• ITW Reports First Quarter 2022 Results

    المصدر: Nasdaq GlobeNewswire / 03 مايو 2022 08:00:02   America/New_York

    • Total revenue of $3.9 billion; organic growth of 11%
    • GAAP EPS of $2.11 including $(0.05) of unfavorable foreign currency translation impact
    • Operating margin of 22.7%; 23.4% excluding 70 bps of margin dilution from the acquisition of MTS
    • Raising guidance for GAAP EPS to $9.00 to $9.40 per share and organic revenue growth to 7 to 10%

    GLENVIEW, Ill., May 03, 2022 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW) today reported its first quarter 2022 results.

    “In what remains a challenging and dynamic environment, our ITW business teams around the world continue to do an exceptional job of leveraging the performance power of the ITW Business Model and our advantaged supply position to support our customers and execute our ‘Win the Recovery’ strategy to accelerate profitable market penetration and organic growth across our portfolio,” said E. Scott Santi, Chairman and Chief Executive Officer. “Our first quarter results reflect continued strong momentum in this regard, and we remain well-positioned to seize the opportunities and respond to the challenges that lie ahead as we move through the balance of 2022.”

    First Quarter 2022 Results
    First quarter revenue grew 11.2 percent to $3.9 billion with organic growth of 10.6 percent. The acquisition of MTS contributed 2.8 percent to revenue. Foreign currency translation impact reduced revenue by 2.2 percent. Six of seven segments delivered positive organic growth, led by Food Equipment up 28 percent, Construction Products up 21 percent, Welding and Polymers & Fluids both up 13 percent, Test & Measurement and Electronics up eight percent, and Specialty Products up one percent. Organic revenue was down one percent in Automotive OEM due to automotive production limitations related to component supply shortages.

    GAAP EPS was $2.11, including $(0.05) of unfavorable foreign currency translation impact. Operating margin was 23.4 percent, excluding 70 basis points of margin dilution impact from the acquisition of MTS. Enterprise initiatives contributed 90 basis points. While pricing actions more than offset raw material cost increases on a dollar-for-dollar basis, the impact of price/cost reduced margin percentage by 250 basis points. Operating cash flow was $323 million, and free cash flow was $249 million with a conversion of 38 percent of net income due to higher working capital investments to support double digit revenue growth and increased inventory levels to help mitigate supply chain risk and sustain customer service levels. The company repurchased $375 million of its own shares, and the effective tax rate for the quarter was 23.1 percent.

    2022 Guidance
    Based on the company’s first quarter results and projecting current levels of demand through the balance of the year, ITW is raising its full-year organic growth guidance to seven to 10 percent and full-year revenue growth guidance to 8.5 to 11.5 percent. The acquisition of MTS is expected to add three percent to revenue. Foreign currency translation is expected to reduce revenue by 1.5 percent. The company is also raising its full-year GAAP EPS guidance to $9.00 to $9.40 per share, an increase of 11 to 16 percent versus prior year excluding the impact of favorable one-time tax items in 2021. Operating margin is expected to expand to 24 to 25 percent, with enterprise initiatives contributing 100 basis points. The margin dilution impact from the acquisition of MTS and price/cost are expected to be 50 and 100 basis points, respectively. Free cash flow is expected to grow 10 to 20 percent year-over-year with a conversion rate of 85 to 95 percent of net income. The company is on pace to repurchase $1.5 billion of its own shares, and the effective tax rate is expected to be 23 to 24 percent.

    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.  

    Forward-looking Statements
    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 and global supply chain challenges, related government actions and the company’s strategy in response thereto on the company’s business, expected impact of raw material inflation, enterprise initiatives, future financial and operating performance, free cash flow and free cash flow conversion rate, organic and total revenue, operating and incremental margin, price/cost impact, diluted income per share, restructuring expenses and related benefits, expected dividend payments, expected repatriation of overseas cash, 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 divestitures and related impact on financial results, including statements with respect to the impact of the 2021 acquisition of the MTS Test & Simulation business, and the company’s 2022 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 2021.

