10-K
1
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, 1994
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 1-985
INGERSOLL-RAND COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 13-5156640
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Woodcliff Lake, New Jersey 07675
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)573-0123
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
Series A Preference New York, London and
Stock Purchase Rights Amsterdam Stock Exchanges
Common Stock, $2 par value New York, London and
Amsterdam Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ X ]
1
The aggregate market value of common stock held by nonaffiliates
on March 10, 1995 was $3,153,047,070 based on the closing price
of such stock on the New York Stock Exchange.
The number of shares of common stock outstanding as of March 10,
1995 was 105,591,901.
DOCUMENTS INCORPORATED BY REFERENCE
Annual Report to Shareowners for fiscal year ended December 31,
1994. 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 1994 Annual Report to Shareowners is not
to be deemed filed as part of this report.
Proxy Statement for Annual Meeting of Shareholders to be held
on April 27, 1995. 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.
Effective October 1, 1992, the company and Dresser
Industries, Inc. (Dresser) formed Ingersoll-Dresser Pump Company
(IDP), a partnership which is owned 51 percent by the company and
49 percent by Dresser. This joint venture includes the majority
of the worldwide pump operations of the two companies, and its
results have been included in the consolidated financial
statements of the company since the formation date.
The following acquisitions have been accounted for as
purchases and, accordingly, each purchase price was allocated to
the acquired assets and assumed liabilities based on their
estimated fair values. The results of operations since the dates
of acquisition are included in the consolidated financial
statements.
2
o In early 1992, the company acquired Industrias del Rodamiento,
S.A. (IRSA) for $14.0 million in cash and $1.8 million in
notes. IRSA manufactures and markets an extensive line of
bearings, as well as wheel kits and automotive accessories.
o In August 1993, the company acquired the Kunsebeck, Germany,
needle and cylindrical bearing business of FAG Kugelfischer
Georg Schafer AG of Schweinfurt, Germany, for $42.5 million in
cash, subject to final contract negotiations.
o In April 1994, the company acquired full ownership of the ball
bearing joint venture with GMN Georg Mueller of America, Inc.
for $4.9 million in cash.
o In June 1994, the company acquired Montabert S.A., a French
manufacturer of hydraulic rock-breaking and drilling equipment
for $18.4 million in cash plus assumption of liabilities.
o In August 1994, the company acquired the Ecoair air compressor
product line from MAN Gutehoffnungshutte AG (MAN GHH) for
$10.6 million in cash. The company also entered into a 50/50
joint venture, GHH-RAND Schraubenkompressoren GmbH & Co. KG
(GHH-RAND) with MAN GHH to manufacture airends. The company
invested approximately $17.6 million in GHH-RAND.
In addition, on March 28, 1995, the company announced
that it had made a proposal to acquire Clark Equipment Company in
a cash merger transaction at a total purchase price of
approximately $1.3 billion. Clark's business is the design,
manufacture and sale of skid steer loaders, construction
machinery and transmissions for off-highway equipment.
Dispositions that the company has made in recent years
are as follows:
o The company sold the assets of several small business units in
1993, as well as substantially all of the assets of its coal-
mining machinery and aerospace bearings businesses for $55.5
million in cash.
o In 1994, the assets of the IDP Australian operations were sold
in return for shares of the purchaser. The company and
Dresser Industries sold IRI International Corporation, a 50/50
joint venture that is a manufacturer of mobile drilling rigs,
to a third party.
3
Products
The company manufactures and sells primarily
nonelectrical machinery and equipment. Principal products
include the following:
Abrasive blasting and recovery Hoists
systems Industrial pumps
Air compressors Lubrication equipment
Air dryers Material handling equipment
Air logic controls Monitoring drills
Air motors Needle roller bearings
Air tools Pavement-milling machines
Architectural hardware trim Paving equipment
Asphalt compactors Pellet mills
Automated-parts finishing Pneumatic cylinders
systems Pneumatic valves
Automated production systems Portable compressors
Automotive components Portable generators
Ball bearings Portable light towers
Blasthole drills Pulp-processing machinery
Construction equipment Road-building machinery
Dewatering presses Rock drills
Diaphragm pumps Roller bearings
Door closers Roller mills
Door hardware Rotary drills
Door locks Rough-terrain forklifts
Emergency exit devices Separation equipment
Engineered pumps Soil compactors
Engine-starting systems Spray-coating systems
Extrusion systems Waterjet-cutting systems
Fluid-handling equipment Water well drills
Food-processing equipment Winches
Foundation drills
These products are sold primarily under the company's
name and also under other names including Torrington, Fafnir,
Klemm, Schlage, CPM, LCN Closers, Von Duprin, Aro, ABG,
Ingersoll-Dresser Pumps, Pacific, Worthington, Jeumont-Schneider
Pumps and Pleuger.
During the past three years, the division of the
company's sales between capital goods and expendables has been in
the approximate ratio of 55 percent and 45 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.
The seasonal business of the company is not material.
4
Additional information on the company's business and
financial information about industry segments is presented in
Footnote 15 of the Annual Report to Shareowners for 1994,
incorporated by reference in this Form 10-K Annual Report.
Distribution
The company's products are distributed by a number of
methods which the company believes are appropriate to the type of
product. Sales are made domestically through branch sales
offices and through distributorships and dealers across the
United States. International sales are made through
approximately 60 subsidiary sales and service companies with a
supporting chain of distributors in over 100 countries.
Working Capital
The working capital requirements of the company vary with
respect to the many products and industries in which it is
involved. In general, the requirements of its Engineered
Equipment Segment, which manufactures machinery for specialized
customer needs, involve a relatively long lead time and, at
times, more significant company investment with respect to the
particular product or order. Historically, these orders are
generally covered by progress payments, which reduce the
company's investment in the amount of inventory maintained by
this segment. The products manufactured by the company's
Standard Machinery and Bearings, Locks and Tools segments are
more in the nature of standard equipment. Consequently, a wider
variety must usually be more readily available to meet rapid
delivery requirements. Such working capital requirements are
not, however, in the opinion of management, materially different
from those experienced by the company's major competitors.
Customers
No material part of the company's business is dependent
upon a single customer or very few customers, the loss of any one
of which would have a material adverse effect on the company's
operations.
Competitive Conditions
The company's products are sold in highly competitive
markets throughout the world against products produced by both
foreign and domestic corporations. The principal methods of
competition in these markets relate to price, quality and
service. The company believes that it is one of the leading
manufacturers in the world of a broad line of air compression
systems, anti-friction bearings, construction equipment, air
tools and pumps (through the IDP joint venture). In addition, it
believes it is a leading supplier in domestic markets for locks
and other door hardware products.
5
International Operations
Sales to customers outside the United States, including
domestic sales for export, accounted for approximately 42 percent
of the consolidated net sales in 1994. Information as to
operating income by geographic area is set forth in Footnote 15
of the Annual Report to Shareowners for 1994, incorporated by
reference in this Form 10-K Annual Report. Sales outside of the
United States are made in more than 100 countries; therefore, the
attendant risks of manufacturing or selling in a particular
country, such as nationalization and establishment of common
markets, would not have a significant effect on the company's
international operations.
Raw Materials
The company manufactures many of the components included
in its products. The principal raw materials required for the
manufacture of the company's products are purchased from numerous
suppliers, and the company believes that available sources of
supply will generally be sufficient for its needs for the
foreseeable future.
Backlog
The company's approximate backlog of orders at December
31, 1994, believed by it to be firm, was $176 million for the
Standard Machinery Segment, $395 million for the Engineered
Equipment Segment and $438 million for the Bearings, Locks and
Tools Segment as compared to $134 million, $393 million and $395
million, respectively, at December 31, 1993. These backlog
figures are based on orders received. While the major portion of
the company's products are built in advance of order and either
shipped or assembled from stock, orders for specialized machinery
or specific customer application are submitted with extensive
lead time and are often subject to revision, deferral,
cancellation or termination. The company estimates that
approximately 90 percent of the backlog will be shipped during
the next twelve months.
Research, Engineering and Development
The company maintains extensive research, engineering and
development facilities for experimenting, testing and developing
high quality products. The company employs approximately 1,500
professional employees for its research, engineering and
development activities. The company spent $155 million in 1994,
$150 million in 1993 and $138 million in 1992 on research,
engineering and development.
6
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 is subject to extensive environmental laws
and regulations. It is the company's policy to comply with all
environmental regulatory requirements and the company is in
substantial compliance with those laws and regulations. While
there is some degree of uncertainty associated with the
compliance costs resulting from new regulatory initiatives, the
ongoing cost of compliance has not had, nor is it expected to
have, a material adverse effect upon the company's capital
expenditures, financial position, results of operations,
liquidity or cash flows.
Federal Superfund and similar state laws impose joint and
several responsibility for cleaning up designated hazardous sites
not only on the owner and operator but also on any person who
contributed hazardous waste to the site. As of December 31,
1994, the company has been identified as a potentially
responsible party ("PRP") in connection with 26 federal and state
superfund sites. At all these sites there are other PRPs and to
date there is no indication the company will be liable for more
than its pro rata share of remediation costs at any site. While
some of these sites are still under investigation, in the
aggregate, the company's anticipated pro rata share of
responsibility at these sites is not deemed to be material.
Additional lawsuits and claims involving environmental matters
are likely to arise from time to time. In addition, the company
continues to investigate and remediate environmental
contamination from past operations at its facilities.
In 1994, the company spent approximately $7 million in
connection with environmental compliance and remediation and an
additional $7 million on capital projects for pollution abatement
and control. Based upon the company's experience to date with
environmental claims and litigation and with site investigation
and remediation, its expenditures for environmental purposes have
not been and are not expected to be material or to have a
material adverse effect on the company's capital expenditures,
earnings or competitive position. (See also Financial Review and
Management Analysis in the Annual Report to Shareowners for 1994
included as Exhibit 13 to this report.)
7
Employees
There are approximately 35,900 employees of the company
throughout the world, of whom approximately 23,200 work in the
United States and 12,700 in foreign countries. Approximately 17
percent of the company's production and maintenance employees,
who work in 9 plants in the United States, are represented by 7
unions. The company believes relations with its employees are
satisfactory.
Item 2. PROPERTIES
The company's executive offices are located at Woodcliff
Lake, New Jersey. Manufacturing and assembly operations are
conducted in 47 plants in the United States; 6 plants in Canada;
27 plants in Europe; 5 plants in the Far East; 5 plants in Latin
America; 2 plants in Asia and 1 plant in Africa. The company
also maintains various warehouses, offices and repair centers in
the United States, Canada and abroad.
Substantially all plant facilities are owned by the
company and the remainder are under long-term lease. The company
believes that its plants and equipment have been well maintained
and are generally in good condition. The company has several
closed facilities that it is actively marketing with the intent
of selling them at their net realizable value.
The operating segments for which the facilities are
primarily used are as described below. Facilities that produce
products in several operating segments are classified by the
products which they primarily manufacture. Facilities under
long-term lease are included below and are not significant to
each operating segment's total number of plants or square
footage.
Standard Machinery
This segment's products include machinery regularly used
in general manufacturing and in industries such as mining and
construction. Products range from blasthole drills used in
mining and construction to small air compressors found worldwide
in auto service stations. The segment is aligned into two
operating groups: Air Compressor Group and Construction and
Mining Group. The segment's manufacturing locations are as
follows:
Approximate
Number of Plants Square Footage
Domestic 7 1,884,000
International 12 2,139,000
Total 19 4,023,000
8
Engineered Equipment
The products manufactured by this segment are
predominantly designed for specific customer applications. The
segment's diverse product line includes pumps, liquid/solid
separation and densification machinery. The segment is organized
into two operating groups: Pump Group and Process Systems Group.
The segment's manufacturing facilities are as follows:
Approximate
Number of Plants Square Footage
Domestic 12 2,516,000
International 19 2,444,000
Total 31 4,960,000
Bearings, Locks and Tools
This segment primarily serves the automotive, capital
goods, energy and construction industries. Products in this
segment include bearings for specialized and industrial
application, locks and door hardware for residential and
commercial buildings, air tools for industrial use, air winches,
hoists and engine starting systems, and automated production
systems for transportation equipment manufacturers. There are
three operating groups in this segment: Bearings and Components
Group, Production Equipment Group and Door Hardware Group. The
segment's manufacturing facilities are as follows:
Approximate
Number of Plants Square Footage
Domestic 28 6,288,000
International 15 1,596,000
Total 43 7,884,000
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 the cleanup of 26 waste 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 its operations or financial condition.
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, 1994.
9
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(59) 5/4/77 Chairman of the Board,
President and Chief
Executive Officer,
Director (President and
Director, September 1992 -
October 1993; Executive
Vice President, 1982 -
1992)
William G. Mulligan(64) 5/2/73 Executive Vice President
J. Frank Travis(59) 2/7/90 Executive Vice President and
President of the
Production Equipment Group
(Vice President and
President of the Bearings
and Components Group,
February 1992 - December
1993; President of the Air
Compressor Group, 1989 -
February 1992)
Thomas F. McBride(59) 9/5/79 Senior Vice President and
Chief Financial Officer
(Senior Vice President
and Comptroller, February
1992 - May 1993; Vice
President and Comptroller,
1981 - 1992)
William J. Armstrong(53) 8/3/83 Vice President and Treasurer
Paul L. Bergren(45) 12/2/92 Vice President, President
of the Air Compressor
Group, and President of
Ingersoll-Rand Europe
(Vice President and
General Manager -
Centrifugal Compressor
Division, 1989 - 1992)
Frederick W. Hadfield(58) 8/1/79 Vice President and President
of IDP (Vice President,
1979 - March 1994)
Daniel E. Kletter(56) 2/7/90 Vice President (Vice
President and President of
the Construction and
Mining Group 1989 - 1994)
10
Date of
Service as Principal Occupation and
an Executive Other Information
Name and Age Officer for Past Five Years
Patricia Nachtigal(48) 11/2/88 Vice President and General
Counsel (Secretary and
Managing Attorney, 1988 -
1991)
Allen M. Nixon(54) 2/1/95 Vice President and President
of Bearing and Components
Group (Vice President and
General Manager Torrington
Needle Bearings Division,
1983 - 1994)
James R. O'Dell(56) 12/3/88 Vice President
Larry H. Pitsch(54) 2/7/90 Vice President and President
of the Process Systems
Group
Donald H. Rice(50) 2/1/95 Vice President (Executive
Director - Human Resources
1994; Vice President,
Human Resources - Bearings
and Components Group, 1988
- 1993)
Gerald E. Swimmer(50) 5/1/82 Vice President
R. Barry Uber(49) 2/7/90 Vice President and President
of the Construction and
Mining Group (Vice
President and President of
the Production Equipment
Group 1989 - 1994)
Ronald G. Heller(48) 2/6/91 Secretary and Assistant
General Counsel (Assistant
General Counsel, 1988 -
1991)
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.
11
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
1994
First quarter $41 5/8 $34 5/8 $.175
Second quarter 38 7/8 32 3/4 .175
Third quarter 38 3/4 34 3/8 .185
Fourth quarter 36 1/4 29 1/2 .185
High Low Dividend
1993
First quarter $36 1/4 $28 3/4 $.175
Second quarter 35 3/8 29 1/2 .175
Third quarter 39 3/4 31 .175
Fourth quarter 39 7/8 35 .175
The Bank of New York (Church Street Station, P.O. Box
11258, New York, NY 10286-1258, (800)524-4458) is the transfer
agent, registrar and dividend reinvestment agent.
There are no significant restrictions on the payment of
dividends. The approximate number of record holders of common
stock as of March 10, 1995 was 14,800.
12
Item 6. SELECTED FINANCIAL DATA
Selected financial data for the five years ended December
31, 1994, is as follows (in thousands except per share amounts):
December 31 1994 1993 1992 1991 1990
Net sales $4,507,470 $4,021,071 $3,783,787 $3,586,220 $3,737,847
Net earnings (loss) 211,140 142,524 (234,406) 150,589 185,343
Total assets 3,596,921 3,375,332 3,387,552 2,979,560 2,982,507
Long-term debt 315,850 314,136 355,598 375,846 265,163
Shareowners' equity 1,531,342 1,349,825 1,293,375 1,633,056 1,556,424
Earnings (loss) per
common share $2.00 $1.36 $(2.25) $1.45 $1.78
Dividends per
common share 0.72 0.70 0.69 0.66 0.63
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial
condition and results of operations is included as Financial
Review and Management Analysis in Exhibit 13 - the Annual Report
to Shareowners for 1994 and is incorporated by reference in this
Form 10-K Annual Report.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and supplementary
financial information included in the accompanying Annual Report
to Shareowners for 1994 are incorporated by reference in this
Form 10-K Annual Report:
(a) The consolidated financial statements and the report
thereon of Price Waterhouse LLP dated January 31, 1995, are
included as Exhibit 13 - the Annual Report to Shareowners
(excluding the Financial Review and Management Analysis) for
1994.
13
(b) The unaudited quarterly financial data for the
two-year period ended December 31, 1994, is as follows (in
thousands except per share amounts):
Earnings
per
Net Cost of Operating Net common
1994 sales goods sold income earnings share
First quarter $1,010,308 $ 775,924 $ 60,127 $ 33,012 $0.31
Second quarter 1,143,808 865,976 91,766 51,569 0.49
Third quarter 1,113,670 840,171 88,965 48,379 0.46
Fourth quarter 1,239,684 894,978 136,149 78,180 0.74
Year 1994 $4,507,470 $3,377,049 $377,007 $211,140 $2.00
1993
First quarter $ 952,105 $ 728,042 $ 45,150 $ 3,628 $0.04
Second quarter 1,006,773 752,816 69,344 35,937 0.34
Third quarter 973,524 736,244 64,505 35,186 0.33
Fourth quarter 1,088,669 799,588 112,515 67,773 0.65
Year 1993 $4,021,071 $3,016,690 $291,514 $142,524 $1.36
o The reductions in LIFO inventory quantities increased net
earnings per share by $0.01 and $0.06 in the third and fourth
quarters of 1994 and $0.02 and $0.05 in the second and fourth
quarters of 1993, respectively.
o During the fourth quarter of 1993, the company retroactively
changed its method of accounting for postemployment benefits.
The effect of this change on the company amounted to $21.0
million (net of tax) and resulted in the restatement of the
company's net earnings for the first quarter from $24.6
million ($0.24 per share) to $3.6 million ($0.04 per share).
o During the second quarter of 1993, the company recorded a
$5.0 million ($0.03 per share) restructure of operations
charge, related to the sale of substantially all of the
underground coal-mining machinery assets (see Note 4 to the
Consolidated Financial Statements).
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
14
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 2 through
6 of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 27, 1995, and (ii)
included in Part I on pages 11 and 12 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 6 through 20
of the company's definitive proxy statement for the Annual
Meeting of Shareholders to be held on April 27, 1995.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information on security ownership of directors and
nominees, directors and officers as a group and certain
beneficial owners is incorporated by reference in this Form 10-K
Annual Report on pages 4 and 5 of the company's definitive proxy
statement for the Annual Meeting of Shareholders to be held on
April 27, 1995.
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 15 of the
company's definitive proxy statement for the Annual Meeting of
Shareholders to be held on April 27, 1995.
15
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. and 2. Financial statements and financial statement
schedules
The financial statements, together with the
report thereon of Price Waterhouse LLP dated
January 31, 1995, included as Exhibit 13
(excluding Financial Review and Management
Analysis) and the unaudited quarterly financial
data included in Part II Item 8(b) are
incorporated by reference in this Form 10-K
Annual Report. The financial statement schedule
listed in the accompanying index should be read
in conjunction with the financial statements in
such Annual Report to Shareowners for 1994.
