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 |
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 |
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 | % |
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 ($0.07) on GAAP earnings per share for the second quarter of 2023. |
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 ($0.15) on GAAP earnings per share for the first half 2023. |
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 | % |
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 | % |
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 | % |
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 | % |
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 | % |
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 | % |
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 |