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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10‑K

(Mark One)
X             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2004
or
__            TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from      _ to____

Commission File No. 1‑985

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

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

Securities registered pursuant to Section 12(b) of the Act:

                                                   Title of each class                                      Name of each exchange on which registered
                                                  Class A Common Shares,                              New York Stock Exchange
                                                  Par Value $1.00 per Share                                                                                                               

                                                             Securities registered pursuant to Section 12(g) of the Act: None

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     _

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act)

YES   X      NO     _

The aggregate market value of common stock held by non affiliates on June 30, 2004 was approximately $11,832,800,148 based on the closing price of such stock on the New York Stock Exchange.

The number of Class A Common Shares outstanding as of February 28, 2005 was 172,923,872.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's proxy statement to be filed within 120 days of the close of the registrant's fiscal year in connection with the registrant's Annual General Meeting of Shareholders to be held June 1, 2005 are incorporated by reference into Part III of this Form 10-K.

           PART I

Item 1.   BUSINESS

Ingersoll-Rand Company Limited, a Bermuda company (IR-Limited or the Company), is the successor to Ingersoll-Rand Company, a New Jersey corporation (IR-New Jersey), following a corporate reorganization (the reorganization) that became effective on December 31, 2001.  The reorganization was accomplished through a merger of a newly-formed merger subsidiary into IR-New Jersey.  IR-New Jersey, the surviving company, continues to exist as an indirect, wholly owned subsidiary of IR-Limited. IR-Limited and its subsidiaries continue to conduct the businesses previously conducted by IR-New Jersey and its subsidiaries.  The reorganization has been accounted for as a reorganization of entities under common control and accordingly it did not result in any changes to the consolidated amounts of assets, liabilities and shareholders' equity.

Ingersoll-Rand Company was organized in 1905 under the laws of the State of New Jersey as a consolidation of Ingersoll-Sergeant Drill Company and the Rand Drill Company, whose businesses were established in the early 1870's.

The Company is a leading provider of climate control, industrial solutions, infrastructure development and security and safety products.  In each of these markets, the Company offers a diverse product portfolio that includes well-recognized industrial and commercial brands. 

Climate Control
This Segment is engaged in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display merchandisers, beverage coolers, and walk-in storage coolers and freezers.  The segment includes the Thermo King, Hussmann and Koxka brands.

Industrial Solutions
This Segment is engaged in the design, manufacture, sale and service of air compressors, fluid products, microturbines, and industrial tools.  It is composed of Air Solutions, Productivity Solutions and Energy Systems.

Infrastructure
This Segment is engaged in the design, manufacture, sale and service of skid-steer loaders, mini-excavators, electric and gasoline powered golf and utility vehicles, portable compressors and light towers, road construction and repair equipment.  It is comprised of Bobcat, Club Car, Utility Equipment and Road Development.

Security and Safety
This Segment is engaged in the design, manufacture, sale and service of locks, door closers, exit devices, door control hardware, doors and frames, decorative hardware, power-operated doors, electronic and biometric access systems. 

Competitive Conditions
The Company's products are sold in highly competitive markets throughout the world and compete against products produced by both U.S. and non-U.S. corporations.  The principal methods of competition in these markets relate to price, quality, service and technology.  The Company believes that it is one of the leading manufacturers in the world of air compression systems, construction equipment, transport temperature control products, refrigerated display merchandisers, refrigeration systems and controls, air tools, golf cars and utility vehicles. In addition, the Company believes it is a leading supplier in U.S. markets for architectural hardware products, mechanical locks, and electronic and biometric access-control technologies.

Distribution
The Company's products are distributed by a number of methods, which the Company believes are appropriate to the type of product.  Sales are made in the U.S. through branch sales offices and through distributors and dealers across the United States.  Non-U.S. sales are made through numerous subsidiary sales and service companies with a supporting chain of distributors in over 100 countries.

These products are sold primarily under the Company's name and also under other names including ABG®, Blaw-Knox®, Bobcat®, Club Car®, Dor-o-Matic®, Falcon®, Glynn-Johnson®, Hussmann®, Johnstone®, Koxka®, LCN®, Legge®, Monarch®, Montabert®, Normbau®, Schlage®, Steelcraft®, Thermo King®, Von Duprin®, and Zimmerman®.

Additional information on the Company's business and financial information about industry segments is presented in the consolidated financial statements.

Working Capital
The products manufactured by the Company must usually be readily available to meet rapid delivery requirements.  Such working capital requirements are not, however, in the opinion of management, materially different from those experienced by the Company's major competitors.

Customers
No material part of the Company's business is dependent upon a single customer or very few customers, the loss of any one of which would have a material adverse effect on the Company's operations.

