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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): January 23, 2004
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
------------------------------------------ ---------------------
(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 January 23, 2004 ITT Industries, Inc. issued a press release providing its
financial results for the fourth quarter of 2003 and the year ended December 31,
2003. A copy of this press release is attached and incorporated by reference
herein as Exhibit 99.1.
Exhibit Index
(99.1) Press release dated January 23, 2004 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: /S/Kathleen S. Stolar
------------------------------
Kathleen S. Stolar
Its: Vice President, Secretary
and Associate General Counsel
Date: January 23, 2004
Exhibit 99.1
ITT Industries Reports Q4 2003 EPS of $1.15;
$1.05 Before Benefit of Special Items
* Q4 revenues up 22 percent; up 14 percent excluding acquisitions and
foreign exchange
* FY 2003 EPS is $4.29, $3.86 before benefit of special items on revenue
of $5.6 billion
* Cash flow exceeds expectations as company improves working capital
performance
* Company enters high-growth water disinfection market with WEDECO
acquisition
WHITE PLAINS, N.Y., Jan. 23 /PRNewswire-FirstCall/ -- ITT Industries, Inc.
(NYSE: ITT) continued its revenue, earnings and cash flow growth trends,
reporting today fourth quarter 2003 net income of $108.1 million, up
$13 million or 14 percent over the period in 2002, including the impact of one
time items. Diluted earnings per share (EPS) for the quarter, including the
net benefit of special items, was $1.15 up $0.14 per share from reported EPS
in the fourth quarter 2002. During the fourth quarter 2003, the company
realized a $0.20 per share benefit from several tax items, which was partially
offset by $0.01 per share of costs for discontinued operations and $0.09 per
share in restructuring costs. The net effect of these special items was a
$0.10 increase in reported EPS for the fourth quarter. Adjusting results to
exclude the benefit of these special items, earnings for the fourth quarter
2003 were $1.05, up 5 percent over the comparable adjusted figure of $1.00 for
the period in 2002.
"Our focus on new product development and continuous process improvement
are clearly paying off, giving us 14 percent organic revenue growth during the
quarter and continued outstanding cash flow, with 2003 marking the 5th
consecutive year of earnings growth for ITT Industries," said Lou Giuliano,
Chairman, President and Chief Executive Officer. "After a very good 2003, ITT
enters the new year with positive momentum, better positioned than we were
even a few months ago to take advantage of any improvements in our various
markets. The recent performance in orders, sales, operational improvement and
cash flow give me added confidence for continued growth going into 2004. This
is a tribute to our management team and their ability to improve their
competitive positions throughout the economic cycle."
Fourth quarter 2003 segment operating income was $161.9 million, up
$6.4 million from the period in 2002, including charges related to
restructuring. Fourth quarter revenues were up 22 percent to $1.52 billion,
attributable mostly to revenue gains in Defense and Fluid Technology, and the
positive impact of foreign currency translation.
Full Year 2003 Results
Reported net income for the full year 2003 was $403.9 million and EPS was
$4.29, both up 6 percent over the full year 2002. The comparison includes the
$0.65 per share favorable impact of tax refunds, settlements and discontinued
operations, all of which were offset by $0.22 per share net restructuring
costs during the year. Excluding the net $0.43 per share benefit of these
special items, earnings for 2003 were $3.86 per share, up 4 percent over the
adjusted EPS of $3.70 for 2002.
Full year 2003 revenues were $5.63 billion, up 13 percent driven by
increased sales in the Defense, Fluid Technology and Motion & Flow Control
segments and the positive impact of foreign currency translation. Excluding
acquisitions and currency translation, organic revenue growth was 5 percent.
Full year segment operating income was $603.2 million, up $4.9 million over
2002. The company said cash from operations was $576 million, which includes
a $200 million voluntary pre-funding of the company's U.S. salaried pension
plan. Free cash flow (defined as cash from operations before pension
pre-funding, minus capital spending) of $622 million grew 27 percent over the
prior year, especially noteworthy given the revenue increase.
"Three of our four segments performed better than expected through the
year, particularly our Defense business, which posted 18 percent organic
revenue growth due to significant new contract wins," Giuliano said. "Our
water business continues to grow, as we fill out our water treatment portfolio
by entering the high-growth disinfection market, most recently with the
acquisitions of WEDECO and Hengtong, which give us the disinfection technology
and global reach we've needed to grow this dynamic business. In Motion & Flow
Control, orders, sales and profitability are better than we had expected, due
to strength in selected end markets. Through the introduction of new products
and customer service improvements, our Electronic Components group finished
the year in a much improved position and is seeing encouraging orders and
sales increases."
