AI interpretation based on checked source excerpts. Issuer assertions and evidence limitations remain explicit.
Policy quality-scores-2: six equally weighted categories. The overall score requires full coverage. Missing inputs are not zero. Qualitative grades are sourced interpretations, not probabilities. 5/6 · 18/10/2026
Moat63
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
structural advantage · 3/4 · Long-running sourcing savings, proprietary operating practices, intellectual-property ownership and commercial innovation contributions jointly support a current advantage. Relative competitor costs and product-level protection remain unquantified.
durability · 3/4 · Reported sourcing improvements since 2013 and sustained 2021–2025 operating returns support persistence, alongside continued commercialization of innovation. They do not establish exceptional protection against replication or a guaranteed future duration.
customer dependency · 2/4 · Developed customer tooling, supply-agreement use rights and growing equipment-service demand support some integration and ongoing customer need. Customer ownership of tooling, short delivery cycles and absent switching-cost measurements limit the inference.
erosion resilience · 2/4 · Enterprise benefits and improving consolidated first-half results coexist with realized Food Equipment demand and margin weakness. Competition and intellectual-property risks are potential erosion channels, not evidence of realized share loss.
Pricing power—
Insufficient evidence for every rubric criterion; no category score is inferred.
realized pricing · 2/4 · Reported favorable price/cost contributions of 30 basis points in 2025 Polymers & Fluids and 10 basis points in second-quarter 2026 Food Equipment are modest positive outcomes. They do not isolate price increases from input-cost movements; expected tariff recovery is not counted as realized.
retention · 2/4 · North American and international service organic growth, annual service arrangements and tooling integration provide indirect evidence of continuing customer demand. These are not measured renewal or retention rates, and equipment demand weakened.
margin resilience · 2/4 · Favorable price/cost and initiative benefits provide partial protection, while Food Equipment suffered a 110-basis-point first-half margin decline. Polymers & Fluids improved, but operating leverage and initiatives contributed, so pricing cannot receive all the credit.
contractual freedom · — · Annual service contracts and tooling supply agreements are disclosed without pricing-reset, escalation, cancellation or negotiation terms. Pass-through risk and tariff-recovery expectations do not establish contractual pricing discretion.
Predictability94
Five consecutive annual periods. Equal weights: nondeclining revenue frequency; revenue-growth volatility (5–40pp); positive FCF frequency; FCF-margin volatility (3–20pp). Stability indicator, not a growth forecast.
- Nondeclining revenue years (%)
- 75.00
- Revenue growth volatility (pp)
- 4.42
- Positive FCF years (%)
- 100.00
- FCF margin volatility (pp)
- 2.39
Financial strength66
Equal-weight grades: debt/FCF (1–8x), net debt/earnings before interest and tax (0–5x), interest service (1–12x), current ratio (0.75–2x). Earnings use reported operating income, or reported pretax profit plus reported interest expense when operating income is unavailable. Interest service uses earnings/interest expense; if unavailable, it uses reported operating cash flow/cash interest paid, without relabeling cash paid as accrued expense. Nonpositive cash flow/earnings score 0 for their service component; reported zero interest with a positive numerator scores 100. Net cash scores 100 for net leverage. Missing disclosures remain unavailable. General nonfinancial-company rubric, not a credit rating; exceptional and nonoperating gains are not normalized out. IFRS finance-cost and cash-flow classifications retain their reported scope.
- debtFcfGrade
- 66.95
- netDebtEbitGrade
- 61.49
- interestCoverageGrade
- 100.00
- currentRatioGrade
- 36.76
- Debt / FCF (x)
- 3.31
- Net debt / operating income (x)
- 1.93
- Interest coverage (x)
- 14.44
- Current ratio (x)
- 1.21
Capital allocation98
Three-year equal-weight indicators: pretax return on average invested capital (0–25%; equity + debt − cash, each year and its prior year), share-count growth (0–5%, lower better), share-based cost/revenue (2–20%, lower better), consolidated FCF/net income (0–1x). Return uses reported operating income or, if unavailable, EBIT calculated from reported pretax profit plus reported interest expense; exceptional/nonoperating gains are not normalized out. Share-based cost uses the reported cash-flow add-back or, if absent, separately reported recognized compensation expense; the latter never becomes an FCF adjustment. Nonpositive net income scores 0 for cash conversion; absent income/FCF stays unavailable. Nonpositive invested capital has no defined return and remains unavailable. Does not establish acquisition quality or buyback timing.
