Illinois Tool Works Inc. (NYSE: ITW) today reported its second
quarter 2022 results.
“In the current environment, our teams around
the world continue to do an exceptional job of demonstrating the
power and resilience of the ITW Business Model as evidenced by the
more than 10 percent organic growth and 23 percent plus operating
margin that they delivered in the second quarter,” said E. Scott
Santi, Chairman and Chief Executive Officer. “Across the company we
continue to leverage our 80/20 front-to-back driven operational
capabilities to support our customers and execute our “Win the
Recovery” strategy to accelerate profitable market penetration and
organic growth across our portfolio. Looking ahead at the remainder
of 2022, based on our first half results and current levels of
demand, we are maintaining our current guidance for full-year 2022,
including organic growth of 8.5 percent and record GAAP EPS of
$9.20 at their respective mid-points. While the near-term
environment has its challenges, we remain focused on delivering
differentiated service to our customers, top-tier financial
performance for our shareholders, and continued progress on our
path to ITW’s full potential performance.”
Second Quarter 2022
ResultsSecond quarter revenue of $4.0 billion increased
nine percent with organic revenue growth of 10 percent. The
acquisition of MTS contributed three percent to revenue.
Unfavorable foreign currency translation reduced revenue by four
percent. Six of seven segments delivered positive organic growth in
the quarter, led by Food Equipment up 25 percent, Welding up 22
percent, Construction Products up 15 percent, Polymers & Fluids
up 10 percent, Automotive OEM up six percent, and Test &
Measurement and
Electronics up one percent due to a difficult
year-over-year comparison. Specialty Products organic revenue was
down less than two percent. On a geographic basis, organic growth
was 14 percent in North America, 6 percent in Europe, and 3 percent
in Asia Pacific.
GAAP EPS was $2.37 and included $(0.05) of
higher restructuring expenses related to 80/20 front-to-back
projects, $(0.10) of unfavorable foreign currency translation, and
a $0.16 one-time tax benefit related to the routine resolution of a
U.S. tax audit. As a reminder, GAAP EPS of $2.45 in the second
quarter of 2021 included a $0.35 one-time tax benefit. Operating
margin was 24.1 percent excluding margin dilution impacts of (50)
basis points each from the MTS acquisition and higher restructuring
expenses. Enterprise initiatives contributed 90 basis points.
Price/cost margin dilution impact moderated in the second quarter
to (160) basis points compared to (250) basis points in the first
quarter of 2022. Operating cash flow was $501 million, and free
cash flow was $420 million with a conversion rate of 57 percent.
The reported tax rate for the second quarter was 18.3 percent and
excluding the one-time tax benefit, the effective tax rate was 23.9
percent.
2022 GuidanceITW is maintaining
its full-year GAAP EPS guidance of $9.00 to $9.40 per share. Based
on current levels of demand, the company is projecting full-year
revenue growth in the range of six to nine percent, with organic
growth of seven to ten percent. At current foreign exchange rates,
currency translation is projected to reduce revenue by four percent
and EPS by approximately $(0.35). The acquisition of MTS is
expected to add three percent to revenue. Operating margin is
forecasted to be in the range of 24 to 25 percent, with enterprise
initiatives contributing approximately 100 basis points and
price/cost margin dilution impact of (100) basis points. Price is
projected to exceed input cost inflation on a dollar-for-dollar
basis. The expected free cash flow conversion rate is unchanged at
85 to 95 percent of net income, and the company is on pace to
repurchase $1.5 billion of its own shares. The projected effective
tax rate is 22 to 23 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
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 the duration and potential effects of the COVID-19
pandemic and global supply chain challenges, related government
actions and the company’s strategy in response thereto on the
company’s business, expected impact of inflation including raw
material inflation, 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, diluted income per share, restructuring expenses
and related benefits, expected dividend payments, expected
repatriation of overseas cash, 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, potential acquisitions and divestitures and related
impact on financial results, including statements with respect to
the impact of the 2021 acquisition of the MTS Test & Simulation
business, and the company’s 2022 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 contained in ITW's
Form 10-K for 2021 and subsequent reports filed with the SEC.