Operations by Geographic Area
Sales to customers outside the United States accounted for approximately 39% percent of the consolidated net sales in 2004. Sales outside of the United States are made in more than 100 countries; therefore, the attendant risks of manufacturing or selling in a particular country, such as nationalization and establishment of common markets, would not have a significant effect on the Company's non-U.S. operations.  Additional information concerning the Company's operating segments is contained in Note 13 of the Company's Annual Report to Shareholders filed as Exhibit 13 and incorporated herein by reference.

Raw Materials
The Company manufactures many of the components included in its products.  The principal raw materials required for the manufacture of the Company's products are purchased from numerous suppliers, and although high prices for some raw materials important to some of the Company's businesses, particularly steel, have caused pricing pressures, the Company believes that available sources of supply will generally be sufficient for its needs for the foreseeable future.

Backlog
The Company's approximate backlog of orders at December 31, 2004, believed by it to be firm, was $359.3 million for Climate Control, $121.6 million for Industrial Solutions, $343.4 million for Infrastructure and $100.0 million for Security and Safety, as compared to $409.5 million, $93.7 million, $202.3 million and $103.3 million, respectively, at December 31, 2003.  These backlog figures are based on orders received.  While the major portion of the Company's products are built in advance of order and either shipped or assembled from stock, orders for specialized machinery or specific customer application are submitted with extensive lead times and are often subject to revision, deferral, cancellation or termination.  The Company estimates that approximately 90 percent of the backlog will be shipped during the next twelve months.

Research and Development
The Company maintains extensive research and development facilities for experimenting, testing and developing high quality products.  The Company spent $149.2 million in 2004, $164.5 million in 2003 and $151.5 million in 2002 on research and development expenditures, including qualifying engineering costs.  The Company also incurs engineering costs which are not considered research and development expenditures.

Patents and Licenses
The Company owns numerous patents and patent applications and is licensed under others.  While it considers that in the aggregate its patents and licenses are valuable, it does not believe that its business is materially dependent on its patents or licenses or any group of them.  In the Company's opinion, engineering and production skills, and experience are more responsible for its market position than patents or licenses.

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 currently is engaged in site investigations and remedial activities to address environmental cleanup from past operations at current and former manufacturing facilities.

During 2004, the Company spent approximately $4.4 million on capital projects for pollution abatement and control, and an additional $7.6 million for environmental remediation expenditures at sites presently or formerly owned or leased by the Company. It should be noted that these amounts are difficult to estimate because environmental projects are generally a part of the overall improvement program at a particular plant. The Company believes that these expenditure levels 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.

The Company is 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 is 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 sites there are other PRPs and in most instances, the Company's site 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.

Although uncertainties regarding environmental technology, U.S. federal and state laws and regulations and individual site information make estimating the liability difficult, management believes that the total liability for the cost of remediation and environmental lawsuits and claims will not have a material effect on the financial condition, results of operations, liquidity or cash flows of the Company for any year.  It should be noted that when the Company estimates its liability for environmental matters, such estimates are based on current technologies, and the Company does not discount its liability nor assume any insurance recoveries.

Employees
There are approximately 36,000 employees of the Company throughout the world, of whom approximately 23,000 work in the United States and 13,000 outside the United States. The Company believes relations with its employees are good.

Available Information
The Company files annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934.  The public may read and copy any materials filed with the SEC at the SEC's Public Reference Room at 405 Fifth Street, N.W., Washington, D.C.  20549.  The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.  The public can obtain any documents that are filed by the Company at http://www.sec.gov.

In addition, this annual report on Form 10-K, as well as the Company's quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to all of the foregoing reports, are made available free of charge on the Company's Internet website (http://www.irco.com) as soon as reasonably practicable after such reports are electronically filed with or furnished to the Securities and Exchange Commission.  The Board of Directors of the Company has also adopted and posted in the Investor Relations section of its website the Company's Corporate Governance Guidelines and charters for each of the Board's standing committees.  A copy of the above filings will also be provided free of charge upon written request to the Company.

Item 2.   PROPERTIES

Manufacturing and assembly operations are conducted in 35 plants in the United States; 1 plant in Canada; 23 plants in Europe; 15 plants in Asia; and 5 plants in Latin America.  The Company also maintains various warehouses, offices and repair centers throughout the world.

Substantially all plant facilities are owned by the Company and the remainder are under long‑term lease. The Company believes that its plants and equipment have been well maintained and are generally in good condition.

Facilities under long‑term lease arrangements are included below and are not significant to each operating segment's total number of plants or square footage.

Climate Control's manufacturing locations are as follows:

Industrial Solutions' manufacturing facilities are as follows:

Infrastructure's manufacturing facilities are as follows:

Security and Safety'smanufacturing facilities are as follows:

Item 3.   LEGAL PROCEEDINGS

In the normal course of business, the Company is involved in a variety of lawsuits, claims and legal proceedings, including commercial and contract disputes, employment matters, product liability claims, environmental liabilities and intellectual property disputes.  In the opinion of the Company, pending legal matters are not expected to have a material adverse effect on the results of operations, financial condition, liquidity or cash flows.