Separate financial statements for all 50
percent or less owned companies, accounted for
by the equity method have been omitted because
no individual entity constitutes a significant
subsidiary.
3. Exhibits
The exhibits listed on the accompanying
index to exhibits are filed as part of this Form
10-K Annual Report.
(b) Reports on Form 8-K
None.
16
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, 1994 and 1993 . . . . . . . . . . . . *
For the years ended December 31, 1994, 1993
and 1992:
Consolidated statement of income . . . . . . . . . *
Consolidated statement of shareowners'
equity . . . . . . . . . . . . . . . . . . . . . *
Consolidated statement of cash flows . . . . . . . *
Notes to consolidated financial statements . . . . . *
Selected unaudited quarterly financial data . . . . . . 14
Financial Statement Schedule:
Report of independent accountants on
financial statement schedule . . . . . . . . . . . 18
Consolidated schedule for the years ended
December 31, 1994, 1993 and 1992:
Schedule II -- Valuation and Qualifying
Accounts . . . . . . . . . . . . . . . . . . . . 19
* See Exhibit 13 - Ingersoll-Rand Company Annual Report to
Shareowners for 1994.
Financial statement schedules not included in this Form 10-K
Annual Report have been omitted because they are not applicable
or the required information is shown in the financial statements
or notes thereto.
Financial statements of the company's 50 percent or less owned
companies, are omitted because individually they do not meet the
significant subsidiary test of Rule 3-09 of Regulation S-X.
17
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareowners of Ingersoll-Rand
Company:
Our audits of the consolidated financial statements referred to
in our report dated January 31, 1995 included as part of Exhibit
13 - the Annual Report to Shareowners for 1994 of Ingersoll-Rand
Company, (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed
in Item 14(a) of this Form 10-K. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Morristown, New Jersey
January 31, 1995
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statements on
Form S-3 (No. 33-53811) and Form S-8 (Post-Effective Amendment
No. 4 to No. 2-64708, No. 2-67834, No. 2-98258 and No. 33-35229)
of Ingersoll-Rand Company of our report dated January 31, 1995
included as part of Exhibit 13 - the Annual Report to Shareowners
for 1994, which is incorporated in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our
report on the Financial Statement Schedule, which appears on this
page.
/S/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Morristown, New Jersey
March 30, 1995
18
SCHEDULE II
INGERSOLL-RAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
(Amounts in thousands)
Additions
charged to
Balance at costs and Balance
beginning expenses Deductions at end
Description of year (*) (**) of year
1994
Doubtful accounts $22,089 $12,636 $ 8,820 $25,905
1993
Doubtful accounts $23,057 $10,218 $11,186 $22,089
1992
Doubtful accounts $18,772 $12,590 $ 8,305 $23,057
(*) "Additions" include foreign currency translation and in
1992 amounts contributed by Dresser Industries, Inc. to
Ingersoll-Dresser Pump.
(**) "Deductions" include accounts and advances written off,
less recoveries.
19
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
Description Page
3 (i) Amendment to Restated Certificate of Incorporation
of Ingersoll-Rand Company filed May 28, 1992.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for Fiscal Year Ended December 31, 1993. (See
pages 30-32 of the 1993 Form 10-K). -
3 (ii) Restated Certificate of Incorporation of
Ingersoll-Rand Company as amended through May 28, 1992.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for Fiscal Year Ended December 31, 1993. (See
pages 33-60 of the 1993 Form 10-K). -
3 (iii) By-Laws of Ingersoll-Rand Company, as amended
through December 7, 1994. 25-38
4 (i) Rights agreement, dated as of December 7, 1988, as
amended by Amendment No. 1 thereto dated as of December 7,
1994. Incorporated by reference from Form 8-A of Ingersoll-
Rand Company filed on December 12, 1988, and Form 8-A/A
of Ingersoll-Rand Company filed December 15, 1994. -
4 (iii) Ingersoll-Rand Company is a party to several
long-term debt instruments under which in each case the
total amount of securities authorized does not exceed
10% of the total assets of Ingersoll-Rand Company and
its subsidiaries on a consolidated basis. Pursuant to
paragraph 4(iii)(A) of Item 601(b) of Regulation S-K,
Ingersoll-Rand Company agrees to furnish a copy of such
instruments to the Securities and Exchange Commission
upon request. -
10 (iii) The following exhibits constitute management
contracts or compensatory plans or arrangements required
by Item 601 of Regulation S-K.
10 (iii) (a) Management Incentive Unit Plan of Ingersoll-
Rand Company. Amendment to the Management Incentive Unit
Plan, effective January 1, 1982. Amendment to the
Management Incentive Unit Plan, effective January 1, 1987.
Amendment to the Management Incentive Unit Plan, effective
June 3, 1987. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended December 31,
1993. (See pages 78-92 of the 1993 Form 10-K). -
20
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
(Continued)
Description Page
10 (iii) (b) Description of Compensation Plan for Retired
Directors of Ingersoll-Rand Company. 39-47
10 (iii) (c) Form of Contingent Compensation Agreements
with Executive Vice Presidents and Group Presidents of
Ingersoll-Rand Company. 48-53
10 (iii) (d) Description of Bonus Arrangements for
Chairman, President and Staff Officers. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See page 100
of the 1993 Form 10-K). -
10 (iii) (e) Form of Change of Control Arrangements with
Chairman and Chief Executive Officer. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See pages 101-113
of the 1993 Form 10-K). -
10 (iii) (f) Form of Change of Control Arrangements
with selected executive officers. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See pages 114-126
of the 1993 Form 10-K). -
10 (iii) (g) Executive Supplementary Retirement Plan
for selected senior executives. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See pages 127-132
of the 1993 Form 10-K). -
10 (iii) (h) Incentive Stock Plan of 1985 of Ingersoll-
Rand Company. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended December
31, 1993. (See pages 133-151 of the 1993 Form 10-K). -
10 (iii) (i) Forms of insurance and related letter
agreements with certain executive officers.
Incorporated by reference to Form 10-K of Ingersoll-Rand
Company for Fiscal Year Ended December 31, 1993. (See
pages 152-160 of the 1993 Form 10-K). -
21
INGERSOLL-RAND COMPANY
INDEX TO EXHIBITS
(Item 14(a))
(Continued)
Description Page
10 (iii) (j) Incentive Stock Plan of 1990 of Ingersoll-
Rand Company. Incorporated by reference to Form 10-K of
Ingersoll-Rand Company for Fiscal Year Ended December
31, 1993. (See pages 161-182 of the 1993 Form 10-K). -
10 (iii) (k) Restated Supplemental Pension Plan effective
January 1, 1992. Incorporated by reference to Form 10-K
of Ingersoll-Rand Company for Fiscal Year Ended December
31, 1993. (See pages 183-188 of the 1993 Form 10-K). -
10 (iii) (l) Supplemental Stock and Savings Investment
Plan effective as of January 1, 1989. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See pages 189-198
of the 1993 Form 10-K). -
10 (iii) (m) Supplemental Retirement Account Plan
effective as of January 1, 1989. Incorporated by
reference to Form 10-K of Ingersoll-Rand Company for
Fiscal Year Ended December 31, 1993. (See pages 199-206
of the 1993 Form 10-K). -
11 (i) Computation of Primary Earnings Per Share. 54-55
11 (ii) Computation of Fully Diluted Earnings Per Share. 56-57
12 Computations of Ratios of Earnings to Fixed Charges. 58
13 Ingersoll-Rand Company Annual Report to
Shareowners for 1994. (Not deemed to be filed as
part of this report except to the extent incorporated
by reference). 59-120
21 List of Subsidiaries of Ingersoll-Rand Company. 121-123
27 Financial Data Schedule. 124
22
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/ Thomas F. McBride
Thomas F. McBride
Senior Vice President and
Chief Financial Officer
Date March 30, 1995
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated.
Signature Title Date
Chairman, President,
Chief Executive Officer
and Director (Principal
/S/ James E. Perrella Executive Officer) March 30, 1995
(James E. Perrella)
Senior Vice President
Chief Financial Officer
(Principal Financial
/S/ Thomas F. McBride Officer) March 30, 1995
(Thomas F. McBride)
Controller -
Accounting and Reporting
(Principal Accounting
/S/ Richard A. Spohn Officer) March 30, 1995
(Richard A. Spohn)
/S/ Donald J. Bainton Director March 30, 1995
(Donald J. Bainton)
/S/ Theodore H. Black Director March 30, 1995
(Theodore H. Black)
23
Signature Title Date
/S/ Brendan T. Byrne Director March 30, 1995
(Brendan T. Byrne)
/S/ Joseph P. Flannery Director March 30, 1995
(Joseph P. Flannery)
/S/ Constance J. Horner Director March 30, 1995
(Constance J. Horner)
/S/ Alexander H. Massad Director March 30, 1995
(Alexander H. Massad)
/S/ John E. Phipps Director March 30, 1995
(John E. Phipps)
/S/ Donald E. Procknow Director March 30, 1995
(Donald E. Procknow)
/S/ Cedric E. Ritchie Director March 30, 1995
(Cedric E. Ritchie)
24
EX-3.III
2
EXHIBIT 3(iii)
Page 1 of 14
BY-LAWS
of
INGERSOLL-RAND COMPANY
As amended through December 7, 1994
25
EXHIBIT 3(iii)
Page 2 of 14
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
26
EXHIBIT 3(iii)
Page 3 of 14
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.
27
EXHIBIT 3(iii)
Page 4 of 14
Section 4. Organization: The Chairman of the Board shall call
meetings of the Stockholders to order and shall act as Chairman
of such meetings. In the absence of the Chairman of the Board,
the Vice-Chairman or the President, or in his absence an
Executive Vice President shall preside: and in the absence of
any of the foregoing officers, the Stockholders present, or
the Board of Directors, may appoint any Stockholder to act as
Chairman of any meeting.
The Secretary of the Company shall act as Secretary of all
meetings of the Stockholders. In the absence of the Secretary at
any meeting of the Stockholders, the presiding officer may
appoint any person to act as Secretary of the Meeting.
Section 5. Voting: At each meeting of the Stockholders, every
Stockholder shall be entitled to vote in person or by proxy
appointed by instrument in writing subscribed by such Stockholder
or by his duly authorized attorney and delivered to the
inspectors at the meeting. The votes for Directors and, upon
demand of any Stockholder, the votes upon any question before the
meeting shall be by ballot.
Section 6. Inspectors: At each annual stated meeting of the
Stockholders for the election of Directors, the presiding officer
of such meeting shall appoint two persons to act as inspectors,
who shall be sworn to perform their duties in accordance with the
laws of the State of New Jersey, and who shall return a formal
certificate.
Section 7. Nominations of Directors: Nominations for the
election of Directors may be made by the Board of Directors or
any Stockholder entitled to vote for the election of Directors.
Any Stockholder entitled to vote for the election of Directors at
a meeting or to express a consent in writing without a meeting
may nominate a person or persons for election as a Director only
if written notice of such Stockholder's intent to make such
nomination is given to the Secretary of the Company, either by
personal delivery or United States mail, postage prepaid, not
later than (a) with respect to an election to be held at an
annual meeting of Stockholders, 90 days in advance of the
anniversary of the immediately preceding annual meeting or if the
date of the annual meeting of Stockholders occurs more than 30
days before or 60 days after the anniversary of such immediately
preceding annual meeting, not later than the close of business on
the seventh day following the date on which notice of such
28
EXHIBIT 3(iii)
Page 5 of 14
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.
29
EXHIBIT 3(iii)
Page 6 of 14
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.
30
EXHIBIT 3(iii)
Page 7 of 14
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.
31
EXHIBIT 3(iii)
Page 8 of 14
ARTICLE IV.
OFFICERS
Section 1. Officers: The executive officers of the Company
shall include a Chairman of the Board of Directors, President,
Treasurer and Secretary and may also include one or more
Vice-Chairmen, Executive Vice Presidents, Senior Vice Presidents,
Vice Presidents, and such other officers as the Board of
Directors shall deem necessary or otherwise appropriate to elect.
The Chief Executive Officer may hold the title of Chairman of the
Board, or President, or both titles.
The Board of Directors may appoint such other officers and
advisory boards as they shall deem necessary, who shall have such
authority and who shall perform such duties as from time to time
may be prescribed by the Board of Directors.
Any executive officer elected by the Board of Directors may be
removed at any time with or without cause by the affirmative vote
of two-thirds (2/3) of the entire Board of Directors.
Any other appointed or elected officer, agent, employee or member
of an advisory board may be removed at any time with or without
cause by affirmative vote of the Directors or by the Committee or
superior officer upon whom such power of removal may be
conferred.
Section 2. Powers and Duties: The Chairman of the Board shall
preside at all meetings of the Board of Directors and
Stockholders. Subject to designation by the Board of Directors
he shall be the Chief Executive Officer of the Company, and he
shall have responsibility for the active management of the
business of the Company. He may sign and execute contracts and
agreements authorized by the Board, delegate other officers to do
so and may, from time to time, require from other officers and
from employees of the Company opinions, reports or information
upon any matter specified by him or generally upon the interests
or affairs of the Company under the supervision of such officers
or employees respectively. He may appoint and remove assistant
officers and other employees and agents. He may exercise any
other powers conferred upon him by the Board of Directors.
32
EXHIBIT 3(iii)
Page 9 of 14
Other officers shall have all the usual and customary powers and
shall perform all the usual and customary duties incident to
their respective offices and, in addition thereto and to any
duties specifically prescribed by any subsequent provisions of
these By-Laws, they shall respectively perform such other general
or special duties as may from time to time be assigned to them by
the Board of Directors or the Chief Executive Officer.
The Board of Directors may appoint an officer to act as Chief
Financial Officer of the Company, who shall have responsibility
for the financial affairs of the Company. He will be responsible
for the preparation of the financial statements of the Company,
and such other duties as from time to time may be assigned to him
by the Board of Directors or the Chief Executive Officer. The
Board of Directors may appoint an officer to act as General
Counsel of the Company, who shall have responsibility for the
legal affairs of the Company. The Board of Directors may appoint
the Comptroller to be the principal accounting and financial
control officer of the Company.
Securities of other corporations or interests in other entities
held by the Company may be voted by the Chairman of the Board or
by any other person designated by the Board of Directors or Chief
Executive Officer.
Section 3. Term: The executive officers elected by the Board of
Directors shall hold office for one year or until their
successors are elected and qualify. The Chairman, and any
Vice-Chairman, shall be elected by the Directors from among their
own number. One person may hold more than one office.
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.
33
EXHIBIT 3(iii)
Page 10 of 14
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.
34
EXHIBIT 3(iii)
Page 11 of 14
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.
35
EXHIBIT 3(iii)
Page 12 of 14
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
36
EXHIBIT 3(iii)
Page 13 of 14
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
37
EXHIBIT 3(iii)
Page 14 of 14
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.
38
EX-10.IIIB
3
EXHIBIT 10(iii)(b)
Page 1 of 9
INGERSOLL-RAND COMPANY
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
ARTICLE I
PURPOSE
1.1 The purpose of this Plan is to provide retirement benefits
to Directors of the Company who meet the eligibility
requirements hereof.
ARTICLE II
DEFINITIONS
2.1 "Base Retainer" means the basic annual retainer for
non-employee Directors in effect as of an Eligible
Director's last date of Service. Base Retainer shall not
include any fees payable as a result of attendance at
meetings of the Board of Directors or its committees, or
other payments made for other services a Director may
render.
2.2 "Board of Directors" means the Board of Directors of
Ingersoll-Rand Company.
2.3 "Company" means Ingersoll-Rand Company.
2.4 "Compensation Committee" means the Compensation and
Nominating Committee of the Board of Directors.
2.5 "Director" means a duly-elected member of the Board of
Directors.
39
EXHIBIT 10(iii)(b)
Page 2 of 9
2.6 "Eligible Director" means an individual who has served on
the Board of Directors on or after the Effective Date of
this Plan (as provided in Section 3.1), who is not an
Employee of the Company and who does not qualify to receive
a retirement benefit under any pension plan of the Company
or its subsidiaries other than this Plan.
2.7 "Employee" means a person employed by the Company or its
subsidiaries in any capacity other than as a Director.
2.8 "Plan" means this Retirement Plan for Non-Employee
Directors.
2.9 "Service" means service as an Eligible Director.
ARTICLE III
EFFECTIVE DATE
3.1 This Plan shall be effective as of September 1, 1994 (the
"Effective Date").
ARTICLE IV
PARTICIPATION
4.1 Each Eligible Director serving on the Board of Directors on
or after the Effective Date shall participate in this Plan.
4.2 Directors who retire or resign prior to the Effective Date
shall continue to be entitled to the retirement benefit, if
any, to which they were entitled under the provisions of the
predecessor program to this Plan.
40
EXHIBIT 10(iii)(b)
Page 3 of 9
ARTICLE V
RETIREMENT BENEFITS/VESTING
5.1 An Eligible Director's annual retirement benefit under this
Plan shall be vested when he or she has completed five years
of Service and shall be equal to a percentage of that
Director's Base Retainer in accordance with the table below:
Completed Years Percentage of
of Service Base Retainer
5 years 50%
6 years 60%
7 years 70%
8 years 80%
9 years 90%
10 years or more 100%
In no event shall an Eligible Director's percentage of
benefit under this Plan exceed 100% of the Eligible
Director's Base Retainer.
5.2 Notwithstanding the provisions of Section 5.1, a Director
who was an Eligible Director on the Effective Date and who
subsequently retires as a Director upon attaining age 70 (or
age 72, in the case of Directors who had attained age 70 by
September 1, 1994) after completing at least five years of
Service (including for such purpose any period prior to the
Effective Date) shall be entitled to a benefit equal to 100%
of the Base Retainer.
ARTICLE VI
YEARS OF SERVICE
6.1 For purposes of this Plan, one year of Service shall mean
365 days of Service as an Eligible Director beginning with
an Eligible Director's initial election or appointment to
the Board of Directors.
41
EXHIBIT 10(iii)(b)
Page 4 of 9
6.2 In the event of a break in Service, a Director's Service as
an Eligible Director before and after the break in Service
shall be combined to determine years of service for vesting
for purposes of Article V.
6.3 A Director's Service as an Eligible Director prior to the
Effective Date of this Plan shall count toward the vesting
rules of Article V.
ARTICLE VII
PAYMENT OF RETIREMENT BENEFITS
7.1 An Eligible Director who is retired and is entitled to
receive retirement benefits hereunder shall begin to receive
retirement benefits when the Eligible Director attains age
70, as more specifically provided in Section 7.2. An
Eligible Director who has retired and has met the vesting
requirements in Section 5.1 shall be entitled to receive
retirement benefits whether or not the Eligible Director is
a member of the Board of Directors on his or her 70th
birthday.
7.2 All retirement benefits hereunder shall be payable in
quarterly installments equal to one-fourth of the annual
amounts determined to be payable under this Plan. An
Eligible Director's vested retirement benefit hereunder, if
any, shall be payable for the life of the Eligible Director,
commencing on the first day of the calendar quarter next
following the Eligible Director's 70th birthday.
ARTICLE VIII
FUNDING
8.1 This Plan shall not be funded by the Company. All payments
required to be made hereunder shall be made from the general
funds of the Company as and when they become due.
