<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
<TABLE>
<S> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
------------ ------------
</TABLE>
Commission file number 1-4797
ILLINOIS TOOL WORKS INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<C> <C>
DELAWARE 36-1258310
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3600 W. LAKE AVENUE, GLENVIEW, ILLINOIS 60025-5811
(Address of Principal Executive (Zip Code)
Offices)
</TABLE>
Registrant's telephone number, including area code: (847) 724-7500
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<C> <C>
Common Stock New York Stock Exchange
Chicago Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
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
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 11, 1997, was approximately $8,000,000,000.
Shares of Common Stock outstanding at March 11, 1997 -- 124,531,549.
---------------
DOCUMENTS INCORPORATED BY REFERENCE
1996 Annual Report to Stockholders...............................Parts I, II, IV
Proxy Statement dated March 25, 1997, for Annual Meeting
of Stockholders to be held on May 9, 1997.............................Part III
================================================================================
<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Illinois Tool Works Inc. (the "Company") was founded in 1912 and
incorporated in 1915. The Company manufactures and markets a variety of products
and systems that provide specific, problem-solving solutions for a diverse
customer base worldwide. The Company has more than 365 operations in 34
countries. The Company's business units are divided into three segments:
Engineered Components, Industrial Systems and Consumables, and Leasing and
Investments. Products in the Company's Engineered Components segment include
short lead-time plastic and metal components, fasteners and assemblies;
industrial fluids and adhesives; fastening tools; and welding products.
Industrial Systems and Consumables' products include longer lead-time systems
and related consumables for consumer and industrial packaging; marking, labeling
and identification systems; industrial spray coating equipment and systems; and
quality assurance equipment and systems. Leasing and Investments' activities
consist of making opportunistic investments that optimally utilize the Company's
cash flow and provide high returns.
In the first quarter of 1993, the Company acquired the Miller Group
Ltd.("Miller"), a manufacturer of arc welding equipment, through an exchange of
ITW voting Common Stock for all of the voting Common Stock of Miller. In early
1996, the Company acquired all of the voting stock of Hobart Brothers Company
("Hobart"), a manufacturer of welding products, in exchange for shares of ITW
voting common stock. As a result, the Miller and Hobart acquisitions have been
accounted for as poolings of interests in conformity with Generally Accepted
Accounting Principles, specifically paragraphs 46 through 48 of Accounting
Principles Board Opinion ("APB") No. 16. The impact of Miller and Hobart on
consolidated operating revenues, net income and net income per share was not
significant. Therefore, the 1992 and 1995 financial statements have not been
restated to reflect the acquisitions of Miller and Hobart, respectively. The
results of operations for Miller and Hobart have been included in the Statement
of Income as of the beginning of 1993 and 1996, respectively.
In late 1996, the Company acquired all of the outstanding common stock of
Azon Limited ("Azon"), an Australian manufacturer of strapping and other
industrial products. The acquisition has been accounted for as a purchase, and
accordingly, the acquired net assets have been recorded at their estimated fair
values at the date of acquisition. The results of operations have been included
in the Statement of Income from the acquisition date, except for the Azon
businesses which are expected to be sold, which have not been consolidated.
Based on the assumption that the Azon acquisition had occurred on January 1,
1996 or January 1, 1995, the Company's pro forma operating revenues, net income
and net income per share would not have been significantly different.
During the five-year period ending December 31, 1996, the Company acquired
and disposed of numerous other operations which did not materially impact
consolidated results.
CURRENT YEAR DEVELOPMENTS
Refer to pages 20 through 23, Management's Discussion and Analysis, in the
Company's 1996 Annual Report to Stockholders.
<PAGE> 3
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The percentage contributions to operating revenues for the last three years
by industry segment are as follows:
<TABLE>
<CAPTION>
INDUSTRIAL
ENGINEERED SYSTEMS AND LEASING AND
COMPONENTS CONSUMABLES INVESTMENTS
---------- ----------- -----------
<S> <C> <C> <C>
1996................................................ 55% 44% 1%
1995................................................ 50% 49% 1%
1994................................................ 53% 47% --
</TABLE>
Segment and geographic data are included on pages 20 through 22 and 38 of
the Company's 1996 Annual Report to Stockholders.
The principal markets served by the Company's two manufacturing segments
are as follows:
<TABLE>
<CAPTION>
% OF OPERATING REVENUES
------------------------
INDUSTRIAL
ENGINEERED SYSTEMS AND
COMPONENTS CONSUMABLES
---------- -----------
<S> <C> <C>
Construction................................................ 30% 7%
Automotive.................................................. 29% 9%
General Industrial.......................................... 18% 27%
Food and Beverage........................................... 1% 21%
Industrial Capital Goods.................................... 4% 11%
Consumer Durables........................................... 7% 4%
Paper Products.............................................. -- 9%
Electronics................................................. 7% 2%
Other....................................................... 4% 10%
--- ---
100% 100%
=== ===
</TABLE>
Operating results of the segments are described on pages 20 through 22 and
38 of the Company's 1996 Annual Report to Stockholders.
BACKLOG
Backlog generally is not considered a significant factor in the Company's
businesses as relatively short delivery periods and rapid inventory turnover are
characteristic of many of its products.
Backlog by manufacturing segment as of December 31, 1996 and 1995 is
summarized as follows:
<TABLE>
<CAPTION>
BACKLOG IN
THOUSANDS OF DOLLARS
-----------------------------------
INDUSTRIAL
ENGINEERED SYSTEMS AND
COMPONENTS CONSUMABLES TOTAL
---------- ----------- --------
<S> <C> <C> <C>
1996.................................................. $272,000 $187,000 $459,000
1995.................................................. $236,000 $213,000 $449,000
</TABLE>
Backlog orders scheduled for shipment beyond calendar year 1997 were not
material in either industry segment as of December 31, 1996.
The following information is equally applicable to all industry segments of
the Company unless otherwise noted:
COMPETITION
The Company's global competitive environment is complex because of the wide
diversity of products the Company manufactures and the markets it serves.
Depending on the product or market, the Company may
2
<PAGE> 4
compete with a few other companies or with many others, some of which may be the
Company's own licensees.
The Company is a leading producer of plastic and metal components,
fasteners and assemblies; industrial fluids and adhesives; tooling for specialty
applications; welding products; packaging systems and related consumables;
industrial spray coating and static control equipment and systems; and quality
assurance equipment and systems.
RAW MATERIALS
The Company uses raw materials of various types, primarily metals and
plastics that are available from numerous commercial sources. The availability
of materials and energy has not resulted in any business interruptions or other
major problems, nor are any such problems anticipated.
RESEARCH AND DEVELOPMENT
The Company's growth has resulted from developing new and improved
products, broadening the application of established products, continuing efforts
to improve and develop new methods, processes and equipment, and from
acquisitions. Many new products are designed to reduce customers' costs by
eliminating steps in their manufacturing processes, reducing the number of parts
in an assembly, or by improving the quality of customers' assembled products.
Typically, the development of such products is accomplished by working closely
with customers on specific applications. Identifiable research and development
costs determined in accordance with generally accepted accounting principles are
set forth on page 27 of the Company's 1996 Annual Report to Stockholders.
The Company owns approximately 1,700 unexpired United States patents
covering articles, methods and machines. Many counterparts of these patents have
also been obtained in various foreign countries. In addition, the Company has
approximately 355 applications for patents pending in the United States Patent
Office, but there is no assurance that any patent will be issued. The Company
maintains an active patent department for the administration of patents and
processing of patent applications.
The Company licenses some of its patents to other companies, from which the
Company collects royalties. The Company believes that many of its patents are
valuable and important. Nevertheless, the Company credits its leadership in the
markets it serves to engineering capability; manufacturing techniques, skills
and efficiency; marketing and sales promotion; and service and delivery of
quality products to its customers.
TRADEMARKS
Many of the Company's products are sold under various trademarks owned or
licensed by the Company. Among the most significant are: ITW, Signode, Apex,
Buildex, Deltar, Devcon, DeVilbiss, Fastex, Hi-Cone, Hobart, Keps, Magnaflux,
Miller, Minigrip, Newtec, Oxo, Paktron, Paslode, Powcon, Ramset, Ransburg, Red
Head, Shakeproof, Teks, Tenax and ZipPak.
ENVIRONMENTAL COMPLIANCE
The Company believes that its plants and equipment are in substantial
compliance with applicable environmental regulations. Additional measures to
maintain compliance are not expected to affect materially the Company's capital
expenditures, competitive position, financial position or results of operations.
Various legislative and administrative regulations concerning environmental
issues have become effective or are under consideration in many parts of the
world relating to manufacturing processes, and the sale or use of certain
products. To date, such developments have not had a substantial adverse impact
on the Company's sales or earnings. The Company has made considerable efforts to
develop and sell environmentally compatible products resulting in new and
expanding marketing opportunities.
3
<PAGE> 5
EMPLOYEES
The Company employed approximately 24,400 persons as of December 31, 1996
and considers its employee relations to be excellent.
INTERNATIONAL
The Company's international operations include subsidiaries, joint ventures
and licensees in 33 countries on six continents. These operations serve such
markets as automotive, food and beverage, construction, general industrial,
industrial capital goods and others on a worldwide basis. The Company's
international subsidiaries contributed approximately 36% and 38% of operating
revenues in 1996 and 1995, respectively.
Refer to pages 20 through 23 in the Company's 1996 Annual Report to
Stockholders for additional information on international activities.
International operations are subject to certain risks inherent in conducting
business in foreign countries, including price controls, exchange controls,
limitations on participation in local enterprises, nationalization,
expropriation and other governmental action, and changes in currency exchange
rates.
EXECUTIVE OFFICERS
Executive Officers of the Company as of March 11, 1997:
<TABLE>
<CAPTION>
NAME OFFICE AGE
---- ------ ---
<S> <C> <C>
Thomas W. Buckman......................... Vice President, Patents and Technology 59
W. James Farrell.......................... Chairman and Chief Executive Officer 54
Russell M. Flaum.......................... Executive Vice President 46
Michael W. Gregg.......................... Senior Vice President and Controller, Accounting 61
Stewart S. Hudnut......................... Senior Vice President, General Counsel and Secretary 57
John Karpan............................... Senior Vice President, Human Resources 56
Jon C. Kinney............................. Senior Vice President and Controller, Operations 54
Dennis J. Martin.......................... Executive Vice President 46
Frank S. Ptak............................. Vice Chairman 53
F. Ronald Seager.......................... Executive Vice President 56
Harold B. Smith........................... Chairman of the Executive Committee 63
David B. Speer............................ Executive Vice President 45
Donald L. VanErden........................ Vice President, Research and Advanced Development 61
Hugh J. Zentmeyer......................... Executive Vice President 50
</TABLE>
Except for Messrs. Kinney, Martin, Speer, and Zentmeyer, each of the
foregoing officers has been employed by the Company in various elected executive
capacities for more than five years. The executive officers of the Company serve
at the pleasure of the Board of Directors. Mr. Kinney joined the Company in 1973
and has served as Vice President and Controller, Operations, and Group
Controller of the Company's automotive, construction, finishing systems and
quality measurement groups. Mr. Martin joined the Company in 1991 and has served
as a general manager in the construction products group and has most recently
served as President and Chief Operating Officer of the welding products group.
Mr. Speer joined the Company in 1978 and has held various sales, marketing and
general management positions within the construction products group, most
recently having served as Group Vice President of the worldwide construction
products group. Mr. Zentmeyer joined the Company as part of Signode Corporation
in 1968 and has most recently served as President of the specialty industrial
packaging businesses.
4
<PAGE> 6
ITEM 2. PROPERTIES
As of December 31, 1996 the Company operated the following plants and
office facilities, excluding regional sales offices and warehouse facilities:
<TABLE>
<CAPTION>
NUMBER FLOOR SPACE
OF ------------------------
PROPERTIES OWNED LEASED TOTAL
---------- ----- ------ -----
(IN MILLIONS OF SQUARE
FEET)
<S> <C> <C> <C> <C>
Domestic --
Engineered Components........................... 90 4.7 1.6 6.3
Industrial Systems and Consumables.............. 94 3.0 1.7 4.7
Leasing and Investments......................... 18 .7 .2 .9
--- ---- --- ----
202 8.4 3.5 11.9
--- ---- --- ----
International --
Engineered Components........................... 67 1.5 .7 2.2
Industrial Systems and Consumables.............. 64 2.7 .9 3.6
--- ---- --- ----
131 4.2 1.6 5.8
--- ---- --- ----
Corporate......................................... 8 1.1 -- 1.1
--- ---- --- ----
341 13.7 5.1 18.8
=== ==== === ====
</TABLE>
The principal international plants are in Australia, Belgium, Canada,
France, Germany, Ireland, Italy, Japan, Malaysia, Spain, Sweden, Switzerland and
the United Kingdom.
The Company's properties are primarily of steel, brick or concrete
construction and are maintained in good operating condition. Productive
capacity, in general, currently exceeds operating levels. Capacity levels are
somewhat flexible based on the number of shifts operated and on the number of
overtime hours worked. The Company adds productive capacity from time to time as
required by increased demand. Additions to capacity can be made within a
reasonable period of time due to the nature of the businesses.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
This information is incorporated by reference to page 39 of the Company's
1996 Annual Report to Stockholders.
ITEM 6. SELECTED FINANCIAL DATA
This information is incorporated by reference to pages 40 and 41 of the
Company's 1996 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This information is incorporated by reference to pages 20 through 23 of the
Company's 1996 Annual Report to Stockholders.
5
<PAGE> 7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and report thereon of Arthur Andersen LLP dated
January 28, 1997, together with other supplementary data, as found on pages 24
through 39 of the Company's 1996 Annual Report to Stockholders, are incorporated
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information regarding the Directors of the Company is incorporated by
reference to the information under the caption "Election of Directors" in the
Company's Proxy Statement for the 1997 Annual Meeting of Stockholders.
Information regarding the Executive Officers of the Company can be found in
Part I of this Annual Report on Form 10-K on page 4.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the information under the
caption "Executive Compensation" in the Company's Proxy Statement for the 1997
Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This information is incorporated by reference to the information under the
caption "Security Ownership" in the Company's Proxy Statement for the 1997
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The financial statements and report thereon of Arthur Andersen LLP dated
January 28, 1997 as found on pages 24 through 39 of the Company's 1996 Annual
Report to Stockholders, are incorporated by reference.
(2) Financial Statement Schedule
The following supplementary financial data should be read in conjunction
with the financial statements and comments thereto as presented in the Company's
1996 Annual Report to Stockholders. Schedules not included with this
supplementary financial data have been omitted because they are not applicable,
immaterial or the required information is included in the financial statements
or the related notes to financial statements.
<TABLE>
<CAPTION>
SCHEDULE PAGE
NO. NO.
-------- ----
<S> <C> <C>
Valuation and Qualifying Accounts........................... II 10
</TABLE>
(3) Exhibits
(i) See the Exhibit Index on page 11 of this Form 10-K.
6
<PAGE> 8
(ii) Pursuant to Regulation S-K, Item 601(b)(4)(iii), the Company has not
filed with Exhibit 4 any debt instruments for which the total amount of
securities authorized thereunder are less than 10% of the total assets of the
Company and its subsidiaries on a consolidated basis as of December 31, 1996,
with the exception of the agreements related to the 7 1/2% and 5 7/8% Notes,
which are filed with Exhibit 4. The Company agrees to furnish a copy of the
agreements related to the debt instruments which have not been filed with
Exhibit 4 to the Securities and Exchange Commission upon request.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the three months ended
December 31, 1996.
