ITW Reports Second Quarter 2023 Results
- Illinois Tool Works Inc. reports strong Q2 2023 results with revenue increasing by 2% to $4.1 billion and operating income up 9% to $1.01 billion. GAAP EPS also increases by 5% to $2.48 per share. The company raises its full-year GAAP EPS guidance by $0.10 to a range of $9.55 to $9.95 per share.
- None.
- Revenue of
$4.1 billion , an increase of2% with organic growth of3% - Record operating income of
$1.01 billion , an increase of9% - Operating margin of
24.8% , an increase of 170 bps - Record GAAP EPS of
$2.48 , an increase of5% ; Excl. one-time tax items, EPS increased9% - Raising full year GAAP EPS guidance by
$0.10 t o a range of$9.55 t o$9.95 per share
GLENVIEW, Ill., Aug. 01, 2023 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW) today reported its second quarter 2023 results.
“The ITW team delivered another quarter of strong operational execution and financial performance. Quarterly operating income grew nine percent and exceeded
Second Quarter 2023 Results
Second quarter revenue of
GAAP EPS increased five percent to
2023 Guidance
ITW is raising its full-year GAAP EPS guidance by
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 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 Statements
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 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, 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 Works
ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenue of
Media Contact | Investor Relations |
Tel: 224.661.7451 | Karen Fletcher |
mediarelations@itw.com | Tel: 224.661.7433 |
investorrelations@itw.com |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES | |||||||||||||||
STATEMENT OF INCOME (UNAUDITED) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
In millions except per share amounts | 2023 | 2022 | 2023 | 2022 | |||||||||||
Operating Revenue | $ | 4,074 | $ | 4,011 | $ | 8,093 | $ | 7,950 | |||||||
Cost of revenue | 2,344 | 2,392 | 4,685 | 4,749 | |||||||||||
Selling, administrative, and research and development expenses | 690 | 659 | 1,365 | 1,311 | |||||||||||
Amortization and impairment of intangible assets | 30 | 34 | 61 | 69 | |||||||||||
Operating Income | 1,010 | 926 | 1,982 | 1,821 | |||||||||||
Interest expense | (69 | ) | (47 | ) | (129 | ) | (95 | ) | |||||||
Other income (expense) | 20 | 24 | 30 | 38 | |||||||||||
Income Before Taxes | 961 | 903 | 1,883 | 1,764 | |||||||||||
Income taxes | 207 | 165 | 415 | 364 | |||||||||||
Net Income | $ | 754 | $ | 738 | $ | 1,468 | $ | 1,400 | |||||||
Net Income Per Share: | |||||||||||||||
Basic | $ | 2.49 | $ | 2.37 | $ | 4.83 | $ | 4.49 | |||||||
Diluted | $ | 2.48 | $ | 2.37 | $ | 4.81 | $ | 4.48 | |||||||
Cash Dividends Per Share: | |||||||||||||||
Paid | $ | 1.31 | $ | 1.22 | $ | 2.62 | $ | 2.44 | |||||||
Declared | $ | 1.31 | $ | 1.22 | $ | 2.62 | $ | 2.44 | |||||||
Shares of Common Stock Outstanding During the Period: | |||||||||||||||
Average | 303.3 | 310.6 | 304.1 | 311.5 | |||||||||||
Average assuming dilution | 304.2 | 311.5 | 305.2 | 312.6 |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES | |||||||
STATEMENT OF FINANCIAL POSITION (UNAUDITED) | |||||||
In millions | June 30, 2023 | December 31, 2022 | |||||
Assets | |||||||
Current Assets: | |||||||
Cash and equivalents | $ | 922 | $ | 708 | |||
Trade receivables | 3,216 | 3,171 | |||||
Inventories | 1,921 | 2,054 | |||||
Prepaid expenses and other current assets | 345 | 329 | |||||
Assets held for sale | — | 8 | |||||
Total current assets | 6,404 | 6,270 | |||||
Net plant and equipment | 1,901 | 1,848 | |||||
Goodwill | 4,887 | 4,864 | |||||
Intangible assets | 708 | 768 | |||||
