<PAGE> 1
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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 September 30, 1995
/ / TRANSACTION 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 CORPORATION
<TABLE>
<S> <C>
INCORPORATED IN THE STATE OF DELAWARE 13-5158950
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
</TABLE>
1330 Avenue of the Americas, New York, NY 10019-5490
(Principal Executive Office)
TELEPHONE NUMBER: (212) 258-1000
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 October 31, 1995, there were outstanding 116.7 million shares of
common stock ($1 par value) of the registrant.
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<PAGE> 2
ITT CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<C> <C> <S> <C>
PART FINANCIAL INFORMATION:
I 1 Financial Statements:
Consolidated Income -- Third Quarter and Nine Months Ended September 30,
1995 and 1994........................................................... 3
Consolidated Balance Sheet -- September 30, 1995 and December 31, 1994.... 4
Consolidated Cash Flow -- Nine Months Ended September 30, 1995 and 1994... 5
Notes to Consolidated Financial Statements................................ 6
Business Segments......................................................... 9
2 Management's Discussion and Analysis of Financial Condition and Results of
Operations:
Third Quarter and Nine Months Ended September 30, 1995 and 1994........... 10
PART OTHER INFORMATION:
II 4 Submission of Matters to a Vote of Security Holders....................... 16
6 Exhibits and Reports on Form 8-K.......................................... 16
Signature................................................................. 17
Exhibit Index............................................................. 18
</TABLE>
1
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PART I.
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
ITEM 1.
The following unaudited financial statements, in the opinion of management,
reflect all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the financial position, the results of
operations and cash flow for the periods presented. For a description of
accounting policies, see notes to financial statements in the 1994 annual report
on Form 10-K.
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED INCOME
(IN MILLIONS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
THIRD QUARTER SEPTEMBER 30,
--------------------- ---------------------
1995 1994* 1995 1994*
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net Sales....................................................... $2,048 $1,863 $6,633 $5,590
Cost of Sales................................................... 1,776 1,609 5,730 4,772
------ ------ ------ ------
272 254 903 818
Selling, General and Administrative Expenses.................... 166 152 505 463
Service Charges from Affiliated Companies....................... 19 18 63 53
Other Operating (Income) Expenses............................... (8) 3 (2) 40
------ ------ ------ ------
95 81 337 262
Interest Expense................................................ (44) (22) (124) (85)
Interest Income................................................. 11 9 32 58
Miscellaneous Expense, net...................................... (133) (17) (163) (17)
------ ------ ------ ------
(71) 51 82 218
Income Tax Benefit (Expense).................................... 17 (31) (45) (100)
------ ------ ------ ------
Income (Loss) from Continuing Operations........................ (54) 20 37 118
Discontinued Operations:
Operating Earnings, net of tax of $46, $80, $208 and $240..... 187 237 533 610
Gain on Sale of Finance Operations, net of tax of $264........ -- -- 403 --
Extraordinary Item -- Early Extinguishment of Debt, net of tax
benefit of $165............................................... (307) -- (307) --
Cumulative Effect of Accounting Changes, net of tax benefit of
$8............................................................ -- -- -- (11)
------ ------ ------ ------
Net Income (Loss)............................................... $ (174) $ 257 $ 666 $ 717
====== ====== ====== ======
EARNINGS (LOSS) PER SHARE*
Income (Loss) from Continuing Operations
Primary....................................................... $ (.62) $ .11 $ .07 $ .79
Fully Diluted................................................. $ (.46) $ .13 $ .23 $ .82
Discontinued Operations
Primary....................................................... $ 1.62 $ 2.03 $ 8.59 $ 5.19
Fully Diluted................................................. $ 1.58 $ 1.88 $ 7.97 $ 4.79
Extraordinary Item
Primary....................................................... $(2.78) $ -- $(2.78) $ --
Fully Diluted................................................. $(2.61) $ -- $(2.61) $ --
Cumulative Effect of Accounting Changes
Primary....................................................... $ -- $ -- $ -- $ (.10)
Fully Diluted................................................. $ -- $ -- $ -- $ (.09)
Net Income (Loss)
Primary....................................................... $(1.78) $ 2.14 $ 5.88 $ 5.88
Fully Diluted................................................. $(1.49) $ 2.01 $ 5.59 $ 5.52
Cash Dividends declared per common share........................ $ -- $ .495 $ .99 $1.485
</TABLE>
- ---------------
* Restated to reflect Insurance, Hospitality, Entertainment & Information
Services as "Discontinued Operations".
The accompanying notes to consolidated financial statements are an integral part
of the above statement.
2
<PAGE> 4
ITT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN MILLIONS EXCEPT FOR SHARES AND PER SHARE)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994*
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................... $ 183 $ 322
Receivables, net............................................................. 1,344 1,138
Inventories.................................................................. 960 990
Other current assets......................................................... 137 80
------- -------
Total current assets....................................................... 2,624 2,530
Plant, Property and Equipment, net............................................. 2,175 2,114
Deferred U.S. Income Taxes..................................................... 262 161
Goodwill, net.................................................................. 357 365
Other Assets................................................................... 502 407
Net Assets of Discontinued Operations.......................................... 7,657 5,458
------- -------
$13,577 $ 11,035
======= =======
LIABILITIES AND STOCKHOLDERS EQUITY
Current Liabilities:
Accounts payable............................................................. $ 650 $ 774
Accrued expenses............................................................. 1,137 848
Notes payable and current maturities of long-term debt....................... 1,474 928
------- -------
Total current liabilities.................................................. 3,261 2,550
Non-U.S. Unfunded Pension...................................................... 699 610
U.S. Unfunded Pension and Postretirement Costs................................. 362 388
Long-term Debt (including ESOP of $- and $562)................................. 801 1,712
Deferred Income Taxes- Foreign, State and Local................................ 71 90
Other Liabilities.............................................................. 433 226
------- -------
5,627 5,576
------- -------
Stockholders Equity:
Cumulative preferred stock................................................... -- 655
Common stock: Authorized 200,000,000 shares, $1 par value
Outstanding 116,481,589 and 105,672,252.................................... 116 106
Capital surplus.............................................................. 685 --
Deferred compensation -- ESOP................................................ -- (562)
Cumulative translation adjustments........................................... (36) (113)
Unrealized loss on securities, net of tax.................................... (111) (1,376)
Retained earnings............................................................ 7,296 6,749
------- -------
7,950 5,459
------- -------
$13,577 $ 11,035
======= =======
</TABLE>
- ---------------
* Restated to reflect Insurance, Hospitality, Entertainment & Information
Services as "Discontinued Operations".
