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John Israelsson
Roland Martel
March 6, 2013<br />
ITW - 100 Years of Innovation and Success<br />
ITW Proprietary &<br />
Confidential
A diversified manufacturer of<br />
advanced industrial technology<br />
Headquartered in Chicago,<br />
Founded 100 years ago with an initial<br />
focus on metal cutting tools<br />
Decentralized organization<br />
More than 150 divisions in 57 countries<br />
60,000 employees<br />
19,000 global patents & patent applications<br />
ITW Proprietary & Confidential 7<br />
7
REVENUES BY GEOGRAPHY<br />
Asia Pacific and Other<br />
20%<br />
North America<br />
48%<br />
Europe, Middle East, and Africa<br />
33%<br />
3/12/2013 ITW Proprietary & Confidential 8
ITW’s CORE CAPABILITIES<br />
80 20<br />
SUSTAINABLE<br />
80/20 BUSINESS MODEL<br />
Proprietary<br />
operating process<br />
that identifies the<br />
key customer and<br />
product profit<br />
drivers in a<br />
<strong>business</strong> and<br />
structures the entire<br />
<strong>business</strong> to fully<br />
leverage them<br />
ITW Proprietary & Confidential<br />
DIFFERENTIATION<br />
Constantly<br />
seeking ways to<br />
deliver<br />
differentiated<br />
value-add for our<br />
key “80”<br />
customers<br />
ENTREPRENEURIAL<br />
CULTURE<br />
• Decentralized<br />
• Flexibility within a<br />
framework<br />
• Results driven<br />
• Autonomy plus<br />
accountability
8 BUSINESS SEGMENTS<br />
Industrial Packaging<br />
14%<br />
Test & Measurement<br />
and Electronics<br />
Automotive OEM<br />
14% 13% 13%<br />
Polymers & Fluids<br />
Food Equipment<br />
11%<br />
ITW Proprietary & Confidential<br />
Construction<br />
Products<br />
Welding<br />
11% 11%<br />
Specialty Products<br />
13%
BUSINESS SEGMENT<br />
14% INDUSTRIAL PACKAGING<br />
Steel, plastic and paper products and equipment<br />
used for bundling, shipping and protecting goods<br />
in transit including plastic stretch film and both<br />
steel and plastic strapping<br />
MAJOR END<br />
MARKETS<br />
General Industrial<br />
Primary Metals<br />
Food & Beverage<br />
Construction<br />
PRIMARY BRANDS<br />
Acme<br />
Angleboard<br />
Mutiboard<br />
Orgapack<br />
Signode<br />
Strapex<br />
ITW Proprietary & Confidential
BUSINESS SEGMENT<br />
14% TEST & MEASUREMENT and<br />
ELECTRONICS<br />
Equipment and related software for testing and<br />
measuring of materials and structures, metal solder<br />
materials for PC board fabrication, and equipment<br />
and services for microelectronics assembly<br />
MAJOR END<br />
MARKETS<br />
General Industrial<br />
Auto OEM & Tiers<br />
Electronics<br />
Consumer<br />
PRIMARY BRANDS<br />
Instron<br />
Despatch<br />
Loma<br />
Speedline<br />
Buehler<br />
Kester<br />
ITW Proprietary & Confidential
BUSINESS SEGMENT<br />
13% AUTOMOTIVE OEM<br />
Transportation related components and fasteners<br />
MAJOR END<br />
MARKETS<br />
Automotive OEM / Tiers<br />
PRIMARY BRANDS<br />
DaeLim<br />
Deltar<br />
Filtertek<br />
Haugk<br />
Shakeproof<br />
Drawform<br />
ITW Proprietary & Confidential
BUSINESS SEGMENT<br />
13% POLYMERS & FLUIDS<br />
Adhesives, sealants, lubrication and cutting fluids;<br />
janitorial and sanitation supplies; and fluids and<br />
polymers for auto aftermarket maintenance and<br />
appearance<br />
MAJOR END<br />
MARKETS<br />
PRIMARY BRANDS<br />
ITW Proprietary & Confidential<br />
General Industrial<br />
Construction<br />
Densit Krafft<br />
Devcon LPS<br />
Dymon TACC<br />
Slime Prolim<br />
