Item 1. BUSINESS Ingersoll-Rand Company (the company) was organized in 1905 under the laws of the State of New Jersey as a consolidation of Ingersoll-Sergeant Drill Company and the Rand Drill Company, whose businesses were established in the early 1870's. Over the years, the company has supplemented its original business, which consisted primarily of the manufacture and sale of rock drilling equipment, with additional products which have been developed internally or obtained through acquisition.
The following acquisitions have been accounted for as purchases and, accordingly, each purchase price was allocated to the acquired assets and assumed liabilities based on their estimated fair values. The results of operations since the dates of acquisition are included in the consolidated financial statements.
o On October 31, 1997, 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 in cash. Thermo King designs, manufactures and distributes transport temperature control systems and service parts for a variety of mobile applications, including trailers, truck bodies, seagoing containers, buses and light-rail cars.
o In April 1997, the company completed the acquisition of Newman Tonks Group PLC (Newman Tonks), a United Kingdom-based producer of architectural hardware products headquartered in Birmingham, England. Newman Tonks is a leading manufacturer, specifier and supplier of branded architectural hardware products.
o On August 27, 1996, the company acquired for $34.3 million in cash and the assumption of certain liabilities, substantially all of the assets of Zimmerman International Corp. (Zimmerman). Zimmerman manufactures equipment and systems that assist in handling or lifting tools, components and materials for a variety of industrial operations.
o On January 31, 1996, the company acquired for $95.4 million in cash and the assumption of certain liabilities, the Steelcraft Division of MascoTech, Inc. Steelcraft manufactures a wide range of cold-rolled and galvanized steel doors for use primarily in nonresidential construction.
o In May 1995, the company acquired Clark Equipment Company (Clark) for approximately $1.5 billion in cash. Clark's business is the design, manufacture and sale of skid-steer loaders, compact excavators, agricultural equipment, asphalt paving equipment, transmissions for off-highway equipment (subsequently sold), golf cars and light utility vehicles.
Dispositions that the company has made in recent years are as follows:
o On February 14, 1997, the company sold Clark-Hurth Components Group to Dana Corporation. At December 31, 1996, the net assets subject to sale totalled $265.7 million and were classified as current assets on the Consolidated Balance Sheet. Clark-Hurth Components had been reported as part of the Engineered Equipment Segment.
o During 1996, the company sold the Process Systems Group in two separate transactions at a price of approximately $180.3 million. The company recorded a pretax gain of $55 million. The Process Systems Group had been reported as part of the Engineered Equipment Segment.
o In May 1995, the company sold the domestic paving equipment business to Champion Road Machinery Limited of Canada. The sale was a preacquisition requirement, in order to satisfy concerns of the United States Justice Department, prior to the Clark acquisition. The company incurred a $7.1 million pretax loss associated with this sale.
Products The company manufactures and sells primarily nonelectrical machinery and equipment. Principal products include the following:
Agricultural sprayers Golf cars Air balancers Hoists Air compressors & accessories Hydraulic breakers Air dryers Lubrication equipment Air logic controls Material handling equipment Air motors Mining equipment Air and electric tools Multistage pumps Architectural hardware trim Needle roller bearings Asphalt compactors Parts-washing systems Asphalt pavers Paving equipment Automated dispensing systems Piston pumps Automated production systems Pneumatic breakers Automotive components Pneumatic cylinders Ball bearings Pneumatic valves Blasthole drills Portable compressors Blowers Portable generators Centrifugal pumps Portable light towers Compact hydraulic excavators Reciprocating pumps Construction equipment Road-building machinery Diaphragm pumps Rock drills Directional drills Rock stabilizers Door closers Roller bearings Door control hardware Rotary drills Door locks, latches & Rotary pumps locksets Rough-terrain forklifts Doors and door frames (steel) Skid-steer loaders Drilling equipment and Soil compactors accessories Spray-coating systems Electrical security systems Submersible pumps Engineered pumps Transport temperature control Engine-starting systems systems Exit devices Utility vehicles Extrusion pump systems Vacuum pumps Fastener-tightening systems Vertical turbine pumps Fluid-handling equipment Waterjet-cutting systems Foundation drills Water-well drills Winches
These products are sold primarily under the company's name and also under other names including ABG, Aro, Beebe, Blaw- Knox, Bobcat, Carryall, Centac, Centri-Spray, Charles Maire, Club Car, Crawlair, Cyclone, Dixie-Pacific, Dor-O-Matic, Ecoair, Elite, Fafnir, Falcon, Glynn-Johnson, GrainTech, Ingersoll- Dresser Pumps, IRB, Jeumont-Schneider Pumps, Kilian, Klemm, LCN, Legge, McCartney, Melroe, Monarch, Montabert, NREC, Newman Tonks, Normbau, Pacific, Phoenix, Pleuger, Promaxx, Rand Equipment, Samiia, Schlage, Scienco, Sensor I, Sierra, Split Set, Spra- Coupe, Steelcraft, Tensor I, Thermo King, Titan, Torrington, Von Duprin, Worthington and Zimmerman.
