Ingersoll-Rand Reports Record Second Quarter Earnings Per Share; Diluted EPS from Continuing Operations up 22%.Business Editors WOODCLIFF LAKE Woodcliff Lake may refer to:
Ingersoll-Rand Company (NYSE NYSE See: New York Stock Exchange : IR), a leading diversified diversified (di·verˑ·s industrial company, today reported record earnings and earnings per share for the second quarter of 2000. For the quarter, net earnings from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the were $183.4 million, 17% above last year's earnings of $156.2 million. For continuing operations, second-quarter diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of of $1.13 increased by 22%, compared to diluted earnings per share of 93 cents in the 1999 second quarter. Second-quarter 2000 revenues from continuing operations were $2,185.8 million, a 7% increase compared to $2,042.0 million in last year's second quarter. The 2000 second-quarter revenues included an unfavorable currency translation equal to 1.5% of revenues. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. from continuing operations was $348.5 million, an increase of 14% over $304.8 million for the second quarter of 1999. Excluding the results of Hussmann International, which was acquired on June June: see month. 14, 2000, second-quarter revenues improved by 4% and operating income increased by 13%. "The second quarter demonstrated our continuing ability to deliver a strong financial performance as we accelerate activities that will enhance IR's growth," said Herbert L. Henkel Henkel KGaA (ISIN: DE0006048432, ISIN: DE0006048408) is an international household products company headquartered in Düsseldorf, Germany. The company has four business sectors operating in three strategic areas: Home Care , chairman, president and chief executive officer. "We are executing our strategic plan as anticipated and as communicated to our shareholders, customers and employees. We remain confident of achieving the near and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. results we expect from the plan's successful implementation. "Our second-quarter acquisition of Hussmann International and the pending acquisition of Interflex Datensysteme of Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). will substantially increase our participation in two market sectors where we are especially focusing our growth efforts: climate control, and security and safety. Our increased participation in these markets substantiates IR's transformation to a diversified industrial company that can deliver consistently strong financial performance. "We are pleased to note that our company's operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: from continuing operations improved to 15.9%, up one full percentage point compared to the second quarter of 1999." Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. Continuing Operations For the first six months of the year, diluted earnings per share of $1.98 from continuing operations increased by 21% compared to $1.63 in 1999. IR's year-to-date revenues were $4,162.5 million, an increase of approximately 6% compared to last year. During the first six months of 2000, the company generated operating income of $617.8 million, an increase of approximately 14% over last year's operating income. Second-quarter Business Review The Climate Control Sector includes Thermo King(R) transport temperature control equipment and Hussmann International, the world leader in display case refrigeration refrigeration, process for drawing heat from substances to lower their temperature, often for purposes of preservation. Refrigeration in its modern, portable form also depends on insulating materials that are thin yet effective. , which was acquired on June 14, 2000. The sector's second-quarter revenues totaled $394.0 million, an increase of 26% compared to last year, reflecting improved results from the North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. truck market, the worldwide container business and the inclusion of Hussmann. Excluding Hussmann, revenues increased by 9%. Operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before increased by 2% to $48.8 million. Operating margins were affected by unfavorable currency comparisons and product mix. Hussmann added revenues of $53.1 million and operating earnings of $3.3 million for the three months ended June 30, 2000. The Industrial Productivity Sector is composed of a diverse group of businesses focused on providing solutions to enhance customers' industrial efficiency. Second-quarter revenues on a comparable basis increased by approximately 5%. Reported revenues of $791.9 million increased 3% compared to last year, reflecting the absence of revenues from the Automation Division, which was sold in the fourth quarter of 1999. Operating earnings increased by 23% to $115.6 million, primarily due to improved results in the Air Solutions and Bearings and Components businesses. All segments in this sector reported increased operating margins for the second quarter. The Industrial Productivity Sector consists of three segments: Air Solutions, Bearings & Components and Industrial Products. Air