Illinois Tool Works Inc. (NYSE: ITW) today reported its third
quarter 2023 results.
“The strength and resilience of ITW’s
proprietary business model and high-quality diversified portfolio
once again drove strong operational execution and financial
performance in the third quarter. Quarterly operating margin
expanded 200 basis points year over year to 26.5 percent, free cash
flow grew 40 percent, and GAAP EPS grew nine percent to $2.55,”
said E. Scott Santi, Chairman and Chief Executive Officer. “Organic
revenue growth was two percent on an equal days’ basis in the
quarter. Looking ahead at the balance of the year, while we
anticipate some impact from ongoing automotive industry labor
actions on our Automotive OEM segment in the fourth quarter, the
company remains well-positioned to deliver another strong year of
differentiated overall performance in 2023.”
Third Quarter 2023 ResultsThird
quarter revenue of $4.0 billion increased 0.5 percent with organic
revenue growth of 0.2 percent, as divestitures reduced revenue by
1.2 percent and foreign currency translation added 1.5 percent. On
an equal days’ basis, organic growth was two percent. End customer
and channel partner inventory reduction efforts associated with
supply chain normalization reduced organic growth by an estimated 1
to 1.5 percent in the quarter.
GAAP EPS increased nine percent to $2.55 and the
effective tax rate was 23.8 percent. Operating income grew nine
percent to $1.1 billion. Operating margin of 26.5 percent expanded
200 basis points as enterprise initiatives contributed 140 basis
points. Operating cash flow was $982 million, and free cash flow
was $856 million, an increase of 40 percent, with a conversion rate
to net income of 111 percent. During the quarter, the company
repurchased $375 million of its own shares and raised its dividend
seven percent to an annualized $5.60 per share.
2023 GuidanceITW is narrowing
the range of its full year GAAP EPS guidance from $9.55 to $9.95
per share to a range of $9.65 to $9.85 per share, which includes a
$0.12 per share adjustment for the estimated fourth quarter impact
of ongoing automotive industry labor actions. The company is
projecting total revenue growth of one to two percent with organic
growth of two to three percent based on current levels of demand
exiting the third quarter, and the estimated fourth quarter impact
of ongoing automotive industry labor actions. Combined divestitures
and foreign currency translation are expected to reduce revenue by
one percent. Operating margin is projected to be in the range of 25
to 25.5 percent, an improvement of 150 basis points at the
mid-point, with enterprise initiatives contributing more than 100
basis points. Free cash flow is projected to be greater than 100
percent of net income and the company plans to repurchase
approximately $1.5 billion of its own shares. The expected tax rate
is in the range of 22.5 to 23.5 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
to net income conversion rate is based on assumptions that are
difficult to predict, and estimated guidance for the most directly
comparable GAAP measure and a reconciliation of this
forward-looking estimate to its most directly comparable GAAP
estimate have been omitted due to the unreasonable efforts required
in connection with such a reconciliation and the lack of reliable
forward-looking cash flow information.
Forward-looking StatementsThis
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 global supply chain challenges, expected impact of
inflation including raw material inflation and rising interest
rates, the impact of enterprise initiatives, future financial and
operating performance, free cash flow and free cash flow conversion
rate, organic and total revenue, operating and incremental margin,
price/cost impact, statements regarding diluted income per share,
restructuring expenses and related benefits, expected dividend
payments, after-tax return on invested capital, 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, the
impact of recent or potential acquisitions and/or divestitures, the
potential impact of automotive industry labor actions, and the
company’s 2023 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 risk factors contained in ITW's Form
10-K for 2022 and subsequent reports filed with the SEC.
