- Revenue of
$4.0 billion , organic growth declined (0.6)% as expected - Operating income of
$1.13 billion , an increase of 16% includes$117 million benefit from a one-time LIFO accounting change (“item”); ex-item, operating income was$1.01 billion , an increase of 4% - Operating margin of 28.4%, an increase of 420 bps; 25.4% ex-item, an increase of 120 bps as enterprise initiatives contributed 140 bps
- GAAP EPS of
$2.73 , an increase of 17%; EPS of$2.44 ex-item, an increase of 5% - Reaffirming full-year organic growth guidance of 1 to 3% and raising full-year GAAP EPS guidance by
$0.30 to a range of$10.30 to$10.70 per share
“While the near-term demand environment across the majority of our segments was challenging as expected, the ITW team delivered a solid start to the year as operating income grew four percent, operating margin expanded 120 basis points to 25.4 percent, and EPS increased five percent to
First Quarter 2024 Results
First quarter revenue of
GAAP EPS increased 17 percent to
One-Time LIFO Inventory Accounting Change
As of
2024 Guidance
ITW is incorporating the impact of the one-time item into its full-year 2024 guidance and raising GAAP EPS 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 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, expected dividend payments, after-tax return on invested capital, effective tax rates, exchange rates, 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 2023 and subsequent reports filed with the
About
ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenue of
Investor Relations & Media Contact:
Tel: 224.661.7431
investorrelations@itw.com | mediarelations@itw.com
STATEMENT OF INCOME (UNAUDITED) | |||||||
Three Months Ended | |||||||
In millions except per share amounts | 2024 | 2023 | |||||
Operating Revenue | $ | 3,973 | $ | 4,019 | |||
Cost of revenue | 2,145 | 2,341 | |||||
Selling, administrative, and research and development expenses | 676 | 675 | |||||
Amortization and impairment of intangible assets | 25 | 31 | |||||
Operating Income | 1,127 | 972 | |||||
Interest expense | (71 | ) | (60 | ) | |||
Other income (expense) | 16 | 10 | |||||
Income Before Taxes | 1,072 | 922 | |||||
Income Taxes | 253 | 208 | |||||
Net Income | $ | 819 | $ | 714 | |||
Net Income Per Share: | |||||||
Basic | $ | 2.74 | $ | 2.34 | |||
Diluted | $ | 2.73 | $ | 2.33 | |||
Cash Dividends Per Share: | |||||||
Paid | $ | 1.40 | $ | 1.31 | |||
Declared | $ | 1.40 | $ | 1.31 | |||
Shares of Common Stock Outstanding During the Period: | |||||||
Average | 298.9 | 305.0 | |||||
Average assuming dilution | 300.0 | 306.1 |
STATEMENT OF FINANCIAL POSITION (UNAUDITED) | |||||||
In millions | |||||||
Assets | |||||||
Current Assets: | |||||||
Cash and equivalents | $ | 959 | $ | 1,065 | |||
Trade receivables | 3,238 | 3,123 | |||||
Inventories | 1,825 | 1,707 | |||||
Prepaid expenses and other current assets | 349 | 340 | |||||
Total current assets | 6,371 | 6,235 | |||||
Net plant and equipment | 1,973 | 1,976 | |||||
4,904 | 4,909 | ||||||
Intangible assets | 653 | 657 | |||||
Deferred income taxes | 462 | 479 | |||||
Other assets | 1,290 | 1,262 | |||||
$ | 15,653 | $ | 15,518 | ||||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | 2,066 | $ | 1,825 | |||
Accounts payable | 597 | 581 | |||||
Accrued expenses | 1,512 | 1,663 | |||||
