Illinois Tool Works (ITW) 10-K risk factor changes: FY2024 vs FY2023

Slower economic growth, financial market instability, supply chain disruptions, natural disasters, public health crises (such as the COVID-19 pandemic), labor market challenges, rapid inflation, armed conflicts (such as [removed: Russia's ongoing invasion of Ukraine),] [added: the Russia and Ukraine conflict),] government deficit reduction, sequestration and other austerity measures impacting the markets the Company serves can adversely affect the Company's businesses by reducing demand for the Company's products and services, limiting financing available to the Company's customers, causing production delays, increasing order cancellations and the difficulty in collecting accounts receivable, increasing price competition, or increasing the risk that counterparties to the Company's contractual arrangements will become insolvent or otherwise unable to fulfill their obligations.

Difficulties or delays in research, development, production or commercialization of new products and services [added: or in the adoption of technological change, such as the use of artificial intelligence and machine learning,] may reduce future revenues and adversely affect the Company's competitive position.

The Company has recorded significant goodwill and other identifiable intangible assets on its balance sheet as a result of [removed: acquisitions, including the acquisition of the MTS Test & Simulation business in December 2021.][added: acquisitions.]

Prices for raw materials [removed: necessary for production] have fluctuated significantly in the past and the Company has experienced upward pricing pressure on [removed: raw] [added: specialty] materials such as [removed: steel, resins and chemicals.][added: high labor-content fabrications.]

In particular, inflation, changes in trade policies, the imposition of duties and tariffs, potential retaliatory countermeasures, public health crises and pandemics (such as the COVID-19 pandemic, which adversely impacted the price and availability of raw materials), threatened or actual military conflicts (such as [removed: Russia's ongoing invasion of Ukraine)] [added: the Russia] and [added: Ukraine conflict) and] severe weather events could adversely impact the price or availability of raw materials.

The Company has engaged in various acquisitions in the [removed: past, such as the acquisition of the MTS Test & Simulation business in December 2021,] [added: past] and could choose to acquire additional businesses in the future.

- The acquired business' inability to adapt to the ITW Business Model or otherwise perform in accordance with the Company's anticipated results or timetable, could cause it to [removed: under-perform] [added: under perform] relative to the Company's expectations and the price paid for it.

The Company may incur fines or penalties, damage to its reputation or other adverse consequences if its employees, agents or business partners violate anti-bribery, competition, export and import, trade sanctions, data privacy, environmental, [added: artificial intelligence,] human rights or other laws.

The Company is subject to complex U.S., foreign and other local laws and regulations that are applicable to its operations, such as anti-bribery and anti-corruption, competition, export and import, trade sanctions, data privacy, [removed: environmental] [added: environmental, the use of artificial intelligence in our business] and [added: in our products and services, and] human rights laws.

Forward-looking statements may be identified by the use of words such as "believe," "expect," "plans," "intend," "may," "strategy," "prospects," "estimate," "will," "should," "could," "project," "target," "anticipate," "guidance," "forecast," and other similar words, and may include, without limitation, statements regarding the duration and potential effects of global supply chain challenges, related government actions and the Company's strategy in response thereto on the Company's business, future financial and operating performance, free cash flow, economic and regulatory conditions in various geographic regions, the impact of foreign currency fluctuations, the timing and amount of benefits from the Company's enterprise strategy initiatives, the timing and amount of dividends and share repurchases, the protection of the Company's intellectual property, the likelihood of future goodwill or intangible asset impairment charges, the impact of adopting new accounting pronouncements, the adequacy of internally generated funds and credit facilities to service debt and finance the Company's capital allocation priorities, the sufficiency of U.S. generated cash to fund cash requirements in the U.S., the cost and availability of additional financing, the availability of raw materials and energy and the impact of raw material cost inflation, enterprise initiatives, the Company's portion of future benefit payments related to pension and postretirement benefits, the Company's information technology infrastructure, potential acquisitions and divestitures and the expected performance of acquired businesses and impact of divested businesses, the impact of U.S. and global tax legislation and the estimated timing and amount related to the resolution of tax matters, the cost of compliance with environmental regulations, the impact of [added: interest rate changes, the impact of] failure of the Company's employees to comply with applicable laws and regulations, and the outcome of outstanding legal proceedings.

The risk and severity of cybersecurity attacks could increase as artificial intelligence is used by threat actors to identify vulnerabilities and conduct increasingly sophisticated attacks.

Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified range of industrial products and equipment with [removed: 84] [added: 86] divisions in 51 countries.

As of December 31, [removed: 2023,] [added: 2024,] the Company employed approximately [removed: 45,000] [added: 44,000] people.

Instead, the Company's corporate management collects data on several key measurements: operating revenue, operating income, operating margin, [added: variable cost of revenue,] overhead [removed: costs,] [added: expenses,] number of months on hand in inventory, days sales outstanding in accounts receivable, past due receivables and return on invested capital.

[removed: Through the application of data driven insights generated by 80/20 practice, ITW focuses on its] largest and best opportunities (the "80") and eliminates cost, complexity and distractions associated with the less [added: profitable opportunities (the "20").]

These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately [removed: 19,600] [added: 20,900] granted and pending patents;

ITW now has [removed: 84] [added: 86] scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation.

At the same time, these 80/20 initiatives [removed: can] [added: may] also result in restructuring initiatives that reduce costs and improve profitability and returns.

OUR NEXT PHASE: [removed: 2024-2030][added: 2024 - 2030]

Volatility, risk and the pace of change in the global operating environment will continue to increase, and a decentralized [added: entrepreneurial culture allows the Company to be a fast adaptor – to read, react, respond and evolve.]

Customer-back Innovation [removed: (CBI)] [added: ("CBI")] is the most impactful driver to achieve high-quality organic growth through the cycle by establishing trusted problem solver relationships with key customers to effectively invent solutions that address customers' most critical pain points or tackle the biggest growth opportunities.

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 [removed: and 2021] was $106 [removed: million and $115 million, respectively.][added: million.]

Operating revenue related to this business that was included in the Company's results of operations was $9 [removed: million, $37] million and [removed: $35] [added: $37] million for the twelve months ended December 31, [removed: 2023, 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively.

Refer to Note [removed: 4.][added: 2.]

Financial Statements and Supplementary Data for [removed: further] [added: additional] information regarding this [removed: acquisition.][added: transaction.]

- Product line simplification [removed: (PLS)] [added: ("PLS")] \- focuses businesses on eliminating the complexity and overhead costs associated with smaller product lines and customers, and focuses businesses on supporting and growing their largest customers and product lines.

Financial Statements and Supplementary Data for further [removed: information.][added: information regarding the Company's acquisitions.]

The Company has four immaterial Russian subsidiaries with total assets of approximately $22 million as of December 31, [removed: 2023.][added: 2024.]

The revenue for these four subsidiaries for the twelve months ended December 31, [removed: 2023] [added: 2024] was approximately [removed: $26] [added: $24] million.

In a challenging and dynamic environment, the Company delivered [removed: strong] [added: solid] financial results in [removed: 2023] [added: 2024] primarily due to the continued successful execution of enterprise initiatives and continued focus on the highly differentiated ITW Business Model.

Refer to the "Results of Operations for Total Company" and the "Results of Operations by Segment" sections for discussion of changes in operating revenue for [removed: 2023] [added: 2024] compared to [removed: 2022] [added: 2023] and [removed: 2022] [added: 2023] compared to [removed: 2021.][added: 2022.]

| Dollars in millions | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | |

| Operating Revenue | | | $ | [removed: 16,107] [added: 15,898] | | | | | $ | [removed: 15,932] [added: 16,107] | | | | | $ | [removed: 14,455] [added: 15,932] | |

| Cost of revenue | | | $ | [removed: 9,316] [added: 8,858] | | | | | $ | [removed: 9,429] [added: 9,316] | | | | | $ | [removed: 8,489] [added: 9,429] | |

| Percent of operating revenue | | | [removed: 57.8] [added: 55.7] | | % | | | | [removed: 59.2] [added: 57.8] | | % | | | | [removed: 58.7] [added: 59.2] | | % |

| Selling, administrative, and research and development expenses | | | $ | [removed: 2,638] [added: 2,675] | | | | | $ | [removed: 2,579] [added: 2,638] | | | | | $ | [removed: 2,356] [added: 2,579] | |

| Percent of operating revenue | | | [removed: 16.4] [added: 16.8] | | % | | | | [removed: 16.2] [added: 16.4] | | % | | | | [removed: 16.3] [added: 16.2] | | % |

| Amortization and impairment of intangible assets | | | $ | [removed: 113] [added: 101] | | | | | $ | [removed: 134] [added: 113] | | | | | $ | [removed: 133] [added: 134] | |

| Percent of operating revenue | | | [removed: 0.7] [added: 0.6] | | % | | | | [removed: 0.8] [added: 0.7] | | % | | | | [removed: 0.9] [added: 0.8] | | % |

Cost of revenue was [removed: $9.3] [added: $8.9] billion in [removed: 2023, $9.4] [added: 2024, $9.3] billion in [removed: 2022] [added: 2023] and [removed: $8.5] [added: $9.4] billion in [removed: 2021.][added: 2022.]

