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For the quarterly period ended June 30, 2002

or

INGERSOLL-RAND COMPANY LIMITED
(Exact name of registrant as specified in its charter)

(441) 295-2838
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   X     No       .

The number of Class A common shares outstanding as of July 31, 2002 was 169,171,114.

INGERSOLL-RAND COMPANY LIMITED
CONDENSED CONSOLIDATED INCOME STATEMENT
(in millions except per share amounts)

(in millions)

See accompanying notes to condensed consolidated financial statements.

INGERSOLL-RAND COMPANY LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)

Note 1 - In the opinion of management, the accompanying condensed consolidated financial statements contain all adjustments (including normal recurring accruals) necessary to present fairly the consolidated unaudited financial position and results of operations for the three and six months ended June 30, 2002 and 2001.

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

Note 2 - During the third quarter of 2000, the Company commenced a $325 million restructuring program, which included such actions as plant rationalizations, organizational realignments consistent with the Company's new market-based structure and the consolidation of back-office processes. During the fourth quarter of 2001, the Company commenced a second restructuring program for an additional $150 million to further reduce the general and administrative expenses across the Company. These programs include certain costs that are identified in Staff Accounting Bulletin (SAB) 100 "Restructuring and Impairment Charges" and Emerging Issues Task Force (EITF) 94-3 "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit and Activity (including Certain Costs Incurred in a Restructuring)" as restructuring, as well as other related costs that do not meet the criteria to be classified as restructuring. Nonrecurring costs associated with these activities not qual ifying as restructuring are referred to as "productivity investments" and have been charged to "Cost of goods sold" and "Selling and administrative expenses." Substantially all income statement activity and cash payments under both programs is expected to be completed by December 31, 2002. Remaining amounts relate primarily to ongoing lease commitments and pension liabilities. The Company expects lower costs and improved customer service in all segments as a result of these actions. The Company manages the 2000 and 2001 programs as a single restructuring program totaling $475 million. Therefore, all comments regarding restructure activity refer to both programs combined.

The total employee terminations related to the restructuring program is expected to be approximately 6,000 (excluding Hussmann International, Inc.) by December 31, 2002. See Note 3 for restructuring activities of Hussmann International, Inc. (Hussmann), which were recorded as part of purchase accounting for the acquisition. These terminations impacted both the salaried and hourly employee groups. The total number of manufacturing facilities to be closed by December 31, 2002 is 21 (excluding Hussmann). Payments for the terminations of employees and facility closures have been made since the inception of the program and will be substantially complete by December 31, 2002.

Management teams that were directly involved with the required actions developed the projected costs for each project within each segment and the Corporate Center. The costs incurred relating to the restructuring and productivity investments included involuntary employee termination benefits and relocation costs, lease exit costs, equipment write-offs, moving costs, and new site set up costs.

A reconciliation of the consolidated restructuring reserve for the 2000 and 2001 programs is as follows:

This segment has undergone significant restructuring due to the acquisition of Hussmann in 2000. During 2000, Thermo King experienced a reduction in volumes due to a severe recession in the North America truck and trailer markets. Manufacturing facilities became a focus to improve production efficiencies and decrease manufacturing operating costs. In conjunction with the Hussmann acquisition, it was necessary to address these issues to achieve the synergies identified. The approved actions were as follows:

• Close five manufacturing locations: U.S. (2), Europe (2) and Latin America (1).
• Outsource the manufacturing of certain components used in products.
• Terminate 1,374 employees.

As of June 30, 2002, all five specified manufacturing locations have been closed, the outsourcing of certain product manufacturing was completed, and 1,329 employees have been terminated. An additional 45 employees will be terminated by December 31, 2002.

A reconciliation of the restructuring reserve for the 2000 and 2001 programs is as follows:

Management examined the segment's operations and determined that the consolidation of manufacturing locations and the reduction of selling and administrative expenses were essential to meet its strategic objectives. To achieve a lower cost structure, an Eastern European
manufacturing plant was opened enabling the business to compete on a global scale. The severe recession in the worldwide industrial markets necessitated employee terminations to align the cost structure with the volume levels. The approved actions were as follows:

• Close eight manufacturing locations: U.S. (4), Asia Pacific (3) and Europe (1).
• Terminate 1,312 employees.

As of June 30, 2002, seven of the specified manufacturing locations have been closed with the final closure to occur by December 31, 2002. Employees terminated as of June 30, 2002 were 1,274 with an additional 38 employees to be terminated by December 31, 2002.

A reconciliation of the restructuring reserve for the 2000 and 2001 programs is as follows:

During the third quarter of 2001, an accrual of $6.2 million was recorded by Air Solutions related to the announcement of a U.K. facility closing. This location manufactured products for two business units, Air Solutions (Air & Productivity Solutions segment) and Portable Power
(Infrastructure segment). During the first quarter of 2002, management determined that $3.1 million, of the original $6.2 million, was related to the Portable Power business and an entry was recorded to properly reflect the activity in each business. This resulted in a credit to the Air & Productivity Solutions segment, which was offset by a debit to the Infrastructure segment. Therefore, there was no change in the total reserve recorded.

