ITW Conference Call
Fourth Quarter
2004
Exhibit 99.2
ITW
Agenda
1.
Introduction……………………..John Brooklier
2.
Financial Overview……………...Jon Kinney
3.
Manufacturing Segments……… John Brooklier
4.
Forecast 2005………………….…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
and future tax rate expectations for full year 2005 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 and prices of raw
materials, (4) an interruption in, or reduction in, introducing new products
into the Company’s product lines, (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
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Telephone replay available through midnight of
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Webcast / PowerPoint replay available at itw.com
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ITW
Quarterly Highlights
2003
2004
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%
Average Invested Capital
6,875.6
7,780.3
(904.7)
-13.2%
Return on Average Invested Capital
17.3%
19.2%
1.9%
Free Operating Cash Flow
425.7
326.4
(99.3)
-23.3%
F(U) Last Year
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 & Investments
0.2%
1.2%
0.1%
Other Revenue
-0.4%
-
0.1%
Total
16.2%
24.0%
1.1%
ITW
Leasing & Investments
2003
2004
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%
F(U) Last Year
ITW
Non Operating & Taxes
2003
2004
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%
30.1%
1.1%
Income From Continuing Operations-A/T
286.9
359.2
72.3
25.2%
F(U) Last Year
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 Working Capital
1,665.9
1,576.1
2,007.4
% to Revenue(Prior 4 Qtrs.)
17%
14%
17%
Net Plant & Equipment
1,728.6
1,807.9
1,876.9
Investments, net of L&I Debt
633.4
820.9
833.5
Goodwill
2,511.3
2,686.8
2,753.1
Other, net
428.1
663.0
534.9
Invested Capital
6,967.3
7,554.7
8,005.8
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
(1,684.5)
(930.3)
(667.4)
Net Debt & Equity
6,967.3
7,554.7
8,005.8
Debt to Total Capital
11%
12%
13%
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
425.7
326.4
Stock Repurchase
-
(527.7)
Acquisitions
(55.6)
(148.9)
Investments
(25.4)
(28.8)
Dividends
(73.8)
(83.0)
Debt
(34.2)
100.6
Other
74.9
98.5
Net Cash Increase/(Decrease)
311.6
(262.9)
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%
2003
2004
F(U)
Year to Date
Q4
Q4
Prior Yr.
Operating Income after taxes
1,078.1
1,377.9
299.8
Operating Margins
10.7%
11.7%
1.0%
Average Invested Capital
6,685.3
7,465.2
(779.9)
Capital Turnover
1.50
1.57
0.07
Return on Average Invested Capital
16.1%
18.5%
2.4%
ITW
Acquisitions
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 Systems
-
2
1
1
-
1
1
1
International
Engineered Products
-
1
2
1
5
2
-
1
Specialty Systems
7
3
3
-
3
4
1
-
Total
8
6
9
5
10
8
3
3
2003
2004
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 Industrial Production: +0.4% in December
’04 versus +2.2% in August ’04; Germany and U.K.
indexes both slightly negative in December ’04
ITW
Engineered Products - North America
2003
2004
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%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
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%
-
Impairment
-
-
-
Restructuring
-
-2.8%
-0.4%
Total
9.3%
11.0%
0.2%
% F(U) Prior Year
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 add to growth
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 build estimates for 2005:
Q1: -7%
FY: flat
Industrial: base revenues +11% for Q4 ’04
Top performers: Minigrip/ZipPak, fluid products, industrial
plastics
ITW
Engineered Products - International
2003
2004
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%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
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%
Impairment
-
-
-
Restructuring
-
-3.8%
-0.6%
Total
27.7%
25.8%
-0.2%
% F(U) Prior Year
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
Builds: -3.5% in Q4 ’04
BMW: +15.6%; Ford: -2%; Daimler/Chrysler -2.8%; GM
-11.4%; Fiat -15.5% in Q4 ’04
ITW forecasting FY ’05 builds: +2%
Industrial base revenues: +2% in Q4 ’04
Top performers: fluid products and polymers
ITW
Specialty Systems - North America
2003
2004
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%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
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%
Impairment
-
-
-
Restructuring
-
1.4%
0.2%
Total
11.7%
30.2%
2.6%
% F(U) Prior Year
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 ; consumables / machinery both
showed improvement
Food Equipment base revenues: +3% in Q4 ’04;
growth due to restaurant/institutional customers and
parts/service
ITW
Specialty Systems - International
2003
2004
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%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
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%
0.2%
Impairment
-
-
-
Restructuring
-
0.3%
0.0%
Total
20.6%
31.0%
1.1%
% F(U) Prior Year
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
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%
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 the first quarter and
the year.
ITW Conference Call
Q & A
Fourth Quarter
2004
