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, 1995
----------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-4797
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ILLINOIS TOOL WORKS INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-1258310
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 West Lake Avenue, Glenview, IL 60025-5811
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (708) 724-7500
-----------------
Former address:
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(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, 1995: 114,154,541.
-1-
<PAGE>
Part I - Financial Information
------------------------------
Item 1
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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.
-2-
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
-----------------------------------------
STATEMENT OF INCOME
-------------------
(UNAUDITED)
-----------
(In Thousands Except for
Per Share Amounts)
Three Months Ended
March 31
------------------
1995 1994
-------- --------
Operating Revenues $929,085 $771,439
Operating costs 616,022 520,264
Selling, administrative,
and research and develop-
ment expenses 173,875 154,366
Amortization of goodwill
and other intangible
assets 6,133 5,493
-------- --------
Operating Income 133,055 91,316
Interest expense (6,159) (7,536)
Amortization of retiree
health care (1,742) (1,742)
Other income (expense) (4,123) 750
-------- --------
Income Before Income Taxes 121,031 82,788
Income taxes 46,000 31,873
-------- --------
Net Income $ 75,031 $ 50,915
======== ========
Per share of common stock:
Net Income $ .66 $ .45
===== =====
Cash dividends:
Paid $ .15 $ .13
===== =====
Declared $ .15 $ .13
===== =====
Average number of shares of
common stock outstanding
during the period 114,032 113,200
======= =======
- -3-
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
-----------------------------------------
STATEMENT OF FINANCIAL POSITION
-------------------------------
(UNAUDITED)
---------
(In Thousands)
ASSETS March 31, 1995 December 31, 1994
- ------ -------------- -----------------
Current Assets:
Cash and equivalents $ 118,712 $ 76,867
Trade receivables 644,938 612,638
Inventories 465,961 439,486
Deferred income taxes 76,541 72,728
Prepaid expenses and other
current assets 63,155 61,214
---------- ----------
Total current assets 1,369,307 1,262,933
---------- ----------
Plant and Equipment:
Land 67,029 66,577
Buildings 318,994 317,714
Machinery and equipment 934,997 915,198
Equipment leased to others 69,175 69,162
Construction in progress 41,846 32,143
---------- ----------
1,432,041 1,400,794
Accumulated depreciation (787,959) (759,559)
---------- ----------
Net plant and equipment 644,082 641,235
---------- ----------
Investment in Leveraged Leases 54,012 55,413
Goodwill 380,143 394,233
Deferred Income Taxes 38,292 --
Other Assets 267,379 226,684
---------- ----------
$2,753,215 $2,580,498
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Short-term debt $ 69,023 $ 67,002
Accounts payable 174,148 174,748
Accrued expenses 343,927 317,031
Cash dividends payable 17,117 17,094
Income taxes payable 65,718 52,558
---------- ----------
Total current liabilities 669,933 628,433
---------- ----------
Non-current Liabilities:
Long-term debt 272,014 272,987
Deferred income taxes -- 69,516
Other 200,615 68,041
---------- ----------
Total non-current liabilities 472,629 410,544
---------- ----------
Stockholders' Equity:
Preferred stock -- --
Common stock 203,810 201,166
Income reinvested in the business 1,402,086 1,344,172
Common stock held in treasury (1,866) (1,952)
Equity adjustment from foreign
currency translation 6,623 (1,865)
---------- ----------
Total stockholders' equity 1,610,653 1,541,521
---------- ----------
$2,753,215 $2,580,498
========== ==========
- -4-
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
-----------------------------------------
STATEMENT OF CASH FLOWS
-----------------------
(UNAUDITED)
---------
(In Thousands) Three Months Ended
March 31
__________________
1995 1994
-------- --------
Cash Provided by (Used for) Operating Activities:
Net income $ 75,031 $ 50,915
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 38,400 33,743
Change in deferred income taxes (896) (1,145)
Gain on sale of plant and equipment,
and equipment under a leveraged lease (3,014) (1,968)
(Income) loss from investment properties (2,588) 166
Gain on sale of operations and affiliates (120) (447)
Other non-cash items, net 14,628 2,577
-------- --------
Cash provided by operating activities 121,441 83,841
Changes in assets and liabilities:
(Increase) decrease in--
Trade receivables (25,478) (32,867)
Inventories (21,480) (18,021)
Prepaid expenses and other assets (7,246) (1,754)
Increase (decrease) in--
Accounts payable (3,115) (1,369)
Accrued expenses 1,286 15,059
Income taxes payable 13,346 12,541
Other, net (124) 4,344
-------- --------
Net cash provided by operating activities 78,630 61,774
-------- --------
Cash Provided by (Used for) Investing Activities:
Acquisition of subsidiaries (excluding cash and
equivalents) and additional interest in affiliates (5,892) (4,716)
Additions to plant and equipment (35,715) (27,835)
