-----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, JNbZ+Z9bJWmFqbY3XACvr9fDWmzQxReHbZUSWl8OJYUwaTv1OAyO0V9ORTldksp2 +llLQInd1jIhAJEix6oI7g== 0000950137-00-002321.txt : 20000515 0000950137-00-002321.hdr.sgml : 20000515 ACCESSION NUMBER: 0000950137-00-002321 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ILLINOIS TOOL WORKS INC CENTRAL INDEX KEY: 0000049826 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT [3560] 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: 628920 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 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, 2000 -------------- 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, $.01 par value, outstanding at April 30, 2000: 301,536,666. 2 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 3 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF INCOME (UNAUDITED) (In Thousands Except for Per Share Amounts) Three Months Ended March 31 ----------------------------- 2000 1999 ----------- ----------- Operating Revenues $ 2,404,960 $ 2,156,657 Cost of revenues 1,571,930 1,411,567 Selling, administrative, and research and development expenses 454,171 423,770 Amortization of goodwill and other intangible assets 20,556 16,823 ----------- ----------- Operating Income 358,303 304,497 Interest expense (16,083) (14,258) Other income 209 7,479 ----------- ----------- Income Before Income Taxes 342,429 297,718 Income taxes 123,300 109,286 ----------- ----------- Net Income $ 219,129 $ 188,432 =========== =========== Per share of common stock: Basic net income $ .73 $ .63 =========== =========== Diluted net income $ .72 $ .62 =========== =========== Cash dividends: Paid $ .180 $ .146 =========== =========== Declared $ .180 $ .146 =========== =========== Shares of common stock outstanding during the period: Average 300,746 300,021 Average assuming dilution 304,019 304,568 3 4 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) (In Thousands) ASSETS March 31, 2000 December 31, 1999 - ------ -------------- ----------------- Current Assets: Cash and equivalents $ 247,902 $ 232,953 Trade receivables 1,625,275 1,630,937 Inventories 1,118,504 1,084,212 Deferred income taxes 193,960 188,729 Prepaid expenses and other current assets 155,067 136,100 ----------- ----------- Total current assets 3,340,708 3,272,931 ----------- ----------- Plant and Equipment: Land 115,172 114,048 Buildings and improvements 942,643 926,306 Machinery and equipment 2,697,560 2,633,212 Equipment leased to others 117,547 118,164 Construction in progress 151,630 120,568 ----------- ----------- 4,024,552 3,912,298 Accumulated depreciation (2,378,857) (2,278,367) ----------- ----------- Net plant and equipment 1,645,695 1,633,931 ----------- ----------- Investments 1,178,791 1,188,120 Goodwill and Other Intangibles 2,142,659 2,029,959 Deferred Income Taxes 432,797 433,792 Other Assets 400,964 501,526 ----------- ----------- $ 9,141,614 $ 9,060,259 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Short-term debt $ 549,513 $ 553,655 Accounts payable 450,106 470,200 Accrued expenses 783,436 906,215 Cash dividends payable 54,204 54,102 Income taxes payable 122,942 61,189 ----------- ----------- Total current liabilities 1,960,201 2,045,361 ----------- ---------- Non-current Liabilities: Long-term debt 1,350,069 1,360,746 Other 871,295 838,729 ----------- ----------- Total non-current liabilities 2,221,364 2,199,475 ----------- ----------- Stockholders' Equity: Preferred stock -- -- Common stock 3,014 3,008 Additional paid-in-capital 530,097 517,210 Income reinvested in the business 4,650,440 4,485,515 Common stock held in treasury (1,783) (1,783) Cumulative translation adjustment (221,719) (188,527) ----------- ----------- Total stockholders' equity 4,960,049 4,815,423 ----------- ----------- $ 9,141,614 $ 9,060,259 =========== =========== 4 5 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF CASH FLOWS (UNAUDITED) (In Thousands) Three Months Ended March 31 -------------------------- 2000 1999 --------- --------- Cash Provided by (Used for) Operating Activities: Net income $ 219,129 $ 188,432 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 89,187 83,395 Change in deferred income taxes (908) 7,125 Provision for uncollectible accounts 5,023 1,902 (Gain) Loss on sale of plant and equipment 348 (727) Income from investments (35,753) (39,536) Non-cash interest on nonrecourse debt 11,105 11,365 Gain on sale of operations and affiliates (1,843) (2,828) Other non-cash items, net (937) (1,349) --------- --------- Cash provided by operating activities 285,351 247,779 Changes in assets and liabilities: (Increase) decrease in-- Trade receivables 5,987 (6,664) Inventories (19,110) (10,676) Prepaid expenses and other assets (3,647) (20,408) Increase (decrease) in-- Accounts