Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q1 2007 Earnings Presentation
29 slides from Illinois Tool Works's earnings presentation, Apr 18, 2007
Slide 1: ITW Conference Call First Quarter 2007
Exhibit 99.2 ITW Conference Call First Quarter 2007
Slide 2: 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: 203-369-0120 No pass code necessary Telephone replay available through midnight of May 2, 2007 Webcast / PowerPoint replay available at itw.com website
Slide 5: Quarterly Highlights
ITW Quarterly Highlights 2006 2007 F(U) Last Year Q1 Q1 Amount % Operating Revenues 3,297.0 3,759.0 462.0 14.0% Operating Income 540.0 568.6 28.6 5.3% % of Revenues 16.4% 15.1% -1.3% Net Income Income Amount 366.5 402.4 35.9 9.8% Income Per Share-Diluted 0.65 0.71 0.06 9.2% 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 1.0% 2.5% 0.3% Nonvolume-related - -0.2% - Total 1.0% 2.3% 0.3% Acquisitions 10.7% - -1.6% Divestitures -0.5% -0.2% - Translation 3.0% 2.4% -0.1% Im
Slide 7: Non Operating & Taxes
ITW Non Operating & Taxes 2006 2007 F(U) Last Year Q1 Q1 Amount % Operating Income 540.0 568.6 28.6 5.3% Interest Expense (18.9) (24.4) (5.5) Other Income 10.1 26.6 16.5 Net Income-P/T 531.2 570.8 39.6 7.5% Income Taxes 164.7 168.4 (3.7) % to Pre Tax Income 31.0% 29.5% 1.5% Net Income-AT 366.5 402.4
Slide 8: Invested Capital
ITW Invested Capital 3/31/06 12/31/06 3/31/07 Trade Receivables 2,191.7 2,471.3 2,681.5 Days Sales Outstanding 59.8 61.1 64.2 Inventories 1,279.1 1,482.5 1,601.7 Months on Hand 1.8 1.9 2.0 Other Current Assets 426.8 662.4 646.6 Accounts Payable & Accruals (1,715.1) (2,173.9) (2,179.5) Operating Work
Slide 9: Debt & Equity
ITW Debt & Equity 3/31/06 12/31/06 3/31/07 Total Capital Short Term Debt 230.8 462.7 577.1 Long Term Debt 959.9 955.6 956.3 Total Debt 1,190.7 1,418.3 1,533.4 Stockholders' Equity 8,065.2 9,017.5 9,156.8 Total Capital 9,255.9 10,435.8 10,690.2 Less: Cash (454.5) (590.2) (574.6) Net Debt & Equity 8,8
Slide 10: Cash Flow
ITW Cash Flow 2006 2007 Q1 Q1 Net Income 366.5 402.4 Adjust for Non-Cash Items 120.5 89.3 Changes in Operating Assets & Liabilities (95.6) (68.9) Net Cash From Operating Activities 391.4 422.8 Additions to Plant & Equipment (68.3) (85.3) Free Operating Cash Flow 323.1 337.5 Stock Repurchase - (179.9
Slide 11: Return on Average Invested Capital
ITW Return on Average Invested Capital 2006 2007 F(U) Q1 Q1 Prior Yr. Operating Income after Taxes 372.6 400.9 28.3 Operating Margins 11.3% 10.7% -0.6% Average Invested Capital 8,594.6 9,980.6 (1,386.0) Capital Turnover 1.53 1.51 (0.02) Return on Average Invested Capital 17.3% 16.1% -1.2%
Slide 12: Acquisitions
ITW Acquisitions 2006 2007 Q1 Q2 Q3 Q4 Q1 Annual Revenues Acquired 353 154 388 820 399 Purchase Price Cash Paid 199 82 447 650 269 Stock Issued 163 - - - - Total 362 82 447 650 269 Number of Acquisitions North America Engineered Products 2 4 5 4 2 Specialty Systems 2 4 4 4 1 International Engineered
Slide 13: Key Economic Data
Key Economic Data • Stronger fundamentals in Europe EuroZone Purchasing Managers Index: 55.4% in March ’07 vs. 56.5% in December ’06 EuroZone industrial production: +4.2% in February ’07 vs. 2.5% in November ’06 • German industrial production: +7.6% in February ’07 • North American March ’07 ISM Ind
Slide 14: Engineered Products - North America
ITW Engineered Products - North America 2006 2007 F(U) Last Year Q1 Q1 Amount % Operating Revenues 1,030.3 1,026.7 (3.6) -0.4% Operating Income 173.3 153.3 (20.0) -11.5% Operating Margins 16.8% 14.9% -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 -6.5% -15.8% -1.7% Nonvolume-related - 3.7% 0.7% Total -6.5% -12.1% -1.0% Acquisitions 6.7% 0.7% -1.0% Divestitures -0.5% -0.2% - Translatio
