Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2013 Earnings Presentation
21 slides from Illinois Tool Works's earnings presentation, Oct 22, 2013
Slide 1: ITW Conference Call Third Quarter 2013
ITW Conference Call Third Quarter 2013 October 22, 2013 SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.
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 and timing of strategic initiatives and related
Slide 3: Conference Call Playback
Conference Call Playback ●Replay number: 866-431-5846; No pass code necessary ●Telephone replay available through midnight of November 5, 2013 ●Webcast / PowerPoint replay available at www.itw.com ●Supplemental financial and investor information will be available on the ITW website under the “Invest
Slide 4: Q3 Overview / Enterprise Initiatives
Q3 Overview / Enterprise Initiatives Q3 Financial Results • Europe has stabilized; Asia Pacific has pockets of growth; North America…“a mixed bag” • Q3 EPS of $0.90, two cents higher than the September 24th midpoint guidance Enterprise Initiatives • 19% operating margin in Q3, +110 bps improvement o
Slide 5: Q3 2013 EPS Guidance vs. Actual
Q3 2013 EPS Guidance vs. Actual September 24th Guidance 2013 EPS Guidance* Q3 Full Year July 2013 Prior Guidance $1.06 - $1.16 $4.10 - $4.30 Industrial Packaging discontinued operations $0.13 - $0.15 $0.51 - $0.55 Discrete tax charge related to foreign earnings $0.09 $0.09 Sept 2013 Guidance $0.84 -
Slide 6: Q3 2013 Highlights
Q3 2013 Highlights $ in Millions, except per share amounts Q3 2013 Q3 2012 F/(U) • Total operating revenues increased 2.9%, excluding GAAP 2012 Decorative Surfaces Operating Revenues $ 3,568 $ 3,733 (4.4%) • Organic revenues up +0.4% Operating Income $ 678 $ 667 1.8% • Operating margins % of Revenue
Slide 7: Q3 2013 Operating Results
Q3 2013 Operating Results F/(U) to Prior Year • International organic Total Operating Operating revenues up 2.9%, North Revenue Income Margin America declined (1.4%) Organic (Base) Business • Base operating margin Operating Leverage 0.4% 1.1% 10 bps improved +120 bps driven by: Changes in Variable M
Slide 8: Q3 2013 Working Capital & Cash Flow
Q3 2013 Working Capital & Cash Flow Net Trade Receivables & Inventory & MOH * YTD Avg. Invested Capital DSO * & ROIC ** $11,434 $1,277 $1,308 $2,424 $2,493 $10,996 1.8 1.8 16.3% 62.9 62.9 15.2% Q3 2012 Q3 2013 Q3 2012 Q3 2013 Q3 2012 Q3 2013 Trade Receivables DSO Inventory MOH Avg. Invested Capital
Slide 9: Capital Structure
Capital Structure 2013 Capital Allocation • ~5 million shares repurchased in Q3 1. Organic Investments • Expect to repurchase ~50 million shares to offset dilution of Industrial Packaging 2. Dividends • Acquired ~$300M annualized revenues in 3. External Investments 2013 Share Repurchases Acquisition
Slide 10: Revenue Growth by Geography Q3 2013 vs. 2012
Revenue Growth by Geography Q3 2013 vs. 2012 • EMEA organic: +1% ITW Worldwide International • North America organic: (-1%) 11% 9% • Asia Pacific organic growth 7% 7% (+7%) reflects strong 5% performance from China 4% 3% 3% (+22%) and Australia/New 1% Zealand (+5%) 0.4% (1%) (1%) Total Company North
Slide 11: Q3 2013 Segment Results
Q3 2013 Segment Results Q3 2013 F/(U) vs. prior year Adjusted Organic $ in Millions Total Operating Operating Operating Total (Base) Operating Revenue Income Margin Margin * Revenue Revenue Margin Test & Measurement and Electronics $ 555 $ 91 16.3% 20.6% (10.9%) (11.8%) (190 bps) Automotive OEM 589
Slide 12: Q3 2013 Segment Commentary
Q3 2013 Segment Commentary Organic Revenue Y/O/Y % Changes / Key Business Trends ~ WW: -12% Test & ~ Total Electronics: -21%, due to difficult "comps" in the electronics assembly Measurement and business (-45%); comps ease in Q4 Electronics ~ Test & Measurement WW: -1% ~ WW: 12% - NA: 10% - Internat
Slide 13: 2013 Guidance
2013 Guidance Q4 Full Year Forecast July Fcst Oct Fcst Total Revenue * 2% - 5% 0.5% - 2.5% 1% - 2% Organic Revenue Growth (1%) - 1% (0.5%) - 0.5% Diluted EPS from Continuing Operations $0.85 - $0.93 $3.50 - $3.66 ** $3.56 - $3.64 % F/(U) to 2012 Diluted EPS from 31% - 43% 9% - 14% 11% - 13% Continui
Slide 14: Q&A
Q&A SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR. 14
Slide 15: Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables
Appendix: GAAP to Non-GAAP Reconciliations & Segment Tables SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR. 15
Slide 16: Q3 GAAP to Non-GAAP Reconciliations
Q3 GAAP to Non-GAAP Reconciliations Q3 2013 Q3 2012 $ in Millions, except per share amounts Total Operating Operating Diluted Total Operating Operating Diluted Revenue Income Margin EPS Revenue Income Margin EPS Actual Results (GAAP) $3,568 $678 19.0% $0.90 $3,733 $667 17.9% $0.95 Discrete tax charg
Slide 17: 2012 GAAP to Non-GAAP Reconciliations
Appendix 2012 GAAP to Non-GAAP Reconciliations Q4 2012 2012 Full Year $ in Millions, except per share amounts Total Operating Diluted Total Operating Diluted Revenue Income EPS Revenue Income EPS Actual Results (GAAP) $3,484 $524 $ 1.99 $14,791 $2,475 $ 4.72 Decorative Surfaces net gain - - 1.37 - -
Slide 18: Adjusted Return on Average Invested Capital
Appendix Adjusted Return on Average Invested Capital The Company uses adjusted return on average invested capital (“adjusted ROIC”) to measure the effectiveness of its operations' use of invested capital to generate profits. Operating income excludes the operating income of the former Decorative Sur
Slide 19: 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 20: Total Debt to Adjusted EBITDA
Appendix Total Debt to Adjusted EBITDA The Company uses the ratio of total debt to adjusted EBITDA to measure its ability to repay its outstanding debt obligations. The ratio of total debt to adjusted EBITDA represents total debt divided by income from continuing operations before interest expense,
Slide 21: Operating Margin % Reconciliation
Appendix Operating Margin % Reconciliation Test & Automotive Polymers & Food Specialty Q3 2013 Measurement OEM Fluids Equipment Welding Construction Products & Electronics Operating Margin % 16.3% 21.1% 18.1% 19.9% 25.4% 16.2% 21.1% Amortization of intangible assets, impairment & other non-cash 4.3%