• Second-quarter revenue of $3 billion was up 10 percent from 2010.
• Earnings from continuing operations were $168 million, or $0.90 per share.
• Adjusted earnings from continuing operations rose to $1.18 per share, up 4 percent from prior year.
• Company raises full-year revenue forecast; reaffirms full-year adjusted EPS guidance midpoint of $4.76.
ITT Corporation (NYSE: ITT) today reported 2011 second-quarter revenue of $3 billion. Income from continuing operations was $168 million, down 26 percent from the prior-year period, primarily due to spinoff-related costs to create independent companies from its defense and water businesses. Excluding the impact of these costs, income from continuing operations for the quarter was $220 million, or $1.18 per share, representing 4 percent year-over-year growth.
"We are exceedingly pleased with our strong overall results and solid revenue across all our businesses this quarter," said Steve Loranger, ITT's chairman, president and chief executive officer. "We delivered robust growth in our commercial businesses, held defense revenue steady despite market uncertainty and continued to grow our global project pipeline. These impressive results were achieved while the organization successfully continued executing our strategic separation into three independent companies."
Second-Quarter Segment Results
Defense and Information Solutions
• Second-quarter 2011 revenue was $1.5 billion, flat with the second quarter of 2010, due to expected revenue declines in radio and jammer programs in the Electronic Systems business, which were offset by significant growth in key service programs.
• Organic orders were 47 percent better than the comparable period in 2010, driven by increased service activity and additional orders from NASA and the FAA.
• Second-quarter operating income, excluding certain separation-related costs, was $143 million, down 26 percent from the same period in 2010, primarily as a result of a shift in the mix of products and services.
• Second-quarter 2011 Fluid Technology revenue of $1.1 billion was up 26 percent on a year-over-year basis, driven by significant oil and gas activity in the Industrial Process business, strength in light industrial and agriculture markets at Residential and Commercial Water, as well as an increase in demand within Water and Wastewater for global dewatering and North American transport equipment.
• Organic revenue (defined as total revenue excluding foreign exchange and acquisition impacts) was up 9 percent, driven by strong performances across all businesses and the shipment of a major oil and gas project by Industrial Process. Organic orders for the segment were up 6 percent, largely driven by growth in the Industrial Process business, combined with strong global commercial orders in the Residential and Commercial Water businesses.
• Second-quarter operating income, excluding certain separation-related costs, was $164 million, up 26 percent from the comparable prior-year period, driven by productivity gains and acquisitions, which more than offset inflation and foreign exchange headwinds.
Motion and Flow Control
• Second-quarter 2011 revenue for the Motion and Flow Control segment grew 14 percent on a comparable prior-year basis to $414 million, as the business experienced strong demand in the aerospace aftermarket for our Control Technologies products, and Motion Technologies continued to drive share gains in the automotive market. These growth factors more than offset the marine market softness in Flow Control that resulted from an unusually slow start to the spring boating season.
• Organic orders were up 6 percent, driven primarily by automotive market strength at Motion Technologies, as well as double-digit growth in the aerospace and general industrial markets for the Control Technologies business that more than offset softness at Flow Control and Interconnect Solutions.
• Operating income of $57 million was up 36 percent from the same period in 2010, with productivity gains more than offsetting higher commodity costs.
Efforts to separate ITT into three independent publicly traded companies continued to progress toward completion prior to the end of 2011. The company recently announced that, upon completion of the spinoffs, the future defense company will be named ITT Exelis, and the future water company will be named Xylem. In addition, the company filed Form 10 registration statements with the SEC on July 11, 2011.
Anticipated pre-spin costs associated with the transformation remain in line with previously provided guidance. After-tax transformation charges incurred during the second quarter included $46 million in advisory, tax and other costs. Further information on the ITT Transformation, including summaries of each new company's initial registration statements, can be found at itt.com/transformation.
The company is raising its total revenue outlook for the full year 2011 to $11.5 billion, due to recent defense services contract wins and strength at Fluid Technologies. ITT is maintaining its 2011 full-year adjusted earnings per share guidance range of $4.70 to $4.82, with the midpoint at $4.76 per share.
Full-year revenue for Defense and Information Solutions is now expected to be between $5.6 billion and $5.7 billion, up from the previous forecast. Fluid Technology revenue is now expected to grow 17 percent, with organic revenue forecasted to grow 6 percent. Motion and Flow Control revenue is expected to grow 10 percent, and organic revenue growth for the business is projected at approximately 6.5 percent.
Third-quarter adjusted earnings for the company are expected to be in the range of $1.10 to $1.14 per share on revenues of $2.9 billion.
Investor Call Today
ITT's senior management will host a conference call for investors today at 9:00 am. Eastern Daylight Time to review second-quarter performance and answer questions. The briefing can be monitored live via webcast at itt.com/investors.
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 our Water and Defense businesses, including the timing and certainty of the completion of those transactions, 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 guidance for full-year 2011 is based on the Company's current structure and does not give effect to the separation of our Water and Defense businesses into newly independent public companies.
The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
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