About Illinois Tool WorksITW
(NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing
leader with revenues totaling $14.5 billion in 2021. 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 45,000 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 |
|
Six Months Ended |
|
June 30, |
|
June 30, |
In millions except per share amounts |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Operating Revenue |
$ |
4,011 |
|
|
$ |
3,676 |
|
|
$ |
7,950 |
|
|
$ |
7,220 |
|
Cost of revenue |
|
2,392 |
|
|
|
2,163 |
|
|
|
4,749 |
|
|
|
4,202 |
|
Selling, administrative, and research and development expenses |
|
659 |
|
|
|
588 |
|
|
|
1,311 |
|
|
|
1,154 |
|
Amortization and impairment of intangible assets |
|
34 |
|
|
|
32 |
|
|
|
69 |
|
|
|
66 |
|
Operating Income |
|
926 |
|
|
|
893 |
|
|
|
1,821 |
|
|
|
1,798 |
|
Interest expense |
|
(47 |
) |
|
|
(52 |
) |
|
|
(95 |
) |
|
|
(104 |
) |
Other income (expense) |
|
24 |
|
|
|
22 |
|
|
|
38 |
|
|
|
34 |
|
Income Before Taxes |
|
903 |
|
|
|
863 |
|
|
|
1,764 |
|
|
|
1,728 |
|
Income Taxes |
|
165 |
|
|
|
88 |
|
|
|
364 |
|
|
|
282 |
|
Net Income |
$ |
738 |
|
|
$ |
775 |
|
|
$ |
1,400 |
|
|
$ |
1,446 |
|
|
|
|
|
|
|
|
|
Net Income Per Share: |
|
|
|
|
|
|
|
Basic |
$ |
2.37 |
|
|
$ |
2.46 |
|
|
$ |
4.49 |
|
|
$ |
4.58 |
|
Diluted |
$ |
2.37 |
|
|
$ |
2.45 |
|
|
$ |
4.48 |
|
|
$ |
4.56 |
|
|
|
|
|
|
|
|
|
Cash Dividends Per Share: |
|
|
|
|
|
|
|
Paid |
$ |
1.22 |
|
|
$ |
1.14 |
|
|
$ |
2.44 |
|
|
$ |
2.28 |
|
Declared |
$ |
1.22 |
|
|
$ |
1.14 |
|
|
$ |
2.44 |
|
|
$ |
2.28 |
|
|
|
|
|
|
|
|
|
Shares of Common Stock Outstanding During the Period: |
|
|
|
|
|
|
|
Average |
|
310.6 |
|
|
|
315.6 |
|
|
|
311.5 |
|
|
|
316.1 |
|
Average assuming dilution |
|
311.5 |
|
|
|
316.9 |
|
|
|
312.6 |
|
|
|
317.4 |
|
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSTATEMENT OF FINANCIAL POSITION
(UNAUDITED)
In millions |
June 30, 2022 |
|
December 31, 2021 |
Assets |
|
|
|
Current Assets: |
|
|
|
Cash and equivalents |
$ |
879 |
|
|
$ |
1,527 |
|
Trade receivables |
|
3,109 |
|
|
|
2,840 |
|
Inventories |
|
1,975 |
|
|
|
1,694 |
|
Prepaid expenses and other current assets |
|
305 |
|
|
|
313 |
|
Assets held for sale |
|
103 |
|
|
|
— |
|
Total current assets |
|
6,371 |
|
|
|
6,374 |
|
|
|
|
|
Net plant and equipment |
|
1,736 |
|
|
|
1,809 |
|
Goodwill |
|
4,870 |
|
|
|
4,965 |
|
Intangible assets |
|
832 |
|
|
|
972 |
|
Deferred income taxes |
|
498 |
|
|
|
552 |
|
Other assets |
|
1,359 |
|
|
|
1,405 |
|
|
$ |
15,666 |
|
|
$ |
16,077 |
|
|
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
Current Liabilities: |
|
|
|
Short-term debt |
$ |
1,525 |
|
|
$ |
778 |
|
Accounts payable |
|
679 |
|
|
|
585 |
|
Accrued expenses |
|
1,562 |
|
|
|
1,648 |
|
Cash dividends payable |
|
378 |
|
|
|
382 |
|
Income taxes payable |
|
120 |
|
|
|
77 |
|
Liabilities held for sale |
|
30 |
|
|
|
— |
|
Total current liabilities |
|
4,294 |
|
|
|
3,470 |
|
|
|
|
|
Noncurrent Liabilities: |
|
|
|
Long-term debt |
|
6,115 |
|
|
|
6,909 |
|
Deferred income taxes |
|
632 |
|
|
|
654 |
|
Noncurrent income taxes payable |
|
274 |
|
