EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
Introduction
Illinois Tool Works Inc. is a multinational manufacturer of industrial
components systems with two business segments: Engineered Components,and
Industrial Systems and Consumables. The markets served by these segments are
shown on pages six and seven of this report. These segments are described below.
Engineered Components Segment
Businesses in this segment manufacture short lead-time plastic and metal
components, fasteners and assemblies; industrial fluids and adhesives; fastening
tools and welding equipment. This segment primarily serves the construction,
automotive and general industrial markets.
Dollars in millions
Operating
Revenues 1994 1993 1992
--------------------------------------------------------------------------------
Domestic $1,204 $1,083 $ 678
International 624 560 603
------ ------ ------
Total $1,828 $1,643 $1,281
====== ====== ======
Operating 1994 1993 1992
Income Income Margin Income Margin Income Margin
-----------------------------------------------------------------------------------
Domestic $193 16.0% $153 14.1% $ 92 13.6%
International 82 13.1 55 9.8 68 11.3
---- ---- ----
Total $275 15.0 $208 12.7 $160 12.5
==== ==== ====
Domestically, automotive businesses significantly contributed to the growth in
operating revenues in 1994 compared with 1993, followed closely by the
construction businesses. The automotive businesses grew as a result of improved
penetration with the "Big Three" automotive companies and a stronger domestic
car market. Residential and nonresidential construction markets were stronger in
1994, which resulted in increased volume in the construction business. Operating
income and margins increased primarily due to sales volume gains in both the
automotive and construction businesses. Miller also contributed to the overall
improved financial performance due to strong demand in welding markets and
internal cost reductions.
From 1992 to 1993, domestic operating revenues increased due to the Miller
acquisition, along with strengthening automotive and construction markets.
Operating income increased due to the Miller acquisition, along with cost
reductions in the automotive related businesses. Due mainly to Miller's lower
margins relative to the other businesses in this segment, margins improved only
slightly.
Internationally, the European automotive business mainly contributed to the
operating revenue growth in 1994 over 1993. Increased market penetration an an
11% increase in European car builds for the year caused revenues in the European
automotive businesses to grow significantly. In 1994, the European economy
picked up faster than anticipated, which resulted in larger than expected
international revenue growth in this segment. Approximately 76% of internation-
al revenues were generated from European operations. Operating income and
margins in 1994 were up compared with 1993 primarily due to increased sales
volume coupled with improved productivity in automotive businesses. Significant
cost reductions and successful product mix marketing in the European
construction markets also contributed to operating income and margin growth.
International operating revenues were down in 1993 versus 1992 due mainly to a
recessionary European economy. Operating income and margins suffered in 1993 due
to price pressure and soft European automotive and construction markets, along
with nonrecurring costs associated with some business units.
Industrial Systems and Consumables Segment
Businesses in this segment manufacture longer lead-time systems and related
consumables for consumer and industrial packaging, industrial spray coating
equipment and systems, and quality assurance application equipment and systems.
The largest markets served by this segment are general industrial, food and
beverage, and industrial capital goods.
Dollars in millions
Operating
Revenues 1994 1993 1992
--------------------------------------------------------------------------------
Domestic $1,025 $ 936 $ 878
International 608 580 653
------ ------ ------
Total $1,633 $1,516 $1,531
====== ====== ======
Operating 1994 1993 1992
Income Income Margin Income Margin Income Margin
-----------------------------------------------------------------------------------
Domestic $168 16.4% $133 14.2% $119 13.6%
International 56 9.2 45 7.8 65 10.0
---- ---- ----
Total $224 13.7 $178 11.7 $184 12.0
==== ==== ====
19
Domestically, operating revenues increased in 1994 versus 1993 due to increased
volume in the industrial packaging group and the finishing systems businesses
resulting from new product introductions and a growing U.S. economy. Operating
income and margins increased due to volume gains and new product introductions
in the industrial packaging and finishing systems businesses. The specialty
engineered products businesses, which serve the capital goods markets, slightly
moderated operating income growth.
Operating revenues increased in 1993 compared with 1992 due to good performances
in all domestic markets as a result of an improved U.S. economy. The finishing
systems businesses largely contributed to the increase in operating income
compared with the previous year due to benefits from significant cost reductions
implemented in 1992 and new product introductions in 1993.
Internationally, operating revenues in 1994 increased versus 1993 primarily due
to higher sales in the industrial packaging group. The consumer packaging group
also contri- buted to the revenue growth as beverage markets picked up in
Europe. Approximately 73% of international revenues in this segment are derived
from European operations. While the industrial packaging group showed revenue
growth in 1994, operating income and margins declined due to price belief given
to customers during the soft economic period in Europe. Margins are expected to
improve as the European economy strengthens and the benefits of cost reductions
are realized. The decline in the industrial packaging group's operating income
and margins was more than offset by improved profitability for the finishing
systems businesses related to new products and cost reductions.
International revenues were down in 1993 compared with with 1992 as a result of
the European recession, which significantly affected the industrial packaging
group. Operating income and margins were lower compared with 1992 as a result of
the decline in volume and increased price pressure in European markets. The
European finishing systems businesses moderated the decline in international
operating income and margins in 1993.
Operating Costs
Operating costs as a percentage of revenues were 66.2% in 1994 compared with
67.2% in 1993 and 66.1% in 1992. The decrease in 1994 versus 1993 was due to
increased sales volume coupled with the overall containment of manufacturing
costs. The increase in 1993 from 1992 was a result of European price pressure
and the acquisition of Miller, which had higher operating costs than the Company
average. 1992.
Selling, Administrative and R&D Expenses
Selling, administrative, and research and develop- ment expenses were 18.8% of
revenues in 1994 versus 19.9% in 1993 and 20.9% in 1992. This ratio was lower
because of expense reductions as a result of a Company-wide objective to reduce
administrative costs.
Interest Expense
Interest expense declined to $26.9 million in 1994, versus $35.0 million in
1993, primarily due to a reduction in commercial paper borrowings and foreign
borrowings. Interest expense declined in 1993 from $42.9 million in 1992. 1992
due to the reduction of foreign debt with higher interest rates and lower
domestic interest rates on commercial paper.
Other Income (Expense)
Other income(expense) increased to net expense of $14.6 million in 1994 versus
$7.7 million in 1993, primarily due to an increase in nonrecurring costs
unrelated to operations, partially offset by gains on sales of plant and
equipment in 1994 versus losses in 1993. Increased nonrecurring costs and lower
interest income resulted in net expense in 1993 compared with net other income
of $8.7 million in 1992.