    About Illinois Tool Works
    ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $14.5 billion in 2021. 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 45,000 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 2022   2021 
    Operating Revenue$3,939  $3,544 
    Cost of revenue 2,357   2,039 
    Selling, administrative, and research and development expenses 652   566 
    Amortization and impairment of intangible assets 35   34 
    Operating Income 895   905 
    Interest expense (48)  (52)
    Other income (expense) 14   12 
    Income Before Taxes 861   865 
    Income Taxes 199   194 
    Net Income$662  $671 
        
    Net Income Per Share:   
    Basic$2.12  $2.12 
    Diluted$2.11  $2.11 
        
    Cash Dividends Per Share:   
    Paid$1.22  $1.14 
    Declared$1.22  $1.14 
        
    Shares of Common Stock Outstanding During the Period:   
    Average 312.5   316.6 
    Average assuming dilution 313.7   317.9 
            

    ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
    STATEMENT OF FINANCIAL POSITION (UNAUDITED)

    In millionsMarch 31, 2022 December 31, 2021
    Assets   
    Current Assets:   
    Cash and equivalents$1,296  $1,527 
    Trade receivables 3,126   2,840 
    Inventories 1,883   1,694 
    Prepaid expenses and other current assets 377   313 
    Total current assets 6,682   6,374 
        
    Net plant and equipment 1,795   1,809 
    Goodwill 5,008   4,965 
    Intangible assets 875   972 
    Deferred income taxes 546   552 
    Other assets 1,380   1,405 
     $16,286  $16,077 
        
    Liabilities and Stockholders' Equity   
    Current Liabilities:   
    Short-term debt$1,041  $778 
    Accounts payable 696   585 
    Accrued expenses 1,541   1,648 
    Cash dividends payable 380   382 
    Income taxes payable 200   77 
    Total current liabilities 3,858   3,470 
        
    Noncurrent Liabilities:   
    Long-term debt 6,817   6,909 
    Deferred income taxes 627   654 
    Noncurrent income taxes payable 365   365 
    Other liabilities 1,037   1,053 
    Total noncurrent liabilities 8,846   8,981 
        
    Stockholders’ Equity:   
    Common stock 6   6 
    Additional paid-in-capital 1,447   1,432 
    Retained earnings 24,607   24,325 
    Common stock held in treasury (21,008)  (20,636)
    Accumulated other comprehensive income (loss) (1,471)  (1,502)
    Noncontrolling interest 1   1 
    Total stockholders’ equity 3,582   3,626 
     $16,286  $16,077 


    ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
    SEGMENT DATA (UNAUDITED)

    Three Months Ended March 31, 2022
    Dollars in millionsTotal
    Revenue    		Operating
    Income    		Operating
    Margin
    Automotive OEM$760 $138 18.1%
    Food Equipment 566  126 22.3%
    Test & Measurement and Electronics 685  149 21.8%
    Welding 450  139 30.8%
    Polymers & Fluids 481  118 24.5%
    Construction Products 551  136 24.7%
    Specialty Products 452  120 26.6%
    Intersegment (6) — —%
    Total Segments 3,939  926 23.5%
    Unallocated —  (31)—%
    Total Company$3,939 $895 22.7%


    ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
    SEGMENT DATA (UNAUDITED)

    Q1 2022 vs. Q1 2021 Favorable/(Unfavorable)
    Operating RevenueAutomotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and
    Electronics    		WeldingPolymers
    & Fluids    		Construction
    Products    		Specialty
    Products    		Total ITW
    Organic(0.7)%28.2%7.9%12.9%12.8%21.3%0.6%10.6%
    Acquisitions/Divestitures—%—%18.1%—%—%—%—%2.8%
    Translation(2.2)%(2.9)%(2.0)%(0.7)%(2.3)%(3.9)%(1.7)%(2.2)%
    Operating
    Revenue    		(2.9)%25.3%24.0%12.2%10.5%17.4%(1.1)%11.2%


    Q1 2022 vs. Q1 2021 Favorable/(Unfavorable)
    Change in Operating MarginAutomotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and
    Electronics    		WeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
    Operating Leverage(10) bps560 bps160 bps180 bps240 bps310 bps10 bps200 bps
    Changes in Variable Margin & OH Costs(480) bps(440) bps(420) bps(120) bps(360) bps(620) bps(140) bps(390) bps
    Total Organic (490) bps 120 bps (260) bps 60 bps (120) bps (310) bps (130) bps (190) bps
    Acquisitions/

    Divestitures    		——(420) bps————(70) bps
    Restructuring/Other(110) bps(10) bps20 bps(10) bps—20 bps30 bps(20) bps
    Total Operating Margin Change (600) bps 110 bps (660) bps 50 bps (120) bps (290) bps (100) bps (280) bps
             
    Total Operating Margin % *18.1%22.3%21.8%30.8%24.5%24.7%26.6%22.7%
             
    *Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 40 bps 60 bps200 bps20 bps220 bps10 bps70 bps 90 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 2022.


