Illinois Tool Works' Q1 net income up 33.6% year-over-year to US$473M due to company's ongoing five-year enterprise strategy and related initiatives; operating revenues up 4.4% to US$3.57B
Elyse Blye
GLENVIEW, Illinois
,
April 24, 2014
(press release)
–
- Q1 diluted EPS from continuing operations of $1.01 up 15 percent
Key highlights for the 2014 first quarter financial results versus the year-ago period include:- Q1 diluted EPS from continuing operations of $1.01 up 15 percent "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.
- 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
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.
- 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
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
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ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
March 31, December 31,
(In millions) 2014 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
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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
ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
For the Three Months Ended March 31, 2014
% F(U) vs. prior year
------------------------------------------------------------------------------------------------------------------
Test &
Automotive Measurement and Food Polymers & Construction Specialty
OEM Electronics Equipment Fluids Welding Products 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%
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For the Three Months Ended March 31, 2014
------------------------------------------------------------------------------------------------------------------
% Point Increase (Decrease)
------------------------------------------------------------------------------------------------------------------
Test &
Automotive Measurement and Food Polymers & Construction Specialty
OEM Electronics Equipment Fluids Welding Products 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%
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