EX-99.1 2 ii3231ex991.txt Exhibit 99.1 ITT INDUSTRIES REPORTS SECOND QUARTER EPS OF $1.46, UP 24 PERCENT INCLUDING BENEFIT OF SPECIAL ITEMS; COMPANY RAISES FY 2005 GUIDANCE - Earnings before benefit of special items $1.43, up 21 percent over comparable $1.18 - Revenue up 20 percent to $1.98 billion; organic revenue up 12 percent, marking seventh consecutive quarter of double-digit organic revenue growth - Water/wastewater revenue up 14 percent; Defense backlog reaches $4 billion as orders grow 109 percent - Strong cash flow as year-to-date cash from operating activities grows 176 percent - Company raises FY EPS guidance from $5.10-5.25 to $5.30-5.40, up 17 percent from 2004 WHITE PLAINS, N.Y., July 29 /PRNewswire-FirstCall/ -- ITT Industries, Inc. (NYSE: ITT) today announced second quarter 2005 net income of $137.7 million, up $25.7 million over the second quarter 2004 including the net benefit of special items. Diluted earnings per share (EPS) for the quarter, including the net benefit of special items, was $1.46, up $0.28 from the same period in 2004. The company realized a $0.08 per share benefit primarily from tax items, offset by restructuring costs of $0.05 per share. The net effect of these special items was a $0.03 increase in reported EPS for the second quarter 2005. Adjusting results to exclude these special items, earnings for the second quarter 2005 were $1.43 per share, up 21 percent over the comparable 2004 figure of $1.18. "This was our seventh consecutive quarter of double-digit organic revenue growth, with Fluid Technology and Defense leading the way. We are encouraged by the favorable environment and the traction we're seeing in our end markets," said Steve Loranger, ITT Industries' Chairman, President and Chief Executive Officer. "Order growth has been outstanding. Defense order activity was up 109 percent in the second quarter, leading to an all-time high Defense backlog of $4 billion. Our Fluid Technology businesses continue to demonstrate strong organic growth, and we're beginning to show attractive margin expansion through successful implementation of lean initiatives. " "We see excellent potential for future growth, and for the second time this year we're raising our full-year earnings, revenue and cash flow guidance," Loranger said. "With a strong first half and solid orders across most of our businesses, we're once again raising our full year earnings target to a range of $5.30 - $5.40 per share, which represents an EPS growth of 17 percent over full year 2004. We now estimate full-year 2005 revenues of $7.7 - $7.8 billion, up 14 - 15 percent from results last year, and we are raising our full-year 2005 cash forecast to $525 - $560 million." Second Quarter Financial Highlights -- Second quarter revenues rose 20 percent over the same period 2004 to $1.98 billion on sales growth across the portfolio, the acquisition of Kodak's Remote Sensing business and the positive impact of foreign exchange. Organic revenue, excluding foreign exchange and acquisitions, grew 12 percent and organic order growth was 32 percent. -- Segment operating income grew 30 percent over the second quarter 2004 to $229.9 million. -- Year-to-date 2005 cash from operations grew 176 percent to $163.1 million. Free cash flow (cash from operations excluding voluntary pension pre-funding less capital expenditures) nearly doubled the 2004 six-month performance to $191.3 million, due to earnings growth and lower working capital investment. -- The company named George Minnich as the new Chief Financial Officer. Minnich joined ITT from United Technologies, where he served as the CFO of UTC's $10 billion Otis unit. Minnich replaces Ed Williams, who is retiring after an 18-year career with ITT. Second Quarter Segment Highlights Fluid Technology -- Second quarter Fluid Technology revenues were $734.5 million, up $83.6 million or 13 percent from the same period last year, with organic revenue growth of 11 percent. Revenue growth was driven by organic growth in wastewater, building trades and industrial product sales, as well as currency translation. Segment operating income was $94.3 million and operating margin rose 120 basis