Exhibit 99.1
ITW Reports Third Quarter 2015 Financial Results
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| • | EPS of $1.39, up 9 percent; up 18 percent excluding $(0.12) of currency headwinds |
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| • | Record operating margin of 22.7 percent, up 180 basis points; Enterprise Initiatives contribute 110 basis points |
| |
| • | Strong free cash flow conversion at 126 percent of net income |
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| • | Record after-tax return on invested capital of 21.5 percent |
GLENVIEW, Ill., October 21, 2015 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW) today reported third quarter 2015 diluted earnings per share (EPS) from continuing operations of $1.39, a 9 percent increase compared to the year-ago period. Organic revenue was down 1.7 percent in the quarter as continued solid organic growth performance in Automotive OEM, Food Equipment and Construction Products was offset by deteriorating end market trends in Welding and Test & Measurement and Electronics. In addition, the company’s ongoing Product Line Simplification (PLS) activities reduced organic growth by 1 percentage-point.
"ITW delivered another strong quarter of margin expansion and earnings per share growth," said E. Scott Santi, chairman and chief executive officer. "In the quarter, ITW set new all-time records for operating margin and after-tax return on invested capital and grew EPS by 9 percent. In addition, free cash flow conversion was very strong at 126 percent. Due to ITW’s unique business model and proven track record of operational execution, the company is well positioned to continue to deliver differentiated performance in both the current environment and over the long-term.”
Third quarter 2015 enterprise highlights*
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| • | EPS increased 9 percent to $1.39. Excluding $(0.12) impact from foreign currency headwinds, EPS would have been up 18 percent. |
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| • | Operating margin increased 180 basis points to a record of 22.7 percent as Enterprise Initiatives contribute 110 basis points. |
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| • | Free cash flow was $644 million, 126 percent of net income. |
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| • | After-tax return on invested capital improved 140 basis points to a record of 21.5 percent. |
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| • | Total revenues of $3.4 billion were down 9 percent primarily due to the impact of foreign currency translation. |
Third quarter 2015 segment performance*
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| • | Automotive OEM organic revenue growth of 5 percent outpaced flat worldwide auto builds. Organic revenue increased 12 percent in Europe, 5 percent in North America and declined 5 percent in China. Operating margin of 25.4 percent was up 200 basis points. |
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| • | Construction Products organic revenue increased 4 percent driven by 7 percent growth in North America and 5 percent growth in Asia Pacific. Record operating margin of 23.1 percent was up 420 basis points. |
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| • | Food Equipment organic revenue increased 3 percent due to 6 percent growth in North America. Record operating margin of 26.3 percent was an increase of 320 basis points. |
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| • | Facing challenging year-over-year comparisons and significant end market weakness, organic revenue in Welding and Test & Measurement and Electronics declined by 10 percent and 11 percent, respectively. |
Guidance
The company is reducing its 2015 full-year EPS guidance by $0.05 or 1 percent at the midpoint to reflect current demand levels. The updated EPS range of $5.05 to $5.15 is a year-over-year increase of 9 percent at the midpoint. Excluding the negative currency impact, full-year EPS would be up 18 percent at the midpoint. Organic revenue for the year is projected to be down 1 percent to flat, which includes the expected 1-percentage point of impact from PLS. Operating margin is projected to exceed 21 percent, an increase of more than 100 basis points year-over-year. For the fourth quarter 2015, the company is expecting EPS to be in a range of $1.15 to $1.25 and operating margin to be approximately 21 percent. Fourth quarter organic revenue is forecast to be down 1 to 2 percent, in line with current demand levels.
*All comparisons are to the prior year period.
Forward-looking statement
This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitation, statements regarding organic and total revenue growth, impact of foreign currency translation, operating margins 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 Form 10-K for 2014 and Form 10-Q for the second quarter of 2015. The attached tables include a calculation of ROIC, a non-GAAP measure.
