ITT Corporation 2011 Earnings

8/2/2019 ITT Corporation 2011 Earnings

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Q4 2011 Earnings Call &2012 Guidance

February 29, 2012


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2011 Highlights

Delivered Strong Results in 2011

+9% 2011 Organic Revenue; +10% Q4 Organic Revenue

+13% 2011 Organic Orders; +9% Q4 Organic Orders

Record Backlog at 12/31/11

+23% Adjusted Pro Forma EPS

Strong 2012 Operational Guidance

omp e e rans orma on o vers e o aIndustrial Company

Positioned Company for Long-Term Growthrong a ance ee

$690M Cash & Cash Equivalents at 12/31/11

Investments Driving Key Q4 Strategic Wins

rongFoundation for

n us r a rocess arge o a as an n ng ns Motion Technologies Auto & Rail Market Share Gains

Interconnect Solutions 1st Major Medical Win

Control Technologies 2 Embraer Aero Program Wins

PremierPerformance

February 29, 2012 P3Q4 2011 Earnings All Results are UnauditedFor non-GAAP reconciliations, refer to appendix and www.itt.com/ir.

Adjusted Pro Forma EPS = Diluted EPS from continuing operations, excluding transformation costs, asbestos costs, restructuring, other special items, and

including pro forma adjustments. Pro Forma adjustments reflect the elimination of interest expense on debt extinguished in connection with the transformationand interest income on cash distribution to the spun-off companies as if the distribution occurred at beginning of the period.


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Significant Strategic Progress

Focused Emerging Market Expansion

2011 Achievements

+9% Organic Revenue Growth

Strategic Growth Drivers

Aftermarket Capture

+100bps Adjusted SegmentOperating Margin Expansion

and R&D

+12% Aftermarket Topline

Growth

Margin Expansion ThroughOperational Excellence

Global Strategic Account Wins

China Automotive Expansion

Effective Capital Deployment to DriveOrganic & Inorganic Growth

Blakers Acquisition

Launched Key New Products



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2011 ITT ResultsContinuin O erations (unaudited) Full Year$ mill ions, except per share amounts 2011 vs 2010

Revenue $2,119 +11%

Adjusted Pro Forma EPS $1.60 +23%

Orders 2,275 +16%

FY 2011 Results

+9% Organic Revenue

Oil & Gas Expansion

+20% Adjusted Segment Operating Income

Operating Productivity

Market Share Gains in Industrial Process &Automotive

Commercial Aerospace Gains

Aftermarket Expansion Across Key Segments

Cost Containment Actions

Higher Material Costs


Global Communication Connectors

+13% Organic Orders

Numerous Strategic Wins

rong evenue row Solid Segment Operating Margin Expansion

Lower Effective Tax Rate

Adjusted Segment Operating Income = Segment Operating Income, excluding transformation costs and restructuring charges.Adjusted Pro Forma EPS = Diluted EPS from continuing operations, excluding transformation costs, asbestos costs, restructuring, other special items, andincluding pro forma adjustments. Pro Forma adjustments reflect the elimination of interest expense on debt extinguished in connection with the transformation

and interest income on cash distribution to the spun-off companies as if the distribution occurred at beginning of the period.



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Q4 2011 ITT ResultsContinuin O erations (unaudited) Q4$ millions, except per share amounts 2011 vs 2010

Revenue $518 +10%

Adjusted Pro Forma EPS $0.36 +20%

Orders $544 +9%

Q4 2011 Results

+10% Organic Revenue

North American Share Gains in Chemical,Oil & Gas and Power Markets

+12% Adjusted Segment Operating Income

Operating Productivity

Global Oil & Gas Expansion

Market Share Gains in European Automotive

Global Communication Connectors

Higher Material Costs

Higher Retirement Benefit Costs


+9% Organic Orders

Global Oil & Gas and Mining

Weak Connectors Orders in Line with Market

Strong Revenue Growth

Solid Segment Operating Margin Expansion

Lower Effective Tax Rate, Partially Offset by PY Limited Run High Speed Rail Seats Higher Corporate Costs


Adjusted Segment Operating Income = Segment Operating Income, excluding transformation costs and restructuring charges.Adjusted Pro Forma EPS = Diluted EPS from continuing operations, excluding transformation costs, asbestos costs, restructuring, other special items, and

including pro forma adjustments. Pro Forma adjustments reflect the elimination of interest expense on debt extinguished in connection with the transformationand interest income on cash distribution to the spun-off companies as if the distribution occurred at beginning of the period.


