The economic climate in 2009 was both volatile and unpredictable. It was a year of unprecedented change and dramatic declines in nearly all of our worldwide end markets. The market uncertainty created an extremely difficult operating environment for our customers and certainly for our business units. And while we saw modest improvements in most markets later in the year, there is still a long road ahead to full recovery.

Despite these very challenging conditions and their impact on our company, ITW maintained focus on the guiding values and principles that have served the Company so well for nearly 100 years. As a result, we made steady improvements in our operating results as the year progressed and, most importantly, we are poised to capitalize on new opportunities ahead as our markets around the world continue improving.

Our Businesses – The Freedom To Adapt
ITW draws its strength and stability from its decentralized operating structure of more than 800 distinct, locally managed businesses and associated brands around the globe, across a wide spectrum of industrial markets. Decentralization is a core attribute of ITW, one that empowers our people around the world, enabling them to act nimbly, seize opportunities, and adapt in response to market conditions. In 2009, our decentralized structure gave us the ability to restructure our businesses quickly at the local business-unit level. Local management teams led these efforts to “right size” their operations according to their individual customer and market needs. These restructuring initiatives led to important and necessary cost reductions as our businesses adjusted to the market realities of the economic downturn. These initiatives were also very painful, as they included a significant reduction in the workforce across our organization. As always, we felt confident that putting these decisions in the hands of our businesses—rather than issuing top-down, prescriptive goals—would be the best approach for minimizing the impact on our people while keeping each business focused on its customer and market needs. As a result, we incurred $161 million of restructuring expenses during the year, which allowed significant improvement in operating margins as the year progressed and mitigated at least some of the economy’s negative effects on the Company.

Our Leadadershihip – The Power Of Principles
But the ability of our individual businesses to adapt to a recessionary economy is only half the story. We successfully weathered the storm in 2009 because all of our businesses are guided by ITW’s focus on 80/20, innovation, and global growth. These core strategies underpin the ITW Toolbox with leadership at all levels in our organization. Using these tools, rigorously and consistently, keeps our businesses focused and ensures that the Company is well positioned as our markets continue to improve.

Our businesses implement the ITW Toolbox in unique ways. In some cases, they employ the 80/20 rule to simplify product offerings or develop stronger partnerships with high-value customers. In others, they utilize our innovative processes to develop products better able to meet customers’ needs while raising the bar with better, technology-driven customer service. Innovation is an important component of our success and something our customers have grown to expect. In fact, ITW was awarded over 1200 new U.S. and foreign patents in 2009. We also consistently rank in the top 100 of U.S. patent recipients, a testament to our strong tradition of innovation. And we cannot overlook how important our global growth has been over the past decade in helping us diversify even more. The strength of our businesses in the geographic regions and end markets that were less impacted by the recession helped offset deeper market declines in the U.S. and in Europe. With businesses in nearly every corner of the world—including higher-growth countries like China and India—our global footprint and the diversity of our business segments continue to serve us well.In this year’s Annual Report, we proudly showcase eight examples that represent ITW’s successful integration of local brand solutions and strategy, with long-term commitment to our core strategies of 80/20, innovation, and global growth.

2009 Financial Highlights
Our full-year 2009 operating revenues of $13.9 billion were 18.8 percent lower than in 2008, reflective of the broad global recession impacting most of our markets. Base revenues fell 18.4 percent for the year, with North American base revenues decreasing 21.6 percent and international base revenues declining 14.9 percent. While full-year operating margins of 10.0 percent were lower than in 2008, we were encouraged by the solid improvements in our operating margins during the second half of 2009. We have seen steady improvement in revenues in some segments, such as Transportation, since the second quarter, while other later-cycle businesses like Power Systems & Electronics experienced smaller rates of decline towards the end of the year. This year, in particular, it is worth noting our extremely strong free operating cash flow of $1.9 billion for the full year. This performance stems from steady improvement in operating margins through the year and significant reductions in operating working capital, again underscoring the flexibility and swift response capabilities of our decentralized organization. We are also pleased that ITW’s credit ratings remained strong despite a turbulent economy. ITW has long been committed to maintaining a strong balance sheet and financial stability.

Management Developments
Leadership experience and continuity among corporate management is especially important during a tumultuous economy. ITW’s senior management has an average tenure of nearly 20 years, and in 2009 we drew heavily on the experience of our leadership across the organization in guiding our businesses through many challenges. We were faced with much volatility and uncertainty, leading to many difficult decisions. Our people responded extremely well in so many ways, and we deeply appreciate their commitment to our core strategies and to the long term success of our businesses. In June 2009, our Board of Directors elected Timothy Gardner as Executive Vice President with responsibility for ITW’s global consumer packaging businesses as well as the marking, coding and decorating businesses. Tim has proven management and leadership skills from 12 years of sales and general management experience within ITW’s consumer packaging businesses. Our Board of Directors also appointed Randy Scheuneman as Principal Accounting Officer in August 2009 with responsibility for all aspects of accounting and financial reporting. Randy’s wide range of financial experience and expertise will serve the Company well. Joining our Board of Directors is David B. Smith Jr., who was elected to the Board in late 2009. David’s breadth of prior experience in the public and private sector will also serve ITW well in the coming years.

During the year, we said goodbye to Executive Vice President Russell Flaum, who retired this year after 33 years of service with the Company. We thank Russ for his many contributions over the years and wish him the very best in retirement.

Looking Ahead
The economic challenges in 2009 were unprecedented, and it’s difficult to predict the speed and trajectory of the global economic recovery. Certainly business conditions will remain challenging for the coming year as markets continue to recover. But in the nearly 100 years of our history, ITW has worked through recessions in the past and has always emerged even stronger. We are confident that we will do just that again. As we head into 2010, our focus on our core customers and markets will continue guiding the long-term investments that position ITW for strong and profitable growth ahead. We are proud of the manner in which our people all over the world responded during the challenging environment in 2009, and we thank all the women and men of ITW for their continued dedication in creating a strong future for our customers and our shareholders in 2010 and beyond.

David B. Speer
Chairman & Chief Executive Officer

Thomas J. Hansen
Vice Chairman

E. Scott Santi
Vice Chairman