Income Taxes
The effective tax rate was 38.3% in 1994, 38.5% in 1993 and 38.0% in 1992. See
the Provision for Income Taxes footnote for a reconciliation of the Federal
statutory rate to the effective tax rate. Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes, was adopted in 1993 and had no
material impact on earnings.
Net Income
Net income in 1994 of $277.8 million ($2.45 per share) was 34.5% higher than the
1993 net income of $206.6 million ($1.83 per share). Net income for 1993 was
7.5% higher than 1992 net income of $192.1 million ($1.72 per share).
Foreign Currency
Foreign currency had no material impact on earnings in 1994 versus 1993. The
strong U.S. dollar against European currency resulted in a reduction of net
income by 4 cents per share in 1993 compared with 1992.
20
Financial Position
Net working capital at December 31, 1994 and 1993 is
summarized as follows:
Increase
Dollars in thousands 1994 1993 (Decrease)
--------------------------------------------------------------------------------
Current Assets:
Cash and equivalents $ 76,867 $ 35,395 $ 41,472
Trade receivables 612,638 544,226 68,412
Inventories 439,486 403,902 35,584
Other 133,942 110,125 23,817
---------- ---------- ---------
$1,262,933 $1,093,648 $ 169,285
---------- ---------- ---------
Current Liabilities:
Short-term debt 67,002 107,073 (40,071)
Accounts payable and
accrued expenses 491,779 383,137 108,642
Other 69,652 55,932 13,720
---------- ---------- ---------
628,433 546,142 82,291
---------- ---------- ---------
Net Working Capital $ 634,500 $ 547,506 $ 86,944
========== =========== =========
Current Ratio 2.01 2.00
==== ====
The increase in trade receivables in 1994 was primarily due to higher operating
revenues in the fourth quarter of 1994 versus 1993. Inventories increased $35.6
million in 1994 mainly as a result of 1994 acquisitions.
Short-term debt decreased in 1994 as a result of the reduction of short-term
commercial paper borrowings of $63.9 million, partially offset by an increase in
bank overdrafts. Accounts payable and accrued expenses increased at December 31,
1994 versus year-end 1993 due to overall business growth and acquisitions.
Long-term debt at December 31, 1994 consisted of $125 million of 7-1/2% notes
due in 1998, $125 million of 5-7/8% notes due in 2000 and $23 million of
capitalized lease obligations and other debt. Long-term debt decreased $103
million from December 31, 1993, principally as a result of the repayment of all
commercial paper borrowings ($164 million) during 1994. The percentage of total
debt to total capitalization decreased to 18.1% at December 31, 1994, from 27.7%
at December 31, 1993.
Stockholders' equity was $1.542 billion at December 31, 1994 compared with
$1.259 billion at December 31, 1993. Affecting equity were earnings of $278
million, dividends declared of $64 million and favorable currency translation
adjustments of $37 million related to stronger European currencies.
The Statement of Cash Flows for the years ended December 31, 1994 and 1993 is
summarized below:
Dollars in thousands 1994 1993
--------------------------------------------------------------------------------
Net income $ 277,783 $ 206,570
Depreciation and amortization 132,149 131,726
Acquisitions (43,365) (303,802)
Additions to plant and equipment (131,055) (119,931)
Cash dividends paid (61,162) (55,175)
Net proceeds (repayments) of
short-term debt (149,103) 20,906
Proceeds from long-term debt 1,885 128,119
Repayments of long-term debt (4,949) (15,939)
Other, net 19,289 11,728
--------- ---------
Net increase in cash and
equivalents $ 41,472 $ 4,202
========= =========
Net cash provided by operating activities of $387 million in 1994 and $314
million in 1993 was used mainly for repayment of commercial paper borrowings in
1994 and for additions to plant and equipment and cash dividends in both years.
Cash provided by the proceeds from long-term debt in 1993 was used principally
to fund acquisitions.
Dividends paid per share increased 10.2% to $.54 per share in 1994 from $.49 in
1993. 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 and small-to-medium sized
acquisitions for cash. The Company has additional debt capacity for larger
acquisitions.
21
FINANCIAL STATEMENTS
------------------------------------------------------------------------------------------------
Statement of Income
Illinois Tool Works Inc. and Subsidiaries
For the Years Ended December 31
--------------------------------------------
In thousands except for per share amounts 1994 1993 1992
------------------------------------------------------------------------------------------------
Operating Revenues $3,461,315 $3,159,181 $2,811,645
Operating costs 2,290,117 2,122,286 1,858,752
Selling, administrative, and research
and development expenses 650,069 629,459 586,801
Amortization of goodwill and other
intangible assets 22,344 21,874 22,169
---------- ---------- ----------
Operating Income 498,785 385,562 343,923
Interest expense (26,943) (35,025) (42,852)
Amortization of retiree health care (6,968) (6,968) --
Other income(expense) (14,591) (7,699) 8,709
---------- ---------- ----------
Income Before Income Taxes 450,283 335,870 309,780
Income taxes 172,500 129,300 117,700
---------- ---------- ----------
Net Income $ 277,783 $ 206,570 $ 192,080
========== ========== ==========
Net Income Per Share of Common Stock $2.45 $1.83 $1.72
===== ===== =====
Statement of Income Reinvested in the Business
Illinois Tool Works Inc. and Subsidiaries
------------------------------------------------------------------------------------------------
For the Years Ended December 31
--------------------------------------------
In thousands 1994 1993 1992
------------------------------------------------------------------------------------------------
Balance, Beginning of Year $1,129,435 $1,201,537 $1,060,931
Net income 277,783 206,570 192,080
Cash dividends declared (63,546) (56,443) (51,474)
Effect of pooling of interests acquisitions 500 (222,229) --
---------- ---------- ----------
Balance, End of Year $1,344,172 $1,129,435 $1,201,537
========== ========== ==========
The Comments on Financial Statements are an integral part of these statements.
