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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): April 22, 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 and ITEM 12. Regulation FD Disclosure and Results of
Operations and Financial Condition
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 April 22, 2004, ITT Industries, Inc. issued a press release providing its
financial results for the first quarter of 2004 and updating its previously
announced full year 2004 guidance. A copy of this press release is attached and
incorporated by reference herein as Exhibit 99.1.
Exhibit Index
(99.1) Press release dated April 22, 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: April 22, 2004
Exhibit 99.1
ITT Industries Reports First Quarter EPS of $0.94, Raises FY 2004 Guidance
* Q1 earnings before benefit of special items $0.92, up 11 percent over
comparable $0.83
* Q1 revenue up 17 percent to $1.5 billion; strong organic growth of 10
percent
* Long-term growth opportunities continue for Defense, Water/Wastewater,
Electronic Components
* Positive outlook leads company to raise FY EPS guidance from $4.15-4.25
to $4.40-4.50
WHITE PLAINS, April 22 /PRNewswire-FirstCall/ -- ITT Industries, Inc.
(NYSE: ITT) today announced first quarter 2004 net income of $88.9 million, up
$2.2 million including the net benefit of special items. Diluted earnings per
share (EPS) for the quarter, including the net benefit of special items, was
$0.94, up $0.02 per share from reported EPS in the first quarter 2003. During
the first quarter 2004, the company realized a $0.05 per share benefit from
several tax items, which was partially offset by other special items,
primarily restructuring costs, of ($0.03) per share. The net effect of these
special items was a $0.02 increase in reported EPS for the first quarter.
Adjusting results to exclude the benefit of these special items, earnings for
the first quarter 2004 were $0.92, up 11 percent over the comparable adjusted
figure of $0.83 for the same period in 2003.
"The first quarter was a very good one for us, with strong earnings and
double digit organic revenue growth, as we continue to expand our higher
margin, high-growth business segments, and continuously improve our operating
performance across the company," said Lou Giuliano, Chairman, President and
Chief Executive Officer of ITT Industries. "We are accelerating organic top-
line and earnings growth, led by our Defense, Water/Wastewater and Electronic
Components businesses. We have supported this strategy through new product
development and finding better ways to serve our customers, supplemented with
strategic acquisitions that create value and improve market strength in our
existing businesses. A good example of this is our acquisition of WEDECO,
which has significantly enhanced our presence and product offering in the
global water treatment market."
"Based on our recent assessment of business conditions in all of our
segments and the strong first quarter performance, we have raised our earnings
target for the year to a range of $4.40-$4.50, up 14-17 percent over adjusted
2003 EPS. Our previous range for 2004 was $4.15-4.25. We now estimate that
full-year 2004 revenues will range from $6.4 to $6.6 billion, up 14-18 percent
from last year, and are raising our full-year 2004 cash forecast by $25
million."
First Quarter Financial Highlights
* First quarter 2004 revenues rose 17 percent to $1.5 billion, helped by
revenue increases in all four business segments, acquisitions and
positive impact of foreign currency translation. Excluding foreign
exchange and acquisitions, first quarter revenue grew 10 percent.
* Higher revenues and continued process improvements combined to increase
net income $2.2 million or 3 percent to $88.9 million or $0.94 per
share. Excluding the net benefit of special items of $0.02 per share,
earnings for the first quarter 2004 were $0.92, up 11 percent over the
comparable adjusted figure of $0.83 for the first quarter 2003.
* Segment operating income in the quarter grew 14 percent over the first
quarter 2003 to $146.6 million on higher revenue and operational
improvements.
* In February, the company announced its intention to buy the Remote
Sensing Systems (RSS) business of Eastman Kodak for $725 million in
cash, complimenting its own space imaging business. Once completed, the
acquisition of RSS, combined with ITT's existing space imaging business,
will form a new Space Systems division in the Defense Electronics &
Services segment, which is expected to generate $600 million in
annualized revenue.
* The company's first quarter 2004 cash usage from operations was $116
million, which includes a previously announced $100 million voluntary
pre-funding of the U.S. Salaried Pension Plan. Adjusted for capital
expenditures of $29 million and the pension pre-funding, the company's
free cash flow usage was $45 million.