Cost of revenue as a percent of operating revenue [removed: increased] [added: improved] in [removed: 2022] [added: 2024] compared to [removed: 2021] [added: 2023] primarily due to [removed: higher raw material costs and increased employee-related expenses, partially offset by positive operating leverage] [added: the LIFO accounting method change] and benefits from the Company's enterprise [removed: initiatives.][added: initiatives, partially offset by higher employee-related expenses.]

Selling, administrative, and research and development expenses were [removed: $2.6] [added: $2.7] billion in [removed: 2023,] [added: 2024,] $2.6 billion in [removed: 2022] [added: 2023] and [removed: $2.4] [added: $2.6] billion in [removed: 2021.][added: 2022.]

Selling, administrative, and research and development expenses as a percent of operating revenue [removed: improved] [added: were higher] in [removed: 2022] [added: 2024] compared to [removed: 2021 primarily due to positive operating leverage] [added: 2023, as higher employee-related expenses] and [added: the unfavorable impact of acquisitions in the first and second quarters of 2024 were partially offset by] benefits from the Company's enterprise [removed: initiatives, partially offset by higher employee-related expenses and research and development expenses.][added: initiatives.]

Refer to the "Results of Operations for Total Company" and the "Results of Operation by Segment" sections for additional discussion of operating results for [removed: 2023] [added: 2024] compared to [removed: 2022] [added: 2023] and [removed: 2022] [added: 2023] compared to [removed: 2021.][added: 2022.]

The Company's consolidated results of operations for [removed: 2023, 2022] [added: 2024, 2023] and [removed: 2021] [added: 2022] were as follows:

| | | | 2023 | | | | | | 2022 | | | | | | | | | | | | Inc (Dec) | | | | | | Organic | | | [removed: Acquisition/ Divestiture] [added: Acquisition/Divestiture] | | | Restructuring | | | [removed: | | |] Foreign Currency | | | Total | | |

[removed: The 2022 effective tax rate benefited from] [added: Also, for comparability, the Company excluded the] discrete [removed: income] tax benefits of $32 million in the fourth [added: quarter of 2022 and $51 million in the second quarter of 2022 from net income and the effective tax rate for the year ended December 31, 2022.]

- Diluted earnings per share [removed: (EPS)] [added: ("EPS")] of $9.74 in 2023 decreased 0.3%.

| | | | [removed: 2022] [added: 2024] | | | | | | [removed: 2021] [added: 2023] | | | | | | | | | | | | Inc (Dec) | | | | | | Organic | | | Acquisition/ Divestiture | | | Restructuring | | | | | | Foreign Currency | | | Total | | |

| Operating margin % | | | [removed: 23.8] [added: 27.2] | | % | | | | [removed: 24.1] [added: 27.2] | | % | | | | | | | | | | [removed: (30) bps] [added: —] | | | | | | [removed: 40] [added: 10] bps | | | [removed: (60) bps] [added: —] | | | (10) bps | | | [removed: | | |] — | | | [removed: (30) bps] [added: —] | | |

- Operating revenue increased due to higher organic [removed: revenue and the MTS Test & Simulation acquisition, which was completed on December 1, 2021,] [added: revenue,] partially offset by the [removed: unfavorable effect of foreign currency translation and the] impact of [added: a] divestiture [removed: activity] in the [removed: fourth] [added: second] quarter of [removed: 2022.][added: 2023 and the unfavorable effect of foreign currency translation.]

Through the application of data driven insights generated by 80/20 practice, ITW focuses on its

This business was presented as held for sale beginning in the fourth quarter of 2022.

On January 2, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $57 million, net of cash acquired.

On April 1, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $59 million, net of cash acquired.

The purchase price for both acquisitions was subject to certain closing adjustments.

These acquisitions were not material, individually or in the aggregate, to the Company’s results of operations, financial position or cash flows.

On August 5, 2024, the Company entered into a purchase agreement with affiliates of Clayton, Dubilier & Rice, LLC ("CD&R") for the sale of the Company’s noncontrolling equity interest in Wilsonart International Holdings LLC ("Wilsonart") for $398 million.

The transaction closed immediately after the execution of the purchase agreement.

Proceeds from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of $363 million which was included in Other income (expense) in the Statement of Income.

Income taxes on the gain were more than offset by a discrete tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss carryforwards upon the sale of Wilsonart.

The sale of the Company’s equity interest in Wilsonart is not expected to have a material impact on the Company’s financial results in subsequent periods.

Other Income (Expense) and Note 6.

This business was presented as held for sale beginning in the fourth quarter of 2022.

On January 2, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $57 million, net of cash acquired.

On April 1, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $59 million, net of cash acquired.

The purchase price for both acquisitions was subject to certain closing adjustments.

These acquisitions were not material, individually or in the aggregate, to the Company’s results of operations, financial position or cash flows.

The allocation of purchase price for these acquisitions will be completed as soon as practicable, but no later than one year from the acquisition date.

Financial Statements and Supplementary Data for further information regarding the Company's acquisitions.

During the first quarter of 2024, the Company changed the method used to determine the cost of inventory at certain U.S. businesses from the last-in, first-out ("LIFO") method to the first-in, first-out ("FIFO") method, as the Company believes the FIFO method is preferable because it provides a more consistent method for valuing inventory across the Company’s operations, improves comparability with peers, and better reflects the current value of inventories at the balance sheet date.

The LIFO provision for the years ended December 31, 2023 and 2022 was $6 million of expense and $7 million of income, respectively, and was not material to the Company’s results of operations, financial position or cash flows.

Therefore, the Company recorded the pre-tax cumulative effect of this change in accounting method of $117 million as a reduction of Cost of revenue in the first quarter of 2024.

Refer to Note 1.

Financial Statements and Supplementary Data for additional information regarding this change in accounting method and the Company’s inventory balances.

On August 5, 2024, the Company entered into a purchase agreement with affiliates of CD&R for the sale of the Company’s noncontrolling equity interest in Wilsonart.

The transaction closed immediately after the execution of the purchase agreement.

Proceeds from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of $363 million which was included in Other income (expense) in the Statement of Income.

Income taxes on the gain were more than offset by a discrete tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss carryforwards upon the sale of Wilsonart.

The sale of the Company’s equity interest in Wilsonart is not expected to have a material impact on the Company’s financial results in subsequent periods.

Refer to Note 5.

Other Income (Expense) and Note 6.

Financial Statements and Supplementary Data for additional information regarding this transaction.

Cost of revenue was 4.9% lower in 2024 compared to 2023 primarily due to lower revenue and the first quarter 2024 LIFO accounting method change, which reduced cost of revenue by 3.1% and 1.3%, respectively.

Expenses in 2024 increased 1.4% compared to 2023 primarily driven by higher employee-related expenses and the impact of acquisitions in 2024.

Amortization and impairment of intangible assets was $101 million in 2024, $113 million in 2023 and $134 million in 2022.

The decreased expense in each respective period was primarily due to fully amortized intangible assets.

