ITW Reports 14% Increase in Earnings per Share for Third Quarter of 2000; Operating Margins Improve 110 Basis Points During Quarter
18 October 2000
ITW Reports 14% Increase in Earnings per Share for Third Quarter of 2000; Operating Margins Improve 110 Basis Points During Quarter
GLENVIEW, Ill., Oct. 18 Illinois Tool Works Inc.
today reported record net income and earnings per share for the
2000 third quarter and nine months as a result of significant operating margin
improvement in both base businesses and acquisitions.
For the 2000 third quarter, net income increased 13 percent to
$264.1 million from $232.9 million. Diluted earnings per share of 87 cents
were 14 percent higher than the year earlier period. Earnings growth for the
third quarter resulted in part from a 6 percent increase in operating revenues
to $2.47 billion from $2.33 billion. Revenue growth was dampened by the
impact of currency translation, including the Euro, which helped to reduce top
line growth by 3 percent. Operating income of $434.3 million was 14 percent
higher than the year earlier period.
Nine month 2000 net income of $756.5 million was 14 percent higher than
the comparable 1999 period, and diluted earnings per share of $2.49 increased
15 percent versus a year ago. Nine month operating revenues and operating
income were 9 percent and 15 percent higher, respectively.
"We are especially pleased with our record third quarter performance when
viewed in the context of a slowing economy and the negative impact of currency
translation," said W. James Farrell, chairman and chief executive officer.
"Even with these events, our businesses were able to produce impressive margin
improvement. Thanks to our focus on the 80/20 process, which leads to
continuous improvement in our businesses, operating margins moved up to
17.6 percent for the third quarter or 110 basis points higher than a year
earlier."
Segment highlights for the 2000 third quarter include:
North American Engineered Products revenues increased 5 percent as growth
was nearly evenly split between acquisition and base business activity.
Revenue growth was driven by contributions from the construction, industrial
plastic and automotive businesses. Operating income grew 16 percent mainly
due to double digit improvements in these businesses and fluid products.
Operating margins improved 200 basis points, including substantial margin
contributions from the Wilsonart business.
International Engineered Products revenues grew 21 percent primarily due
to strong acquisition activity in construction, especially Siddons
Ramset/Australia, as well as in automotive and electronic component packaging.
Operating income was 46 percent higher than the year earlier period thanks to
strong contributions from these businesses. Operating margins were 210 basis
points higher than a year ago.
North American Specialty Systems revenues grew 3 percent as a result of
contributions from acquisitions. Operating income increased 10 percent
largely due to improvements in base businesses such as food equipment and
welding. In total, operating margins were 120 basis points higher than a year
ago and were led by significant margin improvement at food equipment.
International Specialty Systems revenues and operating income each
increased 7 percent as contributions from acquisitions in the industrial
packaging and consumer packaging areas drove both top line and operating
income performance. Operating margins were essentially flat year over year.
Consumer Products revenues were down 2 percent and operating income
decreased 31 percent due to weak operating performance at Florida Tile and the
small appliance sector of West Bend.
Leasing and Investments operating income was 10 percent lower than the
prior year period due to gains realized on the sale of an investment asset and
other income in the 1999 third quarter.
In accordance with the pending implementation of Regulation FD, the
company's outlook for fourth quarter 2000 incorporates restructuring estimates
for the businesses acquired as part of the 1999 Premark transaction. To date,
it is estimated that the Premark businesses have added approximately 13 cents
per share before restructuring and other charges. ITW's year-to-date
restructuring and other Premark charges represent approximately 4 cents per
share. Accordingly, on a year to date basis, Premark has been 9 cents
accretive. ITW now believes that it is far enough along in the 80/20 process
to estimate that fourth quarter Premark restructuring and other charges could
be between $40 million and $45 million after taxes or approximately 14 cents
per share. With these charges, the Premark acquisition would have a slightly
negative full year effect of 2 cents per share.
