ITW Reports Third Quarter 2013 Results
*Third quarter diluted EPS from continuing operations of $0.90 exceeds Company forecast midpoint of $0.88
*Strong operating margins of 19.0 percent improve 110 basis points versus year-ago period; Enterprise initiatives add 80 basis points to operating margin
*Company raises 2013 full-year EPS forecast midpoint to $3.60 from $3.58
GLENVIEW, Ill., Oct. 21, 2013 /PRNewswire/ -- Illinois Tool Works Inc. (NYSE: ITW) today reported third quarter diluted earnings per share (EPS) from continuing operations of $0.90, two cents higher than the midpoint of the Company's forecast. As noted in the Company's September 24, 2013 announcement, the third quarter forecasted EPS midpoint of $0.88 included a $0.14 reduction from the Industrial Packaging segment moving to discontinued operations and a $0.09 reduction related to a discrete tax charge.
Highlights for 2013 third quarter results versus the prior-year period included:
*Total Company operating revenues were $3.6 billion while operating income was $678 million. Excluding the impact of Decorative Surfaces 2012 results, total Company operating revenues grew 2.9 percent and operating income increased 8.4 percent. Organic revenues grew 0.4 percent, with international organic revenues growing 2.9 percent and North American organic revenues declining 1.4 percent. Internationally, Asia Pacific organic revenues grew 6.9 percent, with China organic revenues increasing 21.5 percent. In addition, European organic revenues grew 1.0 percent. The Company was faced with a difficult year-over-year comparison in its electronics assembly platform, which negatively impacted total Company organic revenue growth by 2.5 percent. Reconciliations of GAAP to Non-GAAP results, which exclude the 2012 impact of the divested Decorative Surfaces segment, are included in the attached exhibits.
*By segment, highlights included:
- Automotive OEM's organic revenues increased 11.5 percent, with strong growth across all regions. By comparison, worldwide auto builds increased 4 percent in the quarter. Automotive OEM operating margins improved 200 basis points to 21.1 percent.
- Food Equipment's organic revenues grew 4.4 percent, with across-the-board contributions from the North American and international equipment and service businesses. Food Equipment operating margins improved 90 basis points to 19.9 percent.
- Construction Products organic revenues increased 3.3 percent due to 9.3 percent organic revenue growth in North America. Operating margins improved 250 basis points to 16.2 percent.
"We were pleased with our financial performance in the quarter and the progress we continue to make in executing our Enterprise initiatives," said Scott Santi, president and chief executive officer. "Third quarter operating margins of 19.0 percent were driven by an 80 basis point contribution from our enterprise initiatives. On a year-to-date basis, free cash flow conversion was solidly above 100 percent of net income, and our adjusted after-tax return on average invested capital was 16.3 percent, up 110 basis points versus the same period last year. In addition, we continued to make disciplined, return-oriented decisions with regard to capital allocation. We completed two strategically targeted acquisitions in the quarter, and year-to-date we have returned nearly $1.6 billion to shareholders in the form of share repurchases and dividends."
