-----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, MGcFLIWyzNZiWCkCIRbrvw5tSgWe6lhud7nypoyVQJQux+0v62D6izUaOJ2GB7e6 vHTgmbui8ZHizjrz8Rqd7w== 0000049826-97-000011.txt : 19971117 0000049826-97-000011.hdr.sgml : 19971117 ACCESSION NUMBER: 0000049826-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-04797 FILM NUMBER: 97721453 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 September 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 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 October 31, 1997: 249,454,009. 1 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. 2 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF INCOME (UNAUDITED) (In Thousands Except for Per Share Amounts) Three Months Ended Nine Months Ended September 30 September 30 ---------------------- ---------------------- 1997 1996 1997 1996 ---------- ---------- ---------- ---------- Operating Revenues $1,315,388 $1,238,261 $3,871,530 $3,699,983 Cost of revenues 857,495 817,658 2,519,164 2,444,353 Selling, administrative, and research and develop- ment expenses 210,654 212,525 642,198 653,025 Amortization of goodwill and other intangible assets 9,649 7,605 26,673 22,218 Amortization of retiree health care 1,827 1,742 5,480 5,226 ---------- ---------- ---------- ---------- Operating Income 235,763 198,731 678,015 575,161 Interest expense (4,337) (5,375) (15,915) (20,251) Other income 3,404 1,686 10,079 3,862 ---------- ---------- ---------- ---------- Income Before Income Taxes 234,830 195,042 672,179 558,772 Income taxes 85,700 72,200 245,400 206,800 ---------- ---------- ---------- ---------- Net Income $ 149,130 $ 122,842 $ 426,779 $ 351,972 ========== ========== ========== ========== Per share of common stock: Net Income $ .60 $ .50 $1.71 $1.42 ===== ===== ===== ===== Cash dividends: Paid $ .12 $.085 $.310 $.255 ===== ===== ===== ===== Declared $ .12 $.095 $.335 $.265 ===== ===== ===== ===== Average number of shares of common stock outstanding during the period 249,389 247,610 249,214 247,504 ======= ======= ======= ======= 3 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) (In Thousands) ASSETS September 30, 1997 December 31, 1996 ------------------ ----------------- Current Assets: Cash and equivalents $ 183,152 $ 137,699 Trade receivables 875,089 840,092 Inventories 503,420 526,016 Deferred income taxes 126,133 131,404 Prepaid expenses and other current assets 58,882 65,881 ---------- ---------- Total current assets 1,746,676 1,701,092 ---------- ---------- Plant and Equipment: Land 65,876 68,362 Buildings and improvements 435,657 429,686 Machinery and equipment 1,302,088 1,282,274 Equipment leased to others 104,362 109,030 Construction in progress 80,726 51,744 ---------- ---------- 1,988,709 1,941,096 Accumulated depreciation (1,195,730) (1,132,756) ---------- ---------- Net plant and equipment 792,979 808,340 ---------- ---------- Investments 858,752 872,692 Goodwill 740,615 664,054 Deferred Income Taxes 314,225 292,152 Other Assets 435,894 467,832 ---------- ---------- $4,889,141 $4,806,162 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 259,364 $ 390,425 Accounts payable 242,166 248,062 Accrued expenses 506,324 512,927 Cash dividends payable 29,930 23,538 Income taxes payable 54,602 44,373 ---------- ---------- Total current liabilities 1,092,386 1,219,325 ---------- ---------- Non-current Liabilities: Long-term debt 765,783 818,947 Other 364,997 371,865 ---------- ---------- Total non-current liabilities 1,130,780 1,190,812 ---------- ---------- Stockholders' Equity: Preferred stock -- Common stock 2,497 273,864 Additional Paid-in-Capital 277,039 -- Income reinvested in the business 2,462,195 2,105,144 Common stock held in treasury (1,833) (1,841) Cumulative translation adjustment (73,923) 18,858 ---------- ---------- Total stockholders' equity 2,665,975 2,396,025 ---------- ---------- $4,889,141 $4,806,162 ========== ========== 4 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) Nine Months Ended September 30 ------------------- 1997 1996 ------------------- Cash Provided by (Used for) Operating Activities: Net income $ 426,779 $ 351,972 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 146,615 135,230 Change in deferred income taxes 12,291 (5,226) Provision for uncollectible accounts 3,338 5,166 (Gain)loss on sale of plant and equipment 5,231 (573) Income from investments (68,996) (40,701) Non-cash interest on nonrecourse debt 26,730 12,298 Gain on sale of operations and affiliates (7,153) (5,587) Other non-cash items, net 2,761 (600) --------- --------- Cash provided by operating activities 547,596 451,979 Changes in assets and liabilities: (Increase) decrease in-- Trade receivables (70,500) (20,227) Inventories (5,731) 32,534 Prepaid expenses and other assets (26,430) (39,197) Increase (decrease) in-- Accounts payable 9,228 (18,596) Accrued expenses 3,602 36,429 Income taxes payable (26,173) (18,823) Other, net 5,196 1,958 --------- --------- Net cash provided by operating activities 436,788 426,057 --------- --------- Cash Provided by (Used for) Investing Activities: Acquisition of businesses(excluding cash and equivalents) and additional interest in affiliates (183,500) (101,146) Additions to plant and equipment (119,805) (117,391) Purchase of investments (9,436) (10,855) Proceeds from investments 26,904 46,253 Proceeds from sale