With a market cap of $71.4 billion, Illinois Tool Works Inc. (ITW) is a global manufacturer of a diversified range of industrial products and equipment. The company operates across seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products, serving customers worldwide through both direct sales and independent distributors. The Glenview, Illinois-based company is expected to release its fiscal Q3 2025 results ...

Core Insights - Illinois Tool Works Inc. (ITW) will release its third quarter 2025 results on October 24, 2025, at 7:00 a.m. CDT, followed by a webcast at 9:00 a.m. CDT [1] - The company reported revenue of $15.9 billion in 2024, positioning itself as a leader in the global multi-industrial manufacturing sector [2] Company Overview - ITW is a Fortune 300 company with a decentralized and entrepreneurial culture, employing approximately 44,000 colleagues worldwide [2] - The company operates in seven industry-leading segments, utilizing the ITW Business Model to achieve solid growth and best-in-class margins [2] Investor Relations - Erin Linnihan is the contact for investor relations, available at 224.661.7431 [3]

Core Insights - Illinois Tool Works Inc. (ITW) is experiencing positive momentum in the Food Equipment segment, driven by growth in institutional, restaurant, and food retail markets in North America, as well as strong demand in the European warewashing equipment market [1] - The Automotive OEM segment benefits from increased auto build rates and strength in the electric vehicles market in China, alongside market penetration gains in Europe [2] - The Welding segment is supported by solid momentum in equipment demand in the Asia Pacific and Middle East markets [2] Financial Performance - ITW's focus on cost efficiency and enterprise initiatives is enhancing margin performance, contributing 130 basis points to the operating margin in Q2 2025, with expectations of an operating margin in the range of 26–27% for 2025 [3] - Enterprise initiatives are projected to contribute approximately 100 basis points to the operating margin in 2025 [3] - The company returned $1.63 billion to shareholders through dividends and share buybacks in the first half of 2025, with a 7% increase in dividends to $1.61 per share in August 2025 [4][8] Challenges - The Polymers & Fluids segment is facing persistent weakness due to lower demand in North America and Europe [5] - The automotive aftermarket businesses are experiencing softness due to declining demand in North America [5] - The Test & Measurement and Electronics segment is affected by declining demand in the general industrial market [5] Market Presence - ITW has a significant international presence, making its financial performance susceptible to risks such as foreign currency exchange rate fluctuations and interest rate changes [6] - The company faces competition from peers like Gates Industrial Corporation plc, Helios Technologies, Inc., and Crane Company [7]

Group 1 - Illinois Tool Works Inc. (ITW) is recognized as one of the 11 Best Value Dividend Stocks to buy currently [1] - The company operates in the global industrial manufacturing sector across seven segments, including automotive components and food service equipment, utilizing an "80/20 Front-to-Back" strategy to focus on profitable customers and products [2] - ITW has prioritized efficiency, customer-driven innovation, and disciplined portfolio management, divesting non-core units to enhance focus and allowing divisions to tailor solutions to customer needs [3] Group 2 - On August 4, ITW announced a 7.3% increase in its quarterly dividend to $1.61 per share, extending its dividend growth streak to 53 years, which positions it as a strong value stock with dividends [4] - As of September 26, ITW's stock has a dividend yield of 2.47% [4]

Core Insights - Illinois Tool Works, Inc. (ITW) has been recognized in the "Dividend Channel S.A.F.E. 25" list, indicating strong dividend characteristics including a 2.3% yield and a history of at least two decades of dividend growth [1][3]. Company Overview - ITW operates in the Industrial Machinery & Equipment sector, alongside companies such as Deere & Co. and Lam Research Corp [6]. Dividend Information - The annualized dividend for ITW is $6 per share, distributed quarterly, with the most recent dividend ex-date on March 31, 2025 [4]. - ITW's consistent dividend increases and flawless history of never missing or lowering dividends contribute to its strong dividend ranking [3]. ETF Involvement - ITW is included in the iShares S&P 1500 Index ETF (ITOT) and represents 0.97% of the SPDR S&P Dividend ETF (SDY), which holds approximately $197.5 million worth of ITW shares [2].

Group 1 - The article discusses the investment opportunities related to Illinois Tool Works (NYSE: ITW), highlighting that it was last covered in the summer of 2018 when the company was considered undervalued [1][2]. - The investing group "Value In Corporate Events" focuses on major corporate events such as earnings reports, IPOs, and mergers & acquisitions, aiming to identify the best investment opportunities [2][3].