Proceeds from sale of plant and equipment,
investment properties, and equipment under a
leveraged lease 11,032 7,518
Proceeds from sale of operations and affiliates 1,344 p1,760
Other, net 6,237 168
-------- --------
Net cash used for investing activities (22,994) (23,105)
-------- --------
Cash Provided by (Used for) Financing Activities:
Cash dividends paid (17,094) (14,716)
Issuance of common stock 2,730 1,828
Repayments of short-term debt (1,239) (20,335)
Proceeds from long-term debt -- 217
Repayments of long-term debt (456) (213)
-------- --------
Net cash used for financing activities (16,059) (33,219)
-------- --------
Effect of Exchange Rate Changes on Cash and Equivalents 2,268 (2,661)
-------- --------
Cash and Equivalents:
Increase during the period 41,845 2,789
Beginning of period 76,867 35,395
-------- --------
End of the period $118,712 $ 38,184
======== ========
Cash Paid During the Period for Interest $ 5,538 $ 7,133
======== ========
Cash Paid During the Period for Income Taxes $ 32,383 $ 23,554
======== ========
Liabilities Assumed from Acquisitions $ 3,200 $ --
======== ========
- -5-
<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
March 31
------------------
1995 1994
-------- -------
Interest income $ 2,358 $ 876
Income from unconsolidated
affiliates 112 355
Net reserves for disposition,
relocation and reorganization of
certain facilities,
revaluation of non-operating
assets to realizable value, and
nonrecurring costs unrelated to
operations (11,461) (2,027)
Income (loss) from investment
properties 2,588 (166)
Gain on sale of operations
and affiliates 120 447
Gain on sale of equipment
under a leveraged lease 3,996 --
Gain (loss) on sale of plant and
equipment (982) 1,968
Other, net (854) (703)
-------- -------
$ (4,123) $ 750
======== =======
- -6-
<PAGE>
(2) INVENTORIES at March 31, 1995 and December 31, 1994 were as
-----------
follows:
(In Thousands)
March 31, Dec. 31,
1995 1994
-------- --------
Raw Material $116,017 $126,730
Work-in-process 75,595 66,505
Finished goods 274,349 246,251
-------- --------
$465,961 $439,486
======== ========
(3) NONCASH TRANSACTION:
-------------------
In the first quarter of 1995, the Company exchanged a minority interest
in a subsidiary for certain investments in debt securities. This
transaction, along with the associated tax effects, has not been
reflected in the Statement of Cash Flows, as it had no cash impact.
-7-
<PAGE>
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 equipment. This segment primarily serves the
construction, automotive and general industrial markets.
(Dollars in millions)
Three months ended
March 31
------------------
Operating
Revenues 1995 1994
- --------- -------- --------
Domestic $329 $283
International 171 128
---- ----
Total $500 $411
==== ====
Three months ended March 31
------------------------------
Operating 1995 1994
Income Income Margin Income Margin
- --------- ------ ------ ------ ------
Domestic $54 16.4 % $40 14.1 %
International 20 11.7 11 8.6
--- ---
Total $74 14.8 $51 12.4
=== ===
Domestic revenues, operating income and margins increased compared with last
year primarily due to the Miller operations, followed by the construction
businesses. Both benefited from a steady U.S. economy and new product
introductions. Automotive businesses also contributed to the improved
financial results, although growth has decelerated slightly due to the slow
down in domestic car builds.
Internationally, revenues increased compared with 1994 revenues largely due to
increased penetration in a growing European automotive market. Construction
businesses also contributed to revenue growth as a result of focused marketing
supported by an improving European construction market. Operating income and
margins increased compared with last year due to increased volume in the
automotive and construction businesses and continued cost cutting efforts.
- -8-
<PAGE>
INDUSTRIAL SYSTEMS AND CONSUMABLES SEGMENT
- ------------------------------------------
Businesses in this segment manufacture longer lead-time systems and related
consumables for consumer and industrial packaging, industrial spray coating
equipment and systems, and quality assurance application equipment and systems.
The largest markets served by this segment are general industrial, food and
beverage, and industrial capital goods.
(Dollars in millions)
Three months ended March 31
-----------------------------
Operating
Revenues 1995 1994
- --------- -------- --------
Domestic $269 $229
160 131
International ---- ----
$429 $360
Total ==== ====
Three months ended March 31
-----------------------------
Operating 1995 1994
Income Income Margin Income Margin
- --------- ------ ------ ------ ------
Domestic $45 16.7 % $32 14.0 %
International 14 8.8 8 6.1
--- ---
Total $59 13.8 $40 11.1
=== ===
Domestic revenues increased over last year primarily due to new product
introductions and strong demand in the industrial packaging and finishing
systems businesses. Consumer packaging businesses also contributed to the
increase in revenues because of improved performance in the beverage and food
markets along with the purchase of the remaining portion of a joint venture.
