Edgar Filing: ILLINOIS TOOL WORKS INC

itw10q3q09.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2009

	OR

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

	For the transition period from _______________ to _______________

Commission File Number: 1-4797

ILLINOIS TOOL WORKS INC.

(Exact name of registrant as specified in its charter)

Delaware		36-1258310
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

3600 West Lake Avenue, Glenview, IL		60026-1215
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code) 847-724-7500

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X]No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [ ]

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ]No [X]

The number of shares of registrant’s common stock, $0.01 par value, outstanding at September 30, 2009: 500,909,909.

Part I – Financial Information

Item 1 – Financial Statements

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF INCOME (UNAUDITED)

(In thousands except for per share amounts)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating Revenues	$	3,580,354		$	4,464,621		$	10,119,639		$	13,146,312
Cost of revenues		2,315,175			2,936,599			6,716,255			8,570,541
Selling, administrative, and research
and development expenses		720,042			806,533			2,239,604			2,394,612
Amortization of intangible assets		49,542			50,491			152,059			132,933
Impairment of goodwill and
other intangible assets		12,000			—			101,997			1,438
Operating Income		483,595			670,998			909,724			2,046,788
Interest expense		(45,670	)		(38,240	)		(120,992	)		(112,295	)
Other income (expense)		11,139			16,763			(13,041	)		19,924
Income from Continuing Operations
Before Income Taxes		449,064			649,521			775,691			1,954,417
Income Taxes		146,100			184,935			301,800			565,789
Income from Continuing Operations		302,964			464,586			473,891			1,388,628
Loss from Discontinued Operations		(546	)		(11,068	)		(34,282	)		(103,399	)
Net Income	$	302,418		$	453,518		$	439,609		$	1,285,229

Income Per Share from Continuing
Operations:
Basic		$0.61			$0.90			$0.95			$2.66
Diluted		$0.60			$0.89			$0.95			$2.64
Loss Per Share from Discontinued
Operations:
Basic		$(0.00	)		$(0.02	)		$(0.07	)		$(0.20	)
Diluted		$(0.00	)		$(0.02	)		$(0.07	)		$(0.20	)
Net Income Per Share:
Basic		$0.60			$0.88			$0.88			$2.46
Diluted		$0.60			$0.87			$0.88			$2.45
Cash Dividends:
Paid		$0.31			$0.28			$0.93			$0.84
Declared		$0.31			$0.31			$0.93			$0.87
Shares of Common Stock Outstanding
During the Period:
Average		500,313			517,914			499,635			521,886
Average assuming dilution		502,187			521,086			501,184			525,326

The Notes to Financial Statements are an integral part of these statements.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF FINANCIAL POSITION (UNAUDITED)

(In thousands)		September 30, 2009			December 31, 2008
ASSETS
Current Assets:
Cash and equivalents	$	942,856		$	742,950
Trade receivables		2,410,667			2,571,987
Inventories		1,361,201			1,774,697
Deferred income taxes		243,284			206,496
Prepaid expenses and other current assets		327,083			375,778
Assets held for sale		—			82,071
Total current assets		5,285,091			5,753,979

Plant and Equipment:
Land		236,084			227,167
Buildings and improvements		1,532,356			1,457,732
Machinery and equipment		3,904,162			3,714,456
Equipment leased to others		172,405			164,504
Construction in progress		103,468			98,876
		5,948,475			5,662,735
Accumulated depreciation		(3,841,372	)		(3,553,303	)
Net plant and equipment		2,107,103			2,109,432

Investments		456,450			465,894
Goodwill		4,721,777			4,517,550
Intangible Assets		1,652,292			1,779,669
Deferred Income Taxes		81,870			75,999
Other Assets		579,633			501,028
	$	14,884,216		$	15,203,551
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term debt	$	67,460		$	2,433,973
Accounts payable		626,314			683,991
Accrued expenses		1,391,824			1,315,106
Cash dividends payable		155,282			154,726
Income taxes payable		225,751			216,751
Liabilities held for sale		—			20,546
Total current liabilities		2,466,631			4,825,093
Noncurrent Liabilities:
Long-term debt		2,869,377			1,247,883
Deferred income taxes		71,468			125,089
Other liabilities		1,234,447			1,330,395
Total noncurrent liabilities		4,175,292			2,703,367

Stockholders’ Equity:
Common stock		5,336			5,318
Additional paid-in-capital		199,259			105,497
Income reinvested in the business		9,170,064			9,196,465
Common stock held in treasury		(1,390,594	)		(1,390,594	)
Accumulated other comprehensive income		249,471			(253,211	)
Noncontrolling interest		8,757			11,616
Total stockholders’ equity		8,242,293			7,675,091
	$	14,884,216		$	15,203,551

The Notes to Financial Statements are an integral part of these statements.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF CASH FLOWS (UNAUDITED)

