Fourth Quarter 2023 Highlights
- Revenue of
$4.0 billion , essentially flat - Operating margin of 24.8% as enterprise initiatives contributed 150 bps
- GAAP EPS of
$2.38 included$(0.04) impact from the devaluation of Argentina’s currency
2023 Highlights
- Revenue of
$16.1 billion , an increase of 1% with organic growth of 2% - Operating income of
$4 billion , an increase of 7% - Operating margin of 25.1%, an increase of 130 bps
- GAAP EPS of
$9.74 , an increase of 6% excluding$0.60 of divestiture gains in 2022
2024 Guidance
- Revenue growth of 2 to 4% with organic growth of 1 to 3%
- Operating margin of 25.5 to 26.5% with enterprise initiatives contributing approximately 100 bps
- GAAP EPS of
$10.00 to$10.40 , a year-over-year increase of 5% at the mid-point
“In a challenging macro demand environment, the ITW team continued to leverage the strength and resilience of ITW’s proprietary business model and high-quality diversified portfolio to deliver a solid finish to a record year for the company,” said Christopher A. O’Herlihy, President and Chief Executive Officer.
“2023 marked another year of strong operational execution and financial performance, as ITW delivered organic growth of two percent, expanded operating margin by 130 basis points to 25.1 percent, grew operating income seven percent to
Fourth Quarter 2023 Results
Fourth quarter revenue of
GAAP EPS of
Full Year 2023 Results
Full year revenue of
GAAP EPS of
2024 Guidance
The company is initiating 2024 guidance including GAAP EPS in the range of
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. For the same reasons, the company is unable to address the potential significance of the unavailable information, which could be material to future results.
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 to net income 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 2024 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors, which could cause actual results to differ materially from those anticipated. Important risks that could cause actual results to differ materially from the Company’s expectations include those that are detailed in ITW’s Form 10-K for 2022 and subsequent reports filed with the
About
ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenue of
STATEMENT OF INCOME (UNAUDITED)
Three Months Ended | Twelve Months Ended | ||||||||||||||
In millions except per share amounts | 2023 | 2022 | 2023 | 2022 | |||||||||||
Operating Revenue | $ | 3,983 | $ | 3,971 | $ | 16,107 | $ | 15,932 | |||||||
Cost of revenue | 2,312 | 2,309 | 9,316 | 9,429 | |||||||||||
Selling, administrative, and research and development expenses | 658 | 644 | 2,638 | 2,579 | |||||||||||
Amortization and impairment of intangible assets | 25 | 32 | 113 | 134 | |||||||||||
Operating Income | 988 | 986 | 4,040 | 3,790 | |||||||||||
Interest expense | (70 | ) | (56 | ) | (266 | ) | (203 | ) | |||||||
Other income (expense) | 9 | 191 | 49 | 255 | |||||||||||
Income Before Taxes | 927 | 1,121 | 3,823 | 3,842 | |||||||||||
Income taxes | 210 | 214 | 866 | 808 | |||||||||||
Net Income | $ | 717 | $ | 907 | $ | 2,957 | $ | 3,034 | |||||||
Net Income Per Share: | |||||||||||||||
Basic | $ | 2.39 | $ | 2.96 | $ | 9.77 | $ | 9.80 | |||||||
Diluted | $ | 2.38 | $ | 2.95 | $ | 9.74 | $ | 9.77 | |||||||
Cash Dividends Per Share: | |||||||||||||||
Paid | $ | 1.40 | $ | 1.31 | $ | 5.33 | $ | 4.97 | |||||||
Declared | $ | 1.40 | $ | 1.31 | $ | 5.42 | $ | 5.06 | |||||||
Shares of Common Stock Outstanding During the Period: | |||||||||||||||
Average | 300.1 | 306.8 | 302.6 | 309.6 | |||||||||||
Average assuming dilution | 301.1 | 307.9 | 303.6 | 310.7 |
