ITW Conference Call
Third Quarter
2005
Exhibit 99.2
ITW
Agenda
1.
Introduction……………………..John Brooklier
2.
Financial Overview……………...Ron Kropp
3.
Manufacturing Segments……… John Brooklier
4.
Forecast 2005………………….… Ron Kropp
4.
Q & A………………......…………John Brooklier/Ron Kropp
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 operating
results for the fourth quarter and full-year 2005 and the company’s
earnings and acquired revenue forecasts. These statements are subject to
certain risks, uncertainties, and other factors, which could cause actual
results to differ materially from those anticipated. Important risks that
may influence future results include (1) a downturn in the construction,
automotive, general industrial, food retail and service, or real estate
markets, (2) deterioration in business and economic conditions,
particularly in North America, the European Community and Australia,
(3) the unfavorable impact of foreign currency fluctuations and costs of
raw materials, (4) an interruption in, or reduction in, introducing new
products into the Company’s product lines, (5) an unfavorable
environment for making acquisitions, domestic and international,
including adverse accounting or regulatory requirements and market
values of candidates, and (6) unfavorable tax law changes and tax
authority rulings. The risks covered here are not all inclusive and given
these and other possible risks and uncertainties, investors should not place
undue reliance on forward-looking statements as a prediction
of actual results.
Conference Call Playback
Replay number: 203-369-0666
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Telephone replay available through midnight of
November 2, 2005
Webcast / PowerPoint replay available at itw.com
website
ITW
Quarterly Highlights
2004
2005
Q3
Q3
Amount
%
Operating Revenues
2,967.2
3,257.6
290.4
9.8%
Operating Income
512.2
619.2
107.0
20.9%
% of Revenues
17.3%
19.0%
1.7%
Income From Continuing Operations
Income Amount
330.1
408.2
78.1
23.7%
Income Per Share-Diluted
1.09
1.43
0.34
31.2%
Average Invested Capital
7,533.8
8,122.1
(588.3)
-7.8%
Return on Average Invested Capital
17.9%
20.7%
2.8%
Free Operating Cash Flow
403.3
506.6
103.3
25.6%
F(U) Last Year
ITW
Quarterly Operating Analysis
Revenue
Income
Margins
Base Manufacturing Business
Operating Leverage
4.1%
9.5%
0.9%
Nonvolume-related
-
4.0%
0.7%
Total
4.1%
13.5%
1.6%
Acquisitions / Divestitures
3.9%
2.4%
-0.3%
Translation
0.8%
1.2%
0.1%
Impairment
-
-
-
Restructuring
-
-2.7%
-0.5%
Leasing & Investments
1.1%
6.5%
0.8%
Intercompany
-0.1%
-
-
Total
9.8%
20.9%
1.7%
ITW
Leasing & Investments
2004
2005
Q3
Q3
Amount
%
Operating Revenues
23.6
57.6
34.0
144.3%
Operating Income
20.2
53.5
33.3
164.4%
Operating Margins
85.8%
92.8%
7.0%
F(U) Last Year
ITW
Non Operating & Taxes
2004
2005
Q3
Q3
Amount
%
Operating Income
512.2
619.2
107.0
20.9%
Interest Expense
(18.5)
(18.2)
0.3
Other Income
6.4
(0.8)
(7.2)
Income From Continuing Operations-P/T
500.1
600.2
100.1
20.0%
Income Taxes
170.0
192.0
(22.0)
% to Pre Tax Income
34.0%
32.0%
2.0%
Income From Continuing Operations-A/T
330.1
408.2
78.1
23.7%
F(U) Last Year
ITW
Invested Capital
9/30/04
6/30/05
9/30/05
Trade Receivables
1,983.6
2,134.2
2,168.6
Days Sales Outstanding
60.2
58.3
59.9
Inventories
1,142.5
1,274.5
1,229.7
Months on Hand
1.8
1.8
1.8
Other Current Assets
360.1
299.7
303.2
Accounts Payable & Accruals
(1,910.1)
(1,583.6)
(1,641.8)
Operating Working Capital
1,576.1
2,124.8
2,059.7
% to Revenue(Prior 4 Qtrs.)