points, including the impact of restructuring charges. Adjusting to exclude restructuring costs, operating income was $96.6 million, up 22 percent from the comparable figure in 2004. -- The wastewater business saw 15 percent revenue growth, with double- digit sales growth in Europe and Asia Pacific. One key to the growth has been ITT's proprietary N-pump technology, which is energy efficient, easy to maintain and reduces clogging even under the most extreme conditions. ITT is leveraging this innovative technology to cover a broader range of applications, and expects N-pump to represent half of the wastewater pump revenue in the next five years. -- ITT's water treatment business continues its growth pattern, particularly in the ultraviolet and ozone disinfection business which saw second quarter order activity grow 13 percent. ITT won its first order to combat endocrine disruptors in wastewater. Defense Electronics & Services -- Defense Electronics & Services revenues for the second quarter were $779.5 million, up $248.8 million or 47 percent over last year, due to the Remote Sensing acquisition and to increased sales, particularly at Night Vision, Aerospace/Communications and Systems. Organic revenue growth was 26 percent. Operating income rose 52 percent to $84.9 million, and operating margin rose 40 basis points. The Defense backlog now stands at a record high $4 billion, up 24 percent over the second quarter of 2004. -- The Aerospace/Communications division was successful in ramping up production of SINCGARS tactical radios to 3,000 units per month, triple the production rate in January of this year. In June the division was awarded a $478 million order for 73,000 additional radios to be delivered over the next several years. -- Demand for ITT's Night Vision devices continues a long-term growth trend, evidenced by achieving a record backlog of $400 million through continued strong performance on its existing contracts. The division also won strategic contracts to provide the U.K. and Norway with night vision technology, increasing ITT's presence in the international market. The division expects more growth through the development of enhanced night vision devices (ENVG), which combine light intensification with infrared technology, and received the first ENVG order from a $560 million contract with the U.S. military. -- Strong performance in the Systems division resulted in additional contract orders worth more than $200 million to support U.S. troops in Europe and the Middle East. Further, the division extended its record of success by supporting NASA's Deep Space Network (DSN), and delivering 100 percent of the data required for the Deep Impact mission. In this mission, a NASA probe successfully impacted a comet and provided scientists with new data about the origins of the universe. ITT supports NASA's uplink and downlink communications systems in DSN projects at the Jet Propulsion Laboratory. Motion & Flow Control -- Motion & Flow Control revenues for the second quarter were $290.9 million, up 3 percent on higher volume in friction materials and Aerospace Controls, and foreign exchange. Operating income rose 9 percent to $45 million; excluding restructuring costs, operating income was up $2.3 million to $46 million, while operating margin rose 30 basis points. -- ITT's friction materials business continues to gain market share, realizing double-digit revenue growth during the quarter. The business is on track to begin brake pad production at its U.S. facility in the third quarter. -- The Aerospace Controls unit revenues rose 16 percent while also generating higher margins as a result of lean initiatives, higher volume and strong aftermarket activity. Electronic Components -- Electronic Components revenues for the second quarter were $181.7 million, down $4.9 million from same period last year, with a challenging comparison versus last year's 25 percent revenue growth in the second quarter. Second quarter revenues were up 5 percent sequentially from the first quarter 2005. Although operating income increased $1.2 million to $5.7 million as reported, adjusting for the effects of restructuring, operating income declined