnings per
share........................ $3.57 $3.08 $2.31 $2.21 $1.69
</TABLE>
Note: All common share and per share amounts have been adjusted for the 3-for-2
stock split which was made in the form of a stock dividend in August of 1997.
<TABLE>
EXHIBIT 12
INGERSOLL-RAND COMPANY
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Millions)
Years Ended December 31,
<S> <C> <C> <C> <C> <C>
Fixed charges: 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
Interest expense........................... $204.5 $225.9 $137.5 $120.9 $ 88.3
Amortization of debt discount and expense.. 6.7 7.0 2.0 1.5 0.8
Rentals (one-third of rentals)............. 23.9 23.8 23.3 20.3 19.5
Capitalized interest....................... 4.0 4.0 3.2 4.6 3.5
Equity-linked security charges............ 25.6 19.7 0.0 0.0 0.0
Total fixed charges.......................... $264.7 $280.4 $166.0 $147.3 $112.1
Net earnings from continuing operations $544.9 $455.5 $358.6 $324.7 $243.8
Add: Minority income of majority-
owned subsidiaries.................. 29.1 23.5 3.6 1.5 1.8
Taxes on income from continuing
operations.......................... 299.9 250.7 219.8 190.7 143.2
Fixed charges......................... 264.7 280.4 166.0 147.3 112.1
Less: Capitalized interest.................. 4.0 4.0 3.2 4.6 3.5
Undistributed earnings (losses) from
less than 50% owned affiliates...... 1.7 2.8 7.2 10.1 11.2
Earnings available for fixed charges ....... $1,132.9 $1,003.3 $737.6 $649.5 $486.2
Ratio of earnings to fixed charges .......... 4.28 3.58 4.44 4.41 4.34
Undistributed earnings (losses) from less
than 50% owned affiliates:
Equity in earnings (losses)............ $ 3.9 $ 4.0 $ 9.3 $ 12.1 $ 13.3
Less: Amounts distributed............... 2.2 1.2 2.1 2.0 $ 2.1
Undistributed earnings (losses) from
less-than 50% owned affiliates........... $ 1.7 $ 2.8 $ 7.2 $ 10.1 $ 11.2
All amounts have been restated to reflect discontinued operations.
</TABLE>
Exhibit 13
INGERSOLL-RAND
1999
ANNUAL REPORT
TO
SHAREHOLDERS
Consolidated Statement of Income
In millions except per share amounts
For the years ended December 31 1999 1998 1997
Net sales $7,666.7 $7,384.7 $6,239.1
Cost of goods sold 5,515.0 5,387.8 4,613.0
Administrative, selling and
service engineering
expenses 1,052.4 1,027.8 902.6
Operating income 1,099.3 969.1 723.5
Interest expense (203.1) (224.1) (135.2)
Other income (expense), net (22.3) (15.3) (6.3)
Minority interests (29.1) (23.5) (3.6)
Earnings before income taxes 844.8 706.2 578.4
Provision for income taxes 299.9 250.7 219.8
Earnings from continuing
operations 544.9 455.5 358.6
Discontinued operations
(net of tax) 46.2 53.6 21.9
Net earnings $ 591.1 $ 509.1 $380.5
Basic earnings per share
Continuing operations $3.33 $2.78 $2.20
Discontinued operations 0.28 0.33 0.13
$3.61 $3.11 $2.33
Diluted earnings per share
Continuing operations $3.29 $2.75 $2.18
Discontinued operations 0.28 0.33 0.13
$3.57 $3.08 $2.31
See accompanying Notes to Consolidated Financial Statements.
Consolidated Balance Sheet
In millions except share amounts
December 31 1999 1998
Assets
Current assets:
Cash and cash equivalents $ 222.9 $ 43.5
Marketable securities 0.5 2.0
Accounts and notes receivable, less
allowance for doubtful accounts of
$33.4 in 1999 and $35.4 in 1998 988.5 963.7
Inventories 742.1 824.8
Prepaid expenses 60.7 55.7
Assets held for sale 799.7 400.1
Deferred income taxes 53.9 68.8
2,868.3 2,358.6
Investments in and advances with
partially owned equity affiliates 198.2 183.6
Property, plant and equipment, at cost:
Land and buildings 570.3 569.4
Machinery and equipment 1,514.6 1,492.3
2,084.9 2,061.7
Less-accumulated depreciation 844.7 825.0
1,240.2 1,236.7
Intangible assets, net 3,726.3 3,765.8
Deferred income taxes 158.0 206.0
Other assets 209.2 175.7
$8,400.2 $7,926.4
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $1,224.4 $1,284.4
Loans payable 495.5 318.0
Income taxes 19.0 18.8
1,738.9 1,621.2
Long-term debt 2,113.3 2,166.0
Postemployment and other benefit liabilities 805.0 820.5
Minority interests 95.7 33.6
Other liabilities 161.8 152.5
4,914.7 4,793.8
Company obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely debentures of the company 402.5 402.5
Shareholders' equity:
Common stock, $2 par value, authorized
600,000,000 shares; issued:
1999-171,168,096; 1998-168,883,779 342.3 337.8
Capital in excess of par value 237.8 133.4
Retained earnings 3,053.1 2,567.3
3,633.2 3,038.5
Unallocated LESOP shares, at cost (16.5) (27.0)
Treasury stock, at cost (356.7) (150.9)
Accumulated other comprehensive income (177.0) (130.5)
Shareholders' equity 3,083.0 2,730.1
$8,400.2 $7,926.4
See accompanying Notes to Consolidated Financial Statements.
Consolidated Statement of Shareholders' Equity
In millions
<TABLE>
Capital in Accumulated
Total excess other
<S> <S> <S> <S> <S> <S> <S> <S>
shareholders' Common stock of par Retained Unallocated Treasury comprehensive Comprehensive
equity Amount Shares value earnings LESOP stock income income
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $2,109.9 $220.6 110.3 $143.5 $1,869.6 $(55.6) $(11.5) $(56.7)
Net earnings 380.5 380.5 $380.5
Foreign currency translation (76.3) (76.3) (76.3)
Reclassification adjustment 3.1
Total comprehensive income $307.3
Issuance of shares under
stock plans 2.8 0.1 0.1 2.7
Exercise of stock options 52.6 2.7 1.3 49.9
Stock split 3-for-2 - 111.4 55.7 (111.4)
Allocation of LESOP shares 21.9 7.7 14.2
Purchase of treasury shares (33.0) (33.0)
Cash dividends (93.6) (93.6)
Balance at December 31, 1997 2,364.8 334.8 167.4 92.4 2,156.5 (41.4) (44.5) (133.0)
Net earnings 509.1 509.1 509.1
Foreign currency translation 2.5 2.5 2.5
Total comprehensive income $511.6
Issuance of shares under
stock plans 2.2 0.1 0.1 2.1
Exercise of stock options 45.8 2.9 1.4 42.9
Issuance of equity-linked
securities (16.4) (16.4)
Allocation of LESOP shares 26.8 12.4 14.4
Purchase of treasury shares (106.4) (106.4)
Cash dividends (98.3) (98.3)
Balance at December 31, 1998 2,730.1 337.8 168.9 133.4 2,567.3 (27.0) (150.9) (130.5)
Net earnings 591.1 591.1 591.1
Foreign currency translation (46.5) (46.5) (46.5)
Total comprehensive income $544.6
Issuance of shares under
stock plans 3.0 0.1 0.1 2.9
Exercise of stock options 91.8 4.4 2.2 87.4
Allocation of LESOP shares 24.6 14.1 10.5
Purchase of treasury shares (205.8) (205.8)
Cash dividends (105.3) (105.3)
Balance at December 31, 1999 $3,083.0 $ 342.3 171.2 $237.8 $3,053.1 $(16.5) $(356.7) $(177.0)
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
Consolidated Statement of Cash Flows
In millions
For the years ended December 31 1999 1998 1997
Cash flows from operating activities:
Income from continuing operations $544.9 $455.5 $358.6
Adjustments to arrive at net cash
provided by operating activities:
Depreciation and amortization 272.4 263.6 192.2
Gain on sale of businesses (14.6) (6.6) (7.7)
Gain on sale of property, plant
and equipment (3.4) (8.9) (3.2)
Minority interests, net of dividends (0.2) 0.7 3.4
Equity earnings/losses,
net of dividends (3.1) (6.9) (10.9)
Deferred income taxes 41.8 6.2 (9.7)
Other items 40.9 26.7 41.8
Changes in assets and liabilities
(Increase) decrease in:
Accounts and notes receivable (57.7) 109.3 0.2
Inventories 56.7 (76.0) 53.0
Other current and noncurrent
assets 12.8 21.0 (3.1)
(Decrease) increase in:
Accounts payable and accruals (55.6) 86.0 39.6
Other current and noncurrent
liabilities 1.6 (11.0) 13.4
Net cash provided by operating
activities 836.5 859.6 667.6
Cash flows from investing activities:
Capital expenditures (190.5) (200.9) (169.8)
Proceeds from sales of property,
plant and equipment 30.4 22.9 34.6
Proceeds from business dispositions 84.8 58.0 252.8
Acquisitions, net of cash* (161.2) (55.6) (2,891.3)
Decrease (increase) in marketable
securities 1.5 1.8 (0.1)
Cash (invested in) or advances (to)
from equity companies (2.0) 11.9 5.0
Net cash used in investing
activities (237.0) (161.9) (2,768.8)
Cash flows from financing activities:
(Decrease) increase in short-term
borrowings (36.8) (711.9) 685.6
Debt issuance costs - - (19.1)
Proceeds from long-term debt 21.5 0.2 1,508.6
Payments of long-term debt (252.2) (261.2) (133.8)
Net change in debt (267.5) (972.9) 2,041.3
Issuance of equity-linked securities - 402.5 -
Equity-linked securities issuance costs
and fees - (12.9) -
Net proceeds from issuance of equity-
linked securities - 389.6 -
Proceeds from exercise of stock
options 70.2 36.2 43.3
Purchase of treasury stock (205.8) (106.4) (33.0)
Dividends paid (105.3) (98.3) (93.6)
Other 63.3 10.0 -
Net cash (used in) provided by
financing activities (445.1) (741.8) 1,958.0
Net cash provided by discontinued
operations 32.8 20.1 58.8
Effect of exchange rate changes on cash
and cash equivalents (7.8) 1.0 5.8
Net increase (decrease) in cash
and cash equivalents 179.4 (23.0) (78.6)
Cash and cash equivalents-
beginning of year 43.5 66.5 145.1
Cash and cash equivalents-end of year $222.9 $43.5 $66.5
*Acquisitions:
Working capital, other than cash $ (61.0) $(13.5) $ (113.8)
Property, plant and equipment (13.0) (14.5) (186.6)
Intangibles and other assets (101.4) (34.9) (2,739.5)
Long-term debt and other liabilities 14.2 7.3 148.6
Net cash used to acquire businesses $(161.2) $(55.6) $(2,891.3)
Cash paid during the year for:
Interest, net of amounts capitalized $230.4 $206.1 $136.0
Income taxes 217.7 245.4 210.4
The company acquired the remaining 49% interest in IDP in a noncash
transaction by issuing a note for $377.0 million.
