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 June 30, 1995
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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 July 31, 1995: 117,331,764.
<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 Six Months Ended
June 30 June 30
-------------------- ----------------------
1995 1994 1995 1994
---------- -------- ---------- ----------
Operating Revenues $1,090,713 $881,042 $2,019,798 $1,652,481
Operating costs 706,419 583,910 1,322,441 1,104,174
Selling, administrative,
and research and develop-
ment expenses 196,891 160,526 370,766 314,892
Amortization of goodwill
and other intangible
assets 6,023 5,493 12,156 10,986
---------- -------- ---------- ----------
Operating Income 181,380 131,113 314,435 222,429
Interest expense (7,938) (7,114) (14,097) (14,650)
Amortization of retiree
health care (1,742) (1,742) (3,484) (3,484)
Other expense (352) (7,303) (4,475) (6,553)
---------- -------- ---------- ----------
Income Before Income Taxes 171,348 114,954 292,379 197,742
Income taxes 65,100 44,227 111,100 76,100
Net Income $ 106,248 $ 70,727 $ 181,279 $ 121,642
========== ======== ========== ==========
Per share of common stock:
Net Income $ .91 $ .62 $1.55 $1.07
===== ===== ===== =====
Cash dividends:
Paid $ .15 $ .13 $ .30 $ .26
===== ===== ===== =====
Declared $ .15 $ .13 $ .30 $ .26
===== ===== ===== =====
Average number of shares of
common stock outstanding
during the period 117,214 113,254 117,147 113,225
======= ======= ======= =======
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION
(UNAUDITED)
(In Thousands)
ASSETS June 30, 1995 December 31, 1994
------------- -----------------
Current Assets:
Cash and equivalents $ 73,924 $ 76,867
Trade receivables 732,088 612,638
Inventories 519,922 439,486
Deferred income taxes 80,936 72,728
Prepaid expenses and other
current assets 73,821 61,214
---------- ----------
Total current assets 1,480,691 1,262,933
Plant and Equipment: ---------- ----------
Land 69,511 66,577
Buildings 347,082 317,714
Machinery and equipment 994,120 915,198
Equipment leased to others 72,265 69,162
Construction in progress 44,425 32,143
---------- ----------
1,527,403 1,400,794
Accumulated depreciation (850,104) (759,559)
---------- ----------
Net plant and equipment 677,299 641,235
---------- ----------
Investment in Leveraged Leases 50,658 55,413
Goodwill 469,183 394,233
Deferred Income Taxes 83,842 --
Other Assets 285,347 226,684
---------- ----------
$3,047,020 $2,580,498
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 146,643 $ 67,002
Accounts payable 210,644 174,748
Accrued expenses 403,385 317,031
Cash dividends payable 17,588 17,094
Income taxes payable 27,828 52,558
---------- ----------
Total current liabilities 806,088 628,433
---------- ----------
Non-current Liabilities:
Long-term debt 282,775 272,987
Deferred income taxes -- 69,516
Other 208,035 68,041
---------- ----------
Total non-current liabilities 490,810 410,544
---------- ----------
Stockholders' Equity:
Preferred stock -- --
Common stock 227,418 201,166
Income reinvested in the business 1,503,125 1,344,172
Common stock held in treasury (1,866) (1,952)
Equity adjustment from foreign
currency translation 21,445 (1,865)
---------- ----------
Total stockholders' equity 1,750,122 1,541,521
---------- ----------
$3,047,020 $2,580,498
========== ==========
<PAGE>
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF CASH FLOWS
(UNAUDITED)
(In Thousands) Six Months Ended
June 30
------------------
1995 1994
-------- --------
Cash Provided by (Used for) Operating Activities:
Net income $181,279 $121,642
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 78,864 70,223
