As an organization, what were the lessons learned from the 2009 recession?

The depth and breadth of this economic recession reminds us of the importance of decentralization in ITW’s business approach. This past year showed us how critically important our flexible structure—as well as our core business strategies of 80/20, innovation, and global growth—can be during extremely challenging times. There was great uncertainty and volatility in many of our end markets this past year, which meant that we had to make rapid assessments and adjust our business plans accordingly.

With more than 800 businesses worldwide, our local business leaders were able to make on-the-ground assessments of their customers and end markets and adapt quickly. Our decentralized structure allows our people the freedom to develop and implement plans appropriate for their local environment. Of course, significant restructuring programs and related expenses were reviewed at the corporate level, but the critical plans and recommendations were made locally.

Lessons we learned in 2009: decentralization and local decision making are tried and true ITW practices…and they work in all business environments! This remains more important than ever to the Company’s continued stability, growth and success.

Can ITW take advantage of growth opportunities in 2010?

In a word, absolutely! As a result of our restructuring efforts and the organization-wide application of our proven operating strategies, the Company continued to generate strong free operating cash flow amid the economic downturn. In 2009, we produced a robust $1.9 billion in free operating cash flow. This free cash will continue to help fuel both important investments in strategic growth initiatives as well as acquisition activity. As market conditions continue improving, we are well positioned for a strong acceleration in both our base revenue growth and our acquisition-related revenues.

We have advantageous product technologies in a variety of discrete end markets related to our early-cycle businesses such as automotive, polymers and fluids, and construction businesses. We believe these businesses and associated end markets are poised to recover more quickly than perhaps others in 2010. The same can be said of many of our businesses in the faster-growing emerging markets as well.

While we remain cautious in 2010 about some of our later-cycle equipment-related businesses and end markets driven more by capital expenditures, we believe these businesses remain fundamentally sound and will perform well when the recovery in their end markets begins to occur.

ITW made fewer acquisitions in 2009 versus prior years. What is the outlook and the ITW plan for acquisitions going forward?

At ITW, we have considerable experience with acquisitions and we apply real discipline to the process, recognizing reasonable valuations are important in achieving appropriate returns for our shareholders over time. We target acquisition opportunities we believe support our long-term growth strategies and fit appropriately in our business portfolio. We found that there were fewer opportunities in 2009 primarily due to the economic impact of the recession that drove a fundamental “price gap” between most buyers and sellers. As a result, in 2009 we closed only 20 deals for combined annualized revenues of $290 million—which is low by ITW standards.

We do anticipate the acquisition environment will improve in 2010 largely because potential acquisitions will see more stability in their business and improvement in their earnings. As acquisition opportunities arise, our decentralized business structure enables local managers to identify and execute the kind of transactions that can help accelerate our growth. And at the corporate office, our senior managers will continue to look at larger acquisition opportunities that may arise in potentially new market spaces in the coming year.

How will ITW continue to approach high-growth emerging markets?

At both the corporate and business unit level, we have a keen understanding and appreciation of the growth potential in emerging markets. Two prime examples: China and India. Both countries have impressive growth prospects over the next five years. Today, China is in our top ten revenue countries, which was not the case four years ago. Likewise, we view India as an important country with vibrant market opportunities and where we have made important investments the past several years. We are well positioned to experience significant growth in both these emerging markets across a variety of businesses.

Expanding our global footprint remains one of ITW’s core operating strategies. It’s why we have been steadily expanding our international operations and continue looking for business opportunities and partnerships in these markets. In fact, by 2013 we expect our international operations to represent approximately 60 percent of our total company revenues. Notably, the Asia Pacific region is projected to account for nearly 25 percent of total company revenues by 2013. In 2010, we will continue to extend ITW’s reach in emerging global markets with compelling growth prospects.

What is being done at ITW to ensure leadership continuity and strength?

At ITW, we recognize that our real strength lies in our people—their dedication, talent, and diverse skills. At the leadership level, this also includes significant experience, a deep knowledge of our key customers and markets, and a dedication to ITW’s proven values and principles.

We continue to refine our comprehensive internal leadership development programs and processes to identify and develop talent throughout our global organization. We are providing our future leaders with the training, experience, and mentorship that will empower them to take on new assignments within ITW and power our future growth. These future leaders are committed to ensuring the Company continues delivering the strong results our customers and our shareholders expect.