Item 8. Financial Statements and Supplementary Data

MANAGEMENT REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of Illinois Tool Works Inc. (the "Company" or "ITW") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). ITW’s internal control system was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

ITW management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on our assessment we believe that, as of December 31, 2014, the Company’s internal control over financial reporting is effective based on those criteria.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2014 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report herein.

/s/ E. Scott Santi E. Scott Santi President & Chief Executive Officer February 13, 2015		/s/ Michael M. Larsen Michael M. Larsen Senior Vice President & Chief Financial Officer February 13, 2015

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Illinois Tool Works Inc.

Glenview, IL

We have audited the accompanying consolidated statements of financial position of Illinois Tool Works Inc. and subsidiaries (the "Company") as of December 31, 2014 and 2013, and the related consolidated statements of income, comprehensive income, income reinvested in the business, and cash flows for each of the three years in the period ended December 31, 2014. We also have audited the Company's internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Illinois Tool Works Inc. and Subsidiaries as of December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ DELOITTE & TOUCHE LLP

Deloitte & Touche LLP

Chicago, Illinois

February 13, 2015

Statement of Income

Illinois Tool Works Inc. and Subsidiaries

	For the Years Ended December 31
In millions except per share amounts	2014				2013				2012
Operating Revenues	$	14,484			$	14,135			$	14,791
Cost of revenues	8,673				8,554				9,134
Selling, administrative, and research and development expenses	2,678				2,815				2,928
Amortization of intangible assets	242				250				252
Impairment of goodwill and other intangible assets	3				2				2
Operating Income	2,888				2,514				2,475
Interest expense	(250		)		(239		)		(213		)
Gain on sale of interest in Decorative Surfaces	—				—				933
Other income (expense)	61				72				11
Income from Continuing Operations Before Income Taxes	2,699				2,347				3,206
Income taxes	809				717				973
Income from Continuing Operations	1,890				1,630				2,233
Income from Discontinued Operations	1,056				49				637
Net Income	$	2,946			$	1,679			$	2,870
Income Per Share from Continuing Operations:
Basic	$	4.70			$	3.65			$	4.75
Diluted	$	4.67			$	3.63			$	4.72
Income Per Share from Discontinued Operations:
Basic	$	2.63			$	0.11			$	1.36
Diluted	$	2.61			$	0.11			$	1.35
Net Income Per Share:
Basic	$	7.33			$	3.76			$	6.11
Diluted	$	7.28			$	3.74			$	6.06

The Notes to Financial Statements are an integral part of this statement.

Statement of Comprehensive Income

Illinois Tool Works Inc. and Subsidiaries

	For the Years Ended December 31
In millions	2014				2013				2012
Net Income	$	2,946			$	1,679			$	2,870
Other Comprehensive Income:
Foreign currency translation adjustments	(939		)		(193		)		94
Pension and other postretirement benefit adjustments, net of tax	(103		)		284				(25		)
Comprehensive Income	$	1,904			$	1,770			$	2,939

Statement of Income Reinvested in the Business

Illinois Tool Works Inc. and Subsidiaries

	For the Years Ended December 31
In millions	2014				2013				2012
Beginning Balance	$	14,943			$	13,973			$	11,794
Net income	2,946				1,679				2,870
Cash dividends declared	(716		)		(709		)		(691		)
Ending Balance	$	17,173			$	14,943			$	13,973

The Notes to Financial Statements are an integral part of these statements.

Statement of Financial Position

Illinois Tool Works Inc. and Subsidiaries

	December 31
In millions except shares	2014				2013
Assets
Current Assets:
Cash and equivalents	$	3,990			$	3,618
Trade receivables	2,293				2,365
Inventories	1,180				1,247
Deferred income taxes	212				384
Prepaid expenses and other current assets	401				366
Assets held for sale	—				1,836
Total current assets	8,076				9,816
Net plant and equipment	1,686				1,709
Goodwill	4,667				4,886
Intangible assets	1,799				1,999
Deferred income taxes	301				359
Other assets	1,149				1,197
	$	17,678			$	19,966
Liabilities and Stockholders’ Equity
Current Liabilities:
Short-term debt	$	1,476			$	3,551
Accounts payable	512				634
Accrued expenses	1,287				1,272
Cash dividends payable	186				181
Income taxes payable	64				69
Deferred income taxes	8				10
Liabilities held for sale	—				317
Total current liabilities	3,533				6,034
Noncurrent Liabilities:
Long-term debt	5,981				2,793
Deferred income taxes	338				507
Other liabilities	1,002				923
Total noncurrent liabilities	7,321				4,223
Stockholders’ Equity:
Common stock:
Issued - 550,035,604 shares in 2014 and 2013	6				6
Additional paid-in-capital	1,096				1,046
Income reinvested in the business	17,173				14,943
Common stock held in treasury	(10,798		)		(6,676		)
Accumulated other comprehensive income	(658		)		384
Noncontrolling interest	5				6
Total stockholders’ equity	6,824				9,709
	$	17,678			$	19,966

The Notes to Financial Statements are an integral part of this statement.

Statement of Cash Flows

Illinois Tool Works Inc. and Subsidiaries

	For the Years Ended December 31
In millions	2014				2013				2012
Cash Provided by (Used for) Operating Activities:
Net income	$	2,946			$	1,679			$	2,870
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation	262				299				323
Amortization and impairment of goodwill and other intangible assets	245				314				290
Change in deferred income taxes	55				6				243
Provision for uncollectible accounts	7				3				11
(Income) loss from investments	(8		)		(12		)		(11		)
(Gain) loss on sale of plant and equipment	2				(1		)		(4		)
(Gain) loss on discontinued operations	(1,718		)		91				(499		)
(Gain) loss on sale of operations and affiliates	6				5				(931		)
Stock-based compensation expense	39				37				54
Gain on acquisition of controlling interest in an equity investment	—				(30		)		—
Other non-cash items, net	10				17				23
Change in assets and liabilities, net of acquisitions and divestitures:
(Increase) decrease in—
Trade receivables	(70		)		(83		)		(13		)
Inventories	(10		)		24				82
Prepaid expenses and other assets	(97		)		229				(75		)
Increase (decrease) in—
Accounts payable	(20		)		8				(21		)
Accrued expenses and other liabilities	5				161				(87		)
Income taxes	33				(176		)		(173		)
Other, net	(71		)		(43		)		(10		)
Net cash provided by operating activities	1,616				2,528				2,072
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents) and additional interest in affiliates	(45		)		(369		)		(723		)
Additions to plant and equipment	(361		)		(368		)		(382		)
Proceeds from investments	28				40				281
Proceeds from sale of plant and equipment	28				38				30
Net proceeds from sale of discontinued operations	3,191				206				815
Proceeds from sale of operations and affiliates	18				2				1,028
Other, net	(17		)		(5		)		(2		)
Net cash provided by (used for) investing activities	2,842				(456		)		1,047
Cash Provided by (Used for) Financing Activities:
Cash dividends paid	(711		)		(528		)		(865		)
Issuance of common stock	148				206				283
Repurchases of common stock	(4,346		)		(2,106		)		(2,020		)
Net proceeds from (repayments of) debt with original maturities of three months or less	(239		)		1,267				208
Proceeds from debt with original maturities of more than three months	3,329				3				1,079
Repayments of debt with original maturities of more than three months	(1,751		)		(6		)		(272		)
Excess tax benefits from stock-based compensation	33				24				16
Other, net	(14		)		—				—
Net cash provided by (used for) financing activities	(3,551		)		(1,140		)		(1,571		)
Effect of Exchange Rate Changes on Cash and Equivalents	(535		)		(93		)		53
Cash and Equivalents:
Increase (decrease) during the year	372				839				1,601
Beginning of year	3,618				2,779				1,178
End of year	$	3,990			$	3,618			$	2,779
Supplementary Cash Flow Information:
Cash Paid During the Year for Interest	$	236			$	240			$	211
Cash Paid During the Year for Income Taxes, Net of Refunds	$	1,502			$	602			$	1,134
Supplementary Non-Cash Investing Information:
Liabilities Assumed from Acquisitions	$	4			$	145			$	194
Equity investment in Wilsonart	$	—			$	—			$	204

The Notes to Financial Statements are an integral part of this statement.

Notes to Financial Statements

The Notes to Financial Statements furnish additional information on items in the financial statements. The notes have been arranged in the same order as the related items appear in the statements.

Illinois Tool Works Inc. (the "Company" or "ITW") is a global manufacturer of a diversified range of industrial products and equipment with approximately 90 divisions in 57 countries. The Company primarily serves the automotive OEM/tiers, automotive aftermarket, general industrial, commercial food equipment, and construction end markets.

Significant accounting principles and policies of the Company are in italics. Certain reclassifications of prior year data have been made to conform to current year reporting.

The preparation of the Company’s financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes to financial statements. Actual results could differ from those estimates. The significant estimates included in the preparation of the financial statements are related to inventories, trade receivables, plant and equipment, income taxes, goodwill and intangible assets, product liability matters, litigation, product warranties, pensions, other postretirement benefits, environmental matters and stock-based compensation.

Consolidation and Translation—The financial statements include the Company and its majority-owned subsidiaries. The Company follows the equity method of accounting for investments where the Company has a significant influence but not a controlling interest. Intercompany transactions are eliminated from the financial statements. Foreign subsidiaries’ assets and liabilities are translated to U.S. dollars at end-of-period exchange rates. Revenues and expenses are translated at average rates for the period. Translation adjustments are reported as a component of accumulated other comprehensive income in stockholders’ equity.