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2011 Total Revenue Growth by Market

EmergingMarkets

Energy &Mining

+14%

+19%+20%

+10%Auto, Rail &

Aerospace &

DefenseGeneralIndustrial

+12%

+8%

6%2011v2010

Growth

IndustrialProcessing

2%

4%

Organic +9%

Total +11%

Revenue2011 vs 2010

$200M $300M $400M $700M$500M

0%

$100M $600M

AllFY 2011Revenue

(-15%) Other

End Markets Above Include Emerging Market Results



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2011 Total Revenue by Major Geographies

Emerging Markets

+19% vs 2010North America

+7% vs 2010Western Europe

+11% vs 2010

Industrial Pump Strengthin Chemical, Oil & Gasand General Industry

Automotive Market ShareGains

Latin America Oil & Gasand Chemical IndustrialPumps

Auto Market Gains (Ford)

Northern Europe General

Industrial Strength

Eastern Europe Oil &Gas, Auto & Rail Gains

Aerospace ProductionRamp Up Aerospace OE &

Aftermarket

m e un na aSeat Program

Communication End

CommunicationConnectors

Market Due toCustomers MarketShare Losses

Strong Global Growth



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2012 Financial Outlook

2012 Or anic 5% to 7%

Revenue Range+6% Total Revenue; +6% Organic

Late Cycle Strength (Oil & Gas andMining)

+40 bps vs

Adjusted Segment Operating Margin

Connectors Market Softness Blakers Acquisition Offset by Negative

FX

2012 Margins ~13.6% 2011

2012 Adjusted Pro Forma EPS Range

+10% Emerging Market

Oil & Gas Growth in Middle East & LatinAmerica

+40 bps Adjusted Segment Operating

+4% vs 2011 PF

+13% vs 2011PF (ex Spin Dis-Synergies)

. .Margin

Productivity Offsets Inflation and FuelsInvestments

+80bps Adjusted Segment Operating

2012 FCF Conversion >105% of Net Income

Free Cash Flowarg n xc u ng p n s- ynerg es

+13% Adjusted Pro Forma EPSExcluding Spin Dis-Synergies

Adjusted Segment Operating Income = Segment Operating Income, excluding transformation costs and restructuring charges.Adjusted Pro Forma EPS = Diluted EPS from continuing operations, excluding transformation costs, asbestos costs, restructuring, other special items, andincluding pro forma adjustments. Pro Forma adjustments reflect the elimination of interest expense on debt extinguished in connection with the transformationand interest income on cash distribution to the spun-off companies as if the distribution occurred at beginning of the period.Free Cash Flow = Cash provided by operating activities less capital expenditures, cash payments for transformation costs, and other special items.



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Revenue

2012 vs 2011

2012 Total Revenue Growth

Organic +6%

Total +6%Energy &

Mining14%

Industrial

Processing10% +10%

8%

6%2012v2011

G

rowth

EmergingMarkets

Aerospace &Defense

General

4%Auto, Rail &

Transportation

Industrial

2%

$300M $400M $500M $700M$600M0%

200M

End Markets Above Include Emerging Market Results

2012 AnnualRevenue

(10%)All

Other



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2012 Revenue Outlook by Major Geographies

Emerging Markets

+10% vs 2011North America

+6 to 8% vs 2011Western Europe

FLAT to +2% vs 2011

Oil & Gas andChemical IndustrialProcess Pumps

Automotive AftermarketStability & OEM ShareGains

Oil & Gas, Mining andChemical IndustrialProcess Pumps

General Industry

Aerospace Production

Northern EuropeIndustrial Automation

Expansion

Handheld & MedicalConnectors

Automotive Gains in

New ProductDevelopment

Aerospace Aftermarket

Weak ConnectorsConditions

China

2H China RailRecovery

Automotive ShareGains

Lower AutomotiveProduction Rates

Prior Year Oil & Gasand Rail Mega Projects

vers e eograp c or o o



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2012 Adjusted Segment Operating Margins

+40 bps Growth Volume & Mix:

FY 2011 Adjusted Segment Operating Margin 13.2%

Volume, Mix, Operating Productivity & Other 1.8%

Market Share Gains

Net Operating Productivity:

Lean Six Sigma & GlobalSourcing

- .

