ITW Reports Record Third Quarter 2016 Financial Results

• GAAP EPS of $1.50 (+8%)
  
• Record quarterly operating margin of 23.1% (23.9% excluding EF&C acquisition dilution)
• Record quarterly operating income of $808 million (+6%)
• Record after-tax ROIC of 23% (+140 basis points vs. year ago)
• Total revenue +4%, Organic revenue +2% (including ~1% negative PLS impact)
• FCF of 101% of net income
• Raising full-year 2016 GAAP EPS guidance mid-point

GLENVIEW, Ill., Oct. 20, 2016 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE:ITW) today reported third quarter 2016 diluted earnings per share (EPS) of $1.50, an 8% increase compared to the year-ago period. Currency translation reduced EPS by $0.02 in the quarter. Operating margin increased 40 basis points to 23.1%, including 80 basis points of margin dilution from the third quarter 2016 acquisition of Engineered Fasteners & Components (EF&C). Excluding the EF&C dilution impact, third quarter operating margin was 23.9%. Operating income of $808 million was up 6%, and after-tax return on invested capital increased by 140 basis points to 23%. Organic revenue increased 2% and the company’s ongoing Product Line Simplification (PLS) activities reduced organic revenue growth by approximately 1 percentage point.

"The ITW team delivered another quarter of quality execution and earnings growth marked by all-time record operating income and continued strong margin expansion driven by our Enterprise Strategy initiatives. In addition, continued progress in executing our pivot to growth in combination with our diversified portfolio of seven highly differentiated businesses allowed us to deliver positive organic growth in the third quarter despite a macro environment that remains challenging,” said E. Scott Santi, Chairman and Chief Executive Officer.

Third Quarter Highlights

• Total revenue was $3.5 billion, an increase of 4%. Organic revenue grew 2% with 1% growth in North America and 3% in International.
• Operating margin improved 40 basis points to 23.1%, an all-time record for the company, as enterprise initiatives contributed 120 basis points. The acquisition of EF&C diluted operating margin by 80 basis points. Excluding the EF&C dilution impact, third quarter operating margin was 23.9%.
• Operating income grew 6% to an all-time quarterly record of $808 million.
• GAAP EPS of $1.50 increased 8% due to strong margin performance. Currency translation reduced EPS by $0.02 in the quarter.
• After-tax return on invested capital was 23%, an all-time high and an increase of 140 basis points.
• Free cash flow was solid at 101% of net income. Share repurchases totaled $500 million and the company announced an 18% dividend increase on August 5, 2016.
• Six of seven segments achieved positive organic revenue growth as Automotive OEM and Test & Measurement/Electronics both grew 7%, Construction Products grew 2%, Polymers & Fluids and Food Equipment Group both grew 1% and Specialty Products grew 0.1%.  Welding declined by 9%.
• All seven segments achieved operating margin at or above 21% with Food Equipment at 27.4%, Welding at 26.5%, Specialty Products at 26.1%, Automotive OEM at 21.8% (25.5% excluding EF&C), Construction at 22.6%, Test & Measurement/Electronics and Polymers & Fluids both at 21%.

2016 Guidance

ITW is raising its 2016 full-year GAAP EPS guidance range to $5.56 to $5.66, a year-over-year increase of 9% at the mid-point. Consistent with prior guidance the full-year organic growth forecast is 1 to 2% and includes approximately 1 percentage point of PLS impact. Operating margin is forecast to exceed 22.5%.

For the fourth quarter 2016, the company expects GAAP EPS to be in a range of $1.31 to $1.41, an increase of 11% at the mid-point. Organic revenue is forecast to be 0 to 2%, and operating margin to be approximately 21.5%. Guidance is based on current foreign exchange rates.

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, after-tax return on invested capital and the expected impact of acquisitions on financial results. 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 and Form 10-Q for the second quarter of 2016.

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 more than 51,000 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.

Investors Contact: Mike Drazin 224.661.7433 mdrazin@itw.com
Media Contact: Mallory Ramp 224.661.7431 mramp@itw.com