The Company is now forecasting its full-year diluted income per share from continuing operations to be in a range of $3.56-$3.64. This EPS range assumes a full-year total revenue growth range of 1.0 percent to 2.0 percent. For the 2013 fourth quarter, the Company is forecasting diluted income per share from continuing operations to be in a range of $0.85-$0.93 and assumes a total revenue growth range of 2 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, the amount of expected share repurchases, statements regarding total revenue growth, diluted income per share from continuing operations, operating margin growth, return on invested capital 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 200 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 adjusted revenues totaled $13.9 billion in 2012, with approximately 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, |
||||||||||
| 2013 |
2012 |
2013 |
2012 |
|||||||||
| Operating Revenues |
$ |
3,568 |
$ |
3,733 |
$ |
10,581 |
$ |
11,307 |
||||
| Cost of revenues |
2,148 |
2,289 |
6,381 |
6,957 |
||||||||
| Selling, administrative, and research and development expenses |
676 |
713 |
2,126 |
2,207 |
||||||||
| Amortization of intangible assets |
64 |
62 |
186 |
190 |
||||||||
| Impairment of goodwill and other intangible assets |
2 |
2 |
2 |
2 |
||||||||
| Operating Income |
678 |
667 |
1,886 |
1,951 |
||||||||
| Interest expense |
(60) |
(52) |
(179) |
(152) |
||||||||
| Other income (expense) |
10 |
1 |
67 |
31 |
||||||||
| Income from Continuing Operations Before Income Taxes |
628 |
616 |
1,774 |
1,830 |
||||||||
| Income Taxes |
222 |
171 |
551 |
518 |
||||||||
| Income from Continuing Operations |
406 |
445 |
1,223 |
1,312 |
||||||||
| Income from Discontinued Operations |
46 |
79 |
48 |
579 |
||||||||
| Net Income |
$ |
452 |
$ |
524 |
$ |
1,271 |
$ |
1,891 |
||||
| Income Per Share from Continuing Operations: |
||||||||||||
| Basic |
$ |
0.91 |
$ |
0.96 |
$ |
2.72 |
$ |
2.77 |
||||
| Diluted |
$ |
0.90 |
$ |
0.95 |
$ |
2.70 |
$ |
2.75 |
||||
| Income Per Share from Discontinued Operations: |
||||||||||||
| Basic |
$ |
0.10 |
$ |
0.17 |
$ |
0.11 |
$ |
1.23 |
||||
| Diluted |
$ |
0.10 |
$ |
0.17 |
$ |
0.11 |
$ |
1.22 |
||||
| Net Income Per Share: |
||||||||||||
| Basic |
$ |
1.01 |
$ |
1.13 |
$ |
2.83 |
$ |
4.00 |
||||
| Diluted |
$ |
1.01 |
$ |
1.12 |
$ |
2.81 |
$ |
3.97 |
||||
| Shares of Common Stock Outstanding During the Period: |
||||||||||||
| Average |
445.9 |
464.8 |
449.0 |
473.2 |
||||||||
| Average assuming dilution |
448.9 |
468.1 |
452.1 |
476.6 |
||||||||
| FREE OPERATING CASH FLOW |
Three Months Ended |
Nine Months Ended |
||||||||||
| September 30, |
September 30, |
|||||||||||
| (In millions) |
2013 |
2012 |
2013 |
2012 |
||||||||
| Net cash provided by operating activities |
$ |
811 |
$ |
635 |
$ |
1,820 |
$ |
1,467 |
||||
| Less: Additions to plant and equipment |
(79) |
(90) |
(257) |
(274) |
||||||||
