Thursday, industrial products and equipment maker Illinois Tool Works Inc. (ITW) posted a loss in its first quarter, fissured by an impairment charge and dramatic slowing in the global economy.
The Glenview, Illinois-based company's first-quarter net loss totaled $39.4 million or $0.08 per share, compared to a profit of $303.6 million or $0.57 per share in the year-ago quarter.
Net loss from continuing operations for the latest quarter was $29.4 million or $0.06 per share, compared to a profit of $369.9 million or $0.70 per share in the same quarter of last year.
Excluding the $0.17 per share impact of impairment and the $0.06 per share of tax charges, income per share from continuing operations amounted to $0.17 in the first quarter.
On average, 15 analysts polled by Thomson Reuters expected the company to report earnings of $0.14 per share. Analysts' estimates typically exclude special items.
Quarterly operating revenues declined to $2.91 billion from the previous year's $3.82 billion, due to the further weakening in first quarter worldwide end markets. Wall Street analysts have a consensus revenue estimate of $2.93 billion for the quarter.
The company said an impairment charge of $90 million and discrete tax charges of $28 million as well as dramatic slowing in world wide end markets and macro economic trends affected the recent quarter's revenues and results from continuing operations.
The company adopted a new accounting rule regarding fair value measurements, as part of its annual goodwill impairment testing in the first quarter. Consequently, an impairment charge of $90 million was recorded, of which $78 million was attributed to goodwill and $12 million related to intangibles. In addition, the Company recorded a tax charge of $28 million during the first quarter related to a reduction in the amount of tax loss carry forwards and additional tax reserves.
Total base revenues fell 23.3% from last year, with North America decreasing 26.7% and international revenues falling 19.5%. Currency translation negatively impacted revenues 7.3%, while acquisitions contributed 6.6% in the quarter.
First-quarter operating margins of 2.0% were 13.2 percentage points lower than the previous year, due to lower base margins of 7.4 percentage points, impairment-related charges of 3.0 percentage points, translation impact of 1.2 percentage points and increased restructuring costs of 1.0 percentage points.
Worldwide revenues for the Power Systems and Electronics segment declined 32.1%, with base revenues decreasing 31.9%. Total worldwide welding base revenues fell 31.3%, while the PC board fabrication business unit's base revenues declined more than 50% in the quarter. Ground support equipment's base revenues grew 15.6% in the quarter. Segment operating margins of 6.2 percent were 15.1 percentage points lower than the year ago period. Impairment negatively impacted margins by 6.0 percentage points, base margins declined 5.1 percentage points and restructuring costs negatively impacted margins by 2.0 percentage points.
Worldwide revenues for the Transportation segment decreased 26.8% in the quarter, with base revenues decreasing 35.5%, hurt by a dramatically lower first quarter North American and international auto builds. Worldwide automotive base revenues plunged 45.2%, with North American auto builds declining 52% and European auto builds falling 44% in the quarter.
The company's Food Equipment segment witnessed 15.4% downturn in worldwide revenues, with base revenues down 9.2%. North American food equipment base revenues fell 13.7% and international food equipment base revenues dropped 5.5% in the quarter.
Looking forward to the second quarter, the company expects earnings from continuing operations to be in the range of $0.25 - $0.37 per share, with revenue growth of 5% - 11% versus last year. Analysts are forecasting earnings of $0.36 per share, on revenues of $3.33 billion for the second quarter.
Due to ongoing broad based weakness in worldwide end markets, the company has limited its visibility and said it expects to provide full-year guidance "when longer-term visibility becomes more reliable."
Among others in the sector, Electrical products and tool maker Cooper Industries Ltd. (CBE), in January, said it has doubled its workforce-reduction to more than 2,200, from the prior announced layoff of 1,000 employees, due to deepening deterioration in the economy. The company said it expects first-quarter earnings from continuing operations to range between $0.45 and $0.65 per share, with revenue declines in the range of 10% - 15%. Cooper is scheduled to release first-quarter results on April 23.
ITW shares, which have been trading between $25.60 and $55.59 in the past 52 weeks, is currently trading at $33.51, up $2.59 or 8.31%.
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