2024 Annual Report
Never stronger.
Never better positioned for the future.
Contents
Letter to
Shareholders
1
ITW’s Performance
Since the Launch of
Our Enterprise Strategy
4
Customer-Back
Innovation Is the
Most Impactful
Driver of Consistent,
Above-Market Growth
5
Corporate Executives
and Board of Directors
8
Shareholder
Information
INSIDE BACK COVER
A global industrial company
built around a differentiated
business model.
Illinois Tool Works Inc. (NYSE: ITW) is a Fortune 300 global multi-industry
manufacturing leader with revenue of $15.9 billion in 2024. The company’s
seven industry-leading segments leverage the unique ITW Business Model
to drive solid growth with best-in-class margins and returns in markets
where highly innovative, customer-focused solutions are required. ITW’s
approximately 44,000 dedicated colleagues around the world thrive in
the company’s decentralized and entrepreneurial culture. To learn more,
please visit www.itw.com.
Overview of ITW’s
Operating Segments
6
ITW 2024 Annual Report 1
To Our
Fellow Shareholders
The Next Phase of Our Enterprise Strategy:
2024 to 2030
Over the past decade, we successfully transformed
ITW from a “middle of the pack” industrial company to
one of the highest-quality, best performing, and most
respected industrial companies in the world. In doing so,
we demonstrated that ITW has the most powerful and
competitive business model in the industrial arena.
In 2024, we launched the Next Phase of our Enterprise
Strategy. In this Next Phase, we will continue to improve the
quality of practice in our proprietary business model, while
pivoting decisively to build above-market organic growth,
fueled by Customer-Back Innovation execution, into a core
ITW strength.
Achieving high-quality organic growth of 4%+ through the
cycle is our highest priority in the Next Phase. Simply put,
our goal is to build high-quality, above-market organic growth
into a defining ITW strength on par with our best-in-class
operational capabilities and financial performance by 2030.
35-40%
Incremental
Margin
50%
Scope 1 & 2
GHG Reduction
100%+
Free Cash
Flow as % of
Net Income
9-10%
Average Annual
EPS Growth
~30%
Operating
Margin
35%+
After-Tax
ROIC
7%+
Annual
Dividend
Increase
4%+
Average Annual
Organic Growth
2030 Performance Goals: Differentiated Performance in Any Environment
1 After-tax return on average invested capital (ROIC) is a non-GAAP measure. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations in the 2024 Form 10-K regarding this non-GAAP measure, including a reconciliation to the most closely comparable GAAP measure.
In 2024, we delivered another year of strong operational and financial performance by leveraging
the strength of our best-in-class business model and high-quality, diversified business portfolio.
We achieved record financial results as we outperformed our underlying end markets, improved
profitability and margins, and delivered significant progress on our Next Phase key strategic priorities.
2024 Performance Highlights
»
Revenue of $15.9 billion.
»
Customer-Back Innovation contribution of 2% to
revenue growth.
»
Record operating income of $4.3 billion, up 6%.
»
Record operating margin of 26.8%, up
170 basis points.
»
Record after-tax Return on Invested
Capital (ROIC)1 of 31.2%, up 80 basis points.
»
Record GAAP EPS of $11.71, up 20%.
»
Invested $800 million to support the long-term
profitable growth of our core businesses.
»
Raised our dividend for the 61st consecutive year
(+7% per share).
»
Returned $3.2 billion of surplus capital
to shareholders through dividends and
share repurchases.
2 ITW 2024 Annual Report
2024–2030 TSR Model
Achieving our 4%+ average annual organic growth target at ITW’s best-in-class margins and returns will produce consistent double-digit TSR:
35-40%
Incremental
Margins
+2-3%
Share
Repurchases/
High-Quality
Acquisitions
+2-3%
Dividend
Yield
4%+
Average Annual
Organic Growth
7-8%
Average Annual
Operating
Income Growth
9-10%
Average Annual
Earnings Per
Share Growth
11-13%
Average Annual
Total Shareholder
Return (TSR)
Our highly focused and disciplined capital allocation strategy
remains unchanged. Our top priority is to invest internally
in our highly profitable core businesses to support organic
growth efforts and sustain productivity. Our second priority
is an attractive dividend which grows in line with earnings
over time and remains a critical component of ITW’s total
shareholder return (TSR). Third, we will look to identify and
execute high-quality acquisitions that can supplement
ITW’s long-term organic growth potential and generate
attractive risk-adjusted returns on our shareholders’ capital.
Finally, our surplus capital is allocated to an active share
repurchase program.
Organic Growth Fueled by Customer-Back Innovation
Customer-Back Innovation (CBI) is the most impactful driver
in achieving our organic growth target, and our goal is to
position the company to consistently deliver a 3%+ CBI
annual contribution to revenue growth by 2030.
At ITW, Customer-Back Innovation means that our divisions
partner with key customers as trusted problem solvers,
addressing their most critical challenges. Our innovation
efforts are division led and are centered around customer
needs, not a corporate research and design center.
This approach, built on decades of innovation experience,
delivers better outcomes for our customers and higher
growth and returns on investment for ITW.
Leveraging the proven methodologies that significantly
strengthened our 80/20 Front-to-Back capability over the
last decade, we are reinvigorating and improving our
35-40%
Incremental
Margins
+2-3%
Share
Repurchases/
High-Quality
Acquisitions
+2-3%
Dividend
Yield
4%+
Average Annual
Organic Growth
7-8%
Average Annual
Operating
Income Growth
9-10%
Average Annual
Earnings Per
Share Growth
11-13%
Average Annual
Total Shareholder
Return (TSR)
35-40%
Incremental
Margins
+2-3%
Share
Repurchases/
High-Quality
Acquisitions
+2-3%
Dividend
Yield
4%+
Average Annual
Organic Growth
7-8%
Average Annual
Operating
Income Growth
9-10%
Average Annual
Earnings Per
Share Growth
11-13%
Average Annual
TSR
Customer-Back Innovation capabilities in this Next Phase, and
in 2024, we launched our new CBI framework in every ITW
division. This proprietary framework is now being customized to
each division’s unique needs. It is exciting to see the energy and
enthusiasm in our divisions as they adopt the new framework
and implement their innovation strategies to drive above-market
organic growth.
Our proprietary innovations are protected by a robust portfolio
of approximately 21,000 patents, and more than half of our
revenues were protected by patents or trade secrets last year.
Patent filings, a key leading indicator of Customer-Back Innovation
yield, increased by 18% in 2024.
While we still have some work ahead of us as we position the
company to deliver 3%+ CBI yield by 2030, we are pleased with
the progress so far, achieving 2% in 2024, more than double
historical levels.
Management Updates
We are deeply grateful for our management team and Board
of Directors, both essential components of ITW’s long-term
performance and success, and we thank them for their invaluable
leadership, guidance, and dedication.
In early 2025, we welcomed Mark Thibeault to the executive
leadership team as executive vice president of the Polymers &
Fluids segment. Mark, a seasoned and accomplished ITW leader,
has been with the company since 2006.
ITW 2024 Annual Report 3
E. Scott Santi
Christopher A. O’Herlihy
In Closing
ITW, driven by a combination of powerful competitive
strengths, is unique in the industrial landscape. Our
proprietary business model delivers best-in-class
performance, while our diversified and resilient business
portfolio mitigates economic risks. The combination of our
industry-leading margins and our fortress balance sheet
supports consistent long-term focus and execution and the
ability to sustain strategic growth investments across all
market conditions.
In an increasingly volatile world, ITW is uniquely positioned
to deliver reliable and predictable double-digit TSR over
any 5+ year time frame. Achieving our 4%+ annual organic
growth target, coupled with our best-in-class margins
and disciplined capital allocation, will generate consistent,
double-digit TSR throughout our Next Phase.
Today, ITW is stronger and better positioned than ever
before to deliver differentiated performance, driven by
clear, actionable strategies and our unwavering commitment
to “Do What We Say” execution, which will continue to
be the cornerstone of our success in the Next Phase
and beyond. In 2024, we made significant progress on
our Next Phase priorities and are well on track to deliver
our 2030 performance goals.
We conclude by expressing our sincere gratitude to our
44,000 colleagues for their exceptional dedication and
commitment to serving our customers and executing our
Today, ITW is stronger and better positioned
than ever before to deliver differentiated
performance, driven by clear, actionable
strategies and our unwavering commitment
to “Do What We Say” execution, which
will continue to be the cornerstone of our
success in the Next Phase and beyond.
strategy with excellence each and every day. ITW is a
“Do What We Say” company because our colleagues
around the world do what they say.
Lastly, on behalf of your Board of Directors and
your management team, we thank you, our fellow
shareholders, for your continued support.
March 25, 2025
Christopher A. O’Herlihy
President and
Chief Executive Officer
E. Scott Santi
Non-Executive Chairman
4 ITW 2024 Annual Report
2012
2024
Revenue
$17.9B
$15.9B
Operating Income
$2.8B
$4.3B
Operating Margin
15.9%
26.8%
Earnings Per Share
$3.211
$11.71
After-tax ROIC1
14.5%2
31.2%
Dividends Declared Per Share
$1.48
$5.80
Market Capitalization3
$23B
$75B
-11%
+54%
+1090 bps
3.6x
2.2x
3.9x
3.3x
ITW’s Performance Since the Launch of Our Enterprise Strategy
Segment Peer Group Operating Margin2
ITW Operating Margin
Welding
32%
14%
Construction
Products
29%
16%
Automotive OEM
Specialty Products
20%
8%
Test &
Measurement
and Electronics1
27%
17%
Food Equipment
27%
13%
30%
8%
Polymers & Fluids1
29%
9%
Best-in-Class Business Model = Best-in-Class Performance
At ITW, we believe operating margin is the best indicator of relative competitive advantage, as it incorporates both the
level of value-add in the solutions a business provides to its customers and the efficiency of its processes to produce
and distribute them.
1 Test & Measurement and Electronics and Polymers & Fluids exclude 180 bps and 160 bps, respectively, of unfavorable operating margin impact of amortization expense related to intangible assets.
2 See the appendix included in this Annual Report for segment peer group definitions.
1 After-tax return on average invested capital (ROIC) and 2012 Adjusted EPS are non-GAAP measures. Refer to Item 7. Management’s Discussion and Analysis of Financial Condition and
Results of Operations in the 2024 Form 10-K and the appendix included in this Annual Report for more information regarding these non-GAAP measures, including reconciliations to the
most closely comparable GAAP measures.
2 As reported in the 2013 Form 10-K.
3 As of January 1, 2012 and December 31, 2024.
ITW 2024 Annual Report 5
Customer-Back Innovation Is the
Most Impactful Driver of Consistent,
Above-Market Growth
The ITW Business Model is a powerful source of competitive advantage.
Customer-Back Innovation means we develop solutions to solve our customers’
biggest challenges – innovating from the customer back, not from the research
and development center out. This unique element of our business model
is especially critical to achieve ITW’s organic growth goal for the
Next Phase of our Enterprise Strategy.
To enhance the effectiveness of our team, in 2024 we rolled out a
reinvigorated CBI framework based on our extensive companywide
experience and decades of successful innovation. Our goal is to
mobilize the entire organization around CBI just like we did with
our 80/20 Front-to-Back capability during the first phase of
our Enterprise Strategy. We are confident that above-market
growth, fueled by CBI, will become a defining ITW strength.
3%+
Pre-COVID
~1%
2025E
2024
2%
2.3-
2.5%
2030
Target
CBI Contribution to Growth (Yield)
Achieving high-quality organic growth of 4%+ through the cycle
is our highest priority in the Next Phase, and Customer-Back
Innovation is the most impactful driver of above-market revenue
growth. In 2024, CBI delivered a 2% contribution to organic growth
and enabled us to outperform our underlying end markets. Our goal
is for CBI to contribute 3%+ to organic growth by 2030, and we are
well on track to achieve that goal.
6 ITW 2024 Annual Report
2024 revenue
$3.2 billion
2024 operating margin
19.6%
Highly focused, global, niche
supplier of solutions to top-tier
OEMs and their suppliers
Automotive OEM
2024 revenue
$2.8 billion
2024 operating margin
26.7%
1
Leading global supplier of
production and laboratory
testing and assembly equipment,
accessories, consumables, and
aftermarket parts and service
Test & Measurement
and Electronics
2024 revenue
$2.6 billion
2024 operating margin
27.2%
Industry-leading global positions
through differentiated innovation
in commercial dishwashing,
cooking, refrigeration, retail, and
integrated service offerings
Food Equipment
Seven
Operating
Segments
ITW’s Diversified,
High-Quality
Business Portfolio
ITW 2024 Annual Report 7
3 End markets that
value sustainable
differentiation
3 Positive long-term
macro fundamentals
3 Significant potential to
deliver above-market
organic growth over
the long term
3 Strong and durable
competitive advantages
with relevance to key
end market trends
3 Ability to leverage the ITW
Business Model to generate
consistent best-in-class
margins and returns
ITW’s business portfolio criteria:
2024 revenue
$1.8 billion
2024 operating margin
29.0%
1
Specialized adhesives, lubricants,
and additives for industrial- and
consumer-related end markets
Polymers & Fluids
2024 revenue
$1.9 billion
2024 operating margin
32.3%
Highly focused supplier
of value-added welding
equipment and specialty
consumables for a variety of
commercial, industrial, and
infrastructure applications
Welding
2024 revenue
$1.9 billion
2024 operating margin
29.3%
2024 revenue
$1.7 billion
2024 operating margin
30.3%
Specialty Products
Innovative, value-added
solutions for consumer
packaging, product
branding, and other
niche applications
Global provider of innovative
fastening solutions that improve
contractor productivity and
building quality in residential and
commercial construction
Construction Products
1 Test & Measurement and Electronics and Polymers & Fluids exclude 180 bps and 160 bps, respectively,
of unfavorable operating margin impact of amortization expense related to intangible assets.
8 ITW 2024 Annual Report
Daniel J. Brutto
Retired President,
UPS International
Retired Senior Vice President,
United Parcel Service, Inc.
Susan Crown
Chairman and
Chief Executive Officer,
Owl Creek Partners, LLC
Darrell L. Ford
Executive Vice President and
Chief Human Resources Officer,
UPS International
Kelly J. Grier
Retired US Chair and
Managing Partner (CEO),
Ernst & Young LLP
James W. Griffith
Retired President and
Chief Executive Officer,
The Timken Company
Jay L. Henderson
Retired Vice Chairman,
Client Service,
PricewaterhouseCoopers LLP
Jaime Irick
Former Chief Executive Officer,
The Pittsburgh Paints Company
Richard H. Lenny
Non-Executive Chairman,
Conagra Brands, Inc.
Christopher A. O’Herlihy
President and Chief Executive Officer,
Illinois Tool Works Inc.
E. Scott Santi
Non-Executive Chairman of the Board,
Illinois Tool Works Inc.
David B. Smith Jr.
Executive Vice President for Policy &
Legal Affairs and General Counsel,
Mutual Fund Directors Forum
Pamela B. Strobel
Retired Executive Vice President and
Chief Administrative Officer,
Exelon Corporation
Retired President,
Exelon Business Services Company
2025 Corporate Executives
2025 Board of Directors
Javier Gracia Carbonell, Guilherme F. Silva, Patricia A. Hartzell, Axel R. J. Beck, Christopher A. O’Herlihy, Michael M. Larsen, Mary K. “Katie” Lawler,
T. Kenneth Escoe, Sharon A. Szafranski, Mark A. Thibeault
PICTURED
LEFT TO RIGHT
Christopher A. O’Herlihy
President and
Chief Executive Officer
Michael M. Larsen
Senior Vice President and
Chief Financial Officer
Mary K. “Katie” Lawler
Senior Vice President and
Chief Human Resources Officer
Axel R. J. Beck
Executive Vice President,
Food Equipment
T. Kenneth Escoe
Executive Vice President,
Specialty Products
Javier Gracia Carbonell
Executive Vice President,
Automotive OEM
Patricia A. Hartzell
Executive Vice President,
Test & Measurement and Electronics
Guilherme F. Silva
Executive Vice President,
Construction Products
Sharon A. Szafranski
Executive Vice President,
Welding
Mark A. Thibeault
Executive Vice President,
Polymers & Fluids
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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 No.)
155 Harlem Avenue
Glenview
Illinois
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
0.625% Euro Notes due 2027
ITW27
New York Stock Exchange
3.250% Euro Notes due 2028
ITW28
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
3.375% Euro Notes due 2032
ITW32
New York Stock Exchange
3.00% Euro Notes due 2034
ITW34
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes ☐ No ☒
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 ☒ No ☐
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 such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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
☒
Accelerated filer
☐
Non-accelerated filer
☐
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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under
Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error
to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive
officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, 2024 was approximately $70.1 billion based on the New York Stock Exchange closing
sales price as of June 30, 2024.
Shares of common stock outstanding at January 31, 2025: 293.5 million.
Documents Incorporated by Reference
Portions of the 2025 Proxy Statement for Annual Meeting of Stockholders to be held on May 2, 2025.
Part III
Table of Contents
PART I
Item 1.
Business
3
Item 1A. Risk Factors
10
Item 1B.
Unresolved Staff Comments
15
Item 1C.
Cybersecurity
15
Item 2.
Properties
16
Item 3.
Legal Proceedings
16
Item 4.
Mine Safety Disclosures
16
PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
17
Item 6.
[Reserved]
18
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
18
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
43
Item 8.
Financial Statements and Supplementary Data
44
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
80
Item 9A. Controls and Procedures
80
Item 9B.
Other Information
80
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
80
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
81
Item 11.
Executive Compensation
81
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
81
Item 13.
Certain Relationships and Related Transactions, and Director Independence
81
Item 14.
Principal Accountant Fees and Services
81
PART IV
Item 15.
Exhibit and Financial Statement Schedules
82
Item 16.
Form 10-K Summary
85
Signatures
86
PART I
ITEM 1. Business
General
Illinois Tool Works Inc. (the "Company" or "ITW") was founded in 1912 and incorporated in 1915. The Company's ticker
symbol is ITW. The Company is a global manufacturer of a diversified range of industrial products and equipment with 86
divisions in 51 countries. As of December 31, 2024, the Company employed approximately 44,000 people.
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. The following is a description 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.
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.
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, automotive original
equipment manufacturers and tiers, energy, 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.
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.
3
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.
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.
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, airlines, industrial capital goods 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.
The information set forth below is applicable to all segments of the Company unless otherwise noted.
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 20,900 granted and pending patents;
4
•
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 86 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 may 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.
5
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.
In the second quarter of 2022, plans were approved to divest two businesses, including one business in the Polymers & Fluids
segment and one business in the Food Equipment segment. In the fourth quarter of 2022, both of these businesses were
divested. The business in the Polymers & Fluids segment was sold for $220 million, subject to certain closing adjustments,
resulting in a pre-tax gain of $156 million. The business in the Food Equipment segment was sold for $59 million, subject to
certain closing adjustments, resulting in a pre-tax gain of $41 million. Operating revenue related to these divested businesses
that was included in the Company's results of operations for the twelve months ended December 31, 2022 was $106 million.
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 and $37 million for the twelve months ended December 31, 2023 and 2022, respectively. Refer to
Note 3. Divestitures in Item 8. Financial Statements and Supplementary Data for further information regarding the
Company's divestitures.
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. On April 1, 2024, the Company completed the acquisition of one business in
the Test & Measurement and Electronics segment for $59 million, net of cash acquired. The purchase price for both
acquisitions was subject to certain closing adjustments. These acquisitions were not material, individually or in the aggregate,
to the Company’s results of operations, financial position or cash flows. Refer to Note 2. Acquisitions in Item 8. Financial
Statements and Supplementary Data for further information regarding the Company's acquisitions.
On August 5, 2024, the Company entered into a purchase agreement with affiliates of Clayton, Dubilier & Rice, LLC
("CD&R") for the sale of the Company’s noncontrolling equity interest in Wilsonart International Holdings LLC
("Wilsonart") for $398 million. The transaction closed immediately after the execution of the purchase agreement. Proceeds
from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of $363 million which was
included in Other income (expense) in the Statement of Income. Income taxes on the gain were more than offset by a discrete
tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss carryforwards upon the sale of
Wilsonart. 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 periods. Refer to Note 5. Other Income (Expense) and Note 6. Income Taxes in
Item 8. Financial Statements and Supplementary Data for additional information regarding this transaction.
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.
Current Year Developments
Refer to Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
6
Distribution Methods
The Company's businesses primarily distribute their products directly to industrial manufacturers and through independent
distributors.
Backlog
Backlog generally is not considered a significant factor in the Company's businesses as relatively short delivery periods and
rapid inventory turnover are characteristic of most of their products.
Competition
With operations in 51 countries, the Company offers a wide range of products in a myriad of markets, many of which are
fragmented, and the Company encounters a variety of competitors that vary by product line, end market and geographic area.
The Company's competitors include many regional or specialized companies, as well as large U.S. and non-U.S. companies
or divisions of large companies. Each of the Company's segments generally has several main competitors and numerous
smaller ones in most of their end markets and geographic areas. In addition to numerous smaller regional competitors, the
Welding segment competes globally with Lincoln Electric Holdings, Inc. and ESAB Corporation.
In virtually all segments, the Company differentiates its businesses from its competitors based on product innovation, product
quality, brand preference and service delivery. Technical capability is also a competitive factor in most segments. The
Company believes that each segment's primary competitive advantages derive from the ITW Business Model and
decentralized operating structure, which creates a strong focus on end markets and customers at the local level, enabling its
businesses to respond rapidly to market dynamics. This structure enables the Company's businesses to drive operational
excellence utilizing the Company's 80/20 Front-to-Back process and leveraging its product innovation capabilities. The
Company also believes that its global footprint is a competitive advantage in many of its markets, especially in its
Automotive OEM segment.
Raw Materials
The Company uses raw materials of various types, primarily steel, resins and chemicals, that are available from numerous
commercial sources. The availability of materials and energy has not resulted in any significant business interruptions or
other major problems, and no such problems are currently anticipated.
Intellectual Property
The Company owns approximately 4,100 unexpired U.S. patents and 10,500 unexpired foreign patents covering articles,
methods and machines. In addition, the Company has approximately 1,500 applications for patents pending in the U.S. Patent
Office and 4,800 applications pending in foreign patent offices. There is no assurance that any of these patents will be issued.
The Company maintains a patent group for the administration of patents and processing of patent applications.
The Company believes that many of its patents are valuable and important; however, the expiration of any one of the
Company's patents would not have a material effect on the Company's results of operations or financial position. The
Company also credits its success in the markets it serves to engineering capability; manufacturing techniques; skills and
efficiency; marketing and sales promotion; and service and delivery of quality products to its customers.
In addition to patents, many of the Company's products and services are sold under various owned or licensed trademarks,
which are important to the Company in the aggregate. Some of the Company's more significant trademarks include ITW,
which is also used in conjunction with the trademarks of many of the Company's businesses; Deltar and Shakeproof in the
Automotive OEM segment; Hobart in the Food Equipment segment; Instron and MTS in the Test & Measurement and
Electronics segment; Miller in the Welding segment; Rain-X and Permatex in the Polymers & Fluids segment; Paslode in the
Construction Products segment; and Hi-Cone in the Specialty Products segment.
7
Government Regulations
The Company believes that its businesses and operations, including its manufacturing plants and equipment, are in substantial
compliance with all applicable government laws and regulations, including those related to environmental, consumer
protection, international trade, labor and employment, human rights, tax, anti-bribery and competition matters. Any additional
measures to maintain compliance are not expected to materially affect the Company's capital expenditures (including
expenditures for environmental control facilities), competitive position, financial position or results of operations.
Various legislative and administrative regulations applicable to the Company in the matters noted above have become
effective or are under consideration in many parts of the world. To date, such developments have not had a substantial
adverse impact on the Company's revenues, earnings or cash flows. However, if new or amended laws or regulations impose
significant operational restrictions and compliance requirements upon the Company or its products, the Company's business,
capital expenditures, results of operations, financial condition and competitive position could be negatively impacted. Refer
to Item 1A. Risk Factors for further information.
Human Capital Management
As of December 31, 2024, the Company employed approximately 44,000 people, with approximately 16,000 people located
in the United States and the remainder in multiple other countries where the Company's businesses operate. The Company
strives to be a great employer through its demonstrated commitment to employee safety, its workplace culture, talent
development, the ITW employee experience, compensation and benefits.
