Announces acquisition of Axtone, a leading manufacturer of railway
technologies
Continues to see benefits from effective management of net asbestos
liability
Results Highlights:
-
Revenue down 3% to $582 million, Organic revenue down 10%
-
Segment operating income down 21%, Adjusted segment operating
income down 19%
-
EPS of $0.98, Adjusted EPS of $0.58 (includes unfavorable FX of
$0.04)
-
Adjusts 2016 full-year guidance
ITT Inc. (NYSE:ITT) today reported 2016 third-quarter financial results
that reflect the benefits of a diversified portfolio, corporate
efficiency and effective capital deployment in today’s challenging
economic environment. During the quarter, continued weakness in oil and
gas, chemical and industrial, and mining markets, was partially offset
by growth and share gains in the automotive friction market, as well as
incremental benefits from our 2015 acquisition of Wolverine Advanced
Materials.
“In the third quarter, ITT focused on strategically managing through
this difficult macro-environment, while we continued to drive long-term
structural reset activities in our Industrial Process segment,” said ITT
CEO and President Denise Ramos. “We have aggressively taken extensive
restructuring actions since the market downturn started, but we are
still navigating volatile short-cycle dynamics in the flow market that
are negatively impacting our outlook for the balance of the year.
However, at the same time, we’ve continued to deliver strong results in
our transportation businesses and significant benefits from our
strategic approach to long-term growth and value creation in areas
including operational improvements, effective capital deployment and
risk mitigation.
“Importantly, we have continued to drive operational improvements that
help us manage through the current challenging environment and better
serve our customers. In the third quarter, Motion Technologies,
Interconnect Solutions and Control Technologies’ Industrial business
delivered significant operational improvements that drove solid margin
expansion.
“From a capital deployment perspective, we are pleased to announce today
that we have an agreement to acquire Axtone, which would help us expand
our strong global position in railway components. And, as it relates to
returning value to shareholders, we have executed $70 million of share
repurchases year-to-date.
“During the quarter, we also delivered significant progress in the area
of managing and mitigating future asbestos risk. In the quarter, we
recognized an $82 million pre-tax net benefit attributable to improved
acceptance rates, lower average settlement costs, and benefits from our
single defense firm strategy, which reduced outstanding claims and
lowered defense costs. As a result, we have reduced our net liability by
10 percent in 2016.”
2016 Third-Quarter Results
All quarterly results are compared with the respective prior-year
periods.
On a GAAP basis, revenue was down 3 percent to $582 million as share
gains in our automotive friction business and incremental benefits from
our acquisition of Wolverine Advanced Materials were more than offset by
impacts from our Industrial Process business, including significant
project declines in the oil and gas and mining markets and soft
short-cycle pump activity. GAAP segment operating income decreased 21
percent to $67 million as the benefits from past restructuring and
productivity actions and the Wolverine acquisition were offset by
pricing headwinds, and lower volume and project profitability, primarily
at Industrial Process. GAAP EPS decreased to $0.98 due to tax items and
higher restructuring and realignment costs, partially offset by the
benefit recognized as a result of the annual asbestos re-measurement.
On an adjusted basis, organic revenue (defined as total revenue
excluding foreign exchange, acquisition and divestiture impacts)
decreased 10 percent as strong transportation growth was offset by
significant project declines and softness in short-cycle pumps. Adjusted
segment operating income declined 19 percent to $73 million as benefits
from solid net operating productivity, restructuring and the acquisition
of Wolverine were offset by lower pump volumes, pricing headwinds and
lower profitability on complex projects at Industrial Process, in
addition to $5 million of negative foreign exchange impacts. Adjusted
EPS decreased 8 percent to $0.58 reflecting lower corporate costs, which
were offset by a higher tax rate and the $0.04 per share unfavorable
impact of foreign exchange.
For a reconciliation of GAAP to non-GAAP results and guidance, please click
here.
2016 Third-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 and industrial, oil and gas, and mining
markets.
-
Total revenue decreased 28 percent to $195 million, with organic
revenue down 26 percent. Both measures reflect the impact of
challenging conditions in the oil and gas, mining and chemical and
industrial markets on our projects, short-cycle pumps and aftermarket
businesses. Total revenue also includes the impact of unfavorable
foreign exchange.
-
GAAP operating income decreased 87 percent to $4 million, and adjusted
segment operating income decreased 80 percent to $7 million. Both
measures primarily reflect significantly lower volumes across key end
markets, pricing headwinds and lower profitability on complex
projects, and a $5 million negative impact from foreign exchange,
which were partially offset by incremental restructuring savings.
