The company said sales improved due to stronger demand across the board in its automotive and industrial markets.

Net income in the quarter was $20.9 million, reflecting an operating income margin which fell to 6.5% of sales from 2001's 7.6% of sales, or $20.4 million.

The company said margins were squeezed by higher employee benefit costs, higher insurance costs and costs related to the Nadella acquisition. The sales mix also shifted unfavorably during the quarter and became weighted toward less profitable items.

Overall, Ingersoll-Rand reported second quarter sales of $2.59 billion, returning net earnings of $107.4 million. But the company is not optimistic about the remainder of 2002.

In a statement accompanying the earnings report, Chairman and CEO Herbert Henkel said, "There has been little evidence to suggest that we will enjoy a sustained upward level of demand in the second half of 2002," adding that demand from key customers continued to be erratic. Mr. Henkel went on to say that strong sales in April and May were followed by "significant" year-over-year order declines in June.