ITW Reports First Quarter 2014 Financial Results - Q1 diluted EPS from continuing operations of $1.01 up 15 percent

- Operating margins of 18.7 percent up 180 basis points versus year-ago period; Enterprise initiatives contribute 120 basis points

- Organic revenues up 3.3 percent

- Company raises full-year EPS guidance by 15 cents to new midpoint of $4.55

GLENVIEW, Ill., April 22, 2014 /PRNewswire/ -- Illinois Tool Works Inc. (NYSE: ITW) today reported first quarter 2014 diluted earnings per share (EPS) from continuing operations of $1.01, 15 percent higher than the prior year period.  The stronger-than-expected EPS was driven by meaningful contributions from ongoing enterprise initiatives and accelerated share repurchase.

Key highlights for the 2014 first quarter financial results versus the year-ago period include:

  • Total revenues grew 4 percent to $3.6 billion and operating income increased 16 percent to $667 million. Organic revenues increased 3.3 percent, with international growing 6.3 percent and North America increasing 1.0 percent. Internationally, European and Asia Pacific organic revenues grew 4.8 percent and 7.2 percent, respectively.
  • EPS of $1.01 was 15 percent higher than the prior-year period.
  • Operating margins of 18.7 percent increased 180 basis points, with enterprise initiatives contributing 120 basis points.

First quarter segment highlights versus the year-ago period include:

  • Automotive OEM organic revenue growth of 13 percent significantly outpaced worldwide auto builds of 5 percent. Organic revenues grew 11 percent in North America, 14 percent in Europe and 28 percent in China. Operating margins of 23.3 percent increased 350 basis points.
  • Food Equipment's organic revenues grew 5 percent due to solid growth in equipment and service in North America and strong equipment sales internationally. Operating margins of 18.6 percent increased 190 basis points.
  • Construction Products' organic revenues grew 5 percent due to 14 percent growth in Asia Pacific and 1 percent growth in Europe.  In the United States, organic revenues grew 7 percent in the residential category, while the renovation category was flat and the commercial construction category declined 8 percent.   Operating margins of 14.8 percent increased 310 basis points.

"Underlying our strong first quarter financial results is our ongoing five-year enterprise strategy and related initiatives," said Scott Santi, president and chief executive officer. "Thanks to the worldwide ITW team, we produced operating margins of nearly 19 percent, grew our EPS 15 percent and expanded adjusted after-tax ROIC to more than 17 percent in the quarter.  Finally, we continued to focus on capital allocation during the quarter by returning significant amounts of free cash to our investors in the form of accelerated share repurchase and consistent dividend payout."

Looking forward, the Company is raising its full-year EPS guidance to a range of $4.45 to $4.65, with the $4.55 mid-point representing a 25 percent increase versus 2013.  The 15 cents guidance increase at the mid-point is driven by the accelerated share repurchase program as well as continued contributions from enterprise initiatives.  Total revenue is expected to grow in the range of 3 percent to 4 percent.  For the 2014 second quarter, the Company is forecasting EPS to be in a range of $1.16 to $1.24 and expects total revenue growth in a range of 3 percent to 5 percent.   

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding total revenue growth and diluted income per share from continuing operations. These statements are subject to certain risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated. Such factors include those contained in ITW's 2013 Form 10-K.

ITW is a Fortune 200 global diversified industrial manufacturer of value added consumables and specialty equipment with related service businesses. The Company focuses on solid growth, improving profitability and strong returns across its worldwide platforms and businesses. These businesses serve local customers and markets around the globe, with a significant presence in developed as well as emerging markets. ITW's revenues totaled $14.1 billion in 2013.

 


 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF INCOME (UNAUDITED)


 

 

Three Months Ended

(In millions except per share amounts)

March 31,


 

2014


 

2013

Operating Revenues

$

3,569


 

 

$

3,420


 

Cost of revenues

2,158


 

 

2,078


 

Selling, administrative, and research and development expenses

682


 

 

703


 

Amortization of intangible assets

62


 

 

61


 

Operating Income

667


 

 

578


 

Interest expense

(64)


 

 

(60)


 

Other income (expense)

9


 

 

47


 

Income from Continuing Operations Before Income Taxes

612


 

 

565


 

Income Taxes

184


 

 

164


 

Income from Continuing Operations

428


 

 

401


 

Income (Loss) from Discontinued Operations

45


 

 

(47)


 

Net Income

$

473


 

 

$

354


 

 

 

 

 

Income Per Share from Continuing Operations:


 

 

 

Basic

$

1.01


 

 

$

0.89


 

Diluted

$

1.01


 

 

$

0.88


 

Income (Loss) Per Share from Discontinued Operations:


 

 

 

Basic

$

0.11


 

 

$

(0.10)


 

Diluted

$

0.11


 

 

$

(0.10)


 

Net Income Per Share:


 

 

 

Basic

$

1.12


 

 

$

0.78


 

Diluted

$

1.11


 

 

$

0.78


 

 

 

 

 

Shares of Common Stock Outstanding During the Period:


 

 

 

Average

421.9


 

 

451.7


 

Average assuming dilution

425.0


 

 

454.8


 

 

 


 

FREE OPERATING CASH FLOW (UNAUDITED)


 

 

Three Months Ended

(In millions)

March 31,


 

2014


 

2013

Net cash provided by operating activities

$

314


 

 

$

366


 

Less: Additions to plant and equipment

(68)


 

 

(89)


 

Free operating cash flow

$

246


 

 

$

277


 

