Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2009 Earnings Presentation
32 slides from Illinois Tool Works's earnings presentation, February 2010
Slide 1: ITW Conference Call Fourth Quarter 2009
ITW Conference Call Fourth Quarter 2009 1
Slide 2: Agenda
ITW Agenda 1. Introduction…………………...….. John Brooklier/David Speer 2. Financial Overview…………..….. Ron Kropp 3. Reporting Segments………....…. John Brooklier 4. 2010 Forecasts…………………… Ron Kropp 5. Q & A………………......……...…... John Brooklier/Ron Kropp/David Speer 2
Slide 3: Forward-Looking Statements
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 operating performance, revenue growth, diluted income per share from continuing ope
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 402-220-3450 No pass code necessary Telephone replay available through midnight of February 10, 2010 Webcast / PowerPoint replay available at itw.com website 4
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2008 2009 F(U) Last Year Q4 Q4 Amount % Operating Revenues 3,954.0 3,757.4 (196.6) -5.0% Operating Income 454.5 476.3 21.8 4.8% % of Revenues 11.5% 12.7% 1.2% Income from Continuing Operations Income Amount 302.5 495.6 193.1 63.8% Income Per Share-Diluted 0.59 0.98 0.39 66.1
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage -10.0% -35.6% -3.3% Changes in VM & OH costs - 38.1% 4.9% Total -10.0% 2.5% 1.6% Acquisitions/Divestitures 1.7% 0.2% -0.2% Translation 3.3% 3.2% -0.
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2008 2009 F(U) Last Year Q4 Q4 Amount % Operating Income 454.5 476.3 21.8 4.8% Interest Expense (42.2) (43.8) (1.6) Other Income (expense) (15.2) 5.6 20.8 Income from Continuing Operations-Pretax 397.1 438.1 41.0 10.3% Income Taxes 94.6 (57.5) 152.1 % to Pretax Income 23.8%
Slide 8: Full Year Highlights
ITW Full Year Highlights 2008 2009 F(U) Last Year Amount % Operating Revenues 17,100.3 13,877.1 (3,223.2) -18.8% Operating Income 2,501.3 1,386.0 (1,115.3) -44.6% % of Revenues 14.6% 10.0% -4.6% Income from Continuing Operations Income Amount 1,691.1 969.5 (721.6) -42.7% Income Per Share-Diluted 3.2
Slide 9: Full Year Operating Analysis
ITW Full Year Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage -18.4% -51.8% -6.0% Changes in VM & OH costs - 21.2% 3.8% Total -18.4% -30.6% -2.2% Acquisitions/Divestitures 4.2% - -0.6% Translation -4.8% -5.8% -
Slide 10: Invested Capital
ITW Invested Capital 12/31/08 9/30/09 12/31/09 Trade Receivables 2,572.0 2,410.7 2,491.5 Days Sales Outstanding 58.5 60.6 59.7 Inventories 1,774.7 1,361.2 1,356.2 Months on Hand 2.0 1.8 1.7 Prepaids and Other Current Assets 375.8 327.1 276.2 Accounts Payable & Accrued Expenses (1,999.1) (2,018.1) (2
Slide 11: Debt & Equity
ITW Debt & Equity 12/31/08 9/30/09 12/31/09 Total Capital Short Term Debt 2,434.0 67.5 213.7 Long Term Debt 1,247.9 2,869.4 2,914.9 Total Debt 3,681.9 2,936.9 3,128.6 Stockholders' Equity 7,675.1 8,242.3 8,817.9 Total Capital 11,357.0 11,179.2 11,946.5 Less: Cash (743.0) (942.9) (1,318.8) Net Debt &
Slide 12: Cash Flow
ITW Cash Flow 2008 2009 Q4 Q4 Net Income 233.8 507.4 Adjust for Non-Cash Items 106.0 (230.0) Changes in Operating Assets & Liabilities 249.6 228.9 Net Cash From Operating Activities 589.4 506.3 Additions to Plant & Equipment (88.0) (72.7) Free Operating Cash Flow 501.4 433.6 Stock Repurchases (399.0
Slide 13: Acquisitions
ITW Acquisitions 2008 2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 230 308 847 154 75 54 6 155 Purchase Price Cash Paid 223 439 745 190 65 33 3 185 Number of Acquisitions 16 10 14 10 6 5 2 7 13
Slide 14: Transportation Quarterly Analysis
Transportation Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 541.0 16.7 3.1% 2009 Q4 593.1 88.8 15.0% $ F(U) 52.1 72.1 11.9% % F(U) 9.6% 430.2% % F(U) Prior Year Base Business Operating Leverage 6.3% 70.2% 1.9% Changes in VM & OH costs - 282.0% 8.2% Total 6.3% 352.