Solutions, which provides equipment and services for compressed air compressed air, air whose volume has been decreased by the application of pressure. Air is compressed by various devices, including the simple hand pump and the reciprocating, rotary, centrifugal, and axial-flow compressors. systems, reported revenues in the second quarter of $209.3 million, an improvement of 13% compared to 1999 due to improved overseas markets, stronger sales of small compressors and increased service revenues. Earnings increased by 26% to $25.5 million, reflecting higher volumes and the impact of ongoing cost reduction and efficiency programs. Operating margins improved to 12.2% of sales compared to 10.9% in 1999. Bearings and Components provides motion control technologies to the automotive and industrial markets. Revenues for the quarter declined by 2% to $312.7 million, as lower revenues for industrial bearings and automotive components, the latter related to the loss of the camshaft business in 1999, more than offset gains made in automotive bearings. However, operating margins improved to 16.1% of sales compared to 11.7% in 1999 due to a combination of better product mix, and ongoing cost and expense reduction activities. Industrial Products includes Club Car(R) golf cars and utility vehicles; tools; and related industrial production equipment. Reported revenues of $269.9 million in the second quarter increased slightly, compared to the second quarter of 1999, reflecting the absence of revenues from the Automation Division. Second-quarter revenues on a comparable basis increased by 8%. Operating earnings of $39.9 million increased by 9% because of improved volume for continuing businesses and cost reduction activities. Second quarter operating margins increased to 14.8% of sales compared to 13.8% in 1999. The Infrastructure Development Sector includes Bobcat bobcat: see lynx. bobcat Bobtailed, long-legged North American cat (Lynx rufus) found in forests and deserts from southern Canada to southern Mexico. It is a close relative of the lynx and caracal. (R) compact equipment; road pavers and compactors; portable power products; and drilling equipment. This sector's revenues totaled $646.3 million, slightly above last year's second quarter. Revenues of Bobcat and U.S. paving equipment increased by more than 10%, while portable power, compactor and drill revenues declined. Operating income of $126.0 million increased by 5% and the operating margin improved to 19.5% of sales. The Security and Safety Sector includes architectural hardware products and electronic access-control technologies. For this sector, second quarter revenues increased by 10% to $353.6 million, compared to the prior year. Operating earnings increased by 34% to $75.3 million and the operating margin improved to 21.3% of sales compared to 17.5% for the second quarter of 1999. Revenues and earnings were strong in both residential and commercial markets during the quarter. Comparison of Other Quarterly Income Statement Items Other expense, totaled $16.7 million of net expenses for the second quarter of 2000, an increase of $7.2 million, compared to last year's second quarter. This change is primarily attributable to lower gains from foreign exchange activities and higher minority interest charges. Interest expense for the quarter of $55.3 million was $2.2 million higher than last year's second quarter due to the impact of the debt incurred for the purchase of Hussmann, partially offset by lower year-over-year debt levels in IR's continuing operations. The company's effective tax rate was 33.7% in the second quarter of 2000 compared to 35.5% for the second quarter of 1999, reflecting $5 million of tax credits realized through IR's Foreign Sales Corporation Foreign Sales Corporation (FSC) A special type of corporation created by the Tax Reform Act of 1984 that is designed to provide a tax incentive for exporting U.S.-produced goods. (FSC FSC See: Foreign Sales Corporation ). The tax rate for the third and fourth quarters of 2000 is expected to be 35.5% as higher tax rates from the Hussmann acquisition are offset by savings from our long-term tax strategy. Discontinued Operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. On October October: see month. 4, 1999, Dresser Industries Dresser Industries was a multinational corporation headquartered in Dallas, Texas, which provided a wide range of technology, products, and services used for developing energy and natural resources. , a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Halliburton Company, elected to sell its share of two joint ventures to IR. The ventures are Dresser-Rand Company, a producer of reciprocating compressors A reciprocating compressor is a compressor that uses pistons driven by a crankshaft to deliver gases at high pressure.