- 3-year pre-tax operating return (%)
- 40.30
- 3-year average dilution (%)
- -1.99
- 3-year average SBC / revenue (%)
- 0.41
- cashConversionGrade
- 90.79
Management69
Equal-weight average of four evidence-backed rubric grades (0–4), scaled to 100.
capital discipline · 2/4 · ITW generated substantial cash and maintained capital investment, but 2025 dividends and repurchases exceeded $2.707 billion of free cash flow. First-half 2026 distributions of $2.053 billion also exceeded $1.159 billion of free cash flow, alongside $855 million of net borrowing and rising debt. Buyback value creation is not established.
incentive alignment · 3/4 · Actual 2025 long-term grants were split equally between PSUs and options, with disclosed growth, return and innovation metrics. Ownership guidelines, anti-hedging restrictions and a recovery policy strengthen alignment. Actual ownership compliance and final outcomes of outstanding awards remain unverified.
execution · 3/4 · Reported sourcing savings, realized innovation contributions, enterprise-initiative benefits and higher first-half 2026 operating income demonstrate execution through several operating measures. Attribution remains issuer-reported, segment outcomes vary, and the 4%+ through-cycle growth objective remains a target.
governance · 3/4 · Disclosed annual elections, an independent lead director, shareholder meeting rights, anti-hedging rules and an adopted clawback policy provide strong governance safeguards. The cited independence count concerns nominees, and Board discretion over tendered resignations limits automatic accountability; exceptional effectiveness is not established.
Evidence
•The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at ITW, delivering an average of one percent reduction in spend each year since 2013 and continues to be a key contributor to the Company's ongoing Enterprise Strategy.
MD&A, Enterprise Strategy, Strategic Sourcing · Filed 06/08/2026
It is a unique set of proprietary tools and methodologies that ITW divisions utilize to structure and operate their businesses to (a) maximize the performance, execution, and value-add provided to their largest and most profitable customers (the "80"), and (b) minimize the costs, complexity, and distractions associated with serving less profitable accounts (the "20").
MD&A, ITW Business Model, proprietary operating methodologies · Filed 06/08/2026
• Best-in-class operating margin of 26.3 percent as enterprise initiatives contributed 130 basis points.
Compensation Discussion and Analysis, 2025 enterprise-initiative contribution · Filed 27/03/2026
•In the year-to-date period, operating margin of 26.0% decreased 110 basis points primarily due to higher employee-related expenses, product mix and unfavorable operating leverage of 20 basis points, partially offset by benefits from the Company's enterprise initiatives.
MD&A, Food Equipment, year-to-date 2026 operating margin · Filed 06/08/2026
The Company may not be able to pass along increased raw material and components parts prices to its customers in the form of price increases or its ability to do so could be delayed.
Risk Factors, ability to pass through input costs · Filed 13/02/2026
The Company believes that it continues to be well positioned to minimize the impact of these tariffs because its businesses generally manufacture products in the markets where they are sold and the Company expects to recover any increased cost due to tariffs through price increases.
MD&A, tariff recovery expectations · Filed 06/08/2026
The Company owns patents, trade secrets, copyrights, trademarks and/or other intellectual property rights related to many of its products, and also has exclusive and non-exclusive license rights under intellectual property owned by others.
Risk Factors, intellectual-property ownership and licenses · Filed 13/02/2026
In virtually all segments, the Company differentiates its businesses from its competitors based on product innovation, product quality, brand preference and service delivery.
Business, competition and differentiation · Filed 13/02/2026
ITW divisions partner with their key customers to create unique solutions that solve difficult technical challenges and improve business performance.
MD&A, Customer-Back Innovation and customer partnerships · Filed 06/08/2026
We are encouraged by our 2.4% CBI contribution to revenue growth in 2025 – an improvement of 40 basis points over 2024 – as we continue to advance toward our 3%+ CBI target by 2030.
Board letter, realized 2025 innovation contribution · Filed 27/03/2026
In addition to numerous smaller regional competitors, the Welding segment competes globally with Lincoln Electric Holdings, Inc.
Business, named Welding competitor · Filed 13/02/2026
Unauthorized use of the Company's intellectual property rights by third parties, particularly in countries where property rights are not highly developed or protected, or inability to preserve existing intellectual property rights could adversely impact the Company's competitive position and results of operations.
Risk Factors, intellectual-property protection · Filed 13/02/2026
Each of the Company's segments generally has several main competitors and numerous smaller ones in most of their end markets and geographic areas.
