You are given a text that consists of multiple sentences. Your task is to perform abstractive summarization on this text. Use your understanding of the content to express the main ideas and crucial details in a shorter, coherent, and natural sounding text. 
Text: I'm joined by our; Chairman and CEO, Scott Santi; Vice Chairman, Chris O'Herlihy; and Senior Vice President and CFO, Michael Larsen.
During today's call, we will discuss ITW's first quarter 2020 financial results as well as the impact of the global pandemic on our business and our strategy for managing through it.
Stating the obvious, a lot has changed relative to the environment we operated in for most of the first quarter.
I will provide some brief commentary on our Q1 performance, and then we will transition to our pandemic strategy.
We talk often about the fact that our decentralized entrepreneurial culture is a key element of ITW's secret sauce.
It is core to who we are as a company, and it is never more valuable than during times of significant and in this case, rapid change.
The proactive teamwork, ingenuity and selflessness of our people and quickly adapting to rapidly changing conditions and tackling new challenges that seemingly arise daily at the moment is ITW at its finest.
The fact that the ITW team has responded exactly as we expected they would doesn't make it any less extraordinary.
Now on to first quarter results, total revenue declined 9% year on year with organic revenue down 6.6%, currency at 1.5% headwind, a negative 1% impact from divestitures and 40 basis points of PLS.
The majority of the organic revenue decline occurred in the last two weeks of March where we saw organic revenue down more than 20%.
By geography, North America was down 5% and Europe was down 7%, China was down 24% for the quarter, but appears to have bottomed in February and was flat year on year in April.
In the face of a challenging demand environment, we continue to execute well on the elements within our control.
Despite a 9% decline in revenues, operating margin was flat at 23.6%, five of our seven segments expanded margins in the quarter due largely to benefits from enterprise initiatives which contributed 120 basis points to operating margin at the enterprise level.
After tax return on invested capital is 27% and free cash flow was $554 million with a conversion rate of 98% of net income.
Now let's shift gears and talk about how we will manage ITW through the global pandemic.
Despite the unusual and in some cases unprecedented challenges of the moment, we continue to execute at a high level and with our usual degree of focus and discipline across the company.
As a result of all the work we have done over the last seven years in executing our enterprise strategy and the progress we have made on the path to our full potential performance, ITW is today in a position of significant strength in dealing with the effects of the global pandemic.
Today's ITW is centered on our powerful and proprietary business model and our people are better trained and more skilled at executing it than ever before in the history of our company.
ITW is 80/20 front to back methodology and the laser light focus that drives on the relative handful of critical performance, difference makers, and every one of our businesses has served the company extremely well in times of both opportunity and challenge for a long time now.
I have no doubt that this unique ITW skill will be a significant asset to us as we work our way through the COVID-19 pandemic and its aftermath.
In addition, as I mentioned earlier, we are very fortunate to have a decentralized operating structure and an entrepreneurial culture that has been developed, nurtured, and protected over many years.
Our people think and act like owners.
They are accountable and they deliver.
They are deeply trained in our business model, our strategy and our values and I assure you that even in an unprecedented times such as these, none of them are waiting around to be told what to do.
In addition, in today's ITW, we have worked hard in shaping our portfolio and driving consistent high quality execution across every business in it, both to position the company to deliver consistent upper tier long term earnings growth, when global conditions are favorable and to build in a margin cushion and level of diversification, that makes us highly resilient during most periods when they are not.
And it follows from there that the robust free cash flow we generate through our strong margin profile, and the unique attributes of our business model, combined with our very, disciplined capital allocation strategy, gives us an extremely strong balance sheet and Tier 1 credit ratings.
So with these elements is our foundation, our strategy for managing through the pandemic and its aftermath is to focus, on the following four priorities.
First, to protect the health and support the well being of our ITW colleagues, second, to continue to serve our customers with excellence, third, to maintain financial strength, liquidity and strategic optionality and fourth, to leverage ITW strengths to position the company to fully participate, in the recovery.
Chris will give you some additional color on priorities one and two.
Michael will cover priority three and I will come back and cover priority four.
This is a challenging time for all of us, as the world continues to grapple with the effects of a global pandemic.
