• ITW Reports Fourth Quarter and Full Year 2021 Results

    ソース: Nasdaq GlobeNewswire / 03 2 2022 07:00:01   America/Chicago

    Fourth Quarter 2021 Highlights

    • Total revenue of $3.7 billion, an increase of 6% with organic growth of 5%
    • Operating margin of 22.7% as enterprise initiatives contributed 110 bps
    • GAAP EPS of $1.93 including $(0.02) of MTS acquisition impact

    Full Year 2021 Highlights

    • Total revenue of $14.5 billion, an increase of 15% with organic growth of 12%
    • Operating income of $3.5 billion, an increase of 21%
    • Operating margin of 24.1%, an increase of 120 bps as enterprise initiatives contributed 110 bps
    • Record GAAP EPS of $8.51, an increase of 28%

    Full Year 2022 Guidance (including MTS)

    • Total revenue growth of 7.5 to 10.5% with organic growth of 6 to 9%
    • Operating margin of 24 to 25% with enterprise initiatives contributing 100 bps
    • GAAP EPS of $8.90 to $9.30, an increase of 5 to 9% or 10 to 15% excluding 2021 one-time tax items

    GLENVIEW, Ill., Feb. 03, 2022 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW) today reported its fourth quarter and full year 2021 results and initiated guidance for full year 2022.

    “In the fourth quarter, we saw continued strong growth momentum as six of our seven segments delivered combined organic growth of 12 percent, while our Automotive OEM segment continued to be impacted by limitations on auto production due to component supply shortages,” said E. Scott Santi, Chairman and Chief Executive Officer. “In what remains a very challenging and volatile operating environment, our teams around the world continue to do an exceptional job of delivering for our customers, responding decisively to rapidly rising input costs, and executing our ‘Win the Recovery’ strategy to accelerate profitable market penetration and organic growth across our portfolio.”

    “I want to again thank all of my ITW colleagues for their exceptional dedication and commitment to serving our customers and executing our strategy with excellence.  Their performance throughout 2021 provides another compelling proof point that ITW is a company that has the enduring competitive advantages, agility, and resilience necessary to consistently deliver top-tier performance in any environment,” Santi concluded.

    Fourth Quarter 2021 Results
    Fourth quarter revenue grew six percent to $3.7 billion with 5.3 percent organic growth. The MTS acquisition, which closed on December 1, 2021 as previously announced, contributed 1.3 percent, partially offset by unfavorable foreign currency translation impact of 0.7 percent. Operating margin was 22.7 percent, 23.1 percent excluding 40 basis points of margin dilution impact from MTS. Enterprise initiatives contributed 110 basis points. The margin dilution impact from price/cost was 200 basis points, while pricing actions more than offset raw material cost increases on a dollar-for-dollar basis in the quarter. GAAP EPS was $1.93, including $(0.02) of MTS acquisition impact. Operating cash flow was $774 million, and free cash flow was $695 million with a conversion of 114 percent of net income. The effective tax rate for the quarter was 23.1 percent.

    Full Year 2021 Results
    Revenue grew 15 percent to $14.5 billion with organic growth of 12.3 percent. All seven segments delivered strong organic growth, led by Welding up 18 percent, Food Equipment up 17 percent, Test & Measurement and Electronics up 15 percent, Construction Products up 14 percent, Specialty Products and Polymers & Fluids both up 10 percent and Automotive OEM up 6 percent. The MTS acquisition contributed 0.4 percent, and foreign currency translation impact was favorable 2.3 percent.

    Operating margin was 24.1 percent, an increase of 120 basis points with enterprise initiatives contributing 110 basis points.  The margin dilution impact from price/cost was 150 basis points, while pricing actions more than offset raw material cost increases on a dollar-for-dollar basis for the full year.   GAAP EPS was $8.51, $8.09 excluding $0.42 of favorable one-time tax items, an increase of 22 percent versus the prior year excluding these tax items.   Operating cash flow was $2.6 billion, and free cash flow was $2.3 billion with a conversion of 84 percent of net income, which was below the Company’s 100 percent+ long-term target primarily due to higher working capital investments to support 15 percent revenue growth and the Company’s decision to increase inventory levels on select key raw materials, components, and finished goods to help mitigate supply chain risk and sustain customer service levels. The company repurchased $1.0 billion of its own shares, and the effective tax rate for the full year was 19.0 percent.

    Full Year 2022 Guidance
    The company is initiating full-year GAAP EPS guidance in the range of $8.90 to $9.30 per share, an increase of 10 to 15 percent, excluding the impact of the favorable one-time tax items in 2021. Total revenue growth is expected to be in the range of 7.5 to 10.5 percent with organic growth of six to nine percent. The acquisition of MTS is expected to add approximately three percent to revenue and be neutral to EPS. Foreign currency translation impact is expected to be unfavorable 1.5 percent at current exchange rates.   Operating margin is expected to be in the range of 24 to 25 percent, with 100 basis points contribution from enterprise initiatives, partially offset by approximately 50 basis points each of margin dilution from MTS and price/cost. The company plans to repurchase approximately $1.5 billion of its own shares. The expected effective tax rate is in the range of 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 Statement
    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, 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 dispositions 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 2020 and subsequent reports filed with the SEC.

