GLENVIEW, IL -- Illinois Tool Works (ITW) has reported 8 percent growth in diluted net income per share for the third quarter of 2006. Diluted net income per share was 78 cents compared to 72 cents in the third quarter of 2005. In addition, the company's third quarter revenue increased 11 percent, operating income grew 11 percent and net income rose 9 percent.

The company said the increase in third quarter earnings resulted from improving international end markets combined with moderating growth in North American end markets, including declines in the new housing sector and Big 3 automotive production levels. As a result, total company base revenues grew 2.4 percent in the third quarter, with international base revenue increasing 5 percent and North American base revenues growing 0.6 percent. Non-operating investment income declined $28.1 million during the quarter due to higher gains on sales in the commercial mortgage portfolio in the 2005 third quarter.

For the 2006 third quarter, revenues were $3.538 billion versus $3.2 billion for the year earlier period. Third quarter operating income improved to $626.9 million from $565.2 million a year ago. Net income was $446.1 million compared to $408.2 million in the prior year period. Due to the cumulative impact of higher acquisition activity thus far in 2006 and volume declines in some North American business units, the company's operating margins of 17.7 percent remained level with a year ago.

For the 2006 nine-month period, revenues increased 9 percent, operating income grew 15 percent, net income rose 17 percent and diluted net income per share was 19 percent higher than the year earlier period. Revenues of $10.415 billion compared to $9.538 billion in the year ago period. Operating income was $1.827 billion versus $1.584 billion. Net income was $1.278 billion compared to $1.094 billion and diluted net income per share was $2.24 versus $1.89. Based on strong margin improvement in the first half of 2006, operating margins of 17.5 percent were 90 basis points higher than the year ago period.

The company's free operating cash flow was $486.7 million in the 2006 third quarter. This free cash was utilized, in part, to acquire 13 companies during the quarter representing $388 million of annualized revenues. As of Sept. 30, the company had completed 34 acquisitions totaling $895 million of annualized revenues. Based on increased acquisition activity year-to-date and a strong pipeline of potential transactions, the company is raising the forecasted range to $1.1 billion to $1.4 billion of annualized acquisition revenues for full-year 2006. During the third quarter, the company paid $248 million to repurchase shares as it began its new buyback program announced in August 2006.

"While we experienced moderating growth in several North American end markets in the third quarter, we continue to be encouraged about our growth prospects with our increasingly more diversified geographic and end market revenue mix," said David Speer, chairman and chief executive officer. "We remain very positive about our increased acquisition activity with 34 transactions closed year-to-date and an active pipeline of prospective deals."

Looking ahead, the company believes North American end markets will soften modestly for the remainder of the year. As a result, the company is now forecasting a 2006 fourth quarter earnings range of 77 cents to 81 cents and a full- year range of $3.01 to $3.05. Base revenues are expected to grow in a range of 3.1 percent to 5.1 percent in the fourth quarter and 4.0 percent to 4.6 percent for the full year. If the company achieves the midpoints of these forecasted ranges, earnings growth would be 11 percent in the fourth quarter and 17 percent for the full year.