About Illinois Tool WorksITW
(NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing
leader with revenue of $15.9 billion in 2022. 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 46,000 dedicated colleagues around
the world thrive in the company’s decentralized and entrepreneurial
culture. www.itw.com
|
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSTATEMENT OF INCOME
(UNAUDITED) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
In millions except per share amounts |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Operating Revenue |
$ |
4,031 |
|
|
$ |
4,011 |
|
|
$ |
12,124 |
|
|
$ |
11,961 |
|
|
Cost of revenue |
|
2,319 |
|
|
|
2,371 |
|
|
|
7,004 |
|
|
|
7,120 |
|
|
Selling, administrative, and research and development expenses |
|
615 |
|
|
|
624 |
|
|
|
1,980 |
|
|
|
1,935 |
|
|
Amortization and impairment of intangible assets |
|
27 |
|
|
|
33 |
|
|
|
88 |
|
|
|
102 |
|
|
Operating Income |
|
1,070 |
|
|
|
983 |
|
|
|
3,052 |
|
|
|
2,804 |
|
|
Interest expense |
|
(67 |
) |
|
|
(52 |
) |
|
|
(196 |
) |
|
|
(147 |
) |
|
Other income (expense) |
|
10 |
|
|
|
26 |
|
|
|
40 |
|
|
|
64 |
|
|
Income Before Taxes |
|
1,013 |
|
|
|
957 |
|
|
|
2,896 |
|
|
|
2,721 |
|
|
Income Taxes |
|
241 |
|
|
|
230 |
|
|
|
656 |
|
|
|
594 |
|
|
Net Income |
$ |
772 |
|
|
$ |
727 |
|
|
$ |
2,240 |
|
|
$ |
2,127 |
|
|
|
|
|
|
|
|
|
|
|
Net Income Per Share: |
|
|
|
|
|
|
|
|
Basic |
$ |
2.55 |
|
|
$ |
2.36 |
|
|
$ |
7.38 |
|
|
$ |
6.85 |
|
|
Diluted |
$ |
2.55 |
|
|
$ |
2.35 |
|
|
$ |
7.36 |
|
|
$ |
6.83 |
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Per Share: |
|
|
|
|
|
|
|
|
Paid |
$ |
1.31 |
|
|
$ |
1.22 |
|
|
$ |
3.93 |
|
|
$ |
3.66 |
|
|
Declared |
$ |
1.40 |
|
|
$ |
1.31 |
|
|
$ |
4.02 |
|
|
$ |
3.75 |
|
|
|
|
|
|
|
|
|
|
|
Shares of Common Stock Outstanding During the Period: |
|
|
|
|
|
|
|
|
Average |
|
301.9 |
|
|
|
308.8 |
|
|
|
303.4 |
|
|
|
310.6 |
|
|
Average assuming dilution |
|
303.0 |
|
|
|
309.7 |
|
|
|
304.5 |
|
|
|
311.6 |
|
|
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSTATEMENT OF FINANCIAL POSITION
(UNAUDITED) |
|
In millions |
September 30, 2023 |
|
December 31, 2022 |
|
Assets |
|
|
|
|
Current Assets: |
|
|
|
|
Cash and equivalents |
$ |
990 |
|
|
$ |
708 |
|
|
Trade receivables |
|
3,163 |
|
|
|
3,171 |
|
|
Inventories |
|
1,799 |
|
|
|
2,054 |
|
|
Prepaid expenses and other current assets |
|
336 |
|
|
|
329 |
|
|
Assets held for sale |
|
— |
|
|
|
8 |
|
|
Total current assets |
|
6,288 |
|
|
|
6,270 |
|
|
|
|
|
|
|
Net plant and equipment |
|
1,904 |
|
|
|
1,848 |
|
|
Goodwill |
|
4,828 |
|
|
|
4,864 |
|
|
Intangible assets |
|
682 |
|
|
|
768 |
|
|
Deferred income taxes |
|
455 |
|
|
|
494 |
|
|
Other assets |
|
1,238 |
|
|
|
1,178 |
|
|
|
$ |
15,395 |
|
|
$ |
15,422 |
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
Current Liabilities: |
|
|
|
|