By letter dated January 18, 2005, the Michigan Department of Environmental Quality ("DEQ") reduced its demand for stipulated penalties to $193,000 against the Company for an alleged violation of a DEQ Administrative Order of Consent ("AOC").  The AOC governs the Company's environmental investigation and cleanup obligations related to the McCoy Creek Industrial Park, Buchanan, Michigan.  The Company believes it has valid defenses against the penalty and is seeking to resolve this matter through the informal dispute resolution process provided in the AOC.

On November 10, 2004, the SEC issued an order directing that a number of public companies, including the Company, provide information relating to their participation in transactions under the U.N. Oil For Food Program.  The Company has commenced an investigation to prepare its response to the SEC.

See also the discussion under Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, Environmental and Asbestos Matters and also Exhibit 13, Note 7, Commitments and Contingencies, to the Consolidated Financial Statements.

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during the last quarter of its fiscal year ended December 31, 2004.

PART II

Item 5.            MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
                                MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Information regarding the principal market for the Company's common shares and related shareholder matters are as follows:

Quarterly share prices and dividends for the Class A common shares are shown in the following tabulation.  The common shares are listed on the New York Stock Exchange.

The Bank of New York (Church Street Station, P.O. Box 11258, New York, NY 10286-1258, (800) 524-4458) is the transfer agent, registrar and dividend reinvestment agent.

There are no significant restrictions on the payment of dividends.  The approximate number of record holders of Class A common shares as of February 28, 2005 was 7,319.

Information regarding equity compensation plans required to be disclosed pursuant to this Item is included in the 2004 Form 10-K Annual Report.

Shares owned by subsidiaries are treated as treasury shares and are recorded at cost.  During 2004, a subsidiary of the Company repurchased approximately 5.3 million Class A common shares at cost of $355.9 million.  On August 4, 2004, the board of directors authorized the repurchase of up to 10 million shares of the company's Class A common shares by subsidiaries of the Company.  Approximately 2 million of the above-mentioned 5.3 million shares were purchased under this program, while the remainder was repurchased under a plan approved in 1997.  The repurchased shares are available for general corporate purposes.

Total share repurchases for the three months ended December 31, 2004 are as follows:

Item 6.   SELECTED FINANCIAL DATA

In millions, except per share amounts

Item 7.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                                RESULTS OF OPERATIONS

Executive Summary and Outlook
Ingersoll-Rand (IR or the Company) is a leading innovation and solutions provider with strong brands and leading positions within its markets.  The Company's business segments are Climate Control, Industrial Solutions, Infrastructure, and Security and Safety.  The Company's diverse product portfolio encompasses such leading industrial and commercial brands as Thermo King® transport temperature control equipment, Hussmann® commercial and retail refrigeration equipment, Ingersoll-Rand® industrial and construction equipment, Bobcat® compact construction equipment, Club Car® golf cars and utility vehicles, and Schlage®.  In addition, IR offers products and services under many other premium brands for customers in industrial and commercial markets.

The Company seeks to drive shareholder value through three areas of emphasis: Dramatic Growth, by developing innovative solutions that improve our customers' operations; Operational Excellence, by fostering a culture of continuous improvement and cost consciousness; and Dual Citizenship, by encouraging our employees' active collaboration with colleagues across business units and geographic regions to achieve superior business outcomes.  IR has substantially completed transforming its portfolio to become a more diversified company with strong growth prospects by divesting cyclical, low-growth, asset intensive businesses and improving efficiencies, capabilities and products and services for its high-potential businesses. The Company expects to pursue bolt-on acquisitions, stock buybacks and dividend enhancements with the cash flow generated from operations and divestitures.

The following significant events occurred during 2004:

-        On August 25, 2004, the Company agreed to sell its Dresser-Rand business unit (Dresser-Rand) to a fund managed by First Reserve
         Corporation, a private-equity firm, for cash proceeds of approximately $1.2 billion. The sale was completed on October 29, 2004.  Dresser-
         Rand is now included in "discontinued operations, net of tax," for all periods.  The Company realized an after-tax gain of $282.5 million on
         the disposition, which is included in "discontinued operations, net of tax" for 2004.  The gain is subject to working capital and final purchase
         price adjustments.  The Company had previously sold the Compression Services business of Dresser-Rand in 2000 for $190.0 million.

-        On February 19, 2004, the Company agreed to sell its Drilling Solutions business unit (Drilling Solutions) to Atlas Copco AB, for
          approximately $225 million. The sale of the U.S. and most international operations was completed on June 30, 2004.  The sale of Drilling
          Solutions assets held by Ingersoll-Rand (India) Limited, which was subject to approval by the Indian company's shareholders, was
          completed in the third quarter of 2004.  Drilling Solutions, which was previously included in the Company's Infrastructure Segment, is
          included in "discontinued operations, net of tax," for all periods.  The Company realized an after-tax gain of $38.6 million on the disposition,
          which is included in "discontinued operations, net of tax" for 2004.  The gain is subject to working capital and final purchase price
          adjustments. 

