<PAGE> 1
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, 1996
/ / 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 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 23, 1996, there were outstanding 118,071,518 shares of
common stock ($1 par value per share) of the registrant.
<PAGE> 2
ITT INDUSTRIES, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Part FINANCIAL INFORMATION:
I Financial Statements:
Consolidated Income Statements -- Three Months and Six Months Ended
June 30, 1996 and 1995............................................................2
Consolidated Balance Sheets -- June 30, 1996 and December 31, 1995.....................3
Consolidated Statements of Cash Flows -- Six Months Ended
June 30, 1996 and 1995.............................................................4
Notes to Consolidated Financial Statements ............................................5
Business Segment Information...........................................................7
Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Three Months and Six Months Ended June 30, 1996 and 1995...............................7
Part OTHER INFORMATION:
II Submission of Matters to a Vote of Security Holders...................................11
Exhibits and Reports on Form 8-K......................................................11
Signature....................................................................12
Exhibit Index................................................................13
</TABLE>
1
<PAGE> 3
PART I.
FINANCIAL INFORMATION
FINANCIAL STATEMENTS
The following unaudited consolidated 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, results of operations, and cash flows for the periods presented.
Certain amounts in the prior periods' consolidated financial statements have
been reclassified to conform with the current period presentation. It is
suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's 1995 Annual
Report on Form 10-K and subsequent quarterly filing.
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN MILLIONS, EXCEPT PER SHARE)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- --------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales .................................................... $ 2,241 $ 2,337 $ 4,442 $ 4,585
Cost of sales ................................................ 1,908 2,012 3,816 3,954
------- ------- ------- -------
Gross margin ................................................. 333 325 626 631
Selling, general, and administrative expenses ................ 175 193 365 383
Other operating (income) expenses ............................ 6 (7) 4 6
------- ------- ------- -------
Operating income ............................................. 152 139 257 242
Interest expense ............................................. (39) (47) (83) (80)
Interest income .............................................. 1 12 10 21
Miscellaneous expense, net ................................... -- (30) (1) (30)
------- ------- ------- -------
Income from continuing operations before income tax expense .. 114 74 183 153
Income tax expense ........................................... (46) (28) (75) (62)
------- ------- ------- -------
Income from continuing operations ............................ 68 46 108 91
Discontinued operations:
Operating income, net of tax of $79 and $162 ............... -- 163 -- 346
Gain on sale of Financial operations, net of tax of $264 and
$264 ......................................................... -- 403 -- 403
------- ------- ------- -------
Net income ................................................... $ 68 $ 612 $ 108 $ 840
======= ======= ======= =======
EARNINGS PER SHARE:
Income from continuing operations
Primary .................................................... $ .56 $ .35 $ .89 $ .69
Fully diluted .............................................. $ .56 $ .35 $ .89 $ .69
Discontinued operations
Primary .................................................... -- 5.26 -- 6.97
Fully diluted .............................................. -- 4.82 -- 6.39
Net income
Primary .................................................... $ .56 $ 5.61 $ .89 $ 7.66
Fully diluted .............................................. $ .56 $ 5.17 $ .89 $ 7.08
Cash dividends declared per common share ..................... $ .15 $ .495 $ .30 $ .99
</TABLE>
- ---------
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
2
<PAGE> 4
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT FOR SHARES AND PER SHARE)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ........................................ $ 8 $ 94
Receivables, net ................................................. 1,343 1,257
Inventories ...................................................... 879 908
Other current assets ............................................. 247 243
------ ------
Total current assets .......................................... 2,477 2,502
Plant, property, and equipment, net ................................ 2,113 2,235
Deferred U.S. income taxes ......................................... 207 218
Goodwill, net ...................................................... 355 363
Other assets ....................................................... 542 561
------ ------
$5,694 $5,879
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable ................................................. $ 665 $ 781
Accrued expenses ................................................. 941 1,072
Accrued taxes .................................................... 144 162
Notes payable and current maturities of long-term debt ........... 1,016 646
------ ------
Total current liabilities ..................................... 2,766 2,661
Pension and postretirement costs ................................... 1,079 1,101
Long-term debt ..................................................... 637 961
Deferred foreign, state and local income taxes ..................... 119 121
Other liabilities .................................................. 399 408
------ ------
5,000 5,252
Shareholders' Equity:
Common stock:
Authorized 200,000,000 shares, $1 par value per share
Outstanding 118,066,518 shares and 117,068,833 shares ......... 118 117
Capital surplus .................................................. 413 399
Cumulative translation adjustments ............................... 91 111
Retained earnings ................................................ 72 --
------ ------
694 627
------ ------
$5,694 $5,879
====== ======
</TABLE>
- ----------
The accompanying notes to consolidated financial statements are an integral part
of the above balance sheets.
