Unassociated Document
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
x
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended March 31, 2007
or
o
TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the transition period from __________ to __________
Commission
File Number 1-985
INGERSOLL-RAND
COMPANY LIMITED
(Exact
name of registrant as specified in its charter)
Bermuda
|
|
75-2993910
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or
organization)
|
|
Identification
No.)
|
Clarendon
House
2
Church Street
Hamilton
HM 11, Bermuda
(Address
of principal executive offices)
(441)
295-2838
(Registrant’s
telephone number, including area code)
Indicate
by check mark whether the registrant (1) has filed all reports required to
be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for
the past 90 days. YES x
NO
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer x Accelerated
filer o Non-accelerated
filer o
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
YES o
NO
x
The
number of Class A common shares outstanding as of May 8, 2007 was
301,626,886.
INGERSOLL-RAND
COMPANY LIMITED
FORM
10-Q
INDEX
PART
I
|
|
FINANCIAL
INFORMATION
|
|
|
|
|
|
|
|
|
|
Item
1
|
-
|
Financial
Statements
|
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Income Statement for the three
|
|
|
|
|
|
months
ended March 31, 2007 and 2006
|
1
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheet at March 31, 2007
|
|
|
|
|
|
and
December 31, 2006
|
2
|
|
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statement of Cash Flows for the
|
|
|
|
|
|
three
months ended March 31, 2007 and 2006
|
3
|
|
|
|
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
4
|
|
|
|
|
|
|
|
|
Item
2
|
-
|
Management's
Discussion and Analysis of Financial Condition
|
|
|
|
|
|
and
Results of Operations
|
20
|
|
|
|
|
|
|
|
|
Item
3
|
-
|
Quantitative
and Qualitative Disclosures about Market Risk
|
31
|
|
|
|
|
|
|
|
|
Item
4
|
-
|
Controls
and Procedures
|
31
|
|
|
|
|
|
|
PART
II
|
|
OTHER
INFORMATION
|
|
|
|
|
|
|
|
|
|
Item
1
|
-
|
Legal
Proceedings
|
31
|
|
|
|
|
|
|
|
|
Item
1A
|
-
|
Risk
Factors
|
32
|
|
|
|
|
|
|
|
|
Item
2
|
-
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
32
|
|
|
|
|
|
|
|
|
Item
6
|
-
|
Exhibits
|
32
|
|
|
|
|
|
|
SIGNATURES
|
33
|
|
|
|
|
|
|
CERTIFICATIONS
|
|
Part
I - FINANCIAL INFORMATION
Item
1
- Financial Statements
INGERSOLL-RAND
COMPANY LIMITED
CONDENSED
CONSOLIDATED INCOME STATEMENT
(Unaudited)
|
|
Three
months ended
|
|
|
|
March
31,
|
|
In
millions, except per share amounts
|
|
2007
|
|
2006
|
|
Net
revenues
|
|
$
|
2,668.1
|
|
$
|
2,523.2
|
|
Cost
of goods sold
|
|
|
1,953.0
|
|
|
1,851.2
|
|
Selling
and administrative expenses
|
|
|
415.2
|
|
|
354.7
|
|
Operating
income
|
|
|
299.9
|
|
|
317.3
|
|
Interest
expense
|
|
|
(35.6
|
)
|
|
(35.3
|
)
|
Other
income (expense), net
|
|
|
(3.3
|
)
|
|
3.9
|
|
Earnings
before income taxes
|
|
|
261.0
|
|
|
285.9
|
|
Provision
for income taxes
|
|
|
44.5
|
|
|
41.5
|
|
Earnings
from continuing operations
|
|
|
216.5
|
|
|
244.4
|
|
Discontinued
operations, net of tax
|
|
|
1.0
|
|
|
8.8
|
|
Net
earnings
|
|
$
|
217.5
|
|
$
|
253.2
|
|
|
|
|
|
|
|
|
|
Basic
earnings per common share:
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.71
|
|
$
|
0.74
|
|
Discontinued
operations
|
|
|
-
|
|
|
0.03
|
|
Net
earnings
|
|
$
|
0.71
|
|
$
|
0.77
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share:
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$
|
0.70
|
|
$
|
0.73
|
|
Discontinued
operations
|
|
|
-
|
|
|
0.03
|
|
Net
earnings
|
|
$
|
0.70
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
Dividends
per common share
|
|
$
|
0.18
|
|
$
|
0.16
|
|
See
accompanying Notes to Condensed Consolidated Financial
Statements.
INGERSOLL-RAND
COMPANY LIMITED
CONDENSED
CONSOLIDATED BALANCE SHEET
(Unaudited)
|
|
March
31,
|
|
December
31,
|
|
In
millions
|
|
2007
|
|
2006
|
|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
304.6
|
|
$
|
355.8
|
|
Marketable
securities
|
|
|
0.6
|
|
|
0.7
|
|
Accounts
and notes receivable, less allowance of
|
|
|
1,860.6
|
|
|
1,847.3
|
|
$14.0
in 2007 and $15.6 in 2006
|
|
|
|
|
|
|
|
Inventories
|
|
|
1,249.5
|
|
|
1,178.5
|
|
Prepaid
expenses and deferred income taxes
|
|
|
534.3
|
|
|
396.0
|
|
Assets
held for sale
|
|
|
628.8
|
|
|
601.9
|
|
Total
current assets
|
|
|
4,578.4
|
|
|
4,380.2
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net
|
|
|
1,149.5
|
|
|
1,131.3
|
|
Goodwill
|
|
|
4,534.5
|
|
|
4,505.9
|
|
Intangible
assets, net
|
|
|
731.5
|
|
|
735.3
|
|
Other
assets
|
|
|
1,417.1
|
|
|
1,393.2
|
|
Total
assets
|
|
$
|
12,411.0
|
|
$
|
12,145.9
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
922.7
|
|
$
|
989.3
|
|
Accrued
compensation and benefits
|
|
|
292.0
|
|
|
364.9
|
|
Accrued
expenses and other current liabilities
|
|
|
951.4
|
|
|
1,061.1
|
|
Loans
payable and current maturities of long-term debt
|
|
|
1,186.8
|
|
|
1,079.4
|
|
Liabilities
held for sale
|
|
|
198.3
|
|
|
187.3
|
|
Total
current liabilities
|
|
|
3,551.2
|
|
|
3,682.0
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
903.0
|
|
|
905.2
|
|
Postemployment
and other benefit liabilities
|
|
|
1,393.5
|
|
|
1,390.0
|
|
Other
noncurrent liabilities
|
|
|
1,177.2
|
|
|
763.9
|
|
Total
liabilities
|
|
|
7,024.9
|
|
|
6,741.1
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
Class
A common shares
|
|
|
305.3
|
|
|
306.8
|
|
Retained
earnings
|
|
|
5,397.0
|
|
|
5,456.1
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(316.2
|
)
|
|
(358.1
|
)
|
Total
shareholders' equity
|
|
|
5,386.1
|
|
|
5,404.8
|
|
Total
liabilities and shareholders' equity
|
|
$
|
12,411.0
|
|
$
|
12,145.9
|
|
See
accompanying Notes to Condensed Consolidated Financial
Statements.
INGERSOLL-RAND
COMPANY LIMITED
CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
Three
months ended March 31,
|
|
In
millions
|
|
2007
|
|
2006
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
217.5
|
|
$
|
253.2
|
|
Loss
(income) from discontinued operations, net of tax
|
|
|
(1.0
|
)
|
|
(8.8
|
)
|
Adjustments
to arrive at net cash provided by (used in) operating
activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
43.6
|
|
|
46.2
|
|
Stock
settled share-based compensation
|
|
|
11.9
|
|
|
8.2
|
|
Changes
in other assets and liabilities, net
|
|
|
(112.5
|
)
|
|
(154.3
|
)
|
Other,
net
|
|
|
(105.6
|
)
|
|
(105.8
|
)
|
Net
cash provided by (used in) continuing operating activities
|
|
|
53.9
|
|
|
38.7
|
|
Net
cash provided by (used in) discontinued operating
activities
|
|
|
(8.1
|
)
|
|
(10.9
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(47.0
|
)
|
|
(36.0
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
2.2
|
|
|
1.9
|
|
Acquisitions,
net of cash acquired
|
|
|
(7.8
|
)
|
|
(26.8
|
)
|
Proceeds
from sales and maturities of marketable securities
|
|
|
0.1
|
|
|
109.9
|
|
Other,
net
|
|
|
(0.1
|
)
|
|
(0.6
|
)
|
Net
cash provided by (used in) continuing investing activities
|
|
|
(52.6
|
)
|
|
48.4
|
|
Net
cash provided by (used in) discontinued investing
activities
|
|
|
(4.7
|
)
|
|
(2.3
|
)
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
Increase
(decrease) in short-term borrowings
|
|
|
104.1
|
|
|
(9.0
|
)
|
Proceeds
from long-term debt
|
|
|
-
|
|
|
0.8
|
|
Payments
of long-term debt
|
|
|
(1.9
|
)
|
|
(5.5
|
)
|
Net
change in debt
|
|
|
102.2
|
|
|
(13.7
|
)
|
Dividends
paid
|
|
|
(55.3
|
)
|
|
(52.3
|
)
|
Proceeds
from exercise of stock options
|
|
|
44.7
|
|
|
45.7
|
|
Repurchase
of common shares by subsidiary
|
|
|
(133.6
|
)
|
|
(163.5
|
)
|
Net
cash provided by (used in) continuing financing activities
|
|
|
(42.0
|
)
|
|
(183.8
|
)
|
Net
cash provided by (used in) discontinued financing
activities
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
2.3
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(51.2
|
)
|
|
(103.0
|
)
|
Cash
and cash equivalents - beginning of period
|
|
|
355.8
|
|
|
876.0
|
|
Cash
and cash equivalents - end of period
|
|
$
|
304.6
|
|
$
|
773.0
|
|
See
accompanying Notes to Condensed Consolidated Financial
Statements.
INGERSOLL-RAND
COMPANY LIMITED
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1
-
Basis
of Presentation
In
the
opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments, which include normal recurring adjustments,
necessary to present fairly the consolidated unaudited financial position at
March 31, 2007, and results of operations and cash flows for the three months
ended March 31, 2007 and 2006.
The
accompanying condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the
Ingersoll-Rand Company Limited (the Company or IR-Limited) Annual Report on
Form
10-K for the year ended December 31, 2006.
As
a
result of the divestiture of the Road Development business unit, the Company
realigned its operating and reporting segments to better reflect its market
focus. The former Compact Vehicle Technologies segment and the Construction
Technologies segment, excluding the Road Development business, were aggregated
into one segment - Compact Equipment Technologies. Prior year results have
been
reclassified to conform to this change.
Note
2 - Divestitures and Discontinued Operations
The
components of discontinued operations for the three months ended March 31,
were
as follows:
In
millions
|
|
2007
|
|
2006
|
|
Road
Development, net of tax
|
|
$
|
16.5
|
|
$
|
17.9
|
|
Other
discontinued operations, net of tax
|
|
|
(15.5
|
)
|
|
(9.1
|
)
|
Total
discontinued operations, net of tax
|
|
$
|
1.0
|
|
$
|
8.8
|
|
Road
Development Divestiture
On
February 27, 2007, the Company agreed to sell its Road Development business
unit
to AB Volvo (publ) for cash proceeds of approximately $1.3 billion. The sale
was
completed on April 30, 2007, in all countries except for India, which closed
on
May 4, 2007. The sale is expected to generate net cash proceeds of approximately
$1.05 billion.
The
Road
Development business unit manufactures and sells asphalt paving equipment,
compaction equipment, milling machines, and construction-related material
handling equipment. The Company has accounted for the Road Development business
unit as discontinued operations and has classified the assets and liabilities
sold to AB Volvo as held for sale for all periods presented in accordance with
Statement of Financial Accounting Standard No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”.