(In thousands)		Nine Months Ended September 30
		2009			2008
Cash Provided by (Used for) Operating Activities:
Net income	$	439,609		$	1,285,229
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation		272,336			284,600
Amortization and impairment of goodwill and intangible assets		254,056			272,815
Change in deferred income taxes		(87,050	)		27,236
Provision for uncollectible accounts		13,188			4,010
Loss on sale of plant and equipment		444			623
(Income) loss from investments		2,194			(27,800	)
(Gain) loss on sale of operations and affiliates		34,171			(25,966	)
Stock compensation expense		35,657			31,950
Other non-cash items, net		3,218			11,161
Change in assets and liabilities:
(Increase) decrease in--
Trade receivables		324,088			(105,219	)
Inventories		525,497			(131,583	)
Prepaid expenses and other assets		(18,512	)		(38,197	)
Increase (decrease) in--
Accounts payable		(117,826	)		(35,389	)
Accrued expenses and other liabilities		(123,969	)		46,397
Income taxes receivable and payable		82,727			28,482
Other, net		451			4,438
Net cash provided by operating activities		1,640,279			1,632,787
Cash Provided by (Used for) Investing Activities:
Acquisition of businesses (excluding cash and equivalents)		(118,342	)		(1,324,239	)
Additions to plant and equipment		(174,353	)		(274,295	)
Purchases of investments		(36,676	)		(3,109	)
Proceeds from investments		10,564			21,538
Proceeds from sale of plant and equipment		22,683			15,455
Proceeds from sale of operations and affiliates		16,316			106,364
Other, net		(891	)		(4,679	)
Net cash used for investing activities		(280,699	)		(1,462,965	)
Cash Provided by (Used for) Financing Activities:
Cash dividends paid		(464,399	)		(440,229	)
Issuance of common stock		55,328			45,333
Repurchases of common stock		—			(991,583	)
Net proceeds (repayments) of debt with original maturities 3 months or less		(1,753,883	)		1,275,667
Proceeds from debt with original maturities greater than 3 months		2,158,119			1,824
Repayments of debt with original maturities greater than 3 months		(1,278,674	)		(4,875	)
Excess tax benefits from share-based compensation		609			3,974
Net cash used for financing activities		(1,282,900	)		(109,889	)
Effect of Exchange Rate Changes on Cash and Equivalents		123,226			(19,839	)
Cash and Equivalents:
Increase during the period		199,906			40,094
Beginning of period		742,950			827,524
End of period	$	942,856		$	867,618
Cash Paid During the Period for Interest	$	40,607		$	65,974
Cash Paid During the Period for Income Taxes	$	267,787		$	491,820
Liabilities Assumed from Acquisitions	$	34,659		$	464,053

The Notes to Financial Statements are an integral part of these statements.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

(1) FINANCIAL STATEMENTS

The unaudited financial statements included herein have been prepared by Illinois Tool Works Inc. and Subsidiaries (the “Company”). In the opinion of management, the interim financial statements reflect all adjustments of a normal recurring nature necessary for a fair statement of the results for interim periods. Events that occurred after September 30, 2009 through the time that these financial statements have been filed on October 30, 2009 with the Securities and Exchange Commission were considered in the preparation of these financial statements. These financial statements should be read in conjunction with the financial statements and notes to financial statements included in the Company’s Annual Report on Form 10-K, as updated by the Current Report on Form 8-K filed August 7, 2009. Certain reclassifications of prior year data have been made to conform to current year reporting.

(2) COMPREHENSIVE INCOME

The Company’s components of comprehensive income in the periods presented are:

(In thousands)	Three Months Ended September 30					Nine Months Ended September 30
	2009		2008			2009		2008
Net income	$	302,418	$	453,518		$	439,609	$	1,285,229
Other comprehensive income:
Foreign currency translation adjustments		116,929		(313,175	)		498,567		(171,236	)
Pension and other postretirement benefit adjustments, net of tax		2,181		442			4,115		(6	)
Comprehensive income	$	421,528	$	140,785		$	942,291	$	1,113,987

(3) DISCONTINUED OPERATIONS

The Company periodically reviews its 895 operations for businesses which may no longer be aligned with its long-term objectives. In August 2008, the Company’s Board of Directors authorized the divestiture of the Click Commerce industrial software business which was previously reported in the All Other segment. In the second quarter of 2009, the Company completed the sale of the Click Commerce business.

In the fourth quarter of 2007, the Company classified an automotive components business and a consumer packaging business as held for sale. The consumer packaging business was sold in the second quarter of 2008. The Company sold the automotive components business in the third quarter of 2009.

In May 2009, the Company’s Board of Directors rescinded a resolution from August 2008 to divest the Decorative Surfaces segment. The consolidated financial statements and related notes for all periods have been restated to present the results related to the Decorative Surfaces segment as continuing operations.

Results of the discontinued operations were as follows:

(In thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating revenues	$	2,794		$	25,420		$	25,963		$	98,861

Loss before taxes		(1,043	)		(10,218	)		(36,107	)		(103,439	)
Income tax (expense) benefit		497			(850	)		1,825			40
Loss from discontinued operations	$	(546	)	$	(11,068	)	$	(34,282	)	$	(103,399	)

In 2009, the Company recorded a pre-tax loss on the disposal of the Click Commerce business of $29,626,000. Loss before taxes in 2008 includes goodwill impairment charges of $132,700,000 related to the Click Commerce business and a pre-tax gain on the disposal of the consumer packaging business of $25,062,000.

