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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Illinois Tool Works Inc | NYSE:ITW | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 247.14 | 0 | 12:55:16 |
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
|
SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the quarterly period ended
|
September 30, 2019
|
|
|
|
|
OR
|
|
|
|
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
|
|
SECURITIES EXCHANGE ACT OF 1934
|
|
|
|
|
|
For the transition period from _______________ to _______________
|
Delaware
|
36-1258310
|
||||
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification Number)
|
||||
|
155 Harlem Avenue
|
Glenview
|
IL
|
|
60025
|
(Address of principal executive offices)
|
(Zip Code)
|
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
|
Large accelerated filer
|
x
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
☐
|
|
|
Emerging growth company
|
☐
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
In millions except per share amounts
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Operating Revenue
|
$
|
3,479
|
|
|
$
|
3,613
|
|
|
$
|
10,640
|
|
|
$
|
11,188
|
|
Cost of revenue
|
2,007
|
|
|
2,096
|
|
|
6,165
|
|
|
6,508
|
|
||||
Selling, administrative, and research and development expenses
|
566
|
|
|
581
|
|
|
1,775
|
|
|
1,813
|
|
||||
Amortization and impairment of intangible assets
|
38
|
|
|
47
|
|
|
122
|
|
|
143
|
|
||||
Operating Income
|
868
|
|
|
889
|
|
|
2,578
|
|
|
2,724
|
|
||||
Interest expense
|
(52
|
)
|
|
(64
|
)
|
|
(170
|
)
|
|
(194
|
)
|
||||
Other income (expense)
|
26
|
|
|
10
|
|
|
49
|
|
|
48
|
|
||||
Income Before Taxes
|
842
|
|
|
835
|
|
|
2,457
|
|
|
2,578
|
|
||||
Income Taxes
|
182
|
|
|
197
|
|
|
577
|
|
|
622
|
|
||||
Net Income
|
$
|
660
|
|
|
$
|
638
|
|
|
$
|
1,880
|
|
|
$
|
1,956
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net Income Per Share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
$
|
2.05
|
|
|
$
|
1.91
|
|
|
$
|
5.79
|
|
|
$
|
5.81
|
|
Diluted
|
$
|
2.04
|
|
|
$
|
1.90
|
|
|
$
|
5.76
|
|
|
$
|
5.77
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Shares of Common Stock Outstanding During the Period:
|
|
|
|
|
|
|
|
|
|
||||||
Average
|
322.3
|
|
|
333.3
|
|
|
324.8
|
|
|
336.7
|
|
||||
Average assuming dilution
|
324.0
|
|
|
335.3
|
|
|
326.6
|
|
|
339.0
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net Income
|
$
|
660
|
|
|
$
|
638
|
|
|
$
|
1,880
|
|
|
$
|
1,956
|
|
Other Comprehensive Income (Loss):
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments, net of tax
|
(105
|
)
|
|
(67
|
)
|
|
(134
|
)
|
|
(283
|
)
|
||||
Pension and other postretirement benefit adjustments, net of tax
|
4
|
|
|
8
|
|
|
13
|
|
|
26
|
|
||||
Comprehensive Income
|
$
|
559
|
|
|
$
|
579
|
|
|
$
|
1,759
|
|
|
$
|
1,699
|
|
In millions except per share amounts
|
September 30, 2019
|
|
December 31, 2018
|
||||
Assets
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and equivalents
|
$
|
1,825
|
|
|
$
|
1,504
|
|
Trade receivables
|
2,499
|
|
|
2,622
|
|
||
Inventories
|
1,209
|
|
|
1,318
|
|
||
Prepaid expenses and other current assets
|
292
|
|
|
334
|
|
||
Assets held for sale
|
420
|
|
|
—
|
|
||
Total current assets
|
6,245
|
|
|
5,778
|
|
||
|
|
|
|
|
|
||
Net plant and equipment
|
1,693
|
|
|
1,791
|
|
||
Goodwill
|
4,430
|
|
|
4,633
|
|
||
Intangible assets
|
890
|
|
|
1,084
|
|
||
Deferred income taxes
|
479
|
|
|
554
|
|
||
Other assets
|
1,223
|
|
|
1,030
|
|
||
|
$
|
14,960
|
|
|
$
|
14,870
|
|
|
|
|
|
|
|
||
Liabilities and Stockholders' Equity
|
|
|
|
|
|
||
Current Liabilities:
|
|
|
|
|
|
||
Short-term debt
|
$
|
—
|
|
|
$
|
1,351
|
|
Accounts payable
|
493
|
|
|
524
|
|
||
Accrued expenses
|
1,229
|
|
|
1,271
|
|
||
Cash dividends payable
|
344
|
|
|
328
|
|
||
Income taxes payable
|
61
|
|
|
68
|
|
||
Liabilities held for sale
|
96
|
|
|
—
|
|
||
Total current liabilities
|
2,223
|
|
|
3,542
|
|
||
|
|
|
|
|
|
||
Noncurrent Liabilities:
|
|
|
|
|
|
||
Long-term debt
|
7,643
|
|
|
6,029
|
|
||
Deferred income taxes
|
716
|
|
|
707
|
|
||
Noncurrent income taxes payable
|
462
|
|
|
495
|
|
||
Other liabilities
|
946
|
|
|
839
|
|
||
Total noncurrent liabilities
|
9,767
|
|
|
8,070
|
|
||
|
|
|
|
|
|
||
Stockholders’ Equity:
|
|
|
|
|
|
||
Common stock (par value of $0.01 per share):
|
|
|
|
||||
Issued- 550.0 shares in 2019 and 2018
Outstanding- 321.4 shares in 2019 and 328.1 shares in 2018
|
6
|
|
|
6
|
|
||
Additional paid-in-capital
|
1,286
|
|
|
1,253
|
|
||
Retained earnings
|
22,104
|
|
|
21,217
|
|
||
Common stock held in treasury
|
(18,632
|
)
|
|
(17,545
|
)
|
||
Accumulated other comprehensive income (loss)
|
(1,798
|
)
|
|
(1,677
|
)
|
||
Noncontrolling interest
|
4
|
|
|
4
|
|
||
Total stockholders’ equity
|
2,970
|
|
|
3,258
|
|
||
|
$
|
14,960
|
|
|
$
|
14,870
|
|
In millions except per share amounts
|
Common Stock
|
Additional Paid-in Capital
|
Retained Earnings
|
Common Stock Held in Treasury
|
Accumulated Other Comprehensive Income (Loss)
|
Non-controlling
Interest
|
Total
|
||||||||||||||
|
|
||||||||||||||||||||
Three Months Ended September 30, 2019
|
|||||||||||||||||||||
Balance at June 30, 2019
|
$
|
6
|
|
$
|
1,270
|
|
$
|
21,788
|
|
$
|
(18,276
|
)
|
$
|
(1,697
|
)
|
$
|
4
|
|
$
|
3,095
|
|
Net income
|
—
|
|
—
|
|
660
|
|
—
|
|
—
|
|
—
|
|
660
|
|
|||||||
Common stock issued for stock-based compensation
|
—
|
|
6
|
|
|
19
|
|
—
|
|
—
|
|
25
|
|
||||||||
Stock-based compensation expense
|
—
|
|
10
|
|
|
|
—
|
|
—
|
|
10
|
|
|||||||||
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
(375
|
)
|
—
|
|
—
|
|
(375
|
)
|
|||||||
Dividends declared ($1.07 per share)
|
—
|
|
—
|
|
(344
|
)
|
—
|
|
—
|
|
—
|
|
(344
|
)
|
|||||||
Pension and other postretirement benefit adjustments
|
—
|
|
—
|
|
—
|
|
—
|
|
4
|
|
—
|
|
4
|
|
|||||||
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
(105
|
)
|
—
|
|
(105
|
)
|
|||||||
Balance at September 30, 2019
|
$
|
6
|
|
$
|
1,286
|
|
$
|
22,104
|
|
$
|
(18,632
|
)
|
$
|
(1,798
|
)
|
$
|
4
|
|
$
|
2,970
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Three Months Ended September 30, 2018
|
|||||||||||||||||||||
Balance at June 30, 2018
|
$
|
6
|
|
$
|
1,231
|
|
$
|
20,633
|
|
$
|
(16,555
|
)
|
$
|
(1,530
|
)
|
$
|
3
|
|
$
|
3,788
|
|
Net income
|
—
|
|
—
|
|
638
|
|
—
|
|
—
|
|
—
|
|
638
|
|
|||||||
Common stock issued for stock-based compensation
|
—
|
|
(1
|
)
|
—
|
|
1
|
|
—
|
|
—
|
|
—
|
|
|||||||
Stock-based compensation expense
|
—
|
|
11
|
|
—
|
|
—
|
|
—
|
|
—
|
|
11
|
|
|||||||
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
(500
|
)
|
—
|
|
—
|
|
(500
|
)
|
|||||||
Dividends declared ($1.00 per share)
|
—
|
|
—
|
|
(333
|
)
|
—
|
|
—
|
|
—
|
|
(333
|
