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ILLINOIS TOOL WORKS INC

ITW
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Business Summary

Illinois Tool Works Inc. is a global manufacturer of a diversified range of industrial products and equipment with 88 divisions in 49 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. The Company'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's competitors include many regional or specialized companies, as well as large U.S. and non-U.S. companies or divisions of large companies. In virtually all segments, the Company differentiates its businesses from its competitors based on product innovation, product quality, brand preference and service delivery. 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. In the Welding segment, the Company competes globally with Lincoln Electric Holdings, Inc. and ESAB Corporation.

The Company generates revenue through the manufacture and sale of a diversified range of industrial products and equipment. The ITW Business Model is the Company's core source of value creation and is comprised of three unique elements: ITW's 80/20 Front-to-Back process, Customer-back Innovation, and ITW's Decentralized, Entrepreneurial Culture. The Company's innovation efforts have contributed to a portfolio of approximately 21,800 granted and pending patents. The Company's businesses primarily distribute their products directly to industrial manufacturers and through independent distributors.

The Automotive OEM segment produces components and fasteners for automotive-related applications, primarily serving the automotive original equipment manufacturers and tiers market. For 2025, this segment reported operating revenue of $3.288 billion and operating income of $693 million . The Food Equipment segment is a branded industry leader in commercial food equipment, serving the food service, food retail and food institutional/restaurant markets, and reported operating revenue of $2.699 billion and operating income of $753 million in 2025. The Test & Measurement and Electronics segment produces 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, and reported operating revenue of $2.825 billion and operating income of $694 million in 2025.

The Welding segment produces arc welding equipment, consumables and accessories for a wide array of industrial and commercial applications, and reported operating revenue of $1.890 billion and operating income of $621 million in 2025. The Polymers & Fluids segment produces engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance, and reported operating revenue of $1.765 billion and operating income of $493 million in 2025. The Construction Products segment is a branded supplier of innovative engineered fastening systems and solutions, serving the residential construction, renovation/remodel and commercial construction markets, and reported operating revenue of $1.820 billion and operating income of $550 million in 2025. The Specialty Products 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, and reported operating revenue of $1.775 billion and operating income of $553 million in 2025.

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. On August 5, 2024, the Company entered into a purchase agreement with affiliates of Clayton, Dubilier & Rice, LLC for the sale of the Company's noncontrolling equity interest in Wilsonart International Holdings LLC for $398 million , with proceeds net of transaction costs of $395 million , resulting in a pre-tax gain of $363 million . The Company repurchased approximately 6.0 million shares of its common stock in 2025 for approximately $1.5 billion . The Company increased the quarterly dividend on common stock from $1.50 to $1.61 per share in 2025, or from $6.00 to $6.44 per share on an annualized basis, and total cash dividends of approximately $1.8 billion were paid in 2025.

For the fiscal year 2025, total operating revenue was $16.044 billion , compared to $15.898 billion in 2024 and $16.107 billion in 2023. Operating income was $4.216 billion in 2025, compared to $4.264 billion in 2024 and $4.040 billion in 2023. Net income was $3.066 billion in 2025, compared to $3.488 billion in 2024 and $2.957 billion in 2023. Diluted earnings per share was $10.49 in 2025, compared to $11.71 in 2024 and $9.74 in 2023.

Business Outlook

The Company's focus in the Next Phase (2024-2030) is to build organic growth into a core ITW strength on par with the Company's world-class financial performance and operational capabilities. Customer-back Innovation is the most impactful driver to achieve high-quality organic growth through the cycle. The Company will sustain its foundational strengths built over the past decade, including the high-quality ITW Business Model practice, and will continue to drive 80/20 Front-to-Back practice excellence in every division in the Company, every day, further improving customer-facing performance and supporting additional structural margin expansion at the enterprise level.

The Company's growth strategy includes assessing selective high-quality acquisitions to supplement ITW's long-term growth potential. The Company completed three acquisitions in the Test & Measurement and Electronics segment during 2024 and 2025, including one on October 1, 2025 for $120 million , net of cash acquired. The Company also focuses on Customer-back Innovation, which is built on insight gathered from the 80/20 Front-to-Back process, to 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.

