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ITW - Illinois Tool Works Inc News Story

$228.4 2.6  1.1%

Last Trade - 29/07/21

Sector
Industrials
Size
Large Cap
Market Cap £51.33bn
Enterprise Value £55.26bn
Revenue £9.27bn
Position in Universe 189th / 7008

ITW Reports Record First Quarter 2021 Results

Fri 30th April, 2021 1:00pm
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* Total revenue of $3.5 billion, an increase of 10%
* Organic growth of 6%, 8% on an equal days’ basis
* Record Q1 financial performance: * Operating income of $905 million, an
increase of 19%
* Operating margin of 25.5%, an increase of 190 basis points
* GAAP EPS of $2.11, an increase of 19%
* After-tax ROIC of 32.1%
 
* Raising full year GAAP EPS guidance by $0.60 to a range of $8.20 to $8.60
per share
GLENVIEW, Ill., April 30, 2021 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc.
(NYSE: ITW) today reported its first quarter 2021 results.

“We saw continued improvement in the demand environment across a broad cross
section of our business portfolio in the first quarter and our teams around
the world responded,” said E. Scott Santi, Chairman and Chief Executive
Officer. “The combination of the ‘Win the Recovery’ actions we initiated
over the course of the past year, the foundational strength of ITW’s 80/20
front-to-back business system, and our continuing progress in executing our
long-term enterprise strategy allowed us to meet our customers’ increasing
needs while delivering excellent profitability leverage, as evidenced by our
19 percent earnings growth, 45 percent incremental margins, and 120 basis
points of margin benefit from enterprise initiatives in the quarter. While a
number of significant issues and uncertainties remain on the path to recovery
from the COVID-19 pandemic globally, I am confident that ITW is
well-positioned to both seize the opportunities and deal with the challenges
that lie ahead as we move through the balance of 2021.”

First Quarter 2021 Results
First quarter revenue of $3.5 billion increased 10 percent versus the prior
year period, as organic revenue grew six percent, or eight percent when
equalizing for one less shipping day in 2021 versus 2020, and foreign currency
translation impact was favorable by four percent. Product Line Simplification
(PLS) activities reduced organic revenue growth by 20 basis points.

GAAP EPS of $2.11 increased 19 percent. Operating income increased 19 percent
to $905 million. Operating margin was 25.5 percent, an increase of 190 basis
points with enterprise initiatives contributing 120 basis points. Free cash
flow was $541 million, 81 percent of net income and in line with typical
seasonality. After-tax return on invested capital improved to 32.1 percent
compared to 27.0 percent in the prior year period. The effective tax rate for
the first quarter was 22.4 percent.

Six of our seven segments delivered strong organic growth in the quarter, led
by Construction Products which was up 13 percent. Test & Measurement and
Electronics was up 11 percent, Polymers & Fluids up nine percent, Automotive
OEM up eight percent, Specialty Products up seven percent, and Welding up six
percent. While organic revenue in Food Equipment was down ten percent in Q1,
we saw meaningful improvement in demand trends sequentially versus the 19
percent decline the business experienced in the fourth quarter of 2020.

2021 Guidance
Projecting full year results based on demand rates exiting the first quarter,
the company now expects full year GAAP EPS of $8.20 to $8.60 per share, an
increase of 27 percent at the midpoint. Organic growth is expected to be in
the range of 10 to 12 percent. Revenue is expected to grow in the range of 12
to 14 percent as foreign currency translation at current exchange rates is
projected to increase revenue by approximately two percent. PLS impact is
forecasted to be approximately 50 basis points. Operating margin is expected
to be in the range of 25 to 26 percent, with enterprise initiatives
contributing approximately 100 basis points. Free cash flow is expected to be
greater than 100 percent of net income. The company plans to repurchase
approximately $1 billion of its shares and expects an effective tax rate of 23
to 24 percent. Guidance excludes any impact from the previously announced
acquisition of the MTS Test & Simulation business.

Non-GAAP Measures 
This earnings release contains certain non-GAAP financial measures. A
reconciliation of these measures to the most directly comparable GAAP measures
is included in the attached supplemental reconciliation schedule. The
estimated guidance of Free Cash Flow conversion rate is based on assumptions
that are difficult to predict, and a reconciliation of estimated Free Cash
Flow to the most directly comparable GAAP measure has been omitted due to the
unreasonable efforts required in connection with such a reconciliation and the
lack of availability of reliable forward-looking cash flow and operating
information.

