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UNITED STATES
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 27, 2006
ITT INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana 1-5672 13-5158950
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
4 West Red Oak Lane
White Plains, New York 10604
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (914) 641-2000
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (See General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Not Applicable
(Former name or former address, if changed since last report)
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ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 7.01 REGULATION FD DISCLOSURE
Attached hereto as Exhibit 99.1 and incorporated by reference herein is
financial information for ITT Industries, Inc. for the fourth quarter and full
year ending December 31, 2005 and forward-looking statements relating to 2006 as
presented in a press release dated January 27, 2006. 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.
A copy of this press release is attached and incorporated by reference herein as
Exhibit 99.1.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
99.1 Press release dated January 27, 2006.
2
SIGNATURE
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 27, 2006
3
EXHIBIT 99.1
ITT REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2005 OPERATING RESULTS
* Q4 GAAP net loss of $0.91 includes special charges of $2.34 per share;
excluding special charges Q4 earnings are $1.43 per share, up 17 percent
on revenue of $1.95 billion
* Margins expand in core businesses on operating improvement gains
* FY 2005 revenue up 17 percent to $7.4 billion, organic revenue up 12
percent
* FY 2005 GAAP EPS is $3.81; excluding special items, FY earnings from
continuing operations is $5.24 per share, up 20 percent
* Strong cash flow driven by improved operating performance
WHITE PLAINS, N.Y., Jan. 27 /PRNewswire-FirstCall/ -- ITT Industries, Inc.
(NYSE: ITT) today reported a fourth quarter 2005 net loss of $84.0 million or
$0.91 per share, including the impact of special items of $218.6 million or
$2.34 per share, primarily related to a previously announced non-cash asset
impairment charge in the company's switches business. Excluding special items,
earnings from continuing operations grew 17 percent to $1.43 per share. Fourth
quarter 2005 revenue was $1.95 billion, up 6 percent over the fourth quarter
last year.
"The fourth quarter capped a very good year, with full year results
including 17 percent revenue growth, 20 percent growth in operating earnings
(excluding special items), and higher margins and cash flow," said Steve
Loranger, Chairman, President and Chief Executive Officer. "The year's
performance reflects the strength of our portfolio and attractiveness of our
core businesses. Our Fluid Technology businesses grew revenues more than 9
percent in the year, and our Defense businesses increased full year sales by 34
percent, with organic revenue growth of 21 percent. Both businesses boosted
their operating margins considerably. The ITT Management System is working, and
we will continue to focus our resources on growth, margin improvement and
sustained predictable performance as we aggressively expand our global presence
and lean initiatives."
Full Year 2005 Results
Reported net income for 2005 was $359.5 million and full year GAAP EPS was
$3.81, including the impact of special items. Excluding special items, earnings
from continuing operations were $493.9 million or $5.24 per share, up 20 percent
over 2004. Full year 2005 revenues were $7.4 billion, up 17 percent from the
prior year. Organic revenue, which excludes the impact of acquisitions and
currency translation, grew 12 percent in 2005. Cash from operations was $745.8
million, which includes a $100 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) was $666.6 million, up from
$441.3 million in 2004, with the increase due to operating improvements, as well
as the favorable impact of tax and interest rate swap settlements.
2006 Outlook
"We expect to realize greater benefits from ongoing improvement initiatives
and we see outstanding business opportunities in the year ahead," Loranger said.
"We remain confident in our full year 2006 EPS outlook of $5.78-$5.92, including
the estimated ($0.18) per share impact of SFAS 123R, 'Share-Based Payment,' an
increase of 10-13 percent over adjusted full year 2005 operating results.
Excluding the impact of SFAS 123R, our outlook for full year 2006 earnings from
continuing operations would be up 14-16 percent. We expect Q1 2006 EPS of
$1.18-$1.22." All figures are calculated prior to the impact of a pending
2-for-1 stock split, scheduled to take place in February.
Primary Business Results
Fluid Technology
* Fourth quarter 2005 Fluid Technology revenue was $758.9 million, up $9.8
million or 1 percent from the previous year, exceeding previous guidance;
organic revenues grew 4 percent over the period in 2004. Full year
revenues were up 9 percent to $2.84 billion. Fourth quarter segment
operating income was up 22 percent to $98.0 million; full-year operating
income was up 14 percent to $324.5 million.
