10-KPeriod: FY2010

ILLINOIS TOOL WORKS INC Annual Report, Year Ended Dec 31, 2010

Filed February 28, 2011For Securities:ITW

Summary

Illinois Tool Works Inc. (ITW) reported strong performance in 2010, demonstrating a significant rebound following the 2009 economic downturn. The company's diverse portfolio, spanning eight reportable segments including Transportation, Industrial Packaging, and Food Equipment, showcased resilience. Operating revenues grew by 14.4% to $15.87 billion, and operating income saw a substantial increase of 70.0% to $2.36 billion, indicating effective cost management and operational leverage as end markets recovered. The company's "80/20 business process" continues to be a cornerstone of its strategy, focusing on core value drivers to simplify operations and improve margins. Despite global economic uncertainties and foreign currency fluctuations, ITW's decentralized structure allowed for rapid response to market dynamics. The company also maintained a robust free operating cash flow of $1.27 billion, supporting its commitment to shareholder returns through dividends and share repurchases.

Financial Highlights

54 data points
Beta

Revenue

$15.42B

35.2% Gross Margin

Net Income

$1.50B

9.7% Net Margin

EPS (Diluted)

$2.99

Total Assets

$16.41B

Cash & Equivalents

$1.19B

Free Cash Flow

$1.20B

Financial Statements
Beta
Revenue$15.42B
Cost of Revenue$10.00B
Gross Profit$5.42B
R&D Expenses$213.00M
Operating Income$2.25B
Interest Expense$175.00M
Net Income$1.50B
EPS (Basic)$3.00
EPS (Diluted)$2.99
Shares Outstanding (Basic)500.80M
Shares Outstanding (Diluted)503.35M

Key Highlights

  • 1Revenue recovery in 2010 with a 14.4% increase to $15.87 billion, driven by a rebound in base business revenues across multiple segments.
  • 2Significant operating income growth of 70.0% to $2.36 billion, benefiting from operating leverage and improved base margins.
  • 3The Transportation segment showed a strong 22.5% revenue increase, fueled by automotive production recovery.
  • 4Industrial Packaging and Power Systems & Electronics segments also experienced notable revenue growth, reflecting improved industrial activity.
  • 5The company generated $1.27 billion in free operating cash flow, demonstrating strong cash generation capabilities.
  • 6Strategic acquisitions contributed positively to revenue growth, particularly in the Transportation and Polymers & Fluids segments.
  • 7ITW maintained a healthy return on average invested capital (ROIC) of 15.3% in 2010, an improvement from 10.7% in 2009.

Frequently Asked Questions

The primary driver for ITW's improved performance in 2010 was the recovery of its end markets following the global recession of 2009. This led to a significant increase in base business revenues across most segments, which in turn generated operating leverage and improved margins.

ITW attributes its success to its "80/20 business process," a strategy focused on identifying and prioritizing the most important elements of its business to drive value and reduce complexity. This, combined with a decentralized operating structure, allowed individual businesses to respond quickly to market changes and maintain a focus on customer needs.

The "All Other" segment is a consolidation of various operating segments not included in the seven primary segments. In 2010, this segment showed strong performance with a 16.5% increase in revenue to $3.22 billion and a 46.5% increase in operating income, indicating broad-based improvement across its diverse sub-segments.

Key risks include potential interruptions or slowdowns in economic recovery across its served markets, political and economic risks associated with its global operations (including currency fluctuations), the potential negative impact of acquisitions, and risks related to raw material price increases and supply shortages.