ITT Reports Strong First-Quarter Results and Raises Full-Year Guidance
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ITT Reports Strong First-Quarter Results and Raises Full-Year Guidance

WHITE PLAINS, N.Y. — (BUSINESS WIRE) — April 30, 2010 — ITT Corporation (NYSE: ITT) today reported 2010 first-quarter revenue of $2.6 billion and income from continuing operations of $146 million, or $0.79 per share. Excluding special items, income from continuing operations for the quarter was $156 million, or $0.84 per share, representing 17 percent year-over-year growth. Special items in the year-ago period included a $54 million tax-related gain, compared with a $10 million expense in the first quarter of 2010, primarily related to the recent U.S. healthcare reform legislation.

“Promising organic growth combined with ITT’s focused execution got us off to a great start in 2010. Our Motion & Flow Control business delivered significant increases in revenue and operating income. Our Defense & Information Solutions business made great progress on its strategic realignment, and significant productivity gains drove margin improvements in both our Fluid Technology and Motion & Flow Control businesses,” said Steve Loranger, ITT’s chairman, president and chief executive officer.

The company also raised its full-year 2010 adjusted earnings per share guidance from its previously announced forecast of $3.90 to $4.10 to a new forecast of $4.05 to $4.20. Revenue guidance for the year is revised from the company’s previously announced forecast of three percent growth to a new forecast of four percent growth. Organic revenue (defined as total revenue excluding foreign exchange and merger and acquisition impacts) is expected to grow three percent, compared with a previous forecast of two percent growth.

“Our global teams delivered results above expectations, and we are seeing improving conditions in certain end markets, giving us confidence in raising our full-year earnings outlook,” said Loranger. “We also delivered higher than expected free cash flow, and our strong financial position enabled us to announce an 18 percent dividend increase in the quarter, while we continued to advance our cash deployment and portfolio strategy through ITT’s acquisition of Nova Analytics.

“We believe our strategies to align the portfolio with enduring human needs, while delivering organic growth and focused execution, will continue to drive excellent, sustainable growth -- as ITT has demonstrated this quarter and over the past five years.”

First-Quarter Segment Results

Defense & Information Solutions

Fluid Technology

Motion & Flow Control

Guidance

For the second quarter of 2010, ITT projects adjusted earnings per share will be flat compared with the year-ago period, in the range of $1.05 to $1.07. ITT’s new full-year 2010 adjusted earnings per share guidance range is now $4.05 to $4.20 per share. At the midpoint, this represents nine percent growth from 2009.

For the full year, ITT revenue is now expected to grow four percent, compared with prior revenue guidance of three percent growth. Organic revenue growth for the full year is now forecast at three percent compared with a prior forecast of two percent.

Based on expected timing of orders and customer fielding plans, the company projects 2010 Defense & Information Solutions revenue growth of three percent. Fluid Technology revenue is expected to grow five percent, from a previously announced forecast of two percent growth, due to the Nova acquisition. Total revenue growth guidance for Motion & Flow Control is increased to six percent from the previous forecast of one percent growth. On an organic basis, revenue growth of seven percent is now forecast at Motion & Flow Control compared to the flat prior guidance.

Investor Call Today

ITT's senior management will host a conference call for investors today at 9:00 a.m. Eastern Daylight Time to review first-quarter performance and answer questions. The briefing can be monitored live via webcast at the following address on the company's Web site: www.itt.com/ir.

About ITT Corporation

ITT Corporation 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 2009 revenue of $10.9 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 U.S. or international 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 and changes in local government regulations; Competition and industry capacity and production rates; Ability of third parties, including our commercial partners, counterparties, 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; Changes in the value of goodwill or intangible assets; Acquisitions or divestitures; Personal injury claims; Uncertainties with respect to our estimation of asbestos liability exposure and related insurance recoveries; 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, 2009 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,
2010   2009
 
Revenue $

2,636

 

$ 2,557  
 
Costs of revenue 1,908 1,888
Selling, general and administrative expenses 383 383
Research and development expenses 63 53
Asbestos-related costs, net 15 -
Restructuring and asset impairment charges, net   17     11  
Total costs and expenses 2,386 2,335
 
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, net of tax   -     (3 )
Net income $ 146   $ 184  
 
Earnings (Loss) Per Share
Basic:
Continuing operations $ 0.80 $ 1.02
Discontinued operations   -     (0.01 )
Net Income $ 0.80 $ 1.01
Diluted:
Continuing operations $ 0.79 $ 1.02
Discontinued operations   -     (0.01 )
Net Income $ 0.79 $ 1.01
 
Average common shares — basic 183.3 182.0
Average common shares — diluted 184.9 183.2
 

ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
(Unaudited)

       
March 31, December 31,
2010 2009
 
Assets
Current 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 (a)   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 assets $ 11,200   $ 11,129  
 
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 1,207 $ 1,291
Accrued expenses (b) 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 liabilities 7,281 7,251
 
Shareholders' equity   3,919     3,878  
Total liabilities and shareholders' equity $ 11,200   $ 11,129  
 
(a) Includes asbestos-related assets of $62 for both periods presented.
(b) Includes asbestos-related liabilities of $66 for both periods presented.

