- Earnings excluding special items are $0.80 per share, up 18
percent, and up 21 percent excluding the impact of the adoption of
SFAS-123R WHITE PLAINS, N.Y., July 28 /PRNewswire-FirstCall/ -- ITT
Corporation (NYSE:ITT) today reported record second quarter 2006
net income of $140.9 million or $0.75 per share, including $8.3
million or $0.05 per share net impact of restructuring and
discontinued operations. Excluding special items, 2006 second
quarter earnings from continuing operations grew 18 percent to
$0.80 per share over the second quarter 2005. Excluding the ($0.02)
per share impact of the adoption of SFAS-123R, earnings for the
quarter grew 21 percent compared to the second quarter of 2005.
Second quarter 2006 revenue was $2.07 billion, up 11 percent over
the same period last year, with organic revenue growth of 10
percent. "Our entire team performed extremely well in the second
quarter, delivering results that surpassed our expectations and
bolstering our confidence for the full year. We are raising our
guidance for the year to reflect this strong performance," said
Steve Loranger, Chairman, President and Chief Executive Officer.
"ITT continues to deliver solid revenue growth, particularly
organic growth. This speaks to our performance in the marketplace,
delivering the products and services demanded by our customers. "I
attribute these results to the capabilities of our management team,
our diverse portfolio, and the strength of the ITT Management
System," Loranger said. "I am pleased that we are delivering
consistent results, quarter after quarter, in spite of the normal
fluctuations in market demand and rising material costs." 2006
Outlook and Beyond "As always, we are closely watching the current
economic climate and its potential effects on our business,"
Loranger added. "We believe we are particularly well positioned in
our Fluid Technology markets to benefit from the growing demand for
water-related products and services. We have well-established
product brands, a large installed base and a growing position in
developing markets like China. Our Defense business continues to
grow because of the critical needs being addressed through our
unique technologies and the broad range of services we provide.
Based on our solid performance through the first half and our
outlook for the rest of the year, we are raising our full-year
earnings forecast excluding special items from a range of $2.91 -
$2.97 to $2.95 - $3.00 per share, up 14 - 16 percent compared to
2005, including the estimated ($0.09) per share impact from the
adoption of SFAS-123R. Excluding the impact of the adoption of
SFAS-123R, our outlook for full year 2006 earnings from continuing
operations excluding special items would be up 17 - 19 percent.
"We're also raising our 2006 full-year revenue guidance from a
range of $7.90 - $8.01 billion to $8.08 - $8.17 billion. Our
performance in the record second quarter and this positive outlook
for the remainder of the year underscores the attractive market
positions we have in both our commercial and defense businesses.
These favorable positions, along with our focus on operational
excellence and a disciplined acquisition strategy, reinforce the
confidence we have in meeting our long term financial goals."
Primary Business Results Fluid Technology -- Second quarter 2006
Fluid Technology revenue was $765.3 million, up $40.6 million or 6
percent; organic revenues grew 4 percent over the same period in
2005, led by the Water/Wastewater Handling and Building Trades
businesses. Operating income was $101.3 million for the second
quarter, including the impact of restructuring. Excluding
restructuring, second quarter operating income was up 9 percent to
$103.3 million. -- Operating margins, excluding restructuring, grew
by 40 basis points in the quarter, as a result of ongoing Value
Based Six Sigma and Lean initiatives. -- Total orders for the
second quarter were up 7%, and organic orders were up 5% compared
to the second quarter of 2005. -- The acquisition of F.B. Leopold,
announced during the quarter, adds an important pre-treatment
component to ITT's already wide range of filtration and treatment
capabilities. Defense Electronics & Services -- ITT's Defense
Electronics & Services segment reported second quarter revenues
of $918.5 million, up 18 percent, over the same period last year,
led by increases in the Services, Electronic Systems,
Communications and Night Vision businesses. -- Higher volume,
better yields and contract performance drove second quarter
operating results. Second quarter operating income for the segment
was $100.6 million, including the impact of restructuring.
Excluding restructuring, operating income was up 19 percent in the
quarter to $101.4 million over the comparative period in 2005. --
The Aerospace Communications business led revenue growth at Defense
in the second quarter. Production increased to a rate of 5,000
Single Channel Ground-Air Radio System (SINCGARS) radios per month
to meet increased demand. In August, the group will achieve the
production milestone of 300,000 radios over the life of the
SINCGARS program. -- Consistent with the variable nature of Defense
orders, second quarter orders declined to $636 million. Our order
activity is expected to be robust in the second half of 2006 and
full-year Defense orders, sales, and operating income are all on
track to show continued strong growth. -- The long-term outlook for
Defense is positive, driven by demand for products featuring ITT's
next-generation technology and the ongoing growth in the
outsourcing of military services such as those provided by ITT.