7
<PAGE> 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
ON SCHEDULE
To Illinois Tool Works Inc.:
We have audited, in accordance with generally accepted auditing standards,
the financial statements included in Illinois Tool Works Inc.'s 1996 Annual
Report to Stockholders, incorporated by reference in this Form 10-K, and have
issued our report thereon dated January 28, 1997. Our audits were made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in the accompanying index is the responsibility of the Company's
management and is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The schedule has been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 28, 1997
8
<PAGE> 10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 21st day of
March 1997.
ILLINOIS TOOL WORKS INC.
By /s/ W. JAMES FARRELL
------------------------------------
W. James Farrell
Director, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated on this 21st day of March 1997.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ MICHAEL W. GREGG Senior Vice President and Controller,
- -------------------------------------------------- Accounting (Principal Accounting and Financial Officer)
Michael W. Gregg
JULIUS W. BECTON, JR. Director
MICHAEL J. BIRCK Director
MARVIN D. BRAILSFORD Director
SUSAN CROWN Director
H. RICHARD CROWTHER Director
W. JAMES FARRELL Director
L. RICHARD FLURY Director
RICHARD M. JONES Director
GEORGE D. KENNEDY Director
RICHARD H. LEET Director
ROBERT C. MCCORMACK Director
PHILLIP B. ROONEY Director
HAROLD B. SMITH Director
ORMAND J. WADE Director
By /s/ W. JAMES FARRELL
-----------------------------------
(W. James Farrell
as Attorney-in-Fact)
</TABLE>
Original powers of attorney authorizing W. James Farrell to sign this
Annual Report on Form 10-K and amendments thereto on behalf of the above-named
directors of the registrant have been filed with the Securities and Exchange
Commission as part of this Annual Report on Form 10-K (Exhibit 24).
9
<PAGE> 11
SCHEDULE II
ILLINOIS TOOL WORKS INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1995, AND 1996
<TABLE>
<CAPTION>
DEDUCTIONS
-----------------------------------
RECEIVABLES
BALANCE AT PROVISIONS WRITTEN OFF, BALANCE
BEGINNING CHARGED TO NET OF (1) AT END
OF PERIOD INCOME ACQUISITIONS RECOVERIES DISPOSITIONS OTHER OF PERIOD
---------- ---------- ------------ ------------ ------------ ----- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Year Ended December 31,
1994:
Allowances for
uncollectible
accounts............. $18,000 $7,191 $1,234 $ (6,983) $(131) $ 289 $19,600
Year Ended December 31,
1995:
Allowances for
uncollectible
accounts............. 19,600 6,889 2,672 (5,763) (414) 516 23,500
Year Ended December 31,
1996:
Allowances for
uncollectible
accounts............. 23,500 4,451 4,836 (10,319) 111 (179) 22,400
</TABLE>
- ---------------
(1) Primarily represents effect of foreign currency translation.
10
<PAGE> 12
EXHIBIT INDEX
ANNUAL REPORT ON FORM 10-K
1996
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3(a) -- Restated Certificate of Incorporation of Illinois Tool Works
Inc., as amended, filed as Exhibit 4(a) to the Company's
Registration Statement on Form S-8 (Registration No.
33-53517) filed with the Securities and Exchange Commission
on May 6, 1994 and incorporated herein by reference.
3(b) -- By-laws of Illinois Tool Works Inc., as amended, filed as
Exhibit 4.3 to the Company's Registration Statement on Form
S-8 (Registration Statement No. 333-17473) filed with the
Securities and Exchange Commission on December 9, 1996, and
incorporated herein by reference.
4(a) -- Indenture, dated as of November 1, 1986, between Illinois
Tool Works Inc. and The First National Bank of Chicago, as
Trustee, filed as Exhibit 4 to the Company's Registration
Statement on Form S-3 (Registration Statement No. 33-5780)
filed with the Securities and Exchange Commission on May 14,
1986 and incorporated herein by reference.
4(b) -- Resignation of Trustee and Appointment of Successor under
Indenture (Exhibit 4(a)), filed as Exhibit 4(b) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 (Commission File No. 1-4797) and
incorporated herein by reference.
4(c) -- First Supplemental Indenture, dated as of May 1, 1990
between Illinois Tool Works Inc. and Harris Trust and
Savings Bank, as Trustee, filed as Exhibit 4-3 to the
Company's Post-Effective Amendment No. 1 to Registration
Statement on Form S-3 (Registration No. 33-5780) filed with
the Securities and Exchange Commission on May 8, 1990 and
incorporated herein by reference.
4(d) -- Officers' Certificate Pursuant to Sections 2.01 and 2.04 of
the Indenture (Exhibit 4(a) as amended by Exhibit 4(c))
related to the 5 7/8% Notes due March 1, 2000, filed as
Exhibit 4(e) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992 (Commission File No.
1-4797) and incorporated herein by reference.
4(e) -- Form of 7 1/2% Notes due December 1, 1998, filed as Exhibit
4 to the Company's Current Report on Form 8-K dated December
2, 1991 and incorporated herein by reference.
4(f) -- Form of 5 7/8% Notes due March 1, 2000, filed as Exhibit
4(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992 (Commission File No.
1-4797) and incorporated herein by reference.
10(a) -- Illinois Tool Works Inc. 1996 Stock Incentive Plan dated
February 16, 1996, filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (Registration Statement
No. 333-22035) filed with the Securities and Exchange
Commission on February 19, 1997, and incorporated herein by
reference.
10(b) -- Illinois Tool Works Inc. 1982 Executive Contributory
Retirement Income Plan adopted December 13, 1982, filed as
Exhibit 10(c) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990 (Commission File
No. 1-4797) and incorporated herein by reference.
10(c) -- Illinois Tool Works Inc. 1985 Executive Contributory
Retirement Income Plan adopted December 1985, filed as
Exhibit 10(d) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1990 (Commission File
No. 1-4797) and incorporated herein by reference.
10(d) -- Amendment to the Illinois Tool Works Inc. 1985 Executive
Contributory Retirement Income Plan dated May 1, 1996, filed
as Exhibit 10(c) to the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 1996
(Commission File No. 1-4797) and incorporated herein by
reference.
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10(e) -- Illinois Tool Works Inc. Executive Incentive Plan adopted
February 16, 1996, filed as Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1996 (Commission File No. 1-4797) and incorporated
herein by reference.
10(f) -- Supplemental Plan for Employees of Illinois Tool Works Inc.,
effective January 1, 1989, filed as Exhibit 10(d) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989 (Commission File No. 1-4797) and
incorporated herein by reference.
10(g) -- Directors' deferred fee plan, non-officer directors'
restricted stock program, and non-officer directors' phantom
stock plan, descriptions of which are under the caption
"Directors' Compensation" in the Company's Proxy Statement
for the 1997 Annual Meeting of Stockholders.
10(h) -- Illinois Tool Works Inc. Phantom Stock Plan for Non-officer
Directors, filed as Exhibit 10(e) to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended June 30,
1996 (Commission File No. 1-4797) and incorporated herein by
reference.
10(i) -- Underwriting Agreement dated November 20, 1991, related to
the 7 1/2% Notes due December 1, 1998, filed as Exhibit 1 to
the Company's Current Report on Form 8-K dated December 2,
1991 and incorporated herein by reference.
10(j) -- Underwriting Agreement dated February 23, 1993, related to
the 5 7/8% Notes due March 1, 2000, filed as Exhibit 10(j)
to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992 (Commission File No. 1-4797)
and incorporated herein by reference.
10(k) -- Illinois Tool Works Inc. 1993 Executive Contributory
Retirement Income Plan, filed as Exhibit 10(a) to the
Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1993 (Commission File No. 1-4797) and
incorporated herein by reference.
10(l) -- Amendment to the Illinois Tool Works Inc. 1993 Executive
Contributory Retirement Income Plan dated December 5, 1994,
filed as Exhibit 10(n) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994
(Commission File No. 1-4797) and incorporated herein by
reference.
10(m) -- Amendment to the Illinois Tool Works Inc. 1993 Executive
Contributory Retirement Income Plan dated June 24, 1996,
filed as Exhibit 10(d) to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1996
(Commission File No. 1-4797) and incorporated herein by
reference.
13 -- The Company's 1996 Annual Report to Stockholders, pages
20 -- 41.
21 -- Significant Subsidiaries of the Company.
22 -- Information under the captions "Election of Directors,"
"Executive Compensation" and "Security Ownership" in the
Company's Proxy Statement for the 1997 Annual Meeting of
Stockholders.
23 -- Consent of Arthur Andersen LLP.
24 -- Powers of Attorney.
27 -- Financial Data Schedule.
</TABLE>
12
<PAGE> 1
EXHIBIT 10(g)
Directors' Compensation
Compensation for non-employee directors has three components, the first
being paid in cash and the remaining two being tied to the Company's Common
Stock.
Each non-employee director receives a $25,000 annual retainer, together
with a fee of $1,000 for each Board of Directors' meeting and committee meeting
attended. (Committee Chairmen receive an additional $600 for each meeting
chaired.) The Company's deferred fee plan permits directors to defer receipt of
all or any part of their fees until they cease to be directors. Amounts deferred
are credited with interest at current rates.
Since 1992 the directors' compensation plan has linked a portion of
compensation directly with the interests of the stockholders through periodic
awards of restricted stock. In January 1995 each non-officer director received
an award of 900 restricted shares, which vest in one-third increments on the
first three anniversaries of the award and fully vest upon death or retirement.
Under the program, each non-officer director who joined the Board since January
3, 1995 received on the first business day of January following election a grant
of 300 shares for each full year of service remaining until January 1998. Shares
granted to directors pursuant to this program are included in the table under
"Security Ownership."
The Company also has adopted a phantom stock plan under which each
non-officer director is granted 1,000 units of phantom stock upon becoming a
director. (At the time of the adoption of the plan in 1995, certain long-term
directors with short remaining service periods until retirement received a
greater number of units.) Each unit is equal in value to the market value of one
share of the Company's Common Stock. The phantom stock account is credited with
additional units in an amount equivalent to dividends on the Company's Common
Stock and is adjusted for any stock dividends, stock splits, combinations or
similar changes. A director is eligible for a cash distribution from his or her
phantom stock account at retirement or upon approved resignation in the form of
a lump sum or ten annual installments as elected by the director at the time of
grant. In addition, the value of each director's phantom stock account will be
distributed immediately to the director in the event of a corporate change of
control.
Harold B. Smith has a one-year agreement with the Company providing for a
consulting fee of $85,000.
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction
Illinois Tool Works Inc. is a multinational manufacturer of highly engineered
components and industrial systems with three business segments: Engineered
Components, Industrial Systems and Consumables, and Leasing and Investments.
These segments are described below. Overall, the Company believes that the
majority of the increase in operating revenues is due to higher sales volume
rather than increased sales prices.
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 products. This segment primarily serves the
construction, automotive and general industrial markets.
Dollars in millions
<TABLE>
<CAPTION>
Operating
Revenues 1996 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $1,841 $1,356 $1,204
International 903 751 624
------ ------ ------
Total $2,744 $2,107 $1,828
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Operating 1996 1995 1994
Income Income Margin Income Margin Income Margin
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic $294 16.0% $226 16.7% $189 15.7%
International 115 12.7 97 12.9 77 12.3
---- ---- ----
Total $409 14.9 $323 15.3 $266 14.6
==== ==== ====
</TABLE>
Domestic
Acquisitions (primarily Hobart Brothers and Medalist Industries) contributed
approximately 75% to the increase in domestic revenues in 1996 versus 1995.
The automotive and industrial components businesses also contributed to the
revenue and operating income growth as a result of new products supported by
healthy U.S. car and appliance markets. Construction businesses also
contributed to the revenue and operating income growth due to increased market
share in residential and commercial construction markets and increased
penetration in the hardware and home center distribution channels. Lower
margins at Hobart and Medalist more than offset the margin increases in the
automotive and industrial components and construction businesses.
In 1995, successful penetration in the automotive markets with fasteners and
components largely contributed to the increase in domestic revenues compared
with 1994. The welding products businesses also contributed to the revenue
growth due to new product introductions and a stronger U.S. economy. Increased
distribution efficiencies, continued penetration with new products and steady
commercial construction markets throughout the year led to increased revenues
for the construction businesses. Operating income and margins were up due to a
reduction of manufacturing costs and revenue growth in the construction and
automotive businesses.
International
Substantially all of the revenue and operating income increase in 1996 versus
1995 was due to acquisitions, primarily in the European automotive and
appliance industries. Weak European construction markets caused revenues and
operating income to decline in the construction businesses which moderated
the revenue and operating income growth from acquisitions and from the core
automotive businesses. Margins were down due to the decline in revenues for
construction operations, the lower prices and unit volume in the French
automotive markets and the weak European appliance market. Foreign currency
fluctuations in 1996 versus 1995 had a minimal effect on revenue and earnings.
Seventy-six percent of international revenues are from European operations.
Strong performances in the European automotive markets in 1995 versus 1994
resulted in increased international revenues and operating income. Revenue
declines in the construction businesses as a result of soft Australian and
German markets moderated international revenue growth. Operating income and
margins increased as a result of revenue gains in the European automotive
businesses. These gains were partially offset by lower operating income in the
international construction businesses. Foreign currency fluctuations in 1995
versus 1994 increased revenues by $51 million and operating income by $8
million.
Industrial Systems and Consumables Segment
Businesses in this segment manufacture longer lead-time systems and related
consumables for consumer and industrial packaging; marking, labeling and
identification systems; industrial spray coating equipment and systems; and
quality assurance equipment and systems. The largest markets served by this
segment are food and beverage, general industrial, and industrial capital goods.
Dollars in millions
<TABLE>
<CAPTION>
Operating
Revenues 1996 1995 1994
- ----------------------------------------------------------------
<S> <C> <C> <C>
Domestic $1,277 $1,217 $1,025
International 908 828 608
------ ------ ------
Total $2,185 $2,045 $1,633
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
Operating 1996 1995 1994
Income Income Margin Income Margin Income Margin
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Domestic $261 20.4% $222 18.2% $161 15.7%
International 106 11.7 82 9.9 48 7.9
---- ---- ----
Total $367 16.8 $304 14.9 $209 12.8
==== ==== ====
</TABLE>
PAGE 20
<PAGE> 2
Domestic
The finishing systems operations, which benefited from new customers, and the
specialty packaging businesses, which had steady demand from general industrial
markets, were the major contributors to revenue growth in 1996 compared with
1995. Approximately 42% of the increase in revenues was attributed to
acquisitions. Operating income grew at Signode, specialty packaging and
quality measurement operations as a result of shorter lead-times for equipment
and improved manufacturing efficiencies. Margins increased due to cost
reductions and lower raw material costs in most of the operations.
Stronger demand in 1995 for industrial packaging products and increased market
penetration in the beverage markets for the consumer packaging businesses
resulted in an increase in domestic revenues and operating income compared with
1994. Approximately 50% of the increase in domestic revenues was attributed to
1995 acquisitions, primarily in the consumer packaging and finishing systems
groups. New products for finishing systems operations resulted in higher
revenues but lower margins as a result of product mix. The industrial
packaging businesses' margins increased due to process improvements and new
product introductions.
International
In 1996, revenues increased by $126 million compared with 1995 due to
acquisitions, primarily in the Signode and specialty packaging operations. Soft
European construction, steel and general industrial markets resulted in lower
demand for Signode products, which moderated the revenue growth. Despite weak
demand in the European packaging and general industrial markets, revenues
increased in the specialty packaging and finishing systems businesses due to
increased demand and new customers, respectively. Operating income increased
in 1996 primarily due to lower nonrecurring costs of $10 million and
acquisitions. Margins increased in 1996 mainly due to the lower nonrecurring
costs. Foreign currency translation decreased revenues by $23 million and
operating income by $2 million in 1996 versus 1995. Seventy-six percent of
international revenues are from European operations.
