UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2016~~2017



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-05672

ITT INC.



State of Indiana		81-1197930
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification Number)

1133 Westchester Avenue, White Plains, NY 10604

(Principal Executive Office)

Telephone Number: (914) 641-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer þ	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o
Emerging growth company o	(Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of ~~November~~August 2, ~~2016~~,2017, there were outstanding ~~88.2~~88.0 million shares of common stock ($1 par value per share) of the registrant.

TABLE OF CONTENTS


ITEM		PAGE		PAGE
PART I – FINANCIAL INFORMATION
1.	Financial Statements		Financial Statements
	Consolidated Condensed Income Statements	1
	Consolidated Condensed Statements of Comprehensive Income	2	Consolidated Condensed Statements of Operations	1
	Consolidated Condensed Balance Sheets	3	Consolidated Condensed Statements of Comprehensive Income	2
	Consolidated Condensed Statements of Cash Flows	4	Consolidated Condensed Balance Sheets	3
	Consolidated Condensed Statements of Changes in Shareholders' Equity	5	Consolidated Condensed Statements of Cash Flows	4
	Notes to Consolidated Condensed Financial Statements:		Consolidated Condensed Statements of Changes in Shareholders' Equity	5
	Note 1. Description of Business and Basis of Presentation	6	Notes to Consolidated Condensed Financial Statements:
	Note 2. Recent Accounting Pronouncements	7	Note 1. Description of Business and Basis of Presentation	6
	Note 3. Segment Information	8	Note 2. Recent Accounting Pronouncements	6
	Note 4. Restructuring Actions	9	Note 3. Segment Information	8
	Note 5. Income Taxes	11	Note 4. Restructuring Actions	9
	Note 6. Earnings Per Share Data	11	Note 5. Income Taxes	10
	Note 7. Receivables, Net	12	Note 6. Earnings Per Share Data	11
	Note 8. Inventories, Net	12	Note 7. Receivables, Net	11
	Note 9. Other Current and Non-Current Assets	12	Note 8. Inventories, Net	11
	Note 10. Plant, Property and Equipment, Net	13	Note 9. Other Current and Non-Current Assets	12
	Note 11. Goodwill and Other Intangible Assets, Net	13	Note 10. Plant, Property and Equipment, Net	12
	Note 12. Accrued Liabilities and Other Non-Current Liabilities	14	Note 11. Goodwill and Other Intangible Assets, Net	12
	Note 13. Debt	14	Note 12. Accrued Liabilities and Other Non-Current Liabilities	13
	Note 14. Postretirement Benefit Plans	15	Note 13. Debt	14
	Note 15. Long-Term Incentive Employee Compensation	15	Note 14. Postretirement Benefit Plans	14
	Note 16. Capital Stock	16	Note 15. Long-Term Incentive Employee Compensation	15
	Note 17. Commitments and Contingencies	17	Note 16. Capital Stock	15
	Note 18. Acquisitions	20	Note 17. Commitments and Contingencies	16
	Note 19. Subsequent Events	21	Note 18. Acquisitions	19

2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Overview	22	Overview	20
	Discussion of Financial Results	22	Discussion of Financial Results	20
	Liquidity	29	Liquidity	26
	Key Performance Indicators and Non-GAAP Measures	32	Key Performance Indicators and Non-GAAP Measures	28
	Recent Accounting Pronouncements	36	Recent Accounting Pronouncements	32
	Critical Accounting Estimates	36	Critical Accounting Estimates	32
3.	Quantitative and Qualitative Disclosures about Market Risk	36	Quantitative and Qualitative Disclosures about Market Risk	32
4.	Controls and Procedures	36	Controls and Procedures	32
PART II – OTHER INFORMATION
1.	Legal Proceedings	37	Legal Proceedings	33
1A.	Risk Factors	37	Risk Factors	34
2.	Unregistered Sales of Equity Securities and Use of Proceeds	38	Unregistered Sales of Equity Securities and Use of Proceeds	34
3.	Defaults Upon Senior Securities	38	Defaults Upon Senior Securities	34
4.	Mine Safety Disclosures	38	Mine Safety Disclosures	34
5.	Other Information	39	Other Information	34
6.	Exhibits	39	Exhibits	35
	Signature	40	Signature	36
	Exhibit Index	41	Exhibit Index	37

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

Some of the information included herein includes 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 ~~the~~our business, ~~and~~ future financial results ofand 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.

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 ~~result~~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 our reports filed with the U.S. Securities and Exchange Commission (the SEC), including our Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 (particularly under the caption "Risk Factors"), our Quarterly Reports on Form 10-Q (including Part II, Item 1A, "Risk Factors," of this Quarterly Report on Form 10-Q) and in other documents we file from time to time with the SEC.

The forward-looking statements included in this Quarterly Report on Form 10-Q (this Report) speak only as of the date of this Report. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You can inspect, read and copy these reports, proxy statements and other information at the SEC's Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information regarding the operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov ~~that makes available~~where you may access our reports, proxy statements and other information ~~regarding issuers~~ that we file ~~electronically.~~with, or furnish to, the SEC.

We make available free of charge at www.itt.com (in the "Investors" section) copies of materials we file with, or furnish to, the SEC. We also use the Investor Relations page of our website at www.itt.com (in the "Investors" section) to disclose important information to the public.

Information contained on our website, or that can be accessed through our website, does not constitute a part of this Report. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website. Our corporate headquarters ~~are~~is located at 1133 Westchester Avenue, White Plains, NY 10604 and the telephone number of this location is (914) 641-2000.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED ~~INCOME~~ STATEMENTS OF OPERATIONS (UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)


	Three Months						Nine Months						Three Months						Six Months
For the Periods Ended September 30	2016			2015			2016			2015
For the Periods Ended June 30													2017			2016			2017			2016
Revenue	$	581.7		$	601.9		$	1,817.0		$	1,818.8		$	630.9		$	626.2		$	1,256.7		$	1,235.3
Costs of revenue	397.8			407.0			1,232.2			1,211.0			426.5			420.6			850.0			834.4
Gross profit	183.9			194.9			584.8			607.8			204.4			205.6			406.7			400.9
General and administrative expenses	59.2			60.2			202.2			186.8			65.3			74.0			131.5			143.0
Sales and marketing expenses	39.4			43.1			128.7			139.2			43.9			46.0			87.0			89.3
Research and development expenses	18.6			18.0			58.9			55.2			22.6			21.1			45.1			40.3
Asbestos-related benefit, net	(68.1		)	(30.3		)	(40.3		)	(99.7		)
Asbestos-related costs, net													14.9			15.0			29.8			27.8
Operating income	134.8			103.9			235.3			326.3			57.7			49.5			113.3			100.5
Interest and non-operating expenses (income), net	0.3			(4.0		)	1.5			(2.5		)
Interest and non-operating (income) expenses, net													(0.9		)	(0.5		)	(0.1		)	1.2
Income from continuing operations before income tax expense	134.5			107.9			233.8			328.8			58.6			50.0			113.4			99.3
Income tax expense	46.1			11.4			75.3			53.0			10.6			17.5			19.7			29.2
Income from continuing operations	88.4			96.5			158.5			275.8			48.0			32.5			93.7			70.1
Income from discontinued operations, including tax (expense) benefit of $(1.1), $19.7, $(0.9) and $23.7, respectively	1.8			34.2			2.0			39.3
(Loss) Income from discontinued operations, including tax benefit (expense) of $0.1, $(0.1), $0.2 and $0.2, respectively													(0.1		)	0.5			(0.2		)	0.2
Net income	90.2			130.7			160.5			315.1			47.9			33.0			93.5			70.3
Less: Income attributable to noncontrolling interests	0.1			—			0.2			—
Less: Income (loss) attributable to noncontrolling interests													0.1			0.2			(0.3		)	0.1
Net income attributable to ITT Inc.	$	90.1		$	130.7		$	160.3		$	315.1		$	47.8		$	32.8		$	93.8		$	70.2
Amounts attributable to ITT Inc.:
Income from continuing operations, net of tax	$	88.3		$	96.5		$	158.3		$	275.8		$	47.9		$	32.3		$	94.0		$	70.0
Income from discontinued operations, net of tax	1.8			34.2			2.0			39.3
(Loss) income from discontinued operations, net of tax													(0.1		)	0.5			(0.2		)	0.2
Net income attributable to ITT Inc.	$	90.1		$	130.7		$	160.3		$	315.1		$	47.8		$	32.8		$	93.8		$	70.2
Earnings per share attributable to ITT Inc.:
Basic:
Continuing operations	$	0.99		$	1.08		$	1.77		$	3.07		$	0.54		$	0.36		$	1.06		$	0.78
Discontinued operations	0.02			0.38			0.02			0.44			—			—			—			—
Net income	$	1.01		$	1.46		$	1.79		$	3.51		$	0.54		$	0.36		$	1.06		$	0.78
Diluted:
Continuing operations	$	0.98		$	1.07		$	1.76		$	3.04		$	0.54		$	0.36		$	1.05		$	0.78
Discontinued operations	0.02			0.38			0.02			0.43			—			—			—			—
Net income	$	1.00		$	1.45		$	1.78		$	3.47		$	0.54		$	0.36		$	1.05		$	0.78
Weighted average common shares – basic	89.2			89.4			89.5			89.9			88.5			89.8			88.4			89.7
Weighted average common shares – diluted	89.7			90.3			90.2			90.8			89.0			90.4			89.1			90.4
Cash dividends declared per common share	$	0.124		$	0.1183		$	0.372		$	0.3549		$	0.128		$	0.124		$	0.256		$	0.248

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above ~~income statements.~~statements of operations.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(IN MILLIONS)


	Three Months						Nine Months						Three Months						Six Months
For the Periods Ended September 30	2016			2015			2016			2015
For the Periods Ended June 30													2017			2016			2017			2016
Net income	$	90.2		$	130.7		$	160.5		$	315.1		$	47.9		$	33.0		$	93.5		$	70.3
Other comprehensive income (loss):
Net foreign currency translation adjustment	4.3			(24.4		)	17.1			(72.2		)	42.5			(14.4		)	61.7			12.8
Net change in postretirement benefit plans, net of tax impacts of $0.6, $0.1, $1.6 and $0.5, respectively	1.2			0.8			3.5			1.9
Net change in postretirement benefit plans, net of tax impacts of $0.4, $0.4, $0.9 and $1.0, respectively													1.2			1.2			2.3			2.3
Other comprehensive income (loss)	5.5			(23.6		)	20.6			(70.3		)	43.7			(13.2		)	64.0			15.1
Comprehensive income	95.7			107.1			181.1			244.8			91.6			19.8			157.5			85.4
Less: Comprehensive income attributable to noncontrolling interests	0.1			—			0.2			—
Less: Comprehensive income (loss) attributable to noncontrolling interests													0.1			0.2			(0.3		)	0.1
Comprehensive income attributable to ITT Inc.	$	95.6		$	107.1		$	180.9		$	244.8		$	91.5		$	19.6		$	157.8		$	85.3
Disclosure of reclassification and other adjustments to postretirement benefit plans
Reclassification adjustments (see Note 14):
Amortization of prior service benefit, net of tax expense of $(0.6), $(1.2), $(1.6) and $(3.0), respectively	$	(0.8	)	$	(1.4	)	$	(2.6	)	$	(4.6	)
Amortization of net actuarial loss, net of tax benefits of $1.2, $1.3, $3.2 and $3.5, respectively	2.0			2.2			6.1			6.5
Disclosure of reclassification adjustments to postretirement benefit plans (see Note 14)
Amortization of prior service benefit, net of tax expense of $(0.5), $(0.5), $(1.0) and $(1.0), respectively													$	(0.7	)	$	(0.9	)	$	(1.4	)	$	(1.8	)
Amortization of net actuarial loss, net of tax benefits of $0.9,$0.9, $1.9 and $2.0, respectively													1.9			2.1			3.7			4.1
Net change in postretirement benefit plans, net of tax	$	1.2		$	0.8		$	3.5		$	1.9		$	1.2		$	1.2		$	2.3		$	2.3

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above statements of comprehensive income.

