ITW Conference Call
Second Quarter
2004
Exhibit 99.2
ITW
Agenda
1.
Introduction……………………..John Brooklier
2.
Financial Overview……………...Jon Kinney
3.
Manufacturing Segments……… John Brooklier
4.
Forecast 2004………………….…Jon Kinney
4.
Q & A………………...…………Kinney/Brooklier
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 Company’s related
earnings forecasts. These statements are subject to certain risks,
uncertainties, and other factors, which could cause actual results to differ
materially from those anticipated, including, without limitation, the risks
described herein. Important factors that may influence future results
include (1) a downturn in the construction, automotive, general industrial,
food service and retail, or commercial real estate markets, (2)
deterioration in global and domestic business and economic conditions,
particularly in North America, the European Community or Australia, (3)
the unfavorable impact of foreign currency fluctuations, (4) an
interruption in, or reduction in, introducing new products into the
Company’s product lines, and (5) an unfavorable environment for making
acquisitions or dispositions, domestic and international, including adverse
accounting or regulatory requirements and market values of candidates.
Conference Call Playback
Replay number: 203-369-1569
No pass code necessary
Telephone replay available through
midnight of August 4, 2004
Webcast / PowerPoint replay available at
itw.com website
ITW
Quarterly Highlights
2003
2004
Q2
Q2
Amount
%
Operating Revenues
2,564.0
3,002.3
438.3
17.1%
Operating Income
454.1
561.5
107.4
23.7%
% of Revenues
17.7%
18.7%
1.0%
Income From Continuing Operations
Income Amount
284.0
360.4
76.4
26.9%
Income Per Share-Diluted
0.92
1.16
0.24
26.1%
Average Invested Capital
6,698.2
7,399.2
(701.0)
-10.5%
Return on Average Invested Capital
17.6%
20.0%
2.4%
Free Operating Cash Flow
217.7
314.2
96.5
44.3%
F(U) Last Year
ITW
Quarterly Operating Analysis
Revenue
Income
Margins
Base Manufacturing Business
Operating Leverage
8.4%
19.1%
1.8%
Nonvolume-related
-
-2.8%
-0.5%
Total
8.4%
16.3%
1.3%
Acquisitions / Divestitures
5.7%
2.4%
-0.6%
Translation
4.2%
3.8%
-0.1%
Impairment
-
-
-
Restructuring
-
1.9%
0.3%
Leasing & Investments
-0.5%
-0.7%
-
Other Revenue
-0.7%
-
0.1%
Total
17.1%
23.7%
1.0%
ITW
Leasing & Investments
2003
2004
Q2
Q2
Amount
%
Operating Revenues
65.8
53.2
(12.6)
-19.1%
Operating Income
52.1
48.7
(3.4)
-6.5%
Operating Margins
79.2%
91.5%
12.3%
F(U) Last Year
2003
2004
Q2
Q2
Amount
%
Operating Income
454.1
561.5
107.4
23.7%
Interest Expense
(19.1)
(18.9)
0.2
Other Income
2.0
3.5
1.5
Income From Continuing Operations-P/T
437.0
546.1
109.1
25.0%
Income Taxes
152.9
185.7
(32.8)
% to Pre Tax Income
35.0%
34.0%
1.0%
Income From Continuing Operations-A/T
284.0
360.4
76.4
26.9%
F(U) Last Year
ITW
Non Operating & Taxes
6/30/03
3/31/04
6/30/04
Trade Receivables
1,709.7
1,909.6
1,979.8
Days Sales Outstanding
60.0
63.4
59.3
Inventories
1,011.7
1,070.5
1,098.2
Months on Hand
1.8
1.8
1.7
Other Current Assets
367.0
386.2
383.5
Accounts Payable & Accruals
(1,414.5)
(1,647.4)
(1,729.9)
Operating Working Capital
1,673.9
1,718.9
1,731.6
% to Revenue(Prior 4 Qtrs.)
17%
16%
16%
Net Plant & Equipment
1,703.5
1,783.2
1,791.3
Investments, net of L&I Debt
655.4
659.9
749.5
Goodwill
2,484.3
2,618.1
2,718.2
Other, net
345.1
505.4
522.2
Invested Capital
6,862.2
7,285.5
7,512.8
ITW
Invested Capital
ITW
Debt & Equity
6/30/03
3/31/04
6/30/04
Total Capital
Short Term Debt
116.8
51.4
60.0
Long Term Debt
1,446.0
920.8
923.5
Total Debt
1,562.8
972.2
983.5
Stockholders' Equity
7,295.3
8,234.1
8,210.2
Total Capital
8,858.1
9,206.3
9,193.7
Less:
Leasing & Investments Debt
(761.8)
(191.8)
(143.7)
Cash
(1,234.1)
(1,729.0)
(1,537.2)
Net Debt & Equity
6,862.2
7,285.5
7,512.8
Debt to Total Capital
18%
11%
11%
2003
2004
Q2
Q2
Net Income
276.1
360.4
Adjust for Non-Cash Items
49.8
52.0
Changes in Operating Assets & Liab.
