Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2004 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Oct 19, 2004
Slide 1: ITW Conference Call Third Quarter 2004
Exhibit 99.2 ITW Conference Call Third Quarter 2004
Slide 2: Agenda
ITW Agenda 1. Introduction……………………..John Brooklier 2. Financial Overview……………...Jon Kinney 3. Manufacturing Segments……… John Brooklier 4. Forecast 2004………………….…Jon Kinney 5. Q & A………………...…………Kinney/Brooklier
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 base business and future tax rate expectations for full
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-0331 No pass code necessary Telephone replay available through midnight of November 2, 2004 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2003 2004 F(U) Last Year Q3 Q3 Amount % Operating Revenues 2,531.9 2,967.2 435.3 17.2% Operating Income 426.7 512.2 85.5 20.0% % of Revenues 16.9% 17.3% 0.4% Income From Continuing Operations Income Amount 269.8 330.1 60.3 22.3% Income Per Share-Diluted 0.87 1.09 0.22 25.3%
Slide 6: Leasing & Investments
ITW Leasing & Investments 2003 2004 F(U) Last Year Q3 Q3 Amount % Operating Revenues 28.4 23.6 (4.8) -16.9% Operating Income 24.7 20.2 (4.5) -18.2% Operating Margins 87.0% 85.6% -1.4%
Slide 7: Quarterly Operating Analysis
ITW Quarterly Operating Analysis Revenue Income Margins Base Manufacturing Business Operating Leverage 9.3% 22.5% 2.0% Nonvolume-related - -11.4% -1.8% Total 9.3% 11.1% 0.2% Acquisitions / Divestitures 5.7% 2.5% -0.5% Translation 3.1% 3.2% - Impairment - - - Restructuring - 4.2% 0.7% Leasing & Inves
Slide 8: Non Operating & Taxes
ITW Non Operating & Taxes 2003 2004 F(U) Last Year Q3 Q3 Amount % Operating Income 426.7 512.2 85.5 20.0% Interest Expense (16.1) (18.5) (2.4) Other Income 4.5 6.4 1.9 Income From Continuing Operations-P/T 415.1 500.1 85.0 20.5% Income Taxes 145.3 170.0 (24.7) % to Pre Tax Income 35.0% 34.0% 1.0% In
Slide 9: Invested Capital
ITW Invested Capital 9/30/03 6/30/04 9/30/04 Trade Receivables 1,701.9 1,979.8 1,983.6 Days Sales Outstanding 60.5 59.3 60.2 Inventories 980.0 1,098.2 1,142.5 Months on Hand 1.8 1.7 1.8 Other Current Assets 353.0 383.5 360.1 Accounts Payable & Accruals (1,452.4) (1,729.9) (1,910.1) Operating Working
Slide 10: Debt & Equity
ITW Debt & Equity 9/30/03 6/30/04 9/30/04 Total Capital Short Term Debt 70.2 60.0 97.1 Long Term Debt 926.2 923.5 924.0 Total Debt 996.4 983.5 1,021.1 Stockholders' Equity 7,399.7 8,210.2 7,543.3 Total Capital 8,396.1 9,193.7 8,564.4 Less: Leasing & Investments Debt (239.4) (143.7) (79.4) Cash (1,37
Slide 11: Cash Flow
ITW Cash Flow 2003 2004 Q3 Q3 Net Income 268.9 330.1 Adjust for Non-Cash Items 69.5 11.8 Changes in Operating Assets & Liabilities 56.6 110.2 Net Cash From Operating Activities 395.0 452.1 Additions to Plant & Equipment (60.8) (67.7) Proceeds from investments 15.6 18.8 Free Operating Cash Flow 349.8
Slide 12: Return on Average Invested Capital
ITW Return on Average Invested Capital 2003 2004 F(U) Current Quarter Q3 Q3 Prior Yr. Operating Income after taxes 277.3 338.1 60.8 Operating Margins 11.0% 11.4% 0.4% Average Invested Capital 6,823.1 7,533.8 710.7 Capital Turnover 1.48 1.58 0.10 Return on Average Invested Capital 16.3% 17.9% 1.6% 20
Slide 13: Acquisitions
ITW Acquisitions 2003 2004 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Annual Revenues Acquired 49 35 231 32 247 168 78 Purchase Price Cash Paid 44 30 74 56 184 193 62 Stock Issued - - - - 2 - - Total 44 30 74 56 186 193 62 Number of Acquisitions North America Engineered Products 1 - 3 3 2 1 1 Specialty Systems - 2 1 1 -
Slide 14: Key Economic Data
Key Economic Data • September ’04 ISM: 59% is same as August • US Industrial Production (ex. Tech.): +4.3% in September ’04 compared to +5.5% in August ’04 • Euro-Zone Industrial Production: +2.2% in August ’04 • Euro-Zone Purchasing Managers’ Index: 53% in September ’04 versus 53.9% in August ’04
