EX-99.1 2 ii4625ex991.txt EXHIBIT 99.1 EXHIBIT 99.1 ITT REPORTS STRONG FOURTH QUARTER AND FULL YEAR 2005 OPERATING RESULTS * Q4 GAAP net loss of $0.91 includes special charges of $2.34 per share; excluding special charges Q4 earnings are $1.43 per share, up 17 percent on revenue of $1.95 billion * Margins expand in core businesses on operating improvement gains * FY 2005 revenue up 17 percent to $7.4 billion, organic revenue up 12 percent * FY 2005 GAAP EPS is $3.81; excluding special items, FY earnings from continuing operations is $5.24 per share, up 20 percent * Strong cash flow driven by improved operating performance WHITE PLAINS, N.Y., Jan. 27 /PRNewswire-FirstCall/ -- ITT Industries, Inc. (NYSE: ITT) today reported a fourth quarter 2005 net loss of $84.0 million or $0.91 per share, including the impact of special items of $218.6 million or $2.34 per share, primarily related to a previously announced non-cash asset impairment charge in the company's switches business. Excluding special items, earnings from continuing operations grew 17 percent to $1.43 per share. Fourth quarter 2005 revenue was $1.95 billion, up 6 percent over the fourth quarter last year. "The fourth quarter capped a very good year, with full year results including 17 percent revenue growth, 20 percent growth in operating earnings (excluding special items), and higher margins and cash flow," said Steve Loranger, Chairman, President and Chief Executive Officer. "The year's performance reflects the strength of our portfolio and attractiveness of our core businesses. Our Fluid Technology businesses grew revenues more than 9 percent in the year, and our Defense businesses increased full year sales by 34 percent, with organic revenue growth of 21 percent. Both businesses boosted their operating margins considerably. The ITT Management System is working, and we will continue to focus our resources on growth, margin improvement and sustained predictable performance as we aggressively expand our global presence and lean initiatives." Full Year 2005 Results Reported net income for 2005 was $359.5 million and full year GAAP EPS was $3.81, including the impact of special items. Excluding special items, earnings from continuing operations were $493.9 million or $5.24 per share, up 20 percent over 2004. Full year 2005 revenues were $7.4 billion, up 17 percent from the prior year. Organic revenue, which excludes the impact of acquisitions and currency translation, grew 12 percent in 2005. Cash from operations was $745.8 million, which includes a $100 million voluntary pre-funding of the company's U.S. salaried pension plan. Free cash flow (defined as cash from operations before pension pre-funding, minus capital spending) was $666.6 million, up from $441.3 million in 2004, with the increase due to operating improvements, as well as the favorable impact of tax and interest rate swap settlements. 2006 Outlook "We expect to realize greater benefits from ongoing improvement initiatives and we see outstanding business opportunities in the year ahead," Loranger said. "We remain confident in our full year 2006 EPS outlook of $5.78-$5.92, including the estimated ($0.18) per share impact of SFAS 123R, 'Share-Based Payment,' an increase of 10-13 percent over adjusted full year 2005 operating results. Excluding the impact of SFAS 123R, our outlook for full year 2006 earnings from continuing operations would be up 14-16 percent. We expect Q1 2006 EPS of $1.18-$1.22." All figures are calculated prior to the impact of a pending 2-for-1 stock split, scheduled to take place in February. Primary Business Results Fluid Technology * Fourth quarter 2005 Fluid Technology revenue was $758.9 million, up $9.8 million or 1 percent from the previous year, exceeding previous guidance; organic revenues grew 4 percent over the period in 2004. Full year revenues were up 9 percent to $2.84 billion. Fourth