STATEMENT OF FINANCIAL POSITION (UNAUDITED)
In millions | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and equivalents | $ | 1,065 | $ | 708 | |||
Trade receivables | 3,123 | 3,171 | |||||
Inventories | 1,707 | 2,054 | |||||
Prepaid expenses and other current assets | 340 | 329 | |||||
Assets held for sale | — | 8 | |||||
Total current assets | 6,235 | 6,270 | |||||
Net plant and equipment | 1,976 | 1,848 | |||||
4,909 | 4,864 | ||||||
Intangible assets | 657 | 768 | |||||
Deferred income taxes | 479 | 494 | |||||
Other assets | 1,262 | 1,178 | |||||
$ | 15,518 | $ | 15,422 | ||||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | 1,825 | $ | 1,590 | |||
Accounts payable | 581 | 594 | |||||
Accrued expenses | 1,663 | 1,728 | |||||
Cash dividends payable | 419 | 400 | |||||
Income taxes payable | 187 | 147 | |||||
Liabilities held for sale | — | 1 | |||||
Total current liabilities | 4,675 | 4,460 | |||||
Noncurrent Liabilities: | |||||||
Long-term debt | 6,339 | 6,173 | |||||
Deferred income taxes | 326 | 484 | |||||
Noncurrent income taxes payable | 151 | 273 | |||||
Other liabilities | 1,014 | 943 | |||||
Total noncurrent liabilities | 7,830 | 7,873 | |||||
Stockholders' Equity: | |||||||
Common stock | 6 | 6 | |||||
Additional paid-in-capital | 1,588 | 1,501 | |||||
Retained earnings | 27,122 | 25,799 | |||||
Common stock held in treasury | (23,870 | ) | (22,377 | ) | |||
Accumulated other comprehensive income (loss) | (1,834 | ) | (1,841 | ) | |||
Noncontrolling interest | 1 | 1 | |||||
Total stockholders' equity | 3,013 | 3,089 | |||||
$ | 15,518 | $ | 15,422 |
SEGMENT DATA (UNAUDITED)
Three Months Ended | ||||||||
Dollars in millions | Total Revenue | Operating Income | Operating Margin | |||||
Automotive OEM | $ | 814 | $ | 143 | 17.6 | % | ||
Food Equipment | 655 | 177 | 27.0 | % | ||||
Test & Measurement and Electronics | 731 | 185 | 25.3 | % | ||||
Welding | 451 | 134 | 29.6 | % | ||||
Polymers & Fluids | 440 | 125 | 28.5 | % | ||||
Construction Products | 459 | 124 | 26.9 | % | ||||
Specialty Products | 437 | 116 | 26.6 | % | ||||
Intersegment | (4 | ) | — | — | % | |||
Total Segments | 3,983 | 1,004 | 25.2 | % | ||||
Unallocated | — | (16 | ) | — | % | |||
$ | 3,983 | $ | 988 | 24.8 | % |
Twelve Months Ended | ||||||||
Dollars in millions | Total Revenue | Operating Income | Operating Margin | |||||
Automotive OEM | $ | 3,235 | $ | 561 | 17.3 | % | ||
Food Equipment | 2,622 | 713 | 27.2 | % | ||||
Test & Measurement and Electronics | 2,832 | 686 | 24.2 | % | ||||
Welding | 1,902 | 605 | 31.8 | % | ||||
Polymers & Fluids | 1,804 | 482 | 26.7 | % | ||||
Construction Products | 2,033 | 578 | 28.4 | % | ||||
Specialty Products | 1,697 | 449 | 26.5 | % | ||||
Intersegment | (18 | ) | — | — | % | |||
Total Segments | 16,107 | 4,074 | 25.3 | % | ||||
Unallocated | — | (34 | ) | — | % | |||
$ | 16,107 | $ | 4,040 | 25.1 | % |
SEGMENT DATA (UNAUDITED)
Q4 2023 vs. Q4 2022 Favorable/(Unfavorable) | ||||||||||||||||
Operating Revenue | Automotive OEM | Food Equipment | Test & Measurement and Electronics | Welding | Polymers & Fluids | Construction Products | Specialty Products | Total ITW | ||||||||
Organic | 7.7 | % | 2.7 | % | (1.4 | )% | (6.8 | )% | (1.6 | )% | (3.5 | )% | (5.4 | )% | (0.5 | )% |
Acquisitions/ Divestitures | — | % | (0.9 | )% | — | % | — | % | — | % | — | % | (1.8 | )% | (0.4 | )% |
Translation | 1.7 | % | 2.1 | % | 1.1 | % | 0.5 | % | (1.6 | )% | 1.2 | % | 1.8 | % | 1.2 | % |
Operating Revenue | 9.4 | % | 3.9 | % | (0.3 | )% | (6.3 | )% | (3.2 | )% | (2.3 | )% | (5.4 | )% | 0.3 | % |
Q4 2023 vs. Q4 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 | 130 bps | 50 bps | (30) bps | (100) bps | (30) bps | (60) bps | (110) bps | (10) bps |
