-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TQLVElr6GTfgJwtVuME1wnvoZ2OIRqz4OGrXXqxVIz3xxzcaoT+6yrOQ44MTfS/0 lSmje/hc1fdybUCcWt5RtA== 0000050485-01-500009.txt : 20010514 0000050485-01-500009.hdr.sgml : 20010514 ACCESSION NUMBER: 0000050485-01-500009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20010511 FILED AS OF DATE: 20010511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INGERSOLL RAND CO CENTRAL INDEX KEY: 0000050485 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] IRS NUMBER: 135156640 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-00985 FILM NUMBER: 1631052 BUSINESS ADDRESS: STREET 1: 200 CHESTNUT RIDGE RD STREET 2: PO BOX 8738 CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07677 BUSINESS PHONE: 2015730123 MAIL ADDRESS: STREET 1: 200 CHESTNUT RIDGE ROAD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07677 10-Q 1 tenqmar.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-985 INGERSOLL-RAND COMPANY (Exact name of registrant as specified in its charter) New Jersey 13-5156640 (State of incorporation) (I.R.S. Employer Identification No.) Woodcliff Lake, New Jersey 07677 (Address of principal executive offices) (Zip Code) (201) 573-0123 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes . X . No . . . The number of shares of common stock outstanding as of April 30, 2001 was 159,897,672. INGERSOLL-RAND COMPANY FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Condensed Consolidated Balance Sheet at March 31, 2001 and December 31, 2000 Condensed Consolidated Income Statement for the three months ended March 31, 2001 and 2000 Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2001 and 2000 Notes to Condensed Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. OTHER INFORMATION Item 6 - Exhibits and Reports of Form 8-K SIGNATURES INGERSOLL-RAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (in millions) ASSETS March 31, December 31, 2001 2000 Current assets: Cash and cash equivalents $ 76.2 $ 74.4 Marketable securities 4.6 125.6 Accounts and notes receivable, net 1,326.7 1,323.5 Inventories 1,106.5 1,022.9 Prepaid expenses and deferred income taxes 151.8 164.0 Assets held for sale 571.9 612.4 Total current assets 3,237.7 3,322.8 Investments in and advances with partially owned equity affiliates 167.9 167.6 Property, plant and equipment, at cost 2,418.2 2,417.9 Less - accumulated depreciation 913.8 889.9 Net property, plant and equipment 1,504.4 1,528.0 Intangible assets, net 5,054.2 5,105.3 Deferred income taxes 103.0 114.1 Other assets 345.5 290.7 Total assets $10,412.7 $10,528.5 LIABILITIES AND EQUITY Current liabilities: Accounts payable and accruals $ 1,525.6 $ 1,698.7 Loans payable 1,681.4 2,121.8 Income taxes 118.0 146.1 Total current liabilities 3,325.0 3,966.6 Long-term debt 2,140.3 1,540.1 Postemployment liabilities 818.0 824.8 Minority interests 111.6 110.5 Other liabilities 185.0 188.8 6,579.9 6,630.8 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company 402.5 402.5 Shareholders' equity: Common stock 343.5 343.1 Other shareholders' equity 3,385.4 3,398.7 Accumulated other comprehensive income (298.6) (246.6) Total shareholders' equity 3,430.3 3,495.2 Total liabilities and equity $10,412.7 $10,528.5 See accompanying notes to condensed consolidated financial statements. INGERSOLL-RAND COMPANY CONDENSED CONSOLIDATED INCOME STATEMENT (in millions except per share figures) Three Months Ended March 31, 2001 2000 Net sales $2,119.6 $2,020.4 Cost of goods sold 1,637.7 1,481.6 Selling and administrative expenses 306.4 269.5 Restructuring charges 21.7 - Operating income 153.8 269.3 Interest expense (65.9) (48.2) Other income (expense), net 6.3 2.9 Minority interests (8.5) (7.5) Results from assets held for sale (net of tax) (8.2) (7.9) Earnings before income taxes 77.5 208.6 Provision for income taxes 28.2 76.9 Earnings from continuing operations 49.3 131.7 Discontinued operations (net of tax) - 4.3 Net earnings $ 49.3 $ 136.0 Basic earnings per share: Continuing operations $ 0.31 $ 0.81 Discontinued operations - 0.03 $ 0.31 $ 0.84 Diluted earnings per share: Continuing operations $ 0.31 $ 0.80 Discontinued operations - 0.03 $ 0.31 $ 0.83 Dividends per share $ 0.17 $ 0.17 See accompanying notes to condensed consolidated financial statements. INGERSOLL-RAND COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) Three months ended March 31, 2001 2000 Cash flows from operating activities: Income from continuing operations $ 49.3 $ 131.7 Adjustments to arrive at net cash provided by operating activities: Restructure of operations 21.7 - Depreciation and amortization 84.9 69.0 Changes in other asset and liabilities, net (310.9) (160.2) Other, net 8.3 8.1 Net cash (used in) provided by operating activities (146.7) 48.6 Cash flows from investing activities: Capital expenditures (36.0) (45.8) Acquisitions, net of cash (21.2) (576.3) Proceeds from business dispositions 17.5 79.7 Decrease in marketable securities 95.4 0.2 Other, net 9.9 19.8 Net cash provided by (used in) investing activities 65.6 (522.4) Cash flows from financing activities: Net change in debt 164.9 414.5 Purchase of treasury stock (58.1) (62.3) Dividends paid (27.3) (27.7) Proceeds from exercise of stock options 3.8 2.0 Net cash provided by financing activities 83.3 326.5 Net cash provided by discontinued operations - 12.9 Effect of exchange rate changes on cash and and cash equivalents (0.4) (2.5) Net increase (decrease) in cash and cash equivalents 1.8 (136.9) Cash and cash equivalents - beginning of period 74.4 222.9 Cash and cash equivalents - end of period $ 76.2 $ 86.0 See accompanying notes to condensed consolidated financial statements. INGERSOLL-RAND COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 1 - In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (including normal recurring accruals) necessary to present fairly the consolidated unaudited financial position and results of operations for the three months ended March 31, 2001 and 2000. Note 2 - During the third quarter of 2000, the company began a restructuring program which includes such actions as plant rationalizations, organizational realignments consistent with the company's new market-based structure and the consolidation of back- office processes. Restructuring charges incurred consist of costs associated with severance and other employee termination benefits, and facility exit costs including lease terminations. Charges related to employee severance and other employee termination costs cover approximately 3,800 employees, of which 58% have been terminated as of March 31, 2001. The restructuring plan is expected to be substantially complete by the end of 2001. The company recorded pretax restructuring charges by business segment for the three months ended March 31, 2001 as follows: In millions Climate Control $10.9 Industrial Productivity: Bearings and Components 7.1 Infrastructure 2.9 Security and Safety 0.8 Total $21.7 A reconciliation of the restructuring provision is as follows: Employee termination Facility In millions costs exit costs Total Provision $65.8 $10.4 $76.2 Cash payments (31.6) (0.5) (32.1) Asset write-offs - (7.7) (7.7) Balance at December 31, 2000 34.2 2.2 36.4 Provision 21.5 0.2 21.7 Cash payments (18.0) (1.4) (19.4) Asset write-offs - (0.1) (0.1) Balance at March 31, 2001 $37.7 $0.9 $38.6 Note 3 - The company continues the process to sell the remaining portion of Dresser-Rand Company (D-R). D-R's results were reclassified on the condensed consolidated income statement into results from assets held for sale, net of tax for the three months ended March 31, 2000 from discontinued operations, net of tax. The net assets of D-R have been included in assets held for sale on the condensed balance sheet for all periods presented. The company expects to complete the transaction in the current year. Note 4 - In March 2001, the company acquired, for common stock and cash, Taylor Industries, Inc. (Taylor) and an affiliate business, Taylor Refrigeration. Taylor distributes, installs and services refrigeration equipment, food service equipment and electric doors. In June 2000, the company acquired Hussmann International, Inc. (Hussmann), for approximately $1.7 billion in cash after taking into account amounts paid for outstanding stock options, debt retirement, employee contracts and transaction costs. Hussmann's business is the design, production, installation and service of merchandising and refrigeration systems for the global food industry. The acquisition has been accounted for as a purchase. The purchase price was preliminarily allocated to the acquired assets and liabilities based on their estimated fair values and the allocation is subject to final adjustment. The company has classified as goodwill the cost in excess of the fair value of the net assets acquired. Such excess cost is being amortized on a straight-line basis over forty years. Intangible assets also represent costs allocated to patents and trademarks and other specifically identifiable assets arising from the acquisition. These assets are being