Employee Safety. The safety and well-being of ITW's colleagues around the world is its top priority, in addition to being an
essential component of our commitment to be a great employer. Guided by the Company's Enterprise Safety Strategy and the
philosophy that every accident is preventable, ITW strives every day to foster a proactive safety culture. ITW's Enterprise
Safety Strategy and Safety Policy are based on the following core principles: (i) a goal of zero accidents; (ii) shared
ownership for safety (business and individual); (iii) proactive approach focused on accident prevention; (iv) continuous
improvement philosophy; and (v) compliance with applicable national, regional, and local health and safety laws and
regulations.
Workplace Culture. The Company's culture is deeply rooted in its core values: Integrity, Respect, Trust, Shared Risk and
Simplicity. ITW colleagues are empowered to think and act like business owners within the Company's decentralized,
entrepreneurial culture. Our decentralized structure allows each division to operate with autonomy and enables our people to
embrace the personal impact they can make.
Talent Development. The Company strives for all colleagues to "own" their careers and feel valued for the work they do. ITW
colleagues are encouraged to learn new skills and capabilities primarily through on-the-job experience, hands-on coaching
and feedback, in addition to formal training.
The Great ITW Leader Framework defines leadership capabilities and attributes to help colleagues to reach their full potential
as leaders. Great ITW Leaders are expected to make great strategic choices to drive above-market organic growth, be an
expert in the practice of customer-back innovation and the ITW Business Model, deliver great results, be great talent
managers and lead through ITW's culture and values. Great ITW Leaders who have expertise in the ITW Business Model are
the critical factor in translating the potential of the ITW Business Model into full performance. Because this expertise
develops over time and through specific experiences, the Company focuses on developing and promoting its own talent to
support the Company's sustained business success over the long term.
The ITW Employee Experience. ITW believes it is at its best when it brings together unique perspectives, experiences, and
ideas. Rooted in ITW's core values of Respect and Integrity, the Company is committed to equal employment opportunity,
fair treatment and creating inclusive workplaces where all ITW colleagues can perform to their full potential. Consistent with
these values, ITW is also committed to attracting the best talent for its global leadership teams, valuing the perspectives of
every ITW colleague, and reflecting the communities where we live and work. ITW drives progress through a comprehensive
enterprise talent management strategy, which focuses on: (i) leadership commitment and accountability; (ii) attracting and
retaining great ITW talent; (iii) creating inclusive workplaces; and (iv) striving to be a great employer.
Compensation and Benefits. As a global employer, the Company is committed to providing market-competitive compensation
and benefits that support physical, mental, and financial well-being to attract and retain great talent across its global divisions.
Specific compensation and benefits vary worldwide and are based on regional practices. In the U.S., the Company focuses on
providing a comprehensive, competitive benefits package that supports the health and wellness, educational endeavors,
community involvement and financial stability of its colleagues.
8
Labor Relations. Less than three percent of the Company's U.S. employees are represented by a labor union. Outside the
U.S., employees in certain countries are represented by an employee representative organization, such as a union, works
council or employee association. The Company considers its employee relations to be excellent.
Information About Our Executive Officers
The executive officers of the Company serve at the discretion of the Board of Directors. Set forth below is information
regarding the principal occupations and employment and business experience over the past five years for each executive
officer. Unless otherwise stated, employment is by the Company.
Executive Officers of the Company as of February 14, 2025 were as follows:
Name
Age
Present Position
First Year
in Present
Position
Other Positions Held During 2020-2024
Christopher A. O'Herlihy
61 President & Chief Executive Officer .
2024
Vice Chairman 2015-2023.
Axel R.J. Beck . . . . . . . .
59 Executive Vice President . . . . . . . . . .
2020
Group President, food equipment
businesses, 2016-2020.
T. Kenneth Escoe . . . . . .
49 Executive Vice President . . . . . . . . . .
2020
Javier Gracia Carbonell .
52 Executive Vice President . . . . . . . . . .
2022
Group President, construction
businesses, 2020-2021.
Patricia A. Hartzell . . . . .
48 Executive Vice President . . . . . . . . . .
2022
Group President, test & measurement
and electronics businesses, 2020-2021.
Michael M. Larsen . . . . .
56 Senior Vice President & Chief
Financial Officer . . . . . . . . . . . . . . . . .
2013
Mary K. Lawler . . . . . . .
59 Senior Vice President & Chief
Human Resources Officer . . . . . . . . .
2014
Randall J. Scheuneman .
57 Vice President & Chief Accounting
Officer . . . . . . . . . . . . . . . . . . . . . . . .
2009
Jennifer K. Schott . . . . . .
51 Senior Vice President, General
Counsel & Secretary . . . . . . . . . . . . . .
2021
Deputy General Counsel & Assistant
Secretary, Caterpillar, Inc., 2019-2021.
Guilherme Silva . . . . . .
49 Executive Vice President . . . . . . . . . .
2024
Group President, polymers & fluids
businesses, 2020-2021; Group
President, test & measurement and
electronics businesses, 2021-2023.
Sharon A. Szafranski . . .
58 Executive Vice President . . . . . . . . . .
2020
Mark A. Thibeault . . . . .
41 Executive Vice President . . . . . . . . . .
2025
Vice President/General Manager, test &
measurement and electronics
businesses, 2019-2022; Group
President, test & measurement and
electronics businesses, 2022-2024.
Available Information
Copies of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K
and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
are available free of charge through the Company's website (www.itw.com), as soon as reasonably practicable after
electronically filing with or otherwise furnishing such information to the Securities and Exchange Commission (the "SEC").
The Company's Code of Ethics for the CEO and key financial and accounting personnel is also posted on the Company's
website.
9
ITEM 1A. Risk Factors
The Company's business, financial condition, results of operations and cash flows are subject to various risks, including, but
not limited to, those set forth below, which could cause actual results to vary materially from recent results or from
anticipated future results. These risk factors should be considered together with information included elsewhere in this
Annual Report on Form 10-K. Any of such risks and matters, individually or in combination, could have a material adverse
effect on our business, financial condition, results of operations and cash flows, as well as on the attractiveness and value of
an investment in the Company’s securities.
Economic Risks
The Company's results are impacted by global economic conditions. Downturns in the markets served by the
Company could adversely affect its businesses, results of operations or financial condition.
The Company's businesses are impacted by economic conditions around the globe. Slower economic growth, financial
market instability, supply chain disruptions, natural disasters, public health crises (such as the COVID-19 pandemic), labor
market challenges, rapid inflation, armed conflicts (such as the Russia and Ukraine conflict), government deficit reduction,
sequestration and other austerity measures impacting the markets the Company serves can adversely affect the Company's
businesses by reducing demand for the Company's products and services, limiting financing available to the Company's
customers, causing production delays, increasing order cancellations and the difficulty in collecting accounts receivable,
increasing price competition, or increasing the risk that counterparties to the Company's contractual arrangements will
become insolvent or otherwise unable to fulfill their obligations.
Rising interest rates could have a dampening effect on overall economic activity and/or the financial condition of the
Company's customers, either or both of which could negatively affect customer demand for the Company's products and
customers' ability to repay obligations to the Company. Rising interest rates could have an impact on the Company and its
customers' cost of capital.
The global nature of the Company's operations subjects it to political, economic and social risks that could adversely
affect its business, results of operations or financial condition.
Over 50% of the Company's net sales are derived from customers outside the United States, and the Company currently
operates in 51 countries. The risks inherent in the Company's global operations include:
•
fluctuation in currency exchange rates;
•
limitations on ownership or participation in local enterprises;
•
price controls, exchange controls and limitations on repatriation of earnings;
•
supply chain disruptions, including transportation delays and disruptions;
•
political, social and economic instability and disruptions, including political unrest and armed conflicts;
•
acts of terrorism;
•
the impact of widespread public health crises and pandemics;
•
government embargoes, sanctions or foreign trade restrictions;
•
the imposition of duties and tariffs and other trade barriers and retaliatory countermeasures;
•
government actions impacting international trade agreements, including the EU-UK Trade and Cooperation
Agreement;
•
import and export controls;
•
social and labor unrest and current and changing regulatory environments;
•
the potential for expropriation or nationalization of enterprises;
•
difficulties in staffing and managing multi-national operations;
•
multiple and potentially conflicting laws, regulations and policies that are subject to change;
•
limitations on its ability to enforce legal rights and remedies; and
•
potentially adverse tax consequences.
The global geopolitical and trade environment has resulted in raw material inflation and potential for increased escalation of
domestic and international tariffs and retaliatory trade policies. Further changes in U.S. trade policy (including new or
additional increases in duties or tariffs) and retaliatory actions by U.S. trade partners, including sanctions against Russia and
developments in U.S.-China trade relations, could result in a worsening of economic conditions. If the Company is unable to
successfully manage the risks associated with managing and expanding its international businesses, the Company's business,
results of operations or financial condition may be adversely impacted.
10
A significant fluctuation between the U.S. Dollar and other currencies could adversely impact the Company's
operating income.
Although the Company's financial results are reported in U.S. Dollars, a significant portion of its sales and operating costs are
realized in other currencies, with the largest concentration of foreign sales occurring in Europe. The Company's profitability
is affected by movements of the U.S. Dollar against the Euro and other foreign currencies in which it generates revenues and
incurs expenses. Significant long-term fluctuations in relative currency values, and in particular, an increase in the value of
the U.S. Dollar against foreign currencies, has had and could have an adverse effect on profitability and financial condition.
Business and Operational Risks
The benefits from the Company's enterprise strategy may not be as expected and the Company's financial results
could be adversely impacted, or the Company may not meet its long-term financial performance targets.
As the Company continues to execute on its enterprise strategy initiatives, it remains focused on the core principles of
portfolio discipline, 80/20 Front-to-Back practice excellence, and organic growth. Product line and customer base
simplification activities, which are core elements of the Company's 80/20 Front-to-Back process, continue to be applied by
the Company's operating divisions and are active elements of the enterprise strategy. Although these activities are expected to
improve future operating margins and organic revenue growth, they are also expected to have a negative impact on the
Company's overall organic revenue growth in the short term. Additionally, other core activities of the enterprise strategy
related to portfolio discipline and organic growth, including customer-back innovation, may not have the desired impact on
future operating results. If the Company is unable to realize the expected benefits from its enterprise strategy initiatives, the
Company's financial results could be adversely impacted, or the Company may not meet its long-term financial performance
targets.
The timing and amount of the Company's share repurchases are subject to a number of uncertainties.
Share repurchases constitute a significant component of the Company's capital allocation strategy. The Company has
historically funded its share repurchases with free cash flow and short-term borrowings. The amount and timing of share
repurchases will be based on a variety of factors. Important factors that could cause the Company to limit, suspend or delay
its share repurchases include unfavorable trading market conditions, the price of the Company's common stock, the nature of
other investment opportunities presented to the Company from time to time, regulatory developments relating to share
repurchase programs, the ability to obtain financing at attractive rates and the availability of U.S. cash.
If the Company is unable to successfully introduce new products, its future growth may be adversely affected.
The Company's ability to develop new products based on innovation can affect its competitive position and sometimes
requires the investment of significant time and resources. Difficulties or delays in research, development, production or
commercialization of new products and services or in the adoption of technological change, such as the use of artificial
intelligence and machine learning, may reduce future revenues and adversely affect the Company's competitive position. If
the Company is unable to create sustainable product differentiation, its organic growth may be adversely affected.
If the Company is unable to adequately protect its intellectual property, its competitive position and results of
operations may be adversely impacted.
Protecting the Company's intellectual property is critical to its innovation efforts. The Company owns patents, trade secrets,
copyrights, trademarks and/or other intellectual property rights related to many of its products, and also has exclusive and
non-exclusive license rights under intellectual property owned by others. The Company's intellectual property rights may be
challenged or the Company may be unable to maintain, renew or enter into new license agreements with third-party owners
of intellectual property on reasonable terms. Unauthorized use of the Company's intellectual property rights by third parties,
particularly in countries where property rights are not highly developed or protected, or inability to preserve existing
intellectual property rights could adversely impact the Company's competitive position and results of operations.
11
The Company has significant goodwill and other intangible assets, and future impairment of these assets could have a
material adverse impact on the Company's financial results.
The Company has recorded significant goodwill and other identifiable intangible assets on its balance sheet as a result of
acquisitions. A number of factors may result in impairments to goodwill and other intangible assets, including significant
negative industry or economic trends, disruptions to our business, increased competition and significant changes in the use of
the assets. Impairment charges could adversely affect the Company's financial condition or results of operations in the periods
recognized.
Raw material price increases and supply shortages could adversely affect results.
The supply of raw materials to the Company and to its component parts suppliers could be interrupted for a variety of
reasons, including availability and pricing. Prices for raw materials have fluctuated significantly in the past and the Company
has experienced upward pricing pressure on specialty materials such as high labor-content fabrications. Significant price
increases could adversely affect the Company's results of operations and operating margins. In particular, inflation, changes
in trade policies, the imposition of duties and tariffs, potential retaliatory countermeasures, public health crises and
pandemics (such as the COVID-19 pandemic, which adversely impacted the price and availability of raw materials),
threatened or actual military conflicts (such as the Russia and Ukraine conflict) and severe weather events could adversely
impact the price or availability of raw materials. The Company may not be able to pass along increased raw material and
components parts prices to its customers in the form of price increases or its ability to do so could be delayed. Consequently,
its results of operations and financial condition may be adversely affected.
The Company's defined benefit pension plans are subject to financial market risks that could adversely affect its
results of operations and cash flows.
The performance of financial markets and interest rates impact the Company's funding obligations under its defined benefit
pension plans. Significant changes in market interest rates, decreases in the fair value of plan assets and investment losses on
plan assets may increase the Company's funding obligations and adversely impact its results of operations and cash flows.
If the Company is unable to protect its information technology infrastructure against service interruptions, data
corruption, cyber-based attacks or network security breaches, or if there is a violation of data privacy laws, there
could be a negative impact on operating results or the Company may suffer financial or reputational damage.
The Company relies on information technology networks and systems, including the Internet, to process, transmit and store
electronic information, and to manage or support a variety of business processes and activities, including procurement,
manufacturing, distribution, invoicing and collection. These technology networks and systems may be susceptible to damage,
disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components;
power outages; hardware failures; computer viruses; employee error or malfeasance; and attacks by computer hackers, which
have continued to increase on a global scale in both magnitude and frequency, taken on novel and unprecedented forms and
become more difficult to detect. The risk and severity of cybersecurity attacks could increase as artificial intelligence is used
by threat actors to identify vulnerabilities and conduct increasingly sophisticated attacks. Minor security breaches have
occurred from time to time and are expected to occur in the future. Although the cyber-attacks experienced to date have not
had a material impact, future security breaches of our technology networks and systems or those of our vendors and third-
party service providers could result in unauthorized disclosure of confidential information or personal data belonging to our
employees, partners, customers or suppliers, which could cause reputational and legal harm as we are subject to data privacy
laws, including the EU General Data Protection Regulation, in the various countries in which we operate. If our information
technology systems suffer severe damage, disruption, or shutdown, and business continuity plans do not effectively resolve
the issues in a timely manner, or if we violate data privacy laws, there could be a negative impact on operating results and/or
the financial reporting process and the Company may suffer financial or reputational damage.
In addition, cybersecurity laws and regulations continue to evolve, and are increasingly demanding, both in the U.S. and
globally, which adds compliance complexity and may increase costs of compliance and expose the Company to reputational
damage or litigation, monetary damages, regulatory enforcement actions or fines in one or more jurisdictions.
12
Strategic Transaction Risks
The Company's acquisition of businesses could negatively impact its profitability and returns.
The Company has engaged in various acquisitions in the past and could choose to acquire additional businesses in the future.
Acquisitions involve a number of risks and financial, accounting, managerial and operational challenges, including the
following, any of which could adversely affect the Company's profitability and returns:
•
The acquired business' inability to adapt to the ITW Business Model or otherwise perform in accordance with the
Company's anticipated results or timetable, could cause it to under perform relative to the Company's expectations
and the price paid for it.
•
The acquired business could cause the Company's financial results to differ from expectations in any given fiscal
period, or over the long term.
•
Acquisition-related earnings charges could adversely impact operating results.
•
The acquired business could place unanticipated demands on the Company's management, operational resources and
financial and internal control systems.
•
The Company may assume unknown liabilities, known contingent liabilities that become realized or known
liabilities that prove greater than anticipated, internal control deficiencies or exposure to regulatory sanctions
resulting from the activities of the acquired business. The realization of any of these liabilities or deficiencies may
increase the Company's expenses, adversely affect its financial position or cause noncompliance with its financial
reporting obligations.
•
As a result of acquisitions, the Company has in the past recorded significant goodwill and other identifiable
intangible assets on its balance sheet. If the Company is not able to realize the value of these assets, it may recognize
charges relating to the impairment of these assets.
Divestitures pose the risk of retained liabilities that could adversely affect the Company's financial results.
The Company has had significant divestiture activity in the past in accordance with its portfolio management initiative, and it
divested one business in the first quarter of 2023 as it continues portfolio refinements to maintain portfolio discipline. The
Company has retained certain liabilities directly or through indemnifications made to the buyers against known and unknown
contingent liabilities such as lawsuits, tax liabilities, product liability claims and environmental matters, which could
adversely affect the Company's financial results.
Tax, Legal and Regulatory Risks
Unfavorable tax law changes and tax authority rulings may adversely affect results.
The Company is subject to income taxes in the U.S. and in various foreign jurisdictions. Domestic and international tax
liabilities are based on the income and expenses in various tax jurisdictions. The Company's effective tax rate could be
adversely affected by changes in the mix of earnings among countries with differing statutory tax rates, changes in the
valuation allowance of deferred tax assets or changes in tax laws. The amount of income taxes is subject to ongoing audits by
U.S. federal, state and local tax authorities and by non-U.S. authorities. If these audits result in assessments different from
amounts recorded, future financial results may include unfavorable tax adjustments.
Adverse outcomes in legal proceedings or enforcement actions may adversely affect results.
The Company's businesses expose it to potential costs and adverse rulings associated with commercial, intellectual property,
employment, toxic tort and other product liability claims and lawsuits. The Company's global operations also subject it to
government investigations in numerous countries. We cannot predict the outcome of claims, investigations and lawsuits and
we may incur costs, judgments or fines or enter into settlements that could adversely impact our businesses, reputation or
future financial results. The Company currently maintains insurance programs consisting of self-insurance up to certain limits
and excess insurance coverage for claims over established limits. There can be no assurance that the Company will be able to
obtain insurance on acceptable terms or that its insurance programs will provide adequate protection against actual losses. In
addition, the Company is subject to the risk that one or more of its insurers may become insolvent and become unable to pay
claims that may be made in the future. Even if it maintains adequate insurance programs, claims, judgments or settlements
could have a material adverse effect on the Company's financial condition, liquidity and results of operations and on its
ability to obtain suitable, adequate or cost-effective insurance in the future.
13
Uncertainty related to environmental regulation and industry standards, as well as physical risks of climate change,
could impact the Company's results of operations and financial position.
Increased public awareness and concern regarding environmental risks, including global climate change, may result in more
international, regional and/or federal requirements or industry standards to reduce or mitigate global warming and other
environmental risks. These regulations or standards could mandate even more restrictive requirements, such as stricter limits
on greenhouse gas emissions and production of single use plastics, than the voluntary commitments that the Company has
made or require such changes on a more accelerated time frame. There continues to be a lack of consistent climate legislation,
which creates economic and regulatory uncertainty. In addition, the physical risks of climate change may impact the
availability and cost of materials and natural resources, sources and supply of energy, product demand and manufacturing and
could increase insurance and other operating costs, including, potentially, to repair damage incurred as a result of extreme
weather events or to renovate or retrofit facilities to better withstand extreme weather events. If environmental laws or
regulations or industry standards are either changed or adopted and impose significant operational restrictions and
compliance requirements upon the Company or its products, or the Company's operations are disrupted due to physical
impacts of climate change, the Company's business, capital expenditures, results of operations, financial condition and
competitive position could be negatively impacted.
The Company may incur fines or penalties, damage to its reputation or other adverse consequences if its employees,
agents or business partners violate anti-bribery, competition, export and import, trade sanctions, data privacy,
environmental, artificial intelligence, human rights or other laws.
The Company has a decentralized operating structure under which its individual businesses are allowed significant decision-
making autonomy within the Company's strategic framework and internal financial and compliance controls. The Company is
subject to complex U.S., foreign and other local laws and regulations that are applicable to its operations, such as anti-bribery
and anti-corruption, competition, export and import, trade sanctions, data privacy, environmental, the use of artificial
intelligence in our business and in our products and services, and human rights laws. Although the Company has
implemented compliance programs which include internal controls, policies and procedures and employee training to deter
prohibited practices, these measures may not be effective in preventing employees, agents or business partners from violating
or circumventing such internal policies and violating applicable laws and regulations. Any such improper actions could
subject the Company to civil or criminal investigations, could lead to substantial civil or criminal monetary and non-monetary
penalties against the Company or its subsidiaries, or could damage its reputation.
Forward-Looking Statements
This Annual Report on Form 10-K 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, related government actions 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, 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, enterprise initiatives, the Company's portion of future benefit payments related to
pension and 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 interest rate changes, 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 those risks described above. 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.
14
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 1B. Unresolved Staff Comments
None.
ITEM 1C. Cybersecurity
Risk Management and Strategy
The Company utilizes information systems to support a variety of business processes and activities in its decentralized
operations. These systems may be subject to cyber-based attacks or breaches. For additional information related to the risks
associated with cybersecurity threats, refer to the Business and Operational Risks section of Item 1A. Risk Factors.
Cybersecurity risk management is part of the Company's global enterprise risk management program. In order to manage the
risks associated with cybersecurity threats, the Company has implemented a risk-based cybersecurity program consisting of
processes, technologies, and controls to assess, identify and manage material risks from cybersecurity threats.
A key part of the Company’s cybersecurity program is the ITW Cybersecurity Framework, which is based on the National
Institute of Standards and Technology’s Cybersecurity Framework ("CSF") and is designed to protect the Company’s data
through rapid identification of and effective response to cybersecurity incidents. The Company’s framework includes detailed
processes and controls related to backup and recovery, response planning, awareness, vulnerability management and endpoint
protection as well as cybersecurity requirements for third-party service providers. The framework is regularly reviewed,
assessed, and updated based on input from third party specialists, threat intelligence firms and CSF standard updates.
The ITW Cybersecurity Framework includes a number of activities designed to enhance the Company's resiliency related to
cyber-related risks and ensure that the Company's information systems are secure from material cybersecurity threats. These
activities include the following, among others:
•
Annual cybersecurity training;
•
Quarterly phish simulation testing;
•
Ongoing response planning and tabletop exercises;
•
Network/endpoint protection, monitoring and response;
•
Vulnerability management and
•
Backup and recovery testing.
While the Company's information systems are exposed to cybersecurity threats and risks, the Company has not experienced
any material cybersecurity incidents during 2024, 2023 or 2022, and any costs or operational impacts related to cybersecurity
incidents were immaterial during this period.
Governance
ITW's Board of Directors is responsible for providing oversight and strategic guidance to management to support the long-
term interests of the Company's stakeholders. As part of this responsibility, the Board of Directors annually reviews and
evaluates the Company's cybersecurity policies and practices with respect to risk management as well as steps taken by
management to monitor and control such exposures.
In addition to oversight by the Board of Directors, several cross-functional management teams focus on cybersecurity risk
and report any identified cybersecurity incidents. Each of the Company's divisions has a Division Cyber Incident Response
Team and protocols in place to communicate cybersecurity incidents to a central Cyber Incident Response Team. The Cyber
Incident Response Team is led by the Chief Information Security Officer ("CISO") and is responsible for the initial
assessment of cybersecurity incidents and oversight of any incident response.
15
The Company’s cybersecurity program is overseen by a dedicated global team of cybersecurity professionals, led by the
CISO who brings over 20 years of information technology and cybersecurity leadership experience and holds the Certified
Information Security Manager ("CISM") designation. The CISO reports directly to the Chief Information Officer ("CIO") and
is responsible for leading the execution of the Company's cybersecurity strategy.
