Illinois Tool Works (ITW) 10-K risk factor changes: FY2019 vs FY2018

[removed: The] [added: The] Company's results are impacted by global economic conditions.

Downturns in the markets served by the Company could adversely affect its businesses, results of operations or financial [removed: condition.][added: condition.]

[removed: The] [added: The] global nature of the Company's operations subjects it to political and economic risks that could adversely affect its business, results of operations or financial [removed: condition.][added: condition.]

Over 50% of the Company's net sales are derived from customers outside the United States, and the Company currently operates in [removed: 55] [added: 53] countries.

[removed: In addition, the] [added: The] current global geopolitical and trade environment has resulted in raw material inflation and potential for increased escalation of domestic and international tariffs and retaliatory trade policies.

Further changes in U.S. trade policy (including new or additional increases in duties or [removed: tariffs),] [added: tariffs) and] additional retaliatory actions by U.S. trade [removed: partners, or worsening of economic conditions] [added: partners] could [removed: have] [added: result in] a [removed: material adverse effect on the Company's business, results] [added: worsening] of [removed: operations or financial condition.][added: economic conditions.]

[removed: The] [added: The] benefits from the Company’s Enterprise Strategy may not be as expected and the Company's financial results could be adversely [removed: impacted.][added: impacted, or the Company may not meet its long-term financial performance targets.]

[added: Product line and] customer base simplification activities, which are core elements of the Company’s 80/20 Front-to-Back process, continue to be applied [removed: to] [added: by] the Company’s [removed: scaled up] operating divisions and [removed: remain] [added: are] active elements of the Enterprise Strategy.

If the Company is unable to realize the expected benefits from its Enterprise Strategy initiatives, the Company's financial results could be adversely [removed: impacted.][added: impacted, or the Company may not meet its long-term financial performance targets.]

[removed: The] [added: The] timing and amount of the Company’s share repurchases are subject to a number of [removed: uncertainties.][added: uncertainties.]

Important factors that could cause the Company to limit, suspend or delay its share repurchases include unfavorable trading market conditions, the price of the Company's common stock, the nature of other investment opportunities presented to [removed: us] [added: the Company] from time to time, the ability to obtain financing at attractive rates and the availability of U.S. cash.

[removed: The] [added: The] Company may incur fines or penalties, damage to its reputation or other adverse consequences if its employees, agents or business partners violate anti-bribery, competition, export and import, environmental or other [removed: laws.][added: laws.]

[removed: A] [added: A] significant fluctuation between the U.S. Dollar and other currencies could adversely impact the Company's operating [removed: income.][added: income.]

[removed: If] [added: If] the Company is unable to successfully introduce new products, its future growth may be adversely [removed: affected.][added: affected.]

[removed: If] [added: If] the Company is unable to adequately protect its intellectual property, its competitive position and results of operations may be adversely [removed: impacted.][added: impacted.]

[removed: The] [added: The] Company's acquisition of businesses could negatively impact its profitability and [removed: returns.][added: returns.]

[removed: Past divestitures] [added: Divestitures] pose the risk of retained liabilities that could adversely affect the Company's financial [removed: results.][added: results.]

The [removed: Company's divestiture activity increased in 2012, 2013 and 2014 in accordance with its portfolio management initiative, and the] Company has retained certain liabilities directly or through indemnifications made to the buyers against known and unknown contingent liabilities such as lawsuits, tax liabilities, product liability claims and environmental matters, which could adversely affect the Company's financial results.

[removed: The] [added: The] Company has significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on the Company's financial [removed: results.][added: results.]

[removed: Disruptions] [added: Disruptions] or volatility in global financial markets or changes in the Company's credit ratings could increase the Company's funding costs or reduce the availability of [removed: credit.][added: credit.]

[removed: Raw] [added: Raw] material price increases and supply shortages could adversely affect [removed: results.][added: results.]

In particular, changes in trade policies, the imposition of duties and [removed: tariffs and] [added: tariffs,] potential retaliatory countermeasures [added: and severe weather events] could adversely impact the price or availability of raw materials.

[removed: Unfavorable] [added: Unfavorable] tax law changes and tax authority rulings may adversely affect [removed: results.][added: results.]

[removed: The] [added: The] Company's defined benefit pension plans are subject to financial market risks that could adversely affect its results of operations and cash [removed: flows.][added: flows.]

[removed: Potential] [added: Potential] adverse outcomes in legal proceedings may adversely affect [removed: results.][added: results.]

[removed: Uncertainty] [added: Uncertainty] related to [removed: climate change] [added: environmental] regulation and industry [removed: standards] [added: standards, as well as physical risks of climate change,] could impact the Company's results of operations and financial [removed: position.][added: position.]

[removed: Increased public awareness and concern regarding global climate change may result in more international, regional and/or federal requirements to reduce or mitigate global warming and these] [added: These] regulations [added: or standards] could mandate even more restrictive [removed: standards,] [added: requirements,] such as stricter limits on greenhouse gas [removed: emissions,] [added: emissions and production of single use plastics,] than the voluntary commitments that the Company has made or require such changes on a more accelerated time frame.

If environmental laws or regulations [added: or industry standards] are either changed or adopted and impose significant operational restrictions and compliance requirements upon the Company or its products, [removed: they could negatively impact] [added: or] the [added: Company's operations are disrupted due to physical impacts of climate change, the] Company’s business, capital expenditures, results of operations, financial condition and competitive [removed: position.][added: position could be negatively impacted.]

[removed: If] [added: If] the Company is unable to protect its information technology infrastructure against service interruptions, data corruption, cyber-based attacks or network security breaches, or if there is a violation of data privacy laws, there could be a negative impact on operating results or the Company may suffer financial or reputational [removed: damage.][added: damage.]

[removed: Forward-Looking Statements][added: Forward-Looking Statements]

Investors should be aware that while ITW regularly communicates with securities analysts and other investment professionals, it is against ITW's policy to disclose to them any material [removed: non-public information or other confidential commercial information.][added: non-]

| • | the impact of widespread public health crises; |

Additionally, in early 2020, an outbreak of the coronavirus occurred in China and other jurisdictions.

The extent of the outbreak and its impact on the markets served by the Company and on its operations is uncertain.

A prolonged outbreak could interrupt the operations of the Company and its customers and suppliers.

As the Company continues to execute on its Enterprise Strategy initiatives, it remains focused on the core principles of portfolio discipline, 80/20 Front-to-Back practice excellence, and organic growth.

Additionally, other core activities of the Enterprise Strategy related to portfolio discipline and organic growth, including customer-back innovation and strategic sales excellence, may not have the desired impact on future operating results.

| | |

| --- | --- |

The Company had significant divestiture activity in 2012, 2013 and 2014 in accordance with its portfolio management initiative, and it divested additional businesses in 2019 as it continues portfolio refinements to maintain portfolio discipline.

Increased public awareness and concern regarding environmental risks, including global climate change, may result in more international, regional and/or federal requirements or industry standards to reduce or mitigate global warming and other environmental risks.

In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply of energy, product demand and manufacturing.

public information or other confidential commercial information.

With the initial Enterprise Strategy initiatives of portfolio management and business structure simplification largely complete, the Company's focus has pivoted to organic revenue growth and continued margin improvement.

Product line and

[removed: INTRODUCTION][added: INTRODUCTION]

Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified range of industrial products and equipment with [removed: 87] [added: 84] divisions in [removed: 55] [added: 53] countries.

As of December 31, [removed: 2018,] [added: 2019,] the Company employed approximately [removed: 48,000] [added: 45,000] people.

[removed: THE] [added: THE] ITW BUSINESS [removed: MODEL][added: MODEL]

[removed: This business model] [added: The ITW Business Model] is the Company’s competitive advantage and defines how ITW creates value for its [removed: shareholders and comprises three unique elements:][added: shareholders.]

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

| • | [removed: Customer-back Innovation] [added: Customer-back Innovation] has fueled decades of profitable growth at ITW. The Company’s unique innovation approach is built on insight gathered from the 80/20 Front-to-Back process. Working from the customer back, ITW businesses position themselves as the go-to problem solver for their “80” customers. ITW’s innovation efforts are focused on understanding customer needs, particularly those in “80” markets with solid long-term growth fundamentals, and [removed: subsequently] creating unique solutions to address those needs. These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately 18,000 granted and pending patents; |

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

[removed: ENTERPRISE STRATEGY][added: ENTERPRISE STRATEGY]

[removed: Focusing] [added: The Company undertook a complete review of its performance, focusing] on its businesses delivering consistent above-market growth with best-in-class margins and returns, [removed: ITW developed] [added: and developing] a strategy to replicate that performance across its operations.

[removed: Based on this rigorous evaluation,] ITW determined that solid and consistent above-market organic growth [removed: must be] [added: is] the core growth engine to deliver world-class financial performance and compelling long-term returns for its shareholders.

| • | Step two, Business Structure Simplification, was implemented to simplify and [removed: scale-up] [added: scale up] ITW’s operating structure to support increased engineering, marketing, and sales resources, [removed: and, at the same time,] [added: and] improve global reach and competitiveness, all of which were critical to driving accelerated organic growth. ITW now has [removed: 87] [added: 84] scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation. |

| • | The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at [removed: ITW. The Company’s 80/20-enabled sourcing organization has delivered] [added: ITW, delivering] an average of one percent reduction in spend each year from 2013 through [removed: 2018] [added: 2019] and [removed: is on track] [added: continues] to [removed: do] [added: be a key contributor to] the [removed: same in 2019.] [added: Company's ongoing enterprise strategy.] |

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

[removed: PATH] [added: PATH] TO FULL POTENTIAL - FINISHING THE [removed: JOB][added: JOB]

The ITW Business Model and unique set of capabilities are a source of strong and enduring competitive advantage, but for the Company to truly [added: finish the job and] reach its full [removed: potential over the next five years,] [added: potential,] every one of its divisions must also be operating at its full potential.

To do so, the Company remains focused on [removed: three key areas] [added: its core principles] to [removed: finish the job of positioning] [added: position] ITW to perform to its full potential:

[removed: Portfolio Discipline][added: Portfolio Discipline]

ITW’s portfolio operates in [added: highly] diverse end markets and geographies which makes the Company more resilient in the face of uncertain or volatile market environments.

[removed: 80/20] [added: 80/20] Front-to-Back Practice [removed: Excellence][added: Excellence]

ITW will continue its efforts to [added: finish the job and] drive 80/20 Front-to-Back practice excellence in every division in the Company, every day.

