Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q1 2006 Earnings Presentation
29 slides from Illinois Tool Works's earnings presentation, Apr 20, 2006
Slide 1: ITW Conference Call First Quarter 2006
Exhibit 99.2 ITW Conference Call First 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: 402-220-9685 No pass code necessary Telephone replay available through midnight of May 5, 2006 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2005 2006 F(U) Last Year Q1 Q1 Amount % Operating Revenues 3,051.9 3,297.0 245.1 8.0% Operating Income 458.7 540.0 81.3 17.7% % of Revenues 15.0% 16.4% 1.4% Net Income Income Amount 312.3 366.5 54.2 17.4% Income Per Share-Diluted 1.06 1.29 0.23 21.7% 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 6.1% 16.2% 1.4% Nonvolume-related - 2.2% 0.3% Total 6.1% 18.4% 1.7% Acquisitions / Divestitures 5.3% 1.9% -0.5% Translation -2.6% -2.0% 0.1% Impairm
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes Operating Income 458.7 540.0 81.3 17.7% Interest Expense (20.2) (18.9) 1.3 Investment Income 20.9 10.2 (10.7) Other Income(Expense) 3.2 (0.1) (3.3) Net Income-P/T 462.6 531.2 68.6 14.8% Income Taxes 150.3 164.7 (14.4) % to Pre Tax Income 32.5% 31.0% 1.5% Net Income-A/T 312.
Slide 8: Invested Capital
ITW Invested Capital 3/31/05 12/31/05 3/31/06 Trade Receivables 2,132.5 2,098.3 2,191.7 Days Sales Outstanding 62.9 58.1 59.8 Inventories 1,361.4 1,203.1 1,279.1 Months on Hand 2.0 1.7 1.8 Other Current Assets 309.4 439.8 426.8 Accounts Payable & Accruals (1,585.3) (1,747.8) (1,715.1) Operating Work
Slide 9: Debt & Equity
ITW Debt & Equity 3/31/05 12/31/05 3/31/06 Total Capital Short Term Debt 786.0 252.9 230.8 Long Term Debt 967.8 958.3 959.9 Total Debt 1,753.8 1,211.2 1,190.7 Stockholders' Equity 7,708.7 7,546.9 8,065.2 Total Capital 9,462.5 8,758.1 9,255.9 Less: Cash (1,052.9) (370.4) (454.5) Net Debt & Equity 8,4
Slide 10: Cash Flow
ITW Cash Flow 2005 2006 Q1 Q1 Net Income 312.3 366.5 Adjust for Non-Cash Items 186.0 120.5 Changes in Operating Assets & Liabilities (195.4) (98.0) Net Cash From Operating Activities 302.9 389.0 Additions to Plant & Equipment (64.0) (68.3) Free Operating Cash Flow 238.9 320.7 Stock Repurchase (189.7
Slide 11: Return on Average Invested Capital
ITW Return on Average Invested Capital 2005 2006 F(U) Current Quarter Q1 Q1 Prior Yr. Operating Income after Taxes 309.6 372.6 63.0 Operating Margins 10.1% 11.3% 1.2% Average Invested Capital 8,247.2 8,594.6 (347.4) Capital Turnover 1.48 1.53 0.05 Return on Average Invested Capital 15.0% 17.3% 2.3%
Slide 12: Acquisitions
ITW Acquisitions 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 151 36 105 292 353 - - - Purchase Price Cash Paid 188 12 113 314 199 - - - Stock Issued - - - - 163 - - - Total 188 12 113 314 362 - - - Number of Acquisitions North America Engineered Products 1 1 5 4 2 - - - Specialty Syst
Slide 13: Key Economic Data
Key Economic Data • March ’06 ISM Index: reasonably strong at 55.2%; March ’06 new order index at 58.4% • US Industrial Production (ex. Tech.): +3.7% in March ’06 compared to +2.4% in December ’05 • Weaker fundamentals in Europe EuroZone industrial production: +2.4% • UK industrial production: -1.4%
Slide 14: Engineered Products - North America
ITW Engineered Products - North America 2005 2006 F(U) Last Year Q1 Q1 Amount % Operating Revenues 918.2 1,043.4 125.2 13.6% Operating Income 144.4 176.8 32.4 22.5% Operating Margins 15.7% 16.9% 1.2%
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 6.6% 16.8% 1.5% Nonvolume-related - -0.5% - Total 6.6% 16.3% 1.5% Acquisitions / Divestitures 6.7% 4.4% -0.4% Translation 0.3% 0.5% - Impair
