Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Investor Day (December 2017)
68 slides from Illinois Tool Works's investor day presentation, Dec 1, 2017
Slide 1: 2017 Investor Day
2017 Investor Day December 1, 2017 1
Slide 2: Presenters
PRESENTERS E. SCOTT SANTI CHRISTOPHER A. O’HERLIHY MICHAEL M. LARSEN Chairman & CEO Vice Chairman SVP & CFO 35 28 5 YEARS WITH ITW YEARS WITH ITW YEARS WITH ITW CEO SINCE VICE CHAIRMAN SINCE CFO SINCE 2012 2015 2013 2017 INVESTOR DAY | 2
Slide 3: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS 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 and timing of enterprise initiatives and related b
Slide 4: Agenda
AGENDA 1 ITW’s STRATEGIC FRAMEWORK 2 STRATEGIC FRAMEWORK IMPLEMENTATION PHASE I: REPOSITIONING (2013 - 2018+) PHASE II: SUSTAINING (2018 - 2022) 3 ANNUAL PERFORMANCE GOALS: 2018 - 2022 4 2018 GUIDANCE 5 SUMMARY / MOVING FORWARD 6 BREAK 7 Q&A 2017 INVESTOR DAY | 4
Slide 5: Highly Successful 105 Year History
HIGHLY SUCCESSFUL 105 YEAR HISTORY Total Annualized Shareholder Return ITW’s Enduring Performance: Since 1980 • Willing to CRITICALLY ASSESS our strategic positioning at key points in our history… • … and CHANGE COURSE when necessary to sustain differentiated performance 17% 11% ITW S&P 500 Chicago
Slide 6: Plateauing Company Performance
2011 - 2012: OUR MOST RECENT STRATEGIC PIVOT POINT PLATEAUING COMPANY PERFORMANCE ACQUISITION-CENTRIC Accumulated GLOBALIZATION = growth strategy not sustainable ORGANIZATIONAL increasingly intense COMPLEXITY competitive environment from 600+ acquisitions over 25 years 2017 INVESTOR DAY | 6
Slide 7: Maximize ITW's Potential to Consistently Deliver Differentiated Performance
OBJECTIVES OF OUR 2011 - 2012 STRATEGY “REFRESH”: 1 2 MAXIMIZE ITW’S BEST POSITION ITW POTENTIAL TO AS A HIGHLY VALUED AND CONSISTENTLY DELIVER CORE HOLDING DIFFERENTIATED FOR LONG-TERM PERFORMANCE ORIENTED INVESTORS IN AN INCREASINGLY COMPETITIVELY INTENSE AND VOLATILE GLOBAL MARKET ENVIRONMENT 201
Slide 8: Our Strategic Framework
OUR STRATEGIC FRAMEWORK $ INVEST ONLY OUR BUSINESS GROWTH: “DO WHAT WE SAY” MODEL IS OUR COMPETITIVE QUALITY OVER EXECUTION IS A CRITICAL WHERE WE HAVE COMPELLING = COMPETITIVE ADVANTAGE QUANTITY DIFFERENTIATOR ADVANTAGE SOLID GROWTH WITH BEST-IN-CLASS MARGINS AND RETURNS 2017 INVESTOR DAY | 8
Slide 9: Strategy Framework Implementation
STRATEGY FRAMEWORK IMPLEMENTATION PHASE I – REPOSITIONING (2013 - 2018+) 1 2 3 4 NARROW THE FOCUS SIMPLIFY AND SCALE-UP BETTER LEVERAGE ITW’S SHIFT PRIMARY GROWTH AND IMPROVE THE ITW’S OPERATING SCALE TO ENHANCE FOCUS QUALITY OF ITW’S STRUCTURE GLOBAL BUSINESS PORTFOLIO COMPETITIVENESS From acquisit
Slide 10: Our Business Model is our Competitive Advantage
Our Business Model is our Competitive Advantage 10
Slide 11: Our Business Model Is Our Competitive Advantage
