Market Overview

ITT Reports Record 2018 Second-Quarter Results Raises Full-Year EPS Guidance

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2018 Second-Quarter GAAP Results

  • Record revenue up 10% to $697 million
  • Orders up 18% to $742 million
  • Segment operating income up 30% to $106 million
  • EPS up 46% to $0.79

2018 Second-Quarter Adjusted Results

  • Organic revenue up 7%
  • Organic orders up 15%
  • Record adjusted segment operating income up 21% to $108 million
  • Record adjusted EPS up 26% to $0.82

Strategic Highlights

  • 22 Motion Technologies Friction OEM wins, including 9 front axle
    and 4 EV/Hybrid
  • Net operating productivity, execution & volume drive adjusted
    segment operating margins to 15.5%
  • Raising full-year organic revenue and adjusted EPS guidance

ITT Inc. (NYSE:ITT) today reported 2018 second-quarter financial results
that reflect strong top-line growth and the company's continued focus on
operational execution and strategies to win share in key global end
markets. "For the second consecutive quarter, ITT delivered record
results and double-digit growth across a number of key metrics including
revenue, adjusted segment operating income and adjusted EPS," said CEO
and President Denise Ramos. "This performance was driven by our intense
focus on optimizing execution, reflected in our strong productivity
gains and the year-over-year adjusted margin expansion of 130 basis
points, led by improvements of 350 basis points at Industrial Process
and 280 basis points at Connect and Control Technologies. Our results
also reflect our ability to drive growth and market share gains in
strategic global end markets. As we move into the second half of 2018,
we'll continue to focus on advancing operational excellence while
building on our momentum in target markets that will propel our future
growth."

Revenue and Orders

On a GAAP basis, the company delivered record quarterly revenue of $697
million, reflecting a 10 percent increase over the prior year, which
included a 3 percent benefit from foreign exchange. Organic revenue
(defined as total revenue excluding foreign exchange, acquisition and
divestiture impacts) increased 7 percent with each segment delivering 5
percent or better organic revenue growth. The revenue growth was driven
by strength in transportation and industrial end markets, particularly
in automotive OEM friction and short-cycle baseline pumps and valves,
partially offset by lower oil and gas activity. Organic orders grew 15
percent driven by oil and gas and chemical pump projects, strength in
commercial aerospace and defense, and gains in global automotive
friction.

Segment Operating Income

GAAP segment operating income increased 30 percent to $106 million on
segment margins of 15.2 percent with strong results at each business
segment. Adjusted segment operating income increased 21 percent to $108
million on adjusted segment operating margins of 15.5 percent, an
improvement of 130 basis points. The growth reflects higher volumes at
each segment, solid net operating productivity that more than offset
cost increases, improved performance on pump projects and favorable
foreign exchange, which was partially offset by growth investments. In
addition, the 2017 second-quarter results included estimated impacts
from restrictions on sales of certain military-specification connectors.
The GAAP segment operating income comparison further benefited from the
impact of a legal accrual recorded during second-quarter of 2017.

Earnings Per Share

GAAP EPS increased 46 percent to $0.79. Adjusted EPS increased 26
percent to $0.82, reflecting the growth in adjusted segment operating
income and favorable impacts from a lower non-U.S. tax rate, partially
offset by unfavorable environmental and corporate cost comparisons,
primarily related to incentive compensation. GAAP EPS benefited from
favorable tax adjustments and lower realignment costs.

Guidance

The company is raising its previously announced 2018 full-year organic
revenue guidance to the new range of up 3 percent to up 5 percent
primarily due to the strong year-to-date revenue and order growth.
However, the company is maintaining its previously announced 2018
full-year total revenue guidance of up 5 percent to up 8 percent due to
recent unfavorable foreign currency movements.

