• Third-quarter revenue of $2.98 billion was up 13 percent from the third quarter of 2010.
• Earnings from continuing operations were $71 million, or $0.38 per share.
• Adjusted earnings from continuing operations were $1.17 per share, up 8 percent from the third quarter of 2010.
ITT Corporation (NYSE: ITT) today reported 2011 third-quarter revenue of $2.98 billion and income from continuing operations of $71 million. Excluding the impact of separation costs and other adjustments, income from continuing operations for the quarter was $218 million, or $1.17 per share, compared with $200 million or $1.08 per share, in the prior-year period.
"We are proud of our team for remaining focused on serving our customers to deliver this strong performance, even while executing on the separation of ITT into three strongly positioned, independent companies. I want to thank all of our employees for their diligence and hard work over the last several months," said Steve Loranger, ITT's chairman, president and chief executive officer. "The transformation of ITT and the launch of ITT Exelis and Xylem are on track to occur on October 31. The necessary costs to successfully separate into three companies are in line with our previous forecast, and all three new companies are nicely capitalized for future growth."
Third-Quarter Segment Results
Defense and Information Solutions
• Third-quarter 2011 revenue was $1.5 billion, an increase of 12 percent compared with the third quarter of 2010. The increase reflects gains in exercised options in key Middle East service programs in the Mission Systems business and strong performance in non-Department of Defense programs in the Information Systems business.
• Organic orders increased 12 percent to $1.7 billion from the comparable period in 2010. The increase was driven by two large Middle East programs which together comprised more than $500 million in organic orders.
• Third-quarter operating income, which included $4 million of separation-related costs, was $178 million, flat compared with the same period in 2010. Adjusted operating margin for the period declined 110 basis points compared with the same period in 2010. The segment continued to experience operating income compression as a result of the mix of products and services.
• Third-quarter 2011 Fluid Technology revenue of $1.1 billion was up 17 percent on a year-over-year basis, driven by both acquisitions and organic growth across all businesses.
• Organic revenue (defined as total revenue excluding foreign exchange and acquisition impacts) was up 8 percent, driven by significant activity in the chemical, oil and gas, mining and emerging markets in the Industrial Process business, as well as strength in global dewatering. Organic orders for the segment were up 13 percent, largely driven by growth in the Industrial Process business, combined with strong dewatering orders.
• Third-quarter operating income, which included $22 million of separation-related costs, was $144 million, up 25 percent from the comparable prior-year period, driven by organic revenue growth, strong productivity performance and acquisitions, which more than offset direct material cost increases and strategic investments. Adjusted operating margin for the period increased 300 basis points compared with the same period in 2010.
Motion and Flow Control
• Third-quarter 2011 revenue for the Motion and Flow Control segment grew 6 percent, to $386 million, on a comparable prior-year basis, as the business experienced strong demand in the automotive, aerospace, medical and rail markets. These growth factors more than offset lower sales in the Interconnect Solutions business.
• Organic orders were up 1 percent, driven primarily by growth in aerospace, automotive, and oil and gas applications that offset weaker connectors demand.
• Third-quarter operating income, which included $1 million of separation-related costs, was $49 million, up 7 percent from the same period in 2010, as productivity gains, volume and pricing more than offset increased commodity costs. Adjusted operating margin for the period showed a 30 basis point increase over the same period in 2010.
In addition to spinoff-related costs of $93 million on an after-tax basis, as previously disclosed ITT recognized after-tax asbestos-related costs of $26 million in the third quarter of 2011, resulting from an annual update of the underlying assumptions used in liability and asset estimates.
Other special items included a charge of $14 million for various tax-related items, primarily a deferred tax adjustment, and foreign currency translation losses of $14 million generally pertaining to legacy transactions.
As a result of third-quarter amendments to the U.S. retirement programs, ITT Corporation re-measured its projected benefit obligations and plan assets for certain U.S. and international pension plans. The re-measurement was as of September 30, 2011, and resulted in an increase to ITT's net pension liability of $661 million. The re-measured plans were primarily the salaried retirement plan and excess compensation plan, which will transfer to ITT Exelis upon completion of the spinoff on October 31. This increase in pension liability is not expected to result in a material impact on the future ITT Exelis financial condition.
Supplemental information on ITT's third-quarter 2011 earnings is posted at itt.com/investors.
Efforts to separate ITT into three independent publicly traded companies continued to progress toward completion on October 31, 2011. Transformation costs remain in line with previously provided guidance. The future defense company, to be named ITT Exelis (NYSE: XLS), and the future water company, which will be named Xylem (NYSE: XYL), along with ITT (NYSE: ITT), will each begin regular-way trading on the New York Stock Exchange on November 1, 2011.
About ITT Corporation
ITT Corporation (itt.com) is a high-technology engineering and manufacturing company operating on all seven continents in three vital markets: water and fluids management, global defense and security, and motion and flow control. With a heritage of innovation, ITT partners with its customers to deliver extraordinary solutions that create more livable environments, provide protection and safety and connect our world. Headquartered in White Plains, N.Y., the company reported 2010 revenue of $11 billion.
Safe Harbor Statement
Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about the separation of ITT Corporation (the "Company") into three independent publicly traded companies (the "companies"), the terms and the effect of the separation, the nature and impact of such a separation, capitalization of the companies, future strategic plans and other 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 or implied in, or reasonably inferred from, such forward-looking statements. Factors that could cause results to differ materially from those anticipated include, but are not limited to: economic, political and social conditions in the countries in which we conduct our businesses; changes in U.S. or international government defense budgets; decline in consumer spending; sales and revenue mix and pricing levels; availability of adequate labor, commodities, supplies and raw materials; interest and foreign currency exchange rate fluctuations and changes in local government regulations; competition, industry capacity and production rates; ability of third parties, including our commercial partners, counterparties, financial institutions and insurers, to comply with their commitments to us; our ability to borrow or to refinance our existing indebtedness and availability of liquidity sufficient to meet our needs; changes in the value of goodwill or intangible assets; our ability to achieve stated synergies or cost savings from acquisitions or divestitures; the number of personal injury claims filed against the company or the degree of liability; uncertainties with respect to our estimation of asbestos liability exposures, third-party recoveries, and net cash flow; our ability to effect restructuring and cost reduction programs and realize savings from such actions; government regulations and compliance therewith, including compliance with and costs associated with new Dodd-Frank legislation; changes in technology; intellectual property matters; governmental investigations; potential future employee benefit plan contributions and other employment and pension matters; contingencies related to actual or alleged environmental contamination, claims and concerns; changes in generally accepted accounting principles; other factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and our other filings with the Securities and Exchange Commission. In addition, there are risks and uncertainties relating to the planned tax-free spinoffs of ITT Exelis and Xylem, whether those transactions will result in any tax liability, the operational and financial profile of the Company or any of its businesses after giving effect to the spinoff transactions and the ability of each business to operate as an independent entity.
The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
Investor Contact: Thomas Scalera
T: +1 914 641 2030 / E: thomas.scalera[.]itt.com.