-----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, SoIqSLZgWor4Se166N2G3oA6OReMhBUavzM5zfoMngFyQoKN5qRm2uqgYc0cUlUH c7k+aDrXX24vU+lgV+Smgg== 0000050485-97-000016.txt : 19971106 0000050485-97-000016.hdr.sgml : 19971106 ACCESSION NUMBER: 0000050485-97-000016 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19971031 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971105 SROS: NYSE 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: 8-K SEC ACT: SEC FILE NUMBER: 001-00985 FILM NUMBER: 97707827 BUSINESS ADDRESS: STREET 1: 200 CHESTNUT RIDGE RD STREET 2: PO BOX 8738 CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07675 BUSINESS PHONE: 2015730123 MAIL ADDRESS: STREET 1: 200 CHESTNUT RIDGE ROAD CITY: WOODCLIFF LAKE STATE: NJ ZIP: 07675 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) October 31, 1997 INGERSOLL-RAND COMPANY (Exact name of registrant as specified in its charter) New Jersey 1-985 13-5156640 (State of incorporation) (Commission (I.R.S. Employer File Number) Identification No.) Woodcliff Lake, New Jersey 07675 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (201) 573-0123 INGERSOLL-RAND COMPANY Item 2. ACQUISITION OR DISPOSITION OF ASSETS On October 31, 1997, Ingersoll-Rand Company (the company), purchased all of the outstanding shares of capital stock of Thermo King Corporation (Thermo King) together with other equity interests and assets related to Thermo King, from Westinghouse Electric Corporation, for an aggregate purchase price of approximately $2.56 billion. Thermo King designs, manufactures and distributes transport temperature control systems and service parts for a variety of mobile applications, including trailers, truck bodies, sea-going containers, buses and light rail cars. Thermo King is headquartered in Minneapolis, Minnesota and has six manufacturing/assembly facilities in North America, and international facilities located in Ireland, Brazil, Germany, the Czech Republic, Denmark and, through majority-owned joint ventures, in Spain and China. Thermo King employs more than 4,700 people and distributes its products through a world-wide network of more than 850 dealers. The initial funds used to consummate the acquisition were obtained from the issuance of commercial paper and the use of approximately $100 million of available cash. Over the next few months, the company expects to reduce the outstanding commercial paper with the proceeds from the issuance of approximately $1.6 billion of medium-term debt (with maturities ranging from three to ten years) and $600 million of company obligated mandatorily redeemable preference securities of a subsidiary holding solely debentures of the company (an equity-linked security). Item 7. FINANCIAL STATEMENTS AND EXHIBITS The following financial statements and pro forma information are hereby filed as part of this report: 1.) Audited Combined Balance Sheets of Thermo King at December 31, 1996 and 1995 and the audited Combined Statements of Income and Cash Flows for the years ended December 31, 1996, 1995 and 1994. 2.) An introduction to the pro forma financial statements is attached. 3.) A pro forma balance sheet at December 31, 1996, which combines the balance sheet of the company and the balance sheet of Thermo King, along with a description of all pro forma adjustments. 4.) A pro forma income statement which combines the results of the company and the results of Thermo King, for the year ended December 31, 1996, along with a description of all pro forma adjustments. 5.) A pro forma balance sheet at June 30, 1997, which combines the balance sheet of the company and the balance sheet of Thermo King, along with a description of all pro forma adjustments. 6.) A pro forma income statement which combines the results of the company and the results of Thermo King, for the six months ended June 30, 1997, along with a description of all pro forma adjustments. 7.) Pro forma computations of ratios of earnings to fixed charges for the year ended December 31, 1996 and for the six months ended June 30, 1997. EXHIBITS See attached Exhibit Index. THERMO KING (a Unit of Westinghouse Electric Corporation) Financial Statements December 31, 1996, 1995, and 1994 Independent Auditors' Report To the Board of Directors of Westinghouse Electric Corporation: We have audited the accompanying combined balance sheets of Thermo King (a unit of Westinghouse Electric Corporation) as of December 31, 1996 and 1995, and the related combined statements of income and cash flows for each of the years in the three-year period ended December 31, 1996. These combined financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We did not audit the financial statements of certain combined entities, which statements reflect total assets constituting 57% in 1995 and total revenues constituting 59% and 54% in 1995 and 1994, respectively, of the related combined totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for these entities, is based solely on the reports of other auditors. We conducted our audits in accordance with generally accepted auditing standards. Those standards 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentations. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the combined financial statements referred to above present fairly, in all material respects, the financial position of Thermo King as of December 31, 1996 and 1995, and the results of its operations and cash flows for each of the years in the three- year period ended December 31, 1996, in conformity with generally accepted accounting principles. Minneapolis, Minnesota January 29, 1997 /S/ KPMG Peat Marwick LLP THERMO KING Combined Statements of Income Years ended December 31, 1996, 1995, and 1994 (in thousands) 1996 1995 1994 Revenues $995,536 1,039,425 851,275 Cost of goods sold (note 3) (705,542) (769,462) (635,182) Restructuring (note 14) (5,587) 0 0 Marketing, administrative, and general expenses (note 3) (102,066) (90,135) (75,753) Operating profit 182,341 179,828 140,340 Other expenses, net (920) (2,018) (975) Interest expense (1,343) (2,335) (1,822) Income before income taxes and minority interest in income of consolidated subsidiaries 180,078 175,475 137,543 Income tax expense (note 5) (37,419) (35,589) (24,227) Minority interest in (income) loss of consolidated subsidiaries (1,829) (921) 88 Net income $140,830 138,965 113,404 The notes to the financial statements are an integral part of these financial statements. THERMO KING Combined Balance Sheets December 31, 1996 and 1995 (in thousands) Assets 1996 1995 Cash and cash equivalents(note 2) $ 3,297 6,001 Customer receivables, net of allowances of $1,440 in 1996 and $1,244 in 1995 134,274 132,598 Inventories (note 6) 118,177 126,821 Deferred income taxes (note 5) 7,556 6,142 Prepaid and other current assets 14,297 7,609 277,601 279,171 Plant and equipment, net (note 7) 97,867 88,056 Intangibles and other noncurrent assets (note 8) 32,253 27,516 Total assets $407,721 394,743 Liabilities and Invested Equity Accounts payable 70,558 68,538 Short-term debt (note 9) 6,458 12,056 Current maturities of long-term debt 226 391 Progress payments from customers 2,599 3,398 Other current liabilities (note 10) 89,390 