Item 8. Financial Statements and Supplementary Data

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Item 8. Financial Statements and Supplementary Data

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Illinois Tool Works Inc. (the "Company" or "ITW") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). ITW's internal control system was designed to provide reasonable assurance to the Company's management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

ITW management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2023. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on our assessment we believe that, as of December 31, 2023, 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, 2023 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their attestation report included herein.


/s/ Christopher A. O'Herlihy Christopher A. O'Herlihy President & Chief Executive Officer February 9, 2024						/s/ Michael M. Larsen Michael M. Larsen Senior Vice President & Chief Financial Officer February 9, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Illinois Tool Works Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated statements of financial position of Illinois Tool Works Inc. and subsidiaries (the "Company") as of December 31, 2023 and 2022, 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, 2023, 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, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Taxes — Refer to Note 7 to the financial statements

Critical Audit Matter Description

The Company’s income tax expense is recognized and measured based on management’s interpretation of the tax regulations and rulings in numerous taxing jurisdictions, which requires significant judgment. When calculating income tax expense management makes estimates and assumptions, including determination of the completeness of book income in each jurisdiction, calculation of taxable income through identification and classification of book to tax differences (either temporary or permanent items), consideration of applicable tax deductions or credits and the identification of uncertain tax positions.

The evaluation of each uncertain tax position requires management to apply specialized skill and knowledge related to the identified position. Management evaluates uncertain tax positions identified and a liability is established for unrecognized tax benefits when there is a more than 50% likelihood that its tax position will not be sustained upon examination by taxing authorities. There is additional judgment to determine the amount of the liability for the underlying tax position.

Given the number of taxing jurisdictions and the complex and subjective nature of the associated tax regulations and rulings, certain audit matters required a high degree of auditor judgment and increased extent of effort, including the need to involve our income tax specialists. These matters included the auditing of certain elements of income tax expense, identification of uncertain tax positions and measurement of unrecognized tax benefits, and certain planning transactions with income tax expense implications.

How the Critical Audit Matter Was Addressed in the Audit

With the assistance of our income tax specialists, our principal audit procedures related to the auditing of certain elements of income tax expense, identification of uncertain tax positions and measurement of unrecognized tax benefits and certain planning transactions with income tax expense implications included the following, among others:

We tested the effectiveness of management’s controls over income tax expense, unrecognized tax benefits and certain planning transactions with income tax expense implications.
We evaluated management’s significant estimates and judgments incorporated into the calculation of certain elements of income tax expense by:

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

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

◦Testing the accuracy of the relevant income tax expense calculations.

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

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

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

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

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

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

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

/s/ Deloitte & Touche LLP

Chicago, Illinois

February 9, 2024

We have served as the Company's auditor since 2002.

Statement of Income

Illinois Tool Works Inc. and Subsidiaries


	For the Years Ended December 31
In millions except per share amounts	2023		2022		2021
Operating Revenue	$	16,107	$	15,932	$	14,455
Cost of revenue	9,316		9,429		8,489
Selling, administrative, and research and development expenses	2,638		2,579		2,356
Amortization and impairment of intangible assets	113		134		133
Operating Income	4,040		3,790		3,477
Interest expense	(266)		(203)		(202)
Other income (expense)	49		255		51
Income Before Taxes	3,823		3,842		3,326
Income taxes	866		808		632
Net Income	$	2,957	$	3,034	$	2,694

Net Income Per Share:
Basic	$	9.77	$	9.80	$	8.55
Diluted	$	9.74	$	9.77	$	8.51

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

Statement of Comprehensive Income

Illinois Tool Works Inc. and Subsidiaries


	For the Years Ended December 31
In millions	2023		2022		2021
Net Income	$	2,957	$	3,034	$	2,694

Foreign currency translation adjustments, net of tax	41		(242)		5
Pension and other postretirement benefit adjustments, net of tax	(34)		(97)		135
Other comprehensive income (loss)	7		(339)		140

Comprehensive Income	$	2,964	$	2,695	$	2,834

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

Statement of Financial Position

Illinois Tool Works Inc. and Subsidiaries


	December 31
In millions except per share amounts	2023		2022
Assets
Current Assets:
Cash and equivalents	$	1,065	$	708
Trade receivables	3,123		3,171
Inventories	1,707		2,054
Prepaid expenses and other current assets	340		329
Assets held for sale	—		8
Total current assets	6,235		6,270

Net plant and equipment	1,976		1,848
Goodwill	4,909		4,864
Intangible assets	657		768
Deferred income taxes	479		494
Other assets	1,262		1,178
	$	15,518	$	15,422

Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt	$	1,825	$	1,590
Accounts payable	581		594
Accrued expenses	1,663		1,728
Cash dividends payable	419		400
Income taxes payable	187		147
Liabilities held for sale	—		1
Total current liabilities	4,675		4,460
Noncurrent Liabilities:
Long-term debt	6,339		6,173
Deferred income taxes	326		484
Noncurrent income taxes payable	151		273
Other liabilities	1,014		943
Total noncurrent liabilities	7,830		7,873
Stockholders' Equity:
Common stock (Authorized- 700.0 shares; par value of $0.01 per share):
Issued- 550.0 shares in 2023 and 2022 Outstanding- 299.3 shares in 2023 and 305.0 shares in 2022	6		6
Additional paid-in-capital	1,588		1,501
Retained earnings	27,122		25,799
Common stock held in treasury	(23,870)		(22,377)
Accumulated other comprehensive income (loss)	(1,834)		(1,841)
Noncontrolling interest	1		1
Total stockholders' equity	3,013		3,089
	$	15,518	$	15,422

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

Statement of Changes in Stockholders' Equity

Illinois Tool Works Inc. and Subsidiaries


In millions except per share amounts	Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Income (Loss)		Noncontrolling Interest		Total
Balance as of December 31, 2020	$	6	$	1,362	$	23,114	$	(19,659)	$	(1,642)	$	1	$	3,182
Net income	—		—		2,694		—		—		—		2,694
Common stock issued for stock-based compensation	—		17		—		23		—		—		40
Stock-based compensation expense	—		53		—		—		—		—		53
Repurchases of common stock	—		—		—		(1,000)		—		—		(1,000)
Dividends declared ($4.72 per share)	—		—		(1,483)		—		—		—		(1,483)
Other comprehensive income (loss)	—		—		—		—		140		—		140

Balance as of December 31, 2021	6		1,432		24,325		(20,636)		(1,502)		1		3,626
Net income	—		—		3,034		—		—		—		3,034
Common stock issued for stock-based compensation	—		6		—		9		—		—		15
Stock-based compensation expense	—		63		—		—		—		—		63
Repurchases of common stock	—		—		—		(1,750)		—		—		(1,750)
Dividends declared ($5.06 per share)	—		—		(1,560)		—		—		—		(1,560)
Other comprehensive income (loss)	—		—		—		—		(339)		—		(339)

Balance as of December 31, 2022	6		1,501		25,799		(22,377)		(1,841)		1		3,089
Net income	—				2,957		—		—		—		2,957
Common stock issued for stock-based compensation	—		18		—		20		—		—		38
Stock-based compensation expense	—		69		—		—		—		—		69
Repurchases of common stock	—		—		—		(1,500)		—		—		(1,500)
Excise tax on repurchases of common stock	—		—		—		(13)		—		—		(13)
Dividends declared ($5.42 per share)	—		—		(1,634)		—		—		—		(1,634)
Other comprehensive income (loss)	—		—		—		—		7		—		7

Balance as of December 31, 2023	$	6	$	1,588	$	27,122	$	(23,870)	$	(1,834)	$	1	$	3,013

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

Statement of Cash Flows

Illinois Tool Works Inc. and Subsidiaries


	For the Years Ended December 31
In millions	2023		2022		2021
Cash Provided by (Used for) Operating Activities:
Net income	$	2,957	$	3,034	$	2,694
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	282		276		277
Amortization and impairment of intangible assets	113		134		133
Change in deferred income taxes	(88)		(150)		(148)
Provision for uncollectible accounts	6		5		3
(Income) loss from investments	(2)		(9)		(29)
(Gain) loss on sale of plant and equipment	(1)		(1)		—
(Gain) loss on sale of operations and affiliates	(1)		(191)		—
Stock-based compensation expense	69		63		53
Other non-cash items, net	(4)		5		13
Change in assets and liabilities, net of acquisitions and divestitures:
(Increase) decrease in—
Trade receivables	64		(461)		(240)
Inventories	360		(455)		(450)
Prepaid expenses and other assets	(26)		(19)		(36)
Increase (decrease) in—
Accounts payable	(14)		35		37
Accrued expenses and other liabilities	(102)		119		202
Income taxes	(72)		(35)		49
Other, net	(2)		(2)		(1)
Net cash provided by operating activities	3,539		2,348		2,557
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents)	—		(2)		(731)
Additions to plant and equipment	(455)		(412)		(296)
Proceeds from investments	27		12		38
Proceeds from sale of plant and equipment	20		15		8
Proceeds from sale of operations and affiliates	7		278		—
Other, net	(2)		(1)		(3)
Net cash provided by (used for) investing activities	(403)		(110)		(984)
Cash Provided by (Used for) Financing Activities:
Cash dividends paid	(1,615)		(1,542)		(1,463)
Issuance of common stock	53		29		50
Repurchases of common stock	(1,500)		(1,750)		(1,000)
Net proceeds from (repayments of) debt with original maturities of three months or less	(452)		796		120
Proceeds from debt with original maturities of more than three months	1,425		593		90
Repayments of debt with original maturities of more than three months	(679)		(1,113)		(351)
Other, net	(14)		(13)		(10)
Net cash provided by (used for) financing activities	(2,782)		(3,000)		(2,564)
Effect of Exchange Rate Changes on Cash and Equivalents	3		(57)		(46)
Cash and Equivalents:
Increase (decrease) during the year	357		(819)		(1,037)
Beginning of year	708		1,527		2,564
End of year	$	1,065	$	708	$	1,527
Supplementary Cash Flow Information:
Cash Paid During the Year for Interest	$	260	$	199	$	197
Cash Paid During the Year for Income Taxes, Net of Refunds	$	1,026	$	993	$	731

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

Notes to Financial Statements

(1) Description of Business and Summary of Significant Accounting Policies

Description of business— Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified range of industrial products and equipment with approximately 84 divisions in 51 countries. The Company's operations are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products.

