ITT Industries Reports Full Year 2002 EPS of $4.06, $3.70 Excluding One-time Items
ITT Industries, Inc. (NYSE: ITT) reported full year 2002 net income of $379.9 million and diluted earnings per share (EPS) of $4.06, up 37 percent and 33 percent respectively over the full year 2001. The comparison includes the $0.33 per share favorable impact of a tax settlement in the third quarter of 2002 and the net positive impact of restructuring reserves of $0.03 per share during the third and fourth quarters of 2002.
Adjusting results to reflect the company's adoption of accounting standard FAS No. 142 in 2002, and excluding the impact of one-time items, earnings for 2002 of $3.70 rose 6 percent over the adjusted EPS of $3.49 for 2001.
"By any measure, 2002 was a great year. Despite challenging economic conditions, we have extended our record of revenue, earnings and cash flow growth," said Lou Giuliano, Chairman, President and Chief Executive Officer of ITT Industries. "Three of the four segments posted better than expected growth during the year, and we greatly exceeded our cash flow forecast. The leadership of our global management team maintained positive momentum, constantly improving our processes to better serve our customers while also positioning the company for further growth."
Full year 2002 revenues were $4.99 billion, up 7 percent driven by increased sales in the Defense, Fluid technology and Motion & Flow Control segments. Full year segment operating income was $595.1 million, up $8.8 million over 2001, yielding an operating margin of 11.9 percent. Cash from operations of $595 million resulted from higher income, improved operating capital utilization and lower cash taxes. Free cash flow (defined as cash from operations minus capitalspending) of $442 million grew 46 percent over 2001. Strong cash flow enabled the company to make a $50 million contribution to its U.S. salaried pension plan, complete $159 million in acquisitions and recommend an increase in the quarterly dividend effective April 2003.
"Going forward, we see a continuation of tough economic conditions. Despite that, we're committed to delivering solid growth in 2003 by executing our basic strategy of building on our strong core businesses through new product development, acquisitions and initiatives aimed at operational excellence," Giuliano added.
Fourth Quarter Results
In the fourth quarter, net income was $95.1 million, up $21.1 million or 29 percent over the period in 2001, including the impact of one time items. EPS for the quarter, including the impact of one-time items, was $1.01, up $0.20 per share from reported EPS in the fourth quarter 2001. During the fourth quarter 2002, the company recorded certain one-time items, including a before-tax charge of $9.6 million related to 2002 restructuring activities. The charge was offset by an $11.4 million adjustment for prior period restructuring. The net effect of these one-time items was a $0.01 increase in reported EPS for the fourth quarter. Adjusting results to reflect the adoption of FAS 142 in 2002, and excluding the impact of one-time items,
earnings for the fourth quarter 2002 of $1.00 rose 5 percent over the adjusted
figure of $0.95 for the period in 2001.
Fourth quarter 2002 segment operating income was $154.0 million, relatively flat with the period last year, excluding the impact of a restructuring charge taken in the fourth quarter of 2001. Fourth quarter revenues were up 5 percent to $1.24 billion, attributable mostly to revenue gains in Fluid Technology and Motion & Flow Control, and the positive impact of foreign currency translation.
* The company's Defense business realized significant new contract wins,
growing its backlog to a record $2.8 billion. New contracts announced during the year include a majority stake of the Army's OMNIBUS VI Night Vision Award, and a contract to support and modernize the US and Air Force missile warning, missile defense, and spacetrack missions(SENSOR).
* The water and wastewater business of ITT's Fluid Technology segment posted another strong year, with full-year organic revenue growth of 7 percent and record order activity. The business completed four strategic acquisitions that will enhance its technology and market base, and further position the business as a provider of total system
* ITT Industries completed eight acquisitions during 2002, continuing to
execute its strategy of building on strong core businesses. The acquisitions represent annualized revenues of more than $160 million, and include Precision Stainless, Martin Petersen Company, Svedala Robot, Waterlink, Flowtronex, Royce Instruments and PCI Membranes within Fluid Technology, and Xybion in Defense.
* In December, the company announced its intention to raise the dividend 7 percent to 16 cents per quarter, effective April 2003, pending approval by the Board of Directors. The decision reflects confidence in the performance outlook and a commitment to return value to shareholders.
* ITT Industries' strong full year free cash flow enabled the company to voluntarily pre-fund its U.S. salaried pension plan by $50 million in the fourth quarter. Further, the company has funded the plan by an additional $200 million in January 2003.
* ITT Industries continued to expand the Value-Based Six Sigma initiative, launching Green Belt training for 1,700 executives and managers in the company, and expanding its Value Based Product Development initiative to bring focus to new product engineering and marketing using the "Voice of the Customer" feedback. Value-Based Six Sigma is a key component of the ITT Management System and is the overarching discipline for operational excellence, improving efficiencies, accelerating new product introductionsand developing management talent.
* The Board of Directors elected Maytag CEO Ralph Hake in October, bringing the number of Board members to ten. Hake provides additional operational and financial management experience to the Board.
Outlook for 2003
Looking ahead, the company reiterated guidance for revenue and earnings growth in 2003. Giuliano said he anticipates first quarter 2003 EPS between $0.78 and $0.82. He reiterated full year 2003 EPS expectations between $3.70 and $3.90, corresponding to an increase of up to 5 percent from 2002 earnings per share, adjusted to exclude one-time items. Cash from operations is expected to be approximately equal to 2002, excluding the one-time items of tax refunds and pension contributions.
Primary Business Results
All figures exclude restructuring and other special items. Fluid Technology ITT Industries' Fluid Technology segment reported fourth quarter 2002 revenues of $522.7 million and full year revenues of $1.96 billion, up 13 percent and 7 percent respectively. ITT's water and wastewater-related businesses grew 11 percent during the year, reflecting continued strong demand, acquisitions and the positive impact of foreign currency translation. This and acquisitions in the Engineered Valves business more than offset ongoing softness in the industrial pump sector. Operating income for the quarter was $72.0 million, up 20 percent from the fourth quarter last year, and full year operating income rose 8 percent to $256.0 million. Full year 2002 operating margins in this segment rose 20 basis points. Looking ahead to 2003, the contribution of recent acquisitions and continued demand for water and wastewater equipment will be partially offset by continued weakness in the industrial sector, resulting in revenue growth of 5 to 7 percent.
About ITT Industries
ITT Industries 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 $4.99 billion in 2002 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
For more detailed information, have a look at http://www.itt.com.
Source: ITT Inc.