What were the main drivers for the decrease in operating revenue?

The primary drivers for the decrease in operating revenue were the unfavorable impact of foreign currency translation and a decline in organic revenue, particularly in the Automotive OEM segment due to lower automotive production. Increased restructuring expenses also contributed to the overall decline in operating income.

How did the company's profitability fare in the quarter?

Despite a revenue decline, ITW maintained strong profitability with an overall operating margin of 23.6%. All seven segments reported operating margins above 20%. However, net income decreased year-over-year due to the revenue pressures and increased restructuring costs.

What is the company's approach to returning capital to shareholders?

ITW continues to return capital through dividends and share repurchases. In Q1 2019, the company paid $328 million in dividends and repurchased $375 million of its common stock. While dividends increased, share repurchases were lower than the $500 million seen in Q1 2018.

What is the outlook for the company based on the segment performance?

The Automotive OEM segment showed weakness due to industry-wide production declines. However, segments like Food Equipment, Welding, and Polymers & Fluids demonstrated resilience with positive organic revenue growth. The company's diversified business model across various end markets helps mitigate risks associated with specific sectors.

ITW 10-Q Quarterly Report Q1 FY2019 — Revenue, Net Income, EPS

Summary

Illinois Tool Works Inc. (ITW) reported a decrease in operating revenue and net income for the first quarter of 2019 compared to the same period in 2018. Revenue fell by 5.1% to $3,552 million, while net income declined to $597 million from $652 million. This decline was primarily attributed to unfavorable foreign currency translation, lower organic revenue, and increased restructuring expenses. Despite these top-line challenges, the company's operating margins remained strong, with all segments exceeding 20%. The company continues to focus on its core ITW Business Model, emphasizing the 80/20 process, customer-back innovation, and a decentralized culture. Free cash flow showed a significant increase of 21.4% to $539 million, demonstrating robust cash generation capabilities. ITW also actively returned capital to shareholders through dividends and share repurchases, though the pace of repurchases was lower than the prior year.

Financial Highlights

51 data points

Beta

Revenue

$3.55B

0.4% Gross Margin

Net Income

$597.00M

0.2% Net Margin

EPS (Diluted)

$1.81

Total Assets

$15.33B

Cash & Equivalents

$1.75B

Free Cash Flow

$539.00M

Financial Statements

Beta

Revenue	$3.55B
Cost of Revenue	$2.06B
Gross Profit	$1.49B
Operating Income	$839.00M
Interest Expense	$63.00M
Net Income	$597.00M
EPS (Basic)	$1.82
EPS (Diluted)	$1.81
Shares Outstanding (Basic)	327.30M
Shares Outstanding (Diluted)	329.60M

Key Highlights

1Operating revenue decreased by 5.1% to $3,552 million in Q1 2019, primarily due to foreign currency headwinds and a 1.5% decline in organic revenue.
2Net income fell to $597 million ($1.81 per diluted share) from $652 million ($1.90 per diluted share) in Q1 2018.
3Free cash flow increased significantly by 21.4% to $539 million, indicating strong cash generation.
4The Automotive OEM segment experienced the most significant revenue decline of 10.5%, impacted by lower automotive production.
5Operating margins remained robust across all segments, with an overall operating margin of 23.6%.
6The company repurchased $375 million of common stock in the quarter, a decrease from $500 million in the prior year's comparable quarter.
7Total debt increased to $7,741 million from $7,380 million, while the Total Debt to EBITDA ratio remained healthy at 1.9.

ILLINOIS TOOL WORKS INC Quarterly Report for Q1 Ended Mar 31, 2019

Summary

Financial Highlights

Key Highlights

Frequently Asked Questions