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ITT Corporation Electrical Products Group 2012 Annual Spring Conference

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ITT Corporation Electrical Products Group 2012 Annual Spring Conference

  1. 1. ITT Corporation Electrical Products Group 2012 Annual Spring Conference p g May 21, 2012
  2. 2. Safe Harbor Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the “Act”): Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, future strategic plans and other statements that describe the company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. Whenever used, words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target" and other terms of similar meaning are intended to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such forward-looking statements. Factors that could cause results to differ materially from those anticipated include, but are not limited to: • Uncertainties with respect to our estimation of asbestos liability f • O ability to achieve stated synergies or cost savings from acquisitions or Our f exposures, third-party recoveries and net cash flow; divestitures; • Economic, political and social conditions in the countries in which we • The number of personal injury claims filed against the Company or the degree of conduct our businesses; liability; • Changes in U.S. or International sales and operations; • Our ability to effect restructuring and cost reduction programs and realize savings • Contingencies related to actual or alleged environmental contamination, from such actions; claims and concerns; • Changes in our effective tax rate as a result in changes in the geographic • D li i consumer spending; Decline in di earnings mix, valuation allowances, t examinations or di i i l ti ll tax i ti disputes, t authority t tax th it • Sales and revenues mix and pricing levels; rulings or changes in applicable tax laws; • Availability of adequate union and non-union labor, commodities, supplies • Intellectual property matters; and raw materials; • Governmental investigations; • Interest and foreign currency exchange rate fluctuations; changes in local • Potential future postretirement benefit plan contributions and other employment government regulations and compliance therewith; and pension matters; • Competition, industry capacity & production rates; declines in orders or • Susceptibility to market fluctuations and costs as a result of becoming a smaller, sales as a result of industry or geographic downturn; more focused company after the spin off; spin-off; • Ability of third parties, including our commercial partners, counterparties, • Changes in generally accepted accounting principles; and financial institutions and insurers, to comply with their commitments to us; • Other factors set forth in our Annual Report on Form 10−K for the fiscal year • Our ability to borrow and availability of liquidity sufficient to meet our ended December 31, 2011 and our other filings with the Securities and Exchange needs; Commission. • Changes in the recoverability of goodwill or intangible assets; The Company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. May 21, 2012 P2
  3. 3. NEXT Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P3
  4. 4. Diversified Business Segments Industrial Process Control Technologies • Full Range of Complex Industrial Pumps & Valves 14% • Monitoring & Control Systems g y Interconnect Industrial • Aftermarket Services Solutions Process 20% 36% Motion Technologies Motion • Premium Friction Technology Technologies 30% • Shock Absorbers & Damping Technologies Interconnect Solutions Highly • Broad Range of Harsh Environment Connectors Engineered Control Technologies • Aerospace - Extensive Portfolio of Fuel Management, p g , Critical Actuation and Noise Absorption Components Applications • Industrial - Motion & Energy Absorption Solutions 2011 Data Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P4
  5. 5. Global Reach 34% Europe 40% North America 12% Asia Pacific 8% 6% Latin Africa & America Middle East 28% Emerging Markets Major Operating Facilities ITT World Headquarters Industrial Process Motion Technologies Interconnect S l ti I t t Solutions Control Technologies % 2011 Revenue Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P5