payable (27,746) (6,163) Accrued expenses (83,306) (39,379) Income taxes payable 58,367 65,826 Other, net -- (3,648) --------- --------- Net cash provided by operating activities 215,896 226,667 --------- --------- Cash Provided by (Used for) Investing Activities: Acquisition of businesses(excluding cash and equivalents) and additional interest in affiliates (83,059) (139,172) Additions to plant and equipment (71,894) (71,707) Purchase of investments (3,930) (5,551) Proceeds from investments 18,386 15,156 Proceeds from sale of plant and equipment 4,608 3,699 Proceeds from sale of operations and affiliates 4,220 9,589 Sales (purchases) of short-term investments (3,013) 6,704 Other, net 1,152 491 --------- --------- Net cash used for investing activities (133,530) (180,791) --------- --------- Cash Provided by (Used for) Financing Activities: Cash dividends paid (54,102) (43,707) Issuance of common stock 6,612 4,432 Net borrowings (repayments) of short-term debt 122,352 (333,502) Proceeds from long-term debt 531 499,924 Repayments of long-term debt (134,353) (3,780) Repurchase of treasury stock -- (27,226) Other, net 1,548 4,269 --------- --------- Net cash provided by(used for) financing activities (57,412) 100,410 --------- --------- Effect of Exchange Rate Changes on Cash & Equivalents (10,005) (4,525) --------- --------- Cash and Equivalents: Increase during the period 14,949 141,761 Beginning of period 232,953 109,526 --------- --------- End of period $ 247,902 $ 251,287 ========= ========= Cash Paid During the Period for Interest $ 28,596 $ 16,231 ========= ========= Cash Paid During the Period for Income Taxes $ 53,528 $ 43,461 ========= ========= Liabilities Assumed from Acquisitions $ 57,459 $ 108,074 ========= ========= 5 6 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (1) INVENTORIES at March 31, 2000 and December 31, 1999 were as follows: ----------- (In Thousands) March 31, Dec. 31, 2000 1999 --------- ---------- Raw material $ 325,304 $ 370,300 Work-in-process 139,770 126,783 Finished goods 653,430 587,129 ---------- ---------- $1,118,504 $1,084,212 ========== ========== (2) COMPREHENSIVE INCOME -------------------- The only component of other comprehensive income that the Company has is foreign currency translation adjustments. (In Thousands) March 31, March 31, 2000 1999 ---------- ---------- Net income $ 219,129 $ 188,432 Foreign currency translation adjustments, net of tax (33,192) (45,095) ---------- ---------- Total comprehensive income $ 185,937 $ 143,337 ========== ========== 6 7 Item 2 - Management's Discussion and Analysis - --------------------------------------------- ENGINEERED PRODUCTS - NORTH AMERICA - ----------------------------------- Businesses in this segment are located in North America and manufacture short lead-time components and fasteners, and specialty products such as adhesives, resealable packaging and electronic component packaging. (Dollars in Thousands) Three months ended March 31 -------------------------- 2000 1999 ---------- ---------- Operating revenues $ 805,727 $ 692,886 Operating income 147,790 125,154 Margin % 18.3% 18.1% Operating revenues increased 16% in the first three months of 2000 versus 1999 principally due to base business revenue growth of 11%, mainly in the automotive, industrial plastics and construction businesses, including the Wilsonart decorative laminate operation. Acquisitions also contributed 6% to the revenue growth. Operating income increased 18% primarily due to the revenue increases. Margins improved modestly as operating efficiencies at the base businesses were partially offset by the lower margins of acquired businesses. ENGINEERED PRODUCTS - INTERNATIONAL - ----------------------------------- Businesses in this segment are located outside North America and manufacture short lead-time components and fasteners, and specialty products such as electronic component packaging and adhesives. (Dollars in Thousands) Three months ended March 31 -------------------------- 2000 1999 ---------- ---------- Operating revenues $ 343,088 $ 282,414 Operating income 32,073 22,952 Margin % 9.3% 8.1% For the first quarter of 2000, the revenue increase of 21% versus the prior year was mainly due to acquisitions, which contributed 22% to the increase. Base business revenue growth was 9%, primarily related to the automotive, industrial plastics and construction businesses. Operating 7 8 income increased 40%, largely due to the revenue growth and cost reductions in the base businesses. Margins improved 120 basis points as a result of cost improvements in the base businesses, partially offset by the lower margins of acquired businesses. Foreign currency fluctuations, primarily related to the Euro, negatively impacted revenues by 9% and operating income