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2014 ITW Investor Day

New York, December 5, 2014

E. Scott Santi, President & CEO

David C. Parry, Vice Chairman

Michael M. Larsen, Senior Vice President & CFO

Forward Looking Statements

Safe Harbor StatementThis meeting contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including, without limitation, statements regarding the expected impact and timing of strategic initiatives and related benefits, future financial performance, operating performance, growth in free operating cash flow, organic and total revenue growth, operating margin growth, growth in diluted income per share from continuing operations, restructuring expenses and related benefits, tax rates, exchange rates, timing and amount of share repurchases, end market economic conditions, and the Company’s related 2014 guidance. These statements are subject to certain risks, uncertainties, and other factors which could cause actual results to differ materially from those anticipated. Important risks that could cause actual results to differ materially from the Company’s expectations include those that are detailed in ITW’s Form 10-Q for the second quarter of 2014.

Non-GAAP MeasuresThe Company uses certain non-GAAP measures in discussing the Company’s performance. The reconciliation of those measures to the most comparable GAAP measures are detailed in the appendix of this presentation.

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DAVID C. PARRY

Vice Chairman

20YEARS WITH ITW

NAMED VICE CHAIRMAN IN

2010

Presenters

E. SCOTT SANTI

President & Chief Executive Officer

32YEARS WITH ITW

NAMED PRESIDENT & CEO IN

2012

MICHAEL M. LARSEN

Senior Vice President & CFO

2YEARS WITH ITW

NAMED SVP & CFO IN

2013

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Agenda

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ITW’S ENTERPRISE STRATEGY

ITW’S DIFFERENTIATED BUSINESS MODEL

• The core concept• Updated long-term performance goals

• 80/20 business process• Customer-back innovation• Decentralized, entrepreneurial culture

REFOCUSING ITW (2013 – 2017)• Portfolio management• Business structure simplification• Strategic sourcing

GROWTH (2015 AND BEYOND)• Organic revenue growth strategy• Differentiated segments• The role of acquisitions

SUSTAINABLE FINANCIAL PERFORMANCE

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• 2014 outlook• 2015 guidance• 2017 and beyond performance goals

6 BREAK FOLLOWED BY Q&A

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ITW’s Enterprise Strategy

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Best-in-Class Operator

4

The Core Concept

Refocus the entire company

to deliver on the compelling performance potential from

ITW’s unique and highly differentiated business model

Decentralized Entrepreneurial Culture

Customer-Back Innovation

80/20 Business Process

BUSINESS MODEL

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200 bps organic rev. growth above global GDP

20%+ROIC

~23%operating margin

Updated Long-Term Performance Targets

12-14%total shareholder

returns

BY THE END OF 2017

This Enterprise Strategy positions ITW to deliver sustainable, world-class financial performance

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BEYOND 2017

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ITW’s Differentiated Business Model

• Radically simplify and focus on high value items (the “80”)

• Apply to the whole business (not just manufacturing)

• Unique to ITW, deeply embedded in the culture and executed in multiple business contexts, extremely difficult to replicate

• Focus on solving “80” customer “pain points”

• Invent solutions for customers

• Higher velocity, lower risk, serial innovation

• One company/one team focused on executing ITW’s Enterprise Strategy

• Divisions have “flexibility within the ITW framework”

ITW’s Business Model is the Core Source of Value Creation

80/20 Business Process

Customer-Back Innovation

Decentralized Entrepreneurial Culture

World-class margins and returns andsolid organic revenue growth

High level of product differentiation with IP/patent protection

A culture of execution and performance

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80/20 Business Process

80/20 structures and focuses our businesses to uniquely satisfy the needs of our largest and most profitable customers (the “80”) allowing us to capture a disproportionate share of the available profits in the markets that we choose to serve …

Conversely …

… we handle less critical customers/products/ processes (the “20”) differently as we minimize both focus and overhead cost associated with managing this part of our businesses

