ITT Inc. · NYSE:ITT
ITT — ITT Industries — CSFB Capital Goods Conference 2002
22 slides from ITT's conference presentation, Sep 18, 2002
Slide 1: CSFB Capital Goods Conference
CSFB Capital Goods Conference September 18, 2002 Dave Anderson Senior Vice President and Chief Financial Officer
Slide 2: ITT Industries Today
ITT Industries Today REVENUE PROFILE (2002E: $4.87 Billion) • Global Multi-Industry Company Fluid Defense Technology 39% Electronics & Services • Strong Positions/Attractive Markets 31% • “Engineered Solutions” Focus Electronic Components Motion & Flow Control • Disciplined Management Processes 12%
Slide 3: ITT Key Characteristics
ITT Key Characteristics Consistency • Balanced and diversified portfolio • 15 continuous quarters of y/y earnings growth • 4+ years of margin improvement Credibility • Grounded forecasts • Delivering on expectations • Clear, understandable reporting Continuous Improvement • ITT Management System • V
Slide 4: Financial Track Record (1999-2002E)
Financial Track Record (1999-2002E) REVENUES ($mm) SEGMENT OPERATING MARGIN 11.7% 12.2% $4,829 $4,860 11.3% $4,632 $4,676 10.1% 1999 2000 2001 2002E 1999 2000 2001 2002E EARNINGS PER SHARE FREE CASH FLOW ($mm) $3.64 $303 $300+ $2.94 $3.05 $234 $2.53 $115 1999 2000 2001 2002E 1999 2000 2001 2002E Not
Slide 5: Increasing Cash Flow
Increasing Cash Flow WC % OF SALES CAPITAL EXPENDITURES $228 19.5% 19.0% $181 $174 $155 18.5% 17.8% 1999 2000 2001 2002E 1999 2000 2001 2002E FCF % OF SALES CASH REDEPLOYMENT 6.5% 6.2%+ • Acquisitions 4.9% • Debt Reduction 2.5% • Share Repurchase • Dividends 1999 2000 2001 2002E 4
Slide 6: Improving Debt Statistics
Improving Debt Statistics TOTAL DEBT EBITDA COVERAGE Short Term 21.4 Long Term $609 $630 $514 11.4 $256 9.3 7.0 $479 $408 $459 $459 1999 2000 2001 2002E 1999 2000 2001 2002E NET DEBT/EBITDA NET DEBT/NET CAPITAL 1.5 1.4 45.2% 43.9% 1.2 38.2% 0.7 23.6% 1999 2000 2001 2002E 1999 2000 2001 2002E 5
Slide 7: First Half 2002 Results
First Half 2002 Results REVENUES ($mm) SEGMENT OPERATING MARGIN 12.3% $2,505.9 11.6% $2,370.3 +5.7% (70) b.p. 1H01 1H02 1H01 1H02 EARNINGS PER SHARE FREE CASH FLOW ($mm) $1.76 $184.2 $1.69 $136.0 +4.1% +$48.2 1H01 1H02 1H01 1H02 Note: All figures adjusted for FAS 142 6
Slide 8: ITT Management System
ITT Management System™ Portfolio Consistent Management Results • Value-Based • Long-Term Targets Management • Grounded Forecasts • Invest in Strong Cores • Contingency Plans • Global Market Development • In-Depth Operational Reviews • Ongoing Transformation Operational Growth Leadership Excellence •
Slide 9: Portfolio Transformation
Portfolio Transformation ITT GROWTH/PROFITABILITY FOOTPRINT 1997 2001 Higher Higher Koni Engineered Engineered Water & Valves Electronic Wastewater Economic Profitability Valves HVAC Components Economic Profitability Defense Water & HVAC Defense Electronics Wastewater Flow Control Electronics Indust
Slide 10: Value-Based Six Sigma
Value-Based Six Sigma PROGRAM HIGHLIGHTS SAVINGS $175 • EVA Driven Project Prioritization $125 • Global Deployment 300+ Black Belts • Training Ground for Future Managers • Reward System Tied to Results $22 2000 2001 2002 SELECTED SUCCESS STORIES Business Area Metric Benefit Est Savings Defense - Rad
Slide 11: Value-Based Product Development
Value-Based Product Development OBJECTIVES KEY ELEMENTS • Increase New Product Success to 80%+ • Voice of Customer • 15-20% Faster Time to Market • Early and Fact-Based Specifications • 25% + of Sales from New Products • Focus on Value-Added Functions • $1+B of New Products/Year by 2004 • Robust Des
