Exhibit 99.1
ITT REPORTS RECORD SECOND QUARTER 2006 EPS OF $0.75, INCLUDING IMPACT OF SPECIAL
ITEMS; RAISES GUIDANCE FOR THE YEAR
- Earnings excluding special items are $0.80 per share, up 18 percent, and
up 21 percent excluding the impact of the adoption of SFAS-123R
- Company raises FY 2006 earnings forecast excluding special items from
$2.91 - $2.97 to $2.95 - $3.00 per share, and raises FY 2006 revenue
range from $7.90 - $8.01 billion to $8.08 - $8.17 billion
- Second quarter revenue up 11 percent to $2.07 billion on strong growth in
Defense and Fluid Technology; organic revenue up 10 percent
- Second quarter segment operating margin improves by 40 basis points, and
80 basis points excluding special items and the impact of SFAS-123R
WHITE PLAINS, N.Y., July 28 /PRNewswire-FirstCall/ -- ITT Corporation (NYSE:
ITT) today reported record second quarter 2006 net income of $140.9 million or
$0.75 per share, including $8.3 million or $0.05 per share net impact of
restructuring and discontinued operations. Excluding special items, 2006 second
quarter earnings from continuing operations grew 18 percent to $0.80 per share
over the second quarter 2005. Excluding the ($0.02) per share impact of the
adoption of SFAS-123R, earnings for the quarter grew 21 percent compared to the
second quarter of 2005. Second quarter 2006 revenue was $2.07 billion, up 11
percent over the same period last year, with organic revenue growth of 10
percent.
"Our entire team performed extremely well in the second quarter, delivering
results that surpassed our expectations and bolstering our confidence for the
full year. We are raising our guidance for the year to reflect this strong
performance," said Steve Loranger, Chairman, President and Chief Executive
Officer. "ITT continues to deliver solid revenue growth, particularly organic
growth. This speaks to our performance in the marketplace, delivering the
products and services demanded by our customers.
"I attribute these results to the capabilities of our management team, our
diverse portfolio, and the strength of the ITT Management System," Loranger
said. "I am pleased that we are delivering consistent results, quarter after
quarter, in spite of the normal fluctuations in market demand and rising
material costs."
2006 Outlook and Beyond
"As always, we are closely watching the current economic climate and its
potential effects on our business," Loranger added. "We believe we are
particularly well positioned in our Fluid Technology markets to benefit from the
growing demand for water-related products and services. We have well-established
product brands, a large installed base and a growing position in developing
markets like China. Our Defense business continues to grow because of the
critical needs being addressed through our unique technologies and the broad
range of services we provide. Based on our solid performance through the first
half and our outlook for the rest of the year, we are raising our full-year
earnings forecast excluding special items from a range of $2.91 - $2.97 to $2.95
- - $3.00 per share, up 14 - 16 percent compared to 2005, including the estimated
($0.09) per share impact from the adoption of SFAS-123R. Excluding the impact of
the adoption of SFAS-123R, our outlook for full year 2006 earnings from
continuing operations excluding special items would be up 17 - 19 percent.
"We're also raising our 2006 full-year revenue guidance from a range of
$7.90 - $8.01 billion to $8.08 - $8.17 billion. Our performance in the record
second quarter and this positive outlook for the remainder of the year
underscores the attractive market positions we have in both our commercial and
defense businesses. These favorable positions, along with our focus on
operational excellence and a disciplined acquisition strategy, reinforce the
confidence we have in meeting our long term financial goals."
Primary Business Results
Fluid Technology
-- Second quarter 2006 Fluid Technology revenue was $765.3 million, up $40.6
million or 6 percent; organic revenues grew 4 percent over the same
period in 2005, led by the Water/Wastewater Handling and Building Trades
businesses. Operating income was $101.3 million for the second quarter,
including the impact of restructuring. Excluding restructuring, second
quarter operating income was up 9 percent to $103.3 million.
-- Operating margins, excluding restructuring, grew by 40 basis points in
the quarter, as a result of ongoing Value Based Six Sigma and Lean
initiatives.
-- Total orders for the second quarter were up 7%, and organic orders were
up 5% compared to the second quarter of 2005.
-- The acquisition of F.B. Leopold, announced during the quarter, adds an
important pre-treatment component to ITT's already wide range of
filtration and treatment capabilities.
Defense Electronics & Services
-- ITT's Defense Electronics & Services segment reported second quarter
revenues of $918.5 million, up 18 percent, over the same period last
year, led by increases in the Services, Electronic Systems,
Communications and Night Vision businesses.
