-----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, SXRoJBHWiM+4Suco6YmVZFgo3f+L5+57r67cbxMp9N98b4DlYtuDWhgS4hR8OkoJ niOHk6D5godyDW2Dnkl09w== 0000050485-99-000010.txt : 19991117 0000050485-99-000010.hdr.sgml : 19991117 ACCESSION NUMBER: 0000050485-99-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99751676 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 10-Q 1 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 September 30, 1999 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-985 INGERSOLL-RAND COMPANY Exact name of registrant as specified in its charter New Jersey 13-5156640 State of incorporation I.R.S. Employer Identification No. Woodcliff Lake, New Jersey 07675 Address of principal executive offices Zip Code (201) 573-0123 Telephone number of principal executive offices Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes . X . No . . . The number of shares of common stock outstanding as of October 31, 1999 was 163,575,919. INGERSOLL-RAND COMPANY FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Condensed Consolidated Balance Sheet at September 30, 1999 and December 31, 1998 Condensed Consolidated Income Statement for the three and nine months ended September 30, 1999 and 1998 Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 1999 and 1998 Notes to Condensed Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION SIGNATURES INGERSOLL-RAND COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (in millions) ASSETS September 30, December 31, 1999 1998 Current assets: Cash and cash equivalents $ 61.8 $ 43.5 Marketable securities 1.8 2.1 Accounts and notes receivable, net of allowance for doubtful accounts 1,106.8 963.7 Inventories 783.9 824.8 Prepaid expenses 76.4 55.6 Assets held for sale 267.0 302.8 Deferred income taxes 145.8 139.9 Total current assets 2,443.5 2,332.4 Investments in and advances with partially-owned equity affiliates 187.8 183.6 Property, plant and equipment, at cost 2,138.2 2,061.7 Less - accumulated depreciation 886.8 825.0 Net property, plant and equipment 1,251.4 1,236.7 Intangible assets, net 3,772.0 3,765.7 Deferred income taxes 205.4 229.9 Other assets 177.1 175.7 Total assets $8,037.2 $7,924.0 LIABILITIES AND EQUITY Current liabilities: Loans payable $ 258.4 $ 318.0 Accounts payable and accruals 1,241.7 1,284.4 Income taxes 29.3 16.5 Total current liabilities 1,529.4 1,618.9 Long-term debt 2,116.2 2,166.0 Postemployment liabilities 822.2 820.5 Minority interests 33.6 33.6 Other liabilities 161.3 152.4 4,662.7 4,791.4 Company obligated mandatorily redeemable preferred securities of subsidiary trust holding solely debentures of the company 402.5 402.5 Shareholders' equity: Common stock 342.2 337.8 Other shareholders' equity 2,788.5 2,522.8 Accumulated other comprehensive income (158.7) (130.5) Total shareholders' equity 2,972.0 2,730.1 Total liabilities and equity $8,037.2 $7,924.0 See accompanying notes to condensed consolidated financial statements. INGERSOLL-RAND COMPANY CONDENSED CONSOLIDATED INCOME STATEMENT (in millions except per share figures) Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 Net sales $1,846.1 $1,802.3 $5,779.2 $5,569.4 Cost of goods sold 1,324.7 1,320.1 4,183.3 4,091.5 Administrative, selling and service engineering expenses 248.5 245.2 779.6 767.5 Operating income 272.9 237.0 816.3 710.4 Interest expense (50.1) (51.5) (155.7) (171.2) Other income (expense), net (8.2) (11.7) (13.4) (14.9) Minority interests (7.6) (7.4) (21.3) (15.9) Earnings from continuing operations before income taxes 207.0 166.4 625.9 508.4 Provision for income taxes 73.5 59.1 222.2 180.5 Earnings from continuing operations 133.5 107.3 403.7 327.9 Discontinued operations (net of income taxes) 4.0 12.1 21.5 31.5 Net earnings $ 137.5 $ 119.4 $ 425.2 $ 359.4 Basic earnings per common share - Continuing operations $ 0.81 $ 0.66 $ 2.46 $ 2.00 - Discontinued operations 0.03 0.07 0.13 0.19 $ 0.84 $ 0.73 $ 2.59 $ 2.19 Diluted earnings per common share - Continuing operations $ 0.80 $ 0.65 $ 2.43 $ 1.98 - Discontinued operations 0.03 0.07 0.13 0.19 $ 0.83 $ 0.72 $ 2.56 $ 2.17 Dividends per common share $ 0.17 $ 0.15 $ 0.47 $ 0.45
