Illinois Tool Works (ITW) 10-Q 7 May 15 2015 Q1 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	3 Months Ended
	Mar. 31, 2015
Document and Entity Information [Abstract]
Entity Registrant Name	ILLINOIS TOOL WORKS INC
Entity Central Index Key	49826
Current Fiscal Year End Date	-19
Entity Filer Category	Large Accelerated Filer
Document Type	10-Q
Document Period End Date	31-Mar-15
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Amendment Flag	FALSE
Entity Common Stock, Shares Outstanding	367,691,257

Statement_of_Income_Unaudited

Statement of Income (Unaudited) (USD $)	3 Months Ended
In Millions, except Per Share data, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Operating Revenues	$3,342	$3,569
Cost of revenues	1,970	2,158
Selling, administrative, and research and development expenses	616	682
Amortization of intangible assets	59	62
Operating Income	697	667
Interest expense	-54	-64
Other income (expense)	21	9
Income from Continuing Operations Before Income Taxes	664	612
Income Taxes	206	184
Income from Continuing Operations	458	428
Income from Discontinued Operations	0	45
Net Income	$458	$473
Income Per Share from Continuing Operations:
Basic (in dollars per share)	$1.22	$1.01
Diluted (in dollars per share)	$1.21	$1.01
Income Per Share from Discontinued Operations:
Basic (in dollars per share)	$0	$0.11
Diluted (in dollars per share)	$0	$0.11
Net Income Per Share:
Basic (in dollars per share)	$1.22	$1.12
Diluted (in dollars per share)	$1.21	$1.11
Cash Dividends Per Share:
Paid (in dollars per share)	$0.49	$0.42
Declared (in dollars per share)	$0.49	$0.42
Shares of Common Stock Outstanding During the Period:
Average (in shares)	376.6	421.9
Average assuming dilution (in shares)	379.2	425

Statement_of_Comprehensive_Inc

Statement of Comprehensive Income (Unaudited) (USD $)	3 Months Ended
In Millions, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
Net Income	$458	$473
Other Comprehensive Income (Loss):
Foreign currency translation adjustments, net of tax	-577	28
Pension and other postretirement benefit adjustments, net of tax	9	8
Comprehensive Income (Loss)	($110)	$509

Statement_of_Financial_Positio

Statement of Financial Position (Unaudited) (USD $)	Mar. 31, 2015	Dec. 31, 2014
In Millions, unless otherwise specified
Current Assets:
Cash and equivalents	$2,672	$3,990
Trade receivables	2,367	2,293
Inventories	1,187	1,180
Deferred income taxes	188	212
Prepaid expenses and other current assets	253	401
Total current assets	6,667	8,076
Net plant and equipment	1,624	1,686
Goodwill	4,498	4,667
Intangible assets	1,733	1,799
Deferred income taxes	278	301
Other assets	1,137	1,149
Total Assets	15,937	17,678
Current Liabilities:
Short-term debt	1,708	1,476
Accounts payable	670	512
Accrued expenses	1,083	1,287
Cash dividends payable	179	186
Income taxes payable	96	64
Deferred income taxes	8	8
Total current liabilities	3,744	3,533
Noncurrent Liabilities:
Long-term debt	5,845	5,981
Deferred income taxes	380	338
Other liabilities	986	1,002
Total noncurrent liabilities	7,211	7,321
Stockholders’ Equity:
Common stock	6	6
Additional paid-in-capital	1,102	1,096
Income reinvested in the business	17,453	17,173
Common stock held in treasury	-12,357	-10,798
Accumulated other comprehensive income	-1,226	-658
Noncontrolling interest	4	5
Total stockholders’ equity	4,982	6,824
Total Liabilities and Stockholders' Equity	$15,937	$17,678

