-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, aQjn3hG9hVQNwEJQseMWhZrVy9GW5xotrb91YjnbopaSmq2z8ezmlhOolFjBnRuD kxnXrIFx6aPpjVY+h/YxuQ== 0000049826-94-000006.txt : 19940824 0000049826-94-000006.hdr.sgml : 19940824 ACCESSION NUMBER: 0000049826-94-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS TOOL WORKS INC CENTRAL INDEX KEY: 0000049826 STANDARD INDUSTRIAL CLASSIFICATION: 3089 IRS NUMBER: 361258310 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04797 FILM NUMBER: 94543576 BUSINESS ADDRESS: STREET 1: 3600 W LAKE AVE CITY: GLENVIEW STATE: IL ZIP: 60025 BUSINESS PHONE: 7087247500 MAIL ADDRESS: STREET 1: 3600 WEST LAKE AVENUE CITY: GLENVIEW STATE: IL ZIP: 60025-5811 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to For Quarter Ended Commission file number 1-4797 ILLINOIS TOOL WORKS INC. (Exact name of registrant as specified in its charter) Delaware 36-1258310 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3600 West Lake Avenue, Glenview, IL 60025-5811 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (708) 724-7500 Former address: (Former name, former address and former fiscal year, if changed since last report.) 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 shares of registrant's common stock, without par value, outstanding at July 31, 1994: 113,281,621. Part I - Financial Information Item 1 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES FINANCIAL STATEMENTS The unaudited financial statements included herein have been prepared by Illinois Tool Works Inc. and Subsidiaries (the "Company"). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. It is suggested that these financial statements be read in conjunction with the financial statements and comments on financial statements included in the Company's annual report on Form 10-K. ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF INCOME (UNAUDITED) (In Thousands Except for Per Share Amounts) Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 Operating Revenues $881,042 $829,318 $1,652,481 $1,579,340 Operating costs 583,910 556,998 1,104,174 1,065,885 Selling, administrative, and research and develop- ment expenses 160,526 164,923 314,892 323,238 Amortization of goodwill and other intangible assets 5,493 5,462 10,986 10,697 ------- ------- ------- ------- Operating Income 131,113 101,935 222,429 179,520 Interest expense (7,114) (10,014) (14,650) (18,058) Amortization of retiree health care (1,742) (1,742) (3,484) (3,484) Other expense (7,303) (1,880) (6,553) (1,852) ------- ------- ------- ------- Income Before Income Taxes 114,954 88,299 197,742 156,126 Income taxes 44,227 33,500 76,100 59,300 ------- ------- ------- ------- Net Income $ 70,727 $ 54,799 $ 121,642 $ 96,826 ======= ======= ======= ======= Per share of common stock: Net Income $ .62 $ .49(A) $1.07 $0.86(A) ===== ===== ===== ===== Cash dividends: Paid $ .13 $ .12(A) $ .26 $ .24(A) ===== ===== ===== ===== Declared $ .13 $ .12(A) $ .26 $ .24(A) ===== ===== ===== ===== Average number of shares of common stock outstanding during the period 113,254 112,976(A) 113,225 112,896(A) ======= ======= ======= ======= (A) Restated for two-for-one stock split in June 1993. ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) (In Thousands) ASSETS June 30, 1994 December 31, 1993 Current Assets: Cash and equivalents $ 45,349 $ 35,395 Trade receivables 625,434 544,226 Inventories 430,675 403,902 Deferred income taxes 58,451 57,764 Prepaid expenses and other current assets 53,825 52,361 --------- --------- Total current assets 1,213,734 1,093,648 --------- --------- Plant and Equipment: Land 63,818 65,134 Buildings 290,381 282,104 Machinery and equipment 811,845 771,066 Equipment leased to others 65,762 62,857 Construction in progress 32,810 24,718 --------- --------- 1,264,616 1,205,879 Accumulated depreciation (680,075) (622,114) --------- --------- Net plant and equipment 584,541 583,765 --------- --------- Investment in Leveraged Leases 56,525 60,088 Goodwill 363,029 363,769 Other Assets 226,016 235,621 --------- --------- $2,443,845 $2,336,891 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 90,186 $ 107,073 Accounts payable 155,178 149,205 Accrued expenses 290,319 233,932 Cash dividends payable 14,724 14,710 Income taxes payable 39,686 41,222 --------- --------- Total current liabilities 590,093 546,142 --------- --------- Non-current Liabilities: Long-term debt 325,259 375,641 Deferred income taxes 93,373 92,470 Other 67,681 63,969 --------- --------- Total non-current liabilities 486,313 532,080 --------- --------- Stockholders' Equity: Preferred stock -- -- Common stock 172,562 170,185 Income reinvested in the business 1,221,623 1,129,435 Common stock held in treasury (1,952) (1,955) Equity adjustment from foreign currency translation (24,794) (38,996) --------- --------- Total stockholders' equity 1,367,439 1,258,669 --------- --------- $2,443,845 $2,336,891 ========= ========= ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) Six Months Ended June 30 1994 1993 Cash Provided by (Used for) Operating Activities: Net Income $121,642 $ 96,826 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 70,223 65,838 Change in deferred income taxes 546 (2,953) (Gain) loss on sale of plant and equipment, and investment properties (1,472) 1,080 Gain on sale of operations & affiliates (4,241) -- Other non-cash items, net 5,672 41 ------- ------- Cash provided by operating activities 192,370 160,832 Changes in assets and liabilities: (Increase) decrease in-- Trade receivables (75,828) (53,887) Inventories (18,951) 3,752 Prepaid expenses and other assets 6,071 (3,873) Increase (decrease) in-- Accounts payable 1,546 (12,385) Accrued expenses 49,189 19,976 Income taxes payable (2,564) (15,572) Other, net 5,413 1,054 ------- ------- Net cash provided by operating activities 157,246 99,897 ------- ------- Cash Provided by (Used for) Investing Activities: Acquisition of subsidiaries (excluding cash and equivalents) and additional interest in affiliates (12,514) (262,503) Additions to plant and equipment (61,326) (57,013) Proceeds from sale of plant and equipment, and investment properties 12,458 2,830 Proceeds from sale of operations & affiliates 12,037 -- Other, net 3,524 (931) ------- ------- Net cash used for investing activities (45,821) (317,617) ------- ------- Cash Provided by (Used for) Financing Activities: Cash dividends paid (29,439) (26,980) Issuance of common stock 2,380 3,556 Net proceeds (repayments) of short-term debt (68,391) 146,018 Proceeds from long-term debt 1,755 125,477 Repayments of long-term debt (2,672) (10,269) ------- ------- Net cash provided by (used for) financing activities (96,367) 237,802 ------- ------- Effect of Exchange Rate Changes on Cash and Equivalents (5,104) 1,022 ------- ------- Cash and Equivalents: Increase during the period 9,954 21,104 Beginning of the period 35,395 31,193 ------- ------- End of the period $ 45,349 $ 52,297 ======= ======= Cash Paid During the Period for Interest $ 14,643 $ 20,556 ======= ======= Cash Paid During the Period for Income Taxes $ 80,946 $ 71,129 ======= ======= Liabilities Assumed from Acquisitions $ 2,619 $ 89,891 ======= ======= ILLINOIS TOOL WORKS INC. and SUBSIDIARIES COMMENTS ON FINANCIAL STATEMENTS (UNAUDITED) (1) INVENTORIES at June 30, 1994 and December 31, 1993 were as follows: (In Thousands) June 30, Dec. 31, 1994 1993 Raw Material $108,585 $ 94,105 Work-in-process 65,557 61,314 Finished goods 256,533 248,483 ------- ------- $430,675 $403,902 ======= ======= (2) OTHER INCOME (EXPENSE), consists of the following: (In Thousands) Three Months Ended Six Months Ended June 30 June 30 1994 1993 1994 1993 Interest Income $ 1,091 $ 2,312 $ 1,967 $ 4,392 Income from unconsolidated affiliates 596 349 951 834 Net reserves for disposition and relocation of certain facilities, restructuring costs, revaluation of non-operating assets to realizable value, and nonrecurring costs unrelated to operations (11,669) (4,138) (13,696) (4,525) Loss on sale of investment properties (232) -- (398) -- Gain on sale of operations and affiliates 3,794 -- 4,241 -- Gain (loss) on sale of plant and equipment (98) (346) 1,870 (1,080) Other, net (785) (57) (1,488) (1,473) ------ ------ ------ ------ $(7,303) $(1,880) $(6,553) $(1,852) ====== ====== ====== ====== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES COMMENTS ON FINANCIAL STATEMENTS (UNAUDITED) (3) LONG-TERM DEBT at June 30, 1994 and December 31, 1993 consisted of the following: (In Thousands) June 30, Dec. 31, 1994 1993 Commercial paper $ 50,000 $100,000 7-1/2% notes due December 1, 1998 125,000 125,000 5-7/8% notes due March 1, 2000 125,000 125,000 Other, including capitalized