Exhibit 99.2
ITW Conference Call
Third Quarter
2004
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
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 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 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 and
prices of raw materials, (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, and (6) unfavorable tax law changes and
tax authority rulings.
Conference Call Playback
Replay number: 203-369-0331
No pass code necessary
Telephone replay available through midnight of
November 2, 2004
Webcast / PowerPoint replay available at itw.com
website
ITW
Quarterly Highlights
2003
2004
Q3
Q3
Amount
%
Operating Revenues
2,531.9
2,967.2
435.3
17.2%
Operating Income
426.7
512.2
85.5
20.0%
% of Revenues
16.9%
17.3%
0.4%
Income From Continuing Operations
Income Amount
269.8
330.1
60.3
22.3%
Income Per Share-Diluted
0.87
1.09
0.22
25.3%
Average Invested Capital
6,823.1
7,533.8
(710.7)
-10.4%
Return on Average Invested Capital
16.3%
17.9%
1.6%
Free Operating Cash Flow
349.8
403.2
53.4
15.3%
F(U) Last Year
ITW
Leasing & Investments
2003
2004
Q3
Q3
Amount
%
Operating Revenues
28.4
23.6
(4.8)
-16.9%
Operating Income
24.7
20.2
(4.5)
-18.2%
Operating Margins
87.0%
85.6%
-1.4%
F(U) Last Year
ITW
Quarterly Operating Analysis
Revenue
Income
Margins
Base Manufacturing Business
Operating Leverage
9.3%
22.5%
2.0%
Nonvolume-related
-
-11.4%
-1.8%
Total
9.3%
11.1%
0.2%
Acquisitions / Divestitures
5.7%
2.5%
-0.5%
Translation
3.1%
3.2%
-
Impairment
-
-
-
Restructuring
-
4.2%
0.7%
Leasing & Investments
-0.2%
-1.0%
-0.1%
Other Revenue
-0.7%
-
0.1%
Total
17.2%
20.0%
0.4%
ITW
Non Operating & Taxes
2003
2004
Q3
Q3
Amount
%
Operating Income
426.7
512.2
85.5
20.0%
Interest Expense
(16.1)
(18.5)
(2.4)
Other Income
4.5
6.4
1.9
Income From Continuing Operations-P/T
415.1
500.1
85.0
20.5%
Income Taxes
145.3
170.0
(24.7)
% to Pre Tax Income
35.0%
34.0%
1.0%
Income From Continuing Operations-A/T
269.8
330.1
60.3
22.3%
F(U) Last Year
ITW
Invested Capital
9/30/03
6/30/04
9/30/04
Trade Receivables
1,701.9
1,979.8
1,983.6
Days Sales Outstanding
60.5
59.3
60.2
Inventories
980.0
1,098.2
1,142.5
Months on Hand
1.8
1.7
1.8
Other Current Assets
353.0
383.5
360.1
Accounts Payable & Accruals
(1,452.4)
(1,729.9)
(1,910.1)
Operating Working Capital
1,582.5
1,731.6
1,576.1
% to Revenue(Prior 4 Qtrs.)
16%
16%
14%
Net Plant & Equipment
1,670.2
1,791.3
1,807.9
Investments, net of L&I Debt
584.2
749.5
820.9
Goodwill
2,519.4
2,718.2
2,686.8
Other, net
427.6
522.2
663.0
Invested Capital
6,783.9
7,512.8
7,554.7
ITW
Debt & Equity
9/30/03
6/30/04
9/30/04
Total Capital
Short Term Debt
70.2
60.0
97.1
Long Term Debt
926.2
923.5
924.0
Total Debt
996.4
983.5
1,021.1
Stockholders' Equity
7,399.7
8,210.2
7,543.3
Total Capital
8,396.1
9,193.7
8,564.4
Less:
Leasing & Investments Debt
(239.4)
(143.7)
(79.4)
Cash
(1,372.8)
(1,537.2)
(930.3)
Net Debt & Equity
6,783.9
7,512.8
7,554.7
Debt to Total Capital
12%
11%
12%
ITW
Cash Flow
2003
2004
Q3
Q3
Net Income
268.9
330.1
Adjust for Non-Cash Items
69.5
11.8
Changes in Operating Assets & Liabilities
56.6
110.2
Net Cash From Operating Activities
395.0
452.1
Additions to Plant & Equipment
(60.8)
(67.7)
Proceeds from investments
15.6
18.8
Free Operating Cash Flow
349.8
403.2
Stock Repurchase
-
(943.0)
Acquisitions
(73.8)
(62.1)
Investments
(67.0)
(7.0)
Dividends
(70.6)
(73.6)
Debt
(22.4)
38.4
Other
22.8
37.2
Net Cash Increase/(Decrease)
138.8
(606.9)
ITW
Return on Average Invested Capital
2003
2004
F(U)
Current Quarter
Q3
Q3
Prior Yr.
