Illinois Tool Works Inc. (the “Company” or “ITW”) was founded in 1912 and incorporated in 1915. The Company is a multinational manufacturer of a diversified range of industrial products and equipment with approximately 840 operations in 57 countries. These 840 businesses are internally reported as 60 operating segments to senior management. The Company’s 60 operating segments have been aggregated into the following eight external reportable segments:
Transportation: Businesses in this segment produce components, fasteners, fluids and polymers, as well as truck remanufacturing and related parts and service.
In the Transportation segment, products and services include:
• metal and plastic components, fasteners and assemblies for automobiles and light trucks;
• fluids and polymers for auto aftermarket maintenance and appearance;
• fillers and putties for auto body repair;
• polyester coatings and patch and repair products for the marine industry; and
• truck remanufacturing and related parts and service.
Industrial Packaging: Businesses in this segment produce steel, plastic and paper products and equipment used for bundling, shipping and protecting goods in transit.
In the Industrial Packaging segment, products include:
• steel and plastic strapping and related tools and equipment;
• plastic stretch film and related equipment;
• paper and plastic products that protect goods in transit; and
• metal jacketing and other insulation products.
Food Equipment: Businesses in this segment produce commercial food equipment and related service.
In the Food Equipment segment, products and services include:
• warewashing equipment;
• cooking equipment, including ovens, ranges and broilers;
• refrigeration equipment, including refrigerators, freezers and prep tables;
• food processing equipment, including slicers, mixers and scales;
• kitchen exhaust, ventilation and pollution control systems; and
• food equipment service, maintenance and repair.
Power Systems & Electronics: Businesses in this segment produce equipment and consumables associated with specialty power conversion, metallurgy and electronics.
In the Power Systems & Electronics segment, products include:
• arc welding equipment;
• metal arc welding consumables and related accessories;
• metal solder materials for PC board fabrication;
• equipment and services for microelectronics assembly;
• electronic components and component packaging; and
• airport ground support equipment.
Construction Products: Businesses in this segment produce tools, fasteners and other products for construction applications.
In the Construction Products segment, products include:
• fasteners and related fastening tools for wood and metal applications;
• anchors, fasteners and related tools for concrete applications;
• metal plate truss components and related equipment and software; and
• packaged hardware, fasteners, anchors and other products for retail.
Polymers & Fluids: Businesses in this segment produce adhesives, sealants, lubrication and cutting fluid, and hygiene products.
In the Polymers & Fluids segment, products include:
• adhesives for industrial, construction and consumer purposes;
• chemical fluids that clean or add lubrication to machines;
• epoxy and resin-based coating products for industrial applications;
• hand wipes and cleaners for industrial applications; and
• pressure-sensitive adhesives and components for telecommunications, electronics, medical and transportation applications.
Decorative Surfaces: Businesses in this segment produce decorative surfacing materials for furniture, office and retail space, countertops, flooring and other applications.
In the Decorative Surfaces segment, products include:
• decorative high-pressure laminate for furniture, office and retail space, and countertops;
• high-pressure laminate flooring; and
• high-pressure laminate worktops.
All Other: This segment includes all other operating segments.
In the All Other segment, products include:
• equipment and related software for testing and measuring of materials and structures;
• plastic reclosable packaging for consumer food storage;
• plastic reclosable bags for storage of clothes and home goods;
• plastic consumables that multi-pack cans and bottles and related equipment;
• plastic fasteners and components for appliances, furniture and industrial uses;
• metal fasteners and components for appliances and industrial applications;
• swabs, wipes and mats for clean room usage;
• foil, film and related equipment used to decorate consumer products;
• product coding and marking equipment and related consumables;
• paint spray and adhesive dispensing equipment;
• static and contamination control equipment; and
• line integration, conveyor systems and line automation for the food and beverage industries.
80/20 Business Process
A key element of the Company’s business strategy is its continuous 80/20 business process for both existing businesses and new acquisitions. The basic concept of this 80/20 business process is to focus on what is most important (the 20% of the items which account for 80% of the value) and to spend less time and resources on the less important (the 80% of the items which account for 20% of the value). The Company’s operations use this 80/20 business process to simplify and focus on the key parts of their business, and as a result, reduce complexity that often disguises what is truly important. The Company’s 840 operations utilize the 80/20 process in various aspects of their business. Common applications of the 80/20 business process include:
• Simplifying product lines by reducing the number of products offered by combining the features of similar products, outsourcing products or, as a last resort, eliminating low-value products.
• Segmenting the customer base by focusing on the 80/20 customers separately and finding alternative ways to serve the 20/80 customers.
• Simplifying the supplier base by partnering with 80/20 suppliers and reducing the number of 20/80 suppliers.
• Designing business processes, systems and measurements around the 80/20 activities.
The result of the application of this 80/20 business process is that the Company has over time improved its long-term operating and financial performance. These 80/20 efforts can result in restructuring projects that reduce costs and improve margins. Corporate management works closely with those businesses that have operating results below expectations to help those businesses better apply this 80/20 business process and improve their results.
In August 2008, the Company’s Board of Directors authorized the divestiture of the Click Commerce industrial software business which was previously reported in the All Other segment. In the second quarter of 2009, the Company completed the sale of the Click Commerce business.
In 2006, the Company divested a construction business. In 2007, the Company divested an automotive machinery business and a consumer packaging business. In the fourth quarter of 2007, the Company classified an automotive components business and a second consumer packaging business as held for sale. The second consumer packaging business was sold in 2008. The Company completed the divestiture of the automotive components business in 2009.
Additionally, in August 2008, the Company’s Board of Directors authorized the divestiture of the Decorative Surfaces segment which was subsequently classified as a discontinued operation. In May 2009, the Company’s Board of Directors rescinded its earlier resolution to divest the Decorative Surfaces segment and, accordingly, all periods presented have been restated to present the Decorative Surfaces segment as a continuing operation.
The Company employed approximately 59,000 persons as of December 31, 2009 and considers its employee relations to be excellent.
The Company’s international operations include subsidiaries and joint ventures in 56 foreign countries on six continents. These operations serve such end markets as construction, general industrial, automotive, food institutional/restaurant and service, food and beverage, electronics, consumer durables, primary metals, and others on a worldwide basis. The Company’s revenues from sales to customers outside the United States were approximately 57% of revenues in 2009, 58% of revenues in 2008 and 55% of revenues in 2007.