Statement_of_Cash_Flows_Unaudi

Statement of Cash Flows (Unaudited) (USD $)	3 Months Ended
In Millions, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Cash Provided by (Used for) Operating Activities:
Net Income	$458	$473
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	59	68
Amortization and impairment of goodwill and other intangible assets	59	62
Change in deferred income taxes	11	12
Provision for uncollectible accounts	2	2
(Income) loss from investments	1	0
(Gain) loss on sale of operations and affiliates	-16	1
Stock-based compensation expense	14	9
Other non-cash items, net	14	8
(Increase) decrease in-
Trade receivables	-173	-197
Inventories	-58	-49
Prepaid expenses and other assets	18	-39
Increase (decrease) in-
Accounts payable	62	-5
Accrued expenses and other liabilities	-131	-38
Income taxes	123	63
Other, net	-1	-56
Net cash provided by operating activities	442	314
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents) and additional interest in affiliates	-2	-2
Additions to plant and equipment	-83	-68
Proceeds from investments	1	1
Proceeds from sale of plant and equipment	8	7
Proceeds from sales of operations and affiliates	28	0
Other, net	-10	-4
Net cash provided by (used for) investing activities	-58	-66
Cash Provided by (Used for) Financing Activities:
Cash dividends paid	-186	-181
Issuance of common stock	31	27
Repurchases of common stock	-1,479	-1,440
Net proceeds from (repayments of) debt with original maturities of three months or less	233	-722
Proceeds from debt with original maturities of more than three months	0	1,988
Excess tax benefits from stock-based compensation	16	9
Other, net	-12	-10
Net cash provided by (used for) financing activities	-1,397	-329
Effect of Exchange Rate Changes on Cash and Equivalents	-305	10
Cash and Equivalents:
Increase (decrease) during the period	-1,318	-71
Beginning of period	3,990	3,618
End of period	2,672	3,547
Supplementary Cash and Non-Cash Information:
Cash Paid During the Period for Interest	65	46
Cash Paid During the Period for Income Taxes, Net of Refunds	$42	$114

Financial_Statements

Financial Statements	3 Months Ended
	Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Financial Statements	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. 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 2014 Annual Report on Form 10-K. Certain reclassifications of prior year data have been made to conform with current year reporting.

Discontinued_Operations

Discontinued Operations	3 Months Ended
	Mar. 31, 2015
Discontinued Operations and Disposal Groups [Abstract]
Discontinued Operations	Discontinued Operations
	The Company periodically reviews its operations for businesses that may no longer be aligned with its enterprise initiatives and long-term objectives. As a result, the Company may commit to a plan to exit or dispose of certain businesses and present them as discontinued operations. The following summarizes the Company’s discontinued operations.
	Third Quarter 2013 Discontinued Operations - In the third quarter of 2013, the Company committed to a plan to sell the Industrial Packaging business and began classifying this business as held for sale. The Industrial Packaging business was sold in the second quarter of 2014.
	In the third quarter of 2013, the Company also committed to a plan for the divestiture of a construction business previously included in the Construction Products segment. This business was classified as held for sale beginning in the third quarter of 2013 and was sold in the second quarter of 2014.
	First Quarter 2013 Discontinued Operations - In the first quarter of 2013, the Company committed to a plan for the divestiture of a construction distribution business previously included in the Construction Products segment. This business was classified as held for sale beginning in the first quarter of 2013 and was sold in the second quarter of 2014.
	As of the second quarter of 2014, the Company had completed the divestiture of all of the businesses previously reported as discontinued operations.
	Results of the discontinued operations for the three months ended March 31, 2014 were as follows:
	In millions	Three Months Ended
		31-Mar-14
	Operating revenues	$	586
	Income before income taxes	$	72
	Income tax expense	(27		)
	Income from discontinued operations	$	45
	In April 2014, the Financial Accounting Standards Board ("FASB") issued authoritative guidance to change the criteria for reporting discontinued operations. Under the new guidance, only disposals representing a strategic shift in a company's operations and financial results should be reported as discontinued operations, with expanded disclosures. In addition, disclosure of the pre-tax income attributable to a disposal of a significant part of an organization that does not qualify as a discontinued operation is required. The Company adopted this new guidance effective January 1, 2015. The new guidance applies prospectively to new disposals and new classifications of disposal groups held for sale after such date. As a result, this guidance did not have any impact on the Company's financial statements or related disclosures upon adoption.

Income_Taxes

Income Taxes	3 Months Ended
	Mar. 31, 2015
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes
	The Company files 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 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. The Company has recorded its best estimate of the potential exposure for these issues. 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 $68 million related predominantly to various intercompany transactions. The Company has recorded its best estimate of the potential exposure for these issues.
	On February 18, 2014, the Company received a Notice of Deficiency (“NOD”) from the IRS asserting that a non-taxable return of capital received from a subsidiary was a taxable dividend distribution. The NOD assesses additional taxes of $70 million for the 2006 tax year, plus interest and penalties. In May 2014, the Company petitioned the United States Tax Court to challenge the NOD. The Company's petition was subsequently denied and the case will proceed to court. Although the outcome of this process cannot be predicted with certainty, the Company believes it will be successful in defending its positions. Accordingly, no reserve has been recorded related to this matter.