On a quarterly basis, or sooner if appropriate, cybersecurity incidents are summarized and reported to the Cybersecurity
Governance Committee comprised of senior executives. Additionally, the Audit Committee of the Board of Directors
receives quarterly cybersecurity reports from senior management which cover any identified cybersecurity incidents, results
of third party vulnerability testing, and key developments in policies and practices during the quarter.
ITEM 2. Properties
Due to the Company's decentralized operating structure and global operations, the Company operates out of a large number
of facilities worldwide, none of which are individually significant to the Company or its segments. As of December 31, 2024,
the Company operated approximately 410 plants and office facilities, excluding regional sales offices and warehouse
facilities. Approximately 270 of the facilities were located outside of the United States. Principal foreign countries include
China, Germany, France, and the United Kingdom.
The Company's properties are well suited for the purposes for which they were designed and are maintained in good
operating condition. Production capacity, in general, currently exceeds operating levels. Capacity levels are somewhat
flexible based on the number of shifts operated and on the number of overtime hours worked. The Company adds production
capacity from time to time as required by increased demand. Additions to capacity can be made within a reasonable period of
time due to the nature of the Company's businesses.
ITEM 3. 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 4. Mine Safety Disclosures
None.
16
PART II
ITEM 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Common Stock Data— The Company's common stock is listed on the New York Stock Exchange under the trading symbol
"ITW." There were approximately 4,199 holders of record of common stock as of January 31, 2025. This number does not
include beneficial owners of the Company's securities held in the name of nominees.
*Assumes $100 invested on December 31, 2019, including reinvestment of dividends. Fiscal years ended December 31.
Copyright© 2025 Standard & Poor's, a division of S&P Global. All rights reserved.
The 2024 peer group consists of the following 17 public companies, consistent with the peer group included in the
Company's Proxy Statement:
3M Company
Ecolab Inc.
Parker-Hannifin Corporation
Caterpillar Inc.
Emerson Electric Co.
PPG Industries, Inc.
Cummins Inc.
Fortive Corporation
Rockwell Automation, Inc.
Deere & Company
General Dynamics Corporation
Stanley Black & Decker, Inc.
Dover Corporation
Honeywell International Inc.
Trane Technologies plc
Eaton Corporation plc
Johnson Controls International plc
The Compensation Committee of the Board of Directors of the Company reviews the peer group annually and from time to
time changes the composition of the peer group where changes are appropriate. There were no changes in the Company's peer
group in 2024.
17
Repurchases of Common Stock
On August 3, 2018, 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 "2018 Program"). The 2018 Program was
completed in the first quarter of 2022.
On May 7, 2021, the Company announced a stock repurchase program which provided for the repurchase of up to an
additional $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 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
December 31, 2024, there were approximately $3.5 billion of authorized repurchases remaining under the 2023 Program.
Share repurchase activity under the Company's share repurchase programs for the fourth 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
October 2024 . . . . . . .
0.5 $
258.91
0.5 $
3,721
November 2024 . . . . .
0.5 $
271.32
0.5 $
3,597
December 2024 . . . . . .
0.4 $
269.58
0.4 $
3,490
Total . . . . . . . . . . . . . .
1.4
1.4
ITEM 6. [Reserved]
ITEM 7. 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 86 divisions in 51 countries. As of December 31, 2024, the Company employed approximately 44,000
people.
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.
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, variable cost of revenue,
overhead expenses, 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
18
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 20,900 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 86 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 may 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.
19
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.
In the second quarter of 2022, plans were approved to divest two businesses, including one business in the Polymers & Fluids
segment and one business in the Food Equipment segment. In the fourth quarter of 2022, both of these businesses were
divested. The business in the Polymers & Fluids segment was sold for $220 million, subject to certain closing adjustments,
resulting in a pre-tax gain of $156 million. The business in the Food Equipment segment was sold for $59 million, subject to
certain closing adjustments, resulting in a pre-tax gain of $41 million. Operating revenue related to these divested businesses
that was included in the Company's results of operations for the twelve months ended December 31, 2022 was $106 million.
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 and $37 million for the twelve months ended December 31, 2023 and 2022, respectively. Refer to
Note 3. Divestitures in Item 8. Financial Statements and Supplementary Data for further information regarding the
Company's divestitures.
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. On April 1, 2024, the Company completed the acquisition of one business in
the Test & Measurement and Electronics segment for $59 million, net of cash acquired. The purchase price for both
acquisitions was subject to certain closing adjustments. These acquisitions were not material, individually or in the aggregate,
to the Company’s results of operations, financial position or cash flows. Refer to Note 2. Acquisitions in Item 8. Financial
Statements and Supplementary Data for further information regarding the Company's acquisitions.
On August 5, 2024, the Company entered into a purchase agreement with affiliates of Clayton, Dubilier & Rice, LLC
("CD&R") for the sale of the Company’s noncontrolling equity interest in Wilsonart International Holdings LLC
("Wilsonart") for $398 million. The transaction closed immediately after the execution of the purchase agreement. Proceeds
from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of $363 million which was
included in Other income (expense) in the Statement of Income. Income taxes on the gain were more than offset by a discrete
tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss carryforwards upon the sale of
Wilsonart. 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 periods. Refer to Note 5. Other Income (Expense) and Note 6. Income Taxes in
Item 8. Financial Statements and Supplementary Data for additional information regarding this transaction.
20
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.
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 December 31, 2024. The revenue for these four subsidiaries for the twelve months
ended December 31, 2024 was approximately $24 million. These subsidiaries were not material to the Company's results of
operations or financial position.
In the second quarter of 2022, plans were approved to divest two businesses, including one business in the Polymers & Fluids
segment and one business in the Food Equipment segment. These two businesses were classified as held for sale beginning in
the second quarter of 2022. In the fourth quarter of 2022, both of these businesses were divested. On October 3, 2022, the
business in the Polymers & Fluids segment was sold for $220 million, subject to certain closing adjustments, resulting in a
pre-tax gain of $156 million. On December 1, 2022, the business in the Food Equipment segment was sold for $59 million,
subject to certain closing adjustments, resulting in a pre-tax gain of $41 million. The pre-tax gains were included in Other
income (expense) in the Statement of Income. Income taxes on the gains were mostly offset by the utilization of capital loss
carryforwards of $32 million. Operating revenue related to these divested businesses that was included in the Company's
results of operations for the twelve months ended December 31, 2022 was $106 million.
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 for the twelve months ended December 31, 2023 and 2022 was $9 million and $37 million, respectively. Refer to
Note 3. Divestitures in Item 8. Financial Statements and Supplementary Data for further information regarding the
Company's divestitures.
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. On April 1, 2024, the Company completed the acquisition of one business in
the Test & Measurement and Electronics segment for $59 million, net of cash acquired. The purchase price for both
acquisitions was subject to certain closing adjustments. These acquisitions were not material, individually or in the aggregate,
to the Company’s results of operations, financial position or cash flows. The allocation of purchase price for these
acquisitions will be completed as soon as practicable, but no later than one year from the acquisition date. Refer to Note 2.
21
Acquisitions in Item 8. Financial Statements and Supplementary Data for further information regarding the Company's
acquisitions.
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 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. Description of Business and Summary of Significant Accounting
Policies in Item 8. Financial Statements and Supplementary Data for additional information regarding this change in
accounting method and the Company’s inventory balances.
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 $395 million, resulting in a pre-tax gain of
$363 million which was included in Other income (expense) in the Statement of Income. Income taxes on the gain were more
than offset by a discrete tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss
carryforwards upon the sale of Wilsonart. 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 periods. Refer to Note 5. Other Income (Expense) and Note
6. Income Taxes in Item 8. Financial Statements and Supplementary Data for additional information regarding this
transaction.
In a challenging and dynamic environment, the Company delivered solid financial results in 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 2024 compared to 2023 and 2023 compared to 2022.
Operating Expenses
Dollars in millions
2024
2023
2022
Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,898
$
16,107
$
15,932
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
8,858
$
9,316
$
9,429
Percent of operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55.7 %
57.8 %
59.2 %
Selling, administrative, and research and development expenses . . $
2,675
$
2,638
$
2,579
Percent of operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
16.8 %
16.4 %
16.2 %
Amortization and impairment of intangible assets . . . . . . . . . . . . . $
101
$
113
$
134
Percent of operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.6 %
0.7 %
0.8 %
Cost of revenue was $8.9 billion in 2024, $9.3 billion in 2023 and $9.4 billion in 2022. Cost of revenue was 4.9% lower in
2024 compared to 2023 primarily due to lower revenue and the first quarter 2024 LIFO accounting method change, which
reduced cost of revenue by 3.1% and 1.3%, respectively. Cost of revenue as a percent of operating revenue improved in 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. Cost of revenue was 1.2% lower in 2023 compared to 2022
primarily due to the impact of divestiture activity in the second quarter of 2023 and the fourth quarter of 2022, which reduced
cost of revenue by 1.0%. Cost of revenue as a percent of operating revenue improved in 2023 compared to 2022 primarily
due to benefits from the Company's enterprise initiatives and positive operating leverage, partially offset by higher employee-
related expenses.
22
Selling, administrative, and research and development expenses were $2.7 billion in 2024, $2.6 billion in 2023 and $2.6
billion in 2022. Expenses in 2024 increased 1.4% compared to 2023 primarily driven by higher employee-related expenses
and the impact of acquisitions in 2024. Selling, administrative, and research and development expenses as a percent of
operating revenue were higher in 2024 compared to 2023, as higher employee-related expenses and the unfavorable impact of
acquisitions in the first and second quarters of 2024 were partially offset by benefits from the Company's enterprise
initiatives. Expenses in 2023 increased 2.3% compared to 2022 driven by a 3.0% increase resulting from higher organic
revenue, partially offset by the impact of divestiture activity which reduced expenses by 0.7%. Selling, administrative, and
research and development expenses as a percent of operating revenue were slightly higher in 2023 compared to 2022
primarily due to higher employee-related expenses and research and development expenses, partially offset by positive
operating leverage and benefits from the Company's enterprise initiatives.
Amortization and impairment of intangible assets was $101 million in 2024, $113 million in 2023 and $134 million in 2022.
The decreased expense in each respective period was 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 2024 compared to 2023 and 2023 compared to 2022.
RESULTS OF OPERATIONS FOR TOTAL COMPANY
The Company's consolidated results of operations for 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 15,898
$ 16,107
(1.3) %
(0.7) %
0.1 %
— %
(0.7) %
(1.3) %
Operating income
$ 4,264
$ 4,040
5.5 %
6.2 %
(0.2) %
0.5 %
(1.0) %
5.5 %
Operating margin %
26.8 %
25.1 %
170 bps
170 bps
(10) bps
10 bps
—
170 bps
•
Operating revenue decreased primarily due to lower organic revenue and the unfavorable effect of foreign currency
translation.
•
Organic revenue declined 0.7% as a decrease in the Construction Products, Welding, Test & Measurement and
Electronics and Automotive OEM segments was partially offset by growth in the Specialty Products, Food
Equipment and Polymers & Fluids segments. Product line simplification activities reduced organic revenue by 60
basis points.
◦
North American organic revenue decreased 2.4% as a decline in six segments was partially offset by
growth in the Specialty Products segment.
◦
Europe, Middle East and Africa organic revenue declined 0.3% as a decrease in the Automotive OEM,
Construction Products and Test & Measurement and Electronics segments was partially offset by growth in
the Specialty Products, Food Equipment, Polymers & Fluids and Welding segments.
◦
Asia Pacific organic revenue grew 3.0% as growth in six segments was partially offset by a decline in the
Construction Products segment. Organic revenue in China increased 6.9% as growth in five segments was
partially offset by a decline in the Construction Products and Test & Measurement and Electronics
segments.
•
Operating income of $4.3 billion grew 5.5%, or 2.6% excluding the $117 million favorable impact of the LIFO
accounting method changed discussed previously.
•
Operating margin of 26.8% increased 170 basis points. Excluding the 70 basis points of favorable impact from the
LIFO accounting method change in the first quarter of 2024, operating margin increased 100 basis points primarily
driven by benefits from the Company's enterprise initiatives of 130 basis points and favorable price/cost of 40 basis
points, partially offset by higher employee-related expenses.
•
The Company's effective tax rate for 2024 and 2023 was 21.1% and 22.6%, respectively. The 2024 effective tax rate
benefited from discrete income tax benefits during the third quarter of 2024 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. Refer to Note 5. Other Income
23
(Expense) and Note 6. Income Taxes in Item 8. Financial Statements and Supplementary Data for additional
information regarding these transactions. The 2023 effective tax rate benefited from a discrete income tax benefit of
$20 million in the second quarter of 2023 related to amended 2021 U.S. taxes. Additionally, the effective tax rates
for 2024 and 2023 included discrete income tax benefits of $14 million and $20 million, respectively, related to
excess tax benefits from stock-based compensation.
•
Diluted earnings per share ("EPS") of $11.71 in 2024 increased 20.2%, or 4.2% excluding the favorable impact from
the first quarter 2024 LIFO accounting method change of $0.30 and the favorable impact of $1.26 from the third
quarter 2024 Wilsonart transaction.
•
The Company repurchased approximately 5.9 million shares of its common stock in 2024 for approximately $1.5
billion.
•
The Company increased the quarterly dividend on common stock from $1.40 to $1.50 per share in 2024, or from
$5.60 to $6.00 per share on an annualized basis. Total cash dividends of approximately $1.7 billion were paid in
2024.
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 16,107
$ 15,932
1.1 %
2.0 %
(0.8) %
— %
(0.1) %
1.1 %
Operating income
$ 4,040
$ 3,790
6.6 %
7.6 %
(0.5) %
(0.2) %
(0.3) %
6.6 %
Operating margin %
25.1 %
23.8 %
130 bps
130 bps
10 bps
(10) bps
—
130 bps
•
Operating revenue increased due to higher organic revenue, partially offset by the impact of divestiture activity in
the second quarter of 2023 and the fourth quarter of 2022, and the unfavorable effect of foreign currency translation.
•
Organic revenue increased 2.0% as growth in five segments was partially offset by a decline in the Specialty
Products and Construction Products segments. Product line simplification activities reduced organic revenue by 50
basis points.
◦
North American organic revenue decreased 0.3% as a decline in the Test & Measurement and Electronics,
Specialty Products, Automotive OEM, Welding and Construction Products segments was partially offset by
growth in the Food Equipment and Polymers & Fluids segments.
◦
Europe, Middle East and Africa organic revenue increased 3.9% as growth in three segments was partially
offset by a decline in the Construction Products, Polymers & Fluids, Specialty Products and Welding
segments.
◦
Asia Pacific organic revenue increased 6.9% as growth in five segments was partially offset by a decline in
the Specialty Products and Construction Products segments. Organic revenue in China increased 9.7% as
growth in the Automotive OEM, Test & Measurement and Electronics, Welding, Construction Products
and Polymers & Fluids segments was partially offset by a decline in the Specialty Products and Food
Equipment segments.
•
Operating income of $4.0 billion increased 6.6% compared to the prior year primarily due to higher organic revenue,
partially offset by the impact of divestiture activity, the unfavorable effect of foreign currency translation and higher
restructuring expenses.
•
Operating margin of 25.1% increased 130 basis points primarily driven by favorable price/cost of 210 basis points,
benefits from the Company's enterprise initiatives of 130 basis points and positive operating leverage of 40 basis
points, partially offset by continued investments in the business and higher employee-related expenses.
•
The Company's effective tax rate for 2023 and 2022 was 22.6% and 21.0%, respectively. The 2023 effective tax rate
benefited from a discrete income tax benefit of $20 million in the second quarter of 2023 related to amended 2021
U.S. taxes. The 2022 effective tax rate benefited from discrete income tax benefits of $32 million in the fourth
quarter of 2022 related to the utilization of capital loss carryforwards and $51 million in the second quarter of 2022
related to a decrease in unrecognized tax benefits resulting from the resolution of a U.S. tax audit. Additionally, the
effective tax rates for 2023 and 2022 included discrete income tax benefits of $20 million and $12 million,
respectively, related to excess tax benefits from stock-based compensation.
•
Diluted earnings per share ("EPS") of $9.74 in 2023 decreased 0.3%. Excluding the favorable impact of $0.60 per
diluted share in 2022 related to the pre-tax divestiture gains of $197 million in the fourth quarter of 2022, or $188
million after-tax including the impact of the $32 million discrete tax benefit noted above, EPS increased 6.2%.
24
•
The Company repurchased approximately 6.4 million shares of its common stock in 2023 for approximately $1.5
billion.
•
The Company increased the quarterly dividend on common stock from $1.31 to $1.40 per share in 2023, or from
$5.24 to $5.60 per share on an annualized basis. Total cash dividends of approximately $1.6 billion were paid in
2023.
RESULTS OF OPERATIONS BY SEGMENT
The reconciliation of segment operating revenue and operating income to total operating revenue and operating income is as
follows:
Operating Revenue
In millions
2024
2023
2022
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,188 $
3,235 $
2,969
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,647
2,622
2,444
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
2,818
2,832
2,828
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,851
1,902
1,894
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,764
1,804
1,905
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,909
2,033
2,113
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,743
1,697
1,799
Total segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,920
16,125
15,952
Intersegment revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22)
(18)
(20)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,898 $
16,107 $
15,932
Operating Income
In millions
2024
2023
2022
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
625 $
561 $
499
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
719
713
618
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
703
686
684
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
597
605
583
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
484
482
479
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
559
578
548
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
528
449
481
Total segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,215
4,074
3,892
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
(34)
(102)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,264 $
4,040 $
3,790
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 expenses in 2024 included the favorable pre-tax cumulative effect of the LIFO
accounting method change of $117 million in the first quarter of 2024. Refer to Note 1. Description of Business and
Summary of Significant Accounting Policies in Item 8. Financial Statements and Supplementary Data for additional
information regarding this change in accounting method and the Company’s inventory balances. Unallocated expenses in
2023 were lower as compared to 2022 primarily due to the impact of lower corporate expenses, including favorable health
and welfare expenses, and an immaterial insurance recovery.
25
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 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 3,188
$ 3,235
(1.5) %
(0.4) %
— %
— %
(1.1) %
(1.5) %
Operating income
$
625
$
561
11.4 %
9.6 %
— %
3.0 %
(1.2) %
11.4 %
Operating margin %
19.6 %
17.3 %
230 bps
180 bps
—
50 bps
—
230 bps
•
Operating revenue decreased due to the unfavorable effect of foreign currency translation and lower organic
revenue.
•
Organic revenue declined 0.4% compared to worldwide auto builds which decreased 1%. Product line simplification
activities reduced organic revenue by 70 basis points.
◦
North American revenue decreased 5.1% compared to North American auto builds which declined 1%
primarily due to customer mix and product line simplification activities. Auto builds for the Detroit 3,
where the Company has higher content, decreased 4%.
◦
European organic revenue declined 3.4% compared to European auto builds which decreased 5% primarily
due to market penetration gains.
◦
Asia Pacific organic revenue grew 9.7%. China organic revenue increased 8.1%, including growth in the
electric vehicles market and market penetration gains with Chinese original equipment manufacturers,
versus China auto builds which grew 4%. Auto builds of foreign automotive manufacturers in China, where
the Company has higher content per vehicle, decreased 17%.
•
Operating margin of 19.6% increased 230 basis points primarily driven by benefits from the Company's enterprise
initiatives, lower restructuring expenses and favorable price/cost of 20 basis points, partially offset by higher
employee-related expenses and continued investment in the business.
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 3,235
$ 2,969
9.0 %
8.8 %
— %
— %
0.2 %
9.0 %
Operating income
$
561
$
499
12.4 %
11.7 %
— %
1.1 %
(0.4) %
12.4 %
Operating margin %
17.3 %
16.8 %
50 bps
40 bps
—
20 bps
(10) bps
50 bps
•
Operating revenue grew due to higher organic revenue and the favorable effect of foreign currency translation.
•
Organic revenue increased 8.8% compared to worldwide auto builds which grew 9%. Product line simplification
activities reduced organic revenue by 50 basis points primarily in North America. Additionally, automotive industry
labor actions in North America negatively impacted operating results in the second half of 2023.
◦
North American organic revenue decreased 1.9% compared to North American auto builds which increased
9% primarily due to customer mix and product line simplification. Auto builds for the Detroit 3, where the
Company has higher content, grew 1%.
26
◦
European organic revenue grew 12.5% compared to European auto builds which increased 13%.
◦
Asia Pacific organic revenue increased 21.4%. China organic revenue grew 21.9%, including growth in the
electric vehicles market and higher content in the Chinese original equipment manufacturers, versus China
auto builds which increased 9%.
•
Operating margin of 17.3% increased 50 basis points primarily driven by positive operating leverage of 160 basis
points, favorable price/cost of 140 basis points and benefits from the Company's enterprise initiatives, partially
offset by higher employee-related expenses and continued investments in the business, including the electric
vehicles market, and product mix.
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 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 2,647
$ 2,622
1.0 %
1.1 %
— %
— %
(0.1) %
1.0 %
Operating income
$
719
$
713
1.0 %
1.4 %
— %
(0.3) %
(0.1) %
1.0 %
Operating margin %
27.2 %
27.2 %
—
10 bps
—
(10) bps
—
—
•
Operating revenue increased primarily due to higher organic revenue.
•
Organic revenue grew 1.1% as equipment declined 0.8% and service organic revenue increased 4.8%.
◦
North American organic revenue decreased 0.2%. Equipment organic revenue declined 2.4% primarily due
to lower demand in the independent restaurant and food retail end markets, partially offset by growth in the
institutional end market. Service organic revenue grew 3.9%.
◦
International organic revenue grew 3.0%. Equipment organic revenue increased 1.6% primarily due to
higher demand in the European warewash and cooking end markets and growth in Asia Pacific, partially
offset by lower demand in the European refrigeration end market. Service organic revenue grew 6.4%.
•
Operating margin of 27.2% was flat as benefits from the Company's enterprise initiatives, favorable price/cost of 30
basis points and positive operating leverage of 20 basis points were offset by higher operating expenses, including
employee-related expenses and additional investment in the business.
27
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 2,622
$ 2,444
7.3 %
7.8 %
(1.2) %
— %
0.7 %
7.3 %
Operating income
$
713
$
618
15.2 %
15.4 %
(0.7) %
(0.3) %
0.8 %
15.2 %
Operating margin %
27.2 %
25.3 %
190 bps
180 bps
20 bps
(10) bps
—
190 bps
•
Operating revenue grew due to higher organic revenue and the favorable effect of foreign currency translation,
partially offset by the impact of a divestiture in the fourth quarter of 2022. On December 1, 2022, the Company
completed the sale of a business. Operating revenue for this business that was included in the Company's results of
operations for the year ended December 31, 2022 was $30 million. Refer to Note 3. Divestitures in Item 8. Financial
Statements and Supplementary Data for further information.
•
Organic revenue increased 7.8% as equipment and service organic revenue grew 5.8% and 12.5%, respectively.
◦
North American organic revenue increased 10.4% as equipment organic revenue grew 10.0% with growth
in the institutional, food retail and restaurant end markets. Service organic revenue increased 12.0%.
◦
International organic revenue increased 3.8%. Equipment organic revenue was flat as higher demand in the
European warewash and refrigeration end markets was offset by lower demand in the European cooking
end market and in China. Service organic revenue increased 13.4%.
•
Operating margin of 27.2% increased 190 basis points primarily driven by favorable price/cost of 220 basis points,
positive operating leverage of 150 basis points and benefits from the Company's enterprise initiatives, partially offset
by higher operating expenses, including employee-related expenses.
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, automotive original equipment manufacturers and tiers,
energy, 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 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 2,818
$ 2,832
(0.5) %
(1.0) %
0.9 %
— %
(0.4) %
(0.5) %
Operating income
$
703
$
686
2.5 %
4.0 %
(1.0) %
— %
(0.5) %
2.5 %
Operating margin %
24.9 %
24.2 %
70 bps
130 bps
(50) bps
—
(10) bps
70 bps
•
Operating revenue decreased due to lower organic revenue and the unfavorable effect of foreign currency
translation, partially offset by revenue from acquisitions.
28
•
The Company completed the acquisition of one business for $57 million, net of cash acquired, on January 2, 2024,
and completed the acquisition of a second business for $59 million, net of cash acquired, on April 1, 2024. Refer to
Note 2. Acquisitions in Item 8. Financial Statements and Supplementary Data for additional information regarding
these acquisitions.