Change in deferred income taxes (3,269) 546
Gain on sale of plant and equipment,
and equipment under a leveraged lease (4,324) (1,870)
(Income) loss from investment properties (6,423) 398
Gain on sale of operations and affiliates (502) (4,241)
Other non-cash items, net 16,313 5,672
-------- --------
Cash provided by operating activities 261,938 192,370
Changes in assets and liabilities:
(Increase) decrease in--
Trade receivables (51,055) (75,828)
Inventories (36,885) (18,951)
Prepaid expenses and other assets (1,756) 6,071
Increase (decrease) in--
Accounts payable (4,302) 1,546
Accrued expenses 11,714 49,189
Income taxes payable (27,369) (2,564)
Other, net 8,551 5,413
-------- --------
Net cash provided by operating activities 160,836 157,246
-------- --------
Cash Provided by (Used for) Investing Activities:
Acquisition of subsidiaries (excluding cash and
equivalents) and additional interest in affiliates (131,902) (12,514)
Additions to plant and equipment (73,025) (61,326)
Proceeds from sale of plant and equipment,
investment properties, and equipment under a
leveraged lease 18,538 12,458
Proceeds from sale of operations and affiliates 1,736 12,037
Other, net (5,678) 3,524
-------- --------
Net cash used for investing activities (190,331) (45,821)
-------- --------
Cash Provided by (Used for) Financing Activities:
Cash dividends paid (34,211) (29,439)
Issuance of common stock 4,402 2,380
Proceeds (repayments) of short-term debt 57,983 (68,391)
Proceeds from long-term debt 85 1,755
Repayments of long-term debt (1,690) (2,672)
Other, net (5,039) --
-------- --------
Net cash provided by (used for) financing
activities (21,530) (96,367)
-------- --------
Effect of Exchange Rate Changes on Cash and Equivalents 5,020 (5,104)
-------- --------
Cash and Equivalents:
(Decrease)Increase during the period (2,943) 9,954
Beginning of period 76,867 35,395
-------- --------
End of the period $ 73,924 $ 45,349
======== ========
Cash Paid During the Period for Interest $ 13,968 $ 14,643
======== ========
Cash Paid During the Period for Income Taxes $132,927 $ 80,946
======== ========
Liabilities Assumed from Acquisitions $112,634 $ 2,619
======== ========
<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 Six Months Ended
June 30 June 30
------------------ -------------------
1995 1994 1995 1994
-------- -------- -------- --------
Interest income $ 3,265 $ 1,091 $ 5,623 $ 1,967
Income from unconsolidated
affiliates 356 596 468 951
Net reserves for disposition,
relocation and reorganization
of certain facilities,
revaluation of non-operating
assets to realizable value, and
nonrecurring costs unrelated to
operations (8,253) (11,669) (19,714) (13,696)
Income (loss)from investment
properties 3,835 (232) 6,423 (398)
Gain on sale of operations
and affiliates 382 3,794 502 4,241
Gain on sale of equipment
under a leveraged lease -- -- 3,996 --
Gain (loss) on sale of plant and
equipment 1,310 (98) 328 1,870
Other, net (1,247) (785) (2,101) (1,488)
------- -------- -------- --------
$ (352) $ (7,303) $ (4,475) $ (6,553)
======= ======== ======== ========
<PAGE>
(2) INVENTORIES at June 30, 1995 and December 31, 1994 were as follows:
(In Thousands)
June 30, Dec. 31,
1995 1994
-------- --------
Raw Material $136,845 $126,730
Work-in-process 88,862 66,505
Finished goods 294,215 246,251
-------- --------
$519,922 $439,486
======== ========
(3) NONCASH TRANSACTION:
During 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.
<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;
tools and welding equipment. This segment primarily serves the construction,
automotive and general industrial markets.