amortized over their estimated useful lives. The results of Hussmann's operations have been included in the consolidated financial statements from the acquisition date. The following pro forma consolidated results for the three months ended March 31, 2000 reflect the acquisition as though it occurred at the beginning of the period after adjustments for interest on acquisition debt, depreciation and amortization of assets, including goodwill, based upon the preliminary purchase price allocations (in millions, except per share amounts): For the three months ended March 31, 2000 Sales $2,315.4 Net earnings 112.2 Basic earnings per common share Continuing operations $ 0.66 Discontinued operations 0.03 $ 0.69 Diluted earnings per common share Continuing operations $ 0.66 Discontinued operations 0.03 $ 0.69 The above pro forma results are not necessarily indicative of what the actual results would have been had the acquisition occurred at the beginning of the respective period. Further, the pro forma results are not intended to be a projection of future results of the combined companies. Historically, Hussmann's operating profits tend to be more heavily concentrated during the second half of the year. Note 5 - Inventories are stated at cost, which is not in excess of market. Most domestically manufactured inventories, excluding the Climate Control Sector, are valued on the last-in, first-out (LIFO) method. The Climate Control Sector and foreign manufactured inventories are valued using the first-in, first-out (FIFO) method. The composition of inventories for the balance sheets presented were as follows (in millions): March 31, December 31, 2001 2000 Raw materials and supplies $ 274.9 $ 280.2 Work-in-process 247.2 231.7 Finished goods 728.9 654.4 1,251.0 1,166.3 Less - LIFO reserve 144.5 143.4 Total $1,106.5 $1,022.9 Note 6 - The Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, became effective for the company on January 1, 2001. The statement requires all derivatives to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives will be recognized in earnings or other comprehensive income, depending on the designated purpose of the derivative. If a derivative qualifies for cash flow hedge accounting the effective portion of changes in fair value is recorded temporarily in other comprehensive income then recognized in earnings along with the related effects of the hedged items. If a derivative qualifies for fair value hedge accounting, the changes in fair value of the derivative and the hedged item are recognized currently in earnings. There was no ineffective portion of hedges reported in earnings in the first quarter of 2001. The company operates internationally, with manufacturing and sales facilities in various locations around the world and utilizes primarily forward and option contracts to manage its foreign currency and commodity exposures, primarily related to forecasted transactions. Of the approximate $1.2 million, after tax, recorded in equity at January 1, 2001, upon the adoption of these new standards, $0.5 million was reclassified to earnings during the first quarter of 2001. Of the $2.0 million recorded in equity at March 31, 2001, $2.0 million is expected to be reclassified to earnings over the 12 month period ending March 31, 2002. The actual amounts that will be reclassified to earnings over the next twelve months will vary from this amount as a result of changes in market conditions. No amounts were reclassified to earnings during the first quarter in connection with forecasted transactions that were no longer considered probable of occurring. At March 31, 2001, the maximum term of derivative instruments that hedge forecasted transactions, for both foreign currency and commodity hedges, was twelve months. Derivatives not designated as hedges primarily consist of options and forward contracts. Although these instruments are effective as hedges from an economic perspective, they do not qualify for hedge accounting under SFAS No. 133, as amended. Note 7 - Information on basic and diluted earnings per share is as follows (in millions): Three months ended March 31, 2001 2000 Average number of basic shares 160.3 162.0 Shares issuable assuming exercise under incentive stock plans 1.0 1.3 Average number of diluted Shares 161.3 163.3 Note 8 - The components of comprehensive income (loss) are as follows (in millions): Three months ended March 31, 2001 2000 Net earnings $ 49.3 $136.0 Other comprehensive income (loss) Foreign currency equity adjustment (33.6) (17.8) Cumulative