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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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RULE 14a-6(e)(2)).
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[ ] Soliciting Material Pursuant to Section 240.14a-12
ILLINOIS TOOL WORKS INC.
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SEC 1913 (02-02)
[ILLINOIS TOOL WORKS INC. LOGO]
ILLINOIS TOOL WORKS INC.
3600 WEST LAKE AVENUE
GLENVIEW, ILLINOIS 60025
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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FRIDAY, MAY 7, 2004
3:00 P.M.
THE NORTHERN TRUST COMPANY
50 SOUTH LASALLE STREET
CHICAGO, ILLINOIS
ITW is holding its 2004 Annual Meeting for the following purposes:
1. To elect ten directors for the upcoming year; and
2. To ratify the appointment of Deloitte & Touche LLP.
The Board of Directors recommends that you vote FOR each of the director
nominees and FOR the ratification of the appointment of Deloitte & Touche LLP as
ITW's independent public accountants for 2004.
Stockholders of record on March 9, 2004 are entitled to vote.
It is important that your shares are represented at the Annual Meeting
whether or not you plan to attend. To be certain that your shares are
represented, please sign, date and return the enclosed proxy card as soon as
possible or vote by telephone or the internet by following the instructions on
the proxy card. Whatever method you choose, please vote as soon as possible. You
may revoke your proxy at any time before it is voted at the Annual Meeting.
Our Annual Report for 2003 is enclosed.
By Order of the Board of Directors,
Stewart S. Hudnut
Secretary
March 12, 2004
ILLINOIS TOOL WORKS INC.
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PROXY STATEMENT
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TABLE OF CONTENTS
Page
----
Questions and Answers....................................... 1
Election of Directors....................................... 4
Board of Directors and Its Committees....................... 7
Corporate Governance Policies and Practices................. 9
Director Compensation....................................... 10
Ownership of ITW Stock...................................... 11
Section 16(a) Beneficial Ownership Reporting Compliance..... 14
Executive Compensation...................................... 14
Equity Compensation Plan Information........................ 17
Report of the Compensation Committee on Executive
Compensation............................................. 18
Company Performance......................................... 20
Report of the Audit Committee............................... 21
Ratification of the Appointment of Independent Public
Accountants.............................................. 23
Audit Committee Charter..................................... A-1
Board Independence Standards................................ B-1
ANNUAL REPORT ON FORM 10-K
YOU MAY REVIEW AND DOWNLOAD A COPY OF ITW'S ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2003, INCLUDING SCHEDULES, THAT WE FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION BY ACCESSING OUR WEBSITE, WWW.ITW.COM, OR
BY WRITING TO: STEWART S. HUDNUT, SECRETARY, ILLINOIS TOOL WORKS INC., 3600 WEST
LAKE AVENUE, GLENVIEW, ILLINOIS 60025.
This proxy statement and form of proxy are first being sent to
stockholders on or about March 12, 2004.
QUESTIONS AND ANSWERS
Following are questions often asked by stockholders of publicly held
companies. We hope that the answers will assist you in casting your vote.
WHAT AM I VOTING ON?
We are soliciting your vote on:
1. The election of ten directors for the upcoming year; and
2. The ratification of the appointment of Deloitte & Touche LLP as ITW's
independent public accountants for 2004.
WHO MAY VOTE?
Stockholders at the close of business on March 9, 2004, the record date,
may vote. On that date, there were 309,476,550 shares of ITW common stock
outstanding.
HOW MANY VOTES DO I HAVE?
Each share of ITW common stock that you own entitles you to one vote.
HOW DO I VOTE?
You may vote your shares in one of the following four ways:
1. By mail: Complete the proxy card and sign, date and return
it in the enclosed envelope;
2. By telephone: Call the toll-free number on the proxy card,
enter the holder account number and the proxy
access number from the proxy card, and follow the
recorded instructions;
3. By internet: Go to the website listed on the proxy card, enter
the holder account number and the proxy access
number from the proxy card, and follow the
instructions provided; or
4. In person: Attend the Annual Meeting, where ballots will be
provided.
If you hold your shares through a bank or broker that does not offer telephone
or internet voting, please complete and return your proxy card by mail.
HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?
If you sign, date and return your proxy card, your vote will be cast as
you direct. If you do not indicate how you want to vote, you give authority to
Marvin D. Brailsford, Susan Crown and Harold B. Smith to vote on the items
discussed in these proxy materials and on any other matter that is properly
raised at the Annual Meeting. If you do not indicate how you want to vote, your
proxy will be voted FOR the election of each director nominee and
FOR the ratification of the appointment of Deloitte & Touche LLP as ITW's
independent public accountants and FOR or AGAINST any other properly raised
matter at the discretion of Ms. Crown and Messrs. Brailsford and Smith.
MAY I REVOKE MY PROXY?
You may revoke your proxy at any time before it is voted at the Annual
Meeting in one of four ways:
1. Notify ITW's Secretary in writing before the Annual Meeting that you
wish to revoke your proxy;
2. Submit another proxy with a later date;
3. Vote by telephone or internet after you have given your proxy; or
4. Vote in person at the Annual Meeting.
WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
Your shares are likely registered differently or are in more than one
account. You should sign and return all proxy cards to guarantee that all of
your shares are voted.
WHAT CONSTITUTES A QUORUM?
The presence, in person or by proxy, of the holders of a majority of ITW
shares entitled to vote at the Annual Meeting constitutes a quorum. Your shares
will be considered part of the quorum if you return a signed and dated proxy
card or if you vote by telephone or internet. Abstentions and broker non-votes
are counted as "shares present" at the meeting for purposes of determining if a
quorum exists. A broker non-vote occurs when a broker submits a proxy that does
not indicate a vote as to a proposal because he or she does not have voting
authority and has not received voting instructions from you.
WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL?
ELECTION OF DIRECTORS: The ten nominees who receive the highest number of
votes will be elected. If you do not want to vote your shares for a particular
nominee, you may indicate that in the space provided on the proxy card or
withhold authority as prompted during telephone or internet voting. Broker
non-votes and votes to withhold authority for one or more nominees are not
considered shares voted and will not affect the outcome of the vote.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC
ACCOUNTANTS: Although we are not required to submit the appointment of our
independent public accountants to a vote of stockholders, we believe that it is
appropriate to ask that you ratify the appointment. Ratification of the
appointment of Deloitte & Touche LLP as ITW's independent public accountants
requires the affirmative vote of a majority of the shares present or represented
by proxy at the Annual Meeting and entitled to vote. An abstention will have the
effect of a vote against the proposal since it is one fewer vote for approval,
but a broker non-vote will have no effect.
2
HOW DO I SUBMIT A STOCKHOLDER PROPOSAL?
To be considered for inclusion in our proxy statement for the May 2005
Annual Meeting, a stockholder proposal must be received no later than November
12, 2004. Your proposal must be in writing and must comply with the proxy rules
of the Securities and Exchange Commission (SEC). You may also submit a proposal
that you do not want included in the proxy statement, but that you want to raise
at the May 2005 Annual Meeting. If you submit that proposal after January 26,
2005, then SEC rules permit the individuals named in the proxies solicited by
ITW's Board of Directors for that meeting to exercise discretionary voting power
as to that proposal. You should send your proposal to our Secretary at our
address on the cover of this proxy statement.
HOW DO I NOMINATE A DIRECTOR?
If you wish to nominate an individual for election as director at the May
2005 Annual Meeting, our Secretary must receive your written nomination by
December 31, 2004. Our by-laws require that your nomination include: (1) your
name and address; (2) the name, age and home and business addresses of the
nominee; (3) the principal occupation or employment of the nominee; (4) the
number of shares of ITW stock that the nominee beneficially owns; (5) a
statement that the nominee is willing to be nominated and serve as a director;
and (6) any other information regarding the nominee that would be required by
the SEC to be included in a proxy statement had ITW's Board of Directors
nominated that individual. Any nomination that you make must be approved by the
Corporate Governance and Nominating Committee as well as by the Board of
Directors.
WHO PAYS TO PREPARE, MAIL AND SOLICIT THE PROXIES?
ITW will pay all of the costs of preparing and mailing the proxy
statement and soliciting these proxies. We will ask brokers, dealers, banks,
voting trustees and other nominees and fiduciaries to forward the proxy
materials and our Annual Report to the beneficial owners of ITW common stock.
Upon request, we will reimburse them for their reasonable expenses. In addition
to mailing proxy materials, our officers, directors and employees may solicit
proxies in person, by telephone or otherwise.
3
ELECTION OF DIRECTORS
Stockholders will elect ten directors at the Annual Meeting. The
individuals listed below have been nominated by the Board of Directors as
recommended by the Corporate Governance and Nominating Committee. Each director
will serve until the May 2005 Annual Meeting, until a qualified successor
director has been elected, or until he or she resigns or is removed by the Board
of Directors.
We will vote your shares as you specify on the enclosed proxy card, by
telephone or by internet. If you do not specify how you want your shares voted,
we will vote them FOR the election of all the nominees listed below. If
unforeseen circumstances (such as death or disability) make it necessary for the
Board of Directors to substitute another person for any of the nominees, we will
vote your shares FOR that other person. The Board of Directors does not
anticipate that any nominee will be unable to serve. The nominees have provided
the following information about themselves:
[W.F. ALDINGER PHOTO] WILLIAM F. ALDINGER, 56, has served as the Chairman and
Chief Executive Officer of Household International, Inc., a
subsidiary of HSBC plc, a consumer finance company, since
1996. He serves on the boards of Household International,
Inc., Household Finance Company, AT&T and MasterCard
International. Mr. Aldinger has served as a director of ITW
since 1998.