•
Organic revenue decreased 1.0% 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 declined 1.0% primarily driven by lower demand
in the semiconductor and general industrial end markets, primarily in North America and Asia Pacific,
partially offset by growth in the MTS Test & Simulation business.
◦
Electronics organic revenue decreased 1.3% primarily due to a decline in the consumer electronics end
market, partially offset by higher demand in the consumable semiconductor end market. The electronics
assembly businesses declined 11.1% primarily due to lower demand in North America. The other
electronics businesses, which include the contamination control, static control and pressure sensitive
adhesives businesses, grew 3.1% primarily due to higher demand across all major regions.
•
Operating margin of 24.9% increased 70 basis points primarily driven by benefits from the Company's enterprise
initiatives, favorable price/cost of 60 basis points and lower intangible asset amortization expense, partially offset by
product mix, the dilutive impact of 50 basis points from acquisitions in 2024, higher employee-related expenses and
unfavorable operating leverage of 20 basis points.
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 2,832
$ 2,828
0.1 %
0.3 %
— %
— %
(0.2) %
0.1 %
Operating income
$
686
$
684
0.3 %
1.3 %
— %
(0.5) %
(0.5) %
0.3 %
Operating margin %
24.2 %
24.2 %
—
20 bps
—
(10) bps
(10) bps
—
•
Operating revenue was essentially flat as higher organic revenue was offset by the unfavorable effect of foreign
currency translation.
•
Organic revenue increased 0.3% primarily due to growth in the general industrial end market, partially offset by a
decline in the semiconductor end market.
◦
Organic revenue for the test and measurement businesses increased 7.0% primarily driven by growth in the
MTS Test & Simulation and Instron businesses and higher demand in the automotive, defense, and oil and
gas end markets, partially offset by lower semiconductor demand in North America.
◦
Electronics organic revenue decreased 10.8% primarily due to a decline in the consumer electronics and
semiconductor end markets. The electronics assembly businesses decreased 19.3% 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, decreased 6.4% primarily
due to lower demand in the semiconductor end market, partially offset by higher demand in the automotive
end market.
•
Operating margin of 24.2% was flat compared to the prior year as favorable price/cost of 160 basis points, benefits
from the Company's enterprise initiatives and lower intangible asset amortization expense were offset by higher
employee-related expenses and product mix.
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.
29
The results of operations for the Welding segment for 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 1,851
$ 1,902
(2.7) %
(2.4) %
— %
— %
(0.3) %
(2.7) %
Operating income
$
597
$
605
(1.3) %
(1.3) %
— %
0.2 %
(0.2) %
(1.3) %
Operating margin %
32.3 %
31.8 %
50 bps
40 bps
—
10 bps
—
50 bps
•
Operating revenue decreased due to lower organic revenue and the unfavorable effect of foreign currency
translation.
•
Organic revenue declined 2.4% as equipment and consumables decreased 2.1% and 3.0%, respectively.
◦
North American organic revenue decreased 3.3% as the industrial and commercial end markets declined
2.3% and 6.0%, respectively.
◦
International organic revenue grew 2.2% primarily due to higher equipment demand in the general
industrial and oil and gas end markets in Europe and Asia Pacific.
•
Operating margin of 32.3% increased 50 basis points primarily driven by benefits from the Company's enterprise
initiatives and favorable price/cost of 50 basis points, partially offset by higher employee-related expenses and
unfavorable operating leverage of 40 basis points.
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 1,902
$ 1,894
0.4 %
0.3 %
— %
— %
0.1 %
0.4 %
Operating income
$
605
$
583
3.7 %
3.4 %
— %
(0.1) %
0.4 %
3.7 %
Operating margin %
31.8 %
30.8 %
100 bps
100 bps
—
—
—
100 bps
•
Operating revenue grew due to higher organic revenue and the favorable effect of foreign currency translation.
•
Organic revenue increased 0.3%, which had a challenging comparable in the prior year of 16.0% growth.
Consumables grew 1.3% and equipment decreased 0.4%.
◦
North American organic revenue decreased 0.2% primarily due to a decline in the commercial end markets,
partially offset by growth in the industrial and aerospace end markets.
◦
International organic revenue grew 2.7% primarily due to higher equipment demand in the general
industrial and oil and gas end markets in Asia Pacific.
•
Operating margin of 31.8% increased 100 basis points primarily driven by favorable price/cost of 300 basis points
and benefits from the Company's enterprise initiatives, partially offset by higher employee-related expenses and
product mix.
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;
30
•
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.
The results of operations for the Polymers & Fluids segment for 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 1,764
$ 1,804
(2.2) %
0.9 %
— %
— %
(3.1) %
(2.2) %
Operating income
$
484
$
482
0.4 %
3.7 %
— %
0.9 %
(4.2) %
0.4 %
Operating margin %
27.4 %
26.7 %
70 bps
80 bps
—
20 bps
(30) bps
70 bps
•
Operating revenue decreased due to the unfavorable effect of foreign currency translation, partially offset by higher
organic revenue.
•
Organic revenue grew 0.9% due to increases in South America, Europe and Asia Pacific, partially offset by a
decrease in North America. Product line simplification activities reduced organic revenue by 30 basis points.
◦
Organic revenue for the polymers businesses grew 6.3% due to increases in South America, Europe and
Asia Pacific, partially offset by a decrease in North America.
◦
Organic revenue for the fluids businesses increased 1.9% primarily driven by higher demand in Europe,
primarily due to growth in the life sciences end market, partially offset by lower demand in the North
American and European industrial maintenance, repair and operations and hygiene end markets.
◦
Organic revenue for the automotive aftermarket businesses declined 2.2% primarily due to lower demand in
the North American car care, body repair and tire repair businesses, partially offset by growth in the North
American engine repair business and the European additives and tire repair businesses.
•
Operating margin of 27.4% increased 70 basis points primarily driven by benefits from the Company's enterprise
initiatives, favorable price/cost of 30 basis points, positive operating leverage of 20 basis points, lower restructuring
expenses and lower intangible asset amortization expense, partially offset by higher employee-related expenses.
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 1,804
$ 1,905
(5.3) %
0.3 %
(4.0) %
— %
(1.6) %
(5.3) %
Operating income
$
482
$
479
0.6 %
7.6 %
(3.3) %
(0.8) %
(2.9) %
0.6 %
Operating margin %
26.7 %
25.2 %
150 bps
180 bps
30 bps
(20) bps
(40) bps
150 bps
•
Operating revenue declined due to the impact of a divestiture in the fourth quarter of 2022 and the unfavorable effect
of foreign currency translation, partially offset by higher organic revenue. On October 3, 2022, the Company
completed the sale of a business. Operating revenue for this business that was included in the Company's results of
operations for the year ended December 31, 2022 was $76 million. Refer to Note 3. Divestitures in Item 8. Financial
Statements and Supplementary Data for further information.
•
Organic revenue increased 0.3% as growth in North America was partially offset by a decline in Europe. Product
line simplification activities reduced organic revenue by 70 basis points.
◦
Organic revenue for the automotive aftermarket businesses increased 1.4% primarily due to an increase in
the car care, tire repair and engine repair businesses in North America and growth in Europe, partially
offset by a decline in the body repair business in North America.
◦
Organic revenue for the polymers businesses increased 0.3% due to higher demand in North America,
partially offset by a decline in Europe. Demand in Europe was negatively impacted by declines in the wind
and industrial end markets.
31
◦
Organic revenue for the fluids businesses declined 2.7% driven by lower demand in the European life
sciences end market, the North American industrial maintenance, repair and operations end market, and the
transportation and health and hygiene end markets.
•
Operating margin of 26.7% increased 150 basis points primarily driven by favorable price/cost of 210 basis points,
benefits from the Company's enterprise initiatives and lower intangible asset amortization expense, partially offset
by higher employee-related expenses and product mix.
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.
The results of operations for the Construction Products segment for 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 1,909
$ 2,033
(6.1) %
(6.1) %
— %
— %
— %
(6.1) %
Operating income
$
559
$
578
(3.4) %
(2.5) %
— %
(0.8) %
(0.1) %
(3.4) %
Operating margin %
29.3 %
28.4 %
90 bps
110 bps
—
(20) bps
—
90 bps
•
Operating revenue decreased due to lower organic revenue.
•
Organic revenue declined 6.1% due to lower demand across all major regions. Product line simplification activities
reduced organic revenue by 50 basis points.
◦
North American organic revenue decreased 4.6% primarily due to lower demand in the residential and
commercial end markets. Organic revenue in the United States residential and commercial end markets
declined 4.5% and 9.5%, respectively. Organic revenue in Canada increased 3.9%.
◦
International organic revenue declined 7.7%. European organic revenue decreased 6.3% primarily due to
lower demand in the commercial and residential end markets. Asia Pacific organic revenue declined 9.2%
primarily due to lower demand in the Australia and New Zealand residential end markets.
•
Operating margin of 29.3% increased 90 basis points primarily driven by benefits from the Company's enterprise
initiatives and favorable price/cost of 10 basis points, partially offset by unfavorable operating leverage of 110 basis
points, higher employee-related expenses and higher restructuring expenses.
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 2,033
$ 2,113
(3.8) %
(3.2) %
— %
— %
(0.6) %
(3.8) %
Operating income
$
578
$
548
5.5 %
6.6 %
— %
(0.5) %
(0.6) %
5.5 %
Operating margin %
28.4 %
25.9 %
250 bps
270 bps
—
(20) bps
—
250 bps
•
Operating revenue declined due to lower organic revenue and the unfavorable effect of foreign currency translation.
•
Organic revenue declined 3.2%, which had a challenging comparable in the prior year period of 14.4% growth.
Organic revenue declined primarily due to a decrease in Europe and Asia Pacific. Product line simplification
activities reduced organic revenue by 50 basis points.
32
◦
North American organic revenue decreased 0.2% primarily due to lower demand in the United States
residential and commercial end markets of 0.2% and 0.1%, respectively. Organic revenue in Canada
declined 2.7%.
◦
International organic revenue decreased 6.4%. European organic revenue declined 9.9% primarily due to
lower demand in the commercial and residential end markets. Asia Pacific organic revenue declined 2.3%
primarily due to lower demand in the Australia and New Zealand residential end markets.
•
Operating margin of 28.4% increased 250 basis points primarily driven by favorable price/cost of 350 basis points
and benefits from the Company's enterprise initiatives, partially offset by higher employee-related expenses and
unfavorable operating leverage of 60 basis points.
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, airlines, industrial
capital goods 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.
The results of operations for the Specialty Products segment for 2024, 2023 and 2022 were as follows:
2024 compared to 2023
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2024
2023
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 1,743
$ 1,697
2.7 %
3.5 %
(0.6) %
— %
(0.2) %
2.7 %
Operating income
$
528
$
449
17.6 %
17.3 %
(0.1) %
0.7 %
(0.3) %
17.6 %
Operating margin %
30.3 %
26.5 %
380 bps
350 bps
10 bps
20 bps
—
380 bps
•
Operating revenue increased due to higher organic revenue, partially offset by the impact of a divestiture in the
second quarter of 2023 and the unfavorable effect of foreign currency translation.
•
The Company divested a business on April 3, 2023. Operating revenue for this business in 2023 was $9 million.
•
Organic revenue grew 3.5% as consumables increased 2.3% and equipment sales grew 8.2% due to higher demand
across all major regions. Product line simplification activities reduced organic revenue by 270 basis points.
◦
North American organic revenue increased 1.8% 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 grew 6.9% 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 of 30.3% increased 380 basis points primarily driven by benefits from the Company's enterprise
initiatives, positive operating leverage of 70 basis points, favorable price/cost of 70 basis points and lower
restructuring expenses, partially offset by higher employee-related expenses and product mix.
33
2023 compared to 2022
For the Years Ended
Dollars in millions
December 31,
Components of Increase (Decrease)
2023
2022
Inc (Dec)
Organic
Acquisition/
Divestiture
Restructuring
Foreign
Currency
Total
Operating revenue
$ 1,697
$ 1,799
(5.7) %
(4.9) %
(1.6) %
— %
0.8 %
(5.7) %
Operating income
$
449
$
481
(6.5) %
(7.2) %
(0.1) %
(0.3) %
1.1 %
(6.5) %
Operating margin %
26.5 %
26.7 %
(20) bps
(60) bps
40 bps
(10) bps
10 bps
(20) bps
•
Operating revenue declined due to lower organic revenue and the impact of a divestiture in the second quarter of
2023, partially offset by the favorable effect of foreign currency translation. On April 3, 2023, the Company
completed the sale of a business. Operating revenue for this business that was included in the Company's results of
operations for the years ended December 31, 2023 and 2022 was $9 million and $37 million, respectively. Refer to
Note 3. Divestitures in Item 8. Financial Statements and Supplementary Data for further information.
•
Organic revenue decreased 4.9%. Consumable sales decreased 7.8% due to lower demand in all major regions,
including plastic consumables that multi-pack cans and bottles. Equipment sales increased 7.9% primarily driven by
higher demand in Europe and North America. Product line simplification activities reduced organic revenue by 150
basis points.
◦
North American organic revenue decreased 6.4% primarily driven by a decline in the consumer packaging,
specialty films, strength films and decorating equipment businesses, partially offset by growth in the
ground support equipment, appliance and filter medical businesses.
◦
International organic revenue declined 1.6% primarily due to a decrease in Asia Pacific in the strength
films, graphics and decorating equipment businesses, partially offset by growth in the ground support
equipment and consumer packaging businesses in Europe.
•
Operating margin of 26.5% decreased 20 basis points primarily driven by unfavorable operating leverage of 90 basis
points, higher employee-related expenses and product mix, partially offset by favorable price/cost of 130 basis
points, benefits from the Company's enterprise initiatives and the favorable impact of a divestiture in the second
quarter of 2023.
OTHER FINANCIAL HIGHLIGHTS
•
Interest expense was $283 million in 2024, $266 million in 2023 and $203 million in 2022. 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. Interest expense in 2023 was higher than 2022 primarily
due to higher interest rates, partially offset by the repayment of notes due May 22, 2023. Refer to Note 10. Debt in
Item 8. Financial Statements and Supplementary Data for further information regarding the Company's debt.
•
Other income (expense) was income of $441 million in 2024, $49 million in 2023 and $255 million in 2022. 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 $395 million, resulting in a
pre-tax gain of $363 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 periods. Other income was higher in 2022 as
compared to 2023 primarily due to net pre-tax gains of $191 million related to the sale of businesses in 2022. Refer
to Note 3. Divestitures and Note 5. Other Income (Expense) for additional information regarding these transactions.
•
The Company's effective tax rate for 2024, 2023, and 2022 was 21.1%, 22.6% and 21.0%, respectively. The 2024
effective tax rate benefited from discrete income tax benefits during the third quarter of 2024 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. The 2023 effective
tax rate benefited from a discrete income tax benefit of $20 million in the second quarter of 2023 related to amended
2021 U.S. taxes. The 2022 effective tax rate benefited from discrete income tax benefits of $32 million in the fourth
quarter of 2022 related to the utilization of capital loss carryforwards and $51 million in the second quarter of 2022
related to a decrease in unrecognized tax benefits resulting from the resolution of a U.S. tax audit. Additionally, the
effective tax rates for 2024, 2023 and 2022 included discrete income tax benefits of $14 million, $20 million and
$12 million, respectively, related to excess tax benefits from stock-based compensation. Refer to Note 6. Income
Taxes in Item 8. Financial Statements and Supplementary Data for further information.
34
•
The impact of foreign currencies against the U.S. Dollar in 2024 versus 2023 decreased operating revenue and
income before taxes by approximately $115 million and $40 million, respectively. The impact of foreign currencies
against the U.S. Dollar in 2023 versus 2022 decreased operating revenue and income before taxes by approximately
$7 million and $15 million, respectively.
NEW ACCOUNTING PRONOUNCEMENTS
Information regarding new accounting pronouncements is included in Note 1. Description of Business and Summary of
Significant Accounting Policies in Item 8. Financial Statements and Supplementary Data.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are free cash flow and short-term credit facilities. As of December 31, 2024, the
Company had $948 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.
The Company has certain contractual obligations, primarily the current portion of noncurrent income taxes payable, operating
leases and long-term debt. Refer to Note 6. Income Taxes, Note 9. Leases and Note 10. Debt in Item 8. Financial Statements
and Supplementary Data for details related to the Company's contractual obligations. The Company did not have any
significant off-balance sheet commitments as of December 31, 2024.
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 years ended December 31, 2024, 2023 and 2022 was as follows:
In millions
2024
2023
2022
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . $
3,281 $
3,539 $
2,348
Additions to plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . .
(437)
(455)
(412)
Free cash flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,844 $
3,084 $
1,936
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,695) $
(1,615) $
(1,542)
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,500)
(1,500)
(1,750)
Acquisition of businesses (excluding cash and equivalents) . . . . . .
(115)
—
(2)
Proceeds from sale of operations and affiliates . . . . . . . . . . . . . . . .
—
7
278
Proceeds from sale of noncontrolling interest in Wilsonart
International Holdings LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
395
—
—
Net proceeds from (repayments of) debt . . . . . . . . . . . . . . . . . . . . .
(8)
294
276
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
27
84
42
Effect of exchange rate changes on cash and equivalents . . . . . . . .
(65)
3
(57)
Net increase (decrease) in cash and equivalents . . . . . . . . . . . . . . . $
(117) $
357 $
(819)
35
Net cash provided by operating activities improved in 2023 compared to 2022 as supply chains began to normalize in 2023
and the Company reduced its investment in working capital.
Stock Repurchase Programs
On August 3, 2018, 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 "2018 Program"). Under the 2018 Program,
the Company repurchased approximately 6.7 million shares of its common stock at an average price of $158.11 per share
during 2019, approximately 4.2 million shares of its common stock at an average price of $167.69 per share during 2020,
approximately 4.4 million shares of its common stock at an average price of $227.29 per share during 2021 and
approximately 1.2 million shares of its common stock at an average price of $216.62 per share during 2022. The 2018
Program was completed in the first quarter of 2022.
On May 7, 2021, the Company announced a stock repurchase program which provided for the repurchase of up to an
additional $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 and approximately 6.3 million shares of its common stock at an average price of $235.35 per
share during 2023. The 2021 Program was completed in the fourth quarter of 2023.
On August 4, 2023, the Company announced a 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 during the fourth quarter of 2023 and approximately 5.9 million shares of its common stock at an average price of
$254.04 per share during 2024. As of December 31, 2024, there were approximately $3.5 billion of authorized repurchases
remaining under the 2023 Program.
36
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 year ended December 31, 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 year ended December 31, 2023. Also, for comparability, the Company excluded the discrete tax benefits of $32 million in
the fourth quarter of 2022 and $51 million in the second quarter of 2022 from net income and the effective tax rate for the
year ended December 31, 2022. 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 years ended December 31, 2024, 2023, and 2022 were as follows:
Dollars in millions
2024
2023
2022
Numerator:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,488
$
2,957
$
3,034
Net discrete tax benefit related to the third quarter 2024 . . . . . . . . . . . . . .
(121)
—
—
Discrete tax benefit related to the second quarter 2023 . . . . . . . . . . . . . . .
—
(20)
—
Discrete tax benefit related to the fourth quarter 2022 . . . . . . . . . . . . . . . .
—
—
(32)
Discrete tax benefit related to the second quarter 2022 . . . . . . . . . . . . . . .
—
—
(51)
Interest expense, net of tax (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
215
204
156
Other (income) expense, net of tax (1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(336)
(38)
(196)
Operating income after taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,246
$
3,103
$
2,911
Denominator:
Invested capital:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
948
$
1,065
$
708
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,991
3,123
3,171
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,605
1,707
2,054
Net assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
7
Net plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,036
1,976
1,848
Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,431
5,566
5,632
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . .
(2,095)
(2,244)
(2,322)
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,863)
(8,164)
(7,763)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
264
(16)
(246)
Total net assets (stockholders' equity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,317
3,013
3,089
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(948)
(1,065)
(708)
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,863
8,164
7,763
Total invested capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
10,232
$
10,112
$
10,144
Average invested capital (2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
10,419
$
10,214
$
10,017
Net income to average invested capital . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33.5 %
29.0 %
30.3 %
After-tax return on average invested capital . . . . . . . . . . . . . . . . . . . . . . . .
31.2 %
30.4 %
29.1 %
(1) Effective tax rate used for interest expense and other (income) expense for the years ended December 31, 2024, 2023, and
2022 was 23.8 %, 23.2% and 23.2%, respectively.
37
(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.
After-tax ROIC increased 80 basis points for the twelve month period ended December 31, 2024 compared to the prior year
period as a result of a 4.6% increase in after-tax operating income versus a 2.0% increase in average invested capital.
After-tax ROIC for the year ended December 31, 2024 included 90 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. Description of Business and Summary of
Significant Accounting Policies in Item 8. Financial Statements for additional information regarding this change in
accounting method.
After-tax ROIC increased 130 basis points for the twelve month period ended December 31, 2023 compared to the prior year
period as a result of a 6.6% increase in after-tax operating income versus a 2.0% increase in average invested capital.
A reconciliation of the 2024 effective tax rate 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:
Twelve Months Ended
December 31, 2024
Dollars in millions
Income Taxes
Tax Rate
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
934
21.1 %
Net discrete tax benefit related to the third quarter 2024 . . . . . . . . . . . . . . . . . . . . . . . .
121
2.7 %
As adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,055
23.8 %
A reconciliation of the 2023 effective tax rate excluding the second quarter 2023 discrete tax benefit of $20 million related to
amended 2021 U.S. taxes is as follows:
Twelve Months Ended
December 31, 2023
Dollars in millions
Income Taxes
Tax Rate
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
866
22.6 %
Discrete tax benefit related to the second quarter 2023 . . . . . . . . . . . . . . . . . . . . . . . . .
20
0.6 %
As adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
886
23.2 %
A reconciliation of the 2022 effective tax rate excluding the fourth quarter 2022 discrete tax benefit of $32 million related to
the utilization of capital loss carryforwards and the second quarter 2022 discrete tax benefit of $51 million related to the
resolution of a U.S. tax audit is as follows:
Twelve Months Ended
December 31, 2022
Dollars in millions
Income Taxes
Tax Rate
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
808
21.0 %
Discrete tax benefit related to the fourth quarter 2022 . . . . . . . . . . . . . . . . . . . . . . . . . .
32
0.8 %
Discrete tax benefit related to the second quarter 2022 . . . . . . . . . . . . . . . . . . . . . . . . .
51
1.4 %
As adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
891
23.2 %
Refer to Note 6. Income Taxes in Item 8. Financial Statements and Supplementary Data for further information regarding the
discrete tax items noted above.
38
Working Capital
Management uses working capital as a measurement of the short-term liquidity of the Company. Net working capital as of
December 31, 2024 and 2023 is summarized as follows:
In millions
2024
2023
Increase
(Decrease)
Current Assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
948 $
1,065 $
(117)
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,991
3,123
(132)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,605
1,707
(102)
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . .
312
340
(28)
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,856
6,235
(379)
Current Liabilities:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,555
1,825
(270)
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . .
2,095
2,244
(149)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
658
606
52
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,308
4,675
(367)
Net Working Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,548 $
1,560 $
(12)
As of December 31, 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 December 31, 2024 and 2023 was as follows:
In millions
2024
2023
Increase
(Decrease)
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,555 $
1,825 $
(270)
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,308
6,339
(31)
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,863 $
8,164 $
(301)
As of December 31, 2024, short-term debt included $777 million related to the Euro-denominated credit agreement entered
into on May 5, 2023 (the "Euro Credit Agreement"), 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. As of December 31, 2023, Short-
term debt included $700 million related to the 3.50% notes due March 1, 2024 and $661 million related to the 0.25% Euro
notes due December 5, 2024, both of which were repaid on their respective due dates. Additionally, Short-term debt included
$778 million and $464 million of commercial paper as of December 31, 2024 and 2023, respectively.
As of December 31, 2023, the Company had €1.3 billion outstanding under the Euro Credit Agreement with an interest rate
of 4.59%, 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
39
Euro notes issued on May 17, 2024, as discussed below. As of December 31, 2024, the Company had €750 million
outstanding under the Euro Credit Agreement with an interest rate of 3.61%, 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.
