Illinois Tool Works Inc logo

ITW - Illinois Tool Works Inc News Story

$222.63 4.3  2.0%

Last Trade - 09/04/21

Sector
Industrials
Size
Large Cap
Market Cap £51.40bn
Enterprise Value £55.45bn
Revenue £9.17bn
Position in Universe 178th / 6827

ITW Reports Fourth Quarter and Full Year 2020 Results

Fri 5th February, 2021 1:00pm
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20210205:nGNX2Gcm67&default-theme=true


Provides 2021 Guidance Including EPS Growth of 18% at the Mid-point

Fourth-Quarter 2020 Highlights
* Total revenue of $3.5 billion, an increase of 5% versus Q3 2020
* Record Q4 operating income of $883 million, an increase of 7% year-over-year
* Record Q4 operating margin of 25.4% as enterprise initiatives contributed
130 basis points
* GAAP EPS of $2.02, an increase of 2%, or 7% excluding $0.11 of divestiture
gains in Q4 2019
* Record Q4 after-tax ROIC of 32.0%, an increase of 310 basis points
* Strong free cash flow of $705 million, 110% of net income
2021 Guidance
* Organic growth of 7 to 10%
* GAAP EPS of $7.60 to $8.00, an increase of 15 to 21%
GLENVIEW, Ill., Feb. 05, 2021 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc.
(NYSE: ITW) today reported its fourth-quarter and full-year 2020 results.

“The ITW team closed out 2020 with another quarter of strong execution and
financial performance, generating revenue of $3.5 billion and delivering
all-time record Q4 operating income, operating margin, and ROIC
performance,” said E. Scott Santi, chairman and chief executive officer.

“Looking back at 2020 in its entirety, our people around the world provided
another meaningful demonstration of the power of the ITW Business Model and
the differentiating value of our decentralized entrepreneurial culture in how
the company responded to the unprecedented events and challenges of the past
year. While it was the unique circumstances that we faced and our response to
them that defined the year, it was the sum total of all that the ITW team has
built over the last eight years through the execution of our enterprise
strategy that gave us the capabilities and options to respond as we did. In
the face of a global pandemic, our ability to deliver strong operational and
financial performance while remaining fully invested in the execution of our
long-term enterprise strategy provides further evidence that ITW is a company
that has the enduring competitive advantages, resilience, and agility
necessary to deliver consistent top tier performance in any environment and
over the long term. I offer my heartfelt thanks to all my ITW colleagues for
their dedication and commitment to keeping their co-workers safe, serving our
customers with excellence, and continuing to make progress on our path to
ITW’s full-potential performance,” Santi concluded.

2020 Results
Fourth-quarter revenue of $3.5 billion increased 0.2 percent versus prior
year, as organic revenue declined 0.9 percent, divestitures reduced revenue by
0.7 percent and foreign currency translation impact was favorable by 1.8
percent. Product Line Simplification (PLS) reduced organic revenue by 20 basis
points. GAAP EPS increased two percent to $2.02. Excluding $0.11 of
divestiture gains in the fourth quarter of 2019, EPS increased seven percent.
Operating income increased seven percent to $883 million. Operating margin was
25.4 percent, an increase of 170 basis points with enterprise initiatives
contributing 130 basis points. Free cash flow was $705 million, 110 percent of
net income. After-tax return on invested capital improved to 32.0 percent
compared to 28.9 percent in the prior year period. The effective tax rate for
the fourth quarter was 22.1 percent.

Full year revenue of $12.6 billion declined 10.9 percent, as organic revenue
declined 9.8 percent, divestitures reduced revenue by 0.9 percent and foreign
currency translation impact was unfavorable by 0.2 percent. PLS reduced
organic revenue by 30 basis points. 2020 GAAP EPS declined fourteen percent to
$6.63. Operating margin of 22.9 percent was down from 24.1 percent in the
prior year as the impact of lower volumes was partially offset by enterprise
initiatives of 120 basis points. Free cash flow was $2.6 billion, 122 percent
of net income. After-tax return on invested capital was 26.2 percent. The
company repurchased $706 million of its own shares and raised its dividend
seven percent in August 2020 to an annualized $4.56 per share. The effective
tax rate for the full year was 22.0 percent.