-        During 2004, the Company recorded approximately $29.5 million for claims filed under the Continued Dumping and Subsidy Offset Act of
         2000 on behalf of a subsidiary included in the Engineered Solutions business (Engineered Solutions), which was sold in 2003.  The
         antidumping duty is levied when the U.S. Department of Commerce determines that imported products are being sold in the United States at
         less than fair value causing material injury to a United States industry.  These amounts are reflected in "discontinued operations, net of tax."

-        During 2004, a subsidiary of the Company repurchased approximately 5.3 million Class A common shares at a cost of $355.9 million.  On
         August 4, 2004, the board of directors authorized the repurchase of up to 10 million shares of the Company's Class A common shares. 
         Approximately 2 million of the above mentioned 5.3 million shares were purchased under this program, while the remainder was repurchased
         under a plan approved in 1997.  The repurchased shares are available for general corporate purposes.  The board of directors also
         authorized on August 4, 2004, an increase of the quarterly dividend from 19 cents to 25 cents per Class A common share, effective for
         dividends paid beginning September 1, 2004. 

-        The Company made discretionary cash contributions of $140.0 million to its pension plans during the year ended December 31, 2004, as
         well as $30.1 million in required employer contributions. This includes $20.0 million of discretionary contributions to the Dresser-Rand
         pension plan.

Full-year 2004 net revenues were $9,393.6 million, a 14% increase compared with net revenues of $8,249.3 million in 2003.  The Company attributes the improved revenue growth to its leadership position as a proven source of innovation in worldwide markets and gains in its recurring revenue stream.  For full-year 2004, all business segments experienced growth in revenues compared to 2003, including over 10% growth in the Industrial Solutions, Infrastructure and Security and Safety segments.  Improved markets, new product introductions and product mix drove this revenue growth, as well as improvements in pricing and productivity.  The Company has been able to increase prices and add material surcharges to help offset the impact of cost inflation. 

Total operating income improved significantly for 2004 compared to 2003.  Higher volumes and product mix, improved pricing and increased productivity generated the majority of the increased operating income.  Operating margins grew in all segments, except Security & Safety, which had increased costs related to Kryptonite cylindrical bicycle locks, a plant closing and the discontinuance of a product line, and various legal expenses.

The Company reported full-year earnings of $1,218.7 million, or diluted earnings per share of $6.95.  Full-year earnings from continuing operations increased by 56% compared to 2003.  The Company benefited from the operational improvements and productivity enhancements in our worldwide operations, reduced interest expense from the repayment of debt and interest rate declines, and the effects of our tax strategies, which resulted in an effective tax rate of 14.3%.   

During the year, the Company increased its cash flow due to improved operating results, and reduced interest expense.  Prior year cash flow was adversely affected by $240 million due to the termination of the Company's accounts receivable securitization program.  These net cash flow improvements have allowed the Company to strengthen the balance sheet.  Total debt at year-end was $1,880.4 million, a reduction of approximately $435 million compared to year-end 2003.  The debt-to-capital ratio was 24.3% at the end of 2004, compared to 33.4% at the end of 2003.

Most of Ingersoll-Rand's major end markets continued to improve as the year 2004 came to an end.  In 2005, IR expects to build on the momentum of 2004 to continue generating greater market share gains and operating performance improvements across our businesses.  The Company sees continued strength in most of its worldwide markets as indicated by the recent order pattern.   Additionally, the Company once again expects to produce substantial operating cash flow in 2005.

Critical Accounting Policies
The notes to the financial statements include a summary of significant accounting policies and methods used in the preparation of the consolidated financial statements and the following summarizes what the Company believes are the critical accounting policies and methods used by the Company:

-        Employee benefit plans - The Company provides a range of benefits to employees and retired employees, including pensions, postretirement
         and postemployment and health-care benefits.  Determining the cost associated with such benefits is dependent on various actuarial
         assumptions, including discount rates, expected return on plan assets, compensation increases, employee mortality and turnover rates, and
         health-care cost trend rates.  Independent actuaries perform the required calculations to determine expense in accordance with U.S. generally
         accepted accounting principles. Actual results may differ from the actuarial assumptions and are generally accumulated and amortized over
         future periods.  The Company reviews its actuarial assumptions at each measurement date and makes modifications to the assumptions based
         on current rates and trends, if appropriate.  The discount rate, the rate of compensation increase and the expected long-term rates of return
         on plan assets are determined as of the measurement date.  The discount rate reflects a rate at which pension benefits could be effectively
         settled.  It is established and based primarily on the yields of high-quality fixed-income investments available and expected to be available
         during the life of the plans and a review of the current yields reported by Moody's on AA corporate bonds.  The rate of compensation
         increase is dependent on expected future compensation levels.  The expected long-term rates of return are projected to be the rates of return
         to be earned over the period until the benefits are paid, which should reflect the rates of return on present investments, and on reinvestments
         over the period.  The expected long-term rate of return on plan assets is based on what is achievable given the plan's investment policy and
         the types of assets held.  Historical assets return trends for the larger plans are reviewed over fifteen, ten and five-year periods.  The actual
         rates of return for plan assets over the last ten and fifteen-year periods have exceeded the expected rates of return used.  The Company
         believes that the assumptions utilized in recording its obligations under its plans are reasonable based on input from its actuaries, outside
         investment advisors, and information as to assumptions used by plan sponsors.