About ITW
ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $14.5 billion in 2014. The Company’s seven industry-leading businesses leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW has nearly 50,000 dedicated colleagues in operations around the world who thrive in the company’s unique decentralized and entrepreneurial culture. To learn more about the company and the ITW Business Model, visit www.itw.com.
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| In millions except per share amounts | September 30, | | September 30, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Operating Revenues | $ | 3,354 |
| | $ | 3,692 |
| | $ | 10,130 |
| | $ | 10,980 |
|
| Cost of revenues | 1,953 |
| | 2,182 |
| | 5,947 |
| | 6,559 |
|
| Selling, administrative, and research and development expenses | 581 |
| | 675 |
| | 1,819 |
| | 2,034 |
|
| Amortization of intangible assets | 57 |
| | 60 |
| | 174 |
| | 182 |
|
| Impairment of goodwill and other intangible assets | 2 |
| | 3 |
| | 2 |
| | 3 |
|
| Operating Income | 761 |
| | 772 |
| | 2,188 |
| | 2,202 |
|
| Interest expense | (59 | ) | | (68 | ) | | (168 | ) | | (196 | ) |
| Other income (expense) | 23 |
| | 20 |
| | 65 |
| | 36 |
|
| Income from Continuing Operations Before Income Taxes | 725 |
| | 724 |
| | 2,085 |
| | 2,042 |
|
| Income Taxes | 214 |
| | 217 |
| | 636 |
| | 613 |
|
| Income from Continuing Operations | 511 |
| | 507 |
| | 1,449 |
| | 1,429 |
|
| Income from Discontinued Operations | — |
| | 24 |
| | — |
| | 1,067 |
|
| Net Income | $ | 511 |
| | $ | 531 |
| | $ | 1,449 |
| | $ | 2,496 |
|
| | | | | | | | |
| Income Per Share from Continuing Operations: | | | | | | | |
| Basic | $ | 1.40 |
| | $ | 1.29 |
| | $ | 3.92 |
| | $ | 3.51 |
|
| Diluted | $ | 1.39 |
| | $ | 1.28 |
| | $ | 3.90 |
| | $ | 3.49 |
|
| Income Per Share from Discontinued Operations: | | | | | | | |
| Basic | $ | — |
| | $ | 0.06 |
| | $ | — |
| | $ | 2.62 |
|
| Diluted | $ | — |
| | $ | 0.06 |
| | $ | — |
| | $ | 2.60 |
|
| Net Income Per Share: | | | | | | | |
| Basic | $ | 1.40 |
| | $ | 1.35 |
| | $ | 3.92 |
| | $ | 6.14 |
|
| Diluted | $ | 1.39 |
| | $ | 1.34 |
| | $ | 3.90 |
| | $ | 6.09 |
|
| | | | | | | | |
| Shares of Common Stock Outstanding During the Period: | | | | | | | |
| Average | 365.1 |
| | 394.0 |
| | 369.3 |
| | 406.8 |
|
| Average assuming dilution | 367.1 |
| | 396.8 |
| | 371.6 |
| | 409.7 |
|
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
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| | | | | | | |
In millions | September 30, 2015 | | December 31, 2014 |
| Assets | | | |
| Current Assets: | | | |
| Cash and equivalents | $ | 3,001 |
| | $ | 3,990 |
|
| Trade receivables | 2,339 |
| | 2,293 |
|
| Inventories | 1,153 |
| | 1,180 |
|
| Deferred income taxes | 189 |
| | 212 |
|
| Prepaid expenses and other current assets | 287 |
| | 401 |
|
