Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2005 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Oct 19, 2005
Slide 1: ITW Conference Call Third Quarter 2005
Exhibit 99.2 ITW Conference Call Third Quarter 2005
Slide 2: Agenda
ITW Agenda 1. Introduction……………………..John Brooklier 2. Financial Overview……………...Ron Kropp 3. Manufacturing Segments……… John Brooklier 4. Forecast 2005………………….… 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 fourth quarter and full-year 2
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-0666 No pass code necessary Telephone replay available through midnight of November 2, 2005 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2004 2005 F(U) Last Year Q3 Q3 Amount % Operating Revenues 2,967.2 3,257.6 290.4 9.8% Operating Income 512.2 619.2 107.0 20.9% % of Revenues 17.3% 19.0% 1.7% Income From Continuing Operations Income Amount 330.1 408.2 78.1 23.7% Income Per Share-Diluted 1.09 1.43 0.34 31.2%
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis Revenue Income Margins Base Manufacturing Business Operating Leverage 4.1% 9.5% 0.9% Nonvolume-related - 4.0% 0.7% Total 4.1% 13.5% 1.6% Acquisitions / Divestitures 3.9% 2.4% -0.3% Translation 0.8% 1.2% 0.1% Impairment - - - Restructuring - -2.7% -0.5% Leasing & Inve
Slide 7: Leasing & Investments
ITW Leasing & Investments 2004 2005 F(U) Last Year Q3 Q3 Amount % Operating Revenues 23.6 57.6 34.0 144.3% Operating Income 20.2 53.5 33.3 164.4% Operating Margins 85.8% 92.8% 7.0%
Slide 8: Non Operating & Taxes
ITW Non Operating & Taxes 2004 2005 F(U) Last Year Q3 Q3 Amount % Operating Income 512.2 619.2 107.0 20.9% Interest Expense (18.5) (18.2) 0.3 Other Income 6.4 (0.8) (7.2) Income From Continuing Operations-P/T 500.1 600.2 100.1 20.0% Income Taxes 170.0 192.0 (22.0) % to Pre Tax Income 34.0% 32.0% 2.0
Slide 9: Invested Capital
ITW Invested Capital 9/30/04 6/30/05 9/30/05 Trade Receivables 1,983.6 2,134.2 2,168.6 Days Sales Outstanding 60.2 58.3 59.9 Inventories 1,142.5 1,274.5 1,229.7 Months on Hand 1.8 1.8 1.8 Other Current Assets 360.1 299.7 303.2 Accounts Payable & Accruals (1,910.1) (1,583.6) (1,641.8) Operating Worki
Slide 10: Debt & Equity
ITW Debt & Equity 9/30/04 6/30/05 9/30/05 Total Capital Short Term Debt 97.1 696.8 378.6 Long Term Debt 924.0 967.2 965.5 Total Debt 1,021.1 1,664.0 1,344.1 Stockholders' Equity 7,543.3 7,427.2 7,281.1 Total Capital 8,564.4 9,091.2 8,625.2 Less: Leasing & Investments Debt (79.4) (116.0) (146.3) Cash
Slide 11: Cash Flow
ITW Cash Flow 2004 2005 Q3 Q3 Net Income 330.1 408.2 Adjust for Non-Cash Items 12.3 119.5 Changes in Operating Assets & Liabilities 110.2 31.6 Net Cash From Operating Activities 452.6 559.3 Additions to Plant & Equipment (68.1) (71.3) Proceeds from Investments 18.8 18.6 Free Operating Cash Flow 403.