The accompanying notes to consolidated financial statements are an integral part
of the above statement.
3
<PAGE> 5
ITT CORPORATION
CONSOLIDATED CASH FLOW
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1995 1994*
-------- -----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income.................................................................................. $ 666 $ 717
Discontinued Operations:
Operating Earnings........................................................................ (533) (610)
Gain on Sale of Finance Operations........................................................ (403) --
Extraordinary Item -- Early Extinguishment of Debt.......................................... 307 --
Cumulative Effect of Accounting Changes..................................................... -- 11
-------- -----
Income from continuing operations....................................................... 37 118
Adjustments to income from continuing operations:
Depreciation and amortization............................................................. 322 285
Provision for doubtful receivables........................................................ 1 2
Provision for loss on divestments -- pretax............................................... 172 1
Change in receivables, inventories, payables and accruals................................. (173) (259)
Accrued and deferred taxes................................................................ (68) 66
Other, net................................................................................ (75) 40
-------- -----
Cash from continuing operations............................................................. 216 253
Cash (to) from discontinued operations...................................................... (519) 463
-------- -----
Cash from operating activities............................................................ (303) 716
-------- -----
INVESTING ACTIVITIES
Additions to plant, property and equipment.................................................. (276) (232)
Proceeds from divestments................................................................... 12,474 833
Acquisitions................................................................................ (15) (418)
Other, net.................................................................................. (4) (6)
-------- -----
Cash from investing activities............................................................ 12,179 177
-------- -----
FINANCING ACTIVITIES
Short-term debt, net........................................................................ (182) 96
Long-term debt repaid....................................................................... (25) (111)
Repayment of Finance obligations............................................................ (11,640) --
Repurchase of common stock.................................................................. (38) (655)
Dividends paid.............................................................................. (193) (211)
Other, net.................................................................................. 40 (2)
-------- -----
Cash used for financing activities........................................................ (12,038) (883)
-------- -----
EXCHANGE RATE EFFECT ON CASH AND CASH EQUIVALENTS........................................... 23 35
-------- -----
(Decrease)/increase in cash and cash equivalents............................................ (139) 45
Cash and Cash Equivalents -- Beginning of period............................................ 322 240
-------- -----
Cash and Cash Equivalents -- End of period.................................................. $ 183 $ 285
======== =====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................................................. $ 92 $ 97
======== =====
Income Taxes.............................................................................. $ 121 $ 57
======== =====
</TABLE>
- ---------------
* Restated to reflect Insurance, Hospitality, Entertainment & Information
Services as "Discontinued Operations".
The accompanying notes to consolidated financial statements are an integral part
of the above statement.
4
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS UNLESS OTHERWISE STATED)
1) PLAN OF DISTRIBUTION
On September 21, 1995, the shareholders of ITT Corporation approved all
seven proposals outlined in the August 30, 1995 Proxy Statement. The proposals,
which are subject to final terms and conditions, authorize, among other things,
the change in ITT Corporation's name to ITT Industries, Inc. ("ITT" or the
"Corporation") and the distribution (the "Distribution") to holders of the
Corporation's common stock (on a pro-rata basis) of all outstanding shares of
common stock of ITT Destinations, Inc., a wholly-owned subsidiary which will
hold the Corporation's interests in hospitality, entertainment and information
services businesses ("New ITT") and ITT Hartford Group, Inc., a wholly-owned
subsidiary holding the Corporation's interests in the insurance business segment
("ITT Hartford"). Under the proposed plan, New ITT and ITT Hartford will become
publicly traded companies. These financial statements give effect to the
proposed Distribution, reflecting the accounts of the businesses included in the
Distribution as discontinued operations for all periods presented. For purposes
of these financial statements, all references to New ITT and ITT Hartford
include those companies, their subsidiaries, affiliated companies and other
assets and liabilities that will be transferred to those companies prior to the
Distribution.
2) DISCONTINUED OPERATIONS
Net income of the Corporation's Discontinued Operations, excluding the gain
of $403 on the sale of ITT Financial is comprised of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
New ITT........................................... $ 50 $ 22 $103 $ 59
ITT Hartford...................................... 173 182 418 474
ITT Financial, ITT Rayonier & Other............... (36) 33 12 77
---- ---- ---- ----
Total Discontinued Operations..................... $187 $237 $533 $610
==== ==== ==== ====
</TABLE>
In the accompanying financial statements for all periods presented, New ITT
and ITT Hartford are reported as Discontinued Operations. The net assets of New
ITT and ITT Hartford are included in Net Assets of Discontinued Operations in
the accompanying balance sheet. See Exhibits 99(a) and 99(b) for additional
financial information of New ITT and ITT Hartford.
In September 1994, the Corporation announced plans to seek offers for the
purchase of its Finance business segment, comprised primarily of its ITT
Financial Corporation subsidiary. Summarized financial information for such
business segment is as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1994
---- ------
<S> <C> <C>
Income Statement Data:
Revenues........................................................................ $476 $1,063
Operating Income................................................................ 79 92
Income from Finance Operations.................................................. 48 65
Gain on Sale, net of tax........................................................ 403 --
</TABLE>
5
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE STATED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Balance Sheet Data:
Total Assets........................................................... $ 697 $ 13,398
Total Liabilities...................................................... 595 12,734
</TABLE>
ITT realized gross proceeds totaling $12.4 billion through September 30,
1995 from the sale of the businesses comprising ITT Financial. Proceeds from
these transactions were used to repay ITT Financial debt. The Corporation
recognized an after tax gain of $403 million ($667 million pre-tax) or $3.44 per
fully diluted share in the second quarter including a provision for the
remaining asset sales and closedown costs of ITT Financial Corporation.
In January 1995, the holders of $3.4 billion in ITT Financial term debt
consented to a merger of ITT Financial with the Corporation. The merger was
completed on May 1, 1995. ITT is the surviving corporation and is the obligor on
such debt.
3) EARLY EXTINGUISHMENT OF DEBT
In July 1995, the Corporation announced the successful completion of a
tender offer for an aggregate of $4.1 billion of its debt securities, with $3.4
billion, or 82% of the aggregate principal amount, having been tendered. The
tender offer was financed with the proceeds of commercial paper borrowings of
approximately $3.7 billion. The tender offer resulted in the Corporation paying
a tender premium of $307 after tax ($472 pre-tax) or $2.61 per fully diluted
share in the third quarter of 1995 which has been recorded as an extraordinary
loss on the early extinguishment of debt.