quarter segment operating income was up 22 percent to $98.0 million; full-year operating income was up 14 percent to $324.5 million. * Segment operating margin in the quarter increased 220 basis points over the period last year, reflecting improved performance in the company's WEDECO unit, global sourcing, higher volumes and a favorable product mix. The company anticipates continued margin improvement in Fluid Technology through 2006. * The company's water and wastewater businesses continue to grow organically, with fourth quarter revenue growth particularly strong in the Middle East, Spain, Asia and the U.S. ITT remains very well positioned to grow in nearly every segment of the $50 billion global water equipment market, and the company continues to pursue projects of larger scale and scope. Defense Electronics & Services * ITT's Defense Electronics & Services segment reported fourth quarter revenues of $862.3 million, up 16 percent, with full year revenues of $3.22 billion, up 34 percent. Organic revenue growth for Defense for the fourth quarter and full year was 15 percent and 21 percent, respectively. Operating income for the segment was up 34 percent in the quarter to $104.2 million, and up 43 percent for the full year to $363.7 million. * Higher volume, better yields and contract performance drove Defense operating margin up 170 basis points in the fourth quarter, and 80 basis points in the full year over the comparable periods in 2004. * Revenue growth was driven by continued strong demand in Tactical Communications, Night Vision and ITT's defense systems and services businesses. Contracts won during the fourth quarter include the 5-year $681 million follow-on communications support contract for the U.S. Army in Asia and Africa. Both Night Vision and Tactical Communications continue to execute superbly on higher production rates. Demand for the company's Defense products and services remains robust. Motion & Flow Control * Fourth quarter revenues for ITT's Motion & Flow Control segment were $148.4 million, down 7 percent from the fourth quarter a year earlier. Full year segment revenues rose 6 percent to $670 million. Fourth quarter operating income for the segment was $23.5 million, down $6.2 million from the comparable period in 2004, reflecting both higher raw material prices and production start up costs in the friction materials business, and softness in the marine accessories market in the aftermath of an active hurricane season; the company is seeing early signs of recovery in this sector. * The company's Aerospace Controls business is benefiting from order growth and strong aftermarket demand. Fourth quarter revenues for this business were up 17 percent; full year revenues for this business were up 15 percent. Electronic Components * Fourth quarter revenues for the Electronic Components segment were $183.2 million, up 3 percent over the period in 2004. Full year revenues were up 2 percent to $708.9 million. Operating income for the fourth quarter was ($215.2) million, reflecting the impact of the asset impairment charge. Excluding the impact of this charge, operating income for the fourth quarter was $8.9 million. * Demand for the popular Motorola RAZR phone drove higher sales of the company's mobile handset connectors, which together with automotive connectors contributed to fourth quarter organic revenue growth of 5 percent in the segment. * The company has begun the process to divest the switches business within the Electronic Components segment. 