| Free operating cash flow |
$ |
732 |
$ |
545 |
$ |
1,563 |
$ |
1,193 |
||||
| ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED) |
|||||
| (In millions) |
September 30, 2013 |
December 31, 2012 |
|||
| ASSETS |
|||||
| Current Assets: |
|||||
| Cash and equivalents |
$ |
3,018 |
$ |
2,779 |
|
| Trade receivables |
2,493 |
2,742 |
|||
| Inventories |
1,308 |
1,585 |
|||
| Deferred income taxes |
391 |
332 |
|||
| Prepaid expenses and other current assets |
421 |
522 |
|||
| Assets held for sale |
1,951 |
— |
|||
| Total current assets |
9,582 |
7,960 |
|||
| Net Plant and Equipment |
1,667 |
1,994 |
|||
| Goodwill |
4,854 |
5,530 |
|||
| Intangible Assets |
2,121 |
2,258 |
|||
| Deferred Income Taxes |
353 |
391 |
|||
| Other Assets |
1,174 |
1,176 |
|||
| $ |
19,751 |
$ |
19,309 |
||
| LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||
| Current Liabilities: |
|||||
| Short-term debt |
$ |
1,328 |
$ |
459 |
|
| Accounts payable |
616 |
676 |
|||
| Accrued expenses |
1,282 |
1,392 |
|||
| Cash dividends payable |
187 |
— |
|||
| Income taxes payable |
75 |
116 |
|||
| Deferred income taxes |
59 |
8 |
|||
| Liabilities held for sale |
394 |
— |
|||
| Total current liabilities |
3,941 |
2,651 |
|||
| Noncurrent Liabilities: |
|||||
| Long-term debt |
3,808 |
4,589 |
|||
| Deferred income taxes |
453 |
244 |
|||
| Other liabilities |
1,081 |
1,255 |
|||
| Total noncurrent liabilities |
5,342 |
6,088 |
|||
| Stockholders' Equity: |
|||||
| Common stock |
6 |
5 |
|||
| Additional paid-in-capital |
1,032 |
1,012 |
|||
| Income reinvested in the business |
14,716 |
13,973 |
|||
| Common stock held in treasury |
(5,584) |
(4,722) |
|||
| Accumulated other comprehensive income |
292 |
293 |
|||
| Noncontrolling interest |
6 |
9 |
|||
| Total stockholders' equity |
10,468 |
10,570 |
|||
| $ |
19,751 |
$ |
19,309 |
||
| ILLINOIS TOOL WORKS INC. and SUBSIDIARIES GAAP to NON-GAAP RECONCILIATIONS |
|||||||||||||||||||||||
| (In millions except per share amounts) |
Three Months Ended |
Three Months Ended |
|||||||||||||||||||||
| September 30, 2013 |
September 30, 2012 |
||||||||||||||||||||||
| Total Revenue |
Operating Income |
Operating Margin |
Diluted EPS |
Total Revenue |
Operating Income |
Operating Margin |
Diluted EPS |
||||||||||||||||
| Actual Results (GAAP) |
$ |
3,568 |
$ |
678 |
19.0 |
% |
$ |
0.90 |
$ |
3,733 |
$ |
667 |
17.9 |
% |
$ |
0.95 |
|||||||
| Discrete tax charge related to foreign earnings |
— |
— |
— |
(0.09) |
— |
— |
— |
— |
|||||||||||||||
| Decorative Surfaces operating results |
— |
— |
— |
— |
267 |
41 |
— |
0.06 |
|||||||||||||||
| Adjusted Results (Non-GAAP) |
$ |
3,568 |
$ |
678 |
19.0 |
% |
$ |
0.99 |
$ |
3,466 |
$ |
626 |
18.1 |
% |
$ |
0.89 |
|||||||
| Q3 2013 Growth vs. 2012 (GAAP) |
(4.4) |
% |
1.8 |
% |
+110 bps |
(5.3) |
% |
||||||||||||||||
| Q3 2013 Growth vs. 2012 (Non-GAAP) |
2.9 |
% |
8.4 |
% |
+90 bps |
11.9 |
% |
||||||||||||||||