4) ACQUISITIONS
A cash tender offer for all outstanding shares of Caesars World, Inc. for
approximately $1.7 billion was completed in late January 1995. The acquisition
was accounted for using the purchase method. Accordingly, the purchase price was
allocated to assets acquired based on their estimated fair values. The purchase
price exceeded the fair value of the net assets acquired by $1.1 billion.
Caesars World, Inc., which is part of the Hospitality, Entertainment and
Information Services segments, is reported as a Discontinued Operation, and is
included in the Income Statement of ITT Destinations, Inc. (See Exhibit 99(a))
from February 1, 1995, the date of acquisition.
The Corporation, in a partnership with Cablevision Systems Corporation,
completed the acquisition of Madison Square Garden L.P. (MSG) on March 10, 1995
for approximately $1 billion. The acquisition of the Corporation's 50% interest
in MSG required an initial funding of $610 million. The Corporation's share of
the results of MSG are also included in the Consolidated Income Statement of ITT
Destinations, Inc. from the date of acquisition.
5) RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Trade.................................................................... $ 1,352 $1,148
Accrued for completed work............................................... 31 26
Less -- reserves......................................................... (39) (36)
------ ------
$ 1,344 $1,138
====== ======
</TABLE>
6
<PAGE> 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS UNLESS OTHERWISE STATED)
6) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Finished goods........................................................... $ 419 $ 452
Work in process.......................................................... 470 480
Raw materials and supplies............................................... 362 355
Less -- reserves......................................................... (92) (97)
-- progress payments................................................ (199) (200)
----- -----
$ 960 $ 990
===== =====
</TABLE>
7) PLANT, PROPERTY AND EQUIPMENT
Plant, property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
Land and improvements.................................................... $ 112 $ 106
Buildings and improvements............................................... 798 788
Machinery and equipment.................................................. 2,763 2,615
Construction work in progress............................................ 338 262
Other.................................................................... 1,012 858
------- -------
5,023 4,629
Less -- accumulated depreciation and amortization........................ (2,848) (2,515)
------- -------
$ 2,175 $ 2,114
======= =======
</TABLE>
8) ESOP TERMINATION
In July 1995, the Corporation terminated the ESOP portion of the ITT
Investment and Savings Plan. The trustee of the ESOP then converted the
preferred stock held by the trustee to ITT common stock and sold 5.3 million
shares into the open market. These proceeds were used to repay the debt
associated with the ESOP during August 1995. If the conversion of the ESOP
preferred stock had occurred on January 1, 1995, primary earnings per share for
the nine months ended September 30, 1995 would have been $5.66.
7
<PAGE> 9
BUSINESS SEGMENT INFORMATION
(IN MILLIONS)
Business segment information excluding "Discontinued Operations" is as
follows:
<TABLE>
<CAPTION>
NET SALES OPERATING INCOME/(LOSS)
------------------------------------ -------------------------------
THIRD QUARTER NINE MONTHS THIRD QUARTER NINE MONTHS
---------------- ---------------- ------------- -------------
1995 1994 1995 1994 1995 1994 1995 1994
------ ------ ------ ------ ---- ---- ---- ----
<C> <C> <C> <C> <S> <C> <C> <C> <C>
$1,255 $1,144 $4,283 $3,427 Automotive.................................. $ 71 $ 62 $276 $226
395 367 1,157 1,120 Defense & Electronics....................... 23 22 68 59
305 272 910 791 Fluid Technology............................ 28 25 75 63
93 80 283 252 Dispositions & Other........................ (2) (13) (8) (30)
------ ------ ------ ------ ----- ----- ----- -----
2,048 1,863 6,633 5,590 Total Segments.............................. 120 96 411 318
-- -- -- -- Other....................................... (25) (15) (74) (56)
------ ------ ------ ------ ----- ----- ----- -----
$2,048 $1,863 $6,633 $5,590 $ 95 $ 81 $337 $262
====== ====== ====== ====== ===== ===== ===== =====
</TABLE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended September 30, 1995 compared with three months ended
September 30, 1994
Net loss from continuing operations was $54 million or $0.46 per fully
diluted share compared with net income of $20 million or $0.13 per fully diluted
share reported in the 1994 period. The decline was caused by an after-tax
provision of $82 million or $0.70 per fully diluted share for the expected loss
on the disposal of non-core assets (primarily ITT Community Development
Corporation). Excluding this provision, net income from continuing operations
was $28 million or $0.24 per fully diluted share, a 40% improvement due largely
to higher volumes in a number of product lines and the favorable impact of
continuing cost reduction programs. Income from discontinued operations totaled
$187 million and $237 million for the 1995 and 1994 third quarters,
respectively, and represents the results of ITT Hartford, New ITT and ITT
Financial. The Corporation recorded an extraordinary loss of $307 million after
tax or $2.61 per fully diluted share on the early extinguishment of debt related
to the successful completion of a debt tender offer as part of the Corporation's
recapitalization plan. Net loss was $174 million or $1.49 per fully diluted
share, compared with net income of $257 million or $2.01 per fully diluted share
in the 1994 period.
Net sales totaling $2.0 billion rose 10% with improvements at Automotive,
Defense & Electronics and Fluid Technology. Gross margin approximated 13% in the
1995 period and 14% in the 1994 period due to higher material costs, while
selling, general and administrative expenses slightly decreased to 8.1% of sales
from 8.2% in the 1994 period. Service charges from affiliated companies
represent fees for advice and assistance related to certain centralized general
and administrative functions. Such services represent advice and assistance in
connection with cash management, legal, accounting, tax and insurance services
and charges totaled $19 million and $18 million in the 1995 and 1994 third
quarters, respectively. The fees for these services, which are based upon a
general relations agreement, approximate 1% of sales. Other operating income
(expenses), which includes gains and losses from foreign exchange transactions
and other charges, totaled $8 million in the 1995 period, compared with ($3)
million in the 1994 period. Operating margins (excluding service charges from
affiliated companies) increased slightly to 5.6% in the current three months, up
from 5.3% in the third quarter of 1994. Interest expense increased to $44
million compared with $22 million in 1994 reflecting higher average borrowings
in the period primarily in connection with the funding of capital needs of both
continuing and discontinued operations.
8
<PAGE> 10
Miscellaneous Expense, net includes the aforementioned provisions for the
expected loss on the disposal of ITT Community Development Corporation. The
effective income tax rate was 24% in the 1995 period compared with 61% in 1994.
