Illinois Tool Works : Q2 2017 Illinois Tool Works Inc. Earnings Conference Call Presentation
July 24, 2017 at 08:39 am EDT
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Second Quarter 2017
Conference Call
July 24, 2017
Forward-Looking Statements
SAFE HARBOR STATEMENT
This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the expected impact of product line simplification activities and enterprise initiatives, future financial performance, operating performance, growth in free cash flow, organic and total revenue growth, operating margin growth, growth in diluted income per share, restructuring expenses and related benefits, effective tax rates, exchange rates, timing and amount of share repurchases, after-tax return on invested capital, end market economic conditions, the expected impact of acquisitions on financial results and the company's related 2017 guidance. 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 could cause actual results to differ materially from the company's expectations include those that are detailed in ITW's Form 10-K for 2016.
NON-GAAP MEASURES
The company uses certain non-GAAP measures in discussing the company's performance. The reconciliation of those measures to the most comparable GAAP measures is detailed in ITW's press release for the second quarter of 2017, which is available at www.itw.com, together with this presentation.
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Q2 2017 CONFERENCE CALL
Q2 2017 Performance
Financial Results
Highlights
GAAP EPS
REVENUE
$1.46
$3.4B Q2'16
EPS +16%
$1.69
$3.6B
Q2'17
GAAP EPS of $1.69, an increase of 16%
Total revenue grew 4.9%; organic growth of 2.6%
North America 1.4%, Europe 3.4% and China 13.3%
6 of 7 segments with positive organic growth
Record financial performance
Operating margin of 24.3%, 100 bps from Enterprise Initiatives
After-tax ROIC* of 24.8%
Operating income of $874M, an increase of 10%
OPERATING MARGIN 23.1%
24.3%
+120 bps
Free Cash Flow* of $502M adjusted for pension contribution
AFTER-TAX ROIC* 22.9% 24.8% +190 bps
− 85% of net income, in line with typical seasonality
*See ITW's second quarter 2017 press release for the reconciliation from GAAP to non-GAAP measurements
STRONG FINANCIAL PERFORMANCE IN Q2 2017
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Q2 2017 CONFERENCE CALL
Q2 2017 Operating Margin
Operating Margin
Key Margin Drivers
Q2'17
23.1%
Q2'16
24.3%
Q2'17
Enterprise Initiatives
+100 bps
Volume
+50
Price/Cost
(50)
Legal settlement
+40
EF&C Margin Impact
(60)
Restructuring, Overhead Efficiencies
+40
Total Margin Expansion
+120 bps
+120 bps
ALL-TIME RECORD MARGIN PERFORMANCE
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Illinois Tool Works Inc. published this content on 24 July 2017 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 24 July 2017 12:39:23 UTC.
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Illinois Tool Works Inc. is a diversified industrial group organized around 7 families of products:
- automotive equipment (20.1% of net sales). Besides, the group proposes products for maintenance and refurbishment (coatings, sealants, shutters, etc.);
- electronic equipment (17.5%): primarily equipment of microelectronic assembly. The group also provides test and measurement equipment and software;
- equipment for industrial kitchens (16.3%): cookers, dishwasher, ovens, refrigerators, cupboards, systems of aeration, etc.;
- construction systems and materials (12.6%): powder and gas nailing, perforators and consumables (fuses, chisels, pads, plugs, etc.) intended for applications on wood, steel and concrete;
- polymers, coatings, resins, adhesives and lubricants (11.2%);
- metallurgical equipment (10.5%): arc welding equipment, blowtorches, welding accessories, etc.
- specialty products (11.3%): industrial packaging systems and materials, products coding and marking equipment, etc.
Net sales are distributed geographically as follows: the United States (47.1%), North America (6.9%), Europe/Middle East/Africa (25.8%), Asia/Pacific (18.3%) and South America (1.9%).
ILLINOIS TOOL WORKS INC. 