[MICHAEL J. BIRCK MICHAEL J. BIRCK, 66, has served as the Chairman of Tellabs,
PHOTO] Inc. since 2000 and Chief Executive Officer from 2002 to
February 2004. Mr. Birck founded Tellabs and served as
President and Chief Executive Officer from 1975 to 2000.
Tellabs designs, manufactures, markets and services voice
and data equipment. He is a director of Molex, Inc. and
Tellabs, Inc. Mr. Birck has served as a director of ITW
since 1996.
[MARVIN D. BRAILSFORD MARVIN D. BRAILSFORD, 65, is a retired Vice President of
PHOTO] Kaiser-Hill Company LLC, a construction and environmental
services company. Prior to his employment with Kaiser-Hill,
he served with the United States Army for 33 years, retiring
with the rank of Lieutenant General. Mr. Brailsford is a
director of Conn's Inc. and has served as a director of ITW
since 1996.
4
[JAMES R. CANTALUPO JAMES R. CANTALUPO, 60, has been Chairman and Chief
PHOTO] Executive Officer of McDonald's Corporation, a restaurant
chain, since January 2003, previously serving as President
and Vice Chairman, Emeritus in 2002 and President and Vice
Chairman from 1999 through 2001. He served as Vice Chairman
of McDonald's Corporation and Chairman and Chief Executive
Officer of McDonald's International from 1998 to 1999. He
serves on the board of McDonald's Corporation and has served
as a director of ITW since 2001.
[SUSAN CROWN PHOTO] SUSAN CROWN, 45, has been Vice President of Henry Crown and
Company, a business with diversified investments, since
1984. She is a director of Northern Trust Corporation and
its subsidiary, The Northern Trust Company. Ms. Crown has
served as a director of ITW since 1994.
[DON H. DAVIS PHOTO] DON H. DAVIS, JR., 64, has been Chairman of the Board of
Rockwell Automation, Inc. (formerly Rockwell International
Corporation), a global provider of industrial automation
power, control and information solutions, since 1998 and
Chief Executive Officer from 1997 to February 2004. He is a
director of Rockwell Automation, Inc., Apogent Technologies
Inc., Ciena Corporation and Journal Communications, Inc. Mr.
Davis has served as a director of ITW since 2000.
[W. JAMES FARRELL W. JAMES FARRELL, 61, has been Chairman of ITW since 1996,
PHOTO] Chief Executive Officer since 1995 and has 38 years of
service with ITW. He is a director of Allstate Insurance
Company, Sears Roebuck & Co., Kraft Foods, Inc. and UAL
Corp. Mr. Farrell has served as a director of ITW since
1995.
5
[ROBERT C. MCCORMACK ROBERT C. MCCORMACK, 64, has been a Partner of Trident
PHOTO] Capital LP, a venture capital firm, since 1993. From 1987 to
1993, Mr. McCormack served successively as Deputy Under
Secretary of Defense and Assistant Secretary of the Navy
(Finance and Comptroller). He is a director of DeVry, Inc.,
Mead Westvaco Corp. and the Northern Trust Corporation and
its subsidiary, The Northern Trust Company. Mr. McCormack
has served as a director of ITW since 1993, and previously
served as a director of ITW from 1978 through 1987.
[ROBERT S. MORRISON ROBERT S. MORRISON, 61, is a retired Vice Chairman of
PHOTO] PepsiCo, Inc., a beverage and food products company, serving
from 2001 to 2003. From 1997 to 2001, prior to its merger
with PepsiCo, he was Chairman, President and Chief Executive
Officer of The Quaker Oats Company. Mr. Morrison is a
director of 3M, The Tribune Company and Aon Corporation. Mr.
Morrison has been a director of ITW since 2003.
[HAROLD B. SMITH HAROLD B. SMITH, 70, is a retired officer of ITW and is a
PHOTO] director of W.W. Grainger Inc., Northern Trust Corporation
and its subsidiary, The Northern Trust Company. Mr. Smith
has served as a director of ITW since 1968.
6
BOARD OF DIRECTORS AND ITS COMMITTEES
ITW's Board of Directors met five times during 2003. In addition to
meetings of the full Board, directors attended meetings of Board committees and
independent directors met five times in regularly scheduled executive sessions.
The Chairmen of each of the Board of Directors' standing committees rotate as
the Chairman of executive sessions of the independent directors. The Board of
Directors has standing audit, compensation, corporate governance and nominating,
and finance committees. Under the terms of their charters, each member of the
audit, compensation and corporate governance and nominating committees must meet
applicable New York Stock Exchange and Securities and Exchange Commission
independence requirements. ITW encourages its directors to attend all Board and
committee meetings and the Annual Meeting of Stockholders. In 2003, all of the
directors attended 100% of the meetings of the Board and its committees, as well
as the Annual Meeting of Stockholders.
AUDIT COMMITTEE
Meetings in 2003: 4
Members: James R. Cantalupo (Chairman)
William F. Aldinger
Michael J. Birck
Marvin D. Brailsford
Don H. Davis, Jr.
Function: Responsible for the engagement of independent public
accountants; assisting the Board with respect to matters
involving and overseeing accounting, financial reporting and
internal audit functions; integrity of ITW's financial
statements; compliance with legal and regulatory
requirements; independence and performance of ITW's
independent public accountants; and performance of ITW's
internal audit function. The Board has revised the charter
that specifies the composition and responsibilities of the
Committee. Additional information on the Committee and its
activities is set forth in the "Report of the Audit
Committee" on page 22 and in Appendix A -- Charter of the
Audit Committee.
7
COMPENSATION COMMITTEE
Meetings in 2003: 3
Members: William F. Aldinger (Chairman)
Michael J. Birck
James R. Cantalupo
Susan Crown
Robert C. McCormack
Robert S. Morrison
Function: Establishes and oversees executive compensation policies;
recommends to the other independent directors compensation
for the Chief Executive Officer; approves compensation for
executive officers; and makes recommendations on new
incentive-compensation and equity-based plans or amendments.
Additional information on the Committee and its activities
is set forth in the "Report of the Compensation Committee on
Executive Compensation" on page 18.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE
Meetings in 2003: 1
Members: Marvin D. Brailsford (Chairman)
James R. Cantalupo
Susan Crown
Don H. Davis, Jr.
Function: Identifies, evaluates and recommends director candidates;
develops, administers and recommends corporate governance
guidelines; oversees the evaluation of the Board and
management; and makes recommendations as to Board committees
and Board size.
FINANCE COMMITTEE
Meetings in 2003: 1
Members: Robert C. McCormack (Chairman)
William F. Aldinger
Don H. Davis, Jr.
Robert S. Morrison
Harold B. Smith
Function: Reviews, evaluates and recommends to the Board management's
proposals relating to ITW's financing, investment portfolio
and real estate investments.
8
CORPORATE GOVERNANCE POLICIES AND PRACTICES
GENERAL
We have long believed that good corporate governance is important to
assure that ITW is managed for the long-term benefit of its stockholders. In
that regard, we have reviewed our corporate governance policies and practices
for compliance with the provisions of the Sarbanes-Oxley Act of 2002, the rules
and regulations of the Securities and Exchange Commission, and the new listing
standards of the New York Stock Exchange, or NYSE.
Based on this review, our Board of Directors has adopted or revised
charters for our Audit, Compensation, and Corporate Governance and Nominating
Committees. In addition, we maintain a corporate governance section on our
website, which includes the charters of these committees; ITW's Statement of
Principles of Conduct; and ITW's Code of Ethics for the Chief Executive Officer
and key financial and accounting personnel. In addition, we will promptly post
any amendments to or waivers of the Code of Ethics on our website. You can find
this and other corporate governance information at WWW.ITW.COM.
STOCKHOLDER COMMUNICATIONS WITH DIRECTORS
You may communicate with any of our directors or with the independent
directors as a group by sending an e-mail to INDEPENDENTDIRECTORS@ITW.COM or by
writing to the Independent Directors c/o the Corporate Secretary at our address
on the cover of this proxy statement.
BOARD INDEPENDENCE
Our Board conducts an annual review as to whether each of our directors
meets the applicable independence standards of the NYSE. Pursuant to the
recently adopted NYSE listing standards, our Board of Directors has adopted
categorical standards to assist it in making its determination of director
independence. In addition, a director will not be considered independent unless
the Board of Directors determines that the director has no material relationship
with ITW (either directly or as a partner, shareholder or officer of an
organization that has a relationship with ITW). A copy of these standards is
attached as Appendix B.
The Board has determined that each of the current directors standing for
re-election, except the Chairman of the Board and Chief Executive Officer, has
no material relationship with ITW other than as a director and is independent
within the meaning of ITW's Categorical Standards for Director Independence and
the listing standards of the NYSE. In making its determination, the Board of
Directors has broadly considered all relevant facts and circumstances.
DIRECTOR CANDIDATES
Our by-laws permit stockholders to nominate directors for consideration
at an annual stockholder meeting. The policy of the Corporate Governance and
Nominating Committee is to consider a properly submitted stockholder nomination
for election as director. For a
9
description of the process for submitting a director candidate in accordance
with ITW's by-laws, see "Questions and Answers -- How do I nominate a director?"
on page 3.