effect of change in accounting principal (SFAS No. 133), net of tax (1.2) - Cash flow hedges: Unrealized loss, net of tax (1.3) - Reclassification adjustments, net of tax 0.5 - Reclassification to realized on marketable securities (16.4) - Comprehensive income (loss) $ (2.7) $118.2 Note 9 - A summary of operations by reportable segment is as follows: Three months ended March 31, 2001 2000 Sales Climate Control $ 515.1 $ 324.4 Industrial Productivity Air Solutions 196.7 196.6 Bearings and Components 272.3 306.8 Industrial Products 257.6 253.2 726.6 756.6 Infrastructure Development 542.9 603.6 Security and Safety 335.0 335.8 Total $2,119.6 $2,020.4 Operating income Climate Control $(10.4) $ 38.7 Industrial Productivity Air Solutions 17.5 19.8 Bearings and Components 15.3 32.6 Industrial Products 33.7 36.2 66.5 88.6 Infrastructure Development 62.3 96.9 Security and Safety 54.3 62.9 Unallocated corporate expense (18.9) (17.8) Total $153.8 $269.3 No significant changes in assets by geographic area have occurred since December 31, 2000. INGERSOLL-RAND COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales for the first quarter of 2001 were $2.1 billion, an increase of 5% compared to the first quarter of 2000. Operating income was $153.8 million, which included $21.7 million of restructure changes and $22.1 million of productivity investments. The company's net earnings for the first quarter of the year from continuing operations was $49.3 million or diluted earnings per share (DEPS) of $0.31. Excluding charges relating to restructure and productivity investments, DEPS were $0.51. For the first quarter of 2000, sales were $2.0 billion, operating income was $269.3 million and net earnings from continuing operations was $131.7 million or $0.80 of DEPS. The first quarter of 2000 did not include any charges for restructure or productivity investments. The first quarter of 2001 included the results of Hussmann, acquired in June 2000. Net sales for the first three months of 2001 were $2.1 billion, an increase of 5% over last year's first quarter. Excluding Hussmann, net sales decreased by 7% compared to the first quarter of 2000, primarily due to a 10% decline in North American revenues. Costs of goods sold, and selling and administrative expense in the first quarter of 2001 include charges for productivity investments. Productivity investments consist of costs for equipment moving, facility redesign, employee relocation and retraining, and systems enhancements. Charges for productivity investments are expensed as incurred. All business segments incurred productivity investments. The following table shows the 2001 results adjusted for productivity investments: Reported Productivity Adjusted In millions results investments results Cost of goods sold $1,637.7 12.4 $1,625.3 Selling and administrative expenses 306.4 9.7 296.7 Cost of goods sold in the first quarter of 2001 was 77.3% of sales as compared to 73.3% in the comparable quarter of 2000. The increase in the ratio of cost of goods sold to sales was due to the inclusion of Hussmann, which historically has had a higher ratio than the company has maintained. The ratio of selling and administrative expenses to sales was 14.5% for the first three months of 2001, as compared to 13.3% for the first quarter of 2000. Hussmann's earnings have historically followed a distinct seasonal pattern with two-thirds of the earnings produced in the second half of the year, while selling and administrative expenses are incurred fairly evenly throughout the year. Restructuring charges for the first quarter of 2001 were $21.7 million. The restructuring program began in the third quarter of 2000 and is expected to be substantially complete by the end of 2001. Restructuring charges include $21.5 million of severance and other employee termination costs, while facility exit costs totaled $0.2 million. Charges related to employee severance and other employee termination costs cover approximately 3,800 employees, of which 58% have been terminated as of March 31, 2001. For the three months ended March 31, 2001, the company recorded pretax restructuring charges for the Climate Control Sector of $10.9 million, Bearings and Components Sector of $7.1 million, Infrastructure Sector of $2.9 million, and Security and Safety Sector of $0.8 million. Operating income for the first quarter of 2001 totaled $153.8 million, a decrease of $115.5 million over the $269.3 million reported for last year's first quarter. Excluding productivity and restructure