Illinois Tool Works Inc. Business Report FY ended Dec. 2015

Recent Years

Financial Overview

(in million USD)

	FY ended Dec. 31, 2015	FY ended Dec. 31, 2014	Rate of change (%)	Factors
Overall
Net Sales	13,405	14,484	(7.4)	1)
Operating Income	2,867	2,888	(0.7)	2)
Automotive OEM Segment
Net Sales	2,529	2,590	(2.4)	3)
Operating Income	613	600	2.2	-

Factors
1) Net Sales
-The Company’s net sales in the fiscal year ended December 31, 2015 totaled USD 13,405 million, a 7.4% decrease from the previous year. The main cause of the decrease in sales was the unfavorable effect of foreign currency translation. This was compounded by slight organic declines and impacts of acquisitions and divestitures.

2) Operating Income
-In the fiscal year ended December 31, 2015, the Company’s operating income declined by 0.7% from the previous year to USD 2,867 million. Despite organic growth in operating income of 5.8%, a negative impact from foreign currency translation of 7.4% caused the decrease in operating income.

3) Automotive OEM Segment Net Sales
-Sales in the Company’s Automotive OEM segment declined 2.4% in the fiscal year ended December 31, 2015 to USD 2,529 million. While the segment experienced organic growth in all regions, particularly in Europe, unfavorable currency translation effects offset these gains.

Divestitures

-In October 2012, the Company announced it has closed on the agreement to divest a 51% 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% 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, 2015	FY ended Dec. 31, 2014	FY ended Dec. 31, 2013
Total	218	227	240

Patents

-As of December 31, 2015, the Company owns approximately 3,400 unexpired U.S. patents and 7,200 foreign patents covering articles, methods and machines. The Company also has approximately 1,500 applications for patents pending in the U.S. Patent Office and 4,500 applications pending in foreign patent offices.

-As of December 31, 2015, the Company’s Automotive OEM segment has 2,755 patents and patent applications pending.

Technological Partnership

-In 2013, DuPont announced that it worked 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)

Product Development

WaveShear isolation spring
-The Company has developed the WaveShear isolation spring in response to the issue of smaller, more fuel-efficient engines which generate increased noise and vibration. The WaveShear isolation spring dampens sound and vibration across a wide temperature range.