Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2006 Earnings Presentation
29 slides from Illinois Tool Works's earnings presentation, Jan 30, 2007
Slide 1: ITW Conference Call Fourth Quarter 2006
Exhibit 99.2 ITW Conference Call Fourth Quarter 2006
Slide 2: Agenda
ITW Agenda 1. Introduction…………………….. John Brooklier 2. Financial Overview……………... Ron Kropp 3. Manufacturing Segments……… John Brooklier 4. Forecast 2007………………….… Ron Kropp 5. Q & A………………......……………David Speer/Ron Kropp/John 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, base revenue growth, earnings growth, operating income, tax
Slide 4: Conference Call Playback
Conference Call Playback Replay number: 203-369-1295 No pass code necessary Telephone replay available through midnight of February 13, 2007 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2005 2006 F(U) Last Year Q4 Q4 Amount % Operating Revenues 3,252.2 3,640.5 388.3 11.9% Operating Income 557.1 594.3 37.2 6.7% % of Revenues 17.1% 16.3% -0.8% Net Income Income Amount 400.6 439.3 38.7 9.7% Income Per Share-Diluted 0.71 0.77 0.06 8.5% Average Invested Capital
Slide 6: Quarterly Operating Analysis
ITW Quarterly Operating Analysis % F(U) Prior Year Operating Operating Operating Revenues Income Margins Base Manufacturing Business Operating Leverage 2.2% 5.2% 0.5% Nonvolume-related - -1.3% -0.2% Total 2.2% 3.9% 0.3% Acquisitions / Divestitures 8.1% 0.2% -1.3% Translation 2.1% 1.6% - Impairment -
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2005 2006 F(U) Last Year Q4 Q4 Amount % Operating Income 557.1 594.3 37.2 6.7% Interest Expense (25.1) (26.9) (1.8) Investment Income 40.6 13.9 (26.7) Other Income(Expense) (0.2) 24.4 24.6 Net Income-P/T 572.4 605.7 33.3 5.8% Income Taxes 171.8 166.4 5.4 % to Pre Tax Income
Slide 8: Invested Capital
ITW Invested Capital 12/31/05 9/30/06 12/31/06 Trade Receivables 2,098.3 2,369.7 2,471.3 Days Sales Outstanding 58.1 60.3 61.1 Inventories 1,203.1 1,444.6 1,482.5 Months on Hand 1.7 1.9 1.9 Other Current Assets 439.8 659.6 662.4 Accounts Payable & Accruals (1,747.8) (1,919.0) (2,173.9) Operating Wor
Slide 9: Debt & Equity
ITW Debt & Equity 12/31/05 9/30/06 12/31/06 Total Capital Short Term Debt 252.9 524.6 462.7 Long Term Debt 958.3 964.3 955.6 Total Debt 1,211.2 1,488.9 1,418.3 Stockholders' Equity 7,546.9 8,711.2 8,995.8 Total Capital 8,758.1 10,200.1 10,414.1 Less: Cash (370.4) (617.9) (590.2) Net Debt & Equity 8,
Slide 10: Cash Flow
ITW Cash Flow 2005 2006 Q4 Q4 Net Income 400.6 439.3 Adjust for Non-Cash Items 34.7 172.2 Changes in Operating Assets & Liabilities 53.4 124.8 Net Cash From Operating Activities 488.7 736.3 Additions to Plant & Equipment (77.1) (78.2) Free Operating Cash Flow 411.6 658.1 Share Repurchases - (198.9)
Slide 11: Return on Average Invested Capital
ITW Return on Average Invested Capital 2005 2006 F(U) Current Quarter Q4 Q4 Prior Yr. Operating Income after Taxes 390.0 431.1 41.1 Operating Margins - A/T 12.0% 11.8% -0.2% Average Invested Capital 8,330.8 9,703.1 (1,372.3) Capital Turnover 1.56 1.50 (0.06) Return on Average Invested Capital 18.7%
Slide 12: Acquisitions
ITW Acquisitions 2005 2006 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Annual Revenues Acquired 151 36 105 292 353 154 388 820 Purchase Price Net Cash Paid 188 12 113 314 199 82 447 650 Stock Issued - - - - 163 - - - Total 188 12 113 314 362 82 447 650 Number of Acquisitions North America Engineered Products 1 1 5 4 2
Slide 13: Key Economic Data
Key Economic Data • In Q4: international growth trended up; North American growth moved down • International fundamentals support growth: – Euro-Zone ISM: 56.5% in December ’06 vs. 56.6% in September ’06 – EuroZone industrial production: +2.5% in November ’06 – Germany industrial production: +6.1% i
Slide 14: Engineered Products - North America
