itw-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended	March 31, 2024

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _______________ to _______________

Commission File Number: 1-4797

ILLINOIS TOOL WORKS INC.

(Exact name of registrant as specified in its charter)

Delaware

36-1258310

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

155 Harlem Avenue

Glenview

60025

(Address of principal executive offices)

(Zip Code)

(Registrant's telephone number, including area code) 847-724-7500

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	ITW	New York Stock Exchange
0.250% Euro Notes due 2024	ITW24A	New York Stock Exchange
0.625% Euro Notes due 2027	ITW27	New York Stock Exchange
2.125% Euro Notes due 2030	ITW30	New York Stock Exchange
1.00% Euro Notes due 2031	ITW31	New York Stock Exchange
3.00% Euro Notes due 2034	ITW34	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of registrant's common stock, $0.01 par value, outstanding at March 31, 2024: 298.4 million


	Table of Contents

	PART I - Financial Information
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

	PART II - Other Information

Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 6.	Exhibits	31

Signatures		32

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

Illinois Tool Works Inc. and Subsidiaries

Statement of Income (Unaudited)


	Three Months Ended
	March 31,
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

Shares of Common Stock Outstanding During the Period:
Average	298.9		305.0
Average assuming dilution	300.0		306.1

The Notes to Financial Statements are an integral part of this statement.

Illinois Tool Works Inc. and Subsidiaries

Statement of Comprehensive Income (Unaudited)


	Three Months Ended
	March 31,
In millions	2024		2023
Net Income	$	819	$	714

Foreign currency translation adjustments, net of tax	(51)		37
Pension and other postretirement benefit adjustments, net of tax	1		—
Other comprehensive income (loss)	(50)		37

Comprehensive Income	$	769	$	751

The Notes to Financial Statements are an integral part of this statement.

Illinois Tool Works Inc. and Subsidiaries

Statement of Financial Position (Unaudited)


In millions except per share amounts	March 31, 2024		December 31, 2023
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
Goodwill	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 (Authorized- 700.0 shares; par value of $0.01 per share):
Issued- 550.0 shares in 2024 and 2023 Outstanding- 298.4 shares in 2024 and 299.3 shares in 2023	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

The Notes to Financial Statements are an integral part of this statement.

Illinois Tool Works Inc. and Subsidiaries

Statement of Changes in Stockholders' Equity (Unaudited)


In millions except per share amounts	Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total

Three Months Ended March 31, 2024
Balance at December 31, 2023	$	6	$	1,588	$	27,122	$	(23,870)	$	(1,834)	$	1	$	3,013
Net income	—		—		819		—		—		—		819
Common stock issued for stock-based compensation	—		15		—		4		—		—		19
Stock-based compensation expense	—		15		—		—		—		—		15
Repurchases of common stock	—		—		—		(375)		—		—		(375)
Excise tax on repurchases of common stock	—		—		—		(2)		—		—		(2)
Dividends declared ($1.40 per share)	—		—		(418)		—		—		—		(418)
Other comprehensive income (loss)	—		—		—		—		(50)		—		(50)

Balance at March 31, 2024	$	6	$	1,618	$	27,523	$	(24,243)	$	(1,884)	$	1	$	3,021

Three Months Ended March 31, 2023
Balance at December 31, 2022	$	6	$	1,501	$	25,799	$	(22,377)	$	(1,841)	$	1	$	3,089
Net income	—		—		714		—		—		—		714
Common stock issued for stock-based compensation	—		8		—		11		—		—		19
Stock-based compensation expense	—		17		—		—		—		—		17
Repurchases of common stock	—		—		—		(375)		—		—		(375)
Excise tax on repurchases of common stock	—		—		—		(2)		—		—		(2)
Dividends declared ($1.31 per share)	—		—		(398)		—		—		—		(398)
Other comprehensive income (loss)	—		—		—		—		37		—		37

Balance at March 31, 2023	$	6	$	1,526	$	26,115	$	(22,743)	$	(1,804)	$	1	$	3,101

The Notes to Financial Statements are an integral part of this statement.

Illinois Tool Works Inc. and Subsidiaries

Statement of Cash Flows (Unaudited)


	Three Months Ended
	March 31,
In millions	2024		2023
Cash Provided by (Used for) Operating Activities:
Net income	$	819	$	714
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	72		68
Amortization and impairment of intangible assets	25		31
Change in deferred income taxes	44		3
Net provision for (recoveries of) uncollectible accounts	(3)		3
(Income) loss from investments	3		(2)
(Gain) loss on sale of plant and equipment	—		(1)

Stock-based compensation expense	15		17
Cumulative effect of change in inventory accounting method	(117)		—
Other non-cash items, net	6		4
Change in assets and liabilities, net of acquisitions and divestitures:
(Increase) decrease in-
Trade receivables	(139)		(17)
Inventories	(12)		64
Prepaid expenses and other assets	(38)		(50)
Increase (decrease) in-
Accounts payable	22		2
Accrued expenses and other liabilities	(166)		(184)
Income taxes	57		77
Other, net	1		(1)
Net cash provided by operating activities	589		728
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents)	(57)		—
Additions to plant and equipment	(95)		(113)
Proceeds from investments	6		2
Proceeds from sale of plant and equipment	2		3
Proceeds from sales of operations and affiliates	—		(3)
Other, net	(8)		—
Net cash provided by (used for) investing activities	(152)		(111)
Cash Provided by (Used for) Financing Activities:
Cash dividends paid	(419)		(400)
Issuance of common stock	41		33
Repurchases of common stock	(375)		(375)
Net proceeds from (repayments of) debt with original maturities of three months or less	952		709

Repayments of debt with original maturities of more than three months	(700)		(138)
Other, net	(23)		(14)
Net cash provided by (used for) financing activities	(524)		(185)
Effect of Exchange Rate Changes on Cash and Equivalents	(19)		3
Cash and Equivalents:
Increase (decrease) during the period	(106)		435
Beginning of period	1,065		708
End of period	$	959	$	1,143
Supplementary Cash Flow Information:
Cash Paid During the Period for Interest	$	76	$	62
Cash Paid During the Period for Income Taxes, Net of Refunds	$	152	$	128

The Notes to Financial Statements are an integral part of this statement.

