itw_investor_meeting_2008

Welcome to ITW’s Annual Investor MeetingInvestor Meeting

New York CityDecember 8, 2008

Today’s Agenda• 8:00am – 8:50am Breakfast buffet

• 8:50am – 9:00am John Brooklier, Vice President of Investor RelationsWelcome and Today’s Topics

• 9:00am – 9:45am Ron Kropp, Senior Vice President and CFOCapital Structure

• 9:45am – 10:45am Scott Santi, Vice ChairmanJohn McDonough, President, Food Equipment North AmericaJohn McDonough, President, Food Equipment North AmericaFood Equipment: A Growth Platform

• 10:45am – 11:00am Break

• 11:00am – 12:30pm David Speer, Chairman and Chief Executive OfficerITW Overview: End Market PerspectivesQ&A

• 12:30pm LunchMeeting concludesMeeting concludes

Today’s PresentersRon Kropp, Senior Vice President and Chief Financial Officer

• 15-year tenure with ITW• Named SVP and CFO in 2006• Named SVP and CFO in 2006• Previously held role of vice

president & controllerpresident & controller, financial reporting

Today’s PresentersScott Santi, Vice Chairman

• 25-year tenure with ITW• Responsible for ITW’s• Responsible for ITW s

worldwide Welding, Electronic Component Fabrication, Co po e t ab cat o ,Aircraft Ground Support, and Food Equipment businesses

• Named executive vice president in 2004 and vice chairman in December 2008

Today’s PresentersJohn McDonough, President, Food Equipment North America

• 17-year tenure with ITW• Responsible for North• Responsible for North

American operations of such brands as Hobart, Traulsen, b a ds as oba t, au se ,Vulcan, Wolf, Stero, Somatand Kairak

• Named to this position in 2006

Today’s PresentersDavid Speer, Chairman and Chief Executive Officer

• 30-year tenure with ITW• Named president of ITW in• Named president of ITW in

2004 and chief executive officer in 2005o ce 005

• Assumed additional responsibilities as chairman in p2006

• Managed an assortment of construction businesses earlier in career

ITW Forward - Looking StatementsF d L ki St t tForward - Looking StatementsThis meeting contains forward-looking statementswithin the meaning of the Private Securities Litigation ReformAct of 1995 including without limitation statements regardingAct of 1995 including, without limitation, statements regardingoperating performance, revenue growth, operating income,income from continuing operations, diluted income per sharefrom continuing operations use of free cash potentialfrom continuing operations, use of free cash, potentialacquisitions, end market conditions, discontinued operations,and the Company’s related forecasts. These statements aresubject to certain risks, uncertainties, and other factors whichjcould cause actual results to differ materially from thoseanticipated. Important risks that could cause actual results todiffer materially from the Company’s expectations are setforth in ITW’s Form 10-Q for the 2008 third quarter andForm 10-K for 2007.

Forecast & Capital StructureRon Kropp


4th Quarter 2008 ForecastQ

U d l i d t f N th A i d E

4th Quarter 2008 – Economic data• Underlying macro data for North America and Europe

trending down significantly• North America:

• Industrial production (ex: tech) -6.1% in September and October vs. -3.2% in August

• ISM Index: 36.2% in November (Under 50% “decliningISM Index: 36.2% in November (Under 50% declining growth”) vs. 43.5% in September

• Europe:E roZone ind strial prod ction 2 2% in October s• EuroZone industrial production: -2.2% in October vs. 0.6% in August

• EuroZone Purchasing Managers: 35.6% in November vs. 47.6% in August

Revised 4th Quarter 2008 Forecast MidMid

Low High Point4th Quarter

Total Revenues -7% -9% -8%Diluted Income per Share - Continuing $0.44 $0.52 $0.48

% F(U) 2007 -46% -37% -41%% F(U) 2007 -46% -37% -41%

Full YearT l R 6% 7% 6 5%Total Revenues 6% 7% 6.5%Diluted Income per Share - Continuing $2.94 $3.02 $2.98

% F(U) 2007 -5% -2% -3%

Revised 4th Quarter 2008 ForecastKey Assumptionsy p

• Base revenue decline of between 9% and 11%• Exchange rates through November 30

i i $ i i $ i i• Acquired revenues in the $1.5 billion to $1.6 billion range• Share repurchases of $1.3 billion to $1.4 billion for the year (previous: $1.0 to

$1.2 billion)• No further impairment of goodwill/intangiblesNo u e p e o goodw / g b es• Net nonoperating expense, including interest expense and other nonoperating

income, of $125 to $135 million (previous: $110 to $120 million), which is higher than 2007 by $80 to $90 millionT t f 28 25% t 28 75% f th f th t d 28 4% t 28 6%• Tax rate range of 28.25% to 28.75% for the fourth quarter and 28.4% to 28.6% for the year

Revised 4th Quarter 2008 ForecastRevised 4th Quarter 2008 ForecastReconciliation to Prior Forecast/Year

Vs. Prior Vs. PriorForecast Year

Prior forecast/year EPS 0.78$ 0.82$

Base (0.20) (0.25) Currency translation (0.04) (0.04) Restructuring (0.02) (0.04) Acquisitions (0.02) - Nonoperating (0.02) (0.02) Taxes - (0.03) Shares - 0.04

4th Quarter 2008 EPS - Midpoint 0.48$ 0.48$

Questions ??Questions ??