(Dollars in millions)
Three months ended Six months ended
June 30 June 30
------------------ ----------------
Operating
Revenues 1995 1994 1995 1994
-------- -------- ------ -------
Domestic $364 $313 $ 693 $595
International 197 157 368 286
--- ---- ------ ----
Total $561 $470 $1,061 $881
==== ==== ====== ====
Three months ended June 30 Six months ended June 30
------------------------------ ------------------------------
Operating 1995 1994 1995 1994
Income Income Margin Income Margin Income Margin Income Margin
------------- ------------- ------------- -------------
Domestic $62 17.0 % $53 16.9 % $116 16.7 % $ 93 15.6 %
International 32 16.2 20 12.7 52 14.1 31 10.8
--- --- ---- ----
Total $94 16.8 $73 15.5 $168 15.8 $124 14.1
=== === ==== ====
Domestic revenues for both the three month and six month periods ended June 30,
1995 grew primarily due to new product introductions and increased marketing at
Miller along with volume growth in non-residential construction businesses.
Operating income increased during the same time periods due to the volume
growth at Miller and the construction businesses. Margins were flat for the
three month period due to a slower rate of growth in the automotive and
residential construction businesses. Miller also moderated margin growth for
the second quarter of 1995 compared with last year due to the absorption of raw
material price increases. Margins increased year-to-date in 1995 as a result
of increased volume at Miller and the construction businesses along with new
product introductions at Miller.
International revenues increased for the three month period primarily due to
increase a volume in the European automotive businesses as a result of
increased penetration in the European automotive markets. The European auto-
motive businesses, followed by the European construction businesses, largely
contributed to the year-to date revenue growth. For the three and six month
periods ended June 30, 1995, operating income and margins increased due to cost
reductions in the European construction businesses and volume 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, 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 Six months ended
June 30 June 30
------------------ ----------------
Operating
Revenues 1995 1994 1995 1994
-------- -------- ------ ------
Domestic $324 $261 $593 $490
International 206 150 366 281
---- ---- ---- ----
Total $530 $411 $959 $771
==== ==== ==== ====
Three months ended June 30 Six months ended June 30
------------------------------ ------------------------------
Operating 1995 1994 1995 1994
Income Income Margin Income Margin Income Margin Income Margin
------ ------ ------ ------ ------ ------ ------ ------
Domestic $61 18.8 % $44 16.9 % $106 17.9 % $76 15.5 %
International 26 12.6 14 9.3 40 10.9 22 7.8
--- --- ---- ---
Total $87 16.4 $58 14.1 $146 15.2 $98 12.7
=== === ==== ===
Strong demand for industrial packaging products and increased penetration in
the beverage markets for the consumer packaging businesses led to an increase
in domestic revenues and operating income for the three month period and
year-to- date ended June 30, 1995. Margins increased for the same time periods
due mostly to new product introductions in the industrial packaging businesses.
International revenues and operating income for the quarter ended
June 30, 1995 increased due to the consumer and industrial packaging busines-
ses. For the six month period revenues and operating income increased due to
the previously mentioned groups as well as the finishing systems businesses.
Margins increased for both periods because of new product introductions, and
cost reductions in the industrial packaging businesses. In addition, cost
reductions in the finishing systems businesses led to increased margins for
the both periods.
<PAGE>
OPERATING EXPENSES
Operating costs as a percentage of revenues decreased to 65.5% in the first
half of 1995 versus 66.8% in the first half of 1994. Selling, administrative,
and research and development expenses were 18.4% of revenues in the first half
of 1995 versus 19.1% in the first half 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 $14.1 million in the first half of 1995 from $14.7
million in the first half of 1994, primarily due to a reduction in commercial
paper borrowings outstanding.
OTHER EXPENSE
Other expense decreased to $.4 million in the second quarter of 1995 from $7.3
million in the second quarter of 1994. The decrease in expense is primarily
due to a reduction in nonrecurring costs unrelated to operations, along with an
increase in interest income and income from investment properties, partially
offset by a decrease in the gain on sale of operations and affiliates.
NET INCOME
Net income of $181.3 million ($1.55 per share) in the first half of 1995 was
49.0% higher than the 1994 first half net income of $121.6 million ($1.07 per
share). Foreign currency had no material impact on earnings in the first half
of 1995 versus 1994.
