Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2009 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, 2009
Slide 1: ITW Conference Call Third Quarter 2009
ITW Conference Call Third Quarter 2009 1
Slide 2: Agenda
ITW Agenda 1. Introduction…………………...….. John Brooklier/David Speer 2. Financial Overview…………..….. Ron Kropp pp 3. Reporting Segments………....…. John Brooklier 4 2009 Fourth Quarter Forecast…… 4. Forecast 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 statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding operating performance performance, revenue growth, growth diluted income per share
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-1074 No pass code necessary Telephone replay available through midnight of November 3, 2009 Webcast / PowerPoint replay available at itw.com website 4
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2008 2009 F(U) Last Year Q3 Q3 Amount % Operating Revenues 4,464.6 3,580.4 (884.2) -19.8% Operating Income 671 0 671.0 483 6 483.6 (187 4) (187.4) -27.9% 27 9% % of Revenues 15.0% 13.5% -1.5% Income from Continuing Operations Income Amount 464.6 303.0 ((161.6)) -34.8% Income
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 -17.9% -48.4% -5.6% Changes in VM & OH costs - 31 7% 31.7% 5 8% 5.8% Total -17.9% -16.7% 0.2% Acquisitions/Divestitures 3.6% 1.4% -
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2008 2009 F(U) Last Year Q3 Q3 Amount % Operating Income 671 0 671.0 483 6 483.6 (187 4) (187.4) -27.9% 27 9% Interest Expense (38.3) (45.6) (7.3) Other Income 16.8 11.1 (5.7) I Income from f Continuing C ti i Operations-Pretax O ti P t 649 5 649.5 449 1 449.1 (200 4) (200.
Slide 8: Invested Capital
ITW Invested Capital 9/30/08 6/30/09 9/30/09 Trade Receivables 3 157 3 3,157.3 2 393 2 2,393.2 2 410 7 2,410.7 Days Sales Outstanding 63.6 63.5 60.6 Inventories 1,953.3 1,438.6 1,361.2 Months on Hand 2.0 1.9 1.8 Prepaids and Other Current Assets 513 7 513.7 453 4 453.4 327 1 327.1 Accounts Payable &
Slide 9: Debt & Equity
ITW Debt & Equity 9/30/08 6/30/09 9/30/09 Total Capital Short Term Debt 2,197.1 180.5 67.5 Long Term Debt 1 398 2 1,398.2 2 855 8 2,855.8 2 869 4 2,869.4 Total Debt 3,595.3 3,036.3 2,936.9 Stockholders' Equity 9,108.3 7,926.1 8,242.3 Total Capital 12,703.6 10,962.4 11,179.2 Less: Cash (867.6) (616.4
Slide 10: Cash Flow
ITW Cash Flow 2008 2009 Q3 Q3 Net Income 453.5 302.4 Adjust for Non-Cash Items 224.5 132.1 Changes in Operating Assets & Liabilities 10.8 134.7 Net Cash From Operating p g Activities 688.8 569.2 Additions to Plant & Equipment (89.3) (53.0) Free Operating Cash Flow 599.5 516.2 Stock Repurchases (406.
Slide 11: Acquisitions
ITW Acquisitions 2008 2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 A Annual l Revenues R A Acquired i d 230 308 847 154 75 54 6 Purchase Price Cash Paid 223 439 745 190 65 35 3 Number of Acquisitions 16 10 14 10 6 5 2 11
Slide 12: Industrial Packaging Quarterly Analysis
Industrial Packaging Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q3 694 3 694.3 77 4 77.4 11 2% 11.2% 2009 Q3 489.5 37.2 7.6% $ F(U) (204.8) (40.2) -3.6% % F(U) -29.5% -52.0% % F(U) Prior Year Base Business Operating Leverage -23.3% -83.6% -8.8% Changes in VM & OH c
Slide 13: Industrial Packaging Key Points
Industrial Packaging Key Points • Total segment base revenues show modest signs of improvement: -23.3% for Q3 ’09 vs. -26.1% for Q2 ’09 as industrial production metrics became less negative • Total North American industrial packaging business: -27.0% in Q3 ’09 vs. -31.9% in Q2 ’09 – End markets asso
Slide 14: Power Systems and Electronics Quarterly Analysis
Power Systems and Electronics Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q Q3 620.7 118.9 19.2% 2009 Q3 405.8 70.0 17.2% $ F(U) (214.9) (48.9) -2.0% % F(U) -34.6% -41.2% % F(U) Prior Year Base Business Operating Leverage -34.2% 34 2% -64.8% 64 8% -8.9% 8 9% Changes
Slide 15: Power Systems and Electronics Key Points
Power Systems and Electronics Key Points • Total segment g base revenues appear pp to have bottomed: -34.2% in Q3 ’09 vs. -36.5% in Q2 ’09 • In Q3, Welding Welding’ss worldwide base revenues: -36.2% 36.2% – Q3 North America base revenues:-40.0% – Q3 International base revenues:-26.7% • PC board base
Slide 16: Transportation Quarterly Analysis
Transportation Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q3 581 9 581.9 68 8 68.8 11 8% 11.8% 2009 Q3 540.9 57.0 10.5% $ F(U) (41.0) (11.8) -1.3% % F(U) -7.0% -17.0% % F(U) Prior Year Base Business O Operating ti Leverage L -7.9% 7 9% -24.2% 24 2% -2.1% 2 1% Chang
Slide 17: Transportation Key Points
Transportation Key Points • Total segment base revenues re en es (-7.9% ( 7 9% in Q3 ’09 vs. s -23.7% 23 7% in Q2 ’09) improved quarter to quarter as auto builds ramped up • Auto OEM/Tiers: – North American Auto Q3 base revenues: -14.3% 14 3% vs vs. -39.5% 39 5% in Q2 ’09 • North American auto build
Slide 18: Food Equipment Quarterly Analysis
Food Equipment Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q3 542.7 88.2 16.3% 2009 Q3 487.3 83.7 17.2% $ F(U) (55.4) (4.5) 0.9% % F(U) -10.2% -5.1% % F(U) Prior Year Base Business Operating Leverage -6.3% -16.0% -1.7% Changes in VM & OH costs - 19.5% 3.4% Total -6.