Core Viewpoint - The article highlights two companies, Dover and Illinois Tool Works, which have maintained a long-standing history of increasing their dividends, qualifying them as Dividend Kings, having raised their payouts for at least 50 consecutive years [1][2]. Group 1: Dover - Dover announced a dividend increase of less than 1%, raising its quarterly payout to $0.52 per share, marking the 70th consecutive year of dividend enhancement [4]. - The company reported a 5% year-over-year revenue growth to $2.05 billion and a 16% increase in non-GAAP net income to $337 million for the second quarter [5]. - Dover is focusing on higher-margin products and cost management, and it has also made an acquisition of Site IQ to enhance its fueling solutions unit [6]. - Despite its strong management and Dividend King status, Dover's low dividend yield of under 1.2% and concerns about sustaining growth rates suggest it may not be a compelling investment [7]. Group 2: Illinois Tool Works - Illinois Tool Works raised its quarterly dividend by 7%, increasing it to $1.61 per share, reflecting its diversified operations across various industrial sectors [8]. - The company experienced only a 1% year-over-year revenue increase to $4.1 billion, with adjusted net income also declining slightly [9]. - ITW's revenue guidance indicates a potential maximum growth of 3% for the year, with ongoing pricing actions to mitigate tariff and foreign exchange impacts, suggesting a defensive posture rather than aggressive growth [10]. - The new dividend yield for ITW stands at approximately 2.5%, making it an attractive income stock despite limited expectations for significant fundamental growth [11].

PART I – FINANCIAL INFORMATION [ITEM 1. Financial Statements](index=3&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited interim financial statements and their accompanying notes, providing an overview of the company's financial performance and position [Statement of Income (Unaudited)](index=3&type=section&id=Statement%20of%20Income%20%28Unaudited%29) This statement summarizes the company's revenues, expenses, and net income for the reported periods Statement of Income Highlights (Unaudited) | In millions except per share amounts | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating Revenue | $4,053 | $4,027 | $7,892 | $8,000 | | Operating Income | $1,068 | $1,054 | $2,019 | $2,181 | | Net Income | $755 | $759 | $1,455 | $1,578 | | Diluted Net Income Per Share | $2.58 | $2.54 | $4.95 | $5.27 | [Statement of Comprehensive Income (Unaudited)](index=4&type=section&id=Statement%20of%20Comprehensive%20Income%20%28Unaudited%29) This statement details net income and other comprehensive income components for the reported periods Statement of Comprehensive Income Highlights (Unaudited) | In millions | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $755 | $759 | $1,455 | $1,578 | | Other comprehensive income (loss) | $10 | $(41) | $9 | $(91) | | Comprehensive Income | $765 | $718 | $1,464 | $1,487 | [Statement of Financial Position (Unaudited)](index=5&type=section&id=Statement%20of%20Financial%20Position%20%28Unaudited%29) This statement provides a snapshot of the company's assets, liabilities, and equity at specific dates Statement of Financial Position Highlights (Unaudited) | In millions | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Total current assets | $6,234 | $5,856 | | Total assets | $16,048 | $15,067 | | Total current liabilities | $3,932 | $4,308 | | Total noncurrent liabilities | $8,905 | $7,442 | | Total stockholders' equity | $3,211 | $3,317 | [Statement of Changes in Stockholders' Equity (Unaudited)](index=6&type=section&id=Statement%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Unaudited%29) This statement outlines changes in stockholders' equity resulting from net income, stock repurchases, and dividends Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | In millions | Total Stockholders' Equity | | :-------------------------------- | :------------------------- | | Balance at December 31, 2024 | $3,317 | | Net income | $1,455 | | Repurchases of common stock | $(750) | | Dividends declared | $(877) | | Other comprehensive income (loss) | $9 | | Other, net | $57 | | Balance at June 30, 2025 | $3,211 | [Statement of Cash Flows (Unaudited)](index=7&type=section&id=Statement%20of%20Cash%20Flows%20%28Unaudited%29) This statement reports cash inflows and outflows from operating, investing, and financing activities Statement of Cash Flows Highlights (Six Months Ended June 30) | In millions | 2025 | 2024 | | :-------------------------------------- | :-------- | :-------- | | Net cash provided by operating activities | $1,142 | $1,276 | | Net cash provided by (used for) investing activities | $(184) | $(321) | | Net cash provided by (used for) financing activities | $(1,151) | $(1,125) | | Increase (decrease) in cash and equivalents | $(160) | $(203) | | Cash and Equivalents, End of period | $788 | $862 | [Notes to Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Financial%20Statements%20%28Unaudited%29) This section provides additional details and explanations for the financial statements [(1) Significant Accounting Policies](index=8&type=section&id=%281%29%20Significant%20Accounting%20Policies) This note details key accounting principles and recent changes - The Company changed its inventory costing method from LIFO to FIFO for certain U.S. businesses in Q1 2024 to improve consistency and comparability, resulting in a pre-tax cumulative effect of **$117 million reduction in Cost of revenue** in Q1 2024[26](index=26&type=chunk)[27](index=27&type=chunk)[91](index=91&type=chunk) - New FASB guidance on segment disclosures was adopted retrospectively for annual reporting beginning December 31, 2024, with no impact on financial results; further guidance on income tax disclosures (effective 2025) and income statement expense disaggregation (effective 2027) are being assessed[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) [(2) Acquisitions](index=8&type=section&id=%282%29%20Acquisitions) This note summarizes recent acquisition activities - In 2024, the Company completed two acquisitions in the Test & Measurement and Electronics segment for a total of **$116 million** (net of cash acquired), which were not material to the Company's financial results[31](index=31&type=chunk)[90](index=90&type=chunk) [(3) Operating Revenue](index=9&type=section&id=%283%29%20Operating%20Revenue) This note breaks down operating revenue by segment and outlines recognition policies Operating Revenue by Segment (In millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Automotive OEM | $845 | $815 | $1,631 | $1,631 | | Food Equipment | $680 | $667 | $1,307 | $1,298 | | Test & Measurement and Electronics | $686 | $678 | $1,338 | $1,374 | | Welding | $479 | $466 | $951 | $942 | | Polymers & Fluids | $438 | $454 | $867 | $886 | | Construction Products | $473 | $504 | $916 | $992 | | Specialty Products | $455 | $449 | $890 | $889 | | Total operating revenue | $4,053 | $4,027 | $7,892 | $8,000 | - The Company's seven segments have distinct product offerings, end markets, and revenue recognition policies, generally recognizing revenue at shipment, with exceptions for installation or highly customized systems[32](index=32&type=chunk)[33](index=33&type=chunk)[35](index=35&type=chunk)[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk)[42](index=42&type=chunk)[44](index=44&type=chunk) [(4) Income Taxes](index=11&type=section&id=%284%29%20Income%20Taxes) This note discusses effective tax rates and significant tax events Effective Tax Rates | Period | 2025 | 2024 | | :------------------------- | :---- | :---- | | Three months ended June 30 | 24.4% | 24.4% | | Six months ended June 30 | 23.1% | 24.0% | - The effective tax rate for the six months ended June 30, 2025, included a **$21 million discrete tax benefit** from the reversal of a valuation allowance on net operating loss carryforwards[45](index=45&type=chunk) - The 'One Big Beautiful Bill Act' enacted on July 4, 2025, is not expected to materially impact the Company's financial results for the twelve months ending December 31, 2025, but its future impact is being assessed[47](index=47&type=chunk)[93](index=93&type=chunk) [(5) Net Income Per Share](index=12&type=section&id=%285%29%20Net%20Income%20Per%20Share) This note presents basic and diluted earnings per share calculations Net Income Per Share (In millions except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $755 | $759 | $1,455 | $1,578 | | Weighted-average common shares (Basic) | 292.3 | 297.6 | 292.9 | 298.3 | | Net income per share—Basic | $2.58 | $2.55 | $4.97 | $5.29 | | Weighted-average common shares (Diluted)| 292.9 | 298.5 | 293.7 | 299.3 | | Net income per share—Diluted | $2.58 | $2.54 | $4.95 | $5.27 | [(6) Inventories](index=12&type=section&id=%286%29%20Inventories) This note details the composition of the company's inventories Inventories (In millions) | Category | June 30, 2025 | December 31, 2024 | | :-------------- | :------------ | :---------------- | | Raw material | $648 | $635 | | Work-in-process | $212 | $193 | | Finished goods | $850 | $777 | | Total inventories | $1,710 | $1,605 | [(7) Pension and Other Postretirement Benefits](index=13&type=section&id=%287%29%20Pension%20and%20Other%20Postretirement%20Benefits) This note outlines net periodic benefit costs and expected contributions for pension and postretirement plans Total Net Periodic Benefit Cost (Income) (In millions) | Benefit Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Pension | $1 | $1 | $1 | $2 | | Postretirement | $(1) | $1 | $(3) | $2 | - The Company expects to contribute approximately **$22 million** to its pension plans and **$31 million** to its other postretirement benefit plans in 2025[53](index=53&type=chunk) [(8) Debt](index=13&type=section&id=%288%29%20Debt) This note provides details on the company's