Exhibit 99.1
ITW Reports Second Quarter 2014 Financial Results
Q2 diluted EPS from continuing operations of $1.21 up 32 percent
Record operating margins of 20.5 percent up 300 basis points versus year-ago period; Enterprise initiatives contribute 120 basis points
Total revenues up 4 percent; organic revenues grow 1.4 percent
Raising EPS midpoint and narrowing full-year EPS guidance to $4.50 to $4.62, a 26 percent midpoint increase versus 2013
GLENVIEW, ILLINOIS-July 29, 2014-Illinois Tool Works Inc. (NYSE: ITW) today reported second quarter 2014 diluted earnings per share (EPS) from continuing operations of $1.21, 32 percent higher than the prior-year period. The strong growth in EPS was largely due to ongoing contributions from enterprise initiatives as well as the completion of a previously announced share repurchase program.
Key highlights for the 2014 second quarter financial results versus the year-ago period include:
*Total revenues grew 4 percent to $3.7 billion and operating income increased 21 percent to $763 million. Organic revenues increased 1.4 percent, with international growth of 2 percent compared to 6 percent in the 2014 first quarter. In the second quarter, European and Asia Pacific organic revenues grew 1 percent and 7 percent, respectively. North America organic revenues increased 1 percent in the second quarter. Also in the quarter, as expected, ongoing product line and customer base simplification initiatives associated with the execution of ITW’s enterprise strategy reduced the Company’s overall organic revenue growth rate by approximately 1 percent.
*Record operating margins of 20.5 percent increased 300 basis points, with enterprise initiatives contributing 120 basis points.
Second quarter segment highlights versus the year-ago period include:
*Automotive OEM organic revenue growth of 8 percent outpaced second quarter worldwide auto builds of 2 percent. Organic revenues grew 8 percent in North America, 9 percent in Europe and 22 percent in China. Operating margins of 23.7 percent increased 310 basis points.
*Food Equipment’s organic revenues increased 3 percent due to growth in equipment and service in North America as well as increased equipment sales internationally. Operating margins of 19.5 percent increased 80 basis points.
*While Test & Measurement and Electronics organic revenues increased 1 percent, the test and measurement portion of the segment grew 6 percent. Segment operating margins of 15.2 percent increased 150 basis points.
*Operating margins expanded in six of seven segments with strong performances by Construction Products (up 450 basis points), Specialty Products (up 180 basis points) and Polymers & Fluids (up 130 basis points). Welding’s company-leading operating margins of 26.3 percent declined 20 basis points.
“ITW had a very good second quarter as our operating margins hit record levels, our EPS increased more than 30 percent and our after tax return on invested capital was near 20 percent,” said Scott Santi, president and chief executive officer. “The ITW team continued to execute well on our enterprise initiatives and produced strong financial results that give us increased confidence in our ability to achieve our 2014 and five-year enterprise performance goals. As a result, we are narrowing and raising the EPS guidance range for 2014 and now expect EPS to increase 26 percent at the midpoint. In the second quarter, we also successfully completed the sale of the
Industrial Packaging segment and the associated share repurchase program. We believe that our business portfolio is well positioned for long-term growth with best-in-class margins and return on invested capital.”
As noted, the Company is raising its midpoint and narrowing its full-year EPS guidance range to $4.50 to $4.62 from $4.45 to $4.65. Total revenue is expected to continue to grow in a range of 3 percent to 4 percent. For the 2014 third quarter, the Company is forecasting EPS to be in a range of $1.19 to $1.27 and expects total revenue growth in a range of 3 percent to 4 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.
