ITT Corporation (NYSE: ITT) today reported first quarter 2008
income of $171 million, or 93 cents per share, from continuing
operations. Excluding special items, income for the quarter grew to
$168 million, or 91 cents per share, up 25 percent compared to the
first quarter of 2007. First quarter revenue was $2.8 billion, up
36 percent in total on a comparable basis, comprising nine percent
organic growth, a 23 percent benefit from recent acquisitions, and
four percent from foreign exchange. The company�s organic revenue
growth is largely due to robust international sales in both
commercial segments and continued strong performance on key defense
contracts. In addition, free cash flow generation exceeded $185
million, a first quarter record for the company and nine times
greater than the prior year period. �Our strong operating
capabilities and well-balanced geographic and end-market
participation positioned us well as we built our strategic plan
heading into 2008,� said Steve Loranger, ITT�s chairman, president
and chief executive officer. �Our teams across each business
segment demonstrated extraordinary focus and delivered another
outstanding quarter, which puts us off to a great start and gives
us the confidence to raise our guidance for the year.� ITT now
forecasts full-year revenue of $11.4 billion to $11.5 billion,
approximately 27 percent higher than reported 2007 full-year
revenue. The company also expects earnings from continuing
operations, excluding special items, to be in the range of $4.00 to
$4.10 per share, an 18 cent increase to the mid-point of previous
guidance. This forecast reflects approximately 23 percent
anticipated earnings growth over 2007 on a comparable basis. First
Quarter Business Segment Results Fluid Technology Compared to the
prior year quarter, revenue for the segment grew 12 percent in
total - six percent organically and six percent from foreign
exchange - to $881 million. Strong sales growth in Europe, South
America, China and the Middle East, led by the Industrial Process
business, overcame flat North American performance. First quarter
operating income for the segment was up 17 percent on a comparable
basis to $102 million, as price, productivity improvements and
pension benefits more than offset the impact of foreign exchange
and increased material costs. Compared to first quarter 2007,
operating margins improved 50 basis points in the quarter, despite
a negative 80 basis point impact from foreign exchange. The segment
continues to benefit from robust emerging market growth, especially
in the oil, gas and mining sectors. ITT is again expanding its
footprint to better serve these regions and will soon break ground
on a product assembly and service operation in Saudi Arabia, which
is expected to open during the fourth quarter of this year. Defense
Electronics & Services Segment revenue growth for the quarter
was up 56 percent, compared to the first quarter of 2007, to $1.5
billion, attributable to the acquisition of EDO Corporation and
strong organic growth of 13 percent. Revenue growth was led, in
part, by the Communications Systems business, which grew 38 percent
organically, on a comparable basis. Its performance is due
partially to shipments related to the Iraqi radio and tactical
networking contract awarded in November of last year. The Advanced
Engineering & Sciences business continued its strong
performance achieving first quarter year-over-year organic growth
of 44 percent. This growth is credited to continued success on
several important contracts, including ITT�s work with the
Department of Defense�s Joint Spectrum Center and the Federal
Aviation Administration (FAA). For the Joint Spectrum contract, ITT
is providing engineering and research services to help make use of
the electromagnetic spectrum to meet military objectives. For the
FAA, ITT is the prime contractor leading the development of the
next-generation air traffic control system for the United States.
Compared to the prior year quarter, segment operating income for
the first quarter grew 38 percent to $153 million. Operating
margins declined 130 basis points primarily due to the 170 basis
point impact from the EDO acquisition and related integration
costs. Motion & Flow Control Revenue for the quarter grew 32
percent in total on a comparable basis to $421 million, benefiting
18 percent from the 2007 acquisition of International Motion
Control (IMC), seven percent from strong organic revenue growth -
led by the Aerospace Controls and Friction Technologies businesses
- and the balance due to foreign exchange. Segment operating income
grew 33 percent, compared to first quarter of 2007, to $68 million.
Operating margins improved 20 basis points, despite a 40 basis
point headwind related to the acquisition of IMC and associated
integration expenses. During the quarter, ITT broke ground on a
manufacturing facility in the Czech Republic to support the rapid
ramp up of its Friction Technologies business. Since January,
Friction Technologies has been chosen to supply brake pads on six
new automotive platforms, contributing to its 12 percent organic
revenue growth, year over year. 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 first quarter performance and
answer questions. The briefing can be monitored live via webcast at
the following address on the company's Web site: www.itt.com/ir.
