Company Quick10K Filing
Illinois Tool Works
Price154.94 EPS8
Shares327 P/E20
MCap50,603 P/FCF23
Net Debt6,757 EBIT3,234
TEV57,360 TEV/EBIT18
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-06
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-02-14
10-Q 2019-09-30 Filed 2019-10-28
10-Q 2019-06-30 Filed 2019-08-02
10-Q 2019-03-31 Filed 2019-05-03
10-K 2018-12-31 Filed 2019-02-15
10-Q 2018-09-30 Filed 2018-11-01
10-Q 2018-06-30 Filed 2018-08-03
10-Q 2018-03-30 Filed 2018-05-04
10-K 2017-12-31 Filed 2018-02-15
10-Q 2017-09-30 Filed 2017-10-27
10-Q 2017-06-30 Filed 2017-08-04
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-10
10-Q 2016-09-30 Filed 2016-10-28
10-Q 2016-06-30 Filed 2016-08-04
10-Q 2016-03-31 Filed 2016-05-06
10-K 2015-12-31 Filed 2016-02-12
10-Q 2015-09-30 Filed 2015-10-30
10-Q 2015-06-30 Filed 2015-08-07
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-02-13
10-Q 2014-09-30 Filed 2014-10-31
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-02
10-K 2013-12-31 Filed 2014-02-14
10-Q 2013-09-30 Filed 2013-11-01
10-Q 2013-06-30 Filed 2013-08-02
10-Q 2013-03-31 Filed 2013-05-03
10-K 2012-12-31 Filed 2013-02-19
10-Q 2012-09-30 Filed 2012-10-26
10-Q 2012-08-03 Filed 2012-08-03
10-Q 2012-05-03 Filed 2012-05-04
10-K 2011-12-31 Filed 2012-02-17
10-Q 2011-10-28 Filed 2011-10-28
10-Q 2011-08-05 Filed 2011-08-05
10-Q 2011-05-05 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-02-28
10-Q 2010-10-29 Filed 2010-10-29
10-Q 2010-08-06 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-07-31 Earnings, Exhibits
8-K 2020-05-08
8-K 2020-05-05
8-K 2020-02-05
8-K 2020-01-31
8-K 2019-10-25
8-K 2019-09-27
8-K 2019-07-26
8-K 2019-07-26
8-K 2019-06-10
8-K 2019-06-05
8-K 2019-05-29
8-K 2019-05-03
8-K 2019-04-25
8-K 2019-02-14
8-K 2019-02-01
8-K 2018-12-21
8-K 2018-10-24
8-K 2018-07-23
8-K 2018-05-04
8-K 2018-04-26
8-K 2018-01-24

ITW 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II - Other Information
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31 itw2q20-exhibit31.htm
EX-32 itw2q20-exhibit32.htm

Illinois Tool Works Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
25201510502012201420172020
Assets, Equity
4.33.42.51.70.8-0.12012201420172020
Rev, G Profit, Net Income
3.22.21.10.1-1.0-2.02012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedJune 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission File Number: 1-4797

ILLINOIS TOOL WORKS INC.

(Exact name of registrant as specified in its charter)
Delaware36-1258310
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification Number)
155 Harlem AvenueGlenviewIL60025
(Address of principal executive offices)(Zip Code)

(Registrant’s telephone number, including area code) 847-724-7500

Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading Symbol(s)Name of Each Exchange on Which Registered
Common StockITWNew York Stock Exchange
1.75% Euro Notes due 2022ITW22New York Stock Exchange
1.25% Euro Notes due 2023ITW23New York Stock Exchange
0.250% Euro Notes due 2024ITW24ANew York Stock Exchange
0.625% Euro Notes due 2027ITW27New York Stock Exchange
2.125% Euro Notes due 2030ITW30New York Stock Exchange
1.00% Euro Notes due 2031ITW31New York Stock Exchange
3.00% Euro Notes due 2034ITW34New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x                        No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x                        No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerxAccelerated filero
Non-accelerated filer
o 
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes                       No x

The number of shares of registrant’s common stock, $0.01 par value, outstanding at June 30, 2020: 316,163,249.



