- Earnings per share from continuing operations up 19 percent,
excluding special items, on strong international sales and improved
margins WHITE PLAINS, N.Y., Oct. 26 /PRNewswire-FirstCall/ -- ITT
Corporation (NYSE:ITT) today reported third quarter 2007 earnings
from continuing operations of $169 million or 92 cents per share,
on revenue of $2.2 billion, driven by balanced top-line growth
across most business segments and customer end-markets. Special
item offsets in the quarter resulted in adjusted earnings equal to
the reported 92 cents per share earnings. ITT's adjusted earnings,
which increased 19 percent over the comparable quarter a year
earlier, also benefited from strong international sales and margin
improvements generated by productivity initiatives, including the
continued adoption of lean manufacturing processes. In addition,
ITT recognized a $64 million gain from the sale of its Switches
business, which was announced in July. The gain and other
discontinued operations contributed 33 cents per share to ITT's
total reported earnings of $1.25 per share. As a result of its
continued strong performance, ITT is raising its full-year 2007
earnings per share guidance, excluding special items, to
$3.50-$3.53 on projected revenue of $8.75 billion. "This was an
exciting quarter for our business, marked by a number of major
strategic portfolio moves and transforming customer wins," said
Steve Loranger, chairman, president and chief executive officer,
ITT Corp. "Through it all, our teams have remained focused on our
operating plan and on continuous improvement initiatives, resulting
in high-quality results for our shareholders again this quarter."
On September 17, ITT announced an agreement to acquire EDO Corp.
(NYSE:EDO) for $56 per share pending satisfaction of customary
closing conditions, including EDO shareholder approval. EDO
operates in markets complementary to ITT's defense business and is
a leading producer of advanced technologies serving military and
commercial customers. The acquisition, if approved, would be ITT's
largest since becoming an independent company in 1995. Also during
the quarter, ITT completed the acquisition and began the
integration of International Motion Control (IMC), a global leader
in the design and manufacture of standard and customized energy
absorption, control systems, and hydraulic and pneumatic
components. Loranger noted, "These strategic portfolio moves are
enabled by the strong overall performance of our business and are
expected to position ITT for continued growth in the future. These
significant actions, in addition to the smaller acquisitions we've
announced, demonstrate our disciplined approach to creating value
for our shareholders by expanding from our strong core businesses
and entering attractive adjacent markets." Primary Business
Highlights Defense Electronics & Services -- The Defense
segment reported third quarter revenues of $1.01 billion,
representing six percent growth over the same quarter in 2006.
Growth in the segment was led by ITT's services businesses,
including Advanced Engineering & Sciences, which recorded
revenue growth of 37 percent, and Systems, up 16 percent. On the
product side, ITT's Night Vision business also grew 16 percent,
while its Aerospace/Communications Division and Electronic Systems
businesses were essentially flat. -- Operating income for the
segment grew to $137 million and improved 21 percent compared to
prior year, excluding special items, on strong margin performance.
This operating margin expansion was driven by productivity gains in
ITT's fixed price contracts for products including SINCGARS
battlefield radios. -- During the quarter, the Federal Aviation
Administration (FAA) awarded ITT the first contract for its air
traffic modernization program, known as Automatic Dependent
Surveillance-Broadcast, or ADS-B. ITT brought together each of its