Deferred income taxes | 500 | 494 | |||||
Other assets | 1,252 | 1,178 | |||||
$ | 15,652 | $ | 15,422 | ||||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | 1,275 | $ | 1,590 | |||
Accounts payable | 590 | 594 | |||||
Accrued expenses | 1,625 | 1,728 | |||||
Cash dividends payable | 396 | 400 | |||||
Income taxes payable | 154 | 147 | |||||
Liabilities held for sale | — | 1 | |||||
Total current liabilities | 4,040 | 4,460 | |||||
Noncurrent Liabilities: | |||||||
Long-term debt | 6,947 | 6,173 | |||||
Deferred income taxes | 451 | 484 | |||||
Noncurrent income taxes payable | 151 | 273 | |||||
Other liabilities | 969 | 943 | |||||
Total noncurrent liabilities | 8,518 | 7,873 | |||||
Stockholders' Equity: | |||||||
Common stock | 6 | 6 | |||||
Additional paid-in-capital | 1,550 | 1,501 | |||||
Retained earnings | 26,473 | 25,799 | |||||
Common stock held in treasury | (23,116 | ) | (22,377 | ) | |||
Accumulated other comprehensive income (loss) | (1,820 | ) | (1,841 | ) | |||
Noncontrolling interest | 1 | 1 | |||||
Total stockholders' equity | 3,094 | 3,089 | |||||
$ | 15,652 | $ | 15,422 |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES |
SEGMENT DATA (UNAUDITED) |
Three Months Ended June 30, 2023 | ||||||||||
Dollars in millions | Total Revenue | Operating Income | Operating Margin | |||||||
Automotive OEM | $ | 826 | $ | 139 | 16.8 | % | ||||
Food Equipment | 654 | 182 | 27.8 | % | ||||||
Test & Measurement and Electronics | 700 | 162 | 23.2 | % | ||||||
Welding | 490 | 167 | 33.9 | % | ||||||
Polymers & Fluids | 459 | 119 | 25.9 | % | ||||||
Construction Products | 526 | 154 | 29.3 | % | ||||||
Specialty Products | 423 | 109 | 26.0 | % | ||||||
Intersegment | (4 | ) | — | — | % | |||||
Total Segments | 4,074 | 1,032 | 25.3 | % | ||||||
Unallocated | — | (22 | ) | — | % | |||||
Total Company | $ | 4,074 | $ | 1,010 | 24.8 | % |
Six Months Ended June 30, 2023 | ||||||||||
Dollars in millions | Total Revenue | Operating Income | Operating Margin | |||||||
Automotive OEM | $ | 1,622 | $ | 267 | 16.4 | % | ||||
Food Equipment | 1,289 | 351 | 27.2 | % | ||||||
Test & Measurement and Electronics | 1,403 | 334 | 23.8 | % | ||||||
Welding | 983 | 324 | 32.9 | % | ||||||
Polymers & Fluids | 906 | 228 | 25.2 | % | ||||||
Construction Products | 1,052 | 299 | 28.4 | % | ||||||
Specialty Products | 846 | 218 | 25.8 | % | ||||||
Intersegment | (8 | ) | — | — | % | |||||
Total Segments | 8,093 | 2,021 | 25.0 | % | ||||||
Unallocated | — | (39 | ) | — | % | |||||
Total Company | $ | 8,093 | $ | 1,982 | 24.5 | % |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES |
SEGMENT DATA (UNAUDITED) |
Q2 2023 vs. Q2 2022 Favorable/(Unfavorable) | ||||||||||||||||
Operating Revenue | Automotive OEM | Food Equipment | Test & Measurement and Electronics | Welding | Polymers & Fluids | Construction Products | Specialty Products | Total ITW | ||||||||
Organic | 16.3 | % | 6.9 | % | 1.1 | % | 0.7 | % | (0.5) | % | (5.7) | % | (3.6) | % | 3.0 | % |
Acquisitions/ Divestitures | — | % | (1.0) | % | — | % | — | % | (5.7) | % | — | % | (2.3) | % | (1.1) | % |
Translation | (0.1) | % | 0.4 | % | (0.4) | % | — | % | (1.4) | % | (1.1) | % | 0.5 | % | (0.3) | % |
Operating Revenue | 16.2 | % | 6.3 | % | 0.7 | % | 0.7 | % | (7.6) | % | (6.8) | % | (5.4) | % | 1.6 | % |
Q2 2023 vs. Q2 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 | 320 bps | 140 bps | 30 bps | - | (10) bps | (90) bps | (80) bps | 60 bps | ||||||||
Changes in Variable Margin & OH Costs | (210) bps | 140 bps | 70 bps | 460 bps | 150 bps | 320 bps | 20 bps | 100 bps | ||||||||
Total Organic | 110 bps | 280 bps | 100 bps | 460 bps | 140 bps | 230 bps | (60) bps | 160 bps | ||||||||