2024 compared to 2023

| Operating revenue | | | $ | 15,898 | | | | | $ | 16,107 | | | | | | | | | | | (1.3) | | % | | | | (0.7) | | % | 0.1 | | % | — | | % | | | | (0.7) | | % | (1.3) | | % |

| Operating income | | | $ | 4,264 | | | | | $ | 4,040 | | | | | | | | | | | 5.5 | | % | | | | 6.2 | | % | (0.2) | | % | 0.5 | | % | | | | (1.0) | | % | 5.5 | | % |

| Operating margin % | | | 26.8 | | % | | | | 25.1 | | % | | | | | | | | | | 170 bps | | | | | | 170 bps | | | (10) bps | | | 10 bps | | | | | | — | | | 170 bps | | |

profitable opportunities (the "20").

entrepreneurial culture allows the Company to be a fast adaptor – to read, react, respond and evolve.

The Company previously communicated its intent to explore options, including potential divestitures, for certain businesses with annual revenues totaling up to $1.0 billion.

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.

This business was presented as held for sale in the Statement of Financial Position as of December 31, 2022 and had assets and liabilities held for sale of $8 million and $1 million, respectively.

Divestitures in Item 8.

As the Company continues to make progress toward its full potential, the Company will explore opportunities to reinforce or further expand the long-term organic growth potential of ITW through the addition of selective high-quality acquisitions, such as the acquisition of the Test & Simulation business of MTS Systems Corporation ("MTS") from Amphenol Corporation on December 1, 2021.

The operating results of the MTS Test & Simulation business were reported within the Company's Test & Measurement and Electronics segment.

Starting in early 2020, the COVID-19 pandemic and the measures taken to reduce its spread negatively impacted the global economy and caused significant disruptions in the Company's global operations as COVID-19 spread and impacted the countries in which the Company operates and the markets the Company serves.

Despite the disruptions caused by the COVID-19 pandemic, the Company experienced solid recovery progress in many of its end markets during the past three years.

However, new epidemics and pandemics (including any resurgence of COVID-19) could similarly adversely impact the operations of the Company and its customers and suppliers.

A description of the risks relating to the impact of the COVID-19 outbreak on the Company's business, operations and financial condition is contained in Part I, Item 1A.

Risk Factors.

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.

The MTS Test & Simulation business had operating revenue of $46 million for the one month ended December 31, 2021 and $422 million for the twelve months ended December 31, 2022.

The Company expects the MTS Test & Simulation business to improve operating margin performance in later years through the application of the Company's 80/20 Front-to-Back process.

The operating results of the MTS Test & Simulation business were reported within the Test & Measurement and Electronics segment.

Cost of revenue was 11.1% higher in 2022 compared to 2021 primarily due to a 12.8% increase resulting from higher organic revenue and a 3.0% increase due to the impact of the MTS Test & Simulation acquisition, which was completed on December 1, 2021, partially offset by the effect of foreign currency translation which reduced cost of revenue by 4.5%.

Expenses in 2022 increased 9.5% compared to 2021 primarily due to a 9.2% increase resulting from higher organic revenue and a 4.3% increase due to the impact of the MTS Test & Simulation acquisition, partially offset by the effect of foreign currency translation which reduced expenses by 3.9%.

Amortization and impairment of intangible assets was lower in 2023 compared to 2022 primarily due to fully amortized intangible assets, but was essentially flat in 2022 compared to 2021 as additional amortization expense from the acquisition of the MTS Test & Simulation business was offset by fully amortized intangible assets.

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.

2022 compared to 2021

| Operating revenue | | | $ | 15,932 | | | | | $ | 14,455 | | | | | | | | | | | 10.2 | | % | | | | 12.1 | | % | 2.4 | | % | — | | % | | | | (4.3) | | % | 10.2 | | % |

| Operating income | | | $ | 3,790 | | | | | $ | 3,477 | | | | | | | | | | | 9.0 | | % | | | | 14.3 | | % | (0.1) | | % | (0.7) | | % | | | | (4.5) | | % | 9.0 | | % |

- Organic revenue grew 12.1% with growth in all seven segments.

◦North American organic revenue increased 14.3% with growth in all seven segments primarily driven by the Food Equipment, Welding and Construction Products segments.

The results in 2022 were negatively impacted by the COVID-19 outbreak and government stay-at-home orders in China.

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.

- Diluted earnings per share (EPS) of $9.77 in 2022 increased 14.8%.

Excluding the favorable impact of $0.60 per diluted share related to the pre-tax divestiture gains of $197 million in the fourth quarter of 2022, or $188 million after-tax including the impact of the $32 million discrete tax benefit noted above, EPS increased 7.8%.

Unallocated expenses in 2021 included transaction costs related to the previously discussed acquisition of the MTS Test & Simulation business.

| Operating revenue | | | $ | 2,969 | | | | | $ | 2,800 | | | | | | | | | | | 6.0 | | % | | | | 11.7 | | % | — | | % | — | | % | (5.7) | | % | 6.0 | | % |

| Operating income | | | $ | 499 | | | | | $ | 545 | | | | | | | | | | | (8.6) | | % | | | | 1.5 | | % | — | | % | (4.8) | | % | (5.3) | | % | (8.6) | | % |

The impact of Automotive OEM customers adjusting production schedules to account for the shortage of semiconductor chips and other components continued to negatively impact operating results in 2022.

Auto builds for North America, Europe and China, where the Company has a higher concentration of revenue as compared to the other geographic regions, grew 5%.

◦North American organic revenue increased 14.1% compared to North American auto builds which grew 10%.

On December 1, 2022, the Company completed the sale of a business.

| Operating revenue | | | $ | 2,444 | | | | | $ | 2,078 | | | | | | | | | | | 17.6 | | % | | | | 22.9 | | % | (0.1) | | % | — | | % | (5.2) | | % | 17.6 | | % |

Refer to Note [removed: 11.][added: 10.]

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 [removed: 2019 and] [added: 2019,] the €1.3 billion of Euro term loans borrowed under the Euro Credit Agreement in May 2023 [added: and the €1.5 billion of Euro notes issued in May 2024] 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.

On February 22, 2022, €500 million of the Euro notes issued in May 2014 were redeemed in [removed: full and] [added: full,] on May 22, 2023, €500 million of the Euro notes issued in May 2015 were repaid on the due [added: date and on December 5, 2024, €600 million of the Euro notes issued in May 2019 were repaid on the due] date.

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, [removed: 2023, 2022] [added: 2024, 2023] and [removed: 2021] [added: 2022] was [removed: $(109)] [added: $301] million, [removed: $205] [added: $(109)] million and [removed: $303] [added: $205] million, respectively.

On May 22, 2024, the Company also repaid €550 million of the term loans under the Euro Credit Agreement.

Refer to Note 10.

The Company is a global manufacturer of a diversified range of industrial products and equipment with [removed: 84] [added: 86] divisions in 51 countries.

As of December 31, [removed: 2023,] [added: 2024,] the Company employed approximately [removed: 45,000] [added: 44,000] people.

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

This segment primarily serves the food and beverage, consumer durables, general industrial, [added: airlines,] industrial capital [removed: goods, airlines] [added: goods] and printing and publishing markets.

These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately [removed: 19,600] [added: 20,900] granted and pending patents;

ITW now has [removed: 84] [added: 86] scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation.

At the same time, these 80/20 initiatives [removed: can] [added: may] also result in restructuring initiatives that reduce costs and improve profitability and returns.

OUR NEXT PHASE: [removed: 2024-2030][added: 2024 - 2030]

Customer-back Innovation [removed: (CBI)] [added: ("CBI")] is the most impactful driver to achieve high-quality organic growth through the cycle by establishing trusted problem solver relationships with key customers to effectively invent solutions that address customers' most critical pain points or tackle the biggest growth opportunities.

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 [removed: and 2021] was $106 [removed: million and $115 million, respectively.][added: million.]

Operating revenue related to this business that was included in the Company's results of operations was $9 [removed: million, $37] million and [removed: $35] [added: $37] million for the twelve months ended December 31, [removed: 2023, 2022] [added: 2023] and [removed: 2021,] [added: 2022,] respectively.

Refer to Note [removed: 4.][added: 2.]

Financial Statements and Supplementary Data for [removed: further] [added: additional] information regarding this [removed: acquisition.][added: transaction.]

The Company owns approximately [removed: 4,000] [added: 4,100] unexpired U.S. patents and [removed: 9,900] [added: 10,500 unexpired] foreign patents covering articles, methods and machines.

