(Source: Business Wire)
ITT Corporation (NYSE: ITT) today reported third quarter 2009 net income
from continuing operations of $66 million, or $0.36 per share. When
adjusted to exclude special items, income from continuing operations for
the quarter was $190 million, or $1.03 per share, exceeding the previous
guidance mid-point by $0.18. The Company raised its adjusted full-year
earnings forecast to $3.70 to $3.74 per share, excluding special items.
The third quarter 2009 results included improved operating performance
primarily driven by productivity initiatives. Revenue for the quarter
was $2.7 billion, down six percent year-over-year and down four percent
excluding the impacts of foreign exchange and acquisitions on a
comparable basis. Year-to-date free cash flow generation of $916 million
set another record for ITT and represents a 174 percent conversion of
income from continuing operations, excluding special items primarily
related to the charge for asbestos liability.
"We believe ITT's performance continues to validate the benefits of a
balanced portfolio that is focused on addressing a diversified set of
enduring issues such as clean water and global safety and security,"
said Steve Loranger, ITT's chairman, president and chief executive
officer. "While market challenges will remain into the near future, we
believe the Company is doing what is required to emerge from the current
economic environment as a much stronger company that is well positioned
to grow and improve its financial performance over time."
In the third quarter 2009, ITT completed the effort described in its
2008 10-K and 2009 10-Qs to summarize existing asbestos claims and to
develop an estimate of future claims, associated legal costs and
insurance receivables. These claims are associated with certain ITT
products, primarily pumps sold prior to 1985 that include gaskets and
packing that allegedly contain asbestos and were manufactured by other
companies.
Accordingly, the Company has recorded a special charge to continuing
operations of $131 million after tax, or $0.71 per share, in the third
quarter. The charge is based on a widely accepted external model,
customized for ITT using relevant population data and the Company's
historical experience. The Company used this model to project future
asbestos-related claims over the next 10 years, offset by expected
insurance recoveries. The net liability represents a quantification of
pre-existing exposures and does not reflect any new or increased
exposure for ITT. The charge and associated net liability after
insurance receivables are not projected to materially impact the
Company's 10-year forecasted net annual cash flows. The Company will
continually update the estimated liability on a rolling 10-year basis
and will record an adjustment to earnings if or when required.
Earnings Guidance Raised
As a result of its third quarter performance, ITT forecasts its
full-year earnings, excluding special items, to be $3.70 to $3.74 per
share. ITT is raising its guidance range from the prior earnings
forecast of $3.50 to $3.70 per share. Full-year 2009 revenue is expected
to be unchanged from previous guidance in the range of $10.9 billion to
$11.0 billion.
"We believe our strong performance during the third quarter and our
projected growth outlook for the remainder of the year underscore what
ITT can accomplish by concentrating on execution and meeting our
commitments," said Loranger. "We remain focused on performance and
growing value across our balanced portfolio of businesses, while working
diligently to understand and address the needs of our diverse customer
base and continuing to increase our investments for future organic
growth."
2009 Third Quarter Business Segment Results
Defense Electronics & Services
For the third quarter of 2009, revenue for the segment was $1.57
billion, up two percent over the comparable period in 2008. The
segment recorded revenue growth at every value center, except for the
Communications Systems division, where the expected reduction in
domestic SINCGARS radio deliveries resulted in a negative comparison.
Most notably, increased deliveries of airborne electronics systems and
new program wins at the Company's Systems division fueled revenue
growth.
Third quarter operating income of $203.3 million grew 8.3 percent from
2008 third quarter levels. Operating margins expanded 80 basis points
on strong productivity gains and favorable performance on fixed price
contracts.
During the third quarter of 2009, the segment secured a position to
develop jamming capabilities for dismounted, mounted and fixed site
assets of the Joint Counter Radio-Controlled Improvised Explosive
Device (RC-IED) or CREW 3.3 program. This system represents the next
generation of counter-IED technology development, moving from
platform-based solutions to data collection and networking sensors to
increase awareness of the regional battlespace. This system increases
friendly forces' ability to detect and respond to these insidious
threats. Defense & Electronics Services also received orders for
production of other versions of next generation jammers that are
designed to protect the warfighter against the ever-changing and
evolving RC-IED threat.
Additionally, the segment received an order in early October to build
two imaging systems for geostationary satellites for an international
customer, which will provide round-the-clock weather forecasts and
severe weather alerts. This win represents our largest space system
designed for an international customer to date.
Fluid Technology
Third quarter 2009 revenue for the segment was $826 million, down 13
percent year-over-year and 10 percent organically. Our results
outperformed expectations, despite challenged industrial, municipal
and residential market conditions.
Segment operating performance was strong due to the impact of cost
measures earlier in the year. This was more than offset by higher
restructuring costs, the impact of foreign exchange transactions and
pension costs, resulting in an 18 percent decline in operating income
to $108 million, and an 80 basis-point decline in operating margin.