Short-term debt |
$ |
1,248 |
|
|
$ |
1,590 |
|
|
Accounts payable |
|
580 |
|
|
|
594 |
|
|
Accrued expenses |
|
1,588 |
|
|
|
1,728 |
|
|
Cash dividends payable |
|
421 |
|
|
|
400 |
|
|
Income taxes payable |
|
145 |
|
|
|
147 |
|
|
Liabilities held for sale |
|
— |
|
|
|
1 |
|
|
Total current liabilities |
|
3,982 |
|
|
|
4,460 |
|
|
|
|
|
|
|
Noncurrent Liabilities: |
|
|
|
|
Long-term debt |
|
6,818 |
|
|
|
6,173 |
|
|
Deferred income taxes |
|
464 |
|
|
|
484 |
|
|
Noncurrent income taxes payable |
|
151 |
|
|
|
273 |
|
|
Other liabilities |
|
976 |
|
|
|
943 |
|
|
Total noncurrent liabilities |
|
8,409 |
|
|
|
7,873 |
|
|
|
|
|
|
|
Stockholders' Equity: |
|
|
|
|
Common stock |
|
6 |
|
|
|
6 |
|
|
Additional paid-in-capital |
|
1,569 |
|
|
|
1,501 |
|
|
Retained earnings |
|
26,823 |
|
|
|
25,799 |
|
|
Common stock held in treasury |
|
(23,493 |
) |
|
|
(22,377 |
) |
|
Accumulated other comprehensive income (loss) |
|
(1,902 |
) |
|
|
(1,841 |
) |
|
Noncontrolling interest |
|
1 |
|
|
|
1 |
|
|
Total stockholders' equity |
|
3,004 |
|
|
|
3,089 |
|
|
|
$ |
15,395 |
|
|
$ |
15,422 |
|
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSEGMENT DATA (UNAUDITED)
|
Three Months Ended September
30, 2023 |
|
Dollars in millions |
Total Revenue |
Operating Income |
Operating Margin |
|
Automotive OEM |
$ |
799 |
|
$ |
151 |
18.9 |
% |
|
Food Equipment |
|
678 |
|
|
185 |
27.3 |
% |
|
Test & Measurement and Electronics |
|
698 |
|
|
167 |
23.8 |
% |
|
Welding |
|
468 |
|
|
147 |
31.6 |
% |
|
Polymers & Fluids |
|
458 |
|
|
129 |
28.1 |
% |
|
Construction Products |
|
522 |
|
|
155 |
29.9 |
% |
|
Specialty Products |
|
414 |
|
|
115 |
27.8 |
% |
|
Intersegment |
|
(6 |
) |
|
— |
— |
% |
|
Total Segments |
|
4,031 |
|
|
1,049 |
26.0 |
% |
|
Unallocated |
|
— |
|
|
21 |
— |
% |
|
Total Company |
$ |
4,031 |
|
$ |
1,070 |
26.5 |
% |
|
Nine Months Ended September
30, 2023 |
|
Dollars in millions |
Total Revenue |
Operating Income |
Operating Margin |
|
Automotive OEM |
$ |
2,421 |
|
$ |
418 |
|
17.3 |
% |
|
Food Equipment |
|
1,967 |
|
|
536 |
|
27.2 |
% |
|
Test & Measurement and Electronics |
|
2,101 |
|
|
501 |
|
23.8 |
% |
|
Welding |
|
1,451 |
|
|
471 |
|
32.5 |
% |
|
Polymers & Fluids |
|
1,364 |
|
|
357 |
|
26.2 |
% |
|
Construction Products |
|
1,574 |
|
|
454 |
|
28.9 |
% |
|
Specialty Products |
|
1,260 |
|
|
333 |
|
26.4 |
% |
|
Intersegment |
|
(14 |
) |
|
— |
|
— |
% |
|
Total Segments |
|
12,124 |
|
|
3,070 |
|
25.3 |
% |
|
Unallocated |
|
— |
|
|
(18 |
) |
— |
% |
|
Total Company |
$ |
12,124 |
|
$ |
3,052 |
|
25.2 |
% |
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSEGMENT DATA (UNAUDITED)
|
Q3 2023 vs. Q3 2022 Favorable/(Unfavorable) |
|
Operating Revenue |
Automotive OEM |
Food Equipment |
Test & Measurement and Electronics |
Welding |
Polymers & Fluids |
Construction Products |
Specialty Products |
