Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2012 Earnings Presentation
31 slides from Illinois Tool Works's earnings presentation, Jan 29, 2013
Slide 1: ITW Conference Call Fourth Quarter 2012
ITW Conference Call Fourth Quarter 2012 January 29, 2013 SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR. 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: 888-393-9645; No pass code necessary • Telephone replay available through midnight of February 12, 2013 • Webcast / PowerPoint replay available at www.itw.com • Supplemental financial and investor information will be available on the ITW website under the “I
Slide 4: Enterprise Strategy: 2012 – 2017
Enterprise Strategy: 2012 – 2017 ITW’s Unique Differentiated Core Capabilities Performance Increasingly Challenging 80/20 Business External Environment Solid Growth Model Key Enterprise Initiatives • Portfolio Management Sustainable Strong Differentiation • Business Structure Returns Simplification
Slide 5: Enterprise Strategy: 2012 – 2017 targets
Enterprise Strategy: 2012 – 2017 • Portfolio mix and Organic growth: larger-scale Solid Growth businesses 200 bps • Focused above global IP acquisitions by 2017 EPS Growth • Highly disciplined ROIC: Target : capital allocation Strong Returns strategy 20%+ 12%+ • Key enterprise initiatives by 2017 CA
Slide 6: Q4 2012 Highlights
Q4 2012 Highlights $ in Millions, except per share amounts Q4 2012 Q4 2011 F/(U) • Total operating revenue growth 2.3% excluding Operating Revenues $ 4,221 $ 4,320 -2.3% impact of divestitures • Q4 EPS excluding discrete Operating Income 609 647 -5.9% items was 89 cents, 1.1% growth vs. last year %
Slide 7: Q4 2012 Results vs. Forecast
Q4 2012 Results vs. Forecast Q4 EPS 2012 Actual Results (GAAP) $2.10 Decorative Surfaces net gain on divestiture $1.37 Decorative Surfaces Q4 equity interest ($0.04) Q4 discrete corporate items ($0.04) Q4 discrete tax items ($0.08) 2012 Results (Non-GAAP) * $0.89 Original forecast $0.86 - $0.94 * Se
Slide 8: Q4 2012 vs. Q4 2011 Operating Results
Q4 2012 vs. Q4 2011 Operating Results F(U) to Prior Year • North America (primarily US) organic Total Operating Operating revenue growth of 1.6%; Revenue Income Margin International organic Organic (Base) Business revenue slightly down Operating Leverage 0.6% 1.8% 20 bps • Base operating margins imp
Slide 9: Full Year 2012 Highlights
Full Year 2012 Highlights $ in Millions, except per share amounts FY 2012 FY 2011 F/(U) • Total operating revenue growth of 2.2% excluding Operating Revenues $ 17,924 $17,787 0.8% impact of divestitures • 2012 EPS (excluding Operating Income 2,847 2,731 4.2% discrete items impact in 2012 and 2011):
Slide 10: Full Year 2012 vs. 2011 Operating Results
Full Year 2012 vs. 2011 Operating Results F(U) to Prior Year • Total operating revenue growth of 0.8%: 2.2% Total Operating Operating growth excluding impact Revenue Income Margin of divestitures Organic (Base) Business • North America (mainly US) Operating Leverage 1.7% 4.6% 40 bps organic revenue
Slide 11: Working Capital & Cash Flow
Working Capital & Cash Flow Net Trade Receivables & Inventory & MOH Full Year Avg. Invested DSO Capital & ROIC * $1,716 $13,160 $12,621 $2,819 $2,742 $1,585 15.4% 15.4% 58.7 1.8 1.7 58.4 Q4 2011 Q4 2012 Q4 2011 Q4 2012 FY 2011 FY 2012 Trade Receivables DSO Inventory MOH Avg. Invested Capital ROIC *
Slide 12: 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 $865M FY • $604M of share repurchases in Q4; $2.0B FY 3. External Investments • Approximately $500M annualized revenue
Slide 13: Revenue Growth By Geography Full Year 2012 vs. 2011
Revenue Growth By Geography Full Year 2012 vs. 2011 ITW Worldwide International • North America (mainly 16% US) drives organic growth • Europe continues to be 6% weak 4% 4% • Asia Pacific region 2% 2% 1% 1% reflects stronger 0.2% performance across India; -0.1% China down slightly -1% -2% •South Ame
Slide 14: Q4 2012 Segment Results
Q4 2012 Segment Results Q4 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 $ 873 $ 132 15.1% 4.8% 4.2% 2.5% -30 bps -80 bps Power Systems & 737 12
Slide 15: Q4 2012 Segment Commentary