CONSOLIDATED CONDENSED BALANCE SHEETS

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	475.8		$	415.7		$	355.3		$	460.7
Receivables, net	595.2			584.9			591.1			523.9
Inventories, net	305.1			292.7			314.9			295.2
Other current assets	139.7			204.4			142.9			122.0
Total current assets	1,515.8			1,497.7			1,404.2			1,401.8
Plant, property and equipment, net	450.3			443.5			491.2			464.5
Goodwill	784.8			778.3			883.9			774.7
Other intangible assets, net	166.4			187.2			153.5			160.3
Asbestos-related assets	319.8			337.5			303.8			314.6
Deferred income taxes	294.2			326.1			300.9			297.4
Other non-current assets	186.3			153.3			193.1			188.4
Total non-current assets	2,201.8			2,225.9			2,326.4			2,199.9
Total assets	$	3,717.6		$	3,723.6		$	3,730.6		$	3,601.7
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term loans and current maturities of long-term debt	$	251.9		$	245.7		$	204.1		$	214.3
Accounts payable	304.4			314.7			315.2			301.7
Accrued liabilities	382.6			392.7			373.6			350.2
Total current liabilities	938.9			953.1			892.9			866.2
Asbestos-related liabilities	875.7			954.8			866.0			877.5
Postretirement benefits	255.1			260.4			255.1			248.6
Other non-current liabilities	190.2			189.9			170.6			181.0
Total non-current liabilities	1,321.0			1,405.1			1,291.7			1,307.1
Total liabilities	2,259.9			2,358.2			2,184.6			2,173.3
Shareholders’ equity:
Common stock:
Authorized – 250.0 shares, $1 par value per share (88.3 and 104.5 shares issued, respectively)
Outstanding – 88.3 shares and 89.5 shares, respectively	88.3			89.5
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	1,771.2			1,696.7			1,843.6			1,789.2
Total accumulated other comprehensive loss	(403.5		)	(424.1		)	(387.2		)	(451.2		)
Total ITT Inc. shareholders' equity	1,456.0			1,362.1			1,544.4			1,426.4
Noncontrolling interests	1.7			3.3			1.6			2.0
Total shareholders’ equity	1,457.7			1,365.4			1,546.0			1,428.4
Total liabilities and shareholders’ equity	$	3,717.6		$	3,723.6		$	3,730.6		$	3,601.7

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above balance sheets.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN MILLIONS)


For the Nine Months Ended September 30	2016			2015
For the Six Months Ended June 30							2017			2016
Operating Activities
Net income	$	160.5		$	315.1		$	93.5		$	70.3
Less: Income from discontinued operations	2.0			39.3
Less: Income attributable to noncontrolling interests	0.2			—
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.	158.3			275.8			94.0			70.0
Adjustments to income from continuing operations:
Depreciation and amortization	76.5			63.1			50.4			51.1
Stock-based compensation	9.1			11.1			7.3			5.9
Asbestos-related benefit, net	(40.3		)	(99.7		)
Asbestos-related costs, net							29.8			27.8
Asbestos-related payments, net	(24.5		)	(15.2		)	(30.7		)	(11.5		)
Changes in assets and liabilities:
Change in receivables	(13.9		)	(77.2		)	(35.6		)	(45.6		)
Change in inventories	(8.9		)	(6.3		)	2.3			(3.7		)
Change in accounts payable	(16.2		)	(0.4		)	(7.8		)	(4.3		)
Change in accrued expenses	(18.8		)	(26.1		)	(3.3		)	(28.1		)
Change in accrued and deferred income taxes	33.3			21.9			(3.1		)	9.7
Other, net	(7.9		)	0.1			(10.6		)	0.3
Net Cash – Operating activities	146.7			147.1			92.7			71.6
Investing Activities
Capital expenditures	(68.1		)	(64.2		)	(53.3		)	(46.1		)
Acquisitions, net of cash acquired	(8.8		)	(53.5		)	(113.7		)	(0.2		)
Purchases of investments	(60.6		)	(73.0		)	—			(60.6		)
Maturities of investments	113.6			68.2			—			108.7
Proceeds from sale of businesses and other assets	1.4			8.6			2.4			1.2
Proceeds from insurance recovery	—			2.5
Other, net							0.1			0.2
Net Cash – Investing activities	(22.5		)	(111.4		)	(164.5		)	3.2
Financing Activities
Commercial paper, net borrowings	56.5			10.5			9.4			23.5
Short-term revolving loans, borrowings	27.7			—			77.3			27.7
Short-term revolving loans, repayments	(78.3		)	—			(100.0		)	(78.3		)
Long-term debt, issued							3.9			—
Long-term debt, repayments	(0.8		)	(2.1		)	(0.7		)	(0.6		)
Repurchase of common stock	(70.9		)	(83.9		)	(32.8		)	(27.5		)
Proceeds from issuance of common stock	8.8			5.5			6.5			8.8
Dividends paid	(22.6		)	(21.6		)	(11.6		)	(22.5		)
Excess tax benefit from equity compensation activity	3.4			3.2			—			3.4
Other, net	(2.2		)	(1.8		)	0.1			(2.3		)
Net Cash – Financing activities	(78.4		)	(90.2		)	(47.9		)	(67.8		)
Exchange rate effects on cash and cash equivalents	9.0			(23.9		)	15.2			4.0
Net Cash – Operating activities of discontinued operations	5.3			(0.7		)	(0.9		)	6.6
Net change in cash and cash equivalents	60.1			(79.1		)	(105.4		)	17.6
Cash and cash equivalents – beginning of year	415.7			584.0			460.7			415.7
Cash and cash equivalents – end of period	$	475.8		$	504.9		$	355.3		$	433.3
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest	$	3.3		$	1.0		$	2.1		$	2.4
Income taxes, net of refunds received	$	37.2		$	24.7		$	21.9		$	15.2

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above statements of cash flows.

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)

(IN MILLIONS)


	Three Months						Nine Months						Three Months						Six Months
For the Periods Ended September 30	2016			2015			2016			2015
For the Periods Ended June 30													2017			2016			2017			2016
Common Stock
Common stock, beginning balance	$	89.6		$	89.4		$	89.5		$	91.0		$	88.7		$	90.0		$	88.4		$	89.5
Activity from stock incentive plans	—			0.1			0.9			0.6			0.1			0.2			0.5			0.9
Share repurchases	(1.3		)	—			(2.1		)	(2.1		)	(0.8		)	(0.6		)	(0.9		)	(0.8		)
Common stock, ending balance	88.3			89.5			88.3			89.5			88.0			89.6			88.0			89.6
Retained Earnings
Retained earnings, beginning balance	1,734.6			1,540.9			1,696.7			1,445.1			1,832.6			1,727.2			1,789.2			1,696.7
Cumulative adjustment for accounting change (See Note 2)													—			—			0.5			—
Net income attributable to ITT Inc.	90.1			130.7			160.3			315.1			47.8			32.8			93.8			70.2
Dividends declared	(11.2		)	(10.6		)	(33.6		)	(32.1		)	(11.4		)	(11.3		)	(22.8		)	(22.4		)
Activity from stock incentive plans	3.3			4.5			20.5			19.0			4.3			5.9			14.8			17.2
Share repurchases	(45.6		)	(0.2		)	(72.3		)	(81.8		)	(29.7		)	(20.0		)	(31.9		)	(26.7		)
Purchase of noncontrolling interest	—			—			(0.4		)	—			—			—			—			(0.4		)
Retained earnings, ending balance	1,771.2			1,665.3			1,771.2			1,665.3			1,843.6			1,734.6			1,843.6			1,734.6
Accumulated Other Comprehensive Loss
Postretirement benefit plans, beginning balance	(151.4		)	(143.1		)	(153.7		)	(144.2		)	(144.1		)	(152.6		)	(145.2		)	(153.7		)
Net change in postretirement benefit plans	1.2			0.8			3.5			1.9			1.2			1.2			2.3			2.3
Postretirement benefit plans, ending balance	(150.2		)	(142.3		)	(150.2		)	(142.3		)	(142.9		)	(151.4		)	(142.9		)	(151.4		)
Cumulative translation adjustment, beginning balance	(257.3		)	(224.5		)	(270.1		)	(176.7		)	(286.8		)	(242.9		)	(306.0		)	(270.1		)
Net cumulative translation adjustment	4.3			(24.4		)	17.1			(72.2		)	42.5			(14.4		)	61.7			12.8
Cumulative translation adjustment, ending balance	(253.0		)	(248.9		)	(253.0		)	(248.9		)	(244.3		)	(257.3		)	(244.3		)	(257.3		)
Unrealized loss on investment securities, beginning balance	(0.3		)	(0.3		)	(0.3		)	(0.3		)	—			(0.3		)	—			(0.3		)
Unrealized loss on investment securities, ending balance	(0.3		)	(0.3		)	(0.3		)	(0.3		)	—			(0.3		)	—			(0.3		)
Total accumulated other comprehensive loss	(403.5		)	(391.5		)	(403.5		)	(391.5		)	(387.2		)	(409.0		)	(387.2		)	(409.0		)
Noncontrolling interests
Noncontrolling interests, beginning balance	1.6			5.4			3.3			5.4			1.6			1.5			2.0			3.3
Income attributable to noncontrolling interests	0.1			—			0.2			—
Income (loss) attributable to noncontrolling interests													0.1			0.2			(0.3		)	0.1
Dividend to noncontrolling interest shareholders	—			(1.8		)	(1.9		)	(1.8		)	—			—			—			(1.9		)
Other	—			—			0.1			—			(0.1		)	(0.1		)	(0.1		)	0.1
Noncontrolling interests, ending balance	1.7			3.6			1.7			3.6			1.6			1.6			1.6			1.6
Total Shareholders' Equity
Total shareholders' equity, beginning balance	1,416.8			1,267.8			1,365.4			1,220.3			1,492.0			1,422.9			1,428.4			1,365.4
Net change in common stock	(1.3		)	0.1			(1.2		)	(1.5		)	(0.7		)	(0.4		)	(0.4		)	0.1
Net change in retained earnings	36.6			124.4			74.5			220.2			11.0			7.4			54.4			37.9
Net change in accumulated other comprehensive loss	5.5			(23.6		)	20.6			(70.3		)	43.7			(13.2		)	64.0			15.1
Net change in noncontrolling interests	0.1			(1.8		)	(1.6		)	(1.8		)	—			0.1			(0.4		)	(1.7		)
Total shareholders' equity, ending balance	$	1,457.7		$	1,366.9		$	1,457.7		$	1,366.9		$	1,546.0		$	1,416.8		$	1,546.0		$	1,416.8

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above statements of changes in shareholders' equity.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(DOLLARS AND SHARES (EXCEPT PER SHARE AMOUNTS) IN MILLIONS, UNLESS OTHERWISE STATED)

NOTE 1

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

ITT Inc. is a diversified manufacturer of highly engineered critical components and customized technology solutions for the ~~energy,~~ transportation, industrial, and ~~industrial~~oil and gas markets. Unless the context otherwise indicates, references herein to "ITT," "the Company," and such words as "we," "us," and "our" include ITT Inc. and its subsidiaries. ITT operates through ~~four~~three segments: Industrial Process, consisting of industrial pumping and complementary equipment; Motion Technologies, consisting of friction and shock and vibration equipment; ~~Interconnect Solutions,~~and Connect & Control Technologies, consisting of electronic ~~connectors; and Control Technologies, consisting of~~connectors, fluid handling, motion control and noise and energy absorption products. Financial information for our segments is presented in Note 3, ~~"Segment Information."~~

On May 16, 2016, we consummated a corporate reorganization into a holding company structure. As a result of the reorganization ITT Inc., an Indiana corporation that was previously a wholly owned subsidiary of ITT Corporation, became the publicly traded holding company of ITT Corporation and its subsidiaries and the successor issuer to ITT Corporation under Rule 12g-3(a) under the Securities Exchange Act of 1934 (Exchange Act)Segment Information. As the successor issuer, ITT Inc. common stock was deemed to be registered under Section 12(b) of the Exchange Act and ITT Inc. succeeded to ITT Corporation’s obligation to file reports, proxy statements and other information required by the Exchange Act with the SEC. For additional information regarding the holding company reorganization, please refer to our Current Report on Form 8-K that we filed with the SEC on May 16, 2016.

On October 31, 2011, ITT completed the tax-free spin-off of its Defense and Information Solutions business, Exelis Inc. (Exelis), and its water-related business, Xylem Inc. (Xylem) by way of a distribution of all of the issued and outstanding shares of Exelis common stock and Xylem common stock, on a pro rata basis, to ITT shareholders of record on October 17, 2011. This transaction is referred to in this Report as the "2011 spin-off." On May 29, 2015, Harris Corporation acquired Exelis.

Basis of Presentation

The unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the SEC and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such SEC rules. We believe that the disclosures made are adequate to make the information presented not misleading. We consistently applied the accounting policies described in ITT's Annual Report on Form 10-K for the year ended December 31, ~~2015~~2016 (~~2015~~2016 Annual Report) in preparing these unaudited financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in our ~~2015~~2016 Annual Report.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Estimates are revised as additional information becomes available. Estimates and assumptions are used for, but not limited to, asbestos-related liabilities and recoveries from insurers, revenue recognition, unrecognized tax benefits, deferred tax valuation allowances, projected benefit obligations for postretirement plans, accounting for business combinations, goodwill and other intangible asset impairment testing, environmental liabilities, allowance for doubtful accounts and inventory valuation. Actual results could differ from these estimates.

