10-QPeriod: Q3 FY2021

ILLINOIS TOOL WORKS INC Quarterly Report for Q3 Ended Sep 30, 2021

Filed October 29, 2021For Securities:ITW

Summary

Illinois Tool Works Inc. (ITW) reported solid financial results for the third quarter and year-to-date periods ending September 29, 2021. The company demonstrated revenue growth driven by strong organic sales across most segments, despite ongoing supply chain challenges. Net income and diluted earnings per share saw significant year-over-year increases, reflecting effective operational execution and benefits from enterprise initiatives. The company also maintained a strong liquidity position and continued its commitment to returning capital to shareholders through dividends and share repurchases. Management highlighted the continued success of ITW's differentiated business model, emphasizing customer-back innovation and operational excellence. While some segments, like Automotive OEM, experienced headwinds due to industry-specific issues such as semiconductor shortages impacting auto production, others like Food Equipment and Welding showed robust growth. The company's strategic focus on 'Win the Recovery' and full-potential organic growth appears to be yielding positive results, positioning ITW for sustained performance.

Financial Highlights

52 data points
Beta

Revenue

$3.56B

41.1% Gross Margin

Net Income

$639.00M

18.0% Net Margin

EPS (Diluted)

$2.02

Total Assets

$15.52B

Cash & Equivalents

$1.99B

Free Cash Flow

$548.00M

Financial Statements
Beta
Revenue$3.56B
Cost of Revenue$2.10B
Gross Profit$1.46B
Operating Income$845.00M
Interest Expense$49.00M
Net Income$639.00M
EPS (Basic)$2.03
EPS (Diluted)$2.02
Shares Outstanding (Basic)314.60M
Shares Outstanding (Diluted)315.90M

Key Highlights

  • 1Operating revenue increased by 7.5% to $3,556 million for the third quarter and by 18.4% to $10,776 million for the nine months ended September 30, 2021, compared to the prior year periods.
  • 2Diluted earnings per share (EPS) rose to $2.02 for the third quarter and $6.58 for the nine months, representing significant year-over-year growth.
  • 3Operating income grew by 7.1% in the third quarter and 32.2% year-to-date, with operating margins remaining strong at 23.8% for the quarter and 24.5% year-to-date.
  • 4Six out of seven business segments reported organic revenue growth in the third quarter, indicating broad-based demand recovery.
  • 5The company repurchased approximately $250 million and $750 million of its common stock in the third quarter and year-to-date periods, respectively, demonstrating continued capital return to shareholders.
  • 6ITW is proceeding with its strategy to acquire the Test & Simulation business of MTS Systems Corporation from Amphenol for $750 million, expected to close in Q4 2021.
  • 7Despite supply chain challenges and rising raw material costs, the company maintained its focus on enterprise initiatives and customer-back innovation, driving operational efficiencies.

Frequently Asked Questions

Illinois Tool Works Inc. (ITW) reported a strong third quarter with a 7.5% increase in operating revenue to $3,556 million and a 10.4% rise in diluted EPS to $2.02 compared to the prior year. Operating income also saw a 7.1% increase. The company's performance was driven by broad-based organic revenue growth across most of its segments, demonstrating a solid recovery and effective execution of its business strategies.

While the company acknowledges that the COVID-19 pandemic and ongoing global supply chain challenges continue to present disruptions, ITW has demonstrated resilience. The company reported solid growth in revenue and earnings, with six out of seven segments experiencing organic revenue growth in Q3 2021. However, the Automotive OEM segment was negatively impacted by auto production reductions due to semiconductor shortages and other component issues.

Most segments showed positive organic growth, with Food Equipment, Welding, and Test & Measurement and Electronics showing particularly strong performance. The Automotive OEM segment experienced a decline in revenue for the quarter, primarily due to external industry-wide production constraints. The company's strategic focus on customer-back innovation and its differentiated ITW Business Model continue to be key drivers for growth and operational efficiency across its diversified portfolio.

ITW maintained a strong liquidity position with $2.0 billion in cash and equivalents and no outstanding borrowings under its revolving credit facility as of September 30, 2021. The company continued to return capital to shareholders through dividend payments and share repurchases, totaling $359 million and $250 million, respectively, in the third quarter. ITW also announced its intention to acquire the Test & Simulation business of MTS Systems Corporation for $750 million, indicating a focus on strategic growth.