2003 Milestones
* ITT Industries' Defense business continued its record of winning new
contracts, contributing to a more than 18 percent annual increase in
revenues and a record backlog of $3.2 billion in 2003. New contracts
announced during the year include a $74 million order for air traffic
control radars for Taiwan, a $40 million order for systems engineering
support to NASA's Goddard Space Flight Center, and 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.
* ITT Industries continued to execute its strategy of building on strong
core businesses through acquisitions. ITT just completed its tender
offer for more than 88 percent of the shares of WEDECO, the world's
leading provider of ultraviolet and ozone water disinfection
technology. This acquisition, together with the recent purchase of
Hengtong, a China-based water filtration company, continues the
repositioning of ITT's water treatment business to include all key
water treatment technologies in all regions of the world to take
advantage of significant growth potential in this area. In the first
quarter 2003, the company acquired VEAM, a global producer of
electrical connectors, and Wellpoint Uniserve, a provider of
submersible pumps. Together, ITT's recent acquisitions are expected to
account for more than $200 million in annualized revenues.
* ITT Industries' improvement in operating performance was evident in the
dramatic improvement in working capital, particularly in the fourth
quarter when working capital was a source of cash. Strong cash flow
performance enabled the company to reduce net debt to under
$200 million and fund acquisitions in the company's core businesses.
Additionally, the company voluntarily pre-funded its U.S. salaried
pension plan by $200 million in 2003, and $100 million in early 2004.
* ITT Industries Value-Based Six Sigma and Value-Based Product
Development initiatives spread further through the organization.
Value-Based Six Sigma is a key component of the ITT Management System
and is the overarching discipline for operational excellence, improving
processes, accelerating new product introductions and developing
management talent. To date, more than 3 thousand people have been
trained at ITT in the use of these improvement tools.
Outlook for 2004
Looking ahead, the company reaffirmed previous guidance for revenue and
earnings growth in 2004. Giuliano said he anticipates first quarter 2004 EPS
between $0.85 and $0.89. He reiterated full year 2004 earnings expectations
between $4.05 and $4.25. Full year 2004 revenues, adjusting for the recent
acquisitions, are expected to be $5.8 - $6.0 billion.
"We expect to see ongoing benefits of our continuous improvement
initiatives to enhance our operating performance in all areas of the company,"
Giuliano said. "We're positioned to continue our growth trend this year based
on current conditions. If the economic recovery broadens, we would expect our
growth rate to accelerate."
Primary Business Results
Fluid Technology
* Fourth quarter 2003 Fluid Technology revenues rose 17 percent or
$88.9 million to $611.6 million, driven by organic growth in
water/wastewater and the positive impact of foreign currency
translation. Operating income was flat at $66.7 million, and up
$7.6 million to $79.6 million excluding the impact of restructuring.
Full year Fluid Technology revenue rose 15 percent to $2.25 billion,
while operating income rose 8 percent to $271.4 million. While margins
declined 180 basis points for the quarter and 80 basis points for the
year, margins excluding restructuring, the impact of foreign currency
transactions and acquisitions actually grew by 80 basis points for the
quarter and full year.
* The water and wastewater business (including Flygt, Sanitaire and the
Water Technology Division) continues its growth trend, following
ongoing strong demand in international markets. Excluding acquisitions
and currency translation, revenue for the water and wastewater
business grew 7 percent in the quarter.
* The addition of WEDECO to the segment's Sanitaire division positions
the company as the market leader in UV and ozone water disinfection,
which are attractive alternatives to chlorine treatment. Adding
disinfection to the product portfolio has long been a strategic
priority for our Fluid Technology group in the face of new regulations
concerning wastewater treatment and the company sees significant growth
potential in the years ahead. WEDECO is expected to add approximately
$125-$140 million in 2004 revenues. Another recently completed
acquisition, Hengtong, with approximately $8 million in annual sales,
enhances Sanitaire's filtration business in the important Asian market.
Already, the Sanitaire group has won a $4 million order to provide
biological treatment equipment for a project in Singapore.
* The Fluid Technology group is pursuing new business opportunities
related to reconstruction work in Iraq. Most notably, the Industrial
Pump group landed an order for more than $800 thousand for pumps to
help rebuild the country's power system.
Defense Electronics & Services
* Revenues for Defense Electronics & Services rose 45 percent to
$501.2 million in the fourth quarter 2003, up on higher sales in all of
the segment business areas. Fourth quarter operating income rose
41 percent or $16.7 million to $57.9 million, while operating margin
declined by 30 basis points. Full year Defense revenue was up
18 percent to $1.79 billion. Operating income for the full year rose
22 percent to $187.1 million, and operating margin grew by 20 basis
points.