(4) INCOME TAXES

In the first nine months of 2009, the Company incurred significant charges related to the impairment of goodwill and intangible assets of $101,997,000 that were mostly non-deductible, and discrete tax items of $46,849,000 to record reserves for tax contingencies related to audits and valuation allowances on net operating loss carryforwards no longer expected to be utilized. The components of the effective tax rate for the nine month period ended September 30, 2009 were as follows:

Effective tax rate excluding discrete items	29.6	%
Discrete tax adjustments	6.0
Goodwill and intangible asset impairment charges	3.3
Effective tax rate	38.9	%

The Company and its subsidiaries file tax returns in the U.S. and various state, local and foreign jurisdictions. These tax returns are routinely audited by the tax authorities in these jurisdictions and a number of these audits are currently ongoing.

As part of the Australia, Germany and U.S. tax audits, the tax authorities are reviewing several items, the most significant of which are related to financing transactions, leveraged leases and mortgage-backed securities. The Company believes it is reasonably possible that it will resolve the matters currently under consideration within the next 12 months, and that the amount of the Company’s unrecognized tax benefits may be reduced by a range of approximately $270 million up to $580 million. The Company has recorded its best estimate of the exposure for these issues.

(5) INVENTORIES

Inventories at September 30, 2009 and December 31, 2008 were as follows:

(In thousands)

	September 30, 2009		December 31, 2008
Raw material	$	428,414	$	612,190
Work-in-process		144,219		174,607
Finished goods		788,568		987,900
	$	1,361,201	$	1,774,697

(6) GOODWILL AND INTANGIBLE ASSETS

Goodwill represents the excess cost over fair value of the net assets of purchased businesses. The Company does not amortize goodwill and intangible assets that have indefinite lives. The Company performs an annual impairment assessment of goodwill and intangible assets with indefinite lives based on the fair value of the related reporting unit or intangible asset.

In September 2006, the Financial Accounting Standards Board issued new accounting guidance on fair value measurements. The Company adopted these provisions on January 1, 2009 for all nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value on a nonrecurring basis. The new accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and provides guidance for measuring fair value and the necessary disclosures.

When performing its annual goodwill impairment assessment, the Company compares the estimated fair value of each of its 62 reporting units to the carrying value. Fair values are determined primarily by discounting estimated future cash flows based either on current operating cash flows or on a detailed cash flow forecast prepared by the relevant reporting unit. The Company also considers additional valuation techniques, such as market multiples from similar transactions and quoted market prices of relevant public companies. If the fair value of a reporting unit is less than its carrying value, an impairment loss, if any, is recorded for the difference between the implied fair value and the carrying value of the reporting unit’s goodwill.

The Company’s indefinite-lived intangibles consist of trademarks and brands. The fair values of these intangibles are determined based on a relief-of-royalty income approach derived from internally forecasted revenues of the related products. If the fair value of the trademark or brand is less than its carrying value, an impairment loss is recorded for the difference between the estimated fair value and carrying value of the intangible.

In the first quarter of 2009, the Company performed its annual impairment testing of its goodwill and intangible assets with indefinite lives in compliance with the newly adopted fair value measurement provisions which resulted in goodwill impairment charges of $60,000,000 related to the pressure sensitive adhesive reporting unit in the Polymers & Fluids segment and $18,000,000 related to the PC board fabrication reporting unit in the Power Systems & Electronics segment.

Also in the first quarter of 2009, intangible asset impairments of $11,997,000 were recorded to reduce to the estimated fair value the carrying value of certain trademarks and brands with indefinite lives. Approximately $5,800,000 of this charge related to the PC board fabrication reporting unit and the remainder to various trademarks and brands of other reporting units.

In the third quarter of 2009, the Company changed the date of its annual goodwill impairment assessment from the first quarter to the third quarter. This constitutes a change in the method of applying an accounting principle that the Company believes is preferable. The change was made to better align the timing of the Company’s goodwill impairment assessment with the Company’s annual business planning and forecasting process. The Company performed an impairment assessment of its goodwill in the third quarter which resulted in an impairment charge of $12,000,000 related to the truck remanufacturing and parts/service reporting unit in the Transportation segment.

The goodwill impairments in the first and third quarters were related to new reporting units which were acquired over the last few years before the recent economic downturn. These charges were driven by lower current forecasts compared to the expected forecasts at the time the reporting units were acquired.

