ITW Reports Fourth Quarter 2013 Financial Results

              ITW Reports Fourth Quarter 2013 Financial Results

- Fourth quarter diluted EPS from continuing operations of $0.92, higher than
Company midpoint guidance of $0.89

- Operating margins of 17.7 percent up 260 basis points versus year-ago
period; Enterprise initiatives contribute 110 basis points

- Organic revenues up 3 percent

- Company reiterates 2014 full-year EPS guidance range of $4.30 to $4.50, up
18 percent to 24 percent

PR Newswire

GLENVIEW, Ill., Jan. 28, 2014

GLENVIEW, Ill., Jan. 28, 2014 /PRNewswire/ -- Illinois Tool Works Inc. (NYSE:
ITW) today reported fourth quarter diluted earnings per share (EPS) from
continuing operations of $0.92, three cents higher than the midpoint of the
Company's forecast. The better-than-expected EPS was driven by strong
contributions from the Company's enterprise initiatives as well as improving
organic revenue growth from both international and North American geographies.

Key highlights for the 2013 fourth quarter financial results versus the
prior-year period include:

  oTotal Company revenues were $3.55 billion while operating income totaled
    $628 million. Excluding the impact of Decorative Surfaces 2012 results,
    Company operating revenues increased 4.8 percent and operating income grew
    22.7 percent. Organic revenues increased 2.8 percent, with international
    growing 3.3 percent and North America growing 2.6 percent.
    Internationally, Europe showed further stabilization as organic revenues
    grew 1.8 percent and Asia Pacific grew 4.1 percent.
  oFourth quarter 2013 EPS of $0.92 was 43 percent higher than the prior-year
    period.
  oFourth quarter operating margins of 17.7 percent were 260 basis points
    higher, with enterprise initiatives contributing 110 basis points.
  oFourth quarter free operating cash flow was at 147 percent of net income.
  oFourth quarter segment highlights include:
  oAutomotive OEM grew organic revenues 11.2 percent as increasing product
    penetration with key global customers resulted in revenue growth
    outperforming worldwide auto builds by 5 percentage points. Operating
    margins improved 160 basis points to 20.4 percent.
  oFood Equipment's organic revenues grew 4.2 percent largely due to solid
    equipment and service growth in North America. Operating margins improved
    250 basis points to 19.5 percent.

"We were pleased with the Company's performance in the quarter and for the
year," said Scott Santi, president and chief executive officer. "In the
quarter, we continued to deliver meaningful improvement in our earnings per
share, operating margin, and return on invested capital metrics. In addition,
we saw modest improvement in the demand environment in a number of our key end
markets which drove a noticeable sequential improvement in the Company's
organic growth rate in the quarter."

"For full-year 2013, we grew earnings per share 13 percent, expanded operating
margins by 100 basis points to 17.8 percent, improved after-tax return on
invested capital by 180 basis points to 16.3 percent, and returned $2.9
billion to shareholders in the form of dividends and share repurchases. As a
result of the ongoing execution of our enterprise strategy initiatives, the
Company is well positioned to deliver another year of strong progress towards
our enterprise strategy performance goals across a range of macro-economic
conditions in 2014."

Comparisons to the Company's 2012 financial results exclude the impacts of the
divested Decorative Surfaces segment. Reconciliations of GAAP to non-GAAP
results are included in the attached exhibits.

The Company is reiterating its full-year 2014 earnings forecast that it
presented in December at its annual investor and analyst day in New York City.
The Company continues to expect full-year 2014 EPS to be in a range of $4.30
to $4.50. This EPS range assumes a full-year total revenue growth range of 2
percent to 4 percent and full-year organic growth of 2 percent to 3 percent.
For the 2014 first quarter, the Company is forecasting EPS to be in a range of
$0.93 to $1.01 and expects total revenue growth in a range of 3 percent to 6
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, organic revenue growth,
operating margin improvement and diluted income per share from continuing
operations. 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 2012 Form 10-K and
Form 10-Q for the quarter ended September 30, 2013.

