-----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, UfL1Rsgdyn+un3DevABZ56kFtEpvfEYjtxg5N377HVA42N582rEGWQCzEKoLeofX YyNeTw8jtOkz2QMcELh51g== 0000049826-98-000001.txt : 19980518 0000049826-98-000001.hdr.sgml : 19980518 ACCESSION NUMBER: 0000049826-98-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98624980 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, 1998 ------------------------------------------------- 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, 1998: 249,886,684. 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 March 31 ---------------------- 1998 1997 ---------- ---------- Operating Revenues $1,340,991 $1,229,798 Cost of revenues 873,957 807,317 Selling, administrative, and research and develop- ment expenses 221,078 215,689 Amortization of goodwill and other intangible assets 9,777 8,532 Amortization of retiree health care 1,827 1,827 ---------- --------- Operating Income 234,352 196,433 Interest expense (2,946) (5,961) Other income 2,752 3,583 ---------- ---------- Income Before Income Taxes 234,158 194,055 Income taxes 85,500 70,800 ---------- ---------- Net Income $ 148,658 $ 123,255 ========== ========== Per share of common stock: Basic net income $ .60 $ .49 ===== ===== Diluted net income $ .59 $ .49 ===== ===== Cash dividends: Paid $ .12 $.095 ===== ===== Declared $ .12 $.095 ===== ===== Shares of common stock outstanding during the period: Average 249,693 249,026 ======= ======= Average assuming dilution 252,370 251,340 ======= ======= ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) (In Thousands) ASSETS March 31, 1998 December 31, 1997 - ------ -------------- ----------------- Current Assets: Cash and equivalents $ 206,544 $ 185,856 Trade receivables 916,828 902,022 Inventories 530,423 522,996 Deferred income taxes 166,642 168,697 Prepaid expenses and other current assets 83,891 79,071 ---------- ---------- Total current assets 1,904,328 1,858,642 ---------- ---------- Plant and Equipment: Land 75,949 78,055 Buildings and improvements 490,323 485,845 Machinery and equipment 1,436,719 1,387,502 Equipment leased to others 107,356 107,345 Construction in progress 81,791 58,644 ---------- ---------- 2,192,138 2,117,391 Accumulated depreciation (1,310,133) (1,233,333) ---------- ---------- Net plant and equipment 882,005 884,058 ---------- ---------- Investments 1,172,920 1,170,015 Goodwill 803,454 774,250 Deferred Income Taxes 383,278 379,738 Other Assets 363,204 328,053 ---------- ---------- $5,509,189 $5,394,756 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 308,342 $ 298,278 Accounts payable 270,265 269,088 Accrued expenses 440,909 458,381 Cash dividends payable 29,977 29,952 Income taxes payable 133,908 102,181 ---------- ---------- Total current liabilities 1,183,401 1,157,880 ---------- ---------- Non-current Liabilities: Long-term debt 848,651 854,328 Other 568,222 576,094 ---------- ---------- Total non-current liabilities 1,416,873 1,430,422 ---------- ---------- Stockholders' Equity: Preferred stock -- -- Common stock 2,501 2,499 Additional paid-in-capital 289,556 287,153 Income reinvested in the business 2,711,099 2,592,416 Common stock held in treasury (1,783) (1,833) Cumulative translation adjustment (92,458) (73,781) ---------- ---------- Total stockholders' equity 2,908,915 2,806,454 ---------- ---------- $5,509,189 $5,394,756 ========== ========== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) Three Months Ended March 31 ------------------ 1998 1997 -------- -------- Cash Provided by (Used for) Operating Activities: Net income $148,658 $123,255 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 53,534 49,227 Change in deferred income taxes (2,854) (43,644) Provision for uncollectible accounts 1,371 1,113 Loss on sale of plant and equipment 504 4,800 Income from investments (31,440) (22,603) Non-cash interest on nonrecourse debt 11,772 8,444 Gain on sale of operations and affiliates (875) (6,096) Other non-cash items, net 313 2,848 -------- -------- Cash provided by operating activities 180,983 117,344 Changes in assets and liabilities: (Increase) decrease in-- Trade receivables (24,761) (30,228) Inventories (13,477) (16,162) Prepaid expenses and other assets (13,343) (19,096) Increase (decrease) in-- Accounts payable 5,502 (7,651) Accrued expenses (13,915) (5,405) Income taxes payable 34,093 45,462 Other, net 4,664 2 449 -------- ------- Net cash provided by operating activities 159,746 86,713 -------- ------- Cash Provided by (Used for) Investing Activities: Acquisition of businesses(excluding cash and equivalents) and additional interest in affiliates (75,690) (26,336) Additions to plant and equipment (51,461) (39,701) Purchase of investments (4,162) (2,395) Proceeds from investments 6,169 5,645 Proceeds from sale of plant and equipment 1,380 2,877 Proceeds from sale of operations and affiliates 1,488 80,495 Other, net 3,139 (1,440) -------- ------- Net cash provided by (used for) investing activities (119,137) 19,145 -------- ------- Cash Provided by (Used for) Financing Activities: Cash dividends paid (29,952) (23,538) Issuance of common stock 2,454 2,158 Net borrowings (repayments) of short-term debt 19,699 (67,567) Proceeds from long-term debt 361 417 Repayments of long-term debt (10,571) (31,637) Other, net 1,730 1,586 ------- -------- Net cash used for financing activities (16,279) (118,581) ------- -------- Effect of Exchange Rate Changes on Cash and Equivalents (3,642) (9,197) ------- -------- Cash and Equivalents: Increase (decrease) during the period 20,688 (21,920) Beginning of period 185,856 137,699 -------- -------- End of period $206,544 $115,779 ======== ======== Cash Paid During the Period for Interest $ 4,096 $ 9,105 ======== ======== Cash Paid During the Period for Income Taxes $ 48,733 $ 41,450 ======== ======== Liabilities Assumed from Acquisitions $ 6,841 $ 24,933 ======== ======== ILLINOIS TOOL WORKS INC. and SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) INVENTORIES at March 31, 1998 and December 31, 1997 were as follows: ----------- (In Thousands) March 31, Dec. 31, 1998 1997 -------- -------- Raw material $148,285 $145,851 Work-in-process 70,170 67,956 Finished goods 311,968 309,189 -------- -------- $530,423 $522,996 ======== ======== (2) NEW ACCOUNTING STANDARD: ----------------------- During 1998, the Company adopted SFAS No. 130, Reporting Comprehensive Income, which established standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements. The only component of other comprehensive income that the Company has is foreign currency translation adjustments. The components of comprehensive income are as follows: March 31, March 31, 1998 1997 -------- -------- Net income $148,658 $123,255 Foreign currency translation adjustments, net of tax (18,675) (50,323) --------- -------- Total comprehensive income $129,983 $ 72,932 ======== ======== Item 2 - Management's Discussion and Analysis ENGINEERED COMPONENTS SEGMENT Businesses in this segment manufacture short lead-time components and fasteners primarily for automotive, construction and general industrial applications. They also manufacture specialty products such as adhesives and static-control equipment. (Dollars in Thousands) Three months ended March 31 ------------------ Operating Revenues 1998 1997 - ------------- -------- -------- North America $404,404 $364,264 International 199,521 192,543 -------- -------- Total $603,925 $556,807 ======== ======== Three months ended March 31 -------------------------------- Operating 1998 1997 Income Income Margin Income Margin - ------------- -------- ------ -------- ------ North America $ 81,489 20.2% $ 68,907 18.9% International 23,363 11.7 22,035 11.4 -------- -------- Total $104,852 17.4 $ 90,942 16.3 ======== ======== In North America, unseasonably high demand in the residential construction markets and increased market penetration in the automotive and general industrial markets largely contributed to the increase in North American revenues and operating income compared with last year. Acquisitions also added to the growth in revenues and operating income. Margins grew due to higher revenues in the base businesses and increased leverage of selling and administrative expense. Internationally, revenues increased in the first quarter of 1998 due to higher demand in the European automotive markets as a result of a stronger car build. Acquisitions also added approximately 8% to the revenue growth. The construction businesses experienced flat revenue growth as the French and UK construction markets remained soft. Currency translation moderated revenue growth by 9%. Operating income and margins increased due to revenue growth in the automotive markets and cost reductions in the European construction operations. INDUSTRIAL SYSTEMS AND CONSUMABLES SEGMENT Businesses in this segment produce longer lead-time machinery and related consumables primarily for the food and beverage, construction, automotive and general industrial markets. They also manufacture specialty products for applications such as industrial spray coating and quality measurement. (Dollars in Thousands) Three months ended March 31 Operating Revenues 1998 1997 - ------------- -------- -------- North America $523,181 $490,450 International 255,447 216,988 -------- -------- Total $778,628 $707,438 ======== ======== Three months ended March 31 -------------------------------- Operating 1998 1997 Income Income Margin Income Margin - ------------- -------- ------ ------- ------ North America $ 86,137 16.5% $73,952 15.1% International 29,630 11.6 23,077 10.6 -------- ------- Total $115,767 14.9 $97,029 13.7 ======== ======= In North America, increased demand in the U.S. construction and general industrial markets fueled the growth in North American