)
|
|||||||
Pension and other postretirement benefit adjustments
|
—
|
|
—
|
|
—
|
|
—
|
|
8
|
|
—
|
|
8
|
|
|||||||
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
(67
|
)
|
—
|
|
(67
|
)
|
|||||||
Noncontrolling interest
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1
|
|
1
|
|
|||||||
Balance at September 30, 2018
|
$
|
6
|
|
$
|
1,241
|
|
$
|
20,938
|
|
$
|
(17,054
|
)
|
$
|
(1,589
|
)
|
$
|
4
|
|
$
|
3,546
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Nine months ended September 30, 2019
|
|||||||||||||||||||||
Balance at December 31, 2018
|
$
|
6
|
|
$
|
1,253
|
|
$
|
21,217
|
|
$
|
(17,545
|
)
|
$
|
(1,677
|
)
|
$
|
4
|
|
$
|
3,258
|
|
Net income
|
—
|
|
—
|
|
1,880
|
|
—
|
|
—
|
|
—
|
|
1,880
|
|
|||||||
Common stock issued for stock-based compensation
|
—
|
|
1
|
|
—
|
|
38
|
|
—
|
|
—
|
|
39
|
|
|||||||
Stock-based compensation expense
|
—
|
|
32
|
|
—
|
|
|
—
|
|
—
|
|
32
|
|
||||||||
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
(1,125
|
)
|
—
|
|
—
|
|
(1,125
|
)
|
|||||||
Dividends declared ($3.07 per share)
|
—
|
|
—
|
|
(993
|
)
|
—
|
|
—
|
|
—
|
|
(993
|
)
|
|||||||
Pension and other postretirement benefit adjustments
|
—
|
|
—
|
|
—
|
|
—
|
|
13
|
|
—
|
|
13
|
|
|||||||
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
(134
|
)
|
—
|
|
(134
|
)
|
|||||||
Balance at September 30, 2019
|
$
|
6
|
|
$
|
1,286
|
|
$
|
22,104
|
|
$
|
(18,632
|
)
|
$
|
(1,798
|
)
|
$
|
4
|
|
$
|
2,970
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Nine months ended September 30, 2018
|
|||||||||||||||||||||
Balance at December 31, 2017
|
$
|
6
|
|
$
|
1,218
|
|
$
|
20,210
|
|
$
|
(15,562
|
)
|
$
|
(1,287
|
)
|
$
|
4
|
|
$
|
4,589
|
|
Net income
|
—
|
|
—
|
|
1,956
|
|
—
|
|
—
|
|
—
|
|
1,956
|
|
|||||||
Adoption of new accounting guidance
|
—
|
|
—
|
|
(370
|
)
|
—
|
|
(45
|
)
|
—
|
|
(415
|
)
|
|||||||
Common stock issued for stock-based compensation
|
—
|
|
(8
|
)
|
—
|
|
8
|
|
—
|
|
—
|
|
—
|
|
|||||||
Stock-based compensation expense
|
—
|
|
31
|
|
—
|
|
|
—
|
|
—
|
|
31
|
|
||||||||
Repurchases of common stock
|
—
|
|
—
|
|
—
|
|
(1,500
|
)
|
—
|
|
—
|
|
(1,500
|
)
|
|||||||
Dividends declared ($2.56 per share)
|
—
|
|
—
|
|
(858
|
)
|
—
|
|
—
|
|
—
|
|
(858
|
)
|
|||||||
Pension and other postretirement benefit adjustments
|
—
|
|
—
|
|
—
|
|
—
|
|
26
|
|
—
|
|
26
|
|
|||||||
Currency translation adjustment
|
—
|
|
—
|
|
—
|
|
—
|
|
(283
|
)
|
—
|
|
(283
|
)
|
|||||||
Balance at September 30, 2018
|
$
|
6
|
|
$
|
1,241
|
|
$
|
20,938
|
|
$
|
(17,054
|
)
|
$
|
(1,589
|
)
|
$
|
4
|
|
$
|
3,546
|
|
|
Nine Months Ended
|
||||||
|
September 30,
|
||||||
In millions
|
2019
|
|
2018
|
||||
Cash Provided by (Used for) Operating Activities:
|
|
|
|
||||
Net income
|
$
|
1,880
|
|
|
$
|
1,956
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation
|
199
|
|
|
203
|
|
||
Amortization and impairment of intangible assets
|
122
|
|
|
143
|
|
||
Change in deferred income taxes
|
47
|
|
|
(20
|
)
|
||
Provision for uncollectible accounts
|
3
|
|
|
4
|
|
||
(Income) loss from investments
|
(12
|
)
|
|
(8
|
)
|
||
(Gain) loss on sale of plant and equipment
|
(8
|
)
|
|
(2
|
)
|
||
(Gain) loss on sale of operations and affiliates
|
6
|
|
|
1
|
|
||
Stock-based compensation expense
|
32
|
|
|
31
|
|
||
Other non-cash items, net
|
7
|
|
|
6
|
|
||
Change in assets and liabilities, net of acquisitions and divestitures:
|
|
|
|
|
|
||
(Increase) decrease in-
|
|
|
|
|
|
||
Trade receivables
|
(38
|
)
|
|
(202
|
)
|
||
Inventories
|
31
|
|
|
(122
|
)
|
||
Prepaid expenses and other assets
|
21
|
|
|
8
|
|
||
Increase (decrease) in-
|
|
|
|
|
|
||
Accounts payable
|
15
|
|
|
3
|
|
||
Accrued expenses and other liabilities
|
(68
|
)
|
|
(25
|
)
|
||
Income taxes
|
(21
|
)
|
|
24
|
|
||
Other, net
|
5
|
|
|
2
|
|
||
Net cash provided by operating activities
|
2,221
|
|
|
2,002
|
|
||
Cash Provided by (Used for) Investing Activities:
|
|
|
|
|
|
||
Acquisition of businesses (excluding cash and equivalents) and additional interest in affiliates
|
(4
|
)
|
|
—
|
|
||
Additions to plant and equipment
|
(244
|
)
|
|
(282
|
)
|
||
Proceeds from investments
|
16
|
|
|
13
|
|
||
Proceeds from sale of plant and equipment
|
22
|
|
|
14
|
|
||
Proceeds from sales of operations and affiliates
|
5
|
|
|
1
|
|
||
Other, net
|
(15
|
)
|
|
(4
|
)
|
||
Net cash provided by (used for) investing activities
|
(220
|
)
|
|
(258
|
)
|
||
Cash Provided by (Used for) Financing Activities:
|
|
|
|
|
|
||
Cash dividends paid
|
(977
|
)
|
|
(792
|
)
|
||
Issuance of common stock
|
50
|
|
|
11
|
|
||
Repurchases of common stock
|
(1,125
|
)
|
|
(1,500
|
)
|
||
Net proceeds from (repayments of) debt with original maturities of three months or less
|
(1
|
)
|
|
(850
|
)
|
||
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
|
)
|
|
(1
|
)
|
||
Other, net
|
(12
|
)
|
|
(11
|
)
|
||
Net cash provided by (used for) financing activities
|
(1,641
|
)
|
|
(3,143
|
)
|
||
Effect of Exchange Rate Changes on Cash and Equivalents
|
(39
|
)
|
|
(106
|
)
|
||
Cash and Equivalents:
|
|
|
|
|
|
||
Increase (decrease) during the period
|
321
|
|
|
(1,505
|
)
|
||
Beginning of period
|
1,504
|
|
|
3,094
|
|
||
End of period
|
$
|
1,825
|
|
|
$
|
1,589
|
|
Supplementary Cash Flow Information:
|
|
|
|
||||
Cash Paid During the Period for Interest
|
$
|
207
|
|
|
$
|
211
|
|
Cash Paid During the Period for Income Taxes, Net of Refunds
|
$
|
553
|
|
|
$
|
618
|
|
Cash Paid During the Period for Lease Liabilities
|
$
|
53
|
|
|
|
|
|
Right-of-Use Assets Obtained in Exchange for Lease Liabilities
|
$
|
43
|
|
|
|
|
In millions
|
September 30, 2019
|
||
Trade receivables
|
$
|
95
|
|
Inventories
|
46
|
|
|
Net plant and equipment
|
55
|
|
|
Goodwill and intangible assets
|
192
|
|
|
Other
|
32
|
|
|
Total assets held for sale
|
$
|
420
|
|
|
|
||
Accounts payable
|
$
|
25
|
|
Accrued expenses
|
22
|
|
|
Other
|
49
|
|
|
Total liabilities held for sale
|
$
|
96
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Automotive OEM
|
$
|
744
|
|
|
$
|
781
|
|
|
$
|
2,338
|
|
|
$
|
2,561
|
|
Food Equipment
|
551
|
|
|
567
|
|
|
1,617
|
|
|
1,647
|
|
||||
Test & Measurement and Electronics
|
512
|
|
|
536
|
|
|
1,569
|
|
|
1,633
|
|
||||
Welding
|
402
|
|
|
414
|
|
|
1,251
|
|
|
1,277
|
|
||||
Polymers & Fluids
|
418
|
|
|
415
|
|
|
1,261
|
|
|
1,302
|
|
||||
Construction Products
|
416
|
|
|
431
|
|
|
1,241
|
|
|
1,303
|
|
||||
Specialty Products
|
441
|
|
|
475
|
|
|
1,379
|
|
|
1,482
|
|
||||
Intersegment revenue
|
(5
|
)
|
|
(6
|
)
|
|
(16
|
)
|
|
(17
|
)
|
||||
Total
|
$
|
3,479
|
|
|
$
|
3,613
|
|
|
$
|
10,640
|
|
|
$
|
11,188
|
|
•
|
plastic and metal components, fasteners and assemblies for automobiles, light trucks and other industrial uses.
