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| 410 bps | 20 bps | 20 bps | — | | 450 bps |
•Operating revenue increased in the third quarter due to higher organic revenue, partially offset by the unfavorable effect of foreign currency translation. In the year-to-date period, operating revenue increased due to higher organic revenue, partially offset by the impact of a divestiture in the second quarter of 2023.
•The Company divested a business on April 3, 2023. There was no operating revenue for this business in the third quarter of 2023 and $9 million in the year-to-date period of 2023.
•Organic revenue increased 6.0% in the third quarter as consumables grew 6.0% and equipment sales increased 5.7%. In the year-to-date period, organic revenue grew 6.0% as consumables increased 2.9% and equipment sales grew 19.1%. In both respective periods, organic revenue grew in all major regions. Product line simplification activities reduced organic revenue by 190 basis points in both the third quarter and year-to-date periods.
◦North American organic revenue grew 7.9% in the third quarter primarily driven by growth in the ground support equipment, consumer packaging, specialty films and appliance businesses. In the year-to-date period, organic revenue increased 3.9% primarily driven by growth in the ground support equipment, appliance, consumer packaging and strength films businesses, partially offset by a decline in the decorative and thermal foils businesses.
◦International organic revenue increased 2.2% in the third quarter primarily due to growth in Europe, primarily in the ground support equipment business, partially offset by a decline in the consumer packaging businesses. In the year-to-date period, organic revenue grew 10.2% primarily due to an increase in Europe, primarily in the ground support equipment business, and growth in the appliance business in Asia Pacific, partially offset by a decline in the consumer packaging businesses.
•Operating margin was 31.1% in the third quarter. The increase of 330 basis points was primarily driven by benefits from the Company's enterprise initiatives and favorable operating leverage of 100 basis points, partially offset by higher employee-related expenses, higher restructuring expenses and product mix.
•In the year-to-date period, operating margin of 30.9% increased 450 basis points primarily driven by benefits from the Company's enterprise initiatives, favorable operating leverage of 120 basis points, favorable price/cost of 90 basis points and the favorable impact of a divestiture in the second quarter of 2023, partially offset by higher employee-related expenses and product mix.
OTHER FINANCIAL HIGHLIGHTS
•Interest expense was $69 million and $215 million in the third quarter and year-to-date periods of 2024, respectively, versus $67 million and $196 million in 2023, respectively. Interest expense in 2024 was higher than 2023 primarily due to the issuance of the Euro notes in May of 2024, partially offset by the repayment of the $700 million notes due March 1, 2024. Refer to Note 11. Debt in Item 1. Financial Statements for further information regarding the Company's outstanding debt.
•Other income (expense) was income of $379 million in the third quarter of 2024 and $421 million in the year-to-date period. On August 5, 2024, the Company entered into a purchase agreement with affiliates of CD&R for the sale of the Company’s noncontrolling equity interest in Wilsonart. The transaction closed immediately after the execution of the purchase agreement. Proceeds from the transaction, net of transaction costs, were $ million, resulting in a pre-tax gain of $ million. The sale of the Company’s equity interest in Wilsonart is not expected to have a material impact
on the Company’s financial results in subsequent quarters. Refer to Note 4. Sale of Noncontrolling Interest in Wilsonart International Holdings LLC in Item 1. Financial Statements for additional information regarding this transaction. Excluding the Wilsonart pre-tax gain, other income (expense) in the third quarter of 2024 increased $6 million compared to the third quarter of 2023 primarily due to investment losses in 2023. Excluding the Wilsonart pre-tax gain, the increase in the year-to-date period of $18 million was primarily driven by lower foreign currency transaction losses compared to 2023.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 1. Significant Accounting Policies in Item 1. Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are free cash flow and short-term credit facilities. As of September 30, 2024, the Company had $947 million of cash and equivalents on hand and no outstanding borrowings under its $3.0 billion revolving credit facility. The Company also has maintained strong access to public debt markets. Management believes that these sources are sufficient to service debt and to finance the Company's capital allocation priorities, which include:
•internal investments to support organic growth and sustain core businesses;
•payment of an attractive dividend to shareholders; and
•external investments in selective strategic acquisitions that support the Company's organic growth focus and an active share repurchase program.