87,845 Total current liabilities 169,231 172,228 Long-term debt 1,937 195 Employee benefit obligations (notes 4 and 10) 53,701 76,718 Other noncurrent liabilities 2,349 2,371 Total liabilities 227,218 251,512 Commitments and contingencies (note 12) Minority interest in equity of consolidated subsidiaries 2,983 1,917 Invested equity: (note 11) Minimum pension liability adjustment (note 4) (13,736) (30,286) Cumulative foreign currency translation adjustments 14,153 5,140 Invested equity 177,103 166,460 Total invested equity 177,520 141,314 Total liabilities and invested equity $407,721 394,743 The notes to the financial statements are an integral part of these financial statements. THERMO KING Combined Statements of Cash Flows Years ended December 31, 1996, 1995, and 1994 (in thousands) 1996 1995 1994 Cash flows from operating activities: Net income $140,830 138,965 113,404 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 13,251 13,190 12,813 Noncash restructuring charges 1,331 0 0 Changes in assets and liabilities, net of effects of acquisitions of businesses: Customer receivables 4,457 (8,875) (19,875) Inventories 22,131 (13,049) (28,366) Accounts payable (3,207) 9,675 20,326 Product warranty (3,318) 8,028 14,455 Pension liability 1,644 (2,790) 2,804 Deferred income taxes (1,057) 4,861 (4,040) Other assets and liabilities (3,938) 10,723 865 Cash provided by operating activities 172,124 160,728 112,386 Cash flows from investing activities: Business acquisitions (15,115) 0 0 Capital expenditures (19,835) (22,585) (18,686) Cash used by investing activities (34,950) (22,585) (18,686) Cash flows from financing activities: Net (reduction) increase in short-term debt (5,598) (1,041) 3,538 Repayments of long-term debt (4,093) (369) (1,005) Disbursements to parent company, net of direct charges and allocations (130,187) (136,371) (90,839) Cash used by financing activities (139,878) (137,781) (88,306) (Decrease) increase in cash and cash equivalents (2,704) 362 5,394 Cash and cash equivalents at beginning of year 6,001 5,639 245 Cash and cash equivalents at end of year $ 3,297 6,001 5,639 Supplemental disclosure of cash flow information: Interest paid $ 1,275 2,454 1,753 The notes to the financial statements are an integral part of these financial statements. THERMO KING Notes to the Financial Statements December 31, 1996, 1995, and 1994 (1) Description of Business Thermo King (the Company), a unit of Westinghouse Electric Corporation (Westinghouse), designs, manufactures, and distributes a broad line of transport temperature control equipment, including units and associated service parts for trucks, trailers, seagoing containers, buses and rail cars. The Company serves its customers through 14 manufacturing operations and a network of approximately 400 full sales and service dealers throughout the world, as well as more than 400 authorized service locations. International manufacturing facilities are located in Ireland, Brazil, Germany, the Czech Republic, Denmark and, through majority-owned joint ventures, in Spain and the People's Republic of China. In 1996, approximately 46% of the Company's revenue was generated from sales in North America and approximately 54% internationally (including exports). (2) Summary Of Significant Accounting Policies Basis of Presentation The combined financial statements of the Company include the accounts of Thermo King Corporation (an indirect wholly owned subsidiary of Westinghouse) and certain other Westinghouse affiliates. During the fourth quarter of 1996, the Company acquired Sabroe Reefer Cool, a Danish manufacturer of container refrigeration units for $11 million and the assumption of debt, and Thermal, a German manufacturer of air conditioning units for buses for $4 million. Both of these acquisitions were accounted for under the purchase method of accounting and the results of their operations have been included in the Company's results of operations since their acquisition. Unless otherwise indicated, all dollar amounts in these financial statements are presented in thousands. All material intercompany accounts and transactions have been eliminated in combination. Revenue Recognition Sales are recognized primarily as products are shipped and services are rendered. Amortization of Intangible Assets Goodwill and other acquired intangible assets are amortized using the straight-line method over their estimated lives but not in excess of 40 years for assets acquired prior to January 1, 1994, and not in excess of 15 years for assets acquired after December 31, 1993. Income Taxes Historically, the results of the Company's domestic operations have been included in the consolidated United States income tax return of Westinghouse. The results of the Company's foreign operations have been reported in their respective taxing jurisdiction along with the operations of other Westinghouse affiliates. The income tax-related information in these financial statements is presented as if the Company had not been eligible to be included in the consolidated tax returns of Westinghouse or other affiliates (i.e. the Company on a stand-alone basis). The recognition and measurement of income tax expense and deferred income taxes requires certain assumptions, allocations and significant estimates, which management believes are reasonable to measure the tax consequences as if the Company were a stand-alone taxpayer. The Company's income tax expense is determined in accordance with the asset and liability method of accounting for income taxes. For purposes of these financial statements, any current income tax liabilities are considered to have been paid by Westinghouse and are recorded through the invested equity account with Westinghouse. Cash and Cash Equivalents The Company considers all investment securities with a maturity of three months or less when acquired to be cash equivalents. All cash and temporary investments are placed with high credit quality financial institutions, and the amount of credit exposure to any one financial institution is limited. Inventories Inventories are stated at the lower of cost, which approximates actual cost on a first-in, first-out (FIFO) basis, or market, measured in the aggregate. The elements of cost included in inventories are direct labor, direct material, and certain overheads including factory depreciation. Plant and Equipment Plant and equipment assets are recorded at cost and depreciated over their estimated useful lives. Depreciation is generally computed on the straight-line method based on useful lives of 27.5 to 60 years for buildings, 20 years for land improvements, 3 to 10 years for office equipment, and 3 to 12 years for machinery and transportation equipment. Leasehold improvements are amortized over the terms of the respective leases. Expenditures for additions and improvements are capitalized, and costs for repairs and maintenance are charged to operations as incurred. Foreign Exchange A substantial portion of the Company's international sales are denominated in foreign currencies (primarily those of Western Europe). In order to manage foreign currency risks, the Company evaluates its procurement opportunities in local currency and enters