EX-99.3 5 y93291exv99w3.htm EX-99.3 exv99w3
Exhibit 99.3
UNAUDITED SUPPLEMENTAL FINANCIAL INFORMATION
The Supplemental Information consists of unaudited income statement information for the nine months ended September 30, 2011 and for each of the three fiscal years ended December 31, 2010. The Supplemental Information was derived from our historical consolidated financial statements and gives effect to the Spin-off of Exelis and Xylem and reflects certain non-GAAP adjustments. The unaudited Supplemental Information reflects the Company’s results as if the Spin-off and related transactions had occurred as of January 1, 2008. The Supplemental Information should be read together with our unaudited pro forma consolidated condensed financial statements and accompanying notes included in Exhibit 99.2.
The Supplemental Information consists of information management believes are useful to investors when evaluating our operating performance for the periods presented, and provides a tool for evaluating ITT’s ongoing operations and 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 revenue growth (decline) or other metrics as determined in accordance with GAAP. Further, these measures may not be comparable to similarly titled measures reported by other companies.
  •   Pro Forma Revenues are defined as reported GAAP revenues adjusted for the benefit of certain historical transactions between ITT and Exelis and Xylem that previously eliminated in consolidation.
  •   Adjusted Segment Operating Income and Adjusted Segment Operating Margin are defined as GAAP Segment Operating Income and Operating Margin, adjusted for special items and pro forma adjustments. 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 reflect the benefit of certain historical transactions between ITT and Exelis and Xylem that previously eliminated in consolidation.
  •   Adjusted Operating EBIT and Adjusted Operating EBIT Margin are defined as operating income and margin, adjusted for special items that may include, but are not limited to, non-operating items, transformation costs, and pro forma adjustments. 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 relate to certain historical transactions between ITT and Exelis and Xylem that previously eliminated in consolidation.
  •   Adjusted EBITDA and Adjusted EBITDA Margin are defined as operating income and margin before depreciation, amortization and stock based compensation, adjusted for special items that may include, but are not limited to, non-operating items, transformation costs, and pro forma adjustments. 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 relate to certain historical transactions between ITT and Exelis and Xylem that previously eliminated in consolidation.
The Company’s segments are presented on the same basis used internally for evaluating performance and for allocating resources. Our four segments are referred to as Industrial Process, Motion Technologies, Interconnect Solutions and Control Technologies.
The Supplemental Information is not intended to be a complete presentation of our results of operations had the Distribution occurred as of and for the periods indicated. In addition, the Supplemental Information is provided for illustrative and informational purposes only and are not necessarily indicative of our future results of operations had the Spin-off been completed on the date assumed. The Supplemental Information includes pro forma adjustments that are based on available information and assumptions that management believes are reasonable, that reflect the impacts of events directly attributable to the Distribution and related transaction agreements, are factually supportable, and are expected to have a continuing impact on us.

 

 

UNAUDITED NON-GAAP RECONCILIATIONS
PRO FORMA REVENUE AND ADJUSTED SEGMENT OPERATING INCOME AND MARGIN
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010, NINE MONTHS ENDED SEPTEMBER 30, 2011
                                 
                            Nine months  
                            ended  
                            September 30,  
(in millions)   2008     2009     2010     2011  
Revenue
                                
Total Segment Revenues
   $ 2,153     $ 1,794     $ 1,930     $ 1,616  
Less: Intercompany Eliminations
     (21 )     (23 )     (22 )     (15 )
 
                        
Consolidated Revenue — GAAP
   $ 2,132     $ 1,771     $ 1,908     $ 1,601  
 
                                
Adjustments
                                
Pro Forma (a)
     19       18       16       10  
 
                        
 
                                
Pro Forma Consolidated Revenue
   $ 2,151     $ 1,789     $ 1,924     $ 1,611  
 
                                
Segment Operating Income
                                
GAAP
   $ 281     $ 171     $ 230     $ 221  
 
                                
Adjustments
                                
Restructuring and Realignment
     44       48       4       2  
Pro Forma (a)
     6       6       5       3  
 
                        
Total Adjustments
   $ 50     $ 54     $ 9     $ 5  
 
                                
Adjusted Segment Operating Income
   $ 331     $ 225     $ 239     $ 226  
 
                                
Adjusted Segment Operating Margin
     15.4 %     12.6 %     12.4 %     14.0 %
Note:
 
(a)   Pro forma amounts reflect the benefit of transactions between ITT and Exelis and Xylem that previously eliminated in consolidation.