Operating Income after taxes
277.3
338.1
60.8
Operating Margins
11.0%
11.4%
0.4%
Average Invested Capital
6,823.1
7,533.8
710.7
Capital Turnover
1.48
1.58
0.10
Return on Average Invested Capital
16.3%
17.9%
1.6%
2003
2004
F(U)
Year to Date
Q3
Q3
Prior Yr.
Operating Income after taxes
781.1
1,004.1
223.0
Operating Margins
10.5%
11.6%
1.1%
Average Invested Capital
6,593.6
7,330.1
736.5
Capital Turnover
1.49
1.57
0.08
Return on Average Invested Capital
15.8%
18.3%
2.5%
ITW
Acquisitions
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Annual Revenues Acquired
49
35
231
32
247
168
78
Purchase Price
Cash Paid
44
30
74
56
184
193
62
Stock Issued
-
-
-
-
2
-
-
Total
44
30
74
56
186
193
62
Number of Acquisitions
North America
Engineered Products
1
-
3
3
2
1
1
Specialty Systems
-
2
1
1
-
1
1
International
Engineered Products
-
1
2
1
5
2
-
Specialty Systems
7
3
3
-
3
4
1
Total
8
6
9
5
10
8
3
2003
2004
Key Economic Data
September ’04 ISM: 59% is same as August
US Industrial Production (ex. Tech.): +4.3% in
September ’04 compared to +5.5% in August ’04
Euro-Zone Industrial Production: +2.2% in August ’04
Euro-Zone Purchasing Managers’ Index: 53% in
September ’04 versus 53.9% in August ’04
ITW
Engineered Products - North America
2003
2004
Q3
Q3
Amount
%
Operating Revenues
774.9
853.7
78.8
10.2%
Operating Income
130.8
143.7
12.9
9.9%
Operating Margins
16.9%
16.8%
-0.1%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
7.7%
18.9%
1.8%
Nonvolume-related
-
-12.3%
-1.9%
Total
7.7%
6.6%
-0.1%
Acquisitions / Divestitures
2.4%
1.2%
-0.2%
Translation
0.1%
0.1%
-
Impairment
-
-
-
Restructuring
-
2.0%
0.2%
Total
10.2%
9.9%
-0.1%
% F(U) Prior Year
Engineered Products - North America
Key Points
Total construction: +7% for Q3 ’04
ITW construction (Paslode/Buildex/Ramset/ITW Brands)
base revenues: +14% for Q3; new housing and renovation
markets most active
Wilsonart base revenues: +1%; commercial sales better;
flooring flat
Total construction: new housing +10%; renovation/rehab
+10%; commercial +3%
Engineered Products - North America
Key Points
Auto base revenues: +1% for Q3 ’04
Big 3 build rates: -5% for Q3
GM: -5%
Ford: -8%
Chrysler: -3%
September Big 3 inventories: 69 days
GM: 61 days
Ford: 74 days
Chrysler: 82 days
ITW build estimates for 2004:
Q4: -5%
FY: -4%
Industrial: base revenues +14% for Q3
Industrial Plastics and Engineered Polymers grew 15% - 20%
in Q3
ITW
Engineered Products - International
2003
2004
Q3
Q3
Amount
%
Operating Revenues
461.3
618.1
156.8
34.0%
Operating Income
63.6
95.4
31.8
50.0%
Operating Margins
13.8%
15.4%
1.6%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
9.5%
27.6%
2.3%
Nonvolume-related
-
-9.4%
-1.2%
Total
9.5%
18.2%
1.1%
Acquisitions / Divestitures
16.2%
12.3%
-0.8%
Translation
8.3%
10.8%
0.2%
Impairment
-
-
-
Restructuring
-
8.7%
1.1%
Total
34.0%
50.0%
1.6%
% F(U) Prior Year
Engineered Products - International
Key Points
Construction base revenues: +8% in Q3 ’04
Europe: +11% growth (strength in France, UK, Belgium,
Italy, Denmark, Spain and Portugal)
Austral-Asia: +4% (Paslode in Australia)
Wilsonart Intl.: +11% (good activity in China and U.K.)