into average rate basket options to cover the net exposure on anticipated cash flows. Realized and unrealized gains and losses on these contracts are included in the determination of net income. The notional value of these contracts at December 31, 1996, was $22 million. No contracts existed at December 31, 1995. As discussed in note 12, the Company purchases a significant component of its trailer and certain of its truck products from vendors in Japan. The exchange rate on the purchase commitments from one of these vendors is set at the time the Company enters into the purchase commitment. Assets and liabilities of foreign operations are translated at the rate of exchange in effect on the balance sheet date; revenue and expenses are translated at the average exchange rates in effect during the year. The resulting translation adjustments are reflected in the cumulative foreign currency translation adjustments in invested equity. Financial results of foreign operations in countries with highly inflationary economies are translated using a combination of current and historical exchange rates and any translation adjustments are included in earnings along with transaction gains and losses for the period. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to product warranty, pensions, and income taxes, based on currently available information. Changes in facts and circumstances may result in revised estimates. Impairment of Long-lived Assets and Long-lived Assets to be Disposed Of During the first quarter of 1996, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 121 Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of. The adoption of SFAS 121 did not have a material effect on the results of operations. Subsequent to the acquisition of an intangible or other long- lived asset, the Company continually evaluates whether later events and circumstances indicate the remaining estimated useful life of that asset may warrant revision or that the remaining carrying value of such an asset may not be recoverable. If definitive cash flows are not available for a specific intangible or other long-lived asset, the Company evaluates recoverability of the specific business to which the asset relates. When factors indicate that an intangible or other long-lived asset should be evaluated for possible impairment, the Company uses an estimate of the related asset's undiscounted future cash flows over the remaining life of that asset in measuring recoverability. If such an analysis indicates that impairment has in fact occurred, the Company writes down the book value of the intangible or other long- lived asset to its fair value. Disclosure about Fair Value of Financial Instruments The carrying amount of the Company's financial instruments, consisting of cash and cash equivalents, short-term and long-term debt, approximate fair value due to their short maturity and variable interest rate features. The fair value of foreign exchange contracts is based on quoted market prices to terminate the contracts. At December 31, 1996 and 1995, the unrealized gain on these contracts was $440 and zero, respectively. (3) Related Party Transactions The Company is charged directly for the cost of certain services that Westinghouse provides to its business units and subsidiaries. These services can include information systems support and certain accounting functions, such as transaction processing, legal services, environmental affairs and human resources. Westinghouse centrally develops, negotiates, and administers the Company's insurance programs. The insurance includes broad all-risk coverage for real and personal property and third-party liability coverage, employer's liability coverage, automobile liability, general product liability, and other standard liability coverage. Westinghouse also maintains a program of self-insurance for workers' compensation in the U.S. Westinghouse charges its business units for all of the centrally administered insurance programs based in part on claims history. Specific liabilities for general and product liability, automobile and workers' compensation claims are included in the Company's financial statements. All of the charges for the corporate services described above are based on costs which directly relate to the Company or on a pro rata portion of Westinghouse's total costs for the services provided, on a basis that management believes is reasonable. However, management believes it is possible that the costs of these transactions may differ from those that would result from transactions among unrelated parties. For the years ended December 31, 1996, 1995, and 1994, charges for such services were approximately $14,300, $13,900, and $13,700, respectively. Employees of the Company also participate in various Westinghouse-sponsored employee benefit plans (see note 4). Westinghouse does not charge its divisions for the carrying costs related to its investment in such units (invested equity). Therefore, the Company's results of operations for each of the periods presented do not include any allocated interest charges from Westinghouse, and no portion of Westinghouse's debt is specifically related to the operations of the Company. (4) Employee Benefit Plans Substantially all the Company's employees are covered by defined benefit pension plans sponsored by the Company and Westinghouse. Most plan benefits are based on either years of service and compensation levels at the time of retirement or a formula based on career earnings. Pension benefits are paid primarily from trusts funded by Westinghouse and employee contributions. Westinghouse funds its qualified U.S. pension plans at amounts equal to or greater than the minimum funding requirements of the Employee Retirement Income Security Act (ERISA) of 1974. Substantially all plan assets are invested in equity and fixed income securities. Included in the following tables are the net periodic pension costs and funded status of the plans covering current and former employees of the Company. For purposes of preparing these financial statements, estimates were made of the assets and pension obligations for Company employees who participated in plans sponsored by Westinghouse. The plan assets have been allocated on a method that management believes would be in accordance with applicable ERISA requirements. Year ended December 31 1996 1995 1994 Service cost $ 3,107 2,996 4,267 Interest cost on projected benefit obligation 7,757 8,501 8,339 Amortization of unrecognized net obligation 163 175 175 Amortization of unrecognized prior service benefit (89) (87) (87) Amortization of unrecognized net loss 2,399 1,093 2,365 13,337 12,678 15,059 Return on plan assets: Actual return on plan assets (7,431) (11,022) 2,017 Deferred gain (loss) 2,088 5,879 (8,310) Recognized return on plan assets (5,343) (5,143) (6,293) Net periodic pension cost $ 7,994 7,535 8,766 Significant pension plan assumptions: 1996 1995 1994 Discount rate: Periodic pension cost 6.75% 8.50% 7.25% Pension benefit obligation 7.75% 6.75% 8.50% Compensation increase rate 4.00% 4.00% 4.00% Long-term rate of return on plan assets 9.50% 9.75% 9.75% Based on the requirements of SFAS No. 87, Employers' Accounting