Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2004 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Jan 27, 2005
Slide 1: ITW Conference Call Fourth Quarter 2004
Exhibit 99.2 ITW Conference Call Fourth Quarter 2004
Slide 2: Agenda
ITW Agenda 1. Introduction……………………..John Brooklier 2. Financial Overview……………...Jon Kinney 3. Manufacturing Segments……… John Brooklier 4. Forecast 2005………………….…Jon Kinney 5. Q & A………………...…………Kinney/Brooklier
Slide 3: Forward-Looking Statements
ITW Forward - Looking Statements This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding end market conditions and base business and future tax rate expectations for full
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 402-530-7662 No pass code necessary Telephone replay available through midnight of February 10, 2005 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2003 2004 F(U) Last Year Q4 Q4 Amount % Operating Revenues 2,626.0 3,051.6 425.6 16.2% Operating Income 431.7 535.2 103.5 24.0% % of Revenues 16.4% 17.5% 1.1% Income From Continuing Operations Income Amount 286.9 359.2 72.3 25.2% Income Per Share-Diluted 0.93 1.21 0.28 30.1%
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis Revenue Income Margins Base Manufacturing Business Operating Leverage 8.2% 20.2% 1.8% Nonvolume-related - -2.2% -0.3% Total 8.2% 18.0% 1.5% Acquisitions / Divestitures 4.3% 1.7% -0.4% Translation 3.9% 4.1% - Impairment - - - Restructuring - -1.0% -0.2% Leasing & Inve
Slide 7: Leasing & Investments
ITW Leasing & Investments 2003 2004 F(U) Last Year Q4 Q4 Amount % Operating Revenues 27.9 33.3 5.4 19.4% Operating Income 22.7 27.9 5.2 22.9% Operating Margins 81.3% 83.7% 2.4%
Slide 8: Non Operating & Taxes
ITW Non Operating & Taxes 2003 2004 F(U) Last Year Q4 Q4 Amount % Operating Income 431.7 535.2 103.5 24.0% Interest Expense (18.0) (15.8) 2.2 Other Income(expense) 3.5 (5.5) (9.0) Income From Continuing Operations-P/T 417.2 513.9 96.7 23.2% Income Taxes 130.3 154.7 (24.4) % to Pre Tax Income 31.2% 3
Slide 9: Invested Capital
ITW Invested Capital 12/31/03 9/30/04 12/31/04 Trade Receivables 1,721.2 1,983.6 2,054.6 Days Sales Outstanding 59.0 60.2 60.6 Inventories 992.0 1,142.5 1,281.2 Months on Hand 1.7 1.8 1.9 Other Current Assets 385.5 360.1 319.0 Accounts Payable & Accruals (1,432.8) (1,910.1) (1,647.4) Operating Worki
Slide 10: Debt & Equity
ITW Debt & Equity 12/31/03 9/30/04 12/31/04 Total Capital Short Term Debt 56.1 97.1 203.5 Long Term Debt 920.4 924.0 921.1 Total Debt 976.5 1,021.1 1,124.6 Stockholders' Equity 7,874.3 7,543.3 7,627.6 Total Capital 8,850.8 8,564.4 8,752.2 Less: Leasing & Investments Debt (199.0) (79.4) (79.0) Cash (
Slide 11: Cash Flow
ITW Cash Flow 2003 2004 Q4 Q4 Net Income 283.3 358.1 Adjust for Non-Cash Items 263.1 276.7 Changes in Operating Assets & Liabilities (66.2) (251.8) Net Cash From Operating Activities 480.2 383.0 Additions to Plant & Equipment (75.3) (84.7) Proceeds from investments 20.8 28.1 Free Operating Cash Flow
Slide 12: Return on Average Invested Capital
ITW Return on Average Invested Capital 2003 2004 F(U) Current Quarter Q4 Q4 Prior Yr. Operating Income after taxes 296.9 374.1 77.2 Operating Margins 11.3% 12.3% 1.0% Average Invested Capital 6,875.6 7,780.3 (904.7) Capital Turnover 1.53 1.57 0.04 Return on Average Invested Capital 17.3% 19.2% 1.9%
Slide 13: Acquisitions
ITW Acquisitions 2003 2004 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 49 35 231 32 247 168 78 131 Purchase Price Cash Paid 44 30 74 56 184 193 62 149 Stock Issued - - - - 2 - - - Total 44 30 74 56 186 193 62 149 Number of Acquisitions North America Engineered Products 1 - 3 3 2 1 1 1 Specialty
Slide 14: Key Economic Data
Key Economic Data • December ’04 ISM: 58.6% same as in Q3 ’04; new order index of 67.4% in December ’04 • US Industrial Production (ex. Tech.): +4.1% in December ’04 compared to +5.7% in August ’04 • Euro-Zone Purchasing Managers’ Index: 51.4% in December ’04 versus 53.9% in August ’04 • Euro-Zone I
Slide 15: Engineered Products - North America