         Changes in any of the assumptions can have an impact on the net periodic pension cost or postretirement cost.  Estimated sensitivities to the
         net periodic pension cost of a 0.25% rate decrease in the three basic assumptions are as follows: the discount rate would increase expense by
         approximately $5.8 million, the rate of compensation increase would decrease expense by approximately $3.8 million, and the estimated
         return on assets assumption would increase expense by approximately $6.4 million.  A 0.25% rate decrease in the discount rate for
         postretirement benefits would increase net periodic postretirement benefit cost by $1.4 million and a 1.0% increase in the health care cost
         trend rate would increase the cost by approximately $4.1 million.

-        Commitments and contingencies - The Company is involved in various litigations, claims and administrative proceedings, including
         environmental and asbestos matters, arising in the normal course of business. The Company has recorded reserves in the financial statements
         related to these matters, which are developed, depending on the nature of the reserve, with consultation of legal counsel and internal and
         external consultants and engineers.  Subject to the uncertainties inherent in estimating future costs for these types of liabilities, the Company
         believes its estimated reserves are reasonable and does not believe the final determination of the liabilities with respect to these matters would
         have a material effect on the financial condition, results of operations, liquidity or cash flows of the Company for any year.

-        Accrued liabilities - The Company has accrued liabilities for product liability claims, including asbestos claims, workers' compensation
         matters and product warranty reserves.  The Company has recorded reserves in the financial statements related to these matters, which have
         been developed using input derived from actuarial estimates and historical and anticipated experience data depending on the nature of the
         reserve.  The Company believes its estimated reserves are reasonable.

-        Allowance for doubtful accounts and inventory reserves - The Company has provided an allowance for doubtful accounts receivable and
         inventory reserves based upon its knowledge of its end markets, customer base and products.

-        Goodwill and other intangible assets - The Company has significant goodwill and other intangible assets on its balance sheet related to
         acquisitions.  The valuation and classification of these assets and the assignment of amortization lives involves significant judgments and the use
         of estimates.  The testing of these intangibles under established accounting guidelines for impairment also requires significant use of judgment
         and assumptions, particularly as it relates to the identification of reporting units and the determination of fair market value.  The Company's
         goodwill and other intangible assets are tested and reviewed for impairment on an annual basis or when there is a significant change in
         circumstances.  The Company believes that its use of estimates and assumptions are reasonable and comply with generally accepted
         accounting principles.  Changes in business conditions could potentially require future adjustments to these valuations.

-        Long-lived assets - Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
         amount of an asset may not be recoverable.  An impairment in the carrying value of an asset would be recognized whenever anticipated future
         undiscounted cash flows from an asset are less than its carrying value.  The impairment is measured as the amount by which the carrying value
         exceeds the fair value of the asset as determined by an estimate of discounted cash flows. 

-        Income taxes - Deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of
         assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse.  The
         Company recognizes future tax benefits, such as net operating losses and foreign tax credits, to the extent that realizing these benefits is
         considered in its judgment to be more likely than not.  The Company regularly reviews the recoverability of its deferred tax assets considering
         its historic profitability, projected future taxable income, timing of the reversals of existing temporary differences and the feasibility of its tax
         planning strategies.  Where appropriate, the Company records a valuation allowance with respect to a future tax benefit.

         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, U.S. and non-U.S. 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.  The Company believes that
         it has adequately provided for any reasonably foreseeable resolution of these matters.  The Company will  adjust its estimate if significant
         events so dictate.  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 in the period that the matter is finally resolved.

The preparation of all financial statements includes the use of estimates and assumptions that affect a number of amounts included in the Company's financial statements.  If actual amounts are ultimately different from previous estimates, the revisions are included in the Company's results for the period in which the actual amounts become known.  Historically, the aggregate differences, if any, between the Company's estimates and actual amounts in any year have not had a significant impact on the consolidated financial statements.

Results of Operations
Net earnings from continuing operations for 2004 were $829.8 million, or diluted earnings per share of $4.73, as compared to $532.8 million or $3.09 diluted earnings per share in 2003 and $322.4 million or $1.89 diluted earnings per share in 2002.  