-- Higher volume, better yields and contract performance drove second
quarter operating results. Second quarter operating income for the
segment was $100.6 million, including the impact of restructuring.
Excluding restructuring, operating income was up 19 percent in the
quarter to $101.4 million over the comparative period in 2005.
-- The Aerospace Communications business led revenue growth at Defense in
the second quarter. Production increased to a rate of 5,000 Single
Channel Ground-Air Radio System (SINCGARS) radios per month to meet
increased demand. In August, the group will achieve the production
milestone of 300,000 radios over the life of the SINCGARS program.
-- Consistent with the variable nature of Defense orders, second quarter
orders declined to $636 million. Our order activity is expected to be
robust in the second half of 2006 and full-year Defense orders, sales,
and operating income are all on track to show continued strong growth.
-- The long-term outlook for Defense is positive, driven by demand for
products featuring ITT's next-generation technology and the ongoing
growth in the outsourcing of military services such as those provided by
ITT.
Motion & Flow Control
-- 2006 second quarter revenues for ITT's Motion & Flow Control segment were
$188.1 million, up 4 percent from the second quarter last year.
-- 2006 second quarter operating income for the segment was $30.9 million,
including the impact of restructuring. Excluding restructuring, operating
income for this segment was $38.1 million, up 1 percent from the same
quarter in 2005.
-- On an organic basis, Motion & Flow Control orders grew 12 percent
compared to the second quarter of 2005, led by 18 percent order growth in
Aerospace Controls and 16 percent in Friction Materials. Aerospace
Controls, which produces fuel valves and other components, continues to
benefit from the strength in the regional and business jet segment.
Electronic Components
-- 2006 second quarter revenues for the Electronic Components segment were
$200.8 million, up 11 percent over the same period in 2005. Organic
revenue grew 10 percent, fueled by growth in cellular handsets and
transportation markets. Operating income for the second quarter was $21.3
million. Excluding restructuring, operating income was up 133 percent
over the second quarter last year, and operating margins grew 550 basis
points compared to the second quarter of 2005, primarily driven by volume
growth and operational improvements.
-- 2006 second quarter order intake at Electronic Components exceeded $200
million for the second consecutive quarter, up 9 percent over the second
quarter of 2005 on an organic basis. This increase is primarily
attributable to growth in the cellular handset market, as well as the
transportation and military/aerospace sectors. The segment's 2006 second
quarter book-to-bill ratio was positive at 1.01.
-- The process to prepare Electronic Components' Switches business for
disposition is progressing. Ongoing efforts to improve and manage the
business to create value are yielding results evident in its performance
during the second quarter.
About ITT Corporation
ITT Corporation (http://www.itt.com) supplies advanced technology products
and services in several growth markets. ITT is a global leader in the transport,
treatment and control of water, wastewater and other fluids. The company plays a
vital role in international security through its defense communications and
electronics products; space surveillance and intelligence systems; and advanced
engineering and related services. It also serves the growing leisure marine and
electronic components market with a wide range of products. Headquartered in
White Plains, NY, the company generated $7.4 billion in 2005 sales. In addition
to the New York Stock Exchange, NYSE Arca, ITT Corporation stock is traded on
the Paris, London and Frankfurt exchanges.
