01—Abstract
Summary
Summary of the 10-K filed February 11, 2022. Cited figures are marked; the original filing is the authoritative source.
Illinois Tool Works Inc. (ITW) reported strong performance in its 2021 10-K filing, demonstrating resilience and growth despite ongoing global supply chain challenges and the lingering effects of the COVID-19 pandemic.
The company's diversified portfolio across seven key segments, including Automotive OEM, Food Equipment, and Test & Measurement and Electronics, contributed to a 15.0%a increase in operating revenue and a 20.6% rise in operating income year-over-year. This growth was primarily driven by a 12.3% increase in organic revenue, reflecting broad-based recovery across its businesses. ITW's core strength lies in its differentiated "ITW Business Model," which emphasizes the 80/20 Front-to-Back process, customer-back innovation, and a decentralized, entrepreneurial culture.
This model has enabled the company to achieve operating margin expansion of 120 basis points in 2021, reaching 24.1%b, despite headwinds such as unfavorable price/cost dynamics and increased overhead expenses. The company also successfully integrated the acquisition of the MTS Test & Simulation business, further strengthening its Test & Measurement and Electronics segment, and continued to return value to shareholders through dividends and share repurchases.
02—Key points
Key Highlights
- Operating revenue increased by 15.0% to $14.5 billion in 2021, driven by a 12.3% organic revenue growth across all segments.
- Operating income grew by 20.6% to $3.5 billion, with operating margin expanding by 120 basis points to 24.1%, demonstrating operational leverage and effective enterprise initiatives.
- The company successfully navigated supply chain disruptions and raw material cost increases, achieving margin expansion through cost management and strategic pricing.
- Acquisition of the MTS Test & Simulation business was completed in December 2021, enhancing the Test & Measurement and Electronics segment's capabilities.
- Strong free cash flow generation of $2.3 billion in 2021, underscoring the company's financial health and ability to fund strategic priorities.
- Return of capital to shareholders through $1.5 billion in cash dividends and $1.0 billion in share repurchases.
- The ITW Business Model, with its 80/20 process and customer-back innovation, continues to be a key driver of performance and competitive advantage.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, Illinois Tool Works Inc kept $0.19.
- Revenue$14.46B100.0%
- Cost of revenue−$8.49B58.7%
- Gross profit$5.97B41.3%
- Operating costs−$2.49B17.2%
- Operating income$3.48B24.1%
- Interest, other & tax−$783.0M5.4%
- Net income$2.69B18.6%
Where FY2021 revenue went
$14.46B- Cost of revenue: $8.49B, 59% of revenue
- Net income: $2.69B, 19% of revenue
- Other operating costs: $2.25B, 16% of revenue
- R&D: $239.0M, 1.7% of revenue
- Interest, other & tax: $783.0M, 5.4% of revenue
Kept 19% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 11, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $14.46B$12.57B | +15.0% |
| Cost of Revenue | $8.49B$7.38B | +15.1% |
| Gross Profit | $5.97B$5.20B | +14.8% |
| R&D Expenses | $239.00M$214.00M | +11.7% |
| Operating Income | $3.48B$2.88B | +20.6% |
| Interest Expense | $202.00M$206.00M | −1.9% |
| Net Income | $2.69B$2.11B | +27.7% |
| EPS (Basic) | $8.55$6.66 | +28.4% |
| EPS (Diluted) | $8.51$6.63 | +28.4% |
| Shares Outstanding (Basic) | 315.10M316.90M | −0.6% |
| Shares Outstanding (Diluted) | 316.40M318.30M | −0.6% |
05—Questions
Frequently Asked Questions
What was the overall financial performance of ITW in 2021?
In 2021, Illinois Tool Works Inc. (ITW) demonstrated strong financial performance with a 15.0% increase in operating revenue to $14.5 billion and a 20.6% rise in operating income to $3.5 billion. The company achieved a higher operating margin of 24.1%, up 120 basis points from the previous year, driven by organic growth and effective execution of its enterprise strategy.
How did the company manage supply chain challenges and cost pressures?
ITW navigated significant global supply chain disruptions and rising raw material costs by focusing on its core business model. Despite unfavorable price/cost impacts, the company achieved operating margin expansion through positive operating leverage, benefits from enterprise initiatives, and diligent cost management. The company's diversified business model and strong customer relationships allowed it to maintain performance.
What is the significance of the ITW Business Model for investors?
The ITW Business Model, comprising the 80/20 Front-to-Back process, customer-back innovation, and a decentralized culture, is a critical competitive advantage. It allows ITW to focus on high-potential opportunities, drive operational excellence, deliver unique customer solutions, and ultimately generate superior financial performance and shareholder returns. This model underpins the company's consistent ability to adapt and thrive in various market conditions.
What is the company's strategy for future growth and shareholder returns?
ITW's strategy focuses on achieving full-potential organic growth through market penetration, continuous innovation, and strategic sales excellence. The company also selectively pursues high-quality acquisitions, such as the recent MTS acquisition, to enhance its capabilities. ITW remains committed to returning capital to shareholders through attractive dividends and an active share repurchase program, reflecting its confidence in ongoing cash flow generation.
06—Continue