Illinois Tool Works Inc. and Subsidiaries

Notes to Financial Statements (Unaudited)

(1) Significant Accounting Policies

Financial Statements— The unaudited financial statements included herein have been prepared by Illinois Tool Works Inc. and Subsidiaries (the "Company"). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. Interim results are not necessarily indicative of results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements and notes to financial statements included in the Company's 2023 Annual Report on Form 10-K. Certain reclassifications of prior year data have been made to conform with current year reporting.

Inventories— Inventories are stated at the lower of cost or net realizable value and include material, labor and factory overhead. As of December 31, 2023, the last-in, first-out ("LIFO") method was used to determine the cost of inventories at certain U.S. businesses representing approximately 23% of total inventories, and the first-in, first-out ("FIFO") method, which approximates current cost, was used for all other inventories. During the first quarter of 2024, the Company changed the method used to determine the cost of inventory at certain U.S. businesses from LIFO to the FIFO method, as the Company believes the FIFO method is preferable because it provides a more consistent method for valuing inventory across the Company’s operations, improves comparability with peers, and better reflects the current value of inventories at the balance sheet date.

The LIFO provision for the years ended December 31, 2023 and 2022 was $6 million of expense and $7 million of income, respectively, and was not material to the Company’s results of operations, financial position or cash flows. Therefore, the Company has recorded the pre-tax cumulative effect of this change in accounting method of $117 million as a reduction of Cost of revenue in the first quarter of 2024. Refer to Note 7. Inventories for additional information regarding the Company’s inventory balances.

New Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance which expands annual and interim disclosure requirements for reportable segments. The more significant provisions include the requirement to disclose significant segment expenses and certain disclosures made annually under existing guidance will be required for interim periods. The guidance is effective for the Company beginning with its annual reporting for the year ended December 31, 2024 and is required to be applied retrospectively to all periods presented. The Company is currently assessing the impact the guidance will have on its disclosures.

In December 2023, the FASB issued authoritative guidance that expands the disclosure requirements for income taxes. The new guidance will require consistent categories and greater disaggregation of information presented in the effective tax rate reconciliation as well as disaggregation of income taxes paid by jurisdiction. The guidance is effective for the Company beginning with its annual reporting for the year ended December 31, 2025 and is required to be applied prospectively, with retrospective application to prior periods allowed. The Company is currently assessing the impact the guidance will have on its disclosures.

(2) Acquisitions

On January 2, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $57 million, net of cash acquired. This acquisition was not material to the Company’s results of operations, financial position or cash flows. The allocation of purchase price will be completed as soon as practicable, but no later than one year from the acquisition date.

(3) Divestitures

The Company routinely reviews its portfolio of businesses relative to its business portfolio criteria and evaluates if further portfolio refinements may be needed. As such, the Company may commit to a plan to exit or dispose of certain businesses and present them as held for sale in periods prior to the sale of the business.

In the fourth quarter of 2022, plans were approved to divest one business in the Specialty Products segment. This business was presented as held for sale beginning in the fourth quarter of 2022. This business was sold on April 3, 2023, with no significant gain or loss upon sale. Operating revenue related to this business that was included in the Company's results of operations was $9 million for the three months ended March 31, 2023.

(4) Operating Revenue

The Company's 84 diversified operating divisions are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. Operating revenue by product category, which is consistent with the Company's segment presentation, for the three months ended March 31, 2024 and 2023 was as follows:


	Three Months Ended
	March 31,
In millions	2024		2023
Automotive OEM	$	816	$	796
Food Equipment	631		635
Test & Measurement and Electronics	696		703
Welding	476		493
Polymers & Fluids	432		447
Construction Products	488		526
Specialty Products	440		423
Intersegment revenue	(6)		(4)
Total operating revenue	$	3,973	$	4,019

The following is a description of the product offerings, end markets and typical revenue transactions for each of the Company's seven segments:

Automotive OEM— This segment is a global, niche supplier to top tier OEMs, providing unique innovation to address pain points for sophisticated customers with complex problems. Businesses in this segment produce components and fasteners for automotive-related applications. This segment primarily serves the automotive original equipment manufacturers and tiers market. Products in this segment include:

•plastic and metal components, fasteners and assemblies for automobiles, light trucks and other industrial uses.

Products sold in this segment are primarily manufactured to the customer's specifications and are sold under long-term supply agreements with OEM auto manufacturers and other top tier auto parts suppliers. The Company typically recognizes revenue for products in this segment at the time of shipment. Certain products may be produced utilizing tooling that is owned by the customer that the Company developed and is reimbursed by the customer for the associated cost. In these arrangements, the Company typically retains a contractual right to use the customer-owned tooling for the purpose of fulfilling its obligations under the supply agreement. The Company records reimbursements for the cost of customer-owned tooling as a cost offset rather than operating revenue as tooling is not considered a product offering central to the Company's operations.

Food Equipment— This segment is a highly focused and branded industry leader in commercial food equipment differentiated by innovation and integrated service offerings. This segment primarily serves the food service, food retail and food institutional/restaurant markets. Products in this segment include:

•warewashing equipment;

•cooking equipment, including ovens, ranges and broilers;

•refrigeration equipment, including refrigerators, freezers and prep tables;

•food processing equipment, including slicers, mixers and scales;

•kitchen exhaust, ventilation and pollution control systems; and

•food equipment service, maintenance and repair.

