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