SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 or TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number A. Full title of the plan and address of the plan, if different from that of the issuer named below: INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: Ingersoll-Rand Company P. O. Box 8738 Woodcliff Lake, New Jersey 07675 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Benefits Committee has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized. Ingersoll-Rand Company Savings and Stock Investment Plan (Registrant) Date June 30, 1997 By /S/Donald H. Rice Donald H. Rice Benefits Committee Chairman CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (Post-Effective Amendment No. 4 to No. 2-64708) of Ingersoll-Rand Company of our report dated June 21, 1997 appearing below in this Form 11-K. /S/ Price Waterhouse LLP PRICE WATERHOUSE LLP Morristown, New Jersey June 30, 1997 INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN INDEX TO FINANCIAL STATEMENTS Report of independent accountants Statement of financial condition at December 31, 1996 and 1995 Combined Plan Summary Fixed Income Fund Mutual Fund Company Stock Fund Loan Fund Statement of income and changes in plan/fund equity for the years ended December 31, 1996 and 1995 Combined Plan Summary Fixed Income Fund Mutual Fund Company Stock Fund Loan Fund Notes to financial statements Report of Independent Accountants To the Benefits Committee and Participants of the Ingersoll-Rand Company Savings and Stock Investment Plan In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the net assets available for benefits of the Ingersoll-Rand Company Savings and Stock Investment Plan at December 31, 1996 and 1995, and the changes in its plan equity for the years then ended, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Benefits Committee; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the Benefits Committee, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /S/ Price Waterhouse LLP PRICE WATERHOUSE LLP Morristown, New Jersey June 21, 1997 INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN COMBINED PLAN SUMMARY STATEMENT OF FINANCIAL CONDITION December 31 1996 1995 Assets: Investments at current value: Combined Trust Fixed Income Fund $140,109,747 $133,722,453 Combined Trust Mutual Fund 160,370,187 121,019,034 Combined Trust Ingersoll-Rand Company Stock Fund 204,726,590 183,035,949 505,206,524 437,777,436 Participant loans receivable 25,013,214 24,120,786 Contributions receivable 2,931,601 2,820,869 Total assets 533,151,339 464,719,091 Plan equity $533,151,339 $464,719,091 STATEMENT OF INCOME AND CHANGES IN PLAN EQUITY For the years ended December 31 1996 1995 Contributions: Participants $ 40,156,217 $ 36,428,015 Company -- 9,798,714 40,156,217 46,226,729 Investment income: Dividends and interest 24,795,644 18,540,683 Net appreciation of investments 59,074,527 45,684,603 Net investment income 83,870,171 64,225,286 Total additions 124,026,388 110,452,015 Participant withdrawals and distributions 48,384,259 40,215,502 Transfers (from) other funds, net (26) (86,819) Transfers to (from) other plans, net 7,209,907 (94,700) Net increase in plan equity 68,432,248 70,418,032 Plan equity at beginning of year 464,719,091 394,301,059 Plan equity at end of year $533,151,339 $464,719,091 See accompanying notes to financial statements. INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN FIXED INCOME FUND STATEMENT OF FINANCIAL CONDITION December 31 1996 1995 Assets: Investments at current value: Combined Trust Fixed Income Fund $140,109,747 $133,722,453 Contributions receivable 1,132,550 1,310,243 Total assets 141,242,297 135,032,696 Fund equity $141,242,297 $135,032,696 STATEMENT OF INCOME AND CHANGES IN FUND EQUITY For the years ended December 31 1996 1995 Contributions: Participants $ 16,129,982 $ 17,479,531 Investment income: Interest 7,637,984 7,698,329 Net investment income 7,637,984 7,698,329 Total additions 23,767,966 25,177,860 Participant withdrawals and distributions 18,802,248 16,096,516 Transfers (from) other funds, net (4,922,575) (2,356,769) Transfers to (from) other plans, net 3,678,692 (36,523) Net increase in fund equity 6,209,601 11,474,636 Fund equity at beginning of year 135,032,696 123,558,060 Fund equity at end of year $141,242,297 $135,032,696 See accompanying notes to financial statements. INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN MUTUAL FUND STATEMENT OF FINANCIAL CONDITION December 31 1996 1995 