UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended	September 30, ~~2021~~2022

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _______________ to _______________

Commission File Number: 1-4797

ILLINOIS TOOL WORKS INC.

(Exact name of registrant as specified in its charter)

Delaware

36-1258310

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

155 Harlem Avenue

Glenview

60025

(Address of principal executive offices)

(Zip Code)

(Registrant's telephone number, including area code) 847-724-7500

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	ITW	~~New York Stock Exchange~~
~~1.75% Euro Notes due 2022~~	~~ITW22~~	New York Stock Exchange
1.25% Euro Notes due 2023	ITW23	New York Stock Exchange
0.250% Euro Notes due 2024	ITW24A	New York Stock Exchange
0.625% Euro Notes due 2027	ITW27	New York Stock Exchange
2.125% Euro Notes due 2030	ITW30	New York Stock Exchange
1.00% Euro Notes due 2031	ITW31	New York Stock Exchange
3.00% Euro Notes due 2034	ITW34	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

The number of shares of registrant's common stock, $0.01 par value, outstanding at September 30, ~~2021: 313,880,725~~2022: 307,186,379


	Table of Contents

	PART I - Financial Information
Item 1.	Financial Statements	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1316
Item 4.	Controls and Procedures	3235

	PART II - Other Information

Item 1.	Legal Proceedings	3336
Item 1A.	Risk Factors	3336
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3336
Item 6.	Exhibits	3437

Signatures		3 538

PART I – FINANCIAL INFORMATION

ITEM 1. Financial Statements

Illinois Tool Works Inc. and Subsidiaries

Statement of Income (Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
In millions except per share amounts	In millions except per share amounts	2021		2020		2021		2020		In millions except per share amounts	2022		2021		2022		2021
Operating Revenue	Operating Revenue	$	3,556	$	3,307	$	10,776	$	9,099	Operating Revenue	$	4,011	$	3,556	$	11,961	$	10,776
Cost of revenue	Cost of revenue	2,096		1,910		6,298		5,375		Cost of revenue	2,371		2,096		7,120		6,298
Selling, administrative, and research and development expenses	Selling, administrative, and research and development expenses	581		560		1,735		1,606		Selling, administrative, and research and development expenses	624		581		1,935		1,735
Amortization and impairment of intangible assets	Amortization and impairment of intangible assets	34		48		100		119		Amortization and impairment of intangible assets	33		34		102		100
Operating Income	Operating Income	845		789		2,643		1,999		Operating Income	983		845		2,804		2,643
Interest expense	Interest expense	(49)		(52)		(153)		(154)		Interest expense	(52)		(49)		(147)		(153)
Other income (expense)	Other income (expense)	10		2		44		35		Other income (expense)	26		10		64		44
Income Before Taxes	Income Before Taxes	806		739		2,534		1,880		Income Before Taxes	957		806		2,721		2,534
Income Taxes	Income Taxes	167		157		449		413		Income Taxes	230		167		594		449
Net Income	Net Income	$	639	$	582	$	2,085	$	1,467	Net Income	$	727	$	639	$	2,127	$	2,085

Net Income Per Share:	Net Income Per Share:									Net Income Per Share:
Basic	Basic	$	2.03	$	1.84	$	6.61	$	4.63	Basic	$	2.36	$	2.03	$	6.85	$	6.61
Diluted	Diluted	$	2.02	$	1.83	$	6.58	$	4.61	Diluted	$	2.35	$	2.02	$	6.83	$	6.58

Shares of Common Stock Outstanding During the Period:	Shares of Common Stock Outstanding During the Period:									Shares of Common Stock Outstanding During the Period:
Average	Average	314.6		316.5		315.6		316.9		Average	308.8		314.6		310.6		315.6
Average assuming dilution	Average assuming dilution	315.9		317.9		316.9		318.3		Average assuming dilution	309.7		315.9		311.6		316.9

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Comprehensive Income (Unaudited)


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Net Income	Net Income	$	639	$	582	$	2,085	$	1,467	Net Income	$	727	$	639	$	2,127	$	2,085

Foreign currency translation adjustments, net of tax	Foreign currency translation adjustments, net of tax	(59)		63		(29)		(160)		Foreign currency translation adjustments, net of tax	(210)		(59)		(394)		(29)
Pension and other postretirement benefit adjustments, net of tax	Pension and other postretirement benefit adjustments, net of tax	11		9		33		28		Pension and other postretirement benefit adjustments, net of tax	5		11		14		33
Other comprehensive income (loss)	Other comprehensive income (loss)	(48)		72		4		(132)		Other comprehensive income (loss)	(205)		(48)		(380)		4

Comprehensive Income	Comprehensive Income	$	591	$	654	$	2,089	$	1,335	Comprehensive Income	$	522	$	591	$	1,747	$	2,089

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Financial Position (Unaudited)


In millions except per share amounts	In millions except per share amounts	September 30, 2021		December 31, 2020		In millions except per share amounts	September 30, 2022		December 31, 2021
Assets	Assets					Assets
Current Assets:	Current Assets:					Current Assets:
Cash and equivalents	Cash and equivalents	$	1,987	$	2,564	Cash and equivalents	$	774	$	1,527
Trade receivables	Trade receivables	2,729		2,506		Trade receivables	3,031		2,840
Inventories	Inventories	1,524		1,189		Inventories	2,007		1,694
Prepaid expenses and other current assets	Prepaid expenses and other current assets	337		264		Prepaid expenses and other current assets	281		313
Assets held for sale						Assets held for sale	103		—
Total current assets	Total current assets	6,577		6,523		Total current assets	6,196		6,374

Net plant and equipment	Net plant and equipment	1,744		1,777		Net plant and equipment	1,705		1,809
Goodwill	Goodwill	4,610		4,690		Goodwill	4,759		4,965
Intangible assets	Intangible assets	683		781		Intangible assets	798		972
Deferred income taxes	Deferred income taxes	580		533		Deferred income taxes	448		552
Other assets	Other assets	1,323		1,308		Other assets	1,320		1,405
		$	15,517	$	15,612		$	15,226	$	16,077

Liabilities and Stockholders' Equity	Liabilities and Stockholders' Equity					Liabilities and Stockholders' Equity
Current Liabilities:	Current Liabilities:					Current Liabilities:
Short-term debt	Short-term debt	$	579	$	350	Short-term debt	$	1,688	$	778
Accounts payable	Accounts payable	565		534		Accounts payable	618		585
Accrued expenses	Accrued expenses	1,399		1,284		Accrued expenses	1,559		1,648
Cash dividends payable	Cash dividends payable	383		361		Cash dividends payable	402		382
Income taxes payable	Income taxes payable	70		60		Income taxes payable	97		77
Liabilities held for sale						Liabilities held for sale	28		—
Total current liabilities	Total current liabilities	2,996		2,589		Total current liabilities	4,392		3,470

Noncurrent Liabilities:	Noncurrent Liabilities:					Noncurrent Liabilities:
Long-term debt	Long-term debt	6,972		7,772		Long-term debt	5,940		6,909
Deferred income taxes	Deferred income taxes	633		588		Deferred income taxes	655		654
Noncurrent income taxes payable	Noncurrent income taxes payable	365		413		Noncurrent income taxes payable	273		365
Other liabilities	Other liabilities	1,058		1,068		Other liabilities	952		1,053
Total noncurrent liabilities	Total noncurrent liabilities	9,028		9,841		Total noncurrent liabilities	7,820		8,981

Stockholders' Equity:	Stockholders' Equity:					Stockholders' Equity:
Common stock (par value of $0.01 per share):	Common stock (par value of $0.01 per share):					Common stock (par value of $0.01 per share):
Issued- 550.0 shares in 2021 and 2020 Outstanding- 313.9 shares in 2021 and 316.7 shares in 2020		6		6
Issued- 550.0 shares in 2022 and 2021 Outstanding- 307.2 shares in 2022 and 312.9 shares in 2021						Issued- 550.0 shares in 2022 and 2021 Outstanding- 307.2 shares in 2022 and 312.9 shares in 2021	6		6
Additional paid-in-capital	Additional paid-in-capital	1,416		1,362		Additional paid-in-capital	1,479		1,432
Retained earnings	Retained earnings	24,098		23,114		Retained earnings	25,292		24,325
Common stock held in treasury	Common stock held in treasury	(20,390)		(19,659)		Common stock held in treasury	(21,882)		(20,636)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(1,638)		(1,642)		Accumulated other comprehensive income (loss)	(1,882)		(1,502)
Noncontrolling interest	Noncontrolling interest	1		1		Noncontrolling interest	1		1
Total stockholders' equity	Total stockholders' equity	3,493		3,182		Total stockholders' equity	3,014		3,626
		$	15,517	$	15,612		$	15,226	$	16,077

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Changes in Stockholders' Equity (Unaudited)


In millions except per share amounts	In millions except per share amounts	Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total		In millions except per share amounts	Common Stock		Additional Paid-in Capital		Retained Earnings		Common Stock Held in Treasury		Accumulated Other Comprehensive Income (Loss)		Non-controlling Interest		Total

Three Months Ended September 30, 2022																Three Months Ended September 30, 2022
Balance at June 30, 2022																Balance at June 30, 2022	$	6	$	1,464	$	24,967	$	(21,382)	$	(1,677)	$	1	$	3,379
Net income																Net income	—		—		727		—		—		—		727

Stock-based compensation expense																Stock-based compensation expense	—		15		—		—		—		—		15
Repurchases of common stock																Repurchases of common stock	—		—		—		(500)		—		—		(500)
Dividends declared ($1.31 per share)																Dividends declared ($1.31 per share)	—		—		(402)		—		—		—		(402)
Other comprehensive income (loss)																Other comprehensive income (loss)	—		—		—		—		(205)		—		(205)

Balance at September 30, 2022																Balance at September 30, 2022	$	6	$	1,479	$	25,292	$	(21,882)	$	(1,882)	$	1	$	3,014

Three Months Ended September 30, 2021	Three Months Ended September 30, 2021															Three Months Ended September 30, 2021
Balance at June 30, 2021	Balance at June 30, 2021	$	6	$	1,402	$	23,842	$	(20,140)	$	(1,590)	$	1	$	3,521	Balance at June 30, 2021	$	6	$	1,402	$	23,842	$	(20,140)	$	(1,590)	$	1	$	3,521
Net income	Net income	—		—		639		—		—		—		639		Net income	—		—		639		—		—		—		639
Common stock issued for stock-based compensation		—		—		—		—		—		—		—

Stock-based compensation expense	Stock-based compensation expense	—		14		—		—		—		—		14		Stock-based compensation expense	—		14		—		—		—		—		14
Repurchases of common stock	Repurchases of common stock	—		—		—		(250)		—		—		(250)		Repurchases of common stock	—		—		—		(250)		—		—		(250)
Dividends declared ($1.22 per share)	Dividends declared ($1.22 per share)	—		—		(383)		—		—		—		(383)		Dividends declared ($1.22 per share)	—		—		(383)		—		—		—		(383)
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		(48)		—		(48)		Other comprehensive income (loss)	—		—		—		—		(48)		—		(48)

Balance at September 30, 2021	Balance at September 30, 2021	$	6	$	1,416	$	24,098	$	(20,390)	$	(1,638)	$	1	$	3,493	Balance at September 30, 2021	$	6	$	1,416	$	24,098	$	(20,390)	$	(1,638)	$	1	$	3,493

Three Months Ended September 30, 2020
Balance at June 30, 2020		$	6	$	1,317	$	22,612	$	(19,669)	$	(1,909)	$	1	$	2,358
Nine Months Ended September 30, 2022																Nine Months Ended September 30, 2022
Balance at December 31, 2021																Balance at December 31, 2021	$	6	$	1,432	$	24,325	$	(20,636)	$	(1,502)	$	1	$	3,626
Net income	Net income	—		—		582		—		—		—		582		Net income	—		—		2,127		—		—		—		2,127
Common stock issued for stock-based compensation	Common stock issued for stock-based compensation	—		15		—		17		—		—		32		Common stock issued for stock-based compensation	—		(1)		—		4		—		—		3
Stock-based compensation expense	Stock-based compensation expense	—		14		—		—		—		—		14		Stock-based compensation expense	—		48		—		—		—		—		48

Dividends declared ($1.14 per share)		—		—		(361)		—		—		—		(361)
Repurchases of common stock																Repurchases of common stock	—		—		—		(1,250)		—		—		(1,250)
Dividends declared ($3.75 per share)																Dividends declared ($3.75 per share)	—		—		(1,160)		—		—		—		(1,160)
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		72		—		72		Other comprehensive income (loss)	—		—		—		—		(380)		—		(380)

Balance at September 30, 2020		$	6	$	1,346	$	22,833	$	(19,652)	$	(1,837)	$	1	$	2,697
Balance at September 30, 2022																Balance at September 30, 2022	$	6	$	1,479	$	25,292	$	(21,882)	$	(1,882)	$	1	$	3,014

Nine Months Ended September 30, 2021	Nine Months Ended September 30, 2021															Nine Months Ended September 30, 2021
Balance at December 31, 2020	Balance at December 31, 2020	$	6	$	1,362	$	23,114	$	(19,659)	$	(1,642)	$	1	$	3,182	Balance at December 31, 2020	$	6	$	1,362	$	23,114	$	(19,659)	$	(1,642)	$	1	$	3,182
Net income	Net income	—		—		2,085		—		—		—		2,085		Net income	—		—		2,085		—		—		—		2,085
Common stock issued for stock-based compensation	Common stock issued for stock-based compensation	—		13		—		19		—		—		32		Common stock issued for stock-based compensation	—		13		—		19		—		—		32
Stock-based compensation expense	Stock-based compensation expense	—		41		—		—		—		—		41		Stock-based compensation expense	—		41		—		—		—		—		41
Repurchases of common stock	Repurchases of common stock	—		—		—		(750)		—		—		(750)		Repurchases of common stock	—		—		—		(750)		—		—		(750)
Dividends declared ($3.50 per share)	Dividends declared ($3.50 per share)	—		—		(1,101)		—		—		—		(1,101)		Dividends declared ($3.50 per share)	—		—		(1,101)		—		—		—		(1,101)
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		4		—		4		Other comprehensive income (loss)	—		—		—		—		4		—		4

Balance at September 30, 2021	Balance at September 30, 2021	$	6	$	1,416	$	24,098	$	(20,390)	$	(1,638)	$	1	$	3,493	Balance at September 30, 2021	$	6	$	1,416	$	24,098	$	(20,390)	$	(1,638)	$	1	$	3,493

Nine Months Ended September 30, 2020
Balance at December 31, 2019		$	6	$	1,304	$	22,403	$	(18,982)	$	(1,705)	$	4	$	3,030
Net income		—		—		1,467		—		—		—		1,467
Common stock issued for stock-based compensation		—		12		—		36		—		—		48
Stock-based compensation expense		—		31		—		—		—		—		31
Repurchases of common stock		—		—		—		(706)		—		—		(706)
Dividends declared ($3.28 per share)		—		—		(1,037)		—		—		—		(1,037)
Other comprehensive income (loss)		—		—		—		—		(132)		—		(132)
Noncontrolling interest		—		(1)		—		—		—		(3)		(4)
Balance at September 30, 2020		$	6	$	1,346	$	22,833	$	(19,652)	$	(1,837)	$	1	$	2,697

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

Illinois Tool Works Inc. and Subsidiaries

Statement of Cash Flows (Unaudited)


