Illinois Tool Works (ITW) Q4 2001 earnings summary

Executive summary

• 2001 revenue fell 2% to $9.293B; operating income and diluted EPS each declined 17% amid recession-driven weakness and sharp end-market declines.

• Decentralized operations and the 80/20 process supported responsiveness; management expected improved operating performance as the economy and end markets recovered during 2002.

Financial highlights

• Operating revenue was $9.293B vs. $9.512B in 2000; operating income was $1.306B vs. $1.577B, and operating margin was 14.1% vs. 16.6%.

• Income from continuing operations was $802.449M, or 8.6% of revenue; diluted EPS was $2.62 vs. $3.18 in 2000.

• Revenue change included a 7% base-business decline and 2% adverse currency impact, offset by a 7% acquisition contribution.

Outlook and guidance

• Management anticipated economic and end-market recovery during 2002, with revenue growth and margin improvement in current businesses as conditions improved.

• Priorities included base-business growth, continued 80/20 implementation, margin improvement in acquired businesses, and selective acquisitions and divestitures.

• Acquired businesses initially averaged 9% operating margins and were targeted to double margins over five years; established businesses owned more than five years averaged margins above 20%.