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 $7.4 billion in 2005 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. CONSOLIDATED CONDENSED INCOME STATEMENTS (In millions, except per share) (Unaudited) Three Months Ended Twelve Months Ended December 31, December 31, ----------------------- ----------------------- 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Sales and revenues $ 1,949.5 $ 1,830.8 $ 7,427.3 $ 6,327.4 Costs of sales and revenues 1,270.2 1,197.2 4,917.2 4,102.3 Selling, general and administrative expenses 301.7 278.5 1,071.2 963.4 Research, development and engineering expenses 160.4 168.7 650.3 618.3 Restructuring and asset impairment charges 234.4 11.1 288.5 33.8 Total costs and expenses 1,966.7 1,655.5 6,927.2 5,717.8 Operating income (loss) (17.2) 175.3 500.1 609.6 Interest expense 23.1 16.6 75.0 50.4 Interest income 6.4 3.8 42.7 22.5 Gain on sale of investments - 20.8 - 20.8 Miscellaneous expense, net 6.9 6.0 19.7 17.7 Income from continuing operations before income taxes (40.8) 177.3 448.1 584.8 Income tax expense 47.5 56.0 133.7 164.7 Income (loss) from continuing operations (88.3) 121.3 314.4 420.1 Cumulative effect of accounting change, net of tax benefit of $2.2 (6.5) - (6.5) - Discontinued operations, including tax benefit (expense) of $0.3, $0.3, $37.6 and ($4.9) in each period, respectively 10.8 0.3 51.6 12.2 Net income (loss) $ (84.0) $ 121.6 $ 359.5 $ 432.3 Earnings Per Share: Income from continuing operations: Basic $ (0.96) $ 1.32 $ 3.41 $ 4.55 Diluted $ (0.96) $ 1.29 $ 3.34 $ 4.45 Cumulative Effect of Accounting Change: Basic $ (0.07) $ - $ (0.07) $ - Diluted $ (0.07) $ - $ (0.07) $ - Discontinued operations: Basic $ 0.12 $ - $ 0.55 $ 0.13 Diluted $ 0.12 $ - $ 0.54 $ 0.13 Net income: Basic $ (0.91) $ 1.32 $ 3.89 $ 4.68 Diluted $ (0.91) $ 1.29 $ 3.81 $ 4.58 Average Common Shares - Basic 92.3 92.3 92.3 92.3 Average Common Shares - Diluted 92.3 94.3 94.3 94.4 ITT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In millions) (Unaudited) December 31, December 31, 2005 2004 ------------ ------------ Assets Current Assets: Cash and cash equivalents $ 451.0 $ 262.9 Receivables, net 1,273.7 1,110.9 Inventories, net 666.9 685.7 Current assets of discontinued operations 236.6 258.9 Deferred income taxes 73.7 107.1 Other current assets 70.1 59.7 Total current assets 2,772.0 2,485.2 Plant, property and equipment, net 841.0 872.0 Deferred income taxes 87.5 209.5 Goodwill, net 2,253.9 2,492.0 Other intangible assets, net 215.1 241.8 Other assets 893.9 982.1 Total assets $ 7,063.4 $ 7,282.6 Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 799.6 $ 688.1 Accrued expenses 748.4 698.9 Accrued taxes 187.1 283.1 Current liabilities of discontinued operations 65.4 66.6 Notes payable and current maturities of long-term debt 751.4 729.2 Other current liabilities 8.5 1.9 Total current liabilities 2,560.4 2,467.8 Pension and postretirement benefits 738.1 1,365.2 Long-term debt 516.3 542.8 Other liabilities 525.2 563.8 Total liabilities 4,340.0 4,939.6 Shareholders' equity 2,723.4 2,343.0 Total liabilities and shareholders' equity $ 7,063.4 $ 7,282.6 ITT INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Year Ended December 31, --------------------------- 2005 2004 ------------ ------------ Operating Activities Net income $ 359.5 $ 432.3 Cumulative effect of change in accounting principle 6.5 - Net income from discontinued operations (51.6) (12.2) Income from continuing operations 314.4 420.1 Adjustments to income from continuing operations: Depreciation and amortization 196.6 175.1 Restructuring and asset impairment charges 288.5 33.8 Payments for restructuring (50.4) (29.3) Change in receivables (192.0) (28.2) Change in inventories (18.0) (76.0) Change in accounts payable and accrued expenses 124.1 14.8 Change in accrued and deferred taxes 89.8 101.9 Change in other current and non-current assets (16.3) (54.9) Change in other non-current liabilities 7.5 (56.1) Other, net 1.6 (14.5) Net cash -- operating activities 745.8 486.7 Investing Activities Additions to plant, property and equipment (179.2) (145.4) Acquisitions, net of cash acquired (69.0) (1,010.0) Proceeds from sale of assets and businesses 26.9 7.2 Sale of investments - 24.9 Other, net (2.2) 