Illinois Tool Works Inc. News

ITW Reports Diluted Income Per Share From Continuing Operations of $1.01 in the 2008 Second Quarter; Diluted Income Per Share From Continuing Operations Grew 17 Percent and Revenues Increased 10.5 Percent in the Quarter

GLENVIEW, Ill., July 17 PRNewswire-FirstCall — Illinois Tool Works Inc. (NYSE: ITW) today reported 17 percent growth in 2008 second quarter diluted income per share from continuing operations. In addition, the Company's revenues grew 10.5 percent, operating income increased 8.8 percent and income from continuing operations rose 10.0 percent in the most recent quarter.

The double-digit operating revenue increase in the quarter consisted of a 4.3 percent contribution from acquisitions and a 6.4 percent contribution from currency translation. Base revenues were flat in the quarter, with international base revenues growing 3 percent and North American base revenues declining 2 percent. For the 2008 second quarter, revenues were $4.570 billion versus $4.137 billion for the prior year period. Second quarter operating income was $756.7 million compared to $695.6 million. Income from continuing operations was $528.5 million versus $480.4 million.

In the 2008 second quarter, total company operating margins of 16.6 percent were 20 basis points lower than the prior year period due to the dilutive impact of acquisitions and higher restructuring costs. Acquisitions lowered margins 30 basis points while restructuring reduced margins 20 basis points versus the year ago period. Notably, base margins were 30 basis points higher than a year ago.

"We believe our operating performance in the second quarter exemplifies the Company's ability to outperform across slowing end markets thanks to our decentralized operating structure and our aggressive efforts to manage operating costs," said David B. Speer, chairman and chief executive officer. "In addition, we remain focused on value-adding acquisitions as evidenced by the more than $500 million of acquired revenues we purchased through the end of the second quarter."

Highlights for the 2008 second quarter include:

*Worldwide base revenues for the Power Systems and Electronics segment grew 7.7 percent in the quarter. Worldwide welding base revenues increased 8.9 percent and worldwide PC board fabrication base revenues grew 6.9 percent. Operating margins of 21.9 percent for the segment were 140 basis points higher than a year ago.

*Worldwide base revenues for the Polymers and Fluids segment increased 2.3 percent in the quarter. The segment was led by North American polymers which grew base revenues 9.4 percent. Operating margins of 18.3 percent for the segment were 60 basis points higher than the year ago period.

*Worldwide base revenues for the Transportation segment declined 4.7 percent in the quarter, with North American automotive base revenues decreasing 12.8 percent while international base revenues were essentially flat. North American automotive base revenues decreased only 13 percent even though Detroit 3 auto builds fell 21 percent in the quarter. New domestic auto builds decreased 1 percent in the quarter. Operating margins of 15.8 percent for the segment were 260 basis points lower than a year ago.

*Worldwide base revenues for the Construction segment decreased 4.3 percent in the quarter. North American construction base revenues declined 12.4 percent in the quarter while international base revenues grew 1.7 percent. Operating margins of 13.8 percent were 120 basis points lower than the year ago period.

*The Company's free operating cash flow was $354.1 million in the second quarter. Free cash was utilized, in part, to acquire 10 companies in the second quarter representing $308 million of annualized revenues. Through June 30, 2008, the Company has completed 26 acquisitions representing $538 million of annualized revenues. The most notable acquisition in the second quarter was Stokvis, a specialty die cast adhesives business based in the Netherlands. With $261 million in revenues, Stokvis operates in 22 countries and serves broad end markets.

*Free cash was also employed to repurchase shares. In the second quarter, the Company paid $200 million to repurchase 3.9 million shares. Through June 30, the Company has paid $585.6 million to repurchase 11.8 million shares. The Company's debt-to-capitalization at June 30, 2008 was 24 percent.

Looking ahead, the Company is forecasting diluted income per share from continuing operations of $0.93 to $0.99 for the 2008 third quarter. The 2008 third quarter forecast assumes a total company growth range of 10 percent to 14 percent. The Company is increasing its full-year diluted income per share from continuing operations to a range of $3.40 to $3.52. The full-year forecast assumes a total company revenue growth range of 9 percent to 12 percent. The full-year forecast also reflects a 22 cent after-tax charge to earnings taken in the first quarter due to impairment and European tax charges.

