Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q2 2007 Earnings Presentation
29 slides from Illinois Tool Works's earnings presentation, Jul 19, 2007
Slide 1: ITW Conference Call Second Quarter 2007
Exhibit 99.2 ITW Conference Call Second Quarter 2007
Slide 2: ITW Agenda
ITW Agenda 1. Introduction…………………….John Brooklier/David Speer 2. Financial Overview……………… Ron Kropp 3. Manufacturing Segments………. John Brooklier 4. Forecast 2007………………….… Ron Kropp 5. Q & A…………..…..John Brooklier/Ron Kropp/David Speer
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, base revenue growth, earnings growth, operating income, tax
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 402-220-0196 No pass code necessary Telephone replay available through midnight of August 2, 2007 Webcast / PowerPoint replay available at itw.com website
Slide 5: ITW Quarterly Highlights
ITW Quarterly Highlights 2006 2007 F(U) Last Year Q2 Q2 Amount % Operating Revenues 3,579.5 4,159.7 580.2 16.2% Operating Income 659.8 698.7 38.9 5.9% % of Revenues 18.4% 16.8% -1.6% Net Income Income Amount 465.9 505.6 39.7 8.5% Income Per Share-Diluted 0.81 0.90 0.09 11.1% Average Invested Capital
Slide 6: ITW Quarterly Operating Analysis
ITW Quarterly Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage 2.4% 5.2% 0.5% Nonvolume-related - -1.8% -0.3% Total 2.4% 3.4% 0.2% Acquisitions 12.0% 1.7% -1.7% Divestitures -1.3% -0.8% 0.1% Translation 3.6% 3.1
Slide 7: ITW Non Operating & Taxes
ITW Non Operating & Taxes 2006 2007 F(U) Last Year Q2 Q2 Amount % Operating Income 659.8 698.7 38.9 5.9% Interest Expense (19.0) (25.6) (6.6) Other Income 25.7 44.1 18.4 Net Income-P/T 666.5 717.2 50.7 7.6% Income Taxes 200.6 211.6 (11.0) % to Pre Tax Income 30.1% 29.5% 0.6% Net Income-AT 465.9 505.
Slide 8: ITW Invested Capital
ITW Invested Capital 6/30/06 3/31/07 6/30/07 Trade Receivables 2,374.2 2,681.5 2,882.7 Days Sales Outstanding 59.7 64.2 62.4 Inventories 1,370.0 1,601.7 1,612.4 Months on Hand 1.8 2.0 1.8 Other Current Assets 612.9 646.6 677.7 Accounts Payable & Accruals (1,880.4) (2,179.5) (2,292.1) Operating Worki
Slide 9: ITW Debt & Equity
ITW Debt & Equity 6/30/06 3/31/07 6/30/07 Total Capital Short Term Debt 91.7 577.1 528.1 Long Term Debt 960.2 956.3 956.6 Total Debt 1,051.9 1,533.4 1,484.7 Stockholders' Equity 8,593.9 9,156.8 9,388.4 Total Capital 9,645.8 10,690.2 10,873.1 Less: Cash (459.2) (574.6) (481.5) Net Debt & Equity 9,186
Slide 10: ITW Cash Flow
ITW Cash Flow 2006 2007 Q2 Q2 Net Income 465.9 505.6 Adjust for Non-Cash Items 130.7 98.8 Changes in Operating Assets & Liabilities (235.0) (72.8) Net Cash From Operating Activities 361.6 531.6 Additions to Plant & Equipment (76.7) (89.0) Free Operating Cash Flow 284.9 442.6 Stock Repurchase - (300.