Our directors play a critical role in guiding ITW's strategic direction
and oversee the management of ITW. Board candidates are considered based upon
various criteria, such as their broad-based business and professional skills and
experiences, a global business and social perspective, concern for the long-term
interests of the stockholders, and personal integrity and judgment. In addition,
directors must have time available to devote to Board activities and to enhance
their knowledge of the global manufacturing environment. Accordingly, we seek to
attract and retain highly qualified directors who have sufficient time to attend
to their duties and responsibilities to ITW.
The Corporate Governance and Nominating Committee, our Chairman and CEO
or other members of the Board of Directors may identify a need to add new
members to the Board of Directors with specific criteria or simply to fill a
vacancy on the Board. The Corporate Governance and Nominating Committee will
initiate a search, seeking input from Board members and senior management and,
to the extent it deems appropriate, engaging a search firm. An initial qualified
candidate or a slate of qualified candidates will be identified and presented to
the Committee for its evaluation and approval. The Committee then seeks full
Board endorsement of the selected candidate.
Assuming that a properly submitted stockholder recommendation for a
director candidate has been received, the Corporate Governance and Nominating
Committee will evaluate that candidate by following substantially the same
process, and applying substantially the same criteria, as for candidates
submitted by other sources, but the Committee has no obligation to recommend the
candidate for nomination.
DIRECTOR COMPENSATION
ANNUAL RETAINER AND ATTENDANCE FEES
The annual retainer for non-management directors is $40,000, the fee for
each Board or committee meeting attended is $2,000, and the annual fee for
committee chairs is an additional $3,000, except for the Audit Committee
chairman, whose annual fee is $10,000. Non-management directors can defer
receipt of all or a portion of their annual retainer, chair and meeting fees
until retirement or resignation. Deferred fee amounts are credited with interest
at current rates.
NON-EMPLOYEE DIRECTORS' FEE CONVERSION PLAN
In order to link director compensation with stockholder interests,
non-management directors are given the opportunity to elect annually to receive
all or a portion of their annual retainer, chairman and meeting fees in an
equivalent value of ITW common stock pursuant to the Non-Employee Directors' Fee
Conversion Plan. The number of ITW shares to be issued to a director is
determined by dividing the dollar amount of the fee subject to the election by
the closing price of ITW common stock on the date the fee otherwise would have
been paid in cash. A director can also elect to defer receipt of the shares, in
which case the
10
deferred shares are credited as stock units to an account in the director's
name. The account receives additional credit for cash dividends and is adjusted
for stock dividends, splits, combinations or other changes in ITW common stock.
The stock units in a director's account are distributed as shares of ITW common
stock upon retirement, resignation or a corporate change (as defined in the 1996
Stock Incentive Plan), with any fractional shares paid in cash.
RESTRICTED ITW COMMON STOCK
In 1995, the stockholders approved a plan whereby a portion of each
non-management director's compensation includes the periodic grant of restricted
ITW common stock, thereby directly linking another element of director
compensation with stockholder interests. In February 2004, each non-management
director of ITW received an award of 900 restricted shares. Restricted shares
vest as follows: 450 shares shall become non-forfeitable on each of January 3,
2005 and January 2, 2006, and all 900 will fully vest upon death or retirement.
A director cannot sell the shares until the earliest of retirement from the
Board, death or January 2, 2006. A director who terminates service on the Board
other than for death or retirement prior to January 2006 will forfeit any
unvested restricted shares.
PHANTOM ITW STOCK
To tie a further portion of their compensation to stockholder interests,
non-management directors of ITW are granted 1,000 units of phantom stock upon
first becoming a director. The value of each unit equals the market value of one
share of ITW common stock. Additional units are credited to a director's phantom
stock account in an amount equivalent to cash dividends paid on ITW stock.
Accounts are adjusted for stock dividends, stock splits, combinations or similar
changes. A director is eligible for a cash distribution from his or her account
at retirement or upon approved resignation. When phantom stock is granted,
directors elect to receive the distribution in either a lump sum or in up to ten
annual installments, an election that directors may change at any time until two
years preceding the distribution. Directors receive the value of their phantom
stock account immediately upon a change of control.
OWNERSHIP OF ITW STOCK
DIRECTORS AND EXECUTIVE OFFICERS
The following table shows how much ITW common stock the directors, the
named executive officers, and all directors and executive officers as a group
beneficially owned as of December 31, 2003, except as otherwise noted. The named
executive officers are the Chief Executive Officer and the four next most highly
compensated executive officers based on compensation earned during 2003.
Beneficial ownership is a technical term broadly defined by the SEC to
mean more than ownership in the usual sense. In general, beneficial ownership
includes any shares a director or executive officer can vote or transfer and
stock options that are exercisable currently or that become exercisable within
60 days. Except as otherwise noted, the
11
stockholders named in this table have sole voting and investment power for all
shares shown as beneficially owned by them.
The number of shares beneficially owned by each non-management director
includes 900 shares (600 shares in the case of Mr. Cantalupo and no shares in
the case of Mr. Morrison) of ITW common stock that were granted under the
Directors' Restricted Stock Plan, which fully vested in January 2004. The number
of the directors' phantom stock units disclosed in the table represents an
equivalent number of shares of ITW common stock. Phantom stock units are not
transferable and have no voting rights. The units are not included in the
"percent of class" calculation.
SHARES OF COMMON STOCK PHANTOM PERCENT
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED STOCK UNITS OF CLASS
------------------------ ---------------------- ----------- --------
Directors (other than Executive Officers)
William F. Aldinger............................. 7,624(1) 1,065 *
Michael J. Birck................................ 12,499 2,174 *
Marvin D. Brailsford............................ 5,111 2,168 *
James R. Cantalupo.............................. 3,715 1,032 *
Susan Crown..................................... 11,600(2) 2,192 *
Don H. Davis, Jr. .............................. 5,147 1,049 *
Robert C. McCormack............................. 14,194,944(3) 2,192 4.6%
Robert S. Morrison.............................. 2,500(4) 1,007 *
Harold B. Smith................................. 37,387,275(5) -- 12.1%
Executive Officers
W. James Farrell................................ 1,443,004(6) -- *
James M. Ringler................................ 607,374(7) -- *
Frank S. Ptak................................... 700,282(8) -- *
David B. Speer.................................. 220,323(9) -- *
Jon C. Kinney................................... 181,351(10) -- *
Directors and Executive Officers as a Group (23
Persons)........................................ 41,716,965(11) 12,879 13.7%
------------
* Less than 1%
(1) Includes 100 shares owned by Mr. Aldinger's spouse, as to which he
disclaims beneficial ownership.
(2) Includes (a) 2,000 shares owned by Ms. Crown's spouse as to which she
disclaims beneficial ownership; and (b) 2,000 shares held in trusts of
which Ms. Crown's children are beneficiaries and as to which she disclaims
beneficial ownership.
(3) Includes (a) 400 shares owned in a trust as to which Mr. McCormack shares
voting and investment power with The Northern Trust Company; and (b)
14,186,380 shares owned in twelve trusts as to which Messrs. McCormack, H.
B. Smith and The Northern Trust Company are trustees and share voting and
investment power.
(4) These shares were purchased by Mr. Morrison in February 2004.
(5) Includes (a) 20,540,764 shares owned in twelve trusts as to which Mr. Smith
shares voting and investment power with The Northern Trust Company and
others; (b) 2,103,080 shares owned in ten trusts as to which he shares
voting and investment power; (c) 14,186,380 shares owned in twelve trusts
as to which Messrs. McCormack, H. B. Smith and The Northern Trust Company
are trustees and share voting and investment power; and (d) 46,735 shares
owned by a charitable foundation of which Mr. Smith is a director. Mr.
Smith's address is c/o Secretary, Illinois Tool Works Inc., 3600 West Lake
Avenue, Glenview, Illinois 60025.
12
(6) Includes (a) 16,462 shares owned in a partnership as to which Mr. Farrell
shares voting and investment power; (b) 7,632 shares owned in a revocable
trust as to which Mr. Farrell has sole voting and investment power; (c)
2,860 shares owned by a charitable foundation of which Mr. Farrell is an
officer; (d) 92,400 unvested restricted shares as to which Mr. Farrell has
no investment power; (e) 6,962 shares allocated to Mr. Farrell's account in
the ITW Savings and Investment Plan; and (f) 1,288,106 shares covered by
options exercisable within 60 days.
(7) Includes (a) 16,500 unvested restricted shares as to which Mr. Ringler has
no investment power; (b) 14,270 shares allocated to Mr. Ringler's account
in the ITW Savings and Investment Plan; and (c) 481,638 shares covered by
options exercisable within 60 days.
(8) Includes (a) 46,200 unvested restricted shares as to which Mr. Ptak has no
investment power; and (b) 542,500 shares covered by options exercisable by
Mr. Ptak within 60 days.
(9) Includes (a) 13,200 unvested restricted shares as to which Mr. Speer has no
investment power; (b) 860 shares allocated to Mr. Speer's account in the
ITW Savings and Investment Plan; and (c) 196,250 shares covered by options
exercisable within 60 days.
(10) Includes (a) 13,200 unvested restricted shares as to which Mr. Kinney has
no investment power; (b) 4,825 shares allocated to Mr. Kinney's account in
the ITW Savings and Investment Plan; and (c) 147,580 shares covered by
options exercisable within 60 days.
(11) Includes 3,597,474 shares covered by options exercisable within 60 days and
Mr. Morrison's 2,500 shares.
OTHER PRINCIPAL STOCKHOLDERS
This table shows, as of December 31, 2003, the only stockholder other
than a director that we know to be a beneficial owner of more than 5% of ITW
common stock. We maintain a commercial banking relationship with The Northern
Trust Company and its wholly owned subsidiaries. The Northern Trust Company is a
wholly owned subsidiary of Northern Trust Corporation. Susan Crown, Robert C.
