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ITW Reports Second Quarter 2013 Results

Second quarter GAAP diluted earnings per share (EPS) from continuing operations of $1.03 includes 5 cents of EPS dilution for a pension settlement charge.

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GLENVIEW, Ill. – Illinois Tool Works Inc. (ITW) has reported second quarter 2013 diluted earnings per share (EPS) from continuing operations of $1.03. This included 5 cents of EPS dilution due to a pension settlement charge primarily related to the exit of Decorative Surfaces employees from the ITW pension plan. Excluding the pension settlement charge, second quarter adjusted EPS of $1.08 was 6 percent higher than adjusted second quarter 2012 earnings and met the company’s forecast.
 
ITW reported that total revenues of $4.2 billion increased 1 percent, excluding the impact of the Decorative Surfaces segment in 2012 results. Total company organic revenues were flat, nearly 100 basis points lower than the company anticipated at the beginning of the second quarter. By geography, North American organic revenues decreased 1 percent, largely due to modest end-market softness in the industrial packaging, polymers and fluids and welding segments as well as difficult year-over-year comparisons for the electronics assembly business. International revenues increased 1.1 percent, with European organic revenues decreasing only 1 percent. Asia-Pacific organic revenues increased 2.6 percent, with China and Australia/New Zealand organic revenues growing 13.5 percent and 2.1 percent, respectively.
 
The automotive OEM segment led the company in organic growth, increasing 12 percent versus worldwide auto build growth of 3 percent. The segment’s European automotive organic revenues grew 11 percent, outpacing second quarter Europe auto builds that increased 1 percent. North American and China automotive organic revenues increased 7 percent and 40 percent, respectively, compared to auto builds of 6 percent and 11 percent.
 
"Despite some headwinds in certain North American end-markets, ITW continued to generate strong operating margins and returns in the quarter," said E. Scott Santi, president and CEO. "We continue to be very pleased with the early-stage contributions from our enterprise strategy initiatives-portfolio management, business structure simplification and strategic sourcing. These initiatives contributed 60 basis points to our total company operating margin improvement in the second quarter. Also, our adjusted return on invested capital improved 70 basis points to 16.1 percent in the quarter. For the balance of the year, while we remain cautious about end-markets and revenue growth for some of our segments, we continue to have confidence in our ability to meet our profitability forecasts."
 
Incorporating first half actual results, including the 5 cents of EPS dilution for the second quarter pension settlement charge, the company is now forecasting its full-year diluted income per share from continuing operations to be in a range of $4.10 to $4.30. This EPS range assumes a full-year total revenue growth range of 0.5 percent to 2.5 percent. For the 2013 third quarter, the company is forecasting diluted income per share from continuing operations to be in a range of $1.06 to $1.16 and assumes a total revenue growth range of 3 percent to 5 percent.
 

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