Net
revenues and after-tax earnings of the Road Development business unit for the
three months ended March 31, were as follows:
In
millions
|
|
2007
|
|
2006
|
|
Net
revenues
|
|
$
|
167.7
|
|
$
|
187.8
|
|
After-tax
earnings
|
|
|
16.5
|
|
|
17.9
|
|
Assets
and liabilities recorded as held for sale on the condensed consolidated balance
sheet were as follows:
|
|
March
31,
|
|
December
31,
|
|
In
millions
|
|
2007
|
|
2006
|
|
Assets
|
|
|
|
|
|
|
|
Current
assets
|
|
$
|
351.9
|
|
$
|
317.6
|
|
Property,
plant and equipment, net
|
|
|
138.6
|
|
|
145.0
|
|
Goodwill
and other intangible assets, net
|
|
|
99.8
|
|
|
99.8
|
|
Other
assets and deferred income taxes
|
|
|
38.5
|
|
|
39.5
|
|
Assets
held for sale
|
|
$
|
628.8
|
|
$
|
601.9
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
Current
liabilities
|
|
$
|
124.5
|
|
$
|
118.9
|
|
Non-current
liabilities
|
|
|
73.8
|
|
|
68.4
|
|
Liabilities
held for sale
|
|
$
|
198.3
|
|
$
|
187.3
|
|
Other
Discontinued Operations
The
Company also has other retained costs for discontinued operations that mainly
include costs related to postretirement benefits and product and legal costs
(mostly asbestos-related) from previously sold businesses. The components of
other discontinued operations for the three months ended March 31, were as
follows:
In
millions
|
|
2007
|
|
2006
|
|
Retained
(costs) income, net of tax
|
|
$
|
(15.6
|
)
|
$
|
(9.3
|
)
|
Net
gain on disposals, net of tax
|
|
|
0.1
|
|
|
0.2
|
|
Total
other discontinued operations, net of tax
|
|
$
|
(15.5
|
)
|
$
|
(9.1
|
)
|
Note
3
-
Inventories
Inventories
are stated at the lower of cost or market. Most U.S. manufactured inventories,
excluding the Climate Control Technologies segment, are valued on the last-in,
first-out (LIFO) method. All other inventories are valued using the first-in,
first-out (FIFO) method. The composition of inventories was as
follows:
|
|
March
31,
|
|
December
31,
|
|
In
millions
|
|
2007
|
|
2006
|
|
Raw
materials and supplies
|
|
$
|
463.0
|
|
$
|
480.5
|
|
Work-in-process
|
|
|
222.2
|
|
|
208.2
|
|
Finished
goods
|
|
|
706.0
|
|
|
633.9
|
|
|
|
|
1,391.2
|
|
|
1,322.6
|
|
Less
- LIFO reserve
|
|
|
141.7
|
|
|
144.1
|
|
Total
|
|
$
|
1,249.5
|
|
$
|
1,178.5
|
|
Note
4 -
Goodwill
and Other Intangible Assets
The
changes in the carrying amount of goodwill were as follows:
|
|
Climate
|
|
Compact
|
|
|
|
|
|
|
|
|
|
Control
|
|
Equipment
|
|
Industrial
|
|
Security
|
|
|
|
In
millions
|
|
Technologies
|
|
Technologies
|
|
Technologies
|
|
Technologies
|
|
Total
|
|
Balance
at December 31, 2006
|
|
$
|
2,545.1
|
|
$
|
852.7
|
|
$
|
157.2
|
|
$
|
950.9
|
|
$
|
4,505.9
|
|
Acquisitions
and adjustments*
|
|
|
-
|
|
|
4.2
|
|
|
4.7
|
|
|
3.3
|
|
|
12.2
|
|
Translation
|
|
|
7.4
|
|
|
0.3
|
|
|
1.1
|
|
|
7.6
|
|
|
16.4
|
|
Balance
at March 31, 2007
|
|
$
|
2,552.5
|
|
$
|
857.2
|
|
$
|
163.0
|
|
$
|
961.8
|
|
$
|
4,534.5
|
|
*
Includes
current year adjustments related to final purchase price allocation
adjustments.
The
Company initially records to goodwill the excess of the purchase price over
the
preliminary fair value of the net assets acquired. Once the final valuation
has
been performed for each acquisition, the Company may record an adjustment
to
goodwill.
The
following table sets forth the gross amount and accumulated amortization of
the
Company’s intangible assets:
|
|
March
31, 2007
|
|
December
31, 2006
|
|
|
|
Gross
|
|
Accumulated
|
|
Gross
|
|
Accumulated
|
|
In
millions
|
|
amount
|
|
amortization
|
|
amount
|
|
amortization
|
|
Customer
relationships
|
|
$
|
511.8
|
|
$
|
77.1
|
|
$
|
510.2
|
|
$
|
72.9
|
|
Trademarks
|
|
|
106.8
|
|
|
11.4
|
|
|
105.0
|
|
|
10.0
|
|
Patents
|
|
|
38.2
|
|
|
26.5
|
|
|
38.4
|
|
|
25.9
|
|
Other
|
|
|
49.2
|
|
|
24.8
|
|
|
49.9
|
|
|
24.2
|
|
Total
amortizable intangible assets
|
|
|
706.0
|
|
|
139.8
|
|
|
703.5
|
|
|
133.0
|
|
Indefinite-lived
intangible assets
|
|
|
165.3
|
|
|
-
|
|
|
164.8
|
|
|
-
|
|
Total
|
|
$
|
871.3
|
|
$
|
139.8
|
|
$
|
868.3
|
|
$
|
133.0
|
|
Intangible
asset amortization expense was $6.8 million and $6.5 million for the three
months ended March 31, 2007 and 2006, respectively. Estimated intangible asset
amortization expense for each of the next five years is expected to approximate
$26 million.
Note
5 - Postretirement Benefits Other Than Pensions
The
Company sponsors several postretirement plans that cover certain eligible
employees. These plans provide for health care benefits and, in some instances,
life insurance benefits. Postretirement health plans generally are contributory
and contributions are adjusted annually. Life insurance plans for retirees
are
primarily noncontributory. The Company funds the postretirement benefit costs
principally on a pay-as-you-go basis. The components of net periodic
postretirement benefits cost for the three months ended March 31, were as
follows:
In
millions
|
|
2007
|
|
2006
|
|
Service
cost
|
|
$
|
3.2
|
|
$
|
2.7
|
|
Interest
cost
|
|
|
14.1
|
|
|
13.6
|
|
Net
amortization of prior service gains
|
|
|
(1.1
|
)
|
|
(1.0
|
)
|
Net
amortization of net actuarial losses
|
|
|
4.9
|
|
|
4.6
|
|
Net
periodic postretirement benefits cost*
|
|
$
|
21.1
|
|
$
|
19.9
|
|
*Amounts
include costs reported in continuing and discontinued operations
Note
6 -
Pension
Plans
The
Company sponsors several noncontributory pension plans that cover substantially
all U.S. employees. In addition, certain non-U.S. employees in other countries
are covered by pension plans. The Company’s pension plans for U.S.
non-collectively bargained employees provide benefits on a modest final average
pay formula. The Company’s U.S. collectively bargained pension plans principally
provide benefits based on a flat benefit formula. Non-U.S. plans provide
benefits based on earnings and years of service. The Company maintains
additional other supplemental benefit plans for officers and other key
employees. The components of the Company’s pension-related costs for the three
months ended March 31, were the following:
In
millions
|
|
2007
|
|
2006
|
|
Service
cost
|
|
$
|
14.9
|
|
$
|
14.4
|
|
Interest
cost
|
|
|
41.5
|
|
|
39.9
|
|
Expected
return on plan assets
|
|
|
(58.2
|
)
|
|
(54.1
|
)
|
Net
amortization of:
|
|
|
|
|
|
|
|
Prior
service costs
|
|
|
2.4
|
|
|
2.1
|
|
Transition
amount
|
|
|
0.2
|
|
|
0.2
|
|
Plan
net acturial losses
|
|
|
4.6
|
|
|
6.6
|
|
Net
periodic pension cost*
|
|
$
|
5.4
|
|
$
|
9.1
|
|
*Amounts
include costs reported in continuing and discontinued
operations
The
Company made employer contributions of $7.9 million and $5.0 million to its
pension plans in the first quarter of 2007 and 2006, respectively.
Note
7 -
Share-Based Compensation
The
Company’s Incentive Stock Plan of 1998 authorizes the Company to issue stock
options and other share-based incentives. Total shares authorized by the
shareholders is 60.0 million, of which approximately 14.0 million remains
available for future incentive awards. The Company’s ability to grant future
stock options and other share based incentives under its Incentive Stock Plan
of
1998 expires in May 2007.
Stock
Options
The
average fair value of the stock options granted for the three months ended
March
31, 2007 and 2006 was estimated to be $11.06 and $10.42, respectively, using
the
Black-Scholes option-pricing model. The following assumptions were
used:
|
|
2007
|
|
2006
|
|
Dividend
yield
|
|
|
1.75
|
%
|
|
1.49
|
%
|
Volatility
|
|
|
26.10
|
%
|
|
27.70
|
%
|
Risk-free
rate of return
|
|
|
4.71
|
%
|
|
4.47
|
%
|
Expected
life
|
|
|
4.70
years
|
|
|
4.42
years
|
|
Expected
volatility is based on the historical volatility from traded options on the
Company’s stock. The risk-free rate of interest for periods within the
contractual life of the stock option award is based on the yield curve of a
zero-coupon U.S. Treasury bond on the date the award is granted with a maturity
equal to the expected term of the award. The Company uses historical data to
estimate forfeitures within its valuation model. The Company’s expected life of
the stock option awards is derived from historical experience and represents
the
period of time that awards are expected to be outstanding.
Changes
in the options outstanding under the plans for the three months ended March
31,
2007 was as follows:
|
|
|
|
Weighted-
average
exercise
price
|
|
Aggregate
intrinsic
value
(millions)
|
|
Weighted-
average
remaining
life
|
|
December
31, 2006
|
|
|
19,164,942
|
|
$
|
31.53
|
|
|
|
|
|
|
|
Granted
|
|
|
3,299,230
|
|
|
43.13
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,598,581
|
)
|
|
28.13
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(58,631
|
)
|
|
39.49
|
|
|
|
|
|
|
|
Outstanding
March 31, 2007
|
|
|
20,806,960
|
|
$
|
33.61
|
|
$
|
203.2
|
|
|
6.7
|
|
Exercisable
March 31, 2007
|
|
|
15,504,623
|
|
$
|
30.82
|
|
$
|
194.5
|
|
|
5.8
|
|
SARs
SARs
generally vest ratably over a three-year period from the date of grant and
expire at the end of ten years. Effective August 2, 2006, all exercised SARs
will be settled in the Company’s Class A common shares. Previously, exercised
SARs were paid in cash.
The
following table summarizes the information for currently outstanding SARs for
the three months ended March 31, 2007:
|
|
|
|
Weighted-
average
exercise
price
|
|
Aggregate
intrinsic
value
(millions)
|
|
Weighted-
average
remaining
life
|
|
December
31, 2006
|
|
|
1,693,754
|
|
$
|
33.11
|
|
|
|
|
|
|
|
Granted*
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
Exercised
|
|
|
(196,315
|
)
|
|
30.93
|
|
|
|
|
|
|
|
Cancelled
|
|
|
(11,438
|
)
|
|
31.85
|
|
|
|
|
|
|
|
Outstanding
March 31, 2007
|
|
|
1,486,001
|
|
$
|
33.40
|
|
$
|
14.9
|
|
|
6.7
|
|
Exercisable
March 31, 2007
|
|
|
1,063,563
|
|
$
|
31.13
|
|
$
|
13.1
|
|
|
6.2
|
|
*
As of
the end of 2006, the Company no longer expects to grant SARs
Performance
Shares
The
Company has a Performance Share Program (PSP) for key employees. The
program provides annual awards for the achievement of pre-established long-term
strategic initiatives and annual financial performance of the Company. The
annual target award level is expressed as a number of the Company’s Class A
common shares and for performance year 2006 the award was paid in cash. On
April
17, 2007 and effective for the performance year 2007, the Compensation Committee
of the Board of Directors of the Company approved a revision to the PSP program
such that all
PSP
awards will be paid in Class A common shares rather than in cash and all of
those shares will vest one year after the date of grant. As a result of these
changes, a larger portion of the Company’s executive compensation program will
be directly linked to the performance of the Company’s Class A common shares,
thus further aligning the interests of executives with those of our
shareholders.
