Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q2 2008 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Jul 17, 2008
Slide 1: ITW Conference Call Second Quarter 2008
Exhibit 99.2 ITW Conference Call Second Quarter 2008 1
Slide 2: Agenda
ITW Agenda 1. Introduction……………….. John Brooklier/David Speer 2. Financial Overview……….. Ron Kropp 3. Operating Segments…… . John Brooklier 4. Forecast 2008……….….… Ron Kropp 5. Q & A………………......……John Brooklier/Ron Kropp/David Speer 2
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 operating performance, revenue growth, operating income, diluted income per share f
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-1553 No pass code necessary Telephone replay available through midnight of July 31, 2008 Webcast / PowerPoint replay available at itw.com website 4
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2007 2008 F(U) Last Year Q2 Q2 Amount % Operating Revenues 4,136.8 4,570.5 433.7 10.5% Operating Income 695.6 756.7 61.1 8.8% % of Revenues 16.8% 16.6% -0.2% Income from Continuing Operations Income Amount 480.4 528.5 48.1 10.0% Income Per Share-Diluted 0.86 1.01 0.15 17.4%
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage - 0.1% - Nonvolume-related - 1.4% 0.3% Total 0.0% 1.5% 0.3% Acquisitions/Divestitures 4.2% 2.5% -0.3% Translation 6.4% 6.1% - Impairment - - - Restr
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2007 2008 F(U) Last Year Q2 Q2 Amount % Operating Income 695.6 756.7 61.1 8.8% Interest Expense (25.6) (36.5) (10.9) Other Income 22.0 24.2 2.2 Income from Continuing Operations-Pretax 692.0 744.4 52.4 7.6% Income Taxes 211.6 215.9 (4.3) % to Pretax Income 30.6% 29.0% 1.6%
Slide 8: Invested Capital
ITW Invested Capital 6/30/07 3/31/08 6/30/08 Trade Receivables 2,882.7 3,014.4 3,302.3 Days Sales Outstanding 62.7 65.5 65.0 Inventories 1,612.4 1,766.0 1,845.6 Months on Hand 1.8 2.0 1.9 Prepaids and Other Current Assets 463.8 529.9 553.1 Accounts Payable & Accrued Expenses (1,998.5) (2,224.7) (2,3
Slide 9: Debt & Equity
ITW Debt & Equity 6/30/07 3/31/08 6/30/08 Total Capital Short Term Debt 528.1 1,340.0 1,465.9 Long Term Debt 956.6 1,435.4 1,462.4 Total Debt 1,484.7 2,775.4 2,928.3 Stockholders' Equity 9,388.4 9,248.0 9,499.2 Total Capital 10,873.1 12,023.4 12,427.5 Less: Cash (481.5) (927.4) (640.2) Net Debt & Eq
Slide 10: Cash Flow
ITW Cash Flow 2007 2008 Q2 Q2 Net Income 505.6 528.1 Adjust for Non-Cash Items 98.8 123.3 Changes in Operating Assets & Liabilities (72.8) (201.3) Net Cash From Operating Activities 531.6 450.1 Additions to Plant & Equipment (89.0) (96.0) Free Operating Cash Flow 442.6 354.1 Stock Repurchases (300.0
Slide 11: Acquisitions
ITW Acquisitions 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Annual Revenues Acquired 399 213 218 165 230 308 Purchase Price Cash Paid 263 216 235 163 223 424 Stock Issued - - - - - - Total 263 216 235 163 223 424 Number of Acquisitions 9 10 18 15 16 10 11
Slide 12: Industrial Packaging Quarterly Analysis
Industrial Packaging Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q1 620.7 79.9 12.9% 2008 Q1 711.4 93.7 13.2% $ F(U) 90.7 13.8 0.3% % F(U) 14.6% 17.3% % F(U) Prior Year Base Business Operating Leverage 0.7% 2.0% 0.2% Nonvolume-related - 5.1% 0.7% Total 0.7% 7.1% 0.9
Slide 13: Industrial Packaging Key Points
Industrial Packaging Key Points • Total segment base revenues: +1% for Q2 ’08 • Q2 North America base revenues: +1% – Strapping and equipment businesses: slightly negative in Q2; mirrors weakening industrial production environment in North America • Q2 International base revenues: +1% – Strapping an
Slide 14: Power Systems and Electronics Quarterly Analysis
Power Systems and Electronics Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q2 565.3 116.1 20.5% 2008 Q2 648.8 142.1 21.9% $ F(U) 83.5 26.0 1.4% % F(U) 14.8% 22.4% % F(U) Prior Year Base Business Operating Leverage 7.7% 14.4% 1.3% Nonvolume-related - 3.9% 0.8% Total 7
Slide 15: Power Systems and Electronics Key Points
Power Systems and Electronics Key Points • Total segment base revenues: +8% in Q2 ’08 • In Q2, Welding’s worldwide base revenues: +9% – Welding’s Q2 International base revenues: +25% • Double digit growth in Asia due to high levels of demand for specialty consumable products serving energy/pipeline
Slide 16: Transportation Quarterly Analysis
