ITW Conference Call
Third 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: 203-369-1278
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Telephone replay available through midnight of
October 31, 2007
Webcast / PowerPoint replay available at
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ITW
Quarterly Highlights
2006
2007
Q3
Q3
Amount
%
Operating Revenues
3,538.0
4,093.8
555.8
15.7%
Operating Income
626.9
696.3
69.4
11.1%
% of Revenues
17.7%
17.0%
-0.7%
Net Income
Income Amount
446.1
491.1
45.0
10.1%
Income Per Share-Diluted
0.78
0.89
0.11
14.1%
Average Invested Capital
9,384.4
10,425.3
(1,040.9)
-11.1%
Return on Average Invested Capital
18.6%
19.0%
0.4%
Free Operating Cash Flow
491.8
656.1
164.3
33.4%
F(U) Last Year
ITW
Quarterly Operating Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Manufacturing Business
Operating Leverage
2.2%
5.1%
0.5%
Nonvolume-related
-
0.6%
0.1%
Total
2.2%
5.7%
0.6%
Acquisitions
11.7%
2.7%
-1.5%
Divestitures
-1.4%
-1.1%
-
Translation
3.8%
3.4%
-
Impairment
-
-
-
Restructuring
-
0.4%
0.1%
Intercompany/Other
-0.6%
-
0.1%
Total
15.7%
11.1%
-0.7%
% F(U) Prior Year
ITW
Non Operating & Taxes
2006
2007
Q3
Q3
Amount
%
Operating Income
626.9
696.3
69.4
11.1%
Interest Expense
(20.8)
(25.8)
(5.0)
Other Income
35.8
19.0
(16.8)
Net Income-P/T
641.9
689.5
47.6
7.4%
Income Taxes
195.8
198.4
(2.6)
% to Pre Tax Income
30.5%
28.8%
1.7%
Net Income-AT
446.1
491.1
45.0
10.1%
F(U) Last Year
ITW
Invested Capital
9/30/06
6/30/07
9/30/07
Trade Receivables
2,369.7
2,882.7
2,842.4
Days Sales Outstanding
60.3
62.4
62.5
Inventories
1,444.6
1,612.4
1,607.8
Months on Hand
1.9
1.8
1.8
Prepaids and Other Current Assets
462.4
463.8
431.9
Accounts Payable & Accrued Expenses
(1,725.5)
(1,998.5)
(2,027.2)
Operating Working Capital
2,551.2
2,960.4
2,854.9
% to Revenue(Prior 4 Qtrs.)
19%
20%
18%
Net Plant & Equipment
1,979.1
2,116.8
2,120.6
Investments
917.7
560.7
546.3
Goodwill and Intangibles
4,311.2
5,409.1
5,594.4
Other, net
(177.0)
(655.4)
(657.3)
Invested Capital
9,582.2
10,391.6
10,458.9
ITW
Debt & Equity
9/30/06
6/30/07
9/30/07
Total Capital
Short Term Debt
524.6
528.1
101.4
Long Term Debt
964.3
956.6
1,573.1
Total Debt
1,488.9
1,484.7
1,674.5
Stockholders' Equity
8,711.2
9,388.4
9,386.5
Total Capital
10,200.1
10,873.1
11,061.0
Less:
Cash
(617.9)
(481.5)
(602.1)
Net Debt & Equity
9,582.2
10,391.6
10,458.9
Debt to Total Capital
15%
14%
15%
ITW
Eurobonds
Bonds issued October 1 by ITW Finance Europe
S.A.
Principal of €750 million
7-year term
Fixed coupon rate of 5.25%
Listed on Luxembourg exchange
Proceeds distributed back to U.S.
Outstanding commercial paper refinanced ($616
million)
To be used for general corporate purposes
Debt will be serviced by European free cash flow
ITW
Cash Flow
2006
2007
Q3
Q3
Net Income
446.1
491.1
Adjust for Non-Cash Items
137.1
152.5
Changes in Operating Assets & Liabilities
(13.6)
92.8
Net Cash From Operating Activities
569.6
736.4
Additions to Plant & Equipment
(77.8)
(80.3)
Free Operating Cash Flow
491.8
656.1
Stock Repurchase
(248.0)
(479.0)
Acquisitions
(446.8)
(195.1)
Purchase of Investments
(2.1)
(0.6)
Dividends
(93.7)
(115.9)
Debt
431.9
182.8
Proceeds from Investments
13.8
25.8
Other
11.8
46.5
Net Cash Increase (Decrease)
158.7
120.6
ITW
Return on Average Invested Capital
2006
2007
F(U)
Q3
Q3
Prior Yr.