Motion Technologies designs and manufactures braking
technologies, shock absorbers and specialized sealing solutions for the
automotive and rail markets.
-
Total revenue increased 33 percent to $239 million, and organic
revenue increased 10 percent. Both measures reflect significant share
gains and market growth in global automotive brake pads in both the
OEM and aftermarket. Total revenue also includes incremental revenue
from the 2015 acquisition of Wolverine and the impact of unfavorable
foreign exchange.
-
GAAP operating income increased 37 percent to $45 million, and
adjusted segment operating income increased 34 percent to $47 million.
Both increases reflect higher volumes, benefits from productivity
actions and favorable impacts from the acquisition of Wolverine, which
were partially offset by pricing pressures.
Interconnect Solutions designs and manufactures connectors and
interconnects for the transportation and industrial, aerospace and
defense, and oil and gas markets.
-
Total revenue decreased 5 percent to $79 million, and organic revenue
declined 6 percent. Both decreases reflect significant declines in
global oil and gas markets. Total revenue also reflects the impact of
favorable foreign currency exchange.
-
GAAP operating income increased 61 percent to $6 million and adjusted
segment operating income increased 26 percent to $6 million. Both
measures reflect the benefits of improved productivity and
restructuring actions and $1 million of favorable foreign exchange,
which were partially offset by the unfavorable impacts of volume, and
pricing. GAAP operating income benefited from lower restructuring
costs compared to the prior year.
Control Technologies designs and manufactures products
including fuel management, actuation, and noise and energy absorption
components for the aerospace and industrial markets, as well as
aerospace environmental control system components.
-
Total revenue was up 1 percent to $71 million and organic revenue
increased 1 percent, primarily reflecting growth in industrial energy
absorption markets.
-
GAAP operating income decreased 17 percent to $12 million and adjusted
segment operating income decreased 12 percent to $13 million,
reflecting the benefits of favorable productivity and restructuring
savings, which were offset by a favorable incentive compensation
adjustment in the prior year.
Annual Asbestos Re-measurement
The company also announced that it recognized an $82 million pre-tax
benefit in the third quarter as a result of its annual re-measurement of
its asbestos liability and related insurance assets. This benefit
reflects lower acceptance rates and lower recent average settlement
values, as well as benefits from its single defense firm strategy that
delivered lower defense costs. The benefit was recognized as a special
item and was excluded from adjusted results.
The company also projects a favorable $5 million decrease in the net
annual average (years 6-10) after-tax cash flow projections versus prior
projections primarily due to its effective and comprehensive net
liability management.
Fourth-Quarter 2016 Pension Settlement
ITT has initiated a program offering certain former U.S. employees with
a vested pension benefit an option to take a one-time lump sum
distribution as part of ITT’s overall plan to de-risk its pension plans.
Based on an estimate of participants expected to accept the offer, ITT
expects to recognize a non-cash pretax pension settlement charge of
approximately $18-20 million in the fourth quarter of 2016. The
settlement charge will be recorded as a special item and is excluded
from our adjusted EPS guidance.
2016 Guidance
The company is lowering its previously announced full-year 2016 GAAP and
organic revenue guidance. GAAP revenue is now expected to be down 5
percent to 6 percent, and organic revenue is expected to be down 9 to 10
percent, primarily due to lower short-cycle pump and project activity
across all key end markets.
The company is also adjusting its GAAP EPS and lowering its adjusted EPS
guidance primarily due to lower short-cycle volumes, lower project
profitability and unfavorable foreign exchange at Industrial Process. In
addition, the revised adjusted EPS guidance also reflects a higher tax
rate. GAAP guidance also includes the pension settlement and the
asbestos benefit from the company’s annual re-measurement. As a result,
the company now expects the GAAP EPS guidance range to be $1.96 to $2.15
and the adjusted EPS guidance range to be $2.20 to $2.30.
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 Web site: www.itt.com/investors
and will be available on the website from two hours after the webcast
until Thursday, Nov. 18, 2016, 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 energy,
transportation and industrial 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.