of plant and equipment 13,024 20,662 Proceeds from sale of operations and affiliates 104,932 13,922 Other, net 6,917 (8,021) --------- --------- Net cash used for investing activities (160,964) (156,576) --------- --------- Cash Provided by (Used for) Financing Activities: Cash dividends paid (77,124) (61,953) Issuance of common stock 5,406 4,035 Repayments of short-term debt (111,708) (74,700) Proceeds from long-term debt 785 8,891 Repayments of long-term debt (32,595) (100,980) Other, net 3,210 2,767 --------- --------- Net cash used for financing activities (212,026) (221,940) --------- --------- Effect of Exchange Rate Changes on Cash and Equivalents (18,345) (1,414) --------- --------- Cash and Equivalents: Increase during the period 45,453 46,127 Beginning of period 137,699 116,600 --------- --------- End of period $ 183,152 $ 162,727 ========= ========= Cash Paid During the Period for Interest $ 24,552 $ 33,090 ========= ========= Cash Paid During the Period for Income Taxes $ 219,989 $ 208,919 ========= ========= Liabilities Assumed from Acquisitions $ 60,324 $ 233,881 ========= ========= 5 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) INVENTORIES at September 30, 1997 and December 31, 1996 were as follows: (In Thousands) September 30, Dec. 31, 1997 1996 ------------- --------- Raw material $144,658 $143,979 Work-in-process 68,008 71,641 Finished goods 290,754 310,396 -------- -------- $503,420 $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 will be materially different from net income per share as currently reported. (3) COMMON STOCK: On February 14, 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. 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. 6 Item 2 - Management's Discussion and Analysis ENGINEERED COMPONENTS SEGMENT Businesses in this segment manufacture short lead-time plastic and metal components and fasteners; industrial fluids and adhesives; and welding products. This segment primarily serves the construction, automotive and general industrial markets. (Dollars in Thousands) Three months ended Nine months ended September 30 September 30 ------------------ ---------------------- Operating Revenues 1997 1996 1997 1996 - --------- --------- -------- ---------- ---------- Domestic $498,415 $476,489 $1,503,274 $1,440,075 Int'l 203,235 202,631 629,368 635,192 -------- -------- ---------- ---------- Total $701,650 $679,120 $2,132,642 $2,075,267 ======== ======== ========== ========== Three months ended September 30 Nine months ended September 30 --------------------------------- --------------------------------- Operating 1997 1996 1997 1996 Income Income Margin Income Margin Income Margin Income Margin - -------- -------- ------ -------- ------ -------- ------ -------- ------ Domestic $ 96,189 19.3% $ 79,969 16.8% $282,820 18.8% $230,949 16.0% Int'l 30,442 15.0 21,220 10.5 91,197 14.5 75,848 11.9 -------- -------- -------- -------- Total $126,631 18.0 $101,189 14.9 $374,017 17.5 $306,797 14.8 ======== ======== ======== ======== Domestic Domestic revenues for the three-month and nine-month periods increased primarily due to acquisitions completed in the automotive businesses, along with new products in the construction and industrial products operations. The sale of a fastener distribution business in the first quarter of 1997 moderated revenue growth for both periods. For both the three-month and year-to-date periods, operating income and margins increased due to cost reductions and new products in the welding and industrial products operations. The automotive acquisitions also contributed to the operating income and margin increases. International For both three- and nine-month periods, international revenues grew as a result ofincreased penetration by the European automotive businesses supported by increased European car builds. The increase in revenues was partially offset by the negative effect of currency translation for the three-month period and was more than offset year-to-date. Operating income and margins increased as a result of increased revenues and reduced costs in the European automotive operations and a reduced cost structure for the construction operations. 7 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 Nine months ended September 30 September 30 ------------------ ---------------------- Operating Revenues 1997 1996 1997 1996 - --------- -------- -------- ---------- ---------- Domestic $327,418 $302,721 $ 936,848 $ 906,960 Int'l 254,786 233,706 715,223 666,913 -------- -------- ---------- ---------- Total $582,204 $536,427 $1,652,071 $1,573,873 ======== ======== ========== ========== Three months ended September 30 Nine months ended September 30 Operating 1997 1996 1997 1996 Income Income Margin Income Margin Income Margin Income Margin - -------- -------- ------ -------- ------ -------- ------ -------- ------ Domestic $ 66,395 20.3% $ 62,309 20.6% $184,481 19.7% $175,940 19.4% Int'l 33,548 13.2 29,225 12.5 94,101 13.2 72,881 10.9 Total $ 99,943 17.2 $ 91,534 17.1 $278,582 16.9 $248,821 15.8 ======== ======== ======== ======== Domestic For the three-month period, acquisitions and new products in the marking and labeling operations along with new product introductions in the resealable packaging businesses led to the domestic revenue and operating income growth. The finishing systems businesses also