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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-5627
ITT INDUSTRIES, INC.
INCORPORATED IN THE STATE OF INDIANA 13-5158950
(I.R.S. Employer
Identification Number)
4 WEST RED OAK LANE, WHITE PLAINS, NY 10604
(Principal Executive Office)
TELEPHONE NUMBER: (914) 641-2000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of July 31, 2002, there were outstanding 91,665,392 shares of common
stock ($1 par value per share) of the registrant.
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ITT INDUSTRIES, INC.
TABLE OF CONTENTS
PAGE
----
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Condensed Income Statements -- Three and Six
Months Ended June 30, 2002 and 2001......................... 2
Consolidated Condensed Balance Sheets -- June 30, 2002 and
December 31, 2001........................................... 3
Consolidated Condensed Statements of Cash Flows -- Six
Months Ended June 30, 2002 and 2001......................... 4
Notes to Consolidated Condensed Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations:
Three and Six Months Ended June 30, 2002 and 2001........... 12
Part II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders......... 18
Item 6. Exhibits and Reports on Form 8-K............................ 18
Signature................................................... 19
Exhibit Index............................................... 20
1
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following unaudited consolidated condensed financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC) and, in the opinion of management, reflect all
adjustments (which include normal recurring adjustments) necessary for a fair
presentation of the financial position, results of operations, and cash flows
for the periods presented. Certain information and note disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such SEC rules.
The Company believes that the disclosures made are adequate to make the
information presented not misleading. Certain amounts in the prior periods'
consolidated condensed financial statements have been reclassified to conform to
the current period presentation. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's 2001 Annual Report on Form 10-K.
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(IN MILLIONS, EXCEPT PER SHARE)
(UNAUDITED)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
2002 2001 2002 2001
-------- -------- -------- --------
Sales and revenues................................... $1,320.1 $1,184.3 $2,505.9 $2,370.3
-------- -------- -------- --------
Costs of sales and revenues.......................... 882.3 773.3 1,667.2 1,545.0
Selling, general, and administrative expenses........ 179.2 176.0 352.5 371.8
Research, development, and engineering expenses...... 113.5 102.6 225.5 209.7
-------- -------- -------- --------
Total costs and expenses............................. 1,175.0 1,051.9 2,245.2 2,126.5
-------- -------- -------- --------
Operating income..................................... 145.1 132.4 260.7 243.8
Interest expense, net................................ (10.0) (15.9) (21.9) (36.5)
Miscellaneous income, net............................ 1.6 0.5 3.0 0.6
-------- -------- -------- --------
Income before income taxes........................... 136.7 117.0 241.8 207.9
Income tax expense................................... (43.8) (40.9) (77.4) (72.7)
-------- -------- -------- --------
Net income........................................... $ 92.9 $ 76.1 $ 164.4 $ 135.2
======== ======== ======== ========
EARNINGS PER SHARE:
Net income
Basic.............................................. $ 1.02 $ .87 $ 1.82 $ 1.54
Diluted............................................ $ .99 $ .84 $ 1.76 $ 1.49
Cash dividends declared per common share............. $ .15 $ .15 $ .30 $ .30
PRO FORMA RESULTS:
Reported net income................................ $ 92.9 $ 76.1 $ 164.4 $ 135.2
Add back goodwill amortization, net of tax......... -- 9.2 -- 17.7
-------- -------- -------- --------
Adjusted net income................................ $ 92.9 $ 85.3 $ 164.4 $ 152.9
======== ======== ======== ========
Adjusted basic earnings per share.................. $ 1.02 $ .97 $ 1.82 $ 1.74
Adjusted diluted earnings per share................ $ .99 $ .94 $ 1.76 $ 1.69
Average Common Shares -- Basic....................... 91.0 87.9 90.3 87.9
Average Common Shares -- Diluted..................... 93.9 90.5 93.2 90.5
- ---------------
The accompanying notes to consolidated condensed financial statements are an
integral part of the above statements.
2
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS, EXCEPT FOR SHARES AND PER SHARE)
JUNE 30, DECEMBER 31,
2002 2001
----------- ------------
(UNAUDITED)
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 168.5 $ 121.3
Receivables, net.......................................... 899.1 741.7
Inventories, net.......................................... 542.3 528.9
Other current assets...................................... 75.9 66.9
-------- --------
Total current assets.............................. 1,685.8 1,458.8
Plant, property and equipment, net........................ 797.3 791.0
Deferred income taxes..................................... 305.9 310.9
Goodwill, net............................................. 1,450.9 1,410.0
Other intangible assets, net.............................. 54.2 47.9
Other assets.............................................. 496.3 489.8
-------- --------
Total assets...................................... $4,790.4 $4,508.4
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 479.9 $ 400.5
Accrued expenses.......................................... 770.1 727.9
Accrued taxes............................................. 247.1 251.2
Notes payable and current maturities of long-term debt.... 365.7 517.0
-------- --------
Total current liabilities......................... 1,862.8 1,896.6
Pension benefits............................................ 237.9 199.0
Postretirement benefits other than pensions................. 198.9 195.9
Long-term debt.............................................. 453.1 456.4
Other liabilities........................................... 371.0 384.7
-------- --------
Total liabilities................................. 3,123.7 3,132.6
Shareholders' Equity:
Cumulative Preferred Stock: Authorized 50,000,000 shares,
No par value, none issued.............................. -- --
Common stock:
Authorized 200,000,000 shares, $1 par value per share
Outstanding 91,726,411 and 88,786,701 shares.......... 91.7 88.8
Retained earnings......................................... 1,753.6 1,514.0
Accumulated other comprehensive(loss):
Unrealized (loss) on investment securities............. (1.4) (1.6)
Minimum pension liability.............................. (34.9) (19.2)
Cumulative translation adjustments..................... (142.3) (206.2)
-------- --------
Total shareholders' equity........................ 1,666.7 1,375.8
-------- --------
Total liabilities and shareholders' equity........ $4,790.4 $4,508.4
======== ========
- ---------------
The accompanying notes to consolidated condensed financial statements are an
integral part of the above balance sheets.
