<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
<TABLE>
<C> <S>
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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>
<S> <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
------------------- -----------------------------------------
<S> <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. [ X ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 14, 2000, was approximately $12,400,000,000.
Shares of Common Stock outstanding at March 14, 2000 -- 300,678,897.
DOCUMENTS INCORPORATED BY REFERENCE
1999 Annual Report to Stockholders...............................Parts I, II, IV
Proxy Statement dated March 27, 2000, for Annual Meeting of Stockholders
to be held on May 12, 2000............................................Part III
- --------------------------------------------------------------------------------
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<PAGE> 2
PART I
ITEM 1. BUSINESS
GENERAL
Illinois Tool Works Inc. (the "Company" or "ITW") 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 500 operations in 40
countries. The Company's business units are divided into six segments:
Engineered Products-North America, Engineered Products-International, Specialty
Systems-North America, Specialty Systems-International, Consumer Products, and
Leasing and Investments. Businesses in the Engineered Products-North America
segment are located in North America and manufacture short lead-time components
and fasteners, and specialty products such as adhesives, resealable packaging
and electronic component packaging. Businesses in the Engineered
Products-International segment are located outside North America and manufacture
short lead-time components and fasteners, and specialty products such as
electronic component packaging and adhesives. Businesses in the Specialty
Systems-North America segment are located in North America and produce longer
lead-time machinery and related consumables, and specialty equipment for
applications such as food service and industrial spray coating. Businesses in
the Specialty Systems-International segment are located outside North America
and manufacture longer lead-time machinery and related consumables, and
specialty equipment for food service and industrial spray coating. Businesses in
the Consumer Products segment are located primarily in North America and
manufacture household products which are used by consumers, including small
electric appliances, physical fitness equipment and ceramic tile. The Leasing
and Investment segment makes opportunistic investments in mortgage-related
assets, leveraged and direct financing leases of equipment, properties and
property developments, and affordable housing.
On November 23, 1999, a wholly owned subsidiary of ITW merged with Premark
International, Inc. ("Premark"), a commercial manufacturer of food equipment and
decorative products. Shareholders of Premark received .8081 shares of ITW common
stock in exchange for each share of Premark common stock outstanding. A total of
49,781,665 of ITW common shares were issued to the former Premark shareholders
in connection with the merger. The merger was accounted for under the
pooling-of-interests accounting method and accordingly, ITW's historical
financial statements for periods prior to the merger have been restated to
include the results of operations, financial position and cash flows of Premark,
as though the companies had been combined during such periods.
During the five-year period ending December 31, 1999, the Company acquired
and disposed of numerous other operations which did not materially impact
consolidated results.
CURRENT YEAR DEVELOPMENTS
Refer to pages 21 through 26, Management's Discussion and Analysis, in the
Company's 1999 Annual Report to Stockholders.
FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
Segment and geographic data are included on pages 21 through 23 and 42
through 44 of the Company's 1999 Annual Report to Stockholders.
<PAGE> 3
The principal markets served by the Company's five manufacturing segments
are as follows:
<TABLE>
<CAPTION>
% OF 1999 OPERATING REVENUES
--------------------------------------------------------------
ENGINEERED ENGINEERED SPECIALTY SPECIALTY
PRODUCTS- PRODUCTS- SYSTEMS- SYSTEMS-
NORTH INTER- NORTH INTER- CONSUMER
AMERICA NATIONAL AMERICA NATIONAL PRODUCTS
---------- ---------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Construction................... 48% 38% 9% 5% 33%
Automotive..................... 27% 34% 6% 3% --%
General Industrial............. 11% 11% 19% 24% --%
Consumer Durables.............. 6% 7% 3% 2% 67%
Electronics.................... 3% 7% 1% 2% --%
Food and Beverage.............. 2% --% 9% 9% --%
Industrial Capital Goods....... 2% 1% 6% 6% --%
Food Retail and Service........ --% --% 34% 32% --%
Paper Products................. --% --% 5% 5% --%
Other.......................... 1% 2% 8% 12% --%
--- --- --- --- ---
100% 100% 100% 100% 100%
=== === === === ===
</TABLE>
Operating results of the segments are described on pages 21 through 23 and
42 through 44 of the Company's 1999 Annual Report to Stockholders.
Most of the Company's businesses distribute their products directly to
industrial manufacturers and through independent distributors.
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, 1999 and 1998 is
summarized as follows:
<TABLE>
<CAPTION>
BACKLOG IN THOUSANDS OF DOLLARS
---------------------------------------------------------------------------------
ENGINEERED SPECIALTY
PRODUCTS- ENGINEERED SYSTEMS- SPECIALTY
NORTH PRODUCTS- NORTH SYSTEMS- CONSUMER
AMERICA INTERNATIONAL AMERICA INTERNATIONAL PRODUCTS TOTAL
---------- ------------- --------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1999................. $257,000 $125,000 $196,000 $136,000 -- $714,000
1998................. $227,000 $124,000 $186,000 $134,000 -- $671,000
</TABLE>
Backlog orders scheduled for shipment beyond calendar year 2000 were not
material in any manufacturing segment as of December 31, 1999.
The information set forth below is 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 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, metal and laminate
components, fasteners and assemblies; industrial fluids and adhesives; tooling
for specialty applications; welding products; packaging machinery and related
consumables; food service equipment; and industrial spray coating equipment.
2
<PAGE> 4
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 are set forth on page 31 of the Company's 1999 Annual Report to
Stockholders.
The Company owns approximately 2,500 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 550 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 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, Apex, Buildex,
Deltar, Devcon, DeVilbiss, Fastex, Hi-Cone, Hobart, Keps, Magnaflux, Miller,
Minigrip, Paktron, Paslode, Precor, Ramset, Ransburg, Red Head, Shakeproof,
Signode, Teks, Tenax, West Bend, Wilsonart, and Zip-Pak.
ENVIRONMENTAL
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 materially affect 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.
EMPLOYEES
The Company employed approximately 52,800 persons as of December 31, 1999
and considers its employee relations to be excellent.
INTERNATIONAL
The Company's international operations include subsidiaries, joint ventures
and licensees in 39 countries on six continents. These operations serve such
markets as construction, food and retail service, general industrial,
automotive, and others on a worldwide basis. The Company's international
subsidiaries contributed approximately 34% of operating revenues in 1999 and 33%
in 1998.
3
<PAGE> 5
Refer to pages 21 through 24 and 42 through 44 in the Company's 1999 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.
YEAR 2000
Refer to page 26 in the Company's 1999 Annual Report to Stockholders for
discussion of the effect on the Company of the year 2000 computer issue.
FORWARD-LOOKING STATEMENTS
Refer to page 26 of the Company's 1999 Annual Report to Stockholders for
information on the risks associated with forward-looking statements within this
document.
EXECUTIVE OFFICERS
Executive Officers of the Company as of March 27, 2000:
<TABLE>
<CAPTION>
NAME OFFICE AGE
- ---- ------ ---
<S> <C> <C>
Thomas W. Buckman......... Vice President, Patents and Technology 62
W. James Farrell.......... Chairman and Chief Executive Officer 57
Russell M. Flaum.......... Executive Vice President 49
Thomas J. Hansen.......... Executive Vice President 51
Stewart S. Hudnut......... Senior Vice President, General Counsel and Secretary 60
John Karpan............... Senior Vice President, Human Resources 59
Jon C. Kinney............. Senior Vice President and Chief Financial Officer 57
Dennis J. Martin.......... Executive Vice President 49
Frank S. Ptak............. Vice Chairman 56
James M. Ringler.......... Vice Chairman 54
F. Ronald Seager.......... Executive Vice President 59
Harold B. Smith........... Chairman of the Executive Committee 66
David B. Speer............ Executive Vice President 48
Allan C. Sutherland....... Senior Vice President 36
Hugh J. Zentmeyer......... Executive Vice President 53
</TABLE>
Except for Messrs. Hansen, Kinney, Martin, Ringler, Speer, Sutherland, 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.
Hansen joined the Company in 1980 and has held various management positions
within the Company's automotive metal fasteners and components businesses. Mr.
Kinney joined the Company in 1973 and has served as Vice President and
Controller, Operations, and Group Controller of several of the Company's
businesses. Mr. Martin joined the Company in 1991 and has held several
management positions in the welding businesses. Mr. Ringler joined Premark
International in 1990 where he served as President and Chief Operating Officer
until May 1996. He served as Premark International's Chief Executive Officer and
President from May 1996 to October 1997, after which he served as Chairman of
the Board, Chief Executive Officer and President until Premark International's
merger with the Company in November 1999. Mr. Speer joined the Company in 1978
and has held various sales, marketing and general management positions within
the construction businesses. Mr. Sutherland joined the Company in 1993 after
serving as a senior tax manager with Ernst & Young and has served the Company in
various capacities, most recently as Vice President of Leasing and Investments.
4
<PAGE> 6
Mr. Zentmeyer joined Signode Corporation (which was acquired by the Company in
1986) in 1968 and has held various management positions in the industrial
packaging businesses.
ITEM 2. PROPERTIES
As of December 31, 1999 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>
Engineered Products -- North America.............. 132 6.5 3.5 10.0
Engineered Products -- International.............. 88 5.4 1.2 6.6
Specialty Systems -- North America................ 119 9.5 2.5 12.0
Specialty Systems -- International................ 89 6.3 1.4 7.7
Consumer Products................................. 16 3.0 0.5 3.5
Leasing and Investments........................... 13 0.6 0.2 0.8
Corporate......................................... 5 1.3 -- 1.3
--- ---- --- ----
462 32.6 9.3 41.9
=== ==== === ====
</TABLE>
The principal plants outside of the U.S. are in Australia, Brazil, Canada,
Denmark, France, Germany, Italy, Korea, Mexico, Spain, 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
The Company held a Special Meeting of Stockholders on November 23, 1999. At
the meeting, the following item was submitted to a vote of stockholders:
The proposal to issue the Company's common stock as stated in the Proxy
Statement dated October 12, 1999 pursuant to the Agreement and Plan of Merger
among Premark International, Inc., Illinois Tool Works Inc. and CS Merger Sub
Inc., a wholly owned subsidiary of ITW, dated as of September 9, 1999. The
proposal was approved with 197,508,363 votes for, 4,329,793 votes against and
574,374 votes withheld.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
This information is incorporated by reference to page 45 of the Company's
1999 Annual Report to Stockholders.
5
<PAGE> 7
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Operating revenues....................... $9,333,185 8,386,971 7,627,263 7,264,281 6,391,480
Income from continuing operations........ $ 841,112 809,747 691,589 543,922 467,362
Income from continuing operations per
common share:
Basic.................................. $ 2.80 2.70 2.31 1.83 1.64
Diluted................................ $ 2.76 2.66 2.27 1.80 1.62
Total assets at year-end................. $9,060,259 8,212,488 7,171,407 6,484,251 5,576,352
Long-term debt at year-end............... $1,360,746 1,208,046 966,628 934,847 737,257
Cash dividends declared per common
share.................................. $ .65 .53 .45 .45 .48
</TABLE>
Refer to pages 30 and 31 of the Company's 1999 Annual Report to
Stockholders for discussion of the effect of the Premark Merger.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This information is incorporated by reference to pages 21 through 26 of the
Company's 1999 Annual Report to Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information is incorporated by reference to pages 25 and 26 of the
Company's 1999 Annual Report to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and report thereon of Arthur Andersen LLP dated
January 31, 2000, as found on pages 27 through 44 and the supplementary data
found on page 45 of the Company's 1999 Annual Report to Stockholders, are
incorporated by reference.
The report of Ernst & Young LLP dated January 24, 2000 on the financial
statements of Premark International, Inc. is included as Exhibit 13(b).
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 2000 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 pages 4 and 5.
6
<PAGE> 8
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the information under the
caption "Executive Compensation" and "Directors Compensation" in the Company's
Proxy Statement for the 2000 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 "Ownership of ITW Stock" in the Company's Proxy Statement for the 2000
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Additional information is incorporated by reference to the information
under the captions "Director Compensation" and "Executive Compensation" in the
Company's Proxy Statement for the 2000 Annual Meeting of Stockholders.
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 31, 2000 as found on pages 27 through 44 and the supplementary data
found on page 45 of the Company's 1999 Annual Report to Stockholders, are
incorporated by reference.
The report of Ernst & Young LLP dated January 24, 2000 on the financial
statements of Premark International, Inc. is included as Exhibit 13(b).
(2) Exhibits
(i) See the Exhibit Index on page 10 of this Form 10-K.
(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, 1999,
with the exception of the agreements related to the 5 7/8%, 5 3/4%, 6 7/8% and
10 1/2% 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
The following reports on Form 8-K have been filed during the three months
ended December 31, 1999.
(1) Form 8-K, Current Report, dated November 11, 1999 which included Item
5; Item 7; Letter of Understanding between James M. Ringler and
Illinois Tool Works Inc.; Executive Noncompetition Agreement between
James M. Ringler and Illinois Tool Works Inc.; Letter of Understanding
between William Reeb and Illinois Tool Works Inc.; and Executive
Noncompetition Agreement between William Reeb and Illinois Tool Works
Inc.
(2) Form 8-K, Current Report, dated November 23, 1999, which included Item
2, Item 7, and Agreement and Plan of Merger among Premark
International, Inc., Illinois Tool Works Inc. and CS Merger Sub Inc.
7
<PAGE> 9
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 29th day of
March, 2000.
ILLINOIS TOOL WORKS INC.
By /s/ W. JAMES FARRELL
------------------------------------
W. James Farrell
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 29th day of March, 2000.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ W. JAMES FARRELL Director, Chairman and Chief Executive
- -------------------------------------------------- Officer,
W. James Farrell (Principal Executive Officer)
/s/ JON C. KINNEY Senior Vice President and Chief Financial
- -------------------------------------------------- Officer,
Jon C. Kinney (Principal Accounting and Financial Officer)
WILLIAM F. ALDINGER Director
MICHAEL J. BIRCK Director
MARVIN D. BRAILSFORD Director
SUSAN CROWN Director
H. RICHARD CROWTHER Director
ROBERT C. MCCORMACK Director
PHILLIP B. ROONEY Director
HAROLD B. SMITH Director
ORMAND J. WADE Director
</TABLE>
By /s/ W. JAMES FARRELL
-----------------------------------
(W. James Farrell,
as Attorney-in-Fact)
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).
8
<PAGE> 10
EXHIBIT INDEX
ANNUAL REPORT ON FORM 10-K
1999
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
3(a) -- Restated Certificate of Incorporation of Illinois Tool Works
Inc., as amended, filed as Exhibit 3(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1997 (Commission File No. 1-4797) and incorporated
herein by reference.
3(b) -- By-laws of Illinois Tool Works Inc., as amended, filed as
Exhibit 3(b) to Illinois Tool Works' Annual Report on Form
10-K for the fiscal year ended December 31, 1998 (Commission
File No. 1-4797), 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) -- 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(c) -- 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.
4(d) -- Form of 5 3/4% Notes due March 1, 2009, filed as Exhibit 4
to the Company's Current Report on Form 8-K dated February
24, 1999 and incorporated herein by reference.