core defense capabilities to win the contract, which positions the
company as the prime systems integrator for the next generation air
traffic control program. Fluid Technology -- Third quarter revenue
for the Fluid Technology segment was $858 million, a 10 percent
increase over the comparable quarter last year, including the
impact of foreign currency exchange. -- Top-line growth was led by
organic revenue growth of six percent resulting from strong
international and project sales in the group's Industrial Process
business. -- Operating income for the segment of $111 million, or
$117 million excluding restructuring costs, grew 13 percent on a
comparable basis. Motion & Flow Control -- The Motion &
Flow Control segment reported third quarter revenues of $315
million, up 18 percent over the same period last year, including
the impacts of foreign currency exchange and the integration of
IMC. -- The segment recorded a nine percent increase in organic
revenue in the quarter, driven in part by 26 percent organic growth
at Aerospace Controls. In addition, sales to commercial original
equipment manufacturers (OEMs) contributed to a strong quarter for
Friction Materials, which was up 14 percent organically. --
Operating income for the quarter grew to $44 million. Operating
income was $45 million excluding restructuring, up 24 percent on a
comparable basis, benefiting from volume and cost-saving
initiatives. Investor Call Today ITT's senior management will host
a conference call for investors today at 9:00 a.m. Eastern Daylight
Time to review third quarter performance and answer questions. The
briefing can be monitored live via webcast at the following address
on the company's Web site: http://www.itt.com/ir. 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 water and fluid transport, treatment and control
technology. The company plays a vital role in international
security with communications and electronics products; space
surveillance and intelligence systems; and advanced engineering and
services. It also serves a number of growing markets-including
marine, transportation and aerospace-with a wide range of motion
and flow control technologies. Headquartered in White Plains, N.Y.,
the company employs approximately 35,000 people and generated $7.8
billion in 2006 sales. "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
Corporation Annual Report on Form 10-K for the fiscal year ended
December 31, 2006, 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 believes that
investors' understanding of the Company's operating performance is
enhanced by the use of certain non-GAAP financial measures,
including adjusted GAAP net income and adjusted GAAP EPS, which
Management considers useful in providing insight into operating
performance, as it excludes the impact of special items that cannot
be expected to recur on a quarterly basis. Management also believes
that investors can better analyze the Company's revenue and order
growth by utilizing organic revenue and organic order growth
measures that exclude the effect of foreign exchange translation
and the effect of recent acquisitions. In addition, Management
considers the use of free cash flow to be an important indication
of the Company's ability to make acquisitions, fund pension
obligations, buy back outstanding shares and service debt. Free
cash flow, adjusted net income, adjusted EPS, organic revenue and
organic orders are not financial measures under GAAP, should not be
considered as substitutes for cash from operating activities, EPS,
net income or revenue as defined by GAAP, and may not be comparable
to similarly titled measures reported by other companies. A
reconciliation to the GAAP equivalents of these non-GAAP measures
is set forth in the attached unaudited financial information. ITT
CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED INCOME
