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 ITT Reports Solid 2017 Second-Quarter Results
   Friday, August 04, 2017 6:45:00 AM ET

--GAAP Results:

--Revenue up 1% to $631 million

--Segment operating income up 12%

--EPS increased to $0.54

--Adjusted Results:

--Organic revenue down 2%; Organic orders up 1%

--Adjusted segment operating income down 4%, including unfavorable FX of $6 million

--Adjusted EPS down 3% to $0.65

ITT Inc. (ITT ) today reported solid 2017 second-quarter financial results that primarily reflect the company’s ability to leverage the benefits from proactive restructuring and operational improvements while advancing share gains and market growth strategies in key global end markets.

On a GAAP basis, the company delivered revenue of $631 million, a 1 percent increase, reflecting benefits from the Axtone Rail Components acquisition. Organic revenue (defined as total revenue excluding foreign exchange, acquisition and divestiture impacts) decreased 2 percent as growth in transportation, driven by automotive, was more than offset by lower industrial and global oil and gas pump project activity. Organic orders grew 1 percent primarily due to strong automotive share gains in Europe and China, strength in short-cycle pumps and connector gains across key end markets, partially offset by weakness in upstream oil and gas pump projects.

GAAP segment operating income increased 12 percent and adjusted segment operating income decreased 4 percent, reflecting restructuring and productivity benefits, which were offset by $6 million of unfavorable foreign exchange, $4 million of strategic investments to support continued long-term automotive platform wins and estimated impacts from restrictions on sales of certain military-specification connectors. Excluding foreign exchange, adjusted segment operating income increased 3 percent. GAAP segment operating income also included the impact of a legal accrual that was more than offset by benefits from lower restructuring and acquisition-related costs.

GAAP EPS increased $0.18 to $0.54 and adjusted EPS, which excludes special items, decreased $0.02 to $0.65, as a lower tax rate, interest expense and share count were more than offset by higher environmental costs, as well as unfavorable foreign exchange. Excluding foreign exchange, adjusted EPS grew 6 percent.

For a reconciliation of GAAP to non-GAAP results, please refer to www.itt.com/investors or click here.

"In the second quarter, ITT drove activities across the enterprise to optimize execution while advancing essential long-term growth strategies," said CEO and President Denise Ramos. "From an execution standpoint, we continued to successfully leverage the benefits of our structural reset at Industrial Process (IP) and we drove solid operational improvements at our Connect and Control Technologies (CCT) facilities. These efforts contributed to over 200 basis points of sequential adjusted margin improvement compared to the first quarter at both businesses. And despite increased commodity costs, we continued to deliver solid productivity gains in our Motion Technologies (MT) business.

"In addition, we continued to penetrate new and existing markets as we grew our presence on key incremental automotive brake pad platforms in China and North America, captured new shock absorber business in the China high-speed rail market, and advanced our global electric vehicle market capture strategies in both braking components and connectors.

"We also have recently produced our first prototype automotive brake pads in our new world-class North American facility, we are nicely on track with the integration of our Axtone Railway Components acquisition, and we continue to invest to support recent share gains in key growth markets such as rotorcraft. In addition, we are continuing our track record of strategically deploying our capital, including $30 million of share repurchases, to create value for shareowners."

2017 Second-Quarter Business Segment Results

All quarterly results are compared with the respective prior-year periods.

Industrial Process designs and manufactures industrial pumps and valves for the chemical, industrial, oil and gas, and mining markets.

-- Total revenue and organic revenue decreased 10 percent to $192 million, reflecting project declines, primarily due to lower oil and gas projects in North America, Asia and Latin America, as well as short-cycle declines in baseline oil and gas pumps and chemical valves.

-- GAAP operating income increased 135 percent to $15 million, and adjusted segment operating income decreased 38 percent to $15 million. Both measures primarily reflect lower volumes, negative impacts from pump projects with a high degree of engineering and manufacturing complexity and higher incentive compensation costs, which were partially offset by incremental restructuring benefits. The GAAP operating income increase reflects a prior-year trade name impairment and lower restructuring costs in the current year.

Motion Technologies designs and manufactures braking technologies, shock absorbers and specialized sealing solutions for the automotive and rail markets.

-- Total revenue increased 12 percent to $290 million, and organic revenue increased 5 percent, reflecting share gains and market growth in automotive brake pads in Europe and China and strength in sealing solutions at Wolverine. Total revenue includes $5 million of unfavorable foreign exchange and incremental revenue of $22 million from the acquisition of Axtone.

-- GAAP operating income increased 7 percent to $52 million, and adjusted segment operating income increased 6 percent to $53 million. Both increases reflect strong volume growth, increased productivity and benefits from the acquisition of Axtone, partially offset by commodity costs, pricing pressures, strategic investments and $5 million of unfavorable foreign exchange. Excluding foreign exchange, adjusted segment operating income increased 15 percent.