A summary of goodwill and indefinite-lived intangible assets that were adjusted to fair value and the related impairment charges included in earnings for 2009 is as follows:

(In thousands)	Book Value	Fair Value	Total Impairment Charges
First quarter 2009:
Goodwill	$353,000	$275,000	$78,000
Indefinite-lived intangible assets	94,973	82,976	11,997

Third quarter 2009:
Goodwill	$96,000	$84,000	$12,000

(7)RETIREMENT PLANS AND POSTRETIREMENT BENEFITS

Pension and other postretirement benefit costs for the periods ended September 30, 2009 and 2008 were as follows:

(In thousands)	Three Months Ended September 30												Nine Months Ended September 30
	Pension						Other Postretirement Benefits						Pension						Other Postretirement Benefits
	2009			2008			2009			2008			2009			2008			2009			2008
Components of net periodic benefit cost:
Service cost	$	24,724		$	28,144		$	3,142		$	3,585		$	73,157		$	84,153		$	9,426		$	10,755
Interest cost		30,350			30,042			7,718			8,091			89,280			90,361			23,154			24,524
Expected return on plan assets		(39,078	)		(42,045	)		(3,403	)		(3,848	)		(114,963	)		(126,581	)		(10,209	)		(11,544	)
Amortization of actuarial
(gain) loss		2,093			649			64			(204	)		6,230			1,938			192			(708	)
Amortization of prior service
(income) cost		(391	)		(602	)		1,606			1,565			(1,191	)		(1,804	)		4,818			4,695
Amortization of net transition
amount		34			25			—			—			110			70			—			—
Settlement/curtailment
(income) loss		—			12,900			—			—			(12,345	)		12,900			—			(1,929	)
Net periodic benefit cost	$	17,732		$	29,113		$	9,127		$	9,189		$	40,278		$	61,037		$	27,381		$	25,793

The Company expects to contribute approximately $218,000,000 to its pension plans and $38,000,000 to its other postretirement plans in 2009. As of September 30, 2009, contributions of $209,800,000 to pension plans and $24,200,000 to other postretirement plans have been made.

(8) SHORT-TERM DEBT

On June 12, 2009, the Company entered into a $2,000,000,000 Line of Credit Agreement with a termination date of June 11, 2010 which replaced the prior line of credit. No amounts were outstanding under this facility at September 30, 2009.

The Company had no commercial paper outstanding at September 30, 2009 and $1,820,423,000 outstanding at December 31, 2008.

In 1999, the Company issued $500,000,000 of 5.75% redeemable notes due March 1, 2009. These notes were repaid at maturity.

(9) LONG-TERM DEBT

On March 23, 2009, the Company issued $800,000,000 of 5.15% redeemable notes due April 1, 2014 at 99.92% of face value and $700,000,000 of 6.25% redeemable notes due April 1, 2019 at 99.98% of face value. The effective interest rates of the notes are 5.2% and 6.3%, respectively.

Based on rates for comparable instruments the approximate fair value and related carrying value of the Company’s long-term debt, including current maturities, were as follows:

(In thousands)

		September 30, 2009	December 31, 2008
Fair value	$	3,087,152	$	1,682,304
Carrying value		2,877,534		1,757,807

(10) STOCKHOLDERS' EQUITY

On January 1, 2009, the Company adopted new accounting guidance on noncontrolling interests. Upon adoption, the Company reclassified the December 31, 2008 balance of $11,616,000 from other noncurrent liabilities to noncontrolling interest in stockholders’ equity.

(11) SEGMENT INFORMATION

See Management’s Discussion and Analysis for information regarding operating revenues and operating income for the Company’s segments.

Item 2 - Management’s Discussion and Analysis

CONSOLIDATED RESULTS OF OPERATIONS

In 2007, the Company classified an automotive components business and a consumer packaging business as discontinued operations. Additionally, in 2008, the Company’s Board of Directors authorized the divestiture of the Click Commerce industrial software business which was previously reported in the All Other segment. The consolidated statements of income, statements of financial position, the notes to financial statements and management’s discussion and analysis for all periods have been restated to present the results related to all of these businesses as discontinued operations. See the Discontinued Operations note for further information on the Company’s discontinued operations.

In May 2009, the Company’s Board of Directors rescinded a resolution from August 2008 to divest the Decorative Surfaces segment. The consolidated financial statements, the notes to financial statements and management’s discussion and analysis for all periods have been restated to present the results related to the Decorative Surfaces segment as continuing operations.

The Company’s consolidated results of operations for the third quarter and year-to-date periods of 2009 and 2008 were as follows:

(Dollars in thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating revenues	$	3,580,354		$	4,464,621		$	10,119,639		$	13,146,312
Operating income		483,595			670,998			909,724			2,046,788
Margin %		13.5	%		15.0	%		9.0	%		15.6	%

In the third quarter and year-to-date periods of 2009, the changes in revenues, operating income and operating margins over the prior year were primarily due to the following factors:

	Three Months Ended September 30									Nine Months Ended September 30
	% Increase (Decrease)						% Point Increase (Decrease)			% Increase (Decrease)						% Point Increase (Decrease)
	Operating Revenues			Operating Income			Operating Margins			Operating Revenues			Operating Income			Operating Margins
Base manufacturing business:
Revenue change/Operating
leverage		(17.9	)%		(48.4	)%		(5.6	)%		(20.9	)%		(55.5	)%		(6.8	)%
Changes in variable margins
and overhead costs		—			31.7			5.8			—			17.6			3.5
Total		(17.9	)		(16.7	)		0.2			(20.9	)		(37.9	)		(3.3	)

