ITT Corporation (NYSE:ITT) today reported strong 2014 fourth-quarter and full-year financial results, reflecting the power of a portfolio diversified and balanced across key end markets and geographies, strong operational execution and strategic investments for growth. These earnings results include gains in revenue, adjusted segment operating margins and adjusted earnings per share from continuing operations.
In 2014, the company delivered revenue of $2.7 billion, reflecting 6 percent overall growth and 7 percent organic growth (defined as total revenue excluding foreign exchange, acquisition and divestiture impacts). Full-year organic revenue reflects growth in major geographies including 14 percent growth in emerging markets and 4 percent growth in developed markets.
2014 GAAP earnings totaled $2.03 per share, compared with $5.28 per share in the prior year, primarily reflecting the impact of a significant tax benefit in 2013 from a valuation allowance release. Adjusted earnings, which exclude special items, increased 22 percent to $2.47 per share, reflecting strong productivity and a lower effective tax rate.
“ITT has a history of producing strong operational results, and we built on our performance track record in 2014 by making significant operational improvements while delivering record financial results,” said Denise Ramos, chief executive officer and president. “I am very proud of all that our team has been able to accomplish, from enhancing our brake pad and pump capabilities for customers, to turning around our connectors and shock absorber businesses, to driving Lean and our cultural transformation efforts. I am also pleased that we were able to return additional value to shareowners by completing $50 million of share repurchases and increasing our dividend in 2014.
“As we move into 2015 and continue to face a difficult external environment with global oil and gas market and foreign exchange headwinds, we will proactively drive internal initiatives that will focus on optimizing execution, expanding our global transportation and industrial markets and deploying capital effectively. Through our collective focus in these areas, we will effectively drive our multi-industry strategy, which is keenly focused on long-term growth and value creation for stakeholders. And, we will continue to leverage our diversified and balanced portfolio, which we expect to further enhance with a pending $30 million revenue producing aerospace acquisition.”
2014 Fourth-Quarter Results
In the fourth quarter, the company delivered revenue of $660 million, reflecting 2 percent overall growth and 6 percent organic growth. Fourth-quarter results include growth in global oil and gas project pumps and North American chemical and mining pumps, partially offset by expected weakness in aftermarket automotive brake pads and declines in defense and non-strategic connectors.
Fourth-quarter GAAP earnings increased from $0.12 in 2013 to $0.36 per diluted share. Adjusted earnings, which exclude special items, increased 20 percent to $0.59 per diluted share, reflecting strong operational performance, a lower effective tax rate and negative impacts from foreign exchange.
2014 Fourth-Quarter and Full-Year Business Segment Results
All full-year and 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.
- Fourth-quarter total revenue increased 15 percent to $341 million, and organic revenue was up 19 percent, driven by strong growth in global oil and gas project pumps and North American chemical and mining pumps.
- Fourth-quarter GAAP operating income increased 28 percent to $43.2 million. Adjusted operating income increased 18 percent to $46 million as net operating productivity more than offset incremental strategic investments and pricing pressure.
- Full-year total revenue was up 9 percent to $1.2 billion, and organic revenue was up 11 percent, driven by growth in oil and gas, mining and chemical pumps.
- Full-year GAAP operating income increased 11 percent to $124 million, and adjusted operating income was up 2 percent to $130 million, as increased sales volumes were partially offset by a higher mix of generally lower-margin large projects, incremental strategic investments and continued pricing pressure.
Motion Technologies designs and manufactures braking technologies and shock absorbers for the automotive and rail markets.
- Fourth-quarter total revenue decreased 13 percent to $157 million, while organic revenue decreased 7 percent, as market share gains in China were more than offset by a tough prior-year comparison due to significant aftermarket restocking in 2013.
- Fourth-quarter GAAP operating income increased 2 percent to $20 million. Adjusted operating income was flat at $21 million, as net operating productivity was offset by lower volumes, incremental strategic investments and unfavorable foreign exchange.
- Full-year total revenue increased 7 percent to $769 million, and organic revenue was up 6 percent, driven by automotive brake pad growth in China and shock absorber growth in the global rail and North American automotive markets.
- Full-year GAAP operating income increased 31 percent to $131 million, and adjusted operating income was up 24 percent to $133 million, as increased sales volumes and improved operational performance were partially offset by unfavorable pricing and incremental strategic investments.
Interconnect Solutions designs and manufactures connectors and interconnects for the oil and gas, medical, industrial and transportation, and aerospace and defense markets.
- Fourth-quarter total revenue decreased 10 percent to $91 million, with organic revenue down 7 percent as growth in North American and Middle Eastern oil and gas connectors was more than offset by weakness in defense and expected declines in non-strategic connectors.
- Fourth-quarter GAAP operating results increased $4 million to $2 million of income. Adjusted operating income increased 21 percent to $11 million, as net operating productivity and restructuring benefits more than offset lower volume and negative mix shift.
- Full-year total revenue decreased 1 percent to $393 million, and organic revenue was flat, as growth in the oil and gas, transportation and industrial, and commercial aerospace markets was offset by expected declines in non-strategic connectors and weakness in the defense market.
- Full-year GAAP operating income increased 56 percent to $22 million, and adjusted operating income was up 66 percent to $52 million, due to benefits from restructuring and improved operational performance.
Control Technologies designs and manufactures products including fuel management, actuation, and noise and energy absorption components for the aerospace and industrial markets.
- Fourth-quarter total revenue increased 5 percent to $73 million, and organic revenue was up 6 percent, due to growth in aerospace and defense as well as industrial growth.
- Fourth-quarter GAAP operating income increased 36 percent to $16 million. Adjusted operating income increased 21 percent to $16 million, as net operating productivity, volume and pricing more than funded incremental strategic investments.
- Full-year total revenue increased 4 percent to $291 million, and organic revenue was up 5 percent, due to industrial growth driven by the energy absorption market as well as commercial aerospace growth.
- Full-year GAAP operating income increased 15 percent to $64 million. Adjusted operating income was up 12 percent to $64 million, as improved operational performance and increased sales volumes were partially offset by an unfavorable shift in sales mix.
The company announced 2015 guidance with total revenue down 1 to 3 percent and organic revenue up 1 to 3 percent. Organic revenue growth is expected to be driven by share gains and market growth in automotive, aerospace, and chemical and industrial pumps that more than offsets market-driven declines in oil and gas. The total revenue guidance reflects unfavorable foreign exchange impacts, partially offset by benefits from a pending $30 million revenue producing aerospace acquisition.
The company expects GAAP segment operating margin expansion of approximately 100 basis points as well as solid adjusted segment operating margin expansion of 60-80 basis points due to benefits from improved operational performance and Lean transformation activities across its facilities including incremental benefits from 2014 and 2015 restructuring actions.