Founded in 1920, 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 2015 revenues of $2.5
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 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.
|
ITT INC. AND SUBSIDIARIES
|
CONSOLIDATED CONDENSED INCOME STATEMENTS
|
(In millions, except per share)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Nine Months
|
For the Periods Ended September 30
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
|
|
$
|
581.7
|
|
|
$
|
601.9
|
|
|
$
|
1,817.0
|
|
|
$
|
1,818.8
|
|
Costs of revenue
|
|
|
|
397.8
|
|
|
|
407.0
|
|
|
|
1,232.2
|
|
|
|
1,211.0
|
|
Gross Profit
|
|
|
|
183.9
|
|
|
|
194.9
|
|
|
|
584.8
|
|
|
|
607.8
|
|
General and administrative expenses
|
|
|
|
59.2
|
|
|
|
60.2
|
|
|
|
202.2
|
|
|
|
186.8
|
|
Sales and marketing expenses
|
|
|
|
39.4
|
|
|
|
43.1
|
|
|
|
128.7
|
|
|
|
139.2
|
|
Research and development expenses
|
|
|
|
18.6
|
|
|
|
18.0
|
|
|
|
58.9
|
|
|
|
55.2
|
|
Asbestos-related benefit, net
|
|
|
|
(68.1
|
)
|
|
|
(30.3
|
)
|
|
|
(40.3
|
)
|
|
|
(99.7
|
)
|
Operating Income
|
|
|
|
134.8
|
|
|
|
103.9
|
|
|
|
235.3
|
|
|
|
326.3
|
|
Interest and non-operating expenses (income), net
|
|
|
|
0.3
|
|
|
|
(4.0
|
)
|
|
|
1.5
|
|
|
|
(2.5
|
)
|
Income from continuing operations before income tax expense
|
|
|
|
134.5
|
|
|
|
107.9
|
|
|
|
233.8
|
|
|
|
328.8
|
|
Income tax expense
|
|
|
|
46.1
|
|
|
|
11.4
|
|
|
|
75.3
|
|
|
|
53.0
|
|
Income from continuing operations
|
|
|
|
88.4
|
|
|
|
96.5
|
|
|
|
158.5
|
|
|
|
275.8
|
|
Income from discontinued operations, net of tax
|
|
|
|
1.8
|
|
|
|
34.2
|
|
|
|
2.0
|
|
|
|
39.3
|
|
Net income
|
|
|
|
90.2
|
|
|
|
130.7
|
|
|
|
160.5
|
|
|
|
315.1
|
|
Less: Income attributable to noncontrolling interests
|
|
|
|
0.1
|
|
|
|
-
|
|
|
|
0.2
|
|
|
|
-
|
|
Net Income attributable to ITT Inc.
|
|
|
$
|
90.1
|
|
|
$
|
130.7
|
|
|
$
|
160.3
|
|
|
$
|
315.1
|
|
Amounts attributable to ITT Inc.:
|
|
|
|
|
|
|
|
|
|
Income from continuing operations, net of tax
|
|
|
$
|
88.3
|
|
|
$
|
96.5
|
|
|
$
|
158.3
|
|
|
$
|
275.8
|
|
Income from discontinued operations, net of tax
|
|
|
|
1.8
|
|
|
|
34.2
|
|
|
|
2.0
|
|
|
|
39.3
|
|
Net income attributable to ITT Inc.
|
|
|
$
|
90.1
|
|
|
$
|
130.7
|
|
|
$
|
160.3
|
|
|
$
|
315.1
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share attributable to ITT Inc.:
|
|
|
|
|
|
|
|
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
$
|
0.99
|
|
|
$
|
1.08
|
|
|
$
|
1.77
|
|
|
$
|
3.07
|
|
Discontinued operations
|
|
|
|
0.02
|
|
|
|
0.38
|
|
|
|
0.02
|
|
|
|
0.44
|
|
Net income
|
|
|
$
|
1.01
|
|
|
$
|
1.46
|
|
|
$
|
1.79
|
|
|
$
|
3.51
|
|
|
|
|
|
|
|
|
|
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
|
$
|
0.98
|
|
|
$
|
1.07
|
|
|
$
|
1.76
|
|
|
$
|
3.04
|
|
Discontinued operations
|
|
|
|
0.02
|
|
|
|
0.38
|
|
|
|
0.02
|
|
|
|
0.43
|
|
Net income
|
|
|
$
|
1.00
|
|
|
$
|
1.45
|
|
|
$
|
1.78
|
|
|
$
|
3.47
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares - basic
|
|
|
|
89.2
|
|
|
|
89.4
|
|
|
|
89.5
|
|
|
|
89.9
|
|
Weighted average common shares - diluted
|
|
|
|
89.7
|
|
|
|
90.3
|
|
|
|
90.2
|
|
|
|
90.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITT INC. AND SUBSIDIARIES
|
CONSOLIDATED CONDENSED BALANCE SHEETS
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(Unaudited)
|
|
|
|
Assets
