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| Investec Bnk 24 | LSE:43PZ | London | Medium Term Loan |
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RNS Number:2394C
Ingersoll-Rand Co
18 April 2001
Contact:
Joseph Fimbianti (Analysts)
(201) 573-3113
Paul Dickard (Media)
(201)573-3120
Ingersoll-Rand Reports First-quarter Continuing Diluted EPS of 51 cents;
Results in Line with Revised Expectations
Woodcliff Lake, N.J., April 18, 2001 - Ingersoll-Rand Company (NYSE:IR), a
leading diversified industrial enterprise, today reported net earnings from
continuing operations of $81.9 million, excluding charges related to
restructuring and productivity investments, or diluted earnings per share (DEPS)
of 51 cents, for the first quarter ended March 31, 2001. These results were in
line with the company's revised expectations and compare to 2000 first-quarter
net earnings from continuing operations of $131.7 million, or DEPS of 80 cents.
Excluding the aforementioned one-time charges and 18 cents of seasonally driven
dilution from Hussmann, which was acquired in June 2000, diluted EPS was down
14% compared to 2000. Hussmann's earnings have historically followed a distinct
seasonal pattern with two-thirds of earnings produced in the second half of the
year. Reported net earnings for the first quarter of 2001 were $49.3 million, or
DEPS of 31 cents.
Revenues from continuing operations were $2.1 billion, an increase of 5%
compared to the first quarter of 2000. Excluding Hussmann, net revenues
decreased by 7% compared to last year, primarily due to a 10% decline in North
American revenues. The first quarter also included an unfavorable currency
impact equal to 1% of revenues.
Charges for Restructuring and Productivity Investments
During the first quarter of 2001, IR continued its program to reduce costs and
accelerate productivity initiatives throughout the company. After-tax charges
for restructuring and productivity investments for the first quarter of 2001
totaled $32.6 million, or DEPS of 20 cents, including $3.3 million for
Dresser-Rand, which is classified as assets held for sale. These charges include
accrued restructuring costs and period costs which are recorded as incurred.
This program contributed approximately 4 cents to DEPS for the first quarter of
2001.
The total pre-tax cost of this program will be approximately $325 million and
will include plant rationalizations, organizational realignments consistent with
the company's new market-based structure and the consolidation of "back office"
business processes. These investments, which will reduce company-wide headcount
by approximately 8%, are expected to be substantially completed by year-end
2001.
After-tax charges recorded since the inception of the program in the third
quarter of 2000 have totaled $127.9 million, including $13.2 million for
Dresser-Rand. IR will record additional charges for this program for the balance
of 2001.
First-quarter Business Review
The business sector review excludes the impact of charges for restructuring and
productivity investments.
The Climate Control Sector provides solutions to preserve, store and display
temperature sensitive products and includes the market leading brands of Thermo
King and Hussmann.
An 8% growth in the bus air-conditioning and seagoing container businesses was
more than offset by the significant decline in the North American truck and
trailer market, continued weak truck and trailer results in Europe, and the
unfavorable effects of currency. As a result, Thermo King revenues decreased by
15% compared to 2000.
Reduced capital spending by several major United States supermarket chains
caused Hussmann revenues for the first quarter to fall short of expectations.
Backlog and bid activity is strong, indicating that the spending decline is a
deferral rather than a permanent loss of business. Additionally, international
volumes are improving, particularly in Europe and Latin America.
Revenues for the sector increased by 59%, compared to the first quarter of 2000,
as a result of the Hussmann acquisition. Operating margins decreased from 11.9%
to 1.0% due to the inclusion of Hussmann results net of goodwill, a significant
decline in product volume, and the unfavorable effects of currency. The company
continued to make progress in capturing projected synergies resulting from the
combination of Hussmann and Thermo King.
In keeping with its growth strategy, Hussmann's service revenue in the first
quarter increased by 10% compared to last year. Consistent with this strategy,
the acquisition of Taylor Refrigeration in March expands Hussmann's distribution
and branch networks, particularly to serve Midwest grocery chains.