Core 80/20 principle:

Complexity blurs focus and drives overhead costs

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80%

Customers, Products,Processes

20%

Customers, Products, Processes

the“80”

20%

Revenue & Profit

80%

Revenue & Profit

the“20”

Methodology used to manage all ITW businesses and deliver world-class performance

80/20 Business Process

• Simplify first to eliminate complexity, then improve

• Focus efforts and investment on high value items (the “80”) i.e. large customers, high volume products, mission critical business processes

• Aggressively reduce overhead costs associated with supporting low value items (the “20”) i.e. small customers, low volume products, non critical business processes

• Apply it to the whole business (not just manufacturing)

• Unique to ITW, deeply embedded in the culture and executed in multiple business contexts, extremely difficult to replicate

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7

OverheadCosts

80/20 Financial Impact

Revenue

Overhead Costs

Operating Income

Revenue

OverheadCosts

Operating Income

Revenue

OperatingIncome

80/20 is about driving total cost productivity … by focusing on customers, products, and processes that are best positioned for profitable, organic growth and mobilizing the organization to intensely focus on those opportunities

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1-2 years 3+ yearsBeginning

The Power of 80/20

Welding

Construction

WEIGHTEDPEER AVERAGE*

26% 14%

17% 10%

80/20 ADVANTAGE

+12 PTS.

Food Equipment 21% 16% +5 PTS.

Auto OEM 24% 8% +16 PTS.

+7 PTS.

Operating Margin Comparisons (3Q14 YTD)

14*See Appendix

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Customer-Back Innovation

2 3 4FROM THE

CUSTOMER BACK,

NOT FROM THE COMPANY OUT

LOWER RISK,

HIGHER VELOCITY“Serial” innovation … “singles and doubles”

PATENTSAND TRADE SECRETS

SUPPORT ITW’S COMPETITIVE EDGE

FOCUSED ON SOLVING

“80” CUSTOMER PAIN

POINTS

Inventing solutions for customers

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Key tenets of ITW’s approach to innovation

CUSTOMER PAIN POINT

Door panel sealsmust eliminaterattling

Need to improve workplace conditions and environment

Larger wind turbine blades require greater adhesive strength, more time to bond

Reduce energy and improve wash performance while maintaining ease of operation

Tougher industrystandards for more accurate tensile strength measurement

New engineered lumber and other materials require more power than traditional tools

ITW SOLUTION

2K DOOR FASTENER

MILLER CAPTURE 5

PLEXUS MA-560

GLOBAL FLIGHT WARE WASH

VIDEO MEASUREMENT

COMPACT FRAMER TOOL

No water, gas, dust intrusion or rattles

Captures weld cell fumes at the source; eliminates need for custom hood designs

Industry’s first “long open time” bonding agent lengthens the time it takes the adhesive to set

Reduces energy costs and improves wash performance, ease of operation

High-speed video-based solution effectively measures strain to meet regulatory requirements

Increased power, better cold weather performance with new fuel and management of gas venting

Examples of ITW’s Customer-Back Innovation

10PATENTS

53PATENTS

4PATENTS

135PATENTS

3PATENTS

82PATENTS

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WORLDWIDE PATENT RIGHTS

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1,370NEW PATENT

APPLICATIONS YTD 2014

ITW’s Patent Portfolio

Protecting our customer-back innovation with an active patent portfolio

10,460GRANTEDPATENTS

5,604PENDING PATENT

APPLICATIONS

1,254ITW

PATENT SOCIETY

MEMBERS

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ENTERPRISE

TEAM

Decentralized Entrepreneurial Culture: One Enterprise / One Team …

AT ITW, DECENTRALIZED AND ENTREPRENEURIAL MEANS: ● FLEXIBILITY within the ITW framework

● LEADERS exercise significant control and empowerment over the essential elements necessary to execute their individual business strategies, win with customers, and deliver results