    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 Twelve Months Ended
     December 31, December 31,
    In millions except per share amounts2021
    		 2020 2021 2020
    Operating Revenue$3,679  $3,475  $14,455  $12,574 
    Cost of revenue 2,191   2,000   8,489   7,375 
    Selling, administrative, and research and development expenses 621   557   2,356   2,163 
    Amortization and impairment of intangible assets 33   35   133   154 
    Operating Income 834   883   3,477   2,882 
    Interest expense (49)  (52)  (202)  (206)
    Other income (expense) 7   (7)  51   28 
    Income Before Taxes 792   824   3,326   2,704 
    Income taxes 183   182   632   595 
    Net Income$609  $642  $2,694  $2,109 
            
    Net Income Per Share:       
    Basic$1.94  $2.03  $8.55  $6.66 
    Diluted$1.93  $2.02  $8.51  $6.63 
            
    Cash Dividends Per Share:       
    Paid$1.22  $1.14  $4.64  $4.35 
    Declared$1.22  $1.14  $4.72  $4.42 
            
    Shares of Common Stock Outstanding During the Period:       
    Average 313.6   316.7   315.1   316.9 
    Average assuming dilution 315.0   318.1   316.4   318.3 


    ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
    STATEMENT OF FINANCIAL POSITION (UNAUDITED)
     
    In millionsDecember 31,
    2021    		 December 31,
    2020
    Assets   
    Current Assets:   
    Cash and equivalents$1,527  $2,564 
    Trade receivables 2,840   2,506 
    Inventories 1,694   1,189 
    Prepaid expenses and other current assets 313   264 
    Total current assets 6,374   6,523 
        
    Net plant and equipment 1,809   1,777 
    Goodwill 4,965   4,690 
    Intangible assets 972   781 
    Deferred income taxes 552   533 
    Other assets 1,405   1,308 
     $16,077  $15,612 
        
    Liabilities and Stockholders' Equity   
    Current Liabilities:   
    Short-term debt$778  $350 
    Accounts payable 585   534 
    Accrued expenses 1,648   1,284 
    Cash dividends payable 382   361 
    Income taxes payable 77   60 
    Total current liabilities 3,470   2,589 
        
    Noncurrent Liabilities:   
    Long-term debt 6,909   7,772 
    Deferred income taxes 654   588 
    Noncurrent income taxes payable 365   413 
    Other liabilities 1,053   1,068 
    Total noncurrent liabilities 8,981   9,841 
        
    Stockholders' Equity:   
    Common stock 6   6 
    Additional paid-in-capital 1,432   1,362 
    Retained earnings 24,325   23,114 
    Common stock held in treasury (20,636)  (19,659)
    Accumulated other comprehensive income (loss) (1,502)  (1,642)
    Noncontrolling interest 1   1 
    Total stockholders' equity 3,626   3,182 
     $16,077  $15,612 


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

    Three Months Ended December 31, 2021
    Dollars in millionsTotal
    Revenue    		Operating
    Income    		Operating
    Margin
    Automotive OEM$663 $111 16.8%
    Food Equipment 569  130 22.9%
    Test & Measurement and Electronics 636  168 26.4%
    Welding 422  126 30.0%
    Polymers & Fluids 447  107 24.1%
    Construction Products 480  124 25.8%
    Specialty Products 467  124 26.5%
    Intersegment (5) — —%
    Total Segments 3,679  890 24.2%
    Unallocated —  (56)—%
    Total Company$3,679 $834 22.7%


    Twelve Months Ended December 31, 2021
    Dollars in millionsTotal
    Revenue    		Operating
    Income    		Operating
    Margin
    Automotive OEM$2,800 $545 19.5%
    Food Equipment 2,078  469 22.6%
    Test & Measurement and Electronics 2,346  643 27.4%
    Welding 1,650  490 29.7%
    Polymers & Fluids 1,804  457 25.4%
    Construction Products 1,945  530 27.2%
    Specialty Products 1,854  504 27.2%
    Intersegment (22) — —%
    Total Segments 14,455  3,638 25.2%
    Unallocated —  (161)—%
    Total Company$14,455 $3,477 24.1%


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

    Q4 2021 vs. Q4 2020 Favorable/(Unfavorable)
    Operating RevenueAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
    Organic(16.2)%20.9%11.2%14.7%3.5%12.5%7.1%5.3%
    Acquisitions/ Divestitures—%—%8.6%—%—%(0.2)%—%1.3%
    Translation(0.9)%(0.3)%(0.6)%—%(1.3)%(0.7)%(0.8)%(0.7)%
    Operating Revenue(17.1)%20.6%19.2%14.7%2.2%11.6%6.3%5.9%


