Global Fastener News

Initial 2001 Stock Reports: Profits Down

John Wolz

The economic recession is obvious as the first annual sales and profit reports from publicly held companies put into numbers just what is happening: Illinois Tool Works, Textron Inc. and Fastenal all reported lower profits.\
Illinois Tool Works Inc. reported net income for 2001 fell 16% from 2000 to $805.7 million. Total revenue slipped 2.3% to $9.2 billion.
2001 fourth quarter net income dropped 5% to $191.1 million, �principally the result of ongoing weakness in North American end markets and softening in some international end markets.�
North American engineered products fourth quarter revenue decline 6% and operating income 9% due to �the slowdown in ITW businesses manufacturing short-lead time products for the construction, industrial plastics/electronics, electronic component packaging and automotive sectors,� according to the ITW report. �Lower margins of acquired businesses accounted for most of the 40 basis point decline in fourth quarter operating margins.
For the full year 2001, North American engineered products revenue was down 7% and income dropped 22%.
International engineered products fourth quarter revenue declined 3%. Revenue was flat for the year and operating income increased 6%.

Textron Fastening Sales Down
The sale of its automotive trim business gave Textron Inc. a profit in the fourth quarter, despite lower revenue.
Sales and profits were down for the year.
Textron Fastening Systems 2001 fourth quarter revenue decreased $77 million, while profit before restructuring expenses dropped $57 million.
Textron attributed the TFS sales decline to �lower volume and customer price reductions, partially offset by the favorable impact of foreign exchange.� Profit was also was hurt by �operating inefficiencies as a result of production decreases to reduce inventory levels and the impact of smaller production lot sizes.�
The parent company, manufacturer of Cessna airplanes and Bell helicopters, posted a 2001 fourth quarter net income of $257 million, compared with a net loss of $218 million in the same period of 2000.
Textron forecast 2002 first quarter earnings at 45� per share, compared with 79� in the opening quarter of 2001.
For the full year of 2001, net income fell 23.8% to $166 million. Revenue was down 5.9% to $12.32 billion.
CEO Lewis Campbell commented that �in the midst of what continues to be a challenging economic environment we were pleased to deliver earnings for the quarter consistent with out plan, while exceeding our goals for cash.�

Fastenal 2001 Sales Up, Profits Down
Fastenal Company reported sales for 2001 increased 8.5% over the previous year to $809 million, but 2001 net earnings decreased 13.2% to $70.1 million.
Fourth quarter 2001 sales increased 4.3% over the same period of 2000, but net earnings dropped 29.4%.
Winona, MN-based Fastenal reported opening nine sites, bringing its total to 1,025. The total number of employees decreased 2.1% from the end of 2000 to the end of 2001.
Fastenal began the year with double digit percentage daily sales growth each month of the first quarter, single digit in the second and third quarter and 1.2% for October, a drop of 0.3% for November and 1.6% increase in December.
The decline in daily sales growth rates �represents a trend, which began in November 2000,� according to Fastenal�s announcement. �This trend reflects the overall weakening of the industrial economy we service in North America.�
Earnings didn�t match sales growth because of lower margins, �caused primarily by changes in product mix,� decreased in gross margin dollars from older stores, store opening expenses, increased utility and health care costs, and an increase in depreciation expense.
Fastenal opened 50 stores in the first quarter of 2001, 44 in the second, 25 in the third and nine in the final quarter for a total of 128 or 14.3% for the year.
Fastenal had plans to open 100 to 150 stores during 2002. �Planned openings can be altered in a short time span, usually less than 60 to 90 days. As 2002 unfolds the company will continue to reevaluate the level of planned openings.�
New stores add infrastructure for future growth, but first year sales are low and added expenses for payroll, occupancy and transportation �impact the company�s ability to leverage earnings in a slowing industrial economy,� according to Fastenal�s end of year statement.
New stores take 10 to 12 months to be profitable, Fastenal noted. �2002 FastenerNews.com