Document and Entity Information
Document and Entity Information | ||
Share data in Millions | 3 Months Ended
Mar. 31, 2010 | Apr. 20, 2010
|
Document and Entity Information [Abstract] | ||
Entity Registrant Name | ITT CORP | |
Entity Central Index Key | 0000216228 | |
Document Type | 10-Q | |
Document Period End Date | 2010-03-31 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Voluntary Filers | No | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 183.5 |
Consolidated Condensed Income S
Consolidated Condensed Income Statements (Unaudited) (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Consolidated Condensed Income Statements (Unaudited) [Abstract] | ||
Product revenue | $1,954 | $1,966 |
Service revenue | 682 | 591 |
Total revenue | 2,636 | 2,557 |
Cost of product revenue | 1,307 | 1,371 |
Cost of service revenue | 601 | 517 |
Total costs of revenues | 1,908 | 1,888 |
Gross profit | 728 | 669 |
Selling, general and administrative expenses | 383 | 383 |
Research and development expenses | 63 | 53 |
Asbestos-related costs, net | 15 | 0 |
Restructuring and asset impairment charges, net | 17 | 11 |
Operating income | 250 | 222 |
Interest expense | 25 | 26 |
Interest income | 3 | 4 |
Miscellaneous expense, net | 5 | 3 |
Income from continuing operations before income tax expense | 223 | 197 |
Income tax expense | 77 | 10 |
Income from continuing operations | 146 | 187 |
Loss from discontinued operations, including 2009 tax benefit of $1 | 0 | (3) |
Net income | $146 | $184 |
Basic Earnings Per Share: | ||
Continuing operations | 0.8 | 1.02 |
Discontinued operations | $0 | -0.01 |
Net income | 0.8 | 1.01 |
Diluted Earnings Per Share: | ||
Continuing operations | 0.79 | 1.02 |
Discontinued operations | $0 | -0.01 |
Net income | 0.79 | 1.01 |
Average common shares - basic | 183.3 | 182 |
Average common shares - diluted | 184.9 | 183.2 |
Cash dividends declared per common share | 0.25 | 0.2125 |
1_Consolidated Condensed Income
Consolidated Condensed Income Statements (Unaudited) (Parenthetical) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Consolidated Condensed Income Statements (Unaudited) [Abstract] | ||
Tax benefit from discontinued operations | $0 | $1 |
Consolidated Condensed Balance
Consolidated Condensed Balance Sheets (Unaudited) (USD $) | |||||||||||||||||||
In Millions | Mar. 31, 2010
| Dec. 31, 2009
| |||||||||||||||||
Assets: | |||||||||||||||||||
Cash and cash equivalents | $880 | $1,216 | |||||||||||||||||
Receivables, net | 1,853 | 1,797 | |||||||||||||||||
Inventories, net | 821 | 802 | |||||||||||||||||
Deferred income taxes | 235 | 234 | |||||||||||||||||
Other current assets | 238 | 207 | |||||||||||||||||
Total current assets | 4,027 | 4,256 | |||||||||||||||||
Plant, property and equipment, net | 1,049 | 1,051 | |||||||||||||||||
Deferred income taxes | 546 | 583 | |||||||||||||||||
Goodwill | 4,071 | 3,864 | |||||||||||||||||
Other intangible assets, net | 664 | 519 | |||||||||||||||||
Asbestos-related assets | 584 | 604 | |||||||||||||||||
Other non-current assets | 259 | 252 | |||||||||||||||||
Total non-current assets | 7,173 | 6,873 | |||||||||||||||||
Total assets | 11,200 | 11,129 | |||||||||||||||||
Liabilities: | |||||||||||||||||||
Accounts payable | 1,207 | 1,291 | |||||||||||||||||
Accrued expenses | 970 | 1,035 | |||||||||||||||||
Accrued taxes | 93 | 105 | |||||||||||||||||
Short-term debt and current maturities of long-term debt | 289 | 75 | |||||||||||||||||
Postretirement benefits | 73 | 73 | |||||||||||||||||
Deferred income taxes | 35 | 37 | |||||||||||||||||
Total current liabilities | 2,667 | 2,616 | |||||||||||||||||
Postretirement benefits | 1,775 | 1,788 | |||||||||||||||||
Long-term debt | 1,365 | 1,431 | |||||||||||||||||
Asbestos-related liabilities | 860 | 867 | |||||||||||||||||
Other non-current liabilities | 614 | 549 | |||||||||||||||||
Total non-current liabilities | 4,614 | 4,635 | |||||||||||||||||
Total liabilities | 7,281 | 7,251 | |||||||||||||||||
Common Stock | |||||||||||||||||||
Authorized - 500 shares, $1 par value per share (206.9 shares issued), Outstanding - 183.4 shares and 182.9 shares, respectively | 182 | [1] | 181 | [1] | |||||||||||||||
Retained earnings | 4,850 | 4,737 | |||||||||||||||||
Accumulated other comprehensive (loss) income: | |||||||||||||||||||
Postretirement benefits | (1,373) | (1,388) | |||||||||||||||||
Cumulative translation adjustments | 245 | 336 | |||||||||||||||||
Unrealized gain on investment securities | 15 | 12 | |||||||||||||||||
Total accumulated other comprehensive loss | (1,113) | (1,040) | |||||||||||||||||
Total shareholders' equity | 3,919 | 3,878 | |||||||||||||||||
Total liabilities and shareholders' equity | $11,200 | $11,129 | |||||||||||||||||
[1]Shares outstanding include unvested restricted common stock of 1.3 at both March 31, 2010 and December 31, 2009, respectively. |
2_Consolidated Condensed Balanc
Consolidated Condensed Balance Sheets (Parenthetical) (Unaudited) | ||