First Quarter Segment Highlights
Fluid Technology
* First quarter 2004 Fluid Technology revenues were $574.9 million, up
$71.3 million or 14 percent from the first quarter 2003. Revenue growth
was driven by organic growth in water treatment and in the industrial
pump group, recent acquisitions and the positive impact of foreign
currency translation. Segment operating income was $52.9 million.
After adjusting for the effects of restructuring costs, operating income
was relatively flat compared to the first quarter 2003, at $55.9
million. Operating margin declined 150 basis points primarily due to
start-up costs of acquisitions and foreign currency
translation/transaction.
* In January, the company completed its acquisition of German-based WEDECO
Water Technologies, a world leading provider of ultra-violet and ozone
oxidation water treatment systems, and Shanghai-based Hengtong giving
ITT the disinfection technology and global reach needed to grow its
dynamic wastewater treatment business. Water treatment, which includes
biological treatment, filtration, desalinization and disinfection, is
the fastest growing segment within the water/wastewater business.
* The industrial process pump business saw organic revenue growth of 13
percent, a reflection of progress on its strategy to develop its
international business. Growth was particularly strong in the
petrochemical market.
Defense Electronics & Services
* Defense Electronics & Services revenues for the first quarter were
$506.5 million, up $115.1 million or 29 percent, due to increased sales
at nearly all of the segment's businesses, particularly Night Vision,
Aerospace Communication and Systems. Operating income rose $14.3
million or 42 percent to $48.7 million, and operating margin rose 80
basis points on increased sales of higher margin products. The Defense
backlog now stands at $3.16 billion, up 5 percent over the first quarter
of 2003.
* The company is working to develop the next generation technology in
space, night vision and communication markets. Initial test results for
Night Vision's goggles that combine infrared and light intensification
technology are encouraging, boding well for the company's potential
participation in the next generation Night Vision program, which is
expected to be a $1 billion program over six years.
* The Systems division continues to register strong growth through new
engineering and technical support contracts for a variety of defense and
space agencies. Demand in this area is particularly strong as the
Department of Defense looks to contractors to provide critical tasks
required to accommodate the global deployment of troops.
Motion & Flow Control
* Motion & Flow Control revenues for the first quarter were $274.0
million, up $15.9 million or 6 percent on higher volume in motion and
leisure marine, and the positive impact of foreign currency translation.
Operating income was up $1.1 million to $39.1 million, while operating
margin declined 40 basis points.
* The businesses within Motion & Flow Control continue to expand, taking
existing products and modifying them for new end markets. The company's
friction materials unit, a leading provider to the auto market, has
begun supplying friction materials for the heavy truck market. Though
the truck market for friction materials is in its early stages, the
company believes it will provide the opportunity for double digit
revenue growth.
* The spa-whirlpool business has grown significantly in the last year
thanks to new products, the benefits of improved operational performance
and strategic outsourcing. Its new Magna whirlpool pump, designed in
collaboration with ITT's Goulds unit, provides added pressure and could
generate close to $10 million in incremental revenue in the next few
years.
Electronic Components
* Electronic Components revenues rose $17 million or 12 percent to $161.8
million, in line with expectations and reflecting a modest improvement
in several of the key markets such as mobile handsets. Organic revenue
was up 5 percent in the quarter. First quarter orders were up 34 percent
to $192.9 million, with a book to bill ratio of 1.19. Operating income
rose $5.7 million to $5.9 million with a corresponding increase in
operating margin. Excluding the effects of restructuring, operating
income declined $1.8 million to $7.2 million, and operating margin
declined 180 basis points from the first quarter 2003. Sequentially,
first quarter margin improved 140 basis points.
* New customer satisfaction initiatives and new products are driving the
growth in the company's connectors and switches for mobile telephones,
with multiple new platform wins and higher content per phone. While
global handset sales are expected to grow 10 percent this year, we
expect our businesses in this market to grow revenues by 25 percent.
* Electronic Components continues to take its products to new end markets.
Its mechatronic joystick control switches have captured the interest of
heavy equipment manufacturers such as Caterpillar. New business with
Caterpillar alone in this area is expected to triple to $20 million per
year by 2006.