During the past three years, the division of the company's sales between capital goods and expendables has been in the approximate ratio of 60 percent and 40 percent, respectively. The company generally defines as expendables those products which are not capitalized by the ultimate user. Examples of such products are parts sold for replacement purposes, power tools and needle bearings.
Additional information on the company's business and financial information about industry segments is presented in Note 15 to the Consolidated Financial Statements included in the company's Annual Report to Shareholders for 1997, incorporated by reference in this Form 10-K Annual Report.
Distribution The company's products are distributed by a number of methods which the company believes are appropriate to the type of product. Sales are made domestically through branch sales offices and through distributorships and dealers across the United States. International sales are made through approximately 60 subsidiary sales and service companies with a supporting chain of distributors in over 100 countries.
Working Capital The working capital requirements of the company vary with respect to the many products and industries in which it is involved. In general, the requirements of its Engineered Equipment Segment, which manufactures machinery for specialized customer needs, involve a relatively long lead time and, at times, more significant company investment with respect to the particular product or order. Historically, these orders are generally covered by progress payments, which reduce the company's investment in the amount of inventory maintained by this segment. The products manufactured by the company's Standard Machinery and Bearings, Locks and Tools segments are more in the nature of standard equipment. Consequently, a wider variety must usually be more readily available to meet rapid delivery requirements. Such working capital requirements are not, however, in the opinion of management, materially different from those experienced by the company's major competitors.
Customers No material part of the company's business is dependent upon a single customer or very few customers, the loss of any one of which would have a material adverse effect on the company's operations.
Competitive Conditions The company's products are sold in highly competitive markets throughout the world against products produced by both foreign and domestic corporations. The principal methods of competition in these markets relate to price, quality and service. The company believes that it is one of the leading manufacturers in the world of a broad line of air compression systems, anti-friction bearings, construction equipment, transport temperature control products, air tools, pumps, golf cars and utility vehicles. In addition, the company believes it is a leading supplier in domestic markets for locks, other door hardware products, skid-steer loaders and asphalt paving equipment.
International Operations Sales to customers outside the United States, including domestic sales for export, accounted for approximately 39 percent of the consolidated net sales in 1997. Information as to operating income by geographic area is set forth in Note 15 to the Consolidated Financial Statements included in the company's Annual Report to Shareholders for 1997, incorporated by reference in this Form 10-K Annual Report. Sales outside of the United States are made in more than 100 countries; therefore, the attendant risks of manufacturing or selling in a particular country, such as nationalization and establishment of common markets, would not have a significant effect on the company's international operations.
Raw Materials The company manufactures many of the components included in its products. The principal raw materials required for the manufacture of the company's products are purchased from numerous suppliers, and the company believes that available sources of supply will generally be sufficient for its needs for the foreseeable future.
Backlog The company's approximate backlog of orders at December 31, 1997, believed by it to be firm, was $398 million for the Standard Machinery Segment, $399 million for the Engineered Equipment Segment and $576 million for the Bearings, Locks and Tools Segment as compared to $335 million, $369 million and $638 million, respectively, at December 31, 1996. The acquisition of Thermo King added an additional $172 million in backlog. These backlog figures are based on orders received. While the major portion of the company's products are built in advance of order and either shipped or assembled from stock, orders for specialized machinery or specific customer application are submitted with extensive lead time and are often subject to revision, deferral, cancellation or termination. The company estimates that approximately 90 percent of the backlog will be shipped during the next twelve months.
