0000049826-95-000011.txt : 19950815 0000049826-95-000011.hdr.sgml : 19950815 ACCESSION NUMBER: 0000049826-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS TOOL WORKS INC CENTRAL INDEX KEY: 0000049826 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [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: 95563515 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, 1995 ---------------------------------------- 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 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, 1995: 117,331,764. 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 -------------------- ---------------------- 1995 1994 1995 1994 ---------- -------- ---------- ---------- Operating Revenues $1,090,713 $881,042 $2,019,798 $1,652,481 Operating costs 706,419 583,910 1,322,441 1,104,174 Selling, administrative, and research and develop- ment expenses 196,891 160,526 370,766 314,892 Amortization of goodwill and other intangible assets 6,023 5,493 12,156 10,986 ---------- -------- ---------- ---------- Operating Income 181,380 131,113 314,435 222,429 Interest expense (7,938) (7,114) (14,097) (14,650) Amortization of retiree health care (1,742) (1,742) (3,484) (3,484) Other expense (352) (7,303) (4,475) (6,553) ---------- -------- ---------- ---------- Income Before Income Taxes 171,348 114,954 292,379 197,742 Income taxes 65,100 44,227 111,100 76,100 Net Income $ 106,248 $ 70,727 $ 181,279 $ 121,642 ========== ======== ========== ========== Per share of common stock: Net Income $ .91 $ .62 $1.55 $1.07 ===== ===== ===== ===== Cash dividends: Paid $ .15 $ .13 $ .30 $ .26 ===== ===== ===== ===== Declared $ .15 $ .13 $ .30 $ .26 ===== ===== ===== ===== Average number of shares of common stock outstanding during the period 117,214 113,254 117,147 113,225 ======= ======= ======= ======= ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) (In Thousands) ASSETS June 30, 1995 December 31, 1994 ------------- ----------------- Current Assets: Cash and equivalents $ 73,924 $ 76,867 Trade receivables 732,088 612,638 Inventories 519,922 439,486 Deferred income taxes 80,936 72,728 Prepaid expenses and other current assets 73,821 61,214 ---------- ---------- Total current assets 1,480,691 1,262,933 Plant and Equipment: ---------- ---------- Land 69,511 66,577 Buildings 347,082 317,714 Machinery and equipment 994,120 915,198 Equipment leased to others 72,265 69,162 Construction in progress 44,425 32,143 ---------- ---------- 1,527,403 1,400,794 Accumulated depreciation (850,104) (759,559) ---------- ---------- Net plant and equipment 677,299 641,235 ---------- ---------- Investment in Leveraged Leases 50,658 55,413 Goodwill 469,183 394,233 Deferred Income Taxes 83,842 -- Other Assets 285,347 226,684 ---------- ---------- $3,047,020 $2,580,498 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 146,643 $ 67,002 Accounts payable 210,644 174,748 Accrued expenses 403,385 317,031 Cash dividends payable 17,588 17,094 Income taxes payable 27,828 52,558 ---------- ---------- Total current liabilities 806,088 628,433 ---------- ---------- Non-current Liabilities: Long-term debt 282,775 272,987 Deferred income taxes -- 69,516 Other 208,035 68,041 ---------- ---------- Total non-current liabilities 490,810 410,544 ---------- ---------- Stockholders' Equity: Preferred stock -- -- Common stock 227,418 201,166 Income reinvested in the business 1,503,125 1,344,172 Common stock held in treasury (1,866) (1,952) Equity adjustment from foreign currency translation 21,445 (1,865) ---------- ---------- Total stockholders' equity 1,750,122 1,541,521 ---------- ---------- $3,047,020 $2,580,498 ========== ========== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) Six Months Ended June 30 ------------------ 1995 1994 -------- -------- Cash Provided by (Used for) Operating Activities: Net income $181,279 $121,642 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 78,864 70,223 Change in deferred income taxes (3,269) 546 Gain on sale of plant and equipment, and equipment under a leveraged lease (4,324) (1,870) (Income) loss from investment properties (6,423) 398 Gain