Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q2 2010 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, 2010
Slide 1: ITW Conference Call Second Quarter 2010
ITW Conference Call Second Quarter 2010 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: 203-369-1871 No pass code necessary Telephone replay available through midnight of August 3, 2010 Webcast / PowerPoint replay available at itw.com website 4
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2009 2010 F(U) Last Year Q2 Q2 Amount % Operating Revenues 3,392.9 4,076.3 683.4 20.1% Operating Income 334.8 652.7 317.9 94.9% % of Revenues 9.9% 16.0% 6.1% Income from Continuing Operations Income Amount 178.9 420.8 241.9 135.2% Income Per Share-Diluted 0.36 0.83 0.47 130.
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage 15.1% 62.7% 4.1% Changes in VM & OH costs - 7.5% 0.6% Total 15.1% 70.2% 4.7% Acquisitions/Divestitures 2.9% 3.0% -0.2% Translation 2.3% 3.3% - Impai
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2009 2010 F(U) Last Year Q2 Q2 Amount % Operating Income 334.8 652.7 317.9 94.9% Interest Expense (43.9) (43.7) 0.2 Other Income (expense) (19.8) 5.8 25.6 Income from Continuing Operations-Pretax 271.1 614.8 343.7 126.8% Income Taxes 92.2 194.0 (101.8) % to Pretax Income 34
Slide 8: Invested Capital
ITW Invested Capital 6/30/09 3/31/10 6/30/10 Trade Receivables 2,393.2 2,450.4 2,582.7 Days Sales Outstanding 63.5 61.2 57.0 Inventories 1,438.6 1,413.1 1,458.2 Months on Hand 1.9 1.8 1.7 Prepaids and Other Current Assets 453.4 282.2 243.4 Accounts Payable & Accrued Expenses (1,901.1) (1,978.9) (2,0
Slide 9: Debt & Equity
ITW Debt & Equity 6/30/09 3/31/10 6/30/10 Total Capital Short Term Debt 180.5 324.4 305.9 Long Term Debt 2,855.8 2,807.2 2,724.3 Total Debt 3,036.3 3,131.6 3,030.2 Stockholders' Equity 7,926.1 8,743.0 8,731.9 Total Capital 10,962.4 11,874.6 11,762.1 Less: Cash (616.4) (1,417.6) (1,265.2) Net Debt &
Slide 10: Cash Flow
ITW Cash Flow 2009 2010 Q2 Q2 Net Income 176.6 420.8 Adjust for Non-Cash Items 160.0 133.4 Changes in Operating Assets & Liabilities 287.5 (215.8) Net Cash From Operating Activities 624.1 338.4 Additions to Plant & Equipment (57.4) (62.6) Free Operating Cash Flow 566.7 275.8 Acquisitions (49.1) (189
Slide 11: Acquisitions
ITW Acquisitions 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Annual Revenues Acquired 75 54 6 155 26 253 Purchase Price Cash Paid 65 33 3 185 25 198 Number of Acquisitions 6 5 2 7 4 7 11
Slide 12: Transportation Quarterly Analysis
Transportation Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 501.3 21.4 4.3% 2010 Q2 672.0 108.8 16.2% $ F(U) 170.7 87.4 11.9% % F(U) 34.1% 408.8% % F(U) Prior Year Base Business Operating Leverage 29.3% 238.1% 6.9% Changes in VM & OH costs - 96.5% 3.2% Total 29.3%
Slide 13: Transportation Key Points
Transportation Key Points • Transportation segment benefited from strong auto builds and improved auto aftermarket performance • Auto OEM/Tiers: Worldwide base revenues +34.5% in Q2 ’10 vs. Q2 ’09 – North American Q2 ’10 auto builds: 3.1 million vehicles vs. 1.8 million vehicles in Q2 ’09 – European
Slide 14: Industrial Packaging Quarterly Analysis
Industrial Packaging Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 467.7 16.3 3.5% 2010 Q2 577.7 61.0 10.6% $ F(U) 110.0 44.7 7.1% % F(U) 23.5% 275.1% % F(U) Prior Year Base Business Operating Leverage 17.7% 195.3% 5.3% Changes in VM & OH costs - 15.3% 0.5% Total 1
Slide 15: Industrial Packaging Key Points
Industrial Packaging Key Points • Total segment base revenues continued to improve as industrial production metrics/diversified end markets perform better • Total North American industrial packaging base revenues: +22.5% in Q2 ’10 vs. Q2 ’09 – North American strapping base revenues: +28.7% in Q2 ’10
Slide 16: Food Equipment Quarterly Analysis
Food Equipment Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 451.4 58.4 12.9% 2010 Q2 454.5 60.8 13.4% $ F(U) 3.1 2.4 0.5% % F(U) 0.7% 4.1% % F(U) Prior Year Base Business Operating Leverage -0.2% -0.5% -0.1% Changes in VM & OH costs - -18.7% -2.4% Total -0.2% -19.