Motion & Flow Control -- 2006 second quarter revenues for ITT's
Motion & Flow Control segment were $188.1 million, up 4 percent
from the second quarter last year. -- 2006 second quarter operating
income for the segment was $30.9 million, including the impact of
restructuring. Excluding restructuring, operating income for this
segment was $38.1 million, up 1 percent from the same quarter in
2005. -- On an organic basis, Motion & Flow Control orders grew
12 percent compared to the second quarter of 2005, led by 18
percent order growth in Aerospace Controls and 16 percent in
Friction Materials. Aerospace Controls, which produces fuel valves
and other components, continues to benefit from the strength in the
regional and business jet segment. Electronic Components -- 2006
second quarter revenues for the Electronic Components segment were
$200.8 million, up 11 percent over the same period in 2005. Organic
revenue grew 10 percent, fueled by growth in cellular handsets and
transportation markets. Operating income for the second quarter was
$21.3 million. Excluding restructuring, operating income was up 133
percent over the second quarter last year, and operating margins
grew 550 basis points compared to the second quarter of 2005,
primarily driven by volume growth and operational improvements. --
2006 second quarter order intake at Electronic Components exceeded
$200 million for the second consecutive quarter, up 9 percent over
the second quarter of 2005 on an organic basis. This increase is
primarily attributable to growth in the cellular handset market, as
well as the transportation and military/aerospace sectors. The
segment's 2006 second quarter book-to-bill ratio was positive at
1.01. -- The process to prepare Electronic Components' Switches
business for disposition is progressing. Ongoing efforts to improve
and manage the business to create value are yielding results
evident in its performance during the second quarter. About ITT
Corporation ITT Corporation (http://www.itt.com/) supplies advanced
technology products and services in several growth markets. ITT is
a global leader in the transport, treatment and control of water,
wastewater and other fluids. The company plays a vital role in
international security through its defense communications and
electronics products; space surveillance and intelligence systems;
and advanced engineering and related services. It also serves the
growing leisure marine and electronic components market with a wide
range of products. Headquartered in White Plains, NY, the company
generated $7.4 billion in 2005 sales. In addition to the New York
Stock Exchange, NYSE Arca, ITT Corporation stock is traded on the
Paris, London and Frankfurt exchanges. For free B-roll/video
content and logo about ITT Corporation, please log onto
http://www.thenewsmarket.com/ITT to preview and request video. You
can receive broadcast-standard video quality digitally or by tape
from this site. Registration and video are free to the media. "Safe
Harbor Statement" under the Private Securities Litigation Reform
Act of 1995 ("the Act"): Certain material presented herein includes
forward-looking statements intended to qualify for the safe harbor
from liability established by the Act. These forward-looking
statements include statements that describe the Company's business
strategy, outlook, objectives, plans, intentions or goals, and any
discussion of future operating or financial performance. Whenever
used, words such as "anticipate," "estimate," "expect," "project,"
"intend," "plan," "believe," "target" and other terms of similar
meaning are intended to identify such forward-looking statements.
