Illinois Tool Works Inc. Business Report up until FY ended Dec. 2014

Recent Years

Financial Overview

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	Rate of change (%)	Factors
Overall
Net Sales	14,484	14,135	2.5	1)
Operating Income	2,888	2,514	14.9	2)
Automotive OEM Segment
Net Sales	2,590	2,396	8.1	3)
Operating Income	600	490	22.4	-

Factors
1) Net Sales
-Operating revenues increased 2.5% in 2014 due to an increase in organic and acquisition revenues, partially offset by the unfavorable effect of currency translation which primarily occurred in the fourth quarter. Total organic revenues increased 2.6% in 2014 primarily due to 8.9% growth in the Automotive OEM segment.

2) Operating Income
-Operating income increased 14.9% in 2014 primarily due to changes in variable margins and overhead costs, an increase in organic revenues and lower restructuring expenses, partially offset by the unfavorable effect of currency translation.

3) Automotive OEM Segment Net Sales
-Operating revenues increased 8.1% in 2014 primarily due to an increase in organic revenues, partially offset by the unfavorable effect of currency translation. As a result of product innovation and penetration gains, worldwide automotive organic revenues grew 8.9%, exceeding auto builds which grew 3%. European organic revenue growth of 10.8% exceeded auto build growth of 3%. North American automotive organic revenues grew 7.6% as North American auto builds increased 5%. Organic revenues for Asia Pacific increased 12.1% over the prior year primarily due to revenue growth in China of 17.2%, which exceeded Chinese auto build growth of 8%.

Divestitures

-In October 2012, the Company announced it has closed on the agreement to divest a 51 percent stake in its Decorative Surfaces segment, consisting of Wilsonart and related international businesses, to a fund managed by Clayton, Dubilier & Rice, LLC (CD&R). As announced in August, the Company will receive cash proceeds of approximately USD 1.05 billion and will retain a 49 percent equity interest in the business.

-In April 2012, the Company announced that it completed the sale of its finishing group of businesses to Graco Inc. in a USD 650 million cash transaction. The finishing equipment businesses consist of paint spray systems and technologies for a variety of industrial end markets and applications around the world. Key brands include Gema, Ransburg, DeVilbiss, BGK and Binks.

R&D Expenditure

(in million USD)

	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013	FY ended Dec. 31, 2012
Total	227	240	240

Patents

-As of December 31, 2014, ｔhe Company owns approximately 3,400 unexpired U.S. patents and 6,600 foreign patents covering articles, methods and machines. In addition, the Company has approximately 1,600 applications for patents pending in the U.S. Patent Office and 4,100 applications pending in foreign patent offices.

Technological Partnership

-In 2013, DuPont announced that it worked together with the Company to develop a cross-over coolant component for the new Ford 3.5L and 3.7L engine manifold. The coolant cross-over, manufactured by the Company, uses DuPont Zytel HTN PPA resin instead of brazed metal, which reduces its weight by a pound. Models which contain the new cross-over coolant component include the Ford Taurus, Flex, Edge and Explorer. (From a press release on December 11, 2013)