ITT Corporation

ITT reports 2016 second-quarter results

    8/4/2016

    Announces up to $50 million of incremental share repurchases


    Results Highlights:
    • Revenue flat at $626 million, Organic revenue down 6%
    • Segment operating income down 20%, Adjusted segment operating income down 4%
    • EPS of $0.36, Adjusted EPS of $0.67
    • Adjusts 2016 full-year guidance

    WHITE PLAINS, N.Y., Aug. 4, 2016 – ITT Inc. (NYSE: ITT) today reported 2016 second-quarter financial results that reflect the benefits of a diversified portfolio and effective capital deployment in today’s challenging economic environment, as the impacts of continued weakness in the oil and gas and mining markets were partially offset by significant growth across our transportation businesses and the benefits of recent acquisitions.

    "Over the past two years, ITT has consistently faced a challenging macroeconomic environment that has created persistent weakness in key end markets including oil and gas, mining and general industrial. During this time, we have proactively addressed these headwinds by leveraging our balanced and diverse portfolio to drive growth in more robust markets, improve productivity, proactively restructure to optimize our businesses, and deploy capital to position ITT for the long-term," said ITT CEO and President Denise Ramos.

    "The same was true in the second quarter as solid growth and share gains by our automotive brake pad business and the benefits from the Wolverine acquisition offset the impact of project activity demand and delayed customer maintenance at our Industrial Process business. And from an operational perspective, each of our four businesses delivered strong productivity gains, while our Industrial Process and Interconnect Solutions businesses also advanced the proactive resets of their operational structures.

    "In the second quarter, we also continued to drive benefits from disciplined capital deployment as our Wolverine acquisition delivered strong results ahead of schedule while providing new opportunities for long-term transportation platform growth. The development of our North American automotive brake pad facility and related new platform wins are also progressing nicely ahead of schedule. And, as it relates to returns to shareholders, we executed $20 million of share repurchases in the second quarter, and are announcing up to an additional $50 million of discretionary repurchases that are expected by the end of the year, primarily depending on the actionability of acquisitions."
     
    2016 Second-Quarter Results
    On a GAAP basis, revenue was flat at $626 million due to strong transportation growth, including the incremental benefits from our Wolverine acquisition, which offset project declines in global oil and gas and mining markets, softness in the chemical and industrial markets, and unfavorable foreign exchange. GAAP segment operating income decreased 20 percent to $72 million due to higher restructuring and realignment costs, as well as a trade name impairment. GAAP EPS decreased to $0.36 due to a significant prior-year asbestos-related benefit, higher restructuring and realignment costs, and tax items.

    On an adjusted basis, organic revenue (defined as total revenue excluding foreign exchange, acquisition and divestiture impacts) declined 6 percent due to weakness across global flow markets that was partially offset by strong growth in global transportation markets. Adjusted segment operating income declined 4 percent to $92 million reflecting productivity and restructuring benefits that were offset by negative impacts from lower high-margin, aftermarket volumes; increased strategic investments; and pricing pressure in Motion Technologies and Industrial Process. Adjusted EPS decreased 3 percent to $0.67 reflecting lower adjusted segment operating income and a higher effective tax rate that were partially offset by lower corporate costs.

    For a reconciliation of GAAP to non-GAAP results and guidance, please click here.
     
    2016 Second-Quarter Business Segment Results
    All quarterly results are compared with the respective prior-year periods.

    Industrial Process designs and manufactures industrial pumps and valves for the oil and gas, chemical, mining and industrial markets.
    • Total revenue decreased 26 percent to $214 million, with organic revenue down 22 percent. Both measures reflect the impact of weakness in the oil and gas and mining markets on our project pumps and aftermarket businesses, which was partially offset by improvements in short-cycle baseline pumps and valves. Total revenue also includes the impact of unfavorable foreign exchange.
    • GAAP operating income decreased 85 percent to $6 million, and adjusted segment operating income decreased 41 percent to $24 million. Both measures reflect lower volumes across key end markets, which were partially offset by the benefits of productivity and restructuring actions. GAAP operating income also includes higher restructuring costs and a trade name impairment recorded in the second quarter related to weakness in the oil and gas market.