Deferred
Compensation
The
Company allows key employees and non-employee directors to defer a portion
of
their eligible compensation into a number of investment choices, including
Class
A common share equivalents. The portion deferred into Class A common share
equivalents is currently subject to market fluctuations based on the Company’s
share price. Effective
August 2, 2006, the Company eliminated the provision in the deferred
compensation plans making plan participants eligible to receive a 20%
supplemental amount on deferrals invested for five years in the Company's Class
A common share equivalents. In addition, effective August 2, 2006, the Company
vested the previously awarded, but unvested, portions of the 20% supplemental
amount awarded under the deferred compensation plans.
Other
Plans
The
Company maintains a shareholder-approved Management Incentive Unit Award Plan.
Under the plan, participating key employees were awarded incentive units. When
dividends are paid on Class A common shares, dividends are awarded to unit
holders, one-half of which is paid in cash and the remaining half of which
is
credited to the participants’ account in the form of Class A common share
equivalents. The value of the actual incentive units is never paid to
participants, and only the fair value of accumulated common share equivalents
is
paid in cash upon the participants’ retirement.
Stock
grants were issued prior to February 2000 as an incentive plan for certain
key
employees, with varying vesting periods. Effective August 2, 2006, all remaining
stock grants will be settled with the Company’s Class A common shares rather
than cash.
Compensation
Expense
Share-based
compensation expense is included in Selling and administrative expenses. The
following table summarizes the expenses recognized for the three months ended
March 31:
In
millions
|
|
2007
|
|
2006
|
|
Stock
options
|
|
$
|
11.4
|
|
$
|
8.2
|
|
SARs
|
|
|
0.4
|
|
|
3.3
|
|
Performance
shares
|
|
|
4.2
|
|
|
4.5
|
|
Deferred
compensation
|
|
|
1.0
|
|
|
2.9
|
|
Other
|
|
|
0.3
|
|
|
0.5
|
|
Pre-tax
expense
|
|
|
17.3
|
|
|
19.4
|
|
Tax
benefit
|
|
|
6.6
|
|
|
7.4
|
|
After
tax expense
|
|
$
|
10.7
|
|
$
|
12.0
|
|
In
August
2006, the Company entered into two total return swaps (the Swaps) which are
derivative instruments used to hedge the Company's exposure to changes in its
share-based compensation expense. The aggregate notional amount of the Swaps
is
approximately $52.6 million, and the aggregate fair value of the Swaps was
$8.0
million as of March 31, 2007. For the three months ended March 31, 2007, the
Company recorded income of $5.9 million within Selling and administrative
expenses, associated with the change in fair value of the swaps during the
period.
Note
8 - Income Taxes
Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement 109” (FIN 48),
which prescribes a recognition threshold and measurement process for recording
in the financial statements uncertain tax positions taken or expected to be
taken in a tax return. Additionally, FIN 48 provides guidance on the
recognition, classification, accounting in interim periods and disclosure
requirements for uncertain tax positions. As a result of adopting FIN 48, the
company recorded additional liabilities, to its previously established reserves,
and a corresponding decrease in retained earnings of $145.6
million.
The
Company has total unrecognized tax benefits of $457.0 million as of January
1,
2007. The amount of unrecognized tax benefits that, if recognized, would affect
the effective tax rate are $394.9 million as of January 1, 2007.
The
Company records interest and penalties associated with the uncertain tax
positions within its provision for income taxes on its income statement. As
of
January 1, 2007, the Company had reserves totaling $88.0 million associated
with
interest and penalties, net of tax. For the three months ended March 31, 2007,
the Company recognized $2.9 million in interest and penalties net of tax related
to these uncertain tax positions.
The
provision for income taxes involves a significant amount of management judgment
regarding interpretation of relevant facts and laws in the jurisdictions in
which the Company operates. Future changes in applicable laws, projected levels
of taxable income and tax planning could change the effective tax rate and
tax
balances recorded by the Company. In addition, U.S. and non-U.S. tax authorities
periodically review income tax returns filed by the Company and can raise issues
regarding its filing positions, timing and amount of income or deductions,
and
the allocation of income among the jurisdictions in which the Company operates.
A significant period of time may elapse between the filing of an income tax
return and the ultimate resolution of an issue raised by a revenue authority
with respect to that return. In the normal course of business the Company is
subject to examination by taxing authorities throughout the world, including
such major jurisdictions as Germany, Italy, the Netherlands and the United
States. In general, the examination of the Company’s material tax
returns is completed for the years prior to 2000.
The
IRS
has completed the examination of the Company’s federal income tax returns
through the 2000 tax year and has issued a notice proposing adjustments. The
principle proposed adjustment relates to the disallowance of certain capital
losses. The Company disputes the IRS position and protests have been filed
with
the IRS Appeals Division. It is reasonably possible that in order to reduce
the
potential interest expense, the Company may make a payment within the next
12
months with respect to the capital loss disallowance. The potential payment
of
tax and accrued interest of approximately $200 million will reduce the Company’s
total unrecognized tax position by approximately $140 million.
The
IRS
is in the process of examining the Company’s tax returns for tax years 2001 and
2002. The Company has been actively engaged in discussions with the IRS
regarding issues related to the Company’s reincorporation into Bermuda in 2001.
The
Company believes that it has adequately provided for any reasonably foreseeable
resolution of any tax disputes, but will adjust its reserves if events so
dictate in accordance with FIN 48. To the extent that the ultimate results
differ from the original or adjusted estimates of the Company, the effect will
be recorded in the provision for income taxes.
Note
9
-
Comprehensive
Income
The
components of comprehensive income for the quarters ended March 31, were as
follows:
In
millions
|
|
2007
|
|
2006
|
|
Net
earnings
|
|
$
|
217.5
|
|
$
|
253.2
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
35.5
|
|
|
53.3
|
|
Change
in fair value of derivatives qualifying as cash flow
|
|
|
|
|
|
|
|
hedges,
net of tax
|
|
|
-
|
|
|
(4.1
|
)
|
Unrealized
gain (loss) on marketable securities, net of tax
|
|
|
(0.5
|
)
|
|
(0.7
|
)
|
Pension
and other postretirement benefits liability adjustment, net of
tax
|
|
|
6.9
|
|
|
-
|
|
Comprehensive
income
|
|
$
|
259.4
|
|
$
|
301.7
|
|
Note
10
-
Weighted-Average
Common Shares
Basic
earnings per share is computed by dividing net earnings by the weighted-average
number of Class A common shares outstanding. Dilutive earnings per share is
computed by dividing net earnings by the weighted-average number of Class A
common shares outstanding as well as potentially dilutive common shares, which
in the Company’s case, includes shares issuable under share-based compensation
plans. The following table details the weighted-average number of Class A common
shares outstanding for basic and diluted earnings per share
calculations:
|
|
Three
months ended March 31,
|
|
In
millions
|
|
2007
|
|
2006
|
|
Weighted-average
number of basic shares
|
|
|
306.8
|
|
|
328.8
|
|
Shares
issuable under incentive stock plans
|
|
|
3.5
|
|
|
3.6
|
|
Weighted-average
number of diluted shares
|
|
|
310.3
|
|
|
332.4
|
|
Anti-dilutive
shares
|
|
|
4.0
|
|
|
1.7
|
|
Note
11 - Commitments
and Contingencies
The
Company is involved in various litigations, claims and administrative
proceedings, including environmental and product liability matters. Amounts
recorded for identified contingent liabilities are estimates, which are reviewed
periodically and adjusted to reflect additional information when it becomes
available. Subject to the uncertainties inherent in estimating future costs
for
contingent liabilities, management believes that the liability which may result
from these legal matters would not have a material adverse effect on the
financial condition, results of operations, liquidity or cash flows of the
Company.
Environmental
remediation costs are determined on a site-by-site basis and accruals are made
when it is probable a liability exists and the cost can be reasonably estimated.
The Company estimates the amount of recurring and non-recurring costs at each
site using internal and external experts. In arriving at cost estimates the
following factors are considered: the type of contaminant, the stage of the
clean up, applicable law and existing technology. These estimates, and the
resultant accruals, are reviewed and updated quarterly to reflect changes in
facts and law. The Company does not discount its liability or assume any
insurance recoveries when environmental liabilities are recorded.
Certain
wholly owned subsidiaries of the Company are named as defendants in
asbestos-related lawsuits in state and federal courts. In virtually all of
the
suits, a large number of other companies have also been named as defendants.
The
vast majority of those claims has been filed against Ingersoll-Rand Company
(IR-New Jersey), and generally allege injury caused by exposure to asbestos
contained in certain of IR-New Jersey’s products. Although IR-New Jersey was
neither a producer nor a manufacturer of asbestos, some of its formerly
manufactured products utilized asbestos-containing components, such as gaskets
purchased from third-party suppliers.
All
asbestos-related claims resolved to date have been dismissed or settled. For
the
three month period ended March 31, 2007, total costs for settlement and defense
of asbestos claims after insurance recoveries and net of tax were approximately
$12 million. With the assistance of independent advisors, the Company performs
a
thorough analysis, updated periodically, of its actual and anticipated future
asbestos liabilities projected seven years in the future. Based upon such
analysis, the Company believes that its reserves and insurance are adequate
to
cover its asbestos liabilities, and that these asbestos liabilities are not
likely to have a material adverse effect on its financial position, results
of
operations, liquidity or cash flows.
Legislation
recently under consideration in Congress concerns pending and future
asbestos-related personal injury claims. Whether and when such legislation
will
become law, and the final provisions of such legislation, are unknown.
Consequently, the Company cannot predict with any reasonable degree of certainty
what effect, if any, such legislation would have upon the Company’s financial
position, results of operations or cash flows.
In
connection with the disposition of certain businesses and facilities the Company
has indemnified the purchasers for the expected cost of remediation of
environmental contamination, if any, existing on the date of disposition. Such
expected costs are accrued when environmental assessments are made or remedial
efforts are probable and the costs can be reasonably estimated.
As
previously reported, on November 10, 2004, the Securities and Exchange
Commission (SEC) issued an Order directing that a number of public companies,
including the Company, provide information relating to their participation
in
transactions under the United Nations’ Oil for Food Program. Upon receipt of the
Order, the Company undertook a thorough review of its participation in the
Program, provided the SEC with information responsive to the Order and provided
additional information requested by the SEC. During a March 27, 2007 meeting
with the SEC, at which a representative of the Department of Justice (DOJ)
was
also present, the Company began discussions concerning the resolution of this
matter with both the SEC and DOJ. These discussions are ongoing and the Company
will continue to cooperate fully with the SEC and DOJ in this
matter.
The
Company sells products on a continuous basis under various arrangements through
institutions that provide leasing and product financing alternatives to retail
and wholesale customers. Under these arrangements, the Company is contingently
liable for loan guarantees and residual values of equipment of approximately
$20.7 million, including consideration of ultimate net loss provisions. The
risk
of loss to the Company is minimal, and historically, only immaterial losses
have
been incurred related to these arrangements since the fair value of the
underlying equipment that serves as collateral is generally in excess of the
contingent liability. Management believes these guarantees will not adversely
affect the condensed consolidated financial statements.
The
Company remains contingently liable for approximately $13.8 million relating
to
performance bonds associated with prior sale of products of Ingersoll-Dresser
Pump Company (IDP), which the Company divested in 2000. The acquirer of IDP
is
the primary obligor under these performance bonds. However, should the acquirer
default under these arrangements, the Company would be required to satisfy
these
financial obligations. The obligation extends through 2008.