| Total current assets | 6,969 |
| | 8,076 |
|
| | | | |
| Net plant and equipment | 1,601 |
| | 1,686 |
|
| Goodwill | 4,470 |
| | 4,667 |
|
| Intangible assets | 1,618 |
| | 1,799 |
|
| Deferred income taxes | 286 |
| | 301 |
|
| Other assets | 1,160 |
| | 1,149 |
|
| | $ | 16,104 |
| | $ | 17,678 |
|
| Liabilities and Stockholders' Equity | | | |
| Current Liabilities: | | | |
| Short-term debt | $ | 812 |
| | $ | 1,476 |
|
| Accounts payable | 498 |
| | 512 |
|
| Accrued expenses | 1,137 |
| | 1,287 |
|
| Cash dividends payable | 200 |
| | 186 |
|
| Income taxes payable | 71 |
| | 64 |
|
| Deferred income taxes | 6 |
| | 8 |
|
| Total current liabilities | 2,724 |
| | 3,533 |
|
| | | | |
| Noncurrent Liabilities: | |
| | |
| Long-term debt | 7,000 |
| | 5,981 |
|
| Deferred income taxes | 342 |
| | 338 |
|
| Other liabilities | 948 |
| | 1,002 |
|
| Total noncurrent liabilities | 8,290 |
| | 7,321 |
|
| | | | |
| Stockholders’ Equity: | | | |
| Common stock | 6 |
| | 6 |
|
| Additional paid-in-capital | 1,124 |
| | 1,096 |
|
| Income reinvested in the business | 18,066 |
| | 17,173 |
|
| Common stock held in treasury | (12,740 | ) | | (10,798 | ) |
| Accumulated other comprehensive income | (1,370 | ) | | (658 | ) |
| Noncontrolling interest | 4 |
| | 5 |
|
| Total stockholders’ equity | 5,090 |
| | 6,824 |
|
| | $ | 16,104 |
| | $ | 17,678 |
|
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
|
| | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| Dollars in millions | September 30, | | September 30, |
| | 2015 | | 2014 | | 2015 | | 2014 |
| Operating income | $ | 761 |
| | $ | 772 |
| | $ | 2,188 |
| | $ | 2,202 |
|
| Tax rate | 29.6 | % | | 30.0 | % | | 30.5 | % | | 30.0 | % |
| Income taxes | (225 | ) | | (232 | ) | | (668 | ) | | (661 | ) |
| Operating income after taxes | $ | 536 |
| | $ | 540 |
| | $ | 1,520 |
| | $ | 1,541 |
|
| | | | | | | | |
| Invested capital: | | | |
| | | | |
| Trade receivables | $ | 2,339 |
| | $ | 2,519 |
| | $ | 2,339 |
| | $ | 2,519 |
|
| Inventories | 1,153 |
| | 1,265 |
| | 1,153 |
| | 1,265 |
|
| Net plant and equipment | 1,601 |
| | 1,693 |
| | 1,601 |
| | 1,693 |
|
| Goodwill and intangible assets | 6,088 |
| | 6,596 |
| | 6,088 |
| | 6,596 |
|
| Accounts payable and accrued expenses | (1,635 | ) | | (1,901 | ) | | (1,635 | ) | | (1,901 | ) |
| Other, net | 355 |
| | 339 |
| | 355 |
| | 339 |
|
| Total invested capital | $ | 9,901 |
| | $ | 10,511 |
| | $ | 9,901 |
| | $ | 10,511 |
|
| | | | | | | | |
| Average invested capital | $ | 10,080 |
| | $ | 10,432 |
| | $ | 10,079 |
| | $ | 11,489 |
|
| Adjustment for Wilsonart (formerly the Decorative Surfaces segment) | (121 | ) | | (155 | ) | | (126 | ) | | (158 | ) |
| Adjustment for Industrial Packaging | — |
| | 461 |
| | — |
| | (529 | ) |
| Adjusted average invested capital | $ | 9,959 |
| | $ | 10,738 |
| | $ | 9,953 |