[removed: Full-potential] [added: Full-potential] Organic [removed: Growth][added: Growth]

The Company has clearly defined action plans aimed at leveraging the performance power of the ITW Business Model to achieve full-potential organic growth in every [removed: division.][added: division, with specific focus on:]

The Company [removed: is currently exploring] [added: previously communicated its intent to explore] options, including potential divestitures, for certain businesses with revenues totaling up to $1 billion.

[removed: If a decision is made to divest any of these businesses, the] [added: The] Company expects [removed: that] [added: any] earnings per share dilution [added: from divestitures] would be offset by incremental share repurchases.

[removed: TERMS] [added: TERMS] USED BY [removed: ITW][added: ITW]

| [removed: •] [added: •] | [removed: Organic business] [added: 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. |

| • | [removed: Operating leverage] [added: 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. |

| • | [removed: Price/cost] [added: 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. |

| • | [removed: Product] [added: Product] line simplification [removed: (PLS)] [added: (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. |

[removed: CONSOLIDATED] [added: CONSOLIDATED] RESULTS OF [removed: OPERATIONS][added: OPERATIONS]

[removed: All] [added: Additionally, all] segments had operating margin [added: at or] above [removed: 21%] [added: 21.5%] for [removed: 2018.][added: 2019.]

The Company does not believe that [removed: recently imposed] tariffs [added: imposed] in [removed: 2018] [added: the past year] have had a material impact on its operating results.

The Company will continue to evaluate the impact of enacted and proposed tariffs on its businesses, as well as pricing actions to mitigate the impact of [added: any] raw material cost increases resulting from these tariffs.

The Company’s consolidated results of operations for [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016 are summarized] [added: 2017 were] as follows:

[removed: 2018 compared to 2017][added: 2018 compared to 2017]

| | [removed: For] [added: For] the Years [removed: Ended | |] [added: Ended] | | | | | | | | | | | | | | | | | | | | |

| [removed: Dollars] [added: Dollars] in [removed: millions] [added: millions] | [removed: December 31,] [added: December 31,] | | | | | | | | | | | [removed: Components] [added: Components] of Increase [removed: (Decrease) | |] [added: (Decrease)] | | | | | | | | | |

| | [removed: 2018 | |] [added: 2018] | | [removed: 2017] | | [added: 2017] | | [removed: Inc (Dec)] | | [added: Inc (Dec)] | [removed: Organic] | | [removed: Acq/Div] [added: Organic] | | [removed: Restructuring] [added: Acquisition/ Divestiture] | | [removed: Impairment] [added: Restructuring] | | [removed: Foreign Currency] [added: Foreign Currency] | | [removed: Total] [added: Total] | |

| Operating revenue | $ | 14,768 | | | $ | 14,314 | | | 3.2 | % | | 2.2 | % | (0.1 | )% | — | % | [removed: — | % |] 1.1 | % | 3.2 | % |

It is comprised of three unique elements:

As part of its agenda to finish the job, the Company routinely evaluates its portfolio to ensure it delivers sustainable differentiation and drives consistent long-term performance.

This includes both implementing portfolio refinements and assessing selective high-quality acquisitions to supplement ITW’s long-term growth potential.

In the fourth quarter of 2019, the Company completed the divestitures of three businesses and continues to evaluate options for certain other businesses.

Divestitures in Item 8.

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

| • | "80” focused Market Penetration - fully leveraging the considerable growth potential that resides in the Company's largest and most differentiated product offerings and customer relationships |

| • | Customer-Back Innovation - strengthening the Company's commitment to serial innovation and delivering a continuous flow of differentiated new products to its key customers |

| • | Strategic Sales Excellence - deploying a high-performance sales function in every division |

As the Company continues to make progress toward its full potential, the Company will explore opportunities to reinforce or further expand the long-term organic growth potential of ITW through the addition of selective high-quality acquisitions.

The Company delivered solid financial results in 2019 despite a contracting industrial demand environment.

With the Company's diversified high-quality business portfolio, highly differentiated ITW Business Model and continued strong execution on enterprise initiatives throughout the year, the Company grew diluted earnings per share and returned approximately $2.8 billion to shareholders in the form of dividends and share repurchases in 2019.

In early 2020, an outbreak of the coronavirus occurred in China and other jurisdictions.

The extent of the outbreak and its impact on the markets served by the Company and on its operations is uncertain.

A prolonged outbreak could interrupt the operations of the Company and its customers and suppliers.

2019 compared to 2018

| | 2019 | | | | 2018 | | | | Inc (Dec) | | | Organic | | Acquisition/ Divestiture | | Restructuring | | Foreign Currency | | Total | |

| Operating revenue | $ | 14,109 | | | $ | 14,768 | | | (4.5 | )% | | (1.9 | )% | (0.3 | )% | — | % | (2.3 | )% | (4.5 | )% |

| Operating income | $ | 3,402 | | | $ | 3,584 | | | (5.1 | )% | | (1.3 | )% | (0.1 | )% | (1.4 | )% | (2.3 | )% | (5.1 | )% |

| • | Organic revenue decreased 1.9% primarily driven by a decline in the Automotive OEM, Specialty Products, Welding and Construction Products segments. Product line simplification activities reduced organic revenue by 60 basis points. |

| • | Operating income of $3.4 billion decreased 5.1% primarily due to unfavorable foreign currency translation, higher restructuring expenses and lower organic revenue. |

| • | The effective tax rate for 2019 was 23.3% compared to 24.5% in 2018. The 2019 and 2018 effective tax rates benefited from the lower U.S. corporate federal tax rate and discrete items. The 2019 effective tax rate benefited from a discrete tax benefit of $21 million in the third quarter for the U.S. federal provision to return adjustment resulting primarily from changes in estimates related to the "Tax Cuts and Jobs Act." The 2018 effective tax rate benefited from a discrete tax benefit of $37 million in the third quarter related to the release of a valuation allowance against the deferred tax assets of a non-U.S. subsidiary, which was partially offset by a discrete tax charge of $22 million in the third quarter related to foreign tax credits. Additionally, the effective tax rate for 2019 and 2018 included $28 million and $10 million, respectively, related to excess tax benefits from stock-based compensation. Refer to Note 6. Income Taxes in Item 8. Financial Statements and Supplementary Data for further information. |

| • | Diluted earnings per share (EPS) of $7.74, an increase of 1.8%, included a $0.09 gain in 2019 from the disposal of businesses. |

2019 compared to 2018

| | For the Years Ended | | | | | | | | | | | | | | | | | | | | |

| Dollars in millions | December 31, | | | | | | | | | | | Components of Increase (Decrease) | | | | | | | | | |

| | 2019 | | | | 2018 | | | | Inc (Dec) | | | Organic | | Acquisition/Divestiture | | Restructuring | | Foreign Currency | | Total | |

| Operating revenue | $ | 3,063 | | | $ | 3,338 | | | (8.2 | )% | | (5.4 | )% | — | % | — | % | (2.8 | )% | (8.2 | )% |

| Operating income | $ | 659 | | | $ | 751 | | | (12.2 | )% | | (7.0 | )% | — | % | (2.6 | )% | (2.6 | )% | (12.2 | )% |

| • | Organic revenue declined 5.4% versus worldwide auto builds which decreased 6%. Auto builds for North America, Europe and China, where the Company has a higher concentration of revenue as compared to other geographic regions, declined 6%. Product line simplification activities reduced organic revenue by 120 basis points. Additionally, organic revenue was negatively impacted by approximately 100 basis points due to unexpected customer shutdowns in North America in the second half of 2019. |

| ◦ | European organic revenue declined 4.5% compared to European auto builds which declined 4% in 2019 due to customer mix. |

| ◦ | Asia Pacific organic revenue declined 2.2% in 2019. China organic revenue declined 1.0% versus Chinese auto builds which declined 8% in 2019. |

| | For the Years Ended | | | | | | | | | | | | | | | | | | | | |

| Dollars in millions | December 31, | | | | | | | | | | | Components of Increase (Decrease) | | | | | | | | | |

2019 compared to 2018

| | For the Years Ended | | | | | | | | | | | | | | | | | | | | |

| Dollars in millions | December 31, | | | | | | | | | | | Components of Increase (Decrease) | | | | | | | | | |

| | 2019 | | | | 2018 | | | | Inc (Dec) | | | Organic | | Acquisition/Divestiture | | Restructuring | | Foreign Currency | | Total | |

| Operating revenue | $ | 2,188 | | | $ | 2,214 | | | (1.2 | )% | | 1.1 | % | — | % | — | % | (2.3 | )% | (1.2 | )% |

| Operating income | $ | 578 | | | $ | 572 | | | 1.1 | % | | 4.5 | % | — | % | (1.2 | )% | (2.2 | )% | 1.1 | % |

Since then, ITW has made considerable progress in its path to full potential.

The roots of ITW’s Enterprise Strategy began in late 2011 / early 2012, when the Company undertook a complete review of its performance.

At the same time, the Company consistently reviews its portfolio, assesses businesses that are growth-challenged and evaluates if further portfolio refinements may be needed.

The Company delivered solid financial results in 2018 despite some near-term market challenges in the second half of the year.

While overall market conditions in North America were solid, auto production in Europe and China and demand levels in various international end markets served by the Specialty Products segment softened during the second half of the year.

The primary driver of the Company's financial performance is the continued successful execution of enterprise initiatives and continued focus on the highly differentiated ITW Business Model.

In 2018, five of seven segments achieved worldwide organic revenue growth while two segments were flat.