In addition, the Company has approximately [removed: 1,400] [added: 1,500] applications for patents pending in the U.S. Patent Office and [removed: 4,300] [added: 4,800] applications pending in foreign patent offices.

[added: Any additional] measures to maintain compliance are not expected to materially affect the Company's capital expenditures (including expenditures for environmental control facilities), competitive position, financial position or results of operations.

As of December 31, [removed: 2023,] [added: 2024,] the Company employed approximately [removed: 45,000] [added: 44,000] people, with approximately [removed: 17,000] [added: 16,000] people located in the United States and the remainder in multiple other countries where the Company's businesses operate.

The Company strives to be a great employer through its demonstrated commitment to employee safety, its workplace culture, talent development, [removed: diversity and inclusion,] [added: the ITW employee experience,] compensation and benefits.

Great ITW Leaders are expected to [added: make great strategic choices to drive above-market organic growth,] be [removed: experts] [added: an expert] in the practice of [added: customer-back innovation and] the ITW Business Model, [removed: make great strategic choices,] deliver great results, be great talent managers and [removed: provide strong leadership.][added: lead through ITW's culture and values.]

Rooted in ITW's core values of Respect and Integrity, the Company is committed to equal employment opportunity, fair treatment and creating [removed: diverse and] inclusive workplaces where all ITW colleagues can perform to their full potential.

ITW drives progress through a comprehensive enterprise [removed: Diversity and Inclusion Framework,] [added: talent management strategy,] which focuses [removed: on;] [added: on:] (i) leadership commitment and accountability; (ii) attracting and retaining [removed: global, diverse] [added: great ITW] talent; (iii) creating inclusive workplaces; and (iv) striving to be a great employer.

Executive Officers of the Company as of February [removed: 9, 2024] [added: 14, 2025] were as follows:

| Name | | | Age | | | Present Position | | | First Year in Present Position | | | Other Positions Held During [removed: 2019-2023] [added: 2020-2024] | | |

| Christopher A. O'Herlihy | | | [removed: 60] [added: 61] | | | President & Chief Executive Officer | | | 2024 | | | Vice Chairman 2015-2023. | | |

| Axel [added: R.J.] Beck | | | [removed: 58] [added: 59] | | | Executive Vice President | | | 2020 | | | Group President, food equipment businesses, 2016-2020. | | |

| [added: T.] Kenneth Escoe | | | [removed: 48] [added: 49] | | | Executive Vice President | | | 2020 | | | [removed: Vice President/General Manager, specialty products businesses, 2016-2019; Group President, specialty products businesses, 2019.] | | |

| Javier Gracia Carbonell | | | [removed: 51] [added: 52] | | | Executive Vice President | | | 2022 | | | [removed: Vice President/General Manager, construction businesses, 2017-2020;] Group President, construction businesses, 2020-2021. | | |

| Patricia A. Hartzell | | | [removed: 47] [added: 48] | | | Executive Vice President | | | 2022 | | | [removed: Vice President/General Manager, test & measurement and electronics businesses, 2017-2020;] Group President, test & measurement and electronics businesses, 2020-2021. | | |

| Michael M. Larsen | | | [removed: 55] [added: 56] | | | Senior Vice President & Chief Financial Officer | | | 2013 | | | | | |

| Mary K. Lawler | | | [removed: 58] [added: 59] | | | Senior Vice President & Chief Human Resources Officer | | | 2014 | | | | | |

| Randall J. Scheuneman | | | [removed: 56] [added: 57] | | | Vice President & Chief Accounting Officer | | | 2009 | | | | | |

| Jennifer K. Schott | | | [removed: 50] [added: 51] | | | Senior Vice President, General Counsel & Secretary | | | 2021 | | | [removed: Vice President, Assistant General Counsel & Assistant Secretary, Discover Financial Services, 2016-2019;] Deputy General Counsel & Assistant Secretary, Caterpillar, Inc., 2019-2021. | | |

| Guilherme Silva | | | [removed: 48] [added: 49] | | | Executive Vice President | | | 2024 | | | [removed: Vice President/General Manager, polymers & fluids businesses, 2016-2020;] Group President, polymers & fluids businesses, 2020-2021; Group President, test & measurement and electronics businesses, 2021-2023. | | |

| [removed: Sharon Szafranski] [added: Mark A. Thibeault] | | | [removed: 57] [added: 41] | | | Executive Vice President | | | [removed: 2020] [added: 2025] | | | Vice President/General Manager, test & measurement and electronics businesses, [removed: 2016-2019;] [added: 2019-2022;] Group President, test & measurement and electronics businesses, [removed: 2019.] [added: 2022-2024.] | | |

Copies of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 [added: are available free of charge through the Company's website (www.itw.com), as soon as reasonably practicable after electronically filing with or otherwise furnishing such information to the Securities and Exchange Commission (the "SEC").]

This business was presented as held for sale beginning in the fourth quarter of 2022.

On January 2, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $57 million, net of cash acquired.

On April 1, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $59 million, net of cash acquired.

The purchase price for both acquisitions was subject to certain closing adjustments.

These acquisitions were not material, individually or in the aggregate, to the Company’s results of operations, financial position or cash flows.

Financial Statements and Supplementary Data for further information regarding the Company's acquisitions.

On August 5, 2024, the Company entered into a purchase agreement with affiliates of Clayton, Dubilier & Rice, LLC ("CD&R") for the sale of the Company’s noncontrolling equity interest in Wilsonart International Holdings LLC ("Wilsonart") for $398 million.

The transaction closed immediately after the execution of the purchase agreement.

Proceeds from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of $363 million which was included in Other income (expense) in the Statement of Income.

Income taxes on the gain were more than offset by a discrete tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss carryforwards upon the sale of Wilsonart.

The sale of the Company’s equity interest in Wilsonart is not expected to have a material impact on the Company’s financial results in subsequent periods.

Refer to Note 5.

Other Income (Expense) and Note 6.

Income Taxes in Item 8.

*The ITW Employee Experience*.

Consistent with these values, ITW is also committed to attracting the best talent for its global leadership teams, valuing the perspectives of every ITW colleague, and reflecting the communities where we live and work.

| Sharon A. Szafranski | | | 58 | | | Executive Vice President | | | 2020 | | | | | |

The Company previously communicated its intent to explore options, including potential divestitures, for certain businesses with annual revenues totaling up to $1.0 billion.

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.

This business was presented as held for sale in the Statement of Financial Position as of December 31, 2022 and had assets and liabilities held for sale of $8 million and $1 million, respectively.

As the Company continues to make progress toward its full potential, the Company will explore opportunities to reinforce or further expand the long-term organic growth potential of ITW through the addition of selective high-quality acquisitions, such as the acquisition of the Test & Simulation business of MTS Systems Corporation ("MTS") from Amphenol Corporation on December 1, 2021.

The operating results of the MTS Test & Simulation business were reported within the Company's Test & Measurement and Electronics segment.

Any additional

*Diversity and Inclusion*.

ITW is committed to attracting the best talent and enhancing the diversity of its global leadership teams.

| E. Scott Santi(1) | | | 62 | | | Chairman | | | 2024 | | | Chairman & Chief Executive Officer 2015-2023. | | |

| Michael R. Zimmerman | | | 63 | | | Executive Vice President | | | 2015 | | | | | |

(1) Mr. Santi will remain Chairman through March 1, 2024, after which he will become Non-Executive Chairman and will no longer be an employee of the Company.

are available free of charge through the Company's website (www.itw.com), as soon as reasonably practicable after electronically filing with or otherwise furnishing such information to the Securities and Exchange Commission ("the SEC").

For the fiscal year ended December 31, [removed: 2023][added: 2024]

| [removed: 0.250%] [added: 3.250%] Euro Notes due [removed: 2024] [added: 2028] | | | [removed: ITW24A] [added: ITW28] | | | New York Stock Exchange | | |

The aggregate market value of the voting stock held by non-affiliates of the registrant as of June 30, [removed: 2023] [added: 2024] was approximately [removed: $75.1] [added: $70.1] billion based on the New York Stock Exchange closing sales price as of June 30, [removed: 2023.][added: 2024.]

