-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jyo+nmzJRTNWyrydDaCA4v1e41S9f5GbGQxA4ORfZpVej7EPwF10vWs8zElNoOlL x7yN5RhW+6DJT6ZBs6XIIQ== 0000049826-96-000006.txt : 19960523 0000049826-96-000006.hdr.sgml : 19960523 ACCESSION NUMBER: 0000049826-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 DATE AS OF CHANGE: 19960522 SROS: NYSE 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: 96568394 BUSINESS ADDRESS: STREET 1: 3600 W LAKE AVE CITY: GLENVIEW STATE: IL ZIP: 60025-5811 BUSINESS PHONE: 8477247500 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 March 31, 1996 -------------------------------------- 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) (847) 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 April 30, 1996: 122,445,873. 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/A. Certain reclassifications of prior years' data have been made to conform with current year reporting. ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF INCOME (UNAUDITED) (In Thousands Except for Per Share Amounts) Three Months Ended March 31 1996 1995 Operating Revenues $1,136,922 $938,545 Cost of revenues 755,539 618,668 Selling, administrative, and research and develop- ment expenses 211,071 185,321 Amortization of goodwill and other intangible assets 7,132 6,133 Amortization of retiree health care 1,742 1,742 ---------- -------- Operating Income 161,438 126,681 Interest expense (6,801) (6,155) Other income 2,118 505 ---------- -------- Income Before Income Taxes 156,755 121,031 Income taxes 58,000 46,000 ---------- -------- Net Income $ 98,755 $ 75,031 ========== ======== Per share of common stock: Net Income $ .81 $ .66 ===== ===== Cash dividends: Paid $ .17 $ .15 ===== ===== Declared $ .17 $ .15 ===== ===== Average number of shares of common stock outstanding during the period 122,370 114,032 ======= ======= ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) (In Thousands) ASSETS March 31, 1996 December 31, 1995 Current Assets: Cash and equivalents $ 118,662 $ 116,600 Trade receivables 801,643 741,327 Inventories 536,237 518,964 Deferred income taxes 93,744 80,005 Prepaid expenses and other current assets 80,628 75,594 ---------- ---------- Total current assets 1,630,914 1,532,490 ---------- ---------- Plant and Equipment: Land 61,317 60,486 Buildings and improvements 398,128 375,352 Machinery and equipment 1,176,825 1,076,950 Equipment leased to others 75,456 75,175 Construction in progress 40,356 32,621 ---------- ---------- 1,752,082 1,620,584 Accumulated depreciation (1,015,503) (925,643) ---------- ---------- Net plant and equipment 736,579 694,941 ---------- ---------- Investments 477,851 504,820 Goodwill 535,222 518,747 Deferred Income Taxes 180,557 118,913 Other Assets 247,259 221,407 ---------- ---------- $3,808,382 $3,591,318 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 121,129 $ 176,188 Accounts payable 241,051 221,497 Accrued expenses 453,208 391,702 Cash dividends payable 21,269 20,100 Income taxes payable 75,230 41,445 ---------- ---------- Total current liabilities 911,887 850,932 ---------- ---------- Non-current Liabilities: Long-term debt 611,545 615,557 Other 247,175 200,592 ---------- ---------- Total non-current liabilities 858,720 816,149 ---------- ---------- Stockholders' Equity: Preferred stock -- -- Common stock 245,994 239,688 Income reinvested in the business 1,784,385 1,673,320 Common stock held in treasury (1,841) (1,866) Cumulative translation adjustment 9,237 13,095 ---------- ---------- Total stockholders' equity 2,037,775 1,924,237 ---------- ---------- $3,808,382 $3,591,318 ========== ========== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) Three Months Ended March 31 1996 1995 Cash Provided by (Used for) Operating Activities: Net income $ 98,755 $ 75,031 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 43,750 38,400 Change in deferred income taxes (510) (896) Provision for uncollectible accounts 1,722 1,798 (Gain)loss on sale of plant and equipment (1,202) 982 Income from investments (9,143) (6,610) Gain on sale of operations and affiliates (3,753) (120) Other non-cash items, net 205 12,830 -------- -------- Cash provided by operating activities 129,824 121,415 Changes in assets and liabilities: (Increase) decrease in-- Trade receivables (8,926) (25,478) Inventories (1,004) (21,480) Prepaid expenses and other assets (26,936) (7,201) Increase (decrease) in-- Accounts payable (3,629) (3,115) Accrued expenses 8,074 1,286 Income taxes payable 31,339 13,346 Other, net 545 (124) -------- -------- Net cash provided by operating activities 129,287 78,649 -------- -------- Cash Provided by (Used for) Investing Activities: Acquisition of businesses(excluding cash and equivalents) and additional interest in affiliates (22,216) (5,892) Additions to plant and equipment (39,969) (35,715) Purchase of investments (294) (45) Proceeds from investments 30,496 8,725 Proceeds from sale of plant and equipment 16,235 2,333 Proceeds from sale of operations and affiliates 7,718 1,344 Other, net 1,797 6,237 -------- -------- Net cash used for investing activities (6,233) (23,013) -------- -------- Cash Provided by (Used for) Financing Activities: Cash dividends paid (19,641) (17,094) Issuance of common stock 2,056 2,730 Repayments of short-term debt (56,355) (1,239) Proceeds from long-term debt 8,853 -- Repayments of long-term debt (57,780) (456) -------- -------- Net cash used for financing activities (122,867) (16,059) -------- -------- Effect of Exchange Rate Changes on Cash and Equivalents 1,875 2,268 -------- -------- Cash and Equivalents: Increase during the period 2,062 41,845 Beginning of period 116,600 76,867 -------- -------- End of period $118,662 $118,712 ======== ======== Cash Paid During the Period for Interest $ 1,798 $ 5,538 ======== ======== Cash Paid During the Period for Income Taxes $ 16,329 $ 32,383 ======== ======== Liabilities Assumed from Acquisitions $118,896 $ 3,200 ======== ======== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES COMMENTS ON FINANCIAL STATEMENTS (UNAUDITED) (1) INVENTORIES at March 31, 1996 and December 31, 1995 were as follows: (In Thousands) March 31, Dec. 31, 1996 1995 Raw material $145,179 $140,302 Work-in-process 87,327 84,981 Finished goods 303,731 293,681 -------- -------- $536,237 $518,964 ======== ======== 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; fastening tools; and welding products. This segment primarily serves the construction, automotive and general industrial markets. (Dollars in Thousands) Three months ended March 31 Operating Revenues 1996 1995 Domestic $412,542 $328,916 International 212,424 170,813 -------- -------- Total $624,966 $499,729 ======== ======== Three months ended March 31 Operating 1996 1995 Income Income Margin Income Margin Domestic $61,197 14.8 % $53,025 16.1 % International 23,552 11.1 16,964 9.9 ------- ------- Total $84,749 13.6 $69,989 14.0 ======= ======= Domestic revenues increased compared with last year primarily due to the Hobart acquisition (approximately $60.6 million), as well as higher sales in the fluid and polymer operations. Despite the decline in U.S. car builds for the quarter, the automotive businesses contributed to the increase in revenues as a result of increased penetration in the automotive markets. The construction businesses also added to the revenue growth due to new products as well as continued strength in the U.S. construction markets. Although the automotive, fluid and polymer and construction businesses showed both increased operating income and margins, Hobart's lower margins more than offset the margin growth in those businesses. Internationally, revenues and operating income increased mainly due to acquisitions, primarily related to the European automotive businesses. A nonrecurring goodwill write-off of $3.7 million in the first quarter of 1995 also contributed to the higher 1996 operating income, and was the primary factor for the higher margin in 1996. This margin increase was partially offset by lower margins in the French and German automotive businesses as a result of soft demand. Revenues, operating income and margins declined in the European and Australian construction businesses which moderated revenue and operating income growth. INDUSTRIAL SYSTEMS AND CONSUMABLES SEGMENT Businesses in this segment manufacture longer lead-time systems and related consumables for consumer and industrial packaging; marking, labeling and identification systems; industrial spray coating equipment and systems; and quality assurance equipment and systems. The largest markets served by this segment are general industrial, food and beverage, and industrial capital goods. (Dollars in Thousands) Three months ended March 31 Operating Revenues 1996 1995 Domestic $300,399 $269,298 International 197,652 160,058 -------- -------- Total $498,051 $429,356 ======== ======== Three months ended March 31 Operating 1996 1995 Income Income Margin Income Margin Domestic $54,985 18.3 % $43,715 16.2 % International 15,352 7.8 6,423 4.0 ------- ------- Total $70,337 14.1 $50,138 11.7 ======= ======= Domestic revenues increased due largely to acquisitions in the consumer packaging and finishing systems businesses. Operating income and margins increased due to new products and lower raw material costs in the Signode packaging businesses and increased revenues in the specialty industrial packaging businesses as a result of improved demand in the domestic packaging markets. International revenues increased primarily due to acquisitions in the specialty industrial packaging businesses which also contributed to the operating income growth. The European finishing systems businesses also contributed to the revenue growth as they continued to gain market share with new products. Excluding the impact of acquisitions, the Signode packaging businesses moderated revenue growth as a result of soft demand in the European steel, construction and appliance markets. The majority of the 1996 increase in operating income and margins was due to 1995 nonrecurring costs of $7.6 million, which is primarily related to a write-off of goodwill. LEASING AND INVESTMENTS SEGMENT The Company has historically had strong cash flows from its manufacturing operations. Although most of this cash has been reinvested in the manufacturing businesses, some of the excess cash has been used to make financial investments. These investments primarily include leveraged and direct financing leases of equipment, mortgage-related investments, investments in properties and property developments, and low-income housing investments. In 1996, due to the increased significance of these investments, the Company's leasing and investments business began reporting as a separate segment. Accordingly, certain reclassifications of amounts in the 1995 statement of income have been made. For the Leasing and Investments segment, operating revenues and operating income for the year ended December 31, 1995 were $25.9 million and $18.8 million, respectively, and identifiable assets at December 31, 1995 were $604.5 million. (Dollars in Thousands) Three months ended March 31 1996 1995 Operating revenues $13,905 $9,460 ======= ====== Operating income $ 6,352 $6,554 ======= ====== Margin 45.7% 69.3% In 1996, operating revenues increased primarily due to the commercial mortgage transaction entered into at year-end 1995 (see Financial Position section for discussion). Operating income decreased slightly due to a 1995 nonrecurring gain on the sale of equipment under leveraged lease of $4.0 million, mostly offset by income in 1996 related to commercial mortgages. OPERATING EXPENSES Cost of revenues as a percentage of revenues increased to 66.5% in the first three months of 1996 versus 65.9% in the first three months of 1995, mainly due to lower gross margins for acquired companies. Selling, administrative, and research and development expenses decreased to 18.6% of revenues in the first three months of 1996 versus 19.7% in the first three months of 1995, primarily due to higher 1995 nonrecurring costs of approximately $11.0 million. INTEREST EXPENSE Interest expense increased slightly to $6.8 million in the first three months of 1996 from $6.2 million in the first three months of 1995, primarily due to debt assumed in the Hobart acquisition and increased commercial paper borrowings. OTHER INCOME Other income increased to $2.1 million for the first three months of 1996 from $.5 million in 1995. This increase is primarily due to higher gains on the sale of operations and the sale of plant and equipment partially offset by debt prepayment costs in 1996 and higher 1996 currency translation losses. NET INCOME Net income of $98.8 million ($0.81 per share) in the first three months of 1996 was 31.6% higher than the 1995 first quarter net income of $75.0 million ($0.66 per share). Foreign currency fluctuations had no material impact on revenues or earnings in the first quarter of 1996 versus 1995. FINANCIAL POSITION Net working capital at March 31, 1996 and December 31, 1995 is summarized as follows: (Dollars in Thousands) March 31, Dec. 31, Increase/ 1996 1995 (Decrease) Current Assets: Cash and equivalents $ 118,662 $ 116,600 $ 2,062 Trade receivables 801,643 741,327 60,316 Inventories 