Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2015 Earnings Presentation
21 slides from Illinois Tool Works's earnings presentation, Jan 27, 2016
Slide 1: Fourth Quarter 2015 Conference Call
Fourth Quarter 2015 Conference Call E. Scott Santi, Chairman & CEO Michael M. Larsen, Senior Vice President & CFO Aaron H. Hoffman, Vice President, Investor Relations January 27, 2016
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 the expected impact of product line simplification activities, futu
Slide 3: 2015 Highlights
2015 Highlights ● 2015 financial results driven by solid execution of ITW’s Enterprise Strategy – $5.13 EPS +10%, record 21.4% operating margin +150 bps, record 20.4% ROIC* +140 bps ● Invested ~$560 million in growth and productivity ● 110 basis points of margin improvement from “self-help” Enterpri
Slide 4: Q4 2015 Financial Summary
Q4 2015 Financial Summary Q4 2015 Actuals Highlights EPS +11% ● $1.23 EPS +4%; +11% excluding $(0.08) of currency impact ex. currency $1.23 ● Q4 record operating margin of 20.7% as Enterprise Initiatives EPS $1.18 contribute 110 basis points $3.5B $3.3B ● Organic revenue (0.6)% includes expected (1)
Slide 5: Q4 2015 Organic Revenue Growth
Q4 2015 Organic Revenue Growth Growth by Geography Highlights Organic revenue down 0.6%* ● North America (1.6)% – Consumer facing +2.0% 1.9% – Industrial facing (5.6)% … challenging year-over-year 0.6% comparisons (e.g. Welding +10% in Q4’14) North 0.2% America Inter- EMEA Asia national Pacific ● In
Slide 6: Q4 2015 Operating Margin
Q4 2015 Operating Margin Operating Margin Key Drivers 20.7% 19.6% Q4 2015 Enterprise Initiatives +110 bps Q4‘14 Q4‘15 OM% V bps Price/Cost +30 Automotive OEM 22.0% (30) bps Volume (20) T&M/Electronics 18.1% +300 Food Equipment 23.9% +220 Other (10) Polymers & Fluids 18.2% +70 Margin Expansion +110 b
Slide 7: Segment Results
Segment Results ($’s in millions) Full Year 2015 Automotive OEM Organic +5% Operating Margin (30) bps Total (1)% OM% vs. ‘14 vs. ’12 $620 $615 22.3% Automotive OEM 24.2% +100 bps +480 bps 22.0% T&M and Electronics 16.3 +90 +140 Q4‘14 Q4‘15 Q4‘14 Q4‘15 Food Equipment 23.7 +290 +660 Total Revenue Oper
Slide 8: Q4 2015 Segment Results
Q4 2015 Segment Results ($’s in millions) Test & Measurement/Electronics Food Equipment Organic (3)% Organic +2% +300 bps +220 bps Total (8)% Total (4)% 18.1% $541 23.9% $500 $554 $532 15.1% 21.7% Q4‘14 Q4‘15 Q4‘14 Q4‘15 Q4‘14 Q4‘15 Q4‘14 Q4‘15 Total Revenue Operating Margin Total Revenue Operating
Slide 9: Q4 2015 Segment Results
Q4 2015 Segment Results ($’s in millions) Polymers & Fluids Welding Organic (3)% Organic (11)% +70 bps (290) bps Total (11)% Total (14)% $452 18.2% $458 25.4% 17.5% $395 $402 22.5% Q4‘14 Q4‘15 Q4‘14 Q4‘15 Q4‘14 Q4‘15 Q4‘14 Q4‘15 Total Revenue Operating Margin Total Revenue Operating Margin Highlight
Slide 10: Q4 2015 Segment Results
Q4 2015 Segment Results ($’s in millions) Construction Products Specialty Products Organic +3% Organic flat +420 bps +400 bps Total (6)% Total (5)% 19.9% 23.0% $482 19.0% $402 15.7% $458 $378 Q4‘14 Q4’15 Q4‘14 Q4‘15 Q4‘14 Q4‘15 Q4‘14 Q4‘15 Total Revenue Operating Margin Total Revenue Operating Margi
Slide 11: ITW's Diversified End Market Exposure