Cash dividends payable | 418 | 419 | |||||
Income taxes payable | 251 | 187 | |||||
Total current liabilities | 4,844 | 4,675 | |||||
Noncurrent Liabilities: | |||||||
Long-term debt | 6,259 | 6,339 | |||||
Deferred income taxes | 380 | 326 | |||||
Noncurrent income taxes payable | 151 | 151 | |||||
Other liabilities | 998 | 1,014 | |||||
Total noncurrent liabilities | 7,788 | 7,830 | |||||
Stockholders' Equity: | |||||||
Common stock | 6 | 6 | |||||
Additional paid-in-capital | 1,618 | 1,588 | |||||
Retained earnings | 27,523 | 27,122 | |||||
Common stock held in treasury | (24,243 | ) | (23,870 | ) | |||
Accumulated other comprehensive income (loss) | (1,884 | ) | (1,834 | ) | |||
Noncontrolling interest | 1 | 1 | |||||
Total stockholders' equity | 3,021 | 3,013 | |||||
$ | 15,653 | $ | 15,518 |
SEGMENT DATA (UNAUDITED) | |||||||
Three Months Ended | |||||||
Dollars in millions | Total Revenue | Operating Income | Operating Margin | ||||
Automotive OEM | $ | 816 | $ | 162 | 19.8 | % | |
Food Equipment | 631 | 164 | 26.0 | % | |||
Test & Measurement and Electronics | 696 | 163 | 23.4 | % | |||
Welding | 476 | 156 | 32.7 | % | |||
Polymers & Fluids | 432 | 111 | 25.8 | % | |||
Construction Products | 488 | 143 | 29.4 | % | |||
Specialty Products | 440 | 130 | 29.7 | % | |||
Intersegment | (6 | ) | — | — | % | ||
Total Segments | 3,973 | 1,029 | 25.9 | % | |||
Unallocated | — | 98 | — | % | |||
$ | 3,973 | $ | 1,127 | 28.4 | % |
SEGMENT DATA (UNAUDITED) | ||||||||||||||||
Q1 2024 vs. Q1 2023 Favorable/(Unfavorable) | ||||||||||||||||
Operating Revenue | Automotive OEM | Food Equipment | Test & Measurement and Electronics | Welding | Polymers & Fluids | Construction Products | Specialty Products | Total ITW | ||||||||
Organic | 3.4 | % | (1.4 | )% | (1.3 | )% | (3.5 | )% | (0.9 | )% | (7.0 | )% | 5.5 | % | (0.6 | )% |
Acquisitions/ Divestitures | — | % | — | % | 0.8 | % | — | % | — | % | — | % | (2.2 | )% | (0.1 | )% |
Translation | (0.9 | )% | 0.7 | % | (0.4 | )% | 0.1 | % | (2.4 | )% | (0.3 | )% | 0.5 | % | (0.4 | )% |
Operating Revenue | 2.5 | % | (0.7 | )% | (0.9 | )% | (3.4 | )% | (3.3 | )% | (7.3 | )% | 3.8 | % | (1.1 | )% |
Q1 2024 vs. Q1 2023 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 | 60 bps | (30) bps | (40) bps | (50) bps | (20) bps | (130) bps | 110 bps | (20) bps |
Changes in Variable Margin & OH Costs | 300 bps | (50) bps | (20) bps | 120 bps | 140 bps | 320 bps | 200 bps | 430 bps |
Total Organic | 360 bps | (80) bps | (60) bps | 70 bps | 120 bps | 190 bps | 310 bps | 410 bps |
Acquisitions/ Divestitures | — | — | (50) bps | — | — | — | 50 bps | — |
Restructuring/Other | 10 bps | 10 bps | — | 10 bps | 20 bps | — | 50 bps | 10 bps |
Total Operating Margin Change | 370 bps | (70) bps | (110) bps | 80 bps | 140 bps | 190 bps | 410 bps | 420 bps |
Total Operating Margin % * | 19.8% | 26.0% | 23.4% | 32.7% | 25.8% | 29.4% | 29.7% | 28.4% |
* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets | 30 bps | 50 bps | 170 bps | — | 150 bps | 10 bps | 20 bps | 60 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 | |||||||
Dollars in millions | 2024 | 2023 | |||||
Numerator: | |||||||
Net income | $ | 819 | $ | 714 | |||
Cumulative effect of change in inventory accounting method, net of tax (1) | (88 | ) | — | ||||
Interest expense, net of tax (2) | 54 | 46 | |||||