While general market weakness remains, Fluid Technology saw order
activity stabilizing across the fluid segment in the third quarter
after recent declines, and saw its first significant orders resulting
from U.S. stimulus funding involving a number of municipal water
treatment and transport projects. The Water and Wastewater business
also secured a significant order in Spain for the largest drinking
water treatment plant in Europe, to include ITT's ozone generators,
filters, pumps and a pressure booster set. New investments by
development banks and municipalities in China are resulting in more
order activity for ITT.
ITT opened a new packaging and service center in Dammam, Saudi Arabia.
The facility will be key to the company's ongoing penetration of the
strategic oil and gas market in Saudi Arabia and the surrounding Gulf
region.
Motion & Flow Control
Segment revenue for the third quarter 2009 was $307 million, down 22
percent in total and 16 percent organically compared to the prior
year. Revenue in the automotive market exceeded expectations,
primarily due to recent stimulus activity in Europe, while performance
in general industrial markets met expectations, despite some
contraction. Rail markets in Europe also showed gains.
Operating income for the segment was $40 million, down significantly
year-over-year due to lower volume. Segment operating margin declined
100 basis points, with lower volume, restructuring and the impact of
foreign exchange transactions more than offsetting significant
improvements in productivity.
Motion & Flow Control is benefiting from increased activity in the
global rail market. Motion Technologies received a $2.1 million order
for service part kits from locomotive manufacturer Electro Motive
Diesel (EMD), with deliveries beginning in January 2010.
Control Technologies received a $1.4 million order for large shock
absorbers from Universal Safety Response, a company that designs and
sells non-lethal security barriers that can stop large vehicles from
crashing into sensitive installations.
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/investors.
For non-GAAP reconciliations, refer to www.itt.com/ir.
About ITT Corporation
ITT Corporation is a high-technology engineering and manufacturing
company operating on all seven continents in three vital markets: water
and fluids management, global defense and security, and motion and flow
control. With a heritage of innovation, ITT partners with its customers
to deliver extraordinary solutions that create more livable
environments, provide protection and safety and connect our world.
Headquartered in White Plains, N.Y., the company generated 2008 sales of
$11.7 billion. www.itt.com
Safe Harbor Statement
Certain material presented herein includes forward-looking statements
intended to qualify for the safe harbor from liability established by
the Private Securities Litigation Reform Act of 1995 ("the Act"). These
forward-looking statements include statements that describe the
Company's business strategy, outlook, objectives, plans, intentions or
goals, and any discussion of future operating or financial performance.
Whenever used, words such as "anticipate," "estimate," "expect,"
"project," "intend," "plan," "believe," "target" and other terms of
similar meaning are intended to identify such forward-looking
statements. Forward-looking statements are uncertain and to some extent
unpredictable, and involve known and unknown risks, uncertainties and
other important factors that could cause actual results to differ
materially from those expressed in, or implied from, such
forward-looking statements. Factors that could cause results to differ
materially from those anticipated include: Economic, political and
social conditions in the countries in which we conduct our businesses;
Changes in government defense budgets; Decline in consumer spending;
Sales and revenues mix and pricing levels; Availability of adequate
labor, commodities, supplies and raw materials; Interest and foreign
currency exchange rate fluctuations; Competition and industry capacity
and production rates; Ability of third parties, including our commercial
partners, 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; 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 10âK for the fiscal year ended December 31, 2008
and our other filings with the Securities and Exchange Commission.
The Company undertakes no obligation to update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Exception caught in main.
ITT CORPORATION AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In millions) (Unaudited)
September 30, December 31,
2009 2008
Assets
Current Assets:
Cash and cash equivalents $ 1,347.7 $ 964.9
Receivables, net 1,819.6 1,961.1
Inventories, net 815.4 803.8
Deferred income taxes 209.4 203.4
Other current assets (a) 204.7 131.0
Total current assets 4,396.8 4,064.2
Plant, property and equipment, net 998.0 993.9
Deferred income taxes 853.1 608.5
Goodwill, net 3,867.2 3,831.3
Other intangible assets, net 545.1 616.5
Asbestos-related assets 601.6 201.2
Other non-current assets 282.6 164.6
Total assets $ 11,544.4 $ 10,480.2
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 1,274.5 $ 1,234.6
Accrued expenses (b) 1,079.6 991.2
Accrued taxes 110.0 30.2
Short-term debt and current maturities of long-term debt 242.8 1,679.0
Pension and postretirement benefits 68.8 68.8
Deferred income taxes 27.9 26.7
Total current liabilities 2,803.6 4,030.5
Pension and postretirement benefits 2,149.1 2,141.6
Long-term debt 1,439.7 467.9
Asbestos-related liabilities 852.7 225.9
Other non-current liabilities 711.2 554.4
Total liabilities 7,956.3 7,420.3
Shareholders' equity 3,588.1 3,059.9
Total liabilities and shareholders' equity $ 11,544.4 $ 10,480.2
(a)2009 includes asbestos-related assets of $57.4.
(b)2009 includes asbestos-related liabilities of $64.7.
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Exception caught in main.
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.
