U.S. markets closed
  • S&P 500

    4,232.60
    +30.98 (+0.74%)
     
  • Dow 30

    34,777.76
    +229.23 (+0.66%)
     
  • Nasdaq

    13,752.24
    +119.39 (+0.88%)
     
  • Russell 2000

    2,271.63
    +30.21 (+1.35%)
     
  • Crude Oil

    64.82
    +0.11 (+0.17%)
     
  • Gold

    1,832.00
    +16.30 (+0.90%)
     
  • Silver

    27.57
    +0.09 (+0.32%)
     
  • EUR/USD

    1.2167
    +0.0098 (+0.82%)
     
  • 10-Yr Bond

    1.5770
    +0.0160 (+1.02%)
     
  • GBP/USD

    1.3990
    +0.0098 (+0.70%)
     
  • USD/JPY

    108.5400
    -0.5450 (-0.50%)
     
  • BTC-USD

    58,893.96
    +601.39 (+1.03%)
     
  • CMC Crypto 200

    1,480.07
    +44.28 (+3.08%)
     
  • FTSE 100

    7,129.71
    +53.54 (+0.76%)
     
  • Nikkei 225

    29,357.82
    +26.45 (+0.09%)
     

ITW Reports Record First Quarter 2021 Results

  • Oops!
    Something went wrong.
    Please try again later.
Illinois Tool Works Inc.
·10 min read
  • Oops!
    Something went wrong.
    Please try again later.
  • 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
Revenue

Operating
Income

Operating
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
Revenue

Automotive
OEM

Food
Equipment

Test &
Measurement
and Electronics

Welding

Polymers
& Fluids

Construction
Products

Specialty
Products

Total ITW

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
Margin

Automotive
OEM

Food
Equipment

Test &
Measurement
and Electronics

Welding

Polymers
& Fluids

Construction
Products

Specialty
Products

Total ITW

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
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 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