* The company's space business continues to expand, following the
company's long-term strategy of expanding this business by building on
superior performance. Recent contract wins in this area include those
at Aerospace/Communications with the U.S. government's global
positioning satellite system and the Systems division's $580 million
10-year Deep Space Network (DSN) contract. ITT now maintains the
communications, antennas, command and control systems and software for
DSN at the Jet Propulsion Laboratory. These and other contract wins
contributed to an overall Defense backlog of $3.2 billion at the end of
the fourth quarter.
* The company continues to receive significant additional orders for its
SINCGARS military radios and Night Vision equipment both from the U.S.
and from allied nations, extending the success of these long-running
programs.
Motion & Flow Control
* Fourth quarter Motion & Flow Control (MFC) revenues increased 9 percent
or $21.1 million to $248.5 million, due to revenue growth in the
friction materials and leisure marine businesses and the positive
impact of foreign currency translation. Operating income grew
5 percent to $30.9 million and operating margin declined 50 basis
points, due primarily to a decline in volume in the automotive tubing
business. Full year 2003 MFC revenues were up 6 percent to
$992.3 million. Operating income for the year was up 10 percent to
$134.7 million.
* ITT's motion control businesses saw sales increase 33 percent even in a
flat automotive market, due primarily to key platform wins in Europe
and growth in aftermarket revenues. This business now accounts for
approximately 30 percent of MFC's revenues, compared to 25 percent in
2002.
* The company's leisure marine businesses under the Jabsco brand name
realized 21 percent organic growth in the quarter and 9 percent
organic growth for the full year. This success is built on the
company's expanding capabilities in the marine and RV markets. Most
recently, the company won its first design-in contract for a complete
on-board water pressure system for watercraft.
Electronic Components
* Electronic Components (EC) revenues for the fourth quarter 2003 rose
5 percent or $8 million to $158 million, with the acquisition of VEAM,
the positive impact of foreign currency translation and stronger sales
in the mobile handset and military markets more than offsetting
continued weakness in commercial aerospace. Full year EC revenues rose
3 percent to $600.3 million. Fourth quarter operating income fell to
$6.4 million, and full year operating income declined to $10 million,
both with a corresponding decline in margin, attributable to
unfavorable changes in product mix, ongoing price pressures and
manufacturing transition costs.
* EC's sales and orders continue to increase, with orders growing
23 percent in the fourth quarter over the period in 2002 due to
increased activity in the wireless handset market and new products
introduced in 2003. In the wireless handset business, revenues in the
second half outpaced the first half by 45 percent. EC's book-to-bill
ratio in the fourth
quarter was 1.05, its highest level since the first quarter of 2002.
* The company continues to focus on customer satisfaction through
reduction of lead times utilizing lean initiatives and innovative new
products to grow the EC business. Its new universal contact connector
is being used in an array of consumer, industrial and medical products,
and is expected to generate more than $6 million in sales during 2004.
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: fluid and water management including
water treatment; defense communication, opto-electronics, information
technology and services; electronic interconnects and switches; and other
specialty products. Headquartered in White Plains, NY, the company generated
$5.63 billion in 2003 sales.
In addition to the New York Stock Exchange, ITT Industries stock is traded
on the Midwest, Pacific, Paris and Frankfurt 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 Year
Ended Ended
December 31, December 31,
2003 2002 2003 2002
Sales and revenues $1,516.8 $1,244.3 $5,626.6 $4,985.3
Costs of sales and revenues 983.8 776.5 3,683.5 3,211.9
Selling, general and
administrative expenses 229.9 197.1 824.7 720.2
Research, development and