contributed to the improved performance as a result of several painting systems that were shipped in the third quarter. The revenue growth was moderated by decreased revenues in the Signode operations as a result of a product mix shift towards plastic strapping versus steel, which sells for a lower unit price with higher margins. For the nine-month period, revenue and operating income increased because of the marking and labeling businesses and increased penetration in industrial markets for finishing systems equipment. The growth in year-to-date revenues was partially offset by decreased revenues in the quality measurement and Signode operations. Operating income and margins for both periods increased primarily as a result of higher revenues for the marking and labeling businesses and reduced manufacturing costs at the Signode operations, followed by higher revenues from the finishing systems businesses. For the third quarter, the above margin increases were offset by lower margins for the stretch film operations. International International revenue and operating income increased for both periods primarily due to acquisitions in the Signode and stretch film operations. Currency translation and the sale of the European palletizing businesses in the first quarter of 1997 partially offset the revenue growth. Operating income and margins also improved as a result of cost reductions at the Signode operations. The sale of the under- performing palletizing businesses contributed to the increase in margins. 8 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 Nine months ended September 30 September 30 ------------------ ------------------ 1997 1996 1997 1996 -------- ------- ------- ------- Operating revenues $31,534 $22,714 $86,817 $50,843 ======= ======= ======= ======= Operating income $ 9,189 $ 6,008 $25,416 $19,543 ======= ======= ======= ======= For the third 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 the nine-month period 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 65.1% in the first six months of 1997 versus 66.1% in the first nine months of 1996, due to increased sales volume coupled with lower manufacturing costs. Selling, administrative, and research and development expenses decreased to 16.6% of revenues in the first nine months of 1997 versus 17.6% in the first nine 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 $15.9 million in the first nine months of 1997 from $20.3 million in the first nine 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 $10.1 million for the first nine months of 1997 from $3.9 million in 1996. This increase is primarily due to higher gains on the sale of operations, more interest income in 1997, and higher debt prepayment costs in 1996, partially offset by losses on sale of fixed assets in 1997. NET INCOME Net income of $426.8 million ($1.71 per share) in the first nine months of 1997 was 11.0% higher than 1996 nine-month net income of $352.0 million ($1.42 per share). FOREIGN CURRENCY The strengthening of the U.S. dollar against foreign currencies in 1997 decreased operating revenues for the first nine months of 1997 by approximately $82 million. Foreign currency fluctuations had no material impact on earnings for the first nine months of 1997 versus 1996. 9 FINANCIAL POSITION Net working capital at September 30, 1997 and December 31, 1996 is summarized as follows: (Dollars in Thousands) Sept. 30, Dec. 31, Increase/ 1997 1996 (Decrease) ---------- ---------- ---------- Current Assets: Cash and equivalents $ 183,152 $ 137,699 $ 45,453 Trade receivables 875,089 840,092 34,997 Inventories 503,420 526,016 (22,596) Other 185,015 197,285 (12,270) ---------- ---------- -------- 1,746,676 1,701,092 45,584 ---------- ---------- -------- Current Liabilities: Short-term debt 259,364 390,425 (131,061) Accounts payable and accrued expenses 748,490 760,989 (12,499) Other 84,532 67,911 16,621 ---------- ---------- -------- 1,092,386 1,219,325 (126,939) ---------- ---------- -------- Net Working Capital $ 654,290 $ 481,767 $172,523 ========== ========== ======== Current Ratio 1.60 1.40 ========== ========== The increase in trade receivables for the first nine months of 1997 was primarily due to higher revenues in the third quarter of 1997 versus the fourth quarter of 1996. The increase in trade receivables was partially offset by the effect of foreign currency translation. The decrease in inventories from year-end 1996 is primarily due to currency translation. The reduction in short-term debt is mainly due to the repayment of a portion of the 1996 Azon acquisition debt. 10 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 No reports on Form 8-K have been filed during the quarter for which this report is filed. 11 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: November 14, 1997 By: /s/ Michael W. Gregg ----------------------- --------------------------------------------- Michael W. Gregg, Senior Vice President and Controller, Accounting (Principal Accounting Officer) 12 EX-27 2
5 1 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 183,152 0 875,089 0 503,420 1,746,676 1,988,709 1,195,730 4,889,141 1,092,386 765,783 2,497 0 0 2,739,234 4,889,141 3,871,530 3,871,530 2,519,164 2,519,164 32,153 0 15,915 672,179 245,400 426,779 0 0 0 426,779 1.71 1.71
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