At this point, I'm sure that every one of us has been impacted by this situation, in ways that were unimaginable just a few months ago.
And ITW as a company and the community is certainly being affected.
Having said that, and Scott reference, or divisional leaders think and act like owners, are able to react quickly and take the necessary actions to protect our people and serve our customers, which is a particular advantage of the company, in times of significant challenge.
Let's move to slide six.
The actions were taken to protect the health and support, the well being of our colleagues.
We developed and deployed a number of practices to minimize exposure.
And prevent the spread of COVID-19 and keep our colleagues safe.
We have followed CDC, WHO, and local government guidelines in doing so.
Out ITW colleagues have redesigned production processes to ensure proper social distancing practices, adjusted shift schedules and assignments that have colleagues who have child care needs, due to school closings and implemented aggressive new water and sanitation practices, to minimize infection risk.
We're also providing full compensation to employees, who have been quarantined.
In addition, our strategic sourcing team is heavily engaged in helping our businesses, by coordinating the procurement of personal protective equipment, to ensure all our employees receive the protection they need.
I'm pleased to say, that as a result of our containment efforts, to this point we've largely been able to restrict infections to single cases, in a minority of our locations, which is a testament to the actions our colleagues have taken to implement sound sanitation practices and social distancing and to protect one another, to the best of their abilities.
Turning to slide seven, let's shipped to another important stakeholder group and how we continue to serve our customers with excellence.
To support our customers, our teams have worked diligently to keep our factories open and operating safely.
In areas around the world where governments have issued shelter in place orders, the vast majority of ITW businesses have been designated as critical or essential businesses.
And as such, they're needed to really an open and operational.
In some cases, it's because our products directly impact, the COVID-19 response effort.
For example, our welding equipment is used to manufacture hospital beds or structural products are utilized to build temporary medical facilities, or test and measurement products test medical and laboratory equipment.
Our Polymers & Fluids products sanitize workplaces.
And our food service equipment is used to feed people in hospitals.
In other cases, our businesses are designated as critical, because they play a vital role in serving and supporting industries.
They're essential to the physical and economic health of our communities.
Although, some facilities are subject to mandatory shutdowns, roughly 95% of our global manufacturing capacity is currently available to be deployed to serve our customers.
The same is true for our service networks, particularly in food equipment and test and measurement, which we continue to keep fully available in order to ensure that we can help keep essential businesses and healthcare facilities in operation.
In both cases, across all segments, we continue to maintain best-in-class performance for product and service quality and the availability.
Finally, we're rigorously managing our supplier base to both mitigate near-term supply risk for critical raw materials and components and ensure that we are positioned to win in a wide range recovery scenarios going forward.
Well, that's the primary objective of our enterprise strategy, an important byproduct, if you will, a lot of work done over the last seven years is that ITW is in a position of considerable financial strength to deal with highly disruptive events, such as this global pandemic.
In many ways, ITW was built for times like this.
And through the pandemic, we will manage the company to maintain our financial strength, liquidity and strategic optionality so that we can leverage our strong financial foundation and resilient profitability profile to position the company for maximum participation in the recovery.
ITW has more than enough financial strength and resilient -- resilience to withstand this kind of shock to the system, that the global economy is under experience over the next several months.
We are prepared for it.
We'll get through it.
And we'll come out the other side strongly positioned for the recovery.
As we sit here today, one month into the quarter, we're estimating the Q2 revenues will be down 30% to 40% on a year-over-year basis.
Obviously, there's a fair amount of uncertainty around how May and June actually play out but that is our current view.
As you would expect, given that most of our automotive OEM customers in North America and Western Europe have been essentially shut down since mid-March, and are only beginning to restart production in early to mid-May.
Our automotive OEM business will be the hardest hit with revenues potentially down 60% to 70% year-over-year.
And abrupt decline of this magnitude in the quarter is pretty unprecedented.
As difficult as it may look, if it plays out this way, we expect that ITW will still make operating profit in the $200 million to $400 million range, generate free cash flow of more than $500 million and end the Q2 with cash on hand of about $1.5 billion.
Knowing that we have the financial strength to withstand whatever comes our way over the next few months, our number one priority becomes positioning to play offense in the recovery.
And this is an area where our strong margin profile really helps us.