| (In millions except per share amounts) |
Three Months Ended |
Twelve Months Ended |
|||||||||||||||
| December 31, 2012 |
December 31, 2012 |
||||||||||||||||
| Total Revenue |
Operating Income |
Diluted EPS |
Total Revenue |
Operating Income |
Diluted EPS |
||||||||||||
| Actual Results (GAAP) |
$ |
3,484 |
$ |
524 |
$ |
1.99 |
$ |
14,791 |
$ |
2,475 |
$ |
4.72 |
|||||
| Decorative Surfaces net gain |
— |
— |
1.37 |
— |
— |
1.34 |
|||||||||||
| Decorative Surfaces equity interest (2012) |
— |
— |
(0.04) |
— |
— |
(0.04) |
|||||||||||
| Decorative Surfaces operating results |
93 |
12 |
0.01 |
921 |
143 |
0.21 |
|||||||||||
| Adjusted Results (Non-GAAP) |
$ |
3,391 |
$ |
512 |
$ |
0.65 |
$ |
13,870 |
$ |
2,332 |
$ |
3.21 |
|||||
| ILLINOIS TOOL WORKS INC. and SUBSIDIARIES ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL |
|||||||||||||||
| Three Months Ended |
Nine Months Ended |
||||||||||||||
| (Dollars in millions) |
September 30, |
September 30, |
|||||||||||||
| 2013 |
2012 |
2013 |
2012 |
||||||||||||
| Operating income |
$ |
678 |
$ |
667 |
$ |
1,886 |
$ |
1,951 |
|||||||
| Adjustment for Decorative Surfaces |
— |
(41) |
— |
(131) |
|||||||||||
| Adjusted operating income |
678 |
626 |
1,886 |
1,820 |
|||||||||||
| Tax rate (as adjusted for discrete tax charge in 2013) |
29.0 |
% |
27.8 |
% |
28.8 |
% |
28.3 |
% |
|||||||
| Taxes |
(196) |
(174) |
(543) |
(515) |
|||||||||||
| Adjusted operating income after taxes |
$ |
482 |
$ |
452 |
$ |
1,343 |
$ |
1,305 |
|||||||
| Invested capital: |
|||||||||||||||
| Trade receivables |
$ |
2,493 |
$ |
3,062 |
$ |
2,493 |
$ |
3,062 |
|||||||
| Inventories |
1,308 |
1,760 |
1,308 |
1,760 |
|||||||||||
| Net plant and equipment |
1,667 |
2,081 |
1,667 |
2,081 |
|||||||||||
| Goodwill and intangible assets |
6,975 |
7,808 |
6,975 |
7,808 |
|||||||||||
| Accounts payable and accrued expenses |
(1,898) |
(2,274) |
(1,898) |
(2,274) |
|||||||||||
| Net assets held for sale |
1,557 |
— |
1,557 |
— |
|||||||||||
| Other, net |
484 |
767 |
484 |
767 |
|||||||||||
| Total invested capital |
$ |
12,586 |
$ |
13,204 |
$ |
12,586 |
$ |
13,204 |
|||||||
| Average invested capital |
$ |
12,560 |
$ |
13,260 |
$ |
12,648 |
$ |
13,241 |
|||||||
| Adjustment for Decorative Surfaces |
(169) |
(296) |
(170) |
(299) |
|||||||||||
| Adjustment for Industrial Packaging |
(1,468) |
(1,500) |
(1,482) |
(1,508) |
|||||||||||
| Adjusted average invested capital |
$ |
10,923 |
$ |
11,464 |
$ |
10,996 |
$ |
11,434 |
|||||||
| Annualized return on average invested capital |
17.6 |
% |
15.8 |
% |
16.3 |
% |
15.2 |
% |
|||||||
| Three Months Ended |
||||||||||
| (Dollars in millions) |
September 30, 2013 |
|||||||||
| Income from Continuing Operations Before Income Taxes |
Income Taxes |
Tax Rate |
||||||||
| As reported |
$ |
628 |
$ |
222 |
35.4 |
% |
||||
| Discrete tax charge related to foreign earnings |
— |
(40) |
(6.4) |
% |
||||||
| As adjusted |
$ |
628 |
$ |
182 |
29.0 |
