ITT Corporation (NYSE: ITT) today reported first quarter 2009
income of $187 million, or $1.02 per share, from continuing
operations, including a net $54 million tax benefit resulting
primarily from the reorganization of certain international legal
entities. Excluding special items, income from continuing
operations for the quarter was $132 million, or 72 cents per share,
and better than expected primarily due to performance in the
Defense Electronics & Services and Fluid Technology segments.
Compared to the prior year quarter, earnings decreased due to lower
sales volumes and higher employee benefit plan and restructuring
expenses, partially offset by cost saving initiatives and lower
interest expense.
First quarter revenue was $2.6 billion, down nine percent
compared to the first quarter of 2008, and down five percent
excluding the impact of foreign exchange, acquisitions and
divestitures on a comparable basis. Year-to-date free cash flow
generation exceeded $165 million, representing a 128 percent
conversion of income from continuing operations, excluding the
non-cash tax adjustments.
�Given our solid preparation, strong balance sheet, and focused
execution by our teams, we believe we are managing the current
conditions effectively and performing well relative to our peers,�
said Steve Loranger, ITT�s chairman, president and chief executive
officer.
�We anticipated a slower economy and have been very proactive in
managing the changing conditions. Our current view suggests that
while the outlook for the defense segment remains solid, we
anticipate an extended slowdown in certain end markets affecting
our commercial businesses. We no longer anticipate any sequential
improvement this year in the industrial, commercial, and automotive
markets, and have recalibrated our forecast accordingly,� Loranger
added.
ITT now forecasts full-year earnings from continuing operations,
excluding special items, to be in the range of $3.20 to $3.60 per
share. This range includes an anticipated additional $26 million,
or $0.10 per share, for incremental restructuring and acquisition
expenses. Full-year 2009 revenue is now expected to be in the range
of $10.6 billion to $11.0 billion.
2009 First Quarter Business Segment Results
Fluid Technology
- First quarter revenue for the
segment was $744 million, down 16 percent compared to the first
quarter of the prior year or down 6 percent excluding the impact of
foreign currency exchange. This performance reflects better than
anticipated sales in municipal markets and softer residential and
commercial market performance.
- First quarter operating income
for the segment was down to $69 million, primarily due to volume
declines, change in order mix, and higher employee benefit plan and
restructuring costs.
- During the first quarter, ITT
won a $22 million contract to supply a number of high-end water
pumps for two irrigation systems to the Andhra Pradesh irrigation
project, the largest irrigation project in India.
- ITT recently announced that it
has signed an agreement to acquire Laing GmbH, which will broaden
the company�s portfolio of energy-efficient plumbing and HVAC pumps
and demonstrates ITT�s commitment to its vision of achieving global
water leadership.
Defense Electronics & Services
- Segment revenue for the first
quarter was $1.5 billion, essentially flat as compared to the first
quarter of 2008. Revenue performance was led by double-digit growth
on a comparable basis in the Electronic Systems and Space
businesses that offset a double-digit decline at Communication
Systems due to large one-time shipments during the first quarter of
2008.
- Compared to the prior year
quarter, segment operating income for the first quarter grew to
$164 million. Operating margins improved 80 basis points compared
to the first quarter of the prior year, as productivity
improvements and mix offset increased employee benefit plan
costs.
- Backlog for the segment remained
flat year-over-year at $5.2 billion, on strong orders for Night
Vision goggles, GPS and classified satellite payloads, and a $317
million order for counter-IED jammers for the U.S. Marines.
Motion & Flow Control
- Revenue for the first quarter
was $306 million, down 27 percent compared to the prior year or
down 18 percent excluding the impacts of foreign currency exchange,
acquisitions and divestitures. This performance reflects
challenging conditions in end markets served by the Flow Control,
Interconnect Solutions and Motion Technologies businesses.
- First quarter 2009 segment
operating income was $28 million, down significantly as compared to
the prior year as volume declines, employee benefit plan costs and
foreign currency exchange impacted earnings.
�We have continued confidence in our portfolio, which we�ve
aligned around enduring growth drivers, including threats to global
security, fresh water scarcity, and population growth. It�s a
portfolio we anticipate will continue to perform relatively well
compared to our peers during these times, and positions us for
success well into the future,� said Loranger.