engineering expenses 150.0 132.3 559.4 519.1
Restructuring and other asset
impairments 12.6 (1.8) 30.5 (3.5)
Total costs and expenses 1,376.3 1,104.1 5,098.1 4,447.7
Operating income 140.5 140.2 528.5 537.6
Interest expense (income), net 4.5 4.9 (10.1) 32.4
Miscellaneous expense (income) 3.1 0.3 7.9 (3.6)
Income from continuing operations
before income taxes 132.9 135.0 530.7 508.8
Income tax expense 23.3 39.9 139.8 128.9
Income from continuing operations 109.6 95.1 390.9 379.9
Discontinued operations, including
tax income /(exp) of $5.3 and
$(0.8) in each period,
respectively (1.5) -- 13.0 --
Net income $108.1 $95.1 $403.9 $379.9
Earnings Per Share:
Income from continuing operations:
Basic $1.18 $1.04 $4.24 $4.17
Diluted $1.16 $1.01 $4.15 $4.06
Discontinued operations:
Basic $(0.01) $ -- $0.14 $ --
Diluted $(0.01) $ -- $0.14 $ --
Net income:
Basic $1.17 $1.04 $4.38 $4.17
Diluted $1.15 $1.01 $4.29 $4.06
Average Common Shares - Basic 92.3 91.8 92.1 91.0
Average Common Shares - Diluted 94.3 94.0 94.1 93.6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
December 31, December 31,
2003 2002
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $414.2 $202.2
Receivables, net 974.6 868.3
Inventories, net 578.5 552.9
Other current assets 138.2 77.1
Total current assets 2,105.5 1,700.5
Plant, property and equipment, net 893.3 841.2
Deferred income taxes 385.8 546.3
Goodwill, net 1,629.1 1,550.5
Other intangible assets, net 75.0 74.9
Other assets 861.4 676.2
Total assets $5,950.1 $5,389.6
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $635.3 $484.0
Accrued expenses 653.4 725.3
Accrued taxes 256.9 221.3
Notes payable and current maturities of
long-term debt 141.5 299.6
Other current liabilities 4.5 --
Total current liabilities 1,691.6 1,730.2
Pension and postretirement benefits 1,439.6 1,629.0
Long-term debt 460.9 492.2
Other liabilities 533.6 400.9
Total liabilities 4,125.7 4,252.3
Shareholders' equity 1,824.4 1,137.3
Total liabilities and shareholders' equity $5,950.1 $5,389.6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Year Ended
December 31,
2003 2002
Operating Activities
Net income $403.9 $379.9
Discontinued operations, net (13.0) --
Income from continuing operations 390.9 379.9
Adjustments to income from
continuing operations:
Depreciation and amortization 188.0 171.4
Restructuring and asset impairments 30.5 (3.5)
Payments for restructuring (25.0) (32.2)
Change in receivables (61.3) 3.7
Change in inventories 31.0 (3.5)
Change in accounts payable and accrued expenses 28.4 34.0
Change in accrued and deferred taxes 167.2 125.2
Change in other current and non-current assets (202.7) (56.7)
Change in other non-current liabilities 25.0 (33.3)
Other, net 3.6 9.8
Net Cash - operating activities 575.6 594.8
Investing Activities
Additions to plant, property and equipment (153.6) (153.2)
Acquisitions (46.2) (159.2)
Proceeds from sale of assets and businesses 17.0 11.6
Sale of investments 43.5 --
Other, net (2.0) (3.2)
Net Cash - investing activities (141.3) (304.0)
Financing Activities
Short-term debt, net (144.1) (235.8)
Long-term debt repaid (42.7) (3.3)
Long-term debt issued 0.3 0.7
Repurchase of common stock (69.7) (32.3)
Proceeds from issuance of common stock 45.3 93.3
Dividends paid (58.0) (54.3)
Net Cash - financing activities (268.9) (231.7)
Exchange Rate Effects on
Cash and Cash Equivalents 35.4 5.3
Net Cash - Discontinued Operations 11.2 16.5
Net change in cash and cash equivalents 212.0 80.9
Cash and cash equivalents - beginning of year 202.2 121.3
Cash and Cash Equivalents - End of Period $414.2 $202.2
ITT Industries Non-GAAP Investor Slide Reconciliation
Reported vs. Adjusted Net Income & EPS
Fourth Quarter of 2003 & 2002
($ Millions, except EPS and shares)
Q4 2003 Q4 2003 Q4 2003
As Reported Adjustments As Adjusted
Segment Operating Income 161.9 12.7 #A 174.6
Interest Income (Expense) (4.5) (4.5)
Other Income (Expense) (3.1) -- (3.1)
Corporate (Expense) (21.4) (0.1) (21.5)
Income from Continuing
Operations before Tax 132.9 12.6 145.5
Income Tax Items (23.3) (19.1)#B (42.4)
Income Tax Expense 0.0 (4.0)#C (4.0)
Total Tax Expense (23.3) (23.1) (46.4)
Income from Continuing
Operations 109.6 (10.5) 99.2
Income from Discontinued
Operations (1.5) 1.5 #D 0.0
Net Income 108.1 (9.0) 99.2
1.15 (0.10) 1.05
Change
2003 vs.
