ITW Conference Call
Fourth Quarter
2007
Exhibit 99.2
ITW
Agenda
1. Introduction…………………….. John Brooklier/David Speer
2. Financial Overview…………….. Ron Kropp
3. Operating Segments………..…. John Brooklier
4. Forecast 2008……….…….….… 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, revenue growth, earnings growth,
operating income, tax rates, use of free cash, share repurchases and potential
acquisitions for the 2008 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 or
further 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.
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ITW
Quarterly Highlights
2006
2007
Q4
Q4
Amount
%
Operating Revenues
3,570.4
4,244.1
673.7
18.9%
Operating Income
582.5
665.7
83.2
14.3%
% of Revenues
16.3%
15.7%
-0.6%
Income from Continuing Operations
Income Amount
416.8
469.9
53.1
12.7%
Income Per Share-Diluted
0.73
0.87
0.14
19.2%
Net Income
Income Amount
439.3
470.7
31.4
7.2%
Income Per Share-Diluted
0.77
0.87
0.10
13.0%
Average Invested Capital
9,713.9
10,641.0
(927.1)
-9.5%
Return on Average Invested Capital
17.4%
18.3%
0.9%
Free Operating Cash Flow
665.2
694.4
29.2
4.4%
F(U) Last Year
ITW
Quarterly Operating Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Manufacturing Business
Operating Leverage
2.5%
6.2%
0.6%
Nonvolume-related
-
-1.6%
-0.3%
Total
2.5%
4.6%
0.3%
Acquisitions
10.8%
3.5%
-1.1%
Divestitures
-0.2%
-0.1%
-
Translation
6.1%
5.8%
-
Impairment
-
1.0%
0.2%
Restructuring
-
-0.5%
-0.1%
Intercompany/Other
-0.3%
-
0.1%
Total
18.9%
14.3%
-0.6%
% F(U) Prior Year
ITW
Full Year Highlights
2006
2007
Amount
%
Operating Revenues
13,799.0
16,170.6
2,371.6
17.2%
Operating Income
2,385.4
2,623.8
238.4
10.0%
% of Revenues
17.3%
16.2%
-1.1%
Income from Continuing Operations
Income Amount
1,680.6
1,826.1
145.5
8.7%
Income Per Share-Diluted
2.95
3.28
0.33
11.2%
Net Income
Income Amount
1,717.7
1,869.9
152.2
8.9%
Income Per Share-Diluted
3.01
3.36
0.35
11.6%
Free Operating Cash Flow
1,765.0
2,130.6
365.6
20.7%
F(U) Last Year
ITW
Full Year Operating Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Manufacturing Business
Operating Leverage
1.8%
4.3%
0.4%
Nonvolume-related
-
-0.1%
-
Total
1.8%
4.2%
0.4%
Acquisitions
11.3%
2.1%
-1.5%
Divestitures
-0.1%
-
-
Translation
4.1%
3.7%
-
Impairment
-
0.7%
0.1%
Restructuring
-
-0.7%
-0.1%
Intercompany/Other
0.1%
-
-
Total
17.2%
10.0%
-1.1%
% F(U) Prior Year
ITW
Non Operating & Taxes
2006
2007
Q4
Q4
Amount
%
Operating Income
582.5
665.7
83.2
14.3%
Interest Expense
(26.9)
(26.3)
0.6
Other Income
17.8
2.0
(15.8)
Income from Continuing Operations-Pretax
573.4
641.4
68.0
11.9%
Income Taxes
156.6
171.5
(14.9)
% to Pretax Income
27.3%
26.7%
0.6%
Income from Continuing Operations
416.8
469.9
53.1
12.7%
Income from Discontinued Operations
22.5
0.8
(21.7)
Net Income
439.3
470.7
31.4
7.2%
F(U) Last Year
ITW
Invested Capital
12/31/06
9/30/07
12/31/07
Trade Receivables
2,471.3
2,842.4
2,915.5
Days Sales Outstanding
62.3
62.8
61.8
Inventories
1,482.5
1,607.8
1,625.8
Months on Hand
1.9
1.8
1.8
Prepaids and Other Current Assets
465.5
431.9
607.7
Accounts Payable & Accrued Expenses
(1,895.2)
(2,027.2)
(2,196.0)
Operating Working Capital
2,524.1
2,854.9
2,953.0
% to Revenue(Prior 4 Qtrs.)
