Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q2 2006 Earnings Presentation
29 slides from Illinois Tool Works's earnings presentation, Jul 20, 2006
Slide 1: ITW Conference Call Second Quarter 2006
Exhibit 99.2 ITW Conference Call Second Quarter 2006
Slide 2: Agenda
ITW Agenda 1. Introduction…………………….. John Brooklier 2. Financial Overview……………... Ron Kropp 3. Manufacturing Segments……… John Brooklier 4. Forecast 2006………………….… Ron Kropp 5. Q & A………………......……………John Brooklier/Ron Kropp
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: 402-998-0724 No pass code necessary Telephone replay available through midnight of August 3, 2006 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2005 2006 F(U) Last Year Q2 Q2 Amount % Operating Revenues 3,286.1 3,579.5 293.4 8.9% Operating Income 559.9 659.8 99.9 17.8% % of Revenues 17.0% 18.4% 1.4% Net Income Income Amount 373.8 465.9 92.1 24.6% Income Per Share-Diluted 0.64 0.81 0.17 26.6% Average Invested Capital
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage 4.5% 10.7% 1.0% Nonvolume-related - 3.0% 0.5% Total 4.5% 13.7% 1.5% Acquisitions / Divestitures 6.7% 3.3% -0.7% Translation -1.4% -1.1% 0.1% Impairm
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2005 2006 F(U) Last Year Q2 Q2 Amount % Operating Income 559.9 659.8 99.9 17.8% Interest Expense (28.8) (19.0) 9.8 Investment Income 8.5 26.4 17.9 Other Income(Expense) 6.8 (0.7) (7.5) Net Income-P/T 546.4 666.5 120.1 22.0% Income Taxes 172.6 200.6 (28.0) % to Pre Tax Incom
Slide 8: Invested Capital
ITW Invested Capital 6/30/05 3/31/06 6/30/06 Trade Receivables 2,134.2 2,191.7 2,374.2 Days Sales Outstanding 58.3 59.8 59.7 Inventories 1,274.5 1,279.1 1,370.0 Months on Hand 1.8 1.8 1.8 Other Current Assets 299.7 426.8 612.9 Accounts Payable & Accruals (1,583.6) (1,715.1) (1,880.4) Operating Worki
Slide 9: Debt & Equity
ITW Debt & Equity 6/30/05 3/31/06 6/30/06 Total Capital Short Term Debt 696.8 230.8 91.7 Long Term Debt 967.2 959.9 960.2 Total Debt 1,664.0 1,190.7 1,051.9 Stockholders' Equity 7,427.2 8,065.2 8,593.9 Total Capital 9,091.2 9,255.9 9,645.8 Less: Cash (858.7) (454.5) (459.2) Net Debt & Equity 8,232.5
Slide 10: Cash Flow
ITW Cash Flow 2005 2006 Q2 Q2 Net Income 373.8 465.9 Adjust for Non-Cash Items 68.6 127.7 Changes in Operating Assets & Liabilities 55.9 (235.7) Net Cash From Operating Activities 498.3 357.9 Additions to Plant & Equipment (80.7) (76.7) Free Operating Cash Flow 417.6 281.2 Stock Repurchase (383.0) -
Slide 11: Return on Average Invested Capital
ITW Return on Average Invested Capital 2005 2006 F(U) Current Quarter Q2 Q2 Prior Yr. Operating Income after Taxes 383.0 461.2 78.2 Operating Margins 11.7% 12.9% 1.2% Average Invested Capital 8,321.1 8,994.0 (672.9) Capital Turnover 1.58 1.59 0.01 Return on Average Invested Capital 18.4% 20.5% 2.1%
Slide 12: Acquisitions
ITW Acquisitions 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 151 36 105 292 353 154 188 - Purchase Price Cash Paid 188 12 113 314 199 82 165 - Stock Issued - - - - 163 - - - Total 188 12 113 314 362 82 165 - Number of Acquisitions North America Engineered Products 1 1 5 4 2 4 - - Spec
Slide 13: Key Economic Data
Key Economic Data • Gap between stronger North America and weaker International end market activity narrowed in Q2: North America base revenues at 4.4%; International base revenue at 4.3% • June ’06 ISM Index: declined to 53.8% vs. 55.2% in March ’06; June ’06 new order index at 57.9% vs. 58.4% in M
Slide 14: Engineered Products - North America
ITW Engineered Products - North America 2005 2006 F(U) Last Year Q2 Q2 Amount % Operating Revenues 971.7 1,102.2 130.5 13.4% Operating Income 177.0 211.9 34.9 19.8% Operating Margins 18.2% 19.2% 1.0%