Inventories

Inventories	3 Months Ended
	Mar. 31, 2015
Inventory Disclosure [Abstract]
Inventories	Inventories
	Inventories as of March 31, 2015 and December 31, 2014 were as follows:
	In millions	31-Mar-15			31-Dec-14
	Raw material	$	456		$	458
	Work-in-process	140			133
	Finished goods	679			677
	LIFO reserve	(88		)	(88		)
	Total inventories	$	1,187		$	1,180

Retirement_Plans_and_Postretir

Retirement Plans and Postretirement Benefits	3 Months Ended
	Mar. 31, 2015
Compensation and Retirement Disclosure [Abstract]
Retirement Plans and Postretirement Benefits	Retirement Plans and Postretirement Benefits
	Pension and other postretirement benefit costs related to both continuing and discontinued operations for the three months ended March 31, 2015 and 2014, were as follows:
		Three Months Ended
		March 31,
	In millions	Pension						Other Postretirement Benefits
		2015			2014			2015			2014
	Components of net periodic benefit cost:
	Service cost	$	18		$	20		$	3		$	3
	Interest cost	23			26			6			6
	Expected return on plan assets	(38		)	(40		)	(6		)	(6		)
	Amortization of actuarial (gain) loss	15			12			—			(2		)
	Net periodic benefit cost	$	18		$	18		$	3		$	1
	Amounts were included in the statement of income as follows:
	Continuing operations	$	18		$	16		$	3		$	1
	Discontinued operations	—			2			—			—
	Net periodic benefit cost	$	18		$	18		$	3		$	1
	The Company expects to contribute approximately $100 million to its pension plans and $5 million to its other postretirement plans in 2015. As of March 31, 2015, contributions of $27 million to pension plans and $1 million to other postretirement plans have been made.

Debt

Debt	3 Months Ended
	Mar. 31, 2015
Debt Disclosure [Abstract]
Debt	Debt
	Short-term debt as of March 31, 2015 and December 31, 2014 included commercial paper of $1.7 billion and $1.4 billion, respectively.
	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 March 31, 2015 and December 31, 2014 were as follows:
	In millions	31-Mar-15		31-Dec-14
	Fair value	$	6,438	$	6,431
	Carrying value	5,846		5,982
	The approximate fair values of the Company's long-term debt, including current maturities, were based on a Level 2 valuation model, using observable inputs which included market rates for comparable instruments for the respective periods.

Accumulated_Other_Comprehensiv

Accumulated Other Comprehensive Income	3 Months Ended
	Mar. 31, 2015
Equity [Abstract]
Accumulated Other Comprehensive Income	Accumulated Other Comprehensive Income
	The following table summarizes changes in Accumulated other comprehensive income for the three months ended March 31, 2015 and 2014:
		Three Months Ended
	In millions	March 31,
		2015			2014
	Beginning balance	$	(658	)	$	384
	Foreign currency translation adjustments during the period	(527		)	28
	Foreign currency translation adjustments reclassified to income	—			—
	Income taxes	(50		)	—
	Total foreign currency translation adjustments	(577		)	28
	Pension and other postretirement benefit adjustments during the period	(2		)	—
	Pension and other postretirement benefit adjustments reclassified to income	15			10
	Income taxes	(4		)	(2		)
	Total pension and other postretirement benefit adjustments	9			8
	Ending balance	$	(1,226	)	$	420
	Pension and other postretirement benefit adjustments reclassified to income primarily relate to the amortization of actuarial (gain) loss and prior service cost. Refer to the Retirement Plans and Postretirement Benefits note for additional information.
	The Company designated the €1.0 billion of Euro notes issued in May 2014 as a hedge 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 from fluctuations in the Euro to U.S. dollar exchange rate have been recorded as foreign currency translation adjustments within Accumulated other comprehensive income. The unrealized gain recorded in Accumulated other comprehensive income related to the net investment hedge was $293 million and $158 million as of March 31, 2015 and December 31, 2014, respectively.
	The ending balance of Accumulated other comprehensive income as of March 31, 2015 and 2014 consisted of cumulative translation adjustment expense of $842 million and income of $702 million, respectively, and unrecognized pension and other postretirement benefits costs, net of tax, of $384 million and $282 million, respectively.