Table of Contents
PART I - Financial Information
PART II - Other Information


2


PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

Illinois Tool Works Inc. and Subsidiaries
Statement of Income (Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
In millions except per share amounts2020201920202019
Operating Revenue$2,564  $3,609  $5,792  $7,161  
Cost of revenue1,594  2,099  3,465  4,158  
Selling, administrative, and research and development expenses486  598  1,046  1,209  
Amortization and impairment of intangible assets35  41  71  84  
Operating Income449  871  1,210  1,710  
Interest expense(51) (55) (102) (118) 
Other income (expense)8  9  33  23  
Income Before Taxes406  825  1,141  1,615  
Income Taxes87  202  256  395  
Net Income$319  $623  $885  $1,220  
Net Income Per Share:
Basic
$1.01  $1.92  $2.79  $3.74  
Diluted
$1.01  $1.91  $2.78  $3.72  
Shares of Common Stock Outstanding During the Period:
Average
316.1  324.8  317.2  326.0  
Average assuming dilution
317.4  326.6  318.6  327.9  

The Notes to Financial Statements are an integral part of this statement.
3


Illinois Tool Works Inc. and Subsidiaries
Statement of Comprehensive Income (Unaudited)
Three Months EndedSix Months Ended
June 30,June 30,
In millions2020201920202019
Net Income$319  $623  $885  $1,220  
Foreign currency translation adjustments, net of tax64  (60) (223) (29) 
Pension and other postretirement benefit adjustments, net of tax10  5  19  9  
Other comprehensive income (loss)74  (55) (204) (20) 
Comprehensive Income$393  $568  $681  $1,200  

The Notes to Financial Statements are an integral part of this statement.

4


Illinois Tool Works Inc. and Subsidiaries
Statement of Financial Position (Unaudited)
In millions except per share amountsJune 30, 2020December 31, 2019
Assets
Current Assets:
Cash and equivalents$1,812  $1,981  
Trade receivables2,156  2,461  
Inventories1,167  1,164  
Prepaid expenses and other current assets253  296  
Assets held for sale221  351  
Total current assets5,609  6,253  
Net plant and equipment1,711  1,729  
Goodwill4,443  4,492  
Intangible assets801  851  
Deferred income taxes470  516  
Other assets1,229  1,227  
$14,263  $15,068  
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt$4  $4  
Accounts payable402  472  
Accrued expenses1,106  1,217  
Cash dividends payable338  342  
Income taxes payable152  48  
Liabilities held for sale40  71  
Total current liabilities2,042  2,154  
Noncurrent Liabilities:
Long-term debt7,765  7,754  
Deferred income taxes676  668  
Noncurrent income taxes payable413  462  
Other liabilities1,009  1,000  
Total noncurrent liabilities9,863  9,884  
Stockholders’ Equity:
Common stock (par value of $0.01 per share):
Issued- 550.0 shares in 2020 and 2019
Outstanding- 316.2 shares in 2020 and 319.8 shares in 2019
6  6  
Additional paid-in-capital1,317  1,304  
Retained earnings22,612  22,403  
Common stock held in treasury(19,669) (18,982) 
Accumulated other comprehensive income (loss)(1,909) (1,705) 
Noncontrolling interest1  4  
Total stockholders’ equity2,358  3,030  
$14,263  $15,068  

