Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2012 Earnings Presentation
19 slides from Illinois Tool Works's earnings presentation, Oct 23, 2012
Slide 1: ITW Conference Call Third Quarter 2012
ITW Conference Call Third Quarter 2012 October 23, 2012 PROFITABLE GROWTH, STRONG RETURNS 100 YEARS STRONG
Slide 2: Forward-Looking Statements
Forward-Looking Statements Safe Harbor Statement This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding strategic initiatives and related benefits, operating performance,
Slide 3: Conference Call Playback
Conference Call Playback • Replay number: 888-566-0396; No pass code necessary • Telephone replay available through midnight of November 6, 2012 • Webcast / PowerPoint replay available at www.itw.com • Supplemental financial and investor information will be available on the ITW website under the “In
Slide 4: Key Long-Term Initiatives
Key Long-Term Initiatives • ITW is committed to shareholder value-adding initiatives: business structure simplification, strategic sourcing and portfolio management • These initiatives enable our decentralized management to better leverage ITW’s core competitive advantages globally and enhance our l
Slide 5: Q3 2012 Highlights
Q3 2012 Highlights $ in Millions, except per share amounts Q3 2012 Q3 2011 F/(U) • Total operating revenue decline of 1.7%, as Operating Revenues $ 4,501 $ 4,580 -1.7% organic growth and acquired revenues were more than offset by Operating Income 763 714 6.8% currency impact, primarily weaker Euro %
Slide 6: Q3 2012 vs. Q3 2011 Operating Results
Q3 2012 vs. Q3 2011 Operating Results F(U) to Prior Year • Organic revenue growth: 0.9%, led by US Total Operating Operating Revenue Income Margin • Price / cost margin Organic (Base) Business impact: +80 bps Operating Leverage 0.9% 2.2% 0.2% • Acquisition operating Changes in Variable margins exclu
Slide 7: Working Capital & Cash Flow
Working Capital & Cash Flow Net Trade Receivables & Inventory & MOH Avg. Invested Capital DSO & ROIC * $1,794 $3,062 $2,985 $13,180 $13,260 $1,760 16.3% 61.2 1.8 1.8 58.7 15.4% Q3 2011 Q3 2012 Q3 2011 Q3 2012 Q3 2011 Q3 2012 Trade Receivables DSO Inventory MOH Avg. Invested Capital ROIC * $ In Milli
Slide 8: Capital Structure
Capital Structure Capital Allocation Priorities • Organic investments continue to focus on key growth platforms and emerging market 1. Organic Investments opportunities 2. Dividends $515M YTD • $416M of share repurchases in Q3; $1.4B YTD 3. External Investments • Approximately $400M annualized reven
Slide 9: Portfolio Management Decorative Surfaces Divestiture
Portfolio Management Decorative Surfaces Divestiture • In August, entered into a definitive agreement to divest approximately 51% interest in the Decorative Surfaces segment to certain funds managed by CD&R • ITW will receive cash proceeds of approximately $1.05 billion at closing and will retain ap
Slide 10: Revenue Growth by Geography Q3 2012 vs. Q3 2011
Revenue Growth by Geography Q3 2012 vs. Q3 2011 ITW Worldwide International • North America (US) drives organic growth 20% 4% 4% • Europe continues to be 3% weak 2% 1% • Asia Pacific region 0.4% reflects weak performance across China, partially -1% -1% -1% mitigated by strong India performance -3% -
Slide 11: Q3 2012 Segment Results
Q3 2012 Segment Results Q3 2012 % F(U) vs. prior year $ in Millions Total Operating Operating Total Organic Operating Operating Organic Revenue Income Margin Revenue (Base) Income Margin (Base) Revenue * Op Margin * Transportation $ 858 $ 135 15.7% -2.2% 1.4% -1.8% 0.1% 1.1% Power Systems & 813 179
Slide 12: Q3 2012 Segment Commentary
Q3 2012 Segment Commentary Organic Revenue Y/O/Y % Changes / Key Business Trends ~ Auto OEM WW: 9% ∙ NA: 9%; International: 9% (Europe: 4%, Asia Pacific: 23%) Transportation ∙ Auto builds grew in NA and China but declined in Europe ~ Auto Aftermarket WW: -8%, consumer spending further softened for c
Slide 13: 2012 Guidance
2012 Guidance Full Year (2) Current Q4 Forecast Prior Forecast Forecast(2) Total Revenue (1%) - (4%) 1% - 3% 0% - 1% Diluted EPS from Continuing Operations $0.86 - $0.94 $4.03 - $4.19 $4.06 - $4.14 % F/(U) to 2011 Diluted EPS from (4%) - 4% 7% - 12% 8% - 10% Continuing Operations (1) Tax Rate 28.5%
Slide 14: Q&A
Q&A 100 YEARS STRONG PPROFITABLE ROFITABLE G GROWTH ROWTH,, S STRONG TRONG R RETURNS ETURNS 14
Slide 15: Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables
Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables 100 YEARS STRONG PPROFITABLE ROFITABLE G GROWTH ROWTH,, S STRONG TRONG R RETURNS ETURNS 15
Slide 16: Appendix Return on Average Invested Capital
Appendix Return on Average Invested Capital The Company uses return on average invested capital (“ROIC”) to measure the effectiveness of its operations' use of invested capital to generate profits. Invested capital represents the net assets of the Company, excluding cash and cash equivalents and out
Slide 17: Appendix Free Operating Cash Flow
Appendix Free Operating Cash Flow The Company uses free operating cash flow to measure cash flow generated by operations that is available for dividends, acquisitions, share repurchases and debt repayment. Free operating cash flow represents net cash provided by operating activities less additions t
Slide 18: Appendix Total Debt to EBITDA
Appendix Total Debt to EBITDA The Company uses the ratio of total debt to EBITDA to measure its ability to repay its outstanding debt obligations. The ratio of total debt to EBITDA represents total debt divided by income from continuing operations before interest expense, other income (expense), inc
Slide 19: Appendix Results by Segment Q3 2012 vs. Q3 2011
Appendix Results by Segment Q3 2012 vs. Q3 2011 Power Industrial Food Polymers & Decorative Total Revenue Transportation Systems & Packaging Equipment Construction Fluids Surfaces All Other Electronics Total Organic (Base) 1.4% 4.5% 0.2% 0.3% -2.8% -6.7% -1.7% 4.5% Acquisitions & Divestitures 0.5% 2