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Note 1 – Description of Company
Ingersoll-Rand plc (IR-Ireland), an Irish public limited company, and its consolidated subsidiaries (the Company) is a diversified, global company that provides products, services and solutions to enhance the quality and comfort of air in homes and buildings, transport and protect food and perishables, secure homes and commercial properties, and increase industrial productivity and efficiency. The Company’s business segments consist of Climate Solutions, Residential Solutions, Industrial Technologies and Security Technologies, each with strong brands and leading positions within their respective markets. The Company generates revenue and cash primarily through the design, manufacture, sale and service of a diverse portfolio of industrial and commercial products that include well-recognized, premium brand names such as Club Car®, Hussmann®, Ingersoll-Rand®, Schlage®, Thermo King® and Trane®.
On July 1, 2009, Ingersoll-Rand Company Limited (IR-Limited), a Bermuda company, completed a reorganization to change the jurisdiction of incorporation of the parent company of Ingersoll Rand from Bermuda to Ireland (the Ireland Reorganization). As a result, IR-Ireland replaced IR-Limited as the ultimate parent company effective July 1, 2009. In conjunction with the Ireland Reorganization, IR-Limited became a wholly-owned subsidiary of IR-Ireland and the Class A common shareholders of IR-Limited became ordinary shareholders of IR-Ireland. Unless otherwise indicated, all references to the Company prior to July 1, 2009 relate to IR-Limited.
The Ireland Reorganization did not have a material impact on the Company’s financial results. Ingersoll-Rand plc will continue to be subject to United States Securities and Exchange Commission reporting requirements and prepare financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). Shares of Ingersoll-Rand plc will continue to trade on the New York Stock Exchange under the symbol “IR”, the same symbol under which the Ingersoll-Rand Company Limited Class A common shares previously traded.
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Note 2 – Basis of Presentation
The accompanying condensed consolidated financial statements reflect the consolidated operations of the Company and have been prepared in accordance with GAAP as defined by the Financial Accounting Standards Board (FASB) within the FASB Accounting Standards Codification (FASB ASC). In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments, which include normal recurring adjustments, necessary to present fairly the consolidated unaudited results for the interim periods presented. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Ingersoll-Rand plc Annual Report on Form 10-K for the year ended December 31, 2009.
Certain reclassifications of amounts reported in prior years have been made to conform to the 2010 classification. During the fourth quarter of 2009, the sales price condition set forth in the indenture agreement for the Company’s Exchangeable Senior Notes (the Notes) was satisfied and the Notes became exchangeable at the holders’ option during the first quarter 2010. As the debt and equity components of the Notes are accounted for separately, the Company changed the classification of $315.0 million associated with the debt portion of the Notes from Long-term debt to Short-term borrowings and current maturities of long-term debt in the December 31, 2009 Condensed Consolidated Balance Sheet of this Form 10-Q. In addition, the Company changed the classification of $30.0 million associated with the equity portion of the Notes from Capital in excess of par to Temporary equity to reflect the amount of equity that could result in cash settlement at December 31, 2009.
At the close of business on June 5, 2008 (the Acquisition Date), the Company completed its acquisition of 100% of the outstanding common shares of Trane Inc. (Trane). Trane, formerly American Standard Companies Inc., provides systems and services that enhance the quality and comfort of the air in homes and buildings around the world. Trane’s systems and services have leading positions in premium commercial, residential, institutional and industrial markets, a reputation for reliability, high quality and product innovation and a powerful distribution network. The results of operations of Trane have been included in the condensed consolidated financial statements for all periods presented.
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Note 3 – Inventories
Depending on the business, U.S. inventories are stated at the lower of cost or market using the last-in, first-out (LIFO) method or the lower of cost or market using the first-in, first-out (FIFO) method. Non-U.S. inventories are primarily stated at the lower of cost or market using the FIFO method.
The major classes of inventory are as follows:
In millions |
March 31, 2010 |
December 31, 2009 |
||||||
Raw materials |
$ | 364.6 | $ | 353.6 | ||||
Work-in-process |
263.5 | 222.4 | ||||||
Finished goods |
818.5 | 700.1 | ||||||
1,446.6 | 1,276.1 | |||||||
LIFO reserve |
(82.6 | ) | (82.9 | ) | ||||
Total |
$ | 1,364.0 | $ | 1,193.2 | ||||
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Note 4 – Goodwill
The changes in the carrying amount of goodwill are as follows:
In millions |
Climate Solutions |
Residential Solutions |
Industrial Technologies |
Security Technologies |
Total | ||||||||||||||
December 31, 2009 |
$ | 4,978.3 | $ | 682.3 | $ | 372.9 | $ | 572.5 | $ | 6,606.0 | |||||||||
Acquisitions and adjustments |
3.1 | — | — | — | 3.1 | ||||||||||||||
Translation |
(47.2 | ) | — | (4.3 | ) | (13.6 | ) | (65.1 | ) | ||||||||||
March 31, 2010 |
$ | 4,934.2 | $ | 682.3 | $ | 368.6 | $ | 558.9 | $ | 6,544.0 | |||||||||
As a result of the annual impairment testing in the fourth quarter of 2008, the Company recognized a pre-tax, non-cash charge of $2,840.0 million related to the impairment of goodwill within the following segments:
In millions |
Total | |||
Climate Solutions |
$ | (839.8 | ) | |
Residential Solutions |
(1,656.2 | ) | ||
Security Technologies |
(344.0 | ) | ||
Total |
$ | (2,840.0 | ) | |
The Company does not have any accumulated impairment losses subsequent to the adoption of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” other than the amounts recorded in 2008.
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Note 5 – Intangible Assets
The following table sets forth the gross amount of the Company’s intangible assets and related accumulated amortization:
In millions |
March 31, 2010 |
December 31, 2009 |
||||||
Completed technologies/patents |
$ | 202.4 | $ | 204.0 | ||||
Customer relationships |
2,347.1 | 2,358.4 | ||||||
Trademarks |
104.5 | 111.2 | ||||||
Other |
185.3 | 188.1 | ||||||
Total gross finite-lived intangible assets |
2,839.3 | 2,861.7 | ||||||
Accumulated amortization |
(566.1 | ) | (533.0 | ) | ||||
Total net finite-lived intangible assets |
2,273.2 | 2,328.7 | ||||||
Trademarks (indefinite-lived) |
2,714.1 | 2,714.1 | ||||||
Total |
$ | 4,987.3 | $ | 5,042.8 | ||||
Intangible asset amortization expense was $38.8 million and $38.2 million for the three months ended March 31, 2010 and 2009, respectively. Estimated amortization expense on existing intangible assets is approximately $160 million for each of the next five fiscal years.
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Note 6 – Accounts Receivable Purchase Agreements
In connection with the acquisition of Trane, the Company acquired Trane’s accounts receivable purchase agreement (the Trane Facility) in the U.S. As part of the Trane Facility, Trane formed a special-purpose entity (SPE) for the sole purpose of buying and selling receivables generated by Trane. Under the Trane Facility, Trane, irrevocably and without recourse, transferred all eligible accounts receivable to the SPE, which, in turn, sold undivided ownership interests in them to a conduit administered by the participating bank. The assets of the SPE were not available to pay the claims of Trane or any of its subsidiaries.
For the three months ended March 31, 2009, the Company recorded a cash outflow of $12.8 million within cash flows from operating activities, which represented the decrease in the net interests in the receivables sold to the conduits.
On March 31, 2009, the Company expanded the existing Trane Facility to include originators from all four business segments (the Expanded IR Facility). Under the Expanded IR Facility, the Company continuously sold, through certain consolidated special purpose vehicles, designated pools of eligible trade receivables to an affiliated master special purpose vehicle (MSPV) which, in turn, sold undivided ownership interests to three conduits administered by unaffiliated financial institutions. The maximum purchase limit of the three conduits was $325.0 million. The Expanded IR Facility superseded the Trane Facility.
At December 31, 2009, the outstanding balance of eligible trade receivables sold to the MSPV was $544.2 million. However, no net interests were sold to any of the three conduits administered by unaffiliated financial institutions. On February 17, 2010, the Company terminated the Expanded IR Facility prior to its expiration in March 2010.
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Note 7 – Debt and Credit Facilities
Short-term borrowings and current maturities of long-term debt consisted of the following:
In millions |
March 31, 2010 |
December 31, 2009 |
||||
Commercial paper |
$ | 69.5 | $ | — | ||
Debentures with put feature |
343.6 | 343.6 | ||||
Exchangeable senior notes |
318.3 | 315.0 | ||||
Current maturities of long-term debt |
265.4 | 526.5 | ||||
Other short-term borrowings |
10.8 | 6.6 | ||||
Total |
$ | 1,007.6 | $ | 1,191.7 | ||
Commercial Paper Program
The Company uses borrowings under its commercial paper program for general corporate purposes. At December 31, 2009, the Company had no amounts outstanding after repaying $998.7 million during the year. These payments were funded primarily using cash generated from operations. At March 31, 2010, the Company’s outstanding balance was $69.5 million.
Debentures with Put Feature
At March 31, 2010 and December 31, 2009, the Company had outstanding $343.6 million of fixed rate debentures which only requires early repayment at the option of the holder. These debentures contain a put feature that the holders may exercise on each anniversary of the issuance date. If exercised, the Company is obligated to repay in whole or in part, at the holder’s option, the outstanding principal amount (plus accrued and unpaid interest) of the debentures held by the holder. If these options are not exercised, the final maturity dates would range between 2027 and 2028.
In February 2010, holders of these debentures had the option to exercise the put feature on $37.2 million of the outstanding debentures, of which less than $0.1 million were exercised and repaid in February.
Exchangeable Senior Notes Due 2012
In April 2009, the Company issued $345 million of 4.5% Exchangeable Senior Notes (the Notes) through its wholly-owned subsidiary, Ingersoll-Rand Global Holding Company Limited (IR-Global). The Notes are fully and unconditionally guaranteed by each of IR-Ireland, IR-Limited and Ingersoll-Rand International Holding Limited (IR-International). Interest on the Notes will be paid twice a year in arrears. In addition, holders may exchange their notes at their option prior to November 15, 2011 in accordance with specified circumstances set forth in the indenture agreement or anytime on or after November 15, 2011 through their scheduled maturity.
