-----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, Nr1Ax0499IJSD4ISCBFOR25i3RxSkbHqKTEwYv/EEj/BUpqy53A9bOmc9wmhvi3Z H09FwiYXOliMKl6Z5EOW+Q== 0000049826-97-000010.txt : 19970815 0000049826-97-000010.hdr.sgml : 19970815 ACCESSION NUMBER: 0000049826-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 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: 97663366 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 June 30, 1997 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 Identification No.) incorporation or organization) 3600 West Lake Avenue, Glenview, IL 60025-5811 - ---------------------------------------- --------------------------------------- (Address of principal executive offices) (Zip Code) offices) (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 July 31, 1997: 249,408,319 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 notes to financial statements included in the Company's Annual Report on Form 10-K. 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 Six Months Ended June 30 June 30 ---------------------- ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Operating Revenues $1,326,344 $1,324,800 $2,556,142 $2,461,722 Cost of revenues 854,352 871,156 1,661,669 1,626,695 Selling, administrative, and research and develop- ment expenses 215,855 229,429 431,544 440,500 Amortization of goodwill and other intangible assets 8,492 7,481 17,024 14,613 Amortization of retiree health care 1,826 1,742 3,653 3,484 ---------- ---------- ---------- ---------- Operating Income 245,819 214,992 442,252 376,430 Interest expense (5,617) (8,075) (11,578) (14,876) Other income 3,092 58 6,675 2,176 ---------- ---------- ---------- ---------- Income Before Income Taxes 243,294 206,975 437,349 363,730 Income taxes 88,900 76,600 159,700 134,600 ---------- ---------- ---------- ---------- Net Income $ 154,394 $ 130,375 $ 277,649 $ 229,130 ========== ========== ========== ========== Per share of common stock: Net Income $0.62 $0.53 $1.11 $0.93 ===== ===== ===== ===== Cash dividends: Paid $.095 $.085 $.190 $.170 ===== ===== ===== ===== Declared $.120 $.085 $.215 $.170 ===== ===== ===== ===== Average number of shares of common stock outstanding during the period 249,231 247,528 249,130 247,452 ======= ======= ======= ======= ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) (In Thousands) ASSETS June 30, 1997 December 31, 1996 - ------ ------------- ----------------- Current Assets: Cash and equivalents $ 157,506 $ 137,699 Trade receivables 881,978 840,092 Inventories 506,474 526,016 Deferred income taxes 137,808 131,404 Prepaid expenses and other current assets 76,183 65,881 ---------- ---------- Total current assets 1,759,949 1,701,092 ---------- ---------- Plant and Equipment: Land 66,945 68,362 Buildings and improvements 432,888 429,686 Machinery and equipment 1,273,294 1,282,274 Equipment leased to others 105,291 109,030 Construction in progress 73,768 51,744 ---------- ---------- 1,952,186 1,941,096 Accumulated depreciation (1,157,066) (1,132,756) ---------- ---------- Net plant and equipment 795,120 808,340 ---------- ---------- Investments 867,885 872,692 Goodwill 642,727 664,054 Deferred Income Taxes 314,435 292,152 Other Assets 548,383 467,832 ---------- ---------- $4,928,499 $4,806,162 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 368,268 $ 390,425 Accounts payable 240,312 248,062 Accrued expenses 505,456 512,927 Cash dividends payable 29,919 23,538 Income taxes payable 66,021 44,373 ---------- ---------- Total current liabilities 1,209,976 1,219,325 ---------- ---------- Non-current Liabilities: Long-term debt 777,074 818,947 Other 360,649 371,865 ---------- ---------- Total non-current liabilities 1,137,723 1,190,812 ---------- ---------- Stockholders' Equity: Preferred stock -- -- Common stock 2,496 273,864 Additional Paid-in-Capital 276,550 -- Income reinvested in the business 2,342,981 2,105,144 Common stock held in treasury (1,833) (1,841) Cumulative translation adjustment (39,394) 18,858 ---------- ---------- Total stockholders' equity 2,580,800 2,396,025 ---------- ---------- $4,928,499 $4,806,162 ========== ========== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) Six Months Ended ------------------ June 30 ------------------ 1997 1996 -------- -------- Cash Provided by (Used for) Operating Activities: Net income $277,649 $229,130 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 97,337 90,820 Change in deferred income taxes (2,962) (23) Provision for uncollectible accounts 2,225 3,444 (Gain)loss on sale of plant