Automotive base revenues: +9% in Q3
Builds: +1% ytd
BMW: +15.1%; Ford: +12.5%; Renault: +2.3%;
Daimler/Chrysler 2%
ITW forecasting FY ’04 builds: +1% to +2%
Industrial base revenues: +11% in Q3
Industrial plastics, polymers and electronic component
packaging grew 5% - 15%
ITW
Specialty Systems - North America
2003
2004
Q3
Q3
Amount
%
Operating Revenues
857.9
985.7
127.8
14.9%
Operating Income
154.2
171.2
17.0
11.0%
Operating Margins
18.0%
17.4%
-0.6%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
12.3%
29.1%
2.7%
Nonvolume-related
-
-18.1%
-2.9%
Total
12.3%
11.0%
-0.2%
Acquisitions / Divestitures
2.4%
-0.3%
-0.4%
Translation
0.2%
0.3%
-
Impairment
-
-
-
Restructuring
-
-
-
Total
14.9%
11.0%
-0.6%
% F(U) Prior Year
Specialty Systems - North America
Key Points
Welding base revenues: 25+% in Q3 ’04 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
+14% in Q3; consumables / machinery both show
improvement
Food Equipment base revenues: +5% in Q3; growth
due to restaurant/institutional customers
ITW
Specialty Systems - International
2003
2004
Q3
Q3
Amount
%
Operating Revenues
502.1
597.6
95.5
19.0%
Operating Income
53.4
81.7
28.3
53.0%
Operating Margins
10.6%
13.7%
3.1%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
5.1%
18.2%
1.3%
Nonvolume-related
-
0.7%
0.1%
Total
5.1%
18.9%
1.4%
Acquisitions / Divestitures
6.2%
2.9%
-0.5%
Translation
7.7%
11.7%
0.2%
Impairment
-
-
-
Restructuring
-
19.5%
2.0%
Total
19.0%
53.0%
3.1%
% F(U) Prior Year
Specialty Systems - International
Key Points
Signode base revenues strengthen in Q3 ’04:
-Europe: +7%
-Asia/Pacific: +31%
Food Equipment: base revenues +3% in Q3 thanks to
U.K. and China/Hong Kong
Finishing and welding: base revenues each grew 2%
ITW
2004 Forecast
Mid
Low
High
Point
4th Quarter
Base Revenues
6.7%
8.7%
7.7%
Income Per Share-Diluted
$1.16
$1.22
$1.19
%F(U) 2003
25%
31%
28%
Full Year
Base Revenues
7.7%
8.2%
8.0%
Income Per Share-Diluted
$4.34
$4.42
$4.38
%F(U) 2003
29%
31%
30%
ITW 2004 Forecast
Key Assumptions
Exchange rates hold at current levels.
Acquired revenues in the $500 to $700 million range.
Restructuring cost of $15 to $25 million.
No further goodwill or intangible impairment cost.
Share repurchase will add approximately 7 to 8 cents per
share for the year.
Tax rate of 30% for the fourth quarter and an overall rate of
33% for the year.
ITW Conference Call
Q & A
Third Quarter
2004