Acquisition/Disposition -0.2%

Recurring Spin Costs (Dis-Synergies) -0.4%

~3% Inflation

Pricing:

Large Industrial Projects &Automotive

us e egmen pera ng arg n . Value-Based Commercial

Excellence

Investments: Targeted &Gated in Key Markets

Acquisition: Blakers Dilutionfrom Purchase Accounting

(-40bps) Recurring Spin Costs

Adjusted Segment Operating Margin = Segment Operating Margin, excluding all transformation costs and restructuring charges.



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2012 Adjusted Pro Forma EPS Walk

+13%

$0.29($0.12)

($0.04)

($0.06)$0.14 1.81

+4%

$1.60

$0.14

$1.67Key Investments

China Auto ExpansionPremier Customer Initiatives

$100MGross

Productivity

termar et xpans on GSS

2011 Adj PFEPS

Volume / Price /Mix

Productivity StrategicInvestments

FX Interest/Corp/Other

Dis-Synergies 2012 GuidanceMid-Point

2012 ex Dis-Synergies

Headwinds Key AssumptionsTailwinds

Late-Cycle Backlog

Benefits from Prior Investments

Incremental Productivity

Incremental Recurring Spin Costs(Dis-Synergies) ~$20M

European Uncertainty

Higher Material Prices and Pricing

~$50M Unallocated Corporate Exp

~$10M Other Misc Corp Exp

94.5M Share Count Assumes ShareRepurchases to Offset Dilution

Blakers Acquisition Pressure in Auto

Timing of Large Project Shipments

February 29, 2012 P14

32% Tax Rate

$1.35 RateQ4 2011 Earnings All Results are Unaudited

For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.


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Segment Financial Results


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Q4 2011 ITT Segment Performance

Q4 2011 Total Revenue vs PY 12.3% 20.5% -3.8% 7.0% 10.2%

MotionTechnologies

IndustrialProcess

InterconnectSolutions

ControlTechnologies

NewITT

FX 0.7% 1.2% -0.2% -0.2% 0.4%

Acquisition/Disposition -1.8% 0.0% 2.2% 0.0% -0.2%

rgan c evenue vs . . - . . .

Q4 2010 Adjusted Operating Margin 12.0% 18.6% 6.0% 5.9% 11.4%

Volume, Mix, Operating Productivity &

Other2.1% -4.8% 1.1% 11.8% 1.9%

Growth Investments -0.3% -0.8% 0.9% -0.8% -0.3%

Retirement Benefits -1.9% 0.0% -0.3% -0.6% -0.9%

FX -1.2% 0.5% -0.2% 0.9% -0.2%


Q4 2011 Adjusted Operating Margin 10.1% 13.5% 7.5% 17.2% 11.6%



Q4 2011 Earnings All Results are UnauditedFor non-GAAP reconciliations, refer to appendix and www.itt.com/ir.


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Q4 2011 Industrial Process

Continuing Operations (unaudited)

$ mill ions 2011 vs 2010 2011 vs 2010

Q4 Full Year

Revenue $210 +12% $767 +11%

Adjusted Segment Operating Income $21 (-5%) $94 +18%

+11% Organic Revenue (-5%) Adjusted Operating Income

Q4 Results

u pace or mer can ar e s:

Chemical

Oil & Gas and Power

Retirement Benefits & FX Impacts

Mix Shift to Lower Margin Large Projects

Emerging Market Growth in Oil & Gas Q4 Blakers Acquisition & Growth Investments

+210bps Operating Productivity





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Q4 2011 Motion Technologies


$ mill ions 2011 vs 2010 2011 vs 2010

Q4 Full Year

Revenue $135 +20% $634 +16%

Adjusted Segment Operating Income $18 (-13%) $86 +2%

+22% Organic Revenue (-13%) Adjusted Operating Income

Q4 Results

ar e are a ns n uropean u oMarket

North American Auto Penetration

g er ommo y os s

Mix Shift to Higher OEM Volumes

Incremental Growth Investments in China

European & China Rail

Facility

Production Disruption Costs at Koni Facility

Productivity Gains





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Q4 2011 Interconnect Solutions


$ mill ions 2011 vs 2010 2011 vs 2010

Q4 Full Year

Revenue $100 (-4%) $418 +1%

Adjusted Segment Operating Income $8 +21% $41 +9%

(-2%) Organic Revenue +21% Adjusted Operating Income

Q4 Results

Market Share Losses

Oil & Gas in Emerging Markets

+110bps Operating Productivity

Lower Warranty and Compensation Related

Defense Security and Surveillance Systemsand Radar Based Programs

Transportation Strength in Emerging Markets

Costs

Commodity Cost Increases





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Q4 2011 Control Technologies