ITT's quarterly financial periods end on the Saturday that is generally closest to the last day of the calendar quarter, except for the last quarterly period of the fiscal year, which ends on December 31st. For ease of presentation, the quarterly financial statements included herein are described as ending on the last day of the calendar quarter.

Certain prior year amounts have been reclassified to conform to the current year presentation.

NOTE 2

RECENT ACCOUNTING PRONOUNCEMENTS

The Company considers the applicability and impact of all accounting standard updates (ASUs). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on our consolidated financial position or results of operations.

Accounting Pronouncements ~~Not Yet~~Recently Adopted

In March 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-09 to simplify several aspects of the accounting standard for employee share-based payment transactions, ~~standard,~~ including the classification of excess tax benefits and deficiencies and the accounting for employee forfeitures. ~~The~~ITT elected to adopt this guidance ~~is effective for the Company beginning in the first quarter~~as of ~~2017. The updates to the accounting standard include~~January 1, 2017 which includes the following:

Excess tax benefits and deficiencies will no longer be recognized as a change in additional paid-in-capital in the equity section of the ~~balance sheet, instead~~Balance Sheet. Instead they ~~are to~~will be recognized inon the ~~income statement~~Statements of Operations as a tax expense or benefit. InOn the ~~statement~~Statement of ~~cash flows,~~Cash Flows, excess tax benefits and deficiencies will no longer be classified as a financing ~~activity, instead~~activity. Instead they will be classified as an operating activity. These

~~Entities will have~~

provisions were adopted using a prospective method of transition. During the ~~option~~three and six months ended June 30, 2017, we recorded an income tax benefit of $0.1 and $1.2, respectively, on the Statement of Operations and classified this benefit on the Statement of Cash Flows as an operating activity. The prior year's excess tax benefit of $3.4 was recorded as a change in equity on the Balance Sheet and was classified as a financing activity on the Statement of Cash Flows.

Previously unrecognized tax benefits due to ~~continue to reduce share-based compensation expense~~net operating loss carryforwards were recognized during the ~~vesting period~~first quarter of ~~outstanding awards for estimated future employee forfeitures or they may elect~~2017 using a modified retrospective approach, resulting in a cumulative-effect adjustment to ~~recognize~~increase retained earnings by $2.1 as of January 1, 2017. In addition, a corresponding deferred tax asset of $25.6 was partially offset by a valuation allowance of $23.5 during the first quarter of 2017 as the newly recognized net operating losses were not considered more likely than not realizable.

The impact of forfeitures will now be recognized as they ~~actually occur.~~occur as opposed to previously estimating future employee forfeitures. We adopted this provision utilizing a modified retrospective approach, resulting in a cumulative-effect adjustment reducing retained earnings by $1.6 as of January 1, 2017.

The ASU also provides new guidance to other areas of the standard including minimum statutory tax withholding rules and the calculation of diluted common shares outstanding. The adoption of this provision will be reflected prospectively in the financial statements and did not have a material impact.

Accounting Pronouncements Not Yet Adopted

In March 2017, 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. Under the ASU, entities are now required to disaggregate the service cost component and present it with other current compensation costs for the related employees. All other components of net periodic benefit cost will no longer be classified as an operating expense. In addition, only the service cost component will be eligible for capitalization on the balance sheet. The ~~updates are~~ASU requires a retrospective transition method to ~~be applied using~~adopt the requirement to present service costs separately from the other components of net periodic benefit cost in the statements of operations and a ~~modified retrospective approach as a cumulative adjustment~~prospective transition method to ~~retained earnings. Early adoption~~adopt the requirement that prohibits capitalization of all components of net periodic benefit cost on the balance sheet except service costs. The ASU is ~~permitted.~~effective for the Company beginning in the first quarter of 2018, at which time we expect to adopt the new standard. We have yet to finalize the evaluation of the potential impact of this ASU on our financial ~~statements,~~statements; however we do not expect these changes to have a material impact.

In February 2016, the FASB issued ASU 2016-02 impacting the accounting for leases intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. The revised standard will require entities to recognize a liability for ~~its~~their lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term. Lease obligations are to be measured at the present value of lease payments and accounted for using the effective interest method. The accounting for the leased asset will differ slightly depending on whether the agreement is deemed to be a financing or operating lease. For finance leases, the leased asset is depreciated on a straight-line basis and recorded separately from the interest expense in the ~~income statement~~statements of operations, resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. The ASU requires that assets and liabilities be presented or disclosed separately and classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The ~~new standard~~ASU is effective for the Company beginning in the first quarter 2019, ~~and early adoption is permitted.~~at which time we expect to adopt the new standard. We are currently ~~evaluating~~assessing our existing lease agreements and related financial disclosures to evaluate the impact of these amendments on our financial statements.

In May 2014, the FASB issued ASU 2014-09 amending the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. We are still finalizing our assessment of the impact of the new standard, but we do not currently expect it to have a material impact on our consolidated financial statements. Based on the evaluation of our current contracts and revenue streams, most will be recorded consistently under both the current and new standard. However, the timing of revenue recognition of certain design and build contracts, currently recognized using the

percentage of completion method, will be dependent on contract terms and therefore may vary. Additionally, certain advance payments that are currently presented as a reduction of inventory will be presented as a contract liability under the new guidance. The new guidance will be effective for the Company beginning in its first quarter of 2018. ~~The amendments may be applied retrospectively~~At this time, we expect to ~~each prior period presented or~~adopt the new standard using a modified retrospective approach with the cumulative effect recognized as of the date of initial application. ~~We are currently evaluating the impact of these amendments and the transition alternatives on our financial statements.~~

NOTE 3

SEGMENT INFORMATION

During the first quarter of 2017, we combined our former Interconnect Solutions and Control Technologies segments to form Connect & Control Technologies. All prior year segment information has been reclassified based on our current segment structure. The Company's segments are reported on the same basis used ~~internally~~by our chief operating decision maker, for evaluating performance and for allocating resources. Our ~~four~~three reportable segments are referred to as: Industrial Process, Motion Technologies, ~~Interconnect Solutions~~ and Connect & Control Technologies.

Industrial Process manufactures engineered fluid process equipment serving a diversified mix of customers in global industries such as chemical, oil and gas, mining, and other industrial process markets and is a provider of plant optimization and efficiency solutions and aftermarket services and parts.

Motion Technologies manufactures brake components and specialized sealing solutions, shock absorbers and damping technologies primarily for the global automotive, truck and trailer, public bus and rail transportation markets.

~~Interconnect Solutions~~Connect & Control Technologies manufactures ~~and designs a wide range of highly engineered harsh environment~~harsh-environment connector solutions ~~that make it possible to transfer signal~~ and ~~power between electronic devices which service global customers for the aerospace and defense, industrial and transportation, oil and gas and medical markets.~~

~~Control Technologies~~ ~~manufactures specialized equipment, including actuation, fuel management, noise and~~critical energy absorption and ~~environmental~~flow control ~~system~~ components for the aerospace and defense, general industrial, medical, and ~~industrial~~oil and gas markets.

Corporate and Other consists of corporate office expenses including compensation, benefits, occupancy, depreciation and other administrative costs, as well as charges related to certain matters, such as asbestos and environmental liabilities, that are managed at a corporate level and are not included in segment results when evaluating performance or allocating resources. Assets of the segments exclude general corporate assets, which principally consist of cash, investments, asbestos-related ~~assets~~receivables, deferred taxes, and certain property, plant and equipment.


	Revenue						Operating Income (Loss)						Operating Margin				Revenue						Operating Income						Operating Margin
For the Three Months Ended September 30	2016			2015			2016			2015			2016		2015
For the Three Months Ended June 30																	2017			2016			2017			2016			2017		2016
Industrial Process	$	195.0		$	270.6		$	4.3		$	34.0		2.2	%	12.6	%	$	192.3		$	214.2		$	14.8		$	6.3		7.7	%	2.9	%
Motion Technologies	238.7			179.9			45.2			33.0			18.9	%	18.3	%	290.1			259.6			52.1			48.9			18.0	%	18.8	%
Interconnect Solutions	78.6			82.8			5.8			3.6			7.4	%	4.3	%
Control Technologies	70.5			69.8			11.6			14.0			16.5	%	20.1	%
Connect & Control Technologies																	149.6			153.5			13.7			16.8			9.2	%	10.9	%
Total segment results	582.8			603.1			66.9			84.6			11.5	%	14.1	%	632.0			627.3			80.6			72.0			12.8	%	11.5	%
Asbestos-related benefit, net	—			—			68.1			30.3			—		—
Asbestos-related costs, net																	—			—			(14.9		)	(15.0		)	—		—
Eliminations / Other corporate costs	(1.1		)	(1.2		)	(0.2		)	(11.0		)	—		—		(1.1		)	(1.1		)	(8.0		)	(7.5		)	—		—
Total Eliminations / Corporate and Other costs	(1.1		)	(1.2		)	67.9			19.3			—		—		(1.1		)	(1.1		)	(22.9		)	(22.5		)	—		—
Total	$	581.7		$	601.9		$	134.8		$	103.9		23.2	%	17.3	%	$	630.9		$	626.2		$	57.7		$	49.5		9.1	%	7.9	%

	Revenue						Operating Income (Loss)						Operating Margin				Revenue						Operating Income						Operating Margin
For the Nine Months Ended September 30	2016			2015			2016			2015			2016		2015
For the Six Months Ended June 30																	2017			2016			2017			2016			2017		2016
Industrial Process	$	618.0		$	813.7		$	19.6		$	95.9		3.2	%	11.8	%	$	378.4		$	423.0		$	22.1		$	15.3		5.8	%	3.6	%
Motion Technologies	755.3			555.5			144.8			111.0			19.2	%	20.0	%	577.4			516.6			107.0			99.6			18.5	%	19.3	%
Interconnect Solutions	229.8			243.0			12.6			7.6			5.5	%	3.1	%
Control Technologies	217.2			210.1			34.0			40.5			15.7	%	19.3	%
Connect & Control Technologies																	302.9			297.8			30.0			29.2			9.9	%	9.8	%
Total segment results	1,820.3			1,822.3			211.0			255.0			11.6	%	14.0	%	1,258.7			1,237.4			159.1			144.1			12.7	%	11.7	%
Asbestos-related benefit, net	—			—			40.3			99.7			—		—
Asbestos-related costs, net																	—			—			(29.8		)	(27.8		)	—		—
Eliminations / Other corporate costs	(3.3		)	(3.5		)	(16.0		)	(28.4		)	—		—		(2.0		)	(2.1		)	(16.0		)	(15.8		)	—		—
Total Eliminations / Corporate and Other costs	(3.3		)	(3.5		)	24.3			71.3			—		—		(2.0		)	(2.1		)	(45.8		)	(43.6		)	—		—
Total	$	1,817.0		$	1,818.8		$	235.3		$	326.3		12.9	%	17.9	%	$	1,256.7		$	1,235.3		$	113.3		$	100.5		9.0	%	8.1	%


	Total Assets				Capital Expenditures				Depreciation & Amortization				Total Assets				Capital Expenditures				Depreciation & Amortization
For the Nine Months Ended September 30	2016		2015^(a)		2016		2015		2016		2015
For the Six Months Ended June 30													2017		2016^(a)		2017		2016		2017		2016
Industrial Process	$	1,030.1	$	1,097.5	$	14.9	$	13.0	$	21.0	$	20.9	$	994.8	$	998.1	$	12.4	$	11.2	$	13.5	$	14.3
Motion Technologies	838.5		779.8		45.5		28.7		32.7		20.5		1,073.7		838.4		34.3		29.3		22.0		21.2
Interconnect Solutions	312.8		303.2		2.9		15.6		9.0		7.9
Control Technologies	380.9		370.6		4.4		4.3		9.2		9.1
Connect & Control Technologies													698.7		678.4		6.5		5.4		11.7		12.4
Corporate and Other	1,155.3		1,172.5		0.4		2.6		4.6		4.7		963.4		1,086.8		0.1		0.2		3.2		3.2
Total	$	3,717.6	$	3,723.6	$	68.1	$	64.2	$	76.5	$	63.1	$	3,730.6	$	3,601.7	$	53.3	$	46.1	$	50.4	$	51.1


(a)	Amounts reflect balances as of December 31, ~~2015.~~2016.

