Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 11-K
(Mark One)
|
| |
[X] | ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| |
| For the fiscal year ended December 31, 2016 |
| |
| OR |
| |
[ ] | TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
| |
| For the transition period from _______________ to _______________ |
ILLINOIS TOOL WORKS INC.
(Exact name of registrant as specified in its charter)
|
| | | | |
Delaware | | 1-4797 | | 36-1258310 |
(State or other jurisdiction of incorporation) | | (Commission File No.) | | (IRS Employer Identification No.) |
|
| | | | |
155 Harlem Avenue, Glenview, IL | | | | 60025 |
(Address of principal executive offices) | | | | (Zip Code) |
(Registrant’s telephone number, including area code) 847-724-7500
ITW Savings and Investment Plan
Financial Statements
As of December 31, 2016 and 2015
Plan Number 003
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Employee Benefits Steering Committee
Illinois Tool Works/Plan Administrator
We have audited the accompanying statements of net assets available for benefits of ITW Savings and Investment Plan (the “Plan”) as of December 31, 2016 and 2015, and the related statement of changes in net assets available for benefits for the year ended December 31, 2016. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements 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. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes 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, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of ITW Savings and Investment Plan as of December 31, 2016 and 2015, and the changes in net assets available for benefits for the year ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.
The supplemental information in the accompanying schedule of assets (held at end of year) as of December 31, 2016, has been subjected to audit procedures performed in conjunction with the audit of ITW Savings and Investment Plan’s financial statements. The supplemental information is presented for purposes of additional analysis and is not a required part of the basic financial statements but include supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The supplementary information is the responsibility of the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the basic financial statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy of the information presented in the supplemental information. In forming our opinion on the supplemental information in the accompanying schedule, we evaluated whether the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information referred to above is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
By: /s/ Grant Thornton LLP
Chicago, Illinois
June 26, 2017
ITW Savings and Investment Plan
Financial Statements and Schedule
as of December 31, 2016 and 2015
Employer Identification Number 36-1258310
Plan Number 003
ITW SAVINGS AND INVESTMENT PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
As of December 31, 2016 and 2015
Employer Identification Number 36-1258310, Plan Number 003
|
| | | | | | | |
| 2016 | | 2015 |
ASSETS: | | | |
Receivables | | | |
Company contributions | $ | 2,305,979 |
| | $ | 2,809,095 |
|
Participant contributions | 2,712,954 |
| | 2,650,942 |
|
Notes receivable from participants | 59,055,384 |
| | 59,032,677 |
|
Rollovers | 7,620 |
| | 89,745 |
|
Total receivables | 64,081,937 |
| | 64,582,459 |
|
| | | |
Investments at fair value (Note 5) | 2,283,065,639 |
| | 2,142,009,002 |
|
Investments at contract value (Note 3) | 460,952,900 |
| | 448,621,305 |
|
Total Plan’s interest in Master Trust (Note 4) | 2,744,018,539 |
| | 2,590,630,307 |
|
| | | |
Total assets | 2,808,100,476 |
| | 2,655,212,766 |
|
| | | |
LIABILITIES: | | | |
Administrative expenses payable | 439,949 |
| | 472,937 |
|
| | | |
NET ASSETS AVAILABLE FOR BENEFITS | $ | 2,807,660,527 |
| | $ | 2,654,739,829 |
|
The accompanying notes to financial statements
are an integral part of these statements.
ITW SAVINGS AND INVESTMENT PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
For the Year Ended December 31, 2016
Employer Identification Number 36-1258310, Plan Number 003
|
| | | |
INCREASES (DECREASES): | |
Contributions | |
Company | $ | 63,825,550 |
|
Participant | 85,334,779 |
|
Rollovers | 13,427,694 |
|
Total contributions | 162,588,023 |
|
| |
Plan’s interest in Master Trust net investment gain | 278,456,601 |
|
| |
Interest income on notes receivable from participants | 1,999,760 |
|
| |
Benefits paid to participants | (287,976,660 | ) |
| |
Administrative expenses | (2,211,557 | ) |
| |
Net increase before net transfers to other plans | 152,856,167 |
|
| |
Net transfers from other plan (Note 10) | 64,531 |
|
| |
Net increase | 152,920,698 |
|
| |
NET ASSETS AVAILABLE FOR BENEFITS: | |
Beginning of year | 2,654,739,829 |
|
End of year | $ | 2,807,660,527 |
|
The accompanying notes to financial statements
are an integral part of this statement.