by 12%. SPECIALTY SYSTEMS - NORTH AMERICA - --------------------------------- Businesses in this segment are located in North America and produce longer lead-time machinery and related consumables, and specialty equipment for applications such as food service and industrial spray coating. (Dollars in Thousands) Three months ended March 31 -------------------------- 2000 1999 ---------- ---------- Operating revenues $ 829,062 $ 743,369 Operating income 131,505 113,938 Margin % 15.9% 15.3% Revenues increased 12% in the first quarter of 2000 due to base business revenue growth of 9%, mainly related to the welding, food equipment, industrial packaging and decorating businesses. Acquisitions also contributed 3% to the revenue growth. Operating income increased 15% and margins improved 60 basis points primarily due to the base business revenue growth and improved productivity in the welding, food equipment and finishing businesses. SPECIALTY SYSTEMS - INTERNATIONAL - --------------------------------- Businesses in this segment are located outside North America and manufacture longer lead-time machinery and related consumables, and specialty equipment for food service and industrial spray coating. (Dollars in Thousands) Three months ended March 31 -------------------------- 2000 1999 ---------- ---------- Operating revenues $ 376,692 $ 365,322 Operating income 27,755 14,678 Margin % 7.4% 4.0% 8 9 In the first quarter of 2000, operating revenues increased 3%, mainly due to acquisitions, which contributed 7%, and the base businesses, which grew 3%. These increases were partially offset by the effect of foreign currency fluctuations, which reduced revenues 5%. Operating income increased 89% and margins improved 340 basis points due to the revenue increase and improved productivity in such base businesses, primarily related to the food equipment, industrial packaging and finishing. Also, operating income and margins were higher in 2000 due to a nonrecurring receivables adjustment in the first quarter of 1999. Operating income was reduced 18% due to foreign currency fluctuations, primarily related to the Euro. CONSUMER PRODUCTS - ----------------- Businesses in this segment are located primarily in North America and manufacture household products which are used by consumers, including small electric appliances, physical fitness equipment and ceramic tile. (Dollars in Thousands) Three months ended March 31 -------------------------- 2000 1999 ---------- ---------- Operating revenues $ 119,657 $ 120,923 Operating income 1,816 5,920 Margin % 1.5% 4.9% Operating revenues decreased in the first quarter of 2000 due to lower small appliance sales, partially offset by higher sales of fitness equipment. Operating income and margins declined due to lower sales volume in the small appliance businesses and higher costs in the ceramic tile operation. LEASING AND INVESTMENTS - ----------------------- This segment makes opportunistic investments in mortgage-related assets, leveraged and direct financing leases of equipment, properties and property developments, and affordable housing. (Dollars in Thousands) Three months ended March 31 -------------------------- 2000 1999 Operating revenues $ 34,668 $ 39,859 Operating income 17,364 21,855 In the first quarter of 2000, operating revenues and income decreased from the prior year primarily due to higher gains on the sales of assets in 1999. 9 10 OPERATING REVENUES - ------------------ The reconciliation of segment operating revenues to total operating revenues is as follows: 2000 1999 ---------- ---------- Engineered Products - North America $ 805,727 $ 692,886 Engineered Products - International 343,088 282,414 Specialty Systems - North America 829,062 743,369 Specialty Systems - International 376,692 365,322 Consumer Products 119,657 120,923 Leasing and Investments 34,668 39,859 ---------- ---------- Total segment operating revenues 2,508,894 2,244,773 Intersegment revenues (103,934) (88,116) ---------- ---------- Total operating revenues $2,404,960 $2,156,657 ========== ========== OPERATING EXPENSES - ------------------ Cost of revenues as a percentage of revenues were flat in the first three months of 2000 versus the first three months of 1999. Selling, administrative, and research and development expenses decreased to 18.9% of revenues in the first three months of 2000 versus 19.6% in the first three months of 1999, primarily due to nonrecurring charges in 1999. INTEREST EXPENSE - ---------------- Interest expense increased to $16.1 million in the first three months of 2000 from $14.3 million in the first three months of 1999, primarily due to a full quarter of interest expense on the $500 million of 5.75% notes issued in February 1999. OTHER INCOME - ------------ Other income decreased to $.2 million for the first three months of 2000 from $7.5 million in 1999. This decrease is primarily due to higher minority interest expense on less-than-100%-owned subsidiaries and lower interest income in 2000. NET INCOME - ---------- Net income of $219.1 million ($0.72 per diluted share) in the first three months of 2000 was 16.3% higher than the 1999 first quarter net income of $188.4 million ($0.62 per diluted share). 