		Nine Months Ended					Nine Months Ended
		September 30,					September 30,
In millions	In millions	2021		2020		In millions	2022		2021
Cash Provided by (Used for) Operating Activities:	Cash Provided by (Used for) Operating Activities:					Cash Provided by (Used for) Operating Activities:
Net income	Net income	$	2,085	$	1,467	Net income	$	2,127	$	2,085
Adjustments to reconcile net income to cash provided by operating activities:	Adjustments to reconcile net income to cash provided by operating activities:					Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	Depreciation	206		203		Depreciation	209		206
Amortization and impairment of intangible assets	Amortization and impairment of intangible assets	100		119		Amortization and impairment of intangible assets	102		100
Change in deferred income taxes	Change in deferred income taxes	(79)		19		Change in deferred income taxes	(72)		(79)
Provision for uncollectible accounts	Provision for uncollectible accounts	—		5		Provision for uncollectible accounts	4		—
(Income) loss from investments	(Income) loss from investments	(28)		(6)		(Income) loss from investments	(8)		(28)
(Gain) loss on sale of plant and equipment	(Gain) loss on sale of plant and equipment	—		1		(Gain) loss on sale of plant and equipment	(1)		—
(Gain) loss on sale of operations and affiliates	(Gain) loss on sale of operations and affiliates	—		(1)		(Gain) loss on sale of operations and affiliates	(1)		—
Stock-based compensation expense	Stock-based compensation expense	41		31		Stock-based compensation expense	48		41
Other non-cash items, net	Other non-cash items, net	8		6		Other non-cash items, net	1		8
Change in assets and liabilities, net of acquisitions and divestitures:	Change in assets and liabilities, net of acquisitions and divestitures:					Change in assets and liabilities, net of acquisitions and divestitures:
(Increase) decrease in-	(Increase) decrease in-					(Increase) decrease in-
Trade receivables	Trade receivables	(270)		42		Trade receivables	(417)		(270)
Inventories	Inventories	(365)		50		Inventories	(477)		(365)
Prepaid expenses and other assets	Prepaid expenses and other assets	(63)		50		Prepaid expenses and other assets	27		(63)
Increase (decrease) in-	Increase (decrease) in-					Increase (decrease) in-
Accounts payable	Accounts payable	44		23		Accounts payable	84		44
Accrued expenses and other liabilities	Accrued expenses and other liabilities	133		29		Accrued expenses and other liabilities	14		133
Income taxes	Income taxes	(30)		(6)		Income taxes	(102)		(30)
Other, net	Other, net	1		2		Other, net	(1)		1
Net cash provided by operating activities	Net cash provided by operating activities	1,783		2,034		Net cash provided by operating activities	1,537		1,783
Cash Provided by (Used for) Investing Activities:	Cash Provided by (Used for) Investing Activities:					Cash Provided by (Used for) Investing Activities:

Acquisition of businesses (excluding cash and equivalents)						Acquisition of businesses (excluding cash and equivalents)	(2)		—
Additions to plant and equipment	Additions to plant and equipment	(217)		(168)		Additions to plant and equipment	(256)		(217)
Proceeds from investments	Proceeds from investments	37		10		Proceeds from investments	12		37
Proceeds from sale of plant and equipment	Proceeds from sale of plant and equipment	6		8		Proceeds from sale of plant and equipment	8		6

Proceeds from sales of operations and affiliates						Proceeds from sales of operations and affiliates	3		—
Other, net	Other, net	(2)		(1)		Other, net	(2)		(2)
Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	(176)		(151)		Net cash provided by (used for) investing activities	(237)		(176)
Cash Provided by (Used for) Financing Activities:	Cash Provided by (Used for) Financing Activities:					Cash Provided by (Used for) Financing Activities:
Cash dividends paid	Cash dividends paid	(1,080)		(1,019)		Cash dividends paid	(1,139)		(1,080)
Issuance of common stock	Issuance of common stock	42		60		Issuance of common stock	17		42
Repurchases of common stock	Repurchases of common stock	(750)		(706)		Repurchases of common stock	(1,250)		(750)
Net proceeds from (repayments of) debt with original maturities of three months or less	Net proceeds from (repayments of) debt with original maturities of three months or less	1		—		Net proceeds from (repayments of) debt with original maturities of three months or less	1,078		1

Proceeds from debt with original maturities of more than three months						Proceeds from debt with original maturities of more than three months	454		—
Repayments of debt with original maturities of more than three months	Repayments of debt with original maturities of more than three months	(350)		—		Repayments of debt with original maturities of more than three months	(1,110)		(350)
Other, net	Other, net	(10)		(16)		Other, net	(15)		(10)
Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	(2,147)		(1,681)		Net cash provided by (used for) financing activities	(1,965)		(2,147)
Effect of Exchange Rate Changes on Cash and Equivalents	Effect of Exchange Rate Changes on Cash and Equivalents	(37)		(14)		Effect of Exchange Rate Changes on Cash and Equivalents	(88)		(37)
Cash and Equivalents:	Cash and Equivalents:					Cash and Equivalents:
Increase (decrease) during the period	Increase (decrease) during the period	(577)		188		Increase (decrease) during the period	(753)		(577)
Beginning of period	Beginning of period	2,564		1,981		Beginning of period	1,527		2,564
End of period	End of period	$	1,987	$	2,169	End of period	$	774	$	1,987
Supplementary Cash Flow Information:	Supplementary Cash Flow Information:					Supplementary Cash Flow Information:
Cash Paid During the Period for Interest	Cash Paid During the Period for Interest	$	178	$	175	Cash Paid During the Period for Interest	$	170	$	178
Cash Paid During the Period for Income Taxes, Net of Refunds	Cash Paid During the Period for Income Taxes, Net of Refunds	$	558	$	399	Cash Paid During the Period for Income Taxes, Net of Refunds	$	768	$	558

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

Illinois Tool Works Inc. and Subsidiaries

Notes to Financial Statements (Unaudited)

(1) Significant Accounting Policies

Financial Statements— The unaudited financial statements included herein have been prepared by Illinois Tool Works Inc. and Subsidiaries (the "Company"). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. Interim results are not necessarily indicative of results for the full year. It is suggested that these financial statements be read in conjunction with the financial statements and notes to financial statements included in the Company's ~~2020~~2021 Annual Report on Form 10-K. Certain reclassifications of prior year data have been made to conform with current year reporting.

(2) Novel Coronavirus (COVID-19)

In early 2020, an outbreak of a novel strain of coronavirus ~~(COVID-19)~~("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 have taken 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 have 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 ~~continued to~~ spread and ~~impact~~impacted the countries in which the Company operates and the markets the Company serves. ~~In the first three quarters of~~During 2021 and 2022, the Company experienced solid recovery progress in many of its end markets; however, the disruptions caused by the COVID-19 pandemic ~~continue~~have continued to have an adverse impact on the Company's global operations. The full extent of the COVID-19 outbreak and its impact on the markets served by the Company and on the Company's operations continues to be highly uncertain as conditions continue to fluctuate around the world, with vaccine administration rising in certain regions, ~~and~~ spikes in infections (including the spread of variants) ~~also being experienced. A prolonged outbreak~~continuing to be experienced and certain jurisdictions continuing to impose stay-at-home orders. The pandemic and resurgence of outbreaks could continue to ~~interrupt~~adversely impact the operations of the Company and its customers and suppliers.

(3) MTS Test & Simulation Acquisition

On December 1, 2021, the Company completed the acquisition of the Test & Simulation business of MTS Systems Corporation ("MTS") from Amphenol Corporation 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 $101 million and $308 million for the three and nine months ended September 30, 2022, respectively. The Company is in the process of allocating the purchase price to the acquired assets and liabilities as of the acquisition date, including intangible assets and goodwill. Based on its updated allocation, the Company recorded goodwill of $435 million and intangible assets of $257 million. The intangible assets included $93 million related to indefinite-lived trademarks and brands and $164 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. The Company does not expect any of the goodwill related to the transaction to be 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. Adjustments resulting from updates to the purchase price allocation during 2022 were not material. Subsequent acquisition accounting adjustments may change the amounts recorded, including goodwill and intangible assets, primarily due to the completion of valuations. The allocation of purchase price will be completed as soon as practicable, but no later than one year from the acquisition date.

(4) Divestitures

The Company routinely reviews its portfolio of businesses relative to its business portfolio criteria and evaluates if further portfolio refinements may be needed. The Company previously communicated its intent to explore options, including potential divestitures, for certain businesses with annual revenues totaling up to $1.0 billion. As such, the Company may commit to a plan to exit or dispose of certain businesses and present them as held for sale in periods prior to the sale of the business.

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

In the second quarter of 2022, plans were approved to divest two businesses, including one business in the Polymers & Fluids segment and one business in the Food Equipment segment, with total combined revenues of $115 million for the year ended December 31, 2021. These two businesses were classified as held for sale beginning in the second quarter of 2022.

Subsequent to the third quarter, on October 3, 2022, the Company completed the sale of the one business in the Polymers & Fluids segment for $220 million, subject to certain closing adjustments. The sale is expected to result in a pre-tax gain of approximately $156 million in the fourth quarter of 2022. As of September 30, 2022, this business was presented as held for sale in the Statement of Financial Position.

As of September 30, 2022, the assets and liabilities related to the two businesses discussed above that were included in assets and liabilities held for sale in the Statement of Financial Position were as follows:


In millions	September 30, 2022
Trade receivables	$	20
Inventories	19
Net plant and equipment	14
Goodwill and intangible assets	43
Other	7
Total assets held for sale	$	103

Accounts payable	$	3
Accrued expenses	14
Other	11
Total liabilities held for sale	$	28

Operating revenue of the two businesses held for sale for the three and nine months ended September 30, 2022 and 2021 was as follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
In millions	2022		2021		2022		2021
Operating revenue	$	37	$	28	$	100	$	86

(5) Operating Revenue

The Company's 83 diversified operating divisions are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following 7seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. Operating revenue by product category, which is consistent with the Company's segment presentation, for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Automotive OEM	Automotive OEM	$	647	$	714	$	2,137	$	1,771	Automotive OEM	$	753	$	647	$	2,224	$	2,137
Food Equipment	Food Equipment	544		449		1,509		1,268		Food Equipment	633		544		1,813		1,509
Test & Measurement and Electronics	Test & Measurement and Electronics	552		489		1,710		1,429		Test & Measurement and Electronics	715		552		2,096		1,710
Welding	Welding	425		346		1,228		1,016		Welding	477		425		1,413		1,228
Polymers & Fluids	Polymers & Fluids	456		438		1,357		1,185		Polymers & Fluids	473		456		1,450		1,357
Construction Products	Construction Products	478		456		1,465		1,222		Construction Products	527		478		1,643		1,465
Specialty Products	Specialty Products	459		420		1,387		1,221		Specialty Products	438		459		1,337		1,387
Intersegment revenue	Intersegment revenue	(5)		(5)		(17)		(13)		Intersegment revenue	(5)		(5)		(15)		(17)
Total operating revenue	Total operating revenue	$	3,556	$	3,307	$	10,776	$	9,099	Total operating revenue	$	4,011	$	3,556	$	11,961	$	10,776

The following is a description of the product offerings, end markets and typical revenue transactions for each of the Company's 7seven segments:

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

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

Products sold in this segment are primarily manufactured to the customer's specifications and are sold under long-term supply agreements with OEM auto manufacturers and other top tier auto parts suppliers. The Company typically recognizes revenue for products in this segment at the time of shipment. Certain products may be produced utilizing tooling that is owned by the customer that the Company developed and is reimbursed by the customer for the associated cost. In these arrangements, the Company typically retains a contractual right to use the customer-owned tooling for the purpose of fulfilling its obligations under the supply agreement. The Company records reimbursements for the cost of customer-owned tooling as a cost offset rather than operating revenue as tooling is not considered a product offering central to the Company's operations.

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

•warewashing equipment;

•cooking equipment, including ovens, ranges and broilers;

•refrigeration equipment, including refrigerators, freezers and prep tables;

•food processing equipment, including slicers, mixers and scales;

•kitchen exhaust, ventilation and pollution control systems; and

•food equipment service, maintenance and repair.

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

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

•equipment, consumables, and related software for testing and measuring of materials, structures, gases and fluids;

•electronic assembly equipment;

•electronic components and component packaging;

•static control equipment and consumables used for contamination control in clean room environments; and

•pressure sensitive adhesives and components for electronics, medical, transportation and telecommunications applications.

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

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

•arc welding equipment; and

•metal arc welding consumables and related accessories.

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

Polymers & Fluids— This segment is a branded supplier to niche markets that require value-added, differentiated products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. This segment primarily serves the automotive aftermarket, general industrial, MRO and construction markets. Products in this segment include:

•adhesives for industrial, construction and consumer purposes;

•chemical fluids which clean or add lubrication to machines;

•epoxy and resin-based coating products for industrial applications;

•hand wipes and cleaners for industrial applications;

•fluids, polymers and other supplies for auto aftermarket maintenance and appearance;

•fillers and putties for auto body repair; and

•polyester coatings and patch and repair products for the marine industry.

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

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

•fasteners and related fastening tools for wood and metal applications;

•anchors, fasteners and related tools for concrete applications;

•metal plate truss components and related equipment and software; and

•packaged hardware, fasteners, anchors and other products for retail.

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

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

•~~line integration,~~ conveyor systems and line automation for the food and beverage industries;

•plastic consumables that multi-pack cans and bottles and related equipment;

•foil, film and related equipment used to decorate consumer products;

•product coding and marking equipment and related consumables;

•plastic and metal closures and components for appliances;

•airport ground support equipment; and

•components for medical devices.

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

~~(4)~~(6) Income Taxes

The Company's effective tax rate for the three months ended September 30, 2022 and 2021 was 23.9% and ~~2020 was~~ 20.8% ~~and 21.3%~~, respectively, and ~~17.7%~~21.8% and ~~22.0%~~17.7% for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~ respectively. The effective tax rate for the nine months ended September 30, 2022 included a discrete income tax benefit of $51 million in the second quarter of 2022 related to a decrease in unrecognized tax benefits resulting from the resolution of a U.S. tax audit. The effective tax rate for the three and nine months ended September 30, 2021 included a discrete income tax benefit of $21 million in the third quarter of 2021 related to the utilization of capital losses. The effective tax rate for the nine months ended September 30, 2021 also benefited from a discrete income tax benefit of $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 increases the U.K. income tax rate from 19% to 25% effective April 1, 2023. Additionally, the effective tax ~~rate~~rates for 2022 and 2021 included discrete income tax benefits related to excess tax benefits from stock-based compensation of $1 million ~~and $7 million~~ for the three months ended September 30, 2022 and 2021, and ~~2020, respectively,~~$9 million and $14 ~~million and $20~~ million for the nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

The Company and its subsidiaries file tax returns in the U.S. and various state, local and foreign jurisdictions. These tax returns are routinely audited by the tax authorities in these jurisdictions, including the Internal Revenue Service ("IRS"), ~~Her Majesty's~~HM Revenue and Customs, German Fiscal Authority, French Fiscal Authority, and Australian Tax Office, and a number of these audits are currently ongoing, which may increase the amount of the unrecognized tax benefits in future periods. ~~Due to the ongoing audits, the~~The Company believes it is reasonably possible that within the next twelve months the amount of the Company's unrecognized tax benefits may be decreased by approximately ~~$55~~$22 million related predominantly to ~~various intercompany transactions.~~the potential resolution of income tax examinations. The Company has recorded its best estimate of the potential exposure for these issues.

~~(5)~~(7) Goodwill and Intangible Assets

The Company performed its annual impairment assessment of goodwill and indefinite-lived intangible assets in the third quarters of ~~2021~~2022 and ~~2020.~~2021. The assessments resulted in no impairment charges in either ~~2021~~2022 or ~~2020.~~2021.