Consolidation and translation— The financial statements include the Company and its majority-owned subsidiaries. The Company follows the equity method of accounting for investments where the Company has a significant influence but not a controlling interest. Intercompany transactions are eliminated from the financial statements. Foreign subsidiaries' assets and liabilities are translated to U.S. dollars at end-of-period exchange rates. Revenues and expenses are translated at average rates for the period. Translation adjustments are reported as a component of accumulated other comprehensive income (loss) in stockholders' equity.

Reclassifications— Certain reclassifications of prior year data have been made to conform to current year reporting.

Use of estimates— The preparation of the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to financial statements. Actual results could differ from those estimates.

Acquisitions— The Company accounts for acquisitions under the acquisition method, in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired companies are included in the Company's consolidated financial statements from the date of acquisition. Refer to Note 3. Acquisitions for additional information regarding the Company's acquisitions.

Operating revenue— Operating revenue is recognized at the time a good or service is transferred to a customer and the customer obtains control of that good or receives the service performed. The Company's sales arrangements with customers are predominantly short-term in nature involving a single performance obligation related to the delivery of products and generally provide for transfer of control at the time of shipment. In limited circumstances, there may be significant obligations to the customer that are unfulfilled at the time of shipment, typically involving installation of equipment and customer acceptance. In these circumstances, operating revenue may be deferred until all significant obligations have been completed. In other limited arrangements, the Company may recognize revenue over time. This may include arrangements for service performed over time where operating revenue is recognized over time as the service is provided to the customer. It may also include the sale of highly specialized systems that include a high degree of customization and installation at the customer site which are recognized over time if the product does not have an alternative use and the Company has an enforceable right to payment for work performed to date. Revenue for transactions meeting these criteria is recognized over time as work is performed based on the costs incurred to date relative to the total estimated costs at completion. The amount of operating revenue recorded reflects the consideration to which the Company expects to be entitled in exchange for goods or services and may include adjustments for customer allowances and rebates. Customer allowances and rebates consist primarily of volume discounts and other short-term incentive programs, which are estimated at the time of sale based on historical experience and anticipated trends. Shipping and handling charges billed to customers are included in revenue and are recognized along with the related product revenue as they are considered a fulfillment cost. Sales commissions are expensed when incurred, which is generally at the time of revenue recognition. Contract liabilities associated with sales arrangements primarily relate to deferred revenue on equipment sales and prepaid service contracts. Total deferred revenue and customer deposits were $395 million and $427 million as of December 31, 2023 and 2022, respectively, and are short-term in nature. Refer to Note 5. Operating Revenue for additional information regarding the Company's operating revenue.

Research and development expenses— Research and development expenses are recorded as expense in the year incurred. These costs were $284 million, $269 million and $239 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Advertising expenses— Advertising expenses are recorded as expense in the year incurred. These costs were $60 million, $57 million and $50 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Income taxes— The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws. Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized.

Cash and equivalents— Cash and equivalents include cash on hand and instruments having original maturities of three months or less. Cash and equivalents are stated at cost, which approximates fair value.

Trade receivables— Trade receivables are net of allowances for doubtful accounts. The changes in the allowance for doubtful accounts for the years ended December 31, 2023, 2022 and 2021 were as follows:


In millions	2023		2022		2021
Beginning balance	$	26	$	28	$	29
Provision charged to expense	6		5		3
Acquisitions and divestitures	—		2		2
Write-offs, net of recoveries	(3)		(8)		(5)
Foreign currency translation	—		(1)		(1)
Ending balance	$	29	$	26	$	28

Inventories— Inventories are stated at the lower of cost or net realizable value and include material, labor and factory overhead. The last-in, first-out ("LIFO") method is used to determine the cost of inventories at certain U.S. businesses. The first-in, first-out ("FIFO") method, which approximates current cost, is used for all other inventories. Inventories priced at LIFO were approximately 23% of total inventories as of December 31, 2023 and 22% of total inventories as of December 31, 2022. If the FIFO method was used for all inventories, total inventories would have been approximately $117 million and $111 million higher than reported at December 31, 2023 and 2022, respectively. The major classes of inventory at December 31, 2023 and 2022 were as follows:


In millions	2023		2022
Raw material	$	742	$	887
Work-in-process	234		228
Finished goods	848		1,050
LIFO reserve	(117)		(111)
Total inventories	$	1,707	$	2,054

Net plant and equipment— Net plant and equipment are stated at cost, less accumulated depreciation. Renewals and improvements that increase the useful life of plant and equipment are capitalized. Maintenance and repairs are charged to expense as incurred. Net plant and equipment consisted of the following at December 31, 2023 and 2022:


In millions	2023		2022
Land	$	197	$	188
Buildings and improvements	1,490		1,414
Machinery and equipment	4,070		3,891
Construction in progress	294		259
Gross plant and equipment	6,051		5,752
Accumulated depreciation	(4,075)		(3,904)
Net plant and equipment	$	1,976	$	1,848

The Company's U.S. businesses primarily compute depreciation on an accelerated basis. The majority of the Company's international businesses compute depreciation on a straight-line basis. The ranges of useful lives used to depreciate plant and equipment are as follows:


Buildings and improvements			5—50 years
Machinery and equipment			3—12 years

Depreciation was $282 million, $276 million and $277 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Goodwill and intangible assets— Goodwill represents the excess cost over fair value of the net assets of acquired businesses. The Company does not amortize goodwill and intangible assets that have indefinite lives. Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives of 3 to 20 years.

The Company performs an impairment assessment of goodwill and intangible assets with indefinite lives annually, or more frequently if triggering events occur, based on the estimated fair value of the related reporting unit or intangible asset. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

When performing its annual impairment assessment, the Company evaluates the goodwill assigned to each of its reporting units for potential impairment by comparing the estimated fair value of the relevant reporting unit to the carrying value. The Company uses various Level 2 and Level 3 valuation techniques to determine the fair value of its reporting units, including discounting estimated future cash flows based on a cash flow forecast prepared by the relevant reporting unit and market multiples of relevant public companies. If the fair value of a reporting unit is less than its carrying value, a goodwill impairment loss is recorded for the difference.

The Company's indefinite-lived intangible assets consist of trademarks and brands. The estimated fair values of these intangible assets are determined based on a Level 3 valuation method using a relief-from-royalty income approach derived from internally forecasted revenues of the related products. If the fair value of the trademark or brand is less than its carrying value, an impairment loss is recorded for the difference.

Refer to Note 9. Goodwill and Intangible Assets for additional information regarding the Company's recorded goodwill and intangible assets.

Leases— The Company recognizes a lease liability and corresponding right-of-use asset for all operating leases with a noncancellable lease term of greater than one year. Rental expense for operating leases is recognized on a straight-line basis over the noncancellable lease term based on the minimum lease payments at lease inception. Changes in rent subsequent to commencement that were not included in minimum lease payments at inception are recognized as variable rent in the period incurred. Refer to Note 10. Leases for additional information regarding the Company's operating leases.

Accrued warranties— The Company accrues for product warranties based on historical experience. The changes in accrued warranties for the years ended December 31, 2023, 2022 and 2021 were as follows:


In millions	2023		2022		2021
Beginning balance	$	42	$	46	$	45
Charges	(51)		(41)		(34)
Provision charged to expense	56		40		34
Acquisitions and divestitures	—		(2)		5
Foreign currency translation/other	1		(1)		(4)
Ending balance	$	48	$	42	$	46

New Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (the "FASB") issued authoritative guidance which improves the accounting for acquired revenue contracts with customers in a business combination. The new guidance provides an exception to measure contract assets and contract liabilities acquired in a business combination in accordance with existing

revenue recognition guidance rather than at fair value. The Company early adopted this new guidance in the fourth quarter of 2021. The new guidance is effective prospectively upon adoption and must also be applied retrospectively to all interim periods in the year of adoption. The adoption of this new accounting guidance did not have a material impact on the Company's results of operations or financial position. Refer to Note 3. Acquisitions for additional information regarding the Company's acquisitions.

In November 2023, the FASB issued authoritative guidance which expands annual and interim disclosure requirements for reportable segments. The more significant provisions include the requirement to disclose significant segment expenses and certain disclosures made annually under existing guidance will be required for interim periods. The guidance is effective for the Company beginning with its annual reporting for the year ended December 31, 2024 and is required to be applied retrospectively to all periods presented. The Company is currently assessing the impact the guidance will have on its disclosures.