3
<PAGE> 5
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------
1996 1995
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income ................................................ $ 108 $ 840
Discontinued operations:
Operating income ....................................... -- (346)
Gain on sale of Financial operations ................... -- (403)
-------- --------
Income from continuing operations .................. 108 91
Adjustments to income from continuing operations:
Depreciation ............................................ 203 200
Amortization ............................................ 21 18
Change in receivables, inventories, accounts payable, and
accrued expenses .................................... (276) (134)
Change in accrued and deferred taxes .................... 67 246
Other, net .............................................. (18) (26)
-------- --------
Cash from continuing operations ........................... 105 395
Cash used for discontinued operations ..................... (174) (254)
-------- --------
Cash from (used for) operating activities ............. (69) 141
-------- --------
INVESTING ACTIVITIES
Additions to plant, property, and equipment ............... (172) (165)
Proceeds from sale of assets .............................. 110 11,655
Acquisitions .............................................. -- (15)
Other, net ................................................ -- (2)
-------- --------
Cash from (used for) investing activities ............. (62) 11,473
-------- --------
FINANCING ACTIVITIES
Short-term debt, net ...................................... 210 (28)
Long-term debt repaid ..................................... (159) (18)
Repayment of Financial obligations ........................ -- (11,382)
Repurchase of common stock ................................ -- (38)
Dividends paid ............................................ (18) (130)
Other, net ................................................ 15 18
-------- --------
Cash from (used for) financing activities ............. 48 (11,578)
-------- --------
EXCHANGE RATE EFFECTS ON CASH AND CASH EQUIVALENTS ........ (3) 53
-------- --------
Increase (decrease) in cash and cash equivalents .......... (86) 89
Cash and cash equivalents -- beginning of period .......... 94 322
-------- --------
Cash and cash equivalents -- end of period ................ $ 8 $ 411
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest ................................................ $ 94 $ 47
======== ========
Income taxes ............................................ $ 8 $ 7
======== ========
</TABLE>
- ----------
The accompanying notes to consolidated financial statements are an integral part
of the above statements.
4
<PAGE> 6
ITT INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
1) RECEIVABLES
Receivables consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Trade......................................... $ 1,356 $ 1,254
Accrued for completed work.................... 23 41
Less -- reserves.............................. (36) (38)
------- -------
$ 1,343 $ 1,257
======= =======
</TABLE>
2) INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Finished goods................................ $ 396 $ 417
Work in process............................... 455 421
Raw materials and supplies.................... 310 333
Less -- reserves.............................. (80) (85)
-- progress payments..................... (202) (178)
----- ------
$ 879 $ 908
====== ======
</TABLE>
3) PLANT, PROPERTY, AND EQUIPMENT
Plant, property, and equipment consist of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Land and improvements......................... $ 103 $ 115
Buildings and improvements.................... 848 888
Machinery and equipment....................... 3,410 3,425
Construction work in progress................. 298 297
Other......................................... 318 330
------- -------
4,977 5,055
Less -- accumulated depreciation and
amortization.............................. (2,864) (2,820)
------- -------
$ 2,113 $ 2,235
======= =======
</TABLE>
5
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN MILLIONS, EXCEPT PER SHARE, UNLESS OTHERWISE STATED)
4) DISCONTINUED OPERATIONS
The accompanying financial statements for the three months and six months
ended June 30, 1995, reflect the results of ITT Corporation, a Delaware
corporation ("ITT Delaware"). Discontinued Operations include the results of ITT
Delaware's interests in the insurance business segment ("ITT Hartford"), ITT
Delaware's interests in the hospitality and entertainment, and information
services businesses ("ITT Corporation"), and a wholly-owned Finance business
segment ("ITT Financial"). ITT Hartford and ITT Corporation were distributed to
ITT Delaware's shareholders on December 19, 1995 (the "Distribution") and ITT
Delaware was merged into ITT Industries, Inc. (the "Company"). ITT Delaware
realized gross proceeds totaling $11.7 billion through June 30, 1995 from the
sale of the businesses comprising ITT Financial. Proceeds from these
transactions were used primarily to repay ITT Financial debt. ITT Delaware
recognized an after tax gain of $403 ($667 pretax) or $3.44 per fully diluted
share in the second quarter of 1995, including a provision for the final asset
sales and close down costs of ITT Financial.