Changes in Variable Margin & OH Costs | 80 bps | (90) bps | (110) bps | (110) bps | 370 bps | 190 bps | 90 bps | 40 bps |
Total Organic | 210 bps | (40) bps | (140) bps | (210) bps | 340 bps | 130 bps | (20) bps | 30 bps |
Acquisitions/ Divestitures | — | 10 bps | — | — | — | — | 50 bps | 10 bps |
Restructuring/Other | (160) bps | (30) bps | (20) bps | 10 bps | (70) bps | 10 bps | 60 bps | (40) bps |
Total Operating Margin Change | 50 bps | (60) bps | (160) bps | (200) bps | 270 bps | 140 bps | 90 bps | — |
Total Operating Margin % * | 17.6% | 27.0% | 25.3% | 29.6% | 28.5% | 26.9% | 26.6% | 24.8% |
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets | 20 bps | 50 bps | 140 bps | 10 bps | 160 bps | 20 bps | 20 bps | 60 bps ** |
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ( |
SEGMENT DATA (UNAUDITED)
Full Year 2023 vs Full Year 2022 Favorable/(Unfavorable) | ||||||||||||||||
Operating Revenue | Automotive OEM | Food Equipment | Test & Measurement and Electronics | Welding | Polymers & Fluids | Construction Products | Specialty Products | Total ITW | ||||||||
Organic | 8.8 | % | 7.8 | % | 0.3 | % | 0.3 | % | 0.3 | % | (3.2 | )% | (4.9 | )% | 2.0 | % |
Acquisitions/ Divestitures | — | % | (1.2 | )% | — | % | — | % | (4.0 | )% | — | % | (1.6 | )% | (0.8 | )% |
Translation | 0.2 | % | 0.7 | % | (0.2 | )% | 0.1 | % | (1.6 | )% | (0.6 | )% | 0.8 | % | (0.1 | )% |
Operating Revenue | 9.0 | % | 7.3 | % | 0.1 | % | 0.4 | % | (5.3 | )% | (3.8 | )% | (5.7 | )% | 1.1 | % |
Full Year 2023 vs Full Year 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 | 160 bps | 150 bps | 10 bps | 10 bps | — | (60) bps | (90) bps | 40 bps | ||||||||
Changes in Variable Margin & OH Costs | (120) bps | 30 bps | 10 bps | 90 bps | 180 bps | 330 bps | 30 bps | 90 bps | ||||||||
Total Organic | 40 bps | 180 bps | 20 bps | 100 bps | 180 bps | 270 bps | (60) bps | 130 bps | ||||||||
Acquisitions/ Divestitures | — | 20 bps | — | — | 30 bps | — | 40 bps | 10 bps | ||||||||
Restructuring/Other | 10 bps | (10) bps | (20) bps | — | (60) bps | (20) bps | — | (10) bps | ||||||||
Total Operating Margin Change | 50 bps | 190 bps | — | 100 bps | 150 bps | 250 bps | (20) bps | 130 bps | ||||||||
Total Operating Margin % * | 17.3% | 27.2% | 24.2% | 31.8% | 26.7% | 28.4% | 26.5% | 25.1% | ||||||||
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets | 30 bps | 50 bps | 160 bps | 10 bps | 180 bps | 20 bps | 40 bps | 70 bps ** | ||||||||
** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ( |
GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)
AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)
Three Months Ended | Twelve Months Ended | ||||||||||||||
Dollars in millions | 2023 | 2022 | 2023 | 2022 | |||||||||||
Numerator: | |||||||||||||||
Net income | $ | 717 | $ | 907 | $ | 2,957 | $ | 3,034 | |||||||
Discrete tax benefit related to the second quarter 2023 | — | — | (20) | — | |||||||||||
Discrete tax benefit related to the fourth quarter 2022 | — | (32) | — | (32) | |||||||||||
Discrete tax benefit related to the second quarter 2022 | — | — | — | (51) | |||||||||||
Interest expense, net of tax(1) | 54 | 44 | 204 | 156 | |||||||||||
Other (income) expense, net of tax(1) | (7) | (147) | (38) | (196) | |||||||||||
Operating income after taxes | $ | 764 | $ | 772 | $ | 3,103 | $ | 2,911 | |||||||
Denominator: | |||||||||||||||
Invested capital: | |||||||||||||||
Cash and equivalents | $ | 1,065 | $ | 708 | $ | 1,065 | $ | 708 | |||||||
Trade receivables | 3,123 | 3,171 | 3,123 | 3,171 | |||||||||||
Inventories | 1,707 | 2,054 | 1,707 | 2,054 | |||||||||||