ITW SAVINGS AND INVESTMENT PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
Employer Identification Number 36-1258310, Plan Number 003
| |
1. | DESCRIPTION OF THE PLAN AND INVESTMENT PROGRAM |
The following describes the major provisions of the ITW Savings and Investment Plan (the “Plan”). Participants should refer to the Plan document for a more complete description of the Plan’s provisions.
General
The Plan is a defined contribution plan in which employees of participating business units of Illinois Tool Works Inc. and its wholly owned subsidiaries (the “Company”), are eligible to participate in the Plan as soon as administratively feasible upon hire. Established on November 16, 1967, and as subsequently amended, the Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
The investment assets of the Plan are held in the Illinois Tool Works Inc. Master Pension Trust (the “Master Trust”) at The Northern Trust Company (the “Trustee”). The Trustee also serves as an investment advisor of The Northern Trust Company funds. Empower (the “Recordkeeper”) served as recordkeeper for 2016 and the period April 1, 2015 to December 31, 2015. Voya served as recordkeeper of the Plan for the period January 1, 2015 to March 31, 2015.
Participant and Company Contributions
Participants may contribute amounts from a minimum of 1% to a maximum of 50% of eligible compensation to their pre-tax accounts. In addition, participants may contribute amounts from a minimum of 1% to a maximum of 10% of eligible compensation to their after-tax accounts. The combined pre-tax and after-tax contributions cannot exceed 50% of eligible compensation. Participants may change their contribution percentages with each payroll period.
Participants who are at least age 50 during the plan year may be eligible to contribute an additional amount to the Plan on a pre-tax basis. This additional amount, known as a “catch-up” contribution, is subject to an annual maximum amount.
Participants may enroll in the Plan and begin contributions to their pre-tax and after-tax accounts as soon as administratively feasible after being hired. After sixty days of eligibility, employees will be automatically enrolled in the Plan unless participation is declined. Automatically-enrolled participants will be enrolled at a 3% pre-tax contribution rate, which will escalate each year by 1% until a rate of 6% is reached, unless a participant elects otherwise.
The Company provides for a matching contribution based on each participant’s contribution rate and eligible Plan compensation. The Plan provides for a Company matching contribution immediately upon the start of participant contributions.
The Plan also provides for an enhanced Company match and additional contribution (“Company Basic Contribution”) to certain eligible participants. Certain eligible participants include all employees hired on or after January 1, 2007 and all employees of certain business units participating on or after this date (“Group II”) as designated by the ITW Employee Benefits Steering Committee (“EBSC”). Certain other business units participating on or after the above date as designated by the EBSC and all Plan participants as of December 31, 2006 (“Group I”) are not eligible for the enhanced Company match and additional contribution.
The Company matching contribution for each group is as follows:
Group I - Dollar-for-dollar match on the first 1% and 50¢ per $1 on the next 5% of eligible compensation contributed.
Group II - Dollar-for-dollar match on the first 3% and 50¢ per $1 on the next 3% of eligible compensation contributed.
The Group II Company Basic Contribution formula is based on age and years of service. Eligible Group II participants must have completed one year of service and be age 21 or older to receive this contribution.
Contributions are subject to certain limitations.
Participants may also roll over amounts representing distributions from other qualified defined benefit or defined contribution plans.
Participants’ Accounts
Each participant’s account is credited with the participant’s contribution, the Company’s contributions, Plan earnings, and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
Investment Funds
The Plan offers two investment paths and each path offers a mix of investments with different strategies, objectives and risk/reward potentials. Participants may only select one path but may change paths at any time, subject to certain restrictions on transfers between funds. Within the first path, participants choose a fund based on the date closest to their retirement or need for savings. Participants may choose from a combination of any six core funds in the second path.