|
|
365 |
|
Other liabilities |
|
972 |
|
|
|
1,053 |
|
Total noncurrent liabilities |
|
7,993 |
|
|
|
8,981 |
|
|
|
|
|
Stockholders’ Equity: |
|
|
|
Common stock |
|
6 |
|
|
|
6 |
|
Additional paid-in-capital |
|
1,464 |
|
|
|
1,432 |
|
Retained earnings |
|
24,967 |
|
|
|
24,325 |
|
Common stock held in treasury |
|
(21,382 |
) |
|
|
(20,636 |
) |
Accumulated other comprehensive income (loss) |
|
(1,677 |
) |
|
|
(1,502 |
) |
Noncontrolling interest |
|
1 |
|
|
|
1 |
|
Total stockholders’ equity |
|
3,379 |
|
|
|
3,626 |
|
|
$ |
15,666 |
|
|
$ |
16,077 |
|
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSEGMENT DATA (UNAUDITED)
Three Months Ended June 30, 2022 |
Dollars in millions |
Total Revenue |
Operating Income |
Operating Margin |
Automotive OEM |
$ |
711 |
|
$ |
101 |
|
14.3 |
% |
Food Equipment |
|
614 |
|
|
152 |
|
24.7 |
% |
Test & Measurement and Electronics |
|
696 |
|
|
157 |
|
22.5 |
% |
Welding |
|
486 |
|
|
142 |
|
29.3 |
% |
Polymers & Fluids |
|
496 |
|
|
125 |
|
25.1 |
% |
Construction Products |
|
565 |
|
|
156 |
|
27.6 |
% |
Specialty Products |
|
447 |
|
|
121 |
|
26.9 |
% |
Intersegment |
|
(4 |
) |
|
— |
|
— |
% |
Total Segments |
|
4,011 |
|
|
954 |
|
23.8 |
% |
Unallocated |
|
— |
|
|
(28 |
) |
— |
% |
Total Company |
$ |
4,011 |
|
$ |
926 |
|
23.1 |
% |
Six Months Ended June 30, 2022 |
Dollars in millions |
Total Revenue |
Operating Income |
Operating Margin |
Automotive OEM |
$ |
1,471 |
|
$ |
239 |
|
16.3 |
% |
Food Equipment |
|
1,180 |
|
|
278 |
|
23.6 |
% |
Test & Measurement and Electronics |
|
1,381 |
|
|
306 |
|
22.2 |
% |
Welding |
|
936 |
|
|
281 |
|
30.0 |
% |
Polymers & Fluids |
|
977 |
|
|
243 |
|
24.8 |
% |
Construction Products |
|
1,116 |
|
|
292 |
|
26.2 |
% |
Specialty Products |
|
899 |
|
|
241 |
|
26.8 |
% |
Intersegment |
|
(10 |
) |
|
— |
|
— |
% |
Total Segments |
|
7,950 |
|
|
1,880 |
|
23.6 |
% |
Unallocated |
|
— |
|
|
(59 |
) |
— |
% |
Total Company |
$ |
7,950 |
|
$ |
1,821 |
|
22.9 |
% |
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSEGMENT DATA (UNAUDITED)
Q2 2022 vs. Q2 2021 Favorable/(Unfavorable) |
Operating Revenue |
AutomotiveOEM |
FoodEquipment |
Test &MeasurementandElectronics |
Welding |
Polymers &Fluids |
ConstructionProducts |
SpecialtyProducts |
Total ITW |
Organic |
6.1 |
% |
25.0 |
% |
0.9 |
% |
22.1 |
% |
10.2 |
% |
15.1 |
% |
(1.7 |
)% |
10.4 |
% |
Acquisitions/Divestitures |
— |
% |
— |
% |
17.8 |
% |
— |
% |
— |
% |
— |
% |
— |
% |
2.9 |
% |
Translation |
(5.5 |
)% |
(5.4 |
)% |
(3.8 |
)% |
(1.3 |
)% |
(3.5 |
)% |
(6.0 |
)% |
(3.3 |
)% |
(4.2 |
)% |
Operating Revenue |
0.6 |
% |
19.6 |
% |
14.9 |
% |
20.8 |
% |
6.7 |
% |
9.1 |
% |
(5.0 |
)% |
9.1 |
% |
Q2 2022 vs. Q2 2021 Favorable/(Unfavorable) |
Change in Operating Margin |
Automotive OEM |
Food Equipment |
Test &Measurementand Electronics |
Welding |
Polymers & Fluids |
Construction Products |
Specialty Products |
Total ITW |
Operating Leverage |
120 bps |
480 bps |
20 bps |
290 bps |
170 bps |
220 bps |
(20) bps |
200 bps |
Changes in Variable Margin & OH Costs |
(300) bps |
(200) bps |
(260) bps |
(220) bps |