3
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------
2002 2001
------- -------
OPERATING ACTIVITIES
Net income.................................................. $ 164.4 $ 135.2
Adjustments to Net Income:
Depreciation and amortization............................. 85.1 111.3
Restructuring payments.................................... (22.6) (5.8)
Change in receivables..................................... (115.8) (17.1)
Change in inventories..................................... 7.3 (7.7)
Change in accounts payable and accrued expenses........... 67.1 (39.1)
Change in accrued and deferred taxes...................... 42.7 4.0
Change in other current and non-current assets............ 2.9 14.5
Change in other non-current liabilities................... 2.5 5.0
Other, net................................................ 2.7 3.1
------- -------
Net cash -- operating activities.......................... 236.3 203.4
------- -------
INVESTING ACTIVITIES
Additions to plant, property, and equipment................. (52.1) (67.4)
Proceeds from sale of assets................................ 6.8 31.7
Acquisitions................................................ (38.8) (45.3)
Other, net.................................................. 1.1 1.4
------- -------
Net cash -- investing activities.......................... (83.0) (79.6)
------- -------
FINANCING ACTIVITIES
Short-term debt, net........................................ (168.4) 71.1
Long-term debt repaid....................................... (1.6) (60.9)
Long-term debt issued....................................... 0.3 --
Repurchase of common stock.................................. (13.6) (135.7)
Proceeds from issuance of common stock...................... 79.4 70.4
Dividends paid.............................................. (26.8) (26.4)
Other, net.................................................. (0.2) 0.8
------- -------
Net cash -- financing activities.......................... (130.9) (80.7)
------- -------
EXCHANGE RATE EFFECTS ON CASH AND CASH EQUIVALENTS.......... 4.5 (3.2)
NET CASH -- DISCONTINUED OPERATIONS......................... 20.3 (9.8)
------- -------
Net change in cash and cash equivalents..................... 47.2 30.1
Cash and cash equivalents -- beginning of period............ 121.3 88.7
------- -------
CASH AND CASH EQUIVALENTS -- END OF PERIOD.................. $ 168.5 $ 118.8
======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................. $ 25.8 $ 44.1
======= =======
Income taxes.............................................. $ 34.8 $ 57.4
======= =======
- ---------------
The accompanying notes to consolidated condensed financial statements are an
integral part of the above statements.
4
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
1) RECEIVABLES
Net receivables consist of the following:
JUNE 30, DECEMBER 31,
2002 2001
-------- ------------
Trade....................................................... $879.9 $734.1
Other....................................................... 42.6 29.3
Allowance for doubtful accounts............................. (23.4) (21.7)
------ ------
$899.1 $741.7
====== ======
2) INVENTORIES
Net inventories consist of the following:
JUNE 30, DECEMBER 31,
2002 2001
-------- ------------
Finished goods.............................................. $147.7 $152.0
Work in process............................................. 184.2 172.3
Raw materials............................................... 266.1 272.0
Progress payments........................................... (55.7) (67.4)
------ ------
$542.3 $528.9
====== ======
3) PLANT, PROPERTY, AND EQUIPMENT
Net plant, property, and equipment consist of the following:
JUNE 30, DECEMBER 31,
2002 2001
--------- ------------
Land and improvements....................................... $ 57.7 $ 55.3
Buildings and improvements.................................. 386.2 366.1
Machinery and equipment..................................... 1,428.5 1,340.2
Furniture, fixtures and office equipment.................... 223.7 214.3
Construction work in progress............................... 95.3 92.9
Other....................................................... 35.3 32.7
--------- ---------
2,226.7 2,101.5
Accumulated depreciation and amortization................... (1,429.4) (1,310.5)
--------- ---------
$ 797.3 $ 791.0
========= =========
5
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
4) COMPREHENSIVE INCOME
PRETAX TAX
INCOME (EXPENSE) NET-OF-TAX
(EXPENSE) BENEFIT AMOUNT
--------- --------- ----------
Three Months Ended June 30, 2002:
Net income.................................................. $ 92.9
Other comprehensive income (loss):
Foreign currency translation adjustments.................. $76.8 $ -- 76.8
Unrealized (loss) on investment securities................ (0.3) 0.1 (0.2)
----- ---- ------
Other comprehensive income............................. $76.5 $0.1 76.6
Comprehensive income........................................ $169.5
======
PRETAX TAX
INCOME (EXPENSE) NET-OF-TAX
(EXPENSE) BENEFIT AMOUNT
--------- --------- ----------
Three Months Ended June 30, 2001:
Net income.................................................. $ 76.1
Other comprehensive income (loss):
Foreign currency translation adjustments.................. $(18.2) $ -- (18.2)
Unrealized gain on investment securities.................. 0.8 (0.3) 0.5
------ ----- ------
Other comprehensive (loss)............................. $(17.4) $(0.3) (17.7)
Comprehensive income........................................ $ 58.4
======
PRETAX TAX
INCOME (EXPENSE) NET-OF-TAX
(EXPENSE) BENEFIT AMOUNT
--------- --------- ----------
Six Months Ended June 30, 2002:
Net income.................................................. $164.4
Other comprehensive income (loss):
Foreign currency translation adjustments.................. $ 63.9 $ -- 63.9
Minimum pension liability................................. (23.7) 8.0 (15.7)
Unrealized gain on investment securities.................. 0.3 (0.1) 0.2
------ ----- ------
Other comprehensive income............................. $ 40.5 $ 7.9 48.4
Comprehensive income........................................ $212.8
======
6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
PRETAX TAX
INCOME (EXPENSE) NET-OF-TAX
(EXPENSE) BENEFIT AMOUNT
--------- --------- ----------
Six Months Ended June 30, 2001:
Net income.................................................. $135.2
Other comprehensive income (loss):
Foreign currency translation adjustments.................. $(56.9) $ -- (56.9)
Minimum pension liability................................. (9.6) 3.3 (6.3)
Unrealized gain on investment securities.................. 0.2 (0.1) 0.1
------ ----- ------
Other comprehensive (loss)............................. $(66.3) $ 3.2 (63.1)
Comprehensive income........................................ $ 72.1
======
5) EARNINGS PER SHARE
The following is a reconciliation of the shares used in the computation of
basic and diluted earnings per share for the three months and six months ended
June 30, 2002 and 2001:
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
------------- -----------
2002 2001 2002 2001
----- ----- ---- ----
Weighted average shares of common stock outstanding used in
the computation of basic earnings per share.............. 91.0 87.9 90.3 87.9
Common stock equivalents................................... 2.9 2.6 2.9 2.6
---- ---- ---- ----
Shares used in the computation of diluted earnings per
share.................................................... 93.9 90.5 93.2 90.5
---- ---- ---- ----
There were less than 0.1 of outstanding antidilutive common stock options
excluded from the computation of diluted earnings per share for the three months
and six months ended June 30, 2002 and 2001.