Segment_Information

Segment Information	3 Months Ended
	Mar. 31, 2015
Segment Reporting [Abstract]
Segment Information	Segment Information
	The Company has seven reportable segments: Automotive OEM; Test & Measurement and Electronics; Food Equipment; Polymers & Fluids; Welding; Construction Products; and Specialty Products. See Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations for information regarding operating revenues and operating income for the Company's segments.

Discontinued_Operations_Tables

Discontinued Operations (Tables)	3 Months Ended
	Mar. 31, 2015
Discontinued Operations and Disposal Groups [Abstract]
Results of discontinued operations	Results of the discontinued operations for the three months ended March 31, 2014 were as follows:
	In millions	Three Months Ended
		31-Mar-14
	Operating revenues	$	586
	Income before income taxes	$	72
	Income tax expense	(27		)
	Income from discontinued operations	$	45

Inventories_Tables

Inventories (Tables)	3 Months Ended
	Mar. 31, 2015
Inventory Disclosure [Abstract]
Inventories	Inventories as of March 31, 2015 and December 31, 2014 were as follows:
	In millions	31-Mar-15			31-Dec-14
	Raw material	$	456		$	458
	Work-in-process	140			133
	Finished goods	679			677
	LIFO reserve	(88		)	(88		)
	Total inventories	$	1,187		$	1,180

Retirement_Plans_and_Postretir1

Retirement Plans and Postretirement Benefits (Tables)	3 Months Ended
	Mar. 31, 2015
Compensation and Retirement Disclosure [Abstract]
Pension and other postretirement benefit costs	Pension and other postretirement benefit costs related to both continuing and discontinued operations for the three months ended March 31, 2015 and 2014, were as follows:
		Three Months Ended
		March 31,
	In millions	Pension						Other Postretirement Benefits
		2015			2014			2015			2014
	Components of net periodic benefit cost:
	Service cost	$	18		$	20		$	3		$	3
	Interest cost	23			26			6			6
	Expected return on plan assets	(38		)	(40		)	(6		)	(6		)
	Amortization of actuarial (gain) loss	15			12			—			(2		)
	Net periodic benefit cost	$	18		$	18		$	3		$	1
	Amounts were included in the statement of income as follows:
	Continuing operations	$	18		$	16		$	3		$	1
	Discontinued operations	—			2			—			—
	Net periodic benefit cost	$	18		$	18		$	3		$	1

Debt_Tables

Debt (Tables)	3 Months Ended
	Mar. 31, 2015
Debt Disclosure [Abstract]
Fair value and carrying value of long-term debt, including current maturities	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 March 31, 2015 and December 31, 2014 were as follows:
	In millions	31-Mar-15		31-Dec-14
	Fair value	$	6,438	$	6,431
	Carrying value	5,846		5,982

Accumulated_Other_Comprehensiv1

Accumulated Other Comprehensive Income (Tables)	3 Months Ended
	Mar. 31, 2015
Equity [Abstract]
Schedule of Accumulated Other Comprehensive Income	The following table summarizes changes in Accumulated other comprehensive income for the three months ended March 31, 2015 and 2014:
		Three Months Ended
	In millions	March 31,
		2015			2014
	Beginning balance	$	(658	)	$	384
	Foreign currency translation adjustments during the period	(527		)	28
	Foreign currency translation adjustments reclassified to income	—			—
	Income taxes	(50		)	—
	Total foreign currency translation adjustments	(577		)	28
	Pension and other postretirement benefit adjustments during the period	(2		)	—
	Pension and other postretirement benefit adjustments reclassified to income	15			10
	Income taxes	(4		)	(2		)
	Total pension and other postretirement benefit adjustments	9			8
	Ending balance	$	(1,226	)	$	420

Discontinued_Operations_Detail

Discontinued Operations (Details) (USD $)	3 Months Ended
In Millions, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Discontinued Operations and Disposal Groups [Abstract]
Operating revenues		$586
Income before income taxes		72
Income tax expense		-27
Income from discontinued operations	$0	$45

