ITW Conference Call
First Quarter
2006
Exhibit 99.2
ITW
Agenda
1.
Introduction……………………..John Brooklier
2.
Financial Overview……………...Ron Kropp
3.
Manufacturing Segments……… John Brooklier
4.
Forecast 2006………………….… 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, base revenue
growth, earnings growth, operating income, tax rates, use of free cash and
potential acquisitions for the 2006 full year and the Company’s related
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
institutional and retail, or real estate markets, (2) deterioration in global and
domestic business and economic conditions, particularly in North America,
the European Community, Asia 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
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Telephone replay available through midnight of May
5, 2006
Webcast / PowerPoint replay available at itw.com
website
ITW
Quarterly Highlights
2005
2006
Q1
Q1
Amount
%
Operating Revenues
3,051.9
3,297.0
245.1
8.0%
Operating Income
458.7
540.0
81.3
17.7%
% of Revenues
15.0%
16.4%
1.4%
Net Income
Income Amount
312.3
366.5
54.2
17.4%
Income Per Share-Diluted
1.06
1.29
0.23
21.7%
Average Invested Capital
8,247.2
8,594.6
(347.4)
-4.2%
Return on Average Invested Capital
15.0%
17.3%
2.3%
Free Operating Cash Flow
238.9
320.7
81.8
34.2%
F(U) Last Year
ITW
Quarterly Operating Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Manufacturing Business
Operating Leverage
6.1%
16.2%
1.4%
Nonvolume-related
-
2.2%
0.3%
Total
6.1%
18.4%
1.7%
Acquisitions / Divestitures
5.3%
1.9%
-0.5%
Translation
-2.6%
-2.0%
0.1%
Impairment
-
-0.2%
-
Restructuring
-
-0.4%
-
Intercompany
-0.8%
-
0.1%
Total
8.0%
17.7%
1.4%
% F(U) Prior Year
ITW
Non Operating & Taxes
Operating Income
458.7
540.0
81.3
17.7%
Interest Expense
(20.2)
(18.9)
1.3
Investment Income
20.9
10.2
(10.7)
Other Income(Expense)
3.2
(0.1)
(3.3)
Net Income-P/T
462.6
531.2
68.6
14.8%
Income Taxes
150.3
164.7
(14.4)
% to Pre Tax Income
32.5%
31.0%
1.5%
Net Income-A/T
312.3
366.5
54.2
17.4%
ITW
Invested Capital
3/31/05
12/31/05
3/31/06
Trade Receivables
2,132.5
2,098.3
2,191.7
Days Sales Outstanding
62.9
58.1
59.8
Inventories
1,361.4
1,203.1
1,279.1
Months on Hand
2.0
1.7
1.8
Other Current Assets
309.4
439.8
426.8
Accounts Payable & Accruals
(1,585.3)
(1,747.8)
(1,715.1)
Operating Working Capital
2,218.0
1,993.4
2,182.5
% to Revenue(Prior 4 Qtrs.)
19%
16%
17%
Net Plant & Equipment
1,875.2
1,807.1
1,843.2
Investments
981.0
896.5
890.2
Goodwill and Intangibles
3,336.2
3,678.9
3,956.0
Other, net
(0.8)
11.8
(70.5)
Invested Capital
8,409.6
8,387.7
8,801.4
ITW
Debt & Equity
3/31/05
12/31/05
3/31/06
Total Capital
Short Term Debt
786.0
252.9
230.8
Long Term Debt
967.8
958.3
959.9
Total Debt
1,753.8
1,211.2
1,190.7
Stockholders' Equity
7,708.7
7,546.9
8,065.2
Total Capital
9,462.5
8,758.1
9,255.9
Less:
Cash
(1,052.9)
(370.4)
(454.5)
Net Debt & Equity
8,409.6
8,387.7
8,801.4
Debt to Total Capital
19%
14%
13%
ITW
Cash Flow
2005
2006
Q1
Q1
Net Income
312.3
366.5
Adjust for Non-Cash Items
186.0
120.5
Changes in Operating Assets & Liabilities
(195.4)
(98.0)
Net Cash From Operating Activities
302.9
389.0
Additions to Plant & Equipment
(64.0)
(68.3)
Free Operating Cash Flow
238.9
320.7
Stock Repurchase
(189.7)
-
Acquisitions
(188.4)
(199.0)
Purchase of Investments
(70.7)
(2.1)
Dividends
(81.7)
(92.6)
Debt
630.8
(23.1)
Proceeds from Investments
15.4
12.3
Other
31.0
67.9
Net Cash Increase
385.6
84.1
ITW
Return on Average Invested Capital
2005
2006
F(U)
Current Quarter
Q1
Q1
Prior Yr.