Total ITW |
|
Organic |
3.8 |
% |
6.3 |
% |
(3.9 |
)% |
(2.4 |
)% |
3.4 |
% |
(2.1 |
)% |
(5.6 |
)% |
0.2 |
% |
|
Acquisitions/Divestitures |
— |
% |
(1.8 |
)% |
— |
% |
— |
% |
(5.7 |
)% |
— |
% |
(2.3 |
)% |
(1.2 |
)% |
|
Translation |
2.2 |
% |
2.7 |
% |
1.5 |
% |
0.6 |
% |
(0.8 |
)% |
0.9 |
% |
2.4 |
% |
1.5 |
% |
|
Operating Revenue |
6.0 |
% |
7.2 |
% |
(2.4 |
)% |
(1.8 |
)% |
(3.1 |
)% |
(1.2 |
)% |
(5.5 |
)% |
0.5 |
% |
|
Q3 2023 vs. Q3 2022 Favorable/(Unfavorable) |
|
Change in Operating Margin |
Automotive OEM |
Food Equipment |
Test & Measurement and Electronics |
Welding |
Polymers & Fluids |
Construction Products |
Specialty Products |
Total ITW |
|
Operating Leverage |
70 bps |
110 bps |
(100) bps |
(40) bps |
70 bps |
(30) bps |
(110) bps |
— |
|
Changes in Variable Margin & OH Costs |
100 bps |
(40) bps |
(10) bps |
50 bps |
200 bps |
430 bps |
40 bps |
200 bps |
|
Total Organic |
170 bps |
70 bps |
(110) bps |
10 bps |
270 bps |
400 bps |
(70) bps |
200 bps |
|
Acquisitions/Divestitures |
— |
10 bps |
— |
— |
20 bps |
— |
60 bps |
10 bps |
|
Restructuring/Other |
(30) bps |
20 bps |
(30) bps |
— |
(10) bps |
20 bps |
20 bps |
(10) bps |
|
Total Operating Margin Change |
140 bps |
100 bps |
(140) bps |
10 bps |
280 bps |
420 bps |
10 bps |
200 bps |
|
|
|
|
|
|
|
|
|
|
|
Total Operating Margin % * |
18.9% |
27.3% |
23.8% |
31.6% |
28.1% |
29.9% |
27.8% |
26.5% |
|
|
|
|
|
|
|
|
|
|
|
* Includes unfavorable operating margin impact of amortization
expense from acquisition-related intangible assets |
30 bps |
40 bps |
160 bps |
10 bps |
170 bps |
10 bps |
30 bps |
70 bps ** |
|
** Amortization expense from acquisition-related intangible assets
had an unfavorable impact of ($0.07) on GAAP earnings per share for
the third quarter of 2023. |
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSEGMENT DATA (UNAUDITED)
|
YTD 2023 vs. YTD 2022 Favorable/(Unfavorable) |
|
Operating Revenue |
Automotive OEM |
Food Equipment |
Test & Measurement and Electronics |
Welding |
Polymers & Fluids |
Construction Products |
Specialty Products |
Total ITW |
|
Organic |
9.2 |
% |
9.6 |
% |
0.9 |
% |
2.7 |
% |
0.9 |
% |
(3.1 |
)% |
(4.7 |
)% |
2.8 |
% |
|
Acquisitions/Divestitures |
— |
% |
(1.3 |
)% |
— |
% |
— |
% |
(5.3 |
)% |
— |
% |
(1.5 |
)% |
(1.0 |
)% |
|
Translation |
(0.4 |
)% |
0.2 |
% |
(0.7 |
)% |
— |
% |
(1.5 |
)% |
(1.1 |
)% |
0.4 |
% |
(0.4 |
)% |
|
Operating Revenue |
8.8 |
% |
8.5 |
% |
0.2 |
% |
2.7 |
% |
(5.9 |
)% |
(4.2 |
)% |
(5.8 |
)% |
1.4 |
% |
|
YTD 2023 vs. YTD 2022 Favorable/(Unfavorable) |
|
Change in Operating Margin |
Automotive OEM |
Food Equipment |
Test & Measurement and Electronics |
Welding |
Polymers & Fluids |
Construction Products |
Specialty Products |
Total ITW |
|
Operating Leverage |
180 bps |
180 bps |
20 bps |
50 bps |
10 bps |
(50) bps |
(100) bps |
60 bps |
|