10 11 FINANCIAL POSITION - ------------------ Net working capital at March 31, 2000 and December 31, 1999 is summarized as follows: (Dollars in Thousands) March 31, Dec. 31, Increase/ 2000 1999 (Decrease) ---------- ---------- ---------- Current Assets: Cash and equivalents $ 247,902 $ 232,953 $ 14,949 Trade receivables 1,625,275 1,630,937 (5,662) Inventories 1,118,504 1,084,212 34,292 Other 349,027 324,829 24,198 ---------- ---------- ---------- 3,340,708 3,272,931 67,777 ---------- ---------- ---------- Current Liabilities: Short-term debt 549,513 553,655 (4,142) Accounts payable 450,106 470,200 (20,094) Accrued expenses 783,436 906,215 (122,779) Other 177,146 115,291 61,855 ---------- ---------- ---------- 1,960,201 2,045,361 (85,160) ---------- ---------- ---------- Net Working Capital $1,380,507 $1,227,570 $ 152,937 ========== ========== ========== Current Ratio 1.70 1.60 ========== ========== Accrued liabilities decreased primarily as a result of a decrease in accrued rebates, payroll and bonuses. The increase in other liabilities reflects an increase in income taxes payable as a result of the timing of tax payments. FORWARD-LOOKING STATEMENTS - -------------------------- This document contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks, uncertainties, and other factors which could cause actual results to differ materially from those anticipated, including, without limitation, the risks described herein. Important factors that may influence future results include (1) a downturn in the construction, food service, automotive, general industrial or real estate markets, (2) deterioration in global and domestic business and economic conditions, particularly in North America, Europe, and Australia, (3) an interruption in, or reduction in, introducing new products into the Company's product line, and (4) an unfavorable environment for making acquisitions, domestic and foreign, including adverse accounting or regulatory requirements and market values of candidates. 11 12 Part II - Other Information - --------------------------- Item 5 - Other Information - -------------------------- At the Company's May 12, 2000 Meeting of the Board of Directors, Arthur Andersen LLP was approved as the Company's sole independent accountants for the 2000 fiscal year. Accordingly, the Company has dismissed Ernst & Young LLP as independent accountants for Premark International, Inc. ("Premark"). Premark merged with the Company on November 23, 1999. The report of Ernst & Young LLP for the years ended December 25, 1999 and December 26, 1998 contains no adverse opinion or disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the years ended December 25, 1999 and December 26, 1998, there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference thereto in their report on the financial statements for such years. Item 6 - Exhibits and Reports on Form 8-K - ----------------------------------------- (a) Exhibit Index Exhibit No. Description - ----------- ----------- 27 Financial Data Schedule 99 Letter dated May 12, 2000 from Ernst & Young LLP to the Securities & Exchange Commission. (b) Reports on Form 8-K Form 8-K/A, Current Report (Amendment Number 1) filed February 10, 2000 which included Item 7 and a press release dated February 1, 2000 setting forth the financial results of Illinois Tools Works Inc.. 12 13 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 12, 2000 By: /s/ Jon C. Kinney ------------------ -------------------------------- Jon C. Kinney, Senior Vice President and Chief Financial Officer (Principal Accounting Officer) 13 EX-99 2 LETTER FROM ERNST & YOUNG TO SEC, DATED 5/12/00 1 EX. 99 May 12, 2000 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, DC 20549 Gentlemen: We have read Item 5 of Form 10-Q dated May 12, 2000 of Illinois Tool Works Inc. and are in agreement with the statements contained therein. We have no basis to agree or disagree with other statements of the registrant contained therein. ERNST & YOUNG LLP EX-27 3 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-2000 JAN-01-2000 MAR-31-2000 247,902 0 1,689,065 63,790 1,118,504 3,340,708 4,024,552 2,378,857 9,141,614 1,960,201 1,350,069 0 0 3,014 5,180,537 9,141,614 2,404,960 2,404,960 1,571,930 1,571,930 20,556 7,292 16,083 342,429 123,300 219,129 0 0 0 219,129 0.73 0.72
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