|
•
|
warewashing equipment;
|
•
|
cooking equipment, including ovens, ranges and broilers;
|
•
|
refrigeration equipment, including refrigerators, freezers and prep tables;
|
•
|
food processing equipment, including slicers, mixers and scales;
|
•
|
kitchen exhaust, ventilation and pollution control systems; and
|
•
|
food equipment service, maintenance and repair.
|
•
|
equipment, consumables, and related software for testing and measuring of materials, structures, gases and fluids;
|
•
|
electronic assembly equipment and related consumable solder materials;
|
•
|
electronic components and component packaging;
|
•
|
static control equipment and consumables used for contamination control in clean room environments; and
|
•
|
pressure sensitive adhesives and components for electronics, medical, transportation and telecommunications applications.
|
•
|
arc welding equipment;
|
•
|
metal arc welding consumables and related accessories; and
|
•
|
metal jacketing and other insulation products.
|
•
|
adhesives for industrial, construction and consumer purposes;
|
•
|
chemical fluids which clean or add lubrication to machines;
|
•
|
epoxy and resin-based coating products for industrial applications;
|
•
|
hand wipes and cleaners for industrial applications;
|
•
|
fluids, polymers and other supplies for auto aftermarket maintenance and appearance;
|
•
|
fillers and putties for auto body repair; and
|
•
|
polyester coatings and patch and repair products for the marine industry.
|
•
|
fasteners and related fastening tools for wood and metal applications;
|
•
|
anchors, fasteners and related tools for concrete applications;
|
•
|
metal plate truss components and related equipment and software; and
|
•
|
packaged hardware, fasteners, anchors and other products for retail.
|
•
|
line integration, conveyor systems and line automation for the food and beverage industries;
|
•
|
plastic consumables that multi-pack cans and bottles and related equipment;
|
•
|
foil, film and related equipment used to decorate consumer products;
|
•
|
product coding and marking equipment and related consumables;
|
•
|
plastic and metal closures and components for appliances;
|
•
|
airport ground support equipment; and
|
•
|
components for medical devices.
|
In millions
|
September 30, 2019
|
|
December 31, 2018
|
||||
Raw material
|
$
|
455
|
|
|
$
|
523
|
|
Work-in-process
|
151
|
|
|
161
|
|
||
Finished goods
|
691
|
|
|
731
|
|
||
LIFO reserve
|
(88
|
)
|
|
(97
|
)
|
||
Total inventories
|
$
|
1,209
|
|
|
$
|
1,318
|
|
In millions
|
|
||
October 1, 2019 through December 31, 2019
|
$
|
12
|
|
2020
|
55
|
|
|
2021
|
40
|
|
|
2022
|
30
|
|
|
2023
|
22
|
|
|
2024 and future years
|
37
|
|
|
Total future minimum lease payments
|
196
|
|
|
Less: Imputed interest
|
(13
|
)
|
|
Operating lease liability
|
183
|
|
|
Less: Current portion of operating lease liability
|
(50
|
)
|
|
Long-term portion of operating lease liability
|
$
|
133
|
|
In millions
|
|
||
2019
|
$
|
67
|
|
2020
|
48
|
|
|
2021
|
32
|
|
|
2022
|
24
|
|
|
2023
|
18
|
|
|
2024 and future years
|
34
|
|
|
Total future minimum lease payments
|
$
|
223
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||||||||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||||||||||||||||||
|
Pension
|
|
Other Postretirement Benefits
|
|
Pension
|
|
Other Postretirement Benefits
|
||||||||||||||||||||||||
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
Components of net periodic benefit cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Service cost
|
$
|
13
|
|
|
$
|
15
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
39
|
|
|
$
|
45
|
|
|
$
|
5
|
|
|
$
|
6
|
|
Interest cost
|
20
|
|
|
18
|
|
|
5
|
|
|
4
|
|
|
59
|
|
|
54
|
|
|
15
|
|
|
13
|
|
||||||||
Expected return on plan assets
|
(30
|
)
|
|
(31
|
)
|
|
(5
|
)
|
|
(6
|
)
|
|
(91
|
)
|
|
(95
|
)
|
|
(16
|
)
|
|
(18
|
)
|
||||||||
Amortization of actuarial loss (gain)
|
5
|
|
|
11
|
|
|
—
|
|
|
(1
|
)
|
|
16
|
|
|
33
|
|
|
(1
|
)
|
|
(2
|
)
|
||||||||
Amortization of prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Total net periodic benefit cost
|
$
|
8
|
|
|
$
|
13
|
|
|
$
|
1
|
|
|
$
|
(1
|
)
|
|
$
|
24
|
|
|
$
|
37
|
|
|
$
|
3
|
|
|
$
|
(1
|
)
|
In millions
|
September 30, 2019
|
|
December 31, 2018
|
||||
Fair value
|
$
|
8,582
|
|
|
$
|
7,665
|
|
Carrying value
|
7,643
|
|
|
7,379
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Beginning balance
|
$
|
(1,697
|
)
|
|
$
|
(1,530
|
)
|
|
$
|
(1,677
|
)
|
|
$
|
(1,287
|
)
|
|
|
|
|
|
|
|
|
||||||||
Adoption of new accounting guidance related to reclassification of certain tax effects
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Foreign currency translation adjustments during the period
|
(65
|
)
|
|
(69
|
)
|
|
(98
|
)
|
|
(270
|
)
|
||||
Foreign currency translation adjustments reclassified to income
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
||||
Income taxes
|
(40
|
)
|
|
(3
|
)
|
|
(36
|
)
|
|
(18
|
)
|
||||
Total foreign currency translation adjustments, net of tax
|
(105
|
)
|
|
(67
|
)
|
|
(134
|
)
|
|
(283
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Pension and other postretirement benefit adjustments during the period
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Pension and other postretirement benefit adjustments reclassified to income
|
5
|
|
|
10
|
|
|
16
|
|
|
31
|
|
||||
Income taxes
|
(1
|
)
|
|
(2
|
)
|
|
(3
|
)
|
|
(6
|
)
|
||||
Total pension and other postretirement benefit adjustments, net of tax
|
4
|
|
|
8
|
|
|
13
|
|
|
26
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Ending balance
|
$
|
(1,798
|
)
|
|
$
|
(1,589
|
)
|
|
$
|
(1,798
|
)
|
|
$
|
(1,589
|
)
|
•
|
ITW’s 80/20 Front-to-Back process is the operating system that is applied in every ITW business. Initially introduced as a manufacturing efficiency tool in the 1980s, ITW has continually refined, improved and expanded 80/20 into a proprietary, holistic business management process that generates significant value for the Company and its customers. Through the application of data driven insights generated by 80/20 practice, ITW focuses on its largest and best opportunities (the “80”) and eliminates cost, complexity and distractions associated with the less profitable opportunities (the “20”). 80/20 enables ITW businesses to consistently achieve world-class operational excellence in product availability, quality, and innovation, while generating superior financial performance;
|
•
|
Customer-back Innovation has fueled decades of profitable growth at ITW. The Company’s unique innovation approach is built on insight gathered from the 80/20 Front-to-Back process. Working from the customer back, ITW businesses position themselves as the go-to problem solver for their “80” customers. ITW’s innovation efforts are focused on understanding customer needs, particularly those in “80” markets with solid long-term growth fundamentals, and subsequently creating unique solutions to address those needs. These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately 18,000 granted and pending patents;
|
•
|
ITW’s Decentralized, Entrepreneurial Culture enables ITW businesses to be fast, focused, and responsive. ITW businesses have significant flexibility within the framework of the ITW Business Model to customize their approach in order to best serve their specific customers' needs. ITW colleagues recognize their unique responsibilities to execute the Company's strategy and values. As a result, the Company maintains a focused and simple organizational structure that, combined with outstanding execution, delivers best-in-class services and solutions adapted to each business' customers and end markets.