18%
18%
18%
Net Plant & Equipment
2,053.5
2,120.6
2,194.0
Investments
595.1
546.3
507.6
Goodwill and Intangibles
5,138.7
5,594.4
5,683.3
Other, net
(465.8)
(657.3)
(514.8)
Invested Capital
9,845.6
10,458.9
10,823.1
ITW
Debt & Equity
12/31/06
9/30/07
12/31/07
Total Capital
Short Term Debt
462.7
101.4
410.5
Long Term Debt
955.6
1,573.1
1,888.8
Total Debt
1,418.3
1,674.5
2,299.3
Stockholders' Equity
9,017.5
9,386.5
9,351.3
Total Capital
10,435.8
11,061.0
11,650.6
Less:
Cash
(590.2)
(602.1)
(827.5)
Net Debt & Equity
9,845.6
10,458.9
10,823.1
Debt to Total Capital
14%
15%
20%
ITW
Cash Flow
2006
2007
Q4
Q4
Net Income
439.3
470.7
Adjust for Non-Cash Items
172.2
141.8
Changes in Operating Assets & Liabilities
131.9
180.6
Net Cash From Operating Activities
743.4
793.1
Additions to Plant & Equipment
(78.2)
(98.7)
Free Operating Cash Flow
665.2
694.4
Stock Repurchase
(198.9)
(798.9)
Acquisitions
(650.4)
(193.2)
Purchase of Investments
(19.5)
(20.6)
Dividends
(119.0)
(152.3)
Debt
(89.5)
591.6
Proceeds from Investments
335.0
40.5
Other
49.4
63.9
Net Cash Increase (Decrease)
(27.7)
225.4
ITW
Return on Average Invested Capital
2006
2007
F(U)
Q4
Q4
Prior Yr.
Operating Income after Taxes
423.4
487.7
64.3
Operating Margins
11.9%
11.5%
-0.4%
Average Invested Capital
9,713.9
10,641.0
(927.1)
Capital Turnover
1.47
1.60
0.13
Return on Average Invested Capital
17.4%
18.3%
0.9%
2006
2007
F(U)
Year to Date
Q4
Q4
Prior Yr.
Operating Income after Taxes
1,676.7
1,856.3
179.6
Operating Margins
12.2%
11.5%
-0.7%
Average Invested Capital
9,160.7
10,327.0
(1,166.3)
Capital Turnover
1.51
1.57
0.06
Return on Average Invested Capital
18.3%
18.0%
-0.3%
ITW
Acquisitions
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Annual Revenues Acquired
353
154
388
820
399
213
218
165
Purchase Price
Cash Paid
199
82
447
650
263
216
235
163
Stock Issued
163
-
-
-
-
-
-
-
Total
362
82
447
650
263
216
235
163
Number of Acquisitions
North America
Engineered Products
2
4
5
4
2
3
2
7
Specialty Systems
2
4
4
4
1
1
3
2
International
Engineered Products
4
-
2
11
3
1
6
5
Specialty Systems
3
2
2
-
3
5
7
1
Total
11
10
13
19
9
10
18
15
2006
2007
SEGMENT REPORTING CHANGE
In 4Q07, a change was made to how the
operations were internally reported to top
management.
The company’s 825 business units have been
organized into 56 operating segments.
The 56 operating segments have been
aggregated into eight reportable segments.
Restatements of the operating results for the
new segments for 2005, 2006, and 2007 will
be reported in the 2007 Form 10-K.
NEW SEGMENTS
Revenues
(in millions)
2007
2006
2005
Industrial Packaging
2,401
2,165
2,098
Power Systems & Electronics
2,246
1,848
1,493
Transportation
2,215
1,962
1,913
Construction Products
2,064
1,898
1,727
Food Equipment
1,930
1,521
1,484
Decorative Surfaces
1,239
1,004
940
Polymers & Fluids
1,002
762
677
All Other
3,120
2,699
2,259
Less: Intersegment Revenue
(46)
(60)
(51)
16,171
13,799
12,540
Key Economic Data
Fundamentals declining but still “relatively strong” in Europe
EuroZone industrial production: 2.9% in November ’07 vs.
