Delaware | 1-4797 | 36-1258310 | ||
(State or other jurisdiction of incorporation) | (Commission File No.) | (I.R.S. Employer Identification No.) | ||
155 Harlem Avenue, Glenview, IL | 60025 | |||
(Address of principal executive offices) | (Zip Code) |
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock | ITW | New York Stock Exchange |
1.75% Euro Notes due 2022 | ITW22 | New York Stock Exchange |
1.25% Euro Notes due 2023 | ITW23 | New York Stock Exchange |
0.250% Euro Notes due 2024 | ITW24A | New York Stock Exchange |
0.625% Euro Notes due 2027 | ITW27 | New York Stock Exchange |
2.125% Euro Notes due 2030 | ITW30 | New York Stock Exchange |
1.00% Euro Notes due 2031 | ITW31 | New York Stock Exchange |
3.00% Euro Notes due 2034 | ITW34 | New York Stock Exchange |
(d) | Exhibits | ||
Exhibit Number | Exhibit Description | ||
ILLINOIS TOOL WORKS INC. | ||
Dated: July 26, 2019 | By: /s/ Michael M. Larsen | |
Michael M. Larsen | ||
Senior Vice President & Chief Financial Officer |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
In millions except per share amounts | 2019 | 2018 | 2019 | 2018 | |||||||||||
Operating Revenue | $ | 3,609 | $ | 3,831 | $ | 7,161 | $ | 7,575 | |||||||
Cost of revenue | 2,099 | 2,231 | 4,158 | 4,412 | |||||||||||
Selling, administrative, and research and development expenses | 598 | 620 | 1,209 | 1,232 | |||||||||||
Amortization and impairment of intangible assets | 41 | 48 | 84 | 96 | |||||||||||
Operating Income | 871 | 932 | 1,710 | 1,835 | |||||||||||
Interest expense | (55 | ) | (64 | ) | (118 | ) | (130 | ) | |||||||
Other income (expense) | 9 | 26 | 23 | 38 | |||||||||||
Income Before Taxes | 825 | 894 | 1,615 | 1,743 | |||||||||||
Income Taxes | 202 | 228 | 395 | 425 | |||||||||||
Net Income | $ | 623 | $ | 666 | $ | 1,220 | $ | 1,318 | |||||||
Net Income Per Share: | |||||||||||||||
Basic | $ | 1.92 | $ | 1.98 | $ | 3.74 | $ | 3.90 | |||||||
Diluted | $ | 1.91 | $ | 1.97 | $ | 3.72 | $ | 3.87 | |||||||
Cash Dividends Per Share: | |||||||||||||||
Paid | $ | 1.00 | $ | 0.78 | $ | 2.00 | $ | 1.56 | |||||||
Declared | $ | 1.00 | $ | 0.78 | $ | 2.00 | $ | 1.56 | |||||||
Shares of Common Stock Outstanding During the Period: | |||||||||||||||
Average | 324.8 | 336.7 | 326.0 | 338.5 | |||||||||||
Average assuming dilution | 326.6 | 338.9 | 327.9 | 340.8 |
In millions | June 30, 2019 | December 31, 2018 | |||||
Assets | |||||||
Current Assets: | |||||||
Cash and equivalents | $ | 1,677 | $ | 1,504 | |||
Trade receivables | 2,629 | 2,622 | |||||
Inventories | 1,256 | 1,318 | |||||
Prepaid expenses and other current assets | 288 | 334 | |||||
Assets held for sale | 439 | — | |||||
Total current assets | 6,289 | 5,778 | |||||
Net plant and equipment | 1,717 | 1,791 | |||||
Goodwill | 4,503 | 4,633 | |||||
Intangible assets | 928 | 1,084 | |||||
Deferred income taxes | 516 | 554 | |||||
Other assets | 1,234 | 1,030 | |||||
$ | 15,187 | $ | 14,870 | ||||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | — | $ | 1,351 | |||
Accounts payable | 512 | 524 | |||||
Accrued expenses | 1,207 | 1,271 | |||||
Cash dividends payable | 323 | 328 | |||||
Income taxes payable | 53 | 68 | |||||
Liabilities held for sale | 93 | — | |||||
Total current liabilities | 2,188 | 3,542 | |||||
Noncurrent Liabilities: | |||||||
Long-term debt | 7,809 | 6,029 | |||||
Deferred income taxes | 683 | 707 | |||||
Noncurrent income taxes payable | 462 | 495 | |||||
Other liabilities | 950 | 839 | |||||
Total noncurrent liabilities | 9,904 | 8,070 | |||||
Stockholders’ Equity: | |||||||
Common stock | 6 | 6 | |||||
Additional paid-in-capital | 1,270 | 1,253 | |||||
Retained earnings | 21,788 | 21,217 | |||||
Common stock held in treasury | (18,276 | ) | (17,545 | ) | |||
Accumulated other comprehensive income (loss) | (1,697 | ) | (1,677 | ) | |||
Noncontrolling interest | 4 | 4 | |||||