Vesting
Participants’ interest in their employee and Company matching contribution accounts are fully vested at all times. Eligible Group II participants’ interests in their Company Basic Contribution accounts are fully vested after three years of service.
Notes Receivable from Participants
Participants may borrow up to 50% of their vested account balance, up to $50,000, with a minimum loan amount of $1,000 from the vested portion of their account. Loans bear a reasonable rate of interest based on prevailing market rates, are secured by a portion of the participant’s account and are repayable over a period not to exceed five years. Amounts borrowed do not share in the earnings of the investment funds; the participant’s account is credited with the interest payments made pursuant to the loan agreements. Principal and interest is paid ratably through payroll deductions.
Benefits
Upon termination of employment or death of a plan member, a participant may receive a lump-sum payment of their account balance. Additional optional payment forms are available at the election of the participant, in accordance with the Plan document.
Forfeitures
Forfeitures, primarily representing the unvested portion of Company Basic Contributions amounting to $281,000 and $469,000 as of December 31, 2016 and 2015, respectively, will be used to reduce future Company contributions pursuant to the terms of the Plan. In 2016, Company contributions were reduced by $1,096,000 from forfeited and nonvested accounts.
2. SUMMARY OF ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Plan were prepared on the accrual basis of accounting.
In February 2017, the FASB issued ASU 2017-06, Plan Accounting: Defined Contribution Plans (Topic 962): Employee Benefit Plan Master Trust Reporting. The guidance in this update requires a plan’s interest in a master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and the statement of changes in net assets available for benefits, respectively. The guidance also requires certain other disclosure related changes including removal of the percentage interest in the master trust for plans with divided interest, requirement for all plans to disclose the master trust other asset and liability balances and removal of disclosures for 401(h) accounts for health & welfare plan financial statements. The guidance requires retrospective application and is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. Management is currently assessing the potential impact the guidance will have upon adoption.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and changes therein, and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Investment Valuation and Income Recognition
Investments (other than the fully benefit-responsive investment contracts) are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 5 for a description of the valuation methodologies used for assets measured at fair value.
Fully benefit-responsive investment contracts are reported at contract value. Contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully-benefit responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under terms of the plan. See Note 3 for a description of the valuation methodologies used for assets measured at contract value.
Purchases and sales of securities are recorded on a trade date basis. Interest income is recorded on an accrual basis. Dividend income is recorded on the ex-dividend date.
The Plan provides for investments that, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the participants’ accounts and amounts reported in the Statements of Net Assets Available for Benefits.
Notes Receivable from Participants
Notes receivable from participants are measured at their unpaid balance plus any accrued but unpaid interest. Delinquent loans are reclassified as distributions based upon the terms of the Plan document.
Payment of Benefits
Benefits are recorded when paid.
Administrative Expenses
Certain administrative expenses of the Plan may be paid from Plan assets to the extent permissible by the Plan document. Expenses are identified as either specific or common fees. Specific fees, if any, are charged entirely to the Plan. Common fees are prorated to the Plan based on the Plan assets in relation to Master Trust assets.
Net Appreciation/(Depreciation)
Net appreciation/depreciation on investments is based on the value of the assets at the beginning of the year or at the date of purchase during the year, rather than the original cost at the time of purchase. The Plan’s unrealized appreciation (depreciation) and realized gain (loss) are included in the Plan’s interest of Master Trust net investment gain or (loss).
| |
3. | INVESTMENT CONTRACTS WITH INSURANCE COMPANIES |
The Plan’s investments in the Master Trust include fully benefit-responsive investment contracts in the Stable Asset Fund. The accounts for these contracts are credited with contributions and earnings on the underlying investments and charged for participant withdrawals and administrative expenses.
Investment contracts provide for a variable crediting rate, which typically resets at least quarterly, and the issuer of the wrap contract provides assurance that future adjustments to the crediting rate cannot result in a crediting rate less than zero. The crediting rate is primarily based on the current yield to maturity of the covered investments, plus or minus amortization of the difference between the market value and contract value of the covered investments at the time of computation.
