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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): July 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 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 July 23, 2004, ITT Industries, Inc. issued a press release providing its
financial results for the second 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 July 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: July 23, 2004
Exhibit 99.1
ITT Industries Second Quarter EPS Up 11 Percent to $1.18@
* Q2 revenue up 15 percent to $1.65 billion; strong organic growth of 10
percent
* Long-term growth opportunities seen for all four segments
* Continued strong outlook puts FY 2004 EPS guidance near top end of
$4.40-4.50 range
* New CEO transition well underway, adhering to successful multi-industry
strategy
WHITE PLAINS, N.Y., July 23 /PRNewswire-FirstCall/ -- ITT Industries, Inc.
(NYSE: ITT) today announced second quarter 2004 net income of $112 million, up
12 percent including the net benefit of special items. Diluted earnings per
share (EPS) for the quarter, including the net benefit of special items, was
$1.18, up $0.12 per share or 11 percent from reported EPS in the second
quarter 2003. During the second quarter 2004, the company realized a $0.12
per share benefit from several tax items, which was partially offset by other
special items, primarily costs associated with restructuring, of ($0.11) per
share. The net effect of these special items was a $0.01 increase in reported
EPS for the second quarter. Adjusting results to exclude the benefit of these
special items, earnings for the second quarter 2004 were $1.17, up 15 percent
over the comparable adjusted figure of $1.02 for the same period in 2003.
"The strong second quarter, with double digit earnings and organic revenue
growth, makes this the third consecutive quarter to show double digit organic
revenue growth at ITT," said Steve Loranger, President and Chief Executive
Officer of ITT Industries. "With our current business mix and a seasoned
management team in place, we see many long-term growth opportunities ahead.
In Defense, our products and technical services are right in line with the
priorities of our primary customers in the US and allied nations. Our water
and wastewater businesses are well-positioned to provide complete treatment
solutions for customers throughout the world. Our Electronic Components
business continues to show improvement, with orders up 27 percent over the
period last year and an expectation of revenue and margin growth as market
conditions continue to improve, and the Leisure Marine and Motion Control
businesses continue to gain market share through new product introductions and
operational excellence."
"We are seeing positive signs in the economy, and our orders are ahead of
last year going into the second half of 2004," Loranger said. "Combined with
our strong first half performance, we now expect to see full year EPS near the
top of the range of $4.40-$4.50."
Second Quarter Financial Highlights
* Second quarter 2004 revenues rose 15 percent to $1.65 billion, helped
by revenue increases in all four business segments, acquisitions and
the positive impact of foreign currency translation. Organic revenue,
which excludes the impact of foreign exchange and acquisitions, grew 10
percent, marking the third consecutive quarter the company has
registered double digit organic revenue growth.
* Segment operating income in the second quarter, including the impact of
restructuring charges, grew 10 percent over the second quarter 2003 to
$176.1 million on higher revenue and operational improvements.
* On June 28, Steve Loranger was named President and Chief Executive
Officer of ITT Industries and elected a Director of the company. The
Board of Directors' search committee named Loranger based on his strong
track record of leadership at other global multi-industry companies,
and his direct experience in most of ITT's segments, including defense
and electronic and industrial components. He succeeds Lou Giuliano,
who remains as non-executive Chairman of the Board. The transition
process is on track and Loranger will assume the role of Chairman by
the end of 2004.
* The company's 2004 year-to-date cash from operations was $58 million,
up from ($33) million in the first half of 2003. The improvement is
due to lower pre-funding of the salaried pension plan, and is partially
offset by an increased investment in working capital as a result of
higher revenues.
Second Quarter Segment Highlights
Fluid Technology
* Second quarter 2004 Fluid Technology revenues were $650.9 million, up
$80.3 million or 14 percent from the second quarter 2003, driven by
water/wastewater and the industrial pump group, recent acquisitions and
the positive impact of foreign currency translation. Organic revenue
growth in the segment was 5 percent. Segment operating income was
$75.7 million, including the impact of restructuring costs. Start-up
costs of acquisitions and foreign currency translation/transaction
impacted the segment's margin by 100 basis points.
* The company is progressing with its strategy of providing total system
solutions in water and wastewater treatment, with significant recent
contract wins in North America, Europe and the Middle East. Further
growth is anticipated with the introduction of the company's
breakthrough Membrane Bio-Reactor (MBR) technology in the wastewater
treatment market, combining diffused aeration and biological treatment
with a second stage of membrane filtration. The new MBR system offers
greater energy efficiency and ease of use, and is a more cost-effective
way for municipalities to meet new stricter effluent standards than
existing MBR systems.
* The integration of the recently acquired WEDECO business is
progressing, with strengthening order activity recorded in the second
quarter. Most significantly, WEDECO was chosen to provide a UV
advanced oxidation treatment system for groundwater contaminated with
rocket fuel additive in California, and was selected to supply UV and
ozone treatment systems for an 80 million gallon per day advanced water
treatment system in Arizona.