NOTE 4

RESTRUCTURING ACTIONS

The table below summarizes the restructuring costs presented within general and administrative expenses in our Consolidated Condensed ~~Income~~ Statements of Operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.


	Three Months				Nine Months				Three Months				Six Months
For the Periods Ended September 30	2016		2015		2016		2015
For the Periods Ended June 30									2017		2016		2017		2016
Severance costs	$	3.1	$	1.1	$	22.0	$	16.2	$	1.6	$	13.8	$	2.7	$	18.9
Asset write-offs	0.2		0.7		0.4		0.7		—		—		—		0.2
Other restructuring costs	0.7		—		1.4		0.9		0.1		0.5		1.6		0.7
Total restructuring costs	$	4.0	$	1.8	$	23.8	$	17.8	$	1.7	$	14.3	$	4.3	$	19.8
By segment:
Industrial Process	$	2.9	$	0.6	$	19.9	$	10.6	$	0.4	$	13.8	$	1.7	$	17.0
Motion Technologies	1.1		—		2.5		—		0.6		—		0.8		1.4
Interconnect Solutions	—		0.9		—		6.2
Control Technologies	—		0.3		0.9		0.8
Connect & Control Technologies									0.7		—		1.2		0.9
Corporate and Other	—		—		0.5		0.2		—		0.5		0.6		0.5

The following table displays a rollforward of the restructuring accruals, presented on our Consolidated Condensed Balance Sheet within accrued liabilities, for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.


For the Periods Ended September 30	2016			2015
For the Periods Ended June 30							2017			2016
Restructuring accruals - beginning balance	$	20.0		$	21.9		$	14.6		$	20.0
Restructuring costs	23.8			17.8			4.3			19.8
Cash payments	(22.7		)	(19.5		)	(8.9		)	(15.5		)
Asset write-offs	(0.4		)	(0.7		)	—			(0.2		)
Foreign exchange translation and other	—			(0.3		)	1.4			0.1
Restructuring accrual - ending balance	$	20.7		$	19.2		$	11.4		$	24.2
By accrual type:
Severance accrual	$	19.4		$	18.2		$	9.6		$	23.9
Facility carrying and other costs accrual	1.3			1.0			1.8			0.3

We have initiated various restructuring activities throughout our businesses during the past two years, of which only those noted below are considered to be individually significant. Other less significant restructuring actions taken during ~~2016~~2017 and ~~2015~~2016 included various reduction in ~~force initiatives and the consolidation of two sites within our Control Technologies segment to an existing lower cost location.~~workforce initiatives.

Industrial Process Restructuring Actions

Beginning in early 2015, we have been executing a series of restructuring actions focused on achieving efficiencies and reducing the overall cost structure of the Industrial Process ~~segment.~~segment in an effort to align with the declining oil and gas market conditions experienced over the past two years. During the ~~nine~~first six months ~~ended September 30, 2016,~~of 2017, we continued to pursue these objectives and we recognized ~~$19.9~~$1.7 of restructuring costs primarily related to ~~severance for approximately 370 employees. During 2015, we recognized restructuring costs~~the exit of ~~$12.2 for these actions, with $10.6 recognized during the first nine months of 2015. Total restructuring costs under these actions through September 30, 2016 are $32.1 mainly~~certain office space. Cash payments related to ~~severance for approximately 570 employees. These actions~~the remaining accrual are expected to be substantially complete ~~during the next three months.~~in 2018. However, we will continue to monitor and evaluate the need for any additional restructuring actions.

The following table provides a rollforward of the restructuring accruals associated with the Industrial Process restructuring actions.


For the Nine Months Ended September 30	2016			2015
For the Six Months Ended June 30							2017			2016
Restructuring accruals - beginning balance	$	4.9		$	—		$	6.5		$	4.9
Restructuring costs	19.9			10.6			1.7			17.0
Cash payments	(12.8		)	(3.1		)	(3.5		)	(8.0		)
Asset write-offs	(0.4		)	(0.7		)	—			(0.2		)
Foreign exchange translation and other	0.3			—			(0.8		)	0.3
Restructuring accruals - ending balance	$	11.9		$	6.8		$	3.9		$	14.0

~~Interconnect Solutions Restructuring Actions~~

Beginning in 2013, we initiated a series of restructuring actions to improve the overall cost structure of our ICS segment. These actions included headcount reductions of approximately 500 employees and the transition of certain production lines from one location to an existing lower cost manufacturing site. Payments related to these actions were completed in 2016.

In May 2015, we initiated a separate restructuring action designed to further reduce the cost structure of the ICS segment primarily through additional headcount reductions of approximately 100 employees, for which the Company recognized costs of $6.5 during 2015. Payments related to the remaining accrual for this action are expected to be substantially completed in 2017.

~~The following table provides a rollforward of the restructuring accrual associated with the Interconnect Solutions restructuring actions.~~

For the Nine Months Ended September 30 2016 2015
Restructuring accruals - beginning balance $ 9.4
$ 17.1
Restructuring costs —
6.2
Cash payments (7.0 ) (12.1 )
Foreign exchange translation and other (0.1 ) (0.2 )
Restructuring accruals - ending balance $ 2.3
$ 11.0

NOTE 5

INCOME TAXES

For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recognized income tax expense of ~~$46.1~~$10.6 and ~~$11.4 with~~$17.5 and had an effective tax rate of ~~34.3%~~18.1% and ~~10.6%~~35.0%, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recognized income tax expense of ~~$75.3~~$19.7 and ~~$53.0 with~~$29.2 and had an effective tax rate of ~~32.2%~~17.4% and ~~16.1%~~29.4%, respectively. The ~~higher effective tax rate in 2016 is primarily driven by an increase in the deferred tax liability on foreign earnings which are not considered indefinitely reinvested, whereas the~~ lower effective tax rate in ~~2015 was~~2017 is primarily ~~driven by the settlement of~~due to a ~~U.S. income tax audit and the release of the~~change in valuation allowance, excess share-based compensation deduction due to the adoption of ASU 2016-09, and a tax rate change on ~~certain net~~Korea deferred tax ~~assets in China due~~assets. Refer to ~~positive income in recent years. The~~Note 2, Recent Accounting Pronouncements, for further information on ASU 2016-09. In addition, the Company continues to benefit from a larger mix of earnings in non-U.S. jurisdictions with favorable tax rates.

During the third quarter of 2016, the Company effectively settled the U.S. income tax audit for tax years 2012-2013. The Company recorded a tax benefit of $3.6 in continuing operations, which primarily relates to the realization of previously unrecognized tax positions.

The Company operates in various tax jurisdictions and is subject to examination by tax authorities in these jurisdictions. The Company is currently under examination in several jurisdictions including Canada, Germany, Hong Kong, Italy, Mexico, ~~South Korea,~~ the U.S. and Venezuela. The estimated tax liability calculation for unrecognized tax benefits considers uncertainties in the application of complex tax laws and regulations in various tax jurisdictions. Due to the complexity of some uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the unrecognized tax benefit. Over the next 12 months, the net amount of the tax liability for unrecognized tax benefits in foreign and domestic jurisdictions could change by approximately ~~$18~~$17 due to changes in audit status, expiration of statutes of limitations and other events. In addition, the settlement of any future examinations relating to the 2011 and prior tax years could result in changes in amounts attributable to the Company under its ~~existing~~ Tax Matters Agreement with Exelis Inc. and ~~Xylem.~~Xylem Inc. relating to the Company's 2011 spin-off of those businesses.

NOTE 6

EARNINGS PER SHARE DATA

The following table provides a reconciliation of the data used in the calculation of basic and diluted earnings per share from continuing operations attributable to ITT for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016.


	Three Months		Nine Months		Three Months		Six Months
For the Periods Ended September 30	2016	2015	2016	2015
For the Periods Ended June 30					2017	2016	2017	2016
Basic weighted average common shares outstanding	89.2	89.4	89.5	89.9	88.5	89.8	88.4	89.7
Add: Dilutive impact of outstanding equity awards	0.5	0.9	0.7	0.9	0.5	0.6	0.7	0.7
Diluted weighted average common shares outstanding	89.7	90.3	90.2	90.8	89.0	90.4	89.1	90.4

The following table provides the number of shares underlying stock options excluded from the computation of diluted earnings per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 because they were anti-dilutive.


	Three Months				Nine Months				Three Months				Six Months
For the Periods Ended September 30	2016		2015		2016		2015
For the Periods Ended June 30									2017		2016		2017		2016
Anti-dilutive stock options	0.7		0.4		0.7		0.4		0.4		0.8		0.4		0.7
Weighted average exercise price per share	$	37.99	$	42.42	$	38.47	$	42.53	$	42.30	$	38.02	$	42.41	$	38.74
Year(s) of expiration	2024 - 2026		2024 - 2025		2024 - 2026		2024 - 2025		2024 - 2025		2024 - 2026		2024 - 2025		2024 - 2026

In addition, ~~0.2~~0.3 of outstanding PSU awards were excluded from the computation of diluted earnings per share for both the three and ~~nine~~six months ended ~~September~~June 30, 2017, and 0.2 outstanding PSU awards were excluded for both the three and six months ended June 30, 2016, ~~and 2015 respectively,~~ as the necessary ~~return on invested capital~~ performance conditions had not yet been satisfied.

NOTE 7

RECEIVABLES, NET


	September 30, 2016				December 31, 2015				June 30, 2017				December 31, 2016
Trade accounts receivable		$	565.9			$	554.0			$	581.2			$	513.5
Notes receivable		4.0				3.9				3.8				4.2
Other		41.3				43.1				20.5				21.6
Receivables, gross		611.2				601.0				605.5				539.3
Less: Allowance for doubtful accounts		(16.0		)		(16.1		)		(14.4		)		(15.4		)
Receivables, net		$	595.2			$	584.9			$	591.1			$	523.9

NOTE 8

INVENTORIES, NET


	September 30, 2016				December 31, 2015				June 30, 2017				December 31, 2016
Finished goods		$	44.9			$	60.9			$	54.9			$	53.0
Work in process		65.0				56.0				63.5				60.5
Raw materials		171.8				162.9				178.4				166.0
Inventoried costs related to long-term contracts		44.9				43.0				40.1				33.5
Total inventory before progress payments		326.6				322.8				336.9				313.0
Less: Progress payments		(21.5		)		(30.1		)		(22.0		)		(17.8		)
Inventories, net		$	305.1			$	292.7			$	314.9			$	295.2

NOTE 9

OTHER CURRENT AND NON-CURRENT ASSETS


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Asbestos-related assets		$	66.0		$	74.5		$	66.0		$	66.0
Short-term investments		15.0			64.9
Prepaid income taxes		15.1			14.3			28.2			7.6
Other		43.6			50.7			48.7			48.4
Other current assets		$	139.7		$	204.4		$	142.9		$	122.0
Other employee benefit-related assets		$	96.0		$	92.9		$	99.2		$	96.5
Environmental-related assets^(a)		34.1			10.8
Environmental-related assets								24.3			33.4
Capitalized software costs		34.8			28.2			44.8			38.1
Other		21.4			21.4			24.8			20.4
Other non-current assets		$	186.3		$	153.3		$	193.1		$	188.4

~~(a)~~

Environmental-related assets increased $23.3 primarily related to a settlement agreement and establishment of a Qualified Settlement Fund (QSF), which can be drawn upon to pay certain future environmental expenses associated with environmental remediation sites covered under the settlement agreement. See Note 17, Commitments and Contingencies, to the Consolidated Condensed Financial Statements for further information on environmental-related matters.

NOTE 10

PLANT, PROPERTY AND EQUIPMENT, NET


	September 30, 2016				December 31, 2015				June 30, 2017				December 31, 2016
Land and improvements		$	30.0			$	25.4			$	28.3			$	28.2
Machinery and equipment		928.0				909.3				951.6				898.6
Buildings and improvements		244.4				242.0				242.7				244.6
Furniture, fixtures and office equipment		69.3				66.3				70.6				68.0
Construction work in progress		45.6				42.3				81.6				68.5
Other		5.6				6.7				10.7				5.3
Plant, property and equipment, gross		1,322.9				1,292.0				1,385.5				1,313.2
Less: Accumulated depreciation		(872.6		)		(848.5		)		(894.3		)		(848.7		)
Plant, property and equipment, net		$	450.3			$	443.5			$	491.2			$	464.5

Depreciation expense of ~~$18.1~~$19.2 and ~~$55.5~~$19.3 and ~~$16.4~~$37.5 and ~~$50.4~~$37.4 was recognized in the three and ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, respectively.

