Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q3 2010 Earnings Presentation
30 slides from Illinois Tool Works's earnings presentation, Oct 19, 2010
Slide 1: ITW Conference Call Third Quarter 2010
Exhibit 99.2 ITW Conference Call Third Quarter 2010 1
Slide 2: Agenda
ITW Agenda 1. Introduction…………………...….. John Brooklier/David Speer 2. Financial Overview…………..….. Ron Kropp pp 3. Reporting Segments………....…. John Brooklier 4 2010 Forecasts 4. Forecasts…………………… 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: 402-220-9717 No pass code necessary Telephone replay available through midnight of November 2, 2010 Webcast / PowerPoint replay available at itw.com website 4
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2009 2010 F(U) Last Year Q3 Q3 Amount % Operating Revenues 3,580.4 3 580 4 4,018.5 4 018 5 438.1 438 1 12.2% 12 2% Operating Income 483.6 640.5 156.9 32.4% % of Revenues 13.5% 15.9% 2.4% Income from Continuingg Operations p Income Amount 303.0 419.3 116.3 38.4% Income Per Sh
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 11.2% 35.3% 2.9% Changes in VM & OH costs - -11.1% -1.3% Total 11 2% 11.2% 24 2% 24.2% 1 6% 1.6% Acquisitions/Divestitures 3.5% 1.9
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2009 2010 F(U) Last Year Q3 Q3 Amount % Operating Income 483.6 640.5 156.9 32.4% Interest Expense (45.6) (43.2) 2.4 Other Income 11.1 16.0 4.9 Income from Continuing Operations-Pretax 449.1 613.3 164.2 36.6% Income Taxes 146.1 194.0 (47.9) % to Pretax Income 32.5% 31.6% 0.9
Slide 8: Invested Capital
ITW Invested Capital 9/30/09 6/30/10 9/30/10 Trade Receivables 2,410.7 2,582.7 2,627.7 Days Sales Outstanding 60.6 57.0 58.9 Inventories 1,361.2 1,458.2 1,544.7 Months on Hand 8 1.8 1.7 1.8 8 Prepaids and Other Current Assets 327.1 243.4 286.0 Accounts Payable & Accrued Expenses (2,018.1) (2,004.8)
Slide 9: Debt & Equity
ITW Debt & Equity 9/30/09 6/30/10 9/30/10 Total Capital Short Term Debt 67.5 305.9 644.9 Long Term Debt 2 869 4 2,869.4 2 724 3 2,724.3 2 737 3 2,737.3 Total Debt 2,936.9 3,030.2 3,382.2 Stockholders' Equity 8,242.3 8,731.9 8,890.8 Total Capital 11,179.2 11,762.1 12,273.0 Less: Cash (942.9) (1,265.2
Slide 10: Cash Flow
ITW Cash Flow 2009 2010 Q3 Q3 Net Income 302.4 419.3 Adjust for Non-Cash Items 132.1 120.7 Changes in Operating Assets & Liabilities 134.7 (56.0) Net Cash From Operating p g Activities 569.2 484.0 Additions to Plant & Equipment (53.0) (72.2) Free Operating Cash Flow 516.2 411.8 Stock Repurchases - (
Slide 11: Acquisitions
ITW Acquisitions 2009 2010 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Annual Revenues Acquired 75 54 6 155 26 253 120 Purchase Price Cash Paid 65 33 3 185 25 198 151 Number of Acquisitions 6 5 2 7 4 7 5 11
Slide 12: Transportation Quarterly Analysis
Transportation Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q3 539 4 539.4 54 7 54.7 10 1% 10.1% 2010 Q3 627.4 93.2 14.9% $ F(U) 88.0 38.5 4.8% % F(U) 16.3% 70.5% % F(U) Prior Year Base Business O Operating ti Leverage L 15.8% 15 8% 57.5% 57 5% 3.7% 3 7% Changes in V
Slide 13: Transportation Key Points
Transportation Key Points • Transportation segment benefited from our ongoing penetration into Auto OEM platforms; strong build environment also continued in Q3 ’10 • Auto OEM/Tiers: Worldwide base revenues +21.3% in Q3 ’10 vs. Q3 ’09 – North American Q3 ’10 base revenues: +28.5% vs. Q3 ’09 • North
Slide 14: Industrial Packaging Quarterly Analysis
Industrial Packaging Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q3 498 3 498.3 37 2 37.2 7 5% 7.5% 2010 Q3 580.2 67.1 11.6% $ F(U) 81.9 29.9 4.1% % F(U) 16.4% 80.5% % F(U) Prior Year Base Business Operating Leverage 16.4% 90.9% 4.8% Changes in VM & OH costs - -35.1
Slide 15: Industrial Packaging Key Points
Industrial Packaging Key Points • Total segment g base revenue growth g of 16.4% in Q3 Q ’10 reflected gains for many of our businesses; most end markets remained at sustainable levels – Total Q3 ’10 North America industrial ppackaging g g base revenues: +19.5% vs. Q3 ’09 – Total Q3 ’10 internationa
Slide 16: Food Equipment Quarterly Analysis
Food Equipment Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q3 487.3 83.7 17.2% 2010 Q3 476.4 84.0 17.6% $ F(U) (10.9) 0.3 0.4% % F(U) -2.3% 0.4% % F(U) Prior Year Base Business Operating Leverage 1.4% 3.5% 0.4% Changes in VM & OH costs - 1.0% 0.2% Total 1.4% 4.5% 0.