Through the Stable Asset Fund, the Plan also holds synthetic investment contracts. A synthetic investment contract includes a wrapper fee, which is a risk charge in order to credit participant accounts with contract value over the term of the agreement.
Contract value represents contributions made under the contract, plus earnings, less participant withdrawals and administrative expenses. Participants may direct the withdrawal or transfer of all or a portion of their investment at contract value. There are no reserves against contract value for credit risk of the contract issuer or otherwise.
Certain events, such as Plan termination, may limit the ability of the Plan to transact at contract value with the issuer. The Company does not believe that the occurrence of any such event is probable.
Through the Master Trust agreement, three investment accounts were established to accommodate the investment assets of the Plan and other Company sponsored retirement plans. Within the Master Trust, the investment assets of the Plan reside in the ITW Defined Contribution Plans’ Investment Account (the “DC Investment Account”). The Plan’s interest in the DC Investment Account has an interest in the ITW Collective Defined Benefit and Defined Contribution Plans’ Investment Account (the “Collective Investment Account”). The Plan does not have an interest in the ITW Defined Benefit Plans’ Investment Account (the “DB Investment Account”). Plan investments and investment income reported in the Plan’s financial statements represent the Plan’s interest of the corresponding total of the Master Trust net assets and investment gains and losses.
The net assets in the DC Investment Account as of December 31, 2016 and 2015 are as follows:
|
| | | | | | | |
| 2016 | | 2015 |
Assets | | | |
Interest and dividends receivable | $ | 3,843,411 |
| | $ | 2,916,035 |
|
Due from brokers | 2,822,125 |
| | 1,235,118 |
|
Total receivables | 6,665,536 |
| | 4,151,153 |
|
| | | |
Investments at fair value | | | |
Interest-bearing cash | 12,394,168 |
| | 4,878,610 |
|
Interest in collective trust funds | 1,225,566,250 |
| | 1,127,833,282 |
|
Interest in Collective Investment Account | 187,834,936 |
| | 265,613,406 |
|
Interest in mutual funds | 299,935,289 |
| | 267,898,079 |
|
Company common stock | 430,723,170 |
| | 362,907,725 |
|
Common stock | 130,447,424 |
| | 108,005,232 |
|
Real estate | 9,279,917 |
| | 12,952,746 |
|
Total investments at fair value | 2,296,181,154 |
| | 2,150,089,080 |
|
| | | |
Investments at contract value | | | |
Guaranteed investment contracts | 240,643,994 |
| | 235,322,115 |
|
Synthetic investment contracts | 222,625,252 |
| | 215,553,568 |
|
Total investments at contract value | 463,269,246 |
| | 450,875,683 |
|
| | | |
Total assets | 2,766,115,936 |
| | 2,605,115,916 |
|
| | | |
Liabilities | | | |
Operating payables | 7,245,791 |
| | 669,241 |
|
| | | |
DC Investment Account Net Assets | $ | 2,758,870,145 |
| | $ | 2,604,446,675 |
|
For the year ended December 31, 2016, the net loss on investments in the DC Investment Account are as follows:
|
| | | |
Interest and dividends | $ | 27,285,132 |
|
Net appreciation in fair value of investments | 254,850,151 |
|
Investment management fee | (1,417,152 | ) |
Net investment gain | $ | 280,718,131 |
|
The Plan’s interest in the DC Investment Account assets represents the specific assets which are identifiable to the Plan and an allocation of the common assets. The Plan’s interest in the DC Investment Account net investment gain represents an allocation of the common gain. The Plan’s interest in the DC Investment Account assets and net investment gain/(loss) was 99.5% at December 31, 2016 and December 31, 2015.