Upon any exchange, the Notes will be paid in cash up to the aggregate principal amount of the notes to be exchanged, the remainder due on the option feature, if any, will be paid in cash, the Company’s ordinary shares or a combination thereof at the option of the Company. The Notes are subject to certain customary covenants, however, none of these covenants are considered restrictive to the Company’s operations.
The Company accounts for the Notes in accordance with GAAP, which requires the Company to allocate the proceeds between debt and equity, in a manner that reflects the Company’s nonconvertible debt borrowing rate. The Company allocated approximately $305 million of the gross proceeds to debt, with the remaining discount of approximately $40 million (approximately $39 million after allocated fees) recorded within equity. Additionally, the Company will amortize the discount into earnings over a three-year period.
During the first quarter of 2010, the sales price condition set forth in the indenture agreement for the Notes was satisfied. As a result, the Notes may be exchangeable at the holders’ option during the second quarter 2010. Therefore, the Company classified the debt portion of the Notes as short-term in the Condensed Consolidated Balance Sheet at March 31, 2010. In addition, the Company classified the equity portion of the Notes as Temporary equity to reflect the amount that could result in cash settlement at March 31, 2010.
Long-term debt excluding current maturities consisted of the following:
In millions |
March 31, 2010 |
December 31, 2009 |
||||
6.000% Senior notes due 2013 |
$ | 599.8 | $ | 599.8 | ||
9.50% Senior notes due 2014 |
655.0 | 655.0 | ||||
5.50% Senior notes due 2015 |
199.7 | 199.7 | ||||
4.75% Senior notes due 2015 |
299.4 | 299.3 | ||||
6.875% Senior notes due 2018 |
749.1 | 749.1 | ||||
9.00% Debentures due 2021 |
125.0 | 125.0 | ||||
7.20% Debentures due 2011-2025 |
112.5 | 112.5 | ||||
6.48% Debentures due 2025 |
149.7 | 149.7 | ||||
Other loans and notes |
33.5 | 14.8 | ||||
Total |
$ | 2,923.7 | $ | 2,904.9 | ||
The fair value of the Company’s debt was $4,315.2 million and $4,459.6 million at March 31, 2010 and December 31, 2009, respectively. The fair value of debt was primarily based upon quoted market values.
Senior Notes Due 2014
In April 2009, the Company issued $655 million of 9.5% Senior Notes through its wholly-owned subsidiary, IR-Global. The notes are fully and unconditionally guaranteed by each of IR-Ireland, IR-Limited and IR-International, another wholly-owned indirect subsidiary of IR-Limited. Interest on the fixed rate notes will be paid twice a year in arrears. The Company has the option to redeem them in whole or in part at any time, and from time to time, prior to their stated maturity date at redemption prices set forth in the indenture agreement. The notes are subject to certain customary covenants, however, none of these covenants are considered restrictive to the Company’s operations.
Credit Facilities
At March 31, 2010, the Company’s committed revolving credit facilities totaled $2.25 billion, of which $1.25 billion expires in August 2010 and $1.0 billion expires in June 2011. These lines are unused and provide support for the Company’s commercial paper program as well as for other general corporate purposes.
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Note 8 – Financial Instruments
In the normal course of business, the Company uses various financial instruments, including derivative instruments, to manage the risks associated with interest rate, currency rate, commodity price and share-based compensation exposures. These financial instruments are not used for trading or speculative purposes.
On the date a derivative contract is entered into, the Company designates the derivative instrument either as a cash flow hedge of a forecasted transaction, a cash flow hedge of a recognized asset or liability, or as an undesignated derivative. The Company formally documents its hedge relationships, including identification of the derivative instruments and the hedged items, as well as its risk management objectives and strategies for undertaking the hedge transaction. This process includes linking derivative instruments that are designated as hedges to specific assets, liabilities or forecasted transactions.
The Company also assesses both at the inception and at least quarterly thereafter, whether the derivatives used in cash flow hedging transactions are highly effective in offsetting the changes in the cash flows of the hedged item. Any ineffective portion of a derivative instrument’s change in fair value is recorded in the income statement in the period of change. If the hedging relationship ceases to be highly effective, or it becomes probable that a forecasted transaction is no longer expected to occur, the hedging relationship will be undesignated and any future gains and losses on the derivative instrument would be recorded in the income statement.
The fair market value of derivative instruments are determined through market-based valuations and may not be representative of the actual gains or losses that will be recorded when these instruments mature due to future fluctuations in the markets in which they are traded.
Currency and Commodity Derivative Instruments
The notional amounts of the Company’s currency derivatives were $906.2 million and $884.8 million at March 31, 2010 and December 31, 2009, respectively. At March 31, 2010 and December 31, 2009, a deferred loss of $1.3 million and $1.5 million, net of tax, respectively, was included in Accumulated other comprehensive income (AOCI) related to the fair value of the Company’s currency derivatives designated as accounting hedges. The amount expected to be reclassified into earnings over the next twelve months is $1.3 million. The actual amounts that will be reclassified into earnings may vary from this amount as a result of changes in market conditions. Gains and losses associated with the Company’s currency derivatives not designated as hedges are recorded in earnings as changes in fair value occur. At March 31, 2010, the maximum term of the Company’s currency derivatives was 12 months.
As a result of the acquisition of Trane in June 2008, the Company assumed a cross currency swap that fixed, in U.S. dollars, the currency cash flows on the £60.0 million 8.25% senior notes. These senior notes matured on June 1, 2009 along with the cross currency swap. The cross currency swap met the criteria to be accounted for as a foreign currency cash flow hedge, which allowed for deferral of any associated gains or losses within AOCI until settlement. The deferred gain remaining in AOCI related to the cross currency swap was released into earnings upon maturity.
The Company had no commodity derivatives outstanding as of March 31, 2010 and December 31, 2009. During 2008, the Company discontinued the use of hedge accounting for its commodity hedges at which time the Company recognized into the income statement all deferred gains and losses related to its existing commodity hedges at the time of discontinuance. All further gains and losses associated with the Company’s commodity derivatives were recorded in earnings as changes in fair value occurred.
Other Derivative Instruments
During the third quarter of 2008, the Company entered into interest rate locks for the forecasted issuance of approximately $1.4 billion of Senior Notes due in 2013 and 2018. These interest rate locks met the criteria to be accounted for as cash flow hedges of a forecasted transaction. Consequently, the changes in fair value of the interest rate locks were deferred in AOCI. No further gain or loss will be deferred in AOCI related to these interest rate locks as the contracts were effectively terminated upon issuance of the underlying debt. However, the amount of AOCI associated with these interest rate locks at the time of termination will be recognized into interest expense over the term of the notes. At March 31, 2010 and December 31, 2009, $12.1 million and $12.6 million, respectively, of deferred losses remained in AOCI related to these interest rate locks. The amount expected to be reclassified into interest expense over the next twelve months is $1.8 million.
In March 2005, the Company entered into interest rate locks for the forecasted issuance of $300 million of Senior Notes due 2015. These interest rate locks met the criteria to be accounted for as cash flow hedges of a forecasted transaction. Consequently, the changes in fair value of the interest rate locks were deferred in AOCI. No further gain or loss will be deferred in AOCI related to these interest rate locks as the contracts were effectively terminated upon issuance of the underlying debt. However, the amount of AOCI associated with these interest rate locks at the time of termination will be recognized into interest expense over the term of the notes. At March 31, 2010 and December 31, 2009, $6.3 million and $6.5 million, respectively, of deferred losses remained in AOCI related to these interest rate locks. The amount expected to be reclassified into interest expense over the next twelve months is $1.1 million.
The following table presents the fair values of derivative instruments included within the Condensed Consolidated Balance Sheet as of March 31, 2010 and December 31, 2009:
Asset derivatives |
Liability derivatives |
|||||||||||
In millions |
March 31, 2010 |
December 31, 2009 |
March 31, 2010 |
December 31, 2009 |
||||||||
Derivatives designated as hedges: |
||||||||||||
Currency derivatives |
$ | 0.4 | $ | 0.3 | $ | 2.8 | $ | 2.7 | ||||
Derivatives not designated as hedges: |
||||||||||||
Currency derivatives |
19.1 | 7.0 | 1.1 | 5.2 | ||||||||
Total derivatives |
$ | 19.5 | $ | 7.3 | $ | 3.9 | $ | 7.9 | ||||
Asset and liability derivatives included in the table above are recorded within Other current assets and Accrued expenses and other current liabilities, respectively, on the Condensed Consolidated Balance Sheet.
The following table represents the amounts associated with derivatives designated as hedges affecting the Condensed Consolidated Income Statement and AOCI for the three months ended March 31:
Amount of gain (loss) deferred in AOCI |
Location of gain (loss) reclassified from AOCI and recognized |
Amount of gain (loss) reclassified from AOCI and recognized into earnings |
|||||||||||||||
In millions |
2010 | 2009 |
into earnings |
2010 | 2009 | ||||||||||||
Currency derivatives |
$ | (1.0 | ) | $ | 0.5 | Other, net | $ | (1.1 | ) | $ | 5.1 | ||||||
Interest rate locks |
— | — | Interest expense | (0.7 | ) | (0.7 | ) | ||||||||||
Total |
$ | (1.0 | ) | $ | 0.5 | $ | (1.8 | ) | $ | 4.4 | |||||||
The following table represents the amounts associated with derivatives not designated as hedges affecting the Condensed Consolidated Income Statement for the three months ended March 31:
In millions |
|||||||||
Derivatives not designated as hedges under SFAS 133 |
Location of gain (loss) |
Amount of gain (loss) recognized in earnings |
|||||||
2010 | 2009 | ||||||||
Currency derivatives |
Other, net | $ | 20.2 | $ | (12.7 | )* | |||
Commodity derivatives |
Other, net | — | 0.2 | ||||||
Total |
$ | 20.2 | $ | (12.5 | ) | ||||
* | The gains and losses associated with the Company’s undesignated currency derivatives are materially offset in the Condensed Consolidated Income Statement by changes in the fair value of the underlying transactions. |
Concentration of Credit Risk
The counterparties to the Company’s forward contracts consist of a number of investment grade major international financial institutions. The Company could be exposed to losses in the event of nonperformance by the counterparties. However, the credit ratings and the concentration of risk in these financial institutions are monitored on a continuous basis and present no significant credit risk to the Company.