McCormack and Harold B. Smith, directors of ITW, are also directors of Northern
Trust Corporation and The Northern Trust Company. The commercial banking
relationship may involve, but is not strictly limited to the following services:
creating and maintaining deposit accounts, credit services, investment banking
services, payment and collection services, trade services, credit enhancement or
payment guaranty, acting as agent or fiduciary, consulting services, risk
management services, and broker dealer services. In addition, The Northern Trust
Company serves as the trustee under ITW's principal pension plans. The banking
and trustee relationships with The Northern Trust Company are conducted in the
ordinary course of business on an arms-length basis. Banking and trustee fees
paid to The Northern Trust Company were approximately $1.43 million in 2003.
NAME AND ADDRESS AMOUNT OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
------------------- -------------------- --------
The Northern Trust Company.................................. 44,754,420(1) 14.5%
50 South LaSalle Street
Chicago, Illinois 60675
------------
(1) The Northern Trust Company and its affiliates act as sole fiduciary or
co-fiduciary of trusts and other fiduciary accounts that own an aggregate of
44,754,420 shares. They have sole voting power with respect to 6,533,774
shares and share voting power with respect to 37,077,970 shares. They have
sole investment power with respect to 5,226,782 shares and share investment
power with respect to 36,611,650 shares. In addition, The Northern Trust
Company holds in other accounts, but does not beneficially own,
13
17,513,887 shares, resulting in aggregate holdings by The Northern Trust
Company of 62,268,307 shares, or 20.02%.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires that ITW's
executive officers, directors and greater than 10% stockholders file reports of
ownership and changes of ownership of ITW common stock with the SEC and the
NYSE. Based on a review of copies of these reports provided to us during fiscal
2003 and written representations from executive officers and directors, we
believe that all filing requirements were met during 2003. However, in February
2004, Mr. McCormack was inadvertently late in filing one Form 4 reporting one
exempt transaction.
EXECUTIVE COMPENSATION
This table summarizes the compensation of the Chief Executive Officer and
the other four most highly compensated executive officers of ITW.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION RESTRICTED SECURITIES ALL OTHER
NAME AND ------------------------ STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY(1) BONUS(1)(2) AWARDS(3) OPTIONS(3) (4)
------------------ ---- ---------- ----------- ---------- ------------ ------------
W. James Farrell........... 2003 $1,098,085 $2,112,000 $9,287,600 -- $103,848
Chairman and Chief 2002 1,047,010 1,869,000 -- -- 100,199
Executive Officer 2001 969,240 1,071,630 -- 400,000 111,994
James M. Ringler........... 2003 $ 750,022 $1,402,500 $1,658,500 -- $ 71,663
Vice Chairman 2002 750,022 1,297,500 -- -- 107,382
2001 750,022 826,875 -- 75,000 113,097
Frank S. Ptak.............. 2003 $ 509,221 $ 979,200 $4,643,800 -- $ 48,350
Vice Chairman 2002 488,612 872,200 -- -- 50,288
2001 452,704 500,535 -- 200,000 54,358
David B. Speer............. 2003 $ 333,496 $ 644,620 $1,326,800 -- $ 31,895
Executive Vice President 2002 320,073 577,800 -- -- 32,449
2001 292,768 364,568 -- 60,000 32,579
Jon C. Kinney.............. 2003 $ 363,462 $ 489,216 $1,326,800 -- $ 27,985
Sr. VP & Chief 2002 349,012 436,100 -- -- 33,129
Financial Officer 2001 323,089 238,100 -- 60,000 34,482
---------------
(1) Actual salary or bonus earned. Includes amounts deferred by the executive
under the Executive Contributory Retirement Income Plan or the Savings and
Investment Plan.
(2) Amounts awarded under the Executive Incentive Plan are based on the
executive's base salary as of December 31 for that year and paid in the
following year.
(3) The restricted stock awards granted under our 1996 Stock Incentive Plan on
January 2, 2003 to the Chief Executive Officer and the four next most highly
compensated executive officers reflected in this table vest
14
in three equal installments on December 16 in the years 2003, 2004 and 2005.
An employee's shares will vest only if he or she is actively employed with
ITW on the vesting date, and unvested shares will be forfeited upon
retirement, death or disability. Each employee may exercise full voting
rights and is entitled to receive all dividends and other distributions paid
on the restricted stock from the date of the grant until the stock is
forfeited or sold. The December 31, 2003 value of the unvested portion of
the restricted stock awards for the Chief Executive Officer and the four
next most highly compensated executive officers was: Mr. Farrell,
$7,753,284; Mr. Ringler, $1,384,515; Mr. Ptak, $3,876,642; Mr. Speer,
$1,107,612; and Mr. Kinney, $1,107,612.
(4) Includes company matching contributions in 2003 to the Executive
Contributory Retirement Income Plan or the Savings and Investment Plan as
follows: Mr. Farrell, $103,848; Mr. Ringler, $71,663; Mr. Ptak, $48,350; Mr.
Speer, $31,895; and Mr. Kinney, $27,985.
In the event of a corporate change (as defined in the 1996 Stock
Incentive Plan), each executive officer's unvested restricted stock and stock
options previously granted under the 1996 Stock Incentive Plan fully vest. In
addition, executives receive a cash payment under the Executive Incentive Plan
immediately upon a corporate change. The amount paid under the Executive
Incentive Plan equals a portion of the maximum awards payable under the Plan for
that year based on the number of days in the year that have elapsed as of the
date of corporate change. Executives may also request a distribution of 90% of
their Executive Contributory Retirement Income Plan account within 18 months of
a corporate change, forfeiting the remaining 10% of the account.
OPTION EXERCISES IN 2003 AND
YEAR-END 2003 OPTION VALUES
This table provides information regarding the exercise of options during
2003 and options outstanding at the end of the year for the Chief Executive
Officer and the other four most highly compensated executive officers of ITW.
The "value realized" is calculated using the difference between the option
exercise price and the price of ITW common stock on the date of exercise
multiplied by the number of shares acquired upon exercise. The "value of
unexercised in-the-money options at fiscal year-end 2003" is calculated using
the difference between the option exercise price and $83.91 (the closing price
of ITW stock on December 31, 2003, the last trading day of the year) multiplied
by the number of shares underlying the option. An option is in-the-money if the
market value of ITW common stock is greater than the option's exercise price.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR-END 2003 FISCAL YEAR-END 2003
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ---------- ----------- ------------- ----------- -------------
W. James Farrell..... -- -- 1,288,106 312,500 $40,687,950 $7,485,937
James M. Ringler..... 50,000 $2,815,265 481,638 56,250 21,097,380 1,337,906
Frank S. Ptak........ 60,000 2,766,810 542,500 157,500 15,074,237 3,778,012
David B. Speer....... -- -- 196,250 48,750 5,503,268 1,175,456
Jon C. Kinney........ 40,975 1,150,532 147,580 48,125 3,608,327 1,157,934
15
RETIREMENT PLANS
The ITW Retirement Accumulation Plan is our principal defined benefit
plan. It covers approximately 23,000 domestic business unit employees, including
executive officers. Upon retirement, participants receive benefits based on
years of plan participation and average compensation for the five highest years
out of the last ten years of employment. For the Chief Executive Officer and the
other four most highly compensated officers, compensation includes salary and
bonus shown in the Summary Compensation Table. As of January 1, 2001, the plan
was amended to provide a defined lump-sum amount at retirement that is
convertible to an annuity. Persons who were age 50 or older on January 1, 2001,
and had at least five years of plan participation, will receive a benefit that
is no less valuable than that provided under the prior plan formula, including
early retirement subsidy. Because the Internal Revenue Code imposes limits on
those plan benefits, the Board has established a supplemental plan that provides
for payments to certain executives equal to benefits that would be paid but for
these limitations. The table below shows the estimated annual benefits to be
paid under the pension plan and supplemental plan to an individual who was 57 on
December 31, 2003 (the median age of all of the executive officers) and who
continues to participate in the plans through the plans' normal retirement age
of 65, assuming the plan provisions in effect on December 31, 2003 continue
until that date. For years of participation prior to 2001, benefits have been
computed based on the pension plan formula then in effect and the transition
provisions in the amended plan.
ESTIMATED ANNUAL NORMAL RETIREMENT BENEFITS(1)
------------------------------------------------------------------------------------------
YEARS OF PARTICIPATION AT NORMAL RETIREMENT(2)
COMPENSATION 10 15 20 25 30 35 40
------------ -------- -------- ---------- ---------- ---------- ---------- ----------
$ 600,000............ $102,040 $120,770 $ 177,145 $ 221,432 $ 265,718 $ 286,552 $ 307,387
850,000........... 145,675 172,586 253,538 316,923 380,308 409,823 439,339
1,100,000........... 189,309 224,402 329,932 412,415 494,898 533,094 571,291
1,350,000........... 232,944 276,218 406,325 507,906 609,488 656,365 703,243
1,600,000........... 276,579 328,034 482,718 603,398 724,077 779,636 835,195
2,000,000........... 346,395 410,939 604,948 756,184 907,421 976,870 1,046,318
2,500,000........... 433,665 514,571 757,734 947,168 1,136,601 1,223,412 1,310,222
3,000,000........... 520,935 618,202 910,521 1,138,151 1,365,781 1,469,954 1,574,126
3,500,000........... 608,204 721,834 1,063,307 1,329,134 1,594,961 1,716,495 1,838,030
4,000,000........... 695,474 825,466 1,216,094 1,520,117 1,824,141 1,963,037 2,101,934
---------------
(1) Calculations of benefits in terms of 2003 dollars are based on 4% annual pay
increases before and after 2001, 4% annual increases in Social Security
Covered Compensation from 2003, and a 30-year Treasury rate average (used to
convert defined lump sum benefits into an annuity) of 5.07% (monthly average
for December 2003).