lease obligations 27,669 28,260 ------- ------- 327,669 378,260 Current maturities (2,410) (2,619) ------- ------- $325,259 $375,641 ======= ======= In the second quarter of 1994, $50,000,000 of the long-term commercial paper balance was reclassified to short-term debt, due to earlier repayment than was previously expected. Item 2 - Management's Discussion and Analysis ENGINEERED COMPONENTS SEGMENT Businesses in this segment manufacture short lead-time plastic and metal components and assemblies; industrial fluids and adhesives; plastic and metal fasteners; and fastening tools and equipment. This segment primarily serves the construction, automotive and general industrial markets. (Dollars in millions) Three months ended Six months ended June 30 June 30 Operating Revenues 1994 1993 1994 1993 Domestic $313 $282 $595 $558 International 157 156 286 283 ------- ------- ------- ------- Total $470 $438 $881 $841 ======= ======= ======= ======= Three months ended June 30 Six months ended June 30 Operating 1994 1993 1994 1993 Income Income Margin % Income Margin % Income Margin % Income Margin % Domestic $ 53 17.0% $ 38 13.5% $ 93 15.7% $ 73 13.0% International 20 12.4% 16 9.8% 31 10.8% 24 8.4% ---- ---- ---- ---- Total $ 73 15.4% $ 54 12.2% $124 14.1% $ 97 11.5% ==== ==== ==== ==== For both the three month and six month periods ended June 30, 1994, continued volume growth in the construction businesses and increased penetration in a strong automotive market led to increased domestic revenues compared with last year. Operating income and margins were higher for both the second quarter and year-to-date 1994 as a result of this volume growth. Lower operating costs and selling, administrative and research and development expenses also contributed to improved margins in both periods of 1994. Internationally, revenues increased slightly for both the three month and six month periods ended June 30, 1994, primarily due to increased penetration in the European automotive markets. Operating income and margins grew for both the second quarter and year-to-date 1994, due to a decline in costs in the construction businesses as well as improved productivity and volume gains from the European automotive businesses. INDUSTRIAL SYSTEMS AND CONSUMABLES SEGMENT Businesses in this segment manufacture longer lead-time systems and related consumables for consumer and industrial packaging, finishing, furniture, inspection and quality assurance applications. The largest markets served by this segment are general industrial, food and beverage, construction and industrial capital goods. (Dollars in millions) Three months ended Six months ended June 30 June 30 Operating Revenues 1994 1993 1994 1993 Domestic $261 $238 $490 $454 International 150 153 281 284 ------- ------- ------- ------- Total $411 $391 $771 $738 ======= ======= ======= ======= Three months ended June 30 Six months ended June 30 Operating 1994 1993 1994 1993 Income Income Margin % Income Margin % Income Margin % Income Margin % Domestic $ 44 17.2% $ 36 15.2% $ 76 15.6% $ 62 13.6% International 14 9.1% 12 7.9% 22 7.7% 21 7.4% ---- ---- ---- ---- Total $ 58 14.2% $ 48 12.4% $ 98 12.7% $ 83 11.3% ==== ==== ==== ==== For both the three month and six month periods ended June 30, 1994, domestic revenues increased compared with 1993, primarily due to the industrial packaging group along with the finishing systems and consumer packaging businesses. Operating income and margins improved in both periods of 1994 because of a reduction in expenses and new product introductions in the industrial and consumer packaging groups and continued margin improvement in the finishing systems businesses. Soft Japanese markets, served by industrial packaging and finishing systems businesses, resulted in a slight decline in international revenues in the second quarter of 1994 versus 1993. Year-to-date international revenues decreased slightly in 1994 versus 1993 primarily due to the soft Japanese markets and declines in the German consumer packaging businesses, partially offset by revenue gains in the European industrial packaging markets. Operating income and margins were higher in the second quarter of 1994 compared with 1993 due to cost reductions and new product introductions in the finishing systems businesses. For the six months ended June 30, the improvement in