itw-20260331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

	For the quarterly period ended	March 31, 2026

	OR

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

	For the transition period from _______________ to _______________

Commission File Number: 1-4797

ILLINOIS TOOL WORKS INC.

(Exact name of registrant as specified in its charter)

Delaware

36-1258310

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

155 Harlem Avenue

Glenview

60025

(Address of principal executive offices)

(Zip Code)

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

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


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	ITW	New York Stock Exchange
0.625% 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

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

Yes x No o

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

Yes x No o

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


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

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

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

Yes ☐ No ☒

The number of shares of registrant's common stock, $0.01 par value, outstanding at March 31, 2026: 287.7 million


	Table of Contents

	PART I - Financial Information
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	32

	PART II - Other Information

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6.	Exhibits	34

Signatures		35

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

Illinois Tool Works Inc. and Subsidiaries

Statement of Income (Unaudited)


	Three Months Ended
	March 31,
In millions except per share amounts	2026		2025
Operating Revenue	$	4,016	$	3,839
Cost of revenue	2,256		2,161
Selling, administrative, and research and development expenses	722		706
Amortization and impairment of intangible assets	18		21
Operating Income	1,020		951
Interest expense	(73)		(68)
Other income (expense)	20		12
Income Before Taxes	967		895
Income Taxes	199		195
Net Income	$	768	$	700

Net Income Per Share:
Basic	$	2.66	$	2.39
Diluted	$	2.66	$	2.38

Shares of Common Stock Outstanding During the Period:
Average	288.3		293.6
Average assuming dilution	289.1		294.5

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Comprehensive Income (Unaudited)


	Three Months Ended
	March 31,
In millions	2026		2025
Net Income	$	768	$	700

Foreign currency translation adjustments, net of tax	24		—
Pension and other postretirement benefit adjustments, net of tax	1		(1)
Other comprehensive income (loss)	25		(1)

Comprehensive Income	$	793	$	699

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Financial Position (Unaudited)


In millions except per share amounts	March 31, 2026		December 31, 2025
Assets
Current Assets:
Cash and equivalents	$	827	$	851
Trade receivables	3,380		3,227
Inventories	1,726		1,659
Prepaid expenses and other current assets	402		463
Total current assets	6,335		6,200

Net plant and equipment	2,230		2,230
Goodwill	5,083		5,098
Intangible assets	574		591
Deferred income taxes	505		519
Other assets	1,537		1,510
	$	16,264	$	16,148

Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt	$	2,545	$	2,286
Accounts payable	609		522
Accrued expenses	1,534		1,636
Cash dividends payable	463		465
Income taxes payable	180		217
Total current liabilities	5,331		5,126

Noncurrent Liabilities:
Long-term debt	6,603		6,683
Deferred income taxes	158		154
Other liabilities	942		959
Total noncurrent liabilities	7,703		7,796

Stockholders' Equity:
Common stock (Authorized- 700.0 shares; par value of $0.01 per share):
Issued- 550.0 shares in 2026 and 2025 Outstanding- 287.7 shares in 2026 and 288.6 shares in 2025	6		6
Additional paid-in-capital	1,817		1,771
Retained earnings	30,454		30,150
Common stock held in treasury	(27,246)		(26,875)
Accumulated other comprehensive income (loss)	(1,802)		(1,827)
Noncontrolling interest	1		1
Total stockholders' equity	3,230		3,226
	$	16,264	$	16,148

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Changes in Stockholders' Equity (Unaudited)


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

Three Months Ended March 31, 2026
Balance at December 31, 2025	$	6	$	1,771	$	30,150	$	(26,875)	$	(1,827)	$	1	$	3,226
Net income	—		—		768		—		—		—		768
Common stock issued for stock-based compensation	—		28		—		6		—		—		34
Stock-based compensation expense	—		18		—		—		—		—		18
Repurchases of common stock	—		—		—		(375)		—		—		(375)
Excise tax on repurchases of common stock	—		—		—		(2)		—		—		(2)
Dividends declared ($1.61 per share)	—		—		(464)		—		—		—		(464)
Other comprehensive income (loss)	—		—		—		—		25		—		25