for Pensions, the Company adjusts the discount rate to reflect current and expected-to-be available interest rates on high quality fixed income investments at the end of each year. The following table sets forth the funded status of the defined benefit plans and amounts recognized in the Company's balance sheet at December 31, 1996 and 1995: At December 31 1996 1995 Actuarial present value of benefit obligations: Vested $ (99,408) $ (111,626) Nonvested (6,535) (8,190) Accumulated benefit obligation (105,943) (119,816) Effect of projected future compensation levels (8,990) (14,291) Projected benefit obligation for service rendered to date (114,933) (134,107) Plan assets at fair value 64,342 54,398 Projected benefit obligation in excess of plan assets (50,591) (79,709) Unrecognized net loss 31,105 61,547 Prior service benefit not yet recognized in net periodic pension cost (4,111) (5,162) Unrecognized net obligation 3,128 4,499 Accrued pension cost (20,469) (18,825) Minimum pension liability (21,132) (46,593) Pension liability included in combined balance sheet $ (41,601) (65,418) The Company participates in a Westinghouse-sponsored non- qualified supplemental pension plan that provides additional benefits to certain executives. For financial reporting purposes, this plan is treated as a non-funded pension plan. The unfunded accumulated benefit obligation under this plan included in the table above at December 31, 1996 and 1995, was $5,500 and $6,300, respectively. For financial reporting purposes, a pension plan is considered unfunded when the fair value of plan assets is less than the accumulated benefit obligation. When that is the case, a minimum pension liability is recognized for the sum of the unfunded amount plus any prepaid pension cost. In recognizing such a liability, an intangible asset is usually recorded up to the sum of the prior service cost not yet recognized and the unrecognized transition obligation. When the liability to be recognized is greater than the intangible asset limit, a charge is made to shareholders' equity for the difference, net of any tax effects. At December 31, 1996, a minimum pension liability of $21,132 was recognized for the sum of the unfunded amount of $41,601 less the accrued pension cost of $20,469. A charge to invested equity of $21,132 was reduced to $13,736 due to deferred tax effects of $7,396. As a result of the year-end 1996 remeasurement, invested equity was increased by $16,550 from December 31, 1995. At December 31, 1995, a minimum pension liability of $46,593 was recognized for the sum of the unfunded amount of $65,418 less the accrued pension cost of $18,825. A charge to invested equity of $46,593 was reduced to $30,286 due to deferred tax effects of $16,307. As a result of the year-end 1995 remeasurement, invested equity was decreased by $7,371 from December 31, 1994. The Company also participates in a Westinghouse-sponsored postretirement plan that provides defined medical, dental, and life insurance benefits for eligible retirees and dependents. Included in the following tables are the net periodic postretirement benefit costs and funded status of the plans covering current and former employees of the Company. For purposes of preparing these financial statements, estimates were made of the plan obligations of Company employees who participated in the Westinghouse-sponsored plan. The components of net periodic postretirement benefit cost follow: Year ended December 31 1996 1995 1994 Service cost $ 600 800 1,300 Interest cost on accumulated postretirement benefit obligation 1,800 2,100 1,900 Amortization of unrecognized net (gain) loss 0 (300) 100 Net periodic postretirement benefit cost $ 2,400 2,600 3,300 The assumptions used to develop the net periodic postretirement benefit cost and the present value of benefit obligations are shown below: At December 31 1996 1995 1994 Discount rate 7.75% 6.75% 8.50% Health care cost trend rates 10.00%* 10.50%* 11.00%* Compensation increase rate 4.00% 4.00% 4.00% Long-term rate of return on plan assets 7.00% 7.00% 7.00% *At December 31, 1996, the rate was assumed to decrease ratably to 6% in 2004, decrease to 5.75% in 2005 and remain at that level thereafter. At December 31, 1995, the rate was assumed to decrease ratably to 5% in 2006, decrease to 4.75% in 2007 and remain at that level thereafter. At December 31, 1994, the rate was assumed to decrease ratably to 6.5% in 2003, and remain at that level thereafter. Net periodic postretirement benefit cost is determined using the assumptions as of the beginning of the year. The funded status is determined using the assumptions as of the end of the year. The funded status and amounts recognized in the Company's balance sheet at December 31, 1996 and 1995, were as follows: At December 31 1996 1995 Accumulated postretirement benefit obligation: Retirees $ (10,600) (12,100) Fully eligible, active plan participants (1,500) (1,700) Other active plan participants (13,900) (15,800) Total accumulated postretirement benefit obligation (26,000) (29,600) Unrecognized net loss 3,900 9,000 Unrecognized prior service benefit (2,300) (2,900) Plan assets at fair value 300 200 Accrued postretirement benefit cost $ (24,100) (23,300) The funded assets consist primarily of interest-bearing securities. The effect of a 1% annual increase in the assumed health care cost trend rates would increase the accumulated postretirement benefit obligation by approximately $572 and would increase net periodic postretirement benefit cost by approximately $79. Certain of the Company's non-U.S. subsidiaries have private and government-sponsored plans for postretirement benefits. The cost for these plans is not significant to the Company. The Company provides certain postemployment benefits to former or inactive employees and their dependents during the time period following employment but before retirement. At December 31, 1996 and 1995, the Company's liability for postemployment benefits totaled $1,000. (5) Income Taxes Thermo King is included in the consolidated federal income tax return of Westinghouse Electric Corporation. Income taxes are provided as if the Company had filed its return on a separate company basis. Valuation allowances related to deferred tax assets are evaluated based on management's assessment of the recoverability of the deferred tax assets on a separate company basis. It is the opinion of management that no valuation allowance is necessary at December 31, 1996 and 1995, related to the deferred tax assets of the Company. The components of income tax expense (benefit) at December 31, 1996, 1995 and 1994 are as follows: Year ended December 31 1996 1995 1994 Current: Federal $ 27,081 21,288 20,785 State 3,559 2,770 2,422 Foreign 7,836 6,670 5,060 Total current income tax expense 38,476 30,728 28,267 Deferred: Federal (932) 4,284 (3,561) State (125) 577 (479) Total deferred income tax expense (benefit) (1,057) 4,861 (4,040) Total income tax expense $ 37,419 35,589 24,227 The foreign portion of income before taxes was $65,308, $58,997, and $35,990, respectively, for 1996, 1995, and 1994. This income resulted from profits and losses generated from foreign operations. At December 31, 