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Published: 2021-10-28 00:00:00 ET
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Exhibit 99.1

ITW Reports Third Quarter 2021 Results

•Total revenue of $3.6 billion, an increase of 8% with organic revenue growth of 6%
•Operating margin of 23.8%; Enterprise initiatives contributed 100 basis points
•GAAP EPS of $2.02, an increase of 10%
•Updated full year guidance with organic growth of 11 to 12% and EPS growth of 25 to 28%

GLENVIEW, IL., October 28, 2021 - Illinois Tool Works Inc. (NYSE: ITW) today reported its third quarter 2021 results.

“We saw continued strong growth momentum in six of our seven segments in the third quarter, while our Automotive OEM segment continued to be impacted by auto production reductions associated with the well-publicized supply chain challenges affecting our customers,” said E. Scott Santi, Chairman and Chief Executive Officer. “Our teams around the world continue to do an exceptional job of executing for our customers and for the company in a very challenging environment as evidenced by the six percent organic growth and ten percent earnings per share growth that ITW delivered in the quarter. Moving forward, we remain highly focused on fully leveraging the competitive strength of the ITW Business Model and the investments we have made, and continue to make, in support of the execution of our enterprise strategy and our ‘Win the Recovery’ positioning to their full potential.”

Third Quarter 2021 Results
Third quarter revenue grew eight percent to $3.6 billion, with six percent organic growth. Operating income grew seven percent to $845 million. Excluding Automotive OEM, revenue grew 12 percent and operating income grew 14 percent. Operating margin was 23.8 percent, flat year-over-year, with enterprise initiatives and volume leverage each contributing 100 basis points or more of positive margin impact offset by price/cost margin dilution impact of 200 basis points. Consistent with our strategy, price recovery actions offset raw material cost increases on a dollar-for-dollar basis in the third quarter. GAAP EPS of $2.02 increased 10 percent. The effective tax rate for the third quarter was 20.8 percent, in line with the third quarter of 2020, and included a $0.06 one-time tax benefit. Operating cash flow was $619 million, 97 percent of net income, and free cash flow was $548 million, 86 percent of net income.

Six of seven segments delivered strong organic growth in the quarter, led by Welding up 22 percent, Food Equipment up 19 percent, Test & Measurement and Electronics up 12 percent, and Specialty Products up 8 percent. Polymers & Fluids and Construction Products were both up 3 percent. Automotive OEM declined 11 percent.

Capital Allocation Update
Pending final regulatory approvals, ITW expects to complete its previously announced acquisition of the MTS Test & Simulation business in the fourth quarter of 2021. On August 6, 2021, ITW raised its dividend by seven percent to an annualized rate of $4.88 per share. The company is on pace to repurchase approximately $1 billion of its shares in 2021, having repurchased $750 million year-to-date.

2021 Guidance
ITW expects total revenue growth of 13 to 14 percent and organic growth in the range of 11 to 12 percent. Foreign currency translation impact at current foreign exchange rates is projected to contribute two percentage points to revenue growth. GAAP EPS guidance is updated to a range of $8.30 to $8.50, due to actual and anticipated lower auto production levels in Q3 and Q4 versus previous guidance. Raw material cost increases are expected to be offset with price on a dollar-for-dollar basis and therefore EPS neutral. Full year margin dilution impact from price/cost is expected to be approximately 150 basis points, offset by more than 200 basis points of volume leverage and a contribution from enterprise initiatives of more than 100 basis points. Operating margin is expected to be in the range of 23.5 to 24.5 percent, an increase of more than 100 basis points at the midpoint versus 2020. Free cash flow is expected to be approximately 90 percent of net income adjusted for one-time tax benefits. Guidance excludes any impact from the 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 estimated guidance for the most directly comparable GAAP measure and a reconciliation of estimated free cash flow to the most directly comparable GAAP measure


have 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 and global supply chain challenges, related government actions and the company’s strategy in response thereto on the company’s business, expected impact of tariffs and raw material inflation, product line simplification activities and enterprise initiatives, future financial and operating performance, free cash flow and free cash flow conversion rate, 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 company’s 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 Works
ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenues totaling $12.6 billion in 2020. 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’s approximately 43,000 dedicated colleagues around the world thrive in the company’s decentralized and entrepreneurial culture. www.itw.com


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
STATEMENT OF INCOME (UNAUDITED)