0.2 Net cash -- investing activities (223.5) (1,123.1) Financing Activities Short-term debt, net 26.6 554.2 Long-term debt repaid (18.4) (68.7) Long-term debt issued 0.4 120.2 Repurchase of common stock (334.4) (159.6) Proceeds from issuance of common stock 151.9 76.8 Dividends paid (65.6) (61.8) Other, net (0.3) (0.1) Net cash -- financing activities (239.8) 461.0 Exchange Rate Effects on Cash and Cash Equivalents (25.1) 17.6 Net Cash -- Discontinued Operations Operating Activities (64.1) 26.2 Net Cash -- Discontinued Operations Investing Activities (5.2) (19.7) Net change in cash and cash equivalents 188.1 (151.3) Cash and cash equivalents -- beginning of year 262.9 414.2 Cash and Cash Equivalents -- end of period $ 451.0 $ 262.9 ITT Industries Non-GAAP Press Release Reconciliation Reported vs. Organic Revenue / Orders Growth Fourth Quarter 2005 & 2004 ($ Millions)
(As Reported - GAAP) --------------------------------------------------------- Sales & Sales & Change % Change Revenues Revenues 2005 vs. 2005 vs. 3M 2005 3M 2004 2004 2004 ------------ ------------ ------------ ------------ ITT Industries - Consolidated 1,949.5 1,830.8 118.7 6.5% Fluid Technology 758.9 749.1 9.8 1.3% Defense Electronics & Services 862.3 746.6 115.7 15.5% Electronic Components 183.2 178.6 4.6 2.6% Motion & Flow Control 148.4 160.1 (11.7) -7.3% Friction 61.1 71.5 (10.4) -14.5% Aerospace Controls 18.5 15.8 2.7 17% Leisure Marine 47.9 49.4 (1.5) -3% Water Wastewater 534.2 520.3 13.9 2.7% Tactical Radios 141.4 102.1 39.3 38.5%
(As Adjusted - Organic) ------------------------------------------------------------ Adj. Sales & Acquisition FX Sales & Revenues Contribution Contribution Revenues 3M 2005 3M 2005 3M 2005 3M 2005 ------------ ------------ ------------ ------------- ITT Industries - Consolidated 1,949.5 (5.6) 34.5 1,978.4 Fluid Technology 758.9 (4.4) 21.6 776.1 Defense Electronics & Services 862.3 0.0 (0.3) 862.0 Electronic Components 183.2 0.0 5.1 188.3 Motion & Flow Control 148.4 (1.2) 8.2 155.4 Friction 61.1 0.0 5.4 66.5 Aerospace Controls 18.5 0.0 0.0 18.5 Leisure Marine 47.9 (1.2) 1.2 47.9 Water Wastewater 534.2 (4.4) 21.7 551.5 Tactical Radios 141.4 0.0 (0.1) 141.3
(As Adjusted - Organic) ------------------------------------------ Sales & Change % Change Revenues Adj. 05 Adj. 05 3M 2004 vs. 04 vs. 04 ------------ ------------ ----------- ITT Industries - Consolidated 1,830.8 147.6 8% Fluid Technology 749.1 27.0 4% Defense Electronics & Services 746.6 115.4 15% Electronic Components 178.6 9.7 5% Motion & Flow Control 160.1 (4.7) -3% Friction 71.5 (5.0) -7% Aerospace Controls 15.8 2.7 17% Leisure Marine 49.4 (1.5) -3% Water Wastewater 520.3 31.2 6% Tactical Radios 102.1 39.2 38.4%
ITT Industries Non-GAAP Press Release Reconciliation Reported vs. Organic Revenue / Orders Growth Full Year 2005 & 2004 ($ Millions)
(As Reported - GAAP) ----------------------------------------------------------- Sales & Sales & Change % Change Revenues Revenues 2005 vs. 2005 vs. YTD 2005 YTD 2004 2004 2004 ------------ ------------ ------------ ------------ ITT Industries - Consolidated 7,427.3 6,327.4 1,099.9 17.4% Fluid Technology 2,837.1 2,594.1 243.0 9.4% Defense Electronics & Services 3,224.2 2,414.0 810.2 33.6% Motion & Flow Control 670.0 633.8 36.2 5.7% Motion & Flow Control 670.0 633.8 36.2 5.7%
(As Adjusted - Organic) ----------------------------------------------------------- Adj. Sales & Acquisition FX Sales & Revenues Contribution Contribution Revenues YTD 2005 YTD 2005 YTD 2005 YTD 2005 ------------ ------------ ------------ ------------ ITT Industries - Consolidated 7,427.3 (324.3) (17.0) 7,086.0 Fluid Technology 2,837.1 (16.4) (13.1) 2,807.6 Defense Electronics & Services 3,224.2 (303.3) (0.1) 2,920.8 Motion & Flow Control 670.0 (4.6) (2.6) 662.8 Motion & Flow Control 670.0 (4.6) (2.6) 662.8