4(e) -- Form of Indenture (Revised) in connection with Premark
International, Inc.'s Form S-3 Registration Statement No.
33-35137 and Form S-3 Registration Statement No. 333-62105
(Exhibit 4.2 to the Premark International, Inc.'s Annual
Report on Form 10-K for the year ended December 28, 1996.)
10(a) -- Illinois Tool Works Inc. 1996 Stock Incentive Plan dated
February 16, 1996, as amended on December 12, 1997 and
October 29, 1999, filed as Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1999 (Commission File No. 1-4797) 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 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>
9
<PAGE> 11
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
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) -- 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 2000 Annual Meeting of
Stockholders.
10(h) -- Illinois Tool Works Inc. Outside Directors' Deferred Fee
Plan dated December 12, 1980, filed as Exhibit 10(h) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 (Commission File No. 1-4797) and
incorporated herein by reference.
10(i) -- 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(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. Executive Contributory Retirement
Income Plan effective January 1, 1999, filed as Exhibit
10(k) to the company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (Commission File No.
1-4797) and incorporated herein by reference.
10(l) -- Agreement and Plan of Merger dated as of September 9, 1999
among Premark International, Inc., Illinois Tool Works Inc.
and CS Merger Sub Inc., filed as Annex A to the Company's
Registration Statement on Form S-4 (Registration Statement
No. 333-88801) filed with the Securities and Exchange
Commission on October 12, 1999 and incorporated herein by
reference.
10(m) -- Stock Option Agreement dated as of September 9, 1999 between
Premark International, Inc. and Illinois Tool Works Inc.,
filed as Exhibit 99.1 to Premark's Current Report on Form
8-K dated September 13, 1999 (File No. 1-9256), and
incorporated herein by reference.
10(n) -- Underwriting Agreement dated February 19, 1999, related to
the 5 3/4% Notes due March 1, 2009, filed as Exhibit 1 to
the Company's Current Report on Form 8-K dated February 24,
1999 and incorporated herein reference.
10(o) -- Illinois Tool Works Inc. Non-officer Directors' Fee
Conversion Plan adopted February 19, 1999, filed as Exhibit
10(m) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 (Commission File No.
1-4797) and incorporated herein by reference.
10(p) -- Premark International, Inc. 1994 Incentive Plan, as amended
and restated effective May 5, 1999, filed as Exhibit 10.14
to the Company's Registration Statement on Form S-4
(Registration Statement No. 333-88801) filed with the
Securities and Exchange Commission on October 12, 1999 and
incorporated herein by reference.
10(q) -- Premark International, Inc. Supplemental Plan, as amended
and restated effective January 1, 1999, filed as Exhibit
10.15 to the Company's Registration Statement on Form S-4
(Registration Statement No. 333-88801) filed with the
Securities and Exchange Commission on October 12, 1999 and
incorporated herein by reference.
10(r) -- Letter of Understanding dated November 11, 1999, by and
between James M. Ringler and Illinois Tool Works Inc. filed
as Exhibit 10.1 to the Company's Current Report on Form 8-K
dated November 11, 1999 (Commission File No. 1-4797) and
incorporated herein by reference.
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10(s) -- Executive Noncompetition Agreement dated November 11, 1999,
by and between James M. Ringler and Illinois Tool Works Inc.
filed as Exhibit 10.2 to the Company's Current Report on
Form 8-K dated November 11, 1999 (Commission File No.
1-4797) and incorporated herein by reference.
13(a) -- The Company's 1999 Annual Report to Stockholders, pages
21 -- 45.
13(b) -- Report of Ernst & Young LLP.
21 -- Subsidiaries and Affiliates of the Company.
23(a) -- Consent of Arthur Andersen LLP.
23(b) -- Consent of Ernst & Young LLP.
24 -- Powers of Attorney.
27 -- Financial Data Schedule.
99 -- Description of the capital stock of Illinois Tool Works
Inc., filed as Exhibit 99 to the Company's Quarterly Report
of Form 10-Q for the quarterly period ended March 31, 1997
(Commission File No. 1-4797) and incorporated herein by
reference.
</TABLE>
11
<PAGE> 1
EXHIBIT 10(g)
DIRECTOR COMPENSATION
ANNUAL RETAINER AND ATTENDANCE FEES
For 2000, the retainer is $35,000, the fee for each Board or committee
meeting is $1,500, and the fee for chairman is an additional $900 per meeting
chaired. Non-officer directors can elect to receive some or all of their
retainer and fees in an equivalent value of ITW common stock. Under our deferred
fee plan, a director can defer receipt of all or part of cash fees until he or
she is no longer a director. Deferred amounts are credited with interest at
current rates.
RESTRICTED ITW COMMON STOCK
A portion of director compensation includes the periodic grant of
restricted ITW common stock, which directly links an element of director
compensation with stockholder interests. In January 1998, each non-officer
director of ITW received an award of 900 restricted shares. Each new non-officer
director who joined the Board after January 1998 was granted an award of 300
shares for each full year of service remaining until January 2001. Restricted
shares vest equally over the years remaining from the grant date until January
2001 and fully vest upon death or retirement. A director cannot sell the shares
until the earliest of retirement, death or January 2001. A director who
terminates other than for death or retirement prior to January 2001 will forfeit
any unvested restricted shares.
PHANTOM ITW STOCK
To tie a further portion of their compensation to stockholder interests,
non-officer directors of ITW are granted 1,000 units of phantom stock upon
becoming a director. The value of each unit equals the market value of one share
of ITW common stock. Additional units are credited to a director's phantom stock
account in an amount equivalent to cash dividends paid on ITW stock. Accounts
are adjusted for stock dividends, stock splits, combinations or similar changes.
A director is eligible for a cash distribution from his or her account at
retirement or upon approved resignation. When phantom stock is granted,
directors elect to receive the distribution in either a lump sum or in up to ten
annual installments. Directors may change this election at any time until two
years preceding the distribution. Directors receive the value of their phantom
stock account immediately upon a change of control.
OTHER ARRANGEMENTS WITH DIRECTORS
Harold B. Smith has a one-year agreement with ITW to provide consulting
services for a fee of $85,000.
<PAGE> 1
EXHIBIT 13(a)
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
INTRODUCTION
Illinois Tool Works Inc. (the "Company" or "ITW") is a multinational
manufacturer of highly engineered products and specialty systems. The Company
has more than 500 operations in 40 countries which are aggregated and organized
for internal reporting purposes into the following six segments: Engineered
Products--North America; Engineered Products--International; Specialty
Systems--North America; Specialty Systems--International; Consumer Products; and
Leasing and Investments. These segments are described below.
On November 23, 1999, a wholly owned subsidiary of ITW merged with Premark
International, Inc. ("Premark"), a commercial manufacturer of food equipment and
decorative products. The merger was accounted for under the pooling-of-interests
accounting method and accordingly, ITW's historical financial statements for
periods prior to the merger have been restated to include the results of
operations, financial position and cash flows of Premark, as though the
companies had been combined during such periods.
- --------------------------------------------------------------------------------
ENGINEERED PRODUCTS--NORTH AMERICA
Businesses in this segment are located in North America and manufacture short
lead-time components and fasteners, and specialty products such as adhesives,
resealable packaging and electronic component packaging. In 1999, this segment
primarily served the construction (48%), automotive (27%), and general
industrial (11%) markets.
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------
Operating revenues $2,938,906 $2,538,749 $2,258,828
Operating income 561,742 477,547 402,395
Margin % 19.1% 18.8% 17.8%
In 1999, revenues increased 16% versus 1998 due to acquisitions and base
business revenue growth, which both contributed 8%. The primary contributors to
the base business growth were the automotive, construction and consumer
packaging businesses. Operating income increased 18% from 1998 due to the base
business revenue growth and acquisitions. Overall margins increased as improved
operating efficiencies at the base businesses were partially offset by the lower
margins of acquired businesses.
In 1998, revenues increased 12% versus 1997 largely due to acquisitions,
primarily in the automotive and general industrial businesses. The primary
contributors to the base business revenue growth were the construction,
automotive and general industrial businesses. Operating income grew 19% in 1998
due to acquisitions and cost reductions in the base businesses. Margins improved
in 1998 due to cost improvements in the base businesses, partially offset by
lower margins for acquired businesses.
- --------------------------------------------------------------------------------
ENGINEERED PRODUCTS--INTERNATIONAL
Businesses in this segment are located outside North America and manufacture
short lead-time components and fasteners, and specialty products such as
electronic component packaging and adhesives. In 1999, this segment primarily
served the construction (38%), automotive (34%), and general industrial (11%)
markets.
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------
Operating revenues $1,321,513 $1,036,211 $871,699
Operating income 132,808 127,260 124,821
Margin % 10.0% 12.3% 14.3%
Operating revenues increased in 1999 versus 1998 due to acquisitions, which
contributed 31% to the revenue growth. Base business revenue growth was 1%, as
revenue increases in the automotive and polymer businesses were offset by
declines in the construction businesses. In 1999, operating income grew 4%
mainly due to acquisitions, partially offset by nonrecurring costs associated
with various European operations. The margin decline in 1999 was attributable
both to base businesses, mainly related to the European nonrecurring costs, and
the initial lower margin impact of acquisitions. Foreign currency fluctuations
in 1999 versus 1998 decreased both revenues and operating income by 4%.
Revenues increased 19% in 1998 compared with 1997 mainly due to
acquisitions, primarily in the construction businesses. The general industrial,
electronic component packaging and automotive businesses were the primary
contributors to the base business revenue growth. Operating income was higher in
1998 due to cost reductions in the base businesses and due to acquisitions.
Margins were lower in 1998 as a result of the lower margins of acquired
companies, partially offset by the effect of cost improvements in the base
businesses. Foreign currency fluctuations in 1998 versus 1997 decreased revenues
by 6% and operating income by 8%.
21
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
SPECIALTY SYSTEMS--NORTH AMERICA
Businesses in this segment are located in North America and produce longer
lead-time machinery and related consumables, and specialty equipment for
applications such as food service and industrial spray coating. In 1999, this
segment primarily served the food retail and service (34%), general industrial
(19%), construction (9%), and food and beverage (9%) markets.
Dollars in thousands 1999 1998 1997
- ------------------------------------------------------------
Operating revenues $3,130,347 $2,876,812 $2,787,929
Operating income 537,555 468,352 399,613
Margin % 17.2% 16.3% 14.3%
In 1999, operating revenues increased 9%, primarily due to acquisitions, which
contributed revenue growth of 7%. Base business revenue growth was 3%, mainly
related to the food equipment businesses. Operating income grew 15% in 1999,
primarily due to improved operating efficiencies in various base businesses.
Acquisitions also contributed to the increase in operating income. Overall
margins increased due to the base business efficiencies, partially offset by
lower margins for acquired businesses.
In 1998, revenues increased 3%, primarily due to acquisitions, offset by a
decline in base business revenues as a result of slower growth in the North
American industrial markets, which affected the majority of the businesses.
Operating income and margins increased due to administrative and manufacturing
cost reductions. Acquisitions also contributed to the higher operating income.
- --------------------------------------------------------------------------------
SPECIALTY SYSTEMS--INTERNATIONAL
Businesses in this segment are located outside North America and manufacture
longer lead-time machinery and related consumables, and specialty equipment for
food service and industrial spray coating. In 1999, this segment primarily
served the food retail and service (32%), general industrial (24%) and food and
beverage (9%) markets.
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------------
Operating revenues $1,592,855 $1,575,290 $1,414,324
Operating income 154,022 155,110 116,317
Margin % 9.7% 9.8% 8.2%
In 1999, operating revenues increased 1% versus 1998. The revenue growth
contribution from acquisitions of 8% was partially offset by the effect of a
base business revenue decline of 4%. Operating income and margins were
essentially flat, as increases from acquisitions were offset by reductions for
the base businesses, primarily related to the decreased revenues. Foreign
currency fluctuations in 1999 versus 1998 decreased revenues by 2% and operating
income by 1%.
Operating revenues increased 11% in 1998 versus 1997 mainly due to
acquisitions, primarily in the Signode packaging, stretch film and food
equipment businesses. Operating income and margins increased primarily due to
cost improvements, partially offset by the lower margins of acquired businesses.
Foreign currency translation reduced revenues by 4% and operating income by 6%
in 1998 versus 1997.
- --------------------------------------------------------------------------------
CONSUMER PRODUCTS
Businesses in this segment are located primarily in North America and
manufacture household products which are used by consumers, including small
electric appliances, physical fitness equipment and ceramic tile. In 1999, this
segment served the consumer durables (67%) and construction (33%) markets.
Dollars in thousands 1999 1998 1997
- --------------------------------------------------------
Operating revenues $501,275 $488,686 $478,675
Operating income 15,326 12,925 25,053
Margin % 3.1% 2.6% 5.2%
Operating revenues increased 3% in 1999 compared with 1998, primarily due to
higher sales in the fitness equipment and ceramic tile businesses, offset by
decreased revenues in the small appliance businesses. Operating income and
margins both increased due to operating efficiencies, primarily in the small
appliance businesses.
Revenues increased 2% in 1998 versus 1997 due primarily to increases at the
fitness equipment and ceramic tile businesses, partially offset by decreased
revenues in the small appliance businesses. Operating income and margins
declined due to the effect of lower sales volume in the small appliance
businesses and higher costs in the ceramic tile operation, partially offset by
the effect of higher sales volume in the fitness equipment businesses.
- --------------------------------------------------------------------------------
LEASING AND INVESTMENTS
This segment makes opportunistic investments in mortgage-related
assets, leveraged and direct financing leases of equipment, properties and
property developments, and affordable housing.
Dollars in thousands 1999 1998 1997
- ------------------------------------------------------
Operating revenues $157,385 $149,748 $101,110
Operating income 84,931 67,552 37,089
Both revenues and operating income increased in 1999 versus 1998 due to gains on
the sales of affordable housing and other investments, as well as higher
mortgage-related income.
Revenues and operating income increased in 1998 due primarily to the
commercial mortgage transaction entered into at year-end 1997. Increased
property development activity and sales of mortgage-related assets also
contributed to the higher revenues and operating income.
22
<PAGE> 3
In 1995, 1996 and 1997, the Company acquired pools of mortgage-related
assets in exchange for nonrecourse notes payable of $739.7 million, preferred
stock of subsidiaries of $60 million and cash of $240 million. The
mortgage-related assets acquired in these transactions are located throughout
the U.S. and include 16 subperforming, variable rate, balloon loans and 24
foreclosed properties at December 31, 1999. 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 $26 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
$26 million a year, the Company has a collateral right against the cash flow
generated by three separate pools of mortgage-related assets (owned by third
parties in which the Company has minimal interests) which have a total fair
value of approximately $2.7 billion at December 31, 1999. 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 of $333.3 million
at December 31, 1999 (net of the related nonrecourse notes payable) through its
expected net cash flow of $26 million per year for the remainder of the ten-year
periods and its estimated $413.3 million share of the total proceeds from
disposition of the mortgage-related assets and principal repayments. The Company
believes that because the swaps' counterparty is Aaa-rated and that significant
collateral secures the net annual cash flow of $26 million, its risk of not
recovering that portion of its net investment has been significantly mitigated.