ITW's fourth quarter earnings per share outlook before restructuring and
other charges are forecasted to be in a range of 89 cents to 94 cents per
share for the quarter and $3.42 to $3.47 for full year 2000. Including
restructuring and other charges, the range is forecasted to be 75 cents to
80 cents per share for the quarter and $3.24 to $3.29 for the full year.
Statements regarding the company's earnings estimates and future trends
constitute 'forward looking statements' within the meaning of Section 21E of
the Securities Exchange Act of 1934, and are subject to the safe harbor
created thereby. Although the company believes that the expectations
reflected in such forward looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Important factors
that could cause actual results to differ materially from the company's
expectations include both macro-economic trends and changes in the company's
major end markets.
ITW is a $9.3 billion diversified manufacturer of highly engineered
components and industrial systems. The company consists of more than 500
decentralized operations in 40 countries and employs approximately 52,800
people.
ILLINOIS TOOL WORKS INC.
(In thousands except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
STATEMENT OF INCOME 2000 1999 2000 1999
Operating Revenues $2,472,342 $2,325,749 $7,454,748 $6,845,856
Cost of revenues 1,597,669 1,511,405 4,821,874 4,441,421
Selling,
administrative,
and R&D expenses 416,949 412,995 1,327,021 1,268,969
Amortization of
goodwill & other
intangibles 23,461 19,263 66,784 54,790
Operating Income 434,263 382,086 1,239,069 1,080,676
Interest expense (18,567) (18,004) (52,375) (50,090)
Other income
(expense) (3,111) 167 (4,708) 11,227
Income Before Income
Taxes 412,585 364,249 1,181,986 1,041,813
Income taxes 148,500 131,327 425,500 380,743
Net Income $264,085 $232,922 $756,486 $661,070
Net Income Per Share:
Basic $0.87 $0.78 $2.51 $2.20
Diluted $0.87 $0.76 $2.49 $2.17
Shares outstanding
during the period:
Average 301,857 300,144 301,365 300,045
Average assuming
dilution 304,475 304,842 304,314 304,722
SEPT 30, JUNE 30, DEC 31,
2000 2000 1999
STATEMENT OF FINANCIAL POSITION
ASSETS
Cash & equivalents $267,591 $212,153 $232,953
Trade receivables 1,651,937 1,653,698 1,630,937
Inventories 1,152,183 1,099,866 1,084,212
Deferred income taxes 206,082 193,155 188,729
Prepaids and other current
assets 159,527 148,768 136,100
Total current assets 3,437,320 3,307,640 3,272,931
Plant & equipment 4,034,009 4,012,836 3,912,298
Less: accumulated depreciation (2,407,574) (2,391,580) (2,278,367)
Net plant & equipment 1,626,435 1,621,256 1,633,931
Investments 1,171,393 1,175,438 1,188,120
Goodwill & other intangibles 2,319,660 2,167,006 2,029,959
Deferred income taxes 438,095 441,382 433,792
Other assets 562,634 597,189 501,526
$9,555,537 $9,309,911 $9,060,259
LIABILITIES and STOCKHOLDERS'
EQUITY
Short-term debt $482,348 $616,236 $553,655
Accounts payable 430,764 448,351 470,200
Accrued expenses 801,234 791,877 906,215
Cash dividends payable 60,398 54,306 54,102
Income taxes payable 61,075 61,183 61,189
Total current liabilities 1,835,819 1,971,953 2,045,361
Long-term debt 1,581,787 1,340,305 1,360,746
Other liabilities 848,210 870,154 838,729
Total non-current
liabilities 2,429,997 2,210,459 2,199,475
Common stock 3,022 3,020 3,008
Additional paid-in capital 546,794 536,487 517,210
Income reinvested in the
business 5,073,094 4,869,407 4,485,515
Common stock held in treasury (1,783) (1,783) (1,783)
Cumulative translation
adjustment (331,406) (279,632) (188,527)
Total stockholders' equity 5,289,721 5,127,499 4,815,423
$9,555,537 $9,309,911 $9,060,259