Share data in Millions | Mar. 31, 2010
| Dec. 31, 2009
|
Shareholders' Equity | ||
Common stock, par value | 1 | 1 |
Common stock, shares authorized | 500 | 500 |
Common stock, shares issued | 206.9 | 206.9 |
Common stock, shares outstanding | 183.4 | 182.9 |
Common stock, unvested restricted common stock included in shares outstanding | 1.3 | 1.3 |
Consolidated Condensed Statemen
Consolidated Condensed Statements of Cash Flows (Unaudited) (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Operating Activities | ||
Net income | $146 | $184 |
Less: Loss from discontinued operations | 0 | (3) |
Income from continuing operations | 146 | 187 |
Adjustments to income from continuing operations: | ||
Depreciation and amortization | 69 | 66 |
Stock-based compensation | 8 | 8 |
Asbestos-related costs, net | 15 | 0 |
Restructuring and asset impairment charges, net | 17 | 11 |
Payments for restructuring | (16) | (26) |
Contributions to pension plans | (2) | (5) |
Change in receivables | (68) | 76 |
Change in inventories | 3 | (44) |
Change in accounts payable | (37) | 4 |
Change in accrued expenses | (36) | (21) |
Change in accrued and deferred taxes | 7 | (4) |
Change in other assets | (22) | (46) |
Change in other liabilities | (11) | (2) |
Other, net | 4 | 9 |
Net Cash - Operating Activities | 77 | 213 |
Investing Activities | ||
Capital expenditures | (52) | (48) |
Acquisitions, net of cash acquired | (391) | (1) |
Proceeds from sale of assets and businesses | 1 | 10 |
Other, net | 1 | 2 |
Net Cash - Investing Activities | (441) | (37) |
Financing Activities | ||
Short-term debt, net | 151 | (166) |
Long-term debt repaid | (1) | (3) |
Proceeds from issuance of common stock | 5 | 2 |
Dividends paid | (85) | (32) |
Tax benefit from stock option exercises and restricted stock award lapses | 1 | (1) |
Other, net | 5 | 0 |
Net Cash - Financing Activities | 76 | (200) |
Exchange rate effects on cash and cash equivalents | (48) | (30) |
Net change in cash and cash equivalents | (336) | (54) |
Cash and cash equivalents - beginning of period | 1,216 | 965 |
Cash and cash equivalents - end of period | 880 | 911 |
Cash paid during the period for: | ||
Interest | 3 | 26 |
Income taxes | $66 | $15 |
Basis of Presentation
Basis of Presentation (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | 1) Basis of Presentation The unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such SEC rules. Unless the context otherwise indicates, references herein to ITT, the Company, and such words as we, us, and our include ITT Corporation and its subsidiaries. We believe that the disclosures made are adequate to make the information presented not misleading. We consistently applied the accounting policies described in ITTs 2009 Annual Report on Form10-K in preparing these unaudited financial statements. The preparation of these financial statements requires management to make certain estimates and assumptions that affect the amounts reported, and such estimates could differ from actual results. These financial statements should be read in conjunction with the financial statements and notes thereto included in ITTs 2009 Annual Report on Form10-K. Certain prior year amounts have been reclassified to conform to current year presentation. ITTs 2010 and 2009 quarterly financial periods end on the Saturday closest to the last day of the quarter, except for the last quarterly period of the fiscal year, which ends on December31st. For simplicity of presentation, the quarterly financial statements included herein are presented as ending on the last day of the quarter. |
New Accounting Pronouncements
New Accounting Pronouncements (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
New Accounting Pronouncements [Abstract] | |
New Accounting Pronouncements | 2) New Accounting Pronouncements Pronouncements Not Yet Adopted In October 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.2009-13, which amended the accounting for revenue arrangements that contain multiple elements. The objective of this amendment is to address the accounting for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. The amendments establish a hierarchy for determining the selling price of a deliverable and will allow for the separation of products and services in more instances than previously permitted. The guidance provided within ASU 2009-13 is effective for new or materially modified arrangements in fiscal years beginning on or after June15, 2010 and allows for either prospective or retrospective application, with early adoption permitted. We are currently evaluating the impact that adoption of this guidance will have on our Consolidated Financial Statements. In October 2009, the FASB issued ASU No.2009-14 which amended the accounting requirements for software revenue recognition. The objective of this update is to address the accounting for revenue arrangements that contain tangible products and