~~(6)~~

(8) Inventories

Inventories as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


In millions	In millions	September 30, 2021		December 31, 2020		In millions	September 30, 2022		December 31, 2021
Raw material	Raw material	$	614	$	454	Raw material	$	849	$	716
Work-in-process	Work-in-process	176		136		Work-in-process	250		208
Finished goods	Finished goods	850		681		Finished goods	1,047		888
LIFO reserve	LIFO reserve	(116)		(82)		LIFO reserve	(139)		(118)
Total inventories	Total inventories	$	1,524	$	1,189	Total inventories	$	2,007	$	1,694

~~(7)~~(9) Pension and Other Postretirement Benefits

Pension and other postretirement benefit costs for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 were as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
Pension Other Postretirement Benefits Pension Other Postretirement Benefits
In millions 2021 2020 2021 2020 2021 2020 2021 2020
Components of net periodic benefit cost:
Service cost $ 13 $ 14 $ 2 $ 2 $ 40 $ 41 $ 6 $ 6
Interest cost 10 15 3 4 30 45 8 12
Expected return on plan assets (26) (28) (7) (6) (77) (84) (20) (18)
Amortization of actuarial loss (gain) 14 11 — — 40 35 — —
Amortization of prior service cost — 1 — — 1 1 — —
Total net periodic benefit cost $ 11 $ 13 $ (2) $ — $ 34 $ 38 $ (6) $ —


	Three Months Ended								Nine Months Ended
	September 30,								September 30,
	Pension				Other Postretirement Benefits				Pension				Other Postretirement Benefits
In millions	2022		2021		2022		2021		2022		2021		2022		2021
Components of net periodic benefit cost:
Service cost	$	11	$	13	$	2	$	2	$	35	$	40	$	5	$	6
Interest cost	13		10		3		3		38		30		10		8
Expected return on plan assets	(24)		(26)		(7)		(7)		(76)		(77)		(20)		(20)
Amortization of actuarial loss (gain)	5		14		(1)		—		18		40		(3)		—
Amortization of prior service cost	1		—		—		—		1		1		—		—
Settlements	1		—		—		—		1		—		—		—
Total net periodic benefit cost (income)	$	7	$	11	$	(3)	$	(2)	$	17	$	34	$	(8)	$	(6)

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

The Company expects to contribute approximately ~~$28~~$14 million to its pension plans and $4 million to its other postretirement benefit plans in ~~2021.~~2022. As of September 30, ~~2021,~~2022, contributions of ~~$22~~$8 million to pension plans and $3 million to other postretirement benefit plans have been made.

~~(8)~~(10) Debt

~~There was no commercial paper outstanding~~Total debt as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021 was as follows:


In millions	September 30, 2022		December 31, 2021
Short-term debt	$	1,688	$	778
Long-term debt	5,940		6,909
Total debt	$	7,628	$	7,687

Short-term debt included commercial paper of $1.2 billion and $210 million as of September 30, 2022 and December 31, 2021, respectively. The weighted-average interest rate on commercial paper as of September 30, 2022 and December 31, 2021 was 2.68% and 0.14%, respectively. Short-term debt as of September 30, ~~2021~~2022 also included ~~$578~~$490 million related to the ~~1.75%~~1.25% Euro notes due May ~~20, 2022,~~22, 2023, which were reclassified from Long-term debt to Short-term debt in the second quarter of ~~2021. Short-term debt as~~2022. As of December 31, ~~2020~~2021, Short-term debt also included ~~$350~~$568 million related to the 1.75% Euro notes due May 20, 2022, which were

redeemed in full at face value on February 22, 2022. Additionally, the $350 million of 3.375% notes due September 15, 2021 ~~which~~ were redeemed in full at face value on June 15, 2021.

The Company has a ~~$2.5~~$2.5 billion revolving credit facility with a termination date of September 27, 2024, which is available to provide additional liquidity, including to support the potential issuances of commercial paper. On September 22, 2021, due to the anticipated LIBOR transition, the Company agreed to suspend its right to borrow in Euro, British Pounds Sterling and Japanese Yen currencies under the revolving credit facility, effective December 31, 2021. The Company may continue to borrow in U.S. Dollars under the credit facility. This change is not expected to have a significant impact on the Company’s liquidity or its commercial paper program. No amounts were outstanding under the ~~$2.5~~$2.5 billion revolving credit facility as of September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

On October 21, 2022, the Company entered into a $3.0 billion revolving credit facility with a termination date of October 21, 2027. This agreement replaced the existing $2.5 billion revolving credit facility discussed above.

The approximate fair value and related carrying value of the Company's total long-term debt, including current maturities of long-term debt presented as short-term debt, as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 were as follows:


In millions	In millions	September 30, 2021		December 31, 2020		In millions	September 30, 2022		December 31, 2021
Fair value	Fair value	$	8,451	$	9,412	Fair value	$	5,873	$	8,296
Carrying value	Carrying value	7,551		8,122		Carrying value	6,430		7,477

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

~~(9)~~(11) Accumulated Other Comprehensive Income (Loss)

The following table summarizes changes in Accumulated other comprehensive income (loss) for the three and nine months ended September 30, ~~2021~~2022 and ~~2020:~~2021:

Three Months Ended Nine Months Ended
September 30, September 30,
In millions 2021 2020 2021 2020
Beginning balance $ (1,590) $ (1,909) $ (1,642) $ (1,705)
Foreign currency translation adjustments during the period (35) 22 22 (203)
Foreign currency translation adjustments reclassified to income — — 4 —
Income taxes (24) 41 (55) 43
Total foreign currency translation adjustments, net of tax (59) 63 (29) (160)
Pension and other postretirement benefit adjustments reclassified to income 14 12 41 36
Income taxes (3) (3) (8) (8)
Total pension and other postretirement benefit adjustments, net of tax 11 9 33 28
Ending balance $ (1,638) $ (1,837) $ (1,638) $ (1,837)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
In millions	2022		2021		2022		2021
Beginning balance	$	(1,677)	$	(1,590)	$	(1,502)	$	(1,642)

Foreign currency translation adjustments during the period	(159)		(35)		(277)		22
Foreign currency translation adjustments reclassified to income	—		—		—		4
Income taxes	(51)		(24)		(117)		(55)
Total foreign currency translation adjustments, net of tax	(210)		(59)		(394)		(29)


Pension and other postretirement benefit adjustments reclassified to income	6		14		17		41
Income taxes	(1)		(3)		(3)		(8)
Total pension and other postretirement benefit adjustments, net of tax	5		11		14		33

Ending balance	$	(1,882)	$	(1,638)	$	(1,882)	$	(1,638)

Foreign currency translation adjustments reclassified to income related to the exit of immaterial foreign operations. Pension and other postretirement benefit adjustments reclassified to income represented settlements and the amortization of actuarial ~~losses~~gains and ~~prior service cost.~~losses. Refer to Note 7.9. Pension and Other Postretirement Benefits for additional information.

The Company ~~designated~~designated the €1.0 billion of Euro notes issued in May 2014, the €1.0 billion of Euro notes issued in May 2015 and the €1.6 billion of Euro ~~note~~snotes issued in June 2019 as hedges of a portion of its net investment in Euro-denominated foreign operations to reduce foreign currency risk associated with the investment in these operations. Changes in the value of this debt resulting fromfrom fluctuations in the Euro to U.S. Dollar exchange rate have been recorded as foreign currency translation adjustments within Accumulated other comprehensive income (loss). On February 22, 2022, €500 million of the Euro notes issued in May 2014 were redeemed in full. Refer to Note 10. Debt for additional information regarding the redemption of these notes. The carrying values of the 2019, 2015 and 2014 Euro notes were ~~$1.8~~$1.6 billion, ~~$1.2~~$1.0 billion and ~~$1.1 billion, respectively,~~$481 million, respectively, as of September 30, ~~2021.~~2022. The cumulative unrealized pre-tax gain (loss) recorded in Accumulated other comprehensive income

(loss) related to the net investment hedge was a gain of ~~$108~~$667 million and $183 million as of September 30, ~~2021~~2022 and ~~a loss of $120 million as of~~ December 31, ~~2020.~~2021, respectively.

As of September 30, ~~2021~~2022 and ~~2020,~~2021, the ending balance of Accumulated other comprehensive income (loss) consisted of after-tax cumulative translation adjustment losses of ~~$1.3~~$1.7 billion and ~~$1.5~~$1.3 billion, respectively, and after-tax unrecognized pension and other postretirement ~~benefits cost~~benefit costs of ~~$298~~$182 million and ~~$362~~$298 million, respectively.

~~(10)~~(12) Segment Information

The Company's operations are organized and managed based on similar product offerings and end markets, and are reported to senior management as the following 7seven segments: Automotive OEM; Food Equipment; Test & Measurement and Electronics; Welding; Polymers & Fluids; Construction Products; and Specialty Products. Refer to Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for information regarding operating revenue and operating income for the Company's segments.

~~(11) Acquisition Agreement~~

The Company has entered into an agreement with Amphenol Corporation ("Amphenol"), whereby the Company intends to acquire the Test & Simulation business of MTS Systems Corporation ("MTS") from Amphenol for $750 million, subject to certain post-closing adjustments and excluding transaction-related expenses. The acquisition of the Test & Simulation business of MTS from Amphenol is expected to close following the receipt of all required regulatory approvals and the satisfaction of other customary closing conditions. Upon completion of this acquisition, the Test & Simulation business of MTS will be reported within the Company's Test & Measurement and Electronics segment.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified range of industrial products and equipment with 83 divisions in 52 countries. As of December 31, ~~2020,~~2021, the Company employed approximately ~~43,000~~45,000 people.

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

Due to the large number of diverse businesses and the Company's decentralized operating structure, the Company does not require its businesses to provide detailed information on operating results. Instead, the Company's corporate management collects data on several key measurements: operating revenue, operating income, operating margin, overhead costs, number of months on hand in inventory, days sales outstanding in accounts receivable, past due receivables and return on invested capital. These key measures are monitored by management and significant changes in operating results versus current trends in end markets and variances from forecasts are discussed with operating unit management.

THE ITW BUSINESS MODEL

The powerful and highly differentiated ITW Business Model is the Company's core source of value creation. ~~The ITW Business Model~~It is the Company's competitive advantage and defines how ITW creates value for its shareholders. ItThe ITW Business Model is comprised of three unique elements:

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

•~~Customer-Back~~Customer-back Innovation has fueled decades of profitable growth at ITW. The Company's unique innovation approach is built on insight gathered from the 80/20 Front-to-Back process. Working from the customer back, ITW businesses position themselves as the go-to problem solver for their "80" customers. ITW's innovation efforts are focused on understanding customer needs, particularly those in "80" markets with solid long-term growth fundamentals, and creating unique solutions to address those needs. These customer insights and learnings drive innovation at ITW and have contributed to a portfolio of approximately ~~18,500~~19,300 granted and pending patents;

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

ENTERPRISE STRATEGY

In late 2012, ITW began its strategic framework transitioning the Company on its current path to fully leverage the compelling performance potential of the ITW Business Model. The Company undertook a complete review of its performance, focusing on its businesses delivering consistent above-market growth with best-in-class margins and returns, and developing a strategy to replicate that performance across its operations.

ITW determined that solid and consistent above-market organic growth is the core growth engine to deliver world-class financial performance and compelling long-term returns for its shareholders. To shift its primary growth engine to organic, the Company began executing a multi-step approach.

•The first step was to narrow the focus and improve the quality of ITW's business portfolio. As part of the Portfolio Management initiative, ITW exited businesses that were operating in commoditized market spaces and prioritized sustainable differentiation as a must-have requirement for all ITW businesses. This process included both divesting

entire businesses and exiting commoditized product lines and customers inside otherwise highly differentiated ITW divisions.

As a result of this work, ITW's business portfolio now has significantly higher organic growth potential. ITW segments and divisions now possess attractive and differentiated product lines and end markets as they continue to improve operating margins and generate price/cost increases. The Company achieved this through product line simplification, or eliminating the complexity and overhead costs associated with smaller product lines and customers, while supporting and growing the businesses' largest / most profitable customers and product lines.

•Step two, Business Structure Simplification, was implemented to simplify and scale up ITW's operating structure to support increased engineering, marketing, and sales resources, and improve global reach and competitiveness, all of which were critical to driving accelerated organic growth. ITW now has 83 scaled-up divisions with significantly enhanced focus on growth investments, core customers and products, and customer-back innovation.

•The Strategic Sourcing initiative established sourcing as a core strategic and operational capability at ITW, delivering an average of one percent reduction in spend each year from 2013 through ~~2020~~2021 and continues to be a key contributor to the Company's ongoing enterprise strategy.

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

ITW has clearly demonstrated superior 80/20 management, resulting in meaningful incremental improvement in margins and returns as evidenced by the Company's operating margin and after-tax return on invested capital. At the same time, these 80/20 initiatives can also result in restructuring initiatives that reduce costs and improve profitability and returns.

PATH TO FULL POTENTIAL

Since the launch of the enterprise strategy, the Company has made considerable progress to position itself to reach full potential. The ITW Business Model and unique set of capabilities are a source of strong and enduring competitive advantage, but for the Company to truly reach its full potential, every one of its divisions must also be operating at its full potential. To do so, the Company remains focused on its core principles to position ITW to perform to its full potential:

•Portfolio discipline

•80/20 Front-to-Back practice excellence

•Full-potential organic growth

Portfolio Discipline

The Company only operates in industries where it can generate significant, long-term competitive advantage from the ITW Business Model. ITW businesses have the right "raw material" in terms of market and business attributes that best fit the ITW Business Model and have significant potential to drive above-market organic growth over the long-term.

The Company focuses on high-quality businesses, ensuring it operates in markets with positive long-term macro fundamentals and with customers that have critical needs and value ITW's differentiated products, services and solutions. ITW's portfolio operates in highly diverse end markets and geographies which makes the Company more resilient in the face of uncertain or volatile market environments.

The Company routinely evaluates its portfolio to ensure it delivers sustainable differentiation and drives consistent long-term performance. This includes both implementing portfolio refinements and assessing selective high-quality acquisitions to supplement ITW's long-term growth potential.

The Company previously communicated its intent to explore options, including potential divestitures, for certain businesses with annual revenues totaling up to $1$1.0 billion. ~~The Company expects any earnings per share dilution from divestitures would be offset by incremental share repurchases.~~ In the fourth quarter of 2019, the Company completed the divestitures of three businesses and continues to evaluate options for certain other businesses. ~~However, due~~Due to the COVID-19 pandemic, the Company ~~has deferred~~chose to defer any further significant divestiture activity ~~until market conditions normalize.~~in 2020 and 2021. The Company has reinitiated the divestiture process in 2022 for certain businesses with combined annual revenues of approximately $0.5 billion, subject to approval by the Company's Board of Directors. In the second quarter of 2022, plans were approved to divest two businesses, including one business in the

Polymers & Fluids segment and one business in the Food Equipment segment, with total combined revenues of $115 million for the year ended December 31, 2021. These two businesses were classified as held for sale beginning in the second quarter of 2022. Subsequent to the third quarter, on October 3, 2022, the Company completed the sale of the one business in the Polymers & Fluids segment for $220 million, subject to certain closing adjustments. The sale is expected to result in a pre-tax gain of approximately $156 million in the fourth quarter of 2022. Refer to Note 4. Divestitures in Item 1. Financial Statements for further information regarding the Company's divestitures.

80/20 Front-to-Back Practice Excellence

The 80/20 Front-to-Back process is a rigorous, iterative and highly data-driven approach to identify where the Company has true differentiation and the ability to drive sustainable, high-quality organic growth. The Company simplifies and eliminates complexity and redesigns every aspect of its business to ensure focused execution on key opportunities, markets, customers, and products.

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

~~Near-term Priorities~~

While it was the challenges brought about by the COVID-19 pandemic that dominated the Company's attention starting in 2020, it was the collection of capabilities and competitive advantages that have been built and honed over the past nine years through the execution of ITW's enterprise strategy that provided the Company with the options to respond. This, coupled with the proprietary and powerful ITW Business Model, diversified high-quality business portfolio and diligent execution put the Company in a position of strength in dealing with the global pandemic.

