Whether it's through stocks, bonds, ETFs, or other types of securities, all investors love seeing their portfolios score big returns. But for income investors, generating consistent cash flow from each of your liquid investments is your primary focus.While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is the distribution of a company's earnings paid out to shareholders; it's often viewed by its dividend yield, a metric th ...

A downtrend has been apparent in Illinois Tool Works (ITW) lately with too much selling pressure. The stock has declined 5.7% over the past four weeks. However, given the fact that it is now in oversold territory and Wall Street analysts are majorly in agreement about the company's ability to report better earnings than they predicted earlier, the stock could be due for a turnaround.Guide to Identifying Oversold StocksWe use Relative Strength Index (RSI), one of the most commonly used technical indicators, ...

GLENVIEW, Ill., April 11, 2024 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE:ITW) will issue its first quarter 2024 results on Tuesday, April 30, 2024 at 7:00 a.m. CDT. Following the release, ITW will hold its first quarter 2024 earnings webcast at 9:00 a.m. CDT. To access the webcast for the event, please click on the following link:ITW Q1 2024 Earnings Webcast If you are a participant on the conference call, please dial 1-888-660-6652 (domestic) or 1-646-960-0554 (international) 10 minutes prior to t ...

GLENVIEW, Ill., April 11, 2024 (GLOBE NEWSWIRE) -- Illinois Tool Works Inc. (NYSE: ITW) will issue its first quarter 2024 results on Tuesday, April 30, 2024 at 7:00 a.m. CDT. Following the release, ITW will hold its first quarter 2024 earnings webcast at 9:00 a.m. CDT. To access the webcast for the event, please click on the following link:ITW Q1 2024 Earnings Webcast If you are a participant on the conference call, please dial 1-888-660-6652 (domestic) or 1-646-960-0554 (international) 10 minutes prior to ...

Illinois Tool Works Inc. (ITW) has been benefiting from strength in the Automotive OEM (Original Equipment Manufacturer) segment and enterprise initiatives despite continued softness in the semiconductor end market and foreign currency woes.What’s Aiding ITW?Business Strength: Illinois Tool has been benefiting from stable underlying demand and improving supply chains. Strong market share and penetration gains in the rapidly growing EV market are boosting revenues in the Automotive OEM segment. The Food Equi ...

Part I [Business](index=3&type=section&id=Item%201.%20Business) ITW is a global diversified industrial manufacturer operating through seven segments, driven by its unique Business Model and enterprise strategy - ITW is a global manufacturer with **84 divisions** in **51 countries** and approximately **45,000 employees** as of December 31, 2023[12](index=12&type=chunk)[44](index=44&type=chunk) - The company operates through **seven distinct segments**: Automotive OEM, Food Equipment, Test & Measurement and Electronics, Welding, Polymers & Fluids, Construction Products, and Specialty Products[13](index=13&type=chunk)[14](index=14&type=chunk) - The ITW Business Model, a core competitive advantage, is built on **80/20 Front-to-Back process**, **Customer-back Innovation**, and a **Decentralized, Entrepreneurial Culture**[17](index=17&type=chunk)[19](index=19&type=chunk) - The 2024-2030 enterprise strategy aims to elevate **organic growth** as a core strength, driven by Customer-back Innovation (CBI)[23](index=23&type=chunk)[24](index=24&type=chunk) - ITW holds approximately **19,600 granted and pending patents** globally, forming a significant intellectual property portfolio[17](index=17&type=chunk)[38](index=38&type=chunk) [Risk Factors](index=12&type=section&id=Item%201A.%20Risk%20Factors) The company faces economic, operational, strategic, and regulatory risks that could impact its business and financial results - Economic risks include global economic conditions, rising interest rates, and currency fluctuations, as over **50% of net sales** are from outside the U.S[57](index=57&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk) - Business and operational risks involve enterprise strategy failure, cybersecurity threats, and raw material price increases or supply shortages[62](index=62&type=chunk)[67](index=67&type=chunk)[69](index=69&type=chunk) - Strategic transaction risks include potential negative impacts from acquisitions like MTS Test & Simulation and retained liabilities from divestitures[71](index=71&type=chunk)[72](index=72&type=chunk) - Tax, legal, and regulatory risks stem from unfavorable changes in tax laws, adverse legal outcomes, and environmental regulations or climate change[73](index=73&type=chunk)[74](index=74&type=chunk)[75](index=75&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None [Cybersecurity](index=17&type=section&id=Item%201C.