(400) bps |
(220) bps |
— |
|
(220) bps |
Total Organic |
(180) bps |
280 bps |
(240) bps |
70 bps |
(230) bps |
— |
|
(20) bps |
(20) bps |
Acquisitions/ Divestitures |
— |
|
— |
|
(330) bps |
— |
|
— |
|
— |
|
— |
|
(50) bps |
Restructuring/Other |
(270) bps |
(10) bps |
10 bps |
10 bps |
10 bps |
— |
|
(10) bps |
(50) bps |
Total Operating Margin Change |
(450) bps |
270 bps |
(560) bps |
80 bps |
(220) bps |
— |
|
(30) bps |
(120) bps |
|
|
|
|
|
|
|
|
|
Total Operating Margin % * |
14.3 |
% |
24.7 |
% |
22.5 |
% |
29.3 |
% |
25.1 |
% |
27.6 |
% |
26.9 |
% |
23.1 |
% |
|
|
|
|
|
|
|
|
|
*Includes unfavorable operating margin impact of amortization
expense from acquisition-related intangible assets |
40 bps |
50 bps |
200 bps |
10 bps |
210 bps |
20 bps |
60 bps |
90 bps ** |
** Amortization expense from acquisition-related intangible assets
had an unfavorable impact of ($0.08) on GAAP earnings per share for
the second quarter of 2022. |
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESSEGMENT DATA (UNAUDITED)
1H 2022 vs. 1H 2021 Favorable/(Unfavorable) |
Operating Revenue |
AutomotiveOEM |
FoodEquipment |
Test &MeasurementandElectronics |
Welding |
Polymers &Fluids |
ConstructionProducts |
SpecialtyProducts |
Total ITW |
Organic |
2.5 |
% |
26.5 |
% |
4.3 |
% |
17.5 |
% |
11.5 |
% |
18.1 |
% |
(0.6 |
)% |
10.5 |
% |
Acquisitions/Divestitures |
— |
% |
— |
% |
17.9 |
% |
— |
% |
— |
% |
— |
% |
— |
% |
2.9 |
% |
Translation |
(3.8 |
)% |
(4.2 |
)% |
(3.0 |
)% |
(1.0 |
)% |
(3.0 |
)% |
(5.0 |
)% |
(2.5 |
)% |
(3.3 |
)% |
Operating Revenue |
(1.3 |
)% |
22.3 |
% |
19.2 |
% |
16.5 |
% |
8.5 |
% |
13.1 |
% |
(3.1 |
)% |
10.1 |
% |
1H 2022 vs. 1H 2021 Favorable/(Unfavorable) |
Change in Operating Margin |
Automotive OEM |
Food Equipment |
Test &MeasurementandElectronics |
Welding |
Polymers & Fluids |
Construction Products |
Specialty Products |
Total ITW |
Operating Leverage |
40 bps |
520 bps |
100 bps |
230 bps |
200 bps |
260 bps |
(10) bps |
200 bps |
Changes in Variable Margin & OH Costs |
(390) bps |
(310) bps |
(340) bps |
(170) bps |
(380) bps |
(410) bps |
(60) bps |
(300) bps |
Total Organic |
(350) bps |
210 bps |
(240) bps |
60 bps |
(180) bps |
(150) bps |
(70) bps |
(100) bps |
Acquisitions/Divestitures |
— |
|
— |
|
(370) bps |
— |
|
— |
|
— |
|
— |
|
(60) bps |
Restructuring/Other |
(180) bps |
(10) bps |
10 bps |
— |
|
— |
|
10 bps |
10 bps |
(40) bps |
Total Operating Margin Change |
(530) bps |
200 bps |
(600) bps |
60 bps |
(180) bps |
(140) bps |
(60) bps |
(200) bps |
|
|
|
|
|
|
|
|
|
Total Operating Margin % * |
16.3 |
% |
23.6 |
% |
22.2 |
% |
30.0 |
% |
24.8 |
% |
26.2 |
% |
26.8 |
% |
22.9 |
% |
|
|
|
|
|
|
|
|
|
*Includes unfavorable operating margin impact of amortization
expense from acquisition-related intangible assets |
30 bps |
50 bps |
200 bps |
10 bps |
220 bps |
10 bps |
60 bps |
90 bps ** |
** Amortization expense from acquisition-related intangible assets
had an unfavorable impact of ($0.17) on GAAP earnings per share for
the first half of 2022. |
ILLINOIS TOOL WORKS INC. and
