GlobeNewswire Inc | Apr 30, 2021 08:00AM EDT

April 30, 2021

-- Total revenue of $3.5 billion, an increase of 10% -- Organic growth of 6%, 8% on an equal days basis -- Record Q1 financial performance: Operating income of $905 million, an increase of 19%Operating margin of 25.5%, an increase of 190 basis pointsGAAP EPS of $2.11, an increase of 19%After-tax ROIC of 32.1% -- Raising full year GAAP EPS guidance by $0.60 to a range of $8.20 to $8.60 per share

GLENVIEW, Ill., April 30, 2021 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW) today reported its first quarter 2021 results.

We saw continued improvement in the demand environment across a broad cross section of our business portfolio in the first quarter and our teams around the world responded, said E. Scott Santi, Chairman and Chief Executive Officer. The combination of the Win the Recovery actions we initiated over the course of the past year, the foundational strength of ITWs 80/20 front-to-back business system, and our continuing progress in executing our long-term enterprise strategy allowed us to meet our customers increasing needs while delivering excellent profitability leverage, as evidenced by our 19 percent earnings growth, 45 percent incremental margins, and 120 basis points of margin benefit from enterprise initiatives in the quarter. While a number of significant issues and uncertainties remain on the path to recovery from the COVID-19 pandemic globally, I am confident that ITW is well-positioned to both seize the opportunities and deal with the challenges that lie ahead as we move through the balance of 2021.

First Quarter 2021 ResultsFirst quarter revenue of $3.5 billion increased 10 percent versus the prior year period, as organic revenue grew six percent, or eight percent when equalizing for one less shipping day in 2021 versus 2020, and foreign currency translation impact was favorable by four percent. Product Line Simplification (PLS) activities reduced organic revenue growth by 20 basis points.

GAAP EPS of $2.11 increased 19 percent. Operating income increased 19 percent to $905 million. Operating margin was 25.5 percent, an increase of 190 basis points with enterprise initiatives contributing 120 basis points. Free cash flow was $541 million, 81 percent of net income and in line with typical seasonality. After-tax return on invested capital improved to 32.1 percent compared to 27.0 percent in the prior year period. The effective tax rate for the first quarter was 22.4 percent.

Six of our seven segments delivered strong organic growth in the quarter, led by Construction Products which was up 13 percent. Test & Measurement and Electronics was up 11 percent, Polymers & Fluids up nine percent, Automotive OEM up eight percent, Specialty Products up seven percent, and Welding up six percent. While organic revenue in Food Equipment was down ten percent in Q1, we saw meaningful improvement in demand trends sequentially versus the 19 percent decline the business experienced in the fourth quarter of 2020.

2021 GuidanceProjecting full year results based on demand rates exiting the first quarter, the company now expects full year GAAP EPS of $8.20 to $8.60 per share, an increase of 27 percent at the midpoint. Organic growth is expected to be in the range of 10 to 12 percent. Revenue is expected to grow in the range of 12 to 14 percent as foreign currency translation at current exchange rates is projected to increase revenue by approximately two percent. PLS impact is forecasted to be approximately 50 basis points. Operating margin is expected to be in the range of 25 to 26 percent, with enterprise initiatives contributing approximately 100 basis points. Free cash flow is expected to be greater than 100 percent of net income. The company plans to repurchase approximately $1 billion of its shares and expects an effective tax rate of 23 to 24 percent. Guidance excludes any impact from the previously announced acquisition of the MTS Test & Simulation business.

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. The estimated guidance of Free Cash Flow conversion rate is based on assumptions that are difficult to predict, and a reconciliation of estimated Free Cash Flow to the most directly comparable GAAP measure has been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of availability of reliable forward-looking cash flow and operating information.

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, related government actions and the companys strategy in response thereto on the companys business, expected impact of tariffs and raw material inflation, product line simplification activities and enterprise initiatives, future financial and operating performance, free cash flow, organic and total revenue, operating 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 anticipated acquisition of the MTS Test & Simulation business, and the companys 2021 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.

About Illinois Tool WorksITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $12.6 billion in 2020. The companys 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. ITWs approximately 43,000 dedicated colleagues around the world thrive in the companys decentralized and entrepreneurial culture. www.itw.com

ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSTATEMENT OF INCOME (UNAUDITED)

Three Months Ended March 31,In millions except per share amounts 2021 2020Operating Revenue $ 3,544 $ 3,228 Cost of revenue 2,039 1,871 Selling, administrative, and research and development 566 560 expensesAmortization and impairment of intangible assets 34 36 Operating Income 905 761 Interest expense (52 ) (51 )Other income (expense) 12 25 Income Before Taxes 865 735 Income Taxes 194 169 Net Income $ 671 $ 566 Net Income Per Share: Basic $ 2.12 $ 1.78 Diluted $ 2.11 $ 1.77 Cash Dividends Per Share: Paid $ 1.14 $ 1.07 Declared $ 1.14 $ 1.07 Shares of Common Stock Outstanding During the Period: Average 316.6 318.3 Average assuming dilution 317.9 319.7