The Company believes that its share of 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, 1999 and 1998
are summarized as follows:
In thousands 1999 1998
- -----------------------------------------------------------------------
Assets:
Investments--
Mortgage-related assets $1,006,468 $1,018,698
Leases 62,269 78,396
Properties and affordable housing 76,632 50,837
Prepaid forward contract 21,247 20,247
Other 21,504 15,315
Deferred tax assets 257,687 345,127
Other assets 3,842 3,184
---------- ----------
1,449,649 1,531,804
---------- ----------
Liabilities:
Debt--
Nonrecourse notes payable 673,143 698,462
Allocated general corporate debt 238,828 258,751
Deferred investment income 270,935 313,144
Preferred stock of subsidiaries 60,000 70,000
Other liabilities 27,901 24,831
---------- ----------
1,270,807 1,365,188
---------- ----------
Net assets $ 178,842 $ 166,616
========== ==========
- --------------------------------------------------------------------------------
OPERATING REVENUES
Total operating revenues increased 11.3% in 1999 versus 1998 and 10.0% in 1998
compared with 1997. Overall, the Company believes that the majority of the
increases in operating revenues is due to higher sales volume rather than
increased sales prices.
- --------------------------------------------------------------------------------
COST OF REVENUES
Cost of revenues as a percentage of revenues was 64.7% in 1999 compared with
65.4% in 1998 and 65.7% in 1997. The continued decline in this ratio was mainly
due to increased sales volume coupled with lower manufacturing costs.
- --------------------------------------------------------------------------------
SELLING, ADMINISTRATIVE AND R&D EXPENSES
Selling, administrative, and research and development expenses were 18.5% of
revenues in 1999 versus 18.4% in 1998 primarily due to nonrecurring charges in
1999, mostly offset by administrative expense reductions. Selling,
administrative and research and development expenses decreased to 18.4% in 1998
from 19.3% in 1997 because of increasing revenues and administrative expense
reductions.
- --------------------------------------------------------------------------------
PREMARK MERGER-RELATED COSTS
In the fourth quarter of 1999, the Company incurred pretax nonrecurring
transaction and compensation costs related to the Premark merger of $81.0
million (after-tax of $70.8 million or $.23 per diluted share).
23
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
INTEREST EXPENSE
Interest expense increased to $67.5 million in 1999 versus $29.2 million in
1998, primarily due to higher long-term debt and increased commercial paper
borrowings in 1999. Interest expense decreased to $29.2 million in 1998 versus
$31.5 million in 1997. Interest costs of $57.9 million in 1999, $64.4 million in
1998, and $49.3 million in 1997 attributed to the Leasing and Investments
segment have been classified in the segment's cost of revenues.
- --------------------------------------------------------------------------------
OTHER INCOME
Other income was $14.9 million in 1999 versus $1.0 million in 1998, primarily
due to 1998 losses on the sale of plant and equipment and on the sale of
operations. Other income was $1.0 million in 1998 versus $26.7 million in 1997,
primarily due to losses on the sale of operations in 1998 versus gains on the
sale of operations in 1997 and lower interest income in 1998 versus 1997.
- --------------------------------------------------------------------------------
INCOME TAXES
The effective tax rate was 37.8% in 1999, 36.8% in 1998 and 37.2% in 1997. 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 $622.5 million at December 31, 1999 and
$690.3 million at December 31, 1998 as it expects to continue to generate
significant taxable income in future years.
- --------------------------------------------------------------------------------
NET INCOME
Net income in 1999 of $841.1 million ($2.76 per diluted share) was 3.9% higher
than 1998 net income of $809.7 million ($2.66 per diluted share). Net income in
1999 before the Premark merger-related costs of $911.9 million ($2.99 per
diluted share) was 12.6% higher than 1998 net income of $809.7 million. Net
income in 1998 was 17.1% higher than 1997 net income of $691.6 million ($2.27
per diluted share).
- --------------------------------------------------------------------------------
FOREIGN CURRENCY
The strengthening of the U.S. dollar against foreign currencies in 1999, 1998
and 1997 resulted in decreased operating revenues of $59 million in 1999, $122
million in 1998 and $166 million in 1997 and decreased net income by
approximately 1 cent per diluted share in 1999 and 4 cents per diluted share in
1998 and 1997.
- --------------------------------------------------------------------------------
FINANCIAL POSITION
Net working capital at December 31, 1999 and 1998 is summarized as follows:
INCREASE
Dollars in thousands 1999 1998 (DECREASE)
- --------------------------------------------------------------
Current Assets:
Cash and equivalents $ 232,953 $ 109,526 $ 123,427
Trade receivables 1,630,937 1,465,899 165,038
Inventories 1,084,212 1,036,817 47,395
Other 324,829 416,357 (91,528)
---------- ---------- ----------
3,272,931 3,028,599 244,332
---------- ---------- ----------
Current Liabilities:
Short-term debt 553,655 428,019 125,636
Accounts payable
and accrued
expenses 1,376,415 1,274,165 102,250
Other 115,291 150,252 (34,961)
---------- ---------- ----------
2,045,361 1,852,436 192,925
---------- ---------- ----------
Net Working Capital $1,227,570 $1,176,163 $ 51,407
========== ========== ==========
Current Ratio 1.60 1.63
========== ==========
The increase in trade receivables and inventories at December 31, 1999 was due
to 1999 acquisitions and higher operating revenues in 1999 versus 1998. The
decrease in other current assets is the result of the use of Premark's
marketable securities to repay ITW's commercial paper subsequent to the merger.
The increase in accounts payable and accrued expenses is primarily due to
1999 acquisitions.
Short-term debt increased at December 31, 1999, as a result of $225 million
of notes which are due in 2000, offset by the decline in commercial paper.
In February 1999, the Company issued $500 million of 5.75% notes due March
1, 2009. The proceeds were used primarily to repay commercial paper.
Long-term debt at December 31, 1999, consisted of $125 million of 5.875%
notes, $100 million of 10.5% notes, $150 million of 6.875% notes, $500 million
of 5.75% notes, $673 million of nonrecourse notes, and $77 million of
capitalized lease obligations and other debt. Long-term debt increased $153
million from December 31, 1998 principally as a result of the issuance of the
$500 million notes in 1999 offset by the increase in current maturities of
long-term debt and the reduction of commercial paper borrowings. Excluding the
effect of the Leasing and Investments segment, the percentage of total debt to
total capitalization increased to 17.8% at December 31, 1999, from 14.3% at
December 31, 1998.
Stockholders' equity was $4.8 billion at December 31, 1999, compared with
$4.2 billion at December 31, 1998. Affecting equity were earnings of $841
million, dividends declared of $194 million, and unfavorable currency
translation adjustments of $76 million.
24
<PAGE> 5
The Statement of Cash Flows for the years ended December 31, 1999 and 1998 is
summarized below:
In thousands 1999 1998
- ----------------------------------------------------------
Net income $ 841,112 $ 809,747
Depreciation and amortization 343,284 296,567
Income from investments,
net of non-cash interest on
nonrecourse debt (107,195) (95,932)
Acquisitions (805,664) (921,629)
Additions to plant and equipment (335,918) (316,118)
Cash dividends paid (183,587) (150,934)
Net proceeds of debt 245,835 343,793
Purchase of investments (38,863) (13,232)
Proceeds from investments 81,064 50,455
Sales (purchases)
of short-term investments 132,986 (2,118)
Other, net (49,627) (103,571)
--------- ---------
Net increase (decrease) in cash
and equivalents $ 123,427 $(102,972)
========= =========
Net cash provided by operating activities of $1,037 million in 1999 and
$888 million in 1998 was primarily used for acquisitions, additions to plant and
equipment, and cash dividends. Long-term debt borrowings in 1999 were used to
repay commercial paper and to fund acquisitions. Commercial paper borrowings in
1998 were primarily used to fund acquisitions and to refinance maturing
long-term debt.
Dividends paid per share increased 22% to $.61 per share in 1999 from $.50
per share in 1998. 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, 1999 or 1998.
- --------------------------------------------------------------------------------
MARKET RISK
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt and certain mortgage-related
investments.
The Company has no cash flow exposure on its long-term obligations related
to changes in market interest rates. The Company primarily enters into long-term
debt obligations for general corporate purposes, including the funding of
capital expenditures and acquisitions. The Company has not entered into any
material derivative financial instruments to hedge interest rate risk on these
general corporate borrowings.
The Company has also issued nonrecourse notes in connection with the three
commercial mortgage transactions. The holders of these notes only have recourse
against certain mortgage-related assets.
The mortgage-related assets acquired in the commercial mortgage
transactions include 16 and 24 subperforming, variable rate, balloon loans at
December 31, 1999 and 1998, respectively. The fair value of these commercial
mortgage loans fluctuates as market interest rates change. The Company has
entered into swap and other related agreements to reduce its credit and interest
rate risks relative to the commercial mortgage loans and other mortgage-related
assets. See the Leasing & Investments section for additional details regarding
the net swap receivables.
The following table presents the Company's financial instruments for which
fair value is subject to changing market interest rates:
25
<PAGE> 6
MANAGEMENT'S DISCUSSION AND ANALYSIS
<TABLE>
<CAPTION>
GENERAL CORPORATE DEBT MORTGAGE-RELATED INVESTMENTS AND RELATED NONRECOURSE DEBT
----------------------------------------- ---------------------------------------------------------------
5.75% 6.875% 5.875%
NOTES NOTES DUE NOTES DUE COMMERCIAL 6.59% 7.00% 6.44%
DUE MARCH 1, NOVEMBER 15, DUE MARCH 1, MORTGAGE NET SWAP NONRECOURSE NONRECOURSE NONRECOURSE
In thousands 2009 2008 2000 LOANS RECEIVABLES NOTE NOTE NOTE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1999:
Estimated cash inflow
(outflow) by year
of principal maturity--
2000 $ -- $ -- $(125,000) $ 34,386 $ 6,962 $ (16,000) $ (9,319) $ --
2001 -- -- -- -- 78,119 (16,000) (31,286) --
2002 -- -- -- -- 32,517 (16,000) (13,979) (1,087)
2003 -- -- -- -- 37,795 (16,000) (23,431) (2,174)
2004 -- -- -- -- 40,470 (16,000) (23,431) (2,174)
2005 and thereafter (500,000) (150,000) -- 376,021 270,828 (121,500) (152,757) (212,005)
Total (500,000) (150,000) (125,000) 410,407 466,691 (201,500) (254,203) (217,440)
Estimated fair value (447,891) (135,961) (124,980) 375,057 364,258 (209,522) (263,386) (223,826)
Carrying value (500,000) (150,000) (125,000) 262,443 364,258 (201,500) (254,203) (217,440)
AS OF DECEMBER 31, 1998:
Total estimated cash
inflow (outflow) $ -- $(150,000) $(125,000) $ 569,218 $ 486,083 $(217,500) $(263,522) $ (217,440)
Estimated fair value -- (154,242) (126,270) 510,795 371,000 (237,784) (290,414) (233,834)
Carrying value -- (150,000) (125,000) 371,812 371,000 (217,500) (263,522) (217,440)
</TABLE>
- --------------------------------------------------------------------------------
Foreign Currency Risk
The Company operates in the United States and 39 other countries. In general,
the Company manufactures products that are sold in its significant foreign
markets in the particular local country. As the initial funding for these
foreign manufacturing operations is provided primarily through the permanent
investment of capital from the U.S. parent company, the Company and its
subsidiaries do not have significant assets or liabilities denominated in
currencies other than their functional currencies. As such, the Company does not
have any significant derivatives or other financial instruments which are
subject to foreign currency risk at December 31, 1999 or 1998.
- --------------------------------------------------------------------------------
YEAR 2000 ISSUE
The Company utilizes software and related technologies throughout its businesses
that could have been affected by the date change in the year 2000.
To determine the extent of the year 2000 compliance issues related to its
computer systems, including equipment with embedded chip technology, the Company
began an extensive internal study at all of its business units in 1997. All
testing of existing systems and remediation activities were completed by the end
of 1999.
The Company also had formal communications with its significant suppliers,
customers and other relevant third parties to determine the extent of their year
2000 compliance. No significant issues were identified.
The Company reviewed capital equipment that could have had embedded chip
issues as part of its internal year 2000 compliance study. No significant year
2000 issues related to the Company's equipment products were identified.
The total estimated cost of the Company's year 2000 compliance program was
approximately $58 million for 1997 through 1999. Of this amount, the majority
related to capital expenditures.
- --------------------------------------------------------------------------------
FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 including, without limitation,
statements regarding the adequacy of internally generated funds and the
recoverability of the Company's investment in mortgage-related assets. These
statements are subject to certain risks, uncertainties, and other factors which
could cause actual results to differ materially from those anticipated,
including, without limitation, the risks described herein. Important factors
that may influence future results include (1) a downturn in the construction,
food service, automotive, general industrial or real estate markets, (2)
deterioration in global and domestic business and economic conditions,
particularly in North America, Europe and Australia, (3) an interruption in, or
reduction in, introducing new products into the Company's product line, and (4)
an unfavorable environment for making acquisitions, domestic and foreign,
including adverse accounting or regulatory requirements and market values of
candidates.