Assets: Investments at current value: Combined Trust Mutual Fund $160,370,187 $121,019,034 Contributions receivable 1,386,373 1,129,178 Total assets 161,756,560 122,148,212 Fund equity $161,756,560 $122,148,212 STATEMENT OF INCOME AND CHANGES IN FUND EQUITY For the years ended December 31 1996 1995 Contributions: Participants $ 19,025,763 $ 14,077,987 Investment income: Dividends and interest 11,564,017 5,335,362 Net appreciation of investments 12,252,556 25,602,673 Net investment income 23,816,573 30,938,035 Total additions 42,842,336 45,016,022 Participant withdrawals and distributions 10,423,098 7,770,548 Transfers (from) other funds, net (4,292,235) (1,127,498) Transfers (from) other plans, net (2,896,875) (62,659) Net increase in fund equity 39,608,348 38,435,631 Fund equity at beginning of year 122,148,212 83,712,581 Fund equity at end of year $161,756,560 $122,148,212 See accompanying notes to financial statements. INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN COMPANY STOCK FUND STATEMENT OF FINANCIAL CONDITION December 31 1996 1995 Assets: Investments at current value: Combined Trust Ingersoll-Rand Company Stock Fund $204,726,590 $183,035,949 Contributions receivable 412,678 381,448 Total assets 205,139,268 183,417,397 Fund equity $205,139,268 $183,417,397 STATEMENT OF INCOME AND CHANGES IN FUND EQUITY For the years ended December 31 1996 1995 Contributions: Participants $ 5,000,472 $ 4,870,497 Company -- 9,798,714 5,000,472 14,669,211 Investment income: Dividends 3,725,891 3,844,442 Net appreciation of investments 46,821,971 20,081,930 Net investment income 50,547,862 23,926,372 Total additions 55,548,334 38,595,583 Participant withdrawals and distributions 18,016,417 15,367,837 Transfers to other funds, net 9,572,174 6,681,904 Transfers to other plans, net 6,237,872 4,482 Net increase in fund equity 21,721,871 16,541,360 Fund equity at beginning of year 183,417,397 166,876,037 Fund equity at end of year $205,139,268 $183,417,397 See accompanying notes to financial statements. INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN LOAN FUND STATEMENT OF FINANCIAL CONDITION December 31 1996 1995 Participant loans receivable $25,013,214 $24,120,786 Fund equity $25,013,214 $24,120,786 STATEMENT OF INCOME AND CHANGES IN FUND EQUITY For the years ended December 31 1996 1995 Transfers from other funds for loans $12,785,012 $14,526,476 Interest income from loans 1,867,752 1,662,550 14,652,764 16,189,026 Transfers to other funds for repayments 12,427,622 11,242,020 Transfers to other plans, net 190,218 -- Participant distributions 1,142,496 980,601 Net increase in fund equity 892,428 3,966,405 Fund equity at beginning of year 24,120,786 20,154,381 Fund equity at end of year $25,013,214 $24,120,786 See accompanying notes to financial statements. INGERSOLL-RAND COMPANY SAVINGS AND STOCK INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF THE PLAN: The following brief description of the Ingersoll-Rand Company Savings and Stock Investment Plan (Plan) is for general information purposes. Participants should refer to the Plan document for more complete information. The Ingersoll-Rand Company (Company) adopted the Plan, for eligible employees at participating locations. Eligible employees may participate the first day of the month following 30 calendar days of employment. Participants may contribute as basic contributions one to six percent (in whole percentages) of their compensation through payroll deductions. Participants contributing six percent of compensation may contribute an additional one to eight percent of compensation as supplemental contributions. Only basic contributions receive Company matching contributions. Participants may use before or after-tax dollars for part or all of their contributions. Contributions are subject to varying limitations to ensure compliance with Internal Revenue Code requirements. Participants may change their contribution amounts at any time effective the first pay period of the following month by contacting the recordkeeper through its Benefits Information Line (BIL). The Plan assets are held in the Combined Investment Trust (Combined Trust), together with assets from other participating Plans. Participants may invest their contributions, in multiples of one percent, in one or more of the following funds: o Fixed Income Fund - A fund that invests in securities and debt that produce a fixed rate of return. Investments may include United States government securities, corporate