Total stockholders’ equity | 3,095 | 3,258 | |||||
$ | 15,187 | $ | 14,870 |
Three Months Ended June 30, 2019 | ||||||||
Dollars in millions | Total Revenue | Operating Income | Operating Margin | |||||
Automotive OEM | $ | 788 | $ | 174 | 22.1 | % | ||
Food Equipment | 548 | 140 | 25.6 | % | ||||
Test & Measurement and Electronics | 533 | 131 | 24.5 | % | ||||
Welding | 422 | 122 | 28.8 | % | ||||
Polymers & Fluids | 427 | 97 | 22.8 | % | ||||
Construction Products | 424 | 106 | 25.0 | % | ||||
Specialty Products | 473 | 124 | 26.1 | % | ||||
Intersegment | (6 | ) | — | — | % | |||
Total Segments | 3,609 | 894 | 24.8 | % | ||||
Unallocated | — | (23 | ) | — | % | |||
Total Company | $ | 3,609 | $ | 871 | 24.1 | % |
Six Months Ended June 30, 2019 | ||||||||
Dollars in millions | Total Revenue | Operating Income | Operating Margin | |||||
Automotive OEM | $ | 1,594 | $ | 341 | 21.4 | % | ||
Food Equipment | 1,066 | 269 | 25.3 | % | ||||
Test & Measurement and Electronics | 1,057 | 257 | 24.3 | % | ||||
Welding | 849 | 242 | 28.5 | % | ||||
Polymers & Fluids | 843 | 186 | 22.1 | % | ||||
Construction Products | 825 | 193 | 23.4 | % | ||||
Specialty Products | 938 | 247 | 26.3 | % | ||||
Intersegment | (11 | ) | — | — | % | |||
Total Segments | 7,161 | 1,735 | 24.2 | % | ||||
Unallocated | — | (25 | ) | — | % | |||
Total Company | $ | 7,161 | $ | 1,710 | 23.9 | % |
Q2 2019 vs. Q2 2018 Favorable/(Unfavorable) | ||||||||||||||||
Operating Revenue | Automotive OEM | Food Equipment | Test & Measurement and Electronics | Welding | Polymers & Fluids | Construction Products | Specialty Products | Total ITW | ||||||||
Organic | (7.1 | )% | 1.7 | % | (1.3 | )% | (2.4 | )% | 0.1 | % | (0.7 | )% | (6.4 | )% | (2.8 | )% |
Acquisitions/Divestitures | — | % | — | % | — | % | (0.8 | )% | (0.8 | )% | — | % | (0.8 | )% | (0.3 | )% |
Translation | (3.3 | )% | (2.7 | )% | (2.3 | )% | (1.0 | )% | (3.2 | )% | (3.8 | )% | (2.1 | )% | (2.7 | )% |
Operating Revenue | (10.4 | )% | (1.0 | )% | (3.6 | )% | (4.2 | )% | (3.9 | )% | (4.5 | )% | (9.3 | )% | (5.8 | )% |
Q2 2019 vs. Q2 2018 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 | (120) bps | 40 bps | (40) bps | (40) bps | 10 bps | (20) bps | (130) bps | (60) bps |
Changes in Variable Margin & OH Costs | 90 bps | — | 90 bps | 10 bps | 170 bps | 60 bps | (50) bps | 60 bps |
Total Organic | (30) bps | 40 bps | 50 bps | (30) bps | 180 bps | 40 bps | (180) bps | — |
Acquisitions/Divestitures | — | — | — | 20 bps | 20 bps | — | 30 bps | 10 bps |
Restructuring/Other | (10) bps | (20) bps | 50 bps | (40) bps | (40) bps | 10 bps | (50) bps | (30) bps |
Total Operating Margin Change | (40) bps | 20 bps | 100 bps | (50) bps | 160 bps | 50 bps | (200) bps | (20) bps |
Total Operating Margin % * | 22.1% | 25.6% | 24.5% | 28.8% | 22.8% | 25.0% | 26.1% | 24.1% |
*Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets | 50 bps | 70 bps | 220 bps | 30 bps | 350 bps | 30 bps | 100 bps | 120 bps ** |
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.09) on GAAP earnings per share for the second quarter of 2019. | ||||||||
1H 2019 vs 1H 2018 Favorable/(Unfavorable) | ||||||||||||||||
Operating Revenue | Automotive OEM | Food Equipment | Test & Measurement and Electronics | Welding | Polymers & Fluids | Construction Products | Specialty Products | Total ITW | ||||||||
Organic | (6.7 | )% | 1.7 | % | (0.9 | )% | 0.2 | % | (0.4 | )% | (1.0 | )% | (4.1 | )% | (2.2 | )% |
Acquisitions/Divestitures | — | % | — | % | — | % | (0.7 | )% | (0.9 | )% | — | % | (0.4 | )% | (0.2 | )% |
Translation | (3.7 | )% | (3.0 | )% | (2.7 | )% | (1.1 | )% | (3.7 | )% | (4.4 | )% | (2.4 | )% | (3.1 | )% |
Operating Revenue | (10.4 | )% | (1.3 | )% | (3.6 | )% | (1.6 | )% | (5.0 | )% | (5.4 | )% | (6.9 | )% | (5.5 | )% |
1H 2019 vs. 1H 2018 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 | (110) bps | 40 bps | (30) bps | 10 bps | (10) bps | (10) bps | (90) bps | (40) bps |
