ITT Industries Reports First Quarter EPS of $0.77
-- Diversified portfolio and process improvements drive earnings growth
-- Defense segment revenues and operating income exceed expectations
-- Full-year earnings per share forecast of $3.50 - $3.65
WHITE PLAINS, N.Y., April 24 /PRNewswire-FirstCall/ -- ITT Industries, Inc. (NYSE: ITT) today announced first quarter 2002 net income of $71.5 million and diluted earnings per share of $0.77, up $12 million and 18 percent respectively over the reported first quarter 2001. On January 1, 2002 the company adopted Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible Items," which had the effect of eliminating the amortization of goodwill. Had such standards been in effect for 2001, net income for the first quarter 2001 would have been $67.6 million, and earnings per share would have been $0.75, resulting in year-over-year increases of $4 million and 3 percent respectively.
First quarter 2002 revenues were even with the period last year at $1.19 billion. Growth in ITT's defense and water/wastewater businesses offset expected declines in electronic components and industrial pumps. While operating margin grew in the Defense Electronics & Services and Fluid Technology segments, overall operating margin declined reflecting segment mix changes and lower profitability in Motion & Flow Control. Higher defense revenues, lower interest costs and continued actions taken to improve the company's competitive position resulted in earnings above company expectations.
"We are pleased to deliver another quarter of earnings growth, particularly in this uncertain economic environment. We are operating according to our grounded forecasts, and our management team continues to focus on process improvement initiatives," said Lou Giuliano, Chairman, President, and Chief Executive Officer of ITT Industries. "Our multi-industry portfolio offers a clear advantage in times like these. Our defense business is on a growth track, with first quarter revenues up 22 percent and a backlog of $2.8 billion. ITT Industries' water and wastewater businesses continue to perform well, growing revenues 2 percent over the period last year, excluding the negative impact of foreign exchange. And we are seeing some stability in our Electronic Components segment, which performed in line with expectations."
The company reported first quarter 2002 free cash flow of $15.5 million, ahead of expectations, but below first quarter 2001 free cash flow of $51.4 million, due to lower advance payments in Defense and the timing of collections that benefited the fourth quarter of 2001. Giuliano reiterated that the company is on track to deliver strong cash flow for the full year.
"We are continuing to focus on growth and operational excellence," Giuliano said. "To that end, we continue to put significant emphasis on executing operating improvements through our Value-Based Six Sigma and Value-Based Product Development initiatives. Based on our plans and actions, we are tightening our full year earnings guidance and now expect to report full year EPS between $3.50 and $3.65."
Primary Business Results
All operating income and margin figures for 2001 in this section are adjusted to reflect changes in goodwill accounting, which the company adopted on January 1, 2002.
ITT Industries' Fluid Technology segment reported first quarter revenues of $444.2 million, down $7 million or 2 percent from the first quarter 2001. First quarter 2002 revenues included $17.6 million incremental contribution from acquisitions. Continued growth in the water and wastewater businesses was offset by ongoing weakness in the industrial and building trades markets, and the negative impact of foreign currency exchange. Despite this decline, operating income for the quarter rose $1.2 million or 2 percent to $53.7 million, and segment operating margin rose by 50 basis points, reflecting ongoing process improvements and cost actions. For the full year, the company is prepared for slower growth in the water and wastewater businesses, accompanied by soft industrial markets, resulting in revenues
roughly equal to last year.
Defense Electronics & Services
Revenues for ITT Industries' Defense Electronics & Services segment in the first quarter were $368.7 million, up $65.7 million or 22 percent from the period last year. The rise in revenues over the period in 2001 was driven by contracts won over the past 18 months, including the ramp-up of the Space Lift Range System program, the more rapid transition to production of a key electronic warfare program and increased communication shipments. The Defense segment continued to win new business during the first quarter, including a landmark contract with a potential value of more than $950 million to upgrade the ground portion of the USAF's missile defense infrastructure. The segment backlog reached a new record of $2.8 billion. First quarter operating income increased 28 percent to $31.6 million, while operating margin rose 50 basis points over the first quarter last year, reflecting increased volume and a higher percentage of international sales. Looking ahead, the Defense segment is expected to grow revenues through the remainder of the year.
Motion & Flow Control
ITT Industries' Motion & Flow Control segment recorded first quarter 2002 revenues of $236.0 million, even with the first quarter last year, reflecting gains in the automotive fluid systems business, offset by softness in the segment's European units. Operating income for the Motion & Flow Control segment was $27.9 million, off $3.6 million or 11 percent, and operating margin declined 150 basis points, due to volume decline at Aerospace Controls
and in the segment's European units. Full year segment revenues are expected to decline modestly.
First quarter revenues for the Electronic Components segment were $137.7 million, down $58.8 million or 30 percent from the period last year, in line with expectations. From the fourth quarter 2001, revenues declined 4 percent sequentially, reflecting stabilization in electronic end markets. Acquisitions in this segment contributed incremental revenues of $5 million in the first quarter 2002. Orders in the first quarter were 22% below prior year, but increased 22% sequentially from the fourth quarter 2001, resulting in a book-to-bill ratio of 1.05 in the first quarter 2002. Operating income declined $9.5 million to $17.0 million on lower volume. Cost actions and the contribution of new products allowed the segment to maintain a double digit operating margin, down only 120 basis points from the prior year. The company anticipates continued stable market conditions in the near-term, followed by
only modest growth. The forecast is for full year segment revenues to decline 8-12 percent.
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 $4.7 billion in 2001 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, 2001, and other of its filings with the Securities and Exchange Commission.
Source: ITT Inc.