(2) Actual years of participation as of December 31, 2003 for the Chief
Executive Officer and the other four most highly compensated executive
officers were as follows: Mr. Farrell, 38.5 years; Mr. Ringler, 14.0 years
(10.0 of which were granted as consideration for his employment by ITW); Mr.
Ptak, 28.1 years; Mr. Speer, 25.5 years; and Mr. Kinney, 31.2 years. Mr.
Ringler's benefit for 9.9 years of participation in the Premark
International, Inc. pension plans (in which the formula produced a lesser
benefit than the ITW plans had) prior to our merger with Premark was added
to his benefits under the ITW plans as of December 31, 2000 and will be
adjusted in the future for increases in average pay since 2000.
16
In addition, under ITW's 1982 Executive Contributory Retirement Income
Plan, Mr. Farrell is eligible to receive an annual benefit of $113,529 for 15
years beginning at the normal retirement age of 65.
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information as of December 31, 2003 about
ITW's existing equity compensation plans.
(C)
NUMBER OF SECURITIES
(A) (B) REMAINING AVAILABLE FOR
NUMBER OF SECURITIES WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
TO BE ISSUED UPON EXERCISE PRICE OF EQUITY COMPENSATION
EXERCISE OF OUTSTANDING OUTSTANDING PLANS (EXCLUDING
OPTIONS, WARRANTS AND OPTIONS, WARRANTS SECURITIES REFLECTED IN
PLAN CATEGORY RIGHTS AND RIGHTS COLUMN(A))
------------- ----------------------- ------------------- -----------------------
Equity compensation plans approved
by security holders............. 10,021,026 $57.57 9,943,499(2)
Equity compensation plans not
approved by security holders.... 13,723(1) -- 338,850(3)
---------- ------ ----------
Total............................. 10,034,749 $57.57 10,282,349
========== ====== ==========
------------
(1) Represents shares credited to directors' accounts for annual retainer and
meeting fees deferred pursuant to the Non-Employee Directors' Fee Conversion
Plan. A description of the Plan can be found on page 10. Not included in
this figure are 17,574 shares subject to outstanding options under the
Premark International, Inc. Director Stock Plan having an aggregate
weighted-average exercise price of $29.20.
(2) These shares remain available for issuance under the 1996 Stock Incentive
Plan. This amount excludes 524,481 shares of unvested restricted stock
granted pursuant to the 1996 Stock Incentive Plan and 2,100 shares of
unvested restricted stock granted pursuant to the Directors' Restricted
Stock Plan.
(3) This amount includes 309,113 shares available for issuance under the Premark
International, Inc. Director Stock Plan and 29,737 shares available for
issuance under the Non-Employee Directors' Fee Conversion Plan.
PREMARK INTERNATIONAL, INC. DIRECTOR STOCK PLAN AND 1994 INCENTIVE PLAN
Pursuant to the terms of our merger with Premark International, Inc. in
1999, we assumed Premark's Director Stock Plan and 1994 Incentive Plan. At last
year's Annual Meeting, our stockholders approved the merger of Premark's 1994
Incentive Plan into the Illinois Tool Works 1996 Stock Incentive Plan. Premark's
Director Stock Plan permitted a Premark director to elect annually to receive
his or her retainer fees in the form of an option to purchase Premark stock
rather than in cash. Under the plan, these options had a ten-year term and
vested upon consummation of our merger with Premark. The options were granted at
a discount to the fair market value of Premark stock on the grant date, with the
amount of the discount based on the percentage of fees deferred. This Plan was
approved by Premark's stockholders. While ITW has the ability to do so, it has
not granted, and thus far does not intend to grant, additional awards under this
plan. Shares remaining available for issuance pursuant to this plan are included
in the table above under the caption "Equity compensation plans not approved by
security holders."
17
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of six
directors who meet the independence requirements of the New York Stock Exchange.
The Committee administers ITW's compensation plans for key employees, including
the Executive Incentive Plan and the 1996 Stock Incentive Plan. The Committee
also approves compensation levels for executive officers and recommends the
CEO's compensation for approval by the independent Board members. In making its
recommendations, the Committee considers management's contribution to ITW's
long-term growth. One long-term performance factor that the Committee considers
is ITW's total stockholder return, which is measured by capital appreciation and
reinvested dividends. For the five and ten year periods ending December 31,
2003, the compound annual stockholder rate of return was 9% and 17%,
respectively. For the same periods, the rate of return on the Standard & Poor's
500 Index was -1% and 11%, respectively, and the rate of return on the Standard
& Poor's Industrial Machinery Index was 10% and 13%, respectively.
Compensation for executive officers is composed of base salary, a cash
bonus based on performance and stock incentives. The Committee believes that the
stock incentive and cash bonus components align the executive officers'
performance with stockholder interests. The Committee's philosophy is to provide
executives with total compensation that reflects their relative performance
against a group of comparable industrial companies.
BASE SALARY. In establishing and recommending base salaries for the Chief
Executive Officer and other executive officers, the Committee considers
compensation information of a peer group of comparable industrial companies.
This peer group includes some of the same companies as the S&P Industrial
Machinery and the S&P Industrial Conglomerates Indices used for the Company
Performance graphs on pages 21 and 22. In determining base salary, the Committee
considers the executive officer's past performance and potential future
performance, as well as ITW's net income and the operating income of the
business units that the officer oversees. The Committee's objective is to target
base salaries of the Chief Executive Officer and the other executive officers at
the 50th percentile of the peer group.
BONUS. Executive officers receive annual cash bonuses under the Executive
Incentive Plan based on predetermined financial and non-financial objectives.
Executive officers may elect to take up to half of their annual cash bonus in
ITW common stock. The maximum bonus opportunities range from 70% to 200% of base
salary and reflect a more competitive position with the peer group of comparable
industrial companies and increase the percentage of executive total compensation
that is at risk. The Chief Executive Officer, Vice Chairmen and certain
executive officers can earn half of the maximum bonus opportunity if ITW's net
income is at least 120% of targeted plan. The other half of the maximum bonus
opportunity relates to the individual's performance measured against
predetermined management goals, for example, succession planning, cost reduction
targets, market penetration, acquisition planning and a variety of other
objectives specifically related to the individual unit's performance. For the
Executive Vice Presidents, one-eighth of the maximum bonus opportunity is based
on ITW's net income, three-eighths is based on the operating income of the
operating units for which the individual is responsible, and the remaining
one-half is
18
based on the individual's performance measured against evaluation factors
similar to the Chief Executive Officer's. For 2003, the average bonus received
by executive officers was approximately 91.5% of the maximum award.
STOCK INCENTIVES. The Chief Executive Officer, executive officers and
certain other key employees participate in the 1996 Stock Incentive Plan,
principally through the grant of stock options and restricted stock. The
magnitude of a stock incentive award is based on the executive officer's
performance and the officer's ability to influence ITW's long-term growth and
profitability. Options are priced at fair market value on the date of grant.
STOCK OWNERSHIP GUIDELINES. The Board of Directors and the Compensation
Committee have established stock ownership guidelines to further their objective
of aligning the interests of executive officers and directors with stockholder
interests. These guidelines apply to elected and appointed corporate officers,
as well as to non-employee directors. Recommended stock ownership as a multiple
of executive officers' base salaries and of directors' annual retainers is as
follows: Chief Executive Officer, five times; Vice Chairmen and Executive Vice
Presidents, three times; Senior Vice Presidents, two times; Vice Presidents, one
time; and non-employee directors, four times. The Committee recommends that an
executive officer or non-employee director achieve the applicable ownership
level within five years. As of December 31, 2003, all officers and directors who
have been in their position for five or more years have satisfied the
guidelines.
The Committee grants stock awards under the 1996 Stock Incentive Plan and
believes that these grants are an effective incentive for executive officers to
create value for stockholders. The Committee did not grant stock option awards
to any domestic employees in 2003. On January 2, 2004, the Compensation
Committee granted restricted stock to certain key domestic employees. The shares
will vest in three equal installments on December 16, and 2005 and on December
18, 2006. An employee's shares will vest only if he or she is actively employed
with ITW on the vesting date, and unvested shares will be forfeited upon
retirement, death or disability. Each employee may exercise full voting rights
as to the restricted stock and is entitled to receive all dividends and other
distributions paid on the restricted stock from the date of the grant until the
stock is forfeited or sold.
Internal Revenue Code Section 162(m) limits the deductibility of
compensation in excess of $1,000,000 paid to each of the Chief Executive Officer
and the other four most highly compensated executive officers. Certain
performance based and deferred compensation is not included in compensation
counted for purposes of the limit. The Committee recognizes its obligation to
reward performance that increases shareholder value and exercises its discretion
in determining whether or not to conform ITW's executive compensation plans to
the approach provided for in the Code.