In December 2023, the FASB issued authoritative guidance that expands the disclosure requirements for income taxes. The new guidance will require consistent categories and greater disaggregation of information presented in the effective tax rate reconciliation as well as disaggregation of income taxes paid by jurisdiction. The guidance is effective for the Company beginning with its annual reporting for the year ended December 31, 2025 and is required to be applied prospectively, with retrospective application to prior periods allowed. The Company is currently assessing the impact the guidance will have on its disclosures.

(2) Novel Coronavirus (COVID-19)

In early 2020, an outbreak of a novel strain of coronavirus ("COVID-19") occurred in China and other jurisdictions. The COVID-19 outbreak was subsequently declared a global pandemic by the World Health Organization on March 11, 2020. In response to the outbreak, governments around the globe took various actions to reduce its spread, including travel restrictions, shutdowns of businesses deemed nonessential, and stay-at-home or similar orders. The COVID-19 pandemic and the measures taken globally to reduce its spread negatively impacted the global economy, causing significant disruptions in the Company's global operations starting primarily in the latter part of the first quarter of 2020 as COVID-19 spread and impacted the countries in which the Company operates and the markets the Company serves. Despite the ongoing disruptions caused by the COVID-19 pandemic, the Company experienced solid recovery progress in many of its end markets during 2021 and, to a greater extent, in 2022 as vaccines became widely available and many governments reduced restrictions related to COVID-19.

(3) Acquisitions

On December 1, 2021, the Company completed the acquisition of the Test & Simulation business of MTS Systems Corporation ("MTS") from Amphenol Corporation ("Amphenol") for a purchase price of $750 million, subject to certain closing adjustments. The MTS Test & Simulation business is a leading global supplier of high-performance testing and simulation systems and is highly complementary to the Company's existing Test & Measurement and Electronics segment. The operating results of the MTS Test & Simulation business were reported within the Test & Measurement and Electronics segment from the date of acquisition, with operating revenue of $46 million for the one month ended December 31, 2021 and $422 million for the twelve months ended December 31, 2022. During 2022, the Company completed the allocation of the purchase price to the acquired assets and liabilities as of the acquisition date, including intangible assets and goodwill. Based on its final allocation, the Company recorded goodwill of $430 million and intangible assets of $259 million. The intangible assets included $93 million related to indefinite-lived trademarks and brands and $166 million related to amortizable intangible assets that are expected to be amortized on a straight-line basis over estimated useful lives ranging from 1 to 14 years, with a weighted-average life of 11 years. None of the goodwill related to this transaction 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. This acquisition did not materially affect the Company's results of operations or financial position for any period presented.

(4) Divestitures

The Company routinely reviews its portfolio of businesses relative to its business portfolio criteria and evaluates if further portfolio refinements may be needed. The Company previously communicated its intent to explore options, including potential divestitures, for certain businesses with annual revenues totaling up to $1 billion. As such, the Company may commit to a plan to exit or dispose of certain businesses and present them as held for sale in periods prior to the sale of the business.

In the fourth quarter of 2019, the Company completed the divestitures of three businesses. Due to the COVID-19 pandemic, the Company chose to defer any significant divestiture activity in 2020 and 2021. The Company reinitiated the divestiture process in 2022 for certain businesses with combined annual revenues of approximately $0.5 billion, subject to approval by the Company's Board of Directors.

In the second quarter of 2022, plans were approved to divest two businesses, including one business in the Polymers & Fluids segment and one business in the Food Equipment segment. These two businesses were classified as held for sale beginning in the second quarter of 2022. In the fourth quarter of 2022, both of these businesses were divested. On October 3, 2022, the business in the Polymers & Fluids segment was sold for $220 million, subject to certain closing adjustments, resulting in a pre-tax gain of $156 million. On December 1, 2022, the business in the Food Equipment segment was sold for $59 million, subject to certain closing adjustments, resulting in a pre-tax gain of $41 million. The pre-tax gains were included in Other income (expense) in the Statement of Income. Income taxes on the gains were mostly offset by the utilization of capital loss carryforwards of $32 million. Operating revenue related to these divested businesses that was included in the Company's results of operations for the twelve months ended December 31, 2022 and 2021 was $106 million and $115 million, respectively.

In the fourth quarter of 2022, plans were approved to divest one business in the Specialty Products segment. This business was presented as held for sale beginning in the fourth quarter of 2022. Assets and liabilities held for sale related to this business were $8 million and $1 million, respectively, as of December 31, 2022. This business was sold on April 3, 2023, with no significant gain or loss upon sale. Operating revenue related to this business that was included in the Company's results of operations for the twelve months ended December 31, 2023, 2022 and 2021 was $9 million, $37 million and $35 million, respectively.

(5) Operating Revenue

The Company's 84 diversified operating divisions are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. Operating revenue by product category, which is consistent with the Company's segment presentation, for the twelve months ended December 31, 2023, 2022 and 2021 was as follows:


In millions	2023		2022		2021
Automotive OEM	$	3,235	$	2,969	$	2,800
Food Equipment	2,622		2,444		2,078
Test & Measurement and Electronics	2,832		2,828		2,346
Welding	1,902		1,894		1,650
Polymers & Fluids	1,804		1,905		1,804
Construction Products	2,033		2,113		1,945
Specialty Products	1,697		1,799		1,854
Intersegment revenue	(18)		(20)		(22)
Total	$	16,107	$	15,932	$	14,455

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

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

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

Products sold in this segment are primarily manufactured to the customer's specifications and are sold under long-term supply agreements with OEM auto manufacturers and other top tier auto parts suppliers. The Company typically recognizes revenue for products in this segment at the time of shipment. Certain products may be produced utilizing tooling that is owned by the customer that the Company developed and is reimbursed by the customer for the associated cost. In these arrangements, the

Company typically retains a contractual right to use the customer-owned tooling for the purpose of fulfilling its obligations under the supply agreement. The Company records reimbursements for the cost of customer-owned tooling as a cost offset rather than operating revenue as tooling is not considered a product offering central to the Company's operations.

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

warewashing equipment;
cooking equipment, including ovens, ranges and broilers;
refrigeration equipment, including refrigerators, freezers and prep tables;
food processing equipment, including slicers, mixers and scales;
kitchen exhaust, ventilation and pollution control systems; and
food equipment service, maintenance and repair.

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

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

equipment, consumables, and related software for testing and measuring of materials, structures, gases and fluids;
electronic assembly equipment;
electronic components and component packaging;
static control equipment and consumables used for contamination control in clean room environments; and
pressure sensitive adhesives and components for electronics, medical, transportation and telecommunications applications.

Revenue for products sold in this segment is typically recognized at the time of shipment. In limited circumstances where significant obligations to the customer are unfulfilled at the time of shipment, typically involving installation of equipment and customer acceptance, revenue recognition is deferred until such obligations have been completed. In other limited arrangements involving the sale of highly specialized systems that include a high degree of customization and installation at the customer site, revenue is recognized over time if the product does not have an alternative use and the Company has an enforceable right to payment for work performed to date. Revenue for transactions meeting these criteria is recognized over time as work is performed based on the costs incurred to date relative to the total estimated costs at completion.

Welding**—** This segment is a branded value-added equipment and specialty consumable manufacturer with innovative and leading technology. Businesses in this segment produce arc welding equipment, consumables and accessories for a wide array of industrial and commercial applications. This segment primarily serves the general industrial market, which includes fabrication, shipbuilding and other general industrial markets, and construction, energy, MRO, industrial capital goods and automotive original equipment manufacturers and tiers markets. Products in this segment include:

arc welding equipment; and
metal arc welding consumables and related accessories.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment.

Polymers & Fluids**—** This segment is a branded supplier to niche markets that require value-added, differentiated products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for

auto aftermarket maintenance and appearance. This segment primarily serves the automotive aftermarket, general industrial and MRO markets. Products in this segment include:

adhesives for industrial, construction and consumer purposes;
chemical fluids which clean or add lubrication to machines;
epoxy and resin-based coating products for industrial applications;
hand wipes and cleaners for industrial applications;
fluids, polymers and other supplies for auto aftermarket maintenance and appearance;
fillers and putties for auto body repair; and
polyester coatings and patch and repair products for the marine industry.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment.

Construction Products**—** This segment is a branded supplier of innovative engineered fastening systems and solutions. This segment primarily serves the residential construction, renovation/remodel and commercial construction markets. Products in this segment include:

fasteners and related fastening tools for wood and metal applications;
anchors, fasteners and related tools for concrete applications;
metal plate truss components and related equipment and software; and
packaged hardware, fasteners, anchors and other products for retail.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment.

Specialty Products**—** This segment is focused on diversified niche market opportunities with substantial patent protection producing beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners. This segment primarily serves the food and beverage, consumer durables, general industrial, industrial capital goods, airlines and printing and publishing markets. Products in this segment include:

conveyor systems and line automation for the food and beverage industries;
plastic consumables that multi-pack cans and bottles and related equipment;
foil, film and related equipment used to decorate consumer products;
product coding and marking equipment and related consumables;
plastic and metal closures and components for appliances;
airport ground support equipment; and
components for medical devices.

Products in this segment are primarily manufactured to meet anticipated customer demand. The Company typically recognizes revenue for these products at the time of product shipment. In limited circumstances where significant obligations to the customer are unfulfilled at the time of shipment, typically involving installation of equipment and customer acceptance, revenue is recognized when such obligations have been completed.