revenues. The welding, decorating, finishing systems, Signode strapping and stretch film operations all benefited from the increased demand. Operating income and margins increased compared with last year due to increased revenues from base businesses and cost improvements. Internationally, the European Signode and stretch films operations primarily contributed to the revenue growth. Acquisitions in the Signode and stretch film businesses added 22% to the revenue increase, while currency translation decreased revenues by 12%. Margins increased due to higher revenues and cost reductions. Margin growth was tempered by acquisitions which have overall higher costs than the average base international businesses in this segment. LEASING AND INVESTMENTS SEGMENT This segment makes opportunistic investments that optimally utilize the Company's cash flow. These investments primarily include mortgage-related investments, leveraged and direct financing leases of equipment, investments in properties and property developments, and affordable housing investments. (Dollars in Thousands) Three months ended March 31 ------------------ 1998 1997 ------- ------- Operating revenues $35,015 $31,837 ======= ======= Operating income $13,733 $ 8,462 ======= ======= Revenues and operating income increased primarily due to the commercial mortgage transaction entered into at year-end 1997. OPERATING REVENUES The reconciliation of segment operating revenues to total company operating revenues is as follows: 1998 1997 ---------- ---------- Engineered components $ 603,925 $ 556,807 Industrial systems and consumables 778,628 707,438 Leasing and investments 35,015 31,837 ---------- ---------- Total segment operating revenues $1,417,568 $1,296,082 Intersegment revenues (76,577) (66,284) ---------- ---------- Total company operating revenues $1,340,991 $1,229,798 ========== ========== OPERATING EXPENSES Cost of revenues as a percentage of revenues decreased to 65.2% in the first three months of 1998 versus 65.6% in the first three months of 1997, due to increased sales volume coupled with lower manufacturing costs. Selling, administrative, and research and development expenses decreased to 16.5% of revenues in the first three months of 1998 versus 17.5% in the first three months of 1997, primarily due to expense reductions as a result of a Comapny-wide objective to reduce administrative costs. INTEREST EXPENSE Interest expense decreased to $2.9 million in the first three months of 1998 from $6.0 million in the first three months of 1997, primarily due to decreased short-term borrowings. OTHER INCOME Other income decreased to $2.8 million for the first three months of 1998 from $3.6 million in 1997. This increase is primarily due to higher gains on the sale of operations in 1997, partially offset by losses on the sale of fixed assets in 1997. NET INCOME Net income of $148.7 million ($0.59 per diluted share) in the first three months of 1998 was 20.6% higher than the 1997 first quarter net income of $123.3 million ($0.49 per diluted share). FOREIGN CURRENCY The strengthening of the U.S. dollar against foreign currencies in 1998 decreased operating revenues by approximately $44 million and decreased net income per diluted share by approximately 2 cents per diluted share. FINANCIAL POSITION Net working capital at March 31, 1998 and December 31, 1997 is summarized as follows: (Dollars in Thousands) March 31, Dec. 31, Increase/ 1998 1997 (Decrease) ---------- ---------- ---------- Current Assets: Cash and equivalents $ 206,544 $ 185,856 $ 20,688 Trade receivables 916,828 902,022 14,806 Inventories 530,423 522,996 7,427 Other 250,533 247,768 2,765 ---------- ---------- ---------- 1,904,328 1,858,642 45,686 ---------- ---------- ---------- Current Liabilities: Short-term debt 308,342 298,278 10,064 Accounts payable and accrued expenses 711,174 727,469 (16,295) Other 163,885 132,133 31,752 ----------- ---------- -------- 1,183,401 1,157,880 25,521 ----------- ---------- -------- Net Working Capital $ 720,927 $ 700,762 $ 20,165 ========== ========== ======== Current Ratio 1.61 1.61 ========== ========== 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. 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: May 15, 1998 By: /s/ Jon C. Kinney --------------------- ------------------------------------ Jon C. Kinney, Senior Vice President and Chief Financial Officer (Principal Accounting Officer) EX-27 2
5 This schedule contains summary financial information extracted from the Statement of Income and the Statement of Financial Position and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 206,544 0 937,869 21,041 530,423 1,904,328 2,192,138 1,310,133 5,509,189 1,183,401 848,651 0 0 2,501 3,000,655 5,509,189 1,340,991 1,340,991 873,957 873,957 11,604 1,371 2,946 234,158 85,500 148,658 0 0 0 148,658 .60 .59
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