The Company believes that, based on its operating revenue, operating margin, free cash flow, and credit ratings, it could readily obtain additional financing, if necessary.
Cash Flow
The Company uses free cash flow to measure cash flow generated by operations that is available for dividends, share repurchases, acquisitions and debt repayment. The Company believes this non-GAAP financial measure is useful to investors in evaluating the Company's financial performance and measures the Company's ability to generate cash internally to fund Company initiatives. Free cash flow represents net cash provided by operating activities less additions to plant and equipment. Free cash flow is a measurement that is not the same as net cash flow from operating activities per the statement of cash flows and may not be consistent with similarly titled measures used by other companies. Summarized cash flow information for the third quarter and year-to-date periods of 2024 and 2023 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| In millions | 2024 | | 2023 | | 2024 | | 2023 |
| Net cash provided by operating activities | $ | 891 | | | $ | 982 | | | $ | 2,167 | | | $ | 2,500 | |
| Additions to plant and equipment | (108) | | | (126) | | | (319) | | | (324) | |
| Free cash flow | $ | 783 | | | $ | 856 | | | $ | 1,848 | | | $ | 2,176 | |
| | | | | | | |
| Cash dividends paid | $ | (415) | | | $ | (396) | | | $ | (1,252) | | | $ | (1,194) | |
| Repurchases of common stock | (375) | | | (375) | | | (1,125) | | | (1,125) | |
| Acquisition of businesses (excluding cash and equivalents) | — | | | — | | | (115) | | | — | |
| Proceeds from sale of noncontrolling interest in Wilsonart International Holdings LLC | 395 | | | — | | | 395 | | | — | |
| Net proceeds from (repayments of) debt with original maturities of three months or less | (333) | | | (25) | | | (199) | | | (367) | |
| Proceeds from debt with original maturities of more than three months | — | | | — | | | 1,606 | | | 1,425 | |
| Repayments of debt with original maturities of more than three months | — | | | — | | | (1,295) | | | (678) | |
| Other, net | 9 | | | 31 | | | 31 | | | 75 | |
| Effect of exchange rate changes on cash and equivalents | 21 | | | (23) | | | (12) | | | (30) | |
| Net increase (decrease) in cash and equivalents | $ | 85 | | | $ | 68 | | | $ | (118) | | | $ | 282 | |
Stock Repurchase Programs
On May 7, 2021, the Company announced a stock repurchase program which provided for the repurchase of up to $3.0 billion of the Company's common stock over an open-ended period of time (the "2021 Program"). Under the 2021 program, the Company repurchased approximately 7.1 million shares of its common stock at an average price of $210.46 per share during 2022, approximately 1.6 million shares of its common stock at an average price of $233.62 in the first quarter of 2023, approximately 1.6 million shares of its common stock at an average price of $229.30 in the second quarter of 2023, approximately 1.6 million shares of its common stock at an average price of $241.55 in the third quarter of 2023 and approximately 1.5 million shares of its common stock at an average price of $237.34 in the fourth quarter of 2023. The 2021 Program was completed in the fourth quarter of 2023.
On August 4, 2023, the Company announced a new stock repurchase program which provides for the repurchase of up to an additional $5.0 billion of the Company's common stock over an open-ended period of time (the "2023 Program"). Under the 2023 program, the Company repurchased approximately 38,000 shares of its common stock at an average price of $263.44 per share in the fourth quarter of 2023, approximately 1.4 million shares of its common stock at an average price of $259.07 per share in the first quarter of 2024, approximately 1.6 million shares of its common stock at an average price of $247.42 in the second quarter of 2024 and approximately 1.5 million shares of its common stock at an average price of $244.88 in the third quarter of 2024. As of September 30, 2024, there were $3.9 billion of authorized repurchases remaining under the 2023 Program.
