Hamilton, Bermuda-based Ingersoll-Rand Co., a leading diversified industrial firm, last week announced first-quarter 2007 net earnings of $217.5 million, or diluted earnings per share of $0.70, compared with $253.2 million, or EPS of $0.76 in the same period a year ago. First-quarter net earnings included $216.5 million, or EPS of $0.70 from continuing operations, as well as $1.0 million of income equal to EPS of $0.0, from discontinued operations related to the Road Development business.
“Our first-quarter 2007 performance demonstrated the benefits of our transformed business portfolio, which is characterized by significantly improved product, market and geographic diversity, compared with our previous reliance on capital-intense, heavy machinery businesses,” said Herbert Henkel, chairman, president and CEO. “We offset several sluggish domestic markets with strong revenue growth from international operations and recurring revenues. As we expected when we began our transformation in 2000, we are better positioned to withstand isolated market downturns, and our continuing focus on innovation and operational excellence will sustain our ability to grow and deliver solid financial results.”
The company’s revenues increased by 6 percent to $2.67 billion compared with revenues of $2.52 billion for the 2006 first quarter. Currency had a 2 percent favorable impact on year-over-year revenue gains. First quarter domestic revenues declined slightly, primarily due to lower Bobcat results, while revenues from international operations increased by approximately 18 percent.
Total recurring revenues, which include revenues from parts, service, rental, attachments and used equipment, increased by 12 percent compared with the first quarter of 2006, and accounted for 22 percent of total revenues.
In February, the company entered into an agreement to sell its Road Development business to AB Volvo for cash proceeds of approximately $1.3 billion. The operating results of Road Development have been reclassified as a single line item, net of tax, in discontinued operations for the first quarter of 2007 and for all prior periods. The proposed sale is expected to close in the second quarter of 2007 and generate net cash proceeds of approximately $1.05 billion.
“The sale of Road Development reflects our strategy to transition away from heavy machinery businesses,” said Henkel. “The sale will represent another important step in our transformation to become a diversified industrial company.”
The company realigned its segment reporting to account for the impending sale of the Road Development business. The results of Bobcat and Club Car as well as the Utility Equipment and Attachment businesses are reported as part of a new business segment named Compact Equipment Technologies.
The Compact Equipment Technologies segment, which includes Bobcatcompact equipment, Club Car golf cars and utility vehicles, and Ingersoll Rand Portable Power products, general-purpose construction equipment, and the Attachment business, reported total revenues of approximately $875 million, which were flat compared with the 2006 first quarter.
Bobcat revenues declined by approximately 12 percent compared with record results in the first quarter of last year due to the ongoing contraction in the North American new equipment and rental markets for compact equipment. Europe and worldwide aftermarket parts activity increased significantly compared with last year. Bobcat first-quarter North American dealer inventories were flat compared with the fourth quarter of 2006 and were well balanced and consistent with projected demand levels, the company said.
Utility equipmentrevenues increased by approximately 20 percent, primarily due to strong international markets and expanding recurring revenues. Margins increased substantially due to higher volumes and productivity actions, which more than offset material cost increases.
Attachment revenues increased substantially in all geographic regions as scrap, demolition and commercial construction markets continued to expand. According to the company, new product lines from the 2006 acquisition of Geith have been well received by customers.
In the Industrial Technologies segment, which includes compressed air systems, tools, fluid power production and energy generation systems, total revenues in the first quarter increased by approximately 10 percent to $485 million.
During the first quarter of 2007, the company purchased approximately 3.1 million shares of Ingersoll Rand stock for $134 million under a $2 billion stock repurchase program approved by the board of directors in December 2006. At the end of the first quarter approximately $1.87 billion remained available for future share purchases under the program.
“We had a good start in the first quarter and expect record earnings for 2007,” said Henkel. “Full-year 2007 earnings, excluding the projected gain on the sale of Road Development, are expected to be $3.45 to $3.55 per share. Earnings from continuing operations are expected to be $3.52 to $3.62 per share.”
Ingersoll Rand is a diversified industrial company providing products, services and integrated solutions to industries ranging from transportation and manufacturing to food retailing, construction, and agriculture.