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
475.8
|
|
|
$
|
415.7
|
Receivables, net
|
|
|
|
595.2
|
|
|
|
584.9
|
Inventories, net
|
|
|
|
305.1
|
|
|
|
292.7
|
Other current assets
|
|
|
|
139.7
|
|
|
|
204.4
|
Total current assets
|
|
|
|
1,515.8
|
|
|
|
1,497.7
|
Plant, property and equipment, net
|
|
|
|
450.3
|
|
|
|
443.5
|
Goodwill
|
|
|
|
784.8
|
|
|
|
778.3
|
Other intangible assets, net
|
|
|
|
166.4
|
|
|
|
187.2
|
Asbestos-related assets
|
|
|
|
319.8
|
|
|
|
337.5
|
Deferred income taxes
|
|
|
|
294.2
|
|
|
|
326.1
|
Other non-current assets
|
|
|
|
186.3
|
|
|
|
153.3
|
Total non-current assets
|
|
|
|
2,201.8
|
|
|
|
2,225.9
|
Total assets
|
|
|
$
|
3,717.6
|
|
|
$
|
3,723.6
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Short-term loans and current maturities of long-term debt
|
|
|
$
|
251.9
|
|
|
$
|
245.7
|
Accounts payable
|
|
|
|
304.4
|
|
|
|
314.7
|
Accrued liabilities
|
|
|
|
382.6
|
|
|
|
392.7
|
Total current liabilities
|
|
|
|
938.9
|
|
|
|
953.1
|
Asbestos-related liabilities
|
|
|
|
875.7
|
|
|
|
954.8
|
Postretirement benefits
|
|
|
|
255.1
|
|
|
|
260.4
|
Other non-current liabilities
|
|
|
|
190.2
|
|
|
|
189.9
|
Total non-current liabilities
|
|
|
|
1,321.0
|
|
|
|
1,405.1
|
Total liabilities
|
|
|
$
|
2,259.9
|
|
|
$
|
2,358.2
|
Total ITT Inc. shareholders' equity
|
|
|
|
1,456.0
|
|
|
|
1,362.1
|
Noncontrolling interests
|
|
|
|
1.7
|
|
|
|
3.3
|
Total shareholders' equity
|
|
|
|
1,457.7
|
|
|
|
1,365.4
|
Total liabilities and shareholders' equity
|
|
|
$
|
3,717.6
|
|
|
$
|
3,723.6
|
|
|
|
|
|
|
|
|
|
|
ITT INC. AND SUBSIDIARIES
|
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
|
(In millions)
|
(Unaudited)
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30
|
|
|
2016
|
|
|
2015
|
Operating Activities
|
|
|
|
|
|
|
Net income
|
|
|
$
|
160.5
|
|
|
|
$
|
315.1
|
|
Less: Income from discontinued operations
|
|
|
|
2.0
|
|
|
|
|
39.3
|
|
Less: Income attributable to noncontrolling interests
|
|
|
|
0.2
|
|
|
|
|
-
|
|
Income from continuing operations attributable to ITT Inc.
|
|
|
|
158.3
|
|
|
|
|
275.8
|
|
Adjustments to income from continuing operations:
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
76.5
|
|
|
|
|
63.1
|
|
Stock-based compensation
|
|
|
|
9.1
|
|
|
|
|
11.1
|
|
Asbestos-related benefit, net
|
|
|
|
(40.3
|
)
|
|
|
|
(99.7
|
)
|
Asbestos-related payments, net
|
|
|
|
(24.5
|
)
|
|
|
|
(15.2
|
)
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Change in receivables
|
|
|
|
(13.9
|
)
|
|
|
|
(77.2
|
)
|
Change in inventories
|
|
|
|
(8.9
|
)
|
|
|
|
(6.3
|
)
|
Change in accounts payable
|
|
|
|
(16.2
|
)
|
|
|
|
(0.4
|
)
|
Change in accrued expenses
|
|
|
|
(18.8
|
)
|
|
|
|
(26.1
|
)
|
Change in accrued and deferred income taxes
|
|
|
|
33.3
|
|
|
|
|
21.9
|
|
Other, net
|
|
|
|
(7.9
|
)
|
|
|
|
0.1
|
|
Net Cash - Operating activities
|
|
|
|
146.7
|
|
|
|
|
147.1
|
|
Investing Activities
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
(68.1
|
)
|
|
|
|
(64.2
|
)
|
Acquisitions, net of cash acquired
|
|
|
|
(8.8
|
)
|
|
|
|
(53.5
|
)
|
Purchases of investments
|
|
|
|
(60.6
|
)
|
|
|
|
(73.0
|
)
|
Maturities of investments
|
|
|
|
113.6
|
|
|
|
|
68.2
|
|
Proceeds from sale of businesses and other assets
|
|
|
|
1.4
|
|
|
|
|
8.6
|
|
Proceeds from insurance recovery
|
