ITT tops first-quarter adjusted earnings forecast on strong performance in commercial segments; provides update on separation into three independent companies
*First-quarter revenue of $2.76 billion was up 7 percent from the same period in 2010.
*Earnings from continuing operations were $126 million, or $0.67 per share.
*Adjusted earnings from continuing operations rose to $0.98 per share, up 18 percent from the year-ago period.
*Double-digit order growth in all segments.
Company raises full-year adjusted EPS guidance midpoint to $4.76 per share.
*Spinoff transactions are on track to close by the end of the year.
WHITE PLAINS, N.Y., — ITT Corporation (NYSE: ITT) today reported 2011 first-quarter revenue of $2.76 billion. Income from continuing operations was $126 million, down 13 percent from the prior-year period, due to costs related to the company’s planned spinoffs of its defense and water businesses. Excluding the impact of these costs, income from continuing operations for the quarter was $182 million, or $0.98 per share, representing 18 percent year-over-year growth.
“We are off to a very strong start in the first quarter of 2011, with double-digit revenue and earnings growth in both Fluid Technology and Motion and Flow Control, which is more than offsetting the headwinds we are facing in the U.S. defense market and higher commodity costs,” said Steve Loranger, ITT’s chairman, president and chief executive officer. “Our businesses delivered excellent operating performance, and productivity drove strong operating margin expansion. When coupled with double-digit order demand, this gives us confidence to raise full-year adjusted earnings guidance.”
First-Quarter Segment Results
Defense and Information Solutions
First-quarter 2011 revenue was $1.3 billion, down 4 percent from the first quarter of 2010, due largely to the combined impact of changing U.S. Department of Defense market dynamics and decreased revenue from jammers and radios that was partially offset by revenue from recent long-term services contract wins. Orders were 26 percent better than the comparable period in 2010, driven by increased service activity and new key program wins.
First-quarter operating income was $137 million, down 3 percent from the same period in 2010, as a result of the decline in revenue, which was partially offset by savings resulting from planned realignment activities begun in 2010 and productivity improvements.
First-quarter 2011 Fluid Technology revenue of $992 million was up 24 percent on a year-over-year basis, driven by acquisitions as well as strong organic growth in the Water and Wastewater and Residential and Commercial Water businesses.
Organic revenue (defined as total revenue excluding foreign exchange and acquisition impacts) was up 8 percent, driven by strength in the public utilities treatment and transport, dewatering, light industrial and commercial building services markets around the world. Organic orders for the segment were up 12 percent, largely driven by growth in the Industrial Process business within the oil and gas and mining markets, combined with strong orders across the Water and Wastewater and Residential and Commercial Water businesses.
First-quarter operating income was $124 million, up 36 percent from the comparable prior-year period, driven by volume and productivity gains, which more than offset unfavorable foreign exchange and higher pension costs.
Motion and Flow Control
First-quarter 2011 revenue for the Motion and Flow Control segment grew 11 percent on a comparable prior-year basis to $430 million, driven by increased demand across all of the businesses in this segment.
Organic orders were up 20 percent, driven primarily by significant growth in the aerospace market at Control Technologies, as well as strong performance in the automotive and rail markets for Motion Technologies. The Interconnect Solutions business also experienced strong demand in the oil and gas and handheld device connector markets; Flow Control drove share gains in the marine aftermarket.
Operating income of $65 million was up 18 percent from the same period in 2010, driven by increased volumes.
Efforts to separate ITT into three independent publicly traded companies have progressed nicely in 2011.
“While we continue to make excellent progress on our transformation plans, we remain focused on operating the company in alignment with our business goals, vision and values,” said Loranger. “I’m very proud of our people and the progress they have made so far. I am confident we will continue to deliver excellent operating results, while executing the separation transaction before the end of the year to unlock significant value for shareowners.”
Pre-tax transformation charges during the first quarter included $30 million in advisory and other costs, as well as a $55 million non-cash impairment charge related to the discontinuation of information technology consolidation initiatives that are no longer planned. After-tax estimates for one-time separation-related cash costs expected to be incurred prior to the company’s planned separation date are approximately $500 million.
ITT has tightened its 2011 full-year adjusted earnings per share guidance range to a new range of $4.70 to $4.82, up from the previously announced range of $4.62 to $4.82, increasing the midpoint to $4.76 per share. Strong operating performance and revenue growth in the commercial businesses are expected to more than offset lowered expectations in the Defense segment.
The company is revising its total revenue outlook for the full year 2011 from $11.4 billion to $11.3 billion, due to uncertainty in the U.S. defense market, which is expected to be somewhat offset by revenue increases across the commercial businesses.
Full-year revenue for Defense and Information Solutions is expected to decline to a range of $5.4 billion to $5.6 billion due to persistently difficult budget conditions caused by the U.S. Congress’ Continuing Resolution and changing order patterns. Operating margin for the segment remains unchanged at approximately 12.4 percent. Fluid Technology revenue is expected to grow 15 percent, with organic revenue forecasted to grow 5.5 percent. Fluid Technology operating margin is now expected to increase by 40 basis points to 14.4 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. Operating margin for Motion and Flow Control is now expected to increase by 80 basis points to 15.8 percent.
Second-quarter adjusted earnings for the company are expected to be in the range of $1.10 to $1.14 per share on revenues of $2.8 billion. This forecast reflects the lingering impacts of the current Defense environment, combined with improved expectations for the Fluid Technology and Motion and Flow Control segments.
Investor Call Today
ITT’s senior management will host a conference call for investors today at 9:00 a.m. Eastern Daylight Time to review first-quarter performance and answer questions. The briefing can be monitored live via webcast at the following address on the company’s Web site: www.itt.com/investors.
About ITT Corporation
ITT Corporation 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. www.itt.com.
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