OUR BUSINESS MODEL IS OUR COMPETITIVE ADVANTAGE • The ITW Business Model is a POWERFUL and PROPRIETARY set of strategic, operational and cultural practices that have been in a continual state of development and evolution inside ITW for over 30 years • It is the “VALUE-ADD” from being part of ITW • G
Slide 12: Our Business Model Is Our Competitive Advantage
OUR BUSINESS MODEL IS OUR COMPETITIVE ADVANTAGE 80/20 Front to Back Process: HOW WE OPERATE Customer-Back Innovation: HOW WE INNOVATE Decentralized, Entrepreneurial Culture: HOW WE EXECUTE 2 0 1 7 I N V E S T O R D A Y | 12
Slide 13: 80/20 Front to Back: How We Operate
80/20 FRONT TO BACK: HOW WE OPERATE • ITW’s 80/20 Front to Back process is a UNIQUE and PROPRIETARY methodology used as the core operating system in all ITW Divisions 20 • IMPROVES ALL ASPECTS OF THE BUSINESS 80 • Intense focus on the “80” • Minimize cost / distraction from the “20” • Heavily data d
Slide 14: Customer-Back Innovation: How We Innovate
CUSTOMER-BACK INNOVATION: HOW WE INNOVATE Customer-Back Innovation enables our divisions to deliver a STEADY FLOW OF DIFFERENTIATED NEW PRODUCTS AND SOLUTIONS for our “80” customers A key contributor to ITW’s ability to deliver consistent ABOVE-MARKET REVENUE GROWTH • Contributes 1+% Organic Growth
Slide 15: ITW's Decentralized Entrepreneurial Culture: How We Execute
ITW’S DECENTRALIZED ENTREPRENEURIAL CULTURE: HOW WE EXECUTE ITW’s decentralized entrepreneurial culture is the engine that drives the highly efficient conversion of STRATEGY into ACTION and ACTION into RESULTS 2 0 1 7 I N V E S T O R D A Y | 15
Slide 16: ITW Segment Operating Margin vs. Peer Average
OUR BUSINESS MODEL IS OUR COMPETITIVE ADVANTAGE ITW SEGMENT OPERATING MARGIN VS. PEER AVERAGE* 2017E 22% 27% 27% 27% 25% 25% 24% 23% 18% 14% 14% 13% 11% 15% Automotive OEM Test and Measurement Food Equipment Polymers & Fluids ** Welding Construction Products Specialty Products & Electronics ** * See
Slide 17: Focused on Leveraging Our Business Model to Full Potential
OUR BUSINESS MODEL IS OUR COMPETITIVE ADVANTAGE FOCUSED ON LEVERAGING OUR BUSINESS MODEL TO FULL POTENTIAL 1. High Degree of PORTFOLIO DISCIPLINE 2. EXCELLENCE in the PRACTICE of the ITW BUSINESS MODEL • Everywhere in the company, every day 2 0 1 7 I N V E S T O R D A Y | 17
Slide 18: Leveraging Our Business Model to Full Potential
LEVERAGING OUR BUSINESS MODEL TO FULL POTENTIAL PORTFOLIO DISCIPLINE + EXCELLENCE IN BUSINESS MODEL PRACTICE +340 +580 +950 +550 +160 +1,220 +780 bps bps bps bps bps bps bps 27% 27% 27% 25% 25% 25% 24% 23% 19% 19% 20% 20% 17% 12% Auto OEM Test and Measurement Food Equipment Polymers & Fluids * Weldi
Slide 19: Business Model Derived Competitive Advantage
OUR BUSINESS MODEL IS OUR COMPETITIVE ADVANTAGE BUSINESS MODEL DERIVED COMPETITIVE ADVANTAGE: 1. Enables a HIGHLY DIVERSIFIED Business Portfolio 2. Provides optionality to open up NEW AVENUES of PROFITABLE GROWTH over time BUT, WE HAVE TO CONTINUALLY EARN THE RIGHT TO BE A “MULTI-BUSINESS” COMPANY T
