ITW Reports Fourth Quarter and Full Year 2012 Results and Issues 2013 Guidance

- Fourth quarter GAAP earnings per share (EPS) from continuing operations of $2.10 up significantly versus prior year quarter GAAP EPS of $0.90

- Fourth quarter Non-GAAP EPS from continuing operations of $0.89 up modestly versus prior year quarter Non-GAAP EPS of $0.88

- Free operating cash flow of $497 million generated during the quarter; $1.7 billion for the year

- 2013 full year EPS forecast range of $4.13 to $4.37, midpoint represents 13 percent EPS growth versus Pro Forma 2012 EPS

29 Jan, 2013, 08:00 ET from Illinois Tool Works Inc.

GLENVIEW, Ill., Jan. 29, 2013 /PRNewswire/ -- Illinois Tool Works Inc. (NYSE: ITW) today reported fourth quarter 2012 diluted income per share from continuing operations of $2.10, an increase versus  2011 fourth quarter earnings of $0.90. Excluding certain discrete items shown in the table below, adjusted EPS of $0.89 per share for the 2012 fourth quarter increased 1 percent compared to an adjusted EPS of $0.88 for the year-ago period.

Q4 2012 Results (GAAP vs. Non-GAAP)

2012 Actual Results (GAAP)

$2.10

Gain on divestiture of Decorative Surfaces

$1.37

Decorative Surfaces equity Interest

$(0.04)

Q4 discrete corporate items

$(0.04)

Q4 discrete tax items

$(0.08)

2012 Results (Non-GAAP)

$0.89

Fourth quarter 2012 financial and operating results versus the prior-year period included:

*Total revenues of $4.221 billion declined 2.3 percent largely due to the impact of the Decorative Surfaces divestiture and the negative impact of currency translation. Excluding the impact of divestitures, total revenues would have grown approximately 2 percent. Organic, or base revenues, increased 60 basis points, in line with Company expectations. By region, North American organic revenues grew 1.6 percent and international organic revenues decreased 0.5 percent. European organic revenues decreased 2.6 percent while Asia Pacific organic revenues increased 3.7 percent.

*The Transportation segment led the Company in organic growth, increasing 4.2 percent in the quarter. Notably, the worldwide automotive OEM business produced organic revenue growth of 10.9 percent, including organic growth of 12.4 percent in North America and 1.8 percent organic growth in Europe. The increase in European organic growth took place even as car builds in that region fell 7 percent in the quarter.  

*Free operating cash flow totaled $497 million in the quarter. That represents a free cash to adjusted income from continuing operations conversion rate of 139 percent. The Company returned $954 million to shareholders via share repurchases of $604 million and dividend payments of $350 million.

"In 2012, we grew our adjusted earnings per share 10 percent and improved operating margins by 50 basis points," said E. Scott Santi, president and chief executive officer.  "We also invested nearly $100 million in restructuring projects, many of which were related to the execution of our enterprise strategy and related initiatives - portfolio management, business structure simplification and strategic sourcing.  As we detailed at our investor meeting in New York last month, through our enterprise strategy we are positioning the company to deliver solid growth as well as very strong operating margin and return on invested capital performance over the next five years."

Looking ahead, the Company believes full-year 2013 will be characterized by modest growth for both North American and international geographies.  Total Company organic revenue growth is expected to be in a range of 1 percent to 3 percent.   As part of its enterprise strategy in 2013, the Company also expects to spend $120 million to $140 million for restructuring activities. As a result, the Company is forecasting full-year diluted income per share from continuing operations to be in a range of $4.13 to $4.37. The midpoint of this earnings range would represent a 13 percent increase versus pro forma EPS of $3.76 for 2012. Full year total revenue growth is forecasted to be in a range of 3 percent to 5 percent.  For the 2013 first quarter, the Company is forecasting diluted income per share from continuing operations to be in a range of $0.91 to $0.99. The midpoint of this earnings range would represent a 4 percent increase versus pro forma EPS of $0.91 for the first quarter of 2012.  First quarter total revenue growth is forecasted to be in a range of flat to -2 percent.  All 2013 revenue and EPS metrics compare to the Company's 2012 pro forma results, which are included in the attached exhibits.

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding diluted income per share from continuing operations, total revenue and margin growth, restructuring expenses, the impact of currency translation and North American and international 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 2011 Form 10-K and 2012 third quarter 10-Q.