From the early days of the pandemic, the Company focused its efforts on the following priorities: (1) protect the health and support the well-being of ITW's colleagues; (2) continue to serve the Company's customers with excellence to the best of its

~~ability; (3) maintain financial strength, liquidity and strategic optionality; and (4) leverage the Company's strengths to position it to fully participate in the recovery.~~

"Win the Recovery" is an execution component of the Company's enterprise strategy, not a separate initiative, with every one of the Company's divisions identifying specific opportunities presented by the pandemic to capture sustainable share gains that are aligned with the ITW long-term enterprise strategy. The Company expects these efforts to contribute meaningfully to accelerate its progress toward full-potential organic growth. The Company continues to focus on delivering strong results in any environment while executing its long-term strategy to achieve and sustain ITW's full potential performance.

~~Full-Potential~~Full-potential Organic Growth

Reaching full potential means that every division is positioned for sustainable, high-quality organic growth. The Company has clearly defined action plans aimed at leveraging the performance power of the ITW Business Model to achieve full-potential organic growth in every division, with specific focus on:

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

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

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

As the Company continues to make progress toward its full potential, the Company will explore opportunities to reinforce or further expand the long-term organic growth potential of ITW through the addition of selective high-quality acquisitions, such as the ~~agreement with Amphenol Corporation ("Amphenol") announced earlier this year, whereby the Company intends to acquire~~acquisition of the Test & Simulation business of MTS Systems Corporation ("MTS") from Amphenol ~~which is expected to close in~~Corporation on December 1, 2021. The operating results of the ~~fourth quarter of 2021 following the receipt of all required regulatory approvals and the satisfaction of other customary closing conditions. Upon completion of this acquisition, the~~MTS Test & Simulation business ~~of MTS will be~~were reported within the Company's Test & Measurement and Electronics segment. Refer to Note 3. MTS Test & Simulation Acquisition in Item 1. Financial Statements for further information regarding this acquisition.

TERMS USED BY ITW

Management uses the following terms to describe the financial results of operations of the Company:

•Organic business - acquired businesses that have been included in the Company's results of operations for more than 12 months on a constant currency basis.

•Operating leverage - the estimated effect of the organic revenue volume changes on organic operating income, assuming variable margins remain the same as the prior period.

•Price/cost - represents the estimated net impact of increases or decreases in the cost of materials used in the Company's products versus changes in the selling price to the Company's customers.

•Product line simplification (PLS) - focuses businesses on eliminating the complexity and overhead costs associated with smaller product lines and customers, and focuses businesses on supporting and growing their largest customers and product lines. In the short-term, PLS may result in a decrease in revenue and overhead costs while improving operating margin. In the long-term, PLS is expected to result in growth in revenue, profitability, and returns.

Unless otherwise stated, the changes in financial results in the consolidated results of operations and the results of operations by segment represent the current year period versus the comparable period in the prior year. The following discussion of operating results should be read in conjunction with Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's ~~2020~~2021 Annual Report on Form 10-K.

CONSOLIDATED RESULTS OF OPERATIONS

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 have taken 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 have 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 ~~continued to~~ spread and ~~impact~~impacted the countries in which the Company operates and the markets the Company serves.

For the duration of the COVID-19 pandemic, the Company is focusing on the following priorities: (1) protect the health and support the well-being of ITW's colleagues; (2) continue to serve the Company's customers with excellence to the best of its ability; (3) maintain financial strength, liquidity and strategic optionality; and (4) leverage the Company's strengths to position it to fully participate in the recovery. To support ITW's colleagues, among its many actions and initiatives, the Company redesigned production processes to ensure proper social distancing practices, adjusted shift schedules and assignments to help colleagues who have child and elder care needs, and implemented aggressive new workplace sanitation practices and a coordinated response to ensure access to personal protective equipment to minimize infection risk. To support its customers, the Company has worked diligently to keep its facilities open and operating safely. The Company has adapted customer service systems and practices to seamlessly serve its customers under "work from home" requirements in many parts of the world.

In areas around the world where governments issued stay-at-home or similar orders, the vast majority of ITW's businesses were designated as critical or essential businesses and, as such, they remained open and operational. In some cases, this is because the Company's products directly impact the COVID-19 response effort. In other cases, the Company's businesses are designated as critical because they play a vital role in serving and supporting industries that are deemed essential to the physical and economic health of our communities.

While the vast majority of the Company's facilities have remained open and operational during the pandemic, many of these facilities were operating at a reduced capacity at various times since the outset of the pandemic. The full extent of the COVID-19 outbreak and its impact on the markets served by the Company and on the Company's operations and financial position continues to be highly uncertain as conditions continue to fluctuate around the world, with vaccine administration rising in certain regions, ~~and~~ spikes in infections (including the spread of variants) ~~also being experienced. A prolonged outbreak~~continuing to be experienced and certain jurisdictions continuing to impose stay-at-home orders. The pandemic and resurgence of outbreaks could continue to ~~interrupt~~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 in the Company's ~~2020~~2021 Annual Report on Form 10-K.

~~Separately,~~During the first quarter of 2022, Russian military forces invaded Ukraine. In response, the United States and several other countries imposed economic and other sanctions on Russia. The Company ~~does~~has four immaterial Russian subsidiaries with total assets of approximately $29 million as of September 30, 2022. The revenue for these four subsidiaries for the year ended December 31, 2021 was approximately $31 million. Sales to customers in Russia represented less than one percent of ITW’s total consolidated revenue and were not ~~believe that tariffs imposed in recent years have had a~~ material ~~impact on its operating results. As~~to the ~~global trade environment, including the regulatory environment, continues to evolve, the Company will continue to evaluate the impact~~Company’s results of ~~enacted and proposed tariffs on its businesses, as well as pricing actions to mitigate the impact of any raw material cost increases resulting from these tariffs.~~operations or financial position.

~~The~~In a challenging and dynamic environment, the Company delivered ~~solid~~strong financial results in the third quarter and year-to-date periods of ~~2021~~2022 primarily due to the continued successful execution of enterprise initiatives, including the "Win the Recovery" actions initiated over the course of the past year, and continued focus on the highly differentiated ITW Business Model. Despite rising ~~raw material~~ costs and a challenging global supply chain environment, the Company generated operating revenue growth of 7.5 percent in the third quarter as six of seven segments had organic revenue growth. Organic revenue for the Automotive OEM segment declined as this segment continued to be impacted by auto production reductions associated with the supply chain challenges affecting its customers. In the year-to-date period, operating revenue increased 18.4 percent as all seven segments had double-digit organic revenue growth. Operating income grew 7.112.8 percent and ~~32.2~~11.0 percent in the third quarter and year-to-date periods of ~~2021, respectively.~~2022, respectively, as six of seven segments achieved worldwide organic revenue growth. Operating income was $983 million in the third quarter and $2.8 billion in the year-to-date period of 2022. Operating margin was ~~23.8~~24.5 percent and 23.4 percent in the third quarter and year-to-date periods of ~~2021. In the year-to-date period, operating margin was 24.5 percent as all segments achieved margin expansion compared to the prior year period.~~2022, respectively.

The Company's consolidated results of operations for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended																	Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,												Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring				Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	3,556		$	3,307		7.5	%	6.3	%	—	%	—	%			1.2	%	7.5	%	Operating revenue	$	4,011		$	3,556			12.8	%	15.7	%	2.8	%	—	%	(5.7)	%	12.8	%
Operating income	Operating income	$	845		$	789		7.1	%	2.5	%	—	%	3.1	%			1.5	%	7.1	%	Operating income	$	983		$	845			16.4	%	22.0	%	0.2	%	0.2	%	(6.0)	%	16.4	%
Operating margin %	Operating margin %	23.8		%	23.8		%	—		(80) bps		—		70 bps				10 bps		—		Operating margin %	24.5		%	23.8		%		70 bps		120 bps		(60) bps		10 bps		—		70 bps


		Nine Months Ended																	Nine Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,												Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring				Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	10,776		$	9,099		18.4	%	14.9	%	—	%	—	%			3.5	%	18.4	%	Operating revenue	$	11,961		$	10,776			11.0	%	12.2	%	2.9	%	—	%	(4.1)	%	11.0	%
Operating income	Operating income	$	2,643		$	1,999		32.2	%	26.9	%	—	%	1.1	%			4.2	%	32.2	%	Operating income	$	2,804		$	2,643			6.1	%	11.0	%	0.1	%	(0.9)	%	(4.1)	%	6.1	%
Operating margin %	Operating margin %	24.5		%	22.0		%	250 bps		230 bps		—		20 bps				—		250 bps		Operating margin %	23.4		%	24.5		%		(110) bps		(20) bps		(60) bps		(20) bps		(10) bps		(110) bps

•Operating revenue increased ~~7.5%~~ in the third quarter and ~~18.4% in the~~ year-to-date ~~period~~periods due to higher organic revenue and the ~~favorable~~MTS Test & Simulation acquisition, which was completed on December 1, 2021, partially offset by the unfavorable effect of foreign currency translation.

•Organic revenue ~~increased 6.3%~~grew 15.7% and ~~14.9%~~12.2% in the third quarter and year-to-date periods, ~~respectively. Six~~respectively, with growth in six of seven segments grew in the third quarter and all seven segments increased in the year-to-date period as the Company saw continued improvement in both the breadth and pace of the recovery. In the third quarter, Automotive OEM declined 10.7% primarily due to declines in North America and Europe.segments. Additionally, product line simplification activities reduced organic revenue by 3070 basis points in the third quarter and 2040 basis points in the year-to-date period.

◦North American organic revenue increased ~~9.0%~~16.6% in the third quarter due to growth in six segments, partially offset by a decline in the Automotive OEM segment. In the year-to-date period, organic revenue increased 15.1% due to growth in all segments primarily driven by the Welding, Test & Measurement and Electronics and Food Equipment segments.

◦Europe, Middle East and Africa organic revenue increased 1.0% in the third quarter as growth in five segments was partially offset by a decline in the Automotive OEM and Specialty Products segments. In the year-to-date period, organic revenue increased 13.1% due to growth in all segments primarily driven by the Automotive OEM, Construction Products and Food Equipment segments.

◦~~Asia Pacific organic revenue increased 5.4% in the third quarter due to~~with growth in six segments, partially offset by a decline in the Specialty Products segment. In the year-to-date period, organic revenue increased ~~16.5% due to~~14.8% with growth in all seven segments primarily driven by the Food Equipment, Construction Products and Welding segments. ~~China~~

◦Europe, Middle East and Africa organic revenue ~~grew 2.1%~~increased 13.9% in the third quarter as growth in the Food Equipment, Test & Measurement and Electronics, Automotive OEM and Welding segments was offset by a decline in the Specialty Products, Construction Products and Polymers & Fluids segments. In the year-to-date period, organic revenue increased 21.3% withdue to growth in six segments, partially offset by a decline in the Construction Products segment. In the year-to-date period, organic revenue grew 9.1% due to growth in six segments, partially offset by a decline in the Specialty Products segment.

◦Asia Pacific organic revenue increased 14.6% and 7.9% in the third quarter and year-to-date periods, respectively, due to growth in six segments, partially offset by a decline in the Specialty Products segment. China organic revenue increased 14.5% in the third quarter and 3.9% in the year-to-date period as growth in the Automotive OEM, Test & Measurement and Electronics, Polymers & Fluids and Welding segments was partially offset by a decline in the Specialty Products, Construction Products and Food Equipment segments. The results in 2022 were negatively impacted by the COVID-19 outbreak and government stay-at-home orders in China.

•Operating income of ~~$845~~$983 million and ~~$2.6~~$2.8 billion in the third quarter and year-to-date periods increased 16.4% and 6.1%, respectively, ~~increased 7.1% and 32.2% in the respective periods.~~primarily due to higher organic revenue, partially offset by unfavorable foreign currency translation.

•Operating margin was ~~23.8%~~24.5% in the third ~~quarter, flat to the prior year, as~~quarter. The increase of 70 basis points was primarily driven by positive operating leverage of 130 basis points, benefits from the Company's enterprise initiatives of 100 basis points, lower restructuring expenses and lower intangible asset amortization expense were offset by unfavorable price/cost of 200 basis points, higher freight costs and higher overhead expenses, including employee-related expenses.

•~~In the year-to-date period, operating margin of 24.5% increased 250 basis points primarily due to positive operating leverage of 300~~290 basis points and benefits from the Company's enterprise initiatives of 110 basis points, partially offset by the dilutive impact of 60 basis points from the MTS Test & Simulation acquisition, unfavorable price/cost of ~~130~~40 basis points and higher ~~overhead~~operating expenses, including employee-related expenses.

•In the year-to-date period, operating margin of 23.4% decreased 110 basis points primarily driven by unfavorable price/cost of 150 basis points, the dilutive impact of 60 basis points from the MTS Test & Simulation acquisition and higher operating expenses, including employee-related expenses and freight costs, partially offset by positive operating leverage of 220 basis points and benefits from the Company's enterprise initiatives of 90 basis points.

•The Company's effective tax rate for the third quarter of 2022 and 2021 was 23.9% and ~~2020 was~~ 20.8% ~~and 21.3%~~, respectively, and ~~17.7%~~21.8% and ~~22.0%~~17.7% for the ~~respective~~ year-to-date ~~periods.~~periods of 2022 and 2021, respectively. The effective tax rate for the year-to-date period of 2022 included a discrete income tax benefit of $51 million in the second quarter of 2022 related to a decrease in unrecognized tax benefits resulting from the resolution of a U.S. tax audit. The effective tax rate for the third quarter and year-to-date periods of 2021 included a discrete income tax benefit of $21 million related to the utilization of capital losses. The effective tax rate for the year-to-date period of 2021 also benefited from a discrete income tax benefit of $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 increases the U.K. income tax rate from 19% to 25%

effective April 1, 2023. Additionally, the effective tax ~~rate~~rates for 2022 and 2021 included discrete income tax benefits related to excess tax benefits from stock-based compensation of $1 million ~~and $7 million~~ for the third quarter of 2022 and 2021, and ~~2020, respectively,~~$9 million and $14 ~~million and $20~~ million for the year-to-date periods of 2022 and 2021, ~~and 2020,~~ respectively.

•Diluted earnings per share (EPS) of ~~$2.02~~$2.35 for the third quarter ~~and $6.58 for~~of 2022 increased 16.3%. Excluding the favorable impact of the third quarter 2021 discrete income tax benefit of $0.06 related to the utilization of capital losses, EPS increased 19.9%. In the year-to-date period, EPS of $6.83 increased ~~10.4% and 42.7%, respectively.~~3.8%. Excluding the favorable impact of the $21 million discrete income tax benefit in the third quarter of 2021, ~~and~~ the $112 million discrete income tax benefit in the second quarter of 2021 and the $51 million discrete income tax benefit in the second quarter of 2022, EPS increased ~~7.1% and 33.6% in the third quarter and year-to-date periods, respectively.~~

•Operating cash flow was $619 million and $1.8 billion in the third quarter and year-to-date periods of 2021, respectively. Free cash flow was $548 million and $1.6 billion for the third quarter and year-to-date periods of 2021, respectively. Refer to the Cash Flow section of Liquidity and Capital Resources for a reconciliation of free cash flow, which is a non-GAAP measure.8.1%.

•The Company repurchased approximately ~~1.0~~2.4 million and ~~3.3~~6.0 million shares of its common stock in the third quarter and year-to-date periods of ~~2021,~~2022, respectively, for approximately ~~$250~~$500 million and ~~$750 million,~~$1.2 billion, respectively.

•After-tax return on average invested capital was 28.5% for the third quarter and 30.5% for the year-to-date period of 2021. Refer to the After-tax Return on Average Invested Capital section of Liquidity and Capital Resources for a reconciliation of this non-GAAP measure.

