GLENVIEW, Ill. – Illinois Tool Works Inc. (ITW) has reported first quarter 2013 diluted income per share from continuing operations of $1.01, an increase of 6 percent versus 2012 first quarter earnings of 95 cents.
Excluding the one-time impact of a $30 million pretax gain associated with the acquisition of the majority interest in a consumer packaging joint venture, adjusted EPS of 96 cents was 8 percent higher than pro forma first quarter 2012 earnings. The adjusted EPS of 96 cents also was 1 cent higher than the company’s original mid-point forecast issued in January 2013.
As part of the first quarter 2013, results of several existing and previously divested businesses were reclassified to discontinued operations. These businesses represent more than $600 million in annual revenues and reduced first quarter 2013 diluted income per share from continuing operations by 1 cent. The company expects an additional 6 cents of EPS dilution from these discontinued businesses for the remainder of the year. Also, as previously announced, the company has realigned its reporting segments and has restated segment results for prior periods.
Highlights of the 2013 first quarter versus the prior-year period included:
*Total revenues of $4 billion declined 8 percent due to the Decorative Surfaces segment results included in 2012 and weaker than expected organic revenue activity. Excluding the impact of Decorative Surfaces, total revenues declined 1.8 percent. Total company organic revenues declined 2.7 percent in the first quarter, a result that was lower than the company’s original forecast in January 2013. By geography, North American organic revenues decreased 1.9 percent and international organic revenues declined 3.5 percent. While European organic revenues fell 5.8 percent, Asia Pacific organic revenues grew 0.5 percent. Notably, China organic revenues increased 10.2 percent.
*The Automotive OEM segment led the company in organic growth, increasing 4 percent. North American automotive organic revenues grew 3 percent, outpacing a North American auto build increase of 1 percent. While European organic revenues declined 2 percent, European auto builds fell 8 percent. Asia Pacific organic revenues increased 24 percent as a result of ITW’s growing product penetration amid a robust auto build environment in China.
*Total company operating margins were 16.5 percent, a 60 basis point improvement versus the year-ago period. Notably, six of the company’s eight reporting segments produced gains in operating margin.
"Despite softer than anticipated demand in many of our end-markets, we delivered very solid operating results in the quarter," said E. Scott Santi, president and CEO. "Our above-forecast EPS results and 60 basis point year-on-year operating margin improvement were due to strong contributions from our operating leadership and the early stage benefits of our enterprise strategy initiatives. While the capital goods portion of our overall product portfolio was particularly soft early in the year, we were pleased to see noticeable improvement in demand rates for these products both sequentially and year over year as we moved through the quarter.
In addition, we continued to make significant progress with respect to our portfolio management initiative in the quarter as we announced the strategic review of our Industrial Packaging segment and moved more than $600 million of other non-core revenues to discontinued operations. With these two moves, we have largely completed the process of identifying the core businesses that will constitute our faster growing and more profitable portfolio moving forward."
Incorporating first quarter actual results, the company is now forecasting full-year organic growth to be in a range of 0 percent to 2 percent versus full-year 2012. The company is maintaining its $4.25 mid-point forecast for full-year diluted income per share from continuing operations. The full-year diluted income per share from continuing operations forecast range is now $4.15 to $4.35 and assumes a total revenue growth range of 2 percent to 4 percent. For the 2013 second quarter, the company is forecasting diluted income per share from continuing operations to be in a range of $1.04 to $1.12 and assumes a total revenue growth range of 2.5 percent to 3.5 percent. The full-year and second quarter forecasts include the EPS dilution of discontinued operations described above.