software. Specifically, products that contain software that is more than incidental to the product as a whole will be removed from the scope of the software revenue recognition literature. The amendments align the accounting for these revenue transaction types with the amendments under ASU 2009-13 mentioned above. The guidance provided within ASU 2009-14 is effective for new or materially modified arrangements in fiscal years beginning on or after June15, 2010 and allows for either prospective or retrospective application, with early adoption permitted. We are currently evaluating the impact that adoption of this guidance will have on our Consolidated Financial Statements. In April 2010, the FASB issued ASU No.2010-17 which establishes authoritative guidance permitting use of the milestone method of revenue recognition for research or development arrangements that contain payment provisions or consideration contingent on the achievement of specified events. This guidance is effective for milestones achieved in fiscal years beginning on or after June15, 2010 and allows for either prospective or retrospective application, with early adoption permitted. We are currently evaluating the impact that adoption of this guidance will have on our Consolidated Financial Statements. Recently Adopted Accounting Pronouncements In June 2009, the FASB issued an amendment to the accounting and disclosure requirements for the consolidation of variable interest entities (VIE(s)). The amendments include replacing the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in VIE(s) with an approach focused on identifying which enterprise has the power to direct the activities of VIE(s) that most significantly impact the entitys economic performance and (1)the obligation to absorb losses of the |
Acquisitions
Acquisitions (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Acquisitions [Abstract] | |
Acquisitions | 3) Acquisitions On March23, 2010, we acquired 100% of Nova Analytics Corporation (Nova) for a preliminary purchase price of $385, net of cash acquired. The preliminary purchase price for Nova is subject to change during the measurement period (up to one year from the acquisition date) as certain working capital adjustments are finalized. Nova, which had pro forma 2009 revenue of approximately $135, is a manufacturer of premium quality laboratory, field, portable and on-line analytical instruments used in water and wastewater, environmental, medical, and food and beverage applications. Nova provides us with brands, technologies, distribution and aftermarket content in the $6billion analytical instrumentation market. The addition of Nova will broaden the solutions our Fluid Technology business segment (Fluid segment) offers customers in key markets such as municipal water and wastewater, industrial processing, and food and beverage. Our financial statements include Novas results from March23, 2010; however, Novas contributions were not material to our results of operations or operating cash flows for the quarter ended March31, 2010. The preliminary purchase price for Nova was allocated to the net tangible and intangible assets acquired and liabilities assumed based on their preliminary fair values as of March23, 2010. The excess of the preliminary purchase price over the preliminary assets acquired and liabilities assumed was recorded as goodwill. Due to the proximity of the Nova acquisition to the quarter ended March31, 2010, the purchase price allocation is based upon a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets acquired and liabilities assumed, the valuation of intangible assets acquired, certain environmental matters, income taxes and residual goodwill. We expect to obtain information to assist us in determining the fair value of the net assets acquired at the acquisition date during the measurement period. Of the $385 preliminary purchase price, the aggregate fair value of distributor and customer relationships was $112, trademarks was $42 and proprietary technology was $10. Other assets acquired and liabilities assumed as part of the acquisition were $62 primarily related to working capital balances and $73 primarily related to deferred tax liabilities, respectively. As of March31, 2010, the excess of the preliminary purchase price over the fair value of net assets acquired was $231 (which is not expected to be deductible for income tax purposes). The goodwill arising from the acquisition consists largely of expansion of the Nova footprint to new geographic markets, synergies and economies of scale. All of the goodwill has been assigned to the Fluid segment. Additionally, during the first quarter of 2010 we spent $6, net of cash acquired, on an acquisition within the Fluid segment that was not material to our results of operations or financial position. |
Restructuring and Asset Impairm
Restructuring and Asset Impairment Charges (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Restructuring and Asset Impairment Charges [Abstract] | |
