Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Bank of America Merrill Lynch Global Industrials Conference 2019
13 slides from Illinois Tool Works's conference presentation, Mar 19, 2019
Slide 1: Bank of America Merrill Lynch Global Industrials Conference
CHRIS O’HERLIHY, VICE CHAIRMAN Bank of America Merrill Lynch Global Industrials Conference 19 March 2019
Slide 2: Forward-Looking Statement and Safe Harbor Statement
F O RWA R D - L O O K I N G S TAT E M E N T SAFE HARBOR STATEMENT This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the expected impact of tariffs and raw material infla
Slide 3: Enterprise strategy began in late 2012: what truly differentiates ITW?
E N T E R P RI SE S T R AT E G Y B E G A N I N L AT E 2 0 1 2 STARTED WITH A BASIC QUESTION: What truly differentiates ITW? 3
Slide 4: ITW's business model is our competitive advantage
ITW’S BUSINESS THE ITW BUSINESS MODEL: MODEL IS OUR COMPETITIVE • A POWERFUL and PROPRIETARY A D VA N TA G E set of strategic, operational and cultural practices ITW • Has been in a continual state of BUSINESS development and evolution MODEL inside ITW for over 30 years Decentralized, • Is the VALUE
Slide 5: The ITW business model delivers
THE ITW BUSINESS MODEL DELIVERS: ADVANTAGED COMPETITIVE POSITION IN THE ITW 1 INDUSTRIES IN WHICH WE OPERATE: BUSINESS • Superior performance and value for our MODEL “80” customers Decentralized, • High quality growth with best-in-class Entrepreneurial Culture margins and returns ADVANTAGED PERFORMA
Slide 6: ITW segment operating margin vs. peer average
I T W ’ S B U S I N E S S M O D E L I S O U R C O M P E T I T I V E A D VA N TA G E ITW SEGMENT OPERATING MARGIN VS. PEER AVERAGE* 2018 27% 28% 27% 26% 25% 24% 23% 21% 17% 16% 14% 12% 13% 11% Auto OEM Test & Meas Food Polymers Welding Construction Specialty and Elect ** Equipment & Fluids ** Product
Slide 7: 2012 to 2018 performance
2 0 1 2 TO 2 0 1 8 P E R F O R M A N C E OPERATING MARGIN AFTER-TAX ROIC** EARNINGS PER SHARE +840 +1370 15% bps bps CAGR 24.3% 28.2% $7.60 15.9% 14.5% $3.21 2012* 2018 2012 2018 2012** 2018 * As reported in the 2012 Form 10-K 7 ** See Appendix for the reconciliations from GAAP to non-GAAP measures
Slide 8: ITW's enterprise strategy
I T W ’ S E N T E R P R I S E S T R AT E G Y 1 PORTFOLIO DISCIPLINE: Operate only in industries where we can ~90% complete generate significant differentiated competitive advantage from the ITW Business Model long-term More work to be done in order to 2 QUALITY OF 80/20 FTB PRACTICE: Operate with ex
Slide 9: Finishing the job
FINISHING THE JOB = 1-2 percentage points of additional improvement in enterprise organic growth rate 3-4 percentage points of additional structural margin improvement 9
Slide 10: ITW's core business in 2023
ITW’S CORE BUSINESS IN 2023: 3 - 5% 100+% ~28% ~40% Free Cash ~50% Operating After-tax Organic 35% 7 - 10% Flow as Dividend Growth Incremental EPS Margin ROIC % of Payout Ratio Margin Growth Net Income incl. 30 bps PLS SOLID ORGANIC GROWTH WITH BEST-IN-CLASS MARGINS AND RETURNS … CONSISTENTLY 10
Slide 11: Finishing the job: what it will mean
F I N I S H I N G T H E J O B : W H AT I T W I L L M E A N OVER ANY 5-YEAR PERIOD: Organic Growth . . . Peer Group Average or Better EPS Growth . . . . . Top Quartile of Peer Group Dividend Growth . . Top Quartile of Peer Group Best-in-class Margins and ROIC Free Cash Flow 100%+ of Net Inc
Slide 12: Appendix
APPENDIX ITY
Slide 13: GAAP to non-GAAP reconciliations
G A A P TO N O N - G A A P R E C O N C I L I AT I O N S Segment Peer Group Definitions Adjusted Return on Average Invested Capital For the Years Ended Automotive OEM: Actuant, Allison Transmission Holdings Inc., Anixter, Delphi and BorgWarner Dollars in millions December 31, 2012 December 31, 2018 T
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