Whether the pace of recovery is fast or slow, V shaped or U shaped, over the next few quarters, it doesn't really impact us that much.
Under very fast paced recovery, we end up down 15% for the full year, and margins are 19% to 21%.
They're much slower recovery, revenues are down 25%.
Yet, our margins are still a very strong 17% to 19%.
This is against a backdrop, where most of the companies that our divisions compete with came into the pandemic, with margins at half of ours or less.
As a result, a number of them may have to retrench in a major way in order to get through the epidemic, potentially creating some significant share gain opportunities for us in the recovery.
With our margin cushion, we are concerned with how quickly demand is going to recover in Q3 or Q4.
We can be fairly certain that it will be incrementally better than Q2.
But beyond that, it really doesn't affect us a whole lot, which allows us to think long-term and positioned for maximum participation in the recovery, making sure that we are in a strong position to fully support our customers, as their businesses begin to re accelerate, and that we are in an equally strong position to take share from competitors, who can't, is the central imperative of our pandemic response planning for every one of our divisions.
We will, of course, need to manage our businesses smartly across our portfolio and make some meaningful capacity and cost structure adjustments in businesses, where we expect prolonged recovery periods, or maybe even permanent demand impacts from the pandemic.
But as we always do, we will leave those decisions in the hands of our divisional leaders as they are in the best position to assess the pace and slope of the cut of the recovery in each of their respective businesses.
Turning to slide 11.
The financial benefits of our enterprise strategy, combined with the work done to optimize our capital efficiency, capital structure and capital allocation over the years, has put ITW in a very strong position going into this crisis.
At quarter end, we have more than $1.4 billion of cash and cash equivalents on hand.
At the end of Q1 and it's still the case.
As of today, we have essentially no short-term debt.
And we have not issued any commercial paper.
Why you might ask?
Simply put, because we don't need to cash.
We have a $2.5 billion undrawn credit facility available to us, if needed in the future bring our total liquidity to about $4 billion as we sit here today.
Our net leverage is only 1.7 times and our next maturity is pretty small, $350 million and not until September 2021.
High quality of earnings and strong free cash flow are hallmarks of ITW.
As you know, we consistently generate significantly more cash than we need for internal purposes.
And our annual conversion rate from net income is consistently above 100%.
We expect that to continue to be the case, as we manage our way through the pandemic.
As evidenced by Tier 1 credit ratings that are the highest in our peer group, we continue to have excellent access to credit markets in the event that we needed.
During this time of market volatility, it's also worth mentioning that our pension plans, have remained in great shape.
Over the years, we have consistently funded and de risked our plans.
And as we sit here today, our largest U.S. plan is funded at 104%.
Turning to slide 12.
So how do we think about and adjust our capital allocation approach during the pandemic?
First, with regard to the dividend.
We recognize the importance of ITW's dividend to our long term shareholders.
We have a long history, with more than 56 years of growing the dividend.
And we are part of a small group of so-called dividend aristocrats, and one of about 18 companies that has increased its dividend for more than 50 years.
And we view the dividend as a critical component of ITW's total shareholder return model.
Since 2012, we have increased the annualized dividend from $1.52 per share to currently $4.28 per share, a cumulative annual growth rate of 16%.
Simply put, we remain strongly committed to our dividend and as we sit here today, we do not see a scenario where we would have to reduce the dividend.
In terms of strategic optionality, we are clearly in a position of strength, with ample balance sheet capacity.
And we're certainly open to the possibility that opportunities might emerge as a result of the pandemic.
It could be in the form of more reasonable valuation opportunities for assets that we were already interested in, as well as some unique opportunities with quality companies that may not have the financial strength to weather the pandemic.
Given our financial strength and ample capacity, we will be in a strong position to react to any high quality strategic opportunities that may emerge.
We will continue to fully fund all internal investment and capex projects that meet our criteria, like we always have, but the number will likely come down in terms of aggregate spend in the near term, simply due to the fact that we don't need any capacity expansion projects for the next several quarters.
Finally, I think, it comes as no surprise to anyone that we have suspended share repurchases until end markets stabilize and the recovery path becomes clearer.
And as a priority four, which is all about leveraging our strengths to make sure that every one of our businesses are strongly positioned to fully participate in the recovery.
