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Q1 2013 Earnings Call
May 02, 2013 9:00 am ET
Denise L. Ramos - Chief Executive Officer, President and Director
Thomas M. Scalera - Chief Financial Officer and Senior Vice President
Matt J. Summerville - KeyBanc Capital Markets Inc., Research Division
James Krapfel - Morningstar Inc., Research Division
Brian Konigsberg - Vertical Research Partners, LLC
Ajay Kejriwal - FBR Capital Markets & Co., Research Division
Karen Lau - Deutsche Bank AG, Research Division
Previous Statements by ITT
» ITT Management Discusses Q4 2012 Results - Earnings Call Transcript
» ITT Management Discusses Q3 2012 Results - Earnings Call Transcript
» ITT Management Discusses Q2 2012 Results - Earnings Call Transcript
Thank you, Lori. Good morning, and welcome to ITT's First Quarter 2013 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 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.
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 2013. The first quarter results demonstrate our continued successful execution in difficult conditions.
We grew total revenue 7%, driven in part by strong performance from our recent acquisition of Bornemann Pumps. Organic revenue was up 2% due to global automotive growth of 10%, fueled by our impressive market share gains and our expansion in global energy of 23%.
Both of these results were driven by strategic investments we have made over the years that are now delivering high return. The recipe for our continued success is strong productivity that funds our ongoing strategic investment and establishes the foundation for our continued long-term organic growth.
We were also very pleased with our segment operating margin expansion of 130 basis points, driven by our global strategy forcing and Lean initiatives, benefits from proactive restructuring and volume gains. As we continue to highlight, we have a lot of opportunities to drive Lean across our facilities as we advance our 5-year journey.
These solid operating results are reflected in our EPS of $0.47, which was up 21% versus last year. The strongest contributor to this growth were Motion Technologies and Industrial Process. Motion Technologies' volume was particularly strong as they continue to grow their leading market position in Europe and gain market share in the U.S. and China. They also benefited from productivity actions that drove the bottom line.
Also, we continue to return capital to shareholders, repurchasing $46 million of shares in the quarter. And as a reminder, we raised our dividend 10% earlier this year.
Now let's turn to Slide 4. Our strategic execution is focused on 3 key areas: operational excellence; advancing the turnaround of Interconnect Solutions; and the integration of Bornemann, our recent acquisition. Operational excellence fueled our operating margin expansion this quarter.
So let me provide some examples that highlight some of our value-creating activities so far this year. First, Motion Technologies further improved on its world-class production effectiveness by increasing throughput in average of 1 million brake pads per month through improve machine efficiency.
We also benefited in the quarter from the proactive restructuring actions that we began last year and have continued this year. Interconnect Solutions and Motion Technologies operating income was helped in the quarter from actions taken previously to reduce indirect costs and improve operational performance.
We delivered supply chain savings that exceeded our expectations and reflected the increased leverage our global strategic sourcing council drives entity-wide and business specific initiatives that reduce costs.
Lastly, I'd like to share some insights from our recent visit to our valves facility in Amory, Mississippi that began their Lean facility transformation in 2012. I'm very pleased with the significant strives the team had already made. The excitement at this facility was tangible as every employee was fully engaged in the transformation.
I was able to see the improved plant flow since my last visit when I kicked off the Lean initiative back in early 2012. The changes aren't just improving operational performance, but also employee morale as employees feel real ownership of their workspace and are empowered to suggest and implement improvement.
Another key area of strategic execution this year is advancing the turnaround at Interconnect Solutions. With new leaders in place and improved focus on key end markets and Lean assessments complete cross all sites, we are progressing nicely on the turnaround of this business. The leadership team has strong operational expertise, and they plan to drive improvements, such as reducing past due inventory, optimizing the supply chain and reengineering products to improve performance and reduce costs.
We have redirected the sales focus to key end markets, including medical, transportation, oil and gas and aerospace. This tighter focus allows us to serve our customers better and make sure the front end is aligned with the best opportunities. We have also reduced our global indirect cost structure through proactive restructuring.