Acquisitions and divestitures		3.6			1.4			(0.4	)		5.0			(0.1	)		(0.6	)
Restructuring costs		—			(4.0	)		(0.7	)		—			(4.9	)		(1.0	)
Impairment of goodwill
and intangibles		—			(1.8	)		(0.3	)		—			(4.9	)		(1.0	)
Translation		(5.6	)		(6.8	)		(0.3	)		(7.2	)		(7.7	)		(0.7	)
Other		0.1			—			—			0.1			(0.1	)		—
Total		(19.8	)%		(27.9	)%		(1.5	)%		(23.0	)%		(55.6	)%		(6.6	)%

Operating Revenues

Revenues decreased 19.8% and 23.0% in the third quarter and year-to-date periods of 2009, respectively, primarily due to lower base revenues and the unfavorable effect of currency translation, mainly due to the strengthening of the Dollar, partially offset by revenues from acquisitions. Total base revenues declined 17.9% and 20.9% in the third quarter and year-to-date periods, respectively, but showed improvement as compared to the second quarter 2009. North American base revenue declined 21.6% and 24.8%, in the third quarter and year-to-date periods, respectively, while international base revenues declined 13.8% and 16.7% in the same periods. Both North American and international base revenues were adversely affected by weak, but improving macroeconomic and industrial production trends as compared to the second quarter 2009. The Company anticipates that the current weak global economic environment will continue through 2009 and as such, expects that key end markets will continue to be negatively impacted.

Operating Income

Operating income declined 27.9% and 55.6% in the third quarter and year-to-date periods of 2009, respectively, primarily due to the decline in base revenues, the negative effect of currency translation, increased restructuring charges and increased goodwill and intangible impairment charges. In the first quarter of 2009, the Company recorded impairment charges of $78 million and $12 million against goodwill and intangibles, respectively, and in the third quarter recorded a $12 million goodwill impairment charge. The goodwill and intangible impairments were primarily related to new reporting units which were acquired over the last few years. These charges were driven by lower current forecasts compared to the expected forecasts at the time the reporting units were acquired. The higher restructuring charges reflect the Company’s efforts to reduce costs in response to current economic conditions. Improvements in base variable margins and lower overhead costs increased base margins 5.8% and 3.5% in the third quarter and year-to-date periods, respectively, as the cumulative benefits of past restructuring projects began to be more fully realized and price versus raw material cost comparisons were favorable. Total margins declined by 1.5% and 6.6% in the third quarter and year-to-date periods of 2009, respectively, primarily due to the declines in base revenues, restructuring charges and the goodwill and intangible impairment charges.

The reconciliation of segment operating revenues to total operating revenues is as follows:

(In thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Industrial Packaging	$	489,506		$	694,322		$	1,375,987		$	2,042,058
Power Systems & Electronics		405,764			620,743			1,199,681			1,851,919
Transportation		540,921			581,867			1,477,821			1,806,384
Food Equipment		487,325			542,687			1,369,878			1,590,905
Construction Products		402,459			525,005			1,097,191			1,575,211
Polymers & Fluids		307,299			369,370			834,059			924,130
Decorative Surfaces		252,875			316,861			742,318			955,352
All Other		702,707			828,006			2,046,262			2,443,682
Intersegment revenues		(8,502	)		(14,240	)		(23,558	)		(43,329	)
Total operating revenues	$	3,580,354		$	4,464,621		$	10,119,639		$	13,146,312

INDUSTRIAL PACKAGING

Businesses in this segment produce steel, plastic and paper products used for bundling, shipping and protecting goods in transit.

In the Industrial Packaging segment, products include:
•	steel and plastic strapping and related tools and equipment;
•	plastic stretch film and related equipment;
•	paper and plastic products that protect goods in transit; and
•	metal jacketing and other insulation products.

This segment primarily serves the primary metals, general industrial, construction, and food and beverage markets.

The results of operations for the Industrial Packaging segment for the third quarter and year-to-date periods of 2009 and 2008 were as follows:

(Dollars in thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating revenues	$	489,506		$	694,322		$	1,375,987		$	2,042,058
Operating income		37,193			77,422			50,856			241,122
Margin %		7.6	%		11.2	%		3.7	%		11.8	%

In the third quarter and year-to-date periods of 2009, the changes in revenues, operating income and operating margins over the prior year were primarily due to the following factors:

	Three Months Ended September 30									Nine Months Ended September 30
	% Increase (Decrease)						% Point Increase (Decrease)			% Increase (Decrease)						% Point Increase (Decrease)
	Operating Revenues			Operating Income			Operating Margins			Operating Revenues			Operating Income			Operating Margins
Base manufacturing business:
Revenue change/Operating
leverage		(23.3	)%		(83.6	)%		(8.8	)%		(24.7	)%		(86.6	)%		(9.7	)%
Changes in variable margins
and overhead costs		—			45.9			6.7			—			21.8			3.4
Total		(23.3	)		(37.7	)		(2.1	)		(24.7	)		(64.8	)		(6.3	)