Slide 11: ITW Return on Average Invested Capital
ITW Return on Average Invested Capital 2006 2007 F(U) Q2 Q2 Prior Yr. Operating Income after Taxes 461.2 492.6 31.4 Operating Margins 12.9% 11.8% -1.1% Average Invested Capital 8,994.0 10,253.6 (1,259.6) Capital Turnover 1.59 1.62 0.03 Return on Average Invested Capital 20.5% 19.2% -1.3% 2006 2007 F
Slide 12: ITW Acquisitions
ITW Acquisitions 2006 2007 Q1 Q2 Q3 Q4 Q1 Q2 Annual Revenues Acquired 353 154 388 820 399 213 Purchase Price Cash Paid 199 82 447 650 269 219 Stock Issued 163 - - - - - Total 362 82 447 650 269 219 Number of Acquisitions North America Engineered Products 2 4 5 4 2 3 Specialty Systems 2 4 4 4 1 1 Int
Slide 13: Key Economic Data
Key Economic Data • Stronger fundamentals in Europe EuroZone Purchasing Managers Index: 55.6% in June ’07 vs. 55.4% in March ’07 EuroZone industrial production: 2.3% in May ’07 vs. 4.2% in February ’07 • German industrial production: 4.6% in May ’07 vs. 7.6% in February ’07 • US Industrial Productio
Slide 14: ITW Engineered Products - North America
ITW Engineered Products - North America 2006 2007 F(U) Last Year Q2 Q2 Amount % Operating Revenues 1,091.7 1,088.9 (2.8) -0.3% Operating Income 209.7 194.5 (15.2) -7.3% Operating Margins 19.2% 17.9% -1.3%
Slide 15: Engineered Products - North America Quarterly Analysis
Engineered Products - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage -3.3% -7.0% -0.7% Nonvolume-related - -0.6% -0.1% Total -3.3% -7.6% -0.8% Acquisitions 3.5% 1.5% -0.4% Divestitures -0.6% -0.4% 0.1% Transla
Slide 16: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction base revenues: -5% for Q2 ’07 vs. -10% for Q1 ’07 • ITW construction (tools/fasteners/trusses) base revenues: -9% for Q2 ’07 vs. -12% for Q1 ’07 - new housing: -19% in Q2 ’07 - renovation: +6% in Q2 ’07 - commercial: -3% in Q2 ’07 •
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: -4% for Q2 ’07 vs. -7% for Q1 ’07 • Detroit 3 build rates: -7% for Q2 ’07 vs. -12% for Q1 ’07 – GM: -7% for Q2 ’07 – Ford: -10% for Q2 ’07 – Chrysler: -2% for Q2 ’07 • New domestic build rates: +9% for Q2 ’07 • Detroit 3 inventorie
Slide 18: ITW Engineered Products - International
ITW Engineered Products - International 2006 2007 F(U) Last Year Q2 Q2 Amount % Operating Revenues 736.6 976.7 240.1 32.6% Operating Income 110.5 148.0 37.5 34.0% Operating Margins 15.0% 15.2% 0.2%
Slide 19: Engineered Products - International Quarterly Analysis
Engineered Products - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 7.2% 19.3% 1.7% Nonvolume-related - -5.5% -0.8% Total 7.2% 13.8% 0.9% Acquisitions 16.1% 9.4% -0.9% Divestitures - - - Translation 9.3% 10.5
Slide 20: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +10% in Q2 ’07 – Europe: +12% (growth in many countries: Germany, France and U.K.) – Asia-Pacific: +10% (commercial/retail strength in Australia/New Zealand) – Wilsonart Intl.: +5% (strength in Germany) • Automotive base re
Slide 21: ITW Specialty Systems - North America
ITW Specialty Systems - North America 2006 2007 F(U) Last Year Q2 Q2 Amount % Operating Revenues 1,134.5 1,253.5 119.0 10.5% Operating Income 232.3 238.3 6.0 2.6% Operating Margins 20.5% 19.0% -1.5%
Slide 22: Specialty Systems - North America Quarterly Analysis
Specialty Systems - North America Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 0.4% 0.8% 0.1% Nonvolume-related - 2.0% 0.4% Total 0.4% 2.8% 0.5% Acquisitions 11.7% 1.3% -1.9% Divestitures -1.8% -0.8% 0.2% Translation 0.2%
Slide 23: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Segment base revenues were up marginally in Q2 ’07 as industrial production rate grew approximately 1.0% in Q2 ’07 – Food Equipment base revenues: 7% growth in Q2 ’07 as service and restaurant/institutional side of business prospers – Welding base reven
Slide 24: ITW Specialty Systems - International
ITW Specialty Systems - International 2006 2007 F(U) Last Year Q2 Q2 Amount % Operating Revenues 719.6 960.4 240.8 33.5% Operating Income 107.3 117.9 10.6 9.9% Operating Margins 14.9% 12.3% -2.6%
Slide 25: Specialty Systems - International Quarterly Analysis
Specialty Systems - International Quarterly Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Business Operating Leverage 8.8% 23.1% 2.0% Nonvolume-related - -8.0% -1.1% Total 8.8% 15.1% 0.9% Acquisitions 19.6% -4.9% -2.9% Divestitures -2.8% -2.2% - Translation 7.
Slide 26: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Strong economic/end market fundamentals serve as backdrop for business units in segment – Welding: base revenue +15% in Q2 ’07 due to demand from energy/shipbuilding customers – Finishing: base revenues +14% in Q2 ’07 due to strong demand for powder-bas
Slide 27: ITW 2007 Forecast
ITW 2007 Forecast Mid Low High Point 3rd Quarter Base Revenues 3.0% 5.0% 4.0% Income Per Share-Diluted $0.85 $0.89 $0.87 % F(U) 2006 9% 14% 12% Full Year Base Revenues 2.1% 4.1% 3.1% Income Per Share-Diluted $3.31 $3.41 $3.36 % F(U) 2006 10% 13% 12%
Slide 28: ITW 2007 Forecast Key Assumptions
ITW 2007 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $900 million to $1.2 billion range. • Share repurchases of $700 million to $900 million for the year. • Restructuring cost of $35 to $50 million. • No further impairment of goodwill/intangibles. • N
Slide 29: ITW Conference Call Q & A
ITW Conference Call Q&A Second Quarter 2007