[1] [2] The intake gas enters the suction manifold, then flows into the compression cylinder where it gets compressed by a piston and turbo TURBO A clinical trial–The Ultrasound Removal of Blood Clots in Vein Grafts machinery products, and Ingersoll-Dresser Pumps (IDP), maker of pumps used in industrial, commercial and municipal applications. IR acquired the portion of IDP held by Dresser on December 30, 1999, for a net purchase price of $377 million and acquired Dresser's 51% ownership of Dresser-Rand for a net purchase price of approximately $536 million on February 2, 2000. IR has classified these businesses as discontinued operations because the company expects to sell them in the near future. The company recorded a loss of 5 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. in the second quarter from these discontinued operations. This compares to earnings of 6 cents per share that IR recorded in the second quarter of 1999 reflecting its ownership interests in IDP and Dresser-Rand. Second-quarter 2000 total diluted earnings per share (continuing and discontinued operations) of $1.08 increased by 9%, compared to diluted earnings per share of 99 cents in the 1999 second quarter. On February 9, 2000, IR agreed to sell IDP to Flowserve Corporation for $775 million. On April 14, 2000, IR and Flowserve received a request for additional information from the Department of Justice (DOJ (Department Of Justice) The legal arm of the U.S. government that represents the public interest of the United States. It is headed by the Attorney General. ) under the Hart-Scott-Rodino Act Hart-Scott-Rodino Act Often used in risk arbitrage. Antitrust act administered by U.S. Department of Justice and the FTC that requires an investor to file a form with the government before he acquires an economic interest in the lesser amount of $15 million or 15% of the concerning the sale of IDP to Flowserve. On July 13, 2000, Flowserve announced that it reached an agreement in principle with DOJ to resolve the agency's antitrust Antitrust The antitrust laws apply to virtually all industries and to every level of business, including manufacturing, transportation, distribution, and marketing. They prohibit a variety of practices that restrain trade. concerns. The agreement in principle includes a post-closing divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). that would affect less than three percent of the combined 1999 revenues of Flowserve and IDP. IR and Flowserve expect to close the IDP transaction during August 2000. On July 12, 2000, IR agreed to sell the reciprocating gas compressor <includeonly></includeonly>A gas compressor is a mechanical device that increases the pressure of a gas by reducing its volume. Compression of a gas naturally increases its temperature. packaging and rental business of Dresser-Rand to Hanover Hanover, city, Germany Hanover, Ger. Hannover, city (1994 pop. 524,820), capital of Lower Saxony, N Germany, on the Leine River and the Midland Canal. Compressor compressor, machine that decreases the volume of air or other gas by the application of pressure. Compressor types range from the simple hand pump and the piston-equipped compressor used to inflate tires to machines that use a rotating, bladed element to achieve Company for $190 million, $95 million of which will be cash, with the balance in Hanover stock. The sale, which is subject to necessary government and regulatory approvals, is expected to close in the third quarter of 2000. IR continues the process of selling the remaining portion of Dresser-Rand, with the expected completion during the second half of 2000. IR expects to record a pre-tax accounting gain on the sale of IDP and Dresser-Rand of approximately $250 million and to realize net after-tax cash proceeds of approximately $550 million. Acquisitions IR acquired Hussmann International on June 14, 2000. Hussmann, based in Bridgeton, Missouri Bridgeton is a northwest suburb of St. Louis, Missouri located in St. Louis County. The 2003 population estimate by the U.S. Census Bureau was 15,515, down 35 people from the 2000 census. , is the worldwide leader in the design, production, installation and servicing of merchandising merchandising Element of marketing concerned especially with the sale of goods and services to customers. One aspect of merchandising is advertising, which aims to capture the interest of the segment of the population most likely to buy the product. and refrigeration systems for the global food industry. The business comprises approximately $1.3 billion in revenues. Henkel commented, "The acquisition of Hussmann International significantly expands IR's presence in climate control, which is one of our four key global growth sectors. It perfectly fits the long-term business plan we have communicated to our shareholders, the investment community and our employees. "The combination of our existing Thermo King solution set for refrigerated re·frig·er·ate tr.v. re·frig·er·at·ed, re·frig·er·at·ing, re·frig·er·ates 1. To cool or chill (a substance). 