Acquisitions		0.9			0.8			—			0.8			(0.4	)		(0.1	)
Restructuring costs		—			(5.2	)		(0.8	)		—			(3.5	)		(0.6	)
Translation		(7.1	)		(9.8	)		(0.7	)		(8.8	)		(10.2	)		(1.2	)
Other		—			(0.1	)		—			0.1			—			0.1
Total		(29.5	)%		(52.0	)%		(3.6	)%		(32.6	)%		(78.9	)%		(8.1	)%

Operating Revenues

Revenues decreased 29.5% and 32.6% in the third quarter and year-to-date periods of 2009, respectively, primarily due to lower base revenues and the unfavorable impact of currency translation. Base revenues declined 27.0% and 29.7% for the North American industrial packaging businesses in the third quarter and year-to-date periods, respectively, largely due to declines in consumable and equipment volume in key end markets such as primary metals, construction-related materials and manufacturing. The international industrial packaging businesses declined 25.0% and 25.6%, respectively, in the third quarter and year-to-date periods, as both were adversely affected by the continued global decline in industrial production and construction industries.

Operating Income

Operating income decreased 52.0% and 78.9% in the third quarter and year-to-date periods of 2009, respectively, primarily due to the negative leverage effect of the decline in base revenues described above, the negative effect of currency translation and higher restructuring charges. Improvements in base variable margins and overhead costs increased margins 6.7% and 3.4% in the third quarter and year-to-date periods, respectively, as price versus raw material cost comparisons were favorable and benefits of past restructuring projects began to be realized. Total operating margins declined by 3.6% and 8.1% in the third quarter and year-to-date periods, respectively, mainly due to the declines in base revenues.

POWER SYSTEMS & ELECTRONICS

Businesses in this segment produce equipment and consumables associated with specialty power conversion, metallurgy and electronics.

In the Power Systems & Electronics segment, products include:
•	arc welding equipment;
•	metal arc welding consumables and related accessories;
•	metal solder materials for PC board fabrication;
•	equipment and services for microelectronics assembly;
•	electronic components and component packaging; and
•	airport ground support equipment.

This segment primarily serves the general industrial, electronics and construction markets.

The results of operations for the Power Systems & Electronics segment for the third quarter and year-to-date periods of 2009 and 2008 were as follows:

(Dollars in thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating revenues	$	405,764		$	620,743		$	1,199,681		$	1,851,919
Operating income		69,954			118,910			156,474			385,797
Margin %		17.2	%		19.2	%		13.0	%		20.8	%

In the third quarter and year-to-date periods of 2009, the changes in revenues, operating income and operating margins over the prior year were primarily due to the following factors:

	Three Months Ended September 30									Nine Months Ended September 30
	% Increase (Decrease)						% Point Increase (Decrease)			% Increase (Decrease)						% Point Increase (Decrease)
	Operating Revenues			Operating Income			Operating Margins			Operating Revenues			Operating Income			Operating Margins
Base manufacturing business:
Revenue change/Operating
leverage		(34.2	)%		(64.8	)%		(8.9	)%		(34.3	)%		(61.8	)%		(8.7	)%
Changes in variable margins
and overhead costs		—			25.8			7.5			—			16.0			5.1
Total		(34.2	)		(39.0	)		(1.4	)		(34.3	)		(45.8	)		(3.6	)

Acquisitions		2.4			1.2			(0.3	)		2.5			(1.1	)		(0.8	)
Restructuring costs		—			(0.6	)		(0.2	)		—			(3.5	)		(1.1	)
Impairment of goodwill
and intangibles		—			—			—			—			(6.2	)		(2.0	)
Translation		(2.8	)		(2.8	)		(0.1	)		(3.4	)		(2.9	)		(0.2	)
Other		—			—			—			—			0.1			(0.1	)
Total		(34.6	)%		(41.2	)%		(2.0	)%		(35.2	)%		(59.4	)%		(7.8	)%

Operating Revenues

Revenues declined 34.6% and 35.2% in the third quarter and year-to-date periods of 2009, respectively, mainly due to declines in base revenues and the negative effect of currency translation. Revenues fell as end market demand continued to decline across the broad spectrum of industries that this segment serves, including key end markets such as commercial construction and manufacturing. The revenue decrease was partially offset by 2008 acquisitions, including a welding equipment business and a PC board fabrication business. Worldwide base welding revenues declined 36.2% in the third quarter and 34.9% year-to-date. North American welding businesses declined 40.0% and 39.1% while international base businesses declined 26.7% and 23.5%, in the respective periods. Base revenues for the electronics businesses fell 32.6% and 36.6% in the third quarter and year-to-date periods, respectively, while base revenues in the PC board fabrication businesses fell 42.3% and 52.1% in the same periods, both largely due to the decline in consumer demand for electronics.

