ITT reports strong third quarter earnings of 92 cents per share from continuing operations, raises full-year guidance
ITT Corporation (NYSE: ITT) today reported third quarter 2007 earnings from continuing operations of $169 million or 92 cents per share, on revenue of $2.2 billion, driven by balanced top-line growth across most business segments and customer end-markets. Special item offsets in the quarter resulted in adjusted earnings equal to the reported 92 cents per share earnings. ITT’s adjusted earnings, which increased 19 percent over the comparable quarter a year earlier, also benefited from strong international sales and margin improvements generated by productivity initiatives, including the continued adoption of lean manufacturing processes. In addition, ITT recognized a $64 million gain from the sale of its Switches business, which was announced in July. The gain and other discontinued operations contributed 33 cents per share to ITT’s total reported earnings of $1.25 per share.
As a result of its continued strong performance, ITT is raising its full-year 2007 earnings per share guidance, excluding special items, to $3.50-$3.53 on projected revenue of $8.75 billion.
“This was an exciting quarter for our business, marked by a number of major strategic portfolio moves and transforming customer wins,” said Steve Loranger, chairman, president and chief executive officer, ITT Corp. “Through it all, our teams have remained focused on our operating plan and on continuous improvement initiatives, resulting in high-quality results for our shareholders again this quarter.”
On September 17, ITT announced an agreement to acquire EDO Corp. (NYSE: EDO) for $56 per share pending satisfaction of customary closing conditions, including EDO shareholder approval. EDO operates in markets complementary to ITT’s defense business and is a leading producer of advanced technologies serving military and commercial customers. The acquisition, if approved, would be ITT’s largest since becoming an independent company in 1995.
Also during the quarter, ITT completed the acquisition and began the integration of International Motion Control (IMC), a global leader in the design and manufacture of standard and customized energy absorption, control systems, and hydraulic and pneumatic components.
Loranger noted, “These strategic portfolio moves are enabled by the strong overall performance of our business and are expected to position ITT for continued growth in the future. These significant actions, in addition to the smaller acquisitions we’ve announced, demonstrate our disciplined approach to creating value for our shareholders by expanding from our strong core businesses and entering attractive adjacent markets.”
Primary Business Highlights
Defense Electronics & Services
* The Defense segment reported third quarter revenues of $1.01 billion, representing six percent growth over the same quarter in 2006. Growth in the segment was led by ITT’s services businesses, including Advanced Engineering & Sciences, which recorded revenue growth of 37 percent, and Systems, up 16 percent. On the product side, ITT’s Night Vision business also grew 16 percent, while its Aerospace/Communications Division and Electronic Systems businesses were essentially flat.
* Operating income for the segment grew to $137 million and improved 21 percent compared to prior year, excluding special items, on strong margin performance. This operating margin expansion was driven by productivity gains in ITT’s fixed price contracts for products including SINCGARS battlefield radios.
* During the quarter, the Federal Aviation Administration (FAA) awarded ITT the first contract for its air traffic modernization program, known as Automatic Dependent Surveillance-Broadcast, or ADS-B. ITT brought together each of its core defense capabilities to win the contract, which positions the company as the prime systems integrator for the next generation air traffic control program.
* Third quarter revenue for the Fluid Technology segment was $858 million, a 10 percent increase over the comparable quarter last year, including the impact of foreign currency exchange.
* Top-line growth was led by organic revenue growth of six percent resulting from strong international and project sales in the group’s Industrial Process business.
* Operating income for the segment of $111 million, or $117 million excluding restructuring costs, grew 13 percent on a comparable basis.
Motion & Flow Control
* The Motion & Flow Control segment reported third quarter revenues of $315 million, up 18 percent over the same period last year, including the impacts of foreign currency exchange and the integration of IMC.
* The segment recorded a nine percent increase in organic revenue in the quarter, driven in part by 26 percent organic growth at Aerospace Controls. In addition, sales to commercial original equipment manufacturers (OEMs) contributed to a strong quarter for Friction Materials, which was up 14 percent organically.
* Operating income for the quarter grew to $44 million. Operating income was $45 million excluding restructuring, up 24 percent on a comparable basis, benefiting from volume and cost-saving initiatives.
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 third 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/ir.
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