ITW NEWS RELEASE
ITW Reports Diluted Income Per Share from Continuing Operations of $0.98 in the 2009 Fourth Quarter,
a 66 Percent Increase Versus the 2008 Fourth Quarter; Operating Margins of 12.7 Percent Improve
120 Basis Points Versus Year-Ago Period
GLENVIEW, ILLINOIS—January 27, 2010—Illinois Tool Works Inc. (NYSE: ITW) today reported 2009 fourth quarter diluted income per share from continuing operations of $0.98, a 66 percent increase compared to the 2008 fourth quarter. The Company continued to see the benefits of ongoing restructuring activities and improvements in discrete end markets in the most recent quarter. In addition, the Company recorded several discrete tax adjustments in the fourth quarter, primarily related to a favorable German tax settlement and additional foreign tax credits as a result of reorganization. These tax adjustments had a favorable impact of 37 cents per share in the quarter. Excluding the impact of the discrete tax adjustments, fourth quarter income would have been 61 cents per share.
Fourth quarter 2009 operating revenues of $3.757 billion were 5.0 percent lower than the year-ago period. However, fourth quarter operating revenues were 5.0 percent higher than the 2009 third quarter mainly due to an increase in automotive OEM builds, a modest improvement in worldwide end markets and the positive impact of currency translation. The Company’s base revenues declined 10.0 percent in the 2009 fourth quarter versus the year-ago period, with North American base revenues declining 10.9 percent and international base revenues decreasing 9.0 percent. Acquisitions and currency translation added 1.7 percent and 3.3 percent to revenues, respectively, in the quarter. By comparison, total company base revenues decreased 17.9 percent in the 2009 third quarter versus the 2008 third quarter. Fourth quarter operating margins of 12.7 percent were 120 basis points higher than the year-ago period, with base margins contributing 160 basis points.
Full-year 2009 operating revenues of $13.877 billion were 18.8 percent lower than 2008. Base revenues fell 18.4 percent for the full year, with North American base revenues decreasing 21.6 percent and international base revenues declining 14.9 percent. Acquisitions added 4.2 percent to revenues while currency translation negatively impacted revenues by 4.8 percent. Full-year diluted income per share from continuing operations totaled $1.93, a 40 percent decline versus 2008. Full-year operating margins of 10.0 percent were 460 basis points lower than 2008.
The Company’s fourth quarter free operating cash flow of $434 million was once again driven by improvement in operating margins and ongoing reductions in working capital. For full-year 2009, free operating cash flow totaled $1.899 billion, representing a free operating cash flow to net income conversion rate of 201 percent.
“Given the ongoing modest recovery in many of our worldwide end markets, we are very pleased with the performance of our global businesses and our operating results in the fourth quarter,” said Chairman and Chief Executive Officer David B. Speer. “We continued investing in worldwide restructuring projects, incurring $33 million of expense in the quarter and $161 million of restructuring expense for the full year. We believe these restructuring initiatives, coupled with numerous long-term growth investments in our businesses led by our operating managers, position ITW very well for enhanced top line growth and operating margin performance in 2010 and beyond.”
Segment highlights for the 2009 fourth quarter include:
*Worldwide revenues for the Transportation segment increased 9.6 percent in the quarter versus the year-ago period. Segment base revenues grew 6.3 percent in the fourth quarter compared to the 2008 fourth quarter. By comparison, base revenues declined 7.9 percent in the 2009 third quarter versus the year-ago period. The sequential improvement in base revenues was largely due to increased auto builds both internationally and in North America. European auto builds moved to a robust 5.1 million units in the fourth quarter versus 3.9 million units in the third quarter. And North American auto builds of 2.7 million units in the fourth quarter were 364,000 units higher than the third quarter. Worldwide automotive base revenues grew 8.8 percent in the fourth quarter versus the year-ago period. By comparison, third quarter worldwide automotive base revenues decreased 9.7 percent compared to the year-earlier period. As a result, segment operating margins of 15.0 percent in the fourth quarter were 1190 basis points higher than the year-ago period and 450 basis points higher than the 2009 third quarter.