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

In millions March 31, December 31, 2020 2021Assets Current Assets: Cash and equivalents $ 2,484 $ 2,564 Trade receivables 2,662 2,506 Inventories 1,292 1,189 Prepaid expenses and other current assets 266 264 Total current assets 6,704 6,523 Net plant and equipment 1,746 1,777 Goodwill 4,632 4,690 Intangible assets 747 781 Deferred income taxes 519 533 Other assets 1,315 1,308 $ 15,663 $ 15,612 Liabilities and Stockholders' Equity Current Liabilities: Short-term debt $ 350 $ 350 Accounts payable 589 534 Accrued expenses 1,261 1,284 Cash dividends payable 360 361 Income taxes payable 120 60 Total current liabilities 2,680 2,589 Noncurrent Liabilities: Long-term debt 7,599 7,772 Deferred income taxes 637 588 Noncurrent income taxes payable 413 413 Other liabilities 1,058 1,068 Total noncurrent liabilities 9,707 9,841 Stockholders? Equity: Common stock 6 6 Additional paid-in-capital 1,378 1,362 Retained earnings 23,425 23,114 Common stock held in treasury (19,897 ) (19,659 )Accumulated other comprehensive income (loss) (1,638 ) (1,642 )Noncontrolling interest 2 1 Total stockholders? equity 3,276 3,182 $ 15,663 $ 15,612

ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSEGMENT DATA (UNAUDITED)

Three Months Ended March 31, 2021Dollars in millions Total Operating Operating Revenue Income MarginAutomotive OEM $ 783 $ 189 24.1 %Food Equipment 451 96 21.2 %Test & Measurement and Electronics 552 157 28.4 %Welding 401 121 30.3 %Polymers & Fluids 435 112 25.7 %Construction Products 469 130 27.6 %Specialty Products 457 126 27.6 %Intersegment (4 ) ? ? %Total Segments 3,544 931 26.3 %Unallocated ? (26 ) ? %Total Company $ 3,544 $ 905 25.5 %

Q1 2021 vs. Q1 2020 Favorable/(Unfavorable) Test &Operating Automotive Food Measurement Welding Polymers Construction Specialty TotalRevenue OEM Equipment and & Fluids Products Products ITW ElectronicsOrganic 7.6 % (9.6 ) % 10.7 % 6.2 % 8.8 % 12.8 % 7.3 % 6.1 %Acquisitions/ ? % ? % ? % ? % ? % (0.2 ) % ? % ? %DivestituresTranslation 5.0 % 3.1 % 3.3 % 1.3 % 1.9 % 7.6 % 3.1 % 3.7 %Operating 12.6 % (6.5 ) % 14.0 % 7.5 % 10.7 % 20.2 % 10.4 % 9.8 %Revenue

ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSEGMENT DATA (UNAUDITED)

Q1 2021 vs. Q1 2020 Favorable/(Unfavorable) Test &Change in Operating Automotive Food Measurement Welding Polymers Construction Specialty TotalMargin OEM Equipment and & Fluids Products Products ITW ElectronicsOperating Leverage 130 bps (260) bps 260 bps 100 bps 200 bps 260 bps 140 bps 120 bpsChanges in Variable 170 bps (50) bps 70 bps 20 bps (10) bps 170 bps 50 bps 70Margin & OH Costs bpsTotal Organic 300 bps (310) bps 330 bps 120 bps 190 bps 430 bps 190 bps 190 bpsAcquisitions/ ? ? ? ? ? ? ? ?DivestituresRestructuring/ 20 bps ? ? ? 20 bps (10) bps (60) bps ?OtherTotal Operating 320 bps (310) bps 330 bps 120 bps 210 bps 420 bps 130 bps 190Margin Change bps Total Operating 24.1% 21.2% 28.4% 30.3% 25.7% 27.6% 27.6% 25.5%Margin % * *Includesunfavorableoperating margin 100impact of 40 bps 70 bps 170 bps 10 bps 290 bps 20 bps 80 bps bpsamortization **expense fromacquisition-relatedintangible assets** Amortization expense from acquisition-related intangible assets had anunfavorable impact of ($0.08) on GAAP earnings per share for the first quarterof 2021.

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

AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)

Three Months Ended March 31,Dollars in millions 2021 2020Operating income $ 905 $ 761 Tax rate 22.4 % 23.0 %Income taxes (203 ) (175 ) Operating income after taxes $ 702 $ 586 Invested capital: Trade receivables $ 2,662 $ 2,424 Inventories 1,292 1,185 Net assets held for sale ? 181 Net plant and equipment 1,746 1,704 Goodwill and intangible assets 5,379 5,237 Accounts payable and accrued expenses (1,850 ) (1,593 ) Other, net (488 ) (590 ) Total invested capital $ 8,741 $ 8,548 Average invested capital $ 8,740 $ 8,677 After-tax return on average invested capital 32.1 % 27.0 %

FREE CASH FLOW (UNAUDITED)

Three Months Ended Twelve Months Ended March 31, December 31,Dollars in millions 2021 2020 2020Net cash provided by operating $ 609 $ 614 $ 2,807 activitiesLess: Additions to plant and (68 ) (60 ) (236 ) equipmentFree cash flow $ 541 $ 554 $ 2,571 Net income $ 671 $ 566 $ 2,109 Free cash flow to net income 81 % 98 % 122 %conversion rate

Investor RelationsIllinois Tool WorksKaren FletcherTel: 224.661.7433investorrelations@itw.com