Shares of common stock outstanding at January 31, [removed: 2024: 298.8] [added: 2025: 293.5] million.

| Portions of the [removed: 2024] [added: 2025] Proxy Statement for Annual Meeting of Stockholders to be held on May [removed: 3, 2024.] [added: 2, 2025.] | | | | | | Part III | | |

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| 3.375% Euro Notes due 2032 | | | ITW32 | | | New York Stock Exchange | | |

| | | | [PART I](#ibfcf79ae2d6544b5879fd3b336a5e208_10) | | | | | |

| | | | [PART II](#ibfcf79ae2d6544b5879fd3b336a5e208_34) | | | | | |

| | | | [PART III](#ibfcf79ae2d6544b5879fd3b336a5e208_205) | | | | | |

| | | | [PART IV](#ibfcf79ae2d6544b5879fd3b336a5e208_223) | | | | | |

| | | | [Signatures](#ibfcf79ae2d6544b5879fd3b336a5e208_235) | | | [86](#ibfcf79ae2d6544b5879fd3b336a5e208_235) | | |

| | | | [PART I](#ieeff07b05d2a47a597a934295c9dfff9_10) | | | | | |

| | | | [PART II](#ieeff07b05d2a47a597a934295c9dfff9_31) | | | | | |

| | | | [PART III](#ieeff07b05d2a47a597a934295c9dfff9_199) | | | | | |

| | | | [PART IV](#ieeff07b05d2a47a597a934295c9dfff9_217) | | | | | |

| | | | [Signatures](#ieeff07b05d2a47a597a934295c9dfff9_229) | | | [83](#ieeff07b05d2a47a597a934295c9dfff9_229) | | |

In order to manage the risks associated with cybersecurity threats, the Company has implemented a [removed: robust] risk-based cybersecurity program consisting of processes, technologies, and controls to assess, identify and manage material risks from cybersecurity threats.

- [removed: Network] [added: Network/endpoint protection, monitoring] and [removed: endpoint monitoring;][added: response;]

- Vulnerability management and [removed: testing; and]

While the Company's information systems are exposed to cybersecurity threats and risks, the Company has not experienced any material cybersecurity incidents during [removed: 2023, 2022] [added: 2024, 2023] or [removed: 2021,] [added: 2022,] and any costs or operational impacts related to cybersecurity incidents were immaterial during this period.

The Cyber Incident Response Team is led by the Chief Information Security Officer [added: ("CISO")] and is responsible for the initial assessment of cybersecurity incidents and oversight of any incident response.

[added: Additionally, the Audit Committee of the Board of Directors] receives quarterly cybersecurity reports from senior management which cover any identified cybersecurity incidents, results of third party vulnerability testing, and key developments in policies and practices during the quarter.

The Company’s cybersecurity program is overseen by a dedicated global team of cybersecurity professionals, led by the CISO who brings over 20 years of information technology and cybersecurity leadership experience and holds the Certified Information Security Manager ("CISM") designation.

The CISO reports directly to the Chief Information Officer ("CIO") and is responsible for leading the execution of the Company's cybersecurity strategy.

Additionally, the Audit Committee of the Board of Directors

As of December 31, [removed: 2023,] [added: 2024,] the Company operated approximately 410 plants and office facilities, excluding regional sales offices and warehouse facilities.

Common Stock Data— The Company's common stock is listed on the New York Stock Exchange under the trading symbol "ITW." There were approximately [removed: 4,484] [added: 4,199] holders of record of common stock as of January 31, [removed: 2024.][added: 2025.]

[removed: ][added: ]

*Assumes $100 invested on December 31, [removed: 2018,] [added: 2019,] including reinvestment of dividends.

Copyright© [removed: 2024] [added: 2025] Standard & Poor's, a division of S&P Global.

The [removed: 2023] [added: 2024] peer group consists of the following 17 public companies, consistent with the peer group included in the Company's Proxy Statement:

There were no changes in the Company's peer group in [removed: 2023.][added: 2024.]

On August 4, 2023, the Company announced a [removed: 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").

As of December 31, [removed: 2023,] [added: 2024,] there were approximately [removed: $5.0] [added: $3.5] billion of authorized repurchases remaining under the 2023 Program.

Share repurchase activity under the Company's share repurchase programs for the fourth quarter of [removed: 2023] [added: 2024] was as follows:

| October 2024 | | | 0.5 | | | | | | $ | 258.91 | | | | | 0.5 | | | | | | $ | 3,721 | |

| November 2024 | | | 0.5 | | | | | | $ | 271.32 | | | | | 0.5 | | | | | | $ | 3,597 | |

| December 2024 | | | 0.4 | | | | | | $ | 269.58 | | | | | 0.4 | | | | | | $ | 3,490 | |

| Total | | | 1.4 | | | | | | | | | | | | 1.4 | | | | | | | | |

| October 2023 | | | 0.6 | | | | | | $ | 229.18 | | | | | 0.6 | | | | | | $ | 5,227 | |

| November 2023 | | | 0.6 | | | | | | $ | 235.76 | | | | | 0.6 | | | | | | $ | 5,096 | |

| December 2023 | | | 0.4 | | | | | | $ | 253.48 | | | | | 0.4 | | | | | | $ | 4,990 | |

| Total | | | 1.6 | | | | | | | | | | | | 1.6 | | | | | | | | |

ITW management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, [removed: 2023.][added: 2024.]

Based on our assessment we believe that, as of December 31, [removed: 2023,] [added: 2024,] the Company's internal control over financial reporting is effective based on those criteria.

The effectiveness of the Company's internal control over financial reporting as of December 31, [removed: 2023] [added: 2024] 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 [removed: 9, 2024] [added: 14, 2025] | | | | | | /s/ Michael M. Larsen Michael M. Larsen Senior Vice President & Chief Financial Officer February [removed: 9, 2024] [added: 14, 2025] | | |

We have audited the accompanying consolidated statements of financial position of Illinois Tool Works Inc. and subsidiaries (the "Company") as of December 31, [removed: 2023] [added: 2024] and [removed: 2022,] [added: 2023,] the related consolidated statements of income, comprehensive income, changes in stockholders' equity, and cash flows, for each of the three years in the period ended December 31, [removed: 2023,] [added: 2024,] and the related notes (collectively referred to as the "financial statements").

We also have audited the [removed: Company’s] [added: Company's] internal control over financial reporting as of December 31, [removed: 2023,] [added: 2024,] based on criteria established in *Internal Control — Integrated Framework [removed: (2013)*] [added: (2013)] issued by the Committee of Sponsoring Organizations of the Treadway Commission [removed: (COSO).][added: (COSO)*.]

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2023] [added: 2024] and [removed: 2022,] [added: 2023,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2023,] [added: 2024,] in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2023,] [added: 2024,] based on criteria established in *Internal Control — Integrated Framework (2013)* issued by COSO.

Income Taxes — Refer to Note [removed: 7] [added: 6] to the financial statements

| In millions except per share amounts | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | |

| Operating Revenue | | | $ | [removed: 16,107] [added: 15,898] | | | | | $ | [removed: 15,932] [added: 16,107] | | | | | $ | [removed: 14,455] [added: 15,932] | |

| Cost of revenue | | | [removed: 9,316] [added: 8,858] | | | | | | [removed: 9,429] [added: 9,316] | | | | | | [removed: 8,489] [added: 9,429] | | |

| Selling, administrative, and research and development expenses | | | [removed: 2,638] [added: 2,675] | | | | | | [removed: 2,579] [added: 2,638] | | | | | | [removed: 2,356] [added: 2,579] | | |

| Amortization and impairment of intangible assets | | | [removed: 113] [added: 101] | | | | | | [removed: 134] [added: 113] | | | | | | [removed: 133] [added: 134] | | |

| Operating Income | | | [removed: 4,040] [added: 4,264] | | | | | | [removed: 3,790] [added: 4,040] | | | | | | [removed: 3,477] [added: 3,790] | | |

| Interest expense | | | [removed: (266)] [added: (283)] | | | | | | [removed: (203)] [added: (266)] | | | | | | [removed: (202)] [added: (203)] | | |

| Other income (expense) | | | [removed: 49] [added: 441] | | | | | | [removed: 255] [added: 49] | | | | | | [removed: 51] [added: 255] | | |

| Income Before Taxes | | | [removed: 3,823] [added: 4,422] | | | | | | [removed: 3,842] [added: 3,823] | | | | | | [removed: 3,326] [added: 3,842] | | |