Forward-looking Statement 
This earnings release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements may
include, without limitation, statements regarding the duration and potential
effects of the COVID-19 pandemic, related government actions and the
company’s strategy in response thereto on the company’s business, expected
impact of tariffs and raw material inflation, product line simplification
activities and enterprise initiatives, future financial and operating
performance, free cash flow, organic and total revenue, operating margin,
price/cost impact, diluted income per share, restructuring expenses and
related benefits, expected dividend payments, expected repatriation, after-tax
return on invested capital, effective tax rates, exchange rates, expected
access to liquidity sources, expected capital allocation, expected timing and
amount of share repurchases, end market economic and regulatory conditions,
potential acquisitions and dispositions and related impact on financial
results, including statements with respect to the anticipated acquisition of
the MTS Test & Simulation business, and the company’s 2021 guidance. These
statements are subject to certain risks, uncertainties, assumptions 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 2020.

About Illinois Tool Works
ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader
with revenues totaling $12.6 billion in 2020. 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’s approximately
43,000 dedicated colleagues around the world thrive in the company’s
decentralized and entrepreneurial culture. www.itw.com



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)

                                                                 Three Months Ended                     
                                                                 March 31,                              
 In millions except per share amounts                            2021                  2020             
 Operating Revenue                                               $    3,544            $    3,228       
 Cost of revenue                                                 2,039                 1,871            
 Selling, administrative, and research and development expenses  566                   560              
 Amortization and impairment of intangible assets                34                    36               
 Operating Income                                                905                   761              
 Interest expense                                                (52         )         (51         )    
 Other income (expense)                                          12                    25               
 Income Before Taxes                                             865                   735              
 Income Taxes                                                    194                   169              
 Net Income                                                      $    671              $    566         
                                                                                                        
 Net Income Per Share:                                                                                  
 Basic                                                           $    2.12             $    1.78        
 Diluted                                                         $    2.11             $    1.77        
                                                                                                        
 Cash Dividends Per Share:                                                                              
 Paid                                                            $    1.14             $    1.07        
 Declared                                                        $    1.14             $    1.07        
                                                                                                        
 Shares of Common Stock Outstanding During the Period:                                                  
 Average                                                         316.6                 318.3            
 Average assuming dilution                                       317.9                 319.7            



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF FINANCIAL POSITION (UNAUDITED)

 In millions                                    March 31, 2021          December 31, 2020       
 Assets                                                                                         
 Current Assets:                                                                                
 Cash and equivalents                           $      2,484            $       2,564           
 Trade receivables                              2,662                   2,506                   
 Inventories                                    1,292                   1,189                   
 Prepaid expenses and other current assets      266                     264                     
 Total current assets                           6,704                   6,523                   
                                                                                                
 Net plant and equipment                        1,746                   1,777                   
 Goodwill                                       4,632                   4,690                   
 Intangible assets                              747                     781                     
 Deferred income taxes                          519                     533                     
 Other assets                                   1,315                   1,308                   
                                                $      15,663           $       15,612          
                                                                                                
 Liabilities and Stockholders' Equity                                                           
 Current Liabilities:                                                                           
 Short-term debt                                $      350              $       350             
 Accounts payable                               589                     534                     
 Accrued expenses                               1,261                   1,284                   
 Cash dividends payable                         360                     361                     
 Income taxes payable                           120                     60                      
 Total current liabilities                      2,680                   2,589                   
                                                                                                
 Noncurrent Liabilities:                                                                        
 Long-term debt                                 7,599                   7,772                   
 Deferred income taxes                          637                     588                     
 Noncurrent income taxes payable                413                     413                     
 Other liabilities                              1,058                   1,068                   
 Total noncurrent liabilities                   9,707                   9,841                   
                                                                                                
 Stockholders’ Equity:                                                                          
 Common stock                                   6                       6                       
 Additional paid-in-capital                     1,378                   1,362                   
 Retained earnings                              23,425                  23,114                  
 Common stock held in treasury                  (19,897        )        (19,659         )       
 Accumulated other comprehensive income (loss)  (1,638         )        (1,642          )       
 Noncontrolling interest                        2                       1                       
 Total stockholders’ equity                     3,276                   3,182                   
                                                $      15,663           $       15,612          



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

 Three Months Ended March 31, 2021                                                             
 Dollars in millions                 Total                 Operating           Operating       
                                     Revenue               Income              Margin          
 Automotive OEM                      $    783              $    189            24.1    %       
 Food Equipment                      451                   96                  21.2    %       
 Test & Measurement and Electronics  552                   157                 28.4    %       
 Welding                             401                   121                 30.3    %       
 Polymers & Fluids                   435                   112                 25.7    %       
 Construction Products               469                   130                 27.6    %       
 Specialty Products                  457                   126                 27.6    %       
 Intersegment                        (4          )         —                   —       %       
 Total Segments                      3,544                 931                 26.3    %       
 Unallocated                         —                     (26       )         —       %       
 Total Company                       $    3,544            $    905            25.5    %       