The
following table represents the changes in the product warranty liability for
the
three months ended March 31, respectively:
In
millions
|
|
2007
|
|
2006
|
|
Balance
at beginning of period
|
|
$
|
186.6
|
|
$
|
177.0
|
|
Reductions
for payments
|
|
|
(26.1
|
)
|
|
(22.4
|
)
|
Accruals
for warranties issued during the period
|
|
|
30.3
|
|
|
22.8
|
|
Changes
to accruals related to preexisting warranties
|
|
|
(0.8
|
)
|
|
(1.9
|
)
|
Acquisitions
|
|
|
0.1
|
|
|
-
|
|
Translation
|
|
|
1.1
|
|
|
1.1
|
|
Balance
at end of period
|
|
$
|
191.2
|
|
$
|
176.6
|
|
Note
12 -
Business
Segment Information
The
Company classifies its business into four reportable segments based on industry
and market focus: Climate Control Technologies, Compact Equipment Technologies,
Industrial Technologies and Security Technologies.
As
discussed in Note 1, the Company realigned its operating and reporting segments.
As a result, the former Compact Vehicle Technologies segment and the
Construction Technologies segment, excluding the Road Development business,
were
aggregated into one segment - Compact Equipment Technologies. The Compact
Equipment Technologies segment includes the Bobcat and Club Car brands as well
as the Utility Equipment and Attachment businesses. Prior year results have
been
reclassified to conform to this change. A summary of operations by reportable
segment is as follows:
|
|
Three
months ended March 31,
|
|
In
millions
|
|
2007
|
|
2006
|
|
Net
revenues
|
|
|
|
|
|
|
|
Climate
Control Technologies
|
|
$
|
728.9
|
|
$
|
683.6
|
|
Compact
Equipment Technologies
|
|
|
875.1
|
|
|
875.7
|
|
Industrial
Technologies
|
|
|
484.5
|
|
|
439.1
|
|
Security
Technologies
|
|
|
579.6
|
|
|
524.8
|
|
Total
|
|
$
|
2,668.1
|
|
$
|
2,523.2
|
|
Operating
income
|
|
|
|
|
|
Climate
Control Technologies
|
|
$
|
69.4
|
|
$
|
69.2
|
|
Compact
Equipment Technologies
|
|
|
111.4
|
|
|
136.4
|
|
Industrial
Technologies
|
|
|
64.6
|
|
|
58.2
|
|
Security
Technologies
|
|
|
90.7
|
|
|
79.6
|
|
Unallocated
corporate expense
|
|
|
(36.2
|
)
|
|
(26.1
|
)
|
Total
|
|
$
|
299.9
|
|
$
|
317.3
|
|
Long-lived
assets by geographic area for the periods ended March 31, 2007 and December
31,
2006 were as follows:
In
millions
|
|
March
31,
2007
|
|
December
31,
2006
|
|
United
States
|
|
$
|
797.2
|
|
$
|
789.9
|
|
Non-U.S.
|
|
|
918.6
|
|
|
911.8
|
|
Total
|
|
$
|
1,715.8
|
|
$
|
1,701.7
|
|
Note
13 - IR-New Jersey
IR-Limited
has guaranteed all of the issued public debt securities of IR-New Jersey. The
subsidiary issuer, IR-New Jersey, is 100% owned by the parent, IR-Limited;
the
guarantees are full and unconditional, and no other subsidiary of the Company
guarantees the securities. The following condensed consolidated financial
information for IR-Limited, IR-New Jersey, and all their other subsidiaries
is
included so that separate financial statements of IR-New Jersey are not required
to be filed with the SEC.
The
condensed consolidating financial statements present IR-Limited and IR-New
Jersey investments in their subsidiaries using the equity method of accounting.
Inter-company investments in the non-voting Class B common shares are accounted
for on the cost method and are reduced by inter-company dividends.
Condensed
Consolidating Income Statement
For
the
three months ended March 31, 2007
|
|
IR
|
|
IR
|
|
Other
|
|
Consolidating
|
|
IR
Limited
|
|
In
millions
|
|
Limited
|
|
New
Jersey
|
|
Subsidiaries
|
|
Adjustments
|
|
Consolidated
|
|
Net
revenues
|
|
$
|
-
|
|
$
|
296.0
|
|
$
|
2,372.1
|
|
$
|
-
|
|
$
|
2,668.1
|
|
Cost
of goods sold
|
|
|
-
|
|
|
215.1
|
|
|
1,737.9
|
|
|
-
|
|
|
1,953.0
|
|
Selling
and administrative expenses
|
|
|
11.5
|
|
|
95.0
|
|
|
308.7
|
|
|
-
|
|
|
415.2
|
|
Operating
income
|
|
|
(11.5
|
)
|
|
(14.1
|
)
|
|
325.5
|
|
|
-
|
|
|
299.9
|
|
Equity
earnings in affiliates (net of tax)
|
|
|
249.9
|
|
|
115.5
|
|
|
1.5
|
|
|
(366.9
|
)
|
|
-
|
|
Interest
expense
|
|
|
(11.0
|
)
|
|
(17.0
|
)
|
|
(7.6
|
)
|
|
-
|
|
|
(35.6
|
)
|
Intercompany
interest and fees
|
|
|
(10.2
|
)
|
|
(118.6
|
)
|
|
128.8
|
|
|
-
|
|
|
-
|
|
Other
income (expense), net
|
|
|
0.3
|
|
|
(0.4
|
)
|
|
(3.2
|
)
|
|
-
|
|
|
(3.3
|
)
|
Earnings
(loss) before income taxes
|
|
|
217.5
|
|
|
(34.6
|
)
|
|
445.0
|
|
|
(366.9
|
)
|
|
261.0
|
|
(Benefit)
provision for income taxes
|
|
|
-
|
|
|
(44.7
|
)
|
|
89.2
|
|
|
-
|
|
|
44.5
|
|
Earnings
(loss) from continuing operations
|
|
|
217.5
|
|
|
10.1
|
|
|
355.8
|
|
|
(366.9
|
)
|
|
216.5
|
|
Discontinued
operations, net of tax
|
|
|
-
|
|
|
(8.6
|
)
|
|
9.6
|
|
|
-
|
|
|
1.0
|
|
Net
earnings (loss)
|
|
$
|
217.5
|
|
$
|
1.5
|
|
$
|
365.4
|
|
$
|
(366.9
|
)
|
$
|
217.5
|
|
Condensed
Consolidating Income Statement
For
the
three months ended March 31, 2006
|
|
IR
|
|
IR
|
|
Other
|
|
Consolidating
|
|
IR
Limited
|
|
In
millions
|
|
Limited
|
|
New
Jersey
|
|
Subsidiaries
|
|
Adjustments
|
|
Consolidated
|
|
Net
revenues
|
|
$
|
-
|
|
$
|
289.3
|
|
$
|
2,233.9
|
|
$
|
-
|
|
$
|
2,523.2
|
|
Cost
of goods sold
|
|
|
-
|
|
|
220.9
|
|
|
1,630.3
|
|
|
-
|
|
|
1,851.2
|
|
Selling
and administrative expenses
|
|
|
8.2
|
|
|
78.8
|
|
|
267.7
|
|
|
-
|
|
|
354.7
|
|
Operating
income
|
|
|
(8.2
|
)
|
|
(10.4
|
)
|
|
335.9
|
|
|
-
|
|
|
317.3
|
|
Equity
earnings in affiliates (net of tax)
|
|
|
276.4
|
|
|
148.5
|
|
|
47.6
|
|
|
(472.5
|
)
|
|
-
|
|
Interest
expense
|
|
|
(3.8
|
)
|
|
(25.3
|
)
|
|
(6.2
|
)
|
|
-
|
|
|
(35.3
|
)
|
Intercompany
interest and fees
|
|
|
(11.4
|
)
|
|
(120.2
|
)
|
|
131.6
|
|
|
-
|
|
|
-
|
|
Other
income (expense), net
|
|
|
0.2
|
|
|
(0.5
|
)
|
|
4.2
|
|
|
-
|
|
|
3.9
|
|
Earnings
(loss) before income taxes
|
|
|
253.2
|
|
|
(7.9
|
)
|
|
513.1
|
|
|
(472.5
|
)
|
|
285.9
|
|
(Benefit)
provision for income taxes
|
|
|
-
|
|
|
(53.9
|
)
|
|
95.4
|
|
|
-
|
|
|
41.5
|
|
Earnings
(loss) from continuing operations
|
|
|
253.2
|
|
|
46.0
|
|
|
417.7
|
|
|
(472.5
|
)
|
|
244.4
|
|
Discontinued
operations, net of tax
|
|
|
-
|
|
|
1.6
|
|
|
7.2
|
|
|
-
|
|
|
8.8
|
|
Net
earnings (loss)
|
|
$
|
253.2
|
|
$
|
47.6
|
|
$
|
424.9
|
|
$
|
(472.5
|
)
|
$
|
253.2
|
|
Condensed
Colnsolidating Balance Sheet
March
31,
2007
|
|
IR
|
|
IR
|
|
Other
|
|
Consolidating
|
|
IR
Limited
|
|
In
millions
|
|
Limited
|
|
New
Jersey
|
|
Subsidiaries
|
|
Adjustments
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
-
|
|
$
|
34.1
|
|
$
|
270.5
|
|
$
|
-
|
|
$
|
304.6
|
|
Marketable
securities
|
|
|
-
|
|
|
-
|
|
|
0.6
|
|
|
-
|
|
|
0.6
|
|
Accounts
and notes receivable, net
|
|
|
0.2
|
|
|
199.2
|
|
|
1,661.2
|
|
|
-
|
|
|
1,860.6
|
|
Inventories,
net
|
|
|
-
|
|
|
138.3
|
|
|
1,111.2
|
|
|
-
|
|
|
1,249.5
|
|
Prepaid
expenses and deferred income taxes
|
|
|
1.1
|
|
|
482.2
|
|
|
51.0
|
|
|
-
|
|
|
534.3
|
|
Assets
held for sale
|
|
|
-
|
|
|
307.3
|
|
|
321.5
|
|
|
-
|
|
|
628.8
|
|
Accounts
and notes receivable affiliates
|
|
|
966.8
|
|
|
2,763.6
|
|
|
27,060.3
|
|
|
(30,790.7
|
)
|
|
-
|
|
Total
current assets
|
|
|
968.1
|
|
|
3,924.7
|
|
|
30,476.3
|
|
|
(30,790.7
|
)
|
|
4,578.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in affiliates
|
|
|
7,200.2
|
|
|
11,691.3
|
|
|
30,935.9
|
|
|
(49,827.4
|
)
|
|
-
|
|
Property,
plant and equipment, net
|
|
|
-
|
|
|
181.8
|
|
|
967.7
|
|
|
-
|
|
|
1,149.5
|
|
Intangible
assets, net
|
|
|
-
|
|
|
81.7
|
|
|
5,184.3
|
|
|
-
|
|
|
5,266.0
|
|
Other
assets
|
|
|
1.6
|
|
|
1,286.5
|
|
|
129.0
|
|
|
-
|
|
|
1,417.1
|
|
Total
assets
|
|
$
|
8,169.9
|
|
$
|
17,166.0
|
|
$
|
67,693.2
|
|
$
|
(80,618.1
|
)
|
$
|
12,411.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accruals
|
|
$
|
9.9
|
|
$
|
290.6
|
|
$
|
1,865.6
|
|
$
|
-
|
|
$
|
2,166.1
|
|
Current
maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
loans payable
|
|
|
486.5
|
|
|
597.7
|
|
|
102.6
|
|
|
-
|
|
|
1,186.8
|
|
Liabilities
held for sale
|
|
|
-
|
|
|
140.8
|
|
|
57.5
|
|
|
-
|
|
|
198.3
|
|
Accounts
and note payable affiliates
|
|
|
809.5
|
|
|
7,178.2
|
|
|
22,803.0
|
|
|
(30,790.7
|
)
|
|
-
|
|
Total
current liabilities
|
|
|
1,305.9
|
|
|
8,207.3
|
|
|
24,828.7
|
|
|
(30,790.7
|
)
|
|
3,551.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
299.0
|
|
|
410.3
|
|
|
193.7
|
|
|
-
|
|
|
903.0
|
|
Note
payable affiliate
|
|
|
950.0
|
|
|
2,697.4
|
|
|
-
|
|
|
(3,647.4
|
)
|
|
-
|
|
Other
noncurrent liabilities
|
|
|
228.9
|
|
|
2,171.7
|
|
|
170.1
|
|
|
-
|
|
|
2,570.7
|
|
Total
liabilities
|
|
|
2,783.8
|
|
|
13,486.7
|
|
|
25,192.5
|
|
|
(34,438.1
|
)
|
|
7,024.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A common shares
|
|
|
366.2
|
|
|
-
|
|
|
(60.9
|
)
|
|
-
|
|
|
305.3
|
|
Class
B common shares
|
|
|
270.6
|
|
|
-
|
|
|
-
|
|
|
(270.6
|
)
|
|
-
|
|
Common
shares
|
|
|
-
|
|
|
-
|
|
|
2,362.8
|
|
|
(2,362.8
|
)
|
|
-
|
|
Other
shareholders' equity
|
|
|
9,282.1
|
|
|
4,723.9
|
|
|
44,072.2
|
|
|
(52,681.2
|
)
|
|
5,397.0
|
|