● DECISIONS are made closer to customers, end markets

● SPEED and responsiveness

● We 80/20 everything … and minimize bureaucracy everywhere

An integrated and aligned organization focused on executing ITW’s Enterprise Strategy and

implementing ITW’s operating principles with excellence

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At ITW, Culture Drives Performance

● ITW’s culture is one of “GETTING THINGS DONE!”– Long track record of operational excellence

● ITW’s decentralized entrepreneurial culture is one of the 3 CORE COMPONENTS of our unique and highly differentiated business model

● Quality of Enterprise Strategy execution thus far attributable in large part to the UNIQUE ITW CULTURE

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Refocusing ITW (2013 – 2017)

Portfolio Management

Business Structure Simplification

Strategic Sourcing

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• ~30 divestitures (~$5B of sales) since 2011

• “Heavy lifting” is done … continue to monitor portfolio for risk of commoditization

• Now 7 highly differentiated segments with solid organic revenue growth potential

• Managed pace deliberately to minimize disruption and risk

• With 89 divisions, ITW is becoming a significantly simpler, “tighter” organization, but still decentralized

• Developed organizational structure and leadership team

• Segment-led approach

• Tools in place to deliver savings

Ongoing division level product line & customer simplification creates ~100 bps drag on organic revenue growth in 2015, less in 2016

Enterprise Initiatives Update

This image cannot currently be displayed.

This image cannot currently be displayed.

Portfolio Management

Business Structure Simplification

Strategic Sourcing

Continued progress in 2015 to further simplify the organization

On track to achieve goal of 1% savings per year on total spend

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Positioning the company to capitalize on the compelling performance potential from ITW’s unique and highly differentiated business model

Enterprise Initiatives Impact

Expect $600M to $800M of structural cost savings

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Annualized StructuralCost Savings

$600M to $800M

~23%OPERATING MARGIN

IN 2017

+700 bps OPERATING

MARGIN IMPROVEMENT

2012 to 2017

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Growth (2015 and Beyond)

Organic Growth

Acquisitions

200 bps of organic revenue growth above global GDP beyond 2017

ITW Organic Revenue Growth Framework

Organic Revenue Growth Rate and Path to Enterprise Target

Beyond 2017

3%

~50 bps

ITW Organic Revenue Growth

PortfolioQuality

ManagementFocus

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Global GDP*

2010-2014E Growth Rate

Assuming 3% Global GDP

~1%

~1%~3.5%~200 bps

*Source: IHS Global Insight

~5%TARGET

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ITW’s Enterprise Strategy Growth Agenda

Organic revenue growth is a key driver of financial performance.

Targeting ~5% organic growth in a ~3% global GDP environment.

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PORTFOLIO QUALITY … every one of our segments is differentiated by: Favorable market attributes

Focused strategic position

Sustainable competitive advantages

Meaningful growth drivers

MANAGEMENT FOCUS … from “acquisition first” to “organic first” Division leadership and above incentivized on organic revenue growth

Culture of “getting things done”

Business structure simplification better leverages 80/20 and customer-back innovation for growth

FAVORABLE MARKET ATTRIBUTESVery large, concentrated market where worldwide auto builds are expected to grow at 3% to 4% over the next five years*

STRATEGIC POSITION/COMPETITIVE ADVANTAGESThe only global, niche supplier to top tier OEMs, providing unique innovation to address pain points for sophisticated customers with complex problems

GROWTH DRIVERS Industry demand for improved fuel

economy, safety and drivability result in increasingly complex vehicles and require more sophisticated solutions across global platforms

Reduced engineering resources at OEMs necessitates greater reliance on ITW innovation

Clear plans to increase ITW content per vehicle globally

ITW Automotive OEM

26*Source: IHS Global Insight

ITW has outperformed auto builds by

400-500 bps

for last 4 years

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FAVORABLE MARKET ATTRIBUTES$20B global market of which about $10B is differentiated; growing faster than global GDP due to infrastructure investment, emerging markets, and global investments in energy