Business, competitor breadth across segments · Filed 13/02/2026
Equipment organic revenue declined 8.2% and 9.1% in the second quarter and year-to-date periods, respectively, primarily due to lower demand in the institutional end market and independent and quick service restaurants within the noninstitutional end market.
MD&A, Food Equipment, North American equipment demand · Filed 06/08/2026
31 •Operating margin of 27.4% increased 70 basis points primarily driven by benefits from the Company's enterprise initiatives, favorable price/cost of 30 basis points, positive operating leverage of 20 basis points, lower restructuring expenses and lower intangible asset amortization expense, partially offset by higher employee-related expenses.
MD&A, Polymers & Fluids, 2025 price/cost contribution · Filed 13/02/2026
The decrease of 60 basis points was primarily due to higher employee-related expenses and product mix, partially offset by benefits from the Company's enterprise initiatives and favorable price/cost of 10 basis points.
MD&A, Food Equipment, second-quarter 2026 price/cost contribution · Filed 06/08/2026
Service organic revenue increased 4.9% in the second quarter and 4.5% in the year-to-date period.
MD&A, Food Equipment, North American service organic growth · Filed 06/08/2026
Service organic revenue grew 5.3% in the second quarter and 3.4% in the year-to-date period.
MD&A, Food Equipment, international service organic growth · Filed 06/08/2026
Annual service contracts are typically sold separate from equipment and the related revenue is recognized on a straight-line basis over the annual service period.
Revenue recognition, annual Food Equipment service contracts · Filed 06/08/2026
Backlog generally is not considered a significant factor in the Company's businesses as relatively short delivery periods and rapid inventory turnover are characteristic of most of their products.
Business, short delivery periods and limited backlog · Filed 13/02/2026
Certain products may be produced utilizing tooling that is owned by the customer that the Company developed and is reimbursed by the customer for the associated cost.
Accounting policies, customer-owned tooling developed by ITW · Filed 06/08/2026
In these arrangements, the Company typically retains a contractual right to use the customer-owned tooling for the purpose of fulfilling its obligations under the supply agreement.
Accounting policies, contractual tooling-use rights · Filed 06/08/2026
Summarized cash flow information for the years ended December 31, 2025, 2024 and 2023 was as follows: In millions 2025 2024 2023 Net cash provided by operating activities $ 3,126 $ 3,281 $ 3,539 Additions to plant and equipment (419) (437) (455) Free cash flow $ 2,707 $ 2,844 $ 3,084 Cash dividends paid $ (1,785) $ (1,695) $ (1,615) Repurchases of common stock (1,500) (1,500) (1,500) Acquisition of businesses (excluding cash and equivalents) (119) (115) — Proceeds from sale of operations and affiliates 1 — 7 Proceeds from sale of noncontrolling interest in Wilsonart International Holdings LLC — 395 — Net proceeds from (repayments of) debt 508 (8) 294 Other 49 27 84 Effect of exchange rate changes on cash and equivalents 42 (65) 3 Net increase (decrease) in cash and equivalents $ (97) $ (117) $ 357 Stock Repurchase Programs On May 7, 2021, the Company announced a stock repurchase program which provided for the repurchase of up to $3.0 billion of the Company's common stock over an open-ended period of time (the "2021 Program").
MD&A, 2023–2025 cash generation and capital uses · Filed 13/02/2026
Summarized cash flow information for the second quarter and year-to-date periods of 2026 and 2025 is as follows: Three Months Ended Six Months Ended June 30, June 30, In millions 2026 2025 2026 2025 Net cash provided by operating activities $ 723 $ 550 $ 1,346 $ 1,142 Additions to plant and equipment (92) (101) (187) (197) Free cash flow $ 631 $ 449 $ 1,159 $ 945 Cash dividends paid $ (463) $ (439) $ (928) $ (880) Repurchases of common stock (750) (375) (1,125) (750) Acquisition of businesses (excluding cash and equivalents) — (1) — 1 Net proceeds from (repayments of) debt 596 262 855 464 Other, net (8) (1) 22 27 Effect of exchange rate changes on cash and equivalents 6 20 5 33 Net increase (decrease) in cash and equivalents $ 12 $ (85) $ (12) $ (160) Stock Repurchase Programs On August 4, 2023, the Company announced a new stock repurchase program which provides for the repurchase of up to $5.0 billion of the Company's common stock over an open-ended period of time (the "2023 Program").