2021 Guidance
The company initiated full-year GAAP EPS guidance in a range of $7.60 to $8.00
per share, an increase of 15 to 21 percent. Organic growth is expected to be
in the range of seven to ten percent. Revenue is expected to grow in the range
of nine to twelve percent as foreign currency translation at current exchange
rates is projected to increase revenues by approximately two percent. PLS
impact is forecasted to be approximately 50 basis points. Operating margin is
expected to be in a range of 24 to 25 percent, with enterprise initiatives
contributing approximately 100 basis points. Free cash flow is expected to be
greater than 100 percent of net income. The company plans to repurchase
approximately $1 billion of its shares in 2021 and expects an effective tax
rate in the range of 23 to 24 percent.

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 a reconciliation of estimated Free Cash
Flow to the most directly comparable GAAP measure has 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 potential effects of the
COVID-19 pandemic, related government actions and the company’s strategy in
response thereto on the company’s business, the anticipated duration of the
company’s COVID-19 containment and recovery phases, expected impact of
tariffs and raw material inflation, product line simplification activities and
enterprise initiatives, future financial performance, operating performance,
free cash flow, organic and total revenue, operating margin, price/cost
impact, statements regarding diluted income per share, restructuring expenses
and related benefits, expected adjustments to capacity and cost structure,
expected dividend payments, expected repatriation, after-tax return on
invested capital, expected total shareholder returns, 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 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 2019 and subsequent reports filed with the SEC.

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 Ended                                 Twelve Months Ended                                
                                                                 December 31,                                       December 31,                                       
 In millions except per share amounts                            2020                       2019                    2020                        2019                   
 Operating Revenue                                               $    3,475                 $    3,469              $    12,574                 $    14,109            
 Cost of revenue                                                 2,000                      2,022                   7,375                       8,187                  
 Selling, administrative, and research and development expenses  557                        586                     2,163                       2,361                  
 Amortization and impairment of intangible assets                35                         37                      154                         159                    
 Operating Income                                                883                        824                     2,882                       3,402                  
 Interest expense                                                (52         )              (51         )           (206         )              (221         )         
 Other income (expense)                                          (7          )              58                      28                          107                    
 Income Before Taxes                                             824                        831                     2,704                       3,288                  
 Income taxes                                                    182                        190                     595                         767                    
 Net Income                                                      $    642                   $    641                $    2,109                  $    2,521             
                                                                                                                                                                       
 Net Income Per Share:                                                                                                                                                 
 Basic                                                           $    2.03                  $    2.00               $    6.66                   $    7.78              
 Diluted                                                         $    2.02                  $    1.99               $    6.63                   $    7.74              
                                                                                                                                                                       
 Cash Dividends Per Share:                                                                                                                                             
 Paid                                                            $    1.14                  $    1.07               $    4.35                   $    4.07              
 Declared                                                        $    1.14                  $    1.07               $    4.42                   $    4.14              
                                                                                                                                                                       
 Shares of Common Stock Outstanding During the Period:                                                                                                                 
 Average                                                         316.7                      321.2                   316.9                       323.9                  
 Average assuming dilution                                       318.1                      322.9                   318.3                       325.6                  







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

 In millions                                    December 31, 2020              December 31, 2019            
 Assets                                                                                                     
 Current Assets:                                                                                            
 Cash and equivalents                           $      2,564                   $      1,981                 
 Trade receivables                              2,506                          2,461                        
 Inventories                                    1,189                          1,164                        
 Prepaid expenses and other current assets      264                            296                          
 Assets held for sale                           —                              351                          
 Total current assets                           6,523                          6,253                        
                                                                                                            
 Net plant and equipment                        1,777                          1,729                        
 Goodwill                                       4,690                          4,492                        
 Intangible assets                              781                            851                          
 Deferred income taxes                          533                            516                          
 Other assets                                   1,308                          1,227                        
                                                $      15,612                  $      15,068                
                                                                                                            