Restructuring and Asset Impairment Charges | 4) Restructuring and Asset Impairment Charges First Quarter 2010 Restructuring Activities During the first quarter of 2010, we recorded a net restructuring charge of $17, reflecting costs of $13 related to new actions and $4 related to prior actions. Planned position eliminations for actions announced during the quarter total 606, including 162 factory workers, 421 office workers and 23 management employees. The charges associated with actions announced during the first quarter of 2010 are for employee severance and are primarily associated with the strategic realignment of our Defense Information Solutions segment (Defense segment) to better align with the emerging needs of its expanding global customer base, which is increasingly integrated and network-centric. The realignment, which is scheduled to be completed by year end 2010, will enable better product portfolio integration, encouraging a more coordinated market approach and reduced operational redundancies. The previous organizational structure, consisting of seven divisions, has been consolidated into three larger divisions. Additionally, we anticipate the closure of three facilities by the end of the third quarter of 2010. In addition to this action, we incurred restructuring costs of $1 during the first quarter of 2010 related to an action initiated in the quarter within our Fluid segment to consolidate and realign the sales function. The costs recognized related to prior years plans primarily reflect severance costs from an additional 18 positions that were eliminated within our Fluid segment. The following table details the components of the first quarter 2010 restructuring charge. 2010 Actions Costs of Planned Additional First Quarter Position Costs of Actions Eliminations Prior Actions Defense $ 12 597 $ Fluid 1 9 3 Motion Flow 1 $ 13 606 $ 4 First Quarter 2009 Restructuring Activities During the first quarter of 2009, we recorded a net restructuring charge of $11, reflecting costs of $6 related to new actions and $5 related to prior actions. The charges associated with actions announced during the first quarter of 2009 and prior years plans primarily relate to severance costs within our Fluid segment. Planned position eliminations totaled 118, including 11 factory workers, 94 office workers and 13 management employees. The following table details the components of the first quarter 2009 restructuring charge. 2009 Actions Costs of Planned Additional First Quarter Position Costs of Actions Eliminations Prior Actions Fluid $ 5 82 $ 3 Motion Flow 1 32 2 Corporate and Other(a) 4 |
Income Taxes
Income Taxes (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes [Abstract] | |
Income Taxes | 5) Income Taxes Effective Tax Rate Income tax expense was $77 for the quarter ended March31, 2010, resulting in an effective tax rate of 34.5%, compared to expense of $10 and an effective rate of 5.1% for the comparable prior year period. Impacting the 2010 effective rate was the ratification of the U.S.Patient Protection and Affordable Care Act (the Healthcare Reform Act). Effective January1, 2013, the Healthcare Reform Act eliminates the tax deduction for benefits related to subsidies received for prescription drug benefits provided under retiree healthcare benefit plans that were determined to be actuarially equivalent to Medicare PartD. As a result of the change in tax status for the federal subsidies received, we recorded a discrete income tax charge of $12 in the three months ended March31, 2010. In addition, the 2009 effective rate was favorably impacted as a result of the restructuring of certain international legal entities, which reduced the income tax provision by $58. This reduction was based on our determination that the excess investment for financial reporting purposes over the tax basis in certain foreign subsidiaries will be indefinitely reinvested and the associated deferred tax liability would no longer be required. Uncertain Tax Positions We recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. As of March31, 2010 and December31, 2009, we had $173 and $171, respectively, of total unrecognized tax benefits recorded. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $83 and $81, as of March31, 2010 and December31, 2009, respectively. We do not believe that the total amount of unrecognized tax benefits will significantly change within twelve months of the reporting date. We classify interest relating to tax matters as a component of interest expense and tax penalties as a component of income tax expense in our Consolidated Condensed Income Statement. We have accrued $24 and $23 for payment of interest and penalties as of March31, 2010 and December31, 2009, respectively. |
Earnings Per Share