*Worldwide revenues for the Power Systems and Electronics segment decreased 17.9 percent in the fourth quarter versus the year-ago period. Base revenues declined 21.6 percent in the most recent quarter compared to the 2008 fourth quarter. By comparison, base revenues fell 34.2 percent in the 2009 third quarter versus the prior year period. While total worldwide welding base revenues declined 24.9 percent in the quarter compared to the 2008 fourth quarter, this represents improvement from the 2009 third quarter when base revenues fell 36.2 percent versus the year-ago period. Notably, the PC board fabrication businesses’ base revenues continued to strengthen, with base revenues declining 14.5 percent in the fourth quarter versus the 2008 fourth quarter. Base revenues fell 42.3 percent in the 2009 third quarter compared to the year-earlier period. Segment operating margins of 14.6 percent in the fourth quarter were 100 basis points lower than the year-ago period.
The Company believes most end markets have stabilized and anticipates modest expansion in a variety of worldwide end markets in 2010. The Company is estimating first quarter 2010 diluted income per share from continuing operations to be in a range of $0.48 to $0.60. The 2010 first quarter forecast assumes a total revenue growth range of 14 percent to 18 percent. For full-year 2010, the Company is forecasting diluted income per share from continuing operations to be in a range of $2.43 to $2.93. The 2010 full-year forecast assumes a total revenue growth range of 10 percent to 14 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 operating margin performance, revenue growth, end markets, diluted income per share from continuing operations, restructuring expenses and related benefits and the Company’s related forecast. These statements are subject to certain risks, uncertainties and other factors which could cause actual results to differ materially from those anticipated. Such factors are contained in ITW’s Form 10-K for 2008, as updated by the Company’s current report on Form 8-K filed in August 2009.
With $13.9 billion in 2009 revenues, ITW is a multinational manufacturer of a diversified range of value-adding and short lead-time industrial products and equipment. The Company consists of 840 business units in 57 countries and employs approximately 59,000 people.
Contact: John Brooklier, 847-657-4104 or jbrooklier@itw.com
| ILLINOIS TOOL WORKS INC. | | | | | | | | |
| (In thousands except per share data) | | | | | | | | |
| | | | Three Months Ended | | Twelve Months Ended |
| | | | December 31, | | December 31, |
| Statement of Income | | 2009 | | 2008 | | 2009 | | 2008 |
| Operating Revenues | $ | 3,757,429 | $ | 3,954,029 | $ | 13,877,068 | $ | 17,100,341 |
| Cost of revenues | | 2,428,597 | | 2,616,330 | | 9,144,852 | | 11,186,871 |
| Selling, administrative, and R&D expenses | | 797,835 | | 831,587 | | 3,037,439 | | 3,226,199 |
| Amortization of intangible assets | | 51,171 | | 51,477 | | 203,230 | | 184,410 |
Impairment of goodwill and other intangible assets | | 3,571 | | 137 | | 105,568 | | 1,575 |
| Operating Income | | 476,255 | | 454,498 | | 1,385,979 | | 2,501,286 |
| Interest expense | | (43,847) | | (42,163) | | (164,839) | | (154,458) |
| Other income/(expense) | | 5,691 | | (15,214) | | (7,350) | | 4,710 |
| Income from Continuing Operations Before Taxes | | 438,099 | | 397,121 | | 1,213,790 | | 2,351,538 |
| Income taxes | | (57,500) | | 94,656 | | 244,300 | | 660,445 |
| Income from Continuing Operations | $ | 495,599 | $ | 302,465 | $ | 969,490 | $ | 1,691,093 |
| Income (loss) from Discontinued Operations | | 11,801 | | (68,691) | | (22,481) | | (172,090) |
| Net Income | $ | 507,400 | $ | 233,774 | $ | 947,009 | $ | 1,519,003 |
| | | | | | | | | | |