After-tax Return on Average Invested Capital
The Company uses after-tax return on average invested capital ("After-tax ROIC") to measure the effectiveness of its operations' use of invested capital to generate profits. After-tax ROIC is not defined under U.S. generally accepted accounting principles ("GAAP"). After-tax ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company's ability to generate returns from cash invested in its operations and may be different than the method used by other companies to calculate After-tax ROIC. The Company defines After-tax ROIC as operating income after taxes divided by average invested capital, which is annualized when presented in interim periods. Operating income after taxes is a non-GAAP measure consisting of net income before interest expense and other income (expense), on an after-tax basis, which are excluded as they do not represent returns generated by the Company's operations. For comparability, the Company also excluded the net discrete tax benefit of $121 million in the third quarter of 2024 from net income and the effective tax rate for the three and nine months ended September 30, 2024. Additionally, for comparability, the Company also excluded the discrete tax benefit of $20 million in the second quarter of 2023 from net income and the effective tax rate for the nine months ended September 30, 2023. Total invested capital represents the net assets of the Company, other than cash and equivalents and outstanding debt which do not represent capital investment in the Company's operations. The most comparable GAAP measure to operating income after taxes is net income. Net income to average invested capital and After-tax ROIC for the third quarter and year-to-date periods of 2024 and 2023 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| Dollars in millions | 2024 | | 2023 | | 2024 | | 2023 |
| Numerator: | | | | | | | |
| Net Income | $ | 1,160 | | | $ | 772 | | | $ | 2,738 | | | $ | 2,240 | |
| Net discrete tax benefit related to the third quarter 2024 | (121) | | | — | | | (121) | | | — | |
| Discrete tax benefit related to the second quarter 2023 | — | | | — | | | — | | | (20) | |
Interest expense, net of tax (1) | 53 | | | 51 | | | 164 | | | 150 | |
Other (income) expense, net of tax (1) | (288) | | | (8) | | | (320) | | | (31) | |
| Operating income after taxes | $ | 804 | | | $ | 815 | | | $ | 2,461 | | | $ | 2,339 | |
| | | | | | | |
| Denominator: | | | | | | | |
| Invested capital: | | | | | | | |
| Cash and equivalents | $ | 947 | | | $ | 990 | | | $ | 947 | | | $ | 990 | |
| Trade receivables | 3,226 | | | 3,163 | | | 3,226 | | | 3,163 | |
| Inventories | 1,817 | | | 1,799 | | | 1,817 | | | 1,799 | |
| Net plant and equipment | 2,071 | | | 1,904 | | | 2,071 | | | 1,904 | |
| Goodwill and intangible assets | 5,597 | | | 5,510 | | | 5,597 | | | 5,510 | |
| Accounts payable and accrued expenses | (2,211) | | | (2,168) | | | (2,211) | | | (2,168) | |
| Debt | (8,346) | | | (8,066) | | | (8,346) | | | (8,066) | |
| Other, net | 291 | | | (128) | | | 291 | | | (128) | |
| Total net assets (stockholders' equity) | 3,392 | | | 3,004 | | | 3,392 | | | 3,004 | |
| Cash and equivalents | (947) | | | (990) | | | (947) | | | (990) | |
| Debt | 8,346 | | | 8,066 | | | 8,346 | | | 8,066 | |
| Total invested capital | $ | 10,791 | | | $ | 10,080 | | | $ | 10,791 | | | $ | 10,080 | |
| | | | | | | |
Average invested capital (2) | $ | 10,682 | | | $ | 10,237 | | | $ | 10,466 | | | $ | 10,239 | |
| | | | | | | |
Net income to average invested capital (3) | 43.4 | % | | 30.1 | % | | 34.9 | % | | 29.2 | % |
After-tax return on average invested capital (3) | 30.0 | % | | 31.9 | % | | 31.3 | % | | 30.5 | % |
(1) Effective tax rate used for interest expense and other (income) expense for the three months ended September 30, 2024 and 2023 was 23.7% and 23.8%, respectively. Effective tax rate used for interest expense and other (income) expense for the nine months ended September 30, 2024 and 2023 was 23.9% and 23.4%, 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 September 30, 2024 and 2023 were converted to an annual rate by multiplying the calculated return by 4. Returns for the nine months ended September 30, 2024 and 2023 were converted to an annual rate by dividing the calculated return by 3 and multiplying it by 4.