6) RESTRUCTURING
DEFENSE MOTION CORPORATE,
FLUID ELECTRONICS & & FLOW ELECTRONIC ELIMINATIONS
TECHNOLOGY SERVICES CONTROL COMPONENTS AND OTHER TOTAL
---------- ------------- ------- ---------- ------------ ------
Balance December 31, 2001..... $11.5 $1.0 $ 7.1 $ 28.7 $ 3.6 $ 51.9
Payments...................... (6.1) -- (1.1) (14.0) (1.4) (22.6)
----- ---- ----- ------ ----- ------
Balance June 30, 2002......... $ 5.4 $1.0 $ 6.0 $ 14.7 $ 2.2 $ 29.3
===== ==== ===== ====== ===== ======
At December 31, 2001, the accrual balance for restructuring activities was
$51.9. Cash payments of $22.6 were recorded in the first six months of 2002
decreasing the accrual balance at June 30, 2002 to $29.3, which includes $20.2
for severance and $9.1 for facility carrying costs and other. As of December 31,
2001, remaining actions under restructuring activities announced during 2001
were to close five facilities, discontinue 21 products and reduce headcount by
2,200. During the first six months of 2002, the Company reduced head count by
926 persons. All of the actions contemplated under the 2001 plans will be
substantially completed in 2002. Some severance run-off payments will occur in
2003 and closed-facility expenditures will continue to be incurred through 2006.
7
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
7) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended, was adopted by
the Company on January 1, 2001. The nature of the Company's business activities
necessarily involves the management of various financial and market risks,
including those related to changes in interest rates, currency exchange rates,
and commodity prices. As discussed more completely in Notes 1 and 16 of the 2001
Annual Report on Form 10-K, the Company uses derivative financial instruments to
mitigate or eliminate certain of those risks. The only significant derivatives
that the Company had on January 1, 2001, were the interest rate swaps (the
"Swaps") discussed in Note 16 of the 2001 Annual Report on Form 10-K. The
adoption of SFAS No. 133 required the Company to record the total fair value of
the Swaps in the financial statements, which caused an increase to other assets
and long-term debt of $39.7, bringing the carrying value of the Swaps to $42.5.
At June 30, 2002 and December 31, 2001, the values of the Swaps were $55.8 and
$46.2, including $3.6 and $3.7 of accrued interest, respectively. The adoption
of SFAS No. 133 did not have a material impact on the results of operations or
cash flows of the Company.
A reconciliation of current period changes contained in the accumulated
other comprehensive loss component of shareholders' equity is not provided, as
there was no transition adjustment recorded within other comprehensive loss as
of January 1, 2001 and no material activity to report for the first six months
of 2002 and 2001, respectively. Additional disclosures required by SFAS No. 133,
as amended, are presented below.
HEDGES OF FUTURE CASH FLOWS
At June 30, 2002 the Company had no foreign currency cash flow hedges. At
December 31, 2001, the Company had one foreign currency cash flow hedge that had
appreciations of less than $0.1 during 2001. There were no changes in the
forecasted transactions during 2001 regarding their probability of occurring,
which would require amounts to be reclassified to earnings.
The notional amount of the foreign currency forward contract utilized to
hedge cash flow exposures was $1.1 at December 31, 2001. The applicable fair
value of this contract at December 31, 2001 was $1.1. There were no ineffective
portions of changes in fair values of cash flow hedge positions reported in
earnings for the six months ended June 30, 2002 and 2001, respectively, and no
amounts were excluded from the measure of effectiveness reported in earnings
during these periods.
HEDGES OF RECOGNIZED ASSETS, LIABILITIES AND FIRM COMMITMENTS
At June 30, 2002 and December 31, 2001, the Company had foreign currency
forward contracts with notional amounts of $47.9 and $50.3, respectively, to
hedge the value of recognized assets, liabilities and firm commitments. The fair
value of the 2002 and 2001 contracts were net short positions of $16.9 and $11.5
at June 30, 2002 and December 31, 2001, respectively. The ineffective portion of
changes in fair values of such hedge positions reported in operating income
during the first six months of 2002 and 2001 were $0.3 and $0.1, respectively.
There were no amounts excluded from the measure of effectiveness.
8) GOODWILL AND OTHER INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, Business Combinations
("SFAS No. 141"), and SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS
No. 142"). SFAS No. 141 eliminates the pooling of interests method of accounting
for all business combinations initiated after June 30, 2001 and addresses the
initial recognition and measurement of goodwill and other intangible assets
acquired in a business combination. The Company adopted SFAS No. 141 as of July
1, 2001.