(49.6)
(49.6)
Net Cash From Operating Activities
276.3
362.8
Additions to Plant & Equipment
(66.0)
(69.3)
Proceeds from investments
7.4
20.7
Free Operating Cash Flow
217.7
314.2
Stock Repurchase
-
(259.1)
Acquisitions
(59.5)
(182.8)
Investments
(11.7)
(14.0)
Dividends
(70.5)
(74.0)
Debt
(6.5)
5.2
Other
39.0
18.7
Net Cash Increase/(Decrease)
108.5
(191.8)
ITW
Cash Flow
2003
2004
F(U)
Current Quarter
Q2
Q2
Prior Yr.
Operating Income after taxes
295.1
370.6
75.5
Operating Margins
11.5%
12.3%
0.8%
Average Invested Capital
6,698.2
7,399.2
701.0
Capital Turnover
1.53
1.62
0.09
Return on Average Invested Capital
17.6%
20.0%
2.4%
2003
2004
F(U)
Year to Date
Q2
Q2
Prior Yr.
Operating Income after taxes
503.8
666.1
162.3
Operating Margins
10.3%
11.7%
1.3%
Average Invested Capital
6,632.8
7,255.2
622.4
Capital Turnover
1.47
1.57
0.10
Return on Average Invested Capital
15.2%
18.4%
3.2%
ITW
Return on Average Invested Capital
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Annual Revenues Acquired
49
35
231
32
247
168
-
-
Purchase Price
Cash Paid
44
30
74
56
184
183
-
-
Stock Issued
-
-
-
-
2
-
-
-
Total
44
30
74
56
186
183
-
-
Number of Acquisitions
North America
Engineered Products
1
-
3
3
2
1
-
-
Specialty Systems
-
2
1
1
-
1
-
-
International
Engineered Products
-
1
2
1
5
2
-
-
Specialty Systems
7
3
3
-
3
4
-
-
Total
8
6
9
5
10
8
-
-
2003
2004
ITW
Acquisitions
Key Economic Data
June ’04 ISM: 61.1% is down only slightly from
62.5% in March ’04
US Industrial Production (ex. Tech.): +5.0% in May
’04 compared to +2.2% in March ’04
Euro-Zone Purchasing Managers’ Index: 54.4% in
June ’04 vs. 52.5% in February ’04
Euro-Zone Industrial Production: +1.6% in April
’04 vs. +0.6% in January ’04; UK, Germany and
France all improve
2003
2004
Q2
Q2
Amount
%
Operating Revenues
781.7
845.4
63.7
8.1%
Operating Income
133.3
149.7
16.4
12.2%
Operating Margins
17.1%
17.7%
0.6%
F(U) Last Year
ITW
Engineered Products – North America
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
8.5%
20.6%
1.9%
Nonvolume-related
-
-11.1%
-1.8%
Total
8.5%
9.5%
0.1%
Acquisitions / Divestitures
-0.4%
-0.4%
-
Translation
-
-
-
Impairment
-
-
-
Restructuring
-
3.1%
0.5%
Total
8.1%
12.2%
0.6%
% F(U) Prior Year
Engineered Products-North America
Quarterly Analysis
Engineered Products-North America
Key Points
Total Construction: +11%
ITW construction (Paslode/Buildex/Ramset/ITW Brands)
base revenues: +17% for Q2
Wilsonart base revenues: +6% ; Flooring grows 10+% ; basic
laminate increases 5%
Total construction: new housing +15%; renovation/rehab
+15%; Commercial +6%
2004 End Market Assumptions:
New housing: -3%
Renovation: +3% to +4%
Commercial: Revenues improve in 2nd half of year
Engineered Products-North America
Key Points
Auto base revenues: +3% for Q2
Big 3 build rates: -2% for Q2
GM: -1%
Ford: -5%
Chrysler: +2%
June Big 3 inventories: 85 days
GM: 89 days
Ford: 88 days
Chrysler: 73 days
ITW estimate for 2004:
Q3: -4%
FY: -3%
Industrial: base revenues +10% for Q2
Industrial Plastics, Engineered Polymers, Fibre Glass
Evercoat all had double digit base revenue growth in Q2
ITW
Engineered Products – International
2003
2004
Q2
Q2
Amount
%
Operating Revenues
470.8
645.6
174.8
37.1%
Operating Income
68.2
101.1
32.9
48.3%
Operating Margins
14.5%
15.7%
1.2%