Investor Call Today
ITT's senior management will host a conference call for
investors today at 10:30 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 is a high-technology engineering and
manufacturing company operating on all seven continents in three
vital markets: water and fluids management, global defense and
security, and motion and flow control. With a heritage of
innovation, ITT partners with its customers to deliver
extraordinary solutions that create more livable environments,
provide protection and safety and connect our world. Headquartered
in White Plains, N.Y., the company generated 2008 sales of $11.7
billion. www.itt.com
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 include: Economic, political and social
conditions in the countries in which we conduct our businesses;
Changes in government defense budgets; Decline in consumer
spending; Sales and revenues mix and pricing levels; Availability
of adequate labor, commodities, supplies and raw materials;
Interest and foreign currency exchange rate fluctuations;
Competition and industry capacity and production rates; Ability of
third parties, including our commercial partners, financial
institutions and insurers, to comply with their commitments to us;
Our ability to borrow or refinance our existing indebtedness and
availability of liquidity sufficient to meet our needs;
Acquisitions or divestitures; Personal injury claims; Our ability
to effect restructuring and cost reduction programs and realize
savings from such actions; Government regulations and compliance
therewith; Changes in technology; Intellectual property matters;
Governmental investigations; Potential future employee benefit plan
contributions and other employment and pension matters;
Contingencies related to actual or alleged environmental
contamination, claims and concerns; Changes in generally accepted
accounting principles; Other factors set forth in our Annual Report
on Form 10?K for the fiscal year ended December 31, 2008 and our
other 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, �
2009 � �
2008 � Sales and
revenues $
2,557.1 � $
2,806.4 � Costs of
sales and revenues 1,888.0 2,045.5 Selling, general and
administrative expenses 384.0 420.6 Research and development
expenses 52.9 52.6 Restructuring and asset impairment charges, net
�
10.7 � �
3.6 Total costs and expenses
2,335.6 2,522.3 � Operating income 221.5 284.1 Interest expense
26.4 40.6 Interest income 4.3 8.4 Miscellaneous expense, net �
2.9 � �
3.0 Income from continuing
operations before income tax expense 196.5 248.9 Income taxes �
10.0 � �
78.0 Income from continuing
operations 186.5 170.9 Discontinued operations, net of tax �
(2.4 ) �
1.0 Net income
$ 184.1 �
$
171.9 �
Earnings Per Share: Income from
continuing operations: Basic $ 1.02 $ 0.94 Diluted $ 1.02 $ 0.93
Discontinued operations: Basic $ (0.01 ) $ 0.01 Diluted $ (0.01 ) $
0.00 Net income: Basic $ 1.01 $ 0.95 Diluted $ 1.01 $ 0.93 � �
Average Common Shares � Basic 182.0 181.8 Average Common Shares �
Diluted 183.2 184.0 � �
ITT CORPORATION AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(In millions)
(Unaudited)
�
March 31, December 31, 2009 2008 �
Assets Current Assets: Cash and cash equivalents $ 911.0 $
