Illinois Tool Works Inc. · NYSE:ITW
Illinois Tool Works — Q4 2018 Earnings Presentation
15 slides from Illinois Tool Works's earnings presentation, Feb 1, 2019
Slide 1: Fourth Quarter 2018 Earnings Conference Call
FOURTH QUARTER 2018 EARNINGS CONFERENCE CALL February 1, 2019
Slide 2: Forward-Looking Statement and Safe Harbor Statement
F O RWA R D - L O O K I N G S TAT E M E N T SAFE HARBOR STATEMENT This conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the expected impact of tariffs and raw material in
Slide 3: Q4 2017 Tax Cuts and Jobs Act Impact
Q 4 2 0 1 7 “ TA X C U T S A N D J O B S A C T ” I M PA C T • Following the passage of the “Tax Cuts and Jobs Act” ITW recorded a one-time tax charge of $658 million / ($1.92) EPS • This schedule illustrates the impact of this one-time item on the company’s reported fourth quarter 2017 financial res
Slide 4: FY 2017 Tax Cuts and Jobs Act and Legal Settlement Impact
F Y 2 0 1 7 “ TA X C U T S A N D J O B S A C T ” A N D L E G A L S E T T L E M E N T I M PA C T • Following the passage of the “Tax Cuts and Jobs Act” ITW recorded a one-time tax charge of $658 million / ($1.90) EPS • As previously disclosed, a legal settlement resulted in a favorable one-time benef
Slide 5: Q4 2018 Financial Performance Highlights
Q 4 2 0 1 8 F I N A N C I A L P E R F O R M A N C E ( E x . Ta x C h a r g e ) HIGHLIGHTS +8% EPS $1.83 • GAAP EPS of $1.83, an increase of 8% $1.70* - +10% ex. $(0.04) foreign currency translation impact • Organic revenue +1% - North America +4%, International (2)% - PLS (90) bps REVENUE $3.6B $3.6
Slide 6: Q4 2018 Operating Margin
Q 4 2 0 1 8 O P E R AT I N G M A R G I N KEY MARGIN DRIVERS +70 bps Q4’18 24.0% 23.3% Enterprise Initiatives +110 bps Volume +20 Price/Cost (40) Other (20) Q4’17 Q4’18 Margin Expansion +70 bps CONTINUED STRONG EXECUTION ON ENTERPRISE INITIATIVES 6
Slide 7: Q4 2018 Segment Performance
Q4 2018 SEGMENT PERFORMANCE ORGANIC REVENUE AUTOMOTIVE OEM (6)% (150) bps N.A. INTL WW $828 $777 23.1% 21.6% Automotive OEM 2% (8)% (4)% Food Equipment 7 3 5% T&M / Electronics 2 (2) ~flat Welding 7 11 8 Q4'17 Q4'18 Q4'17 Q4'18 Polymers & Fluids 6 ~flat 4 Total Revenue Operating Margin Construction
Slide 8: Q4 2018 Segment Performance: Food Equipment, Test & Measurement/Electronics
Q4 2018 SEGMENT PERFORMANCE FOOD EQUIPMENT TEST & MEASUREMENT/ELECTRONICS 4% +80 bps (1)% +140 bps $567 $548 25.8% 26.6% $545 $538 24.8% 23.4% Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Total Revenue Operating Margin Total Revenue Operating Margin • Organic growth of 5% (highest since Q3’14) •
Slide 9: Q4 2018 Segment Performance: Welding, Polymers & Fluids
Q4 2018 SEGMENT PERFORMANCE WELDING POLYMERS & FLUIDS +7% +50 bps (1)% +160 bps $414 26.9% $388 26.4% $427 $422 21.5% 19.9% Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Total Revenue Operating Margin Total Revenue Operating Margin • Organic growth of 8% • Organic revenue of 4% - Equipment 7%, Con
Slide 10: Q4 2018 Segment Performance: Construction, Specialty Products
Q4 2018 SEGMENT PERFORMANCE CONSTRUCTION PRODUCTS SPECIALTY PRODUCTS (4)% +150 bps (4)% (50) bps $412 $397 24.9% $487 $469 25.9% 25.4% 23.4% Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Q4'17 Q4'18 Total Revenue Operating Margin Total Revenue Operating Margin • Organic revenue (1)% • Organic revenue (2)% - N
Slide 11: 2018 Financial Performance Highlights
2 0 1 8 F I N A N C I A L P E R F O R M A N C E ( E x . L e g a l S e t t l e m e n t & Ta x C h a r g e ) HIGHLIGHTS +15% EPS $7.60 • GAAP EPS of $7.60, growth of 15% $6.59* • Total revenue grew 3%; organic +2% - North America 4%, International flat - PLS (70) bps as expected $14.8B • Operating inc
Slide 12: 2019 Full Year Guidance
2019 FULL YEAR GUIDANCE HIGHLIGHTS +6% EPS $7.90 - $8.20 • Organic growth of 1 to 3% at current run rates $7.60 - PLS ~(80) bps • Operating margin expansion of ~100 bps - Enterprise Initiatives ~100 bps $14.8 to $14.8B 15.0B • Free Cash Flow 100%+ REVENUE • Share repurchases ~$1.5B • Tax rate 24.5 t
Slide 13: 2018 to 2019 GAAP EPS Bridge
2018 to 2019 GAAP EPS BRIDGE ~$0.25 ~$(0.20) Foreign $0.25 - $0.35 Share Count $(0.10) - $(0.20) Currency Enterprise •Today’s Rates “Other” $7.90 - $8.20 $0.20 - $0.30 Initiatives •Tax rate Organic •80/20 FTB •Restructuring $7.60 •Strategic Sourcing Growth •Interest Expense •1 - 3% Organic @ 35% Inc
Slide 14: 2019 Organic Growth Outlook by Segment
2019 ORGANIC GROWTH OUTLOOK BY SEGMENT Organic Automotive Food Test & Welding Polymers Construction Specialty Growth OEM Equipment Measurement & Fluids Products Products and Electronics 2018 0.0% 2.8% 3.5% 9.7% 1.0% 1.2% (0.4)% 2019E (4) - 0% 3 - 5% 1 - 3% 3 - 6% 1 - 3% 1 - 4% 1 - 3% HIGH QUALITY DI
Slide 15: Q&A
Q&A 15