Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2008 Earnings Presentation
28 slides from Illinois Tool Works's earnings presentation, 2008
Slide 1: ITW Conference Call Third Quarter 2008
ITW Conference Call Third Quarter 2008 1
Slide 2: Agenda
ITW Agenda 1. Introduction…………………….. John Brooklier/David Speer 2. Financial Overview…………….. Ron Kropp pp 3. Reporting Segments………..…. John Brooklier 4 Forecast 2008 4. 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 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, income fro
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 402-220-9716 No pass code necessary Telephone replay available through midnight of October 30, 2008 Webcast / PowerPoint replay available at itw.com website 4
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2007 2008 F(U) Last Year Q3 Q3 Amount % Operating Revenues 3,744.4 4,147.8 403.4 10.8% Operating Income 649 6 649.6 639 0 639.0 (10 6) (10.6) -1.6% 1 6% % of Revenues 17.3% 15.4% -1.9% Income from Continuing Operations Income Amount 464.1 443.3 ( (20.8)) -4.5% Income Per Sha
Slide 6: Quarterly Operating Analysis
ITW Q Quarterly t l Operating O ti Analysis A l i % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage -0.8% -1.9% -0.2% Changes in VM & OH costs - -6 1% -6.1% -1 1% -1.1% Total -0.8% -8.0% -1.3% Acquisitions/Divestitures 6.9% 1.9% -0
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2007 2008 F(U) Last Year Q3 Q3 Amount % Operating Income 649.6 639.0 (10.6) -1.6% Interest Expense (25.8) (38.2) (12.4) Other Income 23.0 15.9 (7.1) Income from Continuing Operations-Pretax 646.8 616.7 (30.1) -4.7% Income Taxes 182.7 173.4 9.3 % to Pretax Income 28.2% 28.1%
Slide 8: Invested Capital
ITW Invested Capital 9/30/07 6/30/08 9/30/08 Trade Receivables 2,842.4 3,302.3 2,981.7 Days Sales Outstanding 63.6 66.0 64.7 Inventories 1,607.8 1,845.6 1,835.5 Months on Hand 1.9 1.9 2.0 Prepaids and Other Current Assets 431.9 408.4 505.8 Accounts Payable & Accrued Expenses (2,027.2) (2,369.5) (2,4
Slide 9: Debt & Equity
ITW Debt & Equity 9/30/07 6/30/08 9/30/08 Total Capital Short Term Debt 101.4 1,465.9 2,197.1 Long Term T Debt D b 1 31 1,573.1 1 462 4 1,462.4 1 398 2 1,398.2 Total Debt 1,674.5 2,928.3 3,595.3 Stockholders' Equity 9,386.5 9,499.2 9,095.9 Total Capital 11,061.0 12,427.5 12,691.2 Less: Cash (602.1)
Slide 10: Cash Flow
ITW Cash Flow 2007 2008 Q3 Q3 Net Income 491.1 453.5 Adjust for Non-Cash Items 152.5 225.7 Changes in Operating Assets & Liabilities 92.8 9.6 Net Cash From Operating p g Activities 736.4 688.8 Additions to Plant & Equipment (80.3) (89.3) Free Operating Cash Flow 656.1 599.5 Stock Repurchases (479.0)
Slide 11: Acquisitions
ITW Acquisitions 2007 2008 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Annual Revenues Acquired 399 213 218 165 230 308 847 Purchase Price Cash Paid 263 216 235 163 223 439 751 Stock Issued - - - - - - - Total 263 216 235 163 223 439 751 Number of Acquisitions 9 10 18 15 16 10 14 11
Slide 12: Industrial Packaging Quarterly Analysis
Industrial Packaging Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q3 599 6 599.6 78 5 78.5 13 1% 13.1% 2008 Q3 687.5 76.2 11.1% $ F(U) 87.9 (2.3) -2.0% % F(U) 14.7% -2.9% % F(U) Prior Year Base Business Operating Leverage 5.2% 15.8% 1.3% Changes in VM & OH costs - -2
Slide 13: Industrial Packaging Key Points
Industrial Packaging Key Points • Total segment base revenues: +5 +5.2% 2% for Q3 ’08 08 • Q3 North America base revenues: +2.2% for Q3 ’08 – Base B revenue growth th driven di by b significant i ifi t price i recovery for raw materials in Q3 • Q3 International base revenues: +7.5% for Q3 ’08 • Worl
Slide 14: Power Systems and Electronics Quarterly Analysis
Power Systems and Electronics Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q Q3 567.5 110.8 19.5% 2008 Q3 620.7 118.2 19.0% $ F(U) 53.2 7.4 -0.5% % F(U) 9.4% 6.7% % F(U) Prior Year Base Business Operating Leverage 3.1% 3 1% 6.1% 6 1% 0.6% 0 6% Changes in VM & OH cost
Slide 15: Power Systems and Electronics Key Points
Power Systems and Electronics Key Points • Total segment base revenues: +3.1% +3 1% in Q3 ’08 08 • In Q3, Welding’s worldwide base revenues: +5.7% – Welding’s W ldi ’ Q3 International I t ti l base b revenues grew 26.4% • Double-digit growth in Asia due to high levels of demand for specialty consuma