Excluding the tax benefit on the disposal of ITT Community Development
Corporation, which is recorded at 35%, the Corporation's 1995 effective income
tax rate is 47% due to the mix of earnings between foreign and domestic
sources. The 1994 period was impacted by the sale of certain assets for which no
tax benefit was realized.
Business Segments -- Sales and operating income before service charges from
affiliated companies for each of the Corporation's three major continuing
business segments were as follows for the third quarter of 1995 and 1994 ($ in
millions):
<TABLE>
<CAPTION>
SALES OPERATING INCOME
- ----------------------- -------------------
THREE MONTHS THREE MONTHS
- ----------------------- -------------------
1995 1994 1995 1994
- ------ ------ ---- ----
<C> <C> <S> <C> <C> <C> <C>
$1,255 $1,144 ..................... Automotive ..................... $71 $62
</TABLE>
Automotive's 1995 three month results benefited from higher volumes and the
continued impact of cost reduction programs. These benefits were partly offset
by continued pricing pressure from original equipment manufacturers and higher
material and labor costs.
<TABLE>
<CAPTION>
SALES OPERATING INCOME
- ----------------------- -------------------
THREE MONTHS THREE MONTHS
- ----------------------- -------------------
1995 1994 1995 1994
- ------ ------ ---- ----
<C> <C> <S> <C> <C> <C> <C>
$ 395 $ 367 ................. Defense & Electronics ................. $23 $22
</TABLE>
At Defense & Electronics, 1995 three month operating income rose slightly
on higher revenues at several units.
<TABLE>
<CAPTION>
SALES OPERATING INCOME
- ----------------------- -------------------
THREE MONTHS THREE MONTHS
- ----------------------- -------------------
1995 1994 1995 1994
- ------ ------ ---- ----
<C> <C> <S> <C> <C> <C> <C>
$ 305 $ 272 ................... Fluid Technology ................... $28 $25
</TABLE>
At Fluid Technology, 1995 three month sales and operating income increased
at all units, most significantly at Flygt, primarily due to higher volumes.
Nine months ended September 30, 1995 compared with nine months ended September
30, 1994
Net income from continuing operations of $37 million or $0.23 per fully
diluted share declined 69% compared with the $118 million or $0.82 per fully
diluted share reported in the 1994 period. The decline was caused by after-tax
provisions of $104 million or $0.88 per fully diluted share for the expected
losses on the disposals of ITT Semiconductors and ITT Community Development
Corporation. Excluding these provisions, the Company would have reported net
income from continuing operations of $141 million or $1.11 per fully diluted
share, a 19% improvement largely due to the contribution of Electrical Systems
Inc. ("ESI"), the former General Motors' motors and actuators business acquired
in March 1994. Excluding ESI, net income still exceeded the 1994 level by 9% due
to higher volumes in a number of product lines and the favorable impact of
continuing cost reduction programs. Income from discontinued operations totaled
$936 million (including $403 million reflecting the gain on the sale of ITT
Financial) and $610 million for the first nine months of 1995 and 1994,
respectively, and represents the results of ITT Hartford, New ITT, ITT Financial
and, in 1994, Rayonier. The Corporation recorded an extraordinary loss of $307
million after tax on the early extinguishment of debt for premium costs related
to the successful completion of a debt tender offer. Net income was $666 million
or $5.59 per fully diluted share, compared with $717 million or $5.52 per fully
diluted share in the 1994 period.
Net sales totaling $6.6 billion rose 19% with improvements at Automotive,
Defense & Electronics and Fluid Technology. Excluding the ESI contribution, net
sales improved 14%. Gross margin approximated 14% in the 1995 period and 15% in
the 1994 period due to higher material costs, while selling, general and
administrative expenses decreased to 7.6% of sales from 8.3% in the 1994 period
due to a
9
<PAGE> 11
continuing focus on cost reduction and efficiency programs. Service charges from
affiliated companies represent fees for advice and assistance related to certain
centralized general and administrative functions. Such services represent advice
and assistance in connection with cash management, legal, accounting, tax and
insurance services and charges totaled $63 million and $53 million in the 1995
and 1994 nine months, respectively. The fees for these services, which are based
upon a general relations agreement, approximate 1% of sales. See "Plan of
Distribution" Note to Consolidated Financial Statements herein. Other operating
(income) expenses, which includes gains and losses from foreign exchange
transactions and other charges, totaled ($2) million in the 1995 period,
compared with $40 million in the 1994 period which includes the loss on the
disposal of certain non-core businesses. Operating margins (excluding service
charges from affiliated companies) rose to 6.0% in the current nine months, up
from 5.6% in the nine months of 1994, a result of the factors discussed above.
Interest expense increased to $124 million compared with $85 million in
1994 reflecting higher borrowings in connection with the acquisition of ESI and
the funding of capital needs of both continuing and discontinued operations.
Interest income in the 1994 period benefited from interest income totaling
$32 million on a note receivable from the sale of Alcatel N.V. in 1992.
Miscellaneous Expense includes the aforementioned provisions for the expected
losses on the disposal of ITT Semiconductors and ITT Community Development
Corporation. The effective income tax rate approximated 55% and 46% in the
1995 and 1994 periods. Both periods were impacted by the sale of certain
assets for which no tax benefit was realized. Excluding these sales, the 1995
and 1994 effective tax rates approximated 42% and 43%, respectively. Income tax
expense decreased by $55 million, to $45 million in the 1995 period, due to
lower pretax earnings.
Business Segments -- Sale and operating income before service charges from
affiliated companies for each of the Corporation's three major continuing
business segments were as follows for the first nine months of 1995 and 1994 ($
in millions):
<TABLE>
<CAPTION>
SALES OPERATING INCOME
- ----------------------- -------------------
NINE MONTHS NINE MONTHS
- ----------------------- -------------------
1995 1994 1995 1994
- ------ ------ ---- ----
<C> <C> <S> <C> <C> <C> <C>
$4,283 $3,427 ..................... Automotive ..................... $276 $226
</TABLE>
Automotive's 1995 nine months results benefited significantly from the ESI
acquisition and from higher volumes and the continued impact of cost reduction
programs. These benefits were partly offset by continued pricing pressure from
original equipment manufacturers and higher material and labor costs.
<TABLE>
<CAPTION>
SALES OPERATING INCOME
- ----------------------- -------------------
NINE MONTHS NINE MONTHS
- ----------------------- -------------------
1995 1994 1995 1994
- ------ ------ ---- ----
<C> <C> <S> <C> <C> <C> <C>
$1,157 $1,120 ................. Defense & Electronics ................. $68 $59
</TABLE>
At Defense & Electronics, 1995 nine month operating income rose on slightly
higher revenues due to improved margins at several units and a $3 million gain
on the termination of a leasehold interest. Order backlog was $2.1 and $2.2
billion at September 30, 1995 and 1994, respectively.