------------------------------------------------------------------------------------------------------
Report of Independent Public Accountants
To the Board of Directors of Illinois Tool Works Inc.:
We have audited the accompanying statement of financial position of Illinois
Tool Works Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1994 and 1993, and the related statements of income, income reinvested in the
business and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Illinois Tool Works Inc. and
Subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 31, 1995
22
------------------------------------------------------------------------------------------------
Statement of Financial Position
Illinois Tool Works Inc. and Subsidiaries
December 31
------------------------------
In thousands except shares 1994 1993
------------------------------------------------------------------------------------------------
Assets
Current Assets:
Cash and equivalents $ 76,867 $ 35,395
Trade receivables 612,638 544,226
Inventories 439,486 403,902
Deferred income taxes 72,728 57,764
Prepaid expenses and other current assets 61,214 52,361
---------- ----------
Total current assets 1,262,933 1,093,648
---------- ----------
Plant and Equipment:
Land 66,577 65,134
Buildings 317,714 282,104
Machinery and equipment 915,198 771,066
Equipment leased to others 69,162 62,857
Construction in progress 32,143 24,718
---------- ----------
1,400,794 1,205,879
Accumulated depreciation (759,559) (622,114)
---------- ----------
Net plant and equipment 641,235 583,765
---------- ----------
Investment in Leveraged Leases 55,413 60,088
---------- ----------
Goodwill 394,233 363,769
---------- ----------
Other Assets 226,684 235,621
---------- ----------
$2,580,498 $2,336,891
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt $ 67,002 $ 107,073
Accounts payable 174,748 149,205
Accrued expenses 317,031 233,932
Cash dividends payable 17,094 14,710
Income taxes payable 52,558 41,222
---------- ----------
Total current liabilities 628,433 546,142
---------- ----------
Non-current Liabilities:
Long-term debt 272,987 375,641
Deferred income taxes 69,516 92,470
Other 68,041 63,969
---------- ----------
Total non-current liabilities 410,544 532,080
---------- ----------
Stockholders' Equity:
Preferred stock -- --
Common stock:
Issued-114,100,500 shares in 1994 and 113,292,888
shares in 1993 201,166 170,185
Income reinvested in the business 1,344,172 1,129,435
---------- ---------
1,545,338 1,299,620
Common stock held in treasury (1,952) (1,955)
Equity adjustment from foreign currency translation (1,865) (38,996)
---------- ----------
Total stockholders' equity 1,541,521 1,258,669
---------- ---------
$2,580,498 $2,336,891
========== ==========
The Comments on Financial Statements are an integral part of this statement.
23
------------------------------------------------------------------------------------------------
Statement of Cash Flows
Illinois Tool Works Inc. and Subsidiaries
For the Years Ended December 31
------------------------------------------
In thousands 1994 1993 1992
-------------------------------------------------------------------------------------------------
Cash Provided by (Used for) Operating Activities:
Net income $277,783 $206,570 $192,080
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 132,149 131,726 122,631
Change in deferred income taxe (31,686) (13,332) (4,104)
(Gain)loss on sale of plant and
equipment, and investment 356 2,932 (351)
properties
(Gain)loss on sale of operations and
affiliates (379) 894 (1,973)
Other non-cash items, net 16,691 12,093 3,204
-------- --------- --------
Cash provided by operating
activities 394,914 340,883 311,487
Change in assets and liabilities:
(Increase) decrease in -
Trade receivables (81,180) (35,029) (15,807)
Inventories (8,053) 23,191 26,661
Prepaid expenses and other assets 9,515 (8,109) (14,114)
Increase (decrease) in -
Accounts payable 11,718 (3,569) (16,496)
Accrued expenses 45,839 (2,954) (16,601)
Income taxes payable 10,424 (4,079) 10,229
Other, net 4,280 3,741 1,430
-------- --------- --------
Net cash provided by operating
activities 387,457 314,075 286,789
-------- --------- ---------
Cash Provided by (Used for) Investing Activities:
Acquisition of subsidiaries (excluding
cash and equivalents) and additional
interest in affiliates (43,365) (303,802) (62,496)
Additions to plant and equipment (131,055) (119,931) (115,313)
Proceeds from sale of plant and equipment,
and investment properties 22,750 14,174 12,975
Proceeds from sale of operations and
affiliates 15,721 1,705 3,584
Other, net (6,224) 14,271 5,097
--------- -------- ---------
Net cash used for investing
activities (142,173) (393,583) (156,153)
--------- -------- ---------
Cash Provided by (Used for) Financing Activities:
Cash dividends paid (61,162) (55,175) (50,290)
Issuance of common stock 3,216 8,316 10,962
Net proceeds (repayments) of short-term
debt (149,103) 20,906 (96,014)
Proceeds from long-term debt 1,885 128,119 102,516
Repayments of long-term debt (4,949) (15,939) (158,274)
--------- --------- --------
Net cash provided by (used for)
financing activities (210,113) 86,227 (191,100)
--------- --------- --------
Effect of Exchange Rate Changes on Cash
and Equivalents 6,301 (2,517) (1,445)
--------- -------- --------
Cash and Equivalents:
Increase (decrease) during the year 41,472 4,202 (61,909)
Beginning of year 35,395 31,193 93,102
--------- -------- --------
End of year $ 76,867 $ 35,395 $ 31,193
========= ======== ========
Cash Paid During the Year for Interest $ 27,257 $ 33,052 $ 39,943
========= ======== ========
Cash Paid During the Year for Income Taxes $ 194,460 $139,344 $ 80,795
========= ======== ========
Liabilities Assumed from Acquisitions $ 28,438 $ 90,848 $ 5,094
========= ======== ========
The Comments on Financial Statements are an integral part of this statement.
24
Comments on Financial Statements
--------------------------------------------------------------------------------
Comments and Associated Schedules in this section furnish additional information
on items in the financial statements. The comments have been arranged in the
same order as the related items appear in the statements.
--------------------------------------------------------------------------------
Consolidation and Translation -- The financial statements include the Company
and its majority-owned subsidiaries. All significant intercompany transactions
are eliminated from the financial statements. The majority 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.
--------------------------------------------------------------------------------
Industry Segment and Geographic Information -- The Company's operations are
divided into two segments: Engineered Components, and Industrial Systems and
Consumables. See Management's Discussion and Analysis for a description of the
segments and information regarding operating revenues and operating income.
Significant accounting principles and policies of Illinois Tool Works Inc.
("the Company") are highlighted in italics. Certain reclassifications of prior
years' data have been made to conform with current year reporting.
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.
No single customer accounted for more than 10% of consolidated revenues in
1994, 1993 or 1992. Export sales from the United States were less than 10% of
total operating revenues during these years.