The company is raising the mid-point of its previously announced 2018
full-year adjusted EPS guidance by five cents to $3.10, which represents
a 20 percent increase compared to the prior year. The updated adjusted
EPS guidance range of $3.05 to $3.15 reflects improving market dynamics,
volume, and additional net operating productivity, partially offset by
higher commodity costs and unfavorable foreign currency. The company is
raising and tightening its previously announced 2018 full-year GAAP EPS
guidance to a new range of $3.32 to $3.44 reflecting operational
strength and improving market conditions, as well as lower restructuring
and realignment costs and tax expenses.

2018 Second-Quarter Business Segment Results

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

Motion Technologies

  • Total revenue increased 14 percent to $330 million, which includes an
    organic revenue increase of 7 percent and a 7 percent favorable impact
    from foreign exchange. The revenue results reflect share gains in
    automotive OEM brake pads in China and North America, strength in
    aftermarket shims at Wolverine, and share gains in China high-speed
    and European rail markets. Growth was partially offset by an
    anticipated decline in aftermarket brake pads due to phasing and
    destocking by European distributors.
  • GAAP operating income increased 7 percent to $56 million, and adjusted
    segment operating income increased 9 percent to $57 million. Both
    increases reflect higher sales volume and operational productivity,
    with notable productivity improvements within the Wolverine business,
    and favorable impacts from foreign exchange, which were partially
    offset by unfavorable aftermarket product mix, pricing pressures,
    higher commodity costs, and strategic investments.

Industrial Process

  • Total revenue increased 6 percent to $203 million, and organic revenue
    increased 5 percent, reflecting double-digit growth in short-cycle
    baseline pumps and valves, partially offset by a project revenue
    decline of 3 percent due to prior-year oil and gas projects, partially
    offset by strong petrochemical activity. The growth in baseline pumps
    was due to strong general industrial, chemical, and mining demand. The
    growth in valves was driven by solid bio-pharmaceutical demand.
  • GAAP and adjusted operating income increased more than 51 percent to
    $23 million, reflecting benefits from higher volumes, net operating
    productivity and continued project performance improvements, favorable
    short-cycle product mix, and favorable price that nearly offset higher
    material costs.

Connect and Control Technologies

  • Total revenue increased 10 percent to $164 million, and organic
    revenue increased 8 percent, reflecting double-digit growth in oil and
    gas connectors on strength in North America and the Middle East and
    growth in aerospace led by commercial aerospace components and
    rotorcraft.
  • GAAP operating income increased 92 percent to $27 million and adjusted
    segment operating income increased 31 percent to $28 million. Both
    measures reflect benefits from higher volumes, improved productivity
    gains in connector operations, restructuring benefits driven by the
    CCT integration, and a beneficial comparison to unfavorable prior-year
    impacts from military-specification connectors. The GAAP operating
    income comparison benefited from a prior-year legal accrual.

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 a replay of the webcast will be available for 90 days following the
presentation. A replay will also be available telephonically from two
hours after the webcast until Friday, August 17, 2018, at midnight.

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

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 2017 revenues of $2.6 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. These forward-looking statements are not
historical facts, but rather are based on current expectations,
estimates, assumptions and projections about our business, future
financial results and 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.

Where in any forward-looking statement we express an expectation or
belief as to future results or events, such expectation or belief is
based on current plans and expectations of our management, expressed in
good faith and believed to have a reasonable basis. However, there can
be no assurance that the expectation or belief will occur or that
anticipated results will be achieved or accomplished. More information
on factors that could cause actual results or events to differ
materially from those anticipated is included 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.

The forward-looking statements included in this release speak only as of
the date hereof. We undertake no obligation to update any
forward-looking statements, whether as a result of new information,
future events or otherwise.