The Notes to Financial Statements are an integral part of this statement.
5


Illinois Tool Works Inc. and Subsidiaries
Statement of Changes in Stockholders' Equity (Unaudited)
In millions except per share amountsCommon StockAdditional Paid-in CapitalRetained EarningsCommon Stock Held in TreasuryAccumulated Other Comprehensive Income (Loss)Non-controlling
Interest
Total
Three Months Ended June 30, 2020
Balance at March 31, 2020$6  $1,309  $22,631  $(19,680) $(1,983) $1  $2,284  
Net income—  —  319  —  —  —  319  
Common stock issued for stock-based
compensation
—  —  —  11  —  —  11  
Stock-based compensation expense—  8  —  —  —  —  8  
Dividends declared ($1.07 per share)—  —  (338) —  —  —  (338) 
Other comprehensive income (loss)—  —  —  —  74  —  74  
Balance at June 30, 2020$6  $1,317  $22,612  $(19,669) $(1,909) $1  $2,358  
Three Months Ended June 30, 2019
Balance at March 31, 2019$6  $1,255  $21,488  $(17,911) $(1,642) $4  $3,200  
Net income—  —  623  —  —  —  623  
Common stock issued for stock-based
compensation
—  3  —  10  —  —  13  
Stock-based compensation expense—  12  —  —  —  —  12  
Repurchases of common stock—  —  —  (375) —  —  (375) 
Dividends declared ($1.00 per share)—  —  (323) —  —  —  (323) 
Other comprehensive income (loss)—  —  —  —  (55) —  (55) 
Balance at June 30, 2019$6  $1,270  $21,788  $(18,276) $(1,697) $4  $3,095  
Six months ended June 30, 2020
Balance at December 31, 2019$6  $1,304  $22,403  $(18,982) $(1,705) $4  $3,030  
Net income—  —  885  —  —  —  885  
Common stock issued for stock-based
compensation
—  (3) —  19  —  —  16  
Stock-based compensation expense—  17  —  —  —  —  17  
Repurchases of common stock—  —  —  (706) —  —  (706) 
Dividends declared ($2.14 per share)—  —  (676) —  —  —  (676) 
Other comprehensive income (loss)—  —  —  —  (204) —  (204) 
Noncontrolling interest—  (1) —  —  —  (3) (4) 
Balance at June 30, 2020$6  $1,317  $22,612  $(19,669) $(1,909) $1  $2,358  
Six months ended June 30, 2019
Balance at December 31, 2018$6  $1,253  $21,217  $(17,545) $(1,677) $4  $3,258  
Net income—  —  1,220  —  —  —  1,220  
Common stock issued for stock-based
compensation
—  (5) —  19  —  —  14  
Stock-based compensation expense—  22  —  —  —  —  22  
Repurchases of common stock—  —  —  (750) —  —  (750) 
Dividends declared ($2.00 per share)—  —  (649) —  —  —  (649) 
Other comprehensive income (loss)—  —  —  —  (20) —  (20) 
Balance at June 30, 2019$6  $1,270  $21,788  $(18,276) $(1,697) $4  $3,095  

The Notes to Financial Statements are an integral part of this statement.
6


Illinois Tool Works Inc. and Subsidiaries
Statement of Cash Flows (Unaudited)
Six Months Ended
June 30,
In millions20202019
Cash Provided by (Used for) Operating Activities:
Net income$885  $1,220  
Adjustments to reconcile net income to cash provided by operating activities:  
Depreciation133  133  
Amortization and impairment of intangible assets71  84  
Change in deferred income taxes22  39  
Provision for uncollectible accounts4  3  
(Income) loss from investments(5) (11) 
(Gain) loss on sale of plant and equipment  1  
(Gain) loss on sale of operations and affiliates(1) 6  
Stock-based compensation expense17  22  
Other non-cash items, net4  6  
Change in assets and liabilities, net of acquisitions and divestitures:  
(Increase) decrease in-  
Trade receivables302  (116) 
Inventories(14) 11  
Prepaid expenses and other assets23  14  
Increase (decrease) in-  
Accounts payable(76) 20  
Accrued expenses and other liabilities(96) (114) 
Income taxes80  (17) 
Other, net2    
Net cash provided by operating activities1,351  1,301  
Cash Provided by (Used for) Investing Activities:  
Acquisition of businesses (excluding cash and equivalents)  (4) 
Additions to plant and equipment(116) (154) 
Proceeds from investments10  15  
Proceeds from sale of plant and equipment5  6  
Proceeds from sales of operations and affiliates  2  
Other, net(2) (16) 
Net cash provided by (used for) investing activities(103) (151) 
Cash Provided by (Used for) Financing Activities:  
Cash dividends paid(680) (654) 
Issuance of common stock28  24  
Repurchases of common stock(706) (750) 
Net proceeds from (repayments of) debt with original maturities of three months or less  (2) 
Proceeds from debt with original maturities of more than three months  1,774  
Repayments of debt with original maturities of more than three months  (1,350) 
Other, net(17) (12) 
Net cash provided by (used for) financing activities(1,375) (970) 
Effect of Exchange Rate Changes on Cash and Equivalents(42) (7) 
Cash and Equivalents:  
Increase (decrease) during the period(169) 173  
Beginning of period1,981  1,504  
End of period$1,812  $1,677  
Supplementary Cash Flow Information:
Cash Paid During the Period for Interest$119  $151  
Cash Paid During the Period for Income Taxes, Net of Refunds$153  $373  