Revenues
2004 vs. 2003:  Revenues for 2004 increased by approximately 14% compared to 2003.  Improved end markets, new product introductions and product mix accounted for approximately 9% of the increase, while the effects of currency translation accounted for approximately 3%.  Improved pricing in all segments also led to increased revenues.  Volume increases were most significant in the Bobcat, Club Car and Road Development product lines in the Infrastructure segment.  The worldwide truck and trailer market for Climate Control also continued to improve.  The Industrial Solutions and Security and Safety segments also had higher sales volumes. 

2003 vs. 2002:  Revenues for 2003 increased by approximately 9% compared to 2002. Higher volumes and the effects of currency translation accounted for the majority of the increase.  Volume increases were primarily attributable to an improvement in Climate Control's worldwide truck and trailer market, continued gains in recurring revenues in the Air and Productivity Solutions Segment, new product introductions in the Bobcat business, and U.S. market share gains in Security and Safety.  The remaining increase was primarily attributable to pricing and the results of acquisitions. Revenues across all business segments were higher.

Cost of Goods Sold
2004 vs. 2003:  Cost of goods sold in 2004 was 73.0% of sales compared to 74.1% in 2003.  Contributions from higher volumes and increased productivity accounted for the majority of the improvement.  These positive effects were partially offset by higher material and product costs. 

2003 vs. 2002:  Cost of goods sold in 2003 was 74.1% of sales compared to 75.4% in 2002.  Contributions from higher volumes and increased productivity accounted for the majority of the decrease.  These positive effects were partially offset by higher material costs, unfavorable currency movements and higher pension and other employee benefit costs.

Selling and Administrative Expenses
2004 vs. 2003:  Selling and administrative expenses were 15.1% of sales in 2004 as compared to 16.4% for 2003.  The decrease in the ratio is mainly due to higher revenues in 2004, a reduction in expenses due to a gain on sale of corporate real estate of approximately $13 million and increased productivity.  These positive effects were partially offset by the cost of operational improvement investments and increased litigation expenses.

2003 vs. 2002:  Selling and administrative expenses were 16.4% of sales in 2003 and 2002.  Higher revenues, benefits associated with the restructuring programs and increased productivity offset the additional costs for stock-based liability programs and other costs, such as employee benefits in 2003. 

Operating Income
2004 vs. 2003:  Operating income for 2004 increased by approximately 42.2% compared to 2003, while operating income margins increased from 9.5% to 11.9%.  The increases were mainly attributable to increased sales volumes, product pricing and productivity.  The effect of currency also had a favorable impact on operating income.  Higher material, product and litigation expenses  offset some of the increases described above.

2003 vs. 2002:  Operating income for 2003 increased by approximately 36.3% compared to 2002, while operating income margins also increased significantly.  The increases were mainly attributable to the benefits associated with the restructuring programs and improved productivity, higher pricing, higher volumes, product mix, and the elimination of charges related to restructuring.  These positive effects were partially offset by higher pension and other employee benefit costs and additional costs for stock-based liabilities .

Interest Expense
2004 vs. 2003:  Interest expense for 2004 totaled $153.1 million, a decrease of $22.4 million from 2003. The decrease is attributable to lower year-over-year debt levels resulting from the net repayment of debt of $469.4 million and lower interest rates during 2004. 

2003 vs. 2002:  Interest expense for 2003 totaled $175.5 million, a decrease from the 2002 total by $52.4 million.  The decrease is attributable to lower year-over-year debt levels resulting primarily from the repayment of $700 million of debt in the first quarter of 2003, approximately $240 million in other debt repayments during the year, as well as a decline in interest rates. 

Other Income (Expense), Net
Other income (expense), net, includes certain foreign exchange gains and losses, equity in earnings of partially owned affiliates, and other miscellaneous income and expense items. 

2004 vs. 2003:  In 2004, other income (expense), net, aggregated to $17.0 million of income, as compared with $10.9 million of income in 2003.  The change is primarily attributable to a $9.8 million increase in interest income due to the increase in cash from the sale of Dresser-Rand and $8.1 million of increased income from partially owned affiliates.  These increases were partially offset by $3.2 million of higher foreign exchange losses in 2004 and income of $10.0 million in 2003 relating to the gain on sale of, and dividend income from, The Timken Company common stock.

2003 vs. 2002:  In 2003, other income (expense), net, aggregated $10.9 million of income, as compared with $20.1 million of expense in 2002.  The change is primarily attributable to the sale of approximately 9.4 million shares of The Timken Company common stock, which resulted in a gain of $7.6 million, due to share-price appreciation from the date of acquisition to the sale date.  Additionally, the Company received $2.4 million in dividend income while holding these shares.  The remaining change was due to lower foreign exchange losses in 2003 and several miscellaneous expense items included in 2002.

