Ingersoll-Rand Reports Second Quarter Net Earnings Per Share; Increase of 16 Percent
22 July 1999
Ingersoll-Rand Reports Second Quarter Net Earnings Per Share; Increase of 16 Percent
WOODCLIFF LAKE, N.J.--July 22, 1999--Ingersoll-Rand Company today reported record sales, net earnings and earnings per share for the second quarter of 1999. For the quarter, net earnings were $166.6 million, 18 percent above last year's second-quarter earnings of $140.9 million. Second-quarter diluted earnings per share of 99 cents increased by 16 percent, compared to diluted earnings per share of 85 cents in the second quarter of 1998.Second-quarter 1999 sales were $2,249.3 million, a three-percent increase over the $2,186.2 million reported in last year's second quarter. The 1999 second-quarter sales included unfavorable currency translation of approximately one percent. Operating income for the second quarter was $319.3 million, an increase of 12 percent over the $286.3 million for the second quarter of last year.
"Over the past five-and-a-half years we have made major changes to better position Ingersoll-Rand for consistent earnings growth," said James E. Perrella, chairman and chief executive officer. "Our second-quarter performance provides further evidence that the activities undertaken to change the company continue to deliver superior financial and operational benefits.
"These benefits are reflected in the progress we are making in other key financial areas. Our operating income margin improved to 14.2 percent of sales during the quarter, compared to 13.1 percent during the second quarter of 1998.
"We attained strong second-quarter cash flow, and we continue to expect to generate more than $500 million in free cash for the full-year 1999. Also, our balance sheet continued to improve, with the debt-to-capital ratio declining to 42 percent."
For the first half of 1999, the company's sales were $4.3 billion, which generated $566.0 million of operating income and produced $287.6 million of net earnings ($1.73 diluted earnings per share). During the first six months of 1998, the company reported net sales of $4.2 billion and $499.9 million of operating income. Net earnings for the first two quarters of 1998 totaled $240.0 million ($1.45 diluted earnings per share). Net diluted earnings per share for the first six months of 1999 increased by 19 percent, compared to last year.
Second-quarter Business Segment Review
The Specialty Vehicles Segment includes Bobcat(r) skid-steer loaders and compact hydraulic excavators; Club Car(r) golf cars; Blaw-Knox(r) and ABG(r) pavers; and Ingersoll-Rand(r) compactors, drilling equipment and rough-terrain material handlers. This segment's sales totaled $679.7 million for the second quarter of 1999, an 11-percent increase over 1998 second-quarter sales. Operating income of $129.3 million increased by 27 percent compared to last year. The Road Machinery, Bobcat and Club Car product lines achieved double-digit sales growth and improved operating margins.
The Air and Temperature Control Segment includes Thermo King(r) transport temperature-control equipment and Ingersoll-Rand air compressors. The segment's second-quarter 1999 sales totaled $574.5 million versus $587.1 million last year. Operating income for the second quarter of 1999 increased by about five percent to $78.8 million from $74.7 million last year.
Air compressor sales declined slightly in the second quarter; operating margins, however, increased due to continuing cost reductions. Thermo King sales were comparable to last year's strong second quarter, and operating earnings improved by nearly 10 percent because of a better sales mix and cost containment actions.
The Hardware and Tools Segment includes architectural hardware products, such as Schlage(r) locks, as well as exit devices, door-control hardware, steel doors and power-operated doors; and Ingersoll-Rand tools and related industrial-production equipment. For this segment, second-quarter 1999 sales increased by eight percent to $469.8 million. Operating income for the quarter totaled $74.5 million, an increase of six percent over last year's second quarter. Architectural hardware products reported strong sales gains and moderate improvements in operating income. Production Equipment sales declined but operating earnings improved through ongoing cost reduction activities.
The Engineered Products Segment includes Torrington(r) and Fafnir(r) bearings and components, and Ingersoll-Dresser Pump Company (IDP), a joint venture that produces pumps used in industrial, commercial and municipal applications. Second-quarter 1999 sales of $525.3 million decreased by about five percent, and operating income of $50.8 million declined slightly, compared to last year's second quarter. Bearings and components sales were down slightly because of continued weakness in industrial bearings. Operating income and margins improved because of strong sales from the needle bearings business. IDP's sales for the second quarter decreased by approximately 10 percent and operating income declined due to lower demand in the worldwide utility and hydrocarbon processing industries.
Comparison of Other Quarterly Income Statement Items
Other income/(expense) totaled $3.9 million of net expense for the second quarter of 1999, a decrease of $4.2 million compared to last year's second quarter. This reduction is attributable mainly to gains on foreign exchange activities.
