Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2007 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Oct 17, 2007
Slide 1: ITW Conference Call Third Quarter 2007
Exhibit 99.2 ITW Conference Call Third Quarter 2007
Slide 2: Agenda
ITW Agenda 1. Introduction…………………….. John Brooklier/David Speer 2. Financial Overview…………….. Ron Kropp 3. Manufacturing Segments….…. John Brooklier 4. Forecast 2007……….…….….… Ron Kropp 5. Q & A………………......………… John Brooklier/Ron Kropp/David Speer
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 end market conditions, base revenue growth, earnings growth, operating income, tax
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-1278 No pass code necessary Telephone replay available through midnight of October 31, 2007 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2006 2007 F(U) Last Year Q3 Q3 Amount % Operating Revenues 3,538.0 4,093.8 555.8 15.7% Operating Income 626.9 696.3 69.4 11.1% % of Revenues 17.7% 17.0% -0.7% Net Income Income Amount 446.1 491.1 45.0 10.1% Income Per Share-Diluted 0.78 0.89 0.11 14.1% Average Invested Capit
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage 2.2% 5.1% 0.5% Nonvolume-related - 0.6% 0.1% Total 2.2% 5.7% 0.6% Acquisitions 11.7% 2.7% -1.5% Divestitures -1.4% -1.1% - Translation 3.8% 3.4% - I
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2006 2007 F(U) Last Year Q3 Q3 Amount % Operating Income 626.9 696.3 69.4 11.1% Interest Expense (20.8) (25.8) (5.0) Other Income 35.8 19.0 (16.8) Net Income-P/T 641.9 689.5 47.6 7.4% Income Taxes 195.8 198.4 (2.6) % to Pre Tax Income 30.5% 28.8% 1.7% Net Income-AT 446.1 49
Slide 8: Invested Capital
ITW Invested Capital 9/30/06 6/30/07 9/30/07 Trade Receivables 2,369.7 2,882.7 2,842.4 Days Sales Outstanding 60.3 62.4 62.5 Inventories 1,444.6 1,612.4 1,607.8 Months on Hand 1.9 1.8 1.8 Prepaids and Other Current Assets 462.4 463.8 431.9 Accounts Payable & Accrued Expenses (1,725.5) (1,998.5) (2,0
Slide 9: Debt & Equity
ITW Debt & Equity 9/30/06 6/30/07 9/30/07 Total Capital Short Term Debt 524.6 528.1 101.4 Long Term Debt 964.3 956.6 1,573.1 Total Debt 1,488.9 1,484.7 1,674.5 Stockholders' Equity 8,711.2 9,388.4 9,386.5 Total Capital 10,200.1 10,873.1 11,061.0 Less: Cash (617.9) (481.5) (602.1) Net Debt & Equity 9
Slide 10: Eurobonds
ITW Eurobonds • Bonds issued October 1 by ITW Finance Europe S.A. – Principal of €750 million – 7-year term – Fixed coupon rate of 5.25% – Listed on Luxembourg exchange • Proceeds distributed back to U.S. – Outstanding commercial paper refinanced ($616 million) – To be used for general corporate pur
Slide 11: Cash Flow
ITW Cash Flow 2006 2007 Q3 Q3 Net Income 446.1 491.1 Adjust for Non-Cash Items 137.1 152.5 Changes in Operating Assets & Liabilities (13.6) 92.8 Net Cash From Operating Activities 569.6 736.4 Additions to Plant & Equipment (77.8) (80.3) Free Operating Cash Flow 491.8 656.1 Stock Repurchase (248.0) (
Slide 12: Return on Average Invested Capital
ITW Return on Average Invested Capital 2006 2007 F(U) Q3 Q3 Prior Yr. Operating Income after Taxes 435.7 496.0 60.3 Operating Margins 12.3% 12.1% -0.2% Average Invested Capital 9,384.4 10,425.3 (1,040.9) Capital Turnover 1.51 1.57 0.06 Return on Average Invested Capital 18.6% 19.0% 0.4% 2006 2007 F(
Slide 13: Acquisitions
ITW Acquisitions 2006 2007 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Annual Revenues Acquired 353 154 388 820 399 213 218 Purchase Price Cash Paid 199 82 447 650 264 215 229 Stock Issued 163 - - - - - - Total 362 82 447 650 264 215 229 Number of Acquisitions North America Engineered Products 2 4 5 4 2 3 2 Specialty Syst
Slide 14: Key Economic Data
Key Economic Data • Stronger fundamentals in Europe EuroZone industrial production: 4.0% in August ’07 vs. 2.3% in May ’07 EuroZone Purchasing Managers Index: 53.2% in September ’07 vs. 55.6% in June ’07 • Weaker macro data for North America US Industrial Production (ex. Tech.): 0.7% in September ’0
Slide 15: Engineered Products - North America
ITW Engineered Products - North America 2006 2007 F(U) Last Year Q3 Q3 Amount % Operating Revenues 1,017.3 1,041.2 23.9 2.4% Operating Income 178.9 173.1 (5.8) -3.2% Operating Margins 17.6% 16.6% -1.0%
