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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 23, 2003
ITT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana 1-5627 13-5158950
--------------- -------------- ----------------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
organization)
4 West Red Oak Lane
White Plains, New York 10604
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 641-2000
(Former name or former address if changed since last report)
ITEM 9. Regulation FD Disclosure
The following information is furnished pursuant to Item 9 "Regulation FD
Disclosure" and Item 12 "Results of Operations and Financial Condition." This
information shall not be deemed filed for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") or incorporated
by reference into any filing under the Securities Act of 1933, as amended, or
the Exchange Act, except as shall be expressly set forth by specific reference
in such filing.
On October 23, 2003 ITT Industries, Inc. issued a press release announcing its
earnings for the third quarter of 2003. This press release is attached and
incorporated by reference herein as Exhibit 99.1.
Exhibit Index
(99.1) Press release dated: October 23, 2003 issued by ITT Industries, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ITT INDUSTRIES, INC.
By:
-------------------------------
Kathleen S. Stolar
Its: Vice President, Secretary
and Associate General Counsel
Date: October 23, 2003
Exhibit 99.1
ITT Industries Reports Third Quarter EPS of $1.16;
$0.96 Before Benefit of Special Items
* Revenues up 11 percent, up 5 percent excluding acquisitions and foreign
exchange
* Defense revenues up 16 percent; robust order activity keeps backlog
over $3 billion
* Water/Wastewater revenue up 20 percent, organic revenue up 10 percent
* EC meets guidance, sees increased order activity in wireless handsets
* Company raises full year cash, revenue guidance
WHITE PLAINS, N.Y., Oct. 23 /PRNewswire-FirstCall/ -- ITT Industries, Inc.
(NYSE: ITT) today announced third quarter 2003 net income of $109.2 million
and diluted earnings per share of $1.16, which includes a net positive
$0.20 per share impact from special items; excluding the benefit of these
special items, third quarter 2003 adjusted earnings were $90.8 million or
$0.96 per share. These figures compare to third quarter 2002 EPS of $1.28,
which included a net $0.34 positive impact from special items, and adjusted
earnings of $88.6 million or $0.94 per share. The third quarter 2003 adjusted
earnings reflects a $2.2 million or $0.02 per share increase over the
comparable figure in the third quarter 2002.
"Our performance in the third quarter was highlighted by strong organic
revenue and cash growth," said Lou Giuliano, Chairman, President, and Chief
Executive Officer of ITT Industries. "I think this is noteworthy given the
challenges within our Electronic Components (EC) business. EC met our
expectations in the quarter, and recent increases in order activity within the
segment's mobile handset business and new product introductions give me
confidence that EC will show improvement going forward."
"Additionally, ITT Industries' Defense segment continues its growth trend,
posting a 16 percent gain in revenues in the third quarter, with revenues up
in nearly every area. The Fluid Technology business remains a steady growth
platform, led by the Water/Wastewater businesses' 10 percent organic revenue
growth, and the Motion & Flow Control businesses continue to perform well
despite challenging end-market conditions."
"Our stronger than expected cash flow during the quarter enables us to
raise cash flow guidance for the full year," Giuliano said. "We reduced our
debt during the quarter, giving us greater flexibility to invest in our
businesses and pursue acquisitions where they can enhance our competitive
position."
Financial Highlights
* Third quarter 2003 revenues rose 11 percent to $1.38 billion, due
mainly to growth in Defense and Fluid Technology and the positive
impact of foreign currency translation. Organic revenue growth
(excluding foreign currency translation and acquisitions) was 5 percent
for the corporation.
* Third quarter 2003 EPS of $1.16 includes a net $0.20 positive impact
from special items, including a $0.21 per share positive impact from
two tax settlements and a gain on the sale of an investment, offsetting
a $0.01 per share charge for restructuring actions.
* Cash from operations significantly exceeded expectations, with the
company's year-to-date 2003 cash from operations totaling $269 million,
which includes the impact of a voluntary $200 million contribution to
the U.S. salaried pension plan. Year-to-date free cash flow --
defined as cash from operations (prior to pension contribution) minus
capital expenditures -- was $372 million.
* The company reduced its debt by more than $230 million during the
quarter.
* Growth at Fluid Technology and Defense more than offset the anticipated
decline at EC, resulting in a 1 percent improvement in operating income
to $152.6 million in the quarter.
* The company continues to see the benefit from improvements implemented
through its Value-Based Six Sigma program, with a significant impact in
increased sales and savings over the last two years.
"Looking ahead, we are encouraged by improvements in Electronic
Components, and continued growth in our other businesses," Giuliano said.