Earnings Per Share (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | 6) Earnings Per Share A reconciliation of the data used in the calculation of basic and diluted earnings per share computations for income from continuing operations is as follows: Three Months Ended March31 2010 2009 Income from continuing operations $ 146 $ 187 Average common shares outstanding 181.8 180.6 Add: Weighted average restricted stock awards outstanding(a) 1.5 1.4 Basic average common shares outstanding 183.3 182.0 Add: Dilutive impact of stock options 1.6 1.2 Diluted average common shares outstanding 184.9 183.2 Basic earnings per share $ 0.80 $ 1.02 Diluted earnings per share $ 0.79 $ 1.02 Anti-dilutive stock options 1.8 4.3 Average exercise price of anti-dilutive stock options $ 54.62 $ 48.50 (a) Restricted stock awards containing rights to non-forfeitable dividends which participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share. |
Comprehensive Income
Comprehensive Income (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Comprehensive Income [Abstract] | |
Comprehensive Income | 7) Comprehensive Income Three Months Ended March31 2010 2009 Pretax Pretax (Expense) Tax Net-of-Tax (Expense) Tax Net-of-Tax Income Expense Amount Income Expense Amount Net income $ 146 $ 184 Other comprehensive (loss) income: Net foreign currency translation adjustments $ (91 ) $ (91 ) $ (72 ) $ (72 ) Changes in postretirement benefit plans 23 8 15 16 6 10 Unrealized gain on investment securities 5 2 3 Other comprehensive (loss) income $ (63 ) $ 10 (73 ) $ (56 ) $ 6 (62 ) Comprehensive income $ 73 $ 122 |
Receivables, Net
Receivables, Net (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Receivables, Net [Abstract] | |
Receivables, Net | 8) Receivables, Net March31, December31, 2010 2009 Trade $ 1,408 $ 1,391 Unbilled contract receivable 432 404 Other 58 56 Receivables, gross 1,898 1,851 Less: allowance for doubtful accounts and cash discounts (45 ) (54 ) Receivables, net $ 1,853 $ 1,797 Unbilled amounts represent revenue recognized on long-term contracts that arise based on performance attainment, though appropriately recognized, cannot be billed as of the balance sheet date. We expect to bill and collect substantially all of the March31, 2010 unbilled contract receivables during the next twelve months as scheduled performance milestones are completed or units are delivered. Our outstanding accounts receivable balance from the U.S.Government was $462 and $338 as of March31, 2010 and December31, 2009, respectively. |
Inventories, Net
Inventories, Net (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Inventories, Net [Abstract] | |
Inventories, Net | 9) Inventories, Net March31, December31, 2010 2009 Finished goods $ 187 $ 176 Work in process 95 57 Raw materials 300 253 582 486 Inventoried costs related to long-term contracts 373 391 Less: progress payments (134 ) (75 ) Inventoried costs related to long-term contracts, net 239 316 Inventories, net $ 821 $ 802 Deferred production costs incurred on in-process and delivered units in excess of the aggregate estimated average cost of those units were $26 and $21 as of March31, 2010 and December31, 2009, respectively. |
Plant, Property and Equipment,
Plant, Property and Equipment, Net (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Plant, Property and Equipment, Net [Abstract] | |
Plant, Property and Equipment, Net | 10) Plant, Property and Equipment, Net March31, December31, 2010 2009 Land and improvements $ 59 $ 57 Buildings and improvements 609 609 Machinery and equipment 1,676 1,686 Furniture, fixtures and office equipment 221 221 Construction work in progress 156 157 Other 97 97 2,818 2,827 Less: accumulated depreciation and amortization (1,769 ) (1,776 ) Plant, property and equipment, net $ 1,049 $ 1,051 |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, Net (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Goodwill and Other Intangible Assets, Net [Abstract] | |
Goodwill and Other Intangible Assets, Net | 11) Goodwill and Other Intangible Assets, Net Changes in the carrying amount of goodwill for the three months ended March31, 2010 by business segment are as follows: Motion Corporate Defense Fluid Flow and Other Total Balance as of January1, 2010 $ 2,208 $ 1,165 $ 486 $ 5 $ 3,864 Goodwill acquired during the period 235 235 Foreign currency translation (23 ) (5 ) (28 ) Balance as of March31, 2010 $ 2,208 $ 1,377 $ 481 $ 5 $ 4,071 Information regarding other intangible assets is as follows: March31, 2010 December31, 2009 Gross Other Gross Other Carrying Accumulated Intangibles Carrying Accumulated Intangibles Amount Amortization Net Amount Amortization Net Finite-lived intangibles: Distributor and customer relationships $ 762 $ (260 ) $ 502 $ 650 $ (243 ) $ 407 Proprietary technology 75 (26 ) 49 66 (24 ) 42 Trademarks 34 (8 ) 26 35 (8 ) 27 Patents and other 46 (20 ) 26 45 (20 ) 25 Indefinite-lived intangibles: Brands and trademarks 61 61 18 18 Other intangible assets, net $ 978 $ (314 ) $ 664 $ 814 $ (295 ) $ 519 Intangible