ITW Engineered Products - North America 2003 2004 F(U) Last Year Q4 Q4 Amount % Operating Revenues 748.6 818.4 69.8 9.3% Operating Income 114.2 126.8 12.6 11.0% Operating Margins 15.3% 15.5% 0.2%
Slide 16: Engineered Products - North America Quarterly Analysis
Engineered Products - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 5.3% 14.5% 1.3% Nonvolume-related - -1.9% -0.3% Total 5.3% 12.6% 1.0% Acquisitions / Divestitures 3.7% 1.0% -0.4% Translation 0.3% 0.2% - Imp
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: +7% for Q4 ’04 • ITW construction (Paslode/Buildex/Ramset/ITW Brands) base revenues: +8% for Q4 ’04; new housing and renovation markets +5% to +8%; commercial +5% • Wilsonart base revenues: +6%; basic laminate and flooring products
Slide 18: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: -4% for Q4 ’04 • Big 3 build rates: -6% for Q4 ’04 – GM: -10% – Ford: -12% – Chrysler: +11% – Transplants: +9% • Big 3 inventories: 78 days at 12-31-04 – GM: 77 days – Ford: 79 days – Chrysler: 80 days – Transplants: 49 days • ITW
Slide 19: Engineered Products - International
ITW Engineered Products - International 2003 2004 F(U) Last Year Q4 Q4 Amount % Operating Revenues 535.9 684.2 148.3 27.7% Operating Income 86.5 108.8 22.3 25.8% Operating Margins 16.1% 15.9% -0.2%
Slide 20: Engineered Products - International Quarterly Analysis
Engineered Products - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 4.3% 10.6% 1.0% Nonvolume-related - - - Total 4.3% 10.6% 1.0% Acquisitions / Divestitures 14.0% 8.4% -0.8% Translation 9.4% 10.6% 0.2% Impair
Slide 21: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +6% in Q4 ’04 – Europe: +5% growth (strength in UK, Belgium, Italy) – Austral-Asia: +3% (numerous businesses in Australia) – Wilsonart Intl.: +18% (good activity in U.K. and China) • Automotive base revenues: +3% in Q4 ’04
Slide 22: Specialty Systems - North America
ITW Specialty Systems - North America 2003 2004 F(U) Last Year Q4 Q4 Amount % Operating Revenues 870.3 972.2 101.9 11.7% Operating Income 140.8 183.3 42.5 30.2% Operating Margins 16.2% 18.8% 2.6%
Slide 23: Specialty Systems - North America Quarterly Analysis
Specialty Systems - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 10.9% 27.7% 2.4% Nonvolume-related - 0.6% 0.1% Total 10.9% 28.3% 2.5% Acquisitions / Divestitures 0.4% -0.2% -0.1% Translation 0.4% 0.7% 0.0% I
Slide 24: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: 20+% in Q4 ’04 due primarily to stronger equipment sales to construction and variety of other end markets; consumables and components units also grew sales • Industrial packaging: Signode base revenue grew +15% in Q4 ’04 ; consuma
Slide 25: Specialty Systems - International
ITW Specialty Systems - International 2003 2004 F(U) Last Year Q4 Q4 Amount % Operating Revenues 542.0 653.4 111.4 20.6% Operating Income 67.5 88.4 20.9 31.0% Operating Margins 12.4% 13.5% 1.1%
Slide 26: Specialty Systems - International Quarterly Analysis
Specialty Systems - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 10.8% 32.8% 2.5% Nonvolume-related - -11.3% -1.3% Total 10.8% 21.5% 1.2% Acquisitions / Divestitures 1.2% -1.5% -0.3% Translation 8.6% 10.7% 0.
Slide 27: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Signode base revenues strengthen in Q4 ’04: -Europe: +20% -Asia/Pacific: +20% • Food Equipment: base revenues +8% in Q4 ’04; growth from all geographic regions • Finishing: base revenue grew 13% in Q4 ’04
Slide 28: 2005 Forecast
ITW 2005 Forecast Mid Low High Point 1st Quarter Base Revenues 5.1% 7.1% 6.1% Income Per Share-Diluted $1.01 $1.07 $1.04 %F(U) 2004 9% 15% 12% Full Year Base Revenues 4.4% 6.4% 5.4% Income Per Share-Diluted $4.91 $5.11 $5.01 %F(U) 2004 12% 16% 14%
Slide 29: 2005 Forecast Key Assumptions
ITW 2005 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $600 to $800 million range. • Restructuring cost of $30 to $50 million. • Leasing & Investments income of $60 to $70 million, which is lower than 2004 by $60 to $70 million. • Tax rate of 33% for th
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Fourth Quarter 2004