Slide 15: Engineered Products - North America
ITW Engineered Products - North America 2003 2004 F(U) Last Year Q3 Q3 Amount % Operating Revenues 774.9 853.7 78.8 10.2% Operating Income 130.8 143.7 12.9 9.9% Operating Margins 16.9% 16.8% -0.1%
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 7.7% 18.9% 1.8% Nonvolume-related - -12.3% -1.9% Total 7.7% 6.6% -0.1% Acquisitions / Divestitures 2.4% 1.2% -0.2% Translation 0.1% 0.1% - Im
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: +7% for Q3 ’04 • ITW construction (Paslode/Buildex/Ramset/ITW Brands) base revenues: +14% for Q3; new housing and renovation markets most active • Wilsonart base revenues: +1%; commercial sales better; flooring flat • Total constru
Slide 18: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: +1% for Q3 ’04 • Big 3 build rates: -5% for Q3 – GM: -5% – Ford: -8% – Chrysler: -3% • September Big 3 inventories: 69 days – GM: 61 days – Ford: 74 days – Chrysler: 82 days • ITW build estimates for 2004: – Q4: -5% – FY: -4% • Ind
Slide 19: Engineered Products - International
ITW Engineered Products - International 2003 2004 F(U) Last Year Q3 Q3 Amount % Operating Revenues 461.3 618.1 156.8 34.0% Operating Income 63.6 95.4 31.8 50.0% Operating Margins 13.8% 15.4% 1.6%
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 9.5% 27.6% 2.3% Nonvolume-related - -9.4% -1.2% Total 9.5% 18.2% 1.1% Acquisitions / Divestitures 16.2% 12.3% -0.8% Translation 8.3% 10.8% 0.
Slide 21: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +8% in Q3 ’04 – Europe: +11% growth (strength in France, UK, Belgium, Italy, Denmark, Spain and Portugal) – Austral-Asia: +4% (Paslode in Australia) – Wilsonart Intl.: +11% (good activity in China and U.K.) • Automotive bas
Slide 22: Specialty Systems - North America
ITW Specialty Systems - North America 2003 2004 F(U) Last Year Q3 Q3 Amount % Operating Revenues 857.9 985.7 127.8 14.9% Operating Income 154.2 171.2 17.0 11.0% Operating Margins 18.0% 17.4% -0.6%
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 12.3% 29.1% 2.7% Nonvolume-related - -18.1% -2.9% Total 12.3% 11.0% -0.2% Acquisitions / Divestitures 2.4% -0.3% -0.4% Translation 0.2% 0.3% -
Slide 24: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: 25+% in Q3 ’04 due primarily to stronger equipment sales to construction and other end markets; consumables and components units also grew sales • Industrial packaging: Signode base revenue grew +14% in Q3; consumables / machinery
Slide 25: Specialty Systems - International
ITW Specialty Systems - International 2003 2004 F(U) Last Year Q3 Q3 Amount % Operating Revenues 502.1 597.6 95.5 19.0% Operating Income 53.4 81.7 28.3 53.0% Operating Margins 10.6% 13.7% 3.1%
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 5.1% 18.2% 1.3% Nonvolume-related - 0.7% 0.1% Total 5.1% 18.9% 1.4% Acquisitions / Divestitures 6.2% 2.9% -0.5% Translation 7.7% 11.7% 0.2% Imp
Slide 27: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Signode base revenues strengthen in Q3 ’04: -Europe: +7% -Asia/Pacific: +31% • Food Equipment: base revenues +3% in Q3 thanks to U.K. and China/Hong Kong • Finishing and welding: base revenues each grew 2%
Slide 28: 2004 Forecast
ITW 2004 Forecast Mid Low High Point 4th Quarter Base Revenues 6.7% 8.7% 7.7% Income Per Share-Diluted $1.16 $1.22 $1.19 %F(U) 2003 25% 31% 28% Full Year Base Revenues 7.7% 8.2% 8.0% Income Per Share-Diluted $4.34 $4.42 $4.38 %F(U) 2003 29% 31% 30%
Slide 29: 2004 Forecast Key Assumptions
ITW 2004 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $500 to $700 million range. • Restructuring cost of $15 to $25 million. • No further goodwill or intangible impairment cost. • Share repurchase will add approximately 7 to 8 cents per share for the
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Third Quarter 2004