(As Adjusted - Organic) ------------------------------------------ Sales & Change % Change Revenues Adj. 05 Adj. 05 YTD 2004 vs. 04 vs. 04 ------------ ------------ ----------- ITT Industries - Consolidated 6,327.4 758.6 12% Fluid Technology 2,594.1 213.5 8% Defense Electronics & Services 2,414.0 506.8 21% Motion & Flow Control 633.8 29.0 5% Motion & Flow Control 633.8 29.0 5%
ITT Industries Non-GAAP Press Release Reconciliation Segment Operating Income & OI Margin Adjusted for Restructuring Fourth Quarter of 2005 & 2004 ($ Millions)
Q4 2005 Q4 2004 % Q4 2005 Adjust for As As Change As 2005 Reported Reported 05 vs. 04 Reported Restructuring ------------ ------------ ------------ ------------ ------------- Sales and Revenues: Electronic Components 183.2 178.6 183.2 Defense Electronics & Services 862.3 746.6 862.3 Fluid Technology 758.9 749.1 758.9 Motion & Flow Control 148.4 160.1 148.4 Intersegment eliminations (3.3) (3.6) (3.3) Total Ongoing segments 1,949.5 1,830.8 1,949.5 Dispositions and other - - - Total Sales and Revenues 1,949.5 1,830.8 1,949.5 Operating Margin: Electronic Components -117.5% 5.2% -117.5% Defense Electronics & Services 12.1% 10.4% 12.1% Fluid Technology 12.9% 10.7% 12.9% Motion & Flow Control 15.8% 18.6% 15.8% Total Ongoing Segments 0.5% 10.8% 0.5% Income: Electronic Components (215.2) 9.2 -2439.1% (215.2) 224.1 Defense Electronics & Services 104.2 77.8 33.9% 104.2 0.0 Fluid Technology 98.0 80.5 21.7% 98.0 8.5 Motion & Flow Control 23.5 29.7 -20.9% 23.5 1.8 Total Segment Operating Income 10.5 197.2 -94.7% 10.5 234.4
Q4 2005 Q4 2004 Adjust for Q4 2004 % As As 2004 As Change Adj. Adjusted Reported Restructuring Adjusted 05 vs. 04 ------------ ------------ ------------- ------------- ------------- Sales and Revenues: Electronic Components 183.2 178.6 178.6 Defense Electronics & Services 862.3 746.6 746.6 Fluid Technology 758.9 749.1 749.1 Motion & Flow Control 148.4 160.1 160.1 Intersegment eliminations (3.3) (3.6) (3.6) Total Ongoing segments 1,949.5 1,830.8 1,830.8 Dispositions and other - - - Total Sales and Revenues 1,949.5 1,830.8 1,830.8 Operating Margin: Electronic Components 4.9% 5.2% 5.9% (100)BP Defense Electronics & Services 12.1% 10.4% 10.4% 170 BP Fluid Technology 14.0% 10.7% 12.0% 200 BP Motion & Flow Control 17.0% 18.6% 18.6% (160)BP Total Ongoing Segments 12.6% 10.8% 11.4% 120 BP Income: Electronic Components 8.9 9.2 1.4 10.6 -16.0% Defense Electronics & Services 104.2 77.8 0.0 77.8 33.9% Fluid Technology 106.5 80.5 9.6 90.1 18.2% Motion & Flow Control 25.3 29.7 0.1 29.8 -15.1% Total Segment Operating Income 244.9 197.2 11.1 208.3 17.6%
ITT Industries Non-GAAP Press Release Reconciliation Reported vs. Adjusted Net Income & EPS Fourth Quarter of 2005 & 2004 ($ Millions, except EPS and shares)
Q4 2005 Q4 2005 Q4 2005 Q4 2004 Q4 2004 Q4 2004 As Adjust- As As Adjust- As Reported ments Adjusted Reported ments Adjusted ---------- ---------- ---------- ---------- ---------- ---------- Segment Operating Income 10.5 234.4 #A 244.9 197.2 11.1 #G 208.3 Interest Income (Expense) (16.7) 1.4 #B (15.3) (12.8) - (12.8) Other Income (Expense) (6.9) - (6.9) (6.0) - (6.0) Gain on sale of Assets - - - 20.8 (20.8)#H - Corporate (Expense) (27.7) - (27.7) (21.9) - (21.9) Income from Continuing Operations before Tax (40.8) 235.8 195.0 177.3 (9.7) 167.6 Income Tax Items 12.9 #C 12.9 (1.1)#I (1.1) Income Tax Expense (47.5) (25.8)#D (73.3) (56.0) 5.2 #J (50.8) Total Tax Expense (47.5) (12.9) (60.4) (56.0) 4.1 (51.9) Income from Continuing Operations (88.3) 222.9 134.6 121.3 (5.6) 115.7 Income from Discontinued Operations 10.8 (10.8)#E 0.0 0.3 (0.3)#K - Cumulative Effect of Accounting Change (6.5) 6.5 #F 0.0 - - - Net Income (84.0) 218.6 134.6 121.6 (5.9) 115.7 Diluted EPS (Q4 2005 Basic Shares used for Reported) (0.91) 2.37 1.46 1.29 (0.07) 1.22 Adjustment from Basic Shares (0.03) Adjusted EPS Diluted Shares (0.91) 2.34 1.43 1.29 (0.07) 1.22
