ITW's 2012 Second Quarter Diluted Income Per Share from Continuing Operations Increases 16 Percent to $1.11; Organic Revenues Increase 2.3 Percent; Operating Margins Improve 110 Basis Points to 16.5 Percent; Company Repurchases $526 Million of Shares; Company Lowers Full-Year Earnings Forecast

GLENVIEW, Ill., July 24, 2012 /PRNewswire/ -- Illinois Tool Works Inc. (NYSE: ITW) today reported second quarter 2012 diluted income per share from continuing operations of $1.11, a 16 percent increase versus the 2011 second quarter. While revenue growth moderated in the second quarter due to the higher-than-expected negative impact of currency translation and slowing demand in a variety of international end markets, operating margins of 16.5 percent improved 110 basis points versus the year-ago period.

Second quarter 2012 financial and operating highlights versus the prior year included:

  • Total revenues of $4.655 billion increased 0.9 percent. Organic or base revenues grew 2.3 percent, with North American organic revenues increasing 5.3 percent and international organic revenues declining 0.8 percent. European organic revenues decreased 1.7 percent. Asia Pacific organic revenues underperformed company expectations, growing only 1.8 percent.  Notably, China organic revenues declined 0.5 percent.
  • Acquisitions net of divestitures added 3.0 percent to revenues while currency translation negatively impacted revenues by 4.5 percent. The declining value of the Euro accounted for the major currency headwind in the quarter.
  • Operating income of $770.0 million grew 8.3 percent.
  • Operating margins improved due to favorable raw material price/cost dynamics as well as effective management of overheads within the decentralized businesses.
  • Total revenues for the Power Systems and Electronics segment increased 7.7 percent. Segment organic revenues grew 5.2 percent based on continuing strength in the worldwide welding businesses and improvement in the electronics assembly businesses. Worldwide welding's organic revenues grew 8.8 percent, with North American and international growing 11.4 percent and 2.1 percent, respectively. Segment operating margins of 21.2 percent improved 60 basis points from the prior year period.
  • The Company returned nearly $700 million to shareholders through share repurchases of $526 million and dividends paid of $172 million. At the end of the 2012 second quarter, the Company had $2.9 billion remaining in its share repurchase authorization.

"Despite slowing in a variety of international end markets and significant currency translation headwinds, we were very pleased with our second quarter operating performance," said David B. Speer, chairman and chief executive officer.  "Based on our differentiated 80/20 operational focus, our businesses produced very strong operating margin improvement in the quarter with excellent management of input and overhead costs.  In addition, we continued to return significant levels of cash to our shareholders through our share repurchase program as well as our strong dividend payout."

Given the ongoing negative impact of currency translation, additional restructuring expenditures that will now total over $100 million for the year, and expected continued sluggish demand in international markets, the Company is lowering its forecast for revenue growth from continuing operations to be in a range of 1 percent to 3 percent versus the prior range of 5 percent to 7 percent.  As a result, full-year diluted income per share from continuing operations is expected to be in a range of $4.03 to $4.19 versus the prior range of $4.14 to $4.38.  For third quarter 2012, the Company is forecasting revenue growth to be in a range from -1 percent to 1 percent and diluted income per share from continuing operations to be in a range of $1.03 to $1.11.

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 and total revenue growth. 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.

Celebrating its 100-year anniversary in 2012, ITW is a Fortune 200 global diversified industrial manufacturer of value-added consumables and specialty equipment with related service businesses. The Company focuses on profitable growth and strong returns across 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 revenues totaled $17.8 billion in 2011, with more than half of the revenues generated outside of the United States.

ILLINOIS TOOL WORKS INC. AND SUBSIDIARIES

STATEMENT OF INCOME (UNAUDITED)

(In millions except per share amounts)



 

THREE MONTHS ENDED



 

SIX MONTHS ENDED




JUNE 30,



JUNE 30,




2012



2011



2012



2011


Operating Revenues

$

4,655


$

4,615


$

9,202


$

8,887


Cost of revenues


2,964



2,996



5,875



5,758


Selling, administrative, and research and

  development expenses


846



845



1,705



1,641


Amortization of intangible assets


75



63



147



118


Operating Income


770



711



1,475



1,370


Interest expense


(50)



(45)



(100)



(89)


Other income (expense)


23



15



31



21


Income from Continuing Operations
  Before Income Taxes


743



681



1,406



1,302


Income Taxes


216



197



408



212


Income from Continuing Operations


527



484



998



1,090


Income from Discontinued Operations


354



15



369



32


Net Income

$

881


$

499


$

1,367


$

1,122















Income Per Share from Continuing













 Operations:













Basic


$1.12



$0.97



$2.09



$2.19


Diluted


$1.11



$0.96



$2.08



$2.17















Income Per Share from Discontinued













 Operations:













Basic


$0.75



$0.03



$0.77



$0.06


Diluted


$0.74



$0.03



$0.77



$0.06















Net Income Per Share:













Basic


$1.86



$1.00



$2.86



$2.25


Diluted


$1.85



$0.99



$2.84



$2.23















Shares Outstanding During the Period:













Average


472.9



497.8



477.4



498.2


Average assuming dilution


476.1



501.9



480.9



502.3




























FREE OPERATING CASH FLOW













 

THREE MONTHS ENDED


 

SIX MONTHS ENDED




JUNE 30,



JUNE 30,




2012



2011



2012



2011


Net cash provided by operating activities

$

509


$

312


$

832


$

457


Less:  Additions to plant and equipment


(100)



(87)



(184)



(176)


Free operating cash flow

$

409


$

225


$

648


$

281


































ILLINOIS TOOL WORKS INC. AND SUBSIDIARIES

STATEMENT OF FINANCIAL POSITION (UNAUDITED)

(In millions)



JUNE 30,



DECEMBER 31,



ASSETS


2012



2011



Current Assets:








Cash and equivalents

$

1,692


$

1,178



Trade receivables


3,164



2,819



Inventories


1,796



1,716



Deferred income taxes


373



366



Prepaid expenses and other current assets


449



384



Assets held for sale


77



386



Total current assets


7,551



6,849











Noncurrent Assets:








Net plant and equipment


2,067



2,025



Investments


271



409



Goodwill


5,456



5,198



Intangible assets


2,368



2,233



Deferred income taxes


514



634



Other assets


694



636




$

18,921


$

17,984











LIABILITIES and STOCKHOLDERS' EQUITY








Current Liabilities:








Short-term debt

$

1,438


$

502



Accounts payable


785



697



Accrued expenses


1,479



1,435



Cash dividends payable


169



174



Income taxes payable


54



57



Deferred income taxes


5



5



Liabilities held for sale


6



107



Total current liabilities


3,936



2,977











Noncurrent Liabilities:








Long-term debt


3,468



3,488



Deferred income taxes


118



117



Other liabilities


1,298



1,368



Total noncurrent liabilities


4,884



4,973











Stockholders' Equity:








Common stock


5



5



Additional paid-in-capital


825



686



Income reinvested in the business


12,821



11,794



Common stock held in treasury


(3,702)



(2,692)



Accumulated other comprehensive income


135



224



Noncontrolling interest


17



17



Total stockholders' equity


10,101



10,034




$

18,921


$

17,984







ILLINOIS TOOL WORKS INC. AND SUBSIDIARIES

SEGMENT DATA




THREE MONTHS ENDED JUNE 30, 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

$

896


$

143


16.0%

0.1%

3.4%

4.4%

0.7%

1.0%

Power Systems & Electronics


810



172


21.2%

7.7%

5.2%

11.0%

0.6%

1.6%

Industrial Packaging


627



76


12.1%

-5.1%

0.2%

8.6%

1.5%

1.8%

Food Equipment


476



75


15.8%

-3.3%

1.3%

11.9%

2.1%

2.2%

Construction


489



59


12.1%

-6.0%

-0.5%

-7.8%

-0.2%

-0.3%

Polymers & Fluids


334



57


17.1%

-0.9%

-0.4%

1.8%

0.4%

1.2%

Decorative Surfaces


286



41


14.3%

0.4%

4.8%

17.1%

2.1%

1.4%

All Other


755



147


19.5%

8.8%

2.6%

15.7%

1.2%

2.5%

Intersegment


(18)











Total Company


4,655



770


16.5%

0.9%

2.3%

8.3%

1.1%

1.5%



SIX MONTHS ENDED JUNE 30, 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

$

1,819


$

294


16.2%

4.9%

4.2%

7.3%

0.4%

0.9%

Power Systems
& Electronics


1,601



341


21.3%

9.4%

6.1%

11.8%

0.5%

1.8%

Industrial Packaging


1,239



144


11.6%

-1.1%

1.0%

10.8%

1.2%

1.6%

Food Equipment


949



151


15.9%

-1.7%

1.4%

12.7%

2.0%

1.9%

Construction


958



95


9.9%

-2.5%

0.0%

-13.6%

-1.3%

-0.3%

Polymers & Fluids


637



103


16.2%

1.9%

0.6%

6.2%

0.6%

1.3%

Decorative Surfaces


561



77


13.7%

1.4%

4.6%

11.6%

1.2%

0.8%

All Other


1,471



270


18.4%

8.8%

1.9%

7.6%

-0.2%

1.9%

Intersegment


(33)











Total Company


9,202



1,475


16.0%

3.5%

2.7%

7.7%

0.6%

1.3%

SOURCE Illinois Tool Works Inc.



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