Connect and Control Technologies designs and manufactures harsh-environment connectors and critical energy absorption and flow control components primarily for the aerospace and defense and industrial markets.

-- Total revenue decreased 3 percent to $150 million, and organic revenue decreased 2 percent. The revenue decreases reflect lower wide-body platform demand in commercial aerospace and impacts from restrictions on sales of certain military-specification connectors, partially offset by an increase in oil and gas global connector activity as well as growth in electric vehicle charging and heavy vehicle connectors.

-- GAAP operating income decreased 19 percent to $14 million and adjusted segment operating income increased 14 percent to $21 million. GAAP operating income included a legal accrual, and higher restructuring costs. Both measures reflect improved productivity from operational efficiency, material savings and labor cost controls, as well as incremental restructuring benefits, partially offset by estimated impacts from military-specification connectors and $1 million of unfavorable foreign exchange. Excluding foreign exchange, adjusted segment operating income increased 20 percent.

Guidance

The company is raising its previously announced 2017 full-year revenue guidance to the range of flat to up 2 percent primarily due to the positive impacts of foreign exchange. In addition, the company is raising the midpoint of its previously announced adjusted EPS guidance by $0.07 to $2.45. The new adjusted EPS range is now $2.40 to $2.50. The updated adjusted EPS guidance reflects solid operational execution, partially offset by incremental commodity headwinds, and benefits from non-operating items, net of incremental investments. The new adjusted EPS midpoint of $2.45 represents a 6 percent increase compared to the prior year, or an 8 percent increase excluding foreign exchange.

Investor Call Today

ITT’s senior management will host a conference call for investors today at 9 a.m. ET to review performance and answer questions. The briefing can be monitored live via webcast at the following address on the company’s website: www.itt.com/investors and will be available on the website from two hours after the webcast until Friday, Aug. 18, 2017, at midnight.

All references to EPS are defined as diluted earnings per share from continuing operations.

About ITT

ITT is a diversified leading manufacturer of highly engineered critical components and customized technology solutions for the transportation, industrial, and oil and gas markets. Building on its heritage of innovation, ITT partners with its customers to deliver enduring solutions to the key industries that underpin our modern way of life. ITT is headquartered in White Plains, N.Y., with employees in more than 35 countries and sales in a total of approximately 125 countries. The company generated 2016 revenues of $2.4 billion. For more information, visit www.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 (the "Act"). No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. All forward-looking statements included in this release are based on information available to us on the date hereof, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about the business and future financial results of 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.

We use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "future," "may," "will," "could," "should," "potential," "continue," "guidance" and other similar expressions to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such forward-looking statements.

Forward-looking statements in this release should be evaluated together with the risks and uncertainties that affect our business, particularly those mentioned in the Risk Factors section of the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents filed from time to time with the Securities and Exchange Commission.

                                                                                                                                                                                               
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
                                                                                                                                                                                                                                                                             
                                                                                                         Three Months                                                                                                     Six Months
------------------------------------------------------------------- -------------------- -------------------- ---------------------------------------------------------------------------------------------------------------------------------------- -------------------- -----------------------------------------------------------------------------------------------------
                    For the Periods Ended June 30                                       2017                                     2016                                     2017                              2016
------------------------------------------------------------------- -------------------- -------------------- --------------------------------------------------------- -------------------- --------------------------------------------------------- -------------------- --------------------------------------------------------- -------------------- ----------------------
  Revenue                                                                                                           $   630.9                                $   626.2                                                                      $ 1,256.7                                   $    1,235.3
  Costs of revenue                                                                426.5                 420.6                 850.0                       834.4
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
Gross profit                                                                      204.4                 205.6                 406.7                       400.9
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
  General and administrative expenses                                                                                    65.3                                                                           74.0                                                                          131.5                                                                                143.0
  Sales and marketing expenses                                                                                           43.9                                                                           46.0                                                                           87.0                                                                                 89.3
  Research and development expenses                                                                                      22.6                                                                           21.1                                                                           45.1                                                                                 40.3
  Asbestos-related costs, net                                                      14.9                  15.0                  29.8                        27.8
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
Operating income                                                                                                         57.7                                                                           49.5                                                                          113.3                                                                                100.5
  Interest and non-operating (income) expenses, net                                (0.9 )                                   (0.5 )                                   (0.1 )                                          1.2
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
Income from continuing operations before income tax expense                                                              58.6                                                                           50.0                                                                          113.4                                                                                 99.3
  Income tax expense                                                               10.6                  17.5                  19.7                        29.2
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
Income from continuing operations                                                                                        48.0                                                                           32.5                                                                           93.7                                                                                 70.1
                                                                                   (0.1 )                                    0.5                  (0.2 )                                          0.2
  (Loss) Income from discontinued operations, including tax benefit
  (expense)
  of $0.1, $(0.1), $0.2 and $0.2, respectively
------------------------------------------------------------------- -------------------- -------------------- --------------  -------------------- -------------------- -------------------- --------------  -------------------- -------------------- -------------------- --------------  -------------------- -------------------- -------------------- --------------------
Net income                                                                         47.9                  33.0                  93.5                        70.3
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
  Less: Income (loss) attributable to noncontrolling interests                      0.1                   0.2                  (0.3 )                                          0.1
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
Net income attributable to ITT Inc.                                           $    47.8             $    32.8             $    93.8                $       70.2
------------------------------------------------------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ---------- ----------
Amounts attributable to ITT Inc.:
  Income from continuing operations, net of tax                                                                     $    47.9                                                                      $    32.3                                                                      $    94.0                                                                         $       70.0
  (Loss) income from discontinued operations, net of tax                           (0.1 )                                    0.5                  (0.2 )                                          0.2
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
Net income attributable to ITT Inc.                                           $    47.8             $    32.8             $    93.8                $       70.2
------------------------------------------------------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ---------- ----------
Earnings per share attributable to ITT Inc.:
  Basic:
    Continuing operations                                                                                           $    0.54                                                                      $    0.36                                                                      $    1.06                                                                         $       0.78
    Discontinued operations                                              --        --        --              --
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
    Net income                                                                                                      $    0.54                                                                      $    0.36                                                                      $    1.06                                                                         $       0.78
  Diluted:
    Continuing operations                                                                                           $    0.54                                                                      $    0.36                                                                      $    1.05                                                                         $       0.78
    Discontinued operations                                              --        --        --              --
------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------ -------------------- -------------------- ----------------------
    Net income                                                                                                      $    0.54                                                                      $    0.36                                                                      $    1.05                                                                         $       0.78
Weighted average common shares - basic                                                                      88.5                                                                           89.8                                                                           88.4                                                                                 89.7
Weighted average common shares - diluted                                                                    89.0                                                                           90.4                                                                           89.1                                                                                 90.4
                                                                                                                                                                                                                                                                                                                                                            
