ITW Conference Call
First Quarter
2007
Exhibit 99.2
ITW
Agenda
1.
Introduction………………………John Brooklier/David Speer
2.
Financial Overview……………...Ron Kropp
3.
Manufacturing Segments………John Brooklier
4.
Forecast 2007………………….…Ron Kropp
4.
Q & A………………......………….John Brooklier/Ron Kropp/David Speer
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 2007 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, general
industrial, automotive or food institutional and service markets, (2)
deterioration in international and domestic business and economic
conditions, particularly in North America, Europe, Asia or 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 2, 2007
Webcast / PowerPoint replay available at
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ITW
Quarterly Highlights
2006
2007
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
8,594.6
9,980.6
(1,386.0)
-16.1%
Return on Average Invested Capital
17.3%
16.1%
-1.2%
Free Operating Cash Flow
323.1
337.5
14.4
4.5%
F(U) Last Year
ITW
Quarterly Operating Analysis
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%
Impairment
-
1.9%
0.3%
Restructuring
-
-1.1%
-0.2%
Intercompany/Other
-0.2%
-
-
Total
14.0%
5.3%
-1.3%
% F(U) Prior Year
ITW
Non Operating & Taxes
2006
2007
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
35.9
9.8%
F(U) Last Year
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 Working Capital
2,182.5
2,442.3
2,750.3
% to Revenue(Prior 4 Qtrs.)
17%
17%
19%
Net Plant & Equipment
1,843.2
2,053.5
2,070.5
Investments
890.2
595.1
552.2
Goodwill and Intangibles
3,956.0
5,138.7
5,283.6
Other, net
(70.5)
(384.0)
(541.0)
Invested Capital
8,801.4
9,845.6
10,115.6
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
8,801.4
9,845.6
10,115.6
Debt to Total Capital
13%
14%
14%
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)
Acquisitions
(199.0)
(269.1)
Dividends
(92.6)
(117.3)
Proceeds from Divestitures
12.5
91.7
Debt
(24.0)
89.2
Proceeds from Investments
12.3
13.1
Other
51.8
19.2
Net Cash Increase (Decrease)
84.1
(15.6)
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%
ITW
Acquisitions
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 Products
4
-
2
11
3
Specialty Systems
3
2
2
-
3
Total
11
10
13
19
9
2006
2007
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 Index: relatively weak 50.9% vs.
51.4% in December ’06 vs. 52.9% in September ’06
North American March ’07 ISM new order index: 51.6% vs.
52.1% in December ’06 vs. 54.2% in September ’06
US Industrial Production (ex. Tech.): +1.2% in March ’07
compared to +2.4% in December ’06
ITW
Engineered Products - North America
2006
2007
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%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
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%
-
Translation
-0.1%
-0.1%
-
Impairment
-
3.1%
0.6%
Restructuring
-
-2.9%
-0.5%
Total
-0.4%
-11.5%
-1.9%
% F(U) Prior Year
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 Q1 ’07
Wilsonart (high pressure laminate): base revenues -8% in Q1 ’07
- weaker commercial/new housing as well as tough flooring “comps”
led to decline
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 domestics’ inventories: 59 days at 3-31-07
Industrial: base revenues -1% for Q1 ’07
Key contributors: Industrial Plastics (-3%); Polymers
(+2%)
ITW
Engineered Products - International
2006
2007
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%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
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%
Translation
8.5%
9.9%
0.2%
Impairment
-
0.2%
-
Restructuring
-
-0.8%
-0.1%
Other
0.1%
-0.1%
-
Total
33.4%
28.6%
-0.4%
% F(U) Prior Year
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% in Q1 ’07
Builds: +6% in Q1 ’07
Mix issue/key builds: Renault Group: +0.8%;
Fiat: +2.3%
Industrial-based revenues: +7% in Q1 ’07
Industrial Plastics: +17%; Fluid Products: +8%;
Polymers: +5%
ITW
Specialty Systems - North America
2006
2007
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%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
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%
-0.1%
-
Impairment
-
1.9%
0.4%
Restructuring
-
1.2%
0.2%
Other
-0.1%
-
-
Total
8.7%
1.0%
-1.4%
% F(U) Prior Year
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 in Q1 ’07 primarily
due to strength in energy related end markets
Food Equipment base revenues: 3% growth in Q1 ’07;
restaurant/institutional side of business prospers
ITW
Specialty Systems - International
2006
2007
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%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
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%
8.8%
0.1%
Impairment
-
0.4%
-
Restructuring
-
-4.5%
-0.5%
Other
-0.1%
-0.1%
-
Total
27.2%
35.9%
0.8%
% F(U) Prior Year
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 revenues +8% in Q1 ’07; most growth
emanating from institutional demand in Europe
Finishing: base revenues grew 22% in Q1 ’07 due to strong
demand for Gema powder-based products in a number of
European countries
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%
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.
Nonoperating other income of $70 to $80 million,
which is lower than 2006 by $30 to $40 million.
Tax rate of 29.5% for the 2nd quarter and the full year.
ITW Conference Call
Q & A
First Quarter
2007