%20Cybersecurity) ITW manages cybersecurity risk through a global enterprise program based on the NIST Cybersecurity Framework with Board oversight - The company's cybersecurity program is based on the **National Institute of Standards and Technology's Cybersecurity Framework (CSF)** and includes annual training, vulnerability management, and response planning[83](index=83&type=chunk)[84](index=84&type=chunk) - Oversight is provided by the **Board of Directors**, a Cybersecurity Governance Committee of senior executives, and a central Cyber Incident Response Team led by the Chief Information Security Officer[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk) - The company has not experienced any **material cybersecurity incidents** during 2023, 2022, or 2021[84](index=84&type=chunk) [Properties](index=19&type=section&id=Item%202.%20Properties) ITW operates approximately **410 plants and office facilities** globally, with production capacity generally exceeding current operating levels - The company operates approximately **410 plants and office facilities** globally, with principal foreign operations in China, Germany, France, and the United Kingdom[90](index=90&type=chunk) - Properties are considered to be in good operating condition, and production capacity currently exceeds operating levels[91](index=91&type=chunk) [Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) The company reports no material legal proceedings - None. The disclosure threshold for environmental legal proceedings involving a governmental authority is **$1 million**[92](index=92&type=chunk) [Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no mine safety disclosures - None Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) ITW's common stock trades on the NYSE, with a new **$5.0 billion** stock repurchase program announced in August 2023 - The company's common stock is listed on the New York Stock Exchange (NYSE) with the trading symbol **"ITW"**[96](index=96&type=chunk) - A new **$5.0 billion** stock repurchase program was announced on August 4, 2023, with approximately **$5.0 billion** remaining authorized as of December 31, 2023[100](index=100&type=chunk) Share Repurchases - Q4 2023 | Period | Total Number of Shares Purchased (millions) | Average Price Paid Per Share | Maximum Value of Shares That May Yet Be Purchased Under Programs ($ millions) | | :--- | :--- | :--- | :--- | | October 2023 | 0.6 | $229.18 | $5,227 | | November 2023 | 0.6 | $235.76 | $5,096 | | December 2023 | 0.4 | $253.48 | $4,990 | | **Total** | **1.6** | | | [Reserved](index=21&type=section&id=Item%206.%20%5BReserved%5D) This item is reserved and contains no information [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2023, ITW achieved **$16.11 billion** operating revenue and **$4.04 billion** operating income, with strong liquidity and capital allocation [Consolidated Results of Operations](index=24&type=section&id=CONSOLIDATED%20RESULTS%20OF%20OPERATIONS) In 2023, ITW's operating revenue increased **1.1%** to **$16.1 billion**, with operating income up **6.6%** to **$4.0 billion** Consolidated Results: 2023 vs 2022 | Metric | 2023 | 2022 | % Change | Organic Change | Divestiture Impact | Foreign Currency Impact | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | $16,107M | $15,932M | 1.1% | 2.0% | (0.8)% | (0.1)% | | Operating Income | $4,040M | $3,790M | 6.6% | 7.6% | (0.5)% | (0.3)% | | Operating Margin | 25.1% | 23.8% | +130 bps | +130 bps | +10 bps | — | - In 2023, diluted EPS was **$9.74**, with **6.4 million shares** repurchased for **$1.5 billion** and **$1.6 billion** paid in dividends[137](index=137&type=chunk) Consolidated Results: 2022 vs 2021 | Metric | 2022 | 2021 | % Change | Organic Change | Acquisition Impact | Foreign Currency Impact | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | $15,932M | $14,455M | 10.2% | 12.1% | 2.4% | (4.3)% | | Operating Income | $3,790M | $3,477M | 9.0% | 14.3% | (0.1)% | (4.5)% | | Operating Margin | 23.8% | 24.1% | (30) bps | +40 bps | (60) bps | — | - In 2022, diluted EPS was **$9.77**, including a **$0.60 per share** favorable impact from divestiture gains, and **8.3 million shares** were repurchased for **$1.75 