RESULTS OF OPERATIONS BY SEGMENT

Total operating revenue and operating income for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months ended September 30,								Nine Months Ended September 30,									Three Months ended September 30,								Nine Months Ended September 30,
Dollars in millions	Dollars in millions	Operating Revenue				Operating Income				Operating Revenue				Operating Income				Dollars in millions	Operating Revenue				Operating Income				Operating Revenue				Operating Income
		2021		2020		2021		2020		2021		2020		2021		2020			2022		2021		2022		2021		2022		2021		2022		2021
Automotive OEM	Automotive OEM	$	647	$	714	$	112	$	149	$	2,137	$	1,771	$	434	$	266	Automotive OEM	$	753	$	647	$	132	$	112	$	2,224	$	2,137	$	371	$	434
Food Equipment	Food Equipment	544		449		130		88		1,509		1,268		339		236		Food Equipment	633		544		167		130		1,813		1,509		445		339
Test & Measurement and Electronics	Test & Measurement and Electronics	552		489		148		116		1,710		1,429		475		354		Test & Measurement and Electronics	715		552		180		148		2,096		1,710		486		475
Welding	Welding	425		346		128		96		1,228		1,016		364		269		Welding	477		425		150		128		1,413		1,228		431		364
Polymers & Fluids	Polymers & Fluids	456		438		111		116		1,357		1,185		350		291		Polymers & Fluids	473		456		119		111		1,450		1,357		362		350
Construction Products	Construction Products	478		456		133		128		1,465		1,222		406		309		Construction Products	527		478		136		133		1,643		1,465		428		406
Specialty Products	Specialty Products	459		420		126		106		1,387		1,221		380		313		Specialty Products	438		459		121		126		1,337		1,387		362		380
Intersegment revenue	Intersegment revenue	(5)		(5)		—		—		(17)		(13)		—		—		Intersegment revenue	(5)		(5)		—		—		(15)		(17)		—		—
Unallocated	Unallocated	—		—		(43)		(10)		—		—		(105)		(39)		Unallocated	—		—		(22)		(43)		—		—		(81)		(105)
Total	Total	$	3,556	$	3,307	$	845	$	789	$	10,776	$	9,099	$	2,643	$	1,999	Total	$	4,011	$	3,556	$	983	$	845	$	11,961	$	10,776	$	2,804	$	2,643

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

AUTOMOTIVE OEM

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

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

The results of operations for the Automotive OEM segment for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended															Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	647		$	714		(9.4)	%	(10.7)	%	—	%	—	%	1.3	%	(9.4)	%	Operating revenue	$	753		$	647			16.5	%	24.7	%	—	%	—	%	(8.2)	%	16.5	%
Operating income	Operating income	$	112		$	149		(24.7)	%	(34.6)	%	—	%	9.3	%	0.6	%	(24.7)	%	Operating income	$	132		$	112			17.8	%	26.1	%	—	%	0.3	%	(8.6)	%	17.8	%
Operating margin %	Operating margin %	17.3		%	20.8		%	(350) bps		(560) bps		—		220 bps		(10) bps		(350) bps		Operating margin %	17.5		%	17.3		%		20 bps		20 bps		—		—		—		20 bps

Nine Months Ended
Dollars in millions September 30, Components of Increase (Decrease)
2021 2020 Inc (Dec) Organic Acquisition/
Divestiture Restructuring Foreign Currency Total
Operating revenue $ 2,137 $ 1,771 20.6 % 15.7 % — % — % 4.9 % 20.6 %
Operating income $ 434 $ 266 63.3 % 51.1 % — % 5.5 % 6.7 % 63.3 %
Operating margin % 20.3 % 15.0 % 530 bps 460 bps — 70 bps — 530 bps

1921


	Nine Months Ended
Dollars in millions	September 30,						Components of Increase (Decrease)
	2022			2021			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	$	2,224		$	2,137		4.1	%	9.2	%	—	%	—	%	(5.1)	%	4.1	%
Operating income	$	371		$	434		(14.5)	%	(3.7)	%	—	%	(6.2)	%	(4.6)	%	(14.5)	%
Operating margin %	16.7		%	20.3		%	(360) bps		(240) bps		—		(120) bps		—		(360) bps

•Operating revenue ~~decreased~~grew in the third quarter and year-to-date periods due to ~~lower~~higher organic revenue, partially offset by the ~~favorable effect of foreign currency translation. In the year-to-date period, operating revenue increased due to higher organic revenue and the favorable~~unfavorable effect of foreign currency translation.

•Organic revenue ~~decreased 10.7%~~increased 24.7% in the third quarter and 9.2% in the year-to-date period. Worldwide auto builds grew 27% in the third quarter and increased ~~15.7%~~7% in the year-to-date period. The impact of Automotive OEM customers adjusting production schedules to account for the shortage of semiconductor chips and other components continued to negatively ~~impacted~~impact operating results in 2022. Additionally, product line simplification activities reduced organic revenue by 40 basis points in the third quarter and year-to-date periods of 2021. Worldwide auto builds declined 20% in the third quarter and increased 10% in the year-to-date period. Auto builds for North America, Europe and China, where the Company has a higher concentration of revenue as compared to the other geographic regions, declined 23% in the third quarter and increased 7%20 basis points in the year-to-date period.

◦North American organic revenue ~~decreased 12.4%~~increased 21.5% and 13.8% in the third quarter and ~~increased 12.3% in the~~ year-to-date ~~period~~periods, respectively, compared to North American auto builds which ~~declined 25%~~grew 24% in the third quarter due to customer mix and ~~grew 7% in the year-to-date period. Auto builds for the Detroit 3, where the Company has higher content, decreased 28% in the third quarter and decreased 1%~~11% in the year-to-date period.

◦European organic revenue ~~declined 18.0%~~grew 26.2% and 2.8% in the third quarter and ~~increased 13.5% in the~~ year-to-date ~~period~~periods, respectively, compared to European auto builds which ~~decreased 30%~~increased 20% in the third quarter and ~~grew 6%~~decreased 3% in the year-to-date period.

◦Asia Pacific organic revenue increased ~~6.0%~~27.8% in the third quarter and ~~26.3%~~12.2% in the year-to-date period. China organic revenue grew 29.3% and 10.4% in the third quarter and year-to-date periods, ~~respectively.~~respectively, versus China ~~organic revenue grew 2.3%~~auto builds which increased 31% in the third quarter and ~~increased 22.7%~~11% in the year-to-date period ~~versus China auto builds which decreased 17% in the third quarter and increased 8% in the year-to-date period.~~due to customer mix. Auto builds of foreign automotive manufacturers in China, where the Company has higher content, ~~declined 28%~~grew 31% and 5% in the third quarter and ~~decreased 6% in the~~ year-to-date ~~period.~~periods, respectively.

•Operating margin ~~of 17.3%~~was 17.5% in the third quarter decreased 350 basis points primarily driven by unfavorable price/cost of 360 basis points, negative operating leverage of 240 basis points and higher overhead expenses, partially offset by benefits from the Company's enterprise initiatives and lower restructuring expenses.

•~~In the year-to-date period, operating margin was 20.3%.~~quarter. The increase of ~~530~~20 basis points was primarily driven by positive operating leverage of ~~310~~420 basis points ~~the net~~and benefits from the Company's enterprise initiatives, partially offset by higher operating expenses, including costs related to continued investment in the business and employee-related expenses, and unfavorable price/cost ~~management,~~of 130 basis points.

•In the year-to-date period, operating margin of 16.7% decreased 360 basis points primarily driven by unfavorable price/cost of 240 basis points, higher operating expenses, including costs related to continued investment in the business and ~~lower~~employee-related expenses, and higher restructuring expenses, partially offset by ~~unfavorable price/cost~~positive operating leverage of ~~230~~170 basis ~~points.~~points and benefits from the Company's enterprise initiatives.

FOOD EQUIPMENT

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

•warewashing equipment;

•cooking equipment, including ovens, ranges and broilers;

•refrigeration equipment, including refrigerators, freezers and prep tables;

•food processing equipment, including slicers, mixers and scales;

•kitchen exhaust, ventilation and pollution control systems; and

•food equipment service, maintenance and repair.

The results of operations for the Food Equipment segment for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended															Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	544		$	449		21.0	%	18.9	%	—	%	—	%	2.1	%	21.0	%	Operating revenue	$	633		$	544			16.4	%	23.1	%	—	%	—	%	(6.7)	%	16.4	%
Operating income	Operating income	$	130		$	88		47.2	%	35.2	%	—	%	8.4	%	3.6	%	47.2	%	Operating income	$	167		$	130			28.3	%	37.0	%	—	%	(1.4)	%	(7.3)	%	28.3	%
Operating margin %	Operating margin %	23.9		%	19.6		%	430 bps		270 bps		—		140 bps		20 bps		430 bps		Operating margin %	26.3		%	23.9		%		240 bps		270 bps		—		(30) bps		—		240 bps


		Nine Months Ended															Nine Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	1,509		$	1,268		19.0	%	15.2	%	—	%	—	%	3.8	%	19.0	%	Operating revenue	$	1,813		$	1,509			20.2	%	25.2	%	—	%	—	%	(5.0)	%	20.2	%
Operating income	Operating income	$	339		$	236		43.4	%	35.6	%	—	%	3.1	%	4.7	%	43.4	%	Operating income	$	445		$	339			31.2	%	37.7	%	—	%	(0.7)	%	(5.8)	%	31.2	%
Operating margin %	Operating margin %	22.5		%	18.6		%	390 bps		330 bps		—		50 bps		10 bps		390 bps		Operating margin %	24.5		%	22.5		%		200 bps		220 bps		—		(10) bps				200 bps

•Operating revenue grew in the third quarter and year-to-date periods due to higher organic revenue, ~~and~~partially offset by the ~~favorable~~unfavorable effect of foreign currency translation.

•Organic revenue increased ~~18.9%~~23.1% in the third quarter as equipment and service organic revenue grew ~~23.1%~~27.9% and ~~11.8%~~14.1%, respectively. In the year-to-date period, organic revenue increased ~~15.2%~~25.2% as equipment and service organic revenue grew ~~20.9%~~28.0% and ~~5.7%~~19.6%, respectively.

◦North American organic revenue increased ~~17.9% and 14.5%~~30.0% in the third quarter and 26.6% in the year-to-date ~~periods, respectively.~~period. Equipment organic revenue grew ~~20.3%~~39.6% in the third quarter ~~primarily due to growth~~and 32.3% in ~~the restaurant and institutional end markets, partially offset by a decline in the food retail end market. In~~ the year-to-date period ~~equipment organic revenue increased 18.3% due to~~with growth in the restaurant, institutional and food retail end markets. Service organic revenue increased ~~14.4%~~15.0% and 17.2% in the third quarter and ~~8.7% in the~~ year-to-date ~~period.~~periods, respectively.

◦International organic revenue increased ~~20.2%~~14.3% and 23.4% in the third quarter and ~~16.3% in the~~ year-to-date ~~period.~~periods, respectively. Equipment organic revenue grew ~~26.3%~~15.0% and ~~24.1%~~22.9% in the third quarter and year-to-date periods, respectively, primarily due to higher demand in the European warewash, refrigeration and cooking end markets. Service organic revenue increased ~~7.7%~~12.7% and 24.0% in the third quarter and ~~grew 0.7% in the~~ year-to-date ~~period.~~periods, respectively.

•Operating margin ~~of 23.9%~~was 26.3% in the third ~~quarter increased 430~~quarter. The increase of 240 basis points was primarily due to positive operating leverage of ~~410~~420 basis points, favorable price/cost of 120 basis points and benefits from the Company's enterprise initiatives, ~~and lower restructuring expenses,~~ partially offset by ~~unfavorable price/cost of 150 basis points and~~ higher ~~overhead~~operating expenses, including employee-related expenses.

•In the year-to-date period, operating margin ~~was 22.5%. The increase~~ of ~~390~~24.5% increased 200 basis points ~~was~~ primarily ~~driven by~~due to positive operating leverage of ~~350~~480 basis points, ~~the net~~ benefits from the Company's enterprise initiatives and favorable price/cost ~~management, and lower restructuring expenses,~~of 10 basis points, partially offset by ~~unfavorable price/cost of 80 basis points and~~ higher ~~overhead~~operating expenses, including employee-related expenses.

TEST & MEASUREMENT AND ELECTRONICS

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

•equipment, consumables, and related software for testing and measuring of materials, structures, gases and fluids;

•electronic assembly equipment;

•electronic components and component packaging;

•static control equipment and consumables used for contamination control in clean room environments; and

•pressure sensitive adhesives and components for electronics, medical, transportation and telecommunications applications.

The results of operations for the Test & Measurement and Electronics segment for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended																	Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,												Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring				Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	552		$	489		12.9	%	11.8	%	—	%	—	%			1.1	%	12.9	%	Operating revenue	$	715		$	552			29.5	%	17.1	%	18.3	%	—	%	(5.9)	%	29.5	%
Operating income	Operating income	$	148		$	116		28.1	%	24.9	%	—	%	1.8	%			1.4	%	28.1	%	Operating income	$	180		$	148			21.5	%	26.1	%	0.9	%	0.1	%	(5.6)	%	21.5	%
Operating margin %	Operating margin %	26.8		%	23.7		%	310 bps		270 bps		—		40 bps				—		310 bps		Operating margin %	25.2		%	26.8		%		(160) bps		210 bps		(370) bps		—		—		(160) bps


		Nine Months Ended															Nine Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	1,710		$	1,429		19.7	%	16.8	%	—	%	—	%	2.9	%	19.7	%	Operating revenue	$	2,096		$	1,710			22.5	%	8.4	%	18.0	%	—	%	(3.9)	%	22.5	%
Operating income	Operating income	$	475		$	354		34.2	%	30.2	%	—	%	0.8	%	3.2	%	34.2	%	Operating income	$	486		$	475			2.3	%	4.9	%	0.5	%	0.3	%	(3.4)	%	2.3	%
Operating margin %	Operating margin %	27.8		%	24.8		%	300 bps		280 bps		—		20 bps		—		300 bps		Operating margin %	23.2		%	27.8		%		(460) bps		(90) bps		(380) bps		10 bps		—		(460) bps

•Operating revenue grew in the third quarter and year-to-date periods due to the MTS Test & Simulation acquisition and higher organic revenue, ~~and~~partially offset by the ~~favorable~~unfavorable effect of foreign currency translation.

•Organic revenue increased ~~11.8%~~17.1% in the third quarter and ~~16.8%~~8.4% in the year-to-date period.

◦Organic revenue for the test and measurement businesses increased ~~15.4%~~19.9% and ~~13.9%~~12.8% in the third quarter and year-to-date periods, respectively, primarily driven by higher semiconductor demand in North America and the impact of a stronger capital spending ~~environment, and higher demand in the oil and gas end markets in North America.~~environment. Instron, where demand is more closely tied to the capital spending environment, had organic revenue growth of ~~14.7%~~12.9% and 8.1% in the third quarter and ~~12.5% in the~~ year-to-date ~~period.~~periods, respectively.

◦Electronics organic revenue increased 7.7% and 20.2% in the third quarter and year-to-date periods, respectively, driven by higher demand in consumer electronics, automotive applications and semiconductor end markets. The electronics assembly businesses grew 4.9%13.8% in the third quarter primarily due to higher demand in ~~Asia Pacific.~~the consumer electronics and semiconductor end markets. In the year-to-date period, organic revenue increased ~~35.9%~~3.7% primarily due to higher demand in the semiconductor end market, partially offset by a decline in the consumer electronics end market. The electronics assembly businesses increased 23.6% in the third quarter primarily due to higher demand in North America, and declined 1.5% in the year-to-date period primarily due to lower demand in North America in the first half of 2022, partially offset by growth in Asia Pacific. The other electronics businesses, which include the contamination control, static control and pressure sensitive adhesives businesses, increased ~~9.1%~~9.2% and ~~12.9%~~6.6% in the third quarter and year-to-date periods, respectively, with growth inacross all major regions.

•Operating margin ~~of 26.8%~~was 25.2% in the third ~~quarter increased 310~~quarter. The decrease of 160 basis points was primarily due to the dilutive impact of 370 basis points from the MTS Test & Simulation acquisition, unfavorable price/cost of 100 basis points, and higher operating expenses, including employee-related expenses, partially offset by positive operating leverage of ~~290~~360 basis points and benefits from the Company's enterprise initiatives, partially offset by unfavorable price/cost of 70 basis points, higher overhead expenses and higher freight costs. Additionally, the prior year included the recapture of amortization and depreciation expense related to a business previously classified as held for sale.initiatives.