8
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
As of January 1, 2002, the Company adopted SFAS No. 142 which addresses the
financial accounting and reporting standards for the acquisition of intangible
assets outside of a business combination and for goodwill and other intangible
assets subsequent to their acquisition. This accounting standard requires that
goodwill and indefinite-lived intangible assets be tested for impairment on an
annual basis, or more frequently if circumstances warrant, and that they no
longer be amortized. The provisions of the standard also require the completion
of a transitional impairment test in the year of adoption, with any impairments
identified treated as a cumulative effect of a change in accounting principle.
In connection with the adoption of SFAS No. 142, the Company completed a
transitional goodwill impairment test and determined that no impairment exists.
In accordance with SFAS No. 142, goodwill associated with acquisitions
consummated after June 30, 2001 is not amortized and the amortization of
goodwill from business combinations consummated before June 30, 2001 ceased on
January 1, 2002. A reconciliation of previously reported net income and earnings
per share to the amounts adjusted for the exclusion of goodwill amortization is
reflected on the face of the consolidated condensed income statements included
herein.
Changes in the carrying amount of goodwill for the six months ended June
30, 2002, by operating segment, are as follows:
DEFENSE MOTION
FLUID ELECTRONICS & & FLOW ELECTRONIC
TECHNOLOGY SERVICES CONTROL COMPONENTS TOTAL
---------- ------------- ------- ---------- --------
Balance as of December 31, 2001......... $627.2 $303.0 $173.6 $306.2 $1,410.0
Goodwill acquired during the period..... 22.5 -- -- -- 22.5
Other, including foreign currency
translation........................... 16.3 -- 2.1 -- 18.4
------ ------ ------ ------ --------
Balance as of June 30, 2002............. $666.0 $303.0 $175.7 $306.2 $1,450.9
Information regarding the Company's other intangible assets follows:
JUNE 30, DECEMBER 31,
2002 2001
-------- ------------
Amortized intangibles --
Patents................................................... $34.7 $34.7
Accumulated amortization.................................. (5.6) (5.1)
Unamortized intangibles --
Brands and trademarks..................................... 12.8 12.5
Pension related........................................... 12.3 5.8
Total intangibles........................................... 59.8 53.0
Total accumulated amortization.............................. (5.6) (5.1)
----- -----
Net intangibles........................................... $54.2 $47.9
Amortization expense related to intangible assets for the six months ended
June 30, 2002 was $0.5. Estimated amortization expense for each of the five
succeeding years is $1.0 per year.
9
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
9) BUSINESS SEGMENT INFORMATION
Unaudited financial information of the Company's business segments for the
three months and the six months ended June 30, 2002 and 2001 were as follows:
DEFENSE MOTION & CORPORATE,
THREE MONTHS ENDED FLUID ELECTRONICS & FLOW ELECTRONIC ELIMINATIONS &
JUNE 30, 2002 TECHNOLOGY SERVICES CONTROL COMPONENTS OTHER TOTAL
------------------ ---------- ------------- -------- ---------- -------------- --------
Sales and revenues....... $ 504.7 $415.9 $251.7 $148.6 $ (0.8) $1,320.1
Cost of sales and
revenues............... 331.9 267.4 187.0 97.2 (1.2) 882.3
Selling, general, and
administrative
expenses............... 93.9 21.5 21.6 25.8 16.4 179.2
Research, development,
and engineering
expenses............... 12.5 86.3 7.7 7.0 -- 113.5
Total costs and
expenses............... 438.3 375.2 216.3 130.0 15.2 1,175.0
Operating income
(expense).............. 66.4 40.7 35.4 18.6 (16.0) 145.1
Total assets............. 1,736.8 836.3 681.0 718.3 818.0 4,790.4
THREE MONTHS ENDED
JUNE 30, 2001
- -------------------------
Sales and revenues....... $ 470.7 $315.2 $240.5 $159.1 $ (1.2) $1,184.3
Cost of sales and
revenues............... 309.7 181.2 177.3 106.6 (1.5) 773.3
Selling, general, and
administrative
expenses*.............. 86.5 23.3 23.6 19.1 13.2 165.7
Research, development,
and engineering
expenses............... 10.8 79.2 5.6 7.0 -- 102.6
Total costs and
expenses*.............. 407.0 283.7 206.5 132.7 11.7 1,041.6
Operating income
(expense):
Before goodwill
amortization........ 63.7 31.5 34.0 26.4 (12.9) 142.7
Goodwill amortization
expense............. (4.5) (2.2) (1.2) (2.4) -- (10.3)
Total operating income
(expense).............. 59.2 29.3 32.8 24.1 (12.9) 132.4
Total assets............. 1,662.7 862.5 675.2 710.0 650.9 4,561.3
SIX MONTHS ENDED
JUNE 30, 2002
- -------------------------
Sales and revenues....... $ 948.9 $784.6 $487.7 $286.3 $ (1.6) $2,505.9
Cost of Sales and
revenues............... 623.8 496.1 362.0 187.3 (2.0) 1,667.2
Selling, general, and
administrative
expenses............... 181.4 43.7 46.8 49.6 31.0 352.5
Research, development,
and engineering
expenses............... 23.6 172.5 15.6 13.8 -- 225.5
Total costs and
expenses............... 828.8 712.3 424.4 250.7 29.0 2,245.2
10
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
DEFENSE MOTION & CORPORATE,
SIX MONTHS ENDED FLUID ELECTRONICS & FLOW ELECTRONIC ELIMINATIONS &
JUNE 30, 2002 TECHNOLOGY SERVICES CONTROL COMPONENTS OTHER TOTAL
---------------- ---------- ------------- -------- ---------- -------------- --------
Operating income
(expense).............. 120.1 72.3 63.3 35.6 (30.6) 260.7
Total assets............. 1,736.8 836.3 681.0 718.3 818.0 4,790.4
SIX MONTHS ENDED
JUNE 30, 2001
- -------------------------
Sales and revenues....... $ 921.9 $618.2 $477.0 $355.5 $ (2.3) $2,370.3
Cost of sales and
revenues............... 602.8 359.3 349.7 236.0 (2.8) 1,545.0
Selling, general, and
administrative
expenses*.............. 180.2 45.7 47.2 51.2 27.2 351.5
Research, development,
and engineering
expenses............... 22.7 157.1 14.6 15.3 -- 209.7
Total costs and
expenses*.............. 805.7 562.1 411.5 302.5 24.4 2,106.2
Operating income
(expense):
Before goodwill
amortization........ 116.2 56.1 65.5 53.0 (26.7) 264.1
Goodwill amortization
expense............. (9.1) (4.3) (2.5) (4.4) -- (20.3)
Total operating income
(expense).............. 107.1 51.8 63.0 48.6 (26.7) 243.8
Total assets............. 1,662.7 862.5 675.2 710.0 650.9 4,561.3
- ---------------
* Selling, general and administrative expenses and total costs and expenses for
the three and six months ended June 30, 2001 exclude goodwill amortization for
comparative purposes.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002 COMPARED WITH THREE MONTHS ENDED JUNE 30,
2001
Sales and revenues for the second quarter of 2002 were $1,320.1 million, an
increase of $135.8 million, or 11.5%, ($120.5 million, or 10.2%, in constant
currencies) from the same period sales for 2001. The increase is primarily
attributable to higher revenues in all markets of the Defense Electronics &
Services segment, reflecting the realization and timing of new contracts, and
growth in the water/wastewater markets of Fluid Technology. Costs of sales and
revenues of $882.3 million for the second quarter of 2002, increased $109.0
million, or 14.1%, from the comparable 2001 period. The increase primarily
reflects higher volume in the Defense Electronic & Services segment and
water/wastewater businesses.