"Based on our reported results so far this year, and given the positive impact
of a number of special items realized during the year, we expect full-year
GAAP EPS of $4.10-$4.16, and full-year adjusted EPS of $3.82-$3.88. Further,
we are raising our full year cash targets by $50-60 million, and we expect
full year revenues to increase 10-12 percent."
Third Quarter Segment Highlights
Fluid Technology
* Third quarter 2003 FTC revenues rose 16 percent or $79.4 million to
$564.1 million, driven by organic growth in water/wastewater,
acquisitions and the positive impact of foreign currency translation.
Operating income was up 15 percent or $9.4 million to $74.3 million,
while operating margin declined 20 basis points, due to charges for
restructuring.
* The water/wastewater business continues its growth trend, with revenues
up 20 percent and orders up 17 percent, following a strategy of taking
products into new markets. Excluding acquisitions and currency
translation, the revenue growth for water and wastewater was 10 percent
for the quarter. The business secured three $1 million orders for
wastewater pumps and services, two in China and one in France.
* The segment's Sanitaire filtration division received $12 million in
system and installation orders from the United Arab Emirates for
desalinization plant projects during the quarter.
* Improved orders for custom industrial pumps in the Middle East and
Asia-Pacific contributed to a 10 percent increase in revenue in this
business, more than offsetting continued softness in the chemical and
pulp/paper markets.
Defense Electronics & Services
* Revenues for Defense Electronics & Services were $445.9 million in the
third quarter, up 16 percent or $62.4 million over the third quarter
2002, on higher international sales of radars, services and secure
communication systems. Operating income rose 19 percent or
$7.6 million to $48.1 million, and operating margin increased 20 basis
points.
* The company's Systems and Advanced Engineering & Sciences units
continue to gain new service contracts, contributing to an overall
Defense backlog of $3.02 billion at the end of the third quarter.
* The company's Advanced Engineering & Sciences division has won several
multi-year contracts totaling more than $450 million to provide
engineering and IT service support for a broad range of government
agencies, including a contract to analyze ways to safeguard U.S.
interests from chemical, biological and radiological weapons.
* The company sees continued growth opportunities in its service
businesses, in addition to defense spending. Contracts won during the
third quarter include a $274 million initial 5-year contract to provide
technical support for NASA's Deep Space Network program, with options
for an additional 5 years worth up to $306 million, bringing the total
potential value to $580 million over ten years.
Motion & Flow Control
* Third quarter MFC revenues increased 1 percent or $2.6 million to
$223 million, due to the positive impact of foreign currency
translation. Operating income declined $1 million to $28.7 million and
operating margin declined 60 basis points, due primarily to charges
related to restructuring.
* ITT's automotive tubing business felt the effects of a slowdown in the
North American auto build rate and platform losses during the quarter.
This decline was partially offset by market share gains at the
company's Motion Control business.
* The company's marine businesses realized a 6 percent revenue increase
in the quarter, with more than 30 percent of revenues coming from new
products.
Electronic Components
* EC revenues declined 2 percent or $3.4 million in the quarter to
$143.8 million, with growth in the transportation and consumer
businesses, acquisitions and the positive impact of foreign currency
translation more than offset by continued weakness in the
telecommunications and commercial aerospace markets. Operating income
fell $14.9 million to $1.5 million, with a corresponding decline in
margin, attributable to unfavorable changes in product mix, ongoing
price pressures and manufacturing transition costs.
* EC's book-to-bill ratio strengthened to 1.02 in the third quarter, its
highest level since the first quarter 2002.
* The company's keypad and dome array businesses are gaining momentum
securing orders for new products on wireless handset models produced by
Motorola, Nokia, Siemens and a number of Chinese domestic producers.
* New products developed during the year are now in the marketplace. A
new universal contact has been designed into products at Motorola,
Sagem, Alcatel and Volvo. The company's photonic high-speed
connector, originally designed for the communications market, is being
adapted for defense applications, with orders from Boeing, Raytheon,
Northrup and Harris.
NOTE: ITT Industries 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 growth by utilizing an
organic revenue growth measure that excludes 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 and organic revenue 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.
About ITT Industries
ITT Industries, Inc. (www.itt.com) supplies advanced technology products
and services in key markets including: electronic interconnects and switches;
defense communication, opto-electronics, information technology and services;
fluid and water management and other specialty products. Headquartered in
White Plains, NY, the company generated $4.99 billion in 2002 sales.
In addition to the New York Stock Exchange, ITT Industries stock is traded
on the Midwest and Pacific exchanges.
Certain material presented herein consists of forward-looking statements
which 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. Such factors
include general economic conditions, foreign currency exchange rates,
competition and other factors all as more thoroughly set forth in Item 1.