     

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

 
      Three Months   Six Months
For the Periods Ended June 30     2018   2017   2018   2017
Revenue $ 696.8   $ 630.9 $ 1,386.1   $ 1,256.7
Costs of revenue     470.8     425.9     935.9     848.6  
Gross profit     226.0     205.0     450.2     408.1  
General and administrative expenses 63.0 64.6 128.1 130.3
Sales and marketing expenses 43.4 43.8 86.9 86.9
Research and development expenses 25.8 22.6 50.5 45.0
Asbestos-related costs (benefit), net     13.5     14.9     (6.2 )   29.8  
Operating income 80.3 59.1 190.9 116.1
Interest and non-operating expenses, net     1.5     0.5     3.3     2.7  
Income from continuing operations before income tax expense 78.8 58.6 187.6 113.4
Income tax expense     8.9     10.6     16.5     19.7  
Income from continuing operations 69.9 48.0 171.1 93.7
(Loss) income from discontinued operations, including tax benefit of
$0.1, $0.1, $0 and $0.2, respectively
        (0.1 )   0.1     (0.2 )
Net income     69.9     47.9     171.2     93.5  
Less: Income (loss) attributable to noncontrolling interests     0.2     0.1     0.3     (0.3 )
Net income attributable to ITT Inc.     $ 69.7     $ 47.8     $ 170.9     $ 93.8  
Amounts attributable to ITT Inc.:
Income from continuing operations, net of tax $ 69.7 $ 47.9 $ 170.8 $ 94.0
(Loss) income from discontinued operations, net of tax         (0.1 )   0.1     (0.2 )
Net income attributable to ITT Inc.     $ 69.7     $ 47.8     $ 170.9     $ 93.8  
Earnings per share attributable to ITT Inc.:
Basic:
Continuing operations $ 0.80 $ 0.54 $ 1.95 $ 1.06
Discontinued operations                  
Net income $ 0.80 $ 0.54 $ 1.95 $ 1.06
Diluted:
Continuing operations $ 0.79 $ 0.54 $ 1.93 $ 1.05
Discontinued operations                  
Net income $ 0.79 $ 0.54 $ 1.93 $ 1.05
Weighted average common shares – basic 87.5 88.5 87.8 88.4
Weighted average common shares – diluted     88.4     89.0     88.7     89.1  
 
     

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

 
      June 30,
2018
  December 31,
2017
Assets
Current assets:
Cash and cash equivalents $ 449.6 $ 389.8
Receivables, net 560.4 629.6
Inventories, net 393.5 311.9
Other current assets     175.1     147.4  
Total current assets     1,578.6     1,478.7  
Plant, property and equipment, net 506.1 521.7
Goodwill 879.9 886.8
Other intangible assets, net 145.3 156.2
Asbestos-related assets 322.6 304.0
Deferred income taxes 164.0 149.9
Other non-current assets     203.2     202.9  
Total non-current assets     2,221.1     2,221.5  
Total assets     $ 3,799.7     $ 3,700.2  
Liabilities and Shareholders' Equity
Current liabilities:
Short-term loans and current maturities of long-term debt $ 210.7 $ 163.6
Accounts payable 331.2 351.4
Accrued liabilities     397.7     384.4  
Total current liabilities     939.6     899.4  
Asbestos-related liabilities 781.6 800.1
Postretirement benefits 223.5 227.3
Other non-current liabilities     172.7     175.6  
Total non-current liabilities     1,177.8     1,203.0  
Total liabilities     2,117.4     2,102.4  
Shareholders' equity:
Common stock:
Authorized – 250.0 shares, $1 par value per share
Issued and outstanding – 87.6 shares and 88.2 shares, respectively 87.6 88.2
Retained earnings 1,959.3 1,856.1
Total accumulated other comprehensive loss     (366.6 )   (348.2 )
Total ITT Inc. shareholders' equity 1,680.3 1,596.1
Noncontrolling interests 2.0 1.7
Total shareholders' equity     1,682.3     1,597.8  
Total liabilities and shareholders' equity     $ 3,799.7     $ 3,700.2  
 
     

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN MILLIONS)