charges, operating income was $197.6 million, a decrease of $71.7 million from 2000's first quarter. Interest expense for the first quarter of 2001 was $65.9 million, which was $17.7 million higher than last year's first quarter due to the impact of the debt incurred for the purchase of Hussmann in June 2000. Additionally, interest expense from the debt required to purchase Dresser-Rand Company (D-R) is included in results from assets held for sale, net of tax. Other income (expense), net, aggregated $6.3 million of income for the three months ended March 31, 2001, as compared to $2.9 million of income in the first quarter of 2000. This favorable change includes a gain of $8.8 million on the sale of the stock of Hanover Compressor Company. This gain was partially offset by increased foreign exchange losses in the first quarter of 2001 over the comparable period of 2000. Minority interest increased from the first quarter of 2000 as a result of higher earnings from consolidated jointly owned entities in which the company has a majority ownership. Charges associated with the company's equity-linked securities were comparable. Results from assets held for sale, net of tax, contains the loss from the unsold portion of D-R. D-R's first quarter net loss of $8.2 million included one-time after tax charges of $3.3 million for restructuring charges relating to organizational realignments. Excluding these charges, D-R's net loss amounted to $4.9 million, compared to $7.9 million net loss in the first quarter of 2000. D-R's earnings also include interest expense, net of tax on debt incurred for the acquisition and amortization of goodwill. The company's effective tax rate for continuing operations for the first quarter of 2001 and 2000 were 36.4% and 36.9%, respectively. Excluding D-R the company's effective tax rate was 33.0% compared to 35.5 % in the first quarter of 2000. Earnings from discontinued operations (net of tax) for 2000 were the results of Ingersoll-Dresser Pump Company (IDP) sold in the third quarter of 2000. Incoming orders for the first quarter of the year totaled $2.2 billion, compared to $2.1 billion in the first quarter of 2000. The company's backlog of orders at March 31, 2001, believed by it to be firm, was $1.2 billion, which approximated the backlog at December 31, 2000. The company estimates that approximately 90% of the backlog will be shipped during the next twelve months. First-quarter Business Segment Review The Climate Control Sector includes Thermo King transport temperature control equipment, and Hussmann display case refrigeration. The sector's first quarter revenues totaled $515.1 million, with operating income of $5.0 million, excluding restructuring charges of $10.9 million and productivity investments of $4.5 million. Thermo King's revenues declined 15% as growth in the bus air conditioning and seagoing container businesses was more than offset by a severe decline in the North American truck and trailer markets and continued weakness in the European truck and trailer market. Operating margins were significantly lower due to the decline in the higher margin North American business and unfavorable currency comparisons. Deferred capital spending by several major supermarkets chains negatively impacted Hussmann operating results. Backlog and bid activity is strong, indicating that the spending decline appears to be a deferral rather than a permanent loss of business. The Industrial Productivity Sector is composed of a group of businesses focused on providing solutions for customers to enhance industrial efficiency. First-quarter revenues on a comparable basis declined by approximately 4%. Revenues were $726.6 million, compared to last year's revenues of $756.6 million. Operating earnings, excluding restructure charges of $7.1 million and productivity investments of $4.6 million, decreased by 12% to $78.2 million. All businesses in the sector experienced weaker operating margins. The Industrial Productivity Sector consists of three segments: O Air Solutions, which provides equipment and services for compressed air systems, reported sales of $196.7 million in the first quarter of 2001, as compared to sales in the first quarter of 2000 of $196.6 million. Operating income excluding the impact of restructuring and productivity investments was approximately the same for the first quarter of 2001 as it was in 2000. O Bearings and Components provides motion control technologies to the automotive and industrial markets. Revenues for the quarter declined by 11% to $272.3 million. Operating income, excluding charges for restructure of $7.1 million and productivity investments of $1.7 million, was $24.1 million as compared to $32.6 million in the first quarter of 2000. Continued softness in the U.S. automotive and industrial equipment markets contributed significantly to this decline. O Industrial Products which includes Club Car golf cars and utility vehicles, tools, fluid products, and the independent power business, showed year-over-year revenue growth of 2%, principally reflecting gains at Club Car. Operating margins for the segment declined slightly, mainly due to increased spending on new product introduction, particularly the Powerworks microturbine. The Infrastructure Sector includes Bobcat compact equipment, road pavers and compactors; portable power products, and drilling equipment. This sector's revenues totaled $542.9 million, a decrease of 10% over last year's first-quarter revenues. Operating earnings, excluding charges of $2.9 million for restructuring and $4.0 million for productivity investments was $69.2 million, a decrease of $27.7 million. The decline reflects weaker North American road development, portable power, and drilling markets combined with dramatically reduced demand from U.S. rental accounts. The Security and Safety Sector includes architectural hardware products and electronic access-control technologies. For this sector, revenues were flat year-over-year, reflecting the slowing in the U.S. and European commercial and residential markets, offset by an increase in electronic solutions revenues. Sector operating income was $61.5 million excluding charges from restructure of $0.8 million and productivity investments of $6.4 million, as compared to $62.9 million during the first quarter of 2000. Liquidity and Capital Resources The company's debt-to-total capital ratio at March 31, 2001, was 49%, compared with 48% reported at December 31, 2000. The increase is attributable to a slight increase in total debt outstanding. The company's working capital increased by $556.5 million. Working capital was a negative $87.3 million at March 31, 2001, compared to the December 31, 2000 negative balance of $643.8 million. The company's cash and cash equivalents totaled $76.2 million at March 31, 2001, a slight increase over the $74.4 million at December 31, 2000. Cash flows from operating activities used $146.7 million, investing activities provided $65.6 million and financing activities provided $83.3 million. Marketable securities decreased from $125.6 million at December 31, 2000 to $4.6 million at March 31, 2001. During the first quarter, the company sold the stock received as partial payment for the reciprocating gas compressor packaging and rental business sold in 2000. Receivables totaled $1.3 billion at March 31, 2001, which is comparable to the amount reported at December 31, 2000. Inventories totaled $1,106.5 million at March 31, 2001, which represents an increase of $83.6 million from the year-end balance of $1,022.9 million. The slowing U.S. economy has impacted the company's results. Weakness has been noted in the North American truck and trailer market, continuing weakness in European truck and trailer market, a falloff in North American light vehicle production, deferred capital spending by supermarkets and a decline in purchasing by large U.S. rental companies. Assets held for sale were $571.9 million at March 31, 2001, a decrease of $40.5 million from December 31, 2000. This account includes the company's remaining investment in D-R. The decrease in net assets as well as the net loss recorded by D-R for the first quarter of 2001 comprised this change. Intangible assets decreased by $51.1 million during the first three months of 2001. Amortization expense for the quarter was $39.8 million. The remaining change was attributable to acquisitions offset by foreign currency translation. Loans payable were $1,681.4 million in the first quarter of 2001 compared to $2,121.8 million at December 31, 2000. Short-term debt was refinanced with long-term notes of $600 million in February 2001. The notes are due in 2003 and carry an interest rate of 5.75%. During the first quarter of 2001, the company repurchased approximately 1.3 million shares of the company's stock. Of this, approximately 350,000 shares were used in connection with the acquisition of Taylor Industries, Inc. A total of 11.2 million shares have been purchased since the inception of the program in 1997. During the first three months of 2001, foreign