and equipment 5,461 (1,171) Income from investments (43,905) (27,079) Non-cash interest on nonrecourse debt 16,670 8,038 Gain on sale of operations and affiliates (7,073) (4,856) Other non-cash items, net 2,657 552 -------- -------- Cash provided by operating activities 348,059 298,855 Changes in assets and liabilities: (Increase) decrease in-- Trade receivables (78,289) (44,836) Inventories (9,234) 14,157 Prepaid expenses and other assets (31,791) (35,693) Increase (decrease) in-- Accounts payable 7,112 (25,312) Accrued expenses 2,185 36,170 Income taxes payable (7,508) (16,286) Other, net 3,926 (1,195) -------- -------- Net cash provided by operating activities 234,460 225,860 -------- -------- Cash Provided by (Used for) Investing Activities: Acquisition of businesses(excluding cash and equivalents) and additional interest in affiliates (160,636) (85,340) Additions to plant and equipment (81,462) (79,487) Purchase of investments (5,753) (4,647) Proceeds from investments 18,138 39,283 Proceeds from sale of plant and equipment 6,873 17,242 Proceeds from sale of operations and affiliates 102,513 12,913 Other, net (2,364) (8,536) -------- -------- Net cash used for investing activities (122,691) (108,572) -------- -------- Cash Provided by (Used for) Financing Activities: Cash dividends paid (47,205) (40,910) Issuance of common stock 4,902 2,688 Repayments of short-term debt (9,579) 18,803 Proceeds from long-term debt 679 8,875 Repayments of long-term debt (31,662) (86,970) Other, net 1,854 2,885 -------- -------- Net cash used for financing activities (81,011) (94,629) -------- -------- Effect of Exchange Rate Changes on Cash and Equivalents (10,951) (2,060) -------- -------- Cash and Equivalents: Increase during the period 19,807 20,599 Beginning of period 137,699 116,600 -------- -------- End of period $157,506 $137,199 ======== ======== Cash Paid During the Period for Interest $ 16,960 $ 18,521 ======== ======== Cash Paid During the Period for Income Taxes $138,228 $139,673 ======== ======== Liabilities Assumed from Acquisitions $ 28,679 $203,459 ======== ======== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) INVENTORIES at June 30, 1997 and December 31, 1996 were as follows: (In Thousands) June 30, Dec. 31, 1997 1996 -------- -------- Raw material $142,747 $143,979 Work-in-process 64,184 71,641 Finished goods 299,543 310,396 -------- -------- $506,474 $526,016 ======== ======== (2) NEW ACCOUNTING STANDARD: Effective for periods ending after December 15, 1997, the Company is required to adopt Statement of Financial Accounting Standards No. 128 ("SFAS 128"), Earnings Per Share. SFAS 128 requires dual presentation of basic and diluted net income per share on the face of the statement of income. Upon adoption of the new standard, the Company does not expect that basic or diluted net income per share to be materially different from net income per share as currently reported. (3) COMMON STOCK: On May 9, 1997, the Board of Directors authorized a two-for-one split of the Company's common stock, with an effective date of May 27, 1997, at a rate of one additional share for each common share held by stockholders of record on May 20, 1997. All per-share data in this report is calculated on a post-split basis. Also on May 9, 1997, the stockholders approved an amendment to the Certificate of Incorporation increasing the number of authorized shares of common stock from 150,000,000 to 350,000,000 and changing the par value of common stock to $.01 per share from no par value. 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 Six months ended June 30 June 30 ------------------ ---------------------- Operating Revenues 1997 1996 1997 1996 - --------- -------- -------- ---------- ---------- Domestic $519,534 $536,979 $1,004,859 $ 963,586 International 224,339 227,459 426,133 432,561 -------- -------- ---------- ---------- Total $743,873 $764,438 $1,430,992 $1,396,147 ======== ======== ========== ========== Three months ended June 30 Six months ended June 30 -------------------------------- -------------------------------- Operating 1997 1996 1997 1996 Income Income Margin Income Margin Income Margin Income Margin -------- ------ -------- ------ -------- ------ -------- ------ Domestic $ 98,361 18.9% $ 85,365 15.9% $186,631 18.6% $150,980 15.7% International 37,861 16.9 33,108 14.6 60,755 14.3 54,628 12.6 -------- -------- -------- -------- Total $136,222 18.3 $118,473 15.5 $247,386 17.3 $205,608 14.7 ======== ======== ======== ======== Domestic revenues declined for the three month