                                                                                                                             
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
                                                                                                                                                                                                           
                                                                                  June 30,                             December 31,
                                                                                                                                             2017                                                                         2016
------------------------------------------------------------------------------------ -------------------- -------------------- ------------------------------   -------------------- -------------------- ---------------------------------
                                                                                                                                          (Unaudited)
Assets
  Current assets:
    Cash and cash equivalents                                                                                                    $   355.3                                                                     $   460.7
    Receivables, net                                                                                                                 591.1                                                                         523.9
    Inventories, net                                                                                                                 314.9                                                                         295.2
    Other current assets                                                                       142.9                122.0  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
  Total current assets                                                                       1,404.2              1,401.8  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
    Plant, property and equipment, net                                                                                               491.2                                                                         464.5
    Goodwill                                                                                                                         883.9                                                                         774.7
    Other intangible assets, net                                                                                                     153.5                                                                         160.3
    Asbestos-related assets                                                                                                          303.8                                                                         314.6
    Deferred income taxes                                                                                                            300.9                                                                         297.4
    Other non-current assets                                                                   193.1                188.4  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
  Total non-current assets                                                                   2,326.4              2,199.9  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
Total assets                                                                               $ 3,730.6            $ 3,601.7  
------------------------------------------------------------------------------------ -------------------- -------------------- --- ------- -------------------- -------------------- -------------------- ------ ------- --------------------
Liabilities and Shareholders’ Equity
  Current liabilities:
    Short-term loans and current maturities of long-term debt                                                                    $   204.1                                                                     $   214.3
    Accounts payable                                                                                                                 315.2                                                                         301.7
    Accrued liabilities                                                                        373.6                350.2  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
  Total current liabilities                                                                    892.9                866.2  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
    Asbestos-related liabilities                                                                                                     866.0                                                                         877.5
    Postretirement benefits                                                                                                          255.1                                                                         248.6
    Other non-current liabilities                                                              170.6                181.0  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
  Total non-current liabilities                                                              1,291.7              1,307.1  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
Total liabilities                                                                            2,184.6              2,173.3  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
Shareholders’ equity:
  Common stock:
     Authorized - 250.0 shares, $1 par value per share
     Issued and Outstanding - 88.0 shares and 88.4 shares, respectively                                                  88.0                                                                          88.4
    Retained earnings                                                                                                              1,843.6                                                                       1,789.2
    Total accumulated other comprehensive loss                                                (387.2 )                                (451.2 )
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
  Total ITT Inc. shareholders’ equity                                                                                              1,544.4                                                                       1,426.4
    Noncontrolling interests                                                                                                           1.6                                                                           2.0
  Total shareholders’ equity                                      1,546.0              1,428.4  
------------------------------------------------------------------------------------ -------------------- -------------------- -------------------------------- -------------------- -------------------- -----------------------------------
Total liabilities and shareholders’ equity                      $ 3,730.6            $ 3,601.7  
------------------------------------------------------------------------------------ -------------------- -------------------- --- ------- -------------------- -------------------- -------------------- ------ ------- --------------------
                                                                                                                                                                                                                          