About ITT Corporation ITT Corporation (www.itt.com) is a
diversified high-technology engineering and manufacturing company
dedicated to creating more livable environments, enabling
communications and providing protection and safety. The company
plays an important role in vital markets including water and fluids
management, global defense and security, and motion and flow
control. ITT employs approximately 40,000 people serving customers
in more than 50 countries. Headquartered in White Plains, N.Y., the
company generated $9 billion in 2007 sales. Safe Harbor Statement
Certain material presented herein includes forward-looking
statements intended to qualify for the safe harbor from liability
established by the Private Securities Litigation Reform Act of 1995
("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 income tax accounting, 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, 2007, 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 March 31, 2008 � 2007 � Sales and revenues $ 2,806.4 $
2,070.3 � Costs of sales and revenues 2,045.5 1,486.1 Selling,
general and administrative expenses 420.6 320.0 Research and
development expenses 52.6 40.3 Restructuring and asset impairment
charges, net 3.6 6.4 Total costs and expenses 2,522.3 1,852.8 �
Operating income 284.1 217.5 Interest expense 40.6 23.8 Interest
income 8.4 8.2 Miscellaneous expense, net 3.0 3.9 Income from
continuing operations before income tax expense 248.9 198.0 Income
tax expense 78.0 61.2 Income from continuing operations 170.9 136.8
Discontinued operations, net of tax 1.0 3.2 Net income $ 171.9 $
140.0 � Earnings Per Share: Income from continuing operations:
Basic $ 0.94 $ 0.75 Diluted $ 0.93 $ 0.74 Discontinued operations:
Basic $ 0.01 $ 0.02 Diluted $ 0.01 $ 0.02 Net income: Basic $ 0.95
$ 0.77 Diluted $ 0.94 $ 0.76 � � Average Common Shares � Basic
180.7 181.2 Average Common Shares � Diluted 183.4 184.3 ITT
CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In
millions) (Unaudited) � March 31, December 31, 2008 2007 � Assets
Current Assets: Cash and cash equivalents $ 899.6 $ 1,840.0
Receivables, net 1,984.3 1,935.0 Inventories, net 960.3 887.6
Deferred income taxes 105.9 105.9 Other current assets 193.2 161.3
Total current assets 4,143.3 4,929.8 � Plant, property and
equipment, net 985.3 980.3 Deferred income taxes 36.2 29.7
Goodwill, net 3,891.4 3,829.7 Other intangible assets, net 684.7
733.0 Other assets 1,054.4 1,050.2 Total assets $ 10,795.3 $
11,552.7 � Liabilities and Shareholders' Equity Current
Liabilities: Accounts payable $ 1,341.0 $ 1,296.8 Accrued expenses
921.1 958.9 Accrued taxes 101.4 40.9 Notes payable and current
maturities of long-term debt 1,990.3 3,083.0 Pension and
postretirement benefits 68.5 68.5 Deferred income taxes 7.5 8.2
Total current liabilities 4,429.8 5,456.3 � Pension and
postretirement benefits 775.4 764.6 Long-term debt 482.5 483.0
Other liabilities 906.7 904.0 Total liabilities 6,594.4 7,607.9 �
Shareholders' equity 4,200.9 3,944.8 Total liabilities and
shareholders' equity $ 10,795.3 $ 11,552.7 ITT CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions)
(Unaudited) � Three Months Ended March 31, 2008 � 2007 Operating
Activities Net income $ 171.9 $ 140.0 Less: Income from
discontinued operations (1.0) (3.2) Income from continuing