In 1995, the international industrial packaging businesses led the revenue and
operating income growth followed by the consumer packaging operations.
Acquisitions accounted for approximately 40% of the revenue growth, mainly in
the industrial packaging businesses. The finishing systems businesses showed
growth as well due to market share gains in the European automotive and general
industrial markets and increased revenue in the Japanese market. Margins
increased due to new product introductions and cost reductions for the
industrial packaging businesses and European finishing systems operations.
Foreign currencies also increased revenues by $65 million and operating income
by $8 million.
LEASING AND INVESTMENTS SEGMENT
The Company has historically had strong cash flows from its manufacturing
operations. Although most of this cash has been reinvested in the
manufacturing businesses, both through investments in capital equipment and
through acquisitions, some of the excess cash has traditionally been used to
make financial investments. These investments primarily include leveraged and
direct financing leases of equipment, mortgage-related investments, investments
in properties and property developments, and affordable housing investments.
In 1996, due to the increased significance of these investments, the Company's
leasing and investments business began reporting as a separate segment.
Accordingly, certain reclassifications of amounts in the 1995 statement of
income have been made.
Dollars in millions
<TABLE>
<CAPTION>
Operating
Revenues 1996 1995
- --------------------------------------------
<S> <C> <C>
Domestic $68 $26
</TABLE>
<TABLE>
<CAPTION>
Operating
Income 1996 1995
- --------------------------------------------
<S> <C> <C>
Domestic $25 $19
</TABLE>
Revenues and operating income increased in 1996 primarily due to the commercial
mortgage transaction entered into at year-end 1995. Operating income in 1995
included a nonrecurring gain on the sale of equipment under leveraged lease of
$4.1 million.
In December 1996, the Company acquired a pool of mortgage-related assets in
exchange for a nonrecourse note payable of $266.3 million preferred stock of a
subsidiary of $20 million and cash of $80 million. In December 1995, the
Company acquired a pool of mortgage-related assets in exchange for a
nonrecourse note payable of $256 million, preferred stock of a subsidiary of
$20 million and cash of $80 million. The mortgage-related assets for both
transactions are located throughout the U.S. and include 32 subperforming,
variable rate, balloon loans and six foreclosed properties at December 31,
1996. In conjunction with these transactions, the Company simultaneously
entered into ten-year swap agreements and other related agreements whereby the
Company will pay a third party the portion of the interest and net operating
cash flow from the mortgage-related assets in excess of $18 million per year
and a portion of the proceeds from the disposition of the mortgage-related
assets and principal repayments, in exchange for the third party making
payments to the Company equal to the contractual principal and interest
payments on the nonrecourse notes payable. In addition, in the event that the
pools of mortgage-related assets do not generate income of $18 million a year,
the Company has a collateral right against the cash flow generated by two
separate pools of mortgage-related assets (owned by third parties in which the
Company have minimal interests) which have a total fair value of approximately
$1.689 billion at December 31, 1996. The Company entered into the swaps and
other related agreements in order to reduce its credit and interest rate risks
relative to the mortgage-related assets.
PAGE 21
<PAGE> 3
The Company expects to recover its net investment in the mortgage-related
assets and net swap receivables of $211.7 million at December 31, 1996 (net of
the related nonrecourse notes payable) through its expected net cash flow of
$18 million per year for the remainder of the ten-year periods and its
estimated share of the proceeds from disposition of the mortgage-related assets
and principal repayments of an additional $239.9 million. The Company believes
that because the swap counterparty is Aaa-rated and that significant collateral
secures the net annual cash flow of $18.0 million, its risk of not recovering
that portion of its net investment has been significantly mitigated. The
Company currently believes that the disposition proceeds will be sufficient to
recover the remainder of its net investment. However, there can be no
assurances that all of the net investment will be recovered.
The net assets attributed to the Leasing and Investments Segment at December
31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
Assets:
Investments -
Mortgage-related assets $ 731,577 $383,815
Leases 83,432 89,441
Properties and affordable housing 50,462 28,270
Other 7,221 3,294
Deferred tax assets 281,307 95,574
Other assets 3,052 4,077
---------- --------
1,157,051 604,471
---------- --------
Liabilities:
Debt -
Nonrecourse notes payable 519,890 256,000
Allocated general corporate debt 248,421 171,995
Deferred investment income 269,595 105,949
Preferred stock of subsidiary 40,000 20,000
Other liabilities 16,464 2,216
--------- --------
1,094,370 556,160
--------- --------
Net assets $ 62,681 $ 48,311
========= ========
</TABLE>
Cost of Revenues
Cost of Revenues as a percentage of revenues was 65.7% in 1996 compared with
65.2% in 1995 and 66.2% in 1994. The increase in 1996 versus 1995 was mainly
due to lower gross margins for acquired companies, while the decrease in 1995
versus 1994 was due to increased sales volume coupled with lower manufacturing
costs.
Selling, Administrative and R&D Expenses
Selling, administrative, and research and development expenses were 17.5% of
revenues in 1996 versus 18.6% in 1995 and 19.3% in 1994. This ratio continues
to decline because of expense reductions as a result of a Company-wide
objective to reduce administrative costs.
Interest Expense
Interest expense decreased to $27.8 million in 1996 versus $30 million in 1995
as a result of lower interest rates related to commercial paper and foreign
borrowings. Interest expense increased slightly in 1995, from $26.9 million in
1994, primarily due to debt assumed from acquisitions. Interest costs of $24.8
million in 1996 and $1.6 million in 1995 attributed to the Leasing and
Investments Segment have been classified in the segment's cost of revenues.
Other Income (Expense)
Other income (expense) was net other expense of $2.4 million in 1996 versus net
other income of $7.7 million in 1995, primarily due to 1996 debt prepayment
costs of $2.7 million related to debt assumed from acquired companies and
foreign currency translation losses of $3.2 million in 1996 versus translation
gains of $2.4 million in 1995. Other income increased in 1995 from $1.9
million in 1994 mainly as a result of higher interest income.
Income Taxes
The effective tax rate was 36.9% in 1996, 37.9% in 1995, and 38.3% in 1994.
See the Income Taxes note for a reconciliation of the U.S. federal statutory
rate to the effective tax rate. The Company has not recorded a valuation
allowance on the net deferred income tax assets of $423.6 million at December
31, 1996 and $198.9 million at December 31, 1995, as it expects to continue to
generate significant taxable income in future years.
Net Income
Net income in 1996 of $486.3 million ($3.93 per share) was 25.5% higher than
the 1995 net income of $387.6 million ($3.29 per share). Net income for 1995
was 39.5% higher than 1994 net income of $277.8 million ($2.45 per share).
Foreign Currency
Foreign currency fluctuations had no material impact on revenues or earnings in
1996 versus 1995. The weakening of the U.S. dollar against foreign currencies
in 1995 (primarily European currencies) resulted in increased operating
revenues of $116 million and increased net income per share of approximately 10
cents per share.
As the Company and its subsidiaries do not have significant assets or
liabilities denominated in currencies other than their functional currencies,
no material transactions to hedge foreign currency exposures occurred in 1996,
1995, or 1994.
PAGE 22
<PAGE> 4
Financial Position
Net working capital at December 31, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
Dollars Increase
in thousands 1996 1995 (Decrease)
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current Assets:
Cash and equivalents $ 137,699 $ 116,600 $ 21,099
Trade receivables 840,092 741,327 98,765
Inventories 526,016 518,964 7,052
Other 197,285 155,599 41,686
---------- ---------- ---------
1,701,092 1,532,490 168,602
---------- ---------- ---------
Current Liabilities:
Short-term debt 390,425 176,188 214,237
Accounts payable and
accrued expenses 760,989 613,199 147,790
Other 67,911 61,545 6,366
---------- ---------- ---------
1,219,325 850,932 368,393
---------- ---------- ---------
Net Working Capital $ 481,767 $ 681,558 $(199,791)
========== ========== =========
Current Ratio 1.40 1.80
==== ====
</TABLE>
The increase in trade receivables at December 31, 1996 was primarily due to
1996 acquisitions.
Short-term debt increased at December 31, 1996, primarily due to borrowings
under an Australian cash advance facility which were used to fund the
acquisition of Azon Limited. Accounts payable and accrued expenses increased
at December 31, 1996 versus year-end 1995 mainly due to 1996 acquisitions.
Long-term debt at December 31, 1996 consisted of $125 million of 7.5%
notes,$125 million of 5.875% notes, a $254 million nonrecourse 6.28% note, a
$266 million 7.00% nonrecourse note and $80 million of capitalized lease
obligations and other debt. Long-term debt increased $203 million from December
31, 1995, principally as a result of the issuance of the 7.00% note. Excluding
the effect of the Leasing and Investments Segment, the percentage of total debt
to total capitalization decreased to 15.9% at December 31, 1996 from 16.2% at
December 31, 1995.
Stockholders' equity was $2.396 billion at December 31, 1996 compared with
$1.924 billion at December 31, 1995. Affecting equity were earnings of $486
million, dividends declared of $89 million, the effect of pooling of interests
acquisitions of $60 million and favorable currency translation adjustments of
$7 million.
The Statement of Cash Flows for the years ended December 31, 1996 and 1995 is
summarized below:
<TABLE>
<CAPTION>
Dollars in thousands 1996 1995
- ------------------------------------------------------
<S> <C> <C>
Net income $486,315 $ 387,608
Depreciation and
amortization 178,233 151,931
Acquisitions (343,595) (212,426)
Additions to plant and
equipment (168,657) (150,176)
Cash dividends paid (85,481) (71,783)
Net proceeds (repayments)
of debt (14,833) 136,087
Purchase of investments (104,159) (126,300)
Other, net 73,276 (75,208)
-------- ---------
Net increase in cash and
equivalents $21,099 $ 39,733
======== =========
</TABLE>
Net cash provided by operating activities of $629 million in 1996 was primarily
used for acquisitions, for additions to plant and equipment, for cash
dividends, to repay long-term debt assumed from acquisitions and to make
investments. Net cash generated by operations in 1995 of $435 million was used
mainly for repayment of commercial paper borrowings, for additions to plant and
equipment and for cash dividends. Commercial paper borrowings in 1995 were
primarily used to make investments and acquisitions.
Dividends paid per share increased 13% to $.70 per share in 1996 from $.62 per
share in 1995. The Company expects to continue to meet its dividend payout
objective of 25-30% of the average of the last three years' net income.
Management continues to believe that internally generated funds will be
adequate to service existing debt and maintain appropriate debt to total
capitalization and earnings to fixed charge ratios. Internally generated funds
are also expected to be adequate to finance internal growth, small-to-medium
sized acquisitions and additional investments. The Company has additional debt
capacity to fund larger acquisitions.
The Company had no material commitments for capital expenditures at December
31, 1996 or 1995.
On February 14, 1997, the Board of Directors approved a two-for-one split of
the Company's common stock, subject to approval at the Annual Meeting of
Stockholders of an increase in the number of authorized common shares to
350,000,000 and a change to a common stock par value of $.01 per share. On May
27, 1997, an additional share for each common share held by stockholders of
record on May 20, 1997, will be distributed.
PAGE 23
<PAGE> 5
FINANCIAL STATEMENTS
Statement of Income
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the Years Ended December 31
--------------------------------------
In thousands except for per share amounts 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues $4,996,681 $4,178,080 $3,461,315
Cost of revenues 3,281,530 2,723,988 2,290,117
Selling, administrative, and research
and development expenses 875,386 776,112 666,576
Amortization of goodwill and other
intangible assets 31,873 25,031 22,344
Amortization of retiree health care 7,306 6,968 6,968
---------- ---------- ----------
Operating Income 800,586 645,981 475,310
Interest expense (27,834) (29,991) (26,943)
Other income (expense) (2,437) 7,718 1,916
---------- ---------- ---------
Income Before Income Taxes 770,315 623,708 450,283
Income taxes 284,000 236,100 172,500
---------- ---------- ---------
Net Income $ 486,315 $ 387,608 $ 277,783
========== ========== =========
Net Income Per Share of Common Stock $3.93 $3.29 $2.45
===== ===== =====
- ------------------------------------------------------------------------------
</TABLE>
Statement of Income Reinvested in the Business
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the Years Ended December 31
--------------------------------------
In thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, Beginning of Year $1,673,320 $1,344,172 $1,129,435
Net income 486,315 387,608 277,783
Cash dividends declared (88,920) (74,789) (63,546)
Effect of pooling of interests
acquisitions 34,429 16,329 500
---------- ---------- ----------
Balance, End of Year $2,105,144 $1,673,320 $1,344,172
========== ========== ==========
- ------------------------------------------------------------------------------
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
- ------------------------------------------------------------------------------
Report of Independent Public Accountants
To the Board of Directors of
Illinois Tool Works Inc.:
We have audited the accompanying statement of financial position of Illinois
Tool Works Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1996 and 1995, and the related statements of income, income reinvested in the
business and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Illinois Tool Works Inc. and
Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 28, 1997
PAGE 24
<PAGE> 6
Statement of Financial Position
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31
------------------------
In thousands except shares 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and equivalents $ 137,699 $ 116,600
Trade receivables 840,092 741,327
Inventories 526,016 518,964
Deferred income taxes 131,404 80,005
Prepaid expenses and other current assets 65,881 75,594
---------- ----------
Total current assets 1,701,092 1,532,490
---------- ----------
Plant and Equipment:
Land 68,362 60,486
Buildings and improvements 429,686 375,352
Machinery and equipment 1,282,274 1,076,950
Equipment leased to others 109,030 75,175
Construction in progress 51,744 32,621
---------- ----------
1,941,096 1,620,584
Accumulated depreciation (1,132,756) (925,643)
---------- ----------
Net plant and equipment 808,340 694,941
Investments 872,692 504,820
Goodwill 711,228 518,747
Deferred Income Taxes 292,152 118,913
Other Assets 420,658 221,407
---------- ----------
$4,806,162 $3,591,318
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt $ 390,425 $ 176,188
Accounts payable 248,062 221,497
Accrued expenses 512,927 391,702
Cash dividends payable 23,538 20,100
Income taxes payable 44,373 41,445
---------- ----------
Total current liabilities 1,219,325 850,932
Noncurrent Liabilities: ---------- ----------
Long-term debt 818,947 615,557
Other 371,865 200,592
---------- ----------
Total noncurrent liabilities 1,190,812 816,149
---------- ----------
Stockholders' Equity:
Preferred stock -- --
Common stock:
Issued- 124,020,123 shares in 1996 and
118,369,029 shares in 1995 273,864 239,688
Income reinvested in the business 2,105,144 1,673,320
Common stock held in treasury (1,841) (1,866)
Cumulative translation adjustment 18,858 13,095
---------- ----------
Total stockholders' equity 2,396,025 1,924,237
---------- ----------
$4,806,162 $3,591,318
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
PAGE 25
<PAGE> 7
Statement of Cash Flows
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
For the Years Ended December 31
------------------------------------------
In thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Provided by (Used for)
Operating Activities:
Net income $486,315 $387,608 $ 277,783
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 178,233 151,931 132,149
Change in deferred income
taxes (12,627) (23,870) (31,686)
Provision for uncollectible
accounts 4,451 6,889 7,191
(Gain) loss on sale of plant
and equipment 536 2,539 (261)
Income from investments (53,623) (20,981) --
(Gain) loss on sale of
operations and affiliates 2,076 (692) (379)
Other non-cash items, net (165) 11,735 10,117
-------- -------- ---------
Cash provided by operating
activities 605,196 515,159 394,914
Change in assets and liabilities:
(Increase) decrease in-
Trade receivables (11,461) (27,869) (81,180)
Inventories 58,935 (22,830) (8,053)
Prepaid expenses and
other assets (30,428) (11,636) 9,515
Increase (decrease) in-
Accounts payable (22,396) (20,020) 11,718
Accrued expenses 22,326 2,061 45,839
Income taxes payable 8,863 (11,764) 10,424
Other, net (1,608) 11,451 4,280
-------- -------- ---------
Net cash provided by
operating
activities 629,427 434,552 387,457
-------- -------- ---------
Cash Provided by (Used for)
Investing Activities:
Acquisition of businesses
(excluding cash and
equivalents)
and additional interest in
affiliates (343,595) (212,426) (43,365)
Additions to plant and
equipment (168,657) (150,176) (131,055)
Purchase of investments (104,159) (126,300) --
Proceeds from investments 50,049 36,926 --
Proceeds from sale of plant
and equipment 20,836 13,500 17,344
Proceeds from sale of
operations and affiliates 24,660 4,650 15,721
Other, net (521) 11,996 (818)
-------- -------- ---------
Net cash used for
investing
activities (521,387) (421,830) (142,173)
-------- --------- ---------
Cash Provided by (Used for)
Financing Activities:
Cash dividends paid (85,481) (71,783) (61,162)
Issuance of common stock 5,514 7,598 3,216
Net proceeds (repayments) of
short-term debt 74,362 137,134 (149,103)
Proceeds from long-term debt 9,776 1,152 1,885
Repayments of long-term debt (98,971) (2,199) (4,949)
Redemption of preferred stock
of subsidiary -- (40,000) --
Other, net 2,940 (7,919) --
-------- --------- ---------
Net cash provided
by (used for)
financing
activities (91,860) 23,983 (210,113)
-------- -------- ---------
Effect of Exchange Rate Changes
on Cash and Equivalents 4,919 3,028 6,301
-------- -------- ---------
Cash and Equivalents:
Increase during the year 21,099 39,733 41,472
Beginning of year 116,600 76,867 35,395
-------- -------- ---------
End of year $137,699 $116,600 $ 76,867
======== ======== =========
Cash Paid During the Year for
Interest $ 45,394 $ 31,595 $ 27,257
======== ======== =========
Cash Paid During the Year for
Income Taxes $262,685 $264,683 $194,460
======== ======== =========
Liabilities Assumed from
Acquisitions $306,677 $185,705 $ 28,438
======== ======== =========
</TABLE>
See the Investments note for information regarding noncash transactions.