Income_Taxes_Details

Income Taxes (Details) (USD $)	3 Months Ended	0 Months Ended
In Millions, unless otherwise specified	Mar. 31, 2015	Feb. 18, 2014
Income Tax Examination [Line Items]
Period for unrecognized tax benefits to decrease	12 months
Significant Change in Unrecognized Tax Benefits is Reasonably Possible, Amount of Unrecorded Benefit	$68
Internal Revenue Service (IRS) [Member] | Tax Year 2006 [Member]
Income Tax Examination [Line Items]
IRS Notice of Deficiency tax assessment		$70

Inventories_Details

Inventories (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
In Millions, unless otherwise specified
Inventory Disclosure [Abstract]
Raw material	$456	$458
Work-in-process	140	133
Finished goods	679	677
LIFO reserve	-88	-88
Total inventories	$1,187	$1,180

Retirement_Plans_and_Postretir2

Retirement Plans and Postretirement Benefits (Details) (USD $)	3 Months Ended
In Millions, unless otherwise specified	Mar. 31, 2015	Mar. 31, 2014
Amounts were included in the statement of income as follows:
Continuing operations	$458	$428
Income from Discontinued Operations	0	45
Net Income	458	473
Pension [Member]
Components of net periodic benefit cost:
Service cost	18	20
Interest cost	23	26
Expected return on plan assets	-38	-40
Amortization of actuarial (gain) loss	15	12
Net periodic benefit cost	18	18
Amounts were included in the statement of income as follows:
Continuing operations	18	16
Income from Discontinued Operations	0	2
Net Income	18	18
Other Postretirement Benefits [Member]
Components of net periodic benefit cost:
Service cost	3	3
Interest cost	6	6
Expected return on plan assets	-6	-6
Amortization of actuarial (gain) loss	0	-2
Net periodic benefit cost	3	1
Amounts were included in the statement of income as follows:
Continuing operations	3	1
Income from Discontinued Operations	0	0
Net Income	$3	$1

Retirement_Plans_and_Postretir3

Retirement Plans and Postretirement Benefits (Details Textual) (USD $)	3 Months Ended
In Millions, unless otherwise specified	Mar. 31, 2015
Pension [Member]
Defined Benefit Plan Disclosure [Line Items]
Expected current year contributions to benefit plans	$100
Contributions to benefit plans	27
Other Postretirement Benefits [Member]
Defined Benefit Plan Disclosure [Line Items]
Expected current year contributions to benefit plans	5
Contributions to benefit plans	$1

Debt_Details

Debt (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Debt Disclosure [Abstract]
Outstanding commercial paper	$1,700,000,000	$1,400,000,000
Fair value	6,438,000,000	6,431,000,000
Carrying value	$5,846,000,000	$5,982,000,000

Accumulated_Other_Comprehensiv2

Accumulated Other Comprehensive Income (Details)	Mar. 31, 2015	Dec. 31, 2014	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Dec. 31, 2014	31-May-14
	USD ($)	USD ($)	USD ($)	USD ($)	Accumulated Translation Adjustment [Member]	Accumulated Translation Adjustment [Member]	Accumulated Defined Benefit Plans Adjustment [Member]	Accumulated Defined Benefit Plans Adjustment [Member]	Euro Notes [Member]	Euro Notes [Member]	Euro Notes [Member]
					USD ($)	USD ($)	USD ($)	USD ($)	Net Investment Hedging [Member]	Net Investment Hedging [Member]	Net Investment Hedging [Member]
									USD ($)	USD ($)	EUR (€)
Changes in Accumulated Other Comprehensive Income [Roll Forward]
Beginning balance	($1,226,000,000)	($658,000,000)	$420,000,000	$384,000,000
Other comprehensive income (loss) adjustments during the period					-527,000,000	28,000,000	-2,000,000	0
Other comprehensive income (loss), adjustments reclassified to income					0	0	15,000,000	10,000,000
Income taxes					-50,000,000	0	-4,000,000	-2,000,000
Other comprehensive income (loss), net of tax					-577,000,000	28,000,000	9,000,000	8,000,000
Ending balance	-1,226,000,000	-658,000,000	420,000,000	384,000,000	-842,000,000	702,000,000	-384,000,000	-282,000,000
Face value of notes											1,000,000,000
Accumulated other comprehensive income related to net investment hedge unrealized gain									$293,000,000	$158,000,000

Segment_Information_Details

Segment Information (Details)	3 Months Ended
	Mar. 31, 2015
	Segment
Segment Reporting [Abstract]
Number of reportable segments	7