Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Robert W. Baird Industrial Conference 2011
24 slides from Illinois Tool Works's conference presentation, Nov 8, 2011
Slide 1: Driving Profitable Growth, Generating Strong Returns
ITW Driving Profitable Growth, Generating Strong Returns Robert W. Baird Industrial Conference November 8, 2011 Chicago 1
Slide 2: Today's Topics
Today’s Topics Organizational Structure and Business Process Company Snapshot Longer-Term Growth Initiatives Q&A 2
Slide 3: Organizational Structure: ITW's Key Platforms
Organizational Structure ITW’s Key Platforms Long-term operational strategy and capital allocation driven by CEO, three vice chairmen and 10 executive vice presidents Industrial Food Automotive Welding Construction Packaging Equipment Test & Polymers & Automotive Decorative Electronics Measurement F
Slide 4: ITW's Business Process: The ITW Toolbox
ITW’s Business Process: The ITW Toolbox A proven and continuously evolving set of tools and processes that drive performance improvements across ITW companies Tools: 80/20 Strategic Portfolio Management Product Line Simplification Outside-In Strategic Perspective Market Rate of Demand Innovation USa
Slide 5: Comparative Revenues by Geography
Company Snapshot Comparative Revenues by Geography 2000 2010 8% 20% North America North America 26% 48% Europe, Middle East Europe, Middle East and Africa and Africa 66% Asia Pacific and Other Asia Pacific and Other 32% $9.2 Billion $15.4 Billion* *Restated for 2011 discontinued operations and elimi
Slide 6: Results by Geography
Company Snapshot Results by Geography Worldwide Revenue Growth Rates Q3 2011 YTD vs. PY North America 9.0% 5.3% 14.3% EMEA 6.6% 4.0% 10.6% Asia/Pacific 6.4% 0.5% 6.9% Central/South America 6.4% 39.5% 45.9% Total WW 8.0% 4.8% 12.8% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% Base
Slide 7: Emerging Markets: 20% of 2010 Revenues
Company Snapshot Emerging Markets: 20% of 2010 Revenues BRIC Other Emerging Markets Rest of World 7% 13% 80% 2010 Revenues Emerging markets include Asia, Latin America and Eastern Europe 7
Slide 8: Results by Geography: BRIC Revenue Growth Rates
Company Snapshot Results by Geography BRIC Revenue Growth Rates Q3 2011 YTD vs. PY China 15.9% 0.4% 16.3% India 20.5% Russia 16.1% Brazil 5.3% 43.1% 48.4% Total BRIC 13.9% 12.1% 26.0% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Base Acquisition % based on seller’s country at constant f/x rates 8
Slide 9: Total Company Revenues: 2010 Revenues by Product Category
Company Snapshot Total Company Revenues: 2010 Revenues by Product Category 12% 23% 65% Consumables Equipment and Tools Service and Parts 9
Slide 10: Revenue Growth by Category
Company Snapshot Revenue Growth by Category Q3 2011 YTD vs. PY Consumables 7.9% 5.2% 13.1% Equipment & Tools 12.1% 4.1% 16.2% Service & Parts 3.5% 4.3% 7.8% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% Base Acquisition % based on customer sales at constant f/x rates 10
Slide 11: Third Quarter Financial Highlights
Company Snapshot Third Quarter Financial Highlights Organic revenue growth: % Inc/ 6.2% $ in Millions Q3 ’10 Q3 ’11 (Dec) Acquired 8 companies: Operating Revenues $3,941.1 $4,580.5 16.2% nearly $300 million of Operating Income $619.7 $714.3 15.3% annualized revenues Operating Margin 15.7% 15.6%
Slide 12: Acquisition Activity
Company Snapshot Acquisition Activity $ in Millions 2009 (FY) 2010 (FY) 3Q’11 YTD Annualized Revenues Acquired $290 $530 $781 Cash Paid $286 $531 $1,226 Number of Acquisitions 20 24 21 82% of acquired revenues (Q3’11 YTD) directly tied to emerging market and platform growth initiatives ITW Globa