Operating Income after Taxes
309.6
372.6
63.0
Operating Margins
10.1%
11.3%
1.2%
Average Invested Capital
8,247.2
8,594.6
(347.4)
Capital Turnover
1.48
1.53
0.05
Return on Average Invested Capital
15.0%
17.3%
2.3%
ITW
Acquisitions
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Annual Revenues Acquired
151
36
105
292
353
-
-
-
Purchase Price
Cash Paid
188
12
113
314
199
-
-
-
Stock Issued
-
-
-
-
163
-
-
-
Total
188
12
113
314
362
-
-
-
Number of Acquisitions
North America
Engineered Products
1
1
5
4
2
-
-
-
Specialty Systems
1
-
3
1
2
-
-
-
International
Engineered Products
-
1
-
-
4
-
-
-
Specialty Systems
1
1
3
-
3
-
-
-
Total
3
3
11
5
11
-
-
-
2005
2006
Key Economic Data
March ’06 ISM Index: reasonably strong at 55.2%;
March ’06 new order index at 58.4%
US Industrial Production (ex. Tech.): +3.7% in
March ’06 compared to +2.4% in December ’05
Weaker fundamentals in Europe
EuroZone industrial production: +2.4%
UK industrial production: -1.4%
France industrial production: -0.6%
Euro-Zone ISM: 56.1% in March ’06
ITW
Engineered Products - North America
2005
2006
Q1
Q1
Amount
%
Operating Revenues
918.2
1,043.4
125.2
13.6%
Operating Income
144.4
176.8
32.4
22.5%
Operating Margins
15.7%
16.9%
1.2%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
6.6%
16.8%
1.5%
Nonvolume-related
-
-0.5%
-
Total
6.6%
16.3%
1.5%
Acquisitions / Divestitures
6.7%
4.4%
-0.4%
Translation
0.3%
0.5%
-
Impairment
-
-0.3%
-0.1%
Restructuring
-
1.6%
0.2%
Total
13.6%
22.5%
1.2%
% F(U) Prior Year
Engineered Products - North America
Key Points
Total construction: +8% for Q1 ’06
Wilsonart (high pressure laminate): base revenues +11% in Q1 ’06
- largely due to new products introduced in the flooring and base
laminate units
ITW construction (tools and fasteners) base revenues: +5% for Q1
’06
- commercial: low double-digit growth in Q1 ’06
- new housing: +7% in Q1 ’06
- renovation: flat in Q1 ’06
Engineered Products - North America
Key Points
Auto base revenues: +2% for Q1 ’06
Big 3 build rates: +2% for Q1 ’06
GM: +6%
Ford: -3%
Chrysler: +4%
New domestics: +11%
Big 3 inventories: 80 days at 3-31-06
GM: 86 days
Ford: 77 days
Chrysler: 76 days
New domestics’ inventories: 55 days at 3-31-06
ITW Big 3 auto build forecast for 2006:
Down 2% to 4% for full year ’06
Industrial: base revenues +8% for Q1 ’06
Top performers: Minigrip/ZipPak, Polymers, Fluid Products
ITW
Engineered Products - International
2005
2006
Q1
Q1
Amount
%
Operating Revenues
647.8
626.9
(20.9)
-3.2%
Operating Income
84.5
75.8
(8.7)
-10.2%
Operating Margins
13.0%
12.1%
-0.9%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
0.6%
1.9%
0.2%
Nonvolume-related
-
-1.7%
-0.2%
Total
0.6%
0.2%
0.0%
Acquisitions / Divestitures
3.0%
0.9%
-0.2%
Translation
-6.8%
-6.3%
-
Impairment
-
-1.9%
-0.3%
Restructuring
-
-3.1%
-0.4%
Total
-3.2%
-10.2%
-0.9%
% F(U) Prior Year
Engineered Products - International
Key Points
Construction base revenues: -1% in Q1 ’06
Europe: -1% (slowing in UK/Ireland)