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Ingersoll-Rand is a multinational manufacturer of primarily
nonelectrical industrial equipment and components. The company's
principal lines of business are air compressors, architectural
hardware products, automotive parts and components, construction
equipment, golf cars and utility vehicles, pumps, tools and
transport temperature control systems. The company's broad product
line has applications in numerous industries including automotive,
construction, utilities, housing, recreational and transportation,
as well as the general industrial market. A summary of significant
accounting policies used in the preparation of the accompanying
financial statements follows:
Principles of Consolidation: The consolidated financial statements
include the accounts of all wholly owned and majority owned
subsidiaries. Intercompany transactions and balances have been
eliminated. Partially owned equity affiliates companiesare
accounted for under the equity method. In conformity with
generally accepted accounting principles, management has used
estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, and the disclosure of
contingent assets and liabilities. Significant estimates include
accounting for doubtful accounts, amortization and depreciation,
warranty, sales returns, taxes and environmental and other
contingencies. Actual results could differ from those estimates.
Reclassifications: Certain reclassifications were made to prior
year amounts to conform with the 1999 presentation, including
classifying two joint ventures as discontinued operations (see Note
2). Unless otherwise noted, all amounts and percentages disclosed
in these Notes do not include discontinued operations.
Cash Equivalents: The company considers all highly liquid
investments, consisting primarily of time deposits and commercial
paper with maturities of three months or less when purchased, to be
cash equivalents. Cash equivalents were $73.0 million and $1.9
million at December 31, 1999 and 1998, respectively.
Inventories: Inventories are generally stated at cost, which is
not in excess of market. Domestically manufactured inventories of
standard products are valued on the last-in, first-out (LIFO)
method and all other inventories are valued using the first-in,
first-out (FIFO) method.
Property and Depreciation: The company principally uses
accelerated depreciation methods for assets placed in service prior
to December 31, 1994. Assets acquired subsequent to that date are
depreciated using the straight-line method over their estimated
useful lives.
Intangible Assets: Intangible assets primarily represent the
excess of the purchase price of acquisitions over the fair value of
the net assets acquired. Such excess costs are being amortized on
a straight-line basis generally over 40 years. Goodwill at
December 31, 1999 and 1998, was $3.7 billion. Intangible assets are
evaluated for impairment whenever circumstances indicate that the
carrying amounts may not be recoverable. Intangible assets also
represent costs allocated to patents arising from business
acquisitions, and debt issuance costs. These assets are amortized
on a straight-line basis over their estimated useful lives.
Accumulated amortization at December 31, 1999 and 1998, was $353.5
million and $246.3 million, respectively. Amortization of
intangible assets was $112.8 million, $110.1 million and $54.4
million in 1999, 1998 and 1997, respectively.
Income Taxes: Deferred taxes are provided on temporary differences
between assets and liabilities for financial reporting and tax
purposes as measured by enacted tax rates expected to apply when
temporary differences are settled or realized. A valuation
allowance is established for deferred tax assets for which
realization is not likely.
Environmental Costs: Environmental expenditures relating to
current operations are expensed or capitalized as appropriate.
Expenditures relating to existing conditions caused by past
operations, which do not contribute to current or future revenues,
are expensed. Costs to prepare environmental site evaluations and
feasibility studies are accrued when the company commits to perform
them. Liabilities for remediation costs are recorded when they are
probable and reasonably estimable, generally no later than the
completion of feasibility studies or the company's commitment to a
plan of action. The assessment of this liability, which is
calculated based on existing technology, does not reflect any
offset for possible recoveries from insurance companies and is not
discounted.
Revenue Recognition: Sales of products are recorded for financial
reporting purposes generally when the products are shipped.
Provisions for discounts and rebates to customers and other
adjustments are generally provided at the time of sale.
Research and Development Costs: Research and development
expenditures, including qualifying engineering costs, are expensed
when incurred and amounted to $186.2 million in 1999, $169.6
million in 1998 and $138.2 million in 1997.
Comprehensive Income: Comprehensive income includes net income, and
currently in the case of the company, only foreign currency
translation adjustments. The amounts shown as reclassification
adjustments relate to the accumulated foreign currency translation
adjustment of entities that had been sold, and thus included in net
earnings of the current period.
Foreign Currency: Assets and liabilities of foreign entities,
where the local currency is the functional currency, have been
translated at year-end exchange rates, and income and expenses have
been translated using weighted average-for-the-year exchange rates.
Adjustments resulting from translation have been recorded in
accumulated other comprehensive income and are included in net
earnings only upon sale or liquidation of the underlying foreign
investment.
For foreign entities where the U.S. dollar is the functional
currency, inventory and property balances and related income
statement accounts have been translated using historical exchange
rates, and resulting gains and losses have been credited or charged
to net earnings.
Foreign currency transactions and translations recorded in the
income statement increased net earnings by $2.5 million in 1999 and
decreased net earnings by $8.0 million and $0.1 million in 1998
and 1997, respectively. Accumulated other comprehensive income was
decreased in 1999 by $46.5 million, increased in 1998 by $2.5
million and decreased in 1997 by $73.2 million due to foreign
currency equity adjustments related to translation and
dispositions.
The company hedges certain foreign currency transactions and firm
foreign currency commitments by entering into forward exchange
contracts (forward contracts). Gains and losses associated with
currency rate changes on forward contracts hedging foreign
currency transactions are recorded currently in income. Gains and
losses on forward contracts hedging firm foreign currency
commitments are deferred off-balance sheet and included as a
component of the related transaction, when recorded; however, a
loss is not deferred if deferral would lead to the recognition of a
loss in future periods. Cash flows resulting from forward
contracts accounted for as hedges of identifiable transactions or
events are classified in the same category as the cash flows from
the items being hedged.
The company also purchases forward contracts to mitigate the
exposure of forecasted future cash flows of foreign subsidiaries.
These contracts range in duration from one to 12 months. Gains and
losses associated with the change in fair market value of these
contracts are recorded in other income.
Earnings Per Share: Basic earnings per share is based on the
weighted average number of common shares outstanding. Diluted
earnings per share is based on the weighted average number of
common shares outstanding as well as dilutive potential common
shares, which in the company's case comprise shares issuable under
stock benefit plans. The weighted average number of common shares
outstanding for basic earnings per share calculations were
163,644,073, 163,669,777 and 163,206,932 for 1999, 1998 and 1997,
respectively. For diluted earnings per share purposes, these
balances increased by 2,108,724, 1,812,035 and 1,617,803 shares for
1999, 1998 and 1997, respectively, due to the effect of common
equivalent shares issuable under the company's stock benefit plans.
Stock-based Compensation: SFAS No. 123, "Accounting for Stock-
Based Compensation," requires companies to measure employee stock
compensation plans based on the fair value method of accounting or
to continue to apply APB No. 25, "Accounting for Stock Issued to
Employees," and provide pro forma footnote disclosures under the
fair value method in SFAS No. 123. The company continues to apply
the principles of APB No. 25 and has provided pro forma fair value
disclosures in Note 14.
New Accounting Standard: In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement will become
effective beginning January 1, 2001. SFAS No. 133 requires all
derivatives to be recognized as assets or liabilities on the
balance sheet and measured at fair value. Changes in the fair
value of derivatives will be recognized in earnings or other
comprehensive income, depending on the designated purpose of the
derivative. The company is currently evaluating the impact of
adopting the standard and will comply as required.