However, the impact of tariffs and global trade policies could increase in the future.

| | | | | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Operating revenue | $ | 14,314 | | | $ | 13,599 | | | 5.3 | % | | 2.9 | % | 1.8 | % | — | % | — | % | 0.6 | % | 5.3 | % |

| Operating income | $ | 3,485 | | | $ | 3,056 | | | 14.1 | % | | 12.6 | % | 0.7 | % | 0.1 | % | 0.1 | % | 0.6 | % | 14.1 | % |

| • | On July 1, 2016, the Company completed the acquisition of the Engineered Fasteners and Components business ("EF&C") from ZF TRW for a purchase price of approximately $450 million. EF&C had operating revenue of $517 million in 2017 and $245 million for the last six months of 2016. EF&C diluted the Company's operating margin in 2017 and 2016 due to lower operating margin and acquisition related expenses. The Company expects EF&C's operating margin to improve in later years through the application of the Company's 80/20 Front-to-Back process. The operating results of EF&C are reported within the Company's Automotive OEM segment. The acquisition of EF&C did not materially affect the Company's results of operations or financial position for any period presented. Refer to Note 2. Acquisitions in Item 8. Financial Statements and Supplementary Data for further information. |

| • | Organic revenue grew 2.9% as all seven segments achieved growth. |

| • | In the second quarter of 2017, the Company entered into a $95 million confidential settlement agreement to resolve a litigation matter. Based on the terms of the agreement, the Company received the settlement within 120 days of the execution of the agreement. The receipt of the settlement resulted in a favorable pre-tax impact of $15 million in the second quarter of 2017 and $80 million in the third quarter of 2017, which was included in operating income. Refer to Note 4. Legal Settlement in Item 8. Financial Statements and Supplementary Data for further information on the confidential legal settlement. |

| • | Operating income of $3.5 billion increased 14.1%. Excluding the favorable impact of the confidential legal settlement, operating income would have increased 11.0%. |

| • | On December 22, 2017, the "Tax Cuts and Jobs Act" (the “Act”) was enacted in the United States. The provisions of the Act significantly revised the U.S. corporate income tax rules. As a result, the Company recorded a one-time income tax charge of $658 million during the fourth quarter of 2017. Refer to Note 6. Income Taxes in Item 8. Financial Statements and Supplementary Data for further information. |

| • | Diluted earnings per share (EPS) of $4.86 included the unfavorable impact of $1.90 for the previously discussed one-time tax charge and the favorable impact of $0.17 for the confidential legal settlement. Excluding these two items, EPS of $6.59 increased 15.6%. |

| Operating revenue | $ | 3,271 | | | $ | 2,864 | | | 14.2 | % | | 4.1 | % | 8.9 | % | — | % | 1.2 | % | 14.2 | % |

| Operating income | $ | 747 | | | $ | 690 | | | 8.2 | % | | 5.7 | % | 3.2 | % | (1.6 | )% | 0.9 | % | 8.2 | % |

| • | Organic revenue grew 4.1% as a result of penetration gains, exceeding auto build growth of 2%. |

| ◦ | European organic revenue growth of 8.3% exceeded European auto builds which grew 3%. |

| ◦ | Asia Pacific organic revenue increased 9.5%. China organic revenue growth of 16.6% exceeded Chinese auto build growth of 2%. Auto builds of foreign automotive manufacturers in China, where the Company has higher content, grew 5%. |

| Operating revenue | $ | 2,123 | | | $ | 2,110 | | | 0.6 | % | | 0.5 | % | — | % | — | % | 0.1 | % | 0.6 | % |

| Operating income | $ | 556 | | | $ | 537 | | | 3.6 | % | | 2.2 | % | — | % | 1.2 | % | 0.2 | % | 3.6 | % |

| • | Operating revenue increased primarily due to organic revenue growth. |

| ◦ | North American organic revenue decreased 1.0%. Equipment organic revenue, which had a challenging comparable in the prior year period of 6.6% growth, decreased 1.8% primarily due to lower end market demand in the retail, restaurant and institutional end markets. Service revenue in North America increased 0.3%. |

| • | electronic assembly equipment and related consumable solder materials; |

| Operating revenue | $ | 2,069 | | | $ | 1,974 | | | 4.8 | % | | 4.8 | % | — | % | — | % | — | % | 4.8 | % |

| Operating income | $ | 464 | | | $ | 372 | | | 24.7 | % | | 24.0 | % | — | % | 0.7 | % | — | % | 24.7 | % |

| Operating margin % | 22.4 | | % | | 18.9 | | % | | 350 bps | | | 340 bps | | — | | 10 bps | | — | | 350 bps | |

| • | Operating revenue increased due to organic revenue growth. |

| • | Organic revenue increased 4.8%. |

| • | metal jacketing and other insulation products. |

| Operating revenue | $ | 1,538 | | | $ | 1,486 | | | 3.5 | % | | 3.2 | % | — | % | — | % | 0.3 | % | 3.5 | % |

| Operating income | $ | 415 | | | $ | 370 | | | 12.1 | % | | 9.6 | % | 1.5 | % | 0.8 | % | 0.2 | % | 12.1 | % |

| Operating margin % | 27.0 | | % | | 24.9 | | % | | 210 bps | | | 160 bps | | 30 bps | | 20 bps | | — | | 210 bps | |

| • | Organic revenue grew 3.2% as equipment grew 6.5%, partially offset by a decrease of 1.0% in consumables. Organic revenue grew primarily due to increased demand in the industrial end markets related to heavy equipment for agriculture, infrastructure and mining and in the commercial end markets related to construction, light fabrication and farm and ranch customers. |

| Operating revenue | $ | 1,724 | | | $ | 1,691 | | | 2.0 | % | | 1.0 | % | — | % | — | % | 1.0 | % | 2.0 | % |

| Operating income | $ | 357 | | | $ | 343 | | | 4.1 | % | | 4.7 | % | — | % | (1.1 | )% | 0.5 | % | 4.1 | % |

[removed: MARKET RISK][added: MARKET RISK]

[removed: Interest] [added: Interest] Rate [removed: Risk][added: Risk]

Refer to Note [removed: 9.][added: 10.]

Financial Statements and Supplemental Data for details related to the fair value of [added: the] Company's debt instruments.

[removed: Foreign] [added: Foreign] Currency [removed: Risk][added: Risk]

The Company operates in the U.S. and [removed: 54] [added: 52] foreign countries.

The Company designated [added: the] €1.0 billion of Euro notes issued in May [removed: 2014 and] [added: 2014, the] €1.0 billion of Euro notes issued in May 2015 [added: and the €1.6 billion of Euro notes issued in June 2019] as hedges of a portion of its net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations.

The cumulative unrealized pre-tax gain recorded in Accumulated other comprehensive income (loss) related to the net investment hedge was [removed: $187] [added: $239] million and [removed: $81] [added: $187] million as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

[removed: General][added: General]

The Company is a global manufacturer of a diversified range of industrial products and equipment with [removed: 87] [added: 84] divisions in [removed: 55] [added: 53] countries.

As of December 31, [removed: 2018,] [added: 2019,] the Company employed approximately [removed: 48,000] [added: 45,000] people.

[removed: Automotive OEM—] [added: 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.

[removed: Food Equipment—] [added: Food Equipment—] This segment is a highly focused and branded industry leader in commercial food equipment differentiated by innovation and integrated service offerings.

[removed: Test] [added: Test] & Measurement and [removed: Electronics—] [added: 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.

This segment primarily serves the electronics, general industrial, [removed: industrial capital goods,] automotive original equipment manufacturers and tiers, [added: industrial capital goods, energy] and consumer durables markets.

[removed: Welding—] [added: Welding—] This segment is a branded value-added equipment and specialty consumable manufacturer with innovative and leading technology.

| • | arc welding equipment; [added: and] |

| • | metal arc welding consumables and related [removed: accessories; and] [added: accessories.] |

[removed: Polymers] [added: Polymers] & [removed: Fluids—] [added: Fluids—] This segment is a branded supplier to niche markets that require value-added, differentiated products.

[removed: Construction Products—] [added: Construction Products—] This segment is a branded supplier of innovative engineered fastening systems and solutions.

[removed: Specialty Products—] [added: 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, [removed: consumer durables,] general industrial, [removed: printing and publishing and] [added: consumer durables,] industrial capital goods [added: and printing and publishing] markets.

[removed: The] [added: The] ITW Business [removed: Model][added: Model]

[removed: This business model] [added: The ITW Business Model] is the Company’s competitive advantage and defines how ITW creates value for its [removed: shareholders and comprises three unique elements:][added: shareholders.]

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

| • | [removed: Customer-back Innovation] [added: Customer-back Innovation] has fueled decades of profitable growth at ITW. The Company’s unique innovation approach is built on insight gathered from the 80/20 Front-to-Back process. Working from the customer back, ITW businesses position themselves as the go-to problem solver for their “80” customers. ITW’s innovation efforts are focused on understanding customer needs, particularly those in “80” markets with solid long-term growth fundamentals, and [removed: subsequently] creating unique solutions to address those needs. These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately 18,000 granted and pending patents; |

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

[removed: Enterprise Strategy][added: Enterprise Strategy]

[removed: Focusing] [added: The Company undertook a complete review of its performance, focusing] on its businesses delivering consistent above-market growth with best-in-class margins and returns, [removed: ITW developed] [added: and developing] a strategy to replicate that performance across its operations.

[removed: Based on this rigorous evaluation,] ITW determined that solid and consistent above-market organic growth [removed: must be] [added: is] the core growth engine to deliver world-class financial performance and compelling long-term returns for its shareholders.

| • | Step two, Business Structure Simplification, was implemented to simplify and [removed: scale-up] [added: scale up] ITW’s operating structure to support increased engineering, marketing, and sales resources, [removed: and, at the same time,] [added: and] improve global reach and competitiveness, all of which were critical to driving accelerated organic growth. ITW now has [removed: 87] [added: 84] scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation. |

| • | The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at [removed: ITW. The Company’s 80/20-enabled sourcing organization has delivered] [added: ITW, delivering] an average of one percent reduction in spend each year from 2013 through [removed: 2018] [added: 2019] and [removed: is on track] [added: continues] to [removed: do] [added: be a key contributor to] the [removed: same in 2019.] [added: Company's ongoing enterprise strategy.] |

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

[removed: Path] [added: Path] to Full Potential - Finishing the [removed: Job][added: Job]

The ITW Business Model and unique set of capabilities are a source of strong and enduring competitive advantage, but for the Company to truly [added: finish the job and] reach its full [removed: potential over the next five years,] [added: potential,] every one of its divisions must also be operating at its full potential.

To do so, the Company remains focused on [removed: three key areas] [added: its core principles] to [removed: finish the job of positioning] [added: position] ITW to perform to its full potential:

[removed: Portfolio Discipline][added: Portfolio Discipline]

ITW’s portfolio operates in [added: highly] diverse end markets and geographies which makes the Company more resilient in the face of uncertain or volatile market environments.

[removed: 80/20] [added: 80/20] Front-to-Back Practice [removed: Excellence][added: Excellence]

ITW will continue its efforts to [added: finish the job and] drive 80/20 Front-to-Back practice excellence in every division in the Company, every day.