See accompanying notes to condensed consolidated financial statements. INGERSOLL-RAND COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (in millions) Nine months ended September 30, 1999 1998 Cash flows from operating activities: Earnings from continuing operations $ 403.7 $ 327.9 Adjustments to arrive at net cash provided by operating activities: Depreciation and amortization 204.5 198.5 Gain on sale of property, plant and equipment (0.5) (6.9) Gain on sale of businesses - (6.6) Equity earnings/loss, net of dividends (2.2) (8.0) Minority interests in earnings, net of dividends 0.3 1.0 Deferred income taxes 19.8 10.6 Other items 29.4 4.3 Changes in other assets and liabilities, net (179.1) 119.2 Net cash provided by operating activities 475.9 640.0 Cash flows from investing activities: Capital expenditures (125.2) (149.6) Proceeds from sales of property, plant and equipment 17.0 20.3 Acquisitions, net of cash (160.2) (53.7) Proceeds from business dispositions 47.0 58.0 Decrease in marketable securities 0.2 1.8 Cash advances from/(to) from equity companies (1.3) (8.4) Net cash used in investing activities (222.5) (131.6) Cash flows from financing activities: Decrease in short-term borrowings (25.4) (623.5) Proceeds from long-term debt 21.5 0.1 Payments of long-term debt (101.1) (145.3) Net change in debt (105.0) (768.7) Net proceeds from issuance of equity-linked securities - 389.7 Purchase of treasury stock (167.1) (93.7) Dividends paid (77.5) (73.7) Proceeds from exercise of stock options 67.5 26.4 Net cash used in financing activities (282.1) (520.0) Net cash provided by discontinued operations 41.1 8.1 Effect of exchange rate changes on cash and cash equivalents 5.9 1.8 Net increase (decrease) in cash and cash equivalents 18.3 (1.7) Cash and cash equivalents - beginning of period 43.5 66.5 Cash and cash equivalents - end of period $ 61.8 $ 64.8 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 at September 30, 1999 and results of operations for the three and nine months ended September 30, 1999 and 1998. As discussed in Note 2, the company's joint ventures in the pump, and reciprocating compressor and turbomachinery businesses are reported as discontinued operations. Certain prior period amounts in the condensed consolidated financial statements have been reclassified in order to conform with current year presentation. NOTE 2 - On August 12, 1999, the company announced its intention to dispose of its interest in Dresser-Rand Company (D-R), a joint venture involved in the reciprocating compressor and turbo machinery business, and Ingersoll-Dresser Pump Company (IDP), a joint venture involved in the pump business. On October 5, 1999, the joint venture partner, as permitted under the joint venture agreements, elected to sell its share of the joint ventures to the company. The net cash price that the company will pay to purchase the remaining ownership in the joint ventures is approximately $925 million. The company intends to divest both these businesses as soon as practical and expects to do so in the first half of 2000. The businesses have been reported as assets held for sale in the accompanying condensed financial statements, and prior periods have been reclassified accordingly. Historically, IDP had been reported as part of the Engineered Products Segment, while D-R had been reported as equity in earnings of partially owned affiliates. The net assets of discontinued operations held for sale are composed of the following (in millions): September 30, December 31, 1999 1998 Cash and cash equivalents $ 24.3 $ 28.5 Other current assets 298.4 345.5 Investment in partially-owned affiliates 126.3 161.1 Property, plant and equipment, net 102.8 110.8 Other assets 19.2 18.4 Current liabilities (183.8) (230.0) Other liabilities (78.1) (78.1) Minority interests (95.3) (100.0) Cumulative translation adjustment 31.3 22.6 Net assets of discontinued operations held for sale $ 245.1 $ 278.8 Results reported separately by either D-R or IDP that are reported on a stand-alone basis, may differ from the results based on discontinued operations reporting. In addition, at September 30, 1999, IDP had intercompany receivables and payables with the company that have been eliminated for purposes of presenting net assets of discontinued operations. The net payable to D-R has been netted against the assets of discontinued operations held for sale. NOTE 3 - On March 30, 1999 the company completed the acquisition of Harrow Industries Inc., a leading manufacturer of access control technologies, architectural hardware, and decorative bath fittings and accessories. The purchase price was approximately $160 million, which includes the assumption and immediate repayment of certain debt. This transaction has been accounted for as a purchase with the results included since the second quarter of 1999. Included in assets held for sale since acquisition are assets of Harrow that are expected to be sold in the first quarter of 2000. NOTE 4 - Inventories of domestically manufactured standard products are valued on the last-in, first-out (LIFO) method and all other inventories are valued using the first-in, first-out (FIFO) method. The composition of inventories for the balance sheets presented were as follows (in millions): September 30, December 31, 1999 1998 Raw materials