May 04, 2018 • 09:00 am ET



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Thomas M. Scalera

to a large prior year spares order from Europe and Africa. However, on a sequential basis, short cycle orders improved 6%. IP's adjusted segment operating income increased 57% to $17 million. This increase was driven by restructuring savings, productivity improvements, favorable mix, some short cycle price realization and improved project execution. Compared to the prior year, margins improved 320 basis points to 9%, which is already above last year's full year margin level and is a great jumping-off point for the rest of this year, as we target full year margins growing into the low double digits.

Turning to Connect and Control Technologies on Slide 8. Before we look at the results, we'd like to point out that there is solid operational momentum building inside of CCT, and we believe that this business will gain additional interest as it continues to deliver incremental value over the coming years. So with that, in the quarter, Connect and Control Technologies grew 3% to $158 million on flat organic revenue. Aerospace grew 4% on triple-digit growth in rotorcraft and strength in commercial aerospace connectors.

Defense revenue declined 6% due to anticipated connectors weakness that was partially offset by component strength. General industrial markets grew 1% due to global energy absorption demand in electric vehicle connectors, supporting charging station infrastructure expansion. Oil and gas connectors improved 3%, an increased activity in the Middle East. CCT's organic orders improved 9%, representing the highest order quarter ever in CCT's history. The order growth was driven by a 23% increase in commercial aerospace, led by strong rotorcraft orders, which have already reached levels to support 100% of our 2018 rotorcraft revenue targets.

In addition, aerospace components, aftermarket and environmental control system orders all improved 18% or better in the quarter. Outside of Aerospace, we saw 20% of order growth in oil and gas and 4% growth in industrial and transportation markets led by EV charging connectors. Adjusted segment operating income increased 28% to $23 million, representing margin growth of 290 basis points over the prior year. The segment operating income growth primarily reflects improved net productivity, including restructuring benefits from the integration of the CCT leadership team.

As we indicated on the 2018 guidance call, CCT is expected to produce modest top line growth, as new platforms continue to ramp and offset legacy program transitions. The real story for CCT in the short-term will be the triple-digit improvement in margins that we will drive through improved execution and the sustained momentum we have generated inside connectors. In addition, CCT is expected to benefit from restructuring and efficiency actions, as we enter a new phase of opportunities from the integration of the CCT businesses.

So with that, let's now turn to our 2018 guidance update on Slide 10. We continue to expect total revenues to be up 5% to 8% and underlying organic growth of 2% to 4%. Some of the primary drivers of the growth include global friction and rail share gains, increased commercial aerospace activity and