• ITW Reports Record First Quarter 2021 Results

    Source: Nasdaq GlobeNewswire / 30 Apr 2021 07:00:01   America/Chicago

    • 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 amounts2021 2020
    Operating Revenue$3,544  $3,228 
    Cost of revenue2,039  1,871 
    Selling, administrative, and research and development expenses566  560 
    Amortization and impairment of intangible assets34  36 
    Operating Income905  761 
    Interest expense(52) (51)
    Other income (expense)12  25 
    Income Before Taxes865  735 
    Income Taxes194  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:   
    Average316.6  318.3 
    Average assuming dilution317.9  319.7 


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

    In millionsMarch 31, 2021 December 31, 2020
    Assets   
    Current Assets:   
    Cash and equivalents$2,484  $2,564 
    Trade receivables2,662  2,506 
    Inventories1,292  1,189 
    Prepaid expenses and other current assets266  264 
    Total current assets6,704  6,523 
        
    Net plant and equipment1,746  1,777 
    Goodwill4,632  4,690 
    Intangible assets747  781 
    Deferred income taxes519  533 
    Other assets1,315  1,308 
     $15,663  $15,612 
        
    Liabilities and Stockholders' Equity   
    Current Liabilities:   
    Short-term debt$350  $350 
    Accounts payable589  534 
    Accrued expenses1,261  1,284 
    Cash dividends payable360  361 
    Income taxes payable120  60 
    Total current liabilities2,680  2,589 
        
    Noncurrent Liabilities:   
    Long-term debt7,599  7,772 
    Deferred income taxes637  588 
    Noncurrent income taxes payable413  413 
    Other liabilities1,058  1,068 
    Total noncurrent liabilities9,707  9,841 
        
    Stockholders’ Equity:   
    Common stock6  6 
    Additional paid-in-capital1,378  1,362 
    Retained earnings23,425  23,114 
    Common stock held in treasury(19,897) (19,659)
    Accumulated other comprehensive income (loss)(1,638) (1,642)
    Noncontrolling interest2  1 
    Total stockholders’ equity3,276  3,182 
     $15,663  $15,612 


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

    Three Months Ended March 31, 2021
     Dollars in millionsTotal
    Revenue    		Operating
    Income    		Operating
    Margin
     Automotive OEM$783  $189  24.1%
     Food Equipment451  96  21.2%
     Test & Measurement and Electronics552  157  28.4%
     Welding401  121  30.3%
     Polymers & Fluids435  112  25.7%
     Construction Products469  130  27.6%
     Specialty Products457  126  27.6%
     Intersegment(4) —  —%
     Total Segments3,544  931  26.3%
     Unallocated—  (26) —%
     Total Company$3,544  $905  25.5%


    Q1 2021 vs. Q1 2020 Favorable/(Unfavorable)
     Operating
     Revenue    		Automotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and Electronics    		WeldingPolymers
    & Fluids    		Construction
    Products    		Specialty
    Products    		Total ITW
     Organic7.6%(9.6)%10.7%6.2%8.8%12.8 %7.3%6.1%
     Acquisitions/
     Divestitures    		—%— %—%—%—%(0.2)%—%—%
     Translation5.0%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
     Margin    		Automotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and Electronics    		WeldingPolymers
    & Fluids    		Construction
    Products    		Specialty
    Products    		Total ITW
     Operating Leverage130 bps(260) bps260 bps100 bps200 bps260 bps140 bps120 bps
     Changes in Variable Margin & OH Costs170 bps(50) bps70 bps20 bps(10) bps170 bps50 bps70 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
     Margin Change    		 320 bps (310) bps 330 bps 120 bps 210 bps 420 bps 130 bps 190 bps
             
     Total Operating
     Margin % *    		24.1%21.2%28.4%30.3%25.7%27.6%27.6%25.5%
             
     *Includes unfavorable
     operating margin impact of
     amortization expense from
     acquisition-related
     intangible assets    		 40 bps 70 bps 170 bps 10 bps 290 bps 20 bps 80 bps 100 bps **
     ** 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 millions2021 2020
    Operating income$905   $761  
    Tax rate22.4 % 23.0 %
    Income taxes(203)  (175) 
    Operating income after taxes$702   $586  
        
    Invested capital:   
    Trade receivables$2,662   $2,424  
    Inventories1,292   1,185  
    Net assets held for sale—   181  
    Net plant and equipment1,746   1,704  
    Goodwill and intangible assets5,379   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 capital32.1 % 27.0 %


    FREE CASH FLOW (UNAUDITED)

     Three Months Ended Twelve Months Ended
     March 31, December 31,
    Dollars in millions2021 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 rate81 % 98 % 122 %

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


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