Acquisitions/ Divestitures | — | 30 bps | — | — | 30 bps | — | 60 bps | 10 bps | ||||||||
Restructuring/Other | 140 bps | — | (30) bps | — | (90) bps | (60) bps | (90) bps | — | ||||||||
Total Operating Margin Change | 250 bps | 310 bps | 70 bps | 460 bps | 80 bps | 170 bps | (90) bps | 170 bps | ||||||||
Total Operating Margin % * | 16.8 | % | 27.8 | % | 23.2 | % | 33.9 | % | 25.9 | % | 29.3 | % | 26.0 | % | 24.8 | % |
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets | 30 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 ( |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES |
SEGMENT DATA (UNAUDITED) |
H1 2023 vs. H2 2022 Favorable/(Unfavorable) | ||||||||||||||||
Operating Revenue | Automotive OEM | Food Equipment | Test & Measurement and Electronics | Welding | Polymers & Fluids | Construction Products | Specialty Products | Total ITW | ||||||||
Organic | 11.9 | % | 11.3 | % | 3.3 | % | 5.3 | % | (0.3) | % | (3.6) | % | (4.3) | % | 4.1 | % |
Acquisitions/Divestitures | — | % | (1.1) | % | — | % | — | % | (5.1) | % | — | % | (1.1) | % | (0.9) | % |
Translation | (1.6) | % | (1.0) | % | (1.7) | % | (0.3) | % | (1.9) | % | (2.1) | % | (0.5) | % | (1.4) | % |
Operating Revenue | 10.3 | % | 9.2 | % | 1.6 | % | 5.0 | % | (7.3) | % | (5.7) | % | (5.9) | % | 1.8 | % |
H1 2023 vs. H2 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 | 230 bps | 210 bps | 80 bps | 80 bps | (10) bps | (60) bps | (90) bps | 90 bps | ||||||||
Changes in Variable Margin & OH Costs | (330) bps | 140 bps | 100 bps | 210 bps | 80 bps | 310 bps | — | 60 bps | ||||||||
Total Organic | (100) bps | 350 bps | 180 bps | 290 bps | 70 bps | 250 bps | (90) bps | 150 bps | ||||||||
Acquisitions/Divestitures | — | 20 bps | — | — | 30 bps | — | 30 bps | 10 bps | ||||||||
Restructuring/Other | 110 bps | (10) bps | (20) bps | — | (60) bps | (30) bps | (40) bps | — | ||||||||
Total Operating Margin Change | 10 bps | 360 bps | 160 bps | 290 bps | 40 bps | 220 bps | (100) bps | 160 bps | ||||||||
Total Operating Margin % * | 16.4 | % | 27.2 | % | 23.8 | % | 32.9 | % | 25.2 | % | 28.4 | % | 25.8 | % | 24.5 | % |
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets | 30 bps | 50 bps | 180 bps | 10 bps | 190 bps | 10 bps | 60 bps | 80 bps ** | ||||||||
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ( |
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES | |||||||||||||||
GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED) | |||||||||||||||
AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Dollars in millions | 2023 | 2022 | 2023 | 2022 | |||||||||||
Numerator: | |||||||||||||||
Net income | $ | 754 | $ | 738 | $ | 1,468 | $ | 1,400 | |||||||
Discrete tax benefit related to the second quarter 2023 | (20 | ) | — | (20 | ) | — | |||||||||
Discrete tax benefit related to the second quarter 2022 | — | (51 | ) | — | (51 | ) | |||||||||
Interest expense, net of tax (1) | 53 | 36 | 99 | 73 | |||||||||||
Other (income) expense, net of tax (1) | (15 | ) | (18 | ) | (23 | ) | (29 | ) | |||||||
Operating income after taxes | $ | 772 | $ | 705 | $ | 1,524 | $ | 1,393 | |||||||
Denominator: | |||||||||||||||
Invested capital: | |||||||||||||||
Cash and equivalents | $ | 922 | $ | 879 | $ | 922 | $ | 879 | |||||||
Trade receivables | 3,216 | 3,109 | 3,216 | 3,109 | |||||||||||
Inventories | 1,921 | 1,975 | 1,921 | 1,975 | |||||||||||
Net assets held for sale | — | 73 | — | 73 | |||||||||||
Net plant and equipment | 1,901 | 1,736 | 1,901 | 1,736 | |||||||||||
Goodwill and intangible assets | 5,595 | 5,702 | 5,595 | 5,702 | |||||||||||
Accounts payable and accrued expenses | (2,215 | ) | (2,241 | ) | (2,215 | ) | (2,241 | ) | |||||||