Selling, general, and administrative ("SG&A") expenses for the second
quarter of 2002 were $179.2 million, an increase of $3.2 million, or 1.8%, from
the second quarter of 2001 ($13.5 million, or 8.1%, excluding goodwill
amortization). Excluding goodwill amortization expense, the increase in SG&A
expenses was primarily due to increased marketing expense in the Fluid
Technology and Electronic Components segments and administrative expenses across
all businesses of the Electronic Components segment. Research, development and
engineering ("RD&E") expenses increased $10.9 million, or 10.6%, compared to the
second quarter of 2001 reflecting increased investment in RD&E across three
segments.
Operating income for the second quarter of 2002 was $145.1 million compared
to $132.4 million for the second quarter of 2001 ($142.7 million excluding
goodwill amortization). Excluding goodwill amortization expense, operating
income increased $2.4 million. The increase is primarily due to higher volume in
the Defense Electronics & Services and Fluid Technology segments. Segment
operating margin for the second quarter of 2002 was 12.2%, which was 0.9% lower
than the margin for the same period in 2001, excluding the impact of goodwill
amortization. The decline is due to a change in segment mix, with increased
contribution from Defense Electronics & Services and lower contribution from
Electronic Components.
Interest expense for the second quarter of 2002 of $10.0 million (net of
interest income of $1.0 million) decreased $5.9 million from the comparable
prior year period primarily due to lower average interest rates.
The effective income tax rate for the second quarter of 2002 was 32%
compared to 35% for the second quarter of 2001. The decrease in the effective
tax rate is due to the adoption of SFAS 142, which eliminated goodwill
amortization expense, and several initiatives taken in 2001 to reduce the
structural tax rate.
Net income for the second quarter of 2002 was $92.9 million, or $0.99 per
diluted share. Net income for the second quarter of 2001 was $76.1 million and
included $9.2 million of after-tax goodwill amortization expense. Excluding
goodwill amortization, net income increased $7.6 million, or $0.05 per diluted
share. The increase was primarily due to higher segment operating income and
lower interest expense, partially offset by higher corporate expenses,
reflecting costs related to process/product improvement initiatives, and higher
taxes.
Fluid Technology's sales and revenues, and cost of sales and revenues,
increased $34.0 million, or 7.2%, and $22.2 million, or 7.2%, respectively, in
the second quarter of 2002 compared to the second quarter of 2001. Higher sales
in the water/wastewater markets and acquisition revenue from Engineered Valves
businesses were the primary factors for the increases. Excluding goodwill
amortization expense, SG&A for the second quarter of 2002 increased $7.4
million, or 8.6%, compared to 2001, mainly due to increased marketing expense in
the water/wastewater and Engineered Valves markets. During the second quarter of
2002, RD&E increased $1.7 million, or 15.7%, in comparison to the second quarter
of 2001. Operating income for the second quarter of 2002 was up $2.7 million, or
4.2%, compared to the second quarter of 2001, excluding goodwill amortization,
due to the activity discussed above.
Defense Electronics & Services' sales and revenues and cost of sales and
revenues for the second quarter of 2002 increased $100.7 million, or 31.9%, and
$86.2 million, or 47.6%, from the comparable prior year period, respectively.
The increases were due to higher revenue from all of the segment's markets,
reflecting the impact and timing of new contracts. Excluding goodwill
amortization expense, SG&A expenses were flat
12
between the second quarter of 2002 and the second quarter of 2001. RD&E expenses
were $7.1 million, or 9.0%, higher in the second quarter of 2002 compared to the
second quarter of 2001, representing increased spending in most businesses.
Operating income for the second quarter of 2002 was $40.7 million, an increase
of $9.2 million, or 29.2%, compared to the same quarter in 2001 excluding
goodwill amortization expense. The increase reflects the results discussed
above.
Motion & Flow Control recorded sales and revenues and costs of sales and
revenues of $251.7 million and $187.0 million, respectively, during the second
quarter of 2002, reflecting increases of $11.2 million, or 4.7%, and $9.7
million, or 5.5%, from the second quarter of 2001. The increases were mainly due
to sales growth in the automotive fluid systems and U.S. spa/whirlpool
businesses. SG&A expenses, excluding goodwill amortization expense, were flat.
RD&E expense increased $2.1 million, or 37.5%, during the second quarter of 2002
compared to the second quarter of 2001, representing an increase in expenditures
in most markets. Operating income, excluding amortization expense, was $1.4
million higher in the second quarter of 2002 compared to the second quarter of
2001 primarily due to the above mentioned items.