[removed: Full-potential] [added: Full-Potential] Organic [removed: Growth][added: Growth]

The Company has clearly defined action plans aimed at leveraging the performance power of the ITW Business Model to achieve full-potential organic growth in every [removed: division.][added: division, with specific focus on:]

The Company [removed: is currently exploring] [added: previously communicated its intent to explore] options, including potential divestitures, for certain businesses with revenues totaling up to $1 billion.

[removed: If a decision is made to divest any of these businesses, the] [added: The] Company expects [removed: that] [added: any] earnings per share dilution [added: from divestitures] would be offset by incremental share repurchases.

[removed: Current] [added: Current] Year [removed: Developments][added: Developments]

[removed: Distribution Methods][added: Distribution Methods]

[removed: Backlog][added: Backlog]

Due to the predominately [removed: short term] [added: short-term] nature of the Company's arrangements with its customers, backlog orders scheduled for shipment beyond calendar year [removed: 2019] [added: 2020] were not material as of December 31, [removed: 2018.][added: 2019.]

| • | electronic assembly equipment; |

It is comprised of three unique elements:

As part of its agenda to finish the job, the Company routinely evaluates its portfolio to ensure it delivers sustainable differentiation and drives consistent long-term performance.

This includes both implementing portfolio refinements and assessing selective high-quality acquisitions to supplement ITW’s long-term growth potential.

In the fourth quarter of 2019, the Company completed the divestitures of three businesses and continues to evaluate options for certain other businesses.

Refer to Note 2.

Divestitures in Item 8.

Financial Statements and Supplementary Data for more information regarding divestitures.

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

| • | "80” focused Market Penetration - fully leveraging the considerable growth potential that resides in the Company's largest and most differentiated product offerings and customer relationships |

| • | Customer-Back Innovation - strengthening the Company's commitment to serial innovation and delivering a continuous flow of differentiated new products to its key customers |

| • | Strategic Sales Excellence - deploying a high-performance sales function in every division |

As the Company continues to make progress toward its full potential, the Company will explore opportunities to reinforce or further expand the long-term organic growth potential of ITW through the addition of selective high-quality acquisitions.

Total backlog was $1.5 billion and $1.6 billion as of December 31, 2019 and 2018, respectively.

| Axel Beck | 54 | Executive Vice President | 2020 | Vice President/General Manager, food equipment businesses, 2011-2016, Group President, food equipment businesses, 2016-2020 |

| Kenneth Escoe | 44 | Executive Vice President | 2020 | Vice President/General Manager, welding businesses, 2014-2016, Vice President/General Manager, specialty products businesses, 2016-2019, Group President, specialty products businesses, 2019-2020 |

| Sharon Szafranski | 53 | Executive Vice President | 2020 | Vice President/General Manager, food equipment businesses, 2010-2016, Vice President/General Manager, test & measurement and electronics businesses, 2016-2019, Group President, test & measurement and electronics businesses, 2019-2020 |

| | |

| --- | --- |

| | |

| --- | --- |

| | |

| --- | --- |

| • | Environmental & Sustainability Policy; |

| | |

| --- | --- |

| • | Human Rights Policy; |

| | |

| --- | --- |

| • | Safety Policy; and |

| | |

| --- | --- |

| • | United Kingdom Tax Policy Document. |

| • | electronic assembly equipment and related consumable solder materials; |

| • | metal jacketing and other insulation products. |

Since then, ITW has made considerable progress in its path to full potential.

The roots of ITW’s Enterprise Strategy began in late 2011 / early 2012, when the Company undertook a complete review of its performance.

At the same time, the Company consistently reviews its portfolio, assesses businesses that are growth-challenged and evaluates if further portfolio refinements may be needed.

Divestiture Activity

Divestiture of the Industrial Packaging Segment— In February 2013, the Company announced that it was initiating a review process to explore strategic alternatives for the Industrial Packaging segment.

In September 2013, the Company’s Board of Directors authorized a plan to commence a sale process for the Industrial Packaging segment.

The Company classified the Industrial Packaging segment as held for sale beginning in the third quarter of 2013 and no longer presented this segment as part of its continuing operations.

On February 6, 2014, the Company announced that it had signed a definitive agreement to sell the Industrial Packaging business to The Carlyle Group for $3.2 billion.

The transaction was completed on May 1, 2014, resulting in a pre-tax gain of $1.7 billion ($1.1 billion after-tax) in the second quarter of 2014 which was included in Income from discontinued operations.

Backlog by segment as of December 31, 2018 and 2017 was as follows:

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| In millions | 2018 | | | | 2017 | | |

| Automotive OEM | $ | 500 | | | $ | 462 | |

| Food & Equipment | 215 | | | | 204 | | |

| Test & Measurement and Electronics | 378 | | | | 342 | | |

| Welding | 93 | | | | 90 | | |

| Polymers & Fluids | 67 | | | | 57 | | |

| Construction Products | 30 | | | | 39 | | |

| Specialty Products | 280 | | | | 243 | | |

| Total | $ | 1,563 | | | $ | 1,437 | |

| Andrew Mines | 47 | Executive Vice President | 2018 | Group President, construction businesses 2013-2018 |

| Christopher O’Herlihy | 55 | Vice Chairman | 2015 | Executive Vice President, 2010-2015 |

| Juan Valls | 57 | Executive Vice President | 2007 | |

[removed: UNITED] [added: UNITED] STATES SECURITIES AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: WASHINGTON,] [added: WASHINGTON,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: x] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the fiscal year [removed: ended December] [added: ended December] 31, [removed: 2018][added: 2019]

| [removed: o] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: For] [added: For] the transition period [removed: from to][added: from to]

[removed: Commission] [added: Commission] file [removed: number 1-4797][added: number 1-4797]

[removed: ILLINOIS] [added: ILLINOIS] TOOL WORKS [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] Name of Registrant as Specified in its [removed: Charter)][added: Charter)]

| [removed: Delaware] [added: Delaware] | | [removed: 36-1258310] | [added: | | | 36-1258310 |]

| (State or Other Jurisdiction of Incorporation or Organization) | | [added: | | | |] (I.R.S. Employer Identification No.) |

| [removed: 155] [added: | 155] Harlem [removed: Avenue, Glenview, Illinois] [added: Avenue] | [added: Glenview] | [removed: 60025] [added: Illinois] | [added: | | 60025 |]

| (Address of Principal Executive Offices) | | [added: | | | |] (Zip Code) |

Registrant’s telephone number, including area code: [removed: (847) 724-7500][added: (847) 724-7500]

[removed: Securities] [added: Securities] registered pursuant to Section 12(b) of the [removed: Act:][added: Act:]

| [removed: Title] [added: Title] of Each [removed: Class] [added: Class] | [added: Trading Symbol(s)] | [removed: Name] [added: Name] of Each Exchange on Which [removed: Registered] [added: Registered] |

| Common Stock | [added: ITW] | New York Stock Exchange |

| 1.75% Euro Notes due 2022 | [added: ITW22] | New York Stock Exchange |

| 1.25% Euro Notes due 2023 | [added: ITW23] | New York Stock Exchange |

| 2.125% Euro Notes due 2030 | [added: ITW30] | New York Stock Exchange |

| 3.00% Euro Notes due 2034 | [added: ITW34] | New York Stock Exchange |

Yes [removed: x] [added: ☒] No [removed: o][added: ☐]

Yes [removed: o] [added: ☐] No [removed: x][added: ☒]

| Large accelerated filer | [removed: x] [added: ☒] | Accelerated filer | [removed: o] [added: ☐] |

| Non-accelerated filer | [removed: o] [added: ☐] | Smaller reporting company | [removed: o] [added: ☐] |

| Emerging growth company | [removed: o] [added: ☐] | | |

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, [removed: 2018] [added: 2019] was approximately [removed: $43.5] [added: $45.6] billion based on the New York Stock Exchange closing sales price as of June 30, [removed: 2018.][added: 2019.]

[removed: Documents] [added: Documents] Incorporated by [removed: Reference][added: Reference]

| Portions of the [removed: 2019] [added: 2020] Proxy Statement for Annual Meeting of Stockholders to be held on May [removed: 3, 2019.] [added: 8, 2020.] | | Part III |

| | [removed: Table] [added: Table] of [removed: Contents] [added: Contents] | |

[removed: | | [PART I](#s6038BC24A46258B0AEAFF92EE584593A) | |][added: PART I]

| [Item [removed: 1.](#s07B80A8793EE5AD2BD26CEC23909467A)] [added: 1.](#s81D6D784461E521EA3E6B82727AFC486)] | [removed: [Business](#s07B80A8793EE5AD2BD26CEC23909467A)] [added: [Business](#s81D6D784461E521EA3E6B82727AFC486)] | [removed: [3](#s07B80A8793EE5AD2BD26CEC23909467A)] [added: [3](#s81D6D784461E521EA3E6B82727AFC486)] |

| [Item [removed: 1A.](#s6A50F2A50F755326B2BA2A526B1DF9BC)] [added: 1A.](#s171F4FEF9D1C5E82A46BB1ED5A8EF4FA)] | [Risk [removed: Factors](#s6A50F2A50F755326B2BA2A526B1DF9BC)] [added: Factors](#s171F4FEF9D1C5E82A46BB1ED5A8EF4FA)] | [removed: [10](#s6A50F2A50F755326B2BA2A526B1DF9BC)] [added: [9](#s171F4FEF9D1C5E82A46BB1ED5A8EF4FA)] |

| [Item [removed: 1B.](#s046C0A2369E7578EA44CA1FFAF2E2FCC)] [added: 1B.](#s62989A6C1CF9533DA42815ABA780DBB6)] | [Unresolved Staff [removed: Comments](#s046C0A2369E7578EA44CA1FFAF2E2FCC)] [added: Comments](#s62989A6C1CF9533DA42815ABA780DBB6)] | [removed: [14](#s046C0A2369E7578EA44CA1FFAF2E2FCC)] [added: [14](#s62989A6C1CF9533DA42815ABA780DBB6)] |

| [Item [removed: 2.](#s7DC4018747C650B7973EBCF471769B71)] [added: 2.](#s17E9918C04245459A886A11F1309DD83)] | [removed: [Properties](#s7DC4018747C650B7973EBCF471769B71)] [added: [Properties](#s17E9918C04245459A886A11F1309DD83)] | [removed: [14](#s7DC4018747C650B7973EBCF471769B71)] [added: [14](#s17E9918C04245459A886A11F1309DD83)] |