| Income taxes | | | [removed: 866] [added: 934] | | | | | | [removed: 808] [added: 866] | | | | | | [removed: 632] [added: 808] | | |

| Net Income | | | $ | [removed: 2,957] [added: 3,488] | | | | | $ | [removed: 3,034] [added: 2,957] | | | | | $ | [removed: 2,694] [added: 3,034] | |

| Basic | | | $ | [removed: 9.77] [added: 11.75] | | | | | $ | [removed: 9.80] [added: 9.77] | | | | | $ | [removed: 8.55] [added: 9.80] | |

| Diluted | | | $ | [removed: 9.74] [added: 11.71] | | | | | $ | [removed: 9.77] [added: 9.74] | | | | | $ | [removed: 8.51] [added: 9.77] | |

| In millions | | | [removed: 2023] [added: 2024] | | | | | | [removed: 2022] [added: 2023] | | | | | | [removed: 2021] [added: 2022] | | |

| Foreign currency translation adjustments, net of tax | | | [removed: 41] [added: (104)] | | | | | | [removed: (242)] [added: 41] | | | | | | [removed: 5] [added: (242)] | | |

| Pension and other postretirement benefit adjustments, net of tax | | | [removed: (34)] [added: 61] | | | | | | [removed: (97)] [added: (34)] | | | | | | [removed: 135] [added: (97)] | | |

| Other comprehensive income (loss) | | | [removed: 7] [added: (43)] | | | | | | [removed: (339)] [added: 7] | | | | | | [removed: 140] [added: (339)] | | |

| Comprehensive Income | | | $ | [removed: 2,964] [added: 3,445] | | | | | $ | [removed: 2,695] [added: 2,964] | | | | | $ | [removed: 2,834] [added: 2,695] | |

| In millions except per share amounts | | | [added: 2024 | | | | | |] 2023 | | | | | | 2022 | | |

| Cash and equivalents | | | $ | [removed: 1,065] [added: 948] | | | | | $ | [removed: 708] [added: 1,065] | |

| Trade receivables | | | [removed: 3,123] [added: 2,991] | | | | | | [removed: 3,171] [added: 3,123] | | |

| Inventories | | | [removed: 1,707] [added: 1,605] | | | | | | [removed: 2,054] [added: 1,707] | | |

| Prepaid expenses and other current assets | | | [removed: 340] [added: 312] | | | | | | [removed: 329] [added: 340] | | |

| Total current assets | | | [removed: 6,235] [added: 5,856] | | | | | | [removed: 6,270] [added: 6,235] | | |

| Net plant and equipment | | | [removed: 1,976] [added: 2,036] | | | | | | [removed: 1,848] [added: 1,976] | | |

| Goodwill | | | [removed: 4,909] [added: 4,839] | | | | | | [removed: 4,864] [added: 4,909] | | |

| Intangible assets | | | [removed: 657] [added: 592] | | | | | | [removed: 768] [added: 657] | | |

| Deferred income taxes | | | [removed: 479] [added: 369] | | | | | | [removed: 494] [added: 479] | | |

| Other assets | | | [removed: 1,262] [added: 1,375] | | | | | | [removed: 1,178] [added: 1,262] | | |

| [added: Total] | | | $ | [added: 15,067 | | | | | $ |] 15,518 | | | | | $ | 15,422 | |

| Short-term debt | | | $ | [removed: 1,825] [added: 1,555] | | | | | $ | [removed: 1,590] [added: 1,825] | |

February 14, 2025

| In millions except per share amounts | | | 2024 | | | | | | 2023 | | |

| | | | $ | 15,067 | | | | | $ | 15,518 | |

| | | | $ | 15,067 | | | | | $ | 15,518 | |

| Net income | | | — | | | — | | | 3,488 | | | — | | | — | | | — | | | 3,488 | | |

| Excise tax on repurchases of common stock | | | — | | | — | | | — | | | (14) | | | — | | | — | | | (14) | | |

| Balance as of December 31, 2024 | | | $ | 6 | | $ | 1,669 | | $ | 28,893 | | $ | (25,375) | | $ | (1,877) | | $ | 1 | | $ | 3,317 | |

| Net income | | | $ | 3,488 | | | | | $ | 2,957 | | | | | $ | 3,034 | |

| Amortization and impairment of intangible assets | | | 101 | | | | | | 113 | | | | | | 134 | | |

| Gain on sale of noncontrolling interest in Wilsonart International Holdings LLC | | | (363) | | | | | | — | | | | | | — | | |

| Cumulative effect of change in inventory accounting method | | | (117) | | | | | | — | | | | | | — | | |

| Proceeds from sale of noncontrolling interest in Wilsonart International Holdings LLC | | | 395 | | | | | | — | | | | | | — | | |

During the first quarter of 2024, the Company changed the method used to determine the cost of inventory at certain U.S. businesses from LIFO to the FIFO method, as the Company believes the FIFO method is preferable because it provides a more consistent method for valuing inventory across the Company’s operations, improves comparability with peers, and better reflects the current value of inventories at the balance sheet date.

The LIFO provision for the years ended December 31, 2023 and 2022 was $6 million of expense and $7 million of income, respectively, and was not material to the Company’s results of operations, financial position or cash flows.

Therefore, the Company recorded the pre-tax cumulative effect of this change in accounting method of $117 million as a reduction of Cost of revenue in the first quarter of 2024.

| In millions | | | 2024 | | | | | | 2023 | | |

| In millions | | | 2024 | | | | | | 2023 | | |

Refer to Note 16.

Segment Information for additional information.

In November 2024, the FASB issued authoritative guidance which expands annual and interim disclosure requirements related to certain costs and expenses recorded in the income statement.

The primary provisions of this new guidance require companies to provide additional footnote disclosures disaggregating income statement line items that include purchases of inventory, employee compensation, depreciation, and intangible asset amortization.

The guidance will be effective for the Company beginning with its annual reporting for the year ended December 31, 2027 and is required to be applied prospectively, with retrospective application to prior periods allowed.

On January 2, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $57 million, net of cash acquired.

On April 1, 2024, the Company completed the acquisition of one business in the Test & Measurement and Electronics segment for $59 million, net of cash acquired.

The purchase price for both acquisitions is subject to certain closing adjustments.

These acquisitions were not material, individually or in the aggregate, to the Company’s results of operations, financial position or cash flows.

The allocation of purchase price for these acquisitions will be completed as soon as practicable, but no later than one year from the acquisition date.

income (expense) in the Statement of Income.

| Total Segments | | | 15,920 | | | | | | 16,125 | | | | | | 15,952 | | |

| In millions | | | 2024 | | | | | | 2023 | | | | | | 2022 | | |

| Gain on sale of noncontrolling interest in Wilsonart | | | 363 | | | | | | — | | | | | | — | | |

On August 5, 2024, the Company entered into a purchase agreement with affiliates of CD&R for the sale of the Company’s noncontrolling equity interest in Wilsonart for $398 million.

The transaction closed immediately after the execution of the purchase agreement.

Proceeds from the transaction, net of transaction costs, were $395 million, resulting in a pre-tax gain of $363 million which was included in Other income (expense) in the Statement of Income.

Income taxes on the gain were more than offset by a discrete tax benefit of $107 million in the third quarter of 2024 related to the utilization of capital loss carryforwards upon the sale of Wilsonart.

Income Taxes for further information.

The sale of the Company’s equity interest in Wilsonart is not expected to have a material impact on the Company’s financial results in subsequent periods.

| In millions | | | 2024 | | | | | | 2023 | | | | | | 2022 | | |

| In millions | | | 2024 | | | | | | 2023 | | | | | | 2022 | | |

| Remeasurement of unrecognized tax benefit | | | 1.6 | | | | | | 0.6 | | | | | | 0.1 | | |

February 9, 2024

| Assets held for sale | | | — | | | | | | 8 | | |

| Liabilities held for sale | | | — | | | | | | 1 | | |

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

| Balance as of December 31, 2020 | | | $ | 6 | | $ | 1,362 | | $ | 23,114 | | $ | (19,659) | | $ | (1,642) | | $ | 1 | | $ | 3,182 | |

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.

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.

(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.

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.

The Company previously communicated its intent to explore options, including potential divestitures, for certain businesses with annual revenues totaling up to $1 billion.

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.