Contact: John Brooklier, 847-657-4104 or jbrooklier@itw.com
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (In millions except per share amounts) | June 30, | | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| Operating Revenues | $ | 3,719 |
| | $ | 3,593 |
| | $ | 7,288 |
| | $ | 7,013 |
|
| Cost of revenues | 2,219 |
| | 2,155 |
| | 4,377 |
| | 4,233 |
|
| Selling, administrative, and research and development expenses | 677 |
| | 747 |
| | 1,359 |
| | 1,450 |
|
| Amortization of intangible assets | 60 |
| | 61 |
| | 122 |
| | 122 |
|
| Operating Income | 763 |
| | 630 |
| | 1,430 |
| | 1,208 |
|
| Interest expense | (64 | ) | | (59 | ) | | (128 | ) | | (119 | ) |
| Other income (expense) | 7 |
| | 10 |
| | 16 |
| | 57 |
|
| Income from Continuing Operations Before Income Taxes | 706 |
| | 581 |
| | 1,318 |
| | 1,146 |
|
| Income Taxes | 212 |
| | 165 |
| | 396 |
| | 329 |
|
| Income from Continuing Operations | 494 |
| | 416 |
| | 922 |
| | 817 |
|
| Income from Discontinued Operations | 998 |
| | 49 |
| | 1,043 |
| | 2 |
|
| Net Income | $ | 1,492 |
| | $ | 465 |
| | $ | 1,965 |
| | $ | 819 |
|
| | | | | | | | |
| Income Per Share from Continuing Operations: | | | | | | | |
| Basic | $ | 1.22 |
| | $ | 0.93 |
| | $ | 2.23 |
| | $ | 1.81 |
|
| Diluted | $ | 1.21 |
| | $ | 0.92 |
| | $ | 2.22 |
| | $ | 1.80 |
|
| Income Per Share from Discontinued Operations: | | | | | | | |
| Basic | $ | 2.47 |
| | $ | 0.11 |
| | $ | 2.52 |
| | $ | — |
|
| Diluted | $ | 2.45 |
| | $ | 0.11 |
| | $ | 2.50 |
| | $ | — |
|
| Net Income Per Share: | | | | | | | |
| Basic | $ | 3.69 |
| | $ | 1.04 |
| | $ | 4.76 |
| | $ | 1.82 |
|
| Diluted | $ | 3.66 |
| | $ | 1.03 |
| | $ | 4.72 |
| | $ | 1.81 |
|
| | | | | | | | |
| Shares of Common Stock Outstanding During the Period: | | | | | | | |
| Average | 404.7 |
| | 449.6 |
| | 413.3 |
| | 450.7 |
|
| Average assuming dilution | 407.6 |
| | 452.5 |
| | 416.3 |
| | 453.7 |
|
FREE OPERATING CASH FLOW (UNAUDITED)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (In millions) | June 30, | | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| Net cash provided by operating activities | $ | 573 |
| | $ | 643 |
| | $ | 887 |
| | $ | 1,009 |
|
| Less: Additions to plant and equipment | (78 | ) | | (89 | ) | | (146 | ) | | (178 | ) |
| Free operating cash flow | $ | 495 |
| | $ | 554 |
| | $ | 741 |
| | $ | 831 |
|
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
|
| | | | | | | |
(In millions) | June 30, 2014 | | December 31, 2013 |
| ASSETS | | | |
| Current Assets: | | | |
| Cash and equivalents | $ | 5,297 |
| | $ | 3,618 |
|
| Trade receivables | 2,598 |
| | 2,365 |
|
| Inventories | 1,305 |
| | 1,247 |
|
| Deferred income taxes | 307 |
| | 384 |
|
| Prepaid expenses and other current assets | 284 |
| | 366 |
|
| Assets held for sale | — |
| | 1,836 |
|
| Total current assets | 9,791 |
| | 9,816 |
|
| | | | |
| Net Plant and Equipment | 1,700 |
| | 1,709 |
|
| Goodwill | 4,904 |
| | 4,886 |
|
| Intangible Assets | 1,876 |
| | 1,999 |
|
| Deferred Income Taxes | 368 |
| | 359 |
|
| Other Assets | 1,297 |
| | 1,197 |
|
| | $ | 19,936 |
| | $ | 19,966 |
|
| | | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current Liabilities: | | | |
| Short-term debt | $ | 1,070 |
| | $ | 3,551 |
|
| Accounts payable | 683 |
| | 634 |
|
| Accrued expenses | 1,278 |
| | 1,272 |
|
| Cash dividends payable | 167 |
| | 181 |
|
| Income taxes payable | 715 |
| | 69 |
|
| Deferred income taxes | 10 |
| | 10 |
|
| Liabilities held for sale | — |
| | 317 |
|