% |
||||
| Nine Months Ended |
||||||||||
| (Dollars in millions) |
September 30, 2013 |
|||||||||
| Income from Continuing Operations Before Income Taxes |
Income Taxes |
Tax Rate |
||||||||
| As reported |
$ |
1,774 |
$ |
551 |
31.1 |
% |
||||
| Discrete tax charge related to foreign earnings |
— |
(40) |
(2.3) |
% |
||||||
| As adjusted |
$ |
1,774 |
$ |
511 |
28.8 |
% |
||||
| ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED) |
|||||||||||||||
| Three Months Ended September 30, 2013 |
% F(U) vs. prior year |
||||||||||||||
| (Dollars in millions) |
Total Revenue |
Operating Income |
Operating Margin |
Total Revenue |
Organic (Base) Revenue |
Operating Margin |
|||||||||
| Test & Measurement and Electronics |
$ |
555 |
$ |
91 |
16.3 |
% |
(10.9) |
% |
(11.8) |
% |
(190) |
bps |
|||
| Automotive OEM |
589 |
124 |
21.1 |
% |
13.2 |
% |
11.5 |
% |
200 |
bps |
|||||
| Polymers & Fluids |
504 |
91 |
18.1 |
% |
(1.1) |
% |
— |
% |
220 |
bps |
|||||
| Food Equipment |
542 |
108 |
19.9 |
% |
10.4 |
% |
4.4 |
% |
90 |
bps |
|||||
| Welding |
438 |
111 |
25.4 |
% |
(1.0) |
% |
(3.5) |
% |
90 |
bps |
|||||
| Construction Products |
440 |
71 |
16.2 |
% |
1.7 |
% |
3.3 |
% |
250 |
bps |
|||||
| Specialty Products |
510 |
108 |
21.1 |
% |
11.4 |
% |
1.9 |
% |
150 |
bps |
|||||
| Intersegment |
(10) |
||||||||||||||
| Total Segments |
3,568 |
704 |
19.7 |
% |
2.9 |
% |
0.4 |
% |
110 |
bps |
|||||
| Decorative Surfaces |
— |
— |
(100) |
% |
(100) |
% |
— |
||||||||
| Unallocated |
— |
(26) |
|||||||||||||
| Total Company |
$ |
3,568 |
$ |
678 |
19.0 |
% |
(4.4) |
% |
0.4 |
% |
110 |
bps |
|||
| Nine Months Ended September 30, 2013 |
% F(U) vs. prior year |
||||||||||||||
| (Dollars in millions) |
Total Revenue |
Operating Income |
Operating Margin |
Total Revenue |
Organic (Base) Revenue |
Operating Margin |
|||||||||
| Test & Measurement and Electronics |
$ |
1,617 |
$ |
233 |
14.4 |
% |
(7.3) |
% |
(8.3) |
% |
(100) |
bps |
|||
| Automotive OEM |
1,792 |
367 |
20.5 |
% |
9.7 |
% |
8.9 |
% |
90 |
bps |
|||||
| Polymers & Fluids |
1,521 |
259 |
17.1 |
% |
(3.8) |
% |
(3.5) |
% |
120 |
bps |
|||||
| Food Equipment |
1,500 |
278 |
18.5 |
% |
4.2 |
% |
1.1 |
% |
130 |
bps |
|||||
| Welding |
1,390 |
361 |
26.0 |
% |
(1.2) |
% |
(3.1) |
% |
(20) |
bps |
|||||
| Construction Products |
1,295 |
180 |
13.9 |
% |
(0.6) |
% |
0.1 |
% |
200 |
bps |
|||||
| Specialty Products |
1,497 |
317 |
21.2 |
% |
6.7 |
% |
1.3 |
% |
100 |
bps |
|||||
| Intersegment |
(31) |
||||||||||||||
| Total Segments |
10,581 |
1,995 |
18.9 |
% |
1.0 |
% |
(0.6) |
% |
80 |
bps |
|||||
| Decorative Surfaces |
— |
— |
(100) |
% |
(100) |
% |
— |
||||||||
| Unallocated** |
— |
(109) |
|||||||||||||
| Total Company |
$ |
10,581 |
$ |
1,886 |
17.8 |
% |
(6.4) |
% |
(0.5) |
% |
50 |
bps |
|||
** Includes 2Q 2013 $34 million pension settlement charge
SOURCE Illinois Tool Works Inc.
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