Capital Structure

Capital Structure• Target debt-to-capital range of

20-30%

1998-2007

– Current debt-to-capital ratio at 28%– Would go above target range for

larger acquisitionsa ge acqu s t o s

• Primary uses of free operating cash flow:– Dividends– Acquisitions– Share repurchases

Acquisition

Dividends

Investments

Share Repurchases

Primary Uses of Free Cash Flow• Dividends

– Guideline of 25-35% of trailing two years net income– Increased annual dividend rate from $1.12 to $1.24 (11% increase)

in August 2008• Acquisitions:

– Preferred use of free operating cash flow– 2008 range: annualized revenues of $1.5 to $1.6 billion

• Share repurchase program:– Repurchase shares with expected excess free cash flow and debt capacity– August 2007: $3 billion authorization ($1.6 billion remaining)– Current 2008 Range: $1.3 billion to $1.4 billion (YTD 3Q08 $992 mil)– Estimated benefit of share repurchases (net of interest) to

2008 EPS = 13¢

Debt Capacity by Type

$1 100

$5,440 (in millions)

Debt outstanding at 9/30/08: Euro Fixed$1,100

US$ bonds $ 940

Euro bonds 1,100

Commercial paper 1 493$3,000

Commercial paper 1,493

Other 64

$3,595

US$ Variable

$50$350

$940

Debt-to-capital % 28.3%

Euro Variable

US$ Fixed

Oth$50 Other

Liquidity• Primary sources of liquidity are strong free cash flow and

credit facilities• Credit facilities recently increased from $2.0 billion to $3.0

billion• Credit facilities used to backstop commercial paper programCredit facilities used to backstop commercial paper program

– No issues with placing commercial paper– “Flight to quality” - rated A1+/P1– Current outstanding is approximately $1 8 billionCurrent outstanding is approximately $1.8 billion– Average term: 67 days (≈70% after year-end)– Average interest rate: 1.7%

• Strong AA /Aa3 credit rating• Strong AA-/Aa3 credit rating– Debt capital markets readily accessible

Free Cash Flow 1998-2007

CAGRNet Income = 11%

RecessionNet Income = 11%Free Cash = 15%

Free Cash Net Income Linear (Free Cash)

Capital Structure Summary

• Strong conservative balance sheet with strong credit ratingsstrong credit ratings

• Have historically generated strong cash flow in downturnsdo tu s

• No liquidity issues• Ample short-term debt capacityAmple short term debt capacity• Readily accessible debt capital markets

Food Equipment: A Growth Platform

Scott Santi, Vice ChairmanJohn McDonough, President,

Food Equipment North America

December 8, 2008

Today’s Topics

• Business Overview• Major End Markets• Major End Markets• Core Product Lines

Key Growth Strategies• Key Growth Strategies• Q & A

Business Overview

ITW Food Equipment Group13% of total ITW revenues—2008(F)

16%20%Industrial Packaging

15%8%

20%Power Systems & ElectronicsTransportation

15%13%

Construction Products

Food Equipment

13%Polymers & Fluids

All Other

ITW Food Equipment Group

• Commercial Food Equipment and Related Services• 55 businesses in 22 countries represent $2 1 billion in55 businesses in 22 countries represent $2.1 billion in

total revenues• 2007 Revenues: +27%• 2008(F) Revenues: +10%


• Revenue by Category

11%

59%30%

Food Service

Service30%

Food Retail


• Revenue by Region

Major End MarketsMajor End Markets


• Revenue by End Market

18%Institutions

47%

7%Food Retail

Food Service ChainsI d R

16%

12% Ind. Restaurants

Other Food Service

Institutions• Colleges/Universities• Schools• HealthcareHealthcare• Lodging/Casinos• Canteens/Catering Cos.• Government

Food Service Chains• Full Service restaurants

– Family Style– Ethnic– Seafood– Steak

• Quick Serve Chains– Burger– Chicken– Sandwich– Ethnic– Bakery CafesP b & T• Pubs & Taverns