Fair Value of Financial Instruments
The carrying value of cash and cash equivalents, accounts receivable, short-term borrowings and accounts payable are a reasonable estimate of their fair value due to the short-term nature of these instruments.
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Note 9 – Pensions and Postretirement Benefits Other than Pensions
The Company sponsors several U.S. and non-U.S. pension plans covering substantially all of our U.S. employees and retirees as well as a portion of our non-U.S. employees and retirees. In addition, postretirement plans provide certain benefits to eligible employees.
Pension Plans
The Company has noncontributory defined benefit pension plans covering substantially all U.S. employees. Most of the plans for non-collectively bargained U.S. employees provide benefits on an average pay formula while most plans for collectively bargained U.S. employees provide benefits on a flat benefit formula. Effective January 1, 2010, non-collectively bargained U.S. employees of Trane began to participate in the Company’s main pension plan for U.S. non-collectively bargained employees. In addition, the Company maintains pension plans for certain non-U.S. employees in other countries. These plans generally provide benefits based on earnings and years of service. The Company also maintains additional other supplemental benefit plans for officers and other key employees.
The components of the Company’s pension-related costs for the three months ended March 31 are as follows:
In millions |
2010 | 2009 | ||||||
Service cost |
$ | 25.7 | $ | 17.5 | ||||
Interest cost |
49.0 | 48.5 | ||||||
Expected return on plan assets |
(49.3 | ) | (43.9 | ) | ||||
Net amortization of: |
||||||||
Prior service costs |
2.0 | 2.1 | ||||||
Transition amount |
— | 0.1 | ||||||
Plan net actuarial losses |
14.1 | 14.3 | ||||||
Net periodic pension benefit cost |
41.5 | 38.6 | ||||||
Net curtailment and settlement (gains) losses |
6.2 | 0.8 | ||||||
Net periodic pension benefit cost after net curtailment and settlement (gains) losses |
$ | 47.7 | $ | 39.4 | ||||
Amounts recorded in continuing operations |
$ | 45.9 | $ | 36.6 | ||||
Amounts recorded in discontinued operations |
1.8 | 2.8 | ||||||
Total |
$ | 47.7 | $ | 39.4 | ||||
The Company made employer contributions of $27.9 million and $25.7 million to its defined benefit pension plans during the three months ended March 31, 2010 and 2009, respectively.
The curtailment and settlement losses in 2010 and 2009 are associated with lump sum distributions under supplemental benefit plans for officers and other key employees.
Postretirement Benefits Other Than Pensions
The Company sponsors several postretirement plans that provide for health-care benefits, and in some instances, life insurance benefits that cover certain eligible employees. These plans are unfunded and have no plan assets, but are instead funded by the Company on a pay as you go basis in the form of direct benefit payments. Generally, postretirement health benefits are contributory with contributions adjusted annually. Life insurance plans for retirees are primarily noncontributory.
The components of net periodic postretirement benefit cost for the three months ended March 31 are as follows:
In millions |
2010 | 2009 | ||||||
Service cost |
$ | 2.4 | $ | 2.6 | ||||
Interest cost |
12.9 | 14.3 | ||||||
Net amortization of prior service gains |
(0.8 | ) | (0.9 | ) | ||||
Net amortization of net actuarial losses |
4.2 | 4.2 | ||||||
Net periodic postretirement benefit cost |
$ | 18.7 | $ | 20.2 | ||||
Amounts recorded in continuing operations |
$ | 11.3 | $ | 12.1 | ||||
Amounts recorded in discontinued operations |
7.4 | 8.1 | ||||||
Total |
$ | 18.7 | $ | 20.2 | ||||
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Note 10 – Fair Value Measurement
FASB ASC 820, “Fair Value Measurements and Disclosures” (ASC 820) establishes a framework for measuring fair value that is based on the inputs market participants use to determine the fair value of an asset or liability and establishes a fair value hierarchy to prioritize those inputs. The fair value hierarchy is comprised of three levels that are described below:
• |
Level 1 – Inputs based on quoted prices in active markets for identical assets or liabilities. |
• |
Level 2 – Inputs other than Level 1 quoted prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability. |
• |
Level 3 – Unobservable inputs based on little or no market activity and that are significant to the fair value of the assets and liabilities. |
The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability based on the best information available under the circumstances. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and liabilities measured at fair value on a recurring basis at March 31, 2010 are as follows:
Fair value measurements | Total | |||||||||||
In millions |
Level 1 | Level 2 | Level 3 | fair value | ||||||||
Assets: | ||||||||||||
Cash and cash equivalents |
$ | 599.1 | $ | — | $ | — | $ | 599.1 | ||||
Marketable securities |
12.2 | — | — | 12.2 | ||||||||
Derivative instruments |
— | 19.5 | — | 19.5 | ||||||||
Benefit trust assets |
15.9 | 151.4 | — | 167.3 | ||||||||
Total |
$ | 627.2 | $ | 170.9 | $ | — | $ | 798.1 | ||||
Liabilities: | ||||||||||||
Derivative instruments |
$ | — | $ | 3.9 | $ | — | $ | 3.9 | ||||
Benefit trust liabilities |
17.3 | 150.7 | — | 168.0 | ||||||||
Total |
$ | 17.3 | $ | 154.6 | $ | — | $ | 171.9 | ||||
The methodologies used by the Company to determine the fair value of its financial assets and liabilities at March 31, 2010 are the same as those used at December 31, 2009.
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Note 13 – Restructuring Activities
Restructuring charges recorded during the three months ended March 31, 2010 and 2009 were as follows:
March 31, | |||||||
In millions |
2010 | 2009 | |||||
Climate Solutions |
$ | 5.0 | $ | 0.3 | |||
Residential Solutions |
1.2 | 0.2 | |||||
Industrial Technologies |
1.3 | 8.8 | |||||
Security Technologies |
3.0 | 0.1 | |||||
Corporate and Other |
(0.1 | ) | 1.5 | ||||
Total |
$ | 10.4 | $ | 10.9 | |||
Cost of goods sold |
$ | 7.4 | $ | 3.3 | |||
Selling and administrative |
3.0 | 7.6 | |||||
Total |
$ | 10.4 | $ | 10.9 | |||
The changes in the restructuring reserve were as follows:
In millions |
Climate Solutions |
Residential Solutions |
Industrial Technologies |
Security Technologies |
Corporate and Other |
Total | ||||||||||||||||||
December 31, 2009 |
$ | 16.3 | $ | 7.8 | $ | 4.3 | $ | 18.2 | $ | 8.3 | $ | 54.9 | ||||||||||||
Additions |
5.0 | 1.2 | 1.3 | 3.0 | (0.1 | ) | 10.4 | |||||||||||||||||
Cash and non-cash uses |
(11.2 | ) | (2.5 | ) | (2.2 | ) | (1.6 | ) | (2.3 | ) | (19.8 | ) | ||||||||||||
Currency translation |
— | — | — | (0.9 | ) | — | (0.9 | ) | ||||||||||||||||
March 31, 2010 |
$ | 10.1 | $ | 6.5 | $ | 3.4 | $ | 18.7 | $ | 5.9 | $ | 44.6 | ||||||||||||
In October 2008, the Company announced an enterprise-wide restructuring program necessitated by the lower demand in many of the Company’s end markets resulting from the overall deterioration in global economic conditions that began in the second half of 2008 and continued through 2009. The program included streamlining the footprint of manufacturing facilities and reducing the general and administrative cost base across all sectors of the Company. During the three months ended March 31, 2009, the Company incurred costs of $10.9 million associated with this program.
During the three months ended March 31, 2010, the Company incurred costs of $10.4 million associated with ongoing restructuring actions. These actions included workforce reductions as well as the consolidation of manufacturing facilities in an effort to increase efficiencies across multiple lines of business. As of March 31, 2010, the Company had $44.6 million accrued for costs associated with these ongoing restructuring actions, of which a majority will be paid throughout the remainder of 2010.
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Note 14 – Other, Net
The components of Other, net for the three months ended March 31 are as follows:
In millions |
2010 | 2009 | |||||
Interest income |
$ | 2.4 | $ | 4.3 | |||
Exchange gain (loss) |
(0.3 | ) | 1.4 | ||||
Earnings from equity investments |
2.7 | 1.4 | |||||
Other |
3.3 | 5.4 | |||||
Other, net |
$ | 8.1 | $ | 12.5 | |||
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Note 15 – Income Taxes
The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income or deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. In the normal course of business the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Brazil, Canada, Germany, Ireland, Italy, the Netherlands and the United States. In general, the examination of the Company’s material tax returns is completed for the years prior to 2000, with certain matters being resolved through appeals and litigation.
On July 20, 2007, the Company received a notice from the IRS containing proposed adjustments to the Company’s tax filings in connection with an audit of the 2001 and 2002 tax years. The IRS did not contest the validity of the Company’s reincorporation in Bermuda. The most significant adjustments proposed by the IRS involve treating the entire intercompany debt incurred in connection with the Company’s reincorporation in Bermuda as equity. As a result of this recharacterization, the IRS disallowed the deduction of interest paid on the debt and imposed dividend withholding taxes on the payments denominated as interest. The IRS also asserted an alternative argument to be applied if the intercompany debt is respected as debt. In that circumstance, the IRS proposed to ignore the entities that hold the debt and to which the interest was paid and impose 30% withholding tax on a portion of the interest payments as if they were made directly to a company that was not eligible for reduced U.S. withholding tax under a U.S. income tax treaty. The IRS asserted under this alternative theory that the Company owes additional taxes with respect to 2002 of approximately $84 million plus interest. If either of these positions were upheld in their entirety the Company would be required to record additional charges. The Company strongly disagreed with the view of the IRS and filed a protest with the IRS in the third quarter of 2007.