Accumulated
other comprehensive income
|
|
|
5.3
|
|
|
(617.1
|
)
|
|
237.0
|
|
|
58.6
|
|
|
(316.2
|
)
|
|
|
|
9,924.2
|
|
|
4,106.8
|
|
|
46,611.1
|
|
|
(55,256.0
|
)
|
|
5,386.1
|
|
Less:
Contra account
|
|
|
(4,538.1
|
)
|
|
(427.5
|
)
|
|
(4,110.4
|
)
|
|
9,076.0
|
|
|
-
|
|
Total
shareholders' equity
|
|
|
5,386.1
|
|
|
3,679.3
|
|
|
42,500.7
|
|
|
(46,180.0
|
)
|
|
5,386.1
|
|
Total
liabilities and equity
|
|
$
|
8,169.9
|
|
$
|
17,166.0
|
|
$
|
67,693.2
|
|
$
|
(80,618.1
|
)
|
$
|
12,411.0
|
|
Condensed
Consolidating Balance Sheet
December
31, 2006
|
|
IR
|
|
IR
|
|
Other
|
|
Consolidating
|
|
IR
Limited
|
|
In
millions
|
|
Limited
|
|
New
Jersey
|
|
Subsidiaries
|
|
Adjustments
|
|
Consolidated
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1.7
|
|
$
|
81.6
|
|
$
|
272.5
|
|
$
|
-
|
|
$
|
355.8
|
|
Marketable
securities
|
|
|
-
|
|
|
-
|
|
|
0.7
|
|
|
-
|
|
|
0.7
|
|
Accounts
and notes receivable, net
|
|
|
0.3
|
|
|
212.8
|
|
|
1,634.2
|
|
|
-
|
|
|
1,847.3
|
|
Inventories,
net
|
|
|
-
|
|
|
123.5
|
|
|
1,055.0
|
|
|
-
|
|
|
1,178.5
|
|
Prepaid
expenses and deferred income taxes
|
|
|
0.4
|
|
|
378.6
|
|
|
17.0
|
|
|
-
|
|
|
396.0
|
|
Assets
held for sale
|
|
|
-
|
|
|
291.9
|
|
|
310.0
|
|
|
-
|
|
|
601.9
|
|
Accounts
and notes receivable affiliates
|
|
|
921.4
|
|
|
2,662.1
|
|
|
26,537.6
|
|
|
(30,121.1
|
)
|
|
-
|
|
Total
current assets
|
|
|
923.8
|
|
|
3,750.5
|
|
|
29,827.0
|
|
|
(30,121.1
|
)
|
|
4,380.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in affiliates
|
|
|
7,130.9
|
|
|
11,565.2
|
|
|
31,009.6
|
|
|
(49,705.7
|
)
|
|
-
|
|
Property,
plant and equipment, net
|
|
|
-
|
|
|
178.6
|
|
|
952.7
|
|
|
-
|
|
|
1,131.3
|
|
Intangible
assets, net
|
|
|
-
|
|
|
81.1
|
|
|
5,160.1
|
|
|
-
|
|
|
5,241.2
|
|
Other
assets
|
|
|
1.7
|
|
|
1,256.8
|
|
|
134.7
|
|
|
-
|
|
|
1,393.2
|
|
Total
assets
|
|
$
|
8,056.4
|
|
$
|
16,832.2
|
|
$
|
67,084.1
|
|
$
|
(79,826.8
|
)
|
$
|
12,145.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accruals
|
|
$
|
6.3
|
|
$
|
416.6
|
|
$
|
1,992.4
|
|
$
|
-
|
|
$
|
2,415.3
|
|
Current
maturities of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
and
loans payable
|
|
|
378.0
|
|
|
596.8
|
|
|
104.6
|
|
|
-
|
|
|
1,079.4
|
|
Liabilities
held for sale
|
|
|
-
|
|
|
129.1
|
|
|
58.2
|
|
|
-
|
|
|
187.3
|
|
Accounts
and note payable affiliates
|
|
|
779.0
|
|
|
7,035.7
|
|
|
22,306.4
|
|
|
(30,121.1
|
)
|
|
-
|
|
Total
current liabilities
|
|
|
1,163.3
|
|
|
8,178.2
|
|
|
24,461.6
|
|
|
(30,121.1
|
)
|
|
3,682.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
debt
|
|
|
299.0
|
|
|
411.3
|
|
|
194.9
|
|
|
-
|
|
|
905.2
|
|
Note
payable affiliate
|
|
|
950.0
|
|
|
2,697.4
|
|
|
-
|
|
|
(3,647.4
|
)
|
|
-
|
|
Other
noncurrent liabilities
|
|
|
239.3
|
|
|
1,789.5
|
|
|
125.1
|
|
|
-
|
|
|
2,153.9
|
|
Total
liabilities
|
|
|
2,651.6
|
|
|
13,076.4
|
|
|
24,781.6
|
|
|
(33,768.5
|
)
|
|
6,741.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class
A common shares
|
|
|
364.5
|
|
|
-
|
|
|
(57.7
|
)
|
|
-
|
|
|
306.8
|
|
Class
B common shares
|
|
|
270.6
|
|
|
-
|
|
|
-
|
|
|
(270.6
|
)
|
|
-
|
|
Common
shares
|
|
|
-
|
|
|
-
|
|
|
2,362.8
|
|
|
(2,362.8
|
)
|
|
-
|
|
Other
shareholders' equity
|
|
|
9,403.3
|
|
|
4,815.3
|
|
|
43,957.1
|
|
|
(52,719.6
|
)
|
|
5,456.1
|
|
Accumulated
other comprehensive income
|
|
|
(36.4
|
)
|
|
(627.9
|
)
|
|
205.7
|
|
|
100.5
|
|
|
(358.1
|
)
|
|
|
|
10,002.0
|
|
|
4,187.4
|
|
|
46,467.9
|
|
|
(55,252.5
|
)
|
|
5,404.8
|
|
Less:
Contra account
|
|
|
(4,597.2
|
)
|
|
(431.6
|
)
|
|
(4,165.4
|
)
|
|
9,194.2
|
|
|
-
|
|
Total
shareholders' equity
|
|
|
5,404.8
|
|
|
3,755.8
|
|
|
42,302.5
|
|
|
(46,058.3
|
)
|
|
5,404.8
|
|
Total
liabilities and equity
|
|
$
|
8,056.4
|
|
$
|
16,832.2
|
|
$
|
67,084.1
|
|
$
|
(79,826.8
|
)
|
$
|
12,145.9
|
|
Condensed
Consolidating Statement of Cash Flows
For
the
three months ended March 31, 2007
|
|
IR
|
|
IR
|
|
Other
|
|
IR
Limited
|
|
In
millions
|
|
Limited
|
|
New
Jersey
|
|
Subsidiaries
|
|
Consolidated
|
|
Net
cash provided by (used in) continuing operating activities
|
|
$
|
(15.2
|
)
|
$
|
(83.5
|
)
|
$
|
152.6
|
|
$
|
53.9
|
|
Net
cash provided by (used in) discontinued operating
activities
|
|
|
-
|
|
|
(5.2
|
)
|
|
(2.9
|
)
|
|
(8.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
-
|
|
|
(8.6
|
)
|
|
(38.4
|
)
|
|
(47.0
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
-
|
|
|
-
|
|
|
2.2
|
|
|
2.2
|
|
Acquisitions,
net of cash
|
|
|
-
|
|
|
(0.6
|
)
|
|
(7.2
|
)
|
|
(7.8
|
)
|
Proceeds
from sales and maturities of marketable securities
|
|
|
-
|
|
|
-
|
|
|
0.1
|
|
|
0.1
|
|
Other,
net
|
|
|
-
|
|
|
-
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
Net
cash provided by (use in) continuing investing activities
|
|
|
-
|
|
|
(9.2
|
)
|
|
(43.4
|
)
|
|
(52.6
|
)
|
Net
cash provided by (used in) discontinued investing
activities
|
|
|
-
|
|
|
(4.1
|
)
|
|
(0.6
|
)
|
|
(4.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in debt
|
|
|
108.5
|
|
|
(1.0
|
)
|
|
(5.3
|
)
|
|
102.2
|
|
Net
inter-company proceeds (payments)
|
|
|
(25.3
|
)
|
|
51.4
|
|
|
(26.1
|
)
|
|
-
|
|
Dividends
(paid) received
|
|
|
(114.4
|
)
|
|
4.1
|
|
|
55.0
|
|
|
(55.3
|
)
|
Proceeds
from the exercise of stock options
|
|
|
44.7
|
|
|
-
|
|
|
-
|
|
|
44.7
|
|
Repurchase
of common shares by subsidiary
|
|
|
-
|
|
|
-
|
|
|
(133.6
|
)
|
|
(133.6
|
)
|
Net
cash provided by (used in) continuing financing activities
|
|
|
13.5
|
|
|
54.5
|
|
|
(110.0
|
)
|
|
(42.0
|
)
|
Net
cash provided by (used in) discontinued financing
activities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
-
|
|
|
-
|
|
|
2.3
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(1.7
|
)
|
|
(47.5
|
)
|
|
(2.0
|
)
|
|
(51.2
|
)
|
Cash
and cash equivalents - beginning of period
|
|
|
1.7
|
|
|
81.6
|
|
|
272.5
|
|
|
355.8
|
|
Cash
and cash equivalents - end of period
|
|
$
|
-
|
|
$
|
34.1
|
|
$
|
270.5
|
|
$
|
304.6
|
|
Condensed
Consolidating Statement of Cash Flows
For
the
three months ended March 31, 2006
|
|
IR
|
|
IR
|
|
Other
|
|
IR
Limited
|
|
In
millions
|
|
Limited
|
|
New
Jersey
|
|
Subsidiaries
|
|
Consolidated
|
|
Net
cash provided by (used in) continuing operating activities
|
|
$
|
(12.9
|
)
|
$
|
(84.8
|
)
|
$
|
136.4
|
|
$
|
38.7
|
|
Net
cash provided by (used in) discontinued operating
activities
|
|
|
-
|
|
|
(7.9
|
)
|
|
(3.0
|
)
|
|
(10.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
-
|
|
|
(6.8
|
)
|
|
(29.2
|
)
|
|
(36.0
|
)
|
Proceeds
from sale of property, plant and equipment
|
|
|
-
|
|
|
0.3
|
|
|
1.6
|
|
|
1.9
|
|
Acquisitions,
net of cash
|
|
|
-
|
|
|
-
|
|
|
(26.8
|
)
|
|
(26.8
|
)
|
Proceeds
from sales and maturities of marketable securities
|
|
|
-
|
|
|
-
|
|
|
109.9
|
|
|
109.9
|
|
Other,
net
|
|
|
-
|
|
|
-
|
|
|
(0.6
|
)
|
|
(0.6
|
)
|
Net
cash provided by (use in) continuing investing activities
|
|
|
-
|
|
|
(6.5
|
)
|
|
54.9
|
|
|
48.4
|
|
Net
cash provided by (used in) discontinued investing
activities
|
|
|
-
|
|
|
(1.8
|
)
|
|
(0.5
|
)
|
|
(2.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
change in debt
|
|
|
-
|
|
|
(0.1
|
)
|
|
(13.6
|
)
|
|
(13.7
|
)
|
Net
inter-company proceeds (payments)
|
|
|
59.0
|
|
|
108.2
|
|
|
(167.2
|
)
|
|
-
|
|
Dividends
(paid) received
|
|
|
(95.6
|
)
|
|
3.7
|
|
|
39.6
|
|
|
(52.3
|
)
|
Proceeds
from the exercise of stock options
|
|
|
45.7
|
|
|
-
|
|
|
-
|
|
|
45.7
|
|
Repurchase
of common shares by subsidiary
|
|
|
-
|
|
|
-
|
|
|
(163.5
|
)
|
|
(163.5
|
)
|
Net
cash provided by (used in) continuing financing activities
|
|
|
9.1
|
|
|
111.8
|
|
|
(304.7
|
)
|
|
(183.8
|
)
|
Net
cash provided by (used in) discontinued financing
activities
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
-
|
|
|
-
|
|
|
6.9
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
(3.8
|
)
|
|
10.8
|
|
|
(110.0
|
)
|
|
(103.0
|
)
|
Cash
and cash equivalents - beginning of period
|
|
|
25.5
|
|
|
207.1
|
|
|
643.4
|
|
|
876.0
|
|
Cash
and cash equivalents - end of period
|
|
$
|
21.7
|
|
$
|
217.9
|
|
$
|
533.4
|
|
$
|
773.0
|
|
Item
2
- Management’s Discussion and Analysis of Financial Condition and Results of
Operations
INGERSOLL-RAND
COMPANY LIMITED
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks
and
uncertainties. Our actual results may differ materially from the results
discussed in the forward-looking statements. Factors that might cause a
difference include, but are not limited to, those discussed under Part II Item
1A Risk Factors in this Quarterly Report on Form 10-Q and under Part I Item
1A
Risk Factors in the Annual Report on Form 10-K for the fiscal year ended
December 31, 2006. The following section is qualified in its entirety by the
more detailed information, including our financial statements and the notes
thereto, which appears elsewhere in this Quarterly Report.