|
|
|
-
|
|
|
|
|
2.5
|
|
Net Cash - Investing activities
|
|
|
|
(22.5
|
)
|
|
|
|
(111.4
|
)
|
Financing Activities
|
|
|
|
|
|
|
Commercial paper, net borrowings
|
|
|
|
56.5
|
|
|
|
|
10.5
|
|
Short-term revolving loans, borrowings
|
|
|
|
27.7
|
|
|
|
|
-
|
|
Short-term revolving loans, repayments
|
|
|
|
(78.3
|
)
|
|
|
|
-
|
|
Long-term debt, repayments
|
|
|
|
(0.8
|
)
|
|
|
|
(2.1
|
)
|
Repurchase of common stock
|
|
|
|
(70.9
|
)
|
|
|
|
(83.9
|
)
|
Proceeds from issuance of common stock
|
|
|
|
8.8
|
|
|
|
|
5.5
|
|
Dividends Paid
|
|
|
|
(22.6
|
)
|
|
|
|
(21.6
|
)
|
Excess tax benefit from equity compensation activity
|
|
|
|
3.4
|
|
|
|
|
3.2
|
|
Other, net
|
|
|
|
(2.2
|
)
|
|
|
|
(1.8
|
)
|
Net Cash - Financing activities
|
|
|
|
(78.4
|
)
|
|
|
|
(90.2
|
)
|
Exchange rate effects on cash and cash equivalents
|
|
|
|
9.0
|
|
|
|
|
(23.9
|
)
|
Net Cash – Operating activities of discontinued operations
|
|
|
|
5.3
|
|
|
|
|
(0.7
|
)
|
Net change in cash and cash equivalents
|
|
|
|
60.1
|
|
|
|
|
(79.1
|
)
|
Cash and cash equivalents - beginning of year
|
|
|
|
415.7
|
|
|
|
|
584.0
|
|
Cash and cash equivalents - end of period
|
|
|
$
|
475.8
|
|
|
|
$
|
504.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, among others. 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 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
for purposes of our reconciliation tables.
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 growth
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
and realignment costs, certain asset impairment charges, repositioning
costs, certain acquisitions-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 adjusted segment operating
income 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 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, repositioning costs, restructuring and
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 and realignment actions, repositioning costs,
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
|
Third Quarter 2016 & 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(As Reported - GAAP)
|
|
(As Adjusted - Organic)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A)
|
|
(B)
|
|
|
|
(C)
|
|
(D)
|
|
(E) = B-C-D
|
|
(F) = E / A
|
|
|
|
|
|
|
Change
|
|
% Change
|
|
Acquisition / Divestitures
|
|
FX Impact
|
|
Change
|
|
% Change
|
|
|
3M 2016
|
|
3M 2015
|
|
2016 vs. 2015
|
|
2016 vs. 2015
|
|
3M 2016
|
|
3M 2016
|
|
Adj. 2016 vs. 2015
|
|
Adj. 2016 vs. 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITT Inc. - Consolidated
|
|
581.7
|
|
601.9
|
|
(20.2
|
)
|
|
(3.4
|
%)
|
|
40.1
|
|
(3.1
|
)
|
|
(57.2
|
)
|
|
(9.5
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Process
|
|
195.0
|
|
270.6
|
|
(75.6
|
)
|
|
(27.9
|
%)
|
|
-
|
|
(5.0
|
)
|
|
(70.6
|
)
|
|
(26.1
|
%)
|
Motion Technologies
|
|
238.7
|
|
179.9
|
|
58.8
|
|
|
32.7
|
%
|
|
40.1
|
|
0.5
|
|
|
18.2
|
|
|
10.1
|
%
|
Interconnect Solutions
|
|
78.6
|
|
82.8
|
|
(4.2
|
)
|
|
(5.1
|
%)
|
|
-
|
|
1.0
|
|
|
(5.2
|
)
|
|
(6.3
|
%)
|
Control Technologies
|
|
70.5
|
|
69.8
|
|
0.7
|
|
|
1.0
|
%
|
|
-
|
|
0.3
|
|
|
0.4
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Orders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Segment Orders
|
|
573.4
|
|
530.4
|
|
43.0
|
|
|
8.1
|
%
|
|
40.6
|
|
(0.1
|
)
|
|
2.5
