Illinois Tool Works Inc.

Welcome and thank you for joining ITW's 2019 first quarter earnings call. My name is Cheryl and I will be your conference operator today. At this time, all participants have been placed in a listen-only mode. After the speaker's remarks, there will be a question and answer session. For those participating in the Q&A, you will have the opportunity to ask one question and if needed, one follow-up question. As a reminder, this conference call is being recorded. I will now turn the call over to Karen Fletcher, Vice President of Investor Relations. You may begin.

Thank you, Cheryl. Good morning, everyone, and welcome to ITW's first quarter 2019 call. I'm joined by our Chairman and CEO, Scott Santee, along with Senior Vice President and CFO, Michael Larson. During today's call, we will discuss first quarter financial results and provide an update on our 2019 full-year outlook. Slide two is a reminder that this presentation contains our financial forecast for the remainder of the year, as well as other forward-looking statements identified on this slide. We refer you to the company's 2018 Form 10-K for more detail about important risks that could cause actual results to differ materially from our expectations. Also, this presentation uses certain non-GAAP measures, and a reconciliation of those measures to the most comparable GAAP measures is contained in the press release. So, let's turn to slide three, and I'll turn the call over to our Chairman and CEO, Scott Santee.

Scott Santee Thank you, Karen, and good morning, everyone. Overall, we had a solid start to the year, and the first quarter played out about as expected with EPS of $1.81 coming in modestly above the midpoint of our guidance. The ITW team continued to execute well on the things within our control, delivering 100 basis points of benefits from enterprise initiatives and an operating margin of 24.3 percent, excluding 70 basis points of margin impact due to accelerated restructuring investments. We delivered 27.7 percent after-tax return on invested capital and a 21 percent increase in free cash flow. Sales started out a little slow across the board in January before picking up the pace in February and March. Organic revenue was down 1.5% or flat, excluding the impact of one less shipping day in the quarter. Our auto OEM sales declined 6% as auto production in North America, Europe, and China was down a combined 8%. That being said, we are seeing some signs of stabilization in Europe and China auto markets and expect to see some modest improvement in the back half of the year. The 6% decline in auto OEM revenues reduced our Q1 organic growth rate by 1.5% at the enterprise level. One less shipping day was another 1.5%, and PLS was 70 basis points as expected. As we discussed on the last call, we had a pretty heavy restructuring agenda in Q1 as we accelerated our 2019 plans into the first quarter, a significant portion of which was directed at our auto OEM business in Europe in order to adjust our costs to current demand levels. As we also discussed on our January call, we knew that the first quarter, and in fact the first half, had some challenges in terms of year-on-year comparisons. Currency translation accelerated restructuring, a slightly higher tax rate, one less shipping day, tougher organic growth comps, and auto production declines in Europe and China. And that these challenges would dissipate and the operating environment would be much more favorable in the back half of the year. Coming out of Q1, things are playing out largely as we anticipated. We are executing well in our long-term enterprise strategy and on our 2019 operating plan. And as a result, we remain firmly on track to deliver on our full-year EPS and margin improvement guidance. I'll now turn the call over to Michael, who will provide you with some additional detail on our Q1 performance and our outlook for the balance of the year. Over to you, Michael. Thank you, Scott, and good morning.