Q4 2012 Segment Commentary Organic Revenue Y/O/Y % Changes / Key Business Trends ~ Auto OEM WW: 11% · NA: 12%; International: 10% (Europe: 2%, Asia Pacific: 28%) Transportation · Auto builds: NA: 10%, Europe: -7% ~ Auto Aftermarket WW: -5%, loss of major product line with key customer ~ Truck Remanu
Slide 16: 2013 Forecast
2013 Forecast SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR. 100 YEARS STRONG
Slide 17: Segment Structure
Segment Structure Current 2012 New 2013 Automotive aftermarket moved to Polymers & Fluids. Transportation Automotive OEM Truck remanufacture & service moved to Specialty Products Power Systems & Welding becomes independent segment. Electronics Welding Electronics combined with Test & Measurement to
Slide 18: Q1 and Full Year 2012 Proforma
Q1 and Full Year 2012 Proforma $ in Millions, except per share amounts Q1 2012 Full Year 2012 Total Operating Total Operating Revenue Income EPS Revenue Income EPS 2012 Actual Results (GAAP) $4,547 $705 $0.97 $17,924 $2,847 $5.27 Decorative Surfaces net gain - - - - - 1.34 Decorative Surfaces equity
Slide 19: 2013 Guidance
2013 Guidance Q1 Forecast FY Forecast Total Revenue * (2%) - 0% 3% - 5% Organic Revenue Growth 1% - 3% Diluted EPS from Continuing Operations $0.91 - $0.99 $4.13 - $4.37 % F/(U) to 2012 Diluted EPS from 0% - 9% 10% - 16% Continuing Operations * Operating Margins 16.5% - 16.9% Tax Rate 28.5% - 29.5%
Slide 20: Q&A
Q&A 100 YEARS STRONG SSOLID OLID G GROWTH ROWTH.. S STRONG TRONG R RETURNS ETURNS.. B BEST EST--IN IN-C -CLASS LASS O OPERATOR PERATOR.. 20
Slide 21: Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables
Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables 100 YEARS STRONG SSOLID OLID G GROWTH ROWTH.. S STRONG TRONG R RETURNS ETURNS.. B BEST EST--IN IN-C -CLASS LASS O OPERATOR PERATOR.. 21
Slide 22: Appendix GAAP to Non-GAAP Reconciliations
Appendix GAAP to Non-GAAP Reconciliations $ in Millions, except per share amounts 2012 2011 Income from Income from Q4 Total Operating Operating Continuing Tax Total Operating Operating Continuing Tax Revenue Income Margin Operations EPS Rate Revenue Income Margin Operations EPS Rate Actual Results
Slide 23: Appendix Full Year GAAP to Proforma Reconciliation
Appendix Full Year GAAP to Proforma Reconciliation $ in Millions, except per share amounts 2012 2011 Income from Income from Full Year Total Operating Operating Continuing Tax Total Operating Operating Continuing Tax Revenue Income Margin Operations EPS Rate Revenue Income Margin Operations EPS Rate
Slide 24: Appendix GAAP to Proforma Reconciliations by Quarter
Appendix GAAP to Proforma Reconciliations by Quarter $ in Millions, except per share amounts 2012 2011 Income from Income from Q1 Total Operating Operating Continuing Total Operating Operating Continuing Revenue Income Margin Operations EPS Revenue Income Margin Operations EPS Actual Results (GAAP)
Slide 25: 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 equivalents and outstand
Slide 26: 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 27: 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, gain on sale of interest in
Slide 28: Appendix Segment Results Q4 2012 vs. Q4 2011
Appendix Segment Results Q4 2012 vs. Q4 2011 Power Industrial Food Polymers & Total Revenue Transportation Systems & Packaging Equipment Construction Fluids All Other Electronics Total Organic (Base) 4.2% -1.2% -0.7% -0.8% 1.1% -7.1% 3.3% Acquisitions & Divestitures 1.4% 0.3% 0.6% - -0.1% 6.7% 4.5%
Slide 29: Appendix FY 2012 Segment Results
Appendix FY 2012 Segment Results 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 $ 3,550 $ 560 15.8% 3.1% 3.5% 3.8% 10 bps 50 bps Power Systems & 3,151
Slide 30: Appendix Segment Results Full Year 2012 vs. 2011
Appendix Segment Results Full Year 2012 vs. 2011 Power Industrial Food Polymers & Total Revenue Transportation Systems & Packaging Equipment Construction Fluids All Other Electronics Total Organic (Base) 3.5% 3.8% 0.4% 0.6% -0.5% -3.1% 2.9% Acquisitions & Divestitures 2.4% 3.0% 1.4% - 0.2% 6.1% 6.5%
Slide 31: Appendix New 2013 External Segment Structure
Appendix New 2013 External Segment Structure 2012 Revenues by Segment Test & Industrial Measurement Automotive Polymers & Food Construction Specialty Welding Packaging and OEM Fluids Equipment Products Products Electronics 14% 13% 13% 13% 11% 11% 11% 14% of total of total of total of total of total