Slide 16: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Total construction: -10% for Q1 ’07 • ITW construction (tools/fasteners/trusses) base revenues: -12% for Q1 ’07…driven by 32% decline in first quarter new housing starts - new housing: -7% in Q1 ’07 - renovation: 30+% in Q1 ’07 - commercial: -13% in Q
Slide 17: Engineered Products - North America Key Points
Engineered Products - North America Key Points • Auto base revenues: -7% for Q1 ’07 • Detroit 3 build rates: -12% for Q1 ’07 – GM: -14% – Ford: -15% – Chrysler: -3% • New domestic build rates: +1% • Detroit 3 inventories: 74 days at 3-31-07 – GM: 86 days – Ford: 64 days – Chrysler: 68 days • New dom
Slide 18: Engineered Products - International
ITW Engineered Products - International 2006 2007 F(U) Last Year Q1 Q1 Amount % Operating Revenues 624.3 833.1 208.8 33.4% Operating Income 75.8 97.5 21.7 28.6% Operating Margins 12.1% 11.7% -0.4%
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 8.2% 27.1% 2.1% Nonvolume-related - -13.2% -1.5% Total 8.2% 13.9% 0.6% Acquisitions 17.2% 4.9% -1.2% Divestitures -0.6% 0.6% 0.1% Translatio
Slide 20: Engineered Products - International Key Points
Engineered Products - International Key Points • Construction base revenues: +13% in Q1 ’07 – Europe: +11% (growth in many countries; led by Germany) – Austral-Asia: +14% (commercial/retail strength in Australia) – Wilsonart Intl.: +14% (strength in the UK and Germany) • Automotive base revenues: +1
Slide 21: Specialty Systems - North America
ITW Specialty Systems - North America 2006 2007 F(U) Last Year Q1 Q1 Amount % Operating Revenues 1,124.1 1,222.4 98.3 8.7% Operating Income 221.9 224.1 2.2 1.0% Operating Margins 19.7% 18.3% -1.4%
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 -0.9% -1.9% -0.2% Nonvolume-related - 2.2% 0.4% Total -0.9% 0.3% 0.2% Acquisitions 9.9% -2.3% -2.2% Divestitures -0.1% - - Translation -0.1% -
Slide 23: Specialty Systems - North America Key Points
Specialty Systems - North America Key Points • Segment base revenues: First negative performance since Q3 2003 • Industrial Packaging: -8% base revenue growth in Q1 ’07 – Weakness in construction-related packaging categories (lumber and brick/block -30% in Q1 ’07) • Welding base revenues: +7% growth
Slide 24: Specialty Systems - International
ITW Specialty Systems - International 2006 2007 F(U) Last Year Q1 Q1 Amount % Operating Revenues 615.7 783.4 167.7 27.2% Operating Income 68.9 93.7 24.8 35.9% Operating Margins 11.2% 12.0% 0.8%
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 9.5% 33.4% 2.5% Nonvolume-related - -0.7% -0.1% Total 9.5% 32.7% 2.4% Acquisitions 10.8% - -1.2% Divestitures -0.9% -1.4% - Translation 7.9% 8
Slide 26: Specialty Systems - International Key Points
Specialty Systems - International Key Points • Welding: base revenue +21% in Q1 ’07 due to demand from energy/shipbuilding customers • Signode industrial packaging grew 9% in Europe and increased 16% in Asia/Pacific; industrial production improves across various regions • Food Equipment: base revenu
Slide 27: 2007 Forecast
ITW 2007 Forecast Mid Low High Point 2nd Quarter Base Revenues 0.4% 2.4% 1.4% Income Per Share-Diluted $0.86 $0.90 $0.88 % F(U) 2006 6% 11% 9% Full Year Base Revenues 1.8% 3.8% 2.8% 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. • No further impairment of goodwill/intangibles. • N
Slide 29: ITW Conference Call Q&A
ITW Conference Call Q&A First Quarter 2007