Electronic Components' sales and revenues and cost of sales and revenues
were $148.6 million and $97.2 million, respectively, in the second quarter of
2002, representing declines of $10.5 million, or 6.6%, and $9.4 million, or
8.8%, respectively, from the same quarter in 2001. The decreases reflect
softness in the communications and commercial aerospace markets partially offset
by growth in industrial markets. Excluding goodwill amortization expense, SG&A
expenses increased $6.7 million due to increased marketing and administrative
expenses. RD&E in the second quarter of 2002 was flat compared to the second
quarter of 2001. Operating income for the second quarter of 2002 was $18.6
million, a decrease of $7.8 million, or 29.5%, from the second quarter of 2001,
excluding goodwill amortization expense. The decline was due to the factors
discussed above.
Corporate expenses increased in the second quarter of 2002 mainly due to
costs related to process/product improvement initiatives, including Value Based
Six Sigma and Value Based Product Development.
SIX MONTHS ENDED JUNE 30, 2002 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2001
Sales and revenues for the first six months of 2002 were $2,505.9 million,
an increase of $135.6 million, or 5.7%, ($136.4 million, or 5.8%, in constant
currencies) from the same period for 2001. The increase is primarily
attributable to higher revenues in all markets of the Defense Electronics &
Services segment, reflecting the realization and timing of new contracts, growth
in the water/wastewater markets, and higher sales in the automotive fluid
systems business. General softness in the markets of Electronic Components
partially offset these items.
Costs of sales and revenues increased by $122.2 million, or 7.9%, to
$1,667.2 million, for the first six months of 2002 compared to the same period
in 2001. The increase reflects higher sales in all markets of Defense
Electronics & Services and growth in the water/wastewater and automotive
businesses.
SG&A expenses for the first six months of 2002 were $352.5 million, a
decrease of $19.3 million, or 5.2%, from the comparable prior year period.
Excluding goodwill amortization expense, SG&A expenses for the first six months
of 2002 were flat with the first six months of 2001. For the first six months of
2002, RD&E expenses were $225.5 million, which was $15.8 million, or 7.5%,
higher than the same period in 2001. Increased expenditures in the Defense
Electronics & Services segment comprise a majority of the increase.
Operating income for the first six months of 2002 was $260.7 million
compared to $243.8 million in the same period of 2001 ($264.1 million excluding
goodwill amortization expense). Excluding goodwill amortization expense,
operating income decreased $3.4 million, or 1.3%. Segment operating margin for
the first six months of 2002 of 11.6% was 0.7 percentage points lower than the
margin for the same period in 2001, excluding goodwill amortization. These
decreases were primarily due to a change in segment mix.
Net interest expense for the first six months of 2002 of $21.9 million (net
of interest income of $2.5 million) decreased $14.6 million from the comparable
period in the prior year mainly due to a favorable change in average interest
rates.
13
The effective income tax rate for the first six months of 2002 was 32%
compared to 35% for the first six months of 2001. The decrease in the effective
tax rate is due to the adoption of SFAS 142, which eliminated goodwill
amortization expense, and several initiatives taken in 2001 to reduce the
structural tax rate.
Net income for the first six months of 2002 was $164.4 million, or $1.76
per diluted share. Net income for the first six months of 2001 was $135.2
million and included $17.7 million of after-tax goodwill amortization expense.
Excluding goodwill amortization, net income increased $11.5 million, or $0.07
per diluted share. The increase in net income was primarily attributable to
lower interest expense, partially offset by lower operating income and higher
taxes.
Fluid Technology's sales and revenues, and cost of sales and revenues in
the first six months of 2002 increased $27.0 million, or 2.9%, and $21.0
million, or 3.5%, respectively, from the comparable prior year period. The
increase is due to growth in the water/wastewater markets and the incremental
contribution from acquisitions partially offset by softness in the fluid
handling business. SG&A expenses, excluding goodwill amortization, and RD&E
expenses for the six months ended June 30, 2002 were flat compared to the same
six month period in 2001. Operating income for the first six months of 2002 of
$120.1 million was up $3.9 million, or 3.4%, compared to operating income,
excluding goodwill amortization, for the first six months of 2001. The increase
was due to the factors discussed above.
Defense Electronics & Services' sales and revenues and costs of sales and
revenues for the first six months of 2002 increased $166.4 million, or 26.9%,
and $136.8 million, or 38.1%, respectively, compared to the same period of last
year. The increases were due to higher revenues in all markets. Excluding
goodwill amortization expense, SG&A expenses declined $2.0 million, or 4.4%,
during the first half of 2002 from the comparable prior year period due to an
increase in other income. RD&E expenses were $172.5 million for the first six
months of 2002, an increase of $15.4 million, or 9.8%, over the first six months
of 2001. The increased spending was spread across all markets. Operating income,
excluding goodwill amortization expense, increased $16.2 million, or 28.9%, in
the first six months of 2002, compared to the same prior year period. Refer to
the discussion above for factors contributing to the increase.
Motion & Flow Control's sales and revenues and costs of sales and revenues
for the first half of 2002 increased $10.7 million, or 2.2%, and $12.3 million,
or 3.5%, respectively, compared to the same period of 2001. The increases were
primarily due to sales growth in the automotive fluid systems and U.S.
spa/whirlpool businesses partially offset by volume declines at Aerospace
Controls and first quarter softness in European markets. SG&A, excluding
goodwill amortization expense, and RD&E expenses for the first six months of
2002 were flat with the first half of 2001. Operating income, excluding goodwill
amortization, decreased $2.2 million, or 3.4%, to $63.3 million between the
first half of 2001 and the first six months of 2002. Refer to the discussion
above for factors contributing to the fluctuation.