Revenue for equipment sold in this segment is typically recognized at the time of product shipment. In limited circumstances involving installation of equipment and customer acceptance, the Company may recognize revenue upon completion of installation and acceptance by the customer. Annual service contracts are typically sold separate from equipment and the related revenue is recognized on a straight-line basis over the annual service period. Operating revenue for on-demand service repairs and parts is recorded upon completion and customer acceptance of the work performed.

Test & Measurement and Electronics— This segment is a branded and innovative producer of test and measurement and electronic manufacturing and maintenance, repair, and operations, or "MRO" solutions that improve efficiency and quality for customers in diverse end markets. Businesses in this segment produce equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. This segment primarily serves the electronics, general industrial, energy, automotive original equipment manufacturers and tiers, industrial capital goods and consumer durables markets. Products in this segment include:

•equipment, consumables, and related software for testing and measuring of materials, structures, gases and fluids;

•electronic assembly equipment;

•electronic components and component packaging;

•static control equipment and consumables used for contamination control in clean room environments; and

•pressure sensitive adhesives and components for electronics, medical, transportation and telecommunications applications.

Revenue for products sold in this segment is typically recognized at the time of shipment. In limited circumstances where significant obligations to the customer are unfulfilled at the time of shipment, typically involving installation of equipment and customer acceptance, revenue recognition is deferred until such obligations have been completed. In other limited arrangements involving the sale of highly specialized systems that include a high degree of customization and installation at the customer site, revenue is recognized over time if the product does not have an alternative use and the Company has an enforceable right to payment for work performed to date. Revenue for transactions meeting these criteria is recognized over time as work is performed based on the costs incurred to date relative to the total estimated costs at completion.

Welding— This segment is a branded value-added equipment and specialty consumable manufacturer with innovative and leading technology. Businesses in this segment produce arc welding equipment, consumables and accessories for a wide array of industrial and commercial applications. This segment primarily serves the general industrial market, which includes fabrication, shipbuilding and other general industrial markets, and construction, energy, MRO, industrial capital goods and automotive original equipment manufacturers and tiers markets. Products in this segment include:

•arc welding equipment; and

•metal arc welding consumables and related accessories.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment.

Polymers & Fluids— This segment is a branded supplier to niche markets that require value-added, differentiated products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. This segment primarily serves the automotive aftermarket, general industrial and MRO markets. Products in this segment include:

•adhesives for industrial, construction and consumer purposes;

•chemical fluids which clean or add lubrication to machines;

•epoxy and resin-based coating products for industrial applications;

•hand wipes and cleaners for industrial applications;

•fluids, polymers and other supplies for auto aftermarket maintenance and appearance;

•fillers and putties for auto body repair; and

•polyester coatings and patch and repair products for the marine industry.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment.

Construction Products— This segment is a branded supplier of innovative engineered fastening systems and solutions. This segment primarily serves the residential construction, renovation/remodel and commercial construction markets. Products in this segment include:

•fasteners and related fastening tools for wood and metal applications;

•anchors, fasteners and related tools for concrete applications;

•metal plate truss components and related equipment and software; and

•packaged hardware, fasteners, anchors and other products for retail.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment.

Specialty Products— This segment is focused on diversified niche market opportunities with substantial patent protection producing beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. This segment primarily serves the food and beverage, consumer durables, general industrial, industrial capital goods, airlines and printing and publishing markets. Products in this segment include:

•conveyor systems and line automation for the food and beverage industries;

•plastic consumables that multi-pack cans and bottles and related equipment;

•foil, film and related equipment used to decorate consumer products;

•product coding and marking equipment and related consumables;

•plastic and metal closures and components for appliances;

•airport ground support equipment; and

•components for medical devices.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment. In limited circumstances where significant obligations to the customer are unfulfilled at the time of shipment, typically involving installation of equipment and customer acceptance, revenue is recognized when such obligations have been completed.

(5) Income Taxes

The Company's effective tax rate for the three months ended March 31, 2024 and 2023 was 23.6% and 22.6%, respectively. The effective tax rates included discrete income tax benefits related to excess tax benefits from stock-based compensation of $9 million and $13 million for the three months ended March 31, 2024 and 2023, respectively.

The Company and its subsidiaries file tax returns in the U.S. and various state, local and foreign jurisdictions. These tax returns are routinely audited by the tax authorities in these jurisdictions, including the Internal Revenue Service, His Majesty's Revenue and Customs, German Fiscal Authority, French Fiscal Authority, and Australian Tax Office, and a number of these audits are currently ongoing, which may increase the amount of the unrecognized tax benefits in future periods. The Company believes it is reasonably possible that within the next twelve months the amount of the Company's unrecognized tax benefits may be decreased by approximately $9 million related predominantly to the potential resolution of income tax examinations. The Company has recorded its best estimate of the potential exposure for these issues.

(6) Net Income Per Share

Net income per basic share is computed by dividing net income by the weighted-average number of shares outstanding for the period. Net income per diluted share is computed by dividing net income by the weighted-average number of shares assuming dilution for stock options and restricted stock units. Dilutive shares reflect the potential additional shares that would be outstanding if the dilutive stock options outstanding were exercised and the unvested restricted stock units vested during the period. The computation of net income per share for the three months ended March 31, 2024 and 2023 was as follows:


	Three Months Ended
	March 31,
In millions except per share amounts	2024		2023
Net Income	$	819	$	714
Net income per share—Basic:
Weighted-average common shares	298.9		305.0
Net income per share—Basic	$	2.74	$	2.34
Net income per share—Diluted:
Weighted-average common shares	298.9		305.0
Effect of dilutive stock options and restricted stock units	1.1		1.1
Weighted-average common shares assuming dilution	300.0		306.1
Net income per share—Diluted	$	2.73	$	2.33

Options that were considered antidilutive were not included in the computation of diluted net income per share. There were 0.2 million and 0.3 million antidilutive options outstanding for the three months ended March 31, 2024 and 2023, respectively.