•In the year-to-date period, operating margin ~~was 27.8%. The increase~~ of ~~300~~23.2% decreased 460 basis points ~~was~~ primarily driven by the dilutive impact of 380 basis points from the MTS Test & Simulation acquisition, unfavorable price/cost of 170 basis points, and higher operating expenses, including employee-related expenses, partially offset by positive operating leverage of ~~380~~180 basis points and benefits from the Company's enterprise initiatives, partially offset by unfavorable price/cost of 20 basis points, higher overhead expenses and product mix. Additionally, the prior year included the recapture of amortization and depreciation expense related to a business previously classified as held for sale.initiatives.

WELDING

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

•arc welding equipment; and

•metal arc welding consumables and related accessories.

The results of operations for the Welding segment for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended																	Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,												Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring				Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	425		$	346		22.9	%	22.0	%	—	%	—	%			0.9	%	22.9	%	Operating revenue	$	477		$	425			12.4	%	13.9	%	—	%	—	%	(1.5)	%	12.4	%
Operating income	Operating income	$	128		$	96		32.5	%	33.0	%	—	%	(1.3)	%			0.8	%	32.5	%	Operating income	$	150		$	128			17.7	%	16.5	%	—	%	2.2	%	(1.0)	%	17.7	%
Operating margin %	Operating margin %	30.0		%	27.9		%	210 bps		250 bps		—		(30) bps				(10) bps		210 bps		Operating margin %	31.5		%	30.0		%		150 bps		70 bps		—		60 bps		20 bps		150 bps


		Nine Months Ended																	Nine Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,												Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring				Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	1,228		$	1,016		20.9	%	19.3	%	—	%	—	%			1.6	%	20.9	%	Operating revenue	$	1,413		$	1,228			15.1	%	16.3	%	—	%	—	%	(1.2)	%	15.1	%
Operating income	Operating income	$	364		$	269		35.1	%	34.1	%	—	%	(0.2)	%			1.2	%	35.1	%	Operating income	$	431		$	364			18.6	%	18.8	%	—	%	0.5	%	(0.7)	%	18.6	%
Operating margin %	Operating margin %	29.6		%	26.5		%	310 bps		330 bps		—		(10) bps				(10) bps		310 bps		Operating margin %	30.5		%	29.6		%		90 bps		60 bps		—		20 bps		10 bps		90 bps

•Operating revenue grew in the third quarter and year-to-date periods due to higher organic revenue, ~~and~~partially offset by the ~~favorable~~unfavorable effect of foreign currency translation.

•Organic revenue ~~grew 22.0%~~increased 13.9% and 16.3% in the third quarter and year-to-date periods, respectively, driven by growth in equipment of ~~24.5%~~13.4% and 15.9% and consumables of ~~18.0%. In the year-to-date period, organic revenue grew 19.3% as equipment increased 23.1%~~14.7% and ~~consumables increased 13.6%.~~16.9%, respectively. In both periods, organic revenue ~~growth was~~grew primarily due to higher demand in the industrial end markets related to heavy equipment for agriculture, infrastructure, and ~~mining~~oil and gas and in the commercial end markets related to construction, light fabrication, and farm and ranch customers.

◦North American organic revenue increased ~~24.2%~~14.4% in the third quarter ~~primarily~~ due to growth in the industrial ~~and commercial ends~~end markets of ~~32.2% and 18.4%~~32.1%, ~~respectively.~~partially offset by a decline in the commercial end market of 9.7%. In the year-to-date period, organic revenue grew ~~21.4% primarily driven by~~17.1% due to growth in the industrial and commercial end markets of ~~24.3%~~25.6% and ~~20.3%~~5.5%, respectively.

◦International organic revenue grew 11.5% and ~~9.4%~~12.1% in the third quarter and year-to-date periods, respectively, primarily due to higher equipment demand in the oil and gas end ~~markets in Europe and Asia.~~markets.

•Operating margin ~~of 30.0%~~was 31.5% in the third ~~quarter~~quarter. The increase of 150 basis points was primarily due to positive operating leverage of 230 basis points, benefits from the Company's enterprise initiatives and lower restructuring expenses, partially offset by higher operating expenses, including employee-related expenses, and unfavorable price/cost of 90 basis points.

•In the year-to-date period, operating margin of 30.5% increased ~~210~~90 basis points primarily driven by positive operating leverage of ~~290~~230 basis points, ~~and~~ benefits from the Company's enterprise initiatives and lower restructuring expenses, partially offset by higher ~~overhead expenses.~~

•~~In the year-to-date period,~~ operating ~~margin was 29.6%. The increase~~expenses, including employee-related expenses and freight costs, and unfavorable price/cost of ~~310~~110 basis ~~points was primarily driven by positive operating leverage of 270 basis points and benefits from the Company's enterprise initiatives, partially offset by higher overhead expenses.~~points.

POLYMERS & FLUIDS

This segment is a branded supplier to niche markets that require value-added, differentiated products. Businesses in this segment produce engineered adhesives, sealants, lubrication and cutting fluids, and fluids and polymers for auto aftermarket maintenance and appearance. This segment primarily serves the automotive aftermarket, general industrial, MRO and construction markets. Products in this segment include:

•adhesives for industrial, construction and consumer purposes;

•chemical fluids which clean or add lubrication to machines;

•epoxy and resin-based coating products for industrial applications;

•hand wipes and cleaners for industrial applications;

•fluids, polymers and other supplies for auto aftermarket maintenance and appearance;

•fillers and putties for auto body repair; and

•polyester coatings and patch and repair products for the marine industry.

The results of operations for the Polymers & Fluids segment for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended																	Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,												Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring				Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	456		$	438		4.1	%	3.4	%	—	%	—	%			0.7	%	4.1	%	Operating revenue	$	473		$	456			3.5	%	8.4	%	—	%	—	%	(4.9)	%	3.5	%
Operating income	Operating income	$	111		$	116		(5.2)	%	(7.0)	%	—	%	1.1	%			0.7	%	(5.2)	%	Operating income	$	119		$	111			8.2	%	14.8	%	—	%	(1.1)	%	(5.5)	%	8.2	%
Operating margin %	Operating margin %	24.2		%	26.6		%	(240) bps		(270) bps		—		30 bps				—		(240) bps		Operating margin %	25.3		%	24.2		%		110 bps		150 bps		—		(30) bps		(10) bps		110 bps


		Nine Months Ended																	Nine Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,												Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring				Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	1,357		$	1,185		14.5	%	12.4	%	—	%	—	%			2.1	%	14.5	%	Operating revenue	$	1,450		$	1,357			6.8	%	10.4	%	—	%	—	%	(3.6)	%	6.8	%
Operating income	Operating income	$	350		$	291		20.1	%	17.5	%	—	%	0.4	%			2.2	%	20.1	%	Operating income	$	362		$	350			3.5	%	7.5	%	—	%	(0.1)	%	(3.9)	%	3.5	%
Operating margin %	Operating margin %	25.8		%	24.6		%	120 bps		110 bps		—		10 bps				—		120 bps		Operating margin %	25.0		%	25.8		%		(80) bps		(70) bps		—		—		(10) bps		(80) bps

•Operating revenue grew in the third quarter and year-to-date periods due to higher organic revenue, ~~and~~partially offset by the ~~favorable~~unfavorable effect of foreign currency translation.

•Organic revenue ~~increased 3.4%~~grew 8.4% and 10.4% in the third quarter and ~~12.4% in the~~ year-to-date ~~period driven by higher demand~~periods, respectively, with growth across all major regions. ~~Additionally, product~~Product line simplification activities reduced organic revenue by 9040 basis points in the third quarter and 7030 basis points in the year-to-date period.

◦Organic revenue for the automotive aftermarket businesses increased ~~3.9% and 14.1%~~1.6% in the third quarter ~~and year-to-date periods, respectively,~~ primarily ~~driven by~~due to growth in the body repair and engine repair businesses in North America and growth in the European tire repair business, partially offset by a decline in the tire repair and car care businesses in North America and the European additives businesses. In the year-to-date period, organic revenue increased 7.1% with growth in the body repair, car care, engine repair and tire repair businesses in North America and growth in the European additives businesses.

◦Organic revenue for the polymers businesses increased ~~8.2%~~21.1% in the third quarter and ~~18.3%~~19.2% in the year-to-date period with growth across all major ~~regions.~~regions, primarily in the heavy industrial and wind end markets.

◦Organic revenue for the fluids businesses ~~decreased 4.7%~~grew 4.8% and 4.5% in the third quarter and year-to-date periods, respectively, primarily due to ~~lower demand~~an increase in ~~North America~~the hygiene and ~~Europe. In the year-to-date period, organic revenue increased 0.5% primarily due to growth in the~~ industrial maintenance, repair and operations end markets in North America ~~partially offset by a decline in~~and Europe.

•Operating margin ~~of 24.2%~~was 25.3% in the third quarter decreased 240 basis points primarily driven by unfavorable price/cost of 260 basis points, higher overhead expenses, higher freight costs and product mix, partially offset by positive operating leverage of 70 basis points, benefits from the Company's enterprise initiatives and lower intangible asset amortization expense.

•~~In the year-to-date period, operating margin was 25.8%.~~quarter. The increase of ~~120~~110 basis points was primarily due to positive operating leverage of ~~240~~150 basis points, benefits from the Company's enterprise initiatives and ~~lower intangible asset amortization expense,~~favorable price/cost of 70 basis points, partially offset by higher operating expenses, including employee-related expenses and freight costs, and higher restructuring expenses.

•In the year-to-date period, operating margin of 25.0% decreased 80 basis points primarily driven by higher operating expenses, including employee-related expenses and freight costs, and unfavorable price/cost of 100 basis points, partially offset by positive operating leverage of 180 basis points ~~higher overhead expenses~~ and ~~higher freight costs.~~benefits from the Company's enterprise initiatives.

CONSTRUCTION PRODUCTS

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

•fasteners and related fastening tools for wood and metal applications;

•anchors, fasteners and related tools for concrete applications;

•metal plate truss components and related equipment and software; and

•packaged hardware, fasteners, anchors and other products for retail.

The results of operations for the Construction Products segment for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended															Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	478		$	456		5.0	%	3.4	%	(0.1)	%	—	%	1.7	%	5.0	%	Operating revenue	$	527		$	478			10.2	%	17.1	%	—	%	—	%	(6.9)	%	10.2	%
Operating income	Operating income	$	133		$	128		4.1	%	0.8	%	(0.1)	%	1.3	%	2.1	%	4.1	%	Operating income	$	136		$	133			1.9	%	8.1	%	—	%	(0.8)	%	(5.4)	%	1.9	%
Operating margin %	Operating margin %	27.8		%	28.1		%	(30) bps		(70) bps		—		40 bps		—		(30) bps		Operating margin %	25.7		%	27.8		%		(210) bps		(210) bps		—		(20) bps		20 bps		(210) bps


		Nine Months Ended															Nine Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	1,465		$	1,222		19.9	%	14.0	%	(0.1)	%	—	%	6.0	%	19.9	%	Operating revenue	$	1,643		$	1,465			12.1	%	17.7	%	—	%	—	%	(5.6)	%	12.1	%
Operating income	Operating income	$	406		$	309		31.5	%	24.8	%	0.1	%	0.2	%	6.4	%	31.5	%	Operating income	$	428		$	406			5.4	%	10.4	%	—	%	(0.1)	%	(4.9)	%	5.4	%
Operating margin %	Operating margin %	27.7		%	25.3		%	240 bps		230 bps		—		10 bps		—		240 bps		Operating margin %	26.0		%	27.7		%		(170) bps		(170) bps		—		—		—		(170) bps

•Operating revenue grew in the third quarter and year-to-date periods ~~primarily~~ due to higher organic revenue, ~~and~~partially offset by the ~~favorable~~unfavorable effect of foreign currency translation.

•Organic revenue increased ~~3.4% and 14.0%~~17.1% in the third quarter primarily due to growth in North America and Asia Pacific, partially offset by a decline in Europe. In the year-to-date ~~periods, respectively,~~period, organic revenue grew 17.7% with growth across all major regions. ~~Additionally, product~~Product line simplification activities reduced organic revenue by 4050 basis points in the third quarter and year-to-date periods.

◦North American organic revenue grew ~~2.0%~~34.8% in the third quarter driven by higher demand in the United States residential and commercial end markets of ~~0.5%~~42.1% and ~~10.2%~~17.4%, ~~respectively, and growth in Canada.~~respectively. In the year-to-date period, organic revenue ~~grew 10.9% due to~~increased 31.9% driven by higher demand in the United States residential and commercial end markets of ~~9.5%~~37.2% and ~~12.6%~~17.5%, ~~respectively, and growth in Canada.~~respectively.

◦International organic revenue increased ~~4.5%~~2.7% and ~~16.8%~~6.6% in the third quarter and year-to-date periods, respectively. European organic revenue ~~grew 7.5%~~declined 0.9% in the third quarter ~~and 26.0%~~primarily due to lower demand in the commercial and residential end markets. In the year-to-date period, European organic revenue increased 7.0% primarily driven by higher demand in the commercial and residential end ~~markets.~~markets in the first half of 2022. Asia Pacific organic revenue increased ~~1.3% and 6.6%~~6.9% in the third quarter and 6.2% in the year-to-date ~~periods, respectively,~~period primarily due to higher demand in the Australia and New Zealand ~~in the~~ residential end markets.

•Operating margin ~~of 27.8%~~was 25.7% in the third ~~quarter decreased 30~~quarter. The decrease of 210 basis points was primarily driven by unfavorable price/cost of ~~330~~150 basis points and higher operating expenses, including employee-related expenses, partially offset by positive operating leverage of 260 basis points and benefits from the Company's enterprise ~~initiatives, positive operating leverage of 50 basis points and lower restructuring expenses.~~initiatives.

•In the year-to-date period, operating margin ~~was 27.7%. The increase~~ of ~~240~~26.0% decreased 170 basis points ~~was~~ primarily ~~due to~~driven by unfavorable price/cost of 390 basis points and higher operating expenses, including employee-related expenses, partially offset by positive operating leverage of ~~250~~260 basis points and benefits from the Company's enterprise ~~initiatives, partially offset by unfavorable price/cost of 150 basis points.~~initiatives.

SPECIALTY PRODUCTS

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

•~~line integration,~~ conveyor systems and line automation for the food and beverage industries;

•plastic consumables that multi-pack cans and bottles and related equipment;

•foil, film and related equipment used to decorate consumer products;

•product coding and marking equipment and related consumables;

•plastic and metal closures and components for appliances;

•airport ground support equipment; and

•components for medical devices.

The results of operations for the Specialty Products segment for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 were as follows:


		Three Months Ended															Three Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	459		$	420		9.4	%	8.3	%	—	%	—	%	1.1	%	9.4	%	Operating revenue	$	438		$	459			(4.7)	%	(0.3)	%	—	%	—	%	(4.4)	%	(4.7)	%
Operating income	Operating income	$	126		$	106		18.4	%	17.3	%	—	%	(0.4)	%	1.5	%	18.4	%	Operating income	$	121		$	126			(3.4)	%	(1.5)	%	—	%	1.9	%	(3.8)	%	(3.4)	%
Operating margin %	Operating margin %	27.3		%	25.2		%	210 bps		210 bps		—		(10) bps		10 bps		210 bps		Operating margin %	27.7		%	27.3		%		40 bps		(30) bps		—		50 bps		20 bps		40 bps


		Nine Months Ended															Nine Months Ended
Dollars in millions	Dollars in millions	September 30,						Components of Increase (Decrease)								Dollars in millions	September 30,										Components of Increase (Decrease)
		2021			2020			Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total			2022			2021				Inc (Dec)		Organic		Acquisition/ Divestiture		Restructuring		Foreign Currency		Total
Operating revenue	Operating revenue	$	1,387		$	1,221		13.6	%	10.8	%	—	%	—	%	2.8	%	13.6	%	Operating revenue	$	1,337		$	1,387			(3.6)	%	(0.5)	%	—	%	—	%	(3.1)	%	(3.6)	%
Operating income	Operating income	$	380		$	313		21.3	%	19.3	%	—	%	(1.0)	%	3.0	%	21.3	%	Operating income	$	362		$	380			(4.7)	%	(2.6)	%	—	%	0.5	%	(2.6)	%	(4.7)	%
Operating margin %	Operating margin %	27.4		%	25.7		%	170 bps		190 bps		—		(20) bps		—		170 bps		Operating margin %	27.1		%	27.4		%		(30) bps		(60) bps		—		20 bps		10 bps		(30) bps

•Operating revenue ~~grew~~declined in the third quarter and year-to-date periods due to ~~higher organic revenue and~~ the ~~favorable~~unfavorable effect of foreign currency ~~translation.~~translation and lower organic revenue.

