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ITT to hike dividend, split stock

THE JOURNAL NEWS

December 17, 2005

ITT Industries Inc., a manufacturer of water treatment systems, has been one of the strongest performing stocks in the S&P 500 during the past five years as profits rose steadily.

Yesterday, the company's shareholders learned they will share in the success after the company announced plans to hike the dividend by 22 percent and split a stock that has risen 20.6 percent this year alone.

"We're completing what has been by any measure an outstanding year for ITT Industries," Chief Executive Officer Steve Loranger said in a written statement.

Loranger added that the company's operating improvements have boosted revenue growth to 17 percent this year and helped drive a surge of about 20 percent in earnings per share. In 2006, ITT's latest forecast calls for an increase of 14 to 18 percent in operating earnings.

The Harrison-based company also said a restructuring will include divesting an electric switches business to concentrate on other products enjoying faster growth. The switches business, expected to generate revenue of about $350 million this year, includes the design and production of keypads and electric controls.

ITT said it will take a special charge of $200 million to $275 million in the fourth quarter primarily related to the divestiture.

"Overall, we applaud these tough moves as they will focus the organization's efforts and investments on its more promising opportunities," Matthew Warren, an analyst at Morningstar, said in a research report.

The stock split comes after a 243 percent total return for ITT's stock during the past five years, including dividends, that far eclipses a gain of 3.2 percent for the S&P 500.

The 2-for-1 split, ITT's first since it became an independent company 10 years ago, will provide each stockholder with one additional share for each share owned. The new shares will be distributed Feb. 21 to stockholders of record on Feb. 7. The stock rose $4.05 yesterday to $101.87.

In addition, the company plans to raise its annual dividend 22 percent to 88 cents per share in April, pending board approval.

"The strength we have seen throughout this year in our core businesses, particularly in fluid technology and defense, is expected to continue in 2006," Loranger said.

The conflicts in the Middle East have meant continued orders for ITT's defense business, including a recently awarded $680 million, five-year contract to provide communications support for military personnel in that region. Overall, ITT is forecasting revenue growth of 8 percent to 10 percent in its defense electronics business next year.

In other businesses, ITT said that it expects revenue growth of 6 percent to 7 percent next year for water and sewage treatment products and revenue growth of 2 to 5 percent in motion and flow control.