Additional segment and geographic information for 1994, 1993 and 1992 was as
follows:
In thousands 1994 1993 1992
-----------------------------------------------------------------------------------------------
Identifiable Assets:
Domestic--
Engineered Components $ 551,603 $ 506,850 $ 382,271
Industrial Systems and Consumables 748,463 620,263 617,654
---------- ---------- ----------
1,300,066 1,127,113 999,925
---------- ---------- ----------
International--
Engineered Components 439,813 429,370 434,416
Industrial Systems and Consumables 510,965 517,869 529,808
---------- ---------- ----------
950,778 947,239 964,224
---------- ---------- ----------
Corporate 329,654 262,539 240,038
---------- ---------- ----------
$2,580,498 $2,336,891 $2,204,187
========== ========== ==========
Plant and Equipment Additions:
Engineered Components $ 85,553 $ 80,672 $ 73,226
Industrial Systems and Consumables 45,502 39,259 42,087
---------- ---------- ---------
$ 131,055 $ 119,931 $ 115,313
========== ========== =========
Depreciation:
Engineered Components $ 65,619 $ 67,746 $ 55,992
Industrial Systems and Consumables 44,186 42,106 44,470
---------- ---------- ---------
$ 109,805 $ 109,852 $ 100,462
========== ========== =========
Identifiable assets by segment and geographic area are those assets that are
specifically used in that segment and geographic area.
Corporate assets are principally cash and equivalents, investments and other
general corporate assets.
25
Acquisitions and Dispositions - In March 1993, the Company acquired the Miller
Group Ltd. (Miller), a manufacturer of arc welding equipment. The acquisition
has been accounted for as a pooling of interests, and accordingly, the results
of operations have been included in the Statement of Income as of the beginning
of 1993. The impact of Miller on consolidated revenues, net income and earnings
per share for 1993 and 1992 was not significant. Therefore, the 1992 financial
statements have not been restated to reflect the acquisition of Miller.
During 1994, 1993 and 1992, the Company acquired and disposed of other
operations which did not materially affect consolidated results.
--------------------------------------------------------------------------------
Depreciation was $109,805,000 in 1994 compared with $109,852,000 in 1993 and
$100,462,000 in 1992 and was reflected primarily in operating costs.
Depreciation of plant and equipment for financial reporting is computed
principally on an accelerated basis. Equipment leased to others is depreciated
over the noncancelable period of the related lease.
--------------------------------------------------------------------------------
Research and Development Costs are recorded as expense in the year incurred.
These costs were $47,500,000 in 1994, $47,200,000 in 1993 and $42,500,000 in
1992.
--------------------------------------------------------------------------------
Rental Expense was $29,720,000 in 1994, $30,550,000 in 1993 and $30,613,000 in
1992.
--------------------------------------------------------------------------------
Other Income(Expense) consisted of the following:
In thousands 1994 1993 1992
--------------------------------------------------------------------------------------------------------
Interest income $ 5,586 $ 6,596 $ 9,167
Income from unconsolidated affiliates 1,844 1,584 2,888
Net reserves for disposition and relocation of
certain facilities, restructuring costs,
revaluation of nonoperating assets to
realizable value, and nonrecurring costs
unrelated to operations (16,527) (9,101) (2,622)
Gain(loss) on sale of investment properties (617) -- 1,974
Gain(loss) on sale of operations and
affiliates 379 (894) 1,973
Gain(loss) on sale of plant and equipment 261 (2,932) (1,623)
Other, net (5,517) (2,952) (3,048)
-------- ------- -------
$(14,591) $(7,699) $ 8,709
======== ======= =======
26
The Provision For Income Taxes - Effective January 1, 1993, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for
Income Taxes, using the current-year recognition approach. SFAS No. 109 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. Prior to January 1, 1993, the income tax provision was
computed using Accounting Principles Board Opinion No. 11, which is based on the
income and expense in the Statement of Income. The adoption of SFAS No. 109 had
no material impact on the Company's results of operations in 1993.
The components of the provision for income taxes were as shown below:
In thousands 1994 1993 1992
----------------------------------------------------------------------------------------------
U.S. Federal income taxes:
Current $120,606 $ 95,406 $ 73,465
Deferred (3,665) (14,383) (4,224)
Investment tax credits (810) (727) (544)
-------- -------- --------
116,131 80,296 68,697
-------- -------- --------
Foreign income taxes:
Current 40,290 28,239 37,915
Deferred (5,314) 4,515 (1,737)
-------- -------- --------
34,976 32,754 36,178
-------- -------- --------
State income taxes 21,393 16,250 12,825
-------- -------- --------
$172,500 $129,300 $117,700
======== ======== ========
Income before income taxes for domestic and foreign operations was as follows:
In thousands 1994 1993 1992
----------------------------------------------------------------------------------------------
Domestic $318,368 $253,068 $224,041
Foreign 131,915 82,802 85,739
-------- -------- --------
$450,283 $335,870 $309,780
======== ======== ========
The reconciliation between the Federal statutory tax rate and the effective tax
rate was as follows:
1994 1993 1992
----------------------------------------------------------------------------------------------
Federal statutory tax rate 35.0% 35.0% 34.0%
Increases(reductions):
State income taxes, net of Federal tax benefit 3.1 3.2 2.7
Amortization of goodwill and other intangible
assets .8 1.1 1.7
Difference between Federal statutory and
foreign tax rates (.4) 1.1 1.4
Other, net (.2) (1.9) (1.8)
---- ---- ----
Effective tax rate 38.3% 38.5% 38.0%
==== ==== ====
27
Deferred U.S. Federal income taxes and foreign withholding taxes have not
been provided on $413,100,000 of undistributed earnings of international
affiliates as of December 31, 1994. In the event these earnings were
distributed to the Company, the Federal income taxes payable would be reduced by
foreign tax credits based on income tax laws and circumstances at the time of
distribution. The net tax effect would not be expected to be material.
The components of deferred income tax assets and liabilities at December 31,
1994 and 1993 were as follows:
In thousands 1994 1993
----------------------------------------------------------------------------------------------
Deferred income tax assets:
Accrued expenses and reserves $ 38,787 $ 30,085
Inventory reserves and capitalized
tax cost 17,077 19,022
Employee benefit accruals 31,647 32,224
Net operating loss carryforwards 15,936 15,492
Accumulated depreciation 7,859 4,373
Allowances for uncollectible accounts 5,365 5,069
Other 23,306 8,141
-------- --------
Gross deferred tax assets 139,977 114,406
Valuation allowances (4,279) (8,189)
-------- --------
Net deferred tax assets 135,698 106,217
-------- --------
Deferred income tax liabilities:
Leveraged leases (40,656) (45,528)
Acquisition asset write-ups (21,592) (23,907)
Accumulated depreciation (25,648) (27,220)
Pension assets (11,904) (12,529)
LIFO inventory (9,036) (8,681)
Other (23,650) (23,058)
-------- --------
Deferred income tax
liabilities (132,486) (140,923)
-------- --------
Net deferred income tax
asset (liability) $ 3,212 $(34,706)
======== ========
--------------------------------------------------------------------------------
Net Income Per Share of Common Stock is computed on the basis of the average
number of shares of common stock outstanding. The dilutive effect of shares of
common stock subject to issuance under stock option plans are excluded from the
computation since the effect is not material. The average number of shares
outstanding was 113,387,000, 112,979,000 and 111,746,000 for 1994, 1993, and
1992, respectively.
