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updated: 10/23/2012 11:14 AM

Weak global markets affect ITW's 3Q revenues

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GLENVIEW -- Illinois Tool Works reported third quarter 2012 diluted income per share from continuing operations of $1.12, a 12 percent increase versus the 2011 third quarter.

Excluding the impact of divestiture gains in the third quarter, diluted income per share from continuing operations totaled $1.09, the company said in a statement. While third quarter total revenues and organic revenues were lower than anticipated due to the negative impact of currency translation and slowing demand in a variety of international end markets, operating margins of 16.9 percent outperformed expectations and reflected improvement across all segments.

Total revenues for the quarter was $4.501 billion, a decrease of 1.7 percent. The company said international currency translations negatively affected revenues by 4.1 percent largely based on a weaker Euro versus last year. Organic or base revenues grew 0.9 percent, with North American organic revenues increasing 3.9 percent and international organic revenues declining 2.7 percent. European and Asia Pacific organic revenues decreased 3.7 percent and 1.5 percent, respectively. Acquisitions net of divestitures added 1.4 percent to revenues.

Operating income of $763 million increased 6.8 percent. Operating margins of 16.9 percent improved 130 basis points due to favorable raw material price/cost trends as well as effective management of overhead costs within the businesses.

Total revenues for the Power Systems and Electronics segment increased 4.6 percent. Segment organic revenues grew 4.5 percent due to contributions from both the electronics and welding businesses. Total organic revenues for electronics grew 10.5 percent due to strong contributions from the electronic assembly businesses. Organic revenues for worldwide welding increased 1.9 percent, with North American welding growing 4.6 percent and international welding decreasing 5.6 percent. Segment operating margins of 22.0 percent improved 220 basis points.

ITW returned nearly $600 million to shareholders via share repurchases of $416 million and dividends paid of $169 million.

"Even with end markets slowing in a number of international geographies, we were pleased by the consistent level of end market demand in North America," said E. Scott Santi, president and acting chief executive officer. "From a profitability standpoint, we continued to focus on our differentiated 80/20 business process and, as a result, we produced very strong operating margin gains in the quarter. We also continued to return significant levels of cash to our shareholders through our share repurchase and dividend programs."

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