Illinois Tool Works Inc. recently reported its third quarter 2020 results.
“We saw solid recovery progress in many of the end markets we serve in the third quarter as evidenced by our revenue being up sequentially 29 percent versus second quarter. Our people around the world responded by leveraging our proprietary business model to provide excellent service to our customers while keeping themselves and their co-workers safe. These efforts and our third quarter financial results support the decisions we made early in the pandemic to provide full compensation and benefits support to all of our ITW team members, to focus on positioning the company for full participation in the recovery, and to remain invested in the key initiatives supporting the execution of our long-term enterprise strategy,” said E. Scott Santi, chairman and chief executive officer. “I am very proud of how the ITW team is managing through this challenging period, and I thank all of my ITW colleagues around the world for their continued exceptional efforts and dedication.
“In the face of the unprecedented challenges and circumstances brought about by the global pandemic, our strong operational and financial performance over the last several quarters provides further evidence that ITW is a company that has both the enduring competitive advantages and the resilience necessary to deliver consistent upper tier performance in any economic environment. Looking ahead, we remain focused on delivering strong results across a range of economic scenarios while continuing to execute on our long-term strategy to achieve and sustain ITW’s full-potential performance,” Santi concluded.
Third Quarter Results
Third-quarter revenue of $3.3 billion declined 4.9 percent compared to the prior year period as organic revenue declined 4.6 percent. Divestitures reduced revenue by 1.0 percent, partially offset by a foreign currency translation benefit of 0.7 percent. Product Line Simplification reduced revenue by 30 basis points.
Operating margin was 23.8 percent compared to 25.0 percent in the prior year period as the lower volume impact and higher restructuring expenses were partially offset with benefits from Enterprise Initiatives of 120 basis points. Six of seven segments delivered operating margin above 20 percent.
GAAP earnings per share was $1.83 compared to $2.04 in the prior year period. Free cash flow was $631 million, 108 percent of net income. After-tax return on invested capital improved to 29.6 percent compared to 29.2 percent in the prior year period. The effective tax rate was 21.3 percent.
On May 5, 2020, ITW suspended annual guidance for 2020 due to uncertainties regarding the duration and severity of the COVID-19 pandemic. On Aug. 7, 2020, ITW raised its dividend seven percent to an annualized $4.56 per share.