In short, we are going to be there to serve every bit of our customers' needs as their businesses begin to reaccelerate and be well prepared to capture any share gain opportunities that may come our way.
Food equipment had a good quarter with organic growth up 2% year-over-year despite a tough comp of 5% organic growth last year.
The service business was solid up 4% in the quarter.
Equipment growth of 1% reflects double-digit growth in retail and modest decline in institutional and restaurants against tough year-over-year comps for both of those.
Operating margin expanded 90 basis points to 27.5% with enterprise initiatives, the main contributor.
Test and measurement in electronics had a very strong quarter with test and measurement up 6% with 13% growth in our Instron business.
The segment also experienced a meaningful pickup in demand from semiconductor customers.
Electronics was up 2%.
Margin was the highlight as the team expanded operating margins 330 basis points to a record, 28.1% the highest in the company this quarter with strong contributions from enterprise initiatives and volume leverage.
Also in the quarter, we divested in electronics business with 2019 revenues of approximately $60 million.
In the face of an unprecedented demand contraction in Q2, as Michael commented earlier, we will still generate operating income in the hundreds of million dollars and generate over $500 million in free cash flow.
We will manage discretionary expenses prudently, but we don't need to start cutting muscle immediately.
And we certainly want to avoid doing so, before we have some level of indication as to the shape and slope of the recovery in each of our businesses.
With this principle in mind, to this point, we are providing full compensation and benefits support to all ITW colleagues around the world.
And we're going to do our best to sustain that level of support for all of our people through at least the end of Q2.
We are doing it because we are in a position to support our people at a time of great personal and family stress and uncertainty.
And we think that it's the right thing to do.
But we're also doing it to protect the significant investment we have made in training and developing great ITW people and great ITW leaders over the past seven years.
As Michael mentioned, it is likely that we will need to make some staffing adjustments to align with prolonged or permanently lower demand in some of our businesses as a result of the pandemic.
So we are committed to being there for all of our people during the worst of this, and we will take the time to make whatever longer-term adjustments need to be made thoughtfully.
The second principle is that we're going to lean into the upside by remaining invested in structure to capture incremental demand.
Given the profitability of our core businesses in the strength of our financial position, what's the bigger risk for ITW, carrying more cost and it turns out we need for a few months or cutting too much and not being able to fully serve the needs of our customers and take share from our competitors as the recovery accelerates.
Obviously, we believe short sheet and the upside potential of the recovery would be the far bigger mistake for ITW.
And we're going to plan and execute our recovery strategies accordingly.
The third principle is that we're going to leverage the strength of ITW to protect investment in areas of strategic importance to the execution of our long-term strategy.
We're early in our planning around all these areas.
But as one example, prior to the pandemic, we invested two plus years in our strategic sales excellence initiative that included significant investments in new sales and sales leadership talent.
We have the financial capacity to protect these types of long-term strategic investments.
And doing so is worth a lot more over the long-term to the company, there are a few extra detrimental margin points in the short-term.
That being said, decremental margins should likely be in our normal 35% to 40% range in Q4.
Between now and then, we're going to focus on making sure ITW is in a strong position to fully participate in the recovery.
Turning to slide 14, this is just a reminder that our long-term strategic priorities remain unchanged that we are committed to achieving and sustaining ITW potential performance, and continuing on our quest to firmly establish ITW as one of the world's best performing, highest quality, and most respected industrial companies.
Now let's move on to slide 15 to wrap things up.
As of right now, there's no way to know how severe this crisis will be, how long it will last, or how quickly our customers and then markets will recover.
What I do know is that the strength and resilience of ITW's business model and our people put us in about a stronger position as an industrial manufacturing company can be in, to deal with that whatever will unfold over the coming weeks and months.
I have every confidence that ITW will rise to the challenges we always have over the course of our 108-year history.
Our strong financial position and margin profile give us the ability to make strategic moves now to position the company to fully participate across a range of recovery scenarios, and to come out the other side ready to continue on our path to ITW full potential performance.
As a reminder, please see the appendix in today's slide deck for the usual segment detail for the first quarter.

user
illinois tool works inc - suspending previously announced annual guidance for 2020.

assistant