STATEMENTS (In millions, except per share) (Unaudited) Three Months
Nine Months Ended Ended September 30, September 30, 2007 2006 2007
2006 Sales and revenues $ 2,181.2 $ 2,001.1 $6,474.6 $5,756.6 Costs
of sales and revenues 1,540.1 1,437.8 4,606.9 4,159.5 Selling,
general and administrative expenses 327.6 296.9 978.5 844.2
Research and development expenses 46.8 41.7 129.9 119.6
Restructuring and asset impairment charges, net 7.2 9.8 31.1 32.0
Total costs and expenses 1,921.7 1,786.2 5,746.4 5,155.3 Operating
income 259.5 214.9 728.2 601.3 Interest expense 25.8 19.4 68.7 60.8
Interest income 12.6 6.3 31.0 14.8 Miscellaneous expense, net 4.6
4.1 10.6 13.6 Income from continuing operations before income taxes
241.7 197.7 679.9 541.7 Income tax expense 73.1 57.3 175.3 163.9
Income from continuing operations 168.6 140.4 504.6 377.8
Discontinued operations, net of tax 61.5 3.1 79.2 62.5 Net income
$230.1 $143.5 $583.8 $440.3 Earnings Per Share: Income from
continuing operations: Basic $0.94 $0.76 $2.79 $2.05 Diluted $0.92
$0.75 $2.74 $2.02 Discontinued operations: Basic $0.34 $0.02 $0.44
$0.34 Diluted $0.33 $0.02 $0.43 $0.33 Net income: Basic $1.28 $0.78
$3.23 $2.39 Diluted $1.25 $0.77 $3.17 $2.35 Average Common Shares -
Basic 180.2 184.1 180.7 184.3 Average Common Shares - Diluted 183.7
186.7 184.0 187.2 ITT CORPORATION AND SUBSIDIARIES CONSOLIDATED
CONDENSED BALANCE SHEETS (In millions) (Unaudited) September 30,
December 31, 2007 2006 Assets Current Assets: Cash and cash
equivalents $1,440.1 $937.1 Receivables, net 1,493.9 1,288.9
Inventories, net 779.1 726.5 Assets of discontinued businesses held
for sale 5.9 183.2 Deferred income taxes 87.7 79.8 Other current
assets 131.1 102.8 Total current assets 3,937.8 3,318.3 Plant,
property and equipment, net 875.3 833.0 Deferred income taxes 196.0
136.1 Goodwill, net 2,600.1 2,336.8 Other intangible assets, net
298.2 213.2 Other assets 689.9 563.2 Total assets $8,597.3 $7,400.6
Liabilities and Shareholders' Equity Current Liabilities: Accounts
payable $1,016.4 $929.4 Accrued expenses 860.5 839.4 Accrued taxes
73.2 105.6 Notes payable and current maturities of long-term debt
1,143.8 597.0 Pension and postretirement benefits 68.9 68.9
Liabilities of discontinued businesses held for sale 1.5 96.7
Deferred income taxes 1.9 0.2 Total current liabilities 3,166.2
2,637.2 Pension and postretirement benefits 716.8 735.5 Long-term
debt 491.4 500.4 Other liabilities 771.9 658.1 Total liabilities
5,146.3 4,531.2 Shareholders' equity 3,451.0 2,869.4 Total
liabilities and shareholders' equity $8,597.3 $7,400.6 ITT
CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS (In millions) (Unaudited) Nine Months Ended September
30, 2007 2006 Operating Activities Net income $583.8 $440.3 Less:
Income from discontinued operations (79.2) (62.5) Income from
continuing operations 504.6 377.8 Adjustments to income from
continuing operations: Depreciation and amortization 134.7 127.1
Stock-based compensation 26.6 16.7 Restructuring and asset
impairment charges, net 31.1 32.0 Payments for restructuring (35.8)
(36.2) Change in receivables (116.4) (68.5) Change in inventories
17.7 (76.9) Change in accounts payable and accrued expenses 70.2
176.3 Change in accrued and deferred taxes (62.7) 14.0 Change in
other current and non- current assets (84.9) (82.9) Change in other
non-current liabilities (1.4) 9.3 Other, net 6.4 (1.3) Net cash -
operating activities 490.1 487.4 Investing Activities Additions to
plant, property and equipment (108.2) (95.2) Acquisitions, net of
cash acquired (395.7) (75.2) Proceeds from sale of assets and
businesses 232.4 223.7 Other, net 1.5 (6.4) Net cash - investing
activities (270.0) 46.9 Financing Activities Short-term debt, net
532.8 (157.2) Long-term debt repaid (7.2) (2.2) Long-term debt
issued 0.4 - Repurchase of common stock (299.0) (136.4) Proceeds
