ITW Reports Fourth Quarter and Full Year 2012 Results and Issues 2013 Guidance

Tue Jan 29, 2013 8:00am EST

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- Fourth quarter GAAP earnings per share (EPS) from continuing operations of
$2.10 up significantly versus prior year quarter GAAP EPS of $0.90
GLENVIEW, Ill.,  Jan. 29, 2013  /PRNewswire/ -- Illinois Tool Works Inc. (NYSE:
ITW) today reported fourth quarter 2012 diluted income per share from continuing
operations of  $2.10, an increase versus  2011 fourth quarter earnings of 
$0.90. Excluding certain discrete items shown in the table below, adjusted EPS
of  $0.89  per share for the 2012 fourth quarter increased 1 percent compared to
an adjusted EPS of  $0.88  for the year-ago period.

 Q4 2012 Results (GAAP vs. Non-GAAP)                   
                                                      
 2012 Actual Results (GAAP)                  $2.10    
                                                      
 Gain on divestiture of Decorative Surfaces  $1.37    
 Decorative Surfaces equity Interest         $(0.04)  
 Q4 discrete corporate items                 $(0.04)  
 Q4 discrete tax items                       $(0.08)  
 2012 Results (Non-GAAP)                     $0.89    


Fourth quarter 2012 financial and operating results versus the prior-year period
included:

*Total revenues of  $4.221 billion  declined 2.3 percent largely due to the
impact of the Decorative Surfaces divestiture and the negative impact of
currency translation. Excluding the impact of divestitures, total revenues would
have grown approximately 2 percent. Organic, or base revenues, increased 60
basis points, in line with Company expectations. By region, North American
organic revenues grew 1.6 percent and international organic revenues decreased
0.5 percent. European organic revenues decreased 2.6 percent while  Asia Pacific
 organic revenues increased 3.7 percent.

*The Transportation segment led the Company in organic growth, increasing 4.2
percent in the quarter. Notably, the worldwide automotive OEM business produced
organic revenue growth of 10.9 percent, including organic growth of 12.4 percent
in  North America  and 1.8 percent organic growth in  Europe. The increase in
European organic growth took place even as car builds in that region fell 7
percent in the quarter.    

*Free operating cash flow totaled  $497 million  in the quarter. That represents
a free cash to adjusted income from continuing operations conversion rate of 139
percent. The Company returned  $954 million  to shareholders via share
repurchases of  $604 million  and dividend payments of  $350 million.  

"In 2012, we grew our adjusted earnings per share 10 percent and improved
operating margins by 50 basis points," said  E. Scott Santi, president and chief
executive officer.  "We also invested nearly  $100 million  in restructuring
projects, many of which were related to the execution of our enterprise strategy
and related initiatives - portfolio management, business structure
simplification and strategic sourcing.  As we detailed at our investor meeting
in  New York  last month, through our enterprise strategy we are positioning the
company to deliver solid growth as well as very strong operating margin and
return on invested capital performance over the next five years."

Looking ahead, the Company believes full-year 2013 will be characterized by
modest growth for both North American and international geographies.  Total
Company organic revenue growth is expected to be in a range of 1 percent to 3
percent.   As part of its enterprise strategy in 2013, the Company also expects
to spend  $120 million to $140 million  for restructuring activities. As a
result, the Company is forecasting full-year diluted income per share from
continuing operations to be in a range of  $4.13 to $4.37. The midpoint of this
earnings range would represent a 13 percent increase versus pro forma EPS of 
$3.76  for 2012. Full year total revenue growth is forecasted to be in a range
of 3 percent to 5 percent.  For the 2013 first quarter, the Company is
forecasting diluted income per share from continuing operations to be in a range
of  $0.91 to $0.99. The midpoint of this earnings range would represent a 4
percent increase versus pro forma EPS of  $0.91  for the first quarter of 2012. 
First quarter total revenue growth is forecasted to be in a range of flat to -2
percent.  All 2013 revenue and EPS metrics compare to the Company's 2012 pro
forma results, which are included in the attached exhibits.

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 and margin growth, restructuring expenses, the impact
of currency translation and North American 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.