1996, cumulative undistributed earnings from foreign subsidiaries were $195 million. These undistributed foreign earnings are deemed to be permanently reinvested and, therefore, no deferred taxes have been recognized. It is not practical to estimate the amount of taxes that may become payable if such earnings were remitted. A substantial portion of the foreign income before taxes is generated through manufacturing operations in Ireland. Under Irish tax laws, the Company receives permanent tax relief afforded to Irish manufacturers. Income before taxes includes income of certain manufacturing operations in Puerto Rico, which are eligible for tax credits against U.S. federal income tax and partially exempt from Puerto Rican income tax under grants of industrial tax exemptions. These tax exemptions provided net tax benefits of $13,161 in 1996, $14,588 in 1995, and $14,361 in 1994. The exemptions expire at various dates from 2002 through 2007. Deferred income taxes result from U.S. temporary differences in the financial bases and tax bases of assets and liabilities. The types of differences that give rise to significant portions of deferred income tax liabilities are shown in the following table: At December 31 1996 1995 Deferred tax assets: Provisions for expenses and losses $ 8,391 6,980 Employee benefit obligations 16,915 25,523 Total deferred tax assets 25,306 32,503 Deferred tax liabilities: Plant and equipment (4,577) (3,920) Leasing activities (104) (104) Other (730) (730) Total deferred tax liabilities (5,411) (4,754) Deferred income taxes $ 19,895 27,749 The following table reconciles the expected income tax expense, based upon a 35% statutory income tax rate, to the actual income tax expenses for each year: Year ended December 31 1996 1995 1994 Federal income tax expense at statutory rate 35.0% 35.0% 35.0% Increase (decrease) in tax resulting from: State income tax, net of federal effect 1.2 1.2 0.9 Lower tax on Puerto Rican operations (7.3) (8.3) (10.4) Foreign rate differential (8.3) (8.0) (5.5) Other differences, net 0.2 0.4 (2.4) Income tax expense 20.8% 20.3% 17.6% (6) Inventories At December 31 1996 1995 Raw materials $ 3,175 4,752 Work in process 63,233 70,049 Finished goods 50,186 50,537 116,594 125,338 Recoverable engineering and other 1,583 1,483 Inventories $ 118,177 126,821 (7) Plant and Equipment At December 31 1996 1995 Land and buildings $ 41,018 38,489 Machinery and equipment 153,638 132,952 Construction in progress 14,007 19,018 Plant and equipment, at cost 208,663 190,459 Accumulated depreciation (110,796) (102,403) Plant and equipment, net $ 97,867 88,056 For the years ended December 31, 1996, 1995, and 1994, depreciation expense totaled $12,175, $12,064, and $11,258, respectively. (8) Intangible and Other Noncurrent Assets At December 31 1996 1995 Goodwill $ 17,208 2,726 Deferred tax assets 12,339 21,607 Other intangible assets 2,413 2,741 Other 293 442 Intangible and other noncurrent assets $ 32,253 27,516 Goodwill and other acquired intangible assets are shown net of accumulated amortization of $4,732 at December 31, 1996, and $3,656 at December 31, 1995. The increase in goodwill in 1996 is primarily attributable to the acquisitions of Sabroe Reefer Cool and Thermal (see note 2). (9) Short-term Debt At December 31, 1996 and 1995, the Company had outstanding $6,458 and $12,056 in foreign bank borrowings, generally at interest rates ranging from 5% to 11.5%. (10) Other Current Liabilities At December 31 1996 1995 Accrued employee compensation $ 14,352 14,892 Accrued product warranty 26,249 29,567 Accrued for employee benefit obligations 13,000 13,000 Accrued expenses 27,874 28,432 Accrued restructuring costs 2,701 0 Other 5,214 1,954 Other current liabilities $ 89,390 87,845 (11) Changes in Invested Equity 1996 1995 1994 Balance at beginning of year $ 141,314 144,177 110,101 Net income 140,830 138,965 113,404 Minimum pension lia- bility adjustment 16,550 (7,371) 4,992 Cumulative translation adjustment 9,013 1,914 6,519 Disbursements to Westinghouse, net (130,187) (136,371) (90,839) Balance at end of year $ 177,520 141,314 144,177 (12) Commitments and Contingencies The Company is involved in various litigation matters in the ordinary course of business. In the opinion of management, the ultimate resolution of such matters will not result in judgments which, in the aggregate, would materially affect the Company's financial position. In the ordinary course of business, standby letters of credit and surety bonds are issued on behalf of the Company. At December 31, 1996, the Company had $8,533 outstanding under such obligations. Additionally, the Company's commitments for the purchase of plant and equipment at December 31, 1996, totaled $2,276. The Company sources all of the diesel engines that constitute a significant component of its trailer and certain of its truck products from two primary vendors in Japan. The products in which these engines are used account for the majority of the Company's sales. While the Company believes that it could locate alternative sources for these components in the event that its relationship with these suppliers were disrupted, the delays and costs associated with such a change would have a short-term adverse impact on the Company's operations. Historically, the Company has entered into long-term agreements with these vendors to attempt to ensure a reliable source of supply. At December 31, 1996, the Company had under such agreements commitments to purchase $51,854 through September 1997. (13) Leases The Company has commitments under operating leases for certain machinery and equipment and facilities used in various operations. Rental expense in 1996, 1995, and 1994 was $4,606, $4,190, and $3,961, respectively. These amounts include immaterial amounts for contingent rentals and sublease income. Minimum rental payments: Lease At December 31, 1996 obligations 1997 $ 3,194 1998 2,470 1999 1,816 2000 1,871 2001 1,817 Subsequent years 1,462 Minimum rental payments $ 12,630 (14) Restructuring In 1996, the Company recorded a charge to operating profit of $5,587 relating to the closure of a manufacturing facility in the United Kingdom and exiting the heavy rail business. The majority of this charge relates to the costs of separating employees. The following is a reconciliation of the restructuring liability: Provision for restructuring $ 5,587 Cash expenditures (2,014) Noncash expenditures (872) Balance at December 31, 1996 $ 2,701 (15) Segment Information The Company operates principally in one industry segment that includes the design, manufacture, and distribution of transport temperature control equipment. The Company does not derive more than 10% of its total revenue from any single customer. The following table presents certain financial information based on the geographic area where the sale originated: At or for the year ended December 31 1996 1995 1994 Revenues: United States $ 572,802 659,066 591,625 Europe, Africa, and Middle East 383,278 340,356 238,213 Asia-Pacific 16,585 12,911 7,381 Latin America 22,871 27,092 14,056 $ 995,536 1,039,425 851,275 Operating profit (loss): United States $ 114,750 115,826 102,118 Europe, Africa, and Middle East 