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 $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, 2003, and other of its filings with the Securities and Exchange
Commission.
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.
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(In millions, except per share)
(Unaudited)
Three Months Ended
March 31,
2004 2003
Sales and revenues $1,515.9 $1,296.4
Costs of sales and revenues 1,007.1 846.4
Selling, general and
administrative expenses 230.2 200.3
Research, development and
engineering expenses 144.9 129.6
Restructuring and asset
impairment charges 4.7 10.4
Total costs and expenses 1,386.9 1,186.7
Operating income 129.0 109.7
Interest expense (income), net 1.1 (15.1)
Miscellaneous expense 3.6 0.7
Income from continuing operations
before income taxes 124.3 124.1
Income tax expense 36.2 37.4
Income from continuing operations 88.1 86.7
Income from discontinued
operations, including tax
expense of $0.4 0.8 -
Net income $88.9 $86.7
Earnings Per Share:
Income from continuing
operations:
Basic $0.95 $0.94
Diluted $0.93 $0.92
Discontinued operations:
Basic $0.01 $-
Diluted $0.01 $-
Net income:
Basic $0.96 $0.94
Diluted $0.94 $0.92
Average Common Shares - Basic 92.3 91.8
Average Common Shares - Diluted 94.5 93.7
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
March 31, December 31,
2004 2003
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $199.1 $414.2
Receivables, net 1,161.0 974.6
Inventories, net 618.4 578.5
Deferred income taxes 68.1 68.2
Other current assets 86.0 70.0
Total current assets 2,132.6 2,105.5
Plant, property and equipment, net 869.9 893.3
Deferred income taxes 374.7 373.3
Goodwill, net 1,845.6 1,629.1
Other intangible assets, net 79.4 74.8
Other assets 969.1 861.6
Total assets $6,271.3 $5,937.6
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $689.5 $635.3
Accrued expenses 612.4 653.4
Accrued taxes 276.3 251.9
Notes payable and current
maturities of long-term debt 414.6 141.5
Other current liabilities 4.6 4.5
Total current liabilities 1,997.4 1,686.6
Pension and postretirement
benefits 1,399.5 1,403.8
Long-term debt 471.6 460.9
Other liabilities 535.7 538.6
Total liabilities 4,404.2 4,089.9
Shareholders' equity 1,847.7
1,867.1
Total liabilities and
shareholders' equity $6,271.3 $5,937.6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three Months Ended
March 31,
2004 2003
Operating Activities
Net income $88.9 $86.7
Income from discontinued
operations (0.8) -
Income from continuing operations 88.1 86.7
Adjustments to income from
continuing operations:
Depreciation and amortization 48.9 45.8
Restructuring and asset
impairment charges 4.7 10.4
Payments for restructuring (9.5) (5.1)
Change in receivables (158.3) (99.7)
Change in inventories 2.6 (9.1)
Change in accounts payable and
accrued expenses (4.2) (48.2)
Change in accrued and deferred
taxes 21.6 17.9
Change in other current and non-
current assets (115.4) (209.5)
Change in other non-current
liabilities 0.4 (14.0)
Other, net 5.6 9.1
Net Cash - operating activities (115.5) (215.7)
Investing Activities
Additions to plant, property and
equipment (29.0) (21.8)
Acquisitions, net of cash
acquired (243.0) (35.1)
Proceeds from sale of assets and
businesses 2.6 7.8
Other, net 0.3 -
Net Cash - investing activities (269.1) (49.1)
Financing Activities
Short-term debt, net 251.2 246.5
Long-term debt repaid (35.5) (0.6)
Long-term debt issued - 0.2
Repurchase of common stock (39.6) (2.0)
Proceeds from issuance of common
stock 17.3 2.5
Dividends paid (14.8) (13.8)
Other, net - 0.1
Net Cash - financing activities 178.6 232.9
Exchange Rate Effects on Cash and
Cash Equivalents (8.9) 2.4
Net Cash - Discontinued
Operations (0.2) 0.9
Net change in cash and cash
equivalents (215.1) (28.6)
Cash and cash equivalents -
beginning of year 414.2 202.2
Cash and Cash Equivalents - End
of Year $199.1 $173.6
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
First Quarter of 2004 & 2003
($ Millions, except EPS and shares)
Change
2004
Q1 Q1 Q1 Q1 Q1 Q1 vs.