on sale of operations and affiliates (502) (4,241) Other non-cash items, net 16,313 5,672 -------- -------- Cash provided by operating activities 261,938 192,370 Changes in assets and liabilities: (Increase) decrease in-- Trade receivables (51,055) (75,828) Inventories (36,885) (18,951) Prepaid expenses and other assets (1,756) 6,071 Increase (decrease) in-- Accounts payable (4,302) 1,546 Accrued expenses 11,714 49,189 Income taxes payable (27,369) (2,564) Other, net 8,551 5,413 -------- -------- Net cash provided by operating activities 160,836 157,246 -------- -------- Cash Provided by (Used for) Investing Activities: Acquisition of subsidiaries (excluding cash and equivalents) and additional interest in affiliates (131,902) (12,514) Additions to plant and equipment (73,025) (61,326) Proceeds from sale of plant and equipment, investment properties, and equipment under a leveraged lease 18,538 12,458 Proceeds from sale of operations and affiliates 1,736 12,037 Other, net (5,678) 3,524 -------- -------- Net cash used for investing activities (190,331) (45,821) -------- -------- Cash Provided by (Used for) Financing Activities: Cash dividends paid (34,211) (29,439) Issuance of common stock 4,402 2,380 Proceeds (repayments) of short-term debt 57,983 (68,391) Proceeds from long-term debt 85 1,755 Repayments of long-term debt (1,690) (2,672) Other, net (5,039) -- -------- -------- Net cash provided by (used for) financing activities (21,530) (96,367) -------- -------- Effect of Exchange Rate Changes on Cash and Equivalents 5,020 (5,104) -------- -------- Cash and Equivalents: (Decrease)Increase during the period (2,943) 9,954 Beginning of period 76,867 35,395 -------- -------- End of the period $ 73,924 $ 45,349 ======== ======== Cash Paid During the Period for Interest $ 13,968 $ 14,643 ======== ======== Cash Paid During the Period for Income Taxes $132,927 $ 80,946 ======== ======== Liabilities Assumed from Acquisitions $112,634 $ 2,619 ======== ======== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES COMMENTS ON FINANCIAL STATEMENTS (UNAUDITED) (1) OTHER INCOME (EXPENSE), consists of the following: (In Thousands) Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------- 1995 1994 1995 1994 -------- -------- -------- -------- Interest income $ 3,265 $ 1,091 $ 5,623 $ 1,967 Income from unconsolidated affiliates 356 596 468 951 Net reserves for disposition, relocation and reorganization of certain facilities, revaluation of non-operating assets to realizable value, and nonrecurring costs unrelated to operations (8,253) (11,669) (19,714) (13,696) Income (loss)from investment properties 3,835 (232) 6,423 (398) Gain on sale of operations and affiliates 382 3,794 502 4,241 Gain on sale of equipment under a leveraged lease -- -- 3,996 -- Gain (loss) on sale of plant and equipment 1,310 (98) 328 1,870 Other, net (1,247) (785) (2,101) (1,488) ------- -------- -------- -------- $ (352) $ (7,303) $ (4,475) $ (6,553) ======= ======== ======== ======== (2) INVENTORIES at June 30, 1995 and December 31, 1994 were as follows: (In Thousands) June 30, Dec. 31, 1995 1994 -------- -------- Raw Material $136,845 $126,730 Work-in-process 88,862 66,505 Finished goods 294,215 246,251 -------- -------- $519,922 $439,486 ======== ======== (3) NONCASH TRANSACTION: During 1995, the Company exchanged a minority interest in a subsidiary for certain investments in debt securities. This transaction, along with the associated tax effects, has not been reflected in the Statement of Cash Flows, as it had no cash impact. Item 2 - Management's Discussion and Analysis ENGINEERED COMPONENTS SEGMENT Businesses in this segment manufacture short lead-time plastic and metal components, fasteners and assemblies; industrial fluids and adhesives; tools and welding 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 1995 1994 1995 1994 -------- -------- ------ ------- Domestic $364 $313 $ 693 $595 International 197 157 368 286 --- ---- ------ ---- Total $561 $470 $1,061 $881 ==== ==== ====== ==== Three months ended June 30 Six months ended June 30 ------------------------------ ------------------------------ Operating 1995 1994 1995 1994 Income Income Margin Income Margin Income Margin Income Margin ------------- ------------- ------------- ------------- Domestic $62 17.0 % $53 16.9 % $116 16.7 % $ 93 15.6 % International 32 16.2 20 12.7 52 14.1 31 10.8 --- --- ---- ---- Total $94 16.8 $73 15.5 $168 15.8 $124 14.1 === === ==== ==== Domestic revenues for both the three month and six month periods ended June 30, 1995 grew primarily due to new product introductions and increased marketing at Miller along with volume growth in non-residential construction businesses. Operating income increased during the same time periods due to the volume growth at Miller and the construction businesses. Margins were flat for the three month period due to a slower rate of growth in the automotive and residential construction businesses. Miller also moderated margin growth for the second quarter of 1995 compared with last year due to the absorption of raw material price increases. Margins increased year-to-date in 1995 as a result of increased volume at Miller and the construction businesses along with new product introductions at Miller. International revenues increased for the three month period primarily due to increase a volume in the European automotive businesses as a result of increased penetration in the European automotive markets. The European auto- motive businesses, followed by the European construction businesses, largely contributed to the year-to date revenue growth. For the three and six month periods ended June 30, 1995, operating income and margins increased due to cost reductions in the European construction businesses and volume gains in 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, industrial spray coating equipment and systems, and quality assurance application equipment and systems. The largest markets served by this segment are general industrial, food and beverage, and industrial capital goods. (Dollars in millions) Three months ended Six months ended June 30 June 30 ------------------ ---------------- Operating Revenues 1995 1994 1995 1994 -------- -------- ------ ------ Domestic $324 $261 $593 $490 International 206 150 366 281 ---- ---- ---- ---- Total $530 $411 $959 $771 ==== ==== ==== ==== Three months ended June 30 Six months ended June 30 ------------------------------ ------------------------------ Operating 1995 1994 1995 1994 Income Income Margin Income Margin Income Margin Income Margin ------ ------ ------ ------ ------ ------ ------ ------ Domestic $61 18.8 % $44 16.9 % $106 17.9 % $76 15.5 % International 26 12.6 14 9.3 40 10.9 22 7.8 --- --- ---- --- Total $87 16.4 $58 14.1 $146 15.2 $98 12.7 === === ==== === Strong demand for industrial packaging products and increased penetration in the beverage markets for the consumer packaging businesses led to an increase in domestic revenues and operating income for the three month period and year-to- date ended June 30, 1995. Margins increased for the same time periods due mostly to new product introductions in the industrial packaging businesses. International revenues and operating income for the quarter ended June 30, 1995 increased due to the consumer and industrial packaging busines- ses. For the six month period revenues and operating income increased due to the previously mentioned groups as well as the finishing systems businesses. Margins increased for both periods because of new product introductions, and cost reductions in the industrial packaging businesses. In addition, cost reductions in the finishing systems businesses led to increased margins for the both periods. OPERATING EXPENSES Operating costs as a percentage of revenues decreased to 65.5% in the first half of 1995 versus 66.8% in the first half of 1994. Selling, administrative, and research and development expenses were 18.4% of revenues in the first half of 1995 versus 19.1% in the first half of 1994. 