26
<PAGE> 7
- --------------------------------------------------------------------------------
STATEMENT OF INCOME
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
----------------------------------------
In thousands except for per share amounts 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues $ 9,333,185 $ 8,386,971 $ 7,627,263
Cost of revenues 6,042,548 5,485,533 5,010,571
Selling, administrative, and research and development expenses 1,730,031 1,542,684 1,469,973
Amortization of goodwill and other intangible assets 74,222 50,008 41,431
Premark merger-related costs 81,020 -- --
----------- ----------- -----------
Operating Income 1,405,364 1,308,746 1,105,288
Interest expense (67,510) (29,216) (31,498)
Other income 14,858 1,017 26,650
----------- ----------- -----------
Income Before Income Taxes 1,352,712 1,280,547 1,100,440
Income taxes 511,600 470,800 408,851
----------- ----------- -----------
Net Income $ 841,112 $ 809,747 $ 691,589
=========== =========== ===========
Net Income Per Share:
Basic $ 2.80 $ 2.70 $ 2.31
=========== =========== ===========
Diluted $ 2.76 $ 2.66 $ 2.27
=========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF INCOME REINVESTED IN THE BUSINESS
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------
In thousands 1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, Beginning of Year $ 3,864,024 $ 3,242,996 $ 2,707,185
Net income 841,112 809,747 691,589
Cash dividends declared (193,981) (159,125) (135,261)
Adjustment to conform year-ends of Premark's international subsidiaries 2,323 -- --
Treasury stock issued for incentive plans (27,963) (29,594) (20,517)
----------- ----------- -----------
Balance, End of Year $ 4,485,515 $ 3,864,024 $ 3,242,996
=========== =========== ===========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF COMPREHENSIVE INCOME
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------
In thousands 1999 1998 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Income $ 841,112 $ 809,747 $ 691,589
Other comprehensive income:
Foreign currency translation adjustments (77,696) (14,413) (106,103)
Income tax related to foreign currency translation adjustments 1,803 (2,389) 1,716
--------- --------- ---------
Comprehensive income $ 765,219 $ 792,945 $ 587,202
========= ========= =========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
27
<PAGE> 8
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF FINANCIAL POSITION
Illinois Tool Works Inc. and Subsidiaries
DECEMBER 31
--------------------------
In thousands except shares 1999 1998
- ------------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and equivalents $ 232,953 $ 109,526
Trade receivables 1,630,937 1,465,899
Inventories 1,084,212 1,036,817
Deferred income taxes 188,729 180,787
Prepaid expenses and other current assets 136,100 235,570
----------- -----------
Total current assets 3,272,931 3,028,599
----------- -----------
Plant and Equipment:
Land 114,048 104,390
Buildings and improvements 926,306 851,691
Machinery and equipment 2,633,212 2,422,484
Equipment leased to others 118,164 107,187
Construction in progress 120,568 106,739
----------- -----------
3,912,298 3,592,491
Accumulated depreciation (2,278,367) (2,100,221)
----------- -----------
Net plant and equipment 1,633,931 1,492,270
----------- -----------
Investments 1,188,120 1,183,493
Goodwill & Other Intangibles 2,029,959 1,556,774
Deferred Income Taxes 433,792 509,486
Other Assets 501,526 441,866
----------- -----------
$ 9,060,259 $ 8,212,488
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ 553,655 $ 428,019
Accounts payable 470,200 421,043
Accrued expenses 906,215 853,122
Cash dividends payable 54,102 43,709
Income taxes payable 61,189 106,543
----------- -----------
Total current liabilities 2,045,361 1,852,436
----------- -----------
Noncurrent Liabilities:
Long-term debt 1,360,746 1,208,046
Other 838,729 908,634
----------- -----------
Total noncurrent liabilities 2,199,475 2,116,680
----------- -----------
Stockholders' Equity:
Common stock:
Issued--300,829,216 shares in 1999 and
306,150,973 shares in 1998 3,008 3,062
Additional paid-in-capital 517,210 730,822
Income reinvested in the business 4,485,515 3,864,024
Common stock held in treasury (1,783) (238,502)
Unearned restricted stock -- (3,400)
Cumulative translation adjustment (188,527) (112,634)
----------- -----------
Total stockholders' equity 4,815,423 4,243,372
----------- -----------
$ 9,060,259 $ 8,212,488
=========== ===========
The Notes to Financial Statements are an integral part of this statement.
28
<PAGE> 9
- --------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS
Illinois Tool Works Inc. and Subsidiaries
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31
-----------------------------------------
In thousands 1999 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Provided by (Used for) Operating Activities:
Net income $ 841,112 $ 809,747 $ 691,589
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 343,284 296,567 258,111
Change in deferred income taxes 105,343 58,553 (13,328)
Provision for uncollectible accounts 17,704 9,017 10,100
(Gain) loss on sale of plant and equipment (297) 4,514 6,534
Income from investments (153,593) (144,310) (93,652)
Non-cash interest on nonrecourse debt 46,398 48,378 35,638
(Gain) loss on sale of operations and affiliates (828) 3,786 (6,824)
Other non-cash items, net (9,936) (50) (6,788)
----------- ----------- -----------
Cash provided by operating activities 1,189,187 1,086,202 881,380
Change in assets and liabilities:
(Increase) decrease in--
Trade receivables (105,084) (24,410) (104,793)
Inventories 7,427 (3,480) (46,091)
Prepaid expenses and other assets (32,115) (34,348) (58,957)
Increase (decrease) in--
Accounts payable 4,381 (70,657) 41,242
Accrued expenses and other liabilities (2,263) (30,376) 35,203
Income taxes payable (24,074) (34,427) 70,730
Other, net (863) (724) 289
----------- ----------- -----------
Net cash provided by operating activities 1,036,596 887,780 819,003
----------- ----------- -----------
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents)
and additional interest in affiliates (805,664) (921,629) (296,861)
Additions to plant and equipment (335,918) (316,118) (260,102)
Purchase of investments (38,863) (13,232) (89,729)
Proceeds from investments 81,064 50,455 43,772
Proceeds from sale of plant and equipment 26,349 26,581 21,898
Proceeds from sale of operations and affiliates 8,679 17,006 168,383
Sales (purchases) of short-term investments 132,986 (2,118) 115,861
Other, net 2,997 73 3,635
----------- ----------- -----------
Net cash used for investing activities (928,370) (1,158,982) (293,143)
----------- ----------- -----------
Cash Provided by (Used for) Financing Activities:
Cash dividends paid (183,587) (150,934) (128,396)
Issuance of common stock 21,887 18,742 15,862
Net proceeds (repayments) of short-term debt (214,465) 318,497 (216,653)
Proceeds from long-term debt 499,681 167,755 4,629
Repayments of long-term debt (39,381) (142,459) (37,729)
Repurchase of treasury stock (44,995) (45,267) (53,380)
Other, net (15,567) 1,565 9,278
----------- ----------- -----------
Net cash provided by (used for) financing activities 23,573 167,899 (406,389)
----------- ----------- -----------
Effect of Exchange Rate Changes on Cash and Equivalents (8,372) 331 (21,600)
----------- ----------- -----------
Cash and Equivalents:
Increase (decrease) during the year 123,427 (102,972) 97,871
Beginning of year 109,526 212,498 114,627
----------- ----------- -----------
End of year $ 232,953 $ 109,526 $ 212,498
=========== =========== ===========
Cash Paid During the Year for Interest $ 69,977 $ 44,487 $ 45,084
=========== =========== ===========
Cash Paid During the Year for Income Taxes $ 414,346 $ 421,510 $ 318,569
=========== =========== ===========
Liabilities Assumed from Acquisitions $ 278,711 $ 255,019 $ 171,317
=========== =========== ===========
</TABLE>
See the Investments note for information regarding noncash transactions.
The Notes to Financial Statements are an integral part of this statement.
29
<PAGE> 10
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of Illinois Tool Works Inc.:
We have audited the accompanying statements of financial position of Illinois
Tool Works Inc. (a Delaware corporation) and Subsidiaries (ITW) as of December
31, 1999 and 1998, and the related statements of income, income reinvested in
the business, cash flows and comprehensive income for each of the three years in
the period ended December 31, 1999. 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 did not audit the
financial statements of Premark International, Inc., a company that merged with
ITW during 1999 in a transaction accounted for as a pooling-of-interests, as
discussed in the Premark Merger note below. Such statements are included in the
consolidated financial statements of Illinois Tool Works Inc. and Subsidiaries
and reflect total assets of 23% and 25% as of December 31, 1999 and 1998, and
total revenues of 31%, 33% and 32% for the years ended December 31, 1999, 1998,
and 1997, respectively, of the related consolidated totals, after restatement to
reflect certain adjustments as set forth in the Premark Merger note. The
financial statements of Premark International, Inc. prior to those adjustments
were audited by other auditors whose report has been furnished to us and our
opinion, insofar as it relates to amounts included for Premark International,
Inc., is based solely upon the report of the other auditors.
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 and the report of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audit and the report of the other auditors,
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, 1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Chicago, Illinois
January 31, 2000
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" or "ITW") is a multinational
manufacturer of highly engineered products and specialty systems. The Company
primarily serves the construction, food retail and service, 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. All prior year amounts and share
data in the financial statements and notes to financial statements have been
restated to reflect the merger of the Company with Premark International, Inc.
(see Premark Merger note below).
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.
- --------------------------------------------------------------------------------
PREMARK MERGER--On November 23, 1999, a wholly owned subsidiary of ITW merged
with Premark International, Inc. ("Premark"), a commercial manufacturer of food
equipment and decorative products. Shareholders of Premark received .8081 shares
of ITW common stock in exchange for each share of Premark common stock
outstanding. A total of 49,781,665 of ITW common shares were issued to the
former Premark shareholders in connection with the merger.
The merger was accounted for under the pooling-of-interests accounting
method and accordingly, ITW's historical financial statements for periods prior
to the merger have been restated to include the results of operations, financial
position and cash flows of Premark, as though the companies had been combined
during such periods.
30
<PAGE> 11
Combined and separate results of ITW and Premark for the periods preceding the
merger are summarized below:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999 FOR THE YEAR ENDED FOR THE YEAR ENDED
In thousands: (UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating revenues:
ITW $ 4,691,815 $ 5,647,889 $ 5,220,433
Premark 2,150,526 2,739,082 2,406,830
Adjustments 3,515 -- --
----------- ----------- -----------
As restated $ 6,845,856 $ 8,386,971 $ 7,627,263
=========== =========== ===========
Net income:
ITW $ 551,408 $ 672,784 $ 586,951
Premark 111,885 136,141 103,802
Adjustments (2,223) 822 836
----------- ----------- -----------
As restated $ 661,070 $ 809,747 $ 691,589
=========== =========== ===========
</TABLE>
The adjustments to the previously reported results of ITW and Premark related to
conforming depreciation methods, methods of recognizing the transition
obligation for postretirement benefits, and the fiscal year-ends of foreign
subsidiaries.
In the fourth quarter of 1999, the Company incurred pretax nonrecurring
transaction and compensation costs related to the Premark merger of $81,020,000
(after-tax of $70,792,000 or $.23 per diluted share).
- --------------------------------------------------------------------------------
ACQUISITIONS AND DISPOSITIONS--During 1999, 1998 and 1997, the Company acquired
31, 46 and 30 operations, respectively, none of which materially affected
consolidated results.
- --------------------------------------------------------------------------------
RESEARCH AND DEVELOPMENT EXPENSES are recorded as expense in the year incurred.
These costs were $114,605,000 in 1999, $101,578,000 in 1998 and
$97,821,000 in 1997.
- --------------------------------------------------------------------------------
RENTAL EXPENSE was $91,797,000 in 1999, $83,290,000 in 1998 and $78,514,000 in
1997.
Future minimum lease payments for the years ended December 31 are as
follows:
In thousands
- ---------------------------------------------
2000 $ 71,961
2001 58,840
2002 41,320
2003 32,779
2004 25,434
2005 and future years 39,138
--------
$269,472
========
- --------------------------------------------------------------------------------
OTHER INCOME consisted of the following:
<TABLE>
<CAPTION>
In thousands 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 17,560 $ 15,918 $ 24,895
Gain (loss) on sale of operations and affiliates 828 (3,786) 6,824
Gain (loss) on sale of plant and equipment 297 (4,514) (6,534)
Gain (loss) on foreign currency translation (5,460) (2,211) 1,455
Other, net 1,633 (4,390) 10
-------- -------- --------
$ 14,858 $ 1,017 $ 26,650
======== ======== ========
</TABLE>
31
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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:
In thousands 1999 1998 1997
- --------------------------------------------------------------
U.S. federal income taxes:
Current $ 318,307 $ 275,949 $ 255,775
Deferred 47,684 11,040 13,983
--------- --------- ---------
365,991 286,989 269,758
--------- --------- ---------
Foreign income taxes:
Current 77,283 98,446 125,864
Deferred 11,557 30,863 (33,132)
--------- --------- ---------
88,840 129,309 92,732
--------- --------- ---------
State income taxes:
Current 49,163 48,141 49,640
Deferred 7,606 6,361 (3,279)
--------- --------- ---------
56,769 54,502 46,361
--------- --------- ---------
$ 511,600 $ 470,800 $ 408,851
========= ========= =========
Income before income taxes for domestic and foreign operations was as follows:
In thousands 1999 1998 1997
- ---------------------------------------------------
Domestic $ 992,633 $ 981,173 $ 910,799
Foreign 360,079 299,374 189,641
---------- ---------- ----------
$1,352,712 $1,280,547 $1,100,440
========== ========== ==========
The reconciliation between the U.S. federal statutory tax rate and the effective
tax rate was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory tax rate 35.0% 35.0% 35.0%
State income taxes, net of U.S. federal tax benefit 2.7 2.7 2.7
Nondeductible goodwill amortization 1.1 .7 .7
Differences between U.S. federal statutory and foreign tax rates -- .6 1.4
Other, net (1.0) (2.2) (2.6)
---- ---- ----
Effective tax rate 37.8% 36.8% 37.2%
==== ==== ====
</TABLE>
Deferred U.S. federal income taxes and foreign withholding taxes have not been
provided on approximately $483,000,000 and $337,000,000 of undistributed
earnings of international affiliates as of December 31, 1999 and 1998,
respectively. 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. If these
undistributed earnings were not considered permanently reinvested, additional
deferred taxes of approximately $84,000,000 and $50,000,000 would have been
provided at December 31, 1999 and 1998, respectively.
32
<PAGE> 13
The components of deferred income tax assets and liabilities at December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------- -----------------------
In thousands ASSET LIABILITY ASSET LIABILITY
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Acquisition asset basis differences $ 43,390 $ (18,545) $ 34,900 $ (25,121)
Inventory reserves, capitalized tax cost and LIFO inventory 28,644 (10,909) 24,279 (10,550)
Investments 287,965 (30,278) 384,632 (39,505)
Plant and equipment 11,973 (58,866) 12,451 (54,970)
Accrued expenses and reserves 129,440 -- 142,292 --
Employee benefit accruals 199,216 -- 186,469 --
Foreign tax credit carryforwards 34,503 -- 34,255 --
Net operating loss carryforwards 51,464 -- 51,410 --
Allowances for uncollectible accounts 6,751 -- 6,287 --
Prepaid pension assets -- (34,189) -- (27,735)
Other 39,816 (24,227) 39,648 (25,455)
--------- --------- --------- ---------
Gross deferred income tax assets (liabilities) 833,162 (177,014) 916,623 (183,336)
Valuation allowances (33,627) -- (43,014) --
--------- --------- --------- ---------
Total deferred income tax assets (liabilities) $ 799,535 $(177,014) $ 873,609 $(183,336)
========= ========= ========= =========
Net deferred income tax assets $ 622,521 $ 690,273
========= =========
</TABLE>
No valuation allowance has been recorded on the net deferred income tax assets
at December 31, 1999 and 1998 as the Company expects to continue to generate
significant taxable income in future years.
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $125,372,000 available to offset future taxable income in the U.S.
and certain foreign jurisdictions which expire as follows:
in thousands
- ------------------------------------
2000 $ 1,898
2001 1,794
2002 5,768
2003 3,460
2004 15,030
2005 4,822
2006 241
2007 --
2008 1,560
2009 --
2010 540
2011 755
2012 2,360
2013 2,123
2014 334
2015 --
2016 --
2017 2,653
2018 3,983
Do not expire 78,051
--------
$125,372
========
33
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NET INCOME PER SHARE--In 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, Earnings per Share ("SFAS 128"). Under SFAS 128,
net income per basic share is computed by dividing net income by the weighted
average number of shares outstanding for the period. Net income per diluted
share is computed by dividing net income by the weighted average number of
shares assuming dilution. Dilutive shares reflect the potential additional
shares that would be outstanding if the dilutive stock options outstanding were
exercised during the period. The computation of net income per share was as
follows:
<TABLE>
<CAPTION>
In thousands except per share data 1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $841,112 $809,747 $691,589
======== ======== ========
Net income per share--Basic:
Weighted average common shares 300,158 299,912 299,663
-------- -------- --------
Net income per share--Basic $ 2.80 $ 2.70 $ 2.31
======== ======== ========
Net income per share--Diluted:
Weighted average common shares 300,158 299,912 299,663
Effect of dilutive stock options 4,491 4,729 4,887
-------- -------- --------
Weighted average common shares assuming dilution 304,649 304,641 304,550
-------- -------- --------
Net income per share--Diluted $ 2.76 $ 2.66 $ 2.27
======== ======== ========
</TABLE>
Options to purchase 1,128,639 shares of common stock at an average price of
$54.61 per share were outstanding at December 31, 1997, but were not included in
the computation of diluted net income per share for the period because the
options' exercise price was greater than the average market price of the common
shares. These options will expire in 2007. There were no significant options
outstanding at December 31, 1999 and 1998 that had an exercise price greater
than the average market price.