On January 12, 2010, the Company received an amended notice from the IRS eliminating its assertion that the intercompany debt incurred in connection with the Company’s reincorporation in Bermuda should be treated as equity. However, the IRS continues to assert the alternative position described above and proposes adjustments to the Company’s 2001 and 2002 tax filings. In addition, the IRS provided notice on January 19, 2010, that it is assessing penalties of 30% on the asserted underpayment of tax described above.
The Company has and intends to continue to vigorously contest these proposed adjustments. The Company, in consultation with its outside advisors, carefully considered the form and substance of the Company’s intercompany financing arrangements including the actions necessary to qualify for the benefits of the applicable U.S. income tax treaties. The Company believes that these financing arrangements are in accordance with the laws of the relevant jurisdictions including the U.S., that the entities involved should be respected and that the interest payments qualify for the U.S. income tax treaty benefits claimed.
Although the outcome of this matter cannot be predicted with certainty, based upon an analysis of the strength of its position, the Company believes that it is adequately reserved for this matter. As the Company moves forward to resolve this matter with the IRS, it is reasonably possible that the reserves established may be adjusted within the next 12 months. However, the Company does not expect that the ultimate resolution will have a material adverse impact on its future results of operations or financial position. At this time, the IRS has not proposed any similar adjustments for years subsequent to 2002. However, if all or a portion of these adjustments proposed by the IRS are ultimately sustained, it is likely to also affect subsequent tax years.
The Company believes that it has adequately provided for any reasonably foreseeable resolution of any tax disputes, but will adjust its reserves if events so dictate in accordance with GAAP. To the extent that the ultimate results differ from the original or adjusted estimates of the Company, the effect will be recorded in the provision for income taxes.
Total unrecognized tax benefits as of March 31, 2010 and December 31, 2009 were $522.1 million and $525.1 million, respectively.
As a result of the Patient Protection and Affordable Care Act (the Act) signed into law on March 23, 2010 and the Health Care and Education Reconciliation Bill of 2010 signed into law on March 30, 2010 (together with the Act, the Healthcare Reform Legislation), effective 2013, the tax benefits available to the Company will be reduced to the extent its prescription drug expenses are reimbursed under the Medicare Part D retiree drug subsidy program. Although the provisions of the Healthcare Reform Legislation relating to the retiree drug subsidy program do not take effect until 2013, the Company is required to recognize the full accounting impact in its financial statements in the reporting period in which the Healthcare Reform Legislation is enacted. As retiree healthcare liabilities and related tax impacts are already reflected in the Company’s financial statements, the Healthcare Reform Legislation resulted in a non-cash charge to income tax expense in the first quarter of 2010 of $40.5 million.
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Note 16 – Divestitures and Discontinued Operations
The components of discontinued operations for the three months ended March 31 are as follows:
In millions |
2010 | 2009 | ||||||
Revenues |
$ | — | $ | — | ||||
Pre-tax earnings (loss) from operations |
$ | (11.6 | ) | $ | (19.3 | ) | ||
Pre-tax gain (loss) on sale |
(0.4 | ) | 4.7 | |||||
Tax expense |
1.6 | 8.3 | ||||||
Discontinued operations, net |
$ | (10.4 | ) | $ | (6.3 | ) | ||
Discontinued operations by business for the three months ended March 31 are as follows:
In millions |
2010 | 2009 | ||||||
Compact Equipment, net of tax |
$ | 1.3 | $ | (0.4 | ) | |||
Road Development, net of tax |
0.3 | 4.6 | ||||||
Other discontinued operations, net of tax |
(12.0 | ) | (10.5 | ) | ||||
Total discontinued operations, net of tax |
$ | (10.4 | ) | $ | (6.3 | ) | ||
Compact Equipment Divestiture
On November 30, 2007, the Company completed the sale of its Bobcat, Utility Equipment and Attachments businesses (collectively, Compact Equipment) to Doosan Infracore for gross proceeds of approximately $4.9 billion, subject to post-closing purchase price adjustments. Compact Equipment manufactured and sold compact equipment, including skid-steer loaders, compact track loaders, mini-excavators and telescopic tool handlers; portable air compressors, generators and light towers; general-purpose light construction equipment; and attachments. The Company is currently in the process of resolving the final purchase price adjustments with Doosan Infracore.
Road Development Divestiture
On April 30, 2007, the Company completed the sale of its Road Development business unit to AB Volvo (publ) for cash proceeds of approximately $1.3 billion. The Road Development business unit manufactured and sold asphalt paving equipment, compaction equipment, milling machines and construction-related material handling equipment.
Other Discontinued Operations
The Company has retained costs from previously sold businesses that mainly include costs related to postretirement benefits, product liability and legal costs (mostly asbestos-related).
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Note 18 – Business Segment Information
In the fourth quarter of 2009, the Company realigned its external reporting structure to more closely reflect our corporate and business strategies and to promote additional productivity and growth. The Company’s segments are now as follows: Climate Solutions, Residential Solutions, Industrial Technologies and Security Technologies. As part of the change, the Company eliminated the Air Conditioning Systems and Services segment which represented the acquired Trane businesses and created two new reportable segments, the Climate Solutions segment and the Residential Solutions segment.
A summary of operations by reportable segment for the three months ended March 31 is as follows:
In millions |
2010 | 2009 | ||||||
Net revenues | ||||||||
Climate Solutions |
$ | 1,620.5 | $ | 1,600.2 | ||||
Residential Solutions |
395.4 | 392.7 | ||||||
Industrial Technologies |
544.7 | 537.6 | ||||||
Security Technologies |
392.8 | 402.4 | ||||||
Total |
$ | 2,953.4 | $ | 2,932.9 | ||||
Operating income (loss) | ||||||||
Climate Solutions |
$ | 30.2 | $ | 4.3 | ||||
Residential Solutions |
14.7 | (4.3 | ) | |||||
Industrial Technologies |
59.3 | 17.2 | ||||||
Security Technologies |
64.8 | 64.9 | ||||||
Unallocated corporate expense |
(35.5 | ) | (32.2 | ) | ||||
Total |
$ | 133.5 | $ | 49.9 | ||||
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Note 19 – Commitments and Contingencies
The Company is involved in various litigations, claims and administrative proceedings, including those related to environmental and product liability matters. Amounts recorded for identified contingent liabilities are estimates, which are reviewed periodically and adjusted to reflect additional information when it becomes available. Subject to the uncertainties inherent in estimating future costs for contingent liabilities, management believes that any liability which may result from these legal matters would not have a material adverse effect on the financial condition, results of operations, liquidity or cash flows of the Company.
Environmental Matters
The Company continues to be dedicated to an environmental program to reduce the utilization and generation of hazardous materials during the manufacturing process and to remediate identified environmental concerns. As to the latter, the Company is currently engaged in site investigations and remediation activities to address environmental cleanup from past operations at current and former manufacturing facilities.
The Company is sometimes a party to environmental lawsuits and claims and has received notices of potential violations of environmental laws and regulations from the Environmental Protection Agency and similar state authorities. It has also been identified as a potentially responsible party (PRP) for cleanup costs associated with off-site waste disposal at federal Superfund and state remediation sites. For all such sites, there are other PRPs and, in most instances, the Company’s involvement is minimal.
In estimating its liability, the Company has assumed it will not bear the entire cost of remediation of any site to the exclusion of other PRPs who may be jointly and severally liable. The ability of other PRPs to participate has been taken into account, based generally on the parties’ financial condition and probable contributions on a per site basis. Additional lawsuits and claims involving environmental matters are likely to arise from time to time in the future.
During the three months ended March 31, 2010, the Company spent $3.1 million for environmental remediation at sites presently or formerly owned or leased by us. As of March 31, 2010 and December 31, 2009, the Company has recorded reserves for environmental matters of $90.1 million and $93.3 million, respectively. The Company believes that these expenditures will continue and may increase over time. Given the evolving nature of environmental laws, regulations and technology, the ultimate cost of future compliance is uncertain.
Asbestos Matters
Certain wholly-owned subsidiaries of the Company are named as defendants in asbestos-related lawsuits in state and federal courts. In virtually all of the suits, a large number of other companies have also been named as defendants. The vast majority of those claims has been filed against either Ingersoll-Rand Company (IR-New Jersey) or Trane and generally allege injury caused by exposure to asbestos contained in certain historical products sold by IR-New Jersey or Trane, primarily pumps, boilers and railroad brake shoes. Neither IR-New Jersey nor Trane was a producer or manufacturer of asbestos, however, some formerly manufactured products utilized asbestos-containing components such as gaskets and packings purchased from third-party suppliers.
Prior to the fourth quarter of 2007, the Company recorded a liability (which it periodically updated) for its actual and anticipated future asbestos settlement costs projected seven years into the future. The Company did not record a liability for future asbestos settlement costs beyond the seven-year period covered by its reserve because such costs previously were not reasonably estimable for the reasons detailed below.
In the fourth quarter of 2007, the Company again reviewed its history and experience with asbestos-related litigation and determined that it had now become possible to make a reasonable estimate of its total liability for pending and unasserted potential future asbestos-related claims. This determination was based upon the Company’s analysis of developments in asbestos litigation, including the substantial and continuing decline in the filing of non-malignancy claims against the Company, the establishment in many jurisdictions of inactive or deferral dockets for such claims, the decreased value of non-malignancy claims because of changes in the legal and judicial treatment of such claims, increasing focus of the asbestos litigation upon malignancy claims, primarily those involving mesothelioma, a cancer with a known historical and predictable future annual incidence rate, and the Company’s substantial accumulated experience with respect to the resolution of malignancy claims, particularly mesothelioma claims, filed against it.
Accordingly, in the fourth quarter of 2007, the Company retained Dr. Thomas Vasquez of Analysis, Research & Planning Corporation (collectively, ARPC) to assist it in calculating an estimate of the Company’s total liability for pending and unasserted future asbestos-related claims. ARPC is a respected expert in performing complex calculations such as this. ARPC has been involved in many asbestos-related valuations of current and future liabilities, and its valuation methodologies have been accepted by numerous courts.