billion**[138](index=138&type=chunk) [Results of Operations by Segment](index=28&type=section&id=RESULTS%20OF%20OPERATIONS%20BY%20SEGMENT) In 2023, Automotive OEM and Food Equipment segments showed strong growth, while Construction Products and Specialty Products declined Operating Revenue by Segment (in millions) | Segment | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Automotive OEM | $3,235 | $2,969 | $2,800 | | Food Equipment | $2,622 | $2,444 | $2,078 | | Test & Measurement and Electronics | $2,832 | $2,828 | $2,346 | | Welding | $1,902 | $1,894 | $1,650 | | Polymers & Fluids | $1,804 | $1,905 | $1,804 | | Construction Products | $2,033 | $2,113 | $1,945 | | Specialty Products | $1,697 | $1,799 | $1,854 | Operating Income by Segment (in millions) | Segment | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Automotive OEM | $561 | $499 | $545 | | Food Equipment | $713 | $618 | $469 | | Test & Measurement and Electronics | $686 | $684 | $643 | | Welding | $605 | $583 | $490 | | Polymers & Fluids | $482 | $479 | $457 | | Construction Products | $578 | $548 | $530 | | Specialty Products | $449 | $481 | $504 | [Liquidity and Capital Resources](index=43&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) The company's liquidity is strong, with **$3.08 billion** free cash flow in 2023 and a **30.4%** After-tax ROIC - Capital allocation priorities include internal investments for organic growth, attractive dividends, selective acquisitions, and an active share repurchase program[185](index=185&type=chunk) Cash Flow Summary (in millions) | Cash Flow | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $3,539 | $2,348 | $2,557 | | Additions to plant and equipment | $(455) | $(412) | $(296) | | **Free cash flow** | **$3,084** | **$1,936** | **$2,261** | After-tax Return on Average Invested Capital (ROIC) | Year | After-tax ROIC | | :--- | :--- | | 2023 | 30.4% | | 2022 | 29.1% | | 2021 | 29.5% | Total Debt to EBITDA Ratio | Year | Total Debt to EBITDA | | :--- | :--- | | 2023 | 1.8x | | 2022 | 1.8x | | 2021 | 2.0x | [Critical Accounting Estimates](index=50&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) Management identifies Income Taxes, Goodwill and Intangible Assets, and Pension Benefits as critical accounting estimates - Income Taxes: Estimates involve interpretation of tax regulations, future taxable income, and uncertain tax positions[206](index=206&type=chunk) - Goodwill and Intangible Assets: Impairment testing relies on management's judgment to determine fair value; total goodwill and intangible assets were approximately **$5.6 billion** as of December 31, 2023[207](index=207&type=chunk)[208](index=208&type=chunk) - Pension and Other Postretirement Benefits: Expense and obligations are determined by actuarial valuations using key assumptions for discount rates, expected return on plan assets, and life expectancy[209](index=209&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from interest rate changes and foreign currency fluctuations, mitigated by Euro-denominated debt hedges - The company is exposed to **interest rate risk** related to its fixed-rate debt and variable-rate commercial paper and Euro term loans[213](index=213&type=chunk) - To reduce **foreign currency risk**, Euro-denominated notes and term loans are designated as hedges of net investment in Euro-denominated foreign operations[215](index=215&type=chunk) [Financial Statements and Supplementary Data](index=43&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes consolidated financial statements, auditor's report, and notes, with Income Taxes identified as a critical audit matter - Management assessed the company's internal control over financial reporting as **effective** as of December 31, 2023, based on the COSO framework[218](index=218&type=chunk) - The independent auditor, Deloitte & Touche LLP, issued an **unqualified opinion** on the financial statements and internal control over financial reporting[222](index=222&type=chunk) - The auditor identified **Income Taxes** as a Critical Audit Matter due to complex judgments required for determining tax expense and unrecognized tax benefits[229](index=229&type=chunk)[231](index=231&type=chunk) [Statement of Income](index=55&type=section&id=Statement%20of%20Income) For 2023, ITW reported **$16.107 billion** operating revenue, **$4.040 billion** operating income, and **$9.74** diluted EPS Statement of Income Highlights (in millions, except per share amounts) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Operating Revenue | $16,107 | $15,932 | $14,455 | | Operating Income | $4,040 | $3,790 | $3,477 | | Net Income | $2,957 | $3,034 | $2,694 | | Diluted EPS | $9.74 | $9.77 | $8.51 | [Statement of Financial Position](index=57&type=section&id=Statement%20of%20Financial%20Position) As of December 31, 2023, ITW had **$15.518 billion** total assets, **$12.505 billion** total liabilities, and **$3.013 billion** total equity Statement of Financial Position Highlights (in millions) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and equivalents | $1,065 | $708 | | Goodwill | $4,909 | $4,864 | | Total Assets | **$15,518** | **$15,422** | | **Liabilities & Equity** | | | | Total debt (Short & Long-term) | $8,164 | $7,763 | | Total Liabilities | $12,505 | $12,333 | | Total Stockholders' Equity | **$3,013** | **$3,089** | [Statement of Cash Flows](index=59&type=section&id=Statement%20of%20Cash%20Flows) In 2023, net cash from operations was **$3.539 billion**, with a **$357 million** increase in cash and equivalents during the year Statement of Cash Flows Highlights (in millions) | Activity | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $3,539 | $2,348 | $2,557 | | Net cash provided by (used for) investing activities | $(403) | $(110) | $(984) | | Net cash provided by (used for) financing activities | $(2,782) | $(3,000) | $(2,564) | | **Net increase (decrease) in cash** | **$357** | **$(819)** | **$(1,037)** | [Notes to Financial Statements](index=60&type=section&id=Notes%20to%20Financial%20Statements) The notes provide detailed information on accounting policies, acquisitions, divestitures, revenue, income taxes, goodwill, debt, and pensions - Note 3 (Acquisitions): Details the December 1, 2021 acquisition of the MTS Test & Simulation business for **$750 million**, adding **$430 million** in goodwill and **$259 million** in intangible assets[269](index=269&type=chunk) - Note 4 (Divestitures): In 2022, two businesses were divested for **$279 million** proceeds, resulting in a **$197 million** pre-tax gain; another business was sold in April 2023 with no significant gain or loss[272](index=272&type=chunk)[273](index=273&type=chunk) - Note 11 (Debt): Total debt was **$8.164 billion** as of Dec 31, 2023; the company maintains a **$3.0 billion** revolving credit facility and borrowed **€1.3 billion** under a new Euro Credit Agreement in May 2023[308](index=308&type=chunk)[309](index=309&type=chunk)[317](index=317&type=chunk) - Note 14 (Stockholders' Equity): A new **$5.0 billion** share repurchase program was announced on August 4, 2023, completing the 2021 program in Q4 2023[340](index=340&type=chunk)[341](index=341&type=chunk) [Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=88&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None [Controls and Procedures](index=88&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of December 31, 2023, with no material changes to internal control - The President & CEO and Senior Vice President & CFO concluded that the company's disclosure controls and procedures were **effective** as of December 31, 2023[365](index=365&type=chunk) - No changes in internal control over financial reporting were identified during Q4 2023 that materially affected or are reasonably likely to affect controls[367](index=367&type=chunk) [Other Information](index=88&type=section&id=Item%209B.%20Other%20Information) Executive Vice President Michael R. Zimmerman adopted a Rule 10b5-1 trading arrangement on December 6, 2023 - Executive Vice President Michael R. Zimmerman adopted a **Rule 10b5-1 trading arrangement** on December 6, 2023[368](index=368&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=88&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) The company reports no disclosures are required under this item - None Part III [Directors, Executive Officers and Corporate Governance](index=78&type=section&id=Item%2010.%20Directors,%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2024 Proxy Statement - Information required by this item is incorporated by reference from the Company's **2024 Proxy Statement**[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk) [Executive Compensation](index=78&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding director and executive compensation is incorporated by reference from the 2024 Proxy Statement - Information required by this item is incorporated by reference from the Company's **2024 Proxy Statement**[374](index=374&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=78&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and related stockholder matters is