Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — ISI Industrial Conference 2012
21 slides from Illinois Tool Works's conference presentation, Mar 6, 2012
Slide 1: Profitable Growth, Strong Returns
Profitable Growth, Strong Returns ISI Industrial Conference March 6, 2012 100 YEARS STRONG
Slide 2: ITW Forward-Looking Statements
ITW Forward - Looking Statements The remarks made and information presented by ITW at this meeting contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding operating income, operating margins, to
Slide 3: Today's Topics
Today’s Topics ITW Operating Structure 2011 Review / 2012 Forecast Profitable Growth with Strong Returns Q&A PROFITABLE GROWTH, STRONG RETURNS ISI CONFERENCE – MARCH 6, 2012 3
Slide 4: ITW Operating Structure
ITW Operating Structure Key Segments Long-term operational strategy and capital allocation driven by CEO, two vice chairmen and eight executive vice presidents Power Transportation Industrial Food Systems & Packaging Equipment Electronics All Other/ Construction Polymers & Decorative Test & Products
Slide 5: 2011 Full Year Highlights
2011 Full Year Highlights Generated record total revenues of $17.8 billion o Organic revenues grew 7.5% Delivered record $2.0 billion of income from continuing operations o 41% diluted EPS growth Produced total company operating margins of 15.4%: +80 basis points Delivered ROIC of 16.8% (aft
Slide 6: ITW Financial Forecast
ITW Financial Forecast Full Year 2012(F) vs. 2011 Total Revenues: 5% to 8% growth Organic Revenues: 3% to 5% growth $4.02 to $4.26 Diluted EPS: midpoint of $4.14 = 10% EPS growth* Free Operating Cash Flow: $1.9 to $2.1 billion * Excludes the 2011 impact of the Australian tax case. PROFITABLE GROWTH,
Slide 7: Driving Profitable Growth
Driving Profitable Growth Organic Growth – by Segment 2010 2011 2012(F) Segment Organic Organic Organic Growth Growth Growth Transportation 18% 10% 4% to 6% Power Systems & Electronics 19% 13% 5% to 7% Industrial Packaging 14% 8% 2% to 4% Food Equipment flat 3% 3% to 5% Construction Products 4% 3% 3
Slide 8: Profitable Growth with Strong Returns
Profitable Growth with Strong Returns Profitable growth with strong returns generate consistent economic profit (returns in excess of cost of capital) and free operating cash flow Three drivers of ITW’s economic profit and long-term shareholder value: o Growth o Margin Improvement o Returns on i
Slide 9: Strong Cash Flow Generation
Strong Cash Flow Generation $ in millions Net Income vs. Free Operating Cash Flow 2,500 2001 – 2011 Average FOCF % of Net Income: 116% 2,000 Strong generator of cash flow – even in recessionary periods 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Net income FOCF Source: 2
Slide 10: Capital Structure Overview
Capital Structure Overview Strong balance sheet o Debt/capital = 28.5% at Dec 31, 2011 o Debt/EBITDA = 1.2x at Dec 31, 2011* o Issued new long-term debt of $1.0 billion in August 2011 at attractive rates o Credit line of $2.5 billion backstops commercial paper program o Cash of $1.2 billion at Dec
Slide 11: Capital Allocation Strategy
Capital Allocation Strategy Priorities 1. Organic Investments • Investments that enhance internal growth and margin improvement opportunities, e.g.: • Expansion into growing emerging markets • Capital expenditures for growing businesses • R&D investments to develop new innovative products • Restruct
Slide 12: Driving Profitable Growth
Driving Profitable Growth Comparative Revenues by Geography North America EMEA 48% 66% Asia Pacific/Other 33% 26% 19% 8% 2001 2011 PROFITABLE GROWTH, STRONG RETURNS ISI CONFERENCE – MARCH 6, 2012 12
Slide 13: Driving Profitable Growth
Driving Profitable Growth Emerging Markets: 21% of 2011 Revenues 1% 4% 9% 12% 95% 79% 2001 2011 BRIC (Brazil, Russia, India, China) Other Emerging Markets * (Asia, Latin America, and Eastern Europe) Rest of World * Other Emerging Markets excludes BRIC, Japan and Australia/NZ PROFITABLE GROWTH, STRON
Slide 14: Acquisitions
Acquisitions Executing value enhancing acquisitions increases shareholder value o Focused on platforms/segments which have higher long-term growth potential o Significant operating margin performance improvement at acquired companies via 80/20 o Revenue growth and margin improvement at acquired com
Slide 15: Acquisition Operating Margins
Acquisition Operating Margins 1st Year of Acquisition 18.0% 16.2% 16.0% Reported margins distort acquisition performance because of amortization and other non-cash 14.0% purchase accounting items 12.0% 11.2% 10.0% 10.0% 8.1% 8.0% 5.0% 6.9% 6.0% 6.4% 4.0% 3.7% 2.0% 3.1% -0.1% 0.0% -2.0% 2007 2008 200
Slide 16: Operating Margins
Operating Margins Continued focus on achieving high operating margins 80/20 simplification process focuses efforts and investment on most profitable businesses, and results in: o Higher growth and more profitable 80/20 products and customers o Lower costs by eliminating activities related to 20/80
Slide 17: Operating Margins: ITW vs. Peer Group
Operating Margins: ITW vs. Peer Group Operating margins have consistently been above peer group 18% 16% 14% 12% 10% 8% US-Based Versus ITW Diversified Peer Industrials Group 6% ‘07 – ‘11 14.2% 10.7% +3.5% Average ITW Peer Group 4% 2007 2008 2009 2010 2011 1) Source: 2011 ITW Annual Report; Peer grou
Slide 18: Historical ROIC: ITW vs. Peer Group
Historical ROIC: ITW vs. Peer Group Consistently generate higher returns than peer group 18% 16% 14% US-Based Versus 12% ITW Diversified Peer Industrials Group 5-yr 15.4% 14.1% +1.3% ITW Peer Group Average 10% 2007 2008 2009 2010 2011 1) Source: 2011 and 2010 ITW Annual Report; 2010 and prior number
Slide 19: Profitable Growth with Strong Returns
Profitable Growth with Strong Returns Strong cash flow generation and balance sheet capacity provide ample opportunity for both investments and returning capital to shareholders We target investments that will generate both good growth and strong returns well in excess of our cost of capital over
Slide 20: ITW 25 Year Revenue/Operating Income
ITW 25 Year Revenue/Operating Income Consistent strategy has yielded long-term results $ millions $ millions 3,000 18,000 CAGR Revenue: 12% 16,000 2,500 CAGR Net Income: 14% 14,000 CAGR Shareholder Return: 13% 2,000 Average ROIC: 14% 12,000 10,000 1,500 8,000 1,000 6,000 4,000 500 2,000 - - 1987 198
Slide 21: Q&A
Q&A 100 YEARS STRONG PROFITABLE GROWTH, STRONG RETURNS 21