item 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon price waterhouse llp dated february 6 1996 included exhibit 13 excluding financial review management analysis unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedule listed accompanying index read conjunction financial statements annual report shareowners 1995 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary 3 exhibits listed accompanying index exhibits filed part form 10k annual report b reports form 8k none ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 1995 1994 years ended december 31 1995 1994 1993 consolidated statement income consolidated statement shareowners equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data 16 financial statement schedule report independent accountants financial statement schedule 20 consolidated schedule years ended december 31 1995 1994 1993 schedule ii valuation qualifying accounts 21 see exhibit 13 ingersollrand company annual report shareowners 1995 financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto financial statements companys 50 percent less owned companies omitted individually meet significant subsidiary test rule 309 regulation sx report independent accountants financial statement schedule board directors ingersollrand company audits consolidated financial statements referred report dated february 6 1996 included part exhibit 13 annual report shareowners 1995 ingersollrand company report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14a form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements price waterhouse llp price waterhouse llp morristown new jersey february 6 1996 consent independent accountants hereby consent incorporation reference prospectus constituting part registration statement form s3 3360249 incorporation reference registration statements form s8 33300829 33 35229 298258 posteffective amendment 4 264708 ingersollrand company report dated february 6 1996 included part exhibit 13 annual report shareowners 1995 incorporated annual report form 10k also consent incorporation reference report financial statement schedule appears page price waterhouse llp price waterhouse llp morristown new jersey march 29 1996 schedule ii ingersollrand company valuation qualifying accounts years ended december 31 1995 1994 1993 amounts millions additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 259 178 54 383 doubtful accounts 221 126 88 259 doubtful accounts 231 102 112 221 additions include foreign currency translation deductions include accounts advances written less recoveries ingersollrand company index exhibits item 14a description page 2 agreement plan merger dated april 9 1995 among ingersollrand company cec acquisition corp clark equipment company incorporated reference amendment 2 schedule 14d1 respect tender offer cec acquisition corp whollyowned subsidiary ingersollrand company shares clark equipment company 3 amendment restated certificate incorporation ingersollrand company filed may 28 1992 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 3032 1993 form 10k 3 ii restated certificate incorporation ingersollrand company amended may 28 1992 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 3360 1993 form 10k 3 iii bylaws ingersollrand company amended january 1 1996 2842 4 rights agreement dated december 7 1988 amended amendment 1 thereto dated december 7 1994 incorporated reference form 8a ingersoll rand company filed december 12 1988 form 8aa ingersollrand company filed december 15 1994 4 ii indenture dated august 1 1986 ingersollrand company bank new york trustee supplemented incorporated reference exhibits 41 42 43 companys form s3 registration statement 3339474 ingersollrand company index exhibits item 14a continued description page 4 iii ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersoll rand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 7892 1993 form 10k 10 iii b description ingersollrand company retirement plan nonemployees directors incorporated reference form 10k ingersoll rand company fiscal year ended december 31 1994 see pages 3947 1994 form 10k 10 iii c form contingent compensation agreements executive vice presidents group presidents ingersollrand company 4347 10 iii description bonus arrangements chairman president staff officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see page 100 1993 form 10k 10 iii e form change control agreement chairman chief executive officer ingersollrand company 4864 ingersollrand company index exhibits item 14a continued description page 10 iii f form change control agreement selected executive officers chairman ingersollrand company 6584 10 iii g executive supplementary retirement agreement selected executive officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 127132 1993 form 10k 10 iii h incentive stock plan 1985 ingersoll rand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 133151 1993 form 10k 10 iii forms insurance related letter agreements certain executive officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 152160 1993 form 10k 10 iii j incentive stock plan 1990 ingersoll rand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 161182 1993 form 10k 10 iii k restated supplemental pension plan 8591 10 iii l supplemental stock savings investment plan effective january 1 1989 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 189198 1993 form 10k 10 iii supplemental retirement account plan effective january 1 1989 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 199206 1993 form 10k ingersollrand company index exhibits item 14a continued description page 10 iii n incentive stock plan 1995 ingersoll rand company incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix proxy statement dated march 15 1995 10 iii senior executive performance plan incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix b proxy statement dated march 15 1995 10 iii p elected officers supplemental plan 92108 10 iii q selected executive officer employment agreement 109111 11 computation primary earnings per share 112 11 ii computation fully diluted earnings per share 113114 12 computations ratios earnings fixed charges 115 13 ingersollrand company annual report shareowners 1995 deemed filed part report except extent incorporated reference 116175 18 letter dated august 11 1995 price waterhouse llp regarding change accounting method incorporated reference form 10q ingersollrand company quarterly period ended june 30 1995 reported item 6 exhibits 21 list subsidiaries ingersollrand company 176178 27 financial data schedule 179 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant thomas f mcbride thomas f mcbride senior vice president chief financial officer date march 29 1996 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date chairman president chief executive officer director principal james e perrella executive officer march 29 1996 james e perrella senior vice president chief financial officer principal financial thomas f mcbride officer march 29 1996 thomas f mcbride controller accounting reporting principal accounting richard spohn officer march 29 1996 richard spohn theodore h black director march 29 1996 theodore h black signature title date brendan byrne director march 29 1996 brendan byrne joseph p flannery director march 29 1996 joseph p flannery constance j horner director march 29 1996 constance j horner h william lichtenberger director march 29 1996 h william lichtenberger john e phipps director march 29 1996 john e phipps cedric e ritchie director march 29 1996 cedric e ritchie orin r smith director march 29 1996 orin r smith richard j swift director march 29 1996 richard j swiftitem 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon price waterhouse llp dated february 4 1997 included exhibit 13 excluding financial review management analysis unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedule listed accompanying index read conjunction financial statements annual report shareowners 1996 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary 3 exhibits listed accompanying index exhibits filed part form 10k annual report b reports form 8k none ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 1996 1995 years ended december 31 1996 1995 1994 consolidated statement income consolidated statement shareowners equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data financial statement schedule report independent accountants financial statement schedule see consolidated schedule years ended december 31 1996 1995 1994 schedule ii valuation qualifying accounts see exhibit 13 ingersollrand company annual report shareowners 1996 see item 8 financial statements supplementary data financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto financial statements companys 50 percent less owned companies omitted individually meet significant subsidiary test rule 309 regulation sx report independent accountants financial statement schedule board directors ingersollrand company audits consolidated financial statements referred report dated february 4 1997 included part exhibit 13 annual report shareowners 1996 ingersollrand company report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14a form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements price waterhouse llp price waterhouse llp morristown new jersey february 4 1997 consent independent accountants hereby consent incorporation reference prospectus constituting part registration statement form s3 3360249 incorporation reference registration statements form s8 33319445 333 00829 3335229 298258 posteffective amendment 4 264708 ingersollrand company report dated february 4 1997 included part exhibit 13 annual report shareowners 1996 incorporated annual report form 10k also consent incorporation reference report financial statement schedule appears page price waterhouse llp price waterhouse llp morristown new jersey march 26 1997 schedule ii ingersollrand company valuation qualifying accounts years ended december 31 1996 1995 1994 amounts millions additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 383 86 126 343 doubtful accounts 259 178 54 383 doubtful accounts 221 126 88 259 additions include foreign currency translation deductions include accounts advances written less recoveries ingersollrand company index exhibits item 14a description 2 agreement plan merger dated april 9 1995 among ingersollrand company cec acquisition corp clark equipment company incorporated reference amendment 2 schedule 14d1 respect tender offer cec acquisition corp whollyowned subsidiary ingersollrand company shares clark equipment company 3 amendment restated certificate incorporation ingersollrand company filed may 28 1992 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 3032 1993 form 10k 3 ii restated certificate incorporation ingersollrand company amended may 28 1992 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 3360 1993 form 10k 3 iii bylaws ingersollrand company amended september 4 1996 filed herewith 4 rights agreement dated december 7 1988 amended amendment 1 thereto dated december 7 1994 incorporated reference form 8a ingersoll rand company filed december 12 1988 form 8aa ingersollrand company filed december 15 1994 4 ii indenture dated august 1 1996 ingersollrand company bank new york trustee supplemented incorporated reference exhibits 41 42 43 companys form s3 registration statement 3339474 4 iii ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersoll rand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 7892 1993 form 10k 10 iii b ingersollrand company directors deferred compensation stock award plan filed herewith 10 iii c forms contingent compensation agreements vice presidents andor group presidents ingersollrand company filed herewith 10 iii description bonus arrangements chairman president staff officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see page 100 1993 form 10k 10 iii e form change control agreement chairman chief executive officer ingersollrand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1995 see pages 4864 1995 form 10k 10 iii f form change control agreement selected executive officers chairman ingersollrand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1995 see pages 6584 1995 form 10k 10 iii g 1 executive supplementary retirement agreement selected executive officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 127132 1993 form 10k 10 iii g 2 executive supplementary retirement agreement selected executive officers filed herewith 10 iii h incentive stock plan 1985 ingersoll rand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 133151 1993 form 10k 10 iii forms insurance related letter agreements certain executive officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 152160 1993 form 10k 10 iii j incentive stock plan 1990 ingersoll rand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 161182 1993 form 10k 10 iii k restated supplemental pension plan incorporated reference form 10k ingersollrand company fiscal year ended december 31 1995 see pages 8591 1995 form 10k 10 iii l supplemental stock savings investment plan effective january 1 1989 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 189198 1993 form 10k 10 iii supplemental retirement account plan effective january 1 1989 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 199206 1993 form 10k 10 iii n incentive stock plan 1995 ingersoll rand company incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix proxy statement dated march 15 1995 10 iii senior executive performance plan incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix b proxy statement dated march 15 1995 10 iii p elected officers supplemental plan incorporated reference form 10k ingersollrand company fiscal year ended december 31 1995 see pages 92108 1995 form 10k 10 iii q selected executive officer employment agreement incorporated reference form 10k ingersollrand company fiscal year ended december 31 1995 see pages 109111 1995 form 10k 10 iii r executive deferred compensation stock award plan filed herewith 10 iii senior vice president chief financial officer employment agreement filed herewith 11 computation primary earnings per share filed herewith 11 ii computation fully diluted earnings per share filed herewith 12 computations ratios earnings fixed charges filed herewith 13 ingersollrand company annual report shareowners 1996 deemed filed part report except extent incorporated referencefiled herewith 18 letter dated august 11 1995 price waterhouse llp regarding change accounting method incorporated reference form 10q ingersollrand company quarterly period ended june 30 1995 reported item 6 exhibits 21 list subsidiaries ingersollrand company filed herewith 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant frank b obrien date march 26 1997 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date chairman president chief executive officer director principal james e perrella executive officer march 26 1997 james e perrella senior vice president chief financial officer principal financial frank b obrien officer march 26 1997 frank b obrien vice president comptroller principal accounting gerard v geraghty officer march 26 1997 gerard v geraghty theodore h black director march 26 1997 theodore h black joseph p flannery director march 26 1997 joseph p flannery constance j horner director march 26 1997 constance j horner h william lichtenberger director march 26 1997 h william lichtenberger theodore e martin director march 26 1997 theodore e martin cedric e ritchie director march 26 1997 cedric e ritchie orin r smith director march 26 1997 orin r smith richard j swift director march 26 1997 richard j swift frank travis director march 26 1997 j frank travis tony l white director march 26 1997 tony l whiteitem 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon pricewaterhousecoopers llp dated february 2 1999 included exhibit 13 unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedule listed accompanying index read conjunction financial statements annual report shareholders 1998 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary 3 exhibits listed accompanying index exhibits filed part form 10k annual report b reports form 8k current report form 8k item 5 dated november 4 1998 reporting adoption shareholder rights plane effective december 22 1998 current report form 8ka item 5 dated november 4 1998 amending reporting shareholer rights plan ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 1998 1997 years ended december 31 1998 1997 1996 consolidated statement income consolidated statement shareholders equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data financial statement schedule report independent accountants financial statement schedule see consolidated schedule years ended december 31 1998 1997 1996 schedule ii valuation qualifying accounts see exhibit 13 ingersollrand company annual report shareholders 1998 see item 8 financial statements supplementary data financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto financial statements companys 50 percent less owned companies omitted individually meet significant subsidiary test rule 309 regulation sx report independent accountants financial statement schedule board directors ingersollrand company audits consolidated financial statements referred report dated february 2 1999 included part exhibit 13 annual report shareholders 1998 ingersollrand company report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14a form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp florham park new jersey february 2 1999 consent independent accountants hereby consent incorporation reference prospectus constituting part registration statements form s3 33338367 33337019 33334029 incorporation reference registration statements form s8 33342133 33319445 33367257 333 00829 3335229 298258 ingersollrand company report dated february 2 1999 included part exhibit 13 annual report shareholders 1998 incorporated annual report form 10k also consent incorporation reference report financial statement schedule appears page pricewaterhousecoopers llp pricewaterhousecoopers llp florham park new jersey march 26 1999 schedule ii ingersollrand company valuation qualifying accounts years ended december 31 1998 1997 1996 amounts millions additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 339 133 52 420 doubtful accounts 343 117 121 339 doubtful accounts 383 86 126 343 additions include foreign currency translation deductions include accounts advances written less recoveries ingersollrand company index exhibits item 14a description 3 restated certificate incorporation ingersollrand company amended may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 ii amendment restated certificate incorporation ingersollrand company filed may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 iii amendment restated certificate incorporation ingersollrand company filed august 20 1997 incorporated reference form s3 filed october 2 1997 3 iv bylaws ingersollrand company amended january 5 1999 filed herewith 4 rights agreement dated november 9 1998 incorporated reference form 8aa ingersoll rand company filed november 13 1998 4 ii indenture dated august 1 1986 ingersoll rand company bank new york trustee supplemented incorporated reference exhibits 41 42 43 companys form s3 registration statement 3339474 4iii purchase contract agreement dated march 23 1998 ingersollrand company bank new york purchase contract agent filed herewith 4iv pledge agreement dated march 23 1998 ingersollrand company chase manhattan bank collateral agent custodial agent securities intermediary filed herewith 4v indenture dated march 23 1998 ingersollrand company bank new york trustee filed herewith 4vi first supplemental indenture dated march 23 1998 ingersollrand company bank new york trustee filed herewith 4vii amended restated declaration trust ingersoll rand financing delaware statutory business trust dated march 23 1998 filed herewith 4viii guarantee agreement dated march 23 1998 ingersollrand company first national bank chicago trustee filed herewith 4 ix ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersoll rand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii b ingersollrand company directors deferred compensation stock award plan incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii c forms contingent compensation agreements vice presidents andor group presidents ingersollrand company filed herewith 10 iii description bonus arrangements executive vice president ingersollrand company filed herewith 10 iii e description bonus arrangements chairman president staff officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii f amended restated form change control agreement march 1 1999 chairman chief executive officer ingersollrand company filed herewith 10 iii g amended restated form change control agreement march 1 1999 selected executive officers chairman ingersollrand company filed herewith 10 iii h executive supplementary retirement agreement selected executive officers incorporated reference form 10 k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii executive supplementary retirement agreement selected executive officers incorporated reference form 10 k year ended december 31 1996 filed march 26 1997 10 iii j incentive stock plan 1985 ingersollrand company incorporated reference form 10k ingersoll rand company year ended december 31 1993 filed march 30 1994 10 iii k forms insurance related letter agreements certain executive officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii l incentive stock plan 1990 ingersollrand company incorporated reference form 10k ingersoll rand company year ended december 31 1993 filed march 30 1994 10 iii restated supplemental pension plan incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii n supplemental stock savings investment plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii supplemental retirement account plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii p incentive stock plan 1995 ingersollrand company incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix proxy statement dated march 15 1995 10 iii q senior executive performance plan incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix b proxy statement dated march 15 1995 10 iii r amended restated elected officers supplemental plan filed herewith 10 iii selected executive officer employment agreement incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii executive deferred compensation stock award plan incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii u senior vice president chief financial officer employment agreement incorporated reference form 10k year ended december 31 1997 filed march 6 1998 10 iii v incentive stock plan 1998 ingersollrand company incorporated reference appendix notice 1998 annual meeting shareholders proxy statement dated march 17 1998 11 computation earnings per share filed herewith 