short-term and long-term debt obligations Total Debt (In millions) | Debt Type | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Short-term debt | $1,242 | $1,555 | | Long-term debt | $7,695 | $6,308 | | Total debt | $8,937 | $7,863 | - Short-term debt included **$1.2 billion in commercial paper** as of June 30, 2025, with a weighted-average interest rate of **4.35%**[54](index=54&type=chunk) - The Euro Credit Agreement was amended in February 2025, extending its termination date to February 28, 2027, and decreasing the interest rate spread; as of June 30, 2025, **$884 million** was outstanding under this agreement, reclassified to long-term debt[55](index=55&type=chunk) - In May 2024, the Company issued **€1.5 billion in Euro notes** (due 2028 and 2032) for general corporate purposes, including debt repayment[56](index=56&type=chunk) - The Company maintains a **$3.0 billion revolving credit facility**, with no outstanding amounts as of June 30, 2025[57](index=57&type=chunk) [(9) Accumulated Other Comprehensive Income (Loss)](index=14&type=section&id=%289%29%20Accumulated%20Other%20Comprehensive%20Income%20%28Loss%29) This note explains changes in the components of accumulated other comprehensive income (loss) Changes in Accumulated Other Comprehensive Income (Loss) (In millions) | Item | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Beginning balance | $(1,878) | $(1,884) | $(1,877) | $(1,834) | | Total foreign currency translation adjustments, net of tax | $10 | $(42) | $10 | $(93) | | Total pension and other postretirement benefit adjustments, net of tax | $0 | $1 | $(1) | $2 | | Ending balance | $(1,868) | $(1,925) | $(1,868) | $(1,925) | - Euro-denominated debt is designated as a hedge for net investment in Euro-denominated foreign operations, with changes in its value due to exchange rate fluctuations resulting in a pre-tax loss of **$411 million for Q2 2025** and **$607 million for YTD 2025**[60](index=60&type=chunk) [(10) Segment Information](index=15&type=section&id=%2810%29%20Segment%20Information) This note presents detailed financial performance by operating segment Segment Operating Revenue (In millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Automotive OEM | $845 | $815 | $1,631 | $1,631 | | Food Equipment | $680 | $667 | $1,307 | $1,298 | | Test & Measurement and Electronics | $686 | $678 | $1,338 | $1,374 | | Welding | $479 | $466 | $951 | $942 | | Polymers & Fluids | $438 | $454 | $867 | $886 | | Construction Products | $473 | $504 | $916 | $992 | | Specialty Products | $455 | $449 | $890 | $889 | | Total segments | $4,056 | $4,033 | $7,900 | $8,012 | Segment Operating Income (In millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Automotive OEM | $180 | $157 | $331 | $319 | | Food Equipment | $189 | $180 | $355 | $344 | | Test & Measurement and Electronics | $157 | $159 | $296 | $322 | | Welding | $159 | $153 | $312 | $309 | | Polymers & Fluids | $121 | $128 | $235 | $239 | | Construction Products | $145 | $148 | $275 | $291 | | Specialty Products | $148 | $144 | $283 | $274 | | Total segments | $1,099 | $1,069 | $2,087 | $2,098 | - The President & CEO, as CODM, uses operating income and margins to assess segment performance and guide enterprise strategies focused on profitable growth and continuous improvement[68](index=68&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key performance drivers, strategic initiatives, and future outlook [Introduction](index=18&type=section&id=Introduction) This introduction provides an overview of Illinois Tool Works Inc. and the key metrics management monitors - Illinois Tool Works Inc. (ITW) is a global manufacturer of diversified industrial products and equipment, operating **86 divisions** across **seven segments** in **51 countries**[74](index=74&type=chunk) - Management monitors key metrics including operating revenue, operating income, operating margin, variable cost of revenue, overhead expenses, inventory levels, days sales outstanding, past due receivables, and return on invested capital[75](index=75&type=chunk) [THE ITW BUSINESS MODEL](index=18&type=section&id=THE%20ITW%20BUSINESS%20MODEL) This section describes the company's core value creation strategy, emphasizing its unique elements - The ITW Business Model, a core source of value creation, comprises three unique elements: the proprietary 80/20 Front-to-Back process, Customer-back Innovation, and a Decentralized, Entrepreneurial Culture[76](index=76&type=chunk)[78](index=78&type=chunk) - The 2012-2023 Enterprise Strategy focused on portfolio management, business structure simplification, strategic sourcing, and the diligent re-application of the 80/20 process to drive above-market organic growth and improve margins and returns[76](index=76&type=chunk)[77](index=77&type=chunk)[87](index=87&type=chunk) [OUR NEXT PHASE: 2024 - 2030](index=19&type=section&id=OUR%20NEXT%20PHASE%3A%202024%20-%202030) This section outlines the company's strategic objectives