assets related to the acquisition of Nova included $112 of distributor and customer relationships, $42 of trademarks and $10 of proprietary technology. The distributor and customer relationships are expected to be amortized over a weighted average period of 19years and the proprietary technology is expected to be amortized over a weighted average period of 11years. The trademarks have been assigned an indefinite life. Amortization expense related to intangible assets for the three months ended March31, 2010 and 2009 was $21 and $26, respectively. We expect to incur amortization expense of $70 over the remaining nine months of 2010. Estimated amortization expense for intangible assets for each of the five succeeding years is as follows: 2011 2012 2013 2014 2015 $76 $6 |
Other Non-Current Assets
Other Non-Current Assets (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Other Non-Current Assets [Abstract] | |
Other Non-Current Assets | 12) Other Non-Current Assets March31, December31, 2010 2009 Other employee benefit-related assets $ 93 $ 87 Capitalized software costs 68 65 Other long-term third party receivables-net 44 44 Equity and cost method investments 31 28 Pension assets and prepaid benefit plan costs 10 16 Other 13 12 Other non-current assets $ 259 $ 252 |
Debt
Debt (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Debt [Abstract] | |
Debt | 13) Debt March31, December31, 2010 2009 Commercial paper $ 190 $ 55 Short-term loans 24 10 Current maturities of long-term debt and other 75 10 Short-term debt and current maturities of long-term debt 289 75 Non-current maturities of long-term debt 1,322 1,392 Non-current capital leases 3 4 Deferred gain on interest rate swaps 49 50 Unamortized discounts and debt issuance costs (9 ) (15 ) Long-term debt 1,365 1,431 Total debt $ 1,654 $ 1,506 The fair value of total debt, excluding the deferred gain on interest rate swaps, was $1,712 and $1,547 as of March31, 2010 and December31, 2009, respectively. We reclassified $65 of debt from a non-current liability to a current liability during the first quarter of 2010, including $4of unamortized discount. This reclassification is the result of a decision to retire 100% of the outstanding balance of two debentures with original maturity dates in May 2011 and July 2011, respectively. |
Other Non-Current Liabilities
Other Non-Current Liabilities (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Other Non-Current Liabilities [Abstract] | |
Other Non-Current Liabilities | 14) Other Non-Current Liabilities March31, December31, 2010 2009 Deferred income taxes and other tax-related accruals $ 229 $ 182 Environmental 130 128 Compensation and other employee-related benefits 114 123 Product liability, guarantees and other legal matters 84 63 Other 57 53 Other non-current liabilities $ 614 $ 549 |
Employee Benefit Plans
Employee Benefit Plans (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Employee Benefit Plans [Abstract] | |
Employee Benefit Plans | 15) Employee Benefit Plans Components of net periodic benefit cost for the three months ended March31, 2010 and 2009 were as follows: Pension Other Benefits 2010 2009 2010 2009 Service cost $ 31 $ 26 $ 2 $ 2 Interest cost 84 81 10 11 Expected return on plan assets (110 ) (108 ) (6 ) (5 ) Amortization of prior service cost 1 1 1 Amortization of actuarial loss 21 10 3 4 Total net periodic benefit cost $ 27 $ 10 $ 9 $ 13 Amounts recognized in the Consolidated Condensed Balance Sheets as of March31, 2010 and December31, 2009 consist of: Pension Other Benefits 2010 2009 2010 2009 Other non-current assets $ 10 $ 16 $ $ Current liabilities (24 ) (24 ) (49 ) (49 ) Non-current liabilities (1,373 ) (1,384 ) (402 ) (404 ) $ (1,387 ) $ (1,392 ) $ (451 ) $ (453 ) We contributed approximately $2 to our various plans during the first quarter of 2010. Additional contributions ranging between $6 and $8 are expected over the balance of 2010. |
Long-Term Incentive Employee Co
Long-Term Incentive Employee Compensation (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Long-Term Incentive Employee Compensation [Abstract] | |
Long-Term Incentive Employee Compensation | 16) Long-Term Incentive Employee Compensation Our long-term incentive awards program (LTIP) comprises three components: non-qualified stock options (NQO), restricted stock, and a total shareholder return target cash award (TSR). We account for substantially all NQOs and restricted stock as equity-based compensation awards. TSR units are cash settled and accounted for as liability-based compensation. Long-term incentive employee compensation costs are primarily recorded within selling, general administrative expenses and are reduced by an estimated forfeiture rate. These costs impacted our consolidated results of operations as follows: Three Months Ended March31 2010 2009 Compensation costs on equity-based awards $ 8 $ 8 Compensation costs on liability-based awards 2 Total compensation