12 computations ratios earnings fixed charges filed herewith 13 ingersollrand company annual report shareholders 1998 deemed filed part report except extent incorporated reference filed herewith 21 list subsidiaries ingersollrand company filed herewith 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant david w devonshire date march 29 1999 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date chairman president chief executive officer director principal james e perrella executive officer march 29 1999 james e perrella senior vice president chief financial officer principal financial david w devonshire accounting officer march 29 1999 david w devonshire controller principal steven r shawley accounting officer march 29 1999 steven r shawley joseph p flannery director march 29 1999 joseph p flannery peter c godsoe director march 29 1999 peter c godsoe constance j horner director march 29 1999 constance j horner h william lichtenberger director march 29 1999 h william lichtenberger theodore e martin director march 29 1999 theodore e martin orin r smith director march 29 1999 orin r smith richard j swift director march 29 1999 richard j swift tony l white director march 29 1999 tony l whiteitem 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon pricewaterhousecoopers llp dated february 1 2000 included exhibit 13 unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedule listed accompanying index read conjunction financial statements annual report shareholders 1999 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary b reports form 8k none 3 exhibits listed accompanying index exhibits filed part form 10k annual report ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 1999 1998 years ended december 31 1999 1998 1997 consolidated statement income consolidated statement shareholders equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data financial statement schedule report independent accountants financial statement schedule see consolidated schedule years ended december 31 1999 1998 1997 schedule ii valuation qualifying accounts see exhibit 13 ingersollrand company annual report shareholders 1999 see item 8 financial statements supplementary data financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto report independent accountants financial statement schedule board directors ingersollrand company audits consolidated financial statements referred report dated february 1 2000 appearing 1999 annual report shareholders ingersollrand company report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp florham park new jersey february 1 2000 consent independent accountants hereby consent incorporation reference registration statements form s3 33338367 333 37019 33334029 incorporation reference registration statements form s8 33342133 33319445 33367257 33300829 3335229 ingersollrand company report dated february 1 2000 relating financial statements appears 1999 annual report shareholders incorporated annual report form 10k also consent incorporation reference report dated february 1 2000 relating financial statement schedule appears form 10k pricewaterhousecoopers llp pricewaterhousecoopers llp florham park new jersey march 29 2000 schedule ii ingersollrand company valuation qualifying accounts years ended december 31 1999 1998 1997 amounts millions additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 354 87 107 334 doubtful accounts 294 105 45 354 doubtful accounts 298 108 112 294 additions include foreign currency translation deductions include accounts advances written less recoveries ingersollrand company index exhibits item 14a description 3 restated certificate incorporation ingersollrand company amended may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 ii amendment restated certificate incorporation ingersollrand company filed may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 iii amendment restated certificate incorporation ingersollrand company filed august 20 1997 incorporated reference form s3 filed october 2 1997 3 iv bylaws ingersollrand company amended october 1 1999 filed herewith 4 rights agreement dated november 9 1998 incorporated reference form 8aa ingersoll rand company filed november 13 1998 4 ii indenture dated august 1 1986 ingersoll rand company bank new york trustee supplemented incorporated reference exhibits 41 42 43 companys form s3 registration statement 3339474 4iii purchase contract agreement dated march 23 1998 ingersollrand company bank new york purchase contract agent incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4iv pledge agreement dated march 23 1998 ingersollrand company chase manhattan bank collateral agent custodial agent securities intermediary incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4v indenture dated march 23 1998 ingersollrand company bank new york trustee incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4vi first supplemental indenture dated march 23 1998 ingersollrand company bank new york trustee incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4vii amended restated declaration trust ingersoll rand financing delaware statutory business trust dated march 23 1998 incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4viii guarantee agreement dated march 23 1998 ingersollrand company first national bank chicago trustee incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4 ix ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersoll rand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii b ingersollrand company directors deferred compensation stock award plan incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii c description bonus arrangement executive vice presidents ingersollrand company filed herewith 10 iii description bonus arrangement chairman president staff officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii e amended restated form change control agreement march 1 1999 chairman ingersollrand company incorporated reference form 10k ingersoll rand company year ended december 31 1998 filed march 30 1999 10 iii f amended restated form change control agreement march 1 1999 selected executive officers chairman ingersollrand company incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 10 iii g executive supplementary retirement agreement selected executive officers incorporated reference form 10 k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii h executive supplementary retirement agreement selected executive officers incorporated reference form 10 k year ended december 31 1996 filed march 26 1997 10 iii forms insurance related letter agreements certain executive officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii j incentive stock plan 1990 ingersollrand company incorporated reference form 10k ingersoll rand company year ended december 31 1993 filed march 30 1994 10 iii k restated supplemental pension plan incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii l supplemental stock savings investment plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii supplemental retirement account plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii n incentive stock plan 1995 ingersollrand company incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix proxy statement dated march 15 1995 10 iii senior executive performance plan incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix b proxy statement dated march 15 1995 10 iii p amended restated elected officers supplemental plan incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 10 iii q selected executive officer employment agreement incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii r executive deferred compensation stock award plan incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii chief financial officer employment agreement incorporated reference form 10k year ended december 31 1997 filed march 6 1998 10 iii incentive stock plan 1998 ingersollrand company incorporated reference appendix notice 1998 annual meeting shareholders proxy statement dated march 17 1998 10 iii u composite employment agreement chief executive officer filed herewith 11 computation earnings per share filed herewith 12 computations ratios earnings fixed charges filed herewith 13 ingersollrand company annual report shareholders 1999 deemed filed part report except extent incorporated reference filed herewith 21 list subsidiaries ingersollrand company filed herewith 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant david w devonshire date march 30 2000 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date presidentchief executive officer director principal herbert l henkel executive officer march 30 2000 herbert l henkel executive vice presidentchief financial officer principal david w devonshire financial officer march 30 2000 david w devonshire vice president controller principal steven r shawley accounting officer march 30 2000 steven r shawley james e perrella chairman director march 30 2000 james e perrella joseph p flannery director march 30 2000 joseph p flannery peter c godsoe director march 30 2000 peter c godsoe constance j horner director march 30 2000 constance j horner h william lichtenberger director march 30 2000 h william lichtenberger theodore e martin director march 30 2000 theodore e martin orin r smith director march 30 2000 orin r smith richard j swift director march 30 2000 richard j swift tony l white director march 30 2000 tony l whiteitem 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon price waterhouse llp dated january 31 1995 included exhibit 13 excluding financial review management analysis unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedule listed accompanying index read conjunction financial statements annual report shareowners 1994 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary 3 exhibits listed accompanying index exhibits filed part form 10k annual report b reports form 8k none ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 1994 1993 years ended december 31 1994 1993 1992 consolidated statement income consolidated statement shareowners equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data 14 financial statement schedule report independent accountants financial statement schedule 18 consolidated schedule years ended december 31 1994 1993 1992 schedule ii valuation qualifying accounts 19 see exhibit 13 ingersollrand company annual report shareowners 1994 financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto financial statements companys 50 percent less owned companies omitted individually meet significant subsidiary test rule 309 regulation sx report independent accountants financial statement schedule board directors shareowners ingersollrand company audits consolidated financial statements referred report dated january 31 1995 included part exhibit 13 annual report shareowners 1994 ingersollrand company report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14a form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements price waterhouse llp price waterhouse llp morristown new jersey january 31 1995 consent independent accountants hereby consent incorporation reference prospectuses constituting part registration statements form s3 3353811 form s8 posteffective amendment 4 264708 267834 298258 3335229 ingersollrand company report dated january 31 1995 included part exhibit 13 annual report shareowners 1994 incorporated annual report form 10k also consent incorporation reference report financial statement schedule appears page price waterhouse llp price waterhouse llp morristown new jersey march 30 1995 schedule ii ingersollrand company valuation qualifying accounts years ended december 31 1994 1993 1992 amounts thousands additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 22089 12636 8820 25905 doubtful accounts 23057 10218 11186 22089 doubtful accounts 18772 12590 8305 23057 additions include foreign currency translation 1992 amounts contributed dresser industries inc ingersolldresser pump deductions include accounts advances written less recoveries ingersollrand company index exhibits item 14a description page 3 amendment restated certificate incorporation ingersollrand company filed may 28 1992 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 3032 1993 form 10k 3 ii restated certificate incorporation ingersollrand company amended may 28 1992 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 3360 1993 form 10k 3 iii bylaws ingersollrand company amended december 7 1994 2538 4 rights agreement dated december 7 1988 amended amendment 1 thereto dated december 7 1994 incorporated reference form 8a ingersoll rand company filed december 12 1988 form 8aa ingersollrand company filed december 15 1994 4 iii ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersoll rand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 7892 1993 form 10k ingersollrand company index exhibits item 14a continued description page 10 iii b description compensation plan retired directors ingersollrand company 3947 10 iii c form contingent compensation agreements executive vice presidents group presidents ingersollrand company 4853 10 iii description bonus arrangements chairman president staff officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see page 100 1993 form 10k 10 iii e form change control arrangements chairman chief executive officer incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 101113 1993 form 10k 10 iii f form change control arrangements selected executive officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 114126 1993 form 10k 10 iii g executive supplementary retirement plan selected senior executives incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 127132 1993 form 10k 10 iii h incentive stock plan 1985 ingersoll rand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 133151 1993 form 10k 10 iii forms insurance related letter agreements certain executive officers incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 152160 1993 form 10k ingersollrand company index exhibits item 14a continued description page 10 iii j incentive stock plan 1990 ingersoll rand company incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 161182 1993 form 10k 10 iii k restated supplemental pension plan effective january 1 1992 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 183188 1993 form 10k 10 iii l supplemental stock savings investment plan effective january 1 1989 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 189198 1993 form 10k 10 iii supplemental retirement account plan effective january 1 1989 incorporated reference form 10k ingersollrand company fiscal year ended december 31 1993 see pages 199206 1993 form 10k 11 computation primary earnings per share 5455 11 ii computation fully diluted earnings per share 5657 12 computations ratios earnings fixed charges 58 13 ingersollrand company annual report shareowners 1994 deemed filed part report except extent incorporated reference 59120 21 list subsidiaries ingersollrand company 121123 27 financial data schedule 124 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant thomas f mcbride thomas f mcbride senior vice president chief financial officer date march 30 1995 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date chairman president chief executive officer director principal james e perrella executive officer march 30 1995 james e perrella senior vice president chief financial officer principal financial thomas f mcbride officer march 30 1995 thomas f mcbride controller accounting reporting principal accounting richard spohn officer march 30 1995 richard spohn donald j bainton director march 30 1995 donald j bainton theodore h black director march 30 1995 theodore h black signature title date brendan byrne director march 30 1995 brendan byrne joseph p flannery director march 30 1995 joseph p flannery constance j horner director march 30 1995 constance j horner alexander h massad director march 30 1995 alexander h massad john e phipps director march 30 1995 john e phipps donald e procknow director march 30 1995 donald e procknow cedric e ritchie director march 30 1995 cedric e ritchieitem 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon pricewaterhousecoopers llp dated february 6 2001 included exhibit 13 unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedule listed accompanying index read conjunction financial statements annual report shareholders 2000 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary b reports form 8k current report form 8k item 7 dated november 3 2000 reporting pro forma financial information reflecting dresserrand company continuing operations current report form 8k item 5 dated february 6 2001 reporting debt securities underwriting agreement standard provisions relating registration statement 333 50902 current report form 8k item 5 dated february 9 2001 reporting filing exhibit 12 computation ratio earnings fixed charges exhibit 13 audited financial statements year ended december 31 2000 current report form 8ka item 5 dated february 9 2001 amending filing exhibit 23 consent pricewaterhousecoopers llp 3 exhibits listed accompanying index exhibits filed part form 10k annual report ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 2000 1999 years ended december 31 2000 1999 1998 consolidated statement income consolidated statement shareholders equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data financial statement schedule report independent accountants financial statement schedule see consolidated schedule years ended december 31 2000 1999 1998 schedule ii valuation qualifying accounts see incorporated reference companys current report form 8k dated february 9 2001 see item 8 financial statements supplementary data financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto report independent accountants financial statement schedule board directors shareholders ingersollrand company audits consolidated financial statements ingersoll rand company referred report dated february 6 2001 appearing companys current report form 8k dated february 9 2001 report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14a2 form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements pricewaterhousecoopers llp pricewaterhousecoopers llp florham park new jersey february 6 2001 consent independent accountants hereby consent incorporation reference registration statement form s3 33350902 incorporation reference registration statements form s8 33342133 33319445 33367257 333 00829 ingersollrand company report dated february 6 2001 relating financial statements appears companys current report form 8k dated february 9 2001 incorporated annual report form 10k also consent incorporation reference report dated february 6 2001 relating financial statement schedule appears form 10k pricewaterhousecoopers llp pricewaterhousecoopers llp florham park new jersey march 20 2001 schedule ii ingersollrand company valuation qualifying accounts years ended december 31 2000 1999 1998 amounts millions additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 334 166 72 428 doubtful accounts 354 87 107 334 doubtful accounts 294 105 45 354 additions include foreign currency translation business acquisitions deductions include accounts advances written less recoveries ingersollrand company index exhibits item 14a description 3 restated certificate incorporation ingersollrand company amended may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 ii amendment restated certificate incorporation ingersollrand company filed may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 iii amendment restated certificate incorporation ingersollrand company filed august 20 1997 incorporated reference form s3 filed october 2 1997 3 iv amendment restated certificate incorporation ingersollrand company filed december 22 1998 filed herewith 3 v bylaws ingersollrand company amended may 4 2000 filed herewith 4 rights agreement dated november 9 1998 incorporated reference form 8aa ingersoll rand company filed november 13 1998 4 ii indenture dated august 1 1986 ingersoll rand company bank new york trustee supplemented incorporated reference exhibits 41 42 43 companys form s3 registration statement 3339474 exhibit 42 form s3 registration statement 33350902 4iii purchase contract agreement dated march 23 1998 ingersollrand company bank new york purchase contract agent incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4iv pledge agreement dated march 23 1998 ingersollrand company chase manhattan bank collateral agent custodial agent securities intermediary incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4v indenture dated march 23 1998 ingersollrand company bank new york trustee incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4vi first supplemental indenture dated march 23 1998 ingersollrand company bank new york trustee incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4vii amended restated declaration trust ingersoll rand financing delaware statutory business trust dated march 23 1998 incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4viii guarantee agreement dated march 23 1998 ingersollrand company first national bank chicago trustee incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 4 ix ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersollrand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii b amended restated ingersollrand company director deferred compensation stock award plan filed herewith 10 iii c description bonus arrangement sector presidents ingersollrand company filed herewith 10 iii description bonus arrangement chairman president staff officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii e amended restated form change control agreement march 1 1999 chairman ingersollrand company incorporated reference form 10k ingersoll rand company year ended december 31 1998 filed march 30 1999 10 iii f amended restated form change control agreement march 1 1999 selected executive officers chairman ingersollrand company incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 10 iii g executive supplementary retirement agreement selected executive officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii h executive supplementary retirement agreement selected executive officers incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii forms insurance related letter agreements certain executive officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii j restated supplemental pension plan incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii k supplemental stock savings investment plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii l supplemental retirement account plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii incentive stock plan 1995 ingersollrand company incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix proxy statement dated march 15 1995 10 iii n senior executive performance plan incorporated reference notice 2000 annual meeting shareholders