and supplies $ 165.6 $ 166.8 Work-in-process 208.6 195.7 Finished goods 560.5 607.7 934.7 970.2 Less - LIFO reserve 150.8 145.4 Total $ 783.9 $ 824.8 Work-in-process inventories are stated after deducting customer progress payments of $3.0 million at September 30, 1999 and $5.6 million at December 31, 1998. NOTE 5 - The company adopted SFAS No. 131 "Disclosures about Segments of an Enterprise and Related Information" effective January 1, 1998. The statement requires companies to report financial and descriptive information about its operating segments in financial statements for interim and annual periods. A summary of operations by reportable segment for the three and nine months ended September 30, is as follows: Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 Sales Specialty Vehicles $ 537.0 $ 534.8 $1,799.1 $1,684.5 Air & Temperature Control 541.2 547.3 1,645.9 1,672.5 Hardware & Tools 485.4 442.1 1,406.3 1,291.2 Engineered Products 282.5 278.1 927.9 921.2 Total $1,846.1 $1,802.3 $5,779.2 $5,569.4 Operating Income Specialty Vehicles $ 92.9 $ 86.8 $ 315.7 $ 260.2 Air & Temperature Control 70.9 57.7 212.6 193.1 Hardware & Tools 93.0 79.2 237.0 209.2 Engineered Products 28.0 24.2 92.0 85.4 Unallocated corporate expense (11.9) (10.9) (41.0) (37.5) Total $ 272.9 $ 237.0 $ 816.3 $ 710.4 Long-lived asset information by geographic area at December 31, 1998, excluding IDP, was United States assets of $4,211.9 million and foreign assets of $966.2 million. IDP had previously been reported as part of the Engineered Products Segment. No other significant changes in the restated segment assets have occurred since December 31, 1998. NOTE 6 - Information on basic and diluted earnings per share is as follows (in millions except per shares figures): Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 Earnings from continuing operations $133.5 $107.3 $403.7 $327.9 Discontinued operations 4.0 12.1 21.5 31.5 Net earnings $137.5 $119.4 $425.2 $359.4 Average number of basic shares 163.9 163.6 164.0 163.8 Shares issuable assuming exercise under incentive stock plans 2.2 1.6 2.2 1.9 Shares issuable in connection with equity-linked securities 0.3 -- -- -- Average number of diluted shares 166.4 165.2 166.2 165.7 Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 Basic earnings per shares Continuing operations $ 0.81 $ 0.66 $ 2.46 $ 2.00 Discontinued operations 0.03 0.07 0.13 0.19 $ 0.84 $ 0.73 $ 2.59 $ 2.19 Diluted earnings per share Continuing operations $ 0.80 $ 0.65 $ 2.43 $ 1.98 Discontinued operations 0.03 0.07 0.13 0.19 $ 0.83 $ 0.72 $ 2.56 $ 2.17 NOTE 7 - The components of comprehensive income are as follows (in millions): Three months ended Nine months ended September 30, September 30, 1999 1998 1999 1998 Net earnings $ 137.5 $ 119.4 $ 425.2 $ 359.4 Other comprehensive income - Foreign currency equity adjustment 22.9 13.6 (28.2) (10.3) Comprehensive income $ 160.4 $ 133.0 $ 397.0 $ 349.1 NOTE 8 -SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities" requires companies to record derivatives on the balance sheet as assets or liabilities, measured at fair value. The FASB recently delayed the required adoption to fiscal years beginning after June 15, 2000. The company will adopt SFAS No. 133 by January 1, 2001, and is currently evaluating the impact this statement may have on the company's financial position and results of operations. INGERSOLL-RAND COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION RESULTS OF OPERATIONS The company's results for the third quarter of the year established a new record for net earnings and earnings per share. Net earnings from continuing operations totalled $133.5 million for the third quarter of 1999, reflecting an increase of $26.2 million (or 24.4 percent) over last year's comparable third quarter figure of $107.3 million. Diluted earning per share from continuing operations totalled $0.80 for the 1999 third quarter versus $0.65 for the third quarter of 1998. Diluted earnings per share (from both continuing and discontinued operations) totalled $0.83 for the three months ended September 30, 1999, as compared to $0.72 for last year's third quarter. In August 1999, the company notified Dresser Industries Inc. (a wholly- owned subsidiary of Halliburton Company) of its desire to terminate their two joint ventures. The ventures are Dresser-Rand Company (D-R), a producer of reciprocating compressors and turbomachinery products, and Ingersoll-Dresser Pump Company (IDP) a manufacturer of pumps used in industrial, commercial and municipal applications. In accordance with the terms of the joint venture agreements, the company gave notice of its intention to sell its 49-percent interest in D-R and its 51- percent interest in IDP to Dresser