--------------------------------------------------------------------------------
Cash and Equivalents included interest-bearing deposits of $18,702,000 at
December 31, 1994 and $28,506,000 at December 31, 1993. Interest-bearing
deposits have maturities of 90 days or less and are stated at cost, which
approximates market.
--------------------------------------------------------------------------------
Trade Receivables as of December 31, 1994 and 1993 were net of allowances for
uncollectible accounts of $19,600,000 and $18,000,000, respectively.
28
Inventories at December 31, 1994 and 1993 were as follows:
In thousands 1994 1993
------------------------------------------------------------------------------------------------------
Raw material $126,730 $ 94,105
Work-in-process 66,505 61,314
Finished goods 246,251 248,483
-------- --------
$439,486 $403,902
======== ========
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 most domestic operations. The first-in,
first-out (FIFO) method is used for all other inventories. Inventories priced at
LIFO were 43% and 46% of total inventories as of December 31, 1994 and 1993,
respectively. Under the FIFO method, which approximates current cost, total
inventories would have been approximately $40,700,000 and $42,800,000 higher
than reported at December 31, 1994 and 1993, respectively.
The LIFO inventory values of certain domestic subsidiaries of the Company
differ from the LIFO inventory values for tax purposes because of the
application of purchase accounting. Inventories for financial statement purposes
exceeded inventories for tax purposes by approximately $21,700,000 and
$22,000,000 at December 31, 1994 and 1993, respectively.
December 31, 1994 and 1993, respectively. Under the FIFO method, which
approximates current cost, total inventories would have been approximately
$40,700,000 and $42,800,000 higher than reported at Decemer 31, 1994 and 1993,
respectively.
--------------------------------------------------------------------------------
Plant and Equipment are stated at cost less accumulated depreciation. Renewals
and improvements that increase the useful life of property are capitalized.
Maintenance and repairs are charged to expense as incurred.
--------------------------------------------------------------------------------
Investment in Leveraged Leases - The Company has investments in leveraged leases
of equipment used primarily in the transportation, mining and paper processing
industries.
The components of the investment in leveraged leases at December 31, 1994 and
1993 were as shown below:
In thousands 1994 1993
------------------------------------------------------------------------------------------------------
Lease contracts receivable
(net of principal and interest on nonrecourse
financing) $ 46,798 $ 52,652
Estimated residual value of leased assets 21,548 21,548
Unearned and deferred income (12,933) (14,112)
-------- --------
Investment in leveraged leases 55,413 60,088
Deferred taxes arising from leveraged leases (40,656) (45,528)
-------- --------
Net investment in leveraged leases $ 14,757 $ 14,560
======== ========
The components of the income from leveraged leases
for the years ended December 31, 1994, 1993
and 1992 were as shown below:
In thousands 1994 1993 1992
-------------------------------------------------------------------------------------------------------
Leveraged lease income (expense) before
income taxes $ 65 $ 124 $(76)
Investment tax credits recognized 810 727 544
Income tax benefit (expense) 211 (543) 235
------ ----- ----
$1,086 $ 308 $703
====== ===== ====
29
Goodwill represents the excess cost over fair value of the net assets of
purchased businesses. Goodwill is being amortized on a straight-line basis over
15 to 40 years. The Company assesses the recoverability of unamortized goodwill
by reviewing the sufficiency of estimated future operating income or
undiscounted cash flows of the related entity to cover the amortization during
the remaining amortization period.
Amortization expense was $14,031,000 in 1994, $13,268,000 in 1993 and
$12,262,000 in 1992. Accumulated goodwill amortization was $79,672,000 and
$64,822,000, at December 31, 1994 and 1993, respectively.
--------------------------------------------------------------------------------
Other Assets as of December 31, 1994 and 1993 consisted of the following:
In thousands 1994 1993
-------------------------------------------------------------------------------
Other intangible assets $134,083 $126,150
Accumulated amortization of other intangible assets (64,455) (62,395)
Investment properties 31,653 39,455
Investment in and advances to unconsolidated affiliates 25,481 31,051
Prepaid pension assets 28,566 33,206
Other 71,356 68,154
-------- --------
$226,684 $235,621
======== ========
Other intangible assets represent patents, noncompete agreements and other
assets acquired with purchased businesses and are being amortized primarily on a
straight-line basis over three to 17 years.
Amortization expense was $8,313,000 in 1994, $8,606,000 in 1993 and
$9,907,000 in 1992.
Investment properties consist primarily of assets held for sale.
--------------------------------------------------------------------------------
Short-term Debt as of December 31, 1994 and 1993
consisted of the following:
In thousands 1994 1993
-------------------------------------------------------------------------------
Commercial paper $ -- $ 63,881
Current maturities of long-term debt 2,009 2,619
Bank overdrafts 45,968 18,034
Other borrowings by foreign subsidiaries 19,025 22,539
------- --------
$67,002 $107,073
======= ========
The weighted average interest rate on other
foreign borrowings was 6.1% at December 31, 1994
and 7.2% at December 31, 1993.
--------------------------------------------------------------------------------
Accrued Expenses as of December 31, 1994 and 1993 consisted of accruals for:
In thousands 1994 1993
------------------------------------------------------------------------------------------------------
Compensation $161,728 $135,855
Taxes, other than income taxes 17,727 15,310
Customer deposits 20,019 10,677
Other 117,557 72,090
-------- --------
$317,031 $233,932
======== ========
30
Retirement Plans - The Company sponsors defined contribution retirement plans
covering substantially all domestic employees. The Company's contributions to
these plans were $8,400,000 in 1994, $6,900,000 in 1993 and $6,200,000 in 1992.
The Company provides substantially all employees with pension benefits. The
Company's principal domestic plan provides benefits based on years of service
and compensation levels during the latter years of employment. Other domestic
and foreign plans provide benefits similar to the principal domestic plan.
In late 1992, the principal domestic pension plan was amended to provide an
early retirement supplement to be paid to future retirees from their early
retirement date to age 65. The pension supplement increased the prior service
cost as of December 31, 1992 by $25,700,000.
Subject to the limitation on deductibility imposed by Federal income tax
laws, the Company's policy has been to contribute funds to the plans annually in
amounts required to maintain sufficient plan assets to provide for accrued
benefits. Due to the current overfunded status of the principal plan, no
contributions to this plan were made in 1994, 1993 or 1992 and none are expected
to be made for the next several years. The previously mentioned amendment will
not significantly affect the status of future contributions. Other domestic plan
contributions were minimal in 1994, 1993 and 1992. Domestic plan assets consist
primarily of listed common stocks and debt securities.