Business and Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations - Forward-Looking Statements in the ITT
Industries, Inc. Form 10-K Annual Report for the fiscal year ended December
31, 2002, and other of its filings with the Securities and Exchange
Commission.
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(In millions, except per share)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
Sales and revenues $1,375.2 $1,235.1 $4,109.8 $3,741.0
Costs of sales and revenues 903.7 798.8 2,699.7 2,435.4
Selling, general and
administrative expenses 195.9 170.6 594.8 523.1
Research, development and
engineering expenses 137.2 130.7 409.4 386.8
Restructuring and other
asset impairments 1.6 (1.7) 17.9 (1.7)
Total costs and expenses 1,238.4 1,098.4 3,721.8 3,343.6
Operating income 136.8 136.7 388.0 397.4
Interest expense (income),
net (5.3) 5.6 (14.6) 27.5
Miscellaneous expense (income) 2.0 (0.9) 4.8 (3.9)
Income from continuing
operations before
income taxes 140.1 132.0 397.8 373.8
Income tax expense 37.6 11.6 116.5 89.0
Income from continuing
operations 102.5 120.4 281.3 284.8
Discontinued operations,
including tax income of
$6.3 and $6.1 in each period,
respectively 6.7 -- 14.5 --
Net income $109.2 $120.4 $295.8 $284.8
Earnings Per Share:
Income from continuing
operations:
Basic $1.11 $1.31 $3.06 $3.14
Diluted $1.09 $1.28 $2.99 $3.05
Discontinued operations:
Basic $0.07 $ - $0.15 $ -
Diluted $0.07 $ - $0.15 $ -
Net income:
Basic $1.18 $1.31 $3.21 $3.14
Diluted $1.16 $1.28 $3.14 $3.05
Average Common Shares -
Basic 92.3 91.7 92.1 90.7
Average Common Shares -
Diluted 94.3 94.2 94.0 93.4
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
September 30, December 31,
2003 2002
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $312.3 $202.2
Receivables, net 1,033.3 868.3
Inventories, net 600.6 552.9
Other current assets 80.3 77.1
Total current assets 2,026.5 1,700.5
Plant, property and equipment, net 840.5 841.2
Deferred income taxes 470.4 546.3
Goodwill, net 1,596.3 1,550.5
Other intangible assets, net 84.4 74.9
Other assets 821.3 676.2
Total assets $5,839.4 $5,389.6
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $571.0 $484.0
Accrued expenses 702.6 725.3
Accrued taxes 294.6 221.3
Notes payable and current maturities of
long-term debt 272.2 299.6
Total current liabilities 1,840.4 1,730.2
Pension and postretirement benefits 1,642.2 1,629.0
Long-term debt 465.8 492.2
Other liabilities 407.3 400.9
Total liabilities 4,355.7 4,252.3
Shareholders' equity 1,483.7 1,137.3
Total liabilities and shareholders' equity $5,839.4 $5,389.6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine Months Ended
September 30,
2003 2002
Operating Activities
Net income $295.8 $284.8
Discontinued operations, net (14.5) --
Income from continuing operations 281.3 284.8
Adjustments to income from continuing operations:
Depreciation and amortization 138.7 125.3
Restructuring and other asset impairments 17.9 (1.7)
Payments for restructuring (14.9) (25.6)
Change in receivables (147.6) (102.9)
Change in inventories (14.6) 16.6
Change in accounts payable and accrued expenses 26.6 49.1
Change in accrued and deferred taxes 172.1 97.3
Change in other current and non-current assets (191.6) (2.3)
Change in other non-current liabilities (7.0) (13.2)
Other, net 8.3 2.3
Net Cash - operating activities 269.2 429.7
Investing Activities
Additions to plant, property and equipment (97.0) (83.7)
Acquisitions (44.1) (103.7)
Proceeds from sale of assets and businesses 9.3 8.6
Sale of investments 43.5 --
Other, net 0.1 (1.7)
Net Cash - investing activities (88.2) (180.5)
Financing Activities
Short-term debt, net (12.0) (223.0)
Long-term debt repaid (40.3) (2.8)