Other (income) expense, net of tax (2) | (12 | ) | (8 | ) | |||
Operating income after taxes | $ | 773 | $ | 752 | |||
Denominator: | |||||||
Invested capital: | |||||||
Cash and equivalents | $ | 959 | $ | 1,143 | |||
Trade receivables | 3,238 | 3,201 | |||||
Inventories | 1,825 | 2,000 | |||||
Net assets held for sale | — | 9 | |||||
Net plant and equipment | 1,973 | 1,885 | |||||
5,557 | 5,622 | ||||||
Accounts payable and accrued expenses | (2,109 | ) | (2,103 | ) | |||
Debt | (8,325 | ) | (8,380 | ) | |||
Other, net | (97 | ) | (276 | ) | |||
Total net assets (stockholders' equity) | 3,021 | 3,101 | |||||
Cash and equivalents | (959 | ) | (1,143 | ) | |||
Debt | 8,325 | 8,380 | |||||
Total invested capital | $ | 10,387 | $ | 10,338 | |||
Average invested capital (3) | $ | 10,249 | $ | 10,241 | |||
Net income to average invested capital (4) | 32.0 | % | 27.9 | % | |||
After-tax return on average invested capital (4) | 30.1 | % | 29.4 | % | |||
(1) Represents the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain
(2) Effective tax rate used for interest expense and other (income) expense for the three months ended
(3) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of the periods presented.
(4) Returns for the three months ended
AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED) | |||
Twelve Months Ended | |||
Dollars in millions | |||
Numerator: | |||
Net income | $ | 2,957 | |
Discrete tax benefit related to the second quarter 2023 | (20 | ) | |
Interest expense, net of tax (1) | 204 | ||
Other (income) expense, net of tax (1) | (38 | ) | |
Operating income after taxes | $ | 3,103 | |
Denominator: | |||
Invested capital: | |||
Cash and equivalents | $ | 1,065 | |
Trade receivables | 3,123 | ||
Inventories | 1,707 | ||
Net plant and equipment | 1,976 | ||
5,566 | |||
Accounts payable and accrued expenses | (2,244 | ) | |
Debt | (8,164 | ) | |
Other, net | (16 | ) | |
Total net assets (stockholders' equity) | 3,013 | ||
Cash and equivalents | (1,065 | ) | |
Debt | 8,164 | ||
Total invested capital | $ | 10,112 | |
Average invested capital (2) | $ | 10,214 | |
Net income to average invested capital | 29.0 | % | |
After-tax return on average invested capital | 30.4 | % | |
(1) Effective tax rate used for interest expense and other (income) expense for the year 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 the period presented.
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 | % |
FREE CASH FLOW (UNAUDITED) | |||||||
Three Months Ended | |||||||
Dollars in millions | 2024 | 2023 | |||||
Net cash provided by operating activities | $ | 589 | $ | 728 | |||
Less: Additions to plant and equipment | (95 | ) | (113 | ) | |||
Free cash flow | $ | 494 | $ | 615 | |||
Net income | $ | 819 | $ | 714 | |||
Net cash provided by operating activities to net income conversion rate | 72 | % | 102 | % | |||
Free cash flow to net income conversion rate | 60 | % | (1) | 86 | % | ||
(1) Excluding the impact of the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain
ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED) | |||
Three Months Ended | |||
As reported | $ | 2.73 | |
Cumulative effect of change in inventory accounting method, net of tax (1) | (0.29 | ) | |
As adjusted | $ | 2.44 | |
(1) Represents the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain
Source:
2024 GlobeNewswire, Inc., source