Slide 1: Meaningful Progress in Year One: ITW's Enterprise Strategy at Work
Meaningful Progress in Year One: ITW’s Enterprise Strategy at Work Fourth Quarter 2013 Conference Call Scott Santi, President & CEO Michael Larsen, Senior Vice President & CFO John Brooklier, Vice President Investor Relations January 28, 2014
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: 800-570-8799; no pass code necessary ● Telephone replay available through midnight of February 11, 2014 ● Webcast / PowerPoint replay available at www.itw.com Meaningful Progress in Year One: ITW’s Enterprise Strategy at Work 3
Slide 4: Q4 2013 Summary
Q4 2013 Summary • Revenue of $3.55B, up 4.8%* … modestly improving environment - 2.8% organic growth • Operating Margins of 17.7%, up 260 bps* … continued execution with discipline and focus - Enterprise initiatives contribute 110 bps • Earnings per share of $0.92, up 43%* - Positive momentum for 20
Slide 5: Q4 2013 Financial Summary
Q4 2013 Financial Summary $ in Millions, except per share amounts Q4 2013 Q4 2012 F/(U) • Revenues increased 4.8% … 2.8% organic, 2.0% from GAAP acquisitions Operating Revenues $ 3,554 $ 3,484 2.0% • International organic revenues Operating Income $ 628 $ 524 19.8% +3.3%, North America +2.6% % of Re
Slide 6: Q4 2013 Operating Margins
Q4 2013 Operating Margins F/(U) to Prior Year • Operating margins up 260 bps Total Operating Operating - Enterprise initiatives +110 bps Revenue Income Margin - Operating leverage +70 bps Organic Business - Price/cost +40 bps Operating Leverage 2.8% 7.7% 70 bps • Margin expansion in all segments Cha
Slide 7: 2013 Financial Summary
2013 Financial Summary Full Year Full Year • Revenues increased 1.9% $ in Millions, except per share amounts F/(U) 2013 2012 - +0.2% organic GAAP Operating Revenues $ 14,135 $ 14,791 (4.4%) • International organic revenues +1.2%, North America (0.5)% Operating Income $ 2,514 $ 2,475 1.6% • Operating
Slide 8: 2013 Cash Flow
2013 Cash Flow $ in Millions Quarter Full Year Q4 2012 Q4 2013 2012 2013 Net cash provided by operating activities $ 605 $ 708 $ 2,072 $ 2,528 Additions to plant and equipment (108) (111) (382) (368) Free Operating Cash Flow * $ 497 $ 597 $ 1,690 $ 2,160 % to Net Income 147% 129% Net Trade Receivabl
Slide 9: 2013 Capital Allocation
2013 Capital Allocation Capital Allocation Priorities • Organic investments fully funded Organic Investments • ~$700M dividends* in 2013 • $2.2B share repurchases / ~30M shares Dividends - Repurchased $1.1B / 14M shares in Q4’13 - Expect to repurchase ~35M shares in ’14 External Investments • Additi
Slide 10: Q4 2013 Revenue Growth by Region
Q4 2013 Revenue Growth by Region Organic Revenue Growth Total Revenue Growth ------------ Worldwide ------------ ---------- International ---------- ------------- Worldwide ------------- ---------- International ---------- 19% 15% 8% 7% 6% 4% 5% 3% 3% 3% 3% 2% Total North International EMEA Asia Sou
Slide 11: Q4 2013 Segment Results
Q4 2013 Segment Results Q4 2013 F/(U) vs. prior year $ in Millions Total Operating Operating Core Total Organic Operating Revenue Income Margin Margin * Revenue Revenue Margin Test & Measurement and Electronics $ 559 $ 88 15.7% 19.5% 1.2% 1.1% 250 bps Automotive OEM 604 123 20.4% 20.5% 12.4% 11.2% 1
Slide 12: Q4 2013 Segment Commentary
Q4 2013 Segment Commentary Organic Revenue Y/O/Y % Changes / Key Business Trends Test & ~ WW: +1% Measurement and ~ Test & Measurement WW: +9%, as equipment orders improve Electronics ~ Total Electronics: (8%), as comps ease in Q4 ~ WW: +11% - NA: +13% - International: +10% Automotive OEM - Europe:
Slide 13: Q1 / FY 2014 Guidance
Q1 / FY 2014 Guidance Guidance Q1 Full Year Total Revenue 3% - 6% 2% - 4% Organic Revenue Growth 2% - 3% Diluted EPS from Continuing Ops $0.93 - $1.01 $4.30 - $4.50 % F/(U) 6% - 15% 18% - 24% Operating Margins ~19% Tax Rate ~30% Restructuring $20M - $30M ~$100M Share Repurchases ~35M shares 2014 EPS
Slide 14: Q&A
Meaningful Progress in Year One: ITW’s Enterprise Strategy at Work Q&A
Slide 15: Appendix
Meaningful Progress in Year One: ITW’s Enterprise Strategy at Work Appendix
Slide 16: GAAP to Non-GAAP Reconciliations
Appendix GAAP to Non-GAAP Reconciliations Q4 2013 Q4 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) $3,554 $628 17.7% $0.92 $3,484 $524 15.0% $1.99 Decorative S
Slide 17: 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 18: 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 19: 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 20: Segment Results Q4 2013 vs. 2012
Appendix Segment Results Q4 2013 vs. 2012 Test & Automotive Polymers & Food Specialty Total Revenue Measurement OEM Fluids Equipment Welding Construction Products & Electronics Total Organic 1.1% 11.2% (1.2%) 4.2% - 1.9% 1.2% Acquisitions 0.2% - - 4.6% 2.1% - 7.1% Divestitures (0.1%) - - - - - - Tra
Slide 21: Full Year 2013 Segment Results
Appendix Full Year 2013 Segment Results Full Year 2013 F/(U) vs. prior year $ in Millions Total Operating Operating Core Total Organic Operating Revenue Income Margin Margin * Revenue Revenue Margin Test & Measurement and Electronics $ 2,176 $ 321 14.8% 18.8% (5.3%) (6.0%) (10 bps) Automotive OEM 2,
Slide 22: Operating Margin % Reconciliation
Appendix Operating Margin % Reconciliation Test & Automotive Polymers & Food Specialty Q4 2013 Measurement OEM Fluids Equipment Welding Construction Products & Electronics Operating Margin % 15.7% 20.4% 16.0% 19.5% 23.1% 13.8% 17.9% Amortization of intangible assets, impairment & other non-cash 3.8%