costs, pre-tax $ 10 $ 8 Future tax benefit $ 3 $ 2 At March31, 2010, there was $67 of total unrecognized compensation cost related to unvested NQOs and restricted stock. This cost is expected to be recognized ratably over a weighted-average period of 2.2years. Total unrecognized compensation cost projected to be incurred under the TSR award plan based on performance measurements as of March31, 2010 was $14 and is expected to be recognized over a weighted average period of 1.5years. Actual performance measurements in future periods may differ from current estimates and positively or negatively impact the total compensation cost to be recognized as well as create volatility between periods. On March5, 2010, we granted the 2010 LTIP awards. The grants comprised 0.6 NQOs, 0.5 restricted shares and 9.3 TSR units with respective grant date fair values of $14.60, $53.49 and $1.00. The NQOs vest either on the completion of a three-year service period or annually in three equal installments and have a ten-year expiration period. Restricted stock and TSR units vest on the completion of a three-year service period. Restrictions on 0.3shares of restricted stock granted in 2007 lapsed on March5, 2010 and a corresponding number of shares were issued out of treasury stock. In addition, payments totaling $18 were made during the first quarter of 2010 to settle the 2007 TSR. The fair value of restricted stock corresponds to the closing price of ITT common stock on the date of grant. The fair value of each NQO grant was estimated on the date of grant using the binomial lattice pricing model incorporating multiple and variable assumptions over time, including assumptions such as employee exercise patterns, stock price volatility and changes in dividends. The following table details the assumptions utilized. March5, 2010 Dividend yield 1.87% Expected volatility 27.0% Expected life 7.1years Risk-free rates 3.10% |
Commitments and Contingencies
Commitments and Contingencies (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | 17) Commitments and Contingencies From time to time we are involved in legal proceedings that are incidental to the operation of our businesses. Some of these proceedings allege damages relating to environmental liabilities, intellectual property matters, copyright infringement, personal injury claims, employment and pension matters, government contract issues and commercial or contractual disputes, sometimes related to acquisitions or divestitures. We will continue to vigorously defend against all claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information including our assessment of the merits of the particular claim, as well as our current reserves and insurance coverage, we do not expect that such legal proceedings will have any material adverse impact on our cash flow, results of operations, or financial condition on a consolidated basis in the foreseeable future, unless otherwise noted below. Asbestos Matters ITT, including its subsidiary Goulds Pumps, Inc. (Goulds), has been joined as a defendant with numerous other companies in product liability lawsuits alleging personal injury due to asbestos exposure. These claims allege that certain of our products sold prior to 1985 contained a part manufactured by a third party, e.g., a gasket, which contained asbestos. To the extent these third-party parts may have contained asbestos, it was encapsulated in the gasket (or other) material and was non-friable. In certain other cases, it is alleged that former ITT companies were distributors for other manufacturers products that may have contained asbestos. As of March31, 2010, there were 104,999 open claims against ITT filed in various state and federal courts alleging injury as a result of exposure to asbestos. Activity related to these asserted asbestos claims during the period was as follows: 2010 2009 Open claims(a) January 1 104,679 103,006 New claims 1,286 1,154 Settlements (247 ) (461 ) Dismissals (719 ) (1,122 ) Adjustment(b) 3,208 Open claims(a) March 31 104,999 105,785 (a) Excludes 34,813 claims related to maritime actions that have been placed on inactive dockets, which the Company believes will not be litigated. Almost all of these claims were filed in the United States District Court for the Northern District of Ohio and transferred to the Eastern District of Pennsylvania pursuant to an order by the Federal Judicial Panel on Multi-District Litigation (MDL). (b) Reflects an adjustment to increase the number of open claims as a result of transitioning claims data from our primary insurance companies to an internal database. Frequently, the plaintiffs are unable to identify any ITT or Goulds product as a source of asbestos exposure. In addition, in a large majority of the 104,999 pending claims against the Company, the plaintiffs are unable to demonstrate any injury. Many of those cl |
Guarantees, Indemnities and War