by $2.4 million due to continued challenges in keypads operations. -- This segment had higher order growth, led by a 34 percent growth in orders from wireless handset customers. The growth is attributable to the Motorola RAZR phone, for which ITT is the sole provider of dome array, backlight modules and switches. -- Order activity increased for ITT's mechatronics technology for electro-mechanical controls. ITT has won 12 new product introductions that will be in production in the coming months for customers such as Bobcat, Caterpillar, AGCO and Volvo. About ITT Industries ITT Industries, Inc. (http://www.itt.com) supplies advanced technology products and services in key markets including: fluid and water management including water treatment; defense communication, opto-electronics, information technology and services; electronic interconnects and switches; and other specialty products. Headquartered in White Plains, NY, the company generated $6.8 billion in 2004 sales. In addition to the New York Stock Exchange, ITT Industries stock is traded on the Midwest, Pacific, Paris, London and Frankfurt exchanges. For free B-roll/video content about ITT Industries, please log onto http://www.thenewsmarket.com/ITT to preview and request video. You can receive broadcast-standard video quality digitally or by tape from this site. Registration and video are free to the media. "Safe Harbor Statement" under the Private Securities Litigation Reform Act of 1995 ("the Act"): Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Act. These forward-looking statements include statements that describe the Company's business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. Whenever used words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target" and other terms of similar meaning are intended to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and 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. Factors that could cause results to differ materially from those anticipated by the Company include general global economic conditions, decline in consumer spending, interest and foreign currency exchange rate fluctuations, availability of commodities, supplies and raw materials, competition, acquisitions or divestitures, changes in government defense budgets, employment and pension matters, contingencies related to actual or alleged environmental contamination, claims and concerns, intellectual property matters, personal injury claims, governmental investigations, tax obligations, and changes in generally accepted accounting principles. Other factors are more thoroughly 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. Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and other of its filings with the Securities and Exchange Commission. The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. NOTE: ITT Industries believes that investors' understanding of the Company's operating performance is enhanced by the use of certain non-GAAP financial measures, including adjusted GAAP net income and adjusted GAAP EPS, which Management considers useful in providing insight into operating performance, as it excludes the impact of special items that cannot be expected to recur on a quarterly basis. Management also believes that investors can better analyze the Company's revenue and order growth by utilizing organic revenue and organic order growth measures that exclude the effect of foreign exchange translation and the effect of recent acquisitions. In addition, Management considers the use of free cash flow to be an important indication of the Company's ability to make acquisitions, fund pension obligations, buy back outstanding shares and service debt. Free cash flow, adjusted net income, adjusted EPS, organic revenue and organic orders are not financial measures under GAAP, should not be considered as substitutes for cash from operating activities, EPS, net income or revenue as defined by GAAP, and may not be comparable to similarly titled measures reported by other companies. A reconciliation to the GAAP equivalents of these non-GAAP measures is set forth in the attached unaudited financial information. CONSOLIDATED CONDENSED