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 Cumulative Effect of Accounting Change Net Income 18.9 16.3% Diluted EPS (Q4 2005 Basic Shares used for Reported) $ 0.24 19.7% Adjustment from Basic Shares Adjusted EPS Diluted Shares $ 0.21 17.2% #A - Remove Restructuring Expense including asset impairment of $234.4M #B - Remove Interest Income Due to Tax Refund $1.4M #C - Remove Tax Matters of $12.9M #D - Remove Tax Benefit on Special Items of ($25.8M) #E - Remove D.O. Income of ($10.8M) #F - Remove Cumulative effect of Accounting Change of $6.5M #G - Remove Restructuring Expense of $11.1M #H - Remove Gain on sale of investment of ($20.8M) #I - Remove Tax Refund of ($1.1M) #J - Remove Tax Expense on Special Items of $5.2M #K - Remove D.O. income of $(0.3M) ITT Industries Non-GAAP Press Release Reconciliation Reported vs. Adjusted Net Income & EPS Full Year of 2005 & 2004 ($ Millions, except EPS and shares) YTD YTD 2005 YTD 2005 As 2005 As Reported Adjustments Adjusted ----------- ----------- ----------- Segment Operating Income 591.2 288.1 #A 879.3 Interest Income (Expense) (32.3) (20.9)#B (53.2) Other Income (Expense) (19.7) - (19.7) Gain on sale of Assets - - - Corporate (Expense) (91.1) 0.4 #C (90.7) Income from Continuing Operations before Tax 448.1 267.6 715.7 Income Tax Items 73.7 #D 73.7 Income Tax Expense (133.7) (161.8)#E (295.5) Total Tax Expense (133.7) (88.1) (221.8) Income from Continuing Operations 314.4 179.5 493.9 Income from Discontinued Operations 51.6 (51.6)#F 0.0 Cumulative Effect of Accounting Change (6.5) 6.5 #G 0.0 Net Income 359.5 134.4 493.9 Diluted EPS 3.81 1.43 5.24 YTD YTD 2004 YTD 2004 As 2004 As Reported Adjustments Adjusted ----------- ----------- ----------- Segment Operating Income 692.0 32.1 #H 724.1 Interest Income (Expense) (27.9) (4.2)#I (32.1) Other Income (Expense) (17.7) 1.2 #J (16.5) Gain on sale of Assets 20.8 (20.8)#K - Corporate (Expense) (82.4) 1.7 #L (80.7) Income from Continuing Operations before Tax 584.8 10.0 594.8 Income Tax Items 16.5 #M 16.5 Income Tax Expense (164.7) (36.3)#N (201.0) Total Tax Expense (164.7) (19.8) (184.5) Income from Continuing Operations 420.1 (9.8) 410.3 Income from Discontinued Operations 12.2 (12.2)#O 0.0 Cumulative Effect of Accounting Change - - - Net Income 432.3 (22.0) 410.3 Diluted EPS 4.58 (0.23) 4.35 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 Cumulative Effect of Accounting Change Net Income 83.6 20.4% Diluted EPS $ 0.89 20.5% #A - Remove Restructuring Expense including asset impairment of $288.1M #B - Remove Interest Income Due to Tax Refund ($20.9M) #C - Remove Restructuring Expense of $0.4M #D - Remove Tax Matters of 73.7M #E - Remove Tax Benefit on Special Items of ($161.8M) #F - Remove D.O. Income of ($51.6M) #G - Remove Cumulative effect of Accounting Change of $6.5M #H - Remove Restructuring Expense of $32.1M #I - Remove Interest Income Due to Tax Refund ($4.2M) #J - Remove Sale of Digital Globe $1.2M #K - Remove Gain on sale of investment of ($20.8M) #L - Remove Restructuring Expense of $1.7M #M - Remove Tax Matters of $16.5M #N - Remove Tax Benefit on Special Items of ($36.3M) #O - Remove D.O. Income of $12.2M ITT Industries Non-GAAP Press Release Reconciliation Cash From Operating Activities vs. Free Cash Flow Full Year of 2005 & 2004 ($ Millions) Full Year 05 Full Year 04 ------------ ------------ Income from Continuing Ops 314.4 420.1 Asset Impairment Charges 213.9 - Depreciation 164.3 154.5 Amortization 32.3 20.6 Working Capital (117.9) (73.8) Pension Pre-funding (100.0) (100.0) Other 238.8 65.3 Cash from Operations 745.8 486.7 Capital Expenditures (179.2) (145.4) Pension Pre-funding 100.0 100.0 Free Cash Flow 666.6 441.3 SOURCE ITT Industries, Inc. -0- 01/27/2006 /CONTACT: Tom Glover of ITT Industries, Inc., +1-914-641-2160, tom.glover@itt.com/ /FCMN Contact: marianna.ricci@itt.com/ /Web site: http://www.itt.com http://www.thenewsmarket.com/ITT / (ITT)