$ mill ions 2011 vs 2010 2011 vs 2010

Q4 Full Year

Revenues $76 +7% $318 +16%

Adjusted Segment Operating Income $13 +210% $58 +83%

+7% Organic Revenue +210% Adjusted Operating Income

Q4 Results

General Industrial Growth in China & Europe

Prior Year Limited Run High Speed Rail Seats

Operational Improvements in IndustrialBusiness

PY Operating Adjustments

FX Impact





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Appendix


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2011 ITT Segment Performance

FY 2011 Total Revenue vs PY 10.5% 15.7% 1.2% 15.6% 11.1%

MotionTechnologies

IndustrialProcess

InterconnectSolutions

ControlTechnologies

NewITT

FX -0.8% -4.8% -2.0% -0.7% -2.3%


FY 2011 Organic Revenue vs PY 8.7% 10.9% -0.3% 14.9% 8.6%

FY 2010 Adjusted Operating Margin 11.5% 15.4% 9.2% 11.5% 12.2%

Volume, Mix, Operating Productivity &

Other2.4% -2.2% 0.7% 6.6% 1.6%

Growth Investments -0.2% 0.3% 0.2% -0.1% 0.0%

Pension -0.7% 0.0% -0.3% -0.3% -0.4%

FX -0.3% 0.1% 0.1% 0.5% 0.0%


FY 2011 Adjusted Operating Margin 12.2% 13.6% 9.9% 18.2% 13.2%



Q4 2011 Earnings All Results are Unaudited


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Financial Data Presentation Overview

Pro FormaAdjustments

GAAPAs Reported

Non-GAAPAdjustments

Continuin O erations Continuin GAAP Excludin Non-GAAP Excludin

Excludes: Discontinued Operations

Transformation Costs

Asbestos Remeasurement &Provision

Interest Expense on

Extinguished $1.25B Long-Term Debt

ua y ng ransac on os s(i.e. advisory fees)

Includes:

Restructuring Expense

Special Items

Special Spin Related Tax

Cash Distributed to Spun-OffCompanies

Interest Expense onExtinguished $1.25B Long-Term Debt

Interest Income on $400M of

APB 23

State Tax Rate Change

2012 Operating Growth:

Certain 2012 Growth

Cash Distributed to Spun-OffCompanies

ax a ua on owance

Change

Note: Still Includes GAAP InterestExpense & Income

Excluding the Impacts of Dis-Synergies Attributable to theSpin

February 29, 2012 P23Q4 2011 Earnings All Results are Unaudited


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ITT Corporation Non-GAAP Reconciliation

epor e vs. rgan c evenue r er rowYear to Date 2011& 2010

($ Millions)

(Unaudited)

(A) (B) (C) (D) (E) = B+C+D (F) = E / A

Change % Change

Acquisition /

Divestitures

FX

Contribution Change % Change

(As Reported - GAAP) (As Adjusted - Organic)

. . . . . .

Revenues

ITT Corporation - Consolidated 2,119 1,908 211 11% (5) (42) 164 9%

Industrial Process 767 694 73 11% (7) (5) 61 9%

Motion Technologies 634 548 86 16% 0 (27) 59 11%

Interconnect Solutions 418 413 5 1% 2 8 1 0%

Control Technologies 318 275 43 16% 0 (2) 41 15%

Orders

Total Segment Orders 2,275 1,959 316 16% (12) (42) 262 13%

Industrial Process 917 719 198 27% (14) (8) 176 25%

Motion Technologies 642 560 82 15% 0 (25) 57 10%

Interconnect Solutions 414 419 (5) -1% 2 (8) (11) -3%

Control Technologies 322 283 39 14% 0 (2) 37 13%

Note: Excludes intercompany eliminations

Q4 2011 Earnings All Results are Unaudited February 29, 2012 P25

Immaterial differences due to rounding


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ITT Corporation Non-GAAP Reconciliation

epor e vs. rgan c evenue r er rowFourth Quarter 2011& 2010

($ Millions)

(Unaudited)

(A) (B) (C) (D) (E) = B+C+D (F) = E / A

Change % Change

Acquisition /

Divestitures

FX

Contribution Change % Change

(As Reported - GAAP) (As Adjusted - Organic)

. . . . . .