4.0% in August ’07
EuroZone Purchasing Managers Index: 52.6% in
December ’07 vs. 53.2% in September ’07
Ongoing weakening of macro data for North America
US Industrial Production (ex. Tech.): 0.2% in December ’07
vs. 0.7% in September ’07
North American December ’07 ISM Index: 47.7% vs. 52.0%
in September ’07; ISM finally goes “no growth” in
December
ITW
Engineered Products - North America
2006
2007
Q4
Q4
Amount
%
Operating Revenues
927.9
952.5
24.6
2.7%
Operating Income
142.1
147.2
5.1
3.6%
Operating Margins
15.3%
15.5%
0.2%
F(U) Last Year
Engineered Products - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
-1.8%
-4.6%
-0.5%
Nonvolume-related
-
4.8%
0.8%
Total
-1.8%
0.2%
0.3%
Acquisitions
3.6%
1.5%
-0.3%
Divestitures
-
-
-
Translation
0.8%
1.0%
-
Impairment
-
-
-
Restructuring
-
0.9%
0.1%
Other
0.1%
-
0.1%
Total
2.7%
3.6%
0.2%
% F(U) Prior Year
Engineered Products - North America
Key Points
Total construction base revenues: -4% for Q4 ’07 vs. -5% for Q3 ’07
ITW construction (tools/fasteners/trusses) base revenues: -10% for Q4 ’07
vs. -8% for Q3 ’07
- new housing: -16% in Q4 ’07 vs. -19% in Q3 ’07 (-24% decline in
housing starts in Q4 ’07)
- renovation: -8% in Q4 ’07 vs. -3% Q3 ’07
- commercial: +4% in Q4 ’07 vs. +4% Q3 ’07
Wilsonart (high pressure laminate): base revenues +3% in Q4 ’07
- Better laminate sales were driven by demand for high end HD laminate
Engineered Products - North America
Key Points
ITW’s Automotive base revenues: 0% for Q4 ’07 vs. +2% for Q3 ’07
Detroit 3 build rates: -3%for Q4 ’07 vs. +1% for Q3 ’07
GM: -7% for Q4 ’07; -8% for FY ’07
Ford: +3% for Q4 ’07; -7% for FY ’07
Chrysler: -3% for Q4 ’07; 0 for FY ’07
New domestic build rates: +8% for Q4 ’07; +6% for FY ’07
Detroit 3 inventories: 68 days at 12-31-07 vs. 70 days at 9-30-07
GM: 73 days
Ford: 70 days
Chrysler: 59 days
New domestics’ inventories: 53 days at 12-31-07 vs. 48 days at 9-30-07
Industrial: base revenues 0% for Q4 ’07
Key contributors: Polymers (+3%); Minigrip/ZipPak (+5%); Fluid
Products (+7%); Industrial Plastics (-6%)
ITW
Engineered Products - International
2006
2007
Q4
Q4
Amount
%
Operating Revenues
816.4
1,108.5
292.1
35.8%
Operating Income
135.0
163.9
28.9
21.4%
Operating Margins
16.5%
14.8%
-1.7%
F(U) Last Year
Engineered Products - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
6.6%
15.8%
1.4%
Nonvolume-related
-
-11.3%
-1.7%
Total
6.6%
4.5%
-0.3%
Acquisitions
16.2%
6.9%
-1.2%
Divestitures
-0.4%
-0.3%
-
Translation
13.3%
13.0%
0.2%
Impairment
-
-
-
Restructuring
-
-2.7%
-0.4%
Other
0.1%
-
-
Total
35.8%
21.4%
-1.7%
% F(U) Prior Year
Engineered Products - International
Key Points
Construction base revenues: +7% in Q4 ’07 vs. +8% in Q3 ’07
Europe: +4% (growth in many countries: France, Germany and
Nordic countries)
Asia-Pacific: +13% (commercial/retail strength in Australia)
Wilsonart Intl.: +3% (strength in Germany)
Automotive base revenues: +8% in Q4 ’07 vs. +8% in Q3 ’07
Builds: +6% in Q4 ’07
Key OEM builds: Fiat: +14%; BMW: +13.1%; GM Group: +11.2%;
Daimler: +10.1%; Ford Group: +3.2%; PSA Group: +1.5%
Industrial-based revenues: base revenues grew 5% in Q4 ’07 vs.