Debt | (8,222 | ) | (7,640 | ) | (8,222 | ) | (7,640 | ) | |||||||
Other, net | (24 | ) | (214 | ) | (24 | ) | (214 | ) | |||||||
Total net assets (stockholders' equity) | 3,094 | 3,379 | 3,094 | 3,379 | |||||||||||
Cash and equivalents | (922 | ) | (879 | ) | (922 | ) | (879 | ) | |||||||
Debt | 8,222 | 7,640 | 8,222 | 7,640 | |||||||||||
Total invested capital | $ | 10,394 | $ | 10,140 | $ | 10,394 | $ | 10,140 | |||||||
Average invested capital (2) | $ | 10,366 | $ | 10,143 | $ | 10,292 | $ | 10,024 | |||||||
Net income to average invested capital (3) | 29.1 | % | 29.1 | % | 28.5 | % | 27.9 | % | |||||||
After-tax return on average invested capital (3) | 29.8 | % | 27.8 | % | 29.6 | % | 27.8 | % |
(1) Effective tax rate used for interest expense and other (income) expense for the three months ended June 30, 2023 and 2022 was
(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 June 30, 2023 and 2022 were converted to an annual rate by multiplying the calculated return by 4. Returns for the six months ended June 30, 2023 and 2022 were converted to an annual rate by multiplying the calculated return by 2.
A reconciliation of the tax rate for the three and six months ended June 30, 2023, excluding the second quarter 2023 discrete tax benefit of
Three Months Ended | Six Months Ended | ||||||||||||
June 30, 2023 | June 30, 2023 | ||||||||||||
Dollars in millions | Income Taxes | Tax Rate | Income Taxes | Tax Rate | |||||||||
As reported | $ | 207 | 21.4 | % | $ | 415 | 22.0 | % | |||||
Discrete tax benefit related to the second quarter 2023 | 20 | 2.2 | % | 20 | 1.1 | % | |||||||
As adjusted | $ | 227 | 23.6 | % | $ | 435 | 23.1 | % |
A reconciliation of the tax rate for the three and six months ended June 30, 2022, excluding the second quarter 2022 discrete tax benefit of
Three Months Ended | Six Months Ended | ||||||||||||
June 30, 2022 | June 30, 2022 | ||||||||||||
Dollars in millions | Income Taxes | Tax Rate | Income Taxes | Tax Rate | |||||||||
As reported | $ | 165 | 18.3 | % | $ | 364 | 20.7 | % | |||||
Discrete tax benefit related to the second quarter 2022 | 51 | 5.6 | % | 51 | 2.8 | % | |||||||
As adjusted | $ | 216 | 23.9 | % | $ | 415 | 23.5 | % |
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
(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
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 | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
Dollars in millions | 2023 | 2022 | 2023 | 2022 | |||||||||||
Net cash provided by operating activities | $ | 790 | $ | 501 | $ | 1,518 | $ | 824 | |||||||
Less: Additions to plant and equipment | (85 | ) | (81 | ) | (198 | ) | (155 | ) | |||||||
Free cash flow | $ | 705 | $ | 420 | $ | 1,320 | $ | 669 | |||||||
Net income | $ | 754 | $ | 738 | $ | 1,468 | $ | 1,400 | |||||||
Net cash provided by operating activities to net income conversion rate | 105 | % | 68 | % | 103 | % | 59 | % | |||||||
Free cash flow to net income conversion rate | 94 | % | 57 | % | 90 | % | 48 | % |
ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED) | |||||||
Three Months Ended | |||||||
June 30, | |||||||
2023 | 2022 | ||||||
As reported | $ | 2.48 | $ | 2.37 | |||
Discrete tax benefit related to the second quarter 2023 | (0.07 | ) | — | ||||
Discrete tax benefit related to the second quarter 2022 | — | (0.16 | ) | ||||
As adjusted | $ | 2.41 | $ | 2.21 |
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 |
FAQ
What are the Q2 2023 results for Illinois Tool Works Inc.?
What is the revised full-year GAAP EPS guidance for Illinois Tool Works Inc.?
How much did revenue and operating income increase in Q2 2023?
What is the current GAAP EPS for Illinois Tool Works Inc.?