42
EXHIBIT 10(iii)(b)
Page 5 of 9
ARTICLE IX
PLAN ADMINISTRATION
9.1 The general administration of this Plan and the
responsibility for carrying out the provisions hereof shall
be vested in the Compensation Committee. The Compensation
Committee may adopt such rules and regulations as it may
deem necessary for the proper administration of this Plan,
which are not inconsistent with the provisions hereof, and
its decision in all matters shall be final, conclusive and
binding.
ARTICLE X
AMENDMENT AND TERMINATION
10.1 The Board of Directors reserves in its sole and exclusive
discretion the right at any time and from time to time to
amend this Plan in any respect or terminate this Plan
without restriction and without the consent of any Eligible
Director, provided, however, that no amendment or
termination of this Plan shall impair the right of any
Eligible Director to receive benefits which have become
vested pursuant to Article V or Article XI prior to such
amendment or termination.
ARTICLE XI
CHANGE OF CONTROL
11.1 For purposes hereof,
(a) "Affiliate" shall mean, when used to indicate a
relationship with a specified person, a person that
directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is
under common control with, such specified person.
43
EXHIBIT 10(iii)(b)
Page 6 of 9
(b) "Associate" shall mean, when used to indicate a
relationship with a specified person, (i) any
corporation, partnership, or other organization of
which such specified person is an officer or partner,
(ii) any trust or other estate in which such specified
person has a substantial beneficial interest or as to
which such specified person serves as trustee or in a
similar fiduciary capacity, (iii) any relative or
spouse of such specified person, or any relative of
such spouse who has the same home as such specified
person, or who is a Director or officer of the Company
or any of its parents or subsidiaries, and (iv) any
person who is a director, officer, or partner of such
specified person or of any corporation (other than the
Company or any wholly-owned subsidiary of the
Company), partnership or other entity which is an
Affiliate of such specified person.
(c) "Beneficial Owner" shall have the same meaning as such
term is defined by Rule 13d-3 under the Securities
Exchange Act of 1934 (or any successor provision at the
time in effect); provided, however, that any
individual, corporation, partnership, group,
association, or other person or entity which has the
right to acquire any of the Company's outstanding
securities entitled to vote generally in the election
of directors at any time in the future, whether such
right is contingent or absolute, pursuant to any
agreement, arrangement, or understanding or upon
exercise of conversion rights, warrants or options, or
otherwise, shall be deemed the Beneficial Owner of such
securities.
(d) "Change in Control" shall mean the occurrence of either
of the following:
(i) any individual, corporation, partnership, group,
association or other person or entity, together
with its Affiliates and Associates (other than a
trustee or other fiduciary holding securities
under an employee benefit plan of the Company), is
or becomes the Beneficial Owner of securities of
the Company representing 20% or more of the
combined voting power of the Company's then
outstanding securities entitled to vote generally
in the election of directors, unless a majority of
44
EXHIBIT 10(iii)(b)
Page 7 of 9
the Continuing Directors determines in their sole
discretion that, for purposes of this Plan, a
Change in Control has not occurred; or
(ii) the Continuing Directors shall at any time fail to
constitute a majority of the members of the Board
of Directors.
(e) "Continuing Director" shall mean a Director who either
was a member of the Board of Directors on the Effective
Date or who became a member of the Board of Directors
subsequent to such date and whose election, or
nomination for election by the Company's shareholders,
was Duly Approved by the Continuing Directors of the
Board of Directors at the time of such nomination or
election, either by a specific vote or by approval of
the proxy statement issued by the Company on behalf of
the Board of Directors in which such person is named as
a nominee for Director, without due objection to such
nomination.
(f) "Duly Approved by the Continuing Directors" shall mean
an action approved by the vote of at least a majority
of the Continuing Directors then on the Board of
Directors, except, if the votes of such Continuing
Directors in favor of such action would be insufficient
to constitute an act of the Board of Directors if a
vote by all of its members were to have been taken,
then such term shall mean an action approved by the
unanimous vote of the Continuing Directors then on the
Board of Directors so long as there are at least three
Continuing Directors on the Board of Directors at the
time of such unanimous vote.
11.2 Upon the occurrence of a Change of Control, the following
changes to this Plan shall immediately and automatically
become effective:
(a) Section 7.2 is deleted and the following is inserted in
lieu thereof:
"All vested retirement benefits hereunder shall be
immediately payable upon a Change of Control in one
lump sum payment. The lump sum shall be the present
value actuarially determined with reference to the
45
EXHIBIT 10(iii)(b)
Page 8 of 9
life expectancy of the Eligible Director whose benefits
have vested pursuant to this Plan and prevailing
interest rates.
(b) New Section 12.9 shall be added to read as follows:
"Notwithstanding any other provisions of this Plan to
the contrary:
(a) the vested benefit hereunder of any Eligible
Director as of the date of a Change of Control may
not be reduced;
(b) any Service accrued by an Eligible Director as of
the date of a Change of Control cannot be
reduced."
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 Nothing contained in this Plan guarantees the continued
retention of a Director on the Board of Directors, nor does
this Plan limit the right to terminate a Director's Service
on the Board of Directors.
12.2 No retirement benefit payable hereunder may be assigned,
pledged, mortgaged or hypothecated and, to the extent
permitted by law, no such retirement benefit shall be
subject to legal process or attachment for the payment of
any claims against any person entitled to receive the same.
12.3 If an Eligible Director entitled to receive any retirement
benefit payments hereunder is adjudged by a court of
competent jurisdiction to be legally incapable of giving
valid receipt and discharge for such retirement benefit,
such payments shall be paid to such person or persons as the
duly appointed guardian or other legal representative of
such Eligible Director. Such payments shall, to the extent
made, be deemed a complete discharge for such payments under
this Plan.
46
EXHIBIT 10(iii)(b)
Page 9 of 9
12.4 Payments made by the Company under this Plan to any Eligible
Director shall be subject to withholding as shall, at the
time for such payment, be required under any income tax or
other laws, whether of the United States or any other
jurisdiction.
12.5 All expenses and costs in connection with the operation of
this Plan shall be borne by the Company.
12.6 The provisions of this Plan will be construed according to
the laws of the State of New Jersey.
12.7 Unless the context clearly indicates a different meaning,
the masculine pronoun wherever used herein shall include the
feminine gender and the feminine the masculine and the
singular number as used herein shall include the plural and
the plural the singular.
12.8 The titles to articles of this Plan are for convenience of
reference only and in case of any conflict, the text of this
Plan, rather than such titles, shall control.
47
EX-10.IIIC
4
EXHIBIT 10(iii)(c)
Page 1 of 6
TO: EXECUTIVE VICE PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1995
The bonus plan applying to you for 1995 is outlined herein.
Your bonus potential for 1995 will be divided into two parts.
% of salary will be based on Group Operating results and % of
salary will be based on the bonus awarded to the Chairman's
Office.
GROUP OPERATIONS CONTRACT (applies to % of salary)
1. Should your Operations Groups attain worldwide operating
income of $ , you will receive a bonus of % of
% of your annual salary rate in effect on December 31,
1995.
2. For each $ by which your worldwide operating
income exceeds $ up to $ , you will
receive % of % of your salary. For each $
over $ , you will receive % of % of your
salary.
3. You will receive a bonus for accounts receivable and
inventory turnover (sales divided by the five point
average of total accounts receivable and inventory)
determined in accordance with the following: For
attaining your PGP for accounts receivable and inventory
turnover of , you will receive % of % of your
salary. For each increase in A/R and inventory
turnover, you will receive % of % of your salary.
48
EXHIBIT 10(iii)(c)
Page 2 of 6
BONUS CONTRACT FOR 1995 - EXECUTIVE VICE PRESIDENT
4. You may receive an additional discretionary award of up to
% of % of your salary. The award will be based upon
your individual achievements and the accomplishments of
your Groups. The award will also be determined on the
basis of performance in process reengineering and in our
company-wide procurement initiative as outlined to you in
my letter of February 14, 1995. Any award also will be
dependent upon the Company's overall performance.
5. The maximum bonus award on the sum of paragraphs (1) and
(2) will be limited to % of % of your salary. The
maximum bonus award on paragraph (3) will be limited to
% of % of your salary. The maximum bonus award on
paragraph (4) will be limited to % of % of your
salary.
6. Should the Company achieve or exceed Earnings Per Share of
$ , the total bonus percentage earned by you under
paragraphs (1) through (5) will be increased in accordance
with the following schedule:
BONUS EARNED PAR. 1-5
E.P.S. ACHIEVED INCREASED BY
$ 10%
$ 15%
$ 20%
$ 25%
CORPORATE CONTRACT (applies to % of salary)
7. You also will receive a bonus based upon the percentage
bonus awarded to the Chairman's office which will apply to
% of your salary. For example, if the bonus awarded to
the Chairman's office is % of salary, your bonus award
under this paragraph (7) would be % of % of salary.
8. The maximum bonus award for paragraphs (1) through (7)
will be limited to % of your total annual salary rate
in effect on December 31, 1995.
49
EXHIBIT 10(iii)(c)
Page 3 of 6
BONUS CONTRACT FOR 1995 - EXECUTIVE VICE PRESIDENT
9. Acquisitions, divestitures, changes in assignment, changes
in accounting procedures or tax law, abnormal deviations
to plan in other income and expenses in your financial
income statements, and/or corrections in historical data
during 1995 may necessitate pro rata adjustments in the
above goals and/or actual operating results. Any such
changes will be advised to you in a timely manner.
10. The results will be tabulated by the Corporate
Controller's Office and reflected on Operating Income and
Accounts Receivable and Inventory Reports. For those
divisions having LIFO expense, the impact of LIFO will be
included in both the income and inventory portion of the
calculation.
11. It is the present intention of the Company to decide the
amount of bonus for 1995 in February 1996. If the above
objectives are not attained, any bonus award will be made
at the sole discretion of the Company.
12. An illustration is attached of the Operations Group
Contract bonus calculation assuming you achieve your PGP
for Operating Income, exceed your Accounts Receivable and
Inventory PGP and receive a discretionary award for your
accomplishments under paragraph (4).
13. The Company will be the final arbiter of interpretation of
the above arrangements.
/S/ J. E. Perrella
J. E. Perrella
Chairman
50
EXHIBIT 10(iii)(c)
Page 4 of 6
TO: GROUP PRESIDENT
SUBJECT: BONUS CONTRACT FOR 1995
The bonus plan applying to you for 1995 is outlined below:
1. Should your operating group attain worldwide operating
income of $ , you will receive a bonus of % of
your annual salary rate in effect on December 31, 1995.
2. For each $ by which your worldwide operating
income exceeds $ up to $ , you will
receive % of your salary. For each $ over
$ , you will receive % of your salary.
3. You will receive a bonus for accounts receivable and
inventory turnover (sales divided by the five point
average of total accounts receivable and inventory)
determined in accordance with the following: For
attaining accounts receivable and inventory turnover of
, you will receive % of your salary. For each
increase in A/R and inventory turnover over ,
you will receive % of your salary.
4. You may receive an additional discretionary award of up to
% of your salary. The award will be based upon your
individual achievements and the accomplishments of your
Group. Your performance related to reengineering of
business processes will be a major factor in determining
the amount of bonus awarded under this paragraph
especially in our company-wide procurement initiative as
outlined to you in my letter of February 14, 1995. Any
award also will be dependent upon the Company's overall
performance.
5. The maximum bonus award on the sum of paragraphs (1) and
(2) will be limited to % of your salary. The maximum
bonus award on paragraph (3) will be % of salary. The
maximum bonus award on paragraph (4) will be % of
salary. The maximum award on the sum of paragraphs (1)
through (4) will be limited to % of salary.
51
EXHIBIT 10(iii)(c)
Page 5 of 6
BONUS CONTRACT FOR 1995 - GROUP PRESIDENT
6. Should the Company achieve or exceed Earnings Per Share of
$ , the total bonus percentage earned by you under
paragraphs (1) through (5) will be increased in accordance
with the following schedule:
EARNINGS PER
SHARE BONUS % EARNED PAR.1-5
ATTAINED INCREASED BY
$ 10%
$ 15%
$ 20%
$ 25%
7. The maximum bonus award for paragraphs (1) through (6)
will be limited to % of your annual salary rate in
effect on December 31, 1995.
8. Acquisitions, divestitures, changes in assignment, changes
in accounting procedures or tax law, abnormal deviations
to plan in other income and expenses in your financial
income statements, and/or corrections in historical data
during 1995 may necessitate pro rata adjustments in the
above goals and/or actual operating results. Any such
changes will be advised as soon as possible.
9. The results will be tabulated by the Corporate
Controller's Office and reflected on Operating Income and
Accounts Receivable and Inventory Reports. For those
divisions having LIFO expense, the impact of LIFO will be
included in both the income and inventory portion of the
calculation.
10. It is the present intention of the Company to decide the
amount of bonus for 1995 in February 1996. If the above
objectives are not attained, any bonus award made will be
at the sole discretion of the Company.
52
EXHIBIT 10(iii)(c)
Page 6 of 6
BONUS CONTRACT FOR 1995 - GROUP PRESIDENT
11. An illustration is attached of the bonus calculation
assuming you achieve your PGP for Operating Income, exceed
your Accounts Receivable and Inventory PGP and receive a
discretionary award for your accomplishments under
paragraph (4).
12. The Company will be the final arbiter of interpretation of
the above arrangements.
/S/ J. E. Perrella
J. E. Perrella
Chairman
53
EX-11.I
5
EXHIBIT 11(i)
Page 1 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(In thousands of dollars except for shares and per share amounts)
Years ended December 31,
1994 1993 1992 1991 1990
PRIMARY EARNINGS PER SHARE:
Earnings before effect of
accounting changes.......... $ 211,140 $ 163,524 $ 115,594 $ 150,589 $ 185,343
Less dividends on
preference stock ......... -- -- -- -- 1,838
Earnings applicable to common
stock before effect of
accounting changes.......... 211,140 163,524 115,594 150,589 183,505
Effect of accounting changes:
- Postemployment benefits -- (21,000) -- -- --
- Postretirement benefits
other than pensions..... -- -- (332,000) -- --
- Income taxes.............. -- -- (18,000) -- --
Net earnings (loss) applicable
to common stock............. $ 211,140 $ 142,524 $ (234,406) $ 150,589 $ 183,505
Average number of common
shares outstanding.......... 105,458,116 104,991,535 104,340,622 103,634,178 103,351,708
Primary earnings per share:
Earnings before effect of
accounting changes.......... $2.00 $ 1.56 $ 1.11 $1.45 $1.78
Effect of accounting changes:
- Postemployment benefits -- (0.20) -- -- --
- Postretirement benefits
other than pensions... -- -- (3.19) -- --
- Income taxes............ -- -- (0.17) -- --
Primary earnings (loss) per
share....................... $2.00 $ 1.36 $(2.25) $1.45 $1.78
54
EXHIBIT 11(i)
Page 2 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF PRIMARY EARNINGS PER SHARE
(Continued)
Notes: All common share and per share amounts have been adjusted
for the 2-for-1 stock split which was made in the form of a stock
dividend in 1992. On February 7, 1990, the board of directors
authorized the redemption of the Dutch Auction Rate Transferable
Securities preference stock. The company redeemed Series D-1
preference stock on March 14, 1990, and Series D-2 preference
stock on April 4, 1990. Shares issuable under outstanding stock
plans, applying the "Treasury Stock" method, have been excluded
from the computation of primary earnings per share since such
shares were less than 1% of common shares outstanding, as
follows: 1994 - 496,893; 1993 - 600,429; 1992 - 738,149; 1991 -
632,056; 1990 - 639,836.
55
EX-11.II
6
EXHIBIT 11(ii)
Page 1 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(In thousands of dollars except for shares and per share amounts)
Years ended December 31,
1994 1993 1992 1991 1990
FULLY DILUTED EARNINGS PER SHARE:
Net earnings before effect of
accounting changes........... $ 211,140 $ 163,524 $ 115,594 $ 150,589 $ 185,343
Less dividends on preference
stock ..................... -- -- -- -- 1,838
Earnings applicable to common
stock before effect of
accounting changes........... 211,140 163,524 115,594 150,589 183,505
Effect of accounting changes:
- Postemployment benefits -- (21,000) -- -- --
- Postretirement benefits
other than pensions...... -- -- (332,000) -- --
- Income taxes............... -- -- (18,000) -- --
Net earnings (loss) applicable
to common stock.............. $ 211,140 $ 142,524 $ (234,406) $ 150,589 $ 183,505
Average number of common
shares outstanding........... 105,458,116 104,991,535 104,340,622 103,634,178 103,351,708
Number of common shares
issuable assuming exercise
under incentive stock plans.. 496,893 600,429 738,149 632,056 639,836
Average number of outstanding
shares as adjusted for
fully diluted earnings per
share calculations........... 105,955,009 105,591,964 105,078,771 104,266,234 103,991,544
56
EXHIBIT 11(ii)
Page 2 of 2
INGERSOLL-RAND COMPANY
COMPUTATION OF FULLY DILUTED EARNINGS PER SHARE
(In thousands of dollars except for shares and per share amounts)
(Continued)
Years ended December 31,
1994 1993 1992 1991 1990
Fully diluted earnings per share:
Earnings before effect of
accounting changes........... $1.99 $ 1.55 $ 1.10 $1.44 $1.76
Effect of accounting changes:
- Postemployment benefits -- (0.20) -- -- --
- Postretirement benefits
other than pensions.... -- -- (3.16) -- --
- Income taxes............. -- -- (0.17) -- --
Fully diluted earnings (loss) per
share........................ $1.99 $ 1.35 $(2.23) $1.44 $1.76
Notes: All common share and per share amounts have been adjusted for the 2-for-1 stock split which
was made in the form of a stock dividend in 1992. This calculation is presented in accordance with
the Securities Exchange Act of 1934, although it is not required disclosure under APB Opinion No.
15. Net earnings per share of common stock computed on a fully diluted basis are based on the
average number of common shares outstanding during each year after adjustment for individual
securities which may be dilutive. Securities entering into consideration in making this calculation
are common shares issuable under employee incentive stock plans. Employee stock options outstanding
have been included in the calculation of fully diluted earnings per share by applying the "Treasury
Stock" Method quarterly. Such calculations have been made using the higher of the average month-end
market prices or the market prices at the end of the quarter, in order to reflect the maximum
potential dilution. On February 7, 1990, the board of directors authorized the redemption of the
Dutch Auction Rate Transferable Securities preference stock. The company redeemed Series D-1
preference stock on March 14, 1990, and Series D-2 preference stock on April 4, 1990.
57
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7
INGERSOLL-RAND COMPANY EXHIBIT 12
COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
(Dollar Amounts in Thousands)
(2) Years Ended December 31,
Fixed charges: 1994 1993 1992 1991 1990
Interest expense........................... $ 46,858 $ 60,222 $ 64,698 $ 64,476 $ 71,663
Amortization of debt discount and expense.. 385 688 288 265 255
Rentals (one-third of rentals)............. 18,773 19,425 20,846 21,229 20,599
Capitalized interest....................... 3,241 3,103 3,460 4,640 4,197
Total fixed charges.......................... $ 69,257 $ 83,438 $ 89,292 $ 90,610 $ 96,714
Net earnings (loss).......................... $211,140 $142,524 $(234,406) $150,589 $185,343
Add: Minority income (loss) of majority-
owned subsidiaries.................. 15,126 13,572 (33,155) 1,938 2,232
Taxes on income....................... 118,800 90,000 67,400 84,600 99,800
Fixed charges......................... 69,257 83,438 89,292 90,610 96,714
Effect of accounting changes.......... -- 21,000 350,000 -- --
Less: Capitalized interest.................. 3,241 3,103 3,460 4,640 4,197
Undistributed earnings (losses) from
less than 50% owned affiliates...... 33,271 39,933 16,603 13,523 3,327
Earnings available for fixed charges ........ $377,811 $307,498 $ 219,068 $309,574 $376,565
Ratio of earnings to fixed charges .......... 5.46 3.69(1) 2.45(3) 3.42(4) 3.89
Undistributed earnings (losses) from less
than 50% owned affiliates:
Equity in earnings (losses)................ $ 36,588 $ 42,077 $ 17,865 $ 14,768 $ 4,187
Less: Dividends paid ................... 3,317 2,144 1,262 1,245 860
Undistributed earnings (losses) from
less-than 50% owned affiliates........... $ 33,271 $ 39,933 $ 16,603 $ 13,523 $ 3,327
(1) The 1993 calculation includes the effect of the $5 million pretax charge relating to the
restructure of the company's underground mining machinery business. Excluding this amount, the
ratio would have been 3.75.
