FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-4797
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ILLINOIS TOOL WORKS INC.
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(Exact name of registrant as specified in its charter)
Delaware 36-1258310
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3600 West Lake Avenue, Glenview, IL 60025-5811
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (847) 724-7500
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Former address:
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X . No _____.
The number of shares of registrant's common stock, $.01 par value, outstanding
at April 30, 2001: 303,955,723.
Part I - Financial Information
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Item 1
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
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FINANCIAL STATEMENTS
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The unaudited financial statements included herein have been prepared by
Illinois Tool Works Inc. and Subsidiaries (the "Company"). In the opinion of
management, the interim financial statements reflect all adjustments of a
normal recurring nature necessary for a fair statement of the results for
interim periods. It is suggested that these financial statements be read in
conjunction with the financial statements and notes to financial statements
included in the Company's Annual Report on Form 10-K. Certain reclassifications
of prior years' data have been made to conform with current year reporting.
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
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STATEMENT OF INCOME
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(UNAUDITED)
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(In Thousands Except for
Per Share Amounts)
Three Months Ended
March 31
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2001 2000
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Operating Revenues $ 2,396,834 $ 2,404,960
Cost of revenues 1,613,042 1,571,930
Selling, administrative,
and research and
development expenses 461,774 454,171
Amortization of goodwill
and other intangible assets 24,539 20,556
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Operating Income 297,479 358,303
Interest expense (18,711) (16,083)
Other income 2,390 209
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Income Before Income Taxes 281,158 342,429
Income taxes 98,400 123,300
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Net Income $ 182,758 $ 219,129
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Per share of common stock:
Basic net income $ .60 $ .73
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Diluted net income $ .60 $ .72
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Cash dividends:
Paid $ .20 $ .18
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Declared $ .20 $ .18
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Shares of common stock
outstanding during the
period:
Average 303,151 300,746
Average assuming dilution 305,731 304,019
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
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STATEMENT OF FINANCIAL POSITION
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(UNAUDITED)
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(In Thousands)
ASSETS March 31, 2001 December 31, 2000
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Current Assets:
Cash and equivalents $ 149,492 $ 151,295
Trade receivables 1,644,660 1,654,632
Inventories 1,192,882 1,181,385
Deferred income taxes 184,981 183,823
Prepaid expenses and other
current assets 144,182 157,926
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Total current assets 3,316,197 3,329,061
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Plant and Equipment:
Land 116,865 116,423
Buildings and improvements 988,717 1,000,807
Machinery and equipment 2,899,161 2,860,472
Equipment leased to others 123,043 118,589
Construction in progress 139,209 103,319
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4,266,995 4,199,610
Accumulated depreciation (2,537,638) (2,477,086)
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Net plant and equipment 1,729,357 1,722,524
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Investments 1,163,254 1,170,392
Goodwill and Other Intangibles 2,506,828 2,483,882
Deferred Income Taxes 481,079 478,420
Other Assets 429,002 419,177
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$ 9,625,717 $ 9,603,456
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current Liabilities:
Short-term debt $ 466,665 $ 425,789
Accounts payable 429,665 455,417
Accrued expenses 731,615 826,107
Cash dividends payable 60,752 60,490
Income taxes payable 122,007 49,807
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Total current liabilities 1,810,704 1,817,610
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Non-current Liabilities:
Long-term debt 1,393,347 1,549,038
Other 837,749 835,821
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Total non-current liabilities 2,231,096 2,384,859
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Stockholders' Equity:
Preferred stock -- --
Common stock 3,038 3,027
Additional paid-in-capital 611,823 584,357
Income reinvested in the business 5,337,503 5,214,098
Common stock held in treasury (1,666) (1,783)
Cumulative translation adjustment (366,781) (398,712)
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Total stockholders' equity 5,583,917 5,400,987
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$ 9,625,717 $ 9,603,456
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
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STATEMENT OF CASH FLOWS
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(UNAUDITED)
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(In Thousands)
Three Months Ended
March 31
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2001 2000
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Cash Provided by (Used for) Operating Activities:
Net income $ 182,758 $ 219,129
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 102,045 89,187
Change in deferred income taxes 178 (908)
Provision for uncollectible accounts 5,282 5,023
Loss on sale of plant and equipment 168 348
Income from investments (36,898) (35,753)
Non-cash interest on nonrecourse debt 10,611 11,105
Gain on sale of operations and affiliates (899) (1,843)
Other non-cash items, net (956) (937)
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Cash provided by operating activities 262,289 285,351
Changes in assets and liabilities:
(Increase) decrease in--
Trade receivables 13,323 5,987