<PAGE>
FINANCIAL POSITION
Net working capital at June 30, 1995 and December 31, 1994 is summarized as
follows:
(Dollars in Thousands)
June 30, Dec. 31, Increase
1995 1994 (Decrease)
---------- ---------- ---------
Current Assets:
Cash and equivalents $ 73,924 $ 76,867 $ (2,943)
Trade receivables 732,088 612,638 119,450
Inventories 519,922 439,486 80,436
Other 154,757 133,942 20,815
---------- ---------- --------
$1,480,691 $1,262,933 $217,758
---------- ---------- --------
Current Liabilities:
Short-term debt $ 146,643 $ 67,002 $ 79,641
Accounts payable and
accrued expenses 614,029 491,779 122,250
Other 45,416 69,652 (24,236)
---------- ---------- --------
$ 806,088 $ 628,433 $177,655
---------- ---------- --------
Net Working Capital $ 674,603 $ 634,500 $ 40,103
========== ========== ========
Current Ratio 1.84 2.01
========== ==========
The increase in trade receivables in the second quarter of 1995 was primarily
due to acquisitions and stronger revenues in the second quarter of 1995 versus
the fourth quarter of 1994. Second quarter acquisitions combined with overall
business growth contributed to the increase in inventories from year-end 1994
to second quarter 1995. The increase in short-term debt was mainly due to
additional borrowing of commercial paper to fund second quarter acquisitions.
Accounts payable and accrued expenses increased at June 30, 1995 versus
year-end 1994 as a result of overall business growth and acquisitions.
<PAGE>
Part II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was held on May 5, 1995.
Approval was granted for the adoption of the Directors' Restricted Stock Plan,
by an in favor vote of 88,529,650 shares.
The following members were elected to the Company's Board of Directors to hold
office for the ensuing year:
Nominees In favor Withheld
----------------- ---------- --------
J. W. Becton, Jr. 96,386,739 164,583
S. S. Cathcart 96,389,872 161,450
S. Crown 96,380,200 171,122
H. R. Crowther 96,304,856 246,466
W. J. Farrell 96,304,590 246,732
R. M. Jones 96,385,768 165,554
G. D. Kennedy 96,387,168 164,154
R. H. Leet 96,388,964 162,358
R. C. McCormack 96,392,170 159,152
J. D. Nichols 96,303,641 247,681
P. B. Rooney 96,389,077 162,245
H. B. Smith 96,392,070 159,252
O. J. Wade 96,391,074 160,248
C. A. H. Waller 96,377,025 174,297
Approval was also granted by an in favor vote of 88,529,650 shares, for the
adoption of the Directors' Restricted Stock Plan.
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
A report on Form 8-K dated July 18, 1995 was filed during the period.
The Form describes various acquisitions by Illinois Tool Works Inc.,
("ITW") and presents unaudited pro forma information for ITW and the
combined pooled companies.
<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: August 14, 1995 By: /s/ Michael W. Gregg
------------------- ---------------------------------------
Michael W. Gregg, Senior Vice President
and Controller, Accounting
(Principal Accounting Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS 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>
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<CASH> 73,924
<SECURITIES> 0
<RECEIVABLES> 732,088
<ALLOWANCES> 0
<INVENTORY> 519,922
<CURRENT-ASSETS> 1,480,691
<PP&E> 1,527,403
<DEPRECIATION> 850,104
<TOTAL-ASSETS> 3,047,020
<CURRENT-LIABILITIES> 806,088
<BONDS> 282,775
<COMMON> 227,418
0
0
<OTHER-SE> 1,522,704
<TOTAL-LIABILITY-AND-EQUITY> 3,047,020
<SALES> 2,019,798
<TOTAL-REVENUES> 2,019,798
<CGS> 1,322,441
<TOTAL-COSTS> 1,322,441
<OTHER-EXPENSES> 12,156
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,097
<INCOME-PRETAX> 292,379
<INCOME-TAX> 111,100
<INCOME-CONTINUING> 181,279
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181,279
<EPS-PRIMARY> 1.55
<EPS-DILUTED> 1.55
</TABLE>