NOTE 2 - DISCONTINUED OPERATIONS: On August 12, 1999, the company
announced its intention to dispose of its interest in Dresser-Rand
Company (D-R), a joint venture involved in the reciprocating
compressor and turbo machinery business, and Ingersoll-Dresser Pump
Company (IDP), a joint venture involved in the engineered pump
business. On October 5, 1999, the joint venture partner, as
permitted under the joint venture agreements, elected to sell its
share of the joint ventures to the company. Effective December 31,
1999, the company completed the purchase of IDP by acquiring the
joint venture partner's 49% share for a net purchase price of
$377.0 million. A note for the full purchase price was issued to
the joint venture partner and was redeemed on January 14, 2000. The
net assets have been reported as assets held for sale in the
accompanying financial statements, and prior periods have been
restated to reflect these businesses as discontinued operations.
Historically, IDP had been reported as part of the Engineered
Products Segment, while D-R had been reported in other income
(expense), net.
The net assets of discontinued operations included in assets held
for sale at December 31, are as follows (in millions):
1999 1998
Cash and cash equivalents $ 49.9 $ 28.5
Other current assets 392.3 416.6
Investments in and advances
with partially owned affiliates 146.3 161.1
Property, plant and equipment, net 103.1 110.8
Intangibles and other assets 310.7 42.2
Current liabilities (194.5) (227.6)
Other liabilities (74.3) (78.1)
Minority interests - (100.0)
Cumulative translation adjustment 34.6 22.6
Net assets of discontinued operations
held for sale $ 768.1 $ 376.1
Income from discontinued operations included the following results
for the years ended December 31 (in millions):
1999 1998 1997
Net sales $837.9 $906.8 $864.2
Operating income 63.9 75.3 36.8
D-R equity earnings 25.4 33.0 9.4
Other income (expense), net 7.4 7.0 4.1
Interest expense (1.4) (1.6) (1.3)
Minority interest (23.7) (30.7) (13.7)
Earnings before income taxes 71.6 83.0 35.3
Income taxes 25.4 29.4 13.4
Income from discontinued
operations $ 46.2 $ 53.6 $ 21.9
The payable to D-R has been netted against the assets held for
sale. Results reported separately by either D-R or IDP that are
presented on a stand-alone basis may differ from the results based
on discontinued operations reporting.
NOTE 3 - ACQUISITIONS OF BUSINESSES: On March 30, 1999, the company
completed the acquisition of Harrow Industries, Inc. (Harrow), a
leading manufacturer of access control technologies, architectural
hardware, and decorative bath fittings and accessories. The
purchase price was approximately $160.0 million, which included the
assumption of certain debt. Since acquisition, the company
segregated certain net assets of Harrow that would be sold within
twelve months.
In the first quarter of 1998, the company acquired for approximately
$15.4 million in cash, substantially all the assets of Johnstone Pump
Company (Johnstone). Johnstone manufactures industrial piston pumps,
automated dispensing systems and related products for use primarily in
the automotive industry. Also in the first quarter of 1998, the
company acquired for approximately $18.0 million in cash
certain manufacturing assets used to produce residential locks,
excluding padlocks, from the Master Lock unit of Fortune Brands, Inc.
In the third quarter of 1998, the company acquired full ownership of
GHH-RAND Schraubenkcompressoren GmbH & Co. KG (GHH-RAND), a
manufacturer of air ends for air compressors. The company previously
owned 50% of GHH-RAND Schraubenkcompressoren GmbH & Co. KG (GHH-RAND).
In addition, during 1998, the company purchased several smaller
businesses.
On October 31, 1997, the company acquired Thermo King Corporation
(Thermo King), for approximately $2.56 billion in cash. Thermo
King is the world leader in the transport temperature-control
business for trailers, truck bodies, seagoing containers, buses and
light-rail cars. The following unaudited pro forma consolidated
results of operations for the year ended December 31, 1997,
reflects the acquisition as though it occurred at the beginning of
the year, after adjustments for the impact of interest on
acquisition debt and depreciation and amortization of assets.
In millions except per share amounts 1997
Sales $7,101.2
Earnings from continuing operations 368.2
Basic earnings per share - continuing operations $2.26
Diluted earnings per share - continuing operations 2.23
The above pro forma results are not necessarily indicative of what
the actual results would have been had the acquisition occurred at
the beginning of the year. Further, the pro forma results are not
intended to be a projection of future results of the combined
companies.
On April 3, 1997, the company completed the acquisition of Newman
Tonks Group PLC (Newman Tonks), a producer of architectural
hardware, for approximately $370.0 million.
These transactions have been accounted for as purchases and
accordingly, each purchase price was allocated to the acquired
assets and assumed liabilities based on their estimated fair
values. The company has classified as intangible assets the costs
in excess of the fair value of the net assets of companies
acquired. The results of all acquired operations have been
included in the consolidated financial statements from their
respective acquisition dates.
NOTE 4 - DISPOSITIONS: During the third quarter, the company
received proceeds of $47.0 million, which approximated book value on
the sale of a portion of the Harrow assets. In December 1999, the
company also sold certain net assets of the Automation Division.
The transaction resulted in a net gain of approximately $4.4
million. The company also made several minor dispositions during
1999.
In the first quarter of 1998, the company completed the sale
of Ing. G. Klemm Bohrtechnik GmbH. Also, during 1998, the company
sold certain assets of Ingersoll-Rand Architectural Hardware Group
Limited (formerly Newman Tonks Group Limited PLC). Sale proceeds
approximated the book value of these assets. In the third quarter
of 1998, the company sold the Spra-Coupe product line, which was
reported as part of the Specialty Vehicles Segment. The sale price
of approximately $35.0 million resulted in a $9.0 million gain.
On February 14, 1997, the company sold the Clark-Hurth Components
Group (Clark-Hurth) for approximately $241.5 million of net cash.
This group's 1997 results, inclusive of the sale transaction,
produced operating income for the first quarter of approximately
$2.7 million, but on an after-tax basis, reduced net earnings by
approximately $3.6 million.
NOTE 5 - INVENTORIES: At December 31, inventories were as follows:
In millions 1999 1998
Raw materials and supplies $ 161.7 $ 166.8
Work-in-process 191.7 195.8
Finished goods 532.9 607.6
886.3 970.2
Less-LIFO reserve 144.2 145.4
Total $ 742.1 $ 824.8
Work-in-process inventories are stated after deducting customer
progress payments of $2.0 million in 1999 and $5.6 million in 1998.
At December 31, 1999 and 1998, LIFO inventories comprised
approximately 51% and 49%, respectively, of consolidated
inventories. There were no material liquidations of LIFO layers
for all periods presented.
NOTE 6 - INVESTMENTS IN PARTIALLY OWNED EQUITY AFFILIATES: The
company has numerous investments, ranging from 20% to 50%, in
companies that operate in similar lines of business.
The company's investments in and amounts due to/(from) partially
owned equity affiliates amounted to $197.4 million and $0.8
million, respectively, at December 31, 1999, and $184.3 million and
$(0.7) million, respectively, at December 31, 1998. The company's
equity in the net earnings of its partially owned equity affiliates
was $9.5 million, $13.6 million and $18.5 million in 1999, 1998 and
1997 respectively.
The company received dividends based on its equity interests in
these companies of $6.4 million, $6.7 million, and $7.6 million in
1999, 1998 and 1997, respectively.
Summarized financial information for these partially owned equity
affiliates at December 31, and for the years then ended:
In millions 1999 1998
Current assets $ 329.8 $ 392.4
Property, plant and equipment, net 260.0 247.2
Other assets 14.1 15.9
Total assets $ 603.9 $ 655.5
Current liabilities $ 171.5 $ 199.5
Long-term debt 61.3 63.1
Other liabilities 22.8 20.9
Total shareholders' equity 348.3 372.0
Total liabilities and equity $ 603.9 $ 655.5
In millions 1999 1998 1997
Net sales $ 609.3 $ 665.8 $ 782.0
Gross profit 88.1 94.9 126.7
Net earnings 19.5 26.1 37.4
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUALS: Accounts payable and
accruals at December 31, were:
In millions 1999 1998
Accounts payable $ 319.2 $ 371.5
Accrued:
Payrolls and benefits 215.1 235.1
Taxes other than income 36.9 39.9
Insurance and claims 116.1 106.6
Postemployment benefits 82.3 63.3
Warranties 57.8 67.5
Interest 60.6 48.1
Other accruals 336.4 352.4
$1,224.4 $1,284.4
NOTE 8 - FINANCIAL INSTRUMENTS: The company, as a large
multinational company, maintains significant operations in foreign
countries. As a result of these global activities, the company is
exposed to changes in foreign currency exchange rates, which affect
the results of operations and financial condition. The company
manages exposure to changes in foreign currency exchange rates
through its normal operating and financing activities, as well as
through the use of financial instruments.
Generally, the only financial instruments the company utilizes are
forward exchange contracts and options.
In late 1999, the company began purchasing commodity contracts to
hedge a portion of the costs of metals used in its products.
Activity for 1999 was minimal.
The purpose of the company's hedging activities is to mitigate the
impact of changes in foreign currency exchange rates. The company
attempts to hedge transaction exposures through natural offsets. To
the extent that this is not practicable, major exposure areas
considered for hedging include foreign currency denominated
receivables and payables, intercompany loans, firm committed
transactions, anticipated sales and purchases, and dividends
relating to foreign subsidiaries. The following table summarizes
by major currency the contractual amounts of the company's forward
contracts in U.S. dollars. Foreign currency amounts are translated
at year-end rates at the respective reporting date. The "buy"
amounts represent the U.S. equivalent of commitments to purchase
foreign currencies, and the "sell" amounts represent the U.S.
equivalent of commitments to sell foreign currencies. Some of the
forward contracts involve the exchange of two foreign currencies
according to local needs in foreign subsidiaries.