The methodology used by ARPC to project the Company’s total liability for pending and unasserted potential future asbestos-related claims relied upon and included the following factors, among others:
• |
ARPC’s interpretation of a widely accepted forecast of the population likely to have been occupationally exposed to asbestos; |
• |
epidemiological studies estimating the number of people likely to develop asbestos-related diseases such as mesothelioma and lung cancer; |
• |
the Company’s historical experience with the filing of non-malignancy claims against it and the historical ratio between the numbers of non-malignancy and lung cancer claims filed against the Company; |
• |
ARPC’s analysis of the number of people likely to file an asbestos-related personal injury claim against the Company based on such epidemiological and historical data and the Company’s most recent three-year claims history; |
• |
an analysis of the Company’s pending cases, by type of disease claimed; |
• |
an analysis of the Company’s most recent three-year history to determine the average settlement and resolution value of claims, by type of disease claimed; |
• |
an adjustment for inflation in the future average settlement value of claims, at a 2.5% annual inflation rate, adjusted downward to 1.5% to take account of the declining value of claims resulting from the aging of the claimant population; |
• |
an analysis of the period over which the Company has and is likely to resolve asbestos-related claims against it in the future. |
Based on these factors, ARPC calculated a total estimated liability of $755 million for the Company to resolve all pending and unasserted potential future claims through 2053, which is ARPC’s reasonable best estimate of the time it will take to resolve asbestos-related claims. This amount is on a pre-tax basis, not discounted for the time-value of money, and excludes the Company’s defense fees (which will continue to be expensed by the Company as they are incurred). After considering ARPC’s analysis and the factors listed above, in the fourth quarter of 2007, the Company increased its recorded liability for asbestos claims by $538 million, from $217 million to $755 million.
In addition, during the fourth quarter of 2007, the Company recorded an $89 million increase in its assets for probable asbestos-related insurance recoveries to $250 million. This represents amounts due to the Company for previously paid and settled claims and the probable reimbursements relating to its estimated liability for pending and future claims. In calculating this amount, the Company used the estimated asbestos liability for pending and projected future claims calculated by ARPC. It also considered the amount of insurance available, gaps in coverage, allocation methodologies, solvency ratings and creditworthiness of the insurers, the amounts already recovered from and the potential for settlements with insurers, and the terms of existing settlement agreements with insurers.
During the fourth quarter of 2007, the Company recorded a non-cash charge to earnings of discontinued operations of $449 million ($277 million after-tax), which is the difference between the amount by which the Company increased its total estimated liability for pending and projected future asbestos-related claims and the amount that the Company expects to recover from insurers with respect to that increased liability.
In connection with our acquisition of Trane, the Company requested ARPC to assist in calculating Trane’s asbestos-related valuations of current and future liabilities. As required by GAAP the Company is required to record the assumed asbestos obligations and associated insurance-related assets at their fair value at the Acquisition Date. The Company estimated that the assumed asbestos obligation and associated insurance-related assets at the Acquisition Date to be $494 million and $249 million, respectively. These amounts were estimated based on certain assumptions and factors consistent with those described above.
Trane continues to be in litigation against certain carriers whose policies it believes provide coverage for asbestos claims. The insurance carriers named in this suit have challenged Trane’s right to recovery. Trane filed the action in April 1999 in the Superior Court of New Jersey, Middlesex County, against various primary and lower layer excess insurance carriers, seeking coverage for environmental claims (the NJ Litigation). The NJ Litigation was later expanded to also seek coverage for asbestos-related liabilities from twenty-one primary and lower layer excess carriers and underwriting syndicates. The environmental claims against the insurers in the NJ Litigation have been resolved or dismissed without prejudice for later resolution. On September 19, 2005, the court granted Trane’s motion to add claims for insurance coverage for asbestos-related liabilities against 16 additional insurers and 117 new insurance policies to the NJ Litigation. The court also required the parties to submit all contested matters to mediation. Trane engaged in its first mediation session with the NJ Litigation defendants on January 18, 2006 and has engaged in active discussions since that time.
Trane has now settled with the majority of the insurers in the NJ Litigation, collectively accounting for approximately 95% of its recorded asbestos-related liability insurance receivable as of January 31, 2010. Most, although not all, of Trane’s settlement agreements constitute “coverage-in-place” arrangements, in which the insurer signatories agree to reimburse Trane for specified portions of its costs for asbestos bodily injury claims and Trane agrees to certain claims-handling protocols and grants to the insurer signatories certain releases and indemnifications.
The amounts recorded by the Company for asbestos-related liabilities and insurance-related assets are based on currently available information. The Company’s actual liabilities or insurance recoveries could be significantly higher or lower than those recorded if assumptions used in the Company’s or ARPC’s calculations vary significantly from actual results. Key variables in these assumptions are identified above and include the number and type of new claims to be filed each year, the average cost of resolution of each such new claim, the resolution of coverage issues with insurance carriers, and the solvency risk with respect to the Company’s insurance carriers. Furthermore, predictions with respect to these variables are subject to greater uncertainty as the projection period lengthens. Other factors that may affect the Company’s liability include uncertainties surrounding the litigation process from jurisdiction to jurisdiction and from case to case, reforms that may be made by state and federal courts, and the passage of state or federal tort reform legislation.
The aggregate amount of the stated limits in insurance policies available to the Company for asbestos-related claims acquired over many years and from many different carriers, is substantial. However, limitations in that coverage, primarily due to the considerations described above, are expected to result in the projected total liability to claimants substantially exceeding the probable insurance recovery.
From receipt of its first asbestos claims more than twenty five years ago to December 31, 2009, the Company has resolved (by settlement or dismissal) approximately 256,000 claims arising from the legacy Ingersoll Rand businesses. The total amount of all settlements paid by the Company (excluding insurance recoveries) and by its insurance carriers is approximately $410 million, for an average payment per resolved claim of $1,595. The average payment per claim resolved during the year ended December 31, 2009 was $12,136. Because claims are frequently filed and settled in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period.
The table below provides additional information regarding asbestos-related claims filed against the legacy Ingersoll Rand businesses, excluding those filed against Trane, reflecting updated information for the last three years.
2009 | 2008 | 2007 | |||||||
Open claims - January 1 |
63,309 | 104,296 | 105,363 | ||||||
New claims filed |
4,821 | 4,567 | 5,399 | ||||||
Claims settled |
(2,514 | ) | (3,693 | ) | (4,993 | ) | |||
Claims dismissed * |
(1,729 | ) | (41,861 | ) | (1,473 | ) | |||
Open claims - December 31 |
63,887 | 63,309 | 104,296 | ||||||
* | The significant increase in dismissals in 2008 is attributed to the dismissal of large numbers of dormant and/or inactive cases in Mississippi and New York. This amount reflects the Company’s emphasis on resolution of higher value malignancy claims, particularly mesothelioma claims, rather than lower value non-malignancy claims, which are more heavily represented in the Company’s historical settlements. |
From receipt of the first asbestos claim more than twenty years ago through December 31, 2009, the Company has resolved approximately 86,646 (by settlement or dismissal) claims arising from the legacy Trane business. The Company and its insurance carriers have paid settlements of approximately $148 million on these claims, which represents an average payment per resolved claim of $1,710. At December 31, 2009, there were 92,298 open claims pending against Trane. Because claims are frequently filed and settled in large groups, the amount and timing of settlements, as well as the number of open claims, can fluctuate significantly from period to period.
The table below provides additional information regarding asbestos-related claims filed against the legacy Trane businesses, reflecting updated information for the last three years.
2009 | 2008 | 2007 | |||||||
Open claims - January 1 |
100,309 | 111,211 | 114,420 | ||||||
New claims filed |
2,343 | 3,705 | 3,055 | ||||||
Claims settled |
(1,042 | ) | (677 | ) | (787 | ) | |||
Claims dismissed |
(9,312 | ) | (13,930 | ) | (5,477 | ) | |||
Open claims - December 31 |
92,298 | 100,309 | 111,211 | ||||||
At December 31, 2009, over 91 percent of the open claims against the Company are non-malignancy claims, many of which have been placed on inactive or deferral dockets and the vast majority of which have little or no settlement value against the Company, particularly in light of recent changes in the legal and judicial treatment of such claims.
At March 31, 2010, the Company’s liability for asbestos-related matters and the asset for probable asbestos-related insurance recoveries totaled $1,097.5 million and $409.7 million, respectively, compared to $1,113.1 million and $424.2 million at December 31, 2009.
The (costs) income associated with the settlement and defense of asbestos-related claims after insurance recoveries for the three months ended March 31 were as follows:
In millions |
2010 | 2009 | ||||||
Continuing operations |
$ | (1.8 | ) | $ | 0.8 | |||
Discontinued operations |
(5.8 | ) | (3.0 | ) | ||||
Total |
$ | (7.6 | ) | $ | (2.2 | ) | ||
The Company records certain income and expenses associated with its asbestos liabilities and corresponding insurance recoveries within discontinued operations, as they relate to previously divested businesses, primarily Ingersoll-Dresser Pump, which was sold in 2000. Income and expenses associated with Trane’s asbestos liabilities and corresponding insurance recoveries are recorded within continuing operations.