 
For the Six Months Ended June 30     2018   2017
Operating Activities
Net income $ 171.2 $ 93.5
Less: Income (loss) from discontinued operations 0.1 (0.2 )
Less: Income (loss) attributable to noncontrolling interests     0.3     (0.3 )
Income from continuing operations attributable to ITT Inc. 170.8 94.0
Adjustments to income from continuing operations:
Depreciation and amortization 55.2 50.4
Equity-based compensation 10.2 7.3
Asbestos-related (benefit) costs, net (6.2 ) 29.8
Asbestos-related payments, net (30.8 ) (30.7 )
Changes in assets and liabilities:
Change in receivables (15.2 ) (35.6 )
Change in inventories (22.8 ) 2.3
Change in accounts payable (14.2 ) (7.8 )
Change in accrued expenses (23.0 ) (3.3 )
Change in accrued and deferred income taxes (11.7 ) (3.1 )
Other, net     7.0     (10.7 )
Net Cash – Operating activities     119.3     92.6  
Investing Activities
Capital expenditures (46.3 ) (53.3 )
Acquisitions, net of cash acquired (113.7 )
Other, net     0.9     2.5  
Net Cash – Investing activities     (45.4 )   (164.5 )
Financing Activities
Commercial paper, net repayments (162.4 ) 9.4
Short-term revolving loans, borrowings 246.5 77.3
Short-term revolving loans, repayments (23.5 ) (100.0 )
Long-term debt, issued 3.9
Long-term debt, repayments (1.9 ) (0.7 )
Repurchase of common stock (55.4 ) (32.8 )
Proceeds from issuance of common stock 4.7 6.5
Dividends paid (12.0 ) (11.6 )
Other, net     (0.1 )   0.1  
Net Cash – Financing activities     (4.1 )   (47.9 )
Exchange rate effects on cash and cash equivalents (8.6 ) 15.3
Net Cash – Operating activities of discontinued operations     (1.4 )   (0.9 )
Net change in cash and cash equivalents 59.8 (105.4 )
Cash and cash equivalents – beginning of year     391.0     461.9  
Cash and cash equivalents – end of period     $ 450.8     $ 356.5  
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest $ 1.1 $ 2.1
Income taxes, net of refunds received     $ 23.2     $ 21.9  
 
 
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, adjusted free cash flow 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 for purposes of our reconciliation tables.
 
Organic Revenue and Organic Orders are defined as
revenue 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,
pension settlement and other curtailment 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.
The after-tax basis of each special item is determined using the
jurisdictional tax rate of where the expense or benefit occurred. 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 2018 & 2017
(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 2018 3M 2017 2018 vs. 2017 2018 vs. 2017 3M 2018 3M 2018 3M 2018 Adj. 2018 vs. 2017 Adj. 2018 vs. 2017
 

Revenue

ITT Inc. 696.8 630.9 65.9 10.4% - 22.5 674.3 43.4 6.9%
 
Industrial Process 203.2 192.3 10.9 5.7% - 0.8 202.4 10.1 5.3%
Motion Technologies 330.3 290.1 40.2 13.9% - 19.5 310.8 20.7 7.1%
Connect & Control Technologies 164.1 149.6 14.5 9.7% - 2.3 161.8 12.2 8.2%
 
 
 

Orders

Total Segment Orders 741.7 626.3 115.4 18.4% - 23.4 718.3 92.0 14.7%
 
Industrial Process 237.4 190.3 47.1 24.8% - 0.7 236.7 46.4 24.4%
Motion Technologies 327.6 288.9 38.7 13.4% - 20.7 306.9 18.0 6.2%
Connect & Control Technologies 177.2 147.8 29.4 19.9% - 2.1 175.1 27.3 18.5%
 
 
 
Note: Excludes intercompany eliminations
Immaterial differences due to rounding
 
                       
ITT Inc. Non-GAAP Reconciliation
Reported vs Adjusted Segment Operating Income & Operating Margin
Second Quarter 2018 & 2017
(In Millions)
   
3M 2018 3M 2018 3M 2018 3M 2017* 3M 2017 3M 2017 % Change % Change
As Reported Special Items As Adjusted As Reported Special Items As Adjusted As Reported 2018 vs. 2017 As Adjusted 2018 vs. 2017
 