•Organic revenue ~~increased 8.3%~~decreased 0.3% in the third quarter ~~driven by growth in consumables of 7.8%~~as equipment sales declined 10.8% and ~~equipment of 10.4%~~consumable sales grew 2.3%. In the year-to-date period, organic revenue ~~grew 10.8%~~declined 0.5% as ~~consumables~~equipment sales declined 15.9% and consumable sales increased ~~11.0% and equipment increased 9.8%~~3.5%. ~~In both periods, organic revenue increased for consumables and equipment primarily due to higher demand in North America.~~ Additionally, product line simplification activities reduced organic revenue by 60370 basis points and 170 basis points in the third quarter and ~~30 basis points in the~~ year-to-date ~~period.~~periods, respectively.

◦North American organic revenue ~~increased 14.9% and 11.6%~~decreased 1.8% in the third quarter ~~and year-to-date periods, respectively,~~ primarily driven by a decline in the appliance, consumer packaging and ground support equipment businesses, partially offset by growth in the foils and thermal films and specialty films businesses. In the year-to-date period, organic revenue increased 3.2% primarily due to growth in the consumer packaging, foils and thermal films, specialty films and filter medical businesses, partially offset by a decline in the appliance, ground support ~~appliance,~~equipment and strength film ~~and product coding and marking~~ businesses.

◦International organic revenue ~~decreased 3.9%~~increased 3.7% in the third quarter primarily due to ~~declines~~growth in Europe in the ~~product coding~~ground support equipment, specialty films, consumer packaging and ~~marking~~filter medical businesses, partially offset by a decline in Asia Pacific in the appliance and strength film businesses. In the year-to-date period, organic revenue declined 6.6% primarily due to a decline in Europe in the consumer packaging, appliance, and ground support equipment businesses, ~~in Europe,~~ partially offset by growth in the filter medical, specialty films, and ~~appliance businesses~~foils and thermal films businesses. Additionally, Asia Pacific organic revenue in ~~Europe. In~~ the year-to-date period ~~organic revenue increased 8.5%~~decreased primarily due to ~~an increase in the appliance businesses in Europe and Asia Pacific and the ground support equipment businesses in Europe, partially offset by~~ a decline in the ~~consumer packaging businesses in Europe~~strength film, appliance, foils and ~~the product coding~~thermal films, and ~~marking businesses in Asia Pacific.~~graphics businesses.

•Operating margin ~~of 27.3%~~was 27.7% in the third ~~quarter increased 210~~quarter. The increase of 40 basis points was primarily ~~driven by positive operating leverage of 180 basis points and~~due to benefits from the Company's enterprise initiatives, lower restructuring expenses and favorable price/cost of 30 basis points, partially offset by ~~unfavorable price/cost of 250 basis points. Additionally, the prior year included an unfavorable impact of a one-time customer cost-sharing settlement.~~higher operating expenses, including employee-related expenses.

•In the year-to-date period, operating margin ~~was 27.4%. The increase~~ of ~~170~~27.1% decreased 30 basis points ~~was~~ primarily ~~due to positive~~driven by higher operating ~~leverage~~expenses, including employee-related expenses, and unfavorable price/cost of ~~210~~10 basis points, ~~and~~partially offset by benefits from the Company's enterprise initiatives ~~partially offset by unfavorable price/cost of 210 basis points. Additionally, the prior year included an unfavorable impact of a one-time customer cost-sharing settlement.~~and lower restructuring expenses.

OTHER FINANCIAL HIGHLIGHTS

•Interest expense ~~was~~in the third quarter of 2022 increased to $52 million versus $49 ~~million and $153~~ million in the third quarter ~~and year-to-date periods~~ of 2021 ~~respectively,~~primarily due to higher average outstanding commercial paper, partially offset by the repayment of notes due May 20, 2022. Interest expense in the year-to-date period of 2022 was $147 million versus ~~$52 million and $154~~$153 million in 2021 primarily due to the ~~respective periods~~repayment of ~~2020.~~notes due September 15, 2021 and May 20, 2022, partially offset by higher average outstanding commercial paper. Refer to Note 10. Debt in Item 1. Financial Statements for further information regarding the repayment of notes.

•Other income (expense) was income of ~~$10~~$26 million in the third quarter of 2022, an increase of $16 million compared to the third quarter of 2021 ~~versus $2 million in the prior year period~~ primarily ~~driven by~~due to higher ~~investment income in 2021 and~~ foreign currency translation ~~losses~~gains, other net periodic benefit income and interest income in ~~2020.~~2022. Other income (expense) was income of ~~$44~~$64 million in the year-to-date period of

2022, an increase of $20 million compared to 2021 ~~versus $35 million~~primarily due to foreign currency translation gains in ~~the prior year period as higher investment income in 2021 was partially offset by~~2022 compared to foreign currency translation losses in 2021, ~~versus gains~~and higher other net periodic benefit income and interest income in ~~2020.~~2022, partially offset by lower investment income in 2022.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are free cash flow and short-term credit facilities. As of September 30, ~~2021,~~2022, the Company had ~~$2.0 billion~~$774 million of cash and equivalents on hand and no outstanding borrowings under its $2.5 billion revolving credit ~~facility, and no commercial paper outstanding.~~facility. The Company also has maintained strong access to public debt markets. Management believes that these sources are sufficient to service debt and to finance the Company's capital allocation priorities, which include:

•internal investments to support organic growth and sustain core businesses;

•payment of an attractive dividend to shareholders; and

•external investments in selective strategic acquisitions that support the Company's organic growth focus, such as the acquisition of the MTS Test & Simulation business, and an active share repurchase program. Refer to Note 3. MTS Test & Simulation Acquisition in Item 1. Financial Statements for further information regarding this acquisition.

The Company believes that, based on its operating revenue, operating margin, free cash flow, and credit ratings, it could readily obtain additional financing, if necessary.

Cash Flow

The Company uses free cash flow to measure cash flow generated by operations that is available for dividends, share repurchases, acquisitions and debt repayment. The Company believes this non-GAAP financial measure is useful to investors in evaluating the Company's financial performance and measures the Company's ability to generate cash internally to fund Company initiatives. Free cash flow represents net cash provided by operating activities less additions to plant and equipment. Free cash flow is a measurement that is not the same as net cash flow from operating activities per the statement of cash flows and may not be consistent with similarly titled measures used by other companies. Summarized cash flow information for the third quarter and year-to-date periods of ~~2021~~2022 and ~~2020~~2021 was as follows:


		Three Months Ended				Nine Months Ended					Three Months Ended				Nine Months Ended
		September 30,				September 30,					September 30,				September 30,
In millions	In millions	2021		2020		2021		2020		In millions	2022		2021		2022		2021
Net cash provided by operating activities	Net cash provided by operating activities	$	619	$	683	$	1,783	$	2,034	Net cash provided by operating activities	$	713	$	619	$	1,537	$	1,783
Additions to plant and equipment	Additions to plant and equipment	(71)		(52)		(217)		(168)		Additions to plant and equipment	(101)		(71)		(256)		(217)
Free cash flow	Free cash flow	$	548	$	631	$	1,566	$	1,866	Free cash flow	$	612	$	548	$	1,281	$	1,566

Cash dividends paid	Cash dividends paid	$	(359)	$	(339)	$	(1,080)	$	(1,019)	Cash dividends paid	$	(377)	$	(359)	$	(1,139)	$	(1,080)
Repurchases of common stock	Repurchases of common stock	(250)		—		(750)		(706)		Repurchases of common stock	(500)		(250)		(1,250)		(750)

Acquisition of businesses (excluding cash and equivalents)										Acquisition of businesses (excluding cash and equivalents)	—		—		(2)		—
Net proceeds from (repayments of) debt with original maturities of three months or less										Net proceeds from (repayments of) debt with original maturities of three months or less	443		1		1,078		1
Proceeds from debt with original maturities of more than three months										Proceeds from debt with original maturities of more than three months	—		—		454		—
Repayments of debt with original maturities of more than three months	Repayments of debt with original maturities of more than three months	—		—		(350)		—		Repayments of debt with original maturities of more than three months	(247)		—		(1,110)		(350)
Other, net	Other, net	10		37		74		61		Other, net	10		9		23		73
Effect of exchange rate changes on cash and equivalents	Effect of exchange rate changes on cash and equivalents	(20)		28		(37)		(14)		Effect of exchange rate changes on cash and equivalents	(46)		(20)		(88)		(37)
Net increase (decrease) in cash and equivalents	Net increase (decrease) in cash and equivalents	$	(71)	$	357	$	(577)	$	188	Net increase (decrease) in cash and equivalents	$	(105)	$	(71)	$	(753)	$	(577)

InFree cash flow decreased in the ~~second quarter~~year-to-date period of ~~2020, the Company elected~~2022 due to ~~defer payment of U.S. income taxes of $158 million~~higher working capital investments to ~~the third quarter of 2020 in accordance with the Coronavirus Aid, Relief~~support revenue growth, including increased inventory levels to help mitigate supply chain risk and ~~Economic Security (CARES) Act.~~sustain customer service levels.

Stock Repurchase Program

Under the 2018 Program, the Company repurchased approximately ~~2.0~~6.7 million shares of its common stock at an average price of ~~$149.04 in the second quarter of~~$158.11 per share during 2019, approximately 2.4 million shares of its common stock at an average price of $150.97 in the third quarter of 2019, approximately 2.2 million shares of its common stock at an average price of $175.02 in the fourth quarter of 2019, and approximately 4.2 million shares of its common stock at an average price of $167.69 ~~in the first quarter of 2020. Due to the COVID-19 pandemic, the Company temporarily suspended its~~per share ~~repurchase program starting in March 2020. In February 2021, the Company resumed its share repurchase program and repurchased~~during 2020, approximately 1.2 million shares of its common stock at an average price of $211.50 in the first quarter of 2021, approximately 1.1 million shares of its common stock at an average price of $233.29 in the second quarter of 2021, ~~and~~ approximately 1.0 million shares of its common stock at

an average price of $229.03 in the third quarter of ~~2021. As~~2021, approximately 1.1 million shares of ~~September 30,~~its common stock at an average price of $237.11 in the fourth quarter of 2021, ~~there were $490~~and approximately 1.2 million shares of ~~authorized repurchases remaining under~~its common stock at an average price of $216.62 in the first quarter of 2022. The 2018 ~~Program.~~Program was completed in the first quarter of 2022.

On May 7, 2021, the Company's Board of Directors authorized a new stock repurchase program which provides for the repurchase of up to an additional $3.0 billion of the Company's common stock over an open-ended period of time (the "2021 Program"). Under the 2021 Program, the Company repurchased approximately 0.6 million shares of its common stock at an average price of $209.29 in the first quarter of 2022, approximately 1.8 million shares of its common stock at an average price of $205.03 in the second quarter of 2022, and approximately 2.4 million shares of its common stock at an average price of $204.54 in the third quarter of 2022. As of September 30, ~~2021,~~2022, there were ~~$3.0~~$2.0 billion of authorized repurchases remaining under the 2021 Program.

After-tax Return on Average Invested Capital

The Company uses after-tax return on average invested capital ("After-tax ROIC") to measure the effectiveness of its operations' use of invested capital to generate profits. After-tax ROIC is not defined under U.S. generally accepted accounting principles ("GAAP"). After-tax ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company's ~~financial performance~~ability to generate returns from cash invested in its operations and may be different than the method used by other companies to calculate After-tax ROIC. ~~Operating~~The Company defines After-tax ROIC as operating income ~~and each of the~~after taxes divided by average invested capital, ~~balances are the GAAP amounts reported~~which is annualized when presented in ~~the Company's financial statements.~~interim periods. Operating income after taxes is a non-GAAP measure consisting of ~~operating~~net income before interest expense and other income (expense), on an after-tax basis, which are excluded as ~~reported~~they do not represent returns generated by the Company's operations. For comparability, the Company also excluded the discrete tax benefit of $51 million in the ~~Company's financial statements less~~second quarter of 2022 from net income ~~taxes calculated based on~~and the ~~Company's~~ effective tax rate for the ~~period. For~~nine months ended September 30, 2022. Additionally, for comparability, the Company excluded the discrete tax benefit of $21 million in the third quarter of 2021 and the discrete tax benefit of $112 million in the second quarter of 2021 from net income and the effective tax rate for the three and nine month periods ended September 30, 2021. Total invested capital represents the net assets of the Company, other than cash and equivalents and outstanding debt which do not represent capital investment in the Company's operations. The most comparable GAAP measure to operating income after taxes is net income. Net income to average invested capital and After-tax ROIC for the third quarter and year-to-date periods of 2022 and 2021 were as follows:


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Dollars in millions	2022			2021			2022			2021
Numerator:
Net Income	$	727		$	639		$	2,127		$	2,085
Discrete tax benefit related to the second quarter 2022	—			—			(51)			—
Discrete tax benefit related to the third quarter 2021	—			(21)			—			(21)
Discrete tax benefit related to the second quarter 2021	—			—			—			(112)
Interest expense, net of tax (1)	39			38			112			118
Other (income) expense, net of tax (1)	(20)			(9)			(49)			(34)
Operating income after taxes	$	746		$	647		$	2,139		$	2,036

Denominator:
Invested capital:
Cash and equivalents	$	774		$	1,987		$	774		$	1,987
Trade receivables	3,031			2,729			3,031			2,729
Inventories	2,007			1,524			2,007			1,524
Net assets held for sale	75			—			75			—
Net plant and equipment	1,705			1,744			1,705			1,744
Goodwill and intangible assets	5,557			5,293			5,557			5,293
Accounts payable and accrued expenses	(2,177)			(1,964)			(2,177)			(1,964)
Debt	(7,628)			(7,551)			(7,628)			(7,551)
Other, net	(330)			(269)			(330)			(269)
Total net assets (stockholders' equity)	3,014			3,493			3,014			3,493
Cash and equivalents	(774)			(1,987)			(774)			(1,987)
Debt	7,628			7,551			7,628			7,551
Total invested capital	$	9,868		$	9,057		$	9,868		$	9,057

Average invested capital (2)	$	10,004		$	9,084		$	9,985		$	8,912

Net income to average invested capital (3)	29.1		%	28.1		%	28.4		%	31.2		%
After-tax return on average invested capital (3)	29.9		%	28.5		%	28.6		%	30.5		%

(1) Effective tax rate used for interest expense and other (income) expense for the three months ended September 30, 2022 and 2021 was 23.9% and 23.4%, respectively. Effective tax rate used for interest expense and other (income) expense for the nine months ended September 30, 2022 and 2021 was 23.7% and 22.9%, respectively.

(2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within each of the periods presented. ~~After-tax ROIC is~~

(3) Returns for the three months ended September 30, 2022 and 2021 were converted to an annual rate by multiplying the calculated return by 4. Returns for the nine months ended September 30, 2022 and 2021 were converted to an annual rate by dividing ~~operating income after taxes~~the calculated return by ~~average invested capital~~3 and multiplying it by 4.