* Segment operating margin in the quarter increased 220 basis points over
the period last year, reflecting improved performance in the company's
WEDECO unit, global sourcing, higher volumes and a favorable product mix.
The company anticipates continued margin improvement in Fluid Technology
through 2006.
* The company's water and wastewater businesses continue to grow
organically, with fourth quarter revenue growth particularly strong in
the Middle East, Spain, Asia and the U.S. ITT remains very well
positioned to grow in nearly every segment of the $50 billion global
water equipment market, and the company continues to pursue projects of
larger scale and scope.
Defense Electronics & Services
* ITT's Defense Electronics & Services segment reported fourth quarter
revenues of $862.3 million, up 16 percent, with full year revenues of
$3.22 billion, up 34 percent. Organic revenue growth for Defense for the
fourth quarter and full year was 15 percent and 21 percent, respectively.
Operating income for the segment was up 34 percent in the quarter to
$104.2 million, and up 43 percent for the full year to $363.7 million.
* Higher volume, better yields and contract performance drove Defense
operating margin up 170 basis points in the fourth quarter, and 80 basis
points in the full year over the comparable periods in 2004.
* Revenue growth was driven by continued strong demand in Tactical
Communications, Night Vision and ITT's defense systems and services
businesses. Contracts won during the fourth quarter include the 5-year
$681 million follow-on communications support contract for the U.S. Army
in Asia and Africa. Both Night Vision and Tactical Communications
continue to execute superbly on higher production rates. Demand for the
company's Defense products and services remains robust.
Motion & Flow Control
* Fourth quarter revenues for ITT's Motion & Flow Control segment were
$148.4 million, down 7 percent from the fourth quarter a year earlier.
Full year segment revenues rose 6 percent to $670 million. Fourth quarter
operating income for the segment was $23.5 million, down $6.2 million
from the comparable period in 2004, reflecting both higher raw material
prices and production start up costs in the friction materials business,
and softness in the marine accessories market in the aftermath of an
active hurricane season; the company is seeing early signs of recovery in
this sector.
* The company's Aerospace Controls business is benefiting from order growth
and strong aftermarket demand. Fourth quarter revenues for this business
were up 17 percent; full year revenues for this business were up 15
percent.
Electronic Components
* Fourth quarter revenues for the Electronic Components segment were $183.2
million, up 3 percent over the period in 2004. Full year revenues were up
2 percent to $708.9 million. Operating income for the fourth quarter was
($215.2) million, reflecting the impact of the asset impairment charge.
Excluding the impact of this charge, operating income for the fourth
quarter was $8.9 million.
* Demand for the popular Motorola RAZR phone drove higher sales of the
company's mobile handset connectors, which together with automotive
connectors contributed to fourth quarter organic revenue growth of 5
percent in the segment.
* The company has begun the process to divest the switches business within
the Electronic Components segment.
About ITT Industries
ITT Industries, Inc. (http://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
$7.4 billion in 2005 sales. In addition to the New York Stock Exchange, ITT
Industries stock is traded on the Midwest, Pacific, Paris, London and Frankfurt
exchanges.
For free B-roll/video content about ITT Industries, please log onto
http://www.thenewsmarket.com/ITT to preview and request video. You can receive
broadcast-standard video quality digitally or by tape from this site.
Registration and video are free to the media.
"Safe Harbor Statement" under the Private Securities Litigation Reform Act
of 1995 ("the Act"):
Certain material presented herein includes forward-looking statements
intended to qualify for the safe harbor from liability established by the Act.
These forward-looking statements include statements that describe the Company's
business strategy, outlook, objectives, plans, intentions or goals, and any
discussion of future operating or financial performance. Whenever used, words
such as "anticipate," "estimate," "expect," "project," "intend," "plan,"
"believe," "target" and other terms of similar meaning are intended to identify
such forward-looking statements. Forward-looking statements are uncertain and to
some extent unpredictable, and involve known and unknown risks, uncertainties
and other important factors that could cause actual results to differ materially
from those expressed in, or implied from, such forward-looking statements.
