ITT Industries Reports Q2 Income
21 July 1998
ITT Industries Reports Second Quarter Net Income Before Non-Recurring Items of $75.8 Million
Company sees strong productivity gains across all business areas;
operating income up sharply in fluid, defense & electronics segments
Diluted EPS of $0.62, excluding non-recurring items, reflects impact
of GM strike on automotive segment
WHITE PLAINS, N.Y., July 21 -- ITT Industries, Inc.
today reported second quarter 1998 net income, before
non-recurring items, of $75.8 million. Diluted Earnings per Share, excluding
non-recurring items, was $0.62, down from the comparable $0.65 EPS, in 1997.
The decline is more than accounted for by the General Motors (GM) strike,
which had an ($0.08) per diluted share impact in the quarter. Operating
income from ongoing segments, before the impact of the GM strike, was
$185.7 million, up 8.0 percent or $13.8 million from the second quarter 1997,
due to productivity gains across the business and the acquisition of Goulds
Pumps and Kaman Sciences during 1997. Total sales for the period were
$2.2 billion, down 4.3 percent from last year due to divestitures, foreign
currency translation and the GM strike.
During the quarter, the company recorded non-recurring expenses of
$10.7 million. This was comprised of restructuring reserves to close its pump
manufacturing facility in Cincinnati, Ohio, partially offset by a gain related
to the sale of the Barton fluid measurement unit. Including these
non-recurring items, the company reported second quarter net income of
$69.3 million, or $0.57 per share.
"We're seeing strong productivity gains across all of our business areas,"
said Travis Engen, chairman, president and chief executive of ITT Industries.
"Excluding the impact of the GM strike, our operating margin from ongoing
operations increased 0.8 percentage points over the period last year to
8.6 percent. We continue to press hard in this area to realize further margin
opportunity in all of our businesses. These gains, and our strategy to
tightly focus on our higher growth, higher margin businesses, will help us to
ensure we're continuing to add value for our shareholders."
"In addition to gains in our operating results, we made progress in our
strategic review of two of our automotive businesses. Last month, we reached
an agreement to sell the automotive Electrical Systems business to Valeo S.A.
for $1.7 billion in cash," Mr. Engen said. "This sale will enable us to
re-deploy these assets to areas that create the most value for our
shareholders by repurchasing stock, paying down debt and/or financing further
growth of the business."
The sale of Electrical Systems could close in the third quarter, pending
regulatory approvals and customary closing conditions. The strategic review
of the Brake and Chassis business continues on schedule and the company
expects an announcement by the end of July. The strategic review does not
include the company's automotive components business.
The company also reported that net income, before non-recurring items, for
the first six months of 1998 was $131.5 million or $1.08 per diluted share, up
$0.06 per share or $8.6 million over the comparable $1.02 EPS for the period
in 1997, despite the GM strike in the second quarter. Operating income from
ongoing segments reached $310.5 million, up $15.6 million or 5.3 percent over
the first six months last year. Total sales for the first six months of
$4.3 billion were down slightly compared to 1997, the decline more than
accounted for by divestitures and foreign currency translation. After
non-recurring items, six months year to date earnings are $124.9 million or
$1.03 per diluted share.
Primary Business Results
Automotive
ITT Industries' automotive businesses reported second quarter operating
income of $84.4 million, down $16.4 million from last year, primarily due to
the GM strike. Sales for the quarter were $1.2 billion, down $204.5 million
from the period last year. The decline is more than accounted for by
businesses divested over the last year, and the impact of the GM strike. The
automotive businesses saw significant productivity gains during the quarter,
with operating margin improvement, prior to the GM strike, of 0.9 percentage
points over the period last year. This gain is a reflection of the
manufacturing rationalization and other cost-cutting programs instituted in
the third quarter 1997. Prior to the GM strike, unit sales volume was up;
this was partially offset by unfavorable foreign currency translation. During
the quarter, the company began production on the award of the complete brake
systems for the all-new 1999 Jeep(R) Grand Cherokee. Targeted marketing
programs have supported ABS sales volume in North America. The company's
worldwide ABS sales unit volume has increased 13% year to date over last year.