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"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 Industries, Inc. Annual Report on Form 10-K for the fiscal
year ended December 31, 2005, 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 Six Months Ended
June 30, June 30,
------------------------ -----------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
Sales and revenues $ 2,067.9 $ 1,863.9 $ 3,954.6 $ 3,629.8
Costs of sales and revenues 1,491.9 1,353.0 2,875.4 2,649.4
Selling, general and
administrative expenses 295.5 262.5 565.8 525.4
Research and development
expenses 43.7 44.6 86.4 88.9
Restructuring and asset
impairment charges 10.0 5.7 25.1 24.1
Total costs and expenses 1,841.1 1,665.8 3,552.7 3,287.8
Operating income 226.8 198.1 401.9 342.0
Interest expense 21.5 13.9 41.4 34.0
Interest income 4.8 5.5 8.5 19.7
Miscellaneous expense, net 4.2 5.5 9.5 10.5
Income from continuing operations
before income taxes 205.9 184.2 359.5 317.2
Income tax expense 63.5 53.2 109.6 64.8
Income from continuing
operations 142.4 131.0 249.9 252.4
Discontinued operations,
including tax (benefit)/
expense of $(0.6), $3.2, $6.8
and $0.1 in each period,
respectively (1.5) 6.7 46.9 1.8
Net income $ 140.9 $ 137.7 $ 296.8 $ 254.2
Earnings Per Share:
Income from continuing operations:
Basic $ 0.77 $ 0.71 $ 1.35 $ 1.37
Diluted $ 0.76 $ 0.70 $ 1.33 $ 1.34
Discontinued operations:
Basic $ (0.01) $ 0.04 $ 0.26 $ 0.01
Diluted $ (0.01) $ 0.03 $ 0.25 $ 0.01
Net income:
Basic $ 0.76 $ 0.75 $ 1.61 $ 1.38
Diluted $ 0.75 $ 0.73 $ 1.58 $ 1.35
Average Common Shares - Basic 184.3 184.5 184.4 184.6
Average Common Shares - Diluted 187.2 188.5 187.5 188.5
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
June 30, December 31,
2006 2005
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 755.0 $ 451.0
Receivables, net 1,403.9 1,268.1
Inventories, net 728.3 661.3
Current assets of discontinued operations - 256.9
Deferred income taxes 74.3 73.6
Other current assets 99.0 69.9
Total current assets 3,060.5 2,780.8
Plant, property and equipment, net 840.1 837.0
Deferred income taxes 90.9 87.5
Goodwill, net 2,348.4 2,249.1
Other intangible assets, net 209.9 214.8
Other assets 976.5 894.2
Total assets $ 7,526.3 $ 7,063.4
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 869.2 $ 797.2
Accrued expenses 788.6 745.8
Accrued taxes 147.9 187.1
Current liabilities of
discontinued operations - 77.9
Notes payable and current
maturities of long-term debt 900.1 751.4
Other current liabilities 9.7 8.3
Total current liabilities 2,715.5 2,567.7
Pension and postretirement benefits 745.9 733.8
Long-term debt 516.2 516.3
Other liabilities 521.7 522.2
Total liabilities 4,499.3 4,340.0
Shareholders' equity 3,027.0 2,723.4
Total liabilities and
shareholders' equity $ 7,526.3 $ 7,063.4
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
June 30,
--------------------------
2006 2005
----------- -----------
Operating Activities
Net income $ 296.8 $ 254.2
(Income) loss from discontinued operations (46.9) (1.8)
Income from continuing operations 249.9 252.4
Adjustments to income from continuing operations:
Depreciation and amortization 92.5 96.4
Amortization of stock compensation 11.0 0.6
Restructuring and asset impairment charges 25.1 24.1
Payments for restructuring (29.6) (21.1)
Change in receivables (120.2) (183.0)
Change in inventories (46.8) (29.3)
Change in accounts payable and accrued expenses 64.3 99.4
Change in accrued and deferred taxes (35.9) 15.6
Change in other current and non-current assets (94.4) (104.7)
Change in other non-current liabilities 1.0 (2.1)
Other, net 4.0 (0.2)
Net cash - operating activities 120.9 148.1
Investing Activities
Additions to plant, property and equipment (64.8) (64.1)
Acquisitions, net of cash acquired (74.0) (1.5)
Proceeds from sale of assets and businesses 230.7 7.7
Other, net (6.3) -
Net cash - investing activities 85.6 (57.9)
Financing Activities
Short-term debt, net 147.2 163.5
Long-term debt repaid (1.0) (4.6)
Long-term debt issued 0.1 0.4
Repurchase of common stock (130.2) (118.2)
Proceeds from issuance of common stock 50.9 56.3
Dividends paid (37.0) (49.8)
Other, net 12.8 (0.1)
Net cash - financing activities 42.8 47.5
Exchange Rate Effects on Cash and
Cash Equivalents 28.6 (21.7)
Net Cash - Discontinued Operations
Operating Activities 28.3 13.1
Net Cash - Discontinued Operations
Investing Activities (2.2) (7.8)
Net change in cash and cash equivalents 304.0 121.3
Cash and cash equivalents - beginning of year 451.0 262.9
Cash and Cash Equivalents - end of period $ 755.0 $ 384.2
ITT Corporation Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue / Orders Growth
Second Quarter 2006 & 2005
($ Millions)
(As Reported - GAAP)
--------------------------------------
Sales & Sales & %
Revenues Revenues Change Change
-------- -------- ------ ------
2006 2006
vs. vs.