Balance at March 31, 2026	$	6	$	1,817	$	30,454	$	(27,246)	$	(1,802)	$	1	$	3,230

Three Months Ended March 31, 2025
Balance at December 31, 2024	$	6	$	1,669	$	28,893	$	(25,375)	$	(1,877)	$	1	$	3,317
Net income	—		—		700		—		—		—		700
Common stock issued for stock-based compensation	—		20		—		7		—		—		27
Stock-based compensation expense	—		16		—		—		—		—		16
Repurchases of common stock	—		—		—		(375)		—		—		(375)
Excise tax on repurchases of common stock	—		—		—		(3)		—		—		(3)
Dividends declared ($1.50 per share)	—		—		(439)		—		—		—		(439)
Other comprehensive income (loss)	—		—		—		—		(1)		—		(1)

Balance at March 31, 2025	$	6	$	1,705	$	29,154	$	(25,746)	$	(1,878)	$	1	$	3,242

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Cash Flows (Unaudited)


	Three Months Ended
	March 31,
In millions	2026		2025
Cash Provided by (Used for) Operating Activities:
Net income	$	768	$	700
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	81		74
Amortization and impairment of intangible assets	18		21
Change in deferred income taxes	1		(17)
Net provision for (recoveries of) uncollectible accounts	1		2
(Income) loss from investments	1		1
(Gain) loss on sale of plant and equipment	—		—

Stock-based compensation expense	18		16
Other non-cash items, net	2		3
Change in assets and liabilities, net of acquisitions and divestitures:
(Increase) decrease in-
Trade receivables	(165)		(120)
Inventories	(75)		(37)
Prepaid expenses and other assets	(12)		(65)
Increase (decrease) in-
Accounts payable	91		64
Accrued expenses and other liabilities	(100)		(123)
Income taxes	(6)		72
Other, net	—		1
Net cash provided by operating activities	623		592
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents)	—		2
Additions to plant and equipment	(95)		(96)
Proceeds from investments	—		—
Proceeds from sale of plant and equipment	2		3

Other, net	(6)		(1)
Net cash provided by (used for) investing activities	(99)		(92)
Cash Provided by (Used for) Financing Activities:
Cash dividends paid	(465)		(441)
Issuance of common stock	52		44
Repurchases of common stock	(375)		(375)
Net proceeds from (repayments of) debt with original maturities of three months or less	259		202


Other, net	(18)		(18)
Net cash provided by (used for) financing activities	(547)		(588)
Effect of Exchange Rate Changes on Cash and Equivalents	(1)		13
Cash and Equivalents:
Increase (decrease) during the period	(24)		(75)
Beginning of period	851		948
End of period	$	827	$	873
Supplementary Cash Flow Information:
Cash Paid During the Period for Interest	$	59	$	53
Cash Paid During the Period for Income Taxes, Net of Refunds	$	205	$	139

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

Illinois Tool Works Inc. and Subsidiaries

Notes to Financial Statements (Unaudited)

(1) Significant Accounting Policies

Financial Statements— The unaudited financial statements included herein have been prepared by Illinois Tool Works Inc. and Subsidiaries (the "Company"). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. Interim results are not necessarily indicative of results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements and notes to financial statements included in the Company's 2025 Annual Report on Form 10-K. Certain reclassifications of prior year data have been made to conform with current year reporting.

New Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (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 ending 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 October 1, 2025, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $120 million, net of cash acquired, and subject to certain closing adjustments. The allocation of purchase price for this acquisition will be completed as soon as practicable, but no later than one year from the acquisition date. This acquisition was not material to the Company's results of operations, financial position or cash flows.