Research, Engineering and Development The company maintains extensive research, engineering and development facilities for experimenting, testing and developing high quality products. The company employs approximately 1,744 professional employees for its research, engineering and development activities. The company spent $216 million in 1997, $209 million in 1996 and $190 million in 1995 on research, engineering and development.
Patents and Licenses The company owns numerous patents and patent applications and is licensed under others. While it considers that in the aggregate its patents and licenses are valuable, it does not believe that its business is materially dependent on its patents or licenses or any group of them. In the company's opinion, engineering and production skills, and experience are more responsible for its market position than patents or licenses.
Environmental Matters The company has been and continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the company currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities.
During 1997, the company spent approximately $9 million on capital projects for pollution abatement and control and an additional $5 million for environmental remediation expenditures at sites presently or formerly owned or leased by the company. It should be noted that these amounts are difficult to estimate because environmental improvement costs are generally a part of the overall improvement costs at a particular plant, and the accurate estimate of which portion of an improvement or a capital expenditure relates to an environmental improvement is difficult to ascertain. The company believes that these expenditure levels will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.
The company is a party to environmental lawsuits and claims, and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It is identified as a potentially responsible party (PRP) for cleanup costs associated with off-site waste disposal at approximately 38 federal Superfund and state remediations sites, excluding sites as to which the company's records disclose no involvement or as to which the company's liability has been fully determined. For all sites there are other PRPs and in most instances, the company's site involvement is minimal. In estimating its liability, the company has assumed it will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties' financial condition and probable contribution on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.
Although uncertainties regarding environmental technology, state and federal laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations liquidity or cash flows of the company for any year. It should be noted that when the company estimates its liability for environmental matters, such estimates are based on current technologies and the company does not discount its liability or assume any insurance recoveries.
Employees There are approximately 46,600 employees of the company throughout the world, of whom approximately 29,100 work in the United States and 17,500 in foreign countries. Approximately 31% percent of the company's United States production and maintenance employees, who work in 14 plants, are represented by 8 unions. The company believes relations with its employees are good.
Item 2.
Item 2. PROPERTIES The company's executive offices are located at Woodcliff Lake, New Jersey. Manufacturing and assembly operations are conducted in 61 plants in the United States; 5 plants in Canada; 39 plants in Europe; 11 plants in Asia; 7 plants in Latin America and 1 plant in Africa. The company also maintains various warehouses, offices and repair centers in the United States, Canada and abroad.
Substantially all plant facilities are owned by the company and the remainder are under long-term lease. The company believes that its plants and equipment have been well-maintained and are generally in good condition. The company has several closed facilities that it is actively marketing with the intent of selling them at their net realizable value.
The operating segments for which the facilities are primarily used are as described below. Facilities that produce products in several operating segments are classified by the products which they primarily manufacture. Facilities under long-term lease are included below and are not significant to each operating segment's total number of plants or square footage.
Standard Machinery This segment's products include machinery regularly used in general manufacturing and in industries such as mining and construction. Products range from blasthole drills used in mining and construction, small air compressors found worldwide in auto service stations, skid-steer loaders and golf cars. The segment is aligned into four operating groups: Air Compressor, Construction and Mining, Melroe, and Club Car. The segment's remaining manufacturing locations are as follows:
Approximate Number of Plants Square Footage
Domestic 11 3,321,000 International 10 1,852,000
Total 21 5,173,000
Engineered Equipment This segment was organized into three operating groups: Pump, Process Systems (sold in 1996) and Clark-Hurth (sold February 1997). The remaining products manufactured by this segment are predominantly pumps for diversified industrial use and specialty pumps for process, power generation and marine applications. The segment's remaining manufacturing facilities are as follows:
Approximate Number of Plants Square Footage
Domestic 7 1,682,000 International 15 1,921,000
Total 22 3,603,000
Bearings, Locks and Tools This segment primarily serves the automotive, capital goods, energy and construction industries. Products in this segment include bearings for specialized and industrial application, locks and architectural hardware for residential and commercial buildings, air tools for industrial use, air winches, hoists and engine starting systems, and automated production systems for transportation equipment manufacturers. There are three operating groups in this segment: Bearings and Components Group, Production Equipment Group and Architectural Hardware Group (formerly known as Door Hardware Group). The segment's manufacturing facilities are as follows:
Approximate Number of Plants Square Footage
Domestic 37 7,388,000 International 28 2,949,000
Total 65 10,337,000
Acquisition of Newman Tonks added six additional domestic plants with 623,000 square feet as well as 10 international plants with 512,000 square feet.