William F. Aldinger, Chairman
Michael J. Birck
James R. Cantalupo
Susan Crown
Robert C. McCormack
Robert S. Morrison
19
COMPANY PERFORMANCE
Shown below are two graphs covering a five-year comparison and a ten-year
comparison of cumulative total returns for ITW, the Standard & Poor's (S&P) 500
Composite Index, the S&P Industrial Conglomerates Index and the S&P Industrial
Machinery Index. In 2002, the S&P replaced the S&P Diversified Manufacturing
Index with the S&P Industrial Conglomerates and S&P Industrial Machinery
Indices. The graphs assume an investment of $100 on December 31, 1998 for the
five-year period and December 31, 1993 for the ten-year period, including
reinvestment of dividends. Total returns are based on market capitalization.
FIVE-YEAR PERFORMANCE GRAPH
(PERFORMANCE GRAPH)
12/98 12/99 12/00 12/01 12/02 12/03
----------- ----------- ----------- ----------- ----------- -----------
------------------------------------------------------------------------------------------------------------
Illinois Tool Works Inc. $100.00 $117.60 $105.07 $121.15 $117.63 $154.27
S&P 500 $100.00 $121.04 $110.02 $ 96.95 $ 75.52 $ 97.18
S&P Industrial Machinery $100.00 $114.08 $108.60 $114.94 $113.95 $157.66
S&P Industrial
Conglomerates $100.00 $144.12 $144.98 $130.23 $ 77.46 $104.47
------------------------------------------------------------------------------------------------------------
20
TEN-YEAR PERFORMANCE GRAPH
(PERFORMANCE GRAPH)
12/93 12/94 12/95 12/96 12/97 12/98 12/99 12/00 12/01
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------------------------------------------------------------------------------------------------------------------------------
Illinois Tool Works Inc. $100.00 $114.05 $155.66 $212.86 $323.37 $314.73 $370.12 $330.67 $381.30
S&P 500 $100.00 $101.32 $139.40 $171.40 $228.59 $293.91 $355.76 $323.37 $284.93
S&P Industrial Machinery $100.00 $100.00 $130.59 $163.59 $223.03 $211.99 $241.84 $230.22 $243.68
S&P Industrial
Conglomerates $100.00 $100.00 $138.66 $192.96 $277.06 $380.24 $548.00 $551.28 $495.17
--------------------------------------------------------------------------------------------------------------------------------
12/02 12/03
--------- ---------
------------------------------------------------------------
Illinois Tool Works Inc. $370.20 $485.52
S&P 500 $221.96 $285.63
S&P Industrial Machinery $241.57 $334.22
S&P Industrial
Conglomerates $294.53 $397.24
-----------------------------------------------------------------
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors is composed of five
independent directors, as defined in the listing standards of the New York Stock
Exchange. In addition, the Board of Directors has determined that all Audit
Committee members are "financially literate" and that at least one member meets
the New York Stock Exchange standard of having accounting or related financial
management expertise. The Board of Directors has also determined that Messrs.
Aldinger, Birck, Cantalupo and Davis meet the SEC criteria of "audit committee
financial expert". The Audit Committee operates under a written charter adopted
by the Board of Directors, which was reviewed and revised in February 2004 and
which is attached to this proxy statement as Appendix A.
The Committee is responsible for providing oversight to ITW's financial
reporting process through periodic meetings with ITW's independent auditors,
internal auditors and management in order to review accounting, auditing,
internal controls and financial reporting matters. The Committee is also
responsible for assisting the Board in overseeing: (a) the integrity of ITW's
financial statements; (b) ITW's compliance with legal and regulatory
requirements; (c) the independent auditors' qualifications, independence and
performance; and (d) the performance of ITW's internal audit function. ITW's
management is responsible for the preparation and integrity of the financial
reporting information and related systems of
21
internal controls. The Committee, in carrying out its role, relies on ITW's
senior management, including senior financial management, and its independent
auditors.
We have reviewed and discussed with senior management the audited
financial statements included in the 2003 Annual Report to Stockholders.
Management has confirmed to the Committee that the financial statements have
been prepared in conformity with generally accepted accounting principles.
We have reviewed and discussed with Deloitte & Touche LLP, ITW's
independent auditors, the matters required to be discussed by the Statement on
Auditing Standards No. 61 (Communications with Audit Committee) under which
Deloitte & Touche LLP must provide us with additional information regarding the
scope and results of its audit of ITW's financial statements. This information
includes: (1) Deloitte & Touche LLP's responsibility under generally accepted
auditing standards; (2) significant accounting policies; (3) management
judgments and estimates; (4) any significant audit adjustments; (5) any
disagreements with management; and (6) any difficulties encountered in
performing the audit.
We have received from Deloitte & Touche LLP a letter providing the
disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) with respect to any
relationships between Deloitte & Touche LLP and ITW that in its professional
judgment may reasonably be thought to bear on independence. Deloitte & Touche
LLP has discussed its independence with us, and has confirmed in the letter
that, in its professional judgment, it is independent of ITW within the meaning
of the federal securities laws.
The Committee also discussed with ITW's internal and independent auditors
the overall scope and plans for their respective audits. The Committee meets
periodically with the internal and independent auditors, with and without
management present, to discuss the results of their examinations, their
evaluations of ITW's internal controls, and the overall quality of ITW's
financial reporting.
Based on the review and discussions described above, we have recommended
to the Board of Directors that the audited financial statements included in
ITW's 2003 Annual Report to Stockholders be included in ITW's Annual Report on
Form 10-K filed with the Securities and Exchange Commission for the year ended
December 31, 2003.
James R. Cantalupo, Chairman
William F. Aldinger
Michael J. Birck
Marvin D. Brailsford
Don H. Davis, Jr.
22
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Audit Committee plans to engage Deloitte & Touche LLP to serve as
ITW's independent public accountants for the fiscal year ending December 31,
2004. Deloitte & Touche LLP has been employed to perform this function for ITW
since 2002.
On May 10, 2002, the Board of Directors, upon recommendation of the Audit
Committee, decided to dismiss ITW's independent auditors, Arthur Andersen LLP,
and to engage the services of Deloitte & Touche LLP as its new independent
auditors. The audit reports of Arthur Andersen LLP on ITW's consolidated
financial statements as of and for the fiscal years ended December 31, 2001 and
2000 did not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.
During fiscal years ended December 31, 2001 and 2000, and the subsequent interim
period through May 10, 2002, there were no disagreements between ITW and Arthur
Andersen LLP on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which disagreements, if not
resolved to Arthur Andersen LLP's satisfaction, would have caused Arthur
Andersen LLP to make reference to the subject matter of the disagreement in
connection with its reports. None of the reportable events described under Item
304(a)(1)(v) of Regulation S-K promulgated under the Securities Exchange Act of
1934 occurred within the fiscal years ended December 31, 2001 and 2000 or within
the interim period through May 10, 2002.
AUDIT FEES
Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and
their respective affiliates (collectively, the "Deloitte Entities") will bill us
approximately $4,653,000 for professional services in connection with the 2003
audit, as compared to $3,390,000 for the 2002 audit. These fees relate to: (i)
the audit of the annual financial statements included in our Annual Report on
Form 10-K; (ii) the review of the quarterly financial statements included in our
Quarterly Reports on Form 10-Q; and (iii) statutory audits.
AUDIT-RELATED FEES
During 2003 and 2002, the Deloitte Entities billed us approximately
$1,155,000 and $615,000, respectively, for audit-related services. These fees
relate to work performed with respect to consulting on actions required by the
Sarbanes-Oxley Act of 2002, acquisition-related due diligence, disposition audit
fees and other technical accounting assistance.
TAX FEES
These fees include work performed by the Deloitte Entities for 2003 and
2002 with respect to tax compliance services ($6,183,000 and $1,489,000,
respectively) and tax planning services ($3,852,000 and $4,115,000,
respectively).
23
ALL OTHER FEES
The aggregate fees for all other services rendered by the Deloitte
Entities for 2003 and 2002 were approximately $89,000 and $158,000,
respectively. These fees relate primarily to risk reviews performed at operating
units.
AUDIT COMMITTEE PRE-APPROVAL POLICIES
The Audit Committee has adopted policies and procedures for pre-approving
all non-audit related work performed by ITW's independent auditors. The
Committee will annually pre-approve services in specified accounting,
acquisition and tax-related areas. The Committee also annually pre-approves the
budget for annual GAAP, statutory and benefit-plan audits. ITW's management
provides quarterly updates to the Committee regarding actual year-to-date
expenditures for non-audit services. The Committee regularly determines whether
specific projects or expenditures could potentially affect the independence of
ITW's independent auditors.
Although we are not required to do so, we believe that it is appropriate
for us to request stockholder ratification of the appointment of Deloitte &
Touche LLP as our independent auditors. If stockholders do not ratify the
appointment, the Audit Committee will investigate the reasons for the
stockholders' rejection and reconsider the appointment. Representatives of
Deloitte & Touche LLP will be present at the Annual Meeting and will have the
opportunity to make a statement and respond to questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
OF DELOITTE & TOUCHE LLP
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APPENDIX A
ILLINOIS TOOL WORKS INC.
CHARTER OF AUDIT COMMITTEE
1. PURPOSE
The Audit Committee will assist the Board of Directors of the Company in
fulfilling its responsibilities with respect to matters involving the
accounting, financial reporting and internal control functions of the Company
and its subsidiaries. This will include assisting the Board in overseeing: (a)
the integrity of the Company's financial statements, (b) the Company's
compliance with legal and regulatory requirements, (c) the independent auditors'
qualifications, independence and performance, and (d) the performance of the
Company's internal audit function. The Audit Committee also will prepare the
Audit Committee report that the United States Securities and Exchange Commission
("SEC") rules require to be included in the Company's annual proxy statement.
