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, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
For Quarter Ended 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) (708) 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, 1994: 113,800,003.
<PAGE>
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.
<PAGE>
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
1994 1993 1994 1993
Operating Revenues $870,911 $779,536 $2,523,392 $2,358,876
Operating costs 579,917 527,854 1,684,091 1,593,739
Selling, administrative,
and research and develop-
ment expenses 159,128 152,367 474,020 475,605
Amortization of goodwill
and other intangible
assets 5,529 5,786 16,515 16,483
-------- -------- ---------- ----------
Operating Income 126,337 93,529 348,766 273,049
Interest expense (6,453) (9,268) (21,103) (27,326)
Amortization of retiree
health care (1,742) (1,742) (5,226) (5,226)
Other income (expense) (2,043) 1,627 (8,596) (225)
-------- -------- ---------- ---------
Income Before Income Taxes 116,099 84,146 313,841 240,272
Income taxes 44,700 33,200 120,800 92,500
-------- -------- ---------- ----------
Net Income $ 71,399 $ 50,946 $ 193,041 $ 147,772
======== ======== ========== ==========
Per share of common stock:
Net Income $ .63 $ .45 $1.70 $1.31
===== ===== ===== =====
Cash dividends:
Paid $ .13 $ .12 $ .39 $ .36
===== ===== ===== =====
Declared $ .15 $ - $ .41 $ .24
===== ===== ===== =====
Average number of shares of
common stock outstanding
during the period 113,291 113,019 113,247 112,936
======= ======= ======= =======
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
(In Thousands)
ASSETS September 30, 1994 December 31, 1993
Current Assets:
Cash and equivalents $ 57,994 $ 35,395
Trade receivables 627,925 544,226
Inventories 420,204 403,902
Deferred income taxes 56,771 57,764
Prepaid expenses and other
current assets 56,654 52,361
---------- ----------
Total current assets 1,219,548 1,093,648
---------- ----------
Plant and Equipment:
Land 65,837 65,134
Buildings 304,530 282,104
Machinery and equipment 850,316 771,066
Equipment leased to others 67,193 62,857
Construction in progress 35,034 24,718
---------- ----------
1,322,910 1,205,879
Accumulated depreciation (729,596) (622,114)
---------- ----------
Net plant and equipment 593,314 583,765
---------- ----------
Investment in Leveraged Leases 55,655 60,088
Goodwill 366,384 363,769
Other Assets 226,189 235,621
---------- ----------
$2,461,090 $2,336,891
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 65,124 $ 107,073
Accounts payable 161,884 149,205
Accrued expenses 308,365 233,932
Cash dividends payable 16,996 14,710
Income taxes payable 39,139 41,222
---------- ---------
Total current liabilities 591,508 546,142
---------- ---------
Non-current Liabilities:
Long-term debt 274,584 375,641
Deferred income taxes 89,053 92,470
Other 67,378 63,969
---------- ---------
Total non-current liabilities 431,015 532,080
---------- ---------
Stockholders' Equity:
Preferred stock - -
Common stock 172,785 170,185
Income reinvested in the business 1,276,024 1,129,435
Common stock held in treasury (1,952) (1,955)
Equity adjustment from foreign
currency translation (8,290) (38,996)
---------- ----------
Total stockholders' equity 1,438,567 1,258,669
---------- ----------
$2,461,090 $2,336,891
========== ==========
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF CASH FLOWS
(UNAUDITED)
(In Thousands) Nine Months Ended
September 30
1994 1993
Cash Provided by (Used for) Operating Activities:
Net income $193,041 $147,772
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 103,143 98,636
Change in deferred income taxes (2,301) 586
(Gain) loss on sale of plant and equipment,
and investment properties (1,100) 1,354
Gain on sale of operations & affiliates (4,372) -
Other non-cash items, net 9,415 1,765
Cash provided by operating activities 297,826 250,113
Changes in assets and liabilities:
(Increase) decrease in--
Trade receivables (71,943) (35,461)
Inventories (3,507) 4,879
Prepaid expenses and other assets 8,560 (5,080)
Increase (decrease) in--
Accounts payable 5,262 (20,584)
Accrued expenses 56,055 23,985