Changes in Variable Margin & OH Costs |
(190) bps |
70 bps |
60 bps |
150 bps |
120 bps |
360 bps |
20 bps |
110 bps |
|
Total Organic |
(10) bps |
250 bps |
80 bps |
200 bps |
130 bps |
310 bps |
(80) bps |
170 bps |
|
Acquisitions/Divestitures |
— |
20 bps |
— |
— |
30 bps |
— |
40 bps |
10 bps |
|
Restructuring/Other |
70 bps |
— |
(20) bps |
— |
(40) bps |
(20) bps |
(30) bps |
— |
|
Total Operating Margin Change |
60 bps |
270 bps |
60 bps |
200 bps |
120 bps |
290 bps |
(70) bps |
180 bps |
|
|
|
|
|
|
|
|
|
|
|
Total Operating Margin % * |
17.3% |
27.2% |
23.8% |
32.5% |
26.2% |
28.9% |
26.4% |
25.2% |
|
|
|
|
|
|
|
|
|
|
|
* Includes unfavorable operating margin impact of amortization
expense from acquisition-related intangible assets |
20 bps |
50 bps |
170 bps |
10 bps |
180 bps |
10 bps |
60 bps |
70 bps ** |
|
** Amortization expense from acquisition-related intangible assets
had an unfavorable impact of ($0.22) on GAAP earnings per share for
the first nine months of 2023. |
|
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESGAAP to NON-GAAP RECONCILIATIONS
(UNAUDITED)AFTER-TAX RETURN ON AVERAGE INVESTED
CAPITAL (UNAUDITED) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
Dollars in millions |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Numerator: |
|
|
|
|
|
|
|
|
Net income |
$ |
772 |
|
|
$ |
727 |
|
|
$ |
2,240 |
|
|
$ |
2,127 |
|
|
Discrete tax benefit related to the second quarter 2023 |
|
— |
|
|
|
— |
|
|
|
(20 |
) |
|
|
— |
|
|
Discrete tax benefit related to the second quarter 2022 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(51 |
) |
|
Interest expense, net of tax(1) |
|
51 |
|
|
|
39 |
|
|
|
150 |
|
|
|
112 |
|
|
Other (income) expense, net of tax(1) |
|
(8 |
) |
|
|
(20 |
) |
|
|
(31 |
) |
|
|
(49 |
) |
|
Operating income after taxes |
$ |
815 |
|
|
$ |
746 |
|
|
$ |
2,339 |
|
|
$ |
2,139 |
|
|
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
|
Invested capital: |
|
|
|
|
|
|
|
|
Cash and equivalents |
$ |
990 |
|
|
$ |
774 |
|
|
$ |
990 |
|
|
$ |
774 |
|
|
Trade receivables |
|
3,163 |
|
|
|
3,031 |
|
|
|
3,163 |
|
|
|
3,031 |
|
|
Inventories |
|
1,799 |
|
|
|
2,007 |
|
|
|
1,799 |
|
|
|
2,007 |
|
|
Net assets held for sale |
|
— |
|
|
|
75 |
|
|
|
— |
|
|
|
75 |
|
|
Net plant and equipment |
|
1,904 |
|
|
|
1,705 |
|
|
|
1,904 |
|
|
|
1,705 |
|
|
Goodwill and intangible assets |
|
5,510 |
|
|
|
5,557 |
|
|
|
5,510 |
|
|
|
5,557 |
|
|
Accounts payable and accrued expenses |
|
(2,168 |
) |
|
|
(2,177 |
) |
|
|
(2,168 |
) |
|
|
(2,177 |
) |
|
Debt |
|
(8,066 |
) |
|
|
(7,628 |
) |
|
|
(8,066 |
) |
|
|
(7,628 |
) |
|
Other, net |
|
(128 |
) |
|
|
(330 |
) |
|
|
(128 |
) |
|
|
(330 |
) |
|
Total net assets (stockholders' equity) |
|
3,004 |
|
|
|
3,014 |
|
|
|
3,004 |
|
|
|
3,014 |
|
|
Cash and equivalents |
|
(990 |
) |
|
|
(774 |
) |
|
|
(990 |
) |
|
|
(774 |
) |
|
Debt |
|