and growth focus for the 2024-2030 period - In the 2024-2030 phase, ITW aims to build organic growth into a core strength, leveraging its decentralized entrepreneurial culture for adaptability and consistent execution through business cycles[81](index=81&type=chunk)[82](index=82&type=chunk) - The Company will continue to drive 80/20 Front-to-Back practice excellence and maintain portfolio discipline, focusing on high-quality businesses in diverse end markets with positive long-term fundamentals[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Terms Used by ITW](index=20&type=section&id=Terms%20Used%20by%20ITW) This section defines key financial and operational terminology used by the company - Key terms defined include 'Organic business' (acquired businesses included for >12 months on constant currency), 'Operating leverage' (effect of organic revenue volume changes on operating income), 'Price/cost' (net impact of material cost vs. selling price changes), and 'Product line simplification (PLS)' (eliminating complexity for focus on largest customers/products)[94](index=94&type=chunk) [Consolidated Results of Operations](index=20&type=section&id=Consolidated%20Results%20of%20Operations) This section analyzes the company's overall financial performance, including revenue, income, and operating margin - The Company delivered solid financial results in Q2 and YTD 2025, driven by enterprise initiatives and the ITW Business Model, despite an uncertain external environment[95](index=95&type=chunk) Consolidated Operating Results (In millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Inc (Dec) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Inc (Dec) | | :---------------- | :------------------------------- | :------------------------------- | :-------- | :----------------------------- | :----------------------------- | :-------- | | Operating revenue | $4,053 | $4,027 | 0.7 % | $7,892 | $8,000 | (1.3)% | | Operating income | $1,068 | $1,054 | 1.2 % | $2,019 | $2,181 | (7.4)% | | Operating margin %| 26.3 % | 26.2 % | 10 bps | 25.6 % | 27.3 % | (170) bps | - Organic revenue decreased **0.4% in Q2** and **1.0% YTD**, impacted by product line simplification activities (**70 bps in Q2, 60 bps YTD**); Asia Pacific organic revenue grew significantly (**9.0% in Q2, 7.9% YTD**), particularly in China (**14.9% in Q2, 13.4% YTD**)[100](index=100&type=chunk) - Operating margin increased **10 bps in Q2** due to enterprise initiatives and lower restructuring, but decreased **170 bps YTD** (or **20 bps** excluding the Q1 2024 LIFO accounting change) primarily due to higher employee-related expenses and unfavorable operating leverage[100](index=100&type=chunk) - Diluted EPS increased **1.6% in Q2 2025 to $2.58** but decreased **6.1% YTD to $4.95** (or **0.6%** excluding the Q1 2024 LIFO accounting change)[103](index=103&type=chunk) [Results of Operations by Segment](index=23&type=section&id=Results%20of%20Operations%20by%20Segment) This section provides detailed performance analysis for each of the company's business segments Total Segment Operating Revenue and Income (In millions) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | Q2 2025 Income | Q2 2024 Income | YTD 2025 Revenue | YTD 2024 Revenue | YTD 2025 Income | YTD 2024 Income | | :---------------------------- | :-------------- | :-------------- | :------------- | :------------- | :--------------- | :--------------- | :-------------- | :-------------- | | Automotive OEM | $845 | $815 | $180 | $157 | $1,631 | $1,631 | $331 | $319 | | Food Equipment | $680 | $667 | $189 | $180 | $1,307 | $1,298 | $355 | $344 | | Test & Measurement and Electronics | $686 | $678 | $157 | $159 | $1,338 | $1,374 | $296 | $322 | | Welding | $479 | $466 | $159 | $153 | $951 | $942 | $312 | $309 | | Polymers & Fluids | $438 | $454 | $121 | $128 | $867 | $886 | $235 | $239 | | Construction Products | $473 | $504 | $145 | $148 | $916 | $992 | $275 | $291 | | Specialty Products | $455 | $449 | $148 | $144 | $890 | $889 | $283 | $274 | [AUTOMOTIVE OEM](index=23&type=section&id=AUTOMOTIVE%20OEM) This subsection details the financial performance of the Automotive OEM segment - Automotive OEM operating revenue increased **3.8% in Q2 2025** (**2.4% organic**) and **0.1% YTD** (**0.6% organic**), driven by market penetration gains in Europe and Asia Pacific, particularly China's EV market (**21.6% Q2, 17.9% YTD**), despite product line simplification reducing organic revenue by **140 bps in Q2** and **120 bps YTD**[104](index=104&type=chunk) - Operating margin for Automotive OEM increased **190 bps in Q2 to 21.3%** and **70 bps YTD to 20.3%**, primarily due to enterprise initiatives, favorable operating leverage, lower restructuring, and favorable price/cost[104](index=104&type=chunk) [FOOD EQUIPMENT](index=25&type=section&id=FOOD%20EQUIPMENT) This subsection details the financial performance of the Food Equipment segment - Food Equipment operating revenue increased **2.1% in Q2 