ITW Reports Second-Quarter 2017 Results Second-quarter

New Post Public Reply Private Reply Replies (0) Message Board
News Desk 2018
74
ITW Reports Second-Quarter 2017 Results

Second-quarter highlights:

  • GAAP EPS of $1.69, an increase of 16%
  • Total revenue of $3.6 billion, an increase of 4.9%; organic growth of 2.6%
  • Operating margin of 24.3%, an increase of 120 bps and an all-time record for the company
  • Company now expects 2017 earnings to be in the range of $6.32 to $6.52 per share

GLENVIEW, Ill., July 24, 2017 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW ) today reported its second-quarter 2017 results.

Second-quarter GAAP earnings were $1.69 per share, an increase of 16% versus the second quarter of 2016. Revenue grew 4.9% to $3.6 billion. Organic revenue increased 2.6% while the 2016 acquisition of Engineered Fasteners & Components (EF&C) added 3.5% to revenue. Foreign currency translation reduced revenue by 1.2%.

Operating income of $874 million for the second quarter was up 10% and was the highest quarterly income total in the company’s history. Operating margin for the quarter was 24.3%, an increase of 120 basis points. Excluding the margin impact from EF&C, operating margin was 24.9%, an increase of 180 basis points year-on-year with 100 basis points of structural margin improvement from Enterprise Initiatives. After-tax return on invested capital was 24.8%, an improvement of 190 basis points. Second-quarter net income was $587 million.

“Our second quarter performance reflects continued progress in our focus on leveraging ITW’s differentiated business model and diversified high-quality business portfolio to full potential,” said E. Scott Santi, Chairman and Chief Executive Officer. “I once again thank the entire ITW team for the great job that they continue to do in serving our customers and executing our strategy with excellence. Due to their efforts, ITW is well-positioned to continue to deliver differentiated performance through the balance of 2017 and beyond.”

Organic revenue growth was positive in six of seven segments: 4% in Automotive OEM, 4% in Test & Measurement/Electronics, 4% in Specialty Products, 3% in Welding, 2% in Construction Products, and 1% in Food Equipment. Polymers & Fluids was down 1%.

During the second quarter, the company recorded an EPS benefit of $0.03 per share related to a legal settlement. Excluding this item, second quarter earnings were $1.66 per share, an increase of 14% versus the prior year.

Full-Year and Third Quarter 2017 Guidance As a result of the company’s strong second quarter results, ITW is raising its 2017 full-year EPS guidance by $0.12 at the mid-point. The company now expects earnings to be in the range of $6.32 to $6.52 per share, up from prior guidance of $6.20 to $6.40 per share, with organic revenue growth of 2 to 4%. ITW expects operating margin of approximately 24% and free cash flow to exceed 100% of net income. The company expects an effective tax rate of approximately 29%.

For the third quarter 2017, the company expects earnings to be in the range of $1.57 to $1.67 per share with organic growth of 1 to 3%.

The company’s third quarter and revised full-year EPS guidance does not include any EPS benefit from the previously disclosed legal settlement beyond the $0.03 per share recorded in the second quarter.

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, including, without limitation, statements regarding diluted earnings per share, organic revenue growth, operating margin, free cash flow, effective tax rate and after-tax return on invested capital. These statements are subject to certain risks, uncertainties 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 2016.

About ITW ITW (NYSE: ITW ) is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $13.6 billion in 2016. 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 has more than 50,000 dedicated colleagues in operations around the world who thrive in the company’s unique, decentralized and entrepreneurial culture. To learn more about the company and the ITW Business Model, visit www.itw.com .

 
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF INCOME (UNAUDITED)
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
In millions except per share amounts 2017   2016   2017   2016
Operating Revenue $ 3,599     $ 3,431     $ 7,070     $ 6,705  
Cost of revenue 2,087     1,967     4,091     3,863  
Selling, administrative, and research and development expenses 586     617     1,191     1,214  
Amortization and impairment of intangible assets 52     55     105     114  
Operating Income 874     792     1,683     1,514  
Interest expense (65 )   (58 )   (129 )   (116 )
Other income (expense) 10     17     14     21  
Income Before Taxes 819     751     1,568     1,419  
Income taxes 232     226     445     426  
Net Income $ 587     $ 525     $ 1,123     $ 993  
               
Net Income Per Share:              
Basic $ 1.70     $ 1.47     $ 3.25     $ 2.76  
Diluted $ 1.69     $ 1.46     $ 3.23     $ 2.75  
               
