Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2005 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Jan 31, 2006
Slide 1: ITW Conference Call Fourth Quarter 2005
Exhibit 99.2 ITW Conference Call Fourth Quarter 2005
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 and operating results for the first quarter and full-year 20
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-0128 No pass code necessary Telephone replay available through midnight of February 14, 2006 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2004 2005 F(U) Last Year Q4 Q4 Amount % Operating Revenues 3,051.6 3,294.3 242.7 8.0% Operating Income 535.2 595.2 60.0 11.2% % of Revenues 17.5% 18.1% 0.6% Income From Continuing Operations Income Amount 359.2 400.6 41.4 11.5% Income Per Share-Diluted 1.21 1.42 0.21 17.4% A
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis Revenue Income Margins Base Manufacturing Business Operating Leverage 3.6% 8.3% 0.8% Nonvolume-related - -1.3% -0.2% Total 3.6% 7.0% 0.6% Acquisitions / Divestitures 5.5% 2.7% -0.4% Translation -0.7% -0.1% 0.1% Impairment - -0.6% -0.1% Restructuring - 0.4% 0.1% Leasi
Slide 7: Leasing & Investments
ITW Leasing & Investments 2004 2005 F(U) Last Year Q4 Q4 Amount % Operating Revenues 33.3 42.2 8.9 26.6% Operating Income 27.9 37.5 9.6 34.7% Operating Margins 83.7% 89.0% 5.3%
Slide 8: Non Operating & Taxes
ITW Non Operating & Taxes 2004 2005 F(U) Last Year Q4 Q4 Amount % Operating Income 535.2 595.2 60.0 11.2% Interest Expense (15.8) (22.7) (6.9) Other Expense (5.5) (0.1) 5.4 Income From Continuing Operations-P/T 513.9 572.4 58.5 11.4% Income Taxes 154.7 171.8 (17.1) % to Pre Tax Income 30.1% 30.0% 0.
Slide 9: Invested Capital
ITW Invested Capital 12/31/04 9/30/05 12/31/05 Trade Receivables 2,054.6 2,168.6 2,098.3 Days Sales Outstanding 60.6 59.9 57.3 Inventories 1,281.2 1,229.7 1,203.1 Months on Hand 1.9 1.8 1.7 Other Current Assets 319.0 303.2 439.8 Accounts Payable & Accruals (1,647.4) (1,641.8) (1,747.8) Operating Wor
Slide 10: Debt & Equity
ITW Debt & Equity 12/31/04 9/30/05 12/31/05 Total Capital Short Term Debt 203.5 378.6 252.9 Long Term Debt 921.1 965.5 958.3 Total Debt 1,124.6 1,344.1 1,211.2 Stockholders' Equity 7,627.6 7,281.1 7,546.9 Total Capital 8,752.2 8,625.2 8,758.1 Less: Cash (667.4) (351.3) (370.4) Net Debt & Equity 8,08
Slide 11: Cash Flow
ITW Cash Flow 2004 2005 Q4 Q4 Net Income 358.1 400.6 Adjust for Non-Cash Items 276.7 34.7 Changes in Operating Assets & Liabilities (251.8) 50.7 Net Cash From Operating Activities 383.0 486.0 Additions to Plant & Equipment (84.7) (77.1) Free Operating Cash Flow 298.3 408.9 Stock Repurchase (527.7) -
Slide 12: Return on Average Invested Capital
ITW Return on Average Invested Capital 2004 2005 F(U) Current Quarter Q4 Q4 Prior Yr. Operating Income after Taxes 374.1 416.7 42.6 Operating Margins 12.3% 12.6% 0.3% Average Invested Capital 7,859.5 8,330.8 (471.3) Capital Turnover 1.55 1.58 0.03 Return on Average Invested Capital 19.0% 20.0% 1.0%
Slide 13: Acquisitions
ITW Acquisitions 2004 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 247 168 78 131 151 36 105 292 Purchase Price Cash Paid 184 193 62 149 188 12 113 314 Stock Issued 2 - - - - - - - Total 186 193 62 149 188 12 113 314 Number of Acquisitions North America Engineered Products 2 1 1 1 1 1 5 4 S
Slide 14: Key Economic Data
Key Economic Data • December ’05 ISM Index: reasonably strong at 54.2%; December ’05 new order index at 55.5% • US Industrial Production (ex. Tech.): +2.4% in December ’05 compared to +1.6% in September ’05 • Weaker fundamentals in Europe – UK industrial production: -2.4% – France industrial product
Slide 15: Engineered Products - North America
ITW Engineered Products - North America 2004 2005 F(U) Last Year Q4 Q4 Amount % Operating Revenues 832.6 916.7 84.1 10.1% Operating Income 130.9 156.9 26.0 19.9% Operating Margins 15.7% 17.1% 1.4%
