ITW Conference Call
Second 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
5. 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
Replay number: 402-220-0196
No pass code necessary
Telephone replay available through midnight of
August 2, 2007
Webcast / PowerPoint replay available at itw.com
website
ITW
Quarterly Highlights
2006
2007
Q2
Q2
Amount
%
Operating Revenues
3,579.5
4,159.7
580.2
16.2%
Operating Income
659.8
698.7
38.9
5.9%
% of Revenues
18.4%
16.8%
-1.6%
Net Income
Income Amount
465.9
505.6
39.7
8.5%
Income Per Share-Diluted
0.81
0.90
0.09
11.1%
Average Invested Capital
8,994.0
10,253.6
(1,259.6)
-14.0%
Return on Average Invested Capital
20.5%
19.2%
-1.3%
Free Operating Cash Flow
284.9
442.6
157.7
55.3%
F(U) Last Year
ITW
Quarterly Operating Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Manufacturing Business
Operating Leverage
2.4%
5.2%
0.5%
Nonvolume-related
-
-1.8%
-0.3%
Total
2.4%
3.4%
0.2%
Acquisitions
12.0%
1.7%
-1.7%
Divestitures
-1.3%
-0.8%
0.1%
Translation
3.6%
3.1%
-
Impairment
-
-
-
Restructuring
-
-1.5%
-0.3%
Intercompany/Other
-0.5%
-
0.1%
Total
16.2%
5.9%
-1.6%
% F(U) Prior Year
ITW
Non Operating & Taxes
2006
2007
Q2
Q2
Amount
%
Operating Income
659.8
698.7
38.9
5.9%
Interest Expense
(19.0)
(25.6)
(6.6)
Other Income
25.7
44.1
18.4
Net Income-P/T
666.5
717.2
50.7
7.6%
Income Taxes
200.6
211.6
(11.0)
% to Pre Tax Income
30.1%
29.5%
0.6%
Net Income-AT
465.9
505.6
39.7
8.5%
F(U) Last Year
ITW
Invested Capital
6/30/06
3/31/07
6/30/07
Trade Receivables
2,374.2
2,681.5
2,882.7
Days Sales Outstanding
59.7
64.2
62.4
Inventories
1,370.0
1,601.7
1,612.4
Months on Hand
1.8
2.0
1.8
Other Current Assets
612.9
646.6
677.7
Accounts Payable & Accruals
(1,880.4)
(2,179.5)
(2,292.1)
Operating Working Capital
2,476.7
2,750.3
2,880.7
% to Revenue(Prior 4 Qtrs.)
19%
19%
19%
Net Plant & Equipment
1,916.0
2,070.5
2,116.8
Investments
907.5
552.2
560.7
Goodwill and Intangibles
3,997.6
5,283.6
5,409.1
Other, net
(111.2)
(541.0)
(575.7)
Invested Capital
9,186.6
10,115.6
10,391.6
ITW
Debt & Equity
6/30/06
3/31/07
6/30/07
Total Capital
Short Term Debt
91.7
577.1
528.1
Long Term Debt
960.2
956.3
956.6
Total Debt
1,051.9
1,533.4
1,484.7
Stockholders' Equity
8,593.9
9,156.8
9,388.4
Total Capital
9,645.8
10,690.2
10,873.1
Less:
Cash
(459.2)
(574.6)
(481.5)
Net Debt & Equity
9,186.6
10,115.6
10,391.6
Debt to Total Capital
11%
14%
14%
ITW
Cash Flow
2006
2007
Q2
Q2
Net Income
465.9
505.6
Adjust for Non-Cash Items
130.7
98.8
Changes in Operating Assets & Liabilities
(235.0)
(72.8)
Net Cash From Operating Activities
361.6
531.6
Additions to Plant & Equipment
(76.7)
(89.0)
Free Operating Cash Flow
284.9
442.6
Stock Repurchase
-
(300.0)
Acquisitions
(82.5)
(155.3)
Dividends
(93.6)
(116.9)
Proceeds from Divestitures
0.4
58.0
Debt
(139.9)
(86.3)
Proceeds from Investments
6.3
11.8
Other
29.1
53.0
Net Cash Increase (Decrease)
4.7
(93.1)
ITW
Return on Average Invested Capital
2006
2007
F(U)
Q2
Q2
Prior Yr.