STRATEGIC POSITION/COMPETITIVE ADVANTAGESBranded value-added equipment and specialty consumable manufacturer with on-trend innovation and leading technology

GROWTH DRIVERSRegulations drive innovation

in the welding environment

Demographics resulting in shortage of experienced welders; need for new, easier to use equipment

Improve weld quality and productivity for more sophisticated applications

Continue to focus on equipment opportunities that are differentiated by brand, technology and IP

ITW Welding

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9% organic revenue CAGR

1993-2014E

FAVORABLE MARKET ATTRIBUTES$16B addressable global market expected to grow at 3%+ through 2016*

STRATEGIC POSITION/COMPETITIVE ADVANTAGESHighly focused and branded industry-leading global positions differentiated by innovation and integrated service offerings

GROWTH DRIVERS Product portfolio helps

customers reduce total cost of ownership by managing food safety and reducing labor cost

Product innovation focused on energy efficiency and water usage

Growth of service offerings, which are unique to ITW

Well positioned in emerging markets (China and Latin America)

ITW Food Equipment

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+4% organic revenue growth in

2014E

*Source: Food Service Equipment Reports 2014 and select GDP forecasts and local market intelligence

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GROWTH DRIVERSTest and Measurement:

Higher global quality standards, particularly in emerging markets, require more sophisticated solutions

Heightened customer focus on safety/brand equity

Customers need to reduce time to market requires more dynamic testing systems

Electronics:

Innovation focused on improving our customers’ production quality, accuracy and throughput

FAVORABLE MARKET ATTRIBUTES•Significant opportunity in ~$5B addressable test and measurement space, largely for structural/mechanical quality assurance

•Electronics/MRO market expected to grow 3% to 4% over next 5 years*

STRATEGIC POSITION/COMPETITIVE ADVANTAGESSophisticated, branded and innovative test and measurement and electronic manufacturing and MRO solutions that improve efficiency and quality for customers in diverse end markets

ITW Test & Measurement and Electronics

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T&M platform revenue growth

20% CAGR

2005-2014E

*Source: Company estimates

FAVORABLE MARKET ATTRIBUTESTotal addressable market of $5B to $6B

STRATEGIC POSITION/COMPETITIVE ADVANTAGESBranded supplier of innovative engineered fastening systems/solutions

GROWTH DRIVERS Innovation focused on differentiated

technology and software to help solve customer pain points

Well positioned to capitalize on long-term positive end-market growth trends in U.S., U.K. and Australia/New Zealand

Product portfolio matches up with growth in off-site residential and pre-cast commercial

Continue to right-size Europe using 80/20 and product line simplification to position it for longer-term revenue and margin growth

ITW Construction Products

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op. margin +490 bps

since 2011

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FAVORABLE MARKET ATTRIBUTES$30B+ market growing in-line with global GDP over time

STRATEGIC POSITION/COMPETITIVE ADVANTAGESHighly branded segment targeting niche markets thatrequire value added differentiated products

GROWTH DRIVERS Significant positions in growth

areas like wind energy, OEM’s tire repair kits, and wiper blades

Strong brands like Rain-X and Permatex

Broad global reach (30+ countries) with strong presence in Asia Pacific and South America

Improve business through product line simplification

ITW Polymers & Fluids

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op. margin +250 bps

since 2011

FAVORABLE MARKET ATTRIBUTESDiverse set of highly differentiated end markets

STRATEGIC POSITION/COMPETITIVE ADVANTAGESFocused on niche market opportunities that deliver strong operating results with substantial patent protection

GROWTH DRIVERS Strong brands that deliver

customer-focused solutions

Segment serves as an “incubator” for developing larger platforms

ITW Specialty Products

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~22%op. margin in 2014E

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●All of ITW’s division leaders and above are INCENTIVIZED on organic revenue growth

●Shifting management focus from 30 to 40 acquisitions annually to ORGANIC REVENUE GROWTH