proxy statement dated march 7 2000 see appendix proxy statement dated march 7 2000 10 iii amended restated elected officers supplemental plan incorporated reference form 10k ingersollrand company year ended december 31 1998 filed march 30 1999 10 iii p amended restated executive deferred compensation plan filed herewith 10 iii q chief financial officer employment agreement incorporated reference form 10k year ended december 31 1997 filed march 6 1998 10 iii r incentive stock plan 1998 ingersollrand company incorporated reference appendix notice 1998 annual meeting shareholders proxy statement dated march 17 1998 10 iii composite employment agreement chief executive officer incorporated reference form 10k year ended december 31 1999 filed march 30 2000 10 iii employment agreement senior vice president rone lewis filed herewith 10 iii u employment agreement senior vice president michael radcliff filed herewith 10 iii v employment agreement senior vice president randy smith filed herewith 10 iii w employment agreement senior vice president john turpin filed herewith 11 computation earnings per share filed herewith 12 computations ratios earnings fixed charges incorporated reference current report form 8k filed february 9 2001 13 ingersollrand company annual report shareholders 2000 incorporated reference current report form 8k filed february 9 2001 deemed filed part report except extent incorporated reference 21 list subsidiaries ingersollrand company filed herewith signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant david w devonshire date march 20 2001 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date chairman president chief executive officer director principal herbert l henkel executive officer march 20 2001 herbert l henkel executive vice president chief financial officer principal david w devonshire financial officer march 20 2001 david w devonshire vice president controller principal steven r shawley accounting officer march 20 2001 steven r shawley joseph p flannery director march 20 2001 joseph p flannery peter c godsoe director march 20 2001 peter c godsoe constance j horner director march 20 2001 constance j horner h william lichtenberger director march 20 2001 h william lichtenberger theodore e martin director march 20 2001 theodore e martin orin r smith director march 20 2001 orin r smith richard j swift director march 20 2001 richard j swift tony l white director march 20 2001 tony l whiteitem 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon price waterhouse dated february 1 1994 included exhibit 13 excluding financial review management analysis unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedules listed accompanying index page 19 read conjunction financial statements annual report shareowners 1993 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary 3 exhibits listed accompanying index exhibits pages 26 27 filed part form 10k annual report b reports form 8k none ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 1993 1992 years ended december 31 1993 1992 1991 consolidated statement income consolidated statement shareowners equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data 15 financial statement schedules report independent accountants financial statement schedules 20 consolidated schedules years ended december 31 1993 1992 1991 schedule v property plant equipment 21 schedule vi accumulated depreciation amortization property plant equipment 22 schedule viii valuation qualifying accounts 23 schedule ix shortterm borrowings 24 schedule x supplementary income statement information 25 see exhibit 13 ingersollrand company annual report shareowners 1993 financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto financial statements companys 50 percent less owned companies omitted individually meet significant subsidiary test rule 309 regulation sx report independent accountants financial statement schedules board directors ingersollrand company audits consolidated financial statements referred report dated february 1 1994 included part exhibit 13 annual report shareowners 1993 ingersollrand company report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedules listed item 14a form 10k opinion financial statement schedules present fairly material respects information set forth therein read conjunction related consolidated financial statements price waterhouse price waterhouse hackensack new jersey february 1 1994 consent independent accountants hereby consent incorporation reference prospectuses constituting part registration statements form s3 3353696 form s8 posteffective amendment 4 264708 267834 298258 3335229 ingersollrand company report dated february 1 1994 included part exhibit 13 annual report shareowners 1993 incorporated annual report form 10k also consent incorporation reference report financial statement schedules appears page price waterhouse price waterhouse hackensack new jersey march 30 1994 schedule viii ingersollrand company valuation qualifying accounts years ended december 31 1993 1992 1991 amounts thousands additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 23057 10218 11186 22089 doubtful accounts 18772 12590 8305 23057 doubtful accounts 17045 9157 7430 18772 additions include foreign currency translation 1992 amounts contributed dresser industries inc ingersolldresser pump deductions include accounts advances written less recoveries schedule x ingersollrand company supplementary income statement information years ended december 31 1993 1992 1991 amounts thousands item charged costs expenses 1993 1992 1991 maintenance repairs 78794 73216 72771 amortization intangible assets 5852 5597 6675 taxes payroll income taxes 24875 28545 28823 royalties advertising costs less one percent sales ingersollrand company index exhibits item 14a description page 3 amendment restated certificate incorporation ingersollrand company filed may 28 1992 3032 3 ii restated certificate incorporation ingersollrand company amended may 28 1992 3360 3 iii bylaws ingersollrand company amended october 1 1993 6177 4 iii ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersoll rand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 7892 10 iii b description compensation plan retired directors ingersollrand company 93 10 iii c form contingent compensation agreements executive vice presidents group presidents ingersollrand company 9499 10 iii description bonus arrangements chairman president staff officers 100 10 iii e form change control arrangements chairman chief executive officer 101113 10 iii f form change control arrangements selected executive officers 114126 ingersollrand company index exhibits item 14a continued description page 10 iii g executive supplementary retirement plan selected senior executives 127132 10 iii h incentive stock plan 1985 ingersoll rand company 133151 10 iii forms insurance related letter agreements certain executive officers 152160 10 iii j incentive stock plan 1990 ingersoll rand company 161182 10 iii k restated supplemental pension plan effective january 1 1992 183188 10 iii l supplemental stock savings investment plan effective january 1 1989 189198 10 iii supplemental retirement account plan effective january 1 1989 199206 11 computation primary earnings per share 207208 11 ii computation fully diluted earnings per share 209210 12 computations ratios earnings fixed charges 211 13 ingersollrand company annual report shareowners 1993 deemed filed part report except extent incorporated reference 212275 21 list subsidiaries ingersollrand company 276278 signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant thomas f mcbride thomas f mcbride senior vice president chief financial officer date march 30 1994 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date chairman president chief executive officer director principal james e perrella executive officer march 30 1994 james e perrella senior vice president chief financial officer principal financial thomas f mcbride officer march 30 1994 thomas f mcbride controller accounting reporting principal accounting richard spohn officer march 30 1994 richard spohn donald j bainton director march 30 1994 donald j bainton theodore h black director march 30 1994 theodore h black signature title date brendan byrne director march 30 1994 brendan byrne joseph p flannery director march 30 1994 joseph p flannery william g kuhns director march 30 1994 william g kuhns alexander h massad director march 30 1994 alexander h massad john e phipps director march 30 1994 john e phipps donald e procknow director march 30 1994 donald e procknow cedric e ritchie director march 30 1994 cedric e ritchie willis strauss director march 30 1994 willis straussitem 14 exhibits financial statement schedules reports form 8k 1 2 financial statements financial statement schedules financial statements together report thereon price waterhouse llp dated february 3 1998 included exhibit 13 excluding financial review management analysis unaudited quarterly financial data included part ii item 8b incorporated reference form 10k annual report financial statement schedule listed accompanying index read conjunction financial statements annual report shareholders 1997 separate financial statements 50 percent less owned companies accounted equity method omitted individual entity constitutes significant subsidiary 3 exhibits listed accompanying index exhibits filed part form 10k annual report b reports form 8k current report form 8k item 2 dated october 31 1997 reporting companys acquisition thermo king corporation current report form 8k items 5 7 dated november 6 1997 filing selling agency agreement issue mediumterm notes aggregate initial offering price 750000000 current report form 8k items 5 7 dated november 19 1997 filing pricing agreement issue 200000000 aggregate principal amount 6391 debentures due 2027 current report form 8k items 5 7 dated november 19 1997 filing debt securities underwriting agreement standard provisions issue debt securities aggregate initial offering price 1050000000 current report form 8k items 5 7 dated november 20 1997 filing pricing agreement issue 200000000 aggregate principal amount 6443 debentures due 2027 current report form 8k items 5 7 dated november 21 1997 filing pricing agreement issue 400000000 aggregate principal amount 6255 notes due 2001 ingersollrand company financial statement schedules item 14 1 2 form 10k consolidated financial statements report independent accountants consolidated balance sheet december 31 1997 1996 years ended december 31 1997 1996 1995 consolidated statement income consolidated statement shareholders equity consolidated statement cash flows notes consolidated financial statements selected unaudited quarterly financial data financial statement schedule report independent accountants financial statement schedule see consolidated schedule years ended december 31 1997 1996 1995 schedule ii valuation qualifying accounts see exhibit 13 ingersollrand company annual report shareholders 1997 see item 8 financial statements supplementary data financial statement schedules included form 10k annual report omitted applicable required information shown financial statements notes thereto financial statements companys 50 percent less owned companies omitted individually meet significant subsidiary test rule 309 regulation sx report independent accountants financial statement schedule board directors ingersollrand company audits consolidated financial statements referred report dated february 3 1998 included part exhibit 13 annual report shareholders 1997 ingersollrand company report consolidated financial statements incorporated reference annual report form 10k also included audit financial statement schedule listed item 14a form 10k opinion financial statement schedule presents fairly material respects information set forth therein read conjunction related consolidated financial statements price waterhouse llp price waterhouse llp morristown new jersey february 3 1998 consent independent accountants hereby consent incorporation reference prospectus constituting part registration statements form s3 33338367 33337019 33334029 incorporation reference registration statements form s8 33342133 33319445 33300829 33 35229 298258 ingersollrand company report dated february 3 1998 included part exhibit 13 annual report shareholders 1997 incorporated annual report form 10k also consent incorporation reference report financial statement schedule appears page price waterhouse llp price waterhouse llp morristown new jersey march 6 1998 schedule ii ingersollrand company valuation qualifying accounts years ended december 31 1997 1996 1995 amounts millions additions charged balance costs balance beginning expenses deductions end description year doubtful accounts 343 117 121 339 doubtful accounts 383 86 126 343 doubtful accounts 259 178 54 383 additions include foreign currency translation deductions include accounts advances written less recoveries ingersollrand company index exhibits item 14a description 2 stock purchase agreement dated september 12 1997 westinghouse electric corporation registrant incorporated reference form 8k ingersollrand company dated september 17 1997 3 amendment restated certificate incorporation ingersollrand company filed may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 ii amendment restated certificate incorporation ingersollrand company filed august 20 1997 incorporated reference form s3 filed october 2 1997 3 iii restated certificate incorporation ingersollrand company amended may 28 1992 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 3 iv bylaws ingersollrand company amended september 1 1997 incorporated reference form s3 filed october 2 1997 4 rights agreement dated december 7 1988 amended amendment 1 thereto dated december 7 1994 incorporated reference form 8a ingersoll rand company filed december 12 1988 form 8aa ingersollrand company filed december 15 1994 4 ii indenture dated august 1 1986 ingersoll rand company bank new york trustee supplemented incorporated reference exhibits 41 42 43 companys form s3 registration statement 33 39474 4 iii ingersollrand company party several longterm debt instruments case total amount securities authorized exceed 10 total assets ingersollrand company subsidiaries consolidated basis pursuant paragraph 4iiia item 601b regulation sk ingersollrand company agrees furnish copy instruments securities exchange commission upon request 10 iii following exhibits constitute management contracts compensatory plans arrangements required item 601 regulation sk 10 iii management incentive unit plan ingersoll rand company amendment management incentive unit plan effective january 1 1982 amendment management incentive unit plan effective january 1 1987 amendment management incentive unit plan effective june 3 1987 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii b ingersollrand company directors deferred compensation stock award plan incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii c forms contingent compensation agreements vice presidents andor group presidents ingersollrand company filed herewith 10 iii description bonus arrangements executive vice president ingersollrand company filed herewith 10 iii e description bonus arrangements chairman president staff officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii f form change control agreement chairman chief executive officer ingersollrand company incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii g form change control agreement selected executive officers chairman ingersollrand company incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii h 1 executive supplementary retirement agreement selected executive officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii 2 executive supplementary retirement agreement selected executive officers incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii j incentive stock plan 1985 ingersollrand company incorporated reference form 10k ingersoll rand company year ended december 31 1993 filed march 30 1994 10 iii k forms insurance related letter agreements certain executive officers incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii l incentive stock plan 1990 ingersollrand company incorporated reference form 10k ingersoll rand company year ended december 31 1993 filed march 30 1994 10 iii restated supplemental pension plan incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii n supplemental stock savings investment plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii supplemental retirement account plan effective january 1 1989 incorporated reference form 10k ingersollrand company year ended december 31 1993 filed march 30 1994 10 iii p incentive stock plan 1995 ingersollrand company incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix proxy statement dated march 15 1995 10 iii q senior executive performance plan incorporated reference notice 1995 annual meeting shareholders proxy statement dated march 15 1995 see appendix b proxy statement dated march 15 1995 10 iii r elected officers supplemental plan incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii selected executive officer employment agreement incorporated reference form 10k ingersollrand company year ended december 31 1995 filed march 29 1996 10 iii executive deferred compensation stock award plan incorporated reference form 10k year ended december 31 1996 filed march 26 1997 10 iii u senior vice president chief financial officer employment agreement filed herewith 11 computation basic earnings per share filed herewith 11 ii computation diluted earnings per share filed herewith 12 computations ratios earnings fixed charges filed herewith 13 ingersollrand company annual report shareholders 1997 deemed filed part report except extent incorporated reference filed herewith 18 letter dated august 11 1995 price waterhouse llp regarding change accounting method incorporated reference form 10q ingersollrand company quarterly period ended june 30 1995 reported item 6 exhibits 21 list subsidiaries ingersollrand company filed herewith 27 financial data schedule signatures pursuant requirements section 13 15d securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized ingersollrand company registrant sdavid w devonshire date march 6 1998 pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated signature title date chairman president chief executive officer director principal james e perrella executive officer march 6 1998 james e perrella senior vice president chief financial officer principal financial david w devonshire accounting officer march 6 1998 david w devonshire joseph p flannery director march 6 1998 joseph p flannery constance j horner director march 6 1998 constance j horner h william lichtenberger director march 6 1998 h william lichtenberger theodore e martin director march 6 1998 theodore e martin orin r smith director march 6 1998 orin r smith richard j swift director march 6 1998 richard j swift jfrank travis director march 6 1998 j frank travis tony l white director march 6 1998 tony l white item 7 managements discussion analysis financial condition results operations managements discussion analysis financial condition results operations included financial review management analysis exhibit 13 annual report shareowners 1995 incorporated reference form 10k annual report item 8item 7 managements discussion analysis financial condition results operations managements discussion analysis financial condition results operations included financial review management analysis exhibit 13 annual report shareowners 1996 incorporated reference form 10k annual report safe harbor statement information provided company 1996 annual report form 10k reports press releases statements made employees oral discussions may constitute contain forwardlooking statements term defined private securities litigation reform act 1995 securities exchange commission rules regulations releases forwardlooking statements nature involve risk uncertainty company cautions investors forwardlooking statements guarantees future performance variety factors could cause business conditions actual results differ materially expected results contained forward looking statements company includes among factors following changes rate economic growth united states major international economies germany impacts unusual items resulting ongoing evaluations organizational structures business strategies acquisitions dispositions significant changes trade monetary fiscal policies worldwide currency fluctuations among us dollar currencies demand company products distributor inventory levels performance issues key suppliers subcontractors failure achieve companys productivity targets costs effects unanticipated legal administrative proceedings competitor actions unanticipated pricing actions product cost reduction strategies item 8item 7 managements discussion analysis financial condition results operations 1998 compared 1997 company reported fifth consecutive year record sales earnings 1998 financial achievements result strong domestic economy moderate economic growth selected international markets continued success companys assetmanagement strategicsourcing productivity improvement programs despite depressed results companys asian markets sales 1998 totalled 83 billion generated 10444 million operating income 5091 million net earnings 308 diluted earnings per share companys results 1998 included full years benefit october 31 1997 acquisition thermo king corporation thermo king thermo king reported 1998 sales 12 billion operating income contribution 1593 million net earnings 240 million 15 cents diluted earnings per share allocation acquisition interest expense related tax benefit companys reported results 1997 sales 71 billion generated 7603 million operating income produced net earnings year 3805 million 231 diluted earnings per share 1997 noncomparable items include following thermo kings activity last two months year generated 1769 million sales produced operating loss 02 million goodwill amortization effect estimated purchase accounting adjustments thermo kings net loss two months ended december 31 1997 113 million seven cents diluted earnings per share allocation acquisition interest expense 273 million equity earnings partiallyowned affiliates 1997 included restructuring charge recorded one companys partiallyowned affiliates charge reduced companys pretax earnings 139 million aftertax results 116 million seven cents diluted earnings per share fourth quarter 1997 consolidated 51percent owned joint venture company recorded 24 million charge operating income costs close consolidate underperforming operations effect restructure charge taxes minority interest 81 million five cents diluted earnings per share considering items listed adjusted 1997 net sales operating income net earnings approximately 69 billion 784 million 412 million 250 diluted earnings per share respectively