• ITW Reports Fourth Quarter and Full Year 2020 Results

    ソース: Nasdaq GlobeNewswire / 05 2 2021 08:00:01   America/New_York

    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 amounts2020 2019 2020 2019
    Operating Revenue$3,475   $3,469   $12,574   $14,109  
    Cost of revenue2,000   2,022   7,375   8,187  
    Selling, administrative, and research and development expenses557   586   2,163   2,361  
    Amortization and impairment of intangible assets35   37   154   159  
    Operating Income883   824   2,882   3,402  
    Interest expense(52)  (51)  (206)  (221) 
    Other income (expense)(7)  58   28   107  
    Income Before Taxes824   831   2,704   3,288  
    Income taxes182   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:       
    Average316.7 321.2 316.9 323.9
    Average assuming dilution318.1 322.9 318.3 325.6




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

    In millionsDecember 31, 2020 December 31, 2019
    Assets   
    Current Assets:   
    Cash and equivalents$2,564   $1,981  
    Trade receivables2,506   2,461  
    Inventories1,189   1,164  
    Prepaid expenses and other current assets264   296  
    Assets held for sale—   351  
    Total current assets6,523   6,253  
        
    Net plant and equipment1,777   1,729  
    Goodwill4,690   4,492  
    Intangible assets781   851  
    Deferred income taxes533   516  
    Other assets1,308   1,227  
     $15,612   $15,068  
        
    Liabilities and Stockholders' Equity   
    Current Liabilities:   
    Short-term debt$350   $4  
    Accounts payable534   472  
    Accrued expenses1,284   1,217  
    Cash dividends payable361   342  
    Income taxes payable60   48  
    Liabilities held for sale—   71  
    Total current liabilities2,589   2,154  
        
    Noncurrent Liabilities:   
    Long-term debt7,772   7,754  
    Deferred income taxes588   668  
    Noncurrent income taxes payable413   462  
    Other liabilities1,068   1,000  
    Total noncurrent liabilities9,841   9,884  
        
    Stockholders' Equity:   
    Common stock6   6  
    Additional paid-in-capital1,362   1,304  
    Retained earnings23,114   22,403  
    Common stock held in treasury(19,659)  (18,982) 
    Accumulated other comprehensive income (loss)(1,642)  (1,705) 
    Noncontrolling interest1   4  
    Total stockholders' equity3,182   3,030  
     $15,612   $15,068  




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

    Three Months Ended December 31, 2020
    Dollars in millionsTotal
    Revenue    		Operating
    Income    		Operating
    Margin
    Automotive OEM$800  $191  23.9%
    Food Equipment471  106  22.3%
    Test & Measurement and Electronics534  153  28.6%
    Welding368  107  28.9%
    Polymers & Fluids437  111  25.4%
    Construction Products430  112  26.2%
    Specialty Products439  119  27.0%
    Intersegment(4) —  —%
    Total Segments3,475   899   25.8 %
    Unallocated—  (16) —%
    Total Company$3,475   $883   25.4 %


    Twelve Months Ended December 31, 2020
    Dollars in millionsTotal
    Revenue    		Operating
    Income    		Operating
    Margin
    Automotive OEM$2,571  $457  17.8%
    Food Equipment1,739  342  19.6%
    Test & Measurement and Electronics1,963  507  25.8%
    Welding1,384  376  27.1%
    Polymers & Fluids1,622  402  24.8%
    Construction Products1,652  421  25.5%
    Specialty Products1,660  432  26.0%
    Intersegment(17) —  —%
    Total Segments12,574   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 RevenueAutomotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and
    Electronics    		WeldingPolymers &
    Fluids    		Construction
    Products    		Specialty
    Products    		Total ITW
    Organic7.8%(19.1)%(3.1)%(2.4)%6.8%8.1%(2.8)%(0.9)%
    Acquisitions/ Divestitures—%— %(1.9)%(3.1)%—%—%(0.3)%(0.7)%
    Translation2.6%1.8 %1.7 %0.7 %0.2%3.8%1.5 %1.8 %
    Operating Revenue10.4%(17.3)%(3.3)%(4.8)%7.0%11.9%(1.6)%0.2 %


    Q4 2020 vs. Q4 2019 Favorable/(Unfavorable)
    Change in Operating MarginAutomotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and
    Electronics    		WeldingPolymers &
    Fluids    		Construction
    Products    		Specialty
    Products    		Total ITW
    Operating Leverage140 bps(470) bps(70) bps(50) bps160 bps160 bps(60) bps(20) bps
    Changes in Variable Margin & OH Costs120 bps(60) bps110 bps280 bps10 bps240 bps270 bps160 bps
    Total Organic260 bps(530) bps40 bps230 bps170 bps400 bps210 bps140 bps
    Acquisitions/ Divestitures——40 bps50 bps——30 bps10 bps
    Restructuring/Other10 bps10 bps(30) bps70 bps70 bps—10 bps20 bps
    Total Operating Margin Change270 bps(520) bps50 bps350 bps240 bps400 bps250 bps170 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 RevenueAutomotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and
    Electronics    		WeldingPolymers &
    Fluids    		Construction
    Products    		Specialty
    Products    		Total ITW
    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 MarginAutomotive
    OEM    		Food
    Equipment    		Test &
    Measurement
    and
    Electronics    		WeldingPolymers &
    Fluids    		Construction
    Products    		Specialty
    Products    		Total ITW
    Operating Leverage(330) bps(540) bps(130) bps(220) bps(30) bps30 bps(180) bps(230) bps
    Changes in Variable Margin & OH Costs(90) bps(140) bps120 bps60 bps180 bps130 bps90 bps70 bps
    Total Organic (420) bps (680) bps (10) bps (160) bps 150 bps 160 bps (90) bps (160) bps
    Acquisitions/ Divestitures——40 bps60 bps——40 bps10 bps
    Restructuring/Other50 bps—(10) bps40 bps50 bps30 bps60 bps30 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 millions2020 2019 2020 2019
    Operating income$883   $824   $2,882   $3,402  
    Tax rate22.1 % 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  
    Inventories1,189   1,164   1,189   1,164  
    Net assets held for sale—   280   —   280  
    Net plant and equipment1,777   1,729   1,777   1,729  
    Goodwill and intangible assets5,471   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 capital32.0 % 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 millionsIncome Taxes Tax Rate
    As reported$767  23.3%
    Discrete tax benefit related to third quarter21  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 millions2020 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 rate110 % 108 % 122 % 106 %

    TOTAL DEBT TO EBITDA (UNAUDITED)

     Twelve Months Ended
    Dollars in millionsDecember 31, 2020
    Total debt$8,122  
      
    Net income$2,109  
    Add: 
    Interest expense206  
    Other income(28) 
    Income taxes595  
    Depreciation273  
    Amortization and impairment of intangible assets154  
    EBITDA$3,309  
    Total debt to EBITDA ratio 2.5x 


    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


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