                                                                                                                      
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
                                                                                                                                                                                                    
For the Six Months Ended June 30                                                              2017                                     2016
------------------------------------------------------------------------- -------------------- -------------------- --------------------------------------------------------- -------------------- -------------------------------------
Operating Activities
  Net income                                                                                                              $    93.5                                                                      $    70.3
  Less: (Loss) income from discontinued operations                                                                             (0.2 )                                                                          0.2
  Less: (Loss) income attributable to noncontrolling interests                           (0.3 )                                    0.1  
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Income from continuing operations attributable to ITT Inc.                                                                     94.0                                                                           70.0
  Adjustments to income from continuing operations:
   Depreciation and amortization                                                                                               50.4                                                                           51.1
   Stock-based compensation                                                                                                     7.3                                                                            5.9
   Asbestos-related costs, net                                                                                                 29.8                                                                           27.8
   Asbestos-related payments, net                                                                                             (30.7 )                                                                        (11.5 )
  Changes in assets and liabilities:
   Change in receivables                                                                                                      (35.6 )                                                                        (45.6 )
   Change in inventories                                                                                                        2.3                                                                           (3.7 )
   Change in accounts payable                                                                                                  (7.8 )                                                                         (4.3 )
   Change in accrued expenses                                                                                                  (3.3 )                                                                        (28.1 )
   Change in accrued and deferred income taxes                                                                                 (3.1 )                                                                          9.7
   Other, net                                                                           (10.6 )                                    0.3  
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Net Cash - Operating activities                                             92.7                  71.6  
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Investing Activities
   Capital expenditures                                                                                                       (53.3 )                                                                        (46.1 )
   Acquisitions, net of cash acquired                                                                                        (113.7 )                                                                         (0.2 )
   Purchases of investments                                                                                          --                                                                          (60.6 )
   Maturities of investments                                                                                         --                                                                          108.7
   Proceeds from sale of businesses and other assets                                                                            2.4                                                                            1.2
   Other, net                                                                             0.1                   0.2  
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Net Cash - Investing activities                                           (164.5 )                                    3.2  
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Financing Activities
   Commercial paper, net borrowings                                                                                             9.4                                                                           23.5
   Short-term revolving loans, borrowings                                                                                      77.3                                                                           27.7
   Short-term revolving loans, repayments                                                                                    (100.0 )                                                                        (78.3 )
   Long-term debt, issued                                                                                                       3.9                                                                 --
   Long-term debt, repayments                                                                                                  (0.7 )                                                                         (0.6 )
   Repurchase of common stock                                                                                                 (32.8 )                                                                        (27.5 )
   Proceeds from issuance of common stock                                                                                       6.5                                                                            8.8
   Dividends paid                                                                                                             (11.6 )                                                                        (22.5 )
   Excess tax benefit from equity compensation activity                                                              --                                                                            3.4
   Other, net                                                                             0.1                  (2.3 )
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Net Cash - Financing activities                                            (47.9 )                                  (67.8 )
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
  Exchange rate effects on cash and cash equivalents                                                                           15.2                                                                            4.0
  Net Cash - Operating activities of discontinued operations                (0.9 )                                    6.6  
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Net change in cash and cash equivalents                                                                                      (105.4 )                                                                         17.6
Cash and cash equivalents - beginning of year                              460.7                 415.7  
------------------------------------------------------------------------- -------------------- -------------------- ------------------------------------ -------------------- -------------------- ------------------------------------
Cash and cash equivalents - end of period                              $   355.3             $   433.3  
------------------------------------------------------------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ------- ------- --------------------
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
  Interest                                                                                                                $     2.1                                                                      $     2.4
  Income taxes, net of refunds received                                             $    21.9             $    15.2  
------------------------------------------------------------------------- -------------------- -------------------- ------- ------- -------------------- -------------------- -------------------- ------- ------- --------------------
                                                                                                                                                                                                                    
          Key Performance Indicators and Non-GAAP Measures
 
Management reviews a variety of key performance indicators including
revenue, segment operating income and margins, earnings per share,
order growth, and backlog, some of which are non-GAAP. In addition,
we consider certain measures to be useful to management and
investors when evaluating our operating performance for the periods
presented. These measures provide a tool for evaluating our ongoing
operations and management of assets from period to period. This
information can assist investors in assessing our financial
performance and measures our ability to generate capital for
deployment among competing strategic alternatives and initiatives,
including, but not limited to, acquisitions, dividends and share
repurchases.
 
These metrics, however, are not measures of financial performance
under accounting principles generally accepted in the United States
of America (GAAP) and should not be considered a substitute for
measures determined in accordance with GAAP. We consider the
following non-GAAP measures, which may not be comparable to
similarly titled measures reported by other companies, to be key
performance indicators.
 