Defense Electronics & Services
* Defense Electronics & Services revenues for the second quarter were
$530.7 million, up $78.3 million or 17 percent, due to increased sales
in nearly all of the divisions in the Defense segment. Operating
income rose $9.1 million or 20 percent to $55.8 million, and operating
margin grew 20 basis points. The Defense backlog now stands at a
record $3.22 billion.
* ITT will continue to hold a leadership position in tactical
communication, building as many tactical radios today as ever, with
upgrades to SINCGARS, the ramp-up of production in the UK's Bowman
program, and production of the Federal Aviation Administration's
ground-to-air radio system. The company is actively pursuing the US
Army's next Joint Tactical Radio Systems cluster, known as the Airborne
Maritime Fixed (AMF) radio contract.
* ITT's space payload business has supplied all of the key remote sensing
instruments for the National Weather Service's (NWS) satellites now in
orbit. The company is providing an additional advanced instrument for
the NWS' next generation of polar orbiting satellites. Additionally,
the company is competing for several additional contracts on the
geostationary satellite constellation payloads. The company plans to
complete its $725 million acquisition of Kodak's Remote Sensing Systems
business in the third quarter. The acquisition, combined with ITT's
current space payload capabilities, will position ITT Industries to
address opportunities in the $6 billion science, government and
commercial remote sensing markets.
* The Defense segment is on-track to continue showing long-term organic
revenue growth of 8-10 percent based on its record backlog and strong
bid activity.
Motion & Flow Control
* Motion & Flow Control revenues for the second quarter were $281.3
million, up $18.6 million or 7 percent on higher volume in the Motion
Control and Leisure Marine businesses, and the positive impact of
foreign currency translation. Organic revenue growth was 3 percent in
the second quarter. Operating income was up 11 percent to $41.3
million, while operating margin increased 60 basis points.
* The company's Jabsco Leisure Marine unit continues to grow through new
product introductions, with six new products scheduled to go to market
in the second half of 2004. Jabsco expects 25 percent of its revenue
this year to come from new products, up from 18 percent in 2003.
* Close collaboration with key customers resulted in a breakthrough new
product in the company's spa and whirlpool business that could
eventually lead to $20 million a year in additional revenue. ITT's new
pre-plumbed harness for spa manufacturers will begin delivery in the
third quarter.
* ITT's friction materials business continues to grow market share
through efficiency gains. Its European OEM auto market share has
doubled over the last five years, and sees additional modest growth
potential in the European OEM market over the next few years. To
supplement that opportunity, the business is also entering the European
heavy truck and U.S. automotive markets.
Electronic Components
* Electronic Components revenues rose $37.7 million or 25 percent to
$191.4 million. Organic revenue grew 21 percent in the quarter, on
strong growth in mobile handsets and military/aerospace. Orders were
up 27 percent in the second quarter, driven primarily by mobile
handsets. Including the impact of restructuring costs realized in the
quarter, operating income rose $1.4 million to $3.3 million with a
corresponding 50 basis point increase in operating margin. Excluding
the impact of restructuring, operating income grew $5.8 million to
$10.4 million, and operating margin increased 240 basis points.
* Growth continues in all parts of the communications market, as network
infrastructure investment increases and as the company's Cannon
connectors and switches gain more content per handset model and
increase market share.
* The company's strategy to enter the medical diagnostic market is
gaining traction. Second quarter sales for the company's switches and
connectors in this market segment were up 17 percent and orders were up
48 percent in the second quarter.
* ITT Industries continues to grow its connector and switch content in
the automotive market. Cannon's new Clip-Lock Connectors are being
used for harness and engine control panels in several platforms of
off-road vehicles, and are expected to contribute $6 million in
full-year revenue in 2004.