<TABLE>
<CAPTION>
SALES OPERATING INCOME
- ----------------------- -------------------
NINE MONTHS NINE MONTHS
- ----------------------- -------------------
1995 1994 1995 1994
- ------ ------ ---- ----
<C> <C> <S> <C> <C> <C> <C>
$ 910 $ 791 ................... Fluid Technology ................... $75 $63
</TABLE>
At Fluid Technology, 1995 nine month sales and operating income increased
at all units, most significantly at Flygt, primarily due to higher volumes and
favorable foreign exchange.
10
<PAGE> 12
Discontinued Operations
Net income of the Corporation's Discontinued Operations, excluding the
aforementioned gain on the sale of ITT Financial, is comprised of the following
($ millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1995 1994 1995 1994
----- ----- ----- -----
<S> <C> <C> <C> <C>
New ITT........................................... $ 50 $ 22 $ 103 $ 59
ITT Hartford...................................... 173 182 418 474
ITT Financial, ITT Rayonier & Other............... (36) 33 12 77
----- ----- ----- -----
$ 187 $ 237 $ 533 $ 610
====== ====== ====== ======
</TABLE>
Results of operations at New ITT comprise those of the Corporation's
Hospitality, Entertainment and Information Services business segments along with
the equity earnings associated with Madison Square Garden, L.P. The 1995 third
quarter results include one-time charges totaling $47 million after tax related
to planned disposals of certain non core assets as well as severance and other
costs related to the restructuring of its businesses. Excluding these charges,
net income more than doubled, reflecting, in part, the contribution of Caesars
World which was acquired in late January, 1995. In addition, higher average room
rates at ITT Sheraton, particularly in North America, along with the
contribution of the Ciga hotel properties acquired in the second half of 1994,
further contributed to the improvement. The Information Services business
segment also showed improvement due to the continuing benefits of cost control
programs.
At ITT Hartford, reported net income in the third quarter 1995 was modestly
lower reflecting competitive conditions in the commercial lines segment of
property and casualty and lower income from servicing businesses. These factors,
as well as the excess catastrophe losses in the second quarter caused by
windstorms, hailstorms and flooding in the Southwest United States and a
provision for the estimated settlement related to the Dow Corning breast implant
insurance claims caused a decline in net income for the 1995 nine months of $56
million. The prior year periods benefited from unusually good workers
compensation results due to the impact of managed care initiatives and favorable
legislative reform. Excluding operations in runoff, the worldwide property and
casualty combined ratio was 105.0 for the first nine months of 1995 compared
with 103.6 for the first nine months of 1994. The combined ratio includes the
impact of excess catastrophe losses and a provision for the estimated settlement
related to Dow Corning breast implant claims. Excluding these items, the
combined ratio for the nine months ended September 30, 1995, would have been
103.6, equivalent to last year. After tax portfolio gains totaled $6 million and
$37 million in the 1995 third quarter and nine months, respectively, compared
with $10 million and $51 million in the comparable 1994 periods.
Businesses comprising ITT Financial were sold at various times throughout
the first and second quarters of 1995 and the substantial portion of these
proceeds have been received by September 30, 1995. A provision for the remaining
asset sales and associated closedown costs has been included in the after tax
gain of $403 million or $3.44 per fully diluted share reflected in the second
quarter. Operating results of these businesses prior to the sale date improved
over the comparable 1994 periods on improved volume and lending spreads,
principally in the commercial lending operations. ITT Rayonier was spun off to
shareholders in February, 1994. Included in Other in the three months ended
September 30, 1995 is $36 million after tax of severance and other costs related
to the rationalization of the Corporation's headquarters operations in
connection with the impending Distribution.
Liquidity and Capital Resources
The Corporation generated EBITDA from continuing operations (defined as
operating income before depreciation and amortization) of $659 million in the
nine months ended September 30, 1995, compared with $547 million in the
comparable 1994 period, a 20% improvement. The improvement reflects earnings
growth, primarily in the Automotive business segment, which benefited from the
ESI acquisition in
11
<PAGE> 13
March 1994 as well as smaller improvements in the Defense & Electronics and
Fluid Technology business segments. Cash from continuing operating activities as
defined by Statement of Financial Accounting Standards ("SFAS") No. 95 decreased
to $216 million in the nine months ended September 30, 1995, compared with $253
million in the comparable 1994 period due primarily to higher net interest
expense. The SFAS definition of cash from continuing operating activities
differs from EBITDA largely due to the inclusion of interest, taxes and changes
in working capital.
Cash to discontinued operations in the nine months ended September 30, 1995
reflects the net cash activity associated with the discontinued finance,
insurance and hospitality, entertainment and information services business
segments. The $(519) million outflow in the 1995 period compared with the $463
million inflow in the 1994 period reflects the timing of income tax and other
intercompany settlements between the Corporation and the discontinued business
segments.
In 1995, the Corporation realized $12.4 billion of proceeds through
September 30 from the sale of assets at ITT Financial. Substantially all the
proceeds from these transactions were used to repay ITT Financial indebtedness.
In addition, cash from operating activities was used to fund capital
expenditures, corporate dividends and stock repurchases. In the 1994 period,
cash from operating activities was used to fund the acquisition of ESI ($374
million), to pay corporate dividends and to repurchase stock.
Gross plant additions totaled $276 million in the first nine months of
1995, with approximately 61% of that total incurred at Automotive, primarily in
ABS and traction control technology. At September 30, 1995, contractual
commitments have been made for additional capital expenditures totaling $169
million in 1995 and an additional $513 million in future years. Spending on
capital expenditures for the 1994 nine months was $232 million, 62% of which was
at Automotive.
External borrowings (excluding discontinued operations) were $2.3 billion
at September 30, 1995 compared with $2.6 billion at December 31, 1994. Cash and
cash equivalents, also excluding cash from discontinued operations, was $183
million at September 30, 1995 compared with $322 million at year-end 1994.
Effective January 1, 1994, the Corporation adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", which
requires investments to be reflected at fair value, with the corresponding
impact reported as a separate component of Stockholders Equity in situations
where those investments are "available for sale", as defined in SFAS No. 115.
The accounting standard does not allow for a corresponding fair value adjustment
to liabilities. Stockholders Equity can vary significantly between reporting
periods as market interest rates and other factors change. Accordingly, the
Corporation does not include unrealized gains or losses in its assessment of
debt to total capitalization.