Cash Dividends Per Share:              
Paid $ 0.65     $ 0.55     $ 1.30     $ 1.10  
Declared $ 0.65     $ 0.55     $ 1.30     $ 1.10  
               
Shares of Common Stock Outstanding During the Period:              
Average 344.7   356.6   345.4   359.3
Average assuming dilution 347.5   358.5   348.3   361.2
 
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES STATEMENT OF FINANCIAL POSITION (UNAUDITED)
 
In millions June 30, 2017   December 31, 2016
Assets      
Current Assets:      
Cash and equivalents $ 2,496     $ 2,472  
Trade receivables 2,629     2,357  
Inventories 1,199     1,076  
Prepaid expenses and other current assets 246     218  
Total current assets 6,570     6,123  
       
Net plant and equipment 1,726     1,652  
Goodwill 4,675     4,558  
Intangible assets 1,366     1,463  
Deferred income taxes 488     449  
Other assets 1,097     956  
  $ 15,922     $ 15,201  
       
Liabilities and Stockholders' Equity      
Current Liabilities:      
Short-term debt $ 691     $ 652  
Accounts payable 582     511  
Accrued expenses 1,172     1,202  
Cash dividends payable 224     226  
Income taxes payable 157     169  
Total current liabilities 2,826     2,760  
       
Noncurrent Liabilities:      
Long-term debt 7,360     7,177  
Deferred income taxes 121     134  
Other liabilities 841     871  
Total noncurrent liabilities 8,322     8,182  
       
Stockholders’ Equity:      
Common stock 6     6  
Additional paid-in-capital 1,196     1,188  
Retained earnings 20,180     19,505  
Common stock held in treasury (15,095 )   (14,638 )
Accumulated other comprehensive income (loss) (1,516 )   (1,807 )
Noncontrolling interest 3     5  
Total stockholders’ equity 4,774     4,259  
  $ 15,922     $ 15,201  
 
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED)
 
Three Months Ended June 30, 2017
Dollars in millions Total Revenue   Operating Income   Operating Margin
Automotive OEM $ 820       $ 182     22.3 %
Food Equipment 529     139     26.4 %
Test & Measurement and Electronics 519     114     21.9 %
Welding 385     105     27.2 %
Polymers & Fluids 437     94     21.4 %
Construction Products 425     102     24.0 %
Specialty Products 490     139     28.3 %
Intersegment (6 )   —     — %
Total Segments 3,599     875     24.3 %
Unallocated —     (1 )   — %
Total Company $ 3,599       $ 874     24.3 %
 
Six Months Ended June 30, 2017
Dollars in millions Total Revenue   Operating Income   Operating Margin
Automotive OEM $ 1,648     $ 384     23.3 %
Food Equipment 1,026     264     25.8 %
Test & Measurement and Electronics 999     210     21.0 %
Welding 772     212     27.4 %
Polymers & Fluids 863     182     21.0 %
Construction Products 820     191     23.3 %
Specialty Products 953     263     27.6 %
Intersegment (11 )   —     — %
Total Segments 7,070     1,706     24.1 %
Unallocated —     (23 )   — %
Total Company $ 7,070     $ 1,683     23.8 %
 
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED)
 
Q2 2017 vs. Q2 2016 Favorable/(Unfavorable)
Operating Revenue Automotive OEM   Food Equipment   Test & Measurement and Electronics   Welding   Polymers & Fluids   Construction Products   Specialty Products   Total ITW
Organic 4.4 %   0.6 %   4.3 %   3.3 %   (1.0 )%   1.6 %   3.9 %   2.6 %
Acquisitions/ Divestitures 19.0 %   — %   — %   — %   — %   — %   (1.4 )%   3.5 %
Translation (1.2 )%   (2.0 )%   (1.8 )%   (0.4 )%   (0.3 )%   (1.2 )%   (1.4 )%   (1.2 )%
Operating Revenue 22.2 %   (1.4 )%   2.5 %   2.9 %   (1.3 )%   0.4 %   1.1 %   4.9 %
 