14%
17%
16%
Net Plant & Equipment
1,807.9
1,822.2
1,825.5
Investments, net of L&I Debt
820.9
855.4
874.9
Goodwill
2,686.8
2,834.8
2,877.8
Other, net
663.0
479.3
489.8
Invested Capital
7,554.7
8,116.5
8,127.7
ITW
Debt & Equity
9/30/04
6/30/05
9/30/05
Total Capital
Short Term Debt
97.1
696.8
378.6
Long Term Debt
924.0
967.2
965.5
Total Debt
1,021.1
1,664.0
1,344.1
Stockholders' Equity
7,543.3
7,427.2
7,281.1
Total Capital
8,564.4
9,091.2
8,625.2
Less:
Leasing & Investments Debt
(79.4)
(116.0)
(146.3)
Cash
(930.3)
(858.7)
(351.2)
Net Debt & Equity
7,554.7
8,116.5
8,127.7
Debt to Total Capital
12%
18%
16%
ITW
Cash Flow
2004
2005
Q3
Q3
Net Income
330.1
408.2
Adjust for Non-Cash Items
12.3
119.5
Changes in Operating Assets & Liabilities
110.2
31.6
Net Cash From Operating Activities
452.6
559.3
Additions to Plant & Equipment
(68.1)
(71.3)
Proceeds from Investments
18.8
18.6
Free Operating Cash Flow
403.3
506.6
Stock Repurchase
(943.0)
(469.1)
Acquisitions
(62.1)
(112.6)
Purchase of Investments
(7.0)
(18.0)
Dividends
(73.6)
(79.9)
Debt
38.4
(318.7)
Other
37.1
(15.6)
Net Cash Decrease
(606.9)
(507.3)
ITW
Return on Average Invested Capital
2004
2005
F(U)
Current Quarter
Q3
Q3
Prior Yr.
Operating Income after Taxes
338.1
421.1
83.0
Operating Margins
11.4%
12.9%
1.5%
Average Invested Capital
7,533.8
8,122.1
(588.3)
Capital Turnover
1.58
1.60
0.02
Return on Average Invested Capital
17.9%
20.7%
2.8%
2004
2005
F(U)
Year to Date
Q3
Q3
Prior Yr.
Operating Income after taxes
1,004.1
1,131.5
127.4
Operating Margins
11.6%
11.8%
0.2%
Average Invested Capital
7,330.1
8,132.2
(802.1)
Capital Turnover
1.57
1.57
-
Return on Average Invested Capital
18.3%
18.6%
0.3%
ITW
Acquisitions
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Annual Revenues Acquired
247
168
78
131
151
36
105
240
Purchase Price
Cash Paid
184
193
62
149
188
12
113
255
Stock Issued
2
-
-
-
-
-
-
-
Total
186
193
62
149
188
12
113
255
Number of Acquisitions
North America
Engineered Products
2
1
1
1
1
1
5
-
Specialty Systems
-
1
1
1
1
-
3
1
International
Engineered Products
5
2
-
1
-
1
-
-
Specialty Systems
3
4
1
-
1
1
3
-
Total
10
8
3
3
3
3
11
1
2004
2005
Key Economic Data
September ’05 ISM: moved up to 59.4% from 53.6% in August ’05;
new orders moved to 63.8% in September ’05 from 56.4% in August
’05
US Industrial Production (ex. Tech.): +1.6% in September ’05
compared to +1.9% in August ’05
Euro-Zone Purchasing Managers’ Index: 51.7% in September ’05
versus 50.4% in August ’05
Euro-Zone Industrial Production: +0.6% in July ’05 versus +0.7% in
June ’05
UK: -1.9% in August ’05
France: +1.0% in August ’05
Germany: +2.1% in August ’05
ITW
Engineered Products - North America
2004
2005
Q3
Q3
Amount
%
Operating Revenues
869.9
959.7
89.8
10.3%
Operating Income
149.4
180.9
31.5
21.1%
Operating Margins
17.2%
18.9%
1.7%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
2.3%
5.4%
0.5%
Nonvolume-related
-
12.2%
2.1%
Total
2.3%
17.6%
2.6%
Acquisitions / Divestitures
7.6%
3.8%
-0.8%
Translation
0.4%
0.3%
-
Impairment
-
-
-
Restructuring
-
-0.6%
-0.1%
Total
10.3%
21.1%
1.7%
% F(U) Prior Year
Engineered Products - North America
Key Points
Total construction: +2% for Q3 ’05
ITW construction (Paslode/Buildex/Ramset/ITW Brands)
base revenues: +3% for Q3 ’05
- new housing: +3% in Q3 ’05
- renovation: +2% in Q3 ’05
- commercial: +4% in Q3 ’05
Wilsonart (high pressure laminate): base revenues +1% in Q3
’05
- basic laminate and flooring both posted modestly positive
top line growth in Q3 ’05
Engineered Products - North America
Key Points
Auto base revenues: +3% for Q3 ’05
Big 3 build rates: -1% for Q3 ’05
GM: -4%
Ford: -7%
Chrysler: +12%
Transplants: +9%
Big 3 inventories: 69 days at 9-30-05
GM: 58 days
Ford: 74 days
Chrysler: 83 days
New domestics’ inventories: 43 days at 9-30-05