(7) Inventories

Inventories as of March 31, 2024 and December 31, 2023 were as follows:


In millions	March 31, 2024		December 31, 2023
Raw material	$	719	$	742
Work-in-process	236		234
Finished goods	870		848
LIFO reserve	—		(117)
Total inventories	$	1,825	$	1,707

During the first quarter of 2024, the Company changed the method used to determine the cost of inventory at certain U.S. businesses from LIFO to the FIFO method, as the Company believes the FIFO method is preferable because it provides a more consistent method for valuing inventory across the Company’s operations, improves comparability with peers, and better reflects the current value of inventories at the balance sheet date. Refer to Note 1. Significant Accounting Policies for additional information regarding this change in accounting method.

(8) Pension and Other Postretirement Benefits

Pension and other postretirement benefit costs for the three months ended March 31, 2024 and 2023 were as follows:


	Three Months Ended
	March 31,
	Pension				Other Postretirement Benefits
In millions	2024		2023		2024		2023
Components of net periodic benefit cost:
Service cost	$	9	$	9	$	1	$	1
Interest cost	23		23		6		6
Expected return on plan assets	(33)		(32)		(5)		(5)
Amortization of actuarial loss (gain)	2		1		(1)		(1)


Total net periodic benefit cost (income)	$	1	$	1	$	1	$	1

The service cost component of net periodic benefit cost is presented within Cost of revenue and Selling, administrative, and research and development expenses in the Statement of Income while the other components of net periodic benefit cost are presented within Other income (expense).

The Company expects to contribute approximately $60 million to its pension plans and $37 million to its other postretirement benefit plans in 2024. As of March 31, 2024, contributions of $32 million to pension plans and $10 million to other postretirement benefit plans have been made.

(9) Debt

Total debt as of March 31, 2024 and December 31, 2023 was as follows:


In millions	March 31, 2024		December 31, 2023
Short-term debt	$	2,066	$	1,825
Long-term debt	6,259		6,339
Total debt	$	8,325	$	8,164

Short-term debt included commercial paper of $1.4 billion and $464 million as of March 31, 2024 and December 31, 2023, respectively. The weighted-average interest rate on commercial paper as of March 31, 2024 and December 31, 2023 was 5.40% for both periods. Short-term debt also included $647 million as of March 31, 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. 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-denominated credit agreement (the "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 March 31, 2024, the Company had €1.3 billion outstanding under the Euro Credit Agreement with an interest rate of 4.61%, which was included in Long-term debt as the Company exercised its first option during the first quarter of 2024 and intends to exercise its second option to extend the termination date.

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 March 31, 2024 or December 31, 2023.

The approximate fair value and related carrying value of the Company's total long-term debt, including current maturities of long-term debt presented as short-term debt, as of March 31, 2024 and December 31, 2023 were as follows:


In millions	March 31, 2024		December 31, 2023
Fair value	$	6,573	$	7,457
Carrying value	6,906		7,700

The approximate fair values of the Company's long-term debt, including current maturities, were based on a valuation model using Level 2 observable inputs which included market rates for comparable instruments for the respective periods.

(10) Accumulated Other Comprehensive Income (Loss)

The following table summarizes changes in Accumulated other comprehensive income (loss) for the three months ended March 31, 2024 and 2023:


	Three Months Ended
	March 31,
In millions	2024		2023
Beginning balance	$	(1,834)	$	(1,841)

Foreign currency translation adjustments during the period	(28)		27

Income taxes	(23)		10
Total foreign currency translation adjustments, net of tax	(51)		37


Pension and other postretirement benefit adjustments reclassified to income	1		—
Income taxes	—		—
Total pension and other postretirement benefit adjustments, net of tax	1		—

Ending balance	$	(1,884)	$	(1,804)

Pension and other postretirement benefit adjustments reclassified to income related primarily to the amortization of actuarial gains and losses. Refer to Note 8. Pension and Other Postretirement Benefits for additional information.

The Company designated the €1.0 billion of Euro notes issued in May 2014, the €1.0 billion of Euro notes issued in May 2015, the €1.6 billion of Euro notes issued in June 2019 and the €1.3 billion term loan under the Euro Credit Agreement in May 2023 as hedges of a portion of its net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations. Changes in the value of this debt resulting from fluctuations in the Euro to U.S. Dollar exchange rate have been recorded as foreign currency translation adjustments within Accumulated other comprehensive income (loss). On February 22, 2022, €500 million of the Euro notes issued in May 2014 were redeemed in full and on May 22, 2023, €500 million of the Euro notes issued in May 2015 were repaid on the due date. The carrying values of the outstanding 2019, 2015 and 2014 Euro notes and 2023 Euro term loan as of March 31, 2024 were $1.7 billion, $536 million, $530 million, and $1.4 billion, respectively. The amount of pre-tax gain (loss) related to this debt recorded in Other comprehensive income (loss) was a gain of $97 million for the three months ended March 31, 2024 and a loss of $41 million for the three months ended March 31, 2023.

As of March 31, 2024 and 2023, the ending balance of Accumulated other comprehensive income (loss) consisted of after-tax cumulative translation adjustment losses of $1.6 billion and $1.5 billion, respectively, and after-tax unrecognized pension and other postretirement benefit costs of $326 million and $293 million, respectively.