Revenue:
Industrial Process 203.2 203.2 192.3 192.3 5.7% 5.7%
Motion Technologies 330.3 330.3 290.1 290.1 13.9% 13.9%
Connect & Control Technologies 164.1 164.1 149.6 149.6 9.7% 9.7%
 
Intersegment eliminations (0.8) (0.8) (1.1) (1.1)    
Total Revenue 696.8 696.8 630.9 630.9 10.4% 10.4%
 
Operating Margin:
Industrial Process 11.5% - BP 11.5% 8.0% - BP 8.0% 350 BP 350 BP
Motion Technologies 16.8% 50 BP 17.3% 18.0% 20 BP 18.2% (120) BP (90) BP
Connect & Control Technologies 16.6% 30 BP 16.9% 9.5% 460 BP 14.1% 710 BP 280 BP
               
Total Operating Segments 15.2% 30 BP 15.5% 12.9% 130 BP 14.2% 230 BP 130 BP
 
 
Income (loss):
Industrial Process 23.4 (0.1) 23.3 15.3 0.1 15.4 52.9% 51.3%
Motion Technologies 55.5 1.8 57.3 52.1 0.7 52.8 6.5% 8.5%
Connect & Control Technologies 27.3 0.4 27.7 14.2 6.9 21.1 92.3% 31.3%
               
Total Segment Operating Income 106.2 2.1 108.3 81.6 7.7 89.3 30.1% 21.3%
 
 
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.
 
*2017 As Reported Operating Income was adjusted to reflect the
adoption of ASU 2017-07 which amends the Statement of Operations
presentation for the components
of net periodic benefit cost for entities that sponsor defined
benefit pension and other postretirement plans.
The 2017 adjustments to Segment Operating Income in the 2017 As
Reported column were as follows:
Industrial Process 0.5
Motion Technologies 0.0
Connect & Control Technologies 0.5
Total Segment Operating Income 1.0
 
                       
ITT Inc. Non-GAAP Reconciliation
Reported vs. Adjusted Income from Continuing Operations &
Adjusted EPS
Second Quarter 2018 & 2017
(In Millions, except per share amounts)
 
Q2 2017 Percent Change
Q2 2018 Non-GAAP Q2 2018 As Previously ASU 2017-07 Non-GAAP Q2 2017 2018 vs. 2017 2018 vs. 2017
As Reported Adjustments As Adjusted Reported Adjustments (1) Adjustments As Adjusted As Adjusted As Adjusted
 
 
Segment Operating Income 106.2 2.1 #A 108.3 80.6 1.0 7.7 #A 89.3
 
Corporate (Expense) (25.9) 13.2 #B (12.7) (22.9) 0.4 13.1 #B (9.4)
             
Operating Income 80.3 15.3 95.6 57.7 1.4 20.8 79.9
 
Interest Income (Expense) (0.2) (0.1) #C (0.3) 1.1 - (2.1) #C (1.0)
Other Income (Expense) (1.3) - (1.3) (0.2) (1.4) - (1.6)
             
Income from Continuing Operations before Tax 78.8 15.2 94.0 58.6 - 18.7 77.3
 
Income Tax (Expense) (8.9) (12.5) #D (21.4) (10.6) - (8.7) #D (19.3)
             
Income from Continuing Operations 69.9 2.7 72.6 48.0 - 10.0 58.0
 
Less: Non Controlling Interest 0.2 - 0.2 0.1 - 0.1
             
Income from Continuing Operations - ITT Inc. 69.7 2.7 72.4 47.9 - 10.0 57.9
             
EPS from Continuing Operations 0.79 0.03 0.82 0.54 - 0.11 0.65 0.17 26.2%
 
Note: Amounts may not calculate due to rounding.
 
#A - 2018 includes restructuring costs ($1.2M) and acquisition
related costs ($0.9M).
#A - 2017 includes restructuring and realignment costs ($2.6M),
legal accrual ($5.0M), and acquisition related costs ($0.1M).
 