Slide 15: 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 1.9% 4.3% 0.4% Nonvolume-related - 5.3% 0.9% Total 1.9% 9.6% 1.3% Acquisitions / Divestitures 11.1% 6.5% -0.9% Translation 0.4% 0.5% - Impai
Slide 16: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: -1% for Q2 ’06 • ITW construction (tools and fasteners) base revenues: -2% for Q2 ’06 - new housing and renovation were slightly negative in Q2 ’06 - commercial: 10% growth in Q2 ’06 • Wilsonart (high pressure laminate): base reven
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: +1% for Q2 ’06 • Big 3 build rates: -1% for Q2 ’06 – GM: Flat – Ford: -1% – Chrysler: -1% – New domestics: +1% • Big 3 inventories: 79 days at 6-30-06 – GM: 73 days – Ford: 79 days – Chrysler: 91 days • New domestics’ inventories:
Slide 18: Engineered Products - International
ITW Engineered Products - International 2005 2006 F(U) Last Year Q2 Q2 Amount % Operating Revenues 711.6 739.2 27.6 3.9% Operating Income 102.1 110.5 8.4 8.2% Operating Margins 14.3% 14.9% 0.6%
Slide 19: Engineered Products - International Quarterly Analysis
Engineered Products - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 4.1% 11.4% 1.0% Nonvolume-related - -2.2% -0.3% Total 4.1% 9.2% 0.7% Acquisitions / Divestitures 3.7% 0.7% -0.4% Translation -3.9% -4.3% -0.
Slide 20: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +5% in Q2 ’06 – Europe: +6% (improvement in wide variety of countries) – Austral-Asia: +8% (commercial/new housing strength in Australia/New Zealand) – Wilsonart Intl.: Flat (growth in Germany neutralized by slowing in Asia
Slide 21: Specialty Systems - North America
ITW Specialty Systems - North America 2005 2006 F(U) Last Year Q2 Q2 Amount % Operating Revenues 1,037.7 1,150.9 113.2 10.9% Operating Income 188.3 230.1 41.8 22.2% Operating Margins 18.1% 20.0% 1.9%
Slide 22: 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 6.8% 15.0% 1.4% Nonvolume-related - 3.2% 0.6% Total 6.8% 18.2% 2.0% Acquisitions / Divestitures 3.5% 2.3% -0.3% Translation 0.6% 0.7% - Impair
Slide 23: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: 21% growth in Q2 ’06 due primarily to demand for replacement products, new product introductions and better pricing metrics • Total Packaging: +4% base revenue growth in Q2 ’06 – Signode packaging: +1% base revenue growth due larg
Slide 24: Specialty Systems - International
ITW Specialty Systems - International 2005 2006 F(U) Last Year Q2 Q2 Amount % Operating Revenues 675.0 728.2 53.2 7.9% Operating Income 92.6 107.3 14.7 15.9% Operating Margins 13.7% 14.7% 1.0%
Slide 25: Specialty Systems - International Quarterly Analysis
Specialty Systems - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 4.6% 13.0% 1.1% Nonvolume-related - 4.4% 0.6% Total 4.6% 17.4% 1.7% Acquisitions / Divestitures 7.2% 2.1% -0.7% Translation -3.9% -4.1% - Impa
Slide 26: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Welding: base revenue +22% in Q2 ’06 due to stronger equipment and consumables sales in Asia and Europe • Total packaging: Flat in Q2 ’06 -Signode industrial packaging declined 1% in Europe and fell 10% in Asia/Pacific • Food Equipment: base revenues +3
Slide 27: 2006 Forecast
ITW 2006 Forecast Mid Low High Point 3rd Quarter Base Revenues 4.0% 6.0% 5.0% Income Per Share-Diluted $0.78 $0.82 $0.80 %F(U) 2005 8% 14% 11% Full Year Base Revenues 4.7% 5.7% 5.2% Income Per Share-Diluted $3.03 $3.11 $3.07 %F(U) 2005 17% 20% 18%
Slide 28: 2006 Forecast Key Assumptions
ITW 2006 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $900 million to $1.1 billion range. • Restructuring cost of $25 to $30 million. • No further impairment of goodwill/intangibles. • Nonoperating investment income of $60 to $70 million, which is lowe
Slide 29: ITW Conference Call Q&A
ITW Conference Call Q&A Second Quarter 2006