period compared with last year primarily as a result of the sale of a fastener distribution business, partially offset by the revenue growth in the construction and welding units. Revenues for the six month period increased primarily due to acquisitions of automotive businesses, penetration gains with fasteners and components in the U.S. automotive markets and increased demand for construction products. Operating income and margins for both periods increased due to cost reductions and new products in the automotive and construction businesses, along with factory process improvements and increased exports in the welding businesses. For the three and six month periods, international revenues grew as a result of increased penetration by the automotive businesses in the European and South American markets. The increase in revenues by the automotive businesses was more than offset by the effect of foreign currency translation. Operating income increased as a result of reduced cost structure in European automotive and construction operations. Slight revenue growth in construction businesses, due to soft European markets, coupled with significant operating income increases, as a result of cost restructuring in 1996, resulted in increased margins compared with last year. INDUSTRIAL SYSTEMS AND CONSUMABLES SEGMENT Businesses in this segment manufacture longer lead-time systems and related consumables for packaging, marking, labeling, and identification applications, and finishing and quality measurement equipment. The largest markets served by this segment are general industrial, food and beverage, and industrial capital goods. (Dollars in Thousands) Three months ended Six months ended June 30 June 30 ------------------ ---------------------- Operating Revenues 1997 1996 1997 1996 - --------- -------- -------- ---------- ---------- Domestic $322,092 $317,904 $ 609,430 $ 604,239 International 236,933 228,234 460,437 433,207 -------- -------- ---------- ---------- Total $559,025 $546,138 $1,069,867 $1,037,446 ======== ======== ========== ========== Three months ended June 30 Six months ended June 30 --------------------------------- ---------------------------- Operating 1997 1996 1997 1996 Income Income Margin Income Margin Income Margin Income Margin -------- ------ ------- ------ -------- ------ -------- ------ Domestic $ 66,630 20.7% $63,064 19.8% $118,086 19.4% $113,631 18.8% International 35,211 14.9 26,272 11.5 60,553 13.2 43,656 10.1 -------- ------- -------- -------- Total $101,841 18.2 $89,336 16.4 $178,639 16.7 $157,287 15.2 ======== ======= ======== ======== For the three and six month periods, domestic revenue growth in the marking and labeling and resealable packaging operations, as a result of new product introductions, was moderated by decreased revenues in the quality measurement businesses. The finishing systems operations slightly moderated revenue growth for the three month period, due to the delay of several large shipments, but contributed to the revenue improvement for the six month period, as a result of increased penetration in the U.S. general industrial markets. For both periods, operating income and margins increased due to new product introductions in the marking and labeling in the decorating businesses and lower manufacturing costs for the certain packaging businesses. International revenues increased for both periods versus last year due to the 1996 Azon and Orgapack acquisitions in the packaging operations. Revenue growth was partially offset by the effect of foreign currency translation and divestitures of certain European packaging businesses. Operating income increased due to successful cost reductions at certain packaging and finishing systems operations, along with the acquisitions. The sale of the under-performing packaging operations and aggressive cost reductions at certain packaging and finishing systems units led to the increase in margins. 