2. MEMBERSHIP AND QUALIFICATION
The Audit Committee, a standing committee of the Board, will be composed of
three or more independent directors meeting the requirements of the Corporate
Governance Standards of the New York Stock Exchange ("NYSE") as well as
applicable laws and regulations of the SEC, as such requirements are interpreted
by the Board of Directors in its business judgment. Directors fees, including
committee fees, are the only compensation that an Audit Committee Member may
receive from the Company. The Committee members shall be elected annually by the
Board.
A) SPECIAL LIMITATION
If an Audit Committee member simultaneously serves on the audit committees of
more than three public companies, the Board must determine that such
simultaneous service would not impair such member's ability to serve effectively
on the Company's Audit Committee and such determination by the Board must be
disclosed in the Company's annual proxy statement.
B) SPECIAL QUALIFICATIONS
Each member of the Audit Committee shall, in the judgment of the Board, be
financially literate, as such requirements are interpreted by the Board of
Directors in its business judgment and have the ability to read and understand
the Company's basic financial statements or shall, promptly following his or her
appointment, obtain adequate training to achieve such literacy and ability. In
addition, at least one member of the Audit Committee must have accounting or
related financial management expertise, as such requirements are interpreted by
the Board of Directors in its business judgment. The Board of Directors may
presume that a member of the Audit Committee who satisfies the definition of an
"audit committee financial expert" as defined in Regulation S-K has accounting
or related financial expertise.
3. MEETINGS AND OTHER ACTIONS
The Committee will hold a sufficient number of meetings every twelve months to
discharge its duties adequately. The Committee will keep minutes of its
meetings, and will regularly report to the Board on its activities, making
recommendations as appropriate.
- As part of its meetings, the Committee shall meet separately, periodically,
with management, with the Company's internal auditors, and with the
Company's independent auditors.
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4. KEY RESPONSIBILITIES AND AUTHORITY
The Committee's job is one of oversight and it is not responsible for preparing
the Company's financial statements, planning the audit of those financial
statements or determining that the Company's financial statements and
disclosures are complete and accurate in accordance with GAAP and applicable
rules and regulations. These are the responsibilities of management and the
independent auditors. Additionally, the Committee recognizes the Company's
financial management, including the internal audit staff, as well as the
Company's independent auditors, have more time, knowledge and detailed
information on the Company than do Committee members.
In carrying out its duties and responsibilities, the following are within the
responsibilities and authority of the Committee. The Committee shall not
allocate any of its functions to a different committee.
A) INTERNAL CONTROLS
The Committee shall:
- Evaluate major issues as to the adequacy of the Company's internal controls
and any special audit steps the independent auditor adopted in light of
material control deficiencies.
- Review and discuss with management (including the senior internal audit
executive) and the independent auditor, the Company's internal controls
report and the independent auditors' attestation of the report prior to the
filing of the Company's Form 10-K.
- Review disclosures made (if any) by the Company's CEO and CFO during their
certification process for the Form 10-K and Form 10-Q about any significant
deficiencies in the design or operation of internal controls or material
weaknesses therein and any fraud involving management or other employees
who have a significant role in the Company's internal controls.
B) FINANCIAL REPORTING GENERALLY
In connection with its general oversight of the Company's financial reporting,
the Committee shall:
- Discuss with management and the independent auditors significant financial
reporting issues and judgments made in connection with the preparation of
the financial statements and review with management and the independent
auditors any analyses prepared by management or the Company's independent
auditors setting forth significant financial reporting issues and judgments
made in connection with the preparation of financial statements, including
analyses of the effects of alternative GAAP methods on the financial
statements.
- Review with management and the independent auditors all critical accounting
policies and practices to be used, and management's proposals regarding:
new accounting pronouncements; the adoption of, and changes of choice
regarding, material accounting principles and practices to be followed when
preparing the financial statements of the Company; and the alternative
principles and practices that could have been followed and the treatment
preferred by the independent auditor.
- Review with management and the independent auditors the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures (if any), on the Company's financial statements.
- Inquire as to whether the independent or internal auditors have any
concerns regarding:
- The possibility of significant accounting or reporting risks or
exposures;
- The appropriateness and quality of significant accounting treatments;
- Any material business transactions that may affect the fair
presentation of the Company's financial condition or results of
operations; or
- Any material weaknesses in or major issues as to the adequacy of the
Company's internal control systems.
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- Establish procedures for:
- The receipt, retention and treatment of any complaints received by the
Company regarding accounting, internal accounting controls or auditing
matters; and
- The confidential, anonymous submission by employees of the Company of
any concerns regarding questionable accounting or auditing matters.
- Establish a procedure whereby management submits to the Committee on a
pre-issuance basis information to be disclosed and types of presentations
to be made in quarterly earnings press releases (paying particular
attention to any use of "pro forma" or "adjusted" non-GAAP information), as
well as review any financial information and earnings guidance provided to
analysts and rating agencies. (This may be done generally and need not
occur in advance of each earnings release or each instance in which the
Company may provide earnings guidance.)
C) ANNUAL FINANCIAL STATEMENTS
In connection with the preparation and audit of the Company's annual financial
statements, the Committee shall:
- Review with the independent auditors in private session without any members
of management being present, whether there have been (and if so the nature
of) any audit problems or difficulties and any related responses by
management.
- Meet with management and the independent auditors to review and discuss the
annual financial statements and related notes, as well as the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A"). The Committee also shall make a recommendation to the
Board regarding inclusion of such financial statements, related notes and
the related MD&A in the Company's Annual Report on Form 10-K.
D) INTERIM FINANCIAL STATEMENTS
- With respect to the Company's interim financial statements, the Committee
shall review the interim financial statements and any related notes, as
well as the related MD&A, prior to public issuance.
E) INTERNAL AUDITORS
The Committee shall oversee the activities and programs administered by those
responsible for the Company's internal audit function and shall meet with the
Company's senior internal audit executive periodically (at least once a year) in
a private session to discuss matters that the Committee or the internal auditors
believe should be discussed.
F) INDEPENDENT AUDITORS
The Committee shall be responsible for the oversight of the Company's
independent auditors (including resolution of disagreements between management
and the auditor regarding financial reporting). The Company's independent
auditors shall report directly to the Audit Committee. In connection with such
oversight, the Committee shall:
- Have sole authority to select, hire and fire the Company's independent
auditors, to pre-approve all fees and other terms of the audit engagement
and to pre-approve any non-audit relationship with the independent
auditors.
- Meet with the independent auditors prior to the audit to discuss the
planning and staffing of the audit.
- Meet with the independent auditors at least once a year in private session
without any members of management being present to discuss matters that the
Committee or the independent auditors believe should be discussed,
including without limitation any audit problems or difficulties and
management's
A-3
response; the responsibilities, budget and staffing of the Company's
internal audit function; and discussion items contemplated elsewhere in
this Charter.
- Obtain and review, at least annually, a report from the independent
auditors that describes: the independent auditing firm's internal
quality-control procedures; and any material issues raised by the most
recent internal quality-control review, or peer review, of the firm, or by
any inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such issues.
- Obtain and review, at least annually, a report from the independent
auditors that describes all relationships between the independent auditors
and the Company including the amount and nature of all related
compensation.
- Evaluate periodically the independent auditors and the partner in charge of
performing the Company's audit. Ensure the rotation of the audit partners
as required by law. The Audit Committee shall present its conclusions with
respect to the independent auditors to the Board.
- Set hiring policies for employees or former employees of the Company's
independent auditors.
G) OTHER RESPONSIBILITIES
The Committee also shall:
- Review and evaluate the Company's policies and practices with respect to
risk assessment and risk management, including the Company's major
financial risk exposures and steps taken by management to monitor and
control such exposures.
- If deemed appropriate, initiate special investigations into matters within
the Committee's scope of responsibilities or as delegated by the Board of
Directors.
- Review the legal affairs and environmental, safety and health matters that
may have a material impact on the Company's financial statements or the
Company's compliance policies at least annually.
- Discuss with management and the independent auditors any correspondence
with regulators or governmental agencies and any published reports that
raise material issues regarding the Company's financial statements or
accounting policies.
- Perform an annual self-evaluation of the Committee's performance.
- Review and assess the adequacy of this Charter annually.
5. ADDITIONAL RESOURCES
- The Committee shall have the right to hire independent accounting experts,
lawyers and other consultants to assist and advise the Committee in
connection with its responsibilities.
- The Committee may request any other director, officer or employee of the
Company or the Company's outside counsel to attend a meeting of the
Committee or to meet with any members of, or consultants to, the Committee.
6. FUNDING
The Committee shall determine, and the Company shall provide, appropriate
funding, for payment of:
- Compensation to any registered public accounting firm engaged for the
purpose of preparing or issuing an audit report or performing other audits,
review or attest services for the Company;
- Compensation to any advisers employed by the Audit Committee in carrying
out its duties hereunder; and
- Ordinary administrative expenses of the Audit Committee that are necessary
or appropriate in carrying out its duties.
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APPENDIX B
CATEGORICAL STANDARDS FOR DIRECTOR INDEPENDENCE
I. INTRODUCTION
To be considered independent, a director of the Company must meet all of the
following categorical standards. In addition, a director who is a member of the
Company's Audit Committee must meet the heightened criteria set forth below in
Section IV to be considered independent for the purposes of membership on the
Audit Committee. These categorical standards may be amended from time to time by
the Company's Board of Directors.
Directors who do not meet these categorical standards for independence can also
make valuable contributions to the Company and its Board of Directors by reason
of their knowledge and experience.