MRO<br />
Automotive Aftermarket<br />
Plexus<br />
ITW Polymer<br />
Technologies<br />
Permatex<br />
Rocol<br />
Schnee-<br />
Moorehead
BUSINESS SEGMENT<br />
13% FOOD EQUIPMENT<br />
Commercial food equipment and<br />
related service<br />
MAJOR END<br />
MARKETS<br />
Food Service<br />
Food Institutional / Restaurant<br />
Food Retail<br />
PRIMARY BRANDS<br />
Avery Berkel<br />
Bonnet<br />
Hobart<br />
MBM<br />
Traulsen<br />
Vulcan<br />
Foster<br />
Peerless<br />
Wolf<br />
ITW Proprietary & Confidential<br />
Gaylord
BUSINESS SEGMENT<br />
11% CONSTRUCTION PRODUCTS<br />
Design and manufacture construction fastening<br />
systems and truss products for the commercial,<br />
residential and remodeling/rehab sectors<br />
MAJOR END<br />
MARKETS<br />
Residential Construction<br />
Restoration Construction<br />
Commercial Construction<br />
PRIMARY BRANDS<br />
Paslode<br />
Duo-Fast<br />
SPIT<br />
Ramset<br />
Red Head<br />
Buildex<br />
ITW Proprietary & Confidential
BUSINESS SEGMENT<br />
11% WELDING<br />
Design and manufacture arc welding equipment,<br />
consumables, and accessories for a wide array of<br />
industrial and commercial applications<br />
MAJOR END<br />
MARKETS<br />
Energy<br />
General Industrial<br />
Automotive OEM / Tiers<br />
Commercial Construction<br />
PRIMARY BRANDS<br />
AXA Power<br />
Bernard<br />
Weldcraft<br />
Hobart<br />
Brothers<br />
Miller<br />
Stovkis Tapes<br />
Tien Tai<br />
Tregaskiss<br />
ITW Proprietary & Confidential
BUSINESS SEGMENT<br />
13% SPECIALTY PRODUCTS<br />
Specialty Products includes beverage multi-pack, plastic reclosable<br />
packaging, plastic consumables, and truck remanufacture and service<br />
MAJOR END<br />
MARKETS<br />
General Industrial<br />
Food & Beverage<br />
Consumer Durables<br />
PRIMARY BRANDS<br />
Zip-Pak<br />
ITW Foils<br />
Diagraph<br />
Fastex<br />
Hi-Cone<br />
ITW Proprietary & Confidential
1987<br />
1988<br />
1989<br />
1990<br />
1991<br />
1992<br />
1993<br />
1994<br />
1995<br />
1996<br />
1997<br />
1998<br />
1999<br />
2000<br />
2001<br />
2002<br />
2003<br />
2004<br />
2005<br />
2006<br />
2007<br />
2008<br />
2009<br />
2010<br />
2011<br />
FINANCIAL PERFORMANCE<br />
25 Year CAGR Revenue 12%<br />
25 Year CAGR Net Income 14%<br />
Return on Average Invested Capital 14%<br />
Return on Average Stockholders’ Equity 12%<br />
$ millions $ millions<br />
3,000<br />
18,000<br />
2,500<br />
2,000<br />
1,500<br />
1,000<br />
500<br />
-<br />
16,000<br />
14,000<br />
12,000<br />
10,000<br />
8,000<br />
6,000<br />
4,000<br />
2,000<br />
-<br />
ITW Proprietary & Confidential<br />
Revenue<br />
Operating Income
A HISTORY OF INNOVATION
1960<br />
1970<br />
1980<br />
1990
The TetraGRIP system drives like a nail and<br />
holds like a screw. This unique system combines<br />
a proprietary nail driven with a pneumatic nailer to<br />
not only fasten subfloors more efficiently during<br />
construction, but also to eliminate subfloor<br />
nail squeak.<br />
The TetraGRIP nail is a barb-threaded fastener that<br />
rotates as it penetrates the lumber, thereby creating<br />
a strong bond with the floor joist and subfloor. The<br />
unique shank design delivers superior holding power<br />
and will not induce squeaks. The TetraGRIP<br />
pneumatic nailer was designed to efficiently drive the<br />
nail through its rotational motions, and deliver the<br />
necessary power for a strong bond.
Enterprise Strategy<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.