Slide 20: 2017E Operating Margin by Segment
OUR BUSINESS MODEL IS OUR COMPETITIVE ADVANTAGE END-MARKET “FIT” + EXCELLENCE IN BUSINESS MODEL PRACTICE = CONSISTENT PERFORMANCE ACROSS ITW’S BUSINESS PORTFOLIO 2017E OPERATING MARGIN 25% 27% 25% 27% 27% 23% 24% Automotive OEM Test and Measurement Food Equipment Polymers & Fluids * Welding Construc
Slide 21: Growth: Quality Over Quantity
Growth: Quality Over Quantity 21
Slide 22: Growth: Quality Over Quantity
GROWTH: QUALITY OVER QUANTITY • Consistent above-market ORGANIC GROWTH IS NET INCOME VS. FREE CASH FLOW OUR #1 GROWTH PRIORITY (2013 - 2017E) • We leverage our differentiated Business Model 108% to ensure that revenue growth achieved is of HIGH QUALITY • Best-in-class margins and returns on capital
Slide 23: Growth: Quality Over Quantity
GROWTH: QUALITY OVER QUANTITY To enable CONSISTENT HIGH QUALITY ORGANIC GROWTH, we have to construct and maintain a portfolio of highly DIFFERENTIATED businesses that can leverage the ITW Business Model to deliver above-market growth across a wide range of economic scenarios: B2B Sustainable ROOM BU
Slide 24: ITW's High Quality Portfolio: Organic Growth Potential
GROWTH: QUALITY OVER QUANTITY ITW’S HIGH QUALITY PORTFOLIO: ORGANIC GROWTH POTENTIAL Test & Organic Automotive Food Polymers Construction Specialty Measurement Welding Growth OEM Equipment & Fluids Products Products Electronics Market 1 - 2% 2 - 3% 2 - 3% 2 - 3% 2 - 3% 2 - 3% 1 - 2% Segment 5 - 6% 4
Slide 25: ITW Automotive OEM
ITW AUTOMOTIVE OEM $3.3B 23% 5 - 6% KEY COMPETITIVE ADVANTAGES 2017E 2017E ORGANIC • Deep engineering relationships with key global Auto OEMs REVENUES OPERATING GROWTH • Complex injection-molding and deep metal forming MARGIN POTENTIAL manufacturing capability • Ability to execute “copy exact” solut
Slide 26: ITW Test and Measurement & Electronics
ITW TEST AND MEASUREMENT & ELECTRONICS $2.0B 25% 4 - 5% KEY COMPETITIVE ADVANTAGES 2017E 2017E ORGANIC • Market leading technology and strong history of REVENUES OPERATING GROWTH innovation MARGIN* POTENTIAL • Long track record of providing differentiated customer solutions for a wide range of deman
Slide 27: ITW Food Equipment
ITW FOOD EQUIPMENT $2.1B 27% 4 - 5% KEY COMPETITIVE ADVANTAGES 2017E 2017E ORGANIC • Widely known and respected brands REVENUES OPERATING GROWTH • Strong track record of differentiated innovation MARGIN POTENTIAL • Fully integrated equipment and service solution offering with global scale and reach
Slide 28: ITW Polymers & Fluids
ITW POLYMERS & FLUIDS $1.7B 25% 3 - 4% KEY COMPETITIVE ADVANTAGES 2017E 2017E ORGANIC • Innovative technologies with well known and highly REVENUES OPERATING GROWTH regarded brands MARGIN* POTENTIAL • Well-positioned in highly stable value-added market niches ORGANIC GROWTH DRIVERS • Industry requir
Slide 29: ITW Welding