2004 2004 2004 2003 2003 2003 2003
As As As As As
Reported Adjust- Adjust- Report- Adjust- Adjust- Adjust-
ments ed ed ments ed ed
Segment Operating
Income 146.6 4.5 #A 151.1 128.9 9.3 #H 138.2
Interest Income
(Expense) (1.1) (4.2)#B (5.3) 15.1 (22.1)#I (7.0)
Other Income
(Expense) (3.6) 1.3 #C (2.3) (0.7) - (0.7)
Corporate (Expense) (17.6) 0.2 #D (17.4) (19.2) 1.1 #J (18.1)
Income from
Continuing
Operations before
Tax 124.3 1.8 126.1 124.1 (11.7) 112.4
Income Tax Items (2.3)#E (2.3) (1.0)#K (1.0)
Income Tax Expense (36.2) (0.6)#F (36.8) (37.4) 3.6 #L (33.8)
Total Tax Expense (36.2) (2.9) (39.1) (37.4) 2.6 (34.8)
Income from
Continuing
Operations 88.1 (1.1) 87.0 86.7 (9.1) 77.6
Income from
Discontinued
Operations 0.8 (0.8)#G 0.0 0.0 0.0 0.0
Net Income 88.9 (1.9) 87.0 86.7 (9.1) 77.6 9.4
Diluted EPS 0.94 (0.02) 0.92 0.92 (0.09) 0.83 $0.09
#A - Remove Segment Restructuring Expense of $4.5M
#B - Remove Interest Income - Tax Settlement ($4.2M)
#C - Remove Bond Discount Loss on Redemption of Bonds $1.3M
#D - Remove HQ Restructuring Expense of $0.2M
#E - Remove Effect of Several Tax Items ($2.3M)
#F - Tax Effect of Adjustments #A, #B, #C and #D
#G - Remove D.O. Income ($0.8M)
#H - Remove Segment Restructuring Expense of $9.3M
#I - Remove Interest Income From Tax Audit Settlement ($22.1M)
#J - Remove HQ Restructuring Expense of $1.1M
#K - Remove Tax Audit Settlement $1.0M
#L - Tax Effect of Adjustments #H and #J
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue Growth
First Quarter 2004 & 2003
($ Millions)
(As Reported - GAAP)
%
Sales & Sales & Change Change
Revenues Revenues 2004 2004
vs. vs.
3M 2004 3M 2003 2003 2003
ITT Industries - Consolidated 1,515.9 1,296.4 219.5 17%
Electronic Components 161.8 144.8 17.0 12%
Industrial Products Group 90.2 79.4 10.8 14%
(As Adjusted - Organic)
Acquisi-
tion FX Adj. Change %Change
Sales & Contrib- Contrib Sales & Sales & Adj. Adj.