(3) Operating Revenue

The Company's 88 diversified operating divisions are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. Operating revenue by product category, which is consistent with the Company's segment presentation, for the three months ended March 31, 2026 and 2025 was as follows:


	Three Months Ended
	March 31,
In millions	2026		2025
Automotive OEM	$	820	$	786
Food Equipment	637		627
Test & Measurement and Electronics	715		652
Welding	507		472
Polymers & Fluids	452		429
Construction Products	458		443
Specialty Products	431		435
Total segments	4,020		3,844
Intersegment revenue	(4)		(5)
Total operating revenue	$	4,016	$	3,839

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

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

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

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

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

•warewashing equipment;

•cooking equipment, including ovens, ranges and broilers;

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

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

•kitchen exhaust, ventilation and pollution control systems; and

•food equipment service, maintenance and repair.

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

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

•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, airlines, general industrial, 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.

(4) Income Taxes

On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted in the United States, which extended and modified certain provisions of the 2017 Tax Cuts and Jobs Act (the "TCJA"). The provisions of the OBBBA did not have a material impact on the Company's operating results, financial position or cash flows for the three months ended March 31, 2026.

The Company's effective tax rate for the three months ended March 31, 2026 and 2025 was 20.6% and 21.7%, respectively. The effective tax rate for the three months ended March 31, 2026 included a discrete tax benefit of $34 million primarily related to the resolution of a U.S. tax audit. The effective tax rate for the three months ended March 31, 2025 included a discrete tax benefit of $21 million related to the reversal of a valuation allowance on net operating loss carryforwards. The effective tax rates also included discrete tax benefits related to excess tax benefits from stock-based compensation of $4 million for both the three months ended March 31, 2026 and 2025.

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 change the amount of the unrecognized tax benefits in future periods. The Company has recorded its best estimate of the potential exposure for these issues.

(5) Net Income Per Share

Net income per basic share is computed by dividing net income by the weighted-average number of shares outstanding for the period. Net income per diluted share is computed by dividing net income by the weighted-average number of shares assuming dilution for stock options and restricted stock units. Dilutive shares reflect the potential additional shares that would be outstanding if the dilutive stock options outstanding were exercised and the unvested restricted stock units vested during the period. The computation of net income per share for the three months ended March 31, 2026 and 2025 is as follows:


	Three Months Ended
	March 31,
In millions except per share amounts	2026		2025
Net Income	$	768	$	700
Net income per share—Basic:
Weighted-average common shares	288.3		293.6
Net income per share—Basic	$	2.66	$	2.39
Net income per share—Diluted:
Weighted-average common shares	288.3		293.6
Effect of dilutive stock options and restricted stock units	0.8		0.9
Weighted-average common shares assuming dilution	289.1		294.5
Net income per share—Diluted	$	2.66	$	2.38

Options that were considered antidilutive were not included in the computation of diluted net income per share. There were 0.5 million and 0.2 million antidilutive options outstanding for the three months ended March 31, 2026 and 2025, respectively.

(6) Inventories

Inventories as of March 31, 2026 and December 31, 2025 were as follows:


In millions	March 31, 2026		December 31, 2025
Raw material	$	638	$	640
Work-in-process	210		191
Finished goods	878		828
Total inventories	$	1,726	$	1,659

(7) Pension and Other Postretirement Benefits

Pension and other postretirement benefit costs for the three months ended March 31, 2026 and 2025 were as follows:


	Three Months Ended
	March 31,
	Pension				Other Postretirement Benefits
In millions	2026		2025		2026		2025
Components of net periodic benefit cost:
Service cost	$	7	$	8	$	1	$	1
Interest cost	21		23		5		6
Expected return on plan assets	(32)		(32)		(7)		(7)
Amortization of actuarial loss (gain)	4		1		(2)		(2)


Total net periodic benefit cost (income)	$	—	$	—	$	(3)	$	(2)

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

The Company expects to contribute approximately $24 million to its pension plans and $31 million to its other postretirement benefit plans in 2026. As of March 31, 2026, contributions of $14 million to pension plans and $6 million to other postretirement benefit plans have been made.