     

ITT CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

 
Three Months Ended
March 31,
2010   2009
Operating Activities

Net income

$

146

$

184

Less: Loss from discontinued operations   -     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 -
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 and accrued expenses (73 ) (17 )
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 impact from equity compensation activity 1 (1 )
Other, net   5     -  
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 year   1,216     965  
Cash and Cash Equivalents — end of period $ 880   $ 911  
 

 
Key Performance Indicators and Non-GAAP Measures
 
Management reviews key performance metrics including sales and revenues, segment operating income and margins, earnings per share, orders growth, and backlog, among others, in connection with its management of our business. In addition, we consider the following non-GAAP measures to be key performance indicators for purposes of this REG-G reconciliation:
 
Organic Sales and Revenues defined as reported GAAP sales and revenues excluding the impact of foreign currency fluctuations and contributions from acquisitions and divestitures (for the first 12 months). The Company believes that Organic Sales and Revenues provide a useful measure of the operation's underlying revenue performance after adjusting for foreign exchange, acquisitions and divestitures that may impact comparability. The Company utilizes Organic Sales and Revenues to measure, evaluate and manage the Company's revenue performance. The Company's definition of Organic Sales and Revenue may not be comparable to similar measures utilized by other companies.
 
Organic Orders are Non-GAAP performance measures that may provide useful information related to the Company's future revenue performance. Organic Orders exclude the impact of foreign currency fluctuations and contributions from acquisitions and divestitures (for the first 12 months). The Company's definition of Organic Orders may not be comparable to similar measures utilized by other companies.
 
Adjusted Income from Continuing Operations and Adjusted EPS are defined as reported GAAP Income from Continuing Operations and reported GAAP Diluted Earnings Per Share, adjusted to exclude Special items. Special items that may include, but are not limited to, unusual and infrequent non-operating items and non-operating tax settlements or adjustments related to prior periods. These items are not a substitute for GAAP measures. Special items represent significant charges or credits that impact current results, but may not be related to the Company’s ongoing operations and performance. The Company uses Adjusted Income from Continuing Operations and Adjusted EPS to measure, evaluate and manage the Company. The Company believes that results excluding Special Items provide a useful analysis of ongoing operating trends. The Company's definitions of Adjusted Income from Continuing Operations and Adjusted EPS may not be comparable to similar measures utilized by other companies.
 
Free Cash Flow is defined as GAAP Net Cash - Operating Activities less Capital Expenditures and other Special Items. Free Cash Flow should not be considered a substitute for income or cash flow data prepared in accordance with GAAP. The Company's definition of Free Cash Flow may not be comparable to similar measures utilized by other companies. Management believes that Free Cash Flow is an important measure of performance and it is utilized as one measure of the Company's ability to generate cash. Note that due to other financial obligations and commitments, the entire Free Cash Flow amount may not be available for discretionary purposes.
 
Management believes that the above metrics are useful to investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations and our management of assets held from period to period. These metrics, however, are not a measure of financial performance under GAAP and should not be considered a substitute for sales and revenue growth (decline), or cash flows from operating, investing and financing activities as determined in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies.
 

 
ITT Corporation Non-GAAP Reconciliation
Reported vs. Organic Revenue / Order Growth
First Quarter 2010 & 2009
               
($ Millions)
 
                           
(As Reported - GAAP) (As Adjusted - Organic)
 
(A) (B) (C) (D) (E) = B+C+D (F) = E / A

Revenue
3M 2010

Revenue
3M 2009

Change
2010 vs. 2009

% Change
2010 vs. 2009

Acquisition /
Divestitures
3M 2010

FX Contribution
3M 2010

Change
Adj. 10 vs. 09

% Change
Adj. 10 vs. 09
 
 
ITT Corporation - Consolidated 2,636 2,557 79 3.1% (13) (50) 16 0.6%
 
Defense & Information Solutions 1,450 1,508 (58) -3.8% 0 0 (58) -3.8%
Electronic Systems 508 676 (168) -24.9% 0 0 (168) -24.9%
Geospatial Systems 297 275 22 8.0% 0 0 22 8.0%
Information Systems 651 575 76 13.2% 0 0 76 13.2%
 
Fluid Technology 801 744 57 7.7% (16) (42) (1) -0.1%
Water & WasteWater 378 344 34 9.9% (4) (32) (2) -0.6%
Residential and Commercial Water Group 267 238 29 12.2% (12) (6) 11 4.6%
Industrial Process 172 184 (12) -6.5% 0 (5) (17) -9.2%
 