Revenues ution ution Revenues Revenues 04 04
3M 2004 3M 2004 3M 2004 3M 2004 3M 2003 vs. 03 vs. 03
ITT Industries -
Consolidated 1,515.9 (24.5) (62.9) 1,428.5 1,296.4 132.1 10%
Electronic
Components 161.8 0.0 (10.1) 151.7 144.8 6.9 5%
Industrial Products
Group 90.2 0.0 (0.5) 89.7 79.4 10.3 13%
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Full Year of 2004 & 2003
Full Year 2004 EPS**
Full Year
Lower Limit Upper Limit 2003 EPS**
As Reported* 4.42 4.52 4.29
Adjustments
Restructuring 0.03 0.03 0.22
Interest (0.03) (0.03) (0.16)
Tax Settlement (0.02) (0.02) (0.35)
Other - Debt Repayment 0.01 0.01
Discontinued Operations (0.01) (0.01) (0.14)
Adjusted Net Income 4.40 4.50 3.86
% Increase 14% 17%
*Amount represents projected figures for full year 2004
** Represents diluted EPS
ITT Industries Non-GAAP Press Release Reconciliation
Cash From Operating Activities vs. Free Cash Flow
First Quarter 2004 & 2003
($ Millions)
3M 04 3M 03
Income from Continuing Ops 88.1 86.7
Depreciation 44.0 40.9
Amortization 4.9 4.9
Working Capital (119.4) (84.6)
Pension Pre-funding (100.0) (200.0)
Other (33.1) (63.6)
Cash from Operations (115.5) (215.7)
Capital Expenditures (29.0) (21.8)
Pension Pre-funding 100.0 200.0
Free Cash Flow (44.5) (37.5)
FY Free Cash Flow Range
FY 04 FY 04
Cash from Operations 485.0 535.0
Capital Expenditures (160.0) (160.0)
Pension Pre-funding 100.0 100.0
Free Cash Flow 425.0 475.0
ITT Industries Non-GAAP Press Release Reconciliation
First Quarter 2004 & 2003 Reported vs. Adjusted EPS
Q1 2004 Q1 2003
Actual Actual
Diluted Earnings Per Share - GAAP $0.94 $0.92
Other Adjustments* (0.05) (0.17)
Restructuring 0.03 0.08
Adjusted Earnings Per Share - NON-
GAAP $0.92 $0.83
*Please refer to "Reported vs. Adjusted Net Income & EPS First Quarter of
2004 & 2003" for details on Other Adjustments
ITT Industries Non-GAAP Press Release Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
First Quarter of 2004 & 2003
($ Millions)
Q1 2004 Q1 2003 % Q1 2004 Adjust for
As As Change As 2004
Reported Reported 04 vs. Reported Restruc-
03 turing
Sales and Revenues:
Electronic Components 161.8 144.8 161.8
Defense Electronics & Services 506.5 391.4 506.5
Fluid Technology 574.9 503.6 574.9
Operating Margin:
Electronic Components 3.6% 0.1% 3.6%
Defense Electronics & Services 9.6% 8.8% 9.6%
Fluid Technology 9.2% 11.2% 9.2%
Income:
Electronic Components 5.9 0.2 2850.0% 5.9 1.3
Defense Electronics & Services 48.7 34.4 41.6% 48.7 0.0
Fluid Technology 52.9 56.3 -6.0% 52.9 3.0
($ Millions)
Q1 2004 Q1 2003 Adjust for Q1 2003 %
As As 2003 As Change
Adjusted Reported Restruc- Adjusted Adj. 04
turing vs. 03
Sales and Revenues:
Electronic Components 161.8 144.8 144.8
Defense Electronics & Services 506.5 391.4 391.4
Fluid Technology 574.9 503.6 503.6
Operating Margin:
Electronic Components 4.4% 0.1% 6.2%
Defense Electronics & Services 9.6% 8.8% 8.8%
Fluid Technology 9.7% 11.2% 11.2%
Income:
Electronic Components 7.2 0.2 8.8 9.0 -20.0%
Defense Electronics & Services 48.7 34.4 0.0 34.4 41.6%
Fluid Technology 55.9 56.3 0.0 56.3 -0.7%
ITT Industries Non-GAAP Press Release Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
First Quarter of 2004 & Fourth Quarter of 2003
($ Millions)
Q1 2004 Q4 2003 % Q1 2004 Adjust for
As As Change As 2004
Reported Reported 04 vs. Reported Restruc-
03 turing
Electronic Components
Sales and Revenues 161.8 158.0 161.8
Operating Margin 3.6% 4.1% 3.6%
Income 5.9 6.4 -7.8% 5.9 1.3
($ Millions)
Adjust for
Q1 2004 Q4 2003 2003 Q4 2003 %
As As As Change
Adjusted Reported Restruc- Adjusted Adj. 04
turing vs. 03
Electronic Components
Sales and Revenues 161.8 158.0 158.0
Operating Margin 4.4% 4.1% 3.0%
Income 7.2 6.4 (1.7) 4.7 53.2%
SOURCE ITT Industries, Inc.
-0- 04/22/2004
/CONTACT: Tom Glover, ITT Industries, Inc., +1-914-641-2160,
tom.glover@itt.com/
/Web site: http://www.itt.com /
(ITT)
CO: ITT Industries, Inc.
ST: New York
IN: CHM ARO
SU: ERN