+3% in Q3 ’07
Fluid Products: +11%; Polymers: +7%; Industrial Plastics: -3%
ITW
Specialty Systems - North America
2006
2007
Q4
Q4
Amount
%
Operating Revenues
1,131.6
1,224.2
92.6
8.2%
Operating Income
193.2
206.1
12.9
6.7%
Operating Margins
17.1%
16.8%
-0.3%
F(U) Last Year
Specialty Systems - North America
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
2.9%
7.0%
0.7%
Nonvolume-related
-
-2.8%
-0.5%
Total
2.9%
4.2%
0.2%
Acquisitions
4.5%
-0.8%
-0.9%
Divestitures
-
-
-
Translation
0.8%
0.8%
-
Impairment
-
1.7%
0.3%
Restructuring
-
0.8%
0.1%
Other
-
-
-
Total
8.2%
6.7%
-0.3%
% F(U) Prior Year
Specialty Systems - North America
Key Points
Segment base revenues increased nearly 3% in Q4 ’07 as U.S.
industrial production rate grew less than 1.0% in Q4 ’07
Food Equipment base revenues: 6% growth in Q4 ’07 vs. 9% growth
in Q3 ’07; restaurant/institutional/service segments of business
prosper; YTD growth: 6%
Welding base revenues: 5% growth in Q4 ’07 vs. 7% growth in Q3
’07; reflects some slowing in industrial end markets and difficult Q4
’06 comps; YTD growth: 5%
Signode Industrial Packaging: -2% base revenues in Q4 ’07 vs. -6%
in Q3 ’07; continued weakness in construction-related packaging
categories (lumber and brick/block) as well as primary metals; YTD
growth: -5%
ITW
Specialty Systems - International
2006
2007
Q4
Q4
Amount
%
Operating Revenues
798.8
1,077.8
279.0
34.9%
Operating Income
112.2
148.5
36.3
32.3%
Operating Margins
14.0%
13.8%
-0.2%
F(U) Last Year
Specialty Systems - International
Quarterly Analysis
Operating
Operating
Operating
Revenues
Income
Margins
Base Business
Operating Leverage
2.5%
6.8%
0.6%
Nonvolume-related
-
4.2%
0.6%
Total
2.5%
11.0%
1.2%
Acquisitions
21.2%
9.5%
-1.5%
Divestitures
-0.4%
-0.2%
-
Translation
11.7%
11.6%
-
Impairment
-
2.0%
0.3%
Restructuring
-
-1.7%
-0.2%
Other
-0.1%
0.1%
-
Total
34.9%
32.3%
-0.2%
% F(U) Prior Year
Specialty Systems - International
Key Points
Relatively strong economic/end market fundamentals serve as
backdrop for business units in segment
Food Equipment: base revenues +10% in Q4 ’07 vs. +14%
in Q3 ’07; Q4 growth largely in Europe (Germany and
France); YTD growth: +10%
Welding: base revenue +12% in Q4 ’07 vs. +6% in Q3 ’07;
Q4 increase due to demand from energy/shipbuilding
customers for consumables in Asia/China; YTD growth:
+13% growth
Signode Industrial Packaging: base revenues decline 5% in
Europe and decrease 4% in Asia/Pacific in Q4 ’07 vs. flat
performance in Q3 ’07; YTD growth: +3% for both
geographies
ITW
2008 Forecast
Mid
Low
High
Point
1st Quarter
Total Revenues
8%
11%
10%
Diluted Income per Share - Continuing
$0.72
$0.78
$0.75
% F(U) 2007
6%
14%
10%
Full Year
Total Revenues
6%
10%
8%
Diluted Income per Share - Continuing
$3.47
$3.61
$3.54
% F(U) 2007
6%
10%
8%
ITW 2008 Forecast
Key Assumptions
Exchange rates hold at current levels.
Acquired revenues in the $0.8 billion to $1.2 billion
range.
Share repurchases of $0.8 billion to $1.0 billion for the
year.
Impairment of goodwill/intangibles of $2 million to $6
million in 1 st quarter.
Net nonoperating expense, including interest expense
and other nonoperating income, of $115 to $125
million, which is higher than 2007 by $70 to $80
million.
Tax rate of 28.75% to 29.25% range for the year.
ITW Conference Call
Q & A
Fourth Quarter
2007
