ILLINOIS TOOL WORKS INC (ITW) · Material Event (8-K) SEC Filing

EX-99.1 2 a20260630-2q26ex991pressre.htm EX-99.1 DocumentExhibit 99.1ITW Reports Second Quarter 2026 Results and Raises Full Year 2026 Guidance Revenue of $4.30 billion, increased +6.1% as organic growth accelerated to +4.5% Operating income of $1.15 billion grew +7.4% marking the most profitable quarter in company history Operating margin of 26.7% expanded 40 bps, as enterprise initiatives contributed 120 bps GAAP EPS of $2.84 increased +10.1% Operating cash flow of $723 million and free cash flow of $631 million an increase of +41% Full Year 2026 guidance raised organic revenue raised +1.5%-pts to new midpoint of 3.5% and GAAP EPS raised +$0.15 to new midpoint of $11.45GLENVIEW, Ill., July 28, 2026 - Illinois Tool Works Inc. (NYSE ITW) today reported its second quarter 2026 results and raised full year 2026 guidance. The ITW team delivered a strong operational and financial performance in the second quarter highlighted by organic growth of 4.5 percent, operating margin of 26.7 percent, and a 10 percent increase in GAAP earnings per share to $2.84, said Christopher A. O Herlihy, President and Chief Executive Officer. Our results reflect a meaningful acceleration in our capex-related segments, led by double-digit organic growth in Welding and Test Measurement and Electronics, alongside strong performance in Polymers Fluids. As we advance our enterprise strategy priorities, we remain well-positioned to drive consistent, above-market organic growth powered by increased contribution to revenue growth from Customer-Back Innovation while further expanding profitability and margins. As a result of our strong operational momentum, we are raising both top- and bottom-line guidance for the full year, O Herlihy concluded.Second Quarter 2026 ResultsSecond quarter revenue of $4.30 billion increased by 6.1 percent. Organic revenue growth was 4.5 percent, led by 6.4 percent growth in North America. Foreign currency translation increased revenue by 1.4 percent and an acquisition added 0.2 percent.GAAP EPS grew 10.1 percent to $2.84, while operating income increased 7.4 percent to $1.15 billion, marking the most profitable quarter in the history of the company. Operating margin expanded by 40 basis points to 26.7 percent as enterprise initiatives contributed 120 basis points. In the quarter, price increases more than offset higher raw material costs in dollar terms, though timing lags between inflation and price adjustments modestly diluted margins. Operating cash flow was $723 million, and free cash flow was $631 million, a 41 percent increase representing a 77 percent conversion of net income. During the quarter, the company returned over $1.2 billion to shareholders through dividends and share repurchases of $750 million. The effective tax rate for the quarter was 24.4 percent.2026 GuidanceITW is raising its full year 2026 GAAP EPS guidance by $0.15 to a narrowed range of $11.35 to $11.55 per share, representing 9 percent growth at the midpoint. Based on current demand levels and prevailing foreign exchange rates, the company is raising revenue growth guidance to a new range of 4 to 5 percent and raising organic growth guidance to 3 to 4 percent, a 1.5 percentage point increase at the midpoint.Operating margin is projected to be in the range of 26.5 to 27.5 percent, with enterprise initiatives contributing more than 100 basis points. Free cash flow is projected to exceed 100 percent of net income, and the company expects to repurchase approximately $1.5 billion of its own shares. The projected effective tax rate is 23 to 24 percent.Non-GAAP MeasuresThis 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 to net income 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 this forward-looking estimate to its most directly comparable GAAP estimate have been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of reliable forward-looking cash flow information. For the same reasons, the company is unable to address the potential significance of the unavailable information, which could be material to future results.Forward-looking StatementsThis 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 