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Process
|
|
198.9
|
|
208.9
|
|
(10.0
|
)
|
|
(4.8
|
%)
|
|
-
|
|
(2.0
|
)
|
|
(8.0
|
)
|
|
(3.8
|
%)
|
Motion Technologies
|
|
236.8
|
|
177.5
|
|
59.3
|
|
|
33.4
|
%
|
|
40.6
|
|
1.0
|
|
|
17.7
|
|
|
10.0
|
%
|
Interconnect Solutions
|
|
72.1
|
|
83.5
|
|
(11.4
|
)
|
|
(13.7
|
%)
|
|
-
|
|
0.8
|
|
|
(12.2
|
)
|
|
(14.6
|
%)
|
Control Technologies
|
|
67.1
|
|
62.1
|
|
5.0
|
|
|
8.1
|
%
|
|
-
|
|
0.2
|
|
|
4.8
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Excludes intercompany eliminations
|
Immaterial differences due to rounding
|
|
|
|
|
|
|
ITT Inc. Non-GAAP Reconciliation
|
Reported vs Adjusted Segment Operating Income & Operating Margin
|
Third Quarter 2016 & 2015
|
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3M 2016
|
|
3M 2016
|
|
|
|
3M 2016
|
|
3M 2015
|
|
3M 2015
|
|
|
|
3M 2015
|
|
% Change
|
|
|
|
% Change
|
|
|
|
|
As Reported
|
|
Special Items
|
|
|
|
As Adjusted
|
|
As Reported
|
|
Special Items
|
|
|
|
As Adjusted
|
|
As Reported 2016 vs. 2015
|
|
|
|
As Adjusted 2016 vs. 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Process
|
|
195.0
|
|
|
|
|
|
|
195.0
|
|
|
270.6
|
|
|
|
|
|
|
270.6
|
|
|
(27.9
|
%)
|
|
|
|
(27.9
|
%)
|
|
|
Motion Technologies
|
|
238.7
|
|
|
|
|
|
|
238.7
|
|
|
179.9
|
|
|
|
|
|
|
179.9
|
|
|
32.7
|
%
|
|
|
|
32.7
|
%
|
|
|
Interconnect Solutions
|
|
78.6
|
|
|
|
|
|
|
78.6
|
|
|
82.8
|
|
|
|
|
|
|
82.8
|
|
|
(5.1
|
%)
|
|
|
|
(5.1
|
%)
|
|
|
Control Technologies
|
|
70.5
|
|
|
|
|
|
|
70.5
|
|
|
69.8
|
|
|
|
|
|
|
69.8
|
|
|
1.0
|
%
|
|
|
|
1.0
|
%
|
|
|
Intersegment eliminations
|
|
(1.1
|
)
|
|
|
|
|
|
(1.1
|
)
|
|
(1.2
|
)
|
|
|
|
|
|
(1.2
|
)
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
581.7
|
|
|
|
|
|
|
581.7
|
|
|
601.9
|
|
|
|
|
|
|
601.9
|
|
|
(3.4
|
%)
|
|
|
|
(3.4
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Process
|
|
2.2
|
%
|
|
150
|
|
BP
|
|
3.7
|
%
|
|
12.6
|
%
|
|
70
|
|
BP
|
|
13.3
|
%
|
|
(1,040
|
)
|
|
BP
|
|
(960
|
)
|
|
BP
|
Motion Technologies
|
|
18.9
|
%
|
|
70
|
|
BP
|
|
19.6
|
%
|
|
18.3
|
%
|
|
120
|
|
BP
|
|
19.5
|
%
|
|
60
|
|
|
BP
|
|
10
|
|
|
BP
|
Interconnect Solutions
|
|
7.4
|
%
|
|
-
|
|
BP
|
|
7.4
|
%
|
|
4.3
|
%
|
|
130
|
|
BP
|
|
5.6
|
%
|
|
310
|
|
|
BP
|
|
180
|
|
|
BP
|
Control Technologies
|
|
16.5
|
%
|
|
180
|
|
BP
|
|
18.3
|
%
|
|
20.1
|
%
|
|
100
|
|
BP
|
|
21.1
|
%
|
|
(360
|
)
|
|
BP
|
|
(280
|
)
|
|
BP
|
Total Operating Segments
|
|
11.5
|
%
|
|
100
|
|
BP
|
|
12.5
|
%
|
|
14.1
|
%
|
|
90
|
|
BP
|
|
15.0
|
%
|
|
(260
|
)
|
|
BP
|
|
(250
|
)
|
|
BP
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Process
|
|
4.3
|
|
|
2.9
|
|
|
|
7.2
|
|
|
34.0
|
|
|
1.9
|
|
|
|
35.9
|
|
|
(87.4
|
%)
|
|
|
|
(79.9
|
%)
|
|
|
Motion Technologies
|
|
45.2
|
|
|
1.7
|
|
|
|
46.9
|
|
|
33.0
|
|
|
2.1
|
|
|
|
35.1
|
|
|
37.0
|
%
|
|
|
|
33.6
|
%
|
|
|
Interconnect Solutions
|
|
5.8
|
|
|
-
|
|
|
|
5.8
|
|
|
3.6
|
|
|
1.0
|
|
|
|
4.6
|
|
|
61.1
|
%
|
|
|
|
26.1
|
%
|
|
|
Control Technologies
|
|
11.6
|
|
|
1.3
|
|
|
|
12.9
|
|
|
14.0
|
|
|
0.7
|
|
|
|
14.7
|
|
|
(17.1
|
%)
|
|
|
|
(12.2
|
%)
|
|
|
Total Segment Operating Income
|
|
66.9
|
|
|
5.9
|
|
|
|
72.8
|
|
|
84.6
|
|
|
5.7
|
|
|
|
90.3
|
|
|
(20.9
|
%)
|
|
|
|
(19.4
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Immaterial differences due to rounding.