operations 170.9 136.8 � Adjustments to income from continuing
operations: Depreciation and amortization 71.2 44.2 Stock-based
compensation 8.1 7.5 Restructuring and asset impairment charges,
net 3.6 6.4 Payments for restructuring (14.6) (11.2) Change in
receivables (2.7) (54.7) Change in inventories (49.7) (34.4) Change
in accounts payable and accrued expenses 0.9 0.1 Change in accrued
and deferred taxes 63.9 1.6 Change in other current and non-current
assets (27.4) (89.1) Change in other current and non-current
liabilities (3.8) (13.7) Other, net (1.1) 5.8 Net cash � operating
activities 219.3 (0.7) � Investing Activities Additions to plant,
property and equipment (33.9) (28.1) Acquisitions, net of cash
acquired (195.9) (4.4) Proceeds from sale of assets and businesses
3.2 1.0 Other, net 0.8 (0.4) Net cash � investing activities
(225.8) (31.9) � Financing Activities Short-term debt, net (972.5)
305.6 Long-term debt repaid (14.1) (1.7) Long-term debt issued 0.5
0.3 Repurchase of common stock � (186.5) Proceeds from issuance of
common stock 4.3 31.3 Dividends paid (25.4) (20.3) Tax benefit from
stock option exercises 0.6 7.3 Other, net (1.8) (0.3) Net cash �
financing activities (1,008.4) 135.7 � Exchange Rate Effects on
Cash and Cash Equivalents 74.0 7.3 Net Cash � Discontinued
Operations: Operating Activities 0.5 5.0 Investing Activities �
(2.3) Financing Activities � � � Net change in cash and cash
equivalents (940.4) 113.1 Cash and cash equivalents � beginning of
year 1,840.0 937.1 Cash and Cash Equivalents � end of period $
899.6 $ 1,050.2 ITT Corporation Non-GAAP Reconciliation Reported
vs. Organic Revenue / Orders Growth First Quarter 2008 & 2007 �
($ Millions) � � � � � � � � � � � � � � � � � � � � � � � (As
Reported - GAAP) (As Adjusted - Organic) � � � � � � � � � � � � �
� � � � � � � Sales & Revenues 3M 2008 Sales & Revenues 3M
2007 Change 2008 vs. 2007 % Change 2008 vs. 2007 � Sales &
Revenues 3M 2008 Acquisition/ OtherContribution3M 2008 FX
Contribution 3M 2008 Adj. Sales &Revenues 3M 2008 Sales
&Revenues 3M 2007 ChangeAdj. 08 vs. 07 % ChangeAdj. 08 vs. 07 �
� ITT Corporation - Consolidated 2,806.4 2,070.3 736.1 35.6%
2,806.4 (474.2) (70.2) 2,262.0 2,070.3 191.7 9.3% � Defense
Electronics & Services 1,507.6 969.4 538.2 55.5% 1,507.6
(417.5) 0.1 1,090.2 969.4 120.8 12.5% Communications Systems 316.5
187.2 129.3 69.1% 316.5 (59.0) 0.0 257.5 187.2 70.3 37.6% Space
Systems 133.0 141.6 (8.6) -6.1% 133.0 0.0 (0.2) 132.8 141.6 (8.8)
-6.2% Advanced Engineering & Sciences 220.0 105.0 115.0 109.5%
220.0 (68.6) 0.0 151.4 105.0 46.4 44.2% Electronic Systems 318.7
106 212.7 200.7% 318.7 (206.0) 0.0 112.7 106.0 6.7 6.3% Night
Vision 113.9 121.1 (7.2) -5.9% 113.9 0.0 0.0 113.9 121.1 (7.2)
-5.9% Systems 326.8 311.3 15.5 5.0% 326.8 0.0 0.0 326.8 311.3 15.5
5.0% Integrated Structures 39.3 0.0 39.3 N/A 39.3 (39.3) 0.3 0.3
0.0 0.3 N/A Intell & Info 47.2 0.0 47.2 N/A 47.2 (47.2) 0.0 0.0
0.0 0.0 N/A � � Fluid Technology 881.4 786.0 95.4 12.1% 881.4 (0.7)
(45.4) 835.3 786.0 49.3 6.3% Industrial Process 189.3 163.7 25.6
15.6% 189.3 0.0 (0.3) 189.0 163.7 25.3 15.5% Residential and
Commercial Water Group 293.1 267.9 25.2 9.4% 293.1 0.0 (12.8) 280.3
267.9 12.4 4.6% Water & WasteWater 410.9 362.6 48.3 13.3% 410.9
(0.7) (33.1) 377.1 362.6 14.5 4.0% � � � Motion & Flow Control
