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Ingersoll Rand

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------------------------------------------------- RE: Ingersoll Rand Credit Write-up

Operating Environment

Industry: Industrial goods - diversified machinery (Residential and commercial). Provides products, services and solutions to enhance the quality of air and security in homes and buildings, climate control and refrigeration along with Industrial technologies that help companies enhance energy efficiency, productivity and operations.

Industry drivers: Economic expansion, new innovative solutions.

Industry outlook: CHECK

Downside scenario: * A sharp increase in costs of goods sold (E.g. ↑ in Steel prices where between 01/2007 to 06/2010 the price of steel coil rose from $500/tonne to $800/tonne) * If overall world economy continues to deteriorate. Ingersoll’s core businesses of refrigeration, industrial and security equipment’s are heavily dependent on demand from an expanding economy (E.g. if convenience stores ↑, D for refrigeration ↑) * If global competition increases (35% of sales are foreign & in highly competitive markets) or if major competitors (United Technologies/Textron) develops more efficient patents/cheaper products and cuts into market share.

Revenue/Earnings * Ingersoll is a leading company in the production/design/servicing of refrigeration, industrial and security equipments. Its brands are well known as high quality products to consumers. * Owns numerous patents and patent applications. Business is not dependent on any single patent/License or any group of them. * Has decreased exposure to cyclical, low growth and asset intensive businesses. * Concentration low (No customer accounts to > 10% of sales) * Ingersoll’s EBIT Margins for the past 4 years are (12.59 -’06, 12.42 -’07, (18.98) - ’08 & 6.53 - ‘09). Historically strong, in 2008, the company took heavy losses due to a decline in worldwide macroeconomic conditions and ill-advised investments. With exception of the down year in 2008, they have consistently maintained a decent earnings margin. (Seems to be recovering in ’09 as EBIT margin remains positive at 6.53). * Ingersoll’s Interest Coverage ratios for the past 4 years are (6.57 -’06, 7.99 -’07, (10.23) - ’08 & 2.85 - ‘09). * As the world economy recovers, demands for Ingersoll’s products are likely to follow the same trend.

Liquidity/Cash Flow * Operating income is $841.6 MM – ’09, ($2,573.8) MM – ’08 & $1,507.8 MM – ’07. (Positive sign as company shows signs of recovery in 2009) * Current ratio for the past 4 years are (1.35 -’06, 2.38 -’07, .98 - ’08 & 1.21 - ‘09). With exception of ’08, Ingersoll’s current assets have been sufficient to cover its current liabilities. * Average A/R Collection days are (58.65 -’06, 69.32 -’07, 69.17 - ’08 & 67.32 - ‘09) * Average Accounts Payable days are (40.83 -’06, 39.17 -’07, 41.97 - ’08 & 47.94 - ‘09) * Although payable days are approx. 20 days shorter than their A/R collection days, Ingersoll’s A/R and A/P terms have remained very consistent for the past 4 years. Terms are similar their major competitors.

Cash Flow from Operation CFO

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