Illinois Tool Works (ITW) Q4 2000 earnings summary

Executive summary

• FY2000 revenue reached a record $9.984B, up 7%; operating income rose 11% to $1.563B and net income increased 14% to $958M.

• Diluted EPS was $3.15 reported and $3.33 excluding Premark charges; late-year sales weakened amid slowing end markets.

• The 80/20 process remained central to business simplification, customer focus, productivity, product development and acquisition integration.

Financial highlights

• Operating revenue was $9.984B, up 7% YoY; acquisitions added 8% growth, base businesses 2%, and currency translation reduced growth by 3%.

• Operating income was $1.563B, up 11%; operating margin improved to 15.7% from 15.1%.

• Net income was $958M, up 14%; diluted EPS was $3.15, up 14%, including $0.18 per share of Premark asset writedowns and restructuring charges.

• Excluding Premark charges, diluted EPS was $3.33, up 11%; 1999 adjusted diluted EPS was $2.99, excluding $0.23 per share in merger-related costs.

• Net cash from operating activities was $1.122B; acquisitions used $799M and plant/equipment additions were $314M.

Outlook and guidance

• FY2001 diluted EPS was expected to exceed FY2000, with end-market weakness continuing through H1 and some recovery expected in H2.

• North American markets were expected to slow further in 2001 before improving in H2; benefits from 2000 Food Equipment and Wilsonart investments were expected to contribute $0.10 per share in 2001.

• Premark operations were targeting operating margin improvement from 9% in 1999 to 18% by 2004; combined Premark margins rose nearly 2% in 2000.

• Dividend payout objective remained 25–30% of average net income over the prior three years; internally generated funds were expected to cover debt service, internal growth and small-to-medium acquisitions.