Austral-Asia: -1% (commercial/retail weakness in Australia)
Wilsonart Intl.: -3% (weakness in China and the UK offset growth in Germany)
Automotive base revenues: +3% in Q1 ’06
Builds: +2% in Q1 ’06
Fiat: +27.9%; D/C: +7.9%; BMW: +4.5%; Ford Group: +2.7%; VW Group: +2.6%;
Citroen/Peugeot: -10.9%; GM Group: -5.9%
ITW FY ’06 forecast: +2% to +3%
Industrial base revenues: +2% in Q1 ’06
Polymers: +5%; Electronic Component Packaging: +17%; Industrial Plastics: -3%
ITW
Specialty Systems - North America
2005
2006
Q1
Q1
Amount
%
Operating Revenues
1,005.9
1,138.4
132.5
13.2%
Operating Income
176.2
218.4
42.2
23.9%
Operating Margins
17.5%
19.2%
1.7%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
9.6%
22.1%
2.0%
Nonvolume-related
-
1.7%
0.3%
Total
9.6%
23.8%
2.3%
Acquisitions / Divestitures
3.2%
0.5%
-0.5%
Translation
0.4%
0.5%
-
Impairment
-
0.8%
0.1%
Restructuring
-
-1.7%
-0.2%
Total
13.2%
23.9%
1.7%
% F(U) Prior Year
Specialty Systems - North America
Key Points
Welding base revenues: 22% growth in Q1 ’06 due
primarily to demand for replacement products and new
product introductions
Total Packaging: +6% base revenue growth in Q1 ’06
Signode packaging: +4% base revenue growth; strong
machinery sales
Other industrial packaging units (stretch/paper) grew
base revenues double-digit in the quarter
Food Equipment base revenues: 5% growth in Q1 ’06;
restaurant/institutional side of business prospers
Finishing: +12% base revenue growth in Q1 ’06
ITW
Specialty Systems - International
2005
2006
Q1
Q1
Amount
%
Operating Revenues
590.6
622.6
32.0
5.4%
Operating Income
53.7
68.9
15.2
28.4%
Operating Margins
9.1%
11.1%
2.0%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
4.4%
18.8%
1.2%
Nonvolume-related
-
15.7%
1.4%
Total
4.4%
34.5%
2.6%
Acquisitions / Divestitures
8.4%
1.4%
-0.8%
Translation
-7.4%
-10.0%
-0.1%
Impairment
-
-0.5%
-
Restructuring
-
3.0%
0.3%
Total
5.4%
28.4%
2.0%
% F(U) Prior Year
Specialty Systems - International
Key Points
Welding: base revenue +18% in Q1 ’06 due to stronger sales in
Asia
Total packaging: +3% in Q1 ’06
-Signode industrial packaging declined 5% in Europe and
grew 9% in Asia/Pacific
Food Equipment: base revenues +3% in Q1 ’06; most growth
emanating from institutional demand in Europe
Finishing: base revenues grew 8% in Q1 ’06
ITW
2006 Forecast
Mid
Low
High
Point
2nd Quarter
Base Revenues
4.2%
6.2%
5.2%
Income Per Share-Diluted
$1.52
$1.58
$1.55
%F(U) 2005
18%
22%
20%
Full Year
Base Revenues
4.6%
6.0%
5.3%
Income Per Share-Diluted
$5.89
$6.07
$5.98
%F(U) 2005
13%
17%
15%
ITW 2006 Forecast
Key Assumptions
Exchange rates hold at current levels.
Acquired revenues in the $800 million to $1.0
billion range.
Restructuring cost of $30 to $50 million.
No further impairment of goodwill/intangibles.
Nonoperating investment income of $50 to $60
million, which is lower than 2005 by $70 to $80
million.
Tax rate of 31.0% for the 2nd quarter and the full
year.
ITW Conference Call
Q & A
First Quarter
2006