global supply chain challenges, expected impact of inflation including raw material inflation and rising interest rates, the potential impact of tariffs, the company s projected pricing actions, the impact of enterprise initiatives, future financial and operating performance, free cash flow and free cash flow to net income conversion rate, organic and total revenue, operating and incremental margin, price cost impact, statements regarding diluted income per share, expected dividend payments, after-tax return on invested capital, effective tax rates, exchange rates, expected timing and amount of share repurchases, end market economic and regulatory conditions, the impact of recent or potential acquisitions and or divestitures, and the company s 2026 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors, which could cause actual results to differ materially from those anticipated. Important risks that could cause actual results to differ materially from the company s expectations include those that are detailed in ITW s Form 10-K for 2025 and subsequent reports filed with the SEC.About Illinois Tool WorksITW (NYSE ITW) is a Fortune 300 global multi-industrial manufacturing leader with revenue of $16 billion in 2025. 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.Investor Relations Media Contact Erin LinnihanTel 224.661.7431investorrelations itw.com mediarelations itw.comILLINOIS TOOL WORKS INC. and SUBSIDIARIESSTATEMENT OF INCOME (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, In millions except per share amounts 2026 2025 2026 2025 Operating Revenue $ 4,301 $ 4,053 $ 8,317 $ 7,892 Cost of revenue 2,403 2,271 4,659 4,432 Selling, administrative, and research and development expenses 735 693 1,457 1,399 Amortization and impairment of intangible assets 16 21 34 42 Operating Income 1,147 1,068 2,167 2,019 Interest expense (79) (74) (152) (142) Other income (expense) 12 4 32 16 Income Before Taxes 1,080 998 2,047 1,893 Income Taxes 265 243 464 438 Net Income $ 815 $ 755 $ 1,583 $ 1,455 Net Income Per Share Basic $ 2.85 $ 2.58 $ 5.51 $ 4.97 Diluted $ 2.84 $ 2.58 $ 5.50 $ 4.95 Cash Dividends Per Share Paid $ 1.61 $ 1.50 $ 3.22 $ 3.00 Declared $ 1.61 $ 1.50 $ 3.22 $ 3.00 Shares of Common Stock Outstanding During the Period Average 286.4 292.3 287.3 292.9 Average assuming dilution 287.0 292.9 288.1 293.7 ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSTATEMENT OF FINANCIAL POSITION (UNAUDITED) In millions June 30, 2026 December 31, 2025 Assets Current Assets Cash and equivalents $ 839 $ 851 Trade receivables 3,564 3,227 Inventories 1,756 1,659 Prepaid expenses and other current assets 441 463 Total current assets 6,600 6,200 Net plant and equipment 2,235 2,230 Goodwill 5,074 5,098 Intangible assets 558 591 Deferred income taxes 489 519 Other assets 1,538 1,510 $ 16,494 $ 16,148 Liabilities and Stockholders' Equity Current Liabilities Short-term debt $ 3,145 $ 2,286 Accounts payable 636 522 Accrued expenses 1,592 1,636 Cash dividends payable 457 465 Income taxes payable 123 217 Total current liabilities 5,953 5,126 Noncurrent Liabilities Long-term debt 6,549 6,683 Deferred income taxes 162 154 Other liabilities 935 959 Total noncurrent liabilities 7,646 7,796 Stockholders' Equity Common stock 6 6 Additional paid-in-capital 1,838 1,771 Retained earnings 30,812 30,150 Common stock held in treasury (28,004) (26,875) Accumulated other comprehensive income (loss) (1,758) (1,827) Noncontrolling interest 1 1 Total stockholders' equity 2,895 3,226 $ 16,494 $ 16,148 ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSEGMENT DATA (UNAUDITED) Three Months Ended June 30, 2026 Dollars in millions Total Revenue Operating Income Operating Margin Automotive OEM $ 857 $ 185 21.6 % Food Equipment 692 188 27.1 % Test Measurement and Electronics 769 193 25.2 % Welding 549 178 32.4 % Polymers Fluids 476 140 29.3 % Construction Products 494 151 30.6 % Specialty Products 468 148 31.5 % Intersegment (4) % Total Segments 4,301 1,183 27.5 % Unallocated (36) % Total Company $ 4,301 $ 1,147 26.7 % Six Months Ended June 30, 2026 Dollars in millions Total Revenue Operating Income Operating Margin Automotive OEM $ 1,677 $ 358 