Summary
Illinois Tool Works Inc. (ITW) reported solid revenue growth of 10.5% for the second quarter of 2008, reaching $4.57 billion, driven by acquisitions and favorable currency translation, though base revenues remained flat. Net income increased to $528.1 million, or $1.01 per diluted share, up from $505.6 million ($0.90 per diluted share) in the prior year's quarter. Despite overall positive financial performance, the company's year-to-date results were impacted by a significant $98.6 million goodwill impairment charge in the first quarter, primarily affecting its software business. This impairment contributed to a decrease in year-to-date operating income and a decline in overall operating margins.
Financial Highlights
29 data pointsBeta
Financial Statements
Beta
| Revenue | $4.56B |
| Cost of Revenue | $2.94B |
| Gross Profit | $1.61B |
| Operating Income | $757.16M |
| Interest Expense | -$36.59M |
| Net Income | $528.09M |
| EPS (Basic) | $1.01 |
| EPS (Diluted) | $1.01 |
| Shares Outstanding (Basic) | 521.49M |
| Shares Outstanding (Diluted) | 525.21M |
Key Highlights
- 1Total operating revenues for the second quarter of 2008 increased by 10.5% to $4.57 billion, compared to $4.14 billion in the prior year period.
- 2Net income for the second quarter rose to $528.1 million, or $1.01 per diluted share, from $505.6 million, or $0.90 per diluted share, in Q2 2007.
- 3A significant goodwill impairment charge of $98.6 million was recorded in the first quarter of 2008, primarily impacting the 'All Other' segment's software business.
- 4Free operating cash flow for the six months ended June 30, 2008, was $759.0 million, a decrease from $780.1 million in the same period of 2007.
- 5The company repurchased approximately $585.6 million of its common stock during the first six months of 2008 as part of its $3 billion repurchase program.
- 6Operating income in the Transportation segment decreased by 6.9% in the second quarter, largely due to a decline in base revenue and increased operating expenses, despite revenue growth from acquisitions and currency translation.
Frequently Asked Questions
Revenue growth was primarily driven by the favorable effect of currency translation due to a weakening U.S. dollar and contributions from recent acquisitions. However, the company noted that total base revenues were flat in the second quarter, with international base revenues showing modest growth while North American base revenues declined.
In the first quarter of 2008, ITW recorded a goodwill impairment charge of $98.6 million, predominantly related to its worldwide software business within the 'All Other' segment. This charge negatively impacted year-to-date operating income and reduced the overall operating margin by 1.4% for the first six months of the year.
The company's primary source of liquidity is free operating cash flow, which management believes will be sufficient to service debt, pay dividends, finance internal growth, acquisitions, and share repurchases. Despite a decrease in free operating cash flow for the first six months of 2008 compared to 2007, the company had $640.2 million in cash and equivalents as of June 30, 2008, and significant available credit lines.
The company highlighted declines in North American revenues, particularly in the residential construction and automotive sectors, as well as weak industrial production. Additionally, increased interest expense due to new debt issuances and the impact of raw material costs and price pressures in certain segments were noted as challenges.