Independent Restaurants• Independents• Restaurant Groups

Other Food Service• Air Catering• Marine

– CruiseCruise– Offshore– Shipyards

• Transportation• Misc./Other

Marine

Misc./Other

Food Retail• Supermarkets• Mass Merchandisers• Membership ClubsMembership Clubs• Hyper Marches• Convenience Stores• Petroleum / Convenience

G• Grocers

Core Product LinesCore Product Lines


• Revenue by Product Line

13%

3%

Service

W h30%14%

Warewash

Cooking/Baking

Food Processing

21%19%Refrigeration

Other

Warewash• North America

• International

Cooking/Baking• North America

• International

Food Processing• North America

• International

Refrigeration• North America

• International

Service• North America

• Billed Services• Service ContractsP t (OTC)• Parts (OTC)

• Installations• Other

• International

ITW Food Equipment GroupPerformance Since Premark Acquisition

$2,500Total

Revenues Op. Margins

$1,500

$2,000

15%

20%

$500

$1,000

5%

10%

$0

$500

2000 2001 2002 2003 2004 2005 2006 2007 20080%

5%

($500)

Base Revenues New Acquisitions

( )

ITW Toolbox Impact - Hobart Germany80/20 MRDUSa Innovation

2000 2008PLS In-Lining Segmentation

Operating Margins: ~20.0%~20.0%Operating Margins: <5.0 %<5.0 %

• ITW Tool Box Implementation Drives:Significant Core Business Profitability Improvement– Significant Core Business Profitability Improvement

– Customer Driven Innovation/Organic Growth

ITW Toolbox Impact - Hobart France80/20 USa MRD

2000 2008PLS In-Lining Segmentation

Operating Margins: 14%14%Operating Margins: (5.0%)(5.0%)

• 80% reduction in SKUs• Refocused on “80” products and geographies

St li d l d d i• Streamlined sales and admin processes• Segmented business by core served markets• Targeted growth in direct service contracts

Key Growth StrategiesKey Growth Strategies

Key Growth Strategies

• Customer-Driven Innovation• Service as a Growth Platform• Service as a Growth Platform• Geographic Expansion/Emerging Market Growth

Targeted Product Category Additions• Targeted Product Category Additions

Customer-Driven Innovation: MBM/Hobart CombiMBM/Hobart Combi

• The Opportunity:• Operators focused on production efficiencies

» Simplicity of operation / ease of replicationp y p p» Process solutions vs. discrete pieces of

equipment• Often used with other “vertical” platforms

» Combi» Chiller» Holding/transport carts

• The User-Driven Solution:The User Driven Solution:• Bar code scanning to deliver ease of replication

» Oven recipes embedded in food company bar codes

» Recipes programmed on-site; onboard label» Recipes programmed on site; onboard label printer

• Interchangeable racking across platforms

Customer-Driven Innovation: 3000 Series Slicer3000 Series Slicer

• The Opportunity:• A core industry product with long-unmet needs

T f d f l i– True ease of use and ease of cleaning– Reliable slice quality (chain specification)– Improved yield (shrink management)– Operator productivity

• The User-Driven Solution:• Nine (9) patent-pending innovations, including:

– Removable knife (ease of cleaning)– Knife geometry (slice quality and yield)– Product tray presentation (slice quality and yield)

Simplified controls interface (ease of use)– Simplified controls interface (ease of use)– Efficiency enhancers on automatic (productivity)

Customer-Driven Innovation: Somat eCorect

• The Opportunity:• Escalating waste management costs

» Weight and/or volume fees vary by municipality• Demand for cost-effective sustainability solutionsDemand for cost effective sustainability solutions

» Majority of foodservice waste is compostable»Food waste; cardboard; compostable

disposables

• The User-Driven Solution:The User Driven Solution:• Zero-environmental impact waste elimination

» 8:1 reduction of waste into soil-grade mulch in 24-hours

» Mulch can be used, donated or sold» Mulch can be used, donated or sold» No water, enzymes, bio-filters or ventilation needed» Complements use of pulpers in high volume

applications»Pulpers reduce waste volume by 80% to a p y

wet pulp»eCorect further reduces weight (70%) and

volume (55%)• Saves energy; supplies; hauling fees; labor

Service as a Growth PlatformService Progression (2000-2008)

– Created separate business units to provide focus– Identified core Hobart equipment and service customers– Identified core Hobart equipment and service customers

» Focused on service quality and field efficiencies» Targeted field operations against this profile of

accounts» Built in-depth tech training programs around this core

– In-depth USa projects to simplify field and back-office processes

– Since acquisition:q» Revenue growth: 2x» Income growth: 4x» Current worldwide operating margin %: mid-20’s

Service as a Growth Platform• Building a Global Service Platform

• Current Status– Expanding International footprint:

» US, Canada, Mexico, Brazil; Puerto Rico; Columbia» UK, France, Germany, Benelux» Australia, Japan, Hong Kong, China, Korea