Slide 12: Invest in Strong Cores
Invest in Strong Cores Focused Growth Initiatives • Value-Based Product Development • Adjacent Acquisitions • Geographic Market Expansion Defense Electronics Water & Wastewater Electronic Components & Services • Leading Pump Position • Battlefield Communications • Leading Switch Position • Biologica
Slide 13: Attractive Core Market – Water and Wastewater
Attractive Core Market – Water and Wastewater WATER/WASTEWATER 10 EQUIPMENT MARKET GROWTH DRIVERS 8 $7.6B • Population & Urbanization 6 $6.0B Growth 4 • Aging Infrastructure 2 5% CAGR • Rising Energy Costs 0 1999 2004E • Stricter Regulations Sludge Handling Disinfection Filtration Biological Mechani
Slide 14: ITT Water & Wastewater — Growth Opportunities
ITT Water & Wastewater — Growth Opportunities ITT CAPABILITIES LEADING GLOBAL BRANDS • World’s Largest Supplier of Wastewater Brand Market Position & Water Treatment Equipment Flygt Wastewater #1 • #1 Global Distribution Network Goulds Water – North #1 • Leading Pump Technology America Lowara Water
Slide 15: Defense Profile
Defense Profile DEFENSE REVENUE CONTRACT TYPES Radars 5% O&M Services Cost Plus Airborne EW 21% 47% 11% Satellite Payloads Engineering 12% Services 8% Night Vision 13% Advanced Engineering Tactical Fixed Price 16% Communications 53% 14% GLOBAL PROFILE FUNDING SOURCE Middle East 3% Asia Pacific Non-D
Slide 16: Defense Financial Performance
Defense Financial Performance BACKLOG ($Billion) REVENUES $1,414 $1,500 $2.9 $1,335 $1,305 $2.6 $2.4 $1.8 1999 2000 2001 2002E 1999 2000 2001 2002E OPERATING INCOME OPERATING MARGIN 10.0% $150 9.5% 8.8% $124 $117 7.7% $109 1999 2000 2001 2002E 1999 2000 2001 2002E Note: All Actual Figures As Reporte
Slide 17: Defense Future Growth
Defense Future Growth $120 DoD BUDGET $100 Procurement RDT&E $80 $60 $40 $20 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 PROPOSED BUDGET INCREASES ITT TECHNOLOGIES Special Operations +94% • Satellite Ground Networks Precision Guided Munitions +63% • Space-Based Navigation, Sounding, and Chemical
Slide 18: ITT Electronic Components
ITT Electronic Components REVENUE PROFILE Global Competitive Position 2001 Revenues Communications Industrial 1. Tyco Int’l $5,452 36% 21% 2. Molex, Inc. 1,957 3. Framatome 1,667 4. Amphenol 840 Mil/Aero 5. JST 693 Computer 17% 7% 6. ITT 647 Consumer Transportation 7. Foxcomm 585 5% 14% All Others $
Slide 19: ITT Electronic Components – Initiatives
ITT Electronic Components – Initiatives STRATEGIC INITIATIVES NEW PRODUCTS PORTFOLIO • Continued focus on new product Mobile Phones • KSS Switch development • LPC Connector • Gain strategic status with Top 5 CEMs • IMD Keypads • Enhance service levels Communications • Tempus 2mm Future Bus • Increas
Slide 20: 2002 Guidance
2002 Guidance Operating Assumptions Strategic Priorities Financial Outlook • Difficult economic and • Process Improvements First Half 2002 Actual market conditions § VBSS initiatives • Revenues +5.7% § VBPD rollout • Overcapacity dampens • FCF $184.2M capital spending • Increased growth in strong •
Slide 21: ITT — Summary Points
ITT — Summary Points v Delivering in Difficult Environment v Implementing ITT Management System v Investing in Strong Cores v Creating Long Term Value 20
Slide 22: ITT Industries
& ITT Industries