2025** (**0.8% organic**) and **0.7% YTD** (**1.0% organic**); North American organic revenue grew **4.5% in Q2** and **2.7% YTD**, driven by higher demand in institutional, independent restaurant, quick serve, and food retail end markets[107](index=107&type=chunk) - Operating margin for Food Equipment increased **60 bps in both Q2 and YTD to 27.7% and 27.1%** respectively, primarily due to benefits from enterprise initiatives and favorable operating leverage[107](index=107&type=chunk) [TEST & MEASUREMENT AND ELECTRONICS](index=27&type=section&id=TEST%20%26%20MEASUREMENT%20AND%20ELECTRONICS) This subsection details the financial performance of the Test & Measurement and Electronics segment - Test & Measurement and Electronics operating revenue increased **1.2% in Q2 2025** but declined **2.6% YTD**, primarily due to lower organic revenue (**-0.7% Q2, -3.1% YTD**), driven by decreased demand in MTS Test & Simulation and general industrial markets, partially offset by growth in the semiconductor end market, especially in Asia Pacific[113](index=113&type=chunk) - Operating margin decreased **70 bps in Q2 to 22.8%** and **130 bps YTD to 22.1%**, mainly due to higher employee-related expenses, unfavorable operating leverage, product mix, and unfavorable price/cost, partially offset by enterprise initiatives and lower intangible asset amortization[113](index=113&type=chunk)[115](index=115&type=chunk) [WELDING](index=29&type=section&id=WELDING) This subsection details the financial performance of the Welding segment - Welding operating revenue grew **2.9% in Q2 2025** (**2.8% organic**) and **1.0% YTD** (**1.4% organic**), driven by higher equipment sales and strong international demand, particularly in Asia Pacific and the Middle East[118](index=118&type=chunk) - Operating margin increased **20 bps in Q2 to 33.1%** and remained **flat YTD at 32.8%**, benefiting from enterprise initiatives, favorable operating leverage, and favorable price/cost, despite higher employee-related expenses[118](index=118&type=chunk) [POLYMERS & FLUIDS](index=31&type=section&id=POLYMERS%20%26%20FLUIDS) This subsection details the financial performance of the Polymers & Fluids segment - Polymers & Fluids operating revenue decreased **3.4% in Q2 2025** (**-3.7% organic**) and **2.1% YTD** (**-1.1% organic**), primarily due to lower demand in North America and Europe across polymers, fluids, and automotive aftermarket businesses; product line simplification reduced organic revenue by **90 bps in Q2** and **60 bps YTD**[122](index=122&type=chunk) - Operating margin decreased **50 bps in Q2 to 27.7%** due to unfavorable operating leverage and higher employee-related expenses, but increased **10 bps YTD to 27.1%** driven by enterprise initiatives[122](index=122&type=chunk)[123](index=123&type=chunk) [CONSTRUCTION PRODUCTS](index=32&type=section&id=CONSTRUCTION%20PRODUCTS) This subsection details the financial performance of the Construction Products segment - Construction Products operating revenue decreased **6.1% in Q2 2025** (**-6.9% organic**) and **7.6% YTD** (**-7.2% organic**), driven by lower demand across all major regions, particularly in North American residential and commercial end markets; product line simplification reduced organic revenue by **120 bps in Q2** and **90 bps YTD**[126](index=126&type=chunk) - Operating margin increased **140 bps in Q2 to 30.8%** and **60 bps YTD to 30.0%**, primarily due to enterprise initiatives and lower restructuring expenses, partially offset by unfavorable operating leverage and price/cost[126](index=126&type=chunk) [SPECIALTY PRODUCTS](index=34&type=section&id=SPECIALTY%20PRODUCTS) This subsection details the financial performance of the Specialty Products segment - Specialty Products operating revenue increased **1.1% in Q2 2025** (**0.3% organic**) and **0.1% YTD** (**0.6% organic**), with equipment sales growth offsetting declines in consumables; North American organic revenue grew due to consumer packaging and specialty films, while international organic revenue declined[130](index=130&type=chunk) - Operating margin increased **70 bps in Q2 to 32.6%** and **100 bps YTD to 31.8%**, driven by enterprise initiatives, favorable price/cost, and lower restructuring expenses, partially offset by higher employee-related expenses and product mix[130](index=130&type=chunk) [OTHER FINANCIAL HIGHLIGHTS](index=36&type=section&id=OTHER%20FINANCIAL%20HIGHLIGHTS) This section covers the company's liquidity, capital resources, and other key financial metrics [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) This subsection discusses the company's sources and uses of cash and capital allocation priorities - The Company's primary liquidity sources are free cash flow and short-term credit facilities, with **$788 million cash on hand** and no outstanding borrowings on its **$3.0 billion revolving credit facility** as of June 30, 2025[132](index=132&type=chunk) - Capital allocation priorities