incorporated by reference from the 2024 Proxy Statement - Information required by this item is incorporated by reference from the Company's **2024 Proxy Statement**[375](index=375&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=78&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions,%20and%20Director%20Independence) Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2024 Proxy Statement - Information required by this item is incorporated by reference from the Company's **2024 Proxy Statement**[376](index=376&type=chunk) [Principal Accountant Fees and Services](index=78&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the 2024 Proxy Statement - Information required by this item is incorporated by reference from the Company's **2024 Proxy Statement**[377](index=377&type=chunk) Part IV [Exhibit and Financial Statement Schedules](index=79&type=section&id=Item%2015.%20Exhibit%20and%20Financial%20Statement%20Schedules) This section lists financial statements and provides a detailed list of all exhibits filed with the report - This item lists the financial statements filed under Item 8 and notes that no financial statement schedules are included[379](index=379&type=chunk) - A comprehensive list of exhibits is provided, including credit agreements, indentures, incentive plans, and various certifications[380](index=380&type=chunk)[381](index=381&type=chunk)[382](index=382&type=chunk) [Form 10-K Summary](index=82&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company reports no Form 10-K summary - None

Financial Data and Key Metrics Changes - In Q4 2023, organic growth was essentially flat, with operating margin at 24.8%, reflecting a 150 basis point contribution from enterprise initiatives and nearly 40% growth in free cash flow [4][15] - GAAP EPS for Q4 was $2.38, which included a $0.04 unfavorable impact from the devaluation of the Argentine currency [4][15] - For the full year 2023, ITW achieved a record income growth of 7% to $4 billion, with an operating margin of 25.1%, and GAAP EPS of $9.74 [10][24] Business Line Data and Key Metrics Changes - Automotive OEM segment led with organic growth of 8%, while North America was down 9% due to an automotive strike; Europe grew 11% and China 31% driven by EV market gains [18] - Food equipment delivered organic growth of 3%, with equipment growing 1% and service up 7% [20] - Test and measurement and electronics saw organic revenue down 1%, with test and measurement growing 5% and electronics declining 14% [20] - Welding experienced a 7% organic revenue decline, with equipment down 8% and consumables down 6% [21] - Construction products saw a 4% organic revenue decline, with North America flat and international markets soft [22] Market Data and Key Metrics Changes - The company expects automotive OEM to grow 3% to 5% in 2024, based on flat global auto builds and typical penetration gains [19] - North America and Europe are forecasted to see low single-digit growth, while China is expected to contribute double-digit growth primarily from the automotive sector [83] Company Strategy and Development Direction - The strategic priority for 2024 is to build above-market organic growth through customer-back innovation, aligning with ITW's financial and operational capabilities [5][12] - The company plans to allocate $800 million for productivity and organic growth initiatives in core businesses [11][28] - Capital allocation priorities include internal investments, attractive dividends, selective acquisitions, and a $1.5 billion share repurchase program in 2024 [29] Management's Comments on Operating Environment and Future Outlook - Management noted a stable to slightly improving demand on a sales per day basis, with expectations for organic growth of 1% to 3% in 2024 [12][13] - The company anticipates a normal pricing environment in 2024, with input cost inflation largely behind them [69] - Management expressed confidence in the ability to navigate a volatile environment while maintaining strong performance [92] Other Important Information - Free cash flow for the full year 2023 was a record $3.1 billion, with a conversion to net income of 127% [17][24] - The company raised its dividend by 7% and returned over $3 billion to shareholders through dividends and share repurchases [24] Q&A Session Summary Question: How should segment growth rates for Q1 be viewed? - Management indicated that Q1 growth rates would track typical seasonality and improve as comparisons get easier throughout the year [35] Question: What is driving the higher incremental