Interest expense for the quarter of $53.5 million was $4.5 million below last year's second quarter because of lower debt balances compared to 1998.
Equity earnings in partially owned affiliates amounted to $8.3 million, compared to $13.3 million in the second quarter of 1998. Lower earnings from the Dresser-Rand joint venture were the primary cause for the decline.
Minority-interest charges totaled $12.0 million in the second quarter of 1999, versus $15.1 million last year. Primarily, this difference reflects lower IDP earnings, which reduced the minority interest charge.
The company's effective tax rate was 35.5 percent in the second quarters of 1999 and 1998.
Outlook
"The 1999 outlook for the company continues to be favorable, and we expect that our continuing focus on business-portfolio management, productivity improvement, manufacturing excellence and working-capital management will contribute to earnings improvement and cash-flow growth. Based on the first-half results and the current outlook, we continue to expect 1999 full-year earnings growth to be at the upper end of our 12 to 15 percent growth range target. This will represent the sixth consecutive year of record earnings for our company," said Perrella.
Ingersoll-Rand is a major diversified industrial and components manufacturer. Its product lines serve a wide range of industrial and commercial markets worldwide. The company employs approximately 47,000 people. Further information on Ingersoll-Rand can be found on the company's World Wide Web site at http://www.ingersoll-rand.com.
This earnings release includes "forward-looking statements" that involve risks and uncertainties. Political, economic, climatic, currency, tax, regulatory, technological, competitive and other factors could cause actual results to differ materially from those anticipated in the forward-looking statements. Additional information regarding these risk factors and uncertainties is detailed from time to time in the company's SEC filings, including but not limited to its report on Form 10-Q for the three months ended March 31, 1999.
INGERSOLL-RAND COMPANY
Consolidated Income Statement
Second Quarter and Six Months
(In millions except per share figures)
UNAUDITED
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Net Sales $2,249.3 $2,186.2 $4,332.6 $4,189.1
Cost of goods sold 1,617.7 1,596.7 3,154.1 3,080.8
Administrative selling
& service engineering
expenses 312.3 303.2 612.5 608.4
-------- -------- -------- --------
Operating Income 319.3 286.3 566.0 499.9
Interest expense (53.5) (58.0) (106.4) (120.3)
Other income/(expense) (3.9) (8.1) (7.5) (8.3)
Equity in earnings of
partially-owned
affiliates 8.3 13.3 14.9 20.1
Minority interests (12.0) (15.1) (21.0) (19.3)
-------- -------- -------- --------
Earnings before taxes 258.2 218.4 446.0 372.1
Provision for taxes 91.6 77.5 158.4 132.1
-------- -------- -------- --------
Net Earnings $ 166.6 $ 140.9 $ 287.6 $ 240.0
======== ======== ======== ========
Basic earnings per share $ 1.01 $ 0.86 $ 1.75 $ 1.46
======== ======== ======== ========
Diluted earnings per share $ 0.99 $ 0.85 $ 1.73 $ 1.45
======== ======== ======== ========
Average number of common
shares outstanding:
Basic 164.5 163.9 164.1 163.9
Diluted 167.7 165.9 166.1 166.0
-0-
INGERSOLL-RAND COMPANY
Business Segment Review
Second Quarter and Six Months
(In millions except percentages)
UNAUDITED
Three Months Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Specialty Vehicles
Sales $ 679.7 $ 610.5 $1,262.1 $1,149.7
Operating Income 129.3 101.9 222.8 173.4
as a % of sales 19.0% 16.7% 17.7% 15.1%
Air & Temperature Control
Sales 574.5 587.1 1,104.7 1,125.2
Operating Income 78.8 74.7 141.7 135.4
as a % of sales 13.7% 12.7% 12.8% 12.0%
Hardware & Tools
Sales 469.8 433.8 920.9 849.1
Operating Income 74.5 70.6 144.0 130.0
as a % of sales 15.9% 16.3% 15.6% 15.3%
Engineered Products
Sales 525.3 554.8 1,044.9 1,065.1
Operating Income 50.8 52.5 86.6 87.7
as a % of sales 9.7% 9.5% 8.3% 8.2%
Total
Sales $2,249.3 $2,186.2 $4,332.6 $4,189.1
Operating Income 333.4 299.7 595.1 526.5
as a % of sales 14.8% 13.7% 13.7% 12.6%
Unallocated corporate expense (14.1) (13.4) (29.1) (26.6)
-------- -------- -------- --------
Consolidated operating income $ 319.3 $ 286.3 $ 566.0 $ 499.9
======== ======== ======== ========
as a % of sales 14.2% 13.1% 13.1% 11.9%