bonds, notes, debentures, convertible securities, preferred stocks, investment funds or investment contracts. o Mutual Fund - Participants may select the following Fidelity Mutual Funds: Fidelity Fund, Growth and Income Portfolio, U.S. Equity Index Portfolio, and Magellan Fund. o Company Stock Fund - A mutual fund consisting primarily of the Company's common stock. This fund limits participant investment to 50% of current contributions or account balance on transfers. Each fund reinvests its income in that fund. The Company matches basic contributions at a rate determined by the Company's board of directors. For 1996 and 1995, the match was set at 50 percent of basic contributions. The Plan requires that Company contributions be at least 25 percent, but no more than 100 percent of participants basic contributions. Effective October 1, 1995, the Plan was amended to provide for an offset in the part of Company match contributions under the Plan with an equivalent benefit to the Plan participants under the Ingersoll-Rand/Clark Leveraged Employee Stock Ownership Plan (LESOP). Amounts accrued under the Plan prior to the effective date of this amendment will remain in the Plan unaffected. Participant contributions are always 100 percent vested. Company contributions vest on a seven-year, graded-vesting schedule. Employees are 20 percent vested after completing three years of service. The vested percentage then increases in increments of 20 percent per year until fully vested after seven years of service. All Company contributions become 100 percent vested if the participant's employment terminates due to disability, retirement or death. On any business day, participants may change their allocation of future contributions and transfer prior contributions between funds. Transfers of prior contributions are in whole percentages or dollars (with a $250 minimum). Participants have several options that permit access to their contributions, earnings, and certain vested Company contributions. These options are subject to certain rules and restrictions. Plan distributions may be in the form of a lump sum, installments over a maximum of five years or in such other manner that the Benefits Committee may permit. Participant accounts are kept in units and are valued on a daily basis. The Benefits Committee, appointed by the Company's board of directors, administers the Plan. The Finance Committee of the Company's board of directors establishes the Plan's investment policies. The Company intends to continue the Plan indefinitely. However, the Company retains the right to discontinue the Plan. If the Company discontinues the Plan, all participant account balances become fully vested at the termination date. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Plan follows the accrual method of accounting. Chase Manhattan Bank, NA (Chase) and Coopers & Lybrand LLP are the trustee and record keeper of the Plan, respectively. Use of Estimates: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. Valuation of Investments: Plan assets are part of the Combined Trust, which provides unified investment management. Chase invests the Plan assets in the various Combined Trust investment funds. Separate participant accounts are maintained by investment fund. These accounts record contributions, withdrawals, transfers, earnings and changes in market value. The insurance company guaranteed interest contracts, the Putnam Guaranteed Horizon Accounts, and the Putnam Managed Account are recorded at their respective contract value. Contract value approximates current value assuming the trust holds the investments until maturity. Contract value equals principal plus cumulative interest earned, reduced by distributions. The Chase Domestic Liquidity Fund contains short-term debt, bank certificates of deposit and collateralized repurchase agreements. The carrying value of these investments is a reasonable estimate of their current value due to the short-term nature of the instruments. The financial statements report investments in the Mutual Fund and the Company Stock Fund at current value based on published market quotations. Security Transactions and Investment Income: Realized gains or losses on security transactions are recorded on the trade date. Realized gains or losses are the difference between the proceeds received and the participant's average unit cost. Dividend income is recorded on the ex-dividend date and interest income is recorded when earned. The