|
Special items include, but are not limited to, restructuring and
realignment costs, certain asset impairment charges,
acquisition-related expenses, and other unusual or infrequent
operating items.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITT Inc. Non-GAAP Reconciliation
|
Reported vs. Adjusted Income from Continuing Operations &
Adjusted EPS
|
Third Quarter 2016 & 2015
|
(In Millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent Change
|
|
|
Q3 2016
|
|
Non-GAAP
|
|
|
|
Q3 2016
|
|
Q3 2015
|
|
Non-GAAP
|
|
|
|
Q3 2015
|
|
2016 vs. 2015
|
|
2016 vs. 2015
|
|
|
As Reported
|
|
Adjustments
|
|
|
|
As Adjusted
|
|
As Reported
|
|
Adjustments
|
|
|
|
As Adjusted
|
|
As Adjusted
|
|
As Adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Operating Income
|
|
66.9
|
|
|
5.9
|
|
|
#A
|
|
72.8
|
|
|
84.6
|
|
|
5.7
|
|
|
#A
|
|
90.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate (Expense)
|
|
67.9
|
|
|
(67.4
|
)
|
|
#B
|
|
0.5
|
|
|
19.3
|
|
|
(30.3
|
)
|
|
#B
|
|
(11.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income
|
|
134.8
|
|
|
(61.5
|
)
|
|
|
|
73.3
|
|
|
103.9
|
|
|
(24.6
|
)
|
|
|
|
79.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income (Expense)
|
|
(0.2
|
)
|
|
(0.5
|
)
|
|
#C
|
|
(0.7
|
)
|
|
3.1
|
|
|
(3.4
|
)
|
|
#C
|
|
(0.3
|
)
|
|
|
|
|
Other Income (Expense)
|
|
(0.1
|
)
|
|
-
|
|
|
|
|
(0.1
|
)
|
|
0.9
|
|
|
(1.6
|
)
|
|
#D
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations before Tax
|
|
134.5
|
|
|
(62.0
|
)
|
|
|
|
72.5
|
|
|
107.9
|
|
|
(29.6
|
)
|
|
|
|
78.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax (Expense)
|
|
(46.1
|
)
|
|
25.7
|
|
|
#E
|
|
(20.4
|
)
|
|
(11.4
|
)
|
|
(10.0
|
)
|
|
#E
|
|
(21.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
88.4
|
|
|
(36.3
|
)
|
|
|
|
52.1
|
|
|
96.5
|
|
|
(39.6
|
)
|
|
|
|
56.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Non Controlling Interest
|
|
0.1
|
|
|
-
|
|
|
|
|
0.1
|
|
|
-
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations - ITT Inc.
|
|
88.3
|
|
|
(36.3
|
)
|
|
|
|
52.0
|
|
|
96.5
|
|
|
(39.6
|
)
|
|
|
|
56.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS from Continuing Operations
|
|
0.98
|
|
|
(0.40
|
)
|
|
|
|
0.58
|
|
|
1.07
|
|
|
(0.44
|
)
|
|
|
|
0.63
|
|
|
(0.05
|
)
|
|
(7.9
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Amounts may not calculate due to rounding.
|
|
|
|
|
|
#A
|
|
-
|
|
2016 includes restructuring and realignment costs ($5.3M);
acquisition related costs ($0.6M).
|
#A
|
|
-
|
|
2015 includes restructuring and realignment costs ($3.2M);
acquisition costs related to Wolverine ($2.1M) and Hartzell
backlog amortization ($0.4M).