At December 31, the contractual amounts were:
In millions 1999 1998
Buy Sell Buy Sell
Australian dollars $ - $ 1.4 $ 2.4 $ 11.5
Brazilian reais - - - 13.8
British pounds 29.2 16.3 13.7 158.9
Canadian dollars 107.3 17.9 2.0 42.4
Czech koruna - - - 10.9
Danish krona 14.5 0.8 5.9 5.9
Euro and euro-linked
currencies 44.3 5.8 102.8 343.4
Japanese yen 4.9 0.6 2.8 19.7
New Zealand dollars - 2.2 3.0 6.4
Singapore dollars 1.3 11.2 - 11.9
Other 4.4 10.1 0.9 3.6
Total $205.9 $66.3 $133.5 $628.4
Forward contracts utilized by the company have maturities of one to
12 months.
The company's forward contracts that hedge transactions or firm
commitments do not subject the company to risk due to foreign
exchange rate movement, since gains and losses on these contracts
generally offset losses and gains on the assets, liabilities or
other transactions being hedged. Contracts purchased to mitigate
the variability of future cash flows of foreign subsidiaries bear
market risk to the extent actual transacted amounts vary from the
forecasted amounts. All gains and losses on these contracts have
been included in earnings.
The counterparties to the company's forward contracts consist of a
number of major international financial institutions. The company
could be exposed to loss in the event of nonperformance by the
counterparties. However, credit ratings and concentration of risk
of these financial institutions are monitored on a continuing basis
and present no significant credit risk to the company.
The carrying value of cash and cash equivalents, marketable
securities, accounts receivable, short-term borrowings and accounts
payable are a reasonable estimate of their fair value due to the
short-term nature of these instruments. The following table
summarizes the estimated fair value of the company's remaining
financial instruments at December 31:
In millions 1999 1998
Long-term debt:
Carrying value $2,113.3 $2,166.0
Estimated fair value 2,083.9 2,299.7
Forward contracts:
Contract (notional) amounts:
Buy contracts $ 205.9 $ 133.5
Sell contracts 66.3 628.4
Fair (market) values:
Buy contracts 209.2 142.9
Sell contracts 66.5 635.3
Fair value of long-term debt was determined by reference to the
December 31, 1999 and 1998, market values of comparably rated debt
instruments. Fair values of forward contracts are based on dealer
quotes at the respective reporting dates.
NOTE 9 - LONG-TERM DEBT AND CREDIT FACILITIES:
At December 31, long-term debt consisted of:
In millions 1999 1998
6 7/8% Notes Due 2003 $ 100.0 $ 100.0
6.255% Notes Due 2001 400.0 400.0
9% Debentures Due 2021 125.0 125.0
7.20% Debentures Due 2025 150.0 150.0
6.48% Debentures Due 2025 150.0 150.0
6.391% Debentures Due 2027 200.0 200.0
6.443% Debentures Due 2027 200.0 200.0
Medium-term Notes Due 2001-2028, at
an average rate of 6.43% 609.9 679.9
9.75% Clark Debentures Due 2001 100.0 100.0
Clark Medium-term Notes Due 2023,
at an average rate of 8.22% 50.2 50.2
Other domestic and foreign
loans and notes, at end-
of-year average interest
rates of 5.756% in 1999
and 6.278% in 1998, maturing
in various amounts to 2014 28.2 10.9
$2,113.3 $2,166.0
Debt retirements for the next five years are as follows:
$73.1 million in 2000, $736.3 million in 2001, $84.0 million in
2002, $198.3 million in 2003 and $315.5 million in 2004.
In December 1998, the company repurchased $110.0 million of its
medium-term notes for $116.9 million including accrued interest.
The average coupon of the notes repurchased was 6.53% with
maturities ranging from 2000 to 2005.
At December 31, 1999, the company's committed revolving credit
lines consisted of two 364-day lines and a five-year line totalling
$1.3 billion and $750.0 million, respectively, both of which were
unused. These lines provide support for commercial paper and
indirectly provide support for other financing instruments, such
as letters of credit and comfort letters, as required in the normal
course of business. The company compensates banks for these lines
with fees equal to a weighted average of 0.06375% per annum.
Available foreign lines of credit were $614.6 million, of which
$540.9 million were unused at December 31, 1999. No major cash
balances were subject to withdrawal restrictions. At December 31,
1999, and 1998 the average rate of interest for loans payable,
excluding the current portion of long-term debt, was 4.186% and
8.306%, respectively.
Capitalized interest on construction and other capital projects
amounted to $4.0 million, $4.0 million and $3.2 million in 1999,
1998 and 1997, respectively. Interest income, included in other
income (expense), net, was $5.4 million, $7.5 million and $11.0
million in 1999, 1998 and 1997, respectively.
NOTE 10 - COMMITMENTS AND CONTINGENCIES: The company is involved
in various litigations, claims and administrative proceedings,
including environmental matters, arising in the normal course of
business. In assessing its potential environmental liability, the
company bases its estimates on current technologies and does not
discount its liability or assume any insurance recoveries. Amounts
recorded for identified contingent liabilities are estimates, which
are reviewed periodically and adjusted to reflect additional
information when it becomes available. Subject to the
uncertainties inherent in estimating future costs for contingent
liabilities, management believes that recovery or liability with
respect to these matters would not have a material effect on the
financial condition, results of operations, liquidity or cash flows
of the company for any year.
The company has established two wholly owned special purpose
subsidiaries to purchase accounts and notes receivable at a
discount from the company on a continuous basis. These special
purpose subsidiaries simultaneously sell an undivided interest in
these accounts and notes receivable to a financial institution up
to a maximum of $170.0 million. The agreements between the special
purpose corporations and the financial institution expire annually
and will be renewed with either the current or another financial
institution. The company is retained as the servicer of the pooled
receivables. During 1999, 1998 and 1997, such sales of receivables
amounted to $781.8 million, $723.7 million and $614.0 million,
respectively. At December 31, 1999, $170.0 million of such sold
receivables remained uncollected.
Receivables, excluding the designated pool of accounts and notes
receivable, sold during 1999 and 1998 with recourse, amounted to
$57.5 million and $55.4 million, respectively. At December 31, 1999
and 1998, $18.7 million and $12.4 million, respectively, of such
receivables sold remained uncollected.
As of December 31, 1999, the company had no significant
concentrations of credit risk in trade receivables due to the large
number of customers which comprised its receivables base and their
dispersion across different industries and countries.
In the normal course of business, the company has issued several
direct and indirect guarantees, including performance letters of
credit, totalling approximately $104.0 million at December 31,
1999. The company has also guaranteed the residual value of leased
product in the aggregate amount of $39.1 million. Upon the
termination of a dealer, a newly selected dealer generally acquires
the assets of the prior dealer and assumes any related financial
obligation. Accordingly, the risk of loss to the company is
minimal, and historically, only immaterial losses have been
incurred relating to these arrangements. Management believes these
guarantees will not adversely affect the consolidated financial
statements.
Certain office and warehouse facilities, transportation vehicles
and data processing equipment are leased. Total rental expense was
$71.6 million in 1999, $71.2 million in 1998 and $69.5 million in
1997. Minimum lease payments required under noncancellable
operating leases with terms in excess of one year
for the next five years and thereafter, are as follows: $46.3
million in 2000, $37.2 million in 2001, $27.2 million in 2002,
$17.9 million in 2003, $15.7 million in 2004 and $25.7 million
thereafter.
NOTE 11 - EQUITY-LINKED SECURITIES: In March 1998, the company,
together with Ingersoll Financing I, a Delaware statutory business
trust of the company (Finance Trust), issued an aggregate of (a)
16,100,000 equity-linked securities, and (b) 1,610,000 Finance
Trust 6.22% capital securities, each with a $25 stated liquidation
amount (the capital securities). The equity-linked securities
consisted of (a) 14,490,000 income equity-linked securities (income
securities), and (b) 1,610,000 growth equity-linked securities
(growth securities).
Each equity-linked security consists of a unit comprised of (a) a
contract to purchase from the company no later than May 16, 2001, a
number of shares of the company's common stock determined in
accordance with a specified formula and to receive an annual
contract adjustment payment until May 15, 2001 of 0.53%, (in the
case of an income security), or 0.78% (in the case of a growth
security), and (b) either beneficial ownership of a capital
security (in the case of an income security), or a 1/40 undivided
beneficial interest in a zero coupon U.S. Treasury Security
maturing May 15, 2001 (in the case of a growth security). Under the
terms of the stock purchase contracts, the company will issue
between 6.9 million and 8.3 million common shares by May 16, 2001.
The capital securities associated with the income securities and
the U.S. Treasury Securities associated with the growth securities
have been pledged as collateral to secure the holders' obligations
in respect of the common stock purchase contracts.
The capital securities were issued by the Finance Trust and are
entitled to a distribution rate of 6.22% per annum of their $25
stated liquidation amount. The Finance Trust utilized the proceeds
from the issuance of the equity-linked and capital securities to
purchase $402.5 million of the company's 6.22% Debentures due May
16, 2003. The Debentures are the sole asset of the Finance Trust.
The interest rate on the 6.22% Debentures and the distribution rate
on the capital securities and common securities of the Finance
Trust are to be reset, subject to certain limitations, effective
May 16, 2001.