The Notes to Financial Statements are an integral part of this statement.
PAGE 26
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
The Notes to Financial Statements furnish additional information on items in
the financial statements. The notes have been arranged in the same order as the
related items appear in the statements.
Illinois Tool Works Inc. ("the Company") is a multinational manufacturer of
highly engineered components and industrial systems. The Company primarily
serves the construction, automotive and general industrial markets.
Significant accounting principles and policies of the Company are
highlighted in italics. Certain reclassifications of prior years' data have
been made to conform with current year reporting.
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements
and the notes to financial statements. Actual results could differ from those
estimates.
- -------------------------------------------------------------------------------
Consolidation and Translation-The financial statements include the Company and
its majority-owned subsidiaries. All significant intercompany transactions are
eliminated from the financial statements. Substantially all of the Company's
foreign subsidiaries have November 30 fiscal year-ends to facilitate inclusion
of their financial statements in the December 31 financial statements.
Foreign subsidiaries' assets and liabilities are translated to U.S. dollars
at end-of-period exchange rates. Revenues and expenses are translated at
average rates for the period. Translation adjustments are not included in
income but are reported as a separate component of stockholders' equity.
- -------------------------------------------------------------------------------
Acquisitions and Dispositions - In the fourth quarter of 1996, the Company
acquired all of the outstanding common stock of Azon Limited ("Azon"), an
Australian manufacturer of strapping and other industrial products. The
acquisition has been accounted for as a purchase, and accordingly, the acquired
net assets have been recorded at their estimated fair values at the date of
acquisition. The results of operations have been included in the Statement of
Income from the acquisition date, except for the Azon businesses which are
expected to be sold, which have not been consolidated.
Based on the assumption that the Azon acquisition had occurred on January 1,
1996 or January 1, 1995, the Company's pro forma operating revenues, net income
and net income per share would not have been significantly different.
During 1996, 1995 and 1994, the Company acquired and disposed of numerous other
operations which did not materially affect consolidated results.
- -------------------------------------------------------------------------------
Research and Development Expenses are recorded as expense in the year incurred.
These costs were $55,800,000 in 1996, $52,700,000 in 1995, and $48,700,000 in
1994.
- -------------------------------------------------------------------------------
Rental Expense was $41,740,000 in 1996, $36,120,000 in 1995, and
$29,720,000 in 1994.
Future minimum lease payments for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
In thousands
- -----------------------------------------------------------------------------
<S> <C>
1997 $ 29,585
1998 22,170
1999 16,191
2000 12,839
2001 10,069
2002 and future years 22,634
--------
$113,488
========
</TABLE>
- ------------------------------------------------------------------------------
Other Income (Expense) consisted of the following:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Interest income $ 9,732 $ 8,177 $5,586
Gain (loss) on sale of operations and affiliates (2,076) 692 379
Gain (loss) on sale of plant and equipment (536) (2,539) 261
Gain (loss) on foreign currency translation (3,198) 2,375 (3,935)
Debt prepayment costs (2,721) -- --
Other, net (3,638) (987) (375)
------- ------ -------
$(2,437) $ 7,718 $1,916
======= ======= =======
</TABLE>
PAGE 27
<PAGE> 9
Income Taxes - The Company utilizes the liability method of accounting for
income taxes. Deferred income taxes are determined based on the estimated
future tax effects of differences between the financial and tax bases of assets
and liabilities given the provisions of the enacted tax laws.
The components of the provision for income taxes were as shown below:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Federal income taxes:
Current $162,454 $156,166 $120,606
Deferred (9,526) 306 (4,475)
-------- -------- --------
152,928 156,472 116,131
Foreign income taxes: -------- -------- --------
Current 80,422 61,864 40,290
Deferred 16,850 (8,488) (5,314)
-------- -------- --------
97,272 53,376 34,976
-------- -------- --------
State income taxes:
Current 32,165 27,448 24,349
Deferred 1,635 (1,196) (2,956)
-------- -------- --------
33,800 26,252 21,393
-------- -------- --------
$284,000 $236,100 $172,500
======== ======== ========
</TABLE>
Income before income taxes for domestic and foreign operations was as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $522,770 $449,508 $318,368
Foreign 247,545 174,200 131,915
-------- -------- --------
$770,315 $623,708 $450,283
======== ======== ========
</TABLE>
The reconciliation between the U.S. federal statutory tax rate and the
effective tax rate was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of U.S. federal tax
benefit 2.9 2.7 3.1
Amortization of nondeductible goodwill .9 .8 .8
Differences between U.S. federal statutory and
foreign tax rates .6 .6 (.4)
Other, net (2.5) (1.2) (.2)
---- ---- ----
Effective tax rate 36.9% 37.9% 38.3%
==== ==== ====
</TABLE>
Deferred U.S. federal income taxes and foreign withholding taxes have not
been provided on approximately $643,100,000 of undistributed earnings of
international affiliates as of December 31, 1996. In the event these earnings
were distributed to the Company, U.S. federal income taxes payable would be
reduced by foreign tax credits based on income tax laws and circumstances at
the time of distribution. The net tax effect would not be expected to be
material.
PAGE 28
<PAGE> 10
The components of deferred income tax assets and liabilities at December 31,
1996 and 1995 were as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ------------------------------------------------------------------------------
Asset Liability Asset Liability
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Acquisition asset basis differences $ 29,625 $ (14,289) $ 26,900 $ (22,217)
Inventory reserves, capitalized tax
cost and LIFO inventory 24,713 (11,011) 18,627 (9,029)
Investments 324,033 (42,726) 140,918 (45,344)
Plant and equipment 3,940 (46,795) 4,124 (33,493)
Accrued expenses and reserves 57,784 -- 42,812 --
Employee benefit accruals 52,529 -- 38,978 --
Net operating loss carryforwards 51,797 -- 52,878 --
Allowances for uncollectible accounts 5,434 -- 4,460 --
Prepaid pension assets -- (19,849) -- (11,808)
Other 28,870 (16,334) 14,046 (18,743)
-------- --------- -------- --------
Gross deferred income tax
assets (liabilities) 578,725 (151,004) 343,743 (140,634)
Valuation allowances (4,165) -- (4,191) --
-------- --------- -------- ---------
Total deferred income tax
assets (liabilities) $574,560 $(151,004) $339,552 $(140,634)
======== ========= ======== =========
Net deferred income tax assets $423,556 $198,918
======== ========
</TABLE>
No valuation allowance has been recorded on the net deferred income tax assets
at December 31, 1996 and 1995 as the Company expects to continue to generate
significant taxable income in future years.
At December 31, 1996, the Company had net operating loss carryforwards of
approximately $132,700,000 available to offset future taxable income in the
U.S. and certain foreign jurisdictions which expire as follows:
<TABLE>
<CAPTION>
In thousands
- ------------------------------------------------------------------------------
<S> <C>
1997 $ 4,600
1998 700
1999 3,900
2000 5,700
2001 18,100
2002 400
2003 1,700
2004 1,700
2005 900
2006 2,200
2007 11,000
2008 4,300
2009 2,500
2010 4,200
Do not expire 70,800
--------
$132,700
========
- -------------------------------------------------------------------------------
</TABLE>
PAGE 29
<PAGE> 11
Net Income Per Share of Common Stock is computed on the basis of the average
number of shares of common stock outstanding. The dilutive effect of shares of
common stock subject to issuance under stock option plans are excluded from the
computation since the effect is not material. The average number of shares
outstanding was 123,778,000, 117,989,000 and 113,387,000 for 1996, 1995 and
1994, respectively.
- --------------------------------------------------------------------------------
Cash and Equivalents included interest-bearing deposits of
$83,900,000 at December 31, 1996 and $40,021,000 at December 31, 1995.
Interest-bearing deposits have maturities of 90 days or less and are stated at
cost, which approximates market.
- --------------------------------------------------------------------------------
- -Trade Receivables as of December 31, 1996 and 1995 were net of allowances for
uncollectible accounts of $22,400,000 and $23,500,000, respectively.
- --------------------------------------------------------------------------------
Inventories at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
In thousands 1996 1995
- -----------------------------------------------------------------------------
<S> <C> <C>
Raw material $143,979 $140,302
Work-in-process 71,641 84,981
Finished goods 310,396 293,681
-------- --------
$526,016 $518,964
======== ========
</TABLE>
Inventories are stated at the lower of cost or market and include material,
labor and factory overhead. The last-in, first-out (LIFO) method is used to
determine the cost of the inventories of the majority of domestic operations.
Inventories priced at LIFO were 43% and 39% of total inventories as of December
31, 1996 and 1995, respectively. The first-in, first-out (FIFO) method is used
for all other inventories. Under the FIFO method, which approximates current
cost, total inventories would have been approximately $57,100,000 and
$42,300,000 higher than reported at December 31, 1996 and 1995, respectively.
- --------------------------------------------------------------------------------
Plant and Equipment are stated at cost less accumulated depreciation. Renewals
and improvements that increase the useful life of plant and equipment are
capitalized. Maintenance and repairs are charged to expense as incurred.
The range of useful lives used to depreciate plant and equipment is as follows:
Buildings and improvements 10 - 40 years
Machinery and equipment 3 - 12 years
Equipment leased to others Term of lease
Depreciation was $146,360,000 in 1996 compared with $126,900,000 in 1995 and
$109,805,000 in 1994 and was reflected primarily in cost of revenues.
Depreciation of plant and equipment for financial reporting purposes is
computed principally on an accelerated basis.
- --------------------------------------------------------------------------------
PAGE 30
<PAGE> 12
Investments as of December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Properties held for sale $ 18,456 $ 18,715
Property developments 18,425 3,135
Commercial mortgage loans 457,015 280,473
Commercial real estate 86,919 8,219
Net swap receivables 171,330 67,308
Receivable from mortgage servicer 16,313 --
Mortgage-backed securities -- 27,815
U.S. treasury security 4,286 --
Leveraged, direct financing and
sales-type leases of equipment 83,432 89,441
Affordable housing 13,581 6,420
Other 2,935 3,294
-------- --------
$872,692 $504,820
======== ========
</TABLE>
In December 1996, the Company acquired a pool of mortgage-related assets in
exchange for a nonrecourse note payable of $266,265,000, preferred stock of a
subsidiary of $20,000,000 and cash of $80,000,000. In December 1995, the
Company acquired a pool of mortgage-related assets in exchange for a
nonrecourse note payable of $256,000,000, preferred stock of a subsidiary of
$20,000,000 and cash of $80,000,000. The mortgage-related assets for both
transactions are located throughout the U.S. and include 32 subperforming,
variable rate, balloon loans and six foreclosed properties at December 31,
1996. In conjunction with these transactions, the Company simultaneously
entered into ten-year swap agreements and other related agreements whereby the
Company will pay a third party the portion of the interest and net operating
cash flow from the mortgage-related assets in excess of $18,000,000 per year
and a portion of the proceeds from the disposition of the mortgage-related
assets and principal repayments, in exchange for the third party making
payments to the Company equal to the contractual principal and interest
payments on the nonrecourse notes payable. In addition, in the event that the
pools of mortgage-related assets do not generate income of $18,000,000 a year,
the Company has a collateral right against the cash flow generated by two
separate pools of mortgage-related assets (owned by third parties in which the
Company have minimal interests) which have a total fair value of approximately
$1,688,823,000 at December 31, 1996. The Company entered into the swaps and
other related agreements in order to reduce its credit and interest rate risks
relative to the mortgage-related assets.
The Company expects to recover its net investment in the mortgage-related
assets and net swap receivables of $211,687,000 at December 31, 1996 (net of
the related nonrecourse notes payable) through its expected net cash flow of
$18,000,000 per year for the remainder of the ten-year periods and its
estimated share of the proceeds from disposition of the mortgage-related assets
and principal repayments of an additional $239,881,000.
In the first quarter of 1995, the Company exchanged preferred stock of a
subsidiary of $40,000,000 for investments in mortgage-backed securities of
$32,000,000 and corporate debt securities of $8,000,000 in a noncash
transaction. The preferred stock was subsequently redeemed for $40,000,000
cash in the fourth quarter of 1995. The mortgage-backed securities of
$27,815,000 at December 31, 1995 are recorded at fair value which approximates
cost and were sold in the first quarter of 1996.
The Company evaluates whether the commercial mortgage loans have been impaired
by reviewing the discounted estimated future cash flows of the loans versus the
carrying value of the loans. If the carrying value exceeds the discounted cash
flows, an impairment loss is recorded through income. At December 31, 1996,
the impairment loss allowance was $4,803,000. The estimated fair value of the
commercial mortgage loans, based on discounted future cash flows, approximates
carrying value at December 31, 1996 and 1995. The net swap receivables are
recorded at fair value, based on the estimated future cash flows discounted at
the current market interest rate. Any adjustments to the carrying value of the
net swap receivables due to changes in expected future cash flows or interest
rates are recorded through income.
The Company's investment in leveraged and direct financing leases relates to
equipment used primarily in the transportation, mining and paper processing
industries. The components of the investment in leveraged, direct financing
and sales-type leases at December 31, 1996 and 1995 were as shown below:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Lease contracts receivable
(net of principal and interest on nonrecourse financing) $92,874 $102,625
Estimated residual value of leased assets 25,601 25,601
Unearned and deferred income (35,043) (38,785)
------- --------
Investment in leveraged, direct financing and
sales-type leases 83,432 89,441
Deferred income taxes related to leveraged and direct
financing leases (37,980) (38,978)
------- --------
Net investment in leveraged, direct financing and
sales-type leases $45,452 $ 50,463
======= ========
</TABLE>
In 1995, the Company had a gain on the sale of equipment previously covered
under leveraged leases of $4,115,000.