Operating Income

Operating income decreased 41.2% and 59.4% in the third quarter and year-to-date periods of 2009, respectively, primarily due to the declines in base revenues described above, first quarter 2009 impairment charges, higher restructuring charges and the negative effect of currency translation. Goodwill and intangible asset impairment charges of $18.0 million and $6.7 million, respectively, were incurred in the PC board fabrication and welding accessories businesses in the first quarter of 2009. Total operating margins declined by 2.0% and 7.8% in the third quarter and year-to-date periods, respectively, primarily due to the declines in base revenues and higher year-to-date impairment and restructuring charges. Improvements in variable margins and overhead expenses, including favorable price versus raw material cost comparisons and benefits of prior restructuring projects, increased operating margins by 7.5% and 5.1% in the third quarter and year-to-date periods, respectively.

TRANSPORTATION

Businesses in this segment produce components, fasteners, fluids and polymers, as well as truck remanufacturing and related parts and service.

In the Transportation segment, products include:
•	metal and plastic components, fasteners and assemblies for automobiles and light trucks;
•	fluids and polymers for auto aftermarkets maintenance and appearance;
•	fillers and putties for auto body repair; and
•	polyester coatings and patch and repair products for the marine industry.

This segment primarily serves the automotive original equipment manufacturers and tiers and automotive aftermarket markets.

The results of operations for the Transportation segment for the third quarter and year-to-date periods of 2009 and 2008 were as follows:

(Dollars in thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating revenues	$	540,921		$	581,867		$	1,477,821		$	1,806,384
Operating income		57,033			68,752			64,906			260,159
Margin %		10.5	%		11.8	%		4.4	%		14.4	%

In the third quarter and year-to-date periods of 2009, the changes in revenues, operating income and operating margins over the prior year were primarily due to the following factors:

	Three Months Ended September 30									Nine Months Ended September 30
	% Increase (Decrease)						% Point Increase (Decrease)			% Increase (Decrease)						% Point Increase (Decrease)
	Operating Revenues			Operating Income			Operating Margins			Operating Revenues			Operating Income			Operating Margins
Base manufacturing business:
Revenue change/Operating
leverage		(7.9	)%		(24.2	)%		(2.1	)%		(22.5	)%		(58.4	)%		(6.7	)%
Changes in variable margins
and overhead costs		—			42.4			5.4			—			8.0			1.5
Total		(7.9	)		18.2			3.3			(22.5	)		(50.4	)		(5.2	)

Acquisitions and divestitures		7.5			(3.2	)		(1.3	)		12.0			(0.8	)		(1.0	)
Restructuring costs		—			(2.3	)		(0.3	)		—			(7.6	)		(1.4	)
Impairment of goodwill
and intangibles		—			(17.5	)		(2.2	)		—			(5.5	)		(1.0	)
Translation		(6.6	)		(12.3	)		(0.8	)		(7.7	)		(10.8	)		(1.4	)
Other		—			0.1			—			—			—			—
Total		(7.0	)%		(17.0	)%		(1.3	)%		(18.2	)%		(75.1	)%		(10.0	)%

Operating Revenues

Revenues declined 7.0% and 18.2% in the third quarter and year-to-date periods, respectively, due to declines in base revenues and the unfavorable effect of currency translation. Acquisition revenue partially mitigated the base revenue decrease and was primarily related to the purchase of a North American truck remanufacturing and parts/service business in the third quarter of 2008. Worldwide automotive base revenues declined 9.7% and 28.9% in the third quarter and year-to-date periods, respectively, as automotive production continued to be lower than last year, but better than the first and second quarters of 2009. North American automotive base revenues declined 14.3% and 33.6% in the third quarter and year-to-date periods, respectively, on declines of 21% and 41% in North American auto builds in the same periods. Despite the year-over-year declines, the third quarter improved as compared to the second quarter 2009 due to the “cash for clunkers” program. International automotive base revenues declined 4.7% and 24.3% for the third quarter and year-to-date periods, respectively, on declines in car builds of 7% and 21%. The automotive aftermarket businesses declined 4.5% in the third quarter and 9.2% year-to-date as a result of a continued decline in discretionary consumer spending.

Operating Income

Operating income decreased 17.0% and 75.1% in the third quarter and year-to-date periods of 2009, respectively, primarily due to the decline in base revenues described above, higher restructuring costs and the unfavorable effect of currency translation. In addition, a $12 million goodwill impairment charge was recorded in the third quarter of 2009 related to the North American truck remanufacturing and parts/service business. The increase in restructuring charges is primarily due to continued efforts to reduce costs in response to current economic conditions and the decline in worldwide automotive production. Total operating margins declined by 1.3% and 10.0% in the third quarter and year-to-date periods, respectively, primarily due to the decline in base revenues described above. Improvements in variable margins and overhead expenses, including favorable price versus raw material cost comparisons and benefits of prior restructuring projects, increased operating margins by 5.4% and 1.5% in the same periods.

FOOD EQUIPMENT

Businesses in this segment produce commercial food equipment and related service.

In the Food Equipment segment, products include:
•	warewashing equipment;
•	cooking equipment, including ovens, ranges and broilers;
•	refrigeration equipment, including refrigerators, freezers and prep tables;
•	food processing equipment, including slicers, mixers and scales; and
•	kitchen exhaust, ventilation and pollution control systems.