Divestiture of Majority Interest in Former Decorative Surfaces Segment—On August 15, 2012, the Company entered into a definitive agreement (the "Investment Agreement") to divest a 51% majority interest in its Decorative Surfaces segment to certain funds managed by Clayton, Dubilier & Rice, LLC ("CD&R"). The transaction closed on October 31, 2012 resulting in a pre-tax gain of $933 million ($632 million after-tax) in the fourth quarter of 2012.

Under the terms of the Investment Agreement, the Company contributed the assets and stock of the Decorative Surfaces segment to a newly formed entity, Wilsonart International Holdings LLC ("Wilsonart"). Through a combination of CD&R’s equity investment in Wilsonart and new third party borrowings by a subsidiary of Wilsonart, the Company and its subsidiaries received payments of approximately $1.05 billion from Wilsonart and its subsidiaries as well as common units (the "Common Units") initially representing approximately 49% (on an as-converted basis) of the total outstanding equity of Wilsonart immediately following the closing of the transaction. CD&R contributed $395 million to Wilsonart in exchange for newly issued cumulative convertible participating preferred units (the "Preferred Units") of Wilsonart initially representing approximately 51% (on an as-converted basis) of the total outstanding equity immediately following the closing of the transaction. The Preferred Units rank senior to the Common Units as to dividends and liquidation preference, and accrue dividends at a rate of 10.00% per annum.

As of October 31, 2012, the Company ceased consolidating the results of the Decorative Surfaces segment and now reports its ownership interest in Wilsonart using the equity method of accounting. The Company recorded its initial equity investment in Wilsonart at fair value. The fair value was determined using an implied equity value approach, which is a Level 3 valuation method. Under this approach, the total equity of Wilsonart was valued using an option pricing model and the value of the Preferred Units was deducted to arrive at the implied equity value of the Common Units. The significant unobservable inputs utilized in this calculation were the expected term of the investment and assumed volatility during the term. The Company also applied a discount factor to the implied equity value of the Common Units due to the lack of marketability of the Common Units. The fair value of the Company’s retained ownership interest was determined to be $204 million and resulted in a pre-tax gain of $51 million related to the retained interest, which was included in the pre-tax gain noted above. The Company’s equity investment in Wilsonart is reported in Other assets in the consolidated statement of financial position. The Company’s proportionate share in the income (loss) of Wilsonart is reported in Other income (expense) in the consolidated statement of income. As the Company’s investment in Wilsonart is structured as a partnership for U.S. tax purposes, U.S. taxes are recorded separately from the equity investment. The Company recorded a pre-tax loss of $30 million for the two-month period ended December 31, 2012 in Other income (expense) primarily due to transaction costs related to the formation of Wilsonart and the impact of purchase accounting. The Company recorded pre-tax losses of $9

million and $14 million for the years ended December 31, 2014 and 2013, respectively, in Other income (expense) related to its interest in Wilsonart.

Due to the Company’s continuing involvement through its 49% interest in Wilsonart, the historical operating results of Decorative Surfaces are presented in continuing operations. Additionally, as of November 1, 2012, the operating results of Decorative Surfaces are no longer reviewed by senior management of the Company and therefore, effective the fourth quarter of 2012, Decorative Surfaces was no longer a reportable segment of the Company.

Historical operating results of the former Decorative Surfaces segment for 2012 were as follows:

In millions		For the Ten Months Ended October 31, 2012
Operating revenues		$	921
Operating income		143

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 February 2013, the Company announced that it was initiating a review process to explore strategic alternatives for its Industrial Packaging segment. In September 2013, the Company’s Board of Directors authorized a plan to commence a sale process for the Industrial Packaging segment. The Company classified the Industrial Packaging segment as held for sale beginning in the third quarter of 2013 and no longer presented this segment as part of its continuing operations.

On February 6, 2014, the Company announced that it had signed a definitive agreement to sell its Industrial Packaging business to The Carlyle Group for $3.2 billion. The transaction was completed on May 1, 2014, resulting in a pre-tax gain of $1.7 billion ($1.1 billion after-tax) in the second quarter of 2014 which was included in Income from discontinued operations.

In the third quarter of 2013, the Company also committed to plans for the divestiture of a construction distribution business previously included in the Construction Products segment and a specialty coatings business previously included in the Polymers & Fluids segment. These businesses were classified as held for sale beginning in the third quarter of 2013. The specialty coatings business was sold in the fourth quarter of 2013. The construction distribution business was sold in the second quarter of 2014.

First Quarter 2013 Discontinued Operations-In the first quarter of 2013, the Company committed to plans for the divestiture of two transportation related businesses and a machine components business previously included in the Specialty Products segment, two construction distribution businesses previously included in the Construction Products segment, and a chemical manufacturing business previously included in the Polymers & Fluids segment. These businesses were classified as held for sale beginning in the first quarter of 2013.

The Company also reclassified certain previously divested businesses as discontinued operations in the first quarter of 2013. These included a consumer packaging business that was previously included in the Specialty Products segment, a packaging distribution business which was previously included in the former Industrial Packaging segment, and a welding manufacturing business previously included in the Welding segment.

In the second quarter of 2013, the Company divested one of the held for sale transportation related businesses, the machine components business, and the chemical manufacturing business. In the third quarter of 2013, the Company divested the second held for sale transportation related business. In the fourth quarter of 2013, the Company divested one construction distribution business and the remaining construction distribution business was sold in the second quarter of 2014.

2011 Discontinued Operations-In April 2011, the Company entered into a definitive agreement to sell its finishing group of businesses included within the Specialty Products segment to Graco Inc. in a $650 million cash transaction. The sale of the finishing business to Graco was completed on April 2, 2012.

Additionally, in the second quarter of 2011, the Company’s Board of Directors approved plans to divest a consumer packaging business in the Specialty Products segment. The consumer packaging business was sold in the third quarter of 2012.

The operating results of the businesses discussed above are reported as discontinued operations in the statement of income for all periods presented. Results of the discontinued operations for the years ended December 31, 2014, 2013 and 2012 were as follows:

In millions		2014				2013				2012
Operating revenues		$	798			$	2,769			$	3,275
Income before income taxes		$	1,805			$	186			$	886
Income tax expense		(749		)		(137		)		(249		)
Income from discontinued operations		$	1,056			$	49			$	637

Included in income before income taxes from discontinued operations are net gain on disposal of $1.7 billion in 2014, net losses on disposal of $91 million in 2013, and net gains of $499 million in 2012. The net gain in 2014 included a pre-tax gain of $1.7 billion ($1.1 billion after-tax) on the sale of the Industrial Packaging business. The net losses in 2013 included a $39 million pre-tax loss related to the sale of one of the construction distribution businesses and a $20 million pre-tax loss related to the sale of one of the transportation businesses. The net gains in 2012 included a $452 million pre-tax gain on the sale of the finishing group of businesses. Also included in income before income taxes from discontinued operations in 2013 was a $42 million goodwill impairment charge recorded in connection with the anticipated sale of one of the transportation related businesses.

In 2014, income tax expense from discontinued operations included $175 million of U.S. income tax expense related to the repatriation of approximately $1.3 billion of international proceeds from the sale of the Industrial Packaging business. In 2013, income tax expense from discontinued operations included $42 million of tax expense related to the legal restructuring of the Industrial Packaging business.

There were no businesses classified as held for sale as of December 31, 2014. As of December 31, 2013, the assets and liabilities of the Industrial Packaging business and the two construction distribution businesses discussed above were included in assets and liabilities held for sale in the statement of financial position, as follows:

In millions	December 31, 2013
Trade receivables	$	352
Inventories	244
Net plant and equipment	305
Goodwill and intangible assets	844
Other	91
Assets held for sale	$	1,836
Accounts payable	$	87
Accrued expenses	139
Other	91
Liabilities held for sale	$	317

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.

Acquisitions—The Company accounts for acquisitions under the acquisition method, in which assets acquired and liabilities assumed are recorded at fair value as of the date of acquisition. The operating results of the acquired companies are included in the Company’s consolidated financial statements from the date of acquisition. Acquisitions, individually and in the aggregate, did not materially affect the Company’s results of operations or financial position for any period presented. Net cash paid for acquisitions during 2014, 2013, and 2012 was $45 million, $369 million, and $723 million, respectively.

The premium over tangible net assets recorded for acquisitions based on purchase price allocations during 2014, 2013 and 2012 was as follows:

		2014							2013						2012
In millions except weighted-average lives (years)		Weighted- Average Life			Premium Recorded				Weighted- Average Life		Premium Recorded				Weighted- Average Life		Premium Recorded
Goodwill					$	18					$	247					$	333
Amortizable intangible assets:
Customer lists and relationships		11.4			12				11.2		100				12.2		169
Patents and proprietary technology		15.4			8				9.8		34				8.2		38
Trademarks and brands		12.9			3				15.5		35				12.8		36
Noncompete agreements		—			—				3.8		1				4.5		29
Other		—			—				5.1		11				7.2		12
Total amortizable intangible assets		12.9			23				11.4		181				10.7		284
Indefinite-lived intangible assets:
Trademarks and brands					—						—						42
Total premium recorded					$	41					$	428					$	659

Of the total goodwill recorded for acquisitions, the Company expects goodwill of $14 million in 2014, $25 million in 2013 and $15 million in 2012 will be tax deductible.