Net income of the Company's Discontinued Operations was comprised of the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1995 1995
------------------ -----------------
<S> <C> <C>
ITT Corporation................................... $ 46 $ 53
ITT Hartford...................................... 105 245
ITT Financial..................................... 12 48
----- -----
$ 163 $ 346
===== =====
</TABLE>
6
<PAGE> 8
BUSINESS SEGMENT INFORMATION
(IN MILLIONS)
(UNAUDITED)
Business segment information excluding "Discontinued Operations" is as follows:
<TABLE>
<CAPTION>
NET SALES OPERATING INCOME/(LOSS)
- ---------------------------------------------- --------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
- ---------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1996 1995 1996 1995 1996 1995
---- ---- ---- ---- ---- ---- ---- ----
$1,448 $1,485 $2,868 $2,962 ..........Automotive.......... $ 102 $ 108 $ 177 $ 207
378 403 732 762 .....Defense & Electronics.... 30 27 50 45
321 316 627 605 .......Fluid Technology....... 30 29 52 47
94 133 215 256 .....Dispositions & other..... 2 -- 5 (8)
- ------ ------ ------ ------ ------ ------ ------ ------
2,241 2,337 4,442 4,585 ........Total Segments........ 164 164 284 291
-- -- -- -- ..Corporate expenses & other.. (12) (25) (27) (49)
- ------ ------ ------ ------ ------ ------ ------ ------
$2,241 $2,337 $4,442 $4,585 $ 152 $ 139 $ 257 $ 242
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1995
Net income of $68 million or $.56 per fully diluted share significantly
exceeded the $46 million or $.35 per fully diluted share, of net income from
continuing operations, reported in the 1995 second quarter. The increase in net
income from continuing operations, in the current quarter, was attributable
primarily to lower headquarters expenses and the absence of charges associated
with the disposition of ITT Semiconductors and ITT Community Development
Corporation recorded in the 1995 second quarter. In the 1995 second quarter, net
income, including $163 million of net income from Discontinued Operations and a
$403 million extraordinary gain on the sale of ITT Financial (see note 4) was
$612 million or $5.17 per fully diluted share.
Net sales, for the second quarter of 1996, were slightly below the second
quarter of 1995, due mainly to slow growth in some of the major markets the
Company serves and unfavorable foreign exchange translation. Operating income
for the second quarter of 1996 of $152 million, after a $10 million pretax
charge for restructuring at ITT Automotive, was slightly higher than the $139
million in the second quarter of 1995. The increase in operating income was
attributable to slightly higher earnings at Defense & Electronics and Fluid
Technology, along with significantly lower headquarters expenses, a result of
reflecting expenses of ITT Industries as an independent entity in 1996 compared
with an apportionment of ITT Delaware's expenses in 1995. Other operating
income/expenses, which include gains and losses from foreign exchange
transactions and other charges, was expense of $6 million in the current
quarter, including the $10 million ITT Automotive restructuring charge, compared
with income of $7 million in the 1995 second quarter. Operating margins were
6.8% in the second quarter of 1996 compared to 5.9% in the second quarter of
1995, a result of the factors discussed above.