The European Commission Investigation
In November 2004, Trane was contacted by the European Commission as part of a multi-company investigation into possible infringement of European Union competition law relating to the distribution of bathroom fixtures and fittings in certain European countries. On March 28, 2007, Trane, along with a number of other companies, received a Statement of Objections from the European Commission. The Statement of Objections, an administrative complaint, alleges infringements of European Union competition rules by numerous bathroom fixture and fittings companies, including Trane and certain of its former European subsidiaries engaged in the Bath and Kitchen business. These former subsidiaries were transferred (i) to WABCO on July 31, 2007 as part of a legal reorganization in connection with the spinoff of Trane’s Vehicle Control Systems business and (ii) to Bain Capital Partners LLC on October 31, 2007 in connection with the sale of Trane’s Bath & Kitchen business. Trane and certain of its former European subsidiaries will be jointly and severally liable for any fines that result from the investigation. However, pursuant to an Indemnification and Cooperation Agreement among Trane and certain other parties (Indemnification Agreement), American Standard Europe BVBA (renamed WABCO Europe BVBA) (WABCO Europe), which is a subsidiary of WABCO following the reorganization, will be responsible for, and will indemnify Trane and its subsidiaries (including certain subsidiaries formerly engaged in the Bath and Kitchen business) and their respective affiliates against, any fines related to this investigation. Trane and the charged subsidiaries responded to the European Commission on August 1, 2007 and July 31, 2007, respectively. A hearing with the European Commission regarding the response to the Statement of Objections was conducted from November 12-14, 2007, in Brussels. WABCO Europe and other former Trane subsidiaries participated in the hearing. Trane, however, did not participate in the hearing.
In 2006, the European Commission adopted new fining guidelines (2006 Guidelines) and stated its intention to apply these guidelines in all cases in which a Statement of Objections is issued after September 2006. In applying the 2006 Guidelines, the Commission retains considerable discretion in calculating the fine although the European Union regulations provide for a cap on the maximum fine equal to ten percent of Trane’s worldwide revenue attributable to all of its products for the fiscal year prior to the year in which the fine is imposed. If the maximum fine is levied in 2010, the total liability
could be as high as $1.1 billion based on Trane’s last full fiscal year of worldwide revenue attributable to all of its product lines owned at the time the Statement of Objections was issued, subject to a probable reduction for leniency of at least 20 percent provided WABCO Europe, as the leniency applicant, fulfilled all conditions set forth in the European Commission’s leniency notice. Based on WABCO’s Form 10-K for the fiscal year ended December 31, 2009 and its Form 10-Q for the quarter ended March 31, 2010, WABCO’s ability to satisfy its obligations under the Indemnification Agreement will be contingent on its funding capability at the time of the fine, which could be affected by, among other things, its ability to access its then existing credit facilities, its ability to obtain alternative sources of financing or its ability to obtain some payment relief or alternative payment measures, such as installment payments or a suspension of the payment obligations, from the European Commission.
Oil for Food Program
As previously reported, on November 10, 2004, the Securities and Exchange Commission (SEC) issued an Order directing that a number of public companies, including the Company, provide information relating to their participation in transactions under the United Nations’ Oil for Food Program. Upon receipt of the Order, the Company undertook a thorough review of its participation in the Oil for Food Program, provided the SEC with information responsive to the Order and provided additional information requested by the SEC. During a March 27, 2007 meeting with the SEC, at which a representative of the Department of Justice (DOJ) was also present, the Company began discussions concerning the resolution of this matter with both the SEC and DOJ. On October 31, 2007, the Company announced it had reached settlements with the SEC and DOJ relating to this matter. Under the terms of the settlements, the Company paid a total of $6.7 million in penalties, interest and disgorgement of profits. The Company has consented to the entry of a civil injunction in the SEC action and has entered into a three-year deferred prosecution agreement (DPA) with the DOJ. Under both settlements, the Company has implemented and will continue to implement improvements to its compliance program that are consistent with its longstanding policy against improper payments. In the settlement documents, the Government noted that the Company thoroughly cooperated with the investigation, that the Company had conducted its own complete investigation of the conduct at issue, promptly and thoroughly reported its findings to them, and took prompt remedial measures.
Additionally, we have reported to the DOJ and SEC certain matters involving Trane, including one relating to the Oil for Food Program, and which raise potential issues under the FCPA and other applicable anti-corruption laws. With respect to these matters, we have conducted a thorough investigation, which began in earnest promptly after our acquisition of Trane in June 2008. Previously, we had reported to the SEC and DOJ potential FCPA issues relating to one of our businesses in China, and we have reported back to them and shared our audit report, which indicated no FCPA violations. With respect to that same business in China, we have discussed with the DOJ and SEC another matter which raises potential FCPA issues. We have had preliminary discussions concerning the foregoing with the SEC and DOJ, to be followed by further discussions about them and possibly other matters which raise potential FCPA concerns. These matters (and others which may arise or of which we become aware in the future) may be deemed to violate the FCPA and other applicable anti-corruption laws. Such determinations could subject us to, among other things, further enforcement actions by the SEC or the DOJ (if, for example, the DOJ deems us to have violated the DPA), securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects and the market value of our stock.
Other
The following table represents the changes in the product warranty liability for the three months ended March 31:
In millions |
2010 | 2009 | ||||||
Balance at beginning of period |
$ | 626.3 | $ | 640.7 | ||||
Reductions for payments |
(60.1 | ) | (67.3 | ) | ||||
Accruals for warranties issued during the current period |
61.3 | 57.5 | ||||||
Changes to accruals related to preexisting warranties |
(1.7 | ) | 2.6 | |||||
Translation |
(0.8 | ) | (4.1 | ) | ||||
Balance at end of period |
$ | 625.0 | $ | 629.4 | ||||
Trane has commitments and performance guarantees, including energy savings guarantees, totaling $155.3 million extending from 2010-2030. These guarantees are provided under long-term service and maintenance contracts related to its air conditioning equipment and system controls. Through March 31, 2010, the Company has experienced one insignificant loss under such arrangements and considers the probability of any significant future losses to be remote.
The Company has other contingent liabilities of $3.6 million as of March 31, 2010. These liabilities include performance bonds, guarantees and stand-by letters of credit associated with the prior sale of products by divested businesses as well as existing loan guarantees and residual values of equipment.
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Note 20 – Guarantor Financial Information
Ingersoll-Rand plc, an Irish public limited company (IR-Ireland), is the successor to Ingersoll-Rand Company Limited, a Bermuda company (IR-Limited), following a corporate reorganization that became effective on July 1, 2009 (the Ireland Reorganization). IR-Limited is the successor to Ingersoll-Rand Company, a New Jersey corporation (IR-New Jersey), following a corporate reorganization that occurred on December 31, 2001 (the Bermuda Reorganization). Both the Ireland Reorganization and Bermuda Reorganization were accounted for as a reorganization of entities under common control and accordingly, did not result in any changes to the consolidated amounts of assets, liabilities and shareholders’ equity.
As a part of the Bermuda Reorganization, IR-Limited issued non-voting, Class B common shares to IR-New Jersey and certain IR-New Jersey subsidiaries in exchange for a $3.6 billion note and shares of certain IR-New Jersey subsidiaries. The note, which is due in 2011, has a fixed rate of interest of 11% per annum payable semi-annually and imposes certain restrictive covenants upon IR-New Jersey. At March 31, 2010, $1.0 billion of the original $3.6 billion note remains outstanding. In 2002, IR-Limited contributed the note to a wholly-owned subsidiary, which subsequently transferred portions of the note to several other subsidiaries, all of which are included in the “Other Subsidiaries” below. Accordingly, the subsidiaries of IR-Limited remain creditors of IR-New Jersey.
In addition, as part of the Bermuda Reorganization, IR-Limited fully and unconditionally guaranteed all of the issued public debt securities of IR-New Jersey. IR-New Jersey unconditionally guaranteed payment of the principal, premium, if any, and interest on IR-Limited’s 4.75% Senior Notes due in 2015 in the aggregate principal amount of $300 million. The guarantee is unsecured and provided on an unsubordinated basis. The guarantee ranks equally in right of payment with all of the existing and future unsecured and unsubordinated debt of IR-New Jersey.
During 2008, the Company revised the guarantor financial statements for all periods presented in order to reflect Ingersoll-Rand Global Holding Company Limited (IR-Global) as a stand-alone subsidiary. IR-Global issued public debt that is guaranteed by IR-Limited.
As part of the Ireland Reorganization, the guarantor financial statements were further revised to present IR-Ireland as the ultimate parent company and Ingersoll-Rand International Holding Limited (IR-International) as a stand-alone subsidiary. In addition, the guarantee structure was updated to reflect the newly created legal structure under which (i) IR-International assumed the obligations of IR-Limited as issuer or guarantor, as the case may be, and (ii) IR-Ireland and IR-Limited fully and unconditionally guaranteed the obligations under the various indentures covering the currently outstanding public debt of Ingersoll-Rand plc and its subsidiaries. Neither IR-Ireland nor IR-Limited has issued or intends to issue guarantees in respect of any indebtedness incurred by Trane. Also as part of the Ireland Reorganization, IR-Limited transferred all the shares of IR-Global to IR-International in exchange for a note payable that initially approximated $15.0 billion, which was then immediately reduced by the settlement of net intercompany payables of $4.1 billion. At March 31, 2010, $10.8 billion remains outstanding.
The condensed consolidating financial statements present the investments of IR-Ireland, IR-Limited, IR-Global, IR-International and IR-New Jersey and their subsidiaries using the equity method of accounting. Intercompany investments in the non-voting Class B common shares are accounted for on the cost method and are reduced by intercompany dividends. In accordance with generally accepted accounting principles, the amounts related to the issuance of the Class B shares have been recorded as a reduction of Total shareholders’ equity. The notes payable continue to be reflected as a liability on the balance sheet of IR-New Jersey and are enforceable in accordance with their terms.
The following condensed consolidated financial information for IR-Ireland, IR-Limited, IR-International, IR-Global, IR-New Jersey, and all their other subsidiaries is included so that separate financial statements of IR-Ireland, IR-Limited, IR-International, IR-Global and IR-New Jersey are not required to be filed with the U.S. Securities and Exchange Commission.
