ITT announces strong first-quarter 2014 results

Thursday, 1 May 2014

• Revenue grew 11 percent to $675 million, including 15 percent growth in emerging markets, with organic revenue up 10 percent
• GAAP earnings from continuing operations of $0.36 per share
• Adjusted earnings from continuing operations up 32 percent to $0.62 per share
• Adjusted segment operating margins expanded by 90 basis points
• New increased 2014 adjusted earnings per share guidance range of $2.28 to $2.36

WHITE PLAINS, N.Y., May 1, 2014 – ITT Corporation (NYSE: ITT) today reported that first-quarter 2014 revenue grew by 11 percent to $675 million, including 15 percent growth in emerging markets and 10 percent organic growth (defined as total revenue excluding foreign exchange, acquisitions and divestitures).
 
Revenue results reflect growth in industrial pumps for the chemical and oil and gas markets, automotive brake pad market share gains and aftermarket expansion, and market share gains across strategic connector end markets. Organic results include 3 percentage points of growth due to the timing of certain large, long-term pump projects.
 
First-quarter GAAP earnings from continuing operations increased to $0.36 per share, compared with $0.20 per share in the prior year. Adjusted earnings from continuing operations, which excludes special items, increased 32 percent to $0.62 per share, reflecting strong segment operational performance and a lower effective tax rate. Special items primarily related to asbestos-related expense and restructuring, transformation and repositioning costs.
 
On a GAAP basis, segment operating margins increased 10 basis points year-over-year. Adjusted segment operating margins, which exclude special items, expanded by 90 basis points. The growth reflects increased volume, strong net operational productivity and restructuring benefits, partially offset by growth investments and negative pricing and mix.
 
“In the first quarter of 2014, we built on our solid track record of execution through the collective efforts of our 9,400 employees, who drove continued market expansion, differentiated customer experience, operational excellence and effective capital deployment,” said CEO and President Denise Ramos. “The impacts of their commitment and contributions are clearly reflected in our ability to grow across key end markets and geographies, expand our aftermarket capabilities, realize benefits from focused customer strategies and drive operational excellence.
 
“We are positioning ITT for even longer-term success by focusing on strategic actions that drive profitable growth and value creation. We are already leveraging our expanded automotive capabilities in China and our enhanced pump manufacturing and R&D capabilities in Asia and North America to grow with our global customers. At the same time, we are turning around businesses, such as connectors and shock absorbers, where we’ve committed to improved performance. All of these efforts position us to continue to deliver results both today and well into the future.”
 
2014 First-Quarter Business Segment Results
All results are compared with the prior-year first quarter
 
Industrial Process designs and manufactures industrial pumps and valves for the oil and gas, chemical, mining and industrial markets.

• First-quarter revenue was up 11 percent to $286 million with organic revenue up 13 percent. The increase reflects strong organic growth in global chemical project pumps, oil and gas project pumps in key end markets, and mining process pumps in Latin America and North America, as well as timing of certain large, long-term pump projects.
• Adjusted operating income decreased 7 percent to $25 million, reflecting a negative mix impact due to large projects, incremental strategic investments, allocations and other items, partially offset by increased volume and net operating productivity.

 
Motion Technologies designs and manufactures braking technologies and shock absorbers for the automotive and rail markets.

• First-quarter total revenue increased 13 percent to $218 million and organic revenue increased 9 percent driven by OEM share gains and market growth in China and Europe, automotive aftermarket growth and strong performance by the shock absorber business.
• Adjusted operating income increased by 20 percent to $40 million. The gain reflects increased volume and positive aftermarket mix, partially offset by higher equipment maintenance costs and pricing pressures.

 
Interconnect Solutions designs and manufactures connectors and interconnects for the oil and gas, medical, industrial and transportation, and aerospace and defense markets.

• First-quarter total and organic revenue increased 10 percent to $100 million, reflecting growth in aerospace and defense, general industrial, and oil and gas connectors.
• Adjusted operating income was up 290 percent to $12 million due to net operating productivity, restructuring benefits, increased volume and positive mix shift.
• As part of its ongoing footprint optimization, Interconnect Solutions announced additional restructuring actions in the quarter, including moving certain production lines from one location to an existing lower-cost manufacturing site.

 
Control Technologies designs and manufactures products including fuel management, actuation, and noise and energy absorption components for the aerospace and industrial markets.

• First-quarter total and organic revenue increased 6 percent to $73 million. The results reflect growth in aerospace components and general industrial solutions, primarily in energy absorption, partially offset by softness in the defense market and the impact of an end-of-life aerospace program.
• Adjusted operating income increased 8 percent to $16 million, as net operating productivity and positive pricing were partially offset by negative mix shift due to the impact of an end-of-life aerospace program and strategic incremental investments.

 
Guidance
The company is maintaining its full-year total and organic revenue guidance in the range of 4 to 6 percent versus the prior year, and it is tightening and raising its adjusted earnings per share to a range of $2.28 to $2.36 from a previous range of $2.23 to $2.33 as a result of the company’s expected full-year lower effective tax rate of 28 percent and improved operational performance. The revised adjusted earnings per share guidance reflects a 15 percent increase at the mid-point compared to the prior year.
 
Investor Call Today
ITT's senior management will host a conference call for investors today at 9 a.m. EDT to review performance and answer questions. The briefing can be monitored live via webcast from the Investor Relations page on the company's website.
 
For a reconciliation of GAAP to non-GAAP results, please visit the Non-GAAP Reconciliations page on the company’s website.