- --------------------------------------------------------------------------------
CASH AND EQUIVALENTS included interest-bearing deposits of $83,392,000 at
December 31, 1999 and $27,434,000 at December 31, 1998.
Interest-bearing deposits have maturities of 90 days or less and are
stated at cost, which approximates market.
- --------------------------------------------------------------------------------
TRADE RECEIVABLES as of December 31, 1999 and 1998 were net of allowances for
uncollectible accounts of $54,900,000 and $48,600,000, respectively.
- --------------------------------------------------------------------------------
INVENTORIES at December 31, 1999 and 1998 were as follows:
In thousands 1999 1998
- -----------------------------------------------------------
Raw material $ 409,532 $ 376,892
Work-in-process 94,815 89,073
Finished goods 579,865 570,852
---------- ----------
$1,084,212 $1,036,817
========== ==========
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 a majority of the U.S. operations.
Inventories priced at LIFO were 45% of total inventories as of December 31, 1999
and 1998. 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 $79,600,000 and $87,800,000 higher
than reported at December 31, 1999 and 1998, 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.
Depreciation was $269,062,000 in 1999 compared with $246,559,000 in 1998
and $216,680,000 in 1997 and was reflected primarily in cost of revenues.
Depreciation of plant and equipment for financial reporting purposes is computed
principally on an accelerated basis.
The range of useful lives used to depreciate plant and equipment is as
follows:
Buildings and improvements 10-50 years
Machinery and equipment 3-20 years
Equipment leased to others Term of lease
34
<PAGE> 15
- --------------------------------------------------------------------------------
INVESTMENTS as of December 31,
1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1999 1998
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial mortgage loans $ 262,443 $ 371,812
Commercial real estate 274,407 217,340
Net swap receivables 364,258 371,000
Receivable from mortgage servicer 105,360 58,546
Prepaid forward contract 21,247 20,247
Leveraged, direct financing and sales-type leases of equipment 62,269 78,396
Properties held for sale 24,200 23,035
Property developments 50,542 16,482
Affordable housing 1,890 11,320
Annuity contract 5,993 5,483
U.S. Treasury security 5,292 4,869
Other 10,219 4,963
---------- ----------
$1,188,120 $1,183,493
========== ==========
</TABLE>
In 1995, 1996 and 1997, the Company acquired pools of mortgage-related assets in
exchange for nonrecourse notes payable of $739,705,000, preferred stock of
subsidiaries of $60,000,000 and cash of $240,000,000. The mortgage-related
assets acquired in these transactions are located throughout the U.S. and
include 16 and 24 subperforming, variable rate, balloon loans and 24 and 23
foreclosed properties at December 31, 1999 and 1998, respectively. 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 $26,000,000 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 $26,000,000 a year, the Company has a collateral right
against the cash flow generated by three separate pools of mortgage-related
assets (owned by third parties in which the Company has minimal interests) which
have a total fair value of approximately $2,700,000,000 at December 31, 1999.
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 of $333,325,000 at December 31, 1999 (net of the related nonrecourse
notes payable) through its expected net cash flow of $26,000,000 per year for
the remainder of the ten-year periods and its estimated $413,340,000 share of
the total proceeds from disposition of the mortgage-related assets and principal
repayments.
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, 1999 and 1998, the impairment loss allowance was $10,100,000 and
$5,600,000, respectively. The estimated fair value of the commercial mortgage
loans, based on discounted future cash flows, exceeds the carrying value at
December 31, 1999 and 1998 by $112,614,000 and $138,983,000, respectively. 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.
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), was issued in 1998.
SFAS 133 requires that an entity recognize certain derivatives in the Statement
of Financial Position and measure those instruments at fair value. The Company
is required to adopt SFAS 133 for annual and interim periods beginning after
June 15, 2000. The adoption of SFAS 133 is not expected to have a material
effect on the Company's financial position or results of operations.
35
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
The Company's investment in leveraged and direct financing leases relates
to equipment used in the transportation industry. The components of the
investment in leveraged, direct financing and sales-type leases at December 31,
1999 and 1998 were as shown below:
<TABLE>
<CAPTION>
In thousands 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lease contracts receivable (net of principal and interest on nonrecourse financing) $ 63,603 $ 81,400
Estimated residual value of leased assets 21,313 25,428
Unearned and deferred income (22,647) (28,432)
-------- --------
Investment in leveraged, direct financing and sales-type leases 62,269 78,396
Deferred income taxes related to leveraged and direct financing leases (28,038) (34,281)
-------- --------
Net investment in leveraged, direct financing and sales-type leases $ 34,231 $ 44,115
======== ========
</TABLE>
- --------------------------------------------------------------------------------
GOODWILL AND OTHER INTANGIBLES--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. Goodwill amortization expense was
$57,470,000 in 1999, $37,763,000 in 1998 and $29,588,000 in 1997. Accumulated
goodwill amortization was $261,188,000 and $207,341,000 at December 31, 1999 and
1998, respectively.
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 five to 17 years. Amortization expense was $16,752,000
in 1999, $12,245,000 in 1998 and $11,843,000 in 1997. Accumulated amortization
was $93,473,000 and $74,985,000 at December 31, 1999 and 1998.
The Company assesses the recoverability of unamortized goodwill and other
intangible assets, and 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.
- --------------------------------------------------------------------------------
OTHER ASSETS as of December 31, 1999 and 1998 consisted of the following:
In thousands 1999 1998
- --------------------------------------------------------------------------------
Cash surrender value of life insurance policies $132,042 $113,999
Investment in unconsolidated affiliates 167,206 135,659
Prepaid pension assets 95,116 77,224
Other 107,162 114,984
-------- --------
$501,526 $441,866
======== ========
- --------------------------------------------------------------------------------
RETIREMENT PLANS AND POSTRETIREMENT BENEFITS--Summarized information regarding
the Company's defined benefit pension and postretirement health care and life
insurance benefits was as follows:
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT BENEFITS
----------------------------------- ------------------------------------
In thousands 1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic
benefit cost:
Service cost $ 50,105 $ 40,861 $ 40,427 $ 5,954 $ 5,034 $ 4,781
Interest cost 72,125 66,812 62,788 17,446 16,707 17,346
Expected return on plan assets (102,568) (83,090) (127,360) -- -- --
Amortization of prior service
(benefit) cost 6,174 6,037 6,136 (574) (493)
Amortization of actuarial (gain) loss 1,147 (4,597) 46,756 (21) (1,835) (1,379)
Amortization of transition amount (6,813) (6,831) (6,974) -- -- --
--------- --------- --------- --------- --------- ---------
Net periodic benefit cost $ 20,170 $ 19,192 $ 21,773 $ 22,805 $ 19,413 $ 20,255
========= ========= ========= ========= ========= =========
</TABLE>
36
<PAGE> 17
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT BENEFITS
-------------------------- ---------------------------
In thousands 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in benefit obligation as of September 30:
Benefit obligation at beginning of period $ 1,122,055 $ 941,112 $ 255,890 $ 246,657
Service cost 50,105 40,861 5,954 5,034
Interest cost 72,125 66,812 17,446 16,707
Plan participant contributions 2,081 1,685 4,621 4,261
Amendments (45,861) 4,219 63,076 --
Actuarial (gain) loss (95,824) 96,770 18,469 6,262
Acquisitions and divestitures 42,341 30,679 9,284 --
Benefits paid (68,571) (63,303) (26,272) (23,031)
Liabilities from other plans 2,178 5,066 -- --
Foreign currency translation (8,922) (1,846) -- --
----------- ----------- ----------- -----------
Benefit obligation at end of period $ 1,071,707 $ 1,122,055 $ 348,468 $ 255,890
=========== =========== =========== ===========
Change in plan assets as of September 30:
Fair value of plan assets at beginning of period $ 1,078,130 $ 1,122,941 $ -- $ --
Actual return on plan assets 208,677 (13,224) -- --
Acquisitions and divestitures 48,447 9,739 -- --
Company contributions 24,417 25,506 21,651 18,770
Plan participant contributions 2,081 1,685 4,621 4,261
Benefits paid (68,571) (63,303) (26,272) (23,031)
Assets from other plans 3,541 -- -- --
Foreign currency translation (4,607) (5,214) -- --
----------- ----------- ----------- -----------
Fair value of plan assets at end of period $ 1,292,115 $ 1,078,130 $ -- $ --
=========== =========== =========== ===========
Net prepaid (accrued) benefit cost as of September 30:
Funded status $ 220,408 $ (43,925) $ (348,468) $ (255,890)
Unrecognized net actuarial (gain) loss (179,338) 22,012 (4,922) (23,314)
Unrecognized prior service (benefit) cost (25,721) 26,252 58,058 (5,592)
Unrecognized net transition amount (9,922) (16,963) -- --
----------- ----------- ----------- -----------
Net prepaid (accrued) benefit cost $ 5,427 $ (12,624) $ (295,332) $ (284,796)
=========== =========== =========== ===========
Plans with accumulated benefit obligation
in excess of plan assets as of September 30:
Projected benefit obligation $ 87,359 $ 94,608
=========== ===========
Accumulated benefit obligation $ 83,679 $ 91,128
=========== ===========
Fair value of plan assets $ 5,044 $ 6,932
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Pension Postretirement Benefits
----------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Weighted average assumptions:
Discount rate 7.19% 6.60% 7.46% 7.50% 6.75% 7.38%
Expected return on plan assets 9.68% 9.92% 9.15% -- -- --
Rate of compensation increases 4.24% 4.33% 4.21% -- -- --
Current health care cost trend rate -- -- -- 5.43% 5.82% 6.23%
Ultimate health care cost trend rate -- -- -- 5.00% 5.22% 5.24%
</TABLE>
37
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
In 1999, the company amended the primary postretirement health care plan to
provide benefits to substantially all domestic employees and amended the primary
pension plan to change the benefit formula.
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Effect on total of service and interest cost components 7.76% (4.52%)
Effect on postretirement benefit obligation 4.06% (3.34%)
</TABLE>
In addition to the above pension benefits, the Company sponsors defined
contribution retirement plans covering the majority of domestic employees. The
Company's contributions to these plans were $29,900,000 in 1999, $29,200,000 in
1998 and $27,500,000 in 1997.
- --------------------------------------------------------------------------------
SHORT-TERM DEBT as of December 31, 1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
In thousands 1999 1998
- ----------------------------------------------------------------------
<S> <C> <C>
Bank overdrafts $ 60,785 $ 64,008
Commercial paper 120,626 226,813
Current maturities of long-term debt 264,302 40,654
Australian cash advance facility 29,451 51,007
Other borrowings by foreign subsidiaries 78,491 45,537
-------- --------
$553,655 $428,019
======== ========
</TABLE>
Commercial paper is issued at a discount and generally matures 30 to 90 days
from the date of issuance. The weighted average interest rate on commercial
paper was 5.04% at December 31, 1999 and 5.15% at December 31, 1998.
In 1996, the Company entered into a 364-day Australian cash advance
facility with maximum available borrowings of Australian $325,000,000. As of
December 31, 1999, this facility has been amended to decrease the maximum
available borrowings to Australian $95,000,000 and to extend the term of the
facility to the first quarter of 2000. The facility had an interest rate of 5.9%
at December 31, 1999 and 5.2% at December 31, 1998.
The weighted average interest rate on other foreign borrowings was 4.2% at
December 31, 1999 and 6.1% at December 31, 1998.
On June 30, 1999, the Company entered into a $400,000,000 Credit Agreement
with a maturity date of June 28, 2000. No amounts were outstanding under this
facility at December 31, 1999.
- --------------------------------------------------------------------------------
ACCRUED EXPENSES as of December 31, 1999 and 1998 consisted of accruals for:
In thousands 1999 1998
- --------------------------------------------------------------------------------
Compensation and employee benefits $301,338 $293,594
Warranties and maintenance service agreements 112,806 114,958
Taxes other than income 51,724 34,335
Deferred investment income 42,211 42,211
Other 398,136 368,024
-------- --------
$906,215 $853,122
======== ========
38
<PAGE> 19
- --------------------------------------------------------------------------------
LONG-TERM DEBT at December 31, 1999 and 1998 consisted of the following:
In thousands 1999 1998
- --------------------------------------------------------------------------------
5.875% notes due March 1, 2000 $ 125,000 $ 125,000
10.5% notes due September 15, 2000 100,000 100,000
6.875% notes due November 15, 2008 150,000 150,000
5.75% notes due March 1, 2009 500,000 --
6.59% nonrecourse note due semiannually through
December 31, 2005 201,500 217,500
7.00% nonrecourse note due semiannually through
November 30, 2006 254,203 263,522
6.44% nonrecourse note due semiannually from
August 31, 2002 through February 29, 2008 217,440 217,440
Commercial paper -- 100,000
Other, including capitalized lease obligations 76,905 75,238
----------- -----------
1,625,048 1,248,700
Current maturities (264,302) (40,654)
----------- -----------
$ 1,360,746 $ 1,208,046
=========== ===========
In 1990, the Company issued redeemable $100,000,000 of 10.5% notes due September
15, 2000, at 99.304% of face value. The effective interest rate of the notes is
10.6%. The quoted market price of the notes exceeded the carrying value by
approximately $2,328,000 at December 31, 1999, and $8,109,000 at December 31,
1998.
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
price of the notes was below the carrying value by approximately $20,000 at
December 31, 1999, and exceeded the carrying value by approximately $1,270,000
at December 31, 1998.
In 1998, the Company issued $150,000,000 of 6.875% notes due November 15,
2008, at 99.228% of face value. The notes may not be redeemed by the Company
prior to maturity. The effective interest rate of the notes is 6.9%. The quoted
market price of the notes was below the carrying value by approximately
$14,039,000 at December 31, 1999, and exceeded the carrying value by
approximately $4,242,000 at December 31, 1998.
In 1999, the Company issued redeemable $500,000,000 of 5.75% notes due
March 1, 2009, at 99.281% of face value. The effective rate of the notes is
5.8%. The quoted market price of the notes was below the carrying value by
approximately $52,109,000 at December 31, 1999.
The Company issued a $256,000,000, 6.28% nonrecourse note at face value in
December 1995, a $266,265,000, 7.0% nonrecourse note at face value in December
1996 and a $217,440,000, 6.44% nonrecourse note at face value in December 1997.