– Unique Value PropositionU que a ue opos t o» Factory-owned service arm» 1700 Hobart technicians in the United States alone» Actively manage total ownership experience for customers

– Adding user-driven product and service offerings to grow base– Adding user-driven product and service offerings to grow base» Multi-brand and full-store service agreements for select customers» Water treatment and grease management products (US and

Canada)» Installation services» Installation services

Service as a Growth Platform

• Service Growth Opportunities Going Forward:• Currently serve less than 20% of ITW-installed baseCurrently serve less than 20% of ITW installed base

– Additional share of ITW-installed base– Active trials of full-kitchen service in select accounts underway– Evaluate coverage of non-ITW-installed base

• Recent acquisitions enhance service platform– (UK, Ireland, France)( )– & (France)

Emerging Markets• History:

• Have been successfully selling US/European equipment to Western-style hotels, large restaurants, institutions and employee dining facilities for years

• Have an established manufacturing and service presence to support these activities

• Targeted Growth Initiatives• Currently building localized marketing competence/capabilities in Cu e t y bu d g oca ed a et g co pete ce/capab t es

these regions• Focusing on penetrating select key end markets in key

geographiesg g p• Expanding our service coverage

Recent Acquisitions: Horis• Revenue @ acquisition: $225 million

• Acquisition closed January 2007St t i Att ti• Strategic Attraction

• Complementary positions with Hobart France» Cooking, Refrigeration» Restaurants and Institutions» New projects focus vs. Renewals (replacements)

• Attractive direct service business• Current Status

M f t i t lb i l t ti i f ll i• Manufacturing toolbox implementation in full swing• Targeting service margin improvements• Detailed market segmentation process was

initiated in early 2008y• Operating margin improvements on track with

acquisition plan

Recent Acquisitions: Avery Berkel• Revenue @ Acquisition: $80 million

• Scales; Slicers; Wrappers• 95% revenues emanate from Europep• Acquisition closed September 2007

• Strategic Attraction• Strong brand recognition• Attractive direct service business• Well positioned range of premium to value-line

products

C t St t• Current Status• Toolbox implementation is well underway• Leveraging growth opportunities across Europe• Exploring global platform development opportunitiesExploring global platform development opportunities

with Hobart • Operating margin improvements on track

w/acquisition plan

Food Equipment: A Growth Platform

Significant Future Growth Potential:• Significant Future Growth Potential:

– Relatively small existing ITW share positionG $ $• Global Food Equipment market estimate: $22 - $26 billion

• Market still highly fragmented

– Lots of Room to Grow:Lots of Room to Grow:• Customer Driven Innovation• Service as a Growth Platform• Geographic Expansion/Emerging Market Growth

N P d t C t Additi• New Product Category Additions

– Direct Service Capabilities• A highly leveragable differentiating advantageA highly leveragable differentiating advantage

QUESTIONS

Welcome to ITW’s Annual Investor Meetingg

BREAKNew York City

December 8, 2008

ITW Overview: End Market PerspectivesMarket Perspectives

David Speer


Today’s Agenda

• Revenue Diversification and Acquisitions• Review of Economic Trends and ITW

Segments• Today’s Key Takeaways• Questions

Revenue Diversification and Acquisitionsand Acquisitions

Revenue Diversification

• ITW’s 2008 revenue mix continues to shift toward broader variety of end marketsshift toward broader variety of end markets and geographies

• Acquisitions continue to play a meaningful• Acquisitions continue to play a meaningful role in expanding both our geographic and end market diversification

Revenue Diversification: ITW Revenues by End MarketsITW Revenues by End Markets

23% 17%Automotive OEM General Industrial

21%12%

13%

General Industrial Auto OEM/Tiers

Food Institutional/Service

6%

9%

10%

5%5%6%6%7%Commercial Construction

Consumer Durables

Food & Beverage

Residential Construction

Commercial Construction

Consumer Durables

Food & BeverageResidential ConstructionPrimary Metals

22%

3%6%

16%

4%4%5%5%

Renovation ConstructionResidential Construction

Other

Renovation Construction

All Others

Electronics

Auto Aftermarket

1997 2008(F)

Revenue Diversification:ITW R b G hITW Revenues by Geography

64%50% 45% North America

30% EMEA

10% 14%25%

26%

36%

Asia/Pacific and Other

10%

1997 2008(F) 2012(F)

Growth Through Acquisitions:C t E i E i tCurrent Economic Environment

• Valuations are lower than before due to falling market values and the economy’s impact on business outlookimpact on business outlook

• Creates opportunity to acquire businesses previously overpriced for ITW • ITW’s strong cash flow and sound balance sheet provide adequate funding

required for acquisitionsrequired for acquisitions • Review of 2008 Acquisitions (through 11-7-2008):