420.5 318.2 102.3 32.1% 420.5 (56.0) (25.0) 339.5 318.2 21.3 6.7%
Aerospace Controls 26.9 23.5 3.4 14.5% 26.9 0.0 0.0 26.9 23.5 3.4
14.5% Flow Control 68.3 62.6 5.7 9.1% 68.3 (7.3) (1.5) 59.5 62.6
(3.1) -5.0% Friction Technologies 130.7 103.2 27.5 26.6% 130.7 0.0
(14.8) 115.9 103.2 12.7 12.3% Energy Absorption 64.9 25.0 39.9
159.6% 64.9 (36.5) (3.5) 24.9 25.0 (0.1) -0.4% IMC Controls 14.0
0.0 14.0 N/A 14.0 (13.9) (0.1) 0.0 0.0 0.0 N/A Interconnect
Solutions 115.9 104.0 11.9 11.4% 115.9 0.0 (5.1) 110.8 104.0 6.8
6.5% � � � � � � � � � � � � Orders3M 2008 Orders3M 2007 Change2008
vs. 2007 % Change2008 vs. 2007 � Orders3M 2008
AcquisitionContribution 3M 2008 FX Contribution 3M 2008 Adj. Orders
3M 2008 Orders3M 2007 ChangeAdj. 08 vs. 07 % ChangeAdj. 08 vs. 07 �
Defense Electronics & Services 1,297.3 803.3 494.0 61% 1,297.3
(298.6) - 998.7 803.3 195.4 24.3% � Fluid Technology 956.7 881.8
74.9 8% 956.7 (1.2) (50.6) 904.9 881.8 23.1 2.6% � Motion &
Flow Control 428.6 328.1 100.5 31% 428.6 (57.9) (25.2) 345.5 328.1
17.4 5.3% � Total Segment Orders 2,679.3 2,011.5 667.8 33% 2,679.3
(357.7) (75.7) 2,245.9 2,011.5 234.4 11.7% � Note: Excludes
intercompany eliminations. ITT Corporation Non-GAAP Reconciliation
Segment Operating Income & OI Margin First Quarter of 2008
& 2007 � � ($ Millions) � � Q1 2008 Q1 2007 % As Reported As
Reported Change 08 vs. 07 � Sales and Revenues: Defense Electronics
& Services 1,507.6 969.4 Fluid Technology 881.4 786.0 Motion
& Flow Control 420.5 318.2 Intersegment eliminations (3.1)
(3.3) Total Sales and Revenues 2,806.4 2,070.3 � Operating Margin:
Defense Electronics & Services 10.1% 11.4% (130) BP Fluid
Technology 11.6% 11.1% 50 BP Motion & Flow Control 16.2% 16.0%
20 BP Total Ongoing Segments 11.5% 12.0% (50) BP � � Income:
Defense Electronics & Services 152.8 110.4 38.4% Fluid
Technology 102.0 87.1 17.1% Motion & Flow Control 68.0 51.0
33.3% Total Segment Operating Income 322.8 248.5 29.9% ITT
Corporation Non-GAAP Reconciliation Reported vs. Adjusted Net
Income & EPS First Quarter of 2008 & 2007 � ($ Millions,
except EPS and shares) � � � � � Change Percent Change Q1 2008 Q1
2008 Q1 2008 Q1 2007 Q1 2007 Q1 2007 2008 vs. 2007 2008 vs. 2007 As
Reported Adjustments As Adjusted As Reported Adjustments As
Adjusted As Adjusted As Adjusted � � � � � � � Segment Operating
Income 322.8 � 322.8 248.5 � 248.5 � � Interest Income (Expense)
(32.2) (32.2) (15.6) � (15.6) Other Income (Expense) (3.0) (3.0)
(3.9) � (3.9) Corporate (Expense) (38.7) � (38.7) (31.0) � (31.0) �
� � � � � Income from Continuing Operations before Tax 248.9 �
248.9 198.0 � 198.0 � � Income Tax Expense (78.0) (3.1) #A (81.1)
(61.2) (1.4) #B (62.6) � � � � � � Total Tax Expense (78.0) (3.1)
(81.1) (61.2) (1.4) (62.6) � � � � � � Income from Continuing
Operations 170.9 (3.1) 167.8 136.8 (1.4) 135.4 � � � � � � � �
Diluted EPS from Continuing Operations 0.93 (0.02) 0.91 0.74 (0.01)
0.73 $0.18 24.7% � � #A - Remove Tax Benefit of ($3.1M). #B -
Remove Tax Benefit of ($1.4M). ITT Corporation Non-GAAP
Reconciliation Cash From Operating Activities vs. Free Cash Flow
First Quarter of 2008 & 2007 � � ($ Millions) � � Q1 2008 Q1
2007 � Net Cash - Operating Activities 219.3 (0.7) � Capital
Expenditures (33.9) (28.1) � Pension Pre-funding, net of tax - 50.0
� Free Cash Flow 185.4 21.2
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