ITT (US:ITT)2021-02-20 02:05Financial Data and Key Metrics Changes - Q4 revenue decreased by 1.5% to $709 million, while segment operating income increased by 11.6% to $120 million [6] - Reported earnings per share was a net loss of $0.16, primarily due to a $137 million charge related to the termination of the U.S. pension plan [6] - Adjusted earnings per share for the full year was $1.01, showing a sequential and year-over-year increase [13] Business Line Data and Key Metrics Changes - Motion Technologies delivered over 10% organic growth, driven by strong performance in the Friction OE business, with segment margins expanding over 400 basis points to 19.5% [26][41] - Industrial Process saw a 10% organic sales decline but managed to grow margins by 90 basis points to 15.1% [27][43] - Connect and Control Technologies experienced weak demand, with sales down over 30% in aerospace and defense, but managed to achieve a book-to-bill ratio above one [20][45] Market Data and Key Metrics Changes - Friction sales in North America were up 43%, and sales in China increased by 19% [41] - Market share in North America increased by almost 400 basis points, more than 200 basis points in China, and nearly 100 basis points in Europe [17] - The company expects full-year organic sales growth of 2% to 4% in 2021, driven by continued share gains in Motion Technologies [22] Company Strategy and Development Direction - The company plans to invest approximately $100 million in capital expenditures in 2021, a 55% increase from 2020, and pursue acquisitions in core markets [24][82] - A 30% increase in dividends was announced, marking the ninth consecutive dividend increase [25] - The focus remains on operational excellence and customer centricity, with a commitment to driving performance and seeking organic and inorganic growth opportunities [37][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of the economic environment and anticipates a strong performance in 2021 [11][54] - The company expects total revenue to increase by 5% to 7% in 2021, with adjusted earnings per share growth of 8% to 17% [58] - Management highlighted the importance of flexibility and agility in operations to adapt to changing market conditions post-COVID [100][101] Other Important Information - The company achieved a free cash flow of $102 million for Q4 and $372 million for the full year, with a free cash flow margin of 15% [13][28] - Significant progress was made in reducing legacy liabilities, including a successful transfer of the U.S. pension liability to a third party [29][30] - The company has increased its copper-free brake pad content from 7% in 2015 to 50% currently, mitigating exposure to copper price fluctuations [111] Q&A Session Summary Question: Can you discuss the outgrowth expectations for Friction? - Management expects to continue outperforming the market in 2021, with a forecasted growth of 10% compared to IHS's 14% [72][74] Question: What is the expected impact of temporary cost cuts in 2021? - Approximately $40 million in carryover savings is expected, with a reversal of temporary cost cuts amounting to $25 million to $30 million [76] Question: How is the company addressing inflation and price costs? - The company anticipates similar pressure from commodity prices as in 2020 but expects to mitigate this through productivity improvements [85][86] Question: What is the company's approach to capital allocation regarding dividends and buybacks? - The company prioritizes organic investments, followed by acquisitions, and then returns to shareholders through dividends and share repurchases [94][96] Question: How has the restructuring plan evolved during COVID? - The company has focused on making fixed costs variable and enhancing operational flexibility to adapt to market changes [99][101]