Factors that could cause results to differ materially from those anticipated by
the Company include general global economic conditions, decline in consumer
spending, interest and foreign currency exchange rate fluctuations, availability
of commodities, supplies and raw materials, competition, acquisitions or
divestitures, changes in government defense budgets, employment and pension
matters, contingencies related to actual or alleged environmental contamination,
claims and concerns, intellectual property matters, personal injury claims,
governmental investigations, tax obligations, and changes in generally accepted
accounting principles. Other factors are 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. Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and
other of its filings with the Securities and Exchange Commission. The Company
undertakes no obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
CONSOLIDATED CONDENSED INCOME STATEMENTS
(In millions, except per share)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------- -----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Sales and revenues $ 1,949.5 $ 1,830.8 $ 7,427.3 $ 6,327.4
Costs of sales and
revenues 1,270.2 1,197.2 4,917.2 4,102.3
Selling, general and
administrative expenses 301.7 278.5 1,071.2 963.4
Research, development and
engineering expenses 160.4 168.7 650.3 618.3
Restructuring and asset
impairment charges 234.4 11.1 288.5 33.8
Total costs and expenses 1,966.7 1,655.5 6,927.2 5,717.8
Operating income (loss) (17.2) 175.3 500.1 609.6
Interest expense 23.1 16.6 75.0 50.4
Interest income 6.4 3.8 42.7 22.5
Gain on sale of investments - 20.8 - 20.8
Miscellaneous expense, net 6.9 6.0 19.7 17.7
Income from continuing
operations before income
taxes (40.8) 177.3 448.1 584.8
Income tax expense 47.5 56.0 133.7 164.7
Income (loss) from
continuing operations (88.3) 121.3 314.4 420.1
Cumulative effect of
accounting change, net of
tax benefit of $2.2 (6.5) - (6.5) -
Discontinued operations,
including tax benefit
(expense) of $0.3, $0.3,
$37.6 and ($4.9) in each
period, respectively 10.8 0.3 51.6 12.2
Net income (loss) $ (84.0) $ 121.6 $ 359.5 $ 432.3
Earnings Per Share:
Income from continuing
operations:
Basic $ (0.96) $ 1.32 $ 3.41 $ 4.55
Diluted $ (0.96) $ 1.29 $ 3.34 $ 4.45
Cumulative Effect of
Accounting Change:
Basic $ (0.07) $ - $ (0.07) $ -
Diluted $ (0.07) $ - $ (0.07) $ -
Discontinued operations:
Basic $ 0.12 $ - $ 0.55 $ 0.13
Diluted $ 0.12 $ - $ 0.54 $ 0.13
Net income:
Basic $ (0.91) $ 1.32 $ 3.89 $ 4.68
Diluted $ (0.91) $ 1.29 $ 3.81 $ 4.58
Average Common Shares -
Basic 92.3 92.3 92.3 92.3
Average Common Shares -
Diluted 92.3 94.3 94.3 94.4
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)
December 31, December 31,
2005 2004
------------ ------------
Assets
Current Assets:
Cash and cash equivalents $ 451.0 $ 262.9
Receivables, net 1,273.7 1,110.9
Inventories, net 666.9 685.7
Current assets of discontinued operations 236.6 258.9
Deferred income taxes 73.7 107.1
Other current assets 70.1 59.7
Total current assets 2,772.0 2,485.2
Plant, property and equipment, net 841.0 872.0
Deferred income taxes 87.5 209.5
Goodwill, net 2,253.9 2,492.0
Other intangible assets, net 215.1 241.8
Other assets 893.9 982.1
Total assets $ 7,063.4 $ 7,282.6
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable $ 799.6 $ 688.1
Accrued expenses 748.4 698.9
Accrued taxes 187.1 283.1
Current liabilities of discontinued operations 65.4 66.6
Notes payable and current maturities of
long-term debt 751.4 729.2
Other current liabilities 8.5 1.9
Total current liabilities 2,560.4 2,467.8
Pension and postretirement benefits 738.1 1,365.2
Long-term debt 516.3 542.8
Other liabilities 525.2 563.8
Total liabilities 4,340.0 4,939.6
Shareholders' equity 2,723.4 2,343.0
Total liabilities and shareholders' equity $ 7,063.4 $ 7,282.6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Year Ended
December 31,
---------------------------
2005 2004