ITW WELDING $1.5B 27% 4 - 5% KEY COMPETITIVE ADVANTAGES 2017E 2017E ORGANIC • Deep technical welding process knowledge REVENUES OPERATING GROWTH • Strong innovation track record MARGIN POTENTIAL • Highly regarded and trusted brands • Market-leading channel positions/relationships ORGANIC GROWTH DRIV
Slide 30: ITW Construction Products
ITW CONSTRUCTION PRODUCTS $1.7B 24% 3 - 4% KEY COMPETITIVE ADVANTAGES 2017E 2017E ORGANIC • Deep fastening system engineering capabilities REVENUES OPERATING GROWTH • Highly regarded global brands MARGIN POTENTIAL • Strong channel partnerships • Market-leading cordless technology ORGANIC GROWTH DRIV
Slide 31: ITW Specialty Products
ITW SPECIALTY PRODUCTS $1.9B 27% 3 - 4% KEY COMPETITIVE ADVANTAGES 2017E 2017E ORGANIC • Proven packaging design and application capabilities REVENUES OPERATING GROWTH • Deep engineering and marketing relationships with major MARGIN POTENTIAL consumer products companies ORGANIC GROWTH DRIVERS • Incr
Slide 32: Growth: Quality Over Quantity
GROWTH: QUALITY OVER QUANTITY • 2013 - 2015: SHIFT PRIMARY GROWTH ENGINE TO ORGANIC • Re-align Portfolio • Business Structure Simplification/Scale Up • Prepare to Grow • 2016 - 2017: ORGANIC GROWTH FRAMEWORK • Divisions “Ready to Grow” • Organic Growth Framework Implemented • 2017 AND BEYOND: ACCELE
Slide 33: Solid Progress on Path to Sustained Above-Market Organic Growth
GROWTH: QUALITY OVER QUANTITY SOLID PROGRESS ON OUR PATH TO SUSTAINED ABOVE-MARKET ORGANIC GROWTH 3 to 5% ~2.5% 1.2% 2015 (0.4)% 2016 2017E 2018 - 2022 Annual Performance Goal 2 0 1 7 I N V E S T O R D A Y | 33
Slide 34: "Do What We Say" Execution is a Critical ITW Differentiator
“Do What We Say” Execution is a Critical ITW Differentiator 34
Slide 35: "Do What We Say" Execution Is a Critical Differentiator
“DO WHAT WE SAY” EXECUTION IS A CRITICAL DIFFERENTIATOR • Clear financial targets for which we are ACCOUNTABLE • Based on strategies ROOTED IN REALITY and EXECUTED AT THE RIGHT PACE • SIMPLE, STRAIGHTFORWARD and TRANSPARENT in everything we do ITW Investor Meeting December 14, 2012 2 0 1 7 I N V E S
Slide 36: ITW Culture: How We Execute
“DO WHAT WE SAY” EXECUTION IS A CRITICAL DIFFERENTIATOR ITW CULTURE: HOW WE EXECUTE At ITW, our DECENTRALIZED, ENTREPRENEURIAL CULTURE is the engine that translates STRATEGY into ACTION and ACTION into RESULTS 2 0 1 7 I N V E S T O R D A Y | 36
Slide 37: Flexibility Within the ITW Framework Operating Model
“DO WHAT WE SAY” EXECUTION IS A CRITICAL DIFFERENTIATOR “FLEXIBILITY WITHIN THE ITW FRAMEWORK” OPERATING MODEL • OUR VALUES Our Values • Trust • Integrity • Respect OUR • Simplicity FRAMEWORK • Shared Risk Our OUR Ensures that all Business “NON-NEGOTIABLES” divisions are • OUR BUSINESS MODEL Model w
Slide 38: Flexibility Within the ITW Framework Operating Model