#B - 2018 includes asbestos related expense ($13.5M); income from a
legacy environmental settlement ($0.4M) and certain costs associated
primarily from the sale of excess property ($0.1M).
#B - 2017 includes asbestos related expense ($14.9M); certain costs
associated primarily with sale of excess property ($2.0M), offset by
income of ($3.8M) related to environmental insurance recovery.
 
#C - Interest income related to a change in uncertain tax position
for both 2018 & 2017.
 
#D - 2018 includes various tax-related special items including tax
benefit for valuation allowance change ($1.5M), tax benefit for tax
law changes ($3.1M), tax benefit on current and future distribution
of foreign earnings ($3.1M),
and the tax impact of other operating special items.
#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.
 
(1) The adjustments in June 2017 reflect the adoption of ASU
2017-07 which amends the Statement of Operations presentation for
the components of net periodic benefit cost for entities that
sponsor defined benefit
pension and other postretirement plans.
 
 
ITT Inc. Non-GAAP Reconciliation
Net Cash - Operating Activities vs. Adjusted Free Cash Flow
Conversion
Second Quarter 2018 & 2017
(In Millions)
 
6M 2018 6M 2017
 
Net Cash - Operating Activities * 119.3 92.6
 
Capital expenditures 46.3 53.3
   
Free Cash Flow 73.0 39.3
 
 
Insurance settlement agreement, net (16.9) -
Asbestos cash payments, net 30.8 30.7
Restructuring cash payments 4.2 8.8
Realignment-related cash (receipts) payments (0.1) 6.2
   
Adjusted Free Cash Flow 91.0 85.0
 
 
Income from Continuing Operations - ITT Inc. 170.8 94.0
 
 
Special Items, net of tax (29.6) 21.3
 
Income from Continuing Operations - ITT Inc., Excluding    
Special Items 141.2 115.3
 
 
Adjusted Free Cash Flow Conversion 64.4% 73.7%
 
 
* 2017 revised to reflect the new standard ASU 2016-18 regarding
presentation of the changes in restricted cash.
 
   
ITT Inc. Non-GAAP Reconciliation
GAAP vs. Adjusted EPS Guidance
Full Year 2018
 
 
2018 Full-Year Guidance
Low High
 
EPS from Continuing Operations - GAAP $ 3.32 $ 3.44
 
Estimated Asbestos Related Costs, Net of Tax 0.18 0.18
 
$ 3.50 $ 3.62
 
 
Estimated Gain on Sale of Excess Property, Net of Tax (0.33) (0.35)
 
 
Estimated Restructuring, Realignment and Other Costs, Net of Tax 0.17 0.17
 
Acquisition Related Costs, Net of Tax 0.02 0.02
 
Other Special Tax Items (0.31) (0.31)
   
EPS from Continuing Operations - Adjusted $ 3.05 $ 3.15
 
       
ITT Inc. Non-GAAP Reconciliation
Adjusted Segment Operating Income & Operating Margin
Restated to Align with New Pension Presentation Requirements*
Quarterly Historical Data 2017
(In Millions)
 
Q1 Q2 Q3 Q4 FY 2017
 
 
Restated Adjusted Segment Income (loss):
Industrial Process 10.8 15.4 17.5 28.0 71.7
Motion Technologies 55.9 52.8 52.6 37.6 198.9
Connect & Control Technologies 18.3 21.1 21.2 20.9 81.5
         
Total Adjusted Segment Operating Income 85.0 89.3 91.3 86.5 352.1
 
Adjusted Segment Operating Margin:
Industrial Process 5.8% 8.0% 8.9% 12.0% 8.9%
Motion Technologies 19.5% 18.2% 17.5% 12.6% 16.9%
Connect & Control Technologies 11.9% 14.1% 14.2% 13.6% 13.5%
         
Total Adjusted Operating Segments 13.6% 14.2% 14.2% 12.7% 13.6%
 
 
 
* The 2017 Adjusted Segment Income was restated as are required
under the FASB issued ASU 2017-07 which amends the Statement of
Operations presentation
for the components of net periodic benefit cost for entities that
sponsor defined benefit pension and other postretirement plans.
 

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