Net interest expense increased to $38 million compared with $35 million in
the 1995 second quarter. Interest expense in the 1996 quarter reflects actual
interest expenses incurred on debt assumed by ITT Industries on, or subsequent
to, the Distribution, while interest expense in the 1995 quarter reflected an
allocation of total ITT Delaware's interest between the continuing and
Discontinued Operations, based on debt outstanding at that time. Interest income
decreased from $12 million in the second quarter of 1995 to $1 million in the
second quarter of 1996. This decrease is a result of maintaining lower cash
balances by using available cash to reduce long-term debt.
7
<PAGE> 9
The effective income tax rate approximated 40% in the 1996 second quarter
and 38% in the 1995 second quarter. The 1995 period benefited from the
utilization of tax credits in Italy. Excluding these credits, the effective
income tax rate for the second quarter of 1995 would have been 41%. Income tax
expense increased by $18 million, to $46 million in the 1996 second quarter, due
to the higher pretax earnings and the higher effective tax rate as discussed
above.
Business Segments -- Sales and operating income for each of the Company's
three major continuing business segments were as follows for the three months
ended June 30, 1996, and 1995 ($ in millions):
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------- -------------------
THREE MONTHS THREE MONTHS
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
$1,448 $1,485 ............Automotive.............. $ 102 $ 108
</TABLE>
ITT Automotive's second quarter sales were slightly below the 1995 sales level,
primarily due to the phase-in of the lower priced Mark 20 ABS braking system and
the negative impact of foreign exchange. In the current quarter, operating
income was adversely affected by a $10 million pretax restructuring charge
primarily to relocate some production facilities to lower cost locations.
Operating income, before the $10 million pretax restructuring charge, was $112
million in the second quarter of 1996 compared with $108 million in the second
quarter of 1995. The increase in operating income, before the restructuring
charge, was primarily attributable to cost reduction actions in excess of price
reductions.
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------- -------------------
THREE MONTHS THREE MONTHS
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
$ 378 $ 403 ........Defense & Electronics....... $ 30 $ 27
</TABLE>
ITT Defense & Electronics revenue was down 6.2%, from the prior year second
quarter, due to lower sales volume in certain defense programs and unfavorable
foreign exchange translation in the electronics segment. However, operating
income was 11% higher in the 1996 period due to operating efficiencies which
enabled the defense business to see improved margins on contracts and the
electronics business to record continued margin improvements.
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------- -------------------
THREE MONTHS THREE MONTHS
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
$ 321 $ 316 .............Fluid Technology....... $ 30 $ 29
</TABLE>
ITT Fluid Technology's 1996 second quarter sales increased slightly over the
comparable 1995 period due to higher sales volume in several segments
particularly in the Asia-Pacific and Eastern European markets. However, sales
for 1996 were negatively impacted by the sale of ITT General Controls product
line, early in the quarter, and weak market conditions in France and Germany.
Operating income for the second quarter of 1996 also had a slight increase over
the 1995 second quarter. This improvement in operating income was the result of
strong performances from emerging markets and cost control actions.
8
<PAGE> 10
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
Net income of $108 million or $.89 per fully diluted share increased 18.7%
compared with the $91 million or $.69 per fully diluted share, of income from
continuing operations, reported in the 1995 period. The increase was primarily
caused by an after-tax provision, recorded in the second quarter of 1995, of $29
million or $.25 per fully diluted share for the expected loss on the disposal of
ITT Semiconductors and a portion of ITT Community Development Corporation.
Excluding this provision and its related impact on the effective tax rate, 1995
net income from continuing operations would have been $109 million or $.93 per
fully diluted share. Net income, for the first six months of 1995, was $840
million or $7.08 per fully diluted share including income from Discontinued
Operations of $749 million (including $403 million reflecting the gain on the
sale of ITT Financial).
Net sales totaling $4.4 billion, for the first six months of 1996, were slightly
below the $4.6 billion for the 1995 period. This decrease included the effects
of the GM strike in the first quarter of 1996 and unfavorable foreign exchange
translation, partially offset by an increase in ITT Fluid Technology's sales.