SUBSIDIARIESGAAP 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 |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Numerator: |
|
|
|
|
|
|
|
Net Income |
$ |
738 |
|
|
$ |
775 |
|
|
$ |
1,400 |
|
|
$ |
1,446 |
|
Discrete tax benefit related to the second quarter 2022 |
|
(51 |
) |
|
|
— |
|
|
|
(51 |
) |
|
|
— |
|
Discrete tax benefit related to the second quarter 2021 |
|
— |
|
|
|
(112 |
) |
|
|
— |
|
|
|
(112 |
) |
Interest expense, net of tax (1) |
|
36 |
|
|
|
41 |
|
|
|
73 |
|
|
|
81 |
|
Other (income) expense, net of tax (1) |
|
(18 |
) |
|
|
(17 |
) |
|
|
(29 |
) |
|
|
(26 |
) |
Operating income after taxes |
$ |
705 |
|
|
$ |
687 |
|
|
$ |
1,393 |
|
|
$ |
1,389 |
|
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
|
Invested capital: |
|
|
|
|
|
|
|
Cash and equivalents |
$ |
879 |
|
|
$ |
2,058 |
|
|
$ |
879 |
|
|
$ |
2,058 |
|
Trade receivables |
|
3,109 |
|
|
|
2,786 |
|
|
|
3,109 |
|
|
|
2,786 |
|
Inventories |
|
1,975 |
|
|
|
1,400 |
|
|
|
1,975 |
|
|
|
1,400 |
|
Net assets held for sale |
|
73 |
|
|
|
— |
|
|
|
73 |
|
|
|
— |
|
Net plant and equipment |
|
1,736 |
|
|
|
1,767 |
|
|
|
1,736 |
|
|
|
1,767 |
|
Goodwill and intangible assets |
|
5,702 |
|
|
|
5,374 |
|
|
|
5,702 |
|
|
|
5,374 |
|
Accounts payable and accrued expenses |
|
(2,241 |
) |
|
|
(1,933 |
) |
|
|
(2,241 |
) |
|
|
(1,933 |
) |
Debt |
|
(7,640 |
) |
|
|
(7,648 |
) |
|
|
(7,640 |
) |
|
|
(7,648 |
) |
Other, net |
|
(214 |
) |
|
|
(283 |
) |
|
|
(214 |
) |
|
|
(283 |
) |
Total net assets (stockholders' equity) |
|
3,379 |
|
|
|
3,521 |
|
|
|
3,379 |
|
|
|
3,521 |
|
Cash and equivalents |
|
(879 |
) |
|
|
(2,058 |
) |
|
|
(879 |
) |
|
|
(2,058 |
) |
Debt |
|
7,640 |
|
|
|
7,648 |
|
|
|
7,640 |
|
|
|
7,648 |
|
Total invested capital |
$ |
10,140 |
|
|
$ |
9,111 |
|
|
$ |
10,140 |
|
|
$ |
9,111 |
|
|
|
|
|
|
|
|
|
Average invested capital (2) |
$ |
10,143 |
|
|
$ |
8,926 |
|
|
$ |
10,024 |
|
|
$ |
8,864 |
|
|
|
|
|
|
|
|
|
Net income to average invested capital (3) |
|
29.1 |
% |
|
|
34.8 |
% |
|
|
27.9 |
% |
|
|
32.6 |
% |
After-tax return on average invested capital (3) |
|
27.8 |
% |
|
|
30.8 |
% |
|
|
27.8 |
% |
|
|
31.3 |
% |
(1) Effective tax rate used for interest expense
and other (income) expense for the three months ended June 30, 2022
and 2021 was 23.9% and 23.0%, respectively. Effective tax rate used
for interest expense and other (income) expense for the six months
ended June 30, 2022 and 2021 was 23.5% and 22.7%, 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 June 30,
2022 and 2021 were converted to an annual rate by multiplying the
calculated return by 4. Returns for the six months ended June 30,
2022 and 2021 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, 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:
|
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 |
% |
A reconciliation of the tax rate for the three and
six months ended June 30, 2021, excluding the second quarter 2021
discrete tax benefit of $112 million related to a change in the
U.K. income tax rate, is as follows:
|
Three Months Ended |
|
Six Months Ended |
|
June 30, 2021 |
|
June 30, 2021 |