●BSS better leverages 80/20 and our unique CUSTOMER-BACK INNOVATION

– 80/20 focus on largest customers and products

– Full new product pipeline

– Product Line Simplification “drag” declines in 2016

– Culture of “GETTING THINGS DONE”

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Management Focus on Organic Revenue Growth

FROM “ACQUISITION

FIRST” TO

“ORGANIC FIRST”

200 bps of organic revenue growth above global GDP beyond 2017

ITW Organic Revenue Growth Framework

Organic Revenue Growth Rate and Path to Enterprise Target

Beyond 2017

3%

~50 bps

ITW Organic Revenue Growth

PortfolioQuality

ManagementFocus

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Global GDP*

2010-2014E Growth Rate

Assuming 3% Global GDP

~1%

~1%~3.5%~200 bps

*Source: IHS Global Insight

~5%TARGET

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The Role of Acquisitions

BOLT-ON acquisitions to support and accelerate organic revenue growth in a core segment

NEW PLATFORM development to expand the long-term growth and earnings potential of ITW

Current portfolio has everything we need to achieve our performance goals

But, HIGHLY TARGETED acquisitions have a role to play in supplementing

ITW’s GROWTH STRATEGY

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Segment Bolt-on Acquisitions

Support / accelerate

ORGANICrevenue

growth rate in a core segment

Significant margin

improvement potential from

80/20 business process

implementation

Accretive to ITW’s margin,

ROIC and organic revenue

growth rate targets within

5-7 YEARS

$50M to $250M

typical range;

2-3/year

• Mid-tier Western kitchen equipment manufacturer in China acquired in 2013

• Doubled ITW FEG presence in high growth market and accelerated organic revenue growth rate

• In year one, +300 bps margin expansion from 80/20 implementation*

• Accretive to ITW margins and ROIC by 2018

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Rigorous and disciplined acquisition process

*Excluding purchase accounting adjustments and amortization

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Current portfolio has all the potential we need to achieve our performance goals …

SO, WHY NEW PLATFORMS?• Extend the reach and growth potential of ITW by

entering and developing new platforms to expand long-term earnings potential

• ITW business model provides opportunities to enter new spaces successfully

The unique and differentiated business model is the core source of value creation for the company

PROVEN DEVELOPMENT PROCESS• Attractive end market fundamentals with sustainable

differentiation attributes

Potential / multiple paths to build $1B+ position over time

• A piece at a time, not all at once

Start from a single entrée acquisition at limited scale/risk profile: $100M to $250M

Significant margin improvement potential from 80/20

• Use actual industry experience to make scale-up decision

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New Platform Development

2005 2014E

Total Revenue

Proven Track Record of New Platform Development

• Acquired in 1993

• The beginning of ITW’s Welding segment

• Largely developed through organic revenue growth initiatives

• Acquired in 2005• Established the foundation

for the test and measurement platform

• Bolt-on acquisitions have extended reach into new end markets

381993 2014E

Total Revenue

$0.3BMiller

$1.8BWelding Segment

$0.2BInstron

$1.2BT&M Platform

9%CAGR

20%CAGR

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Sustainable Financial Performance

Financial Highlights

● STRONG 2014 RESULTS in year 2 of ITW’s 5-year Enterprise Strategy … PORTFOLIO WELL POSITIONED FOR ORGANIC REVENUE GROWTH

● Expect another strong 2015 … EPS $5.15 to $5.35, +12% to 16% OVER 2014E

● ON TRACK TO DELIVER ON UPDATED 2017 ENTERPRISE GOALS

● Strong, consistent cash flow … DISCIPLINED AND RETURNS-FOCUSED CAPITAL ALLOCATION … returning significant cash to shareholders