This Earnings Release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including, without limitations, statements regarding operating performance, revenue growth, operating income, diluted income per share from continuing operations, use of free cash, potential acquisitions, end market conditions, charges, and the Company's related forecasts. These statements are subject to certain risks, uncertainties and other factors which could cause actual results to differ materially from those anticipated. Important factors that could cause actual results to differ materially from the Company's expectations are set forth in ITW's Form 10-Q for the 2008 first quarter.

With $16.2 billion in revenues, ITW is a multinational manufacturer of a diversified range of value-added industrial products and equipment. The Company consists of approximately 825 business units in 52 countries and employs some 60,000 people.

ILLINOIS TOOL WORKS INC. (In thousands except per share data) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, STATEMENT OF INCOME 2008 2007 2008 2007 Operating Revenues $4,570,472 $4,136,836 $8,709,886 $7,853,477 Cost of revenues 2,946,725 2,657,405 5,644,691 5,070,415 Selling, administrative, and R&D expenses 822,435 744,056 1,602,895 1,439,032 Amortization of Intangible Assets 44,600 39,779 87,037 77,803 Impairment of Goodwill and Other Intangible Assets - - 98,590 2,154 Operating Income 756,712 695,596 1,276,673 1,264,073 Interest expense (36,575) (25,607) (74,063) (49,986) Other income 24,233 22,025 2,835 37,079 Income From Continuing Operations Before Taxes 744,370 692,014 1,205,445 1,251,166 Income taxes 215,900 211,578 375,600 385,717 Income From Continuing Operations 528,470 480,436 829,845 865,449 Income (Loss) From Discontinued Operations (380) 25,170 1,866 42,592 Net Income $528,090 $505,606 $831,711 $908,041 Income Per Share from Continuing Operations: Basic $1.01 $0.86 $1.58 $1.55 Diluted $1.01 $0.86 $1.57 $1.54 Income Per Share from Discontinued Operations: Basic $0.00 $0.05 $0.00 $0.08 Diluted $0.00 $0.04 $0.00 $0.08 Net Income Per Share: Basic $1.01 $0.91 $1.59 $1.63 Diluted $1.01 $0.90 $1.58 $1.61 Shares outstanding during the period: Average 521,488 556,793 523,894 558,022 Average assuming dilution 525,209 561,244 527,467 562,388 ESTIMATED FREE OPERATING CASH FLOW THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2008 2007 2008 2007 Net cash provided by operating activities $450,104 $531,638 $944,028 $954,457 Less: Additions to PP&E (95,982) (89,038) (184,987) (174,329) Free operating cash flow $354,122 $442,600 $759,041 $780,128 ILLINOIS TOOL WORKS INC. (In thousands) JUNE 30, MAR 31, DEC 31, STATEMENT OF FINANCIAL POSITION 2008 2008 2007 ASSETS Cash & equivalents $640,174 $927,441 $827,524 Trade receivables 3,302,285 3,014,391 2,915,546 Inventories 1,845,621 1,766,019 1,625,820 Deferred income taxes 209,103 190,940 189,093 Prepaids and other current assets 553,059 529,926 607,672 Total current assets 6,550,242 6,428,717 6,165,655 Net plant & equipment 2,285,049 2,247,641 2,194,010 Investments 506,407 506,983 507,567 Goodwill 4,753,450 4,476,496 4,387,165 Intangible assets 1,526,430 1,363,040 1,296,176 Deferred income taxes 68,482 70,113 61,416 Other assets 899,895 891,953 913,873 $16,589,955 $15,984,943 $15,525,862 LIABILITIES and STOCKHOLDERS' EQUITY Short-term debt $1,465,927 $1,339,993 $410,512 Accounts payable 921,223 873,604 854,148 Accrued expenses 1,448,273 1,351,091 1,341,817 Cash dividends payable 145,423 146,379 148,427 Income taxes payable 194,363 212,133 205,381 Total current liabilities 4,175,209 3,923,200 2,960,285 Long-term debt 1,462,435 1,435,464 1,888,839 Deferred income taxes 376,741 301,126 260,658 Other liabilities 1,076,411 1,077,181 1,064,755 Total non-current liabilities 2,915,587 2,813,771 3,214,252 Common stock 5,311 5,307 5,625 Additional paid-in capital 61,213 30,928 173,610 Income reinvested in the business 8,822,359 8,439,692 9,879,065 Common stock held in treasury (585,574) (385,574) (1,757,761) Accumulated other comprehensive income 1,195,850 1,157,619 1,050,786 Total stockholders' equity 9,499,159 9,247,972 9,351,325 $16,589,955 $15,984,943 $15,525,862

SOURCE Illinois Tool Works Inc.

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