Inventories 6,178 (19,110)
Prepaid expenses and other assets 6,895 (3,647)
Increase (decrease) in--
Accounts payable (31,312) (27,746)
Accrued expenses (91,431) (83,306)
Income taxes payable 71,434 58,367
Other, net (9) --
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Net cash provided by operating activities 237,367 215,896
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Cash Provided by (Used for) Investing Activities:
Acquisition of businesses(excluding cash and
equivalents) and additional interest in affiliates (52,193) (83,059)
Additions to plant and equipment (72,293) (71,894)
Purchase of investments (9,518) (3,930)
Proceeds from investments 22,050 18,386
Proceeds from sale of plant and equipment 3,880 4,608
Proceeds from sale of operations and affiliates 6,890 4,220
Sales (purchases) of short-term investments 2,045 (3,013)
Other, net 666 1,152
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Net cash used for investing activities (98,473) (133,530)
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Cash Provided by (Used for) Financing Activities:
Cash dividends paid (60,490) (54,102)
Issuance of common stock 27,146 6,612
Net borrowings (repayments) of short-term debt (108,761) 122,352
Proceeds from long-term debt 939 531
Repayments of long-term debt (2,290) (134,353)
Other, net 116 1,548
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Net cash used for financing activities (143,340) (57,412)
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Effect of Exchange Rate Changes on Cash and Equivalents 2,643 (10,005)
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Cash and Equivalents:
Increase (decrease) during the period (1,803) 14,949
Beginning of period 151,295 232,953
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End of period $ 149,492 $ 247,902
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Cash Paid During the Period for Interest $ 24,980 $ 28,596
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Cash Paid During the Period for Income Taxes $ 26,040 $ 53,528
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Liabilities Assumed from Acquisitions $ 4,165 $ 57,459
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
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NOTES TO FINANCIAL STATEMENTS
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(UNAUDITED)
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(1) INVENTORIES at March 31, 2001 and December 31, 2000 were as
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follows:
(In Thousands)
March 31, Dec. 31,
2001 2000
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Raw material $ 355,173 $ 350,943
Work-in-process 136,446 134,044
Finished goods 701,263 696,398
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$1,192,882 $1,181,385
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(2) COMPREHENSIVE INCOME:
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The only component of other comprehensive income that the Company has
is foreign currency translation adjustments.
(In Thousands)
March 31, Dec. 31,
2001 2000
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Net income $ 182,758 $ 219,129
Foreign currency translation
adjustments, net of tax 31,930 (33,192)
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Total comprehensive income $ 214,688 $ 185,937
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Item 2 - Management's Discussion and Analysis
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ENGINEERED PRODUCTS - NORTH AMERICA
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Businesses in this segment are located in North America and manufacture short
lead-time plastic and metal components and fasteners, and specialty products
such as polymers, fluid products and resealable packaging.
(Dollars in Thousands)
Three months ended
March 31
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2001 2000
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Operating revenues $744,595 $805,727
Operating income 105,398 147,803
Margin % 14.2% 18.3%
For the first quarter of 2001, operating revenues declined by 8% mainly
due to lower demand in the automotive and construction end markets. The
10% decline in base business revenues was partially offset by a 3%
increase from acquisitions. Operating income declined by 29% and margins
declined 410 basis points due to lower revenues, higher nonrecurring costs
and the impact of acquired companies.
ENGINEERED PRODUCTS - INTERNATIONAL
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Businesses in this segment are located outside North America and manufacture
short lead-time plastic and metal components and fasteners, and specialty
products such as polymers, fluid products and electronic component packaging.
(Dollars in Thousands)
Three months ended
March 31
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2001 2000
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Operating revenues $375,787 $343,088
Operating income 33,514 32,037
Margin % 8.9% 9.3%
Operating revenues increased 10% in the first three months of 2001 due mainly
to acquisitions, which contributed 15% to the increase. Base business
revenue growth of 2% was primarily related to the construction, automotive
and industrial plastics businesses. Operating income grew 5%, primarily
related to the construction, automotive and polymers/fluid products
businesses in Europe and Australia. Operating margins were 40 basis points
lower due to the impact of acquired businesses. Foreign currency fluctuations
reduced both revenues and operating income by 8%.
SPECIALTY SYSTEMS - NORTH AMERICA
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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 finishing.
(Dollars in Thousands)
Three months ended
March 31
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2001 2000
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Operating revenues $850,691 $829,062
Operating income 102,585 131,519
Margin % 12.1% 15.9%
In the first quarter of 2001, operating revenues increased 3% due to
acquisitions, which contributed 11% to the increase. Base business
revenues decreased 7% as slowing demand in most end markets negatively
impacted the welding, industrial packaging, food equipment and finishing
businesses. Operating income was 22% lower in the first three months of 2001,
primarily related to the welding and industrial packaging businesses.
Operating margins decreased by 380 basis points due to the revenue declines,
nonrecurring costs and the lower margins of acquired companies.
SPECIALTY SYSTEMS - INTERNATIONAL
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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 finishing.