8,066 |
|
|
|
7,628 |
|
|
|
8,066 |
|
|
|
7,628 |
|
|
Total invested capital |
$ |
10,080 |
|
|
$ |
9,868 |
|
|
$ |
10,080 |
|
|
$ |
9,868 |
|
|
|
|
|
|
|
|
|
|
|
Average invested capital(2) |
$ |
10,237 |
|
|
$ |
10,004 |
|
|
$ |
10,239 |
|
|
$ |
9,985 |
|
|
|
|
|
|
|
|
|
|
|
Net income to average invested capital(3) |
|
30.1 |
% |
|
|
29.1 |
% |
|
|
29.2 |
% |
|
|
28.4 |
% |
|
After-tax return on average invested capital(3) |
|
31.9 |
% |
|
|
29.9 |
% |
|
|
30.5 |
% |
|
|
28.6 |
% |
(1) Effective tax rate used for interest
expense and other (income) expense for the three months ended
September 30, 2023 and 2022 was 23.8% and 23.9%, respectively.
Effective tax rate used for interest expense and other (income)
expense for the nine months ended September 30, 2023 and 2022
was 23.4% and 23.7%, respectively.
(2) Average invested capital is
calculated using the total invested capital balances at the start
of the period and at the end of each quarter within each of the
periods presented.
(3) Returns for the three months ended
September 30, 2023 and 2022 were converted to an annual rate by
multiplying the calculated return by 4. Returns for the nine months
ended September 30, 2023 and 2022 were converted to an annual rate
by dividing the calculated return by 3 and multiplying it by 4.A
reconciliation of the tax rate for the nine months ended September
30, 2023, excluding the second quarter 2023 discrete tax benefit of
$20 million related to amended 2021 U.S. taxes, is as follows:
|
|
|
Nine Months Ended |
|
|
|
September 30, 2023 |
|
Dollars in millions |
|
Income Taxes |
|
Tax Rate |
|
As reported |
|
$ |
656 |
|
22.7 |
% |
|
Discrete tax benefit related to the second quarter 2023 |
|
|
20 |
|
0.7 |
% |
|
As adjusted |
|
$ |
676 |
|
23.4 |
% |
A reconciliation of the tax rate for the nine
months ended September 30, 2022, excluding the second quarter 2022
discrete tax benefit of $51 million related to the resolution of a
U.S. tax audit, is as follows:
|
|
Nine Months Ended |
|
|
September 30, 2022 |
|
Dollars in millions |
Income Taxes |
|
Tax Rate |
|
As reported |
$ |
594 |
|
21.8 |
% |
|
Discrete tax benefit related to the second quarter 2022 |
|
51 |
|
1.9 |
% |
|
As adjusted |
$ |
645 |
|
23.7 |
% |
|
AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL
(UNAUDITED) |
|
|
Twelve Months Ended |
|
Dollars in millions |
December 31, 2022 |
|
Numerator: |
|
|
Net income |
$ |
3,034 |
|
|
Discrete tax benefit related to the fourth quarter 2022 |
|
(32 |
) |
|
Discrete tax benefit related to the second quarter 2022 |
|
(51 |
) |
|
Interest expense, net of tax(1) |
|
156 |
|
|
Other (income) expense, net of tax(1) |
|
(196 |
) |
|
Operating income after taxes |
$ |
2,911 |
|
|
|
|
|
Denominator: |
|
|
Invested capital: |
|
|
Cash and equivalents |
$ |
708 |
|
|
Trade receivables |
|
3,171 |
|
|
Inventories |
|
2,054 |
|
|