68,720 58,737 35,549 Asia-Pacific 2,450 2,067 958 Latin America (3,579) 3,198 1,715 $ 182,341 179,828 140,340 Identifiable assets at end of year: United States $ 224,498 220,590 229,499 Europe, Africa, and Middle East 150,934 140,661 118,587 Asia-Pacific 15,620 14,527 8,264 Latin America 16,669 18,965 9,985 $ 407,721 394,743 366,335 U.S. export sales: Canada $ 25,816 23,459 27,179 Europe, Africa, and 5,773 6,013 6,019 Middle East Asia-Pacific 68,465 84,541 69,108 Latin America 12,653 9,127 11,507 $ 112,707 123,140 113,813 (16) Events (Unaudited) Subsequent to the Date of the Report of the Independent Auditor On September 15, 1997, Westinghouse signed a definitive agreement to sell the Company to Ingersoll-Rand Company for $2.56 billion in cash and the assumption of approximately $42 million in pension liabilities. The transaction is expected to close during the fourth quarter of 1997 upon receipt of regulatory approvals. INGERSOLL-RAND COMPANY THERMO KING CORPORATION INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS On October 31, 1997, Ingersoll-Rand Company (the company), purchased all of the outstanding shares of capital stock of Thermo King Corporation (Thermo King) together with other equity interests and assets related to Thermo King, from Westinghouse Electric Corporation, for an aggregate purchase price of approximately $2.56 billion. Thermo King designs, manufactures and distributes transport temperature control systems and service parts for a variety of mobile applications, including trailers, truck bodies, sea-going containers, buses and light rail cars. The purchase price, of approximately $2.56 billion, for the common stock of Thermo King has been preliminarily allocated to tangible and identifiable assets and liabilities of Thermo King based upon estimates of their respective values. These allocations will be subsequently adjusted based upon appraisals, valuations and other studies which will be conducted over the next several months; such final values may differ substantially from those shown herein. The pro forma financial statements should be read in conjunction with the Company's and Thermo King's historical financial statements. The pro forma information presented is for informational purposes only and it is not necessarily indicative of future earnings or financial position or of what the earnings and financial position would have been had the Company's acquisition of Thermo King been consummated at the beginning of the respective periods or as of the date for which such pro forma financial information is presented. INGERSOLL-RAND COMPANY PRO FORMA BALANCE SHEET December 31, 1996 (In millions of dollars) Pro forma Ingersoll- Ingersoll- Thermo Adjustments Rand Rand King Debit Credit Pro forma Assets Current assets: Cash and cash equivalents $ 184.1 $ 3.3 $ -- $ 80.9 (1) $ 106.5 Marketable securities 8.0 -- -- -- 8.0 Accounts and notes receivable 1,066.2 134.3 -- -- 1,200.5 Inventories 775.1 118.2 19.0 (2) -- 912.3 Prepaid expenses 74.1 14.3 -- -- 88.4 Assets held for sale 265.7 -- -- -- 265.7 Deferred income taxes 162.4 7.5 -- 1.4 (5) 168.5 2,535.6 277.6 19.0 82.3 2,749.9 Investments and advances: Dresser-Rand Company 152.6 -- -- -- 152.6 Partially-owned equity companies 223.6 -- -- -- 223.6 376.2 -- -- -- 376.2 Investment in Thermo King -- -- 2,550.8 (1) 2,550.8 (6) -- Property, plant and equipment 2,103.7 208.7 43.0 (2) 110.8 (3) 2,244.6 Less-accumulated depreciation 958.3 110.8 110.8 (3) -- 958.3 1,145.4 97.9 153.8 110.8 1,286.3 Intangible assets, net 1,178.0 19.6 2,373.0 (1+4) -- 3,570.6 Deferred income taxes 162.6 12.3 17.7 (5) -- 192.6 Other assets 223.8 0.3 2.0 (2) -- 226.1 $5,621.6 $407.7 $5,116.3 $2,743.9 $8,401.7 Liabilities and Equity Current liabilities: Accounts payable and accruals $1,095.4 $159.9 $ -- $ 2.0 (2) $1,257.3 Loans payable 162.3 6.7 -- 303.0 (1) 472.0 Customers' advance payments 19.1 2.6 -- -- 21.7 Income taxes 13.4 -- -- -- 13.4 1,290.2 169.2 -- 305.0 1,764.4 Long-term debt 1,163.8 1.9 -- 1,600.0 (1) 2,765.7 Postemployment liabilities 814.7 53.7 -- 40.0 (3) 908.4 Other liabilities 134.2 2.3 -- 32.2 (1+2) 168.7 Minority interests 127.9 3.0 -- -- 130.9 Obligated mandatorily redeemable preferred securities of subsidiary holding solely debentures of I-R -- -- -- 600.0 (1) 600.0 Shareowners' equity: Common stock 220.6 -- -- -- 220.6 Capital in excess of par value 143.5 -- 2,400.4 (1+6)2,373.2 (2-5) 116.3 Earnings retained for use in the business 1,869.6 177.1 177.1 (6) -- 1,869.6 2,233.7 177.1 2,577.5 2,373.2 2,206.5 Less: Unallocated LESOP shares, at cost 55.6 -- -- -- 55.6 Treasury stock, at cost 11.5 -- -- -- 11.5 Minimum pension liability adjustment -- 13.7 -- 13.7 (6) -- Foreign currency equity adjustment 75.8 (14.2) 14.2 (6) -- 75.8 Shareowners' equity 2,090.8 177.6 2,591.7 2,386.9 2,063.6 $5,621.6 $ 407.7 $2,591.7 $4,964.1 $8,401.7
INGERSOLL-RAND COMPANY THERMO KING CORPORATION NOTES TO PRO FORMA BALANCE SHEET December 31, 1996 NOTES: GENERAL COMMENT: The pro forma balance sheet at December 31, 1996, reflects the pro forma adjustments required to present the acquisition of Thermo King, as if the acquisition took place on December 31, 1996. (1)Reflects the Company's investment in Thermo King for $2.56 billion plus acquisition costs estimated at $9.9 million, and the related financing thereof (including financing costs estimated at $33.1 million) which includes the issuance of $303.0 million in short-term debt, $1.6 billion of medium- term debt, $600 million of company obligated mandatorily redeemable preference securities of a subsidiary holding solely debentures of the company and approximately $100 million of available cash. (2)Reflects the adjustments to record inventories, property, plant and equipment and intangible assets at their estimated fair market value. (3)Reflects the adjustments to conform Thermo King's accounting policies to those of the company. (4)Reflects the appropriate goodwill adjustment relating to the acquisition of Thermo King. (5)Reflects the adjustment to record the tax effects related to the pro forma adjustments. (6)Reflects the elimination entry by the company for its investment in Thermo King. INGERSOLL-RAND COMPANY Pro Forma Statement of Income For the year ended December 31, 1996 (In millions of dollars except per share amounts) Pro forma Ingersoll- Ingersoll- Thermo Adjustments Rand Rand King Debit Credit Pro forma Net sales $6,702.9 $995.5 $ -- $ -- $7,698.4 Cost of goods sold 5,029.9 711.1 83.1(1,2,4,5)-- 5,824.1 Administrative, selling and service engineering expenses 989.5 102.1 0.5 (5) -- 1,092.1 Operating income 683.5 182.3 (83.6) -- 782.2 Interest expense (119.9) (1.3) (171.9)(3,7) -- (293.1) Other income (expense), net 0.6 (1.0) (4.0) (6) -- (4.4) Dresser-Rand income 23.0 -- -- -- 23.0 Minority interests (18.9) (1.8) -- -- (20.7) Earnings before income taxes 568.3 178.2 (259.5) -- 487.0 Provision for income taxes 210.3 37.4 -- 91.9 (8) 155.8 Net earnings $ 358.0 $140.8 $(259.5) $91.9 $331.2 Net earnings per common share $2.22 $2.05 Outstanding shares 161,238,547 161,238,547
