ITT's CEO Discusses Q1 2012 Results - Earnings Call Transcript

ITT (ITT)

Q1 2012 Earnings Call

May 04, 2012 9:00 am ET

Executives

Melissa Trombetta -

Denise L. Ramos - Chief Executive Officer and President

Thomas Scalera - Chief Financial Officer

Analysts

James C. Lucas - Janney Montgomery Scott LLC, Research Division

Michael Halloran - Robert W. Baird & Co. Incorporated, Research Division

Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division

Ajay Kejriwal - FBR Capital Markets & Co., Research Division

James Krapfel - Morningstar Inc., Research Division

Presentation

Operator

Welcome to ITT's First Quarter 2012 Earnings Conference Call. Starting the call today from ITT is Melissa Trombetta, Director of Investor Relations. She is joined by Denise Ramos, Chief Executive Officer and President; and Tom Scalera, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 12:00 p.m. Eastern Daylight Time. [Operator Instructions] It is now my pleasure to turn the floor over to Melissa Trombetta. You may begin.

Melissa Trombetta

Thank you, Jackie. Good morning, and welcome to ITT's first quarter 2012 investor review. Presenting this morning are ITT's Chief Executive Officer and President, Denise Ramos; and ITT's Chief Financial Officer, Tom Scalera.

I'd like to highlight that this morning's presentation, press release and reconciliations of GAAP and non-GAAP financial measures, as well as selected historical financial data can be found on our website at itt.com/ir.

Please note that any remarks we make about future expectations constitute forward-looking statements under the Safe Harbor provision. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those discussed in ITT's 10-K and other public SEC filings.

So now let's turn to Slide #3 where Denise will discuss our results.

Denise L. Ramos

Good morning, everyone. I appreciate you joining us as we announce our financial results for the first quarter of 2012. I'd like to take this opportunity to share with you my perspective on our business performance.

In the first quarter, the results demonstrate our continued record of growth, which exceeded our expectations. Organic revenue was up 9% to $577 million. This strength reflected our global balance as both emerging markets in North America markets generated significant growth. Emerging markets expanded 22%. And North America grew an impressive 11%.

We also set a record at Industrial Process with $226 million in shipments, reflecting growth in all regions and all end markets. Everyone of our businesses had book-to-bill ratios in excess of 1.0 with a total of the businesses at 1.06. This demonstrates the upward trajectory that we are on, and why we believe the second half will outperform the first half in 2012.

Our EPS of $0.39 per share nicely exceeded our expectations due to very focused execution at each business.

I'm very pleased with our ability to deliver solid results and improve customer focus while continuing to invest for future growth. These results, which were achieved even as we manage through the continuing demand from the spin-off, reflect the collective effort of our businesses to execute our strategy to grow this company.

In our Industrial Process business, we continued to grow in all the right places and significantly populated our installed base around the world.

As we discussed with you previously, this initially generates lower margin, but it positions us nicely for high-margin aftermarket business over the long term. We're ahead of our plan for growth, and combined with our efforts to improve our operating efficiency, we are well-positioned for the future.

In our second largest business, Motion Technologies, we gained share against competitors in a difficult European market, and we continue to make progress on our global growth strategy. We are already seeing strong gains in our focus markets of China and North America from our previous investments. And with our focus on improved operating performance, we expect to continue this progress in the second half of 2012 and beyond.

Our Interconnect Solutions business is being challenged by weakness in the global connectors markets that we serve, but is gaining momentum in those areas that support our strategic focus on harsh environment applications. We have positioned ourselves in attractive end markets, including general, industrial and aerospace where we're better able to differentiate with customers because of our expertise in highly engineered customized technology.

In Control Technologies, we began initiatives last year to focus on improving operating efficiency and pricing, and we're now seeing the results as we continue to strengthen our unique positions in key aerospace and industrial end markets.

We are delivering on our strategies to grow this company. At the same time, our employees around the world are continuing to drive their productivity improvement that will help us deliver profitable growth over the long term.

Our business has also delivered a number of key strategic wins in the first quarter. As you can see on Slide 4, these achievements include industrial pump wins in the Middle East, automotive and rail gains in emerging markets, large-scale successes in energy absorption, and all are aligned with our 6 profitable growth drivers that the ITT leadership team focus on everyday.

While all these wins are important, let me just highlight a few: first, we're extremely pleased with our continuing success in the emerging markets. And once again, we delivered a number of key wins in the quarter that really demonstrate our global range of capabilities. Our petrochemical industrial pump win was based on our footprint and customer relationship in both Saudi Arabia and China that provided our customer with the comfort that we are the right provider to address their needs. Our brake pad win in China validates our continuing investment in the world's largest and fastest-growing automotive market. And our connectors business also support the Chinese automotive market through electric vehicle chargers. These 2 businesses, together, generated a lot of interest during their joint participation in the recent Beijing Auto Show. These highlights are true evidence of the benefit of our focused emerging market expansion.

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