include internal investments for organic growth, attractive dividend payments, selective strategic acquisitions, and an active share repurchase program[134](index=134&type=chunk) Free Cash Flow (In millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $550 | $687 | $1,142 | $1,276 | | Additions to plant and equipment | $(101) | $(116) | $(197) | $(211) | | Free cash flow | $449 | $571 | $945 | $1,065 | [Stock Repurchase Programs](index=37&type=section&id=Stock%20Repurchase%20Programs) This subsection details the company's common stock repurchase activities - Under the 2023 Program, the Company repurchased approximately **1.5 million shares for $375 million in Q2 2025** and **3.0 million shares for $750 million YTD 2025**; approximately **$2.7 billion** remains authorized under the program as of June 30, 2025[136](index=136&type=chunk) Share Repurchase Activity (Q2 2025) | Period | Total Number of Shares Purchased (millions) | Average Price Paid Per Share | | :--------- | :------------------------------------------ | :--------------------------- | | April 2025 | 0.6 | $234.10 | | May 2025 | 0.5 | $245.35 | | June 2025 | 0.4 | $245.01 | | Total | 1.5 | | [After-tax Return on Average Invested Capital](index=38&type=section&id=After-tax%20Return%20on%20Average%20Invested%20Capital) This subsection presents the company's after-tax return on average invested capital (ROIC) metrics After-tax Return on Average Invested Capital (ROIC) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income to average invested capital | 27.4 % | 29.0 % | 27.1 % | 30.5 % | | After-tax return on average invested capital | 29.4 % | 30.4 % | 28.5 % | 32.0 % | - After-tax ROIC for the six months ended June 30, 2024, included a **170 basis points favorable impact** from the LIFO to FIFO accounting method change[138](index=138&type=chunk) [Working Capital](index=39&type=section&id=Working%20Capital) This subsection analyzes the company's current assets and liabilities, and net working capital Net Working Capital (In millions) | Category | June 30, 2025 | December 31, 2024 | Increase/ (Decrease) | | :------------------------ | :------------ | :---------------- | :------------------- | | Total current assets | $6,234 | $5,856 | $378 | | Total current liabilities | $3,932 | $4,308 | $(376) | | Net working capital | $2,302 | $1,548 | $754 | - A significant portion of cash and equivalents is held by international subsidiaries, typically used for international operations or reinvestment, and may be subject to foreign withholding taxes if repatriated[140](index=140&type=chunk) [Debt](index=40&type=section&id=Debt) This subsection provides details on the company's debt levels and key debt ratios Total Debt (In millions) | Debt Type | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Short-term debt | $1,242 | $1,555 | | Long-term debt | $7,695 | $6,308 | | Total debt | $8,937 | $7,863 | Total Debt to EBITDA Ratio | Period | June 30, 2025 | December 31, 2024 | | :---------------------- | :------------ | :---------------- | | Total debt to EBITDA ratio | 2.0 | 1.7 | [Stockholders' Equity](index=41&type=section&id=Stockholders%27%20Equity) This subsection summarizes changes in the company's stockholders' equity Changes in Stockholders' Equity (Six Months Ended June 30, 2025) | In millions | Total Stockholders' Equity | | :-------------------------------- | :------------------------- | | Total stockholders' equity, December 31, 2024 | $3,317 | | Net income | $1,455 | | Repurchases of common stock | $(750) | | Dividends declared | $(877) | | Other comprehensive income (loss) | $9 | | Other, net | $57 | | Total stockholders' equity, June 30, 2025 | $3,211 | [Forward-Looking Statements](index=41&type=section&id=Forward-Looking%20Statements) This subsection cautions investors regarding future-oriented information and associated risks - The report contains forward-looking statements subject to various risks and uncertainties, including market downturns, geopolitical conditions, foreign currency fluctuations, and the effectiveness of enterprise strategy initiatives; investors are cautioned not to place undue reliance on these statements[149](index=149&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that there have been no material changes to the Company's exposures to market risk since the last annual report - No material changes to market risk exposures have occurred since the Company's 2024 Annual Report on Form 10-K[152](index=152&type=chunk) [ITEM 4. Controls and Procedures](index=42&type=section&id=ITEM%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes to internal control over financial reporting - The Company's management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2025[153](index=153&type=chunk) - No changes in internal control over financial reporting were identified that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting during the quarter ended June 30, 2025[154](index=154&type=chunk) PART II – OTHER INFORMATION [ITEM 1. Legal Proceedings](index=43&type=section&id=ITEM%201.