964.9 Receivables, net 1,853.6 1,961.1 Inventories, net 826.2 803.8
Deferred income taxes 203.0 203.4 Other current assets �
159.3 �
131.0 Total current assets
3,953.1 4,064.2 � Plant, property and equipment, net 960.5 993.9
Deferred income taxes 602.8 608.5 Goodwill, net 3,798.8 3,831.3
Other intangible assets, net 584.5 616.5 Other assets �
398.1 �
365.8 Total assets
$
10,297.8 $ 10,480.2 �
Liabilities and Shareholders' Equity Current Liabilities:
Accounts payable $ 1,231.3 $ 1,234.6 Accrued expenses 926.2 991.2
Accrued taxes 69.1 30.2 Notes payable and current maturities of
long-term debt 1,510.9 1,679.0 Pension and postretirement benefits
68.8 68.8 Deferred income taxes �
28.2 �
26.7 Total current liabilities 3,834.5 4,030.5 �
Pension and postretirement benefits 2,134.7 2,141.6 Long-term debt
466.5 467.9 Other liabilities �
707.8 �
780.3 Total liabilities 7,143.5 7,420.3 �
Shareholders' equity �
3,154.3 �
3,059.9
Total liabilities and shareholders' equity
$
10,297.8 $ 10,480.2 �
ITT CORPORATION AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(In millions)
(Unaudited)
�
Three Months Ended March 31, �
2009 � � �
2008 �
Operating Activities
Net income
$
184.1
$
171.9
Loss (Income) from discontinued operations �
2.4 � �
(1.0 ) Income from continuing operations
186.5 170.9 � Adjustments to income from continuing operations:
Depreciation and amortization 66.2 71.2 Stock-based compensation
8.1 8.1 Restructuring and asset impairment charges, net 10.7 3.6
Payments for restructuring (25.9 ) (14.6 ) Change in receivables
75.6 (2.7 ) Change in inventories (44.2 ) (49.7 ) Change in
accounts payable and accrued expenses (16.8 ) 0.9 Change in accrued
and deferred taxes (3.8 ) 63.9 Change in other current and
non-current assets (46.5 ) (27.4 ) Change in other current and
non-current liabilities (6.5 ) (3.8 ) Other, net �
9.7
� �
(1.1 ) Net cash � operating
activities �
213.1 � �
219.3 � �
Investing Activities
Additions to plant, property and
equipment
(47.7
)
(33.9
)
Acquisitions, net of cash acquired (1.6 ) (195.9 ) Proceeds from
sale of assets and businesses 10.3 3.2 Other, net �
2.0 � �
0.8 � Net cash � investing
activities �
(37.0 ) �
(225.8 ) �
Financing Activities
Short-term debt, net
(166.2
)
(972.5
)
Long-term debt repaid (2.6 ) (14.1 ) Long-term debt issued � 0.5
Proceeds from issuance of common stock 2.4 4.3 Dividends paid (31.8
) (25.4 ) Tax benefit from stock option exercises and restricted
stock award lapses (1.4 ) 0.6 Other, net �
� � �
(1.8 ) Net cash � financing activities �
(199.6 ) �
(1,008.4
) �
Exchange Rate Effects on Cash and Cash
Equivalents (29.8 ) 74.0
Net Cash � Discontinued
Operations: Operating Activities �
(0.6
) �
0.5 � � Net change in cash and cash
equivalents (53.9 ) (940.4 ) Cash and cash equivalents � beginning
of year �
964.9 � �
1,840.0 �
Cash and
Cash Equivalents � end of period $
911.0 �
$ 899.6 � �
ITT
Corporation Non-GAAP Reconciliation Reported vs. Organic
Revenue / Orders Growth First Quarter 2009 & 2008 �
� � � � � � � � � � �
($ Millions) � � � � � � � � � � � � �
� � � � � � �
(As Reported - GAAP) (As Adjusted -
Organic) �
Sales & Revenues
3M 2009
Sales & Revenues
3M 2008
Change
2009 vs. 2008
% Change