  6. 6. Strong End Market Participation Industrial Motion Interconnect Control Process Technologies Solutions Technologies Auto 25%   Strong Macro Trend Alignment Energy & Mining 20%    • Growing Middle Class Industrial • Large-Scale Urbanization Processing 17%   • Energy Creation & Efficiency Aerospace 15%   • Resource Scarcity General Industrial 15%    Rail & Transport 8%   2011 Data Diversified, Connected & Aligned Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P6
  7. 7. We Are ITT Leader in Attractive and Defensible Niches Leading Positions in High Growth Attractive Markets Global and Highly Diversified Company • 60% International Revenue • 28% Emerging Markets • 30% Aftermarket Long-Standing Brand & Operating History Established Management System & Leadership Team Engineered for Growth Profitable Growth Drivers f G Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P7
  8. 8. Profitable Growth Drivers • Focused Emerging Market Expansion • Aftermarket C t Capture • Investment in Technology & Innovation • Premier Customer Experience • Margin Expansion Through Operational Excellence • Effective Capital Deployment Total to Drive Organic & Inorganic Growth Value Creation Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P8
  9. 9. Oil & Gas Organic Growth Story Korea O&G Initiative Begins Saudi Arabia Saudi Aramco Brazil B il 13% % India Australia CAGR 2012 2011 2010 $275M* 2009 2006 2008 $200M* $130M* 5 Gl b l St t i Wi Global Strategic Wins *Amounts Represent Orders Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P9
  10. 10. 2012 Capital Overview Strong Balance Sheet Supports Long-Term Growth Geography of Cash Balances $705M Net Cash & Cash Equivalents at 3/31/12 < 5% Cash in US +166% Q1 Adjusted Free Cash Flow Conversion Strategic Capital Deployment (Q1 Results) $9M Strategic Investments APAC Europe • Wuxi, China Automotive F ilit E W i Chi A t ti Facility Expansion i • Advanced Front-End Capabilities • Expanded Aftermarket Reach & Capabilities $74M Gross Share Repurchases (April YTD) • Share Repurchase YTD Activity In-Line with Full-Year Expected Share Count $9M Dividend Payment y Disciplined & $32M Pension Contribution Balanced • Includes $15M Discretionary Funding Capital Building M&A Pipeline Deployment Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P10 All Results are Unaudited - For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  11. 11. 2012 Financial Outlook Revenue Range Geographic Outlook vs 2011 2012 Organic 5% to 7% Adjusted Segment Operating Margin 2012 Margins ~13.6% +40 bps vs 2011 2012 Adjusted EPS Range $1.62 to $1.72 North America +4% vs 2011* +6 to +8% +13% vs 2011* (ex Spin Dis-Synergies) Europe Adjusted Free Cash Flow Conversion FLAT to +2% Emerging Markets 2012 Adjusted FCF Conversion >105% of Net Income 10% +10% *2011 Results are Adjusted Pro Forma EPS from Continuing Operations Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P11 For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  12. 12. NEXT Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P12
  13. 13. Appendix
  14. 14. 2012 Total Revenue Growth Outlook Revenue Energy & 2012 vs 2011 14% Mining Organic +5 to +7% Total +5 to +7% 12% Industrial Processing 10% +10% Emerging 2012 v 2011 8% Markets Growth Aerospace & Defense 6% General Industrial 4% Auto, Rail & Transportation 2% 0% $ $200M $300M $400M $500M $600M $700M All 2012 Annual (10%) Other Revenue Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P14 All Results are Unaudited - For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  15. 15. Diversified & Balanced Revenue Profile End Markets OEM/Aftermarket Mix Geographic Mix Aerospace Gen’l Ind’l & Def 15% Projects 15% 25% International 60% OEM North Industrial Platforms America Process Auto, Auto 45% 40% 17% Rail & Transport 33% Energy Aftermarket & Mining 30% 20% Strong 60% 28% Growth Op Income from p Emerging g g Markets Aftermarket Markets 2011 Data Uniquely Strong Foundation for Growth Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P15