Enterprise Strategy: 2012 – 2017<br />
ITW’s Unique<br />
Core Capabilities<br />
Differentiated<br />
Performance<br />
80/20 Business<br />
Model<br />
Sustainable<br />
Differentiation<br />
Entrepreneurial<br />
Culture<br />
Increasingly Challenging<br />
External Environment<br />
Key Enterprise Initiatives<br />
• Portfolio Management<br />
• Business Structure<br />
Simplification<br />
• Strategic Sourcing<br />
Highly Disciplined Capital<br />
Allocation Strategy<br />
Solid Growth<br />
Strong<br />
Returns<br />
Best-in-Class<br />
Operator<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
27
Operating Environment<br />
The external operating environment continues to evolve…<br />
Continued<br />
globalization of<br />
end markets<br />
Slower growth<br />
Fundamental<br />
changes in the<br />
competitive<br />
landscape<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
28
ITW’s Unique Core Capabilities<br />
80/20 Business Model<br />
80/20<br />
Business Model<br />
Sustainable<br />
Differentiation<br />
Entrepreneurial<br />
Culture<br />
ITW’s 80/20 <strong>business</strong> model is a proprietary operating process<br />
that identifies the key customer and product profit drivers in a <strong>business</strong><br />
and structures the entire <strong>business</strong> to fully leverage them<br />
Customers/Products<br />
Revenue/Profits<br />
80%<br />
20%<br />
80%<br />
20%<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
29
ITW’s Unique Core Capabilities<br />
Sustainable Differentiation<br />
80/20<br />
Business Model<br />
Sustainable<br />
Differentiation<br />
Entrepreneurial<br />
Culture<br />
ITW’s <strong>business</strong> model is<br />
squarely centered on constantly seeking<br />
ways to deliver differentiated value-add<br />
for our key (“80”) customers<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
30
ITW’s Unique Core Capabilities<br />
Sustainable Differentiation<br />
Platform:<br />
Customer/End Market:<br />
Engine Thermo Management<br />
OEM/Tiers<br />
• Key customer pain points:<br />
– Need for improved fuel efficiency<br />
– Increasingly challenging vehicle emissions<br />
standards<br />
• ITW solution: Ball Stat®<br />
– Replaces conventional thermostats<br />
– Improves vehicle fuel economy and reduces<br />
CO2 emission<br />
– Allows faster temperature start-up for more<br />
efficient combustion<br />
– 5 new and leveraged patents<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
31
ITW’s Unique Core Capabilities<br />
Entrepreneurial Culture<br />
80/20<br />
Business Model<br />
Sustainable<br />
Differentiation<br />
Entrepreneurial<br />
Culture<br />
Decentralized<br />
Flexibility<br />
within a<br />
framework<br />
Results<br />
driven<br />
Autonomy +<br />
accountability<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
32
Key Initiatives<br />
Portfolio Management<br />
Portfolio Composition: Commoditization Impact<br />
Operational<br />
excellence<br />
alone is no<br />
longer enough<br />
Shifting<br />
sustainable<br />
differentiation<br />
from a<br />
“desirable” to<br />
a “must have”<br />
attribute<br />
Commoditizing<br />
<strong>business</strong>es<br />
currently in our<br />
portfolio<br />
negatively<br />
impact the<br />
company’s<br />
performance<br />
We will divest<br />
commoditizing<br />
<strong>business</strong>es: up<br />
to 25% of<br />
portfolio<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
33
Key Initiatives<br />
Portfolio Management<br />
Disciplined portfolio<br />
management strategy<br />
Acquisitions focused on accelerated<br />
growth platforms<br />
Divest differentiation “challenged”<br />
<strong>business</strong>es<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
34
Key Initiatives<br />
Business Structure Simplification<br />
Simplify and scale up operating approach and<br />
structure in order to improve focus and enhance<br />
global competitiveness<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
35
Key Initiatives<br />
Business Structure Simplification<br />
Benefits<br />
Profitable<br />
Growth<br />
Improved<br />
Margins<br />
More focused growth investments:<br />
– Marketing<br />
– Innovation<br />
– Emerging markets<br />
Significant margin improvement from:<br />
– Reduced management infrastructure<br />
– “Front to back” reapplication of 80/20 to the<br />
scaled-up divisions<br />
Culture<br />
ITW’s core entrepreneurial culture remains intact<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
36
Key Initiatives<br />
Strategic Sourcing<br />
Leverage scale to enhance profitability<br />
and global competiveness<br />
Transform sourcing into a core strategic function<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
37
Capital Allocation Strategy<br />
External Investments: Acquisitions<br />
Focus on<br />
accelerated<br />
growth segments<br />
and platforms<br />
Strong sustainable<br />
differentiation<br />
potential<br />
Meaningful margin<br />
improvement<br />
potential from<br />
80/20<br />
Highly<br />
disciplined<br />
and focused<br />
acquisition<br />
strategy<br />
Target: ROIC significantly above the cost of capital within 3 to 5 years<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
38
Summary<br />
“We are moving to a different strategic view of our <strong>business</strong>, but not<br />
destroying the culture that has made this a strong company.<br />
We didn't get to be 100 years old by not changing.”<br />
‒David B. Speer<br />
Wall Street Journal, August 31, 2012<br />
We will be the same ITW — only more<br />
focused, more efficient and more streamlined<br />
in order to deliver profitable growth and<br />
strong returns in an increasingly challenging<br />
external environment<br />
SOLID GROWTH. STRONG RETURNS. BEST-IN-CLASS OPERATOR.<br />
39
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