 | ITT Corporation, Inc. tel 914 641 2000 fax 914 696 2977 |
Press Release HOLD FOR RELEASE AT 7:00 AM EDT, OCT. 26, 2007 |
Andy Hilton
914-641-2160
andy.hilton@itt.com
ITT reports strong third quarter earnings of 92 cents per share from continuing operations, raises full-year guidance
| · | Earnings per share from continuing operations up 19 percent, excluding special items, on strong international sales and improved margins |
| · | Portfolio realignment continues with completed purchase of International Motion Control and announced acquisition of EDO Corp. |
| · | Discontinued operations contribute 33 cents to total EPS of $1.25, primarily from gain on Switches sale |
| · | ITT raises full-year 2007 adjusted earnings guidance to $3.50-$3.53 per share |
WHITE PLAINS, N.Y., October 26, 2007 - 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: www.itt.com/ir.
About ITT Corporation
ITT Corporation (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 Ended | Nine Months 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 | |||||||||
Orders 3M 2007 | Acquisition 3M 2007 | FX Contribution 3M 2007 | Adj. Orders 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 | ||||||||||
Q3 2007 As Reported | Q3 2006 As Reported | Adjust for 2006 Restructering | Q3 2006 As Reported | % Change Adj. 07 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 2006 | |||||||||||
| As | Q3 2007 | As | As | ||||||||||
| Reported | Adjustments | Reported | 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 | |||||