Operating income and margins increased due to volume gains in the industrial
packaging and finishing systems businesses.
International revenues increased due largely to the industrial packaging
businesses which are benefiting from an improving European economy. Consumer
packaging businesses contributed to the revenue growth for the same reasons
stated above. The increase in European revenues in the finishing systems
businesses were offset by declines in the Japanese and the UK operations.
New product introductions continued to allow finishing systems businesses to
gain market share. Operating income and margins increased due to volume
gains and cost reductions in industrial packaging businesses along with new
products in the finishing systems businesses.
- -9-
<PAGE>
OPERATING EXPENSES
- ------------------
Operating costs as a percentage of revenues decreased to 66.3% in the first
quarter of 1995 versus 67.4% in the first quarter of 1994. Selling,
administrative, and research and development expenses were 18.7% of revenues
in the first quarter of 1995 versus 20.0% in the first quarter of 1994.
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 $6.2 million in the first quarter of 1995 from
$7.5 million in the first quarter of 1994, primarily due to a reduction in
commercial paper borrowings.
OTHER INCOME (EXPENSE)
- ----------------------
Other income (expense) increased to net other expense of $4.1 million in the
first quarter of 1995 from net other income of $.8 million in the first
quarter of 1994. The increase in expense is mainly due to nonrecurring costs
unrelated to operations, partially offset by a gain on the sale of equipment
under a leveraged lease and an increase in interest income.
NET INCOME
- ----------
Net income of $75.0 million ($0.66 per share) in the first quarter of 1995
was 47.4% higher than the 1994 first quarter net income of $50.9 million
($0.45 per share). Foreign currency had no material impact on earnings in
the first quarter of 1995 versus 1994.
- -10-
<PAGE>
FINANCIAL POSITION
- ------------------
Net working capital at March 31, 1995 and December 31, 1994 is summarized as
follows:
(Dollars in Thousands)
March 31, Dec. 31,
1995 1994 Increase
---------- ---------- ----------
Current Assets:
Cash and equivalents $ 118,712 $ 76,867 $ 41,845
Trade receivables 644,938 612,638 32,300
Inventories 465,961 439,486 26,475
Other 139,696 133,942 5,754
---------- ---------- ----------
$1,369,307 $1,262,933 $ 106,374
---------- ---------- ----------
Current Liabilities:
Short-term debt $ 69,023 $ 67,002 $ 2,021
Accounts payable and
accrued expenses 518,075 491,779 26,296
Other 82,835 69,652 13,183
---------- ---------- ----------
$ 669,933 $ 628,433 $ 41,500
---------- ---------- ----------
Net Working Capital $ 699,374 $ 634,500 $ 64,874
========== ========== ==========
Current Ratio 2.04 2.01
========== ==========
The increase in cash and equivalents in the first quarter of 1995 was
primarily due to an increase in cash generated from operations. Trade
receivables increased primarily due to seasonally stronger domestic revenues
in the first quarter of 1995 versus the fourth quarter of 1994.
- -11-
<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.
- -12-
<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: May 12, 1995 By: /s/ Michael W. Gregg
------------------------ ---------------------------------------
Michael W. Gregg, Senior Vice President
and Controller, Accounting
(Principal Accounting Officer)
Dated: May 12, 1995 By: /s/ Stewart S. Hudnut
------------------------ ---------------------------------------
Stewart S. Hudnut, Senior Vice
President, General Counsel and
Secretary
- -13-
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 118,712
<SECURITIES> 0
<RECEIVABLES> 644,938
<ALLOWANCES> 0
<INVENTORY> 465,961
<CURRENT-ASSETS> 1,369,307
<PP&E> 1,432,041
<DEPRECIATION> 787,959
<TOTAL-ASSETS> 2,753,215
<CURRENT-LIABILITIES> 669,933
<BONDS> 272,014
<COMMON> 203,810
0
0
<OTHER-SE> 1,406,843
<TOTAL-LIABILITY-AND-EQUITY> 2,753,215
<SALES> 929,085
<TOTAL-REVENUES> 929,085
<CGS> 616,022
<TOTAL-COSTS> 616,022
<OTHER-EXPENSES> 6,133
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,159
<INCOME-PRETAX> 121,031
<INCOME-TAX> 46,000
<INCOME-CONTINUING> 75,031
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,031
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