Overview
Organizational
Ingersoll-Rand
Company Limited (we, our or the Company) is a leading innovation and solutions
provider with strong brands and leading positions within its markets. Our
business segments consist of Climate Control Technologies, Compact Equipment
Technologies, Industrial Technologies and Security Technologies. The Company
generates revenue and cash primarily through the design, manufacture, sale
and
service of a diverse portfolio of industrial and commercial products that
include well-recognized, premium brand names such as Bobcat®, Club Car®,
Hussmann®, Ingersoll Rand®, Schlage® and Thermo King®.
We
seek
to drive shareholder value by achieving:
· |
Dramatic
Growth, by developing innovative products and solutions that improve
our
customers’ operations, expanding highly profitable recurring revenues and
executing low-risk, high-return bolt-on
acquisitions;
|
· |
Operational
Excellence, by fostering a lean culture of continuous improvement
and cost
control; and
|
· |
Dual
Citizenship, by encouraging our employees’ active collaboration with
colleagues across business units and geographic regions to achieve
superior business results.
|
To
achieve these goals and to become a more diversified company with strong growth
prospects, we continue to transform our product portfolio by divesting cyclical,
low-growth, and asset-intensive businesses. We continue to focus on increasing
our recurring revenue stream, which includes revenues from parts, service,
used
equipment, rentals and attachments. We also intend to continuously improve
the
efficiencies, capabilities, and products and services of our high-potential
businesses. We expect to use our strong operating cash flow for bolt-on
acquisitions, share buybacks, capital expenditures and dividend
enhancements.
Trends
and Economic Events
We
are a
global corporation with worldwide operations. As a global business, our
operations are affected by worldwide, regional and industry-specific economic
factors, as well as political factors, wherever we operate or do business.
However, due to our geographic and industry diversity, as well as the diversity
of our product sales and services, the impact of any one industry or the economy
of any single country on the consolidated operating results is limited. Given
the broad range of products manufactured and geographic markets served,
management uses a variety of factors to predict the outlook for the Company.
The
Company monitors key competitors and customers to gauge relative performance
and
the outlook for the future. In addition, our order rates are indicative of
future revenue and thus a key measure of anticipated performance. In those
industry segments where we are a capital equipment provider, revenues depend
on
the capital expenditure budgets and spending patterns of our customers, who
may
delay or accelerate purchases in reaction to changes in their businesses and
in
the economy.
Our
revenues for the first quarter of 2007 have increased approximately 6% compared
with the first quarter of 2006. Improved markets, new product introductions,
product volume and pricing improvements drove this growth. We have been able
to
increase prices and add surcharges to help mitigate the impact of cost inflation
during the quarter. We expect to see continued high material and energy costs
during the next year, which we plan to offset by increased productivity and
pricing actions. We have generated positive cash flows from operating activities
during the first three months of 2007 and expect to continue to produce positive
operating cash flows for the foreseeable future.
Our
major
end markets for commercial construction, general industrial, refrigerated
trucks, supermarkets and golf vehicles remained firm during the first quarter
of
2007. However, there was on-going weakness in the North American compact
equipment market, as well as in the residential construction
market.
Recent
Developments
· |
On
February 27, 2007, the Company agreed to sell its Road Development
business unit to AB Volvo (publ) for cash proceeds of approximately
$1.3
billion. The sale was completed on April 30, 2007, in all countries
except
for India, which closed on May 4, 2007. The sale is expected to generate
net cash proceeds of approximately $1.05 billion.
|
· |
During
the three months ended March 31, 2007, the Company repurchased 3.1
million
Class A common shares at a cost of $133.6 million. Subsequently,
the
Company repurchased an additional 4.2 million Class A common shares
as of
May 8, 2007, at a total cost of $187.7
million.
|
· |
Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes - an interpretation of
FASB
Statement 109” (FIN 48), which prescribes a recognition threshold and
measurement process for recording in the financial statements uncertain
tax positions taken or expected to be taken in a tax return. As a
result
of adopting FIN 48 as of January 1, 2007, the Company recorded additional
liabilities to its previously established reserves, and a corresponding
decrease in retained earnings of $145.6 million. See Note 8 to the
Company’s condensed consolidated financial statements for further
description of FIN 48 and the related impacts of
adoption.
|
Results
of Operations - Three Months Ended March 31, 2007 and
2006
|
|
Three
months ended March 31,
|
|
Dollar
amounts in millions, except per share amounts
|
|
2007
|
|
%
of revenues
|
|
2006
|
|
%
of revenues
|
|
Net
revenues
|
|
$
|
2,668.1
|
|
|
|
|
$
|
2,523.2
|
|
|
|
|
Cost
of goods sold
|
|
|
1,953.0
|
|
|
73.2%
|
|
|
1,851.2
|
|
|
73.4%
|
|
Selling
and administrative expenses
|
|
|
415.2
|
|
|
15.6%
|
|
|
354.7
|
|
|
14.1%
|
|
Operating
income
|
|
|
299.9
|
|
|
11.2%
|
|
|
317.3
|
|
|
12.6%
|
|
Interest
expense
|
|
|
(35.6
|
)
|
|
|
|
|
(35.3
|
)
|
|
|
|
Other
income (expense), net
|
|
|
(3.3
|
)
|
|
|
|
|
3.9
|
|
|
|
|
Earnings
before income taxes
|
|
|
261.0
|
|
|
|
|
|
285.9
|
|
|
|
|
Provision
for income taxes
|
|
|
44.5
|
|
|
|
|
|
41.5
|
|
|
|
|
Earnings
from continuing operations
|
|
|
216.5
|
|
|
|
|
|
244.4
|
|
|
|
|
Discontinued
operations, net of tax
|
|
|
1.0
|
|
|
|
|
|
8.8
|
|
|
|
|
Net
earnings
|
|
$
|
217.5
|
|
|
|
|
$
|
253.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
from continuing operations
|
|
$
|
0.70
|
|
|
|
|
$
|
0.73
|
|
|
|
|
Discontinued
operations, net of tax
|
|
|
-
|
|
|
|
|
|
0.03
|
|
|
|
|
Net
earnings
|
|
$
|
0.70
|
|
|
|
|
$
|
0.76
|
|
|
|
|
Net
Revenues
Net
revenues for the first quarter of 2007 increased by 5.7%, or $144.9 million,
compared with the first quarter of 2006, primarily due to improved pricing
(2%),
a favorable currency impact (2%), acquisitions (1%) and higher volumes and
product mix. Strong international markets, especially in Europe, offset the
continued weakness of the North American market. The Company also continues
to
make progress in increasing recurring revenues, which improved by 12% over
the
first quarter of 2006 and accounted for 22% of net revenues.
Cost
of Goods Sold
Cost
of
goods sold as a percentage of revenue decreased slightly in the first quarter
of
2007 compared with 2006, as increased sales were offset by higher material
costs, due to commodity price increases.
Selling
and Administrative Expenses
Selling
and administrative expenses as a percentage of revenue increased in the first
quarter of 2007 compared with the first quarter of 2006. This increase was
mainly due to the year-over-year increase in costs related acquisitions and
investments in new product development of approximately $10 million, increased
regulatory and compliance costs of approximately $10 million and a favorable
reduction to the Company’s doubtful accounts reserve of $20.5 million that was
made in the first quarter of 2006.
Operating
Income
Operating
income for the first quarter of 2007 decreased by 5.5%, or $17.4 million,
compared with the first quarter of 2006, mainly due to volume declines in
compact equipment, higher material costs and investments in new product
development and productivity. These decreases were partially offset by improved
pricing and productivity actions.
Interest
Expense
Interest
expense for the first quarter of 2007 remained consistent with the first quarter
of 2006.
Other
Income (Expense), Net
Other
income, net includes currency gains and losses, equity in earnings of partially
owned affiliates, minority interests, and other miscellaneous income and expense
items. Other income, net decreased by $7.2 million in the first quarter of
2007
compared with the first quarter of 2006. The decrease is primarily attributable
to an adjustment in 2006 to a reserve no longer deemed necessary ($8.7 million),
a decrease in interest income ($2.7 million) and a decrease of minority interest
($0.9 million), partially offset by a favorable currency impact ($5.4
million).
Provision
for Income Taxes
The
Company’s first quarter 2007 effective tax rate was 17.0%, compared with 14.5%
in the first quarter of 2006, reflecting a 2007 expected annual rate of 18.5%,
adjusted for a tax benefit of $3.8 million associated with discrete items.
The
increase in the 2007 expected annual tax rate versus last years expected annual
rate is partially attributed to higher interest costs resulting from our
adoption of FIN 48.
Discontinued
Operations
The
components of discontinued operations for the three months ended March 31,
are
as follows:
In
millions
|
|
2007
|
|
2006
|
|
Road
Development, net of tax
|
|
$
|
16.5
|
|
$
|
17.9
|
|
Other
discontinued operations, net of tax
|
|
|
(15.5
|
)
|
|
(9.1
|
)
|
Total
discontinued operations, net of tax
|
|
$
|
1.0
|
|
$
|
8.8
|
|
Road
Development Divestiture
As
explained further in the section titled “Recent Developments”, on February 27,
2007, the Company agreed to sell its Road Development business unit to AB Volvo
(publ) for cash proceeds of approximately $1.3 billion. The sale was completed
on April 30, 2007, in all countries except for India, which closed on May 4,
2007. The sale is expected to generate net cash proceeds of $1.05 billion.
The
Road Development business unit manufactures and sells asphalt paving equipment,
compaction equipment, milling machines, and construction-related material
handling equipment. The Company has accounted for the Road Development business
unit as discontinued operations and has classified the assets and liabilities
sold to AB Volvo as held for sale for all periods presented in accordance with
Statement of Financial Accounting Standard No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”.