The Company expects to continue driving 80/20 Front-to-Back practice excellence in every division, which is expected to support additional structural margin expansion at the enterprise level. The Company's enterprise strategy initiatives, including product line simplification and strategic sourcing, are expected to improve future operating margins. The Strategic Sourcing initiative has delivered 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.

The Company's decentralized entrepreneurial culture allows it to be a fast adaptor to read, react, respond and evolve in the face of increasing volatility, risk and the pace of change in the global operating environment. The Company's ability to consistently execute and invest through the ups and downs of the business cycle is now a defining competitive advantage. The Company has 88 scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation.

The Company's capital allocation priorities 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 and an active share repurchase program. As of December 31, 2025, there were approximately $2.0 billion of authorized repurchases remaining under the 2023 Program. The Company increased the quarterly dividend on common stock from $1.50 to $1.61 per share in 2025, or from $6.00 to $6.44 per share on an annualized basis. Additions to plant and equipment were $419 million in 2025.

The Company faces headwinds from global economic conditions, including slower economic growth, financial market instability, supply chain disruptions, labor market challenges, rapid inflation, and armed conflicts. 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. On April 2, 2025, the United States government announced additional tariffs on goods imported to the U.S. from numerous countries, and in response, certain countries retaliated with additional counter-tariffs. The Company believes it is 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 the increased cost of tariffs through price increases, but current tariff policies have introduced additional uncertainty and may negatively impact overall demand from the Company's customers.

The Company's results are impacted by fluctuations in currency exchange rates, with over 50% of the Company's net sales derived from customers outside the United States. A significant fluctuation between the U.S. Dollar and other currencies could adversely impact the Company's operating income. The largest concentration of foreign sales occurs in Europe. The impact of foreign currencies against the U.S. Dollar in 2025 versus 2024 increased operating revenue and income before taxes by approximately $131 million and $29 million , respectively.

Risk Factors

The Company's results are impacted by global economic conditions, and downturns in the markets served could adversely affect its businesses. Over 50% of the Company's net sales are derived from customers outside the United States, and the Company currently operates in 49 countries, exposing it to political, economic and social risks including fluctuation in currency exchange rates, supply chain disruptions, and the imposition of duties and tariffs. The Company has significant goodwill and other intangible assets of approximately $5.7 billion as of December 31, 2025, and future impairment of these assets could have a material adverse impact on financial results. Raw material price increases and supply shortages could adversely affect results, as the Company may not be able to pass along increased raw material and component parts prices to its customers. The Company's defined benefit pension plans are subject to financial market risks, and a 25 basis point decrease in the discount rate would increase the present value of the U.S. primary pension plan obligation by approximately $21 million , while a 25 basis point decrease in the expected return on plan assets would increase the annual pension expense by approximately $3 million .