Organic Revenues and Organic Orders are defined as
revenues and orders, excluding the impacts of foreign currency
fluctuations, acquisitions and divestitures. Divestitures include
sales of portions of our business that did not meet the criteria for
presentation as a discontinued operation. The period-over-period
change resulting from foreign currency fluctuations is estimated
using a fixed exchange rate for both the current and prior periods.
Management believes that reporting organic revenue and organic
orders provides useful information to investors by helping identify
underlying trends in our business and facilitating easier
comparisons of our revenue performance with prior and future periods
and to our peers.
 
 
Adjusted Operating Income, Adjusted Segment Operating Income and
Adjusted Segment Operating Margin are defined as total operating
income and segment operating income, adjusted to exclude special
items that include, but are not limited to, asbestos-related costs,
restructuring costs, realignment costs, certain asset impairment
charges, certain acquisition-related expenses, and other unusual or
infrequent operating items. Special items represent significant
charges or credits that impact the current results, which management
views as unrelated to the Company’s ongoing operations and
performance. Adjusted segment operating margin is defined as
adjusted segment operating income divided by total revenue. We
believe that these measures are useful to investors and other users
of our financial statements in evaluating ongoing operating
profitability, as well as in evaluating operating performance in
relation to our competitors.
 
 
Adjusted Income from Continuing Operations, Adjusted EPS and
Adjusted EPS Guidance are defined as income from continuing
operations attributable to ITT Inc. and income from continuing
operations attributable to ITT Inc. per diluted share, adjusted to
exclude special items that include, but are not limited to,
asbestos-related costs, restructuring costs, realignment costs,
certain asset impairment charges, certain acquisition-related
expenses, income tax settlements or adjustments, and other unusual
and infrequent non-operating items. Special items represent
significant charges or credits, on an after-tax basis, that impact
current results, which management views as unrelated to the
Company’s ongoing operations and performance. We believe that
adjusted income from continuing operations is useful to investors
and other users of our financial statements in evaluating ongoing
operating profitability, as well as in evaluating operating
performance in relation to our competitors.
 
 
Adjusted Free Cash Flow is defined as net cash provided by
operating activities less capital expenditures, adjusted for cash
payments for restructuring costs, realignment actions, net asbestos
cash flows and other significant items that impact current results
which management views as unrelated to the Company’s ongoing
operations and performance. Due to other financial obligations and
commitments, including asbestos, the entire free cash flow may not
be available for discretionary purposes. We believe that adjusted
free cash flow provides useful information to investors as it
provides insight into the primary cash flow metric used by
management to monitor and evaluate cash flows generated by our
operations.
                                                                                                                                                                                          ITT Inc. Non-GAAP Reconciliation
                                                                                                                                                                                     Reported vs. Organic Revenue / Order Growth
                                                                                                                                                                                             Second Quarter 2017 & 2016
                                                                                                                                                                                                    (In Millions)
                                                                                 
                               -------------------- -------------------- -------------------- -------------------- ----------------------------------------- ---------------------                     -------------------------- -------------------- ---------------------------------------------------- -------------------- -------------------- ----------------------------------------- ---------------------
                                                                                              (As Reported - GAAP)                                                                                                                                                                                 (As Adjusted - Organic)
                               ---------------------------------------------------------------------------------------------------------------------------------------------------                     --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                                          
                                        (A)                                       (B)                                       (C)                                                                                    (D)                                                (E)                                        (F) = A-D-E                               (G) =C-D-E                                (H) = G / B
                                                                                                                          Change                                   % Change                            Acquisition / Divestitures                                  FX Impact                                  Revenue / Orders                               Change                                   % Change
                                      3M 2017                                   3M 2016                                2017 vs. 2016                             2017 vs. 2016                                   3M 2017                                 3M 2017                                3M 2017                             Adj. 2017 vs. 2016                        Adj. 2017 vs. 2016
                               --------------------                      --------------------                      ---------------------                     ---------------------                     --------------------------                      ---------- --------------------                      --------------------                      ---------------------                     ---------------------
                                                                                                                                                                                                                                                                                                                                                                                                 
Revenues
------------------------------
ITT Inc. - Consolidated                       630.9                                     626.2                             4.7                                       0.8 %                                                    22.0                            (5.6 )                                                        614.5                           (11.7 )                                    (1.9 %)
                                                                                                                                                                                                                                                                                                                                                                                                 
Industrial Process                            192.3                                     214.2                           (21.9 )                                   (10.2 %)                                                      -                            (0.2 )                                                        192.5                           (21.7 )                                   (10.1 %)
Motion Technologies                           290.1                                     259.6                            30.5                                      11.7 %                                                    22.0                            (4.7 )                                                        272.8                            13.2                                       5.1 %
Connect & Control Technologies                149.6                                     153.5                            (3.9 )                                    (2.5 %)                                                      -                            (0.7 )                                                        150.3                            (3.2 )                                    (2.1 %)
                                                                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                 
Orders
------------------------------
Total Segment Orders                          626.3                                     605.9                            20.4                                       3.4 %                                                    20.2                            (6.5 )                                                        612.6                             6.7                                       1.1 %
                                                                                                                                                                                                                                                                                                                                                                                                 