Net
revenues and after-tax earnings of the Road Development business unit for the
three months ended March 31, were:
In
millions
|
|
2007
|
|
2006
|
|
Net
revenues
|
|
$
|
167.7
|
|
$
|
187.8
|
|
After-tax
earnings
|
|
|
16.5
|
|
|
17.9
|
|
Other
Discontinued Operations
The
Company also has other retained costs for discontinued operations that mainly
include costs related to postretirement benefits and product and legal costs
(mostly asbestos-related) from previously sold businesses. The components of
other discontinued operations for the three months ended March 31, are as
follows:
In
millions
|
|
|
2007
|
|
|
2006
|
|
Retained
(costs) income, net of tax
|
|
$
|
(15.6
|
)
|
$
|
(9.3
|
)
|
Net
gain on disposals, net of tax
|
|
|
0.1
|
|
|
0.2
|
|
Total
other discontinued operations, net of tax
|
|
$
|
(15.5
|
)
|
$
|
(9.1
|
)
|
Review
of Business Segments
As
a
result of the divestiture of the Road Development business unit, the Company
realigned its operating and reporting segments to better reflect its market
focus. The former Compact Vehicle Technologies segment and the Construction
Technologies segment, excluding the Road Development business, were aggregated
into one segment - Compact Equipment Technologies. Prior year results have
been
reclassified to conform to this change.
Climate
Control Technologies
Climate
Control Technologies provides solutions to transport, preserve, store and
display temperature-sensitive products by engaging in the design, manufacture,
sale and service of transport temperature control units, HVAC systems,
refrigerated display merchandisers, beverage coolers, and walk-in storage
coolers and freezers. The segment includes the Thermo King and Hussmann
brands.
|
|
Three
months ended March 31,
|
|
Dollar
amounts in millions
|
|
|
2007
|
|
|
2006
|
|
|
%
change
|
|
Net
revenues
|
|
$
|
728.9
|
|
$
|
683.6
|
|
|
6.6%
|
|
Operating
income
|
|
|
69.4
|
|
|
69.2
|
|
|
0.3%
|
|
Operating
margin
|
|
|
9.5
|
%
|
|
10.1
|
%
|
|
|
|
Net
revenues for the first quarter of 2007 increased by 6.6%, or $45.3 million,
compared with the first quarter of 2006, primarily resulting from higher volumes
and product mix (3%), favorable currency impact (2%) and improved pricing (2%).
Operating income increased slightly for the first quarter of 2007 primarily
due
to improved pricing ($11 million) and a favorable currency impact ($4 million).
These increases were offset by higher net material costs ($7 million) and lower
productivity ($7 million).
Net
revenues grew in all regions during the first quarter of 2007, benefiting from
expanding trailer and truck sales in Europe and Asia Pacific, increased bus
and
aftermarket parts revenues and increased revenues from display cases and
contracting. These increases were partially offset by decreased trailer sales
in
North America and lower sales related to sea-going containers.
Compact
Equipment Technologies
Compact
Equipment Technologies is engaged in the design, manufacture, sale and service
of skid-steer loaders, all-wheel steer loaders, compact track loaders, compact
excavators, attachments, golf and utility vehicles, portable power products,
portable light towers, compressors and general-purpose construction equipment.
The segment includes the Bobcat and Club Car brands as well as the Utility
Equipment and Attachment businesses.
|
|
Three
months ended March 31,
|
|
Dollar
amounts in millions
|
|
|
2007
|
|
|
2006
|
|
|
%
change
|
|
Net
revenues
|
|
$
|
875.1
|
|
$
|
875.7
|
|
|
-0.1%
|
|
Operating
income
|
|
|
111.4
|
|
|
136.4
|
|
|
-18.3%
|
|
Operating
margin
|
|
|
12.7
|
%
|
|
15.6
|
%
|
|
|
|
Net
revenues for the first quarter of 2007 were flat compared with the first quarter
of 2006. Increased revenues from acquisitions (2%) and a favorable currency
impact (1%) were offset by lower volumes and an unfavorable product mix (3%).
Operating income for the first quarter of 2007 decreased, primarily due to
lower
volumes and product mix ($17 million) and investments in new product development
and productivity programs ($7 million), partially offset by increased
productivity ($2 million).
Bobcat
revenues decreased by 12% compared with the first quarter of 2006, mainly due
to
the ongoing contraction in the North American new equipment and rental markets
for compact equipment. Europe and worldwide aftermarket parts activity increased
significantly compared with last year. Club Car revenues increased by 17%
compared with the first quarter of 2006, mainly due to ongoing market share
gains in golf vehicles, recurring revenues growth and higher sales of utility
and off-road vehicles. Utility Equipment and Attachment revenues increased
on a
total basis by 31% compared with the first quarter of 2006. Utility Equipment
revenues increased due to strong international markets and recurring revenues
growth. Attachment revenues increased as scrap, demolition and commercial
construction markets continued to expand. Revenues also increased from new
product lines related to the 2006 acquisition of Geith
International.
Industrial
Technologies
Industrial
Technologies is focused on providing solutions to enhance customers’ industrial
and energy efficiency, mainly by engaging in the design, manufacture, sale
and
service of compressed air systems, tools, fluid and material handling and energy
generation systems. The segment includes the Air Solutions and Productivity
Solutions businesses.
|
|
Three
months ended March 31,
|
|
Dollar
amounts in millions
|
|
2007
|
|
2006
|
|
%
change
|
|
Net
revenues
|
|
$
|
484.5
|
|
$
|
439.1
|
|
|
10.3%
|
|
Operating
income
|
|
|
64.6
|
|
|
58.2
|
|
|
11.0%
|
|
Operating
margin
|
|
|
13.3
|
%
|
|
13.3
|
%
|
|
|
|
Net
revenues for the first quarter of 2007 increased by 10.3%, or $45.4 million,
compared with the first quarter of 2006, mainly resulting from acquisitions
(4%), higher volumes and product mix (3%), improved pricing (2%) and a favorable
currency impact (2%). Operating income for the first quarter of 2007 increased
primarily due to improved pricing ($9 million) and favorable volumes ($4
million). These improvements were partially offset by investments in new product
and market development ($3 million).
Air
Solutions revenues increased 15% compared with the first quarter of 2006, mainly
driven by strength in the industrial and process markets for both complete
air
compressor units and recurring revenues growth. Productivity Solutions revenues
increased by 2% compared with the first quarter 2006, mainly due to expanding
activity in traditional industrial fluid and handling markets outside of North
America and recurring revenues growth.
Security
Technologies
Security
Technologies is engaged in the design, manufacture, sale and service of
mechanical and electronic security products, biometric access control systems
and security and scheduling software. The segment includes the Schlage, LCN,
CISA and Von Duprin brands.
|
|
Three
months ended March 31,
|
|
Dollar
amounts in millions
|
|
2007
|
|
2006
|
|
%
change
|
|
Net
revenues
|
|
$
|
579.6
|
|
$
|
524.8
|
|
|
10.4%
|
|
Operating
income
|
|
|
90.7
|
|
|
79.6
|
|
|
13.9%
|
|
Operating
margin
|
|
|
15.7
|
%
|
|
15.2
|
%
|
|
|
|
Net
revenues for the first quarter of 2007 increased by 10.4%, or $54.8 million,
compared with the first quarter of 2006, mainly resulting from higher volumes
and product mix (4%), improved pricing (4%) and a favorable currency impact
(2%). Operating income increased in the first quarter of 2006, primarily due
to
improved pricing ($20 million), partially offset by higher net material costs
($6 million).
Net
revenues grew in all regions during the quarter benefiting from strong worldwide
commercial construction markets, large customers restocking inventory levels
and
growth from newly introduced residential security products. This growth was
offset by ongoing weakness in the new homebuilder markets in North
America.
Liquidity
and Capital Resources
The
Company generates significant cash flow from operating activities. We believe
that we will be able to meet our current and long term liquidity and capital
requirements, through our cash flow from operating activities, existing cash
and
cash equivalents, available borrowings under existing credit facilities, and
our
ability to obtain future external financing.
Cash
Flows
Dollar
amounts in millions
|
|
March
31,
2007
|
|
March
31,
2006
|
|
Operating
cash flow provided by (used in) continuing operations
|
|
$
|
53.9
|
|
$
|
38.7
|
|
Investing
cash flow provided by (used in) continuing operations
|
|
|
(52.6
|
)
|
|
48.4
|
|
Financing
cash flow provided by (used in) continuing operations
|
|
|
(42.0
|
)
|
|
(183.8
|
)
|
Operating
Activities
Net
cash
provided by continuing operating activities during the three months ended March
31, 2007, was $53.9 million, compared with $38.7 million during the comparable
period in 2006. The change in operating activities is primary related to larger
growth in working capital in the first quarter of 2006 than the growth
experienced in 2007, partially offset by reduced earnings in 2007.
Investing
Activities
Net
cash
used in investing activities during the three months ended March 31, 2007,
was
$52.6 million, compared with net cash provided by investing activities of $48.4
million during the comparable period of 2006. The change in investing activities
is primarily attributable to proceeds from the sale and maturity of $109.9
million of marketable securities during the three months ended March 31, 2006.
During the three months ended March 31, 2007, cash used for capital expenditures
and acquisitions was $47.0 million and $7.8 million, respectively. During the
three months ended March 31, 2006 cash used for capital expenditures and
acquisitions was $36.0 million and $26.8 million, respectively.
Financing
Activities
Net
cash
used in financing activities during the three months ended March 31, 2007,
was
$42.0 million compared with $183.8 million during the comparable period in
2006.
The decrease in cash used in financing activities is primarily due to additional
net short-term borrowings of $104.1 million during the quarter. These borrowings
were more than offset by the repurchase of Class A common shares. The amount
of
repurchases during the three months ended March 31, 2007 and 2006 was $133.6
million and $163.5 million, respectively.
Other
Liquidity Measures
The
following table contains several key measures to gauge the Company’s financial
condition and liquidity for the periods ended:
Dollar
amounts in millions
|
|
March
31,
2007
|
|
December
31,
2006
|
|
Cash
and cash equivalents
|
|
$
|
304.6
|
|
$
|
355.8
|
|
Working
capital
|
|
|
1,027.2
|
|
|
698.2
|
|
Total
debt
|
|
|
2,089.8
|
|
|
1,984.6
|
|
Total
shareholders' equity
|
|
|
5,386.1
|
|
|
5,404.8
|
|
Debt-to-total
capital ratio
|
|
|
27.7
|
%
|
|
26.6
|
%
|
The
Company’s working capital increased $329.0 million during the first quarter of
2007. The change was primarily due to an increase of $138.3 million in prepaid
expenses and deferred income taxes, an increase of $71.0 million in inventory,
a
decrease of $109.7 million in accrued expenses, a decrease of $66.6 million
in
accounts payable and a decrease of $72.9 million in accrued compensation and
benefits. These changes were partially offset by an increase of $107.4 million
in loans payable.
The
Company’s debt levels at March 31, 2007, increased by $105.2 million from the
debt levels at December 31, 2006. This increase was mainly due to $104.1 million
of net short-term borrowings during the quarter, mainly under the Company’s
commercial paper program.
The
Company’s debt-to-total capital ratio increased from December 31, 2006 to March
31, 2007, primarily due to higher debt levels. The Company traditionally
maintains significant availability under our lines of credit and commercial
paper program to meet our short-term liquidity requirements. As of March 31,
2007, amounts available under these facilities totaled $2.0
billion.
Days
sales outstanding increased to 64 days for the three months ended March 31,
2007, compared with 62 days for the three months ended March 31, 2006. This
increase is primarily due to strong international growth, where terms are longer
than the U.S. average.
For
a
further discussion of Liquidity and Capital Resources, refer to Part II, Item
7,
“Management’s Discussion and Analysis of Financial Condition and Results of
Operations,” contained in the Company’s Annual Report on Form 10-K for the
period ended December 31, 2006.
Contingencies,
Environmental and Asbestos Matters
The
Company is involved in various litigations, claims and administrative
proceedings, including environmental and product liability matters. Amounts
recorded for identified contingent liabilities are estimates, which are reviewed
periodically and adjusted to reflect additional information when it becomes
available. Subject to the uncertainties inherent in estimating future costs
for
contingent liabilities, management believes that the liability which may result
from these legal matters would not have a material adverse effect on the
financial condition, results of operations, liquidity or cash flows of the
Company.
Environmental
remediation costs are determined on a site-by-site basis and accruals are made
when it is probable a liability exists and the cost can be reasonably estimated.