income and margins in 1994 from the finishing systems businesses was partially offset by reduced income from the European industrial packaging businesses as a result of price pressure. OPERATING EXPENSES Operating costs as a percentage of revenues decreased to 66.8% in the first half of 1994 versus 67.5% in the first half of 1993. Selling, administrative, and research and development expenses were 19.1% of revenues in the first half of 1994 versus 20.5% in the first half of 1993. These ratios were lower because of cost reductions as a result of a Company-wide objective to reduce costs. INTEREST EXPENSE Interest expense declined to $14.7 million in the first half of 1994 from $18.1 million in the second quarter of 1993, primarily due to a reduction in commercial paper borrowings and foreign borrowings, and lower foreign interest rates. OTHER EXPENSE Other expense increased to $7.3 million in the second quarter of 1994 from $1.9 million in the second quarter of 1993. This increase is mainly due to nonrecurring costs unrelated to operations and lower interest income, partially offset by a gain on the sale of operations and affiliates. NET INCOME Net income of $70.7 million ($0.62 per share) in the second quarter of 1994 was 29.1% higher than the 1993 second quarter net income of $54.8 million ($0.49 per share). Net income of $121.6 million ($1.07 per share) for the first half of 1994 exceeded 1993 first half net income of $96.8 ($0.86 per share). The Company effected a two-for-one stock split in June 1993 that doubled the outstanding shares. Net income per share for 1993 has been restated for the stock split. For both the second quarter and first half of 1994, foreign currency had no material impact on earnings versus 1993. FINANCIAL POSITION Net working capital at June 30, 1994 and December 31, 1993 is summarized as follows: (In Thousands) June 30, Dec. 31, Increase/ 1994 1993 (Decrease) Current Assets: Cash and equivalents $ 45,349 $ 35,395 $ 9,954 Trade receivables 625,434 544,226 81,208 Inventories 430,675 403,902 26,773 Other 112,276 110,125 2,151 ---------- ---------- ---------- $1,213,734 $1,093,648 $ 120,086 ---------- ---------- ---------- Current Liabilities: Short-term debt $ 90,186 $ 107,073 $ (16,887) Accounts payable and accrued expenses 445,497 383,137 62,360 Other 54,410 55,932 (1,522) ---------- ---------- ---------- $ 590,093 $ 546,142 $ 43,951 ---------- ---------- ---------- Net Working Capital $ 623,641 $ 547,506 $ 76,135 ========== ========== ========== Current Ratio 2.06 2.00 ========== ========== Trade receivables increased primarily due to seasonally stronger domestic revenues in the second quarter of 1994 versus the fourth quarter of 1993. Overall growth of the business combined with a seasonal buildup contributed to the increase in inventories from year-end 1993 to second quarter 1994. Accounts payable and accrued expenses increased at June 30, 1994, versus December 31, 1993, due mainly to seasonal growth and an increase in accrued retiree health care. In the second quarter of 1994, $50,000,000 of the long-term commercial paper balance was reclassified to short-term debt, due to earlier repayment than was previously expected. Part II - Other Information Item 4 - Submission of Matters to a Vote of Security Holders The Company's Annual Meeting of Stockholders was held on May 6, 1994. The following members were elected to the Company's Board of Directors to hold office for the ensuing year: Nominees In Favor Withheld Non-votes J. W. Becton, Jr. 89,027,931 356,720 S. S. Cathcart 89,037,733 346,918 S. Crown 89,011,822 372,829 R. M. Jones 89,035,955 348,696 G. D. Kennedy 89,028,490 356,161 R. H. Leet 89,037,803 346,848 R. C. McCormack 89,038,186 346,465 J. D. Nichols 89,034,618 350,033 P. B. Rooney 89,036,035 348,616 H. B. Smith 89,033,313 351,308 30 O. J. Wade 89,034,035 350,416 200 Item 6 - Exhibits and Reports on Form 8-K No reports on Form 8-K have been filed during the quarter for which this report is filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ILLINOIS TOOL WORKS INC. Dated: August 12, 1994 By: /s/ Michael W. Gregg Michael W. Gregg, Senior Vice President and Controller (Principal Accounting Officer) Dated: August 12, 1994 By: /s/ Stewart S. Hudnut Stewart S. Hudnut, Senior Vice President and Secretary -----END PRIVACY-ENHANCED MESSAGE-----