Changes in Variable Margin & OH Costs | 20 bps | 40 bps | 100 bps | (10) bps | 120 bps | 50 bps | (10) bps | 50 bps |
Total Organic | (90) bps | 80 bps | 70 bps | — | 110 bps | 40 bps | (100) bps | 10 bps |
Acquisitions/Divestitures | — | — | — | 20 bps | 20 bps | — | 20 bps | 10 bps |
Restructuring/Other | (100) bps | (50) bps | 10 bps | (20) bps | (30) bps | (30) bps | (30) bps | (50) bps |
Total Operating Margin Change | (190) bps | 30 bps | 80 bps | — | 100 bps | 10 bps | (110) bps | (30) bps |
Total Operating Margin % * | 21.4% | 25.3% | 24.3% | 28.5% | 22.1% | 23.4% | 26.3% | 23.9% |
*Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets | 50 bps | 70 bps | 240 bps | 20 bps | 350 bps | 30 bps | 100 bps | 120 bps ** |
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.19) on GAAP earnings per share for the first half of 2019. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Dollars in millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Operating income | $ | 871 | $ | 932 | $ | 1,710 | $ | 1,835 | |||||||
Tax rate | 24.5 | % | 25.5 | % | 24.5 | % | 25.2 | % | |||||||
Income taxes | (213 | ) | (238 | ) | (418 | ) | (462 | ) | |||||||
Operating income after taxes | $ | 658 | $ | 694 | $ | 1,292 | $ | 1,373 | |||||||
Invested capital: | |||||||||||||||
Trade receivables | $ | 2,629 | $ | 2,878 | $ | 2,629 | $ | 2,878 | |||||||
Inventories | 1,256 | 1,320 | 1,256 | 1,320 | |||||||||||
Net assets held for sale | 346 | — | 346 | — | |||||||||||
Net plant and equipment | 1,717 | 1,783 | 1,717 | 1,783 | |||||||||||
Goodwill and intangible assets | 5,431 | 5,852 | 5,431 | 5,852 | |||||||||||
Accounts payable and accrued expenses | (1,719 | ) | (1,847 | ) | (1,719 | ) | (1,847 | ) | |||||||
Other, net | (433 | ) | (407 | ) | (433 | ) | (407 | ) | |||||||
Total invested capital | $ | 9,227 | $ | 9,579 | $ | 9,227 | $ | 9,579 | |||||||
Average invested capital | $ | 9,206 | $ | 9,675 | $ | 9,182 | $ | 9,724 | |||||||
Adjusted return on average invested capital | 28.6 | % | 28.7 | % | 28.1 | % | 28.2 | % |
Six Months Ended | ||||||
June 30, 2018 | ||||||
Dollars in millions | Income Taxes | Tax Rate | ||||
As reported | $ | 425 | 24.4 | % | ||
Discrete tax benefit | 14 | 0.8 | % | |||
As adjusted | $ | 439 | 25.2 | % |
Dollars in millions | Twelve Months Ended December 31, 2018 | ||
Operating income | $ | 3,584 | |
Tax rate | 24.9 | % | |
Income taxes | (893 | ) | |
Operating income after taxes | $ | 2,691 | |
Invested capital: | |||
Trade receivables | $ | 2,622 | |
Inventories | 1,318 | ||
Net plant and equipment | 1,791 | ||
Goodwill and intangible assets | 5,717 | ||
Accounts payable and accrued expenses | (1,795 | ) | |
Other, net | (519 | ) | |
Total invested capital | $ | 9,134 | |
Average invested capital | $ | 9,533 | |
Adjusted return on average invested capital | 28.2 | % |
Twelve Months Ended | ||||||
December 31, 2018 | ||||||
Dollars in millions | Income Taxes | Tax Rate | ||||
As reported | $ | 831 | 24.5 | % | ||
Net discrete tax benefit | 15 | 0.4 | % | |||
As adjusted | $ | 846 | 24.9 | % |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Dollars in millions | 2019 | 2018 | 2019 | 2018 | |||||||||||
Net cash provided by operating activities | $ | 685 | $ | 620 | $ | 1,301 | $ | 1,158 | |||||||
Less: Additions to plant and equipment | (77 | ) | (87 | ) | (154 | ) | (181 | ) | |||||||
Free cash flow | $ | 608 | $ | 533 | $ | 1,147 | $ | 977 | |||||||
Net income | $ | 623 | $ | 666 | $ | 1,220 | $ | 1,318 | |||||||
Free cash flow to net income conversion rate | 98 | % | 80 | % | 94 | % | 74 | % |
Three Months Ended | |||
June 30, 2019 | |||
As reported | $ | 1.91 | |
Foreign currency translation | 0.06 | ||
Higher restructuring expenses | 0.02 | ||
Loss on divestitures | 0.01 | ||
As adjusted | $ | 2.00 |