3M 2006 3M 2005 2005 2005
-------- -------- ------ ------
ITT Corporation - Consolidated 2,067.9 1,863.9 204.0 11%
Fluid Technology 765.3 724.7 40.6 6%
Defense Electronics & Services 918.5 779.5 139.0 18%
Electronic Components 200.8 181.7 19.1 11%
Motion & Flow Control 188.1 181.6 6.5 4%
%
Orders Orders Change Change
-------- -------- ------ ------
2006 2006
vs. vs.
3M 2006 3M 2005 2005 2005
-------- -------- ------ ------
Fluid Technology 798.0 746.8 51.2 7%
Motion & Flow Control 193.0 172.0 21.0 12%
Aerospace Controls 23.9 20.2 3.7 18%
Friction Materials 84.6 72.5 12.1 17%
Electronic Components 202.9 185.6 17.3 9%
Orders/
Orders Sales Sales
-------- -------- Book-to-
3M 2006 3M 2006 Bill
-------- -------- --------
Electronic Components 202.9 200.8 1.01
(As Adjusted - Organic)
-------------------------------------------------------------------------------------------
Acquis-
ition FX Adj.
Sales & Contri- Contri- Sales & Sales & %
Revenues bution bution Revenues Revenues Change Change
---------- ---------- ---------- ---------- ---------- ---------- ----------
Adj. Adj.
06 06
3M 2006 3M 2006 3M 2006 3M 2006 3M 2005 vs. 05 vs. 05
---------- ---------- ---------- ---------- ---------- ---------- ----------
ITT Corporation -
Consolidated 2,067.9 (5.8) (4.8) 2,057.3 1,863.9 193.4 10%
Fluid Technology 765.3 (5.8) (3.8) 755.7 724.7 31.0 4%
Defense Electronics
& Services 918.5 0.0 (0.1) 918.4 779.5 138.9 18%
Electronic
Components 200.8 0.0 (0.8) 200.0 181.7 18.3 10%
Motion & Flow
Control 188.1 0.0 (0.1) 188.0 181.6 6.4 4%
Acquis-
ition FX
Contri- Contri- Adj. %
Orders bution bution Orders Orders Change Change
---------- ---------- ---------- ---------- ---------- ---------- ----------
Adj. Adj.
06 06
3M 2006 3M 2006 3M 2006 3M 2006 3M 2005 vs. 05 vs. 05
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fluid Technology 798.0 (6.9) (5.3) 785.8 746.8 39.0 5%
Motion & Flow
Control 193.0 0.0 (0.5) 192.5 172.0 20.5 12%
Aerospace Controls 23.9 0.0 - 23.9 20.2 3.7 18%
Friction Materials 84.6 0.0 (0.5) 84.1 72.5 11.6 16%
Electronic
Components 202.9 0.0 (0.9) 202.0 185.6 16.4 9%
ITT Corporation Non-GAAP Press Release Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
Second Quarter of 2006 & 2005
($ Millions)
Adjust
Q2 2006 Q2 2005 Q2 2006 for 2006 Q2 2006
----------- ----------- % ----------- ----------- -----------
Change
As As 06 vs. As Restruc- As
Reported Reported 05 Reported turing Adjusted
----------- ----------- ----------- ----------- ----------- -----------
Sales and Revenues:
Electronic Components 200.8 181.7 200.8 200.8
Defense Electronics &
Services 918.5 779.5 918.5 918.5
Fluid Technology 765.3 724.7 765.3 765.3
Motion & Flow Control 188.1 181.6 188.1 188.1
Intersegment eliminations (4.8) (3.5) (4.8) (4.8)
Total Ongoing
segments 2,067.9 1,864.0 2,067.9 2,067.9
Dispositions and other - - - -
Total Sales and
Revenues 2,067.9 1,864.0 2,067.9 2,067.9
Operating Margin:
Electronic Components 10.6% 3.1% 10.6% 10.5%
Defense Electronics &
Services 11.0% 10.9% 11.0% 11.0%
Fluid Technology 13.2% 12.9% 13.2% 13.5%
Motion & Flow Control 16.4% 20.5% 16.4% 20.3%
Total Ongoing Segments 12.3% 11.9% 12.3% 12.8%
Total Ongoing Segments
(Excluding impact of
SFAS-123R) 13.0%
Income:
Electronic Components 21.3 5.7 273.7% 21.3 (0.3) 21.0
Defense Electronics &
Services 100.6 84.9 18.5% 100.6 0.8 101.4
Fluid Technology 101.3 93.3 8.6% 101.3 2.0 103.3
Motion & Flow Control 30.9 37.3 -17.2% 30.9 7.2 38.1
Total Segment
Operating Income 254.1 221.2 14.9% 254.1 9.7 263.8
Impact of SFAS-123R
Adoption 6.1
Total Segment
Operating Income
(Excluding impact of
SFAS-123R) 269.9
Adjust
Q2 2005 for 2005 Q2 2005 % Change
------------ ------------ ------------- Adj.