------------ ------------
Operating Activities
Net income $ 359.5 $ 432.3
Cumulative effect of change in
accounting principle 6.5 -
Net income from discontinued operations (51.6) (12.2)
Income from continuing operations 314.4 420.1
Adjustments to income from continuing operations:
Depreciation and amortization 196.6 175.1
Restructuring and asset impairment charges 288.5 33.8
Payments for restructuring (50.4) (29.3)
Change in receivables (192.0) (28.2)
Change in inventories (18.0) (76.0)
Change in accounts payable and accrued expenses 124.1 14.8
Change in accrued and deferred taxes 89.8 101.9
Change in other current and non-current assets (16.3) (54.9)
Change in other non-current liabilities 7.5 (56.1)
Other, net 1.6 (14.5)
Net cash -- operating activities 745.8 486.7
Investing Activities
Additions to plant, property and equipment (179.2) (145.4)
Acquisitions, net of cash acquired (69.0) (1,010.0)
Proceeds from sale of assets and businesses 26.9 7.2
Sale of investments - 24.9
Other, net (2.2) 0.2
Net cash -- investing activities (223.5) (1,123.1)
Financing Activities
Short-term debt, net 26.6 554.2
Long-term debt repaid (18.4) (68.7)
Long-term debt issued 0.4 120.2
Repurchase of common stock (334.4) (159.6)
Proceeds from issuance of common stock 151.9 76.8
Dividends paid (65.6) (61.8)
Other, net (0.3) (0.1)
Net cash -- financing activities (239.8) 461.0
Exchange Rate Effects on Cash and
Cash Equivalents (25.1) 17.6
Net Cash -- Discontinued Operations
Operating Activities (64.1) 26.2
Net Cash -- Discontinued Operations
Investing Activities (5.2) (19.7)
Net change in cash and cash equivalents 188.1 (151.3)
Cash and cash equivalents -- beginning of year 262.9 414.2
Cash and Cash Equivalents -- end of period $ 451.0 $ 262.9
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue / Orders Growth
Fourth Quarter 2005 & 2004
($ Millions)
(As Reported - GAAP)
---------------------------------------------------------
Sales & Sales & Change % Change
Revenues Revenues 2005 vs. 2005 vs.
3M 2005 3M 2004 2004 2004
------------ ------------ ------------ ------------
ITT Industries - Consolidated 1,949.5 1,830.8 118.7 6.5%
Fluid Technology 758.9 749.1 9.8 1.3%
Defense Electronics & Services 862.3 746.6 115.7 15.5%
Electronic Components 183.2 178.6 4.6 2.6%
Motion & Flow Control 148.4 160.1 (11.7) -7.3%
Friction 61.1 71.5 (10.4) -14.5%
Aerospace Controls 18.5 15.8 2.7 17%
Leisure Marine 47.9 49.4 (1.5) -3%
Water Wastewater 534.2 520.3 13.9 2.7%
Tactical Radios 141.4 102.1 39.3 38.5%
(As Adjusted - Organic)
------------------------------------------------------------
Adj.
Sales & Acquisition FX Sales &
Revenues Contribution Contribution Revenues
3M 2005 3M 2005 3M 2005 3M 2005
------------ ------------ ------------ -------------
ITT Industries - Consolidated 1,949.5 (5.6) 34.5 1,978.4
Fluid Technology 758.9 (4.4) 21.6 776.1
Defense Electronics & Services 862.3 0.0 (0.3) 862.0
Electronic Components 183.2 0.0 5.1 188.3
Motion & Flow Control 148.4 (1.2) 8.2 155.4
Friction 61.1 0.0 5.4 66.5
Aerospace Controls 18.5 0.0 0.0 18.5
Leisure Marine 47.9 (1.2) 1.2 47.9
Water Wastewater 534.2 (4.4) 21.7 551.5
Tactical Radios 141.4 0.0 (0.1) 141.3
(As Adjusted - Organic)
------------------------------------------
Sales & Change % Change
Revenues Adj. 05 Adj. 05
3M 2004 vs. 04 vs. 04
------------ ------------ -----------
ITT Industries - Consolidated 1,830.8 147.6 8%
Fluid Technology 749.1 27.0 4%
Defense Electronics & Services 746.6 115.4 15%
Electronic Components 178.6 9.7 5%
Motion & Flow Control 160.1 (4.7) -3%
Friction 71.5 (5.0) -7%
Aerospace Controls 15.8 2.7 17%
Leisure Marine 49.4 (1.5) -3%
Water Wastewater 520.3 31.2 6%
Tactical Radios 102.1 39.2 38.4%
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Organic Revenue / Orders Growth
Full Year 2005 & 2004
($ Millions)
(As Reported - GAAP)
-----------------------------------------------------------
Sales & Sales & Change % Change
Revenues Revenues 2005 vs. 2005 vs.