(2) The company's portion of the earnings and fixed charges of the Dresser-Rand Company are included
through September 30, 1992. Effective October 1, 1992, the company's ownership interest in the
Dresser-Rand Company was reduced from 50% to 49%.
(3) The 1992 calculation includes (i) the effect of the $10 million pretax charge relating to the
restructure of the company's aerospace bearings business and (ii) the full effect of the $70
million pretax restructure of operations charge relating to the Ingersoll-Dresser Pump Company.
Excluding the 1992 restructure charges the ratio would have been 3.35.
(4) The 1991 ratio includes the $7.1 million net pretax benefit from a restructure of operations.
Excluding this amount the ratio would have been 3.34.
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8
EXHIBIT 13
Page 1 of 62
INGERSOLL-RAND
1994
ANNUAL REPORT
TO
SHAREOWNERS
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Table of Contents
Financial Review and Management Analysis . . . . . . . . 3-24
Consolidated Statement of Income . . . . . . . . . . . . 25
Consolidated Balance Sheet . . . . . . . . . . . . . . . 26-27
Consolidated Statement of Shareowners' Equity . . . . . . 28-29
Consolidated Statement of Cash Flows . . . . . . . . . . 30-31
Notes to Consolidated Financial Statements . . . . . . . 32-60
Report of Management . . . . . . . . . . . . . . . . . . 61
Report of Independent Accountants . . . . . . . . . . . . 62
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Ingersoll-Rand Company
Financial Review and Management Analysis
1994 Compared to 1993
1994 marked a milestone in the company's history. Its 1994
financial performance registered record levels in sales of $4.5
billion and record net earnings of $211.1 million, or $2.00 per
share. 1994 was a year of achievement brought about by strong
domestic markets for most of the company's products, recovering
European markets and continued benefits from asset management and
cost containment programs.
The company's outlook for 1995 is for a steady improvement in
operating results based on continued stability in our domestic
markets and additional recoveries in our international markets.
As outlined last year, these expectations are supplemented by our
aggressive cost-containment programs, our commitment to total
quality management and a focus on reengineering our business
processes to accelerate our efficiency gains.
A comparison of key financial data between 1994 and 1993
follows:
o Net sales in 1994 totalled $4.5 billion, representing an
increase of $486 million over 1993 and establishing a new
record high. Net sales reflected strong increases in the
Standard Machinery and Bearings, Locks and Tools segments.
o Cost of goods sold in 1994 was 74.9 percent of sales, compared
to 75.0 percent in 1993. A partial liquidation of LIFO
(last-in, first-out) inventories lowered 1994 costs by $11.6
million ($7.1 million after-tax, or seven cents per share); a
similar liquidation in 1993 lowered costs by $12.5 million
($7.6 million after-tax, or seven cents per share). Excluding
the benefit of the LIFO liquidations, the 1994 cost of goods
sold percentage relationship to sales would have been 75.2
percent versus 75.3 percent for 1993. This reduction
represented the benefit from the company's continuing programs
of aggressive cost-containment.
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o Administrative, selling and service engineering expenses were
16.7 percent of sales in 1994, compared to 17.6 percent for
1993. The marked improvement was due to the continued effect
of the company's efforts from cost-containment programs and
the benefit of leverage from the increased sales volume which
were large enough to offset the effects of inflation for
salaries, services, etc.
o Operating income for the year totalled $377.0 million, an
increase of 27.2 percent over 1993's operating income of
$296.5 million, before the restructure of operations charge.
The 1993 restructure of operations charge totalled $5.0
million and related to the company's decision to sell its
underground coal-mining machinery business during the second
quarter of the year. The sale of this business was finalized
in July 1993. There were no restructuring charges in 1994.
o Interest expense for 1994 was $43.8 million, approximately 16
percent lower than the $52.0 million reported for 1993. The
reduction was due to lower overall outstanding indebtedness,
which was a result of the company's ongoing asset management
program.
o The "other income (expense), net" category is essentially the
sum of three activities: (i) foreign exchange, (ii) equity
interest in partially-owned equity companies, and (iii) other
miscellaneous income and expense items. In 1994, this
category totalled a net expense balance of $14.7 million, a
$7.2 million increase in net expense over 1993's level. A
review of the components of this category show that:
o foreign exchange activity for 1994 totalled $6.1 million of
losses, as compared to $6.6 million of losses in 1993;
o earnings from equity interests in partially-owned equity
companies were approximately $2 million lower than 1993's
level, reflecting a 1994 loss on the sale of a partially-
owned company; and
o other net miscellaneous expense items were approximately
double the prior year levels, principally due to lower gains
on the sale of fixed assets and lower royalty earnings.
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o Dresser-Rand Company is a partnership between the company and
Dresser Industries, Inc. (Dresser). It commenced operations
on January 1, 1987, and comprises the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
The company's pretax profits from its interest in Dresser-Rand
for 1994 totalled $24.6 million, as compared to $33.1 million
in the prior year. The reduction is attributed to the
combination of an increase in expenses to establish a presence
in Eastern Europe, increased depreciation charges due to the
effect of its equipment improvement programs during the past
few years and lower production levels in some of its
businesses.
o The Ingersoll-Dresser Pump Company (IDP) is another
partnership between the company and Dresser in which the
company owns the majority interest. In 1994, the minority
interest charge was $13.2 million, as compared to the 1993
charge of $11.6 million. This charge reflects the portion of
IDP's earnings that were allocable to our joint venture
partner.
o The company's effective tax rate for 1994 was 36.0 percent,
which is a slight increase over the 35.5 percent reported for
the prior year. The variance from the 35.0 percent statutory
rate was due primarily to the higher tax rates associated with
foreign earnings and the effect of state and local taxes.
At December 31, 1994, employment totalled 35,932. This
represents a net increase of 789 employees over last year's level
of 35,143. Acquisitions accounted for virtually all of this
increase.
Liquidity and Capital Resources
Management continues to maximize efforts to utilize assets and
resources in an efficient manner. The following table contains
several key measures of the company's financial performance:
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EXHIBIT 13
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1994 1993 1992
Working capital (in millions) $963 $878 $888
Current ratio 1.9 1.9 1.8
Debt-to-total capital ratio 22/78 28/72 30/70
Average working capital
to net sales 20.4% 22.0% 23.7%
Average days outstanding
in receivables 64.6 64.1 61.1
Average months' supply
of inventory 3.7 4.4 4.6
Ingersoll-Rand, as a large multinational company, maintains
significant operations in foreign countries. The movement of the
U.S. dollar against foreign currencies has a day-to-day impact on
the company's financial position. This impact is not always
apparent since the company reports its consolidated results in
U.S. dollars. Generally, the functional currency of the
company's foreign subsidiaries is their local currency, the
currency in which they transact their business. During 1994,
many foreign currencies strengthened against the U.S. dollar for
most of the year and the effect of these foreign currency
fluctuations was significant. The company manages exposure in
foreign currency exchange rates through its normal operating and
financing activities, as well as through the use of forward
exchange contracts. The company attempts through its hedging
activities to mitigate the impact on the income statement of
changes in foreign exchange rates. Additionally, the company
maintains operations in several hyperinflationary economies and
in countries, like Mexico, where the company's operations
transact business in U.S. dollars. The functional currency of
these operations have been and will remain the U.S. dollar.
(Additional information on the company's use of "Financial
Instruments" can be found in Note 10 to the Consolidated
Financial Statements.)
The following highlights the financial results and financial
condition of the company's operations, with the impact of
currency variations where appropriate:
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o Cash and cash equivalents totalled $207.0 million at December
31, 1994, a $21.0 million decrease from the prior year-end
balance of $228.0 million. In evaluating the net change in
cash and cash equivalents, cash flows from operating,
investing and financing activities, and the effect of exchange
rate changes, should be considered. Cash flows from operating
activities totalled $301.8 million, investing activities used
$141.6 million and financing activities used $187.7 million.
Exchange rate changes during 1994 increased cash and cash
equivalents by approximately $6.6 million.
o Marketable securities totalled $4.2 million at the end of
1994, $1.9 million less than the balance at December 31, 1993.
Foreign marketable securities increased by approximately $0.9
million during the year due to foreign exchange rate
fluctuations. The remaining reduction was due to the maturity
of the various securities and their liquidation into cash and
cash equivalents.
o Receivables totalled $949.4 million at December 31, 1994,
compared to $797.5 million at the prior year-end, for a net
increase of $151.9 million. Currency translation increased
the receivable balance during the year by $21.4 million, and
acquisitions added approximately $20 million during 1994. In
addition, heavy sales volume in the 1994 fourth quarter
contributed significantly to the increase. Net sales for the
fourth quarter of 1994 increased 14 percent over 1993's fourth
quarter. The average days outstanding in receivables
increased slightly from 1993's level because of the higher mix
of international receivables, which traditionally carry longer
payment terms than domestic receivables and customers in
certain domestic industries have implemented slightly longer
payment terms.
o Inventories amounted to $679.3 million at December 31, 1994,
$34.4 million lower than last year's level of $713.7 million.
This decrease was a result of the company's aggressive
inventory control programs and record fourth quarter sales,
which reduced inventory levels by approximately $82 million.
Currency movements accounted for $21.3 million increase in
inventory for the year, while acquisitions accounted for an
additional $25.9 million increase in inventory. The company's
emphasis on inventory control was reflected in the reduction
in the average months' supply of inventory, which was 3.7
months at December 31, 1994, compared to 4.4 months at the
prior year-end.
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o Prepaid expenses totalled $43.7 million at the end of the
year, $3.9 million higher than the balance at December 31,
1993. Foreign exchange activity had the effect of increasing
the balance in this account by $1.9 million during the year.
The remaining net increase for the year was due to a general
increase in the company's prepaid expenses of $1.3 million and
acquisitions contributed $0.7 million.
o Deferred income taxes (current) of $119.2 million at December
31, 1994, represent the deferred tax benefit of the difference
between the book and tax values of various current assets and
liabilities. A schedule of the components for this balance is
in Note 14 of the Notes to Consolidated Financial Statements.
The year-end balance represented an increase of approximately
$2 million from the December 31, 1993, level. Changes due to
foreign currency movements had an immaterial effect on the
year's activities.
o The investment in Dresser-Rand Company totalled $90.7 million
at December 31, 1994. This represented a net decrease of
approximately $21.9 million from 1993's balance of $112.6
million. The components of the change for 1994 consisted of
income for the current year of $24.6 million, a $48.9 million
change in the advance account between the entities and a $2.4
million increase due to currency fluctuations.
o The investments in partially-owned equity companies at
December 31, 1994, totalled $173.9 million, $15.2 million
higher than the 1993 balance. Income and dividends from
investments in partially-owned equity companies was $15.6
million and $3.8 million, respectively. Amounts due from
these units decreased from $27.6 million to $3.4 million at
December 31, 1994. Currency movements relating to partially-
owned equity companies was approximately $11.1 million in
1994. In 1994, the company acquired full ownership of a ball
bearing joint venture with GMN Mueller of America, Inc. The
company also entered into a 50/50 joint venture, GHH-RAND
Schraubenkompressoren GmbH & Co. KG, to manufacture airends.
Also in 1994, the assets of the IDP Australian operations were
sold in return for shares of the purchaser. The company also
sold its interest in IRI International Corporation, a
manufacturer of mobile drilling rigs.
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o Net property, plant and equipment increased by approximately
$84 million in 1994 to a year-end balance of $959.3 million.
Fixed assets from acquisitions during 1994 added $39.8
million. Capital expenditures in 1994 totalled $158.6
million, a 20 percent increase over the prior year's level.
Foreign exchange fluctuations increased the net fixed asset
values in U.S. dollars by approximately $16.8 million. The
remaining net decrease was principally due to depreciation
expense.
o Intangible assets, net, totalled $124.5 million at December
31, 1994, as compared to $105.9 million at December 31, 1993,
for a net increase of $18.6 million. Amortization (which was
charged to expense) accounted for a reduction of $6.8 million.
Acquisitions added $27.8 million of intangibles during 1994.
The remaining net change was attributable to an increase from
currency fluctuations and a decrease in the required pension
intangible asset.
o Deferred income taxes (noncurrent) totalled $74.5 million at
December 31, 1994. This net deferred asset arose in 1992
primarily because of the tax effects related to the adoption
of SFAS No. 106 (Postretirement Benefits Other Than Pensions).
The 1994 balance was $16.4 million lower than the 1993
balance. A listing of the components which comprised the
balance at December 31, 1994, can be found in Note 14 of the
Notes to Consolidated Financial Statements.
o Other assets totalled $171.2 million at year-end, an increase
of approximately $41.2 million from the December 31, 1993,
balance of $130.0 million. The change in the account balance
was primarily due to an increase in prepaid pensions and
acquisitions. Foreign exchange activity in 1994 had a minimal
effect on the account balance during the year.
o Accounts payable and accruals totalled $883.8 million at
December 31, 1994, an increase of $121.4 million from last
year's balance of $762.4 million. The increase in the 1994
balance is related to acquisitions, foreign exchange activity,
and a general increase in trade accounts payable.
Acquisitions caused an increase of approximately $50 million
and foreign currency activity added approximately $20 million.
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o Loans payable were $117.2 million at the end of 1994, compared
to $206.9 million at December 31, 1993. Current maturities of
long-term debt, included in loans payable, were $4.2 million
and $82 million at December 31, 1994 and 1993, respectively.
Excluding the current maturities of long-term debt, short-term
borrowings decreased by $24.4 million during 1994. This
balance can be attributed to a decrease in foreign short-term
debt offset by increases in the total loans outstanding during
1994 of $11.8 million due to foreign currency fluctuations and
debt assumed from acquisitions.
o Long-term debt, excluding current maturities, totalled $315.6
million at December 31, 1994, compared to $314.1 million at
December 31, 1993, a net increase of $1.5 million. This net
increase was the result of additions to long-term debt of $2.3
million, additions due to acquisitions of $6.9 million, a $0.4
million increase from foreign currency fluctuations; reduced
by transfers to loans payable for current maturities.
o Postemployment liabilities at December 31, 1994, totalled
$518.3 million, an increase of $2.5 million over the December
31, 1993, balance. Postemployment liabilities include medical
and life insurance postretirement benefits, long-term pension
accruals and other noncurrent postemployment accruals.
Postemployment liabilities represent the company's noncurrent
liability in accordance with SFAS Nos. 87, 106 and 112. See
Notes 16 and 17 of the Notes to Consolidated Financial
Statements for additional information.
o The Ingersoll-Dresser Pump Company minority interest, which
represents Dresser's interest in the IDP joint venture,
totalled $154.1 million and $146.3 million at December 31,
1994 and 1993, respectively. Earnings allocable to IDP's
minority interest totalled $13.2 million for 1994, while
increases due to translation adjustments totalled $5.4
million. At December 31, 1994, Dresser had loans payable to
IDP totalling $10.8 million which was shown as a reduction in
IDP's minority interest. Earnings allocable to IDP's minority
interest totalled $11.6 million for 1993, which were virtually
offset by translation adjustment and final valuation
modifications.
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o Other liabilities (noncurrent) at December 31, 1994, totalled
$37.3 million, which were $12.4 million higher than the
balance at December 31, 1993. The net increase for 1994
represented changes to various accruals primarily due to
acquisitions, which are not expected to be paid out in the
company's next business cycle. These accruals generally cover
environmental obligations, legal accruals, and other
contractual obligations.
Other information concerning the company's financial
resources, commitments and plans is as follows:
The average amount of short-term borrowings outstanding,
excluding current maturities of long-term debt, was $141.9
million in 1994, compared to $159.1 million in 1993. The
weighted average interest rate during 1994 was 6.8%, compared to
7.8% during the previous year. The maximum amounts outstanding
during 1994 and 1993 were $181.6 million and $184.1 million,
respectively. The decrease in the 1994 average amount of
short-term borrowings outstanding was attributable to the
company's foreign operations, which used short-term debt
financings as a hedge against currency movements.
The company had a $400 million domestic short-term credit line
at December 31, 1994, and $466 million of foreign credit
available for working capital purposes, all of which were unused
at the end of the year. These facilities exceed projected
requirements for 1995 and provide direct support for commercial
paper and indirect support for other financial instruments, such
as letters of credit and comfort letters.
At December 31, 1994, the debt-to-total capital ratio was
22/78, as compared to 28/72 at the prior year-end. The
significant improvement in the ratio at December 31, 1994, was
primarily due to the company's continuing programs of inventory
reductions and spending controls to generate cash which was used
to reduce the company's overall debt obligations.
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In 1994, foreign currency adjustments increased shareowners'
equity by approximately $38.4 million. The change was due to the
weakening of the U.S. dollar against other currencies in
countries where the company has significant operations and the
local currencies are the functional currencies. Currency
fluctuations in the United Kingdom, Canada, France, Italy,
Germany, Australia, Singapore, Japan and Spain accounted for
approximately 80 percent of the change. Inventories, accounts
receivable, net property, plant and equipment, accounts payable
and loans payable were principal accounts affected.
In 1994, the company continued to sell an undivided fractional
ownership interest in designated pools of accounts and notes
receivable up to a maximum of $125 million. Similar agreements
have been in effect since 1987. These agreements expire in one-
and two-year periods based on the particular pool of receivables
sold. The company intends to renew these agreements at their
expiration dates with either the current institution or another
financial institution using the basic terms and conditions of the
existing agreement. At December 31, 1994 and 1993, $125 million
of such receivables remained uncollected.
Capital expenditures were $159 million and $132 million in
1994 and 1993, 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 1995 is
estimated at approximately $175 million, including carryover from
projects approved in prior periods. There are no planned
projects that, either individually or in the aggregate, 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.
As a result of high inflationary periods in the 1970s,
experimental disclosure of supplementary information to measure
the effects of inflation on historical financial statements in
terms of the constant dollar and current costs was required.
While the company presented inflation-adjusted data, the
information presented was based on assumptions, estimates and
judgements, which were far from precise indicators of the effects
of inflation on the company. High inflationary trends have
dissipated in recent years and, after a review of the effects of
inflation, the company has determined that such information is
neither material nor meaningful at this time.
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Environmental Matters
The company is subject to extensive environmental laws and
regulations. We believe that the company, as well as industry in
general, will be faced with increasingly stringent laws and
regulations in the future. As a result, 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 1994, the company spent approximately $7 million on
capital projects for pollution abatement and control and an
additional $7 million for environmental remediation expenditures,
including operation and maintenance of existing environmental
programs. It should be noted that these amounts are difficult to
estimate because environmental improvements are generally
intertwined with 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.