PAGE 31
<PAGE> 13
- ------------------------------------------------------------------------------
Goodwill represents the excess cost over fair value of the net assets of
purchased businesses. Goodwill is being amortized on a straight-line basis over
15 to 40 years. The Company assesses the recoverability of unamortized goodwill
and the other long-lived assets whenever events or changes in circumstances
indicate that such assets may be impaired by reviewing the sufficiency of
future undiscounted cash flows of the related entity to cover the amortization
or depreciation over the remaining useful life of the asset. For any
long-lived assets which are determined to be impaired, a loss would be
recognized for the difference between the carrying value and the fair value for
assets to be held or the net realizable value for assets to be disposed of.
This policy is consistent with Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of.
Amortization expense was $21,727,000 in 1996, $16,335,000 in 1995, and
$14,031,000 in 1994. Accumulated goodwill amortization was $125,532,000 and
$100,242,000, at December 31, 1996 and 1995, respectively.
- ------------------------------------------------------------------------------
Other Assets as of December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Other intangible assets $136,774 $126,418
Accumulated amortization of other intangible assets (48,269) (59,727)
Cash surrender value of life insurance policies 64,234 36,113
Investment in unconsolidated affiliates 34,217 30,849
Investment in businesses to be sold 123,305 --
Prepaid pension assets 54,115 32,994
Other 56,282 54,760
-------- --------
$420,658 $221,407
======== ========
</TABLE>
Other intangible assets represent patents, noncompete agreements and other
assets acquired with purchased businesses and are being amortized primarily on
a straight-line basis over three to 17 years. Amortization expense was
$10,146,000 in 1996, $8,696,000 in 1995, and $8,313,000 in 1994.
The businesses acquired in the Azon acquisition in 1996 which are expected to
be sold have not been consolidated and are recorded at estimated fair value at
December 31, 1996.
- ------------------------------------------------------------------------------
Short-Term Debt as of December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1996 1995
- --------------------------------------------------------------------- --------
<S> <C> <C>
Commercial paper $ 54,990 $ 93,728
Current maturities of long-term debt 30,549 7,949
Bank overdrafts 45,472 64,663
Australian cash advance facility 244,717 --
Other borrowings by foreign subsidiaries 14,697 9,848
-------- --------
$390,425 $176,188
======== ========
</TABLE>
Commercial paper is issued at a discount and generally matures 30 to 90 days
from the date of issue. The weighted average interest rate on commercial paper
outstanding was 6.41% at December 31, 1996 and 5.85% at December 31, 1995.
The Company entered into an Australian cash advance facility in August 1996 to
fund the Azon acquisition. The maximum available borrowings under the facility
are Australian $325,000,000 or the U.S. dollar equivalent. The facility has a
364-day term and has an interest rate of 6.65% at December 31, 1996.
The weighted average interest rate on other foreign borrowings was 4.4% at
December 31, 1996 and 6.3% at December 31, 1995.
- ------------------------------------------------------------------------------
PAGE 32
<PAGE> 14
Retirement Plans - The Company sponsors defined contribution retirement plans
covering the majority of domestic employees. The Company's contributions to
these plans were $12,200,000 in 1996, $9,900,000 in 1995, and $8,400,000 in
1994. The Company provides the majority of its employees with pension benefits.
The Company's principal domestic plan provides benefits based on years of
service and compensation levels during the latter years of employment. Other
domestic and foreign plans provide benefits similar to the principal domestic
plan.
Subject to the limitation on deductibility imposed by Federal income tax
laws, the Company's policy has been to contribute funds to the plans annually
in amounts required to maintain sufficient plan assets to provide for accrued
benefits. A contribution of $11,303,000 was made to the principal plan during
1996. No contributions to the principal plan were made in 1995 or 1994.
Contributions to international and other domestic plans were minimal in 1996,
1995 and 1994. Domestic plan assets consist primarily of listed common stocks
and debt securities.
The components of net pension expense for the years ended December 31, 1996,
1995 and 1994 were as shown below:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 24,373 $24,369 $ 21,622
Interest cost on projected benefit obligation 35,641 33,972 32,800
Actual return on plan assets (71,754) (99,364) (4,655)
Net amortization and deferral 19,233 49,102 (38,278)
-------- ------- --------
Net pension expense $ 7,493 $ 8,079 $ 11,489
======== ======= ========
</TABLE>
The following table sets forth the funded status and amounts recognized in the
Company's Statement of Financial Position at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------------------- -------------------
In thousands Domestic Foreign Domestic Foreign
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested $(323,331) $(86,844) $(269,601) $(72,237)
Non-vested (62,057) (16,118) (54,992) (14,130)
--------- -------- --------- --------
Accumulated benefit obligation (385,388) (102,962) (324,593) (86,367)
Effect of projected wage increases (49,970) (16,751) (38,550) (15,332)
--------- -------- --------- --------
Projected benefit obligation (435,358) (119,713) (363,143) (101,699)
Plan assets at fair value 499,218 122,956 443,910 103,631
--------- -------- --------- --------
Plan assets in excess of
projected benefit obligation 63,860 3,243 80,767 1,932
Unrecognized net gain (52,218) (13,653) (84,421) (6,379)
Unrecognized prior service cost 31,038 -- 35,299 32
Unrecognized transition asset (15,501) (6,554) (20,389) (8,314)
Adjustment to recognize minimum
liability (5,873) (643) (3,448) (492)
--------- -------- --------- --------
Prepaid (accrued) pension asset
(liability) $ 21,306 $(17,607) $ 7,808 $(13,221)
========= ======== ========= ========
</TABLE>
The significant actuarial assumptions at December 31, 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic plans:
Discount rate 7.75% 7.75% 8.50%
Expected long-term rate of return on
plan assets 10.00% 10.00% 10.00%
Rate of increase in future
compensation levels 4.50% 4.00% 4.30%
Foreign plans:
Discount rate 4.00-9.00% 5.50-9.00% 5.50-9.00%
Expected long-term rate of return on
plan assets 5.50-9.00% 5.50-9.00% 5.50-9.00%
</TABLE>
PAGE 33
<PAGE> 15
- --------------------------------------------------------------------------------
Postretirement Health Care Benefits- The Company provides postretirement health
care benefits to the majority of domestic employees and their covered
dependents. Generally, employees who have reached age 55 and rendered 10 years
of service are eligible for these benefits, which are subject to retiree
contributions, deductibles, copayment provisions and other limitations. The
expected cost of the health care is charged to expense during the service lives
of the employees. The expected cost of the health care benefits is charged to
expense during the service lives of the employees. The Company funds the
health care benefits principally on a pay-as-you-go basis.
A one-percentage point increase in the health care cost trend rate would
increase the APBO as of December 31, 1996 by approximately $15,863,000 and the
sum of the 1996 annual service and interest cost by approximately $1,597,000.
The costs of postretirement health care benefits for the years ended December
31, 1996, 1995 and 1994 were as shown below:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 2,253 $ 2,110 $ 2,187
Interest cost on accumulated postretirement
benefit obligation 9,182 10,077 10,715
Net amortization and deferral 6,067 5,581 7,519
------- ------- -------
Net postretirement benefit cost $17,502 $17,768 $20,421
======= ======= =======
</TABLE>
The following table sets forth the amounts recognized in the Company's
Statement of Financial Position at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ (86,467) $ (90,504)
Active employees (35,614) (31,952)
--------- ---------
(122,081) (122,456)
Unrecognized transition obligation 115,346 122,555
Unrecognized net gain (26,461) (27,284)
--------- ---------
Accrued postretirement benefit cost $ (33,196) $ (27,185)
========= =========
</TABLE>
The significant actuarial assumptions at December 31, 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.75% 7.75% 8.50%
Health care cost trend rate:
Current rate 5.00% 7.00% 8.00%
Ultimate rate in 1998 5.00% 5.00% 5.00%
</TABLE>
PAGE 34
<PAGE> 16
- ------------------------------------------------------------------------------
Accrued Expenses as of December 31, 1996 and 1995 consisted of accruals for:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Compensation and employee benefits $237,476 $196,002
Taxes, other than income taxes 23,375 19,202
Customer deposits 29,816 24,966
Other 222,260 151,532
-------- --------
$512,927 $391,702
======== ========
</TABLE>
- ------------------------------------------------------------------------------
Long-Term Debt at December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
7.5% notes due December 1, 1998 125,000 $125,000
5.875% notes due March 1, 2000 125,000 125,000
6.28% nonrecourse note due semiannually through
December 31, 2005 253,625 256,000
7.00% nonrecourse note due semiannually through
November 30, 2006 266,265 --
Commercial paper -- 75,000
Other, including capitalized lease obligations 79,606 42,506
-------- --------
849,496 623,506
Current maturities (30,549) (7,949)
-------- --------
818,947 $615,557
======== ========
</TABLE>
In 1991, the Company issued $125,000,000 of 7.5% notes due December 1, 1998
at 99.892% of face value. The notes may not be redeemed by the Company prior to
maturity. The effective interest rate of the notes is 7.6%.
In 1993, the Company issued $125,000,000 of 5.875% notes due March 1, 2000 at
99.744% of face value. The notes may not be redeemed by the Company prior to
maturity. The effective interest rate of the notes is 5.9%.
The quoted market prices of the 7.5% and 5.875% notes exceeded the carrying
values by approximately $700,000 at December 31, 1996, and $6,000,000 at
December 31, 1995.
The Company issued a $256,000,000 6.28% nonrecourse note at face value in
December 1995 and a $266,265,000 7.0% nonrecourse note at face value in
December 1996. The holders of these notes only have recourse against the
commercial mortgage loans, commercial real estate and the net swap receivable,
which are included in investments.
In 1992, the Company entered into a $300,000,000 revolving credit facility
(RCF) expiring on August 14, 1997. In August 1995, the Company entered into
another RCF for $175,000,000 which expired on August 21, 1996. In May 1996,
the Company amended its existing RCF to allow it to increase the maximum
available borrowings to $350,000,000 and extended the commitment termination
date to May 30, 2001. The amended RCF provides for borrowings under a number
of options and may be reduced or canceled at any time at the Company's option.
There were no amounts outstanding under these facilities as of December 31,
1996 or 1995. The Company maintains unused commitments under the RCF equal to
any commercial paper borrowings.
The amended RCF contains financial covenants establishing a maximum total
debt to total capitalization percentage and a minimum consolidated tangible net
worth. The Company was in compliance with these covenants at December 31,
1996.
The commercial paper balance expected to remain outstanding beyond one year
has been classified as long-term in the accompanying Statement of Financial
Position, reflecting the Company's intent and ability to finance the borrowings
on a long-term basis. The remaining commercial paper balance has been
classified as short-term.
- -------------------------------------------------------------------------------
Other debt bears interest at rates ranging from 1.0% to 13.9%, with
maturities through the year 2015.
Scheduled maturities of long-term debt for the years ended December 31 are
as follows:
<TABLE>
<CAPTION>
In thousands
- -------------------------------------------------------------------------------
<S> <C>
1998 $178,041
1999 23,937
2000 151,292
2001 23,446
2002 and future years 442,231
--------
$818,947
========
</TABLE>
- -------------------------------------------------------------------------------
PAGE 35
<PAGE> 17
Other Noncurrent Liabilities at December 31, 1996 and 1995 consisted of the
following:
<TABLE>
<CAPTION>
In thousands 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C>
Deferred investment income $238,870 $ 92,947
Preferred stock of subsidiary 40,000 20,000
Other 92,995 87,645
-------- --------
$371,865 $200,592
======== ========
</TABLE>
- -------------------------------------------------------------------------------
Preferred Stock, without par value, of which 300,000 shares are authorized, is
issuable in series. The Board of Directors is authorized to fix by resolution
the designation and characteristics of each series of preferred stock. The
Company has no present commitments to issue its preferred stock.
- -------------------------------------------------------------------------------
Common Stock, without par value, and Common Stock Held in Treasury transactions
during 1996, 1995 and 1994 were as shown below.
<TABLE>
<CAPTION>
Common Stock
Common Stock Held in Treasury
-------------------- --------------------
Dollars in thousands Shares Amount Shares Amount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 113,292,888 170,185 (142,768) (1,955)
During 1994-
Stock options exercised 199,679 3,851 22,653 994
Shares surrendered on exercise
of stock options (14,531) (635) (22,653) (994)
Tax benefits related to
stock options exercised -- 1,212 -- --
Shares issued for
acquisitions 476,464 20,726 -- --
Shares issued for
restricted stock grants 146,000 5,827 200 3
----------- -------- -------- -------
Balance, December 31, 1994 114,100,500 201,166 (142,568) (1,952)
During 1995-
Stock options exercised 382,587 7,300 2,113 118
Shares surrendered on exercise
of stock options (4,626) (243) (2,113) (118)
Tax benefits related to stock
options exercised -- 2,528 -- --
Shares issued for
acquisitions 3,876,477 27,501 -- --
Shares issued for stock
incentive and restricted
stock grants 14,091 1,436 6,300 86
----------- -------- -------- -------
Balance, December 31, 1995 118,369,029 239,688 (136,268) (1,866)
----------- -------- -------- -------
During 1996-
Stock options exercised 254,181 5,871 23,462 1,579
Shares surrendered on exercise
of stock options (11,791) (462) (23,462) (1,579)
Tax benefits related to stock
options exercised -- 3,176 -- --
Shares issued for
acquisitions 5,408,704 25,510 -- --
Shares issued for stock
incentive and restricted
stock grants -- 81 1,800 25
----------- -------- -------- -------
Balance, December 31, 1996 124,020,123 $273,864 (134,468) $(1,841)
=========== ======== ======== =======
Authorized, December 31, 1996 150,000,000
===========
</TABLE>
PAGE 36
<PAGE> 18
- ------------------------------------------------------------------------------
Stock Options have been issued to officers and other employees under the
Company's 1996 Stock Incentive Plan, which was adopted in 1996. At December
31, 1996, 9,824,900 shares were reserved for issuance under the plan. Option
prices are 100% of the common stock fair market value on the date of grant.
Effective in 1996, Statement of Financial Accounting Standards (SFAS)No. 123,
Accounting for Stock-Based Compensation, allows the recognition of compensation
cost related to employee stock options. The Company has elected to continue to
apply Accounting Principles Board Opinion No.25, Accounting for Stock Issued to
Employees, which does not require that compensation cost be recognized. The
pro forma net income effect of applying SFAS No.123 is not material.
Stock option transactions during 1996, 1995 and 1994 were as shown below:
<TABLE>
<CAPTION>
Number of Shares Weighted Average
Exercise Price
- ---------------------------------------------------------------------------
<S> <C> <C>
Under Option at December 31, 1993 2,334,526 $27.13
During 1994-
Granted 126,358 41.33
Exercised (222,332) 20.96
Canceled or expired (15,000) 31.08
---------
Under option at December 31, 1994 2,223,552 28.51
During 1995-
Granted 777,165 60.24
Exercised (384,700) 19.12
Canceled or expired (38,938) 34.67
---------
Under option at December 31, 1995 2,577,079 39.41
During 1996-
Granted 210,014 67.37
Exercised (278,010) 26.88
Canceled or expired (9,375) 46.58
---------
Under option at December 31, 1996 2,499,708 43.13
=========
Exercisable at December 31, 1996 1,518,532
Reserved for grant-December 31, 1995 2,027,036
-December 31, 1996 7,325,192
</TABLE>
- ------------------------------------------------------------------------------
Cash Dividends declared were $.72 per share in 1996, $.64 per share in 1995 and
$.56 per share in 1994.
Cash dividends paid were $.70 per share in 1996, $.62 per share in 1995 and
$.54 per share in 1994.