  16. 16. Industrial Process Global Manufacturer of Industrial Pumps, Valves, Monitoring and Control Systems and Aftermarket Services Revenues Competitive Advantages $ Millions 850 • Goulds Pumps Brand & Reputation 816 800 767 • Broad Portfolio of Process Pumps 750 719 • North American Leader in Chemical 704 694 700 & General Industry Markets 650 • Global Footprint 600 2007 2008 2009 2010 2011 • Focus on Total Cost of Ownership Revenue by End Market Revenue by Region Europe p Latin 5% Other America 19% North Energy & Mining ~37% Industrial Processing Middle East & Africa ~42% America Aftermarket Aft k t Emerging E i 54% 10% Markets Asia Pac 12% 2011 Data Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P16 All Results are Unaudited - For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  17. 17. Global Manufacturer of Highly Engineered Motion Technologies and Durable Brake Pads, Shock Absorbers and Damping Technologies Revenues Competitive Advantages $ Millions • Material Science Expertise 800 634 • Strong Brand Recognition 562 548 600 495 491 • Efficient Production Capability 400 • 48% Aftermarket Revenue 200 • Low Cost Region Footprint 0 2007 2008 2009 2010 2011 • Reputation for Quality Revenue by End Market Revenue by Endby Region Revenue Market & Region Eastern Automotive Europe 11% Bus, China 3% ~48% Truck & Trailer Western ROW 5% Aftermarket Europe North 71% Rail America 10% 2011 Data Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P17 All Results are Unaudited - For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  18. 18. Designs and Manufactures Highly Interconnect Solutions Engineered Connectors for Harsh Environments Revenues Competitive Advantages $ Millions 500 • Strong Cannon Brand 453 426 413 418 • Engineering Capability to Configure 400 Technology Building Blocks into Customer 341 Solutions 300 • Broad Product Portfolio 200 • Gl b l M Global Manufacturing F f i Footprint i 2007 2008 2009 2010 2011 Revenue by End Market Revenue by Region Europe General 27% Industrial Aerospace Asia & Defense Commun- ications North ~28% Pacific Emerging 21% America A i 43% Markets Auto, Other Transport ROW & Rail Energy & 9% Mining 2011 Data Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P18 All Results are Unaudited - For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  19. 19. Specializes in Highly Engineered Control Technologies Aerospace Components and Industrial Products Revenues Competitive Advantages $ Millions • Market Leading Technologies 400 322 318 • Application Engineering Expertise 300 275 243 • Strong Global Relationships 200 160 100 • Extensive Portfolio of Qualified Products 0 • Mission Critical Applications Throughout pp g 2007 2008 2009 2010 2011 Product Life-Cycle Revenue by End Market Revenue by Region Europe General 15% Industrial North Aerospace America 67% Asia A i & Defense Pacific 15% Other ROW 3% 2011 Data Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P19 All Results are Unaudited - For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  20. 20. Q1 2012 ITT Results Continuing Operations g p ( (unaudit ed) ) Q Q1 $ millions, except per share amounts 2012 vs 2011 Revenue $577 +8% Adjusted Segment Operating Income $65 (-12%) Adjusted EPS $0.39 (-13%)* Orders $614 +1% Q1 2012 Results +9% Organic Revenue (-12%) Adjusted Segment Operating Income  Mining, Oil & Gas and Chemical Growth  Recurring Spin Dis-Synergy Costs  Market Share Gains in Automotive C Connectors V l t Volume & Mi Mix  Strong Emerging Market Growth  Mix Shift to Large Projects at Industrial Process  Global Connectors & Customer Market Share Loss (-13%) Adjusted Pro Forma EPS  Difficult PY Compares ($4M PY Rail Seats)  Negative FX +2% Organic Orders  Higher Tax Rate & Share Count  1.06x Book-to-Bill  Lower Interest Expense  Oil & Gas, Chemical, Auto and Rail Strength  Global Connectors and PY China Rail Seats ($13M) *Adjusted EPS growth rate includes pro forma adjustments in 2011 results. Pro Forma adjustments reflect the elimination of interest expense on debt extinguished in connection with the transformation and interest income on cash distribution to the spun-off companies as if the distribution occurred at beginning of the period. Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P20 All Results are Unaudited - For non-GAAP reconciliations, refer to appendix and www.itt.com/ir.