Operating Revenues are recognized when persuasive evidence of an arrangement exists, product has shipped and the risks and rewards of ownership have transferred or services have been rendered, the price to the customer is fixed or determinable, and collectibility is reasonably assured, which is generally at the time of product shipment. Typical sales arrangements are for standard products and provide for transfer of ownership and risk of loss at the time of shipment. In limited circumstances where significant obligations to the customer are unfulfilled at the time of shipment, typically involving installation and customer acceptance, revenue recognition is deferred until such obligations have been completed. Customer allowances and rebates, consisting primarily of volume discounts and other short-term incentive programs, are estimated at the time of sale based on historical experience and known trends and are recorded as a reduction in reported revenues.

In May 2014, the FASB issued authoritative guidance to change the criteria for revenue recognition. The core principle of the new standard is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, several new revenue recognition disclosures will be required. This guidance is effective for the Company beginning January 1, 2017. The Company is currently assessing the potential impact the guidance will have upon adoption.

Research and Development Expenses are recorded as expense in the year incurred. These costs were $227 million in 2014, $240 million in 2013 and $240 million in 2012.

Rental Expense was $130 million in 2014, $138 million in 2013 and $144 million in 2012. Future minimum lease payments under non-cancelable leases for the years ending December 31 are as follows:

In millions
2015	$	105
2016	78
2017	52
2018	35
2019	26
2020 and future years	41
	$	337

Advertising Expenses are recorded as expense in the year incurred. These costs were $66 million in 2014, $67 million in 2013 and $78 million in 2012.

Other Income (Expense) consisted of the following:

In millions		2014				2013				2012
Interest income		$	65			$	50			$	38
Gain (loss) on foreign currency transactions, net		8				(5		)		(10		)
Income from investments		8				12				11
Gain (loss) on disposal of operations and affiliates		(6		)		(5		)		(2		)
Equity loss in Wilsonart		(9		)		(14		)		(30		)
Gain on acquisition of controlling interest in an equity investment		—				30				—
Other, net		(5		)		4				4
		$	61			$	72			$	11

On January 31, 2013, the Company acquired the controlling interest of an existing consumer packaging business in the Specialty Products segment previously accounted for under the equity method. The Company recorded a pre-tax gain of $30 million in Other income (expense) in the first quarter of 2013 as a result of remeasuring the Company's existing equity interest to fair value by determining the implied equity value using a Level 3 valuation method.

Income Taxes—The Company utilizes the asset and liability method of accounting for income taxes. Deferred income taxes are determined based on the estimated future tax effects of differences between the financial and tax bases of assets and liabilities given the provisions of the enacted tax laws. The components of the provision for income taxes were as shown below:

In millions		2014				2013				2012
U.S. federal income taxes:
Current		$	413			$	410			$	474
Deferred		121				84				250
		534				494				724
Foreign income taxes:
Current		163				153				239
Deferred		66				35				(29		)
Benefit of net operating loss carryforwards		(13		)		(13		)		(30		)
		216				175				180
State income taxes:
Current		50				64				64
Deferred		9				(16		)		5
		59				48				69
		$	809			$	717			$	973

Income from continuing operations before income taxes for domestic and foreign operations was as follows:

In millions		2014				2013				2012
Domestic		$	1,669			$	1,444			$	2,207
Foreign		1,030				903				999
		$	2,699			$	2,347			$	3,206

The reconciliation between the U.S. federal statutory tax rate and the effective tax rate was as follows:

		2014			2013			2012
U.S. federal statutory tax rate		35.0	%		35.0	%		35.0	%
State income taxes, net of U.S. federal tax benefit		1.6			1.8			0.9
Differences between U.S. federal statutory and foreign tax rates		(3.5	)		(3.4	)		(2.2	)
Nontaxable foreign interest income		(3.6	)		(3.5	)		(2.8	)
Tax effect of foreign dividends		2.1			2.4			0.7
Tax relief for U.S. manufacturers		(1.5	)		(1.3	)		(1.1	)
Other, net		(0.1	)		(0.4	)		(0.2	)
Effective tax rate		30.0	%		30.6	%		30.3	%

Deferred U.S. federal income taxes and foreign withholding taxes have not been provided on the remaining undistributed earnings of certain international subsidiaries as these earnings are considered permanently invested. Undistributed earnings of these subsidiaries were approximately $7.1 billion and $9.0 billion as of December 31, 2014 and 2013, respectively. Upon repatriation of these earnings to the U.S. in the form of dividends or otherwise, the Company may be subject to U.S. income taxes and foreign withholding taxes. The actual U.S. tax cost would depend on income tax laws and circumstances at the time of distribution. Determination of the related tax liability is not practicable because of the complexities associated with the hypothetical calculation.

On January 1, 2014 the Company adopted new accounting guidance that requires companies to net unrecognized tax benefits against same-jurisdiction net operating losses or tax credit carryforwards that would be used to settle the position with the

relevant tax authority. The adoption of this new accounting guidance did not have a significant impact on the consolidated financial statements.

The components of deferred income tax assets and liabilities at December 31, 2014 and 2013 were as follows:

		2014								2013
In millions		Asset				Liability				Asset				Liability
Goodwill and intangible assets		$	277			$	(758	)		$	312			$	(795	)
Inventory reserves, capitalized tax cost and LIFO inventory		48				(1		)		58				(5		)
Investments		31				(273		)		32				(288		)
Plant and equipment		26				(85		)		25				(106		)
Accrued expenses and reserves		73				—				76				—
Employee benefit accruals		324				—				296				—
Foreign tax credit carryforwards		195				—				112				—
Net operating loss carryforwards		670				—				694				—
Capital loss carryforwards		80				—				91				—
Allowances for uncollectible accounts		11				—				14				—
Pension liabilities		11				—				—				(13		)
Deferred intercompany deductions		14				—				169				—
Unrealized loss (gain) on foreign debt instruments		—				(59		)		—				—
Other		123				(10		)		124				(11		)
Gross deferred income tax assets (liabilities)		1,883				(1,186		)		2,003				(1,218		)
Valuation allowances		(530		)		—				(559		)		—
Total deferred income tax assets (liabilities)		$	1,353			$	(1,186	)		$	1,444			$	(1,218	)

Valuation allowances are established when it is estimated that it is more likely than not that the tax benefit of the deferred tax asset will not be realized. The valuation allowances recorded at December 31, 2014 and 2013 related primarily to certain net operating loss carryforwards and capital loss carryforwards.

At December 31, 2014, the Company had net operating loss carryforwards available to offset future taxable income in the U.S. and certain foreign jurisdictions, which expire as follows:

	Gross Carryforwards Related
In millions	to Net Operating Losses
2015	$	2
2016	4
2017	18
2018	9
2019	12
2020	72
2021	75
2022-2034	87
Do not expire	2,086
	$	2,365

The Company has foreign tax credit carryforwards of $195 million as of December 31, 2014 that are available for use by the Company between 2015 and 2024.

The changes in the amount of unrecognized tax benefits during 2014, 2013 and 2012 were as follows:

In millions		2014				2013				2012
Beginning balance		$	268			$	249			$	437
Additions based on tax positions related to the current year		23				26				32
Additions for tax positions of prior years		12				40				62
Reductions for tax positions of prior years		(59		)		(21		)		(163		)
Settlements		(18		)		(27		)		(125		)
Foreign currency translation		(8		)		1				6
Ending balance		$	218			$	268			$	249

Included in the balance at December 31, 2014 were approximately $218 million of unrecognized tax benefits that, if recognized, would impact the Company’s effective tax rate.

During the third quarter of 2013, the Company recorded a discrete tax charge of $40 million related to the tax treatment of intercompany financing transactions that impact the taxability of foreign earnings.

During the fourth quarter of 2012, the Company came to an agreement with the Internal Revenue Service on issues related predominately to intercompany transactions and global legal structure reorganization transactions identified by the Internal Revenue Service during its 2008-2009 audit. Based on this agreement, the Company decreased its unrecognized tax benefits related to this matter by approximately $125 million and recorded an unfavorable tax charge of $35 million.

The Company and its subsidiaries file 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, 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. Due to the ongoing audits, 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 $44 million related predominantly to various intercompany transactions. The Company has recorded its best estimate of the potential exposure for these issues. The following table summarizes the open tax years for the Company’s major jurisdictions:

Jurisdiction		Open Tax Years
United States – Federal		2012-2014
United Kingdom		2012-2014
Germany		2009-2014
France		2007-2014
Australia		2010-2014

The Company recognizes interest and penalties related to income tax matters in income tax expense. The accrual for interest and penalties as of December 31, 2014 and 2013 was $30 million and $21 million, respectively.

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.

Income Per Share from Continuing Operations is computed by dividing income from continuing operations by the weighted-average number of shares outstanding for the period. Income from continuing operations per diluted share is computed by dividing income from continuing operations by the weighted-average number of shares assuming dilution for stock options and restricted stock units. Dilutive shares reflect the potential additional shares that would be outstanding if the dilutive stock options outstanding were exercised and the unvested restricted stock units vested during the period. The

computation of income per share from continuing operations was as follows:

In millions except per share amounts		2014				2013				2012
Income from continuing operations		$	1,890			$	1,630			$	2,233
Income per share from continuing operations—Basic:
Weighted-average common shares		401.7				446.2				469.8
Income per share from continuing operations—Basic		$	4.70			$	3.65			$	4.75
Income per share from continuing operations—Diluted:
Weighted-average common shares		401.7				446.2				469.8
Effect of dilutive stock options and restricted stock units		2.9				3.1				3.4
Weighted-average common shares assuming dilution		404.6				449.3				473.2
Income per share from continuing operations—Diluted		$	4.67			$	3.63			$	4.72

Options that were considered antidilutive were not included in the computation of diluted income per share from continuing operations. There were no antidilutive options outstanding as of December 31, 2014. The number of antidilutive options outstanding as of December 31, 2013 and 2012 was 0.1 million and 0.1 million, respectively.