    Motion Technologies designs and manufactures braking technologies, shock absorbers and specialized sealing solutions for the automotive and rail markets.
    • Total revenue increased 41 percent to $260 million, and organic revenue increased 15 percent. Both measures reflect significant share gains and market growth in global automotive brake pads in both the OEM and aftermarket due to OEM market share gains in each of our key geographies of Europe, China and North America; strong aftermarket activity; and automotive market growth. Total revenue also includes incremental revenue from the 2015 acquisition of Wolverine Advanced Materials and the impact of favorable foreign exchange.
    • GAAP operating income increased 32 percent to $49 million, and adjusted segment operating income increased 35 percent to $50 million. Both increases reflect higher volume, benefits from productivity actions and favorable impacts from the acquisition of Wolverine Advanced Materials, which were partially offset by unfavorable impacts from pricing pressures.

    Interconnect Solutions designs and manufactures connectors and interconnects for the oil and gas, transportation and industrial, and aerospace and defense markets.
    • Total revenue decreased 5 percent to $79 million, and organic revenue declined 6 percent. Both decreases reflect weakness in the global oil and gas market that was partially offset by gains in the aerospace and defense market. Total revenue includes the modest impact of favorable foreign currency exchange.
    • GAAP operating income increased to $5 million and adjusted segment operating income decreased 2 percent to $5 million. Both measures reflect the benefits of improved operations and productivity and restructuring actions, which were offset by the unfavorable impacts of volume, mix and pricing. GAAP operating income benefited from lower restructuring costs compared to the prior year.

    Control Technologies designs and manufactures products including fuel management, actuation, and noise and energy absorption components for the aerospace and industrial markets, as well as aerospace environmental control system components.
    • Total revenue was flat at $75 million and organic revenue increased 2 percent, reflecting growth in aerospace and defense, which was offset by softness in global industrial markets driven by energy market dynamics. Total revenue growth was unfavorably impacted by prior-year revenue from a divested industrial product line.
    • GAAP operating income decreased 2 percent to $12 million and adjusted segment operating income increased 4 percent to $13 million, reflecting the benefits of favorable productivity and restructuring actions. GAAP operating income also includes realignment costs related to the recent Hartzell acquisition.
     
    2016 Guidance
    The company is lowering its previously announced full-year 2016 GAAP and organic revenue guidance. GAAP revenue is now expected to be down 3 percent to down 5 percent, and organic revenue is expected to be down 7 percent to down 9 percent, primarily due to negative impacts from weaker than expected aftermarket activities and lower project revenues due to customer delays at Industrial Process, partially offset by incremental growth in automotive due to greater visibility in the aftermarket.

    The company is also lowering its GAAP and adjusted EPS guidance primarily due to its revised volume expectations for the second half of the year at Industrial Process. As a result, the company now expects the GAAP EPS guidance range to be $1.40 to $1.62 and the adjusted EPS guidance range to be $2.34 to $2.46 with a mid-point of $2.40.
     
    Investor Call Today
    ITT's senior management will host a conference call for investors today at 9 a.m. ET to review performance and answer questions. The briefing can be monitored live via webcast at the following address on the company's Web site: www.itt.com/investors and will be available on the website from two hours after the webcast until Thursday, Aug. 18, 2016, at midnight.

    All references to EPS are defined as diluted earnings per share from continuing operations.

     

About ITT

ITT is a diversified leading manufacturer of highly engineered critical components and customized technology solutions for the energy, transportation and industrial markets. Building on its heritage of innovation, ITT partners with its customers to deliver enduring solutions to the key industries that underpin our modern way of life. Founded in 1920, ITT is headquartered in White Plains, N.Y., with employees in more than 35 countries and sales in a total of approximately 125 countries. The company generated 2015 revenues of $2.5 billion.

Safe Harbor Statement

This release contains "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 (the "Act"). No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. All forward-looking statements included in this release are based on information available to us on the date hereof, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about the business and future financial results of the industry in which we operate, and other legal, regulatory and economic developments. 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.

We use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "future," "may," "will," "could," "should," "potential," "continue," "guidance" and other similar expressions 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.

Forward-looking statements in this release should be evaluated together with the risks and uncertainties that affect our business, particularly those mentioned in the Risk Factors section of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents filed from time to time with the Securities and Exchange Commission.

Investors

Melissa Trombetta
tel +1 914-641-2030
melissa.trombetta@itt.com

Media

Kathleen Bark
tel +1 914-641-2103
kathleen.bark@itt.com

Download Documentation

Financial Statements [29 kB]
SEC Reg G Reconciliations [61 kB]
Presentation [1248 kB]
Press Release [125 kB]

Visit the Investors page

MEDIA