adjusted basis 1998 sales increased modestly 128 percent increase operating income resulting significant increase 18 percent net earnings 1998 adjusted 1997 results comparison key financial data 1998 1997 follows net sales 1998 established record 83 billion reflecting 167percent improvement 1997 total 71 billion excluding noncomparable units years adjusted sales 1998 increased 23 percent 1997 adjusted total cost goods sold 1998 729 percent sales compared 741 percent 1997 partial liquidations lifo lastin firstout inventory 1998 liquidations lowered 1997 costs 41 million excluding effects lifo liquidations 1997 cost goods sold relationship sales would 742 percent versus 729 percent 1998 excluding noncomparable items years adjusted ratio cost goods sold sales reflected marked improvement 1998 compared 1997 administrative selling service engineering expenses 145 percent sales 1998 compared 152 percent 1997 decrease primarily attributable inclusion thermo king traditionally ratio selling administrative expenses sales lower companys historical lines business operating income year totalled 10444 million 374percent increase 1997 operating income 7603 million ratio operating income sales 1998 126 percent compared 107 percent prior year excluding noncomparable items previously discussed years adjusted 1998 operating income still reflects doubledigit improvement adjusted 1997 results improvement combined effect companys aggressive productivityimprovement procurement programs continued stability domestic markets interest expense year totalled 2258 million versus 1366 million 1997 interest expense associated debt incurred thermo king acquisition totalled approximately 1293 million 1998 excluding costs related companys equitylinked securities 273 million last two months 1997 income expense net sum foreign exchange activities miscellaneous income expense items 1998 activities resulted net expense 220 million unfavorable change 05 million compared 1997 net expense 215 million change caused higher foreign exchange losses 102 million 1998 offset lower net miscellaneous income expense items companys equity earnings partiallyowned affiliates includes interest several affiliates operate similar lines business includes companys 49percent interest dresserrand company dresserrand combined equity earnings 1998 totalled 468 million compared 288 million 1997 yearoveryear increase 180 million reflects 236 million improvement results dresserrand improvement resulted combination stronger operating results 1998 nonrecurring charge 116 million 1997 partially offset lower earnings companys partially owned affiliates operating asian markets companys charges minority interests composed two items 1 interests minority owners less 50 percent consolidated unit company totalled 345 million 1998 173 million 1997 2 197 million charges associated companys equitylinked securities issued first quarter 1998 financing component thermo king acquisition largest minority interest relates ingersolldresser pump company idp represented 307 million 1998 balance compared 137 million 1997 idps change due stronger operating results 1998 1997 pretax restructuring charge 24 million discussed previously remaining charges minority interests two periods comparable companys effective tax rate 1998 355 percent improved 380 percent reported prior year due fullyear favorable tax benefit associated thermo king acquisition variance 350 percent statutory rate primarily due higher tax rates associated foreign earnings effect state local taxes nondeductibility portion goodwill associated acquisitions favorable tax benefits associated thermo king acquisition december 31 1998 employment totalled 46525 represents slight decrease last years level 46567 outlook companys outlook 1999 steady improvement operating results based continued stability growth domestic markets deterioration asian markets strengthening european markets expectations supported aggressive assetmanagement strategicsourcing productivityimprovement programs review business segments specialty vehicles specialty vehicles segment sales 22 billion increase 84 percent 20 billion reported 1997 operating income 1998 totalled 3333 million representing increase 470 percent last years total 2267 million major product lines reported improvements sales operating income operating margins year air temperature control air temperature control segment reported sales operating income 22 billion 2625 million respectively compared 13 billion 1337 million respectively 1997 results 1997 include two months thermo king full year 1998 produced sales 12 billion operating income 1593 million air compressor sales decreased 43 percent operating income decreased 229 percent decline caused continued weakness companys asian markets hardware tools hardware tools segment sales increased 44 percent 17 billion operating income increased 335 million 2548 million 1997 architectural hardware products reported increases 139 percent sales 269 percent operating income modest decreases sales operating income industrialproduction equipment attributable continued weakness automated production systems business engineered products 1998 engineered products segment reported 15 percent decrease sales 94 percent increase operating income compared 1997 lower sales reflect weakness fafnir industrial bearings business idps sales 49 percent 1997 operating income increased 372 million largely due 24 million restructuring charge recorded 1997 liquidity capital resources 1998 company made significant progress improving liquidity capital resources 1 completing financing thermo king acquisition issuance 4025 million equitylinked securities first quarter year 2 reducing companys debt additional 5709 million generated companys strong cash flow year proceeds equity linked securities used reduce companys shortterm borrowings originally issued satisfy portion cash requirements acquisition thermo king october 31 1997 actions primarily contributed companys reduction debttototal capital ratio 58 percent end last year 43 percent december 31 1998 following table contains several key measures companys management uses gauge companys financial performance 1998 1997 1996 working capital millions 579 217 1245 current ratio 13 11 20 debttototal capital ratio 43 58 37 average working capital net sales 48 103 169 average days outstanding receivables 509 545 561 average months supply inventory 24 25 30 company maintains significant operations foreign countries therefore movement us dollar foreign currencies impact companys financial position generally functional currency companys foreign subsidiaries local currency transact business company manages exposure changes foreign currency exchange rates normal operating financing activities well use forward exchange contracts company attempts hedging activities mitigate impact income changes foreign exchange rates additionally company maintains operations countries company transacts business us dollars functional currency operations us dollar additional information companys use financial instruments found note 7 consolidated financial statements following points highlight financial results financial condition companys operations impact foreign currency translation appropriate cash equivalents totalled 719 million december 31 1998 330 million reduction prior yearend balance 1049 million evaluating net change cash equivalents cash flows operating investing financing activities effect exchange rate changes considered cash flows operating activities provided 8990 million investing activities used 1834 million financing activities used 7524 million exchange rate changes 1998 increased cash equivalents 38 million marketable securities totalled 57 million end 1998 12 million balance december 31 1997 net reduction due maturities exchange rate changes receivables totalled 11771 million december 31 1998 compared 12815 million prior year end net decrease 1044 million decrease attributable improved cash collections reductions dispositions company focuses decreasing receivables base assetmanagement program produced reduction average days outstanding receivables 509 days 1997 level 545 days inventories amounted 9408 million december 31 1998 increase 860 million last years level 8548 million inventory increases year end anticipation early 1999 shipments primary reason increase companys emphasis inventory control demonstrated reduction average months supply inventory 24 months december 31 1998 compared 25 months prior year end prepaid expenses totalled 887 million end year 473 million lower balance december 31 1997 dispositions associated assets held sale primary reason reduction account balance deferred income taxes current 1434 million december 31 1998 represented deferred tax benefit difference book tax values various current assets liabilities components balance included note 14 consolidated financial statements investments advances partiallyowned equity affiliates december 31 1998 totalled 3447 million 167 million 1997 balance 3280 million category includes companys 49percent investment dresserrand company well investments partiallyowned equity affiliates investment dresserrand increased approximately 33 million year reflecting companys portion dresserrands 1998 results effects translation offset reduction advance account company dresserrand income dividends investments partiallyowned equity affiliates 138 million 67 million respectively amounts due units decreased 136 million december 31 1997 currency movements capital infusions primary cause remaining change account balance net property plant equipment increased 644 million 1998 yearend balance 13476 million capital expenditures 1998 totalled 2210 million acquisitions net dispositions added 130 million foreign exchange fluctuations increased net fixed assets approximately 46 million remaining net decrease result depreciation sales retirements intangible assets net totalled 37743 million december 31 1998 compared 38330 million december 31 1997 net decrease 587 million amortization expense current year 1105 million acquisition activity effects foreign currency translation accounted balance change deferred income taxes noncurrent totalled 2359 million december 31 1998 210 million higher 1997 balance components comprising balance december 31 1998 found note 14 consolidated financial statements assets totalled 1794 million year end decrease 322 million december 31 1997 balance 2116 million assets decreased approximately 25 million due decrease prepaid pensions general reduction noncurrent assets accounted balance reductions foreign exchange activity 1998 minimal effect account balance year accounts payable accruals totalled 14886 million december 31 1998 increase 1181 million last years balance 13705 million increased inventory levels year end acquisitions net dispositions along timing payrolls benefits account increase 1998 loans payable 3187 million end 1998 reflects 6064 million reduction 9251 million level december 31 1997 proceeds 3896 million issuance companys equitylinked securities used reduce shortterm debt year addition result companys aggressive asset management policies company also repaid additional 4684 million short term debt 1998 current maturities longterm debt increased account balance additional 2518 million effect translation accounted remaining change account balance previous year end longterm debt excluding current maturities totalled 21660 million reduction approximately 3620 million prior years balance 25280 million reductions long term debt 2518 million represent reclassification current maturities longterm debt loans payable addition company also repaid 1100 million longterm debt accelerated payments year foreign exchange activity minimal effect account balance year postemployment liabilities december 31 1998 totalled 8971 million decrease 400 million december 31 1997 balance postemployment liabilities include medical life insurance postretirement benefits longterm pension noncurrent postemployment accruals see notes 15 16 consolidated financial statements additional information minority interest liabilities december 31 1998 totalled 1336 million represents net increase 57 million balance end prior year liability represents ownership interests entities selected consolidated subsidiaries company largest 49percent interest idp idps minority interest december 31 1997 1043 million balance increased 307 million based idps 1998 earnings reduced 350 million represented increases advances minority partner effect translation liability minority interests totalled 236 million december 31 1997 increased 336 million 1998 due earnings advances changes ownership participation liabilities noncurrent december 31 1998 totalled 1540 million approximated balance december 31 1997 obligations expected paid next year generally accruals cover environmental insurance legal contractual obligations information concerning companys financial resources commitments plans follows average amount shortterm borrowings outstanding excluding current maturities longterm debt 3158 million 1998 compared 3800 million 1997 weighted average interest rate 1998 63 compared 62 previous year maximum amounts outstanding 1998 1997 7962 million 24341 million respectively company 10 billion domestic shortterm credit lines december 31 1998 4542 million foreign credit lines available working capital purposes 14 billion unused end year facilities exceed projected requirements 1999 provide direct support commercial paper indirect support financial instruments letters credit comfort letters 1998 foreign currency translation adjustments increased shareholders equity 33 million change due minor weakening us dollar currencies countries company significant operations local currencies functional currencies currency changes france germany japan accounted nearly change 1997 company established two whollyowned special purpose subsidiaries purchase accounts notes receivable discount company continuous basis special purpose subsidiaries simultaneously sell undivided interest accounts notes receivable financial institution maximum 170 million agreements special purpose corporations financial institution expire oneyear periods company intends renew agreements expiration dates either current another financial institution company retained servicer pooled receivables prior 1997 company sold undivided interest accounts notes receivable directly financial institutions december 31 1998 1997 170 million 150 million respectively receivables remained uncollected capital expenditures 2210 million 1860 million 1998 1997 respectively company continues investing improve manufacturing productivity reduce costs provide environmental enhancements advanced technologies existing facilities capital expenditure program 1999 estimated approximately 220 million including amounts approved prior periods planned projects either individually aggregate represent material commitment company many projects subject review cancellation option company without incurring substantial charges equitylinked securities march 1998 company together statutory business trust company finance trust issued aggregate 16100000 equitylinked securities b 1610000 finance trust 622 capital securities stated liquidation amount equitylinked securities consisted 14490000 income equitylinked securities b 1610000 growth equity linked securities additional details equitylinked securities included note 10 consolidated financial statements financial market risk company generates foreign currency exposures normal course business mitigate risk foreign currency exchange rate fluctuations company generally enter forward currency exchange contracts purchase sale currency accordance authorized levels pursuant companys policies procedures company applies sensitivity analysis value risk var techniques measuring companys exposure currency fluctuations var measurement estimated loss fair value currency positions neutralized recessed liquidated assumes 95percent confidence level normal market conditions potential one day loss december 31 1998 28 million considered insignificant relation companys results operations shareholders equity regard interest rate risk effect hypothetical onepercentage point increase interest rates across maturities would increase estimated fair value companys longterm debt december 31 1998 carrying value 21660 million 21888 million year 2000 company place year 2000 compliance program address issues raised computer date programs using last two digits year pursuant year 2000 program company reviewed computer information systems computer hardware embedded technology used companys products processes review designed identify computer systems embedded technology might fail correctly process year 2000 based upon review complete company replacing modifying andor upgrading certain computer systems embedded technology objective significant systems devices malfunction result failing correctly process year 2000 company use internal resources outside consultants actively engaged replacement modification upgrading substantially completed remediation program testing end 1998 review company products revealed products currently produced year 2000 compliant total estimated cost year 2000 compliance program approximately 60 million management estimates december 31 1998 total costs incurred date approximately 55 million approximately 45 percent expenses internal costs company although company incurred expenses prior 1997 costs separately identified company continue fund cost year 2000 compliance program operating cash flow addition internal review process company contacted suppliers distributors year 2000 issue minimize problems supply distribution chains major suppliers given assurances ability supply company affected year 2000 issue however company cannot assure timely compliance third parties may adversely affected failure significant third party become year 2000 compliant company believes costs address issues raised year 2000 problem material impact companys financial condition results operations liquidity cash flows year schedule successful completion year 2000 program estimated costs based upon certain assumptions management future events including continued availability qualified resources implement program current costs resources company fails successfully complete significant portion year 2000 compliance program failure may material adverse impact companys financial condition currently management consider possibility failure reasonably likely however event managements assessment changes appropriate contingency plan developed euro conversion january 1 1999 eleven fifteen member countries european union established fixed conversion rates existing sovereign currencies euro participating countries agreed adopt euro common legal currency date company continues identify address euro conversion compliance issues time company experienced significant difficulties cannot predict impact euro conversion numerous uncertainties associated noncompliance third parties effect market place pricing due currency transparency environmental matters company continues dedicated environmental program reduce utilization generation hazardous materials manufacturing process remediate identified environmental concerns latter company currently engaged site investigations remedial activities address environmental cleanup past operations current former manufacturing facilities 1998 company spent approximately 8 million capital projects pollution abatement control additional 6 million environmental remediation expenditures sites presently formerly owned leased company noted amounts difficult estimate environmental improvement costs generally part overall improvement costs particular plant therefore accurate estimate portion improvement capital expenditure relates environmental improvement difficult ascertain company believes expenditure levels continue may increase time given evolving nature environmental laws regulations technology ultimate cost future compliance uncertain company party environmental lawsuits claims received notices potential violations environmental laws regulations environmental protection agency similar state authorities identified potentially responsible party prp cleanup costs associated site waste disposal approximately 32 federal superfund state remediation sites excluding sites companys records disclose involvement companys liability fully determined sites prps instances companys site involvement minimal estimating liability company assumed bear entire cost remediation site exclusion prps may jointly severally liable ability prps participate taken account based generally parties financial condition probable contributions per site basis additional lawsuits claims involving environmental matters likely arise time future although uncertainties regarding environmental technology state federal laws regulations individual site information make estimating liability difficult management believes total liability cost remediation environmental lawsuits claims material effect financial condition results operations liquidity cash flows company year noted company estimates liability environmental matters estimates based current technologies company discount liability assume insurance recoveries forwardlooking statements information provided company 1998 annual report form 10k periodic reports form 10q press releases statements made employees oral discussions may constitute contain forwardlooking statements term defined private securities litigation reform act 1995 securities exchange commission rules regulations releases forwardlooking statements represent companys expectations concerning future events nature involve risk uncertainty company cautions investors forwardlooking statements guarantees future performance variety factors could cause business conditions actual results differ materially expected results contained forwardlooking statements company includes among factors following changes rate economic growth united states major international economies impacts unusual items resulting ongoing evaluations organizational structures business strategies acquisitions dispositions significant changes trade monetary fiscal policies worldwide currency fluctuations among us dollar currencies demand company products distributor inventory levels performance issues key suppliers subcontractors impact year 2000 failure achieve companys productivity targets costs effects unanticipated legal administrative proceedings competitor actions unanticipated pricing actions cost reduction strategies entry direct product line competition 1997 compared 1996 sales 1997 totalled 71 billion generated 7603 million operating income 3805 million net earnings 233 basic earnings per share companys results 1997 reflect impressive increase 1996 considering following noncomparable items october 31 1997 company completed acquisition thermo king corporation thermo king westinghouse electric corporation