(6) Other Income (Expense)

Other income (expense) for the twelve months ended December 31, 2023, 2022 and 2021 consisted of the following:


In millions	2023		2022		2021
Interest income	$	51	$	22	$	12
Other net periodic benefit income	33		41		23
Income (loss) from investments	2		9		29
Gain (loss) on sale of operations and affiliates	1		191		—

Equity income in Wilsonart	—		—		—
Gain (loss) on foreign currency transactions, net	(39)		(7)		(9)
Other, net	1		(1)		(4)
Total other income (expense)	$	49	$	255	$	51

Gain (loss) on sale of operations and affiliates for the twelve months ended December 31, 2022 primarily related to two businesses divested in the fourth quarter of 2022. Refer to Note 4. Divestitures for further information regarding the Company's divestitures.

In the fourth quarter of 2012, the Company divested a 51% majority interest in its former Decorative Surfaces segment to certain funds managed by Clayton, Dubilier & Rice, LLC ("CD&R"). As a result of the transaction, the Company owns common units (the "Common Units") of Wilsonart International Holdings LLC ("Wilsonart") initially representing approximately 49% (on an as-converted basis) of the total outstanding equity. CD&R owns cumulative convertible participating preferred units (the "Preferred Units") of Wilsonart representing approximately 51% (on an as-converted basis) of the total outstanding equity. The Preferred Units rank senior to the Common Units as to dividends and liquidation preference, and accrue dividends at a rate of 10% per annum. The ownership interest in Wilsonart is reported using the equity method of accounting. The Company's proportionate share in the income (loss) of Wilsonart is reported in Other income (expense) in the Statement of Income. As the Company's investment in Wilsonart is structured as a partnership for U.S. tax purposes, U.S. taxes are recorded separately from the equity investment. In 2016, the Company received a $167 million dividend distribution from Wilsonart which exceeded the Company's equity investment balance and resulted in a $54 million pre-tax gain in 2016. As a result of the dividend distribution, the equity investment balance in Wilsonart was reduced to zero and any subsequent equity investment income will not be recognized until the gain is recaptured.

(7) Income Taxes

Noncurrent income taxes payable— On December 22, 2017, the "Tax Cuts and Jobs Act" (the "Act") was enacted in the United States. The provisions of the Act significantly revised the U.S. corporate income tax rules. In connection with the enactment of the Act, the Company recorded a one-time additional income tax expense of $676 million in the fourth quarter of 2017 related to a one-time repatriation tax on the deemed repatriation of post-1986 undistributed earnings of foreign subsidiaries. A portion of the resulting income taxes payable can be paid in installments over eight years. The noncurrent income taxes payable related to the one-time repatriation tax was $151 million and $273 million as of December 31, 2023 and 2022, respectively.

Provision for income taxes— The components of the provision for income taxes for the twelve months ended December 31, 2023, 2022 and 2021 were as follows:


In millions	2023		2022		2021
U.S. federal income taxes:
Current	$	455	$	478	$	399
Deferred	(111)		(143)		(95)

Total U.S. federal income taxes	344		335		304
Foreign income taxes:
Current	405		387		302
Deferred	31		13		(57)
Total foreign income taxes	436		400		245
State income taxes:
Current	94		93		79
Deferred	(8)		(20)		4

Total state income taxes	86		73		83
Total provision for income taxes	$	866	$	808	$	632

Income before taxes for domestic and foreign operations for the twelve months ended December 31, 2023, 2022 and 2021 was as follows:


In millions	2023		2022		2021
Domestic	$	1,953	$	2,128	$	1,667
Foreign	1,870		1,714		1,659
Total income before taxes	$	3,823	$	3,842	$	3,326

The reconciliation between the U.S. federal statutory tax rate and the effective tax rate for the twelve months ended December 31, 2023, 2022 and 2021 was as follows:


	2023		2022		2021
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of U.S. federal tax benefit	1.9		1.6		2.1
Differences between U.S. federal statutory and foreign tax rates	1.1		0.6		0.3
U.S. tax effect of foreign earnings	0.8		1.0		1.2
Tax effect of foreign dividends	0.1		0.6		0.6
Changes in tax law	—		—		(3.4)
Audit resolution	(0.2)		(1.4)		(0.1)
Excess tax benefits from stock-based compensation	(0.5)		(0.3)		(0.5)
Foreign derived intangible income	(1.4)		(1.3)		(1.3)
Other, net	(0.2)		(0.8)		(0.9)
Effective tax rate	22.6	%	21.0	%	19.0	%

The Company's effective tax rate for the twelve months ended December 31, 2023, 2022 and 2021 was 22.6%, 21.0% and 19.0%, respectively. The 2023 effective tax rate benefited from a discrete income tax benefit of $20 million in the second quarter of 2023 related to amended 2021 U.S. taxes. The 2022 effective tax rate benefited from discrete income tax benefits of $32 million in the fourth quarter of 2022 related to the utilization of capital loss carryforwards and $51 million in the second quarter of 2022 related to a decrease in unrecognized tax benefits resulting from the resolution of a U.S. tax audit. The 2021 effective tax rate benefited from discrete income tax benefits of $21 million in the third quarter of 2021 related to the utilization of capital loss carryforwards and $112 million in the second quarter of 2021 related to the remeasurement of net deferred tax assets due to the enactment of the U.K. Finance Bill 2021, which increased the U.K. income tax rate from 19% to 25% effective April 1, 2023. Additionally, the effective tax rates for 2023, 2022 and 2021 included discrete income tax

benefits of $20 million, $12 million and $17 million, respectively, related to excess tax benefits from stock-based compensation.

Upon repatriation of foreign earnings to the U.S., the Company may be subject to foreign withholding taxes. The accrual for foreign withholding taxes related to the expected repatriation of foreign held cash and equivalents as of December 31, 2023 and 2022 was $39 million and $50 million, respectively.

Deferred foreign withholding taxes have not been provided on undistributed earnings considered permanently invested. As of December 31, 2023, undistributed earnings of certain international subsidiaries that are considered permanently invested were approximately $6 billion. Determination of the related deferred tax liability is not practicable because of the complexities associated with the hypothetical calculation.

Deferred tax assets and liabilities— The components of deferred income tax assets and liabilities as of December 31, 2023 and 2022 were as follows:


	2023				2022
In millions	Asset		Liability		Asset		Liability
Goodwill and intangible assets	$	505	$	(492)	$	437	$	(505)
Inventory reserves, capitalized tax cost and LIFO inventory	51		(3)		51		(3)
Investments	19		(124)		23		(141)
Plant and equipment	12		(113)		15		(106)
Accrued expenses and reserves	34		—		39		—
Employee benefit accruals	165		—		166		—
Foreign tax credit carryforwards	12		—		14		—
Net operating loss carryforwards	463		—		441		—
Capital loss carryforwards	194		—		194		—
Allowances for uncollectible accounts	12		—		11		—
Capitalized research and development	88		—		44		—
Pension liabilities	—		(21)		—		(25)

Unrealized loss (gain) on foreign debt instruments	—		(37)		—		(65)
Operating leases	53		(53)		47		(47)
Other	43		(31)		45		(30)
Gross deferred income tax assets (liabilities)	1,651		(874)		1,527		(922)
Valuation allowances	(624)		—		(595)		—
Total deferred income tax assets (liabilities)	$	1,027	$	(874)	$	932	$	(922)

The valuation allowances recorded as of December 31, 2023 and 2022 related primarily to certain net operating loss carryforwards and capital loss carryforwards. As of December 31, 2023, the Company had utilized all realizable foreign tax credit carryforwards.

As of December 31, 2023, the Company had net operating loss carryforwards available to offset future taxable income in the U.S. and certain foreign jurisdictions, which expire as follows:


	Gross Carryforwards
	Related to Net
In millions	Operating Losses
2024	$	10
2025	1
2026	4
2027	1
2028	2

2029-2049	664
Do not expire	1,027
Total gross carryforwards related to net operating losses	$	1,709

Unrecognized tax benefits— The changes in the amount of unrecognized tax benefits for the twelve months ended December 31, 2023, 2022 and 2021 were as follows:


In millions	2023		2022		2021
Beginning balance	$	314	$	360	$	346
Additions based on tax positions related to the current year	21		9		11
Additions for tax positions of prior years	48		9		23
Reductions for tax positions of prior years	(33)		(56)		(12)
Settlements	(23)		—		—
Foreign currency translation	2		(8)		(8)
Ending balance	$	329	$	314	$	360

Included in the balance as of December 31, 2023 were approximately $295 million of unrecognized tax benefits that, if recognized, would impact the Company's effective tax rate.

The Company and its subsidiaries file tax returns in the U.S. and various state, local and foreign jurisdictions. These tax returns are routinely audited by the tax authorities in these jurisdictions including the Internal Revenue Service, His Majesty's Revenue and Customs, German Fiscal Authority, French Fiscal Authority, and Australian Tax Office, and a number of these audits are currently ongoing, which may increase the amount of the unrecognized tax benefits in future periods. The Company believes it is reasonably possible that within the next twelve months the amount of the Company's unrecognized tax benefits may be decreased by approximately $8 million related predominantly to the potential resolution of federal, state and foreign examinations. The Company has recorded its best estimate of the potential exposure for these issues. The following table summarizes the open tax years for the Company's major jurisdictions:


Jurisdiction			Open Tax Years
United States – Federal			2019-2023
United Kingdom			2017-2023
Germany			2019-2023
France			2017-2023
Australia			2015-2023

The Company recognizes interest and penalties related to income tax matters in income tax expense. The accrual for interest and penalties as of December 31, 2023 and 2022 was $34 million and $26 million, respectively.