Operating Income after Taxes
461.2
492.6
31.4
Operating Margins
12.9%
11.8%
-1.1%
Average Invested Capital
8,994.0
10,253.6
(1,259.6)
Capital Turnover
1.59
1.62
0.03
Return on Average Invested Capital
20.5%
19.2%
-1.3%
2006
2007
F(U)
Year to Date
Q2
Q2
Prior Yr.
Operating Income after Taxes
833.8
893.5
59.7
Operating Margins
12.1%
11.3%
-0.8%
Average Invested Capital
8,791.9
10,117.6
(1,325.7)
Capital Turnover
1.56
1.57
0.01
Return on Average Invested Capital
19.0%
17.7%
-1.3%
ITW
Acquisitions
Q1
Q2
Q3
Q4
Q1
Q2
Annual Revenues Acquired
353
154
388
820
399
213
Purchase Price
Cash Paid
199
82
447
650
269
219
Stock Issued
163
-
-
-
-
-
Total
362
82
447
650
269
219
Number of Acquisitions
North America
Engineered Products
2
4
5
4
2
3
Specialty Systems
2
4
4
4
1
1
International
Engineered Products
4
-
2
11
3
1
Specialty Systems
3
2
2
-
3
5
Total
11
10
13
19
9
10
2006
2007
Key Economic Data
Stronger fundamentals in Europe
EuroZone Purchasing Managers Index: 55.6% in June ’07 vs.
55.4% in March ’07
EuroZone industrial production: 2.3% in May ’07 vs. 4.2% in
February ’07
German industrial production: 4.6% in May ’07 vs. 7.6% in
February ’07
US Industrial Production (ex. Tech.): 0.6% in June ’07 vs. 1.2%
in March ’07
North American June ’07 ISM Index: 56.0% vs. 50.9% in March
’07
North American June ’07 ISM New Order Index: 60.3% vs. 51.6%
in March ’07
ITW
Engineered Products - North America
2006
2007
Q2
Q2
Amount
%
Operating Revenues
1,091.7
1,088.9
(2.8)
-0.3%
Operating Income
209.7
194.5
(15.2)
-7.3%
Operating Margins
19.2%
17.9%
-1.3%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
-3.3%
-7.0%
-0.7%
Nonvolume-related
-
-0.6%
-0.1%
Total
-3.3%
-7.6%
-0.8%
Acquisitions
3.5%
1.5%
-0.4%
Divestitures
-0.6%
-0.4%
0.1%
Translation
0.1%
0.1%
-
Impairment
-
-
-
Restructuring
-
-0.9%
-0.2%
Other
-
-
-
Total
-0.3%
-7.3%
-1.3%
% F(U) Prior Year
Engineered Products - North America
Key Points
Total construction base revenues: -5% for Q2 ’07 vs. -10% for Q1 ’07
ITW construction (tools/fasteners/trusses) base revenues: -9% for Q2
’07 vs. -12% for Q1 ’07
- new housing: -19% in Q2 ’07
- renovation: +6% in Q2 ’07
- commercial: -3% in Q2 ’07
Wilsonart (high pressure laminate): base revenues flat in Q2 ’07
- growth in laminate/solid surfacing for commercial applications
offset by decline in flooring business
Engineered Products - North America
Key Points
Auto base revenues: -4% for Q2 ’07 vs. -7% for Q1 ’07
Detroit 3 build rates: -7% for Q2 ’07 vs. -12% for Q1 ’07
GM: -7% for Q2 ’07
Ford: -10% for Q2 ’07
Chrysler: -2% for Q2 ’07
New domestic build rates: +9% for Q2 ’07
Detroit 3 inventories: 76 days at 6-30-07
GM: 87 days
Ford: 63 days
Chrysler: 72 days
New domestics’ inventories: 53 days at 6-30-07
Industrial: base revenues -1% for Q2 ’07
Key contributors: Industrial Plastics (-11%); Polymers
(+2%); Fluid Products (+7%)
ITW
Engineered Products - International
2006
2007
Q2
Q2
Amount
%
Operating Revenues
736.6
976.7
240.1
32.6%
Operating Income
110.5
148.0
37.5
34.0%
Operating Margins
15.0%
15.2%
0.2%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
7.2%
19.3%
1.7%
Nonvolume-related
-
-5.5%
-0.8%
Total
7.2%
13.8%
0.9%
Acquisitions
16.1%
9.4%
-0.9%
Divestitures
-
-
-
Translation
9.3%
10.5%
0.1%
Impairment
-
-
-
Restructuring
-
0.3%
0.1%
Other
-
-
-
Total
32.6%
34.0%
0.2%
% F(U) Prior Year
Engineered Products - International
Key Points
Construction base revenues: +10% in Q2 ’07
Europe: +12% (growth in many countries: Germany,
France and U.K.)