last two months 1997 thermo king generated 1769 million sales produced operating loss approximately 02 million goodwill amortization effect estimated purchase accounting adjustments thermo kings net loss two months ended december 31 1997 approximately 113 million seven cents per share allocation acquisition interest expense approximately 273 million beginning april 1997 company completed acquisition newman tonks group plc newman tonks since acquisition newman tonks generated approximately 230 million sales produced approximately 15 million operating income effect goodwill amortization estimated purchase accounting adjustments synergistic benefits group operations newman tonks essentially operated breakeven level 1997 considering allocation approximately 170 million acquisition interest expense related tax benefit dresserrand company dresserrand partnership manufactures reciprocating compressor turbomachinery products company owns 49percent interest company accounts interest dresserrand equity accounting method company records related ownership interest results dresserrand fourth quarter 1997 dresserrand recorded 36 million restructuring charge reduce headcount close underperforming operations charge reduced companys pretax earnings 139 million tax results 116 million seven cents per share prior restructuring charge dresserrand generated approximately 475 million net earnings tax costs international subsidiaries 1997 ingersolldresser pump company idp joint venture company owns 51percent interest therefore consolidated companys financial statements fourth quarter 1997 idp recorded 24 million charge operating income costs close consolidate underperforming operations effect restructure charge taxes minority interest 81 million considering items listed adjusted 1997 net sales operating income net earnings approximately 67 billion 770 million 412 million 252 basic earnings per share respectively company reported sales 67 billion 1996 generated 6835 million operating income 3580 million net earnings 222 basic earnings per share companys 1996 results also included following noncomparable items 1996 company sold process systems group two transactions generated combined pretax gain 550 million benefitted net earnings 347 million 21 cents per share noncomparable items 1996 caused net reduction companys operating income 37 million restructure charge principally european operations 54 million charge closure foundry idp charges reduced gain sale investment 1996 first quarter 48 million recorded income aftertax effect items reduced net earnings 225 million 14 cents per share considering effect items adjusted 1996 net sales operating income net earnings 67 billion 6709 million 3458 million 215 basic earnings per share respectively comparison key financial data 1997 1996 follows net sales 1997 established record 71 billion reflecting sixpercent improvement 1996 total 67 billion excluding noncomparable units years adjusted sales 1997 increased comparable percent 1996 adjusted total cost goods sold 1997 741 percent sales compared 750 percent 1996 partial liquidations lifo last firstout inventory lowered 1997 costs 41 million compared 48 million liquidation 1996 excluding effects lifo liquidations 1997 cost goods sold relationship sales would 742 percent versus 751 percent 1996 excluding noncomparable items years adjusted ratio cost goods sold sales reflected marked improvement 1997 compared 1996 administrative selling service engineering expenses 152 percent sales 1997 compared 148 percent 1996 increase primarily attributable inclusion newman tonks traditionally ratio selling administrative expenses sales higher companys historical lines divestment clarkhurth lower ratio overall company operating income year totalled 7603 million 112percent increase 1996 operating income 6835 million ratio operating income sales 1997 107 percent compared 102 percent prior year excluding noncomparable items previously discussed years adjusted 1997 operating income reflects significant improvement adjusted 1996 results improvement combined effect companys aggressive productivityimprovement procurement programs continued stability domestic markets interest expense 1997 totalled 1366 million versus 1199 million 1996 interest expense associated debt incurred thermo king acquisition totalled approximately 273 million income expense net sum foreign exchange activities miscellaneous income expense items 1997 activities resulted net expense 215 million unfavorable change 27 million compared 1996 net expense 188 million change caused lower foreign exchange losses approximately 46 million 1997 absence 1996 gain 48 million sale investment higher net miscellaneous expense items approximately 25 million companys equity earnings partiallyowned affiliates including dresserrand results 1997 288 million compared 424 million 1996 decrease mainly due dresserrand restructuring charges previously discussed companys charges minority interests totalled 173 million 1997 versus 189 million 1996 charges represent interests minority owners less 50 percent consolidated unit company largest minority interest relates idp represents 137 million 1997 balance compared 173 million 1996 idps change due 1997 pretax restructuring charge 24 million discussed previously remaining charges represent minority interests companys operations principally located india china companys effective tax rate 1997 380 percent represented slight increase 370 percent reported prior year variance 350 percent statutory rate primarily due higher tax rates associated foreign earnings effect state local taxes nondeductibility portion goodwill associated acquisitions favorable tax benefits associated thermo king acquisition december 31 1997 employment totalled 46567 represents net increase 4693 employees 1996 level 41874 increase principally results 1997 acquisition activity partially offset reduction resulting clarkhurth disposition significant event affecting companys liquidity 1997 acquisition thermo king october 311997 total purchase price paid thermo king approximately 256 billion cash financed mainly issuance longterm shortterm debt effects transaction discussed throughout report including note 2 consolidated financial statements following points highlight financial results financial condition companys operations impact currency variations appropriate cash equivalents totalled 1049 million december 31 1997 792 million reduction prior yearend balance 1841 million funds used reduce portion companys outstanding shortterm debt incurred connection thermo king acquisition evaluating net change cash equivalents cash flows operating investing financing activities effect exchange rate changes considered cash flows operating activities provided 7035 million investing activities used 27 billion financing activities provided approximately 20 billion exchange rate changes 1997 increased cash equivalents 16 million marketable securities totalled 69 million end 1997 11 million balance december 31 1996 net reduction due mainly exchange rate changes receivables totalled 12815 million december 31 1997 compared 10662 million prior year end net increase 2153 million increase attributable acquisitions thermo king newman tonks added approximately 2282 million increase partially offset currency translation dispositions reclassifications assets held sale caused net reductions 345 million timing companys strong fourth quarter sales also increased yearend receivables balance company focuses decreasing receivables base assetmanagement program produced reduction average days outstanding receivables 545 days 1996 level 561 days inventories amounted 8548 million december 31 1997 increase 797 million prior years level 7751 million acquisitions thermo king newman tonks accounted increases approximately 1856 million dispositions reclassifications assets held sale effects currency fluctuations reduced inventories 572 million companys emphasis inventory control demonstrated reduction average months supply inventory 25 months december 31 1997 compared 30 months prior year end prepaid expenses including assets held sale totalled 1360 million end year 2038 million lower balance december 31 1996 assets held sale totalled 465 million december 31 1997 principally represented net book value selected operations newman tonks acquisition meet companys long term objectives certain european assets specialty vehicles segment assets held sale december 31 1996 comprised net assets clarkhurth sold february 14 1997 foreign exchange activity minimal effect remaining prepaid expenses acquisitions accounted 142 million increase deferred income taxes current 1608 million december 31 1997 represented deferred tax benefit difference book tax values various current assets liabilities components balance included note 14 consolidated financial statements investments partiallyowned equity affiliates december 31 1997 totalled 3280 million 482 million 1996 balance 3762 million included account investment dresserrand totalled 1150 million december 31 1997 dresserrands investment decreased 376 million 1996 balance 1526 million components dresserrand change 1997 consisted income year 94 million 429 million change companys advance account 41 million reduction due foreign currency movements income dividends investments partiallyowned equity affiliates 192 million 87 million respectively amounts due partiallyowned affiliates excluding dresserrand decreased 183 million 135 million december 31 1997 currency movements primary cause remaining 163 million reduction net property plant equipment increased 1378 million 1997 december 31 1997 balance 12832 million fixed assets acquisitions added 1866 million capital expenditures 1997 totalled 1860 million business dispositions reclassifications assets held sale reduced balance 209 million addition foreign exchange fluctuations decreased net fixed assets approximately 245 million remaining net decrease result depreciation sales retirements intangible assets net totalled 38330 million december 31 1997 compared 11780 million december 31 1996 net increase approximately 27 billion goodwill thermo king newman tonks acquisitions net amortization expense 547 million 1997 accounted change deferred income taxes noncurrent totalled 2149 million december 31 1997 523 million higher 1996 balance components comprising balance december 31 1997 found note 14 consolidated financial statements assets totalled 2116 million december 31 1997 decrease 122 million december 31 1996 balance 2238 million assets decreased approximately 20 million due prepaid pensions amount partially offset increases due acquisitions foreign exchange activity 1997 minimal effect account balance year accounts payable accruals totalled 13705 million december 31 1997 increase 2751 million 1996 balance 10954 million acquisition activity 1997 accounted 2594 million increase dispositions currency fluctuations decreased accounts payable accruals 363 million additionally accruals increased 17 million due idps restructure charge loans payable 9251 million end 1997 reflects 7628 million increase 1623 million december 31 1996 shortterm debt assumed companies acquired 1997 added 694 million current maturities longterm debt increased balance additional 1454 million effects translation dispositions reclassifications assets held sale caused 44 million reduction remaining increase primarily due higher shortterm borrowings finance thermo king acquisitions longterm debt excluding current maturities totalled 25280 million increase approximately 14 billion prior years balance 11638 million proceeds issuance longterm debt 15086 million primarily used thermo king acquisition reductions longterm debt 1454 million represent reclassification current maturities longterm debt loans payable foreign exchange activity minimal effect account balance year postemployment liabilities december 31 1997 totalled 9371 million increase 1224 million december 31 1996 balance postemployment liabilities include medical life insurance postretirement benefits longterm pension noncurrent postemployment accruals increase liability 1997 almost exclusively related acquisitions thermo king newman tonks see notes 15 16 consolidated financial statements additional information minority interest liabilities december 31 1997 totalled 1279 million also represented balance end prior year liability represents ownership interests entities selected consolidated subsidiaries company largest dresser industries 49percent interest idp minority interests relate primarily joint ventures india china idps minority interest december 31 1996 1134 million increased 137 million based idps 1997 earnings reduced 227 million represented increases advances dresser industries effect translation liability minority interests totalled 145 million december 31 1996 increased 235 million 1997 due earnings acquisitions advances liabilities noncurrent december 31 1997 totalled 1534 million 192 million higher balance december 31 1996 net increase primarily related thermo king acquisition obligations expected paid next year generally accruals cover environmental insurance legal contractual obligations information concerning companys financial resources commitments plans follows average amount shortterm borrowings outstanding excluding current maturities longterm debt 380 million 1997 compared 580 million 1996 weighted average interest rate 1997 62 compared 78 1996 maximum amounts outstanding 1997 1996 24 billion 1817 million respectively company 15 billion domestic shortterm credit lines december 31 1997 5094 million foreign credit lines available working capital purposes 20 billion unused end year facilities provide direct support commercial paper indirect support financial instruments letters credit comfort letters december 31 1997 debttototal capital ratio 58 percent compared 37 percent prior year end substantial increase resulted debt issued connection thermo king acquisition 1997 foreign currency translation adjustments decreased shareholders equity 806 million change due strengthening us dollar currencies countries company significant operations local currencies functional currencies currency changes australia canada belgium france germany india italy japan netherlands singapore spain accounted nearly change stock split august 1997 board directors declared threefortwo stock split companys common stock split made form stock dividend paid september 2 1997 shareholders record august 19 1997 prior year per share amounts restated reflect stock split item 7aitem 7 managements discussion analysis financial condition results operations background august 1999 company notified dresser industries wholly owned subsidiary halliburton company desire terminate two joint ventures dresserrand company dr producer reciprocating compressors turbomachinery products ingersolldresser pump company idp manufacturer pumps used industrial commercial municipal applications accordance terms joint venture agreements company gave notice wanted sell 49 interest dr 51 interest idp dresser industries governing agreements dresser industries option either buy one joint ventures sell one joint ventures ingersollrand however company also announced dresser industries elected sell shares joint ventures back ingersollrand company would divest units soon practical october 5 1999 company notified dresser industries elected sell interests joint ventures company accordance companys decision sell units soon practical purchased dresser industries results related activity reclassified discontinued operations net tax accompanying consolidated statement income three years ended december 31 1999 addition net assets units reclassified assets held sale accompanying consolidated balance sheet unless otherwise noted amounts percentages ratios discussed financial review management analysis include discontinued operations february 9 2000 company agreed sell idp flowserve corporation 7750 million cash 1999 compared 1998 company reported another year record earnings 1999 achievements result strong domestic economy moderate economic growth selected international markets continued success companys assetmanagement strategic sourcing productivityimprovement programs sales 1999 totalled 77 billion generated 10993 million operating income 5449 million net earnings continuing operations 329 diluted earnings per share net earnings discontinued operations totalled 462 million 028 diluted earnings per share 1998 sales 74 billion generated 9691 million operating income produced net earnings continuing operations year 4555 million 275 diluted earnings per share 1998 net earnings discontinued operations totalled 536 million 033 diluted earnings per share comparison key financial data 1999 1998 follows net sales 1999 amounted 77 billion reflecting 38 improvement 1998 total 74 billion cost goods sold 1999 719 sales compared 730 1998 ratio cost goods sold sales reflected marked improvement 1999 compared 1998 based continued success companys assetmanagement strategicsourcing productivityimprovement programs administrative selling service engineering expenses 137 sales 1999 compared 139 1998 decrease attributable companys costcontainment programs operating income year totalled 10993 million 134 increase 1998 operating income 9691 million ratio operating income sales 1999 143 compared 131 prior year improvement combined effect companys aggressive productivity improvement procurement programs continued stability domestic markets interest expense year totalled 2031 million versus 2241 million 1998 reduction interest expense totalled 210 million principally due lower average outstanding debt balances 1999 compared prior year income expense net sum foreign exchange activities equity earnings partially owned affiliates miscellaneous income expense items 1999 activities resulted net expense 223 million unfavorable change 70 million compared 1998 net expense 153 million change caused lower earnings partially owned affiliate companies lower miscellaneous income higher miscellaneous expenses offset favorable change foreign currency activity 1999 compared prior year companys charges minority interests composed two items 1 charges associated companys equity linked securities issued first quarter 1998 totalled 256 million 1999 197 million 1998 2 interests minority owners less 50 consolidated unit company totalled 35 million 1999 38 million 1998 companys effective tax rate 1999 1998 355 variance 350 statutory rate primarily due lower tax rates associated foreign earnings foreign sales corporation favorable tax benefits associated income earned puerto rico offset effect state local taxes nondeductibility portion goodwill discontinued operations net tax 1999 amounted 462 million 74 million lower 536 million year ended december 31 1998 category represents companys 49 interest earnings dr companys 51 interest idp net appropriate taxes previously announced company intends divest businesses therefore net operating results classified discontinued operations partnership earnings 1999 approximately 20 1998 levels additional information discontinued operations contained throughout report note 2 consolidated financial statements december 31 1999 employment totalled 46062 represents slight decrease last years level 46525 outlook companys outlook 2000 continued strong improvement operating results based scenario moderate worldwide growth companys end markets including car production housing commercial construction road paving positive outlook expectations supported aggressive assetmanagement strategicsourcing productivityimprovement programs review business segments specialty vehicles specialty vehicles segment sales 23 billion increase 77 22 billion reported 1998 operating income 1999 totalled 4053 million representing increase 216 last years total 3333 million major product lines reported improvements sales operating income operating margins year air temperature control air temperature control segment reported sales 22 billion almost equalled last years level however operating income 1999 totalled 2867 million reflecting 92 improvement 2625 million reported 1998 thermo kings sales 1999 reflected modest increase 1998s level operating income increased approximately 5 air compressor business reported modest decrease sales year however operating income increased 15 hardware tools hardware tools segment sales increased 87 19 billion operating income year 3203 million increase 320 million 2883 million reported 1998 architectural hardware products reported increases 155 sales 133 operating income industrial production equipment reported lower sales 1999 4 increase operating income engineered products engineered products segment includes results companys bearings components products results idp formerly included segment reclassified discontinued operations sales bearings components 1999 reflect 1 decrease prior year operating income increased 5 compared 1998 due continued cost improvement programs liquidity capital resources 1999 company continued make progress improving liquidity capital resources aggressive asset management programs ability generate 8365 million cash flow operations actions contributed companys reduction debttototal capital ratio 44 end last year 42 december 31 1999 addition adjusting december 31 1999 shortterm liability purchase remaining interest idp lowers debtto total capital ratio 38 following table contains several key measures used management gauge companys financial performance 1999 1998 1997 working capital millions 1129 737 342 current ratio 16 15 12 debttototal capital ratio 42 44 59 average working capital net sales 118 107 166 average days outstanding receivables 462 488 535 average months supply inventory 24 25 note working capital includes assets held sale company maintains significant operations foreign countries therefore movement us dollar foreign currencies impact companys financial position generally functional currency companys foreign subsidiaries local currency company manages exposure changes foreign currency exchange rates normal operating financing activities well use forward exchange contracts options company attempts hedging activities mitigate impact income changes foreign exchange rates additionally company maintains operations countries company transacts business us dollars functional currency operations us dollar additional information companys use financial instruments found note 8 consolidated financial statements following points highlight financial results financial condition companys operations impact foreign currency translation appropriate cash equivalents totalled 2229 million december 31 1999 1794 million increase prior yearend balance 435 million cash flows operating activities provided 8365 million investing activities used 2370 million financing activities used 4451 million exchange rate changes 1999 decreased cash equivalents 78 million receivables totalled 9885 million december 31 1999 compared 9637 million prior year end net increase 