Illinois Tool Works Inc.

Last modified by Asif Farooqui on 2023/06/12 18:02

Contents

Summary
Recent Developments
Financial Highlights
Company Overview
Company History
References

Summary

Illinois Tool Works is a global manufacturer of a diversified range of industrial products and equipment in 51 countries.
ITW is a Fortune 200 global multi-industrial manufacturing leader with revenue of $15.9 billion in 2022.

Illinois Tool Works (NYSE: ITW, LSE: 0J8W) is a global manufacturer of a diversified range of industrial products and equipment with operations in 51 countries. As of December 31, 2022, the Company employed approximately 46,000 people.

Recent Developments

Acquisition of the MTS Test & Simulation

On December 1, 2021, the Company completed the acquisition of the MTS Test & Simulation business for a purchase price of $750 million, subject to certain closing adjustments. The MTS Test & Simulation business had operating revenue of $46 million for the one month ended December 31, 2021 and $422 million for the twelve months ended December 31, 2022.

ITW Sells Two Businesses for $289 Million

In the second quarter of 2022, plans were approved to divest two businesses, including one business in the Polymers & Fluids segment and one business in the Food Equipment segment. These two businesses were classified as held for sale beginning in the second quarter of 2022. In the fourth quarter of 2022, both of these businesses were divested. On October 3, 2022, the business in the Polymers & Fluids segment was sold for $220 million, subject to certain closing adjustments, resulting in a pre-tax gain of $156 million. On December 1, 2022, the business in the Food Equipment segment was sold for $59 million, subject to certain closing adjustments, resulting in a pre-tax gain of $41 million.

Plans to Divest Specialty Products Segment

In the fourth quarter of 2022, plans were approved to divest one business in the Specialty Products segment. This business was presented as held for sale in the Statement of Financial Position as of December 31, 2022 and had assets and liabilities held for sale of $8 million and $1 million, respectively. Operating revenue for this business was approximately $37 million for the twelve months ended December 31, 2022. The Company expects to sell this business within one year.

Financial Highlights

First Quarter 2023 Results

May 02, 2023; Illinois Tool Works Inc. reported its first quarter 2023 results.¹

First quarter revenue of $4.0 billion increased two percent with organic revenue growth of five percent. Foreign currency translation impact and divestitures combined reduced revenue by three percent.

GAAP EPS increased 10 percent to $2.33, a new first quarter record, and included $0.06 of unfavorable foreign currency translation impact. Operating income increased nine percent to $972 million. Operating margin of 24.2 percent improved 150 basis points with enterprise initiatives contributing 100 basis points. Operating cash flow was $728 million, and free cash flow was $615 million, an increase of 147 percent, with a conversion rate to net income of 86 percent. The company repurchased $375 million of its own shares and the effective tax rate was 22.6 percent.

Full Year 2022 Results

Full year revenue of $15.9 billion increased 10 percent with organic revenue growth of 12 percent. The net impact from acquisitions and divestitures contributed two percent to revenue. Unfavorable foreign currency translation reduced revenue by four percent. Five of seven segments delivered double-digit organic growth for the year, led by Food Equipment up 23 percent, Welding up 16 percent, Construction Products up 14 percent, Automotive OEM up 12 percent, and Polymers & Fluids up 11 percent. Test & Measurement and Electronics was up nine percent and Specialty Products was up 0.4 percent. On a geographic basis, organic growth was 14 percent in North America, 10 percent in Europe, and eight percent in Asia Pacific.²

GAAP EPS increased 15 percent to $9.77 including the abovementioned divestiture gains and $0.39 of unfavorable foreign currency translation impact. Excluding divestiture gains and foreign currency translation impact, EPS increased 12 percent. Operating margin of 23.8 percent declined 30 basis points primarily due to 150 basis points of combined unfavorable margin headwind from price/cost and MTS acquisition impact. Operating cash flow was $2.3 billion and free cash flow was $1.9 billion with a conversion rate of 64 percent to net income, as the company continues to make working capital investments to support double-digit organic revenue growth and to mitigate supply chain risk in order to sustain best-in-class customer service levels across its portfolio. The company repurchased $1.75 billion of its own shares, and the effective tax rate was 21 percent.

Company Overview

The Company is a global manufacturer of a diversified range of industrial products and equipment with 84 divisions in 51 countries. As of December 31, 2022, the Company employed approximately 46,000 people.³

The Company operated approximately 440 plants and office facilities, excluding regional sales offices and warehouse facilities. Approximately 290 of the facilities were located outside of the United States. Principal foreign countries include Germany, China, France, and the United Kingdom.

Business Segments

following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.