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 through investments in capital equipment, acquisitions and new products, 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 affordable housing investments. (Dollars in Thousands) Three months ended Six months ended June 30 June 30 ------------------ ------------------ 1997 1996 1997 1996 -------- -------- -------- -------- Operating revenues $23,446 $14,224 $55,283 $28,129 ======= ======= ======= ======= Operating income $ 7,756 $ 7,183 $16,227 $13,535 ======= ======= ======= ======= For the second quarter and first half of the year, revenues and operating income increased primarily due to the commercial mortgage transaction entered into at year-end 1996. The operating income increase for both the three and six month periods was partially offset by losses related to property developments and property held for sale. OPERATING EXPENSES Cost of revenues as a percentage of revenues decreased to 65.0% in the first six months of 1997 versus 66.1% in the first six months of 1996, due to increased sales volume coupled with lower manufacturing costs. Selling, administrative, and research and development expenses decreased to 16.9% of revenues in the first six months of 1997 versus 17.9% in the first six months of 1996, primarily due to expense reductions as a result of a Company-wide objective to reduce administrative costs. INTEREST EXPENSE Interest expense decreased to $11.6 million in the first six months of 1997 from $14.9 million in the first six months of 1996, primarily due to decreased commercial paper borrowings and higher interest expense in 1996 due to debt assumed from acquisitions. OTHER INCOME Other income increased to $6.7 million for the first six months of 1997 from $2.2 million in 1996. This increase is primarily due to higher gains on the sale of operations in 1997 and debt prepayment costs in 1996, partially offset by losses on sale of fixed assets in 1997. NET INCOME Net income of $277.6 million ($1.11 per share) in the first six months of 1997 was 21.2% higher than the 1996 first half net income of $229.1 million ($0.93 per share). FOREIGN CURRENCY The strengthening of the U.S. dollar against foreign currencies in 1997 decreased operating revenues for the first six months of 1997 by approximately $43 million. Foreign currency fluctuations had no material impact on earnings in the first half of 1997 versus 1996. FINANCIAL POSITION Net working capital at June 30, 1997 and December 31, 1996 is summarized as follows: (Dollars in Thousands) June 30, Dec. 31, Increase/ 1997 1996 (Decrease) ---------- ---------- ---------- Current Assets: Cash and equivalents $ 157,506 $ 137,699 $ 19,807 Trade receivables 881,978 840,092 41,886 Inventories 506,474 526,016 (19,542) Other 213,991 197,285 16,706 ---------- ---------- -------- 1,759,949 1,701,092 58,857 ---------- ---------- -------- Current Liabilities: Short-term debt 368,268 390,425 (22,157) Accounts payable and accrued expenses 745,768 760,989 (15,221) Other 95,940 67,911 28,029 ---------- ---------- -------- 1,209,976 1,219,325 (9,349) ---------- ---------- -------- Net Working Capital $ 549,973 $ 481,767 $ 68,206 ========== ========== ======== Current Ratio 1.45 1.40 ========== ========== The increase in trade receivables in the first half of 1997 was primarily due to higher revenues in the second quarter of 1997 versus the fourth quarter of 1996. The increase in trade receivables was partially offset by the effect of foreign currency translation. 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 9, 1997. The stockholders approved an increase in the number of authorized shares of common stock to 350,000,000 from 150,000,000 and a change in the par value of common stock to $.01 per share from no par value, by a vote of 109,996,316 in favor (with 1,970,208 votes against and 1,003,275 votes withheld). The following members were elected to the Company's Board of Directors to hold office for the ensuing year: Nominees In Favor Withheld M. J. Birck 111,289,497 1,680,302 M. D. Brailsford 112,857,611 112,188 S. Crown 112,855,138 114,661 H. R. Crowther 112,861,064 108,735 W. J. Farrell 112,856,120 113,679 L. R. Flury 112,857,312 112,487 R. C. McCormack 112,857,014 112,785 P. B. Rooney 112,847,956 121,843 H. B. Smith 112,860,853 108,946 O. J. Wade 112,858,744 111,055 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 Form 8-K, Current Report, dated April 18, 1997 which included Item 5, Item 7 and a description of ITW's capital stock was filed during the period. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, 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, 1997 By: /s/ Michael W. Gregg --------------------------------------- Michael W. Gregg, Senior Vice President and Controller, Accounting (Principal Accounting Officer) EX-27 2
5 1 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 157,506 0 881,978 0 506,474 1,759,949 1,952,186 1,157,066 4,928,499 1,209,976 777,074 2,496 0 0 2,619,531 4,928,499 2,556,142 2,556,142 1,661,669 1,661,669 20,677 0 11,578 437,349 159,700 277,649 0 0 0 277,649 1.11 1.11
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