– Of 44 acquisitions completed, 42 deals were generated by business unitsExpect to acquire $1 5 billion of annualized revenues in 2008– Expect to acquire $1.5 billion of annualized revenues in 2008

– On average, ITW has paid about 1.0X revenues for deals– Majority of companies acquired are international

Acquisitions complement existing business units and add to growth platforms– Acquisitions complement existing business units and add to growth platforms (test and measurement, polymers and fluids, and food equipment)

ITW Acquisition Criteria • Products that provide value add to customers• Strong market position• Well known brand name• Well known brand name• Improve financial metrics - double below average

margins in three to five years• Retain key management at acquired companies• Retain key management at acquired companies• Utilize management talent to implement

ITW Toolbox initiativesF th di if hi ll• Further diversify geographically

• Further diversify end markets• Return on investment significantly exceeding

the cost of capital within three to five years

10-Year Historical Acquisition Summary

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008(11-7-08)

# Deals 32 45 29 21 28 24 22 53 52 44

Acquired Revenues

(in millions)$3800 $1000 $556 $195 $347 $624 $584 $1714 $995 $1450

Avg. SizeAcquisition

$119 $22 $19 $9 $12 $26 $27 $32 $19 $33Acquisition

# Business Units 488 592 614 603 622 650 700 750 825 850+

350 Acquisitions (1999-YTD) $11.3 billion acquired revenues $32 million average acquisition size

Acquisitions – Historical LookA i d i 2000 2007

20%

25%Acquired in 2000-2007

15%

20%

5%

10%

0%

5%

Year 1 Year 2 Year 3 Year 4 Year 5

Margin Revenue Growth ROI

Acquisitions – Historical Look • Reviewed performance of larger acquisitions from 2000 – 2007

– Revenues > $20 million– Businesses which remained discrete for five yearsBusinesses which remained discrete for five years

• 73 Acquisitions with $4.2 million of first year revenue (70% of total)

• Conclusions:– Revenue growth only 0.2% in 2nd full year from first full year –

reflects impact of 80/20 simplification– Margins improve each year – from 9.2% in

year 1 to 19 3% in year 5year 1 to 19.3% in year 5– Return on investment improves from 9.2% in

year 1 to 17.0% in year 5– More recent acquisitions have room for continued improvementq p

Review of Economic Trends and ITW SegmentsTrends and ITW Segments

Review of Economic TrendsUnderlying macro data for North America and Europe is negative

U it d St tUnited StatesIndustrial Production (ex. tech):

• 2007 +0.7% O t 2008 6 1%

Euro ZoneIndustrial production:

• 2007 +3.4% vs. •Oct. 2008 -6.1%

ISM:• Jan. 2008 50.7%

• Oct. 2008 -2.2%

PMI:Jan 2008 52 8%• Nov. 2008 36.2%

(November New Orders Index: 27.9%; lowest level since June 1980)

• Jan. 2008 52.8%• Oct. 2008 41.1%

ITW Reporting Segments

• Industrial Packaging• Power Systems & Electronics• Power Systems & Electronics• Transportation

Construction Products• Construction Products• Food Equipment

P l & Fl id• Polymers & Fluids• All Other

Industrial Packaging

16%20%

15%8%

15%13%

15%

13%

16% of total ITW revenues—2008(F)

Industrial Packaging

• Steel, plastic and paper products used for bundling, shipping and protecting transported goodsshipping and protecting transported goods

• 108 businesses in 45 countries represent $2.6 billion of revenues$ 6 b o o e e ues

• 2007 revenues: +11%• 2008(F) revenues: +9%2008(F) revenues: +9%

Industrial PackagingW ld id R 2008(F)Worldwide Revenues 2008(F)

Primary Metals

22%

25%42%

Primary Metals

General IndustrialNorth America

13%

13%41%Consumer Durables

Food & Beverage

Europe

17%

10%

17%Other

Construction


By End Markets By Geography

Industrial Packaging2008 T d2008 Trends

• North America primary metals markets decrease 12% during Q3 vs year earlier periodsduring Q3 vs. year-earlier periods

• North America building materials market declines 25% to 30% for first nine months vs. prior-year periodsp y p

• Base revenues in Europe and Asia grew in the first half of 2008, but Europe declines in the second half of 2008 as

t l d l i d t i l k t f ll i ifi tlmetals and general industrial markets fall significantly• Asia growth continues up 10% from July through October

Industrial Packaging2009 G th A ti2009 Growth Assumptions

• Worldwide base revenues: -4% to -8% in 2009• Developed markets (North America and Western

Europe) forecasted to contract 5% to 10% as metals, construction and general industrial markets continueconstruction and general industrial markets continue to sag

