Hamilton, Bermuda, January 26, 2006 – Ingersoll-Rand Company Limited (NYSE:IR), a leading diversified industrial firm, today announced that revenues and earnings from continuing operations increased significantly in the fourth quarter of 2005 compared to the 2004 fourth quarter.
The company reported net earnings of $291.6 million, or EPS of $0.87, for the fourth quarter of 2005. Fourth-quarter earnings included $272.9 million, or EPS of $0.81, from continuing operations, as well as earnings of $18.7 million, or EPS of $0.06, from discontinued operations. The results of discontinued operations include the gains on sale of divested businesses equal to EPS of $0.08 and retained continuing costs of divested operations equal to net cost of $0.02 per share.
Net earnings for the 2004 fourth quarter of $515.2 million, or EPS of $1.48, included $222.3 million, or EPS of $0.64, from continuing operations, as well as $292.9 million, or EPS of $0.84, from discontinued operations. The results of discontinued operations include the gains on sale of divested businesses equal to EPS of $0.79, a benefit of EPS $0.03 for anti-dumping claims under the Continued Dumping Subsidy Offset Act (CDSOA), and net earnings of divested operations equal to EPS of $0.02.
“Our efforts over the last five years to drive organic growth and operational excellence delivered the strong financial results we experienced in the fourth quarter and for full-year 2005,” said Herbert L. Henkel, chairman, president and chief executive officer. “Throughout the year, we demonstrated that our business model works, our strategy is on target, and we possess the employee talent, brand strength, and ability to develop and deliver solutions that add value for our customers. We fully expect our strategy and execution to continue producing strong results across our global markets.”
Additional Highlights for the 2005 Fourth Quarter
Revenues: The company’s revenues increased by more than 10% to $2,713 million, compared to revenues of $2,459 million for the 2004 fourth quarter. Approximately 6 percentage points of the revenue increase was attributable to organic growth with an additional 4 percentage points of growth contributed by acquisitions completed in 2005. Total recurring revenues, which include revenues from parts, service, attachments, rental and used equipment, increased by 18% compared to the fourth quarter of 2004, and accounted for 21% of total revenues. “We continue to deliver innovative products and solutions that meet expressed customer needs,” said Henkel. “Because of this, and expanding markets for our products, we continue to achieve our growth targets.”
Operating Income and Margins: Operating income of $345.7 million for the fourth quarter of 2005 increased by 16% compared to $297.9 million for the fourth quarter of 2004 due to higher volumes and productivity improvement actions. Fourth-quarter operating margins increased to 12.7% compared to 12.1% in 2004. “Our ongoing focus on operational excellence has steadily created a cost structure that allows us to continuously improve our revenue growth leverage,” said Henkel.
Interest and Other Income: Interest expense was $34.6 million for the 2005 fourth quarter compared to $37.0 million in the 2004 fourth quarter, a decrease of $2.4 million. This decrease was primarily due to lower year-over-year interest rates. Other income totaled $13.4 million for the fourth quarter, compared to $0.8 million in other income for the fourth quarter of 2004.
Taxes: The company’s effective tax rate for continuing operations for the fourth quarter of 2005 was 15.9%, compared to 15.1% in the fourth quarter of 2004. A greater portion of income from the United States tax jurisdiction resulted in a higher year-over-year tax rate.
Full-year 2005 Results
Full-year 2005 net revenues were $10,547 million, a 12% increase compared to net revenues of $9,394 million in 2004. Excluding acquisitions, revenues increased by 9%. Recurring revenues were $2,173 million for 2005, an increase of 14% compared to last year. Operating income for 2005 totaled $1,361.8 million and increased by 22% compared to 2004. Operating margins for 2005 were 12.9%, an increase of one percentage point compared to the prior year. The company reported full-year earnings of $1,054.2 million, or EPS of $3.09, which includes earnings from continuing operations of $1,053.1 million, or EPS of $3.09, and net benefits of $1.1 million from discontinued operations. EPS from continuing operations increased by 31% compared to full year 2004. The results of discontinued operations include the gains on sale of divested businesses equal to EPS of $0.10 and retained continuing costs of divested operations equal to net cost of $0.10 per share.
The company reported full-year 2004 earnings of $1,218.7 million, or EPS of $3.47. This included EPS of $2.36 from continuing operations and EPS of $1.11 from discontinued operations. Discontinued operations included EPS of $0.96 from the sale of businesses and EPS of $0.15 from the net earnings of divested businesses.
The company continued to be a strong cash generator with full-year available cash flow in 2005 of $784 million. For the eight years ending in 2005, the company has generated more than $5.0 billion of available cash flow. Return on invested capital was 14.0% for the full year 2005, compared to 13.0% in 2004.
Acquisitions
On December 1, 2005, the company signed a definitive agreement to acquire an 80 percent share of Shenzhen Bocom System Engineering Co. Ltd., a China-based provider of security-systems integration technologies and services. The transaction was completed on January 19, 2006.
Headquartered in Shenzhen, with branch offices in Beijing and Shanghai, Bocom System is the largest independent security-systems integration company in China. The business supplies security-systems design, engineering, installation and integration.
“Bocom System continues the development of Ingersoll-Rand’s global security-systems portfolio, providing technologies, expertise, and related integration services, which expands our capabilities in a large and growing market. During 2005, the company supplemented its organic growth by completing 15 bolt-on acquisitions which added more than $300 million to our full year revenue growth for the year,” said Henkel.
Fourth-quarter Business Review
The company classifies its businesses into five reportable segments based on industry and market focus: Climate Control Technologies, Compact Vehicle Technologies, Construction Technologies, Industrial Technologies and Security Technologies.
Climate Control Technologies provides solutions to transport, preserve, store and display temperature-sensitive products, and includes the market-leading brands of Hussmann