Slide 17: Food Equipment Key Points
Food Equipment Key Points • Total segment Q2 ’10 base revenues: -0.2% vs. Q2 ’09 • North America Q2 ’10 base revenues: -3.7% vs. Q2 ’09 as customers continue to delay equipment purchases – Equipment base revenues: -7.8% in Q2 ’10 vs. Q2 ’09 – Service base revenues: +2.8% in Q2 ’10 vs. Q2 ’09 • Inter
Slide 18: Power Systems and Electronics Quarterly Analysis
Power Systems and Electronics Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 395.8 61.2 15.5% 2010 Q2 493.4 107.5 21.8% $ F(U) 97.6 46.3 6.3% % F(U) 24.6% 75.7% % F(U) Prior Year Base Business Operating Leverage 22.6% 58.7% 4.6% Changes in VM & OH costs - 6.2% 0.8%
Slide 19: Power Systems and Electronics Key Points
Power Systems and Electronics Key Points • Total Q2 ’10 segment base revenues increase as welding and PC board fabrication contribute to growth • In Q2 ’10, worldwide welding base revenues: +13.5% vs. Q2 ’09 – Q2 ’10 North America welding base revenues: +20.6% vs. Q2 ’09 – Q2 ’10 International weldi
Slide 20: Construction Products Quarterly Analysis
Construction Products Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 370.6 21.7 5.9% 2010 Q2 459.4 67.7 14.7% $ F(U) 88.8 46.0 8.8% % F(U) 24.0% 211.6% % F(U) Prior Year Base Business Operating Leverage 12.9% 89.3% 4.0% Changes in VM & OH costs - 86.3% 4.5% Total 12
Slide 21: Construction Products Key Points
Construction Products Key Points • Total segment base revenue growth comes from both North American and international locales • North America Q2 ’10 base revenues: +17.2% vs. Q2 ‘09 – Q2 ’10 residential base revenues: +14.2% vs. Q2 ’09; Q2 new housing starts at 600,000 units – Q2 ’10 renovation base
Slide 22: Polymers and Fluids Quarterly Analysis
Polymers and Fluids Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 287.7 31.1 10.8% 2010 Q2 353.2 57.8 16.4% $ F(U) 65.5 26.7 5.6% % F(U) 22.8% 85.7% % F(U) Prior Year Base Business Operating Leverage 15.6% 60.7% 4.2% Changes in VM & OH costs - -0.3% - Total 15.6% 6
Slide 23: Polymers and Fluids Key Points
Polymers and Fluids Key Points • Total Q2 ’10 segment base revenues helped by expanding industrial production and MRO surge • Q2 ’10 base revenues for worldwide polymers: +16.1% vs. Q2 ‘09 – International base revenues grew 17.5% in Q2 ’10; North America base revenues increased 11.6% in Q2 ’10 • Q2
Slide 24: Decorative Surfaces Quarterly Analysis
Decorative Surfaces Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 257.3 34.0 13.2% 2010 Q2 264.0 31.9 12.1% $ F(U) 6.7 (2.1) -1.1% % F(U) 2.6% -6.2% % F(U) Prior Year Base Business Operating Leverage 1.5% 5.0% 0.4% Changes in VM & OH costs - -18.7% -2.4% Total 1.5%
Slide 25: Decorative Surfaces Key Points
Decorative Surfaces Key Points • Total Q2 ’10 segment base revenues: +1.5% vs. Q2 ’09 • North America laminate Q2 ’10 base revenues: +4.1% vs. Q2 ’09 due to Wilsonart brand strength and resiliency as well as less negative commercial construction environment • International Q2 ’10 base revenues: -0.5
Slide 26: All Other Quarterly Analysis
All Other Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q2 676.6 90.7 13.4% 2010 Q2 824.8 157.1 19.0% $ F(U) 148.2 66.4 5.6% % F(U) 21.9% 73.2% % F(U) Prior Year Base Business Operating Leverage 14.2% 49.4% 4.1% Changes in VM & OH costs - 4.0% 0.5% Total 14.2% 53.4% 4
Slide 27: All Other Key Points
All Other Key Points • Total Q2 ’10 segment base revenues: +14.2% vs. Q2 ’09 • Q2 ’10 worldwide test and measurement base revenues: +10.4% vs. Q2 ’09; first positive base revenue comparison since Q4 ’08 • Q2 ’10 worldwide consumer packaging base revenues: +7.6% vs. Q2 ’09 due to recovery in graphics
Slide 28: 2010 Forecast
ITW 2010 Forecast Mid Low High Point 3rd Quarter 2010 Total Revenues 9% 13% 11% Diluted Income per Share - Continuing $0.72 $0.84 $0.78 % F(U) 3rd Quarter 2009 20% 40% 30% Full Year 2010 Total Revenues 11% 13% 12% Diluted Income per Share - Continuing $2.82 $3.08 $2.95 % F(U) 2009 46% 60% 53% 28
Slide 29: 2010 Forecast Key Assumptions
ITW 2010 Forecast Key Assumptions • Exchange rates hold at current levels • Acquired revenues in the $500 to $700 million range for the year • Restructuring costs of $50 to $70 million for the full year • Tax rate range of 30.25% to 30.75% for the 3rd quarter and a range of 31.25% to 31.75% for the
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Second Quarter 2010 30