(11) Segment Information

The Company's operations are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. Refer to Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for information regarding operating revenue and operating income for the Company's segments.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified range of industrial products and equipment with 84 divisions in 51 countries. As of December 31, 2023, the Company employed approximately 45,000 people.

Due to the large number of diverse businesses and the Company's decentralized operating structure, the Company does not require its businesses to provide detailed information on operating results. Instead, the Company's corporate management collects data on several key measurements: operating revenue, operating income, operating margin, overhead costs, number of months on hand in inventory, days sales outstanding in accounts receivable, past due receivables and return on invested capital. These key measures are monitored by management and significant changes in operating results versus current trends in end markets and variances from forecasts are discussed with operating unit management.

THE ITW BUSINESS MODEL

The powerful and highly differentiated ITW Business Model is the Company's core source of value creation. It is the Company's competitive advantage and defines how ITW creates value for its shareholders. The ITW Business Model is comprised of three unique elements:

•ITW's 80/20 Front-to-Back process is the operating system that is applied in every ITW business. Initially introduced as a manufacturing efficiency tool in the 1980s, ITW has continually refined, improved and expanded 80/20 into a proprietary, holistic business management process that generates significant value for the Company and its customers. Through the application of data driven insights generated by 80/20 practice, ITW focuses on its largest and best opportunities (the "80") and eliminates cost, complexity and distractions associated with the less profitable opportunities (the "20"). 80/20 enables ITW businesses to consistently achieve world-class operational excellence in product availability, quality, and innovation, while generating superior financial performance;

•Customer-back Innovation has fueled decades of profitable growth at ITW. The Company's unique innovation approach is built on insight gathered from the 80/20 Front-to-Back process. Working from the customer back, ITW businesses position themselves as the go-to problem solver for their "80" customers. ITW's innovation efforts are focused on understanding customer needs, particularly those in "80" markets with solid long-term growth fundamentals, and creating unique solutions to address those needs. These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately 19,600 granted and pending patents;

•ITW's Decentralized, Entrepreneurial Culture enables ITW businesses to be fast, focused, and responsive. ITW businesses have significant flexibility within the framework of the ITW Business Model to customize their approach in order to best serve their specific customers' needs. ITW colleagues recognize their unique responsibilities to execute the Company's strategy and values. As a result, the Company maintains a focused and simple organizational structure that, combined with outstanding execution, delivers best-in-class services and solutions adapted to each business' customers and end markets.

ENTERPRISE STRATEGY: 2012-2023

In late 2012, ITW began its strategic framework transitioning the Company to fully leverage the unique and powerful set of capabilities and operating practices of the ITW Business Model. The Company undertook a complete review of its performance, focusing on its businesses delivering consistent above-market growth with best-in-class margins and returns, and developing a strategy to replicate that performance across its operations. ITW determined that solid and consistent above-market organic growth is the core growth engine to deliver world-class financial performance and compelling long-term returns for its shareholders.

Key initiatives in the Company's enterprise strategy included portfolio management, business structure simplification, strategic sourcing and the diligent re-application of ITW's proprietary 80/20 Front-to-Back process.

•As part of the Portfolio Management initiative, ITW exited businesses that were operating in commoditized market spaces and prioritized sustainable differentiation as a must-have requirement for all ITW businesses. This process

included both divesting entire businesses and exiting commoditized product lines and customers inside otherwise highly differentiated ITW divisions.

•Business Structure Simplification was implemented to simplify and scale up ITW's operating structure to support increased engineering, marketing, and sales resources, and improve global reach and competitiveness, all of which were critical to driving accelerated organic growth. ITW now has 84 scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation.

•The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at ITW, delivering an average of one percent reduction in spend each year since 2013 and continues to be a key contributor to the Company's ongoing enterprise strategy.

•With the initial portfolio realignment and scale-up work largely completed, the Company shifted its focus to preparing for and accelerating organic growth, reapplying the 80/20 Front-to-Back process to optimize its scaled-up divisions for growth, first, to build a foundation of operational excellence, and second, to identify the best opportunities to drive organic growth.

Since implementing the Company's enterprise strategy in 2012, the Company has demonstrated the compelling performance potential of the ITW Business Model and superior 80/20 management, resulting in meaningful incremental improvement in margins and returns as evidenced by the Company's operating margin and after-tax return on invested capital. At the same time, these 80/20 initiatives can also result in restructuring initiatives that reduce costs and improve profitability and returns.

OUR NEXT PHASE: 2024-2030

In the Next Phase of the Company’s evolution, the ITW Business Model and the Enterprise Strategy framework will be as formidable of a competitive advantage and performance differentiator as it has been over the last decade, if not more so. Volatility, risk and the pace of change in the global operating environment will continue to increase, and a decentralized entrepreneurial culture allows the Company to be a fast adaptor – to read, react, respond and evolve. The Company’s ability to consistently execute and invest through the ups and downs of the business cycle is now a defining competitive advantage.

Throughout the Next Phase, the Company's focus is to build organic growth into a core ITW strength on par with the Company’s world-class financial performance and operational capabilities. Throughout this phase, the Company will sustain its foundational strengths built over the past decade, including the high-quality ITW Business Model practice. Customer-back Innovation (CBI) is the most impactful driver to achieve high-quality organic growth through the cycle by establishing trusted problem solver relationships with key customers to effectively invent solutions that address customers' most critical pain points or tackle the biggest growth opportunities. CBI successes, coupled with underlying market growth and share gains, are how the Company intends to achieve its high-quality organic growth.

Portfolio Discipline

The Company only operates in industries where it can generate significant, long-term competitive advantage from the ITW Business Model. ITW businesses have the right "raw material" in terms of market and business attributes that best fit the ITW Business Model and have significant potential to drive above-market organic growth over the long-term.