About ITT Industries
ITT Industries, Inc. (http://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, London, 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 Six Months Ended
June 30, June 30,
2004 2003 2004 2003
Sales and revenues $1,652.5 $1,438.2 $3,168.4 $2,734.6
Costs of sales and revenues 1,079.0 949.6 2,086.1 1,796.0
Selling, general and administrative
expenses 237.6 198.6 467.8 398.9
Research, development and
engineering expenses 166.7 142.6 311.6 272.2
Restructuring and asset impairment
charges 14.3 5.9 19.0 16.3
Total costs and expenses 1,497.6 1,296.7 2,884.5 2,483.4
Operating income 154.9 141.5 283.9 251.2
Interest expense (income), net 5.4 5.8 6.5 (9.3)
Miscellaneous expense 3.1 2.1 6.7 2.8
Income from continuing operations
before income taxes 146.4 133.6 270.7 257.7
Income tax expense 33.7 41.5 69.9 78.9
Income from continuing operations 112.7 92.1 200.8 178.8
Discontinued operations, including
tax income /(exp) of $0.3,
$(0.2), $(0.1) and $(0.2) in each
period, respectively (0.7) 7.8 0.1 7.8
Net income $112.0 $99.9 $200.9 $186.6
Earnings Per Share:
Income from continuing operations:
Basic $1.22 $1.00 $2.18 $1.94
Diluted $1.19 $0.98 $2.13 $1.90
Discontinued operations:
Basic $(0.01) $0.08 $ -- $0.08
Diluted $(0.01) $0.08 $ -- $0.08
Net income:
Basic $1.21 $1.08 $2.18 $2.02
Diluted $1.18 $1.06 $2.13 $1.98
Average Common Shares - Basic 92.4 92.0 92.3 92.0
Average Common Shares - Diluted 94.5 94.0 94.5 93.9
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
June 30, December 31,
2004 2003
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $219.5 $414.2
Receivables, net 1,213.9 974.6
Inventories, net 632.3 578.5
Deferred income taxes 68.1 68.2
Other current assets 80.7 70.0
Total current assets 2,214.5 2,105.5
Plant, property and equipment, net 862.1 893.3
Deferred income taxes 375.7 373.3
Goodwill, net 1,793.7 1,629.1
Other intangible assets, net 154.1 74.8
Other assets 925.3 861.6
Total assets $6,325.4 $5,937.6
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $733.8 $635.3
Accrued expenses 651.6 653.4
Accrued taxes 271.9 251.9
Notes payable and current maturities of
long-term debt 359.7 141.5
Other current liabilities 2.4 4.5
Total current liabilities 2,019.4 1,686.6
Pension and postretirement benefits 1,403.2 1,403.8
Long-term debt 440.5 460.9
Other liabilities 533.0 538.6
Total liabilities 4,396.1 4,089.9
Shareholders' equity 1,929.3 1,847.7
Total liabilities and shareholders' equity $6,325.4 $5,937.6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Six Months Ended
June 30,
2004 2003
Operating Activities
Net income $200.9 $186.6
Income from discontinued operations (0.1) (7.8)
Income from continuing operations 200.8 178.8
Adjustments to income from continuing operations:
Depreciation and amortization 97.1 93.4
Restructuring and asset impairment charges 19.0 16.3
Payments for restructuring (17.8) (10.2)
Change in receivables (195.9) (132.4)
Change in inventories (37.8) (8.4)
Change in accounts payable and accrued expenses 66.5 (3.2)
Change in accrued and deferred taxes 37.6 49.8
Change in other current and non-current assets (104.8) (214.6)
Change in other non-current liabilities (9.1) (8.9)
Other, net 1.9 6.0
Net cash - operating activities 57.5 (33.4)
Investing Activities
Additions to plant, property and equipment (63.5) (57.7)
Acquisitions, net of cash acquired (257.3) (42.5)
Proceeds from sale of assets and businesses 4.7 9.5
Other, net 0.3 0.1
Net cash - investing activities (315.8) (90.6)
Financing Activities
Short-term debt, net 199.6 181.1
Long-term debt repaid (36.2) (17.0)
Long-term debt issued 0.9 0.3
Repurchase of common stock (114.7) (16.8)
Proceeds from issuance of common stock 56.4 19.9
Dividends paid (30.5) (28.5)
Other (0.1) 0.1
Net cash - financing activities 75.4 139.1
Exchange Rate Effects on Cash and Cash Equivalents (7.6) 8.9
Net Cash - Discontinued Operations (4.2) 9.8
Net change in cash and cash equivalents (194.7) 33.8
Cash and cash equivalents - beginning of year 414.2 202.2
Cash and Cash Equivalents - end of period $219.5 $236.0
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue Growth
Second Quarter 2004 & 2003
($ Millions)
(As Reported - GAAP)
%
Change Change
Sales & Sales & 2004 2004
Revenues Revenues vs. vs.
3M 2004 3M 2003 2003 2003
ITT Industries - Consolidated 1,652.5 1,438.2 214.3 15%
Fluid Technology 650.9 570.6 80.3 14%
Defense Electronics & Services 530.7 452.4 78.3 17%
Electronic Components 191.4 153.7 37.7 25%
Motion & Flow Control 281.3 262.7 18.6 7%
(As Adjusted - Organic)
Adj.