INCOME STATEMENTS (In millions, except per share) (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Sales and revenues $ 1,983.2 $ 1,646.8 $ 3,866.3 $ 3,157.9 Costs of sales and revenues 1,318.1 1,074.6 2,605.8 2,078.0 Selling, general and administrative expenses 271.6 235.7 542.5 463.7 Research, development and engineering expenses 180.1 166.4 332.9 311.0 Restructuring and asset impairment charges 6.6 14.0 26.0 18.7 Total costs and expenses 1,776.4 1,490.7 3,507.2 2,871.4 Operating income 206.8 156.1 359.1 286.5 Interest expense 13.9 10.8 34.0 21.1 Interest income 5.5 5.4 19.7 14.6 Miscellaneous expense, net 5.7 3.1 10.7 6.7 Income from continuing operations before income taxes 192.7 147.6 334.1 273.3 Income tax expense 55.8 34.0 70.0 70.7 Income from continuing operations 136.9 113.6 264.1 202.6 Discontinued operations, including tax benefit (expense) of $(0.5), $0.8, $5.2 and $0.8 in each period, respectively 0.8 (1.6) (9.9) (1.7) Net income $ 137.7 $ 112.0 $ 254.2 $ 200.9 Earnings Per Share: Income from continuing operations: Basic $ 1.48 $ 1.23 $ 2.85 $ 2.20 Diluted $ 1.45 $ 1.20 $ 2.80 $ 2.15 Discontinued operations: Basic $ 0.01 $ (0.02) $ (0.10) $ (0.02) Diluted $ 0.01 $ (0.02) $ (0.10) $ (0.02) Net income: Basic $ 1.49 $ 1.21 $ 2.75 $ 2.18 Diluted $ 1.46 $ 1.18 $ 2.70 $ 2.13 Average Common Shares - Basic 92.3 92.4 92.3 92.3 Average Common Shares - Diluted 94.2 94.5 94.2 94.5
ITT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited) June 30, December 31, 2005 2004 ------------ ------------ Assets Current Assets: Cash and cash equivalents $ 384.2 $ 262.9 Receivables, net 1,309.3 1,174.3 Inventories, net 696.1 708.4 Current assets of discontinued operations - 7.3 Deferred income taxes 99.3 107.2 Other current assets 93.9 69.1 Total current assets 2,582.8 2,329.2 Plant, property and equipment, net 909.3 980.9 Deferred income taxes 233.2 212.1 Goodwill, net 2,447.3 2,514.1 Other intangible assets, net 231.1 240.3 Other assets 1,092.8 1,000.1 Total assets $ 7,496.5 $ 7,276.7 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 764.3 $ 719.8 Accrued expenses 729.0 717.2 Accrued taxes 269.8 277.4 Current liabilities of discontinued operations - - Notes payable and current maturities of long-term debt 887.7 729.2 Other current liabilities 10.3 2.2 Total current liabilities 2,661.1 2,445.8 Pension and postretirement benefits 1,362.9 1,378.5 Long-term debt 561.3 542.8 Other liabilities 554.4 566.6 Total liabilities 5,139.7 4,933.7 Shareholders' equity 2,356.8 2,343.0 Total liabilities and shareholders' equity $ 7,496.5 $ 7,276.7 ITT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Six Months Ended June 30, --------------------------- 2005 2004 ------------ ------------ Operating Activities Net income $ 254.2 $ 200.9 Loss from discontinued operations 9.9 1.7 Income from continuing operations 264.1 202.6 Adjustments to income from continuing operations: Depreciation and amortization 108.8 96.6 Restructuring and asset impairment charges 26.0 18.7 Payments for restructuring (23.4) (17.7) Change in receivables (197.6) (193.6) Change in inventories (28.3) (37.3) Change in accounts payable and accrued expenses 105.2 63.9 Change in accrued and deferred taxes 16.2 38.0 Change in other current and non-current assets (107.1) (104.8) Change in other non-current liabilities (1.8) (9.1) Other, net 1.0 1.9 Net cash - operating activities 163.1 59.2 Investing Activities Additions to plant, property and equipment (71.8) (63.4) Acquisitions, net of cash acquired (1.5) (257.3) Proceeds from sale of assets and businesses 7.7 4.7 Other, net 0.1 0.3 Net cash - investing activities (65.5) (315.7) Financing Activities Short-term debt, net 162.6 199.6 Long-term debt repaid (4.6) (36.2) Long-term debt issued 0.4 0.9 Repurchase of common stock (118.2) (114.7) Proceeds from issuance of common stock 56.3 56.4 Dividends paid (49.8) (30.5) Other, net (0.1) (0.1) Net cash - financing activities 46.6 75.4 Exchange Rate Effects on Cash and Cash Equivalents (21.9) (7.6) Net Cash - Discontinued Operations (1.0) (6.0) Net change in cash and cash equivalents 121.3 (194.7) Cash and cash equivalents - beginning of year 262.9 414.2 Cash and Cash Equivalents - end of period $ 384.2 $ 219.5 ITT Industries Non-GAAP Press Release Reconciliation Reported vs. Organic Revenue / Orders Growth Second Quarter 2005 & 2004 ($ Millions)