The Plan’s interest in the DC Investment Account includes an interest in the Collective Investment Account. The net assets in the Collective Investment Account as of December 31, 2016 and 2015 are as follows:
|
| | | | | | | |
| 2016 | | 2015 |
Assets | | | |
Noninterest-bearing cash | $ | 19,878 |
| | $ | 18,446 |
|
| | | |
| | | |
Interest and dividends | 828,525 |
| | 921,074 |
|
Due from brokers | 306,024 |
| | 1,060,267 |
|
Total receivables | 1,134,549 |
| | 1,981,341 |
|
| | | |
Investments at fair value | | | |
Interest bearing cash | 1,088,211 |
| | 7,265,706 |
|
Interest in collective trust funds | 6,918,218 |
| | 11,601,406 |
|
Corporate bonds | 1,366,979 |
| | 1,794,405 |
|
Preferred stock | 917,260 |
| | 1,197,518 |
|
Common stocks | 175,777,989 |
| | 361,084,196 |
|
Real estate | 1,405,425 |
| | 3,224,795 |
|
Total investments | 187,474,082 |
| | 386,168,026 |
|
| | | |
Total assets | 188,628,509 |
| | 388,167,813 |
|
| | | |
Liabilities | | | |
Operating payables | 382,342 |
| | 717,201 |
|
Due to brokers and other liabilities | 411,231 |
| | 1,975,856 |
|
Total liabilities | 793,573 |
| | 2,693,057 |
|
| | | |
Collective Investment Account Net Assets | $ | 187,834,936 |
| | $ | 385,474,756 |
|
For the year ended December 31, 2016, the net loss on investments in the Collective Investment Account are as follows:
|
| | | |
Interest and dividends | $ | 3,079,719 |
|
Net depreciation in fair value of investments | (3,881,785 | ) |
Investment management fee | (1,881,049 | ) |
Net investment loss | $ | (2,683,115 | ) |
The Plan’s interest in the Collective Investment Account assets and net investment loss represents an allocation of the common assets and loss. The Plan’s interest in the Collective Investment Account net assets and the net investment loss was 99.5% at December 31, 2016 and 68.6% at December 31, 2015.
| |
5. | FAIR VALUE MEASUREMENTS |
Financial Accounting Standards Board (FASB) ASC 820, Fair Value Measurements and Disclosures, provides a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The valuation inputs for the three levels of the fair value hierarchy under ASC 820 are described below:
| |
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Plan has the ability to access. |
| |
Level 2 | Other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. If the asset or liability has a specified (contractual) term, a Level 2 input must be observable for substantially the full term of the asset or liability. |
Inputs to the valuation methodology include:
| |
• | quoted prices for similar assets or liabilities in active markets; |
| |
• | quoted prices for identical or similar assets or liabilities in inactive markets; |
| |
• | inputs other than quoted prices that are observable for the asset or liability; |
| |
• | inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
| |
Level 3 | Unobservable inputs for the asset or liability. |
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2016 and 2015.
Cash and cash equivalents are recorded at cost, which approximates fair value.
Collective trust funds are valued using the net asset value provided by the fund trustee based on the value of the underlying assets owned by the trust, minus its liabilities, and then divided by the number of shares outstanding. The NAV, as provided by the trustee, is used as a practical expedient to estimate fair value.
Mutual funds are traded in active markets and are valued based on quoted net asset value of shares held by the Master Trust investment accounts at year end.
Common and preferred stock is valued at the closing price reported on the active market on which the individual securities are traded.
Corporate bonds are valued using pricing models maximizing the use of observable inputs for similar securities. This includes basing value on yields currently available on comparable securities of issuers with similar credit ratings.
Real estate is valued at closing price reported in the market on which the individual securities are traded.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future values. Furthermore, while the Plan believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.