• Emerging markets (Asia Pacific/Latin America/India) g g ( )expected to grow base revenues with slowing market growth in China, Brazil, and India

Power Systems & Electronics

16%20%

15%8%

15%13%

15%

13%


Power Systems & Electronics• Designer and manufacturer of arc welding

equipment, consumables, and accessories for a wide array of industrial andfor a wide array of industrial and commercial applications

• 96 businesses in 25 countries represent $2 4 billion of revenues$2.4 billion of revenues

• 48% Capital Equipment, 52% Consumables & Accessories

• 2007 revenues: +22%• 2008(F) revenues: +5%

Power Systems & ElectronicsWorldwide Revenues 2008(F)Worldwide Revenues 2008(F)

G l I d t i l

67%21%

26%

North America

General Industrial

Electronics

6%7%9%

21%

Fabrication

Construction

ShipbuildingG d P

21%

12%

15%

5%5%6%6%

Europe

Asia/Pacific and OtherOther

Energy

Ground PowerMRO

By End Markets By Geography

Power Systems & Electronics2008 Trends2008 Trends

• Welding Businesses:– +6% YTD through September

• North America : Flat, equipment slows while consumables continue modest growthg

• International : +18%, Europe slows during Q3 while Asia continues strong +20%

– Flat in October• North America slows dramatically across all markets: -9%• International: +22%, Europe flat while Asia still going strong +20%

• Electronic Component Assembly Businesses:– Flat YTD through September with equipment orders very slow and g p q p y

consumable volumes modestly positive– -38% in October as equipment orders in telecommunications and consumer

electronics dry up; consumables drop as production schedules are curtailed

• Aircraft Ground Support Equipment Businesses:– Flat YTD through September– +15% in October

Power Systems & Electronics2009 G th A ti2009 Growth Assumptions

• Worldwide segment base revenues expected to be down 4% to 6% in 2009 vs. 2008in 2009 vs. 2008

• Welding Businesses down 4% to 6%– North America: Down 5% to 8% overall on declining general industrial and

construction markets, offset partially by relatively robust new product pipeline– International: Flat to +2%, reasonable growth in energy-related and shipbuilding end

markets in Asia offset by lower capital spending in the heavy construction sector; Europe declining

• Electronic Component Assembly Businesses down 10% to 14%• Electronic Component Assembly Businesses down 10% to 14% on continued weak capital spending

• Aircraft Ground Support Equipment Businesses up 4% to 5% on moderating fuel prices and a strong backlog of airporton moderating fuel prices and a strong backlog of airport projects worldwide

Transportation

16%20%

15%8%

15%13%

15%13%


Transportation• Components, fasteners, fluids and polymers for

transportation-related applicationsp pp• 85 businesses in 22 countries represent

$2.4 billion of revenues• 2007 revenues: +13%• 2008(F) revenues: +7%( )

TransportationW ld id R 2008(F)Worldwide Revenues 2008(F)

55%65%

North AmericaAuto OEM/Tiers

E rope

7%

38%

6%6%

23%Europe


Auto Aftermarket

Other

Commercial Truck Aftermarket

GeographyEnd Market

Transportation2008 T d2008 Trends

• Penetrated new global platforms with Honda, Hyundai, R lt/Ni D i l GM & F d d i 2008Renault/Nissan, Daimler, GM & Ford during 2008

• Revenues for businesses located in Asia/Pacific approaching $200 million in 2009

• Product development activities begun in emerging markets with Suzuki, TATA, Chery and Daewoo during 2008

• North America total builds: -15% (Detroit 3: -20% and• North America total builds: -15% (Detroit 3: -20% and New Domestics: -6%)

• Europe total builds: -2% (1st half +5%; 2nd half down – 8%)

Transportation2009 G th A ti2009 Growth Assumptions

• Base revenues: -8% to -12% for full year 2009• North America will continue to show weakening automotive marketg

– +/- 11 million vehicle builds– Detroit 3: -16% to -20%– New domestics: -4% to -6%

• International auto builds also decline in 2009– Europe: -12% to -15%– Brazil: flat– China: flat

• Lower gas price and aging car population should lead to improving markets for car maintenance and care products in the U.S. and Western EuropeWestern Europe

• Truck aftermarket service in U.S. offers some potential upside


16%20%

15%8%

15%13%

13%


Construction Products• Designer and manufacturer of

construction fastening systems and truss products for the commercial, residential and remodeling/rehab sectorsremodeling/rehab sectors

• 94 autonomous businesses in 29 countries represent $2.0 billion of revenues

• 2007 revenues: +9%• 2008(F) revenues: 3%• 2008(F) revenues: -3%

Construction ProductsW ld id R 2008(F)Worldwide Revenues 2008(F)