The components of net pension expense for the years ended December 31, 1994,
1993 and 1992 were as shown below:
In thousands 1994 1993 1992
------------------------------------------------------------------------------------------------------
Service cost $21,622 $ 21,757 $ 19,889
Interest cost on projected benefit
obligation 32,800 29,832 25,348
Actual return on plan assets (4,655) (48,002) (38,009)
Net amortization and deferral (38,278) 7,879 (5,560)
-------- -------- --------
Net pension expense $11,489 $ 11,466 $ 1,668
======== ======== ========
The following table sets forth the funded status and amounts recognized in the
Company's Statement of Financial Position at December 31, 1994 and 1993:
1994 1993
--------------------------------------------------------
In thousands Domestic Foreign Domestic Foreign
----------------------------------------------------------------------------------------------------
Actuarial present value of
benefit obligations:
Vested $(244,931) $(65,919) $(271,698) $(47,817)
Non-vested (43,866) (13,389) (50,878) (10,262)
--------- -------- --------- --------
Accumulated benefit obligation (288,797) (79,308) (322,576) (58,079)
Effect of projected wage increases (36,099) (14,013) (38,644) (15,707)
--------- -------- --------- --------
Projected benefit obligation (324,896) (93,321) (361,220) (73,786)
Plan assets at fair value 375,632 97,771 399,770 87,369
--------- -------- --------- --------
Plan assets in excess of projected
benefit obligation 50,736 4,450 38,550 13,583
Unrecognized net gain (56,385) (6,909) (41,364) (4,501)
Unrecognized prior service cost 40,620 29 45,667 33
Unrecognized transition asset (24,461) (9,073) (28,534) (10,640)
Adjustment to recognize minimum liability (1,140) (587) (5,623) (745)
--------- -------- --------- ---------
Prepaid (accrued) pension asset (liability) $ 9,370 $(12,090) $ 8,696 $ (2,270)
========= ======== ========= ========
The significant actuarial assumptions at December 31, 1994, 1993 and 1992 were
as follows:
1994 1993 1992
------------------------------------------------------------------------------------------------------
Domestic plans:
Discount rate 8.5% 7.6% 8.5%
Expected long-term rate of return on plan assets 10.0% 9.0% 9.0%
Rate of increase in future compensation levels 4.3% 4.3% 6.1%
Foreign plans:
Discount rate 5.5 -9.0% 5.5 - 9.0% 5.5 - 9.0%
Expected long-term rate of return on plan assets 5.5 -9.0% 5.5 - 9.0% 5.5 - 10.0%
31
Postretirement Health Care Benefits - The Company provides health care benefits
to substantially all retired domestic employees and their covered dependents.
Generally, employees who have reached age 55 and rendered 10 years of service
are eligible for these benefits, which are subject to retiree contributions,
deductibles, copayment provisions and other limitations.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions. This standard requires that the expected cost of
health care benefits be charged to expense during the service lives of employees
rather than the cash basis method previously used. The Company has elected to
amortize the unfunded accumulated postretirement benefit obligation (APBO) of
$145,500,000 as of January 1, 1993 over 20 years.
A one-percentage point increase in the health care cost trend rate would
increase the APBO as of December 31, 1994 by approximately $13,668,000 and the
sum of the 1994 annual service and interest cost by approximately $1,666,000.
Prior to 1993, the cost of providing postretirement health care benefits net
of retiree contributions was recognized as expense as claims were paid and
amounted to $8,900,000 in 1992.
The costs of postretirement health care benefits under SFAS No. 106 for the
years ended December 31, 1994 and 1993 were as shown below:
In thousands 1994 1993
------------------------------------------------------------------------------------------------------
Service cost $ 2,187 $ 2,312
Interest cost on accumulated postretirement benefit obligation 10,715 11,912
Net amortization and deferral 7,519 6,968
------- -------
Net postretirement benefit cost $20,421 $21,192
======= =======
The following table sets forth the amounts recognized in the Company's Statement
of Financial Position at December 31, 1994 and 1993:
In thousands 1994 1993
------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation:
Retirees $ (91,691) $(112,876)
Active employees (29,661) (31,439)
--------- ---------
(121,352) (144,315)
Unrecognized transition obligation 129,764 137,283
Unrecognized net gain (28,689) (3,470)
--------- ---------
Accrued postretirement benefit cost $ (20,277) $ (10,502)
========= =========
The significant actuarial assumptions at December 31, 1994 and 1993 were as
follows:
1994 1993
------------------------------------------------------------------------------------------------------
Discount rate 8.5% 7.6%
Health care cost trend rate:
Current rate 8.0% 10.0%
Ultimate rate in 1999 5.0% 5.0%
32
Long-Term Debt at December 31, 1994 and 1993 consisted of the following:
In thousands 1994 1993
------------------------------------------------------------------------------------------------------
7-1/2% notes due December 1, 1998 $125,000 $125,000
5-7/8% notes due March 1, 2000 125,000 125,000
Commercial paper -- 100,000
Other, including capitalized lease obligations 24,996 28,260
-------- --------
274,996 378,260
Current maturities (2,009) (2,619)
-------- --------
$272,987 $375,641
======== ========
In December 1991, the Company issued $125,000,000 of 7-1/2% notes due
December 1, 1998 at 99.892% of face value. The notes may not be redeemed by the
Company prior to maturity. The effective interest rate of the notes is 7.6%.
In March 1993, the Company issued $125,000,000 of 5-7/8% 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%
At December 31, 1994, the carrying values of the 7-1/2% and 5-7/8% notes
exceeded the quoted market prices by approximately $14,000,000.
In August 1992, the Company entered into a $300,000,000 revolving credit
facility (RCF) expiring on August 14, 1997, which provides for borrowings under
a number of options and which may be reduced or canceled at any time at the
Company's option. In July 1994, the Company canceled $150,000,000 of the RCF.
There were no amounts outstanding under this facility as of December 31, 1994.
The 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, 1994.
Commercial paper is issued at a discount and generally matures 30 to 90 days
from the date of issue. The Company maintains unused commitments under the RCF
equal to any commercial paper borrowings. No commercial paper was outstanding at
December 31, 1994. The weighted average interest rate on commercial paper
outstanding at December 31, 1993 was 3.3%.
Other debt bears interest at rates ranging from 3.5% to 13.9%, with
maturities through the year 2014. Some of the debt is collateralized by plant
and equipment.