Thermo King This segment principally operates in one industry that includes the design, manufacture, and distribution of transport temperature control equipment. These products are primarily used in the transport temperature control business for trailers, truck bodies, seagoing containers, buses and light-rail cars. Thermo King was acquired on October 31, 1997.
Approximate Number of Plants Square Footage
Domestic 6 1,457,000 International 10 1,234,000
Total 16 2,691,000
Item 3.
Item 3. LEGAL PROCEEDINGS In the normal course of business, the company is involved in a variety of lawsuits, claims and legal proceedings, including proceedings for off-site waste disposal cleanup of approximately 38 sites under federal Superfund and similar state laws. In the opinion of the company, pending legal matters are not expected to have a material adverse effect on the results of operations, financial condition, liquidity or cash flows.
See also the discussion under Item 1 - Environmental Matters.
Item 4.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the company's security holders during the last quarter of its fiscal year ended December 31, 1997.
The following information is included in accordance with the provision of Part III, Item 10.
Date of Service as Principal Occupation and an Executive Other Information Name and Age Officer for Past Five Years James E. Perrella(62) 5/4/77 Chairman of the Board, President and Chief Executive Officer, Director (President and Director, 1992 - 1993) J. Frank Travis(62) 2/7/90 Vice Chairman of the Board, (Executive Vice President 1993-1996; Executive Vice President and President of the Production Equipment Group, 1994 - 1995; Vice President and President of the Bearings and Components Group, 1992 - 1993) Paul L. Bergren(48) 12/2/92 Executive Vice President, (Vice President, President of the Air Compressor Group, President of Ingersoll-Rand Europe, 1994 - 1997) Brian D. Jellison(52) 2/7/96 Executive Vice President, (Vice President and President of the Architectural Hardware Group, 1995 - 1998; President of the Door Hardware Group,1994 - 1995; President, Von Duprin, 1988 - 1994) Steven T. Martin(56) 5/2/96 Executive Vice President (Vice President and President of Production Equipment Group,1996 - 1998; President of Production Equipment Group 1995 - 1996; Vice President and General Manager Fafnir Bearings Division of Torrington, 1986 - 1995) David W. Devonshire(52) 1/12/98 Senior Vice President and Chief Financial Officer, (Senior Vice President and Chief Financial Officer, Owens Corning 1993 - 1997; Corporate Vice President, Finance Honeywell Inc., 1992 - 1993) William J. Armstrong(56) 8/3/83 Vice President and Treasurer Gerard V. Geraghty(47) 5/2/96 Vice President, President of the Construction and Mining Group (Vice President and Comptroller, 1996 - 1998; Controller - Operations, 1993 - 1996; Assistant Controller 1988 - 1993) Frederick W. Hadfield(61) 8/1/79 Vice President and President of Ingersoll Dresser Pump Company (Vice President, 1979 - 1994) Daniel E. Kletter(59) 2/7/90 Vice President (Vice President and President of the Construction and Mining Group, 1989 - 1994) Patricia Nachtigal(51) 11/2/88 Vice President and General Counsel Allen M. Nixon(57) 2/1/95 Vice President and President of Bearing and Components Group (Vice President and General Manager Torrington Needle Bearings Division, 1983 - 1994) James R. O'Dell(59) 12/3/88 Vice President Nicholas J. Pishotti(57) 4/10/95 Vice President - Strategic Sourcing (General Manager, Aircraft Engine Sourcing Department, General Electric Company, 1988 - 1995) Donald H. Rice(53) 2/1/95 Vice President (Executive Director - Human Resources 1994; Vice President, Human Resources - Bearings and Components Group, 1988 - 1993) Charles R. Hoge(41) 2/4/98 Vice President and President and Chief Executive Officer of Melroe Company Gerald E. Swimmer(53) 5/1/82 Vice President Marvin L. Walrath (55) 12/1/97 Vice President and Chief Information Officer (Executive Director, Information Technology 1997; Vice President and General Manager - Small Air and Recip Divisions, 1997; Vice President and General Manager - Small Compressor Division 1990 - 1997) Ronald G. Heller(51) 2/6/91 Secretary and Assistant General Counsel
No family relationship exists between any of the above-listed executive officers of the company. All officers are elected to hold office for one year or until their successors are elected and qualify. PART II
Note: All applicable share prices and dividends per share amounts have been restated to reflect the September 2, 1997 three- for-two stock split.