The company has recorded the present value of the contract
adjustment payments, totalling $6.4 million, as a liability and a
reduction of shareholders' equity. The liability will be reduced
as the contract adjustment payments are made. The company has the
right to defer the contract adjustment payments and the payment of
interest on the 6.22% Debentures, but any such election will
subject the company to restrictions on the payment of dividends on,
and redemption of, its outstanding shares of common stock, and on
the payment of interest on, or redemption of, debt securities of
the company junior in rank to the 6.22% Debentures.
The company paid costs of approximately $12.9 million in connection
with the issuance of the equity-linked securities and the capital
securities. The portion of such costs which relate to the issuance
of the stock purchase contracts has been recorded as a reduction of
shareholders' equity.
NOTE 12 - COMMON STOCK: In May 1997, the board of directors
authorized the repurchase of up to 15.0 million shares of the
company's common stock at management's discretion. Shares
repurchased will be used for general corporate purposes. The
number of treasury shares at December 31, 1999, and December 31,
1998, were 8,039,516 and 4,494,930, respectively.
In August 1997, the board of directors declared a three-for-two
stock split of the company's common stock. The stock split was
made in the form of a stock dividend, and was paid on September
2, 1997, to shareholders of record on August 19, 1997. All prior
year per share amounts have been restated to reflect the stock
split.
In November 1998, the company adopted a new shareholder rights plan
to replace the plan which expired on December 22, 1998. Under the
new plan, one right was distributed for each share of Ingersoll-
Rand common stock outstanding at the close of business on December
22, 1998.
Initially, the rights are attached to the common stock and are not
exercisable. The rights become exercisable and will trade
separately from the common stock 10 days following the first
public announcement that any person or group has acquired at least
15% of the company's outstanding common stock, or on the 10th day
following the commencement or the announcement of an intention to
commence a tender offer, which would result in that person or group
acquiring beneficial ownership of att least 15 % of the outstanding
shares of common stock. Each right would entitle the holder to
purchase one-thousandth of a share of Series A Preference Stock at
an exercise price of $200.
If any person or group acquires 15% or more of the company's common
stock, the rights not held by the 15% shareholder would become
exercisable to purchase the company's common stock at a 50%
discount. The plan provides that, at any time after a person or
group becomes an acquiring person and prior to the acquisition by
that person or group of 50% or more of the outstanding common
stock, the board may exchange the rights (other than the rights
held by the acquiring person, which will have become void), at an
exchange ratio of one share of common stock per right.
The new rights will expire on December 22, 2008, unless earlier
redeemed or exchanged by the company, as provided in the rights
plan. The company may elect to redeem the rights at $0.01 per
right.
NOTE 13 - LEVERAGED EMPLOYEE STOCK OWNERSHIP PLAN: The company's
sponsors a Leveraged Employee Stock Ownership Plan (LESOP) for
eligible employees. The LESOP is used to fund certain employee
benefit plans. At December 31, 1999, and December 31, 1998, the
LESOP held approximately 0.7 million and 1.1 million shares,
respectively, which are unallocated. The carrying value0 offor the
unallocated shares was $16.5 million and $27.0 million at December
31, 1999, and December 31, 1998, respectively, and is classified as
a reduction of shareholders' equity pending allocation to
participants. At December 31, 1999, the LESOP owed
the company $8.4 million payable in monthly installments through
2001. Company contributions to the LESOP and dividends on
unallocated shares are used to make loan principal and interest
payments. With each principal and interest payment, the LESOP
allocates a portion of the common stock to participating employees.
NOTE 14 - INCENTIVE STOCK PLANS: Under the company's Incentive
Stock Plans, key employees have been granted options to purchase
common shares at prices not less than the fair market value at the
date of the grant. Options issued before December 31, 1998, became
exercisable one year after the date of the grant and expire at the
end of 10 years. Options issued after January 1, 1999, become
exercisable ratably over a three year period from their date of
grant and expire at the end of 10 years. The plans, approved in
1990, 1995 and 1998, also authorize stock appreciation rights
(SARs) and stock awards.
As permitted by SFAS No. 123, "Accounting for Stock-Based
Compensation," the company continues to account for its stock plans
in accordance with APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and its related interpretations. Accordingly,
compensation expense has been recognized for SARs (which were
generally settled for cash) and for stock awards.
Under SFAS No. 123, compensation cost for the applicable provisions
of the company's incentive stock plans would be determined based
upon the fair value at the grant date for awards issued since 1996.
Applying this methodology would have reduced net earnings and
diluted earnings per share by approximately $8.5 million and five
cents per share for 1999; $14.7 million and nine cents per share
for 1998; and $10.0 million and six cents per share for 1997. On
December 15, 1996, the company cancelled SARs which were previously
attached to 2,758,500 stock options. Included in the SFAS No. 123
expense for 1997 was approximately $1.5 million (or one cent per
share) for the cost of this revocation. The average fair values of
the options granted during 1999, 1998 and 1997 were estimated at
$14.15, $8.06 and $8.55, respectively, on the date of grant, using
the Black-Scholes option-pricing model, which included the
following assumptions:
1999 1998 1997
Dividend yield 1.27% 1.42% 1.61%
Volatility 29.59% 25.76% 22.59%
Risk-free interest rate 4.93% 5.39% 6.52%
Forfeiture rate -- -- --
Expected life 4 years 4 years 4 years
Changes in options outstanding under the plans were as follows:
Shares subject Option Price Weighted average
to option range per share exercise price
January 1, 1997 5,955,150 $13.83-31.13 $23.25
Granted 2,031,000 30.33-41.28 34.14
Exercised (1,905,250) 13.83-28.54 22.74
Canceled (37,500) 26.21-26.63 26.29
December 31, 1997 6,043,400 $13.83-41.28 $27.06
Granted 2,280,250 37.03-47.03 42.45
Exercised (1,419,525) 13.83-40.47 25.65
Cancelled (69,600) 24.08-41.28 33.75
December 31, 1998 6,834,525 $14.77-47.03 $32.43
Granted 2,816,480 49.09-69.75 50.50
Exercised (2,216,558) 14.77-46.00 31.74
Cancelled (93,590) 26.21-26.63 48.99
December 31, 1999 7,340,857 $15.13-69.75 $39.35
At December 31, 1999, there were 402,050 SARs outstanding with no
stock options attached. The company has reserved 10,309,456 shares
for future awards at December 31, 1999. In addition, 554,875
440,422 shares of common stock were reserved for future issue,
contingent upon attainment of certain performance goals and future
service and 229,427 shares have been earned but deferred at
December 31, 1999.
The following table summarizes information concerning currently outstanding and
exercisable options:
Options Options
outstanding exercisable
Weighted Weighted Weighted
Number average average Number average
Range of outstanding remaining exercise exercisable exercise
exercise price at 12/31/99 life price at 12/31/99 price
$15.13-$20.00 81,400 1.2 $15.64 81,400 $15.64
20.01- 25.00 1,213,250 4.4 23.06 1,213,250 23.06
25.01- 30.00 663,500 6.4 26.31 663,500 26.31
30.01- 35.00 952,300 7.3 33.65 952,300 33.65
35.01- 40.00 - - - - -
40.01- 45.00 1,630,867 8.1 42.26 1,545,734 42.23
45.01- 50.00 2,254,290 9.1 49.01 68,483 46.45
50.01- 55.00 350,000 9.3 51.46 - -
55.01- 60.00 - - - - -
60.01- 65.00 45,900 9.7 62.59 - -
65.01- 69.75 149,350 9.4 65.93 - -
$15.13-$69.75 7,340,857 $39.35 4,524,667 $32.53
The weighted average number of shares exercisable and the weighted average
exercise prices were 4,561,025 shares at a price of $27.44 for December 31,
1998, and 4,012,400 shares at a price of $23.47 for December 31, 1997.
The company also maintains a shareholder-approved Management
Incentive Unit Award Plan. Under the plan, qualifying executives
are awarded incentive units. When dividends are paid on common
stock, dividends are awarded to unit holders, one-half of which is
paid in cash, the remaining half of which is credited to the
participant's account in the form of so-called common stock
equivalents. The fair value of accumulated common stock
equivalents is paid in cash upon the participant's retirement. The
number of common stock equivalents credited to participants' accounts
at December 31, 1999 and 1998, are315,210 484,341 and 513,470, respectively.