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 $17.0 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

Twelve Months Ended

(In millions except per share amounts)

December 31,

December 31,

2012

2011

2012

2011

Operating Revenues

$

4,221

$

4,320

$

17,924

$

17,787

Cost of revenues

2,725

2,798

11,455

11,518

Selling, administrative, and research

and development expenses

816

806

3,332

3,283

Amortization of intangible assets

71

69

288

255

Impairment of goodwill and other intangible assets

2

Operating Income

609

647

2,847

2,731

Interest expense

(61)

(54)

(214)

(192)

Gain on sale of interest in Decorative Surfaces

933

933

Other income (expense)

(23)

8

37

54

Income from Continuing Operations

Before Income Taxes

1,458

601

3,603

2,593

Income taxes

486

164

1,108

576

Income from Continuing Operations

972

437

2,495

2,017

Income from Discontinued Operations

7

5

375

54

Net Income

$

979

$

442

$

2,870

$

2,071

Income Per Share from Continuing Operations:

Basic

$

2.12

$

0.90

$

5.31

$

4.10

Diluted

$

2.10

$

0.90

$

5.27

$

4.08

Income Per Share from Discontinued Operations:

Basic

$

0.01

$

0.01

$

0.80

$

0.11

Diluted

$

0.01

$

0.01

$

0.79

$

0.11

Net Income Per Share:

Basic

$

2.13

$

0.91

$

6.11

$

4.21

Diluted

$

2.11

$

0.91

$

6.06

$

4.19

Shares of Common Stock Outstanding

During the Period:

Average

459.7

483.4

469.8

491.4

Average assuming dilution

463.1

485.6

473.2

494.6

FREE OPERATING CASH FLOW

Three Months Ended

Twelve Months Ended

December 31,

December 31,

2012

2011

2012

2011

Net cash provided by operating activities

$

605

$

712

$

2,072

$

1,956

Less: Additions to plant and equipment

(108)

(94)

(382)

(353)

Free operating cash flow

$

497

$

618

$

1,690

$

1,603

 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED)

(In millions)

December 31, 2012

December 31, 2011

ASSETS

Current Assets:

Cash and equivalents

$

2,779

$

1,178

Trade receivables

2,742

2,819

Inventories

1,585

1,716

Deferred income taxes

332

366

Prepaid expenses and other current assets

522

384

Assets held for sale

386

Total current assets

7,960

6,849

Net Plant and Equipment

1,994

2,025

Investments

146

409

Goodwill

5,530

5,198

Intangible Assets

2,258

2,233

Deferred Income Taxes

391

634

Other Assets

1,030

636

$

19,309

$

17,984

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:

Short-term debt

$

459

$

502

Accounts payable

676

697

Accrued expenses

1,392

1,435

Cash dividends payable

174

Income taxes payable

116

57

Deferred income taxes

8

5

Liabilities held for sale

107

Total current liabilities

2,651

2,977

Noncurrent Liabilities:

Long-term debt

4,589

3,488

Deferred income taxes

244

117

Other liabilities

1,255

1,368

Total noncurrent liabilities

6,088

4,973

Stockholders' Equity:

Common stock

5

5

Additional paid-in-capital

1,012

686

Income reinvested in the business

13,973

11,794

Common stock held in treasury

(4,722)

(2,692)

Accumulated other comprehensive income

293

224

Noncontrolling interest

9

17

Total stockholders' equity

10,570

10,034

$

19,309

$

17,984

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED)

Three Months Ended December 31, 2012

% F(U) vs. prior year

$ in Millions

Total Revenue

Operating Income

Operating Margin

Total Revenue

Organic (Base) Revenue

Operating Income

Operating Margin

Organic (Base)

Op Margin

Transportation

$

873

$

132

15.1

%

4.8

%

4.2

%

2.5

%

(0.3)

%

(0.8)

%

Power Systems & Electronics

737

122

16.6

%

(1.2)

%

(1.2)

%

(16.5)

%

(3.0)

%

(2.5)

%

Industrial Packaging

575

62

10.7

%

(1.2)

%

(0.7

%

13.9

%

1.4

%

1.6

%

Food Equipment

498

80

16.1

%

(1.8)

%

(0.8

%

(7.2)

%

(1.0)

%

(0.4

%

Construction

467

44

9.5

%

1.3

%

1.1

%

(14.4)

%

(1.8)

%

(1.3)

%

Polymers & Fluids

285

38

13.4

%

(2.9)

%

(7.1)

%

10.1

%

1.5

%

3.2

%

All Other

708

121

17.0

%

6.9

%

3.3

%

3.2

%

(0.6)

%

0.1

%

Intersegment

(15)

Total Segments

4,128

599

14.5

%

1.4

%

0.6

%

(3.2)

%

(0.7)

%

(0.3)