Stockholders equity increased by $1.2 billion during the first nine months
of 1995, excluding the SFAS 115 impact, due to growth in retained earnings which
included the ITT Financial gain on sale of $403 million after tax and the
elimination of the deferred compensation on the ESOP, as a result of the ESOP
termination in July, 1995. The trustee of the ESOP then converted the preferred
stock held by the trustee to ITT common stock and sold 5.3 million shares into
the open market. The sales proceeds were used to repay the debt associated with
the ESOP during August 1995, which totaled $541 million.
In July, 1995, as part of a recapitalization plan for its soon to be three
independent businesses, the Corporation completed a tender offer for $3.4
billion of its debt securities. The tender offer was financed with the proceeds
of commercial paper borrowings by ITT and resulted in the Corporation paying a
tender premium of $307 million after tax ($472 million pretax). Such amount has
been recorded as an extraordinary loss on the early extinguishment of debt in
the 1995 third quarter.
12
<PAGE> 14
PART II.
OTHER INFORMATION
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At a special meeting of the shareholders of ITT Corporation ("ITT") held on
September 21, 1995 in New York, New York, the following matters more fully
described in the Proxy Statement dated August 30, 1995 relating to such meeting
(the "Proxy Statement") were voted upon with the votes relating to each such
matter as indicated:
1) The distribution by ITT of all the outstanding shares of common stock of
ITT Destinations, Inc., a wholly owned subsidiary of ITT and a Nevada
corporation ("ITT Destinations" or "New ITT"), and of all the
outstanding shares of common stock of ITT Hartford Group, Inc., a wholly
owned subsidiary of ITT and a Delaware corporation ("ITT Hartford"), on
the basis described in the Proxy Statement, was approved by a vote of
87,554,820 shares in favor, 306,423 shares against and 276,729 shares
abstaining.
2) The Agreement and Plan of Merger between ITT and ITT Indiana, Inc. ("ITT
Indiana"), a newly formed Indiana corporation and a wholly owned
subsidiary of ITT, providing for the reincorporation of ITT in Indiana
pursuant to a statutory merger of ITT into ITT Indiana, was approved and
adopted by a vote of 77,440,234 shares in favor, 10,016,250 shares
against and 681,488 shares abstaining.
3) The amendments to the ITT 1977 Stock Option Incentive Plan and ITT 1986
Incentive Stock Plan were approved by a vote of 84,794,673 shares in
favor, 2,726,522 shares against and 616,777 shares abstaining.
4) The adoption by New ITT of the New ITT 1995 Incentive Stock Plan was
approved by a vote of 70,652,057 shares in favor, 16,757,836 shares
against and 728,080 shares abstaining.
5) The adoption by ITT Hartford of the ITT Hartford 1995 Incentive Stock
Plan was approved by a vote of 70,594,633 shares in favor, 16,799,733
shares against and 743,606 shares abstaining.
6) The adoption by ITT of the ITT 1996 Restricted Stock Plan for
Non-Employee Directors was approved by a vote of 83,473,629 shares in
favor, 3,497,317 shares against and 1,167,026 shares abstaining.
7) The amendments of the Restated Certificate of Incorporation of ITT to
change the name of ITT to ITT Industries, Inc. and remove the article of
the Restated Certificate of Incorporation in respect of ITT's gaming
licenses were approved by a vote of 87,077,902 shares in favor, 506,762
shares against and 553,307 shares abstaining.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) See the Exhibit Index for a list of exhibits filed herewith.
(b) There were no reports on Form 8-K filed by ITT during the quarter for
which this report is filed.
13
<PAGE> 15
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 Corporation
(Registrant)
By J.F. Danski
------------------------------------
J.F. Danski
Senior Vice President and Controller
(Chief Accounting Officer)
November 1, 1995
(Date)
14
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
------- ------------------------------------------------------- --------------------------
<C> <S> <C>
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession.............................. None
(3) Articles of Incorporation and by-laws.................. None
(4) Instruments defining the rights of security holders,
including indentures................................... None
(10) Material contracts..................................... None
(11) Statement re: computation of per share earnings........ Filed Herewith
(12) Statements re: computation of ratios...................
Calculation of ratio of earnings to total fixed
charges................................................
Calculation of ratio of earnings to total fixed charges
and preferred dividend requirements of ITT
Corporation............................................
(a) ITT Corporation........................................ Filed Herewith
(b) ITT Destinations, Inc. ................................ Filed Herewith
(c) ITT Hartford Group, Inc. and Subsidiaries.............. Filed Herewith
(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
(27) Financial Data Schedule................................ Filed Herewith
(99) Additional Exhibits
(a) ITT Destinations, Inc. -- Combined Financial
Statements............................................. Filed Herewith
(b) ITT Hartford Group, Inc. -- Consolidated Financial
Statements............................................. Filed Herewith
(c) Proxy Statement of ITT Dated August 30, 1995 relating
to the Special Meeting of Shareholders held
September 21, 1995..................................... Incorporated by reference
to ITT's Proxy Statement
dated August 30, 1995
filed with the Commission
on August 28, 1995
</TABLE>
15
<PAGE> 1
EXHIBIT 11
ITT CORPORATION AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(IN MILLIONS EXCEPT PER SHARE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1995 1994
------ -----
<S> <C> <C>
PRIMARY BASIS --
Net income............................................................................... $ 666 $ 717
ESOP preferred dividends -- net of tax................................................... (17) (26)
----- -----
Net income applicable to primary earnings per share........................................ $ 649 $ 691
----- -----
Average common shares outstanding........................................................ 109 116
Common shares issuable in respect to common stock equivalents............................ 1 1
----- -----
Average common equivalent shares......................................................... 110 117
----- -----
Earnings Per Share
Continuing operations.................................................................... $ .07 $ .79
Discontinued operations.................................................................. 8.59 5.19
Extraordinary Item....................................................................... (2.78) --
Cumulative effect of accounting changes.................................................. -- (.10)
----- -----
Net income............................................................................... $ 5.88 $5.88
===== =====
FULLY DILUTED BASIS --
Net income applicable to primary earnings per share...................................... $ 649 $ 691
ESOP preferred dividends -- net of tax................................................... 17 26
If converted ESOP expense adjustment -- net of tax benefit............................... (10) (16)
----- -----
Net income applicable to fully diluted earnings per share................................ $ 656 $ 701
----- -----
Average common equivalent shares......................................................... 110 117
Additional common shares issuable assuming full dilution................................. 8 10
----- -----
Average common equivalent shares assuming full dilution.................................. 118 127
----- -----
Earnings Per Share
Continuing operations.................................................................... $ .23 $ .82
Discontinued operations.................................................................. 7.97 4.79
Extraordinary Item....................................................................... (2.61) --
Cumulative effect of accounting changes.................................................. -- (.09)
----- -----
Net income............................................................................... $ 5.59 $5.52
===== =====
</TABLE>
The Series N convertible preferred stock is considered a common stock
equivalent. With respect to options, it is assumed that the proceeds to be
received upon exercise are used to acquire common stock of the Corporation. The
calculation impact of dilutive securities is determined quarterly based on the
forecast of annual earnings.