ITW Big 3 auto build forecast for 2005:
Down 4% to 5% for full year ’05
Down 1% for Q4 ’05
Industrial: base revenues +3% for Q3 ’05
Top performers: Minigrip/ZipPak, Fluid Products
Industrial plastics declines nearly 10% due to increased
global competition
ITW
Engineered Products - International
2004
2005
Q3
Q3
Amount
%
Operating Revenues
624.2
656.8
32.6
5.2%
Operating Income
96.0
100.3
4.3
4.5%
Operating Margins
15.4%
15.3%
-0.1%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
-0.7%
-1.8%
-0.2%
Nonvolume-related
-
3.0%
0.5%
Total
-0.7%
1.2%
0.3%
Acquisitions / Divestitures
4.5%
4.6%
-
Translation
1.4%
2.8%
0.2%
Impairment
-
-
-
Restructuring
-
-4.1%
-0.6%
Total
5.2%
4.5%
-0.1%
% F(U) Prior Year
Engineered Products - International
Key Points
Construction base revenues: +1% in Q3 ’05
Europe: +1% (growth in Spain, France & Nordic countries)
Austral-Asia: -1% (commercial/new housing weakness in
Australia/New Zealand)
Wilsonart Intl.: +9% (good activity in Thailand, China &
Germany)
Automotive base revenues: -3% in Q3 ’05
Builds: -2% in Q3 ’05
Daimler/Chrysler: -10.9%; Fiat: -8.5%; GM: -7.8%;
Citroen/Peugeot: -6.4%; VW: +8.6%; BMW: +5.1%
ITW forecast: FY ’05 auto builds down 1% - 2%
Industrial base revenues: -2% in Q3 ’05
Industrial plastics: -12%; electronic component packaging:
-3%; fluid products: +4%; polymers: +3%
ITW
Specialty Systems - North America
2004
2005
Q3
Q3
Amount
%
Operating Revenues
964.8
1,054.3
89.5
9.3%
Operating Income
165.6
211.5
45.9
27.7%
Operating Margins
17.2%
20.1%
2.9%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
8.2%
19.2%
1.7%
Nonvolume-related
-
6.3%
1.0%
Total
8.2%
25.5%
2.7%
Acquisitions / Divestitures
0.5%
0.3%
-
Translation
0.6%
0.8%
-
Impairment
-
-
-
Restructuring
-
1.1%
0.2%
Total
9.3%
27.7%
2.9%
% F(U) Prior Year
Specialty Systems - North America
Key Points
Welding base revenues: 20+% growth in Q3 ’05 due
primarily to demand for replacement products and
new product introductions
Food Equipment base revenues: 1% growth in Q3 ’05;
restaurant/institutional customers and parts/service
activity offset food retail weakness
Marking & Decorating: +7% base revenue growth
Finishing: +6% base revenue growth
Industrial Packaging: +1% base revenue growth;
dealing with pricing issues related to resins
ITW
Specialty Systems - International
2004
2005
Q3
Q3
Amount
%
Operating Revenues
591.5
639.0
47.5
8.0%
Operating Income
81.1
73.0
(8.1)
-9.9%
Operating Margins
13.7%
11.4%
-2.3%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
Operating
Operating
Operating
Revenue
Income
Margins
Base Business
Operating Leverage
4.5%
12.8%
1.1%
Nonvolume-related
-
-13.0%
-1.7%
Total
4.5%
-0.2%
-0.6%
Acquisitions / Divestitures
2.8%
2.1%
-0.1%
Translation
0.7%
1.8%
0.2%
Impairment
-
-
-
Restructuring
-
-13.6%
-1.8%
Total
8.0%
-9.9%
-2.3%
% F(U) Prior Year
Specialty Systems - International
Key Points
Industrial packaging: base revenues continued to grow in
Q3 ’05:
-Europe: +5%
-Asia: +6%
Food Equipment: base revenues +2% in Q3 ’05; most
growth emanating from demand in U.K. and Germany
Welding: base revenue grew 13% in Q3 ’05
Finishing: base revenues grew 7% in Q3 ’05
ITW
2005 Forecast
Mid
Low
High
Point
4th Quarter
Base Revenues
2.0%
4.0%
3.0%
Income Per Share-Diluted
$1.34
$1.40
$1.37
%F(U) 2004
11%
16%
13%
Full Year
Base Revenues
4.1%
4.6%
4.3%
Income Per Share-Diluted
$5.12
$5.18
$5.15
%F(U) 2004
17%
18%
17%
ITW 2005 Forecast
Key Assumptions
Exchange rates hold at current levels.
Acquired revenues in the $600 to $800 million
range.
Restructuring cost of $40 to $60 million.
No further impairment of goodwill or intangibles.
Leasing & Investments income of $95 to $105
million, which is lower than 2004 by $25 to $35
million.
Tax rate of 32.0% for the 4th quarter and the full
year.
ITW Conference Call
Q & A
Third Quarter
2005