PAGE 37
<PAGE> 19
Industry Segment and Geographic Information -The Company's operations are
divided into three segments: Engineered Components, Industrial Systems and
Consumables, and Leasing and Investments. See Management's Discussion and
Analysis for a description of the segments and information regarding operating
revenues and operating income.
No single customer accounted for more than 10% of consolidated revenues in
1996, 1995 or 1994. Export sales from the United States were less than 10% of
total operating revenues during these years.
Additional segment and geographic information for 1996, 1995 and 1994 was as
follows:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Identifiable Assets:
Domestic -
Engineered Components $ 817,233 $ 637,578 $ 586,084
Industrial Systems and Consumables 806,030 809,387 719,400
Leasing and Investments 1,157,051 604,471 --
---------- ---------- ----------
2,780,314 2,051,436 1,305,484
---------- ---------- ----------
International -
Engineered Components 660,129 600,456 441,616
Industrial Systems and Consumables 1,011,036 676,289 503,744
---------- ---------- ----------
1,671,165 1,276,745 945,360
---------- ---------- ----------
Corporate 354,683 263,137 329,654
---------- ---------- ----------
$4,806,162 $3,591,318 $2,580,498
========== ========== ==========
Plant and Equipment Additions:
Engineered Components $ 106,738 $ 90,294 $ 85,553
Industrial Systems and Consumables 61,919 59,882 45,502
Leasing and Investments -- -- --
---------- ---------- ----------
$ 168,657 $ 150,176 $ 131,055
========== ========== ==========
Depreciation and Amortization:
Engineered Components $ 103,914 $ 82,240 $ 73,638
Industrial Systems and Consumables 73,615 69,189 58,511
Leasing and Investments 704 502 --
---------- ---------- ----------
$ 178,233 $ 151,931 $ 132,149
========== ========== ==========
</TABLE>
Identifiable assets by segment and geographic area are those assets that are
specifically used in that segment and geographic area.
Corporate assets are principally cash and equivalents, investments, and other
general corporate assets.
PAGE 38
<PAGE> 20
QUARTERLY AND COMMON STOCK DATA
Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
In
thousands Three Months Ended
except -------------------------------------------------------------------------------------
per
share March 31 June 30 September 30 December 31
amounts ------------------- --------------------- --------------------- ---------------------
1996 1995 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating
revenues $1,136,922 $938,545 $1,324,800 $1,095,658 $1,238,261 $1,050,123 $1,296,698 $1,093,754
Cost of
revenues 755,539 618,668 871,156 707,104 817,658 690,594 837,177 707,622
Operating
income 161,438 126,681 214,992 175,970 198,731 168,124 225,425 175,205
Net income 98,755 75,031 130,375 106,248 122,842 100,016 134,343 106,313
Net income
per share .81 .66 1.05 .91 .99 .85 1.08 .90
- --------------------------------------------------------------------------------------------------
</TABLE>
Common Stock Price and Dividend Data-
The common stock of Illinois Tool Works Inc. is listed on the New York Stock
Exchange and the Chicago Stock Exchange. Quarterly market price and dividend
data for 1996 and 1995 were as shown below:
<TABLE>
<CAPTION>
Market Price
Per Share Dividends
----------------- Paid
High Low Per Share
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
1996
Fourth quarter $87-1/4 $69-1/2 $.19
Third quarter 74-1/4 60-7/8 .17
Second quarter 69-3/4 61 .17
First quarter 69-1/2 51-7/8 .17
1995
Fourth quarter $64-1/4 $54-1/2 $.17
Third quarter 65-1/2 54-1/4 .15
Second quarter 55-5/8 46 .15
First quarter 48-7/8 39-3/4 .15
</TABLE>
The approximate number of holders of record of common stock as of February 10,
1997 was 4,511. This number does not include beneficial owners of the Company's
securities held in the name of nominees.
PAGE 39
<PAGE> 21
ELEVEN-YEAR FINANCIAL SUMMARY
Dollars and shares in thousands except per share amounts
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Income:
Operating revenues $4,996,681 4,178,080
Cost of revenues $3,281,530 2,723,988
Selling, administrative and research and development
expenses $ 875,386 776,112
Amortization of goodwill and other intangible assets $ 31,873 25,031
Amortization of retiree health care $ 7,306 6,968
Operating income $ 800,586 645,981
Interest expense $ (27,834) (29,991)
Other income (expense) $ (2,437) 7,718
Income before income taxes $ 770,315 623,708
Income taxes $ 284,000 236,100
Net income $ 486,315 387,608
Per share $ 3.93 3.29
Financial Position:
Net working capital $ 481,767 681,558
Net plant and equipment $ 808,340 694,941
Total assets $4,806,162 3,591,318
Long-term debt $ 818,947 615,557
Total debt $1,209,372 791,745
Stockholders' equity $2,396,025 1,924,237
Other Data:
Operating income:
Return on operating revenues % 16.0 15.5
Net income:
Return on operating revenues % 9.7 9.3
Return on average stockholders' equity % 22.5 22.4
Cash dividends paid $ 85,481 71,783
Per share - paid $ .70 .62
- declared $ .72 .64
Book value per share $ 19.34 16.27
Common stock market price at year-end $ 79.88 59.00
Long-term debt to total capitalization % 25.5 24.2
Total debt to total capitalization % 33.5 29.2
Total debt to total capitalization
(excluding Leasing and Investments Segment) % 15.9 16.2
Shares outstanding:
At December 31 123,886 118,233
Average during year 123,778 117,989
Plant and equipment additions $ 168,657 150,176
Depreciation $ 146,360 126,900
Research and development expenses $ 55,800 52,700
Employees at December 31 24,400 21,200
Operating revenues per employee $ 205 197
</TABLE>
Note: Certain reclassifications of prior years' data have been made to
conform with current year reporting.
ELEVEN-YEAR FINANCIAL SUMMARY continued
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Income:
Operating revenues $3,461,315 3,159,181
Cost of revenues $2,290,117 2,122,286
Selling, administrative and research and development
expenses $ 666,576 638,560
Amortization of goodwill and other intangible assets $ 22,344 21,874
Amortization of retiree health care $ 6,968 6,968
Operating income $ 475,310 369,493
Interest expense $ (26,943) (35,025)
Other income (expense) $ 1,916 1,402
Income before income taxes $ 450,283 335,870
Income taxes $ 172,500 129,300
Net income $ 277,783 206,570
Per share $ 2.45 1.83
Financial Position:
Net working capital $ 634,500 547,506
Net plant and equipment $ 641,235 583,765
Total assets $2,580,498 2,336,891
Long-term debt $ 272,987 375,641
Total debt $ 339,989 482,714
Stockholders' equity $1,541,521 1,258,669
Other Data:
Operating income:
Return on operating revenues % 13.7 11.7
Net income:
Return on operating revenues % 8.0 6.5
Return on average stockholders' equity % 19.8 15.9
Cash dividends paid $ 61,162 55,175
Per share - paid $ .54 .49
- declared $ .56 .50
Book value per share $ 13.53 11.12
Common stock market price at year-end $ 43.75 39.00
Long-term debt to total capitalization % 15.0 23.0
Total debt to total capitalization % 18.1 27.7
Total debt to total capitalization
(excluding Leasing and Investments) % 18.1 27.7
Shares outstanding:
At December 31 113,958 113,150
Average during year 113,387 112,979
Plant and equipment additions $ 131,055 119,931
Depreciation $ 109,805 109,852
Research and development expenses $ 48,700 47,200
Employees at December 31 19,500 19,000
Operating revenues per employee $ 178 166
</TABLE>
PAGE 40
<PAGE> 22
ELEVEN-YEAR FINANCIAL SUMMARY continued
<TABLE>
<CAPTION>
1992 1991
<S> <C> <C>
Income:
Operating revenues $2,811,645 2,639,650
Cost of revenues $1,858,752 1,759,288
Selling, administrative and research and development
expenses $ 589,423 551,865
Amortization of goodwill and other intangible assets $ 22,169 23,979
Amortization of retiree health care $ -- --
Operating income $ 341,301 304,518
Interest expense $ (42,852) (44,342)
Other income (expense) $ 11,331 27,583
Income before income taxes $ 309,780 287,759
Income taxes $ 117,700 107,200
Net income $ 192,080 180,559
Per share $ 1.72 1.62
Financial Position:
Net working capital $ 492,118 442,041
Net plant and equipment $ 524,116 525,695
Total assets $2,204,187 2,257,139
Long-term debt $ 251,979 307,082
Total debt $ 335,240 489,189
Stockholders' equity $1,339,673 1,212,051
Other Data:
Operating income:
Return on operating revenues % 12.1 11.5
Net income:
Return on operating revenues % 6.8 6.8
Return on average stockholders' equity % 15.1 15.7
Cash dividends paid $ 50,290 44,108
Per share - paid $ .45 .40
- declared $ .46 .42
Book value per share $ 11.96 10.88
Common stock market price at year-end $ 32.62 31.88
Long-term debt to total capitalization % 15.8 20.2
Total debt to total capitalization % 20.0 28.8
Total debt to total capitalization
(excluding Leasing and Investments) % 20.0 28.8
Shares outstanding:
At December 31 112,014 111,436
Average during year 111,746 111,178
Plant and equipment additions $ 115,313 106,036
Depreciation $ 100,462 91,414
Research and development expenses $ 42,500 40,300
Employees at December 31 17,800 18,700
Operating revenues per employee $ 158 141
</TABLE>
ELEVEN-YEAR FINANCIAL SUMMARY continued
<TABLE>
<CAPTION>
1990 1989
<S> <C> <C>
Income:
Operating revenues $2,544,153 2,172,747
Cost of revenues $1,686,423 1,450,116
Selling, administrative and research and development
expenses $ 512,685 417,520
Amortization of goodwill and other intangible assets $ 19,181 15,829
Amortization of retiree health care $ -- --
Operating income $ 325,864 289,282
Interest expense $ (39,190) (30,995)
Other income (expense) $ 13,209 10,735
Income before income taxes $ 299,883 269,022
Income taxes $ 117,500 105,200
Net income $ 182,383 163,822
Per share $ 1.68 1.53
Financial Position:
Net working capital $ 615,055 440,406
Net plant and equipment $ 483,549 413,578
Total assets $2,150,307 1,687,985
Long-term debt $ 430,632 334,407
Total debt $ 495,952 370,507
Stockholders' equity $1,091,842 871,124
Other Data:
Operating income:
Return on operating revenues % 12.8 13.3
Net income:
Return on operating revenues % 7.2 7.5
Return on average stockholders' equity % 18.6 20.3
Cash dividends paid $ 35,861 28,747
Per share - paid $ .33 .27
- declared $ .35 .28
Book value per share $ 9.96 8.12
Common stock market price at year-end $ 24.13 22.44
Long-term debt to total capitalization % 28.3 27.7
Total debt to total capitalization % 31.2 29.8
Total debt to total capitalization
(excluding Leasing and Investments) % 31.2 29.8
Shares outstanding:
At December 31 109,610 107,332
Average during year 108,872 107,028
Plant and equipment additions $ 101,183 84,263
Depreciation $ 82,913 68,890
Research and development expenses $ 40,300 32,500
Employees at December 31 18,400 15,700
Operating revenues per employee $ 138 138
</TABLE>
ELEVEN-YEAR FINANCIAL SUMMARY continued
<TABLE>
<CAPTION>
1988 1987
<S> <C> <C>
Income:
Operating revenues $1,929,805 1,698,353
Cost of revenues $1,287,297 1,117,990
Selling, administrative and research and development
expenses $ 377,003 344,661
Amortization of goodwill and other intangible assets $ 13,106 16,812
Amortization of retiree health care $ -- --
Operating income $ 252,399 218,890
Interest expense $ (26,109) (33,439)
Other income (expense) $ 6,522 14,333
Income before income taxes $ 232,812 199,784
Income taxes $ 92,800 93,600
Net income $ 140,012 106,184
Per share $ 1.33 1.03
Financial Position:
Net working capital $ 392,283 332,290
Net plant and equipment $ 342,794 318,690
Total assets $1,380,237 1,334,063
Long-term debt $ 255,907 309,515
Total debt $ 257,597 357,249
Stockholders' equity $ 744,727 608,541
Other Data:
Operating income:
Return on operating revenues % 13.1 12.9
Net income:
Return on operating revenues % 7.3 6.3
Return on average stockholders' equity % 20.7 19.6
Cash dividends paid $ 23,027 20,144
Per share - paid $ .22 .20
- declared $ .23 .20
Book value per share $ 7.05 5.88
Common stock market price at year-end $ 17.25 16.50
Long-term debt to total capitalization % 23.3 33.7
Total debt to total capitalization % 25.7 37.0
Total debt to total capitalization
(excluding Leasing Investments) % 25.7 37.0
Shares outstanding:
At December 31 105,588 103,560
Average during year 105,350 103,272
Plant and equipment additions $ 84,107 61,052
Depreciation $ 62,064 57,839
Research and development expenses $ 26,588 24,739
Employees at December 31 14,200 13,600
Operating revenues per employee $ 136 125
</TABLE>
ELEVEN-YEAR FINANCIAL SUMMARY continued
<TABLE>
<CAPTION>
1986
<S> <C>
Income:
Operating revenues $ 961,077
Cost of revenues $ 622,310
Selling, administrative and research and development
expenses $ 239,861
Amortization of goodwill and other intangible assets $ 8,635
Amortization of retiree health care $ --
Operating income $ 90,271
Interest expense $ (14,468)
Other income (expense) $ 67,480
Income before income taxes $ 143,283
Income taxes $ 63,700
Net income $ 79,583
Per share $ .78
Financial Position:
Net working capital $ 293,575
Net plant and equipment $ 317,829
Total assets $1,309,886
Long-term debt $ 468,269
Total debt $ 503,998
Stockholders' equity $ 476,550
Other Data:
Operating income:
Return on operating revenues % 9.4
Net income:
Return on operating revenues % 8.3
Return on average stockholders' equity % 18.1
Cash dividends paid $ 18,295
Per share - paid $ .18
- declared $ .18
Book value per share $ 4.65
Common stock market price at year-end $ 12.97
Long-term debt to total capitalization % 49.6
Total debt to total capitalization % 51.4
Total debt to total capitalization
(excluding Leasing and Investments) % 51.4
Shares outstanding:
At December 31 102,508
Average during year 102,206
Plant and equipment additions $ 44,722
Depreciation $ 37,213
Research and development expenses $ 13,161
Employees at December 31 13,700
Operating revenues per employee $ 70
</TABLE>
PAGE 41
<PAGE> 1
EXHIBIT 21
DECEMBER, 1996
ILLINOIS TOOL WORKS INC.