ITW Engineered Products - North America 2005 2006 F(U) Last Year Q4 Q4 Amount % Operating Revenues 916.7 943.4 26.7 2.9% Operating Income 156.9 143.6 (13.3) -8.5% Operating Margins 17.1% 15.2% -1.9%
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 -5.0% -11.8% -1.2% Nonvolume-related - 3.9% 0.7% Total -5.0% -7.9% -0.5% Acquisitions / Divestitures 7.8% 0.7% -1.1% Translation 0.1% - - Im
Slide 16: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: -7% in Q4 ’06 • ITW Construction (tools and fasteners) base revenues: -14% in Q4 ’06 - new housing: -21% in Q4 ’06 (housing starts in Q4: -24%) - renovation: +9% in Q4 ’06 - commercial: +1% in Q4 ’06 • Wilsonart (high pressure lami
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: -9% in Q4 ’06 • Detroit 3 build rates: -12% in Q4 ’06 – GM: -14% – Ford: -20% – Chrysler: -2% • New domestic builds: +3% in Q4 ’06 • Detroit 3 inventories: 75 days at 12-31-06 – GM: 80 days – Ford: 70 days – Chrysler: 74 days • New
Slide 18: Engineered Products - International
ITW Engineered Products - International 2005 2006 F(U) Last Year Q4 Q4 Amount % Operating Revenues 723.7 824.7 101.0 13.9% Operating Income 118.7 134.7 16.0 13.5% Operating Margins 16.4% 16.3% -0.1%
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 5.9% 14.5% 1.3% Nonvolume-related - -8.9% -1.4% Total 5.9% 5.6% -0.1% Acquisitions / Divestitures 3.4% 1.1% -0.4% Translation 4.6% 3.8% -0.1
Slide 20: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +12% in Q4 ’06 – Europe: +8% (improvement in wide variety of countries…especially Germany) – Austral-Asia: +11% (commercial/new housing strength in Australia/New Zealand) – Wilsonart Intl.: +24% (growth in Germany and UK) –
Slide 21: Specialty Systems - North America
ITW Specialty Systems - North America 2005 2006 F(U) Last Year Q4 Q4 Amount % Operating Revenues 1,070.4 1,174.4 104.0 9.7% Operating Income 198.5 198.8 0.3 0.2% Operating Margins 18.5% 16.9% -1.6%
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 1.5% 3.5% 0.3% Nonvolume-related - -1.7% -0.3% Total 1.5% 1.8% 0.0% Acquisitions / Divestitures 8.1% -1.6% -1.6% Translation 0.1% 0.1% - Impai
Slide 23: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Welding base revenues: +13% in Q4 ’06 due to strong markets such as energy and heavy fabricators • Food Equipment base revenues: +5% in Q4 ’06; restaurant/institutional and service side of business continue to drive growth • Total Packaging base revenue
Slide 24: Specialty Systems - International
ITW Specialty Systems - International 2005 2006 F(U) Last Year Q4 Q4 Amount % Operating Revenues 665.8 838.2 172.4 25.9% Operating Income 82.9 117.2 34.3 41.3% Operating Margins 12.5% 14.0% 1.5%
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% 27.3% 2.1% Nonvolume-related - 1.7% 0.2% Total 8.8% 29.0% 2.3% Acquisitions / Divestitures 12.3% 1.8% -1.4% Translation 4.8% 5.1% - Impai
Slide 26: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Welding: base revenue +19% in Q4 ’06 due to strong consumables and equipment sales in Asia and Europe • Finishing: base revenues grew 18% in Q4 ’06 thanks to sales of Gema powder based products in Europe and finishing equipment in Asia (Japan and China)
Slide 27: 2007 Forecast
ITW 2007 Forecast Mid Low High Point 1st Quarter Base Revenues 1.2% 3.2% 2.2% Income Per Share-Diluted $0.69 $0.73 $0.71 %F(U) 2006 6% 12% 9% Full Year Base Revenues 2.5% 4.5% 3.5% Income Per Share-Diluted $3.27 $3.39 $3.33 %F(U) 2006 9% 13% 11%
Slide 28: 2007 Forecast Key Assumptions
ITW 2007 Forecast Key Assumptions • Exchange rates hold at current levels. • Acquired revenues in the $800 million to $1.2 billion range. • Share repurchases of $500 million to $700 million for the year. • Restructuring cost of $30 to $50 million. • Impairment of goodwill/intangibles of $15 to $25 m
Slide 29: ITW Conference Call Q&A
ITW Conference Call Q&A Fourth Quarter 2006