Management examined the Engineered Solutions' operations and determined that the geographical realignment of the manufacturing footprint was critical to achieve its strategic objectives. To enable the business to compete on a global scale, an Eastern European manufacturing plant was opened. Manufacturing facilities became a focus to improve production efficiencies and decrease manufacturing operating costs. The approved actions were as follows:

• Close one manufacturing location in the U.S.
• Terminate 1,393 employees.

As of June 30, 2002, the specified manufacturing location was closed, and 1,138 employees were terminated, with an additional 255 expected by December 31, 2002.

Management examined the segment's operations and selling and administrative (S&A) expense structure, and determined that the reduction of S&A expenses, as well as the consolidation of its sales regions was essential to meet its strategic objectives. The approved actions were as follows:

• Organizational realignment - five regions reduced to three.
• Terminate 318 employees.
• Close or consolidate several non-manufacturing locations.

As of June 30, 2002, the organizational realignment was complete, all 318 identified employees were terminated, and the closure of the non-manufacturing locations was complete.

A reconciliation of the restructuring reserve for the 2000 and 2001 programs is as follows:

Manufacturing facilities became a focus to improve production efficiencies and decrease manufacturing operating costs. The consolidation of the manufacturing locations will enable the business to leverage its capacity when the volumes return. Additional significant management realignments were essential to the success of the market strategy and to leverage the distribution channels. The approved actions were as follows:

• Close two manufacturing locations in the U.S.
• Terminate 715 employees.

As of June 30, 2002, the two specified manufacturing location were closed, and 696 employees were terminated. An additional 19 employee terminations are expected by December 31, 2002.

A reconciliation of the restructuring reserve for the 2000 and 2001 programs is as follows:

Manufacturing facilities became a focus to improve production efficiencies and decrease manufacturing operating costs. Management also reviewed the current S&A expense structure and determined that significant actions were required to align the cost structure with the current volume levels. The approved actions were as follows:

• Close five manufacturing locations: U.S. (3) and Europe (2).
• Terminate 472 employees.

As of June 30, 2002, four of the specified manufacturing locations were closed and 395 of the 472 employees had been terminated. The final facility closure and employee terminations will occur prior to December 31, 2002.

Management determined that previously decentralized back office functions (such as accounts payable, accounts receivable, benefits administration and payroll) proved to be an inefficient way of managing costs of high volume transactions. The creation of Global Business Services (a shared service center) enabled the Company to consolidate high volume transactions at a lower cost by reducing the number of employees in business units' back office operations. These actions resulted in employee terminations of 153 as of June 30, 2002, and an additional 243 reduction in staff is expected by December 31, 2002. The restructuring costs associated with corporate are primarily related to the involuntary employee terminations.

A reconciliation of the restructuring reserve for the 2000 and 2001 programs is as follows:

Note 3 - In June 2000, the Company acquired Hussmann for approximately $1.7 billion in cash, after consideration of amounts paid for outstanding stock options, debt retirement, employee contracts and transaction costs. Hussmann's business is the design, production, installation and service of merchandising and refrigeration systems for the global food industry.

As part of the acquisition process, the Company determined that significant synergies could be achieved through the consolidation of manufacturing facilities and the reduction of excess manufacturing and selling and administrative employees. The Company expects lower costs and improved customer service as a result of these actions. The following initiatives were identified to achieve these synergies:

U.S. & Canada

Four facilities were consolidated into other U.S. plants, which manufacture similar products. One closure was completed in December 2000 and the other closures were completed in the first half of 2002.

International Operations

• Mexico - one corporate office and two manufacturing facilities were closed. All three of these locations were combined into an existing Hussmann Mexican facility.
• U.K. - closure of a manufacturing facility in England. Numerous sales offices were closed and certain facilities were merged into existing Company facilities.
• Spain - closure of one manufacturing facility. Operations were combined with existing facilities or were outsourced.

The international plant closures began in October 2000 and were completed by December 31, 2001.

The costs incurred relating to each of the above restructurings included involuntary employee termination benefits and relocation costs, lease exit costs, and equipment write-offs.

The total number of employees terminated as part of the above restructuring plans was approximately 1,500. These terminations affected both the salaried and hourly employee groups.

The restructuring has been substantially completed as of the second quarter 2002, and the reserves have been utilized, except those relating to ongoing lease commitments and pension liabilities not yet settled. The remaining exit cost liabilities relating to employee termination costs will be paid by June 30, 2003. All facility exit costs, except for ongoing lease commitments, are expected to be paid by December 31, 2002. Ongoing lease commitment payments of approximately $0.3 million are expected to be paid annually from 2003 through 2016, unless subleased.

During the first half of 2001, Hussmann recorded $43 million of additional restructuring liabilities to goodwill. These additional amounts were recorded due to the finalization of exit plans of the remaining facilities identified at acquisition in accordance with the integration plan. Additionally, in accordance with EITF 95-3, "Recognition of Liabilities in Connection with a Purchase Business Combination", costs exceeding the amounts originally recorded as liabilities required an adjustment to increase the liability and were identified within one year of the acquisition date, and therefore recorded as part of the acquisition price.