The Notes to Financial Statements are an integral part of this statement.
7


Illinois Tool Works Inc. and Subsidiaries
Notes to Financial Statements (Unaudited)

(1) Significant Accounting Policies

Financial Statements The unaudited financial statements included herein have been prepared by Illinois Tool Works Inc. and Subsidiaries (the “Company”). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. It is suggested that these financial statements be read in conjunction with the financial statements and notes to financial statements included in the Company’s 2019 Annual Report on Form 10-K. Certain reclassifications of prior year data have been made to conform with current year reporting.

New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued authoritative guidance which changes the methodology used to measure credit losses for certain financial instruments. Under prior guidance, credit loss reserves were estimated based on historical information. The new guidance requires credit loss reserves to reflect the estimated credit losses expected to be incurred over the life of the financial asset. The Company adopted this new guidance effective January 1, 2020, which did not have a material impact on the Company's results of operations or financial position.

In January 2017, the FASB issued authoritative guidance which simplifies the assessment of goodwill for impairment. Under prior guidance, when the estimated fair value of a reporting unit was less than its carrying value, the fair value of the goodwill was determined by valuing the other assets and liabilities of the reporting unit. Under the new guidance, the requirement to determine the fair value of goodwill has been eliminated, and an impairment charge is recognized for the amount that the carrying value of the reporting unit exceeds its fair value. Effective January 1, 2020, the Company adopted the new guidance prospectively and will apply the new guidance during its annual assessment of goodwill in the third quarter, or earlier if a triggering event occurs. The adoption of this new accounting guidance had no impact on the Company's results of operations or financial position.

In December 2019, the FASB issued authoritative guidance which simplifies certain aspects of the accounting for income taxes, including the elimination of an exception to the methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated full year loss. The Company early adopted this new guidance effective January 1, 2020, which did not have a material impact on the Company's results of operations or financial position.

(2) Novel Coronavirus (COVID-19)

In early 2020, an outbreak of a novel strain of coronavirus (COVID-19) occurred in China and other jurisdictions. The COVID-19 outbreak was subsequently declared a global pandemic by the World Health Organization on March 11, 2020. In response to the outbreak, governments around the globe have taken various actions to reduce its spread, including travel restrictions, shutdowns of businesses deemed nonessential, and stay-at-home or similar orders. The COVID-19 pandemic and the measures taken globally to reduce its spread have negatively impacted the global economy, causing significant disruptions in the Company’s global operations starting primarily in the latter part of the first quarter of 2020 as COVID-19 continued to spread and impact the countries in which the Company operates and the markets the Company serves. The Company expects the disruptions caused by the COVID-19 outbreak to continue to have an adverse impact on the Company's operating results across all segments in the second half of 2020. However, the full extent of the COVID-19 outbreak in 2020 and its impact on the markets served by the Company and on the Company’s operations is highly uncertain. A prolonged outbreak will continue to interrupt the operations of the Company and its customers and suppliers.