currency translation adjustments resulted in a net decrease of $33.6 million in shareowners' equity, caused by the continued strengthening of the U.S. dollar against European currencies. Environmental Matters The company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off- site waste disposal at approximately 26 federal Superfund and state remediation sites, excluding sites as to which the company's records disclose no involvement or as to which the company's liability has been fully determined. For all sites, there are other PRPs and in most instances, the company's site involvement is minimal. In estimating its liability, the company has not assumed that it will bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties' financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future. Although uncertainties regarding environmental technology, state and federal laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the company for any year. It should be noted that when the company estimates its liability for environmental matters, such estimates are based on current technologies, and the company does not discount its liability or assume any insurance recoveries. Acquisitions In March 2001, the company acquired Taylor Industries, Inc. (Taylor) and its affiliate business, Taylor Refrigeration. Taylor distributes, installs and services refrigeration equipment, food service equipment and electric doors. Taylor is included in the Climate Control Sector. On August 7, 2000, the company acquired Interflex Datensysteme GmbH (Interflex). Interflex provides integrated products and services for electronic access control, time and attendance recording, personnel scheduling and industrial data management and is included in the Security and Safety Sector. On June 14, 2000, the company acquired Hussmann for approximately $1.7 billion. Hussmann is a world leader in the design, production, installation and service of merchandising and refrigeration systems for the global food industry. Hussmann's results have been reported as part of the Climate Control Sector since acquisition. Discontinued Operations and Dispositions In September 2000, the company completed the sale of the reciprocating gas compressor packaging and rental business of D-R to Hanover Compressor Company (Hanover). The sale was completed for $190.0 million, $95.0 million cash with the balance in Hanover common stock. The company recorded a $30.2 million after- tax gain on the sale. During February 2000, the company sold one of the businesses acquired with the Harrow acquisition for approximately $43.0 million, which approximated book value. Also in February 2000, the company sold its interest in three joint ventures relating to the manufacture of full steering-column assemblies for approximately $37.0 million in cash. In August 2000, the company sold IDP, a venture involved in the engineered pump business for $775.0 million, realizing an after- tax gain of $124.8 million. IDP's results were reported as discontinued operations (net of tax) in the income statement for 2000. New Accounting Standard The Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, became effective for the company on January 1, 2001. The statement requires all derivatives to be recognized as assets or liabilities on the balance sheet and measured at fair value. Changes in the fair value of derivatives will be recognized in earnings or other comprehensive income, depending on the designated purpose of the derivative. If a derivative qualifies for cash flow hedge accounting the effective portion of changes in fair value is recorded temporarily in other comprehensive income then recognized in earnings along with the related effects of the hedged items. If a derivative qualifies for fair value hedge accounting, the changes in fair value of the derivative and the hedged item are recognized currently in earnings. There was no ineffective portion of hedges reported in earnings in the first quarter of 2001. The company operates internationally, with manufacturing and sales facilities in various locations around the world and utilizes primarily forward and option contracts to manage its foreign currency and commodity exposures, primarily related to forecasted transactions. Of the approximate $1.2 million, after tax, recorded in equity at January 1, 2001, upon the adoption of these new standards, $0.5 million was reclassified to earnings during the first quarter of 2001. Of the $2.0 million recorded in equity at March 31, 2001, $2.0 million is expected to be