(8) Net Income Per Share

Net income per basic share is computed by dividing net income by the weighted-average number of shares outstanding for the period. Net income per diluted share is computed by dividing net income by the weighted-average number of shares

assuming dilution for stock options and restricted stock units. Dilutive shares reflect the potential additional shares that would be outstanding if the dilutive stock options outstanding were exercised and the unvested restricted stock units vested during the period. The computation of net income per share for the twelve months ended December 31, 2023, 2022 and 2021 was as follows:


In millions except per share amounts	2023		2022		2021
Net Income	$	2,957	$	3,034	$	2,694
Net income per share—Basic:
Weighted-average common shares	302.6		309.6		315.1
Net income per share—Basic	$	9.77	$	9.80	$	8.55
Net income per share—Diluted:
Weighted-average common shares	302.6		309.6		315.1
Effect of dilutive stock options and restricted stock units	1.0		1.1		1.3
Weighted-average common shares assuming dilution	303.6		310.7		316.4
Net income per share—Diluted	$	9.74	$	9.77	$	8.51

Options that were considered antidilutive were not included in the computation of diluted net income per share. There were 0.3 million, 0.9 million and 0.4 million antidilutive options outstanding for the twelve months ended December 31, 2023, 2022 and 2021, respectively.

(9) Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the twelve months ended December 31, 2023 and 2022 were as follows:


In millions	Automotive OEM		Food Equipment		Test & Measurement and Electronics		Welding		Polymers & Fluids		Construction Products		Specialty Products		Total
Balance, December 31, 2021	$	475	$	265	$	1,707	$	258	$	873	$	518	$	869	$	4,965
Acquisitions / (divestitures)	—		—		58		—		—		—		—		58
Transfers to assets held for sale	—		(2)		—		—		(33)		—		(2)		(37)
Foreign currency translation	(16)		(14)		(36)		(10)		(17)		(15)		(14)		(122)
Balance, December 31, 2022	459		249		1,729		248		823		503		853		4,864

Foreign currency translation	7		2		6		3		11		3		13		45
Balance, December 31, 2023	$	466	$	251	$	1,735	$	251	$	834	$	506	$	866	$	4,909
Cumulative goodwill impairment charges, December 31, 2023	$	24	$	60	$	83	$	5	$	15	$	7	$	46	$	240

Intangible assets as of December 31, 2023 and 2022 were as follows:


	2023						2022
In millions	Cost		Accumulated Amortization		Net		Cost		Accumulated Amortization		Net
Amortizable intangible assets:
Customer lists and relationships	$	1,746	$	(1,534)	$	212	$	1,746	$	(1,479)	$	267
Trademarks and brands	713		(573)		140		713		(541)		172
Patents and proprietary technology	615		(581)		34		615		(565)		50
Other	511		(487)		24		509		(477)		32
Total amortizable intangible assets	3,585		(3,175)		410		3,583		(3,062)		521
Indefinite-lived intangible assets:
Trademarks and brands	247		—		247		247		—		247
Total intangible assets	$	3,832	$	(3,175)	$	657	$	3,830	$	(3,062)	$	768

On December 1, 2021, the Company completed the acquisition of the MTS Test & Simulation business for a purchase price of $750 million, subject to certain closing adjustments, which was reported within the Test & Measurement and Electronics segment. During 2022, the Company completed the allocation of the purchase price to the acquired assets and liabilities as of the acquisition date, including intangible assets and goodwill. Based on its final allocation, the Company recorded goodwill of $430 million and intangible assets of $259 million. Refer to Note 3. Acquisitions for additional information regarding this acquisition.

The Company performed its annual impairment assessment of goodwill and indefinite-lived intangible assets in the third quarter of 2023, 2022 and 2021. There were no impairment charges as a result of these assessments.

As of December 31, 2023, the estimated future amortization expense of intangible assets for the twelve months ending December 31 was as follows:


In millions
2024	$	96
2025	75
2026	54
2027	43
2028	33

(10) Leases

The Company's lease transactions are primarily for the use of facilities, vehicles and office equipment under operating lease arrangements. Total rental expense for operating leases for the twelve months ended December 31, 2023, 2022 and 2021 was $132 million, $122 million and $118 million, respectively. Total rental expense for the twelve months ended December 31, 2023, 2022 and 2021 included $60 million, $56 million and $47 million, respectively, related to short-term operating leases and variable lease payments. Short-term operating leases have original terms of one year or less, or can be terminated at the Company's option with a short notice period and without significant penalty, and are not capitalized.

The following table summarizes information related to the Company's capitalized operating leases for 2023, 2022 and 2021:


Dollars in millions	2023			2022			2021
Rental expense related to capitalized operating leases	$	72		$	66		$	71
Cash paid related to maturities of operating lease liabilities	$	70		$	67		$	70
Right-of-use assets obtained in exchange for operating lease liabilities	$	82		$	74		$	71

Right-of-use assets	$	248		$	212

Current portion of operating lease liabilities	$	58		$	55
Long-term portion of operating lease liabilities	148			131
Operating lease liabilities	$	206		$	186

Weighted-average remaining lease term	5.0 years			4.9 years
Weighted-average discount rate	2.95		%	2.25		%

The right-of-use assets related to operating leases and the current and long-term portions of operating lease liabilities were included in Other assets, Accrued expenses and Other liabilities, respectively, in the Statement of Financial Position. The weighted-average discount rate was based on the incremental borrowing rate of the Company and its subsidiaries. As of December 31, 2023, future maturities of operating lease liabilities for the twelve months ending December 31 were as follows:


In millions
2024	$	63
2025	47
2026	35
2027	26
2028	17
2029 and future years	36
Total future minimum lease payments	224
Less: Imputed interest	(18)
Operating lease liabilities	$	206

(11) Debt

Total debt as of December 31, 2023 and 2022 was as follows:


In millions	2023		2022
Short-term debt	$	1,825	$	1,590
Long-term debt	6,339		6,173
Total debt	$	8,164	$	7,763

Short-term debt— Short-term debt represents obligations with a maturity date of one year or less and is stated at cost, which approximates fair value. Short-term debt also includes current maturities of long-term debt that have been reclassified to short-term, and excludes short-term debt classified as long-term because the Company has the intent and ability to extend the maturity date beyond one year. Short-term debt as of December 31, 2023 and 2022 consisted of the following:


In millions	2023		2022
Current maturities of long-term debt	$	1,361	$	535
Commercial paper	464		1,053
Other	—		2
Total short-term debt	$	1,825	$	1,590

As of December 31, 2023, current maturities of long-term debt included $700 million related to the 3.50% notes due March 1, 2024, which were reclassified from Long-term debt to Short-term debt in the first quarter of 2023 and $661 million related to the 0.25% Euro notes due December 5, 2024, which were reclassified from Long-term debt to Short-term debt in the fourth quarter of 2023. As of December 31, 2022, current maturities of long-term debt included $535 million related to the 1.25% Euro notes due May 22, 2023, which were repaid on the due date.

The Company may issue commercial paper to fund general corporate needs, share repurchases, and small and medium-sized acquisitions. During the fourth quarter of 2022, the Company entered into a $3.0 billion, five-year revolving credit facility with a termination date of October 21, 2027, which is available to provide additional liquidity, including to support the potential issuances of commercial paper. No amounts were outstanding under the revolving credit facility as of December 31, 2023 or 2022. The Company was also in compliance with the financial covenants of the revolving credit facility as of December 31, 2023, which included a minimum interest coverage ratio. The weighted-average interest rate on commercial paper was 5.40% and 4.35% as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, the Company had unused capacity of approximately $158 million under international debt facilities. In the ordinary course of business, the Company also had approximately $231 million outstanding in guarantees, letters of credit and other similar arrangements with financial institutions as of December 31, 2023.

Long-term debt— Long-term debt represents obligations with a maturity date greater than one year or where the Company has the intent and ability to extend the maturity date beyond one year, and excludes current maturities that have been reclassified to short-term debt. Long-term debt at carrying value and fair value as of December 31, 2023 and 2022 consisted of the following:


		2023				2022
In millions	Effective Interest Rate	Carrying Value		Fair Value		Carrying Value		Fair Value
1.25% Euro notes due May 22, 2023	1.35%	$	—	$	—	$	535	$	533
3.50% notes due March 1, 2024	3.54%	700		698		699		691
Euro Credit Agreement due May 3, 2024	Variable	1,434		1,434		—		—
0.25% Euro notes due December 5, 2024	0.31%	661		642		641		606
2.65% notes due November 15, 2026	2.69%	997		956		996		932
0.625% Euro notes due December 5, 2027	0.71%	549		509		531		469
2.125% Euro notes due May 22, 2030	2.18%	548		530		531		484
1.00% Euro notes due June 5, 2031	1.09%	546		488		529		438
3.00% Euro notes due May 19, 2034	3.13%	543		551		525		492
4.875% notes due September 15, 2041	4.97%	638		660		638		638
3.90% notes due September 1, 2042	3.96%	1,084		989		1,083		945

Total		7,700		$	7,457	6,708		$	6,228
Less: Current maturities of long-term debt		(1,361)				(535)
Total long-term debt		$	6,339			$	6,173

The approximate fair values of the Company's long-term debt, including current maturities, were based on a valuation model using Level 2 observable inputs, which included market rates for comparable instruments for the respective periods.

In 2011, the Company issued $350 million of 3.375% notes due September 15, 2021 at 99.552% of face value, which were redeemed in full on June 15, 2021, and $650 million of 4.875% notes due September 15, 2041 at 98.539% of face value.