“DO WHAT WE SAY” EXECUTION IS A KEY DIFFERENTIATOR “FLEXIBILITY WITHIN THE ITW FRAMEWORK” OPERATING MODEL Our Values OUR FRAMEWORK WITHIN OUR FRAMEWORK, Solid Growth Our our division leaders customize the Ensures that all with Best-in-Class Business application of ITW’s business model divisions are
Slide 39: Entrepreneurial: Decentralized Divisional Structure
“DO WHAT WE SAY” EXECUTION IS A CRITICAL DIFFERENTIATOR ENTREPRENEURIAL: Within our DECENTRALIZED divisional structure our leaders run REAL BUSINESSES They are empowered to THINK AND ACT LIKE OWNERS • Full Functional Control (No Matrix Structures) • Real P&L Ownership and Accountability 2 0 1 7 I N
Slide 40: Ownership and Accountability
“DO WHAT WE SAY” EXECUTION IS A KEY DIFFERENTIATOR OWNERSHIP ACCOUNTABILITY • Divisional goal setting and operational • Performance metrics are SIMPLE, planning are done “BOTTOM UP” CLEAR and CONSISTENT not “Top Down” across the company: • “CLOSE TO THE 1. Organic Growth CUSTOMER” decision making by
Slide 41: Invest Only Where We Have Compelling Competitive Advantage
Invest Only Where We Have Compelling Competitive Advantage 41
Slide 42: Invest Only Where We Have Compelling Competitive Advantage
INVEST ONLY WHERE WE HAVE COMPELLING COMPETITIVE ADVANTAGE Underpinning our Enterprise Strategy is a HIGHLY FOCUSED and DISCIPLINED Approach to Capital Allocation: • We only invest in areas of opportunity where we can leverage the ITW Business Model to create a compelling COMPETITIVE ADVANTAGE and d
Slide 43: Capital Allocation Priorities: % of Operating Cash Flow
INVEST ONLY WHERE WE HAVE COMPELLING COMPETITIVE ADVANTAGE OUR PRIORITIES: % OF OPERATING CASH FLOW 1 INTERNAL INVESTMENTS to support organic 25-30% growth and sustain core businesses 2 An ATTRACTIVE DIVIDEND 35-40% 3 EXTERNAL INVESTMENTS: Acquisitions that 30-40% expand ITW’s long-term organic grow
Slide 44: Internal Investments That Support Organic Growth
INVEST ONLY WHERE WE HAVE COMPELLING COMPETITIVE ADVANTAGE INTERNAL INVESTMENTS that support organic growth and sustain our core businesses are OUR NUMBER ONE capital allocation PRIORITY • All internal investments that meet our criteria are FULLY FUNDED • Capital is allocated to DISCRETE PROJECTS an
Slide 45: Dividend Growth History
INVEST ONLY WHERE WE HAVE COMPELLING COMPETITIVE ADVANTAGE 50+ YEAR HISTORY OF DIVIDEND GROWTH ANNUALIZED DIVIDEND PER SHARE 43% Current $3.12 Payout 15% Ratio* CAGR $2.60 $2.20 $1.94 +20% $1.68 +18% $1.52 +13% +15% +11% 2012 2013 2014 2015 2016 2017 *Dividend payout ratio = Annual dollars paid as a
Slide 46: Bolt-On Acquisitions and EF&C Acquisition
INVEST ONLY WHERE WE HAVE COMPELLING COMPETITIVE ADVANTAGE BOLT-ON ACQUISITIONS EF&C ACQUISITION TIGHT STRATEGIC FIT: Only acquisitions ~20% 1 that expand a segment’s long-term organic growth OPERATING MARGIN potential ~11% OPERATING $575M+ AND … MARGIN* 80/20 IMPACT: Has the potential to generate 2
Slide 47: Surplus Capital Returned Through Share Repurchases
