Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2003 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Jan 29, 2004
Slide 1: ITW Conference Call Fourth Quarter 2003
Exhibit 99.2 ITW Conference Call Fourth Quarter 2003
Slide 2: Agenda
ITW Agenda 1. Introduction……………………..John Brooklier 2. Financial Overview……………..Jon Kinney 3. Manufacturing Segments……… John Brooklier 4. Forecast 2004…………………………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 expectations for full year 2004 and the comp
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 402-220-9672 Telephone replay available through midnight of February 12, 2004 No pass code necessary Web cast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2002 2003 F(U) Last Year Q4 Q4 Amount % Operating Revenues 2,427.4 2,626.0 198.6 8.2% Operating Income 369.9 431.7 61.8 16.7% % of Revenues 15.2% 16.4% 1.2% Income From Continuing Operations Income Amount 227.9 286.9 59.0 25.9% Income Per Share-Diluted 0.74 0.93 0.19 25.7% A
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis Revenue Income Margins Base Manufacturing Business Operating Leverage 0.4% 1.1% 0.1% Non Volume Related 5.8% 0.9% Total 0.4% 6.9% 1.0% Acquisitions / Divestitures 4.0% 2.3% -0.3% Translation 5.9% 5.8% -0.1% Restructuring 2.6% 0.4% Leasing & Investment -1.9% -0.9% 0.2
Slide 7: Leasing & Investment
ITW Leasing & Investment 2002 2003 F(U) Last Year Q4 Q4 Amount % Operating Revenues 74.1 27.9 (46.2) -62.4% Operating Income 25.7 22.7 (3.0) -11.7% Operating Margins 34.7% 81.3% 46.6%
Slide 8: Non Operating & Taxes
ITW Non Operating & Taxes 2002 2003 F(U) Last Year Q4 Q4 Amount % Operating Income 369.9 431.7 61.8 16.7% Interest Expense (17.9) (18.0) (0.1) Other Income (Expense) (1.3) 3.5 4.8 Income From Continuing Operations-P/T 350.7 417.2 66.5 19.0% Income Taxes 122.8 130.3 7.5 % to Pre Tax Income 35% 31% 4%
Slide 9: Invested Capital
ITW Invested Capital 12/31/02 9/30/03 12/31/03 Trade Receivables 1,500.0 1,701.9 1,721.2 Days Sales Outstanding 55.6 60.5 59.0 Inventories 962.7 980.0 992.0 Months on Hand 1.8 1.8 1.7 Other Current Assets 354.3 353.0 385.5 Accounts Payable & Accruals (1,476.8) (1,452.4) (1,432.8) Operating Working C
Slide 10: Debt & Equity
ITW Debt & Equity 12/31/02 9/30/03 12/31/03 Total Capital Short Term Debt 121.6 70.2 56.1 Long Term Debt 1,460.4 926.2 920.4 Total Debt 1,582.0 996.4 976.5 Stockholders' Equity 6,649.0 7,399.7 7,874.3 Total Capital 8,231.0 8,396.1 8,850.8 Less: Leasing & Investment Debt (770.1) (239.4) (199.0) Cash
Slide 11: Cash Flow
ITW Cash Flow 2002 2003 Q4 Q4 Net Income 223.0 283.3 Adjust for Non-Cash Items 11.8 263.1 Changes in Operating Assets & Liab. 109.8 (69.1) Net Cash From Operating Activities 344.6 477.3 Additions to Plant & Equipment (78.9) (75.3) Proceeds from investments 28.5 23.7 Free Operating Cash Flow 294.2 42
Slide 12: Return on Average Invested Capital
ITW Return on Average Invested Capital 2002 2003 F(U) Current Quarter Q4 Q4 Prior Yr. Operating Income after taxes 240.5 296.9 56.4 Operating Margins 9.9% 11.3% 1.4% Average Invested Capital 6,496.5 6,875.6 379.1 Capital Turnover 1.49 1.53 0.04 Return on Average Invested Capital 14.8% 17.3% 2.5% 200
Slide 13: Acquisitions
ITW Acquisitions 2002 2003 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 31 59 33 72 49 35 231 32 Purchase Price Cash Paid 35 57 14 82 44 30 74 56 Stock Issued - - - - - - - - Total 35 57 14 82 44 30 74 56 Number of Acquisitions North America Engineered Products 2 1 1 1 1 - 3 3 Specialty Systems
Slide 14: Key Economic Data
Key Economic Data • December ’03 ISM: 66.2% is up from 53.7% in September ’03 • US Industrial Production (ex. Tech.): +1.6% in December ’03 compared to -2.3% in August ’03 • Euro-Zone Purchasing Manager’s Index: 52.4% in December ’03 vs. 50.1% in September ’03 • Euro-Zone Industrial Production: 0.9%
Slide 15: Engineered Products – North America
