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ILLINOIS TOOL WORKS INC Annual Report (Amendment), Year Ended Dec 31, 2004

Filing Date
Filed March 11, 2005
Period End
December 31, 2004
Security
ITW
In the record · 2016–202610-K1110-Q338-K86

ITW filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 86 current reports (8-K) between 2016 and 2026.

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  2. Leadership change8-K · Feb ’21Feb ’21
  3. Leadership change8-K · Feb ’23Feb ’23
  4. Material agreement8-K · Feb ’25Feb ’25

01—Abstract

Summary

Summary of the 10-K/A filed March 11, 2005. Cited figures are marked; the original filing is the authoritative source.

Illinois Tool Works (ITW) reported a strong 2004, with operating revenues rising 16.9% to $11.73 billiona and operating income climbing 25.9% to $2.06 billion, lifting operating margin from 16.3% to 17.5%.

Diluted income from continuing operations reached $4.39b per share, up 30% from $3.37 in 2003. Growth came from a mix of base business revenue recovery in North America and Europe, acquisitions (24 deals costing $588 million), favorable currency translation, and lower restructuring costs, partly offset by higher raw material (notably steel) costs and goodwill impairments of about $21.7 million. Cash generation and capital allocation were central to the year.

Operating cash flow was $1.53 billionc and free operating cash flow was $1.33 billion. ITW spent $1.73 billion repurchasing about 18.9 million shares at an average of $91.45 under an authorization of up to 31 million shares, and paid $305 million in dividends. Cash fell by about $1.0 billion to $667 million, while total debt rose modestly to $1.12 billion, a 12.8% debt-to-capitalization ratio.

ROIC improved to 18.5% from 16.1%. Management forecast modest slowing of end markets in 2005, with full-year diluted EPS guidance of $4.91 to $5.11d before the effect of expensing stock options under SFAS 123R, which is expected to reduce EPS by roughly 12 cents.

Investors should also note the Leasing and Investments segment, which contributed $131.6 million of operating income largely from mortgage investments, and the Wilsonart high-pressure laminate class action, which seeks $439 million to $475 million before trebling and has no reserve recorded. This filing is a 10-K/A that incorporates the 2004 Annual Report to Stockholders by reference, with Deloitte & Touche giving an unqualified opinion on both the financial statements and internal control over financial reporting.

02—Key points

Key Highlights

  1. Operating revenues grew 16.9% to $11.73 billion in 2004, with base business revenue up 8.1% and acquisitions contributing 5.0 points
  2. Operating income rose 25.9% to $2.06 billion; operating margin expanded 120 basis points to 17.5%
  3. Diluted EPS from continuing operations was $4.39, up 30% from $3.37; net income was $1.34 billion
  4. Free operating cash flow reached $1.33 billion, up 14% year over year
  5. ITW repurchased 18.9 million shares for $1.73 billion, and ROIC improved to 18.5% from 16.1%
  6. 2005 guidance calls for diluted EPS of $4.91 to $5.11 before SFAS 123R, which is expected to cost about 12 cents per share
  7. Wilsonart faces a class action seeking $439–$475 million before trebling, with no reserve recorded

03—Questions

Frequently Asked Questions

  1. How did ITW perform financially in 2004?

    ITW had a strong year. Operating revenues reached $11.73 billion, up 16.9%, and operating income reached $2.06 billion, up 25.9%. Diluted EPS from continuing operations was $4.39, compared with $3.37 in 2003. Growth came from recovering North American industrial demand, European penetration gains, acquisitions, favorable currency effects, and lower restructuring costs.

  2. What is ITW doing with its cash?

    ITW generated $1.53 billion in operating cash flow and $1.33 billion in free operating cash flow. It used this cash mainly for $588 million of acquisitions, $1.73 billion of share repurchases, and $305 million of dividends. Cash on hand fell to $667 million, and total debt rose to $1.12 billion, a 12.8% debt-to-capitalization ratio.

  3. What is the outlook for 2005?

    Management expects modest slowing in end markets and forecasts 2005 diluted EPS from continuing operations of $4.91 to $5.11, excluding the effect of SFAS 123R. Assumptions include base business revenue growth of 4.4% to 6.4%, $600–800 million of revenue from acquisitions, a 33% tax rate, and $60–70 million of Leasing and Investments income.

  4. What are the main risks or contingencies disclosed?

    The Wilsonart class action over high-pressure laminate pricing seeks $439–$475 million before trebling, and the company has recorded no reserve, believing the claims lack merit. Raw material and steel cost increases compressed variable margins in some segments. The Leasing and Investments segment carries exposure to mortgage swap structures, aircraft leases, and about $112.8 million of future income tied to mortgage transactions. Company-wide, the disclosed controls were deemed effective, with no material changes in internal control during the fourth quarter.

  5. Why does this filing say 10-K/A and where are the financial statements?

    The document is a 10-K/A, and Item 8 and the financial statements are incorporated by reference from the 2004 Annual Report to Stockholders (Exhibit 13). The auditor, Deloitte & Touche LLP, issued an unqualified opinion dated March 1, 2005, covering both the financial statements and the effectiveness of internal control over financial reporting.

04—Continue

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