Defense & Electronics
Operating income at ITT Industries' defense & electronics segment was
$40.2 million, up 18.6 percent, due to higher volume at its Avionics and
GaAsTek (Gallium Arsenide) units, productivity gains at the company's Cannon
electrical connectors unit, and the acquisition of Kaman Sciences. Operating
margins across the business increased 0.6 percentage points over the period
last year. Sales were $449.3 million, up $39.8 million over 1997, reflecting
international sales growth and the acquisition of Kaman Sciences at the end of
the fourth quarter 1997. Contract wins announced across the defense business
during the quarter totaled more than $230 million, bringing the backlog in
this segment to $2.3 billion. In the electrical connectors area, Cannon
reported a 2.4 percent decline in sales, but nonetheless increased operating
income by 9.3 percent, due to cost reductions and better operational
performance.
Fluid Technology
ITT Industries' fluid technology business reported operating income of
$45.3 million during the second quarter, $8.1 million or 21.8 percent above
the figure for the quarter last year. Operating margins were up by
0.6 percentage points, excluding the impact of the Goulds Pumps acquisition.
An increase in total sales of $118.3 million to $515.5 million was more than
accounted for by the acquisition of Goulds Pumps. This was partially offset
by weakness in many of the company's end markets due, in large part, to the
economic situation in Asia. The fluid technology business continues to
improve productivity and grow market share in the face of challenging market
conditions. In its ongoing commitment to improve productivity, the company
has decided to phase out its pump manufacturing facility in Cincinnati, Ohio
over the next twelve months. Additionally, the fluid technology business
continues to make niche acquisitions to enhance its market position,
including, during the quarter, Rule Industries' marine business and the
UK-based Sinton Engineering Group in the pharmaceutical and bioprocessing
markets.
ITT Industries Second Quarter and Six Month Financial Results, 1998
(in millions, except EPS)
Second Quarter Six Months
1998* 1997** 1998* 1997
Total Sales $2,154.4 $2,250.9 $4,297.9 $4,417.5
Operating Income
From ongoing Segments $169.9 $171.9 $310.5 $294.9
Net Income Before
non-recurring items $75.8 $78.6 $131.5 $122.9
Shares, Diluted $122.1 $120.5 $121.8 $120.5
Diluted EPS before
Non-recurring items $0.62 $0.65 $1.08 $1.02
* Adjusted to exclude non-recurring charges of $6.5 million after-tax or
$0.05 per share
** Adjusted to exclude non-recurring gains of $4.0 million after tax or
$0.04 per share
ITT Industries (http://www.ittind.com) is a leading global diversified
manufacturing company, with 1997 sales of $8.8 billion in its three primary
business segments: automotive, defense & electronics, and fluid technology.
ITT Industries' automotive business is one of the world's largest independent
suppliers of systems and components to automotive manufacturers. In the
defense & electronics area, ITT Industries is a leader in the design,
manufacture and support of high technology electronic systems and components,
including Night Vision, tactical communications and mobile telecommunications.
In fluid technology, ITT Industries is the world's leading manufacturer of
pumps, systems and services for the movement, measurement and control of
fluids. Headquartered in White Plains, NY, ITT Industries employs more than
58,000 people around the world.
In addition to the New York Stock Exchange, ITT Industries' common stock
is traded under the symbol ("IIN") on the Midwest, Pacific, London, Frankfurt
and Paris exchanges.
Certain material presented herein consists of forward-looking statements
which involve known and unknown risks, uncertainties and other important
factors that could cause actual results to differ materially from those
expressed in or implied from such forward-looking statements. Such factors
include those set forth in Item 1. Business and Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Forward-Looking Statements in the ITT Industries, Inc. Form 10-K Annual Report
for the fiscal year ended December 31, 1997, and other of its filings with the
Securities and Exchange Commission.
ITT Industries and its subsidiaries' news releases are available at no
charge via fax and the Internet. For ITT Industries news and information on
the Internet, visit http://www.ittind.com. To receive releases by fax, call
800-758-5804, extension 110006.