FILED BY INGERSOLL-RAND COMPANY
PURSUANT TO RULE 425 UNDER THE SECURITIES ACT OF 1933
AND DEEMED FILED PURSUANT TO RULE 14A-12
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO.: 1-985
SUBJECT COMPANY: INGERSOLL-RAND COMPANY
DATE: OCTOBER 18, 2001
The following press release was issued by Ingersoll-Rand
Company on October 18, 2001 in conjunction with the
announcement of its third quarter earnings:
WOODCLIFF LAKE, N.J., OCTOBER 18, 2001 - Ingersoll-Rand
Company (NYSE:IR), a leading diversified industrial
enterprise, today reported net earnings of $76.3 million,
excluding charges related to restructuring and productivity
investments, or diluted earnings per share (DEPS) of 45
cents, for the third quarter ended September 30, 2001.
These results were in line with the company's revised
expectations. Reported net earnings for the third quarter
of 2001 were $33.9 million, or DEPS of 20 cents. Current
and historical data have been restated to consolidate the
results of Dresser-Rand (D-R) in accordance with GAAP, which
requires reconsolidation of businesses held for sale more
than 12 months. Previously, D-R had been classified as an
asset held for sale and reported as a single line item net
of tax on the income statement. Third-quarter 2000 net
earnings from continuing operations were $139.6 million, or
DEPS of 86 cents. Third-quarter 2000 net earnings exclude
one-time gains related to the sale of the compression
services business of Dresser-Rand (D-R) and the Ingersoll-
Dresser Pump Company, as well as charges related to
restructuring and productivity investments.
Revenues from continuing operations were $2.4 billion,
a decrease of 5% compared to the third quarter of 2000. The
decline was primarily due to lower North American revenues.
During the third quarter of 2001, IR continued its
restructuring program to reduce costs and accelerate
productivity initiatives throughout the company. After-tax
charges for restructuring and productivity investments for
the third quarter of 2001 totaled $42.4 million, or DEPS of
25 cents. These charges include accrued restructuring
costs, and period costs which are recorded as incurred.
The total pre-tax cost of this program, which began in
the third quarter of 2000, will be approximately $325
million and includes plant rationalizations, organizational
realignments, and the consolidation of "back office"
business processes. These investments will reduce company-
wide workforce by approximately 8%.
THIRD-QUARTER BUSINESS REVIEW
The business sector review excludes the impact of
charges for restructuring and productivity investments.
THE CLIMATE CONTROL SECTOR provides solutions to
transport, preserve, store and display temperature sensitive
products and includes the market leading brands of Thermo
King and Hussmann.
Revenues for the sector decreased by 3%, compared to the
third quarter of 2000. Operating margins decreased from
9.4% to 6.0% due to a significant decline in highly
profitable truck trailer volume.
Significant year-over-year declines in the North American
truck and trailer market, continued weak truck and trailer
results in Europe, and the unfavorable effects of currency
caused transport refrigeration revenues to decrease by 15%
compared to 2000. Demand for new equipment is impeded by
high levels of used truck and trailer equipment.
Reported stationary refrigeration revenues increased by
7%, compared to last year, due to the acquisitions of Taylor
and National Refrigeration Services in the first half of
2001. Revenues without these acquisitions declined by 8%
compared to the third quarter of 2000 due to cautious
spending by major supermarket customers. Third quarter
revenues increased by 13% compared to the second quarter,
which is in line with the normal seasonal business pattern.
THE INDUSTRIAL PRODUCTIVITY SECTOR is composed of a
diverse group of businesses focused on providing solutions
to enhance customers' industrial efficiency. The continued
worldwide decline of the industrial economy in the third
quarter contributed to a decrease in sector revenues of
approximately 7%. Operating margins declined to 6.5% of
revenues, compared to 12.6% in 2000. The Industrial
Productivity sector consists of three businesses: Air
Solutions, Bearings and Components, and Industrial Products.