In May 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 may issue commercial paper to fund general corporate needs, share repurchases, and small and medium-sized
acquisitions. During the fourth quarter of 2022, the Company entered into a $3.0 billion, five-year 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 December 31,
2024 or 2023. The maximum outstanding commercial paper balance during 2024 was $1.9 billion, while the average daily
balance was $906 million.
As of December 31, 2024, the Company had unused capacity of approximately $170 million under international debt
facilities. In the ordinary course of business, the Company also had approximately $250 million outstanding in guarantees,
letters of credit and other similar arrangements with financial institutions as of December 31, 2024. Refer to Note 10. Debt in
Item 8. Financial Statements and Supplementary Data for additional details regarding the Company's outstanding debt
obligations.
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 years ended
December 31, 2024, 2023 and 2022 was as follows:
Dollars in millions
2024
2023
2022
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,863 $
8,164 $
7,763
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,488 $
2,957 $
3,034
Add:
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
283
266
203
Other (income) expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(441)
(49)
(255)
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
934
866
808
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
301
282
276
Amortization and impairment of intangible assets . . . . . . . . . .
101
113
134
EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,666 $
4,435 $
4,200
Total debt to EBITDA ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.7
1.8
1.8
40
Stockholders' Equity
The changes to stockholders' equity during 2024 and 2023 were as follows:
In millions
2024
2023
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,013 $
3,089
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,488
2,957
Cash dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,717)
(1,634)
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,500)
(1,500)
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(43)
7
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76
94
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,317 $
3,013
CRITICAL ACCOUNTING ESTIMATES
The Company has three accounting estimates that it believes are most important to the Company's financial condition and
results of operations, and which require the Company to make judgments about matters that are inherently uncertain.
Management bases its estimates on historical experience, and in some cases on observable market information. Various
assumptions are also used that are believed to be reasonable under the circumstances and form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
The Company's critical accounting estimates are as follows:
Income Taxes— The Company provides deferred income tax assets and liabilities based on the estimated future tax effects of
differences between the financial and tax bases of assets and liabilities based on currently enacted tax laws. The Company's
deferred and other tax balances are based on management's interpretation of the tax regulations and rulings in numerous
taxing jurisdictions. Income tax expense, assets and liabilities recognized by the Company also reflect its best estimates and
assumptions regarding, among other things, the level of future taxable income, the effect of the Company's various tax
planning strategies and uncertain tax positions. Future tax authority rulings and changes in tax laws, changes in projected
levels of taxable income and future tax planning strategies could affect the actual effective tax rate and tax balances recorded
by the Company.
Goodwill and Intangible Assets— The Company's business acquisitions typically result in recording goodwill and other
intangible assets, which are a significant portion of the Company's total assets and affect the amount of amortization expense
and impairment charges that the Company could incur in future periods. The Company follows the guidance prescribed in the
accounting standards to test goodwill and intangible assets for impairment. On an annual basis, or more frequently if
triggering events occur, the Company compares the estimated fair value of its reporting units to the carrying value of each
reporting unit to determine if a potential goodwill impairment exists. If the fair value of a reporting unit is less than its
carrying value, a goodwill impairment loss is recorded for the difference. In calculating the fair value of the reporting units or
specific intangible assets, management relies on a number of factors, including business plans, economic projections,
anticipated future cash flows, comparable transactions and other market data. There are inherent uncertainties related to these
factors and management's judgment in applying them in the impairment tests of goodwill and other intangible assets.
As of December 31, 2024, the Company had total goodwill and intangible assets of approximately $5.4 billion allocated to its
reporting units. Although there can be no assurance that the Company will not incur additional impairment charges related to
its goodwill and other intangible assets, the Company generally believes the risk of significant impairment charges is lessened
by the number of diversified businesses and end markets represented by its reporting units that have goodwill and other
intangible assets. In addition, the individual businesses in many of the reporting units have been acquired over a long period
of time, and in many cases have been able to improve their performance, primarily as a result of the application of the
Company's 80/20 Front-to-Back process. The amount of goodwill and other intangible assets allocated to individual reporting
units ranges from approximately $232 million to $1.4 billion, with the average amount equal to $542 million. In all cases, the
fair value of the individual reporting unit significantly exceeds its carrying value. Fair value determinations require
considerable judgment and are sensitive to changes in the factors described above. Due to the inherent uncertainties
associated with these factors and economic conditions in the Company's global end markets, impairment charges related to
one or more reporting units could occur in future periods.
41
Pension and Other Postretirement Benefits— The Company has various company-sponsored defined benefit retirement
plans covering a number of U.S. employees and many employees outside the U.S. Pension and other postretirement benefit
expense and obligations are determined based on actuarial valuations. Pension benefit obligations are generally based on each
participant's years of service, future compensation, and age at retirement or termination. Important assumptions in
determining pension and postretirement expense and obligations are the discount rate, the expected long-term return on plan
assets, life expectancy, and health care cost trend rates. Future changes in any of these assumptions could materially affect the
amounts recorded related to the Company's pension and other postretirement benefit plans. See Note 11. Pension and Other
Postretirement Benefits in Item 8. Financial Statements and Supplementary Data for additional discussion of actuarial
assumptions used in determining pension and postretirement health care liabilities and expenses.
The Company determines the discount rate used to measure plan liabilities as of the year-end measurement date for the U.S.
primary pension plan. The discount rate reflects the current rate at which the associated liabilities could theoretically be
effectively settled at the end of the year. In estimating this rate, the Company looks at rates of return on high-quality fixed
income investments, with similar duration to the liabilities in the plan. A 25 basis point decrease in the discount rate would
increase the present value of the U.S. primary pension plan obligation by approximately $24 million. The Company estimates
the service and interest cost components of net periodic benefit cost by applying specific spot rates along the yield curve to
the projected cash flows rather than a single weighted-average rate. See Note 11. Pension and Other Postretirement Benefits
in Item 8. Financial Statements and Supplementary Data for information on the Company's pension and other postretirement
benefit plans and related assumptions.
The expected long-term return on plan assets is based on historical and expected long-term returns for similar investment
allocations among asset classes. For the U.S. primary pension plan, a 25 basis point decrease in the expected return on plan
assets would increase the annual pension expense by approximately $3 million.
42
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
MARKET RISK
The Company is exposed to certain market risks that exist as part of its ongoing business operations, including fluctuations in
currency exchange rates, price volatility for certain commodities and changes in interest rates. The Company does not engage
in speculative or leveraged transactions and does not hold or issue financial instruments for trading purposes.
Interest Rate Risk
The Company's exposure to market risk for changes in interest rates relates primarily to the fair value of the Company's fixed
rate debt. Refer to Note 10. Debt in Item 8. Financial Statements and Supplemental Data for details related to the fair value of
the Company's debt instruments. Additionally, rising interest rates would negatively impact the amount of interest expense
related to new issuances of commercial paper and the outstanding Euro term loans borrowed under the Euro Credit
Agreement.
Foreign Currency Risk
The Company operates in the U.S. and 50 foreign countries. The funding for the foreign manufacturing operations is
provided primarily through the permanent investment of equity capital. The Company's products are typically manufactured
and sold within the same country or economic union. Therefore, the Company's manufacturing operations generally do not
have significant assets or liabilities denominated in currencies other than their functional currencies.
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, the €1.3 billion of Euro term loans borrowed under the Euro Credit
Agreement in May 2023 and the €1.5 billion of Euro notes issued in May 2024 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, on May 22, 2023, €500 million of the Euro notes
issued in May 2015 were repaid on the due date and on December 5, 2024, €600 million of the Euro notes issued in May
2019 were repaid on the due date. On May 22, 2024, the Company also repaid €550 million of the term loans under the Euro
Credit Agreement. Refer to Note 10. Debt in Item 8. Financial Statements and Supplemental Data for additional information
regarding the redemption of these notes. The amount of pre-tax gain (loss) related to these notes that was recorded in Other
comprehensive income (loss) for the twelve months ended December 31, 2024, 2023 and 2022 was $301 million,
$(109) million and $205 million, respectively.
43
ITEM 8. Financial Statements and Supplementary Data
MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Illinois Tool Works Inc. (the "Company" or "ITW") is responsible for establishing and maintaining adequate
internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). ITW's internal control system
was designed to provide reasonable assurance to the Company's management and Board of Directors regarding the preparation
and fair presentation of published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to
be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
ITW management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2024.
In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control—Integrated Framework (2013). Based on our assessment we believe that, as of
December 31, 2024, the Company's internal control over financial reporting is effective based on those criteria.
The effectiveness of the Company's internal control over financial reporting as of December 31, 2024 has been audited by
Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report included herein.
/s/ Christopher A. O'Herlihy
Christopher A. O'Herlihy
President & Chief Executive Officer
February 14, 2025
/s/ Michael M. Larsen
Michael M. Larsen
Senior Vice President & Chief Financial Officer
February 14, 2025
44
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholders and the Board of Directors of Illinois Tool Works Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated statements of financial position of Illinois Tool Works Inc. and subsidiaries (the "Company")
as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and
cash flows, for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the "financial
statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2024, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in
Internal Control — Integrated Framework (2013) issued by COSO.
Basis for Opinions
The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and
for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal
Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A
company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter
below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
45
Income Taxes — Refer to Note 6 to the financial statements
Critical Audit Matter Description
The Company’s income tax expense is recognized and measured based on management’s interpretation of the tax regulations and rulings in
numerous taxing jurisdictions, which requires significant judgment. When calculating income tax expense management makes estimates and
assumptions, including determination of the completeness of book income in each jurisdiction, calculation of taxable income through
identification and classification of book to tax differences (either temporary or permanent items), consideration of applicable tax deductions or
credits and the identification of uncertain tax positions.
The evaluation of each uncertain tax position requires management to apply specialized skill and knowledge related to the identified position.
Management evaluates uncertain tax positions identified and a liability is established for unrecognized tax benefits when there is a more than
50% likelihood that its tax position will not be sustained upon examination by taxing authorities. There is additional judgment to determine the
amount of the liability for the underlying tax position.
Given the number of taxing jurisdictions and the complex and subjective nature of the associated tax regulations and rulings, certain audit
matters required a high degree of auditor judgment and increased extent of effort, including the need to involve our income tax specialists. These
matters included the auditing of certain elements of income tax expense, identification of uncertain tax positions and measurement of
unrecognized tax benefits, and certain planning transactions with income tax expense implications.
How the Critical Audit Matter Was Addressed in the Audit
With the assistance of our income tax specialists, our principal audit procedures related to the auditing of certain elements of income tax
expense, identification of uncertain tax positions and measurement of unrecognized tax benefits and certain planning transactions with income
tax expense implications included the following, among others:
•
We tested the effectiveness of management’s controls over income tax expense, unrecognized tax benefits and certain planning
transactions with income tax expense implications.
•
We evaluated management’s significant estimates and judgments incorporated into the calculation of certain elements of income tax
expense by:
◦
Selecting a sample of book to tax differences (temporary and permanent) and testing the accuracy, completeness, and
classification of the selections, including evaluating that all impacts of significant transactions with income tax expense
implications are considered.
◦
Developing an expectation over the foreign income tax expense by jurisdiction and comparing it to the recorded balance.
◦
Testing the accuracy of the relevant income tax expense calculations.
•
We evaluated management’s significant judgments regarding the identification of uncertain tax positions by:
◦
Evaluating the reasonableness of a selection of certain planning transactions with income tax expense implications,
including the completeness and accuracy of the underlying data supporting the transactions.
◦
Assessing management’s methods and assumptions used in identifying uncertain tax positions.
◦
Comparing results of prior tax audits to ongoing and anticipated tax audits by tax authorities.
◦
Evaluating external information including applicable tax law, new interpretations, and related changes to assess the
completeness and reasonableness of management’s considerations.
◦
Determining if there was additional information not considered in management’s assessment.
•
We evaluated a sample of the liabilities recorded for unrecognized tax benefits to assess the establishment and amount of the liability
for the specific underlying tax position.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 14, 2025
We have served as the Company's auditor since 2002.
46
Statement of Income
Illinois Tool Works Inc. and Subsidiaries
For the Years Ended December 31
In millions except per share amounts
2024
2023
2022
Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,898 $
16,107 $
15,932
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,858
9,316
9,429
Selling, administrative, and research and development expenses .
2,675
2,638
2,579
Amortization and impairment of intangible assets . . . . . . . . . . . . .
101
113
134
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,264
4,040
3,790
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(283)
(266)
(203)
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
441
49
255
Income Before Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,422
3,823
3,842
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
934
866
808
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,488 $
2,957 $
3,034
Net Income Per Share:
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
11.75 $
9.77 $
9.80
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
11.71 $
9.74 $
9.77
The Notes to Financial Statements are an integral part of this statement.
47
Statement of Comprehensive Income
Illinois Tool Works Inc. and Subsidiaries
For the Years Ended December 31
In millions
2024
2023
2022
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,488 $
2,957 $
3,034
Foreign currency translation adjustments, net of tax . . . . . . . . . . . .
(104)
41
(242)
Pension and other postretirement benefit adjustments, net of tax . .
61
(34)
(97)
Other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . .
(43)
7
(339)
Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,445 $
2,964 $
2,695
The Notes to Financial Statements are an integral part of this statement.
48
Statement of Financial Position
Illinois Tool Works Inc. and Subsidiaries
December 31
In millions except per share amounts
2024
2023
Assets
Current Assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
948 $
1,065
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,991
3,123
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,605
1,707
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
312
340
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,856
6,235
Net plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,036
1,976
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,839
4,909
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
592
657
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
369
479
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,375
1,262
$
15,067 $
15,518
Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,555 $
1,825
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
519
581
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,576
1,663
Cash dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
441
419
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
217
187
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,308
4,675
Noncurrent Liabilities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,308
6,339
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
119
326
Noncurrent income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
151
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,015
1,014
Total noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,442
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- 294.0 shares in 2024 and 299.3 shares in 2023 . . . . . . . . . . . . .
6
6
Additional paid-in-capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,669
1,588
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28,893
27,122
Common stock held in treasury . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(25,375)
(23,870)
Accumulated other comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,877)
(1,834)
Noncontrolling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,317
3,013
$
15,067 $
15,518
The Notes to Financial Statements are an integral part of this statement.
49
Statement of Changes in Stockholders' Equity
Illinois Tool Works Inc. and Subsidiaries
In millions except per share amounts
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Common
Stock Held
in Treasury
Accumulated
Other
Comprehensive
Income (Loss)
Noncontrolling
Interest
Total
Balance as of December 31, 2021 . . . . . . $
6 $
1,432 $
24,325 $
(20,636) $
(1,502) $
1 $
3,626
Net income . . . . . . . . . . . . . . . . . . . .
—
—
3,034
—
—
—
3,034
Common stock issued for stock-
based compensation . . . . . . . . . . .
—
6
—
9
—
—
15
Stock-based compensation expense .
—
63
—
—
—
—
63
Repurchases of common stock . . . . .
—
—
—
(1,750)
—
—
(1,750)
Dividends declared ($5.06 per share)
—
—
(1,560)
—
—
—
(1,560)
Other comprehensive income (loss) .
—
—
—
—
(339)
—
(339)
Balance as of December 31, 2022 . . . . . .
6
1,501
25,799
(22,377)
(1,841)
1
3,089
Net income . . . . . . . . . . . . . . . . . . . .
—
—
2,957
—
—
—
2,957
Common stock issued for stock-
based compensation . . . . . . . . . . .
—
18
—
20
—
—
38
Stock-based compensation expense .
—
69
—
—
—
—
69
Repurchases of common stock . . . . .
—
—
—
(1,500)
—
—
(1,500)
Excise tax on repurchases of
common stock . . . . . . . . . . . . . . .
—
—
—
(13)
—
—
(13)
Dividends declared ($5.42 per share)
—
—
(1,634)
—
—
—
(1,634)
Other comprehensive income (loss) .
—
—
—
—
7
—
7
Balance as of December 31, 2023 . . . . . .
6
1,588
27,122
(23,870)
(1,834)
1
3,013
Net income . . . . . . . . . . . . . . . . . . . .
—
—
3,488
—
—
—
3,488
Common stock issued for stock-
based compensation . . . . . . . . . . .
—
20
—
9
—
—
29
Stock-based compensation expense .
—
61
—
—
—
—
61
Repurchases of common stock . . . . .
—
—
—
(1,500)
—
—
(1,500)
Excise tax on repurchases of
common stock . . . . . . . . . . . . . . .
—
—
—
(14)
—
—
(14)
Dividends declared ($5.80 per share)
—
—
(1,717)
—
—
—
(1,717)
Other comprehensive income (loss) .
—
—
—
—
(43)
—
(43)
Balance as of December 31, 2024 . . . . . . $
6 $
1,669 $
28,893 $
(25,375) $
(1,877) $
1 $
3,317
The Notes to Financial Statements are an integral part of this statement.
50
Statement of Cash Flows
Illinois Tool Works Inc. and Subsidiaries
For the Years Ended December 31
In millions
2024
2023
2022
Cash Provided by (Used for) Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,488
$
2,957
$
3,034
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
301
282
276
Amortization and impairment of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
101
113
134
Change in deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(176)
(88)
(150)
Provision for uncollectible accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
6
5
(Income) loss from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(2)
(9)
(Gain) loss on sale of plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(1)
(1)
(Gain) loss on sale of operations and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(1)
(191)
Gain on sale of noncontrolling interest in Wilsonart International Holdings LLC . . . .
(363)
—
—
Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61
69
63
Cumulative effect of change in inventory accounting method . . . . . . . . . . . . . . . . . . .
(117)
—
—
Other non-cash items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
(4)
5
Change in assets and liabilities, net of acquisitions and divestitures:
(Increase) decrease in—
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
64
(461)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
176
360
(455)
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(41)
(26)
(19)
Increase (decrease) in—
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(43)
(14)
35
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(74)
(102)
119
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(70)
(72)
(35)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
(2)
(2)
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,281
3,539
2,348
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents) . . . . . . . . . . . . . . . . . . . . . . .
(115)
—
(2)
Additions to plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(437)
(455)
(412)
Proceeds from investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11
27
12
Proceeds from sale of plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12
20
15
Proceeds from sale of operations and affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
7
278
Proceeds from sale of noncontrolling interest in Wilsonart International Holdings LLC .
395
—
—
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(10)
(2)
(1)
Net cash provided by (used for) investing activities . . . . . . . . . . . . . . . . . . . . . . . .
(144)
(403)
(110)
Cash Provided by (Used for) Financing Activities:
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,695)
(1,615)
(1,542)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52
53
29
Repurchases of common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,500)
(1,500)
(1,750)
Net proceeds from (repayments of) debt with original maturities of three months or less
312
(452)
796
Proceeds from debt with original maturities of more than three months . . . . . . . . . . . . . .
1,606
1,425
593
Repayments of debt with original maturities of more than three months . . . . . . . . . . . . .
(1,926)
(679)
(1,113)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(38)
(14)
(13)
Net cash provided by (used for) financing activities . . . . . . . . . . . . . . . . . . . . . . . .
(3,189)
(2,782)
(3,000)
Effect of Exchange Rate Changes on Cash and Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . .
(65)
3
(57)
Cash and Equivalents:
Increase (decrease) during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(117)
357
(819)
Beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,065
708
1,527
End of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
948
$
1,065
$
708
Supplementary Cash Flow Information:
Cash Paid During the Year for Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
248
$
260
$
199
Cash Paid During the Year for Income Taxes, Net of Refunds . . . . . . . . . . . . . . . . . . . . . $
1,180
$
1,026
$
993
The Notes to Financial Statements are an integral part of this statement.
51
Notes to Financial Statements
(1)
Description of Business and Summary of Significant Accounting Policies
Description of business— Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified
range of industrial products and equipment with approximately 86 divisions in 51 countries. 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.
Consolidation and translation— The financial statements include the Company and its majority-owned subsidiaries. The
Company follows the equity method of accounting for investments where the Company has a significant influence but not a
controlling interest. Intercompany transactions are eliminated from the financial statements. Foreign subsidiaries' assets and
liabilities are translated to U.S. dollars at end-of-period exchange rates. Revenues and expenses are translated at average rates
for the period. Translation adjustments are reported as a component of Accumulated other comprehensive income (loss) in
stockholders' equity.
Reclassifications— Certain reclassifications of prior year data have been made to conform to current year reporting.
Use of estimates— The preparation of the Company's financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and the notes to financial statements. Actual results could differ from those estimates.
Acquisitions— The Company accounts for acquisitions under the acquisition method, in which assets acquired and liabilities
assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired companies are included
in the Company's consolidated financial statements from the date of acquisition. Refer to Note 2. Acquisitions for additional
information regarding the Company's acquisitions.
Operating revenue— Operating revenue is recognized at the time a good or service is transferred to a customer and the
customer obtains control of that good or receives the service performed. The Company's sales arrangements with customers
are predominantly short-term in nature involving a single performance obligation related to the delivery of products and
generally provide for transfer of control at the time of shipment. In limited circumstances, there may be significant
obligations to the customer that are unfulfilled at the time of shipment, typically involving installation of equipment and
customer acceptance. In these circumstances, operating revenue may be deferred until all significant obligations have been
completed. In other limited arrangements, the Company may recognize revenue over time. This may include arrangements
for service performed over time where operating revenue is recognized over time as the service is provided to the customer. It
may also include the sale of highly specialized systems that have a high degree of customization and installation at the
customer site, which are 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. Operating 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. The amount of operating revenue recorded reflects the consideration to which the Company expects to be entitled
in exchange for goods or services and may include adjustments for customer allowances and rebates. Customer allowances
and rebates consist primarily of volume discounts and other short-term incentive programs, which are estimated at the time of
sale based on historical experience and anticipated trends. Shipping and handling charges billed to customers are included in
operating revenue and are recognized along with the related product revenue as they are considered a fulfillment cost. Sales
commissions are expensed when incurred, which is generally at the time of revenue recognition. Contract liabilities
associated with sales arrangements primarily relate to deferred revenue on equipment sales and prepaid service contracts.
Total deferred revenue and customer deposits were $360 million and $395 million as of December 31, 2024 and 2023,
respectively, and are short-term in nature. Refer to Note 4. Operating Revenue for additional information regarding the
Company's operating revenue.
Research and development expenses— Research and development expenses are recorded as expense in the period incurred.
These costs were $292 million, $284 million and $269 million for the years ended December 31, 2024, 2023 and 2022,
respectively.
Advertising expenses— Advertising expenses are recorded as expense in the period incurred. These costs were $58 million,
$60 million and $57 million for the years ended December 31, 2024, 2023 and 2022, respectively.
52
Income taxes— The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes
are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and
liabilities given the provisions of the enacted tax laws. Valuation allowances are established when it is estimated that it is
more likely than not that the tax benefit of the deferred tax asset will not be realized.
Cash and equivalents— Cash and equivalents include cash on hand and instruments having original maturities of three
months or less. Cash and equivalents are stated at cost, which approximates fair value.
Trade receivables— Trade receivables are net of allowances for doubtful accounts. The changes in the allowance for
doubtful accounts for the years ended December 31, 2024, 2023 and 2022 were as follows:
In millions
2024
2023
2022
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
29 $
26 $
28
Provision charged to expense . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
6
5
Acquisitions and divestitures . . . . . . . . . . . . . . . . . . . . . . . . . .
1
—
2
Write-offs, net of recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
(3)
(8)
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
—
(1)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
24 $
29 $
26
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. If the FIFO method was used for all inventories, total
inventories would have been approximately $117 million higher than reported at December 31, 2023.
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 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.
The major classes of inventory at December 31, 2024 and 2023 were as follows:
In millions
2024
2023
Raw material . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
635 $
742
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
193
234
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
777
848
LIFO reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(117)
Total inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,605 $
1,707
53
Net plant and equipment— Net plant and equipment are stated at cost, less accumulated depreciation. Renewals and
improvements that increase the useful life of plant and equipment are capitalized. Maintenance and repairs are charged to
expense as incurred. Net plant and equipment consisted of the following at December 31, 2024 and 2023:
In millions
2024
2023
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
188 $
197
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,562
1,490
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,043
4,070
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
270
294
Gross plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,063
6,051
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,027)
(4,075)
Net plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,036 $
1,976
The Company's U.S. businesses primarily compute depreciation on an accelerated basis. The majority of the Company's
international businesses compute depreciation on a straight-line basis. The ranges of useful lives used to depreciate plant and
equipment are as follows:
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5—50 years
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3—12 years
Depreciation was $301 million, $282 million and $276 million for the years ended December 31, 2024, 2023 and 2022,
respectively.