In 1997, the Company refinanced the 6.28% nonrecourse note with a 6.59%
nonrecourse note with similar terms. The holders of these notes only have
recourse against the commercial mortgage loans, commercial real estate and net
swap receivables, which are included in investments. The estimated fair value of
the three nonrecourse notes, based on discounted cash flows, exceeded the
carrying value by $23,591,000 at December 31, 1999, and $63,570,000 at
December 31, 1998.
In 1992, the Company entered into a $300,000,000 revolving credit facility
(RCF). In 1994, the Company canceled $150,000,000 of the RCF. In 1996, the
Company amended the RCF to increase the maximum available borrowings to
$250,000,000 and extended the commitment termination date to May 30, 2001. In
September 1998, the Company amended the RCF to increase the maximum available
borrowings to $350,000,000 and extend the termination date to September 30,
2003. 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, 1999 or 1998. 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, 1999.
In 1998, the commercial paper balance expected to remain outstanding beyond
one year has been classified as long-term, 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 outstanding at December 31, 1999, bears interest at rates
ranging from 1.5% to 26.2%, with maturities through the year 2012.
Scheduled maturities of long-term debt for the years ended December 31 are
as follows:
In thousands
- ----------------------------------------
2001 $ 65,065
2002 43,013
2003 55,485
2004 44,949
2005 and future years 1,152,234
----------
$1,360,746
==========
39
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
OTHER NONCURRENT LIABILITIES at December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
In thousands 1999 1998
- ---------------------------------------------------------------------------
<S> <C> <C>
Deferred investment income $228,724 $270,933
Postretirement benefit obligation 283,231 277,917
Preferred stock of subsidiaries 60,000 70,000
Other 266,774 289,784
-------- --------
$838,729 $908,634
======== ========
</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, ADDITIONAL PAID-IN-CAPITAL AND COMMON STOCK HELD IN TREASURY
transactions during 1999, 1998 and 1997 are shown below. On May 9, 1997, the
stockholders approved a) an amendment to the Restated Certificate of
Incorporation changing the number of authorized shares of common stock from
150,000,000 shares without par value to 350,000,000 shares with a par value of
$.01 and b) a two-for-one split of the Company's common stock, with a
distribution date of May 27, 1997, at a rate of one additional share for each
common share held by stockholders of record on May 20, 1997. All per share data
in this report has been restated to reflect the stock split.
<TABLE>
<CAPTION>
ADDITIONAL COMMON STOCK
COMMON STOCK PAID-IN-CAPITAL HELD IN TREASURY
--------------------------- --------------- ----------------------------
In thousands except shares SHARES AMOUNT AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 151,901,125 $ 685,548 $ -- (2,670,817) $ (213,276)
During 1997--
Adjustment to reflect the May 1997 stock split 151,901,125 -- -- (2,670,817) --
Adjustment to reflect change in par value -- (686,827) 686,827 -- --
Shares surrendered on exercise of stock options (33,162) (10) (744) (14,862) (796)
Tax benefits related to stock options exercised -- -- 13,910 -- --
Repurchase of treasury stock -- -- -- (1,616,200) (53,380)
Shares issued for acquisitions 1,181,228 289 (14) -- --
Shares issued for stock incentive and
restricted stock grants 677,592 4,056 4,4528 85,577 29,521
----------- ------- ------------ -------- ------------
Balance, December 31, 1997 305,627,908 3,056 704,431 (6,087,119) (237,931)
=========== ===== ======= ========== ========
During 1998--
Shares surrendered on exercise of stock options (28,334) -- (1,679) (3,163) (176)
Tax benefits related to stock options exercised -- -- 19,064 -- --
Repurchase of treasury stock -- -- -- (1,167,704) (45,267)
Shares issued for stock incentive and
restricted stock grants 551,399 6 9,006 1,199,078 44,872
----------- ------- ------------ -------- ------------
Balance, December 31, 1998 306,150,973 3,062 730,822 (6,058,908) (238,502)
=========== ===== ======= ========== ========
During 1999--
Shares surrendered on exercise of stock options (54,437) (1) (3,703) (72,633) (3,449)
Tax benefits related to stock options exercised -- -- 22,497 -- --
Repurchase of treasury stock -- -- -- (1,058,611) (44,995)
Shares issued for stock incentive and
restricted stock grants 713,019 7 13,180 957,503 40,118
Cash paid for Premark's fractional shares (8,226) -- (601) -- --
Cancellation of Premark's treasury shares (5,972,113) (60) (244,985) 5,972,113 245,045
----------- ------- ------------ -------- ------------
Balance, December 31, 1999 300,829,216 $ 3,008 $ 517,210 (260,536) $ (1,783)
=========== ======= ============ ======== ============
Authorized, December 31, 1999 350,000,000
===========
</TABLE>
40
<PAGE> 21
- --------------------------------------------------------------------------------
CASH DIVIDENDS declared were $.65 per share in 1999, $.53 per share in 1998 and
$.45 per share in 1997. Cash dividends paid were $.61 per share in 1999, $.50
per share in 1998 and $.43 per share in 1997.
- -------------------------------------------------------------------------------
COMPREHENSIVE INCOME--During 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income, which established
standards for reporting and displaying comprehensive income and its components
in a separate financial statement. Comprehensive Income is defined as the
changes in equity during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners. The Company's only component of other comprehensive income is foreign
currency translation adjustments.
- --------------------------------------------------------------------------------
STOCK OPTIONS have been issued to officers and other employees under ITW's 1996
Stock Incentive Plan and Premark's 1994 Incentive Plan. At December 31, 1999,
26,065,445 shares were reserved for issuance under these plans. Option prices
are 100% of the common stock fair market value on the date of grant. Statement
of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), 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 123 was as follows:
In thousands except per share data 1999 1998 1997
- --------------------------------------------------------------------------------
Net Income:
As reported $841,112 $809,747 $691,589
Pro forma 807,301 797,152 684,097
Net income per basic share:
As reported $2.80 $2.70 $2.31
Pro forma 2.69 2.66 2.28
Net income per diluted share:
As reported $2.76 $2.66 $2.27
Pro forma 2.65 2.62 2.25
The estimated fair value of each option granted by ITW and Premark is calculated
using the Black-Scholes option pricing model. The following summarizes the
assumptions used in the model:
<TABLE>
<CAPTION>
ITW PREMARK
------------------------ ---------------------------
1999 1998 1997 1999 1998 1997
- ------------------------------------------------------------ ---------------------------
<S> <C> <C> <C> <C> <C> <C>
Risk-free interest rate 6.5% 4.8% 5.9% 5.8% 5.1% 6.1%
Expected stock volatility 27.1% 24.5% 21.7% 28.7% 27.0% 26.0%
Dividend yield 1.11% 1.20% 1.29% 1.20% 1.30% 1.30%
Expected years until exercise 5.5 5.5 5.5 5.1 5.1 5.1
</TABLE>
41
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
Stock option activity during 1999, 1998 and 1997, including the retroactive
effect of converting Premark's options into ITW options, is summarized as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------- ---------------------------- ----------------------------
NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Under option at beginning of year 11,849,368 $27.74 11,562,274 $ 21.85 11,527,898 $ 16.21
Granted 1,864,925 60.30 1,990,834 49.36 1,786,675 49.02
Exercised (1,667,509) 15.56 (1,651,251) 12.23 (1,552,895) 11.50
Canceled or expired (96,141) 42.83 (52,489) 36.78 (199,404) 19.81
---------- ---------- ----------
Under option at end of year 11,950,643 34.41 11,849,368 27.74 11,562,274 21.85
========== ========== ==========
Exercisable at year-end 9,100,013 6,599,519 6,464,813
Available for grant at year-end 14,114,802 15,687,710 17,595,276
Weighted average fair value of
options granted during the year $20.69 $ 14.39 $ 14.53
</TABLE>
The following table summarizes information on stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------------------- ---------------------------------------
WEIGHTED AVERAGE
RANGE OF NUMBER OUTSTANDING REMAINING WEIGHTED AVERAGE NUMBER EXERCISABLE WEIGHTED AVERAGE
EXERCISE PRICES 1999 CONTRACTUAL LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.13-15.12 2,790,082 3.45 years $10.99 2,790,082 $10.99
15.72-30.50 3,292,211 5.56 years 23.23 3,292,211 23.23
31.43-46.59 2,336,816 8.19 years 39.53 2,172,316 39.98
51.06-65.50 3,531,534 9.03 years 59.93 845,404 55.86
11,950,643 6.61 years 34.41 9,100,013 26.51
</TABLE>
- --------------------------------------------------------------------------------
SEGMENT INFORMATION--In 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS 131"). SFAS 131 requires that segment information be
reported based on the way the segments are organized within the Company for
making operating decisions and assessing performance.
The Company has more than 500 operations in 40 countries which are
aggregated and organized for internal reporting purposes into the following six
segments:
Engineered Products--North America: Businesses that are located in North
America and that manufacture short lead-time components and fasteners, and
specialty products such as adhesives, resealable packaging and electronic
component packaging.
Engineered Products--International: Businesses that are located outside
North America and that manufacture short lead-time components and fasteners, and
specialty products such as electronic component packaging and adhesives.
Specialty Systems--North America: Businesses that are located in North
America and that produce longer lead-time machinery and related consumables, and
specialty equipment for applications such as food service and industrial spray
coating.
Specialty Systems--International: Businesses that are located outside North
America and that manufacture longer lead-time machinery and related consumables,
and specialty equipment for food service and industrial spray coating.
Consumer Products: Businesses that are located primarily in North America
and that manufacture household products that are used by consumers, including
small electric appliances, physical fitness equipment and ceramic tile.
Leasing & Investments: Businesses that make opportunistic investments in
mortgage-related assets, leveraged and direct financing leases of equipment,
properties and property developments and affordable housing.
42
<PAGE> 23
Segment information for 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
In thousands 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues:
Engineered Products--North America $ 2,938,906 $ 2,538,749 $ 2,258,828
Engineered Products--International 1,321,513 1,036,211 871,699
Specialty Systems--North America 3,130,347 2,876,812 2,787,929
Specialty Systems--International 1,592,855 1,575,290 1,414,324
Consumer Products 501,275 488,686 478,675
Leasing & Investments 157,385 149,748 101,110
Intersegment revenues (309,096) (278,525) (285,302)
----------- ----------- -----------
$ 9,333,185 $ 8,386,971 $ 7,627,263
=========== =========== ===========
Operating Income:
Engineered Products--North America $ 561,742 $ 477,547 $ 402,395
Engineered Products--International 132,808 127,260 124,821
Specialty Systems--North America 537,555 468,352 399,613
Specialty Systems--International 154,022 155,110 116,317
Consumer Products 15,326 12,925 25,053
Leasing & Investments 84,931 67,552 37,089
Premark merger-related costs (81,020) -- --
----------- ----------- -----------
$ 1,405,364 $ 1,308,746 $ 1,105,288
=========== =========== ===========
Depreciation and Amortization:
Engineered Products--North America $ 103,373 $ 92,164 $ 79,566
Engineered Products--International 66,405 47,407 36,107
Specialty Systems--North America 99,350 85,537 75,540
Specialty Systems--International 51,296 48,648 44,586
Consumer Products 21,793 21,708 21,731
Leasing & Investments 1,067 1,103 581
----------- ----------- -----------
$ 343,284 $ 296,567 $ 258,111
=========== =========== ===========
Plant & Equipment Additions:
Engineered Products--North America $ 126,926 $ 132,760 $ 83,734
Engineered Products--International 63,774 44,923 39,277
Specialty Systems--North America 84,774 77,773 80,066
Specialty Systems--International 41,880 46,291 38,480
Consumer Products 18,534 14,371 18,545
Leasing & Investments 30 -- --
----------- ----------- -----------
$ 335,918 $ 316,118 $ 260,102
=========== =========== ===========
Identifiable Assets:
Engineered Products--North America $ 1,707,587 $ 1,461,483 $ 1,043,296
Engineered Products--International 1,447,076 983,371 630,824
Specialty Systems--North America 1,997,290 1,793,334 1,483,571
Specialty Systems--International 1,334,996 1,340,921 1,332,662
Consumer Products 372,484 378,505 383,566
Leasing & Investments 1,449,649 1,531,804 1,542,290
Corporate 751,177 723,070 755,198
----------- ----------- -----------
$ 9,060,259 $ 8,212,488 $ 7,171,407
=========== =========== ===========
</TABLE>
Identifiable assets by segment are those assets that are specifically used in
that segment. Corporate assets are principally cash and equivalents, investments
and other general corporate assets.
43
<PAGE> 24
NOTES TO FINANCIAL STATEMENTS
Enterprise-wide information for 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
In thousands 1999 1998 1997
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues by Product Line:
Engineered Products--North America--
Fasteners & Components $2,317,264 $2,046,927 $1,809,874
Specialty Products 621,642 491,822 448,954
---------- ---------- ----------
$2,938,906 $2,538,749 $2,258,828
========== ========== ==========
Engineered Products--International--
Fasteners & Components $1,178,424 $ 963,822 $ 792,542
Specialty Products 143,089 72,389 79,157
---------- ---------- ----------
$1,321,513 $1,036,211 $ 871,699
========== ========== ==========
Specialty Systems--North America--
Equipment & Consumables $1,680,751 $1,640,263 $1,627,470
Specialty Equipment 1,449,596 1,236,549 1,160,459
---------- ---------- ----------
$3,130,347 $2,876,812 $2,787,929
========== ========== ==========
Specialty Systems--International--
Equipment & Consumables $ 899,986 $ 892,537 $ 760,422
Specialty Equipment 692,869 682,753 653,902
---------- ---------- ----------
$1,592,855 $1,575,290 $1,414,324
========== ========== ==========
Consumer Products $ 501,275 $ 488,686 $ 478,675
========== ========== ==========
Operating Revenues by Geographic Region:
United States $6,195,574 $5,608,719 $5,181,977
Europe 2,275,311 2,052,953 1,785,903
Asia 295,788 217,440
196,431
Other 566,512 507,859 462,952
---------- ---------- ----------
$9,333,185 $8,386,971 $7,627,263
========== ========== ==========
</TABLE>
No single customer accounted for more than 10% of consolidated revenues in 1999,
1998 or 1997. Export sales from U.S. operations to third parties were less than
10% of total operating revenues during those years.
Total noncurrent assets excluding deferred tax assets and financial
instruments were $4,724,000,000 and $3,798,000,000 at December 31, 1999 and
1998, respectively. Of these amounts, approximately 63% was attributed to U.S.
operations for both years. The remaining amounts were attributed to the
Company's foreign operations, with no single country accounting for a
significant portion.