| [Item [removed: 3.](#s101CBBC2A87B5AEB814C7EA51834B64E)] [added: 3.](#s1F1EF399BEC1547AA417AF45A3536780)] | [Legal [removed: Proceedings](#s101CBBC2A87B5AEB814C7EA51834B64E)] [added: Proceedings](#s1F1EF399BEC1547AA417AF45A3536780)] | [removed: [15](#s101CBBC2A87B5AEB814C7EA51834B64E)] [added: [14](#s1F1EF399BEC1547AA417AF45A3536780)] |

| [Item [removed: 4.](#s26F0BE9BFA5453739B9ADCD5F4282C2C)] [added: 4.](#s03A8C14800845005BC5A2E822E0B014F)] | [Mine Safety [removed: Disclosures](#s26F0BE9BFA5453739B9ADCD5F4282C2C)] [added: Disclosures](#s03A8C14800845005BC5A2E822E0B014F)] | [removed: [15](#s26F0BE9BFA5453739B9ADCD5F4282C2C)] [added: [14](#s03A8C14800845005BC5A2E822E0B014F)] |

| [Item [removed: 5.](#sC0D9EC6F2C5A59D793648576F023B434)] [added: 5.](#s447D9FDBC09F5289BF1E219BB4D640FD)] | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#sC0D9EC6F2C5A59D793648576F023B434)] [added: Securities](#s447D9FDBC09F5289BF1E219BB4D640FD)] | [removed: [16](#sC0D9EC6F2C5A59D793648576F023B434)] [added: [15](#s447D9FDBC09F5289BF1E219BB4D640FD)] |

| [Item [removed: 6](#s3FEB5273FB695B9383A5609C9F7E728C).] [added: 6](#s8679CC3BF7845E8B8646FACAAF41179F).] | [Selected Financial [removed: Data](#s3FEB5273FB695B9383A5609C9F7E728C)] [added: Data](#s8679CC3BF7845E8B8646FACAAF41179F)] | [removed: [17](#s3FEB5273FB695B9383A5609C9F7E728C)] [added: [16](#s8679CC3BF7845E8B8646FACAAF41179F)] |

OR

| | | | | | | |

| --- | --- | --- | --- | --- | --- | --- |

| | | | | | | |

| 0.250% Euro Notes due 2024 | ITW24A | New York Stock Exchange |

| 0.625% Euro Notes due 2027 | ITW27 | New York Stock Exchange |

| 1.00% Euro Notes due 2031 | ITW31 | New York Stock Exchange |

Yes ☒ No ☐

Yes ☒ No ☐

Yes ☐ No ☒

Shares of Common Stock outstanding at January 31, 2020: 318,864,237.

| | [PART II](#s0BAF78C6DDB95848A8B375CD45D0B203) | |

| | [PART IV](#s86DA3D28705C5AAC99F2123B143D0A05) | |

| | [Signatures](#s2AB090D251275B54B19480147D2AE2E3) | [82](#s2AB090D251275B54B19480147D2AE2E3) |

10-K 1 itw-20181231x10k.htm 10-K

OR

| | | |

| --- | --- | --- |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Shares of Common Stock outstanding at January 31, 2019: 328,108,383.

| | [PART II](#s1CDD57435C3656EFAB8A070CE1FD259A) | |

| | [PART IV](#s3D2B7B21B4385FDE9F7DE7A242E113EF) | |

| | [Signatures](#s9E0AADA9DA575C7BA1F2BD6B0DF04C15) | [82](#s9E0AADA9DA575C7BA1F2BD6B0DF04C15) |

Due to the Company’s decentralized operating [removed: structure,] [added: structure and global operations,] the Company operates out of a number of facilities worldwide, none of which are individually significant to the Company or its segments.

As of December 31, [removed: 2018,] [added: 2019,] the Company operated [removed: the following] [added: approximately 440] plants and office facilities, excluding regional sales offices and warehouse [removed: facilities:][added: facilities.]

The Company adds production [added: capacity from time to time as required by increased demand.]

Approximately 280 of the facilities were located outside of the United States.

Principal foreign countries include China, Germany, the United Kingdom and France.

| | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | Number Of Properties | | | | | | | |

| | Owned | | | Leased | | | Total | | |

| Automotive OEM | | 66 | | | 25 | | | 91 | |

| Food Equipment | | 26 | | | 19 | | | 45 | |

| Test & Measurement and Electronics | | 27 | | | 57 | | | 84 | |

| Welding | | 27 | | | 12 | | | 39 | |

| Polymers & Fluids | | 34 | | | 29 | | | 63 | |

| Construction Products | | 25 | | | 24 | | | 49 | |

| Specialty Products | | 49 | | | 29 | | | 78 | |

| Corporate | | 1 | | | 9 | | | 10 | |

| Total | | 255 | | | 204 | | | 459 | |

capacity from time to time as required by increased demand.

The Company operated 288 plants and office facilities outside of the U.S. Principal countries include China, Germany, France and the United Kingdom.

[removed: PART II][added: PART II]

[removed: Common] [added: Common] Stock [removed: Data—] [added: Data—] The Company's common stock is listed on the New York Stock Exchange.

There were approximately [removed: 5,834] [added: 5,513] holders of record of common stock as of January 31, [removed: 2019.][added: 2020.]

[removed: ][added: ]

*Assumes $100 invested on [removed: 12/31/13] [added: 12/31/14] in stock or index, including reinvestment of dividends.

The [removed: 2018] [added: 2019] peer group consists of the following 17 public companies, consistent with the peer group included in the Company's Proxy statement:

[removed: Repurchases] [added: Repurchases] of Common [removed: Stock—] [added: Stock—] On February 13, 2015, the Company’s Board of Directors authorized a stock repurchase program which [removed: provides] [added: provided] for the repurchase of up to $6.0 billion of the Company’s common stock over an open-ended period of time (the "2015 Program").

As of December 31, [removed: 2018,] [added: 2019,] there were approximately [removed: $446 million] [added: $1.9 billion] of authorized repurchases remaining under the [removed: 2015 Program.][added: 2018 program.]

On August 3, 2018, the Company's Board of Directors authorized a new stock repurchase program which provides for the [removed: buyback] [added: repurchase] of up to an additional $3.0 billion of the Company's common stock over an open-ended period of time (the "2018 Program").

Share repurchase activity under the Company's share repurchase [removed: programs] [added: program] for the fourth quarter of [removed: 2018] [added: 2019] was as follows:

| [removed: In] [added: In] millions except per share [removed: amounts] [added: amounts] | | | | | | | | | | | | | |

| [removed: Period] [added: Period] | [removed: Total] [added: Total] Number of Shares [removed: Purchased] [added: Purchased] | | | [removed: Average] [added: Average] Price Paid Per [removed: Share] [added: Share] | | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced [removed: Program] [added: Program] | | | [removed: Maximum] [added: Maximum] Value of Shares That May Yet Be Purchased Under [removed: Programs] [added: Programs] | | |

Copyright© 2020 Standard & Poor's, a division of S&P Global.

The 2015 Program was completed in the second quarter of 2019.

| October 2019 | 0.1 | | | $ | 167.78 | | | 0.1 | | | $ | 2,301 | |

| November 2019 | 0.3 | | | $ | 173.98 | | | 0.3 | | | $ | 2,256 | |

| December 2019 | 1.8 | | | $ | 175.67 | | | 1.8 | | | $ | 1,946 | |

| Total | 2.2 | | | | | | | 2.2 | | | | | |

Copyright© 2019 S&P, a division of McGraw Hill Financial.

As of December 31, 2018, there were $3.0 billion of authorized repurchases remaining under the 2018 program.

| October 2018 | 2.0 | | | $ | 126.43 | | | 2.0 | | | $ | 3,690 | |

| November 2018 | 0.7 | | | $ | 131.50 | | | 0.7 | | | $ | 3,595 | |

| December 2018 | 1.2 | | | $ | 131.92 | | | 1.2 | | | $ | 3,446 | |

| Total | 3.9 | | | | | | | 3.9 | | | | | |

| [removed: In] [added: In] millions except per share [removed: amounts] [added: amounts] | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Operating revenue | $ | [removed: 14,768] [added: 14,109] | | | $ | [removed: 14,314] [added: 14,768] | | | $ | [removed: 13,599] [added: 14,314] | | | $ | [removed: 13,405] [added: 13,599] | | | $ | [removed: 14,484] [added: 13,405] | |

| Income from continuing operations | [removed: 2,563] [added: 2,521] | | | | [removed: 1,687] [added: 2,563] | | | | [removed: 2,035] [added: 1,687] | | | | [removed: 1,899] [added: 2,035] | | | | [removed: 1,890] [added: 1,899] | | |

| Basic | [removed: 7.65] [added: 7.78] | | | | [removed: 4.90] [added: 7.65] | | | | [removed: 5.73] [added: 4.90] | | | | [removed: 5.16] [added: 5.73] | | | | [removed: 4.70] [added: 5.16] | | |

| Diluted | [removed: 7.60] [added: 7.74] | | | | [removed: 4.86] [added: 7.60] | | | | [removed: 5.70] [added: 4.86] | | | | [removed: 5.13] [added: 5.70] | | | | [removed: 4.67] [added: 5.13] | | |

| Total assets at year-end | [removed: 14,870] [added: 15,068] | | | | [removed: 16,780] [added: 14,870] | | | | [removed: 15,201] [added: 16,780] | | | | [removed: 15,729] [added: 15,201] | | | | [removed: 17,465] [added: 15,729] | | |

| Long-term debt at year-end | [removed: 6,029] [added: 7,754] | | | | [removed: 7,478] [added: 6,029] | | | | [removed: 7,177] [added: 7,478] | | | | [removed: 6,896] [added: 7,177] | | | | [removed: 5,943] [added: 6,896] | | |

| Cash dividends declared per common share | [removed: 3.56] [added: 4.14] | | | | [removed: 2.86] [added: 3.56] | | | | [removed: 2.40] [added: 2.86] | | | | [removed: 2.07] [added: 2.40] | | | | [removed: 1.81] [added: 2.07] | | |

Additionally, the income tax effects related to excess tax benefits [added: should be presented within operating cash flows in the statement of cash flows rather than as a financing activity.]

