ITW Reports Decline in Revenues
GLENVIEW, Ill., July 19 Illinois Tool Works Inc.
today reported that 2001 second quarter diluted earnings per share
decreased 16 percent versus the prior year period primarily due to widespread
slowing in many of the company's North American end markets. Operating
revenues were down 3 percent, operating income fell 15 percent and net income
declined 15 percent during the 2001 second quarter.
Net income for the second quarter decreased to $232.8 million from
$273.3 million for the 2000 second quarter. Diluted earnings per share was
76 cents compared to 90 cents for the year earlier period.
The decrease in second quarter earnings primarily was a result of declines
in North American base business revenues and continued restructuring in a
number of ITW businesses. For the 2001 second quarter, operating revenues were
$2.51 billion versus $2.58 billion from the year earlier period. Operating
income was $378.8 million compared to $446.5 million for the same period.
First half 2001 net income of $415.5 million decreased 16 percent compared
with $492.4 for the first six months of 2000. Diluted earnings per share of
$1.36 was 16 percent lower than the $1.62 for the year earlier period.
Operating revenues and operating income also declined 2 percent and
16 percent, respectively, versus the prior year period.
"The company's financial performance in the second quarter and first half
of the year directly mirrored weak economic conditions in a variety of end
markets, especially the North American automotive, general industrial and
construction sectors," said W. James Farrell, ITW's chairman and chief
executive officer. "While we aggressively trimmed our operating costs as
evidenced by our three percent reduction in second quarter SG&A costs, we also
continued to take advantage of the economic slowdown to accelerate our
investment in a variety of restructuring projects. For the second half of the
year, we believe many of our end markets will continue to be slow and we don't
foresee any meaningful improvement in sales."
Second quarter 2001 segment highlights include:
North American Engineered Products revenues and operating income decreased
8 percent and 22 percent, respectively, primarily as a result of a slowdown in
key end markets such as automotive, construction and consumer durables. The
falloff in revenues, together with lower margin acquired businesses and
restructuring costs, translated into a 340 basis point decline in second
quarter operating margins.
International Engineered Products revenues grew 7 percent mainly due to
contributions from both acquisitions and the automotive businesses. Operating
income declined 13 percent as strength in the construction businesses in both
Europe and Australia was more than offset by weakness in the industrial
plastics and electronic component packaging businesses. The impact of weakness
in certain end markets and the effect of translation caused operating margins
to decline by 240 basis points.
North American Specialty Systems revenues increased 2 percent largely due
to contributions from acquisitions which offset weaker base business
performance. As a result, operating income fell 18 percent as demand for
welding, finishing and industrial packaging declined in the second quarter.
Sales volume declines, coupled with acquisition and restructuring costs, meant
that operating margins decreased 340 basis points for the quarter.
International Specialty Systems revenues and operating income each
decreased 8 percent due to the impact of translation and top line weakness in
the industrial packaging businesses. The decline in operating income for the
industrial packaging and other businesses more than offset growth from the
food equipment and decorating businesses. This translated into flat operating
margins for the quarter.
Consumer Products revenues declined 12 percent and operating income
improved significantly due to the positive impact of past restructuring
projects at Florida Tile, West Bend and Precor. Operating margins also
improved dramatically for the quarter.
Leasing and Investments operating income was up 12 percent in the second
quarter due to gains on sales of mortgage related investments.
Looking ahead, the company is revising its previous forecast based on what
it believes will be slower than originally anticipated end market conditions
for the third quarter and remainder of the year. The company is forecasting
third quarter earnings per share on a fully diluted basis to be in the range
of 65 cents to 75 cents. For the full year, the company is forecasting
earnings per share on a fully diluted basis to be in the range of $2.75 to
$2.95.
This Second Quarter 2001 Earnings Release contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995 including, without limitation, statements regarding end market
conditions in the second half of 2001 and the Company's 2001 forecasts. These
statements are subject to certain risks, uncertainties, and other factors,
which could cause actual results to differ materially from those anticipated.
Important factors that could cause actual results to differ materially from
the Company's expectations are set forth on page 26 of the Company's 2000
Annual Report to Shareholders.
ITW is a $10 billion diversified manufacturer of highly engineered
components and industrial systems. The company consists of approximately 600
decentralized operations in 43 countries and employs 55,300 people.
ILLINOIS TOOL WORKS INC.
(In thousands except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
STATEMENT OF INCOME 2001 2000 2001 2000
Operating Revenues $2,510,113 $2,577,446 $4,906,947 $4,982,406
Cost of revenues 1,664,403 1,652,275 3,277,445 3,224,205
Selling, administrative,
and R&D expenses 440,799 455,901 902,573 910,072
Amortization of
goodwill & other
intangibles 26,103 22,767 50,642 43,323
Operating Income 378,808 446,503 676,287 804,806
Interest expense (17,859) (17,725) (36,570) (33,808)
Other expense (2,773) (1,806) (383) (1,597)
Income Before Income Taxes 358,176 426,972 639,334 769,401
Income taxes 125,400 153,700 223,800 277,000
Net Income $232,776 $273,272 $415,534 $492,401
Net Income Per Share :
Basic $0.77 $0.91 $1.37 $1.64
Diluted $0.76 $0.90 $1.36 $1.62
Shares outstanding during
the period :
Average 304,160 301,516 303,641 301,131
Average assuming
dilution 306,477 304,484 306,101 304,248
STATEMENT OF FINANCIAL JUNE 30, MAR 31, DEC 31,
POSITION 2001 2001 2000
ASSETS
Cash & equivalents $176,931 $149,492 $151,295
Trade receivables 1,635,693 1,644,660 1,654,632
Inventories 1,154,948 1,192,882 1,181,385
Deferred income taxes 191,473 184,981 183,823
Prepaids and other current
assets 136,689 144,182 157,926
Total current assets 3,295,734 3,316,197 3,329,061
Plant & equipment 4,312,403 4,266,995 4,199,610
Less: accumulated
depreciation (2,600,621) (2,537,638) (2,477,086)
Net plant & equipment 1,711,782 1,729,357 1,722,524
Investments 1,280,334 1,163,254 1,170,392
Goodwill & other
intangibles 2,624,540 2,506,828 2,483,882
Deferred income taxes 503,586 481,079 478,420
Other assets 455,290 429,002 419,177
$9,871,266 $9,625,717 $9,603,456
LIABILITIES and
STOCKHOLDERS' EQUITY
Short-term debt $559,484 $466,665 $425,789
Accounts payable 409,073 429,665 455,417
Accrued expenses 762,172 731,615 826,107
Cash dividends payable 60,898 60,752 60,490
Income taxes payable 58,182 122,007 49,807
Total current
liabilities 1,849,809 1,810,704 1,817,610
Long-term debt 1,390,434 1,393,347 1,549,038
Other liabilities 936,927 837,749 835,821
Total non-current
liabilities 2,327,361 2,231,096 2,384,859
Common stock 3,047 3,038 3,027
Additional paid-in capital 629,921 611,823 584,357
Income reinvested in the
business 5,509,381 5,337,503 5,214,098
Common stock held in
treasury (1,666) (1,666) (1,783)
Cumulative translation
adjustment (446,587) (366,781) (398,712)
Total stockholders'
equity 5,694,096 5,583,917 5,400,987
$9,871,266 $9,625,717 $9,603,456
Total Debt % to Total
Capitalization 25.5% 25.0% 26.8%
Total Debt % to Total
Capitalization (excluding
Leasing and Investments
segment) 18.3% 16.8% 18.6%