Slide 12: Return on Average Invested Capital
ITW Return on Average Invested Capital 2004 2005 F(U) Current Quarter Q3 Q3 Prior Yr. Operating Income after Taxes 338.1 421.1 83.0 Operating Margins 11.4% 12.9% 1.5% Average Invested Capital 7,533.8 8,122.1 (588.3) Capital Turnover 1.58 1.60 0.02 Return on Average Invested Capital 17.9% 20.7% 2.8%
Slide 13: Acquisitions
ITW Acquisitions 2004 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 247 168 78 131 151 36 105 240 Purchase Price Cash Paid 184 193 62 149 188 12 113 255 Stock Issued 2 - - - - - - - Total 186 193 62 149 188 12 113 255 Number of Acquisitions North America Engineered Products 2 1 1 1 1 1 5 - S
Slide 14: Key Economic Data
Key Economic Data • September ’05 ISM: moved up to 59.4% from 53.6% in August ’05; new orders moved to 63.8% in September ’05 from 56.4% in August ’05 • US Industrial Production (ex. Tech.): +1.6% in September ’05 compared to +1.9% in August ’05 • Euro-Zone Purchasing Managers’ Index: 51.7% in Septe
Slide 15: Engineered Products - North America
ITW Engineered Products - North America 2004 2005 F(U) Last Year Q3 Q3 Amount % Operating Revenues 869.9 959.7 89.8 10.3% Operating Income 149.4 180.9 31.5 21.1% Operating Margins 17.2% 18.9% 1.7%
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 2.3% 5.4% 0.5% Nonvolume-related - 12.2% 2.1% Total 2.3% 17.6% 2.6% Acquisitions / Divestitures 7.6% 3.8% -0.8% Translation 0.4% 0.3% - Impai
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: +2% for Q3 ’05 • ITW construction (Paslode/Buildex/Ramset/ITW Brands) base revenues: +3% for Q3 ’05 - new housing: +3% in Q3 ’05 - renovation: +2% in Q3 ’05 - commercial: +4% in Q3 ’05 • Wilsonart (high pressure laminate): base rev
Slide 18: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: +3% for Q3 ’05 • Big 3 build rates: -1% for Q3 ’05 – GM: -4% – Ford: -7% – Chrysler: +12% – Transplants: +9% • Big 3 inventories: 69 days at 9-30-05 – GM: 58 days – Ford: 74 days – Chrysler: 83 days • New domestics’ inventories: 43
Slide 19: Engineered Products - International
ITW Engineered Products - International 2004 2005 F(U) Last Year Q3 Q3 Amount % Operating Revenues 624.2 656.8 32.6 5.2% Operating Income 96.0 100.3 4.3 4.5% Operating Margins 15.4% 15.3% -0.1%
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 -0.7% -1.8% -0.2% Nonvolume-related - 3.0% 0.5% Total -0.7% 1.2% 0.3% Acquisitions / Divestitures 4.5% 4.6% - Translation 1.4% 2.8% 0.2% Impa
Slide 21: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +1% in Q3 ’05 – Europe: +1% (growth in Spain, France & Nordic countries) – Austral-Asia: -1% (commercial/new housing weakness in Australia/New Zealand) – Wilsonart Intl.: +9% (good activity in Thailand, China & Germany) • A
Slide 22: Specialty Systems - North America
ITW Specialty Systems - North America 2004 2005 F(U) Last Year Q3 Q3 Amount % Operating Revenues 964.8 1,054.3 89.5 9.3% Operating Income 165.6 211.5 45.9 27.7% Operating Margins 17.2% 20.1% 2.9%
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 8.2% 19.2% 1.7% Nonvolume-related - 6.3% 1.0% Total 8.2% 25.5% 2.7% Acquisitions / Divestitures 0.5% 0.3% - Translation 0.6% 0.8% - Impairment
Slide 24: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: 20+% growth in Q3 ’05 due primarily to demand for replacement products and new product introductions • Food Equipment base revenues: 1% growth in Q3 ’05; restaurant/institutional customers and parts/service activity offset food re
Slide 25: Specialty Systems - International
ITW Specialty Systems - International 2004 2005 F(U) Last Year Q3 Q3 Amount % Operating Revenues 591.5 639.0 47.5 8.0% Operating Income 81.1 73.0 (8.1) -9.9% Operating Margins 13.7% 11.4% -2.3%
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 4.5% 12.8% 1.1% Nonvolume-related - -13.0% -1.7% Total 4.5% -0.2% -0.6% Acquisitions / Divestitures 2.8% 2.1% -0.1% Translation 0.7% 1.8% 0.2%
Slide 27: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Industrial packaging: base revenues continued to grow in Q3 ’05: -Europe: +5% -Asia: +6% • Food Equipment: base revenues +2% in Q3 ’05; most growth emanating from demand in U.K. and Germany • Welding: base revenue grew 13% in Q3 ’05 • Finishing: base re
Slide 28: 2005 Forecast
ITW 2005 Forecast Mid Low High Point 4th Quarter Base Revenues 2.0% 4.0% 3.0% Income Per Share-Diluted $1.34 $1.40 $1.37 %F(U) 2004 11% 16% 13% Full Year Base Revenues 4.1% 4.6% 4.3% Income Per Share-Diluted $5.12 $5.18 $5.15 %F(U) 2004 17% 18% 17%
Slide 29: 2005 Forecast Key Assumptions
ITW 2005 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $600 to $800 million range. • Restructuring cost of $40 to $60 million. • No further impairment of goodwill or intangibles. • Leasing & Investments income of $95 to $105 million, which is lower than
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Third Quarter 2005