Illinois Tool Works (ITW) Q4 2004 earnings summary

Executive summary

• FY04 revenue $11.731B, operating income $2.057B and income from continuing operations $1.340B; diluted continuing-operations EPS $4.39.

• Operating income rose on stronger base-business revenue, favorable currency translation, acquisitions and lower restructuring costs; higher raw-material and overhead costs and impairment charges partly offset gains.

• Q4 revenue was $3.052B, operating income $535.2M, continuing-operations income $359.2M and diluted continuing-operations EPS $1.21.

Financial highlights

• FY04 revenue increased from $10.036B in 2003; operating income rose from $1.633B and continuing-operations income from $1.040B.

• Net income was $1.339B vs. $1.024B in 2003; 2002 included a $221.9M after-tax cumulative accounting-change charge.

• Operating cash flow was $1.532B; free operating cash flow, as defined internally, was $1.335B.

• FY04 base-business revenue growth was 8.1%; acquisitions/divestitures added 5.0% and currency translation 4.4% to revenue growth.

Outlook and guidance

• FY05 continuing-operations diluted EPS forecast: $4.91–$5.11, excluding SFAS 123R adoption; assumptions include base-business revenue growth of 4.4%–6.4%.

• Other FY05 assumptions: FX at year-end 2004 levels, $600M–$800M annualized acquired revenue, $30M–$50M restructuring costs, $60M–$70M Leasing and Investments income and a 33% tax rate.

• Forecast assumes modest end-market slowing; SFAS 123R adoption in Q3 2005 was estimated to reduce 2004 diluted EPS by $0.12 if applied.