Operating Income after Taxes
435.7
496.0
60.3
Operating Margins
12.3%
12.1%
-0.2%
Average Invested Capital
9,384.4
10,425.3
(1,040.9)
Capital Turnover
1.51
1.57
0.06
Return on Average Invested Capital
18.6%
19.0%
0.4%
2006
2007
F(U)
Year to Date
Q3
Q3
Prior Yr.
Operating Income after Taxes
1,269.5
1,389.3
119.8
Operating Margins
12.2%
11.6%
-0.6%
Average Invested Capital
8,989.5
10,202.9
(1,213.4)
Capital Turnover
1.54
1.57
0.03
Return on Average Invested Capital
18.8%
18.2%
-0.6%
ITW
Acquisitions
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Annual Revenues Acquired
353
154
388
820
399
213
218
Purchase Price
Cash Paid
199
82
447
650
264
215
229
Stock Issued
163
-
-
-
-
-
-
Total
362
82
447
650
264
215
229
Number of Acquisitions
North America
Engineered Products
2
4
5
4
2
3
2
Specialty Systems
2
4
4
4
1
1
3
International
Engineered Products
4
-
2
11
3
1
6
Specialty Systems
3
2
2
-
3
5
7
Total
11
10
13
19
9
10
18
2006
2007
Key Economic Data
Stronger fundamentals in Europe
EuroZone industrial production: 4.0% in August ’07 vs.
2.3% in May ’07
EuroZone Purchasing Managers Index: 53.2% in
September ’07 vs. 55.6% in June ’07
Weaker macro data for North America
US Industrial Production (ex. Tech.): 0.7% in September
’07 vs. 0.6% in June ’07
North American September ’07 ISM Index: 52.0% vs.
56.0% in June ’07
ITW
Engineered Products - North America
2006
2007
Q3
Q3
Amount
%
Operating Revenues
1,017.3
1,041.2
23.9
2.4%
Operating Income
178.9
173.1
(5.8)
-3.2%
Operating Margins
17.6%
16.6%
-1.0%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
-1.7%
-4.0%
-0.4%
Nonvolume-related
-
-1.0%
-0.2%
Total
-1.7%
-5.0%
-0.6%
Acquisitions
4.5%
2.2%
-0.4%
Divestitures
-0.8%
-0.8%
-
Translation
0.4%
0.4%
-
Impairment
-
-
-
Restructuring
-
-
-
Other
-
-
-
Total
2.4%
-3.2%
-1.0%
% F(U) Prior Year
Engineered Products - North America
Key Points
ITW’s Automotive base revenues: +2% for Q3 ’07 vs. -4%
for Q2 ’07 vs. -7% for Q1 ’07
Detroit 3 build rates: +1% for Q3 ’07 vs. -6% for Q2 ’07 vs.
-12% for Q1 ’07
GM: -3% for Q3 ’07
Ford: +2% for Q3 ’07
Chrysler: +11% for Q3 ’07
New domestic build rates: +8% for Q3 ’07
Detroit 3 inventories: 70 days at 9-30-07 vs. 76 days at
6-30-07
GM: 66 days
Ford: 76 days
Chrysler: 71 days
New domestics’ inventories: 49 days at 9-30-07 vs. 53 days
at 6-30-07
Industrial: base revenues -1% for Q3 ’07
Key contributors: Industrial Plastics (-8%); Polymers
(+5%); Minigrip/ZipPak (+2%); Fluid Products (flat)
Engineered Products - North America
Key Points
Total construction base revenues: -5% for Q3 ’07 vs. -5% for Q2 ’07
vs. -10% for Q1 ’07
ITW construction (tools/fasteners/trusses) base revenues:
-8% for Q3 ’07 vs. -9% for Q2 ’07 vs. - -12% for Q1 ’07
- new housing: -19% in Q3 ’07
- renovation: -3% in Q3 ’07
- commercial: +4% in Q3 ’07
Wilsonart (high pressure laminate): base revenues -1% in Q3 ’07
- better pricing for high end HD laminate offset by decline in flooring
business
ITW
Engineered Products - International
2006
2007
Q3
Q3
Amount
%
Operating Revenues
720.4
954.6
234.2
32.5%
Operating Income
109.6
140.6
31.0
28.3%
Operating Margins
15.2%
14.7%
-0.5%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
6.7%
17.2%
1.5%
Nonvolume-related
-
-2.4%
-0.3%
Total
6.7%
14.8%
1.2%
Acquisitions
16.9%
4.2%
-1.7%
Divestitures
-0.2%
-0.2%
-
Translation
9.2%
10.3%
0.2%
Impairment
-
-
-
Restructuring
-
-0.9%
-0.1%
Other
-0.1%
0.1%
-0.1%
Total
32.5%
28.3%
-0.5%
% F(U) Prior Year