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  Twelve Months Ended
(In millions except per share amounts) December31,        December31,
                                       2013       2012     2013       2012
Operating Revenues                     $  3,554   $ 3,484  $  14,135  $ 14,791
Cost of revenues                       2,173      2,177    8,554      9,134
Selling, administrative, and research  689        721      2,815      2,928
and development expenses
Amortization of intangible assets      64         62       250        252
Impairment of goodwill and other       —          —        2          2
intangible assets
Operating Income                       628        524      2,514      2,475
Interest expense                       (60)       (61)     (239)      (213)
Gain on sale of interest in Decorative —          933      —          933
Surfaces
Other income (expense)                 5          (20)     72         11
Income from Continuing Operations      573        1,376    2,347      3,206
Before Income Taxes
Income Taxes                           166        455      717        973
Income from Continuing Operations      407        921      1,630      2,233
Income from Discontinued Operations    1          58       49         637
Net Income                             $  408     $ 979    $  1,679   $ 2,870
Income Per Share from Continuing
Operations:
Basic                                  $  0.93    $ 2.00   $  3.65    $ 4.75
Diluted                                $  0.92    $ 1.99   $  3.63    $ 4.72
Income Per Share from Discontinued
Operations:
Basic                                  $  —       $ 0.12   $  0.11    $ 1.36
Diluted                                $  —       $ 0.12   $  0.11    $ 1.35
Net Income Per Share:
Basic                                  $  0.93    $ 2.13   $  3.76    $ 6.11
Diluted                                $  0.93    $ 2.11   $  3.74    $ 6.06
Shares of Common Stock Outstanding
During the Period:
Average                                437.7      459.7    446.2      469.8
Average assuming dilution              440.9      463.1    449.3      473.2
FREE OPERATING CASH FLOW               Three Months Ended  Twelve Months Ended
                                       December31,        December31,
(In millions)                          2013       2012     2013       2012
Net cash provided by operating         $  708     $ 605    $  2,528   $ 2,072
activities
Less: Additions to plant and equipment (111)      (108)    (368)      (382)
Free operating cash flow               $  597     $ 497    $  2,160   $ 1,690





ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF FINANCIAL POSITION (UNAUDITED)
(In millions)                             December31,  December31,
                                          2013          2012
ASSETS
Current Assets:
Cash and equivalents                      $   3,618     $   2,779
Trade receivables                         2,365         2,742
Inventories                               1,247         1,585
Deferred income taxes                     384           332
Prepaid expenses and other current assets 366           522
Assets held for sale                      1,836         —
Total current assets                      9,816         7,960
Net Plant and Equipment                   1,709         1,994
Goodwill                                  4,886         5,530
Intangible Assets                         1,999         2,258
Deferred Income Taxes                     359           391
Other Assets                              1,197         1,176
                                          $   19,966    $   19,309
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt                           $   3,551     $   459
Accounts payable                          634           676
Accrued expenses                          1,272         1,392
Cash dividends payable                    181           —
Income taxes payable                      69            116
Deferred income taxes                     10            8
Liabilities held for sale                 317           —
Total current liabilities                 6,034         2,651
Noncurrent Liabilities:
Long-term debt                            2,793         4,589
Deferred income taxes                     507           244
Other liabilities                         923           1,255
Total noncurrent liabilities              4,223         6,088
Stockholders' Equity:
Common stock                              6             5
Additional paid-in-capital                1,046         1,012
Income reinvested in the business         14,943        13,973
Common stock held in treasury             (6,676)       (4,722)
Accumulated other comprehensive income    384           293
Noncontrolling interest                   6             9
Total stockholders' equity                9,709         10,570
                                          $   19,966    $   19,309



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATIONS
(In
millions
except per Three Months Ended                       Three Months Ended
share
amounts)
           December31, 2013                        December31, 2012
           Total     Operating  Operating  Diluted  Total     Operating  Operating  Diluted
           Revenue   Income     Margin     EPS      Revenue   Income     Margin     EPS
Actual
Results    $ 3,554   $  628     17.7%      $  0.92  $ 3,484   $  524     15.0%      $  1.99
(GAAP)
Decorative
Surfaces   —         —          —          —        —         —          —          1.37
net gain
Decorative
Surfaces
equity     —         —          —          —        —         —          —          (0.04)
interest
(2012)
Decorative
Surfaces   —         —          —          —        93        12         12.9%      0.01
operating
results
Adjusted
Results    $ 3,554   $  628     17.7%      $  0.92  $ 3,391   $  512     15.1%      $  0.65
(Non-GAAP)
Q4 2013
Growth vs. 4.8%      22.7%      260 bps    42.9%
2012
(Non-GAAP)
(In
millions
except per Twelve Months Ended                      Twelve Months Ended
share
amounts)
           December31, 2013                        December31, 2012
           Total     Operating  Operating  Diluted  Total     Operating  Operating  Diluted
           Revenue   Income     Margin     EPS      Revenue   Income     Margin     EPS
Actual
Results    $ 14,135  $  2,514   17.8%      $  3.63  $ 14,791  $  2,475   16.7%      $  4.72
(GAAP)
Decorative
Surfaces   —         —          —          —        —         —          —          1.34
net gain
Decorative
Surfaces
equity     —         —          —          —        —         —          —          (0.04)
interest
(2012)
Decorative
Surfaces   —         —          —          —        921       143        15.5%      0.21
operating
results
Adjusted
Results    $ 14,135  $  2,514   17.8%      $  3.63  $ 13,870  $  2,332   16.8%      $  3.21
(Non-GAAP)
FY 2013
Growth vs. 1.9%      7.8%       100 bps    13.1%
2012
(Non-GAAP)





ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

ADJUSTED RETURN ON AVERAGE INVESTED CAPITAL
                                      Three Months Ended  Twelve Months Ended
(Dollars in millions)                 December31,        December31,
                                      2013      2012      2013       2012
Operating income                      $ 628     $ 524     $  2,514   $ 2,475
Adjustment for Decorative Surfaces    —         (12)      —          (143)
Adjusted operating income             628       512       2,514      2,332
Tax rate (as adjusted for discrete    29.0%     30.4%     28.8%      29.2%
tax charges in 3Q 2013 and 4Q 2012)
Taxes                                 (182)     (156)     (724)      (681)
Adjusted operating income after taxes $ 446     $ 356     $  1,790   $ 1,651
Invested capital:
Trade receivables                     $ 2,365   $ 2,742   $  2,365   $ 2,742
Inventories                           1,247     1,585     1,247      1,585
Net plant and equipment               1,709     1,994     1,709      1,994
Goodwill and intangible assets        6,885     7,788     6,885      7,788
Accounts payable and accrued expenses (1,906)   (2,068)   (1,906)    (2,068)
Net assets held for sale              1,519     —         1,519      —
Other, net                            616       798       616        798
Total invested capital                $ 12,435  $ 12,839  $  12,435  $ 12,839
Average invested capital              $ 12,511  $ 13,022  $  12,605  $ 13,160
Adjustment for Decorative Surfaces    (165)     (232)     (169)      (274)
Adjustment for Industrial Packaging   (1,469)   (1,494)   (1,477)    (1,504)
Adjusted average invested capital     $ 10,877  $ 11,296  $  10,959  $ 11,382
Annualized return on average invested 16.4%     12.6%     16.3%      14.5%
capital



A reconciliation of the effective tax rate to the adjusted tax rate excluding
the discrete tax charge is as follows:
(Dollars in Three Months Ended                  Twelve Months Ended
millions)
            December31,                        December31,
            2013               2012             2013            2012
            Income     Tax     Income   Tax     Income  Tax     Income  Tax
            Taxes      Rate    Taxes    Rate    Taxes   Rate    Taxes   Rate
As reported $   166    29.0%   $  455   33.0%   $  717  30.6%   $  973  30.3%
Discrete    —          —%      (36)     (2.6)%  (40)    (1.8)%  (36)    (1.1)%
tax charges
As adjusted $   166    29.0%   $  419   30.4%   $  677  28.8%   $  937  29.2%



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT DATA (UNAUDITED)
Three Months Ended December 31, 2013             % F(U) vs. prior year
(Dollars in       Total     Operating  Operating Total    Organic  Operating
millions)         Revenue   Income     Margin    Revenue  Revenue  Margin
Test &
Measurement and   $ 559     $  88      15.7%     1.2%     1.1%     250 bps
Electronics
Automotive OEM    604       123        20.4%     12.4%    11.2%    160 bps
Polymers & Fluids 472       76         16.0%     (2.4)%   (1.2)%   20 bps
Food Equipment    547       107        19.5%     9.7%     4.2%     250 bps
Welding           447       103        23.1%     1.7%     —%       10 bps
Construction      422       58         13.8%     (0.1)%   1.9%     310 bps
Products
Specialty         510       91         17.9%     9.1%     1.2%     50 bps
Products
Intersegment      (7)       —          —%        —%       —%       —
Total Segments    3,554     646        18.2%     4.8%     2.8%     160 bps
Decorative        —         —          —%        (100)%   (100)%   —
Surfaces
Unallocated       —         (18)       —%        —%       —%       —
Total Company     $ 3,554   $  628     17.7%     2.0%     2.8%     270 bps
Twelve Months Ended December 31, 2013            % F(U) vs. prior year
(Dollars in       Total     Operating  Operating Total    Organic  Operating
millions)         Revenue   Income     Margin    Revenue  Revenue  Margin
Test &
Measurement and   $ 2,176   $  321     14.8      (5.3)%   (6.0)%   -10 bps
Electronics
Automotive OEM    2,396     490        20.5      10.4%    9.5%     110 bps
Polymers & Fluids 1,993     335        16.8      (3.4)%   (2.9)%   100 bps
Food Equipment    2,047     385        18.8      5.5%     1.9%     170 bps
Welding           1,837     464        25.3      (0.4)%   (2.3)%   -10 bps
Construction      1,717     238        13.9      (0.5)%   0.5%     230 bps
Products
Specialty         2,007     408        20.3      7.3%     1.3%     80 bps
Products
Intersegment      (38)      —          —         —%       —%       —
Total Segments    14,135    2,641      18.7      1.9%     0.2%     100 bps
Decorative        —         —          —         (100)%   (100)%   —
Surfaces
Unallocated       —         (127)      —         —%       —%       —
Total Company     $ 14,135  $  2,514   17.8      (4.4)%   0.2%     110 bps



SOURCE Illinois Tool Works Inc.

Website: http://www.itw.com
Contact: John Brooklier, 847-657-4104, jbrooklier@itw.com
 
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