NOTE 15 - INCOME TAXES: Earnings before income taxes for the years
ended December 31, were taxed within the following jurisdictions:
In millions 1999 1998 1997
United States $669.0 $539.9 $452.5
Foreign 175.8 166.3 125.9
Total $844.8 $706.2 $578.4
The provision for income taxes was as follows:
In millions 1999 1998 1997
Current tax expense:
United States $220.5 $183.2 $176.9
Foreign 37.6 61.3 52.6
Total current 258.1 244.5 229.5
Deferred tax expense:
United States 26.4 12.0 (0.9)
Foreign 15.4 (5.8) (8.8)
Total deferred 41.8 6.2 (9.7)
Total provision for
income taxes $299.9 $250.7 $219.8
The provision for income taxes differs from the amount of income
taxes determined by applying the applicable U.S. statutory income
tax rate to pretax income, as a result of the following differences:
Percent of pretax income
1999 1998 1997
Statutory U.S. rates 35.0% 35.0% 35.0%
Increase (decrease) in rates
resulting from:
Amortization of goodwill 2.0 2.5 2.1
Foreign operations (1.0) 0.1 (0.4)
Foreign sales corporation (1.7) (2.0) (0.9)
State and local income taxes,
net of U.S. tax 2.1 2.3 1.3
Puerto Rico - Sec 936 Credit (1.8) (2.2) (0.6)
Other 0.9 (0.2) 1.5
Effective tax rate 35.5% 35.5% 38.0%
A summary of the deferred tax accounts at December 31, follows:
In millions 1999 1998 1997
Current deferred assets and (liabilities):
Differences between book and tax bases
of inventories and receivables $ 21.1 $ 21.4 $ 22.4
Differences between book and tax
expense for other employee related
benefits and allowances 8.5 16.7 4.5
Other reserves and valuation
allowances in excess of tax deductions 35.4 28.3 62.4
Other differences between tax and
financial statement values (11.1) 2.4 1.7
Gross current deferred net tax assets 53.9 68.8 91.0
Noncurrent deferred tax assets and
(liabilities):
Postretirement and postemployment
benefits other than pensions in
excess of tax deductions 262.4 255.1 255.4
Other reserves in excess of tax expense 119.2 124.0 118.9
Tax depreciation in excess of book
depreciation (124.7) (96.0) (95.2)
Pension contributions in excess of
book expense (38.5) (32.6) (34.2)
Taxes provided for unrepatriated
foreign earnings (22.5) (22.5) (28.5)
Gross noncurrent deferred net tax
assets 195.9 228.0 216.4
Less: deferred tax valuation
allowances (37.9) (22.0) (36.7)
Total net deferred tax assets $211.9 $274.8 $270.7
A total of $22.5 million of deferred taxes have been provided for a portion
of the undistributed earnings of subsidiaries operating outside of the
United States. As to the remainder, these earnings have been, and under
current plans, will continue to be reinvested. Therefore, it is not
practicable to estimate the amount of additional taxes which may be payable
upon repatriation.
NOTE 16 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: The company
sponsors several postretirement plans that cover most domestic
employees. These plans provide for health care benefits and in some
instances, life insurance benefits. Postretirement health plans
are contributory and are adjusted annually. Life insurance plans
are noncontributory. When fulltime employees retire from the
company between age 55 and 65, most are eligible to receive, at a
cost to the retiree, certain health care benefits identical to
those available to active employees. After attaining age 65, an
eligible retiree's health care benefit coverage becomes coordinated
with Medicare. The company funds the benefit costs principally on
a pay-as-you-go basis.
Summary information on the company's plans at December 31, was as
follows:
In millions 1999 1998
Change in benefit obligations:
Benefit obligation at beginning of year $ 610.3 $ 567.4
Service cost 8.8 9.6
Interest cost 38.0 38.9
Plan participants' contributions 4.3 3.2
Actuarial (gains)/losses (36.8) 29.6
Benefits paid (58.4) (48.0)
Other 0.2 9.6
Benefit obligation at end of year $ 566.4 $ 610.3
Funded status:
Plan assets less than benefit
obligations $(566.4) $(610.3)
Unrecognized:
Prior service gains (54.5) (59.0)
Plan net gains (55.7) (20.2)
Accrued costs in the balance sheet $(676.6) $(689.5)
Weighted-average assumptions:
Discount rate 7.50% 6.75%
Current year medical inflation 6.50% 7.60%
Ultimate inflation rate (2003) 5.00% 4.50%
The components of net periodic postretirement benefits cost for the
years ended December 31, were as follows:
In millions 1999 1998 1997
Service cost $ 8.8 $ 9.6 $ 7.3
Interest cost 38.0 38.9 36.3
Net amortization of
unrecognized:
Prior service gains (4.2) (4.5) (4.5)
Plan net gains - - (0.9)
Net periodic postretirement
benefits cost $42.6 $44.0 $38.2
A 1% change in the medical trend rate assumed for postretirement
benefits would have the following effects at December 31, 1999:
In millions 1% Increase 1% Decrease
Effect on total of service and
interest cost components $ 3.6 $ (3.4)
Effect on postretirement
benefit obligation 47.3 (41.4)
NOTE 17 - PENSION PLANS: The company has noncontributory
pension plans covering substantially all domestic employees. In
addition, certain employees in other countries are covered by
pension plans. The company's domestic salaried plans principally
provide benefits based on a career average earnings formula.
The company's hourly pension plans provide benefits under flat
benefit formulas. Foreign plans provide benefits based on
earnings and years of service. Most of the foreign plans
require employee contributions based on the employee's earnings.
In addition, the company maintains other supplemental benefit
plans for officers and other key employees. The company's
policy is to fund an amount which could be in excess of the
pension cost expensed, subject to the limitations imposed by
current statutes or tax regulations.
Information regarding the company's pension plans in accordance
with SFAS No. 132 is as follows:
In millions 1999 1998
Change in benefit obligations:
Benefit obligation at beginning of year $1,985.7 $1,845.2
Service cost 42.0 37.7
Interest cost 132.1 130.3
Employee contributions 4.5 5.2
Amendments 3.6 19.4
Acquisitions 35.7 5.6
Expenses paid (3.9) (2.6)
Actuarial (gains)/losses (113.2) 91.4
Benefits paid (142.4) (143.1)
Foreign exchange impact (14.0) (3.9)
Other 4.6 0.5
Benefit obligation at end of year $1,934.7 $1,985.7
In millions 1999 1998
Change in plan assets:
Fair value at beginning of year $2,133.2 $1,977.0
Actual return on assets 197.7 262.7
Company contributions 17.4 37.7
Employee contributions 4.5 5.2
Acquisitions 48.7 0.8
Expenses paid (3.8) (2.6)
In millions 1999 1998
Benefits paid (140.2) (140.6)
Foreign exchange impact (10.6) (7.0)
Fair value of assets at end of year $2,246.9 $2,133.2
Funded status:
Plan assets in excess of benefit
obligations $ 312.2 $ 147.5
Unrecognized:
Net transition asset 6.9 8.0
Prior service costs 58.1 54.1
Plan net gains (317.2) (186.3)
Net amount recognized $ 60.0 $ 23.3
Prepaid/(accrued) costs included
in the balance sheet:
Prepaid benefit cost $ 136.7 $ 95.0
Accrued benefit liability (79.7) (73.1)
Intangible asset 3.0 1.4
Net amount recognized $ 60.0 $ 23.3
Weighted-average assumptions:
Discount rate:
U.S. plans 7.50% 6.75%
International plans 6.00% 6.75%
Rate of compensation increase:
U.S. plans 5.25% 4.50%
International plans 3.50% 4.50%
Expected return on plan assets:
U.S. plans 9.00% 9.00%
International plans 7.75% 8.00%
The components of the company's pension costs for the years ended
December 31, include the following:
In millions 1999 1998 1997
Service cost $ 42.0 $ 37.7 $ 33.4
Interest cost 132.1 130.3 117.7
Expected return on plan assets (183.0) (170.3) (148.6)
Net amortization of unrecognized:
Prior service costs 5.9 3.7 3.6
Transition amount 0.7 0.7 0.6
Plan net losses 2.9 2.3 0.9
Net pension cost $ 0.6 $ 4.4 $ 7.6
The projected benefit obligation, accumulated benefit obligation,
and fair value of plan assets for pension plans with accumulated
benefit obligations more than plan assets were $151.9 million,
$117.3 million and $37.7 million, respectively, as of December 31,
1999, and $169.0 million, $136.8 million and $59.1 million,
respectively, as of December 31, 1998.
Plan investment assets of domestic plans are balanced between
equity securities and cash equivalents or debt securities. Assets
of foreign plans are invested principally in equity securities.
Most of the company's domestic employees are covered by savings and
other defined contribution plans. Employer contributions and costs
are determined based on criteria specific to the individual plans
and amounted to approximately $25.1 million, $29.0 million and
$25.0 million in 1999, 1998 and 1997, respectively.
The company's costs relating to foreign defined contribution plans,
insured plans and other foreign benefit plans were $4.1 million,
$5.3 million and $8.6 million in 1999, 1998 and 1997, respectively.
NOTE 18 - BUSINESS SEGMENT INFORMATION: Operating segments are
defined as components of a company engaging in business activities
for which separate financial information is available and evaluated
regularly by the chief operating decision maker in assessing
performance and allocating resources.
The accounting policies of the operating segments are the same as
those described in the summary of significant accounting policies
except that the operating segments results are prepared on a
management basis that is consistent with the manner in which the
company disaggregates financial information for internal review and
decision making. The company evaluates performance based on
operating income contribution rates. Intercompany sales
transactions are entirely contained within each segment and are
eliminated at the segment level. A description of the company's
reportable segments is as follows:
Specialty Vehicles
The Specialty Vehicles Segment designs, manufactures and markets
powered vehicles that play a niche role in such fields as
infrastructure development, commercial construction and material
movement. Specialty Vehicles includes Bobcat skid-steer loaders and
compact hydraulic excavators, Club Car golf cars and industrial
vehicles, Blaw-Knox and ABG pavers, and Ingersoll-Rand compactors,
drilling equipment and rough-terrain material handlers.
Air and Temperature Control
The Air and Temperature Control Segment focuses on markets
requiring air and refrigerant-gas compression technology and
services to provide gas pressure for distribution to end users or
to maintain a refrigeration cycle. Air and Temperature Control
includes Thermo King transport temperature-control equipment and
Ingersoll-Rand air compressors.
Hardware and Tools
The Hardware and Tools Segment concentrates on manufacturing,
marketing, and managing the distribution channels required to reach
end user customers seeking products that enhance productivity and
security in the industrial, construction, and do-it-yourself
markets. Hardware and Tools includes architectural hardware
products, such as Schlage locks, Von Duprin exit devices, door-
control hardware, steel doors, power-operated doors and
architectural columns, and tools and related industrial-production
equipment.