Industries. Under the governing agreements, Dresser Industries had the option of either buying one or both of the joint ventures from or selling one or both of the joint ventures to the company. However, the company also announced that if Dresser Industries elected to sell its shares in these joint ventures to the company, the company would divest these units, as soon as practical. On October 5, 1999, the company was notified by Dresser Industries that it had elected to sell its interests in the joint ventures to the company. The net cash price for the joint ventures will be approximately $925 million, which represents a price of $555 million for the 51-percent of D-R and $370 million for the 49-percent of IDP. In 1998, D-R reported revenues for the year of $1,249 million, while IDP reported revenues of $907 million for the comparable period. In accordance with the company's decision to sell these units, as soon as practical after their purchase, the results of operations (and related activity) have been reclassified as "discontinued operations (net of income taxes)" in the accompanying condensed consolidated income statement for both the three and nine month periods ended September 30, 1999 and 1998. In addition, the net assets of these joint ventures have been reclassified to "assets held for sale" on the accompanying condensed consolidated balance sheet at September 30, 1999 and December 31, 1998. The company's discussion and analysis of its results for both the three and nine month periods ended September 30, 1999 and 1998, are after the effects of these reclassifications. A comparison of key income statement amounts between the quarters, is as follows: o Net sales for the third quarter of 1999 totalled $1.8 billion, an increase of 2.4-percent over last year's comparable quarter. o The ratio of cost of goods sold to sales for the third quarter of 1999 was 71.8 percent and reflected a marked improvement over the 1998 third-quarter ratio of 73.2 percent. o The ratio of administrative, selling and service engineering expenses to sales was 13.4 percent for the three months ended September 30, 1999, which was slightly lower than last year's third quarter ratio, and emphasizes the company's continued commitment to cost containment. o Operating income for the third quarter of 1999 totalled $272.9 million, an increase of $35.9 million (or 15.1 percent) over the $237.0 million for last year's third quarter. The ratio of operating income to sales in the third quarter increased to 14.8 percent, as compared to 13.1 percent in 1998's third quarter. o Other income (expense), net, is the sum of foreign exchange activities, equity earnings from partially-owned affiliates and other miscellaneous income and expense items. These activities aggregated $8.2 million of net expense for the three months ended September 30, 1999, as compared to $11.7 million of net expense in the third quarter of 1998. This $3.5 million favorable change is primarily attributed to decreased foreign exchange losses. o The company's charges for minority interests are composed of (i) interests of minority owners (less than 50 percent) in consolidated units of the company and (ii) charges associated with the company's equity-linked securities, issued in March of 1998. The charge for minority interests totalled $7.6 million for the three months ended September 30, 1999 versus $7.4 million in 1998. This change is attributed to higher earnings from consolidated units which are not fully owned by the company; therefore, generating a higher charge for minority interests for the company during the third quarter of 1999. o Interest expense for the third quarter of 1999 was $50.1 million as compared to $51.5 million for the third quarter of 1998. The reduction is attributed to lower outstanding debt balances during the comparable periods. o The company's effective tax rate for the third quarters of both 1999 and 1998 was 35.5 percent. The current year's estimated effective tax rate for the full year 1999 is 35.5 percent, which equaled last year's effective rate. o During the third quarter of 1999, the company has decided to exit the businesses served by its investments in D-R and IDP. The caption "discontinued operations (net of income taxes)" represents the net results of the company's 49-percent interest in the net earnings of D-R, the net earnings of IDP, the minority interest associated with IDP and the net tax effect of these results for the periods presented. (See note 2 for additional information on these entities.) The consolidated results for the third quarter of the year benefited from the combination of business improvements in a number of the company's domestic and selected foreign markets and a continued