Air Solutions provides equipment and services for
compressed air systems. Declining U.S. industrial
production resulted in decreased unit volume sales. Total
revenues declined by 7% and operating margins decreased to
8.8% of revenues, compared to 12.4% for the prior year's
third quarter, primarily due to lower demand for medium and
large compressors used in industrial applications. The
aftermarket business continued to produce positive results
with a strong 7% growth in service revenues.
Bearings and Components provides motion-control
technologies for OEM and aftermarket applications to both
the automotive and industrial markets. Third-quarter
revenues declined by 10% due to lower volumes in the U.S.
automotive and industrial equipment markets, and in the
industrial bearings aftermarket. Operating margins were
8.0% of revenues compared to 15.1% in 2000.
Industrial Products includes Club Car golf cars and
utility vehicles; tools; fluid products equipment; and the
company's independent power business. Revenues for the
quarter declined by 4% compared to 2000, primarily related
to decreased demand for air tools and fluid power products.
Club Car sales and operating margins improved compared to
last year's third quarter, due to market share gains. Total
segment margins decreased to 2.4% of revenues compared to
9.3% in 2000, principally due to lower volumes and increased
spending on new product introductions, particularly the
PowerWorks microturbine. The Independent Power Sector began
manufacturing production series 70 kilowatt PowerWorks
microturbines in the quarter. The company expects to ship
75 to 100 units in the fourth quarter of 2001.
THE INFRASTRUCTURE SECTOR includes Bobcat compact
equipment and Ingersoll-Rand road pavers, compactors,
portable-power products and drilling equipment. Total
sector revenues declined by 9%, and operating margins were
9.1% of revenues, compared to 15.4% in 2000. Infrastructure
results for the third quarter are a reflection of declining
demand from the company's distribution channel. Equipment
dealers are aggressively managing inventory, and retail
sales for the last three weeks of September declined
dramatically. Demand from rental companies, which are major
customers of the Infrastructure businesses, remains 70% to
80% below prior year-end levels. IR's market shares in this
sector have remained steady despite mounting competitive
pressure.
THE SECURITY AND SAFETY SECTOR includes architectural
hardware products and electronic access-control
technologies. Third-quarter revenues decreased slightly and
operating margins remained at a strong 20.1% of revenues,
compared to 21.8% in 2000. Activity levels declined in both
commercial and residential markets, offsetting higher
electronic solutions revenues that resulted mainly from
Interflex, which was acquired in August 2000. Margins were
affected by increased development spending in the electronic
security solutions business and the acceleration of product
and market related growth initiatives during the quarter.
DRESSER-RAND reported third-quarter operating earnings
of $4.3 million in 2001 compared to $5.2 million in 2000.
Results in 2000 include the operating results of D-R's
compression services business up until the time of its sale
on September 5, 2000. Excluding these results, Dresser-
Rand's third-quarter 2001 revenues increased by 7% compared
to 2000, and operating earnings increased by $5.7 million,
reflecting the increased volume and cost reductions from
restructuring actions. D-R's end markets continued to
improve with third-quarter orders increasing by more than
60% compared to last year, and backlog increasing by $150
million compared to 2000.
COMPARISONS OF OTHER QUARTERLY INCOME STATEMENT ITEMS
INTEREST EXPENSE for the quarter of $75.2 million was
$9.3 million below the 2000 third quarter due to lower year-
over-year debt levels and a decline in interest rates.
OTHER INCOME/(EXPENSE) totaled $18.1 million of net
expenses for the third quarter, compared to $47.6 million of
net income in last year's third quarter. The net change is
primarily due to the sale of the compression services
business of Dresser-Rand in 2000.
THE COMPANY'S THIRD-QUARTER PROVISION FOR TAXES was a
credit of $2.6 million, reflecting $13.5 million in tax
credits realized through IR's Foreign Sales Corporation
(FSC). We anticipate that the fourth-quarter of 2001 will
include additional FSC credits of approximately $4.5
million.