As Restruc- As 06 vs.
Reported turing Adjusted 05
------------ ------------ ------------- ------------
Sales and Revenues:
Electronic Components 181.7 181.7
Defense Electronics & Services 779.5 779.5
Fluid Technology 724.7 724.7
Motion & Flow Control 181.6 181.6
Intersegment eliminations (3.5) (3.5)
Total Ongoing segments 1,864.0 1,864.0
Dispositions and other - -
Total Sales and Revenues 1,864.0 1,864.0
Operating Margin:
Electronic Components 3.1% 5.0% 550 BP
Defense Electronics & Services 10.9% 10.9% 10 BP
Fluid Technology 12.9% 13.1% 40 BP
Motion & Flow Control 20.5% 20.9% (60)BP
Total Ongoing Segments 11.9% 12.2% 60 BP
Total Ongoing Segments (Excluding
impact of SFAS-123R) 12.2% 80 BP
Income:
Electronic Components 5.7 3.3 9.0 133%
Defense Electronics & Services 84.9 0.0 84.9 19%
Fluid Technology 93.3 1.8 95.1 9%
Motion & Flow Control 37.3 0.6 37.9 1%
Total Segment Operating Income 221.2 5.7 226.9 16%
Impact of SFAS-123R Adoption
Total Segment Operating Income
(Excluding impact of SFAS-123R) 226.9 19%
ITT Corporation Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Second Quarter of 2006 & 2005
($ Millions, except EPS and shares)
Q2 2006 Q2 2006 Q2 2006 Q2 2005 Q2 2005 Q2 2005
As Adjust- As As Adjust- As
Reported ments Adjusted Reported ments Adjusted
---------- ---------- ---------- ---------- ---------- ----------
Segment Operating Income 254.1 9.7 #A 263.8 221.2 5.7 #D 226.9
Interest Income (Expense) (16.7) - (16.7) (8.4) (3.5)#E (11.9)
Other Income (Expense) (4.2) - (4.2) (5.5) - (5.5)
Gain on sale of Assets - - - - - -
Corporate (Expense) (27.3) 0.3 #A (27.0) (23.1) - (23.1)
Income from Continuing
Operations before Tax 205.9 10.0 215.9 184.2 2.2 186.4
Income Tax Items - - - - (4.0)#F (4.0)
Income Tax Expense (63.5) (3.2)#B (66.7) (53.2) (0.6)#G (53.8)
Total Tax Expense (63.5) (3.2) (66.7) (53.2) (4.6) (57.8)
Income from Continuing
Operations 142.4 6.8 149.2 131.0 (2.4) 128.6
(Loss) Income from
Discontinued Operations (1.5) 1.5 #C 0.0 6.7 (6.7)#H -
Net Income 140.9 8.3 149.2 137.7 (9.1) 128.6
Diluted EPS 0.75 0.05 0.80 0.73 (0.05) 0.68
Impact of SFAS-123R
Adoption 0.02 0.00
Diluted EPS Excluding
Impact of SFAS-123R
Adoption 0.82 0.68
Change Percent Change
2006 vs. 2005 2006 vs. 2005
As Adjusted As Adjusted
-------------- --------------
Net Income 20.6 16%
Diluted EPS $ 0.12 18%
Impact of SFAS-123R Adoption
Diluted EPS Excluding Impact of
SFAS-123R Adoption $ 0.14 21%
#A - Remove Restructuring Expense of $10.0M ($9.7 + $0.3).
#B - Remove Tax Benefit on Special Items of ($3.2M).
#C - Remove D.O. expense of $1.5M.
#D - Remove Restructuring Expense of $5.7M.
#E - Remove Interest Income due to Tax Refund ($3.5M).
#F - Remove Tax Refund of ($4.0M).
#G - Remove Tax Benefit on Special Items of ($0.6M).
#H - Remove D.O. income of ($6.7M).
SOURCE ITT Corporation
-0- 07/28/2006
/CONTACT: Tom Martin of ITT Corporation, +1-914-641-2157,
tom.martin@itt.com/
/First Call Analyst: /
/FCMN Contact: /
/Web site: http://www.itt.com /