| Total current liabilities | 3,923 |
| | 6,034 |
|
| | | | |
| Noncurrent Liabilities: | | | |
| Long-term debt | 6,140 |
| | 2,793 |
|
| Deferred income taxes | 515 |
| | 507 |
|
| Other liabilities | 918 |
| | 923 |
|
| Total noncurrent liabilities | 7,573 |
| | 4,223 |
|
| | | | |
| Stockholders’ Equity: | | | |
| Common stock | 6 |
| | 6 |
|
| Additional paid-in-capital | 1,064 |
| | 1,046 |
|
| Income reinvested in the business | 16,568 |
| | 14,943 |
|
| Common stock held in treasury | (9,562 | ) | | (6,676 | ) |
| Accumulated other comprehensive income | 359 |
| | 384 |
|
| Noncontrolling interest | 5 |
| | 6 |
|
| Total stockholders’ equity | 8,440 |
| | 9,709 |
|
| | $ | 19,936 |
| | $ | 19,966 |
|
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended |
| (Dollars in millions) | June 30, | | June 30, |
| | 2014 | | 2013 | | 2014 | | 2013 |
| Operating income | $ | 763 |
| | $ | 630 |
| | $ | 1,430 |
| | $ | 1,208 |
|
| Tax rate | 30.0 | % | | 28.4 | % | | 30.0 | % | | 28.7 | % |
| Income taxes | (229 | ) | | (179 | ) | | (429 | ) | | (347 | ) |
| Operating income after taxes | $ | 534 |
| | $ | 451 |
| | $ | 1,001 |
| | $ | 861 |
|
| | | | | | | | |
| Invested capital: | | | |
| | | | |
| Trade receivables | $ | 2,598 |
| | $ | 2,907 |
| | $ | 2,598 |
| | $ | 2,907 |
|
| Inventories | 1,305 |
| | 1,490 |
| | 1,305 |
| | 1,490 |
|
| Net assets held for sale | — |
| | 171 |
| | — |
| | 171 |
|
| Net plant and equipment | 1,700 |
| | 1,936 |
| | 1,700 |
| | 1,936 |
|
| Goodwill and intangible assets | 6,780 |
| | 7,491 |
| | 6,780 |
| | 7,491 |
|
| Accounts payable and accrued expenses | (1,961 | ) | | (2,053 | ) | | (1,961 | ) | | (2,053 | ) |
| Other, net | (69 | ) | | 593 |
| | (69 | ) | | 593 |
|
| Total invested capital | $ | 10,353 |
| | $ | 12,535 |
| | $ | 10,353 |
| | $ | 12,535 |
|
| | | | | | | | |
| Average invested capital | $ | 11,504 |
| | $ | 12,583 |
| | $ | 11,815 |
| | $ | 12,668 |
|
| Adjustment for Wilsonart (formerly Decorative Surfaces) | (157 | ) | | (171 | ) | | (159 | ) | | (172 | ) |
| Adjustment for Industrial Packaging | (409 | ) | | (1,480 | ) | | (771 | ) | | (1,483 | ) |
| Adjusted average invested capital | $ | 10,938 |
| | $ | 10,932 |
| | $ | 10,885 |
| | $ | 11,013 |
|
| Annualized adjusted return on average invested capital | 19.5 | % | | 16.5 | % | | 18.4 | % | | 15.6 | % |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)
|
| | | | | | | | | | | | | | | |
| For the Three Months Ended June 30, 2014 | % F(U) vs. prior year |
| (Dollars in millions) | Total Revenue | Operating Income | Operating Margin | | Total Revenue | Organic Revenue | Operating Margin |
| Automotive OEM | $ | 671 |
| $ | 158 |
| 23.7 | % | | 9.2 | % | 7.8 | % | 310 bps |
|
Test & Measurement and Electronics
| 558 |
| 85 |
| 15.2 | % | | 2.7 | % | 1.4 | % | 150 bps |
|
| Food Equipment | 537 |
| 105 |
| 19.5 | % | | 9.5 | % | 3.4 | % | 80 bps |
|
Polymers & Fluids
| 506 |
| 99 |
| 19.6 | % | | (3.5 | )% | (3.0 | )% | 130 bps |
|
| Welding | 470 |
| 124 |
| 26.3 | % | | (2.0 | )% | (1.8 | )% | -20 bps |
|
| Construction Products | 444 |
| 81 |
| 18.2 | % | | (0.4 | )% | 0.4 | % | 450 bps |
|
| Specialty Products | 540 |
| 130 |
| 24.2 | % | | 6.8 | % | — | % | 180 bps |
|
| Intersegment | (7 | ) | — |
| — | % | | — | % | — | % | — |
|
| Total Segments | 3,719 |
| 782 |
| 21.0 | % | | 3.5 | % | 1.4 | % | 180 bps |
|
| Unallocated | — |
| (19 | ) | — | % | | — | % | — | % | — |
|
| Total Company | $ | 3,719 |
| $ | 763 |
| 20.5 | % | | 3.5 | % | 1.4 | % | 300 bps |
|