Forward-looking statements are uncertain and to some extent
unpredictable, and involve known and unknown risks, uncertainties
and other important factors that could cause actual results to
differ materially from those expressed in, or implied from, such
forward-looking statements. Factors that could cause results to
differ materially from those anticipated by the Company include
general global economic conditions, decline in consumer spending,
interest and foreign currency exchange rate fluctuations,
availability of commodities, supplies and raw materials,
competition, acquisitions or divestitures, changes in government
defense budgets, employment and pension matters, contingencies
related to actual or alleged environmental contamination, claims
and concerns, intellectual property matters, personal injury
claims, governmental investigations, tax obligations, and changes
in generally accepted accounting principles. Other factors are more
thoroughly set forth in Item 1. Business, Item 1A. Risk Factors,
and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Forward-Looking Statements
in the ITT Industries, Inc. Annual Report on Form 10-K for the
fiscal year ended December 31, 2005, and other of its filings with
the Securities and Exchange Commission. The Company undertakes no
obligation to update any forward- looking statements, whether as a
result of new information, future events or otherwise. ITT
CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED INCOME
STATEMENTS (In millions, except per share) (Unaudited) Three Months
Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Sales
and revenues $2,067.9 $1,863.9 $3,954.6 $3,629.8 Costs of sales and
revenues 1,491.9 1,353.0 2,875.4 2,649.4 Selling, general and
administrative expenses 295.5 262.5 565.8 525.4 Research and
development expenses 43.7 44.6 86.4 88.9 Restructuring and asset
impairment charges 10.0 5.7 25.1 24.1 Total costs and expenses
1,841.1 1,665.8 3,552.7 3,287.8 Operating income 226.8 198.1 401.9
342.0 Interest expense 21.5 13.9 41.4 34.0 Interest income 4.8 5.5
8.5 19.7 Miscellaneous expense, net 4.2 5.5 9.5 10.5 Income from
continuing operations before income taxes 205.9 184.2 359.5 317.2
Income tax expense 63.5 53.2 109.6 64.8 Income from continuing
operations 142.4 131.0 249.9 252.4 Discontinued operations,
including tax (benefit)/ expense of $(0.6), $3.2, $6.8 and $0.1 in
each period, respectively (1.5) 6.7 46.9 1.8 Net income $140.9
$137.7 $296.8 $254.2 Earnings Per Share: Income from continuing
operations: Basic $0.77 $0.71 $1.35 $1.37 Diluted $0.76 $0.70 $1.33
$1.34 Discontinued operations: Basic $(0.01) $0.04 $0.26 $0.01
Diluted $(0.01) $0.03 $0.25 $0.01 Net income: Basic $0.76 $0.75
$1.61 $1.38 Diluted $0.75 $0.73 $1.58 $1.35 Average Common Shares -
Basic 184.3 184.5 184.4 184.6 Average Common Shares - Diluted 187.2
188.5 187.5 188.5 ITT CORPORATION AND SUBSIDIARIES CONSOLIDATED
BALANCE SHEETS (In millions) (Unaudited) June 30, December 31, 2006
2005 Assets Current Assets: Cash and cash equivalents $755.0 $451.0
Receivables, net 1,403.9 1,268.1 Inventories, net 728.3 661.3
Current assets of discontinued operations - 256.9 Deferred income
taxes 74.3 73.6 Other current assets 99.0 69.9 Total current assets
3,060.5 2,780.8 Plant, property and equipment, net 840.1 837.0
Deferred income taxes 90.9 87.5 Goodwill, net 2,348.4 2,249.1 Other
intangible assets, net 209.9 214.8 Other assets 976.5 894.2 Total
assets $7,526.3 $7,063.4 Liabilities and Shareholders' Equity
Current Liabilities: Accounts payable $869.2 $797.2 Accrued
expenses 788.6 745.8 Accrued taxes 147.9 187.1 Current liabilities
of discontinued operations - 77.9 Notes payable and current
maturities of long-term debt 900.1 751.4 Other current liabilities
9.7 8.3 Total current liabilities 2,715.5 2,567.7 Pension and
postretirement benefits 745.9 733.8 Long-term debt 516.2 516.3
Other liabilities 521.7 522.2 Total liabilities 4,499.3 4,340.0
Shareholders' equity 3,027.0 2,723.4 Total liabilities and
shareholders' equity $7,526.3 $7,063.4 ITT CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(Unaudited) Six Months Ended June 30, 2006 2005 Operating
Activities Net income $296.8 $254.2 (Income) loss from discontinued
operations (46.9) (1.8) Income from continuing operations 249.9
252.4 Adjustments to income from continuing operations:
Depreciation and amortization 92.5 96.4 Amortization of stock
compensation 11.0 0.6 Restructuring and asset impairment charges
25.1 24.1 Payments for restructuring (29.6) (21.1) Change in
receivables (120.2) (183.0) Change in inventories (46.8) (29.3)
Change in accounts payable and accrued expenses 64.3 99.4 Change in
accrued and deferred taxes (35.9) 15.6 Change in other current and
non-current assets (94.4) (104.7) Change in other non-current
liabilities 1.0 (2.1) Other, net 4.0 (0.2) Net cash - operating
activities 120.9 148.1 Investing Activities Additions to plant,
property and equipment (64.8) (64.1) Acquisitions, net of cash
acquired (74.0) (1.5) Proceeds from sale of assets and businesses
230.7 7.7 Other, net (6.3) - Net cash - investing activities 85.6
(57.9) Financing Activities Short-term debt, net 147.2 163.5
Long-term debt repaid (1.0) (4.6) Long-term debt issued 0.1 0.4
Repurchase of common stock (130.2) (118.2) Proceeds from issuance
of common stock 50.9 56.3 Dividends paid (37.0) (49.8) Other, net
12.8 (0.1) Net cash - financing activities 42.8 47.5 Exchange Rate
Effects on Cash and Cash Equivalents 28.6 (21.7) Net Cash -
Discontinued Operations Operating Activities 28.3 13.1 Net Cash -
Discontinued Operations Investing Activities (2.2) (7.8) Net change
in cash and cash equivalents 304.0 121.3 Cash and cash equivalents
- beginning of year 451.0 262.9 Cash and Cash Equivalents - end of
period $755.0 $384.2 ITT Corporation Non-GAAP Press Release
Reconciliation Reported vs. Organic Revenue / Orders Growth Second
Quarter 2006 & 2005 ($ Millions) (As Reported - GAAP) Sales
& Sales & % Revenues Revenues Change Change 2006 2006 vs.