Operating income for the first half of 1996 was $257 million, which included the
impacts of the GM strike and of the restructuring charge at ITT Automotive in
the first and second quarters of 1996, compared with $242 million reported in
the 1995 period. The increase in operating income was attributable to higher
earnings at Defense & Electronics and Fluid Technology, along with significantly
lower headquarters expenses. The decrease in headquarters expenses is a result
of reflecting expenses of ITT Industries as an independent entity in 1996
compared with an apportionment of ITT Delaware's expenses in 1995. Other
operating expenses, which includes gains and losses from foreign exchange
transactions and other charges, totaled $4 million in the 1996 period, compared
with $6 million in the 1995 period. Operating margins rose to 5.8% in the first
six months of 1996, up from 5.3% in the comparable period of 1995, a result of
the factors discussed above.
Net interest expense increased to $73 million compared with $59 million in 1995.
Interest expense for 1996 reflects actual interest expense incurred on debt
assumed by ITT Industries on, or subsequent to, the Distribution, while interest
expense in 1995 reflected an allocation of total ITT Delaware's interest between
the continuing and Discontinued Operations, based on debt outstanding at that
time. Interest income for the first six months of 1996 decreased to $10 million
from $21 million in the first six months of 1995. This decrease is a result of
maintaining lower cash balances by using available cash to reduce long-term
debt.
Miscellaneous expense, for the first six months of 1995, includes the
aforementioned provision for the expected loss on the disposal of ITT
Semiconductors and a portion of ITT Community Development Corporation. The
effective income tax rate approximated 41% in the 1996 and 1995 periods. Income
tax expense increased by $13 million, to $75 million in the 1996 period, due to
the higher pretax earnings.
Business Segments -- Sales and operating income for each of the Company's
three major continuing business segments were as follows for the six months
ended June 30, 1996, and 1995 ($ in millions):
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------- -------------------
SIX MONTHS SIX MONTHS
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
$2,868 $2,962 ............Automotive.............. $ 177 $ 207
</TABLE>
ITT Automotive's revenues, for the first six months of 1996, were lower than the
1995 six month period, due primarily to the GM strike in the first quarter of
1996 and a reduction in the second quarter of 1996 of approximately $50 million
in sales related to foreign exchange translation. Operating income was reduced
by the GM strike and a restructuring charge in the first half of 1996. This
decrease was partially offset by cost reduction actions in excess of price
reductions.
9
<PAGE> 11
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------- -------------------
SIX MONTHS SIX MONTHS
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
$ 732 $ 762 ........Defense & Electronics....... $ 50 $ 45
</TABLE>
ITT Defense & Electronics revenue was down from the prior year six month period,
due to lower sales volume in certain defense programs and unfavorable foreign
exchange translation in the electronics segment. Despite lower sales, operating
income was 11% higher due to operating efficiencies which enabled improved
margins in both the defense and electronics businesses.
<TABLE>
<CAPTION>
SALES OPERATING INCOME
------------------- -------------------
SIX MONTHS SIX MONTHS
------------------- -------------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C>
$ 627 $ 605 .............Fluid Technology....... $ 52 $ 47
</TABLE>
ITT Fluid Technology's 1996 six month sales were 3.6% higher than the comparable
1995 period due to higher sales volume, despite the weak market conditions in
France and Germany and the sale of ITT General Controls product line. Operating
income increased 10.6% over the first half of 1995. This improvement was
attributable to strong performances from several business lines, as well as
continued growth in emerging markets and cost control actions.
LIQUIDITY AND CAPITAL RESOURCES
Operating cash flow from continuing operations was $105 million in the
first six months, offset by payments of $174 million related to Discontinued
Operations, principally prior year's tax payments and expenses related to the
Distribution. Operating cash flow, including Discontinued Operations, in the
first six months of 1995 was $141 million.
Many of the Company's businesses require substantial investment in plant
and tooling in order to produce competitively superior products. Expenditures
for plant additions totaled $172 million in the first six months of 1996, with
approximately 70% of that total incurred at Automotive, primarily in ABS,
traction control technology, and brake and wiper systems. Spending for the first
six months of 1995 was $165 million, 60% of which was also at Automotive. Cash
expenditures for plant, property, and equipment are projected to approximate
last year's level of $450 million for the full year.
Cash inflows in the first half of 1996 included $110 million from the sale
of land and other assets, including a portion of ITT Community Development
Corporation and ITT General Controls product line.
