ITT Industries Reports Second Quarter EPS of $1.06 with Revenues Up 9 Percent
ITT Industries, Inc. today announced second quarter 2003 net income of $99.9 million and diluted earnings per share of $1.06, up $7 million and $0.07 respectively over the second quarter 2002.
Reported EPS contains an $0.08 per share positive impact from a benefits claim settlement and a tax settlement, and ($0.04) per share for restructuring actions taken during the second quarter, for a net $0.04 per share impact.
"We're pleased to deliver another quarter of earnings growth, with revenues and cash flow exceeding expectations.Our management team continues to do an excellent job in a demanding environment," said Lou Giuliano, Chairman, President, and Chief Executive Officer of ITT Industries."Our Defense segment posted a 9 percent gain in revenues and strong margin improvement, continuing a long-term growth trend.Our Fluid Technology and Motion & Flow Control businesses each turned in higher revenues and strong performances, thus helping to more than offset continued weakness in our Electronic Components business."
"Our Electronic Components segment continues to face difficult market conditions, impacted this quarter particularly by a falloff in demand for our handset connectors and switches in Asia," Giuliano added."Newly appointed president Brenda Reichelderfer and her team understand the issues facing Electronic Components.The next two quarters will see the introduction of several major new products and improvements in service offerings.Going forward, we believe Electronic Components presents ITT with a real opportunity to boost earnings growth."
- Second quarter 2003 revenues rose 9 percent to $1.44 billion, due mainly to growth in Defense and Fluid Technology. Organic revenue growth was 5 percent.
- Operating income for the quarter was $141.5 million, including the ($5.9) million impact of restructuring charges.
- During the quarter, the company recorded a ($0.04) per share charge forrestructuring, primarily within the Electronic Components and Motion & Flow Control segments.This was more than offset by an $0.08 per share impact from a benefits claim settlement and a tax settlement.
- The company continues to see the benefit from improvements implemented through its Value-Based Six Sigma program, with a significant impact inincreased sales and savings over the last two years. Cash from operations significantly exceeded expectations, with the company's second quarter 2003 cash from operations totaling $182.3 million. The company expects continued strong cash flow through the full year.
"Overall, we're facing a very mixed set of business conditions, and this actually plays to the strength of our multi-industry portfolio," Giuliano said."We know that our continuous efforts to improve our competitive stance put us in an excellent position to take advantage of any broad upturn in the economy.Based on our reported results so far this year, including the
effects of one-time items, we are raising our full-year (GAAP) EPS guidance to $3.77 - $3.97 per share."
Second Quarter Segment Highlights
- Second quarter 2003 FTC revenues rose 13 percent or $65.9 million to $570.6 million, driven by growth in water/wastewater.Operating income was up 12 percent or $7.7 million to $74.1 million, while operating margin declined 20 basis points, reflecting the impact of acquisition integration.
- Activity remains strong in the water/wastewater business, with revenues up 24 percent and orders up 27 percent, including acquisitions.Orders realized in the second quarter include an $800K order for wastewater treatment plant equipment in Italy, a $500K order in Sweden and a $1.1 million service contract in Denmark.
- In its water business, ITT is positioned to capture new global growth opportunities.The company has entered the high-growth desalinization market, securing in the second quarter a $4.9 million order for a private water system in the United Arab Emirates and a $1.7 million municipal order in Virginia.
Defense Electronics & Services
- Revenues for Defense Electronics & Services were $452.4 million in the second quarter, up 9 percent or $36.5 million over the second quarter 2002.Operating income rose 15 percent to $46.7 million, and operating margin increased 50 basis points.
- The company's Systems and Advanced Engineering & Sciences units continue to gain new service contracts, notably an equipment maintenance contract in Qatar and a facility service contract in Eastern Europe, and additional work on the Spacelift Range Systems and SENSOR contracts.
- Contracts won during the second quarter include a $43 million contract to provide communications support to U.S. Air Force locations in Northern Europe, a $31 million contract to upgrade Global Positioning Satellites (GPS), and $21 million in international SINCGARS radio orders.
- The company sees long-term growth opportunities in its defense services businesses as the U.S. military repositions its forces around the world.
Motion & Flow Control
- Despite a downturn in certain key markets, second quarter MFC revenues increased 4 percent or $11 million to $262.7 million, and operating income rose 5 percent to $37.1 million.Operating margin remained flat, due to charges for restructuring.
- ITT's automotive businesses see strength amid a sluggish OEM environment, gaining market share in Europe.The Motion Control businesses saw revenues increase 30 percent over the period last year, and the Auto Tubing business secured new platform wins for '05 and '06 models.
- The company's Leisure Marine unit realized a 9 percent revenue increase in the quarter, helped by new products and market share gains in the Marine business, and is well positioned to leverage positive market conditions in the recreation, beverage and industrial markets.
- EC revenues rose $5.1 million in the quarter to $153.7 million. Operating income fell $16.7 million to $1.9 million, with a corresponding decline in margin, attributable to unfavorable changes in product mix, ongoing price pressures and the impact of restructuring charges taken during the quarter.
- Restructuring actions taken in the first half will have the effect of reducing SG&A expenses, increasing Lean Manufacturing initiatives and outsourcing, and accelerating migration of production to lower-cost regions.
- ITT has seen revenues within its high-margin mobile handset business decline 30 percent from the period last year due to price pressures, SARS-related inventory buildup in Asia and late product introductions.
- A number of new ITT products are now available or are being qualified with customers that will have an impact later in 2003:
- KSM switch, the successor to the KSS miniature switch, for mobile telephones
- High speed connectors with fiber optic inserts for military and industrial applications
- New keypad design for mobile handsets
- New interface control for the transportation market
About ITT Industries
ITT Industries, Inc. (NYSE: ITT) 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, Paris and Frankfurt exchanges.
Source: ITT Inc.