Scheduled maturities of long-term debt for the years ended December 31 are as
follows:
In thousands
------------------------------------------------
1996 $ 2,560
1997 5,813
1998 126,368
1999 991
2000 and future years 137,255
--------
$272,987
========
--------------------------------------------------------------------------------
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 any preferred stock.
33
Common Stock, without par value, and Common Stock Held in Treasury transactions
during 1994, 1993 and 1992 were as shown below.
On May 7, 1993, the Board of Directors authorized a two-for-one split of the
Company's common stock, with a distribution date of June 18, 1993, at a rate of
one additional share for each common share held by stockholders of record on
June 1, 1993. All per-share data in this report is calculated on a post-split
basis.
Common Stock
Common Stock Held in Treasury
--------------------------------------------
Dollars in thousands Shares Amount Shares Amount
----------------------------------------------------------------------------------------
Balance, December 31, 1991 55,792,374 $139,982 (74,284) $(2,034)
During 1992-
Stock options exercised 288,917 8,274 5,552 356
Shares surrendered on exercise
of stock options (3,000) (190) (5,552) (356)
Tax benefits related to stock
options exercised -- 2,776 -- --
Restricted stock grant -- 102 2,700 74
---------- -------- ------- -------
Balance, December 31, 1992 56,078,291 150,944 (71,584) (1,960)
During 1993-
Adjustment to reflect the June 1993
stock split 56,078,291 -- (71,584) --
Stock options exercised 403,558 5,693 27,348 991
Shares surrendered on exercise
of stock options (5,274) (194) (27,348) (991)
Tax benefits related to stock
options exercised -- 2,114 -- --
Shares issued for acquisitions 718,810 10,931 -- --
Shares issued for stock incentive
grants and restricted stock grants 19,212 697 400 5
----------- --------- --------- -------
Balance, December 31, 1993 113,292,888 170,185 (142,768) (1,955)
During 1994-
Stock options exercised 199,679 3,851 22,653 994
Shares surrendered on exercise
of stock options (14,531) (635) (22,653) (994)
Tax benefits related to stock
options exercised -- 1,212 -- --
Shares issued for acquisitions 476,464 20,726 -- --
Restricted stock grant 146,000 5,827 200 3
----------- -------- --------- -------
Balance, December 31, 1994 114,100,500 $201,166 (142,568) $(1,952)
=========== ======== ========= =======
Authorized, December 31, 1994 150,000,000
===========
34
Stock Options have been issued to officers and other employees under the
Company's 1979 Stock Incentive Plan. At December 31, 1994, 5,000,793 shares were
reserved for issuance under the plans. Option prices are 100% of the common
stock fair market value on the date of grant.
Stock option transactions during 1994, 1993 and 1992 were as shown below:
Number of Shares Price per Share
----------------------------------------------------------------------------------------
Under option at December 31, 1991 2,727,584 $ 1.38 to 29.75
During 1992-
Granted 25,582 31.44 to 32.50
Exercised (588,938) 1.38 to 29.75
Canceled or expired (61,402) 16.13 to 29.75
---------
Under option at December 31, 1992 2,102,826 7.13 to 32.50
During 1993-
Granted 688,008 36.38 to 37.00
Exercised (430,906) 7.13 to 29.75
Canceled or expired (25,402) 20.69 to 29.75
---------
Under option at December 31, 1993 2,334,526 8.19 to 37.00
During 1994-
Granted 126,358 40.13 to 44.38
Exercised (222,332) 8.19 to 36.38
Canceled or expired (15,000) 29.75 to 36.38
---------
Under option at December 31, 1994 2,223,552 8.19 to 44.38
=========
Exercisable at December 31, 1994 1,406,591 8.19 to 37.00
Reserved for grant - December 31, 1993 3,011,946
- December 31, 1994 2,777,241
------------------------------------------------------------------------------------------------------
Cash Dividends Declared were $.56 per share in 1994,
$.50 per share in 1993 and $.46 per share
in 1992.
35
Thirteen Year Financial Summary
------------------------------------------------------------------------------------------------------------
Dollars and shares in thousands except per share amounts 1994 1993 1992 1991
------------------------------------------------------------------------------------------------------------
Income:
Operating revenues $3,461,315 3,159,181 2,811,645 2,639,650
Operating costs $2,290,117 2,122,286 1,858,752 1,759,288
Selling, administrative, and research and
development expenses $ 650,069 629,459 586,801 552,874
Amortization of goodwill and other intangible
assets $ 22,344 21,874 22,169 23,979
Operating income $ 498,785 385,562 343,923 303,509
Interest expense $ (26,943) (35,025) (42,852) (44,342)
Amortization of retiree health care $ (6,968) (6,968) -- --
Other income (expense) $ (14,591) (7,699) 8,709 28,592
Income before income taxes $ 450,283 335,870 309,780 287,759
Income taxes $ 172,500 129,300 117,700 107,200
Net income $ 277,783 206,570 192,080 180,559
Per share $ 2.45 1.83 1.72 1.62
Financial Position:
Net working capital $ 634,500 547,506 492,118 442,041
Plant and equipment, net $ 641,235 583,765 524,116 525,695
Total assets $2,580,498 2,336,891 2,204,187 2,257,139
Long-term debt $ 272,987 375,641 251,979 307,082
Total debt $ 339,989 482,714 335,240 489,189
Stockholders' equity $1,541,521 1,258,669 1,339,673 1,212,051
Other Data:
Operating income:
Return on operating revenues % 14.4 12.2 12.2 11.5
Net income:
Return on operating revenues % 8.0 6.5 6.8 6.8
Return on average stockholders' equity % 19.8 15.9 15.1 15.7
Cash dividends paid $ 61,162 55,175 50,290 44,108
Per share - paid $ .54 .49 .45 .40
- declared $ .56 .50 .46 .42
Book value per share $ 13.53 11.12 11.96 10.88
Common stock market price at year-end $ 43.75 39.00 32.62 31.88
Long-term debt to total capitalization % 15.0 23.0 15.8 20.2
Total debt to total capitalization % 18.1 27.7 20.0 28.8
Shares outstanding:
At December 31 113,958 113,150 112,014 111,436
Average during year 113,387 112,979 111,746 111,178
Plant and equipment additions $ 131,055 119,931 115,313 106,036
Depreciation $ 109,805 109,852 100,462 91,414
Research and development expenses $ 47,500 47,200 42,500 40,300
Employees at December 31 19,500 19,000 17,800 18,700