vs. 3M 2006 3M 2005 2005 2005 ITT Corporation - Consolidated
2,067.9 1,863.9 204.0 11% Fluid Technology 765.3 724.7 40.6 6%
Defense Electronics & Services 918.5 779.5 139.0 18% Electronic
Components 200.8 181.7 19.1 11% Motion & Flow Control 188.1
181.6 6.5 4% % Orders Orders Change Change 2006 2006 3M 2006 3M
2005 vs. vs. 2005 2005 Fluid Technology 798.0 746.8 51.2 7% Motion
& Flow Control 193.0 172.0 21.0 12% Aerospace Controls 23.9
20.2 3.7 18% Friction Materials 84.6 72.5 12.1 17% Electronic
Components 202.9 185.6 17.3 9% Orders Sales Orders/ Sales 3M 2006
3M 2006 Book-to- Bill Electronic Components 202.9 200.8 1.01 (As
Adjusted - Organic) Acquis- ition FX Adj. Sales & Contri-
Contri- Sales & Sales & % Revenues bution bution Revenues
Revenues Change Change Adj. Adj. 06 06 3M 2006 3M 2006 3M 2006 3M
2006 3M 2005 vs. 05 vs. 05 ITT Corporation - Consolidated 2,067.9
(5.8) (4.8) 2,057.3 1,863.9 193.4 10% Fluid Technology 765.3 (5.8)
(3.8) 755.7 724.7 31.0 4% Defense Electronics & Services 918.5
0.0 (0.1) 918.4 779.5 138.9 18% Electronic Components 200.8 0.0
(0.8) 200.0 181.7 18.3 10% Motion & Flow Control 188.1 0.0
(0.1) 188.0 181.6 6.4 4% Acquis- ition FX Contri- Contri- Adj. %
Orders bution bution Orders Orders Change Change Adj. Adj. 06 06 3M
2006 3M 2006 3M 2006 3M 2006 3M 2005 vs. 05 vs. 05 Fluid Technology
798.0 (6.9) (5.3) 785.8 746.8 39.0 5% Motion & Flow Control
193.0 0.0 (0.5) 192.5 172.0 20.5 12% Aerospace Controls 23.9 0.0 -
23.9 20.2 3.7 18% Friction Materials 84.6 0.0 (0.5) 84.1 72.5 11.6
16% Electronic Components 202.9 0.0 (0.9) 202.0 185.6 16.4 9% ITT
Corporation Non-GAAP Press Release Reconciliation Segment Operating
Income & OI Margin Adjusted for Restructuring Second Quarter of
2006 & 2005 ($ Millions) Adjust Q2 2006 Q2 2005 % Q2 2006 for
2006 Q2 2006 Change As As 06 vs. As Restruc- As Reported Reported
05 Reported turing Adjusted Sales and Revenues: Electronic
Components 200.8 181.7 200.8 200.8 Defense Electronics &
Services 918.5 779.5 918.5 918.5 Fluid Technology 765.3 724.7 765.3
765.3 Motion & Flow Control 188.1 181.6 188.1 188.1
Intersegment eliminations (4.8) (3.5) (4.8) (4.8) Total Ongoing
segments 2,067.9 1,864.0 2,067.9 2,067.9 Dispositions and other - -
- - Total Sales and Revenues 2,067.9 1,864.0 2,067.9 2,067.9
Operating Margin: Electronic Components 10.6% 3.1% 10.6% 10.5%
Defense Electronics & Services 11.0% 10.9% 11.0% 11.0% Fluid
Technology 13.2% 12.9% 13.2% 13.5% Motion & Flow Control 16.4%
20.5% 16.4% 20.3% Total Ongoing Segments 12.3% 11.9% 12.3% 12.8%
Total Ongoing Segments (Excluding impact of SFAS-123R) 13.0%
Income: Electronic Components 21.3 5.7 273.7% 21.3 (0.3) 21.0
Defense Electronics & Services 100.6 84.9 18.5% 100.6 0.8 101.4
Fluid Technology 101.3 93.3 8.6% 101.3 2.0 103.3 Motion & Flow
Control 30.9 37.3 -17.2% 30.9 7.2 38.1 Total Segment Operating
Income 254.1 221.2 14.9% 254.1 9.7 263.8 Impact of SFAS-123R