Goodwill and intangible assets— Goodwill represents the excess cost over fair value of the net assets of acquired
businesses. The Company does not amortize goodwill and intangible assets that have indefinite lives. Amortizable intangible
assets are being amortized on a straight-line basis over their estimated useful lives of 3 to 20 years.
The Company performs an impairment assessment of goodwill and intangible assets with indefinite lives annually, or more
frequently if triggering events occur, based on the estimated fair value of the related reporting unit or intangible asset. Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants.
When performing its annual impairment assessment, the Company evaluates the goodwill assigned to each of its reporting
units for potential impairment by comparing the estimated fair value of the relevant reporting unit to the carrying value. The
Company uses various Level 2 and Level 3 valuation techniques to determine the fair value of its reporting units, including
discounting estimated future cash flows based on a cash flow forecast prepared by the relevant reporting unit and market
multiples of relevant public companies. If the fair value of a reporting unit is less than its carrying value, a goodwill
impairment loss is recorded for the difference.
The Company's indefinite-lived intangible assets consist of trademarks and brands. The estimated fair values of these
intangible assets are determined based on a Level 3 valuation method using a relief-from-royalty income approach derived
from internally forecasted revenues of the related products. If the fair value of the trademark or brand is less than its carrying
value, an impairment loss is recorded for the difference.
Refer to Note 8. Goodwill and Intangible Assets for additional information regarding the Company's recorded goodwill and
intangible assets.
Leases— The Company recognizes a lease liability and corresponding right-of-use asset for all operating leases with a
noncancellable lease term of greater than one year. Rental expense for operating leases is recognized on a straight-line basis
over the noncancellable lease term based on the minimum lease payments at lease inception. Changes in rent subsequent to
commencement that were not included in minimum lease payments at inception are recognized as variable rent in the period
incurred. Refer to Note 9. Leases for additional information regarding the Company's operating leases.
54
Accrued warranties— The Company accrues for product warranties based on historical experience. The changes in accrued
warranties for the years ended December 31, 2024, 2023 and 2022 were as follows:
In millions
2024
2023
2022
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
48 $
42 $
46
Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(58)
(51)
(41)
Provision charged to expense . . . . . . . . . . . . . . . . . . . . . . . . . .
63
56
40
Acquisitions and divestitures . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(2)
Foreign currency translation/other . . . . . . . . . . . . . . . . . . . . . .
(1)
1
(1)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
52 $
48 $
42
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 of this new guidance
include the requirement to disclose significant segment expenses and certain disclosures made annually under existing
guidance are required for interim periods. The Company adopted this new guidance beginning with its annual reporting for
the year ended December 31, 2024 and applied the new disclosure requirements retrospectively to all periods presented. The
new guidance did not have an impact on the Company’s results of operations, financial position or cash flows for any period.
Refer to Note 16. Segment Information for additional information.
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 ending 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.
In November 2024, the FASB issued authoritative guidance which expands annual and interim disclosure requirements
related to certain costs and expenses recorded in the income statement. The primary provisions of this new guidance require
companies to provide additional footnote disclosures disaggregating income statement line items that include purchases of
inventory, employee compensation, depreciation, and intangible asset amortization. The guidance will be effective for the
Company beginning with its annual reporting for the year ended December 31, 2027 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. On April 1, 2024, the Company completed the acquisition of one business in
the Test & Measurement and Electronics segment for $59 million, net of cash acquired. The purchase price for both
acquisitions is subject to certain closing adjustments. These acquisitions were not material, individually or in the aggregate, to
the Company’s results of operations, financial position or cash flows. The allocation of purchase price for these acquisitions
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 second quarter of 2022, plans were approved to divest two businesses, including one business in the Polymers & Fluids
segment and one business in the Food Equipment segment. These two businesses were classified as held for sale beginning in
the second quarter of 2022. In the fourth quarter of 2022, both of these businesses were divested. On October 3, 2022, the
business in the Polymers & Fluids segment was sold for $220 million, subject to certain closing adjustments, resulting in a
pre-tax gain of $156 million. On December 1, 2022, the business in the Food Equipment segment was sold for $59 million,
subject to certain closing adjustments, resulting in a pre-tax gain of $41 million. The pre-tax gains were included in Other
55
income (expense) in the Statement of Income. Income taxes on the gains were mostly offset by the utilization of capital loss
carryforwards of $32 million. Operating revenue related to these divested businesses that was included in the Company's
results of operations for the twelve months ended December 31, 2022 was $106 million.
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 for the twelve months ended December 31, 2023 and 2022 was $9 million and $37 million, respectively.
(4)
Operating Revenue
The Company's 86 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 twelve months ended
December 31, 2024, 2023 and 2022 was as follows:
In millions
2024
2023
2022
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,188 $
3,235 $
2,969
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,647
2,622
2,444
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
2,818
2,832
2,828
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,851
1,902
1,894
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,764
1,804
1,905
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,909
2,033
2,113
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,743
1,697
1,799
Total Segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,920
16,125
15,952
Intersegment revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22)
(18)
(20)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,898 $
16,107 $
15,932
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.
56
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, automotive original
equipment manufacturers and tiers, energy, 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;
57
•
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, airlines, industrial capital goods 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)
Other Income (Expense)
Other income (expense) for the twelve months ended December 31, 2024, 2023 and 2022 consisted of the following:
In millions
2024
2023
2022
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
44 $
51 $
22
Other net periodic benefit income . . . . . . . . . . . . . . . . . . . . . . . . . .
28
33
41
Gain (loss) on foreign currency transactions, net . . . . . . . . . . . . . .
7
(39)
(7)
Income (loss) from investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2
9
Gain (loss) on sale of operations and affiliates . . . . . . . . . . . . . . . .
—
1
191
Gain on sale of noncontrolling interest in Wilsonart . . . . . . . . . . . .
363
—
—
Equity income in Wilsonart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1)
1
(1)
Total other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
441 $
49 $
255
58
Gain (loss) on sale of operations and affiliates for the twelve months ended December 31, 2022 primarily related to two
businesses divested in the fourth quarter of 2022. Refer to Note 3. Divestitures for further information regarding the
Company's divestitures.
In the fourth quarter of 2012, the Company divested a 51% majority interest in its former Decorative Surfaces segment to
certain funds managed by Clayton, Dubilier & Rice, LLC ("CD&R"). As a result of the transaction, the Company owned
common units (the "Common Units") of Wilsonart International Holdings LLC ("Wilsonart") initially representing
approximately 49% (on an as-converted basis) of the total outstanding equity and CD&R owned cumulative convertible
participating preferred units (the "Preferred Units") of Wilsonart representing approximately 51% (on an as-converted basis)
of the total outstanding equity. The ownership interest in Wilsonart was reported using the equity method of accounting. The
Company's proportionate share in the income (loss) of Wilsonart was reported in Other income (expense) in the Statement of
Income. As the Company's investment in Wilsonart was structured as a partnership for U.S. tax purposes, U.S. taxes were
recorded separately from the equity investment. In 2016, the Company received a $167 million dividend distribution from
Wilsonart which exceeded the Company's equity investment balance and resulted in a $54 million pre-tax gain in 2016. As a
result of the dividend distribution, the equity investment balance in Wilsonart was reduced to zero and subsequent equity
investment income was suspended and no longer recognized.
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 for $398 million. The transaction closed immediately after the execution of the
purchase agreement. Proceeds from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of
$363 million which was included in Other income (expense) in the Statement of Income. Income taxes on the gain were more
than offset by a discrete tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss
carryforwards upon the sale of Wilsonart. Refer to Note 6. Income Taxes for further information. 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
periods.
(6)
Income Taxes
Noncurrent income taxes payable— On December 22, 2017, the "Tax Cuts and Jobs Act" (the "Act") was enacted in the
United States. The provisions of the Act significantly revised the U.S. corporate income tax rules. In connection with the
enactment of the Act, the Company recorded a one-time additional income tax expense of $676 million in the fourth quarter
of 2017 related to a one-time repatriation tax on the deemed repatriation of post-1986 undistributed earnings of foreign
subsidiaries. A portion of the resulting income taxes payable can be paid in installments over eight years. During 2024, the
remaining noncurrent income taxes payable related to the one-time repatriation tax of $151 million was reclassified from
Noncurrent income taxes payable as of December 31, 2023 to Income taxes payable as of December 31, 2024.
Provision for income taxes— The components of the provision for income taxes for the twelve months ended December 31,
2024, 2023 and 2022 were as follows:
In millions
2024
2023
2022
U.S. federal income taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
486 $
455 $
478
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(576)
(111)
(143)
Total U.S. federal income taxes . . . . . . . . . . . . . . . . . . . . . . . .
(90)
344
335
Foreign income taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
515
405
387
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
487
31
13
Total foreign income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,002
436
400
State income taxes:
Current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
109
94
93
Deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(87)
(8)
(20)
Total state income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22
86
73
Total provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . $
934 $
866 $
808
59
Income before taxes for domestic and foreign operations for the twelve months ended December 31, 2024, 2023 and 2022
was as follows:
In millions
2024
2023
2022
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,603 $
1,953 $
2,128
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,819
1,870
1,714
Total income before taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,422 $
3,823 $
3,842
The reconciliation between the U.S. federal statutory tax rate and the effective tax rate for the twelve months ended
December 31, 2024, 2023 and 2022 was as follows:
2024
2023
2022
U.S. federal statutory tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.0 %
21.0 %
21.0 %
State income taxes, net of U.S. federal tax benefit . . . . . . . . . . . . .
2.0
1.8
1.9
Differences between U.S. federal statutory and foreign tax rates . .
1.0
1.1
0.7
U.S. tax effect of foreign earnings . . . . . . . . . . . . . . . . . . . . . . . . . .
0.5
0.8
1.0
Remeasurement of unrecognized tax benefit . . . . . . . . . . . . . . . . .
1.6
0.6
0.1
Change in valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2.3)
0.5
(0.8)
Intellectual property reorganization . . . . . . . . . . . . . . . . . . . . . . . .
(1.1)
—
—
Audit resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.1
(0.2)
(1.4)
Excess tax benefits from stock-based compensation . . . . . . . . . . .
(0.3)
(0.5)
(0.3)
Foreign derived intangible income . . . . . . . . . . . . . . . . . . . . . . . . .
(1.2)
(1.4)
(1.3)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.2)
(1.1)
0.1
Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21.1 %
22.6 %
21.0 %
The Company's effective tax rate for the twelve months ended December 31, 2024, 2023 and 2022 was 21.1%, 22.6% and
21.0%, respectively. The 2024 effective tax rate benefited from discrete income tax benefits during the third quarter of 2024
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. The 2023 effective tax rate
benefited from a discrete income tax benefit of $20 million in the second quarter of 2023 related to amended 2021 U.S. taxes.
The 2022 effective tax rate benefited from discrete income tax benefits of $32 million in the fourth quarter of 2022 related to
the utilization of capital loss carryforwards and $51 million in the second quarter of 2022 related to a decrease in
unrecognized tax benefits resulting from the resolution of a U.S. tax audit. Additionally, the effective tax rates for 2024, 2023
and 2022 included discrete income tax benefits of $14 million, $20 million and $12 million, respectively, related to excess tax
benefits from stock-based compensation.
Upon repatriation of foreign earnings to the U.S., the Company may be subject to foreign withholding taxes. The accrual for
foreign withholding taxes related to the expected repatriation of foreign held cash and equivalents as of December 31, 2024
and 2023 was $44 million and $39 million, respectively.
Deferred foreign withholding taxes have not been provided on undistributed earnings considered permanently invested. As of
December 31, 2024, undistributed earnings of certain international subsidiaries that are considered permanently invested were
approximately $6 billion. Determination of the related deferred tax liability is not practicable because of the complexities
associated with the hypothetical calculation.
60
Deferred tax assets and liabilities— The components of deferred income tax assets and liabilities as of December 31, 2024
and 2023 were as follows:
2024
2023
In millions
Asset
Liability
Asset
Liability
Goodwill and intangible assets . . . . . . . . . . . . . . . . . . . . . . . $
553 $
(476) $
505 $
(492)
Inventory reserves, capitalized tax cost and LIFO inventory
54
—
51
(3)
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
(53)
19
(124)
Plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
(108)
12
(113)
Accrued expenses and reserves . . . . . . . . . . . . . . . . . . . . . .
35
—
34
—
Employee benefit accruals . . . . . . . . . . . . . . . . . . . . . . . . . .
137
—
165
—
Foreign tax credit carryforwards . . . . . . . . . . . . . . . . . . . . .
13
—
12
—
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . .
465
—
463
—
Capital loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . .
81
—
194
—
Allowances for uncollectible accounts . . . . . . . . . . . . . . . . .
11
—
12
—
Capitalized research and development . . . . . . . . . . . . . . . . .
173
—
88
—
Pension liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(43)
—
(21)
Unrealized loss (gain) on foreign debt instruments . . . . . . .
—
(98)
—
(37)
Operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
56
(56)
53
(53)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
(53)
43
(31)
Gross deferred income tax assets (liabilities) . . . . . . . . . .
1,653
(887)
1,651
(874)
Valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(516)
—
(624)
—
Total deferred income tax assets (liabilities) . . . . . . . . . . . $
1,137 $
(887) $
1,027 $
(874)
The valuation allowances recorded as of December 31, 2024 and 2023 related primarily to certain net operating loss
carryforwards and capital loss carryforwards. As of December 31, 2024, the Company had utilized all realizable foreign tax
credit carryforwards.
As of December 31, 2024, the Company had net operating loss carryforwards available to offset future taxable income in the
U.S. and certain foreign jurisdictions, which expire as follows:
Gross Carryforwards
Related to Net
In millions
Operating Losses
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
2030-2050 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
836
Do not expire . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
949
Total gross carryforwards related to net operating losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,796
61
Unrecognized tax benefits— The changes in the amount of unrecognized tax benefits for the twelve months ended
December 31, 2024, 2023 and 2022 were as follows:
In millions
2024
2023
2022
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
329 $
314 $
360
Additions based on tax positions related to the current year . .
35
21
9
Additions for tax positions of prior years . . . . . . . . . . . . . . . . .
37
48
9
Reductions for tax positions of prior years . . . . . . . . . . . . . . .
(30)
(33)
(56)
Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
(23)
—
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . .
(12)
2
(8)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
359 $
329 $
314
Included in the balance as of December 31, 2024 were approximately $329 million of unrecognized tax benefits that, if
recognized, would impact the Company's effective tax rate.
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 $17 million related predominantly to the potential resolution of federal, state
and foreign examinations. The Company has recorded its best estimate of the potential exposure for these issues. The
following table summarizes the open tax years for the Company's major jurisdictions:
Jurisdiction
Open Tax Years
United States – Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019-2024
United Kingdom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017-2024
Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2019-2024
France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017-2024
Australia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015-2024
The Company recognizes interest and penalties related to income tax matters in income tax expense. The accrual for interest
and penalties as of December 31, 2024 and 2023 was $69 million and $34 million, respectively.
(7)
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 twelve months ended December 31, 2024, 2023 and 2022 was as
follows:
In millions except per share amounts
2024
2023
2022
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,488 $
2,957 $
3,034
Net income per share—Basic:
Weighted-average common shares . . . . . . . . . . . . . . . . . . . . . .
296.8
302.6
309.6
Net income per share—Basic . . . . . . . . . . . . . . . . . . . . . . . . . . $
11.75 $
9.77 $
9.80
Net income per share—Diluted:
Weighted-average common shares . . . . . . . . . . . . . . . . . . . . . .
296.8
302.6
309.6
Effect of dilutive stock options and restricted stock units . . . .
1.0
1.0
1.1
Weighted-average common shares assuming dilution . . . . . . .
297.8
303.6
310.7
Net income per share—Diluted . . . . . . . . . . . . . . . . . . . . . . . . $
11.71 $
9.74 $
9.77
62
Options that were considered antidilutive were not included in the computation of diluted net income per share. There were
0.2 million, 0.3 million and 0.9 million antidilutive options outstanding for the twelve months ended December 31, 2024,
2023 and 2022, respectively.
(8)
Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the twelve months ended December 31, 2024 and 2023 were as follows:
In millions
Automotive
OEM
Food
Equipment
Test &
Measurement
and
Electronics
Welding
Polymers &
Fluids
Construction
Products
Specialty
Products
Total
Balance, December 31, 2022 . . . $
459
$
249
$
1,729
$
248
$
823
$
503
$
853
$
4,864
Foreign currency translation . . . .
7
2
6
3
11
3
13
45
Balance, December 31, 2023 . . .
466
251
1,735
251
834
506
866
4,909
Acquisitions / (divestitures) . . . .
—
—
71
—
—
—
—
71
Foreign currency translation . . . .
(21)
(9)
(26)
(11)
(31)
(18)
(25)
(141)
Balance, December 31, 2024 . . . $
445
$
242
$
1,780
$
240
$
803
$
488
$
841
$
4,839
Cumulative goodwill impairment
charges, December 31, 2024 . $
24
$
60
$
83
$
5
$
15
$
7
$
46
$
240
Intangible assets as of December 31, 2024 and 2023 were as follows:
2024
2023
In millions
Cost
Accumulated
Amortization
Net
Cost
Accumulated
Amortization
Net
Amortizable intangible assets:
Customer lists and relationships . . . $
1,748 $
(1,576) $
172 $
1,746 $
(1,534) $
212
Trademarks and brands . . . . . . . . . .
717
(602)
115
713
(573)
140
Patents and proprietary technology .
635
(596)
39
615
(581)
34
Other . . . . . . . . . . . . . . . . . . . . . . . .
516
(497)
19
511
(487)
24
Total amortizable intangible assets . . . .
3,616
(3,271)
345
3,585
(3,175)
410
Indefinite-lived intangible assets:
Trademarks and brands . . . . . . . . . .
247
—
247
247
—
247
Total intangible assets . . . . . . . . . . . . . . $
3,863 $
(3,271) $
592 $
3,832 $
(3,175) $
657
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. On April 1, 2024, the Company completed the acquisition of one business in
the Test & Measurement and Electronics segment for $59 million, net of cash acquired. The purchase price for both
acquisitions is subject to certain closing adjustments. These acquisitions were not material, individually or in the aggregate, to
the Company’s results of operations, financial position or cash flows. The allocation of purchase price for these acquisitions
will be completed as soon as practicable, but no later than one year from the acquisition date. Refer to Note 2. Acquisitions
for additional information regarding the Company's acquisitions.
The Company performed its annual impairment assessment of goodwill and indefinite-lived intangible assets in the third
quarter of 2024, 2023 and 2022. There were no impairment charges as a result of these assessments.
63
As of December 31, 2024, the estimated future amortization expense of intangible assets for the twelve months ending
December 31 was as follows:
In millions
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
78
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
32
(9)
Leases
The Company's lease transactions are primarily for the use of facilities, vehicles and office equipment under operating lease
arrangements. Total rental expense for operating leases for the twelve months ended December 31, 2024, 2023 and 2022 was
$143 million, $132 million and $122 million, respectively. Total rental expense for the twelve months ended December 31,
2024, 2023 and 2022 included $65 million, $60 million and $56 million, respectively, related to short-term operating leases
and variable lease payments. Short-term operating leases have original terms of one year or less, or can be terminated at the
Company's option with a short notice period and without significant penalty, and are not capitalized.
The following table summarizes information related to the Company's capitalized operating leases for 2024, 2023 and 2022:
Dollars in millions
2024
2023
2022
Rental expense related to capitalized operating leases . . . . . . . . . . . . . . $
78
$
72
$
66
Cash paid related to maturities of operating lease liabilities . . . . . . . . . $
77
$
70
$
67
Right-of-use assets obtained in exchange for operating lease liabilities $
79
$
82
$
74
Right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
266
$
248
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . $
57
$
58
Long-term portion of operating lease liabilities . . . . . . . . . . . . . . . . . . .
158
148
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
215
$
206
Weighted-average remaining lease term . . . . . . . . . . . . . . . . . . . . . . . .
4.7 years
5.0 years
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.30 %
2.95 %
The right-of-use assets related to operating leases and the current and long-term portions of operating lease liabilities were
included in Other assets, Accrued expenses and Other liabilities, respectively, in the Statement of Financial Position. The
weighted-average discount rate was based on the incremental borrowing rate of the Company and its subsidiaries. As of
December 31, 2024, future maturities of operating lease liabilities for the twelve months ending December 31 were as
follows:
In millions
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
63
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
53
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
2030 and future years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30
Total future minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
234
Less: Imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19)
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
215
64
(10)
Debt
Total debt as of December 31, 2024 and 2023 was as follows:
In millions
2024
2023
Short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,555 $
1,825
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,308
6,339
Total debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,863 $
8,164
Short-term debt— Short-term debt represents obligations with a maturity date of one year or less and is stated at cost, which
approximates fair value. Short-term debt also includes current maturities of long-term debt that have been reclassified to
short-term, and excludes short-term debt classified as long-term because the Company has the intent and ability to extend the
maturity date beyond one year. Short-term debt as of December 31, 2024 and 2023 consisted of the following:
In millions
2024
2023
Current maturities of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
777 $
1,361
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
778
464
Total short-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,555 $
1,825
As of December 31, 2024, current maturities of long-term debt included $777 million related to the Euro-denominated credit
agreement entered into on May 5, 2023 (the "Euro Credit Agreement"), 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. As of
December 31, 2023, current maturities of long-term debt included $700 million related to the 3.50% notes due March 1, 2024
and $661 million related to the 0.25% Euro notes due December 5, 2024, both of which were repaid on their respective due
dates.
The Company may issue commercial paper to fund general corporate needs, share repurchases, and small and medium-sized
acquisitions. During the fourth quarter of 2022, the Company entered into a $3.0 billion, five-year 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 December 31,
2024 or 2023. The Company was also in compliance with the financial covenants of the revolving credit facility as of
December 31, 2024, which included a minimum interest coverage ratio. The weighted-average interest rate on commercial
paper was 4.56% and 5.40% as of December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Company had unused capacity of approximately $170 million under international debt
facilities. In the ordinary course of business, the Company also had approximately $250 million outstanding in guarantees,
letters of credit and other similar arrangements with financial institutions as of December 31, 2024.
65
Long-term debt— Long-term debt represents obligations with a maturity date greater than one year or where the Company
has the intent and ability to extend the maturity date beyond one year, and excludes current maturities that have been
reclassified to short-term debt. Long-term debt at carrying value and fair value as of December 31, 2024 and 2023 consisted
of the following:
2024
2023
In millions
Effective
Interest Rate
Carrying Value
Fair Value
Carrying Value
Fair Value
3.50% notes due March 1, 2024 . . . . . . . . .
3.54%
$
— $
— $
700 $
698
0.25% Euro notes due December 5, 2024 .
0.31%
—
—
661
642
Euro Credit Agreement due April 30, 2025
Variable
777
777
1,434
1,434
2.65% notes due November 15, 2026 . . . . .
2.69%
998
971
997
956
0.625% Euro notes due December 5, 2027
0.71%
515
490
549
509
3.25% Euro notes due May 17, 2028 . . . . .
3.38%
668
685
—
—
2.125% Euro notes due May 22, 2030 . . . .
2.18%
515
501
548
530
1.00% Euro notes due June 5, 2031 . . . . . .
1.09%
513
460
546
488
3.375% Euro notes due May 17, 2032 . . . .
3.51%
867
901
—
—
3.00% Euro notes due May 19, 2034 . . . . .
3.13%
509
511
543
551
4.875% notes due September 15, 2041 . . .
4.97%
639
610
638
660
3.90% notes due September 1, 2042 . . . . .
3.96%
1,084
900
1,084
989
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,085 $
6,806
7,700 $
7,457
Less: Current maturities of long-term debt .
(777)
(1,361)
Total long-term debt . . . . . . . . . . . . . . . . . .
$
6,308
$
6,339
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.
In 2011, the Company issued $650 million of 4.875% notes due September 15, 2041 at 98.539% of face value.
In 2012, the Company issued $1.1 billion of 3.9% notes due September 1, 2042 at 99.038% of face value.