2009 vs. 2008
Sales & Revenues
3M 2009
Acquisition/
Divestitures
3M 2009
FX Contribution
3M 2009
Adj. Sales &
Revenues
3M 2009
Sales &
Revenues
3M 2008
Change
Adj. 09 vs. 08
% Change
Adj. 09 vs. 08
� � ITT Corporation - Consolidated 2,557.1 2,806.4 (249.3) -8.9%
2,557.1 4.3 119.7 2,681.1 2,806.4 (125.3) -4.5% � Defense
Electronics & Services 1,508.5 1,507.6 0.9 0.1% 1,508.5 0.0 2.4
1,510.9 1,507.6 3.3 0.2% Communications Systems 257.3 316.5 (59.2)
-18.7% 257.3 0.0 0.0 257.3 316.5 (59.2) -18.7% Space Systems 150.1
133.0 17.1 12.9% 150.1 0.0 0.3 150.4 133.0 17.4 13.1% Advanced
Engineering & Sciences 231.8 220.0 11.8 5.4% 231.8 0.0 0.0
231.8 220.0 11.8 5.4% Electronic Systems 398.7 357.9 40.8 11.4%
398.7 0.0 2.1 400.8 357.9 42.9 12.0% Night Vision 115.5 113.9 1.6
1.4% 115.5 0.0 0.0 115.5 113.9 1.6 1.4% Systems 333.2 326.8 6.4
2.0% 333.2 0.0 0.0 333.2 326.8 6.4 2.0% Intell & Info Warfare
31.4 47.2 (15.8) -33.5% 31.4 0.0 0.0 31.4 47.2 (15.8) -33.5% � �
Fluid Technology 744.3 881.4 (137.1) -15.6% 744.3 0.0 84.1 828.4
881.4 (53.0) -6.0% Industrial Process 183.6 189.3 (5.7) -3.0% 183.6
0.0 8.4 192.0 189.3 2.7 1.4% Residential and Commercial Water Group
241.4 296.2 (54.8) -18.5% 241.4 0.0 16.1 257.5 296.2 (38.7) -13.1%
Water & WasteWater 336.8 409.8 (73.0) -17.8% 336.8 0.0 60.6
397.4 409.8 (12.4) -3.0% � � Motion & Flow Control 305.9 420.5
(114.6) -27.3% 305.9 4.3 33.3 343.5 420.5 (77.0) -18.3% Flow
Control 43.4 68.3 (24.9) -36.5% 43.4 1.2 7.4 52.0 68.3 (16.3)
-23.9% Motion Technologies 113.3 160.1 (46.8) -29.2% 113.3 0.0 19.7
133.0 160.1 (27.1) -16.9% Control Technologies 63.8 76.5 (12.7) NA
63.8 3.1 1.4 68.3 76.5 (8.2) -10.7% Interconnect Solutions 86.9
115.9 (29.0) -25.0% 86.9 0.0 4.8 91.7 115.9 (24.2) -20.9% � �
Orders
3M 2009
Orders
3M 2008
Change
2009 vs. 2008
% Change
2009 vs. 2008
Orders
3M 2009
Acquisition
Contribution
3M 2009
FX Contribution
3M 2009
Adj. Orders
3M 2009
Orders
3M 2008
Change
Adj. 09 vs. 08
% Change
Adj. 09 vs. 08
� Defense Electronics & Services 1,489.5 1,297.3 192.2 15%
1,489.5 0.0 1.8 1,491.3 1,297.3 194.0 15.0% � Fluid Technology
802.0 956.7 (154.7) -16% 802.0 0.0 88.3 890.3 956.7 (66.4) -6.9% �
Motion & Flow Control 281.1 428.6 (147.5) -34% 281.1 5.1 33.2
319.4 428.6 (109.2) -25.5% � Total Segment Orders 2,572.6 2,682.6
(110.0) -4% 2,572.6 5.1 123.2 2,700.9 2,682.6 18.3 0.7% � Note:
Excludes intercompany eliminations. � � � �
ITT Corporation
Segment Operating Income & OI Margin First Quarter of
2009 & 2008 �
($ Millions) �
Q1 2009
As Reported
Q1 2008
As Reported
%
Change 09
vs. 08
�
Sales and Revenues: Defense Electronics & Services
1,508.5 1,507.6 Fluid Technology 744.3 881.4 Motion & Flow
Control 305.9 420.5 Intersegment eliminations (1.6 ) (3.1 ) Total
Sales and Revenues 2,557.1 � 2,806.4 � �
Operating Margin:
Defense Electronics & Services 10.9 % 10.1 % 80 BP Fluid
Technology 9.2 % 11.6 % (240 ) BP Motion & Flow Control 9.1 %
16.2 % (710 ) BP Total Ongoing Segments 10.2 % 11.5 % (130 ) BP � �
Income: Defense Electronics & Services 164.3 152.8 7.5 %
Fluid Technology 68.8 102.0 -32.5 % Motion & Flow Control 27.9
� 68.0 � -59.0 % Total Segment Operating Income 261.0 � 322.8 �
-19.1 % �
ITT Corporation Non-GAAP Reconciliation