  21. 21. Key Performance Indicators and Non-GAAP Measures Management reviews key performance metrics including revenue, segment operating income and margins, earnings per share, share orders growth and backlog among others in connection with the management of our business Management growth, backlog, others, business. believes that the following metrics are useful to investors when evaluating operating performance for all the periods presented, and provide a tool for evaluating our ongoing operations and our management of assets held from period to period. These metrics, however, are not a measure of financial performance under GAAP and should not be considered a substitute for measures determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators for purposes of this REG-G reconciliation: REG G Organic Revenues and Orders are defined as revenues and orders excluding the impact of foreign currency fluctuations and contributions from acquisitions and divestitures made during the current year. Divestitures include sales of insignificant portions of our business that did not meet the criteria for presentation as a discontinued operation. The period-over-period change resulting from foreign currency fluctuations assumes no change in exchange rates from the p o period. prior pe od Book-to-Bill is defined as organic orders divided by organic revenue. Adjusted Segment Operating Income and Adjusted Segment Operating Margin are defined as segment operating income and operating margin, adjusted for special items. Special items represent significant charges or credits that impact current results, but may not be related to the Company's ongoing operations and p y p y g g p performance, such as transformation costs and restructuring charges. Adjusted Pro Forma Income from Continuing Operations and Adjusted Pro Forma EPS from Continuing Operations are defined as reported income from continuing operations and reported income from continuing operations per diluted share, adjusted to exclude special items and include pro forma adjustments. Special items may include, but are not limited to, transformation and repositioning costs, asbestos, restructuring costs, income tax settlements or adjustments and other unusual and infrequent non-operating items. Special items represent significant charges or credits that impact current results, but may not be related to the Company’s ongoing operations and performance. Pro Forma adjustments in 2011 reflect the elimination of interest expense as if repayment of $1,250M of long term debt occurred January 1 and elimination of interest income as if $400M of aggregate cash was distributed to the spun-off companies on January 1. Adjusted Free Cash Flow is defined as net cash provided by operating activities less capital expenditures, cash payments for transformation costs, net asbestos cash flows and other special items. Due to other financial obligations and commitments, the entire free cash flow amount may not be available for discretionary purposes. Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P21 All Results are Unaudited
  22. 22. ITT Corporation Non-GAAP Reconciliation Reported vs. Organic Revenue / Order Growth First Quarter 2012 & 2011 ($ Millions) (As Reported - GAAP) (As Adjusted - Organic) (A) (B) (C) (D) (E) = B+C+D (F) = E / A Acquisition / FX Change % Change Divestitures Contribution Change % Change 3M 2012 3M 2011 2012 vs. 2011 2012 vs. 2011 3M 2012 3M 2012 Adj. 12 vs. 11 j Adj. 12 vs. 11 j Revenues ITT Corporation - Consolidated 577 533 44 8% (6) 8 46 9% Industrial Process 226 168 58 35% (7) (1) 50 30% Motion Technologies 180 184 (4) -2% 0 8 4 2% Interconnect Solutions 93 108 ( ) (15) -14% 1 1 ( ) (13) -12% Control Technologies 79 78 1 1% 0 0 1 1% Orders Total Segment Orders 614 605 9 1% (7) 8 10 2% Industrial Process 246 220 26 12% (8) (1) 17 8% Motion Technologies 186 177 9 5% 0 8 17 10% Interconnect Solutions 98 117 (19) -16% 1 1 (17) -15% Control Technologies 86 99 (13) -13% 0 0 (13) -13% Note: Excludes intercompany eliminations Immaterial differences due to rounding Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P22 All Results are Unaudited