Electronic Components' sales and revenues and cost of sales and revenues
decreased $69.2 million, or 19.5%, and $48.7 million, or 20.6%, respectively, in
the first six months of 2002 compared with the same period of 2001. The declines
are due to general softness in all markets of Electronic Components. Excluding
goodwill amortization, SG&A expenses for the first half of 2002 decreased $1.6
million, or 3.1%, mainly due to lower marketing expenses. RD&E expenses declined
$1.5 million, or 9.8%, for the first six months of 2002 in comparison to the
first half of 2001. The fluctuation reflects reduced spending across most
businesses. Excluding goodwill amortization, operating income for the first six
months of 2002 was down $17.4 million, or 32.8%, from the comparable prior year
period due to the items discussed above.
Corporate expenses increased in the first six months of 2002 primarily due
to costs to account for process/product improvement initiatives, including Value
Based Six Sigma and Value Based Product Development, and professional fees
associated with various tax planning initiatives.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows: Cash from operating activities in the six months of 2002 was
$236.3 million, an increase of $32.9 million from the same period of 2001. The
increase is primarily attributable to lower tax and interest payments and
payment of accrued expenses in 2001. These items were partially offset by
increased accounts
14
receivable balances reflecting revenue growth at Defense Electronics & Services,
the timing of receipts at Fluid Technology and a decline in 2001 sales at
Electronic Components.
Status of Restructuring Activities: During the fourth quarter of 2001, the
Company recorded restructuring charges to close facilities, discontinue product
lines and reduce headcount. As of June 30, 2002, the Company has five facilities
and 21 planned product lines to close related to these charges. The Company has
reduced workforce by 2,126, or 62.5% of the planned aggregate reduction of
approximately 3,400 persons as of June 30, 2002
As of June 30, 2002 restructuring actions announced in 1998 and 1999 were
substantially complete.
Additions to Plant, Property and Equipment: Capital expenditures during
the first six months of 2002 were $52.1 million, a decrease of $15.3 million
from the first six months of 2001. The decrease reflects reduced spending at all
segments.
Acquisitions: During the first six months of 2002 the Company made several
small acquisitions for a total of $38.8 million. The excess of the purchase
price over the fair values of net assets acquired of $22.5 was recorded as
goodwill. During the first six months of 2001 the Company made several small
acquisitions for a total of $45.3 million. Goodwill of $38.9 was recorded in
connection with these acquisitions.
Divestitures: During the first six months of 2002, the Company sold its
interest in a defense-related joint venture for approximately $6 million and
other plant, property, and equipment for $0.8 million. During the first six
months of 2001, the Company sold two corporate jets for $30.7 million and other
plant, property, and equipment for $1.0 million. The jets are being leased by
the Company in the form of operating leases.
Financing Activities: External debt at June 30, 2002 was $818.8 million,
compared with $973.4 million at December 31, 2001. Cash and cash equivalents
were $168.5 million at June 30, 2002, compared to $121.3 million at year-end
2001. The maximum amount of borrowing available under the Company's revolving
credit agreement, which provides back-up for the Company's commercial paper
program, at June 30, 2002, was $1.0 billion. Borrowing through commercial paper
and under the revolving credit agreement may not exceed $1.0 billion in the
aggregate outstanding at any time. The Company received proceeds of $79.4
million from exercised stock options in the first six months of 2002.
Expenditures of $13.6 million were made to repurchase shares to partially offset
the dilutive effect of the issued shares.
CRITICAL ACCOUNTING POLICIES
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported value of assets and liabilities and the
disclosure of contingent assets and liabilities.
The Company has identified three accounting policies where estimates are
used that require assumptions or factors that are of an uncertain nature, or
where a different estimate could have been reasonably utilized or changes in the
estimate are reasonably likely to occur from period to period.
Environmental: Accruals for environmental matters are recorded on a site
by site basis when it is probable that a liability has been incurred and the
amount can be reasonably estimated. The Company calculates the liability by
utilizing a cost estimating and weighting matrix that separates costs into
recurring and non-recurring categories. The Company then uses internal and
external experts to assign confidence levels based on the site's development
stage, type of contaminate found, applicable laws, existing technologies, and
the identification of other potentially responsible parties. This methodology
produces a range of estimates, including a best estimate. At June 30, 2002, the
Company had accruals that approximated the best estimate and that were 140% of
the low range estimate and 78% of the high range estimate. These estimates are
reviewed periodically and updated for progress of remediation efforts and
changes in facts and legal circumstances. Liabilities for environmental
expenditures are recorded on an undiscounted basis.
The Company is currently involved in the environmental investigation and
remediation of over one hundred sites, including certain instances where it is
considered to be a potentially responsible party by the United States
Environmental Protection Agency ("EPA") or similar state agency.
15
At present, the Company is involved in litigation against its insurers for
reimbursement of environmental response costs. Recoveries from insurance
companies or other third parties are recognized in the financial statements when
realized.
In the event that future remediation expenditures are in excess of the
amounts accrued, management does not anticipate that they will have a material
adverse effect on the consolidated financial position, results of operations or
liquidity of the Company.
Employee Benefit Plans: The Company sponsors numerous employee pension and
welfare benefit plans. These plans utilize various assumptions in the
determination of projected benefit obligations and expense recognition related
to pension and other postretirement obligations. These assumptions include:
discount rates, expected rates of return on plan assets, rate of future
compensation increases, mortality, termination and health care inflation trend
rates, some of which are disclosed in Note 17 to the consolidated financial
statements in the ITT Industries, Inc. Form 10-K Annual Report for the fiscal
year ended December 31, 2001.
Management develops each assumption by using relevant company experience in
conjunction with market related data for each individual country in which such
plans exist. All assumptions are reviewed periodically with third party
actuarial consultants and adjusted as necessary.
If actual experience differs from that assumed, the Company may be subject
to increased cash contributions, an increase (or decrease) in net periodic
expense and/or the need to record a reduction in its net equity position in
accordance with the minimum pension liability provisions of SFAS No. 87.