(3) Divestitures

The Company routinely reviews its portfolio of businesses relative to its business portfolio criteria and evaluates if further portfolio refinements may be needed. The Company previously communicated its intent to explore options, including potential divestitures, for certain businesses with annual revenues totaling up to $1 billion. As such, the Company may commit to a plan to exit or dispose of certain businesses and present them as held for sale in periods prior to the sale of the business.

In the second quarter of 2019, the Company approved plans to divest six businesses, including two businesses in the Test & Measurement and Electronics segment, one business in the Automotive OEM segment, one business in the Welding segment, and two businesses in the Specialty Products segment. These six businesses were classified as held for sale beginning in the second quarter of 2019.
8


In the fourth quarter of 2019, the Company divested three of the held for sale businesses which included one business in the Test & Measurement and Electronics segment, one business in the Welding segment, and one business in the Specialty Products segment. For the twelve months ended December 31, 2019, the Company recorded net pre-tax gains on disposal of businesses of $44 million ($30 million after-tax, or $0.09 per diluted share) which was primarily due to the three divestitures of held for sale businesses discussed above. The net pre-tax gain was included in Other income (expense) in the Statement of Income.

Operating revenue related to businesses divested in 2019 that was included in the Company's results of operations for the three months ended June 30, 2019 was $37 million, which included $16 million in the Welding segment, $17 million in the Test & Measurement and Electronics segment, and $4 million in the Specialty Products segment. Operating revenue related to businesses divested in 2019 for the six months ended June 30, 2019 was $73 million, which included $31 million in the Welding segment, $33 million in the Test & Measurement and Electronics segment, and $9 million in the Specialty Products segment.

As of December 31, 2019, three of the businesses discussed above continued to be held for sale, including one business in the Test & Measurement and Electronics segment, one business in the Automotive OEM segment, and one business in the Specialty Products segment. In the first quarter of 2020, the Company concluded that the sales of the one business in the Automotive OEM segment and the one business in the Specialty Products segment previously held for sale were no longer probable of being completed within one year, primarily due to the disruptions and economic uncertainty resulting from the COVID-19 pandemic. Accordingly, these businesses were no longer presented as held for sale in the Statement of Financial Position beginning in the first quarter of 2020. As of June 30, 2020, only the one business in the Test & Measurement and Electronics segment continued to be presented as held for sale, and it is expected to be sold within one year.

The assets and liabilities related to the held for sale businesses that were included in assets and liabilities held for sale in the Statement of Financial Position as of June 30, 2020 and December 31, 2019, were as follows:

In millionsJune 30, 2020December 31, 2019
Trade receivables$34  $81  
Inventories24  28  
Net plant and equipment16  48  
Goodwill and intangible assets142  166  
Other5  28  
Total assets held for sale$221  $351  
Accounts payable$9  $21  
Accrued expenses10  17  
Other21  33  
Total liabilities held for sale$40  $71  

Operating revenue related to the one business held for sale as of June 30, 2020 that was included in the Company's results of operations for the three and six months ended June 30, 2020 and 2019, was as follows:

Three Months EndedSix Months Ended
June 30,June 30,
In millions2020201920202019
Operating revenue$40  $51  $90  $102  

9


(4) Operating Revenue

The Company's 84 diversified operating divisions are organized and managed based on similar product categories and end markets, and are reported to senior management as the following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. Operating revenue by product category, which is consistent with the Company's segment presentation, for the three and six months ended June 30, 2020 and 2019 was as follows:

Three Months EndedSix Months Ended
June 30,June 30,
In millions2020201920202019
Automotive OEM$361  $788  $1,057  $1,594  
Food Equipment336  548  819  1,066  
Test & Measurement and Electronics455  533  940  1,057  
Welding298  422  670  849  
Polymers & Fluids354  427  747  843  
Construction Products376  424  766  825  
Specialty Products387  473  801  938  
Intersegment revenue(3) (6) (8) (11) 
Total operating revenue$2,564  $3,609  $5,792  $7,161  

The following is a description of the product offerings, end markets and typical revenue transactions for each of the Company's seven segments:

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. Products in this segment include:

plastic and metal components, fasteners and assemblies for automobiles, light trucks and other industrial uses.

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