from issuance of common stock 55.2 53.0 Dividends paid (71.3)
(57.3) Tax benefit from stock option exercises 13.0 13.6 Other, net
(2.4) - Net cash - financing activities 221.5 (286.5) Exchange Rate
Effects on Cash and Cash Equivalents 70.7 29.8 Net Cash -
Discontinued Operations: Operating Activities (2.7) 71.2 Investing
Activities (5.6) (7.2) Financing Activities (1.0) (0.1) Net change
in cash and cash equivalents 503.0 341.5 Cash and cash equivalents
- beginning of year 937.1 451.0 Cash and Cash Equivalents - end of
period $1,440.1 $792.5 ITT Corporation Non-GAAP Reconciliation
Reported vs. Organic Revenue / Orders Growth Third Quarter 2007
& 2006 ($ Millions) (As Reported - GAAP) Sales & Sales
& Change % Change Revenues Revenues 2007 vs. 2007 vs. 3M 2007
3M 2006 2006 2006 ITT Corporation - Consolidated 2,181.2 2,001.1
180.1 9.0% Defense Electronics & Services 1,011.5 957.4 54.1
5.7% ACD - Tactical Radios 198.3 196.5 1.8 0.9% Space Systems 144.7
186.4 (41.7) -22.4% Advanced Engineering & Sciences 120.4 87.0
33.4 38.4% Electronic Systems 105.6 105.5 0.1 0.1% Night Vision
129.1 111.1 18.0 16.2% Systems 316.4 273.0 43.4 15.9% Fluid
Technology 858.4 780.3 78.1 10.0% Industrial Process 173.4 147.4
26.0 17.6% Residential and Commercial Water Group 305.8 279.4 26.4
9.4% Water & WasteWater 389.2 359.4 29.8 8.3% Motion & Flow
Control 314.6 267.0 47.6 17.8% Aerospace Controls 26.1 20.3 5.8
28.6% Marine & Leisure 58.8 55.4 3.4 6.1% Friction Materials
88.7 72.1 16.6 23.0% Koni Shocks 22.8 19.4 3.4 17.5% IMC 11.1 0.0
11.1 0.0% Connectors 107.1 99.8 7.3 7.3% % Change Change 2007
Orders Orders 2007 vs. vs. 3M 2007 3M 2006 2006 2006 Defense
Electronics & Services 1,126.1 1,056.5 69.6 7% Fluid Technology
929.8 821.3 108.5 13% Motion & Flow Control 325.7 274.9 50.8
18% Total Segment Orders 2,378.4 2,150.8 227.6 11% (As Adjusted -
Organic) Acqui- sition FX Adj. Sales & Contri- Contri- Sales
Revenues bution bution & Revenues 3M 2007 3M 2007 3M 2007 3M
2007 ITT Corporation - Consolidated 2,181.2 (12.8) (44.0) 2,124.4
Defense Electronics & Services 1,011.5 (1.2) (0.1) 1,010.2 ACD
- Tactical Radios 198.3 0.0 0.0 198.3 Space Systems 144.7 0.0 (0.1)
144.6 Advanced Engineering & Sciences 120.4 (1.2) 0.0 119.2
Electronic Systems 105.6 0.0 0.0 105.6 Night Vision 129.1 0.0 0.0
129.1 Systems 316.4 0.0 0.0 316.4 Fluid Technology 858.4 0.0 (31.9)
826.5 Industrial Process 173.4 0.0 (1.3) 172.1 Residential and
Commercial Water Group 305.8 0.0 (8.0) 297.8 Water & WasteWater
389.2 0.0 (22.9) 366.3 Motion & Flow Control 314.6 (11.6)
(12.1) 290.9 Aerospace Controls 26.1 (0.5) 0.0 25.6 Marine &
Leisure 58.8 0.0 (1.9) 56.9 Friction Materials 88.7 0.0 (6.5) 82.2
Koni Shocks 22.8 0.0 (1.3) 21.5 IMC 11.1 (11.1) 0.0 0.0 Connectors
107.1 0.0 0.0 107.1 Acqui- sition FX Contri- Contri- Adj. Orders
bution bution Orders 3M 2007 3M 2007 3M 2007 3M 2007 Defense
Electronics & Services 1,126.1 (1.2) (0.1) 1,124.8 Fluid
Technology 929.8 0.0 (33.0) 896.8 Motion & Flow Control 325.7
(1.0) (13.1) 311.6 Total Segment Orders 2,378.4 (2.2) (46.2)
2,330.0 (As Adjusted - Organic) Sales & Change % Change
Revenues Adj. 07 Adj. 07 3M 2006 vs. 06 vs. 06 ITT Corporation -
Consolidated 2,001.1 123.3 6.2% Defense Electronics & Services
957.4 52.8 5.5% ACD - Tactical Radios 196.5 1.8 0.9% Space Systems
186.4 (41.8) -22.4% Advanced Engineering & Sciences 87.0 32.2
37.0% Electronic Systems 105.5 0.1 0.1% Night Vision 111.1 18.0
16.2% Systems 273.0 43.4 15.9% Fluid Technology 780.3 46.2 5.9%
Industrial Process 147.4 24.7 16.8% Residential and Commercial
Water Group 279.4 18.4 6.6% Water & WasteWater 359.4 6.9 1.9%
Motion & Flow Control 267.0 23.9 9.0% Aerospace Controls 20.3
5.3 26.1% Marine & Leisure 55.4 1.5 2.7% Friction Materials
72.1 10.1 14.0% Koni Shocks 19.4 2.1 10.8% IMC 0.0 0.0 0.0%
Connectors 99.8 7.3 7.3% Change % Change Orders Adj. 07 Adj. 07 3M
2006 vs. 06 vs. 06 Defense Electronics & Services 1,056.5 68.3