emphasis on the company's productivity-improvement programs. The company's backlog of orders at September 30 1999, believed by it to be firm, was $1.1 billion, which approximated the adjusted backlog at December 31, 1998. The company estimates that approximately 90 percent of the backlog will be shipped during the next twelve months. A comparison of key income statement amounts between the first three quarters of both years, is as follows: o Net sales for the first nine months of 1999 totalled $5.8 billion, an increase of 3.8 percent over last year's nine month total of $5.6 billion. o The ratio of cost of goods sold to sales for the first nine months of 1999 was 72.4 percent and reflected an improvement over the 1998 nine month ratio of 73.5 percent. o The ratio of administrative, selling and service engineering expenses to sales was 13.5 percent for the nine months ended September 30, 1999 and reflected an improvement over the 13.8 percent ratio for the comparable 1998 period. o Operating income for the first three quarters of 1999 totalled $816.3 million, an increase of $105.9 million (or 14.9 percent) over the $710.4 million for last year's nine month total. The ratio of operating income to sales in the period increased to 14.1 percent, as compared to 12.7 percent the comparable 1998 period. o Other income (expense), net, aggregated $13.4 million of expense for the nine months ended September 30, 1999, as compared to $14.9 million of net expense for the first three quarters of 1998. This $1.5 million net favorable change is the net result of (i) a favorable change in foreign currency activities (which generated gains in 1999 as compared to losses in 1998); (ii) reduced earnings from interest, commissions and royalties; (iii) reduced equity earnings from partially-owned equity companies; and (iv) slightly higher charges of a miscellaneous nature. o The company's charges for minority interests are composed of (i) interests of minority owners (less than 50 percent) in a consolidated unit of the company and (ii) charges associated with the company's equity-linked securities (which were issued in March of 1998). The charges for minority interests totalled $21.3 million for the nine months ended September 30, 1999 versus $15.9 million in 1998. This change is attributed mainly to the fact the equity-linked securities were outstanding for the full nine months in 1999. In addition, overall lower net earnings for the nine months of 1999 for minority owners in consolidated units of the company were also a factor. o Interest expense for the first three quarters of 1999 was $155.7 million as compared to $171.2 million for the first nine months of 1998. The reduction is attributed to lower outstanding debt balances during the comparable periods. o The company's effective tax rate for the nine months ended September 30, 1999 was 35.5 percent, which equalled 1998's rate for the comparable period. o Discontinued operations, (net of income taxes), during the third quarter of 1999, represents the net results of the company's 49- percent interest in the net earnings of D-R, the net earnings of IDP, the minority interest associated with IDP and the net tax effect of these results for the periods provided. Liquidity and Capital Resources The following comments relate strictly to continuing operations. During the first three quarters of 1999 the company experienced improvements in its overall financial position. The company's working capital increased by $200.6 million to $914.1 million at September 30, 1999, from the restated December 31, 1998 balance of $713.5 million. The current ratio increased to 1.6 to 1.0 at the end of the first nine months from the restated 1.4 to 1.0 ratio at the end of 1998. The company's debt-to-total capital ratio at September 30, 1999, totalled 41 percent, which reflects an improvement from the restated 44 percent reported at December 31, 1998. This improvement is even more significant after considering the company's March 30, 1999 acquisition of Harrow Industries, Inc. for approximately $160 million (see Note 3). The company's cash and cash equivalents totalled $61.8 million at September 30, 1999, which reflects an increase of $18.3 million from the $43.5 million at December 31, 1998. Cash flows from operating activities provided $475.9 million, investing activities used $222.5 million, financing activities used $282.1 million, and discontinued operations provided an additional $41.1 million. Exchange rate changes during the first nine months of 1999 decreased cash and cash equivalents by $5.9 million. Receivables totalled $1.1 billion at September 30, 1999, which represents a $143.1 million increase from the $963.7 million at December 31, 1998. The