Adoption 6.1 Total Segment Operating Income (Excluding impact of
SFAS-123R) 269.9 Adjust Q2 2005 for 2005 Q2 2005 % Change Adj. As
Restruc- As 06 vs. Reported turing Adjusted 05 Sales and Revenues:
Electronic Components 181.7 181.7 Defense Electronics &
Services 779.5 779.5 Fluid Technology 724.7 724.7 Motion & Flow
Control 181.6 181.6 Intersegment eliminations (3.5) (3.5) Total
Ongoing segments 1,864.0 1,864.0 Dispositions and other - - Total
Sales and Revenues 1,864.0 1,864.0 Operating Margin: Electronic
Components 3.1% 5.0% 550 BP Defense Electronics & Services
10.9% 10.9% 10 BP Fluid Technology 12.9% 13.1% 40 BP Motion &
Flow Control 20.5% 20.9% (60)BP Total Ongoing Segments 11.9% 12.2%
60 BP Total Ongoing Segments (Excluding impact of SFAS-123R) 12.2%
80 BP Income: Electronic Components 5.7 3.3 9.0 133% Defense
Electronics & Services 84.9 0.0 84.9 19% Fluid Technology 93.3
1.8 95.1 9% Motion & Flow Control 37.3 0.6 37.9 1% Total
Segment Operating Income 221.2 5.7 226.9 16% Impact of SFAS-123R
Adoption Total Segment Operating Income (Excluding impact of
SFAS-123R) 226.9 19% ITT Corporation Non-GAAP Press Release
Reconciliation Reported vs. Adjusted Net Income & EPS Second
Quarter of 2006 & 2005 ($ Millions, except EPS and shares) Q2
2006 Q2 2006 Q2 2006 Q2 2005 Q2 2005 Q2 2005 As Adjust- As As
Adjust- As Reported ments Adjusted Reported ments Adjusted Segment
Operating Income 254.1 9.7 #A 263.8 221.2 5.7 #D 226.9 Interest
Income (Expense) (16.7) - (16.7) (8.4) (3.5)#E (11.9) Other Income
(Expense) (4.2) - (4.2) (5.5) - (5.5) Gain on sale of Assets - - -
- - - Corporate (Expense) (27.3) 0.3 #A (27.0) (23.1) - (23.1)
Income from Continuing Operations before Tax 205.9 10.0 215.9 184.2
2.2 186.4 Income Tax Items - - - - (4.0)#F (4.0) Income Tax Expense
(63.5) (3.2)#B (66.7) (53.2) (0.6)#G (53.8) Total Tax Expense
(63.5) (3.2) (66.7) (53.2) (4.6) (57.8) Income from Continuing
Operations 142.4 6.8 149.2 131.0 (2.4) 128.6 (Loss) Income from
Discontinued Operations (1.5) 1.5 #C 0.0 6.7 (6.7)#H - Net Income
140.9 8.3 149.2 137.7 (9.1) 128.6 Diluted EPS 0.75 0.05 0.80 0.73
(0.05) 0.68 Impact of SFAS-123R Adoption 0.02 0.00 Diluted EPS
Excluding Impact of SFAS-123R Adoption 0.82 0.68 Change Percent
Change 2006 vs. 2005 2006 vs. 2005 As Adjusted As Adjusted Net
Income 20.6 16% Diluted EPS $0.12 18% Impact of SFAS-123R Adoption
Diluted EPS Excluding Impact of SFAS-123R Adoption $0.14 21% #A -
Remove Restructuring Expense of $10.0M ($9.7 + $0.3). #B - Remove
Tax Benefit on Special Items of ($3.2M). #C - Remove D.O. expense
of $1.5M. #D - Remove Restructuring Expense of $5.7M. #E - Remove
Interest Income due to Tax Refund ($3.5M). #F - Remove Tax Refund
of ($4.0M). #G - Remove Tax Benefit on Special Items of ($0.6M). #H
- Remove D.O. income of ($6.7M). DATASOURCE: ITT Corporation
CONTACT: Tom Martin of ITT Corporation, +1-914-641-2157, Web site:
http://www.itt.com/
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