Q4 2002 Q4 2002 Q4 2002 2002
As Reported Adjustments As Adjusted As
Adjusted
Segment Operating Income 155.5 (1.4) #E 154.1
Interest Income (Expense) (4.9) -- (4.9)
Other Income (Expense) (0.3) -- (0.3)
Corporate (Expense) (15.3) -- (15.3)
Income from Continuing
Operations before Tax 135.0 (1.4) 133.6
Income Tax Items (39.9) 0.0 (39.9)
Income Tax Expense 0.0 0.2 #H 0.2
Total Tax Expense (39.9) 0.2 (39.7)
Income from Continuing
Operations 95.1 (1.2) 93.9
Income from Discontinued
Operations 0.0 0.0 0.0
Net Income 95.1 (1.2) 93.9 5.2
1.01 (0.01) 1.00 $0.05
#A - Remove Segment Restructuring Expense of $12.7M
#B - Remove Effect of Several Tax Items ($19.1M)
#C - Tax Effect of Adjustments #A
#D - Remove D.O. Charge $1.5M
#E - Remove Restructuring Reversal of ($1.4M)
#F - Tax Effect of Adjustments #E
ITT Industries Non-GAAP Investor Slide Reconciliation
Reported vs. Organic Revenue Growth
Fourth Quarter of 2003 & 2002
($ Millions)
(As Reported - GAAP)
Sales & Sales & Change % Change
Revenues Revenues 2003 vs. 2003 vs.
Q4 2003 Q4 2002 2002 2002
ITT Industries - Consolidated 1,516.8 1,244.3 272.5 22%
Fluid Technology 611.6 522.7 88.9 17%
Motion & Flow Control 248.5 227.4 21.1 9%
Electronic Components 158.0 150.0 8.0 5%
Water / Waste Water 387.9 322.0 65.9 20%
Water Treatment 37.4 24.7 12.7 51%
Leisure Marine 37.0 29.8 7.2 24%
(As Adjusted - Organic)
Acquisition Adj. Sales
Sales & Revenues Contribution FX Contribution & Revenues
Q4 2003 Q4 2003 Q4 2003 Q4 2003
ITT Industries -
Consolidated 1,516.8 (28.7) (66.3) 1,421.8
Fluid Technology 611.6 (20.1) (37.7) 553.8
Motion & Flow
Control 248.5 0.0 (19.2) 229.3
Electronic
Components 158.0 (8.6) (9.5) 139.9
Water / Waste Water 387.9 (8.1) (35.4) 344.4
Water Treatment 37.4 (6.6) (1.1) 29.7
Leisure Marine 37.0 0.0 (1.0) 36.0
Sales &
Revenues Change % Change
Q4 2002 Adj. 03 vs. 02 Adj. 03 vs. 02
ITT Industries -
Consolidated 1,244.3 177.5 14 %
Fluid Technology 522.7 31.1 6 %
Motion & Flow
Control 227.4 1.9 1 %
Electronic
Components 150.0 (10.1) -7 %
Water / Waste Water 322.0 22.4 7 %
Water Treatment 24.7 5.0 20 %
Leisure Marine 29.8 6.2 21 %
ITT Industries Non-GAAP Investor Slide Reconciliation
Reported vs. Organic Revenue Growth
Full Year 2003 & 2002
($ Millions)
(As Reported - GAAP)
Sales & Revenues Sales & Revenues
12M 2003 12M 2002
ITT Industries - Consolidated 5,626.6 4,985.3
Fluid Technology 2,249.9 1,956.3
Motion & Flow Control 992.3 935.5
Electronic Components 600.3 583.5
Water / Waste Water 1,432.2 1,174.6
Water Treatment 124.0 72.5
Leisure Marine 148.8 132.8
(As Reported - GAAP)
Change % Change
2003 vs. 2002 2003 vs. 2002
ITT Industries - Consolidated 641.3 13%
Fluid Technology 293.6 15%
Motion & Flow Control 56.8 6%
Electronic Components 16.8 3%
Water / Waste Water 257.6 22%
Water Treatment 51.5 71%
Leisure Marine 16.0 12%
(As Adjusted - Organic)
Sales & Acquisition FX
Revenues Contribution Contribution
12M 2003 12M 2003 12M 2003
ITT Industries - Consolidated 5,626.6 (156.6) (243.8)
Fluid Technology 2,249.9 (116.8) (131.1)
Motion & Flow Control 992.3 0.0 (74.6)
Electronic Components 600.3 (39.8) (38.1)
Water / Waste Water 1,432.2 (76.7) (122.4)
Water Treatment 124.0 (39.9) (2.7)
Leisure Marine 148.8 0.0 (4.0)
(As Adjusted - Organic)
Adj. Sales & Sales &
Revenues Revenues Change % Change
12M 2003 12M 2002 Adj. 03 vs. Adj. 03 vs.