Revenues

ITT Corporation - Consolidated 518 470 48 10% (1) 2 49 10%

Industrial Process 210 187 23 12% (3) 1 21 11%

Motion Technologies 135 113 22 20% 0 1 23 22%

Interconnect Solutions 100 104 4 -4% 2 0 2 -2%

Control Technologies 76 71 5 7% 0 0 5 7%

Orders

Total Segment Orders 544 499 45 9% (5) 3 43 9%

Industrial Process 235 180 55 31% (7) 1 49 27%Motion Technologies 149 158 (9) -5% 0 2 (6) -4%

Interconnect Solutions 95 101 (6) -6% 2 0 (4) -4%

Control Technologies 66 68 (2) -3% 0 0 (2) -3%


Immaterial differences due to rounding


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ITT Corporation

Reported vs Adjusted Segment Operating Income & OI Margin

Year to Date of 2011 & 2010

($ Millions)

(Unaudited)

FY 2011 FY 2011 FY 2011 FY 2011 FY 2010 FY 2010 FY 2010 % Change % Change

As Reported Spin Costs Restructuring As Adjusted As Reported Restructuring As Adjusted

As Reported 11

vs. 10 Adj for 11 vs. 10

Revenue:

. .

Motion Technologies 634 634 548 548 15.7% 15.7%

Interconnect Solutions 418 418 413 413 1.2% 1.2%

Control Technologies 318 318 275 275 15.6% 15.6%

Intersegment eliminations (18) (18) (22) (22) -18.2% -18.2%

Total Revenue 2,119 2,119 1,908 1,908 11.1% 11.1%

Operating Margin:Industrial Process 11.9% 30 BP - BP 12.2% 11.4% 10 BP 11.5% 50 BP 70 BP

-. . . .

Interconnect Solutions 9.1% 10 BP 70 BP 9.9% 9.0% 20 BP 9.2% 10 BP 70 BP

Control Technologies 17.3% 40 BP 50 BP 18.2% 10.5% 100 BP 11.5% 680 BP 670 BP

Total Operating Segments 12.7% 30 BP 20 BP 13.2% 12.1% 10 BP 12.2% 60 BP 100 BP

Income:

Industrial Process 91 2 0 94 79 1 80 15.2% 17.8%

Motion Technologies 85 1 0 86 85 0 85 0.0% 2.0%

Interconnect Solutions 38 1 3 41 37 1 38 2.7% 9.4% . .

Control Technologies 55 1 2 58 29 3 32 89.7% 83.2%

Total Segment Operating Income 269 5 5 279 230 4 234 17.0% 19.5%

Note: Immaterial differences due to rounding



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ITT Corporation

Reported vs Adjusted Segment Operating Income & OI Margin

Fourth Quarter of 2011 & 2010

($ Millions)

(Unaudited)

3M 2011 3M 2011 3M 2011 3M 2011 3M 2010 3M 2010 3M 2010 % Change % Change

As Reported Spin Costs Restructuring As Adjusted As Reported Restructuring As Adjusted

As Reported 11

vs. 10 Adj for 11 vs. 10

Revenue:

. .

Motion Technologies 135 135 113 113 20.3% 20.3%

Interconnect Solutions 100 100 104 104 -4.2% -4.2%

Control Technologies 76 76 71 71 6.5% 6.5%

Intersegment eliminations (3) (3) (5) (5) -37.5% -37.5%

Total Revenue 518 518 470 470 10.2% 10.2%

Operating Margin:Industrial Process 9.0% 100 BP 10 BP 10.1% 11.9% 10 BP 12.0% (290) BP (190) BP

- - -. - - . . - .

Interconnect Solutions 4.0% 50 BP 300 BP 7.5% 6.0% - BP 6.0% (200) BP 150 BP

Control Technologies 15.5% 150 BP 20 BP 17.2% 4.4% 150 BP 5.9% 1,110 BP 1,130 BP

Total Operating Segments 10.2% 70 BP 70 BP 11.6% 11.2% 20 BP 11.4% (100) BP 20 BP

Income:

Industrial Process 19 2 0 21 22 0 23 -14.8% -5.4%

Motion Technologies 18 0 0 18 21 0 21 -12.9% -12.9%

Interconnect Solutions 4 1 3 8 6 - 6 -35 5% 21 0% . .

Control Technologies 12 1 0 13 3 1 4 277.4% 209.8%

Total Segment Operating Income 53 4 3 60 53 1 54 0.8% 11.5%

Note: Immaterial differences due to rounding



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Documents

ITT Corporation 2011 Earnings