The increase in working capital (receivables, inventory, payables, and
accrued liabilities) required a cash outflow of approximately $276 million. This
was due largely to a first quarter seasonal increase in receivables and a
reduction of accounts payable at Automotive and Defense & Electronics.
External borrowings were $1,653 million at June 30, 1996, compared with
$1,607 million at December 31, 1995. Cash and cash equivalents were $8 million
at June 30, 1996, compared to $94 million at year end 1995. The higher debt
level at June 30, 1996, reflects the cash flows discussed above.
Shareholders' equity increased $67 million during the first half of 1996,
due primarily to growth in retained earnings. The Company paid dividends of $.15
per share for the first and second quarter of 1996 on April 1, 1996 and July 1,
1996, respectively. A third quarter dividend of the same amount will be paid on
October 1, 1996.
10
<PAGE> 12
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 21, 1996, the
persons whose names are set forth below were elected as directors, constituting
the entire Board of Directors, with relevant voting information for each person:
<TABLE>
<CAPTION>
Votes Cast
--------------------------------------------- Broker
For Withheld Nonvotes
-------------------- ----------------- ----------
<S> <C> <C> <C>
Rand V. Araskog................................................. 102,086,778 965,128 0
Robert A. Burnett............................................... 102,480,985 570,921 0
Curtis J. Crawford.............................................. 102,566,248 485,658 0
Michel David-Weill.............................................. 91,067,954 11,983,952 0
D. Travis Engen................................................. 102,558,082 493,824 0
S. Parker Gilbert............................................... 102,614,916 436,990 0
Edward C. Meyer................................................. 102,597,405 454,501 0
</TABLE>
In addition to the election of directors, the following matters were acted upon:
(a) The reappointment of Arthur Andersen LLP as independent auditors for
1996 was ratified by a vote of 101,815,322 shares in favor, 957,375 shares
against, 279,209 shares abstained, and 0 broker nonvotes.
(b) A shareholder proposal calling for ITT Industries to list in the proxy
statement the executive officers earning more than $100,000 annually was not
approved by a vote of 80,445,484 shares against, 7,487,090 shares in favor,
5,199,466 shares abstained, and 9,919,866 broker nonvotes.
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.
11
<PAGE> 13
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 Richard J.M. Hamilton
-------------------------------------
Richard J.M. Hamilton
Senior Vice President and Controller
(Principal accounting officer)
July 31, 1996
(Date)
12
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description Location
- ------- ----------- --------
<S> <C> <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 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 None
</TABLE>
13
<PAGE> 1
EXHIBIT 11
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CALCULATION OF EARNINGS PER SHARE
(IN MILLIONS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------- ----------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
PRIMARY BASIS --
Net income .................................................................. $ 68 $ 612 $ 108 $ 840
ESOP preferred dividends -- net of tax ...................................... -- (9) -- (17)
----- ----- ----- -----
Net income applicable to primary earnings per share ......................... $ 68 $ 603 $ 108 $ 823
----- ----- ----- -----
Average common shares outstanding ........................................... 118 106 118 106
Common shares issuable in respect to common stock equivalents ............... 3 1 3 1
----- ----- ----- -----
Average common equivalent shares ............................................ 121 107 121 107
----- ----- ----- -----
Earnings Per Share
Continuing operations ....................................................... $ .56 $ .35 $ .89 $ .69
Discontinued operations ..................................................... -- 5.26 -- 6.97
----- ----- ----- -----
Net income .................................................................. $ .56 $5.61 $ .89 $7.66
===== ===== ===== =====
FULL DILUTED BASIS --
Net income applicable to primary earnings per share ......................... $ 68 $ 603 $ 108 $ 823
ESOP preferred dividends -- net of tax ...................................... -- 9 -- 17
If converted ESOP expense adjustment -- net of tax benefit .................. -- (6) -- (10)
----- ----- ----- -----
Net income applicable to fully diluted earnings per share ................... $ 68 $ 606 $ 108 $ 830
----- ----- ----- -----
Average common equivalent shares ............................................ 121 107 121 107
Additional common shares issuable assuming full dilution .................... -- 10 -- 10
----- ----- ----- -----
Average common equivalent shares assuming full dilution ..................... 121 117 121 117
----- ----- ----- -----
Earnings Per Share
Continuing operations ....................................................... $ .56 $ .35 $ .89 $ .69
Discontinued operations ..................................................... -- 4.82 -- 6.39
----- ----- ----- -----
Net income .................................................................. $ .56 $5.17 $ .89 $7.08
===== ===== ===== =====
</TABLE>
In 1995, the Series N convertible preferred stock was 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 Company. The
calculation impact of dilutive securities is determined quarterly based on the
forecast of annual earnings.