● Deliver LONG-TERM, SUSTAINABLE SHAREHOLDER VALUE … 12% to 14% TSR beyond 2017

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Reaffirming 2014 Outlook

• ~2.5% organic revenue growth after -1% drag from product line simplification

• ~20% operating margin … enterprise initiatives contribute ~120 basis points

• Strong cash flows with FCF* conversion >100% and enhanced capital structure

• ~$5B returned to shareholders• $4B+ share buyback ($3B related to divestiture)

• 15% dividend increase

Strong progress in year 2 of ITW’s 5-year Enterprise Strategy

Total Revenue

Operating Margin ~20%17.8%

$14.1B

~$14.5B

2014E2013

$3.63

$4.57 - $4.65

+200bps

Adjusted ROIC* ~18%-19%16.3%+200

bps

EPS

41*See Appendix

+27%

EPS

Progress on Refocusing ITW

Operating Margin

Operating Income

~20%15.9%

Adjusted ROIC* ~18%-19%14.5%

RECORD OPERATING

INCOMEAND MUCH BETTER

POSITIONED FOR ORGANIC

REVENUE GROWTH

Financial performance in 2014 illustrates the shift to focus on ITW’s most profitable, differentiated segments

~$2.9B$2.8B

2012 2014E

$17.9B~$14.5B

Total Revenue

+410bps

+350bps

42*See Appendix

Total Revenue

Operating IncomeOperating Income

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2015 Guidance: EPS $5.15 to $5.35, up 12% to 16%

Total Revenue

Operating Margin ~21%~20%

$14.5B2.5-3.5% organic

2015E2014E

$4.57 - $4.65 $5.15 - $5.35

+130bps

Adjusted ROIC* 19-20%~18-19%

EPS

*See Appendix

• 2.5% to 3.5% organic revenue growth, includes -1% drag from product line simplification

• Total revenue of 0.5% to 1.5%, includes -2% impact from foreign currency translation at the current rates

• ~21% operating margin … enterprise initiatives contribute ~100 basis points

• Expected EPS headwinds:

• Foreign currency, ~$0.15

• Pension, ~$0.05

• Strong cash flows with FCF* conversion >100%

+14%

EPS

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ITW Will Deliver on Updated 2017 Enterprise Goals with World-Class Performance

BY THE END OF 2017, ITW WILL HAVE …

• A high quality portfolio with solid organic revenue growth potential

• Organic revenue growth 200 bps > global GDP

• Supplemented by highly targeted acquisitions

• World-class operating margins and returns

• Positioned for strength through economic cycles

• Strong cash flows and enhanced capital structure

• FCF* Conversion > 100% … higher in economic downturns

• Disciplined capital allocation based on best risk-adjusted returns

Organic Revenue

Operating Margin ~23%15.9%

2.2%

~5%

2017E2012

+700bps

Adjusted ROIC* 20%+14.5% +550bps

~21%

2.5-3.5%

2015E

19-20%

44*See Appendix

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PRIORITIES• Investments that support organic revenue

growth and profitability … ~5% of sales• Cap Ex, customer-back innovation, restructuring

• Dividend grows in-line with earnings over time

• Acquisitions and/or share repurchases based on best risk-adjusted return • Bolt-on acquisitions and new platform

development

• Opportunistic share repurchases that add to EPS growth

Leverage strong balance sheet and continue to enhance capital structure

• Minimize global cash … invest overseas, tax efficient repatriation to U.S.

• Target leverage 2.25 x EBITDA* … maintain some flexibility and continue to reduce cost of capital

45*See Appendix

Disciplined Capital Allocation Aligned with Enterprise Strategy

• Expect to return ~$2B to shareholders

• ~$1.5B share buyback

• Dividend grows in-line with earnings over time

~25% Internal Investments

20-30% Dividend

~50% External Investments

2015 FRAMEWORK

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2

3

1

2

3

Enterprise Strategy will generate world-class financial performance and create sustainable, long-term shareholder value