A reconciliation of the tax rate for the ~~period presented, and~~nine months ended September 30, 2022, excluding the second quarter 2022 discrete tax benefit of $51 million related to the resolution of a U.S. tax audit, is ~~annualized for interim periods. After-tax ROIC for the third quarter and year-to-date periods of 2021 and 2020 was~~ as follows:

Three Months Ended Nine Months Ended
September 30, September 30,
Dollars in millions 2021 2020 2021 2020
Operating income $ 845 $ 789 $ 2,643 $ 1,999
Tax rate (as adjusted in 2021) 23.4 % 21.3 % 22.9 % 22.0 %
Income taxes (198) (168) (607) (439)
Operating income after taxes $ 647 $ 621 $ 2,036 $ 1,560
Invested capital:
Trade receivables $ 2,729 $ 2,494 $ 2,729 $ 2,494
Inventories 1,524 1,149 1,524 1,149
Net plant and equipment 1,744 1,736 1,744 1,736
Goodwill and intangible assets 5,293 5,405 5,293 5,405
Accounts payable and accrued expenses (1,964) (1,784) (1,964) (1,784)
Other, net (269) (527) (269) (527)
Total invested capital $ 9,057 $ 8,473 $ 9,057 $ 8,473
Average invested capital $ 9,084 $ 8,394 $ 8,912 $ 8,536
After-tax return on average invested capital 28.5 % 29.6 % 30.5 % 24.4 %


	Nine Months Ended
	September 30, 2022
Dollars in millions	Income Taxes		Tax Rate
As reported	$	594	21.8	%
Discrete tax benefit related to the second quarter 2022	51		1.9	%
As adjusted	$	645	23.7	%

A reconciliation of the tax rate for the three and nine month periods ended September 30, 2021, excluding the third quarter 2021 discrete tax benefit of $21 million related to the utilization of capital losses and the second quarter 2021 discrete tax benefit of $112 million related to a change in the U.K. income tax rate, is as follows:


	Three Months Ended				Nine Months Ended
	September 30, 2021				September 30, 2021
Dollars in millions	Income Taxes		Tax Rate		Income Taxes		Tax Rate
As reported	$	167	20.8	%	$	449	17.7	%
Discrete tax benefit related to the third quarter 2021	21		2.6	%	21		0.8	%
Discrete tax benefit related to the second quarter 2021	—		—	%	112		4.4	%
As adjusted	$	188	23.4	%	$	582	22.9	%

Refer to Note 4.6. Income Taxes in Item 1. Financial Statements for further information regarding the second quarter 2022 and second and third quarter 2021 discrete tax benefits.

Working Capital

Management uses working capital as a measurement of the short-term liquidity of the Company. Net working capital as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 is summarized as follows:


In millions	In millions	September 30, 2021		December 31, 2020		Increase/ (Decrease)		In millions	September 30, 2022		December 31, 2021		Increase/ (Decrease)
Current assets:	Current assets:							Current assets:
Cash and equivalents	Cash and equivalents	$	1,987	$	2,564	$	(577)	Cash and equivalents	$	774	$	1,527	$	(753)
Trade receivables	Trade receivables	2,729		2,506		223		Trade receivables	3,031		2,840		191
Inventories	Inventories	1,524		1,189		335		Inventories	2,007		1,694		313
Other		337		264		73
Prepaid expenses and other current assets								Prepaid expenses and other current assets	281		313		(32)
Assets held for sale								Assets held for sale	103		—		103
Total current assets	Total current assets	6,577		6,523		54		Total current assets	6,196		6,374		(178)
Current liabilities:	Current liabilities:							Current liabilities:
Short-term debt	Short-term debt	579		350		229		Short-term debt	1,688		778		910
Accounts payable and accrued expenses	Accounts payable and accrued expenses	1,964		1,818		146		Accounts payable and accrued expenses	2,177		2,233		(56)
Liabilities held for sale								Liabilities held for sale	28		—		28
Other	Other	453		421		32		Other	499		459		40
Total current liabilities	Total current liabilities	2,996		2,589		407		Total current liabilities	4,392		3,470		922
Net working capital	Net working capital	$	3,581	$	3,934	$	(353)	Net working capital	$	1,804	$	2,904	$	(1,100)

As of September 30, ~~2021,~~2022, a significant portion of the Company's cash and equivalents was held by international subsidiaries. Cash and equivalents held internationally may be subject to foreign withholding taxes if repatriated to the U.S. Cash and equivalents held internationally are typically used for international operating needs or reinvested to fund expansion of existing international businesses. International funds may also be used to fund international acquisitions or, if not considered permanently invested, may be repatriated to the U.S. The Company has accrued for foreign withholding taxes related to foreign held cash and equivalents that are not permanently invested.

In the U.S., the Company utilizes cash flows from operations to fund domestic cash needs and the Company's capital allocation priorities. This includes operating needs of the U.S. businesses, dividend payments, share repurchases, acquisitions, servicing of domestic debt obligations, reinvesting to fund expansion of existing U.S. businesses and general corporate needs. The Company may also use its commercial paper program, which is backed by a long-term credit ~~facilities,~~facility, for short-term liquidity needs. The Company believes cash generated by operations and liquidity provided by the Company's commercial paper program will continue to be sufficient to fund cash requirements in the U.S.

Debt

Total debt as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was as follows:


In millions	In millions	September 30, 2021		December 31, 2020		In millions	September 30, 2022		December 31, 2021
Short-term debt	Short-term debt	$	579	$	350	Short-term debt	$	1,688	$	778
Long-term debt	Long-term debt	6,972		7,772		Long-term debt	5,940		6,909
Total debt	Total debt	$	7,551	$	8,122	Total debt	$	7,628	$	7,687

~~There was no~~Short-term debt included commercial paper ~~outstanding~~of $1.2 billion and $210 million as of September 30, ~~2021~~2022 and December 31, ~~2020.~~2021, respectively. The weighted-average interest rate on commercial paper as of September 30, 2022 and December 31, 2021 was 2.68% and 0.14%, respectively. Short-term debt as of September 30, ~~2021~~2022 also included ~~$578~~$490 million related to the ~~1.75%~~1.25% Euro notes due May ~~20, 2022,~~22, 2023, which were reclassified from Long-term debt to Short-term debt in the second quarter of ~~2021. Short-term debt as~~2022. As of December 31, ~~2020~~2021, Short-term debt also included ~~$350~~$568 million related to the 1.75% Euro notes due May 20, 2022, which were redeemed in full at face value on February 22, 2022. Additionally, the $350 million of 3.375% notes due September 15, 2021 ~~which~~ were redeemed in full at face value on June 15, 2021.

The Company has a $2.5 billion revolving credit facility with a termination date of September 27, 2024, which is available to provide additional liquidity, including to support the potential issuances of commercial paper. On September 22, 2021, due to the anticipated LIBOR transition, the Company agreed to suspend its right to borrow in Euro, British Pounds Sterling and Japanese Yen currencies under the revolving credit facility, effective December 31, 2021. The Company may continue to borrow in U.S. Dollars under the credit facility. This change is not expected to have a significant impact on the Company’s liquidity or its commercial paper program. No amounts were outstanding under the $2.5 billion revolving credit facility as of September 30, ~~2021~~2022 or December 31, ~~2020.~~2021.

Total Debt to EBITDA

The Company uses the ratio of total debt to EBITDA as a measure of its ability to repay its outstanding debt obligations. EBITDA and the ratio of total debt to EBITDA are non-GAAP financial measures. The Company believes that total debt to EBITDA is a meaningful metric to investors in evaluating the Company's long term financial liquidity and may be different than the method used by other companies to calculate total debt to EBITDA. The ratio of total debt to EBITDA represents total debt divided by net income before interest expense, other income (expense), income taxes, depreciation, and amortization and impairment of intangible assets on a trailing twelve month basis. Total debt to EBITDA for the trailing twelve month periods ended September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was as follows:


Dollars in millions	Dollars in millions	September 30, 2021		December 31, 2020		Dollars in millions	September 30, 2022		December 31, 2021
Total debt	Total debt	$	7,551	$	8,122	Total debt	$	7,628	$	7,687

Net income	Net income	$	2,727	$	2,109	Net income	$	2,736	$	2,694
Add:	Add:					Add:
Interest expense	Interest expense	205		206		Interest expense	196		202
Other income	Other income	(37)		(28)		Other income	(71)		(51)
Income taxes	Income taxes	631		595		Income taxes	777		632
Depreciation	Depreciation	276		273		Depreciation	280		277
Amortization and impairment of intangible assets	Amortization and impairment of intangible assets	135		154		Amortization and impairment of intangible assets	135		133
EBITDA	EBITDA	$	3,937	$	3,309	EBITDA	$	4,053	$	3,887
Total debt to EBITDA ratio	Total debt to EBITDA ratio	1.9		2.5		Total debt to EBITDA ratio	1.9		2.0

Stockholders' Equity

The changes to stockholders' equity during the nine months ended September 30, ~~2021~~2022 were as follows:


In millions
Total stockholders' equity, December 31, ~~2020~~2021	$	~~3,182~~3,626
Net income	~~2,085~~2,127
Repurchases of common stock	~~(750)~~(1,250)
Dividends declared	~~(1,101)~~(1,160)
Foreign currency translation adjustments, net of tax	~~(29)~~(394)
Other, net	~~106~~65
Total stockholders' equity, September 30, ~~2021~~2022	$	~~3,493~~3,014

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as "believe," "expect," "plans," "intend," "may," "strategy," "prospects," "estimate," ~~“will,” “should,” “could,”~~"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 the COVID-19 pandemic and 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 including inflation, 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 ~~tariffs and~~ raw material cost inflation, ~~product line simplification activities and enterprise initiatives,~~ the Company's portion of future benefit payments related to pension and other 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 failure of the Company's employees to comply with applicable laws and regulations, and the outcome of outstanding legal proceedings. These statements are subject to certain risks, uncertainties, and other factors, which could cause actual results to differ materially from those anticipated. Important risks that may influence future results include (1) the COVID-19 pandemic, related government actions and the Company's strategy in response thereto, (2) weaknesses or downturns in the markets served by the Company, (3) changes or deterioration in international and domestic political and economic conditions, such as the Russian invasion of Ukraine and the impact of related economic and other sanctions imposed on Russia, (4) the unfavorable impact of foreign currency fluctuations, (5) the ~~timing and amount of benefits from the~~ Company's enterprise strategy initiatives ~~and their~~may not have the desired impact on organic revenue growth, (6) market conditions and cost and availability of financing to fund the Company's share repurchases, (7) a delay or decrease in the introduction of new products into the Company's product lines, (8) any failure to protect the Company's intellectual property, (9) potential negative impact of impairments to goodwill and other intangible assets on the Company's return on invested capital, financial condition or results of operations, (10) raw material price increases and supply shortages or delays, (11) financial market risks to the Company's obligations under its defined benefit pension plans, (12) negative effects of service interruptions, data corruption, cyber-based attacks, network security breaches, or violations of data privacy laws, (13) the potential negative impact of acquisitions on the Company's profitability and returns, (14) potential negative effects of divestitures, including retained liabilities and unknown contingent liabilities, (15) impact of tax legislation and regulatory action and changing tax rates, (16) potential adverse outcomes in legal proceedings, (17) uncertainties related to environmental regulation and the physical risks of climate change, ~~and~~ (18) potential failure of the Company's employees, agents or business partners to comply with anti-corruption, import/export, human rights and other ~~laws.~~laws, and (19) increases in inflation or interest rates and the possibility of economic recession. A more detailed description of these risks is contained under the heading ~~“Risk Factors”~~"Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. These risks are not ~~all~~all- inclusive and given these and other possible risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.

Any forward-looking statements made by ITW speak only as of the date on which they are made. ITW is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise.

ITW practices fair disclosure for all interested parties. Investors should be aware that while ITW regularly communicates with securities analysts and other investment professionals, it is against ITW's policy to disclose to them any material non-public information or other confidential commercial information. Investors should not assume that ITW agrees with any statement or report issued by any analyst irrespective of the content of the statement or report.

ITEM 4. Controls and Procedures

The Company's management, with the participation of the Company's Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e)) as of September 30, ~~2021.~~2022. Based on such evaluation, the Company's Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer have concluded that, as of September 30, ~~2021,~~2022, the Company's disclosure controls and procedures were effective.

In connection with the evaluation by management, including the Company's Chairman & Chief Executive Officer and Senior Vice President & Chief Financial Officer, no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) during the quarter ended September 30, ~~2021~~2022 were identified that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

None. The Company's threshold for disclosing environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.

ITEM 1A. Risk Factors

The Company's business, financial condition, results of operations and cash flows are subject to various risks which could cause actual results to vary materially from recent results or from anticipated future results. Refer to the description of the Company's risk factors previously disclosed in Part I - Item 1A - Risk Factors in the Company's ~~2020~~2021 Annual Report on Form 10-K. There have been no material changes to the risk factors described therein.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 3, 2018, the Company's Board of Directors authorized a stock repurchase program which ~~provides~~provided for the repurchase of up to $3.0 billion of the Company's common stock over an open-ended period of time (the "2018 Program"). AsThe 2018 Program was completed in the first quarter of ~~September 30, 2021, there were $490 million of authorized repurchases remaining under the 2018 Program.~~2022.

On May 7, 2021, the Company's Board of Directors authorized a new stock repurchase program which provides for the repurchase of up to an additional $3.0 billion of the Company's common stock over an open-ended period of time (the "2021 Program"). As of September 30, ~~2021,~~2022, there were ~~$3.0~~$2.0 billion of authorized repurchases remaining under the 2021 Program.

Share repurchase activity for the third quarter of ~~2021~~2022 was as follows:


In millions except per share amounts	In millions except per share amounts							In millions except per share amounts
Period	Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Value of Shares That May Yet Be Purchased Under Programs		Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum Value of Shares That May Yet Be Purchased Under Programs
July 2021		—	$	—	—	$	3,740
August 2021		0.7	$	230.38	0.7	$	3,561
September 2021		0.3	$	225.69	0.3	$	3,490
July 2022								July 2022	—	$	—	—	$	2,490
August 2022								August 2022	1.4	$	207.03	1.4	$	2,192
September 2022								September 2022	1.0	$	200.97	1.0	$	1,990
Total	Total	1.0			1.0			Total	2.4			2.4

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ITEM 6. Exhibits

Exhibit Index


Exhibit Number						Exhibit Description

~~10.1~~10(a)						~~Suspension of Rights~~Credit Agreement dated ~~September 22, 2021 between~~as of October 21, 2022 among Illinois Tool Works Inc. ~~and~~, JPMorgan Chase Bank, N.A., as Agent, ~~under the Five Year Credit Agreement dated as of September 27, 2019, among Illinois Tool Works Inc., as Borrower, and JPMorgan Chase Bank,~~Citibank, N.A., as Syndication Agent, and a syndicate of Lenders, filed as Exhibit 10(a) to the ~~Lenders thereto (as amended or otherwise modified from time to time).~~Company’s Current Report on Form 8-K filed on October 26, 2022 (Commission File No. 1-4797) and incorporated herein by reference.

31						Rule 13a-14(a) Certifications.

32						Section 1350 Certification.

101						The following financial and related information from the Illinois Tool Works Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, ~~2021~~2022 is formatted in Inline Extensible Business Reporting Language (iXBRL) and submitted electronically herewith: (i) Statement of Income, (ii) Statement of Comprehensive Income, (iii) Statement of Financial Position, (iv) Statement of Changes in Stockholders' Equity, (v) Statement of Cash Flows, and (vi) related Notes to Financial Statements.

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

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SIGNATURES

Pursuant to the requirements 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.



		ILLINOIS TOOL WORKS INC.

Dated:	October ~~28, 2021~~27, 2022	By:	/s/ Randall J. Scheuneman
			Randall J. Scheuneman
			Vice President & Chief Accounting Officer
			(Principal Accounting Officer and Duly Authorized Officer)

3538