(8) Debt

Total debt as of March 31, 2026 and December 31, 2025 was as follows:


In millions	March 31, 2026		December 31, 2025
Short-term debt	$	2,545	$	2,286
Long-term debt	6,603		6,683
Total debt	$	9,148	$	8,969

Short-term debt included commercial paper of $1.5 billion and $1.3 billion as of March 31, 2026 and December 31, 2025, respectively. The weighted-average interest rate on commercial paper as of March 31, 2026 and December 31, 2025 was 3.81% and 3.84%, respectively. Short-term debt also included $999 million as of March 31, 2026 and December 31, 2025 related to the 2.65% notes due November 15, 2026, which were reclassified from Long-term debt to Short-term debt in the fourth quarter of 2025.

On February 24, 2025, the Company entered into an amendment to the Euro-denominated credit agreement entered into on May 5, 2023 (the "Euro Credit Agreement") to extend the termination date from April 30, 2025 to February 28, 2027, with an option to further extend the termination date to September 15, 2027. The amendment also decreased the interest rate spread applicable to the loans from 0.75% to 0.70% and removed the option for a one-month interest period. As of March 31, 2026, the Company had $866 million outstanding under the Euro Credit Agreement with an interest rate of 2.71%, which was included in Long-term debt as the Company intends to exercise its option to extend the termination date. As of December 31, 2025, the Company had $881 million outstanding under the Euro Credit Agreement with an interest rate of 2.77%, which was included in Long-term debt.

On February 20, 2026, the Company entered into a $3.0 billion, five-year revolving credit facility with a termination date of February 20, 2031, which is available to provide additional liquidity, including to support the potential issuances of commercial paper. This agreement replaced the existing $3.0 billion, five-year revolving credit facility with a termination date of October 21, 2027. No amounts were outstanding under the revolving credit facility as of March 31, 2026.

The approximate fair value and related carrying value of the Company's total long-term debt, including current maturities of long-term debt presented as short-term debt, as of March 31, 2026 and December 31, 2025 were as follows:


In millions	March 31, 2026		December 31, 2025
Fair value	$	7,290	$	7,451
Carrying value	7,602		7,682

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.

(9) Accumulated Other Comprehensive Income (Loss)

The following table summarizes changes in Accumulated other comprehensive income (loss) for the three months ended March 31, 2026 and 2025:


	Three Months Ended
	March 31,
In millions	2026		2025
Beginning balance	$	(1,827)	$	(1,877)

Foreign currency translation adjustments during the period	43		(47)

Income taxes	(19)		47
Total foreign currency translation adjustments, net of tax	24		—


Pension and other postretirement benefit adjustments reclassified to income	2		(1)
Income taxes	(1)		—
Total pension and other postretirement benefit adjustments, net of tax	1		(1)

Ending balance	$	(1,802)	$	(1,878)

Pension and other postretirement benefit adjustments reclassified to income related primarily to the amortization of actuarial gains and losses. Refer to Note 7. Pension and Other Postretirement Benefits for additional information.

The outstanding balances of the Euro notes issued in May 2014, May 2015, June 2019 and May 2024, and the Euro term loan under the Euro Credit Agreement are designated as hedges of a portion of the Company’s 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). The amount of pre-tax gain (loss) related to this debt recorded in Other comprehensive income (loss) was a gain of $82 million and a loss of $196 million for the three months ended March 31, 2026 and 2025, respectively. The carrying value of the outstanding balance of Euro-denominated debt that was designated as a net investment hedge as of March 31, 2026 and December 31, 2025 was $4.9 billion and $5.0 billion, respectively. Refer to Note 8. Debt for additional information regarding the Company’s outstanding Euro debt.

As of March 31, 2026 and 2025, the ending balance of Accumulated other comprehensive income (loss) consisted of after-tax cumulative translation adjustment losses of $1.6 billion in both periods, and after-tax unrecognized pension and other postretirement benefit costs of $236 million and $267 million, respectively.

