23 Apr 03. ITT Industries, Inc. (NYSE: ITT – News) announced first quarter 2003 net income of $86.7m and diluted earnings per share of $0.92, up $15.2m and $0.15 respectively over the first quarter 2002. Reported EPS contains a $0.09 net positive impact from an IRS settlement of $23.1m or $0.17 per share, and a $10.4m pre-tax charge or ($0.08) per share, for restructuring actions, primarily in the Electronic Components segment.
“Our results this quarter came in above expectations and speak to the strength of our operating disciplines and balanced global portfolio. I’m proud of our management team for delivering these results in a demanding environment. It underscores our continued focus on enhancing customer service, improving operations and introducing new products despite tough conditions,” said Lou Giuliano, Chairman, President, and Chief Executive Officer of ITT Industries. “Our strong platforms in the Defense, water/wastewater and Motion & Flow Control businesses helped fuel 9 percent revenue growth for the quarter. Additionally, we are seeing stability in order rates at the Electronic Components segment, which performed in line with expectations.
“We continue to make adjustments in each business based on market conditions, maintaining a defensive posture while positioning the company for an eventual economic upturn,” Giuliano said. “The actions being taken in Electronic Components will increase its flexibility to adjust to market conditions and enhance the competitiveness of its global manufacturing footprint.”
First Quarter Financial Highlights
* First quarter 2003 revenues up 9 percent to $1.3bn, due to contribution of Fluid Technology and Defense, acquisitions and positive impact of foreign currency translation.
* Higher revenues, lower interest costs and continued process
improvements combined to increase net income 21 percent and increase EPS 20 percent, as reported.
* Operating income up in three of four segments on higher volumes and
Value-Based Six Sigma contributions.
* The company recorded a $10.4m, or ($0.08) per share, charge for
restructuring, primarily within the Electronic Components segment. Including this charge, Operating Income was $109.7m, off $5.9m or 5 percent from first quarter 2002. The company anticipates
additional EPS impact of restructuring to be ($0.08) through end of 2003.
* Effective tax rate for first quarter of 30.1 percent, down from previous guidance of 32 percent; full-year 2003 estimated effective tax rate of 31 percent.
* Cash flow came in as expected. The company’s first quarter 2003 cash usage from operations of ($215.7m) included previously
announced $200m funding of U.S. Salaried Pension Plan.
“The results for the first quarter, combined with positive order trends give us confidence in our full year outlook,” Giuliano said. “As a result, we are maintaining our full year earnings guidance of $3.70 – $3.90 per share.”
Defense Electronics & Services
* Defense backlog reaches new record of $3.0bn.
* Revenues $391.4m, up $22.7m or 6 percent on key service contracts and increased communication shipments.
* New contracts include 5-year contract for chemical-biological detection research for U.S. Army and $95m contract for communications technical support services in Middle East.
* First quarter operating income rose 9 percent to $34.4m with operating margin up 20 basis points.
* Defense revenue and margins benefit from introduction of new
generation of products and migration to higher value-added services.
* Order outlook remains strong with technology, logistics and
communication services demand driving anticipated 6-8 percent full year segment revenue growth.
Electronic Components
* EC revenues $144.8m, up $7.1m or 5 percent, in line with expectations.
* Strength in military and automotive offset by weakness in commercial aerospace and timing of communication shipments.
* Orders up 2 percent sequential