INVEST ONLY WHERE WE HAVE COMPELLING COMPETITIVE ADVANTAGE SURPLUS CAPITAL RETURNED TO SHAREHOLDERS through Share Repurchases $4.3B • $11.4 BILLION of ”Surplus Capital” including divestiture proceeds and overseas cash allocated $3.2B to share repurchases since 2013 $2.1B $2B $2B • Share count reduce
Slide 48: Strategic Framework Implementation: Phase I and Phase II
STRATEGIC FRAMEWORK IMPLEMENTATION PHASE I PHASE II = REPOSITIONING = SUSTAINING DIFFERENTIATED PERFORMANCE 2013 - 2018+ 2018 - 2022 2 0 1 7 I N V E S T O R D A Y | 48
Slide 49: Phase I – Repositioning (2013 - 2018+)
PHASE I – REPOSITIONING (2013 - 2018+) ✓ Divested 30+ BUSINESSES (including two segments) over $5B in revenue ✓ Product Line Simplification: EXITED ~$415M IN REVENUE ✓ Business Structure Simplification: From 800 business units to 85 DIVISIONS ✓ CLARIFIED what BUSINESS MODEL EXCELLENCE “looks like” a
Slide 50: Enterprise Strategy Performance Since 2012
ENTERPRISE STRATEGY PERFORMANCE SINCE 2012 OPERATING MARGIN AFTER-TAX ROIC EARNINGS PER SHARE +860 +950 16% bps bps CAGR ~24.5% $6.67 ~24% 15.9% 14.5% $3.21 2012* 2017E 2012** 2017E 2012** 2017E * As reported in the 2012 Form 10-K ** See Appendix for GAAP to non-GAAP reconciliation 2 0 1 7 I N V E S
Slide 51: Expect Additional Improvement in 2018
PHASE I – REPOSITIONING (2013 - 2018+) EXPECT ADDITIONAL IMPROVEMENT IN 2018 FOR SURE, AND PROBABLY IN 2019 • Additional ~100 BASIS POINTS of MARGIN EXPANSION from Enterprise Initiatives in 2018 2 0 1 7 I N V E S T O R D A Y | 51
Slide 52: Phase II – 2018-2022 Annual Performance Goals
PHASE II – SUSTAINING DIFFERENTIATED PERFORMANCE ITW is well-positioned to deliver sustained DIFFERENTIATED PERFORMANCE OUR 2018 - 2022 ANNUAL PERFORMANCE GOALS: From 43% to 25+% 20+% 3 - 5% ~35% 8 - 10% 100+% Operating After-tax Organic Incremental EPS Free Cash Flow ~50% Margin ROIC Growth Margin
Slide 53: 2018 Guidance
ITWY 2018 Guidance
Slide 54: 2017 Guidance: On Track
2017 GUIDANCE: ON TRACK GAAP GUIDANCE INCL. LEGAL ITEM HIGHLIGHTS EXCL. LEGAL ITEM • EPS of $6.45 - $6.55, an increase of 14% $6.62 - $6.72 • Revenue growth of 4.5 - 5.5%, organic of 2 - 3% GAAP EPS • More than 1%-point organic improvement year-on-year $5.70 ~$14.3B • Key performance metrics at all-
Slide 55: 2018 Organic Growth Rate
2018 ORGANIC GROWTH RATE CONTINUED PROGRESS ON OUR PATH TO SUSTAINED ABOVE-MARKET ORGANIC GROWTH IN 2018 3 to 4% Includes ~2.5% ~0.5% PLS 1.2% 2015 (0.4)% 2016 2017E 2018 Guidance 2 0 1 7 I N V E S T O R D A Y | 55
Slide 56: 2018 Organic Growth by Segment
2018 ORGANIC GROWTH BY SEGMENT Test & Automotive Food Polymers Construction Specialty Measurement Welding OEM Equipment & Fluids Products Products Electronics 2017E ~4% ~3.5% ~1% ~1% ~3% ~2.5% ~3% 2018E 4 - 5% 4 - 5% 2 - 3% 2 - 3% 4 - 5% 3 - 4% 3 - 4% WELL-POSITIONED FOR CONTINUED PROGRESS IN 2018 2
Slide 57: 2018 Guidance