margin forecast? - The higher incremental margin is attributed to a 100 basis point contribution from enterprise initiatives, independent of volume [36] Question: What is the outlook for food equipment growth? - Food equipment is projected to grow 3% to 5% due to new product launches, less channel destocking, and recovery in service [42] Question: What is the outlook for CapEx businesses? - Management noted that while there has been slowing demand, improvements in inventory levels and new product contributions are expected to support growth [49] Question: What challenges are seen in specialty equipment and construction products? - Specialty equipment is undergoing strategic portfolio adjustments, while construction is impacted by declining housing bills across major markets [56] Question: How is customer sentiment and headcount being managed? - Customer sentiment has been cautious, but management is adding headcount in growth-related areas to support innovation and sales [62] Question: What is the visibility on channel inventory levels? - Management has improved visibility on inventory levels, indicating that destocking is less of a drag moving into 2024 [64] Question: How does pricing competition look for 2024? - Management expects a normal contribution from pricing, with inflation-driven price increases largely behind them [69]

February 1, 2024 Non-GAAP Measures Fourth Quarter 2023 Earnings Conference Call Safe Harbor Statement The Company uses certain non-GAAP measures in discussing the Company's performance. The reconciliation of those measures to the most directly comparable GAAP measures is detailed in ITW's press release for the fourth quarter of 2023, which is available at www.itw.com, together with this presentation. The estimated guidance of free cash flow to net income conversion rate and after-tax return on average inves ...

Financial Performance - Operating revenue for Q3 2023 was $4,031 million, a slight increase of 0.5% compared to $4,011 million in Q3 2022[14] - Net income for Q3 2023 reached $772 million, up 6.2% from $727 million in Q3 2022[17] - Basic net income per share increased to $2.55 in Q3 2023, compared to $2.36 in Q3 2022, reflecting a growth of 8.1%[14] - Comprehensive income for Q3 2023 was $690 million, significantly higher than $522 million in Q3 2022, marking a 32.2% increase[17] - Net income for the nine months ended September 30, 2023, was $2,240 million, an increase of 5.3% compared to $2,127 million in 2022[25] - Total operating revenue for the nine months ended September 30, 2023, was $12,124 million, up 1.4% from $11,961 million in 2022[31] - Operating income for Q3 2023 was $1.070 billion, an 8.9% increase from $983 million in Q3 2022[81] - Operating income for the nine months ended September 30, 2023, was $3,052 million, reflecting an 8.8% increase from $2,804 million in 2022[83] Assets and Liabilities - Total current assets as of September 30, 2023, were $6,288 million, slightly up from $6,270 million at the end of 2022[20] - Cash and equivalents increased to $990 million in Q3 2023, compared to $708 million at the end of 2022[20] - Total liabilities decreased to $12,391 million as of September 30, 2023, down from $12,333 million at the end of 2022[20] - Long-term debt increased to $6,818 million as of September 30, 2023, compared to $6,173 million at the end of 2022[20] - Total debt increased from $7,763 million as of December 31, 2022, to $8,066 million as of September 30, 2023, with short-term debt comprising $1,248 million[50] - Net working capital as of September 30, 2023, was $2,306 million, an increase of $496 million compared to $1,810 million as of December 31, 2022[129] Cash Flow and Investments - Net cash provided by operating activities increased to $2,500 million from $1,537 million, representing a growth of 62.5% year-over-year[25] - The company reported a net cash used for investing activities of $(283) million, compared to $(237) million in the same period last year[25] - Free cash flow for Q3 2023 was $856 million, up from $612 million in Q3 2022, while year-to-date free cash flow was $2,176 million compared to $1,281 million[121] Dividends and Share Repurchase - The company declared dividends of $1.40 per share in Q3 2023, totaling $422 million[21] - Cash dividends paid during the nine months ended September 30, 2023, totaled $1,194 million, compared to $1,139 million in 2022, marking a 4.8% increase[25] - The company announced a new stock repurchase program on August 4, 2023, allowing for the repurchase of up to $5.0 billion