Minority Interests
2004 vs. 2003:  Minority interests increased to $16.0 million in 2004, from $14.9 million in 2003 as a result of higher earnings from consolidated subsidiaries in which the Company has a majority ownership.

2003 vs. 2002:  Minority interests decreased to $14.9 million in 2003, from $15.5 million in 2002 as a result of lower earnings from consolidated subsidiaries in which the Company has a majority ownership.

Provision for Income Taxes 
The tax provision for the year ended December 31, 2004 was $138.4 million, resulting in an effective tax rate of 14.3%.  This compares to a provision of $75.3 million, or effective rate of 12.4%, for the year ended December 31, 2003 and a benefit of $7.9 million, for the year ended December 31, 2002.

The increase in tax provision and effective rate for 2004, relates to an increase in earnings compared to 2003, especially in the United States.  Higher earnings were the main factor in the increase in the provision and effective rate for 2003 compared to 2002.

Discontinued Operations
Discontinued operations for the year ended December 31, 2004, amounted to income of $388.9 million, net of tax provisions of $343.5 million.  This total includes net after tax gains of $334.9 million, primarily comprised of gains from the sales of Dresser-Rand ($282.5 million) and Drilling Solutions ($38.6 million).   After-tax net income from discontinued operations amounted to $54.0 million.  This income mainly includes profit from Dresser-Rand ($45.0 million) and Engineered Solutions ($20.9 million), which includes antidumping subsidy net of tax of $29.5 million.  This income is partially offset by retained costs related to Ingersoll-Dresser Pump Company ("IDP") of $14.9 million, which mostly include product liability costs, primarily related to asbestos liability claims, and employee benefit costs.

Discontinued operations for the year ended December 31, 2003, amounted to income of $111.7 million, net of tax provisions of $58.6 million.  This total includes net after tax gains of $68.8 million, comprised of gains from the sales of Engineered Solutions ($58.2 million) and Waterjet ($18.2 million), offset by a loss from the sale of Laidlaw ($7.6 million).  After-tax net income from discontinued operations amounted to $42.9 million.  This income principally includes profit from Dresser-Rand ($41.1 million) and Drilling Solutions ($19.6 million), partially offset by retained costs (mainly product liability costs, primarily related to asbestos liability claims, and employee benefit costs) related to IDP ($19.8 million). 

Discontinued operations for the year ended December 31, 2002, amounted to income of $138.6 million, net of tax provisions of $90.5 million.  This income primarily includes profit from Dresser-Rand ($29.8 million), Drilling Solutions ($13.4 million) and Engineered Solutions ($108.4 million).  This profit was partially offset by retained costs (mainly product liability costs, primarily related to asbestos liability claims, and employee benefit costs) related to IDP ($14.8 million). 

Restructuring Programs
During the third quarter of 2000 and the fourth quarter of 2001, the Company commenced two restructuring programs totaling $475 million, which included plant rationalizations, organizational realignments consistent with the Company's new market-based structure, the consolidation of back-office processes and other reductions in general and administrative expenses across the Company.  These programs included certain costs that were identified as restructuring using the applicable accounting guidance during those periods, including employee termination costs such as severance, extended medical costs, pension liabilities, and outplacement costs, and facility exit costs such as lease exit costs and equipment write-offs.  The programs also included costs that did not meet the criteria to be classified as restructuring.  These nonrecurring costs were charged to "Cost of sales" and "Selling and administrative expenses," as incurred.  Approximately 5,000 employee terminations were completed impacting both the salaried and hourly employee groups.  The Company closed 20 manufacturing facilities in connection with the restructuring programs.  The Company has realized lower costs and improved customer service in all segments as a result of these actions.

Review of Business Segments

Climate Control
Climate Control is engaged in the design, manufacture, sale and service of transport temperature control units, HVAC systems, refrigerated display merchandisers, beverage coolers, and walk-in storage coolers and freezers.  It includes the Thermo King, Hussmann and Koxka brands.

2004 vs. 2003:  Climate Control revenues for 2004 increased by approximately 5% compared to 2003.  The effects of currency translation accounted for approximately 3% of the increase, mainly due to the weakening of the U.S. dollar.  The remaining increase was primarily due to higher volumes and product mix and pricing.  Operating income and margins for the year ended 2004 increased significantly.  Higher prices accounted for $48.6 million of increased operating income, while volumes and product mix added $30.9 million.  Increased productivity from cost saving programs such as low cost country savings (approximately $22 million), improved labor and overhead efficiencies (approximately $18 million) and improved operating efficiencies in service and aftermarket businesses (approximately $13 million), more than offset higher material costs of $28.7 million.

Climate Control revenues and operating income benefited from strong worldwide market conditions for the truck & trailer product lines.  North American operations were also helped by the bus business, while retail stationary refrigeration equipment and contracting sales were flat.  Growth in the European and Asian display case markets also contributed to the improvement. 

