10-KPeriod: FY2002

ILLINOIS TOOL WORKS INC Annual Report, Year Ended Dec 31, 2002

Filed March 4, 2003For Securities:ITW

Summary

Illinois Tool Works Inc. (ITW) presents its 2002 annual report, highlighting a diversified global manufacturing business organized into five segments: Engineered Products North America, Engineered Products International, Specialty Systems North America, Specialty Systems International, and Leasing & Investments. The company emphasizes its "80/20" simplification process as a core strategy to enhance operational and financial performance by focusing on high-value activities and reducing complexity. A significant development in 2002 was the divestiture of the Consumer Products segment, primarily the sale of Precor and West Bend, with an estimated net gain realized, and ongoing efforts to dispose of Florida Tile in 2003. This strategic shift reflects ITW's focus on its core industrial businesses. The company's financial data shows a steady increase in operating revenues and income from continuing operations over the past five years, with a notable rise in diluted earnings per share. The Selected Financial Data section also indicates consistent dividend growth. ITW operates a substantial global manufacturing footprint with over 548 properties, and its competitive landscape is characterized by diversity across its product lines and end markets, including construction, automotive, and general industrial sectors. The company also highlights its robust patent portfolio and engineering capabilities as key differentiators.

Key Highlights

  • 1ITW operates a diversified global manufacturing business across five segments, with a strong emphasis on Engineered Products and Specialty Systems in both North America and internationally.
  • 2The company's core strategy revolves around the "80/20" simplification process, aimed at improving efficiency and profitability by focusing on critical aspects of its operations.
  • 3In 2002, ITW began divesting its Consumer Products segment, completing the sale of Precor and West Bend, and planning the sale of Florida Tile, indicating a strategic refocus on industrial-centric businesses.
  • 4Financial highlights include consistent growth in operating revenues and income from continuing operations from 1998 to 2002, with a concurrent increase in cash dividends declared per common share.
  • 5The company possesses a significant global operational footprint with 548 properties and a broad market presence, serving key industries such as construction, automotive, and general industrial.
  • 6ITW actively manages its intellectual property, holding approximately 2,400 unexpired U.S. patents and approximately 900 pending applications, underscoring its commitment to innovation.
  • 7The company experienced a change in its independent auditors, dismissing Arthur Andersen LLP and engaging Deloitte & Touche LLP in May 2002.

Frequently Asked Questions

ITW's businesses are organized into five segments for internal reporting: Engineered Products - North America, Engineered Products - International, Specialty Systems - North America, Specialty Systems - International, and Leasing & Investments. These segments manufacture highly engineered products and specialty systems for a diverse customer base.

The '80/20' process is a key business strategy focused on identifying and concentrating resources on the most critical 20% of activities that drive 80% of the value, while simplifying or reducing efforts on the less impactful 80% of activities. This process is applied across ITW's operations to simplify product lines, customer bases, supplier relationships, and business processes, aiming to improve operating and financial performance.

A major development in 2002 was the initiation of the divestiture of the Consumer Products segment, which was acquired as part of the Premark merger. ITW completed the sale of its Precor and West Bend businesses and was actively marketing Florida Tile for sale in 2003, signaling a strategic move to focus on its core industrial manufacturing businesses.

Based on the Selected Financial Data, ITW has demonstrated a generally positive financial trend. Operating revenues have shown growth, reaching $9.47 billion in 2002. Income from continuing operations has also seen an increase, reaching $931.8 million in 2002. Furthermore, cash dividends declared per common share have steadily risen, indicating a commitment to returning value to shareholders.