Motion & Flow Control 387 306 81 26.5% 3 (8) 76 24.8%
Motion Technologies 169 113 56 49.6% 0 (5) 51 45.1%
Interconnect Solutions 98 87 11 12.6% 0 (2) 9 10.3%
Control Technologies 66 64 2 3.1% 1 0 3 4.7%
Flow Control 54 43 11 25.6% 2 (1) 12 27.9%
 
 

Orders
3M 2010

Orders
3M 2009

Change
2010 vs. 2009

% Change
2010 vs. 2009

Acquisition
Contribution
3M 2010

FX Contribution
3M 2010
Change
Adj. 10 vs. 09
% Change
Adj. 10 vs. 09
 
Defense & Information Solutions 1,256 1,504 (248) -16.5% 0 0 (248) -16.5%
 
Fluid Technology 890 802 88 11.0% (17) (47) 24 3.0%
 
Motion & Flow Control 374 281 93 33.1% 3 (6) 90 32.0%
 
Total Segment Orders 2,518 2,586 (68) -2.6% (14) (53) (135) -5.2%
 
Note: Excludes intercompany eliminations.
 

ITT Corporation
Segment Operating Income & OI Margin
First Quarter of 2010 & 2009
       
($ Millions)
 
 

Q1 2010

Q1 2009

%

 

 

Change 10 vs.

As Reported As Reported

09

 
Revenue:
Defense & Information Solutions 1,450 1,508 -3.8 %
Fluid Technology 801 744 7.7 %
Motion & Flow Control 387 306 26.5 %
Intersegment eliminations (2 ) (1 ) 100.0 %
Total Revenue 2,636   2,557   3.1 %
 
Operating Margin:
Defense & Information Solutions 10.1 % 10.9 % (80 ) BP
Fluid Technology 11.4 % 9.3 % 210 BP
Motion & Flow Control 14.2 % 9.2 % 500   BP
Total Operating Segments 11.1 % 10.2 % 90   BP
 
 
Income:
Defense & Information Solutions 146 164 -11.0 %
Fluid Technology 91 69 31.9 %
Motion & Flow Control 55   28   96.4 %
Total Segment Operating Income 292   261   11.9 %
 

 
ITT Corporation Non-GAAP Reconciliation
Reported vs. Adjusted Income from Continuing Operations & Adjusted EPS
First Quarter of 2010 & 2009
                           
($ Millions, except EPS and shares)
 

Q1 2010
As Reported

Q1 2010
Adjustments
Q1 2010
As Adjusted
Q1 2009
As Reported
Q1 2009
Adjustments
Q1 2009
As Adjusted
Change
2010 vs. 2009
As Adjusted
Percent Change
2010 vs. 2009
As Adjusted
 
           
Segment Operating Income 292     292   261     261  
 
Interest Income (Expense) (22 ) (1 )

 #A 

(23 ) (22 ) (22 )
Other Income (Expense) (5 ) (5 ) (3 ) (3 )
Corporate (Expense) (42 )   (42 ) (39 )   (39 )
           
Income from Continuing Operations before Tax 223   (1 ) 222   197     197  
 
           
Income Tax Expense (77 ) 11  

 #B 

(66 ) (10 ) (54 )

 #C 

(64 )
           
Income from Continuing Operations 146   10   156   187   (54 ) 133  
 
           
Diluted EPS from Continuing Operations 0.79   0.05   0.84   1.02   (0.30 ) 0.72  

$0.12

 

16.7 %
 
 
#A - Interest refund related to prior year tax settlement.
#B - Primarily related to a reduction of deferred tax assets associated with the U.S. Patient Protection and Affordable Care Act (the Healthcare Reform Act).
#C - Primarily the reversal of a deferred tax liability no longer required as a result of the restructuring of certain international legal entities.
 

 
ITT Corporation Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Free Cash Flow
First Quarter of 2010 & 2009
       

($ Millions)

 
 
3M 2010 3M 2009
 
Net Cash - Operating Activities 77 213
 
Capital Expenditures (52) (48)
 
Free Cash Flow 25 165
 
Income from Continuing Operations 146 187
 
Free Cash Flow Conversion 17% 88%
 
 
Non-Cash Special Tax Items 11 (58)
 
Income from Continuing Operations, Excluding
Non-Cash Special Tax Items
157 129
 
Adjusted Free Cash Flow Conversion 16% 128%
 

 
ITT Corporation
Debt Coverage Ratios 2010 & 2009
($ Millions)
   
 
March 30, 2010 December 30, 2009
 
Net Debt/Net Capitalization 16.5 % 7.0 %
Total Debt/Total Capitalization 29.7 % 28.0 %
 
 
Short Term Debt 289 75
Long Term Debt 1,365   1,431  
Total Debt 1,654 1,506
Cash & Cash equivalents 880   1,216  
Net Debt 774 290
 
 
Total Shareholders' Equity 3,919 3,878
Net Debt 774   290  
Net Capitalization 4,693 4,168



Contact:

ITT Corporation
Jenny Schiavone, +1-914-641-2160
Email Contact