Cash and Equivalents included interest-bearing instruments of $3.1 billion at December 31, 2014 and $2.0 billion at December 31, 2013. These interest-bearing instruments have maturities of three months or less and are stated at cost, which approximates fair value.

Trade Receivables were net of allowances for uncollectible accounts. The changes in the allowances for uncollectible accounts during 2014, 2013 and 2012 were as follows:

In millions		2014				2013				2012
Beginning balance		$	(46	)		$	(65	)		$	(65	)
Provision charged to expense		(7		)		(3		)		(11		)
Write-offs, net of recoveries		7				14				14
Acquisitions and divestitures		—				(1		)		—
Foreign currency translation		3				1				(1		)
Transfer to assets held for sale		—				8				—
Other		—				—				(2		)
Ending balance		$	(43	)		$	(46	)		$	(65	)

Inventories at December 31, 2014 and 2013 were as follows:

In millions		2014				2013
Raw material		$	458			$	482
Work-in-process		133				150
Finished goods		677				700
LIFO reserve		(88		)		(85		)
		$	1,180			$	1,247

Inventories are stated at the lower of cost or market and include material, labor and factory overhead. The last-in, first-out ("LIFO") method is used to determine the cost of the inventories at certain U.S. businesses. The first-in, first-out ("FIFO") method, which approximates current cost, is used for all other inventories. Inventories priced at LIFO were approximately 22% and 20% of total inventories as of December 31, 2014 and 2013, respectively. If the FIFO method was used for all inventories, total inventories would have been approximately $88 million and $85 million higher than reported at December 31, 2014 and 2013, respectively.

Prepaid Expenses and Other Current Assets as of December 31, 2014 and 2013 were as follows:

In millions		2014				2013
Income tax refunds receivable		$	129			$	120
Value-added-tax receivables		50				68
Vendor advances		30				30
Other		192				148
		$	401			$	366

Net Plant and Equipment are stated at cost, less accumulated depreciation. Renewals and improvements that increase the useful life of plant and equipment are capitalized. Maintenance and repairs are charged to expense as incurred. Depreciation of plant and equipment for financial reporting purposes is primarily computed on an accelerated basis for U.S. businesses and on a straight-line basis for a majority of the international businesses.

Depreciation was $262 million in 2014, $270 million in 2013 and $277 million in 2012, and was reflected primarily in cost of revenues. There was no depreciation included in Income from discontinued operations in 2014. Depreciation included in Income from discontinued operations was $29 million in 2013 and $46 million in 2012.

Net plant and equipment consisted of the following at December 31, 2014 and 2013:

In millions		2014				2013
Land		$	177			$	189
Buildings and improvements		1,200				1,235
Machinery and equipment		3,034				3,145
Equipment leased to others		158				160
Construction in progress		230				143
Gross plant and equipment		4,799				4,872
Accumulated depreciation		(3,113		)		(3,163		)
Net plant and equipment		$	1,686			$	1,709

The ranges of useful lives used to depreciate plant and equipment are as follows:

Buildings and improvements	5—50 years
Machinery and equipment	3—12 years
Equipment leased to others	Term of lease

Goodwill and Intangible Assets—Goodwill represents the excess cost over fair value of the net assets of purchased businesses. The Company does not amortize goodwill and intangible assets that have indefinite lives. The Company performs an impairment assessment of goodwill and intangible assets with indefinite lives annually, or more frequently if triggering events occur, based on the estimated fair value of the related reporting unit or intangible asset. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

When performing its annual impairment assessment, the Company evaluates the goodwill assigned to each of its reporting units for potential impairment by comparing the estimated fair value of the relevant reporting unit to the carrying value. The Company uses various Level 2 and Level 3 valuation techniques to determine the fair value of its reporting units, including discounting estimated future cash flows based on a detailed cash flow forecast prepared by the relevant reporting unit and market multiples of relevant public companies. If the fair value of a reporting unit is less than its carrying value, an impairment loss, if any, is recorded for the difference between the implied fair value and the carrying value of the reporting unit's goodwill.

The Company's indefinite-lived intangible assets consist of trademarks and brands. The estimated fair values of these intangible assets are determined based on a Level 3 valuation method using a relief-of-royalty income approach derived from

internally forecasted revenues of the related products. If the fair value of the trademark or brand is less than its carrying value, an impairment loss is recorded for the difference between the estimated fair value and carrying value of the intangible asset.

Amortization and impairment of goodwill and other intangible assets for the years ended December 31, 2014, 2013 and 2012 were as follows:

In millions		2014				2013				2012
Goodwill:
Impairment		$	—			$	—			$	1
Intangible Assets:
Amortization		242				250				252
Impairment		3				2				1
		$	245			$	252			$	254

Income from discontinued operations included intangible asset amortization of $20 million in 2013 and $36 million in 2012.

The Company performed its annual impairment assessment of goodwill and indefinite-lived intangible assets in the third quarter of 2014, 2013 and 2012. In the third quarter of 2014, these assessments resulted in no goodwill impairment charges and indefinite-lived intangible asset charges of $3 million related to certain brands in the Polymers & Fluids and Test & Measurement and Electronics segments. In 2013, these assessments resulted in no goodwill impairment charges and an indefinite-lived intangible asset impairment charge of $2 million related to a brand in the Test & Measurement and Electronics segment. In 2012, these assessments resulted in a goodwill impairment charge of $1 million in the Test & Measurement and Electronics segment and an indefinite-lived intangible asset impairment charge of $1 million related to a brand in the Food Equipment segment.

A summary of goodwill and indefinite-lived intangible assets that were adjusted to fair value and the related impairment charges included in earnings for the years ended December 31, 2014, 2013, and 2012 is as follows:

		2014												2013												2012
In millions		Book Value				Fair Value				Total Impairment Charges				Book Value				Fair Value				Total Impairment Charges				Book Value				Fair Value				Total Impairment Charges
Goodwill		$	—			$	—			$	—			$	—			$	—			$	—			$	146			$	145			$	1
Indefinite-lived intangible assets		11				8				3				42				40				2				5				4				1

The changes in the carrying amount of goodwill for the years ended December 31, 2014 and 2013 were as follows:

In millions	Automotive OEM				Test & Measurement and Electronics				Food Equipment				Polymers & Fluids				Welding				Construction Products				Specialty Products				Industrial Packaging				Total
Balance, December 31, 2012	$	318			$	1,431			$	203			$	1,043			$	288			$	603			$	909			$	735			$	5,530
2013 activity:
Acquisitions & divestitures	—				2				86				9				10				(2		)		139				—				244
Impairment charges	—				—				—				—				—				—				(42		)		—				(42		)
Foreign currency translation	2				—				5				(18		)		(4		)		(20		)		5				(2		)		(32		)
Transfer to assets held for sale	—				(7		)		—				(13		)		—				(20		)		(41		)		(733		)		(814		)
Balance, December 31, 2013	320				1,426				294				1,021				294				561				970				—				4,886
2014 activity:
Acquisitions & divestitures	(3		)		—				—				3				—				8				—				—				8
Impairment charges	—				—				—				—				—				—				—				—				—
Foreign currency translation	(23		)		(36		)		(18		)		(60		)		(17		)		(27		)		(46		)		—				(227		)
Balance, December 31, 2014	$	294			$	1,390			$	276			$	964			$	277			$	542			$	924			$	—			$	4,667
Cumulative goodwill impairment charges, December 31, 2014	$	24			$	83			$	60			$	15			$	5			$	7			$	46			$	—			$	240

Income from discontinued operations included a goodwill impairment of $42 million in 2013.

Intangible assets as of December 31, 2014 and 2013 were as follows:

		2014												2013
In millions		Cost				Accumulated Amortization				Net				Cost				Accumulated Amortization				Net
Amortizable intangible assets:
Customer lists and relationships		$	1,638			$	(820	)		$	818			$	1,631			$	(691	)		$	940
Trademarks and brands		707				(249		)		458				689				(207		)		482
Patents and proprietary technology		622				(354		)		268				588				(311		)		277
Noncompete agreements		155				(137		)		18				155				(125		)		30
Software		204				(192		)		12				202				(188		)		14
Other		112				(101		)		11				113				(98		)		15
Total amortizable intangible assets		3,438				(1,853		)		1,585				3,378				(1,620		)		1,758
Indefinite-lived intangible assets:
Trademarks and brands		214				—				214				241				—				241
Total intangible assets		$	3,652			$	(1,853	)		$	1,799			$	3,619			$	(1,620	)		$	1,999

Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives of 3 to 20 years.