increase is attributed to strong sales for the first nine months of the year and the effect of an acquisition, which were partially offset by the effects of foreign currency translation of $33.8 million. Inventories totalled $783.9 million at September 30, 1999, which represents a decrease of $40.9 million from the year-end balance of $824.8 million. The net decrease is attributed to the effects of foreign currency translation of approximately $24 million, with the balance being the effect of inventory reduction programs which more than offset increases caused by the company's acquisition program during the first three quarters of the year. Assets held for sale totalled $267.0 million at September 30, 1999, and reflects a reduction of $35.8 million from the December 31, 1998 total of $302.8 million. This decrease primarily represents changes in the payable/receivable balances due D-R and IDP from the joint venture partners for the periods presented. Intangible assets totalled $3,772.0 million at September 30, 1999 which was $6.3 million above the $3,765.7 million balance at December 31, 1998. Intangible assets increased by approximately $100 million from acquisitions and were reduced by amortization of $84.3 million and the effects of foreign currency translation. Long term debt, including current maturities, at September 30, 1999, totalled $2.3 billion. The company's debt-to-total capital ratio was 41 percent at September 30, 1999, which represented a reduction from the 44 percent at December 31, 1998. It should be noted that, this improvement takes into account the company's March 30, 1999 acquisition of Harrow Industries, Inc. for approximately $160 million less proceeds of $47 million from the sale of certain Harrow assets during the third quarter. The company is in the process of securing short-term financing of approximately $900 million, for the acquisition of Dresser Industries interests in D-R and IDP, which will be sold, as soon as practical after their acquisition. (See note 2 for additional information). During the first nine months of 1999, foreign currency translation adjustments resulted in a decrease of approximately $28.2 million in shareholders' equity, caused by the strengthening of the U.S. dollar against other currencies. Currency changes in Brazil, Czech Republic, France and Germany accounted for most of this change. Computer Systems and the Year 2000 The company has in place a year 2000 compliance program to address the issues raised by computer date programs using the last two digits of a year. Pursuant to its year 2000 program, the company reviewed its computer information systems, computer hardware and embedded technology used in the company's products and processes. This review was designed to identify which computer systems and embedded technology might fail to correctly process the year 2000. Based upon this review, which is now complete, the company is replacing, modifying and/or upgrading certain computer systems and embedded technology with the objective being that no significant systems or devices will malfunction as the result of failing to correctly process the year 2000. The company, through the use of both internal resources and outside consultants, has actively engaged in this replacement, modification and upgrading and had substantially completed its remediation program and testing by the end of 1998. The review of company products revealed that all products currently being produced are year 2000 compliant. The total cost of the year 2000 compliance program since 1997, is approximately $60 million. Although the company had incurred expenses prior to 1997, these costs were not separately identified. Management estimates that as of September 30, 1999, all of the costs have been incurred and were funded through operating cash flow. Approximately 45 percent of these expenses were internal costs of the company. The company believes that all internal systems are completed. In addition to its internal review process, the company has contacted suppliers and distributors on the year 2000 issue to minimize problems in its supply and distribution chains. Most major suppliers have given assurances that their ability to supply the company will not be affected by the year 2000 issue; however, the company cannot assure timely compliance of third parties and may be adversely affected by failure of a significant third party to become year 2000 compliant. The company believes that the costs to address the issues raised by the year 2000 problem will not have a material impact on the company's financial condition, results of operations, liquidity or cash flows for any period. The schedule for successful completion of the year 2000 program and the