 Liabilities and Stockholders' Equity                                                                       
 Current Liabilities:                                                                                       
 Short-term debt                                $      350                     $      4                     
 Accounts payable                               534                            472                          
 Accrued expenses                               1,284                          1,217                        
 Cash dividends payable                         361                            342                          
 Income taxes payable                           60                             48                           
 Liabilities held for sale                      —                              71                           
 Total current liabilities                      2,589                          2,154                        
                                                                                                            
 Noncurrent Liabilities:                                                                                    
 Long-term debt                                 7,772                          7,754                        
 Deferred income taxes                          588                            668                          
 Noncurrent income taxes payable                413                            462                          
 Other liabilities                              1,068                          1,000                        
 Total noncurrent liabilities                   9,841                          9,884                        
                                                                                                            
 Stockholders' Equity:                                                                                      
 Common stock                                   6                              6                            
 Additional paid-in-capital                     1,362                          1,304                        
 Retained earnings                              23,114                         22,403                       
 Common stock held in treasury                  (19,659        )               (18,982        )             
 Accumulated other comprehensive income (loss)  (1,642         )               (1,705         )             
 Noncontrolling interest                        1                              4                            
 Total stockholders' equity                     3,182                          3,030                        
                                                $      15,612                  $      15,068                







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

 Three Months Ended December 31, 2020                                                          
 Dollars in millions                 Total                 Operating           Operating       
                                     Revenue               Income              Margin          
 Automotive OEM                      $    800              $    191            23.9    %       
 Food Equipment                      471                   106                 22.3    %       
 Test & Measurement and Electronics  534                   153                 28.6    %       
 Welding                             368                   107                 28.9    %       
 Polymers & Fluids                   437                   111                 25.4    %       
 Construction Products               430                   112                 26.2    %       
 Specialty Products                  439                   119                 27.0    %       
 Intersegment                        (4          )         —                   —       %       
 Total Segments                      3,475                 899                 25.8    %       
 Unallocated                         —                     (16       )         —       %       
 Total Company                       $    3,475            $    883            25.4    %       



 Twelve Months Ended December 31, 2020                                                             
 Dollars in millions                 Total                   Operating             Operating       
                                     Revenue                 Income                Margin          
 Automotive OEM                      $     2,571             $    457              17.8    %       
 Food Equipment                      1,739                   342                   19.6    %       
 Test & Measurement and Electronics  1,963                   507                   25.8    %       
 Welding                             1,384                   376                   27.1    %       
 Polymers & Fluids                   1,622                   402                   24.8    %       
 Construction Products               1,652                   421                   25.5    %       
 Specialty Products                  1,660                   432                   26.0    %       
 Intersegment                        (17           )         —                     —       %       
 Total Segments                      12,574                  2,937                 23.4    %       
 Unallocated                         —                       (55         )         —       %       
 Total Company                       $     12,574            $    2,882            22.9    %       







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

 Q4 2020 vs. Q4 2019 Favorable/(Unfavorable)                                                                                                                               
 Operating Revenue           Automotive      Food               Test &               Welding         Polymers &      Construction      Specialty         Total ITW         
                             OEM             Equipment          Measurement                          Fluids          Products          Products                            
                                                                and                                                                                                        
                                                                Electronics                                                                                                
 Organic                     7.8     %       (19.1  )     %     (3.1   )      %      (2.4  )    %    6.8     %       8.1      %        (2.8  )     %     (0.9  )     %     
 Acquisitions/ Divestitures  —       %       —            %     (1.9   )      %      (3.1  )    %    —       %       —        %        (0.3  )     %     (0.7  )     %     
 Translation                 2.6     %       1.8          %     1.7           %      0.7        %    0.2     %       3.8      %        1.5         %     1.8         %     
 Operating Revenue           10.4    %       (17.3  )     %     (3.3   )      %      (4.8  )    %    7.0     %       11.9     %        (1.6  )     %     0.2         %     



