Excluding special items, income from continuing operations for the quarter was $156 million, or $0.84 per share, representing 17 percent year-over-year growth. Special items in the year-ago period included a $54 million tax-related gain, compared with a $10 million expense in the first quarter of 2010, primarily related to the recent U.S. healthcare reform legislation.
• Revenue up three percent to $2.6 billion.
• Earnings from continuing operations of $0.79 per share. Adjusted earnings from continuing operations up 17 percent to $0.84 per share.
• 2010 adjusted earnings per share guidance increased to a range of $4.05 to $4.20 — projected midpoint growth of nine percent over 2009 adjusted earnings per share.
• Revenue guidance raised to four percent total growth and three percent organic growth.
"Promising organic growth combined with ITT's focused execution got us off to a great start in 2010. Our Motion & Flow Control business delivered significant increases in revenue and operating income. Our Defense & Information Solutions business made great progress on its strategic realignment, and significant productivity gains drove margin improvements in both our Fluid Technology and Motion & Flow Control businesses," said Steve Loranger, ITT's chairman, president and chief executive officer.
The company also raised its full-year 2010 adjusted earnings per share guidance from its previously announced forecast of $3.90 to $4.10 to a new forecast of $4.05 to $4.20. Revenue guidance for the year is revised from the company's previously announced forecast of three percent growth to a new forecast of four percent growth. Organic revenue (defined as total revenue excluding foreign exchange and merger and acquisition impacts) is expected to grow three percent, compared with a previous forecast of two percent growth.
"Our global teams delivered results above expectations, and we are seeing improving conditions in certain end markets, giving us confidence in raising our full-year earnings outlook," said Loranger. "We also delivered higher than expected free cash flow, and our strong financial position enabled us to announce an 18 percent dividend increase in the quarter, while we continued to advance our cash deployment and portfolio strategy through ITT's acquisition of Nova Analytics.
"We believe our strategies to align the portfolio with enduring human needs, while delivering organic growth and focused execution, will continue to drive excellent, sustainable growth — as ITT has demonstrated this quarter and over the past five years."
First-Quarter Segment Results
Defense & Information Solutions
First-quarter 2010 revenue for the Defense segment was $1.5 billion, down four percent compared to the year-ago period. Volume declines from strong prior-year results for tactical radios and counter improvised explosive device units were partially offset by growth in service contracts, special purpose jammers and very strong international night vision goggle revenues.
Strong productivity in the segment was more than offset by increased costs related to the business' strategic realignment, higher pension costs, and lower volumes, resulting in an 11 percent decline in operating income to $146 million.
Backlog at the end of the quarter was $5 billion, and significant orders during the quarter included international night vision goggles, airborne integrated defensive electronic countermeasures, Saudi Arabia tactical radios and next generation satellite radios. ITT was also selected by the U.S. Air Force Space and Missile Systems to provide components and services for the next generation of the Global Positioning System (GPS).
First-quarter 2010 Fluid Technology revenue of $801 million was up eight percent on a year-over-year basis. Organic revenue was flat, as growth in residential markets was offset by a decline versus the strong year-ago period in industrial projects. Organic orders for the segment were up three percent, largely driven by stabilizing residential market conditions and strong mining, oil and gas projects.
First-quarter segment operating income was $91 million, up 32 percent from the comparable prior-year period, driven by exceptional productivity and lower restructuring and realignment costs.
Key recent achievements include an award to create an energy-efficient water system in Chongqing, China; a full suite of treatment equipment to upgrade a water reclamation plant in Maryland with ITT's Flygt, Leopold, WEDECO and Sanitaire product lines; a desalination award in Saudi Arabia; and the start-up of the one of the largest dissolved air flotation water treatment systems in North America. The company also completed the acquisition of Nova Analytics, establishing a new growth platform for ITT in the $6 billion analytical instrumentation market.
Motion & Flow Control
First-quarter 2010 revenue for the Motion & Flow Control segment grew 26 percent on a comparable basis to $387 million. Organic revenue was up 25 percent, driven by the 2009 European auto stimulus programs, share gains in rail and beverage in emerging markets, restocking in the marine and connectors markets and recovering industrial markets. Organic orders were up 32 percent.
Operating income of $55 million was up 96 percent, driven by strong productivity, volume and mix. Key business achievements during the quarter included a locomotive damper order for a rail project in China, European automotive platform wins, and a five-year fuel valve award in the aerospace sector. The business also garnered emerging market share gains in beverage.
For the second quarter of 2010, ITT projects adjusted earnings per share will be flat compared with the year-ago period, in the range of $1.05 to $1.07. ITT's new full-year 2010 adjusted earnings per share guidance range is now $4.05 to $4.20 per share. At the midpoint, this represents nine percent growth from 2009.
For the full year, ITT revenue is now expected to grow four percent, compared with prior revenue guidance of three percent growth. Organic revenue growth for the full year is now forecast at three percent compared with a prior forecast of two percent.
Based on expected timing of orders and customer fielding plans, the company projects 2010 Defense & Information Solutions revenue growth of three percent. Fluid Technology revenue is expected to grow five percent, from a previously announced forecast of two percent growth, due to the Nova acquisition. Total revenue growth guidance for Motion & Flow Control is increased to six percent from the previous forecast of one percent growth. On an organic basis, revenue growth of seven percent is now forecast at Motion & Flow Control compared to the flat prior guidance.
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 first-quarter performance and answer questions. The briefing can be monitored live via webcast at the following address on the company's Website itt.com/investors/.
About ITT Corporation
ITT Corporation (itt.com) is a high-technology engineering and manufacturing company operating on all seven continents in three vital markets: water and fluids management, global defense and security, and motion and flow control. With a heritage of innovation, ITT partners with its customers to deliver extraordinary solutions that create more livable environments, provide protection and safety and connect our world. Headquartered in White Plains, N.Y., the company generated 2009 revenue of $10.9 billion.
Safe Harbor Statement
Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 (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 include: Economic, political and social conditions in the countries in which we conduct our businesses; Changes in U.S. or international government defense budgets; Decline in consumer spending; Sales and revenues mix and pricing levels; Availability of adequate labor, commodities, supplies and raw materials; Interest and foreign currency exchange rate fluctuations and changes in local government regulations; Competition and industry capacity and production rates; Ability of third parties, including our commercial partners, counterparties, financial institutions and insurers, to comply with their commitments to us; Our ability to borrow or refinance our existing indebtedness and availability of liquidity sufficient to meet our needs; Changes in the value of goodwill or intangible assets; Acquisitions or divestitures; Personal injury claims; Uncertainties with respect to our estimation of asbestos liability exposure and related insurance recoveries; Our ability to effect restructuring and cost reduction programs and realize savings from such actions; Government regulations and compliance therewith; Changes in technology; Intellectual property matters; Governmental investigations; Potential future employee benefit plan contributions and other employment and pension matters; Contingencies related to actual or alleged environmental contamination, claims and concerns; Changes in generally accepted accounting principles; Other factors set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and our other 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.
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