02 02
ITT Industries - Consolidated 5,226.2 4,985.3 240.9 5%
Fluid Technology 2,002.0 1,956.3 45.7 2%
Motion & Flow Control 917.7 935.5 (17.8) -2%
Electronic Components 522.4 583.5 (61.1) -10%
Water / Waste Water 1,233.1 1,174.6 58.5 5%
Water Treatment 81.4 72.5 8.9 12%
Leisure Marine 144.8 132.8 12.0 9%
ITT Industries Non-GAAP Investor Slide Reconciliation
Cash From Operating Activities vs. Free Cash Flow
Full Year 2003 & 2002 / Fourth Quarter 2003
($ Millions)
Q4 2003
12M 03 12M 02 12M 03 9M 03 Only
Income from Continuing Ops 390.9 379.9 390.9 281.3 109.6
Depreciation 167.4 152.0 167.4 123.6 43.8
Amortization 20.6 19.4 20.6 15.1 5.5
Working Capital 87.2 48.6 87.2 (91.3) 178.5
Pension Pre-funding (200.0) (50.0) (200.0) (200.0) 0.0
Other 109.5 44.9 109.5 140.5 (31.0)
Cash from Operations 575.6 594.8 575.6 269.2 306.4
Capital Expenditures (153.6) (153.2) (153.6) (97.0) (56.6)
Pension Pre-funding 200.0 50.0 200.0 200.0 0.0
Free Cash Flow 622.0 491.6 622.0 372.2 249.8
1Q Free Cash FY Free Cash Flow
Flow Range Range
1Q 04 1Q 04 FY 04 FY 04
Cash from Operations (60.0) (10.0) 460.0 510.0
Capital Expenditures (40.0) (40.0) (160.0) (160.0)
Pension Pre-funding 100.0 100.0 100.0 100.0
Free Cash Flow 0.0 50.0 400.0 450.0
ITT Industries Non-GAAP Investor Slide Reconciliation
2003 & 2002 Reported vs. Adjusted EPS
Q4 Q1 Q2 Q3 Q4 FY
2002 2003 2003 2003 2003 2003
Actual Actual Actual Actual Actual Actual
Diluted Earnings Per Share -
GAAP $1.01 $0.92 $1.06 $1.16 $1.15 $4.29
Other Adjustments* -- (0.17) (0.08) (0.21) (0.19) (0.65)
Restructuring (0.01) 0.08 0.04 0.01 0.09 0.22
Adjusted Earnings Per Share -
NON-GAAP $1.00 $0.83 $1.02 $0.96 $1.05 $3.86
* Please refer to Reported vs. Adjusted Net Income & EPS Reconciliation
for details on Other Adjustments
ITT Industries Non-GAAP Investor Slide Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
Fourth Quarter of 2003 & 2002
($ Millions)
Q4 2003 Q4 2002 Q4 2003 Adjust for
Change 2003
As As 03 vs. As Restructuring
Reported Reported 02 Reported
Sales and Revenues:
Electronic Components 158.0 150.0 158.0
Defense Electronics
& Services 501.2 345.8 501.2
Fluid Technology 611.6 522.7 611.6
Motion & Flow Control 248.5 227.4 248.5
Intersegment eliminations (2.5) (1.6) (2.5)
Total Ongoing segments 1,516.8 1,244.3 1,516.8
Dispositions and other -- -- --
Total Sales and Revenues 1,516.8 1,244.3 1,516.8
Operating Margin:
Electronic Components 4.1% 12.3% 4.1%
Defense Electronics
& Services 11.6% 11.9% 11.6%
Fluid Technology 10.9% 12.7% 10.9%
Motion & Flow Control 12.4% 12.9% 12.4%
Total Ongoing Segments 10.7% 12.5% 10.7%
Income:
Electronic Components 6.4 18.4 -65.2% 6.4 (1.7)
Defense Electronics
& Services 57.9 41.2 40.5% 57.9 1.0
Fluid Technology 66.7 66.5 0.3% 66.7 12.9
Motion & Flow Control 30.9 29.4 5.1% 30.9 0.5
Total Segment Operating Income 161.9 155.5 4.1% 161.9 12.7
Adjust
for
Q4 2003 Q4 2002 2002 Q4 2002
Restructuring Change
As As As Adj. 03
Adjusted Reported Adjusted vs. 02
Sales and Revenues:
Electronic Components 158.0 150.0 150.0
Defense Electronics & Services 501.2 345.8 345.8
Fluid Technology 611.6 522.7 522.7
Motion & Flow Control 248.5 227.4 227.4
Intersegment eliminations (2.5) (1.6) (1.6)
Total Ongoing segments 1,516.8 1,244.3 1,244.3
Dispositions and other -- -- --
