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.
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.
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.
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.
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.
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.
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.
Our automotive OEM business will be the hardest hit with revenues potentially down 60% to 70% year-over-year.
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.
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%.
At quarter end, we have more than $1.4 billion of cash and cash equivalents on hand.
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.
And our annual conversion rate from net income is consistently above 100%.
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.
And as we sit here today, our largest U.S. plan is funded at 104%.
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.
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%.
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.
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.
That being said, decremental margins should likely be in our normal 35% to 40% range in Q4.

Summary:
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.