Excess tax benefits recognized in equity under the prior guidance were $29 [removed: million, $20] million and [removed: $33] [added: $20] million for the years ended December 31, [removed: 2016,] [added: 2016 and] 2015, [removed: 2014,] respectively.

Excess tax benefits of [added: $28 million,] $10 million and $50 million were included in Income taxes in the statement of income for the years ended December 31, [added: 2019,] 2018 and 2017, respectively.

In April 2014, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance to change the criteria for reporting discontinued operations.

Under the new guidance, only disposals representing a strategic shift in a company's operations and financial results should be reported as discontinued operations.

The Company adopted this new guidance effective January 1, 2015.

The new guidance applies prospectively to new disposals and new classifications of disposal groups held for sale after such date.

There were no discontinued operations subsequent to 2014 under this new accounting guidance.

Income from discontinued operations was $1.1 billion in 2014.

In November 2015, the FASB issued authoritative guidance to simplify the presentation of deferred taxes.

Under the new guidance, all deferred tax assets and liabilities are presented as noncurrent in the statement of financial position.

Early adoption of this guidance in the fourth quarter of 2015 decreased total assets by $175 million in 2014.

should be presented within operating cash flows in the statement of cash flows rather than as a financing activity.

[removed: MANAGEMENT] [added: MANAGEMENT] REPORT ON INTERNAL CONTROL OVER FINANCIAL [removed: REPORTING][added: REPORTING]

ITW management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2018.][added: 2019.]

Based on our assessment we believe that, as of December 31, [removed: 2018,] [added: 2019,] the Company’s internal control over financial reporting is effective based on those criteria.

The effectiveness of the Company’s internal control over financial reporting as of December 31, [removed: 2018] [added: 2019] has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report herein.

| /s/ E. Scott Santi E. Scott Santi Chairman & Chief Executive Officer February [removed: 15, 2019] [added: 14, 2020] | | /s/ Michael M. Larsen Michael M. Larsen Senior Vice President & Chief Financial Officer February [removed: 15, 2019] [added: 14, 2020] |

[removed: REPORT] [added: REPORT] OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING [removed: FIRM][added: FIRM]

To the [added: stockholders and the] Board of Directors [removed: and Stockholders] of Illinois Tool Works Inc.

[removed: Opinions] [added: Opinions] on the Financial Statements and Internal Control over Financial [removed: Reporting][added: Reporting]

We have audited the accompanying consolidated statements of financial position of Illinois Tool Works Inc. and subsidiaries (the "Company") as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes (collectively referred to as the "financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in [removed: Internal] [added: *Internal] Control - Integrated Framework [removed: (2013)] [added: (2013)*] issued by COSO.

[removed: Basis] [added: Basis] for [removed: Opinions][added: Opinions]

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying [removed: Management] [added: *Management] Report on Internal Control Over Financial [removed: Reporting.][added: Reporting*.]

[removed: Definition] [added: Definition] and Limitations of Internal Control over Financial [removed: Reporting][added: Reporting]

[removed: Statement] [added: Statement] of [removed: Income][added: Income]

[removed: Illinois] [added: Illinois] Tool Works Inc. and [removed: Subsidiaries][added: Subsidiaries]

| | [removed: For] [added: For] the Years Ended December [removed: 31] [added: 31] | | | | | | | | | | |

| [removed: In] [added: In] millions except per share [removed: amounts] [added: amounts] | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Operating Revenue | $ | [removed: 14,768] [added: 14,109] | | | $ | [removed: 14,314] [added: 14,768] | | | $ | [removed: 13,599] [added: 14,314] | |

| Cost of revenue | [removed: 8,604] [added: 8,187] | | | | [removed: 8,306] [added: 8,604] | | | | [removed: 7,908] [added: 8,306] | | |

| Selling, administrative, and research and development expenses | [removed: 2,391] [added: 2,361] | | | | [removed: 2,412] [added: 2,391] | | | | [removed: 2,411] [added: 2,412] | | |

| Legal settlement (income) | — | | | | [removed: (95] [added: —] | | [removed: )] | | [removed: —] [added: (95] | | [added: )] |

| Amortization and impairment of intangible assets | [removed: 189] [added: 159] | | | | [removed: 206] [added: 189] | | | | [removed: 224] [added: 206] | | |

| Operating Income | [removed: 3,584] [added: 3,402] | | | | [removed: 3,485] [added: 3,584] | | | | [removed: 3,056] [added: 3,485] | | |

| Interest expense | [removed: (257] [added: (221] | | ) | | [removed: (260] [added: (257] | | ) | | [removed: (237] [added: (260] | | ) |

[removed: |] [added: (5)] Other [removed: income (expense) | 67 | | | | 45 | | | | 89 | | |][added: Income (Expense)]

| Income Before Taxes | [removed: 3,394] [added: 3,288] | | | | [removed: 3,270] [added: 3,394] | | | | [removed: 2,908] [added: 3,270] | | |

| Income taxes | [removed: 831] [added: 767] | | | | [removed: 1,583] [added: 831] | | | | [removed: 873] [added: 1,583] | | |

| Net Income | $ | [removed: 2,563] [added: 2,521] | | | $ | [removed: 1,687] [added: 2,563] | | | $ | [removed: 2,035] [added: 1,687] | |

| Basic | $ | [removed: 7.65] [added: 7.78] | | | $ | [removed: 4.90] [added: 7.65] | | | $ | [removed: 5.73] [added: 4.90] | |

| Diluted | $ | [removed: 7.60] [added: 7.74] | | | $ | [removed: 4.86] [added: 7.60] | | | $ | [removed: 5.70] [added: 4.86] | |

[removed: The] [added: *The] Notes to Financial Statements are an integral part of this [removed: statement.][added: statement.*]

[removed: Statement] [added: Statement] of Comprehensive [removed: Income][added: Income]

| [removed: In millions] [added: In millions] | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Foreign currency translation adjustments, net of tax | [removed: (328] [added: (2] | | ) | | [removed: 406] [added: (328] | | [added: )] | | [removed: (277] [added: 406] | | [removed: )] |

| Pension and other postretirement benefit adjustments, net of tax | [removed: (17] [added: (26] | | ) | | [removed: 114] [added: (17] | | [added: )] | | [removed: (26] [added: 114] | | [removed: )] |

| Comprehensive Income | $ | [removed: 2,218] [added: 2,493] | | | $ | [removed: 2,207] [added: 2,218] | | | $ | [removed: 1,732] [added: 2,207] | |

[removed: Statement] [added: Statement] of Financial [removed: Position][added: Position]

| | [removed: December 31] [added: December 31] | | | | | | |

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes-Refer to Note 6 to the financial statements

*Critical Audit Matter Description*

The Company’s income tax expense is recognized and measured based on management’s interpretation of the tax regulations and rulings in numerous taxing jurisdictions, which requires significant judgment.

When calculating income tax expense management makes estimates and assumptions, including determination of the completeness of book income in each jurisdiction, calculation of taxable income through identification and classification of book to tax differences (either temporary or permanent items), consideration of applicable tax deductions or credits, and the identification of uncertain tax positions.

The evaluation of each uncertain tax position requires management to apply specialized skill and knowledge related to the identified position.

Management evaluates uncertain tax positions identified and a liability is established for unrecognized tax benefits when there is a more than 50% likelihood that its tax position will not be sustained upon examination by taxing authorities.

There is additional judgment to determine the amount of the liability for the underlying tax position.

The Company’s income tax expense for 2019 was $767 million and the liability recorded for unrecognized tax benefits as of December 31, 2019, was $296 million.

Given the number of taxing jurisdictions and the complex and subjective nature of the associated tax regulations and rulings, certain audit matters required a high degree of auditor judgment and increased extent of effort, including the need to involve our income tax specialists.

These matters included the auditing of income tax expense, identification of uncertain tax positions, measurement of unrecognized tax benefits, and certain planning transactions with income tax expense implications.

*How the Critical Audit Matter Was Addressed in the Audit*

With the assistance of our income tax specialists, our principal audit procedures related to income tax expense included the following, among others:

| • | We tested the effectiveness of management’s controls over income taxes, including those over income tax expense, unrecognized tax benefits, and certain planning transactions with income tax expense implications. |

| • | We evaluated management’s significant estimates and judgments incorporated into the calculation of income tax expense by: |

| • | Selecting a sample of book to tax differences (temporary and permanent) and testing the accuracy, completeness, and classification of the selections, including evaluating that all impacts of significant transactions with income tax expense implications are considered. |

| • | Developing an expectation over the foreign income tax expense by jurisdiction and comparing it to the recorded balance. |

| • | Testing the accuracy of the income tax expense calculation. |

| • | We evaluated management’s significant judgments regarding the identification of uncertain tax positions by: |

| • | Evaluating the reasonableness of a selection of certain planning transactions with income tax expense implications, including the completeness and accuracy of the underlying data supporting the transactions. |

| • | Assessing management’s methods and assumptions used in identifying uncertain tax positions. |

| • | Comparing results of prior tax audits to ongoing and anticipated tax audits by tax authorities. |

| • | Evaluating external information, including applicable tax law, new interpretations, and related changes to assess the completeness and reasonableness of management’s considerations. |

| • | Determining if there was additional information not considered in management’s assessment. |

| • | We evaluated a sample of the liabilities recorded for unrecognized tax benefits to assess the establishment and amount of the liability for the specific underlying tax position. |

February 14, 2020

Illinois Tool Works Inc. and Subsidiaries

| | For the Years Ended December 31 | | | | | | | | | | |

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

Illinois Tool Works Inc. and Subsidiaries

| Assets held for sale | 351 | | | | — | | |

| | $ | 15,068 | | | $ | 14,870 | |

| Liabilities held for sale | 71 | | | | — | | |

| | $ | 15,068 | | | $ | 14,870 | |

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

Illinois Tool Works Inc. and Subsidiaries

| Balance at December 31, 2019 | $ | 6 | | $ | 1,304 | | $ | 22,403 | | $ | (18,982 | ) | $ | (1,705 | ) | $ | 4 | | $ | 3,030 | |

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

Glenview, Illinois

February 15, 2019

| Balance at December 31, 2015 | $ | 6 | | $ | 1,135 | | $ | 18,316 | | $ | (12,729 | ) | $ | (1,504 | ) | $ | 4 | | $ | 5,228 | |

| Tax benefits related to stock options | — | | | 29 | | | — | | | — | | | — | | | — | | | 29 | | |

| Tax benefits related to defined contribution plans | — | | | 3 | | | — | | | — | | | — | | | — | | | 3 | | |

| Gain on dividend distribution from equity investment in Wilsonart | — | | | | — | | | | (54 | | ) |

| Dividend distribution from equity investment in Wilsonart | — | | | | — | | | | 167 | | |

| Liabilities Assumed from Acquisitions | $ | — | | | $ | 5 | | | $ | 150 | |

| Equipment leased to others | | 165 | | | | 164 | | |

| Equipment leased to others | Term of lease |

In March 2016, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance that includes several changes to simplify the accounting for stock-based compensation, including the accounting for income taxes, forfeitures, statutory tax withholding requirements and classification of tax benefits in the statement of cash flows.