It has received notices of potential violations of environmental
laws and regulations from the Environmental Protection Agency and
similar state authorities, and is identified as a potentially
responsible party (PRP) for cleanup costs at approximately 26
federal Superfund and state remediation sites. For all sites
there are other PRPs and in most instances, the company's site
involvement is minimal. While all PRPs may be jointly and
severally liable to pay all site investigation and remediation
costs, to date there is no indication the company will be liable
for more than the costs of its own percentage of responsibility
at any site. Additional lawsuit and claims involving
environmental matters are likely to arise from time to time in
the future.
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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.
1993 Compared to 1992
1993 continued to be a year of challenges and accomplishments for
the company. We were challenged by striving to exceed 1992's
results while faced with a continued recession in Europe
throughout the year. The turnaround in Europe, which we had
originally expected by the latter half of 1993 did not occur.
However, based on stronger domestic markets, principally in the
automotive, housing, industrial and selected construction
markets, together with continued benefits from company-wide cost-
containment programs, the company was able to meet its operating
goals in 1993.
The company notes two significant events for the year. The
first was the full year inclusion of Ingersoll-Dresser Pump
Company (IDP) in the company's results. IDP is a joint venture
between the company and Dresser Industries, Inc., formed
effective October 1, 1992. IDP's operating results in 1993,
which are discussed throughout this report, were adversely
affected by the European recession, but benefitted from the
restructuring plan, which was provided for in 1992 but
implemented for the most part during 1993.
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Second, the company adopted, effective January 1, 1993,
Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits." SFAS No.
112 requires an accrual for the expected cost of benefits
provided by an employer to former or inactive employees after
employment but before retirement. These benefits typically are
associated with the continuation of medical and life insurance
benefits for employees on short- and long-term disability.
Previously, these benefits were expensed as incurred. The
company elected to adopt this standard in the fourth quarter of
1993, and recognized the postemployment benefit obligation as of
January 1, 1993. The effect of the adoption of SFAS No. 112 for
the company totalled $21.0 million ($0.20 per share), net of a
$13.5 million tax benefit. Aside from the effect of the
adjustment, the adoption of SFAS No. 112 was not material to the
company's 1993 financial results and accordingly, the results for
the first three quarters of 1993 have not been restated to
reflect this adoption.
A comparison of key financial data between 1993 and 1992
follows:
o Net sales for 1993 totalled $4.0 billion, 6.3 percent higher
than in 1992. Excluding the sales from the pump units
contributed to IDP by Dresser, sales would have decreased by
approximately two percent.
o Cost of goods sold in 1993 was 75.0 percent of sales, compared
to 76.2 percent in 1992. A partial liquidation of LIFO
(last-in, first-out) inventories lowered 1993 costs by $12.5
million ($7.6 million after-tax, or seven cents per share); a
similar liquidation in 1992 lowered costs by $5.8 million
($3.6 million after-tax, or three cents per share). Excluding
the benefit of the LIFO liquidations, the 1993 cost of goods
sold percentage relationship to sales would have been 75.3
percent versus 76.3 percent for 1992. This reduction
represented the benefit from the company's continuing programs
of aggressive cost-containment and improved volume from some
of our domestic markets.
o Administrative, selling and service engineering expenses were
17.6 percent of sales in 1993, compared to 17.1 percent for
1992. The increase was due to the combined effect of
including IDP's results for the full year of 1993 and
increases in salaries, administrative costs and expenses of a
general nature.
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o The 1993 restructure of operations charge totalled $5.0
million and related to the company's decision to sell its
underground coal-mining machinery business during the second
quarter of the year. The sale of this business was finalized
in July 1993. The 1992 restructure charges totalled $80
million, $70 million of which related to the IDP venture and
was recorded in 1992's fourth quarter. The remaining $10
million charge was recorded in the third quarter of 1992 and
related to the company's decision to realign its aerospace
bearings business.
o Interest expense for 1993 was $52.0 million, approximately
four percent lower than the $54.1 million reported for 1992.
The reduction was due to the combined effect of lower overall
outstanding debt and lower effective interest rates in 1993,
when compared to 1992.
o The "other income (expense), net" category is essentially the
sum of three activities: (i) foreign exchange, (ii) equity
interest in partially-owned equity companies, and (iii) other
miscellaneous income and expense items. In 1993, this
category totalled a net expense balance of $7.5 million, as
compared to only $0.7 million for 1992. A review of the
components of this category show that:
- foreign exchange activity for 1993 totalled $6.6 million of
losses, as compared to $6.2 million of losses in 1992;
- earnings from equity interests in partially-owned equity
companies decreased by approximately $5 million in 1993,
when compared to 1992, principally due to the 1992 sale of
the company's interest in one of these equity companies; and
- other net miscellaneous expense items were approximately
one-half of prior-year levels, but 1992 included a gain from
the sale of an equity interest in a company, which offset
1992's net miscellaneous expense items.
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o Dresser-Rand Company is another partnership between the
company and Dresser Industries, Inc. It commenced operations
on January 1, 1987, and comprises the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
The company's pretax profits from its interest in Dresser-Rand
for 1993 totalled $33.1 million, as compared to $27.6 million
in 1992. The improvement in the operating results of Dresser-
Rand is attributed primarily to the benefits obtained from
cost-containment programs and the efficiencies generated by
maintaining volume levels at their manufacturing locations.
o The Ingersoll-Dresser Pump Company minority interest
represents Dresser's interest in the operating results of IDP.
In 1993, the minority interest was a charge of $11.6 million,
and represented the portion of IDP's earnings that was
allocable to our joint venture partner. The 1992 benefit of
$35.0 million basically represented the portion of 1992's $70
million restructure charge for IDP, which was the
responsibility of our joint venture partner. IDP's 1992
fourth quarter results, excluding the restructure charge, were
essentially at the break-even level. Overall, the
restructuring efforts in IDP have been substantially completed
and the company expects to realize the majority of the
benefits from these actions in 1994 and beyond.
o The company's effective tax rate for 1993 was 35.5 percent,
which is a modest decrease over the 36.8 percent reported for
1992. The variance from the 35.0 percent statutory rate was
due primarily to the higher tax rates associated with foreign
earnings and the effect of state and local taxes.
o At December 31, 1993, employment totalled 35,143. This
represents a net decrease of 165 employees from 1992's level
of 35,308. Acquisitions added a total of 2,610 employees,
while divestitures, attrition and cost-reduction programs
reduced total employment by 2,775.
The following highlights the financial results and financial
condition of the company's operations, with the impact of
currency variations where appropriate:
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o Cash and cash equivalents totalled $228.0 million at December
31, 1993, $11.2 million more than the December 31, 1992
balance of $216.8 million. In evaluating the net change in
cash and cash equivalents, cash flows from operating,
investing and financing activities, and the effect of exchange
rate changes should be considered. Cash flows from operating
activities totalled $164.9 million, investing activities used
$60.7 million and financing activities used $86.1 million.
Exchange rate changes during 1993 decreased cash and cash
equivalents by approximately $6.9 million.
o Marketable securities totalled $6.2 million at the end of
1993, approximately $7.2 million less than the balance at
December 31, 1992. Foreign marketable securities decreased by
approximately $0.8 million during the year due to foreign
exchange rate fluctuations. The remaining reduction was due
to the maturity of the various securities and their
liquidation into cash and cash equivalents.
o Receivables totalled $797.5 million at December 31, 1993,
compared to $809.6 million at December 31, 1992, for a net
decrease of $12.1 million. Currency translation decreased the
receivable balance during the year by $27.7 million, offset
partially by increased receivables, principally from IDP's
European operations. The average days outstanding in
receivables increased slightly from 1992's level because of
the higher mix of international receivables, due to the IDP
joint venture, which traditionally carry longer payment terms
than domestic receivables.
o Inventories amounted to $713.7 million at December 31, 1993,
$56.6 million lower than 1992's level of $770.3 million. This
decrease was a result of the company's aggressive inventory
control programs, which reduced inventory levels by
approximately $36 million. Currency movements accounted for
an additional $18.8 million reduction in inventory for the
year. Acquisitions less dispositions accounted for the
remaining difference. Since 1991, the company has been able
to reduce its inventory by more than $100 million (excluding
the inventory from the contributed pump units of Dresser).
The company's emphasis on inventory control was reflected in
the reduction in the average months' supply of inventory,
which was 4.4 months at December 31, 1993, compared to 4.6
months at December 31, 1992.
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o Prepaid expenses totalled $39.8 million at December 31, 1993,
$15.7 million lower than the balance at December 31, 1992.
Foreign exchange activity had the effect of reducing the
balance in this account by $0.8 million during the year. The
net decrease for the year was split between a general decrease
in the company's prepaid expenses and the disposition of
certain assets held for sale.
o Deferred income taxes (current) of $116.9 million at December
31, 1993, represent the deferred tax benefit of the difference
between the book and tax values of various current assets and
liabilities. A schedule of the components for this balance is
in Note 14 of the Notes to Consolidated Financial Statements.
The year-end balance represented an increase of approximately
$15 million from the December 31, 1992, level. Changes due to
foreign currency movements had an immaterial effect on the
year's activities.
o The investment in Dresser-Rand Company totalled $112.6 million
at December 31, 1993. This represented a net decrease of
approximately $7.1 million from 1992's balance of $119.7
million. The components of the change for 1993 consisted of
income of $33.1 million, a $37.7 million change in the advance
account between the entities and a $2.5 million reduction due
to currency fluctuations.
o The investments in partially-owned equity companies at
December 31, 1993, totalled $158.6 million, $9.3 million
higher than the 1992 balance. The components of this change
consisted of income for 1993 of $15.6 million, dividends of
$3.1 million, a net decrease in the amounts due from these
units of $7.6 million and currency movements of $4.4 million.
o Net property, plant and equipment increased by approximately
$28 million in 1993 to a year-end balance of $875.1 million.
Fixed assets from acquisitions during 1993 added $25.9
million. Capital expenditures in 1993 totalled $132.0
million, a slight increase over the 1992 level. Foreign
exchange fluctuations decreased the net fixed asset values in
U.S. dollars by approximately $11.9 million. The remaining
net decrease was principally due to depreciation expense.
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o Intangible assets, net, totalled $105.9 million at December
31, 1993, as compared to $113.2 million at December 31, 1992,
for a net decrease of $7.3 million. Amortization (which was
charged to expense) accounted for a reduction of $5.9 million.
The remaining net change was attributable to currency
fluctuations and acquisitions during the year.
o Deferred income taxes (noncurrent) totalled $90.9 million at
December 31, 1993. This net deferred asset arose in 1992
primarily because of the tax effects related to the adoption
of SFAS No. 106 (Postretirement Benefits Other Than Pensions).
The 1993 balance was $13.9 million higher than the 1992
balance, primarily due to the company's adoption of SFAS No.
112 relating to postemployment benefits. A listing of the
components which comprised the balance at December 31, 1993,
can be found in Note 14 of the Notes to Consolidated Financial
Statements.
o Other assets totalled $130.0 million at year-end, an increase
of approximately $16.5 million from the December 31, 1992,
balance of $113.5 million. The change in the account balance
was primarily due to an increase in prepaid pensions. Foreign
exchange activity in 1993 had a minimal effect on the account
balance during the year.
o Accounts payable and accruals totalled $762.4 million at
December 31, 1993, a decrease of $60.7 million from 1992's
balance of $823.1 million. The majority of the 1993 reduction
related to expenditures made with respect to restructure of
operations reserves for IDP, which were established in the
fourth quarter of 1992 but not paid until 1993. All other
activity, including acquisitions, caused an increase of
approximately $20 million in this category during 1993, while
foreign exchange activity decreased this account by
approximately $21 million.
o Loans payable were $206.9 million at the end of 1993, compared
to $201.3 million at December 31, 1992. Current maturities of
long-term debt, included in loans payable, were $82 million
and $17.2 million at December 31, 1993 and 1992, respectively.
Excluding the current maturities of long-term debt, short-term
borrowings decreased by $49.5 million during 1993. This
balance can be attributed to a decrease in foreign short-term
debt and a reduction in the total loans outstanding during
1993 of $4.2 million due to foreign currency fluctuations.
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EXHIBIT 13
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o Long-term debt, excluding current maturities, totalled $314.1
million at December 31, 1993, compared to $355.6 million at
December 31, 1992, a net decrease of $41.5 million. This net
decrease was the result of additions to long-term debt of
$101.8 million reduced by transfers to loans payable for
current maturities and a $0.6 million reduction from foreign
currency fluctuations. The additions to long-term debt
primarily represented the February 3, 1993, issuance by the
company of $100 million of notes at 6 7/8% per annum, which
are not redeemable prior to maturity in 2003. The proceeds
from these notes were used to redeem $68 million of the
company's outstanding 8.05% Debentures Due 2004 and for
general corporate purposes.
o Postemployment benefits at December 31, 1993, totalled $515.8
million, an increase of $21.3 million over the December 31,
1992, balance. Postemployment benefits include medical and
life insurance postretirement benefits, long-term pension
accruals and other noncurrent postemployment accruals.
Postemployment benefits represent the company's noncurrent
liability in accordance with SFAS Nos. 87, 106 and 112. SFAS
No. 112 was adopted as of January 1, 1993. See Notes 16 and
17 of the Notes to Consolidated Financial Statements for
additional information.
o The Ingersoll-Dresser Pump Company minority interest, which
represents Dresser's interest in the IDP joint venture,
totalled $146.3 million and $146.2 million at December 31,
1993 and 1992, respectively. Earnings allocable to IDP's
minority interest totalled $11.6 million for 1993, which were
virtually offset by translation adjustments and final
valuation modifications.
o Other liabilities (noncurrent) at December 31, 1993, totalled
$24.9 million, which were $6.9 million higher than the balance
at December 31, 1992. The net increase for 1993 represented
changes to various accruals, which are not expected to be paid
out in the company's next business cycle. These accruals
generally cover environmental obligations, legal accruals, and
other contractual obligations.
Other information concerning the company's financial
resources, commitments and plans is as follows:
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The average amount of short-term borrowings outstanding,
excluding current maturities of long-term debt, was $159.1
million in 1993, compared to $166.5 million in 1992. The
weighted average interest rate during 1993 was 7.8%, compared to
10.4% during the previous year. The decrease in the 1993 average
amount of short-term borrowings outstanding was attributable to
the company's foreign operations, which used short-term debt
financings as a hedge against currency movements.
The company had $400 million of domestic short-term credit
lines at December 31, 1993, and $412 million of foreign credit
available for working capital purposes, all of which were unused
at the end of the year. These facilities exceed projected
requirements for 1994 and provide direct support for commercial
paper and indirect support for other financial instruments, such
as letters of credit and comfort letters.
At December 31, 1993, the debt-to-total capital ratio was
28/72, as compared to 30/70 at December 31, 1992. The
improvement in the ratio at December 31, 1993, was primarily due
to the company's continuing program to reduce inventory and
control spending to generate cash to reduce the company's overall
debt obligations.
In 1993, foreign currency adjustments decreased shareowners'
equity by approximately $31.7 million. The change was due to the
strengthening of the U.S. dollar against other currencies in
countries where the company has significant operations. Currency
fluctuations in the United Kingdom, Canada, France, Italy,
Germany, Japan and Spain accounted for virtually all of the
change. Inventories, accounts receivable, net property, plant
and equipment, accounts payable and loans payable were the
principal accounts affected.
In 1993, the company sold an undivided fractional ownership
interest in designated pools of accounts and notes receivables up
to a maximum of $125 million. Similar agreements have been in
effect since 1987. These agreements expire in one- and two-year
periods based on the particular pool of receivables sold. The
company intends to renew these agreements at their expiration
dates with either the current institution or another financial
institution using the basic terms and conditions of the existing
agreement. At December 31, 1993 and 1992, $125 million of such
receivables remained uncollected.
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REVIEW OF BUSINESS SEGMENTS
Standard Machinery
Standard Machinery Segment's sales of $1.4 billion were
approximately 16 percent higher than 1993's level. Operating
income for 1994, totalled $122.4 million, representing an
increase of over 35 percent when compared to last year's total of
$89.6 million, before the 1993 restructure of operations charge
of $5 million. The 1993 restructure charge related to the sale
of the Mining Machinery Group, which was substantially completed
in July 1993.
The Construction and Mining Group's sales for 1994 were more
than 20 percent higher than the prior year's level due to a
strong domestic market and improving conditions throughout the
year in Europe. The group's operating income and operating
income margins improved markedly over 1993's results. Sales for
the Air Compressor Group were 14 percent higher than 1993's
level, based on stronger domestic and international markets with
a corresponding increase in both margins and operating income
results.
Engineered Equipment
Engineered Equipment Segment's sales for 1994 totalled $926.4
million which approximates last year's level. Operating income
totalled $35.3 million for 1994 as compared to $30.5 million for
the prior year. IDP's sales in 1994 were virtually at the same
level as 1993's due to the continued weakness of the industrial
pump industry in the European markets. However, IDP reported an
improvement in its operating income in 1994 based on stronger
domestic business, the continued effect of 1992's restructuring
and cost containment programs. Sales and operating income in the
Process Systems Group were below 1993's levels due to a weak pulp
and paper industry.
Bearings, Locks and Tools
In 1994, this segment reported sales of $2.1 billion, a 16
percent increase over the prior year. Operating income totalled
$256.6 million, an increase of more than 20 percent over the
$210.7 million reported for 1993.
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Bearings and Components sales for 1994 exceeded the prior
year's level by more than 15 percent. A strong domestic
automotive industry and continued benefits from cost-containment
programs generated improved operating income for this group in
1994.
Door Hardware sales were also more than 15 percent higher than
1993's level. The percentage improvement in operating income
exceeded the sales increase and established another record year
for the group. Continued strength and market penetration in
domestic markets coupled with aggressive cost controls
contributed to 1994's record operating income.
The Production Equipment Group's sales and operating income in
1994 reflected improvements over the amounts reported for the
prior year. A recovering economy in the European-served area and
stronger domestic markets contributed to the group's improved
results for 1994.
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Consolidated Statement of Income
In thousands except per share amounts
For the years ended December 31 1994 1993 1992
Net sales $4,507,470 $4,021,071 $3,783,787
Cost of goods sold 3,377,049 3,016,690 2,881,861
Administrative, selling and
service engineering
expenses 753,414 707,867 646,687
Restructure of operations-
charge -- (5,000) (80,000)
Operating income 377,007 291,514 175,239
Interest expense (43,751) (51,955) (54,129)
Other income (expense), net (14,734) (7,536) (734)
Dresser-Rand income 24,600 33,090 27,630
Ingersoll-Dresser Pump
minority interest (13,182) (11,589) 34,988
Earnings before income taxes
and effect of accounting
changes 329,940 253,524 182,994
Provision for income taxes 118,800 90,000 67,400
Earnings before effect of
accounting changes 211,140 163,524 115,594
Effect of accounting changes
(net of income tax benefits):
- Postemployment benefits -- (21,000) --
- Postretirement benefits
other than pensions -- -- (332,000)
- Income taxes -- -- (18,000)
Net earnings (loss) $ 211,140 $ 142,524 $ (234,406)
Earnings per share of
common stock:
Earnings before effect
of accounting changes $ 2.00 $ 1.56 $ 1.11
Effect of accounting changes:
- Postemployment benefits -- (0.20) --
- Postretirement benefits
other than pensions -- -- (3.19)
- Income taxes -- -- (0.17)
Net earnings (loss) per share $ 2.00 $ 1.36 $(2.25)
See accompanying notes to consolidated financial statements.