The estimated amortization expense of intangible assets for the future years ending December 31 is as follows:

In millions
2015	$	229
2016	216
2017	195
2018	175
2019	152

Other Assets as of December 31, 2014 and 2013 consisted of the following:

In millions		2014				2013
Cash surrender value of life insurance policies		$	418			$	400
Prepaid pension assets		165				134
Equity investment in Wilsonart		141				164
Investments		110				130
Customer tooling		96				110
Other		219				259
		$	1,149			$	1,197

Accrued Expenses as of December 31, 2014 and 2013 consisted of accruals for:

In millions		2014				2013
Compensation and employee benefits		$	441			$	462
Deferred revenue and customer deposits		194				207
Rebates		128				127
Warranties		49				50
Current portion of pension and other postretirement benefit obligations		14				21
Other		461				405
		$	1,287			$	1,272

The Company accrues for product warranties based on historical experience. The changes in accrued warranties during 2014, 2013 and 2012 were as follows:

In millions		2014				2013				2012
Beginning balance		$	50			$	51			$	55
Charges		(41		)		(44		)		(44		)
Provision charged to expense		43				43				44
Acquisitions and divestitures		—				2				(4		)
Foreign currency translation		(3		)		1				—
Transfer to liabilities held for sale		—				(3		)		—
Ending balance		$	49			$	50			$	51

Debt

Short-term debt represents obligations with a maturity date of one year or less and is stated at cost which approximates fair value. Short-term debt also includes current maturities of long-term debt. Short-term debt as of December 31, 2014 and 2013 consisted of the following:

In millions		2014				2013
Commercial paper		$	1,413			$	1,652
Bank overdrafts		62				65
Current maturities of long-term debt		1				1,834
		$	1,476			$	3,551

The Company may issue commercial paper to fund general corporate needs and to fund share repurchases and small and medium-sized acquisitions. The Company has committed lines of credit of $2.5 billion in the U.S. to support the potential issuances of commercial paper. Of this amount, $1.0 billion is provided under a line of credit agreement with a termination date of August 15, 2018 and $1.5 billion is provided under a line of credit agreement with a termination date of June 8,

2017. No amounts were outstanding under these two facilities at December 31, 2014. The weighted-average interest rate on commercial paper was 0.1% at December 31, 2014 and 0.2% at December 31, 2013.

In May 2014, the Company amended its financial covenants within the line of credit agreements. The previous financial covenant, limiting total debt to total capitalization, was replaced with a minimum interest coverage ratio. As of December 31, 2014, the Company was in compliance with this covenant.

As of December 31, 2014, the Company had unused capacity of approximately $330 million under international debt facilities.

Current maturities of long-term debt as of December 31, 2014 included $1.0 million of 4.88% notes payable in 2015. Current maturities of long-term debt as of December 31, 2013 included the $1.0 billion of 5.25% Euro notes due October 1, 2014 and $800 million of 5.15% redeemable notes due April 1, 2014.

Long-term debt represents obligations with a maturity date greater than one year, and excludes current maturities that have been reclassified to short-term debt. Long-term debt at carrying value and fair value as of December 31, 2014 and 2013 consisted of the following:

				2014								2013
In millions		Effective Interest Rate		Carrying Value				Fair Value				Carrying Value				Fair Value
5.15% notes due April 1, 2014		5.2%		$	—			$	—			$	800			$	809
5.25% Euro notes due October 1, 2014		5.3%		—				—				1,031				1,067
0.90% notes due February 25, 2017		0.9%		649				648				—				—
1.95% notes due March 1, 2019		2.0%		649				651				—				—
6.25% notes due April 1, 2019		6.3%		700				817				700				834
4.88% notes due thru December 31, 2020		5.0%		5				6				7				8
3.375% notes due September 15, 2021		3.4%		349				369				349				350
1.75% Euro notes due May 20, 2022		1.9%		600				640				—				—
3.50% notes due March 1, 2024		3.5%		698				735				—				—
3.0% Euro notes due May 19, 2034		3.1%		594				702				—				—
4.875% notes due September 15, 2041		4.9%		641				746				641				649
3.9% notes due September 1, 2042		4.0%		1,090				1,110				1,090				944
Other borrowings				7				7				9				9
				$	5,982			$	6,431			$	4,627			$	4,670
Current maturities				(1		)						(1,834		)
				$	5,981							$	2,793

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 as of December 31, 2014 and 2013.

All of the Company's notes, listed above, represent senior unsecured obligations, ranking equal in right of payment.

In 2005, the Company issued $54 million of 4.88% notes due through December 31, 2020 at 100% of face value.

In 2007, the Company, through a wholly-owned European subsidiary, issued €750 million of 5.25% Euro notes due October 1, 2014 at 99.874% of face value. The €750 million of 5.25% Euro notes due October 1, 2014 were repaid on the due date.

In 2009, the Company issued $800 million of 5.15% redeemable notes due April 1, 2014 at 99.92% of face value and $700 million of 6.25% redeemable notes due April 1, 2019 at 99.98% of face value. The $800 million of 5.15% redeemable notes due April 1, 2014 were repaid on the due date.

In 2011, the Company issued $350 million of 3.375% notes due September 15, 2021 at 99.552% of face value and $650 million of 4.875% notes due September 15, 2041 at 98.539% of face value.

In 2012, the Company issued $1.1 billion of 3.9% notes due September 1, 2042 at 99.038% of face value.

In February 2014, the Company issued $650 million of 0.9% notes due February 25, 2017 at 99.861% of face value, $650 million of 1.95% notes due March 1, 2019 at 99.871% of face value, and $700 million of 3.5% notes due March 1, 2024 at 99.648% of face value. Net proceeds from the February 2014 debt issuance were used to repay commercial paper.

In May 2014, the Company issued €500 million of 1.75% Euro notes due May 20, 2022 at 99.16% of face value and €500 million of 3.0% Euro notes due May 19, 2034 at 98.089% of face value. Net proceeds from the May 2014 debt issuances were used for general corporate purposes. The Company designated the €1.0 billion of Euro notes 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 $158 million for the year ended December 31, 2014.

Scheduled maturities of long-term debt, including current maturities of long-term debt, for the future years ending December 31 are as follows:

In millions
2015	$	1
2016	1
2017	650
2018	—
2019	1,349
2020 and future years	3,981
	$	5,982

Pension and Other Postretirement Benefits—The Company has both funded and unfunded defined benefit pension and other postretirement benefit plans, predominately in the U.S.

The U.S. primary pension plan provides benefits based on years of service and final average salary. The U.S. primary postretirement health care plan is contributory with the participants’ contributions adjusted annually. The U.S. primary postretirement life insurance plan is noncontributory.

Beginning January 1, 2007, the U.S. primary pension and other postretirement benefit plans were closed to new participants. Newly hired employees and employees from acquired businesses that are not participating in these plans are eligible for additional Company contributions under the existing U.S. primary defined contribution retirement plans. The Company’s expense related to defined contribution plans was $78 million in 2014, $72 million in 2013 and $78 million in 2012.

In addition to the U.S. plans, the Company also has defined benefit pension plans in certain other countries, mainly the United Kingdom, Switzerland, Canada and Germany.

Summarized information regarding the Company’s significant defined benefit pension and other postretirement benefit plans related to both continuing and discontinued operations is as follows:

		Pension												Other Postretirement Benefits
In millions		2014				2013				2012				2014				2013				2012
Components of net periodic benefit cost:
Service cost		$	80			$	87			$	100			$	10			$	12			$	13
Interest cost		103				100				107				24				24				27
Expected return on plan assets		(159		)		(157		)		(157		)		(25		)		(22		)		(20		)
Amortization of actuarial (gain) loss		48				65				57				(4		)		1				1
Amortization of prior service cost		1				—				1				1				1				3
Settlement/curtailment (gain) loss		1				49				14				(9		)		—				—
		$	74			$	144			$	122			$	(3	)		$	16			$	24

Net periodic benefit cost was included in the statement of income as follows:

		Pension												Other Postretirement Benefits
In millions		2014				2013				2012				2014				2013				2012
Income from continuing operations		$	69			$	131			$	112			$	6			$	14			$	22
Income from discontinued operations		5				13				10				(9		)		2				2
		$	74			$	144			$	122			$	(3	)		$	16			$	24

The pension settlement charges in 2013 included $45 million tied primarily to higher lump sum pension payments resulting from the exit of Decorative Surfaces employees from the Company's U.S. primary pension plan. These charges were included in Income from continuing operations. Refer to the Divestiture of Majority Interest in Former Decorative Surfaces Segment note for further details regarding the Decorative Surfaces transaction.

In addition, the Company recognized a $9 million curtailment gain on the U.S. primary postretirement plan in the second

quarter of 2014 and a $2 million curtailment charge on the U.S. primary pension plan in the third quarter of 2013 related to the

Company's sale of the Industrial Packaging business and the reclassification of the Industrial Packaging business to

discontinued operations. These curtailment charges were included in Income from discontinued operations.

During 2014, the Society of Actuaries released a new mortality table, referred to as RP-2014, which is believed to better reflect mortality improvements. The Company used the RP-2014 mortality table to measure its U.S. pension and other postretirement obligations as of December 31, 2014 which resulted in additional actuarial losses of $76 million for pension and $46 million for other postretirement benefits.