Total Sales and Revenues 1,516.8 1,244.3 1,244.3
Operating Margin:
Electronic Components 3.0% 12.3% 6.9%
Defense Electronics & Services 11.8% 11.9% 11.6%
Fluid Technology 13.0% 12.7% 13.8%
Motion & Flow Control 12.6% 12.9% 13.9%
Total Ongoing Segments 11.5% 12.5% 12.4%
Income:
Electronic Components 4.7 18.4 (8.1) 10.3 -54.4%
Defense Electronics & Services 58.9 41.2 (1.0) 40.2 46.5%
Fluid Technology 79.6 66.5 5.5 72.0 10.6%
Motion & Flow Control 31.4 29.4 2.1 31.5 -0.3%
Total Segment Operating Income 174.6 155.5 (1.5) 154.0 13.4%
ITT Industries Non-GAAP Investor Slide Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
Full Year 2003 & 2002
($ Millions)
12M 2003 12M 2002 12M 2003 Adjust
Change for
As As 03 vs. As 2003
Reported Reported 02 Reported Restructuring
Sales and Revenues:
Electronic Components 600.3 583.5 600.3
Defense Electronics
& Services 1,790.9 1,513.9 1,790.9
Fluid Technology 2,249.9 1,956.3 2,249.9
Motion & Flow Control 992.3 935.5 992.3
Intersegment eliminations (6.8) (3.9) (6.8)
Total Ongoing segments 5,626.6 4,985.3 5,626.6
Dispositions and other -- -- --
Total Sales and Revenues 5,626.6 4,985.3 5,626.6
Operating Margin:
Electronic Components 1.7% 12.1% 1.7%
Defense Electronics
& Services 10.4% 10.2% 10.4%
Fluid Technology 12.1% 12.9% 12.1%
Motion & Flow Control 13.6% 13.1% 13.6%
Total Ongoing Segments 10.7% 12.0% 10.7%
Income:
Electronic Components 10.0 70.4 -85.8% 10.0 10.0
Defense Electronics
& Services 187.1 154.0 21.5% 187.1 1.0
Fluid Technology 271.4 251.5 7.9% 271.4 13.8
Motion & Flow Control 134.7 122.4 10.0% 134.7 4.4
Total Segment Operating
Income 603.2 598.3 0.8% 603.2 29.2
12M 2003 12M 2002 Adjust 12M 2002
for Change
As As 2002 as Adj. 03
Adjusted Reported Restructuring Adjusted vs. 02
Sales and Revenues:
Electronic Components 600.3 583.5 583.5
Defense Electronics
& Services 1,790.9 1,513.9 1,513.9
Fluid Technology 2,249.9 1,956.3 1,956.3
Motion & Flow Control 992.3 935.5 935.5
Intersegment eliminations (6.8) (3.9) (3.9)
Total Ongoing segments 5,626.6 4,985.3 4,985.3
Dispositions and other -- -- --
Total Sales and Revenues 5,626.6 4,985.3 4,985.3
Operating Margin:
Electronic Components 3.3% 12.1% 10.7%
Defense Electronics
& Services 10.5% 10.2% 10.1%
Fluid Technology 12.7% 12.9% 13.1%
Motion & Flow Control 14.0% 13.1% 13.2%
Total Ongoing Segments 11.2% 12.0% 11.9%
Income:
Electronic Components 20.0 70.4 (8.1) 62.3 -67.9%
Defense Electronics
& Services 188.1 154.0 (1.0) 153.0 22.9%
Fluid Technology 285.2 251.5 4.5 256.0 11.4%
Motion & Flow Control 139.1 122.4 1.4 123.8 12.4%
Total Segment Operating
Income 632.4 598.3 (3.2) 595.1 6.3%
ITT Industries Non-GAAP Investor Slide Reconcilliation - Net Debt & Ratios
Third & Fourth Quarter of 2003 & Fourth Quarter of 2002
December 31, 2002
EBITDA Coverage 22.0
Operating Income Coverage (Most Comparible
Measure to EBITDA Coverage) 16.6
Net Debt/EBITDA 0.83
Net Debt/Operating Income (Most Comparible
Measure to Net Debt/EBITDA) 1.10
Net Debt/Net Capitalization 34.1%
Short Term Debt 299.6
Long Term Debt 492.2
Total Debt 791.8
Cash & Cash equivalents 202.2
Net Debt 589.6
Total Shareholders' Equity 1,137.3
Net Debt 589.6
Net Capitalization 1,726.9
712.6
EBITDA Coverage 32.4 22.0
537.6
Operating Income Coverage 32.4 16.6
589.6