| | $ | 10,802 |
|
| Annualized adjusted return on average invested capital | 21.5 | % | | 20.1 | % | | 20.4 | % | | 19.0 | % |
FREE CASH FLOW (UNAUDITED)
|
| | | |
| In millions | Three Months Ended |
| | September 30, 2015 |
| Net income | $ | 511 |
|
| | |
| Net cash provided by operating activities | $ | 706 |
|
| Less: Additions to plant and equipment | (62 | ) |
| Free cash flow | $ | 644 |
|
| | |
| Free cash flow conversion | 126 | % |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)
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| | | | | | | | | | | | | | | |
| For the Three Months Ended September 30, 2015 | % F(U) vs. prior year |
| Dollars in millions | Total Revenue | Operating Income | Operating Margin | | Total Revenue | Organic Revenue | Operating Margin |
| Automotive OEM | $ | 612 |
| $ | 156 |
| 25.4 | % | | (3.0 | )% | 5.2 | % | 2.0 | % |
| Test & Measurement and Electronics | 490 |
| 82 |
| 16.6 | % | | (16.4 | )% | (11.3 | )% | (2.1 | )% |
| Food Equipment | 551 |
| 144 |
| 26.3 | % | | (4.2 | )% | 3.1 | % | 3.2 | % |
| Polymers & Fluids | 423 |
| 80 |
| 19.0 | % | | (13.6 | )% | (3.0 | )% | (1.2 | )% |
| Welding | 396 |
| 98 |
| 24.8 | % | | (13.7 | )% | (10.3 | )% | (1.4 | )% |
| Construction Products | 409 |
| 94 |
| 23.1 | % | | (8.1 | )% | 3.7 | % | 4.2 | % |
| Specialty Products | 479 |
| 115 |
| 24.0 | % | | (6.5 | )% | (0.1 | )% | 2.7 | % |
| Intersegment | (6 | ) | — |
| — | % | | — | % | — | % | — | % |
| Total Segments | 3,354 |
| 769 |
| 22.9 | % | | (9.2 | )% | (1.7 | )% | 1.2 | % |
| Unallocated | — |
| (8 | ) | — | % | | — | % | — | % | — | % |
| Total Company | $ | 3,354 |
| $ | 761 |
| 22.7 | % | | (9.2 | )% | (1.7 | )% | 1.8 | % |
|
| | | | | | | | | | | | | | | |
| For the Nine Months Ended September 30, 2015 | % F(U) vs. prior year |
| Dollars in millions | Total Revenue | Operating Income | Operating Margin | | Total Revenue | Organic Revenue | Operating Margin |
| Automotive OEM | $ | 1,914 |
| $ | 478 |
| 25.0 | % | | (2.8 | )% | 6.0 | % | 1.5 | % |
| Test & Measurement and Electronics | 1,469 |
| 232 |
| 15.8 | % | | (11.6 | )% | (5.9 | )% | 0.3 | % |
| Food Equipment | 1,564 |
| 370 |
| 23.7 | % | | (3.7 | )% | 3.7 | % | 3.2 | % |
| Polymers & Fluids | 1,310 |
| 262 |
| 20.0 | % | | (11.2 | )% | (1.7 | )% | 1.2 | % |
| Welding | 1,255 |
| 326 |
| 26.0 | % | | (9.9 | )% | (6.5 | )% | (0.1 | )% |
| Construction Products | 1,209 |
| 241 |
| 19.9 | % | | (7.4 | )% | 4.0 | % | 2.5 | % |
| Specialty Products | 1,427 |
| 334 |
| 23.4 | % | | (9.2 | )% | (3.1 | )% | 1.2 | % |
| Intersegment | (18 | ) | — |
| — | % | | — | % | — | % | — | % |
| Total Segments | 10,130 |
| 2,243 |
| 22.1 | % | | (7.7 | )% | (0.3 | )% | 1.4 | % |
| Unallocated | — |
| (55 | ) | — | % | | — | % | — | % | — | % |
| Total Company | $ | 10,130 |
| $ | 2,188 |
| 21.6 | % | | (7.7 | )% | (0.3 | )% | 1.5 | % |