After-tax ROIC for the nine months ended September 30, 2024 included 110 basis points of favorable impact related to the cumulative effect of the change from the LIFO method of accounting to the FIFO method for certain U.S. businesses ($117 million pre-tax, or $88 million after-tax) in the first quarter of 2024. Refer to Note 1. Significant Accounting Policies and Note 8. Inventories in Item 1. Financial Statements for additional information regarding this change in accounting method.
A reconciliation of the tax rate for the three and nine month periods ended September 30, 2024, excluding the third quarter 2024 net discrete tax benefit of $121 million, which included favorable discrete tax benefits of $107 million related to the utilization of capital loss carryforwards upon the sale of Wilsonart and $87 million related to a reorganization of the Company's intellectual property, partially offset by a $73 million discrete tax expense related to the remeasurement of unrecognized tax benefits associated with various intercompany transactions, is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| September 30, 2024 | | September 30, 2024 |
| Dollars in millions | Income Taxes | | Tax Rate | | Income Taxes | | Tax Rate |
| As reported | $ | 202 | | | 14.9 | % | | $ | 701 | | | 20.4 | % |
| Net discrete tax benefit related to the third quarter 2024 | 121 | | | 8.8 | % | | 121 | | | 3.5 | % |
| As adjusted | $ | 323 | | | 23.7 | % | | $ | 822 | | | 23.9 | % |
A reconciliation of the tax rate for the nine month period ended September 30, 2023, excluding the second quarter 2023 discrete tax benefit of $20 million related to amended 2021 U.S. taxes, is as follows:
| | | | | | | | | | | |
| Nine Months Ended |
| September 30, 2023 |
| Dollars in millions | Income Taxes | | Tax Rate |
| As reported | $ | 656 | | | 22.7 | % |
| Discrete tax benefit related to the second quarter 2023 | 20 | | | 0.7 | % |
| As adjusted | $ | 676 | | | 23.4 | % |
Refer to Note 6. Income Taxes in Item 1. Financial Statement for additional information regarding the third quarter 2024 and second quarter 2023 discrete tax items.
Working Capital
Management uses working capital as a measurement of the short-term liquidity of the Company. Net working capital as of September 30, 2024 and December 31, 2023 is summarized as follows:
| | | | | | | | | | | | | | | | | |
| In millions | September 30, 2024 | | December 31, 2023 | | Increase/
(Decrease) |
| Current assets: | | | | | |
| Cash and equivalents | $ | 947 | | | $ | 1,065 | | | $ | (118) | |
| Trade receivables | 3,226 | | | 3,123 | | | 103 | |
| Inventories | 1,817 | | | 1,707 | | | 110 | |
| Prepaid expenses and other current assets | 314 | | | 340 | | | (26) | |
| Total current assets | 6,304 | | | 6,235 | | | 69 | |
| Current liabilities: | | | | | |
| Short-term debt | 1,768 | | | 1,825 | | | (57) | |
| Accounts payable and accrued expenses | 2,211 | | | 2,244 | | | (33) | |
| Other | 648 | | | 606 | | | 42 | |
| Total current liabilities | 4,627 | | | 4,675 | | | (48) | |
| Net working capital | $ | 1,677 | | | $ | 1,560 | | | $ | 117 | |
As of September 30, 2024, a significant portion of the Company's cash and equivalents was held by international subsidiaries. Cash and equivalents held internationally may be subject to foreign withholding taxes if repatriated to the U.S. Cash and equivalents held internationally are typically used for international operating needs or reinvested to fund expansion of existing international businesses. International funds may also be used to fund international acquisitions or, if not considered permanently invested, may be repatriated to the U.S. The Company has accrued for foreign withholding taxes related to foreign held cash and equivalents that are not permanently invested.
