ITW's 2012 Third Quarter Diluted Income Per Share from Continuing Operations of $1.12 Increases 12 Percent Versus Prior-Year Period; Excluding Impact of Divestiture Gains, EPS Totals $1.09; Operating Margins of 16.9 Percent Improve 130 Basis Points; Company Repurchases $416 Million of Shares in Third Quarter and $1.4 Billion of Shares Year to Date

GLENVIEW, Ill., Oct. 23, 2012 /PRNewswire/ -- Illinois Tool Works Inc. (NYSE: ITW) today reported third quarter 2012 diluted income per share from continuing operations of $1.12, a 12 percent increase versus the 2011 third quarter. Excluding the impact of divestiture gains in the third quarter, diluted income per share from continuing operations totaled $1.09. While third quarter total revenues and organic revenues were lower than anticipated due to the negative impact of currency translation and slowing demand in a variety of international end markets, operating margins of 16.9 percent outperformed expectations and reflected improvement across all segments.

Third quarter 2012 financial and operating highlights versus the prior-year period included:

*Total revenues of $4.501 billion decreased 1.7 percent. Notably, currency translation negatively impacted revenues by 4.1 percent largely based on a weaker Euro versus last year. Organic or base revenues grew 0.9 percent, with North American organic revenues increasing 3.9 percent and international organic revenues declining 2.7 percent. European and Asia Pacific organic revenues decreased 3.7 percent and 1.5 percent, respectively. Acquisitions net of divestitures added 1.4 percent to revenues.

*Operating income of $763 million increased 6.8 percent. Operating margins of 16.9 percent improved 130 basis points due to favorable raw material price/cost trends as well as effective management of overhead costs within the businesses.

*Total revenues for the Power Systems and Electronics segment increased 4.6 percent. Segment organic revenues grew 4.5 percent due to contributions from both the electronics and welding businesses. Total organic revenues for electronics grew 10.5 percent due to strong contributions from the electronic assembly businesses. Organic revenues for worldwide welding increased 1.9 percent, with North American welding growing 4.6 percent and international welding decreasing 5.6 percent. Segment operating margins of 22.0 percent improved 220 basis points.

*The Company returned nearly $600 million to shareholders via share repurchases of $416 million and dividends paid of $169 million.

"Even with end markets slowing in a number of international geographies, we were pleased by the consistent level of end market demand in North America," said E. Scott Santi, president and acting chief executive officer. "From a profitability standpoint, we continued to focus on our differentiated 80/20 business process and, as a result, we produced very strong operating margin gains in the quarter. We also continued to return significant levels of cash to our shareholders through our share repurchase and dividend programs."

Looking ahead, the Company believes international end markets will continue to be sluggish and the impact of currency translation will be modestly negative in the 2012 fourth quarter.  As a result, we now expect full-year total revenue growth to be in a range of 0 percent to 1 percent.  Full-year diluted income per share from continuing operations is forecasted to be in a range of $4.06 to $4.14.  For the 2012 fourth quarter, the Company is forecasting diluted income per share from continuing operations to be in a range of $0.86 to $0.94 and total revenues to decline in a range of 1 percent to 4 percent.  The Company expects the previously announced Decorative Surfaces divestiture transaction to close in the fourth quarter.  Both the full year and fourth quarter forecasts exclude two months of operating contributions from the Decorative Surfaces segment, gains and expenses related to the transaction, as well as the impact from the 49 percent ongoing equity interest in the new Decorative Surfaces entity.

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 growth, and the impact of currency translation 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.

Celebrating its 100-year anniversary in 2012, ITW is a Fortune 150 global diversified industrial manufacturer of value-added consumables and specialty equipment with related service businesses. The Company focuses on profitable growth with 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)






Three Months Ended


Nine Months Ended

(In millions except per share amounts)

September 30,


September 30,


2012


2011


2012


2011

Operating Revenues

$

4,501



$

4,580



$

13,703



$

13,467


Cost of revenues

2,855



2,962



8,730



8,720


Selling, administrative, and research and development expenses

811



836



2,516



2,477


Amortization of intangible assets

70



68



217



186


Impairment of goodwill and other intangible assets

2





2




Operating Income

763



714



2,238



2,084


Interest expense

(53)



(49)



(153)



(138)


Other income (expense)

29



25



60



46


Income from Continuing Operations








Before Income Taxes

739



690



2,145



1,992


Income Taxes

214



200



622



412


Income from Continuing Operations

525



490



1,523



1,580


Income from Discontinued Operations

(1)



17



368



49


Net Income

$

524



$

507



$

1,891



$

1,629


Income Per Share from Continuing Operations:








Basic

$

1.13



$

1.01



$

3.22



$

3.20


Diluted

$

1.12



$

1.00



$

3.20



$

3.17


Income Per Share from Discontinued Operations:








Basic

$



$

0.04



$

0.78



$

0.10


Diluted

$



$

0.04



$

0.77



$

0.10


Net Income Per Share:








Basic

$

1.13



$

1.04



$

4.00



$

3.30


Diluted

$

1.12



$

1.04



$

3.97



$

3.27


Shares of Common Stock Outstanding








During the Period:








Average

464.8



486.3



473.2



494.2


Average assuming dilution

468.1



488.8



476.6



497.9






FREE OPERATING CASH FLOW

Three Months Ended


Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

Net cash provided by operating activities

$

635



$

787



$

1,467



$

1,244


Less: Additions to plant and equipment

(90)



(83)



(274)



(259)


Free operating cash flow

$

545



$

704



$

1,193



$

985


 

 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF FINANCIAL POSITION (UNAUDITED)





(In millions)

September 30,

2012


December 31,

2011

ASSETS




Current Assets:




Cash and equivalents

$

2,054



$

1,178


Trade receivables

3,062



2,819


Inventories

1,760



1,716


Deferred income taxes

410



366


Prepaid expenses and other current assets

364



384


Assets held for sale



386


Total current assets

7,650



6,849


Net Plant and Equipment

2,081



2,025


Investments

226



409


Goodwill

5,506



5,198


Intangible Assets

2,302



2,233


Deferred Income Taxes

473



634


Other Assets

785



636



$

19,023



$

17,984


LIABILITIES AND STOCKHOLDERS' EQUITY




Current Liabilities:




Short-term debt

$

424



$

502


Accounts payable

770



697


Accrued expenses

1,504



1,435


Cash dividends payable

176



174


Income taxes payable

48



57


Deferred income taxes

6



5


Liabilities held for sale



107


Total current liabilities

2,928



2,977


Noncurrent Liabilities:




Long-term debt

4,572



3,488


Deferred income taxes

120



117


Other liabilities

1,141



1,368


Total noncurrent liabilities

5,833



4,973


Stockholders' Equity:




Common stock

5



5


Additional paid-in-capital

921



686


Income reinvested in the business

13,168



11,794


Common stock held in treasury

(4,118)



(2,692)


Accumulated other comprehensive income

277



224


Noncontrolling interest

9



17


Total stockholders' equity

10,262



10,034



$

19,023



$

17,984


 

 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT DATA (UNAUDITED)


THREE MONTHS ENDED SEPTEMBER 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

$

858


$

135


15.7%

(2.2)%

1.4%

(1.8)%

0.1%

1.1%

Power Systems & Electronics

813


179


22.0%

4.6%

4.5%

16.6%

2.2%

2.9%

Industrial Packaging

599


77


12.8%

(4.6)%

0.2%

19.2%

2.6%

2.5%

Food Equipment

491


93


18.8%

(4.0)%

0.3%

11.3%

2.6%

2.3%

Construction

477


60


12.6%

(7.2)%

(2.8)%

(5.4)%

0.1%

0.7%

Polymers & Fluids

308


53


17.4%

(7.3)%

(6.7)%

(5.3)%

0.5%

1.2%

Decorative Surfaces

267


35


13.0%

(5.7)%

(1.7)%

1.8%

1.0%

0.8%

All Other

704


131


18.6%

4.1%

4.5%

7.8%

0.6%

2.5%

Intersegment

(16)









Total Company

4,501


763


16.9%

(1.7)%

0.9%

6.8%

1.3%

2.0%



NINE MONTHS ENDED SEPTEMBER 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

$

2,677


$

428


16.0%

2.5%

3.3%

4.3%

0.3%

1.0%

Power Systems & Electronics

2,414


520


21.6%

7.7%

5.5%

13.4%

1.1%

2.1%

Industrial Packaging

1,838


221


12.0%

(2.3)%

0.8%

13.2%

1.6%

1.8%

Food Equipment

1,440


244


16.9%

(2.5)%

1.1%

12.3%

2.2%

2.1%

Construction

1,435


156


10.9%

(4.2)%

(1.0)%

(10.3)%

(0.6)%

0.1%

Polymers & Fluids

945


156


16.5%

(1.3)%

(1.9)%

2.2%

0.5%

1.2%

Decorative Surfaces

828


112


13.5%

(0.8)%

2.4%

8.0%

1.2%

0.9%

All Other

2,175


401


18.4%

7.3%

2.8%

7.7%

—%

2.1%

Intersegment

(49)









Total Company

13,703


2,238


16.3%

1.7%

2.1%

7.4%

0.8%

1.6%

 

 

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

GAAP TO NON-GAAP RECONCILIATION (UNAUDITED)




Three Months Ended


September 30, 2012

Diluted EPS from Continuing Operations - As Reported

$

1.12

Impact of Divestitures, Net of Tax

(0.03)

Diluted EPS from Continuing Operations


Adjusted to Exclude the Net Impact of Divestitures After Tax

$

1.09

 

SOURCE Illinois Tool Works Inc.



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