 Q4 2020 vs. Q4 2019 Favorable/(Unfavorable)                                                                                                                                                                             
 Change in Operating Margin                                                                                         Automotive   Food        Test &         Welding   Polymers &   Construction   Specialty   Total ITW  
                                                                                                                    OEM          Equipment   Measurement              Fluids       Products       Products               
                                                                                                                                             and                                                                         
                                                                                                                                             Electronics                                                                 
 Operating Leverage                                                                                                 140 bps      (470) bps   (70) bps       (50) bps  160 bps      160 bps        (60) bps    (20) bps   
 Changes in Variable Margin & OH Costs                                                                              120 bps      (60) bps    110 bps        280 bps   10 bps       240 bps        270 bps     160 bps    
 Total Organic                                                                                                      260 bps      (530) bps   40 bps         230 bps   170 bps      400 bps        210 bps     140 bps    
 Acquisitions/ Divestitures                                                                                         —            —           40 bps         50 bps    —            —              30 bps      10 bps     
 Restructuring/Other                                                                                                10 bps       10 bps      (30) bps       70 bps    70 bps       —              10 bps      20 bps     
 Total Operating Margin Change                                                                                      270 bps      (520) bps   50 bps         350 bps   240 bps      400 bps        250 bps     170 bps    
                                                                                                                                                                                                                         
 Total Operating Margin % *                                                                                         23.9%        22.3%       28.6%          28.9%     25.4%        26.2%          27.0%       25.4%      
                                                                                                                                                                                                                         
 * Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets  40 bps       80 bps      180 bps        20 bps    300 bps      20 bps         90 bps      110 bps**  
 ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.09) on GAAP earnings per share for the fourth quarter of 2020.                                                      







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

 Full Year 2020 vs Full Year 2019 Favorable/(Unfavorable)                                                                                                                         
 Operating Revenue           Automotive         Food               Test &               Welding          Polymers &        Construction      Specialty         Total ITW          
                             OEM                Equipment          Measurement                           Fluids            Products          Products                             
                                                                   and                                                                                                            
                                                                   Electronics                                                                                                    
 Organic                     (16.0  )     %     (20.6  )     %     (4.9   )      %      (11.8  )    %    (1.4  )     %     1.5      %        (8.2  )     %     (9.8   )     %     
 Acquisitions/ Divestitures  —            %     —            %     (2.8   )      %      (3.7   )    %    —           %     —        %        (0.8  )     %     (0.9   )     %     
 Translation                 (0.1   )     %     0.1          %     0.3           %      —           %    (1.4  )     %     0.2      %        (0.1  )     %     (0.2   )     %     
 Operating Revenue           (16.1  )     %     (20.5  )     %     (7.4   )      %      (15.5  )    %    (2.8  )     %     1.7      %        (9.1  )     %     (10.9  )     %     



 Full Year 2020 vs Full Year 2019 Favorable/(Unfavorable)                                                                                                                                                                 
 Change in Operating Margin                                                                                         Automotive   Food        Test &         Welding    Polymers &   Construction   Specialty   Total ITW  
                                                                                                                    OEM          Equipment   Measurement               Fluids       Products       Products               
                                                                                                                                             and                                                                          
                                                                                                                                             Electronics                                                                  
 Operating Leverage                                                                                                 (330) bps    (540) bps   (130) bps      (220) bps  (30) bps     30 bps         (180) bps   (230) bps  
 Changes in Variable Margin & OH Costs                                                                              (90) bps     (140) bps   120 bps        60 bps     180 bps      130 bps        90 bps      70 bps     
 Total Organic                                                                                                      (420) bps    (680) bps   (10) bps       (160) bps  150 bps      160 bps        (90) bps    (160) bps  
 Acquisitions/ Divestitures                                                                                         —            —           40 bps         60 bps     —            —              40 bps      10 bps     
 Restructuring/Other                                                                                                50 bps       —           (10) bps       40 bps     50 bps       30 bps         60 bps      30 bps     
 Total Operating Margin Change                                                                                      (370) bps    (680) bps   20 bps         (60) bps   200 bps      190 bps        10 bps      (120) bps  
                                                                                                                                                                                                                          