|
•
|
The first step was to narrow the focus and improve the quality of ITW’s business portfolio. As part of the Portfolio Management initiative, ITW exited businesses that were operating in commoditized market spaces and prioritized sustainable differentiation as a must-have requirement for all ITW businesses. This process included both divesting entire businesses and exiting commoditized product lines and customers inside otherwise highly differentiated ITW divisions.
|
•
|
Step two, Business Structure Simplification, was implemented to simplify and scale-up ITW’s operating structure to support increased engineering, marketing, and sales resources, and, at the same time, improve global reach and competitiveness, all of which were critical to driving accelerated organic growth. ITW now has 87 scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation.
|
•
|
The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at ITW. The Company’s 80/20-enabled sourcing organization has delivered an average of one percent reduction in spend each year from 2013 through 2018 and is on track to do the same in 2019.
|
•
|
With the initial portfolio realignment and scale-up work largely complete, the Company has shifted its focus to preparing for and accelerating organic growth, reapplying the 80/20 Front-to-Back process to optimize its newly scaled-up divisions for growth, first, to build a foundation of operational excellence, and second, to identify the best opportunities to drive organic growth.
|
•
|
Portfolio discipline
|
•
|
80/20 Front-to-Back practice excellence
|
•
|
Full-potential organic growth
|
•
|
Organic business - acquired businesses that have been included in the Company's results of operations for more than 12 months on a constant currency basis.
|
•
|
Operating leverage - the estimated effect of the organic revenue volume changes on organic operating income, assuming variable margins remain the same as the prior period.
|
•
|
Price/cost - represents the estimated net impact of increases or decreases in the cost of materials used in the Company's products versus changes in the selling price to the Company's customers.
|
•
|
Product line simplification (PLS) - focuses businesses on eliminating the complexity and overhead costs associated with smaller product lines and customers, and focuses businesses on supporting and growing their largest customers and product lines; in the short-term, PLS may result in a decrease in revenue and overhead costs while improving operating margin. In the long-term, PLS is expected to result in growth in revenue, profitability, and returns.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
3,479
|
|
|
$
|
3,613
|
|
|
(3.7
|
)%
|
|
(1.7
|
)%
|
(0.2
|
)%
|
—
|
%
|
(1.8
|
)%
|
(3.7
|
)%
|
Operating income
|
$
|
868
|
|
|
$
|
889
|
|
|
(2.3
|
)%
|
|
(0.1
|
)%
|
(0.1
|
)%
|
(0.1
|
)%
|
(2.0
|
)%
|
(2.3
|
)%
|
Operating margin %
|
25.0
|
%
|
|
24.6
|
%
|
|
40 bps
|
|
|
40 bps
|
|
—
|
|
—
|
|
—
|
|
40 bps
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
10,640
|
|
|
$
|
11,188
|
|
|
(4.9
|
)%
|
|
(2.0
|
)%
|
(0.2
|
)%
|
—
|
%
|
(2.7
|
)%
|
(4.9
|
)%
|
Operating income
|
$
|
2,578
|
|
|
$
|
2,724
|
|
|
(5.3
|
)%
|
|
(1.4
|
)%
|
—
|
%
|
(1.3
|
)%
|
(2.6
|
)%
|
(5.3
|
)%
|
Operating margin %
|
24.2
|
%
|
|
24.3
|
%
|
|
(10) bps
|
|
|
20 bps
|
|
—
|
|
(30) bps
|
|
—
|
|
(10) bps
|
|
•
|
Operating revenue declined in the third quarter and year-to-date periods primarily due to the unfavorable effect of foreign currency translation and lower organic revenue.
|
•
|
Organic revenue decreased 1.7% and 2.0% in the third quarter and year-to-date periods, respectively, primarily driven by a decline in the Automotive OEM, Specialty Products and Test & Measurement and Electronics segments. Product line simplification activities reduced organic revenue by 60 basis points in the third quarter and 70 basis points in the year-to-date period. Additionally, the third quarter of 2019 benefited from one extra shipping day versus the prior year. Adjusting for this impact, organic revenue declined 3.2% on an equal days basis. The year-to-date period had the same number of shipping days compared to the prior year.
|
◦
|
North American organic revenue decreased 2.4% in the third quarter as a decline in the Automotive OEM, Specialty Products, Test & Measurement and Electronics, Welding and Construction Products segments was partially offset by growth in the Polymers & Fluids and Food Equipment segments. Organic revenue declined 1.7% in the year-to-date period as a decrease in five segments was partially offset by growth in the Food Equipment and Polymers & Fluids segments.
|
◦
|
Europe, Middle East and Africa organic revenue decreased 1.6% in the third quarter as five segments declined, partially offset by growth in the Polymers & Fluids and Construction Products segments. Organic revenue declined 2.5% in the year-to-date period as a decline in five segments was partially offset by growth in the Food Equipment and Construction Products segments.
|
◦
|
Asia Pacific organic revenue increased 1.5% in the third quarter as growth in the Polymers & Fluids, Automotive OEM, Specialty Products and Welding segments was partially offset by a decrease in the Construction Products, Food Equipment and Test & Measurement and Electronics segments. In the year-to-date period, organic revenue declined 2.2% as a decrease in five segments was partially offset by growth in the Welding and Polymers & Fluids segments.
|
•
|
Operating income of $868 million and $2.6 billion in the third quarter and year-to-date periods, respectively, decreased 2.3% and 5.3% in the respective periods primarily due to unfavorable foreign currency translation, lower organic revenue and higher restructuring expenses.
|
•
|
Operating margin of 25.0% in the third quarter increased 40 basis points primarily driven by benefits from the Company's enterprise initiatives of 120 basis points and favorable price/cost of 20 basis points, partially offset by negative operating leverage of 40 basis points and higher employee-related expenses.
|
•
|
In the year-to-date period, operating margin of 24.2% decreased 10 basis points. Excluding the unfavorable impact of higher restructuring expenses of 30 basis points, operating margin increased 20 basis points primarily due to benefits from the Company's enterprise initiatives that contributed 110 basis points, partially offset by negative operating leverage of 40 basis points and higher employee-related expenses.
|
•
|
The third quarter 2019 effective tax rate was 21.6% versus 23.7% in 2018. The third quarter 2019 effective tax rate benefited from a discrete tax benefit of $21 million for the U.S. federal provision to return adjustment which primarily related to changes in estimates related to the "Tax Cuts and Jobs Act." Additionally, the third quarter of 2019 benefited from discrete tax benefits of $7 million related to excess tax benefits from stock-based compensation. The third quarter
|
•
|
The effective tax rate for the year-to-date period of 2019 was 23.5% compared to 24.1% in 2018. The year-to-date effective tax rates for 2019 and 2018 benefited from the discrete tax items discussed above. Additionally, the year-to-date periods of 2019 and 2018 benefited from discrete tax benefits of $16 million and $6 million, respectively, related to excess tax benefits from stock-based compensation. Refer to Note 4. Income Taxes in Item 1 - Financial Statements for further information.
|
•
|
Diluted earnings per share (EPS) was $2.04 for the third quarter and $5.76 for the year-to-date period of 2019. EPS for the third quarter and year-to-date periods included headwinds of $0.05 and $0.26, respectively, compared to the prior year primarily related to unfavorable foreign currency translation and higher restructuring expenses.
|
•
|
Free cash flow was $830 million and $2.0 billion for the third quarter and year-to-date periods, respectively. Refer to the Cash Flow section of Liquidity and Capital Resources for a reconciliation of this non-GAAP measure.
|
•
|
The Company repurchased approximately 2.4 million and 7.6 million shares of its common stock in the third quarter and year-to-date periods of 2019, respectively, for approximately $375 million and $1.1 billion, respectively.
|
•
|
The Company increased the quarterly dividend by 7.0% in the third quarter of 2019. Total cash dividends of $977 million were paid in the year-to-date period of 2019.