In 2012, the Company issued $1.1 billion of 3.9% notes due September 1, 2042 at 99.038% of face value.

In February 2014, the Company issued $700 million of 3.5% notes due March 1, 2024 at 99.648% of face value.

In May 2014, the Company issued €500 million of 1.75% Euro notes due May 20, 2022 at 99.16% of face value, which were redeemed in full at face value on February 22, 2022, and €500 million of 3.0% Euro notes due May 19, 2034 at 98.089% of face value.

In May 2015, the Company issued €500 million of 1.25% Euro notes due May 22, 2023 at 99.239% of face value, which were repaid on the due date, and €500 million of 2.125% Euro notes due May 22, 2030 at 99.303% of face value.

In November 2016, the Company issued $1.0 billion of 2.65% notes due November 15, 2026 at 99.685% of face value.

In June 2019, the Company issued €600 million of 0.25% Euro notes due December 5, 2024 at 99.662% of face value, €500 million of 0.625% Euro notes due December 5, 2027 at 99.343% of face value and €500 million of 1.00% Euro notes due June 5, 2031 at 98.982% of face value.

On May 5, 2023, the Company entered into a €1.3 billion Euro-denominated credit agreement (the "Euro Credit Agreement") with a termination date of May 3, 2024; provided, however, that the Company may extend the termination date by six months on up to two occasions. On May 12, 2023, the Company borrowed €1.3 billion of Euro term loans under the Euro Credit Agreement. Proceeds from the borrowing were used for general corporate purposes, including the repayment of outstanding debt. Any loan under the Euro Credit Agreement may not be re-borrowed once repaid, in full or in part, and will bear interest

at a per annum rate equal to the applicable EURIBOR (adjusted for any statutory reserves) plus 0.75% for the interest period selected by the Company of one, three or six months. As of December 31, 2023, the Company had €1.3 billion outstanding under the Euro Credit Agreement with an interest rate of 4.59%, which was included in Long-term debt as the Company intends to exercise its options to extend the termination date.

All of the Company's long-term debt listed above represent senior unsecured obligations ranking equal in right of payment. As of December 31, 2023, scheduled future maturities of long-term debt, including current maturities of long-term debt, for the twelve months ending December 31 were as follows:


In millions
2024	$	1,361
2025	1,434
2026	997
2027	549
2028	—
2029 and future years	3,359
Total	$	7,700

The €1.3 billion of Euro term loans due May 3, 2024 that were borrowed under the Euro Credit Agreement were included in the 2025 maturities in the scheduled future maturities of long-term debt as the Company intends to exercise its options to extend the termination date up to twelve months.

(12) Pension and Other Postretirement Benefits

The Company has both funded and unfunded defined benefit pension and other postretirement benefit plans, predominately in the U.S. The U.S. primary pension plan provides benefits based on years of service and final average salary. The U.S. primary postretirement health care plan is contributory with the participants' contributions adjusted annually. The U.S. primary postretirement life insurance plan is noncontributory. Beginning January 1, 2007, the U.S. primary pension and other postretirement benefit plans were closed to new participants. Newly hired employees and employees from acquired businesses that are not participating in these plans are eligible for additional Company contributions under the existing U.S. primary defined contribution retirement plans. The Company's expense related to defined contribution plans was $117 million in 2023, $111 million in 2022, and $88 million in 2021. In addition to the U.S. plans, the Company also has defined benefit pension plans in certain other countries, mainly the United Kingdom, Canada, Germany and Switzerland.

Summarized information regarding net periodic benefit cost included in the Statement of Income related to the Company's significant defined benefit pension and other postretirement benefit plans for the twelve months ended December 31, 2023, 2022 and 2021 is as follows:


	Pension						Other Postretirement Benefits
In millions	2023		2022		2021		2023		2022		2021
Components of net periodic benefit cost:
Service cost	$	35	$	47	$	53	$	5	$	7	$	7
Interest cost	94		50		39		23		13		11
Expected return on plan assets	(129)		(100)		(101)		(22)		(26)		(25)
Amortization of actuarial (gain) loss	3		24		53		(4)		(3)		—
Amortization of prior service cost	1		1		1		—		—		—
Settlement loss	—		1		—		—		—		—
Total net periodic benefit cost (income)	$	4	$	23	$	45	$	2	$	(9)	$	(7)

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

The Company used the most recently published mortality improvement scale from the Society of Actuaries, MP-2021, to measure its U.S. pension and other postretirement benefit obligations as of December 31, 2023 and 2022, which did not have a significant impact.

The following table provides a rollforward of the plan benefit obligations for the twelve months ended December 31, 2023 and 2022:


	Pension				Other Postretirement Benefits
In millions	2023		2022		2023		2022
Change in benefit obligation:
Beginning balance	$	1,993	$	2,765	$	468	$	580
Service cost	35		47		5		7
Interest cost	94		50		23		13
Plan participants' contributions	1		1		9		10

Actuarial (gain) loss	64		(607)		38		(101)

Benefits paid	(153)		(160)		(45)		(43)
Medicare subsidy received	—		—		1		2

Foreign currency translation	35		(103)		—		—
Ending balance	$	2,069	$	1,993	$	499	$	468
Accumulated benefit obligation as of December 31	$	1,972	$	1,911

For the years ended December 31, 2023 and 2022, the actuarial (gain) loss related to the Company's pension and other postretirement benefit obligations was primarily related to changes in discount rates. Refer to the Assumptions section below for further details related to the discount rates used in the valuations of pension and other postretirement benefit obligations.

The following table provides a rollforward of the plan assets and a reconciliation of funded status for the twelve months ended December 31, 2023 and 2022:


	Pension				Other Postretirement Benefits
In millions	2023		2022		2023		2022
Change in plan assets:
Beginning balance	$	2,114	$	3,041	$	336	$	434
Actual return on plan assets	157		(662)		51		(69)
Company contributions	10		14		7		4
Plan participants' contributions	1		1		9		10

Benefits paid	(153)		(160)		(45)		(43)
Foreign currency translation	42		(120)		—		—
Ending balance	$	2,171	$	2,114	$	358	$	336
Reconciliation of funded status:
Funded status	$	102	$	121	$	(141)	$	(132)
Other immaterial plans	(58)		(55)		(4)		(4)
Net asset (liability) as of December 31	$	44	$	66	$	(145)	$	(136)
The amounts recognized in the Statement of Financial Position as of December 31 consist of:
Other assets	$	243	$	251	$	—	$	—
Accrued expenses	(29)		(12)		(3)		(3)
Other noncurrent liabilities	(170)		(173)		(142)		(133)
Net asset (liability) as of December 31	$	44	$	66	$	(145)	$	(136)
The pre-tax amounts recognized in accumulated other comprehensive (income) loss consist of:
Net actuarial (gain) loss	$	512	$	479	$	(61)	$	(74)
Prior service cost	3		4		—		—
Pre-tax accumulated other comprehensive (income) loss as of December 31	$	515	$	483	$	(61)	$	(74)

As of December 31, 2023 and 2022, pension plans with projected benefit obligations in excess of plan assets had projected benefit obligations of $179 million and $137 million, respectively, and plan assets of $55 million and $22 million, respectively. As of December 31, 2023 and 2022, pension plans with accumulated benefit obligations in excess of plan assets had accumulated benefit obligations of $175 million and $131 million, respectively, and plan assets of $55 million and $22 million, respectively.

Assumptions— The weighted-average assumptions used in the valuations of pension and other postretirement benefits were as follows:


	Pension						Other Postretirement Benefits
	2023		2022		2021		2023		2022		2021
Assumptions used to determine benefit obligations as of December 31:
Discount rate	4.69	%	4.94	%	2.33	%	5.01	%	5.19	%	2.92	%
Rate of compensation increases	3.39	%	3.46	%	3.40	%
Interest crediting rate - U.S. cash balance plan	3.75	%	3.75	%	3.75	%
Assumptions used to determine net periodic benefit cost for the twelve months ended December 31:
Discount rate	4.94	%	2.33	%	1.89	%	5.19	%	2.92	%	2.59	%
Expected return on plan assets	5.27	%	3.72	%	3.67	%	6.75	%	6.25	%	6.65	%
Rate of compensation increases	3.46	%	3.40	%	3.24	%
Interest crediting rate - U.S. cash balance plan	3.75	%	3.75	%	3.75	%

The expected long-term rates of return for pension and other postretirement benefit plans were developed using historical asset class returns while factoring in current market conditions such as inflation, interest rates and asset class performance.

The discount rate reflects the current rate at which the associated liabilities could theoretically be effectively settled at the end of the year. In estimating this rate, the Company looks at rates of return on high-quality fixed income investments, with similar duration to the liabilities in the plan. The Company estimates the service and interest cost components of net periodic benefit cost by applying specific spot rates along the yield curve to the projected cash flows rather than a single weighted-average rate.

Assumed health care cost trend rates have an effect on the amounts reported for the postretirement health care benefit plans. The assumed health care cost trend rates used to determine the postretirement benefit obligation as of December 31 were as follows:


	2023		2022		2021
Health care cost trend rate assumed for the next year	7.50	%	7.00	%	7.00	%
Ultimate trend rate	4.50	%	4.50	%	4.50	%
Year the rate reaches the ultimate trend rate	2033		2031		2029

Plan assets— The Company's overall investment strategy for the assets in the pension funds is to achieve a balance between the goals of growing plan assets and keeping risk at a reasonable level over a long-term investment horizon. In order to reduce unnecessary risk, the pension funds are diversified across several asset classes, securities and investment managers. The target allocations for plan assets are 15% to 25% equity investments, 75% to 85% fixed income investments and 0% to 10% in other types of investments. The Company does not use derivatives for the purpose of speculation, leverage, circumventing investment guidelines or taking risks that are inconsistent with specified guidelines.