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Consolidated Balance Sheet
In thousands except share amounts
December 31 1994 1993
Assets
Current assets:
Cash and cash equivalents $ 207,023 $ 227,993
Marketable securities 4,231 6,172
Accounts and notes receivable, less
allowance for doubtful accounts of
$25,905 in 1994 and $22,089 in 1993 949,392 797,525
Inventories 679,308 713,690
Prepaid expenses 43,748 39,844
Deferred income taxes 119,185 116,936
2,002,887 1,902,160
Investments and advances:
Dresser-Rand Company 90,705 112,630
Partially-owned equity companies 173,871 158,645
264,576 271,275
Property, plant and equipment, at cost:
Land and buildings 557,287 521,748
Machinery and equipment 1,261,277 1,143,680
1,818,564 1,665,428
Less-accumulated depreciation 859,273 790,284
959,291 875,144
Intangible assets, net 124,487 105,855
Deferred income taxes 74,480 90,913
Other assets 171,200 129,985
$3,596,921 $3,375,332
Liabilities and Equity
Current liabilities:
Accounts payable and accruals $ 883,780 $ 762,387
Loans payable 117,249 206,939
Customers' advance payments 16,937 24,231
Income taxes 22,111 30,767
1,040,077 1,024,324
Long-term debt 315,850 314,136
Postemployment liabilities 518,297 515,787
Ingersoll-Dresser Pump Company
minority interest 154,069 146,331
Other liabilities 37,286 24,929
Shareowners' equity:
Common stock, $2 par value, authorized
400,000,000 shares; issued:
1994-109,168,872; 1993-108,939,462 218,338 217,879
Capital in excess of par value 42,358 34,917
Earnings retained for use in the business 1,403,672 1,268,472
1,664,368 1,521,268
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Consolidated Balance Sheet (Continued)
In thousands except share amounts
December 31 1994 1993
Less:
- Treasury stock, at cost 53,035 53,035
- Foreign currency equity adjustment 79,991 118,408
Shareowners' equity 1,531,342 1,349,825
$3,596,921 $3,375,332
See accompanying notes to consolidated financial statements.
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Consolidated Statement of Shareowners' Equity
In thousands except share data
December 31 1994 1993 1992
Common stock, $2 par value:
Balance at beginning of year $ 217,879 $ 216,553 $ 107,393
Exercise of stock options
and SARs 226 1,095 964
Issuance of shares under
stock plans 233 231 135
Two-for-one stock split -- -- 108,061
Balance at end of year $ 218,338 $ 217,879 $ 216,553
Capital in excess of par value:
Balance at beginning of year $ 34,917 $ 17,148 $ 106,265
Exercise of stock options and
SARs including tax benefits 3,257 14,294 15,592
Issuance of shares under
stock plans 4,184 3,475 3,352
Two-for-one stock split -- -- (108,061)
Balance at end of year $ 42,358 $ 34,917 $ 17,148
Earnings retained for use
in the business:
Balance at beginning of year $1,268,472 $1,199,438 $1,505,881
Net earnings (loss) 211,140 142,524 (234,406)
Cash dividends (75,940) (73,490) (72,037)
Balance at end of year $1,403,672 $1,268,472 $1,199,438
Treasury stock-at cost:
Common stock, $2 par value:
Balance at beginning of year $ (53,035) $ (53,036) $ (53,036)
Disposition of stock -- 1 --
Balance at end of year $ (53,035) $ (53,035) $ (53,036)
Foreign currency
equity adjustment:
Balance at beginning of year $ (118,408) $ (86,728) $ (33,447)
Adjustments due to
translation changes 38,417 (31,680) (53,281)
Balance at end of year $ (79,991) $ (118,408) $ (86,728)
Total shareowners' equity $1,531,342 $1,349,825 $1,293,375
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Consolidated Statement of Shareowners' Equity (Continued)
In thousands except share data
December 31 1994 1993 1992
Shares of Capital Stock
Common stock, $2 par value:
Balance at beginning of year 108,939,462 108,276,462 53,696,378
Exercise of stock options
and SARs 112,850 547,400 482,175
Issuance of shares under
stock plans 116,560 115,600 67,278
Two-for-one stock split -- -- 54,030,631
Balance at end of year 109,168,872 108,939,462 108,276,462
Treasury stock:
Common stock, $2 par value:
Balance at beginning of year 3,672,732 3,672,822 1,836,409
Two-for-one stock split -- -- 1,836,409
Purchases of stock -- -- 4
Disposition of stock -- (90) --
Balance at end of year 3,672,732 3,672,732 3,672,822
See accompanying notes to consolidated financial statements.
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Consolidated Statement of Cash Flows
In thousands
For the years ended December 31 1994 1993 1992
Cash flows from operating activities:
Net earnings (loss) $ 211,140 $ 142,524 $(234,406)
Adjustments to arrive at net cash
provided by operating activities:
Effect of accounting changes -- 21,000 350,000
Restructure of operations -- 5,000 80,000
Depreciation and amortization 132,540 123,521 116,579
(Gain) loss on sale of assets (137) (5,480) (15,429)
Minority interests 13,751 13,571 (33,181)
Equity earnings/losses,
net of dividends (36,355) (45,621) (46,790)
Deferred income taxes 14,166 (14,767) (43,575)
Other noncash items (10,530) 125 44,273
Changes in assets and liabilities
(Increase) decrease in:
Accounts and notes receivable (111,783) (11,998) (54,634)
Inventories 81,578 35,500 37,133
Other current and noncurrent
assets (14,547) (22,414) (9,825)
(Decrease) increase in:
Accounts payable and accruals 41,465 (73,250) 12,437
Other current and noncurrent
liabilities (19,502) (2,838) (32,837)
Net cash provided by operating
activities 301,786 164,873 169,745
Cash flows from investing activities:
Capital expenditures (158,624) (132,001) (131,650)
Proceeds from sales of property,
plant and equipment 7,287 6,612 5,753
Proceeds from business dispositions 2,250 55,460 53,971
Acquisitions, net of cash and
formation of Ingersoll-Dresser Pump* (37,812) (42,479) (2,928)
Decrease in marketable securities 2,828 6,416 1,641
Cash (invested in) or advances (to)
from equity companies 42,430 45,282 (32,902)
Net cash used in investing
activities (141,641) (60,710) (106,115)
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Consolidated Statement of Cash Flows (Continued)
In thousands
For the years ended December 31 1994 1993 1992
Cash flows from financing activities:
(Decrease) increase in short-term
borrowings (31,411) (49,480) 92,955
Proceeds from long-term debt 2,330 101,779 2,806
Payments of long-term debt (85,710) (78,042) (12,722)
Net change in debt (114,791) (25,743) 83,039
Proceeds from exercise of stock
options and treasury stock sales 3,001 13,116 13,511
Dividends paid (75,940) (73,490) (72,037)
Net cash (used in) provided by
financing activities (187,730) (86,117) 24,513
Effect of exchange rate changes on cash
and cash equivalents $ 6,615 $ (6,885) $ (8,231)
Net (decrease) increase in cash
and cash equivalents (20,970) 11,161 79,912
Cash and cash equivalents-
beginning of year 227,993 216,832 136,920
Cash and cash equivalents-end of year $ 207,023 $ 227,993 $ 216,832
*Acquisitions and formation
of Ingersoll-Dresser Pump:
Working capital, other than cash $ 15,856 $ (25,542) $(127,313)
Property, plant and equipment (39,771) (25,910) (78,189)
Intangibles and other assets (32,590) (2,000) (19,088)
Long-term debt and other liabilities 18,693 10,973 221,662
Net cash used to acquire businesses $ (37,812) $ (42,479) $ (2,928)
Cash paid during the year for:
Interest, net of amounts capitalized $ 47,330 $ 47,388 $ 53,351
Income taxes 119,817 126,954 140,909
See accompanying notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation: The consolidated financial
statements include the accounts of all wholly-owned and
majority-owned subsidiaries. Intercompany transactions and
balances have been eliminated. Partially-owned equity companies
are accounted for under the equity method.
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 $108,320,000 and
$75,046,000 at December 31, 1994 and 1993, respectively.
Inventories: Inventories are generally stated at cost, which is
not in excess of market. Domestic manufactured inventories of
standard products are valued on the last-in, first-out (LIFO)
method and all other inventories are valued using the first-in,
first-out (FIFO) method.
Property and Depreciation: The company principally uses
accelerated depreciation methods for both tax and financial
reporting.
Intangible Assets: Intangible assets primarily represent the
excess of the purchase price of acquisitions over the fair value
of the net assets acquired. Such excess costs are being
amortized on a straight-line basis over various periods not
exceeding 40 years. Intangible assets also represent costs
allocated to patents, tradenames and other specifically
identifiable assets arising from business acquisitions. These
assets are amortized on a straight-line basis over their
estimated useful lives. Accumulated amortization at December 31,
1994 and 1993, was $26,476,000 and $19,657,000, respectively.
Amortization of intangible assets was $6,815,000, $5,852,000 and
$5,597,000 in 1994, 1993 and 1992, respectively.
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Income Taxes: The Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
109, "Accounting for Income Taxes", in February 1992. The
company elected to adopt the new standard effective January 1,
1992.
The new accounting standard requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequences of temporary differences between the financial
statement bases and the tax bases of the company's assets and
liabilities using the enacted tax rates in effect at year-end,
the "liability method".
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 the earlier of completion of feasibility studies or the
company's commitment to a plan of action. The assessment of this
liability is calculated based on existing technology, does not
reflect any offset for possible recoveries from insurance
companies and is not discounted. There were no material changes
in the liability for the periods presented.
Revenue Recognition: Sales of products are recorded for
financial reporting purposes generally when the products are
shipped.
Research, Engineering and Development Costs: Research and
development expenditures, including engineering costs, are
expensed when incurred and amounted to $154,600,000 in 1994,
$150,100,000 in 1993 and $138,400,000 in 1992.
Foreign Currency: Assets and liabilities of foreign entities
operating in other than highly inflationary economies have been
translated at current exchange rates, and income and expenses
have been translated using average-for-the-year exchange rates.
Adjustments resulting from translation have been recorded in
shareowners' equity and are included in net earnings only upon
sale or liquidation of the underlying foreign investment.
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For foreign subsidiaries operating in highly inflationary
economies, inventory and property balances and related income
statement accounts have been translated using historical exchange
rates and resulting gains and losses have been credited or
charged to net earnings.
Foreign currency transactions and translations recorded in the
income statement decreased net earnings by $5,107,000, $4,744,000
and $4,848,000 in 1994, 1993 and 1992, respectively.
Shareowners' equity was increased in 1994 by $38,417,000 and
reduced in 1993 and 1992 by $31,680,000 and $53,281,000,
respectively, due to foreign currency equity adjustments related
to translation and corresponding tax effects. Tax effects were
not significant for the periods presented.
The company hedges certain foreign currency transactions and
firm foreign currency commitments by entering into forward
exchange contracts (forward contracts). Gains and losses
associated with currency rate changes on forward contracts
hedging foreign currency transactions are recorded currently in
income. Gains and losses on forward contracts hedging firm
foreign currency commitments are deferred off-balance sheet and
included as a component of the related transaction, when
recorded; however, a loss is not deferred if deferral would lead
to the recognition of a loss in future periods.
Cash flows resulting from forward contracts accounted for as
hedges of identifiable transactions or events are classified in
the same category as the cash flows from the items being hedged.
Earnings Per Share: Net earnings per share of common stock are
earnings divided by the average number of common shares
outstanding during the year. The effect of common stock
equivalents on earnings per share was not material.
Accounting Changes: The company implemented SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," effective January 1, 1994. Adoption of this
statement had no impact on the financial statements.
Effective January 1, 1993, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 112, "Employers'
Accounting for Postemployment Benefits." SFAS No. 112 requires
an accrual for the expected cost of benefits provided by an
employer to former or inactive employees after employment but
before retirement, such as the continuation of medical and life
insurance benefits for employees on long-term disability.
Previously, these benefits were expensed as incurred. The
company elected to adopt this standard in the fourth quarter of
1993, and recognized the postemployment benefit obligation as of
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January 1, 1993. The effect of the adoption of SFAS No. 112 for
the company totalled $21.0 million ($0.20 per share), net of a
$13.5 million tax benefit. Aside from the effect of the
adjustment, the adoption of SFAS No. 112 was not material to the
company's 1993 financial results and accordingly, the results for
the first three quarters of 1993 have not been restated to
reflect this adoption. Operating results for the years preceding
1993 were not restated for the adoption of SFAS No. 112.
The company adopted effective January 1, 1992, SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" and SFAS No. 109, "Accounting for Income Taxes." SFAS
No. 106 requires an accrual for the expected cost of providing
postretirement benefits, such as health care and life insurance
benefits, during the years that the employees provide service to
the company. Previously, these benefits were expensed as
incurred. The effect of the adoption of SFAS No. 106 for the
company's worldwide pre-1992 obligations totalled $283.8 million
($2.73 per share), net of a $145.2 million tax benefit.
Also, in 1992, included in the $332.0 million ($3.19 per share)
after-tax effect of this accounting change was $48.2 million
($0.46 per share), representing the company's share of the effect
of the adoption of SFAS No. 106 by Dresser-Rand.
Earnings for 1992, before the effect of accounting changes,
decreased by $19.5 million ($0.19 per share) for the company's
worldwide obligations associated with SFAS No. 106. In addition,
the company's portion of earnings from Dresser-Rand Company was
reduced by $7.2 million or $4.8 million ($0.04 per share) after-
tax for the 1992 earnings effect of this accounting change.
The company also elected to apply the provisions of SFAS No.
109, "Accounting for Income Taxes" effective January 1, 1992.
SFAS No. 109 changes the method of accounting for income taxes
from the deferral method to the liability method. Under the
liability method, deferred income taxes are determined based on
enacted tax laws and rates, which are applied to the differences
between the financial statement bases and tax bases of assets and
liabilities. The effect of adopting SFAS No. 109 at January 1,
1992, produced an $18.0 million ($0.17 per share) charge to the
company. This charge related principally to the differences
between the financial statement value of assets and liabilities
and the tax bases of those items recorded for acquisitions made
since 1984. The effect of this adoption on the 1992 earnings of
the company was not material.
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NOTE 2 - INGERSOLL-DRESSER PUMP COMPANY: Effective October 1,
1992, the company and Dresser Industries, Inc. (Dresser), formed
Ingersoll-Dresser Pump Company (IDP), a partnership owned 51
percent by the company and 49 percent by Dresser. This joint
venture includes the majority of the worldwide pump operations of
the two companies, and its results have been included in the
consolidated financial statements of the company since the
formation date. One of the principal purposes of this venture
was to create a pump company that is capable of competing for
business on a global basis.
The company's consolidated net sales for 1992 included
approximately $140 million for the pump units contributed by
Dresser. The effect of these sales on the company's operating
income for 1992 was minimal. As a result of the formation of
IDP, certain facilities, products and personnel became redundant.
During the fourth quarter of 1992, IDP adopted a formal plan to
restructure the operations of IDP. Based on these actions, the
company recorded a $70.0 million restructure of operations charge
for IDP. This charge was for the reduction in work force and
realignment charges to relocate production and eliminate excess
plant and capacity. This charge was shared evenly by the
partners of IDP; therefore, the minority interest elimination for
this item was $35.0 million and the company's portion was $35.0
million ($25.7 million after-tax, or $0.25 per share).
The net assets contributed by each partner to IDP were
approximately $180 million. At December 31, 1994, Dresser
Industries had loans payable to IDP totalling $10,824,000 which
are shown as a reduction in IDP's minority interest.
NOTE 3 - ACQUISITIONS AND DISPOSITIONS OF BUSINESSES: During
1994, the company made several acquisitions. In April 1994, the
company acquired full ownership of the ball bearing joint venture
with GMN Georg Mueller of America, Inc. for $4.9 million in cash.
The company previously owned 50% of the joint venture. The
company acquired Montabert S.A., a French manufacturer of
hydraulic rock-breaking and drilling equipment on June 30, 1994,
for approximately $18.4 million, plus assumption of liabilities.
In August 1994, the company acquired the Ecoair air compressor
product line from MAN Gutehoffnungshutte AG (MAN GHH) for $10.6
million in cash. The company also entered into a 50/50 joint
venture, GHH-RAND Schraubenkompressoren GmbH & Co. KG (GHH-RAND)
with MAN GHH to manufacture airends. The company invested
approximately $17.6 million in GHH-RAND. The company also had
several additional purchases of operations during the year
totalling $3.9 million in cash.
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In 1993, the company acquired the Kunsebeck, Germany, needle
and cylindrical bearing business of FAG Kugelfischer Georg
Schafer AG of Schweinfurt, Germany, for $42.5 million in cash,
subject to final contract negotiations.
In 1992, the company acquired Industrias del Rodamiento, S.A.
(IRSA), for $14.0 million in cash and $1.8 million in notes.
IRSA manufactures and markets an extensive line of bearings, as
well as wheel kits and automotive accessories.
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.
In 1994, the assets of the IDP Australian operations were sold
in return for shares of the purchaser. The company and Dresser
Industries sold IRI International Corporation, a 50/50 joint
venture that is a manufacturer of mobile drilling rigs, to a
third party.
The company sold the assets of several small business units in
1993, as well as substantially all of the assets of its coal-
mining machinery and aerospace bearings businesses for $55.5
million in cash.
NOTE 4 - RESTRUCTURE OF OPERATIONS: In July 1993, the company
sold substantially all of its underground coal-mining machinery
assets to Long-Airdox Company. In connection with this sale, the
company recorded a $5.0 million restructure of operations charge
during the second quarter of 1993. During 1992, the company
reported an $80,000,000 charge for restructuring of operations
consisting of a fourth quarter $70,000,000 charge for IDP
described in Note 2 and a third quarter $10,000,000 charge
associated with the company's aerospace bearings unit. The third
quarter restructure charge was for the realignment of the
company's aerospace bearings unit resulting from the depressed
condition of the aerospace business. The after-tax cost for this
charge was $6,200,000 or $0.06 per share. Overall, the
restructuring efforts described above were substantially
completed in accordance with the original restructuring plans.
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NOTE 5 - INVENTORIES: At December 31, inventories were as
follows:
In thousands 1994 1993
Raw materials and supplies $117,613 $121,083
Work-in-process 293,023 295,829
Finished goods 429,655 462,677
840,291 879,589
Less-LIFO reserve 160,983 165,899
Total $679,308 $713,690
Work-in-process inventories are stated after deducting customer
progress payments of $27,242,000 in 1994 and $14,395,000 in 1993.
At December 31, 1994 and 1993, LIFO inventories comprised
approximately 35 percent and 38 percent, respectively, of
consolidated inventories.
During the periods presented, inventory quantities were
reduced, resulting in partial liquidations of LIFO layers. This
decreased cost of goods sold by $11,587,000 in 1994, $12,506,000
in 1993 and $5,801,000 in 1992. These liquidations increased net
earnings in 1994, 1993 and 1992 by approximately $7,080,000
($0.07 per share), $7,641,000 ($0.07 per share) and $3,599,000
($0.03 per share), respectively.
NOTE 6 - INVESTMENTS IN PARTIALLY-OWNED EQUITY COMPANIES: The
company has numerous investments, ranging from 20 percent to 50
percent, in companies which operate in similar lines of business.
The company's investments in and amounts due from partially-
owned equity companies amounted to $170,438,000 and $3,433,000,
respectively, at December 31, 1994, and $131,051,000 and
$27,594,000, respectively, at December 31, 1993.
The company's equity in the net earnings of its partially-owned
equity companies was $15,572,000, $15,641,000 and $20,578,000 in
1994, 1993 and 1992, respectively.