|
•
|
Adjusted after-tax return on average invested capital was 29.2% for the third quarter and 28.6% for the year-to-date period of 2019. Refer to the Adjusted After-Tax Return on Average Invested Capital section of Liquidity and Capital Resources for a reconciliation of this non-GAAP measure.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||
Dollars in millions
|
Operating Revenue
|
|
Operating Income
|
|
Operating Revenue
|
|
Operating Income
|
||||||||||||||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||||||||||
Automotive OEM
|
$
|
744
|
|
|
$
|
781
|
|
|
$
|
164
|
|
|
$
|
168
|
|
|
$
|
2,338
|
|
|
$
|
2,561
|
|
|
$
|
505
|
|
|
$
|
583
|
|
Food Equipment
|
551
|
|
|
567
|
|
|
152
|
|
|
151
|
|
|
1,617
|
|
|
1,647
|
|
|
421
|
|
|
421
|
|
||||||||
Test & Measurement and Electronics
|
512
|
|
|
536
|
|
|
130
|
|
|
132
|
|
|
1,569
|
|
|
1,633
|
|
|
387
|
|
|
390
|
|
||||||||
Welding
|
402
|
|
|
414
|
|
|
113
|
|
|
117
|
|
|
1,251
|
|
|
1,277
|
|
|
355
|
|
|
363
|
|
||||||||
Polymers & Fluids
|
418
|
|
|
415
|
|
|
101
|
|
|
91
|
|
|
1,261
|
|
|
1,302
|
|
|
287
|
|
|
278
|
|
||||||||
Construction Products
|
416
|
|
|
431
|
|
|
105
|
|
|
111
|
|
|
1,241
|
|
|
1,303
|
|
|
298
|
|
|
315
|
|
||||||||
Specialty Products
|
441
|
|
|
475
|
|
|
116
|
|
|
128
|
|
|
1,379
|
|
|
1,482
|
|
|
363
|
|
|
404
|
|
||||||||
Intersegment revenue
|
(5
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
|
(17
|
)
|
|
—
|
|
|
—
|
|
||||||||
Unallocated
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(38
|
)
|
|
(30
|
)
|
||||||||
Total
|
$
|
3,479
|
|
|
$
|
3,613
|
|
|
$
|
868
|
|
|
$
|
889
|
|
|
$
|
10,640
|
|
|
$
|
11,188
|
|
|
$
|
2,578
|
|
|
$
|
2,724
|
|
•
|
plastic and metal components, fasteners and assemblies for automobiles, light trucks and other industrial uses.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
744
|
|
|
$
|
781
|
|
|
(4.7
|
)%
|
|
(2.3
|
)%
|
—
|
%
|
—
|
%
|
(2.4
|
)%
|
(4.7
|
)%
|
Operating income
|
$
|
164
|
|
|
$
|
168
|
|
|
(2.3
|
)%
|
|
0.5
|
%
|
—
|
%
|
(0.5
|
)%
|
(2.3
|
)%
|
(2.3
|
)%
|
Operating margin %
|
22.1
|
%
|
|
21.5
|
%
|
|
60 bps
|
|
|
70 bps
|
|
—
|
|
(10) bps
|
|
—
|
|
60 bps
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
2,338
|
|
|
$
|
2,561
|
|
|
(8.7
|
)%
|
|
(5.4
|
)%
|
—
|
%
|
—
|
%
|
(3.3
|
)%
|
(8.7
|
)%
|
Operating income
|
$
|
505
|
|
|
$
|
583
|
|
|
(13.4
|
)%
|
|
(7.3
|
)%
|
—
|
%
|
(3.0
|
)%
|
(3.1
|
)%
|
(13.4
|
)%
|
Operating margin %
|
21.6
|
%
|
|
22.8
|
%
|
|
(120) bps
|
|
|
(50) bps
|
|
—
|
|
(70) bps
|
|
—
|
|
(120) bps
|
|
•
|
Operating revenue declined in the third quarter and year-to-date periods due to lower organic revenue and the unfavorable effect of foreign currency translation.
|
•
|
Organic revenue declined 2.3% in the third quarter and 5.4% in the year-to-date period versus worldwide auto builds which decreased 3% in the third quarter and 6% in the year-to-date period. Auto builds for North America, Europe and China, where the Company has higher content, declined 2% and 6% in the third quarter and year-to-date periods, respectively. Product line simplification activities reduced organic revenue by 100 basis points in the third quarter and 120 basis points in the year-to-date period. Additionally, organic revenue in the third quarter of 2019 was negatively impacted by approximately 100 basis points due to unexpected customer shutdowns in North America.
|
◦
|
North American organic revenue decreased 6.4% in the third quarter and 6.1% in the year-to-date period compared to North American auto builds which were flat in the third quarter and declined 2% in the year-to-date period due to customer mix. Auto builds for the Detroit 3, where the Company has higher content, decreased 4% in the third quarter and 6% in the year-to-date period. Additionally, the third quarter of 2019 was negatively impacted by unexpected customer shutdowns.
|
◦
|
European organic revenue was flat in the third quarter and declined 5.7% in the year-to-date period compared to European auto builds which increased 1% in the third quarter and declined 4% in the year-to-date period due to customer mix.
|
◦
|
Asia Pacific organic revenue increased 2.6% in the third quarter and declined 3.8% in the year-to-date period. China organic revenue grew 7.0% in the third quarter and declined 5.0% in the year-to-date period versus China auto builds which declined 5% and 12% in the third quarter and year-to-date periods, respectively.
|
•
|
Operating margin was 22.1% in the third quarter. The increase of 60 basis points was primarily driven by benefits from the Company's enterprise initiatives, partially offset by product mix, negative operating leverage of 40 basis points and unfavorable price/cost of 30 basis points.
|
•
|
In the year-to-date period, operating margin of 21.6% decreased 120 basis points primarily due to negative operating leverage of 100 basis points, product mix, higher restructuring expenses of 70 basis points and unfavorable price/cost of 70 basis points, partially offset by benefits from the Company's enterprise initiatives.
|
•
|
warewashing equipment;
|
•
|
cooking equipment, including ovens, ranges and broilers;
|
•
|
refrigeration equipment, including refrigerators, freezers and prep tables;
|
•
|
food processing equipment, including slicers, mixers and scales;
|
•
|
kitchen exhaust, ventilation and pollution control systems; and
|
•
|
food equipment service, maintenance and repair.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
551
|
|
|
$
|
567
|
|
|
(2.7
|
)%
|
|
(0.7
|
)%
|
—
|
%
|
—
|
%
|
(2.0
|
)%
|
(2.7
|
)%
|
Operating income
|
$
|
152
|
|
|
$
|
151
|
|
|
0.5
|
%
|
|
1.5
|
%
|
—
|
%
|
1.1
|
%
|
(2.1
|
)%
|
0.5
|
%
|
Operating margin %
|
27.5
|
%
|
|
26.6
|
%
|
|
90 bps
|
|
|
60 bps
|
|
—
|
|
30 bps
|
|
—
|
|
90 bps
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
1,617
|
|
|
$
|
1,647
|
|
|
(1.8
|
)%
|
|
0.9
|
%
|
—
|
%
|
—
|
%
|
(2.7
|
)%
|
(1.8
|
)%
|
Operating income
|
$
|
421
|
|
|
$
|
421
|
|
|
—
|
%
|
|
3.6
|
%
|
—
|
%
|
(1.0
|
)%
|
(2.6
|
)%
|
—
|
%
|
Operating margin %
|
26.0
|
%
|
|
25.6
|
%
|
|
40 bps
|
|
|
60 bps
|
|
—
|
|
(20) bps
|
|
—
|
|
40 bps
|
|
•
|
Operating revenue declined in the third quarter due to the unfavorable effect of foreign currency translation and lower organic revenue. In the year-to-date period, operating revenue declined due to the unfavorable effect of foreign currency translation, partially offset by higher organic revenue.
|
•
|
Organic revenue decreased 0.7% in the third quarter as equipment organic revenue declined 2.2% and service organic revenue increased 2.6%. In the year-to-date period, organic revenue increased 0.9% as equipment organic revenue decreased 0.4% and service organic revenue increased 3.5%.
|
◦
|
North American organic revenue was flat in the third quarter as equipment organic revenue declined 1.3%, primarily driven by lower demand in food retail, and service organic revenue increased 2.7%. Additionally, this region had a challenging comparable organic revenue growth in the prior year third quarter of 4.4%, as equipment grew 5.8%. In the year-to-date period, North American organic revenue grew 1.1%. Equipment organic revenue declined 0.3% primarily driven by lower demand in food service, partially offset by higher demand in food retail in the first half of the year. Service organic revenue increased 3.6% in the year-to-date period.
|
◦
|
International organic revenue decreased 1.7% in the third quarter as equipment organic revenue declined 3.3% primarily due to lower demand in the European warewash and cooking end markets and lower demand in Asia. Service organic revenue increased 2.4%. International organic revenue grew 0.5% in the year-to-date period as equipment organic revenue declined 0.6% primarily due to lower demand in Asia, partially offset by higher demand in the European warewash and cooking end markets, and service organic revenue increased 3.3%.
|
•
|
Operating margin of 27.5% in the third quarter increased 90 basis points primarily due to benefits from the Company's enterprise initiatives, favorable price/cost of 40 basis points and lower restructuring expenses, partially offset by negative operating leverage of 20 basis points, product mix and higher employee-related expenses.
|
•
|
In the year-to-date period, operating margin was 26.0%. The increase of 40 basis points was primarily driven by benefits from the Company's enterprise initiatives and favorable price/cost of 40 basis points, partially offset by product mix, higher employee-related expenses and higher restructuring expenses.