The assets in the Company's postretirement health care plan are primarily invested in life insurance policies. The Company's overall investment strategy for the assets in the postretirement health care fund is to invest in assets that provide a reasonable tax exempt rate of return while preserving capital.

The following tables present the fair value of the Company's pension and other postretirement benefit plan assets as of December 31, 2023 and 2022 by asset category and valuation methodology. Level 1 assets are valued using unadjusted quoted prices for identical assets in active markets. Level 2 assets are valued using quoted prices or other observable inputs for similar assets. Level 3 assets are valued using unobservable inputs, but reflect the assumptions market participants would be expected to use in pricing the assets. Each financial instrument's categorization is based on the lowest level of input that is significant to the fair value measurement.


	2023
In millions	Total		Level 1		Level 2		Level 3
Pension Plan Assets:
Cash and equivalents	$	47	$	47	$	—	$	—


Fixed income securities:
Government securities	334		—		334		—
Corporate debt securities	800		—		800		—

Investment contracts with insurance companies	1		—		—		1
Commingled funds:
Mutual funds	25
Collective trust funds	946
Partnerships/private equity interests	8
Other	10		—		10		—
Total fair value of pension plan assets	$	2,171	$	47	$	1,144	$	1

Other Postretirement Benefit Plan Assets:

Life insurance policies	$	358
Total fair value of other postretirement benefit plan assets	$	358	$	—	$	—	$	—


	2022
In millions	Total		Level 1		Level 2		Level 3
Pension Plan Assets:
Cash and equivalents	$	44	$	44	$	—	$	—


Fixed income securities:
Government securities	299		—		299		—
Corporate debt securities	737		—		737		—

Investment contracts with insurance companies	1		—		—		1
Commingled funds:
Mutual funds	22
Collective trust funds	994
Partnerships/private equity interests	13
Other	4		—		4		—
Total fair value of pension plan assets	$	2,114	$	44	$	1,040	$	1

Other Postretirement Benefit Plan Assets:

Life insurance policies	$	336
Total fair value of other postretirement benefit plan assets	$	336	$	—	$	—	$	—

Cash and equivalents include cash on hand and instruments with original maturities of three months or less and are valued at cost, which approximates fair value. Fixed income securities primarily consist of U.S. and foreign government bills, notes and bonds, corporate debt securities and investment contracts. The majority of the assets in this category are valued by evaluating bid prices provided by independent financial data services. For securities where market data is not readily available, unobservable market data is used to value the security.

Pension assets measured at net asset value include mutual funds, collective trust funds, partnerships/private equity interests and life insurance policies. Mutual funds and collective trust funds are funds that are valued based on the value of the underlying investments which can be redeemed on a daily basis. The underlying investments include both passively and actively managed U.S. and foreign large- and mid-cap equity funds and short-term investment funds. Partnerships/private equity interests are investments in partnerships where the benefit plan is a limited partner. The investments are valued by the investment managers on a periodic basis using pricing models that use market, income and cost valuation methods. Distributions are received from these funds on a periodic basis through the liquidation of the underlying assets of the fund.

Life insurance policies are used to fund other postretirement benefits in order to obtain favorable tax treatment and are valued based on the cash surrender value of the underlying policies. The Company has selected the funds in which these assets are invested and may elect to withdraw funds with proper notice to the insurance company or maintain the policies and receive death benefits as determined by the contracts.

Cash flows— The Company generally funds its pension and other postretirement benefit plans as required by law or to the extent such contributions are tax deductible. The Company expects to contribute approximately $60 million to its pension plans and $4 million to its other postretirement benefit plans in 2024. As of December 31, 2023, the Company's portion of the future benefit payments that are expected to be paid during the twelve months ending December 31 is as follows:


In millions	Pension		Other Postretirement Benefits
2024	$	179	$	37
2025	162		38
2026	161		38
2027	163		38
2028	165		38
Years 2029-2033	803		184

(13) Commitments and Contingencies

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving environmental, product liability (including toxic tort) and general liability claims. The Company accrues for such liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the Company's estimates of the outcomes of these matters and its experience in contesting, litigating and settling other similar matters. The Company believes resolution of these matters, individually and in the aggregate, will not have a material adverse effect on the Company's financial position, liquidity or future operations.

(14) Stockholders' Equity

Preferred stock— Preferred stock, without par value, of which 0.3 million shares are authorized and unissued, is issuable in series. The Board of Directors is authorized to fix by resolution the designation and characteristics of each series of preferred stock. The Company has no present commitment to issue its preferred stock.

Share repurchases— On August 3, 2018, the Company announced a stock repurchase program which provided for the repurchase of up to $3.0 billion of the Company's common stock over an open-ended period of time (the "2018 Program"). Under the 2018 Program, the Company repurchased approximately 6.7 million shares of its common stock at an average price of $158.11 per share during 2019, approximately 4.2 million shares of its common stock at an average price of $167.69 per share during 2020, approximately 4.4 million shares of its common stock at an average price of $227.29 per share during 2021 and approximately 1.2 million shares of its common stock at an average price of $216.62 per share during 2022. The 2018 Program was completed in the first quarter of 2022.

On May 7, 2021, the Company announced a stock repurchase program which provided for the repurchase of up to an additional $3.0 billion of the Company's common stock over an open-ended period of time (the "2021 Program"). Under the 2021 program, the Company repurchased approximately 7.1 million shares of its common stock at an average price of $210.46 per share during 2022 and approximately 6.3 million shares of its common stock at an average price of $235.35 per share during 2023. The 2021 Program was completed in the fourth quarter of 2023.

On August 4, 2023, the Company announced a new stock repurchase program which provides for the repurchase of up to an additional $5.0 billion of the Company's common stock over an open-ended period of time (the "2023 Program"). Under the 2023 program, the Company repurchased approximately 38,000 shares of its common stock at an average price of $263.44 per share during 2023. As of December 31, 2023, there were approximately $5.0 billion of authorized repurchases remaining under the 2023 program.

Cash Dividends— Cash dividends declared were $5.42 per share in 2023, $5.06 per share in 2022 and $4.72 per share in 2021. Cash dividends paid were $5.33 per share in 2023, $4.97 per share in 2022 and $4.64 per share in 2021.

Accumulated other comprehensive income (loss)— The changes in accumulated other comprehensive income (loss) during 2023, 2022 and 2021 were as follows:


In millions	2023		2022		2021
Beginning balance	$	(1,841)	$	(1,502)	$	(1,642)

Foreign currency translation adjustments during the period	16		(192)		73
Foreign currency translation adjustments reclassified to income	(1)		—		5
Income taxes	26		(50)		(73)
Total foreign currency translation adjustments, net of tax	41		(242)		5

Pension and other postretirement benefit adjustments during the period	(45)		(149)		125
Pension and other postretirement benefit adjustments reclassified to income	—		23		54
Income taxes	11		29		(44)
Total pension and other postretirement benefit adjustments, net of tax	(34)		(97)		135

Ending balance	$	(1,834)	$	(1,841)	$	(1,502)

Foreign currency translation adjustments reclassified to income primarily relate to the exit of immaterial foreign operations. Pension and other postretirement benefit adjustments reclassified to income represented settlements and the amortization of actuarial gains and losses and prior service cost. Refer to Note 12. Pension and Other Postretirement Benefits for the amounts included in net periodic benefit cost.

The Company designated the €1.0 billion of Euro notes issued in May 2014, the €1.0 billion of Euro notes issued in May 2015, the €1.6 billion of Euro notes issued in June 2019 and the €1.3 billion of Euro term loans borrowed under the Euro Credit Agreement in May 2023 as hedges of a portion of its net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations. Changes in the value of this debt resulting from fluctuations in the Euro to U.S. Dollar exchange rate have been recorded as foreign currency translation adjustments within Accumulated other comprehensive income (loss). On February 22, 2022, €500 million of the Euro notes issued in May 2014 were redeemed in full and on May 22, 2023, €500 million of the Euro notes issued in May 2015 were repaid on the due date. Refer to Note 11. Debt for additional information regarding the redemption of these notes. The amount of pre-tax gain (loss) related to these notes that was recorded in Other comprehensive income (loss) for the twelve months ended December 31, 2023, 2022 and 2021 was $(109) million, $205 million and $303 million, respectively.

As of December 31, 2023 and 2022, the ending balance of Accumulated other comprehensive income (loss) consisted of after-tax cumulative translation adjustment losses of $1.5 billion in both periods, and after-tax unrecognized pension and other postretirement benefits costs of $327 million and $293 million, respectively.

(15) Stock-Based Compensation

On May 8, 2015 (the "Effective Date"), the 2015 Long-Term Incentive Plan (the "2015 Plan") was approved by shareholders. The 2015 Plan allows for the issuance of up to 10 million shares of ITW common stock for awards granted under the plan. As of the Effective Date, no additional awards will be granted to employees under the 2011 Long-Term Incentive Plan (the "2011 Plan"). The significant terms of stock options and restricted stock units ("RSUs") were not changed under the 2015 Plan. Stock options and RSUs are issued to officers and/or other management employees under these plans. Stock options generally vest over a four-year period and have an expiration of ten years from the issuance date. RSUs generally "cliff" vest after a three-year period and include units with and without performance criteria. RSUs with performance criteria provide for full "cliff" vesting after three years if the Compensation Committee of the Board of Directors certifies that the performance goals have been met. Upon vesting, the holder will receive one share of common stock of the Company for each vested restricted stock unit.