Among the more significant changes, the new guidance requires that the income tax effects associated with the settlement of stock-based awards after adoption of the guidance be recognized through income tax expense rather than directly in equity.

Additionally, the income tax effects related to excess tax benefits should be presented within operating cash flows in the statement of cash

flows rather than as a financing activity.

Excess tax benefits recognized in equity under the prior guidance was $29 million for the year ended December 31, 2016.

The Company adopted the new guidance effective January 1, 2017 and applied the new guidance prospectively.

Excess tax benefits of $10 million and $50 million were included in Income taxes in the statement of income for the years ended December 31, 2018 and December 31, 2017, respectively.

The expected effect on income tax expense or net cash provided from operating activities related to future stock-based award settlements will vary each period and will depend on inputs such as the stock price at the time of settlement and the number of awards settled in the period presented.

In March 2017, the FASB issued authoritative guidance which changes the income statement presentation of net periodic benefit cost related to defined benefit pension and other postretirement plans.

The primary change under the new guidance is that only the service cost component of net periodic benefit cost should be included in operating income and is eligible for capitalization as an asset.

The other components of net periodic benefit cost ("other net periodic benefit cost"), including interest cost, expected return on assets, settlements, curtailments, and amortization of actuarial gains and losses and prior service cost, should be presented below operating income.

Effective January 1, 2018, the Company adopted the new presentation of other net periodic benefit cost and restated the prior year statements of income and related disclosures for comparability, as required under the new guidance.

For the years ended December 31, 2018, 2017 and 2016, other net periodic benefit cost included in Other income (expense) was income of $20 million, $9 million and $8 million, respectively.

This guidance was effective January 1, 2019 and the Company will apply the guidance prospectively to lease transactions as of and after the

effective date.

Although the Company is currently finalizing its review of operating leases as of the adoption date, the Company expects to record a right of use asset and lease liability for its operating leases of less than two percent of total assets.

Additionally, the Company expects to provide additional disclosures in periods subsequent to adoption.

(2) Acquisitions

There were no acquisitions during 2018.

Net cash paid for acquisitions during 2017 and 2016 was $3 million and $453 million, respectively.

Acquisitions, individually and in the aggregate, did not materially affect the Company's results of operations or financial position for any period presented.

The net cash paid for acquisitions in 2016 primarily related to the acquisition of the Engineered Fasteners and Components ("EF&C") business from ZF TRW on July 1, 2016 for a purchase price of approximately $450 million.

As a result of the EF&C transaction, which was reported in the Company's Automotive OEM segment, the Company recorded $187 million of goodwill and $134 million of amortizable intangible assets primarily related to customer relationships and technology.

Approximately $104 million of the acquired goodwill balance is tax deductible.

The fair values of the intangible assets were estimated based on discounted cash flow and market-based valuation models using Level 2 and Level 3 inputs and assumptions.

The intangible assets are amortized on a straight-line basis over their estimated useful lives ranging from 4 to 17 years, with a weighted average amortization period of 16 years.

Description of Business and Summary of Significant Accounting Policies for additional information.

| • | electronic assembly equipment and related consumable solder materials; |

| • | metal jacketing and other insulation products. |

In the second quarter of 2017, the Company entered into a $95 million confidential settlement agreement to resolve a litigation matter.

[removed: Controls] [added: Controls] and [removed: Procedures][added: Procedures]

The Company’s management, with the participation of the Company’s Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, [removed: 2018.][added: 2019.]

Based on such evaluation, the Company’s Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer have concluded that, as of December 31, [removed: 2018,] [added: 2019,] the Company’s disclosure controls and procedures were effective.

[removed: Management] [added: Management] Report on Internal Control over Financial [removed: Reporting][added: Reporting]

In connection with the evaluation by management, including the Company’s Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer, no changes in the Company’s internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended December 31, [removed: 2018] [added: 2019] were identified that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

[removed: PART III][added: PART III]

Information regarding the Directors of the Company is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

Information regarding the Audit Committee and its Financial Experts is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Board of Directors and Its Committees" and "Audit Committee Report" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

Information regarding the Executive Officers of the Company can be found in Part I of this Annual Report on Form 10-K under the caption [removed: "Executive] [added: "Information About Our Executive] Officers."

Information regarding compliance with Section 16(a) of the Exchange Act is incorporated by reference from the information under the caption "Proposal 1 - Election of Directors - Section 16(a) Beneficial Ownership [removed: Reporting Compliance"] [added: Reports"] in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

Information regarding the Company’s code of ethics that applies to the Company’s Chairman & Chief Executive Officer, Senior Vice President & Chief Financial Officer, and key financial and accounting personnel is incorporated by reference from the information under the caption "Proposal 1 - Election of Directors - Corporate Governance Policies and Practices" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

This information is incorporated by reference from the information under the captions "NEO Compensation," "Proposal 1 - Election of Directors - Director Compensation," and "Compensation Discussion and Analysis" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

This information is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Ownership of ITW Stock" and "NEO Compensation - Equity Compensation Plan Information" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

Information regarding certain relationships and related transactions is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Ownership of ITW Stock," "Certain Relationships and Related Party Transactions" and "Proposal 1 - Election of Directors - Corporate Governance Policies and Practices" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

Information regarding director independence is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Corporate Governance Policies and Practices" and "Appendix A - Categorical Standards for Director Independence" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

This information is incorporated by reference from the information under the caption "Proposal 2 - Ratification of the Appointment of Independent Registered Public Accounting Firm" in the Company’s Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders.

[removed: PART IV][added: PART IV]

| [removed: (a)] [added: *(a)*] | [removed: (1)] [added: *(1)] Financial [removed: Statements] [added: Statements*] |

[removed: The] [added: *The] following information is included as part of Item 8.

Financial Statements and Supplementary [removed: Data:][added: Data:*]

[removed: Management] [added: *Management] Report on Internal Control over Financial [removed: Reporting][added: Reporting*]

[removed: Report] [added: *Report] of Independent Registered Public Accounting [removed: Firm][added: Firm*]

[removed: Statement] [added: *Statement] of [removed: Income][added: Income*]

[removed: Statement] [added: *Statement] of Comprehensive [removed: Income][added: Income*]

[removed: Statement] [added: *Statement] of Financial [removed: Position][added: Position*]

[removed: Statement] [added: *Statement] of Changes in Stockholders' [removed: Equity][added: Equity*]

[removed: Statement] [added: *Statement] of Cash [removed: Flows][added: Flows*]

[removed: Notes] [added: *Notes] to Financial [removed: Statements][added: Statements*]

[removed: (2)] [added: *(2)] Financial Statement [removed: Schedules][added: Schedules*]

[removed: None.][added: *None.*]

[removed: (3) Exhibits][added: *(3) Exhibits*]

| [removed: Exhibit Number] [added: Exhibit Number] | | [removed: Description] [added: Description] |

| [removed: [4(c)](http://www.sec.gov/Archives/edgar/data/49826/000095013709002300/c50292exv4w3.htm)] [added: [4(d)](http://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] | | [removed: [Officers’] [added: [Officers'] Certificate dated [removed: March 26, 2009] [added: August 28, 2012,] establishing the terms, and setting forth the forms, of the [removed: 5.15% Notes due 2014 and the 6.25%] [added: 3.9%] Notes due [removed: 2019,] [added: 2042,] filed as Exhibit [removed: 4.3] [added: 4.1] to the [removed: Company’s] [added: Company's] Current Report on Form 8-K filed on [removed: March 27, 2009] [added: August 28, 2012] (Commission File No. [removed: 1-4797)] [added: 001-4797)] and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000095013709002300/c50292exv4w3.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] |

| [removed: [4(d)](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm)] [added: [4(c)](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm)] | | [Officers’ Certificate dated August 31, 2011, establishing the terms, and setting forth the forms, of the 3.375% Notes due 2021 and the 4.875% Notes due 2041, filed as Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on September 1, 2011 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982611000059/exhibit43.htm) |

| [removed: [4(e)](http://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] [added: [4(h)](http://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] | | [removed: [Officers'] [added: [Officer’s] Certificate dated [removed: August 28, 2012,] [added: November 7, 2016,] establishing the terms, and setting forth the forms, of the [removed: 3.9%] [added: 2.65%] Notes due [removed: 2042,] [added: 2026,] filed as Exhibit 4.1 to the [removed: Company's] [added: Company’s] Current Report on Form 8-K filed on [removed: August 28, 2012] [added: November 10, 2016] (Commission File No. [removed: 001-4797)] [added: 001-04797)] and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] |

| [removed: [4(f)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm)] [added: [4(e)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm)] | | [Officers’ Certificate dated February 25, 2014, establishing the terms, and setting forth the forms, of the 0.9% Notes due 2017, the 1.95% Notes due 2019, and the 3.5% Notes due 2024, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on February 26, 2014 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm) |

| [removed: [4(g)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)] [added: [4(f)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)] | | [Officers’ Certificate dated May 20, 2014, establishing the terms, and setting forth the forms, of the 1.75% Euro Notes due 2022 and the 3.0% Euro Notes due 2034, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 22, 2014 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm) |

| [removed: [4(h)](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)] [added: [4(g)](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)] | | [Officers’ Certificate dated May 19, 2015, establishing the terms, and setting forth the forms, of the 1.25% Euro Notes due 2023 and the 2.125% Euro Notes due 2030, filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on May 22, 2015 (Commission File No. 001-04797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm) |

