ITW Reports First Quarter 2016 Financial Results

• 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.