 Q1 2021 vs. Q1 2020 Favorable/(Unfavorable)                                                                                                                      
 Operating                   Automotive      Food              Test &                Welding     Polymers      Construction         Specialty       Total ITW     
 Revenue                     OEM             Equipment         Measurement                       & Fluids      Products             Products                      
                                                               and Electronics                                                                                    
 Organic                     7.6     %       (9.6  )     %     10.7       %          6.2   %     8.8    %      12.8          %      7.3     %       6.1    %      
 Acquisitions/ Divestitures  —       %       —           %     —          %          —     %     —      %      (0.2   )      %      —       %       —      %      
 Translation                 5.0     %       3.1         %     3.3        %          1.3   %     1.9    %      7.6           %      3.1     %       3.7    %      
 Operating Revenue           12.6    %       (6.5  )     %     14.0       %          7.5   %     10.7   %      20.2          %      10.4    %       9.8    %      



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

 Q1 2021 vs. Q1 2020 Favorable/(Unfavorable)                                                                                                  
 Change in Operating                    Automotive   Food        Test &            Welding  Polymers   Construction   Specialty   Total ITW   
 Margin                                 OEM          Equipment   Measurement                & Fluids   Products       Products                
                                                                 and Electronics                                                              
 Operating Leverage                     130 bps      (260) bps   260 bps           100 bps  200 bps    260 bps        140 bps     120 bps     
 Changes in Variable Margin & OH Costs  170 bps      (50) bps    70 bps            20 bps   (10) bps   170 bps        50 bps      70 bps      
 Total Organic                          300 bps      (310) bps   330 bps           120 bps  190 bps    430 bps        190 bps     190 bps     
 Acquisitions/ Divestitures             —            —           —                 —        —          —              —           —           
 Restructuring/ Other                   20 bps       —           —                 —        20 bps     (10) bps       (60) bps    —           
 Total Operating                        320 bps      (310) bps   330 bps           120 bps  210 bps    420 bps        130 bps     190 bps     
 Margin Change                                                                                                                                
                                                                                                                                              
 Total Operating                        24.1 %       21.2 %      28.4 %            30.3 %   25.7 %     27.6 %         27.6 %      25.5 %      
 Margin % *                                                                                                                                   
                                                                                                                                              
 *Includes unfavorable                  40 bps       70 bps      170 bps           10 bps   290 bps    20 bps         80 bps      100 bps **  
 operating margin impact of                                                                                                                   
 amortization expense from                                                                                                                    
 acquisition-related                                                                                                                          
 intangible assets                                                                                                                            
 ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.08) on GAAP earnings per share for the first quarter of 2021. 



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)

AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)

                                               Three Months Ended                                 
                                               March 31,                                          
 Dollars in millions                           2021                        2020                   
 Operating income                              $     905                   $     761              
 Tax rate                                      22.4              %         23.0              %    
 Income taxes                                  (203         )              (175         )         
 Operating income after taxes                  $     702                   $     586              
                                                                                                  
 Invested capital:                                                                                
 Trade receivables                             $     2,662                 $     2,424            
 Inventories                                   1,292                       1,185                  
 Net assets held for sale                      —                           181                    
 Net plant and equipment                       1,746                       1,704                  
 Goodwill and intangible assets                5,379                       5,237                  
 Accounts payable and accrued expenses         (1,850       )              (1,593       )         
 Other, net                                    (488         )              (590         )         
 Total invested capital                        $     8,741                 $     8,548            
                                                                                                  
 Average invested capital                      $     8,740                 $     8,677            
 After-tax return on average invested capital  32.1              %         27.0              %    



FREE CASH FLOW (UNAUDITED)

                                               Three Months Ended                             Twelve Months Ended         
                                               March 31,                                      December 31,                
 Dollars in millions                           2021                     2020                  2020                        
 Net cash provided by operating activities     $    609                 $    614              $      2,807                
 Less: Additions to plant and equipment        (68       )              (60       )           (236          )             
 Free cash flow                                $    541                 $    554              $      2,571                
                                                                                                                          
 Net income                                    $    671                 $    566              $      2,109                
 Free cash flow to net income conversion rate  81             %         98             %      122                  %      

Investor Relations
Illinois Tool Works
Karen Fletcher
Tel: 224.661.7433
investorrelations@itw.com

(https://www.globenewswire.com/NewsRoom/AttachmentNg/5947b771-ca1d-4d68-8a54-06116e780a4e)



GlobeNewswire, Inc. 2021
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