| Income Per Share from Continuing Operations: | | | | | | | | |
| Basic | | $0.99 | | $0.59 | | $1.94 | | $3.26 |
| Diluted | | $0.98 | | $0.59 | | $1.93 | | $3.24 |
| | | | | | | | | | |
| Income (loss) Per Share from Discontinued Operations: | | | | | | | | |
| Basic | | $0.02 | | $(0.13) | | $(0.04) | | $(0.33) |
| Diluted | | $0.02 | | $(0.13) | | $(0.04) | | $(0.33) |
| | | | | | | | | | |
| Net Income Per Share: | | | | | | | | |
| Basic | | $1.01 | | $0.46 | | $1.89 | | $2.93 |
| Diluted | | $1.01 | | $0.46 | | $1.89 | | $2.91 |
| | | | | | | | | | |
| Shares outstanding during the period: | | | | | | | | |
| Average | | 501,784 | | 508,851 | | 500,177 | | 518,609 |
| Average assuming dilution | | 504,873 | | 510,184 | | 501,921 | | 521,213 |
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| Estimated Free Operating Cash Flow | | Three Months Ended | | Twelve Months Ended |
| | | | December 31, | | December 31, |
| | | | 2009 | | 2008 | | 2009 | | 2008 |
| | | | | | | | | | |
| | Net cash provided by operating activities | $ | 506,310 | $ | 589,437 | $ | 2,146,589 | $ | 2,222,224 |
| | Less: Additions to PP&E | | (72,749) | | (88,017) | | (247,102) | | (362,312) |
| | Free operating cash flow | $ | 433,561 | $ | 501,420 | $ | 1,899,487 | $ | 1,859,912 |
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| ILLINOIS TOOL WORKS INC. | | | | | | | |
| (In thousands) | | | | | | | |
| | | | Dec 31, | | Sept 30, | | Dec 31, | |
| Statement of Financial Position | | 2009 | | 2009 | | 2008 | |
| Assets | | | | | | | |
| Cash & equivalents | $ | 1,318,772 | $ | 942,856 | $ | 742,950 | |
| Trade receivables | | 2,491,492 | | 2,410,667 | | 2,571,987 | |
| Inventories | | 1,356,233 | | 1,361,201 | | 1,774,697 | |
| Deferred income taxes | | 231,858 | | 243,284 | | 206,496 | |
| Prepaids and other current assets | | 276,240 | | 327,083 | | 375,778 | |
| Assets held for sale | | — | | — | | 82,071 | |
| Total current assets | | 5,674,595 | | 5,285,091 | | 5,753,979 | |
| | | | | | | | | |
| Net plant & equipment | | 2,136,527 | | 2,107,103 | | 2,109,432 | |
| Investments | | 451,293 | | 456,450 | | 465,894 | |
| Goodwill | | 4,860,732 | | 4,721,777 | | 4,517,550 | |
| Intangible assets | | 1,723,417 | | 1,652,292 | | 1,779,669 | |
| Deferred income taxes | | 673,044 | | 81,870 | | 75,999 | |
| Other assets | | 562,376 | | 579,633 | | 501,028 | |
| | | $ | 16,081,984 | $ | 14,884,216 | $ | 15,203,551 | |
| | | | | | | | | |
| Liabilities & Stockholders' Equity | | | | | | | |
| Short-term debt | $ | 213,681 | $ | 67,460 | $ | 2,433,973 | |
| Accounts payable | | 689,572 | | 626,314 | | 683,991 | |
| Accrued expenses | | 1,359,394 | | 1,391,824 | | 1,315,106 | |
| Cash dividends payable | | 155,724 | | 155,282 | | 154,726 | |
| Income taxes payable | | 417,267 | | 225,751 | | 216,751 | |
| Liabilities held for sale | | — | | — | | 20,546 | |
| Total current liabilities | | 2,835,638 | | 2,466,631 | | 4,825,093 | |
| | | | | | | | | |
| Long-term debt | | 2,914,874 | | 2,869,377 | | 1,247,883 | |
| Deferred income taxes | | 207,677 | | 71,468 | | 125,089 | |
| Other liabilities | | 1,305,919 | | 1,234,447 | | 1,330,395 | |
| Total noncurrent liabilities | | 4,428,470 | | 4,175,292 | | 2,703,367 | |
| | | | | | | | | |
| Common stock | | 5,350 | | 5,336 | | 5,318 | |
| Additional paid-in capital | | 270,985 | | 199,259 | | 105,497 | |
| Income reinvested in the business | | 9,521,740 | | 9,170,064 | | 9,196,465 | |
| Common stock held in treasury | | (1,390,594) | | (1,390,594) | | (1,390,594) | |
| Accumulated other comprehensive income | | 400,726 | | 249,471 | | (253,211) | |
| Noncontrolling interest | | 9,669 | | 8,757 | | 11,616 | |
| Total stockholders' equity | | 8,817,876 | | 8,242,293 | | 7,675,091 | |
| | | $ | 16,081,984 | $ | 14,884,216 | $ | 15,203,551 | |