Slide 16: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: +8% for Q1 ’06 • Wilsonart (high pressure laminate): base revenues +11% in Q1 ’06 - largely due to new products introduced in the flooring and base laminate units • ITW construction (tools and fasteners) base revenues: +5% for Q1 ’
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: +2% for Q1 ’06 • Big 3 build rates: +2% for Q1 ’06 – GM: +6% – Ford: -3% – Chrysler: +4% – New domestics: +11% • Big 3 inventories: 80 days at 3-31-06 – GM: 86 days – Ford: 77 days – Chrysler: 76 days • New domestics’ inventories:
Slide 18: Engineered Products - International
ITW Engineered Products - International 2005 2006 F(U) Last Year Q1 Q1 Amount % Operating Revenues 647.8 626.9 (20.9) -3.2% Operating Income 84.5 75.8 (8.7) -10.2% Operating Margins 13.0% 12.1% -0.9%
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 0.6% 1.9% 0.2% Nonvolume-related - -1.7% -0.2% Total 0.6% 0.2% 0.0% Acquisitions / Divestitures 3.0% 0.9% -0.2% Translation -6.8% -6.3% - Im
Slide 20: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: -1% in Q1 ’06 – Europe: -1% (slowing in UK/Ireland) – Austral-Asia: -1% (commercial/retail weakness in Australia) – Wilsonart Intl.: -3% (weakness in China and the UK offset growth in Germany) • Automotive base revenues: +3
Slide 21: Specialty Systems - North America
ITW Specialty Systems - North America 2005 2006 F(U) Last Year Q1 Q1 Amount % Operating Revenues 1,005.9 1,138.4 132.5 13.2% Operating Income 176.2 218.4 42.2 23.9% Operating Margins 17.5% 19.2% 1.7%
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 9.6% 22.1% 2.0% Nonvolume-related - 1.7% 0.3% Total 9.6% 23.8% 2.3% Acquisitions / Divestitures 3.2% 0.5% -0.5% Translation 0.4% 0.5% - Impair
Slide 23: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: 22% growth in Q1 ’06 due primarily to demand for replacement products and new product introductions • Total Packaging: +6% base revenue growth in Q1 ’06 – Signode packaging: +4% base revenue growth; strong machinery sales – Other
Slide 24: Specialty Systems - International
ITW Specialty Systems - International 2005 2006 F(U) Last Year Q1 Q1 Amount % Operating Revenues 590.6 622.6 32.0 5.4% Operating Income 53.7 68.9 15.2 28.4% Operating Margins 9.1% 11.1% 2.0%
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 4.4% 18.8% 1.2% Nonvolume-related - 15.7% 1.4% Total 4.4% 34.5% 2.6% Acquisitions / Divestitures 8.4% 1.4% -0.8% Translation -7.4% -10.0% -0.1
Slide 26: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Welding: base revenue +18% in Q1 ’06 due to stronger sales in Asia • Total packaging: +3% in Q1 ’06 -Signode industrial packaging declined 5% in Europe and grew 9% in Asia/Pacific • Food Equipment: base revenues +3% in Q1 ’06; most growth emanating from
Slide 27: 2006 Forecast
ITW 2006 Forecast Mid Low High Point 2nd Quarter Base Revenues 4.2% 6.2% 5.2% Income Per Share-Diluted $1.52 $1.58 $1.55 %F(U) 2005 18% 22% 20% Full Year Base Revenues 4.6% 6.0% 5.3% Income Per Share-Diluted $5.89 $6.07 $5.98 %F(U) 2005 13% 17% 15%
Slide 28: 2006 Forecast Key Assumptions
ITW 2006 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $800 million to $1.0 billion range. • Restructuring cost of $30 to $50 million. • No further impairment of goodwill/intangibles. • Nonoperating investment income of $50 to $60 million, which is lowe
Slide 29: ITW Conference Call Q&A
ITW Conference Call Q&A First Quarter 2006