Income taxes payable (4,125) (13,871)
Other, net 4,263 516
--------- --------
Net cash provided by operating activities 292,391 204,497
--------- --------
Cash Provided by (Used for) Investing Activities:
Acquisition of subsidiaries (excluding cash and
equivalents) and additional interest in (24,059) (272,494)
affiliates
Additions to plant and equipment (92,118) (81,280)
Proceeds from sale of plant and equipment, and
investment properties 16,403 4,735
Proceeds from sale of operations & affiliates 15,721 -
Other, net 646 3,253
-------- --------
Net cash used for investing activities (83,407) (345,786)
-------- --------
Cash Provided by (Used for) Financing Activities:
Cash dividends paid (44,166) (40,510)
Issuance of common stock 2,603 4,874
Net proceeds (repayments) of short-term debt (144,687) 56,711
Proceeds from long-term debt 1,800 126,572
Repayments of long-term debt (4,163) (12,650)
-------- --------
Net cash provided by (used for) financing
activities (188,613) 134,997
-------- --------
Effect of Exchange Rate Changes on Cash and 2,228 (2,431)
Equivalents -------- --------
Cash and Equivalents:
Increase during the period 22,599 (8,723)
Beginning of the period 35,395 31,193
-------- --------
End of the period $ 57,994 $ 22,470
======== ========
Cash Paid During the Period for Interest $ 20,413 $ 24,208
======== ========
Cash Paid During the Period for Income Taxes $126,588 $102,605
======== ========
Liabilities Assumed from Acquisitions $ 3,696 $ 93,112
======== ========
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
COMMENTS ON FINANCIAL STATEMENTS
(UNAUDITED)
(1) OTHER INCOME (EXPENSE), consists of the following:
(In Thousands)
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
Interest income $ 1,385 $ 2,037 $ 3,352 $ 6,429
Income from unconsolidated
affiliates 452 284 1,403 1,118
Net reserves for disposition
and relocation of certain
facilities, restructuring costs,
revaluation of non-operating
assets to realizable value, and
nonrecurring costs unrelated to
operations (2,532) 555 (16,228) (3,970)
Loss on sale of investment
properties (159) - (557) -
Gain on sale of operations
and affiliates 131 - 4,372 -
Gain (loss) on sale of plant and
equipment (213) (274) 1,657 (1,354)
Other, net (1,107) (975) (2,595) (2,448)
------- ------- ------- -------
$(2,043) $ 1,627 $(8,596) $ (225)
======= ======= ======= =======
(2) INVENTORIES at September 30, 1994 and December 31, 1993 were as
follows:
(In Thousands)
Sept.30, Dec. 31,
1994 1993
Raw Material $118,320 $ 94,105
Work-in-process 65,239 61,314
Finished goods 236,645 248,483
-------- --------
$420,204 $403,902
======== ========
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
COMMENTS ON FINANCIAL STATEMENTS
(UNAUDITED)
(3) LONG-TERM DEBT at September 30, 1994 and December 31, 1993 consisted of
the following:
(In Thousands)
Sept. 30, Dec. 31,
1994 1993
Commercial paper $ - $100,000
7-1/2% notes due December 1, 1998 125,000 125,000
5-7/8% notes due March 1, 2000 125,000 125,000
Other, including capitalized lease obligations 26,960 28,260
--------- --------
276,960 378,260
Current maturities (2,376) (2,619)
--------- --------
$ 274,584 $375,641
========= ========
In the first nine months of 1994, $100,000,000 of the long-term commercial
paper balance was reclassified to short-term debt, due to earlier repayment
than was previously expected. At September 30, 1994, the outstanding
commercial paper balance of approximately $10,000,000 is included in short-
term debt.
In July 1994, the Company canceled $150,000,000 of its $300,000,000 revolving
credit facility, which provides for borrowings under a number of options and
which may be reduced or canceled at any time at the Company's option. There
were no amounts outstanding under this facility as of September 30, 1994.
<PAGE>
Item 2 - Management's Discussion and Analysis
ENGINEERED COMPONENTS SEGMENT
Businesses in this segment manufacture short lead-time plastic and metal
components and assemblies; industrial fluids and adhesives; plastic and metal
fasteners; and fastening tools and equipment. This segment primarily serves
the construction, automotive and general industrial markets.