Long-term debt issued 0.3 0.4
Repurchase of common stock (32.2) (29.2)
Proceeds from issuance of common stock 27.9 88.4
Dividends paid (43.2) (40.5)
Other, net 0.2 (0.1)
Net Cash - financing activities (99.3) (206.8)
Exchange Rate Effects on Cash and Cash Equivalents 12.3 3.3
Net Cash - Discontinued Operations 16.1 19.0
Net change in cash and cash equivalents 110.1 64.7
Cash and cash equivalents - beginning of year 202.2 121.3
Cash and Cash Equivalents - End of Period $312.3 $186.0
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Third Quarter of 2003 & 2002
($ Millions, except EPS and shares)
Change
Q3 2003 Q3 2003 Q3 2003 Q3 2002 Q3 2002 Q3 2002 2003 vs. 2002
As Adjust- As As Adjust- As As
Reported ments Adjusted Reported ments Adjusted Adjusted
Segment
Operating
Income 152.6 1.6 #A 154.2 151.5 (1.7)#F 149.8
Interest
Income
(Expense) 5.3 (10.2)#B (4.9) (5.6) -- (5.6)
Other
Income
(Expense) (2.0) -- (2.0) 0.9 -- 0.9
Corporate
(Expense) (15.8) -- (15.8) (14.8) -- (14.8)
Income from
Continuing
Operations
before Tax 140.1 (8.6) 131.5 132.0 (1.7) 130.3
Income Tax
Expense (37.6) 2.6 #C (34.9) (11.6) 0.5 #G (11.1)
Income Tax
Settlements 0.0 (5.9)#D (5.9) 0.0 (30.6)#H (30.6)
Total Tax
Expense (37.6) (3.2) (40.8) (11.6) (30.1) (41.7)
Income from
Continuing
Operations 102.5 (11.8) 90.8 120.4 (31.8) 88.6
Income from
Discontinued
Operations 6.7 (6.7)#E 0.0 0.0 0.0 0.0
Net Income 109.2 (18.5) 90.8 120.4 (31.8) 88.6 2.2
1.16 (0.20) 0.96 1.28 (0.34) 0.94 $0.02
#A - Remove Restructuring Expense of $1.6M
#B - Remove Interest Income - Sale of Investment & Tax Settlement ($10.2M)
#C - Tax Effect of Adjustments #A & #B $2.6M
#D - Remove Income from Tax Settlement ($5.9M)
#E - Remove Income Primarily from Tax Settlement ($6.7M)
#F - Remove Income from Reversal of Restructuring Charges ($1.7M)
#G - Tax Effect of Adjustment #F $.5M
#H - Remove Income from Tax Settlement ($30.6M)
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue Growth
Third Quarter of 2003 & 2002
($ Millions)
(As Reported - GAAP)
Sales & Sales & %
Revenues Revenues Change Change
Q3 Q3 2003 vs. 2003 vs.
2003 2002 2002 2002
ITT Industries - Consolidated 1,375.2 1,235.1 140.1 11%
Fluid Technology 564.1 484.7 79.4 16%
Water / Waste Water 362.8 301.6 61.2 20%
As Adjusted - Organic)
Acquisition FX Adj. Change % Change
Sales & Contri- Contri- Sales Sales & Adj. Adj.
Revenues bution bution & Revenues 03 03
Q3 Q3 Q3 Q3 Q3 vs. vs.
2003 2003 2003 2003 2002 02 02
ITT
Industries -
Consolidated 1,375.2 (31.8) (43.8) 1,299.6 1,235.1 64.5 5%
Fluid
Technology 564.1 (21.8) (24.9) 517.4 484.7 32.7 7%
Water /
Waste
Water 362.8 (9.3) (23.1) 330.4 301.6 28.8 10%
ITT Industries Non-GAAP Press Release Reconciliation
Cash From Operating Activities vs. Free Cash Flow
Third Quarter 2003 & 2002
($ Millions)
9M 03 9M 02
Income from Continuing Ops 281.3 284.8
Depreciation 123.6 113.2
Amortization 15.1 12.1
Working Capital (91.3) (35.6)
Pension Pre-funding (200.0) 0.0
Other 140.5 55.2
Cash from Operations 269.2 429.7
Capital Expenditures (97.0) (83.7)
Pension Pre-funding 200.0 0.0
Free Cash Flow 372.2 346.0
ITT Industries Non-GAAP Press Release Slide Reconciliation
2003 Reported vs. Adjusted EPS
Q4 Range Full Year Range
Q1 Q2 Q3 Q4 Q4 FY FY
2003 2003 2003 2003 2003 2003 2003
Actual Actual Actual Forecast Forecast Forecast Forecast
Diluted Earnings
Per Share - GAAP $0.92 $1.06 $1.16 $0.96 $1.02 $4.10 $4.16
Other Adjustments* (0.17) (0.08) (0.21) -- -- (0.46) (0.46)
Restructuring 0.08 0.04 0.01 0.05 0.05 0.18 0.18
Adjusted Earnings
Per Share -
NON-GAAP $0.83 $1.02 $0.96 $1.01 $1.07 $3.82 $3.88
* Please refer to Reported vs. Adjusted Net Income & EPS Reconciliation
for details on Other Adjustments