The Company focuses on high-quality businesses, ensuring it operates in markets with positive long-term macro fundamentals and with customers that have critical needs and value ITW's differentiated products, services and solutions. ITW's portfolio operates in highly diverse end markets and geographies which makes the Company more resilient in the face of uncertain or volatile market environments.

The Company routinely evaluates its portfolio to ensure it delivers sustainable differentiation and drives consistent long-term performance. This includes both implementing portfolio refinements and assessing selective high-quality acquisitions to supplement ITW's long-term growth potential.

80/20 Front-to-Back Practice Excellence

ITW will continue to drive 80/20 Front-to-Back practice excellence in every division in the Company, every day. Driving strong operational excellence in the quality of 80/20 Front-to-Back practice across the Company, division by division, will produce further customer-facing performance improvement in a number of divisions and additional structural margin expansion at the enterprise level.

TERMS USED BY ITW

Management uses the following terms to describe the financial results of operations of the Company:

•Organic business - acquired businesses that have been included in the Company's results of operations for more than 12 months on a constant currency basis.

•Operating leverage - the estimated effect of the organic revenue volume changes on organic operating income, assuming variable margins remain the same as the prior period.

•Price/cost - represents the estimated net impact of increases or decreases in the cost of materials used in the Company's products versus changes in the selling price to the Company's customers.

•Product line simplification (PLS) - focuses businesses on eliminating the complexity and overhead costs associated with smaller product lines and customers, and focuses businesses on supporting and growing their largest customers and product lines. In the short-term, PLS may result in a decrease in revenue and overhead costs while improving operating margin. In the long-term, PLS is expected to result in growth in revenue, profitability, and returns.

Unless otherwise stated, the changes in financial results in the consolidated results of operations and the results of operations by segment represent the current year period versus the comparable period in the prior year. The following discussion of operating results should be read in conjunction with Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2023 Annual Report on Form 10-K.

CONSOLIDATED RESULTS OF OPERATIONS

During the first quarter of 2022, Russian military forces invaded Ukraine. In response, the United States and several other countries imposed economic and other sanctions on Russia. The Company has four immaterial Russian subsidiaries with total assets of approximately $22 million as of March 31, 2024. The revenue for these subsidiaries for the three months ended March 31, 2024 was approximately $5 million. These subsidiaries are not material to the Company’s results of operations or financial position.

During the first quarter of 2024, the Company changed the method used to determine the cost of inventory at certain U.S. businesses from the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO") method, as the Company believes the FIFO method is preferable because it provides a more consistent method for valuing inventory across the Company’s operations, improves comparability with peers, and better reflects the current value of inventories at the balance sheet date. The LIFO provision for the years ended December 31, 2023 and 2022 was $6 million of expense and $7 million of income, respectively, and was not material to the Company’s results of operations, financial position or cash flows. Therefore, the Company has recorded the pre-tax cumulative effect of this change in accounting method of $117 million as a reduction of Cost of revenue in the first quarter of 2024. Refer to Note 1. Significant Accounting Policies and Note 7. Inventories in Item 1. Financial Statements for additional information regarding this change in accounting method and the Company’s inventory balances.

In a challenging and dynamic environment, the Company delivered strong financial results in the first quarter of 2024 primarily due to the continued successful execution of enterprise initiatives and continued focus on the highly differentiated ITW Business Model.

Operating Revenue

Refer to the "Results of Operations for Total Company" and the "Results of Operations by Segment" sections for discussion of changes in operating revenue for the first quarter of 2024 compared to 2023.

Operating Expenses


	Three Months Ended March 31,
Dollars in millions	2024			2023
Operating Revenue	$	3,973		$	4,019
Cost of revenue	$	2,145		$	2,341
Percent of operating revenue	54.0		%	58.3		%
Selling, administrative, and research and development expenses	$	676		$	675
Percent of operating revenue	17.0		%	16.8		%
Amortization and impairment of intangible assets	$	25		$	31
Percent of operating revenue	0.6		%	0.8		%

Cost of revenue was $2.1 billion and $2.3 billion in the first quarter of 2024 and 2023, respectively. Cost of revenue was 8.4% lower in the first quarter of 2024 compared to 2023 primarily due to the LIFO accounting method change, which reduced cost of revenue by 5.0%. Cost of revenue as a percent of operating revenue improved in the first quarter of 2024 compared to 2023 primarily due to the LIFO accounting method change and benefits from the Company's enterprise initiatives, partially offset by higher employee-related expenses and unfavorable operating leverage.

Selling, administrative, and research and development expenses were $676 million and $675 million in the first quarter of 2024 and 2023, respectively. Selling, administrative, and research and development expenses as a percent of operating revenue were slightly higher in 2024 compared to 2023 primarily due to higher employee-related expenses, partially offset by benefits from the Company's enterprise initiatives.

Amortization and impairment of intangible assets was lower in the first quarter of 2024 compared to 2023 primarily due to fully amortized intangible assets.

Refer to the "Results of Operations for Total Company" and the "Results of Operation by Segment" sections for additional discussion of operating results for the first quarter of 2024 compared to 2023.

RESULTS OF OPERATIONS FOR TOTAL COMPANY

The Company's consolidated results of operations for the first quarter of 2024 and 2023 were as follows:


	Three Months Ended
Dollars in millions	March 31,						Components of Increase (Decrease)
	2024			2023			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	$	3,973		$	4,019		(1.1)	%	(0.6)	%	(0.1)	%	—	%	(0.4)	%	(1.1)	%
Operating income	$	1,127		$	972		15.9	%	16.1	%	(0.2)	%	0.4	%	(0.4)	%	15.9	%
Operating margin %	28.4		%	24.2		%	420 bps		410 bps		—		10 bps		—		420 bps

•Operating revenue declined in the first quarter primarily due to lower organic revenue and the unfavorable effect of foreign currency translation.