    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 2022   2021 
    Numerator:   
    Net Income$662  $671 
    Interest expense, net of tax (1) 37   40 
    Other (income) expense, net of tax (1) (11)  (9)
    Operating income after taxes$688  $702 
        
    Denominator:   
    Invested capital:   
    Cash and equivalents$1,296  $2,484 
    Trade receivables 3,126   2,662 
    Inventories 1,883   1,292 
    Net plant and equipment 1,795   1,746 
    Goodwill and intangible assets 5,883   5,379 
    Accounts payable and accrued expenses (2,237)  (1,850)
    Debt (7,858)  (7,949)
    Other, net (306)  (488)
    Total net assets (stockholders' equity) 3,582   3,276 
    Cash and equivalents (1,296)  (2,484)
    Debt 7,858   7,949 
    Total invested capital$10,144  $8,741 
        
    Average invested capital (2)$9,966  $8,740 
        
    Net income to average invested capital (3) 26.6%  30.7%
    After-tax return on average invested capital (3) 27.6%  32.1%

    (1) Effective tax rate used for interest expense and other (income) expense for the three months ended March 31, 2022 and 2021 was 23.1% and 22.4%, respectively.

    (2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of the periods presented.

    (3) Returns for the three months ended March 31, 2022 and 2021 were converted to an annual rate by multiplying the calculated return by 4.


    AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)

     Twelve Months Ended
    Dollars in millionsDecember 31, 2021
    Numerator: 
    Net income$2,694 
    Discrete tax benefit related to the third quarter 2021 (21)
    Discrete tax benefit related to the second quarter 2021 (112)
    Interest expense, net of tax (1) 157 
    Other (income) expense, net of tax (1) (40)
    Operating income after taxes$2,678 
      
    Denominator: 
    Invested capital: 
    Cash and equivalents$1,527 
    Trade receivables 2,840 
    Inventories 1,694 
    Net plant and equipment 1,809 
    Goodwill and intangible assets 5,937 
    Accounts payable and accrued expenses (2,233)
    Debt (7,687)
    Other, net (261)
    Total net assets (stockholders' equity) 3,626 
    Cash and equivalents (1,527)
    Debt 7,687 
    Total invested capital$9,786 
      
    Average invested capital (2)$9,087 
      
    Net income to average invested capital 29.6%
    After-tax return on average invested capital 29.5%

    (1) Effective tax rate used for interest expense and other (income) expense for the year ended December 31, 2021 was 23.0%.

    (2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within the period presented.

    A reconciliation of the 2021 effective tax rate excluding the third quarter 2021 discrete tax benefit of $21 million related to the utilization of capital losses and the second quarter 2021 discrete tax benefit of $112 million related to a change in the U.K. income tax rate is as follows:

     Twelve Months Ended
     December 31, 2021
    Dollars in millionsIncome Taxes Tax Rate
    As reported$632 19.0%
    Discrete tax benefit related to the third quarter 2021 21 0.6%
    Discrete tax benefit related to the second quarter 2021 112 3.4%
    As adjusted$765 23.0%


    FREE CASH FLOW (UNAUDITED)

     Three Months Ended
     March 31,
    Dollars in millions 2022   2021 
    Net cash provided by operating activities$323  $609 
    Less: Additions to plant and equipment (74)  (68)
    Free cash flow$249  $541 
        
    Net income$662  $671 
        
    Net cash provided by operating activities to net income conversion rate 49%  91%
    Free cash flow to net income conversion rate 38%  81%


    ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED)

     Twelve Months Ended
     December 31, 2021
    As reported$8.51 
    Discrete tax benefit related to the third quarter 2021 (0.07)
    Discrete tax benefit related to the second quarter 2021 (0.35)
    As adjusted$8.09 


      
    Media ContactInvestor Relations
    Tel: 224.661.7451Karen Fletcher
    mediarelations@itw.com   Tel: 224.661.7433
      investorrelations@itw.com 



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