Engineered Products
The Engineered Products Segment is composed of highly engineered
specific application products that are sold on a contract basis.
Engineered Products includes Torrington and Fafnir bearings and
components.
Sales by destination and long-lived asset by geographic area for
the years ended December 31 were as follows:
In millions 1999 1998 1997
Sales
United States $5,051.5 $4,770.8 $4,003.5
Foreign 2,615.2 2,613.9 2,235.6
Total $7,666.7 $7,384.7 $6,239.1
In millions 1999 1998
Long-lived assets
United States $4,247.0 $4,211.9
Foreign 928.7 966.3
Total $5,175.7 $5,178.2
A summary of operations by reportable segments for the years ended
December 31, were as follows:
Dollar amounts in millions 1999 1998 1997
Specialty Vehicles
Sales $2,347.8 $2,180.4 $2,011.8
Operating income 405.3 333.3 226.7
Operating income as %
of sales 17.3% 15.3% 11.3%
Depreciation and
amortization 60.2 59.7 63.3
Air and Temperature Control
Sales 2,211.8 2,236.0 1,256.6
Operating income 286.7 262.5 133.7
Operating income as %
of sales 13.0% 11.7% 10.6%
Depreciation and
amortization 106.2 105.4 35.7
Hardware and Tools
Sales 1,874.2 1,724.2 1,652.1
Operating income 320.3 288.3 254.8
Operating income as %
of sales 17.1% 16.7% 15.4%
Depreciation and
amortization 52.2 44.8 39.7
Engineered Products
Sales 1,232.9 1,244.1 1,318.6
Operating income 144.2 136.9 157.1
Operating income as %
of sales 11.7% 11.0% 11.9%
Depreciation and
amortization 51.6 51.1 52.1
Total
Sales $7,666.7 $7,384.7 $6,239.1
Operating income from
reportable segments 1,156.5 1,021.0 772.3
Unallocated corporate
expenses (57.2) (51.9) (48.8)
Total operating income $1,099.3 $ 969.1 $ 723.5
Total operating income as
% of sales 14.3% 13.1% 11.6%
Depreciation and
amortization from
reportable segments 270.2 261.0 190.8
Unallocated depreciation
and amortization 2.2 2.6 1.4
Total depreciation and
amortization $ 272.4 $ 263.6 $ 192.2
NOTE 19 - SUBSEQUENT EVENTS (Unaudited): On February 2, 2000, the
company completed the purchase of D-R by acquiring the joint
venture partner's 51% share for a net purchase price of
approximately $536.0 million in cash. The company intends to
divest of this business (see Note 2).
On February 9, 2000, the company agreed to sell its IDP unit to
the Flowserve Corporation for $775.0 million in cash. The
transaction is subject to regulatory approval and is expected to
close during the second quarter of 2000.
Report of Management
The accompanying consolidated financial statements have been
prepared by the company. They conform with generally accepted
accounting principles and reflect judgments and estimates as to the
expected effects of incomplete transactions and events being
accounted for currently. The company believes that the accounting
systems and related controls that it maintains are sufficient to
provide reasonable assurance that assets are safeguarded,
transactions are appropriately authorized and recorded, and the
financial records are reliable for preparing such financial
statements. The concept of reasonable assurance is based on the
recognition that the cost of a system of internal accounting
controls must be related to the benefits derived. The company
maintains an internal audit function that is responsible for
evaluating the adequacy and application of financial and operating
controls, and for testing compliance with company policies and
procedures.
The Audit Committee of the board of directors is comprised entirely
of individuals who are not employees of the company. This committee
meets periodically with the independent accountants, the internal
auditors and management to consider audit results and to discuss
significant internal accounting controls, auditing and financial
reporting matters. The Audit Committee recommends the selection of
the independent accountants, who are then appointed by the board of
directors, subject to ratification by the shareholders.
The independent accountants are engaged to perform an audit of the
consolidated financial statements in accordance with generally
accepted auditing standards. Their report follows.
/S/David W. Devonshire
Executive Vice President and Chief Financial Officer
Report of Independent Accountants
PricewaterhouseCoopers LLP
400 Campus Drive
Florham Park, NJ 07932
February 1, 2000
To the Board of Directors and
Shareholders of Ingersoll-Rand Company:
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of income, shareholders' equity and
cash flows present fairly, in all material respects, the financial
position of Ingersoll-Rand Company and its subsidiaries at December
31, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December
31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements based on our
audits. We conducted our audits of these statements in accordance
with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/S/PricewaterhouseCoopers LLP
EXHIBIT 21
LIST OF SUBSIDIARIES OF INGERSOLL-RAND COMPANY
The following list represents the principal subsidiaries of the
company all of which (except as otherwise indicated) are deemed to
be 100% owned, directly or indirectly, and whose financial
statements are included in the consolidated statements. The
subsidiaries of Ingersoll-Dresser Pump Company (IDP), a general
partnership and Dresser-Rand Company, a general partnership, are now
owned 100% by the company. The names of particular subsidiaries
omitted, if considered in the aggregate as a single subsidiary,
would not constitute a significant subsidiary.
SUBSIDIARIES OF INGERSOLL-RAND COMPANY
Aro International Corporation Delaware
Clark Equipment Company Delaware
Bobcat Corporation Japan
Blaw-Knox Construction Equipment
Corporation Delaware
I-R-E Medical, Inc. Delaware
Clark Industries Company Delaware
Blaw-Knox Company England
Clark Business Services Corporation Michigan
Clark Foreign Sales Corporation Barbados
Clark-Hurth Components Marketing
Company Delaware
Checker Flag Parts, Inc. Minnesota
Ingersoll-Rand Italiana S.p.A. Italy
Ingersoll-Rand Services &
Engineering Company Switzerland
Ingersoll-Rand Acceptance
Company S.A. Switzerland
Ingersoll-Rand Construction
Services Inc. Delaware
Ingersoll-Rand Investment
Company S.A. Switzerland
Ingersoll-Rand
Best-Matic AB Sweden
Melroe Equipment Limited Canada
Melroe Parts Trading GmbH Germany
Club Car Inc. Delaware
Club Car International Inc. Guam
Club Car Limited New Zealand
Compagnie Ingersoll-Rand France
Ingersoll-Rand Equipements de
Construction France
Etablissements Montabert, S.A. France
Montabert GmbH Germany
Ingersoll-Rand Equipements
de Production, S.A. France
S.A. Etablissements Charles Maire France
Sambron S.A. France
Torrington France S.A.R.L. France
D-R Acquisition, LLC Delaware
Harrow Industries, Inc. Delaware
Harrow Products, Inc. (Delaware) Delaware
Harrow Products, Inc. Delaware
Recognition Systems, Inc. California
IDP Acquisition, LLC Delaware
Thermo King Ireland Limited Ireland
Thermo King Czech Republic Czech Republic
Improved Machinery, Inc. Delaware
Industria e Comercio Aro do Brasil Ltda. Brazil
Ingersoll-Rand AB Sweden
Ingersoll-Rand Argentina S.A.I.C. Argentina
Ingersoll-Rand Asia Pacific Inc. Delaware
Ingersoll-Rand (Australia) Ltd. Australia
Ingersoll-Rand South East Asia
(Pte.) ltd. Singapore
Ingersoll-Rand Benelux, N.V. Belgium
Thermo King Belgium N.V. Belgium
Ingersoll-Rand Beteiligungs GmbH Germany
ABG Allgemeine Baumaschinen
Gesellschaft mbh Germany
ABG Verwaltungs GmbH Germany
ABG France S.A.R.L. France
ABG Iberica S.A. Spain
I-R Beteiligungs und
Grundstucksverwaltungs GmbH Germany
Ingersoll-Rand GmbH Germany
Thermo King Deutschland GmbH Germany
Ingersoll-Rand Sales Company LLC Delaware
Ingersoll-Rand China Limited Delaware
Ingersoll-Rand China Investment
Company Limited China
Ingersoll-Rand (Guilin) Tools Company Limited China
Ingersoll-Rand (Wuxi) Road
Machinery Company Limited China
(92% owned by the company)
Thermo King-Dalian Transport China
Refrigeration Company, Limited
(70% owned by the company)
Torrington-Wuxi Bearings Company China
Limited
(78% owned by the company)
Shanghai Ingersoll-Rand Compressor China