44
<PAGE> 25
QUARTERLY AND COMMON STOCK DATA
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
In thousands except ----------------------- ---------------------- ----------------------- -----------------------
per share amounts 1999 1998 1999 1998 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues $2,156,657 $1,957,340 $2,363,450 $2,095,820 $2,325,749 $2,075,705 $2,487,329 $2,258,106
Cost of revenues 1,411,567 1,290,834 1,518,449 1,370,413 1,511,405 1,365,529 1,601,127 1,458,757
Operating income 304,497 275,290 394,093 338,811 382,086 327,615 324,688 367,030
Net income 188,432 172,720 239,716 208,550 232,922 202,745 180,042 225,732
Net income per share:
Basic .63 .58 .80 .70 .78 .68 .60 .75
Diluted .62 .57 .79 .68 .76 .67 .59 .74
</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 1999 and 1998 were as shown below:
Market Price Per Share
----------------------
High Low Dividends Declared Per Share
- ---------------------------------------------------------------------------
1999
Fourth quarter $80.25 $61.44 $.180
Third quarter 81.81 69.25 .173
Second quarter 82.00 59.81 .148
First quarter 72.63 58.13 .146
1998
Fourth quarter $67.69 $50.88 $.146
Third quarter 68.75 45.19 .146
Second quarter 73.19 62.13 .121
First quarter 65.00 52.56 .119
The approximate number of holders of record of common stock as of February 16,
2000 was 24,073. This number does not include beneficial owners of the Company's
securities held in the name of nominees.
45
<PAGE> 1
EXHIBIT 13(b)
REPORT OF INDEPENDENT AUDITORS
Shareholder and Board of Directors
Premark International, Inc.
We have audited the consolidated balance sheets of Premark International, Inc.
and subsidiaries (a wholly owned subsidiary of Illinois Tool Works Inc. as of
November 23, 1999)(Premark) as of December 25, 1999 and December 26, 1998, and
the related consolidated statements of income, cash flows, and changes in
shareholder's equity for each of the three years in the period ended December
25, 1999 (not presented separately herein). 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 auditing standards generally accepted
in the United States. These 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 consolidated financial position of Premark
International, Inc. and subsidiaries at December 25, 1999 and December 26, 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 25, 1999, in conformity with
accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
January 24, 2000
<PAGE> 1
EXHIBIT 21
ILLINOIS TOOL WORKS INC.
SUBSIDIARIES AND AFFILIATES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
A 3 Sud S.p.A. - Italy 100%
A/S Strapex - Denmark 100%
Accu-Lub manufacturing GmbH - Germany +50%
Acme Flooring Limited - United Kingdom 100%
Adamatic, A Corporation - New Jersey 100%
Alma Corp. SARL - France 100%
Arcsmith Canada, Inc. - Canada 100%
Azon Nominees Ltd. - Australia 100%
Azon Pty. Limited - Australia 100%
B.C. Holdings S.A. - France 100%
B.C. Immo S.C.I. - France 100%
B.T. Urethane Systems Limited - United Kingdom 100%
B.T.U. Coil Company Limited - United Kingdom 100%
Bailly Comte S.A. - France 100%
Bailly Comte Vercors S.A. - France 100%
Baker's Aid, Inc. - Delaware 100%
Baxter Manufacturing Company, Inc. - Washington 100%
Berrington (UK) Ltd. - United Kingdom 100%
Binks (UK) Limited - United Kingdom 100%
Bourgeois Tricautt Regethermic Int. S.A. - France 34.2%
BSH-TM GmbH - Germany 100%
Buell Industries, Inc. - Delaware 100%
Burseryds Bruk AB - Sweden 100%
Bursped AB - Sweden 100%
California Industrial Products L.L.C. - Delaware 100%
Carbim Duo-Fast do Brazil, Ltd. - Brazil 50%
CBIL, Inc. - Delaware 100%
Cema Maschinefabrik GmbH - Germany 100%
CEV Hydroelectric Company - Italy 5.77%
Champs Investment E.U.R.L. - France 100%
Charles & Reid Associateds Limited - Hong Kong 100%
Cofiva S.p.A. - Italy 100%
Comercial Izadora West Bend de Mexico - Mexico 100%
Compagnie de Materiel et d'Equipements Techniques S.A.S. - France 100%
Compagnie Hobart S.A. - France 100%
Company Consurtium Valle D'Aosta - Italy 1.37%
Comptoir des Produits Metallurgiques S.A. - France 100%
Corporacion Coral S.A. de C.V. - Mexico 100%
CS Packaging (Malaysia) Sdn Bhd - Malaysia 50%
CS Packaging Corporation (Shanghai) Ltd. - China 50%
CS Packaging Corporation Ltd. - British Virgin Islands 50%
CS Packaging Corporation Ltd. - Hong Kong 50%
CS Packaging Corporation Pte. Ltd.- Singapore 50%
CS Packaging Investment Pte. Ltd.- Singapore 50%
CS PMI Inc. - Delaware 100%
Cumberland Leasing Co. - Illinois 100%
Cyclone Industries Pty. Ltd. - Australia 100%
Cyklop Singapore Pte. Ltd.- Singapore 100%
D.F. Exploitatie Maatschappij B.V. - Netherlands 100%
Devcon de Mexico, S.A. - Mexico 100%
Devcon Limited - Ireland 100%
DeVilbiss Equipamentos Para Pintura Industrial Ltda. - Brazil 100%
DeVilbiss Europa Unterstuetzungskasse GmbH 100%
DeVilbiss Ransburg de Mexico S.A. de C.V. - Mexico 100%
Display Edge Technology Ltd. - Ohio 61.4%
Duo-Fast (Singapore) Pte. Ltd. - Singapore 50%
</TABLE>
<PAGE> 2
Page 2...DECEMBER 31, 1999
ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
Duo-Fast (U.K.) Limited - United Kingdom 100%
Duo-Fast Austria GmbH - Austria 100%
Duo-Fast Belgium N.V. - Belgium 100%
Duo-Fast Benelux B.V. - Netherlands 100%
Duo-Fast Corporation - Illinois 100%
Duo-Fast CR, S.R.O. - Czechoslovakia 100%
Duo-Fast Distribucion Centro, S.A. - Spain 100%
Duo-Fast Distribucion Este, S.A. - Spain 100%
Duo-Fast Espana, S.A. - Spain 100%
Duo-Fast France S.A. - France 100%
Duo-Fast GmbH - Germany 100%
Duo-Fast Korea Co. Ltd. - Korea 49%
Duo-Fast Polska S.P. Z.o.o. - Poland 100%
Duo-Fast Europe B.V. - Netherlands 100%
Edgepack Limited - United Kingdom 100%
Elematic s.r.l. - Italy 100%
Elematic 2 s.r.l. - Italy 100%
Elettro Gibi S.p.A. - Italy 100%
Elleyse Financing SNC - France 100%
Eltex Elektrostatic GmbH - Germany 100%
Eltex Inc. - Delaware 100%
Endra B.V. - Netherlands 100%
Envases Multipac, S.A.de C.V. - Mexico 49%
Epirez Adelaide Pty. Ltd. - Australia 100%
Epirez Australia Pty. Ltd. - Australia 100%
Epirez Melbourne Pty. Ltd. - Australia 100%
Epirez Sydney Pty. Ltd. - Australia 100%
Equipment Technique Services S.A.R.L. - France 100%
ERG Components Limited - UK 100%
ERG Industrial Corporation Limited - UK 100%
European Diamond Tools N.V. - Belgium 100%
Eurotec S.r.l. - Italy 100%
Eurowash S.A. - France 100%
Exportadora Lerma SA - Mexico 100%
Faltex AG - Switzerland 100%
Fastener Imports Limited - Cayman Islands 100%
FEG France Holdings, Inc. - Delaware 100%
Florida Tile Factors Inc. - Delaware 100%
Florida Tile Industries, Inc. - Florida 100%
Foster Canada Inc. - Canada 100%
Foster Refrigerator (U.K.) Development Limited - United Kingdom 100%
Foster Refrigerator (U.K.) Limited - United Kingdom 100%
Foster Refrigerator France S.A. - France 100%
Foster Refrigerator Management Services Ltd. - United Kingdom 100%
Genious Development SARL - France 100%
Gerhard Haugk GmbH - Germany 100%
Gerrard Signode Pty. Limited - Australia 100%
Grawo AG - Switzerland 100%
H.A. Springer Far East Pte. Ltd. - Singapore 100%
H.A. Springer marine & industrie service GmbH - Germany 100%
Halles Financing E.U.R.L. - France 100%
Haloila Vertrieb GmbH - Germany 100%
Heistrap Industriesysteme GmbH - Germany 100%
Henschel Kunststofftechnik GmbH - Germany 100%
HFD af 18 December 1997 A/S - Denmark 100%
HFN Drammensveien 120 AS - Norway 100%
Hobart (Japan) K.K. - Japan 100%
Hobart (Swiss) A.G. - Switzerland 100%
</TABLE>
<PAGE> 3
Page 3...DECEMBER 31, 1999
ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
Hobart Adina - Columbia 100%
Hobart Argentina S.A. - Argentina 100%
Hobart Brothers (International) AG - Switzerland 100%
Hobart Brothers Company - Ohio 100%
Hobart Brothers International Limitada - Chile 100%
Hobart Canada Corp. - Canada 100%
Hobart Corporation - Delaware 100%
Hobart Dayton Mexicana S.A. de c.v. - Mexico 100%
Hobart Equipment Leasing Limited - United Kingdom 100%
Hobart Food Equipment Company, Inc. - China 100%
Hobart Food Equipment Pty. Ltd. - Australia 100%
Hobart Foster (South Africa) Pty. Ltd. - South Africa 100%
Hobart Foster Belgium N.V. - Belgium 100%
Hobart Foster Holland B.V. - Netherlands 100%
Hobart Foster Scandanavia A/S - Denmark 100%
Hobart Foster Sverige AB - Sweden 100%
Hobart Foster Technick B.V. - Netherlands 100%
Hobart G.m.b.H. - Germany 100%
Hobart Holdings, Inc. - Delaware 100%
Hobart International (Singapore) Pte. Ltd. - Singapore 100%
Hobart International (Southeast Asia) Inc. - Delaware 100%
Hobart International Inc. - Delaware 100%
Hobart Korea Co. Ltd. - Korea 100%
Hobart Manufacturing Co. Pty. Ltd. - Australia 100%
Hobart Manufacturing Company Limited - Canada 100%
Hobart Manufacturing Company Limited, The - United Kingdom 100%
Hobart Manufacturing Company Ltd., The - Canada 100%
Hobart Manufacturing Company, The - Ohio 100%
Hobart Sales & Service, Inc. - Ohio 100%
Hobart Sales & Service Inc. - Puerto Rico 100%
Hobart do Brasil Ltd. - Brazil 100%
Hoi Young Trading Company Limited - Hong Kong 100%
Hospital Services Systems S.A. - France 100%
Hylec Eletro Gibi (UK) Ltd. - United Kingdom 33%
I.T.W. Inc. - Illinois 100%
ICI Products, Inc. - Delaware 100%
Illinois Tool Works FSC Inc. - Barbados 100%
IMSA ITW, S.A. de C.V. - Mexico 50%
IMSA Paslode, S.A. de C.V. - Mexico 50%
IMSA Signode, S.A. de C.V. - Mexico 50%
Industrias Regard - Spain 10%
Inmobiliaria Cit, S.A. de C.V. - Mexico 49%
Inox Eaquipment S.A. - France 100%
International Product Supply, Inc. - Delaware 100%
Interstrap B.V. - Netherlands 100%
Isis S.N.C. - France 100%
Ispra-Control S.p.A. - Italy 100%
Ispra-Flex S.p.A. - Italy 85%
ITW (Deutschland) GmbH - Germany 100%
ITW Ampang Industries Philippines, Inc. - Philippines 100%
ITW Asia (Pte) Limited - Singapore 100%
ITW Ateco GmbH - Germany 100%
ITW Australia Pty. Ltd. 100%
ITW Austria Vertriebs GmbH - Austria 100%
ITW Automotive Products GmbH - Germany 100%
ITW Automotive Products GmbH, K.G. - Germany 100%
ITW Befestigungssyteme GmbH - Germany 100%
ITW Belgium S.A. - Belgium 100%
</TABLE>
<PAGE> 4
Page 4...DECEMBER 31, 1999
ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
ITW Bevestigingssystemen B.V. - Netherlands 100%
ITW Binks Corporation - Delaware 100%
ITW Canada - Canada 100%
ITW Canada Holdings Company - Canada 100%
ITW Canada Management Inc. - Canada 100%
ITW Cayman - Cayman Islands 100%
ITW Chemical Products Ltd. -Brazil 100%
ITW Chemical Products of Europe B.V. - Netherlands 100%
ITW Chemical Products Scandinavia ApS - Denmark 100%
ITW Chemische Produkte GmbH - Germany 100%
ITW China Components Inc. - Delaware 100%
ITW Construction Products (Suzhou) Co. Ltd. - China 100%
ITW de Argentina S.A - Argentina 100%
ITW de Fastex de Argentina S.A. - Argentina 96%
ITW de France S.A.S. - France 100%
ITW Decorating Swiss AG - Switzerland 100%
ITW Devcon Industriel Products GmbH - Germany 100%
ITW do Brazil Industrial e Comercial Ltda. - Brazil 100%
ITW Domestic Finance Company - Delaware 100%
ITW Domestic Holdings Inc. - Delaware 100%
ITW Dynatec (Hong Kong) Limited - Hong Kong 50%
ITW Dynatec Kabushiki Kaisha - Japan 100%
ITW Dynatec Singapore Pte. Ltd.- Singapore 50%
ITW Dynatec Thailand Ltd. - Thailand 20%
ITW Electronic Components Packaging
Systems, S. de R.L. de C.V. - Mexico 100%
ITW Electronic Components Pte. Ltd. - Singapore 100%
ITW Electronic Packaging (Malta) Ltd. - Malta 100%
ITW Espana, S.A. - Spain 100%
ITW Fastex de Mexico S.A. de C.V. - Mexico 100%
ITW Fastex Italia S.p.A. - Italy 100%
ITW Finance L.L.C. - Delaware 100%
ITW Finance II L.L.C. - Delaware 100%
ITW Finishing L.L.C. - Delaware 100%
ITW Gema AG - Switzerland 100%
ITW Gema s.r.l. - Italy 100%
ITW Gunther Denmark A/S - Denmark 100%
ITW Gunther GmbH - Germany 100%
ITW Gunther S.A.S - France 100%
ITW Gunther Sweden AB - Sweden 100%
ITW Holding France S.A.S. - France 100%
ITW Holdings GmbH - Germany 100%
ITW Holdings Pty. - Australia 100%
ITW Holdings U.K. - United Kingdom 100%
ITW Industrie G.m.b.H. - Germany 100%
ITW Industry Co., Ltd. - Japan 100%
ITW International Finance Inc. - Delaware 100%
ITW International Finance S.A.S. - France 100%
ITW International Holdings Inc. - Delaware 100%
ITW Investments, Inc. - Delaware 100%
ITW Ireland - Ireland 100%
ITW Ireland Holdings - Ireland 100%
ITW Italy Finance E.U.R.L. - Italy 100%
ITW Italy Holdings SNC - France 100%
ITW Jeju Industries Private Limited - India 51%
ITW Leasing & Investments Inc. - Delaware 100%
ITW Limited Sweden Filial Sverige - Sweden 100%