Assets and liabilities held for sale related to this business were $8 million and $1 million, respectively, as of December 31, 2022.

In these arrangements, the

auto aftermarket maintenance and appearance.

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.

| Tax effect of foreign dividends | | | 0.1 | | | | | | 0.6 | | | | | | 0.6 | | |

| Changes in tax law | | | — | | | | | | — | | | | | | (3.4) | | |

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.

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

The Company's management, with the participation of the Company's President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of December 31, [removed: 2023.][added: 2024.]

Based on such evaluation, the Company's President & Chief Executive Officer and Senior Vice President & Chief Financial Officer have concluded that, as of December 31, [removed: 2023,] [added: 2024,] the Company's disclosure controls and procedures were effective.

In connection with the evaluation by management, including the Company's President & Chief Executive Officer and Senior Vice President & Chief Financial Officer, no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended December 31, [removed: 2023] [added: 2024] were identified that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

None.

On December 6, 2023, Michael R.

Zimmerman, Executive Vice President, adopted a plan intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (a "Rule 10b5-1 trading arrangement").

The Rule 10b5-1 trading arrangement covers the exercise of 19,567 stock options and the related sale of such shares.

The 10b5-1 trading arrangement expires on March 7, 2025.

Information regarding the Directors of the Company who are standing for reelection and any persons nominated to become Directors of the Company is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors" and "Delinquent Section 16(a) Reports" in the Company's Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders.

Information regarding the Audit Committee and its Financial Experts is incorporated by reference from the information under the captions "Corporate Governance - Board of Directors and its Committees" and "Proposal [removed: 4] [added: 3] – Ratification of the Appointment of Independent Public Accounting Firm - Audit Committee Report" in the Company's Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders.

Information regarding the Company's code of ethics that applies to the Company's President & Chief Executive Officer, Senior Vice President & Chief Financial Officer, and key financial and accounting personnel is incorporated by reference from the information under the caption "Corporate Governance Policies and Code of Conduct" in the Company's Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders.

Information regarding the Company’s Insider Trading Policy and related policies and procedures is incorporated by reference from the information under the caption "Other Governance Matters - Insider Trading Policies and Procedures" in the Company’s Proxy Statement for the 2025 Annual Meeting of Stockholders.

Information regarding executive compensation is incorporated by reference from the information under the captions "Director Compensation," and "Executive Compensation" in the Company's Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders.

Information regarding security ownership of certain beneficial owners and management and related stockholder matters is incorporated by reference from the information under the captions "Beneficial Ownership of Common Stock" and "NEO Compensation - Equity Compensation Plan Information" in the Company's Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders.

Information regarding certain relationships and related transactions as well as director independence is incorporated by reference from the information under the captions "Proposal 1 - Election of Directors - Board Independence," "Other Governance Matters - Certain Relationships and [removed: Related Party] [added: Related-Party] Transactions" and [removed: "Corporate] [added: "Other] Governance [added: Matters - Corporate Governance] Policies and Code of Conduct" in the Company's Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders.

This information is incorporated by reference from the information under the caption "Proposal [removed: 4] [added: 3] - Ratification of the Appointment of Independent Registered Public Accounting Firm" in the Company's Proxy Statement for the [removed: 2024] [added: 2025] Annual Meeting of Stockholders.

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

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

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

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

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

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

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

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

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

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

[removed: *The] [added: The] following report of the Company's independent registered public accounting firm (PCAOB ID:34) is included as part of Item 8.

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

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

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

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

| [removed: [3(a)(i)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm)] [added: [3(a)(i)](https://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm)] | | | | | | [Amended and Restated Certificate of Incorporation of Illinois Tool Works Inc., filed as Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2014 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982614000130/itw_exhibit0301.htm)] | | |

| [removed: [3(a)(ii)](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm)] [added: [3(a)(ii)](https://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm)] | | | | | | [Certificate of Amendment of Certificate of Incorporation of Illinois Tool Works Inc., filed as Exhibit 3(a)(ii) to the Company's Current Report on Form 8-K filed on May 12, 2016 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3aii.htm)] | | |

| [removed: [3(b)](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3bi.htm)] [added: [3(b)](https://www.sec.gov/Archives/edgar/data/49826/000004982624000024/exhibit3b-byxlawsofillinoi.htm)] | | | | | | [By-laws of Illinois Tool Works Inc., amended and restated as of May [removed: 6, 2016,] [added: 3, 2024,] filed as Exhibit [removed: 3(b)(i)] [added: 3(b)] to the Company's Current Report on Form 8-K filed on May [removed: 12, 2016] [added: 9, 2024] (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312516588819/d192476dex3bi.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982624000024/exhibit3b-byxlawsofillinoi.htm)] | | |

| [removed: [4(a)](http://www.sec.gov/Archives/edgar/data/0000049826/000119312520213047/d95049dex44.htm)] [added: [4(a)](https://www.sec.gov/Archives/edgar/data/0000049826/000119312520213047/d95049dex44.htm)] | | | | | | [Indenture between Illinois Tool Works Inc. and The First National Bank of Chicago, as Trustee, dated as of November 1, 1986, filed as Exhibit 4.4 to the Company's Registration Statement on Form S-3 filed on August 4, 2023 (Commission File No. 333-242331) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/0000049826/000119312520213047/d95049dex44.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/0000049826/000119312520213047/d95049dex44.htm)] | | |

| [removed: [4(b)](http://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm)] [added: [4(b)](https://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm)] | | | | | | [First Supplemental Indenture between Illinois Tool Works Inc. and Harris Trust and Savings Bank, as Trustee, dated as of May 1, 1990, filed as Exhibit 4.5 to the Company's Registration Statement on Form S-3 filed on August 7, 2020 (Commission File No. 333-242331) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000119312520213047/d95049dex45.htm)] | | |

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

| [removed: [4(d)](http://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] [added: [4(d)](https://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] | | | | | | [Officers' Certificate dated August 28, 2012, establishing the terms, and setting forth the forms, of the 3.900% Notes due 2042, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on August 28, 2012 (Commission File No. 001-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982612000083/exhibit41.htm)] | | |

| [removed: [4(e)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm)] [added: [4(g)](https://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] | | | | | | [Officers' Certificate dated [removed: February 25, 2014,] [added: November 7, 2016,] establishing the terms, and setting forth the forms, of the [removed: 0.900% Notes due 2017, the 1.950% Notes due 2019, and the 3.500%] [added: 2.650%] Notes due [removed: 2024,] [added: 2026,] filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on [removed: February 26, 2014] [added: November 10, 2016] (Commission File No. 001-04797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000055/exhibit41.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] | | |

| [removed: [4(f)](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)] [added: [4(e)](https://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)] | | | | | | [Officers' Certificate dated May 20, 2014, establishing the terms, and setting forth the forms, of the 1.750% Euro Notes due 2022 and the 3.000% Euro Notes due 2034, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 22, 2014 (Commission File No. 001-04797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982614000099/itwexhibit41.htm)] | | |

| [removed: [4(g)](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)] [added: [4(f)](https://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)] | | | | | | [Officers' Certificate dated May 19, 2015, establishing the terms, and setting forth the forms, of the 1.250% Euro Notes due 2023 and the 2.125% Euro Notes due 2030, filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 22, 2015 (Commission File No. 001-04797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000119312515198771/d930210dex41.htm)] | | |

| [removed: [4(h)](http://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] [added: [4(h)](https://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)] | | | | | | [Officers' Certificate dated [removed: November 7, 2016,] [added: June 5, 2019,] establishing the terms, and setting forth the forms, of the [removed: 2.650%] [added: 0.25%] Notes due [removed: 2026,] [added: 2024, the 0.625% Notes due 2027 and the 1.00% Notes due 2031,] filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on [removed: November 10, 2016] [added: June 5, 2019] (Commission File No. 001-04797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000277/exhibit41.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)] | | |