(10) 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:

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.

Construction Products— This segment is a branded supplier of innovative engineered fastening systems and solutions.

The Company's chief operating decision maker ("CODM") is the President & Chief Executive Officer. The CODM primarily uses operating revenue, 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.

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.

Segment operating revenue, significant expenses and operating income for the three months ended March 31, 2026 and 2025 were as follows:


	Three Months Ended
	March 31,
In millions	2026		2025
Operating revenue:
Automotive OEM	$	820	$	786
Food Equipment	637		627
Test & Measurement and Electronics	715		652
Welding	507		472
Polymers & Fluids	452		429
Construction Products	458		443
Specialty Products	431		435
Total segments	4,020		3,844
Intersegment revenue	(4)		(5)
Operating Revenue	$	4,016	$	3,839
Variable cost of revenue:
Automotive OEM	$	442	$	435
Food Equipment	298		284
Test & Measurement and Electronics	309		282
Welding	227		214
Polymers & Fluids	210		205
Construction Products	206		200
Specialty Products	195		201
Total segments	$	1,887	$	1,821
Overhead expenses:
Automotive OEM	$	205	$	200
Food Equipment	182		177
Test & Measurement and Electronics	242		231
Welding	117		105
Polymers & Fluids	116		110
Construction Products	117		113
Specialty Products	101		99
Total segments	$	1,080	$	1,035
Operating income:
Automotive OEM	$	173	$	151
Food Equipment	157		166
Test & Measurement and Electronics	164		139
Welding	163		153
Polymers & Fluids	126		114
Construction Products	135		130
Specialty Products	135		135
Total segments	1,053		988
Unallocated	(33)		(37)
Operating Income	1,020		951
Interest expense	(73)		(68)
Other income (expense)	20		12
Income Before Taxes	$	967	$	895

Segment depreciation and amortization and impairment of intangible assets for the three months ended March 31, 2026 and 2025 was as follows:


	Three Months Ended
	March 31,
In millions	2026		2025
Automotive OEM	$	35	$	32
Food Equipment	10		10
Test & Measurement and Electronics	18		18
Welding	9		8
Polymers & Fluids	9		10
Construction Products	8		8
Specialty Products	10		9
Total	$	99	$	95

Asset and capital expenditure information by segment is not regularly provided to or reviewed by the CODM and is therefore not disclosed.

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

INTRODUCTION

Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified range of industrial products and equipment. As of December 31, 2025, the Company had 88 divisions with approximately 43,000 people in 49 countries.

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 serves as the Company's primary competitive advantage and defines the framework through which ITW generates sustainable value for its shareholders. The ITW Business Model is comprised of three unique elements:

•80/20 Front-to-Back defines how the Company operates. It is a unique set of proprietary tools and methodologies that ITW divisions utilize to structure and operate their businesses to (a) maximize the performance, execution, and value-add provided to their largest and most profitable customers (the "80"), and (b) minimize the costs, complexity, and distractions associated with serving less profitable accounts (the "20"). Through the application of the 80/20 Front-to-Back process, ITW divisions deliver best-in-class customer-facing execution, high-quality organic growth, and superior profitability and return on capital performance.

•Customer-Back Innovation ("CBI") drives the Company's approach to innovation and development. ITW innovates from the customer back, rather than from a centralized research and development center out. ITW divisions partner with their key customers to create unique solutions that solve difficult technical challenges and improve business performance. This disciplined, repeatable process directs innovation efforts toward high-growth markets with solid long-term fundamentals.

•ITW's Decentralized, Entrepreneurial Culture is the key to the Company's execution. Divisions are clear on the expectations of the ITW Business Model, strategy, and values. Within this framework, business teams are empowered to make decisions and customize their approach to maximize the relevance and impact of the ITW Business Model for their specific customers and end markets. This "flexibility within the framework" culture encourages an ownership mindset and accountability, enabling the Company to consistently deliver differentiated results.