Slide 15: Transportation Key Points
Transportation Key Points • Total segment base revenues (+6.3% in Q4 ’09 vs. -7.9% in Q3 ’09) improved sequentially as Q4 auto builds significantly ramped up in Europe and North America • Auto OEM/Tiers: Worldwide base revenues +8.8% in Q4 ’09 vs. -9.7% in Q3 ’09 – European Q4 builds: 5.1 million ve
Slide 16: Industrial Packaging Quarterly Analysis
Industrial Packaging Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 576.9 40.0 6.9% 2009 Q4 519.7 37.9 7.3% $ F(U) (57.2) (2.1) 0.4% % F(U) -9.9% -5.3% % F(U) Prior Year Base Business Operating Leverage -16.3% -89.3% -6.1% Changes in VM & OH costs - 88.4% 7.3% Total
Slide 17: Industrial Packaging Key Points
Industrial Packaging Key Points • Total segment base revenues continued to show signs of improvement: -16.3% in Q4 ’09 vs. -23.3% in Q3 ’09 as industrial production metrics in U.S. and Europe became less negative • Total North American industrial packaging business: -12.4% in Q4 ’09 vs. -27.0% in Q3
Slide 18: Food Equipment Quarterly Analysis
Food Equipment Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 542.3 88.7 16.4% 2009 Q4 489.4 68.6 14.0% $ F(U) (52.9) (20.1) -2.4% % F(U) -9.8% -22.6% % F(U) Prior Year Base Business Operating Leverage -12.5% -32.8% -3.8% Changes in VM & OH costs - 14.9% 2.8% Total
Slide 19: Food Equipment Key Points
Food Equipment Key Points • Total segment Q4 base revenues: -12.5% vs. -6.3% in Q3 ’09 due to soft equipment sales • North America Q4 base revenues: -14.6% vs. -8.0% in Q3 ’09 as customers continue to delay equipment purchases • North America Q4 service revenues continue to be bright spot: -0.8% vs.