YTD 2005 YTD 2004 2004 2004
------------ ------------ ------------ ------------
ITT Industries - Consolidated 7,427.3 6,327.4 1,099.9 17.4%
Fluid Technology 2,837.1 2,594.1 243.0 9.4%
Defense Electronics & Services 3,224.2 2,414.0 810.2 33.6%
Motion & Flow Control 670.0 633.8 36.2 5.7%
Motion & Flow Control 670.0 633.8 36.2 5.7%
(As Adjusted - Organic)
-----------------------------------------------------------
Adj.
Sales & Acquisition FX Sales &
Revenues Contribution Contribution Revenues
YTD 2005 YTD 2005 YTD 2005 YTD 2005
------------ ------------ ------------ ------------
ITT Industries - Consolidated 7,427.3 (324.3) (17.0) 7,086.0
Fluid Technology 2,837.1 (16.4) (13.1) 2,807.6
Defense Electronics & Services 3,224.2 (303.3) (0.1) 2,920.8
Motion & Flow Control 670.0 (4.6) (2.6) 662.8
Motion & Flow Control 670.0 (4.6) (2.6) 662.8
(As Adjusted - Organic)
------------------------------------------
Sales & Change % Change
Revenues Adj. 05 Adj. 05
YTD 2004 vs. 04 vs. 04
------------ ------------ -----------
ITT Industries - Consolidated 6,327.4 758.6 12%
Fluid Technology 2,594.1 213.5 8%
Defense Electronics & Services 2,414.0 506.8 21%
Motion & Flow Control 633.8 29.0 5%
Motion & Flow Control 633.8 29.0 5%
ITT Industries Non-GAAP Press Release Reconciliation
Segment Operating Income & OI Margin Adjusted for Restructuring
Fourth Quarter of 2005 & 2004
($ Millions)
Q4 2005 Q4 2004 % Q4 2005 Adjust for
As As Change As 2005
Reported Reported 05 vs. 04 Reported Restructuring
------------ ------------ ------------ ------------ -------------
Sales and Revenues:
Electronic Components 183.2 178.6 183.2
Defense Electronics & Services 862.3 746.6 862.3
Fluid Technology 758.9 749.1 758.9
Motion & Flow Control 148.4 160.1 148.4
Intersegment eliminations (3.3) (3.6) (3.3)
Total Ongoing segments 1,949.5 1,830.8 1,949.5
Dispositions and other - - -
Total Sales and Revenues 1,949.5 1,830.8 1,949.5
Operating Margin:
Electronic Components -117.5% 5.2% -117.5%
Defense Electronics & Services 12.1% 10.4% 12.1%
Fluid Technology 12.9% 10.7% 12.9%
Motion & Flow Control 15.8% 18.6% 15.8%
Total Ongoing Segments 0.5% 10.8% 0.5%
Income:
Electronic Components (215.2) 9.2 -2439.1% (215.2) 224.1
Defense Electronics & Services 104.2 77.8 33.9% 104.2 0.0
Fluid Technology 98.0 80.5 21.7% 98.0 8.5
Motion & Flow Control 23.5 29.7 -20.9% 23.5 1.8
Total Segment Operating Income 10.5 197.2 -94.7% 10.5 234.4
Q4 2005 Q4 2004 Adjust for Q4 2004 %
As As 2004 As Change Adj.