ENTERPRISE STRATEGY: LEVERAGING THE ITW BUSINESS MODEL TO ITS FULL POTENTIAL

Since the initiation of the Enterprise Strategy in 2012, the entire organization has focused on utilizing the ITW Business Model to its full potential to deliver solid growth with best-in-class margins and returns. To execute the strategy, the Company undertook a complete review of its performance, focusing on its businesses that delivered consistent above-market growth with best-in-class margins and returns, and developed a framework to replicate that performance across its operations. ITW determined that high-quality 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 88 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.

NEXT PHASE: 2024 - 2030

In the Next Phase of the Company's Enterprise Strategy, the ITW Business Model remains the Company's core competitive advantage and a powerful performance differentiator, uniquely positioning the Company to navigate a global operating environment characterized by increasing volatility and a rapid pace of change. The 80/20 Front-To-Back process provides the strategic clarity to deliver high-quality organic growth and superior customer service, profitability and returns on capital. Through Customer-Back Innovation, the Company innovates technical solutions to solve critical customer challenges with higher effectiveness and lower risk. The Company's decentralized entrepreneurial culture allows it to be a "fast adaptor," capable of reading and reacting to market shifts with agility. Furthermore, the Company's ability to execute and invest consistently through all phases of the business cycle has become a defining strength.

As the Company advances through this Next Phase, it is continuing to improve the quality of practice in its 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 four percent or more through the cycle is the Company's highest priority in the Next Phase. 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.

TERMS USED BY ITW

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

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

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

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

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

Unless otherwise stated, the changes in financial results in the consolidated results of operations and the results of operations by segment represent the current year period versus the comparable period in the prior year. The following discussion of operating results should be read in conjunction with Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's 2025 Annual Report on Form 10-K.

CONSOLIDATED RESULTS OF OPERATIONS

During the first quarter of 2022, Russian military forces invaded Ukraine. In response, the United States and several other countries imposed economic and other sanctions on Russia. The Company has four immaterial Russian subsidiaries with net assets of approximately $38 million as of March 31, 2026. The revenue for these four subsidiaries for the three months ended March 31, 2026 was approximately $6 million. These subsidiaries are not material to the Company's results of operations or financial position.

On April 2, 2025, the United States government announced additional tariffs on goods imported to the U.S. from numerous countries. In response, certain countries retaliated with additional counter-tariffs or negotiated with the U.S. government regarding tariffs. Tariffs on goods from many countries became effective on August 1, 2025. On February 20, 2026, the U.S. Supreme Court invalidated many of the tariffs imposed under the International Emergency Economic Powers Act (the "IEEPA"), resulting in the termination of many tariffs imposed in 2025. Following this decision, a new temporary 10 percent global tariff was imposed under the Trade Act, which may remain in effect up to 150 days. The Company believes that it continues to be well positioned to minimize the impact of these tariffs because its businesses generally manufacture products in the markets where they are sold and the Company expects to recover any increased cost due to tariffs through price increases. However, current tariff policies have introduced additional uncertainty and may negatively impact overall demand from the Company's customers. The Company continues to assess the impact of the tariffs and actions that can be taken to moderate and/or minimize their effects on the Company.

In an uncertain external environment, the Company delivered solid financial results in the first quarter of 2026 primarily due to the continued successful execution of enterprise initiatives and continued focus on the highly differentiated ITW Business Model.

Operating Revenue

Refer to the "Results of Operations for Total Company" and the "Results of Operations by Segment" sections for discussion of changes in operating revenue for the first quarter of 2026 compared to 2025.

Operating Expenses


	Three Months Ended
	March 31,
Dollars in millions	2026			2025
Operating Revenue	$	4,016		$	3,839
Cost of revenue	$	2,256		$	2,161
Percent of operating revenue	56.2		%	56.3		%
Selling, administrative, and research and development expenses	$	722		$

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