Net Debt/EBITDA 712.6 0.83
589.6
Net Debt/Operating Income 537.6 1.10
589.6
Net Debt/Net Capitalization 1,726.9 34.1%
Annualized Annualized Miscellaneous
Operating Depreciation & Income Annualized
Income Amortization (Expense) EBITDA
Operating Income
1st Quarter 115.6 40.6 1.4
2nd Quarter 145.1 44.5 1.6
3rd Quarter 136.7 40.2 0.9
4th Quarter 140.2 46.1 (0.3)
1st Quarter -- -- --
Total 537.6 171.4 3.6 712.6
Annualized
Interest Interest Annualized Interest
Expense Income Expense (Income)
(Income) Adjustment Adjustment
Net Interest Expense (Income)
1st Quarter 11.9
2nd Quarter 10.0 --
3rd Quarter 5.6 --
4th Quarter 4.9 --
1st Quarter -- --
Total 32.4 -- 32.4
September 30, 2003
EBITDA Coverage 31.4
Operating Income Coverage (Most
Comparible Measure to EBITDA Coverage) 23.5
Net Debt/EBITDA 0.60
Net Debt/Operating Income (Most Comparible
Measure to Net Debt/EBITDA) 0.81
Net Debt/Net Capitalization 22.3%
Short Term Debt 272.2
Long Term Debt 465.8
Total Debt 738.0
Cash & Cash equivalents 312.3
Net Debt 425.7
Total Shareholders' Equity 1,483.7
Net Debt 425.7
Net Capitalization 1,909.4
707.9
EBITDA Coverage 22.5 31.4
528.2
Operating Income Coverage 22.5 23.5
425.7
Net Debt/EBITDA 707.9 0.60
425.7
Net Debt/Operating Income 528.2 0.81
425.7
Net Debt/Net Capitalization 1,909.4 22.3%
Annualized Annualized Miscellaneous
Operating Depreciation & Income Annualized
Income Amortization (Expense) EBITDA
Operating Income
1st Quarter
2nd Quarter 140.2 46.1 (0.3)
3rd Quarter 109.7 45.8 (0.7)
4th Quarter 141.5 47.6 (2.1)
1st Quarter 136.8 45.3 (2.0)
Total 528.2 184.8 (5.1) 707.9
Annualized
Interest Interest Annualized Interest
Expense Income on Tax Expense (Income)
(Income) Adjustment Adjustment
Net Interest Expense (Income)
1st Quarter --
2nd Quarter 4.9 --
3rd Quarter (15.1) 22.0
4th Quarter 5.8 --
1st Quarter (5.3) 10.2
Total (9.7) 32.2 22.5
December 31, 2003
EBITDA Coverage 32.1
Operating Income Coverage (Most Comparible
Measure to EBITDA Coverage) 23.9
Net Debt/EBITDA 0.27
Net Debt/Operating Income (Most Comparible
Measure to Net Debt/EBITDA) 0.36
Net Debt/Net Capitalization 9.4%
Short Term Debt 141.5
Long Term Debt 460.9
Total Debt 602.4
Cash & Cash equivalents 414.2
Net Debt 188.2
Total Shareholders' Equity 1,824.4
Net Debt 188.2
Net Capitalization 2,012.6
708.6
EBITDA Coverage 22.1 32.1
528.5
Operating Income Coverage 22.1 23.9
188.2
Net Debt/EBITDA 708.6 0.27
188.2
Net Debt/Operating Income 528.5 0.36
188.2
Net Debt/Net Capitalization 2,012.6 9.4 %
Annualized Annualized Miscellaneous
Operating Depreciation & Income Annualized
Income Amortization (Expense) EBITDA
Operating Income
1st Quarter
2nd Quarter 109.7 45.8 (0.7)
3rd Quarter 141.5 47.6 (2.1)
4th Quarter 136.8 45.3 (2.0)
1st Quarter 140.5 49.3 (3.1)
Total 528.5 188.0 (7.9) 708.6
Annualized
Interest Interest Annualized Interest
Expense Income on Tax Expense (Income)
(Income) Adjustment Adjustment
Net Interest Expense (Income)
1st Quarter (15.1) 22.0
2nd Quarter 5.8 --
3rd Quarter (5.3) 10.2
4th Quarter 4.5 --
1st Quarter -- --
Total (10.1) 32.2 22.1
SOURCE ITT Industries, Inc.
-0- 01/23/2004
/CONTACT: Tom Glover of ITT Industries, +1-914-641-2160,
tom.glover@itt.com/
/Web site: http://www.itt.com /
(ITT)
CO: ITT Industries, Inc.
ST: New York
IN: CPR ITE ENV ARO
SU: ERN