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ITT Inc. News

ITT REPORTS STRONG 2021 FOURTH-QUARTER EARNINGS

02/10/2022

EARNINGS PER SHARE OF $1.20, ADJUSTED EPS OF $1.06; INITIATES 2022 GUIDANCE

  • Q4 orders up 9% (10% organic) driven by strong demand across Industrial Process and Connect & Control
  • Q4 segment operating margin of 17.9%, up 100 bps; adjusted segment operating margin of 18.2%, up 130 bps driven by strong pricing and productivity
  • Initiates 2022 EPS guidance of $4.22 to $4.66, up 16% to 28%; adjusted EPS guidance of $4.30 to $4.70, up 11% at the midpoint
  • 2022 revenue growth of 7% to 9%, up 9% to 11% on an organic basis
  • Announces 20% increase in quarterly dividend to $0.264 per share
 

White Plains, N.Y., February 9, 2021 – ITT Inc. (NYSE: ITT) today reported financial results for the fourth quarter and full year ended December 31, 2021. For the fourth quarter, the company reported a year-over-year revenue decrease of 3%, down 2% on an organic basis, driven primarily by global supply chain disruptions and a tough prior year comparison related to auto OE demand, which offset strong deliveries in Connect & Control (CCT). For the full year, revenue increased 12%, or 10% on an organic basis, driven by strong demand in Motion Technologies (MT) and CCT.

Segment operating margin of 17.9% for the fourth quarter expanded 100 basis points versus prior year driven by productivity, strategic commercial actions, a favorable mix of higher margin products, foreign currency, and other items. This was partially offset by raw material inflation impacts, supply chain disruptions, and strategic growth investments.

Earnings per share for the fourth quarter of $1.20 increased from a net loss per share of $(0.16) in the prior year. The net loss in 2020 was primarily driven by a pre-tax non-cash settlement charge of $137 million related to the termination of ITT’s U.S. pension plan. Excluding the impact of this and other items, adjusted earnings per share of $1.06 for the fourth quarter of 2021 was up 5% compared to prior year driven by higher segment operating income, share repurchases, and a lower effective tax rate.

Operating cash flow for the fourth quarter of $120 million increased $2 million due to higher segment operating income, partially offset by working capital investments to mitigate continued supply chain disruptions. For the full year, operating cash flows declined by $444 million from 2020 mainly driven by a $398 million payment related to the divestiture of ITT’s asbestos liabilities and related insurance assets in the second quarter of 2021, as well as working capital investments. This was partially offset by a 47% increase in segment operating income.

Table 1. Fourth Quarter Performance

  4Q 2021 4Q 2020 Change
 Revenue   $685.4     $708.6   (3.3)%  
     Organic             (2.1)%  
 Segment Operating Income   $122.6     $119.5   2.6%  
     Segment Operating Margin   17.9%     16.9%   100 bps  
 Adjusted Segment Operating Income   $124.7     $120.1   3.8%  
     Adjusted Segment Operating Margin   18.2%     16.9%   130 bps  
 Earnings Per Share   $1.20     $(0.16)   850.0%  
     Adjusted Earnings Per Share   $1.06     $1.01   5.0%  
 Operating Cash Flow (YTD)   $119.5     $117.8   1.4%  
     Free Cash Flow (YTD)   $83.7     $101.7   (17.7)%  

Note: all results unaudited


Management Commentary

ITT delivered on its commitments to our customers and to our shareholders in the fourth quarter in what continues to be an extremely challenging environment. I am incredibly proud of the performance of the entire ITT team throughout 2021 and this quarter," said Luca Savi, Chief Executive Officer and President of ITT. "We achieved 130 basis points of adjusted segment margin expansion and 5% adjusted earnings growth in the fourth quarter despite sustained inflation and global supply chain disruptions. We also generated organic orders growth of 10% with broad-based strength across Industrial Process and Connect & Control. ITT is well positioned entering 2022, with 18% higher organic backlog compared to the prior year.

Our results in 2021 demonstrated once again the tangible benefits of our business-first focus and entrepreneurial approach that enabled ITT to execute this year. Demand for our innovation and our products drove a 10% increase in organic revenue for the full year with outperformance in our market-leading Friction business and strength in connectors. Orders were up over 20% on an organic basis resulting from robust demand across our long-cycle pump project and aerospace businesses, and our short-cycle products portfolio in Industrial Process. ITT teams around the world overcame over $80 million of inflationary headwinds to generate 200 basis points of adjusted segment margin improvement versus 2020. Thanks to all these actions we exceeded ITT's pre-pandemic adjusted operating margin and adjusted EPS levels from 2019."