Slide 17: Food Equipment Key Points
Food Equipment Key Points • Total segment Q3 ’10 base revenues: +1.4% vs. Q3 ’09 customers ’09; t d delayed l d equipment i t purchases h but b t continued to invest in our service support • North America Q3 ’10 base revenues: flat vs. Q3 ’09 – Equipment base revenues: -3.8% in Q3 ’10 vs. Q3 ’09 – S
Slide 18: Power Systems and Electronics Quarterly Analysis
Power Systems and Electronics Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q Q3 402.4 70.0 17.4% 2010 Q3 497.6 109.3 22.0% $ F(U) 95.2 39.3 4.6% % F(U) 23.7% 56.2% % F(U) Prior Year Base Business Operating Leverage 23.8% 23 8% 56.1% 56 1% 4.5% 4 5% Changes in VM & OH
Slide 19: Power Systems and Electronics Key Points
Power Systems and Electronics Key Points • Total Q3 ’10 segment base revenue increase +23.8% due to strong g contributions from welding g and PC board fabrication units • In Q3 ’10, 10, worldwide welding base revenues: +14.8% 14.8% vs. Q3 ’09 – Q3 ’10 North America welding base revenues: +19.4% vs.
Slide 20: Construction Products Quarterly Analysis
Construction Products Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q3 402.6 43.7 10.9% 2010 Q3 446.6 52.5 11.8% $ F(U) 44.0 8.8 0.9% % F(U) 10.9% 20.1% % F(U) Prior Year Base Business O Operating ti Leverage L 4.0% 4 0% 15.4% 15 4% 1.2% 1 2% Changes in VM & OH costs
Slide 21: Construction Products Key Points
Construction Products Key Points • Total segment base revenue growth of 4.0% due to more stable international construction demand;; North America end markets weaker • International Q3 ’10 10 base revenues: +7 +7.0% 0% vs vs. Q3 ’09 09 – Q3 ’10 Europe base revenues: +13.3% vs. Q3 ‘09 – Q3 ’10 Asia-Pa
Slide 22: Polymers and Fluids Quarterly Analysis
Polymers and Fluids Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q3 317 9 317.9 50 9 50.9 16 0% 16.0% 2010 Q3 334.7 55.0 16.4% $ F(U) 16.8 4.1 0.4% % F(U) 5.3% 8.1% % F(U) Prior Year Base Business Operating Leverage 4.3% 4 3% 11.5% 11 5% 1.1% 1 1% Changes in VM & OH
Slide 23: Polymers and Fluids Key Points
Polymers and Fluids Key Points • Total Q3 ’10 segment base revenue growth of 4.3% due to better international demand but slower than expected growth in key North American end markets • Q3 ’10 worldwide polymers: – International base revenues: +8.1% 8.1% vs. Q3 ’09 09 – North America base revenues:-7
Slide 24: Decorative Surfaces Quarterly Analysis
Decorative Surfaces Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q3 252 9 252.9 27 7 27.7 10 9% 10.9% 2010 Q3 252.7 26.9 10.7% $ F(U) (0.2) (0.8) -0.2% % F(U) - -2.7% % F(U) Prior Year Base Business Operating Leverage 3.1% 11.8% 0.9% Changes in VM & OH costs - -8.6%
Slide 25: Decorative Surfaces Key Points
Decorative Surfaces Key Points • Total Q3 ’10 10 segment base revenues: +3 +3.1% 1% vs vs. Q3 ’09 09 • North America laminate Q3 ’10 base revenues: +5.0% vs. Q3 ’09 due to increased buying by office equipment customers and improved demand for retail outlet remodeling • International Q3 ’10 base reve
Slide 26: All Other Quarterly Analysis
All Other Quarterly Analysis Operating Operating Operating Revenues Income Margins 2009 Q3 697 0 697.0 115 8 115.8 16 6% 16.6% 2010 Q3 826.3 152.4 18.4% $ F(U) 129.3 36.6 1.8% % F(U) 18 6% 18.6% 31 % 31.7% % F(U) Prior Year Base Business Operating Leverage 13.7% 13 7% 39.6% 39 6% 3.8% 3 8% Changes i
Slide 27: All Other Key Points
All Other Key Points • Total Q3 ’10 segment base revenues: +13.7% vs. Q3 ’09 • Q3 ’10 worldwide test and measurement base revenues: +8.9% vs. Q3 ’09; service and consumables helped drive growth; Cap Ex recovery next? • Q3 ’10 worldwide consumer packaging base revenues: +9.9% vs. Q3 ’09 due to streng
Slide 28: 2010 Forecast
ITW 2010 F Forecastt Mid Low High Point 4th Quarter 2010 Total Revenues 7% 9% 8% Diluted Income per Share - Continuing $0 74 $0.74 $0 82 $0.82 $0 78 $0.78 % F(U) 4th Quarter 2009* 21% 34% 28% Full Year 2010 Total Revenues 13% 14% 14% Diluted Income per Share - Continuing $2.99 $3.07 $3.03 % F(U) 200
Slide 29: 2010 Forecast Key Assumptions
ITW 2010 Forecast Key Assumptions • Exchange rates hold at current levels • Acquired revenues in the $500 to $700 million range for the year • Q4 operating margins expected to be in a range of 14.2% to 15.2% which would be lower than 3rd quarter margins primarily due to North America/International m
Slide 30: ITW Conference Call Q&A
ITW Conference Call Q&A Third Quarter 2010 30