(Dollars in millions)
Three months ended Nine months ended
September 30 September 30
Operating
Revenues 1994 1993 1994 1993
Domestic $302 $269 $ 897 $ 827
International 154 129 441 412
---- ---- ------ ------
Total $456 $398 $1,338 $1,239
==== ==== ====== ======
Three months ended Sept. 30 Nine months ended Sept. 30
Operating 1994 1993 1994 1993
Income Income Margin % Income Margin % Income Margin % Income Margin %
Domestic $50 16.6 % $41 15.2 % $143 15.9 % $113 13.7 %
Int'l 21 13.6 % 10 7.8 % 52 11.8 % 35 8.5 %
--- --- ---- ----
Total $71 15.6 % $51 12.8 % $195 14.6 % $148 11.9 %
=== === ==== ====
For both the three-month and nine-month periods ended September 30, 1994,
continued volume growth in the construction businesses and increased penetra-
tion in a strong automotive market led to increased domestic revenues in 1994
compared with last year. Domestic operating income and margins were higher for
both the third quarter and year-to-date 1994 as a result of this volume growth.
Internationally, revenues increased in the third quarter of 1994 compared with
last year due to increased penetration in the European automotive market and
volume gains in the European construction market. Year-to-date 1994 revenues
increased versus 1993 primarily due to increased penetration in an advancing
European automotive market. Operating income and margins grew for both the
three-month and nine-month periods of 1994 due to volume gains and cost reduc-
tions in the construction businesses as well as improved productivity and vol-
ume gains in the European automotive businesses.
<PAGE>
INDUSTRIAL SYSTEMS AND CONSUMABLES SEGMENT
Businesses in this segment manufacture longer lead-time systems and related
consumables for consumer and industrial packaging, finishing, furniture,
inspection and quality assurance applications. The largest markets served by
the segment are general industrial, food and beverage, construction and indus-
trial capital goods.
(Dollars in millions)
Three months ended Nine months ended
September 30 September 30
Operating
Revenues 1994 1993 1994 1993
Domestic $256 $236 $ 745 $ 690
International 159 146 440 430
---- ---- ------ ------
Total $415 $382 $1,185 $1,120
==== ==== ====== ======
Three months ended Sept. 30 Nine months ended Sept. 30
Operating 1994 1993 1994 1993
Income Income Margin % Income Margin % Income Margin % Income Margin %
Domestic $39 15.2 % $32 13.6 % $116 15.6 % $ 93 13.5 %
Int'l 16 10.1 % 11 7.5 % 38 8.6 % 32 7.4 %
--- --- ---- ----
Total $55 13.3 % $43 11.3 % $154 13.0 % $125 11.2 %
=== === ==== ====
Domestically, revenues increased in the 1994 third quarter versus last year due
to increased volume in the industrial packaging group and the finishing systems
businesses. The specialty engineered products businesses slightly moderated
revenue growth as a result of delayed shipment of some long lead-time quality
measurement machines. For the first nine months of 1994, revenues were up in
the industrial and consumer packaging groups as well as the finishing systems
businesses, supported by a healthy domestic economy. Operating income and
margins increased in the three months ending September 30, 1994, compared with
the same period last year due to volume gains and new product introductions in
the industrial packaging group and continued margin improvement in the
finishing systems businesses. The industrial and consumer packaging groups
along with the finishing systems businesses contributed to the operating income
and margin improvement for the first nine months of 1994.
Internationally, revenues increased in the three months ended September 30,
1994, versus last year as a result of volume growth in the industrial packaging
group, market share gains in the finishing systems businesses and a seasonally
healthier European beverage and food market for the consumer packaging group.
Year-to-date 1994 international revenues increased versus 1993 primarily due to
higher revenues in the industrial packaging group. In the 1994 third quarter,
<PAGE>
operating income and margins improved largely in the finishing systems
businesses as well as the Japanese industrial packaging businesses. Year-to-
date, the increase in operating income and margins in 1994 was primarily in
finishing systems businesses. In the European industrial packaging businesses,
profitability was down for the first nine months of 1994 compared with last
year as a result of price pressure which slightly moderated overall operating
income and margin growth.
OPERATING EXPENSES
Operating costs as a percentage of revenues decreased to 66.7% in the first
nine months of 1994 versus 67.6% in the same period of last year. Selling,
administrative, and research and development expenses were 18.8% of revenues in
the first nine months of 1994 versus 20.2% in the first nine months of 1993.
These ratios were lower because of cost reductions as a result of a Company-
wide objective to reduce costs.