Three Months EndedNine Months Ended
September 30,September 30,
In millions except per share amounts2021202020212020
Operating Revenue$3,556 $3,307 $10,776 $9,099 
Cost of revenue2,096 1,910 6,298 5,375 
Selling, administrative, and research and development expenses581 560 1,735 1,606 
Amortization and impairment of intangible assets34 48 100 119 
Operating Income845 789 2,643 1,999 
Interest expense(49)(52)(153)(154)
Other income (expense)10 2 44 35 
Income Before Taxes806 739 2,534 1,880 
Income Taxes167 157 449 413 
Net Income$639 $582 $2,085 $1,467 
Net Income Per Share:
Basic$2.03 $1.84 $6.61 $4.63 
Diluted$2.02 $1.83 $6.58 $4.61 
Cash Dividends Per Share:
Paid$1.14 $1.07 $3.42 $3.21 
Declared$1.22 $1.14 $3.50 $3.28 
Shares of Common Stock Outstanding During the Period:
Average314.6 316.5 315.6 316.9 
Average assuming dilution315.9 317.9 316.9 318.3 



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

In millionsSeptember 30, 2021December 31, 2020
Assets
Current Assets:
Cash and equivalents$1,987 $2,564 
Trade receivables2,729 2,506 
Inventories1,524 1,189 
Prepaid expenses and other current assets337 264 
Total current assets6,577 6,523 
Net plant and equipment1,744 1,777 
Goodwill4,610 4,690 
Intangible assets683 781 
Deferred income taxes580 533 
Other assets1,323 1,308 
 $15,517 $15,612 
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt$579 $350 
Accounts payable565 534 
Accrued expenses1,399 1,284 
Cash dividends payable383 361 
Income taxes payable70 60 
Total current liabilities2,996 2,589 
Noncurrent Liabilities:
Long-term debt6,972 7,772 
Deferred income taxes633 588 
Noncurrent income taxes payable365 413 
Other liabilities1,058 1,068 
Total noncurrent liabilities9,028 9,841 
Stockholders’ Equity:
Common stock6 6 
Additional paid-in-capital1,416 1,362 
Retained earnings24,098 23,114 
Common stock held in treasury(20,390)(19,659)
Accumulated other comprehensive income (loss)(1,638)(1,642)
Noncontrolling interest1 1 
Total stockholders’ equity3,493 3,182 
 $15,517 $15,612 



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

Three Months Ended September 30, 2021
Dollars in millionsTotal RevenueOperating IncomeOperating Margin
Automotive OEM$647 $112 17.3 %
Food Equipment544 130 23.9 %
Test & Measurement and Electronics552 148 26.8 %
Welding425 128 30.0 %
Polymers & Fluids456 111 24.2 %
Construction Products478 133 27.8 %
Specialty Products459 126 27.3 %
Intersegment(5)— — %
Total Segments3,556 888 24.9 %
Unallocated— (43)— %
Total Company$3,556 $845 23.8 %

Nine Months Ended September 30, 2021
Dollars in millionsTotal RevenueOperating IncomeOperating Margin
Automotive OEM$2,137 $434 20.3 %
Food Equipment1,509 339 22.5 %
Test & Measurement and Electronics1,710 475 27.8 %
Welding1,228 364 29.6 %
Polymers & Fluids1,357 350 25.8 %
Construction Products1,465 406 27.7 %
Specialty Products1,387 380 27.4 %
Intersegment(17)— — %
Total Segments10,776 2,748 25.5 %
Unallocated— (105)— %
Total Company$10,776 $2,643 24.5 %


ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

Q3 2021 vs. Q3 2020 Favorable/(Unfavorable)
Operating RevenueAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Organic(10.7)%18.9 %11.8 %22.0 %3.4 %3.4 %8.3 %6.3 %
Acquisitions/Divestitures— %— %— %— %— %(0.1)%— %— %
Translation1.3 %2.1 %1.1 %0.9 %0.7 %1.7 %1.1 %1.2 %
Operating
Revenue		(9.4)%21.0 %12.9 %22.9 %4.1 %5.0 %9.4 %7.5 %

Q3 2021 vs. Q3 2020 Favorable/(Unfavorable)
Change in Operating MarginAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Operating Leverage (240) bps  410 bps  290 bps  290 bps  70 bps  50 bps  180 bps  130 bps
Changes in Variable Margin & OH Costs (320) bps  (140) bps  (20) bps  (40) bps  (340) bps  (120) bps  30 bps  (210) bps
Total Organic (560) bps  270 bps  270 bps  250 bps  (270) bps  (70) bps  210 bps  (80) bps
Acquisitions/Divestitures————————
Restructuring/Other 210 bps  160 bps  40 bps  (40) bps  30 bps  40 bps — 80 bps
Total Operating Margin Change (350) bps  430 bps  310 bps  210 bps  (240) bps  (30) bps  210 bps —
Total Operating Margin % *17.3%23.9%26.8%30.0%24.2%27.8%27.3%23.8%
*Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 40 bps  60 bps  170 bps  20 bps  240 bps  20 bps  80 bps  90 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.08) on GAAP earnings per share for the third quarter of 2021.



ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT DATA (UNAUDITED)

YTD 2021 vs. YTD 2020 Favorable/(Unfavorable)
Operating RevenueAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Organic15.7 %15.2 %16.8 %19.3 %12.4 %14.0 %10.8 %14.9 %
Acquisitions/Divestitures— %— %— %— %— %(0.1)%— %— %
Translation4.9 %3.8 %2.9 %1.6 %2.1 %6.0 %2.8 %3.5 %
Operating
Revenue		20.6 %19.0 %19.7 %20.9 %14.5 %19.9 %13.6 %18.4 %

YTD 2021 vs. YTD 2020 Favorable/(Unfavorable)
Change in Operating MarginAutomotive OEMFood EquipmentTest & Measurement and ElectronicsWeldingPolymers & FluidsConstruction ProductsSpecialty ProductsTotal ITW
Operating Leverage 310 bps  350 bps  380 bps  270 bps  240 bps  250 bps  210 bps  300 bps
Changes in Variable Margin & OH Costs 150 bps  (20) bps  (100) bps  60 bps  (130) bps  (20) bps  (20) bps  (70) bps
Total Organic 460 bps  330 bps  280 bps  330 bps  110 bps  230 bps  190 bps  230 bps
Acquisitions/Divestitures————————
Restructuring/Other 70 bps  60 bps  20 bps  (20) bps  10 bps  10 bps  (20) bps  20 bps
Total Operating Margin Change 530 bps  390 bps  300 bps  310 bps  120 bps  240 bps  170 bps  250 bps
Total Operating Margin % *20.3%22.5%27.8%29.6%25.8%27.7%27.4%24.5%
*Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 40 bps  60 bps  160 bps  10 bps  250 bps  20 bps  70 bps  100 bps **
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.24) on GAAP earnings per share for the first nine months of 2021.


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

AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)

Three Months EndedNine Months Ended
September 30,September 30,
Dollars in millions2021202020212020
Operating income$845 $789 $2,643 $1,999 
Tax rate (as adjusted in 2021)23.4 %21.3 %22.9 %22.0 %
Income taxes(198)(168)(607)(439)
Operating income after taxes$647 $621 $2,036 $1,560 
Invested capital:  
Trade receivables$2,729 $2,494 $2,729 $2,494 
Inventories1,524 1,149 1,524 1,149 
Net plant and equipment1,744 1,736 1,744 1,736 
Goodwill and intangible assets5,293 5,405 5,293 5,405 
Accounts payable and accrued expenses(1,964)(1,784)(1,964)(1,784)
Other, net(269)(527)(269)(527)
Total invested capital$9,057 $8,473 $9,057 $8,473 
Average invested capital$9,084 $8,394 $8,912 $8,536 
After-tax return on average invested capital28.5 %29.6 %30.5 %24.4 %

A reconciliation of the tax rate for the three and nine month periods ended September 30, 2021, excluding the third quarter 2021 discrete tax benefit of $21 million related to the utilization of capital losses and the second quarter 2021 discrete tax benefit of $112 million related to a change in the U.K. income tax rate, is as follows:

Three Months EndedNine Months Ended
September 30, 2021September 30, 2021
Dollars in millionsIncome TaxesTax RateIncome TaxesTax Rate
As reported$167 20.8 %$449 17.7 %
Discrete tax benefit related to the third quarter 202121 2.6 %21 0.8 %
Discrete tax benefit related to the second quarter 2021— — %112 4.4 %
As adjusted$188 23.4 %$582 22.9 %

















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

FREE CASH FLOW (UNAUDITED)

Three Months EndedNine Months EndedTwelve Months
September 30,September 30,Ended
Dollars in millions2021202020212020December 31, 2020
Net cash provided by operating activities$619 $683 $1,783 $2,034 $2,807 
Less: Additions to plant and equipment(71)(52)(217)(168)(236)
Free cash flow$548 $631 $1,566 $1,866 $2,571 
Net income$639 $582 $2,085 $1,467 $2,109 
Net cash provided by operating activities to Net income conversion rate97 %117 %86 %139 %133 %
Free cash flow to Net income conversion rate86 %108 %75 %127 %122 %