MD&A, first-half 2026 cash generation and capital uses · Filed 06/08/2026
Debt Total debt as of June 30, 2026 and December 31, 2025 was as follows: In millions June 30, 2026 December 31, 2025 Short-term debt $ 3,145 $ 2,286 Long-term debt 6,549 6,683 Total debt $ 9,694 $ 8,969 Short-term debt included commercial paper of $2.1 billion and $1.3 billion as of June 30, 2026 and December 31, 2025, respectively.
MD&A, debt balances at June 30, 2026 and December 31, 2025 · Filed 06/08/2026
Accordingly, the long-term incentive mix for 2025 was granted in 50 percent Performance Share Units and 50 percent stock options.
Compensation Discussion and Analysis, actual 2025 long-term incentive grants · Filed 27/03/2026
Plan Performance Measure Weight 2025 Executive Incentive Plan Organic Revenue Growth 40 % Operating Income Growth 60 % 2025-2027 Performance Share Units Operating Margin 25 % After-tax ROIC 25 % EPS Growth 25 % CBI Yield 25 % 37 Compensation Discussion and Analysis Executive Compensation Highlights Compensation Philosophy Philosophy Key Components Our executive compensation philosophy is designed to deliver competitive total compensation upon the achievement of our strategic objectives, which will attract, motivate and retain leaders who drive the creation of long-term stockholder value.
Compensation Discussion and Analysis, annual and long-term performance metrics · Filed 27/03/2026
Robust Stock Ownership Guidelines: We have stock ownership guidelines of 6 x salary for CEO, 3 x salary for Executive Vice Presidents and CFO and 2 x salary for Senior Vice Presidents.
Executive Compensation Highlights, stock-ownership guidelines · Filed 27/03/2026
Hedging/Pledging of Company Equity Securities: We prohibit executive officers and directors from engaging in any transaction that is designed to hedge or offset a decrease in the market value of ITW common stock and from pledging ITW equity securities.
Compensation governance, prohibition on hedging and pledging · Filed 27/03/2026
Director Age Demographic Background Independence Tenure Corporate Governance Highlights Board Composition Corporate Governance • Annual Election of All Directors Yes • Regular Executive Sessions of Independent Directors Yes • Majority Voting for Directors with Director Yes • Annual Evaluation of the Board and Individual Yes Resignation Policy Directors • Number of Independent Director Nominees 11 • Annual Self-Evaluations by Board Committees Yes Standing for Election • Annual Independent Director Evaluation of the Yes • Total Number of Director Nominees 13 President & CEO • Independent Lead Director Yes • Risk Oversight by Full Board and Committees Yes • Mandatory Retirement Age Yes • Strong Board Oversight of Sustainability Yes • Director Time Commitment Limits Yes • Strong Board Oversight of Cybersecurity Yes • Shareholder Engagement Program Yes Compensation • Code of Conduct for Members of the Board of Yes • Annual Advisory Approval of Executive Yes Directors Compensation • Stockholder Ability to Call Special Meetings Yes • Stock Ownership Requirements for Executives and • Proxy Access Yes Directors Yes • Simple Majority Vote to Amend Charter and Yes • Anti-Hedging, Anti-Short-Sale and Anti- By-Laws Pledging Policies Yes • Exclusive Venue Requirement No • Compensation/Clawback Policy (mandatory for • Poison Pill No financial restatement regardless of misconduct) Yes 2026 PROXY STATEMENT 6 Proxy Summary Overview The Compensation Committee adopted our executive compensation pay-for-performance philosophy which is designed to deliver competitive total compensation upon the achievement of our strategy objectives, which will attract, motivate and retain leaders who drive the creation of long-term stockholder value.
Proxy Summary, governance practices and director-nominee independence · Filed 27/03/2026
Clawback Policy: Our Compensation Recovery Policy, updated in 2023, provides for the mandatory reimbursement of incentives if a material financial restatement is required, whether or not based on misconduct, and equity forfeiture provisions for violations of restrictive covenants and certain misconduct whether or not related to restatement.
Compensation governance, adopted compensation-recovery policy · Filed 27/03/2026
Our existing majority voting standard and director resignation policy strikes the right balance by giving the Board the flexibility to determine, after a thoughtful and case-specific review, whether accepting a director’s resignation is in the best interests of the company and its stockholders.
