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22 Jan 03. ITT Industries, Inc. (NYSE: ITT – News) today reported full year 2002 net income of $379.9m 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 $4.99bn, up 7 percent driven by increased sales in the Defense, Fluid Technology and Motion & Flow Control segments. Full year segment operating income was $595.1m, up $8.8m over 2001, yielding an operating margin of 11.9 percent. Cash from operations of $595m resulted from higher income, improved operating capital utilization and lower cash taxes. Free cash flow (defined as cash from operations minus capital spending) of $442m grew 46 percent over 2001. Strong cash flow enabled the company to make a $50m contribution to its U.S. salaried pension plan, complete $159m in acquisitions and recommend an increase in the quarterly dividend effective April 2003.

The company’s Defense business realized significant new contract wins, growing its backlog to a record $2.8bn. 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).

Revenues in this segment were $345.8m for the fourth quarter, off 5 percent from the fourth quarter 2001, due primarily to the timing of payments. Full-year segment revenues were $1.51bn, up 16 percent from the full year 2001, reflecting increased international sales, new service contracts, and the ramp up of production of key electronic warfare programs. The Defense Segment backlog grew 10 percent through the year to $2.8 billion. Operating income was relatively flat at $40.2m in the fourth quarter, but grew by 16 percent for the full year to $153.0m. Operating margin for the Defense segment was flat for the year. Bid activity remains strong, driven by demand for the company’s advanced technology and services. The company expects full-year 2003 Defense revenues to grow 5 to 7 percent, due primarily to new service contracts, production of Night Vision equipment for the U.S. Army and continued growth in international shipments.

In the fourth quarter, net income was $95.1m, up $21.1m 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 $9.6m related to 2002 restructuring activities.

Fourth quarter 2002 segment operating income was $154.0m, 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 $1.24bn, attributable mostly to revenue gains in Fluid Technology and Moti

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