248 million increase attributable higher sales activity later part fourth quarter acquisitions offset reductions caused exchange rate changes 1999 company focuses decreasing receivables base asset management program produced reduction average days outstanding receivables 462 days 1998 level 488 days inventories amounted 7421 million december 31 1999 decrease 827 million last years level 8248 million net reduction inventories 1999 net result reduction caused exchange rate changes year 315 million companys effort reduce inventories net effect reductions caused dispositions exceeding increases acquisitions prepaid expenses totalled 607 million end year 50 million higher balance december 31 1998 increase associated general increase prepaid expense accounts acquired companies year assets held sale totalled 7997 million reflects increase 3996 million december 31 1998 balance 4001 million account balance end 1998 primarily represents companys investments ventures idp dr identified discontinued operations see note 2 consolidated financial statements current year account increased operating results joint ventures december 31 1999 purchase remaining 49 interest idp 3770 million well net change assets liabilities idp february 2 2000 company purchased remaining 51 interest dr previously additional payment 5360 million deferred income taxes current 539 million december 31 1999 represented deferred tax benefit difference book tax values various current assets liabilities components balance included note 15 consolidated financial statements investments advances partially owned equity affiliates december 31 1999 totalled 1982 million increase 146 million 1998 balance 1836 million category includes companys investments partially owned equity affiliates ie 50 less ownership income dividends investments partially owned equity affiliates 95 million 64 million respectively 1999 amounts due units increased 15 million december 31 1998 currency movements primary cause remaining change account balance net property plant equipment increased 35 million 1999 yearend balance 12402 million capital expenditures 1999 totalled 1905 million acquisitions net dispositions added 27 million foreign exchange fluctuations decreased net fixed assets approximately 212 million remaining net decrease result depreciation sales retirements intangible assets net totalled 37263 million december 31 1999 compared 37658 million december 31 1998 net decrease 395 million amortization expense current year 1128 million acquisition activity effects foreign currency translation accounted balance change deferred income taxes noncurrent totalled 1580 million december 31 1999 amount 480 million lower 1998 balance components comprising balance december 31 1999 found note 15 consolidated financial statements assets totalled 2092 million year end increase 335 million 1998 balance primarily due increase prepaid pensions 320 million accounts payable accruals totalled 12244 million december 31 1999 decrease 600 million last years balance 12844 million reduced inventory levels year end acquisitions net dispositions along timing payrolls benefits accounted reduction 1999 loans payable including current maturities longterm debt 4955 million end 1999 reflects 1775 million increase 3180 million level december 31 1998 approximately 2522 million current maturities longterm debt repaid 1999 balance end 1999 included 3770 million note payable issued connection companys purchase remaining interest idp joint venture excluding item loans payable would reflected reduction 1998 yearend balance approximately 2000 million effect translation activity 1999 minimal effect account balance year longterm debt excluding current maturities totalled 21133 million reduction approximately 527 million prior years balance 21660 million reductions long term debt 731 million represent reclassification current maturities longterm debt loans payable long term financings plant office expansions accounted modest increase debt activity year foreign exchange activity minimal effect account balance year postemployment benefit liabilities december 31 1999 totalled 8050 million decrease 155 million december 31 1998 balance postemployment liabilities include medical life insurance postretirement benefits longterm pension noncurrent benefit accruals see notes 16 17 consolidated financial statements additional information minority interest liabilities december 31 1999 totalled 957 million represents net increase 621 million balance end prior year liability represents ownership interests entities certain consolidated subsidiaries company increase 1999 primarily represents equity interest purchase vendor entity controlled company liabilities noncurrent december 31 1999 totalled 1618 million increase 93 million balance december 31 1998 increase associated acquisitions 1999 obligations expected paid next year generally accruals cover environmental insurance legal longterm contractual obligations information concerning companys financial resources commitments plans follows average shortterm borrowings outstanding excluding current maturities longterm debt 1048 million 1999 compared 3148 million 1998 weighted average interest rate 1999 66 compared 63 previous year maximum amounts outstanding 1999 1998 4224 million 7941 million respectively company 13 billion domestic shortterm credit lines 7500 million longterm credit lines december 31 1999 unused additionally 5998 million foreign credit lines available working capital purposes 5273 million used end year facilities exceed projected requirements 2000 provide direct support commercial paper indirect support financial instruments letters credit comfort letters 1999 foreign currency translation adjustments decreased shareholders equity 465 million change due strengthening us dollar currencies countries company significant operations currency changes euro eurolinked currencies british pound accounted nearly change company utilizes two wholly owned special purpose subsidiaries purchase accounts notes receivable discount company continuous basis special purpose subsidiaries simultaneously sell undivided interest accounts notes receivable financial institution maximum 1700 million agreements special purpose corporations financial institution renewable annually company intends renew agreements expiration dates either current another financial institution company retained servicer pooled receivables december 31 1999 1998 1700 million receivables remained uncollected capital expenditures 1905 million 2009 million 1999 1998 respectively company continues investing improve manufacturing productivity reduce costs provide environmental enhancements advanced technologies existing facilities capital expenditure program 2000 estimated approximately 2100 million including amounts approved prior periods planned projects either individually aggregate represent material commitment company many projects subject review cancellation option company without incurring substantial charges financial market risk company generates foreign currency exposures normal course business mitigate risk foreign currency exchange rate fluctuations company generally enter forward currency exchange contracts purchase sale currency accordance companys policies procedures company applies sensitivity analysis value risk var techniques measuring companys exposure currency fluctuations var measurement estimated loss fair value currency positions neutralized recessed liquidated assumes 95 confidence level normal market conditions potential oneday loss december 31 1999 11 million considered insignificant relation companys results operations shareholders equity regard interest rate risk effect hypothetical 1 increase interest rates across maturities would decrease estimated fair value companys longterm debt december 31 1999 20839 million estimated fair value 20041 million environmental matters company continues dedicated environmental program reduce utilization generation hazardous materials manufacturing process remediate identified environmental concerns latter company currently engaged site investigations remedial activities address environmental cleanup past operations current former manufacturing facilities 1999 company spent approximately 80 million capital projects pollution abatement control additional 60 million environmental remediation expenditures sites presently formerly owned leased company noted amounts difficult estimate environmental improvement costs generally part overall improvement costs particular plant therefore accurate estimate portion improvement capital expenditure relates environmental improvement difficult ascertain company believes expenditure levels continue may increase time given evolving nature environmental laws regulations technology ultimate cost future compliance uncertain company party environmental lawsuits claims received notices potential violations environmental laws regulations environmental protection agency similar state authorities identified potentially responsible party prp cleanup costs associated site waste disposal approximately 30 federal superfund state remediation sites excluding sites companys records disclose involvement companys liability fully determined sites prps instances companys site involvement minimal estimating liability company assumed bear entire cost remediation site exclusion prps may jointly severally liable ability prps participate taken account based generally parties financial condition probable contributions per site basis additional lawsuits claims involving environmental matters likely arise time future although uncertainties regarding environmental technology state federal laws regulations individual site information make estimating liability difficult management believes total liability cost remediation environmental lawsuits claims material effect financial condition results operations liquidity cash flows company year noted company estimates liability environmental matters estimates based current technologies company discount liability assume insurance recoveries forwardlooking statements annual report contains historical information also forwardlooking statements regarding expectations future company performance forwardlooking statements involve risk uncertainty see companys 1999 annual report form 10k discussion factors could cause future results differ current expectations 1998 compared 1997 sales 1998 totalled 74 billion generated 9691 million operating income 4555 million net earnings continuing operations 275 diluted earnings per share net income discontinued operations totalled 536 million 1998 033 diluted earnings per share companys results 1998 included full years benefit october 31 1997 acquisition thermo king corporation thermo king thermo king reported 1998 sales 12 billion operating income contribution 1593 million net earnings 240 million 15 cents diluted earnings per share allocation acquisition interest expense related tax benefit companys results 1997 sales 62 billion generated 7235 million operating income produced net earnings continuing operations 3586 million year 218 diluted earnings per share 1997 net income discontinued operations 219 million 013 diluted earnings per share thermo king generated 1769 million sales produced operating loss 02 million goodwill amortization effect estimated purchase accounting adjustments last two months 1997 thermo kings net loss twomonth period 113 million seven cents diluted earnings per share allocation acquisition interest expense 273 million excluding thermo kings results years 1998 sales increased modestly 119 increase operating income resulting significant increase 17 net earnings continuing operations 1998 adjusted 1997 results comparison key financial data 1998 1997 follows net sales 1998 74 billion reflecting 184 improvement 1997 total 62 billion excluding thermo kings results years adjusted sales 1998 increased 2 1997 adjusted total cost goods sold 1998 730 sales compared 739 1997 excluding thermo kings results years adjusted ratio cost goods sold sales reflected marked improvement 1998 compared 1997 administrative selling service engineering expenses 139 sales 1998 compared 145 1997 decrease primarily attributable inclusion thermo king traditionally lower ratio selling administrative expenses sales companys historical lines business operating income year totalled 9691 million 339 increase 1997 operating income 7235 million ratio operating income sales 1998 131 compared 116 prior year excluding thermo kings results years adjusted 1998 operating income still reflects doubledigit improvement adjusted 1997 results improvement combined effect companys aggressive productivityimprovement procurement programs continued stability domestic markets interest expense year totalled 2241 million versus 1352 million 1997 interest expense associated debt incurred thermo king acquisition totalled approximately 1293 million 1998 excluding costs related companys equitylinked securities 273 million last two months 1997 income expense net sum foreign exchange activities equity earnings partially owned affiliates miscellaneous income expense items 1998 activities resulted net expense 153 million unfavorable change 90 million compared 1997 net expense 63 million change caused lower earnings partially owned affiliates higher foreign exchange losses 82 million 1998 offset lower net miscellaneous income expense items companys charges minority interests composed two items 1 197 million charges associated companys equitylinked securities issued first quarter 1998 2 interests minority owners less 50 consolidated unit company totalled 38 million 1998 36 million 1997 companys effective tax rate 1998 355 improved 380 reported prior year due fullyear favorable tax benefit associated thermo king acquisition variance 350 statutory rate primarily due tax rates associated foreign earnings foreign sales corporation favorable tax benefits associated income earned puerto rico effect state local taxes nondeductibility portion goodwill discontinued operations net tax 1998 amounted 536 million double 1997s results 219 million category represents companys 49 interest earnings dr companys 51 interest idp reduced appropriate taxes previously announced company intends divest units therefore net operating results classified discontinued operations net earnings partnerships 1998 substantially 1997 levels increases result stronger economic climate products coupled fact operations recorded total 600 million restructuring charges 1997 reduce headcount close underperforming operations see note 2 consolidated financial statements additional information december 31 1998 employment totalled 46525 represents slight decrease prior years level 46567 1998 company made significant progress improving liquidity capital resources 1 completing financing thermo king acquisition issuance 4025 million equitylinked securities first quarter year 2 reducing companys debt additional 5709 million generated companys strong cash flow year proceeds equitylinked securities used reduce companys shortterm borrowings originally issued satisfy portion cash requirements acquisition thermo king october 31 1997 actions primarily contributed companys reduction debttototal capital ratio 59 end 1997 44 december 31 1998 following points highlight financial results financial condition companys operations impact foreign currency translation appropriate cash equivalents totalled 435 million december 31 1998 230 million reduction prior yearend balance 665 million cash flows operating activities provided 8596 million investing activities used 1619 million financing activities used 7418 million exchange rate changes 1998 increased cash equivalents 10 million marketable securities totalled 20 million end 1998 18 million balance december 31 1997 net reduction due maturity exchange rate changes receivables totalled 9637 million december 31 1998 compared 10807 million end 1997 net decrease 1170 million decrease attributable improved cash collections reductions dispositions company focuses decreasing receivables base asset management program produced reduction average days outstanding receivables 488 days 1997 level 535 days inventories amounted 8248 million december 31 1998 increase 843 million 1997s level 7405 million inventory increases year end anticipation early 1999 shipments primary reason increase companys emphasis inventory control demonstrated reduction average months supply inventory 24 months december 31 1998 compared 25 months prior year end prepaid expenses totalled 557 million end 1998 237 million lower balance december 31 1997 changes prepaid pension assets general reduction prepaid assets reasons reduction account balance assets held sale totalled 4001 million december 31 1998 reflects increase 110 million december 31 1997 balance 3891 million account balance end years primarily represents companys investments idp dr identified discontinued operations see note 2 consolidated financial statements 1998 account increased operating results joint ventures reduced changes net assets addition account balance also reduced approximately 225 million asset dispositions involving either idp dr deferred income taxes current 688 million december 31 1998 represented deferred tax benefit difference book tax values various current assets liabilities components balance included note 15 consolidated financial statements investments advances partially owned equity affiliates december 31 1998 totalled 1836 million 161 million 1997 balance 1997 million income dividends partially owned equity affiliates 136 million 67 million respectively amounts due units decreased 126 million december 31 1997 currency movements acquisitions primary cause remaining change account balance net property plant equipment increased 630 million 1998 yearend balance 12367 million capital expenditures 1998 totalled 2009 million acquisitions net dispositions added 130 million foreign exchange fluctuations increased net fixed assets approximately 36 million remaining net decrease result depreciation sales retirements intangible assets net totalled 37658 million december 31 1998 compared 38224 million december 31 1997 net decrease 566 million amortization expense 1998 1101 million acquisition activity effects foreign currency translation accounted balance change deferred income taxes noncurrent totalled 2060 million december 31 1998 total 263 million higher 1997 balance components comprising balance december 31 1998 found note 15 consolidated financial statements assets totalled 1757 million end 1998 decrease 316 million december 31 1997 balance 2073 million assets decreased approximately 250 million due decrease prepaid pensions general reduction noncurrent assets foreign exchange activity 1998 minimal effect account balance year accounts payable accruals totalled 12844 million december 31 1998 increase 1091 million last years balance 11753 million increased inventory levels year end acquisitions net dispositions along timing payrolls benefits account increase 1998 loans payable including current maturities longterm debt 3180 million end 1998 reflects 6058 million reduction 9238 million level december 31 1997 proceeds 3896 million issuance companys equitylinked securities used reduce short term debt year current maturities longterm debt increased account balance additional 2518 million addition company also repaid approximately 2612 million current maturities longterm debt longterm debt excluding current maturities totalled 21660 million reduction approximately 3621 million prior years balance 25281 million reductions long term debt 2518 million represent reclassification current maturities longterm debt loans payable addition company repaid 1100 million longterm debt accelerated payments year foreign exchange activity minimal effect account balance year postemployment benefit liabilities december 31 1998 totalled 8205 million decrease 416 million december 31 1997 balance postemployment liabilities include medical life insurance postretirement benefits longterm pension noncurrent postemployment accruals see notes 16 17 consolidated financial statements additional information minority interest liabilities december 31 1998 totalled 336 million represents net increase 101 million balance end prior year liability represents ownership interests entities selected consolidated subsidiaries company change account balance 1998 due earnings advances changes ownership participation liabilities noncurrent december 31 1998 totalled 1525 million reflected increase 65 million balance december 31 1997 obligations expected paid next year generally accruals cover environmental insurance legal long term contractual obligations information concerning companys financial resources commitments plans follows average shortterm borrowings outstanding excluding current maturities longterm debt 3148 million 1998 compared 3760 million 1997 weighted average interest rate 1998 63 compared 62 previous year maximum amounts outstanding 1998 1997 7941 million 24330 million respectively company 10 billion domestic shortterm credit lines december 31 1998 4362 million foreign credit lines available working capital purposes 14 billion unused end year 1998 foreign currency translation adjustments increased shareholders equity 25 million change due minor weakening us dollar currencies countries company significant operations currency changes france germany japan accounted nearly change item 7aitem 7 managements discussion analysis financial condition results operations managements discussion analysis financial condition results operations included financial review management analysis exhibit 13 annual report shareowners 1994 incorporated reference form 10k annual report item 8item 7 managements discussion analysis financial condition results operations net earnings 2000 6694 million diluted earnings per share 412 year net earnings continuing operations 5462 million diluted earnings per share 336 net earnings discontinued operations contributed 1232 million 076 diluted earnings per share 2000 following significant events occurred affect yeartoyear comparisons june 14 2000 company acquired hussmann international inc hussmann approximately 17 billion cash including amounts paid outstanding stock options debt retirement employee contracts transaction costs hussmanns business design production installation service merchandising refrigeration systems global food industry early 2000 company completed purchase dresser rand company dr acquiring joint venture partners 51 share company reporting results dr discontinued operations since sale dr completed within year dr presented periods results assets held sale net tax order reposition future company began program restructure initiate productivity investments across worldwide operations total pretax cost program approximately 325 million include plant rationalizations organizational realignments consistent companys new marketbased structure consolidation