ITW is a Fortune 150 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 pro
forma revenues totaled  $17.0 billion  in 2012, 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                    Twelve Months Ended                          
 (In millions except per share amounts)              December 31,                          December 31,                                 
                                                     2012                2011            2012                 2011           
 Operating Revenues                                  $     4,221        $     4,320    $     17,924        $     17,787  
 Cost of revenues                                    2,725               2,798           11,455               11,518         
 Selling, administrative, and research                                                                                       
 and development expenses                            816                 806             3,332                3,283          
 Amortization of intangible assets                   71                  69              288                  255            
 Impairment of goodwill and other intangible assets  -                   -               2                    -              
 Operating Income                                    609                 647             2,847                2,731          
 Interest expense                                    (61)                (54)            (214)                (192)          
 Gain on sale of interest in Decorative Surfaces     933                 -               933                  -              
 Other income (expense)                              (23)                8               37                   54             
 Income from Continuing Operations                                                                                           
 Before Income Taxes                                 1,458               601             3,603                2,593          
 Income taxes                                        486                 164             1,108                576            
 Income from Continuing Operations                   972                 437             2,495                2,017          
 Income from Discontinued Operations                 7                   5               375                  54             
 Net Income                                          $     979          $     442      $     2,870         $     2,071   
                                                                                                                             
 Income Per Share from Continuing Operations:                                                                                
 Basic                                               $     2.12         $     0.90     $     5.31          $     4.10    
 Diluted                                             $     2.10         $     0.90     $     5.27          $     4.08    
 Income Per Share from Discontinued Operations:                                                                              
 Basic                                               $     0.01         $     0.01     $     0.80          $     0.11    
 Diluted                                             $     0.01         $     0.01     $     0.79          $     0.11    
 Net Income Per Share:                                                                                                       
 Basic                                               $     2.13         $     0.91     $     6.11          $     4.21    
 Diluted                                             $     2.11         $     0.91     $     6.06          $     4.19    
 Shares of Common Stock Outstanding                                                                                          
 During the Period:                                                                                                          
 Average                                             459.7               483.4           469.8                491.4          
 Average assuming dilution                           463.1               485.6           473.2                494.6          


                                                                                                                                          
 FREE OPERATING CASH FLOW                   Three Months Ended                         Twelve Months Ended                                
                                            December 31,                               December 31,                                       
                                            2012               2011                  2012              2011                     
 Net cash provided by operating activities  $     605         $     712            $    2,072       $    1,956  
 Less: Additions to plant and equipment     (108)              (94)                  (382)             (353)        
 Free operating cash flow                   $     497         $     618            $    1,690       $    1,603  


 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES                                                     
 STATEMENT OF FINANCIAL POSITION (UNAUDITED)                                                   
                                                                                            
 (In millions)                              December 31, 2012        December 31, 2011      
 ASSETS                                                                                     
 Current Assets:                                                                            
 Cash and equivalents                       $          2,779        $          1,178      
 Trade receivables                          2,742                    2,819                  
 Inventories                                1,585                    1,716                  
 Deferred income taxes                      332                      366                    
 Prepaid expenses and other current assets  522                      384                    
 Assets held for sale                       -                        386                    
 Total current assets                       7,960                    6,849                  
 Net Plant and Equipment                    1,994                    2,025                  
 Investments                                146                      409                    
 Goodwill                                   5,530                    5,198                  
 Intangible Assets                          2,258                    2,233                  
 Deferred Income Taxes                      391                      634                    
 Other Assets                               1,030                    636                    
                                            $          19,309       $          17,984     
 LIABILITIES AND STOCKHOLDERS' EQUITY                                                       
 Current Liabilities:                                                                       
 Short-term debt                            $          459          $          502        
 Accounts payable                           676                      697                    
 Accrued expenses                           1,392                    1,435                  
 Cash dividends payable                     -                        174                    
 Income taxes payable                       116                      57                     
 Deferred income taxes                      8                        5                      
 Liabilities held for sale                  -                        107                    
 Total current liabilities                  2,651                    2,977                  
 Noncurrent Liabilities:                                                                    
 Long-term debt                             4,589                    3,488                  
 Deferred income taxes                      244                      117                    
 Other liabilities                          1,255                    1,368                  
 Total noncurrent liabilities               6,088                    4,973                  
 Stockholders' Equity:                                                                      
 Common stock                               5                        5                      
 Additional paid-in-capital                 1,012                    686                    
 Income reinvested in the business          13,973                   11,794                 
 Common stock held in treasury              (4,722)                  (2,692)                
 Accumulated other comprehensive income     293                      224                    
 Noncontrolling interest                    9                        17                     
 Total stockholders' equity                 10,570                   10,034                 
                                            $          19,309       $          17,984     


