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Excluding items, earnings per share from continuing operations declined 7%, and came in ahead of analysts' expectations. Quarterly revenues also declined 6% and came in line with consensus estimate. The company also raised its adjusted earnings guidance for fiscal 2009.
In a statement, chairman, president and chief executive officer, Steve Loranger said, "While market challenges will remain into the near future, we believe the Company is doing what is required to emerge from the current economic environment as a much stronger company that is well positioned to grow and improve its financial performance over time."
Third Quarter Results
The White Plains, New York-based provider of advanced technology products and services reported net income of $59.0 million or $0.32 per share for the third quarter, sharply lower than $216.3 million or $1.17 per share in the prior-year quarter.
Income from continuing operations plunged to $66.0 million or $0.36 per share from $204.5 million or $1.11 per share in the year-ago quarter.
The results for the latest quarter include a net charge to continuing operations of after-tax $131 million or $0.71 per share related to future asbestos-related claims over the next 10 years, offset by expected insurance recoveries. These claims are associated with certain ITT products, primarily pumps sold prior to 1985 that include gaskets and packing that allegedly contain asbestos and were manufactured by other companies.
Excluding special items, adjusted income from continuing operations during the latest quarter was $190 million or $1.03 per share. On average, sixteen analysts surveyed by Thomson Reuters expected the company to earn $0.90 per share for the third quarter. Analysts' estimates typically exclude special items.
Sales and revenues for the quarter declined 6% to $2.70 billion from $2.88 billion in the same quarter last year, and came in line with ten Wall Street analysts' consensus estimate of $2.70 billion. Excluding the impacts of foreign exchange and acquisitions, revenues for the quarter was down 4%.
Segmental details
Revenues from defense electronics & services segment for the third quarter edged up 1.8% to $1.57 billion over last year. Segment operating income grew 8.3% to $203.3 million from last year, while operating margins expanded 80 basis points on strong productivity gains and favorable performance on fixed price contracts.
Fluid technology revenues for the quarter totaled $825.6 million, down 13% from the year-ago quarter, with revenues growing 10% organically. Segment operating income dropped 18% to $108 million, due primarily to higher restructuring costs, the impact of foreign exchange transactions and pension costs. Operating margin declined 80 basis points to 13.1% from last year. While general market weakness remains, Fluid Technology saw order activity stabilizing across the fluid segment.
Motion & flow control revenues dropped 22.1% to $306.9 million from last year, with organic revenues declining 15.8%. Segment operating income dropped 27.7% to $40.4 million on lower volumes, and operating margins also declined 100 basis points to 13.2% from a year ago, with lower volume, restructuring and the impact of foreign exchange transactions more than offsetting significant improvements in productivity. The segment is benefiting from increased activity in the global rail market.
Other Metrics
Operating income for the third quarter plunged to $92.7 million from $328.0 million in the year-ago quarter.
Total costs and expenses were $2.61 billion, up from $2.55 billion in the prior-year quarter. Expenses include selling, general and administrative expenses of $386.1 million, lower than $415.4 million in the comparable quarter a year ago, and net asbestos-related costs of $222.9 million, compared to $1.6 million last year.
Interest expense for the quarter decreased to $24.4 million from $29.3 million in the same quarter last year, while income tax expense was $11.9 million, sharply lower than $98.6 million in the prior-year quarter.
The company ended the third quarter with cash and cash equivalents of $1.35 billion, compared to $0.96 billion at end of the year-ago quarter. Nine-Month Highlights
For the nine-month period, ITT posted net income of $444.5 million or $2.42 per share, lower than $609.2 million or $3.30 per share in the prior-year period. Income from continuing operations for the period dropped to $455.1 million or $2.48 per share from $599.7 million or $3.25 per share in the year-ago period.
Total sales and revenues for the year-to-date period declined to $8.03 billion from $8.75 billion reported in the same period last year.
Looking Ahead........
"We believe our strong performance during the third quarter and our projected growth outlook for the remainder of the year underscore what ITT can accomplish by concentrating on execution and meeting our commitments. We remain focused on performance and growing value across our balanced portfolio of businesses, while working diligently to understand and address the needs of our diverse customer base and continuing to increase our investments for future organic growth," Loranger added.
For fiscal 2009, based on its third quarter performance, ITT raised its adjusted earnings guidance range to a range of $3.70 to $3.74 per share from the prior forecast of $3.50 to $3.70 per share. However, revenues for the full year were reaffirmed to be between $10.9 billion and $11.0 billion.
The Street is currently looking for full year 2009 earnings of $3.66 per share, on revenues of $10.9 billion.
Stock Quote ITT closed Thursday's regular trading session at $54.36, up $0.78 on a volume of 1.92 million shares, higher than the three-month average volume of 1.59 million shares. In the past 52-week period, the stock has been trading in a broad range of $31.94 to $56.95.
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