Revenue Recognition: The Company generally recognizes revenue when
products are delivered or services are rendered. The Defense Electronics &
Services segment typically recognizes revenue and anticipated profits under
long-term, fixed-price contracts based on units of delivery or the completion of
scheduled performance milestones. Estimated contract profits are recorded in
earnings in proportion to recorded sales. During the performance of such
contracts, estimated final contract prices and costs (design, manufacturing,
engineering and development costs) are periodically reviewed and revisions are
made when necessary. The effect of these revisions to estimates is included in
earnings in the period in which revisions are made.
STATUS OF FLUID HANDLING SYSTEMS STRATEGIC REVIEW
During the second quarter, the Company completed the strategic review of
its automotive Fluid Handling Systems (FHS) business, a review that had been
previously announced and initiated in October 2001. FHS is a profitable market
leader that supplies specialty tubing and connections for use in automobiles and
light trucks. Based on a comprehensive review of alternatives, and with the
support of a team of internal and outside advisors, the Company has determined
that continuing to own and operate FHS is the best option for continued
shareholder value creation.
ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets" ("SFAS No. 142") which addresses the financial
accounting and reporting standards for the acquisition of intangible assets
outside of a business combination and for goodwill and other intangible assets
subsequent to their acquisition. SFAS 142 changes the accounting for goodwill
from an amortization method to an impairment only approach. In connection with
the adoption of SFAS 142, the Company completed a transitional goodwill
impairment test that compared the fair value of each reporting unit to its
carrying value and determined that no impairment exists.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS No. 143"). The standard requires that legal
obligations associated with the retirement of tangible long-lived assets be
recorded at fair value when incurred and is effective for the Company on January
1, 2003. The Company is currently reviewing the provisions of SFAS No. 143 to
determine the standard's impact upon adoption.
16
The Company adopted SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" ("SFAS No. 144"), effective January 1, 2002. SFAS
No. 144 outlines accounting and financial reporting guidelines for the sale or
disposal of long-lived assets and discontinued operations. The adoption of the
pronouncement did not have a material impact on the Company's results of
operations or financial position.
FORWARD-LOOKING STATEMENTS
Certain material presented herein consists of forward-looking statements
which 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. Such factors include general
economic and worldwide political conditions, foreign currency exchange rates,
competition and other factors all as 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. Form 10-K Annual Report for the fiscal year ended December 31, 2001 and
other of its filings with the Securities and Exchange Commission, to which
reference is hereby made.
17
PART II.
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At ITT Industries' annual meeting of shareholders held on May 7, 2002, the
persons whose names are set forth below were elected as directors, constituting
the entire Board of Directors. Relevant voting information for each person
follows:
VOTES
----------------------
FOR WITHHELD
---------- ---------
Rand V. Araskog............................................. 77,096,667 1,824,563
Curtis J. Crawford.......................................... 77,488,415 1,432,815
Louis J. Giuliano........................................... 77,508,464 1,412,766
Christina A. Gold........................................... 77,127,951 1,793,279
John J. Hamre............................................... 77,140,921 1,780,309
Raymond W. LeBoeuf.......................................... 77,143,053 1,778,177
Frank T. MacInnis........................................... 77,505,302 1,415,928
Linda S. Sanford............................................ 77,136,369 1,784,861
Markos I. Tambakeras........................................ 77,493,625 1,427,605
In addition to the election of directors, four other votes were taken at
the meeting: 1) The appointment of Deloitte & Touche LLP as independent auditors
for 2002 was ratified by a vote of 75,831,089 shares in favor, 2,788,887 shares
against, and 301,254 shares abstained; 2) The ITT Industries 1997 Annual
Incentive Plan for Executive Officers was reapproved by a vote of 72,813,909
shares in favor, 5,426,342 shares against, and 680,979 shares abstained; 3) The
ITT Industries 1997 Long-Term Incentive Plan was reapproved by a vote of
73,163,739 shares in favor, 5,089,108 shares against, and 668,383 shares
abstained; 4) The 2002 ITT Industries Stock Option Plan for Non-Employee
Directors was approved by a vote of 59,905,915 shares in favor, 18,253,001
shares against, and 762,314 shares abstained. In all cases, there were no broker
nonvotes. There were no other matters presented for a vote at the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) See the Exhibit Index for a list of exhibits filed herewith.
(b) ITT Industries did not file any Form 8-K Current Reports during the
quarter for which this Report is filed.
18
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ITT Industries, Inc.
(Registrant)
By /s/ EDWARD W. WILLIAMS
------------------------------------
Edward W. Williams
Senior Vice President and Corporate
Controller
(Principal accounting officer)
August 9, 2002
19
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION LOCATION
- ------- ----------- --------
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession............................................................ None
(3) Articles of Incorporation and by-laws, as amended..................... Incorporated by reference
to Exhibit 3(c) to ITT
Industries' Form 10-K for
the fiscal year ended
December 31, 1999 (CIK
No. 216228, File No. 1-
5627).
(4) Instruments defining the rights of security holders, including
Indentures............................................................ Not required to be filed.
The Registrant hereby
agrees to file with the
Commission a copy of any
instrument defining the
rights of holders of
long-term debt of the
Registrant and its
consolidated subsidiaries
upon request of the
Commission.
(10) Material contracts.................................................... None
(11) Statement re computation of per share earnings........................ See Note 5 of Notes to
Consolidated Financial
Statements
(15) Letter re unaudited interim financial information..................... None
(18) Letter re change in accounting principles............................. None
(19) Report furnished to security holders.................................. None
(22) Published report regarding matters submitted to vote of security
holders............................................................... None
(23) Consents of experts and counsel....................................... None
(24) Power of attorney..................................................... None
(99.1) Certification Pursuant to 18. U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes -- Oxley Act of 2002................... Attached
(99.2) Certification Pursuant to 18. U.S.C. Section 1350, as adopted pursuant
to Section 906 of the Sarbanes -- Oxley Act of 2002................... Attached
20