Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q2 2005 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Jul 21, 2005
Slide 1: ITW Conference Call Second Quarter 2005
Exhibit 99.2 ITW Conference Call Second Quarter 2005
Slide 2: Agenda
ITW Agenda 1. Introduction……………………..John Brooklier 2. Financial Overview……………...Ron Kropp 3. Manufacturing Segments……… John Brooklier 4. Forecast 2005………………….…Jon Kinney 5. Q & A………………......…………Group
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 third quarter and full-year 20
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-1470 No pass code necessary Telephone replay available through midnight of August 4, 2005 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2004 2005 F(U) Last Year Q2 Q2 Amount % Operating Revenues 3,002.3 3,295.6 293.3 9.8% Operating Income 561.5 566.9 5.4 0.9% % of Revenues 18.7% 17.2% -1.5% Income From Continuing Operations Income Amount 360.4 373.8 13.4 3.7% Income Per Share-Diluted 1.16 1.29 0.13 11.2% Ave
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis Revenue Income Margins Base Manufacturing Business Operating Leverage 4.0% 8.6% 0.8% Nonvolume-related - -3.8% -0.7% Total 4.0% 4.8% 0.1% Acquisitions / Divestitures 4.4% 2.8% -0.3% Translation 2.9% 2.6% 0.0% Impairment - - - Restructuring - -1.7% -0.3% Leasing & Inv
Slide 7: Leasing & Investments
ITW Leasing & Investments 2004 2005 F(U) Last Year Q2 Q2 Amount % Operating Revenues 53.2 9.7 (43.5) -81.7% Operating Income 48.7 6.3 (42.4) -87.0% Operating Margins 91.5% 65.1% -26.4%
Slide 8: Non Operating & Taxes
ITW Non Operating & Taxes 2004 2005 F(U) Last Year Q2 Q2 Amount % Operating Income 561.5 566.9 5.4 0.9% Interest Expense (18.9) (27.4) (8.5) Other Income 3.5 6.9 3.4 Income From Continuing Operations-P/T 546.1 546.4 0.3 0.1% Income Taxes 185.7 172.6 13.1 % to Pre Tax Income 34.0% 31.6% 2.4% Income F
Slide 9: Invested Capital
ITW Invested Capital 6/30/04 3/31/05 6/30/05 Trade Receivables 1,979.8 2,132.5 2,134.2 Days Sales Outstanding 59.3 62.4 58.3 Inventories 1,098.2 1,361.4 1,274.5 Months on Hand 1.7 2.0 1.8 Other Current Assets 383.5 309.4 299.7 Accounts Payable & Accruals (1,729.9) (1,585.3) (1,583.6) Operating Worki
Slide 10: Debt & Equity
ITW Debt & Equity 6/30/04 3/31/05 6/30/05 Total Capital Short Term Debt 60.0 786.0 696.8 Long Term Debt 923.5 967.9 967.2 Total Debt 983.5 1,753.9 1,664.0 Stockholders' Equity 8,210.2 7,708.7 7,427.2 Total Capital 9,193.7 9,462.6 9,091.2 Less: Leasing & Investments Debt (143.7) (130.8) (116.0) Cash
Slide 11: Cash Flow
ITW Cash Flow 2004 2005 Q2 Q2 Net Income 360.4 373.8 Adjust for Non-Cash Items 52.8 68.6 Changes in Operating Assets & Liabilities (36.4) 55.9 Net Cash From Operating Activities 376.8 498.3 Additions to Plant & Equipment (69.2) (80.7) Proceeds from Investments 19.6 12.3 Free Operating Cash Flow 327.