2003 vs. 2002:  Climate Control revenues for 2003 increased by approximately 7% compared to 2002. The effects of currency translation accounted for approximately 4% of the increase, mainly due to the strengthening of the Euro against the U.S. dollar.  The remaining increase was primarily due to higher volumes, pricing, and the full year inclusion of the results of acquisitions that occurred in 2002.  Operating income and margins for the year ended 2003 increased significantly.  The estimated benefits associated with the restructuring programs and improved productivity increased operating income by approximately $37 million, while pricing, and higher volumes and product mix increased operating income by $25.8 million and $8.7 million, respectively.  These positive effects were partially offset by other expenses, such as higher pension and other employee benefit costs. 

Industrial Solutions
Industrial Solutions is comprised of a diverse group of businesses focused on providing solutions to enhance customers' industrial efficiency mainly by engaging in the design, manufacture, sale and service of air compressors, microturbines and industrial tools.  Industrial Solutions results have been restated for  the  sale of Dresser-Rand,  now included in Discontinued Operations.

2004 vs. 2003:  Industrial Solutions' revenues for 2004 increased by approximately 14% compared to 2003.  Higher volumes, new product introductions and product mix accounted for approximately 10% of the increase.  The effects of currency translation accounted for approximately 2% of the increase, mainly due to the continued weakening of the U.S. dollar.  Operating income and margins for the year ended 2004 increased significantly.  Higher volumes and product mix increased operating income by $45.6 million.  Pricing and improved productivity also increased operating income by $12.9 million and $14.6 million, respectively.  The effect of currency also had a favorable effect on operating profit.

Industrial Solutions' revenues and operating income benefited from higher volumes and product mix, as recurring revenues for the segment experienced double digit growth.   New products with higher margins and increased aftermarket business, along with high growth in the Asian markets also improved revenues and profitability for the segment.  

2003 vs. 2002:  Industrial Solutions' revenues for 2003 increased by approximately 7% compared to 2002.  The effects of currency translation accounted for approximately 4% of the increase, mainly due to the strengthening of the euro.  The remaining increase was primarily due to higher volumes and service revenue growth.  Operating income and margins for the year ended 2003 increased significantly.  Higher volumes and product mix, and the effects of currency translation increased operating income by $8.9 million and $8.7 million, respectively, while the estimated benefits associated with the restructuring programs and improved productivity increased operating income by approximately $37 million.  These positive effects partially offset costs for implementing new efficiency initiatives, and other charges, such as higher employee benefit costs. 

Infrastructure
Infrastructure is engaged in the design, manufacture, sale and service of skid-steer loaders, mini-excavators, golf and utility vehicles, portable compressors and light towers, and road construction and repair equipment.  It is comprised of Bobcat, Club Car, Utility Equipment and Road Development.  Infrastructure prior years' results have been restated for  the  sale of Drilling Solutions,  now included in Discontinued Operations.

2004 vs. 2003:  Infrastructure revenues for 2004 increased by approximately 24% compared to 2003.  Higher volumes and product mix accounted for approximately 18% of the increase, while the effects of currency translation and pricing accounted for the majority of the remaining increase.  Operating income and margins for the year ended 2004 increased significantly.  Higher volumes and product mix, and pricing increased operating income by $134.1 million and $74.2 million, respectively.  Additionally, the effects of currency translation helped improve operating income.  These positive effects were partially offset by higher material costs of $66.0 million and higher product costs and productivity investments.

Revenues and operating income for all businesses in the Infrastructure Segment increased in 2004.  Bobcat's sales volumes and pricing improvements were led by increased market demand, new products and attachments introduced during the year and an increase in aftermarket parts sales.  Club Car also had improvements in volume and pricing with an increase in parts sales and the successful introduction of the Precedent golf car and a new utility work vehicle.  European demand was also strong for Club Car.  Road Development had higher volumes during the year due to increased market demand and strong growth in the European market. 

2003 vs. 2002:  Infrastructure revenues for 2003 increased by approximately 11% compared to 2002.  Higher volumes accounted for approximately 6% of the increase, while the effects of currency translation accounted for a majority of the remaining increase.  Operating income and margins for the year ended 2003 increased significantly.  The estimated benefits associated with the restructuring programs and improved productivity increased operating income by approximately $27 million, while higher volumes and product mix, and the effects of currency translation increased operating income by $34.7 million and $17.0 million, respectively.  These positive effects were partially offset by costs for implementing new efficiency initiatives, facility consolidation costs, increased product liability costs, and other charges, such as higher pension and other employee benefit costs. 

Security and Safety
Security and Safety is engaged in the design, manufacture, sale and service of locks, door closers, exit devices, door control hardware, doors and frames, decorative hardware, electronic and biometric access control systems, and time and attendance systems.