Director-resignation policy, Board discretion · Filed 27/03/2026
and Subsidiaries Statement of Income (Unaudited) Three Months Ended Six Months Ended June 30, June 30, In millions except per share amounts 2026 2025 2026 2025 Operating Revenue $ 4,301 $ 4,053 $ 8,317 $ 7,892 Cost of revenue 2,403 2,271 4,659 4,432 Selling, administrative, and research and development expenses 735 693 1,457 1,399 Amortization and impairment of intangible assets 16 21 34 42 Operating Income 1,147 1,068 2,167 2,019 Interest expense (79) (74) (152) (142) Other income (expense) 12 4 32 16 Income Before Taxes 1,080 998 2,047 1,893 Income Taxes 265 243 464 438 Net Income $ 815 $ 755 $ 1,583 $ 1,455 Net Income Per Share: Basic $ 2.85 $ 2.58 $ 5.51 $ 4.97 Diluted $ 2.84 $ 2.58 $ 5.50 $ 4.95 Shares of Common Stock Outstanding During the Period: Average 286.4 292.3 287.3 292.9 Average assuming dilution 287.0 292.9 288.1 293.7 The Notes to Financial Statements are an integral part of this statement.
Unaudited income statement, first-half 2026 operating results · Filed 06/08/2026
Net income to average invested capital and After-tax ROIC for the years ended December 31, 2025, 2024, 2023, 2022 and 2021 were as follows: A-1 Appendix A Dollars in millions 2025 2024 2023 2022 2021 Numerator: Net income $ 3,066 $ 3,488 $ 2,957 $ 3,034 $ 2,694 Net discrete tax benefit related to the third quarter 2025 (27 ) — — — — Discrete tax benefit related to the first quarter 2025 (21 ) — — — — Net discrete tax benefit related to the third quarter 2024 — (121 ) — — — Discrete tax benefit related to the second quarter 2023 — — (20 ) — — Discrete tax benefit related to the fourth quarter 2022 — — — (32 ) — Discrete tax benefit related to the second quarter 2022 — — — (51 ) — Discrete tax benefit related to the third quarter 2021 — — — — (21 ) Discrete tax benefit related to the second quarter 2021 — — — — (112 ) Interest expense, net of tax(1) 222 215 204 156 157 Other (income) expense, net of tax(1) (32 ) (336 ) (38 ) (196 ) (40 ) Operating income after taxes $ 3,208 $ 3,246 $ 3,103 $ 2,911 $ 2,678 Denominator: Invested capital: Cash and equivalents $ 851 $ 948 $ 1,065 $ 708 $ 1,527 Trade receivables 3,227 2,991 3,123 3,171 2,840 Inventories 1,659 1,605 1,707 2,054 1,694 Net assets held for sale — — — 7 — Net plant and equipment 2,230 2,036 1,976 1,848 1,809 Goodwill and intangible assets 5,689 5,431 5,566 5,632 5,937 Accounts payable and accrued expenses (2,158 ) (2,095 ) (2,244 ) (2,322 ) (2,233 ) Debt (8,969 ) (7,863 ) (8,164 ) (7,763 ) (7,687 ) Other, net 697 264 (16 ) (246 ) (261 ) Total net assets (stockholders' equity) 3,226 3,317 3,013 3,089 3,626 Cash and equivalents (851 ) (948 ) (1,065 ) (708 ) (1,527 ) Debt 8,969 7,863 8,164 7,763 7,687 Total invested capital $ 11,344 $ 10,232 $ 10,112 $ 10,144 $ 9,786 Average invested capital(2) $ 10,959 $ 10,419 $ 10,214 $ 10,017 $ 9,087 Net income to average invested capital 28.0 % 33.5 % 29.0 % 30.3 % 29.6 % After-tax return on average invested capital 29.3 % 31.2 % 30.4 % 29.1 % 29.5 % (1) Effective tax rate used for interest expense and other (income) expense for the years ended December 31, 2025, 2024, 2023, 2022 and 2021 was 23.9%, 23.8%, 23.2%, 23.2% and 23.0%, respectively.
Appendix A, 2021–2025 return-on-invested-capital reconciliation · Filed 27/03/2026
•In the year-to-date period, operating margin of 28.7% increased 160 basis points primarily due to benefits from the Company's enterprise initiatives and positive operating leverage of 90 basis points, partially offset by higher employee-related expenses.
MD&A, Polymers & Fluids, first-half 2026 operating-margin drivers · Filed 06/08/2026
Achieving high-quality organic growth of 4+ percent through the cycle is our highest priority in the Next Phase.
Enterprise Strategy, through-cycle organic-growth objective · Filed 27/03/2026