Slide 16: Engineered Products - North America Quarterly Analysis
Engineered Products - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage -1.7% -4.0% -0.4% Nonvolume-related - -1.0% -0.2% Total -1.7% -5.0% -0.6% Acquisitions 4.5% 2.2% -0.4% Divestitures -0.8% -0.8% - Translatio
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • ITW’s Automotive base revenues: +2% for Q3 ’07 vs. -4% for Q2 ’07 vs. -7% for Q1 ’07 • Detroit 3 build rates: +1% for Q3 ’07 vs. -6% for Q2 ’07 vs. -12% for Q1 ’07 – GM: -3% for Q3 ’07 – Ford: +2% for Q3 ’07 – Chrysler: +11% for Q3 ’07 • New domestic
Slide 18: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction base revenues: -5% for Q3 ’07 vs. -5% for Q2 ’07 vs. -10% for Q1 ’07 • ITW construction (tools/fasteners/trusses) base revenues: -8% for Q3 ’07 vs. -9% for Q2 ’07 vs. -12% for Q1 ’07 - new housing: -19% in Q3 ’07 - renovation: -3% i
Slide 19: Engineered Products - International
ITW Engineered Products - International 2006 2007 F(U) Last Year Q3 Q3 Amount % Operating Revenues 720.4 954.6 234.2 32.5% Operating Income 109.6 140.6 31.0 28.3% Operating Margins 15.2% 14.7% -0.5%
Slide 20: Engineered Products - International Quarterly Analysis
Engineered Products - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 6.7% 17.2% 1.5% Nonvolume-related - -2.4% -0.3% Total 6.7% 14.8% 1.2% Acquisitions 16.9% 4.2% -1.7% Divestitures -0.2% -0.2% - Translation 9
Slide 21: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +8% in Q3 ’07 – Europe: +9% (growth in many countries: Germany and Sweden) – Asia-Pacific: +6% (commercial/retail strength in Australia/New Zealand) – Wilsonart Intl.: +9% (strength in Germany and China) • Automotive base r
Slide 22: Specialty Systems - North America
ITW Specialty Systems - North America 2006 2007 F(U) Last Year Q3 Q3 Amount % Operating Revenues 1,150.2 1,271.5 121.3 10.5% Operating Income 229.6 246.3 16.7 7.3% Operating Margins 20.0% 19.4% -0.6%
Slide 23: Specialty Systems - North America Quarterly Analysis
Specialty Systems - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 1.9% 3.9% 0.4% Nonvolume-related - 3.4% 0.7% Total 1.9% 7.3% 1.1% Acquisitions 9.8% 0.2% -1.8% Divestitures -1.5% -0.5% 0.2% Translation 0.4%
Slide 24: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Segment base revenues were up 1.9% in Q3 ’07 as U.S. industrial production rate grew less than 1.0% in Q3 ’07 – Food Equipment base revenues: 9% growth in Q3 ’07 as restaurant/institutional/service segments of business prosper; YTD growth: 6+% – Welding
Slide 25: Specialty Systems - International
ITW Specialty Systems - International 2006 2007 F(U) Last Year Q3 Q3 Amount % Operating Revenues 750.0 947.0 197.0 26.3% Operating Income 108.8 136.3 27.5 25.3% Operating Margins 14.5% 14.4% -0.1%
Slide 26: Specialty Systems - International Quarterly Analysis
Specialty Systems - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 3.6% 9.6% 0.9% Nonvolume-related - 0.9% 0.1% Total 3.6% 10.5% 1.0% Acquisitions 18.0% 7.3% -1.5% Divestitures -3.0% -3.5% -0.1% Translation 7.
Slide 27: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Strong economic/end market fundamentals serve as backdrop for business units in segment – Food Equipment: base revenues +14% in Q3 ’07; growth in Europe (Germany, UK, and France) – Welding: base revenue +6% in Q3 ’07 due to demand from energy/shipbuildi
Slide 28: 2007 Forecast
ITW 2007 Forecast Mid Low High Point 4th Quarter Base Revenues 2.1% 4.1% 3.1% Income Per Share-Diluted $0.86 $0.90 $0.88 % F(U) 2006 12% 17% 14% Full Year Base Revenues 1.9% 2.5% 2.2% Income Per Share-Diluted $3.36 $3.40 $3.38 % F(U) 2006 12% 13% 12%
Slide 29: 2007 Forecast Key Assumptions
ITW 2007 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $1.0 billion to $1.2 billion range. • Share repurchases of $1.5 billion to $1.6 billion for the year. • Restructuring cost of $35 to $40 million. • No further impairment of goodwill/intangibles. • N
Slide 30: Conference Call Q & A
ITW Conference Call Q&A Third Quarter 2007