6.5% Fluid Technology 821.3 75.5 9.2% Motion & Flow Control
274.9 36.7 13.4% Total Segment Orders 2,150.8 179.2 8.3% Note:
Excludes intercompany eliminations. ITT Corporation Non-GAAP
Reconciliation Segment Operating Income & OI Margin Adjusted
for Restructuring Third Quarter of 2007 & 2006 ($ Millions)
Adjust % for Q3 2007 Q3 2006 Change Q3 2007 2007 As As 07 vs. As
Restruc- Reported Reported 06 Reported turing Sales and Revenues:
Defense Electronics & Services 1,011.5 957.4 1,011.5 Fluid
Technology 858.4 780.3 858.4 Motion & Flow Control 314.6 267.0
314.6 Intersegment eliminations (3.3) (3.6) (3.3) Total Sales and
Revenues 2,181.2 2,001.1 2,181.2 Operating Margin: Defense
Electronics & Services 13.6% 11.8% 13.6% Fluid Technology 12.9%
12.5% 12.9% Motion & Flow Control 14.1% 12.6% 14.1% Total
Ongoing Segments 13.4% 12.2% 13.4% Income: Defense Electronics
& Services 137.1 112.6 21.8% 137.1 (0.1) Fluid Technology 110.7
97.8 13.2% 110.7 6.6 Motion & Flow Control 44.4 33.7 31.8% 44.4
0.6 Total Segment Operating Income 292.2 244.1 19.7% 292.2 7.1
Adjust for % Q3 2007 Q3 2006 2006 Q3 2006 Change As As Restruc- As
Adj. 07 Adjusted Reported turing Adjusted vs. 06 Sales and
Revenues: Defense Electronics & Services 1,011.5 957.4 957.4
Fluid Technology 858.4 780.3 780.3 Motion & Flow Control 314.6
267.0 267.0 Intersegment eliminations (3.3) (3.6) (3.6) Total Sales
and Revenues 2,181.2 2,001.1 2,001.1 Operating Margin: Defense
Electronics & Services 13.5% 11.8% 11.9% 160 BP Fluid
Technology 13.7% 12.5% 13.3% 40 BP Motion & Flow Control 14.3%
12.6% 13.6% 70 BP Total Ongoing Segments 13.7% 12.2% 12.7% 100 BP
Income: Defense Electronics & Services 137.0 112.6 1.0 113.6
20.6% Fluid Technology 117.3 97.8 5.6 103.4 13.4% Motion & Flow
Control 45.0 33.7 2.6 36.3 24.0% Total Segment Operating Income
299.3 244.1 9.2 253.3 18.2% ITT Corporation Non-GAAP Reconciliation
Reported vs. Adjusted Net Income & EPS Third Quarter of 2007
& 2006 ($ Millions, except EPS and shares) Q3 2007 Q3 2007 Q3
2007 Q3 2006 As Adjust- As As Reported ments Adjusted Reported
Segment Operating Income 292.2 7.1 #A 299.3 244.1 Interest Income
(Expense) (13.2) - (13.2) (13.1) Other Income (Expense) (4.6) -
(4.6) (4.1) Corporate (Expense) (32.7) 0.1 #A (32.6) (29.2) Income
from Continuing Operations before Tax 241.7 7.2 248.9 197.7 Income
Tax Items 4.4 (4.4)#B - 2.6 Income Tax Expense (77.5) (2.3)#C
(79.8) (59.9) Total Tax Expense (73.1) (6.7) (79.8) (57.3) Income
from Continuing Operations 168.6 0.5 169.1 140.4 Diluted EPS from
Continuing Operations 0.92 0.00 0.92 0.75 Percent Change Change Q3
2006 Q3 2006 2007 vs. 2007 vs. Adjust- As 2006 As 2006 As ments
Adjusted Adjusted Adjusted Segment Operating Income 9.2 #D 253.3
Interest Income (Expense) - (13.1) Other Income (Expense) - (4.1)
Corporate (Expense) 0.5 #D (28.7) Income from Continuing Operations
before Tax 9.7 207.4 Income Tax Items (4.2)#E (1.6) Income Tax
Expense (3.0)#F (62.9) Total Tax Expense (7.2) (64.5) Income from
Continuing Operations 2.5 142.9 Diluted EPS from Continuing
Operations 0.02 0.77 $0.15 19.5% #A - Remove Restructuring Expense
of $7.1M and $0.1M. #B - Remove Tax Benefit - special items of
($4.4M). #C - Remove Tax Benefit on restructuring of ($2.3M). #D -
Remove Restructuring Expense of $9.2M and $0.5M. #E - Remove Tax
Refund of ($2.6M) and apply structural tax rate impact in Q3. #F -
Remove Tax Benefit on restructuring of ($3.0M). ITT Corporation
Non-GAAP Reconciliation Cash From Operating Activities vs. Free
Cash Flow Third Quarter of 2007 & 2006 ($ Millions) 3rd Qtr.07
3rd Qtr.06 Cash from Operations 490.1 487.4 Capital Expenditures
(108.2) (95.2) Pension Pre-funding, net of tax 50.0 87.0 Free Cash
Flow 431.9 479.2 DATASOURCE: ITT Corporation CONTACT: Andy Hilton
of ITT Corporation, +1-914-641-2160, Web site: http://www.itt.com/
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