The company received dividends based on its equity interests in
these companies of $3,817,000, $3,110,000 and $1,417,000 in 1994,
1993 and 1992, respectively.
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Summarized financial information for these partially-owned
equity companies at December 31, and for the years presented was:
In thousands 1994 1993
Current assets $ 388,592 $ 355,884
Property, plant and
equipment, net 264,558 256,322
Other assets 20,318 23,409
Total assets $ 673,468 $ 635,615
Current liabilities $ 250,495 $ 326,830
Long-term debt 50,226 44,024
Other liabilities 29,974 24,873
Total shareowners' equity 342,773 239,888
Total liabilities
and equity $ 673,468 $ 635,615
In thousands 1994 1993 1992
Net sales $ 701,007 $ 730,138 $ 904,831
Gross profit 141,996 127,467 187,802
Net earnings 33,749 48,494 42,167
NOTE 7 - DRESSER-RAND COMPANY: Dresser-Rand Company is a
partnership between Dresser Industries, Inc. (51 percent), and
the company (49 percent) comprising the worldwide reciprocating
compressor and turbomachinery businesses of the two companies.
The company's investment in Dresser-Rand is accounted for using
the equity method of accounting.
Summarized financial information for Dresser-Rand at December
31, and for the years presented was:
In thousands 1994 1993
Current assets $ 440,539 $ 489,122
Property, plant and
equipment, net 197,797 220,604
Other assets and investments 18,445 18,531
656,781 728,257
Deduct:
Current liabilities 295,048 321,629
Noncurrent liabilities 188,937 188,211
483,985 509,840
Net partners' equity
and advances $ 172,796 $ 218,417
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In thousands 1994 1993 1992
Net sales $1,219,355 $1,187,279 $1,232,615
Gross profit 203,064 241,906 229,396
Earnings before
effect of
accounting
change 50,204 68,112 52,916
Net income (loss) 50,204 68,112 (93,209)
The effect of the adoption of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", for
Dresser-Rand effective January 1, 1992, was $146,125,000.
Operating results for 1992 were reduced by $14,400,000 because of
this accounting change. The tax effects associated with this
change are recorded on the books of the partners.
The company's investment in Dresser-Rand was $160,832,000 and
$133,867,000 at December 31, 1994 and 1993, respectively.
The company owed Dresser-Rand $70,127,000 at December 31, 1994,
and $21,237,000 at December 31, 1993.
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUALS: Accounts payable and
accruals at December 31, were:
In thousands 1994 1993
Accounts payable $255,616 $201,172
Accrued:
Payrolls and benefits 137,321 121,063
Taxes 48,598 46,842
Insurance and claims 93,670 98,474
Postemployment benefits 73,970 51,945
Warranties 36,836 31,838
Interest 10,815 14,057
Other accruals 226,954 196,996
$883,780 $762,387
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NOTE 9 - LONG-TERM DEBT AND CREDIT FACILITIES:
At December 31, long-term debt consisted of:
In thousands 1994 1993
6 7/8% Notes Due 2003 $100,000 $100,000
9% Debentures Due 2021 125,000 125,000
8 1/4% Notes Due 1996 75,000 75,000
Other domestic and foreign
loans and notes, at end-
of-year average interest
rates of 6.99% in 1994
and 8.61% in 1993, maturing
in various amounts to 2027 15,850 14,136
$315,850 $314,136
Debt retirements for the next five years are as follows:
$4,191,000 in 1995, $81,323,000 in 1996, $1,238,000 in 1997,
$1,065,000 in 1998 and $620,000 in 1999.
At December 31, 1994, the company had a $400,000,000 five-year
committed revolving credit line, all of which was unused. This
line provides support for commercial paper and indirectly
provides support for other financial instruments, such as letters
of credit and comfort letters, as required in the normal course
of business. The company compensates banks for this line with
fees equal to .08% per annum. Available foreign lines of credit
were $593,240,000, of which $465,888,000 were unused at December
31, 1994. No major cash balances were subject to withdrawal
restrictions. At December 31, 1994, the average rate of interest
for loans payable, excluding the current portion of long-term
debt, was 6.58% and related principally to foreign loans.
Capitalized interest on construction and other capital projects
amounted to $3,241,000, $2,838,000 and $3,460,000 in 1994, 1993
and 1992, respectively. Interest income, included in "Other
income (expense), net" was $11,502,000, $11,720,000 and
$15,396,000 in 1994, 1993 and 1992, respectively.
NOTE 10 - FINANCIAL INSTRUMENTS: The company, as a large
multinational company, maintains significant operations in
foreign countries. As a result of its global operating and
financing activities, the company is exposed to changes in
foreign currency exchange rates which affect its 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.
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The purpose of the company's hedging activities is to mitigate
the impact of changes in foreign exchange rates. The company
attempts to hedge transaction exposures through natural offsets.
To the extent this is not practicable, major exposure areas which
the company considers 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 table below
summarizes by major currency the contractual amounts of the
company's forward contracts in U.S. dollars. Foreign currency
amounts are translated at current 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 1994 1993
Buy Sell Buy Sell
Australian dollars $ -- $ 3.8 $ -- $ 16.0
Canadian dollars 2.4 13.3 2.1 10.0
Deutsche marks 8.4 81.8 4.8 88.1
Dutch guilders -- 1.3 0.3 6.5
French francs 3.3 10.6 3.5 14.2
Italian lira 34.9 2.3 6.7 2.0
Japanese yen 3.4 19.2 13.7 15.5
Pounds sterling 59.1 55.5 29.3 39.6
Spanish pesetas 2.3 2.6 1.5 13.9
Other 16.6 23.1 17.3 21.5
Total $130.4 $213.5 $79.2 $227.3
Forward contracts for normal operating activities have
maturities of one to 12 months; and forward contracts for
intercompany loans have maturities that range from one month to
36 months.
The company's forward contracts do not subject the company to
risk due to foreign exchange rate movement, because gains and
losses on these contracts generally offset losses and gains on
the assets, liabilities or other transactions being hedged.
The counterparties to the company's forward contracts consist
of a number of major international financial institutions. The
credit ratings and concentration of risk of these financial
institutions are monitored on a continuing basis and present no
significant credit risk to the company.
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The carrying value of cash and cash equivalents, marketable
securities (classified as held to maturity), accounts receivable,
short-term borrowings and accounts payable are a reasonable
estimate of their fair value due to the short-term nature of
these instruments. The following table summarizes the estimated
fair value of the company's remaining financial instruments at
December 31:
In millions 1994 1993
Long-term debt:
Carrying value $315.9 $314.1
Estimated fair value 312.5 349.5
Forward contracts:
Contract (notional) amounts:
Buy contracts $130.4 $ 79.2
Sell contracts 213.5 227.3
Fair (market) values:
Buy contracts 131.2 78.4
Sell contracts 211.9 223.8
Fair value of long-term debt was determined by reference to
the December 31, 1994 and 1993, market values of comparably rated
debt instruments. Fair value of forward contracts are based on
dealer quotes at the respective reporting date.
NOTE 11 - COMMITMENTS AND CONTINGENCIES: The company is involved
in various litigations, claims and administrative proceedings,
including environmental matters, arising in the normal course of
business. In assessing its potential environmental liability,
the company bases its estimates on current technologies and does
not discount its liability or assume any insurance recoveries.
Amounts recorded for identified contingent liabilities are
estimates which are reviewed periodically and adjusted to reflect
additional information when it becomes available. Subject to the
uncertainties inherent in estimating future costs for contingent
liabilities, management believes that recovery or liability with
respect to these matters would not have a material effect on the
financial condition, results of operations, liquidity or cash
flows of the company for any year.
In the normal course of business, the company has issued
several direct and indirect guarantees, including performance
letters of credit, totalling approximately $99,700,000 at
December 31, 1994. Management believes these guarantees will not
adversely affect the consolidated financial statements.
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In 1994, the company continued to sell an undivided interest in
designated pools of accounts and notes receivable up to a maximum
of $125,000,000. Similar agreements have been in effect since
1987. During 1994, 1993 and 1992, such sales amounted to
$487,825,000, $518,651,000 and $526,090,000, respectively. At
December 31, 1994 and 1993, $125,000,000 of such sold receivables
remained uncollected. The undivided interest in the designated
pool of receivables was sold with limited recourse. These
agreements expire in one- and two-year periods based on the
particular pool of receivables sold. The company intends to
renew these agreements at their expiration dates with either the
current financial institution or another financial institution,
using the basic terms and conditions of the existing agreements.
For receivables sold, the company has retained collection and
administrative responsibilities as agent for the purchaser.
Receivables, excluding the designated pool of accounts and
notes receivable, sold during 1994, 1993 and 1992 with recourse,
amounted to $64,590,000, $39,284,000 and $38,343,000,
respectively. At December 31, 1994 and 1993, $14,666,000 and
$16,076,000, respectively, of such receivables sold remained
uncollected.
As of December 31, 1994, the company had no significant
concentrations of credit risk in trade receivables due to the
large number of customers which comprise its receivables base and
their dispersion across different industries and countries.
All principal manufacturing facilities are owned by the
company. Certain office and warehouse facilities, transportation
vehicles and data processing equipment are leased. Total rental
expense was $56,195,000 in 1994, $57,949,000 in 1993 and
$56,218,000 in 1992. 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:
$34,583,000 in 1995, $23,253,000 in 1996, $13,724,000 in 1997,
$7,833,000 in 1998, $5,619,000 in 1999 and $20,204,000
thereafter.
NOTE 12 - COMMON STOCK: In May 1992, the board of directors
declared a two-for-one split of the company's common stock. The
stock split was made in the form of a stock dividend, payable on
June 1, 1992, to shareowners of record on May 19, 1992.
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On December 7, 1988, the board of directors adopted a Rights
Plan (Plan) and declared a dividend distribution of one right for
each then outstanding share of the company's common stock. As a
result of the stock split referred to above, each current
outstanding share of the company's common stock has one-half a
right associated with it. In December 1994, the Plan was amended
by the board of directors. Under the Plan as amended, each right
entitles the holder to purchase 1/100th of a share of Series A
preference stock at an exercise price of $130. The company has
reserved 563,000 shares of Series A preference stock for issuance
upon exercise of the rights. The rights become exercisable in
accordance with the provisions of the Plan on (i) the tenth day
following the acquisition by a person or group of persons of 15
percent or more of the company's common stock, (ii) the tenth day
after the commencement of a tender or exchange offer for 15
percent or more of the company's common stock, or (iii) the
determination by the board of directors that a person is an
Adverse Person as defined in the Plan (Distribution Date). Upon
either a person's becoming an Acquiring Person as defined in the
Plan, or the board's determination that a person is an Adverse
Person, or the occurrence of certain other events following the
Distribution Date, each holder of a right shall thereafter have a
right to receive the common stock of the company (or in certain
circumstances, the stock of an acquiring entity) for a price of
approximately half its value. The rights are not exercisable by
any Acquiring Person or Adverse Person. The Plan as amended
provides that the board of directors, at its option any time
after any person becomes an Acquiring Person or an Adverse
Person, may exchange all or part of the outstanding and
exercisable rights for shares of common stock, currently at an
exchange ratio of one right for two shares. The right of the
holders to exercise the rights to purchase shares automatically
terminates if the board orders an exchange of rights for shares.
The rights may be redeemed by the company for one cent per right
in accordance with the provisions of the Plan. The rights will
expire on December 22, 1998, unless redeemed earlier by the
company.
Shares held in treasury at December 31, 1994, will be used for
employee benefit plans and for other corporate purposes.
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NOTE 13 - INCENTIVE STOCK PLANS: Under the company's Incentive
Stock Plans, key employees have been granted options to purchase
common shares at prices not less than the fair market value at
the date of grant. The plans, approved in 1980, 1985 and 1990,
also authorize stock appreciation rights (SARs) and stock awards.
If SARs issued in conjunction with stock options are exercised,
the related stock options are cancelled; conversely, the exercise
of stock options cancels the SARs.
Changes during the year in options outstanding under the plans
were as follows:
Shares subject Option price
to option range per share
January 1, 1994 2,762,700 $ 9.79-36.31
Granted 920,050 31.81-37.19
Exercised 286,950 9.79-32.44
Cancelled 11,500 32.44-34.94
December 31, 1994 3,384,300 $10.04-37.19
Of the shares subject to option, 1,823,600 were granted with
SARs. In addition, there are 195,000 SARs outstanding with no
stock options. At December 31, 1994, 346,780 shares of common
stock were reserved for future issue, contingent upon attainment
of certain performance goals and future service. At December 31,
1994, options for 2,468,250 shares were exercisable and 470,030
shares were available for future awards.
The company also maintains a shareowner-approved Management
Incentive Unit Award Plan. Under the plan, qualifying executives
are awarded incentive units. When dividends are paid on common
stock, dividends are awarded to unit holders, one-half of which
is paid in cash, the remaining half of which is credited to the
participant's account in the form of so-called common stock
equivalents. The fair value of accumulated common stock
equivalents is paid in cash upon the participant's retirement.
The number of common stock equivalents credited to participant's
accounts at December 31, 1994 and 1993, are 284,409 and 260,018,
respectively.
NOTE 14 - INCOME TAXES: Earnings before income taxes and the
effect of accounting changes for the years ended December 31,
were taxed within the following jurisdictions:
In thousands 1994 1993 1992
United States $279,373 $229,503 $120,311
Foreign 50,567 24,021 62,683
Total $329,940 $253,524 $182,994
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The provision for income taxes before the effect of accounting
changes was as follows:
Current tax expense:
United States $ 69,847 $ 74,912 $ 73,655
Foreign 34,768 30,625 37,320
Total current 104,615 105,537 110,975
Deferred tax expense:
United States 30,330 5,261 (36,698)
Foreign (16,145) (20,798) (6,877)
Total deferred 14,185 (15,537) (43,575)
Total provision for
income taxes $118,800 $ 90,000 $ 67,400
As discussed in Note 1, the company adopted SFAS No. 109 as of
January 1, 1992, and the effect of this accounting change was
reported in the 1992 Consolidated Statement of Income.
The provision for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory
income tax rate to pretax income before the effect of accounting
changes, as a result of the following differences:
Percent of pretax income
1994 1993 1992
Statutory U.S. rates 35.0% 35.0% 34.0%
Increase (decrease) in rates
resulting from:
Foreign operations 0.3 0.6 3.3
Effect of changes in statutory
rate on deferred taxes -- (2.2) --
Earnings/losses of equity
companies (0.9) (2.2) (4.4)
State and local income taxes,
net of U.S. tax 1.6 1.3 2.3
Other -- 3.0 1.6
Effective tax rates 36.0% 35.5% 36.8%
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A summary of the deferred tax accounts at December 31, follows:
In thousands 1994 1993 1992
Current deferred assets and (liabilities):
Differences between book and tax bases
of inventories and receivables $ 36,533 $ 32,576 $ 32,046
Differences between book and tax
expense for other employee related
benefits and allowances 33,938 42,137 31,373
Provisions for restructure of
operations and plant closings
not yet deductible for tax purposes 6,377 5,328 15,718
Other reserves and valuation
allowances in excess of tax deductions 32,470 27,954 25,604
Other differences between tax and
financial statement values 9,867 8,941 (2,902)
Gross current deferred net tax assets 119,185 116,936 101,839
Noncurrent deferred tax assets and
(liabilities):
Tax items associated with equity
companies 12,956 31,022 29,653
Postretirement and postemployment
benefits other than pensions in
excess of tax deductions 159,922 159,922 150,125
Other reserves in excess of tax expense 36,237 28,136 12,747
Tax depreciation in excess of book
depreciation (45,986) (54,855) (52,841)
Pension contributions in excess of
book expense (47,470) (36,607) (33,719)
Taxes provided for unrepatriated
foreign earnings (20,091) (26,353) (25,600)
Gross noncurrent deferred net tax assets 95,568 101,265 80,365
Less: deferred tax valuation allowances (21,088) (10,352) (3,392)
Total net deferred tax assets $193,665 $207,849 $178,812
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A total of $20,091,000 of deferred taxes have been provided for
a portion of the undistributed earnings of subsidiaries operating
outside of the United States. As to the remainder, these
earnings have been, and under current plans will continue to be
reinvested and it is not practicable to estimate the amount of
additional taxes which may be payable upon repatriation.
NOTE 15 - BUSINESS SEGMENT INFORMATION: A description of
business segments and operations by business segments and
geographic area for the three years ended December 31, 1994, were
as follows:
DESCRIPTION OF BUSINESS SEGMENTS
Ingersoll-Rand's operations are organized into three worldwide
business segments: Standard Machinery; Engineered Equipment; and
Bearings, Locks and Tools.
Standard Machinery
The segment's products are categorized into three groups:
Air Compressor - products include portable, reciprocating, rotary
and centrifugal air compressors, vacuum pumps, air drying and
filtering systems and other compressor accessories. The products
are used primarily to supply pressurized air to industrial
plants, refineries, chemical plants, electrical utilities and
service stations.
Construction and Mining - manufactures vibratory compactors,
pavement millers, asphalt pavers, rock drills, blasthole drills,
water-well drills, crawler drills, jumbo drills, jackhammers and
rock and roof stabilizers primarily for the construction, highway
maintenance, metals-mining and well-drilling industries.
Mining Machinery(1) - products include continuous and long-wall
mining machines, crushers, coal haulers and mine-service
vehicles, which principally serve the underground coal-mining
industry.
Engineered Equipment
The segment's products are categorized into two groups:
Pump(2) - manufactures centrifugal and reciprocating pumps.
These products serve oil production and refining, chemical
process, marine, agricultural, electric utility and general
manufacturing industries.
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Process Systems - consists of pulp and paper processing
equipment, pelleting equipment, filters, aerators and dewatering
systems. This equipment is used in the pulp and paper, food and
agricultural, and minerals-processing industries.
Bearings, Locks and Tools
The segment's products are categorized into three groups:
Bearings and Components - principal products include needle
bearings, needle roller bearings, needle rollers, thrust
bearings, tapered roller bearings, drawn cup bearings,
high-precision ball bearings, spherical bearings, radial
bearings, universal joints, dowel pins, swagers and precision
components. These products are sold principally to durables-
industry customers primarily in the automotive and aerospace
markets.
Production Equipment - manufactures air-powered tools, hoists and
winches, air motors and air starters, automated assembly and test
systems, air and electric automated fastener tightening systems
and waterjet cutting systems. These products are sold to general
manufacturing industries and to the appliance, aircraft,
construction and automotive industries.
Door Hardware - major products include locks, door closers and
exit devices used in commercial and residential construction and
the retail hardware market.
(1)
The Mining Machinery Group was sold during 1993.
(2)
See Note 2 in the accompanying Notes to the Consolidated
Financial Statements for information regarding the joint
venture relating to this group.
