GLENVIEW, IL — Illinois Tool Works Inc. (ITW) reported 19 percent growth in diluted income per share from continuing operations in the 2007 fourth quarter. Diluted income per share from continuing operations was 87 cents versus 73 cents in the 2006 fourth quarter. Revenues increased 19 percent and operating income grew 14 percent in the most recent quarter. As previously announced, certain divested businesses and businesses currently being held for sale which collectively reached a more significant level are now being reported as discontinued operations.
The company said double-digit increase in fourth quarter diluted income per share from continuing operations was helped by strong top line growth. Acquisitions contributed 10.8 percent to total revenues while base revenues grew at a rate of 2.5 percent and currency translation added 6.1 percent. Similar to past quarters, the company benefited from strong base revenue growth from its international operations. International base revenues increased 4.6 percent in the fourth quarter while North American base revenues grew 0.8 percent. A lower than expected fourth quarter tax rate of 26.7 percent had a favorable impact of 3 cents per diluted share versus the company’s previous earnings guidance.
For the 2007 fourth quarter, revenues were $4.244 billion versus $3.57 billion for the prior year period. Fourth quarter operating income improved to $665.7 million from $582.5 million a year ago. Income from continuing operations was $469.9 million compared to $416.8 million in the prior year period, an increase of 13 percent. The company’s fourth quarter operating margins of 15.7 percent were 60 basis points lower than a year ago due to the dilutive impact of acquisitions. Base margins in the fourth quarter actually improved 30 basis points versus a year ago.
For full-year 2007, revenues increased 17 percent, operating income grew 10 percent, income from continuing operations rose 9 percent and diluted income per share from continuing operations was 11 percent higher than the year-ago period. Revenues were $16.171 billion compared to $13.799 billion for full-year 2006. Operating income was $2.624 billion versus $2.385 billion. Income from continuing operations was $1.826 billion compared to $1.681 billion and diluted income per share from continuing operations was $3.28 versus $2.95. Total company operating margins of 16.2 percent for full-year 2007 were 110 basis points lower than 2006, even though base revenue margins improved 40 basis points on a year-over-year basis.
The company’s free operating cash flow was a robust $694 million in the fourth quarter and $2.1 billion for the full year. Free cash was utilized, in part, to acquire 15 companies during the fourth quarter representing $165 million of acquired revenues. For full-year 2007, the company completed 52 acquisitions totaling $995 million of annualized revenues and paid less than one time revenues for these transactions. During the fourth quarter, the company also paid $799 million to repurchase 14.4 million shares as part of its ongoing, open-ended buyback program. For the full year, the company paid $1.8 billion to repurchase 32.4 million shares.
"Despite slowing in a number of North American end markets, we were helped by the strength of our international end markets and improved contributions from our acquisitions to produce a fourth quarter highlighted by both double digit revenue and earnings growth," said David Speer, chairman and chief executive officer. "While we expect 2008 to be a challenging year, we believe the company will benefit in the upcoming year from our increasingly diversified end markets and geographies as well as our acquisition activity."
Looking ahead, the company is forecasting a full-year 2008 diluted income per share from continuing operations range of $3.47 to $3.61. The full-year forecast assumes a total company revenue growth range of 6 percent to 10 percent. For the 2008 first quarter, the company is forecasting income per share from continuing operations of 72 cents to 78 cents. The 2008 first quarter forecast assumes a total company revenue growth range of 8 percent to 11 percent. The mid-points of the full-year and first quarter ranges would represent earnings growth of 8 percent and 10 percent, respectively.