Expect ITW Business Model to Deliver 12% to 14% TSR Beyond 2017

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Earnings Per Share

OperatingIncome

3% Global GDP

Total Shareholder

Returns+200 bps

~9-10% ~10-12% ~12-14%

+~2%

DIVIDENDYIELD

+1-2%

SHAREREPURCHASE/ACQUISITIONS

~35%

INCREMENTALMARGINS

Compelling and achievable long-term performance goals

~5%ORGANIC

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15-Minute Break

Question and Answer

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Appendix

ITW DefinitionsPeer GroupWeighted Average Peer Group Operating Margin • Peer group data (3Q14 YTD) is from S&P Capital IQ as of November 6, 2014, and includes Welding: Colfax

(Fabrication Technology segment), Lincoln; Food Equipment: Middleby, Dover (Refrigeration & Food Equipment segment); Manitowoc (Foodservice segment); Auto OEM: TRW, Magna Automotive Services, BorgWarner Inc., Autoliv, Inc.; Construction: USG Corp., Simpson Manufacturing. Weighted average based on revenue.

Adjusted Return on Invested CapitalThe Company uses adjusted return on average invested capital (“adjusted ROIC”) to measure the effectiveness of its operations’ use of invested capital to generate profits. Adjusted ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company’s financial performance and may be different than the method used by other companies to calculate ROIC. Adjusted average invested capital represents the net assets of the Company, excluding cash and equivalents and outstanding debt, as they do not represent capital investment in the Company's operations. Adjusted average invested capital also excludes the Company's net investment in the former Industrial Packaging segment and the equity investment in the Wilsonart business (formerly the Decorative Surfaces segment). Adjusted average invested capital is calculated using balances at the start of the period and at the end of each quarter.

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ITW Definitions

Free Operating Cash Flow

The Company uses free operating cash flow to measure cash flow generated by operations that is available for dividends, share repurchases, acquisitions and debt repayment. The Company believes this non-GAAP financial measure is useful to investors in evaluating the Company's financial performance and measures the Company's ability to generate cash internally to fund Company initiatives. Free operating cash flow represents net cash provided by operating activities less additions to plant and equipment. Free operating cash flow is a measurement that is not the same as net cash flow from operating activities per the statement of cash flows and may not be consistent with similarly titled measures used by other companies.

Total Debt to Adjusted EBITDA

The Company uses the ratio of total debt to adjusted EBITDA to measure its ability to repay its outstanding debt obligations. The Company believes that total debt to adjusted EBITDA is a meaningful metric to investors in evaluating the Company’s long-term financial liquidity and may be different than the method used by other companies to calculate total debt to EBITDA. Adjusted EBITDA and the ratio of total debt to adjusted EBITDA are non-GAAP financial measures. The ratio of total debt to adjusted EBITDA represents total debt divided by income from continuing operations before interest expense, other income (expense), income taxes, depreciation, and amortization and impairment of goodwill and other intangible assets on a trailing twelve month basis.

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ROIC ReconciliationDollars in millions

AdjustedDecember 31, 2012

AdjustedDecember 31, 2013

Operating income, as reported $ 2,475 $ 2,514

Adjustment for Decorative Surfaces (143) -

Adjusted operating income 2,332 2,514

Taxes (Tax rate: 29.2% 2012, 28.8% 2013) (681) (724)

Adjusted operating income after taxes $ 1,651 $ 1,790

Invested capital at end of period:

Trade receivables $ 2,742 $ 2,365

Inventories 1,585 1,247

Net plant and equipment 1,994 1,709

Goodwill and intangible assets 7,788 6,885

Accounts payable and accrued expenses (2,068) (1,906)

Net assets held for sale - 1,519

Other, net 798 616

Total invested capital $ 12,839 $ 12,435

Average invested capital $ 13,160 $ 12,605

Adjustment for Decorative Surfaces (274) (169)

Adjustment for Industrial Packaging (1,504) (1,477)

Adjusted average invested capital $ 11,382 $ 10,959

Adjusted return on average invested capital 14.5% 16.3%

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