The following table sets forth by level, within the fair value hierarchy, the DC Investment Account’s and Collective Investment Account’s assets at fair value as of December 31, 2016 and 2015:
|
| | | | | | | | | | | | | | | |
| Assets at Fair Value as of December 31, 2016 |
| Total | | Level 1 | | Level 2 | | Level 3 |
DC Investment Account | | | | | | | |
Cash & cash equivalents | $ | 12,394,168 |
| | $ | 12,394,168 |
| | $ | — |
| | $ | — |
|
Mutual funds | 299,935,289 |
| | 299,935,289 |
| | — |
| | — |
|
Collective trust funds (a) | 1,225,566,250 |
| | | | | | |
Company common stock | 430,723,170 |
| | 430,723,170 |
| | — |
| | — |
|
Common stock | 130,447,424 |
| | 130,447,424 |
| | — |
| | — |
|
Interest in Collective Investment Account: | | | | | | | |
Cash & cash equivalents | $ | 1,090,306 |
| | 1,090,306 |
| | — |
| | — |
|
Collective short-term investment fund (a) | 6,931,534 |
| | | | | | |
Corporate bonds | 1,369,610 |
| | — |
| | 1,369,610 |
| | — |
|
Preferred stock | 919,026 |
| | 919,026 |
| | — |
| | — |
|
Common stock | 176,116,330 |
| | 176,116,330 |
| | — |
| | — |
|
Real estate | 1,408,130 |
| | 1,408,130 |
| | — |
| | — |
|
Real estate | 9,279,917 |
| | 9,279,917 |
| | — |
| | — |
|
Total investments at fair value | $ | 2,296,181,154 |
| | $ | 1,062,313,760 |
| | $ | 1,369,610 |
| | $ | — |
|
| | | | | | | |
Collective Investment Account | | | | | | | |
Cash & cash equivalents | $ | 1,088,211 |
| | $ | 1,088,211 |
| | $ | — |
| | $ | — |
|
Collective short-term investment fund (a) | 6,918,218 |
| | | | | | |
Corporate bonds | 1,366,979 |
| | — |
| | 1,366,979 |
| | — |
|
Preferred stocks | 917,260 |
| | 917,260 |
| | — |
| | — |
|
Common stocks | 175,777,989 |
| | 175,777,989 |
| | — |
| | — |
|
Real estate | 1,405,425 |
| | 1,405,425 |
| | — |
| | — |
|
Total investments at fair value | $ | 187,474,082 |
| | $ | 179,188,885 |
| | $ | 1,366,979 |
| | $ | — |
|
|
| | | | | | | | | | | | | | | |
| Assets at Fair Value as of December 31, 2015 |
| Total | | Level 1 | | Level 2 | | Level 3 |
DC Investment Account | | | | | | | |
Cash & cash equivalents | $ | 4,878,610 |
| | $ | 4,878,610 |
| | $ | — |
| | $ | — |
|
Mutual funds | 267,898,079 |
| | 267,898,079 |
| | — |
| | — |
|
Collective trust funds (a) | 1,127,833,282 |
| | | | | | |
Company common stock | 362,907,725 |
| | 362,907,725 |
| | — |
| | — |
|
Common stock | 108,005,232 |
| | 108,005,232 |
| | — |
| | — |
|
Interest in Collective Investment Account: | | | | | | | |
Cash & cash equivalents | 4,997,485 |
| | 4,997,485 |
| | — |
| | — |
|
Collective short-term investment fund (a) | 7,979,658 |
| | | | | | |
Corporate bonds | 1,234,224 |
| | — |
| | 1,234,224 |
| | — |
|
Preferred stock | 823,675 |
| | 823,675 |
| | — |
| | — |
|
Common stock | 248,360,291 |
| | 248,360,291 |
| | — |
| | — |
|
Real estate | 2,218,073 |
| | 2,218,073 |
| | — |
| | — |
|
Real estate | 12,952,746 |
| | 12,952,746 |
| | — |
| | — |
|
Total investments at fair value | $ | 2,150,089,080 |
| | $ | 1,013,041,916 |
| | $ | 1,234,224 |
| | $ | — |
|
| | | | | | | |
Collective Investment Account | | | | | | | |
Cash & cash equivalents | $ | 7,265,706 |
| | $ | 7,265,706 |
| | $ | — |
| | $ | — |
|
Collective short-term investment fund (a) | 11,601,406 |
| | | | | | |
Corporate bonds | 1,794,405 |
| | — |
| | 1,794,405 |
| | — |
|
Preferred stocks | 1,197,518 |
| | 1,197,518 |
| | — |
| | — |
|
Common stocks | 361,084,196 |
| | 361,084,196 |
| | — |
| | — |
|
Real estate | 3,224,795 |
| | 3,224,795 |
| | — |
| | — |
|
Total investments at fair value | $ | 386,168,026 |
| | $ | 372,772,215 |
| | $ | 1,794,405 |
| | $ | — |
|
| |
a) | These funds allows for daily liquidation with no additional notice required for redemption. Certain investments measured at net asset value per share (or its equivalent) as a practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the master trust disclosure. |
The Master Trust agreement provides, among other things, that the Trustee shall keep accounts of all trust transactions and report them periodically to the Company. Investment decisions, within the guidelines of the investment funds, are made by the Trustee and investment managers. The Trustee may use an independent agent to effect purchases and sales of common stock of the Company for the Illinois Tool Works Inc. Common Stock Fund.