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UNAUDITED ADJUSTED SEGMENT OPERATING INCOME TO ADJUSTED OPERATING EBIT
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010, NINE MONTHS ENDED SEPTEMBER 30, 2011
                                 
                            Nine months  
                            ended  
                            September 30,  
(in millions)   2008     2009     2010     2011  
Total Adjusted Segment Operating Income
   $ 331     $ 225     $ 239     $ 226  
 
                                
Less Corporate Costs after Adjustments (a):
                                
Corporate General and Administrative Expenses
     45       55       36       24  
Corporate Restructuring & Realignment
     (4 )     —       —       —  
Corporate Transformation Costs
     —       —       —       10  
Information System Initiatives (b)
     —       (1 )     (4 )     (4 )
Other Expenses
     16       3       (1 )     12  
 
                        
Adjusted Corporate Costs
   $ 57     $ 57     $ 31     $ 42  
 
                                
Adjusted Operating EBIT
   $ 274     $ 168     $ 208     $ 184  
 
                                
Adjusted Operating EBIT Margin
     12.7 %     9.4 %     10.8 %     11.4 %
                                 
Notes:
                                
 
(a)     Corporate costs exclude the following:
                                
Information System Initiatives (b)
   $ —     $ —     $ —     $ 55  
Asbestos Remeasurement (c)
   $ —     $ 210     $ 330     $ 41  
Asbestos Provision (d)
   $ 14     $ 28     $ 55     $ 50  
(b)   Information System initiatives which were terminated as a result of the Spin-off.
 
(c)   Effect of annual asbestos reassessment.
 
(d)   2008 reflects adjustment related to pending claims. 2009, 2010 and nine months ended September 30, 2011 reflect the effect of maintaining rolling 10 year net asbestos liability.

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UNAUDITED ADJUSTED OPERATING EBIT, ADJUSTED OPERATING EBITDA AND MARGIN
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010, NINE MONTHS ENDED SEPTEMBER 30, 2011
                                 
                            Nine months  
                            ended  
                            September 30,  
(in millions)   2008     2009     2010     2011  
GAAP Operating Income
   $ 206     $ (125 )   $ (192 )   $ 19  
 
                                
Pro Forma Adjustments
                                
Pro Forma (a)
     6       6       5       3  
Transformation Costs
     —       —       2       10  
Information System Initiatives (b)
     —       —       —       59  
 
                        
Pro Forma Operating Income
   $ 212     $ (119 )   $ (185 )   $ 91  
Non GAAP Adjustments
                                
Restructuring and Realignment
   $ 48     $ 48     $ 4     $ 2  
Information System Initiatives (b)
     —       1       4       —  
 
                                
Asbestos Remeasurement (c)
     —       210       330       41  
Asbestos Provision (d)
     14       28       55       50  
 
                        
Total Asbestos Expense
   $ 14     $ 238     $ 385     $ 91  
 
                        
 
                                
Total Adjustments
   $ 62     $ 287     $ 393     $ 93  
 
                        
 
                                
Adjusted Operating EBIT
   $ 274     $ 168     $ 208     $ 184  
 
                                
Depreciation
   $ 57     $ 54     $ 52     $ 42  
Amortization and Stock Based Compensation
     18       25       27       19  
 
                        
 
                                
Adjusted Operating EBITDA
   $ 349     $ 247     $ 287     $ 245  
 
                                
Adjusted Operating EBITDA Margin
     16.2 %     13.8 %     14.9 %     15.2 %
Notes:
 
(a)   Pro forma amounts reflect the benefit of transactions between ITT and Exelis and Xylem that previously eliminated in consolidation.
 
(b)   Information System initiatives which were terminated as a result of the Spin-off.
 
(c)   Effect of annual asbestos reassessment.
 
(d)   2008 reflects the adjustment related to pending claims. 2009, 2010 and nine months ended September 30, 2011 reflect the effect of maintaining rolling 10 year net asbestos liability.