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
PERCENT
COMPANY RELATIONSHIP OWNERSHIP
- ---------------------------------------------- ------------ ---------
<S> <C> <C>
Azon Limited - Australia (1) Subsidiary 100%
Buell Industries, Inc. - Delaware Subsidiary 100%
Burseryds Bruk AB - Sweden Subsidiary 100%
Coding Products Inc. - Michigan (2) Subsidiary 100%
Cumberland Leasing Co. - Illinois (3) Subsidiary 100%
Elettro GiBi S.p.A. - Italy Subsidiary 100%
Gema Volstatic AG - Switzerland (4) Subsidiary 100%
Gerrard Strapping Systems Ltd. - New Zealand (5) Subsidiary 100%
Gerrard Strapping Systems Pty Ltd. - Australia (5) Subsidiary 100%
Hobart Brothers Company - Ohio Subsidiary 100%
Hobart Brothers of Canada, Inc. - Canada (6) Subsidiary 100%
ITW Austria Vertriebs-Ges.m.b.H. - Austria (7) Subsidiary 100%
ITW Ateco GmbH - Germany (8) Subsidiary 100%
ITW Befestigungssyteme GmbH - Germany (9) Subsidiary 100%
ITW Canada Inc. - Canada (6) Subsidiary 100%
ITW de France S.A. - France (10) Subsidiary 100%
ITW (Deutschland) GmbH - Germany (4) Subsidiary 100%
ITW Espana S.A. - Spain (11) Subsidiary 100%
ITW Fastex Italia S.p.A. - Italy Subsidiary 100%
ITW Gunther - France (10) Subsidiary 100%
ITW Holding S.A. - France (11) Subsidiary 100%
ITW Holdings Proprietary - Australia (12) Subsidiary 100%
ITW Holdings U.K. - England (15) Subsidiary 100%
ITW International Finance S.A.S. - France (13) Subsidiary 100%
ITW International Holdings Inc. - Delaware (3) Subsidiary 100%
ITW Ireland - Ireland (14) Subsidiary 100%
ITW Leasing & Investments Inc. - Delaware Subsidiary 100%
ITW Limited - England (22) Subsidiary 100%
ITW Meritex Sdn Bhd - Malaysia (11) Subsidiary 100%
ITW Mortgage Investments I, Inc. - Delaware (3) Subsidiary 100%
ITW Mortgage Investments II, Inc. - Delaware Subsidiary 100%
ITW Mortgage Investments III, Inc. - Delaware Subsidiary 100%
ITW Oberflachentechnik GmbH - Germany (8) Subsidiary 100%
ITW Overseas Investments Corp. - Delaware (11) Subsidiary 100%
ITW Real Estate L.L.C. - Delaware (16) Subsidiary 100%
ITW Residuals Inc. - Delaware Subsidiary 100%
ITW Tech Co. Inc. - Delaware (3) Subsidiary 100%
Illinois Tool Works FSC Inc - Barbados (3) Subsidiary 100%
IspraControl s.r.l. - Italy (23) Subsidiary 100%
Liljendals Bruk Ab - Finland Subsidiary 100%
Loveshaw Corporation, The - Delaware Subsidiary 100%
Lys Fusion S.p.A. - Italy (23) Subsidiary 100%
Medalist Industries, Inc. - Wisconsin Subsidiary 100%
Miller Electric Mfg. Co. - Wisconsin Subsidiary 100%
Miller Europe, S.p.A. - Italy (18) Subsidiary 100%
Miller Thermal, Inc. - Wisconsin (18) Subsidiary 100%
Mima, Inc. - Florida Subsidiary 100%
Minigrip Inc. - Delaware Subsidiary 100%
N. A. Woodworth Company - Michigan Subsidiary 100%
Orgapack AG - Switzerland (19) Subsidiary 100%
Orgapack Holding AG - Switzerland (20) Subsidiary 100%
Paslode Corporation - Illinois Subsidiary 100%
Pro/Mark Corporation - Connecticut (21) Subsidiary 100%
Ransburg Corporation - Indiana Subsidiary 100%
</TABLE>
<PAGE> 2
ILLINOIS TOOL WORKS INC.
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
DECEMBER, 1996
PAGE 2
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT
COMPANY RELATIONSHIP OWNERSHIP
- ---------------------------------------------- ------------ ---------
<S> <C> <C>
Ransburg Industrial Finishing KK - Japan (11) Subsidiary 100%
Shippers Paper Products Company - Ohio Subsidiary 100%
Signode France - France (10) Subsidiary 100%
Signode Kabushiki Kaisha - Japan (11) Subsidiary 100%
Signode Systems GmbH - Germany (7) Subsidiary 100%
Societe de Prospection et d'Invention Techniques - France (10) Subsidiary 100%
W. A. Deutsher Pty. Ltd. - Australia Subsidiary 100%
</TABLE>
<PAGE> 3
ILLINOIS TOOL WORKS INC.
SIGNIFICANT SUBSIDIARIES OF THE COMPANY
DECEMBER, 1996
PAGE 3
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
( 1) Wholly owned by ITW Holdings Pty.
( 2) 80% owned by Maple Control Company; 20% owned by Illinois Tool Works Inc.
( 3) Wholly owned by ITW Leasing & Investments Inc.
( 4) Wholly owned by Ransburg Corporation
( 5) Wholly owned by Azon Pty. Limited
( 6) Wholly owned by Hobart Brothers Company
( 7) Wholly owned by ITW Signode Holdings GmbH
( 8) Wholly owned by ITW Industrie GmbH
( 9) Wholly owned by ITW (Deutschland) GmbH
(10) Wholly owned by ITW Holding S.A.
(11) Wholly owned by ITW International Holdings Inc.
(12) 99% owned by Illinois Tool Works Inc.; 1% owned by ITW W. A. Deutsher Pty. Ltd.
(13) 99.9% owned by ITW International Holdings Inc.; .1% owned by ITW Holdings S.A.
(14) 99.9% owned by ITW Ireland Holdings Inc.; .1% owned by ITW Cayman
(15) 90% owned by ITW International Holdings Inc.; 10% owned by ITW Leasing
and Investments Inc.
(16) 99% owned by ITW Mortgage Investments I; 1% owned by Illinois Tool Works Inc.
(17) Wholly owned by Elettro GiBi S.p.A.
(18) Wholly owned by Miller Electric Mfg. Co.
(19) Wholly owned by Orgapack Holding AG
(20) Wholly owned by Gema Volstatic AG
(21) Wholly owned by Maple Roll Leaf Company, Inc.
(22) Wholly owned by ITW Holdings U.K.
(23) Wholly owned by Cofiva S.p.A.
</TABLE>
<PAGE> 1
EXHIBIT 22
Election of Directors
Ten directors of the Company are to be elected to hold office until the
next annual meeting or until their successors are duly elected and qualified or
until their earlier resignation or removal. Unless otherwise directed, proxies
will be voted at the meeting for the election of the persons listed below, or in
the event of an unforeseen contingency, for different persons as substitutes.
The Corporate Governance and Nominating Committee and the Board of Directors are
recommending this slate, and note with regret the retirement as directors of
Julius Becton, Richard Jones, George Kennedy and Richard Leet. Each of these
individuals has brought unique skills to his service on the Board, but has now
reached the mandatory retirement age. Following are the name, age, principal
occupation and other information concerning each nominee.
<PAGE> 2
MICHAEL J. BIRCK (58)
Founder, and President and Chief Executive Officer since 1975, of Tellabs,
Inc. Tellabs designs, manufactures, markets and services voice and data
equipment. Mr. Birck is a director of USF&G Corporation and Molex, Inc. He
has been a director of the Company since 1996.
MARVIN D. BRAILSFORD (58)
Vice President of Kaiser-Hill LLC (construction and environmental services)
since August 1996, founder and President of the Brailsford Group from 1995 to
1996, and President of Metters Industries from 1992 to 1995. He retired from
the United States Army in 1992 with the rank of Lieutenant General after 33
years of service. He has been a director of the Company since 1996.
SUSAN CROWN (38)
Vice President, Henry Crown and Company since 1984, a family owned and
operated company with investments in securities, real estate, resort
properties and manufacturing operations. Ms. Crown is a director of Baxter
International Inc. She is also a trustee and executive committee member of
Rush-Presbyterian-St. Luke's Medical Center in Chicago and a trustee of The
Yale Corporation. She has been a director of the Company since 1994.
H. RICHARD CROWTHER (64)
Former Vice Chairman of the Company from 1990 through 1995. Prior to becoming
Vice Chairman, Mr. Crowther was Executive Vice President from 1983 through
1989 and had a total of 36 years of service with the Company before his
retirement. He is a director of Applied Power Inc. and has been a director of
the Company since 1995.
<PAGE> 3
W. JAMES FARRELL (54)
Chairman since May 1996 and Chief Executive Officer of the Company since
September 1995. Mr. Farrell served as President from December 1994 until May
1996 and as Executive Vice President from 1983 to 1994. He has a total of 31
years service with the Company. Mr. Farrell is a director of Hon Industries
Inc., Morton International, Inc. and Premark International, Inc. and has been
a director of the Company since 1995.
L. RICHARD FLURY (49)
Executive Vice President, Amoco Corporation (energy and chemicals) since
January 1996, formerly Senior Vice President for Shared Services from June
1994 through 1995 and Executive Vice President, Amoco Chemical Co., from 1991
to June 1994, with a total of 27 years service with Amoco. Mr. Flury is a
director of the Illinois Coalition, North Central College, the Field Museum
and Amoco Foundation, and has been a director of the Company since 1995.
ROBERT C. MCCORMACK (57)
Partner, Trident Capital L.P.(venture capital) since 1993; Assistant
Secretary of the Navy from 1990 to 1993; Deputy Under Secretary of Defense
from 1987 to 1990; and Managing Director, Morgan Stanley & Co. Incorporated
(investment banking) from 1985 to 1987. Mr. McCormack is a director of DeVry,
Inc. and has been a director of the Company since 1993. He was previously a
director from 1978 through 1987.
PHILLIP B. ROONEY (52)
Chairman, F.N.B.C. of LaGrange, Inc. (multi-bank holding company) since
February 1997. Former President of WMX Technologies Inc. (waste management)
from 1985 until 1997. Mr. Rooney is a director of The ServiceMaster Company
and Urban Shopping Centers Inc. and has been a director of the Company since
1990.
<PAGE> 4
HAROLD B. SMITH (63)
Chairman of the Executive Committee of the Company since 1982. Mr. Smith is a
director of W.W. Grainger Inc. and Northern Trust Corporation and its
subsidiary, The Northern Trust Company, and a Trustee of The Northwestern
Mutual Life Insurance Company. He has been a director of the Company since
1968.
ORMAND J. WADE (57)
Former Vice Chairman, Ameritech Corp. (telecommunications products and
services) from 1987 to 1993 and President and Chief Executive Officer,
Illinois Bell Telephone Company from 1982 through 1986. Mr. Wade is a
director of Andrew Corporation and Westell Inc. and has been a director of
the Company since 1985.
<PAGE> 5
Security Ownership
The following table sets forth information regarding ownership of the
Company's Common Stock as of December 31, 1996 by each director and nominee for
director; by each of the named Executive Officers; by directors, nominees and
Executive Officers as a group; and by other persons who, to the knowledge of the
Company, own of record or beneficially more than 5% of the outstanding Common
Stock of the Company.
<TABLE>
<CAPTION>
DIRECTORS'
AMOUNT AND NATURE OF PHANTOM STOCK PERCENT OF
NAME OF BENEFICIAL OWNER OR GROUP BENEFICIAL OWNERSHIP(1) UNITS(2) CLASS
--------------------------------- ----------------------- ------------- ----------
<S> <C> <C> <C>
Directors and Nominees (Other than Executive
Officers)
Julius W. Becton, Jr...................... 1,300 1,731 *
Michael J. Birck.......................... 300(3) 1,002 *
Marvin D. Brailsford...................... 300(3) 1,000 *
Susan Crown............................... 3,900(4) 1,010 *
H. Richard Crowther....................... 196,517(5)(6) 1,086 *
L. Richard Flury.......................... 600 1,010 *
Richard M. Jones.......................... 5,500 1,731 *
George D. Kennedy......................... 1,760 1,731 *
Richard H. Leet........................... 4,500 1,731 *
Robert C. McCormack....................... 7,259,150(7)(8) 1,010 5.8
Phillip B. Rooney......................... 5,816 1,010 *
Harold B. Smith........................... 19,546,756(8)(9) -- 15.6
Ormand J. Wade............................ 1,900 1,010 *
Executive Officers
W. James Farrell.......................... 122,462(6)(10) *
Russell M. Flaum.......................... 49,169(6)(11) *
Frank S. Ptak............................. 93,838(6) *
F. Ronald Seager.......................... 92,417(6)(12) *
Hugh J. Zentmyer.......................... 16,742(6)(13) *
Directors, Nominees and All Executive
Officers as a Group (26 Persons).......... 20,303,735(6) 15,062 16.2
Other Principal Beneficial Owners
Edward Byron Smith, Jr.................... 7,553,996(8)(14) 6.0
The Northern Trust Company................ 23,570,704(15) 18.8
</TABLE>
- ------------
* Less than 1% of class.
(1) Unless otherwise noted, ownership is direct.
(2) Represents units of phantom stock and dividend equivalents earned under the
phantom stock plan for non-officer directors. Each unit is equal in value
to one share of Common Stock. The units are not transferable and have no
voting rights. Such units are not included in the "Percent of Class"
column.
(3) Represents shares of restricted stock granted on January 2, 1997 under the
Directors' Restricted Stock Plan.
(4) Includes 1,000 shares owned in a trust as to which Ms. Crown shares voting
and investment power.
(5) Includes 160,987 shares held in a revocable living trust as to which Mr.
Crowther shares voting and investment power.
(6) Includes shares covered by stock options exercisable within 60 days of
December 31, 1996 as follows: Mr. Crowther, 30,620; Mr. Farrell, 82,496;
Mr. Flaum, 29,800; Mr. Ptak, 57,000; Mr. Seager,
<PAGE> 6
65,000; Mr. Zentmyer, 16,000; and directors, nominees and all Executive
Officers as a group, 413,491.
(7) Includes 3,760 shares held in a revocable living trust as to which Mr.
McCormack has sole voting and investment power, 200 shares owned in a trust
as to which he shares voting and investment power with The Northern Trust
Company, and 7,255,190 shares as described in Footnote 8.
(8) Robert C. McCormack, Edward Byron Smith, Jr., Harold B. Smith and The
Northern Trust Company are trustees of twelve trusts owning 7,255,190
shares as to which they share voting and investment power.
(9) Includes 197,338 shares held in a revocable living trust as to which Harold
B. Smith has sole voting and investment power; 10,825,732 shares owned in
twelve trusts as to which he shares voting and investment power with The
Northern Trust Company and others; 1,082,240 shares owned in eleven trusts
as to which he shares voting and investment power; 7,255,190 shares as
described in Footnote 8; and 42,256 shares owned by a charitable foundation
of which he is a director.
(10) Includes 1,225 shares held by Mr. Farrell as custodian for his minor child
and 850 shares owned by his spouse, as to both of which Mr. Farrell
disclaims beneficial ownership; 10,691 shares held in a revocable living
trust as to which he has sole voting and investment power; and 24,000
shares owned in a partnership as to which Mr. Farrell shares voting and
investment power.
(11) Includes 702 shares allocated to Mr. Flaum's account in the Company's
Savings and Investment Plan.
(12) Includes 10,876 shares held in a revocable living trust as to which Mr.
Seager has sole voting and investment power and 1,038 shares owned by his
spouse, as to which Mr. Seager disclaims beneficial ownership.
(13) Includes 209 shares held in a revocable living trust as to which Mr.
Zentmyer has sole voting and investment power and 533 shares allocated to
his account in the Company's Savings and Investment Plan.
(14) Includes 10,874 shares owned in a trust as to which Edward Byron Smith, Jr.
has sole voting and investment power; 96,200 shares owned in a trust as to
which The Northern Trust Company has sole voting and investment power;
105,992 shares owned in three trusts as to which Mr. Smith shares voting
and investment power; and 7,255,190 shares as described in Footnote 8. Also
includes the following shares held for the benefit of Mr. Smith's children:
58,580 shares owned in two trusts as to which The Northern Trust Company
has sole voting and investment power; 6,720 shares held in a trust as to
which Mr. Smith shares voting and investment power; 9,320 shares held in a
trust as to which Mr. Smith's spouse and sister share voting and investment
power; and 4,400 shares owned in two trusts as to which Mr. Smith's sister
has sole voting and investment power.