In the U.S., the Company utilizes cash flows from operations to fund domestic cash needs and the Company's capital allocation priorities. This includes operating needs of the U.S. businesses, dividend payments, share repurchases, acquisitions, servicing of domestic debt obligations, reinvesting to fund expansion of existing U.S. businesses and general corporate needs. The Company may also use its commercial paper program, which is supported by a long-term credit facility, for short-term liquidity needs. The Company believes cash generated by operations and liquidity provided by the Company's commercial paper program will continue to be sufficient to fund cash requirements in the U.S.
Debt
Total debt as of September 30, 2024 and December 31, 2023 was as follows:
| | | | | | | | | | | |
| In millions | September 30, 2024 | | December 31, 2023 |
| Short-term debt | $ | 1,768 | | | $ | 1,825 | |
| Long-term debt | 6,578 | | | 6,339 | |
| Total debt | $ | 8,346 | | | $ | 8,164 | |
Short-term debt included commercial paper of $265 million and $464 million as of September 30, 2024 and December 31, 2023, respectively. The weighted-average interest rate on commercial paper as of September 30, 2024 and December 31, 2023 was 4.85% and 5.40%, respectively. Short-term debt also included $668 million as of September 30, 2024 and $661 million as of December 31, 2023 related to the 0.25% Euro notes due December 5, 2024, which were reclassified from Long-term debt to Short-term debt in the fourth quarter of 2023. Short-term debt as of September 30, 2024 also included $835 million related to the Euro-denominated credit agreement (the "Euro Credit Agreement") entered into on May 5, 2023, which was reclassified to Short-term debt in the second quarter of 2024 since the debt, including the options to extend the termination date, is due in April 2025. Additionally, Short-term debt as of December 31, 2023 included $700 million related to the 3.50% notes due March 1, 2024, which were repaid on the due date.
On May 5, 2023, the Company entered into a €1.3 billion Euro Credit Agreement with an initial termination date of May 3, 2024; provided, however, that the Company may extend the termination date by six months on up to two occasions. On May
12, 2023, the Company borrowed €1.3 billion of Euro term loans under the Euro Credit Agreement. Proceeds from the borrowing were used for general corporate purposes, including the repayment of outstanding debt. Any loan under the Euro Credit Agreement may not be re-borrowed once repaid, in full or in part, and will bear interest at a per annum rate equal to the applicable EURIBOR (adjusted for any statutory reserves) plus 0.75% for the interest period selected by the Company of one, three or six months. As of December 31, 2023, the Company had €1.3 billion outstanding under the Euro Credit Agreement, which was included in Long-term debt as the Company intended to exercise its options to extend the termination date. The first and second options to extend the termination date were both exercised in 2024. On May 22, 2024, the Company repaid €550 million of the term loans under the Euro Credit Agreement using a portion of the proceeds from the Euro notes issued on May 17, 2024, as discussed below. As of September 30, 2024, the Company had €750 million remaining outstanding under the Euro Credit Agreement with an interest rate of 4.13%.
On May 17, 2024, the Company issued €650 million of 3.25% Euro notes due May 17, 2028 at 99.525% of face value and €850 million of 3.375% Euro notes due May 17, 2032 at 99.072% of face value. Proceeds from the issuance were used for general corporate purposes, including the repayment of a portion of the indebtedness under the commercial paper program and the Euro Credit Agreement.
The Company also has a $3.0 billion revolving credit facility with a termination date of October 21, 2027, which is available to provide additional liquidity, including to support the potential issuances of commercial paper. No amounts were outstanding under the revolving credit facility as of September 30, 2024 or December 31, 2023.