  23. 23. ITT Corporation Reported vs Adjusted Segment Operating Income & OI Margin First Quarter of 2012 & 2011 ($ Millions) 3M 2012 3M 2012 3M 2012 3M 2012 3M 2011 3M 2011 3M 2011 3M 2011 % Change % Change As Reported 12 As Adjusted As Reported Spin Costs Restructuring As Adjusted As Reported Spin Costs Restructuring As Adjusted vs. 11 12 vs. 11 Revenue: Industrial Process 226 226 168 168 35.0% 35.0% Motion Technologies 180 180 184 184 -1.9% -1.9% Interconnect Solutions 93 93 108 108 -14.3% -14.3% Control Technologies 79 79 78 78 1.0% 1.0% Intersegment eliminations (1) (1) (5) (5) -80.0% -80.0% Total Revenue 577 577 533 533 7.5% 7.5% Operating Margin: Industrial Process 9.6% 30 BP - BP 9.9% 12.5% - BP 10 BP 12.6% (290) BP (270) BP Motion Technologies 15.2% - BP - BP 15.2% 15.1% - BP - BP 15.1% 10 BP 10 BP Interconnect Solutions 2.0% 60 BP - BP 2.6% 10.4% - BP - BP 10.4% (840) BP (780) BP Control Technologies 16.5% - BP 20 BP 16.7% 17.1% - BP 140 BP 18.5% (60) BP (180) BP Total Operating Segments 11.1% 20 BP - BP 11.3% 13.7% - BP 30 BP 14.0% (260) BP (270) BP Income: Industrial Process 22 1 0 23 21 - 0 21 3.8% 6.6% Motion Technologies 27 - - 27 28 - - 28 -1.4% -1.4% Interconnect Solutions 2 0 - 2 11 - - 11 -83.2% -78.8% Control Technologies 13 - 0 13 13 - 1 14 -3.0% -9.6% 'Total Segment Operating Income 64 1 0 65 73 - 1 74 -12.8% -12.2% Note: Immaterial differences due to rounding. Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P23 All Results are Unaudited
  24. 24. ITT Corporation Non-GAAP Reconciliation Reported vs. Adjusted Income from Continuing Operations & Adjusted EPS First Quarter of 2012 & 2011 (Unaudited) ($ Millions, except EPS and shares) Change Percent Change Q1 2012 Non-GAAP Q1 2012 Q1 2011 Non-GAAP Pro Forma Q1 2011 2012 vs. 2011 2012 vs. 2011 As Reported Adjustments As Adjusted As Reported Adjustments Adjustments As Adjusted As Adjusted As Adjusted Segment Operating Income 64 1 #A 65 73 1 #A - 74 Interest Income (Expense) (1) - (1) (24) - 17 #D (7) Other Income (Expense) (1) - (1) (1) - - (1) Corporate (Expense) (27) 17 #B (10) (83) 76 #C - (7) (Loss) Income from Continuing Operations before Tax 35 18 53 (35) 77 17 59 Income Tax Benefit (Expense) (25) 9 #E (16) 13 (24) (6) (17) (Loss) Income from Continuing Operations 10 27 37 (22) 53 11 42 EPS from Continuing Operations 0.11 0.28 #F 0.39 (0.23) 0.57 #F 0.11 #F 0.45 (0.06) -13% #A - Segment operating income in 2012 includes Transformation costs ($1M) and in 2011 Restructuring costs of ($1M). #B - Primarily transformation costs ($4M); Quarterly asbestos provision ($13M). #C - Transformation costs ($60M); Quarterly asbestos provision ($16M) #D - Pro forma adjustment reflects elimination of interest expense as if repayment of $1,250M of long term debt occurred January 1 and elimination of interest income as if $400M of aggregate cash was distributed to Exelis and Xylem on January 1 #E - Includes valuation allowance on US deferred tax assets. #F - Adjustments to EPS from Continuing Operations Restructuring, Restructuring net of related tax benefit - 0.01 0 01 Transformation costs, net of related tax benefit 0.04 0.43 Asbestos, net of related tax benefit 0.08 0.13 Valuation allowance on US deferred tax assets. 0.15 - Pro forma interest expense adjustments, net of tax benefit - 0.11 Other 0.01 - Adjustments to EPS from Continuing Operations 0.28 0.68 Note: Immaterial d e e ces due to rounding oe a e a differences o ou d g Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P24 All Results are Unaudited
  25. 25. ITT Corporation Non-GAAP Reconciliation Net Cash - Operating Activities vs. Adjusted Free Cash Flow Conversion First Quarter 2012 & 2011 ($ Millions) 3M 2012 3M 2011 Net Cash - Operating Activities 18 (45) Capital Expenditures (13) (15) Free Cash Flow, including Transformation 5 (60) Transformation Capex 1 0 Transformation Cash Payments 30 15 Net Asbestos Cash Payments N tA b t C hP t 16 7 Discretionary Pension Contributions, net of tax 9 0 Free Cash Flow 61 (38) Income from Continuing Operations 10 (22) Special Items (including Transformation Costs) 27 64 Income from Continuing Operations, Excluding Special Items 37 42 Adjusted Free Cash Flow Conversion 166% NA Electrical Products Group – 2012 Annual Spring Conference May 21, 2012 P25 All Results are Unaudited

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