Guarantees, Indemnities and Warranties (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Guarantees, Indemnities and Warranties [Abstract] | |
Guarantees, Indemnities and Warranties | 18) Guarantees, Indemnities and Warranties Guarantees Indemnities Since ITTs incorporation in 1920, we have acquired and disposed of numerous entities. The related acquisition and disposition agreements contain various representation and warranty clauses and may provide indemnities for a misrepresentation or breach of the representations and warranties by either party. The indemnities address a variety of subjects; the term and monetary amounts of each such indemnity are defined in the specific agreements and may be affected by various conditions and external factors. Many of the indemnities have expired either by operation of law or as a result of the terms of the agreement. We do not have a liability recorded for the historic indemnifications and are not aware of any claims or other information that would give rise to material payments under such indemnities. In December of 2007, we entered into a sale leaseback type agreement for our corporate aircraft, with the aircraft leased back under a five-year operating lease. We have provided, under the lease, a residual value guarantee to the counterparty in the amount of $42. We would have to make payments under the residual value guarantee only if the fair value of the aircraft was less than the residual value guarantee upon termination of the agreement. At March31, 2010, the projected fair value of the aircraft at the end of the lease is estimated to be $4 less than the residual value guarantee. However, since this estimated loss does not exceed the $5 gain we realized from the sale of the aircraft which has been deferred as a loss contingency for the residual value guarantee, we have not recorded any additional accrual in our financial statements. We have a number of individually immaterial guarantees outstanding at March31, 2010, that may be affected by various conditions and external forces, some of which could require that payments be made under such guarantees. We do not believe these payments will have any material adverse impact on the financial position, results of operations or cash flow on a consolidated basis in the foreseeable future. Product Warranties We provide warranty for numerous products, the terms of which vary widely. In general, we provide warranty on our products against defect and specific non-performance. In the automotive businesses, liability for product defects could extend beyond the selling price of the product and could be significant if the defect interrupts production or results in a recall. Changes in product warranty accrual for the three months ended March31, 2010 and 2009 were as follows: 2010 2009 Beginning balance January 1 $ 67 $ 57 Accruals for product warranties issued in the period 14 6 Changes in pre-existing warranties and estimates 3 (1 ) Payments (9 ) (7 ) Foreign currency translation (1 ) (1 ) Ending balance March 31 $ 74 $ 54 |
Business Segment Information
Business Segment Information (Unaudited) | |
3 Months Ended
Mar. 31, 2010 | |
Business Segment Information [Abstract] | |
Business Segment Information | 19) Business Segment Information The Companys business segments are reported on the same basis used internally for evaluating performance and for allocating resources. Our three reporting segments are referred to as: Defense Information Solutions (Defense segment), Fluid Technology (Fluid segment), and Motion Flow Control (Motion Flow segment). Corporate and Other consists of corporate office expenses including compensation, benefits, occupancy, depreciation, and other administrative costs, as well as charges which occur from time to time related to certain matters, such as asbestos and environmental liabilities, that are managed at a corporate level and are not included in the business segments in evaluating performance or allocating resources. Assets of the business segments exclude general corporate assets, which principally consist of cash, deferred tax assets, insurance receivables, certain property, plant and equipment, and certain other assets. Three Months Ended March31, 2010 Motion Corporate Defense Fluid Flow and Other Eliminations Total Product revenue $ 801 $ 770 $ 385 $ $ (2 ) $ 1,954 Service revenue 649 31 2 682 Total revenue $ 1,450 $ 801 $ 387 $ $ (2 ) $ 2,636 Operating income (loss) $ 146 $ 91 $ 55 $ (42 ) $ $ 250 Operating margin 10.1 % 11.4 % 14.2 % 9.5 % Total assets $ 4,294 $ 3,342 $ 1,342 $ 2,222 $ $ 11,200 Three Months Ended March31, 2009 Motion Corporate Defense Fluid Flow and Other Eliminations Total Product revenue $ 948 $ 715 $ 304 $ $ (1 ) $ 1,966 Service revenue 560 29 2 591 Total revenue $ 1,508 $ 744 $ 306 $ $ (1 ) $ 2,557 Operating income (loss) $ 164 $ 69 $ 28 $ (39 ) $ $ 222 Operating margin 10.9 % 9.3 % 9.2 % 8.7 % Total assets(a) $ 4,292 $ 2,930 $ 1,323 $ 2,584 $ $ 11,129 (a) As of December31, 2009 |