of common stock[125] - The company repurchased approximately 1.6 million shares for about $375 million in Q3 2023, totaling 4.8 million shares for $1.1 billion year-to-date[88] Segment Performance - Automotive OEM segment revenue for the nine months ended September 30, 2023, was $2,421 million, a 8.9% increase from $2,224 million in 2022[31] - Food Equipment segment revenue rose to $1,967 million, reflecting a 8.5% increase compared to $1,813 million in the previous year[31] - Operating revenue in the Automotive OEM segment increased by 6.0% in Q3 2023, with operating income rising by 14.5%[91] - Operating revenue for the Food Equipment segment increased by 7.2% to $678 million in Q3 2023, compared to $633 million in Q3 2022[94] - Operating revenue for the Welding segment declined by 1.8% to $468 million in Q3 2023, compared to $477 million in Q3 2022[107] Tax and Interest - The effective tax rate for the nine months ended September 30, 2023, was 23.4%, compared to 23.7% for the same period in 2022[128] - The effective tax rate for Q3 2023 was 23.8%, slightly down from 23.9% in Q3 2022[88] - Interest expense rose to $67 million in Q3 2023 from $52 million in Q3 2022, attributed to higher interest rates[117] Other Financial Metrics - The total debt to EBITDA ratio remained stable at 1.8 for the trailing twelve months ended September 30, 2023, consistent with the ratio as of December 31, 2022[136] - After-tax return on average invested capital was 31.9% for Q3 2023, compared to 29.9% in Q3 2022[127] - The company has a $3.0 billion revolving credit facility with no amounts outstanding as of September 30, 2023[135]

Financial Data and Key Metrics Changes - Operating margin improved by 200 basis points year-over-year to 26.5%, with enterprise initiatives contributing 140 basis points [10][34] - Quarterly operating income grew by 9% to $1.1 billion, and GAAP EPS increased by 9% to $2.55 [10][12] - Free cash flow rose by 40% to $856 million, with a conversion to net income of 111% [35] Business Line Data and Key Metrics Changes - Automotive OEM organic growth was 4%, with North America down 5%, Europe up 5%, and China up 18% [36] - Food Equipment achieved solid organic growth of 6%, with North America growing 10% [37] - Welding's organic revenue declined by 2%, with equipment revenue down 3% [38] - Construction organic revenue was down 2%, with North America growing 2% [39] - Specialty Products saw organic revenue down 6%, with North America down 9% [40] Market Data and Key Metrics Changes - North America revenue was down 3%, while international revenue was essentially flat [16] - Organic revenue growth by geography showed North America down 2%, Europe flat, and Asia Pacific up 6% [13] Company Strategy and Development Direction - The company aims to elevate high-quality organic growth and customer-back innovation as key differentiators [9] - The focus remains on leveraging ITW's unique strengths and capabilities to optimize long-term performance [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged uncertainties in the demand environment, including inventory normalization and elevated interest rates [42] - The company is projecting organic growth of 2% to 3% for the full year and has raised its operating margin guidance to 25% to 25.5% [41][18] Other Important Information - The company announced a CEO succession plan, with Chris O'Herlihy set to take over at year-end [6] - The impact of the auto strike is estimated to reduce Q4 earnings by $0.12 per share [14] Q&A Session Summary Question: What contributed to the operating margin expansion? - The operating margin expansion of 200 basis points was driven by enterprise initiatives and positive price/cost impacts, with some headwinds from investments in labor and compensation [51][67] Question: What is the outlook for price versus cost in 2024? - There is no significant deflation expected, but inflation levels have stabilized, indicating a tight environment for pricing [61] Question: How is the company managing inventory levels? - The company is currently running slightly above three months of inventory, with expectations to normalize by early to mid-next year [118] Question: What is the impact of the auto strike on Q4? - The $0.12 headwind from the auto strike assumes it continues through the end of the quarter, affecting organic growth [69] Question: How is the company performing in the Electronics segment? - The consumer electronics market remains weak, but the company is committed to investing in these businesses for future recovery [77][110]