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UNAUDITED ADJUSTED SEGMENT OPERATING INCOME AND MARGIN
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010, NINE MONTHS ENDED SEPTEMBER 30, 2011
                                 
                            Nine months  
                            ended  
                            September 30,  
(in millions)   2008     2009     2010     2011  
Industrial Process Operating Income
                                
GAAP Operating Income
   $ 114     $ 72     $ 79     $ 77  
Adjustments
                                
Restructuring and Realignment
     19       16       1       —  
Pro Forma (a)
     3       4       3       2  
 
                        
Total Adjustments
   $ 22     $ 20     $ 4     $ 2  
 
Adjusted Operating Income
   $ 136     $ 92     $ 83     $ 79  
 
Adjusted Operating Margin
     16.7 %     12.8 %     11.9 %     14.3 %
 
 
                                
Motion Technologies Operating Income
                                
GAAP Operating Income
   $ 82     $ 48     $ 85     $ 67  
 
                                
Adjustments
                                
Restructuring and Realignment
     8       22       —       —  
Pro Forma (a)
     —       —       —       —  
 
                        
Total Adjustments
   $ 8     $ 22     $ —     $ —  
 
                                
Adjusted Operating Income
   $ 90     $ 70     $ 85     $ 67  
 
                                
Adjusted Operating Margin
     16.0 %     14.3 %     15.5 %     13.4 %
 
 
                                
Interconnect Solutions Operating Income
                                
GAAP Operating Income
   $ 42     $ 19     $ 37     $ 34  
 
                                
Adjustments
                                
Restructuring and Realignment
     8       7       1       —  
Pro Forma (a)
     3       2       2       1  
 
                        
Total Adjustments
   $ 11     $ 9     $ 3     $ 1  
 
                                
Adjusted Operating Income
   $ 53     $ 28     $ 40     $ 35  
 
                                
Adjusted Operating Margin
     11.7 %     8.2 %     9.8 %     10.9 %
 
 
                                
Control Technologies Operating Income
                                
GAAP Operating Income
   $ 43     $ 32     $ 29     $ 43  
 
                                
Adjustments
                                
Restructuring and Realignment
     9       3       2       2  
Pro Forma (a)
     —       —       —       —  
 
                        
Total Adjustments
   $ 9     $ 3     $ 2     $ 2  
 
                                
Adjusted Operating Income
   $ 52     $ 35     $ 31     $ 45  
 
                                
Adjusted Operating Margin
     16.1 %     14.4 %     11.3 %     18.5 %
 
Note:
 
(a)   Pro forma amounts reflect the benefit of transactions between ITT and Exelis and Xylem that previously eliminated in consolidation.

5

 

UNAUDITED FINANCIAL IMPACTS OF ASBESTOS ON CONTINUING OPERATIONS
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010, NINE MONTHS ENDED SEPTEMBER 30, 2011
                                 
                            Nine months  
                            ended  
                            September 30,  
(in millions)   2008     2009     2010     2011  
As Reported
                                
Net Annual Asbestos Remeasurement (a)
   $ —     $ 210     $ 330     $ 41  
Net Asbestos Provision (b)
     14       28       55       50  
 
                        
Total Net Asbestos Expense
   $ 14     $ 238     $ 385     $ 91  
 
                                
Tax Effect
                                
Net Annual Asbestos Remeasurement
   $ —     $ 79     $ 118     $ 16  
Net Asbestos Provision
     5       11       20       19  
 
                        
Total Net Asbestos Expense
   $ 5     $ 90     $ 138     $ 35  
 
                                
After-Tax Effect
                                
Net Annual Asbestos Remeasurement
   $ —     $ 131     $ 212     $ 25  
Net Asbestos Provision
     9       17       35       31  
 
                        
Total Net Asbestos Expense
   $ 9     $ 148     $ 247     $ 56  
Notes:
 
(a)   Effect of annual asbestos reassessment.
 
(b)   2008 reflects the adjustment related to pending claims. 2009, 2010 and the nine months ended September 30, 2011 reflect the effect of maintaining rolling 10 year net asbestos liability.

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