Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q2 2013 Earnings Presentation
21 slides from Illinois Tool Works's earnings presentation, Jul 23, 2013
Slide 1: ITW Conference Call Second Quarter 2013
ITW Conference Call Second Quarter 2013 July 23, 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: 800-308-7855; No pass code necessary ●Telephone replay available through midnight of August 6, 2013 ●Webcast / PowerPoint replay available at www.itw.com ●Supplemental financial and investor information will be available on the ITW website under the “Investor
Slide 4: Enterprise Strategy Update
Enterprise Strategy Update • ITW continues to execute its 2012-2017 Enterprise Strategy • Overall execution is on track and operational benefits are being realized. Impact will continue to accelerate as we move through 2013 and beyond. • Enterprise Strategy initiatives +60 bps operating margin impac
Slide 5: Q2 GAAP to Non-GAAP Reconciliations
Q2 GAAP to Non-GAAP Reconciliations Q2 2013 Q2 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) $4,219 $702 16.6% $1.03 $4,463 $758 17.0% $1.09 Pension Settlement
Slide 6: Q2 2013 Highlights
Q2 2013 Highlights $ in Millions, except per share amounts Q2 2013 Q2 2012 F/(U) • Adjusted total operating revenue increased 1.0% GAAP Operating Revenues $ 4,219 $ 4,463 -5.5% • Adjusted organic revenue flat; By category: Operating Income $ 702 $ 758 -7.5% • Equipment sales: -4% • Consumable sales:
Slide 7: Q2 2013 vs. 2012 Operating Results
Q2 2013 vs. 2012 Operating Results F/(U) to Prior Year • International organic revenues Total Operating Operating up 1.1%; North America Revenue Income Margin declined 1.0% Organic (Base) Business • Base operating margin +100 Operating Leverage - -0.1% - bps: Changes in Variable • Enterprise initiat
Slide 8: Working Capital & Cash Flow
Working Capital & Cash Flow Net Trade Receivables & Inventory & MOH * Avg. Invested Capital & DSO * Adjusted ROIC ** $13,157 $2,886 $2,907 $1,572 $1,490 1.8 $12,412 62.2 1.7 62.0 15.4% 16.1% Q2 2012 Q2 2013 Q2 2012 Q2 2013 Q2 2012 Q2 2013 Trade Receivables DSO Inventory MOH Avg. Invested Capital Adj
Slide 9: Capital Structure
Capital Structure Capital Allocation Priorities • Organic investments continue to focus on key growth platforms and emerging 1. Organic Investments market opportunities • $310M of share repurchases in Q2; Full 2. Dividends $171M YTD year forecast $1B+ 3. External Investments • Acquired approximately
Slide 10: Revenue Growth by Geography Q2 2013 vs. 2012
Revenue Growth by Geography Q2 2013 vs. 2012 ITW Worldwide International • International organic 27% revenue growth offset by decline in North America 19% • Europe down only 1% 3% 3% • Asia Pacific region 2% reflects strong double 1% 1% 0% digit performance from China and India; 0% 0% -1% -1% Austra
Slide 11: Q2 2013 Segment Results
Q2 2013 Segment Results Q2 2013 F/(U) vs. prior year $ in Millions Total Operating Operating Adjusted Total Organic Operating Revenue Income Margin Operating Revenue (Base) Margin Margin * Revenue * Test & Measurement $ 542 $ 74 13.7% 17.7% -8.5% -9.1% -200 bps and Electronics Automotive OEM 614 126
Slide 12: Q2 2013 Segment Commentary
Q2 2013 Segment Commentary Organic Revenue Y/O/Y % Changes / Key Business Trends Test & ~ Total Electronics: -16%, due to difficult "comps" and softness in the electronics assembly business (-38%) Measurement and ~ Test & Measurement WW: -2% Electronics ~ Auto OEM WW: 12% - NA: 7% - International: 1
Slide 13: 2013 Guidance
2013 Guidance Q3 Full Year Forecast April Fcst July Fcst Total Revenue * 3% - 5% 2% - 4% 0.5% - 2.5% Organic Revenue Growth 0% - 2% (1%) - 1% Diluted EPS from Continuing Operations $1.06 - $1.16 $4.15 - $4.35 $4.10 - $4.30 % F/(U) to 2012 Diluted EPS from 4% - 14% 12% - 18% 11% - 16% Continuing Oper
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: 2012 GAAP to Non-GAAP Reconciliations
Appendix 2012 GAAP to Non-GAAP Reconciliations Q3 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) 4,337 752 $ 1.08 17,224 2,806 $ 5.21 Decorative Surfaces net gain - - - - - 1.34 D
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 Q2 2013 vs. 2012
Appendix Segment Results Q2 2013 vs. 2012 Test & Automotive Polymers & Food Specialty Industrial Total Revenue Measurement OEM Fluids Equipment Welding Construction Products Packaging & Electronics Total Organic (Base) -9.1% 11.6% -3.6% 1.4% - 0.3% 1.6% -1.0% Acquisitions 0.9% - - 1.5% 2.2% 0.3% 3.6
Slide 21: Operating Margin % Reconciliation
Appendix Operating Margin % Reconciliation Test & Automotive Polymers & Food Specialty Industrial Q2 2013 Measurement OEM Fluids Equipment Welding Construction Products Packaging & Electronics Operating Margin % 13.7% 20.6% 18.1% 18.7% 26.5% 13.8% 22.4% 11.8% Amortization of intangible assets & othe