Limited (80% owned by the company)
Ingersoll-Rand Company (Chile) y Cia Ltda. Chile
Ingersoll-Rand de Colombia S.A. Colombia
Ingersoll-Rand de Puerto Rico, Inc. Puerto Rico
Ingersoll-Rand Enhanced Recovery Company Delaware
Ingersoll-Rand Europe France
Ingersoll-Rand European Holding Company B.V. Netherlands
Ingersoll-Rand (India) Limited India
(74% owned by the company)
Ingersoll-Rand International Foreign
Sales Corporation Guam
Ingersoll-Rand International Holding
Corporation New Jersey
Ingersoll-Rand S.A. Switzerland
Ingersoll-Rand Equipment &
Consulting S.A.R.L. Switzerland
Ingersoll-Rand Machinery &
Services S.A.R.L. Switzerland
Ingersoll-Rand Technical &
Services S.A.R.L. Switzerland
Ingersoll-Rand Trading S.A. Switzerland
Ingersoll-Rand International, Inc. Delaware
Ingersoll-Rand International Sales Inc. Delaware
Ingersoll-Rand Japan Limited Japan
Ingersoll-Rand Manufacturing Co. Delaware
Ingersoll-Rand Canada Inc. Canada
Torrington Beteiligungs GmbH Germany
Torrington GmbH Germany
Torrington Nadellager GmbH Germany
Ingersoll-Rand (Barbados) Corporation Barbados
Ingersoll-Rand World Trade (Ltd.) Bermuda
Torrington Inc. Canada
Ingersoll-Rand do Brasil Ltda. Brazil
Ingersoll-Rand Philippines, Inc. Philippines
Ingersoll-Rand S.A. de C.V. Mexico
Ingersoll-Rand Sales Company Limited Delaware
Ingersoll-Rand European Sales Ltd. England
Ingersoll-Rand Holdings Limited England
Ingersoll-Rand European Sales
Limited England
Ingersoll-Rand Company Limited England
A/S Parts Limited England
Ingersoll-Rand Company
(Ireland) Limited Ireland
Ingersoll-Rand (New Zealand)
Limited New Zealand
Ingersoll-Rand Company
South Africa (Pty.) Limited South Africa
Longrigg Engineering Limited England
Roconeco Limited England
The Aro Corporation (UK) Limited England
The Torrington Company Limit England
NT Acquisition Limited England
Ingersoll-Rand Architectural
Hardware Group Limited England
Newman Tonks Management
Services Limited England
Newman Tonks (Overseas
Holdings) Limited England
NT Access Limited England
NT Architectural Hardware
Limited England
NT Door Controls Limited England
NT Group Properties Limited England
NT Laidlaw Limited England
NT Legge Limited England
NT Martin Roberts Limited England
NT Partition Systems Limited England
NT Projects Limited England
NT Railing Systems Limited England
NT Security Limited England
Newman Tonks Investments, Inc. Delaware
Newman Tonks Holdings, Inc. Delaware
Monarch Hardware
and Mfg.Co. Inc. Delaware
MFP,Inc. Kentucky
Newman Tonks, USA, Inc. Delaware
Dixie Pacific Manufacturing
Company, Inc. Alabama
NT Falcon Lock, Inc. California
ARMORO, Inc. California
NT Dor-O-Matic Inc. Illinois
NT Dor-O-Matic Limited England
NT Dor-O-Matic
Chicago Inc. Illinois
NT Dor-O-Matic Detroit Inc. Michigan
Dor-O-Matic of Mid
Atlantic States, Inc. New Jersey
NT USA FSC INC. Barbados
NT Randi A/S Denmark
NT South Africa South Africa
Newman Tonks Brussels NV Belgium
Newman Tonks Holdings GmbH Germany
NT Normbau Beschlage and
Ausstattungs GmbH Germany
NT Normbau Iberica Spain
Newman Tonks Europe GmbH Germany
NT Asia (Hong Kong) Limited Hong Kong
NT Asia (Singapore) Limited Singapore
NT Dalco Pty Limited Australia
Newman Tonks France SA France
NT Mustad SA France
Ingersoll-Rand Services Company Delaware
Ingersoll-Rand Transportation Services
Company Delaware
Ingersoll-Rand Wadco Tools Ltd. India
(74% owned by the company)
Ingersoll-Rand Western Hemisphere
Trade Corporation Delaware
Ingersoll-Rand Worldwide, Inc. Delaware
Instrum-Rand (59.1% owned by the company) Russia
IR Receivables Funding I Corporation Delaware
IR Receivables Funding II Corporation Delaware
McCartney Manufacturing Company, Inc. Kansas
Northern Research and Engineering
Corporation Massachusetts
Roconeco Corporation South Carolina
S&S Corporation Virginia
SBG Holding Corp. Delaware
Schlage Lock Company California
Ingersoll-Rand Architectural
Hardware Limited New Zealand
Ingersoll-Rand Architectural Hardware
(Australia) Limited Australia
Touch-Plate International, Inc. California
Von Duprin, Inc. Indiana
Schlage de Mexico S.A. de C.V. Mexico
Silver Holding Corp. Colorado
Woodcliff Insurance Ltd. Bermuda
Sonna B.V. Netherlands
Sonna Rail B.V. Netherlands
Steelcraft Holding Company Delaware
The Torrington Company (Delaware) Delaware
Industrias del Rodamiento, S.A. Spain
Ingersoll-Rand Iberica S.L. Spain
Reftrans, S.A. (85% owned by the company) Spain
Ingersoll-Rand Liability Management Company Michigan
Kilian Manufacturing Corp. Delaware
Torrington Holdings, Inc. Delaware
Torrington Sales Limited Switzerland
Thermo King Corporation Delaware
Thermo King Container-Denmark A/S Denmark
Thermo King de Puerto Rico, Inc. Delaware
Thermo King do Brasil, Ltda. Brazil
Thermo King SVC, Inc. Delaware
Thermo King Trading Company Delaware
Tokyo Ryuki Seizo Co. Ltd. Japan
SUBSIDIARIES OF DRESSER-RAND COMPANY
Dresser-Rand Argentina, S.A. Argentina
Dresser-Rand Machinery Repair Belgie N.V. Belgium
Dresser-Rand Canada, Inc. Canada
Dresser-Rand C.I. Limited (Cayman Islands) Cayman Is.
Dresser-Rand Compression Services S.A.-Switzerland Switzerland
Dresser-Rand Compressor Col, Ltd. Shanghai China
Dresser-Rand de Mexico S.A. Mexico
Dresser-Rand Global Services, LLC Delaware
Dresser-Rand Holding Company Delaware
Dresser-Rand Asia Pacific Sdn. Bhd. Malaysia
Dresser-Rand B.V. Netherlands
Dresser-Rand & Enserv Services Sdn. Bhd. Malaysia
Dresser-Rand de Venezuela, S.A. Venezuela
Dresser-Rand Gesellschaft Mit Beschrankter
Haftung Germany
Dresser-Rand Japan, Ltd. Japan
Dresser-Rand Overseas Sales Company Delaware
Dresser-Rand Company Ltd.-UK UK
Dresser-Rand (UK) Ltd. UK
Dresser-Rand Sales Company S.A. Switzerland
Dresser-Rand Services, S.a.r.l. Switzerland
Southwest Industries, Inc. Delaware
Turbodyne Electric Power Corporation Delaware
Dresser-Rand India Private Limited India
Dresser-Rand International B.V. Netherlands
Dresser-Rand Italia S.r.l. Italy
Dresser-Rand (Nigeria) Ltd. Nigeria
Dresser-Rand Power, Inc. Delaware
Dresser-Rand A/S Norway
Dresser-Rand Comercio e Industria Ltda. Brazil
Dresser-Rand (SEA) Pte. Ltd. Singapore
Dresser-Rand S.A.-France France
Dresser-Rand Services B.V. Netherlands
Dresser-Rand Czech S.R.O. Czech Rep.
Engeturb Turbinas a Vapor Ltda. Brazil
Multiphase Power and Processing Technologies, LLC Delaware
Paragon Engineering Services, Inc. Texas
SUBSIDIARIES OF INGERSOLL-DRESSER PUMP COMPANY
Ingersoll-Dresser Pumps de Argentina, S.A. Argentina
Ingersoll-Dresser Pumps GmbH Austria
Ingersoll-Dresser Pumps do Brazil Brazil
Industria e Comercio Ltda. Brazil
Ingersoll-Dresser Pump Canada, Inc. Canada
Ingersoll-Dresser Pumps de Colombia, S.A. Colombia
Ingersoll-Dresser Pompes France
IDP Pleuger France
IDP International France
Deutsche Ingersoll-Dresser Pumpen GmbH Germany
Ingersoll-Dresser Pump GmbH Germany
Pleuger Worthington GmbH Germany
Deutsche Worthington GmbH Germany
Ingersoll-Dresser Pumps S.p.A. Italy
Worthington S.p.A. Italy
Ingersoll-Dresser Pump (Asia) Pte., Ltd. Singapore
Ingersoll-Dresser Pump, S.A. Switzerland
Ingersoll-Dresser Pump Services Sarl Switzerland
ID Pump AG Switzerland
Ingersoll-Dresser Pump Nederland B.V. Netherlands
Ingersoll-Dresser Pumps (UK), Ltd. England
Ingersoll-Dresser Pumps Newark, Ltd. England
IDP Alternate Energy Company Delaware
Pump Investments, Inc. Delaware
Energy Hydro, Inc. Delaware
Compania Ingersoll-Dresser Pump, S.A. Spain
Ingersoll-Dresser Pumps (Thailand), Ltd. Thailand
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE DECEMBER 31, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 233
<SECURITIES> 1
<RECEIVABLES> 1,022
<ALLOWANCES> 33
<INVENTORY> 742
<CURRENT-ASSETS> 2,868
<PP&E> 2,085
<DEPRECIATION> 845
<TOTAL-ASSETS> 8,400
<CURRENT-LIABILITIES> 1,739
<BONDS> 2,113
402
0
<COMMON> 342
<OTHER-SE> 2,741
<TOTAL-LIABILITY-AND-EQUITY> 8,400
<SALES> 7,667
<TOTAL-REVENUES> 7,667
<CGS> 5,515
<TOTAL-COSTS> 5,515
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203
<INCOME-PRETAX> 845
<INCOME-TAX> 300
<INCOME-CONTINUING> 545
<DISCONTINUED> 46
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 591
<EPS-BASIC> 3.61
<EPS-DILUTED> 3.57
</TABLE>