%20Legal%20Proceedings) This section states that there are no material legal proceedings to report - There are no material legal proceedings to disclose; the Company's disclosure threshold for environmental legal proceedings is **$1 million**[157](index=157&type=chunk) [ITEM 1A. Risk Factors](index=43&type=section&id=ITEM%201A.%20Risk%20Factors) This section indicates that there have been no material changes to the risk factors previously disclosed in the Company's 2024 Annual Report on Form 10-K - No material changes to the risk factors described in the Company's 2024 Annual Report on Form 10-K have occurred[158](index=158&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the Company's common stock repurchase activities under its 2023 program - The Company repurchased **1.5 million shares of common stock in Q2 2025** under the 2023 Program, with approximately **$2.7 billion** remaining authorized for repurchases as of June 30, 2025[159](index=159&type=chunk)[160](index=160&type=chunk) Share Repurchase Activity (Q2 2025) | Period | Total Number of Shares Purchased (millions) | Average Price Paid Per Share | | :--------- | :------------------------------------------ | :--------------------------- | | April 2025 | 0.6 | $234.10 | | May 2025 | 0.5 | $245.35 | | June 2025 | 0.4 | $245.01 | | Total | 1.5 | | [ITEM 6. Exhibits](index=44&type=section&id=ITEM%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and financial information formatted in iXBRL - Exhibits include Rule 13a-14(a) and Section 1350 Certifications, and financial information formatted in Inline Extensible Business Reporting Language (iXBRL)[161](index=161&type=chunk) SIGNATURES - The report was signed on July 31, 2025, by Randall J. Scheuneman, Vice President & Chief Accounting Officer[165](index=165&type=chunk)

Core Insights - Illinois Tool Works (ITW) reported strong second-quarter results for fiscal 2025, with GAAP earnings per share of $2.58, surpassing analyst expectations of $2.56, and revenue of $4.1 billion, exceeding the consensus of $4.02 billion [1][2] - The company achieved record operating margin of 26.3%, the highest for any second quarter in its history, driven by enterprise cost initiatives [1][5] - Despite the strong profitability, organic growth was flat, and free cash flow declined compared to Q2 2024, indicating areas for attention [1][9] Financial Performance - GAAP EPS for Q2 2025 was $2.58, a 1.6% increase from Q2 2024's $2.54 [2] - Revenue for Q2 2025 was $4.1 billion, a 1.7% increase from $4.03 billion in Q2 2024 [2] - Operating margin reached 26.3%, up 0.1 percentage points from 26.2% in Q2 2024 [2] - Free cash flow fell to $449 million, down 21.4% from $571 million in Q2 2024 [2][9] - Net income was $755 million, a slight decrease of 0.5% from $759 million in Q2 2024 [2] Segment Performance - Automotive OEM parts grew organically by 2.4%, driven by demand in China's electric vehicle market [5][6] - Food Equipment reported slight positive organic growth, particularly in institutional channels [5] - Welding equipment sales rose 2.8% organically, while the Test & Measurement and Electronics segment declined 0.7% [6] - The Polymers & Fluids segment shrank 3.7% organically, and the Construction Products group saw a 6.9% drop in organic revenue [6] Strategic Focus - The company emphasizes operational excellence, customer-centric innovation, and active portfolio management, divesting non-core businesses to sharpen strategic focus [4] - ITW's "80/20 Front-to-Back" approach targets the most profitable customers and products while continuously improving operations [3] - Management reported progress on the Customer-Back Innovation program, streamlining operations and exiting less differentiated offerings [8] Future Guidance - For fiscal 2025, management raised full-year GAAP EPS guidance to $10.35–$10.55, up from $10.15–$10.55 [10] - Total revenue growth is expected to be 1–3%, with organic growth projected to be flat to 2% [10] - Operating margin is projected between 26–27%, supported by ongoing cost initiatives [10] - Free cash flow conversion is targeted to exceed 100% of net income, with a focus on disciplined capital returns [11]

Core Viewpoint - Illinois Tool Works Inc. (ITW) is conducting its Q2 2025 earnings call to discuss financial results and provide an outlook for the full year 2025 [4]. Group 1: Company Overview - The conference call is led by Erin Linnihan, Vice President of Investor Relations, along with President and CEO Chris O'Herlihy and Senior VP and CFO Michael Larsen [3]. - The call includes discussions on ITW's second quarter financial results and updates on the company's outlook for the full year 2025 [4]. Group 2: Financial Reporting - The presentation will contain forward-looking statements and references to the company's 2024 Form 10-K and subsequent SEC filings for details on risks that could affect actual results [4].