                                                                                                                                                                                                                          
                                                                                                                                                                                                                          
 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES                                                                                                                                                                                
 SEGMENT DATA (UNAUDITED)                                                                                                                                                                                                 
                                                                                                                                                                                                                          
 Three Months Ended December 31, 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               $        873      $          132        15.1       %          4.8      %        4.2           %             2.5        %          (0.3)      %          (0.8)     %         
 Power Systems & Electronics  737                122                    16.6       %          (1.2)    %        (1.2)         %             (16.5)     %          (3.0)      %          (2.5)     %         
 Industrial Packaging         575                62                     10.7       %          (1.2)    %        (0.7          %             13.9       %          1.4        %          1.6       %         
 Food Equipment               498                80                     16.1       %          (1.8)    %        (0.8          %             (7.2)      %          (1.0)      %          (0.4      %         
 Construction                 467                44                     9.5        %          1.3      %        1.1           %             (14.4)     %          (1.8)      %          (1.3)     %         
 Polymers & Fluids            285                38                     13.4       %          (2.9)    %        (7.1)         %             10.1       %          1.5        %          3.2       %         
 All Other                    708                121                    17.0       %          6.9      %        3.3           %             3.2        %          (0.6)      %          0.1       %         
 Intersegment                 (15)                                                                                                                                                                                
 Total Segments               4,128              599                    14.5       %          1.4      %        0.6           %             (3.2)      %          (0.7)      %          (0.3)     %         
 Decorative Surfaces          93                 10                     10.8       %                                                                                                                             
 Total Company                $        4,221    $          609        14.4       %          (2.3)    %        0.6           %             (5.9)      %          (0.6)      %          (0.4)     %         


                                                                                                                                                                                                                        
 Twelve Months Ended December 31, 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               $        3,550    $          560        15.8       %          3.1      %        3.5           %             3.8        %          0.1        %          0.5       %         
 Power Systems & Electronics  3,151              643                    20.4       %          5.5      %        3.8           %             6.2        %          0.2        %          1.1       %         
 Industrial Packaging         2,412              282                    11.7       %          (2.0)    %        0.4           %             13.4       %          1.6        %          1.8       %         
 Food Equipment               1,939              324                    16.7       %          (2.3)    %        0.6           %             6.7        %          1.4        %          1.4       %         
 Construction                 1,902              200                    10.5       %          (2.9)    %        (0.5)         %             (11.3)     %          (1.0)      %          (0.2)     %         
 Polymers & Fluids            1,230              195                    15.8       %          (1.6)    %        (3.1)         %             3.7        %          0.8        %          1.7       %         
 All Other                    2,883              521                    18.1       %          7.2      %        2.9           %             6.7        %          (0.1)      %          1.6       %         
 Intersegment                 (64)                                                                                                                                                                                
 Total Segments               17,003             2,725                  16.0       %          1.8      %        1.7           %             4.8        %          0.4        %          1.1       %         
 Decorative Surfaces          921                122                    13.3       %                                                                                                                             
 Total Company                $        17,924   $          2,847      15.9       %          0.8      %        1.7           %             4.2        %          0.5        %          1.1       %         


 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES                                                                                                                                  
 
GAAP TO NON-GAAP RECONCILIATION (UNAUDITED)                                                                                                                               
                                                                                                                                                                            