| [removed: [4(i)](https://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)] [added: [4(i)](https://www.sec.gov/Archives/edgar/data/0000049826/000119312524141739/d842350dex41.htm)] | | | | | | [removed: [Officers'] [added: [Officers’] Certificate dated [removed: June 5, 2019,] [added: May 17, 2024,] establishing the terms, and setting forth the forms, of the [removed: 0.25% Notes due 2024, the 0.625%] [added: 3.250%] Notes due [removed: 2027] [added: 2028] and [removed: the 1.00%] [added: 3.375%] Notes due [removed: 2031,] [added: 2032,] filed as Exhibit 4.1 to the Company's Current Report on Form 8-K filed on [removed: June 5, 2019] [added: May 17, 2024] (Commission File No. [removed: 001-04797)] [added: 1-04797)] and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312519165902/d753649dex41.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/0000049826/000119312524141739/d842350dex41.htm)] | | |

| [removed: [4(j)](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm)] [added: [4(j)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm)] | | | | | | [Description of the Company's Common Stock, filed as Exhibit 4(j) to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4jdescriptionof.htm)] | | |

| [removed: [4(k)](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4kdescriptionof.htm)] [added: [4(k)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4kdescriptionof.htm)] | | | | | | [Description of the 1.75% Euro Notes due 2022 and 3.00% Euro Notes due 2034, filed as Exhibit 4(k) to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4kdescriptionof.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4kdescriptionof.htm)] | | |

| [removed: [4(l)](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4ldescriptionof.htm)] [added: [4(l)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4ldescriptionof.htm)] | | | | | | [Description of the 1.25% Euro Notes due 2023 and 2.125% Euro Notes due 2030, filed as Exhibit 4(l) to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4ldescriptionof.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4ldescriptionof.htm)] | | |

| [removed: [4(m)](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4mdescriptionof.htm)] [added: [4(m)](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4mdescriptionof.htm)] | | | | | | [Description of the 0.250% Euro Notes due 2024, 0.625% Euro Notes due 2027 and 1.000% Euro Notes due 2031, filed as Exhibit 4(m) to the Company's Annual Report on Form 10-K for the year ended December 31, 2019 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4mdescriptionof.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982620000020/exhibit4mdescriptionof.htm)] | | |

| [removed: [10(a)(i)](http://www.sec.gov/ix?doc=/Archives/edgar/data/49826/000004982622000057/itw-20221021.htm)] [added: [10(a)(i)](https://www.sec.gov/Archives/edgar/data/49826/000004982622000057/a2022creditagreement.htm)] | | | | | | [Credit Agreement dated as of October 21, 2022 among Illinois Tool Works Inc., JPMorgan Chase Bank, N.A., as Agent, Citibank, N.A., as Syndication Agent, and a syndicate of lenders, filed as Exhibit 10(a) to the Company's Current Report on Form 8-K filed on October 26, 2022 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/ix?doc=/Archives/edgar/data/49826/000004982622000057/itw-20221021.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982622000057/a2022creditagreement.htm)] | | |

| [removed: [10(a)(ii)](http://www.sec.gov/Archives/edgar/data/49826/000004982621000079/itw3q21-ex101xsuspensionof.htm)] [added: [10(a)(ii)](https://www.sec.gov/Archives/edgar/data/49826/000004982623000029/eurocreditagreement.htm)] | | | | | | [Euro Credit Agreement dated as of May 5, 2023 among Illinois Tool Works Inc., as Borrower, the lender(s) party thereto and ING Bank, N.V., London Branch, as Agent, filed as Exhibit 10(a) to the [removed: Company'](http://www.sec.gov/Archives/edgar/data/49826/000004982623000029/eurocreditagreement.htm)[s] [added: Company's] Current Report on Form 8-K filed on May 10, 2023 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982623000029/eurocreditagreement.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982623000029/eurocreditagreement.htm)] | | |

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

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

| [removed: [10(d)*](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)] [added: [10(e)*](https://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)] | | | | | | [Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2011 Long-Term Incentive Plan, filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 13, 2014 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982614000019/ex991universaloptiongrant.htm)] | | |

| [removed: [10(e)*](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit991stockoptionterms.htm)] [added: [10(f)*](https://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit991stockoptionterms.htm)] | | | | | | [Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan, filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 9, 2016 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit991stockoptionterms.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982616000135/exhibit991stockoptionterms.htm)] | | |

| [removed: [10(f)*](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex991awardsagrmnt4q2016.htm)] [added: [10(g)*](https://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex991awardsagrmnt4q2016.htm)] | | | | | | [Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan, filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 9, 2017 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex991awardsagrmnt4q2016.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982617000019/ex991awardsagrmnt4q2016.htm)] | | |

| [removed: [10(g)*](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] [added: [10(h)*](https://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] | | | | | | [Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan, filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 14, 2019 (Commission File No. 1-4797) and incorporated herein by [removed: reference](http://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982619000017/a9912019universaloptionagr.htm)] | | |

| [removed: [10(h)*](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)] [added: [10(i)*](https://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)] | | | | | | [Form of Terms of Option Grant Pursuant to the Illinois Tool Works Inc. 2015 Long-Term Incentive Plan, filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed on February 5, 2020 (Commission File No. 1-4797) and incorporated herein by [removed: reference.](http://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)] [added: reference.](https://www.sec.gov/Archives/edgar/data/49826/000119312520025381/d840623dex991.htm)] | | |

Financial Statements and Supplementary Data:

| [4(n)](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex4n.htm) | | | | | | [Description of the 3.250% Euro Notes due 2028 and 3.375% Euro Notes due 2032, filed herewith.](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex4n.htm) | | |

| [10(d)*](https://www.sec.gov/Archives/edgar/data/0000049826/000004982624000024/exhibit101-2024ltipplan.htm) | | | | | | [Illinois Tool Works Inc. 2024 Long-Term Incentive Plan effective June 30, 2024, filed as Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 9, 2024 (Commission File No. 1-4797) and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/0000049826/000004982624000024/exhibit101-2024ltipplan.htm) | | |

| [10(m)*](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex10m.htm) | | | | | | [Form of Stock Option Agreement Pursuant to the Illinois Tool Works Inc. 2024 Long-Term Incentive Plan, filed herewith.](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex10m.htm) | | |

| [10(n)*](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex10n.htm) | | | | | | [Form of Performance Share Unit Award Agreement Pursuant to the Illinois Tool Works Inc. 2024 Long-Term Incentive Plan, filed herewith.](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex10n.htm) | | |

| [10(o)*](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex10o.htm) | | | | | | [Form of Restricted Stock Unit Award Agreement Pursuant to the Illinois Tool Works Inc. 2024 Long-Term Incentive Plan, filed herewith.](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex10o.htm) | | |

| [19](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex19.htm) | | | | | | [Insider Trading Policies and Procedures, filed herewith](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex19.htm) | | |

| [97](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex97.htm) | | | | | | [Policy Relating to Recovery of Erroneously Awarded Compensation, filed as Exhibit 97 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (Commission File No. 001-04797) and incorporated herein by reference.](https://www.sec.gov/Archives/edgar/data/49826/000004982625000007/a20241231-ex97.htm) | | |

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

| Exhibit Number | | | | | | Description | | |

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| | | | | | | | | |

| [2.1(a)](http://www.sec.gov/Archives/edgar/data/49826/000004982612000073/wimbledoninvtagmt.htm) | | | | | | [Investment Agreement, dated as of August 15, 2012, by and among CD&R Wimbledon Holdings III, L.P., a Cayman Islands limited partnership; Illinois Tool Works Inc.; ITW DS Investments Inc., a Delaware corporation; and Wilsonart International Holdings LLC, a Delaware limited liability company, filed as Exhibit 2.1 to the Company's Current Report on Form 8-K filed on August 17, 2012 (Commission File No. 1-4797) and incorporated herein by reference. (Certain of the schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K, but the Company undertakes to furnish a copy of the schedules or similar attachments to the Securities and Exchange Committee upon request.)](http://www.sec.gov/Archives/edgar/data/49826/000004982612000073/wimbledoninvtagmt.htm) | | |

| [97](https://www.sec.gov/Archives/edgar/data/49826/000004982624000008/a20231231-ex97.htm) | | | | | | [Policy Relating to Recovery of Erroneously Awarded Compensation, filed herewith](https://www.sec.gov/Archives/edgar/data/49826/000004982624000008/a20231231-ex97.htm) | | |

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this [removed: 9th] [added: 14th] day of February [removed: 2024.][added: 2025.]

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on this [removed: 9th] [added: 14th] day of February [removed: 2024.][added: 2025.]