38% 35% North AmericaResidential

29% 38% EuropeCommercial

4%

29%27% Asia/Pacific and Other

Other

Renovation

End Markets Geography

Construction Products 2008 Trends2008 Trends

• U.S. new residential housing starts drop from 1.15 million at end of Q4 2007 to forecasted 785,000 starts at end of Q4 2008 (32% decline) and Europe housingat end of Q4 2008 (32% decline) and Europe housing declines 13%

• Non-residential construction awards in U.S. drop nearly 20% and Europe falls over 6%20% and Europe falls over 6%

• North American renovation sales dampened in 2008 as consumer credit issues curtail spendingHIRI f t ti ti it 3% t 4% i 2008• HIRI forecasts renovation activity -3% to 4% in 2008

• Rapid slowing in European and modest growth in Asia/Pacific construction end markets results in 1% base revenue growth f i t ti l b i th h Q3 2008for international businesses through Q3 2008


2008 YTD/Sq. Ft % ChangeU.S. Summary in thousands (Oct. 2008) vs. YTD 2007

Construction ProductsDodge Construction Potentials Bulletin

Total Non-Residential 1,166,838 -19%Commercial 660,969 -28%

Stores and Food Service, Warehouse (ex. mfr. owned)Office and Bank Buildings Hotels & Motels

y ( )

Office and Bank Buildings, Hotels & Motels, Garages & Service Stations

Manufacturing 62,699 -17%Manufacturing Plants, Warehouses (mfr. owned), Laboratories (mfr. owned)

Education & Science 192,453 +3%Schools & Colleges, Laboratories (ex. mfr. owned), Libraries & Museums, etc.

Dormitories 24,925 +12%Hospital & Health Treatment 87,594 -2%Public Buildings 41,212 -3%

Government Administration, Other Government Service

Religious 23 083 -13%Religious 23,083 13%Amusement 54,494 -9%

Construction Products 2009 Growth Assumptions2009 Growth Assumptions

• Worldwide construction base revenues: -6% to -10%• North America (2009 forecast)North America (2009 forecast)

– Residential: Further decline of 20% to 25% with 2009 starts between 700,000 and 750,000 (NAHB)

– Renovation: HIRI projects renovation activity to– Renovation: HIRI projects renovation activity to increase 1% to 2% in 2009

– Non-residential: square footage initiated ( FW Dodge) projected to decline 12% in 2009projected to decline 12% in 2009

• Europe (2009 forecast) - EuroConstruct– Residential: -15% to -18%– Non-residential: -8% to -10%– Renovation: flat

ITW Construction Products 2009 G th A ti ( t )2009 Growth Assumptions (cont.)

• Asia/Pacific (2009 forecast)– Australian/New Zealand housing starts: Flat to +2%– Australian/New Zealand commercial construction

activity (square meters): Flat to +2%activity (square meters): Flat to +2%– Australian and New Zealand renovation : +4%– Southeast Asia construction: +4 to +5%Southeast Asia construction: 4 to 5%– China construction: +6 to +8%

Food Equipment16%20%

15%8%

15%

13%

13%

13%


Food Equipment

• Commercial food equipment and related service• 55 businesses in 22 countries represent• 55 businesses in 22 countries represent

$2.1 billion of revenues• 2007 revenues: +27%• 2007 revenues: +27%• 2008(F) revenues: +10%

Food EquipmentW ld id R 2008(F)Worldwide Revenues 2008(F)

59%49% North AmericaFood Institutional/

Restaurants

4 %

11%

30%

6%

45%EMEA


Service

Food Retail

By Category By Geography

Food Equipment2008 Trends2008 Trends

• Expect to finish 2008 with base revenues +3%North America:– North America:

• Food service / food retail chains pulled back new store construction and deferred rollouts early in the year

• Institutional base began to slow in late summerg• Channels conserving cash, burning off inventories going into 2009

– EMEA:• A strong start in the first quarter met with a gradual softening in the institutional g q g g

markets

– Emerging Markets:• Remained strong through Q3, softening going into 2009• Asia-Pacific beginning to see a slowdown in the lodging sector

Food Equipment2009 Growth Assumptions2009 Growth Assumptions

• Worldwide base revenues expected to be in a range of -4% to -8%• Broad-based slowdown in North America expected to last throughBroad based slowdown in North America expected to last through

2009• Continued softening in European institutional base and

independent restaurantsindependent restaurants• Latin America to largely mirror North America• Positive growth expected in Asia-Pacific, but at a much reduced g

pace• Service business worldwide is expected to mitigate some of the

decline in equipment salesdecline in equipment sales

Polymers & Fluids

16%20%

15%8%

20%

15%13%

8%

15%13%


Polymers & Fluids• Adhesives, sealants, lubrication and cutting fluids,

and janitorial and sanitation supplies• 94 business units in 32 countries represent $1.3 billion of

revenues2007 24%• 2007 revenues: +24%

• 2008(F) revenues: +32%

Polymers & FluidsWorldwide Revenues by Geography 2008(F)Worldwide Revenues by Geography 2008(F)