Condensed Consolidating Income Statement
For the three months ended March 31, 2010
In millions |
IR Ireland |
IR Limited |
IR International |
IR Global Holding |
IR New Jersey |
Other Subsidiaries |
Consolidating Adjustments |
IR Ireland Consolidated |
|||||||||||||||||||||||
Net revenues |
$ | — | $ | — | $ | — | $ | — | $ | 160.1 | $ | 2,793.3 | $ | — | $ | 2,953.4 | |||||||||||||||
Cost of goods sold |
— | — | — | — | (122.1 | ) | (2,051.2 | ) | — | (2,173.3 | ) | ||||||||||||||||||||
Selling and administrative expenses |
(2.3 | ) | — | — | (0.3 | ) | (45.7 | ) | (598.3 | ) | — | (646.6 | ) | ||||||||||||||||||
Operating income |
(2.3 | ) | — | — | (0.3 | ) | (7.7 | ) | 143.8 | — | 133.5 | ||||||||||||||||||||
Equity earnings in affiliates (net of tax) |
3.7 | 28.1 | 76.6 | 108.2 | 32.1 | 3.8 | (252.5 | ) | — | ||||||||||||||||||||||
Interest expense |
— | — | (3.9 | ) | (48.2 | ) | (13.3 | ) | (5.8 | ) | — | (71.2 | ) | ||||||||||||||||||
Intercompany interest and fees |
— | — | (33.9 | ) | (6.5 | ) | (30.3 | ) | 70.7 | — | — | ||||||||||||||||||||
Other, net |
(0.3 | ) | 0.1 | 0.3 | 24.7 | 4.5 | (10.7 | ) | (10.5 | ) | 8.1 | ||||||||||||||||||||
Earnings (loss) before income taxes |
1.1 | 28.2 | 39.1 | 77.9 | (14.7 | ) | 201.8 | (263.0 | ) | 70.4 | |||||||||||||||||||||
Benefit (provision) for income taxes |
0.3 | — | — | — | (22.1 | ) | (32.2 | ) | — | (54.0 | ) | ||||||||||||||||||||
Continuing operations |
1.4 | 28.2 | 39.1 | 77.9 | (36.8 | ) | 169.6 | (263.0 | ) | 16.4 | |||||||||||||||||||||
Discontinued operations, net of tax |
— | — | — | — | 1.6 | (12.0 | ) | — | (10.4 | ) | |||||||||||||||||||||
Net earnings (loss) |
1.4 | 28.2 | 39.1 | 77.9 | (35.2 | ) | 157.6 | (263.0 | ) | 6.0 | |||||||||||||||||||||
Less: Net earnings attributable to noncontrolling interests |
— | — | — | — | — | 9.4 | (14.0 | ) | (4.6 | ) | |||||||||||||||||||||
Net earnings (loss) attributable to |
|||||||||||||||||||||||||||||||
Ingersoll-Rand plc |
$ | 1.4 | $ | 28.2 | $ | 39.1 | $ | 77.9 | $ | (35.2 | ) | $ | 167.0 | $ | (277.0 | ) | $ | 1.4 | |||||||||||||
Condensed Consolidating Income Statement
For the three months ended March 31, 2009
In millions |
IR Limited |
IR International |
IR Global Holding |
IR New Jersey |
Other Subsidiaries |
Consolidating Adjustments |
IR Limited Consolidated |
|||||||||||||||||||||
Net revenues |
$ | — | $ | — | $ | — | $ | 170.5 | $ | 2,762.4 | $ | — | $ | 2,932.9 | ||||||||||||||
Cost of goods sold |
(0.3 | ) | — | — | (146.3 | ) | (2,059.8 | ) | — | (2,206.4 | ) | |||||||||||||||||
Selling and administrative expenses |
(17.6 | ) | — | (0.6 | ) | (61.5 | ) | (596.9 | ) | — | (676.6 | ) | ||||||||||||||||
Operating income |
(17.9 | ) | — | (0.6 | ) | (37.3 | ) | 105.7 | — | 49.9 | ||||||||||||||||||
Equity earnings in affiliates (net of tax) |
11.2 | 0.4 | 120.5 | (40.5 | ) | (73.1 | ) | (18.5 | ) | — | ||||||||||||||||||
Interest expense |
(3.9 | ) | — | (37.9 | ) | (13.5 | ) | (12.1 | ) | — | (67.4 | ) | ||||||||||||||||
Intercompany interest and fees |
(15.4 | ) | (13.0 | ) | (18.9 | ) | (12.1 | ) | 59.4 | — | — | |||||||||||||||||
Other, net |
(1.0 | ) | (0.1 | ) | 0.8 | 33.6 | (36.9 | ) | 16.1 | 12.5 | ||||||||||||||||||
Earnings (loss) before income taxes |
(27.0 | ) | (12.7 | ) | 63.9 | (69.8 | ) | 43.0 | (2.4 | ) | (5.0 | ) | ||||||||||||||||
Benefit (provision) for income taxes |
— | — | — | 1.2 | (11.7 | ) | — | (10.5 | ) | |||||||||||||||||||
Continuing operations |
(27.0 | ) | (12.7 | ) | 63.9 | (68.6 | ) | 31.3 | (2.4 | ) | (15.5 | ) | ||||||||||||||||
Discontinued operations, net of tax |
— | — | — | (3.8 | ) | (2.5 | ) | — | (6.3 | ) | ||||||||||||||||||
Net earnings (loss) |
(27.0 | ) | (12.7 | ) | 63.9 | (72.4 | ) | 28.8 | (2.4 | ) | (21.8 | ) | ||||||||||||||||
Less: Net earnings attributable to noncontrolling interests |
0.3 | — | — | (0.7 | ) | 11.6 | (16.1 | ) | (4.9 | ) | ||||||||||||||||||
Net earnings (loss) attributable to |
||||||||||||||||||||||||||||
Ingersoll-Rand plc |
$ | (26.7 | ) | $ | (12.7 | ) | $ | 63.9 | $ | (73.1 | ) | $ | 40.4 | $ | (18.5 | ) | $ | (26.7 | ) | |||||||||
Condensed Consolidating Balance Sheet
March 31, 2010
In millions |
IR Ireland |
IR Limited |
IR International |
IR Global Holding |
IR New Jersey |
Other Subsidiaries |
Consolidating Adjustments |
IR Ireland Consolidated |
||||||||||||||||||
Current assets: |
||||||||||||||||||||||||||
Cash and cash equivalents |
$ | — | $ | — | $ | — | $ | 1.5 | $ | 19.3 | $ | 578.3 | $ | — | $ | 599.1 | ||||||||||
Accounts and notes receivable, net |
0.1 | — | — | — | 191.7 | 1,981.1 | — | 2,172.9 | ||||||||||||||||||
Inventories |
— | — | — | — | 51.4 | 1,312.6 | — | 1,364.0 | ||||||||||||||||||
Other current assets |
0.7 | 1.4 | 0.8 | 0.6 | 833.1 | (152.6 | ) | — | 684.0 | |||||||||||||||||
Accounts and notes receivable affiliates |
17.7 | 294.5 | 17.0 | 2,699.1 | 2,431.7 | 49,501.6 | (54,961.6 | ) | — | |||||||||||||||||
Total current assets |
18.5 | 295.9 | 17.8 | 2,701.2 | 3,527.2 | 53,221.0 | (54,961.6 | ) | 4,820.0 | |||||||||||||||||
Investment in affiliates |
7,118.1 | 6,402.0 | 15,862.2 | 13,518.6 | 7,661.7 | 66,085.9 | (116,648.5 | ) | — | |||||||||||||||||
Property, plant and equipment, net |
0.1 | — | — | — | 209.8 | 1,645.9 | — | 1,855.8 | ||||||||||||||||||
Intangible assets, net |
— | — | — | — | 72.4 | 11,458.9 | — | 11,531.3 | ||||||||||||||||||
Other noncurrent assets |
— | — | 1.0 | 18.7 | 1,097.8 | 392.1 | — | 1,509.6 | ||||||||||||||||||
Total assets |
$ | 7,136.7 | $ | 6,697.9 | $ | 15,881.0 | $ | 16,238.5 | $ | 12,568.9 | $ | 132,803.8 | $ | (171,610.1 | ) | $ | 19,716.7 | |||||||||
Current liabilities: |
||||||||||||||||||||||||||
Accounts payable and accruals |
$ | 5.7 | $ | — | $ | 5.3 | $ | 49.5 | $ | 332.1 | $ | 2,806.2 | $ | — | $ | 3,198.8 | ||||||||||
Short term borrowings and current maturities of long-term debt |
— | — | — | 637.8 | 351.3 | 18.5 | — | 1,007.6 | ||||||||||||||||||
Accounts and note payable affiliates |
6.7 | 10.0 | 4,558.2 | 6,278.3 | 4,708.7 | 39,026.3 | (54,588.2 | ) | — | |||||||||||||||||
Total current liabilities |
12.4 | 10.0 | 4,563.5 | 6,965.6 | 5,392.1 | 41,851.0 | (54,588.2 | ) | 4,206.4 | |||||||||||||||||
Long-term debt |
— | — | 299.4 | 2,004.0 | 388.5 | 231.8 | — | 2,923.7 | ||||||||||||||||||
Note payable affiliate |
— | — | 10,789.4 | — | 1,047.4 | — | (11,836.8 | ) | — | |||||||||||||||||
Other noncurrent liabilities |
— | 9.0 | 3.8 | 315.0 | 2,310.2 | 3,112.6 | (315.0 | ) | 5,435.6 | |||||||||||||||||
Total liabilities |
12.4 | 19.0 | 15,656.1 | 9,284.6 | 9,138.2 | 45,195.4 | (66,740.0 | ) | 12,565.7 | |||||||||||||||||
Temporary equity |
— | — | — | 26.7 | — | — | — | 26.7 | ||||||||||||||||||
Shareholders’ equity: |
||||||||||||||||||||||||||
Total shareholders’ equity |
7,124.3 | 6,678.9 | 224.9 | 6,927.2 | 3,430.7 | 87,608.4 | (104,870.1 | ) | 7,124.3 | |||||||||||||||||
Total liabilities and equity |
$ | 7,136.7 | $ | 6,697.9 | $ | 15,881.0 | $ | 16,238.5 | $ | 12,568.9 | $ | 132,803.8 | $ | (171,610.1 | ) | $ | 19,716.7 | |||||||||
Condensed Consolidating Balance Sheet
December 31, 2009
In millions |
IR Ireland |
IR Limited |
IR International |
IR Global Holding |
IR New Jersey |
Other Subsidiaries |
Consolidating Adjustments |
IR Ireland Consolidated |
|||||||||||||||||
Current assets: |
|||||||||||||||||||||||||
Cash and cash equivalents |
$ | 0.6 | $ | — | $ | — | $ | 81.8 | $ | 175.5 | $ | 618.8 | $ | — | $ | 876.7 | |||||||||