Q2 2017 vs. Q2 2016 Favorable/(Unfavorable)
Change in Operating Margin Automotive OEM   Food Equipment   Test & Measurement and Electronics   Welding   Polymers & Fluids   Construction Products   Specialty Products   Total ITW
Operating Leverage 70 bps 10 bps 120 bps 60 bps (20) bps 40 bps 80 bps 50 bps
Changes in Variable Margin & OH Costs (70) bps 90 bps 200 bps 10 bps 100 bps (140) bps 100 bps 110 bps
Total Organic —      100 bps  320 bps  70 bps  80 bps  (100) bps  180 bps  160 bps
Acquisitions/ Divestitures (270) bps —     —     —     —     —     30 bps (60) bps
Restructuring/Other (80) bps 40 bps 10 bps 160 bps (30) bps 70 bps 20 bps 20 bps
Total Operating Margin Change  (350) bps  140 bps  330 bps  230 bps  50 bps  (30) bps  230 bps  120 bps
                 
Total Operating Margin % * 22.3 %   26.4 %   21.9 %   27.2 %   21.4 %   24.0 %   28.3 %   24.3 %
                 
*Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 50 bps 80 bps 320 bps 40 bps 400 bps 60 bps 120 bps 150 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.10) on GAAP net income diluted earnings per share for the second quarter of 2017.
 
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES SEGMENT DATA (UNAUDITED)
 
1H 2017 vs 1H 2016 Favorable/(Unfavorable)
Operating Revenue Automotive OEM   Food Equipment   Test & Measurement and Electronics   Welding   Polymers & Fluids   Construction Products   Specialty Products   Total ITW
Organic 6.7 %   1.3 %   4.9 %   1.5 %   0.2 %   2.2 %   2.4 %   3.0 %
Acquisitions/ Divestitures 19.2 %   — %   — %   — %   — %   — %   (1.1 )%   3.6 %
Translation (1.7 )%   (2.2 )%   (2.0 )%   (0.4 )%   0.1 %   (0.7 )%   (1.3 )%   (1.2 )%
Operating Revenue 24.2 %   (0.9 )%   2.9 %   1.1 %   0.3 %   1.5 %   — %   5.4 %
 
1H 2017 vs. 1H 2016 Favorable/(Unfavorable)
Change in Operating Margin Automotive OEM   Food Equipment   Test & Measurement and Electronics   Welding   Polymers & Fluids   Construction Products   Specialty Products   Total ITW
Operating Leverage 90 bps 20 bps 140 bps 40 bps —     50 bps 60 bps 60 bps
Changes in Variable Margin & OH Costs (50) bps 40 bps 250 bps 110 bps 110 bps (20) bps 90 bps 110 bps
Total Organic 40 bps 60 bps 390 bps 150 bps 110 bps 30 bps 150 bps 170 bps
Acquisitions/ Divestitures (270) bps —     —     —     —     —     30 bps (60) bps
Restructuring/Other (50) bps 40 bps —     150 bps (70) bps 20 bps (20) bps 10 bps
Total Operating Margin Change (280) bps 100 bps 390 bps 300 bps 40 bps 50 bps 160 bps 120 bps
                 
Total Operating Margin % * 23.3 %   25.8 %   21.0 %   27.4 %   21.0 %   23.3 %   27.6 %   23.8 %
                 
*Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 60 bps 80 bps 340 bps 50 bps 410 bps 60 bps 130 bps 150 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.21) on GAAP net income diluted earnings per share for the first half of 2017.
 
Full Year 2016 vs Full Year 2015 Favorable/(Unfavorable)
Operating Revenue Automotive OEM   Food Equipment   Test & Measurement and Electronics   Welding   Polymers & Fluids   Construction Products   Specialty Products   Total ITW
Organic 5.1 %   2.8 %   1.8 %   (9.1 )%   1.3 %   3.0 %   1.2 %   1.2 %
Acquisitions/ Divestitures 9.7 %   — %   — %   — %   (0.2 )%   (0.2 )%   (0.1 )%   1.7 %
Translation (1.5 )%   (2.1 )%   (1.5 )%   (0.9 )%   (2.3 )%   (1.4 )%   (1.1 )%   (1.5 )%
Operating Revenue 13.3 %   0.7 %   0.3 %   (10.0 )%   (1.2 )%   1.4 %   — %   1.4 %
 
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
 
ADJUSTED AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
 
  Three Months Ended   Six Months Ended   Twelve Months Ended
  June 30,   June 30,   December 31,
Dollars in millions 2017   2016   2017   2016   2016
Operating income $ 874     $ 792     $ 1,683     $ 1,514     $ 3,064  
Tax rate 28.4 %   30.0 %   28.4 %   30.0 %   30.0 %
Income taxes (248 )   (238 )   (477 )   (454 )   (919 )
Operating income after taxes $ 626     $ 554     $ 1,206     $ 1,060     $ 2,145  
                   
