ITW Reports 2013 First Quarter Results and Updates 2013 Earnings Guidance - First quarter GAAP diluted earnings per share (EPS) from continuing operations of $1.01 increases 6 percent

- First quarter Non-GAAP diluted EPS of $0.96 grows 8 percent vs. pro forma first quarter 2012

- Company moves businesses with more than $600 million of revenues to discontinued operations in Q1

- First quarter operating margins of 16.5 percent improve 60 basis points vs. prior year quarter

- Company launches new reporting segments

- Company maintains full-year EPS midpoint of $4.25

GLENVIEW, Ill., April 23, 2013 /PRNewswire/ -- Illinois Tool Works Inc. (NYSE: ITW) today reported first quarter 2013 diluted income per share from continuing operations of $1.01, an increase of 6 percent versus 2012 first quarter earnings of $0.95. Excluding the one-time impact of a $30 million pretax gain associated with the acquisition of the majority interest in a consumer packaging joint venture, adjusted EPS of $0.96 was 8 percent higher than pro forma first quarter 2012 earnings.  The adjusted EPS of $0.96 also was $0.01 higher than the Company's original mid-point forecast issued in January 2013.  Reconciliations of GAAP to adjusted results, which also exclude the 2012 impact of the Decorative Surfaces business, are included in the attached exhibits.

As part of the first quarter 2013, results of several existing and previously divested businesses were reclassified to discontinued operations. These businesses represent more than $600 million in annual revenues and reduced first quarter 2013 diluted income per share from continuing operations by $0.01. The Company expects an additional $0.06 of EPS dilution from these discontinued businesses for the remainder of the year.  Also, as previously announced, the Company has realigned its reporting segments and has restated segment results for prior periods.   

Highlights of the 2013 first quarter versus the prior-year period included:

*Total revenues of $4.0 billion declined 8.0 percent due to the Decorative Surfaces segment results included in 2012 and weaker than expected organic revenue activity. Excluding the impact of Decorative Surfaces, total revenues declined 1.8 percent. Total Company organic revenues declined 2.7 percent in the first quarter, a result that was lower than the Company's original forecast in January 2013. By geography, North American organic revenues decreased 1.9 percent and international organic revenues declined 3.5 percent. While European organic revenues fell 5.8 percent, Asia Pacific organic revenues grew 0.5 percent. Notably, China organic revenues increased 10.2 percent.

*The Automotive OEM segment led the Company in organic growth, increasing 4.0 percent. North American automotive organic revenues grew 3 percent, outpacing a North American auto build increase of 1 percent.  While European organic revenues declined 2 percent, European auto builds fell 8 percent. Asia Pacific organic revenues increased 24 percent as a result of ITW's growing product penetration amid a robust auto build environment in China.

*Total Company operating margins were 16.5 percent, a 60 basis point improvement versus the year-ago period.  Notably, six of the Company's eight reporting segments produced gains in operating margin.

"Despite softer than anticipated demand in many of our end markets, we delivered very solid operating results in the quarter," said E. Scott Santi, president and chief executive officer.  "Our above-forecast EPS results and 60 basis point year-on-year operating margin improvement were due to strong contributions from our operating leadership and the early stage benefits of our enterprise strategy initiatives.  While the capital goods portion of our overall product portfolio was particularly soft early in the year, we were pleased to see noticeable improvement in demand rates for these products both sequentially and year over year as we moved through the quarter.  In addition, we continued to make significant progress with respect to our portfolio management initiative in the quarter as we announced the strategic review of our Industrial Packaging segment and moved more than $600 million of other non-core revenues to discontinued operations.  With these two moves, we have largely completed the process of identifying the core businesses that will constitute our faster growing and more profitable portfolio moving forward."       

Incorporating first quarter actual results, the Company is now forecasting full-year organic growth to be in a range of 0 percent to 2 percent versus full-year 2012.  The Company is maintaining its $4.25 midpoint forecast for full-year diluted income per share from continuing operations. The full-year diluted income per share from continuing operations forecast range is now $4.15 to $4.35 and assumes a total revenue growth range of 2 percent to 4 percent.  For the 2013 second quarter, the Company is forecasting diluted income per share from continuing operations to be in a range of $1.04 to $1.12 and assumes a total revenue growth range of 2.5 percent to 3.5 percent.  The full-year and second quarter forecasts include the EPS dilution of discontinued operations described above.