Industrial Process                            190.3                                     199.7                            (9.4 )                                    (4.7 %)                                                      -                            (0.4 )                                                        190.7                            (9.0 )                                    (4.5 %)
Motion Technologies                           288.9                                     261.2                            27.7                                      10.6 %                                                    20.2                            (5.3 )                                                        274.0                            12.8                                       4.9 %
Connect & Control Technologies                147.8                                     145.9                             1.9                                       1.3 %                                                       -                            (0.8 )                                                        148.6                             2.7                                       1.9 %
                                                                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                 
                                                                                                                                                                                                                                                                                                                                                                                                 
Note: Excludes intercompany eliminations
Immaterial differences due to rounding
                                                                                                                                                                                                                                     ITT Inc. Non-GAAP Reconciliation
                                                                                                                                                                                                                                     Reported vs Adjusted Segment Operating Income & Operating Margin
                                                                                                                                                                                                                                     Second Quarter 2017 & 2016
                                                                                                                                                                                                                                     (In Millions)
                                                                                                                                                                                                                                                                                                             
                                                   3M 2017                                           3M 2017                                                                 3M 2017                                              3M 2016                                        3M 2016                                                                 3M 2016                                              % Change                                                                   % Change
                                                 As Reported                                      Special Items                                                            As Adjusted                                          As Reported                                   Special Items                                                            As Adjusted                                    As Reported 2017 vs. 2016                                                  As Adjusted 2017 vs. 2016
                                    -------------------------------------                     --------------------                                              --------------------------------                     --------------------------------                     --------------------                                              --------------------------------                     ----------------------------------                                             --------------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Revenue:
Industrial Process                            192.3                                                                                                                  192.3                                                214.2                                                                                                                  214.2                                                  (10.2 %)                                                                       (10.2 %)
Motion Technologies                           290.1                                                                                                                  290.1                                                259.6                                                                                                                  259.6                                                   11.7 %                                                                         11.7 %
Connect & Control Technologies                149.6                                                                                                                  149.6                                                153.5                                                                                                                  153.5                                                   (2.5 %)                                                                        (2.5 %)
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Intersegment eliminations                      (1.1 )                                                                                                                 (1.1 )                                               (1.1 )                                                                                                                 (1.1 )                                                                                                      
                                    --------------- --------------------                                                                                        ---------- --------------------                      ---------- --------------------                                                                                        ---------- --------------------                      ----------------------------------                                             --------------------------
     Total Revenue                            630.9                                                                                               630.9                             626.2                                                                                               626.2                                 0.8 %                                                                          0.8 %
                                    --------------- --------------------                                                                                        ---------- --------------------                      ---------- --------------------                                                                                        ---------- --------------------                      ------------ --------------------                                              ------------ ------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Operating Margin:
Industrial Process                              7.7 %                                                            -                      BP                             7.7 %                                                2.9 %                                                          840                      BP                            11.3 %                                                  480                                           BP                              (360 )                                 BP
Motion Technologies                            18.0 %                                                           20                      BP                            18.2 %                                               18.8 %                                                           50                      BP                            19.3 %                                                  (80 )                                         BP                              (110 )                                 BP
Connect & Control Technologies                  9.2 %                                                          460                      BP                            13.8 %                                               10.9 %                                                           80                      BP                            11.7 %                                                 (170 )                                         BP                               210                                   BP
                                                                                                                                                                                                                                                                                                                                            
                                    -------------------------------------                     --------------------                                              --------------------------------                     --------------------------------                     --------------------                                              --------------------------------                     ----------------------------------                                             --------------------------
     Total Operating Segments                  12.8 %                                                          120                      BP                            14.0 %                                               11.5 %                                                          320                      BP                            14.7 %                                                  130                        BP                               (70 )                                 BP
                                    --------------- --------------------                      --------------------                                              ---------- --------------------                      ---------- --------------------                      --------------------                                              ---------- --------------------                      ------------ --------------------                                              ------------ ------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Income (loss):
Industrial Process                             14.8                                                            0.1                                                    14.9                                                  6.3                                                           17.9                                                    24.2                                                  134.9 %                                                                        (38.4 %)
Motion Technologies                            52.1                                                            0.7                                                    52.8                                                 48.9                                                            1.1                                                    50.0                                                    6.5 %                                                                          5.6 %
Connect & Control Technologies                 13.7                                                            6.9                                                    20.6                                                 16.8                                                            1.2                                                    18.0                                                  (18.5 %)                                                                        14.4 %
                                                                                                                                                                                                                                                                                                                                            
