Slide 1: Fourth Quarter 2017 Earnings Conference Call
Fourth Quarter 2017 Earnings Conference Call January 24, 2018
Slide 2: Forward-Looking Statements
Forward-Looking Statements NON-GAAP MEASURES The company uses certain non-GAAP measures in discussing the company’s performance. The reconciliation of those measures to the most comparable GAAP measures is detailed in ITW’s press release for the fourth quarter of 2017, which is available at www.itw.
Slide 3: Q4 2017 Tax Cuts and Jobs Act Impact
Q4 2017 “Tax Cuts and Jobs Act” Impact ▪ Following the passage of the “Tax Cuts and Jobs Act” ITW recorded a one-time tax charge of $658 million / ($1.92) EPS ▪ This schedule illustrates the impact of this one-time charge on the company’s reported fourth quarter financial results Q4’16 As Q4’17 As T
Slide 4: FY 2017 Tax Cuts and Jobs Act and Legal Settlement Impact
FY 2017 “Tax Cuts and Jobs Act” and Legal Settlement Impact ▪ Following the passage of the “Tax Cuts and Jobs Act” ITW recorded a one-time tax charge of $658 million / ($1.90) EPS ▪ As previously disclosed, a legal settlement resulted in a favorable one-time benefit of $95 million / $0.17 EPS ▪ This
Slide 5: Q4 2017 Financial Performance (Ex. Tax Charge)
Q4 2017 Financial Performance (Ex. Tax Charge) Financial Results Highlights +17% ▪ EPS of $1.70, an increase of 17% $1.70 ▪ Total revenue grew 7%; organic growth of 4% EPS $1.45 – 6 of 7 segments and all major geographies with positive organic growth ▪ Strong progress on key performance metrics $3.6
Slide 6: Q4 2017 Operating Margin
Q4 2017 Operating Margin Operating Margin Key Margin Drivers Q4'17 +160 bps Enterprise Initiatives +140 bps 23.4% 21.8% Volume/Other +70 Price/Cost (50) Margin Expansion +160 bps Q4'16 Q4'17 STRONG OPERATING MARGIN PERFORMANCE Q4’17 EARNINGS CALL | 6
Slide 7: Q4 2017 Segment Performance
Q4 2017 Segment Performance Q4’17 Performance Automotive OEM Organic Growth Operating Margin +7% +10 bps $828 23.0% 23.1% Q4’16 Q4’17 Q4’16 Q4’17 Change $773 Automotive 7% 3% 23.0% 23.1% +10 bps OEM Food 3 ~flat 24.7 25.8 +110 Equipment T&M and Q4'16 Q4'17 Q4'16 Q4'17 ~flat 9 20.1 23.4 +330 Total Re
Slide 8: Q4 2017 Segment Performance
Q4 2017 Segment Performance Food Equipment Test & Measurement/Electronics +3% +110 bps +12% +330 bps $532 $548 24.7% 25.8% $545 23.4% $487 20.1% Q4'16 Q4'17 Q4'16 Q4'17 Q4'16 Q4'17 Q4'16 Q4'17 Total Revenue Operating Margin Total Revenue Operating Margin Q4 Performance Q4 Performance ▪ Organic reven
Slide 9: Q4 2017 Segment Performance
Q4 2017 Segment Performance Welding Polymers & Fluids +7% 26.4% +200 bps +5% +90 bps $361 $388 24.4% $408 $427 19.0% 19.9% Q4'16 Q4'17 Q4'16 Q4'17 Q4'16 Q4'17 Q4'16 Q4'17 Total Revenue Operating Margin Total Revenue Operating Margin Q4 Performance Q4 Performance ▪ Organic growth of 6% ▪ Organic grow
Slide 10: Q4 2017 Segment Performance
Q4 2017 Segment Performance Construction Products Specialty Products +7% +200 bps +7% +190 bps $487 25.9% 23.4% $456 24.0% $412 21.4% $386 Q4'16 Q4'17 Q4'16 Q4'17 Q4'16 Q4'17 Q4'16 Q4'17 Total Revenue Operating Margin Total Revenue Operating Margin Q4 Performance Q4 Performance ▪ Organic growth of 4
Slide 11: 2017 Financial Performance (Ex. Legal Settlement & Tax Charge)
2017 Financial Performance (Ex. Legal Settlement & Tax Charge) Financial Results Highlights +16% ▪ EPS of $6.59, an increase of 16% $6.59 ▪ Total revenue grew 5%; organic growth of 3% EPS $5.70 – All segments and all major geographies with positive organic growth ▪ Record results on key performance
Slide 12: 2017 Operating Margin Improvement
2017 Operating Margin Improvement Operating Margin Key Margin Drivers 2017 24.4% Enterprise Initiatives +120 bps Legal Item +120 bps Volume +70 22.5% 23.7% Price/Cost (40) EF&C Acquisition (30) Legal Item +70 bps 2016 2017 Margin Expansion +190 bps RECORD OPERATING MARGIN PERFORMANCE Q 4 ’ 1 7 E A R
Slide 13: Organic Growth Acceleration
Organic Growth Acceleration CONTINUED PROGRESS ON OUR PATH TO SUSTAINED ABOVE-MARKET ORGANIC GROWTH 3 to 4% 2.9% 1.2% 2015 (0.4)% 2016 2017 2018 Guidance Q 4 ’ 1 7 E A R N I N G S C A L L | 13
Slide 14: 2018 Guidance (2017 ex. Legal Settlement & Tax Charge)
2018 Guidance (2017 ex. Legal Settlement & Tax Charge) Financial Guidance Highlights +15% ▪ Raising GAAP EPS guidance by $0.40 / 6% at $7.55 midpoint $7.45 - $7.65 – $0.35 from lower tax rate + $0.05 from foreign currency translation EPS $6.59 ▪ Total revenue growth 5 - 6%; organic growth of 3 - 4%
Slide 15: Q&A
WT Q&A