This segment primarily serves the food institutional/restaurant, service and food retail markets.

The results of operations for the Food Equipment segment for the third quarter and year-to-date periods of 2009 and 2008 were as follows:

(Dollars in thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating revenues	$	487,325		$	542,687		$	1,369,878		$	1,590,905
Operating income		83,661			88,193			186,492			232,184
Margin %		17.2	%		16.3	%		13.6	%		14.6	%

In the third quarter and year-to-date periods of 2009, the changes in revenues, operating income and operating margins over the prior year were primarily due to the following factors:

	Three Months Ended September 30									Nine Months Ended September 30
	% Increase (Decrease)						% Point Increase (Decrease)			% Increase (Decrease)						% Point Increase (Decrease)
	Operating Revenues			Operating Income			Operating Margins			Operating Revenues			Operating Income			Operating Margins
Base manufacturing business:
Revenue change/Operating
leverage		(6.3	)%		(16.0	)%		(1.7	)%		(8.0	)%		(22.6	)%		(2.3	)%
Changes in variable margins
and overhead costs		—			19.5			3.4			—			13.5			2.1
Total		(6.3	)		3.5			1.7			(8.0	)		(9.1	)		(0.2	)

Acquisitions		1.6			1.0			(0.1	)		1.5			(0.1	)		(0.2	)
Restructuring costs		—			(3.6	)		(0.6	)		—			(2.5	)		(0.4	)
Translation		(5.5	)		(6.0	)		(0.1	)		(7.4	)		(7.9	)		(0.2	)
Other		—			—			—			—			(0.1	)		—
Total		(10.2	)%		(5.1	)%		0.9	%		(13.9	)%		(19.7	)%		(1.0	)%

Operating Revenues

Revenues decreased 10.2% and 13.9% in the third quarter and year-to-date periods of 2009, respectively, primarily due to the decline in base business and the unfavorable effect of currency translation, partially offset by revenues from acquisitions. The acquired revenues were attributable to the acquisition of a European food equipment business. North American food equipment base revenues declined 8.0% and 10.0%, respectively, for the third quarter and year-to-date periods, while international food equipment base revenues declined 4.9% and 6.9% in the same periods. Base revenues for the North American institutional/restaurant businesses declined 7.9% and 13.0% in the third quarter and year-to-date periods, respectively, as customers delayed equipment purchases. Base service revenues were flat in the third quarter and declined 1.4% for the year-to-date period as customers continued to maintain existing equipment.

Operating Income

Operating income declined 5.1% and 19.7% in the third quarter and year-to-date periods, respectively, primarily due to the decrease in base revenues described above and the unfavorable effect of currency translation and restructuring. Total operating margins increased 0.9% in the third quarter and decreased 1.0% year-to-date primarily due to the decline in base revenues offset in the third quarter by margin gains due to favorable price versus raw material cost comparisons, favorable product mix and benefits from restructuring. For the year-to-date period, lower operating costs did not fully offset the effect of lower base revenues.

CONSTRUCTION PRODUCTS

Businesses in this segment produce tools, fasteners and other products for construction applications.

In the Construction Products segment, products include:
•	fasteners and related fastening tools for wood applications;
•	anchors, fasteners and related tools for concrete applications;
•	metal plate truss components and related equipment and software; and
•	packaged hardware, fasteners, anchors and other products for retail.

This segment primarily serves the residential construction, renovation construction and commercial construction markets.

The results of operations for the Construction Products segment for the third quarter and year-to-date periods of 2009 and 2008 were as follows:

(Dollars in thousands)	Three Months Ended September 30						Nine Months Ended September 30
	2009			2008			2009			2008
Operating revenues	$	402,459		$	525,005		$	1,097,191		$	1,575,211
Operating income		43,712			75,040			55,230			207,263
Margin %		10.9	%		14.3	%		5.0	%		13.2	%

In the third quarter and year-to-date periods of 2009, the changes in revenues, operating income and operating margins over the prior year were primarily due to the following factors:

	Three Months Ended September 30									Nine Months Ended September 30
	% Increase (Decrease)						% Point Increase (Decrease)			% Increase (Decrease)						% Point Increase (Decrease)
	Operating Revenues			Operating Income			Operating Margins			Operating Revenues			Operating Income			Operating Margins
Base manufacturing business:
Revenue change/Operating
leverage		(16.5	)%		(50.7	)%		(5.9	)%		(19.9	)%		(64.4	)%		(7.3	)%
Changes in variable margins
and overhead costs		—			22.6			3.9			—			10.4			1.7
Total		(16.5	)		(28.1	)		(2.0	)		(19.9	)		(54.0	)		(5.6	)

Acquisitions		0.9			(0.4	)		(0.2	)		0.7			(0.9	)		(0.2	)
Restructuring costs		—			(2.9	)		(0.5	)		—			(3.6	)		(0.6	)
Translation		(7.8	)		(10.4	)		(0.8	)		(11.1