Transportation Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q2 583.7 107.2 18.4% 2008 Q2 630.7 99.7 15.8% $ F(U) 47.0 (7.5) -2.6% % F(U) 8.0% -6.9% % F(U) Prior Year Base Business Operating Leverage -4.7% -10.1% -1.0% Nonvolume-related - -2.9% -0.6% Total -4.7% -13.0
Slide 17: Transportation Key Points
Transportation Key Points • Total segment base revenues: -5% in Q2 ’08 – North America base revenues: -8% – International base revenues: Flat • Auto OEM/Tiers: – North America Q2 base revenues: -13% • Q2 Detroit 3 builds decline 21%: GM: -28%; Ford: -15%; Chrysler: -19% • Q2 New Domestics: -1% • Q2
Slide 18: Construction Products Quarterly Analysis
Construction Products Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q2 541.2 81.2 15.0% 2008 Q2 566.2 78.3 13.8% $ F(U) 25.0 (2.9) -1.2% % F(U) 4.6% -3.5% % F(U) Prior Year Base Business Operating Leverage -4.3% -12.0% -1.2% Nonvolume-related - -1.7% -0.3% Total -4.3%
Slide 19: Construction Products Key Points
Construction Products Key Points • Total segment base revenues: -4% in Q2 ’08 • North America Q2 base revenues: -12% – Q2 Residential: -16% vs. -32% housing start decrease in Q2 ’08 – Q2 Renovation: -10% due to weakness at Big Box stores – Q2 Commercial Construction base revenues: -6% largely due to
Slide 20: Food Equipment Quarterly Analysis
Food Equipment Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q2 473.6 65.7 13.9% 2008 Q2 538.5 73.0 13.6% $ F(U) 64.9 7.3 -0.3% % F(U) 13.7% 11.1% % F(U) Prior Year Base Business Operating Leverage 2.3% 6.9% 0.6% Nonvolume-related - -7.5% -1.0% Total 2.3% -0.6% -0.4%
Slide 21: Food Equipment Key Points
Food Equipment Key Points • Total segment base revenues: +2% in Q2 ’08 • North America Q2 base revenues: +2% – Q2 Institutional/restaurant base revenues: +2% – Q2 Service base revenues: +3% • International Q2 base revenues: +4% – Asia-Pacific and Europe combine to produce reasonably healthy base rev
Slide 22: Decorative Surfaces Quarterly Analysis
Decorative Surfaces Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q2 322.8 47.6 14.8% 2008 Q2 336.0 47.4 14.1% $ F(U) 13.2 (0.2) -0.7% % F(U) 4.1% -0.5% % F(U) Prior Year Base Business Operating Leverage -1.3% -3.7% -0.4% Nonvolume-related - 0.3% - Total -1.3% -3.4% -
Slide 23: Decorative Surfaces Key Points
Decorative Surfaces Key Points • Total segment base revenues: -1% in Q2 ’08 • North America Q2 base revenues: -2% in Q2 – Q2 laminate base revenues: +1% due to larger commercial construction exposure and success of premium priced high definition laminate product line – Q2 flooring base revenues: dou
Slide 24: Polymers and Fluids Quarterly Analysis
Polymers and Fluids Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q2 229.7 40.7 17.7% 2008 Q2 300.8 55.2 18.3% $ F(U) 71.1 14.5 0.6% % F(U) 31.0% 35.5% % F(U) Prior Year Base Business Operating Leverage 2.3% 5.8% 0.6% Nonvolume-related - 13.5% 2.3% Total 2.3% 19.3% 2.
Slide 25: Polymers and Fluids Key Points
Polymers and Fluids Key Points • Total segment base revenues: +2% in Q2 ’08 – North America Q2 base revenues: +6% – International revenues: Flat • North America: – Polymers Q2 base revenues: +9% thanks to specialty adhesives and epoxy products – Fluids Q2 base revenues: -1% • International: – Fluids
Slide 26: All Other Quarterly Analysis
All Other Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q2 811.5 157.2 19.4% 2008 Q2 853.1 167.3 19.6% $ F(U) 41.6 10.1 0.2% % F(U) 5.1% 6.4% % F(U) Prior Year Base Business Operating Leverage -0.9% -2.2% -0.3% Nonvolume-related - 3.8% 0.7% Total -0.9% 1.6% 0.4% Acqui
Slide 27: All Other Key Points
All Other Key Points • Total segment base revenues: -1% in Q2 ’08 • Q2 worldwide test and measurement Q2 base revenues: +9% • Q2 worldwide consumer packaging Q2 base revenues: -2% • Q2 worldwide finishing Q2 base revenues: -2% • Q2 worldwide appliance/industrial Q2 base revenues: -5% 27
Slide 28: 2008 Forecast
ITW 2008 Forecast Mid Low High Point 3rd Quarter Total Revenues 10% 14% 12% Diluted Income per Share - Continuing $0.93 $0.99 $0.96 % F(U) 2007 5% 11% 8% Full Year Total Revenues 9% 12% 11% Diluted Income per Share - Continuing $3.40 $3.52 $3.46 % F(U) 2007 4% 7% 5% 28
Slide 29: 2008 Forecast Key Assumptions
ITW 2008 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $0.8 billion to $1.2 billion range. • Share repurchases of $0.8 billion to $1.0 billion for the year. • No further impairment of goodwill/intangibles. • Net nonoperating expense, including interest
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Second Quarter 2008 30