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Operations by Geographic Area
In millions
United Other Adjustments/
For the year 1994 States Europe International Eliminations Consolidated
Sales to customers $2,809.9 $1,253.9 $443.7 $ -- $4,507.5
Transfers between geographic
areas 429.7 54.7 34.1 (518.5) --
Total sales and transfers $3,239.6 1,308.6 477.8 (518.5) $4,507.5
Operating income from
operations $ 335.8 43.2 34.5 0.8 $ 414.3
General corporate expenses
charged to operating income (37.3)
Operating income $ 377.0
Identifiable assets at
December 31, 1994 $1,684.3 949.0 297.5 (11.6) $2,919.2
Corporate assets 677.7
Total assets at
December 31, 1994 $3,596.9
For the year 1993
Sales to customers $2,526.9 1,071.5 422.7 -- $4,021.1
Transfers between geographic
areas 357.3 53.0 33.0 (443.3) --
Total sales and transfers $2,884.2 1,124.5 455.7 (443.3) $4,021.1
Operating income excluding
restructure of operations $ 260.0 35.5 34.7 0.6 $ 330.8
Restructure of operations-
charge (5.0) -- -- -- (5.0)
Operating income from
operations $ 255.0 35.5 34.7 0.6 $ 325.8
General corporate expenses
charged to operating income (34.3)
Operating income $ 291.5
Identifiable assets at
December 31, 1993 $1,597.3 780.5 286.7 (12.4) $2,652.1
Corporate assets 723.2
Total assets at
December 31, 1993 $3,375.3
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Operations by Geographic Area (Continued)
In millions
United Other Adjustments/
For the year 1992 States Europe International Eliminations Consolidated
Sales to customers $2,311.2 1,064.4 408.2 -- $3,783.8
Transfers between geographic
areas 370.7 47.7 44.4 (462.8) --
Total sales and transfers $2,681.9 1,112.1 452.6 (462.8) $3,783.8
Operating income excluding
restructure of operations $ 184.3 54.9 47.0 1.1 $ 287.3
Restructure of operations-
charge (64.5) (12.7) (2.8) -- (80.0)
Operating income from
operations $ 119.8 42.2 44.2 1.1 $ 207.3
General corporate expenses
charged to operating income (32.1)
Operating income $ 175.2
Identifiable assets at
December 31, 1992 $1,564.0 854.3 301.5 (13.0) $2,706.8
Corporate assets 680.8
Total assets at
December 31, 1992 $3,387.6
International sales of U.S. manufactured products were $743,300,000 in 1994, $580,700,000 in 1993 and
$577,200,000 in 1992.
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Operations by Business Segments
Dollar amounts in millions
For the years ended % of % of % of
December 31 1994 total 1993 total 1992(b) total
Standard Machinery
Sales $1,445.7 32% $1,250.9 31% $1,385.3 37%
Operating income excluding
restructure of operations 122.4 30% 89.6 27% 90.9 32%
Restructure of operations-
charge -- (5.0) --
Operating income from
operations 122.4 30% 84.6 26% 90.9 44%
Operating income as % of sales 8.5% 6.8% 6.6%
Identifiable assets 1,099.6 927.1 980.6
Depreciation and amortization 31.5 27.0 28.3
Capital expenditures 30.9 25.0 42.8
Engineered Equipment
Sales 926.4 21% 929.6 23% 645.3 17%
Operating income excluding
restructure of operations 35.3 8% 30.5 9% 29.0 10%
Restructure of operations-
charge -- -- (70.0)
Operating income from
operations 35.3 8% 30.5 9% (41.0) (20)%
Operating income as % of sales 3.8% 3.3% (6.4)%
Identifiable assets 634.5 622.3 696.4
Depreciation and amortization 28.8 29.3 20.0
Capital expenditures 30.3 29.0 27.1
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Operations by Business Segments (Continued)
Dollar amounts in millions
For the years ended % of % of % of
December 31 1994 total 1993 total 1992(b) total
Bearings, Locks and Tools
Sales 2,135.4 47% 1,840.6 46% 1,753.2 46%
Operating income excluding
restructure of operations 256.6 62% 210.7 64% 167.4 58%
Restructure of operations-
charge -- -- (10.0)
Operating income from
operations 256.6 62% 210.7 65% 157.4 76%
Operating income as % of sales 12.0% 11.4% 9.0%
Identifiable assets 1,185.1 1,102.7 1,029.8
Depreciation and amortization 70.9 65.5 66.7
Capital expenditures 97.0 77.8 61.7
Total
Sales 4,507.5 100% 4,021.1 100% 3,783.8 100%
Operating income excluding
restructure of operations 414.3 100% 330.8 100% 287.3 100%
Restructure of operations-
charge -- (5.0) (80.0)
Operating income from
operations 414.3 100% 325.8 100% 207.3 100%
Operating income as % of sales 9.2% 8.1% 5.5%
Identifiable assets 2,919.2 2,652.1 2,706.8
Depreciation and amortization 131.2 121.8 115.0
Capital expenditures 158.2 131.8 131.6
General corporate expenses
charged to operating income (37.3) (34.3) (32.1)
Operating income 377.0 291.5 175.2
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Operations by Business Segments (Continued)
Dollar amounts in millions
For the years ended % of % of % of
December 31 1994 total 1993 total 1992(b) total
Unallocated
Interest expense (43.8) (52.0) (54.1)
Other income (expense), net (14.7) (7.5) (0.7)
Dresser-Rand income 24.6 33.1 27.6
Ingersoll-Dresser Pump
minority interest (13.2) (11.6) 35.0
Earnings before income taxes
and effect of accounting
changes 329.9 253.5 183.0
Corporate assets (a) 677.7 723.2 680.8
Total assets $3,596.9 $3,375.3 $3,387.6
(a) Corporate assets consist primarily of cash and cash equivalents, marketable securities,
investments and advances, and other assets not directly associated with the operations of a business
segment. (b) The 1992 change in accounting for postretirement benefits decreased operating income by
$4.7 million for Standard Machinery, $5.3 million for Engineered Equipment and $19.6 million for
Bearings, Locks and Tools.
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NOTE 16 - PENSION PLANS: The company has noncontributory pension
plans covering substantially all domestic employees. In
addition, certain employees in other countries are covered by
pension plans. The company's domestic salaried plans principally
provide benefits based on a career average earnings formula. The
company's hourly pension plans provide benefits under flat
benefit formulas. Foreign plans provide benefits based on
earnings and years of service. Most of the foreign plans require
employee contributions based on the employee's earnings. 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. Ingersoll-Dresser Pump
Company's costs for the years ended December 31, 1994 and 1993,
and the three months ended December 31, 1992, and status of its
benefit plans at December 31, 1994 and 1993, have been
consolidated.
The components of the company's pension cost for the years
ended December 31, include the following:
In thousands 1994 1993 1992
Benefits earned during the
year $ 31,747 $ 27,749 $ 25,813
Interest cost on projected
benefit obligation 79,072 72,131 70,543
Actual return on plan assets 6,290 (124,432) (84,446)
Net amortization and deferral (99,635) 32,685 (7,484)
Net pension cost $ 17,474 $ 8,133 $ 4,426
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The status of employee pension benefit plans at December 31, 1994 and 1993, was as
follows:
1994 1993
Overfunded Underfunded Overfunded Underfunded
In thousands plans plans plans plans
Actuarial present value of
projected benefit obligation,
based on employment service to
date and current salary levels:
Vested employees $ (942,526) $(48,413) $ (962,348) $ (84,311)
Nonvested employees (5,329) (5,956) (8,067) (4,764)
Accumulated benefit obligation (947,855) (54,369) (970,415) (89,075)
Additional amount related to
projected salary increases (48,778) (20,598) (38,713) (17,361)
Total projected benefit obligation (996,633) (74,967) (1,009,128) (106,436)
Funded assets at fair value 1,053,890 12,342 1,079,203 46,035
Assets in excess of (less than)
projected benefit obligation 57,257 (62,625) 70,075 (60,401)
Unamortized (net asset) liability
existing at date of adoption (3,499) 4,517 (3,344) 4,573
Unrecognized prior service cost 16,570 9,468 13,685 10,015
Unrecognized net loss (gain) 41,236 (485) 27,103 5,506
Adjustment required to recognize
minimum liability -- (956) -- (7,060)
Prepaid (accrued) pension cost $ 111,564 $(50,081) $ 107,519 $ (47,367)
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Plan investment assets of domestic plans are balanced between
equity securities and cash equivalents or debt securities.
Assets of foreign plans are invested principally in equity
securities.
The present value of benefit obligations for domestic plans at
December 31, 1994 and 1993, was determined using an assumed
discount rate of 8.0% and 7.0%, an assumed rate of increase in
future compensation levels of 5.5% and 4.5%, respectively, and an
expected long-term rate of return on assets of 8.5% for both
years. The weighted averages of the actuarially assumed discount
rate, long-term rate of return on assets and the rate for
compensation increases for foreign plans were 9.0%, 9.0% and 6.5%
in 1994, and 8.0%, 9.0% and 5.5% in 1993, respectively.
Most of the company's domestic employees are covered by savings
and other defined contribution plans. Employer contributions and
costs are determined based on criteria specific to the individual
plans and amounted to approximately $21,657,000, $20,494,000 and
$19,106,000 in 1994, 1993 and 1992, respectively. In addition,
the company maintains other supplemental benefit plans for
officers and other key employees.
The company's costs relating to foreign defined contribution
plans, insured plans and other foreign benefit plans were
$4,279,000, $307,000 and $553,000 in 1994, 1993 and 1992,
respectively.
In 1994, 1993 and 1992, the number of employees covered by
multiemployer pension plans, was 217, 214 and 211, respectively.
Amounts charged to pension cost and contributed to multiemployer
plans in 1994, 1993 and 1992 were $530,000, $484,000 and
$460,000, respectively.
The existing pension rules require the recognition of a
liability in the amount that the company's unfunded accumulated
benefit obligation exceeds the accrued pension cost, with an
equal amount recognized as an intangible asset. As a result, the
company recorded a noncurrent liability of $956,000 in 1994, and
a current liability of $1,226,400 and a noncurrent liability of
$5,833,400 in 1993. Offsetting intangible assets were recorded
in the Consolidated Balance Sheets.
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NOTE 17 - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: In the
fourth quarter of 1992, the company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions," effective
January 1, 1992. The company elected to immediately recognize
the effect of the change in accounting for postretirement
benefits of $428.9 million ($283.8 million net of income tax
benefit), which represented the accumulated postretirement
benefit obligation (APBO) existing at January 1, 1992. The
results for the first three quarters of 1992 were restated as a
result of the adoption. In addition to the effect, the company's
1992 postretirement benefits cost increased $29.6 million ($19.5
million after-tax, or $0.19 per share). The company continues to
fund benefit costs principally on a pay-as-you-go basis, with the
retiree paying a portion of the costs. In situations where
full-time employees retire from the company between age 55 and
age 65, most are eligible to receive, at a cost to the retiree,
certain health care benefits identical to those available to
active employees. After attaining age 65, an eligible retiree's
health care benefit coverage becomes coordinated with Medicare,
with the retiree paying a portion of the cost of the coverage.
Summary information on the company's plans was as follows:
In thousands
December 31 1994 1993
Financial status of plans:
Accumulated postretirement benefits
obligation:
Retirees $(251,260) $(286,470)
Active employees (120,225) (181,606)
(371,485) (468,076)
Plan assets at fair value -- --
Unfunded accumulated benefits
obligation in excess of plan assets (371,485) (468,076)
Unrecognized net loss (gain) (9,682) 88,325
Unrecognized prior service benefits (90,010) (95,269)
Accrued postretirement benefits cost $(471,177) $(475,020)
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The components of net periodic postretirement benefits cost for
the years ended December 31, were as follows:
In millions 1994 1993 1992
Service cost, benefits attributed to
employee service during the year $ 8.5 $ 5.7 $11.4
Interest cost on accumulated
postretirement benefit obligation 26.9 28.3 32.6
Net amortization and deferral (5.2) (5.1) --
Net periodic postretirement benefits cost $30.2 $28.9 $44.0
The 1994 service cost of net periodic postretirement benefits
cost includes a settlement charge of $3,198,000 relating to
retired employees from a closed facility. The discount rates
used in determining the APBO were 8.0% and 7.0% at December 31,
1994 and 1993, respectively. The assumed health care cost trend
rates used in measuring the accumulated postretirement benefits
obligation were 12.4% in 1994 and 13.0% in 1993, respectively,
declining each year to an ultimate rate of 5.5% by 2003.
Increasing the health care cost trend rate by 1.0% as of
December 31, 1994, would increase the APBO by 10.6%. The effect
of this change on the sum of the service cost and interest cost
components of net periodic postretirement benefits cost for 1994
would be an increase of 12.4%. In 1993, the company made several
modifications to the cost-sharing provisions of its
postretirement plans.
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Report of Management
The accompanying consolidated financial statements have been
prepared by the company. They conform with generally accepted
accounting principles and reflect judgments and estimates as to
the expected effects of incomplete transactions and events being
accounted for currently. The company believes that the
accounting systems and related controls that it maintains are
sufficient to provide reasonable assurance that assets are
safeguarded, transactions are appropriately authorized and
recorded, and the financial records are reliable for preparing
such financial statements. The concept of reasonable assurance
is based on the recognition that the cost of a system of internal
accounting controls must be related to the benefits derived. The
company maintains an internal audit function that is responsible
for evaluating the adequacy and application of financial and
operating controls and for testing compliance with company
policies and procedures.
The Audit Committee of the Board of Directors is comprised
entirely of individuals who are not employees of the company.
This committee meets periodically with the independent
accountants, the internal auditors and management to consider
audit results and to discuss significant internal accounting
controls, auditing and financial reporting matters. The Audit
Committee recommends the selection of the independent
accountants, who are then appointed by the board of directors,
subject to ratification by the shareowners.
The independent accountants are engaged to perform an audit
of the consolidated financial statements in accordance with
generally accepted auditing standards. Their report follows.
/S/ Thomas F. McBride
Thomas F. McBride
Senior Vice President and
Chief Financial Officer
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Report of Independent Accountants
January 31, 1995
To the Board of Directors and
Shareowners of Ingersoll-Rand Company:
In our opinion, the accompanying consolidated balance sheet
and the related consolidated statements of income, of
shareowners' equity and of cash flows present fairly, in all
material respects, the financial position of Ingersoll-Rand
Company and its subsidiaries at December 31, 1994 and 1993, and
the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
As discussed in Note 1 to the consolidated financial
statements, the Company changed its method of accounting for
postemployment benefits in 1993 and for postretirement benefits
and income taxes in 1992.
/S/ Price Waterhouse LLP
Price Waterhouse LLP
120
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9
EXHIBIT 21
Page 1 of 3
LIST OF SUBSIDIARIES OF INGERSOLL-RAND COMPANY
The following list represents the principal subsidiaries of
the company all of which (except as otherwise indicated) are
deemed to be 100% owned, directly or indirectly, and whose
financial statements are included in the consolidated statements.
The subsidiaries of Ingersoll-Dresser Pump Company (IDP), a
general partnership owned 51% by the company, are deemed to be
100% owned by IDP directly or indirectly. The names of
particular subsidiaries omitted, if considered in the aggregate
as a single subsidiary, would not constitute a significant
subsidiary.
SUBSIDIARIES OF INGERSOLL-RAND COMPANY
California Pellet Mill Company California
CPM/Europe BV Netherlands
CPM/Europe Limited (Ireland) Ireland
CPM/Europe S.A. France
CPM/Pacific (Private) Limited Singapore
California Pellet Mill Europe Limited England
Ingersoll-Rand China Limited Delaware
Ingersoll-Rand International, Inc. Delaware
Ingersoll-Rand International Sales Inc. Delaware
Ingersoll-Rand International Holding Corporation New Jersey
Ingersoll-Rand S.A. Switzerland
Woodcliff Insurance, Ltd. Bermuda
Ingersoll-Rand Worldwide, Inc. Delaware
Northern Research & Engineering Company Massachusetts
Schlage Lock Company California
Von Duprin, Inc. Indiana
Schlage de Mexico S.A. de C.V. Mexico
Silver Engineering Works, Inc. Colorado
The Aro Corporation Delaware
The Torrington Company Delaware
Kilian Manufacturing Corporation Delaware
Torrington Holdings, Inc. Delaware
Torrington France, S.A.R.L. France
Industrias del Rodamiento S.A. Spain
Ingersoll-Rand Iberica, S.L. Spain
Ingersoll-Rand (Australia) Ltd. Australia
Ingersoll-Rand S.E. Asia (Private), Limited Singapore
Ingersoll-Rand Benelux Belgium
N.V. Aro S.A. Belgium
Ingersoll-Rand Canada, Inc. Canada
Torrington, Inc. Canada
Torrington Industria e Comercio Ltda. Brazil
Ingersoll-Rand World Trade Ltd. Bermuda
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Ingersoll-Rand (Barbados) Corporation Barbados
Torrington Beteiligungs GmbH Germany
Torrington GmbH Germany
Torrington Nadellager GmbH Germany
Compagnie Ingersoll-Rand France
Ingersoll-Rand Equipements de Production S.A. France
Ingersoll-Rand Equipements de Construction France
Etablissements Montabert S.A. France
S.A. Charles Maire France
Ingersoll-Rand GesmbH (Austria) Austria
IMPCO-Voest-Alpine Pulping Technologies
A.G.(75% owned by the company) Austria
Ingersoll-Rand Sales Company Limited Delaware
Ingersoll-Rand Holdings Limited England
Ingersoll-Rand Company Limited England
Ingersoll-Rand Company South Africa
(Proprietary) Ltd. South Africa
The Torrington Company Limited England
The Aro Corporation (U.K.) Limited England
Ingersoll-Rand Beteiligungs GmbH Germany
ABG Allgemeine Baumaschinen-Gesellschaft mbH Germany
ABG Verwaltungs GmbH Germany
ABG Werke GmbH Germany
Ingersoll-Rand GmbH Germany
Ingersoll-Rand Beteiligungs und
Grundstucks Verwaltungs GmbH Germany
CPM Europe (Wesel) GmbH Germany
Ingersoll-Rand (India) Ltd. (74% owned by
the company) India
Ingersoll-Rand Italiana S.p.A. Italy
Ingersoll-Rand Japan Ltd. Japan
Tokyo Ryuki Seizo Kabushiki Kaisha Japan
Ingersoll-Rand Philippines, Inc. Philippines
Ingersoll-Rand AB Sweden
Ingersoll-Rand Services & Engineering Company Switzerland
Ingersoll-Rand Acceptance Company, S.A. Switzerland
Ingersoll-Rand Investment Company, S.A. Switzerland
G. Klemm Bohrtechnik GmbH Germany
Ingersoll-Rand Best Matic AB Sweden
Ingersoll-Rand S.A. de C.V. Mexico
SUBSIDIARIES OF INGERSOLL-DRESSER PUMP COMPANY
Worthington Argentina S.A.I.C. Argentina
Ingersoll-Dresser Pumps (Australia) Pty. Limited Australia
Worthington GmbH Austria
Worthington Industria e Comercio Ltda. Brazil
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Ingersoll-Dresser Pump Canada Inc. Canada
Ingersoll-Dresser Pumps de Colombia S.A. Colombia
Worthington Centroamericana Ltda. Costa Rica
Ingersoll-Dresser Pompes France
IDP Pleuger France
IDP International France
Deutsche Ingersoll-Dresser Pumpen GmbH Germany
Ingersoll-Dresser Pumpen GmbH Germany
Pleuger 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) Limited England
Ingersoll-Dresser Pumps Newark Limited England
Bombas Ingersoll-Dresser de Venezuela, C.A.
(51% owned by IDP) Venezuela
IDP Alternate Energy Company Delaware
Mascoma Hydro Corporation New Hampshire
Pump Investments, Inc. Delaware
Energy Hydro Inc. Delaware
Compania Ingersoll-Dresser Pump, S.A. Spain
123
EX-27
10
5
1,000
YEAR
DEC-31-1994
DEC-31-1994
207,023
4,231
975,297
25,905
679,308
2,002,887
1,818,564
859,273
3,596,921
1,040,077
315,850
218,338
0
0
1,313,004
3,596,921
4,507,470
4,507,470
3,377,049
3,377,049
0
0
43,751
329,940
118,800
211,140
0
0
0
211,140
2.00
1.99