The Industrial Productivity Sector is composed of a diverse group of businesses
focused on providing solutions to enhance customers' industrial efficiency. The
North American industrial economy continued to be sluggish in the first quarter.
This contributed to a decrease in sector revenues of approximately 4%. Operating
margins declined to 10.8% of revenues, compared to 11.7% in 2000. Industrial
Productivity consists of three businesses: Air Solutions, Bearings and
Components, and Industrial Products.
Air Solutions provides equipment and services for compressed air systems.
Declining U.S. industrial production resulted in decreased unit volume sales;
however, European markets were somewhat improved compared to last year. Total
revenues and operating margins were flat compared to the prior year's first
quarter. IR's aftermarket strategy produced a 9% year-over-year growth in the
parts and service business.
Bearings and Components provides motion-control technologies for OEM and
aftermarket applications to both the automotive and industrial markets. Lower
volumes in the U.S. automotive and industrial equipment markets caused reported
revenues in the first quarter to decline by 11%, while operating margins
declined to 8.9% of revenues. During the quarter, aftermarket shipments
increased, and the backlog indicates that this trend will continue.
Industrial Products includes Club Car(R) golf cars and utility vehicles; tools;
fluid products equipment; and the company's independent power business.
Continued growth of the golf car and utility vehicle markets offset sluggish
activity in industrial end markets. Revenues for the quarter increased by 2%
compared to 2000, primarily due to revenue growth at Club Car. Margins decreased
to 13.4% of revenues compared to 14.3% in 2000, principally due to increased
spending on new product introductions, particularly the PowerWorks(R)
microturbine. The Independent Power Sector continued to make progress in the
quarter. There are currently 13 microturbines in field testing and the company
expects to ship 75 to 100 units in the second half of 2001.
The Infrastructure Sector includes Bobcat(R) compact equipment and
Ingersoll-Rand(R) road pavers, compactors, portable-power products and drilling
equipment. The sector's revenues were negatively impacted by weaker demand in
North American road development, portable power and drilling markets as well as
dramatically reduced demand from large U.S. rental companies. Excluding the
large U.S. rental channel, Bobcat revenues increased in the first quarter, as
market share remained steady. Bobcat's introduction of the industry's first
all-wheel-steer compact loader as well as new track loader models are expected
to help drive future demand. The road development and portable power businesses
were sharply impacted by the decline in North American demand. Sector revenues
declined by 10% and operating margins decreased to 12.7% of sales, compared to
16.1% in 2000, primarily reflecting lower volumes.
The Security and Safety Sector includes architectural hardware products and
electronic access-control technologies. Activity levels slowed slightly in both
U.S. and European commercial and residential markets offsetting higher
electronic solutions revenues. The overall market uncertainty caused commercial
and residential distributors to reduce product inventory. First-quarter revenues
were flat compared to last year and operating margins remained at a very strong
18.4% of revenues compared to 18.7% in 2000. Margins were negatively affected by
increased development spending in the electronic security solutions business,
which continued to show excellent growth in the quarter.
Comparisons of Other Quarterly Income Statement Items
Interest expense for the quarter of $65.9 million was $17.7 million higher than
the 2000 first quarter due to the impact of the debt incurred for the purchase
of Hussmann. This increase was partially offset by lower year-over-year debt
levels in IR's other operations and lower interest rates.
Other/income (expense) totaled $2.2 million of net expenses for the first
quarter, compared to $4.6 million of net expenses in last year's first quarter.
Results from assets held for sale represents the remaining portion of
Dresser-Rand (D-R) that was reclassified, in the third quarter of 2000 to a
single line item in continuing operations, net of taxes. D-R's reported
first-quarter net loss of $8.2 million included one-time after-tax charges of
$3.3 million for restructuring charges related to organizational realignments.
Excluding these charges, D-R's net loss amounted to $4.9 million, compared to a
$7.9 million net loss in the first quarter of 2000.
The company's effective tax rate for the first quarter of 2001, excluding D-R,
was 33.0%, compared to 35.5% in the first quarter of 2000. Excluding D-R and
restructuring charges, the effective full year tax rate for 2001 and 2002 is
expected to be 33.0%, compared to 34.75% for 2000, reflecting the success of
ongoing tax planning initiatives.