16
<PAGE> 1
EXHIBIT 12(A)
ITT CORPORATION AND SUBSIDIARIES
CALCULATION OF RATIOS OF EARNINGS TO TOTAL FIXED CHARGES
AND CALCULATION OF EARNINGS TO TOTAL FIXED CHARGES AND
PREFERRED DIVIDEND REQUIREMENTS OF ITT
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
---------------
1995 1994
---- ----
<S> <C> <C>
Earnings:
Income from continuing operations.......................................... $ 37 $118
Add:
Adjustment for distributions in excess of undistributed equity earnings
and losses............................................................ 1 --
Income taxes............................................................. 45 100
Amortization of interest capitalized..................................... -- 3
----- -----
83 221
----- -----
Fixed Charges:
Interest and other financial charges..................................... 124 85
Interest factor attributable to rentals.................................. 17 18
----- -----
141 103
----- -----
Earnings, as adjusted, from continuing operations.......................... $224 $324
===== =====
Fixed Charges:
Fixed charges above...................................................... $141 $103
Interest capitalized..................................................... 2 5
----- -----
Total fixed charges...................................................... 143 108
Dividends on preferred stock of ITT (pre-income tax basis)................. 24 36
----- -----
Total fixed charges and preferred dividend requirements.................. $167 $144
===== =====
Ratios:
Earnings, as adjusted, from continuing operations to total fixed
charges............................................................... 1.57 3.00
===== =====
Earnings, as adjusted, from continuing operations to total fixed charges
and preferred dividend requirements of ITT............................ 1.34 2.25
===== =====
</TABLE>
- ---------------
Notes:
a) The adjustment for distributions in excess of undistributed equity earnings
and losses represents the adjustment to income for distributions in excess of
undistributed earnings and losses of companies in which at least 20% but less
than 50% equity is owned.
b) The interest factor attributable to rentals was computed by calculating the
estimated present value of all long-term rental commitments and applying the
approximate weighted average interest rate inherent in the lease obligations
and adding thereto the interest element assumed in short-term cancelable and
contingent rentals excluded from the commitment data but included in rental
expense.
c) The dividend requirements on preferred stock of ITT have been determined by
adding to the total preferred dividends an allowance for income taxes,
calculated on the effective income tax rate.
17
<PAGE> 1
EXHIBIT 12(B)
ITT DESTINATIONS, INC.
CALCULATION OF RATIO OF EARNINGS TO TOTAL FIXED CHARGES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1995 1994
---- ----
<S> <C> <C>
Earnings:
Income from continuing operations.......................................................... $103 $ 59
Add:
Adjustment for distributions in excess of undistributed equity earnings and losses......... 13 11
Income taxes............................................................................... 69 44
Minority equity in net income.............................................................. 16 11
Amortization of interest capitalized....................................................... 2 2
---- ----
203 127
---- ----
Fixed Charges:
Interest and other financial charges....................................................... 254 74
Interest factor attributable to rentals.................................................... 19 22
---- ----
273 96
---- ----
Earnings, as adjusted, from continuing operations............................................ $476 $223
==== ====
Fixed Charges:
Fixed charges above........................................................................ $273 $ 96
Interest capitalized....................................................................... 5 1
---- ----
Total fixed charges........................................................................ $278 $ 97
==== ====
Ratios:
Earnings, as adjusted, from continuing operations to total fixed charges................... 1.71 2.30
==== ====
</TABLE>
- ---------------
Notes:
a) The adjustment for distributions in excess of undistributed equity earnings
and losses represents the adjustment to income for distributions in excess of
undistributed earnings and losses of companies in which at least 20% but less
than 50% equity is owned.
b) The interest factor attributable to rentals was computed by calculating the
estimated present value of all long-term rental commitments and applying the
approximate weighted average interest rate inherent in the lease obligations
and adding thereto the interest element assumed in short-term cancelable and
contingent rentals excluded from the commitment data but included in rental
expense.
18
<PAGE> 1
EXHIBIT 12(C)
ITT HARTFORD GROUP, INC. AND SUBSIDIARIES
CALCULATION OF RATIO OF EARNINGS TO TOTAL FIXED CHARGES
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1995 1994
---- ----
<S> <C> <C>
Earnings:
Income from continuing operations........................................................... $418 $474
Add:
Income taxes.............................................................................. 126 164
Minority equity in net income............................................................. 2 5
Amortization of interest capitalized...................................................... -- 1
---- ----
546 644
---- ----
Fixed Charges:
Interest and other financial charges...................................................... 70 54
Interest factor attributable to rentals................................................... 26 27
---- ----
96 81
---- ----
Earnings, as adjusted, from continuing operations........................................... $642 $725
==== ====
Fixed Charges:
Fixed charges above....................................................................... $ 96 $ 81
Dividends on preferred stock of subsidiaries included in minority equity.................. 2 5
---- ----
Total fixed charges......................................................................... $ 98 $ 86
==== ====
Ratios:
Earnings, as adjusted, from continuing operations to total fixed charges.................. 6.55 8.43
==== ====
</TABLE>
Notes:
a) The interest factor attributable to rentals was computed by calculating the
estimated present value of all long-term rental commitments and applying the
approximate weighted average interest rate inherent in the lease obligations
and adding thereto the interest element assumed in short-term cancelable and
contingent rentals excluded from the commitment data but included in rental
expense.
