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

23 Apr, 2013, 08:00 ET from Illinois Tool Works Inc.

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.



RELATED LINKS

http://www.itw.com