Dollars in millions |
Income Taxes |
|
Tax Rate |
|
Income Taxes |
|
Tax Rate |
As reported |
$ |
88 |
|
10.1 |
% |
|
$ |
282 |
|
16.3 |
% |
Discrete tax benefit related to the second quarter 2021 |
|
112 |
|
12.9 |
% |
|
|
112 |
|
6.4 |
% |
As adjusted |
$ |
200 |
|
23.0 |
% |
|
$ |
394 |
|
22.7 |
% |
AFTER-TAX RETURN ON AVERAGE INVESTED
CAPITAL (UNAUDITED)
|
Twelve Months Ended |
Dollars in millions |
December 31, 2021 |
Numerator: |
|
Net income |
$ |
2,694 |
|
Discrete tax benefit related to the third quarter 2021 |
|
(21 |
) |
Discrete tax benefit related to the second quarter 2021 |
|
(112 |
) |
Interest expense, net of tax (1) |
|
157 |
|
Other (income) expense, net of tax (1) |
|
(40 |
) |
Operating income after taxes |
$ |
2,678 |
|
|
|
Denominator: |
|
Invested capital: |
|
Cash and equivalents |
$ |
1,527 |
|
Trade receivables |
|
2,840 |
|
Inventories |
|
1,694 |
|
Net plant and equipment |
|
1,809 |
|
Goodwill and intangible assets |
|
5,937 |
|
Accounts payable and accrued expenses |
|
(2,233 |
) |
Debt |
|
(7,687 |
) |
Other, net |
|
(261 |
) |
Total net assets (stockholders' equity) |
|
3,626 |
|
Cash and equivalents |
|
(1,527 |
) |
Debt |
|
7,687 |
|
Total invested capital |
$ |
9,786 |
|
|
|
Average invested capital (2) |
$ |
9,087 |
|
|
|
Net income to average invested capital |
|
29.6 |
% |
After-tax return on average invested capital |
|
29.5 |
% |
(1) Effective tax rate used for interest
expense and other (income) expense for the year ended
December 31, 2021 was 23.0%.
(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 2021 effective tax rate
excluding the third quarter 2021 discrete tax benefit of $21
million related to the utilization of capital losses and the second
quarter 2021 discrete tax benefit of $112 million related to a
change in the U.K. income tax rate, is as follows:
|
Twelve Months Ended |
|
December 31, 2021 |
Dollars in millions |
Income Taxes |
|
Tax Rate |
As reported |
$ |
632 |
|
19.0 |
% |
Discrete tax benefit related to the third quarter 2021 |
|
21 |
|
0.6 |
% |
Discrete tax benefit related to the second quarter 2021 |
|
112 |
|
3.4 |
% |
As adjusted |
$ |
765 |
|
23.0 |
% |
FREE CASH FLOW (UNAUDITED)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
Dollars in millions |
|
2022 |
|
|
|
2021 |
|
|
|
2022 |
|
|
|
2021 |
|
Net cash provided by operating activities |
$ |
501 |
|
|
$ |
555 |
|
|
$ |
824 |
|
|
$ |
1,164 |
|
Less: Additions to plant and equipment |
|
(81 |
) |
|
|
(78 |
) |
|
|
(155 |
) |
|
|
(146 |
) |
Free cash flow |
$ |
420 |
|
|
$ |
477 |
|
|
$ |
669 |
|
|
$ |
1,018 |
|
|
|
|
|
|
|
|
|
Net Income |
$ |
738 |
|
|
$ |
775 |
|
|
$ |
1,400 |
|
|
$ |
1,446 |
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities to net income conversion
rate |
|
68 |
% |
|
|
72 |
% |
|
|
59 |
% |
|
|
80 |
% |
Free cash flow to net income conversion rate |
|
57 |
% |
|
|
62 |
% |
|
|
48 |
% |
|
|
70 |
% |
Media
Contact |
Investor Relations |
Tel: 224.661.7451 |
Karen Fletcher |
mediarelations@itw.com |
Tel: 224.661.7433 |
|
investorrelations@itw.com |
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