CHANGE IN INCORPORATION
On October 16, Ingersoll-Rand announced that its board
of directors approved a plan to change its place of
incorporation from New Jersey to Bermuda. Under the plan,
Ingersoll-Rand Company Limited, a newly formed Bermuda
corporation, will become the parent company of Ingersoll-
Rand Company.
"This change will enable IR to realize a variety of
business, financial and strategic benefits," said Herbert L.
Henkel, chairman, president and chief executive officer.
"Specifically we will improve expected cash flow for use in
investing in further earnings growth and in reducing the
amount of our debt, enhance our global competitive position;
create a more favorable corporate structure for worldwide
expansion of our current business; reduce our worldwide
effective tax rate; enable implementing our business
strategy more effectively; and expand our investor base. As
a result of this initiative, in 2002the first full year of
benefitwe expect to realize annual, incremental net earnings
of at least $40 million. Additionally, the reincorporation
from New Jersey to Bermuda is expected to trigger one-time
benefits in the fourth-quarter of 2001. The impact on net
earnings in the fourth quarter is expected to be $50 to $60
million, which is net of costs to effect the
reincorporation. Finally, the new structure positions IR to
achieve higher returns on businesses acquired in the future.
"The change is expected to have no effect on the day-to-
day operations of the company, and IR will continue to
maintain its corporate headquarters in New Jersey."
The proposal is subject to approval by IR shareholders.
A special meeting of shareholders of Ingersoll-Rand Company
has been called to vote on the proposed plan. Notice of the
special meeting, to be held in mid-December, and a proxy
statement/prospectus describing the change will be mailed to
all Ingersoll-Rand Company shareholders in early November.
Upon completion, which is expected on or about December
31, 2001, all shares of Ingersoll-Rand common stock will
automatically convert into shares of the Bermuda company,
Ingersoll-Rand Company Limited, and will have the same
attributes as the common shares before the conversion.
Ingersoll-Rand Company Limited shares will be listed on the
New York Stock Exchange under the symbol IR, the same symbol
under which the company's stock currently trades.
2001 OUTLOOK
"Based on our view of the economic environment, full-
year 2001 DEPS is forecast to be in the range of $2.00 to
$2.25, excluding charges related to restructuring and
anticipated one-time benefits from IR's reincorporation,"
said Henkel. "Ongoing demand continues to be uncertain,
especially in the U.S. market. The third quarter ended with
a 10% decline in revenues and a 15% decline in orders during
the last three weeks in September, compared to last year.
Our earnings estimate reflects an increasing concern about
the direction of the global economy. Fourth-quarter results
include normal seasonal improvement in Hussmann and Dresser-
Rand.
"Free cash flow remains a high priority in 2001 as we
continue to aggressively manage our working capital and
capital expenditure programs. We are targeting $250 million
of free cash flow for full year 2001 before restructuring.
Despite the slower economic environment, we continue to make
progress in implementing our long range plan focusing on
innovation, operational excellence, and the integration of
our acquisitions," said Henkel.
IR is a leading innovation and solutions provider for
the major global markets of Security and Safety, Climate
Control, Industrial Productivity and Infrastructure. The
company's diverse product portfolio encompasses such leading
industrial and commercial brands as SCHLAGE locks and
security solutions; THERMO KING transport temperature
control equipment; HUSSMANN commercial and retail
refrigeration equipment; BOBCAT compact equipment; CLUB CAR
golf cars and utility vehicles; TORRINGTON bearings and
components; POWERWORKS microturbines; and INGERSOLL-RAND
industrial and construction equipment. In addition, IR
offers products and services under many more premium brands
for customers in industrial and commercial markets. Further
information on IR can be found on the company's web site at
www.irco.com.
