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  • GAAP EPS of $1.29 up 7 percent, up 10 percent excluding currency
  • Operating margin of 22.1 percent, up 120 basis points driven by ITW’s Enterprise Initiatives
  • Organic revenue grew 1 percent, 2 percent excluding Product Line Simplification
  • Raising full-year 2016 guidance by $0.05 at the mid-point

GLENVIEW, Ill., April 20, 2016 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE:ITW) today reported first quarter 2016 diluted earnings per share (EPS) of $1.29, a 7 percent increase compared to the year-ago period. Operating margin increased 120 basis points to 22.1 percent and organic revenue increased 1 percent.  The company’s ongoing Product Line Simplification (PLS) activities reduced organic revenue growth by 1 percentage-point.

"We are pleased with ITW’s strong start to 2016,” said E. Scott Santi, Chairman and Chief Executive Officer. "In a challenging environment, the company continued to deliver meaningful improvement in all of our key performance metrics: organic growth, EPS, operating margin, return on invested capital, and free cash flow.  Consistent with our strategy, we continue to execute the steps necessary to position the company to deliver solid above-market organic growth with best-in-class margins and returns.  In the current economic environment and over the long-term, ITW’s unique business model and our proven track record of operational execution position us very well for continued differentiated performance.”

First Quarter Highlights

  • GAAP EPS increased 7 percent to $1.29.  Excluding $(0.04) impact from foreign currency translation, EPS would have been up 10 percent. 
  • Operating margin increased 120 basis points to a first quarter record of 22.1 percent as Enterprise Initiatives contributed 130 basis points.
  • Organic revenue grew 1 percent as North America grew 2 percent and International declined 1 percent.  Consumer-facing businesses grew 3 percent and Industrial-facing businesses declined 3 percent.  Total revenue was $3.3 billion, a decline of 2 percent due to the impact of foreign currency.
  • After-tax return on invested capital improved 180 basis points to a first quarter record of 21.2 percent.
  • Free cash flow conversion was 90 percent.
  • Five of seven segments achieved positive organic revenue growth as Construction Products grew 5 percent, Automotive OEM, Food Equipment, and Specialty Products all grew 3 percent, and Polymers and Fluids 1 percent.  Welding and Test & Measurement Electronics declined by 9 and 2 percent, respectively.
  • Six of seven segments increased operating margin with Automotive OEM up 140 basis points to 26.4 percent, Food Equipment up 190 basis points to 24.5 percent, Test & Measurement Electronics up 80 basis points to 15.5 percent, Polymers & Fluids up 20 basis points to 20.2 percent, Construction Products up 440 basis points to 21.0 percent, and Specialty Products up 350 basis points to 26.1 percent. Welding declined 300 basis points to 23.9 percent.

2016 Guidance

The company is raising its 2016 full-year GAAP EPS guidance range by $0.05 to $5.40 to $5.60, which represents a 7 percent increase at the mid-point. The organic revenue growth forecast is unchanged at 1 to 3 percent and includes approximately 1 percentage-point of PLS impact. Operating margin is now projected to exceed 22.5 percent, an increase of more than 100 basis points.  Enterprise Initiatives are expected to improve operating margin by more than 100 basis points.

For the second quarter 2016, the company expects GAAP EPS to be in a range of $1.34 to $1.44, an increase of 7 percent at the mid-point, and operating margin to be approximately 22.5 percent.  Organic revenue is forecast to be flat to up 2 percent.

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 diluted earnings per share, organic revenue growth, the impact of product line simplification activities and enterprise initiatives, operating margin and after-tax return on invested capital. 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 2015.

About ITW
ITW (NYSE:ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $13.4 billion in 2015. The company’s seven industry-leading segments 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
 March 31,
In millions except per share amounts2016 2015
Operating Revenue$3,274  $3,342 
Cost of revenue1,896  1,970 
Selling, administrative, and research and development expenses597  616 
Amortization and impairment of intangible assets59  59 
Operating Income722  697 
Interest expense(58) (54)
Other income (expense)4  21 
Income Before Taxes668  664 
Income Taxes200  206 
Net Income$468  $458 
    
Net Income Per Share:   
Basic$1.29  $1.22 
Diluted$1.29  $1.21 
    
Shares of Common Stock Outstanding During the Period:   
Average362.0  376.6 
Average assuming dilution363.9  379.2 


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
 
In millionsMarch 31, 2016 December 31, 2015
Assets   
Current Assets:   
Cash and equivalents$2,448  $3,090 
Trade receivables2,394  2,203 
Inventories1,134  1,086 
Prepaid expenses and other current assets265  341 
Total current assets6,241  6,720 
    
