May 04, 2018 • 09:00 am ET



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Welcome to ITT's 2018 First Quarter Conference Call. Today is Friday May 4, 2018. I'm starting the call from ITT today is Jessica Kourakos, Head 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 PM Eastern. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. (Operator Instructions).

It is now my pleasure to turn the floor over to Jessica Kourakos. You may begin.

Jessica Kourakos

Thank you, Lori. 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 Please note that our discussion this morning will primarily focus on non-GAAP measures unless otherwise indicated.

During the course of this call, we will make forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. No forward-looking statements can be guaranteed and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements made on this call should be evaluated together with the risks and uncertainties that affect our business, particularly those disclosed in our SEC filings.

So let's now turn to Slide No. 3, where Denise will discuss our results.

Denise L. Ramos

Thank you, Jessica. Good morning, everyone. Thank you for joining us today to discuss ITT's record first quarter financial results and the significant operational and strategic progress we delivered in the quarter. On the heels of a very strong 2017, the momentum we carried into Q1 allowed us to deliver ITT records in orders, sales, adjusted operating income and adjusted EPS. And in each category, we delivered double-digit growth compared to the prior year.

Total revenue was up 10%, total orders up 14%; segment OI, up 22%; and EPS, up 20%. In addition, segment margins improved 140 basis points to 15%, and working capital as a percent of sales improved 90 basis points, excluding FX. As I reflect on our Q1 performance, I'm energized by the significant progress we continue to drive in the three main focus areas that underpin our strategy as a Company. Those are execution, growth and innovation, and effective capital deployment. These are the key elements of our enterprise strategy. These are the areas that our dedicated people are driving with intensity every day. And these are the areas where we still have tremendous upside potential.

So let me start with the execution highlights. In Q1, Industrial Process and Connect and Control Technologies, each produced margin improvements of about 300 basis points. IP's productivity enhancements, supply-chain actions, restructuring benefits and project execution improvements all contributed to IP's 57% growth in adjusted operating income and their 320 basis point improvement in operating margins. CCT produced 28% adjusted operating income growth and 290