2. To preserve (food) by chilling. food transport with the Hussmann product range creates a one-stop resource in the $25 billion global 'cold chain' that can provide products and services for the storage, transportation and retailing of food. In addition, Hussmann's extensive international manufacturing assets provide the capacity to serve the growing European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. , Asian and Latin American markets." Henkel concluded, "On a combined basis, our climate control operations will have annual revenues of approximately $2.8 billion. We expect the profitable growth of this business to be enhanced as we realize cumulative operating synergies of more than $100 million by 2003. The expected synergies will include purchasing and procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. savings generated by increased volume and improvements in manufacturing, general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. . Also, we will quickly and cost-efficiently complete our planned international expansion in the climate control business by building on Hussmann's existing worldwide manufacturing capabilities." IR expects the acquisition to be accretive to earnings per share by two to five cents for the year ending December 31, 2000, and 15 to 20 cents in 2001, the first full year of combined operations For the department of the British War Office during World War II, see . In the military, combined operations are operations conducted by forces of two or more allied nations acting together for the accomplishment of a single mission. See also
On June 27, 2000, IR announced that it agreed to acquire Interflex Datensysteme, GmbH, based in Stuttgart, Germany. Interflex provides integrated products and services for electronic access control, time and attendance recording, personnel scheduling and industrial data management. The transaction, which is subject to regulatory approval, is expected to be completed within the next few weeks. "Interflex represents a significant product line, service and geographic expansion for our Security and Safety Sector," Henkel said. "The company is a major participant in the rapidly growing market segment related to electronics-based security and access control; it provides a strong European platform to increase regional opportunities for our Security and Safety Sector; and Interflex provides IR added capabilities in the downstream From the provider to the customer. Downloading files and Web pages from the Internet is the downstream side. The upstream is from the customer to the provider (requesting a Web page, sending e-mail, etc.). markets related to service and installation, which is in keeping with a critical element of our strategic growth plan. "Furthermore, we will benefit from the application of Interflex's technologies to our existing security and safety product lines that primarily serve the North American market, including Schlage(R) locks and Locknetics(R) and Recognition Systems(R) electronic and biometric bi·o·met·rics n. (used with a sing. verb) The statistical study of biological phenomena. bi access-control technologies. "Interflex has revenues of approximately $70 million and an operating margin of 15%. The transaction is expected to be accretive to earnings in our first full year of ownership. "Year to date we have announced six acquisitions, which will all add more than $1.6 billion to our revenues on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis. All six of the new businesses meet our financial criteria and will be positive contributors to earnings in 2000. We are making rapid changes to these businesses to integrate them into current operations and to improve their financial performance." Outlook "The outlook for the balance of 2000 continues to be favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. , and we expect our ongoing focus on manufacturing excellence, working capital management and aggressive corporate development activities to drive our earnings and cash flow growth," Henkel said. "We believe that we are well positioned to achieve diluted earnings per share of approximately $4.00 in 2000. We expect third-quarter earnings from continuing operations to increase in the range of 14% to 16% compared to last year, which will result in diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. of $.91 to $.93 per share for the quarter. Our growing operating earnings and excellent working capital management will also generate more than $500 million in free cash flow, after capital expenditures and dividends, for 2000. In addition, we expect to invest substantially all of the gain on the sales of IDP and Dresser-Rand to accelerate productivity initiatives throughout the company. This will include plant rationalizations, organizational realignments consistent with our new market-based structure and consolidation of our "back office" business processes. We are beginning to implement these actions in July. The savings from these programs should contribute 5 to 8 cents of earnings per share to year 2000 results." IR is a major diversified industrial company. Its product lines serve a wide range of industrial and commercial markets worldwide. Further information on IR can be found on the company's World Wide Web site at http://www.ingersoll-rand.com. This earnings release includes "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " that involve risks and uncertainties. Political, economic, climatic, currency, tax, regulatory, technological, competitive and other factors 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 Form 10-Q See 10-Q. for the quarter ended March 31, 2000.