back office processes every business sector impacted program result closing 50 facilities 40 factories 8 reduction workforce company implemented emerging issues task force issue 0010 accounting shipping handling fees costs fourth quarter 2000 required company include revenues billed shipping handling net sales effect increase net sales cost goods sold 1806 million 2000 1759 million 1999 1555 million 1998 sales 2000 87982 million increase approximately 12 78426 million 1999 increase includes favorable effect hussmann acquisition excluding hussmann sales increased approximately 3 cost goods sold selling administrative expenses 2000 include charges productivity investments productivity investments consist costs equipment moving facility redesign employee relocation retraining systems enhancements charges productivity investments expensed incurred productivity investments incurred business segments following table shows 2000 results adjusted productivity investments reported productivity adjusted millions results investments results cost goods sold 64610 220 64390 selling administrative expenses 11467 280 11187 cost goods sold 2000 734 sales compared 726 1999 excluding productivity investments ratio 732 sales increase ratio cost goods sold sales due inclusion hussmann historically higher ratio company maintained selling administrative expenses 130 sales 2000 compared 134 1999 adjusted selling administrative expenses 127 sales 2000 decrease ratio reflects hussmanns ratio historically lower companys restructuring charges 2000 762 million restructuring program began third quarter 2000 expected substantially complete end 2001 restructuring charges 658 million consist severance employee termination costs facility exit costs including lease terminations totaled 104 million charges related employee severance employee termination costs cover approximately 2100 employees 55 terminated december 31 2000 operating income year totaled 11143 million slight increase 1999 operating income 10993 million restructuring productivity investments charges included operating income 762 million 500 million respectively excluding restructuring productivity investments well increase due inclusion hussmann acquisition operating income increased approximately 6 interest expense year totaled 2537 million versus 2031 million 1999 increase due impact debt incurred purchase hussmann interest expense debt required purchase dr included results assets held sale net tax income expense net includes foreign exchange activities equity earnings partially owned affiliates miscellaneous income expense items 2000 activities resulted net expense 153 million favorable change 70 million 223 million net expense reported 1999 positive change attributable gains sale three joint ventures partially offset higher foreign exchange losses companys charges minority interests composed two items 1 charges associated companys equitylinked securities 2 interests minority owners less 50 consolidated subsidiaries company minority interest charges increased due higher earnings jointly owned entities company majority ownership charges equitylinked securities comparable results assets held sale net tax contains unsold portion dr third quarter results dr reclassified discontinued operations results assets held sale since sale completed within year companys portion net earnings dr 2000 233 million earnings include 302 million aftertax gain sale drs compression services business aftertax restructuring charges productivity investments 99 million interest expense net tax acquisition debt foreign sales corporation tax benefit companys effective tax rate continuing operations 341 2000 348 1999 companys effective tax rate continuing operations excluding dr restructuring productivity investments charges 348 2000 355 1999 effective tax rate 2000 includes tax credits generated companys foreign sales corporation ongoing tax planning initiatives variance companys rate statutory rate 350 primarily due lower tax rates associated foreign earnings foreign sales corporation tax benefits associated income puerto rico offset effect state local taxes nondeductibility goodwill earnings discontinued operations net tax 1232 million 2000 represents ingersolldresser pump company idp operating loss 16 million 2000 aftertax gain 1248 million recorded sale idp see note 4 consolidated financial statements outlook world economy 2001 difficult predict especially true united states economic activity declined last several months 2000 declines occurred key markets particularly automotive truck trailer road development construction markets stayed steady expected also decline first half 2001 stronger results expected air solutions security safety businesses company expects revenue slightly driven new product introductions companys new product introductions scheduled 2001 include electronic access products new compact equipment offerings safe tire mounting system new climate control offerings well 70 kilowatt microturbine company expects hussmann add earnings since included full year company also expects receive initial benefit productivity investments company anticipates pricing pressure certain endmarkets product mix changes negatively impact revenue growth earnings expected company spend 6 cents per share commercialize powerworks microturbine product line another significant factor 2001 conversion equitylinked securities may add approximately 8 million shares total number outstanding shares common stock cause dilution earnings per share company believes 2001 challenging year produce another strong earnings performance review business segments climate control climate control sector includes thermo king transport temperature control equipment hussmann display case refrigeration sectors revenues 2000 totaled 20211 million compared 12218 million 1999 sectors revenues increased approximately 65 due inclusion hussmann acquired june 14 2000 operating income year 2064 million included restructuring charges 36 million productivity investments 69 million operating income 1999 totaled 1665 million 2000 thermo king business adversely affected severe decline north american truck trailer market continued weak truck trailer results europe unfavorable effect currency however bus air conditioning seagoing container businesses improved substantially hussmanns operating results consistent expectations reduced capital spending several major supermarket chains affected revenues operating margins sector declined 136 102 due inclusion hussmanns results decline truck trailer market unfavorable effect foreign currency industrial productivity industrial productivity sector composed group businesses focused providing solutions customers enhance industrial efficiency reported revenues 30250 million increased slightly reported 1999 29911 million operating income 3659 million included 280 million restructuring charges 81 million productivity investments charges excluding charges operating income 4020 million increase 154 3485 million 1999 increase primarily due improved results air solutions bearings components businesses industrial productivity sector consists three segments air solutions provides equipment services compressed air systems reported sales 8595 million year improvement 125 compared 1999 operating income increased approximately 215 excluding effect restructure charges 105 million productivity investments 43 million business performance benefited primarily increased emphasis aftermarket business ongoing cost expense reduction activity bearings components provides motion control technologies automotive industrial markets revenues year declined slightly 11853 million 12395 million 1999 due lower volumes automotive market operating income improved 97 including restructuring charges significant ongoing cost expense reduction activities higher aftermarket revenues contributed improvement restructuring charges 115 million segment charges productivity investments 13 million downturn production light trucks sportutility vehicles affected fourthquarter 2000 revenues business industrial products includes club carr golf cars utility vehicles tools related industrial production equipment reported revenues 9802 million year decreased slightly compared 9873 million 1999 excluding last years revenues automation division sold fourth quarter 1999 revenues increased 67 operating income 1124 million year includes charges restructuring 60 million productivity investments 25 million lower margins resulted cost pressures european industrial business unfavorable effects currency infrastructure sector includes bobcat compact equipment road pavers compactors portable power products drilling equipment sectors revenues year totaled 23417 million versus 23415 million 1999 bobcats revenue improvement due volume gains offset lower sales balance sector operating income 3755 million includes charges restructuring 114 million productivity investments 85 million excluding restructure productivity investments operating income increased slightly 1999 operating income level 3931 million operating margins sector impacted significantly foreign exchange bobcat acquired new product line continues introduce new products enables maintain market share compact equipment market portable power revenues declined slowness national rental accounts occurred road development revenues also declined domestic market softness outweighed growth europe security safety security safety sector includes architectural hardware products electronic accesscontrol technologies sector revenues increased 95 14104 million compared prior year operating income 2000 increased 2716 million 2484 million 1999 sectors operating income included 151 million 89 million charges restructure productivity investments respectively revenue growth attributable continued strength commercial residential markets addition higher volumes profitability due productivity improvements successful assimilation recent acquisitions liquidity capital resources 2000 company acquired hussmann 17 billion cash sold idp 775 million cash acquired full ownership dr 543 million acquisitions hussmann dr financed principally issuing shortterm commercial paper internally generated cash acquisitions hussmann dr discussed notes 5 3 respectively sale idp note 4 consolidated financial statements following table contains several key measures used management gauge companys financial performance 2000 1999 1998 working capital millions 644 1129 737 current ratio 08 16 15 debttototal capital ratio 48 42 44 average working capital net sales 15 115 105 average days outstanding receivables 533 488 515 average months supply inventory 23 24 note working capital includes assets held sale company maintains significant operations foreign countries therefore movement us dollar foreign currencies impact companys financial position generally functional currency companys foreign subsidiaries local currency company manages exposure changes foreign currency exchange rates normal operating financing activities well use forward exchange contracts options company attempts hedging activities mitigate impact income changes foreign exchange rates additional information companys use financial instruments found note 10 consolidated financial statements following points highlight financial results financial condition companys operations impact foreign currency translation appropriate cash equivalents totaled 744 million december 31 2000 1485 million decrease prior yearend balance 2229 million cash flows operating activities provided 7741 million investing activities used 15372 million financing activities provided 6470 million net cash used discontinued operations 221 million exchange rate changes 2000 decreased cash equivalents 103 million receivables totaled 13235 million december 31 2000 compared 9885 million prior year end net increase 3350 million acquisitions accounted increase 3488 million receivables increased approximately 580 million due higher sales activity latter part fourth quarter offset reductions caused exchange rate changes 2000 company also sold additional 40 million accounts receivable financial institution 2000 average days outstanding receivables 533 days compared 1999 level 488 days inventories amounted 10229 million december 31 2000 increase 2808 million last years level 7421 million net increase inventories 2000 result increase acquisitions 1327 million reduction caused exchange rate changes year 278 million overall increase inventories prepaid expenses totaled 820 million end year 213 million higher balance december 31 1999 increase associated pensions acquisitions assets held sale totaled 6124 million reflects decrease 1873 million december 31 1999 balance 7997 million account balance end 1999 primarily represented companys investments ventures idp dr see notes 4 3 consolidated financial statements current year activity account included operating results joint ventures february 2000 purchase remaining 51 interest dr 543 million divestiture idp dr compression services business well net change assets liabilities dr company expects complete sale dr 2001 deferred income taxes current 820 million december 31 2000 represented deferred tax benefit difference book tax values various current assets liabilities components balance included note 17 consolidated financial statements investments advances partially owned equity affiliates december 31 2000 totaled 1676 million decrease 306 million 1999 balance 1982 million 2000 company sold interests three partially owned affiliates relating manufacture steeringcolumn assemblies approximately 37 million cash income dividends investments partially owned equity affiliates 89 million 28 million respectively 2000 amounts due units 106 million december 31 2000 currency movements primary cause remaining change account balance net property plant equipment increased 2878 million 2000 yearend balance 15280 million capital expenditures 2000 totaled 1866 million acquisitions net dispositions added 2969 million foreign exchange fluctuations decreased net fixed assets approximately 194 million remaining net decrease result depreciation sales retirements intangible assets net totaled 51053 million december 31 2000 compared 37263 million december 31 1999 net increase 13790 million amortization expense current year 1354 million acquisition activity accounted 15 billion increase remainder due foreign currency translation deferred income taxes noncurrent totaled 1141 million december 31 2000 amount 439 million lower 1999 balance components amount december 31 2000 found note 17 consolidated financial statements assets totaled 2907 million year end increase 815 million 1999 balance primarily due increase prepaid pensions accounts payable accruals totaled 16987 million december 31 2000 increase 4743 million previous years balance 12244 million acquisitions net dispositions accounted approximately 3886 million increase restructuring charges timing payrolls benefits accounted additional increase 2000 loans payable including current maturities longterm debt 21218 million end 2000 reflects significant increase 16263 million 4955 million level december 31 1999 loans payable december 31 2000 included approximately 7429 million current maturities longterm debt 731 million included prior year end balance additional increase loans payable due acquisitions principally hussmann february 2001 company replaced portion loans payable longterm debt carrying interest rate 575 longterm debt excluding current maturities totaled 15401 million reduction approximately 5732 million prior years balance 21133 million reductions long term debt 7372 million 64 million represent reclassification current maturities longterm debt loans payable payments longterm debt respectively postemployment benefit liabilities december 31 2000 totaled 8248 million increase 198 million december 31 1999 balance postemployment liabilities include medical life insurance postretirement benefits longterm pension noncurrent benefit accruals see notes 18 19 consolidated financial statements additional information minority interest liabilities december 31 2000 totaled 1105 million represent net increase 148 million balance end prior year liability represents ownership interests entities certain consolidated subsidiaries company liabilities noncurrent december 31 2000 totaled 1888 million increase 270 million compared balance december 31 1999 increase associated acquisitions 2000 generally accruals cover environmental insurance legal longterm contractual obligations may 1997 board directors authorized repurchase 150 million shares companys stock managements discretion total 99 million shares purchased since inception program 2000 30 million shares repurchased treasury shares used past year small acquisition connection shares issued stock incentive plans information concerning companys financial resources commitments plans follows average shortterm borrowings outstanding excluding current maturities longterm debt 13521 million 2000 compared 1048 million 1999 weighted average interest rate 2000 1999 66 maximum amounts outstanding 2000 1999 25338 million 4224 million respectively company 13 billion domestic shortterm credit lines 7500 million longterm credit lines december 31 2000 unused additionally 6028 million foreign credit lines available working capital purposes 4333 million unused end year facilities exceed projected requirements 2000 provide direct support commercial paper indirect support financial instruments letters credit comfort letters 2000 foreign currency translation adjustments decreased shareholders equity 860 million due strengthening us dollar currencies countries company significant operations currency fluctuations euro eurolinked currencies british pound accounted nearly change company utilizes two wholly owned special purpose subsidiaries purchase accounts notes receivable discount company continuous basis special purpose subsidiaries simultaneously sell undivided interest accounts notes receivable financial institution maximum 2100 million 2000 1700 million 1999 agreements special purpose corporations financial institution predefined expiration dates company retained servicer pooled receivables december 31 2000 1999 2100 million 1700 million receivables respectively remained uncollected capital expenditures 1866 million 1905 million 2000 1999 respectively company continues investing improve manufacturing productivity reduce costs provide environmental enhancements advanced technologies existing facilities capital expenditure program 2001 estimated approximately 220 million including amounts approved prior periods many projects subject review cancellation option company without incurring substantial charges planned projects either individually aggregate represent material commitment company december 31 2000 employment totaled 50855 represents increase prior years level 46062 increase due acquisitions year offset terminations companys restructuring program financial market risk company generates foreign currency exposures normal course business mitigate risk foreign currency exchange rate fluctuations company generally enter forward currency exchange contracts purchase sale currency accordance companys policies procedures company applies sensitivity analysis value risk var techniques measuring companys exposure currency fluctuations var measurement estimated loss fair value currency positions neutralized recessed liquidated assumes 95 confidence level normal market conditions potential oneday loss december 31 2000 33 million considered insignificant relation companys results operations shareholders equity regard interest rate risk effect hypothetical 1 increase interest rates across maturities would decrease estimated fair value companys longterm debt december 31 2000 15371 million estimated fair value 14650 million environmental matters company continues dedicated environmental program reduce utilization generation hazardous materials manufacturing process remediate identified environmental concerns latter company currently engaged site investigations remedial activities address environmental cleanup past operations current former manufacturing facilities 2000 company spent approximately 50 million capital projects pollution abatement control additional 60 million environmental remediation expenditures sites presently formerly owned leased company noted amounts difficult estimate environmental improvement costs generally part overall improvement costs particular plant therefore accurate estimate portion improvement capital expenditure relates environmental improvement difficult ascertain company believes expenditure levels continue may increase time given evolving nature environmental laws regulations technology ultimate cost future compliance uncertain company party environmental lawsuits claims received notices potential violations environmental laws regulations environmental protection agency similar state authorities identified potentially responsible party prp cleanup costs associated site waste disposal approximately 26 federal superfund state remediation sites excluding sites companys records disclose involvement companys liability fully determined sites prps instances companys site involvement minimal estimating liability company assumed bear entire cost remediation site exclusion prps may jointly severally liable ability prps participate taken account based generally parties financial condition probable contributions per site basis additional lawsuits claims involving environmental matters likely arise time future although uncertainties regarding environmental technology state federal laws regulations individual site information make estimating liability difficult management believes total liability cost remediation environmental lawsuits claims material effect financial condition results operations liquidity cash flows company year noted company estimates liability environmental matters estimates based current technologies company discount liability assume insurance recoveries new accounting standard company adopted sfas 133 accounting derivative instruments hedging activities amendments january 1 2001 statement requires derivatives recognized assets liabilities balance sheet measured fair value changes fair value derivatives recognized earnings comprehensive income depending designated purpose derivative company recorded approximately 12 million tax cumulative effect adjustment decrease accumulated comprehensive income january 1 2001 1999 compared 1998 sales 1999 totaled 78 billion generated 10993 million operating income 5631 million net earnings continuing operations 340 diluted earnings per share net earnings discontinued operations totaled 280 million 017 diluted earnings per share 1998 sales 75 billion generated 9691 million operating income produced net earnings continuing operations year 4816 million 291 diluted earnings per share 1998 net earnings discontinued operations totaled 