ITW Engineered Products – North America 2002 2003 F(U) Last Year Q4 Q4 Amount % Operating Revenues 726.5 748.6 22.1 3.0% Operating Income 125.4 114.2 (11.2) -8.9% Operating Margins 17.3% 15.3% -2.0%
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 0.6% 1.4% 0.1% Non Volume Related -11.3% -1.9% Total 0.6% -9.9% -1.8% Acquisitions / Divestitures 1.9% 1.3% -0.1% Translation 0.5% 0.5% 0.0% Re
Slide 17: Engineered Products-North America Key Points
Engineered Products-North America Key Points • Total Construction: +1% • ITW construction base revenues: +9% for Q4 -Commercial construction: slightly positive -New housing: +5% to +10% -Renovation/rehab: +5% to +10% • Wilsonart base revenues declined 5% for the quarter; flooring positive, basic lam
Slide 18: Engineered Products-North America Key Points
Engineered Products-North America Key Points • Auto base revenues: -3% for Q4 • Big 3 build rates: -3% for Q4 – GM: -2% – Ford: -4% – Chrysler: -2% • December Big 3 inventories: 72 days – GM: 69 days – Ford: 76 days – Chrysler: 73 days • ITW estimate for 2004: – Q1: -3% – FY: -3% • Industrial: Base
Slide 19: Engineered Products – International
ITW Engineered Products – International 2002 2003 F(U) Last Year Q4 Q4 Amount % Operating Revenues 448.1 535.5 87.4 19.5% Operating Income 66.7 86.4 19.7 29.5% Operating Margins 14.9% 16.1% 1.2%
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 2.4% 6.2% 0.5% Non Volume Related 4.2% 0.6% Total 2.4% 10.4% 1.1% Acquisitions / Divestitures 1.5% 1.7% 0.0% Translation 15.6% 18.2% 0.2% Restr
Slide 21: Engineered Products-International Key Points
Engineered Products-International Key Points • Construction base revenues: +3% in Q4 – Europe: +3% growth (strength in France, Germany and UK) – Austral-Asia: +2% (Paslode / Buildex strength) – Wilsonart Intl.: +3% (good activity in China) • Automotive base revenues: 0% in Q4 – Builds: -2% ytd – BMW
Slide 22: Specialty Systems-North America
ITW Specialty Systems-North America 2002 2003 F(U) Last Year Q4 Q4 Amount % Operating Revenues 801.3 859.8 58.5 7.3% Operating Income 115.7 140.8 25.1 21.7% Operating Margins 14.4% 16.4% 2.0%
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 2.4% 7.0% 0.7% Non Volume Related 5.3% 0.8% Total 2.4% 12.3% 1.5% Acquisitions / Divestitures 4.0% 1.7% -0.4% Translation 0.9% 1.3% 0.0% Restruct
Slide 24: Specialty Systems-North America Key Points
Specialty Systems-North America Key Points • Welding base revenues: +12% in Q4 due to stronger equipment sales to construction; consumables and components units also grew sales • Decorating base revenues: +2% growth led by hot stamp business • Food Equipment base revenues: –3% in Q4 but operating ma
Slide 25: Specialty Systems-International
ITW Specialty Systems-International 2002 2003 F(U) Last Year Q4 Q4 Amount % Operating Revenues 461.1 542.4 81.3 17.6% Operating Income 36.4 67.6 31.2 85.7% Operating Margins 7.9% 12.5% 4.6%
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 -5.2% -24.4% -1.6% Non Volume Related 70.1% 5.8% Total -5.2% 45.7% 4.2% Acquisitions / Divestitures 9.3% 9.8% -0.4% Translation 13.5% 19.9% -0.1%
Slide 27: Specialty Systems-International Key Points
Specialty Systems-International Key Points . Total packaging: -7% base revenues in Q4 • Signode led decline for industrial packaging: -Europe: -9% -Asia/Pacific: -3% • Food Equipment: base revenues -4%; operating margins improve more than 180 basis points in Q4 • Finishing: base revenues +1% in Q4;
Slide 28: 2004 Forecast
ITW 2004 Forecast Mid %F(U) Low High Point 2003 1st Quarter Base Revenues 0% 3% 2% Income Per Share-Diluted $0.73 $0.81 $0.77 18% Full Year Base Revenues 1% 4% 3% Income Per Share-Diluted $3.66 $3.96 $3.81 13%
Slide 29: 2004 Forecast Key Assumptions
ITW 2004 Forecast Key Assumptions • Exchange rates hold at year end levels. • Acquired revenues in the $500 to $700 million range. • Restructuring cost of $55 to $65 million. • Goodwill and Intangible impairment cost $5 to $15 million. • Tax rate of 34%.
Slide 30: Conference Call Q & A
ITW Conference Call Q&A Fourth Quarter 2003