31%35% North AmericaGeneral Industrial

Construction

11%

13%

14%

47% EuropeElectronics/Consumer Durables/Primary Metals

MRO

23%

8%

18%Asia/Pacific and Other

Auto Aftermarket

Other

By GeographyBy End Market

Polymers & Fluids 2008 T d2008 Trends

• General Industrial markets – Wind, solar, rail and petrochemical industries , , p

continue to demonstrate growth– Maintenance and repair markets demonstrating

continued strength – OEM market (recreational marine, transportation)

is lackluster• Construction end markets decline in NA and Europe partially

offset by strong new product introductionsoffset by strong new product introductions • Applications of performance technologies in new industries

like aerospace yield good growth• BRIC markets: acquisitions have added new channels and• BRIC markets: acquisitions have added new channels and

market opportunities

Polymers & Fluids2009 G th A ti2009 Growth Assumptions

• Worldwide base revenues expected to expected to be in ranges of -5% to flat in 2009g

• Increased market penetration, new products and lower raw material costs will allow stabilization of margins in base business

• Utilization of ITW Toolbox offers good margin improvement opportunities in newer acquisitions

• Investments in BRIC countries will show increasingInvestments in BRIC countries will show increasing returns in 2009

• Overall global market is highly fragmented and the opportunity for acquisitions remains good with a solidopportunity for acquisitions remains good with a solid potential pipeline

All Other

16%20%

15%8%

15%13%

15%13%


All Other Businesses • All other operating segments include equipment and related

software for test and measurement, paint spray equipment, finishing equipment, plastic reclosable packaging, plastic consumables, q p , p p g g, p ,plastic and metal fasteners

• End markets include general industrial, finishing, consumer packaging, beverage and food, and test & measurementp g g, g ,

• $3.3 billion in revenues• 2007 revenues: +15%• 2008(F) revenues: +4%• 2008(F) revenues: +4%

All OtherWorldwide Revenues by Geography 2008(F)Worldwide Revenues by Geography 2008(F)

General Industrial

57%21%

23%

North America

General Industrial

Consumer Durables

5%6%

18%

E rope

ElectronicsAuto OEM/Tiers

Food & Beverage

9%

34%

27%

5% Europe


Auto OEM/Tiers

Other

By GeographyBy End Market

All Other2008 Trends

T t & M t• Test & Measurement: – Base revenues: +6% for full-year 2008, with double-digit growth coming from Asia– Three 2008 acquisitions (QSA, Sonotech and Avery Weigh-Tronix) drive Test &

Measurement annualized revenues to nearly $900 millionMeasurement annualized revenues to nearly $900 million • Consumer Packaging:

– Base revenues: +2%– Material costs in most of consumer packaging businesses are declining following record

price levels in 2008– Private Label volume has shown strength at the expense of branded products as

consumers cut back on expenditures • Finishing:• Finishing:

– Base revenues: -1%– Economic softness has delayed large system orders and diminished automotive

refinishing markets– Continued success in the finishing business is increasingly dependent upon global reach

and partnerships, for which we are well positioned

All Other2009 G th A ti2009 Growth Assumptions

• Total segment revenues: -4% to -7% T t & M t• Test & Measurement:– Base revenues: -3% to flat in 2009, with majority of growth again

emanating from AsiaAcquisition opportunities expected to push platform revenues to– Acquisition opportunities expected to push platform revenues to over $1 billion in 2009

• Consumer Packaging:Base revenues for Consumer Products Group: 3% to 5% due to– Base revenues for Consumer Products Group: -3% to -5% due to weakening consumer demand

• Finishing:Base revenues: 5% to 7% due to declining general industrial activity– Base revenues: -5% to -7% due to declining general industrial activity

Today’s Key TakeawaysToday s Key Takeaways

Today’s Key Takeaways• Newly-reduced Q4 forecast reflects slowing end markets

both in North America and internationally as well as i ifi tl l t ib tisignificantly lower currency contributions

• ITW’s balance sheet, cash flow and credit ratings remain strongg

• Food Equipment is a growing business platform…one we will continue to grow via innovative products and complementary acquisitionscomplementary acquisitions

• 2009 will be a challenging year in nearly all end markets with preliminary total company base revenues expected to be in a range of 5% to 10% for the full yearbe in a range of -5% to -10% for the full year

• We are prepared for the challenge!

itw_investor_meeting_2008

Economy & Finance

president of itw

executive vice president

senior vice president

th quarter

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