|
•
|
equipment, consumables, and related software for testing and measuring of materials, structures, gases and fluids;
|
•
|
electronic assembly equipment and related consumable solder materials;
|
•
|
electronic components and component packaging;
|
•
|
static control equipment and consumables used for contamination control in clean room environments; and
|
•
|
pressure sensitive adhesives and components for electronics, medical, transportation and telecommunications applications.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
512
|
|
|
$
|
536
|
|
|
(4.7
|
)%
|
|
(3.3
|
)%
|
—
|
%
|
—
|
%
|
(1.4
|
)%
|
(4.7
|
)%
|
Operating income
|
$
|
130
|
|
|
$
|
132
|
|
|
(1.3
|
)%
|
|
1.2
|
%
|
—
|
%
|
(1.1
|
)%
|
(1.4
|
)%
|
(1.3
|
)%
|
Operating margin %
|
25.6
|
%
|
|
24.7
|
%
|
|
90 bps
|
|
|
110 bps
|
|
—
|
|
(20) bps
|
|
—
|
|
90 bps
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
1,569
|
|
|
$
|
1,633
|
|
|
(4.0
|
)%
|
|
(1.7
|
)%
|
—
|
%
|
—
|
%
|
(2.3
|
)%
|
(4.0
|
)%
|
Operating income
|
$
|
387
|
|
|
$
|
390
|
|
|
(0.6
|
)%
|
|
1.7
|
%
|
—
|
%
|
(0.1
|
)%
|
(2.2
|
)%
|
(0.6
|
)%
|
Operating margin %
|
24.7
|
%
|
|
23.9
|
%
|
|
80 bps
|
|
|
80 bps
|
|
—
|
|
—
|
|
—
|
|
80 bps
|
|
•
|
Operating revenue declined in the third quarter and year-to-date periods due to the unfavorable effect of foreign currency translation and lower organic revenue.
|
•
|
Organic revenue decreased 3.3% and 1.7% in the third quarter and year-to-date periods, respectively.
|
◦
|
Organic revenue for the test and measurement businesses decreased 3.9% and 3.0% in the third quarter and year-to-date periods, respectively, primarily driven by lower semi-conductor end market demand in North America. Excluding semi-conductor, the test and measurement businesses increased 0.7% and 3.3% in the third quarter and year-to-date periods, respectively. Additionally, the test and measurement businesses had challenging comparable organic revenue growth in the prior year of 7.2% in the third quarter and 8.0% in the year-to-date period. Instron, where demand is more closely tied to the capital spending environment, had organic revenue growth of 1.8% and 4.1% in the third quarter and year-to-date periods of 2019, respectively.
|
◦
|
Electronics organic revenue declined 2.6% in the third quarter and 0.2% in the year-to-date period. The electronics assembly businesses decreased 8.6% and 2.7% in the third quarter and year-to-date periods, respectively, primarily due to lower demand in North America and Asia. The other electronics businesses, which include the contamination control, static control and pressure sensitive adhesives businesses, grew 1.5% in the third quarter and 1.4% in the year-to-date period primarily due to growth in North America and Asia, partially offset by a decline in Europe.
|
•
|
Operating margin of 25.6% in the third quarter increased 90 basis points primarily due to favorable price/cost of 90 basis points, benefits from the Company's enterprise initiatives and lower intangible asset amortization expense, partially offset by negative operating leverage of 100 basis points.
|
•
|
In the year-to-date period, operating margin was 24.7%. The increase of 80 basis points was primarily driven by benefits from the Company's enterprise initiatives, favorable price/cost of 40 basis points and lower intangible asset amortization expense, partially offset by negative operating leverage of 50 basis points.
|
•
|
arc welding equipment;
|
•
|
metal arc welding consumables and related accessories; and
|
•
|
metal jacketing and other insulation products.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
402
|
|
|
$
|
414
|
|
|
(3.0
|
)%
|
|
(1.6
|
)%
|
(0.8
|
)%
|
—
|
%
|
(0.6
|
)%
|
(3.0
|
)%
|
Operating income
|
$
|
113
|
|
|
$
|
117
|
|
|
(2.9
|
)%
|
|
(2.1
|
)%
|
(0.1
|
)%
|
(0.5
|
)%
|
(0.2
|
)%
|
(2.9
|
)%
|
Operating margin %
|
28.2
|
%
|
|
28.2
|
%
|
|
—
|
%
|
|
(20) bps
|
|
20 bps
|
|
(10) bps
|
|
10 bps
|
|
—
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
1,251
|
|
|
$
|
1,277
|
|
|
(2.1
|
)%
|
|
(0.4
|
)%
|
(0.7
|
)%
|
—
|
%
|
(1.0
|
)%
|
(2.1
|
)%
|
Operating income
|
$
|
355
|
|
|
$
|
363
|
|
|
(2.2
|
)%
|
|
(0.7
|
)%
|
—
|
%
|
(1.1
|
)%
|
(0.4
|
)%
|
(2.2
|
)%
|
Operating margin %
|
28.4
|
%
|
|
28.4
|
%
|
|
—
|
|
|
(10) bps
|
|
20 bps
|
|
(30) bps
|
|
20 bps
|
|
—
|
|
•
|
Operating revenue decreased in the third quarter and year-to-date periods due to lower organic revenue, a divestiture and the unfavorable effect of foreign currency translation.
|
•
|
Organic revenue declined 1.6% in the third quarter driven by a decrease in equipment sales of 2.2%, primarily due to lower demand in the industrial end markets, and a decrease in consumable sales of 0.8%. In the year-to-date period, organic revenue decreased 0.4% as equipment declined 1.4%, partially offset by growth in consumables of 1.0%.
|
◦
|
North American organic revenue decreased 1.3% in the third quarter primarily due to a 2.7% decline in the industrial end markets, partially offset by an increase of 4.5% in the oil and gas end markets. In the year-to-date period, organic revenue declined 0.6% as decreases in the industrial and oil and gas end markets were offset by growth in the commercial end markets.
|
◦
|
International organic revenue decreased 2.9% in the third quarter primarily due to a decline in the oil and gas end markets. In the year-to-date period, organic revenue increased 0.3% primarily due to higher demand in Asia in the oil and gas end markets in the first half of the year, partially offset by a decline in Europe.
|
•
|
Operating margin of 28.2% in the third quarter was flat compared to the prior year as benefits from the Company's enterprise initiatives and favorable price/cost of 40 basis points were offset by product mix, negative operating leverage of 40 basis points and higher employee-related expenses.
|
•
|
In the year-to-date period, operating margin of 28.4% was flat compared to the prior year as benefits from the Company's enterprise initiatives and favorable price/cost of 80 basis points were offset by product mix, higher restructuring expenses and higher employee-related expenses.
|
•
|
adhesives for industrial, construction and consumer purposes;
|
•
|
chemical fluids which clean or add lubrication to machines;
|
•
|
epoxy and resin-based coating products for industrial applications;
|
•
|
hand wipes and cleaners for industrial applications;
|
•
|
fluids, polymers and other supplies for auto aftermarket maintenance and appearance;
|
•
|
fillers and putties for auto body repair; and
|
•
|
polyester coatings and patch and repair products for the marine industry.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
418
|
|
|
$
|
415
|
|
|
0.8
|
%
|
|
2.8
|
%
|
0.1
|
%
|
—
|
%
|
(2.1
|
)%
|
0.8
|
%
|
Operating income
|
$
|
101
|
|
|
$
|
91
|
|
|
10.3
|
%
|
|
13.6
|
%
|
0.1
|
%
|
(0.4
|
)%
|
(3.0
|
)%
|
10.3
|
%
|
Operating margin %
|
24.1
|
%
|
|
22.1
|
%
|
|
200 bps
|
|
|
230 bps
|
|
—
|
|
(10) bps
|
|
(20) bps
|
|
200 bps
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
1,261
|
|
|
$
|
1,302
|
|
|
(3.1
|
)%
|
|
0.7
|
%
|
(0.6
|
)%
|
—
|
%
|
(3.2
|
)%
|
(3.1
|
)%
|
Operating income
|
$
|
287
|
|
|
$
|
278
|
|
|
3.0
|
%
|
|
7.7
|
%
|
(0.1
|
)%
|
(0.9
|
)%
|
(3.7
|
)%
|
3.0
|
%
|
Operating margin %
|
22.8
|
%
|
|
21.4
|
%
|
|
140 bps
|
|
|
150 bps
|
|
10 bps
|
|
(20) bps
|
|
—
|
|
140 bps
|
|
•
|
Operating revenue increased in the third quarter primarily due to higher organic revenue, partially offset by the unfavorable effect of foreign currency translation. In the year-to-date period, operating revenue decreased due to the unfavorable effect of foreign currency translation and a divestiture, partially offset by higher organic revenue.
|
•
|
Organic revenue increased 2.8% in the third quarter as growth in the polymers and automotive aftermarket businesses was offset by a decline in the fluids businesses. In the year-to-date period, organic revenue increased 0.7% as growth in the polymers businesses was partially offset by a decline in the automotive aftermarket businesses, resulting from lower demand in the first quarter, and a decline in the fluids businesses.
|
◦
|
Organic revenue for the automotive aftermarket businesses grew 2.0% in the third quarter primarily driven by an increase in the car care businesses in North America and the additives businesses in Europe. In the year-to-date period, organic revenue declined 0.5% primarily due to lower demand in the tire repair businesses in North America and the additives businesses in Europe, partially offset by stronger demand in the car care businesses in North America.