INGERSOLL-RAND COMPANY THERMO KING CORPORATION NOTES TO PRO FORMA INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 1996 NOTES: GENERAL COMMENT: The pro forma income statement for the year 1996, reflects the pro forma income statement adjustments required to present the estimated combined results of the company and Thermo King, as if the acquisition of Thermo King took place on January 1, 1996. (1) Reflects the write-off of the inventory step-up to fair value over one turn of the inventory. (2) Reflects the additional depreciation on the fixed asset write-up to fair value and the additional amortization of the patents, etc. (3) Reflects the amortization of the debt issuance cost for the Thermo King acquisition. (4) Reflects the amortization of the goodwill from the Thermo King acquisition, which is being amortized over its estimated life of 40 years for book purposes. (5) Reflects the additional postemployment costs for conforming Thermo King's plans to the actuarial assumptions used by the company. (6) Reflects the lost interest income on funds used by the company for the Thermo acquisition. (7) Reflects the interest expense incurred by the company for the Thermo King acquisition. The interest expense was calculated for the first full year on a pro forma basis as follows: o for a period of 45 days, interest was calculated at a rate of 6.25% on an outstanding loan balance of $2.503 billion, o for a period of 320 days, interest was calculated at a rate of 6.5% on a loan balance of $303 million, o for a period of 320 days, interest was calculated at a rate of 6.8% on a loan balance of $1.6 billion, and o for a period of 320 days, interest was calculated at a rate of 6.5% on a balance of $600 million. (8) The tax benefits related to the pro forma adjustments included: o $64.3 million associated with interest expense, o $15.7 million with the deductible portion of goodwill, o $7.2 million associated with the write-off of the inventory step-up, and o $4.7 million associated with the remainder of the pro forma adjustments. INGERSOLL-RAND COMPANY PRO FORMA BALANCE SHEET June 30, 1997 (In millions of dollars) Pro forma Ingersoll- Ingersoll- Thermo Adjustments Rand Rand King Debit Credit Pro forma Assets Current assets: Cash and cash equivalents $ 173.4 $ 5.5 $ -- $ 100.0 (1) $ 78.9 Marketable securities 7.3 -- -- -- 7.3 Accounts and notes receivable 1,216.8 154.9 -- -- 1,371.7 Inventories 811.7 120.1 19.0 (2) -- 950.8 Prepaid expenses 132.6 9.1 -- -- 141.7 Assets held for sale 18.9 -- -- -- 18.9 Deferred income taxes 176.7 7.5 -- 1.4 (5) 182.8 2,537.4 297.1 19.0 101.4 2,752.1 Investments and advances: Dresser-Rand Company 153.0 -- -- -- 153.0 Partially-owned equity companies 212.5 -- -- -- 212.5 365.5 -- -- -- 365.5 Investment in Thermo King -- -- 2,569.9 (1) 2,569.9 (6) -- Property, plant and equipment 2,146.7 212.1 43.0 (2) 114.9 (3) 2,286.9 Less-accumulated depreciation 983.4 114.9 114.9 (3) -- 983.4 1,163.3 97.2 157.9 114.9 1,303.5 Intangible assets, net 1,470.0 17.1 2,373.0 (1+4) -- 3,860.1 Deferred income taxes 146.2 9.4 17.7 (5) -- 173.3 Other assets 221.3 0.3 2.0 (2) -- 223.6 $5,903.7 $421.1 $5,139.5 $2,786.2 $8,678.1 Liabilities and Equity Current liabilities: Accounts payable and accruals $1,236.5 $159.1 $ -- $ 2.0 (2) $1,397.6 Loans payable 167.8 8.9 -- 303.0 (1) 479.7 Customers' advance payments 18.2 1.4 -- -- 19.6 Income taxes 13.8 -- -- -- 13.8 1,436.3 169.4 -- 305.0 1,910.7 Long-term debt 1,164.9 1.7 -- 1,600.0 (1) 2,766.6 Postemployment liabilities 825.8 48.5 -- 40.0 (3) 914.3 Other liabilities 116.8 1.8 -- 32.2 (1+2) 150.8 Minority interests 128.1 3.0 -- -- 131.1 Obligated mandatorily redeemable preferred securities of subsidiary holding solely debentures of I-R -- -- -- 600.0 (1) 600.0 Shareowners' equity: Common stock 222.7 -- -- -- 222.7 Capital in excess of par value 181.2 -- 2,400.4 (1+6) 2,373.2 (2-5) 154.0 Earnings retained for use in the business 2,014.6 196.0 196.0 (6) -- 2,014.6 2,418.5 196.0 2,596.4 2,373.2 2,391.3 Less: Unallocated LESOP shares, at cost 47.5 -- -- -- 47.5 Treasury stock, at cost 11.5 -- -- -- 11.5 Pension liability adjustment -- 7.3 -- 7.3 (6) -- Foreign currency equity adjustment 127.7 (8.0) 8.0 (6) -- 127.7 Shareowners'equity 2,231.8 196.7 2,604.4 2,380.5 2,204.6 $5,903.7 $ 421.1 $2,604.4 $4,957.7 $8,678.1
INGERSOLL-RAND COMPANY THERMO KING CORPORATION NOTES TO PRO FORMA BALANCE SHEET June 30, 1997 NOTES: GENERAL COMMENT: The pro forma balance sheet at June 30, 1997, reflects the pro forma adjustments required to present the acquisition of Thermo King, as if the acquisition took place on June 30, 1997. (1)Reflects the Company's investment in Thermo King for $2.56 billion plus acquisition costs estimated at $9.9 million, and the related financing thereof (including financing costs estimated at $33.1 million) which included the issuance of $303.0 million in short-term debt, $1.6 billion of medium- term debt, $600 million of company obligated mandatorily redeemable preference securities of a subsidiary holding solely debentures of the company and approximately $100 million of available cash. (2)Reflects the adjustments to record inventories, property, plant and equipment and intangible assets at their estimated fair market value. (3)Reflects the adjustments to conform Thermo King's accounting policies to those of the company. (4)Reflects the appropriate goodwill adjustment relating to the acquisition of Thermo King. (5)Reflects the adjustment to record the tax effects related to the pro forma adjustments. (6)Reflects the elimination entry by the company for its investment in Thermo King. INGERSOLL-RAND COMPANY Pro Forma Statement of Income For the six months ended June 30, 1997 (In millions of dollars except per share amounts) Pro forma Ingersoll- Ingersoll- Thermo Adjustments Rand Rand King Debit Credit Pro forma Net sales $3,476.8 $506.3 $ -- $ -- $3,983.1 Cost of goods sold 2,583.9 355.8 32.1 (1,2,4) -- 2,971.8 Administrative, selling and service engineering expenses 516.7 53.7 0.2 (4) -- 570.6 Operating income 376.2 96.8 (32.3) -- 440.7 Interest expense (57.0) (0.5) (85.4) (3,6) -- (142.9) Other income (expense), net (6.6) 1.2 (2.0) (5) -- (7.4) Dresser-Rand income 9.5 -- -- -- 9.5 Minority interests (10.6) (1.0) -- -- (11.6) Earnings before income taxes 311.5 96.5 (119.7) -- 288.3 Provision for income taxes 122.1 19.3 -- 42.1 (7) 99.3 Net earnings $ 189.4 $ 77.2 $(119.7) $42.1 $189.0 Net earnings per share $1.16 $1.16 Outstanding shares 162,718,226 162,718,226