(15) Including its holdings as trustee described in Footnotes 7, 8, 9 and 14,
The Northern Trust Company and its affiliates act as sole fiduciary or
co-fiduciary of trusts and other fiduciary accounts which own an aggregate
of 23,570,704 shares. They have sole voting power with respect to 8,962,471
shares and share voting power with respect to 8,367,252 shares. They have
sole investment power with respect to 1,700,207 shares and share investment
power with respect to 19,065,931 shares. In addition, The Northern Trust
Company holds in other accounts, but does not beneficially own, 9,341,199
shares, resulting in aggregate holdings by The Northern Trust Company of
32,911,903 shares (26.2%).
Because of their holdings individually and as trustees, the holdings of
their immediate families and/or their positions with the Company, Robert C.
McCormack, Edward Byron Smith, Jr. and Harold B. Smith may be deemed to be
"controlling persons" of the Company within the meaning of the Securities Act of
1933, as amended. Byron L. Smith, great grandfather of Robert C. McCormack,
Edward Byron Smith, Jr. and Harold B. Smith, founded the Company in 1912.
<PAGE> 7
The Company maintains normal commercial banking relationships with The
Northern Trust Company, which also acts as the trustee under the Company's
pension plan. The Northern Trust Company is a wholly owned subsidiary of
Northern Trust Corporation. Harold B. Smith, a director of the Company, is a
director of both Northern Trust Corporation and The Northern Trust Company.
The Northern Trust Company's address is 50 South LaSalle Street, Chicago,
IL 60675 and the address of each of the other beneficial owners of more than 5%
of the Company's Common Stock is c/o The Secretary, Illinois Tool Works Inc.,
3600 West Lake Avenue, Glenview, IL 60025.
Executive Compensation
The table below summarizes the compensation of the Chief Executive Officer
and the other four most highly compensated Executive Officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
----------------------------------------- ----------------------- -------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUTS COMPENSATION
POSITION YEAR ($)(1) ($)(1)(2) ($)(3) ($)(4) (#) ($) ($)
--------- ---- ------- --------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. James Farrell 1996 453,754 500,000 -- -- 200,000 -- 40,808(5)(6)(7)
Chairman and Chief 1995 317,212 370,000 -- -- 60,000 -- 38,000
Executive Officer 1994 250,850 291,200 -- 1,400,000 -- -- 9,236
Frank S. Ptak 1996 255,261 275,000 -- -- -- -- 11,429(5)(6)
Vice Chairman 1995 219,397 219,670 -- -- 30,000 -- 10,252
1994 192,165 195,000 -- 1,400,000 -- -- 7,320
F. Ronald Seager 1996 218,801 204,580 -- -- -- -- 12,160(5)(6)
Executive 1995 209,501 206,150 -- -- 30,000 -- 11,306
Vice President 1994 199,606 182,608 -- 875,000 -- -- 7,733
Russell M. Flaum 1996 208,082 209,195 -- -- -- -- 6,411(5)(6)
Executive 1995 199,452 195,000 -- -- 15,000 -- 6,364
Vice President 1994 179,660 176,540 -- 875,000 -- -- 5,074
Hugh J. Zentmyer 1996 184,493 179,358 -- -- -- -- 7,461(5)(6)
Executive 1995 170,110 120,435 -- -- 12,000 -- 6,990
Vice President 1994 139,925 67,968 -- -- 8,000 -- 4,849
</TABLE>
- ---------------
(1) Actual salary or bonus earned. Includes amounts deferred under the Company's
1993 Executive Contributory Retirement Income Plan or Savings and Investment
Plan or both.
(2) Amounts awarded under the Executive Incentive Plan are calculated on the
base salary of record as of December 31 for the respective years and paid in
the subsequent year.
(3) Perquisites and other personal benefits, securities or property in the
aggregate do not exceed the threshold reporting level of the lesser of
$50,000 or 10% of total salary and bonus reported for the named Executive
Officer.
(4) Represents the value on the grant date (December 8, 1994) of restricted
stock awarded under the 1979 Stock Incentive Plan. The number of shares and
their value as of December 31, 1996 for each of the officers were: Mr.
Farrell, 32,000 shares ($2,556,000); Mr. Ptak, 32,000 shares ($2,556,000);
Mr. Seager, 20,000 shares ($1,597,500); and Mr. Flaum, 20,000 shares
($1,597,500). These individuals may exercise full voting rights as to the
restricted stock and are entitled to receive all dividends and other
distributions paid on the restricted stock from the date of grant until
forfeited or sold. Messrs. Farrell's and Ptak's shares each vest in the
following manner: 3,200 on December 31, 1995; 4,800 on December 31, 1996;
6,400 on December 31, 1997; 6,400 on December 31, 1998; 6,400 on December
31, 1999; 3,200 on December 31, 2000; and 1,600 on December 31, 2001.
Messrs. Seager's and Flaum's shares each vest in the following manner: 2,000
on December 31, 1995; 3,000 on December 31, 1996; 4,000 on December 31,
1997; 4,000 on December 31, 1998; 4,000 on
<PAGE> 8
December 31, 1999; 2,000 on December 31, 2000; and 1,000 on December 31,
2001. Unvested shares will be forfeited if the Executive Officer leaves
the Company for any reason other than retirement, death or disability.
(5) Includes Company matching contributions to the 1993 Executive Contributory
Retirement Income Plan or the Savings and Investment Plan as follows: Mr.
Farrell, $13,613; Mr. Ptak, $7,658; Mr. Seager, $6,564; Mr. Flaum, $4,500;
and Mr. Zentmyer, $5,535.
(6) Includes interest credited on deferred compensation in excess of 120% of the
Applicable Federal Long Term Rate as follows: Mr. Farrell, $4,074; Mr. Ptak,
$3,771; Mr. Seager, $5,596; Mr. Flaum, $1,911; and Mr. Zentmyer $1,926.
(7) Includes $23,121 representing imputed income on Mr. Farrell's outstanding
home loan made by the Company in 1995, the balance of which was $355,000 as
of February 28, 1997 (formerly $460,000). The imputed rate of interest on
the loan is 7.34% per annum and the loan is repayable in annual installments
through the year 2000.
The Company has a loan program for Executive Officers to assist them in
complying with the Company's stock ownership guidelines. As of February 28,
1997, Mr. Farrell had an outstanding loan of $88,938 payable December 31, 2000,
bearing interest at a rate of 5.91% per annum and secured by 3,200 shares of
Common Stock of the Company. The five-year term of the promissory note is
renewable, but the note is repayable 180 days following termination of
employment with the Company (or immediately if termination is for gross or
willful misconduct) and upon bankruptcy, insolvency or death of the employee or
breach of the terms of the note.
------------------------
The table below sets forth information as to options granted during 1996 to
the Executive Officers listed in the Summary Compensation Table.
OPTION GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL REALIZABLE VALUE AT
SECURITIES OPTIONS ASSUMED ANNUAL RATES
UNDERLYING GRANTED EXERCISE OF STOCK PRICE APPRECIATION
OPTIONS TO OR BASE FOR OPTION TERM(1)
GRANTED EMPLOYEES PRICE EXPIRATION -------------------------------
NAME (#) IN 1996 ($/SH) DATE 0% ($) 5% ($) 10% ($)
---- ---------- ---------- -------- ---------- ------ --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
W. J. Farrell........... 200,000(2) 95% 66.75 05/03/06 0 8,395,743 21,276,462
Frank S. Ptak........... --
F. Ronald Seager........ --
Russell M. Flaum........ --
Hugh J. Zentmyer........ --
</TABLE>
- ---------------
(1) The dollar amounts under these columns are the result of calculations at 0%
and at the 5% and 10% rates set by the Securities and Exchange Commission.
They are therefore not intended to forecast possible future appreciation,
if any, of the Company's Common Stock price and reflect neither the income
tax liability of the individual recipient nor the time value of money. The
Company did not use an alternative formula for a grant date valuation as
the Company is not aware of any formula that will determine with reasonable
accuracy a present value based on future unknown or volatile factors.
(2) This option becomes exercisable as to 20% of the underlying shares on each
of the first five anniversaries of the grant and is fully exercisable after
the first anniversary in the event of disability or death. A restorative
option right applies to this option.
<PAGE> 9
The table below sets forth information as to option exercises during 1996
as well as the number and value of unexercised options as of December 31, 1996
for the Executive Officers listed in the Summary Compensation Table.
AGGREGATED OPTION EXERCISES IN 1996
AND 1996 YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT YEAR END (#) AT YEAR END ($)(1)
ON EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
W. James Farrell............ -- -- 82,496 252,500 3,641,828 3,834,375
Frank S. Ptak............... -- -- 57,000 30,000 2,615,438 767,812
F. Ronald Seager............ 5,000 257,500 65,000 30,000 3,039,063 767,812
Russell M. Flaum............ -- -- 29,800 15,000 1,348,319 383,906
Hugh J. Zentmyer............ -- -- 16,000 14,000 646,625 376,625
</TABLE>
- ------------
(1) Based on the closing market price ($79.875) of the Company's Common Stock on
December 31, 1996.
RETIREMENT PLANS
The Company's principal non-contributory defined benefit pension plan
covers employees of participating domestic business units. Executive Officers
participate in this plan on the same basis as do approximately 12,000 other
eligible employees. Benefit amounts are based on years of service and average
monthly compensation for the five highest consecutive years out of the last ten
years of employment. The following table illustrates the maximum estimated
annual benefits to be paid upon normal retirement at age 65 to individuals in
specified compensation and years of service classifications. The table does not
reflect the limitations contained in the Internal Revenue Code of 1986 on
benefit accruals under the pension plan. Under a plan adopted by the Board of
Directors, supplemental payments in excess of those limitations will be made to
participants designated by the Compensation Committee in order to maintain
benefits upon retirement at the levels provided under the pension plan's
formula.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL NORMAL RETIREMENT BENEFITS(1)
--------------------------------------------------------------------------
YEARS OF SERVICE AT NORMAL RETIREMENT(2)
COMPENSATION(3) 10 15 20 25 30 35 40
--------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 250,000........... $ 41,250 $ 61,875 $ 82,500 $103,125 $123,750 $133,125 $142,500
500,000........... 82,500 123,750 165,000 206,250 247,500 266,250 285,000
750,000........... 123,750 185,625 247,500 309,375 371,250 399,375 427,500
1,000,000........... 165,000 247,500 330,000 412,500 495,000 532,500 570,000
1,250,000........... 206,250 309,375 412,500 515,625 618,750 665,625 712,500
</TABLE>
- ---------------
(1) Amounts shown exceed actual amounts by .65% of Social Security covered
compensation for each year of service up to 30 years.
(2) Years of service as of December 31, 1996 for the five most highly
compensated Executive Officers were as follows: Mr. Farrell, 31.5 years;
Mr. Ptak, 21.1 years; Mr. Seager, 16.6 years; Mr. Flaum, 10.0 years; and
Mr. Zentmyer, 10.0 years.
(3) Compensation includes all amounts shown under the columns "Salary" and
"Bonus" in the Summary Compensation Table.
The Company's 1982 Executive Contributory Retirement Income Plan provided
certain executives designated by the Compensation Committee the opportunity to
supplement their retirement benefits in exchange for salary reductions during
the four-year period 1983 through 1986. Under the Plan the Company agreed to pay
benefits upon retirement, death or disability, with the actual benefit amounts
<PAGE> 10
dependent upon the amount of the deferral, the amount of the Company's
contribution, and the age of the participant at entry into the plan. Two of the
five named Executive Officers included in the Summary Compensation Table were
eligible and elected to have their salaries reduced by 10%. During the period of
salary reduction the executives could not contribute to and did not receive the
Company's matching contribution in the Savings and Investment Plan. The Company
purchased insurance on the lives of the participants to fund the benefits, with
the 10% of salary retained by the Company and the 3% of base compensation that
the Company would have contributed to match participant contributions to the
Savings and Investment Plan applied to the premium for the insurance. Under the
1982 Plan, annual benefits payable beginning at the normal retirement age of 65
for 15 years were fixed following the deferral period and are as follows: Mr.
Farrell, $113,529 and Mr. Seager, $68,266.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports dated January 28, 1997 incorporated by reference
and included in this Form 10-K into the Company's previously filed registration
statements on Form S-8 (File No.'s 333-22035 and 333-17473), Form S-4 (File
No.'s 33-60013 and 33-302671) and Form S-3 (File no. 33-5780).
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 24, 1997
<PAGE> 1
EXHIBIT 24
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Julius W. Becton, Jr.
-----------------------------------
(signature)
Julius W. Becton, Jr.
------------------------------------
(printed name)
<PAGE> 2
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Michael J. Birck
-----------------------------------
(signature)
Michael J. Birck
------------------------------------
(printed name)
<PAGE> 3
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Marvin D. Brailsford
-----------------------------------
(signature)
Marvin D. Brailsford
------------------------------------
(printed name)
<PAGE> 4
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Susan Crown
-----------------------------------
(signature)
Susan Crown
------------------------------------
(printed name)
<PAGE> 5
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) H. Richard Crowther
-----------------------------------
(signature)
H. Richard Crowther
------------------------------------
(printed name)
<PAGE> 6
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) W. James Farrell
-----------------------------------
(signature)
W. James Farrell
------------------------------------
(printed name)
<PAGE> 7
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) L. Richard Flury
-----------------------------------
(signature)
L. Richard Flury
------------------------------------
(printed name)
<PAGE> 8
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Richard M. Jones
-----------------------------------
(signature)
Richard M. Jones
------------------------------------
(printed name)
<PAGE> 9
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) George D. Kennedy
-----------------------------------
(signature)
George D. Kennedy
------------------------------------
(printed name)
<PAGE> 10
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Richard H. Leet
-----------------------------------
(signature)
Richard H. Leet
------------------------------------
(printed name)
<PAGE> 11
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Robert C. McCormack
-----------------------------------
(signature)
Robert C. McCormack
------------------------------------
(printed name)
<PAGE> 12
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Phillip B. Rooney
-----------------------------------
(signature)
Phillip B. Rooney
------------------------------------
(printed name)
<PAGE> 13
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Harold B. Smith
-----------------------------------
(signature)
Harold B. Smith
------------------------------------
(printed name)
<PAGE> 14
ILLINOIS TOOL WORKS INC.
FORM 10-K ANNUAL REPORT
--------------------------
POWER OF ATTORNEY
--------------------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned whose signature appears
below constitutes and appoints W. James Farrell, Harold B. Smith, and Stewart
S. Hudnut, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution for him and in his name,
place and stead, in any and all capacities, to sign the Company's Form 10-K
Annual Report and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue thereof.
IN WITNESS WHEREOF, the undersigned has executed this power of attorney this
14th day of February 1997.
(s) Ormand J. Wade
-----------------------------------
(signature)
Ormand J. Wade
------------------------------------
(printed name)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 137,699
<SECURITIES> 0
<RECEIVABLES> 862,492
<ALLOWANCES> 22,400
<INVENTORY> 526,016
<CURRENT-ASSETS> 1,701,092
<PP&E> 1,941,096
<DEPRECIATION> 1,132,756
<TOTAL-ASSETS> 4,806,162
<CURRENT-LIABILITIES> 1,219,325
<BONDS> 818,947
0
0
<COMMON> 273,864
<OTHER-SE> 2,122,161
<TOTAL-LIABILITY-AND-EQUITY> 4,806,162
<SALES> 4,996,681
<TOTAL-REVENUES> 4,996,681
<CGS> 3,281,530
<TOTAL-COSTS> 3,281,530
<OTHER-EXPENSES> 39,179
<LOSS-PROVISION> 4,451
<INTEREST-EXPENSE> 27,834
<INCOME-PRETAX> 770,315
<INCOME-TAX> 284,000
<INCOME-CONTINUING> 486,315
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 486,315
<EPS-PRIMARY> 3.93
<EPS-DILUTED> 3.93
</TABLE>
