Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Deutsche Bank Conference 2016
17 slides from Illinois Tool Works's conference presentation, Jun 9, 2016
Slide 1: Differentiated Business Model = Differentiated Performance
Differentiated Business Model = Differentiated Performance Christopher A. O’Herlihy, Vice Chairman Michael M. Larsen, SVP & CFO June 9, 2016
Slide 2: Forward Looking Statement
Forward Looking Statement Safe Harbor Statement This presentation 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 and enter
Slide 3: ITW is a "Business Model Centric" Company
ITW is a “Business Model Centric” Company • A set of highly powerful and proprietary business practices and capabilities • The core source of our competitive advantage … drives our ability to win with customers and deliver long-term differentiated returns for our shareholders • ITW’s “secret sauce,”
Slide 4: The ITW Business Model is Composed of Three Elements
The ITW Business Model is Composed of Three Elements • Radically simplify and focus on high value items (the “80”) • Apply to the whole business (not just manufacturing) • Unique to ITW, deeply embedded in the culture and executed in multiple business contexts, extremely difficult to replicate → Bes
Slide 5: ITW's Strategic Focus/Approach is "Business Model Centric"
ITW’s Strategic Focus/Approach is “Business Model Centric” • Vs. Industry or Geography Centric • A key corporate Portfolio Management role is to make thoughtful choices to insure we are only investing and operating in industries that have great raw material for leveraging the ITW Business Model into
Slide 6: ITW's "Business Model Centric" Portfolio Strategy
ITW’s “Business Model Centric” Portfolio Strategy Test & Automotive Food Polymers & Construction Specialty Measurement Welding OEM Equipment Fluids Products Products and Electronics 2015 Operating 24.2% 16.3% 23.7% 19.6% 25.2% 19.9% 23.3% Margin vs. 2012 (bps) +480 +140 +660 +380 (20) +830 +380 *Tes
Slide 7: Enterprise Strategy
Prepare to Accelerate Realign BSS/ Accelerate Organic Portfolio Scale-Up Organic Growth 2013-2016 2013-2014 Growth 2016- 2014-2016 Forward Solid Above- Shift Primary Market Organic Growth Engine to Growth Organic Comprehensive Strategy Review 2011-2012 ENTERPRISE STRATEGY Leverage ITW Business Model
Slide 8: Portfolio Management
Portfolio Management We have aligned our portfolio with our organic growth focus • Exited businesses operating in low-growth commoditized markets • ITW is now focused on seven core segments that each have strong sustainable competitive advantages and favorable long-term growth fundamentals • Our por
Slide 9: Business Structure Simplification/Scale-Up
Business Structure Simplification/Scale-Up We have scaled-up our divisional structure to accelerate organic growth Divisional structure needed sufficient scale to support investments in engineering, marketing, and sales resources necessary to drive accelerated organic growth • 800+ regional to 84 gl
Slide 10: Prepare for Accelerated Organic Growth
Prepare for Accelerated Organic Growth Delivering high-quality growth consistently and sustainably requires a strong foundation of operational and financial performance. • All ITW businesses must demonstrate that they are serving existing customers with excellence and delivering acceptable financial
Slide 11: Accelerate Organic Growth
Accelerate Organic Growth • All “ready to grow” divisions are now executing growth strategies and action plans for all three growth levers in our organic growth framework: – “80” focused selling … sell more to existing customers – Core market expansion … identify and sell to customers that are like
Slide 12: Bolt-on Acquisitions that support our organic growth focus
Bolt-on Acquisitions that support our organic growth focus • In alignment with our Enterprise Strategy and disciplined capital allocation, we will use bolt-on acquisitions selectively to reinforce and further enhance the organic growth potential of our seven core segments. • In January, 2016 ITW ann
Slide 13: ITW's Performance Goals
WTVAY ITW’s Performance Goals
Slide 14: ITW Performance Goals
ITW Performance Goals The focus of ITW’s Enterprise Strategy is to position the Company for solid growth with best-in-class margins and returns 23%+ 20%+ 200+ bps 12-14% Operating margin After-tax ROIC Organic revenue Total shareholder growth above global returns GDP BEYOND 2017 Best-in-class busine
Slide 15: ITW Business Model Delivers 12-14% TSR Beyond 2017
ITW Business Model Delivers 12-14% TSR Beyond 2017 Enterprise Strategy will generate best-in-class financial performance and create sustainable, long-term shareholder value ~5% ~10-12% ~12-14% ORGANIC ~9-10% Total +200 bps +1-2% Earnings Per Shareholder ~35% Operating +~2% INCREMENTAL Income SHARE S
Slide 16: Progress since launch of ITW's Enterprise Strategy
Progress since launch of ITW’s Enterprise Strategy Operating Margin After-tax ROIC Earnings per Share (CAGR) +550 bps +590 bps 21.4% 20.4% 17% 15.9% 12.4% 14.5% 13.9% 4% Peer Group Peer Group Peer Group 2012 2015 Average 2012 2015 Average 2012 – 2015 Average Notes: 2012 Operating Margin as reported
Slide 17: Differentiated Total Shareholder Returns
Differentiated Total Shareholder Returns 1 Year 3 Year 5 Year 0.1% 95.7% 62.8% 56.6% (9.7)% 36.5% Peer Group Peer Group Peer Group Average Average Average 17