Management Priorities

Management's message emphasizes that the ITW Business Model and the Enterprise Strategy framework will be as formidable of a competitive advantage and performance differentiator in the Next Phase (2024-2030) as it has been over the last decade. 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. Management highlights that in 2025, the Company delivered solid financial results in a challenging and dynamic environment primarily due to the strong execution on enterprise initiatives as an outcome of the highly differentiated ITW Business Model. The strategic priorities for the period ahead include sustaining foundational strengths built over the past decade, driving 80/20 Front-to-Back practice excellence in every division, and leveraging Customer-back Innovation as the most impactful driver to achieve high-quality organic growth through the cycle.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — General
  2. [2] Item 1, Business — General
  3. [3] Item 1, Business — The ITW Business Model
  4. [4] Item 7, MD&A — Results of Operations by Segment, Automotive OEM
  5. [5] Item 7, MD&A — Results of Operations by Segment, Automotive OEM
  6. [6] Item 7, MD&A — Results of Operations by Segment, Food Equipment
  7. [7] Item 7, MD&A — Results of Operations by Segment, Food Equipment
  8. [8] Item 7, MD&A — Results of Operations by Segment, Test & Measurement and Electronics
  9. [9] Item 7, MD&A — Results of Operations by Segment, Test & Measurement and Electronics
  10. [10] Item 7, MD&A — Results of Operations by Segment, Welding
  11. [11] Item 7, MD&A — Results of Operations by Segment, Welding
  12. [12] Item 7, MD&A — Results of Operations by Segment, Polymers & Fluids
  13. [13] Item 7, MD&A — Results of Operations by Segment, Polymers & Fluids
  14. [14] Item 7, MD&A — Results of Operations by Segment, Construction Products
  15. [15] Item 7, MD&A — Results of Operations by Segment, Construction Products
  16. [16] Item 7, MD&A — Results of Operations by Segment, Specialty Products
  17. [17] Item 7, MD&A — Results of Operations by Segment, Specialty Products
  18. [18] Item 7, MD&A — Current Year Developments
  19. [19] Item 7, MD&A — Current Year Developments
  20. [20] Item 7, MD&A — Current Year Developments
  21. [21] Item 7, MD&A — Current Year Developments
  22. [22] Item 7, MD&A — Consolidated Results of Operations, 2025 compared to 2024
  23. [23] Item 7, MD&A — Consolidated Results of Operations, 2025 compared to 2024
  24. [24] Item 7, MD&A — Consolidated Results of Operations, 2025 compared to 2024
  25. [25] Item 8, Statement of Income
  26. [26] Item 8, Statement of Income
  27. [27] Item 8, Statement of Income
  28. [28] Item 8, Statement of Income
  29. [29] Item 8, Statement of Income
  30. [30] Item 8, Statement of Income
  31. [31] Item 8, Statement of Income
  32. [32] Item 8, Statement of Income
  33. [33] Item 8, Statement of Income
  34. [34] Item 8, Statement of Income
  35. [35] Item 8, Statement of Income
  36. [36] Item 8, Statement of Income
  37. [37] Item 7, MD&A — Current Year Developments
  38. [38] Item 1, Business — General
  39. [39] Item 7, MD&A — Stock Repurchase Programs
  40. [40] Item 7, MD&A — Cash Flow
  41. [41] Item 7, MD&A — Other Financial Highlights
  42. [42] Item 7, MD&A — Other Financial Highlights
  43. [43] Item 1, Business — General
  44. [44] Item 7, MD&A — Critical Accounting Estimates, Goodwill and Intangible Assets
  45. [45] Item 7, MD&A — Critical Accounting Estimates, Pension and Other Postretirement Benefits
  46. [46] Item 7, MD&A — Critical Accounting Estimates, Pension and Other Postretirement Benefits
  47. [47] Item 8, Statement of Income
  48. [48] Item 8, Statement of Income
  49. [49] Item 8, Statement of Income
  50. [50] Item 8, Statement of Income
  51. [51] Item 8, Statement of Income
  52. [52] Item 8, Statement of Income
  53. [53] Item 8, Statement of Income
  54. [54] Item 8, Statement of Income
  55. [55] Item 7, MD&A — Consolidated Results of Operations, 2025 compared to 2024
  56. [56] Item 7, MD&A — Consolidated Results of Operations, 2025 compared to 2024
  57. [57] Item 7, MD&A — Cash Flow
  58. [58] Item 7, MD&A — Cash Flow
  59. [59] Item 7, MD&A — Debt
  60. [60] Item 7, MD&A — Debt
  61. [61] Item 7, MD&A — Other Financial Highlights
  62. [62] Item 7, MD&A — Other Financial Highlights
  63. [63] Item 7, MD&A — Other Financial Highlights
  64. [64] Item 7, MD&A — Other Financial Highlights
  65. [65] Item 7, MD&A — Other Financial Highlights
  66. [66] Item 7, MD&A — Current Year Developments
  67. [67] Item 7, MD&A — Current Year Developments
  68. [68] Item 7, MD&A — Results of Operations by Segment, Automotive OEM
  69. [69] Item 7, MD&A — Results of Operations by Segment, Food Equipment
  70. [70] Item 7, MD&A — Results of Operations by Segment, Test & Measurement and Electronics
  71. [71] Item 7, MD&A — Results of Operations by Segment, Welding
  72. [72] Item 7, MD&A — Results of Operations by Segment, Polymers & Fluids
  73. [73] Item 7, MD&A — Results of Operations by Segment, Construction Products
  74. [74] Item 7, MD&A — Results of Operations by Segment, Specialty Products

Analysis on 6/8/2026