In addition, if a director meets the standards set forth below, a director will
not be considered independent unless the Board of Directors of the Company
affirmatively determines that the director has no material relationship with the
Company (either directly or as a partner, shareholder or officer of an
organization that has a relationship with the Company). In making its
determination, the Board of Directors shall broadly consider all relevant facts
and circumstances. Material relationships can include commercial, industrial,
banking, consulting, legal, accounting, charitable and familial relationships,
among others.
II. DEFINITIONS
An "immediate family member" includes a person's spouse, parents, children,
siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and
sisters-in-law, and anyone (other than domestic employees) who shares such
person's home. When considering the application of the three-year period
referred to in each of paragraphs III.1 through III.5 below, the Company need
not consider individuals who are no longer immediate family members as a result
of legal separation or divorce, or those who have died or become incapacitated.
The "Company" includes any subsidiary in its consolidated group.
III. STANDARDS FOR DIRECTORS
The following standards have been established to determine whether a director of
the Company is independent:
1. A director who is an employee, or whose immediate family member is an
executive officer, of the Company is not independent until three years
after the end of such employment relationship. Employment as an interim
Chairman or CEO shall not disqualify a director from being considered
independent following that employment.
2. A director who receives, or whose immediate family member receives, more
than $100,000 per year in direct compensation from the Company, other than
director and committee fees and pension or other forms of deferred
compensation for prior service (provided such compensation is not
contingent in any way on continued service), is not independent until
three years after he or she ceases to receive more than $100,000 per year
in such compensation. Compensation received by a director for former
service as an interim Chairman or CEO need not be considered in
determining independence under this test. Compensation received by an
immediate family member for service as a non-executive employee of the
Company need not be considered in determining independence under this
test.
3. A director who is affiliated with or employed by, or whose immediate
family member is affiliated with or employed in a professional capacity
by, a present or former internal or external auditor of the Company is not
"independent" until three years after the end of the affiliation or the
employment or auditing relationship.
4. A director who is employed, or whose immediate family member is employed,
as an executive officer of another company where any of the Company's
present executives serve on that company's compensation
B-1
committee is not "independent" until three years after the end of such
service or the employment relationship.
5. A director who is an executive officer or an employee, or whose immediate
family member is an executive officer of a company that makes payments to,
or receives payments from, the Company for property or services in an
amount which, in any single fiscal year, exceeds the greater of $1 million
or 2% of such other company's consolidated gross revenues is not
"independent" until three years after falling below such threshold.(1)
6. The three-year period referred to in paragraphs III.1 through III.5 above
will be applied consistently with the New York Stock Exchange's transition
rules, which permit a one year look-back period until November 4, 2004.
Accordingly, until November 4, 2004, a one-year period, rather than a
three-year period, shall apply to the determination of independence and
the application of paragraphs III.1 through III.5 above.
7. Stock ownership in the Company by directors is encouraged and the
ownership of a significant amount of stock, by itself, does not bar a
director from being independent.
IV. STANDARDS FOR AUDIT COMMITTEE MEMBERS
In addition to satisfying the criteria set forth in Section III above, directors
who are members of the Company's Audit Committee will not be considered
independent for purposes of membership on the Audit Committee unless they
satisfy the following criteria:
1. A director who is a member of the Audit Committee may not, other than in
his or her capacity as a member of the Audit Committee, the Board of
Directors or any other Board committee, accept directly or indirectly any
consulting, advisory or other compensatory fee from the Company or any
subsidiary thereof, provided that, unless the rules of the New York Stock
Exchange provide otherwise, compensatory fees do not include the receipt
of fixed amounts of compensation under a retirement plan (including
deferred compensation) for prior service with the Company (provided that
such compensation is not contingent in any way on continued service).
2. A director who is a member of the Audit Committee may not, other than in
his or her capacity as a member of the Audit Committee, the Board of
Directors or any other Board committee, be an affiliated person of the
Company or any subsidiary thereof.
3. If an Audit Committee member simultaneously serves on the audit committees
of more than three public companies, the Board must determine that such
simultaneous service would not impair the ability of such member to serve
effectively on the Company's Audit Committee.
---------------
(1)In applying this test, both the payments and the consolidated gross revenues
to be measured shall be those reported in the last completed fiscal year. The
look-back provision for this test applies solely to the financial relationship
between the Company and the director or immediate family member's current
employer; the Company need not consider former employment of the director or
immediate family member. Charitable organizations shall not be considered
"companies" for purposes of this test, provided however, that the Company shall
disclose in its annual proxy statement any charitable contributions made by the
Company to any charitable organization in which a director serves as an
executive officer if, within the preceding three years, contributions in any
single fiscal year exceeded the greater of $1 million or 2% of such charitable
organization's consolidated gross revenues.
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(ILLINOIS TOOL WORKS INC. LOGO)
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DESIGNATION (IF ANY) 000000000.000 ext
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ADD 6 C 1234567890 J N T
[ ] Mark this box with an X if
you have made changes to
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ANNUAL MEETING PROXY CARD
A ELECTION OF DIRECTORS PLEASE REFER TO THE REVERSE SIDE FOR INTERNET AND TELEPHONE VOTING INSTRUCTIONS.
1. The Board of Directors recommends a vote FOR the listed nominees.
FOR WITHHOLD FOR WITHHOLD FOR WITHHOLD
01 - William F. Aldinger [ ] [ ] 05 - Susan Crown [ ] [ ] 09 - Robert S. Morrison [ ] [ ]
02 - Michael J. Birck [ ] [ ] 06 - Don H. Davis, Jr. [ ] [ ] 10 - Harold B. Smith [ ] [ ]
03 - Marvin D. Brailsford [ ] [ ] 07 - W. James Farrell [ ] [ ]
04 - James R. Cantalupo [ ] [ ] 08 - Robert C. McCormack [ ] [ ]
B ISSUES C NON-PROPOSAL
2. The Board of Directors recommends a vote FOR the following proposal.
FOR AGAINST ABSTAIN I CONSENT
Ratification of the appointment of [ ] [ ] [ ] 1. Until contrary notice to the Corporation, I [ ]
Deloitte & Touche LLP. consent to access all future notices of annual
meetings, proxy statements, and annual reports
issued by the Corporation over the internet.
SEE REVERSE FOR DETAILS.
D AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When
signing as attorney, trustee, executor, administrator, guardian or corporate officer, please provide your full title
in the space provided.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (mm/dd/yyyy)
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1 U P X H H H P P P P 0031781 +
PROXY - ILLINOIS TOOL WORKS INC.
3600 WEST LAKE AVENUE, GLENVIEW, ILLINOIS 60025
ANNUAL MEETING OF STOCKHOLDERS MAY 7, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of Illinois Tool Works Inc. ("ITW") hereby appoints
Marvin D. Brailsford, Susan Crown and Harold B. Smith, or any of them, with full
power of substitution, to act as proxies at the Annual Meeting of Stockholders
of ITW to be held in Chicago, Illinois on May 7, 2004 with authority to vote as
directed by this Proxy at the meeting, and any adjournments of the meeting, all
shares of common stock of ITW registered in the name of the undersigned.
IMPORTANT - THIS PROXY MUST BE SIGNED AND DATED ON THE REVERSE SIDE.
ILLINOIS TOOL WORKS INC.
ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, MAY 7, 2004
THE NORTHERN TRUST COMPANY (6TH FLOOR)
50 SOUTH LASALLE STREET
CHICAGO, ILLINOIS
ELECTRONIC ACCESS TO FUTURE DOCUMENTS NOW AVAILABLE
Illinois Tool Works Inc. provides its annual reports and proxy solicitation
materials, including notices to shareholders of annual meetings and proxy
statements, over the internet. If you give your consent to access these
documents over the internet, ITW will advise you when these documents become
available. Providing these documents over the internet will reduce ITW's
printing and postage costs. Once you give your consent, it will remain in effect
until you notify ITW that you wish to resume mail delivery of its annual reports
and proxy statements. Even though you give your consent, you still have the
right at any time to request copies of these documents.
To give your consent, mark the appropriate box located on the reverse side of
this Proxy Card.
INSTRUCTIONS FOR VOTING BY THE INTERNET, TELEPHONE OR MAIL
Illinois Tool Works Inc. encourages you to take advantage of new and convenient
ways to vote your shares for proposals to be covered at the Annual Meeting of
Stockholders. Please take this opportunity to use one of the three voting
methods detailed below to vote your shares. Voting is easier than ever.
(TELEPHONE GRAPHIC) (COMPUTER MOUSE GRAPHIC) (MAILBOX GRAPHIC)
TO VOTE USING THE TELEPHONE TO VOTE USING THE INTERNET TO VOTE BY MAIL
(WITHIN U.S. AND CANADA)
o Call toll free 1-866-668-0870 in the United o Go to the following web site: o Mark, sign and date the proxy card.
States or Canada any time on a touch tone WWW.COMPUTERSHARE.COM/US/PROXY
telephone. There is NO CHARGE to you for o Return the proxy card in the
the call. o Enter the information requested on your postage-paid envelope provided.
computer screen and follow the
o Follow the simple instructions provided by simple instructions.
the recorded message.
C0123456789 12345
IF YOU VOTE BY TELEPHONE OR THE INTERNET, PLEASE DO NOT MAIL BACK THIS PROXY
CARD.
PROXIES SUBMITTED BY TELEPHONE OR THE INTERNET MUST BE RECEIVED BY 1:00
A.M., (CST), ON MAY 7, 2004.
THANK YOU FOR VOTING