Sales & Acquisition FX Sales &
Revenues Contribution Contribution Revenues
3M 2004 3M 2004 3M 2004 3M 2004
ITT Industries -
Consolidated 1,652.5 (35.7) (33.1) 1,583.7
Fluid Technology 650.9 (35.1) (18.6) 597.2
Defense Electronics
& Services 530.7 0.0 0.0 530.7
Electronic Components 191.4 0.0 (5.5) 185.9
Motion & Flow Control 281.3 (0.6) (9.1) 271.6
Sales &
Revenues Change % Change
3M 2003 Adj. 04 vs. 03 Adj. 04 vs. 03
ITT Industries - Consolidated 1,438.2 145.5 10%
Fluid Technology 570.6 26.6 5%
Defense Electronics & Services 452.4 78.3 17%
Electronic Components 153.7 32.2 21%
Motion & Flow Control 262.7 8.9 3%
ITT Industries Non-GAAP Press Release Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
Second Quarter of 2004 & 2003
($ Millions)
Q2 2004 Q2 2003 % Q2 2004 Adjust for
As As Change 04 As 2004
Reported Reported vs. 03 Reported Restructuring
Sales and Revenues:
Electronic Components 191.4 153.7 191.4
Operating Margin:
Electronic Components 1.7% 1.2% 1.7%
Income:
Electronic Components 3.3 1.9 73.7% 3.3 7.1
Q2 2004 Q2 2003 Adjust for Q2 2003 % Change
As As 2003 As Adj.
Adjusted Reported Restructuring Adjusted 04 vs. 03
Sales and Revenues:
Electronic Components 191.4 153.7 153.7
Operating Margin:
Electronic Components 5.4% 1.2% 3.0%
Income:
Electronic Components 10.4 1.9 2.7 4.6 126.1%
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Second Quarter of 2004 & 2003
($ Millions, except EPS and shares)
Q2 2004 Q2 2004 Q2 2004
As As
Reported Adjustments Adjusted
Segment Operating Income 176.1 12.7 #A 188.8
Interest Income (Expense) (5.4) -- (5.4)
Other Income (Expense) (3.1) -- (3.1)
Corporate (Expense) (21.2) 1.6 #B (19.6)
Income from Continuing Operations
before Tax 146.4 14.3 160.7
Income Tax Items (11.7)#C (11.7)
Income Tax Expense (33.7) (4.4)#D (38.1)
Total Tax Expense (33.7) (16.1) (49.8)
Income from Continuing Operations 112.7 (1.8) 110.9
Income from Discontinued Operations (0.7) 0.7 #E 0.0
Net Income 112.0 (1.1) 110.9
Diluted EPS 1.18 (0.01) 1.17
Q2 2003 Q2 2003 Q2 2003 Change
As As 2004 vs. 2003
Reported Adjustments Adjusted As Adjusted
Segment Operating
Income 159. 8 5.6 #F 165.4
Interest Income
(Expense) (5.8) -- (5.8)
Other Income (Expense) (2.1) -- (2.1)
Corporate (Expense) (18.3) 0.3 #G (18.0)
Income from Continuing
Operations
before Tax 133.6 5.9 139.5
Income Tax Items 0.0 0.0
Income Tax Expense (41.5) (1.9)#H (43.4)
Total Tax Expense (41.5) (1.9) (43.4)
Income from Continuing
Operations 92.1 4.0 96.1
Income from Discontinued
Operations 7.8 (7.8)#I 0.0
Net Income 99.9 (3.8) 96.1 14.8
Diluted EPS 1.06 (0.04) 1.02 $0.15
#A - Remove Segment Restructuring Expense of $12.7M
#B - Remove HQ Restructuring Expense of $1.6M
#C - Remove Effect of Favorable Tax Items ($11.7M)
#D - Tax Effect of Adjustments #A and #B
#E - Remove D.O. Expense of $0.7M
#F - Remove Segment Restructuring Expense of $5.6M
#G - Remove HQ Restructuring Expense of $0.3M
#H - Tax Effect of Adjustments #F and #G
#I - Remove D.O. Income of ($7.8M)
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* 4.43 4.53 4.29
Adjustments
Restructuring 0.14 0.14 0.22
Interest (0.03) (0.03) (0.16)
Tax Settlement (0.15) (0.15) (0.35)
Other - Debt Repayment 0.01 0.01
Discontinued Operations 0.00 0.00 (0.14)
Adjusted Net Income 4.40 4.50 3.86
*Amount represents projected figures for full year 2004
** Represents diluted EPS
ITT Industries Non-GAAP Press Release Reconciliation
Second Quarter 2004 & 2003 Reported vs. Adjusted EPS
Q2 2004 Q2 2003
Actual Actual
Diluted Earnings Per Share - GAAP $1.18 $1.06
Other Adjustments* (0.12) (0.08)
Restructuring 0.11 0.04
Adjusted Earnings Per Share - NON-GAAP $1.17 $1.02
*Please refer to "Reported vs. Adjusted Net Income & EPS First Quarter of
2004 & 2003" for details on Other Adjustments
SOURCE ITT Industries, Inc.
-0- 07/23/2004
/CONTACT: Tom Glover of 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: UTI FIN CPR ARO
SU: ERN