The following tables provide a rollforward of the plan benefit obligations, plan assets and a reconciliation of funded status for the years ended December 31, 2014 and 2013 for continuing and discontinued operations:

		Pension								Other Postretirement Benefits
In millions		2014				2013				2014				2013
Change in benefit obligation:
Benefit obligation at January 1		$	2,545			$	2,655			$	519			$	589
Service cost		80				87				10				12
Interest cost		103				100				24				24
Plan participants’ contributions		3				5				13				15
Amendments		(5		)		—				—				—
Actuarial (gain) loss		240				(68		)		97				(77		)
Acquisitions/divestitures		(97		)		(12		)		(18		)		—
Benefits paid		(192		)		(247		)		(46		)		(47		)
Medicare subsidy received		—				—				2				3
Liabilities from (to) other immaterial plans		—				10				—				—
Settlement/curtailment (gain) loss		(2		)		(1		)		(10		)		—
Foreign currency translation		(68		)		16				—				—
Benefit obligation at December 31		$	2,607			$	2,545			$	591			$	519

		Pension								Other Postretirement Benefits
In millions		2014				2013				2014				2013
Change in plan assets:
Fair value of plan assets at January 1		$	2,487			$	2,288			$	370			$	328
Actual return on plan assets		264				294				28				66
Company contributions		127				136				7				8
Plan participants’ contributions		3				5				13				15
Acquisitions/divestitures		(65		)		(16		)		—				—
Benefits paid		(192		)		(247		)		(46		)		(47		)
Assets from immaterial plans		—				12				—				—
Foreign currency translation		(67		)		15				—				—
Fair value of plan assets at December 31		$	2,557			$	2,487			$	372			$	370
Funded status		$	(50	)		$	(58	)		$	(219	)		$	(149	)
Other immaterial plans		(52		)		(61		)		(5		)		(6		)
Net liability at December 31		$	(102	)		$	(119	)		$	(224	)		$	(155	)
The amounts recognized in the statement of financial position as of December 31 consist of:
Other assets		$	165			$	134			$	—			$	—
Accrued expenses		(10		)		(16		)		(4		)		(5		)
Liabilities held for sale		—				(24		)		—				(23		)
Other noncurrent liabilities		(257		)		(213		)		(220		)		(127		)
Net liability at end of year		$	(102	)		$	(119	)		$	(224	)		$	(155	)
The pre-tax amounts recognized in accumulated other comprehensive income consist of:
Net actuarial loss		$	638			$	568			$	(6	)		$	(112	)
Prior service cost		1				6				(1		)		—
		$	639			$	574			$	(7	)		$	(112	)
Accumulated benefit obligation		$	2,361			$	2,273
Plans with accumulated benefit obligation in excess of plan assets as of December 31:
Projected benefit obligation		$	168			$	263
Accumulated benefit obligation		$	154			$	249
Fair value of plan assets		$	26			$	91

Assumptions

The weighted-average assumptions used in the valuations of pension and other postretirement benefits were as follows:

	Pension									Other Postretirement Benefits
	2014			2013			2012			2014			2013			2012
Assumptions used to determine benefit obligations at December 31:
Discount rate	3.70	%		4.32	%		3.85	%		4.15	%		4.95	%		4.15	%
Rate of compensation increases	3.72	%		3.72	%		3.86	%		—	%		—	%		—	%
Assumptions used to determine net periodic benefit cost for years ended December 31:
Discount rate	4.32	%		3.85	%		4.64	%		4.95	%		4.15	%		4.95	%
Expected return on plan assets	7.02	%		7.28	%		7.23	%		7.00	%		7.00	%		7.00	%
Rate of compensation increases	3.72	%		3.86	%		3.86	%		—	%		—	%		—	%

The expected long-term rates of return for pension and other postretirement benefit plans were developed using historical asset class returns while factoring in current market conditions such as inflation, interest rates and asset class performance.

Assumed health care cost trend rates have an effect on the amounts reported for the postretirement health care benefit plans. The assumed health care cost trend rates used to determine the postretirement benefit obligation at December 31 were as follows:

	2014			2013			2012
Health care cost trend rate assumed for the next year	8.00	%		8.00	%		7.35	%
Ultimate trend rate	4.50	%		5.00	%		5.00	%
Year the rate reaches the ultimate trend rate	2022			2020			2019

A one percentage-point change in assumed health care cost trend rates would have the following impact:

In millions		1 Percentage-Point Increase				1 Percentage-Point Decrease
Change in service cost and interest cost for 2014		$	1			$	(1	)
Change in postretirement benefit obligation at December 31, 2014		$	13			$	(15	)

Plan Assets

The Company’s overall investment strategy for the assets in the pension funds is to achieve a balance between the goals of growing plan assets and keeping risk at a reasonable level over a long-term investment horizon. In order to reduce unnecessary risk, the pension funds are diversified across several asset classes, securities and investment managers. The target allocations for plan assets are 30% to 50% equity securities, 45% to 60% fixed income securities and 0% to 10% in other types of investments. The Company does not use derivatives for the purpose of speculation, leverage, circumventing investment guidelines or taking risks that are inconsistent with specified guidelines.

The assets in the Company’s postretirement health care plan are primarily invested in life insurance policies. The Company’s overall investment strategy for the assets in the postretirement health care fund is to invest in assets that provide a reasonable tax exempt rate of return while preserving capital.

The following tables present the fair value of the Company’s pension and other postretirement benefit plan assets at December 31, 2014 and 2013, by asset category and valuation methodology. Level 1 assets are valued using unadjusted quoted prices for identical assets in active markets. Level 2 assets are valued using quoted prices or other observable inputs for similar assets. Level 3 assets are valued using unobservable inputs, but reflect the assumptions market participants would be expected to use in pricing the assets. Each financial instrument’s categorization is based on the lowest level of input that is significant to the fair value measurement.

		2014
In millions		Level 1				Level 2				Level 3				Total
Pension Plan Assets:
Cash and equivalents		$	164			$	—			$	—			$	164
Equity securities:
Domestic		1				—				—				1
Foreign		72				—				—				72
Fixed income securities:
Government securities		—				286				—				286
Corporate debt securities		—				378				—				378
Mortgage-backed securities		—				8				—				8
Investment contracts with insurance companies		—				—				1				1
Commingled funds:
Mutual funds		317				—				—				317
Collective trust funds		—				1,252				—				1,252
Partnerships/private equity interests		—				—				77				77
Other		—				—				1				1
		$	554			$	1,924			$	79			$	2,557
Other Postretirement Benefit Plan Assets:
Cash and equivalents		$	11			$	—			$	—			$	11
Life insurance policies		—				—				361				361
		$	11			$	—			$	361			$	372

		2013
In millions		Level 1				Level 2				Level 3				Total
Pension Plan Assets:
Cash and equivalents		$	27			$	—			$	—			$	27
Equity securities:
Domestic		—				—				—				—
Foreign		77				—				—				77
Fixed income securities:
Government securities		—				314				—				314
Corporate debt securities		—				316				—				316
Mortgage-backed securities		—				10				—				10
Investment contracts with insurance companies		—				—				67				67
Commingled funds:
Mutual funds		459				—				—				459
Collective trust funds		—				1,135				—				1,135
Partnerships/private equity interests		—				—				81				81
Other		—				1				—				1
		$	563			$	1,776			$	148			$	2,487
Other Postretirement Benefit Plan Assets:
Cash and equivalents		$	9			$	—			$	—			$	9
Life insurance policies		—				—				361				361
		$	9			$	—			$	361			$	370

Cash and equivalents include cash on hand and investments with maturities of three months or less and are valued at cost, which approximates fair value. Equity securities primarily include common and preferred equity securities covering a wide range of industries and geographies that are traded in active markets and are valued based on quoted prices. Fixed income securities primarily consist of U.S. and foreign government bills, notes and bonds, corporate debt securities, asset-backed securities and investment contracts. The majority of the assets in this category are valued by evaluating bid prices provided by independent financial data services. For securities where market data is not readily available, unobservable market data is used to value the security. Commingled funds include investments in public and private pooled funds. Mutual funds are traded in active markets and are valued based on quoted prices. The underlying investments include small-cap equity, international equity and long- and short-term fixed income instruments. Collective trust funds are private funds that are valued at the net asset value, which is determined based on the fair value of the underlying investments. The underlying investments include both passively and actively managed U.S. and foreign large- and mid-cap equity funds and short-term investment funds. Partnerships/private equity interests are investments in partnerships where the benefit plan is a limited partner. The investments are valued by the investment managers on a periodic basis using pricing models that use market, income and cost valuation methods. Life insurance policies are used to fund other postretirement benefits in order to obtain favorable tax treatment and are valued based on the cash surrender value of the underlying policies.

The following table presents a reconciliation of Level 3 assets measured at fair value for pension and other postretirement benefit plans during the years ended December 31, 2014 and 2013:

In millions		Investment Contracts with Insurance Companies				Partnerships/ Private Equity Interests				Life Insurance Policies				Other				Total
December 31, 2012		$	75			$	84			$	294			$	—			$	453
2013 Activity:
Realized gains (losses)		—				7				—				—				7
Unrealized gains (losses)		5				(1		)		67				—				71
Purchases and sales		(13		)		(9		)		—				—				(22		)
December 31, 2013		67				81				361				—				509
2014 Activity:
Realized gains (losses)		—				—				2				—				2
Unrealized gains (losses)		—				2				26				—				28
Purchases and sales		—				(6		)		(28		)		1				(33		)
Acquistions/divestitures		(66		)		—				—				—				(66		)
December 31, 2014		$	1			$	77			$	361			$	1			$	440

Cash Flows

The Company generally funds its pension and other postretirement benefit plans as required by law or to the extent such contributions are tax deductible. The Company expects to contribute approximately $100 million to its pension plans and $5 million to its other postretirement benefit plans in 2015.

The Company’s portion of the benefit payments that are expected to be paid during the years ending December 31 is as follows:

In millions		Pension				Other Postretirement Benefits
2015		$	206			$	37
2016		172				37
2017		179				38
2018		179				39
2019		180				40
Years 2020-2024		895				206

Other Noncurrent Liabilities at December 31, 2014 and 2013 consisted of the following:

In millions		2014				2013
Pension benefit obligation		$	257			$	213
Postretirement benefit obligation		220				127
Other		525				583
		$	1,002			$	923

Commitments and Contingencies—The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, including those involving environmental, product liability (including toxic tort) and general liability claims. The Company accrues for such liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Such accruals are based on developments to date, the Company’s estimates of the outcomes of these matters and its experience in contesting, litigating and settling other similar matters. The Company believes resolution of these matters, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position, liquidity or future operations.