Engineered Products - International
Key Points
Construction base revenues: +8% in Q3 ’07
Europe: +9% (growth in many countries: Germany
and Sweden)
Asia-Pacific: +6% (commercial/retail strength in
Australia/New Zealand)
Wilsonart Intl.: +9% (strength in Germany and China)
Automotive base revenues: +9% in Q3 ’07
Builds: +7.5% in Q3 ’07
Key OEM builds: BMW: +16%; VW Group: +8%; Ford
Group: +7%; PSA Group: +6%; GM Group: +2%; and
Renault Group: -4%
Industrial-based revenues: base revenues grew 3% in
Q3 ’07
Polymers: +8% ; Fluid Products: +9%; Industrial
Plastics: -1%
ITW
Specialty Systems - North America
2006
2007
Q3
Q3
Amount
%
Operating Revenues
1,150.2
1,271.5
121.3
10.5%
Operating Income
229.6
246.3
16.7
7.3%
Operating Margins
20.0%
19.4%
-0.6%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
1.9%
3.9%
0.4%
Nonvolume-related
-
3.4%
0.7%
Total
1.9%
7.3%
1.1%
Acquisitions
9.8%
0.2%
-1.8%
Divestitures
-1.5%
-0.5%
0.2%
Translation
0.4%
0.4%
-
Impairment
-
-
-
Restructuring
-
-
-
Other
-0.1%
-0.1%
-0.1%
Total
10.5%
7.3%
-0.6%
% F(U) Prior Year
Specialty Systems - North America
Key Points
Segment base revenues were up 1.9% in Q3 ’07 as
U.S. industrial production rate grew less than 1.0%
in Q3 ’07
Food Equipment base revenues: 9% growth in Q3 ’07
as restaurant/institutional/service segments of
business prosper; YTD growth: 6+%
Welding base revenues: +7% growth in Q3 ’07 reflects
some slowing in industrial end markets and difficult
Q3 ’06 comps; YTD growth: 5+%
Signode Industrial Packaging: -6% base revenues in
Q3 ’07 due to weakness in construction-related
packaging categories (lumber and brick/block)
ITW
Specialty Systems - International
2006
2007
Q3
Q3
Amount
%
Operating Revenues
750.0
947.0
197.0
26.3%
Operating Income
108.8
136.3
27.5
25.3%
Operating Margins
14.5%
14.4%
-0.1%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
3.6%
9.6%
0.9%
Nonvolume-related
-
0.9%
0.1%
Total
3.6%
10.5%
1.0%
Acquisitions
18.0%
7.3%
-1.5%
Divestitures
-3.0%
-3.5%
-0.1%
Translation
7.6%
7.8%
0.1%
Impairment
-
-
-
Restructuring
-
3.2%
0.4%
Other
0.1%
-
-
Total
26.3%
25.3%
-0.1%
% F(U) Prior Year
Specialty Systems - International
Key Points
Strong economic/end market fundamentals serve as backdrop
for business units in segment
Food Equipment: base revenues +14% in Q3 ’07; growth in
Europe (Germany, UK, and France)
Welding: base revenue +6% in Q3 ’07 due to demand from
energy/shipbuilding customers for consumables in China;
Europe also contributes to growth
Finishing: base revenues +7% in Q3 ’07 due to strong
demand for Gema powder-based products in a number of
European and Asian countries
Signode Industrial Packaging: flat in both Europe and
Asia/Pacific in Q3 ’07
ITW
2007 Forecast
Mid
Low
High
Point
4th Quarter
Base Revenues
2.1%
4.1%
3.1%
Income Per Share-Diluted
$0.86
$0.90
$0.88
% F(U) 2006
12%
17%
14%
Full Year
Base Revenues
1.9%
2.5%
2.2%
Income Per Share-Diluted
$3.36
$3.40
$3.38
% F(U) 2006
12%
13%
12%
ITW 2007 Forecast
Key Assumptions
Exchange rates hold at current levels.
Acquired revenues in the $1.0 billion to $1.2 billion
range.
Share repurchases of $1.5 billion to $1.6 billion for the
year.
Restructuring cost of $35 to $40 million.
No further impairment of goodwill/intangibles.
Non-operating other income of $90 to $100 million,
which is lower than 2006 by $10 to $20 million.
Tax rate of 29.25% for the 4th quarter and the full year.
ITW Conference Call
Q & A
Third Quarter
2007