21.3 % Food Equipment 1,329 345 26.0 % Test Measurement and Electronics 1,484 357 24.1 % Welding 1,056 341 32.3 % Polymers Fluids 928 266 28.7 % Construction Products 952 286 30.0 % Specialty Products 899 283 31.4 % Intersegment (8) % Total Segments 8,317 2,236 26.9 % Unallocated (69) % Total Company $ 8,317 $ 2,167 26.1 % ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSEGMENT DATA (UNAUDITED) Q2 2026 vs. Q2 2025 Favorable (Unfavorable) Operating Revenue Automotive OEM Food Equipment Test Measurement and Electronics Welding Polymers Fluids Construction Products Specialty Products Total ITW Organic (0.4) % % 10.0 % 13.9 % 7.3 % 2.0 % 1.6 % 4.5 % Acquisitions Divestitures % % 1.3 % % % % % 0.2 % Translation 1.7 % 1.6 % 0.8 % 0.8 % 1.5 % 2.3 % 1.4 % 1.4 % Operating Revenue 1.3 % 1.6 % 12.1 % 14.7 % 8.8 % 4.3 % 3.0 % 6.1 % Q2 2026 vs. Q2 2025 Favorable (Unfavorable) Change in Operating Margin Automotive OEM Food Equipment Test Measurement and Electronics Welding Polymers Fluids Construction Products Specialty Products Total ITW Operating Leverage (10) bps 250 bps 220 bps 140 bps 40 bps 20 bps 90 bps Changes in Variable Margin OH Costs 20 bps (60) bps (250) bps 40 bps (40) bps (150) bps (50) bps Total Organic 10 bps (60) bps 250 bps (30) bps 180 bps (130) bps 40 bps Acquisitions Divestitures (20) bps Restructuring Other 20 bps 10 bps (40) bps (20) bps (20) bps 20 bps Total Operating Margin Change 30 bps (60) bps 240 bps (70) bps 160 bps (20) bps (110) bps 40 bps Total Operating Margin % * 21.6% 27.1% 25.2% 32.4% 29.3% 30.6% 31.5% 26.7% * Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 20 bps 10 bps 120 bps 80 bps 10 bps 20 bps 40 bps ** ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.04) on GAAP earnings per share for the second quarter of 2026. ILLINOIS TOOL WORKS INC. and SUBSIDIARIESSEGMENT DATA (UNAUDITED) H1 2026 vs. H1 2025 Favorable (Unfavorable) Operating Revenue Automotive OEM Food Equipment Test Measurement and Electronics Welding Polymers Fluids Construction Products Specialty Products Total ITW Organic (0.6) % (1.3) % 7.4 % 10.0 % 4.6 % 0.4 % (1.5) % 2.5 % Acquisitions Divestitures % % 1.5 % % % % % 0.3 % Translation 3.4 % 2.9 % 2.0 % 1.0 % 2.5 % 3.5 % 2.6 % 2.6 % Operating Revenue 2.8 % 1.6 % 10.9 % 11.0 % 7.1 % 3.9 % 1.1 % 5.4 % H1 2026 vs. H1 2025 Favorable (Unfavorable) Change in Operating Margin Automotive OEM Food Equipment Test Measurement and Electronics Welding Polymers Fluids Construction Products Specialty Products Total ITW Operating Leverage (10) bps (20) bps 200 bps 160 bps 90 bps 20 bps (30) bps 50 bps Changes in Variable Margin OH Costs 70 bps (100) bps 20 bps (180) bps 80 bps (10) bps (40) bps (10) bps Total Organic 60 bps (120) bps 220 bps (20) bps 170 bps 10 bps (70) bps 40 bps Acquisitions Divestitures (40) bps Restructuring Other 40 bps 10 bps 20 bps (30) bps (10) bps (10) bps 30 bps 10 bps Total Operating Margin Change 100 bps (110) bps 200 bps (50) bps 160 bps (40) bps 50 bps Total Operating Margin % * 21.3% 26.0% 24.1% 32.3% 28.7% 30.0% 31.4% 26.1% * Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets 20 bps 130 bps 90 bps 10 bps 20 bps 40 bps ** ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.09) on GAAP earnings per share for the first half of 2026. ILLINOIS TOOL WORKS INC. and SUBSIDIARIESGAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, Dollars in millions 2026 2025 2026 2025 Numerator Net Income $ 815 $ 755 $ 1,583 $ 1,455 Discrete tax benefit related to the first quarter 2026 (34) Discrete tax benefit related to the first quarter 2025 (21) Interest expense, net of tax (1) 59 56 115 108 Other (income) expense, net of tax (1) (9) (3) (24) (12) Operating income after taxes $ 865 $ 808 $ 1,640 $ 1,530 Denominator Invested capital Cash and equivalents $ 839 $ 788 $ 839 $ 788 Trade receivables 3,564 3,320 3,564 3,320 Inventories 1,756 1,710 1,756 1,710 Net plant and equipment 2,235 2,177 2,235 2,177 Goodwill and intangible assets 5,632 5,596 5,632 5,596 Accounts payable and accrued expenses (2,228) (2,157) (2,228) (2,157) Debt (9,694) (8,937) (9,694) (8,937) Other, net 791 714 791 714 Total net assets (stockholders' equity) 2,895 3,211 2,895 3,211 Cash and equivalents (839) (788) (839) (788) Debt 9,694 8,937 9,694 8,937 Total invested capital $ 11,750 $ 11,360 $ 11,750 $ 11,360 Average invested capital (2) $ 11,650 $ 10,996 $ 11,548 $ 10,741 Net income to average invested capital (3) 28.0 % 27.4 % 27.4 % 27.1 % After-tax return on average invested capital (3) 29.7 % 29.4 % 28.4 % 28.5 % (1) Effective tax rate used for interest expense and other (income) expense for the three months ended June 30, 2026 and 2025 was 24.4% in both periods. Effective tax rate used for interest expense and other (income) expense for the six months ended June 30, 2026 and 2025 was 24.3% and 24.2%, respectively.(2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within each of the periods presented.(3) Returns for the three months ended June 30, 2026 and 2025 were converted to an annual rate by multiplying the calculated return by 4. Returns for the six months ended June 30, 2026 and 2025 were converted to an annual rate by multiplying the calculated return by 2.A reconciliation of the tax rate for the six month period ended June 30, 2026, excluding the first quarter 2026 discrete tax benefit of $34 million primarily related to the resolution of a U.S. tax audit, is as follows Six Months Ended June 30, 2026 Dollars in millions Income Taxes Tax Rate As reported $ 464 22.6 % Discrete tax benefit related to the first quarter 2026 34 1.7 % As adjusted $ 498 24.3 % A reconciliation of the tax rate for the six month period ended June 30, 2025, excluding the first quarter 2025 discrete tax benefit of $21 million related to the reversal of a valuation allowance on net operating loss carryforwards, is as follows Six Months Ended June 30, 2025 Dollars in millions Income Taxes Tax Rate As reported $ 438 23.1 % Discrete tax benefit related to the first quarter 2025 21 1.1 % As adjusted $ 459 24.2 % AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED) Twelve Months Ended Dollars in millions December 31, 2025 Numerator Net income $ 3,066 Net discrete tax benefit related to the third quarter 2025 (27) Discrete tax benefit related to the first quarter 2025 (21) Interest expense, net of tax (1) 222 Other (income) expense, net of tax (1) (32) Operating income after taxes $ 3,208 Denominator Invested capital Cash and equivalents $ 851 Trade receivables 3,227 Inventories 1,659 Net plant and equipment 2,230 Goodwill and intangible assets 5,689 Accounts payable and accrued expenses (2,158) Debt (8,969) Other, net 697 Total net assets (stockholders' equity) 3,226 Cash and equivalents (851) Debt 8,969 Total invested capital $ 11,344 Average invested capital (2) $ 10,959 Net income to average invested capital 28.0 % After-tax return on average invested capital 29.3 % (1) Effective tax rate used for interest expense and other (income) expense for the year ended December 31, 2025 was 23.9%.(2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within the period presented.A reconciliation of the 2025 effective tax rate, excluding the third quarter 2025 net discrete tax benefit of $27 million, which included a favorable discrete tax benefit of $43 million related to the estimated U.S. federal tax liability for 2024, partially offset by a $16 million discrete tax expense related primarily to the resolution of a foreign tax audit, and excluding the first quarter 2025 discrete tax benefit of $21 million related to the reversal of a valuation allowance on net operating loss carryforwards, is as follows Twelve Months Ended December 31, 2025 Dollars in millions Income Taxes Tax Rate As reported $ 900 22.7 % Net discrete tax benefit related to the third quarter 2025 27 0.7 % Discrete tax benefit related to the first quarter 2025 21 0.5 % As adjusted $ 948 23.9 % FREE CASH FLOW (UNAUDITED) Three Months Ended Six Months Ended June 30, June 30, Dollars in millions 2026 2025 2026 2025 Net cash provided by operating activities $ 723 $ 550 $ 1,346 $ 1,142 Less Additions to plant and equipment (92) (101) (187) (197) Free cash flow $ 631 $ 449 $ 1,159 $ 945 Net income $ 815 $ 755 $ 1,583 $ 1,455 Net cash provided by operating activities to net income conversion rate 89 % 73 % 85 % 78 % Free cash flow to net income conversion rate 77 % 59 % 73 % 65 %