[Link from ITT Industries in the News]

CNBC: Lou Giuliano Talks About 3Q Earnings

ITT Industries reported its third quarter earnings on Thursday, October 25. With earnings-per-share beating expectations and net income up four percent over third quarter 2000, the company garnered a good share of news coverage. On Thursday, Chairman, President and Chief Operating Officer Lou Giuliano was interviewed live on both CNBC and Bloomberg. Below is the transcript of the CNBC interview:

Mark Haines, CNBC anchor: Does ITT Industries have the vision for the future? The defense contractor is reporting earnings, seventy-five cents a share, that beat the expectations of seventy-three; income up four percent to sixty-seven and a half million dollars, revenue down five percent at 1.12. Actually the script says it was up and the graphic says it was down. Well, we'll find out.

The maker of tactical communications, night-vision and electronic-warfare equipment says revenues for its defense products and services was up 10.7 million dollars from last year due primarily to the ramp-up of new programs won over the last twelve months. Joining us now to talk about that business is Lou Giuliano, chairman and CEO of ITT Industries.

Good morning, sir.

Lou Giuliano (Chairman and Chief Executive Officer, ITT Industries): Good morning.

Haines: First of all, what is the correct revenue number? Was it up or down five percent?

Giuliano: It was down approximately five percent.

Haines: OK. Down five percent. Why?

Giuliano: Well, we have a broad portfolio of businesses, we're a multi-industry company. Some of our businesses, like our defense business and our water and wastewater businesses, are doing well. But other parts of our businesses, specifically our connectors and switches business, which is tied to the electronic marketplaces, are seeing severely challenging market conditions today. And their sales are down significantly this year.

Haines: So looking forward, is there – I mean here we are involved in a war on terrorism, no one knows how long it's going to last, no one knows where it's going to be fought, no one knows how much it's going to cost. Is there any way to quantify what you might see in your business as a result?

Giuliano: Well certainly this is a time of unprecedented uncertainly, both on the plus and the minus side. We don't know exactly where things are going to go but we pride ourselves--we work hard at trying to be prepared for rapidly changing market conditions.

I think that's one of the reasons why we've been able to continue to generate earnings growth this year, even in those difficult market conditions.

We try to react quickly, react aggressively to changes. I think our earnings growth is a real tribute to our management team and their ability to react. And so as we look forward to the future, no matter what happens, we try to position ourselves so that we're prepared and we can take advantage of upside but also be ahead of the curve on the downside.

Jim Cramer (TheStreet.com): Mr. Giuliano, Jim Cramer here.

Giuliano: Yes.

Cramer: ITT was always – the parent, the old parent from when we all got started in the business – was always willing to be bring up value and created a company of a kind of a hodgepodge of companies.

Now that we know that your government and military division seems to have a lot of momentum, is there any chance that you would rejigger the assets, spin off the division or create different companies from what is clearly a conglomerate of the old style.

Giuliano: Well we think that our business today, ITT Industries, is much more focused than the old conglomerate model. We think that we have an ability to generate value with the businesses that we have.

We've continued to transform our portfolio to put it into businesses areas that offer higher growth, higher margin rates and--and a longer term stronger value-creating future. We think we've got a good mix of businesses today. We continue to look at those portfolios to find what's the best way to create value for our shareholders.

Haines: One of the long-term positives, I would imagine, the water technology that you have has got to be very promising.

Giuliano: I agree. We think that's a real opportunity for us on a worldwide, global basis. Water is going to continue to be a scarce resource and it's going to be more so in the future. We've got a very strong part of our business oriented that way. We're trying to grow that business through acquisitions as well as through internal product development.

We think that that's a very promising business for the future. It's just one of the elements of our portfolio that we think fits that model. We've got that business, we've got the defense business that we talked about.

Even our connectors and switches business, even though that market is down today – the electronics markets are down – we are absolutely certain that that market's going to come back. The technology that's behind the electronic boxes of tomorrow are going to drive that business in the future.

Our task is to figure out how do we manage and balance these businesses, grow these key core areas to continue to create value.

Haines: Mr. Giuliano, thank you very much. We appreciate your time.

Giuliano: Thank you.