•Organic revenue declined 0.6% as a decrease in the Construction Products, Welding, Test & Measurement and Electronics, Food Equipment and Polymers & Fluids segments was partially offset by growth in the Automotive OEM and Specialty Products segments. Product line simplification activities reduced organic revenue by 40 basis points.

◦North American organic revenue decreased 3.5% as all seven segments declined primarily driven by the Test & Measurement and Electronics and Automotive OEM segments.

◦Europe, Middle East and Africa organic revenue increased 1.3% as growth in the Specialty Products, Test & Measurement and Electronics and Automotive OEM segments was partially offset by a decline in the Construction Products, Polymers & Fluids, Welding and Food Equipment segments.

◦Asia Pacific increased 5.6% as growth in five segments, primarily driven by Automotive OEM, was partially offset by a decline in the Construction Products and Welding segments. Organic revenue in China increased 15.3% due to an increase in the Automotive OEM, Polymers & Fluids, Specialty Products, Test & Measurement and Electronics and Food Equipment segments, partially offset by a decline in the Construction Products and Welding segments.

•Operating income of $1.1 billion grew 15.9%, or 3.8% excluding the $117 million favorable impact of the LIFO accounting method change discussed previously.

•Operating margin of 28.4% increased 420 basis points. Excluding the 300 basis points of favorable impact from the LIFO accounting method change, operating margin increased 120 basis points primarily driven by benefits from the Company's enterprise initiatives of 140 basis points and favorable price/cost of 90 basis points, partially offset by higher employee-related expenses, mix and unfavorable operating leverage of 20 basis points.

•The Company's effective tax rate for the first quarter of 2024 and 2023 was 23.6% and 22.6%, respectively. The effective tax rates included discrete income tax benefits related to excess tax benefits from stock-based compensation of $9 million and $13 million for the first quarter of 2024 and 2023, respectively.

•Diluted earnings per share (EPS) of $2.73 for the first quarter of 2024 increased 17.2%, or 4.7% excluding the favorable impact of $0.29 from the LIFO accounting method change.

•The Company repurchased approximately 1.4 million shares of its common stock in the first quarter of 2024 for approximately $375 million.

RESULTS OF OPERATIONS BY SEGMENT

Total operating revenue and operating income for the first quarter of 2024 and 2023 were as follows:


	Three Months Ended March 31,
Dollars in millions	Operating Revenue				Operating Income
	2024		2023		2024		2023
Automotive OEM	$	816	$	796	$	162	$	128
Food Equipment	631		635		164		169
Test & Measurement and Electronics	696		703		163		172
Welding	476		493		156		157
Polymers & Fluids	432		447		111		109
Construction Products	488		526		143		145
Specialty Products	440		423		130		109
Intersegment revenue	(6)		(4)		—		—
Unallocated	—		—		98		(17)
Total	$	3,973	$	4,019	$	1,127	$	972

Segments are allocated a fixed overhead charge based on the segment's revenue. Expenses not charged to the segments are reported separately as Unallocated. Because the Unallocated category includes a variety of items, it is subject to fluctuations on a quarterly and annual basis. Unallocated in 2024 includes the favorable pre-tax cumulative effect of the LIFO accounting method change of $117 million. Refer to Note 1. Significant Accounting Policies and Note 7. Inventories in Item 1. Financial Statements for additional information regarding this change in accounting method and the Company’s inventory balances.

AUTOMOTIVE OEM

This segment is a global, niche supplier to top tier OEMs, providing unique innovation to address pain points for sophisticated customers with complex problems. Businesses in this segment produce components and fasteners for automotive-related applications. This segment primarily serves the automotive original equipment manufacturers and tiers market. Products in this segment include:

•plastic and metal components, fasteners and assemblies for automobiles, light trucks and other industrial uses.

The results of operations for the Automotive OEM segment for the first quarter of 2024 and 2023 were as follows:


	Three Months Ended
Dollars in millions	March 31,						Components of Increase (Decrease)
	2024			2023			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	$	816		$	796		2.5	%	3.4	%	—	%	—	%	(0.9)	%	2.5	%
Operating income	$	162		$	128		26.1	%	26.5	%	—	%	0.6	%	(1.0)	%	26.1	%
Operating margin %	19.8		%	16.1		%	370 bps		360 bps		—		10 bps		—		370 bps

•Operating revenue grew due to higher organic revenue, partially offset by the unfavorable effect of foreign currency translation.

•Organic revenue increased 3.4% compared to worldwide auto builds which decreased 1%. Product line simplification activities reduced organic revenue by 50 basis points.

◦North American organic revenue decreased 5.7% compared to North American auto builds which increased 1% primarily due to customer mix and product line simplification activities. Auto builds for the Detroit 3, where the Company has higher content, declined 4%.

◦European organic revenue grew 2.2% compared to European auto builds which decreased 2% primarily due to market penetration gains and customer mix.

◦Asia Pacific organic revenue increased 20.6%. China organic revenue grew 23.2%, including growth in the electric vehicles market and higher content in the Chinese original equipment manufacturers, versus China auto builds which increased 4%.

•Operating margin of 19.8% increased 370 basis points primarily driven by benefits from the Company's enterprise initiatives, favorable price/cost of 100 basis points and positive operating leverage of 60 basis points, partially offset by higher employee-related expenses and continued investment in the business.

FOOD EQUIPMENT

This segment is a highly focused and branded industry leader in commercial food equipment differentiated by innovation and integrated service offerings. This segment primarily serves the food service, food retail and food institutional/restaurant markets. Products in this segment include:

•warewashing equipment;

•cooking equipment, including ovens, ranges and broilers;

•refrigeration equipment, including refrigerators, freezers and prep tables;

•food processing equipment, including slicers, mixers and scales;

•kitchen exhaust, ventilation and pollution control systems; and

•food equipment service, maintenance and repair.