Total Debt to EBITDA
The Company uses the ratio of total debt to EBITDA as a measure of its ability to repay its outstanding debt obligations. EBITDA and the ratio of total debt to EBITDA are non-GAAP financial measures. The Company believes that total debt to EBITDA is a meaningful metric to investors in evaluating the Company's long term financial liquidity and may be different than the method used by other companies to calculate total debt to EBITDA. The ratio of total debt to EBITDA represents total debt divided by net income before interest expense, other income (expense), income taxes, depreciation, and amortization and impairment of intangible assets on a trailing twelve month basis. Total debt to EBITDA for the trailing twelve month periods ended September 30, 2024 and December 31, 2023 was as follows:
| | | | | | | | | | | |
| Dollars in millions | September 30, 2024 | | December 31, 2023 |
| Total debt | $ | 8,346 | | | $ | 8,164 | |
| | | |
| Net income | $ | 3,455 | | | $ | 2,957 | |
| Add: | | | |
| Interest expense | 285 | | | 266 | |
| Other (income) expense | (430) | | | (49) | |
| Income taxes | 911 | | | 866 | |
| Depreciation | 298 | | | 282 | |
Amortization and impairment of intangible assets | 101 | | | 113 | |
| EBITDA | $ | 4,620 | | | $ | 4,435 | |
| Total debt to EBITDA ratio | 1.8 | | | 1.8 | |
Stockholders' Equity
The changes to stockholders' equity during the nine months ended 2024 were as follows:
| | | | | |
| In millions | |
Total stockholders' equity, December 31, 2023 | $ | 3,013 | |
| Net income | 2,738 | |
| Repurchases of common stock | (1,125) | |
| Dividends declared | (1,277) | |
| Other comprehensive income (loss) | (15) | |
| Other, net | 58 | |
Total stockholders' equity, September 30, 2024 | $ | 3,392 | |
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "believe," "expect," "plans," "intend," "may," "strategy," "prospects," "estimate," "will," "should," "could," "project," "target," "anticipate," "guidance," "forecast," and other similar words, and may include, without limitation, statements regarding the duration and potential effects of global supply chain challenges and the Company's strategy in response thereto on the Company's business, future financial and operating performance, free cash flow, economic and regulatory conditions in various geographic regions including inflation, the impact of foreign currency fluctuations, the timing and amount of benefits from the Company's enterprise strategy initiatives, the timing and amount of dividends and share repurchases, the protection of the Company's intellectual property, the likelihood of future goodwill or intangible asset impairment charges, the impact of adopting new accounting pronouncements, the adequacy of internally generated funds and credit facilities to service debt and finance the Company's capital allocation priorities, the sufficiency of U.S.-generated cash to fund cash requirements in the U.S., the cost and availability of additional financing, the availability of raw materials and energy and the impact of raw material cost inflation, the Company's portion of future benefit payments related to pension and other postretirement benefits, the Company's information technology infrastructure, potential acquisitions and divestitures and the expected performance of acquired businesses and impact of divested businesses, the impact of U.S. and global tax legislation and the estimated timing and amount related to the resolution of tax matters, the cost of compliance with environmental regulations, the impact of failure of the Company's employees to comply with applicable laws and regulations, and the outcome of outstanding legal proceedings. These statements are subject to certain risks, uncertainties, and other factors, which could cause actual results to differ materially from those anticipated. Important risks that may influence future results include (1) weaknesses or downturns in the markets served by the Company, (2) changes or deterioration in international and domestic political and economic conditions, such as the Russia and Ukraine conflict or U.S.-China trade relations and the impact of related economic and other sanctions, (3) the unfavorable impact of foreign currency fluctuations, (4) the Company's enterprise strategy initiatives may not have the desired impact on organic revenue growth, (5) market conditions and cost and availability of financing to fund the Company's share repurchases, (6) a delay or decrease in the introduction of new products into the Company's product lines, (7) any failure to protect the Company's intellectual property, (8) potential negative impact of impairments to goodwill and other intangible assets on the Company's return on invested capital, financial condition or results of operations, (9) raw material price increases and supply shortages or delays, (10) financial market risks to the Company's obligations under its defined benefit pension plans, (11) negative effects of service interruptions, data corruption, cyber-based attacks, security breaches of our technology networks and systems or those of our vendors and third-party service providers, or violations of data privacy laws, (12) the potential negative impact of acquisitions on the Company's profitability and returns, (13) potential negative effects of divestitures, including retained liabilities and unknown contingent liabilities, (14) impact of tax legislation and regulatory action and changing tax rates, (15) potential adverse outcomes in legal proceedings or enforcement actions, (16) uncertainties related to environmental regulation and the physical risks of climate change, (17) potential failure of the Company's employees, agents or business partners to comply with anti-bribery, competition, import/export, trade sanctions, data privacy, human rights and other laws, (18) public health crises and related government actions, and (19) increases in inflation or interest rates and the possibility of economic recession. A more detailed description of these risks is contained under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. These risks are not all inclusive and given these and other possible risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.