INTEREST EXPENSE
Interest expense declined to $21.1 million in the first nine months of 1994
from $27.3 million in the first nine months 1993, primarily due to a reduction
in commercial paper borrowings and foreign borrowings.
OTHER INCOME (EXPENSE)
Other income (expense) increased to net other expense of $8.6 million in the
first nine months of 1994 from $.2 million in the first nine months of 1993.
Net other expense was $2.0 million in the third quarter of 1994 compared to net
other income of $1.6 million in the third quarter of 1993. The year-to-date
and third quarter increases in expense are mainly due to nonrecurring costs
unrelated to operations and lower interest income, partially offset by gains on
the sale of operations and affiliates.
NET INCOME
Net income of $71.4 million ($0.63 per share) in the third quarter of 1994 was
40.1% higher than the 1993 third quarter net income of $50.9 million ($0.45 per
share). Net income of $193.0 million ($1.70 per share) for the first nine
months of 1994 exceeded 1993 first nine months net income of $147.8 million
($1.31 per share). For both the third quarter and first nine months of 1994,
foreign currency had no material impact on earnings versus 1993.
<PAGE>
FINANCIAL POSITION
Net working capital at September 30, 1994 and December 31, 1993 is summarized
as follows:
(In Thousands)
Sept. 30, Dec. 31, Increase/
1994 1993 (Decrease)
Current Assets:
Cash and equivalents $ 57,994 $ 35,395 $ 22,599
Trade receivables 627,925 544,226 83,699
Inventories 420,204 403,902 16,302
Other 113,425 110,125 3,300
---------- ---------- ----------
$1,219,548 $1,093,648 $ 125,900
---------- ---------- ----------
Current Liabilities:
Short-term debt $ 65,124 $ 107,073 $ (41,949)
Accounts payable and
accrued expenses 470,249 383,137 87,112
Other 56,135 55,932 203
---------- ---------- ----------
$ 591,508 $ 546,142 $ 45,366
---------- ---------- ----------
Net Working Capital $ 628,040 $ 547,506 $ 80,534
========== ========== ==========
Current Ratio 2.06 2.00
========== ==========
Trade receivables increased primarily due to seasonally stronger domestic
revenues in the third quarter of 1994 versus the fourth quarter of 1993.
Accounts payable and accrued expenses increased at September 30, 1994, versus
December 31, 1993, due mainly to seasonal growth and an increase in accrued
retiree health care.
In the first nine months of 1994, $100,000,000 of the long-term commercial
paper balance was reclassified to short-term debt, due to earlier repayment
than was previously expected. At September 30, 1994, the outstanding commer-
cial paper balance of approximately $10,000,000 is included in short-term debt.
In July 1994, the Company canceled $150,000,000 of its $300,000,000 revolving
credit facility, which provides for borrowings under a number of options and
which may be reduced or canceled at any time at the Company's option. There
were no amounts outstanding under this facility as of September 30, 1994.
<PAGE>
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.
<PAGE>
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: November 3, 1994 By: /s/ Michael W. Gregg
Michael W. Gregg, Senior Vice President
and Controller (Principal Accounting
Officer)
Dated: November 3, 1994 By: /s/ Stewart S. Hudnut
Stewart S. Hudnut, Senior Vice President
and Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY 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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<CASH> 57,994
<SECURITIES> 0
<RECEIVABLES> 627,925
<ALLOWANCES> 0
<INVENTORY> 420,204
<CURRENT-ASSETS> 1,219,548
<PP&E> 1,322,910
<DEPRECIATION> 729,596
<TOTAL-ASSETS> 2,461,090
<CURRENT-LIABILITIES> 591,508
<BONDS> 274,584
<COMMON> 172,785
0
0
<OTHER-SE> 1,265,782
<TOTAL-LIABILITY-AND-EQUITY> 2,461,090
<SALES> 2,523,392
<TOTAL-REVENUES> 2,523,392
<CGS> 1,684,091
<TOTAL-COSTS> 1,684,091
<OTHER-EXPENSES> 16,515
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,103
<INCOME-PRETAX> 313,841
<INCOME-TAX> 120,800
<INCOME-CONTINUING> 193,041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 193,041
<EPS-PRIMARY> 1.70
<EPS-DILUTED> 1.70
</TABLE>