Item 5.
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information regarding the principal market for the company's common stock and related stockholder matters are as follows:
Quarterly share prices and dividends for the common stock are shown in the following tabulation. The common shares are listed on the New York Stock Exchange and also on the London and Amsterdam exchanges.
Common Stock High Low Dividend First quarter $32 7/8 $28 9/16 $.137 Second quarter 41 3/4 27 13/16 .137 Third quarter 45 9/16 37 1/2 .150 Fourth quarter 46 1/4 34 11/16 .150 High Low Dividend First quarter $28 9/16 $23 3/8 $.123 Second quarter 29 9/16 24 13/16 .123 Third quarter 31 5/8 25 1/4 .137 Fourth quarter 31 3/4 27 1/16 .137 The Bank of New York (Church Street Station, P.O. Box 11258, New York, NY 10286-1258, (800)524-4458) is the transfer agent, registrar and dividend reinvestment agent.
There are no significant restrictions on the payment of dividends. The approximate number of record holders of common stock as of February 27, 1998 was 11,990.
Item 6.
Item 6. SELECTED FINANCIAL DATA Selected financial data for the five years ended December 31, 1997, is as follows (in millions except per share amounts):
December 31 1997 1996 1995 1994 1993
Net sales $7,103.3 $6,702.9 $5,729.0 $4,507.5 $4,021.1
Net earnings 380.5 358.0 270.3 211.1 142.5
Total assets 8,415.6 5,621.6 5,563.3 3,596.9 3,375.3
Long-term debt 2,528.0 1,163.8 1,304.4 315.9 314.1
Shareholders' equity 2,341.4 2,090.8 1,795.5 1,531.3 1,349.8
Basic earnings per common share $2.33 $2.22 $1.70 $1.33 $0.91
Diluted earning per common share $2.31 $2.21 $1.69 $1.33 $0.90
Dividends per common share 0.57 0.52 0.49 0.48 0.47
Item 7.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's discussion and analysis of financial condition and results of operations is included as Financial Review and Management Analysis in Exhibit 13 - the Annual Report to Shareholders for 1997 and is incorporated by reference in this Form 10-K Annual Report.
Forward-looking Statements Information provided by the company in this 1997 Annual Report on Form 10-K, in periodic reports 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; 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.
Item 7A.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The discussion under the caption "Financial Review and Management Analysis - Financial Market Risk" in the Annual Report to Shareholders for 1997 (filed as Exhibit 13 to this Form 10-K Annual Report), is incorporated herein by reference.
Item 8.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements and supplementary financial information included in the accompanying Annual Report to Shareholders for 1997 are incorporated by reference in this Form 10-K Annual Report:
(a) The consolidated financial statements and the report thereon of Price Waterhouse LLP dated February 3, 1998, are included as Exhibit 13 - the Annual Report to Shareholders (excluding the Financial Review and Management Analysis) for 1997.
(b) The unaudited quarterly financial data for the two-year period ended December 31, 1997, is as follows (in millions except per share amounts): Net Cost of Operating Net 1997 sales goods sold income earnings
First quarter $1,639.4 $1,228.4 $166.6 $ 77.8 Second quarter 1,837.4 1,355.5 209.6 111.6 Third quarter 1,694.0 1,250.8 179.7 97.1 Fourth quarter 1,932.5 1,429.0 204.4 94.0 Year 1997 $7,103.3 $5,263.7 $760.3 $380.5
First quarter $1,604.9 $1,208.8 $150.6 $ 74.5 Second quarter 1,761.9 1,338.0 176.3 92.3 Third quarter 1,595.8 1,206.7 148.7 81.9 Fourth quarter 1,740.3 1,276.4 207.9 109.3 Year 1996 $6,702.9 $5,029.9 $683.5 $358.0
1997 1996
Basic Diluted Basic Diluted earnings per earnings per earnings per earnings per common share common share common share common share
First quarter $0.48 $0.48 $0.46 $0.46 Second quarter 0.68 0.68 0.58 0.57 Third quarter 0.60 0.58 0.50 0.50 Fourth quarter 0.57 0.57 0.68 0.68 Year $2.33 $2.31 $2.22 $2.21
Item 9.