|
|
|
|
|
|
#B
|
|
-
|
|
2016 includes realignment costs of ($0.7M); asbestos related
income of ($68.1M).
|
|
|
|
|
Note: ($68.1M) net asbestos related income includes adjustment to
maintain 10 year accrual ($13.7M) and remeasurement income of
($81.8M).
|
#B
|
|
-
|
|
2015 includes net asbestos related income of ($30.3M).
|
|
|
|
|
Note: ($30.3M) net asbestos related income includes adjustment to
maintain 10 year accrual ($15.7M), remeasurement income of ($44.8M)
and ($1.2M) for a settlement with an insurance carrier.
|
|
|
|
|
|
#C
|
|
-
|
|
Interest income for a change in uncertain tax position for both
2016 & 2015.
|
|
|
|
|
|
#D
|
|
-
|
|
2015 Other income related to recognition of receivable entitled
under the Tax Matters Agreement.
|
|
|
|
|
|
#E
|
|
-
|
|
2016 includes various tax-related special items, including tax
expense on distribution of foreign earnings ($1.9M), tax expense
on undistributed foreign earnings ($21.7M), tax benefit on
valuation allowance changes ($4.5M), tax benefit on return to
accruals ($3.9M), tax benefit for changes in uncertain tax
positions ($11.0M), in addition to the tax impact of other
operating special items.
|
|
|
|
|
|
#E
|
|
-
|
|
2015 includes various tax-related special items including changes
in tax benefit related to the closing of the IRS Audit ($18.0M),
offset by the tax expense of other operating special items ($8.0M).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ITT Inc. Non-GAAP Reconciliation
|
Net Cash - Operating Activities vs. Adjusted Free Cash Flow
Conversion
|
Third Quarter 2016 & 2015
|
(In Millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9M 2016
|
|
|
|
9M 2015
|
|
|
|
|
|
|
|
|
|
Net Cash - Operating Activities
|
|
|
|
146.7
|
|
|
|
|
147.1
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
68.1
|
|
|
|
|
64.2
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
|
|
78.6
|
|
|
|
|
82.9
|
|
|
|
|
|
|
|
|
|
|
Realignment Related Cash Payments, including Capex
|
|
|
|
4.2
|
|
|
|
|
2.8
|
|
Restructuring Cash Payments
|
|
|
|
22.7
|
|
|
|
|
19.5
|
|
Asbestos Cash Payments, net
|
|
|
|
24.5
|
|
|
|
|
15.2
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow
|
|
|
|
130.0
|
|
|
|
|
120.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations - ITT Inc.
|
|
|
|
158.3
|
|
|
|
|
275.8
|
|
|
|
|
|
|
|
|
|
|
Special Items
|
|
|
|
7.2
|
|
|
|
|
(96.8
|
)
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations - ITT Inc., Excluding
|
|
|
|
|
|
|
|
|
Special Items
|
|
|
|
165.5
|
|
|
|
|
179.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow Conversion
|
|
|
|
78.5
|
%
|
|
|
|
67.3
|
%
|
|
|
|
|
|
|
|
|
|
|
ITT Inc. Non-GAAP Reconciliation
|
GAAP vs. Adjusted EPS Guidance
|
Full Year 2016
|
|
|
|
|
|
|
|
|
|
|
2016 Full-Year Guidance
|
|
|
|
Low
|
|
|
High
|
|
|
|
|
|
|
|
EPS from Continuing Operations - GAAP
|
|
|
$
|
1.96
|
|
|
|
$
|
2.15
|
|
|
|
|
|
|
|
|
Estimated Asbestos Related (Benefit), Net of Tax
|
|
|
|
(0.14
|
)
|
|
|
|
(0.17
|
)
|
|
|
|
|
|
|
|
|
|
|
$
|
1.82
|
|
|
|
$
|
1.98
|
|
|
|
|
|
|
|
|
Pension Settlement Charge, Net of Tax
|
|
|
|
0.14
|
|
|
|
|
0.13
|
|
|
|
|
|
|
|
|
Estimated Restructuring, Realignment and Other Costs, Net of Tax
|
|
|
|
0.31
|
|
|
|
|
0.26
|
|
|
|
|
|
|
|
|
Acquisition Related Costs, Net of Tax
|
|
|
|
0.03
|
|
|
|
|
0.03
|
|
|
|
|
|
|
|
|
Other Special Tax Items
|
|
|
|
(0.10
|
)
|
|
|
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EPS from Continuing Operations - Adjusted
|
|
|
$
|
2.20
|
|
|
|
$
|
2.30
|
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20161104005121/en/
Copyright Business Wire 2016