2001 Outlook
Preliminary data for April and May show a continued 7% year-over-year reduction
in revenues in the second quarter, excluding Hussmann. As a result,
second-quarter 2001 earnings per share from continuing operations before
one-time charges are expected to be in the range of 75 to 85 cents, including 5
cents per share dilution from Hussmann. This compares to record results in the
second quarter of 2000 of $1.10 per share.
"We foresee no significant improvement in our major North American end markets
for the balance of 2001. Consequently, we now forecast 2001 revenues to decrease
by 5 to 7%, excluding Hussmann. Diluted earnings per share from continuing
operations for full year 2001 are expected to be in the range of $3.00 to $3.25,
excluding restructuring and productivity charges," said Herbert L. Henkel,
chairman, president and chief executive officer.
"Free cash flow remains a high priority in 2001 as we continue to aggressively
manage our working capital and capital programs. We plan to continue to pursue
bolt-on acquisitions in 2001. Despite the slower economic environment we
continue to make progress in implementing our long range plan focusing on
innovation, operational excellence, and the integration of our acquisitions,"
said Henkel.
IR is a leading innovation and solutions provider for the major global markets
of Security and Safety, Climate Control, Industrial Productivity and
Infrastructure. The company's diverse product portfolio encompasses such leading
industrial and commercial brands as Schlage locks and security solutions; Thermo
King transport temperature control equipment; Hussmann commercial and retail
refrigeration equipment; Bobcat compact equipment; Club Car golf cars and
utility vehicles; Torrington bearings and components; PowerWorks microturbines;
and Ingersoll-Rand industrial and construction equipment. In addition, IR offers
products and services under many more premium brands for customers in industrial
and commercial markets. Further information on IR can be found on the company's
web site at www.irco.com.
This news release includes "forward-looking statements" that involve risks and
uncertainties. Political, economic, climatic, currency, tax, regulatory,
technological, competitive and other factors 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-K for the year ended December 31, 2000.
INGERSOLL-RAND COMPANY
Consolidated Income Statement
First Quarter
(In millions except percentages and per share figures)
UNAUDITED
Three Months
Ended March 31,
2001 2000
Revenues $2,119.6 $2,020.4
Cost of goods sold 1,637.7 1,481.6
Administrative selling & service
engineering expenses 306.4 269.5
Restructuring charges 21.7 -
Operating income 153.8 269.3
Interest expense (65.9) (48.2)
Other income/(expense) (2.2) (4.6)
Results from assets held
for sale (net of tax) (8.2) (7.9)
Earnings before taxes 77.5 208.6
Provision for taxes 28.2 76.9
Net earnings from continuing operations 49.3 131.7
Discontinued operations (net of tax) - 4.3
Net earnings $49.3 $136.0
Basic earnings per share
-Continuing operations $0.31 $0.81
-Discontinued operations - 0.03
$0.31 $0.84
Diluted earnings per share
-Continuing operations $0.31 $0.80
-Discontinued operations - 0.03
$0.31 $0.83
Average number of common
shares outstanding:
Basic 160.3 162.0
Diluted 161.3 163.3
INGERSOLL-RAND COMPANY
Business Review
First Quarter
(In millions except percentages)
UNAUDITED
Three Months
Ended March 31,
2001 2000
Climate Control
Revenues $515.1 $324.4
Operating income (10.4) 38.7
and as a % of revenues (2.0%) 11.9%
Industrial Productivity