Reported vs. Adjusted Net Income & EPS First Quarter
of 2009 & 2008 � � � � � � � � � � � �
($ Millions,
except EPS and shares) �
Q1 2009
As Reported
Q1 2009
Adjustments
Q1 2009
As Adjusted
Q1 2008
As Reported
Q1 2008
Adjustments
Q1 2008
As Adjusted
Change
2009 vs. 2008
As Adjusted
Percent Change
2009 vs. 2008
As Adjusted
� � � � � � � Segment Operating Income 261.0 � 261.0 322.8 � 322.8
� � Interest Income (Expense) (22.1) (22.1) (32.2) (32.2) Other
Income (Expense) (2.9) (2.9) (3.0) (3.0) Corporate (Expense) (39.5)
� (39.5) (38.7) � (38.7) � � � � � � Income from Continuing
Operations before Tax 196.5 � 196.5 248.9 � 248.9 � � � � � � �
Income Tax Expense (10.0) (54.1) #A (64.1) (78.0) (3.1) #B (81.1) �
� � � � � Income from Continuing Operations 186.5 (54.1) 132.4
170.9 (3.1) 167.8 � � � � � � � � Diluted EPS from Continuing
Operations 1.02 (0.30) 0.72 0.93 (0.02) 0.91 ($0.19) -20.9% � #A -
Primarily removal of the reversal of a deferred tax liability no
longer required as a result of the restructuring of certain
international legal entities. � #B - Remove Tax Benefit of ($3.1M)
related to prior year adjustments. � � � � � � �
ITT Corporation
Non-GAAP Reconciliation EPS - as Adjusted re: FSP No. EITF
03-6-1 For the Quarters of 2008 �
($ Millions, except
EPS and shares) � 1st Qtr 08 2nd Qtr 08 Jun YTD 08 3rd Qtr 08
Sep YTD 08 4th Qtr 08 Dec YTD 08 � Income from Operations 170.9
224.3 395.2 204.5 599.7 175.5 775.2 � Adjustments - Special Items
(3.1 ) (5.3 ) (8.4 ) 0.6 � (7.8 ) (26.3 ) (34.1 ) � Income from
Operations - As Adjusted 167.8 219.0 386.8 205.1 591.9 149.2 741.1
� Diluted Shares Previously Reported 183.4 184.3 184.0 183.8 183.8
182.4 183.4 New Diluted Shares 184.0 184.9 184.6 184.4 184.4 182.9
184.0 � �
As Adjusted EPS � � � � � � � � � � � � � �
Income from Continuing Op's - As Adjusted Diluted (Old
Share Count) 0.91 1.19 2.10 1.12 3.22 0.82 4.04 � � � � � � � �
� � � � � � � �
EPS Change - (0.01 ) - (0.01 ) (0.01 ) -
(0.01 ) � � � � � � � � � � � � � � �
Income from Continuing
Op's - As Adjusted Diluted (New Share Count) 0.91 1.18
2.10 1.11 3.21 0.82 4.03 � � � � � � � � � � � � � � � � � � � � �
� � �
ITT Corporation Non-GAAP Reconciliation Cash From
Operating Activities vs. Free Cash Flow First Quarter of
2009 & 2008 �
($ Millions)
� 3M 2009 3M 2008 �
Net Cash - Operating Activities
213.1 219.3 � Capital Expenditures (47.7 ) (33.9 ) �
Pension Pre-funding, net of tax - � - � �
Free Cash Flow
165.4 �
185.4 � �
Income from Continuing
Operations 186.5 �
170.9 � �
Free Cash Flow
Conversion 89 % 108 % � � Non-Cash
Special Tax Item (57.7 ) - � � �
Adjusted Income from Continuing
Operations 128.8 �
170.9 � � �
Adjusted Free
Cash Flow Conversion 128 % 108 % �
ITT Corporation Non-GAAP Reconciliation Debt Coverage
Ratios 2009 & 2008 � �
March-09 December-08 �
Net Debt/Net Capitalization 25.3 % 27.9 % Total Debt/Total
Capitalization 38.5 % 41.2 % � � Short Term Debt 1,510.9 1,679.0
Long Term Debt 466.5 � 467.9 � Total Debt 1,977.4 2,146.9 Cash
& Cash equivalents 911.0 � 964.9 � Net Debt 1,066.4 1,182.0 � �
Total Shareholders' Equity 3,154.3 3,059.9 Net Debt 1,066.4 �
1,182.0 � Net Capitalization 4,220.7 4,241.9
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