| [removed: [4(i)](http://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] [added: [4(i)](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/0001193125-19-165902-index.htm)] | | [removed: [Officer’s] [added: [Officers’] Certificate dated [removed: November 7, 2016,] [added: June 5, 2019,] establishing the terms, and setting forth the forms, of the [removed: 2.65%] [added: 0.250%] Notes due [removed: 2026,] [added: 2024, the 0.625% Notes due 2027 and the 1.000% Notes due 2031,] filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on [removed: November 10, 2016] [added: June 5, 2019] (Commission File No. 001-04797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/0001193125-19-165902-index.htm)] |

| [removed: [10(a)*](http://www.sec.gov/Archives/edgar/data/49826/000004982606000018/exhibit10a.htm)] [added: [10(b)*](http://www.sec.gov/Archives/edgar/data/49826/000004982615000101/itw2q15-exhibit101.htm)] | | [Illinois Tool Works Inc. [removed: 2006 Stock] [added: 2015 Long-Term] Incentive Plan [removed: dated February 10, 2006, as amended on] [added: effective] May [removed: 5, 2006,] [added: 8, 2015,] filed as Exhibit [removed: 10(a)] [added: 10.1] to the [removed: Company’s] [added: Company's] Quarterly Report on Form 10-Q for the quarterly period ended [removed: March 31, 2006] [added: June 30, 2015] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982606000018/exhibit10a.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982615000101/itw2q15-exhibit101.htm)] |

| [removed: [10(b)*](http://www.sec.gov/Archives/edgar/data/49826/000095013708002954/c23108exv10wxqy.htm)] [added: [10(t)*](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxpy.htm)] | | [removed: [Amendment to Illinois] [added: [Illinois] Tool Works Inc. [removed: 2006 Stock Incentive Plan dated February 8,] [added: Nonqualified Pension Plan, effective January 1,] 2008, [added: as amended and approved by the Board of Directors on December 22, 2008,] filed as Exhibit [removed: 10(q)] [added: 10(p)] to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, [removed: 2007] [added: 2008] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000095013708002954/c23108exv10wxqy.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxpy.htm)] |

| [removed: [10(c)*](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxdy.htm)] [added: [10(r)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)] | | [removed: [Second Amendment to Illinois] [added: [Illinois] Tool Works Inc. [removed: 2006 Stock] [added: 2011 Executive] Incentive [removed: Plan dated February 13, 2009,] [added: Plan,] filed as Exhibit [removed: 10(d)] [added: 99.1] to the Company’s [removed: Annual] [added: Current] Report on Form [removed: 10-K for the fiscal year ended] [added: 8-K filed on] December [removed: 31, 2008] [added: 16, 2010] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000095013709001368/c48856exv10wxdy.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit1.htm)] |

| [removed: [10(d)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit2.htm)] [added: [10(a)*](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit2.htm)] | | [Illinois Tool Works Inc. 2011 Long-Term Incentive Plan, filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on December 16, 2010 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993310004465/exhibit2.htm) |

| [removed: [10(e)*](http://www.sec.gov/Archives/edgar/data/49826/000004982615000101/itw2q15-exhibit101.htm)] [added: [10(v)*](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)] | | [Illinois Tool Works Inc. [removed: 2015 Long-Term Incentive] [added: Amended and Restated Directors’ Deferred Fee] Plan effective May [removed: 8, 2015,] [added: 2, 2014,] filed as Exhibit 10.1 to the [removed: Company's] [added: Company’s] Quarterly Report on Form 10-Q for the quarterly period ended June 30, [removed: 2015] [added: 2014] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982615000101/itw2q15-exhibit101.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit101.htm)] |

| [removed: [10(f)*](http://www.sec.gov/Archives/edgar/data/49826/000129993311000437/exhibit1.htm)] [added: [10(c)*](http://www.sec.gov/Archives/edgar/data/49826/000129993311000437/exhibit1.htm)] | | [Form of stock option terms filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on February 9, 2011 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000129993311000437/exhibit1.htm) |

| [removed: [10(g)*](http://www.sec.gov/Archives/edgar/data/49826/000004982612000012/itw8k991awardagreement.htm)] [added: [10(d)*](http://www.sec.gov/Archives/edgar/data/49826/000004982612000012/itw8k991awardagreement.htm)] | | [Form of stock option terms filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on February 7, 2012 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982612000012/itw8k991awardagreement.htm) |

| [removed: [10(h)*](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)] [added: [10(e)*](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)] | | [Form of stock option terms filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on February 13, 2014 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm) |

| [removed: [10(i)*](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit991stockoptionterms.htm)] [added: [10(f)*](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit991stockoptionterms.htm)] | | [Form of stock option terms filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 9, 2016 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit991stockoptionterms.htm) |

| [removed: [10(j)*](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit992rsugrantterms.htm)] [added: [10(h)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex992awardsagrmnt4q2016.htm)] | | [Form of restricted stock unit terms filed as Exhibit 99.2 to the Company's Current Report on Form 8-K filed on February 9, [removed: 2016] [added: 2017] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit992rsugrantterms.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex992awardsagrmnt4q2016.htm)] |

| [removed: [10(k)*](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit993prsugrantterms.htm)] [added: [10(i)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex993awardsagrmnt4q2016.htm)] | | [Form of performance [removed: restricted stock] [added: share] unit terms filed as Exhibit 99.3 to the Company's Current Report on Form 8-K filed on February 9, [removed: 2016] [added: 2017] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit993prsugrantterms.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex993awardsagrmnt4q2016.htm)] |

| [removed: [10(l)*](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit994lticashgrantterms.htm)] [added: [10(j)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex994awardsagrmnt4q2016.htm)] | | [Form of [removed: Long-Term Incentive Cash Grant] [added: performance cash grant] filed as Exhibit 99.4 to the Company's Current Report on Form 8-K filed on February 9, [removed: 2016] [added: 2017] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit994lticashgrantterms.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex994awardsagrmnt4q2016.htm)] |

| [removed: [10(m)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex991awardsagrmnt4q2016.htm)] [added: [10(g)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex991awardsagrmnt4q2016.htm)] | | [Form of stock option terms filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 9, 2017 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex991awardsagrmnt4q2016.htm) |

| [removed: [10(n)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex992awardsagrmnt4q2016.htm)] [added: [10(q)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)] | | [Form of restricted stock unit terms filed as Exhibit [removed: 99.2] [added: 99.4] to the [removed: Company's] [added: Company’s] Current Report on Form 8-K filed on February [removed: 9, 2017] [added: 5, 2020] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex992awardsagrmnt4q2016.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex994.htm)] |

| [removed: [10(o)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex993awardsagrmnt4q2016.htm)] [added: [10(o)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)] | | [Form of performance share unit terms filed as Exhibit [removed: 99.3] [added: 99.2] to the [removed: Company's] [added: Company’s] Current Report on Form 8-K filed on February [removed: 9, 2017] [added: 5, 2020] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex993awardsagrmnt4q2016.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex992.htm)] |

| [removed: [10(p)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex994awardsagrmnt4q2016.htm)] [added: [10(p)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)] | | [Form of performance cash [removed: grant] [added: terms] filed as Exhibit [removed: 99.4] [added: 99.3] to the [removed: Company's] [added: Company’s] Current Report on Form 8-K filed on February [removed: 9, 2017] [added: 5, 2020] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex994awardsagrmnt4q2016.htm)] [added: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex993.htm)] |

| [removed: [10(q)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] [added: [10(k)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] | | [Form of stock option terms filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on February 14, 2019 (Commission File No. 1-4797) and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm) |

| [removed: [10(r)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm)] [added: [10(l)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm)] | | [Form of performance share unit terms filed as Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on February 14, 2019 (Commission File No. 1-4797) and incorporated herein by reference](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a992universalpsuagreementf.htm) |

| Exhibit Number | | Description |

| [4(j)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm) | | [Description of the Company’s common stock.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm) |

| [4(k)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4kdescriptionof.htm) | | [Description of the 1.75% Euro Notes due 2022 and 3.00% Euro Notes due 2034.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4kdescriptionof.htm) |

| [4(l)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4ldescriptionof.htm) | | [Description of the 1.25% Euro Notes due 2023 and 2.125% Euro Notes due 2030.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4ldescriptionof.htm) |

| [4(m)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4mdescriptionof.htm) | | [Description of the 0.250% Euro Notes due 2024, 0.625% Euro Notes due 2027 and 1.00% Euro Notes due 2031.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4mdescriptionof.htm) |

| Exhibit Number | | Description |

| 104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |

| | | |

| --- | --- | --- |

| [10(z)*](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm) | | [First Amendment to the ITW Executive Contributory Retirement Income Plan dated February 15, 2013, filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm) |

| [10(aa)](http://www.sec.gov/Archives/edgar/data/49826/000004982613000024/itwexhibit102.htm) | | [Five Year Credit Agreement dated as of May 9, 2016 among Illinois Tool Works Inc., the Lenders, JPMorgan Chase Bank, National Association, as Administrative Agent, and Citibank, N.A., as Syndication Agent filed as Exhibit 10(a) to the Company’s Current Report on Form 8-K filed on May 12, 2016 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex10a.htm) |

| [10(ab)*](http://www.sec.gov/Archives/edgar/data/49826/000004982618000053/itw1q18-exhibit10.htm) | | [Offer of Employment Letter from Illinois Tool Works Inc. to Norman D. Finch dated January 4, 2017, filed as exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018 (Commission File No. 1-4797) and incorporated by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982618000053/itw1q18-exhibit10.htm) |

| [99(a)](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/form8-kawardagreements22017.htm) | | [A description of the capital stock of Illinois Tool Works Inc. is included under Item 8.01 Other Events in the Company's Report on Form 8-K filed on February 9, 2017 (Commission File No. 1-4797) and incorporated herein by reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/form8-kawardagreements22017.htm) |

[removed: SIGNATURES][added: SIGNATURES]

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this [removed: 15th] [added: 14th] day of February [removed: 2019.][added: 2020.]

| [removed: ILLINOIS] [added: ILLINOIS] TOOL WORKS [removed: INC.] [added: INC.] | | |

| | | [removed: Chairman] [added: *Chairman] & Chief Executive [removed: Officer] [added: Officer*] |

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on this [removed: 15th] [added: 14th] day of February [removed: 2019.][added: 2020.]

| [removed: Signatures] [added: Signatures] | | [removed: Title] [added: Title] |

| | | (E. Scott Santi, [removed: as Attorney-in-Fact)] [added: *as Attorney-in-Fact)*] |