Air Solutions
Revenues 196.7 196.6
Operating income 17.5 19.8
and as a % of revenues 8.9% 10.1%
Bearings & Components
Revenues 272.3 306.8
Operating income 15.3 32.6
and as a % of revenues 5.6% 10.6%
Industrial Products
Revenues 257.6 253.2
Operating income 33.7 36.2
and as a % of revenues 13.1% 14.3%
Industrial Productivity
Revenues 726.6 756.6
Operating income 66.5 88.6
and as a % of revenues 9.2% 11.7%
Infrastructure
Revenues 542.9 603.6
Operating income 62.3 96.9
and as a % of revenues 11.5% 16.1%
Security & Safety
Revenues 335.0 335.8
Operating income 54.3 62.9
and as a % of revenues 16.2% 18.7%
Total
Revenues $2,119.6 $2,020.4
Operating income 172.7 287.1
and as a % of revenues 8.1% 14.2%
Unallocated corporate expense (18.9) (17.8)
Consolidated operating income $153.8 $269.3
and as a % of revenues 7.3% 13.3%
INGERSOLL-RAND COMPANY
Consolidated Income Statement
First Quarter Reconciliation
(In millions except percentages and per share figures)
UNAUDITED
Three months ended March 31,
2001 2000
Restructure
Reported and Other Adjusted Reported
Results Charges Results Results
Revenues $2,119.6 $ - $2,119.6 $2,020.4
Cost of goods sold 1,637.7 12.4 1,625.3 1,481.6
Administrative selling & service
engineering expenses 306.4 9.7 296.7 269.5
Restructuring charges 21.7 21.7 - -
Operating income 153.8 (43.8) 197.6 269.3
Interest expense (65.9) - (65.9) (48.2)
Other income/(expense) (2.2) - (2.2) (4.6)
Results from assets held
for sale (net of tax) (8.2) (3.3) (4.9) (7.9)
Earnings before taxes 77.5 (47.1) 124.6 208.6
Provision for taxes 28.2 (14.5) 42.7 76.9
Net earnings from continuing
operations 49.3 (32.6) 81.9 131.7
Discontinued operations (net of tax) - - - 4.3
Net earnings $49.3 $(32.6) $81.9 $136.0
Basic earnings per share
-Continuing operations $0.31 $(0.20) $0.51 $0.81
-Discontinued operations - - - 0.03
$0.31 $(0.20) $0.51 $0.84
Diluted earnings per share
-Continuing operations $0.31 $(0.20) $0.51 $0.80
-Discontinued operations - - - 0.03
$0.31 $(0.20) $0.51 $0.83
Average number of common
shares outstanding:
Basic 160.3 160.3 160.3 162.0
Diluted 161.3 161.3 161.3 163.3
INGERSOLL-RAND COMPANY
Business Review
First Quarter Reconciliation
(In millions except percentages)
UNAUDITED
Three months ended March 31,
2001 2000
Restructure
Reported and Other Adjusted Reported
Results Charges Results Results
Climate Control
Revenues $515.1 $ - $515.1 $324.4
Operating income (10.4) (15.4) 5.0 38.7
and as a % of revenues (2.0%) 1.0% 11.9%
Industrial Productivity
Air Solutions
Revenues 196.7 - 196.7 196.6
Operating income 17.5 (2.1) 19.6 19.8
and as a % of revenues 8.9% 10.0% 10.1%
Bearings & Components
Revenues 272.3 - 272.3 306.8
Operating income 15.3 (8.8) 24.1 32.6
and as a % of revenues 5.6% 8.9% 10.6%
Industrial Products
Revenues 257.6 - 257.6 253.2
Operating income 33.7 (0.8) 34.5 36.2
and as a % of revenues 13.1% 13.4% 14.3%
Industrial Productivity
Revenues 726.6 - 726.6 756.6
Operating income 66.5 (11.7) 78.2 88.6
and as a % of revenues 9.2% 10.8% 11.7%
Infrastructure
Revenues 542.9 - 542.9 603.6
Operating income 62.3 (6.9) 69.2 96.9
and as a % of revenues 11.5% 12.7% 16.1%
Security & Safety
Revenues 335.0 - 335.0 335.8
Operating income 54.3 (7.2) 61.5 62.9
and as a % of revenues 16.2% 18.4% 18.7%
Total
Revenues $2,119.6 $ - $2,119.6 $2,020.4
Operating income 172.7 (41.2) 213.9 287.1
and as a % of revenues 8.1% 10.1% 14.2%
Unallocated corporate expense (18.9) (2.6) (16.3) (17.8)
Consolidated operating income $153.8 $(43.8) $197.6 $269.3
and as a % of revenues 7.3% 9.3% 13.3%
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