%

Decorative Surfaces

93

10

10.8

%

Total Company

$

4,221

$

609

14.4

%

(2.3)

%

0.6

%

(5.9)

%

(0.6)

%

(0.4)

%

Twelve Months Ended December 31, 2012

% F(U) vs. prior year

$ in Millions

Total Revenue

Operating Income

Operating Margin

Total Revenue

Organic (Base) Revenue

Operating Income

Operating Margin

Organic (Base)

Op Margin

Transportation

$

3,550

$

560

15.8

%

3.1

%

3.5

%

3.8

%

0.1

%

0.5

%

Power Systems & Electronics

3,151

643

20.4

%

5.5

%

3.8

%

6.2

%

0.2

%

1.1

%

Industrial Packaging

2,412

282

11.7

%

(2.0)

%

0.4

%

13.4

%

1.6

%

1.8

%

Food Equipment

1,939

324

16.7

%

(2.3)

%

0.6

%

6.7

%

1.4

%

1.4

%

Construction

1,902

200

10.5

%

(2.9)

%

(0.5)

%

(11.3)

%

(1.0)

%

(0.2)

%

Polymers & Fluids

1,230

195

15.8

%

(1.6)

%

(3.1)

%

3.7

%

0.8

%

1.7

%

All Other

2,883

521

18.1

%

7.2

%

2.9

%

6.7

%

(0.1)

%

1.6

%

Intersegment

(64)

Total Segments

17,003

2,725

16.0

%

1.8

%

1.7

%

4.8

%

0.4

%

1.1

%

Decorative Surfaces

921

122

13.3

%

Total Company

$

17,924

$

2,847

15.9

%

0.8

%

1.7

%

4.2

%

0.5

%

1.1

%

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION (UNAUDITED)

(In millions except per share amounts)

Total Revenue

Operating Income

Earnings Per Share

For the three months ended December 31,

2012

2011

2012

2011

2012

2011

Actual Results (GAAP)

$

4,221

$

4,320

$

609

$

647

$

2.10

$

0.90

Gain on Divestiture of Decorative Surfaces

1.37

Decorative Surfaces Equity Interest

(0.04)

Discrete Corporate Items

(16)

(0.04)

Discrete Tax Items

(0.08)

Decorative Surfaces Business*

159

18

0.02

Adjusted Results (Non-GAAP)

$

4,221

$

4,161

$

625

$

629

$

0.89

$

0.88

(In millions except per share amounts)

Total Revenue

Operating Income

Earnings Per Share

For the twelve months ended December 31,

2012

2011

2012

2011

2012

2011

Actual Results (GAAP)

$

17,924

$

17,787

$

2,847

$

2,731

$

5.27

$

4.08

Gain on Divestiture of Decorative Surfaces

1.34

Decorative Surfaces Equity Interest

(0.04)

Discrete Corporate Items

(16)

(0.04)

Discrete Tax Items

(0.08)

Decorative Surfaces Business*

159

18

0.03

Australian Tax Matter

0.33

Adjusted Results (Non-GAAP)

$

17,924

$

17,628

$

2,863

$

2,713

$

4.09

$

3.72

* Excludes November and December 2011 for comparative purposes as the divestiture closed on October 31, 2012.  Also excludes corporate expense allocations that remain with ITW.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION (UNAUDITED)

Free Operating Cash Flow Conversion Rate

(In millions)

Three Months Ended December 31, 2012

Free Operating Cash Flow

$

497

Income from Continuing Operations (GAAP)

$

972

Decorative Surfaces gain on sale, after tax

632

Decorative Surfaces equity interest, after tax

(19)

Adjusted Income from Continuing Operations

$

359

Free Operating Cash Flow to Adjusted Income from Continuing Operations

139%

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

GAAP TO PRO FORMA RECONCILIATION (UNAUDITED)

(In millions except per share amounts)

Total Revenue

Earnings Per Share

Three Months Ended

March 31,

Twelve Months Ended December 31,

Three Months Ended

March 31,

Twelve Months Ended December 31,

2012

2012

2012

2012

Actual Results (GAAP)

$

4,547

$

17,924

$

0.97

$

5.27

Gain on Divestiture of Decorative Surfaces

1.34

Decorative Surfaces Equity Interest

(0.04)

Decorative Surfaces Business*

275

921

0.06

0.21

Adjusted Results (Proforma)

$

4,272

$

17,003

$

0.91

$

3.76

*Excludes 1Q12 results for the three months ended March 31, 2012 and January through October 2012 results for the twelve months ended December 31, 2012.  Pro forma impact excludes corporate expense allocations that remain with ITW.

SOURCE Illinois Tool Works Inc.



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