INGERSOLL-RAND COMPANY THERMO KING CORPORATION NOTES TO PRO FORMA INCOME STATEMENT FOR THE SIX MONTHS ENDED JUNE 30, 1997 NOTES: GENERAL COMMENT: The pro forma income statement for the first six months of 1997 reflects the pro forma income statement adjustments required to present the estimated combined results of the company and Thermo King, as if the acquisition of Thermo King took place on January 1, 1997. (1) Reflects the additional depreciation on the fixed asset write-up to fair value and the additional amortization of the patents, etc. (2) Reflects the amortization of the debt issuance cost for the Thermo King acquisition. (3) Reflects the amortization of the goodwill from the Thermo King acquisition, which is being amortized over its estimated life of 40 years for book purposes. (4) Reflects the additional postemployment costs for conforming Thermo King's plans to the actuarial assumptions used by the company. (5) Reflects the lost interest income on funds used by the company for the Thermo King acquisition. (6) Reflects the interest expense incurred by the company for the Thermo King acquisition. The interest expense was calculated for the first six months of 1997 on a pro forma basis as follows: o for a period of six months, interest was calculated at a rate of 6.5% on a loan balance of $303 million, o for a period of six months, interest was calculated at a rate of 6.8% on a loan balance of $1.6 billion, and o for a period of six months, interest was calculated at a rate of 6.5% on a balance of $600 million. (7) The tax benefits related to the pro forma adjustments included: o $32.0 million associated with interest expense, o $7.8 million associated with the deductible portion of goodwill, and o $2.3 million associated with the remainder of the pro forma adjustments. INGERSOLL-RAND COMPANY PRO FORMA COMPUTATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES (Dollar Amounts in Millions) For the Year Ended For the Six Months December 31, 1996 Ended June 30, 1997 Historical Pro forma Historical Pro forma Fixed charges: Interest expense........................... $122.4 $293.2 $ 58.2 $142.7 Amortization of debt discount and expense.. 1.5 4.3 0.7 2.1 Rentals (one-third of rentals)............. 22.4 23.9 12.3 13.1 Capitalized interest....................... 4.6 4.6 1.4 1.4 Total fixed charges.......................... $150.9 $326.0 $ 72.6 $159.3 Net earnings................................. $358.0 $331.2 $189.4 $189.0 Add: Minority income (loss) of majority- owned subsidiaries.................. 18.9 20.7 10.6 11.6 Taxes on income....................... 210.3 155.8 122.1 99.3 Fixed charges......................... 150.9 326.0 72.6 159.3 Less: Capitalized interest.................. 4.6 4.6 1.4 1.4 Undistributed earnings (losses) from less than 50% owned affiliates...... (23.1) (23.1) 11.5 11.5 Earnings available for fixed charges ........ $756.6 $852.2 $381.8 $446.3 Ratio of earnings to fixed charges .......... 5.01 2.61 5.26 2.80 Undistributed earnings (losses) from less than 50% owned affiliates: Equity in earnings (losses)................ $36.4 $ 36.4 $ 14.2 $ 14.2 Less: Amounts distributed............... 59.5 59.5 2.7 2.7 Undistributed earnings (losses) from less-than 50% owned affiliates........... $(23.1) $(23.1) $ 11.5 $ 11.5
Note: The pro forma ratios of earnings to fixed charges for the year ended December 31, 1996 and for the six months ended June 30, 1997, are based on the pro forma income statements filed herewith. The pro forma ratios presented are for information purposes only and they are not necessarily indicative of what the ratios would have been, had the Company's acquisition of Thermo King Corporation been consummated at the beginning of the respective periods. 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 November 3, 1997 /S/ Gerard V. Geraghty Gerard V. Geraghty Vice President and Comptroller (Principal Financial and Accounting Officer) INGERSOLL-RAND COMPANY INDEX TO EXHIBITS (Item 7) Description (10) Stock Purchase Agreement, dated as of September 12, 1997, between Westinghouse Electric Corporation and the Registrant. (Incorporated herein by reference from the Registrant's Form 8-K, dated September 17, 1997.) (23) (i)Consent of KPMG Peat Marwick LLP (23) (ii)Consents of Price Waterhouse EX-23 2 Exhibit 23(i) Page 1 of 1 Independent Auditors' Consent The Board of Directors Westinghouse Electric Corporation: We consent to the incorporation by reference in the registration statements on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated January 29, 1997, with respect to the combined balance sheets of Thermo King (a unit of Westinghouse Electric Corporation) as of December 31, 1996 and 1995 and the related combined statements of income and cash flows for each of the years in the three-year period ended December 31, 1996, which report appears in the Form 8-K of Ingersoll-Rand Company dated November 3, 1997. Minneapolis, Minnesota October 31, 1997 /S/ KPMG Peat Marwick LLP EX-23 3 Exhibit 23(ii) Page 1 of 7 Consent Of Independent Accountants We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated 30 September 1996 relating to the financial statements of Westinghouse Electric Ireland Limited, which appears in the Current Report on Form 8- K of Ingersoll-Rand Company dated November 3, 1997. /S/ Price Waterhouse Price Waterhouse Limerick, Ireland October 30, 1997 Exhibit 23(ii) Page 2 of 7 Report of Independent Accountants We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated March 15, 1996 relating to the financial statements of Westinghouse de Puerto Rico, Inc., which appears in the Current Report on Form 8-K of Ingersoll-Rand Company dated November 3, 1997. /S/ Price Waterhouse San Juan, Puerto Rico October 30, 1997 Exhibit 23(ii) Page 3 of 7 Report of Independent Accountants We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated March 31, 1995 relating to the financial statements of Westinghouse de Puerto Rico, Inc., which appears in the Current Report on Form 8-K of Ingersoll-Rand Company dated November 3, 1997. /S/ Price Waterhouse San Juan, Puerto Rico October 30, 1997 Exhibit 23(ii) Page 4 of 7 Consent Of Independent Accountants We hereby consent to the incorporation by reference in the Prospectuses constituting part of the Registration Statement on Form S-3 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated 12 May 1995, relating to the financial statements of Petter Refrigeration Limited which appears in the Current Report on Form 8-K of Ingersoll-Rand Company dated November 3, 1997. /S/ Price Waterhouse Price Waterhouse Southampton, England October 31, 1997 Exhibit 23(ii) Page 5 of 7 Consent Of Independent Accountants We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (No.Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated March 14, 1996 relating to the financial statements of Thermo King Dalian Transport Refrigeration Company Limited, which appears in the Current Report on Form 8-K of Ingersoll-Rand Company dated November 3, 1997. /S/ Price Waterhouse, Da Hua Certified Public Accountants China, October 30, 1997 Exhibit 23(ii) Page 6 of 7 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 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated March 8, 1996, relating to the financial statements of Reftrans S.A. as of November 30, 1995 and 1994 which appears in the Current Report on Form 8-K of Ingersoll-Rand Company dated November 3, 1997. /S/ Price Waterhouse Price Waterhouse Auditores, S.A. Barcelona, Spain October 30, 1997 Exhibit 23(ii) Page 7 of 7 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 (Nos. 33-60249, 333-34029, 333-37019 and 333-38367) of Ingersoll-Rand Company of our report dated May 30, 1996 relating to the financial statements of Thermo King Czech Republic, s.r.o., which appears in the Current Report on Form 8- K of Ingersoll-Rand Company dated November 3, 1997. /S/ Lindsay R. Dart Lindsay R. Dart partner for and on behalf of BNP - Leasing, spol. s.r.o. Prague, Czech Republic October 30, 1997 -----END PRIVACY-ENHANCED MESSAGE-----