Illinois Tool Works Inc.

Good morning. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the ITW fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. For those participating in the Q&A, you will have an opportunity to ask one question, and if needed, one follow-up question. Thank you. Karen Fletcher, Vice President of Investor Relations, you may begin your conference.

Thank you, Sheryl. Good morning, and welcome to ITW's fourth quarter 2022 conference call. I'm joined by our Chairman and CEO, Scott Santee, and Senior Vice President and CFO, Michael Larson. During today's call, we will discuss ITW's fourth quarter and full year 2022 financial results and provide guidance for full year 2023. Slide two is a reminder that this presentation contains forward-looking statements. We refer you to the company's 2021 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations. This presentation uses certain non-GAAP measures, and a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to slide three, and it's now my pleasure to turn the call over to our chairman and CEO, Scott Santee.

Thanks, Karen, and good morning, everyone. As you saw from our release this morning, in Q4, we delivered a strong finish to a year of high-quality execution in the face of some pretty unique challenges in the operating environment. Starting with the top line, organic growth was 12% as all segments delivered positive organic growth, and five of our seven segments grew double digits, led by auto OEM up 20%, food equipment up 17%, welding up 15%, polymers and fluids up 11 percent, and tested measurements and electronics up 10 percent. Construction products was up 4 percent, and specialty products was up 3. Operating margin expanded 210 basis points to 24.8 percent, with 110 basis point contribution from enterprise initiatives and favorable price-cost margin impact of 70 basis points which was for the first time in nine quarters, which was favorable for the first time in nine quarters. Incremental margin was 52% and operating income grew 18%. Gap earnings per share increased 53% to a record $2.95, including 61 cents of gains from divestitures and 12 cents of negative currency, excluding 61 cents, sorry, Of divestiture gains and $0.12 of negative currency, EPS growth was 27%. For all of 2022, the company delivered organic growth of 12% for the second year in a row, best-in-class operating margin of 24.4% in our base business, after-tax return on invested capital of 29.1%, and record gap EPS of 977, an increase of 15% versus the prior year. There's no question that our decision to stay invested in our enterprise strategy and in our people throughout the pandemic and the quality of our team's execution of our win the recovery focus coming out of it are powering the strong growth and financial performance ITW is currently delivering. As a result, we are very pleased with our momentum and positioning heading into 2023. Turning to our 2023 guidance, Demand remains solid across the majority of our portfolio, and we are seeing meaningful improvements in supply chain performance and moderating input cost inflation. At the same time, there's no question that the economic outlook, let's call it, remains certainly dynamic. As a result, our organic growth projection for 2023 of 3 to 5 percent and our EPS guidance of 960 at the midpoint reflect current levels of demand and a risk adjustment for further slowing in certain end markets. Michael will provide more detail on that in just a minute. Before I turn it over to Michael, I want to again thank my ITW colleagues around the world for their extraordinary dedication and commitment to serving our customers and executing our strategy with excellence. Michael, over to you.