estimated costs are based upon certain assumptions by management on future events, including the continued availability of qualified resources to implement the program and current costs for such resources. If the company fails to successfully complete a significant portion of its year 2000 compliance program, such failure may have a material adverse impact on the company's financial condition. Currently management does not consider the possibility of such a failure to be reasonably likely; however, in the event management's assessment changes an appropriate contingency plan is being developed. Euro Conversion The company continues to identify and address all euro conversion compliance issues. At this time, the company has not experienced significant difficulties. 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 30 federal Superfund and state remediation sites, excluding sites as to which the company's records disclose no involvement or as to which the company's liability has been fully determined. For all sites, there are other PRPs and in most instances, the company's site involvement is minimal. In estimating its liability, the company has not assumed 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 and Dispositions On March 30, 1999, the company completed the acquisition of Harrow Industries, Inc.(Harrow), a leading manufacturer of access control technologies, architectural hardware, and decorative bath fittings and accessories. The purchase price was approximately $160 million, which includes the assumption of certain debt. At acquisition, the company segregated certain net assets of Harrow that would be sold within twelve months. During the third quarter, the company received proceeds of $47 million on the sale of a portion of these assets. At September 30, 1999, the remainder of such Harrow assets are classified as "assets held for sale" on the accompanying condensed consolidated balance sheet. On March 20, 1998 the company completed the sale of Ing. G. Klemm Bohrtechinik GmbH. Also in the first quarter, the company sold certain assets of Newman Tonks Group Limited. Sales proceeds approximated the book value of these assets. Third-quarter Business Segment Review The Specialty Vehicles Segment includes Bobcat skid-steer loaders and compact hydraulic excavators; Club Car golf cars; Blaw-Knox pavers; and Ingersoll-Rand compactors, drilling equipment and rough- terrain material handlers. This segment's sales totaled $537.0 million for the third quarter of 1999, representing a slight increase over the $534.8 million reported for 1998's third quarter. Operating income of $92.9 million increased by seven percent compared to last year's third quarter. Excluding the third quarter 1998 $9 million gain on the sale of the Spra-coupe product line, third quarter operating income improved 20 percent. Strong operating income improvements at Bobcat, Club Car and the paving business were partially offset by weaker sales and earnings at the company's drill business. The Air and Temperature Control Segment includes Thermo King transport temperature-control equipment and Ingersoll-Rand air compressors. The segment's third quarter 1999 sales totaled $541.2 million versus $547.3 million last year. However, operating income for the third quarter of 1999 increased by approximately 23 percent to $70.9 million from $57.7 million last year. Air compressor sales declined in the third quarter; however, operating margins increased due to continuing cost reductions. Thermo King sales increased approximately two percent, when compared to last year's third quarter and operating earnings improved by more than 10 percent because of a improved sales mix and productivity improvement actions. The Hardware and Tools Segment includes architectural hardware products, such as Schlage locks, as well as exit devices, door-control hardware, steel doors and power-operated doors; and Ingersoll-Rand tools and related industrial-production equipment. For this segment, third-quarter 1999 sales increased by 10 percent to $485.4 million. Operating income for the quarter totaled $93.0 million, an increase of more than 17 percent over last year's third quarter. Architectural hardware products reported a double-digit sales increase and improved operation margins. Production Equipment sales increased by approximately five percent with improved operating margins from ongoing cost reduction activities. The Engineered Products Segment includes Torrington and Fafnir bearings and components. The results of IDP were formerly included in this segment, but have been reclassified as discontinued operations. Third-quarter 1999 sales of $282.5 million improved slightly, while operating income increased by approximately 