reclassified to earnings over the 12 month period ending March 31, 2002. The actual amounts that will be reclassified to earnings over the next twelve months will vary from this amount as a result of changes in market conditions. No amounts were reclassified to earnings during the first quarter in connection with forecasted transactions that were no longer considered probable of occurring. Derivatives not designated as hedges primarily consist of options and forward contracts. Although these instruments are effective as hedges from an economic perspective, they do not qualify for hedge accounting under SFAS No. 133, as amended. Safe Harbor Statement Information provided by the company in reports such as this report on Form 10-Q, in press releases and in statements made by employees in oral discussions, to the extent the information is not historical fact, constitutes "forward looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934. Forward looking statements by their nature involve risk and uncertainty. The company cautions that a variety of factors, including but not limited to the following, could cause business conditions and results to differ from those expected by the company: changes in the rate of economic growth in the United States and in other major international economies; significant changes in trade, monetary and fiscal policies worldwide; currency fluctuations among the U.S. dollar and other currencies; demand for company products; distributor inventory levels; failure to achieve the company's productivity targets; and competitor actions including unanticipated pricing actions or new product introductions. INGERSOLL-RAND COMPANY PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description 12 Computations of Ratios of Earnings to Fixed Charges (b) Reports on Form 8-K A Current Report on Form 8-K (Item 5) dated February 6, 2001 reporting the Debt Securities Underwriting Agreement Standard Provisions relating to Registration Statement No. 33350902. A Current Report on Form 8-K (Item 5) dated February 9, 2001 reporting the filing of Exhibit 12 - Computation of the Ratio of Earnings to Fixed Charges and Exhibit 13 - Audited Financial Statements at and for the year ended December 31, 2000. A Current Report on Form 8-K/A (Item 5) dated February 9, 2001 amending the filing of Exhibit 23 - Consent of PricewaterhouseCoopers LLP. INGERSOLL-RAND COMPANY SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INGERSOLL-RAND COMPANY (Registrant) Date May 11, 2001 /S/ D.W. Devonshire D. W. Devonshire, Executive Vice President & Chief Financial Officer Principal Financial Officer Date May 11, 2001 /S/ S.R. Shawley S. R. Shawley, Vice President and Controller Principal Accounting Officer EX-12 2 ex12.txt COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGE EXHIBIT 12 INGERSOLL-RAND COMPANY COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollar Amounts in Millions) Three Months Ended March 31, Years Ended December 31, Fixed charges: 2001 2000 1999 1998 1997 1996 Interest expense........................... $ 72.7 $286.6 $204.5 $225.9 $137.5 $120.9 Amortization of debt discount and expense.. 1.6 6.1 6.7 7.0 2.0 1.5 Rentals (one-third of rentals)............. 8.4 28.2 23.9 23.8 23.3 20.3 Capitalized interest....................... 1.1 4.4 4.0 4.0 3.2 4.6 Equity-linked security charges............ 6.3 25.6 25.6 19.7 0.0 0.0 Total fixed charges.......................... $ 90.1 $350.9 $264.7 $280.4 $166.0 $147.3 Net earnings from continuing operations $ 49.3 $546.2 $563.1 $481.6 $367.6 $342.3 Add: Minority income of majority- owned subsidiaries.................. 8.5 39.3 29.1 23.5 3.6 1.5 Taxes on income from continuing operations.......................... 28.2 283.1 299.9 250.7 219.8 190.7 Fixed charges......................... 90.1 350.9 264.7 280.4 166.0 147.3 Less: Capitalized interest.................. 1.1 4.4 4.0 4.0 3.2 4.6 Undistributed earnings (losses) from less than 50% owned affiliates.. 1.3 9.1 19.9 26.9 16.2 (29.1) Earnings available for fixed charges ........ $173.7 $1,206.0 $1,132.9 $1,005.3 $737.6 $706.3 Ratio of earnings to fixed charges .......... 1.93 3.44 4.28 3.59 4.44 4.79 Undistributed earnings (losses) from less than 50% owned affiliates: Equity in earnings (losses)............ $ 1.9 $ 11.6 $ 22.1 $ 30.1 $ 18.3 $ 29.7 Less: Amounts distributed............... 0.6 2.5 2.2 3.2 2.1 58.8 Undistributed earnings (losses) from less-than 50% owned affiliates........... $ 1.3 $ 9.1 $ 19.9 $ 26.9 $ 16.2 $(29.1)
-----END PRIVACY-ENHANCED MESSAGE-----