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 $14.1 million in the first half of 1995 from $14.7 million in the first half of 1994, primarily due to a reduction in commercial paper borrowings outstanding. OTHER EXPENSE Other expense decreased to $.4 million in the second quarter of 1995 from $7.3 million in the second quarter of 1994. The decrease in expense is primarily due to a reduction in nonrecurring costs unrelated to operations, along with an increase in interest income and income from investment properties, partially offset by a decrease in the gain on sale of operations and affiliates. NET INCOME Net income of $181.3 million ($1.55 per share) in the first half of 1995 was 49.0% higher than the 1994 first half net income of $121.6 million ($1.07 per share). Foreign currency had no material impact on earnings in the first half of 1995 versus 1994. FINANCIAL POSITION Net working capital at June 30, 1995 and December 31, 1994 is summarized as follows: (Dollars in Thousands) June 30, Dec. 31, Increase 1995 1994 (Decrease) ---------- ---------- --------- Current Assets: Cash and equivalents $ 73,924 $ 76,867 $ (2,943) Trade receivables 732,088 612,638 119,450 Inventories 519,922 439,486 80,436 Other 154,757 133,942 20,815 ---------- ---------- -------- $1,480,691 $1,262,933 $217,758 ---------- ---------- -------- Current Liabilities: Short-term debt $ 146,643 $ 67,002 $ 79,641 Accounts payable and accrued expenses 614,029 491,779 122,250 Other 45,416 69,652 (24,236) ---------- ---------- -------- $ 806,088 $ 628,433 $177,655 ---------- ---------- -------- Net Working Capital $ 674,603 $ 634,500 $ 40,103 ========== ========== ======== Current Ratio 1.84 2.01 ========== ========== The increase in trade receivables in the second quarter of 1995 was primarily due to acquisitions and stronger revenues in the second quarter of 1995 versus the fourth quarter of 1994. Second quarter acquisitions combined with overall business growth contributed to the increase in inventories from year-end 1994 to second quarter 1995. The increase in short-term debt was mainly due to additional borrowing of commercial paper to fund second quarter acquisitions. Accounts payable and accrued expenses increased at June 30, 1995 versus year-end 1994 as a result of overall business growth and acquisitions. 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 5, 1995. Approval was granted for the adoption of the Directors' Restricted Stock Plan, by an in favor vote of 88,529,650 shares. The following members were elected to the Company's Board of Directors to hold office for the ensuing year: Nominees In favor Withheld ----------------- ---------- -------- J. W. Becton, Jr. 96,386,739 164,583 S. S. Cathcart 96,389,872 161,450 S. Crown 96,380,200 171,122 H. R. Crowther 96,304,856 246,466 W. J. Farrell 96,304,590 246,732 R. M. Jones 96,385,768 165,554 G. D. Kennedy 96,387,168 164,154 R. H. Leet 96,388,964 162,358 R. C. McCormack 96,392,170 159,152 J. D. Nichols 96,303,641 247,681 P. B. Rooney 96,389,077 162,245 H. B. Smith 96,392,070 159,252 O. J. Wade 96,391,074 160,248 C. A. H. Waller 96,377,025 174,297 Approval was also granted by an in favor vote of 88,529,650 shares, for the adoption of the Directors' Restricted Stock Plan. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibit Index Exhibit No. Description 27 Financial Data Schedule (b) Reports on Form 8-K A report on Form 8-K dated July 18, 1995 was filed during the period. The Form describes various acquisitions by Illinois Tool Works Inc., ("ITW") and presents unaudited pro forma information for ITW and the combined pooled companies. 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 14, 1995 By: /s/ Michael W. Gregg ------------------- --------------------------------------- Michael W. Gregg, Senior Vice President and Controller, Accounting (Principal Accounting Officer) EX-27 2 ART.5 FDS FOR 2ND QUARTER 10-Q
5 THE SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF INCOME (UNAUDITED) AND THE STATEMENT OF FINANCIAL POSITION (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 DEC-31-1995 JAN-01-1995 JUN-30-1995 6-MOS 73,924 0 732,088 0 519,922 1,480,691 1,527,403 850,104 3,047,020 806,088 282,775 227,418 0 0 1,522,704 3,047,020 2,019,798 2,019,798 1,322,441 1,322,441 12,156 0 14,097 292,379 111,100 181,279 0 0 0 181,279 1.55 1.55