(As Reported - GAAP) ------------------------------------------------- Change % Change Sales & Sales & 2005 2005 Revenues Revenues vs. vs. 3M 2005 3M 2004 2004 2004 ---------- ---------- ---------- ---------- ITT Industries - Consolidated 1,983.2 1,646.8 336.4 20% Fluid Technology 734.5 650.9 83.6 13% Defense Electronics 779.5 530.7 248.8 47%
Change % Change 2005 2005 Orders Orders vs. vs. 3M 2005 3M 2004 2004 2004 ---------- ---------- ---------- ---------- ITT Industries - Consolidated 2,460.4 1,762.4 698.0 40% Defense Electronics 1,236.1 592.6 643.5 109%
Orders Sales Orders/Sales 3M 2005 3M 2005 Book-to-Bill ---------- ---------- ------------ Electronic Components 185.6 181.7 1.02
(As Adjusted - Organic) ----------------------------------------------------- Sales & Acquisition FX Adj. Sales Revenues Contribution Contribution & Revenues 3M 2005 3M 2005 3M 2005 3M 2005 ---------- ------------ ------------ ---------- ITT Industries - Consolidated 1,983.2 (110.4) (25.1) 1,847.7 Fluid Technology 734.5 - (15.1) 719.4 Defense Electronics 779.5 (109.0) 0.0 670.5
Acquisition FX Adj. Orders Contribution Contribution Orders 3M 2005 3M 2005 3M 2005 3M 2005 ---------- ------------ ------------ ---------- ITT Industries - Consolidated 2,460.4 (107.1) (24.5) 2,328.8 Defense Electronics 1,236.1 (105.6) - 1,130.5 Electronic Components
Sales & Revenues Change % Change 3M 2004 Adj. 05 vs. 04 Adj. 05 vs. 04 -------------- -------------- -------------- ITT Industries - Consolidated 1,646.8 200.9 12% Fluid Technology 650.9 68.5 11% Defense Electronics 530.7 139.8 26%
Orders Change % Change 3M 2004 Adj. 05 vs. 04 Adj. 05 vs. 04 -------------- -------------- -------------- ITT Industries - Consolidated 1,762.4 566.4 32% Defense Electronics 592.6 537.9 91% Electronic Components
ITT Industries Non-GAAP Press Release Reconciliation Segment Operating Income & OI Margin Adjusted for Restructuring Second Quarter of 2005 & 2004 ($ Millions) Q2 2005 Q2 2004 % Q2 2005 As As Change As Reported Reported 05 vs. 04 Reported ---------- ---------- ---------- ---------- Sales and Revenues: Electronic Components 181.7 186.6 181.7 Defense Electronics & Services 779.5 530.7 779.5 Fluid Technology 734.5 650.9 734.5 Motion & Flow Control 290.9 281.3 290.9 Intersegment eliminations (3.4) (2.7) (3.4) Total Ongoing segments 1,983.2 1,646.8 1,983.2 Dispositions and other - - - Total Sales and Revenues 1,983.2 1,646.8 1,983.2 Operating Margin: Electronic Components 3.1% 2.4% 3.1% Defense Electronics & Services 10.9% 10.5% 10.9% Fluid Technology 12.8% 11.6% 12.8% Motion & Flow Control 15.5% 14.7% 15.5% Total Ongoing Segments 11.6% 10.8% 11.6% Income: Electronic Components 5.7 4.5 26.7% 5.7 Defense Electronics & Services 84.9 55.8 52.2% 84.9 Fluid Technology 94.3 75.7 24.6% 94.3 Motion & Flow Control 45.0 41.3 9.0% 45.0 Total Segment Operating Income 229.9 177.3 29.7% 229.9 Adjust Q2 2005 Q2 2004 Adjust for 2005 As As for 2004 Restructuring Adjusted Reported Restructuring ------------- -------- -------- ------------- Sales and Revenues: Electronic Components 181.7 186.6 Defense Electronics & Services 779.5 530.7 Fluid Technology 734.5 650.9 Motion & Flow Control 290.9 281.3 Intersegment eliminations (3.4) (2.7) Total Ongoing segments 1,983.2 1,646.8 Dispositions and other - - Total Sales and Revenues 1,983.2 1,646.8 Operating Margin: Electronic Components 5.0% 2.4% Defense Electronics & Services 10.9% 10.5% Fluid Technology 13.2% 11.6% Motion & Flow Control 15.8% 14.7% Total Ongoing Segments 11.9% 10.8% Income: Electronic Components 3.3 9.0 4.5 6.9 Defense Electronics & Services 0.0 84.9 55.8 0.0 Fluid Technology 2.3 96.6 75.7 3.2 Motion & Flow Control 1.0 46.0 41.3 2.4 Total Segment Operating Income 6.6 236.5 177.3 12.5 Q2 2004 % Change As Adjusted Adj. 05 vs. 04 ----------- -------------- Sales and Revenues: Electronic Components 186.6 Defense Electronics & Services 530.7 Fluid Technology 650.9 Motion & Flow Control 281.3 Intersegment eliminations (2.7) Total Ongoing segments 1,646.8 Dispositions and other - Total Sales and Revenues 1,646.8 Operating Margin: Electronic Components 6.1% Defense Electronics & Services 10.5% Fluid Technology 12.1% Motion & Flow Control 15.5% 30 BP Total Ongoing Segments 11.5% Income: Electronic Components 11.4 -21.1% Defense Electronics & Services 55.8 52.2% Fluid Technology 78.9 22.4% Motion & Flow Control 43.7 5.3% Total Segment Operating Income 189.8 24.6% ITT Industries Non-GAAP Press Release Reconciliation Reported vs. Adjusted Net Income & EPS Second Quarter of 2005 & 2004 ($ Millions, except EPS and shares)