(Dollars in Thousands)
Three months ended
March 31
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2001 2000
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Operating revenues $402,665 $376,692
Operating income 32,014 27,761
Margin % 8.0% 7.4%
Operating revenues grew 7% in the first quarter of 2001 as the acquisition-
related growth of 18% was partially offset by unfavorable foreign currency
impact of 8% and a 1% decline in base business revenues. Operating income
increased 15% and margins improved 60 basis points due to acquisitions and
higher nonrecurring costs in 2000. Foreign currency fluctuations reduced
operating income by 9%.
CONSUMER PRODUCTS
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Businesses in this segment are located primarily in North America and
manufacture specialty exercise equipment, small electrical appliances,
cookware and ceramic tile.
(Dollars in Thousands)
Three months ended
March 31
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2001 2000
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Operating revenues $103,681 $119,657
Operating income 1,206 1,819
Margin % 1.2% 1.5%
For the first three months of 2001, the decline in operating revenues of 13%
was related to the ceramic tile, small appliance and specialty exercise
equipment businesses. The decline in operating income and margins was
related to nonrecurring costs, partially offset by improved results at the
ceramic tile business.
LEASING AND INVESTMENTS
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This segment makes opportunistic investments in mortgage-related assets,
leveraged and direct financing leases of equipment, properties and property
developments, a limited partnership investment trust and affordable housing.
(Dollars in Thousands)
Three months ended
March 31
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2001 2000
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Operating revenues $40,323 $34,668
Operating income 22,762 17,364
Operating revenues and income increased in the first quarter of 2001 due to
gains on the sales of properties held for sale.
OPERATING REVENUES
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The reconciliation of segment operating revenues to total operating revenues
is as follows:
2001 2000
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Engineered Products - North America $ 744,595 $ 805,727
Engineered Products - International 375,787 343,088
Specialty Systems - North America 850,691 829,062
Specialty Systems - International 402,665 376,692
Consumer Products 103,681 119,657
Leasing and Investments 40,323 34,668
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Total segment operating revenues 2,517,742 2,508,894
Intersegment revenues (120,908) (103,934)
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Total operating revenues $ 2,396,834 $ 2,404,960
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OPERATING EXPENSES
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Cost of revenues as a percentage of revenues increased to 67.3% in the
first three months of 2001 versus 65.4% in the first three months of 2000
due to decreased sales volume in the North American base businesses. Selling,
administrative, and research and development expenses increased to 19.3% of
revenues in the first three months of 2001 versus 18.9% in the first three
months of 2000, primarily due to nonrecurring charges in 2001.
INTEREST EXPENSE
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Interest expense increased to $18.7 million in the first three months of 2001
from $16.1 million in the first three months of 2000, primarily due to higher
commercial paper borrowings in 2001, partially offset by reduced interest
expense related to bonds repaid in 2000.
OTHER INCOME
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Other income increased to $2.4 million for the first three months of 2001 from
$.2 million in 2000. This increase is primarily due to lower minority interest
expense on less-than-100%-owned subsidiaries and lower losses on foreign
currency translation in 2001.
NET INCOME
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Net income of $182.8 million ($0.60 per diluted share) in the first three
months of 2001 was 16.6% lower than the 2000 first quarter net income of
$219.1 million ($0.72 per diluted share).
The Company is not expecting any material improvement in its various North
American end markets until much later in 2001.
FINANCIAL POSITION
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Net working capital at March 31, 2001 and December 31, 2000 is summarized
as follows:
(Dollars in Thousands)
March 31, Dec. 31, Increase/
2001 2000 (Decrease)
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Current Assets:
Cash and equivalents $ 149,492 $ 151,295 $ (1,803)
Trade receivables 1,644,660 1,654,632 (9,972)
Inventories 1,192,882 1,181,385 11,497
Other 329,163 341,749 (12,586)
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3,316,197 3,329,061 (12,864)
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Current Liabilities:
Short-term debt 466,665 425,789 40,876
Accounts payable 429,665 455,417 (25,752)
Accrued expenses 731,615 826,107 (94,492)
Other 182,759 110,297 72,462
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1,810,704 1,817,610 (6,906)
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Net Working Capital $ 1,505,493 $ 1,511,451 $ (5,958)
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Current Ratio 1.83 1.83
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Accrued liabilities decreased primarily as a result of a decrease in accrued
bonuses, rebates and payroll. The increase in other liabilities reflects an
increase in income taxes payable as a result of the timing of tax payments.
FORWARD-LOOKING STATEMENTS
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This document contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. 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 retail and
service, automotive, general industrial or real estate markets,
(2) deterioration in global and domestic business and economic conditions,
such as interest rate and currency fluctuations, 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 international, including adverse
accounting or regulatory requirements and market values of candidates.
Part II - Other Information
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Item 6 - Exhibits and Reports on Form 8-K
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(a) Exhibit Index
No exhibits.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which
the report has been filed.
SIGNATURES
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Pursuant to the requirements 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.
ILLINOIS TOOL WORKS INC.
Dated: May 11, 2001 By: /s/ Jon C. Kinney
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Jon C. Kinney, Senior Vice President
and Chief Financial Officer
(Principal Accounting Officer)
