ITT Reports Record Second Quarter 2006
"Our entire team performed extremely well in the second quarter, delivering results that surpassed our expectations and bolstering our confidence for the full year. We are raising our guidance for the year to reflect this strong performance," said Steve Loranger, Chairman, President and Chief Executive Officer.
"ITT continues to deliver solid revenue growth, particularly organic growth. This speaks to our performance in the marketplace, delivering the products and services demanded by our customers.
"I attribute these results to the capabilities of our management team, our diverse portfolio, and the strength of the ITT Management System," Loranger said. "I am pleased that we are delivering consistent results, quarter after quarter, in spite of the normal fluctuations in market demand and rising material costs."
- Earnings excluding special items are $0.80 per share, up 18 percent, and up 21 percent excluding the impact of the adoption of SFAS-123R
- Company raises FY 2006 earnings forecast excluding special items from $2.91 - $2.97 to $2.95 - $3.00 per share, and raises FY 2006 revenue range from $7.90 - $8.01 billion to $8.08 - $8.17 billion
- Second quarter revenue up 11 percent to $2.07 billion on strong growth in Defense and Fluid Technology; organic revenue up 10 percent
- Second quarter segment operating margin improves by 40 basis points, and 80 basis points excluding special items and the impact of SFAS-123R
ITT Corporation reported record second quarter 2006 net income of $140.9 million or $0.75 per share, including $8.3 million or $0.05 per share net impact of restructuring and discontinued operations. Excluding special items, 2006 second quarter earnings from continuing operations grew 18 percent to $0.80 per share over the second quarter 2005. Excluding the ($0.02) per share impact of the adoption of SFAS-123R, earnings for the quarter grew 21 percent compared to the second quarter of 2005. Second quarter 2006 revenue was $2.07 billion, up 11 percent over the same period last year, with organic revenue growth of 10 percent.
2006 Outlook and Beyond
"As always, we are closely watching the current economic climate and its potential effects on our business," Loranger added. "We believe we are particularly well positioned in our Fluid Technology markets to benefit from the growing demand for water-related products and services. We have well-established product brands, a large installed base and a growing position in developing markets like China. Our Defense business continues to grow because of the critical needs being addressed through our unique technologies and the broad range of services we provide. Based on our solid performance through the first half and our outlook for the rest of the year, we are raising our full-year earnings forecast excluding special items from a range of $2.91 - $2.97 to $2.95 - $3.00 per share, up 14 – 16 percent compared to 2005, including the estimated ($0.09) per share impact from the adoption of SFAS-123R. Excluding the impact of the adoption of SFAS-123R, our outlook for full year 2006 earnings from continuing operations excluding special items would be up 17 - 19 percent.
"We're also raising our 2006 full-year revenue guidance from a range of $7.90 - $8.01 billion to $8.08 - $8.17 billion. Our performance in the record second quarter and this positive outlook for the remainder of the year underscores the attractive market positions we have in both our commercial and defense businesses. These favorable positions, along with our focus on operational excellence and a disciplined acquisition strategy, reinforce the confidence we have in meeting our long term financial goals."
Primary Business Results
- Second quarter 2006 Fluid Technology revenue was $765.3 million, up $40.6 million or 6 percent; organic revenues grew 4 percent over the same period in 2005, led by the Water/Wastewater Handling and Building Trades businesses. Operating income was $101.3 million for the second quarter, including the impact of restructuring. Excluding restructuring, second quarter operating income was up 9 percent to $103.3 million.
- Operating margins, excluding restructuring, grew by 40 basis points in the quarter, as a result of ongoing Value Based Six Sigma and Lean initiatives.
- Total orders for the second quarter were up 7%, and organic orders were up 5% compared to the second quarter of 2005.
- The acquisition of F.B. Leopold, announced during the quarter, adds an important pre-treatment component to ITT's already wide range of filtration and treatment capabilities.
Defense Electronics & Services
- ITT's Defense Electronics & Services segment reported second quarter revenues of $918.5 million, up 18 percent, over the same period last year, led by increases in the Services, Electronic Systems, Communications and Night Vision businesses.
- Higher volume, better yields and contract performance drove second quarter operating results. Second quarter operating income for the segment was $100.6 million, including the impact of restructuring. Excluding restructuring, operating income was up 19 percent in the quarter to $101.4 million over the comparative period in 2005.
- The Aerospace Communications business led revenue growth at Defense in the second quarter. Production increased to a rate of 5,000 Single Channel Ground-Air Radio System (SINCGARS) radios per month to meet increased demand. In August, the group will achieve the production milestone of 300,000 radios over the life of the SINCGARS program.
- Consistent with the variable nature of Defense orders, second quarter orders declined to $636 million. Our order activity is expected to be robust in the second half of 2006 and full-year Defense orders, sales, and operating income are all on track to show continued strong growth.
- The long-term outlook for Defense is positive, driven by demand for products featuring ITT's next-generation technology and the ongoing growth in the outsourcing of military services such as those provided by ITT.
Motion & Flow Control
- 2006 second quarter revenues for ITT's Motion & Flow Control segment were $188.1 million, up 4 percent from the second quarter last year. .
- 2006 second quarter operating income for the segment was $30.9 million, including the impact of restructuring. Excluding restructuring, perating income for this segment was $38.1 million, up 1 percent from the same quarter in 2005. .
- On an organic basis, Motion & Flow Control orders grew 12 percent compared to the second quarter of 2005, led by 18 percent order growth in Aerospace Controls and 16 percent in Friction Materials. Aerospace Controls, which produces fuel valves and other components, continues to benefit from the strength in the regional and business jet segment. .
- 2006 second quarter revenues for the Electronic Components segment were $200.8 million, up 11 percent over the same period in 2005. Organic revenue grew 10 percent, fueled by growth in cellular handsets and transportation markets. Operating income for the second quarter was $21.3 million. Excluding restructuring, operating income was up 133 percent over the second quarter last year, and operating margins grew 550 basis points compared to the second quarter of 2005, primarily driven by volume growth and operational improvements.
- 2006 second quarter order intake at Electronic Components exceeded $200 million for the second consecutive quarter, up 9 percent over the second quarter of 2005 on an organic basis. This increase is primarily attributable to growth in the cellular handset market, as well as the transportation and military/aerospace sectors. The segment's 2006 second quarter book-to-bill ratio was positive at 1.01.
- The process to prepare Electronic Components' Switches business for disposition is progressing. Ongoing efforts to improve and manage the business to create value are yielding results evident in its performance during the second quarter.
Source: ITT Inc.