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 Per

July 17, 2008 8:00 AM EDT

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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