36
------------------------------------------------------------------------------------------------------------
Dollars and shares in thousands except per share amounts 1990 1989 1988 1987
------------------------------------------------------------------------------------------------------------
Income:
Operating revenues $2,544,153 2,172,747 1,929,805 1,698,353
Operating costs $1,686,423 1,450,116 1,287,297 1,117,990
Selling, administrative, and research and
development expenses $ 510,276 417,874 369,138 339,143
Amortization of goodwill and other intangible
assets $ 19,181 15,829 13,106 16,812
Operating income $ 328,273 288,928 260,264 224,408
Interest expense $ (39,190) (30,995) ( 26,109) (33,439)
Amortization of retiree health care $ -- -- -- --
Other income (expense) $ 10,800 11,089 (1,343) 8,815
Income before income taxes $ 299,883 269,022 232,812 199,784
Income taxes $ 117,500 105,200 92,800 93,600
Net income $ 182,383 163,822 140,012 106,184
Per share $ 1.68 1.53 1.33 1.03
Financial Position:
Net working capital $ 615,055 440,406 392,283 332,290
Plant and equipment, net $ 483,549 413,578 342,794 318,690
Total assets $2,150,307 1,687,985 1,380,237 1,334,063
Long-term debt $ 430,632 334,407 225,907 309,515
Total debt $ 495,952 370,507 257,597 357,249
Stockholders' equity $1,091,842 871,124 744,727 608,541
Other Data:
Operating income:
Return on operating revenues % 12.9 13.3 13.5 13.2
Net income:
Return on operating revenues % 7.2 7.5 7.3 6.3
Return on average stockholders' equity % 18.6 20.3 20.7 19.6
Cash dividends paid $ 35,861 28,747 23,027 20,144
Per share - paid $ .33 .27 .22 .20
- declared $ .35 .28 .23 .20
Book value per share $ 9.96 8.12 7.05 5.88
Common stock market price at year-end $ 24.13 22.44 17.25 16.50
Long-term debt to total capitalization % 28.3 27.7 23.3 33.7
Total debt to total capitalization % 31.2 29.8 25.7 37.0
Shares outstanding:
At December 31 109,610 107,332 105,588 103,560
Average during year 108,872 107,028 105,350 103,272
Plant and equipment additions $ 101,183 84,263 84,107 61,052
Depreciation $ 82,913 68,890 62,064 57,839
Research and development expenses $ 40,300 32,500 26,588 24,739
Employees at December 31 18,400 15,700 14,200 13,600
37
------------------------------------------------------------------------------------------------------------------------------
Dollars and shares in thousands except per share amounts 1986 1985 1984 1983 1982
------------------------------------------------------------------------------------------------------------------------------
Income:
Operating revenues $ 961,077 596,127 592,253 497,821 446,983
Operating costs $ 622,310 390,501 382,299 325,022 287,528
Selling, administrative, and research and
development expenses $ 223,765 123,292 115,845 104,594 97,195
Amortization of goodwill and other intangible
assets $ 8,635 715 630 317 264
Operating income $ 106,367 81,619 93,479 67,888 61,996
Interest expense $ (14,468) (1,917) (1,914) (2,433) (2,004)
Amortization of retiree health care $ -- -- -- -- --
Other income (expense) $ 51,384 (9,755) 7,139 17,433 9,698
Income before income taxes $ 143,283 69,947 98,704 82,888 69,690
Income taxes $ 63,700 38,400 38,700 33,300 29,600
Net income $ 79,583 31,547 60,004 49,588 40,090
Per share $ .78 .31 .60 .50 .41
Financial Position:
Net working capital $ 293,575 172,201 182,698 168,717 130,015
Plant and equipment, net $ 317,829 137,001 118,889 108,695 109,978
Total assets $1,309,886 521,850 483,953 449,811 394,509
Long-term debt $ 468,269 9,995 11,101 11,578 10,292
Total debt $ 503,998 17,618 17,457 17,328 17,196
Stockholders' equity $ 476,550 403,439 377,557 339,952 301,540
Other Data:
Operating income:
Return on operating revenues % 11.1 13.7 15.8 13.6 13.9
Net income:
Return on operating revenues % 8.3 5.3 10.1 10.0 9.0
Return on average stockholders' equity % 18.1 8.1 16.7 15.5 13.6
Cash dividends paid $ 18,295 17,095 15,648 14,375 13,511
Per share - paid $ .18 .17 .16 .15 .14
- declared $ .18 .18 .16 .15 .14
Book value per share $ 4.65 4.00 3.76 3.40 3.07
Common stock market price at year-end $ 12.97 8.75 7.06 6.83 4.94
Long-term debt to total capitalization % 49.6 2.4 2.9 3.3 3.3
Total debt to total capitalization % 51.4 4.2 4.4 4.8 5.4
Shares outstanding:
At December 31 102,508 100,796 100,304 99,846 98,374
Average during year 102,206 100,558 100,138 99,650 98,248
Plant and equipment additions $ 44,722 39,062 39,248 24,491 24,073
Depreciation $ 37,213 27,312 25,742 24,039 22,749
Research and development expenses $ 13,161 7,795 8,029 6,022 6,426
Employees at December 31 13,700 7,300 7,800 7,300 6,500
37
Quarterly and Common Stock Data
Quarterly Financial Data (Unaudited)
was as summarized below:
Three Months Ended
-----------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- ------------------ ------------------ ------------------
In thousands except
per share amounts 1994 1993 1994 1993 1994 1993 1994 1993
--------------------------------------------------------------------------------------------------
Operating revenues $771,439 $750,022 $881,042 $829,318 $870,911 $779,536 $937,923 $800,305
Operating costs 520,264 508,887 583,910 556,998 579,917 527,854 606,026 528,547
Operating income 91,316 77,585 131,113 101,935 126,337 93,529 150,019 112,513
Net income 50,915 42,027 70,727 54,799 71,399 50,946 84,742 58,798
Net income per share .45 .37 .62 .49 .63 .45 .75 .52
--------------------------------------------------------------------------------------------------------
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 1994 and 1993 were as
shown below:
Market Price Dividends
Per Share Paid
---------------------
High Low Per Share
--------------------------------------------------------------------------------------------------
1994
First quarter $45-1/8 $37 $.13
Second quarter 42-1/4 36-3/4 .13
Third quarter 44-7/8 37 .13
Fourth quarter 45-1/2 39-5/8 .15
1993
First quarter $39 $32-1/2 $.12
Second quarter 38-3/4 34-7/8 .12
Third quarter 40-1/2 35-1/4 .12
Fourth quarter 39-7/8 36 .13
The approximate number of holders of record of
common stock as of February 22, 1995 was 3,700.
This number does not include beneficial owners
of the Company's securities held in the name of
nominees.
38