Slide 20: Power Systems and Electronics Quarterly Analysis
Power Systems and Electronics Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 504.9 78.5 15.6% 2009 Q4 414.8 60.4 14.6% $ F(U) (90.1) (18.1) -1.0% % F(U) -17.9% -23.1% % F(U) Prior Year Base Business Operating Leverage -21.6% -54.4% -6.5% Changes in VM & OH costs - 3
Slide 21: Power Systems and Electronics Key Points
Power Systems and Electronics Key Points • Total segment base revenues improve sequentially: -21.6% in Q4 ’09 vs. -34.2% in Q3 ’09 • In Q4, Welding’s worldwide base revenues: -24.9% vs. -36.2% in Q3 ’09 – Q4 North America base revenues:-25.6% vs. -40.0% in Q3 ’09 – Q4 International base revenues:-23
Slide 22: Construction Products Quarterly Analysis
Construction Products Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 415.5 37.6 9.0% 2009 Q4 432.3 42.6 9.9% $ F(U) 16.8 5.0 0.9% % F(U) 4.0% 13.5% % F(U) Prior Year Base Business Operating Leverage -5.5% -27.2% -2.1% Changes in VM & OH costs - 25.8% 2.5% Total -5.5
Slide 23: Construction Products Key Points
Construction Products Key Points • Total segment base revenues: -5.5% in Q4 ’09 vs. -16.5% in Q3 ’09 • North America Q4 base revenues: -9.0% vs. -27.3% in Q3 ‘09 – Q4 Residential base revenues: -7.2% vs. -30.4% in Q3 ’09; Q4 new housing starts at 554,000 units (16% y/o/y decrease) – Q4 Renovation ba
Slide 24: Polymers and Fluids Quarterly Analysis
Polymers and Fluids Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 325.5 36.8 11.3% 2009 Q4 321.8 43.7 13.6% $ F(U) (3.7) 6.9 2.3% % F(U) -1.2% 18.7% % F(U) Prior Year Base Business Operating Leverage -4.7% -16.8% -1.4% Changes in VM & OH costs - 27.7% 3.3% Total -4
Slide 25: Polymers and Fluids Key Points
Polymers and Fluids Key Points • Total segment base revenues: -4.7% in Q4 ’09 vs. -13.9% in Q3 ’09 • Q4 Worldwide Fluids: +0.6% vs. -11.9% in Q3 ’09 – Improved North America business performance linked to increased demand for hygiene and MRO products • Q4 Worldwide Polymers: -6.9% vs. -16.8% in Q3 ‘
Slide 26: Decorative Surfaces Quarterly Analysis
Decorative Surfaces Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 275.6 34.4 12.5% 2009 Q4 255.9 24.0 9.4% $ F(U) (19.7) (10.4) -3.1% % F(U) -7.2% -30.1% % F(U) Prior Year Base Business Operating Leverage -10.3% -32.9% -3.2% Changes in VM & OH costs - 12.5% 1.7% To
Slide 27: Decorative Surfaces Key Points
Decorative Surfaces Key Points • Total segment base revenues: -10.3% in Q4 ’09 vs. -15.6% in Q3 ’09 • North America laminate Q4 base revenues: -15.9% vs. -20.6% in Q3 ’09 – Due to North America and commercial construction mix, demand for high pressure laminate remained constrained • International Q4
Slide 28: All Other Quarterly Analysis
All Other Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q4 783.2 121.8 15.5% 2009 Q4 740.4 110.3 14.9% $ F(U) (42.8) (11.5) -0.6% % F(U) -5.5% -9.4% % F(U) Prior Year Base Business Operating Leverage -11.9% -34.7% -4.0% Changes in VM & OH costs - 22.1% 3.9% Total -11.
Slide 29: All Other Key Points
All Other Key Points • Total segment base revenues: -11.9% in Q4 ’09 vs. -18.9% in Q3 ’09 – Q4 industrial/appliance base revenues: -2.6% vs. -21.8% in Q3 ’09; improvement largely due to energy efficiency initiatives in appliance sector – Q4 worldwide consumer packaging base revenues: -8.5% vs. -11.7
Slide 30: 2010 Forecast
ITW 2010 Forecast Mid Low High Point 1st Quarter 2010 Total Revenues 14% 18% 16% Diluted Income per Share - Continuing $0.48 $0.60 $0.54 % F(U) 1st Quarter 2009 * 129% 186% 157% Full Year 2010 Total Revenues 10% 14% 12% Diluted Income per Share - Continuing $2.43 $2.93 $2.68 % F(U) 2009 26% 52% 39%
Slide 31: 2010 Forecast Key Assumptions
ITW 2010 Forecast Key Assumptions • Exchange rates hold at current levels • Acquired revenues in the $300 to $500 million range for the year • Restructuring costs of $50 to $100 million for the full year • Tax rate range of 28.75% to 29.25% for the 1st quarter and the full year 31
Slide 32: ITW Conference Call Q&A
ITW Conference Call Q&A Fourth Quarter 2009 32