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
Illinois Tool Works (NYSE:ITW)
Historical Stock Chart
Von Feb 2024 bis Mär 2024 Click Here for more Illinois Tool Works Charts.
Illinois Tool Works (NYSE:ITW)
Historical Stock Chart
Von Mär 2023 bis Mär 2024 Click Here for more Illinois Tool Works Charts.