Item 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
PART III
Item 10.
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 10 is (i) incorporated by reference in this Form 10-K Annual Report from pages 1 through 5, 17 and 18 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 24, 1998, and (ii) included after Item 4 in Part I of this Form 10-K Annual Report.
Item 11.
Item 11. EXECUTIVE COMPENSATION Information on executive compensation is incorporated by reference in this Form 10-K Annual Report from pages 7 through 17 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 24, 1998.
Item 12.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information on security ownership of directors and nominees, directors and officers as a group and certain beneficial owners is incorporated by reference in this Form 10-K Annual Report on pages 4 and 5 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 24, 1998.
Item 13.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information required by Item 13 is incorporated by reference in this Form 10-K Annual Report from page 17 of the company's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 24, 1998.
PART IV
Item 14.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. and 2. Financial statements and financial statement schedules The financial statements, together with the report thereon of Price Waterhouse LLP dated February 3, 1998, included as Exhibit 13 (excluding Financial Review and Management Analysis) and the unaudited quarterly financial data included in Part II Item 8(b) are incorporated by reference in this Form 10-K Annual Report. The financial statement schedule listed in the accompanying index should be read in conjunction with the financial statements in such Annual Report to Shareholders for 1997.
Separate financial statements for all 50 percent or less owned companies, accounted for by the equity method have been omitted because no individual entity constitutes a significant subsidiary.
3. Exhibits The exhibits listed on the accompanying index to exhibits are filed as part of this Form 10-K Annual Report.
(b) Reports on Form 8-K
A Current Report on Form 8-K (Item 2) dated October 31, 1997 reporting on the company's acquisition of Thermo King Corporation.
A Current Report on Form 8-K (Items 5 and 7) dated November 6, 1997 filing the Selling Agency Agreement to issue Medium-Term Notes having an aggregate initial offering price of up to $750,000,000.
A Current Report on Form 8-K (Items 5 and 7) dated November 19, 1997 filing a Pricing Agreement to issue $200,000,000 aggregate principal amount of 6.391% Debentures Due 2027.
A Current Report on Form 8-K (Items 5 and 7) dated November 19, 1997 filing the Debt Securities Underwriting Agreement Standard Provisions to issue debt securities having an aggregate initial offering price of up to $1,050,000,000.
A Current Report on Form 8-K (Items 5 and 7) dated November 20, 1997 filing a Pricing Agreement to issue $200,000,000 aggregate principal amount of 6.443% Debentures Due 2027.
A Current Report on Form 8-K (Items 5 and 7) dated November 21, 1997 filing a Pricing Agreement to issue $400,000,000 aggregate principal amount of 6.255% Notes Due 2001.
INGERSOLL-RAND COMPANY
AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a) 1 and 2)
Form 10-K Consolidated Financial Statements: Report of independent accountants * Consolidated balance sheet at December 31, 1997 and 1996 * For the years ended December 31, 1997, 1996 and 1995: Consolidated statement of income * Consolidated statement of shareholders' equity * Consolidated statement of cash flows * Notes to consolidated financial statements * Selected unaudited quarterly financial data **
Financial Statement Schedule: Report of independent accountants on financial statement schedule See below Consolidated schedule for the years ended December 31, 1997, 1996 and 1995: Schedule II -- Valuation and Qualifying Accounts See below
* See Exhibit 13 - Ingersoll-Rand Company Annual Report to Shareholders for 1997.
** See Item 8 Financial Statements and Supplementary Data.
Financial statement schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
Financial statements of the company's 50 percent or less owned companies, are omitted because individually they do not meet the significant subsidiary test of Rule 3-09 of Regulation S-X.