536,237 518,964 17,273 Other 174,372 155,599 18,773 ---------- ---------- -------- $1,630,914 $1,532,490 $ 98,424 ---------- ---------- -------- Current Liabilities: Short-term debt $ 121,129 $ 176,188 $(55,059) Accounts payable and accrued expenses 694,259 613,199 81,060 Other 96,499 61,545 34,954 ---------- ---------- -------- $ 911,887 $ 850,932 $ 60,955 ---------- ---------- -------- Net Working Capital $ 719,027 $ 681,558 $ 37,469 ========== ========== ======== Current Ratio 1.79 1.80 ==== ==== The increase in trade receivables in the first quarter of 1996 was primarily due to first quarter 1996 acquisitions. The decrease in short-term debt was due to a reduction in commercial paper borrowings during the first quarter of 1996. Accounts payable and accrued expenses increased at March 31, 1996 versus year-end 1995 as a result of overall business growth and 1996 acquisitions. In the first quarter of 1996, long-term debt of $53.3 million assumed in the Hobart acquisition was repaid. In December 1995, the Company acquired a pool of mortgage-related assets in exchange for a nonrecourse note payable of $256,000,000, preferred stock of a subsidiary of $20,000,000 and cash of $80,000,000. The mortgage-related assets relate to commercial real estate located throughout the U.S. and include 26 subperforming, variable rate, balloon loans and five foreclosed properties. In conjunction with this transaction, the Company simultaneously entered into a ten-year swap agreement and other related agreements whereby the Company will pay a third party the portion of the interest and net operating cash flow from the mortgage-related assets in excess of $9,000,000 per year and a portion (currently estimated to be $197,000,000) of the proceeds from the disposition of the mortgage-related assets and principal repayments, in exchange for the third party making payments to the Company equal to the contractual principal and interest payments on the nonrecourse note payable. In addition, in the event that the pool of mortgage-related assets does not generate income of $9,000,000 a year, the Company has a collateral right against the cash flow generated by a separate pool of mortgage-related assets (owned by a third party in which the Company has a minimal interest) which currently has a fair value of approximately $679,000,000. The Company entered into the swap and other related agreements in order to reduce its credit and interest rate risks relative to the mortgage-related assets. The Company expects to recover its net investment in the mortgage-related assets and net swap receivable of $100,000,000 (net of the related nonrecourse note payable) through its expected net cash flow of $9,000,000 per year for ten years and its estimated share of the proceeds from disposition of the mortgage-related assets and principal repayments of $118,000,000. The Company believes that because the swap counterparty is Aaa-rated and that significant collateral secures the net annual cash flow of $9,000,000, its risk of not recovering that portion of its $100,000,000 net investment has been significantly mitigated. The Company currently believes that the disposition proceeds will be sufficient to recover the remainder of its net investment. However, there can be no assurances that all of the net investment will be recovered. Part II - Other Information 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 The following reports on Form 8-K have been filed during the period: (1) Form 8-K Current Report dated February 21, 1996 which included Item 5, Item 7 and selected pages of the 1995 Annual Report to Stockholders. (2) Form 8-K/A Current Report (Amendment No. 1) dated March 25, 1996 which included Item 5, Item 7 and amended selected pages of the 1995 Annual Report to Stockholders. 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: May 15, 1996 By: /s/ Michael W. Gregg --------------------------------------- Michael W. Gregg, Senior Vice President and Controller, Accounting (Principal Accounting Officer) EX-27 2 ART. 5 FDS FOR 1ST 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 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 118,662 0 801,643 0 536,237 1,630,914 1,752,082 1,015,503 3,808,382 911,887 611,545 245,994 0 0 1,784,385 3,808,382 1,136,922 1,136,922 755,539 755,539 8,874 0 6,801 156,755 58,000 98,755 0 0 0 98,755 .81 .81
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