Commencing in February 2013, the Company began issuing shares from treasury stock to cover the exercised options and vested RSUs. Prior to February 2013, the Company generally issued new shares from its authorized but unissued share pool.

The Company records compensation expense for the grant date fair value of stock awards over the remaining service periods of those awards. The following table summarizes the Company's stock-based compensation expense for the twelve months ended December 31, 2023, 2022 and 2021:


In millions	2023		2022		2021
Pre-tax stock-based compensation expense	$	69	$	63	$	53
Tax benefit	(7)		(7)		(6)
Total stock-based compensation expense, net of tax	$	62	$	56	$	47

The following table summarizes activity related to non-vested RSUs for the twelve months ended December 31, 2023:


Shares in millions	Number of Shares	Weighted-Average Grant-Date Fair Value
Unvested, January 1, 2023	0.6	$203.48
Granted	0.2	232.21
Vested	(0.2)	189.20

Unvested, December 31, 2023	0.6	218.85

The following table summarizes stock option activity for the twelve months ended December 31, 2023:


In millions except exercise price and contractual terms	Number of Shares	Weighted-Average Exercise Price	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Under option, January 1, 2023	3.2	$158.71
Granted	0.3	235.52
Exercised	(0.5)	99.12

Under option, December 31, 2023	3.0	177.01	5.8	$249
Exercisable, December 31, 2023	2.0	159.24	4.9	$207

The fair value of RSUs is equal to the common stock fair market value on the date of the grant. RSUs provide for dividend equivalents payable in additional RSUs for dividends that would have been paid during the vesting period. Stock option exercise prices are equal to the common stock fair market value on the date of grant. The Company estimates forfeitures based on historical rates for awards with similar characteristics. The Company uses a binomial option pricing model to estimate the fair value of the stock options granted. The following summarizes the assumptions used in the option valuations for the twelve months ended December 31, 2023, 2022 and 2021:


	2023	2022	2021
Risk-free interest rate	3.92-4.86%	1.04-2.07%	0.04%-1.38%
Weighted-average volatility	22.0%	21.0%	24.0%
Dividend yield	2.13%	2.20%	2.50%
Expected years until exercise	8.6-9.2	9.1-9.6	8.9-9.4

Lattice-based option valuation models, such as the binomial option pricing model, incorporate ranges of assumptions for inputs. The risk-free rate of interest for periods within the contractual life of the option is based on a zero-coupon U.S. government instrument over the contractual term of the equity instrument. Expected volatility is based on implied volatility from traded options on the Company's stock and historical volatility of the Company's stock. The Company uses historical data to estimate option exercise timing and employee termination rates within the valuation model. The weighted-average dividend yield is based on historical information. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The ranges presented result from separate groups of employees assumed to exhibit different exercise behavior.

The weighted-average grant-date fair value of stock options granted for the twelve months ended December 31, 2023, 2022 and 2021 was $67.16, $45.15 and $40.90 per share, respectively. The aggregate intrinsic value of stock options exercised

during the twelve months ended December 31, 2023, 2022 and 2021 was $79 million, $38 million and $68 million, respectively. As of December 31, 2023, there was $11 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted-average period of 2.0 years. Exercise of stock options during the twelve months ended December 31, 2023, 2022 and 2021 resulted in cash receipts of $53 million, $29 million and $50 million, respectively. The total fair value of vested stock option awards during the twelve months ended December 31, 2023, 2022 and 2021 was $18 million, $18 million and $19 million, respectively.

As of December 31, 2023, there was $50 million of total unrecognized compensation cost related to unvested RSUs. That cost is expected to be recognized over a weighted-average remaining contractual life of 1.7 years. The total fair value of vested RSU awards during the twelve months ended December 31, 2023, 2022 and 2021 was $35 million, $28 million and $23 million, respectively.

(16) Other Balance Sheet Information

Other balance sheet information as of December 31, 2023 and 2022 was as follows:


In millions	2023		2022
Prepaid expenses and other current assets:
Value-added-tax receivables	$	99	$	92
Vendor advances	55		52
Income tax refunds receivable	29		10
Other	157		175
Total prepaid expenses and other current assets	$	340	$	329

Other assets:
Cash surrender value of life insurance policies	$	436	$	433
Operating lease right-of-use assets	248		212
Prepaid pension assets	243		251
Customer tooling	181		159
Other	154		123
Total other assets	$	1,262	$	1,178

Accrued expenses:
Compensation and employee benefits	$	423	$	451
Deferred revenue and customer deposits	395		427
Rebates	218		225
Current portion of operating lease liabilities	58		55
Warranties	48		42
Current portion of pension and other postretirement benefit obligations	32		15
Other	489		513
Total accrued expenses	$	1,663	$	1,728

Other liabilities:
Pension benefit obligation	$	170	$	173
Long-term portion of operating lease liabilities	148		131
Postretirement benefit obligation	142		133
Other	554		506
Total other liabilities	$	1,014	$	943

(17) Segment Information

The Company's operations are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. The following is a description of the Company's seven segments:

Automotive OEM— This segment is a global, niche supplier to top tier OEMs, providing unique innovation to address pain points for sophisticated customers with complex problems. Businesses in this segment produce components and fasteners for automotive-related applications.

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

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

Welding— This segment is a branded value-added equipment and specialty consumable manufacturer with innovative and leading technology. Businesses in this segment produce arc welding equipment, consumables and accessories for a wide array of industrial and commercial applications.

Polymers & Fluids— This segment is a branded supplier to niche markets that require value-added, differentiated products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance.

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

Specialty Products— This segment is focused on diversified niche market opportunities with substantial patent protection producing beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners.

Segments are allocated a fixed overhead charge based on the segment's revenue. Expenses not charged to the segments are reported separately as Unallocated. Because the Unallocated category includes a variety of items, it is subject to fluctuations on a quarterly and annual basis.

Segment information for 2023, 2022 and 2021 was as follows:


In millions	2023		2022		2021
Operating revenue:
Automotive OEM	$	3,235	$	2,969	$	2,800
Food Equipment	2,622		2,444		2,078
Test & Measurement and Electronics	2,832		2,828		2,346
Welding	1,902		1,894		1,650
Polymers & Fluids	1,804		1,905		1,804
Construction Products	2,033		2,113		1,945
Specialty Products	1,697		1,799		1,854
Intersegment revenue	(18)		(20)		(22)
Total	$	16,107	$	15,932	$	14,455
Operating income:
Automotive OEM	$	561	$	499	$	545
Food Equipment	713		618		469
Test & Measurement and Electronics	686		684		643
Welding	605		583		490
Polymers & Fluids	482		479		457
Construction Products	578		548		530
Specialty Products	449		481		504
Total segments	4,074		3,892		3,638
Unallocated	(34)		(102)		(161)
Total	$	4,040	$	3,790	$	3,477
Depreciation and amortization and impairment of intangible assets:
Automotive OEM	$	123	$	121	$	128
Food Equipment	41		40		42
Test & Measurement and Electronics	80		87		66
Welding	29		26		26
Polymers & Fluids	46		57		62
Construction Products	33		31		32
Specialty Products	43		48		54
Total	$	395	$	410	$	410
Plant and equipment additions:
Automotive OEM	$	224	$	181	$	116
Food Equipment	54		41		30
Test & Measurement and Electronics	43		49		37
Welding	41		43		27
Polymers & Fluids	27		23		15
Construction Products	31		33		30
Specialty Products	35		42		41
Total	$	455	$	412	$	296
Identifiable assets:
Automotive OEM	$	2,615	$	2,447	$	2,260
Food Equipment	1,193		1,188		1,052
Test & Measurement and Electronics	3,230		3,289		3,242
Welding	838		933		784
Polymers & Fluids	1,762		1,819		1,881
Construction Products	1,230		1,370		1,367
Specialty Products	1,627		1,696		1,682
Total segments	12,495		12,742		12,268
Corporate	3,023		2,680		3,809
Total	$	15,518	$	15,422	$	16,077

Identifiable assets by segment are those assets that are specifically used in that segment. Corporate assets are principally cash and equivalents, investments and other general corporate assets.

Enterprise-wide information for the twelve months ended December 31, 2023, 2022 and 2021 was as follows:


In millions	2023		2022		2021
Operating Revenue by Geographic Region:
United States	$	7,576	$	7,609	$	6,578
Canada/Mexico	1,146		1,095		940
Total North America	8,722		8,704		7,518
Europe, Middle East and Africa	4,147		3,913		3,870
Asia Pacific	2,935		2,991		2,802
South America	303		324		265
Total operating revenue	$	16,107	$	15,932	$	14,455

Operating revenue by geographic region is based on the customers' locations. The Company had approximately 44% and 45% of its total net plant and equipment in the United States as of December 31, 2023 and 2022, respectively. Additionally, the Company had 13% and 12% of its total net plant and equipment in China as of December 31, 2023 and 2022, respectively. No other countries represented more than 10% of the Company's net plant and equipment as of December 31, 2023 and 2022. No single customer accounted for more than 5% of consolidated revenues for the twelve months ended December 31, 2023, 2022 or 2021.

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