|
◦
|
Organic revenue for the polymers businesses increased 6.6% and 3.2% in the third quarter and year-to-date periods, respectively, primarily driven by growth in North America, primarily in the heavy industrial end markets, and in Asia. In the prior year third quarter, organic revenue for the polymers businesses declined 2.9%.
|
◦
|
Organic revenue for the fluids businesses decreased 1.1% and 0.9% in the third quarter and year-to-date periods, respectively, primarily due to a decline in the industrial maintenance, repair, and operations end markets in North America.
|
•
|
Operating margin of 24.1% in the third quarter increased 200 basis points primarily driven by the net benefits from the Company's enterprise initiatives and cost management, positive operating leverage of 60 basis points and favorable price/cost of 20 basis points.
|
•
|
In the year-to-date period, operating margin was 22.8%. The increase of 140 basis points was primarily due to the net benefits from the Company's enterprise initiatives and cost management, partially offset by higher restructuring expenses.
|
•
|
fasteners and related fastening tools for wood and metal applications;
|
•
|
anchors, fasteners and related tools for concrete applications;
|
•
|
metal plate truss components and related equipment and software; and
|
•
|
packaged hardware, fasteners, anchors and other products for retail.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
416
|
|
|
$
|
431
|
|
|
(3.6
|
)%
|
|
(0.7
|
)%
|
—
|
%
|
—
|
%
|
(2.9
|
)%
|
(3.6
|
)%
|
Operating income
|
$
|
105
|
|
|
$
|
111
|
|
|
(6.1
|
)%
|
|
(3.1
|
)%
|
—
|
%
|
(0.3
|
)%
|
(2.7
|
)%
|
(6.1
|
)%
|
Operating margin %
|
25.1
|
%
|
|
25.8
|
%
|
|
(70) bps
|
|
|
(60) bps
|
|
—
|
|
(10) bps
|
|
—
|
|
(70) bps
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
1,241
|
|
|
$
|
1,303
|
|
|
(4.8
|
)%
|
|
(0.9
|
)%
|
—
|
%
|
—
|
%
|
(3.9
|
)%
|
(4.8
|
)%
|
Operating income
|
$
|
298
|
|
|
$
|
315
|
|
|
(5.4
|
)%
|
|
(0.8
|
)%
|
—
|
%
|
(1.0
|
)%
|
(3.6
|
)%
|
(5.4
|
)%
|
Operating margin %
|
24.0
|
%
|
|
24.2
|
%
|
|
(20) bps
|
|
|
—
|
|
—
|
|
(30) bps
|
|
10 bps
|
|
(20) bps
|
|
•
|
Operating revenue decreased in the third quarter and year-to-date periods due to the unfavorable effect of foreign currency translation and lower organic revenue.
|
•
|
Organic revenue declined 0.7% in the third quarter and 0.9% in the year-to-date period.
|
◦
|
North American organic revenue was essentially flat for the third quarter and declined 0.3% in the year-to-date period, as an increase of 0.5% and 0.6% in the United States residential and commercial end markets, respectively, was offset by a decline in Canada.
|
◦
|
International organic revenue declined 1.1% and 1.3% in the third quarter and year-to-date periods, respectively. Asia Pacific organic revenue decreased 3.5% and 5.6% in the third quarter and year-to-date periods, respectively, primarily due to a decline in Australia and New Zealand across all end markets. European organic revenue increased 1.4% in the third quarter and 2.7% in the year-to-date period driven by growth in continental Europe.
|
•
|
Operating margin was 25.1% in the third quarter. The decrease of 70 basis points was driven by unfavorable price/cost of 30 basis points, negative operating leverage of 20 basis points, higher restructuring expenses and higher employee-related expenses, partially offset by benefits from the Company's enterprise initiatives.
|
•
|
In the year-to-date period, operating margin of 24.0% decreased 20 basis points primarily driven by unfavorable price/cost of 50 basis points, higher restructuring expenses and negative operating leverage of 20 basis points, partially offset by benefits from the Company's enterprise initiatives.
|
•
|
line integration, conveyor systems and line automation for the food and beverage industries;
|
•
|
plastic consumables that multi-pack cans and bottles and related equipment;
|
•
|
foil, film and related equipment used to decorate consumer products;
|
•
|
product coding and marking equipment and related consumables;
|
•
|
plastic and metal closures and components for appliances;
|
•
|
airport ground support equipment; and
|
•
|
components for medical devices.
|
|
Three Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
441
|
|
|
$
|
475
|
|
|
(7.1
|
)%
|
|
(4.7
|
)%
|
(0.8
|
)%
|
—
|
%
|
(1.6
|
)%
|
(7.1
|
)%
|
Operating income
|
$
|
116
|
|
|
$
|
128
|
|
|
(9.1
|
)%
|
|
(7.7
|
)%
|
(0.2
|
)%
|
0.5
|
%
|
(1.7
|
)%
|
(9.1
|
)%
|
Operating margin %
|
26.2
|
%
|
|
26.8
|
%
|
|
(60) bps
|
|
|
(80) bps
|
|
10 bps
|
|
10 bps
|
|
—
|
|
(60) bps
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
||||||||||||||
Dollars in millions
|
September 30,
|
|
Components of Increase (Decrease)
|
||||||||||||||||||
|
2019
|
|
2018
|
|
Inc (Dec)
|
|
Organic
|
Acquisition/Divestiture
|
Restructuring
|
Foreign Currency
|
Total
|
||||||||||
Operating revenue
|
$
|
1,379
|
|
|
$
|
1,482
|
|
|
(6.9
|
)%
|
|
(4.3
|
)%
|
(0.6
|
)%
|
—
|
%
|
(2.0
|
)%
|
(6.9
|
)%
|
Operating income
|
$
|
363
|
|
|
$
|
404
|
|
|
(10.1
|
)%
|
|
(7.8
|
)%
|
—
|
%
|
(0.4
|
)%
|
(1.9
|
)%
|
(10.1
|
)%
|
Operating margin %
|
26.3
|
%
|
|
27.2
|
%
|
|
(90) bps
|
|
|
(100) bps
|
|
20 bps
|
|
(10) bps
|
|
—
|
|
(90) bps
|
|
•
|
Operating revenue decreased in the third quarter and year-to-date periods due to lower organic revenue, the unfavorable effect of foreign currency translation and a divestiture.
|
•
|
Organic revenue decreased 4.7% and 4.3% in the third quarter and year-to-date periods, respectively. Consumables declined 5.0% in the third quarter and 5.6% in the year-to-date period primarily due to lower demand in North America and Europe. Equipment sales declined 3.6% in the third quarter with decreases across all major regions. In the year-to-date period, equipment sales increased 0.5% primarily due to higher demand in North America, partially offset by a decline in Asia. Product line simplification activities reduced organic revenue by 100 basis points in the respective periods.
|
◦
|
North American organic revenue decreased 4.3% and 2.9% in the third quarter and year-to-date periods, respectively, primarily due to a decrease in the consumer packaging, specialty films and labels businesses, partially offset by growth in the ground support equipment business.
|
◦
|
International organic revenue decreased 5.2% and 6.5% in the third quarter and year-to-date periods, respectively, primarily due to a decline in the graphics, specialty films and foils businesses in Europe.
|
•
|
Operating margin was 26.2% in the third quarter. The decrease of 60 basis points was primarily driven by product mix, negative operating leverage of 100 basis points and higher employee-related expenses, partially offset by benefits from the Company's enterprise initiatives.
|
•
|
In the year-to-date period, operating margin of 26.3% decreased 90 basis points primarily due to product mix, negative operating leverage of 80 basis points and higher employee-related expenses, partially offset by benefits from the Company's enterprise initiatives.
|
•
|
Interest expense of $52 million and $170 million in the third quarter and year-to-date periods, respectively, decreased from $64 million and $194 million in the respective periods of 2018. The decrease in the third quarter and year-to-date periods was primarily due to the repayment of the $700 million notes due April 1, 2019 and the $650 million notes due March 1, 2019.
|
•
|
Other income (expense) was income of $26 million and $10 million in the third quarter of 2019 and 2018, respectively. Other income (expense) was income of $49 million in the year-to-date period of 2019 versus $48 million in the prior year period. The year-to-date period of 2019 included estimated losses of $4 million recorded in the second quarter of 2019 related to the divestiture of two businesses in the Specialty Products segment. Refer to Note 2. Divestitures in Item 1 - Financial Statements for further information.
|
•
|
internal investments to support organic growth and sustain core businesses;
|
•
|
payment of an attractive dividend to shareholders; and
|
•
|
external investments in selective strategic acquisitions that support the Company's organic growth focus, and an active share repurchase program.