Slide 16: Engineered Products - North America Quarterly Analysis
Engineered Products - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 2.8% 7.2% 0.7% Nonvolume-related - 3.4% 0.5% Total 2.8% 10.6% 1.2% Acquisitions / Divestitures 7.1% 5.8% -0.3% Translation 0.2% 0.2% - Impair
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: -1% for Q4 ’05 • Wilsonart (high pressure laminate): base revenues -7% in Q4 ’05 - largely due to volume issues from flooring unit; focusing on new product development • ITW construction (tools and fasteners) base revenues: +5% for
Slide 18: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: +5% for Q4 ’05 • Big 3 build rates: -1% for Q4 ’05 – GM: +1% – Ford: -7% – Chrysler: +2% – New domestics: +15% • Big 3 inventories: 77 days at 12-31-05 – GM: 71 days – Ford: 79 days – Chrysler: 86 days • New domestics’ inventories:
Slide 19: Engineered Products - International
ITW Engineered Products - International 2004 2005 F(U) Last Year Q4 Q4 Amount % Operating Revenues 691.3 716.5 25.2 3.6% Operating Income 109.8 117.2 7.4 6.7% Operating Margins 15.9% 16.4% 0.5%
Slide 20: Engineered Products - International Quarterly Analysis
Engineered Products - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 0.5% 1.2% 0.1% Nonvolume-related - 0.4% 0.1% Total 0.5% 1.6% 0.2% Acquisitions / Divestitures 4.7% 3.3% -0.2% Translation -1.6% -0.1% 0.2% Im
Slide 21: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +1% in Q4 ’05 – Europe: +2% (growth in France & Nordic countries) – Austral-Asia: -1% (commercial/retail weakness in Australia) – Wilsonart Intl.: -2% (weakness in UK offset growth in Asia & Germany) • Automotive base reven
Slide 22: Specialty Systems - North America
ITW Specialty Systems - North America 2004 2005 F(U) Last Year Q4 Q4 Amount % Operating Revenues 952.2 1,070.4 118.2 12.4% Operating Income 179.1 199.1 20.0 11.1% Operating Margins 18.8% 18.6% -0.2%
Slide 23: Specialty Systems - North America Quarterly Analysis
Specialty Systems - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 7.7% 17.0% 1.6% Nonvolume-related - -5.3% -0.9% Total 7.7% 11.7% 0.7% Acquisitions / Divestitures 4.4% 2.9% -0.2% Translation 0.3% 0.4% - Impai
Slide 24: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: 14% growth in Q4 ’05 due primarily to demand for replacement products and new product introductions • Food Equipment base revenues: 5% growth in Q4 ’05; restaurant/institutional customers and parts/service were strongest contribut
Slide 25: Specialty Systems - International
ITW Specialty Systems - International 2004 2005 F(U) Last Year Q4 Q4 Amount % Operating Revenues 646.3 673.0 26.7 4.1% Operating Income 87.4 84.5 (2.9) -3.3% Operating Margins 13.5% 12.6% -0.9%
Slide 26: Specialty Systems - International Quarterly Analysis
Specialty Systems - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenue Income Margins Base Business Operating Leverage 1.7% 4.9% 0.4% Nonvolume-related - -3.8% -0.5% Total 1.7% 1.1% -0.1% Acquisitions / Divestitures 4.9% -1.9% -0.8% Translation -2.5% -1.5% 0.1%
Slide 27: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Total packaging: +1% in Q4 ’05 -Signode packaging declined 6% in Europe and grew 3% in Asia/Pacific -Other specialty packaging businesses grew 3% and 17% • Food Equipment: base revenues +2% in Q4 ’05; most growth emanating from institutional demand in E
Slide 28: 2006 Forecast
ITW 2006 Forecast Mid Low High Point 1st Quarter Base Revenues 2.7% 4.7% 3.7% Income Per Share-Diluted $1.12 $1.18 $1.15 %F(U) 2005 6% 11% 8% Full Year Base Revenues 3.2% 5.2% 4.2% Income Per Share-Diluted $5.60 $5.78 $5.69 %F(U) 2005 8% 11% 9%
Slide 29: 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. • Estimated impairment of goodwill/intangibles of $15 to $25 million. • Nonoperating investment income of $45 to $55 m
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Fourth Quarter 2005