Among the toxic tort cases in which the Company is a defendant, the Company and its subsidiaries Hobart Brothers Company and Miller Electric Mfg. Co. have been named, along with numerous other defendants, in lawsuits alleging injury from exposure to welding consumables. The plaintiffs in these suits claim unspecified damages for injuries resulting from alleged exposure to asbestos, manganese and/or toxic fumes in connection with the welding process. In the first quarter of 2012, the Company entered into an agreement resolving substantially all of the manganese-related claims for an immaterial amount. As of December 31, 2014, all of the manganese-related cases against the Company, Hobart Brothers and Miller Electric have been dismissed. The Company believes that the remaining asbestos and toxic fumes claims will not have a material adverse effect on the Company’s operating results, financial position or cash flows. The Company has not recorded any significant reserves related to these cases.

Preferred Stock, without par value, of which 0.3 million shares are authorized and unissued, is issuable in series. The Board of Directors is authorized to fix by resolution the designation and characteristics of each series of preferred stock. The Company has no present commitment to issue its preferred stock.

Common Stock, with a par value of $0.01, Additional Paid-In-Capital and Common Stock Held in Treasury transactions during 2014, 2013, and 2012 are shown below.

		Common Stock							Additional Paid-In- Capital				Common Stock Held in Treasury
In millions		Shares			Amount				Amount				Shares			Amount
Balance, December 31, 2011		542.5			$	5			$	686			(58.9	)		$	(2,692	)
During 2012-
Shares issued for stock options		6.3			—				285				—			—
Shares withheld for taxes		—			—				1				(0.3	)		(19		)
Shares issued for stock compensation and vesting of restricted stock		0.8			—				(10		)		0.2			9
Stock compensation expense		—			—				54				—			—
Noncontrolling interest		—			—				(22		)		—			—
Tax benefits related to stock options		—			—				14				—			—
Tax benefits related to defined contribution plans		—			—				4				—			—
Repurchases of common stock		—			—				—				(35.5	)		(2,020		)
Balance, December 31, 2012		549.6			5				1,012				(94.8	)		(4,722		)
During 2013-
Shares issued for stock options		0.4			1				9				4.0			198
Shares withheld for taxes		—			—				—				(0.2	)		(11		)
Shares issued for stock compensation and vesting of restricted stock		—			—				(28		)		0.6			28
Stock compensation expense		—			—				36				—			1
Noncontrolling interest		—			—				(8		)		—			—
Tax benefits related to stock options		—			—				23				—			—
Tax benefits related to defined contribution plans		—			—				2				—			—
Repurchases of common stock		—			—				—				(29.7	)		(2,170		)
Balance, December 31, 2013		550.0			6				1,046				(120.1	)		(6,676		)
During 2014-
Shares issued for stock options		—			—				—				3.0			148
Shares withheld for taxes		—			—				—				(0.1	)		(14		)
Shares issued for stock compensation and vesting of restricted stock		—			—				(26		)		0.5			26
Stock compensation expense		—			—				39				—			—
Tax benefits related to stock options		—			—				33				—			—
Tax benefits related to defined contribution plans		—			—				4				—			1
Repurchases of common stock		—			—				—				(50.4	)		(4,283		)
Balance, December 31, 2014		550.0			$	6			$	1,096			(167.1	)		$	(10,798	)
Authorized, December 31, 2014		700.0

On May 6, 2011, the Company’s Board of Directors authorized a stock repurchase program, which provided for the buyback of up to $4.0 billion of the Company’s common stock over an open-ended period of time (the "2011 Program"). Under the 2011 Program, the Company repurchased approximately 1.8 million shares of its common stock at an average price of $43.20 per share during 2011, approximately 35.5 million shares of its common stock at an average price of $56.93 per share during 2012 and approximately 26.4 million shares of its common stock at an average price of $71.89 per share during 2013. As of December 31, 2013, there were no authorized repurchases remaining under the 2011 Program.

On August 2, 2013, the Company’s Board of Directors authorized a new stock repurchase program, which provides for the buyback of up to an additional $6.0 billion of the Company’s common stock over an open-ended period of time (the "2013 Program"). Under the 2013 Program, the Company repurchased approximately 3.3 million shares of its common stock at an average price of $81.62 per share during 2013 and approximately 50.4 million shares of its common stock at an average price of $84.92 per share during 2014. As of December 31, 2014, there was approximately $1.4 billion of authorized repurchases remaining under the 2013 Program.

Cash Dividends declared were $1.81 per share in 2014, $1.60 per share in 2013 and $1.48 per share in 2012. Cash dividends paid were $1.745 per share in 2014, $1.18 per share in 2013 and $1.84 per share in 2012. The 2012 cash dividends included an accelerated dividend payment of $0.38 per share in December 2012, which was originally scheduled to be paid in January 2013.

Accumulated Other Comprehensive Income—Effective January 1, 2013, the Company adopted new accounting guidance that was issued in February 2013 requiring disclosure of amounts transferred out of accumulated other comprehensive income and recognized in the statement of income.

In March 2013, new accounting guidance was issued which clarifies that an entity should release cumulative translation adjustments into net income when the entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, which is consistent with the Company's prior accounting policy. The new guidance became effective for the Company on January 1, 2014 and did not have any impact on the Company's financial statements.

The changes in accumulated other comprehensive income during 2014, 2013 and 2012 were as follows:

In millions		2014				2013				2012
Beginning balance		$	384			$	293			$	224
Foreign currency translation adjustments during the period		(806		)		(200		)		146
Foreign currency translation adjustments reclassified to income		(133		)		7				(52		)
Total foreign currency translation adjustments		(939		)		(193		)		94
Pension and other postretirement benefit adjustments during the period		(224		)		327				(159		)
Pension and other postretirement benefit adjustments reclassified to income		54				122				121
Income taxes		67				(165		)		13
Total pension and other postretirement benefit adjustments		(103		)		284				(25		)
Ending balance		$	(658	)		$	384			$	293

Foreign currency translation adjustments reclassified to income are primarily related to the disposal of certain discontinued operations and were included in the related gain or loss upon disposal. Refer to the Discontinued Operations note for additional information regarding the sale of the Company's discontinued operations.

Pension and other postretirement benefit adjustments reclassified to income represent the amortization of actuarial losses and prior service cost, and settlement and curtailment charges recognized in net periodic benefit cost. Refer to the Retirement Plans and Postretirement Benefits note for the amounts included in net periodic benefit cost. Pension and other postretirement benefit adjustments reclassified to income also include the reclass of deferred losses of $6 million, $6 million, and $11 million for the years ended December 31, 2014, 2013 and 2012, respectively, related to the disposal of certain discontinued operations. Refer to the Discontinued Operations note for additional information regarding the sale of the Company's discontinued operations.

As of December 31, 2014 and 2013, the ending balance of accumulated other comprehensive income consisted of cumulative translation adjustment expense of $265 million and income of $674 million, respectively, and unrecognized pension and other postretirement benefits costs of $393 million and $290 million, respectively. The estimated unrecognized benefit cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2015 is $62 million for pension and other postretirement benefits.

Stock-Based Compensation—Stock options and restricted stock units have been issued to officers and other management employees under ITW’s 2011 Long-Term Incentive Plan (the "Plan"). The stock options generally vest over a four-year period and have a maturity of ten years from the issuance date. Restricted stock units generally vest after a three-year period and include units with and without performance criteria. To cover the exercise of vested options and vesting of restricted stock units in 2012, the Company generally issued new shares from its authorized but unissued share pool. Commencing in February 2013, the Company issued shares from treasury stock. At December 31, 2014, approximately 34 million shares of ITW common stock were reserved for issuance under the Plan. The Company records compensation expense for the grant date fair value of stock awards over the remaining service periods of those awards.

The following table summarizes the Company’s stock-based compensation expense:

In millions		2014				2013				2012
Pre-tax compensation expense		$	34			$	30			$	50
Tax benefit		(12		)		(10		)		(18		)
Total stock-based compensation expense, net of tax		$	22			$	20			$	32

Pre-tax stock-based compensation expense included in income from discontinued operations was $5 million in 2014, $6 million in 2013 and $4 million in 2012.

The following table summarizes activity related to non-vested restricted stock units during 2014:

Shares in millions		Number of Shares			Weighted-Average Grant-Date Fair Value
Unvested, January 1, 2014		1.4			$54.02
Granted		0.3			73.61
Vested		(0.6	)		52.15
Canceled		(0.1	)		57.50
Unvested, December 31, 2014		1.0			60.68

The following table summarizes stock option activity under the Plan for the year ended December 31, 2014:

In millions except exercise price and contractual terms		Number of Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Under option, January 1, 2014		9.4			$51.95
Granted		0.8			78.71
Exercised		(3.0	)		49.02
Canceled or expired		(0.1	)		60.55
Under option, December 31, 2014		7.1			56.25		5.9 years		$272
Exercisable, December 31, 2014		4.7			51.02		4.9 years		$207

The Company's annual equity awards consist of stock options, restricted stock units ("RSUs") and performance restricted stock units ("PRSUs"). The RSUs provide for full "cliff" vesting three years from the date of grant. The PRSUs provide for full "cliff" vesting after three years if the Compensation Committee certifies that the performance goals set with respect to the PRSUs have been met. Upon vesting, the holder will receive one share of common stock of the Company for each vested RSU or PRSU. The fair value of RSUs and PRSUs is determined by reducing the closing market price on the date of the grant by the present value of projected dividends over the vesting period. Option exercise prices are equal to the common stock fair market value on the date of grant. The Company uses a binomial option pricing model to estimate the fair value of the stock options granted. The following summarizes the assumptions used in the models:

		2014		2013		2012
Risk-free interest rate		0.16-2.83%		0.2-2.9%		0.2-2.1%
Weighted-average volatility		22.9%		21.1%		25.0%
Dividend yield		2.46%		2.72%		2.61%
Expected years until exercise		6.7-7.9		6.6-7.6		7.6-7.8

Lattice-based option valuation models, such as the binomial option pricing model, incorporate ranges of assumptions for inputs. The risk-free rate of interest for periods within the contractual life of the option is based on a zero-coupon U.S. government instrument over the contractual term of the equity instrument. Expected volatility is based on implied volatility from traded options on the Company’s stock and historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise timing and employee termination rates within the valuation model. The weighted-average dividend yield is based on historical information. The expected term of options granted is derived from the output of the option valuation model and represents the period of time that options granted are expected to be outstanding. The ranges presented result from separate groups of employees assumed to exhibit different behavior.