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding organic and total revenue growth, diluted income per share from continuing operations, operating margin growth, and end market conditions. These statements are subject to certain risks, uncertainties and other factors which could cause actual results to differ materially from those anticipated. Such factors include those contained in ITW's 2012 Form 10-K.

ITW is a Fortune 150 global diversified industrial manufacturer of value-added consumables and specialty equipment with related service businesses. The Company focuses on solid growth and strong returns across its worldwide platforms and businesses. The businesses serve local customers and markets around the globe, with a significant presence in developed as well as emerging markets. ITW's pro forma revenues totaled $16.3 billion in 2012, with more than half of the revenues generated outside of the United States.


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF INCOME (UNAUDITED)




Three Months Ended

(In millions except per share amounts)

March 31


2013


2012

Operating Revenues

$

4,009



$

4,358


Cost of revenues

2,502



2,763


Selling, administrative, and research and development expenses

779



832


Amortization of intangible assets

68



69


Operating Income

660



694


Interest expense

(60)



(50)


Other income (expense)

46



8


Income from Continuing Operations Before Income Taxes

646



652


Income Taxes

187



188


Income from Continuing Operations

459



464


Income (Loss) from Discontinued Operations

(105)



22


Net Income

$

354



$

486






Income Per Share from Continuing Operations:




Basic

$

1.02



$

0.96


Diluted

$

1.01



$

0.95


Income (Loss) Per Share from Discontinued Operations:




Basic

$

(0.23)



$

0.05


Diluted

$

(0.23)



$

0.05


Net Income Per Share:




Basic

$

0.78



$

1.01


Diluted

$

0.78



$

1.00






Shares of Common Stock Outstanding




During the Period:




Average

451.7



482.0


Average assuming dilution

454.8



485.6






FREE OPERATING CASH FLOW

Three Months Ended


March 31,


2013


2012

Net cash provided by operating activities

$

366



$

323


Less: Additions to plant and equipment

(89)



(84)


Free operating cash flow

$

277



$

239


 


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF FINANCIAL POSITION (UNAUDITED)





(In millions)

 

March 31, 2013


December 31, 2012

ASSETS




Current Assets:




     Cash and equivalents

$

2,662



$

2,779


     Trade receivables

2,789



2,742


     Inventories

1,514



1,585


     Deferred income taxes

343



332


     Prepaid expenses and other current assets

486



522


     Assets held for sale

316




       Total current assets

8,110



7,960






Net Plant and Equipment

1,960



1,994


Goodwill

5,392



5,530


Intangible Assets

2,182



2,258


Deferred Income Taxes

390



391


Other Assets

1,172



1,176



$

19,206



$

19,309






LIABILITIES AND STOCKHOLDERS' EQUITY




Current Liabilities:




     Short-term debt

$

456



$

459


     Accounts payable

749



676


     Accrued expenses

1,235



1,392


     Cash dividends payable

171




     Income taxes payable

99



116


     Deferred income taxes

8



8


     Liabilities held for sale

84




       Total current liabilities

2,802



2,651






Noncurrent Liabilities:




     Long-term debt

4,556



4,589


     Deferred income taxes

309



244


     Other liabilities

1,260



1,255


       Total noncurrent liabilities

6,125



6,088






Stockholders' Equity:




Common stock

6



5


Additional paid-in-capital

1,012



1,012


Income reinvested in the business

14,156



13,973


Common stock held in treasury

(5,055)



(4,722)


Accumulated other comprehensive income

155



293


Noncontrolling interest

5



9


Total stockholders' equity

10,279



10,570



$

19,206



$

19,309


 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT DATA (UNAUDITED)










Three Months Ended March 31, 2013

% F(U) vs. prior year


(Dollars in millions)