Savi concluded, "The hard work and commitment of our teams to serve our customers are building a solid foundation for ITT entering 2022. We continue to see challenges on the supply side, as well as global uncertainty from the pandemic, labor shortages, and inflationary pressure, but I am always encouraged by our team's ability to manage these headwinds as we did throughout 2021. Given our strong performance and actions taken in 2021, and the strategic elimination of ITT's legacy asbestos liability exposure, ITT today has the capital to deploy across growth investments, including green capex, dividends, share repurchases, and particularly M&A. There are challenges ahead but I am excited about the opportunities for ITT, our employees, and our stakeholders in 2022."

 

Table 2. Fourth Quarter Segment Results

  Revenue Operating Income
  4Q 2021 Reported Increase/
(Decrease)
Organic Growth/
(Decline)
4Q 2021 Reported Increase/
(Decrease)
Adjusted Increase/
(Decrease)
 Motion Technologies $323.6 (8.1)% (7.2)% $63.9 (8.8)% (7.4)%
 Industrial Process $216.3 (5.3)% (3.9)% $31.9 (3.6)% (0.9)%
 Connect & Control Technologies $145.8 13.0% 14.3% $26.8 64.4% 59.5%
 Total segment results $685.4 (3.3)% (2.1)% $122.6 2.6% 3.8%

Note: all results unaudited; excludes intercompany eliminations; comparisons to Q4 2020


Motion Technologies revenue decreased primarily due to supply chain constraints in Friction and Wolverine as well as a tough prior year comparison in the fourth quarter of 2020 related to auto OE demand, partially offset by growth in Friction aftermarket. Operating income decreased from $70 million to $64 million primarily due to lower sales volume and higher raw material inflation, partially offset by strategic commercial actions, shop floor and sourcing productivity, foreign currency, and a one-time gain on an asset sale in the fourth quarter of 2021.

Industrial Process revenue decreased primarily due to continued supply disruptions stemming from labor shortages, supplier delays, and extended lead times, which primarily impacted the projects business. This was partially offset by growth in short-cycle pumps, parts, valves, and service, with strength in the energy market. Operating income decreased to $32 million primarily due to lower sales volume and higher operating costs attributable to supply chain disruptions, including higher freight and raw material costs, and labor shortages, partially offset by productivity, favorable mix of higher margin products, foreign currency, and strategic commercial actions.

Connect & Control Technologies revenue increased primarily due to connector demand in North America and Europe, principally in the industrial, transportation, and commercial aerospace markets, and through distribution. Operating income increased from $16 million to $27 million, primarily driven by higher sales volume, shop floor and sourcing productivity, and strategic commercial actions, partially offset by higher raw materials and labor inflation.

Table 3. 2021 Full Year Performance

  FY 2021 FY 2020 Change
 Revenue   $2,765.0     2,477.8   11.6%  
     Organic             9.6%  
 Segment Operating Income   $466.7     $318.6   46.5%  
     Segment Operating Margin   16.9%     12.9%   400 bps  
 Adjusted Segment Operating Income   $476.7     $376.4   26.6%  
     Adjusted Segment Operating Margin   17.2%     15.2%   200 bps  
 Earnings Per Share   $3.64     $0.78   366.7%  
     Adjusted Earnings Per Share   $4.05     $3.20   26.6%  
 Operating Cash Flow (YTD)   $(8.4)     $435.9   (101.9)%  
     Free Cash Flow   $(96.8)     $372.2   (126.0)%  

Note: all results unaudited

Quarterly Dividend Increase

The company also announced today that it is increasing its quarterly dividend 20% to $0.264 per share on the company's outstanding common stock. ITT's Board of Directors approved the cash dividend for the first quarter of 2022, which will be payable on April 4, 2022, to shareholders of record as of the close of business on March 9, 2022. The 20% increase in the quarterly dividend announced today follows increases of 15% and 30% announced in 2020 and 2021.

2022 Guidance

The company's 2022 guidance assumes continued disruptions in the global supply chain stemming from labor shortages, supplier delays, and raw material inflation, which we anticipate will persist through at least the first half of 2022. We expect revenue growth of 7% to 9%, or up 9% to 11% on an organic basis; segment operating margin of 17.5% to 18.4%, and adjusted segment operating margin of 17.6% to 18.5%, up 40 to 130 bps; earnings per share of $4.22 to $4.66, and adjusted earnings per share of $4.30 to $4.70 per share, up 6% to 16%; and free cash flow of $300 million to $325 million, representing free cash flow margin of 10% to 11% for the full year.