In February 2014, the Company issued $700 million of 3.5% notes due March 1, 2024 at 99.648% of face value, which were
repaid on the due date.
In May 2014, the Company issued €500 million of 3.0% Euro notes due May 19, 2034 at 98.089% of face value.
In May 2015, the Company issued €500 million of 1.25% Euro notes due May 22, 2023 at 99.239% of face value, which
were repaid on the due date, and €500 million of 2.125% Euro notes due May 22, 2030 at 99.303% of face value.
In November 2016, the Company issued $1.0 billion of 2.65% notes due November 15, 2026 at 99.685% of face value.
In June 2019, the Company issued €600 million of 0.25% Euro notes due December 5, 2024 at 99.662% of face value, which
were repaid on the due date, €500 million of 0.625% Euro notes due December 5, 2027 at 99.343% of face value and €500
million of 1.00% Euro notes due June 5, 2031 at 98.982% of face value.
On May 5, 2023, the Company entered into a €1.3 billion Euro Credit Agreement with a 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
with an interest rate of 4.59%, 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
66
proceeds from the Euro notes issued on May 17, 2024, as discussed below. As of December 31, 2024, the Company had
€750 million outstanding under the Euro Credit Agreement with an interest rate of 3.61%, 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.
In May 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 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, the €1.3 billion of Euro term loans borrowed under the Euro Credit
Agreement in May 2023 and the €1.5 billion of Euro notes issued in May 2024 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. On
February 22, 2022, €500 million of the Euro notes issued in May 2014 were redeemed in full, on May 22, 2023, €500 million
of the Euro notes issued in May 2015 were repaid on the due date and on December 5, 2024, €600 million of the Euro notes
issued in May 2019 were repaid on the due date. On May 22, 2024, the Company also repaid €550 million of the term loans
under the Euro Credit Agreement. Refer to Note 13. Stockholders' Equity for additional information regarding the net
investment hedge.
All of the Company's long-term debt listed above represent senior unsecured obligations ranking equal in right of payment.
As of December 31, 2024, scheduled future maturities of long-term debt, including current maturities of long-term debt, for
the twelve months ending December 31 were as follows:
In millions
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
777
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
998
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
515
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
668
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
2030 and future years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,127
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,085
(11)
Pension and Other Postretirement Benefits
The Company has both funded and unfunded defined benefit pension and other postretirement benefit plans, predominately in
the U.S. The U.S. primary pension plan provides benefits based on years of service and final average salary. The U.S.
primary postretirement health care plan is contributory with the participants' contributions adjusted annually. The U.S.
primary postretirement life insurance plan is noncontributory. Beginning January 1, 2007, the U.S. primary pension and other
postretirement benefit plans were closed to new participants. Newly hired employees and employees from acquired
businesses that are not participating in these plans are eligible for additional Company contributions under the existing U.S.
primary defined contribution retirement plans. The Company's expense related to defined contribution plans was $117
million in 2024, $117 million in 2023, and $111 million in 2022. In addition to the U.S. plans, the Company also has defined
benefit pension plans in certain other countries, mainly the United Kingdom, Canada, Germany and Switzerland.
67
Summarized information regarding net periodic benefit cost included in the Statement of Income related to the Company's
significant defined benefit pension and other postretirement benefit plans for the twelve months ended December 31, 2024,
2023 and 2022 is as follows:
Pension
Other Postretirement Benefits
In millions
2024
2023
2022
2024
2023
2022
Components of net periodic benefit cost:
Service cost . . . . . . . . . . . . . . . . . . . . . . . $
36 $
35 $
47 $
4 $
5 $
7
Interest cost . . . . . . . . . . . . . . . . . . . . . . .
92
94
50
24
23
13
Expected return on plan assets . . . . . . . .
(133)
(129)
(100)
(22)
(22)
(26)
Amortization of actuarial (gain) loss . . .
6
3
24
(2)
(4)
(3)
Amortization of prior service cost . . . . .
1
1
1
—
—
—
Settlement loss . . . . . . . . . . . . . . . . . . . .
6
—
1
—
—
—
Total net periodic benefit cost (income) . . . . $
8 $
4 $
23 $
4 $
2 $
(9)
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 used the most recently published mortality improvement scale from the Society of Actuaries, MP-2021, to
measure its U.S. pension and other postretirement benefit obligations as of December 31, 2024 and 2023, which did not have
a significant impact.
The following table provides a rollforward of the plan benefit obligations for the twelve months ended December 31, 2024
and 2023:
Pension
Other Postretirement Benefits
In millions
2024
2023
2024
2023
Change in benefit obligation:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,069 $
1,993 $
499 $
468
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
35
4
5
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .
92
94
24
23
Plan participants' contributions . . . . . . . . . . . . .
1
1
9
9
Actuarial (gain) loss . . . . . . . . . . . . . . . . . . . . .
(130)
64
(26)
38
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . .
(177)
(153)
(46)
(45)
Medicare subsidy received . . . . . . . . . . . . . . . .
—
—
1
1
Foreign currency translation . . . . . . . . . . . . . . .
(21)
35
—
—
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,870 $
2,069 $
465 $
499
Accumulated benefit obligation as of December 31 $
1,790 $
1,972
For the years ended December 31, 2024 and 2023, the actuarial (gain) loss related to the Company's pension and other
postretirement benefit obligations was primarily related to changes in discount rates. Refer to the Assumptions section below
for further details related to the discount rates used in the valuations of pension and other postretirement benefit obligations.
68
The following table provides a rollforward of the plan assets and a reconciliation of funded status for the twelve months
ended December 31, 2024 and 2023:
Pension
Other Postretirement Benefits
In millions
2024
2023
2024
2023
Change in plan assets:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,171 $
2,114 $
358 $
336
Actual return on plan assets . . . . . . . . . . . . . . .
19
157
44
51
Company contributions . . . . . . . . . . . . . . . . . . .
60
10
35
7
Plan participants' contributions . . . . . . . . . . . . .
1
1
9
9
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . .
(177)
(153)
(46)
(45)
Foreign currency translation . . . . . . . . . . . . . . .
(21)
42
—
—
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,053 $
2,171 $
400 $
358
Reconciliation of funded status:
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . $
183 $
102 $
(65) $
(141)
Other immaterial plans . . . . . . . . . . . . . . . . . . .
(48)
(58)
(3)
(4)
Net asset (liability) as of December 31 . . . . . . . . . . $
135 $
44 $
(68) $
(145)
The amounts recognized in the Statement of
Financial Position as of December 31 consist of:
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
305 $
243 $
— $
—
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . .
(11)
(29)
(3)
(3)
Other noncurrent liabilities . . . . . . . . . . . . . . . .
(159)
(170)
(65)
(142)
Net asset (liability) as of December 31 . . . . . . . . . . $
135 $
44 $
(68) $
(145)
The pre-tax amounts recognized in accumulated
other comprehensive (income) loss consist of:
Net actuarial (gain) loss . . . . . . . . . . . . . . . . . . $
482 $
512 $
(108) $
(61)
Prior service cost . . . . . . . . . . . . . . . . . . . . . . . .
2
3
—
—
Pre-tax accumulated other comprehensive (income)
loss as of December 31 . . . . . . . . . . . . . . . . . . . . . $
484 $
515 $
(108) $
(61)
As of December 31, 2024 and 2023, pension plans with projected benefit obligations in excess of plan assets had projected
benefit obligations of $159 million and $179 million, respectively, and plan assets of $56 million and $55 million,
respectively. As of December 31, 2024 and 2023, pension plans with accumulated benefit obligations in excess of plan assets
had accumulated benefit obligations of $155 million and $175 million, respectively, and plan assets of $56 million and
$55 million, respectively.
69
Assumptions— The weighted-average assumptions used in the valuations of pension and other postretirement benefits were
as follows:
Pension
Other Postretirement Benefits
2024
2023
2022
2024
2023
2022
Assumptions used to determine benefit obligations
as of December 31:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.30 %
4.69 %
4.94 %
5.66 %
5.01 %
5.19 %
Rate of compensation increases . . . . . . . . . . . . .
3.43 %
3.39 %
3.46 %
Interest crediting rate - U.S. cash balance plan .
3.75 %
3.75 %
3.75 %
Assumptions used to determine net periodic
benefit cost for the twelve months ended
December 31:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.69 %
4.94 %
2.33 %
5.01 %
5.19 %
2.92 %
Expected return on plan assets . . . . . . . . . . . . . .
5.33 %
5.27 %
3.72 %
6.50 %
6.75 %
6.25 %
Rate of compensation increases . . . . . . . . . . . . .
3.39 %
3.46 %
3.40 %
Interest crediting rate - U.S. cash balance plan .
3.75 %
3.75 %
3.75 %
The expected long-term rates of return for pension and other postretirement benefit plans were developed using historical
asset class returns while factoring in current market conditions such as inflation, interest rates and asset class performance.
The discount rate reflects the current rate at which the associated liabilities could theoretically be effectively settled at the end
of the year. In estimating this rate, the Company looks at rates of return on high-quality fixed income investments, with
similar duration to the liabilities in the plan. The Company estimates the service and interest cost components of net periodic
benefit cost by applying specific spot rates along the yield curve to the projected cash flows rather than a single weighted-
average rate.
Assumed health care cost trend rates have an effect on the amounts reported for the postretirement health care benefit plans.
The assumed health care cost trend rates used to determine the postretirement benefit obligation as of December 31 were as
follows:
2024
2023
2022
Health care cost trend rate assumed for the next year . . . . . . . . . . .
8.00 %
7.50 %
7.00 %
Ultimate trend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.50 %
4.50 %
4.50 %
Year the rate reaches the ultimate trend rate . . . . . . . . . . . . . . . . . .
2035
2033
2031
Plan assets— The Company's overall investment strategy for the assets in the pension funds is to achieve a balance between
the goals of growing plan assets and keeping risk at a reasonable level over a long-term investment horizon. In order to
reduce unnecessary risk, the pension funds are diversified across several asset classes, securities and investment managers.
The target allocations for plan assets are 15% to 25% equity investments, 75% to 85% fixed income investments and 0% to
10% in other types of investments. The Company does not use derivatives for the purpose of speculation, leverage,
circumventing investment guidelines or taking risks that are inconsistent with specified guidelines.
The assets in the Company's postretirement health care plan are primarily invested in life insurance policies. The Company's
overall investment strategy for the assets in the postretirement health care fund is to invest in assets that provide a reasonable
tax exempt rate of return while preserving capital.
The following tables present the fair value of the Company's pension and other postretirement benefit plan assets as of
December 31, 2024 and 2023 by asset category and valuation methodology. Level 1 assets are valued using unadjusted
quoted prices for identical assets in active markets. Level 2 assets are valued using quoted prices or other observable inputs
for similar assets. Level 3 assets are valued using unobservable inputs, but reflect the assumptions market participants would
be expected to use in pricing the assets. Each financial instrument's categorization is based on the lowest level of input that is
significant to the fair value measurement.
70
2024
In millions
Total
Level 1
Level 2
Level 3
Pension Plan Assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $
32 $
26 $
6 $
—
Fixed income securities:
Government securities . . . . . . . . . . . . . . . . . . . . . .
300
—
300
—
Corporate debt securities . . . . . . . . . . . . . . . . . . . .
780
—
780
—
Investment contracts with insurance companies . .
1
—
—
1
Commingled funds:
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
Collective trust funds . . . . . . . . . . . . . . . . . . . . . . .
909
Partnerships/private equity interests . . . . . . . . . . .
2
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
—
4
—
Total fair value of pension plan assets . . . . . . . . . . . . . . . . . $
2,053 $
26 $
1,090 $
1
Other Postretirement Benefit Plan Assets:
Life insurance policies . . . . . . . . . . . . . . . . . . . . . . . . . $
400
Total fair value of other postretirement benefit plan assets . $
400 $
— $
— $
—
2023
In millions
Total
Level 1
Level 2
Level 3
Pension Plan Assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . $
47 $
47 $
— $
—
Fixed income securities:
Government securities . . . . . . . . . . . . . . . . . . . . . .
334
—
334
—
Corporate debt securities . . . . . . . . . . . . . . . . . . . .
800
—
800
—
Investment contracts with insurance companies . .
1
—
—
1
Commingled funds:
Mutual funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
25
Collective trust funds . . . . . . . . . . . . . . . . . . . . . . .
946
Partnerships/private equity interests . . . . . . . . . . .
8
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10
—
10
—
Total fair value of pension plan assets . . . . . . . . . . . . . . . . . $
2,171 $
47 $
1,144 $
1
Other Postretirement Benefit Plan Assets:
Life insurance policies . . . . . . . . . . . . . . . . . . . . . . . . . $
358
Total fair value of other postretirement benefit plan assets . $
358 $
— $
— $
—
Cash and equivalents include cash on hand and instruments with original maturities of three months or less and are valued at
cost, which approximates fair value. Fixed income securities primarily consist of U.S. and foreign government bills, notes
and bonds, corporate debt securities and investment contracts. The majority of the assets in this category are valued by
evaluating bid prices provided by independent financial data services. For securities where market data is not readily
available, unobservable market data is used to value the security.
Pension assets measured at net asset value include mutual funds, collective trust funds, partnerships/private equity interests
and life insurance policies. Mutual funds and collective trust funds are funds that are valued based on the value of the
underlying investments which can be redeemed on a daily basis. The underlying investments include both passively and
actively managed U.S. and foreign large- and mid-cap equity funds and short-term investment funds. Partnerships/private
equity interests are investments in partnerships where the benefit plan is a limited partner. The investments are valued by the
investment managers on a periodic basis using pricing models that use market, income and cost valuation methods.
Distributions are received from these funds on a periodic basis through the liquidation of the underlying assets of the fund.
71
Life insurance policies are used to fund other postretirement benefits in order to obtain favorable tax treatment and are valued
based on the cash surrender value of the underlying policies. The Company has selected the funds in which these assets are
invested and may elect to withdraw funds with proper notice to the insurance company or maintain the policies and receive
death benefits as determined by the contracts.
Cash flows— The Company generally funds its pension and other postretirement benefit plans as required by law or to the
extent such contributions are tax deductible. The Company expects to contribute approximately $22 million to its pension
plans and $31 million to its other postretirement benefit plans in 2025. As of December 31, 2024, the Company's portion of
the future benefit payments that are expected to be paid during the twelve months ending December 31 is as follows:
In millions
Pension
Other
Postretirement
Benefits
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
160 $
38
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
161
38
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
161
38
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
165
38
2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
167
38
Years 2030-2034 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
786
183
(12)
Commitments and Contingencies
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those
involving environmental, product liability (including toxic tort) and general liability claims. The Company accrues for such
liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are
based on developments to date, the Company's estimates of the outcomes of these matters and its experience in contesting,
litigating and settling other similar matters. The Company believes resolution of these matters, individually and in the
aggregate, will not have a material adverse effect on the Company's financial position, liquidity or future operations.
(13)
Stockholders' Equity
Preferred stock— Preferred stock, without par value, of which 0.3 million shares are authorized and unissued, is issuable in
series. The Board of Directors is authorized to fix by resolution the designation and characteristics of each series of preferred
stock. The Company has no present commitment to issue its preferred stock.
Share repurchases— On August 3, 2018, 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 "2018 Program").
Under the 2018 Program, the Company repurchased approximately 6.7 million shares of its common stock at an average price
of $158.11 per share during 2019, approximately 4.2 million shares of its common stock at an average price of $167.69 per
share during 2020, approximately 4.4 million shares of its common stock at an average price of $227.29 per share during
2021 and approximately 1.2 million shares of its common stock at an average price of $216.62 per share during 2022. The
2018 Program was completed in the first quarter of 2022.
On May 7, 2021, the Company announced a stock repurchase program which provided for the repurchase of up to an
additional $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 and approximately 6.3 million shares of its common stock at an average price of $235.35 per
share during 2023. The 2021 Program was completed in the fourth quarter of 2023.
On August 4, 2023, the Company announced a 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 during the fourth quarter of 2023 and approximately 5.9 million shares of its common stock at an average price of
$254.04 per share during 2024. As of December 31, 2024, there were approximately $3.5 billion of authorized repurchases
remaining under the 2023 Program.
72
Cash Dividends— Cash dividends declared were $5.80 per share in 2024, $5.42 per share in 2023 and $5.06 per share in
2022. Cash dividends paid were $5.70 per share in 2024, $5.33 per share in 2023 and $4.97 per share in 2022.
Accumulated other comprehensive income (loss)— The changes in accumulated other comprehensive income (loss) during
2024, 2023 and 2022 were as follows:
In millions
2024
2023
2022
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,834) $
(1,841) $
(1,502)
Foreign currency translation adjustments during the period . . . . . . . . . . . . . . . . . . . . .
(62)
16
(192)
Foreign currency translation adjustments reclassified to income . . . . . . . . . . . . . . . . .
30
(1)
—
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(72)
26
(50)
Total foreign currency translation adjustments, net of tax . . . . . . . . . . . . . . . . . . . . .
(104)
41
(242)
Pension and other postretirement benefit adjustments during the period . . . . . . . . . . .
67
(45)
(149)
Pension and other postretirement benefit adjustments reclassified to income . . . . . . .
13
—
23
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19)
11
29
Total pension and other postretirement benefit adjustments, net of tax . . . . . . . . . . .
61
(34)
(97)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
(1,877) $
(1,834) $
(1,841)
In 2024, foreign currency translation adjustments reclassified to income related primarily to the sale of the noncontrolling
interest in Wilsonart in the third quarter of 2024. Pension and other postretirement benefit adjustments reclassified to income
related primarily to settlements, the amortization of actuarial gains and losses and prior service cost, and the sale of the
noncontrolling interest in Wilsonart. In 2023, foreign currency translation adjustments reclassified to income primarily
related to the exit of immaterial foreign operations. In 2022, pension and other postretirement benefit adjustments reclassified
to income represented settlements and the amortization of actuarial gains and losses and prior service cost. Refer to Note 5.
Other Income (Expense) and Note 11. 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, the €1.3 billion of Euro term loans borrowed under the Euro Credit
Agreement in May 2023 and the €1.5 billion of Euro notes issued in May 2024 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, on May 22, 2023, €500 million of the Euro notes
issued in May 2015 were repaid on the due date and on December 5, 2024, €600 million of the Euro notes issued in May
2019 were repaid on the due date. On May 22, 2024, the Company also repaid €550 million of the term loans under the Euro
Credit Agreement. The carrying values of the outstanding 2024, 2019, 2015 and 2014 Euro notes and 2023 Euro term loan as
of December 31, 2024 were $1.5 billion, $1.0 billion, $515 million, $509 million, and $777 million, respectively. Refer to
Note 10. Debt for additional information regarding the redemption of these notes. The amount of pre-tax gain (loss) related to
these notes that was recorded in Other comprehensive income (loss) for the twelve months ended December 31, 2024, 2023
and 2022 was $301 million, $(109) million and $205 million, respectively.
As of December 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 benefits costs of $266 million and $327 million, respectively.
73
(14)
Stock-Based Compensation
On May 3, 2024, the 2024 Long-Term Incentive Plan (the "2024 Plan") was approved by shareholders, and became effective
on June 30, 2024 (the "Effective Date"). Subsequent to the Effective Date, no additional awards will be granted to employees
under the 2015 Long-Term Incentive Plan (the "2015 Plan"). The 2024 Plan allows for the issuance of up to 11.5 million
shares of ITW common stock for awards granted under the plan, of which 3.5 million shares were subject to awards
outstanding under the 2015 Plan as of the Effective Date and are available for rollover should the awards expire, terminate or
be forfeited. The significant terms of stock options and restricted stock units ("RSUs") were not changed under the 2024 Plan.
Stock options and RSUs are issued to officers and/or other management employees under these plans. Stock options generally
vest over a four-year period and have an expiration of ten years from the issuance date. RSUs generally "cliff" vest after a
three-year period and include units with and without performance criteria. RSUs with performance criteria provide for full
"cliff" vesting after three years if the Compensation Committee of the Board of Directors certifies that the performance goals
have been met. Upon vesting, the holder will receive one share of common stock of the Company for each vested restricted
stock unit.
Commencing in February 2013, the Company began issuing shares from treasury stock to cover the exercised options and
vested RSUs. Prior to February 2013, the Company generally issued new shares from its authorized but unissued share pool.
The Company records compensation expense for the grant date fair value of stock awards over the remaining service periods
of those awards. The following table summarizes the Company's stock-based compensation expense for the twelve months
ended December 31, 2024, 2023 and 2022:
In millions
2024
2023
2022
Pre-tax stock-based compensation expense . . . . . . . . . . . . . . . . . . . $
61 $
69 $
63
Tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(8)
(7)
(7)
Total stock-based compensation expense, net of tax . . . . . . . . . . . . $
53 $
62 $
56
The following table summarizes activity related to non-vested RSUs for the twelve months ended December 31, 2024:
Shares in millions
Number of
Shares
Weighted-Average
Grant-Date
Fair Value
Unvested, January 1, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.6
$218.85
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.3
243.77
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.3)
203.32
Unvested, December 31, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.6
236.70
The following table summarizes stock option activity for the twelve months ended December 31, 2024:
In millions except exercise price and contractual terms
Number of
Shares
Weighted-
Average
Exercise Price
Weighted-Average
Remaining
Contractual Term
Aggregate
Intrinsic Value
Under option, January 1, 2024 . . . . . . . . . . . . .
3.0
$177.01
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
0.2
255.75
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.4)
125.87
Canceled or expired . . . . . . . . . . . . . . . . . . . . . .
(0.1)
236.29
Under option, December 31, 2024 . . . . . . . . . .
2.7
190.79
5.6
$171
Exercisable, December 31, 2024 . . . . . . . . . . . .
2.0
175.85
4.8
$155
74
The fair value of RSUs is equal to the common stock fair market value on the date of the grant. RSUs provide for dividend
equivalents payable in additional RSUs for dividends that would have been paid during the vesting period. Stock option
exercise prices are equal to the common stock fair market value on the date of grant. The Company estimates forfeitures
based on historical rates for awards with similar characteristics. The Company uses a binomial option pricing model to
estimate the fair value of the stock options granted. The following summarizes the assumptions used in the option valuations
for the twelve months ended December 31, 2024, 2023 and 2022:
2024
2023
2022
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.22-4.90%
3.92-4.86%
1.04-2.07%
Weighted-average volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
20.0%
22.0%
21.0%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.21%
2.13%
2.20%
Expected years until exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3-9.5
8.6-9.2
9.1-9.6
Lattice-based option valuation models, such as the binomial option pricing model, incorporate ranges of assumptions for
inputs. The risk-free rate of interest for periods within the contractual life of the option is based on a zero-coupon U.S.
government instrument over the contractual term of the equity instrument. Expected volatility is based on implied volatility
from traded options on the Company's stock and historical volatility of the Company's stock. The Company uses historical
data to estimate option exercise timing and employee termination rates within the valuation model. The weighted-average
dividend yield is based on historical information. The expected term of options granted is derived from the output of the
option valuation model and represents the period of time that options granted are expected to be outstanding. The ranges
presented result from separate groups of employees assumed to exhibit different exercise behavior.
The weighted-average grant-date fair value of stock options granted for the twelve months ended December 31, 2024, 2023
and 2022 was $68.98, $67.16 and $45.15 per share, respectively. The aggregate intrinsic value of stock options exercised
during the twelve months ended December 31, 2024, 2023 and 2022 was $55 million, $79 million and $38 million,
respectively. Exercise of stock options during the twelve months ended December 31, 2024, 2023 and 2022 resulted in cash
receipts of $52 million, $53 million and $29 million, respectively. The total fair value of vested stock option awards during
the twelve months ended December 31, 2024, 2023 and 2022 was $18 million, $18 million and $18 million, respectively. As
of December 31, 2024, there was $11 million of total unrecognized compensation cost related to unvested stock options. That
cost is expected to be recognized over a weighted-average period of 2.0 years.
The weighted-average grant-date fair value of RSU awards granted for the twelve months ended December 31, 2024, 2023
and 2022 was $243.77, $232.21 and $215.36, respectively. The total grant-date fair value of vested RSU awards during the
twelve months ended December 31, 2024, 2023 and 2022 was $52 million, $35 million and $28 million, respectively. As of
December 31, 2024, there was $47 million of total unrecognized compensation cost related to unvested RSUs. That cost is
expected to be recognized over a weighted-average remaining contractual life of 1.7 years.