Automotive OEM

This segment is a global, niche supplier to top tier OEMs, providing unique innovation to address pain points for sophisticated customers with complex problems. Businesses in this segment produce components and fasteners for automotive-related applications. This segment primarily serves the automotive original equipment manufacturers and tiers market.

Food Equipment

This segment is a highly focused and branded industry leader in commercial food equipment differentiated by innovation and integrated service offerings. This segment primarily serves the food service, food retail and food institutional/restaurant markets.

Test & Measurement and Electronics

This segment is a branded and innovative producer of test and measurement and electronic manufacturing and maintenance, repair, and operations, or "MRO" solutions that improve efficiency and quality for customers in diverse end markets. Businesses in this segment produce equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. This segment primarily serves the electronics, general industrial, automotive original equipment manufacturers and tiers, energy, consumer durables and industrial capital goods markets.

Welding

This segment is a branded value-added equipment and specialty consumable manufacturer with innovative and leading technology. Businesses in this segment produce arc welding equipment, consumables and accessories for a wide array of industrial and commercial applications. This segment primarily serves the general industrial market, which includes fabrication, shipbuilding and other general industrial markets, and construction, energy, MRO, industrial capital goods and automotive original equipment manufacturers and tiers markets.

Polymers & Fluids

This segment is a branded supplier to niche markets that require value-added, differentiated products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. This segment primarily serves the automotive aftermarket, general industrial and MRO markets.

Construction Products

This segment is a branded supplier of innovative engineered fastening systems and solutions. This segment primarily serves the residential construction, renovation/remodel and commercial construction markets.

Specialty Products

This segment is focused on diversified niche market opportunities with substantial patent protection producing beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. This segment primarily serves the food and beverage, consumer durables, general industrial, industrial capital goods and printing and publishing markets.

Patents

The Company owns approximately 3,900 unexpired U.S. patents and 9,600 foreign patents covering articles, methods and machines. In addition, the Company has approximately 1,400 applications for patents pending in the U.S. Patent Office and 4,300 applications pending in foreign patent offices.

Brands

Company’s key brands

Automotive OEM	Construction Products	Food Equipment	Polymers & Fluids	Specialty Products	Test & Measurement and Electronics	Welding
Deltar	Alpine	Baxter	Black Magic	Filtertek	Avery Weigh Tronix	Bernard
ITW Drawform	ITW Buildex	Foster	Devcon	ITW GSE	Brooks Instrument	Hobart Welding Products
Shakeproof	GRK Fasteners	Gamko	LPS	ITW Hartness	Buehler	Miller
	Paslode	Hobart	Permatex	HI Cone	Camalot	Orbitalum
	Ramset	Traulsen	Plexus	Meurer	Despatch	Tregaskiss
	Red Head	Vesta	rainx	Zip Pak	Electrovert	Ehwachs
	Reid	Vulcan	Rocol	Diagraph	Instron	Hobart Filler Metals
	Spit		Slime	ITW Dynatec	Loma Systems
	Tapcon		Wynn's		Magnaflux
	Elemantic				MPM
	NKT Fasteners				Simco Ion
	Cullen				Texwipe
					MTS

Company History

Illinois Tool Works Inc. was founded in 1912 and incorporated in 1915.⁴

Year	Milestone
1912	ITW was founded by Byron L. Smith in Chicago, Illinois, under the name "Smith & Whitehead Company." The company initially focused on manufacturing electric welding equipment.
1920s:	The company expanded its product line to include fasteners and specialized metal components.
1930s:	ITW introduced a range of innovative fastening products, including a self-piercing eyelet, which became widely used in the textile industry.
1950s:	The company underwent significant growth and expansion, entering new markets and industries, such as packaging, food equipment, and construction.
1960s:	ITW adopted its current name, Illinois Tool Works Inc., to reflect its diversified business operations. The company began acquiring various companies to broaden its product offerings and expand its global presence.
1970s:	ITW continued its expansion through acquisitions and established a decentralized organizational structure, allowing individual business units to operate autonomously.
1980s:	The company focused on streamlining its operations and divesting non-core businesses to improve profitability.
1990s:	ITW experienced substantial growth, primarily through acquisitions, and expanded into new markets, including automotive components, polymers, and electronic manufacturing.
2000s:	ITW implemented a strategy called "80/20," which emphasized focusing on the most profitable products and customers while streamlining operations. The company also expanded its international presence during this period.
2010s:	ITW continued its focus on the "80/20" strategy and pursued organic growth initiatives while making targeted acquisitions in key markets.
2020	ITW celebrated its 100th anniversary and continued to operate as a global diversified manufacturer across seven business segments, including automotive OEM, food equipment, construction products, and more.