The Company entered into an agreement to sell fully depreciated excess property for a cash purchase price of approximately $41. On April 16, 2017, the purchaser’s due diligence period ended. There are remaining conditions to closing which are anticipated to be finalized in the first half of 2018. At closing, the Company will receive the cash proceeds and ~~2015, respectively.~~is expected to record a gain of approximately $38 to $40.

NOTE 11

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following table provides a rollforward of the carrying amount of goodwill for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 by segment.

Industrial
Process

Motion
Technologies

Interconnect
Solutions

Control
Technologies
Total
Goodwill - December 31, 2015 $ 312.6
$ 201.0
$ 69.0
$ 195.7
$ 778.3
Adjustments to purchase price allocations —
0.3
—
0.4
0.7
Foreign exchange translation 4.3
1.2
0.3
—
5.8
Goodwill - September 30, 2016 $ 316.9
$ 202.5
$ 69.3
$ 196.1
$ 784.8



	Industrial Process			Motion Technologies			Connect & Control Technologies			Total
Goodwill - December 31, 2016		$	308.4		$	202.3		$	264.0	$	774.7
Acquired		—			88.4			—		88.4
Foreign exchange translation		9.9			9.4			1.5		20.8
Goodwill - June 30, 2017		$	318.3		$	300.1		$	265.5	$	883.9

Goodwill acquired during 2017 relates to our acquisition of Axtone Railway Components (Axtone) and represents the excess of the purchase price over the net assets acquired, the valuation of which is pending

completion. Upon completion of the valuation, goodwill acquired will be adjusted to reflect the final fair value of the net assets acquired. Refer to Note 18, Acquisitions, for additional information.

Other Intangible Assets, Net

Information regarding our other intangible assets is as follows:


	September 30, 2016										December 31, 2015										June 30, 2017										December 31, 2016
	Gross Carrying Amount			Accumulated Amortization				Net Intangibles			Gross Carrying Amount			Accumulated Amortization				Net Intangibles			Gross Carrying Amount			Accumulated Amortization				Net Intangibles			Gross Carrying Amount			Accumulated Amortization				Net Intangibles
Customer relationships		$	157.1		$	(56.3	)		$	100.8		$	157.4		$	(45.3	)		$	112.1		$	156.9		$	(66.8	)		$	90.1		$	155.8		$	(59.3	)		$	96.5
Proprietary technology		53.4			(16.2		)		37.2			54.9			(12.7		)		42.2			53.6			(19.4		)		34.2			52.5			(16.8		)		35.7
Patents and other		8.7			(7.5		)		1.2			8.6			(6.6		)		2.0			10.7			(8.7		)		2.0			9.0			(7.6		)		1.4
Finite-lived intangible total		219.2			(80.0		)		139.2			220.9			(64.6		)		156.3			221.2			(94.9		)		126.3			217.3			(83.7		)		133.6
Indefinite-lived intangibles		27.2			—				27.2			30.9			—				30.9			27.2			—				27.2			26.7			—				26.7
Other intangible assets		$	246.4		$	(80.0	)		$	166.4		$	251.8		$	(64.6	)		$	187.2		$	248.4		$	(94.9	)		$	153.5		$	244.0		$	(83.7	)		$	160.3

Amortization expense related to finite-lived intangible assets was ~~$5.5~~$4.6 and ~~$15.6~~$4.7 and ~~$3.0~~$9.2 and ~~$8.7~~$10.1 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively.

During the second quarter of 2016, we recognized an impairment loss of $4.1 within general and administrative expenses related to indefinite-lived trade names within our Industrial Process segment. The impairment loss was the result of the challenging economic conditions within the upstream oil and gas market.

NOTE 12

ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Compensation and other employee-related benefits		$	123.5		$	138.6		$	124.5		$	120.5
Asbestos-related liabilities		76.1			88.0			76.6			76.8
Customer-related liabilities		41.3			38.0			44.4			39.9
Accrued income taxes and other tax-related liabilities		44.2			30.9			44.1			31.0
Environmental liabilities and other legal matters		26.0			24.0			30.2			25.1
Accrued warranty costs		18.9			21.7			16.0			17.4
Other accrued liabilities		52.6			51.5			37.8			39.5
Accrued liabilities		$	382.6		$	392.7		$	373.6		$	350.2
Deferred income taxes and other tax-related accruals		$	28.3		$	44.5		$	22.0		$	24.9
Environmental liabilities		62.1			72.0			59.8			63.2
Compensation and other employee-related benefits		33.9			35.6			33.6			33.0
Other^(a)		65.9			37.8			55.2			59.9
Other non-current liabilities		$	190.2		$	189.9		$	170.6		$	181.0

~~(a)~~

Increase primarily driven by deferred income associated with an insurance settlement agreement and establishment of a QSF related to our environmental liability. The deferred income will be reduced as costs for remediation sites covered under the settlement agreement are incurred. See Note 17, Commitments and Contingencies, to the Consolidated Condensed Financial Statements for further information.

NOTE 13

DEBT


	September 30, 2016			December 31, 2015			June 30, 2017			December 31, 2016
Commercial paper		$	151.0		$	94.5		$	123.0		$	113.5
Short-term loans		100.0			150.0			79.9			100.0
Current maturities of long-term debt and capital leases		0.9			1.2			1.2			0.8
Short-term loans and current maturities of long-term debt		251.9			245.7			204.1			214.3
Long-term debt and capital leases		2.3			2.8			5.6			2.0
Total debt and capital leases		$	254.2		$	248.5		$	209.7		$	216.3

Commercial Paper

Commercial paper outstanding ~~was $151.0 and $94.5,~~ had an associated weighted average interest rate of ~~0.97%~~1.57% and ~~1.04%~~1.14% and maturity terms less than one month from the date of issuance as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015,~~2016, respectively.

Short-term Loans

As of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015, we had $100.0 and $150.0 in~~2016, outstanding borrowings under our $500 ~~revolving credit facility, respectively, with~~Revolving Credit Agreement, had an associated weighted average interest rate of ~~1.63%~~1.1% and ~~1.55%~~1.87%, respectively. ~~Please refer~~Refer to the Liquidity section within "Item 2. Management's Discussion and Analysis," for additional information on the revolving credit facility as well as our overall funding and liquidity strategy.

NOTE 14

POSTRETIREMENT BENEFIT PLANS

The following tables provide the components of net periodic benefit cost for pension plans and other employee-related benefit plans for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~.2016.


	2016												2015												2017												2016
For the Three Months Ended September 30	Pension				Other Benefits				Total				Pension				Other Benefits				Total
For the Three Months Ended June 30																									Pension				Other Benefits				Total				Pension				Other Benefits				Total
Service cost		$	1.5			$	0.2			$	1.7			$	1.4			$	0.3			$	1.7			$	1.4			$	0.2			$	1.6			$	1.3			$	0.2			$	1.5
Interest cost		3.3				1.2				4.5				3.6				1.4				5.0				3.0				1.2				4.2				3.5				1.2				4.7
Expected return on plan assets		(5.0		)		(0.1		)		(5.1		)		(5.1		)		(0.2		)		(5.3		)		(4.5		)		(0.1		)		(4.6		)		(5.1		)		(0.1		)		(5.2		)
Amortization of prior service cost (benefit)		0.2				(1.6		)		(1.4		)		0.2				(2.8		)		(2.6		)		0.3				(1.5		)		(1.2		)		0.3				(1.7		)		(1.4		)
Amortization of net actuarial loss		2.0				1.2				3.2				2.2				1.3				3.5				1.8				1.0				2.8				1.8				1.2				3.0
Total net periodic benefit cost		$	2.0			$	0.9			$	2.9			$	2.3			$	—			$	2.3			$	2.0			$	0.8			$	2.8			$	1.8			$	0.8			$	2.6

	2016												2015												2017												2016
For the Nine Months Ended September 30	Pension				Other Benefits				Total				Pension				Other Benefits				Total
For the Six Months Ended June 30																									Pension				Other Benefits				Total				Pension				Other Benefits				Total
Service cost		$	4.0			$	0.6			$	4.6			$	4.0			$	0.7			$	4.7			$	2.8			$	0.4			$	3.2			$	2.5			$	0.4			$	2.9
Interest cost		10.2				3.6				13.8				10.7				3.8				14.5				6.0				2.3				8.3				6.9				2.4				9.3
Expected return on plan assets		(15.1		)		(0.4		)		(15.5		)		(15.3		)		(0.6		)		(15.9		)		(9.1		)		(0.2		)		(9.3		)		(10.1		)		(0.3		)		(10.4		)
Amortization of prior service cost (benefit)		0.7				(4.9		)		(4.2		)		0.7				(8.3		)		(7.6		)		0.5				(2.9		)		(2.4		)		0.5				(3.3		)		(2.8		)
Amortization of net actuarial loss		5.7				3.6				9.3				6.5				3.5				10.0				3.5				2.1				5.6				3.7				2.4				6.1
Total net periodic benefit cost (benefit)		$	5.5			$	2.5			$	8.0			$	6.6			$	(0.9	)		$	5.7
Total net periodic benefit cost																										$	3.7			$	1.7			$	5.4			$	3.5			$	1.6			$	5.1

We made contributions to our global postretirement plans of ~~$11.9~~$6.4 and ~~$8.2~~$7.4 during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, respectively. We expect to make contributions of approximately $2$5 to $5$9 during the remainder of ~~2016,~~2017, principally related to our other postretirement employee benefit plans.

Amortization from accumulated other comprehensive income into earnings related to prior service cost and net actuarial loss was $1.2 and ~~$3.5 and $0.8 and $1.9,~~$2.3, net of tax, for the three and ~~nine~~six months ended, ~~September~~respectively, for both the June 30, 2017 and 2016 ~~and September 30, 2015, respectively.~~periods. No other reclassifications from accumulated other comprehensive income into earnings were recognized during any of the presented periods.

NOTE 15

LONG-TERM INCENTIVE EMPLOYEE COMPENSATION

Our long-term incentive plan (LTIP) costs are primarily recorded within general and administrative expenses. The following table provides the components of LTIP costs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016.


	Three Months					Nine Months				Three Months				Six Months
For the Periods Ended September 30	2016		2015			2016		2015
For the Periods Ended June 30										2017		2016		2017		2016
Equity based awards	$	3.2	$	4.2		$	9.1	$	11.1	$	3.6	$	3.0	$	7.3	$	5.9
Liability-based awards	0.4		(0.1		)	1.2		0.8		0.4		0.3		0.9		0.8
Total share-based compensation expense	$	3.6	$	4.1		$	10.3	$	11.9	$	4.0	$	3.3	$	8.2	$	6.7

~~As of~~At ~~September~~June 30, ~~2016~~2017, there was ~~estimated~~$25.8 of total unrecognized compensation cost ~~of $23.3~~ related to ~~unvested equity-based awards that~~non-vested equity awards. This cost is expected to be recognized ratably over a weighted-average period of ~~2.0 years, and $2.6~~2.2 years. Additionally, unrecognized compensation cost related to ~~unvested~~ liability-based awards ~~that are~~was $3.2, which is expected to be recognized ratably over a weighted-average period of ~~2.0~~2.1 years.

Year-to-Date ~~2016~~2017 LTIP Activity

The majority of our LTIP ~~activity occurs~~awards are granted during the first quarter of each ~~year.~~year and vest on the completion of a three-year service period. During the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, we granted the following LTIP awards as provided in the table below:

# of Awards Granted Weighted Average Grant Date Fair Value Per Share
Non-qualified stock options (NQOs) 0.4 $ 9.16
Restricted stock units (RSUs) 0.3 $ 33.28
Performance stock units (PSUs) 0.2 $ 33.27

The NQOs vest either on the completion of a three-year service period or annually in three equal installments, as determined by employee level, and have a 10-year expiration period. RSUs and PSUs vest on the completion of a three-year service period.

During the ~~nine~~six months ended ~~September~~June 30, 2017 and 2016, 0.3 and ~~2015,~~ 0.4 ~~and 0.3 NQOs~~non-qualified stock options were exercised resulting in proceeds of ~~$8.8~~$6.5 and ~~$5.5,~~$8.8, respectively. During ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, RSUs of 0.2 and 0.3 vested and were ~~issued. In addition, 0.2~~issued, respectively. There were no PSUs that vested on December 31, ~~2015~~2016 because the minimum performance requirements were not met. PSUs of 0.2 were issued during the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~

~~The fair value of each NQO grant was estimated~~2016 that vested on the date of grant using a binomial lattice pricing model that incorporates multiple and variable assumptions over time, including assumptions such as employee exercise patterns, stock price volatility and changes in dividends. The following table details the weighted average assumptions used to measure fair value and the resulting grant date fair value for the first quarter 2016 NQO grants.