Total Revenue


Operating Income


Operating Margin



Adjusted Operating Margin*



Total Revenue


Organic (Base) Revenue


Operating Margin


Test & Measurement and Electronics

$

520


$

68


13.0

%


17.2

%


(2.1)%


(3.4)%


120 bps


Automotive OEM

589


117


19.8

%


19.9

%


4.0%


4.0%


10 bps


Polymers & Fluids

495


72


14.6

%


18.7

%


(5.9)%


(6.7)%


(30) bps


Food Equipment

467


78


16.7

%


17.4

%


(1.2)%


(2.5)%


70 bps


Welding

472


122


26.0

%


26.5

%


(4.8)%


(5.5)%


(200) bps


Construction Products

418


49


11.7

%


12.7

%


(3.3)%


(3.4)%


320 bps


Specialty Products

481


96


19.9

%


21.6

%


3.6%


0.3%


80 bps


Industrial Packaging

579


72


12.4

%


13.5

%


(4.7)%


(4.4)%


130 bps


Intersegment

(12)














Total Segments

4,009


674


16.8

%


18.5

%


(1.8)%


(2.7)%


60 bps


Unallocated


(14)


n/a










Total Company

$

4,009


$

660


16.5

%


18.2

%


(8.0)%


(2.7)%


60 bps





















* Adjusted operating margin excludes intangible amortization and other non-cash acquisition accounting items. 

 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

PRO FORMA RESULTS NON-GAAP (UNAUDITED)







































(In millions except per share amounts)

Three Months Ended


Twelve Months Ended



March 31, 2012



June 30, 2012



September 30, 2012



December 31, 2012



December 31, 2012




Total Revenue


Operating Income


Diluted EPS



Total Revenue


Operating Income


Diluted EPS



Total Revenue


Operating Income


Diluted EPS



Total Revenue


Operating Income


Diluted EPS



Total Revenue


Operating Income


Diluted EPS





















































Actual Results (GAAP)


$

4,358


$

694


$

0.95



$

4,463


$

758


$

1.09



$

4,337


$

752


$

1.08



$

4,066


$

602


$

2.11



$

17,224


$

2,806


$

5.21


Decorative Surfaces net gain
















1.37





1.34


Decorative Surfaces equity interest
















(0.04)





(0.04)


Decorative Surfaces segment


275


42


0.06



286


48


0.07



267


41


0.06



93


12


0.01



921


143


0.21


Adjusted Results (Pro-forma)


$

4,083


$

652


$

0.89



$

4,177


$

710


$

1.02



$

4,070


$

711


$

1.02



$

3,973


$

590


$

0.77



$

16,303


$

2,663


$

3.70























 

(In millions except per share amounts)


Three Months Ended




March 31, 2013




Total Revenue

Operating Income

Diluted EPS


Actual Results (GAAP)


$4,009

$660

$1.01


Gain on incremental 51% acquisition


0.05


Adjusted Results (Pro-forma)


$4,009

$660

$0.96














 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

OPERATING MARGIN % RECONCILIATION (UNAUDITED)



Three Months Ended

March 31, 2013


Industrial Packaging

Test & Measurement and Electronics

Automotive OEM

Polymers & Fluids

Food Equipment

Welding

Construction Products

Specialty Products

Operating Margin %

12.4

%

13.0

%

19.8

%

14.6

%

16.7

%

26.0

%

11.7

%

19.9

%

Amortization of intangible assets and other non-cash acquisition accounting items

1.1

%

4.2

%

0.1

%

4.1

%

0.7

%

0.5

%

1.0

%

1.7

%

Adjusted Operating Margin %

13.5

%

17.2

%

19.9

%

18.7

%

17.4

%

26.5

%

12.7

%

21.6

%










 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF INCOME RESTATED FOR DISCONTINUED OPERATIONS (UNAUDITED)










(In millions except per share amounts)











1Q 2012


2Q 2012


3Q 2012


4Q 2012


2012 YTD


2011 YTD

Operating Revenues


$

4,358



$

4,463



$

4,337



$

4,066



$

17,224



$

16,991


Cost of revenues


2,763



2,814



2,728



2,600



10,905



10,916


Selling, administrative, and research and  development expenses


832



819



788



796



3,235



3,162


Amortization of intangible assets


69



72



67



68



276



244


Impairment of goodwill and other intangible assets






2





2




Operating Income


694



758



752



602



2,806



2,669


Interest expense


(50)



(50)



(52)



(61)



(213)



(191)


Gain on sale of interest in Decorative Surfaces








933



933




Other income (expense)


8



24



1



(19)