The weighted-average grant-date fair value of options granted during 2014, 2013 and 2012 was $15.14, $10.06 and $11.48 per share, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $115 million, $108 million and $84 million, respectively. As of December 31, 2014, there was $13 million of total unrecognized compensation cost related to unvested stock options. That cost is expected to be recognized over a weighted-average period of 2.4 years. Exercise of options during the years ended December 31, 2014, 2013 and 2012 resulted in cash receipts of $148 million, $206 million and $285 million, respectively. The total fair value of vested stock option awards during the years ended December 31, 2014, 2013 and 2012 was $16 million, $16 million and $48 million, respectively.

As of December 31, 2014, there was $16 million of total unrecognized compensation cost related to unvested restricted stock units. That cost is expected to be recognized over a weighted-average remaining contractual life of 1.7 years. The total fair value of vested restricted stock unit awards during the years ended December 31, 2014, 2013 and 2012 was $27 million, $23 million and $31 million, respectively.

Segment Information—The Company's operations are organized and managed based on similar product offerings and similar end markets, and are reported to senior management as the following seven segments: Automotive OEM; Test & Measurement and Electronics; Food Equipment; Polymers & Fluids; Welding; Construction Products; and Specialty Products.

As discussed in the Divestiture of Majority Interest in Former Decorative Surfaces Segment note, the Company ceased consolidating the results of the Decorative Surfaces segment as of October 31, 2012 and now reports its 49% ownership interest in Wilsonart using the equity method of accounting. Effective November 1, 2012, the Company made changes to its management reporting structure and Decorative Surfaces is no longer a reportable segment of the Company.

As discussed in the Discontinued Operations note, in September 2013, the Company’s Board of Directors authorized a plan to commence a sale process for the Industrial Packaging segment. The Company classified the Industrial Packaging segment as held for sale beginning in the third quarter of 2013 and no longer presented this segment as part of its continuing operations. On February 6, 2014, the Company announced that it had signed a definitive agreement to sell its Industrial Packaging business to The Carlyle Group for $3.2 billion. The transaction was completed on May 1, 2014, resulting in a pre-tax gain of $1.7 billion ($1.1 billion after-tax) in the second quarter of 2014 which was included in Income from discontinued operations.

The following is a description of the Company's seven segments:

Automotive OEM—Components and fasteners for automotive-related applications.

Test & Measurement and Electronics—Equipment, consumables, and related software for testing and measuring of materials and structures, and equipment and consumables used in the production of electronic subassemblies and microelectronics.

Food Equipment—Commercial food equipment and related service.

Polymers & Fluids—Adhesives, sealants, lubrication and cutting fluids, janitorial and hygiene products, and fluids and polymers for auto aftermarket maintenance and appearance.

Welding—Arc welding equipment, consumables and accessories for a wide array of industrial and commercial applications.

Construction Products—Construction fastening systems and truss products.

Specialty Products—Beverage packaging equipment and consumables, product coding and marking equipment and consumables, and appliance components and fasteners.

Segments are allocated a fixed overhead charge based on the segment's revenues. Expenses not charged to the segments are reported separately as Unallocated. Because the Unallocated category includes a variety of items, it is subject to fluctuations on a quarterly and annual basis.

Segment information for 2014, 2013 and 2012 was as follows:

In millions		2014				2013				2012
Operating revenues:
Automotive OEM		$	2,590			$	2,396			$	2,171
Test & Measurement and Electronics		2,204				2,176				2,299
Food Equipment		2,177				2,047				1,939
Polymers & Fluids		1,927				1,993				2,063
Welding		1,850				1,837				1,847
Construction Products		1,707				1,717				1,724
Specialty Products		2,055				2,007				1,871
Intersegment revenues		(26		)		(38		)		(44		)
Total Segments		14,484				14,135				13,870
Decorative Surfaces		—				—				921
Total		$	14,484			$	14,135			$	14,791
Operating income:
Automotive OEM		$	600			$	490			$	421
Test & Measurement and Electronics		340				321				342
Food Equipment		453				385				332
Polymers & Fluids		357				335				327
Welding		479				464				470
Construction Products		289				238				201
Specialty Products		440				408				365
Total Segments		2,958				2,641				2,458
Decorative Surfaces		—				—				143
Unallocated		(70		)		(127		)		(126		)
Total		$	2,888			$	2,514			$	2,475
Depreciation and amortization and impairment of goodwill and intangible assets:
Automotive OEM		$	79			$	80			$	70
Test & Measurement and Electronics		115				119				122
Food Equipment		52				50				47
Polymers & Fluids		99				103				102
Welding		38				37				34
Construction Products		43				49				57
Specialty Products		81				84				82
Total Segments		507				522				514
Decorative Surfaces		—				—				17
Discontinued Operations		—				91				82
Total		$	507			$	613			$	613
Plant and equipment additions:
Automotive OEM		$	96			$	119			$	112
Test & Measurement and Electronics		56				39				36
Food Equipment		47				37				34
Polymers & Fluids		28				28				29
Welding		36				35				38
Construction Products		41				32				29
Specialty Products		54				47				43
Total Segments		358				337				321
Decorative Surfaces		—				—				18
Discontinued Operations		3				31				43
Total		$	361			$	368			$	382
Identifiable assets:
Automotive OEM		$	1,454			$	1,571			$	1,526
Test & Measurement and Electronics		2,615				2,772				2,851
Food Equipment		1,123				1,184				979
Polymers & Fluids		2,257				2,420				2,540
Welding		879				936				914
Construction Products		1,249				1,309				1,463
Specialty Products		1,798				1,939				1,898
Total Segments		11,375				12,131				12,171
Corporate		6,303				5,999				5,352
Assets held for sale		—				1,836				—
Industrial Packaging		—				—				1,786
Total		$	17,678			$	19,966			$	19,309

Identifiable assets by segment are those assets that are specifically used in that segment. Corporate assets are principally cash and equivalents, investments and other general corporate assets.

Enterprise-wide information for 2014, 2013 and 2012 was as follows:

In millions		2014				2013				2012
Operating Revenues by Geographic Region:
United States		$	6,191			$	6,030			$	6,339
Canada/Mexico		993				973				1,014
Total North America		7,184				7,003				7,353
Europe, Middle East and Africa		4,319				4,162				4,356
Asia Pacific		2,427				2,366				2,493
South America		554				604				589
		$	14,484			$	14,135			$	14,791

Prior year information in table above has been reorganized to conform to the current year reporting of geographic regions. Operating revenues by geographic region are based on the customers’ locations. Long-lived assets in any single country outside of the U.S. did not exceed 10% of the Company's total long-lived assets.

No single customer accounted for more than 5% of consolidated revenues in 2014, 2013 or 2012. Additionally, the Company has thousands of product lines within its businesses; therefore, providing operating revenues by product line is not practicable.

QUARTERLY AND COMMON STOCK DATA (UNAUDITED)

Quarterly Financial Data

The unaudited quarterly financial data included as supplementary data reflects all adjustments that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented.

		Three Months Ended
		March 31								June 30								September 30								December 31
In millions except per share amounts		2014				2013				2014				2013				2014				2013				2014				2013
Operating revenues		$	3,569			$	3,420			$	3,719			$	3,593			$	3,692			$	3,568			$	3,504			$	3,554
Cost of revenues		2,158				2,078				2,219				2,155				2,182				2,148				2,114				2,173
Operating income		667				578				763				630				772				678				686				628
Income from continuing operations		428				401				494				416				507				406				461				407
Income (loss) from discontinued operations		45				(47		)		998				49				24				46				(11		)		1
Net income		473				354				1,492				465				531				452				450				408
Income per share from continuing operations:
Basic		1.01				0.89				1.22				0.93				1.29				0.91				1.19				0.93
Diluted		1.01				0.88				1.21				0.92				1.28				0.90				1.18				0.92
Net income per share:
Basic		1.12				0.78				3.69				1.04				1.35				1.01				1.17				0.93
Diluted		1.11				0.78				3.66				1.03				1.34				1.01				1.16				0.93

Certain reclassifications of prior year data have been made to conform to current year reporting, including discontinued operations.

In the second quarter of 2014, the Company recorded an after-tax gain of $1.1 billion, or $2.82 per diluted share, related to the sale of the Industrial Packaging business, which was included in Income (loss) from discontinued operations.

In the first quarter of 2013, the Company recorded a goodwill impairment charge and loss reserves on assets held for sale of $98 million after-tax, or $0.22 per diluted share, which were included in Income (loss) from discontinued operations.