This news release includes "forward-looking statements"
that involve risks and uncertainties. Political, economic,
climatic, currency, tax, regulatory, technological,
competitive and other factors, including the shareholder
vote on reincorporation in Bermuda, could cause actual
results to differ materially from those anticipated in the
forward-looking statements. Additional information
regarding these risk factors and uncertainties is detailed
from time to time in the company's SEC filings, including
but not limited to its report on Form 10-Q for the three
months ended June 30, 2001.
In conjunction with the issuance of such press release,
Ingersoll-Rand Company used the following slides as part of
the material presented on its October 18, 2001 analyst call.
The slide show presentation is also available at
www.irco.com:
SLIDE #7
Reincorporation
IR NEW JERSEY - - INGERSOLL-RAND LTD. BERMUDA
* Shareholder approval required
* Special meeting in December
* No other regulatory approvals needed
New structure to facilitate global growth $40 million in
annual savings
SLIDE #8
Reincorporation
IR NEW JERSEY - - INGERSOLL-RAND LTD. BERMUDA
* Continued to be headquartered in New Jersey
* No change in incorporation for IR operating companies
* IR common shares automatically convert to
Ingersoll-Rand LTD shares
* IR LTD shares trade on NYSE under symbol IR
No impact on day-to-day operations
SLIDE #9
Reincorporation Benefits
* Improve cash flow
* Create more favorable corporate structure
* Re-invest cash in current growth businesses
- Can reduce debt or.
- Repurchase shares
Enhance global competitive position
SLIDE #10
Reincorporation
* No change in financial reporting
* Reincorporation will trigger one time benefit of $50 to
$60 million in the fourth quarter
* Taxable transaction for shareholders
* Minimal effect on corporate governance
Reincorporation creates shareholder value
SLIDE #20
Impact of Reincorporation
Benefits 2001 2002
Net earnings $50-60 million $40 million
EPS impact 30-35 cents 25 cents
One-time benefits in 2001 not included in earnings estimate
Incremental annual benefit of $40 million
# # #
ADDITIONAL INFORMATION REGARDING THE INGERSOLL-RAND COMPANY
REORGANIZATION AND WHERE TO FIND IT.
THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES FOR SALE OR AN OFFER OR AN INVITATION TO PURCHASE
ANY SECURITIES. INVESTORS SHOULD CAREFULLY REVIEW INGERSOLL-
RAND COMPANY LIMITED'S REGISTRATION STATEMENT ON FORM S-4
AND THE RELATED PROXY STATEMENT/PROSPECTUS WITH RESPECT TO
THE PROPOSED TRANSACTION FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION BEFORE MAKING ANY DECISION CONCERNING
THE PROPOSED OFFER. THESE DOCUMENTS CONTAIN IMPORTANT
INFORMATION. THESE DOCUMENTS AND ANY OTHER RELEVANT
DOCUMENTS ARE AVAILABLE FOR FREE AT THE SECURITY AND
EXCHANGE COMMISSION'S WEB SITE, WWW.SEC.GOV, AND AT
INGERSOLL-RAND COMPANY'S WEB SITE, WWW.IRCO.COM. INVESTORS
SHOULD READ THE PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE
MAKING A DESCISION CONCERNING THE TRANSACTION.
INGERSOLL-RAND COMPANY AND ITS RESPECTIVE DIRECTORS AND
EXECUTIVE OFFICERS MAY BE DEEMED TO BE PARTICIPANTS IN THE
SOLICITATION OF PROXIES FROM INGERSOLL-RAND COMPANY'S
SHAREHOLDERS IN CONNECTION WITH THE PROPOSED REORGANIZATION.
INFORMATION CONCERNING INGERSOLL-RAND COMPANY'S PARTICIPANTS
IN THE SOLICITATION IS SET FORTH IN INGERSOLL-RAND COMPANY
LIMITED'S REGISTRATION STATEMENT ON FORM S-4 FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 2001.