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Ingersoll-Rand Company:
Our audits of the consolidated financial statements referred to in our report dated February 3, 1998, which is included as part of Exhibit 13 - the Annual Report to Shareholders for 1997 of Ingersoll-Rand Company, (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K), also included an audit of the Financial Statement Schedule listed in Item 14(a) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/S/ Price Waterhouse LLP PRICE WATERHOUSE LLP Morristown, New Jersey February 3, 1998
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. 333-38367, No. 333-37019, and No. 333-34029) and to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-42133, No. 333-19445, No. 333-00829, No. 33- 35229, and No. 2-98258) of Ingersoll-Rand Company of our report dated February 3, 1998, which is included as part of Exhibit 13 - the Annual Report to Shareholders for 1997, which is incorporated in this Annual Report on Form 10-K. We also consent to the incorporation by reference of our report on the Financial Statement Schedule, which appears on this page.
/S/ Price Waterhouse LLP PRICE WATERHOUSE LLP Morristown, New Jersey March 6, 1998 SCHEDULE II
INGERSOLL-RAND COMPANY
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995 (Amounts in millions)
Additions charged to Balance at costs and Balance beginning expenses Deductions at end Description of year (*) (**) of year
Doubtful accounts $34.3 $11.7 $12.1 $33.9
Doubtful accounts $38.3 $ 8.6 $12.6 $34.3
Doubtful accounts $25.9 $17.8 $ 5.4 $38.3
(*) "Additions" include foreign currency translation.
(**) "Deductions" include accounts and advances written off, less recoveries.
INGERSOLL-RAND COMPANY INDEX TO EXHIBITS (Item 14(a)) Description 2 Stock Purchase Agreement, dated as of September 12, 1997, between Westinghouse Electric Corporation, and the Registrant. Incorporated by reference from Form 8-K of Ingersoll-Rand Company, dated September 17, 1997.
3 (i) Amendment to Restated Certificate of Incorporation of Ingersoll-Rand Company filed May 28, 1992. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
3 (ii) Amendment to Restated Certificate of Incorporation of Ingersoll-Rand Company filed August 20, 1997. Incorporated by reference to Form S-3 filed October 2, 1997.
3 (iii) Restated Certificate of Incorporation of Ingersoll-Rand Company as amended through May 28, 1992. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
3 (iv) By-Laws of Ingersoll-Rand Company, as amended through September 1, 1997. Incorporated by reference to Form S-3 filed October 2, 1997.
4 (i) Rights Agreement, dated as of December 7, 1988, as amended by Amendment No. 1 thereto dated as of December 7, 1994. Incorporated by reference from Form 8-A of Ingersoll- Rand Company filed on December 12, 1988, and Form 8-A/A of Ingersoll-Rand Company filed December 15, 1994.
4 (ii) Indenture, dated as of August 1, 1986 between Ingersoll- Rand Company and The Bank of New York, as Trustee, as supplemented. Incorporated by reference to Exhibits 4.1, 4.2 and 4.3 of the company's Form S-3 Registration Statement No. 33- 39474.
4 (iii) Ingersoll-Rand Company is a party to several long-term debt instruments under which in each case the total amount of securities authorized does not exceed 10% of the total assets of Ingersoll-Rand Company and its subsidiaries on a consolidated basis. Pursuant to paragraph 4(iii)(A) of Item 601(b) of Regulation S-K, Ingersoll-Rand Company agrees to furnish a copy of such instruments to the Securities and Exchange Commission upon request.
10 (iii) The following exhibits constitute management contracts or compensatory plans or arrangements required by Item 601 of Regulation S-K.
10 (iii) (a) Management Incentive Unit Plan of Ingersoll- Rand Company. Amendment to the Management Incentive Unit Plan, effective January 1, 1982. Amendment to the Management Incentive Unit Plan, effective January 1, 1987. Amendment to the Management Incentive Unit Plan, effective June 3, 1987. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (b) Ingersoll-Rand Company Directors Deferred Compensation and Stock Award Plan. Incorporated by reference to Form 10-K for the year ended December 31, 1996, filed March 26, 1997.
10 (iii) (c) Forms of Contingent Compensation Agreements with Vice Presidents and/or Group Presidents of Ingersoll-Rand Company. Filed herewith.