Any forward-looking statements made by ITW speak only as of the date on which they are made. ITW is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise, except as required by law.
ITW practices fair disclosure for all interested parties. Investors should be aware that while ITW regularly communicates with securities analysts and other investment professionals, it is against ITW's policy to disclose to them any material non-public information or other confidential commercial information. Investors should not assume that ITW agrees with any statement or report issued by any analyst irrespective of the content of the statement or report.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to exposures to market risk as reported in the Company's 2023 Annual Report on Form 10-K.
ITEM 4. Controls and Procedures
The Company's management, with the participation of the Company's President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e)) as of September 30, 2024. Based on such evaluation, the Company's President & Chief Executive Officer and Senior Vice President & Chief Financial Officer have concluded that, as of September 30, 2024, the Company's disclosure controls and procedures were effective.
In connection with the evaluation by management, including the Company's President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended September 30, 2024 were identified that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. Legal Proceedings
None. The Company's threshold for disclosing environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.
ITEM 1A. Risk Factors
The Company's business, financial condition, results of operations and cash flows are subject to various risks which could cause actual results to vary materially from recent results or from anticipated future results. Refer to the description of the Company's risk factors previously disclosed in Part I - Item 1A - Risk Factors in the Company's 2023 Annual Report on Form 10-K. There have been no material changes to the risk factors described therein.
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 7, 2021, the Company announced a stock repurchase program which provided for the repurchase of up to $3.0 billion of the Company's common stock over an open-ended period of time (the "2021 Program"). The 2021 Program was completed in the fourth quarter of 2023.
On August 4, 2023, the Company announced a new stock repurchase program which provides for the repurchase of up to an additional $5.0 billion of the Company's common stock over an open-ended period of time (the "2023 Program"). As of September 30, 2024, there were approximately $3.9 billion of authorized repurchases remaining under the 2023 Program.
Share repurchase activity for the third quarter of 2024 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions except per share amounts |
| Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Programs | | Maximum Value of Shares That May Yet Be Purchased Under Programs |
| July 2024 | | 0.6 | | | $ | 242.75 | | | 0.6 | | | $ | 4,102 | |
| August 2024 | | 0.5 | | | $ | 243.09 | | | 0.5 | | | $ | 3,965 | |
| September 2024 | | 0.4 | | | $ | 250.45 | | | 0.4 | | | $ | 3,865 | |
| Total | | 1.5 | | | | | 1.5 | | | |
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| Exhibit Number | | Exhibit Description |
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| 101 | | The following financial and related information from the Illinois Tool Works Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 is formatted in Inline Extensible Business Reporting Language (iXBRL) and submitted electronically herewith: (i) Statement of Income, (ii) Statement of Comprehensive Income, (iii) Statement of Financial Position, (iv) Statement of Changes in Stockholders' Equity, (v) Statement of Cash Flows, and (vi) related Notes to Financial Statements. |
| | |
| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | ILLINOIS TOOL WORKS INC. |
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| Dated: | October 30, 2024 | By: | /s/ Randall J. Scheuneman |
| | | Randall J. Scheuneman |
| | | Vice President & Chief Accounting Officer |
| | | (Principal Accounting Officer and Duly Authorized Officer) |
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