A reconciliation of the restructuring reserve is as follows:

In June 2002, the Company acquired Electronic Technologies Corporation (ETC), based in Dover Plains, New York, for approximately $22 million. ETC provides specialty security systems integration, serving as a single source for integrating a facility's access control, closed circuit television and fire/life safety systems. The final purchase price may be increased by approximately $15 million based upon certain future operating goals as specified in the contract.

In May 2002, the Company acquired a 51 percent interest in Superay, a manufacturer of tools and related products based in Jin Tan, China, for approximately $3 million.

In the first quarter, the Company acquired a 30% interest in CISA S.p.A. (CISA), a European manufacturer of mechanical and electronic security products, for approximately $60 million. CISA operates worldwide and will enable the Company to provide customers with a complete portfolio of security products in the Americas and the European and Asia Pacific markets.

Note 4 - Inventories are stated at cost, which is not in excess of market. Most U.S. manufactured inventories, excluding the Climate Control and Dresser-Rand segments, are valued on the last-in, first-out (LIFO) method. All other inventories are valued using the first-in, first-out (FIFO) method. The composition of inventories was as follows (in millions):

Note 5 - Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standard (SFAS) No. 142 "Goodwill and Other Intangible Assets". Under the provisions of this standard, goodwill and intangible assets deemed to have indefinite lives are no longer subject to amortization, but rather are tested for impairment at least annually. All other intangible assets are to be amortized over their estimated useful lives.

Step one of the impairment testing required under SFAS No. 142 was completed by June 30, 2002. Under step one of the impairment test, all reporting units were identified in accordance with the guidance of SFAS No. 142 and SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information". The January 1, 2002 carrying value of the reporting units was then compared to the fair value of the reporting units. Fair value was computed by utilizing a discounted cash flow model. Upon completion of the comparison of the values of the reporting units, it was determined that the carrying value of the Thermo King reporting unit of the Climate Control segment was in excess of its fair value.

Step two of the impairment test, which compares the implied fair value of the reporting unit goodwill with carrying amount of that goodwill, was then completed. The implied fair value of goodwill was determined by allocating the fair value of the reporting unit to all the assets and liabilities (including unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. This resulted in a goodwill impairment charge of $864.4 million being recorded. As required by SFAS No. 142, this charge, $634.5 million, net of tax, was recognized as a cumulative effect of a change in accounting principle retroactive to January 1, 2002.

The following is a reconciliation of previously reported financial information to adjusted amounts excluding amortization expense relating to goodwill and other intangible assets deemed to have indefinite lives, which are no longer being amortized (in millions, except per share amounts):

The changes in the carrying amount of goodwill for the six months ended June 30, 2002 are as

follows (in millions):

* Upon acquisition of a new business, the Company records the excess purchase price to goodwill until final valuations are completed to further disaggregate the amount.

** Represents goodwill related to current year acquisitions or adjustments as a result of final allocations of purchase price.

The following table sets forth the gross amount and accumulated amortization of the Company's intangible assets (in millions):

During the first six months of 2002, the Company acquired software in the amount of $12.5 million with a weighted average amortization period of 4.3 years.

Intangible asset amortization expense for the second quarter and six months ended of 2002 was $7.1 million and $15.8 million, respectively.

Estimated intangible asset amortization expense for each of the next five fiscal years is expected to be $34.9 million in 2002, $37.8 million in 2003, $37.8 million in 2004, $36.6 million in 2005, and $36.6 million in 2006.

Note 6 - Information on basic and diluted shares is as follows (in millions):

Diluted earnings per share computations for the three months ended June 30, 2002 and 2001 excluded the weighted average effect of the assumed exercise of approximately 4.7 million and 5.1 million shares issuable under stock benefit plans, respectively. Excluded for each of the six-month periods ended June 30, 2002 and 2001 were 5.1 million shares. These shares were excluded because the effect would be anti-dilutive.

Note 7 - The components of comprehensive income are as follows (in millions):

Included in accumulated other comprehensive income at June 30, 2002, is $2.0 million related to the fair value of derivatives qualifying as cash flow hedges, of which $1.1 million is expected to be reclassified to earnings over the twelve month period ending June 30, 2003. The actual amounts that will be reclassified to earnings over the next twelve months will vary from this amount as a result of changes in market conditions. No amounts were reclassified to earnings during the quarter in connection with forecasted transactions that were no longer considered probable of occurring.

At June 30, 2002, the maximum term of derivative instruments that hedge forecasted transactions, for foreign currency hedges, was 10 months. At June 30, 2002, the maximum term of derivative instruments that hedge forecasted transactions, for commodity hedges, was 18 months.

Note 8 - A summary of operations by reportable segment is as follows (in millions):

* Note: Before reduction of $5.3 billion of assets and shareholders' equity related to the Class B common shares issued pursuant to the reorganization on December 31, 2001.

* Note: Before reduction of $5.3 billion of assets and shareholders' equity related to the Class B common shares issued pursuant to the reorganization on December 31, 2001.