~~Dividend yield~~	~~1.5%~~
~~Expected volatility~~	~~32.2%~~
~~Expected life~~	~~6.0 years~~
~~Risk-free rates~~	~~1.5%~~
~~Weighted average grant date fair value per share~~	~~$9.16~~

December 31, 2015.

NOTE 16

CAPITAL STOCK

On October 27, 2006, a three-year $1 billion share repurchase program was approved by the Board of Directors (Share Repurchase Program). On December 16, 2008, the provisions of the Share Repurchase Program were modified by the Board of Directors to replace the original three-year term with an indefinite term. During ~~the nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, we repurchased ~~1.9~~ and ~~2.0~~retired 0.8 and 0.6 shares of common stock for ~~$66.6~~$30.0 and ~~$80.0,~~$20.0, respectively, under this ~~program.~~program. To date, the Company has repurchased ~~20.3~~21.2 shares for ~~$825.9~~$859.4 under the Share Repurchase Program.

Separate from the Share Repurchase Program, the Company repurchased ~~0.2~~0.1 shares and ~~0.1~~0.2 shares for an aggregate price of ~~$7.8~~$2.8 and ~~$3.9,~~$7.5, during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016, respectively, in settlement of employee tax withholding obligations due upon the vesting of RSUs and PSUs.

~~On May 16, 2016, we canceled all 15.0 shares in our treasury account. Shares repurchased after May 16, 2016 were canceled following the repurchase.~~

NOTE 17

COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in legal proceedings that are incidental to the operation of our businesses. Some of these proceedings allege damages relating to environmental exposures, intellectual property matters, copyright infringement, personal injury claims, employment and employee benefit matters, government contract issues and commercial or contractual disputes and acquisitions or divestitures. We will continue to defend vigorously against all claims. Although the ultimate outcome of any legal matter cannot be predicted with certainty, based on present information including our assessment of the merits of the particular claim, as well as our current reserves and insurance coverage, we do not expect that such legal proceedings will have a material adverse impact on our financial statements, unless otherwise noted below.

Asbestos Matters

Subsidiaries of ITT, including ITT LLC ~~(f/k/a ITT Corporation)~~ and Goulds Pumps LLC, ~~(f/k/a Goulds Pumps, Inc.),~~ have been sued, along with many other ~~legacy~~ companies in product liability lawsuits alleging personal injury due to asbestos exposure. These claims generally allege that certain products sold by our subsidiaries prior to 1985 contained a part manufactured by a third party (e.g., a gasket) which contained asbestos. To the extent these third-party parts may have contained asbestos, it was encapsulated in the gasket (or other) material and was non-friable. As of ~~September~~June 30, ~~2016~~2017, there were approximately 3027 thousand pending claims against ITT subsidiaries, including Goulds Pumps LLC, filed in various state and federal courts alleging injury as a result of exposure to asbestos. Activity related to these asserted asbestos claims during the period was as follows:



For the ~~Nine~~Six Months Ended ~~September~~June 30 (in thousands)	~~2016~~2017
Pending claims – Beginning	3730
New claims	32
Settlements	(1	)
Dismissals	(94	)
Pending claims – Ending	3027

Frequently, plaintiffs are unable to identify any ITT LLC or Goulds Pumps LLC products as a source of asbestos exposure. Our experience to date is that a majority of resolved claims are dismissed without any payment from ITT subsidiaries. Management believes that a large majority of the pending claims have little or no value. In addition, because claims are sometimes dismissed in large groups, the average cost per resolved claim can fluctuate significantly from period to period. ITT expects more asbestos-related suits will be filed in the future, and ITT will continue to aggressively defend or seek a reasonable resolution, as appropriate.

Asbestos litigation is a unique form of litigation. Frequently, the plaintiff sues a large number of defendants and does not state a specific claim amount. After filing complaint, the plaintiff engages defendants in settlement negotiations to establish a settlement value based on certain criteria, including the number of defendants in the case. Rarely do the plaintiffs seek to collect all damages from one defendant. Rather, they seek to spread the liability, and thus the payments, among many defendants. As a result of this and other factors, the Company is unable to estimate the maximum potential exposure to pending claims and claims estimated to be filed over the next 10 years.

Estimating our exposure to pending asbestos claims and those that may be filed in the future is subject to significant uncertainty and risk as there are multiple variables that can affect the timing, severity, quality, quantity and resolution of claims. Any predictions with respect to the variables impacting the estimate of the asbestos liability and related asset are subject to even greater uncertainty as the projection period lengthens. In light of the ~~uncertainties~~variables and ~~variables~~uncertainties inherent in the long-term projection of the Company's asbestos exposures, although it is probable that the Company will incur additional costs for asbestos claims filed beyond the next 10 years, which additional costs may be material, we do not believe there is a reasonable basis for estimating those costs at this time.

The asbestos liability and related receivables reflect management's best estimate of future events. However, future events affecting the key factors and other variables for either the asbestos liability or the related receivables could cause actual costs or recoveries to be materially higher or lower than currently estimated. Due to these uncertainties, as well as our inability to reasonably estimate any additional asbestos liability for claims which may be filed beyond the next 10 years, it is difficult to predict the ultimate cost of resolving all pending and unasserted asbestos claims. We believe it is possible that future events affecting the key factors and other variables within

the next 10 years, as well as the cost of asbestos claims filed beyond the next 10 years, net of expected recoveries, could have a material adverse effect on our financial statements.

~~Income Statement Costs/Benefit~~Asbestos-Related Costs, Net

InAs part of our ongoing review of our net asbestos exposure, each quarter we assess the ~~third quarter of each year, we conduct our~~most recent qualitative and quantitative data available for the key inputs and assumptions, comparing the data to expectations on which the most recent annual ~~remeasurement with the assistance of outside consultants in order to review and update the underlying assumptions used in our asbestos~~ liability and ~~related~~ asset estimates. In each remeasurement, the underlying assumptions are updated based on our actual experience since our previous annual remeasurement, and we reassess the appropriate reference period used in determining each assumption and our expectations regarding future conditions, including inflation.

estimates were calculated. Based on this evaluation, the ~~results of this study,~~Company determined that no change in the ~~third~~estimate was warranted for the quarter ended June 30, 2017 other than the incremental accrual to maintain a rolling 10-year forecast period. A net asbestos charge of 2016, we decreased our estimated undiscounted asbestos liability, including legal fees, by $75.9, reflecting a decrease in costs the company estimates will be incurred to resolve all pending claims, as well as unasserted claims estimated to be filed over the next 10 years. The decrease in our estimated liability is a result of several developments, including favorable experience in dismissal rates$14.9 and ~~settlement values. These favorable factors were offset, in part, by an increase in number of cases expected to be adjudicated. Further,~~$29.8 was recognized in the ~~third~~three and six months ended June 30, 2017 and $15.2 and $30.6 in the three and six months June 2016, respectively, to maintain the 10-year forecast period.

During the second quarter of 2016, the ~~Company increased its~~company was able to transition all remaining claims to our single defense firm in connection with the change in defense strategy initiated in 2015. As a result, we reduced our estimated ~~asbestos-related assets~~liability by ~~$5.9, primarily due to an increase in expected recoveries due to a favorable court decision.~~$4.9 during the second quarter of 2016.

During ~~each of~~ the first ~~and second quarters~~quarter of 2016, we entered into a settlement agreement with an insurer to settle responsibility for multiple insurance claims, resulting in a benefit of $2.6. During the second quarter of 2016, ITT entered into a settlement agreement (Settlement) with an insurer to settle responsibility for multiple insurance claims. Under the terms of the ~~settlements,~~Settlement, the ~~insurers~~insurer agreed to a ~~payment or~~ specified series of payments over the course of the next five years to a ~~QSF,~~Qualified Settlement Fund, resulting in a ~~benefit of $2.6 and a~~ loss of ~~$4.7, respectively.~~

During the second quarter of 2015, the Company changed its asbestos defense strategy and retained a single firm to defend the Company in all asbestos litigation. This long-term strategy streamlined the Company’s management of cases and significantly reduced defense costs. Our agreement with the defense firm was initially limited to a certain set of claims and the remaining claims were expected to transition within the next four years; however, ITT was able to transition the remaining claims during the second quarter of 2016 as a result of the settlement described above. Based on the terms of the agreement, the Company adjusted its asbestos liability and related assets and recognized a net benefit of $4.9 and $100.7 during the nine months ended September 30, 2016 and 2015, respectively, for the revised estimate of the cost to defend pending claims and claims expected to be filed over the next 10 years.

In addition to the charges associated with our annual remeasurement, we record a net asbestos charge each quarter to maintain a rolling 10-year forecast period. The table below summarizes the total net asbestos charges for the three and nine months ended September 30, 2016 and 2015.

Three Months Nine Months
For the Periods Ended September 30 2016 2015 2016 2015
Asbestos provision $ 13.7
$ 15.7
$ 44.3
$ 47.0
Net asbestos remeasurement benefit (81.8 ) (44.8 ) (81.8 ) (44.8 )
Defense cost adjustment —
—
(4.9 ) (100.7 )
Settlement agreements —
(1.2 ) 2.1
(1.2 )
Asbestos-related benefit, net $ (68.1 ) $ (30.3 ) $ (40.3 ) $ (99.7 )

$4.7.

Changes in Financial Position

The Company's estimated asbestos exposure, net of expected recoveries for the resolution of all pending claims and claims estimated to be filed in the next 10 years was $572.8 and $573.7 as of June 30, 2017 and December 31, 2016.The following table provides a rollforward of the estimated asbestos liability and related assets for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.


	2016									2015									2017									2016
For the Nine Months Ended September 30	Liability			Asset			Net			Liability			Asset			Net
For the Six Months Ended June 30																			Liability			Asset			Net			Liability			Asset			Net
Beginning balance	$	1,042.8		$	412.0		$	630.8		$	1,223.2		$	476.4		$	746.8		$	954.3		$	380.6		$	573.7		$	1,042.8		$	412.0		$	630.8
Asbestos provision	51.6			7.3			44.3			54.8			7.8			47.0			34.8			5.0			29.8			35.4			4.8			30.6
Asbestos remeasurement	(75.9		)	5.9			(81.8		)	(52.7		)	(7.9		)	(44.8		)
Defense costs adjustment	(4.9		)	—			(4.9		)	(124.2		)	(23.5		)	(100.7		)	—			—			—			(4.9		)	—			(4.9		)
Settlement agreements	—			(2.1		)	2.1			—			1.2			(1.2		)
Insurance settlement agreements																			—			—			—			—			(2.1		)	2.1
Net cash activity	(61.8		)	(37.3		)	(24.5		)	(52.3		)	(37.1		)	(15.2		)	(46.5		)	(15.8		)	(30.7		)	(35.3		)	(23.8		)	(11.5		)
Ending balance	$	951.8		$	385.8		$	566.0		$	1,048.8		$	416.9		$	631.9		$	942.6		$	369.8		$	572.8		$	1,038.0		$	390.9		$	647.1
Current portion	$	76.1		$	66.0					$	87.6		$	74.5					$	76.6		$	66.0					$	87.4		$	74.5
Noncurrent portion	$	875.7		$	319.8					$	961.2		$	342.4					$	866.0		$	303.8					$	950.6		$	316.4

Environmental Matters

In the ordinary course of business, we are subject to federal, state, local, and foreign environmental laws and regulations. We are responsible, or are alleged to be responsible, for ongoing environmental investigation and site remediation. These sites are in various stages of investigation or remediation and in many of these proceedings our liability is considered de minimis. We have received notification from the U.S. Environmental Protection Agency, and from similar state and foreign environmental agencies, that a number of sites formerly or currently owned or operated by ITT, and other properties or water supplies that may be or have been impacted from those operations, contain disposed or recycled materials or wastes and require environmental investigation or remediation. These sites include instances where we have been identified as a potentially responsible party under federal and state environmental laws and regulations.

The following table provides a rollforward of the estimated environmental liability for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.