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7. | RELATED PARTY TRANSACTIONS |
Through the Master Trust, certain Plan investments are shares of collective trust funds managed by the Trustee. In addition, the Recordkeeper was paid administrative fees in the Plan year. As defined by ERISA, any person or organization which provides these services to the Plan qualifies as a related party-in-interest. The Company is also a party-in-interest according to Section 3(14) of ERISA. The Illinois Tool Works Inc. Common Stock Fund is a Plan investment option.
Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants would become 100% vested in the Company contributions’ portion of their accounts.
The Plan obtained its latest determination letter on September 16, 2013, in which the Internal Revenue Service stated that the Plan and related Trust, as adopted, was designed in accordance with the applicable requirements of the Internal Revenue Code (“IRC”). The Company believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC. Therefore, the Company believes that the Plan was qualified and the related Trust was tax-exempt as of the financial statement dates.
Accounting principles generally accepted in the United States of America require Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the organization has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
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10. | TRANSFERS (TO) FROM OTHER PLAN |
Assets transferred (to) from the following plan in 2016:
|
| | | | | |
Plan Name | Transfer Date | | Assets Transferred (to) from Other Plan |
ITW Bargaining Savings and Investment Plan (“BSIP”) | Various | | 64,531 |
|
Total transfers (to) from other plan | | | $ | 64,531 |
|
Assets from BSIP represent transfers of individual participant account balances due to changes in job classification.
| |
11. | RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 |
The following reconciles net assets available for benefits per the financial statements to the Form 5500:
|
| | | | | | | |
| As of December 31 |
| 2016 | | 2015 |
Net assets available for benefits per the financial statements | $ | 2,807,660,527 |
| | $ | 2,654,739,829 |
|
Amounts allocated to withdrawing participants | (1,567,421 | ) | | (1,175,773 | ) |
Net assets available for benefits per the Form 5500 | $ | 2,806,093,106 |
| | $ | 2,653,564,056 |
|
The following reconciles benefits paid to participants per the financial statements to the Form 5500 for the year ended December 31, 2016:
|
| | | |
Benefits paid to participants per the financial statements | $ | 287,976,660 |
|
Amounts allocated to withdrawing participants at: | |
December 31, 2016 | 1,567,421 |
|
December 31, 2015 | (1,175,773 | ) |
Benefits paid to participants per the Form 5500 | $ | 288,368,308 |
|
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have been processed and approved for payment prior to December 31, 2016, but not yet paid as of that date.
Effective in 2017, participant assets and account balances pertaining to Precise Biomedical's 401k Plan have been merged into the Plan. The assets that were transferred to the Plan total approximately $194,000.
The Company has evaluated subsequent events from December 31, 2016 through the date these financial statements were available to be issued. Except as described above, there are no subsequent events that require recognition or additional disclosure in these financial statements.
Schedule
ITW SAVINGS AND INVESTMENT PLAN
Schedule H, Line 4i SCHEDULE OF ASSETS (HELD AT END OF YEAR)
As of December 31, 2016
Employer Identification Number 36-1258310, Plan Number 003
|
| | | | |
Identity of Issuer/Description of Investments | | Current Value |
*Participant loans** | |
| $59,055,384 |
|
*Party-in-interest
**Interest rates on loans to participants with balances outstanding at December 31, 2016, lowest 3.25% to highest 13.00%
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on June 26, 2017.
ITW SAVINGS AND INVESTMENT PLAN
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| ILLINOIS TOOL WORKS INC. |
| |
| |
Dated: June 26, 2017 | By: /s/ Karen Tulloch |
| Karen Tulloch |
| Vice President, Human Resources |