Invested capital:                  
Trade receivables $ 2,629     $ 2,413     $ 2,629     $ 2,413     $ 2,357  
Inventories 1,199     1,145     1,199     1,145     1,076  
Net plant and equipment 1,726     1,580     1,726     1,580     1,652  
Goodwill and intangible assets 6,041     5,907     6,041     5,907     6,021  
Accounts payable and accrued expenses (1,754 )   (1,635 )   (1,754 )   (1,635 )   (1,713 )
Other, net 488     349     488     349     223  
Total invested capital $ 10,329     $ 9,759     $ 10,329     $ 9,759     $ 9,616  
                   
Average invested capital $ 10,105     $ 9,768     $ 9,942     $ 9,698     $ 9,780  
Adjustment for Wilsonart (formerly the Decorative Surfaces segment) —     (112 )   —     (112 )   (91 )
Adjusted average invested capital $ 10,105     $ 9,656     $ 9,942     $ 9,586     $ 9,689  
Adjusted return on average invested capital 24.8 %   22.9 %   24.3 %   22.1 %   22.1 %
 
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
 
FREE CASH FLOW (UNAUDITED)
       
  Three Months Ended   Six Months Ended
  June 30,   June 30,
Dollars in millions 2017   2016   2017   2016
Net cash provided by operating activities $ 464     $ 535     $ 927     $ 1,014  
Less: Additions to plant and equipment (77 )   (64 )   (141 )   (121 )
Free cash flow $ 387     $ 471     $ 786     $ 893  
               
Net income $ 587     $ 525     $ 1,123     $ 993  
Free cash flow to net income conversion rate 66 % * 90 %   70 % * 90 %
 
*  Excluding $115 million related to an additional discretionary pension contribution, the free cash flow to net income conversion rate for the three months ended June 30, 2017 would have been 85%. Excluding $160 million of discretionary pension contributions for the six months ended June 30, 2017 as compared to the prior year period, the free cash flow to net income conversion rate would have been 84%.
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
Dollars in millions 2017   2017
Free cash flow $ 387     $ 786  
Pension contribution adjustment 115     160  
Adjusted free cash flow $ 502     $ 946  
       
Net income $ 587     $ 1,123  
Adjusted free cash flow to net income conversion rate 85 %   84 %

Contact: Mike Drazin 224.661.7433 or mdrazin@itw.com

Scroll down for more posts ▼

Top 10 Most Recent News Articles

CalExitNow Push for CA GOP Ban & Sovereignty Talks

Updated Category News Views 144

California's Political Pot Stirs In the wild world of politics, California stands as a fiery beacon yet again. This time, CalExitNow, a fiery group championing California's self-determination, is taking aim at the state’s Republican Party. Reminds me of a stock under pressure—hesitate at your peril as the winds of change sweep through. Disqualification Petition: A...

Continue Reading
Pigeon Unveils Green Innovations at CIIE 2026

Updated Category News Views 164

An International Celebration: Cultural Connections at CIIE Babies have a way of bringing the world together. Every culture has its own quirks and traditions, but the love for a newborn is common ground. Pigeon gets that, and they're putting it on full display at the China International Import Expo (CIIE) in Shanghai. It's their fourth run at this rodeo, and they’re not...

Continue Reading
PAC Criticizes JD Vance's Billionaire Connections

Updated Category News Views 187

Unveiling Vance's High-Powered Backers Brace yourself for a fresh round of political sparring, folks. The Patriots for American Principles PAC has decided that JD Vance's relationships with the billionaire elite need a little more sunshine. And they're not shy about it—Vance's billionaires will be paraded around the streets of Washington D.C. on a mobile billboard,...

Continue Reading
Everest Group Faces Major Class Action Deadline Looms

Updated Category News Views 154

Everest Group's Headaches Multiply as Deadline Approaches Well, here we find a classic case of Wall Street drama—Everest Group, Ltd. (NYSE:EG), a company whose troubles would make any trader weary. As of late, it's caught up in a nasty class-action lawsuit with stakes high enough to raise eyebrows from Broadway to Bayou. Investors in Everest better be tuned in, because...

Continue Reading
Preventing Dental Issues in Kids: Valuable Tips Shared

Updated Category News Views 73

Pediatric Dental Challenges Under the Microscope When it comes to kids and dental health, we're talking about the fundamentals—the kind that sticks around and makes a difference in their future pearly whites. None of that flashy tech gizmo stuff, just straight-on strategies for resilient chompers. Cavities, gum irritation, early tooth alignment—these are the everyday...