For the Nine Months Ended September 30	2016			2015
For the Six Months Ended June 30							2017			2016
Environmental liability - beginning balance	$	82.6		$	89.9		$	76.6		$	82.6
Change in estimates for pre-existing accruals
Continuing operations	2.4			1.4			1.7			1.6
Discontinued operations	0.7			(2.8		)	—			0.3
Net cash activity	(10.2		)	(9.1		)	(5.3		)	(7.7		)
Foreign currency	—			(0.4		)	0.1			—
Environmental liability - ending balance	$	75.5		$	79.0		$	73.1		$	76.8

InDuring the ~~fourth~~first quarter of ~~2015,~~2017, ITT entered into a settlement agreement with ~~one of our insurance providers whereby~~a former subsidiary to settle all claims covered by the ~~provider agreed to pay the net present value of the remaining limits of the policy amounting to approximately $34.2. In~~environmental Qualified Settlement Fund (QSF) established in the first quarter of 2016, the Company received $2.0 in cash and $32.2 was deposited into a QSF which can be drawn upon to pay certain future environmental expenses associated with remediation sites covered under the policy, including sites owned by a2016. The former subsidiary ofno longer has rights to the ~~Company.~~funds in the QSF. The ~~Company recorded $23.0 of~~settlement resulted in a reduction to both our environmental-related asset and the corresponding deferred income ~~related to~~liability balance of $5.2. During the ~~settlement representing the excess~~second quarter of ~~QSF monies over the probable liabilities associated with the covered remediation sites. In addition to~~2017, the QSF ~~asset, there is a receivable~~was amended resulting in income of ~~$2.0 from other third parties for reimbursement of environmental costs.~~$3.8. The total environmental-related asset as of ~~September~~June 30, ~~2016~~2017 and December 31, ~~2015~~2016 was ~~$34.1~~$24.3 and ~~$12.8,~~$33.4, respectively.

We are currently involved with 4035 active environmental investigation and remediation sites. At ~~September~~June 30, ~~2016,~~2017, we have estimated the potential high-end liability range of environmental-related matters to be ~~$127.7.~~$122.8.

As actual costs incurred at identified sites in future periods may vary from our current estimates given the inherent uncertainties in evaluating environmental exposures, management believes it is possible that the outcome of these uncertainties may have a material adverse effect on our financial statements.

Other Matters

The Company ~~is responding to~~received a civil subpoena from the Department of Defense, Office of the Inspector General, ~~which was issued~~ in the second quarter of 2015 as part of an investigation being led by the Civil Division of the U.S. Department of ~~Justice.~~Justice (DOJ). The subpoena and related investigation involve certain connector products manufactured by the Company’s ~~Interconnect Solutions~~Connect & Control Technologies segment that are purchased or used by the U.S. government. The Company is cooperating with the government and has produced documents responsive to DOJ’s request under the subpoena. Based on its current analysis following discussions with DOJ to resolve this matter, the Company has accrued $5 as its current best estimate of the minimum amount of probable loss. It is reasonably possible that any actual loss may be higher than this amount, but at this time management is unable to estimate a range of potential loss in excess of the ~~timing or outcome of this matter.~~amount accrued.

NOTE 18

ACQUISITIONS

~~Wolverine Automotive Holdings~~

Axtone Railway Components

On ~~October 5, 2015,~~January 26, 2017, we ~~completed~~acquired 100% of the privately held stock of Axtone Railway Components (Axtone) for a purchase price of $113.7, net of cash acquired. The purchase price is subject to change during the measurement period (up to one year from the acquisition date). Axtone, which had 2016 revenue of ~~Wolverine Automotive Holdings Inc., the parent company of Wolverine Advanced Materials LLC (Wolverine). Wolverine~~approximately $72, is a manufacturer of highly engineered and customized ~~technologies~~energy absorption solutions, including springs, buffers, and coupler components for ~~automotive braking systems~~the railway and ~~specialized sealing solutions for harsh operating environments across a range of industries.~~ industrial markets.

The purchase price ~~of $307.0,~~for Axtone was allocated to net ~~of cash~~tangible assets acquired ~~was funded through a combination of cash~~ and ~~borrowings from our revolving credit facility. Wolverine had approximately 680 employees globally~~liabilities assumed based on their preliminary fair values as of ~~September 30, 2016. Wolverine reported 2014 revenues of $154, including $17 of sales to ITT.~~

~~The allocation~~January 26, 2017, with the excess of the purchase price ~~is based on~~of $88.4 recorded as goodwill. The primary areas of purchase price allocation that are not yet finalized relate to the valuation of intangible assets acquired, certain tangible assets and liabilities, income tax, and residual goodwill. We expect to obtain the information necessary to finalize the fair value of the net assets ~~acquired,~~and liabilities assumed and non-controlling interests in Wolverine as of October 5, 2015 and a preliminary estimate of fair value for deferred income taxes. Our assessment of fair value of deferred income taxes will be finalized during the ~~fourth quarter of 2016 and changes~~measurement period. Changes to the preliminary estimates of the fair value during the measurement period will be recorded as adjustments to those ~~deferred income tax~~ assets and liabilities with a corresponding adjustment to ~~goodwill.~~

goodwill in the period they occur. The goodwill ~~of $161.9,~~arising from this acquisition, which is not expected to be deductible for income tax purposes, has been assigned to the Motion Technologies ~~segment, is not deductible for income tax purposes. Other intangibles acquired include existing customer relationships, proprietary technology, and trade names.~~segment.

Preliminary Allocation of Purchase Price for ~~Wolverine~~Axtone



Cash	$	8.5		$	9.4
Receivables	31.6			11.5
Inventory	35.0			11.7
Plant, property and equipment	28.5			14.1
Goodwill	161.9			88.4
Other intangible assets	86.0
Other assets	12.3			5.9
Accounts payable and accrued liabilities	(21.2		)	(12.0		)
Postretirement liabilities	(14.6		)	(3.8		)
Other liabilities	(12.5		)	(2.1		)
Net assets acquired	$	315.5		$	123.1

Pro forma results of operations have not been presented because the acquisition was not deemed material at the acquisition date.

~~NOTE 19~~

~~SUBSEQUENT EVENTS~~

~~Agreement to Acquire Axtone Railway Group~~

On November 3, 2016, we entered into an agreement to acquire Axtone Railway Group (Axtone) for cash consideration of $118. The final purchase price is subject to a customary net working capital adjustment. Axtone, with estimated 2016 revenue of $80 and approximately 660 employees, is a manufacturer of highly engineered and customized energy absorption solutions for railway and other harsh-environment industrial markets, including springs, buffers and coupler components that are critical safety technologies. The acquisition is expected to close in the first quarter of 2017, subject to customary closing conditions and appropriate regulatory approvals. Axtone will be reported within the Motion Technologies segment.

~~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 to $20 in the fourth quarter of 2016.

~~The impact of the settlement will not materially impact the plans' funded status, future pension expense, or require additional contributions to the plans.~~

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(In millions, except per share amounts, unless otherwise stated)

OVERVIEW

ITT Inc. is a diversified manufacturer of highly engineered critical components and customized technology solutions for the ~~energy,~~ transportation, industrial, and ~~industrial~~oil and gas markets. Building on our heritage of engineering, we partner with our customers to deliver enduring solutions to the key industries that underpin our modern way of life. We manufacture components that are integral to the operation of systems and manufacturing processes in our key markets. Our products provide enabling functionality for applications where reliability and performance are critically important to our customers and the users of their products.

Our businesses share a common, repeatable operating model. Each business applies technology and engineering expertise to solve our customers' most pressing challenges. Our applied engineering aptitude enables a tight business fit with our customers given the critical nature of their applications. This in turn provides us with unique insight to our customer’s requirements and enables us to develop solutions to assist our customers in achieving their business goals. Our technology and customer intimacy work in tandem to produce opportunities to capture recurring revenue streams, aftermarket opportunities, and long-lived original equipment manufacturer (OEM) platforms.

Our product and service offerings are organized into ~~four~~three segments: Industrial Process, Motion Technologies, ~~Interconnect Solutions~~ and Connect & Control Technologies. See Note 3, Segment Information, in this Report for a summary description of each segment. Additional information is also available in our ~~2015~~2016 Annual Report within Part I, Item 1, "Description of Business".

DISCUSSION OF FINANCIAL RESULTS

Three and ~~Nine~~Six Months Ended ~~September~~June 30


	Three Months								Nine Months								Three Months								Six Months
For the Periods Ended September 30	2016			2015			Change		2016			2015			Change
For the Periods Ended June 30																	2017			2016			Change		2017			2016			Change
Revenue	$	581.7		$	601.9		(3.4	%)	$	1,817.0		$	1,818.8		(0.1	%)	$	630.9		$	626.2		0.8	%	$	1,256.7		$	1,235.3		1.7	%
Gross profit	183.9			194.9			(5.6	%)	584.8			607.8			(3.8	%)	204.4			205.6			(0.6	%)	406.7			400.9			1.4	%
Gross margin	31.6		%	32.4		%	(80	)bp	32.2		%	33.4		%	(120	)bp	32.4		%	32.8		%	(40	)bp	32.4		%	32.5		%	(10	)bp
Operating expenses^(a)	49.1			91.0			(46.0	%)	349.5			281.5			24.2	%	146.7			156.1			(6.0	%)	293.4			300.4			(2.3	%)
Expense to revenue ratio	8.4		%	15.1		%	(670	)bp	19.2		%	15.5		%	370	bp	23.3		%	24.9		%	(160	)bp	23.3		%	24.3		%	(100	)bp
Operating income	134.8			103.9			29.7	%	235.3			326.3			(27.9	%)	57.7			49.5			16.6	%	113.3			100.5			12.7	%
Operating margin	23.2		%	17.3		%	590	bp	12.9		%	17.9		%	(500	)bp	9.1		%	7.9		%	120	bp	9.0		%	8.1		%	90	bp
Interest and non-operating expenses (income), net	0.3			(4.0		)	(107.5	%)	1.5			(2.5		)	(160.0	%)
Interest and non-operating (income) expenses, net																	(0.9		)	(0.5		)	80.0	%	(0.1		)	1.2			(108.3	%)
Income tax expense	46.1			11.4			304.4	%	75.3			53.0			42.1	%	10.6			17.5			(39.4	%)	19.7			29.2			(32.5	%)
Effective tax rate	34.3		%	10.6		%	2,370	bp	32.2		%	16.1		%	1,610	bp	18.1		%	35.0		%	(1,690	)bp	17.4		%	29.4		%	(1,200	)bp
Income from continuing operations attributable to ITT Inc.	88.3			96.5			(8.5	%)	158.3			275.8			(42.6	%)	47.9			32.3			48.3	%	94.0			70.0			34.3	%
Income from discontinued operations, net of tax	1.8			34.2			(94.7	%)	2.0			39.3			(94.9	%)
(Loss) income from discontinued operations, net of tax																	(0.1		)	0.5			(120.0	%)	(0.2		)	0.2			(200.0	%)
Net income attributable to ITT Inc.	90.1			130.7			(31.1	%)	160.3			315.1			(49.1	%)	47.8			32.8			45.7	%	93.8			70.2			33.6	%


~~(a)~~	Operating expenses for the three and nine months ended September 30, 2016 and 2015 includes activity related to asbestos matters. Refer to Note 17, Commitments and Contingencies, for additional information.

All comparisons included within Management's Discussion and Analysis of Financial Condition and Results of Operations refer to the comparable three and ~~nine~~six months ended ~~September~~June 30, ~~2015,~~2016, unless stated otherwise.

Executive Summary

During the ~~third~~second quarter of ~~2016,~~2017, we ~~had a strong emphasis on reducing costs and strategically managing through~~drove activities across the ~~current challenging environment and its impact on our key flow end markets, with our continued focus on~~enterprise to optimize execution while advancing essential long-term growth ~~and value creation in areas such as market expansion, capital deployment, risk mitigation, and operational improvements. We continued~~strategies. During the quarter we successfully leveraged the benefits of our on-going structural reset ofat our Industrial Process segment ~~to optimize~~ and ~~align~~drove solid operational improvements at our Connect and Control Technologies facilities. We also made productivity gains in our Motion Technologies business despite rising commodity costs. These benefits helped offset weak industrial pump activity and ~~their respective cost structure to support these challenging market conditions, particularly within~~reduced global oil and gas project activity. In addition, we continued to penetrate new and ~~mining. Our third quarter results reflect benefits from our on-going Lean transformation~~existing key incremental automotive brake pad platforms in China and ~~cost actions, as well as from our balanced and diverse portfolio as the impact of difficult markets were mitigated by our continued market share growth and geographic expansion~~North America, captured new shock absorber business in the ~~transportation end-markets.~~ China high-speed rail market, and advanced our global electric vehicle market capture strategies in both braking components and connectors.

In relation to capital deployment, we ~~executed nearly $50~~recently produced our first prototype automotive brake pads in our new North American facility, the integration of our first quarter 2017 acquisition of Axtone Railway Group (Axtone) is on track and we continue to invest to support recent share gains in key growth markets such as rotorcraft. In addition, we continued our track record of strategically deploying our capital by executing $30 of share repurchases ~~during the third~~to create value for shareowners.