                                    -------------------------------------                     --------------------                                              --------------------------------                     --------------------------------                     --------------------                                              --------------------------------                     ----------------------------------                                             --------------------------
     Total Segment Operating Income            80.6                                         7.7                                                    88.3                              72.0                                        20.2                                                    92.2                                11.9 %                                                                         (4.2 %)
                                    --------------- --------------------                      --------------------                                              ---------- --------------------                      ---------- --------------------                      --------------------                                              ---------- --------------------                      ------------ --------------------                                              ------------ ------------
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
Note: Immaterial differences due to rounding.
                                                                                                                                                                                                                ITT Inc. Non-GAAP Reconciliation
                                                                                                                                                                                                    Reported vs. Adjusted Income from Continuing Operations &
                                                                                                                                                                                                                          Adjusted EPS
                                                                                                                                                                                                                   Second Quarter 2017 & 2016
                                                                                                                                                                                                             (In Millions, except per share amounts)
                                                                                                                                                                                                                                                                                  
                                                                                                                                                                                                                                                                                                                                                                                                                                              Percent Change
                                                                               Q2 2017                                               Non-GAAP                                                Q2 2017                                              Q2 2016                                               Non-GAAP                                                Q2 2016                                  2017 vs. 2016                         2017 vs. 2016
                                                                             As Reported                                            Adjustments                                            As Adjusted                                          As Reported                                            Adjustments                                            As Adjusted                                 As Adjusted                           As Adjusted
                                                                  --------------------------------                     ------------------------------------                     --------------------------------                     --------------------------------                     ------------------------------------                     --------------------------------                     --------------                     ---------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                                                                                                                            
Segment Operating Income                                                80.6                                                  7.7                       #A                            88.3                                                 72.0                                                 20.2                       #A                            92.2
                                                                                                                                                                                                                                                                                                                                                                                                                                            
Corporate (Expense)                                                    (22.9 )                                               13.1                       #B                            (9.8 )                                              (22.5 )                                               15.8                       #B                            (6.7 )
                                                                                                                                                                                                                                                     
                                                                  --------------------------------                     --------------------------------                         --------------------------------                     --------------------------------                     --------------------------------                         --------------------------------
Operating Income                                                        57.7                              20.8                                  78.5                              49.5                              36.0                                  85.5  
                                                                  ---------- --------------------                      ---------- --------------------                          ---------- --------------------                      ---------- --------------------                      ---------- --------------------                          ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                            
Interest Income (Expense)                                                1.1                                                 (2.1 )                     #C                            (1.0 )                                                0.8                                                 (2.4 )                     #C                            (1.6 )
Other Income (Expense)                                                  (0.2 )                                                  -                                                     (0.2 )                                               (0.3 )                                                  -                                                     (0.3 )
                                                                                                                                                                                                                                                     
                                                                  --------------------------------                     --------------------------------                         --------------------------------                     --------------------------------                     --------------------------------                         --------------------------------
Income from Continuing Operations before Tax                            58.6                              18.7                                  77.3                              50.0                              33.6                                  83.6  
                                                                  ---------- --------------------                      ---------- --------------------                          ---------- --------------------                      ---------- --------------------                      ---------- --------------------                          ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                            
Income Tax (Expense)                                                   (10.6 )                                               (8.7 )                     #D                           (19.3 )                                              (17.5 )                                               (5.7 )                     #D                           (23.2 )
                                                                                                                                                                                                                                                     
                                                                  --------------------------------                     --------------------------------                         --------------------------------                     --------------------------------                     --------------------------------                         --------------------------------
Income from Continuing Operations                                       48.0                              10.0                                  58.0                              32.5                              27.9                                  60.4  
                                                                  ---------- --------------------                      ---------- --------------------                          ---------- --------------------                      ---------- --------------------                      ---------- --------------------                          ---------- --------------------
                                                                                                                                                                                                                                                                                                                                                                                                                                            
Less: Non Controlling Interest                                           0.1                                                    -                                                      0.1                                                  0.2                                                    -                                                      0.2
                                                                                                                                                                                                                                                     
                                                                  --------------------------------                     --------------------------------                         --------------------------------                     --------------------------------                     --------------------------------                         --------------------------------
Income from Continuing Operations - ITT Inc.                            47.9                              10.0                                  57.9                              32.3                              27.9                                  60.2  
                                                                  ---------- --------------------                      ---------- --------------------                          ---------- --------------------                      ---------- --------------------                      ---------- --------------------                          ---------- --------------------
                                                                                                                                                                                                                                                     
                                                                  --------------------------------                     --------------------------------                         --------------------------------                     --------------------------------                     --------------------------------                         --------------------------------
EPS from Continuing Operations                                          0.54                              0.11                                  0.65                              0.36                              0.31                                  0.67                         (0.02 )                                 (3.0 %)
                                                                  ========== ====================                      ========== ====================                          ========== ====================                      ========== ====================                      ========== ====================                          ========== ====================                      ====== ======
                                                                                                                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                                                                                                                            
                                                                                                                                                                                                                                                                                                                                                                                                                                            
Note: Amounts may not calculate due to rounding.
#A - 2017 includes restructuring and realignment costs ($2.6M),
legal accrual ($5.0M), and acquisition related costs ($0.1M).
#A - 2016 includes restructuring and realignment costs ($14.8M);
acquisition related costs ($1.3M), and impairment of trade name
($4.1M).
 