16 percent, when compared to last year's third quarter performance. Continued strong sales of needle bearings and operating improvements from cost containment programs offset weaknesses in the industrial bearings business. Forward-Looking Statements Information provided by the company in reports such as this report on Form 10-Q, in press releases and in statements made by employees in oral discussions may constitute or contain "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 or by the Securities and Exchange Commission in its rules, regulations and releases. Forward-looking statements represent the company's expectations concerning future events and, by their nature, involve risk and uncertainty. The company cautions investors that forward-looking statements are not guarantees of future performance. A variety of factors could cause business conditions and actual results to differ materially from expected results contained in forward-looking statements. The company includes among those factors the following: changes in the rate of economic growth in the United States and in other major international economies; impacts of unusual items resulting from ongoing evaluations of organizational structures, business strategies and acquisitions and dispositions; significant changes in trade, monetary and fiscal policies worldwide; currency fluctuations among the U.S. dollar and other currencies; demand for company products; distributor inventory levels; performance issues with key suppliers and subcontractors; impact of the year 2000; failure to achieve the company's productivity targets; costs and effects of unanticipated legal and administrative proceedings; and, competitor actions, such as unanticipated pricing actions or cost reduction strategies and entry into direct product line competition. INGERSOLL-RAND COMPANY PART II OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits Exhibit No. Description 27 Financial Data Schedules (b) Reports on Form 8-K None 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 15, 1999 /S/ D.W. Devonshire D.W. Devonshire, Senior Vice President & Chief Financial Officer Principal Financial Officer Date November 15, 1999 /S/ S.R. Shawley S.R. Shawley, Vice President & Controller Principal Accounting Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1997, JUNE 30, 1997, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND MARCH 31, 1998 FINANCIAL STATEMENTS AND IS QUALIFIEDIN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS 6-MOS 9-MOS 12-MOS 3-MOS DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1998 MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997 MAR-31-1998 420 126 163 66 80 4 4 4 4 3 1,007 1,075 1,039 1,113 1,184 31 35 38 32 33 674 698 661 741 795 2,591 2,472 2,392 2,420 2,544 1,747 1,809 1,822 1,938 1,983 747 755 773 764 795 5,316 5,546 5,474 8,037 8,165 1,150 1,241 1,261 2,113 1,763 1,165 1,165 1,020 2,528 2,527 0 0 0 0 403 0 0 0 0 0 221 223 335 335 336 1,917 2,034 1,977 2,030 2,085 5,316 5,546 5,474 8,037 8,165 1,446 3,062 4,557 6,239 1,813 1,446 3,062 4,557 6,239 1,813 1,082 2,274 3,374 4,613 1,342 1,082 2,274 3,374 4,613 1,342 0 0 0 0 0 0 0 0 0 0 28 56 82 135 62 125 286 427 578 146 51 112 166 220 52 74 174 261 359 94 4 16 25 22 5 0 0 0 0 0 0 0 0 0 0 78 189 286 381 99 0.48 1.16 1.76 2.33 0.60 0.48 1.16 1.74 2.31 0.60
EX-27 3
5 THIS SCHEDULE CONTAINS SUMMARY FIANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1998, SEPTEMBER 30, 1998, AND DECEMBER 31, 1998 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS 9-MOS 12-MOS DEC-31-1998 DEC-31-1998 DEC-31-1998 JUN-30-1998 SEP-30-1998 DEC-31-1998 83 65 43 3 2 2 1,183 1,098 1,003 39 38 39 776 827 825 2,536 2,485 2,332 1,998 2,066 2,062 814 854 825 8,116 8,071 7,924 1,638 1,609 1,619 2,527 2,427 2,166 403 403 403 0 0 0 336 337 337 2,163 2,239 2,393 8,116 8,071 7,924 3,767 5,569 7,385 3,767 5,569 7,385 2,771 4,092 5,388 2,771 4,092 5,388 0 0 0 0 0 0 120 171 224 342 508 706 121 181 251 221 328 456 19 32 54 0 0 0 0 0 0 240 359 509 1.46 2.19 3.11 1.45 2.17 3.08
EX-27 4
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1999, JUNE 30, 1999 AND SEPTEMBER 30, 1999 FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS 6-MOS 9-MOS DEC-31-1999 DEC-31-1999 DEC-31-1999 MAR-31-1999 JUN-30-1999 SEP-30-1999 45 57 62 2 2 2 1,114 1,170 1,151 43 45 44 839 796 784 2,464 2,536 2,444 2,076 2,108 2,138 846 868 887 8,158 8,142 8,037 1,784 1,622 1,529 2,166 2,186 2,116 403 403 403 0 0 0 339 342 342 2,467 2,575 2,630 8,158 8,142 8,037 1,891 3,933 5,779 1,891 3,933 5,779 1,390 2,859 4,183 1,390 2,859 4,183 0 0 0 0 0 0 53 106 156 177 419 626 63 149 222 114 270 404 7 18 22 0 0 0 0 0 0 121 288 425 0.74 1.75 2.59 0.73 1.73 2.56
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