Slide 16: Transportation Quarterly Analysis
Transportation Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q3 534 5 534.5 88 8 88.8 16 6% 16.6% 2008 Q3 581.9 68.9 11.8% $ F(U) 47.4 (19.9) -4.8% % F(U) 8.9% -22.4% % F(U) Prior Year Base Business O Operating ti Leverage L -9.6% 9 6% -22.5% 22 5% -2.4% 2 4% Changes
Slide 17: Transportation Key Points
Transportation Key Points • Total segment base revenues: -9.6% in Q3 ’08 • Auto OEM/Tiers: – Automotive Worldwide Q3 base revenues: -12.5% – North America Q3 base revenues: -18.1% • Q3 combined build: -16% 16% • Q3 Detroit 3 builds decline 23%: GM: -12%; Ford: -33%; Chrysler: -31% • Q3 New Domestics
Slide 18: Construction Products Quarterly Analysis
Construction Products Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q3 516.4 77.0 14.9% 2008 Q3 525.0 73.4 14.0% $ F(U) 8.6 (3.6) -0.9% % F(U) 1.7% -4.7% % F(U) Prior Year Base Business O Operating ti Leverage L -4.4% 4 4% -12.5% 12 5% -1.3% 1 3% Changes in VM & OH co
Slide 19: Construction Products Key Points
Construction Products Key Points • Total segment base revenues: -4.4% 4.4% in Q3 ’08 08 • North America Q3 base revenues: -6.2% – Q3 Residential: -12% 12% vs. -31% 31% housing starts in Q3 ’08 08 – Q3 Renovation: -2% due to uptick in orders at Big Box stores – Q3 Commercial Construction base revenue
Slide 20: Food Equipment Quarterly Analysis
Food Equipment Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q3 500.4 88.9 17.8% 2008 Q3 542.7 87.5 16.1% $ F(U) 42.3 (1.4) -1.7% % F(U) 8.4% -1.6% % F(U) Prior Year Base Business Operating Leverage -1.7% -4.1% -0.5% Changes in VM & OH costs - -2.9% -0.5% Total -1.7%
Slide 21: Food Equipment Key Points
Food Equipment Key Points • Total segment base revenues: -1.7% in Q3 ’08 • North America Q3 base revenues: -1.2% – Q3 Institutional/restaurant base revenues: -3.8% as institutional customers delay purchases – Q3 Service base revenues: +2.8% • International Q3 base revenues: -3.2% – Europe base reven
Slide 22: Polymers and Fluids Quarterly Analysis
Polymers and Fluids Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q3 252 5 252.5 43 8 43.8 17 3% 17.3% 2008 Q3 371.0 53.4 14.4% $ F(U) 118.5 9.6 -2.9% % F(U) 46.9% 22.0% % F(U) Prior Year Base Business Operating Leverage 3.5% 3 5% 8.9% 8 9% 0.9% 0 9% Changes in VM & O
Slide 23: Polymers and Fluids Key Points
Polymers and Fluids Key Points • T l segment base Total b revenues: +3.5% 3 5% in i Q3 ’08 • North America: – Polymers Q3 base revenues: +15 +15.4% 4% thanks to demand for specialty adhesives and epoxy products – Fluids Q3 base revenues: -3.3% as manufacturing demand slackens • International: – Poly
Slide 24: All Other Quarterly Analysis
All Other Quarterly Analysis Operating Operating Operating Revenues Income Margins 2007 Q3 786.9 161.7 20.5% 2008 Q3 833.1 161.3 19.4% $ F(U) 46.2 (0.4) -1.1% 1.1% % F(U) 5.9% -0.3% % F(U) Prior Year Base Business Operating Leverage -0.7% -1.6% -0.2% Changes in VM & OH costs - -5.3% -1.1% Total -0.7
Slide 25: All Other Key Points
All Other Key Points • Total segment base revenues: -0.7% -0 7% in Q3 ’08 08 • Q3 worldwide test and measurement base revenues: +11.2% 11 2% • Q3 worldwide consumer packaging base revenues: -2.4% • Q3 worldwide finishing base revenues: +0.8% +0 8% • Q3 worldwide industrial/appliance pp base revenues
Slide 26: ITW 2008 Forecast
ITW 2008 F Forecastt Mid Low High Point 4th Quarter Total Revenues 6% 9% 8% Diluted Income per Share - Continuing $0.74 $0.82 $0.78 % F(U) 2007 -10% 0% -5% Full Year Total Revenues 10% 11% 11% Dil t d Income Diluted I per Share Sh - Continuing C ti i $3 24 $3.24 $3 32 $3.32 $3 28 $3.28 % F(U) 2007 5
Slide 27: ITW 2008 Forecast Key Assumptions
ITW 2008 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired A i d revenues in i the h $1.5 $1 5 billion billi to $1.6 $1 6 billion billi range. • Share repurchases of $1.0 $1 0 billion to $1 $1.2 2 billion for the year. • No further impairment of goodwill/intangibles. • Net
Slide 28: ITW Conference Call Q & A
ITW Conference Call Q&A Third Quarter 2008 28