10 (iii) (d) Description of Bonus Arrangements for Executive Vice President of Ingersoll-Rand Company. Filed herewith.
10 (iii) (e) Description of Bonus Arrangements for Chairman, President and Staff Officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (f) Form of Change of Control Agreement with Chairman and Chief Executive Officer of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1995, filed March 29, 1996.
10 (iii) (g) Form of Change of Control Agreement with selected executive officers other than Chairman of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1995, filed March 29, 1996.
10 (iii) (h) (1) Executive Supplementary Retirement Agreement for selected executive officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (i) (2) Executive Supplementary Retirement Agreement for selected executive officers. Incorporated by reference to Form 10-K for the year ended December 31, 1996, filed March 26, 1997.
10 (iii) (j) Incentive Stock Plan of 1985 of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll- Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (k) Forms of insurance and related letter agreements with certain executive officers. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (l) Incentive Stock Plan of 1990 of Ingersoll-Rand Company. Incorporated by reference to Form 10-K of Ingersoll- Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (m) Restated Supplemental Pension Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1995, filed March 29, 1996.
10 (iii) (n) Supplemental Stock and Savings Investment Plan effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (o) Supplemental Retirement Account Plan effective as of January 1, 1989. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1993, filed March 30, 1994.
10 (iii) (p) Incentive Stock Plan of 1995 of Ingersoll-Rand Company. Incorporated by reference to the Notice of 1995 Annual Meeting of Shareholders and Proxy Statement dated March 15, 1995. See Appendix A of the Proxy Statement dated March 15, 1995.
10 (iii) (q) Senior Executive Performance Plan. Incorporated by reference to the Notice of 1995 Annual Meeting of Shareholders and Proxy Statement dated March 15, 1995. See Appendix B of the Proxy Statement dated March 15, 1995.
10 (iii) (r) Elected Officers Supplemental Plan. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1995, filed March 29, 1996.
10 (iii) (s) Selected Executive Officer Employment Agreement. Incorporated by reference to Form 10-K of Ingersoll-Rand Company for the year ended December 31, 1995, filed March 29, 1996.
10 (iii) (t) Executive Deferred Compensation and Stock Award Plan. Incorporated by reference to Form 10-K for the year ended December 31, 1996, filed March 26, 1997.
10 (iii) (u) Senior Vice President and Chief Financial Officer Employment Agreement. Filed herewith.
11 (i) Computation of Basic Earnings Per Share. Filed herewith.
11 (ii) Computation of Diluted Earnings Per Share. Filed herewith.
12 Computations of Ratios of Earnings to Fixed Charges. Filed herewith.
13 Ingersoll-Rand Company Annual Report to Shareholders for 1997. Not deemed to be filed as part of this report except to the extent incorporated by reference. Filed herewith.
18 Letter dated August 11, 1995 from Price Waterhouse LLP regarding change in accounting method. Incorporated by reference to Form 10-Q of Ingersoll-Rand Company for the quarterly period ended June 30, 1995 reported under Item 6, Exhibits.
21 List of Subsidiaries of Ingersoll-Rand Company. Filed herewith.
27 Financial Data Schedule.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INGERSOLL-RAND COMPANY (Registrant)
By /S/David W. Devonshire
Date March 6, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature Title Date
Chairman, President, Chief Executive Officer and Director (Principal /S/ James E. Perrella Executive Officer) March 6, 1998 (James E. Perrella)
Senior Vice President Chief Financial Officer (Principal Financial /S/ David W. Devonshire and Accounting Officer) March 6, 1998 (David W. Devonshire)
/S/ Joseph P. Flannery Director March 6, 1998 (Joseph P. Flannery)
/S/ Constance J. Horner Director March 6, 1998 (Constance J. Horner)
/S/ H. William Lichtenberger Director March 6, 1998 (H. William Lichtenberger)
/S/ Theodore E. Martin Director March 6, 1998 (Theodore E. Martin)
/S/ Orin R. Smith Director March 6, 1998 (Orin R. Smith)
/S/ Richard J. Swift Director March 6, 1998 (Richard J. Swift)
/S/ J.Frank Travis Director March 6, 1998 (J. Frank Travis)
/S/ Tony L. White Director March 6, 1998 (Tony L. White)