The Company estimates the amount of recurring and non-recurring costs at each
site using internal and external experts. In arriving at cost estimates the
following factors are considered: the type of contaminant, the stage of the
clean up, applicable law and existing technology. These estimates, and the
resultant accruals, are reviewed and updated quarterly to reflect changes in
facts and law. The Company does not discount its liability or assume any
insurance recoveries when environmental liabilities are recorded.
Certain
wholly owned subsidiaries of the Company are named as defendants in
asbestos-related lawsuits in state and federal courts. In virtually all of
the
suits, a large number of other companies have also been named as defendants.
The
vast majority of those claims has been filed against IR-New Jersey, and
generally allege injury caused by exposure to asbestos contained in certain
of
IR-New Jersey’s products. Although IR-New Jersey was neither a producer nor a
manufacturer of asbestos, some of its formerly manufactured products utilized
asbestos-containing components, such as gaskets purchased from third-party
suppliers.
All
asbestos-related claims resolved to date have been dismissed or settled. For
the
three month period ended March 31, 2007, total costs for settlement and defense
of asbestos claims after insurance recoveries and net of tax were approximately
$12 million. With the assistance of independent advisors, the Company performs
a
thorough analysis, updated periodically, of its actual and anticipated future
asbestos liabilities projected seven years in the future. Based upon such
analysis, the Company believes that its reserves and insurance are adequate
to
cover its asbestos liabilities, and that these asbestos liabilities are not
likely to have a material adverse effect on its financial position, results
of
operations, liquidity or cash flows.
Legislation
recently under consideration in Congress concerns pending and future
asbestos-related personal injury claims. Whether and when such legislation
will
become law, and the final provisions of such legislation, are unknown.
Consequently, the Company cannot predict with any reasonable degree of certainty
what effect, if any, such legislation would have upon the Company’s financial
position, results of operations or cash flows.
As
previously reported, on November 10, 2004, the Securities and Exchange
Commission (SEC) issued an Order directing that a number of public companies,
including the Company, provide information relating to their participation
in
transactions under the United Nations’ Oil for Food Program. Upon receipt of the
Order, the Company undertook a thorough review of its participation in the
Program, provided the SEC with information responsive to the Order and provided
additional information requested by the SEC. During a March 27, 2007 meeting
with the SEC, at which a representative of the Department of Justice (DOJ)
was
also present, the Company began discussions concerning the resolution of this
matter with both the SEC and DOJ. These discussions are ongoing and the Company
will continue to cooperate fully with the SEC and DOJ in this matter.
Critical
Accounting Policies
Management’s
discussion and analysis of the Company’s financial condition and results of
operations are based upon the Company’s consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires
management to make estimates and judgments that affect the reported amounts
of
assets, liabilities, sales and expenses, and related disclosure of contingent
assets and liabilities. The Company bases these estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates.
Management
believes there have been no significant changes during the three months ended
March 31, 2007, to the items that the Company disclosed as its critical
accounting policies and estimates in Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the Company’s Annual Report on
Form 10-K for the year ended December 31, 2006, except for the accounting for
uncertain tax positions as described below.
Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement 109” (FIN 48),
which prescribes a recognition threshold and measurement process for recording
in the financial statements uncertain tax positions taken or expected to be
taken in a tax return. Additionally, FIN 48 provides guidance on the
recognition, classification, accounting in interim periods and disclosure
requirements for uncertain tax positions. As a result of adopting FIN 48, the
company recorded additional liabilities, to its previously established reserves,
and a corresponding decrease in retained earnings of $145.6
million.
The
IRS
has completed the examination of the Company’s federal income tax returns
through the 2000 tax year and has issued a notice proposing adjustments. The
principle proposed adjustment relates to the disallowance of certain capital
losses. The Company disputes the IRS position and protests have been filed
with
the IRS Appeals Division. It is reasonably possible that in order to reduce
the
potential interest expense, the Company may make a payment within the next
12
months with respect to the capital loss disallowance. The potential payment
of
tax and accrued interest of approximately $200 million will reduce the Company’s
total unrecognized tax position by approximately $140 million.
The
IRS
is in the process of examining the Company’s tax returns for tax years 2001 and
2002. The Company has been actively engaged in discussions with the IRS
regarding issues related to the Company’s reincorporation into Bermuda in 2001.
The
Company believes that it has adequately provided for any reasonably foreseeable
resolution of any tax disputes, but will adjust its reserves if events so
dictate in accordance with FIN 48. To the extent that the ultimate results
differ from the original or adjusted estimates of the Company, the effect will
be recorded in the provision for income taxes. See Note 8 to the Company’s
condensed consolidated financial statements for a further description of FIN
48
and the related impacts.
New
Accounting Standards
In
September 2006, the FASB issued Statement of Financial Accounting Standard
No.
157, “Fair Value Measurements” (SFAS 157). SFAS 157 establishes a framework for
measuring fair value that is based on the assumptions market participants would
use when pricing an asset or liability and establishes a fair value hierarchy
that prioritizes the information to develop those assumptions. Additionally,
the
standard expands the disclosures about fair value measurements to include
disclosing the fair value measurements of assets or liabilities within each
level of the fair value hierarchy. SFAS 157 is effective for the Company
starting on January 1, 2008. The Company is currently evaluating the impact
on
its financial statements of adopting SFAS 157.
In
February 2007, the FASB issued Statement of Financial Accounting Standard No.
159, “The Fair Value Option for Financial Assets and Financial Liabilities”
(SFAS 159). SFAS 159 permits companies the option, at specified election dates,
to measure financial assets and liabilities at their current fair value, with
the corresponding changes in fair value from period to period recognized in
the
income statement. Additionally, SFAS 159 establishes presentation and disclosure
requirements designed to facilitate comparisons between companies that choose
different measurement attributes for similar assets and liabilities. SFAS 159
is
effective for the Company starting on January 1, 2008. The Company is currently
evaluating the impact on its financial statements of adopting SFAS
159.
Safe
Harbor Statement
Information
provided by the Company in reports such as this quarterly report on Form 10-Q,
in press releases and in statements made by employees in oral discussions,
to
the extent the information is not historical fact, may be deemed to be
“forward-looking statements” within the meaning of federal securities laws.
These statements are based on currently available information and are based
on
our current expectations and projections about future events. These statements
are subject to risks and uncertainties that could cause actual results,
performance or achievements to differ materially from anticipated results,
performance or achievements.
These
risks and uncertainties include, but are not limited to: fluctuations in the
condition of, and the overall political landscape of, the economies in which
we
operate; our competitive environment; material changes in technology or
technology substitution; our ability to attract, train and retain
highly-qualified employees; unanticipated climatic changes; changes in
governmental regulation; the costs and effects of legal and administrative
proceedings; changes
in tax laws, tax treaties or tax regulations or the interpretation or
enforcement thereof; currency
fluctuations;
our
ability to complete acquisitions on financially attractive terms and
successfully integrate them with our other businesses; and the impact of new
accounting standards. Undue reliance should not be placed on such
forward-looking statements as they speak only as of the date made. Additional
information regarding these and other risks and uncertainties is contained
in
our periodic filings with the SEC, including, but not limited to, our Annual
Report on Form 10-K for the fiscal year ended December 31, 2006.
Item
3
- Quantitative and Qualitative Disclosures about Market Risk
There
has
been no significant change in our exposure to market risk during the first
quarter of 2007. For a discussion of the Company’s exposure to market risk,
refer to Part II, Item 7A, “Quantitative and Qualitative Disclosures About
Market Risk,” contained in the Company’s Annual Report on Form 10-K for the
fiscal year ended December 31, 2006.
Item
4
- Controls and Procedures
The
Company’s management, including its Chief Executive Officer and Chief Financial
Officer, have conducted an evaluation of the effectiveness of disclosure
controls and procedures (as such term is defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act)), as of the end of the period covered by this Quarterly Report on Form
10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded as of March 31, 2007, that the disclosure controls and
procedures are effective in ensuring that all material information required
to
be filed in this Quarterly Report on Form 10-Q has been recorded, processed,
summarized and reported when required and the information is accumulated and
communicated, as appropriate, to allow timely decisions regarding required
disclosure.
There
has
been no change in the Company’s internal control over financial reporting that
occurred during the first quarter of 2007 that has materially affected, or
is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
PART
II OTHER INFORMATION
Item
1
- Legal Proceedings
In
the
normal course of business, the Company is involved in a variety of lawsuits,
claims and legal proceedings, including commercial and contract disputes,
employment matters, product liability claims, environmental liabilities and
intellectual property disputes. 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.
As
previously reported, on November 10, 2004, the Securities and Exchange
Commission (SEC) issued an Order directing that a number of public companies,
including the Company, provide information relating to their participation
in
transactions under the United Nations’ Oil for Food Program. Upon receipt of the
Order, the Company undertook a thorough review of its participation in the
Program, provided the SEC with information responsive to the Order and provided
additional information requested by the SEC. During a March 27, 2007 meeting
with the SEC, at which a representative of the Department of Justice (DOJ)
was
also present, the Company began discussions concerning the resolution of this
matter with both the SEC and DOJ. These discussions are ongoing and the Company
will continue to cooperate fully with the SEC and DOJ in this matter.
See
also
the discussion under the section titled “Environmental and Asbestos Matters” of
Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and
Results of Operations, Environmental and Asbestos Matters and also Part I,
Item
1, Note 11 to the Condensed Consolidated Financial Statements.
Item
1A - Risk Factors
There
have been no material changes to our risk factors and uncertainties during
the
first quarter of 2007. For a discussion of the Risk Factors, refer to Part
I,
Item 1A, “Risk Factors,” contained in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2006.
Item
2
- Unregistered Sales of Equity Securities and Use of Proceeds
Issuer
Purchases of Equity Securities
The
following table provides information with respect to purchases by the Company
of
its Class A common shares during the first quarter of 2007:
|
|
|
|
|
|
|
|
Approximate
dollar
|
|
|
|
|
|
|
|
Total
number
|
|
value
of shares still
|
|
|
|
Total
number
|
|
|
|
of
shares
|
|
available
to be
|
|
|
|
of
shares
|
|
Average
|
|
purchased
as
|
|
purchased
under
|
|
|
|
purchased
|
|
price
paid
|
|
part
of program
|
|
the
program
|
|
Period
|
|
(000's)
|
|
per
share
|
|
(000's)
|
|
($000's)
|
|
1/01/2007
- 1/31/2007
|
|
|
-
|
|
$
|
-
|
|
|
-
|
|
$
|
-
|
|
2/01/2007
- 2/28/2007
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
3/01/2007
- 3/31/2007
|
|
|
3,075.0
|
|
|
43.43
|
|
|
3,075.0
|
|
|
1,866,394
|
|
Total
|
|
|
3,075.0
|
|
$
|
43.43
|
|
|
3,075.0
|
|
$
|
1,866.394
|
|
In
October 2006, the Company completed its repurchases under the share repurchase
program originally authorized in August 2004 and expanded in August 2005. In
December 2006, the Company’s Board of Directors authorized a new share
repurchase program to repurchase up to $2 billion worth of Class A common
shares. Based on market conditions, share repurchases will be made from time
to
time in the open market and in privately negotiated transactions at the
discretion of management. Class A common shares owned by a subsidiary are
treated as treasury shares and are recorded at cost.
Item
6 -
Exhibits
(a) Exhibits
|
|
|
|
|
|
Exhibit
No.
|
|
Description
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a),
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Filed herewith.
|
|
|
|
32
|
|
Certifications
of Chief Executive Officer and Chief Financial Officer Pursuant to
Rule
13a-14(b) or Rule 15d-14(b) and 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed
herewith.
|
INGERSOLL-RAND
COMPANY LIMITED
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
|
INGERSOLL-RAND
COMPANY LIMITED
(Registrant)
|
|
|
|
Date:
May 10, 2007
|
|
/s/
Timothy R. McLevish
|
|
Timothy
R. McLevish, Senior Vice President
and
Chief Financial Officer
|
|
|
|
|
Principal
Financial Officer
|
|
|
|
Date:
May 10, 2007
|
|
/s/ Richard
W. Randall |
|
Richard
W. Randall, Vice President and
Controller
|
|
|
|
Principal
Accounting Officer
|