Q2 2005 Q2 2004 Q2 2004 Q2 2005 Q2 2005 As As Q2 2004 As Reported Adjustments Adjusted Reported Adjustments Adjusted -------- ----------- -------- -------- ----------- -------- Segment Operating Income 229.9 6.6 #A 236.5 177.3 12.5 #F 189.8 Interest Income (Expense) (8.4) (3.5)#B (11.9) (5.4) - (5.4) Other Income (Expense) (5.7) - (5.7) (3.1) - (3.1) Gain on sale of Assets - - - - - - Corporate (Expense) (23.1) - (23.1) (21.2) 1.6 #G (19.6) Income from Continuing Operations before Tax 192.7 3.1 195.8 147.6 14.1 161.7 Income Tax Items (4.0)#C (4.0) (11.7)#H (11.7) Income Tax Expense (55.8) (0.9)#D (56.7) (34.0) (4.4)#K (38.4) Total Tax Expense (55.8) (4.9) (60.7) (34.0) (16.1) (50.1) Income from Continuing Operations 136.9 (1.8) 135.1 113.6 (2.0) 111.6 Income from Discontinued Operations 0.8 (0.8)#E 0.0 (1.6) 1.6 #L 0.0 Net Income 137.7 (2.6) 135.1 112.0 (0.4) 111.6 Diluted EPS 1.46 (0.03) 1.43 1.18 (0.00) 1.18
Change Percent Change 2005 vs. 2004 2005 vs. 2004 As Adjusted As Adjusted ------------- -------------- Segment Operating Income Interest Income (Expense) Other Income (Expense) Gain on sale of Assets Corporate (Expense) Income from Continuing Operations before Tax Income Tax Items Income Tax Expense Total Tax Expense Income from Continuing Operations Income from Discontinued Operations Net Income 23.5 21% Diluted EPS $ 0.25 21% #A - Remove Restructuring Expense of $6.6M #B - Remove Interest Income Due to Tax Refund ($3.5M) #C - Remove Tax Matters of ($4.0M) #D - Remove Tax Benefit on Special Items of ($0.9M) #E - Remove D.O. Income of $0.8M #F - Remove Restructuring Expense of $12.5M #G - Remove Restructuring Expense of $1.6M #H - Remove Tax Refund of ($11.7M) #K - Remove Tax Benefit on Special Items of ($4.4M) #L - Remove D.O. Expense of $1.6M ITT Industries Non-GAAP Press Release Reconciliation Cash From Operating Activities vs. Free Cash Flow Second Quarter of 2005 & 2004 ($ Millions) 2nd Qtr 05 2nd Qtr 04 ---------- ---------- Income from Continuing Ops 264.1 202.6 Depreciation 92.1 86.8 Amortization 16.7 9.8 Working Capital (142.7) (160.0) Pension Pre-funding (100.0) (100.0) Other 32.9 20.0 Cash from Operations 163.1 59.2 Capital Expenditures (71.8) (63.4) Pension Pre-funding 100.0 100.0 Free Cash Flow 191.3 95.8 ITT Industries Non-GAAP Press Release Reconciliation Cash From Operating Activities vs. Free Cash Flow Third Quarter & Full Year 2005 Free Cash Flow Q3 2005 ----------------------- Lower Upper ---------- ---------- Cash from Operations 335.0 360.0 Capital Expenditures (135.0) (135.0) Pension Pre-funding 100.0 100.0 Free Cash Flow 300.0 325.0 Free Cash Flow FY 2005 ----------------------- Lower Upper ---------- ---------- Cash from Operations 625.0 660.0 Capital Expenditures (200.0) (200.0) Pension Pre-funding 100.0 100.0 Free Cash Flow 525.0 560.0 ITT Industries Non-GAAP Press Release Reconciliation Reported vs. Adjusted Net Income & EPS Full Year of 2005 & 2004 Full Year 2005 EPS** ------------------------------------- Lower Upper Full Year Limit Limit 2004 EPS** ---------- ---------- ----------- As Reported* 5.44 5.54 4.58 Adjustments Restructuring 0.19 0.19 0.28 Interest (0.07) (0.07) (0.03) Tax Settlement (0.36) (0.36) (0.17) Gain on Sale of Investments - - (0.15) Discontinued Operations 0.10 0.10 0.05 Adjusted Net Income 5.30 5.40 4.56 * Amount represents projected figures for full year 2005 ** Represents diluted EPS SOURCE ITT Industries, Inc. -0- 07/29/2005 /CONTACT: Tom Glover of ITT Industries, Inc., +1-914-641-2160, tom.glover@itt.com/ /First Call Analyst: / /FCMN Contact: marianna.ricci@itt.com / /Web site: http://www.itt.com/