Accounts and notes receivable, net |
0.1 | — | — | — | 187.1 | 1,933.0 | — | 2,120.2 | |||||||||||||||||
Inventories |
— | — | — | — | 39.1 | 1,154.1 | — | 1,193.2 | |||||||||||||||||
Other current assets |
0.7 | 1.4 | — | — | 519.2 | 115.9 | — | 637.2 | |||||||||||||||||
Accounts and notes receivable affiliates |
26.1 | 294.5 | 17.0 | 2,734.0 | 1,777.5 | 48,967.4 | (53,816.5 | ) | — | ||||||||||||||||
Total current assets |
27.5 | 295.9 | 17.0 | 2,815.8 | 2,698.4 | 52,789.2 | (53,816.5 | ) | 4,827.3 | ||||||||||||||||
Investment in affiliates |
7,158.5 | 6,437.4 | 15,785.3 | 13,413.2 | 7,611.2 | 66,558.4 | (116,964.0 | ) | — | ||||||||||||||||
Property, plant and equipment, net |
0.1 | — | — | — | 213.3 | 1,699.4 | — | 1,912.8 | |||||||||||||||||
Intangible assets, net |
— | — | — | — | 72.4 | 11,576.4 | — | 11,648.8 | |||||||||||||||||
Other noncurrent assets |
— | — | 1.1 | 20.3 | 1,129.3 | 451.4 | — | 1,602.1 | |||||||||||||||||
Total assets |
$ | 7,186.1 | $ | 6,733.3 | $ | 15,803.4 | $ | 16,249.3 | $ | 11,724.6 | $ | 133,074.8 | $ | (170,780.5 | ) | $ | 19,991.0 | ||||||||
Current liabilities: |
|||||||||||||||||||||||||
Accounts payable and accruals |
$ | 6.0 | $ | — | $ | 1.8 | $ | 52.2 | $ | 325.7 | $ | 2,715.8 | $ | — | $ | 3,101.5 | |||||||||
Short term borrowings and current maturities of long-term debt |
— | — | — | 565.0 | 351.2 | 275.5 | — | 1,191.7 | |||||||||||||||||
Accounts and note payable affiliates |
4.4 | 6.0 | 4,523.8 | 6,407.0 | 3,952.7 | 38,535.1 | (53,429.0 | ) | — | ||||||||||||||||
Total current liabilities |
10.4 | 6.0 | 4,525.6 | 7,024.2 | 4,629.6 | 41,526.4 | (53,429.0 | ) | 4,293.2 | ||||||||||||||||
Long-term debt |
— | — | 299.3 | 2,003.9 | 388.9 | 212.8 | — | 2,904.9 | |||||||||||||||||
Note payable affiliate |
— | — | 10,789.4 | — | 1,047.4 | — | (11,836.8 | ) | — | ||||||||||||||||
Other noncurrent liabilities |
— | 9.0 | 3.8 | 339.5 | 2,301.3 | 3,273.1 | (339.5 | ) | 5,587.2 | ||||||||||||||||
Total liabilities |
10.4 | 15.0 | 15,618.1 | 9,367.6 | 8,367.2 | 45,012.3 | (65,605.3 | ) | 12,785.3 | ||||||||||||||||
Temporary equity |
— | — | — | 30.0 | — | — | — | 30.0 | |||||||||||||||||
Shareholders’ equity: |
|||||||||||||||||||||||||
Total shareholders’ equity |
7,175.7 | 6,718.3 | 185.3 | 6,851.7 | 3,357.4 | 88,062.5 | (105,175.2 | ) | 7,175.7 | ||||||||||||||||
Total liabilities and equity |
$ | 7,186.1 | $ | 6,733.3 | $ | 15,803.4 | $ | 16,249.3 | $ | 11,724.6 | $ | 133,074.8 | $ | (170,780.5 | ) | $ | 19,991.0 | ||||||||
Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2010
In millions |
IR Ireland |
IR Limited |
IR International |
IR Global Holding |
IR New Jersey |
Other Subsidiaries |
IR Ireland Consolidated |
|||||||||||||||||||||
Net cash provided by (used in) continuing operating activities |
$ | (2.6 | ) | $ | 0.1 | $ | (3.6 | ) | $ | (23.9 | ) | $ | (5.9 | ) | $ | (16.5 | ) | $ | (52.4 | ) | ||||||||
Net cash provided by (used in) discontinued operating activities |
— | — | — | — | 1.6 | (11.6 | ) | (10.0 | ) | |||||||||||||||||||
Cash flows from investing activities: |
||||||||||||||||||||||||||||
Capital expenditures |
— | — | — | — | (5.3 | ) | (29.0 | ) | (34.3 | ) | ||||||||||||||||||
Proceeds from sale of property, plant and equipment |
— | — | — | — | — | 1.7 | 1.7 | |||||||||||||||||||||
Acquisitions, net of cash |
— | — | — | — | — | (3.3 | ) | (3.3 | ) | |||||||||||||||||||
Proceeds from business disposition, net of cash |
— | — | — | — | — | — | — | |||||||||||||||||||||
Other, net |
— | — | — | — | — | — | — | |||||||||||||||||||||
Net cash provided by (used in) continuing investing activities |
— | — | — | — | (5.3 | ) | (30.6 | ) | (35.9 | ) | ||||||||||||||||||
Net cash provided by (used in) discontinued investing activities |
— | — | — | — | — | — | — | |||||||||||||||||||||
Cash flows from financing activities: |
||||||||||||||||||||||||||||
Net change in debt |
— | — | — | 69.5 | (0.3 | ) | (238.7 | ) | (169.5 | ) | ||||||||||||||||||
Net inter-company proceeds (payments) |
24.5 | (10.5 | ) | 3.6 | (125.9 | ) | (146.3 | ) | 254.6 | — | ||||||||||||||||||
Dividends (paid) received |
(22.5 | ) | — | — | — | — | — | (22.5 | ) | |||||||||||||||||||
Proceeds from the exercise of stock options |
— | 10.4 | — | — | — | — | 10.4 | |||||||||||||||||||||
Other, net |
— | — | — | — | — | (1.6 | ) | (1.6 | ) | |||||||||||||||||||
Net cash provided by (used in) continuing financing activities |
2.0 | (0.1 | ) | 3.6 | (56.4 | ) | (146.6 | ) | 14.3 | (183.2 | ) | |||||||||||||||||
Net cash provided by (used in) discontinued financing activities |
— | |||||||||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
— | — | — | — | — | 3.9 | 3.9 | |||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents |
(0.6 | ) | — | — | (80.3 | ) | (156.2 | ) | (40.5 | ) | (277.6 | ) | ||||||||||||||||
Cash and cash equivalents - beginning of period |
0.6 | — | — | 81.8 | 175.5 | 618.8 | 876.7 | |||||||||||||||||||||
Cash and cash equivalents - end of period |
$ | — | $ | — | $ | — | $ | 1.5 | $ | 19.3 | $ | 578.3 | $ | 599.1 | ||||||||||||||
Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2009
In millions |
IR Limited |
IR International |
IR Global Holding |
IR New Jersey |
Other Subsidiaries |
IR Limited Consolidated |
|||||||||||||||||
Net cash provided by (used in) continuing operating activities |
$ | (22.9 | ) | $ | — | $ | (37.7 | ) | $ | (120.9 | ) | $ | 233.5 | $ | 52.0 | ||||||||
Net cash provided by (used in) discontinued operating activities |
— | — | — | (3.8 | ) | (7.3 | ) | (11.1 | ) | ||||||||||||||
Cash flows from investing activities: |
|||||||||||||||||||||||
Capital expenditures |
— | — | — | (7.7 | ) | (51.2 | ) | (58.9 | ) | ||||||||||||||
Proceeds from sale of property, plant and equipment |
— | — | — | 0.4 | 8.3 | 8.7 | |||||||||||||||||
Acquisitions, net of cash |
— | — | — | — | — | — | |||||||||||||||||
Proceeds from business disposition, net of cash |
— | — | — | — | — | — | |||||||||||||||||
Other, net |
— | — | — | — | (0.1 | ) | (0.1 | ) | |||||||||||||||
Net cash provided by (used in) continuing investing activities |
— | — | — | (7.3 | ) | (43.0 | ) | (50.3 | ) | ||||||||||||||
Net cash provided by (used in) discontinued investing activities |
— | — | — | — | — | — | |||||||||||||||||
Cash flows from financing activities: |
|||||||||||||||||||||||
Net change in debt |
— | — | 32.1 | (1.9 | ) | (0.5 | ) | 29.7 | |||||||||||||||
Net inter-company proceeds (payments) |
124.6 | — | (4.1 | ) | 127.1 | (247.6 | ) | — | |||||||||||||||
Dividends (paid) received |
(102.3 | ) | — | 9.4 | 4.1 | 31.4 | (57.4 | ) | |||||||||||||||
Proceeds from the exercise of stock options |
0.6 | — | — | — | — | 0.6 | |||||||||||||||||
Other, net |
— | — | — | — | (3.7 | ) | (3.7 | ) | |||||||||||||||
Net cash provided by (used in) continuing financing activities |
22.9 | — | 37.4 | 129.3 | (220.4 | ) | (30.8 | ) | |||||||||||||||
Net cash provided by (used in) discontinued financing activities |
— | — | — | — | — | — | |||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
— | — | — | — | (16.4 | ) | (16.4 | ) | |||||||||||||||
Net increase (decrease) in cash and cash equivalents |
— | — | (0.3 | ) | (2.7 | ) | (53.6 | ) | (56.6 | ) | |||||||||||||
Cash and cash equivalents - beginning of period |
— | — | 1.1 | 8.6 | 540.5 | 550.2 | |||||||||||||||||
Cash and cash equivalents - end of period |
$ | — | $ | — | $ | 0.8 | $ | 5.9 | $ | 486.9 | $ | 493.6 | |||||||||||