Net plant and equipment1,598  1,577 
Goodwill4,504  4,439 
Intangible assets1,501  1,560 
Deferred income taxes505  346 
Other assets1,088  1,087 
 $15,437  $15,729 
Liabilities and Stockholders' Equity   
Current Liabilities:   
Short-term debt$650  $526 
Accounts payable525  449 
Accrued expenses1,086  1,136 
Cash dividends payable198  200 
Income taxes payable257  57 
Total current liabilities2,716  2,368 
    
Noncurrent Liabilities:   
Long-term debt6,353  6,896 
Deferred income taxes151  256 
Other liabilities995  981 
Total noncurrent liabilities7,499  8,133 
    
Stockholders’ Equity:   
Common stock6  6 
Additional paid-in-capital1,141  1,135 
Income reinvested in the business18,586  18,316 
Common stock held in treasury(13,183) (12,729)
Accumulated other comprehensive income (loss)(1,332) (1,504)
Noncontrolling interest4  4 
Total stockholders’ equity5,222  5,228 
 $15,437  $15,729 


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
 
ADJUSTED AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
 
 Three Months Ended Twelve Months Ended
 March 31, December 31,
Dollars in millions2016 2015 2015
Operating income$722  $697  $2,867 
Tax rate30.0% 31.0% 30.1%
Income taxes(216) (216) (864)
Operating income after taxes$506  $481  $2,003 
      
Invested capital:     
Trade receivables$2,394  $2,367  $2,203 
Inventories1,134  1,187  1,086 
Net plant and equipment1,598  1,624  1,577 
Goodwill and intangible assets6,005  6,231  5,999 
Accounts payable and accrued expenses(1,611) (1,752) (1,585)
Other, net257  169  280 
Total invested capital$9,777  $9,826  $9,560 
      
Average invested capital$9,668  $10,039  $9,943 
Adjustment for Wilsonart (formerly the Decorative Surfaces segment)(111) (130) (123)
Adjusted average invested capital$9,557  $9,909  $9,820 
Adjusted return on average invested capital21.2% 19.4% 20.4%


FREE CASH FLOW (UNAUDITED)
 
 Three Months Ended
 March 31,
Dollars in millions2016 2015
Net cash provided by operating activities$479  $442 
Less: Additions to plant and equipment(57) (83)
Free cash flow$422  $359 
    
Net income$468  $458 
Free cash flow to net income conversion rate90% 78%


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)
 
Three Months Ended March 31, 2016
Dollars in millionsTotal
Revenue
Operating
Income
Operating
Margin
Automotive OEM$656 $173 26.4%
Food Equipment499 122 24.5%
Test & Measurement and Electronics464 72 15.5%
Welding389 93 23.9%
Polymers & Fluids418 84 20.2%
Construction Products384 81 21.0%
Specialty Products468 122 26.1%
Intersegment(4) %
Total Segments3,274 747 22.8%
Unallocated (25)%
Total Company$3,274 $722 22.1%


Q1 2016 vs. Q1 2015 Favorable/(Unfavorable)
Operating RevenueAutomotive
OEM
Food
Equipment
Test &
Measurement
and Electronics
WeldingPolymers
& Fluids
Construction
Products
Specialty
Products
Total
ITW
Organic2.7%3.2%(1.9)%(8.5)%0.6%4.9%3.3%0.7%
Divestitures%%%%(0.9)%(0.1)%%(0.1)%
Translation(2.3)%(2.4)%(2.0)%(1.5)%(4.8)%(4.0)%(1.9)%(2.6)%
Operating Revenue0.4%0.8%(3.9)%(10.0)%(5.1)%0.8%1.4%(2.0)%


Q1 2016 vs. Q1 2015 Favorable/(Unfavorable)
Change in Operating MarginAutomotive
OEM
Food
Equipment
Test &
Measurement and
Electronics
WeldingPolymers &
Fluids
Construction
Products
Specialty
Products
Total
ITW
Operating Leverage30 bps70 bps(60) bps(150) bps20 bps130 bps80 bps20 bps
Changes in Variable Margin & OH Costs100 bps110 bps140 bps(20) bps(40) bps190 bps210 bps90 bps
Total Organic130 bps180 bps80 bps(170) bps(20) bps320 bps290 bps110 bps
Restructuring/Other10 bps10 bps(130) bps40 bps120 bps60 bps10 bps
Total Operating Margin Change140 bps190 bps80 bps(300) bps20 bps440 bps350 bps120 bps
         
Total Operating Margin % * 26.4% 24.5% 15.5% 23.9% 20.2% 21.0% 26.1% 22.1%
         
*Includes unfavorable operating
margin impact of amortization
expense from acquisition-related
intangible assets
10 bps90 bps420 bps150 bps440 bps70 bps170 bps180 bps

 

Investors Contact: Aaron Hoffman 224.661.7429 ahoffman@itw.com
Media Contact: Alison Donnelly 224.661.7427 adonnelly@itw.com

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Source: Illinois Tool Works