 

 


 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF FINANCIAL POSITION (UNAUDITED)


 

(In millions)

March 31,

2014


 

December 31,
2013

ASSETS


 

 

 

Current Assets:


 

 

 

Cash and equivalents

$

3,547


 

 

$

3,618


 

Trade receivables

2,563


 

 

2,365


 

Inventories

1,298


 

 

1,247


 

Deferred income taxes

335


 

 

384


 

Prepaid expenses and other current assets

345


 

 

366


 

Assets held for sale

1,940


 

 

1,836


 

Total current assets

10,028


 

 

9,816


 

 

 

 

 

Net Plant and Equipment

1,699


 

 

1,709


 

Goodwill

4,893


 

 

4,886


 

Intangible Assets

1,936


 

 

1,999


 

Deferred Income Taxes

383


 

 

359


 

Other Assets

1,231


 

 

1,197


 

 

$

20,170


 

 

$

19,966


 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY


 

 

 

Current Liabilities:


 

 

 

Short-term debt

$

2,833


 

 

$

3,551


 

Accounts payable

689


 

 

634


 

Accrued expenses

1,204


 

 

1,272


 

Cash dividends payable

174


 

 

181


 

Income taxes payable

84


 

 

69


 

Deferred income taxes

15


 

 

10


 

Liabilities held for sale

361


 

 

317


 

Total current liabilities

5,360


 

 

6,034


 

 

 

 

 

Noncurrent Liabilities:


 

 

 

Long-term debt

4,789


 

 

2,793


 

Deferred income taxes

522


 

 

507


 

Other liabilities

919


 

 

923


 

Total noncurrent liabilities

6,230


 

 

4,223


 

 

 

 

 

Stockholders' Equity:


 

 

 

Common stock

6


 

 

6


 

Additional paid-in-capital

1,043


 

 

1,046


 

Income reinvested in the business

15,243


 

 

14,943


 

Common stock held in treasury

(8,138)


 

 

(6,676)


 

Accumulated other comprehensive income

420


 

 

384


 

Noncontrolling interest

6


 

 

6


 

Total stockholders' equity

8,580


 

 

9,709


 

 

$

20,170


 

 

$

19,966


 

 

 


 


 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)


 

 

Three Months Ended

(Dollars in millions)

March 31,


 

2014


 

2013

Operating income

$

667


 

 

$

578


 

Tax rate

30.0

%


 

29.0

%

Income taxes

(200)


 

 

(168)


 

Operating income after taxes

$

467


 

 

$

410


 

 

 

 

 

Invested capital:


 

 

 

Trade receivables

$

2,563


 

 

$

2,789


 

Inventories

1,298


 

 

1,514


 

Net assets held for sale

1,579


 

 

232


 

Net plant and equipment

1,699


 

 

1,960


 

Goodwill and intangible assets

6,829


 

 

7,574


 

Accounts payable and accrued expenses

(1,893)


 

 

(1,984)


 

Other, net

580


 

 

544


 

Total invested capital

$

12,655


 

 

$

12,629


 

 

 

 

 

Average invested capital

$

12,545


 

 

$

12,735


 

Adjustment for Wilsonart (formerly Decorative Surfaces)

(161)


 

 

(172)


 

Adjustment for Industrial Packaging

(1,521)


 

 

(1,493)


 

Adjusted average invested capital

$

10,863


 

 

$

11,070


 

Annualized adjusted return on average invested capital

17.2

%


 

14.8

%


 

 


 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT RESULTS (UNAUDITED)

 


 

For the Three Months Ended March 31, 2014

% F(U) vs. prior year


 

Automotive OEM

Test & Measurement and Electronics

Food Equipment

Polymers & Fluids

Welding

Construction Products

Specialty Products

Total Revenue:


 

 

 

 

 

 

 

Total organic revenue

13.0

%

(0.4)%


 

5.3

%

(0.4)%


 

(2.0)%


 

4.7

%

1.5

%

Acquisitions & divestitures

%

(0.1)%


 

3.3

%

%

1.2

%

%

6.0

%

Other

0.4

%

0.4

%

0.8

%

(2.3)%


 

(1.0)%


 

(3.0)%


 

0.6

%

Total Revenue

13.4

%

(0.1)%


 

9.4

%

(2.7)%


 

(1.8)%


 

1.7

%

8.1

%


 

 

 

 

 

 

 

 

For the Three Months Ended March 31, 2014

% Point Increase (Decrease)


 

Automotive OEM

Test & Measurement and Electronics

Food Equipment

Polymers & Fluids

Welding

Construction Products

Specialty Products

Operating Margin:


 

 

 

 

 

Operating leverage

2.0

%

(0.1)%


 

1.4

%

(0.1)%


 

(0.3)%


 

1.4

%

0.4

%

Variable margin & overhead costs

0.9

%

(0.1)%


 

1.4

%

1.5

%

0.8

%

1.7

%

0.6

%

Total Organic Margin

2.9

%

(0.2)%


 

2.8

%

1.4

%

0.5

%

3.1

%

1.0

%

Acquisitions & divestitures

%

0.1

%

(0.4)%


 

%

(0.2)%


 

%

(1.0)%


 

Other

0.6

%

(0.7)%


 

(0.5)%


 

0.6

%

(0.6)%


 

%

1.2

%

Total Operating Margin

3.5

%

(0.8)%


 

1.9

%

2.0

%

(0.3)%


 

3.1

%

1.2

%


 

SOURCE Illinois Tool Works Inc.



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