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
September 30, 1995 Financial Statements included in Form 10-Q and is qualified
in its entirety by reference to such Financial Statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 183
<SECURITIES> 0
<RECEIVABLES> 1,383
<ALLOWANCES> 39
<INVENTORY> 960
<CURRENT-ASSETS> 2,624
<PP&E> 5,023
<DEPRECIATION> 2,848
<TOTAL-ASSETS> 13,577
<CURRENT-LIABILITIES> 3,261
<BONDS> 801
<COMMON> 116
0
0
<OTHER-SE> 7,834
<TOTAL-LIABILITY-AND-EQUITY> 13,577
<SALES> 6,633
<TOTAL-REVENUES> 6,633
<CGS> 5,730
<TOTAL-COSTS> 5,730
<OTHER-EXPENSES> 566
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 92
<INCOME-PRETAX> 82
<INCOME-TAX> 45
<INCOME-CONTINUING> 37
<DISCONTINUED> 936
<EXTRAORDINARY> (307)
<CHANGES> 0
<NET-INCOME> 666
<EPS-PRIMARY> 5.88
<EPS-DILUTED> 5.59
</TABLE>
<PAGE> 1
EXHIBIT 99(A)
ITT DESTINATIONS, INC.
COMBINED INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
THIRD QUARTER SEPTEMBER 30,
--------------------- ---------------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues.................................................... $1,647 $1,108 $4,629 $3,224
Costs and Expenses:
Salaries, benefits and other operating.................... 1,248 902 3,464 2,589
Selling, general and administrative, net of service fee
income of $23, $23, $75 and $66......................... 209 123 582 358
Depreciation and amortization............................. 53 21 181 87
------ ------ ------ ------
1,510 1,046 4,227 3,034
------ ------ ------ ------
137 62 402 190
Interest Expense (net of interest income of $34, $10, $47
and $18).................................................. (61) (21) (218) (67)
Miscellaneous Income (Expense), net......................... (5) (1) 4 (9)
------ ------ ------ ------
71 40 188 114
Income Tax.................................................. (14) (13) (69) (44)
Minority Equity............................................. (7) (5) (16) (11)
------ ------ ------ ------
Net Income.................................................. $ 50 $ 22 $ 103 $ 59
====== ====== ====== ======
</TABLE>
21
<PAGE> 2
EXHIBIT 99(A)
ITT DESTINATIONS, INC.
COMBINED BALANCE SHEET
(IN MILLIONS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................................... $ 470 $ 191
Receivables, net............................................................... 661 498
Inventories.................................................................... 92 59
Prepaid expenses and other..................................................... 109 217
------ ------
Total current assets..................................................... 1,332 965
Plant, Property and Equipment, net............................................... 4,026 2,882
Investments in Uncombined Affiliates............................................. 1,733 655
Goodwill, net.................................................................... 1,343 232
Long-Term Receivables, net....................................................... 123 133
Other Assets..................................................................... 281 145
------ ------
$ 8,838 $5,012
====== ======
LIABILITIES AND INVESTMENTS AND ADVANCES FROM ITT INDUSTRIES, INC.
Current Liabilities:
Accounts payable............................................................... $ 255 $ 72
Accrued expenses............................................................... 618 426
Notes payable and current maturities of long-term debt......................... 169 31
Other current liabilities...................................................... 233 95
------ ------
Total current liabilities................................................ 1,275 624
Long-Term Debt................................................................... 663 600
Deferred Income Taxes............................................................ 84 39
Other Liabilities................................................................ 321 192
Minority Interest................................................................ 264 204
Investments and Advances from ITT Industries, Inc................................ 6,231 3,353
------ ------
$ 8,838 $5,012
====== ======
</TABLE>
22
<PAGE> 1
EXHIBIT 99(B)
ITT HARTFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
THIRD NINE MONTHS
QUARTER ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
1995 1994 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues
Property and casualty insurance, net of increase
in unearned premium of $24, $114, $88 and $176................ $1,719 $1,663 $5,129 $4,913
Life insurance.................................................. 683 505 1,961 1,537
Net investment income........................................... 648 520 1,831 1,543
Net realized capital gains...................................... 8 15 56 77
------ ------ ------ ------
3,058 2,703 8,977 8,070
------ ------ ------ ------
Costs and Expenses
Benefits, claims and claim adjustment expenses:
Property and casualty......................................... 1,279 1,222 3,927 3,673
Life.......................................................... 629 618 1,831 1,613
Amortization of deferred policy acquisition costs............... 504 368 1,317 1,169
Other expenses.................................................. 423 255 1,356 972
------ ------ ------ ------
2,835 2,463 8,431 7,427
------ ------ ------ ------
223 240 546 643
Income Tax Expense................................................ 50 57 126 164
Dividend on Subsidiary Preferred Stock............................ -- (1) (2) (5)
------ ------ ------ ------
Income before Cumulative Effect of Accounting Changes............. 173 182 418 474
Cumulative Effect of Accounting Changes, net of tax of $7......... -- -- -- 12
------ ------ ------ ------
Net Income........................................................ $ 173 $ 182 $ 418 $ 486
====== ====== ====== ======
</TABLE>
23
<PAGE> 2
EXHIBIT 99(B)
ITT HARTFORD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN MILLIONS EXCEPT FOR SHARES AND PER SHARE)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
Investments --
Fixed maturities, available for sale, at fair value............................ $30,514 $ 27,418
Equity securities, at fair value............................................... 1,346 1,350
Policy loans, at cost.......................................................... 4,446 2,614
Other investments, at cost..................................................... 796 1,071
------- -------
Total investments........................................................ 37,102 32,453
Cash............................................................................. 82 55
Premiums Receivable and Agents' Balances......................................... 2,080 1,996
Reinsurance Recoverables......................................................... 12,427 12,220
Deferred Policy Acquisition Costs................................................ 2,823 2,525
Deferred Income Tax.............................................................. 1,352 1,729
Other Assets..................................................................... 2,395 2,532
Separate Account Assets.......................................................... 31,976 23,255
------- -------
$90,237 $ 76,765
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
Liabilities --
Future policy benefits, unpaid claims and claim adjustment expenses:
Property and casualty........................................................ $17,440 $ 17,435
Life......................................................................... 3,639 3,152
Other policy claims and benefits payable....................................... 24,452 22,308
Unearned premiums.............................................................. 2,838 2,725
Short-term debt................................................................ 914 902
Long-term debt................................................................. 597 596
Other liabilities (including subsidiary preferred stock of $86)................ 3,393 3,208
Separate account liabilities................................................... 31,976 23,255
------- -------
85,249 73,581
------- -------
Stockholder's Equity --
Common stock -- authorized, issued and outstanding 1 share, $1 par value....... -- --
Capital surplus................................................................ 1,610 1,357
Cumulative translation adjustments............................................. 49 24
Unrealized loss on securities, net of tax benefit.............................. (111) (1,219)
Retained earnings.............................................................. 3,440 3,022
------- -------
4,988 3,184
------- -------
$90,237 $ 76,765
======= =======
</TABLE>
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