The results of operations for the Food Equipment segment for the first quarter of 2024 and 2023 were as follows:


	Three Months Ended
Dollars in millions	March 31,						Components of Increase (Decrease)
	2024			2023			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	$	631		$	635		(0.7)	%	(1.4)	%	—	%	—	%	0.7	%	(0.7)	%
Operating income	$	164		$	169		(3.2)	%	(4.0)	%	—	%	0.1	%	0.7	%	(3.2)	%
Operating margin %	26.0		%	26.7		%	(70) bps		(80) bps		—		10 bps		—		(70) bps

•Operating revenue declined due to lower organic revenue, partially offset by the favorable effect of foreign currency translation.

•Organic revenue decreased 1.4%, which had a challenging comparable in the prior year first quarter of 16.0% growth. Equipment organic revenue declined 3.7% and service organic revenue grew 3.2%.

◦North American organic revenue declined 2.3%. Equipment organic revenue decreased 5.0% with lower demand in the food service and restaurant end markets, partially offset by growth in the food retail end markets. Service organic revenue increased 2.7%.

◦International organic revenue was flat. Equipment organic revenue decreased 1.8% primarily due to lower demand in the European warewash and refrigeration end markets, partially offset by higher demand in the Asian warewash and the European cooking end markets. Service organic revenue increased 4.1%.

•Operating margin of 26.0% decreased 70 basis points primarily driven by higher employee-related expenses and unfavorable operating leverage of 30 basis points, partially offset by benefits from the Company's enterprise initiatives and favorable price/cost of 50 basis points.

TEST & MEASUREMENT AND ELECTRONICS

This segment is a branded and innovative producer of test and measurement and electronic manufacturing and maintenance, repair, and operations, or "MRO" solutions that improve efficiency and quality for customers in diverse end markets. Businesses in this segment produce equipment, consumables, and related software for testing and measuring of materials and structures, as well as equipment and consumables used in the production of electronic subassemblies and microelectronics. This segment primarily serves the electronics, general industrial, energy, automotive original equipment manufacturers and tiers, industrial capital goods and consumer durables markets. Products in this segment include:

•equipment, consumables, and related software for testing and measuring of materials, structures, gases and fluids;

•electronic assembly equipment;

•electronic components and component packaging;

•static control equipment and consumables used for contamination control in clean room environments; and

•pressure sensitive adhesives and components for electronics, medical, transportation and telecommunications applications.

The results of operations for the Test & Measurement and Electronics segment for the first quarter of 2024 and 2023 were as follows:


	Three Months Ended
Dollars in millions	March 31,						Components of Increase (Decrease)
	2024			2023			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	$	696		$	703		(0.9)	%	(1.3)	%	0.8	%	—	%	(0.4)	%	(0.9)	%
Operating income	$	163		$	172		(5.3)	%	(3.8)	%	(1.0)	%	0.3	%	(0.8)	%	(5.3)	%
Operating margin %	23.4		%	24.5		%	(110) bps		(60) bps		(50) bps		10 bps		(10) bps		(110) bps

•Operating revenue declined due to lower organic revenue and the unfavorable effect of foreign currency translation, partially offset by revenue from an acquisition in the first quarter of 2024.

•On January 2, 2024, the Company completed the acquisition of one business for $57 million, net of cash acquired. Refer to Note 2. Acquisitions in Item 1. Financial Statements for additional information regarding the acquisition.

•Organic revenue decreased 1.3% primarily due to a decline in the semiconductor and electronics end markets, partially offset by growth in the MTS Test & Simulation business.

◦Organic revenue for the test and measurement businesses increased 2.1% primarily driven by growth in the MTS Test & Simulation business, partially offset by lower demand in the semiconductor and capital expenditure end markets in North America.

◦Electronics organic revenue decreased 7.9% primarily due to a decline in the consumer electronics and semiconductor end markets. The electronics assembly businesses decreased 23.8% primarily due to lower demand in North America and Asia Pacific. The other electronics businesses, which include the contamination control, static control and pressure sensitive adhesives businesses, were essentially flat as growth in Asia Pacific was offset by a decline in North America and Europe.

•Operating margin of 23.4% decreased 110 basis points primarily driven by product mix, higher employee-related expenses, the dilutive impact of 50 basis points from an acquisition in the first quarter of 2024 and unfavorable operating leverage of 40 basis points, partially offset by favorable price/cost of 90 basis points and benefits from the Company's enterprise initiatives.

WELDING

This segment is a branded value-added equipment and specialty consumable manufacturer with innovative and leading technology. Businesses in this segment produce arc welding equipment, consumables and accessories for a wide array of industrial and commercial applications. This segment primarily serves the general industrial market, which includes fabrication,

shipbuilding and other general industrial markets, and construction, energy, MRO, industrial capital goods and automotive original equipment manufacturers and tiers markets. Products in this segment include:

•arc welding equipment; and

•metal arc welding consumables and related accessories.

The results of operations for the Welding segment for the first quarter of 2024 and 2023 were as follows:


	Three Months Ended
Dollars in millions	March 31,						Components of Increase (Decrease)
	2024			2023			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	$	476		$	493		(3.4)	%	(3.5)	%	—	%	—	%	0.1	%	(3.4)	%
Operating income	$	156		$	157		(1.1)	%	(1.4)	%	—	%	0.1	%	0.2	%	(1.1)	%
Operating margin %	32.7		%	31.9		%

SEC Form 10-Q filed by Illinois Tool Works Inc.