Adjusted Reported Restructuring Adjusted 05 vs. 04
------------ ------------ ------------- ------------- -------------
Sales and Revenues:
Electronic Components 183.2 178.6 178.6
Defense Electronics & Services 862.3 746.6 746.6
Fluid Technology 758.9 749.1 749.1
Motion & Flow Control 148.4 160.1 160.1
Intersegment eliminations (3.3) (3.6) (3.6)
Total Ongoing segments 1,949.5 1,830.8 1,830.8
Dispositions and other - - -
Total Sales and Revenues 1,949.5 1,830.8 1,830.8
Operating Margin:
Electronic Components 4.9% 5.2% 5.9% (100)BP
Defense Electronics & Services 12.1% 10.4% 10.4% 170 BP
Fluid Technology 14.0% 10.7% 12.0% 200 BP
Motion & Flow Control 17.0% 18.6% 18.6% (160)BP
Total Ongoing Segments 12.6% 10.8% 11.4% 120 BP
Income:
Electronic Components 8.9 9.2 1.4 10.6 -16.0%
Defense Electronics & Services 104.2 77.8 0.0 77.8 33.9%
Fluid Technology 106.5 80.5 9.6 90.1 18.2%
Motion & Flow Control 25.3 29.7 0.1 29.8 -15.1%
Total Segment Operating Income 244.9 197.2 11.1 208.3 17.6%
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Fourth Quarter of 2005 & 2004
($ Millions, except EPS and shares)
Q4 2005 Q4 2005 Q4 2005 Q4 2004 Q4 2004 Q4 2004
As Adjust- As As Adjust- As
Reported ments Adjusted Reported ments Adjusted
---------- ---------- ---------- ---------- ---------- ----------
Segment Operating
Income 10.5 234.4 #A 244.9 197.2 11.1 #G 208.3
Interest Income
(Expense) (16.7) 1.4 #B (15.3) (12.8) - (12.8)
Other Income (Expense) (6.9) - (6.9) (6.0) - (6.0)
Gain on sale of Assets - - - 20.8 (20.8)#H -
Corporate (Expense) (27.7) - (27.7) (21.9) - (21.9)
Income from Continuing
Operations before Tax (40.8) 235.8 195.0 177.3 (9.7) 167.6
Income Tax Items 12.9 #C 12.9 (1.1)#I (1.1)
Income Tax Expense (47.5) (25.8)#D (73.3) (56.0) 5.2 #J (50.8)
Total Tax Expense (47.5) (12.9) (60.4) (56.0) 4.1 (51.9)
Income from Continuing
Operations (88.3) 222.9 134.6 121.3 (5.6) 115.7
Income from Discontinued
Operations 10.8 (10.8)#E 0.0 0.3 (0.3)#K -
Cumulative Effect of
Accounting Change (6.5) 6.5 #F 0.0 - - -
Net Income (84.0) 218.6 134.6 121.6 (5.9) 115.7
Diluted EPS (Q4 2005
Basic Shares used for
Reported) (0.91) 2.37 1.46 1.29 (0.07) 1.22
Adjustment from
Basic Shares (0.03)
Adjusted EPS
Diluted
Shares (0.91) 2.34 1.43 1.29 (0.07) 1.22
Change Percent Change
2005 vs. 2004 2005 vs. 2004
As Adjusted As Adjusted
--------------- ---------------
Segment Operating Income
Interest Income (Expense)
Other Income (Expense)
Gain on sale of Assets
Corporate (Expense)
Income from Continuing Operations
before Tax
Income Tax Items
Income Tax Expense
Total Tax Expense
Income from Continuing Operations
Income from Discontinued Operations
Cumulative Effect of Accounting
Change
Net Income 18.9 16.3%
Diluted EPS (Q4 2005 Basic Shares
used for Reported) $ 0.24 19.7%
Adjustment from Basic Shares
Adjusted EPS Diluted
Shares $ 0.21 17.2%
#A - Remove Restructuring Expense including asset impairment of $234.4M
#B - Remove Interest Income Due to Tax Refund $1.4M
#C - Remove Tax Matters of $12.9M
#D - Remove Tax Benefit on Special Items of ($25.8M)
#E - Remove D.O. Income of ($10.8M)
#F - Remove Cumulative effect of Accounting Change of $6.5M
#G - Remove Restructuring Expense of $11.1M
#H - Remove Gain on sale of investment of ($20.8M)
#I - Remove Tax Refund of ($1.1M)
#J - Remove Tax Expense on Special Items of $5.2M
#K - Remove D.O. income of $(0.3M)
ITT Industries Non-GAAP Press Release Reconciliation