F(U) Last Year
Engineered Products-International
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
9.8%
27.2%
2.3%
Nonvolume-related
-
-0.2%
-
Total
9.8%
27.0%
2.3%
Acquisitions / Divestitures
15.5%
9.5%
-0.9%
Translation
11.8%
13.9%
0.1%
Impairment
-
-
-
Restructuring
-
-2.1%
-0.3%
Total
37.1%
48.3%
1.2%
% F(U) Prior Year
Engineered Products-International
Key Points
Construction base revenues: +12% in Q2
Europe: +11% growth (strength in France, Germany, UK,
Italy and Denmark)
Austral-Asia: +9% (Paslode/Buildex in Australia)
Wilsonart Intl.: +16% (good activity in China)
Automotive base revenues: +7% in Q2
Builds: -1% ytd
Ford: +10.8%; BMW: +6.4%; Renault: +1.9%; Fiat: -
16.8%; GM Group: -7.6%; VW Group: -1.3%
ITW forecasting FY ’04 builds: +1% to +2%
Industrial base revenues: +8% in Q2
Electronic component packaging, industrial plastics, and
fluid products all grew base revenues in range of 8% to
10%
ITW
Specialty Systems-North America
2003
2004
Q2
Q2
Amount
%
Operating Revenues
842.2
972.2
130.0
15.4%
Operating Income
142.7
177.7
35.0
24.6%
Operating Margins
16.9%
18.3%
1.4%
F(U) Last Year
Specialty Systems-North America
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
10.8%
26.7%
2.4%
Nonvolume-related
-
-4.2%
-0.6%
Total
10.8%
22.5%
1.8%
Acquisitions / Divestitures
4.6%
2.3%
-0.4%
Translation
-
0.1%
-
Impairment
-
-
-
Restructuring
-
-0.3%
-
Total
15.4%
24.6%
1.4%
% F(U) Prior Year
Specialty Systems-North America
Key Points
Welding base revenues: 20+% in Q2 due primarily
to stronger equipment sales to construction and
other end markets; consumables and components
units also grew sales
Industrial packaging: Signode base revenue grew
+13% in Q2; consumables / machinery both show
improvement
Food Equipment base revenues: Flat in Q2 vs. -9%
FY 2003; late cycle recovery business
ITW
Specialty Systems-International
2003
2004
Q2
Q2
Amount
%
Operating Revenues
498.4
598.4
100.0
20.1%
Operating Income
57.8
84.3
26.5
45.9%
Operating Margins
11.6%
14.1%
2.5%
F(U) Last Year
Specialty Systems-International
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
2.2%
7.0%
0.6%
Nonvolume-related
-
12.4%
1.4%
Total
2.2%
19.4%
2.0%
Acquisitions / Divestitures
7.6%
3.0%
-0.7%
Translation
10.3%
12.9%
-
Impairment
-
-
-
Restructuring
-
10.6%
1.2%
Total
20.1%
45.9%
2.5%
% F(U) Prior Year
Specialty Systems-International
Key Points
Signode base revenues strengthen in Q2:
-Europe: +4%
-Asia/Pacific: +10%
Food Equipment: base revenues +2%;
operating margins improve 250 basis points
in Q2
Finishing: base revenues +4% in Q2;
operating margins improve 180 basis points
Welding: base revenues +5% and operating
margins improved substantially
Mid
Low
High
Point
3rd Quarter
Base Revenues
6.5%
8.5%
7.5%
Income Per Share-Diluted
$1.05
$1.11
$1.08
%F(U) 2003
21%
28%
24%
Full Year
Base Revenues
6.6%
7.8%
7.2%
Income Per Share-Diluted
$4.21
$4.35
$4.28
%F(U) 2003
25%
29%
27%
ITW
2004 Forecast
ITW 2004 Forecast
Key Assumptions
Exchange rates hold at current levels.
Acquired revenues in the $500 to $700 million
range.
Restructuring cost of $20 to $30 million.
No further goodwill or intangible impairment cost.
Share repurchase will add 5 to 7 cents per share
for the year.
Tax rate of 34%.
ITW Conference Call
Q & A
Second Quarter
2004