<PAGE> 1
EXHIBIT 12
ITT INDUSTRIES, INC. AND SUBSIDIARIES
CALCULATION OF RATIOS OF EARNINGS TO TOTAL FIXED CHARGES
AND CALCULATION OF EARNINGS TO TOTAL FIXED CHARGES AND
PREFERRED DIVIDEND REQUIREMENTS
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEARS ENDED DECEMBER 31,
--------------- ----------------------------------
1996 1995 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Income from continuing operations.... $108 $ 91 $ 21 $202 $135 $ 655 $ 231
Add (deduct):
Adjustment for distributions in
excess of (less than)
undistributed equity earnings
and losses a).................... 1 -- 1 -- (2) (31) (146)
Income taxes....................... 75 62 50 147 65 311 84
Amortization of interest capitalized -- -- 2 1 4 3 2
---- ---- ---- ---- ---- ------ ----
184 153 74 350 202 938 171
---- ---- ---- ---- ---- ------ ----
Fixed Charges:
Interest and other financial
charges.......................... 83 80 175 114 153 180 125
Interest factor attributable to
rentals b)....................... 15 11 29 22 24 25 25
---- ---- ---- ---- ---- ------ ----
98 91 204 136 177 205 150
---- ---- ---- ---- ---- ------ ----
Earnings, as adjusted, from
continuing operations.............. $282 $244 $278 $486 $379 $1,143 $ 321
==== ==== ==== ==== ==== ====== ====
Fixed Charges:
Fixed charges above................ 98 $ 91 $204 $136 $177 $ 205 $ 150
Interest capitalized............... -- 2 3 7 8 12 11
---- ---- ---- ---- ---- ------ ----
Total fixed charges.............. 98 93 207 143 185 217 161
Dividends on preferred stock
(pre-income tax basis) c).......... -- 24 24 48 50 63 78
---- ---- ---- ---- ---- ------ ----
Total fixed charges and preferred
dividend requirements.......... $ 98 $117 $231 $191 $235 $ 280 $ 239
==== ==== ==== ==== ==== ====== ====
Ratios:
Earnings, as adjusted, from
continuing operations to total
fixed charges.................... 2.88 2.62 1.34 3.40 2.05 5.27 1.99
==== ==== ==== ==== ==== ====== ====
Earnings, as adjusted, from
continuing operations to total
fixed charges and preferred
dividend requirements............ 2.88 2.09 1.20 2.54 1.61 4.08 1.34
==== ==== ==== ==== ==== ====== ====
</TABLE>
- ---------
Notes:
a) The adjustment for distributions in excess of (less than) undistributed
equity earnings and losses represents the adjustment to income for
distributions in excess of (less than) 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 dividends on preferred stock have been determined by adding to the
total preferred dividends an allowance for income taxes, calculated on the
effective income tax rate.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1996 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 1,379
<ALLOWANCES> 36
<INVENTORY> 879
<CURRENT-ASSETS> 2,477
<PP&E> 4,977
<DEPRECIATION> 2,864
<TOTAL-ASSETS> 5,694
<CURRENT-LIABILITIES> 2,766
<BONDS> 637
0
0
<COMMON> 118
<OTHER-SE> 576
<TOTAL-LIABILITY-AND-EQUITY> 5,694
<SALES> 4,442
<TOTAL-REVENUES> 4,442
<CGS> 3,816
<TOTAL-COSTS> 3,816
<OTHER-EXPENSES> 369
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> 183
<INCOME-TAX> 75
<INCOME-CONTINUING> 108
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