275 million 017 diluted earnings per share comparison key financial data 1999 1998 follows net sales 1999 amounted 78 billion reflecting 40 improvement 1998 total 75 billion net sales 1999 1998 include increases 1759 million 1555 million respectively implementation eitf 00 10 accounting shipping handling fees costs cost goods sold 1999 726 sales compared 735 1998 ratio cost goods sold sales reflected marked improvement 1999 compared 1998 based continued success companys assetmanagement strategicsourcing productivity improvement programs cost goods sold includes reclassification shipping handling fees selling administrative expenses 134 sales 1999 compared 136 1998 decrease attributable companys costcontainment programs operating income year totaled 10993 million 134 increase compared 1998 operating income 9691 million ratio operating income sales 1999 140 compared 129 prior year improvement combined effect companys aggressive productivity improvement procurement programs continued stability domestic markets interest expense year totaled 2031 million versus 2241 million 1998 reduction interest expense totaled 210 million principally due lower average outstanding debt balances 1999 compared prior year income expense net sum foreign exchange activities equity earnings partially owned affiliates miscellaneous income expense items 1999 activities resulted net expense 223 million unfavorable change 70 million compared 1998 net expense 153 million change caused lower earnings partially owned equity affiliates lower miscellaneous income higher miscellaneous expenses offset favorable change foreign currency activity 1999 compared prior year companys charges minority interests composed two items 1 charges associated companys equity linked securities issued first quarter 1998 totaled 256 million 1999 197 million 1998 2 interests minority owners less 50 consolidated unit company totaled 35 million 1999 38 million 1998 results assets held sale net tax represents companys equity earnings dr equity earnings dr 182 million 1999 261 million 1998 companys effective tax rates 1999 1998 348 342 respectively variance 350 statutory rate primarily due lower tax rates associated foreign earnings foreign sales corporation favorable tax benefits associated income earned puerto rico offset effect state local taxes nondeductibility portion goodwill discontinued operations net tax 1999 amounted 280 million 05 million higher 275 million year ended december 31 1998 category represents companys 51 interest idp net appropriate taxes additional information discontinued operations contained throughout report note 4 consolidated financial statements december 31 1999 employment totaled 46062 represents slight decrease 1998s level 46525 1999 company made progress improving liquidity capital resources aggressive asset management programs ability generate 8547 million cash flow operations actions contributed companys reduction debttototal capital ratio 44 end 1998 42 december 31 1999 addition adjusting december 31 1999 shortterm liability purchase remaining interest idp lowers debttototal capital ratio 38 following points highlight financial results financial condition companys operations impact foreign currency translation appropriate cash equivalents totaled 2229 million december 31 1999 1794 million increase prior yearend balance 435 million cash flows operating activities provided 8547 million investing activities used 2370 million financing activities used 4451 million exchange rate changes 1999 decreased cash equivalents 78 million receivables totaled 9885 million december 31 1999 compared 9637 million prior year end net increase 248 million increase attributable higher sales activity latter part fourth quarter acquisitions offset reductions caused exchange rate changes 1999 company focuses decreasing receivables base asset management program produced reduction average days outstanding receivables 488 days 1998 level 515 days inventories amounted 7421 million december 31 1999 decrease 827 million 1998s level 8248 million net reduction inventories 1999 net result reduction caused exchange rate changes year 315 million companys effort reduce inventories net effect reductions caused dispositions exceeding increases acquisitions prepaid expenses totaled 607 million end 1999 50 million higher balance december 31 1998 increase associated general increase prepaid expense accounts acquired companies year assets held sale totaled 7997 million reflects increase 3996 million compared december 31 1998 balance 4001 million account balance end 1998 primarily represents companys investments idp dr identified discontinued operations results assets held sale net tax respectively see notes 4 3 consolidated financial statements 1999 account increased operating results joint ventures december 31 1999 purchase remaining 49 interest idp 3770 million well net change assets liabilities idp deferred income taxes current 539 million december 31 1999 represented deferred tax benefit difference book tax values various current assets liabilities components balance included note 17 consolidated financial statements investments advances partially owned equity affiliates december 31 1999 totaled 1982 million increase 146 million compared 1998 balance 1836 million category includes companys investments partially owned equity affiliates ie 50 less ownership income dividends investments partially owned equity affiliates 95 million 64 million respectively 1999 amounts due units increased 15 million december 31 1998 currency movements primary cause remaining change account balance net property plant equipment increased 35 million 1999 yearend balance 12402 million capital expenditures 1999 totaled 1905 million acquisitions net dispositions added 27 million foreign exchange fluctuations decreased net fixed assets approximately 212 million remaining net decrease result depreciation sales retirements intangible assets net totaled 37263 million december 31 1999 compared 37658 million december 31 1998 net decrease 395 million amortization expense 1999 1128 million acquisition activity effects foreign currency translation accounted balance change deferred income taxes noncurrent totaled 1580 million december 31 1999 amount 480 million lower 1998 balance components comprising balance december 31 1999 found note 17 consolidated financial statements assets totaled 2092 million december 31 1999 increase 335 million 1998 balance primarily due increase prepaid pensions 320 million accounts payable accruals totaled 12244 million december 31 1999 decrease 600 million 1998s balance 12844 million reduced inventory levels year end acquisitions net dispositions along timing payrolls benefits accounted reduction 1999 loans payable including current maturities longterm debt 4955 million end 1999 reflects 1775 million increase 3180 million level december 31 1998 approximately 2522 million current maturities longterm debt repaid 1999 balance end 1999 included 3770 million note payable issued connection companys purchase remaining interest idp joint venture excluding item loans payable would reflected reduction 1998 yearend balance approximately 2000 million longterm debt excluding current maturities totaled 21133 million reduction approximately 527 million prior years balance 21660 million reductions long term debt 731 million represent reclassification current maturities longterm debt loans payable long term financings plant office expansions accounted modest increase debt activity year postemployment benefit liabilities december 31 1999 totaled 8050 million decrease 155 million december 31 1998 balance postemployment liabilities include medical life insurance postretirement benefits longterm pension noncurrent benefit accruals see notes 18 19 consolidated financial statements additional information minority interest liabilities december 31 1999 totaled 957 million represented net increase 621 million balance end prior year liability represents ownership interests entities certain consolidated subsidiaries company increase 1999 primarily represents equity interest purchase vendor entity controlled company liabilities noncurrent december 31 1999 totaled 1618 million increase 93 million balance december 31 1998 increase associated acquisitions 1999 obligations expected paid next year generally accruals cover environmental insurance legal longterm contractual obligations information concerning companys financial resources commitments plans follows average shortterm borrowings outstanding excluding current maturities longterm debt 1048 million 1999 compared 3148 million 1998 weighted average interest rate 1999 66 compared 63 1998 maximum amounts outstanding 1999 1998 4224 million 7941 million respectively company 13 billion domestic shortterm credit lines 7500 million longterm credit lines december 31 1999 unused additionally 5998 million foreign credit lines available working capital purposes 5273 million unused end year 1999 foreign currency translation adjustments decreased shareholders equity 465 million change due strengthening us dollar currencies countries company significant operations currency changes euro eurolinked currencies british pound accounted nearly change item 7aitem 7 managements discussion analysis financial condition results operations managements discussion analysis financial condition results operations included financial review management analysis exhibit 13 annual report shareowners 1993 incorporated reference form 10k annual report item 8item 7 managements discussion analysis financial condition results operations managements discussion analysis financial condition results operations included financial review management analysis exhibit 13 annual report shareholders 1997 incorporated reference form 10k annual report forwardlooking statements information provided company 1997 annual report form 10k periodic reports form 10q press releases statements made employees oral discussions may constitute contain forwardlooking statements term defined private securities litigation reform act 1995 securities exchange commission rules regulations releases forwardlooking statements represent companys expectations concerning future events nature involve risk uncertainty company cautions investors forwardlooking statements guarantees future performance variety factors could cause business conditions actual results differ materially expected results contained forward looking statements company includes among factors following changes rate economic growth united states major international economies impacts unusual items resulting ongoing evaluations organizational structures business strategies acquisitions dispositions significant changes trade monetary fiscal policies worldwide currency fluctuations among us dollar currencies demand company products distributor inventory levels performance issues key suppliers subcontractors failure achieve companys productivity targets costs effects unanticipated legal administrative proceedings competitor actions unanticipated pricing actions cost reduction strategies entry direct product line competition item 7a nannanitem 7a quantitative qualitative disclosure market risk information required item 7a provided caption financial market risk item 7 managements discussion analysis financial condition results operations item 8item 7a quantitative qualitative disclosure market risk information caption financial market risk item 7 managements discussion analysis financial condition results operations incorporated herein reference item 8nanitem 7a quantitative qualitative disclosure market risk information caption financial market risk item 7 managements discussion analysis financial condition results operations incorporated herein reference item 8nanitem 7a quantitative qualitative disclosures market risk discussion caption financial review management analysis financial market risk annual report shareholders 1997 filed exhibit 13 form 10k annual report incorporated herein reference item 8 item 8 financial statements supplementary data following financial statements supplementary financial information included accompanying annual report shareowners 1995 incorporated reference form 10k annual report consolidated financial statements report thereon price waterhouse llp dated february 6 1996 included exhibit 13 annual report shareowners excluding financial review management analysis 1995 b unaudited quarterly financial data twoyear period ended december 31 1995 follows millions except per share amounts earnings per net cost operating net common 1995 sales goods sold income earnings share first quarter 11856 8931 892 463 044 second quarter 13921 10510 1187 666 063 third quarter 15213 11632 1191 618 058 fourth quarter 16300 12029 1700 956 090 year 1995 57290 43102 4970 2703 255 first quarter 10103 7759 601 330 031 second quarter 11438 8660 918 515 049 third quarter 11137 8402 890 484 046 fourth quarter 12397 8950 1361 782 074 year 1994 45075 33771 3770 2111 200 reductions lifo inventory quantities increased net earnings per share 002 fourth quarter 1995 001 006 third fourth quarters 1994 respectively second third fourth quarters 1995 include results clark equipment company see note 2 consolidated financial statements item 9item 8 financial statements supplementary data following financial statements supplementary financial information included accompanying annual report shareowners 1996 incorporated reference form 10k annual report consolidated financial statements report thereon price waterhouse llp dated february 4 1997 included exhibit 13 annual report shareowners excluding financial review management analysis 1996 b unaudited quarterly financial data twoyear period ended december 31 1996 follows millions except per share amounts earnings per net cost operating net common 1996 sales goods sold income earnings share first quarter 16049 12088 1506 745 070 second quarter 17619 13380 1763 923 086 third quarter 15958 12067 1487 819 076 fourth quarter 17403 12764 2079 1093 101 year 1996 67029 50299 6835 3580 333 first quarter 11856 8931 892 463 044 second quarter 13921 10510 1187 666 063 third quarter 15213 11632 1191 618 058 fourth quarter 16300 12029 1700 956 090 year 1995 57290 43102 4970 2703 255 reductions lifo inventory quantities increased net earnings per share 001 002 second fourth quarters 1996 respectively 002 fourth quarter 1995 first quarter 1995 include results clark equipment company see note 2 consolidated financial statements included companys annual report shareowners 1996 incorporated reference form 10k annual report item 9item 8 financial statements supplementary data following financial statements supplementary financial information included accompanying annual report shareholders 1998 incorporated reference form 10k annual report consolidated financial statements report thereon pricewaterhousecoopers llp dated february 2 1999 included exhibit 13 annual report shareholders 1998 b unaudited quarterly financial data twoyear period ended december 31 1998 follows millions except per share amounts net cost operating net 1998 sales goods sold income earnings first quarter 20029 14841 2136 991 second quarter 21862 15967 2863 1409 third quarter 20200 14841 2502 1194 fourth quarter 20824 14817 2943 1497 year 1998 82915 60466 10444 5091 net cost operating net 1997 sales goods sold income earnings first quarter 16394 12284 1666 778 second quarter 18374 13555 2096 1116 third quarter 16940 12508 1797 971 fourth quarter 19325 14290 2044 940 year 1997 71033 52637 7603 3805 1998 1997 basic diluted basic diluted earnings per common share first quarter 060 048 second quarter 086 085 068 third quarter 073 072 060 058 fourth quarter 092 091 057 year 311 308 233 231 item 9item 8 financial statements supplementary data consolidated financial statements report thereon pricewaterhousecoopers llp dated february 1 2000 included exhibit 13 annual report shareholders 1998 b unaudited quarterly financial data twoyear period ended december 31 1999 follows millions except per share amounts net cost operating net 1999 sales goods sold income earnings first quarter 18911 13902 2386 1211 second quarter 20420 14684 3048 1666 third quarter 18461 13247 2729 1375 fourth quarter 18875 13317 2830 1659 year 1999 76667 55150 10993 5911 net cost operating net 1998 sales goods sold income earnings first quarter 18127 13419 2066 991 second quarter 19544 14295 2668 1409 third quarter 18023 13201 2370 1194 fourth quarter 18153 12963 2587 1497 year 1998 73847 53878 9691 5091 amounts shown restated reflect discontinued operations 1999 1998 basic diluted basic diluted earnings per common share first quarter 074 073 060 second quarter 101 099 086 085 third quarter 084 083 073 072 fourth quarter 102 101 092 091 year 361 357 311 308 item 9item 8 financial statements supplementary data following financial statements supplementary financial information included accompanying annual report shareowners 1994 incorporated reference form 10k annual report consolidated financial statements report thereon price waterhouse llp dated january 31 1995 included exhibit 13 annual report shareowners excluding financial review management analysis 1994 b unaudited quarterly financial data twoyear period ended december 31 1994 follows thousands except per share amounts earnings per net cost operating net common 1994 sales goods sold income earnings share first quarter 1010308 775924 60127 33012 031 second quarter 1143808 865976 91766 51569 049 third quarter 1113670 840171 88965 48379 046 fourth quarter 1239684 894978 136149 78180 074 year 1994 4507470 3377049 377007 211140 200 first quarter 952105 728042 45150 3628 004 second quarter 1006773 752816 69344 35937 034 third quarter 973524 736244 64505 35186 033 fourth quarter 1088669 799588 112515 67773 065 year 1993 4021071 3016690 291514 142524 136 reductions lifo inventory quantities increased net earnings per share 001 006 third fourth quarters 1994 002 005 second fourth quarters 1993 respectively fourth quarter 1993 company retroactively changed method accounting postemployment benefits effect change company amounted 210 million net tax resulted restatement companys net earnings first quarter 246 million 024 per share 36 million 004 per share second quarter 1993 company recorded 50 million 003 per share restructure operations charge related sale substantially underground coalmining machinery assets see note 4 consolidated financial statements item 9item 8 financial statements supplementary data consolidated financial statements report thereon pricewaterhousecoopers llp dated february 6 2001 incorporated reference companys current report form 8k dated february 9 2001 b unaudited quarterly financial data twoyear period ended december 31 follows millions except per share amounts net cost operating net 2000 sales goods sold income earnings first quarter 20204 14816 2693 1360 second quarter 22329 16148 3485 1754 third quarter 23008 17138 2460 2519 fourth quarter 22441 16508 2505 1061 year 2000 87982 64610 11143 6694 first quarter 19336 14327 2386 1211 second quarter 20896 15160 3048 1666 third quarter 18889 13675 2729 1375 fourth quarter 19305 13747 2830 1659 year 1999 78426 56909 10993 5911 amounts shown restated reflect adoption emerging issues task force issue 0010 accounting shipping handling fees costs fourth quarter 2000 impact increased net sales cost goods sold 1806 million year 2000 1759 million year 1999 2000 1999 basic diluted basic diluted earnings per common share first quarter 084 083 074 073 second quarter 109 108 101 099 third quarter 156 155 084 083 fourth quarter 066 102 101 year 415 412 361 357 item 9item 8 financial statements supplementary data following financial statements supplementary financial information included accompanying annual report shareowners 1993 incorporated reference form 10k annual report consolidated financial statements report thereon price waterhouse dated february 1 1994 included exhibit 13 annual report shareowners excluding financial review management analysis 1993 b unaudited quarterly financial data twoyear period ended december 31 1993 follows thousands except per share amounts fourth quarter 1993 company retroactively changed method accounting postemployment benefits effect change company amounted 210 million net tax resulted restatement companys net earnings first quarter 246 million 024 per share 36 million 004 per share second quarter 1993 company recorded 50 million 003 per share restructure operations charge related sale substantially underground coalmining machinery assets see note 4 consolidated financial statements reductions lifo inventory quantities increased net earnings per share 002 005 001 002 second fourth quarters 1993 1992 respectively fourth quarter 1992 company retroactively changed method accounting postretirement benefits pensions deferred income taxes effect changes periods prior january 1 1992 amounted 3500 million net tax resulted restatement companys net earnings first quarter 264 million 025 per share net loss 3294 million 316 per share changes also resulted restatement companys net earnings second third quarters year 386 million 037 per share 359 million 035 per share 326 million 031 per share 300 million 029 per share respectively fourth quarter 1992 included results ingersolldresser pump company formed october 1 1992 see note 2 consolidated financial statements third quarter 1992 company recorded 100 million 006 per share restructure operations charge relating aerospace bearings business see note 4 consolidated financial statements fourth quarter 1992 included 700 million restructuring charge relating ingersolldresser pump company companys portion restructure operations charge idp 350 million pretax 257 million 025 per share aftertax item 9item 8 financial statements supplementary data following financial statements supplementary financial information included accompanying annual report shareholders 1997 incorporated reference form 10k annual report consolidated financial statements report thereon price waterhouse llp dated february 3 1998 included exhibit 13 annual report shareholders excluding financial review management analysis 1997 b unaudited quarterly financial data twoyear period ended december 31 1997 follows millions except per share amounts net cost operating net 1997 sales goods sold income earnings first quarter 16394 12284 1666 778 second quarter 18374 13555 2096 1116 third quarter 16940 12508 1797 971 fourth quarter 19325 14290 2044 940 year 1997 71033 52637 7603 3805 first quarter 16049 12088 1506 745 second quarter 17619 13380 1763 923 third quarter 15958 12067 1487 819 fourth quarter 17403 12764 2079 1093 year 1996 67029 50299 6835 3580 1997 1996 basic diluted basic diluted earnings per earnings per earnings per earnings per common share common share common share common share first quarter 048 046 second quarter 068 058 057 third quarter 060 058 050 fourth quarter 057 068 year 233 231 222 221 item 9 nannannannannannannannan