 Total Operating Margin % *                                                                                         17.8 %       19.6 %      25.8 %         27.1 %     24.8 %       25.5 %         26.0 %      22.9 %     
                                                                                                                                                                                                                          
 * Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets  50 bps       80 bps      250 bps        20 bps     330 bps      30 bps         90 bps      130 bps**  
 ** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.37) on GAAP earnings per share for 2020.                                                                             







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

AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)

                                               Three Months Ended                                   Twelve Months Ended                                
                                               December 31,                                         December 31,                                       
 Dollars in millions                           2020                        2019                     2020                        2019                   
 Operating income                              $     883                   $     824                $     2,882                 $     3,402            
 Tax rate                                      22.1              %         22.8              %      22.0              %         24.0              %    
 Income taxes                                  (194         )              (188         )           (633         )              (815         )         
 Operating income after taxes                  $     689                   $     636                $     2,249                 $     2,587            
                                                                                                                                                       
 Invested capital:                                                                                                                                     
 Trade receivables                             $     2,506                 $     2,461              $     2,506                 $     2,461            
 Inventories                                   1,189                       1,164                    1,189                       1,164                  
 Net assets held for sale                      —                           280                      —                           280                    
 Net plant and equipment                       1,777                       1,729                    1,777                       1,729                  
 Goodwill and intangible assets                5,471                       5,343                    5,471                       5,343                  
 Accounts payable and accrued expenses         (1,818       )              (1,689       )           (1,818       )              (1,689       )         
 Other, net                                    (385         )              (481         )           (385         )              (481         )         
 Total invested capital                        $     8,740                 $     8,807              $     8,740                 $     8,807            
                                                                                                                                                       
 Average invested capital                      $     8,606                 $     8,797              $     8,576                 $     9,028            
 After-tax return on average invested capital  32.0              %         28.9              %      26.2              %         28.7              %    

A reconciliation of the 2019 effective tax rate excluding the third quarter
2019 discrete tax benefit of $21 million is as follows:

                                                Twelve Months Ended                      
                                                December 31, 2019                        
 Dollars in millions                            Income Taxes               Tax Rate      
 As reported                                    $      767                 23.3   %      
 Discrete tax benefit related to third quarter  21                         0.7    %      
 As adjusted                                    $      788                 24.0   %      







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

FREE CASH FLOW (UNAUDITED)

                                               Three Months Ended                             Twelve Months Ended                              
                                               December 31,                                   December 31,                                     
 Dollars in millions                           2020                     2019                  2020                       2019                  
 Net cash provided by operating activities     $    773                 $    774              $    2,807                 $    2,995            
 Less: Additions to plant and equipment        (68       )              (82       )           (236        )              (326        )         
 Free cash flow                                $    705                 $    692              $    2,571                 $    2,669            
                                                                                                                                               
 Net income                                    $    642                 $    641              $    2,109                 $    2,521            
 Free cash flow to net income conversion rate  110            %         108            %      122              %         106              %    

TOTAL DEBT TO EBITDA (UNAUDITED)

                                                   Twelve Months Ended         
 Dollars in millions                               December 31, 2020           
 Total debt                                        $      8,122                
                                                                               
 Net income                                        $      2,109                
 Add:                                                                          
 Interest expense                                  206                         
 Other income                                      (28           )             
 Income taxes                                      595                         
 Depreciation                                      273                         
 Amortization and impairment of intangible assets  154                         
 EBITDA                                            $      3,309                
 Total debt to EBITDA ratio                               2.5    x             



 Media Contact Illinois Tool Works Trisha Knych Tel: 224.661.7566 mediarelations@itw.com  Investor Relations Illinois Tool Works Karen Fletcher Tel: 224.661.7433 investorrelations@itw.com  



(https://www.globenewswire.com/NewsRoom/AttachmentNg/5947b771-ca1d-4d68-8a54-06116e780a4e)



GlobeNewswire, Inc. 2021
© Stockopedia 2021, Refinitiv, Share Data Services.
This site cannot substitute for professional investment advice or independent factual verification. To use it, you must accept our Terms of Use, Privacy and Disclaimer policies.