Asia-Pacific: +10% (commercial/retail strength in
Australia/New Zealand)
Wilsonart Intl.: +5% (strength in Germany)
Automotive base revenues: +5% in Q2 ’07
Builds: +3% in Q2 ’07
Key OEM builds: Ford Group: (+9.5%); Fiat: (+6.8%);
GM Group (+3.6%); PSA Group (-4.8%); and Renault
Group (-5.5%)
Industrial-based revenues: +4% in Q2 ’07
Industrial Plastics: +2%; Fluid Products: +8%;
Polymers: +6% ; and Electronics -3%
ITW
Specialty Systems - North America
2006
2007
Q2
Q2
Amount
%
Operating Revenues
1,134.5
1,253.5
119.0
10.5%
Operating Income
232.3
238.3
6.0
2.6%
Operating Margins
20.5%
19.0%
-1.5%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
0.4%
0.8%
0.1%
Nonvolume-related
-
2.0%
0.4%
Total
0.4%
2.8%
0.5%
Acquisitions
11.7%
1.3%
-1.9%
Divestitures
-1.8%
-0.8%
0.2%
Translation
0.2%
0.1%
-
Impairment
-
-
-
Restructuring
-
-0.9%
-0.2%
Other
-
0.1%
-0.1%
Total
10.5%
2.6%
-1.5%
% F(U) Prior Year
Specialty Systems - North America
Key Points
Segment base revenues were up marginally in Q2 ’07 as
industrial production rate grew approximately 1.0% in Q2 ’07
Food Equipment base revenues: 7% growth in Q2 ’07 as
service and restaurant/institutional side of business
prospers
Welding base revenues: +3% growth in Q2 ’07 reflects
slowdown in industrial end markets and difficult Q2 ’06
comps
Industrial Packaging: -3% base revenue growth in Q2 ’07 due
to weakness in construction-related packaging categories
(lumber and brick/block: -24% in Q2 ’07)
ITW
Specialty Systems - International
2006
2007
Q2
Q2
Amount
%
Operating Revenues
719.6
960.4
240.8
33.5%
Operating Income
107.3
117.9
10.6
9.9%
Operating Margins
14.9%
12.3%
-2.6%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
8.8%
23.1%
2.0%
Nonvolume-related
-
-8.0%
-1.1%
Total
8.8%
15.1%
0.9%
Acquisitions
19.6%
-4.9%
-2.9%
Divestitures
-2.8%
-2.2%
-
Translation
7.9%
7.9%
0.2%
Impairment
-
-
-
Restructuring
-
-6.1%
-0.9%
Other
-
0.1%
0.1%
Total
33.5%
9.9%
-2.6%
% F(U) Prior Year
Specialty Systems - International
Key Points
Strong economic/end market fundamentals serve as backdrop
for business units in segment
Welding: base revenue +15% in Q2 ’07 due to demand from
energy/shipbuilding customers
Finishing: base revenues +14% in Q2 ’07 due to strong
demand for powder-based products in a number of
European and Asian countries
Food Equipment: base revenues +9% in Q2 ’07; growth in
Europe, Asia and Latin America
Signode industrial packaging: +8% in Europe and +5% in
Asia/Pacific in Q2 ’07
ITW
2007 Forecast
Mid
Low
High
Point
3rd Quarter
Base Revenues
3.0%
5.0%
4.0%
Income Per Share-Diluted
$0.85
$0.89
$0.87
% F(U) 2006
9%
14%
12%
Full Year
Base Revenues
2.1%
4.1%
3.1%
Income Per Share-Diluted
$3.31
$3.41
$3.36
% F(U) 2006
10%
13%
12%
ITW 2007 Forecast
Key Assumptions
Exchange rates hold at current levels.
Acquired revenues in the $900 million to $1.2 billion
range.
Share repurchases of $700 million to $900 million for
the year.
Restructuring cost of $35 to $50 million.
No further impairment of goodwill/intangibles.
Nonoperating other income of $80 to $90 million,
which is lower than 2006 by $20 to $30 million.
Tax rate of 29.5% for the 3rd quarter and the full year.
ITW Conference Call
Q & A
Second Quarter
2007