 (In millions except per share amounts)        Total Revenue                            Operating Income                     Earnings Per Share                       
 For the three months ended December 31,       2012              2011                 2012             2011               2012                2011                
 Actual Results (GAAP)                         $    4,221       $    4,320         $    609       $    647         $     2.10        $     0.90        
 Gain on Divestiture of Decorative Surfaces    -                 -                   -               -                 1.37               -                  
 Decorative Surfaces Equity Interest           -                 -                   -               -                 (0.04)             -                  
 Discrete Corporate Items                      -                 -                   (16)            -                 (0.04)             -                  
 Discrete Tax Items                            -                 -                   -               -                 (0.08)             -                  
 Decorative Surfaces Business*                 -                 159                 -               18                -                  0.02               
 Adjusted Results (Non-GAAP)                   $    4,221       $    4,161         $    625       $    629         $     0.89        $     0.88        


                                                                                                                                                                                  
                                                                                                                                                                                  
 (In millions except per share amounts)        Total Revenue                              Operating Income                         Earnings Per Share                       
 For the twelve months ended December 31,      2012                2011                  2012               2011                 2012                2011                
 Actual Results (GAAP)                         $    17,924       $    17,787         $    2,847       $    2,731         $     5.27        $     4.08        
 Gain on Divestiture of Decorative Surfaces    -                  -                    -                 -                   1.34               -                  
 Decorative Surfaces Equity Interest           -                  -                    -                 -                   (0.04)             -                  
 Discrete Corporate Items                      -                  -                    (16)              -                   (0.04)             -                  
 Discrete Tax Items                            -                  -                    -                 -                   (0.08)             -                  
 Decorative Surfaces Business*                 -                  159                  -                 18                  -                  0.03               
 Australian Tax Matter                         -                  -                    -                 -                   -                  0.33               
 Adjusted Results (Non-GAAP)                   $    17,924       $    17,628         $    2,863       $    2,713         $     4.09        $     3.72        


                                                                                                                                                                                   
 * Excludes November and December 2011 for comparative purposes as the divestiture closed on October 31, 2012.  Also excludes corporate expense allocations that remain with ITW.  


 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES                                                                                               
 
GAAP TO NON-GAAP RECONCILIATION (UNAUDITED)                                                                                            
                                                                                                                                         
 Free Operating Cash Flow Conversion Rate                                                                                                
 (In millions)                                                           Three Months Ended December 31, 2012                           
 Free Operating Cash Flow                                                $                              497                            
                                                                                                                                        
 Income from Continuing Operations (GAAP)                                $                              972                            
 Decorative Surfaces gain on sale, after tax                             632                                                            
 Decorative Surfaces equity interest, after tax                          (19)                                                           
 Adjusted Income from Continuing Operations                              $                              359                            
                                                                                                                                        
 Free Operating Cash Flow to Adjusted Income from Continuing Operations  139%                                                           


 ILLINOIS TOOL WORKS INC. and SUBSIDIARIES                                                                                                                                                      
 
GAAP TO PRO FORMA RECONCILIATION (UNAUDITED)                                                                                                                                                  
                                                                                                                                                                                             
 (In millions except per share amounts)      Total Revenue                                                            Earnings Per Share                                                     
                                             Three Months Ended           Twelve Months Ended December 31,           Three Months Ended           Twelve Months Ended December 31,         
                                             
March 31,                                                              
March 31,                                                            
                                             2012                         2012                                       2012                         2012                                     
 Actual Results (GAAP)                       $        4,547             $            17,924                      $        0.97              $            5.27                      
 Gain on Divestiture of Decorative Surfaces  -                           -                                         -                           1.34                                    
 Decorative Surfaces Equity Interest         -                           -                                         -                           (0.04)                                  
 Decorative Surfaces Business*               275                         921                                       0.06                        0.21                                    
 Adjusted Results (Proforma)                 $        4,272             $            17,003                      $        0.91              $            3.76                      


                                                                                                                                                                                                                                          
 *Excludes 1Q12 results for the three months ended March 31, 2012 and January through October 2012 results for the twelve months ended December 31, 2012.  Pro forma impact excludes corporate expense allocations that remain with ITW.  


SOURCE  Illinois Tool Works Inc.


John L. Brooklier, +1-847-657-4104 or jbrooklier@itw.com

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