Slide 13: 25 Year Revenue/Operating Income
Company Snapshot 25 Year Revenue/Operating Income $18,000 $3,100 CAGR Revenue: 14% $15,000 $2,600 CAGR Net Income: 17% Average ROIC: 14% CAGR Shareholder Return: 15% $12,000 $2,100 $9,000 $1,600 $6,000 $1,100 $3,000 $600 $0 $100 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2
Slide 14: ITW demonstrates strong returns to investors
Company Snapshot ITW demonstrates strong returns to investors Return on average invested capital 20% Average ROIC 2000-2010: 14.8% 18.3% 18.0% 18% 17.6% 16.8% 16.0% 16% 15.3% 13.7% 13.7% 14% 12.3% 12% 10.6% 10.7% 10% 8% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: 2010 ITW Annual R
Slide 15: Historical ROIC: ITW vs. Peer Group
Company Snapshot Historical ROIC: ITW vs. Peer Group 20% 18% 16% 14% ITW US-Based Diversified Industrials 12% 5-yr Average 15.7% 14.9% ITW Peer Group 10% FY2006A FY2007A FY2008A FY2009A FY2010A Source: 2010 ITW Annual Report; Numbers not restated for discontinued operations or the elimination of the
Slide 16: Capital Structure
Company Snapshot Capital Structure Uses of free cash • Strong generator of free cash flow, even in flow/debt recessionary periods 2001-2010 • Credit line of $2.5 billion backstops commercial paper program • Issued new long-term debt of $1.0 billion in August 2011 at attractive rates • Target debt-to
Slide 17: Balanced Uses of Capital
Company Snapshot Balanced Uses of Capital Dividends • Guidelines: 30% to 45% of the last two years’ average free operating cash flow • Increased dividend 6% in August 2011 to an annual rate of $1.44 per share • Current dividend yield of approximately 3% Acquisitions • Preferred use of free operating
Slide 18: Organic Growth Performance (2004-2008)
Longer-Term Growth Initiatives Organic Growth Performance (2004-2008) 2004-2008 base growth CAGR: 3% excluding automotive OEM and construction: 4% Continued focus on: – Innovation – Emerging Markets – New Platforms ITW’s Organic Growth Rate Goal 2011-2015: 5% to 6% 18
Slide 19: Innovation: A Core Performance Driver Throughout Our History
Longer-Term Growth Initiatives Innovation: A Core Performance Driver Throughout Our History • Over 19,000 active patents currently • Ranked in top 100 companies for new U.S. patents issued since 2002 • Worldwide patents issued last two years: 2,245 • ITW Patent Society members: 1,065 Innovation Inve
Slide 20: Emerging Markets: China
Longer-Term Growth Initiatives Emerging Markets: China 2010 Revenues $678M* # of Units 45 # of Employees 4,800 *includes export sales into China Key Market Segments Strategy • Oil and Gas – End market / value-added focused…must be • Shipyards able to sustain meaningful differentiation – Localization
Slide 21: Three New Platforms for Growth
Longer-Term Growth Initiatives Three New Platforms for Growth Automotive Aftermarket Test and Measurement Electronics 21
Slide 22: 2011-2015: What to Expect
Longer-Term Growth Initiatives 2011-2015: What to Expect • Organic revenue: • Operating margins • ROIC remains in 5% to 6% for base businesses sweet spot of 15% • Innovation 50 to 70 basis points to 17% over next • Emerging markets higher than prior cycle • New platforms peak periods • We will conti
Slide 23: ITW Forward-Looking Statements
ITW Forward - Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that may be identified by the use of words such as “believe,” “expect,” “plans,” “intends,” “strategy,” “prospects,” “estimate,” “project
Slide 24: Q&A
Q&A 24
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