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

GLENVIEW, Illinois , April 24, 2014 (press release) – - Q1 diluted EPS from continuing operations of $1.01 up 15 percent

- 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.

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

- 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

"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.

 
 
               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 
                                            ===  =======      ====== 
 
 
 
 
                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 
                                                =======      ========== 
 
 
 
 
               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% 
=============  =====   ====  ======  ========  ======       ======  ====  ======      =======   ====  ====== === 
 
                                    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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