 

Investor Conference Call Details

ITT's management will host a conference call for investors on Thursday, February 10 at 8:30 a.m., Eastern Time. The briefing can be accessed live via webcast which is available on the company's website: www.itt.com/investors.

To participate on the conference call, please dial +1 (646) 904-5544 approximately ten minutes before the 8:30 a.m. Eastern Time start. Please provide Access Code: 467739 to the conference operator. A real-time audio webcast of the presentation can be accessed at www.itt.com/investors, where related materials will be posted prior to the presentation.

A replay of the webcast will be available for 90 days following the presentation. A replay will also be available telephonically from two hours after the webcast until Thursday, February 24, 2022, at midnight, Eastern Time. Reconciliations of non-GAAP financial performance metrics to their most comparable U.S. GAAP financial performance metrics are defined and presented below and should not be considered a substitute for, nor superior to, the financial data prepared in accordance with U.S. GAAP.

Investor Contact

Mark Macaluso
+1 914-641-2064
mark.macaluso@itt.com


Media Contact

Kellie Harris
+1 914-641-2103
kellie.harris@itt.com


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. In addition, the conference call (including the financial results presentation material) may include, and officers and representatives of ITT may from time to time make and discuss, projections, goals, assumptions, and statements that may constitute "forward-looking statements". These forward-looking statements are not historical facts, but rather represent only a belief regarding future events based on current expectations, estimates, assumptions and projections about our business, future financial results, and 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 events and future operating or financial performance.

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Where in any forward-looking statement we express an expectation or belief as to future results or events, such expectation or belief is based on current plans and expectations of our management, expressed in good faith, and believed to have a reasonable basis. However, there can be no assurance that the expectation or belief will occur or that anticipated results will be achieved or accomplished.

Among the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation:


The forward-looking statements included in this release speak only as of the date hereof. We undertake no obligation (and expressly disclaim any obligation) to update any forward-looking statements, whether written or oral or as a result of new information, future events or otherwise.

  • impacts on our business due to the COVID-19 pandemic, including:
    • variant strains of the virus, as well as the timing, effectiveness and availability of, and people’s receptivity to, vaccines or other medical remedies;
    • disruptions to our operations and demand for our products, increased costs, disruption of supply chain and other constraints in the availability of materials and other necessary services;
    • government-mandated site closures, employee illness, skilled labor shortages, the impact of potential travel restrictions, stay-in-place restrictions, and vaccination requirements on our business and workforce; and
    • customer and supplier bankruptcies, impacts to the global economy and financial markets, and liquidity challenges in accessing capital markets;
  • uncertain global economic and capital markets conditions, including those due to COVID-19, trade disputes between the U.S. and its trading partners, actions taken by the current U.S. administration, political and social unrest, and the availability and fluctuations in prices of steel, oil, copper, and other commodities;
  • volatility in raw material prices and our suppliers’ ability to meet quality and delivery requirements;
  • failure to manage the distribution of products and services effectively;
  • failure to compete successfully and innovate in our markets;
  • failure to protect our intellectual property rights or violations of the intellectual property rights of others;
  • the extent to which there are quality problems with respect to manufacturing processes or finished goods;
  • the risk of cybersecurity breaches;
  • loss of or decrease in sales from our most significant customers;
  • risks due to our operations and sales outside the U.S. and in emerging markets;
  • fluctuations in foreign currency exchange rates and the impact of such fluctuations on our hedging arrangements;
  • fluctuations in demand or customers’ levels of capital investment and maintenance expenditures, especially in the oil and gas, chemical, and mining markets, or changes in our customers’ anticipated production schedules, especially in the commercial aerospace market;
  • the risk of material business interruptions, particularly at our manufacturing facilities;
  • risk of liabilities from past divestitures and spin-offs;
  • failure of portfolio management strategies, including cost-saving initiatives, to meet expectations;
  • risks related to government contracting, including changes in levels of government spending and regulatory and contractual requirements applicable to sales to the U.S. government, including the impact of COVID vaccine mandates on our ability to continue to participate in federal contracting;
  • fluctuations in our effective tax rate, including as a result of possible tax reform legislation in the U.S.;
  • changes in environmental laws or regulations, discovery of previously unknown or more extensive contamination, or the failure of a potentially responsible party to perform;
  • failure to comply with the U.S. Foreign Corrupt Practices Act (or other applicable anti-corruption legislation), export controls and trade sanctions, including tariffs;
  • risk of product liability claims and litigation; and
  • changes in laws relating to the use and transfer of personal and other information.

The forward-looking statements included in this release speak only as of the date hereof. We undertake no obligation (and expressly disclaim any obligation) to update any forward-looking statements, whether written or oral or as a result of new information, future events or otherwise.