75
(15)
Other Balance Sheet Information
Other balance sheet information as of December 31, 2024 and 2023 was as follows:
In millions
2024
2023
Prepaid expenses and other current assets:
Value-added-tax receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
67 $
99
Vendor advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
55
Income tax refunds receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
29
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
147
157
Total prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
312 $
340
Other assets:
Cash surrender value of life insurance policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
439 $
436
Prepaid pension assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
305
243
Operating lease right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
266
248
Customer tooling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
176
181
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
189
154
Total other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,375 $
1,262
Accrued expenses:
Compensation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
407 $
423
Deferred revenue and customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
360
395
Rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
200
218
Current portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
57
58
Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52
48
Current portion of pension and other postretirement benefit obligations . . . . . . . .
14
32
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
486
489
Total accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,576 $
1,663
Other liabilities:
Pension benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
159 $
170
Long-term portion of operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
158
148
Postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
142
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
633
554
Total other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,015 $
1,014
76
(16)
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. The following is a description 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.
Food Equipment— This segment is a highly focused and branded industry leader in commercial food equipment
differentiated by innovation and integrated service offerings.
Test & Measurement and Electronics— This segment is a branded and innovative producer of test and measurement and
electronic manufacturing and 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.
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.
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.
Construction Products— This segment is a branded supplier of innovative engineered fastening systems and solutions.
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.
The Company’s chief operating decision maker (“CODM”) is the President & Chief Executive Officer. The CODM primarily
uses operating income and related operating margins in assessing the current and expected long-term performance of the
Company’s segments, including the application of the Company’s enterprise strategies which focus on profitable growth and
continuous improvement to margins and returns through the application of the Company’s business model. Operating income
and margins are also used by the CODM when evaluating segment investments in capital projects and restructuring
initiatives. The CODM regularly reviews summarized financial information related to segment operating revenue, variable
margins, overhead expenses, operating income and operating margins as compared to forecasted results.
The accounting policies for the Company’s segments are the same as the policies described in Note 1. Description of
Business and Summary of Significant Accounting Policies. Intersegment sales transactions are accounted for at prices
consistent with sales to third parties and are not considered material. Segments are allocated a fixed overhead charge for
general corporate administrative expenses based on a percentage of the segment's operating revenue. Expenses not allocated
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.
77
Segment operating revenue, significant expenses and operating income for 2024, 2023 and 2022 was as follows:
Operating revenue:
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,188 $
3,235 $
2,969
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,647
2,622
2,444
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
2,818
2,832
2,828
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,851
1,902
1,894
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,764
1,804
1,905
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,909
2,033
2,113
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,743
1,697
1,799
Total segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,920
16,125
15,952
Intersegment revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(22)
(18)
(20)
Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,898 $
16,107 $
15,932
Variable cost of revenue:
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,781 $
1,869 $
1,719
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,228
1,222
1,204
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
1,206
1,267
1,305
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
838
892
936
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
847
877
974
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
890
984
1,105
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
814
833
893
Total segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,604 $
7,944 $
8,136
Overhead expenses:
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
782 $
805 $
751
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
700
687
622
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
909
879
839
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
416
405
375
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
433
445
452
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
460
471
460
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
401
415
425
Total segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,101 $
4,107 $
3,924
Operating income:
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
625 $
561 $
499
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
719
713
618
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
703
686
684
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
597
605
583
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
484
482
479
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
559
578
548
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
528
449
481
Total segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,215
4,074
3,892
Unallocated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
49
(34)
(102)
Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,264
4,040
3,790
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(283)
(266)
(203)
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
441
49
255
Income Before Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,422 $
3,823 $
3,842
In millions
2024
2023
2022
Unallocated expenses in 2024 included the favorable pre-tax cumulative effect of the LIFO accounting method change of
$117 million in the first quarter of 2024. Refer to Note 1. Description of Business and Summary of Significant Accounting
Policies for additional information regarding this change in accounting method.
78
Other segment information for 2024, 2023 and 2022 was as follows:
In millions
2024
2023
2022
Depreciation and amortization and impairment of intangible assets:
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
129 $
123 $
121
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
41
40
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
82
80
87
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
29
26
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
42
46
57
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
33
33
31
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
43
48
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
402 $
395 $
410
Plant and equipment additions:
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
209 $
224 $
181
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
54
41
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
32
43
49
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43
41
43
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
28
27
23
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
34
31
33
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
35
42
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
437 $
455 $
412
Identifiable assets:
Automotive OEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
2,578 $
2,615 $
2,447
Food Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,188
1,193
1,188
Test & Measurement and Electronics . . . . . . . . . . . . . . . . . . . . . . .
3,186
3,230
3,289
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
857
838
933
Polymers & Fluids . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,673
1,762
1,819
Construction Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,172
1,230
1,370
Specialty Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,566
1,627
1,696
Total segments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,220
12,495
12,742
Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,847
3,023
2,680
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,067 $
15,518 $
15,422
Identifiable assets by segment are those assets that are specifically used in that segment. Corporate assets are principally cash
and equivalents, investments and other general corporate assets.
Enterprise-wide information for the twelve months ended December 31, 2024, 2023 and 2022 was as follows:
In millions
2024
2023
2022
Operating Revenue by Geographic Region:
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,374 $
7,576 $
7,609
Canada/Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,156
1,146
1,095
Total North America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8,530
8,722
8,704
Europe, Middle East and Africa . . . . . . . . . . . . . . . . . . . . . . . .
4,101
4,147
3,913
Asia Pacific . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,961
2,935
2,991
South America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
306
303
324
Total operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
15,898 $
16,107 $
15,932
Operating revenue by geographic region is based on the customers' locations. The Company had approximately 44% and
44% of its total net plant and equipment in the United States as of December 31, 2024 and 2023, respectively. Additionally,
the Company had 16% and 13% of its total net plant and equipment in China as of December 31, 2024 and 2023,
respectively. No other country represented more than 10% of the Company's net plant and equipment as of December 31,
79
2024 and 2023. No single customer accounted for more than 5% of consolidated revenues for the twelve months ended
December 31, 2024, 2023 or 2022.
ITEM 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
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 December 31, 2024. Based on such evaluation, the Company's President &
Chief Executive Officer and Senior Vice President & Chief Financial Officer have concluded that, as of December 31, 2024,
the Company's disclosure controls and procedures were effective.
Management Report on Internal Control over Financial Reporting
The Management Report on Internal Control over Financial Reporting and the Report of Independent Registered Public
Accounting Firm are found in Item 8. Financial Statements and Supplementary Data.
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 December 31, 2024 were identified that have materially affected or
are reasonably likely to materially affect the Company's internal control over financial reporting.
ITEM 9B. Other Information
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
80
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
Information regarding the Directors of the Company who are standing for reelection and any persons nominated to become
Directors of the Company is incorporated by reference from the information under the captions "Proposal 1 - Election of
Directors" and "Delinquent Section 16(a) Reports" in the Company's Proxy Statement for the 2025 Annual Meeting of
Stockholders.
Information regarding the Audit Committee and its Financial Experts is incorporated by reference from the information under
the captions "Corporate Governance - Board of Directors and its Committees" and "Proposal 3 – Ratification of the
Appointment of Independent Public Accounting Firm - Audit Committee Report" in the Company's Proxy Statement for the
2025 Annual Meeting of Stockholders.
Information regarding the Executive Officers of the Company can be found in Part I of this Annual Report on Form 10-K
under the caption "Information About Our Executive Officers."
Information regarding the Company’s Insider Trading Policy and related policies and procedures is incorporated by reference
from the information under the caption "Other Governance Matters - Insider Trading Policies and Procedures" in the
Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders.
Information regarding the Company's code of ethics that applies to the Company's President & Chief Executive Officer,
Senior Vice President & Chief Financial Officer, and key financial and accounting personnel is incorporated by reference
from the information under the caption "Corporate Governance Policies and Code of Conduct" in the Company's Proxy
Statement for the 2025 Annual Meeting of Stockholders.
ITEM 11. Executive Compensation
Information regarding executive compensation is incorporated by reference from the information under the captions "Director
Compensation," and "Executive Compensation" in the Company's Proxy Statement for the 2025 Annual Meeting of
Stockholders.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information regarding security ownership of certain beneficial owners and management and related stockholder matters is
incorporated by reference from the information under the captions "Beneficial Ownership of Common Stock" and "NEO
Compensation - Equity Compensation Plan Information" in the Company's Proxy Statement for the 2025 Annual Meeting of
Stockholders.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
Information regarding certain relationships and related transactions as well as director independence is incorporated by
reference from the information under the captions "Proposal 1 - Election of Directors - Board Independence," "Other
Governance Matters - Certain Relationships and Related-Party Transactions" and "Other Governance Matters - Corporate
Governance Policies and Code of Conduct" in the Company's Proxy Statement for the 2025 Annual Meeting of Stockholders.
ITEM 14. Principal Accountant Fees and Services
This information is incorporated by reference from the information under the caption "Proposal 3 - Ratification of the
Appointment of Independent Registered Public Accounting Firm" in the Company's Proxy Statement for the 2025 Annual
Meeting of Stockholders.
81
PART IV
ITEM 15. Exhibit and Financial Statement Schedules
(a) (1) Financial Statements
The following information is included as part of Item 8. Financial Statements and Supplementary Data:
Management Report on Internal Control over Financial Reporting
Statement of Income
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Stockholders' Equity
Statement of Cash Flows
Notes to Financial Statements
The following report of the Company's independent registered public accounting firm (PCAOB ID:34) is included as
part of Item 8. Financial Statements and Supplementary Data:
Report of Independent Registered Public Accounting Firm
(2) Financial Statement Schedules
None.
(3) Exhibits
3(a)(i)
Amended and Restated Certificate of Incorporation of Illinois Tool Works Inc., filed as Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 (Commission
File No. 1-4797) and incorporated herein by reference.
3(a)(ii)
Certificate of Amendment of Certificate of Incorporation of Illinois Tool Works Inc., filed as Exhibit
3(a)(ii) to the Company's Current Report on Form 8-K filed on May 12, 2016 (Commission File No.
1-4797) and incorporated herein by reference.
3(b)
By-laws of Illinois Tool Works Inc., amended and restated as of May 3, 2024, filed as Exhibit 3(b) to the
Company's Current Report on Form 8-K filed on May 9, 2024 (Commission File No. 1-4797) and
incorporated herein by reference.
4(a)
Indenture between Illinois Tool Works Inc. and The First National Bank of Chicago, as Trustee, dated as
of November 1, 1986, filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3 filed on
August 4, 2023 (Commission File No. 333-242331) and incorporated herein by reference.
4(b)
First Supplemental Indenture between Illinois Tool Works Inc. and Harris Trust and Savings Bank, as
Trustee, dated as of May 1, 1990, filed as Exhibit 4.5 to the Company's Registration Statement on Form
S-3 filed on August 7, 2020 (Commission File No. 333-242331) and incorporated herein by reference.
4(c)
Officers' Certificate dated August 31, 2011, establishing the terms, and setting forth the forms, of the
3.375% Notes due 2021 and the 4.875% Notes due 2041, filed as Exhibit 4.3 to the Company's Current
Report on Form 8-K filed on September 1, 2011 (Commission File No. 001-04797) and incorporated
herein by reference.
4(d)
Officers' Certificate dated August 28, 2012, establishing the terms, and setting forth the forms, of the
3.900% Notes due 2042, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on
August 28, 2012 (Commission File No. 001-4797) and incorporated herein by reference.
4(e)
Officers' Certificate dated May 20, 2014, establishing the terms, and setting forth the forms, of the 1.750%
Euro Notes due 2022 and the 3.000% Euro Notes due 2034, filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K filed on May 22, 2014 (Commission File No. 001-04797) and incorporated herein by
reference.
Exhibit
Number
Description
82
4(f)
Officers' Certificate dated May 19, 2015, establishing the terms, and setting forth the forms, of the 1.250%
Euro Notes due 2023 and the 2.125% Euro Notes due 2030, filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K filed on May 22, 2015 (Commission File No. 001-04797) and incorporated herein by
reference.
4(g)
Officers' Certificate dated November 7, 2016, establishing the terms, and setting forth the forms, of the
2.650% Notes due 2026, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on
November 10, 2016 (Commission File No. 001-04797) and incorporated herein by reference.
4(h)
Officers' Certificate dated June 5, 2019, establishing the terms, and setting forth the forms, of the 0.25%
Notes due 2024, the 0.625% Notes due 2027 and the 1.00% Notes due 2031, filed as Exhibit 4.1 to the
Company's Current Report on Form 8-K filed on June 5, 2019 (Commission File No. 001-04797) and
incorporated herein by reference.
4(i)
Officers’ Certificate dated May 17, 2024, establishing the terms, and setting forth the forms, of the 3.250%
Notes due 2028 and 3.375% Notes due 2032, filed as Exhibit 4.1 to the Company's Current Report on
Form 8-K filed on May 17, 2024 (Commission File No. 1-04797) and incorporated herein by reference.
4(j)
Description of the Company's Common Stock, filed as Exhibit 4(j) to the Company's Annual Report on
Form 10-K for the year ended December 31, 2019 (Commission File No. 1-4797) and incorporated herein
by reference.
4(k)
Description of the 1.75% Euro Notes due 2022 and 3.00% Euro Notes due 2034, filed as Exhibit 4(k) to
the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No.
1-4797) and incorporated herein by reference.
4(l)
Description of the 1.25% Euro Notes due 2023 and 2.125% Euro Notes due 2030, filed as Exhibit 4(l) to
the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No.
1-4797) and incorporated herein by reference.
4(m)
Description of the 0.250% Euro Notes due 2024, 0.625% Euro Notes due 2027 and 1.000% Euro Notes
due 2031, filed as Exhibit 4(m) to the Company's Annual Report on Form 10-K for the year ended
December 31, 2019 (Commission File No. 1-4797) and incorporated herein by reference.
4(n)
Description of the 3.250% Euro Notes due 2028 and 3.375% Euro Notes due 2032, filed herewith.
10(a)(i)
Credit Agreement dated as of October 21, 2022 among Illinois Tool Works Inc., JPMorgan Chase Bank,
N.A., as Agent, Citibank, N.A., as Syndication Agent, and a syndicate of lenders, filed as Exhibit 10(a) to
the Company's Current Report on Form 8-K filed on October 26, 2022 (Commission File No. 1-4797) and
incorporated herein by reference.
10(a)(ii)
Euro Credit Agreement dated as of May 5, 2023 among Illinois Tool Works Inc., as Borrower, the
lender(s) party thereto and ING Bank, N.V., London Branch, as Agent, filed as Exhibit 10(a) to the
Company's Current Report on Form 8-K filed on May 10, 2023 (Commission File No. 1-4797) and
incorporated herein by reference.
10(b)*
Illinois Tool Works Inc. 2011 Long-Term Incentive Plan, filed as Exhibit 99.2 to the Company's Current
Report on Form 8-K filed on December 16, 2010 (Commission File No. 1-4797) and incorporated herein
by reference.
10(c)*
Illinois Tool Works Inc. 2015 Long-Term Incentive Plan effective May 8, 2015, filed as Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 (Commission
File No. 1-4797) and incorporated herein by reference.
10(d)*
Illinois Tool Works Inc. 2024 Long-Term Incentive Plan effective June 30, 2024, filed as Exhibit 10.1 to
the Company's Current Report on Form 8-K filed on May 9, 2024 (Commission File No. 1-4797) and
incorporated herein by reference.
10(e)*
Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2011 Long-Term Incentive Plan,
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 13, 2014
(Commission File No. 1-4797) and incorporated herein by reference.
10(f)*
Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan,
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 9, 2016
(Commission File No. 1-4797) and incorporated herein by reference.
10(g)*
Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan,
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 9, 2017
(Commission File No. 1-4797) and incorporated herein by reference.
Exhibit
Number
Description
83
10(h)*
Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan,
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 14, 2019
(Commission File No. 1-4797) and incorporated herein by reference.
10(i)*
Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan,
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 5, 2020
(Commission File No. 1-4797) and incorporated herein by reference.
10(j)*
Form of Terms of Performance Share Unit Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term
Incentive Plan, filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on February 5,
2020 (Commission File No. 1-4797) and incorporated herein by reference.
10(k)*
Form of Terms of Performance Cash Award Pursuant to the Illinois Tool Works Inc. 2015 Long-Term
Incentive Plan, filed as Exhibit 99.3 to the Company's Current Report on Form 8-K filed on February 5,
2020 (Commission File No. 1-4797) and incorporated herein by reference.
10(l)*
Form of Terms of Restricted Stock Unit Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term
Incentive Plan, filed as Exhibit 99.4 to the Company’s Current Report on Form 8-K filed on February 5,
2020 (Commission File No. 1-4797) and incorporated herein by reference.
10(m)*
Form of Stock Option Agreement Pursuant to the Illinois Tool Works Inc. 2024 Long-Term Incentive
Plan, filed herewith.
10(n)*
Form of Performance Share Unit Award Agreement Pursuant to the Illinois Tool Works Inc. 2024 Long-
Term Incentive Plan, filed herewith.
10(o)*
Form of Restricted Stock Unit Award Agreement Pursuant to the Illinois Tool Works Inc. 2024 Long-
Term Incentive Plan, filed herewith.
10(p)*
Illinois Tool Works Inc. Executive Contributory Retirement Income Plan as amended and restated,
effective as of January 1, 2010, filed as Exhibit 10 to the Company's Current Report on Form 8-K filed on
November 5, 2009 (Commission File No. 1-4797) and incorporated herein by reference.
10(q)*
Illinois Tool Works Inc. Nonqualified Pension Plan, effective January 1, 2008, as amended and restated,
filed as Exhibit 10(p) to the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 2008 (Commission File No. 1-4797) and incorporated herein by reference.
10(r)*
Illinois Tool Works Inc. 2011 Change-in-Control Severance Compensation Policy, filed as Exhibit 99.3 to
the Company's Current Report on Form 8-K filed on December 16, 2010 (Commission File No. 1-4797)
and incorporated herein by reference.
10(s)*
Illinois Tool Works Inc. Amended and Restated Directors' Deferred Fee Plan effective May 2, 2014, as
amended on May 8, 2015 and May 4, 2018, filed herewith.
10(t)*
First Amendment to the Illinois Tool Works Inc. Executive Contributory Retirement Income Plan dated
February 15, 2013, filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2013 (Commission File No. 1-4797) and incorporated herein by
reference.
19
Insider Trading Policies and Procedures, filed herewith
21
Subsidiaries and Affiliates of the Company, filed herewith
23
Consent of Independent Registered Public Accounting Firm, filed herewith
24
Powers of Attorney, filed herewith
31
Rule 13a-14(a) Certifications, filed herewith
32
Section 1350 Certification, filed herewith
97
Policy Relating to Recovery of Erroneously Awarded Compensation, filed as Exhibit 97 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (Commission File No.
001-04797) and incorporated herein by reference.
101.INS
iXBRL Instance Document**
101.SCH
iXBRL Taxonomy Extension Schema**
Exhibit
Number
Description
84
101.CAL
iXBRL Taxonomy Extension Calculation Linkbase**
101.DEF
iXBRL Taxonomy Extension Definition Linkbase**
101.LAB
iXBRL Taxonomy Extension Label Linkbase**
101.PRE
iXBRL Taxonomy Extension Presentation Linkbase**
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
Exhibit
Number
Description
*
Management contract or compensatory plan or arrangement.
**
The following financial information from Illinois Tool Works Inc.'s Annual Report on Form 10-K for the year ended
December 31, 2024, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Statement of Income,
(ii) Statement of Comprehensive Income, (iii) Statement of Changes in Stockholders' Equity (iv) Statement of
Financial Position, (v) Statement of Cash Flows and (vi) related Notes to Financial Statements.
ITEM 16. Form 10-K Summary
None.
85
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on this 14th day of February 2025.
ILLINOIS TOOL WORKS INC.
By:
/s/ CHRISTOPHER A. O'HERLIHY
Christopher A. O'Herlihy
President & Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities indicated on this 14th day of February 2025.
Signatures
Title
/s/ Christopher A. O'Herlihy
President & Chief Executive Officer, Director
Christopher A. O'Herlihy
(Principal Executive Officer)
/s/ Michael M. Larsen
Senior Vice President & Chief Financial Officer
Michael M. Larsen
(Principal Financial Officer)
/s/ Randall J. Scheuneman
Vice President & Chief Accounting Officer
Randall J. Scheuneman
(Principal Accounting Officer)
Daniel J. Brutto
Director
Susan Crown
Director
Darrell L. Ford
Director
Kelly J. Grier
Director
James W. Griffith
Director
Jay L. Henderson
Director
Jaime Irick
Director
Richard H. Lenny
Director
E. Scott Santi
Chairman of the Board
David B. Smith, Jr.
Director
Pamela B. Strobel
Director
By: /s/ CHRISTOPHER A. O'HERLIHY
(Christopher A. O'Herlihy, as Attorney-in-Fact)
Original powers of attorney authorizing Christopher A. O'Herlihy to sign the Company's Annual Report on Form 10-K and
amendments thereto on behalf of the above-named directors of the registrant have been filed with the Securities and
Exchange Commission as part of this Annual Report on Form 10-K (Exhibit 24).
86
ANNUAL REPORT APPENDIX
2012 ADJUSTED INCOME PER SHARE FROM CONTINUING OPERATIONS - DILUTED (UNAUDITED)
Twelve Months Ended
December 31, 2012
As reported in the 2013 Form 10-K
4.72
$
Decorative Surfaces net gain
1.34
Decorative Surfaces equity interest
(0.04)
Decorative Surfaces operating results
0.21
As adjusted for the Decorative Surfaces business
3.21
$
Automotive OEM: Lear Corporation, Aptiv PLC, Autoliv, Inc. and BorgWarner Inc.
Food Equipment: Middleby Corporation and Electrolux Professional AB
Welding: Kennametal Inc., Lincoln Electric Holdings, Inc. and ESAB Corporation
Construction Products: Carlisle Companies Incorporated, Masco Corporation, Stanley Black & Decker, Inc. and Simpson Manufacturing Co., Inc.
Specialty Products: Ball Corporation, Berry Global Group, Inc. and Amcor plc
Test & Measurement and Electronics: Ametek, Inc., Fortive Corporation, Mettler-Toledo International Inc., Spectris PLC, MKS Instruments,
Inc. and Moog Inc.
Polymers & Fluids: 3M Company, DuPont de Nemours, Inc., Huntsman Corporation and Dow Inc.
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
GAAP TO NON-GAAP RECONCILIATIONS (UNAUDITED)
ILLINOIS TOOL WORKS INC. and SUBSIDIARIES
SEGMENT PEER GROUP
Transfer Agent and Registrar
Questions regarding stock ownership, dividend payments,
or change of address should be directed to the company’s
transfer agent:
Broadridge Corporate Issuer Solutions, Inc.
P.O. Box 1342
Brentwood, NY 11717
http://shareholder.broadridge.com/ITW
Phone Toll Free: 888.829.7424
International: +1.720.399.2177
Common Stock
New York Stock Exchange
Symbol: ITW
Trademarks
Certain trademarks in this publication are owned or licensed by
Illinois Tool Works Inc. or its wholly owned subsidiaries.
Contact Investor Relations
For additional assistance, including media inquiries: 224.661.7431
or investorrelations@itw.com.
Shareholder
Information
Visit Us on the Web
www.itw.com
Committed to Sustainability
Learn about our activities, goals, and progress in our annual
Sustainability Report: www.itw.com/sustainability.
Stock and Dividend Action
Effective with the October 11, 2024 payment, the quarterly cash
dividend on ITW common stock was increased to $1.50 per share.
ITW’s annual dividend payment has increased for 61 consecutive
years, except during a period of government controls in 1971.
The ITW Common Stock Dividend Reinvestment Plan enables
registered shareholders to reinvest ITW dividends they receive
in additional shares of common stock of the company at no
additional cost. Participation in the plan is voluntary, and
shareholders may join or withdraw at any time. The plan also
allows for additional voluntary cash investments in any amount
from $100 to $10,000 per month. For a brochure and full details
of the program, please direct inquiries to the company’s transfer
agent, Broadridge Corporate Issuer Solutions, Inc.
155 Harlem Avenue Glenview, Illinois 60025 www.itw.com