Net assets held for sale | — | 7 | — | 7 | |||||||||||
Net plant and equipment | 1,976 | 1,848 | 1,976 | 1,848 | |||||||||||
5,566 | 5,632 | 5,566 | 5,632 | ||||||||||||
Accounts payable and accrued expenses | (2,244) | (2,322) | (2,244) | (2,322) | |||||||||||
Debt | (8,164) | (7,763) | (8,164) | (7,763) | |||||||||||
Other, net | (16) | (246) | (16) | (246) | |||||||||||
Total net assets (stockholders' equity) | 3,013 | 3,089 | 3,013 | 3,089 | |||||||||||
Cash and equivalents | (1,065) | (708) | (1,065) | (708) | |||||||||||
Debt | 8,164 | 7,763 | 8,164 | 7,763 | |||||||||||
Total invested capital | $ | 10,112 | $ | 10,144 | $ | 10,112 | $ | 10,144 | |||||||
Average invested capital(2) | $ | 10,096 | $ | 10,006 | $ | 10,214 | $ | 10,017 | |||||||
Net income to average invested capital(3) | 28.4% | 36.3% | 29.0% | 30.3% | |||||||||||
After-tax return on average invested capital(3) | 30.3% | 30.8% | 30.4% | 29.1% |
(1) | Effective tax rate used for interest expense and other (income) expense for the three months ended | |
(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 | |
A reconciliation of the 2023 effective tax rate excluding the second quarter 2023 discrete tax benefit of
Twelve Months Ended | |||||
Dollars in millions | Income Taxes | Tax Rate | |||
As reported | $ | 866 | 22.6 | % | |
Discrete tax benefit related to the second quarter 2023 | 20 | 0.6 | % | ||
As adjusted | $ | 886 | 23.2 | % |
A reconciliation of the effective tax rate for the three and twelve month periods ended
Three Months Ended | Twelve Months Ended | ||||||||||
Dollars in millions | Income Taxes | Tax Rate | Income Taxes | Tax Rate | |||||||
As reported | $ | 214 | 19.1 | % | $ | 808 | 21.0 | % | |||
Discrete tax benefit related to the fourth quarter 2022 | 32 | 2.9 | % | 32 | 0.8 | % | |||||
Discrete tax benefit related to the second quarter 2022 | — | — | % | 51 | 1.4 | % | |||||
As adjusted | $ | 246 | 22.0 | % | $ | 891 | 23.2 | % |
FREE CASH FLOW (UNAUDITED)
Three Months Ended | Twelve Months Ended | |||||||||||
Dollars in millions | 2023 | 2022 | 2023 | 2022 | ||||||||
Net cash provided by operating activities | $ | 1,039 | $ | 811 | $ | 3,539 | $ | 2,348 | ||||
Less: Additions to plant and equipment | (131) | (156) | (455) | (412) | ||||||||
Free cash flow | $ | 908 | $ | 655 | $ | 3,084 | $ | 1,936 | ||||
Net income | $ | 717 | $ | 907 | $ | 2,957 | $ | 3,034 | ||||
Net cash provided by operating activities to net income conversion rate | 145% | 89% | 120% | 77% | ||||||||
Free cash flow to net income conversion rate | 127% | 72% | 104% | 64% |
Three Months Ended | ||||||||
Dollars in millions | 2023 | 2023 | 2023 | |||||
Net cash provided by operating activities | $ | 728 | $ | 790 | $ | 982 | ||
Less: Additions to plant and equipment | (113) | (85) | (126) | |||||
Free cash flow | $ | 615 | $ | 705 | $ | 856 | ||
Net income | $ | 714 | $ | 754 | $ | 772 | ||
Net cash provided by operating activities to net income conversion rate | 102% | 105% | 127% | |||||
Free cash flow to net income conversion rate | 86% | 94% | 111% |
ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED)
Three Months Ended | ||
As reported | $ | 2.38 |
0.04 | ||
As adjusted | $ | 2.42 |
Three Months Ended | Twelve Months Ended | ||||||
As reported | $ | 2.95 | $ | 9.77 | |||
Net impact of gains from two divestitures in the fourth quarter 2022 | (0.61 | ) | (0.60 | ) | |||
As adjusted | $ | 2.34 | $ | 9.17 |
Media Contact | Investor Relations | |
Erin Linnihan | ||
Tel: 224.661.7451 | Tel: 224.661.7433 | |
mediarelations@itw.com | investorrelations@itw.com |
Source:
2024 GlobeNewswire, Inc., source