Consolidated Income Statement
Second Quarter and Six Months
(In millions except percentages)
UNAUDITED
Three months Six months
ended June 30, ended June 30,
--------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ----------- ---------
Revenues $2,185.8 $2,042.0 $4,162.5 $3,933.1
Cost of goods sold 1,567.7 1,468.4 3,005.6 2,858.6
Administrative selling
& service engineering
expenses 269.6 268.8 539.1 531.1
---------- ---------- ----------- ---------
Operating income 348.5 304.8 617.8 543.4
Interest expense (55.3) (53.1) (103.5) (105.6)
Other income/(expense) (16.7) (9.5) (21.3) (18.9)
---------- ---------- ----------- ---------
Earnings before taxes 276.5 242.2 493.0 418.9
Provision for taxes 93.1 86.0 170.0 148.7
---------- ---------- ----------- ---------
Net earnings from
continuing operations 183.4 156.2 323.0 270.2
Discontinued operations
(net of taxes) (8.0) 10.3 (11.6) 17.4
---------- ---------- ----------- ---------
Net earnings $ 175.4 $ 166.5 $ 311.4 $ 287.6
========== ========== =========== =========
Basic earnings per share
-Continuing operations $ 1.14 $ 0.95 $ 2.00 $ 1.65
-Discontinued operations $ (0.05) $ 0.06 $ (0.07) $ 0.10
---------- ---------- ----------- ---------
$ 1.09 $ 1.01 $ 1.93 $ 1.75
========== ========== =========== =========
Diluted earnings per share
-Continuing operations $ 1.13 $ 0.93 $ 1.98 $ 1.63
-Discontinued operations $ (0.05) $ 0.06 $ (0.07) $ 0.10
---------- ---------- ----------- ---------
$ 1.08 $ 0.99 $ 1.91 $ 1.73
========== ========== =========== =========
Average number of common
shares outstanding:
Basic 161.5 164.5 161.7 164.1
Diluted 162.8 167.7 163.1 166.1
Business Review
Second Quarter and Six Months
(In millions except percentages)
UNAUDITED
Three months Six months
ended June 30, ended June 30,
--------------------- ---------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Climate Control
Revenues $ 394.0 $ 313.3 $ 714.4 $ 604.1
Operating income 48.8 47.9 87.5 85.8
and as a % of revenues 12.4% 15.3% 12.2% 14.2%
Industrial Productivity
Air Solutions
Revenues 209.3 185.7 398.2 359.4
Operating income 25.5 20.3 45.3 37.1
and as a % of revenues 12.2% 10.9% 11.4% 10.3%
Bearings & Components
Revenues 312.7 318.0 617.5 645.4
Operating income 50.2 37.1 82.8 66.0
and as a % of revenues 16.1% 11.7% 13.4% 10.2%
Industrial Products
Revenues 269.9 266.3 517.6 526.9
Operating income 39.9 36.7 76.1 63.9
and as a % of revenues 14.8% 13.8% 14.7% 12.1%
Industrial Productivity
Revenues 791.9 770.0 1,533.3 1,531.7
Operating income 115.6 94.1 204.2 167.0
and as a % of revenues 14.6% 12.2% 13.3% 10.9%
Infrastructure Development
Revenues 646.3 636.9 1,227.7 1,185.1
Operating income 126.0 120.5 222.9 209.4
and as a % of revenues 19.5% 18.9% 18.2% 17.7%
Security & Safety
Revenues 353.6 321.8 687.1 612.2
Operating income 75.3 56.4 138.2 110.3
and as a % of revenues 21.3% 17.5% 20.1% 18.0%
Total
Revenues $ 2,185.8 $ 2,042.0 $ 4,162.5 $ 3,933.1
Operating income 365.7 318.9 652.8 572.5
and as a % of revenues 16.7% 15.6% 15.7% 14.6%
Unallocated corporate
expense (17.2) (14.1) (35.0) (29.1)
---------- ---------- ---------- ----------
Consolidated operating
income $ 348.5 $ 304.8 $ 617.8 $ 543.4
========== ========== ========== ==========
and as a % of revenues 15.9% 14.9% 14.8% 13.8%
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