14



54


Income from Continuing Operations before Income Taxes


652



732



701



1,455



3,540



2,532


Income taxes


188



213



196



479



1,076



555


Income from Continuing Operations


464



519



505



976



2,464



1,977


Income from Discontinued Operations


22



362



19



3



406



94


Net Income


$

486



$

881



$

524



$

979



$

2,870



$

2,071















Income Per Share from Continuing Operations:













Basic


$

0.96



$

1.10



$

1.09



$

2.12



$

5.24



$

4.02


Diluted


$

0.95



$

1.09



$

1.08



$

2.11



$

5.21



$

4.00


Income Per Share from Discontinued Operations:













Basic


$

0.05



$

0.76



$

0.04



$

0.01



$

0.86



$

0.19


Diluted


$

0.05



$

0.76



$

0.04



$

0.01



$

0.86



$

0.19


Net Income Per Share:













Basic


$

1.01



$

1.86



$

1.13



$

2.13



$

6.11



$

4.21


Diluted


$

1.00



$

1.85



$

1.12



$

2.11



$

6.06



$

4.19















Shares of Common Stock Outstanding During the Period:













Average


482.0



472.9



464.8



459.7



469.8



491.4


Average assuming dilution


485.6



476.1



468.1



463.1



473.2



494.6





















 


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT DATA RESTATED FOR SEGMENT CHANGES AND DISCONTINUED OPERATIONS (UNAUDITED)














(Dollars in millions)

Q1 2012


Q2 2012


Q3 2012


Q4 2012


2012 Full Year



2011 Full Year


Total

Revenue

Operating

Income

Operating

Margin %

Total

Revenue

Operating

Income

Operating

Margin %

Total

Revenue

Operating

Income

Operating

Margin %

Total

Revenue

Operating

Income

Operating

Margin %

Total

Revenue

Operating

Income

Operating

Margin %


Total

Revenue

Operating

Income

Operating

Margin %

Industrial Packaging

$

608


$

68


11.1

%

$

622


$

78


12.6

%

$

595


$

76


12.8

%

$

571


$

66


11.6

%

$

2,396


$

288


12.0

%


$

2,436


$

270


11.1

%

Test & Measurement and Electronics

530


62


11.8

%

593


93


15.7

%

623


114


18.2

%

553


73


13.2

%

2,299


342


14.9

%


2,011


300


14.9

%

Automotive OEM

566


112


19.7

%

547


109


19.9

%

521


99


19.1

%

537


101


18.8

%

2,171


421


19.4

%


2,092


386


18.4

%

Polymers & Fluids

526


78


14.9

%

550


91


16.6

%

510


81


15.8

%

485


76


15.7

%

2,071


326


15.8

%


2,069


329


15.9

%

Food Equipment

473


76


16.0

%

476


78


16.4

%

491


93


19.0

%

499


85


17.0

%

1,939


332


17.1

%


1,985


311


15.7

%

Welding

495


139


28.0

%

469


121


25.9

%

443


109


24.5

%

440


101


23.0

%

1,847


470


25.4

%


1,724


440


25.5

%

Construction Products

433


37


8.5

%

453


61


13.4

%

442


60


13.7

%

433


47


10.8

%

1,761


205


11.6

%


1,792


226


12.6

%

Specialty Products

465


88


19.1

%

481


106


22.0

%

458


90


19.6

%

467


81


17.4

%

1,871


365


19.5

%


1,856


383


20.6

%

Intersegment

(13)





(14)






(13)






(12)






(52)






(58)





Total Segments

$4,083


$660


16.2

%

$4,177


$737


17.6

%

$4,070


$722


17.7

%

$3,973


$630


15.9

%

$16,303


$2,749


16.9

%


$15,907


$2,645


16.6

%

Unallocated


(8)


n/a



(27)


n/a



(11)


n/a



(40)


n/a



(86)


n/a




(130)


n/a


Decorative Surfaces

275


42


15.3

%

286


48


16.8

%

267


41


15.4

%

93


12


12.9

%

921


143


15.5

%


1,084


154


14.2

%

Total Company

$4,358


$694


15.9

%

$4,463


$758


17.0

%

$4,337


$752


17.3

%

$4,066


$602


14.8

%

$17,224


$2,806


16.3

%


$16,991


$2,669


15.7

%

 

 

 

 

 

SOURCE Illinois Tool Works Inc.



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