statement of income and changes in Plan/fund equity includes unrealized appreciation or depreciation in accordance with the policy of stating investments at current value. Contributions: Participant and Company matching contributions are contributed to the Combined Trust or LESOP as soon as practicable, after the end of each month. Participant contributions for each fund are based on the participants' investment decisions. The Company matching contributions are made to the Company Stock Fund in cash or common stock. Forfeitures: Forfeitures of nonvested Company contributions occur when participants are terminated. Forfeitures of $569,345 in 1996 and $737,713 in 1995 were used to reduce future Company contributions. Expenses of the Plan: Most expenses for the administration of the Plan and the Combined Trust are paid for by the Company. Expenses of the funds related to the investment and reinvestment of assets are included in the cost of the related investments. Benefit Obligations: Distributions to terminated employees are recorded in each fund's financial statements, when paid. The approved and unpaid amounts were $1,720,418 and $4,038,929 at December 31, 1996 and 1995 respectively. These amounts are reflected as liabilities on the Plan's Form 5500. NOTE 3 - FIXED INCOME FUND: Investments in the Fixed Income Fund at December 31 were as follows: 1996 1995 Group annuity contract with: The Travelers Companies $ -- $ 4,428,355 Putnam Guaranteed Horizon Accounts 78,726,520 77,702,758 Putnam Managed Account 93,410,720 89,191,183 Chase Domestic Liquidity Fund 20,346,853 13,483,488 Chase Cash Account 230 103 Total Combined Trust Fixed Income Fund 192,484,323 184,805,887 Less: Other plans 52,374,576 51,083,434 Plan investment in Fixed Income Fund $140,109,747 $133,722,453 The Travelers Companies' group annuity contract establishes a new interest rate every December, when the contract renews. The new rate applies to all funds held in the group annuity contract during the next Plan year. The interest rate was 6.50% for 1996 and 5.95% in 1995. The contract was not renewed and therefore, the balance as of December 31, 1996 was $0. At December 31, 1996, certain assets of the Plan are invested in synthetic investment contracts. The Putnam Guaranteed Horizon Accounts and the Putnam Managed Account consist principally of an investment agreement between the Company and Putnam and a wrapper contract with a financially reliable third party which provides liquidity, or benefit-responsiveness. The Putnam Guaranteed Horizon Accounts under contract at December 31, 1996 were: Net Crediting Amount Average Yield Interest Rate Maturity Date $ 6,742,584 5.78% 5.44% February 15, 1998 24,963,300 5.79% 7.44% December 22, 1997 15,214,111 5.33% 5.93% November 15, 1997 31,806,525 6.09% 6.22% November 15, 1999 $78,726,520 The Putnam Guaranteed Horizon Accounts under contract at December 31, 1995 were: Net Crediting Amount Average Yield Interest Rate Maturity Date $ 6,959,870 5.24% 5.44% February 15, 1998 23,924,784 5.29% 7.44% December 22, 1997 15,324,134 5.19% 5.93% November 15, 1997 31,493,970 5.35% 6.22% November 15, 1999 $77,702,758 The contract value of the Putnam Managed Account at December 31 was $93,410,720 in 1996, and $89,191,183 in 1995. This contract has no maturity date and ends upon written notice. The average yield for the Putnam Managed Account was 6.68% in 1996 and 6.02% in 1995. The net crediting rate as of December 31 was 6.05% in 1996 and 6.21% in 1995. The net crediting rate for all synthetic investment contracts is reset twice a year, on January 1 and July 1. In no event shall the net crediting rate be reset below 0%. The Chase Domestic Liquidity Fund reported an annualized rate of return as of December 31 of 5.30% in 1996 and 5.81% in 1995. NOTE 4 - MUTUAL FUND: Participants in the Mutual Fund may invest in the Fidelity Fund, Growth and Income Portfolio, U.S. Equity Index Portfolio and Magellan Fund. Each fund consists of a portfolio of common stocks or other securities based on the fund's investment objective. Prospectuses are available from the Fidelity Management Trust Company. Investments in the Mutual Fund at December 31 were as follows: 1996 1995 Fidelity Fund $ 17,710,287 $ 8,901,110 Growth and Income Portfolio 64,067,743 39,440,377 U.S. Equity Index Portfolio 71,666,187 58,776,728 Magellan Fund 57,388,300 53,489,060 Total Combined Trust Mutual Fund 210,832,517 160,607,275 Less: Other plans 50,462,330 39,588,241 Plan investment in