2018 GUIDANCE GAAP GUIDANCE INCL. LEGAL ITEM HIGHLIGHTS EXCL. LEGAL ITEM • High Quality EPS growth of 10% $7.05 - $7.25 • Revenue growth of 4 - 5%, organic of 3 - 4% GAAP EPS $6.62 - $6.72 • All seven segments with accelerating organic growth ~$14.9B • Key Performance Metrics – Continued Progress Re
Slide 58: 2017 to 2018 EPS Bridge
2017 TO 2018 EPS BRIDGE HIGH QUALITY EARNINGS GROWTH $0.15 $(0.15) $7.05 - $7.25 ~$0.30 FX & Shares Other •Interest Enterprise •Price/cost Initiatives ~$0.35 $6.62 - $6.72 $(0.17) Organic •80/20 Legal Item $6.45 - $6.55 Growth •Strategic Sourcing 2018 GAAP EPS •3 - 4% Organic @ 29% Tax •35% Incremen
Slide 59: Summary / Moving Forward
Summary / Moving Forward 59
Slide 60: Maximize ITW's Potential to Consistently Deliver Differentiated Performance
GOAL MAXIMIZE ITW’S POTENTIAL TO CONSISTENTLY DELIVER 1 DIFFERENTIATED PERFORMANCE 2018-2022 2012-2017E Annual Goals Operating Margin 16 24% 25+% After-tax ROIC 15 24% 20+% Annual Organic Growth (1) - 2.5% 3 - 5% Incremental Margin 30 - 35% ~35% Annual EPS Growth 10 - 29% 8 - 10% Free Cash Flow % of
Slide 61: Additional Growth Optionality from New Segment Additions
ADDITIONAL GROWTH OPTIONALITY FROM NEW SEGMENT ADDITIONS PARAMETERS: 1. GREAT “RAW MATERIAL”: Market characteristics a strong long-term fit with our business model 2. STRONG POTENTIAL FOR SUSTAINED ABOVE-MARKET ORGANIC GROWTH 3. SUBSTANTIAL MARGIN IMPROVEMENT POTENTIAL FROM 80/20 4. “SEGMENT SIZED”:
Slide 62: That Said…
THAT SAID… • We remain intensely focused on ORGANIC GROWTH ACCELERATION and high quality organic growth remains our #1 GROWTH PRIORITY • We DO NOT NEED ACQUISITIONS to achieve our 2018-2022 performance goals 2 0 1 7 I N V E S T O R D A Y | 62
Slide 63: Best Position ITW as a Highly Valued Core Holding
GOAL BEST POSITION ITW AS A HIGHLY VALUED CORE HOLDING FOR 2 LONG-TERM ORIENTED INVESTORS Strong, Enduring and Adaptable Diversified High-Quality Competitive Advantage: Business Portfolio: • Highly differentiated Business Model • Consistent above-market organic growth • Best-in-class margins • Diver
Slide 64: 15 Minute Break
15 Minute Break 64
Slide 65: Q&A
Q&A 65
Slide 66: Appendix
Appendix 66
Slide 67: GAAP to Non-GAAP Reconciliations
GAAP to Non-GAAP Reconciliations Operating Margin % 2012 Actuals 2017 Estimate Test & Test & Polymers & Polymers & Measurement/ Measurement/ Fluids Fluids Electronics Electronics Total Operating Margin 15.8% 14.9% 21.1% 21.7% Amortization expense from acquisition-related intangible assets 3.9% 4.2%
Slide 68: GAAP to Non-GAAP Reconciliations and Peer Group Definition
GAAP to Non-GAAP Reconciliations and Peer Group Definition Adjusted Return on Average Invested Capital For the Years Ended Dollars in millions December 31, Diluted EPS For the Year Ended December 2012 2013 31, 2012 Operating income, as reported $ 2,475 $ 2,514 As reported $ 4.72 Adjustment for Decor