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net cash provided by operating activities
|
$
|
920
|
|
|
$
|
844
|
|
|
$
|
2,221
|
|
|
$
|
2,002
|
|
Additions to plant and equipment
|
(90
|
)
|
|
(101
|
)
|
|
(244
|
)
|
|
(282
|
)
|
||||
Free cash flow
|
$
|
830
|
|
|
$
|
743
|
|
|
$
|
1,977
|
|
|
$
|
1,720
|
|
|
|
|
|
|
|
|
|
||||||||
Cash dividends paid
|
$
|
(323
|
)
|
|
$
|
(262
|
)
|
|
$
|
(977
|
)
|
|
$
|
(792
|
)
|
Repurchases of common stock
|
(375
|
)
|
|
(500
|
)
|
|
(1,125
|
)
|
|
(1,500
|
)
|
||||
Acquisition of businesses (excluding cash and equivalents) and additional interest in affiliates
|
—
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
||||
Net proceeds from (repayments of) debt with original maturities of three months or less
|
1
|
|
|
—
|
|
|
(1
|
)
|
|
(850
|
)
|
||||
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
|
)
|
|
(1,350
|
)
|
|
(1
|
)
|
||||
Other
|
47
|
|
|
10
|
|
|
66
|
|
|
24
|
|
||||
Effect of exchange rate changes on cash and equivalents
|
(32
|
)
|
|
(29
|
)
|
|
(39
|
)
|
|
(106
|
)
|
||||
Net increase (decrease) in cash and equivalents
|
$
|
148
|
|
|
$
|
(39
|
)
|
|
$
|
321
|
|
|
$
|
(1,505
|
)
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
September 30,
|
|
September 30,
|
||||||||||||
Dollars in millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Operating income
|
$
|
868
|
|
|
$
|
889
|
|
|
$
|
2,578
|
|
|
$
|
2,724
|
|
Adjusted tax rate
|
24.1
|
%
|
|
25.5
|
%
|
|
24.3
|
%
|
|
24.7
|
%
|
||||
Income taxes
|
(210
|
)
|
|
(227
|
)
|
|
(628
|
)
|
|
(674
|
)
|
||||
Operating income after taxes
|
$
|
658
|
|
|
$
|
662
|
|
|
$
|
1,950
|
|
|
$
|
2,050
|
|
|
|
|
|
|
|
|
|
||||||||
Invested capital:
|
|
|
|
|
|
|
|
||||||||
Trade receivables
|
$
|
2,499
|
|
|
$
|
2,777
|
|
|
$
|
2,499
|
|
|
$
|
2,777
|
|
Inventories
|
1,209
|
|
|
1,338
|
|
|
1,209
|
|
|
1,338
|
|
||||
Net assets held for sale
|
324
|
|
|
—
|
|
|
324
|
|
|
—
|
|
||||
Net plant and equipment
|
1,693
|
|
|
1,799
|
|
|
1,693
|
|
|
1,799
|
|
||||
Goodwill and intangible assets
|
5,320
|
|
|
5,785
|
|
|
5,320
|
|
|
5,785
|
|
||||
Accounts payable and accrued expenses
|
(1,722
|
)
|
|
(1,844
|
)
|
|
(1,722
|
)
|
|
(1,844
|
)
|
||||
Other, net
|
(535
|
)
|
|
(494
|
)
|
|
(535
|
)
|
|
(494
|
)
|
||||
Total invested capital
|
$
|
8,788
|
|
|
$
|
9,361
|
|
|
$
|
8,788
|
|
|
$
|
9,361
|
|
|
|
|
|
|
|
|
|
||||||||
Average invested capital
|
$
|
9,007
|
|
|
$
|
9,470
|
|
|
$
|
9,083
|
|
|
$
|
9,634
|
|
Adjusted return on average invested capital
|
29.2
|
%
|
|
28.0
|
%
|
|
28.6
|
%
|
|
28.4
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||
|
September 30, 2019
|
|
September 30, 2019
|
||||||||||
Dollars in millions
|
Income Taxes
|
|
Tax Rate
|
|
Income Taxes
|
|
Tax Rate
|
||||||
As reported
|
$
|
182
|
|
|
21.6
|
%
|
|
$
|
577
|
|
|
23.5
|
%
|
Discrete tax benefit
|
21
|
|
|
2.5
|
%
|
|
21
|
|
|
0.8
|
%
|
||
As adjusted
|
$
|
203
|
|
|
24.1
|
%
|
|
$
|
598
|
|
|
24.3
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||
|
September 30, 2018
|
|
September 30, 2018
|
||||||||||
Dollars in millions
|
Income Taxes
|
|
Tax Rate
|
|
Income Taxes
|
|
Tax Rate
|
||||||
As reported
|
$
|
197
|
|
|
23.7
|
%
|
|
$
|
622
|
|
|
24.1
|
%
|
Net discrete tax benefit
|
15
|
|
|
1.8
|
%
|
|
15
|
|
|
0.6
|
%
|
||
As adjusted
|
$
|
212
|
|
|
25.5
|
%
|
|
$
|
637
|
|
|
24.7
|
%
|
In millions
|
September 30, 2019
|
|
December 31, 2018
|
|
Increase/
(Decrease)
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Cash and equivalents
|
$
|
1,825
|
|
|
$
|
1,504
|
|
|
$
|
321
|
|
Trade receivables
|
2,499
|
|
|
2,622
|
|
|
(123
|
)
|
|||
Inventories
|
1,209
|
|
|
1,318
|
|
|
(109
|
)
|
|||
Other
|
292
|
|
|
334
|
|
|
(42
|
)
|
|||
Assets held for sale
|
420
|
|
|
—
|
|
|
420
|
|
|||
Total current assets
|
6,245
|
|
|
5,778
|
|
|
467
|
|
|||
Current liabilities:
|
|
|
|
|
|
||||||
Short-term debt
|
—
|
|
|
1,351
|
|
|
(1,351
|
)
|
|||
Accounts payable and accrued expenses
|
1,722
|
|
|
1,795
|
|
|
(73
|
)
|
|||
Other
|
405
|
|
|
396
|
|
|
9
|
|
|||
Liabilities held for sale
|
96
|
|
|
—
|
|
|
96
|
|
|||
Total current liabilities
|
2,223
|
|
|
3,542
|
|
|
(1,319
|
)
|
|||
Net working capital
|
$
|
4,022
|
|
|
$
|
2,236
|
|
|
$
|
1,786
|
|
In millions
|
September 30, 2019
|
|
December 31, 2018
|
||||
Short-term debt
|
$
|
—
|
|
|
$
|
1,351
|
|
Long-term debt
|
7,643
|
|
|
6,029
|
|
||
Total debt
|
$
|
7,643
|
|
|
$
|
7,380
|
|
Dollars in millions
|
September 30, 2019
|
|
December 31, 2018
|
||||
Total debt
|
$
|
7,643
|
|
|
$
|
7,380
|
|
|
|
|
|
||||
Net income
|
$
|
2,487
|
|
|
$
|
2,563
|
|
Add:
|
|
|
|
||||
Interest expense
|
233
|
|
|
257
|
|
||
Other income
|
(68
|
)
|
|
(67
|
)
|
||
Income taxes
|
786
|
|
|
831
|
|
||
Depreciation
|
268
|
|
|
272
|
|
||
Amortization and impairment of intangible assets
|
168
|
|
|
189
|
|
||
EBITDA
|
$
|
3,874
|
|
|
$
|
4,045
|
|
Total debt to EBITDA ratio
|
2.0
|
|
|
1.8
|
|
In millions
|
|
||
Total stockholders’ equity, December 31, 2018
|
$
|
3,258
|
|
Net income
|
1,880
|
|
|
Repurchases of common stock
|
(1,125
|
)
|
|
Cash dividends declared
|
(993
|
)
|
|
Foreign currency translation adjustments, net of tax
|
(134
|
)
|
|
Other
|
84
|
|
|
Total stockholders’ equity, September 30, 2019
|
$
|
2,970
|
|
ITEM 6. Exhibits
|
Exhibit Index
|
Exhibit Number
|
|
Exhibit Description
|
|
|
|
|
||
|
|
|
|
||
|
|
|
|
||
|
|
|
101
|
|
The following financial and related information from the Illinois Tool Works Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 is formatted in Inline Extensible Business Reporting Language (iXBRL) and submitted electronically herewith: (i) Statement of Income, (ii) Statement of Comprehensive Income, (iii) Statement of Financial Position, (iv) Statement of Changes in Stockholders' Equity, (v) Statement of Cash Flows, and (vi) related Notes to Financial Statements.
|
|
|
|
104
|
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
|
|
|
|
|
|
|
ILLINOIS TOOL WORKS INC.
|
|
|
|
|
|
|
|
|
|
Dated:
|
October 28, 2019
|
By:
|
/s/ Randall J. Scheuneman
|
|
|
|
Randall J. Scheuneman
|
|
|
|
Vice President & Chief Accounting Officer
|
|
|
|
(Principal Accounting Officer and Duly Authorized Officer)
|
1 Year Illinois Tool Works Chart |
1 Month Illinois Tool Works Chart |
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