Mutual Fund $160,370,187 $121,019,034 These funds cost $165,220,983 and $127,913,945 at December 31, 1996 and 1995, respectively. Net realized and unrealized appreciation of investments for the years ended December 31, 1996 and 1995 was as follows: 1996 1995 Fidelity Fund $ 1,033,725 $ 1,341,840 Growth and Income Portfolio 6,672,187 7,736,459 U.S. Equity Index Portfolio 11,398,945 14,353,970 Magellan Fund (2,848,573) 10,246,129 Total Combined Trust Mutual Fund 16,256,284 33,678,398 Less: Other plans 4,003,728 8,075,725 Net plan appreciation $ 12,252,556 $ 25,602,673 NOTE 5 - COMPANY STOCK FUND: Investments in the Company Stock Fund at December 31 were as follows: 1996 1995 Ingersoll-Rand Company common stock $223,084,354 $198,743,432 Chase Domestic Liquidity Fund 1,763,702 2,002,775 Cash 7 9 Total Combined Trust Ingersoll-Rand Company Stock Fund 224,848,063 200,746,216 Less: Other plans 20,121,473 17,710,267 Plan investment in Ingersoll-Rand Company Stock Fund $204,726,590 $183,035,949 The Company Stock Fund investment in Company common stock at December 31, 1996 and 1995, included 4,996,704 shares and 5,658,176 shares, respectively. At December 31, 1996 and 1995, these shares cost $114,705,537 and $125,136,230, respectively. Net realized and unrealized appreciation of investments for the years ended December 31, 1996 and 1995 was as follows: 1996 1995 Combined Investment Trust $ 51,347,920 $ 22,059,385 Less: Other plans 4,525,949 1,977,455 Net plan appreciation $ 46,821,971 $ 20,081,930 NOTE 6 - LOAN FUND: The Plan allows participants to borrow from their vested account balance subject to certain limits. Loans are withdrawn from the participants' accounts in a sequence outlined in the Plan. The Benefits Committee establishes the loan interest rate and reviews the rate quarterly. The loan rate may be adjusted each quarter thereafter in order to reflect the current prime rate. In 1995, the interest rate on new loans was 8% during the first half of the year, and became 9% effective July 1, 1995. In 1996, the interest rate on new loans was 9% during the entire year. Interest charges begin 60 days after the initial loan date. Loans are repaid in equal installments through payroll deductions over a maximum of five years. Loan repayments consist of interest and principal, and are reinvested according to the participant's current investment elections. If a participant terminates employment with the Company, any outstanding loan balance is considered a distribution. NOTE 7 - FEDERAL INCOME TAXES: In May 1997, a favorable determination letter was received from the Internal Revenue Service indicating that the Plan documentation satisfied the requirements for tax qualification under Section 401(a) of the Internal Revenue Code. The trust established for the Plan is exempt from federal income tax under Section 501(a) of the Internal Revenue Code. Filing for certain amendments is pending. The Company believes the Plan complies with Section 401(a); therefore, the financial statements do not provide for income taxes. Employees defer taxes on income earned, Company contributions, and contributions made under the salary deferral feature. Taxes on employee distributions depend on the form and amount of such payment. NOTE 8 - TRANSFERS (FROM) TO OTHER PLANS: In 1995 and 1996, there were transfers to (from) the Ingersoll- Rand Company Savings and Stock Investment Plan resulting from the transfer of Ingersoll-Dresser Pump Company and Dresser Industries employees. In 1996, there were transfers to (from) the Plan resulting from the acquisition of the Steelcraft Division of MascoTech, Inc. ($8 million) and the sale of the Process Systems Group ($15 million). NOTE 9 - SUBSEQUENT EVENTS: Effective March 1, 1997, the Ingersoll-Rand Company Hourly Pension Plan (Plan 45), the Clark Savings and Investment Plan and the Ingersoll-Rand Company Retirement Account Plan were merged into the Ingersoll-Rand Company Savings and Stock Investment Plan. As applicable, existing participant balances were transferred to the investment options available in the Ingersoll- Rand Company Savings and Stock Investment Plan that were elected by each participant. Effective March 1, 1997, a change in investment options occurred. The Fidelity Fund was eliminated as an election, and there are five additional investment options available to participants: Fidelity Low Priced Stock Fund, Fidelity Contrafund, Templeton Foreign Fund, Putnam New Opportunities Fund and Putnam Vista Fund.