ITW Limited - United Kingdom 100%
</TABLE>
<PAGE> 5
Page 5...DECEMBER 31, 1999
ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
ITW Litec S.A.S. - France 100%
ITW Delfast do Brazil Ltda - Brazil 96%
ITW Meritex Sdn. Bhd. - Malaysia 100%
ITW Mima Films L.L.C. - Delaware 100%
ITW Mima Holdings L.L.C. - Delaware 100%
ITW Mima Service S.A.S. - France 100%
ITW Mima Systems S.A.S. - France 100%
ITW Morlock GmbH - Germany 100%
ITW Mortgage Investments I, Inc. - Delaware 100%
ITW Mortgage Investments II, Inc. - Delaware 100%
ITW Mortgage Investments III, Inc. - Delaware 100%
ITW Mortgage Investments IV, Inc. - Delaware 100%
ITW Nederland B.V. - Netherlands 100%
ITW New Zealand - New Zealand 100%
ITW Oberflaechentechnik GmbH - Germany 100%
ITW Packaging Corporation - Delaware 100%
ITW Paris E.U.R.L. - France 100%
ITW Philippines, Inc. - Philippines 100%
ITW Polska Sp.s.o.o. - Poland 100%
ITW Polymers & Fluids Group Pty. Ltd. - Australia 100%
ITW Products Chemiques S.A. - France 100%
ITW PSL Inc. - Delaware 100%
ITW Real Estate Investments Inc. - Delaware 100%
ITW Leasing - Delaware 100%
ITW Residuals Inc. - Delaware 100%
ITW Residuals II Inc. - Delaware 100%
ITW Residuals III L.L.C. 100%
ITW Residuals IV L.L.C. 100%
ITW Scanimed S.A.S. - France 100%
ITW Service Inc. - Korea 100%
ITW Shippers S.A. - Belgium 100%
ITW Signode Australasia Pty. Limited - Australia 100%
ITW Signode Belgium N.V. - Belgium 100%
ITW Signode Holding GmbH - Germany 100%
ITW Signode India Limited - India 51%
ITW South Africa L.L.C. - Delaware 100%
ITW SP Europe S.a.r.l. - Luxembourg 100%
ITW Specialty Film Co. Ltd. - Korea 100%
ITW Strapping Co. #1 - Mexico 100%
ITW Strapping Co. #2 - Mexico 100%
ITW Stretch Packaging Systems L.L.C. - Delaware 100%
ITW Surfaces & Finitions S.A. - France 100%
ITW Sverige AB - Sweden 100%
ITW Switches Asia Ltd.- Taiwan 100%
ITW Tech Co. Inc. - Delaware 100%
ITW Universal L.L.C. - Delaware 100%
ITW Welding Products Asia Pacific Pte. Limited - Singapore 100%
ITW Welding Products Group, S.A. de C.V. - Mexico 100%
ITW Welding S.A. - France 100%
ITW-Canguru Rotulos Ltda. - Brazil 50%
ITW-Imaden Industria E Comercio Ltda. - Brazil 75%
Japit Inc. - Japan 19%
Jemco de Mexico, S.A. de C.V. - Mexico 100%
KaiRak Inc. - California 100%
KC Metal Products Pty. Ltd. - Australia 100%
Kinnears Pty. Ltd. - Australia 100%
Kormag Industries e Comercio Ltda. - Brazil 40%
Liljendals Bruk Ab - Finland 100%
</TABLE>
<PAGE> 6
Page 6...DECEMBER 31, 1999
ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
Lombard Pressings Limited - United Kingdom 100%
Loveshaw Corporation, The - Delaware 100%
LSPS Inc. - Delaware 100%
Lys Comet S.A.S. - France 100%
Lys Fusion Poland Sp.z.o.o. - Poland 89.9%
Lys Fusion S.p.A. - Italy 100%
Magna Industrial Co. Limited - Hong Kong 100%
Maine Investment SARL - France 100%
Maquilas y Componentes Industriales, S.A. de C.V. - Mexico 100%
Marcap, Inc. - Washington 100%
Mazel (1980) Limited - United Kingdom 100%
MBM S.r.l. - Italy 100%
Meritex Plastic Industries, Inc. - Texas 100%
Metalflex d.o.o. - Slovenia 100%
Miller Electric Mfg. Co. - Wisconsin 100%
Miller Europe S.p.A. - Italy 100%
Miller Insurance Ltd - Bermuda 100%
Mima Films S.a.r.l. - Luxembourg 100%
Mima Films SCA - Belgium 74%
Metales Industrializados S.A. de C.V. - Mexico 100%
Mortgage Ally Inc. - Delaware 100%
Nifco Hi-Cone Leasing Company Limited - Japan 40%
NKT Tradvaerket A/S - Denmark 100%
Nouva Cannottieri Olona s.r.l. - Italy .5%
Nuovo Lys Fusion s.r.l. - Italy 100%
Odesign, Inc. - Illinois 100%
Orgapack E.U.R.L. - France 100%
Orgapack Finance GmbH - Switzerland 100%
Orgapack GmbH - Switzerland 100%
Oy Eltex Elektrostatic AB - Finland 100%
Oy M Haloila Ab - Finland 100%
Pabru Beheer, N.V. - Netherlands 100%
Pack-Band Hagen GmbH - Germany 65%
Packaging Leasing Systems Inc. - Delaware 80%
Packaging Systems, L.L.C. - Illinois 50%
PanCon GmbH - Germany 100%
PMI Food Equipment (Hong Kong) Ltd. - Hong Kong 100%
PMI Food Equipment Group (Malaysia), Inc. - Delaware 100%
PMI Food Equipment Group Canada Inc. - Canada 100%
PMI Food Equipment Group Europe S.A. - France 100%
PMI Food Equipment Group France S.A. - France 100%
Precor Incorporated - Delaware 100%
Precor Products Limited - United Kingdom 100%
Precor Sportgerate G.m.b.H. - Germany 100%
Premark Canada Inc. - Canada 100%
Premark Export Sales, Inc. - Barbados 100%
Premark FEG Beteiligungs gesellschaft m.b.h. - Germany 100%
Premark FEG G.m.b.H. & Co. K..G. - Germany 100%
Premark FEG L.L.C. - Delaware 100%
Premark Finance Limited - United Kingdom 100%
Premark FT Holdings, Inc. - Delaware 100%
Premark HII Holdings Inc. - Delaware 100%
Premark Holdings Limited - United Kingdom 100%
Premark International Holdings B.V. - Netherlands 100%
Premark International, Inc. - Delaware 100%
Premark International, Inc. - Wyoming 100%
Premark N.V. - Netherland Antilles 100%
Premark Netherlands B.V. - Netherlands 100%
</TABLE>
<PAGE> 7
Page 7...DECEMBER 31, 1999
ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
Premark Real Estate Holdings, Inc. - Delaware 100%
Premark RWP Holdings, Inc. - Delaware 100%
Premark Services Inc. - Delaware 100%
Premark WB Holdings, Inc. - Delaware 100%
Pronovia s.r.o. - Czechoslovakia 100%
Pronovia Plus s.r.o. - Czechoslovakia 100%
PT Cyklop Indo Utama - Indonesia 57%
Ransburg Industrial Finishing K.K. - Japan 100%
Ransburg Manufacturing Corporation - Indiana 100%
Resopal G.m.b.H. - Germany 100%
Richmond Systempak Limited - Hong Kong 49.25%
Rivex Ltd. - United Kingdom 100%
Rivex S.A. - France 97.74%
Rocol Far East Limited - Hong Kong 100%
Rocol France S.A. - France 100%
Rocol GmbH - Germany 100%
Rocol Group Limited - United Kingdom 100%
Rocol Korea Limited - Korea 100%
Rocol Limited - United Kingdom 100%
Rocol Mexicana, S.A. de C.V. - Mexico 100%
Rocol Site Safety Systems Limited - United Kingdom 100%
Rox Foil Industries B.V. - Netherlands 100%
Roxs Praegefoiln GmbH - Germany 100%
S.C. Bourgeous S.A. - France 34.2%
S.P.I.M. S.A. - France 100%
Sam Jung Signode Inc. - Korea 70%
Sarsfield N.V. - Netherland Antilles 100%
Scanilec B.V. - Netherlands 100%
Scybele S.A.S. - France 100%
Seine Investments E.U.R.L. - France 100%
SEM & BC S.A.S. - France 50%
Serim s.r.l. - Italy 100%
Servicios de Ingenieria Aguascalientes, S. de R.L. de C.V. - Mexico 100%
Servicios de Reynosa, S.A. - Mexico 100%
Servizi Ovadesi S.r.l. - Italy 100%
Shanghai ITW Plastic & Metal Company Limited - China 93%
Signode B.V. - Netherlands 100%
Signode Bernpak GmbH - Germany 100%
Signode Brasileria S.A. - Brazil 60%
Signode France S.A.S. - France 100%
Signode Ireland Limited - United Kingdom 50%
Signode Kabushiki Kaisha - Japan 100%
Signode Packaging Systems Limited - East Africa 20%
Signode Systems GmbH - Germany 100%
Sima Industri A/S - Denmark 100%
Simco (Nederland) B.V. - Netherlands 100%
Simco Japan, K.K. - Japan 100%
SMPI S.A. - France 100%
Societe Civile Immobiliere Rousseau - France 100%
Societe de Prospection et d'Inventions Techniques S.A.S. (SPIT) - France 100%
Societe de Rectification et de Decolletage SARL - France 52%
Spencer & Co. (Machinery) Limited - United Kingdom 100%
Spiroid Inc. - Delaware 100%
Stahl, S.A. de C.V. - Mexico 50%
Stanley Knight Company - Delaware 100%
Starplast, Inc. - Glenview 100%
Strapex (Canada) Inc. 100%
Strapex AG - Switzerland 100%
</TABLE>
<PAGE> 8
Page 8...DECEMBER 31, 1999
ILLINOIS TOOL WORKS INC. SUBSIDIARIES AND AFFILIATES
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP
- ----------------------------------------------------------------- ---------
<S> <C>
Strapex Austria GmbH - Austria 100%
Strapex Corporation - North Carolina 100%
Strapex Embalagem, Ltda. - Portugal 60%
Strapex Handels AG - Switzerland 100%
Strapex Holding AG - Switzerland 100%
Strapex Immobilien AG - Switzerland 100%
Strapex Nederland B.V. - Netherlands 100%
Strapex S.A. - Belgium 100%
Strapex S.A. - France 100%
Strapex S.r.l. - Italy 100%
Strapex UK Ltd. - United Kingdom 100%
Synertech GmbH - Germany 38%
Tamanaco Holding B.V. - Netherlands 100%
Tasselli Industria Figoriferi S.r.l. - Italy 100%
Tempil, Inc. - Delaware 100%
Thimax S.A. - France 100%
Tien Tai Electrode Co., Ltd. 30%
Toolmatic B.V. - Netherlands 100%
Toolmatic N.V. - Belgium 100%
Traulsen International, Inc. - New York 100%
Traulsen & Co. Inc. - Delaware 100%
Triumph Financing E.U.R.L. - France 100%
Unipac Corporation - Canada 100%
Unipac, Inc. - Delaware 100%
Unipac Limited - United Kingdom 100%
Veneta Decalogomme S.r.l. - Italy 100%
Viktor Ridder GmbH & Co. KG - Germany 100%
Vulcan-Hart Canada Corp. - Canada 100%
Wavebest Limited - United Kingdom 100%
West Bend Company, The - Delaware 100%
West Bend de Mexico S.A. do C.V.- Mexico 100%
Wide Body (FSC) I, Inc. - U.S. Virgin Islands 100%
Wilsonart (Shanghai) Co., Ltd. - China 100%
Wilsonart (South Africa) Pty. Ltd. - South Africa 100%
Wilsonart (Thailand) Co. Ltd. - Thailand 100%
Wilsonart Holdings Limited - United Kingdom 100%
Wilsonart Hong Kong Ltd. - Hong Kong 100%
Wilsonart International Holdings, Inc. - Delaware 100%
Wilsonart International, Inc. - Delaware 100%
Wilsonart Korea Ltd. - Korea 100%
Wilsonart Limited - United Kingdom 100%
Wilsonart Singapore Pte. Ltd. - Singapore 100%
Wilsonart Taiwan Corp. Ltd. - Taiwan 100%
Wittco Food Service Equipment, Inc. - Wisconsin 100%
Wolf Catering Equipment (U.K.) Limited - United Kingdom 100%
Wolf Range L.L.C. - Delaware 100%
</TABLE>
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated January 31, 2000 included in this Form 10-K into the Company's
previously filed registration statements on Form S-8 (File No.'s 333-22035,
333-17473 and 333-75767), Form S-4 (File No.'s 333-02671, 333-25471 and
333-88801) and Form S-3(File No.'s 33-5780 and 333-70691).
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 29, 2000
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement Nos.
333-22035, 333-17473, and 333-75767 of Illinois Tool Works, Inc. on Form S-8,
Registration Statement Nos. 33-5780 and 333-70691 of Illinois Tool Works Inc.
on Form S-3, and Registration Statement Nos. 33-302671, 333-25471, and 333-88801
of Illinois Tool Works Inc. on Form S-4 of our report dated January 24, 2000
(relating to the consolidated financial statements of Premark International,
Inc., not presented separately herein) included in this Annual Report on Form
10-K of Illinois Tool Works Inc. for the year ended December 31, 1999.
ERNST & YOUNG LLP
Chicago, Illinois
March 29, 2000
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ William F. Aldinger
----------------------------
William F. Aldinger
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ Michael J. Birck
----------------------------
Michael J. Birck
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ Marvin D. Brailsford
-------------------------------
Marvin D. Brailsford
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ Susan Crown
------------------------
Susan Crown
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ H. Richard Crowther
----------------------------
H. Richard Crowther
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ Robert C. McCormack
---------------------------
Robert C. McCormack
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ Phillip B. Rooney
----------------------------
Phillip B. Rooney
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ Harold B. Smith
--------------------------
Harold B. Smith
<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 or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for her or him and in
his or her 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 or she 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
18th day of February 2000.
/s/ Ormand J. Wade
--------------------------
Ormand J. Wade
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 232,953
<SECURITIES> 0
<RECEIVABLES> 1,685,837
<ALLOWANCES> 54,900
<INVENTORY> 1,084,212
<CURRENT-ASSETS> 3,272,931
<PP&E> 3,912,298
<DEPRECIATION> 2,278,367
<TOTAL-ASSETS> 9,060,259
<CURRENT-LIABILITIES> 2,045,361
<BONDS> 1,360,746
0
0
<COMMON> 3,008
<OTHER-SE> 5,002,725
<TOTAL-LIABILITY-AND-EQUITY> 9,060,259
<SALES> 9,333,185
<TOTAL-REVENUES> 9,333,185
<CGS> 6,042,548
<TOTAL-COSTS> 6,042,548
<OTHER-EXPENSES> 74,222
<LOSS-PROVISION> 17,704
<INTEREST-EXPENSE> 67,510
<INCOME-PRETAX> 1,352,712
<INCOME-TAX> 511,600
<INCOME-CONTINUING> 841,112
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 841,112
<EPS-BASIC> 2.80
<EPS-DILUTED> 2.76
</TABLE>