#B - 2017 includes certain costs associated primarily with sale of
excess property ($2.0M), asbestos related expense ($14.9M) offset by
income of ($3.8M) related to environmental insurance recovery.
#B - 2016 includes restructuring and realignment costs of ($0.8M);
asbestos related costs ($15.0M).
                                    
#C - Includes interest income for a change in uncertain tax position
for both 2017 & 2016.
                                    
#D -2017 includes various tax-related special items including tax
benefit on change in uncertain tax positions ($2.3M), tax benefit
for change in valuation allowance ($2.2M),
tax expense on distribution of foreign earnings ($1.0M), and the tax
impact of other operating special items.
#D - 2016 includes various tax-related special items, including
tax expense on distribution of foreign earnings ($1.4M), valuation
allowance changes ($1.5M), and tax rate change in Italy ($2.2M),
and a tax benefit on uncertain tax positions ($1.7M), in addition
to the tax impact of other operating special items.
                                                                           ITT Inc. Non-GAAP Reconciliation
                                                              Net Cash - Operating Activities vs. Adjusted Free Cash Flow
                                                                                      Conversion
                                                                              Second Quarter 2017 & 2016
                                                                                     (In Millions)
                                                                                    
                                                                                                                                    6M 2017                                   6M 2016
                                                                                                                       --------------------                      --------------------
                                                                                                                                                                  
                     Net Cash - Operating Activities                                                                                   92.7                                      71.6
                                                                                                                                                                  
                     Capital Expenditures                                                                                              53.3                                      46.1
                                                                                                                                               
                                                                                                                       --------------------                      --------------------
                     Free Cash Flow                                                                                                    39.4                                      25.5
                                                                                                                       --------------------                      --------------------
                                                                                                                                                                  
                     Realignment Related Cash Payments, including Capex                                                                 6.2                                       2.2
                     Restructuring Cash Payments                                                                                        8.8                                      15.5
                     Asbestos Cash Payments, net                                                                                       30.7                                      11.5
                                                                                                                       --------------------                      --------------------
                     Adjusted Free Cash Flow                                                                                           85.1                                      54.7
                                                                                                                       --------------------                      --------------------
                                                                                                                                                                  
                                                                                                                                                                  
                     Income from Continuing Operations - ITT Inc.                                                                      94.0                                      70.0
                                                                                                                                                                  
                     Special Items                                                                                                     21.3                                      43.5
                                                                                                                                                                  
                     Income from Continuing Operations - ITT Inc., Excluding                                                                   
                                                                                                                       --------------------                      --------------------
                     Special Items                                                                                                    115.3                                     113.5
                                                                                                                       --------------------                      --------------------
                                                                                                                                                                  
                                                                                                                                                                  
                     Adjusted Free Cash Flow Conversion                                                                               73.8%                                     48.2%
                                                                                                                       --------------------                      --------------------
                                                                                                 ITT Inc. Non-GAAP Reconciliation
                                                                                                  GAAP vs. Adjusted EPS Guidance
                                                                                                          Full Year 2017
                                                                                                                       
                                                                                                                                                                                  
                                                                                                                                                           2017 Full-Year Guidance
                                                                                                           -----------------------------------------------------------------------------------------------------------------------
                                                                                                                                  Low                                                                  High
                                                                                                           -------------------------------------------------                     -------------------------------------------------
                                                                                                                                                                                  
EPS from Continuing Operations - GAAP                                                                                         $   1.66                                                              $   1.82
                                                                                                                                                                                  
Estimated Asbestos Related Costs, Net of Tax                                                                   0.42                            0.42  
                                                                                                           -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                                                                                                  
                                                                                                                              $   2.08                                                              $   2.24
                                                                                                                                                                                  
Estimated Restructuring, Realignment and Other Costs, Net of Tax                                                                  0.28                                                                  0.24
                                                                                                                                                                                  
Acquisition Related Costs, Net of Tax                                                                                             0.11                                                                  0.09
                                                                                                                                                                                  
Other Special Tax Items                                                                                                          (0.07 )                                                               (0.07 )
                                                                                                                                                               
                                                                                                           -------------------------------------------------                     -------------------------------------------------
EPS from Continuing Operations - Adjusted                                                                                     $   2.40                                           $   2.50  
                                                                                                           -------------------- ------ --------------------                      -------------------- ------ --------------------

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170804005187r1&sid=cmtx6&distro=nx&

View source version on businesswire.com: http://www.businesswire.com/news/home/20170804005187/en/

SOURCE: ITT Inc.

ITT Inc. 
Investors: 
Jason Moss, +1 914-641-2030 
jason.moss@itt.com 
or 
Media: 
Kathleen Bark, +1 914-641-2103 
kathleen.bark@itt.com


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