Continue Reading
Havertys Dividend: A Steady Payout Tradition Continues

Updated Category News Views 141

Another Year, Another Dividend for Havertys Man, talk about a company with a rock-solid habit. Havertys Furniture Companies (NYSE: HVT) just announced its latest cash dividend, cementing a tradition that's been rolling since 1935. They're dropping $0.33 per share on the common stock and $0.31 on the Class A common stock. It's set to hit investors' pockets by December 9,...

Continue Reading
Tenax Sued: Investors Face Class Action Over TNX-103

Updated Category News Views 108

What Tenax Investors Need to Know Alright, folks, time to pull up a chair and pay attention to what's brewing with Tenax Therapeutics—yeah, we're talking NASDAQ: TENX. The company's head is spinning as it's caught up in a securities class action lawsuit. What's the fuss? The fine print here accuses Tenax of misleading investors about the effectiveness of their product,...

Continue Reading
IRTC Faces Investigation: Shares Plunge Amid Uncertainty

Updated Category News Views 48

Securities Trouble on the Horizon: IRTC Takes a Hit Wake up and adjust your seat, folks—iRhythm Technologies (NASDAQ:IRTC) is in the spotlight, and it ain't pretty. Shares nosedived over 30% in a single morning, stirring up quite the murky waters for shareholders. The trigger? A less-than-stellar third-quarter report. The Numbers Don't Lie—Or Do They? Management...

Continue Reading
2027 Toy of the Year Finalists Energize Play Market

Updated Category News Views 37

A Kaleidoscope of Innovation in Toys There's a familiar buzz in the air, folks. The 2027 Toy of the Year Awards finalists have been unveiled, and they're bringing a fresh wave of creativity to children's playrooms. These aren't just toys; they're miniature innovators ready to light up the market this holiday season. The reveal happened at the Chicago Toy & Game Fair and...

Continue Reading
AZZ Inc.'s 2026 Sustainability Report: A Closer Look

Updated Category News Views 207

Diving into AZZ's Sustainability Commitment AZZ Inc., known in the trading circles as NYSE:AZZ, has just dropped its 2026 Sustainability Report and it’s quite the document to chew on. This ain't your typical corporate fluff. Tom Ferguson, the man steering the AZZ ship, laid it down plain and simple. This report isn’t just about ticking boxes for ESG; it’s reflecting...

Continue Reading
More News Articles

Top 5 Most Recently Viewed Articles

Primrose Schools® Accelerates Growth with New Franchises

Updated Category News Views 331

Primrose Schools® Drives Expansion with New Franchise Agreements As a leading preschool franchise, Primrose Schools is excited to announce that it has awarded 19 new franchise agreements. The company is strategically focusing on expanding its reach in several key markets across the nation. This growth and enthusiasm for early education aims to create more business...

Continue Reading
Synopsys Partners with Vector for Next-Gen Vehicle Development

Updated Category News Views 141

Collaborative Innovation in the Automotive Sector Synopsys, Inc. (NASDAQ: SNPS) and Vector Informatik have announced an important strategic partnership aimed at revolutionizing the development of software-defined vehicles (SDVs). This collaboration focuses on streamlining the development process, which is vital as automotive manufacturers seek to adapt to rapidly changing...

Continue Reading
Lululemon's Business Model: A Case for Long-Term Value

Updated Category News Views 774

Understanding Lululemon's Business Model When considering an investment in a company, the fundamental question becomes: if I could acquire this company entirely at its current market value, would I want to hold onto it for the foreseeable future? Lululemon represents more than just a clothing brand; it signifies a robust lifestyle brand which emerged from a unique niche,...

Continue Reading
Celebrating Our Heroes: The Exchange's Salute to Service Month

Updated Category News Views 266

Honoring Military Heroes with Salute to Service Month This November marks a special occasion as the Army & Air Force Exchange Service dedicates the month to celebrate active-duty military members, retirees, and veterans. Throughout Salute to Service Month, exclusive limited-edition giveaways will be offered at PXs and BXs worldwide, ensuring that the contributions of our...

Continue Reading
Huawei Cloud's 2026 Partner Policies: A Blueprint for Success

Updated Category News Views 221

Huawei Cloud's Dynamic Vision for 2026 In a significant move toward empowering collaboration, Huawei Cloud launched its new Global Sales Partner Policies, emphasizing a theme of "Shared Intelligence, Shared Success." This initiative reflects Huawei's commitment to building a prosperous partner ecosystem in an increasingly competitive digital landscape. Driving Trust and...

Continue Reading