Slide 12: Return on Average Invested Capital
ITW Return on Average Invested Capital 2004 2005 F(U) Current Quarter Q2 Q2 Prior Yr. Operating Income after Taxes 370.6 387.7 17.1 Operating Margins 12.3% 11.8% -0.5% Average Invested Capital 7,399.2 8,197.7 (798.5) Capital Turnover 1.62 1.61 (0.01) Return on Average Invested Capital 20.0% 18.9% -1
Slide 13: Acquisitions
ITW Acquisitions 2004 2005 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 247 168 78 131 151 36 - - Purchase Price Cash Paid 184 193 62 149 188 12 - - Stock Issued 2 - - - - - - - Total 186 193 62 149 188 12 - - Number of Acquisitions North America Engineered Products 2 1 1 1 1 1 - - Specialty Sys
Slide 14: Key Economic Data
Key Economic Data • June ’05 ISM: moved up to 53.8% from 51.4% in May ’05 • US Industrial Production (ex. Tech.): +2.4% in May ’05 compared to +4.1% in December ’04 • Euro-Zone Purchasing Managers’ Index: 49.9% in May ’05 versus 51.4% in December ’04 • Euro-Zone Industrial Production: +1.0% in most
Slide 15: Engineered Products - North America
ITW Engineered Products - North America 2004 2005 F(U) Last Year Q2 Q2 Amount % Operating Revenues 862.0 971.7 109.7 12.7% Operating Income 154.6 177.0 22.4 14.4% Operating Margins 17.9% 18.2% 0.3%
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 2.9% 6.7% 0.7% Nonvolume-related - 4.9% 0.9% Total 2.9% 11.6% 1.6% Acquisitions / Divestitures 9.5% 6.4% -0.6% Translation 0.3% 0.2% 0.0% Imp
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: +2% for Q2 ’05 • ITW construction (Paslode/Buildex/Ramset/ITW Brands) base revenues: +7% for Q2 ’05: - new housing: + 2% in Q2 ’05 - renovation: + 10% in Q2 ’05 - commercial: +6% in Q2 ’05 • Wilsonart (high pressure laminate): base
Slide 18: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: -1% for Q2 ’05 • Big 3 build rates: -6% for Q2 ’05 – GM: -11% – Ford: -6% – Chrysler: +5% – Transplants: +12% • Big 3 inventories: 62 days at 6-30-05 – GM: 47 days – Ford: 81 days – Chrysler: 75 days – Transplants: 52 days • ITW au
Slide 19: Engineered Products - International
ITW Engineered Products - International 2004 2005 F(U) Last Year Q2 Q2 Amount % Operating Revenues 652.8 708.9 56.1 8.6% Operating Income 102.1 101.8 (0.3) -0.3% Operating Margins 15.6% 14.4% -1.2%
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 -1.8% -4.7% -0.4% Nonvolume-related - -4.9% -0.8% Total -1.8% -9.6% -1.2% Acquisitions / Divestitures 4.0% 4.0% 0.1% Translation 6.4% 7.3% 0.
Slide 21: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: flat in Q2 ’05 – Europe: -2% (weakness in Germany, Belgium, Spain) – Austral-Asia: -1% (commercial/new housing weakness in Australia/New Zealand) – Wilsonart Intl.: +11% (good activity in China, Germany) • Automotive base r
Slide 22: Specialty Systems - North America
ITW Specialty Systems - North America 2004 2005 F(U) Last Year Q2 Q2 Amount % Operating Revenues 949.8 1,037.7 87.9 9.3% Operating Income 172.8 188.9 16.1 9.3% Operating Margins 18.2% 18.2% 0.0%
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 8.1% 18.3% 1.7% Nonvolume-related - -8.9% -1.5% Total 8.1% 9.4% 0.2% Acquisitions / Divestitures 0.6% 0.5% 0.0% Translation 0.6% 0.7% 0.0% Impa
Slide 24: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: 17% growth in Q2 ’05 due primarily to demand for replacement products and new product introductions • Food Equipment base revenues: +6% in Q2 ’05; growth due to restaurant/institutional customers and parts/service activity • Indus
Slide 25: Specialty Systems - International
ITW Specialty Systems - International 2004 2005 F(U) Last Year Q2 Q2 Amount % Operating Revenues 591.2 677.6 86.4 14.6% Operating Income 83.3 92.8 9.5 11.4% Operating Margins 14.1% 13.7% -0.4%
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 4.9% 13.7% 1.2% Nonvolume-related - -10.5% -1.4% Total 4.9% 3.2% -0.2% Acquisitions / Divestitures 3.3% 1.3% -0.3% Translation 6.4% 6.6% 0.1% I
Slide 27: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Signode base revenues continued to grow in Q2 ’05: -Europe: +7% -Asia/Pacific: +22% • Food Equipment: base revenues +2% in Q2 ’05; most growth emanating from refrigeration products in Europe and other products in Germany • Welding: base revenue grew 17%
Slide 28: 2005 Forecast
ITW 2005 Forecast Mid Low High Point 3rd Quarter Base Revenues 3.2% 5.2% 4.2% Income Per Share-Diluted $1.33 $1.39 $1.36 %F(U) 2004 22% 28% 25% Full Year Base Revenues 3.7% 4.7% 4.2% Income Per Share-Diluted $5.02 $5.14 $5.08 %F(U) 2004 14% 17% 16%
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. • Leasing & Investments income of $85 to $95 million, which is lower than 2004 by $35 to $45 million. • Tax rate of 32.0% for
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Second Quarter 2005