Slide 19: Food Equipment Key Points
Food Equipment Key Points • Total segment g base revenues: -6.3% in Q Q3 ’09 vs. -8.5% in Q2 ’09; best performing segment throughout 2009 • Service revenues: flat in Q3 ’09 vs. -1.1% in Q2 ’09 • International Q3 base revenues: -4.9% -4 9% in Q3 ’09 09 vs vs. -10.2% in Q2 ‘09 • North America Q3 base
Slide 20: Construction Products Quarterly Analysis
Construction Products Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q3 525.0 75.0 14.3% 2009 Q3 402.5 43.7 10.9% $ F(U) (122.5) (31.3) -3.4% % F(U) -23.3% -41.7% % F(U) Prior Year Base Business O Operating ti Leverage L -16.5% 16 5% -50.7% 50 7% -5.9% 5 9% Changes in
Slide 21: Construction Products Key Points
Construction Products Key Points • Total segment base revenues: -16.5% in Q3 ’09 vs. -22.1% in Q2 ’09 • North America Q3 base revenues: -27.3% vs. -34.0% in Q2 ‘09 – Q3 Residential: -30.4% base revenues vs. -43.2% in Q2 ’09; new housing starts continue to improve to near 600,000 units – Q3 Commercia
Slide 22: Polymers and Fluids Quarterly Analysis
Polymers and Fluids Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q3 369 4 369.4 53 6 53.6 14 5% 14.5% 2009 Q3 307.3 48.4 15.8% $ F(U) (62.1) (5.2) 1.3% % F(U) -16.8% -9.7% % F(U) Prior Year Base Business Operating Leverage -13.9% 13 9% -39.1% 39 1% -4.2% 4 2% Changes
Slide 23: Polymers and Fluids Key Points
Polymers and Fluids Key Points • Total segment base revenues: -13.9% in Q3 ’09 vs. -15.1% in Q2 ’09 as industrial production /MRO demand modestly improves • Worldwide Fluids: -11.9% in Q3 ’09 vs. -15.9% in Q2 ’09 – Both North America and International show improvement vs. Q2 ’09 • Worldwide Polymers
Slide 24: Decorative Surfaces Quarterly Analysis
Decorative Surfaces Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q3 316 9 316.9 27 1 27.1 8 6% 8.6% 2009 Q3 252.9 27.7 10.9% $ F(U) (64.0) 0.6 2.3% % F(U) -20.2% 1.9% % F(U) Prior Year Base Business Operating Leverage -15.6% -73.1% -5.8% Changes in VM & OH costs - 78
Slide 25: Decorative Surfaces Key Points
Decorative Surfaces Key Points • T Totall segment base b revenues: -15.6% 15 6% iin Q3 ’09 09 vs. -16.0% in Q2 ’09 • North America laminate Q3 base revenues: -20.6% in Q3 ’09 vs. -20.0% in Q2 ’09 – Weak commercial construction environment puts pressure on demand for high pressure laminate • Internat
Slide 26: All Other Quarterly Analysis
All Other Quarterly Analysis Operating Operating Operating Revenues Income Margins 2008 Q3 828 0 828.0 161 9 161.9 19 6% 19.6% 2009 Q3 702.7 116.0 16.5% $ F(U) (125.3) (45.9) -3.1% % F(U) -15.1% 1 1% -28.4% 28 4% % F(U) Prior Year Base Business Operating Leverage -18.9% -18 9% -43.8% -43 8% -6.0% -6
Slide 27: All Other Key Points
All Other Key Points • Total segment base revenues: -18.9% in Q3 ’09 vs. -20.0% in Q2 ’09 – Q3 worldwide consumer packaging base revenues: -11.7% 11 7% in Q3 vs vs. -12.9% 12 9% in Q2 ’09; Hi Hi-Cone Cone and Zip-Pak Zip Pak units had strong revenue performance in the quarter – Q3 industrial/applian
Slide 28: 4th Quarter 2009 Forecast
ITW 4th Quarter Q t 2009 F Forecastt Mid Low High Point 4th Quarter 2009 (versus 4th Quarter 2008) Total Revenues -11% -5% -8% Diluted Income per Share - Continuing $0.54 $0.66 $0.60 % F(U) 4th Quarter 2008 -8% 8% 12% 2% 4th Quarter 2009 (versus 3rd Quarter 2009) Total Revenues -1% 1% 5% 2% Diluted
Slide 29: 4th Quarter 2009 Forecast Key Assumptions
ITW 4th Quarter 2009 Forecast Key Assumptions • Exchange rates hold at current levels • Restructuring costs of $25 to $40 million ((versus $ $31 million in 3rd q quarter 2009)) • Net nonoperating expense, including interest expense and other nonoperating income, of $35 to $45 million ((versus $35 mi
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Third Quarter 2009 30