ITW’s Diversified End Market Exposure % of Revenues Q4 vs. PY Q4 vs. Q3* FY ’15 vs. PY Consumer Facing ~60% +3% flat +3% Industrial Facing ~40% (6)% +4% (5)% Total Company (0.6)% +1% (0.4)% *Adjusted for normal seasonality. 11
Slide 12: 2015 Financial Summary
2015 Financial Summary Full Year 2015 Actuals Highlights ● $5.13 EPS +10%; +19% excluding $(0.41) of currency impact EPS +19% ex. currency ● Full-year record operating margin of 21.4% as Enterprise $5.13 EPS $4.67 Initiatives contribute 110 bps ● Organic revenue (0.4)% … (1) percentage-point from PL
Slide 13: Enterprise Strategy Progress – End of Year 3
Enterprise Strategy Progress – End of Year 3 Operating Margin After-tax ROIC** +550 bps +590 bps 21.4% 20.4% 15.9% 14.5% 2012* 2015 2012 2015 Earnings per Share Organic Growth 17% CAGR % OF TOTAL REVENUE Ready to Grow and Growing +6% 45% $5.13 Ready to Grow, Not Growing (5)% $3.21 15% 40% Preparing
Slide 14: Reaffirming 2016 Financial Guidance
Reaffirming 2016 Financial Guidance 2016 Guidance EPS +10% ● 1 to 3% organic growth in-line with current demand levels ex. currency ● 100 bps of operating margin improvement from Enterprise $5.35 - $5.55 Initiatives, independent of volume EPS $5.13 ● 10% EPS growth at mid-point excluding $(0.20) of
Slide 15: Capital Allocation Update
Capital Allocation Update 1 Announced ~$450 million bolt-on acquisition, ~70% funded with non-U.S. cash; expect acquisition to generate returns on invested capital of 16 to 20% by year 7 2 Tax-efficiently accessed $1.2 billion of non-U.S. cash and increased 2016 share repurchase expectation by $1 bi
Slide 16: ITW to Acquire Engineered Fasteners and Components from ZF TRW
ITW to Acquire Engineered Fasteners and Components from ZF TRW
Slide 17: Acquisition of Engineered Fasteners & Components (EF&C) from ZF TRW
Acquisition of Engineered Fasteners & Components (EF&C) from ZF TRW ITW Automotive OEM segment: – Highly focused niche supplier of value-added solutions to automotive OEM’s/tier suppliers – $2.5 billion revenues in 2015; 8% organic growth CAGR since 2012 – Attractive long-term growth fundamentals wi
Slide 18: Acquisition of EF&C: Highly complementary addition to Automotive OEM
Acquisition of Engineered Fasteners & Components (EF&C) Highly complementary addition to ITW’s Automotive OEM segment: – Leading global supplier of engineered fastening systems and interior technical components – Headquartered in Germany; 13 manufacturing facilities and 3,500 employees globally – Re
Slide 19: Acquisition of Engineered Fasteners & Components (EF&C)
Acquisition of Engineered Fasteners & Components (EF&C) Broadens our ability to serve global and regional automotive OEM/tier customers and expands our long-term growth potential – Adds several strategic product platforms – Demonstrated innovation capabilities (500+ active patents) – Strategically l
Slide 20: Acquisition of Engineered Fasteners & Components (EF&C)
Acquisition of Engineered Fasteners & Components (EF&C) Transaction overview: – Purchase price: $450 million – Slightly accretive to EPS in first twelve months (including non-cash acquisition accounting related costs) – Expect to generate returns on invested capital of 16 - 20% by year 7 – ~70% of p
Slide 21: Q&A
WTA/ Q&A