Reported vs. Adjusted Net Income & EPS
Full Year of 2005 & 2004
($ Millions, except EPS and shares)
YTD YTD
2005 YTD 2005
As 2005 As
Reported Adjustments Adjusted
----------- ----------- -----------
Segment Operating Income 591.2 288.1 #A 879.3
Interest Income (Expense) (32.3) (20.9)#B (53.2)
Other Income (Expense) (19.7) - (19.7)
Gain on sale of Assets - - -
Corporate (Expense) (91.1) 0.4 #C (90.7)
Income from Continuing Operations
before Tax 448.1 267.6 715.7
Income Tax Items 73.7 #D 73.7
Income Tax Expense (133.7) (161.8)#E (295.5)
Total Tax Expense (133.7) (88.1) (221.8)
Income from Continuing Operations 314.4 179.5 493.9
Income from Discontinued Operations 51.6 (51.6)#F 0.0
Cumulative Effect of Accounting
Change (6.5) 6.5 #G 0.0
Net Income 359.5 134.4 493.9
Diluted EPS 3.81 1.43 5.24
YTD YTD
2004 YTD 2004
As 2004 As
Reported Adjustments Adjusted
----------- ----------- -----------
Segment Operating Income 692.0 32.1 #H 724.1
Interest Income (Expense) (27.9) (4.2)#I (32.1)
Other Income (Expense) (17.7) 1.2 #J (16.5)
Gain on sale of Assets 20.8 (20.8)#K -
Corporate (Expense) (82.4) 1.7 #L (80.7)
Income from Continuing Operations
before Tax 584.8 10.0 594.8
Income Tax Items 16.5 #M 16.5
Income Tax Expense (164.7) (36.3)#N (201.0)
Total Tax Expense (164.7) (19.8) (184.5)
Income from Continuing Operations 420.1 (9.8) 410.3
Income from Discontinued Operations 12.2 (12.2)#O 0.0
Cumulative Effect of Accounting
Change - - -
Net Income 432.3 (22.0) 410.3
Diluted EPS 4.58 (0.23) 4.35
Change Percent Change
2005 vs. 2004 2005 vs. 2004
As Adjusted As Adjusted
--------------- ---------------
Segment Operating Income
Interest Income (Expense)
Other Income (Expense)
Gain on sale of Assets
Corporate (Expense)
Income from Continuing Operations
before Tax
Income Tax Items
Income Tax Expense
Total Tax Expense
Income from Continuing Operations
Income from Discontinued Operations
Cumulative Effect of Accounting
Change
Net Income 83.6 20.4%
Diluted EPS $ 0.89 20.5%
#A - Remove Restructuring Expense including asset impairment of $288.1M
#B - Remove Interest Income Due to Tax Refund ($20.9M)
#C - Remove Restructuring Expense of $0.4M
#D - Remove Tax Matters of 73.7M
#E - Remove Tax Benefit on Special Items of ($161.8M)
#F - Remove D.O. Income of ($51.6M)
#G - Remove Cumulative effect of Accounting Change of $6.5M
#H - Remove Restructuring Expense of $32.1M
#I - Remove Interest Income Due to Tax Refund ($4.2M)
#J - Remove Sale of Digital Globe $1.2M
#K - Remove Gain on sale of investment of ($20.8M)
#L - Remove Restructuring Expense of $1.7M
#M - Remove Tax Matters of $16.5M
#N - Remove Tax Benefit on Special Items of ($36.3M)
#O - Remove D.O. Income of $12.2M
ITT Industries Non-GAAP Press Release Reconciliation
Cash From Operating Activities vs. Free Cash Flow
Full Year of 2005 & 2004
($ Millions)
Full Year 05 Full Year 04
------------ ------------
Income from Continuing Ops 314.4 420.1
Asset Impairment Charges 213.9 -
Depreciation 164.3 154.5
Amortization 32.3 20.6
Working Capital (117.9) (73.8)
Pension Pre-funding (100.0) (100.0)
Other 238.8 65.3
Cash from Operations 745.8 486.7
Capital Expenditures (179.2) (145.4)
Pension Pre-funding 100.0 100.0
Free Cash Flow 666.6 441.3
SOURCE ITT Industries, Inc.
-0- 01/27/2006
/CONTACT: Tom Glover of ITT Industries, Inc., +1-914-641-2160,
tom.glover@itt.com/
/FCMN Contact: marianna.ricci@itt.com/
/Web site: http://www.itt.com
http://www.thenewsmarket.com/ITT /
(ITT)
