01—Abstract
Summary
Summary of the 10-K filed February 10, 2023. Cited figures are marked; the original filing is the authoritative source.
Illinois Tool Works Inc. (ITW) reported solid financial performance for the fiscal year ended December 31, 2022, demonstrating resilience in a dynamic global environment.
The company achieved operating revenue growth of 10.2%a and organic revenue growth of 12.1%, with all seven business segments contributing positively. This growth was driven by the continued successful execution of its enterprise strategy and its differentiated ITW Business Model, which emphasizes a customer-back innovation approach and a focus on the '80' percent of opportunities that represent the most significant value. Despite facing headwinds such as rising costs and global supply chain challenges, ITW maintained an operating margin of 23.8%.
The company also continued its commitment to returning capital to shareholders through dividends and share repurchases. ITW's strategic focus on portfolio discipline, operational excellence through its 80/20 process, and full-potential organic growth positions it for sustained long-term performance and shareholder value creation.
02—Key points
Key Highlights
- Achieved 10.2% consolidated operating revenue growth and 12.1% organic revenue growth in 2022.
- All seven business segments contributed to organic revenue growth, showcasing broad-based performance.
- Maintained a strong operating margin of 23.8% despite inflationary pressures and supply chain disruptions.
- Continued to execute its enterprise strategy focused on portfolio discipline, 80/20 process excellence, and organic growth.
- Returned significant capital to shareholders through approximately $1.75 billion in share repurchases and $1.5 billion in cash dividends paid in 2022.
- Successfully divested two businesses in the fourth quarter of 2022 as part of ongoing portfolio refinement, resulting in pre-tax gains.
- Acquired the MTS Test & Simulation business in December 2021, which contributed to revenue growth in the Test & Measurement and Electronics segment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Illinois Tool Works Inc kept $0.19.
- Revenue$15.93B100.0%
- Cost of revenue−$9.43B59.2%
- Gross profit$6.50B40.8%
- Operating costs−$2.71B17.0%
- Operating income$3.79B23.8%
- Interest, other & tax−$756.0M4.7%
- Net income$3.03B19.0%
Where FY2022 revenue went
$15.93B- Cost of revenue: $9.43B, 59% of revenue
- Net income: $3.03B, 19% of revenue
- Other operating costs: $2.44B, 15% of revenue
- R&D: $269.0M, 1.7% of revenue
- Interest, other & tax: $756.0M, 4.7% of revenue
Kept 19% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 10, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $15.93B$14.46B | +10.2% |
| Cost of Revenue | $9.43B$8.49B | +11.1% |
| Gross Profit | $6.50B$5.97B | +9.0% |
| R&D Expenses | $269.00M$239.00M | +12.6% |
| Operating Income | $3.79B$3.48B | +9.0% |
| Interest Expense | $203.00M$202.00M | +0.5% |
| Net Income | $3.03B$2.69B | +12.6% |
| EPS (Basic) | $9.80$8.55 | +14.6% |
| EPS (Diluted) | $9.77$8.51 | +14.8% |
| Shares Outstanding (Basic) | 309.60M315.10M | −1.7% |
| Shares Outstanding (Diluted) | 310.70M316.40M | −1.8% |
05—Questions
Frequently Asked Questions
What is the ITW Business Model and why is it important?
The ITW Business Model is ITW's core source of value creation and competitive advantage. It comprises three key elements: the 80/20 Front-to-Back process (focusing on major opportunities and eliminating complexity), Customer-back Innovation (developing solutions based on deep customer insights), and a Decentralized, Entrepreneurial Culture (enabling businesses to be fast and responsive). This model drives operational excellence, innovation, and superior financial performance.
How did divestitures and acquisitions impact ITW's financial performance in 2022?
In 2022, ITW divested two businesses (one in Polymers & Fluids and one in Food Equipment) in the fourth quarter, generating pre-tax gains. These divestitures, along with the acquisition of the MTS Test & Simulation business (completed in late 2021), had a mixed impact on revenue, with acquisitions contributing positively and divestitures being a partial offset. The company views these actions as part of its ongoing portfolio management strategy to enhance long-term growth potential.
What were the main drivers of operating margin changes in 2022?
The operating margin of 23.8% in 2022 decreased by 30 basis points compared to the prior year. This was primarily driven by higher operating expenses (including employee-related and freight costs), unfavorable price/cost dynamics (90 basis points), and the dilutive impact of the MTS acquisition (60 basis points). These were partially offset by positive operating leverage (220 basis points) and benefits from enterprise initiatives (90 basis points).
How is ITW managing supply chain challenges and inflation?
ITW acknowledges the challenges posed by rising raw material costs and global supply chain disruptions. The company's strategy includes focusing on its 80/20 process to simplify operations, increasing inventory levels to mitigate risks, and passing on increased costs to customers where possible through price adjustments. Its diversified business model and strong customer relationships help it navigate these complexities.
06—Continue