    Q4 2021 vs. Q4 2020 Favorable/(Unfavorable)
    Change in Operating MarginAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
    Operating Leverage(340) bps410 bps230 bps210 bps70 bps210 bps120 bps100 bps
    Changes in Variable Margin & OH Costs(340) bps(370) bps(350) bps(100) bps(200) bps(260) bps(150) bps(350) bps
    Total Organic(680) bps40 bps(120) bps110 bps(130) bps(50) bps(30) bps(250) bps
    Acquisitions/ Divestitures——(130) bps——10 bps—(20) bps
    Restructuring/Other(30) bps20 bps30 bps———(20) bps—
    Total Operating Margin Change(710) bps60 bps(220) bps110 bps(130) bps(40) bps(50) bps(270) bps
             
    Total Operating Margin % *16.8%22.9%26.4%30.0%24.1%25.8%26.5%22.7%
             
    * Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 40 bps 60 bps160 bps10 bps240 bps 20 bps 70 bps 90 bps**
    ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.08) on GAAP earnings per share for the fourth quarter of 2021.


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

    Full Year 2021 vs Full Year 2020 Favorable/(Unfavorable)
    Operating RevenueAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
    Organic5.8%16.7%15.3%18.1%10.0%13.6%9.8%12.3%
    Acquisitions/ Divestitures—%—%2.3%—%—%(0.1)%—%0.4%
    Translation3.1%2.8%1.9%1.1%1.2%4.2%1.9%2.3%
    Operating Revenue8.9%19.5%19.5%19.2%11.2%17.7%11.7%15.0%


    Full Year 2021 vs Full Year 2020 Favorable/(Unfavorable)
    Change in Operating MarginAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
    Operating Leverage120 bps370 bps340 bps260 bps200 bps240 bps190 bps250 bps
    Changes in Variable Margin & OH Costs—(110) bps(160) bps10 bps(150) bps(80) bps(50) bps(150) bps
    Total Organic120 bps260 bps180 bps270 bps50 bps160 bps140 bps100 bps
    Acquisitions/ Divestitures——(40) bps—————
    Restructuring/Other50 bps40 bps20 bps(10) bps10 bps10 bps(20) bps20 bps
    Total Operating Margin Change170 bps300 bps160 bps260 bps60 bps170 bps120 bps120 bps
             
    Total Operating Margin % *19.5%22.6%27.4%29.7%25.4%27.2%27.2%24.1%
             
    * Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets40 bps60 bps170 bps10 bps250 bps20 bps70 bps 90 bps**
    ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.32) on GAAP earnings per share for 2021.


    ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
    GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
     
    AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
     
     Three Months Ended Twelve Months Ended
     December 31, December 31,
    Dollars in millions2021 2020 2021 2020
    Numerator:       
    Net income$609  $642  $2,694  $2,109 
    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) 38   42   157   162 
    Other (income) expense, net of tax (1) (5)  5   (40)  (22)
    Operating income after taxes$642  $689  $2,678  $2,249 
            
    Denominator:       
    Invested capital:       
    Cash and equivalents$1,527  $2,564  $1,527  $2,564 
    Trade receivables 2,840   2,506   2,840   2,506 
    Inventories 1,694   1,189   1,694   1,189 
    Net plant and equipment 1,809   1,777   1,809   1,777 
    Goodwill and intangible assets 5,937   5,471   5,937   5,471 
    Accounts payable and accrued expenses (2,233)  (1,818)  (2,233)  (1,818)
    Debt (7,687)  (8,122)  (7,687)  (8,122)
    Other, net (261)  (385)  (261)  (385)
    Total net assets (stockholders' equity) 3,626   3,182   3,626   3,182 
    Cash and equivalents (1,527)  (2,564)  (1,527)  (2,564)
    Debt 7,687   8,122   7,687   8,122 
    Total invested capital$9,786  $8,740  $9,786  $8,740 
            
    Average invested capital (2)$9,421  $8,606  $9,087  $8,576 
            
    Net income to average invested capital (3) 25.8%  29.9%  29.6%  24.6%
    After-tax return on average invested capital (3) 27.2%  32.0%  29.5%  26.2%

    (1)  Effective tax rate used for interest expense and other (income) expense for the three months ended December 31, 2021 and 2020 was 23.1% and 22.1%, respectively, and 23.0% and 22.0% for the twelve months ended December 31, 2021 and 2020, respectively.

    (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 each of the periods presented.

    (3)  Returns for the three months ended December 31, 2021 and 2020 were converted to an annual rate by multiplying the calculated return by 4.


    ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
    GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)

    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 Twelve Months Ended
     December 31, December 31,
    Dollars in millions2021 2020 2021 2020
    Net cash provided by operating activities$774  $773  $2,557  $2,807 
    Less: Additions to plant and equipment (79)  (68)  (296)  (236)
    Free cash flow$695  $705  $2,261  $2,571 
            
    Net income$609  $642  $2,694  $2,109 
            
    Net cash provided by operating activities to net income conversion rate 127%  120%  95%  133%
    Free cash flow to net income conversion rate 114%  110%  84%  122%

    ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED)

     Twelve Months Ended
     December 31,
     2021 2020
    As reported$8.51  $6.63
    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  $6.63
    Percentage increase in adjusted net income per share - diluted 22%  


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

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