Net assets held for sale |
|
7 |
|
|
Net plant and equipment |
|
1,848 |
|
|
Goodwill and intangible assets |
|
5,632 |
|
|
Accounts payable and accrued expenses |
|
(2,322 |
) |
|
Debt |
|
(7,763 |
) |
|
Other, net |
|
(246 |
) |
|
Total net assets (stockholders' equity) |
|
3,089 |
|
|
Cash and equivalents |
|
(708 |
) |
|
Debt |
|
7,763 |
|
|
Total invested capital |
$ |
10,144 |
|
|
|
|
|
Average invested capital(2) |
$ |
10,017 |
|
|
|
|
|
Net income to average invested capital |
|
30.3 |
% |
|
After-tax return on average invested capital |
|
29.1 |
% |
(1) Effective tax rate used for interest
expense and other (income) expense for the year ended December 31,
2022 was 23.2%.
(2) Average invested capital is
calculated using the total invested capital balances at the start
of the period and at the end of each quarter within the period
presented.
A reconciliation of the 2022 effective tax rate
excluding the fourth quarter 2022 discrete tax benefit of $32
million related to the utilization of capital loss carryforwards
and the second quarter 2022 discrete tax benefit of $51 million
related to the resolution of a U.S. tax audit is as follows:
|
|
Twelve Months Ended |
|
|
December 31, 2022 |
|
Dollars in millions |
Income Taxes |
|
Tax Rate |
|
As reported |
$ |
808 |
|
21.0 |
% |
|
Discrete tax benefit related to the fourth quarter 2022 |
|
32 |
|
0.8 |
% |
|
Discrete tax benefit related to the second quarter 2022 |
|
51 |
|
1.4 |
% |
|
As adjusted |
$ |
891 |
|
23.2 |
% |
|
FREE CASH FLOW (UNAUDITED) |
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
Dollars in millions |
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
Net cash provided by operating activities |
$ |
982 |
|
|
$ |
713 |
|
|
$ |
2,500 |
|
|
$ |
1,537 |
|
|
Less: Additions to plant and equipment |
|
(126 |
) |
|
|
(101 |
) |
|
|
(324 |
) |
|
|
(256 |
) |
|
Free cash flow |
$ |
856 |
|
|
$ |
612 |
|
|
$ |
2,176 |
|
|
$ |
1,281 |
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
772 |
|
|
$ |
727 |
|
|
$ |
2,240 |
|
|
$ |
2,127 |
|
|
|
|
|
|
|
|
|
|
| Net cash provided by operating
activities to net income conversion rate |
|
127 |
% |
|
|
98 |
% |
|
|
112 |
% |
|
|
72 |
% |
|
Free cash flow to net income conversion rate |
|
111 |
% |
|
|
84 |
% |
|
|
97 |
% |
|
|
60 |
% |
|
ADJUSTED NET INCOME PER SHARE - DILUTED
(UNAUDITED) |
|
|
Twelve Months Ended |
|
|
December 31, 2022 |
|
As reported |
$ |
9.77 |
|
|
Net impact of gains from two divestitures in the fourth quarter
2022 |
|
(0.60 |
) |
|
As adjusted |
$ |
9.17 |
|
|
Media Contact |
Investor Relations |
|
Tel: 224.661.7451 |
Karen Fletcher |
|
mediarelations@itw.com |
Tel: 224.661.7433 |
|
|
investorrelations@itw.com |
Illinois Tool Works (NYSE:ITW)
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Illinois Tool Works (NYSE:ITW)
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