Our second quarter and announced a plan to de-risk certain long-term obligations by executing a voluntary pension settlement program in the fourth quarter. We have also reached an agreement to acquire Axtone Railway Group (Axtone), a manufacturer of highly engineered and customized energy absorption solutions for railway and other harsh environment industrial markets. See Note 19, Subsequent Events, in the Notes to Consolidated Condensed Financial Statements for additional information regarding the pending acquisition of Axtone.2017 results include:

Revenue of ~~$581.7 for the third quarter~~$630.9, reflecting year-over-year growth of ~~2016 decreased $20.2~~$4.7 or ~~3.4% compared to the prior year, reflecting~~0.8% driven by higher sales volume declines and pricing challenges at our Industrial Process segment due to the challenging conditions experienced within the oil and gas and mining markets, coupled with on-going revenue softness in the short-cycle North American chemical and industrial pump markets. However, our 2016 third quarter revenue results also reflect 21% growthvolumes in the transportation ~~markets, driven by~~end-markets from share gains in our automotive brake pad business and incremental ~~benefits from~~revenue of $22.0 related to our ~~2015 Wolverine~~ acquisition ~~at our Motion Technologies segment.~~of Axtone. Our revenue results for the quarter also reflect lower industrial and global oil and gas pump project activity. Organic revenue, which excludes the impacts from foreign exchange, acquisitions, and divestitures, ~~declined 9.5%~~decreased 1.9% compared to the prior year.

Orders of $626.3, reflecting year-over-year growth of $20.4 or 3.4% driven by continued share gains in the automotive brake pad market, particularly in Europe and China, stronger order activity for short-cycle pumps and strength in connectors across end-markets. We also received ~~during the third quarter of 2016 were $573.4 reflecting an increase of $43.0, or 8.1%, including~~ incremental ~~benefits of $40.6~~orders from our ~~2015 acquisition~~newly acquired Axtone business of Wolverine. Organic orders increased 0.5%, as strong growth in transportation markets, primarily from past automotive platform wins that have entered the production cycle, and significant petrochemical pump project orders. The organic order$20.2. Order growth was partially offset by ~~lower order activity from industrial and~~a decline in upstream oil and gas ~~markets reflecting weak market conditions resulting~~pump projects. Organic orders, which excludes the impacts from ~~capital project uncertainty, extended deferrals in~~foreign exchange, acquisitions, and divestitures, increased 1.1% compared to the ~~aftermarket and replacement cycle, and difficult~~ prior ~~year comparisons.~~year.

Operating income of ~~$134.8 for the third quarter~~$57.7, reflecting year-over-year growth of ~~2016 reflects~~$8.2 or 16.6% and a ~~$30.9 increase from the prior year primarily due~~120 basis point improvement to ~~our annual asbestos remeasurement which resulted in a benefit of $81.8 compared to a $44.8 benefit recognized in the third quarter of 2015. Our~~ operating ~~results for the quarter also reflect productivity improvements across all of our business segments, savings~~margin, was driven by incremental benefits from past restructuring actions ~~incremental contributions from our 2015 Wolverine acquisition,~~ and ~~lower corporate costs. However, lower Industrial Process segment sales volume and adverse pricing headwinds,~~productivity savings as well as lower ~~profitability on complex pump projects and~~year-over-year restructuring costs. Operating income growth was partially offset by unfavorable impacts associated with certain military-specification connector products, a legal accrual, unfavorable foreign currency fluctuations, and costs related to the build-out of our new North American auto facility. Adjusted segment operating income which excludes the impacts ~~partially offset the growth in~~of restructuring and realignment costs, certain asset impairment charges, acquisition-related expenses, and other unusual or infrequent operating ~~income.~~items decreased $3.9, or 4.2%.

Income from continuing operations ~~attributable to ITT during~~was $0.54 per diluted share, reflecting an increase of $0.18 over the third quarter of 2016 was $88.3, representing a decrease of $8.2 or 8.5%. The decrease was driven by lower segment operating income, higher income tax expense, and unfavorable foreign currency impacts, which were partially offset by a higher benefit from our annual asbestos remeasurement that was recognized in the third quarter of 2016.prior year. Adjusted income from continuing operations ~~a non-GAAP measure,~~ was ~~$52.0, or $0.58~~$0.65 per diluted share, ~~for~~reflecting a $0.02, or 3.0%, decrease compared to the ~~third quarter of 2016, representing a decrease of $4.9 or 8.6%.~~prior year.

As we ~~near~~move through 2017, we plan to maintain our operational and strategic momentum as we continue to leverage the end of 2016, we believe that the persistent volatility in the global macroeconomic environment, particularly in the oil and gas end-market, may continue and that these conditions may have an impact to our businesses and financial results. Demand for our products that serve the oil and gas market, primarily pumps and connectors that represented approximately 20% of 2015 revenue, depend substantially on the level of expenditures by the oil and gas industry for development and production. These expenditures are generally dependent on the industry’s view of future demand for oil and natural gas. Oil and gas prices have been volatile and have remained at low levels for a sustained period of time, resulting in lower expenditures by the oil and gas industry. As a result, manybenefits of our ~~customers have reduced or delayed spending, thus reducing~~global and end-market diversification. We will continue to focus on optimizing execution, and monitor and reduce our cost structure by taking approximately $20 in restructuring and realignment actions during the ~~demand for~~remainder of 2017. We also expect to realize significant benefits from our ~~products~~prior restructuring and ~~exerting downward pressure on the prices for our products. In addition, some of our customers~~productivity actions. We are ~~in regions with significant geopolitical instability, such as Venezuela. These conditions or worsening of economic conditions related~~also continuing to ~~our business could result in the cancellation of contracts or impact the collectability of certain accounts~~closely monitor on-going market volatility, including pricing pressures, rising commodity costs, and ~~may have~~

~~an adverse impact~~additional impacts on our ~~results of operations and financial condition including but not limited to further restructuring and impairment charges.~~connectors business.

Further details related to these results are contained elsewhere in the Discussion of Financial Results section. Refer to the section titled "Key Performance Indicators and Non-GAAP Measures" for reconciliations between GAAP and non-GAAP metrics.

REVENUE


For the Three Months Ended September 30	2016			2015			Change		Organic Revenue Growth^(a)
For the Three Months Ended June 30											2017			2016			Change		Organic Revenue Growth^(a)
Industrial Process	$	195.0		$	270.6		(27.9	)%	(26.1	)%	$	192.3		$	214.2		(10.2	)%	(10.1	)%
Motion Technologies	238.7			179.9			32.7	%	10.1	%	290.1			259.6			11.7	%	5.1	%
Interconnect Solutions	78.6			82.8			(5.1	)%	(6.3	)%
Control Technologies	70.5			69.8			1.0	%	0.6	%
Connect & Control Technologies											149.6			153.5			(2.5	)%	(2.1	)%
Eliminations	(1.1		)	(1.2		)	(8.3	)%	—		(1.1		)	(1.1		)	—	%	—
Revenue	$	581.7		$	601.9		(3.4	)%	(9.5	)%	$	630.9		$	626.2		0.8	%	(1.9	)%

For the Nine Months Ended September 30	2016			2015			Change		Organic Revenue Growth^(a)
For the Six Months Ended June 30											2017			2016			Change		Organic Revenue Growth^(a)
Industrial Process	$	618.0		$	813.7		(24.1	)%	(21.1	)%	$	378.4		$	423.0		(10.5	)%	(10.5	)%
Motion Technologies	755.3			555.5			36.0	%	13.2	%	577.4			516.6			11.8	%	7.3	%
Interconnect Solutions	229.8			243.0			(5.4	)%	(6.0	)%
Control Technologies	217.2			210.1			3.4	%	0.6	%
Connect & Control Technologies											302.9			297.8			1.7	%	2.2	%
Eliminations	(3.3		)	(3.5		)	(5.7	)%	—		(2.0		)	(2.1		)	(4.8	)%	—
Revenue	$	1,817.0		$	1,818.8		(0.1	)%	(6.1	)%	$	1,256.7		$	1,235.3		1.7	%	—	%


(a)	See the section titled "Key Performance Indicators and Non-GAAP Measures" for a definition and reconciliation of organic revenue.

Industrial Process

Revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$75.6,~~$21.9 or ~~27.9%~~10.2%, and ~~$195.7,~~$44.6 or ~~24.1%~~10.5%, ~~including an~~respectively, which includes unfavorable foreign currency ~~translation impact~~impacts of ~~$5.0~~$0.2 in both periods. The decline in revenue was primarily driven by project declines of 24% and ~~$24.0, respectively. Organic revenue for~~32% during the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017, respectively, due to lower oil and gas projects in North America, Asia and Latin America as well as a weaker general industrial market. In addition, revenue from valves, primarily in the chemical market, declined ~~$70.6, or 26.1%~~16% and 9%, respectively, while baseline pump revenue declined 7% and ~~$171.7, or 21.1%~~2%, ~~respectively. The decrease~~respectively, stemming from further weakness in ~~both periods reflects challenging conditions within~~ the oil and gas ~~mining, and chemical and industrial markets that have driven~~market. Aftermarket revenue declined approximately 3% in both periods primarily due to lower ~~demand for original equipment and replacement~~service activity. The decline in aftermarket revenue was partially offset in the second quarter by a 5% increase in parts as well as the postponement of customer maintenance activities. These market conditions contributed to revenue declines for the projects, baseline pumps and aftermarket portions of our business, of approximately 51%, 17% and 13%, during the three month period ended September 30, 2016, respectively, and declines of 42%, 15% and 12% for the nine month period ended September 30, 2016, respectively.revenue.

Orders ~~for~~decreased $9.4 or 4.7% during the three months ended ~~September~~June 30, ~~2016 decreased $10.0, or 4.8%, including an~~2017, which includes unfavorable foreign currency ~~translation impact~~impacts of ~~$2.0. Organic orders for the three months ended September 30, 2016 decreased $8.0, or 3.8%,~~$0.4. The decrease is primarily driven by ~~a 10% decline~~lower project orders which declined approximately 33% due to weak order intake in the Middle East and North American oil and gas ~~pump orders, as weak activity from global upstream and midstream markets was partially offset by solid downstream project and aftermarket activity, as well as a 20% decline in~~market. Higher demand for short-cycle baseline pumps within the general industrial ~~pumps due to soft North American market conditions~~markets and ~~strong prior year project activity. The decline in organic orders was partially offset by a 32% increase in chemical pump orders that reflected increased petrochemical project~~stronger service activity in North America ~~and~~helped to partially offset the ~~Middle East.~~

~~Orders for~~decline in project orders. During the ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased $115.6,~~2017 orders increased $23.7 or ~~16.4%~~6.1%, ~~including an~~which includes unfavorable foreign currency ~~translation impact~~impacts of ~~$20.2. Organic~~$0.3. Activity for the year included a $26 downstream oil and gas order in Africa during the first quarter of 2017. Excluding this large project win, orders for the nine months ended September 30, 2016 decreased $95.4, or 13.6%, due to the challenging market conditions across all markets which has delayed capital projects, as well as customer maintenance and replacement activities that have resulted in lower pump projects, baseline pumps, and aftermarket activity of approximately 22%, 12% and 12%, respectively, assix month period were flat compared to the prior ~~year.~~

~~Backlog~~year due to weak project orders which were partially offset by higher aftermarket activity as orders from service and parts increased approximately 19% and 5%, respectively. In addition, short-cycle baseline pumps for the six month period increased 6% over the prior year due to stronger general industrial orders.

The level of order and shipment activity related to ~~engineered~~ project pumps can vary significantly from period to period, which may impact ~~the~~ year-over-year comparisons. Backlog as of ~~September~~June 30, ~~2016~~2017 was ~~$370.8,~~$373.7, reflecting ~~a decrease~~an increase of ~~$40.1,~~$26.5, or ~~9.8%~~7.6%, from the December 31, ~~2015~~2016 level. The decrease reflects lower project order intake due to global capital project delays and lower oil and gas and mining orders due to market uncertainty and volatility. The book-to-bill ratio for the three and nine months ended September 30, 2016 was 1.02 and 0.95, respectively.

Motion Technologies

Revenue for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~$58.8,~~$30.5 or ~~32.7%~~11.7%, ~~including~~which includes incremental revenue of ~~$40.1~~$22.0 from our ~~2015~~2017 acquisition of ~~Wolverine. Organic revenue increased $18.2, or 10.1%, driven by growth~~Axtone and unfavorable foreign currency translation impacts of approximately 14% within our Friction Technologies business reflecting 19% growth in global OEM from share gains and market strength, mostly driven by China and Europe, and 7% growth in aftermarket due to past platforms shifting to the dealer service cycle as well as favorable independent aftermarket results. Sales from our KONI Shock Absorber business decreased approximately 8%, due to weakness in the rail market in China and North America.

$4.7. Revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~$199.8,~~$60.8 or ~~36.0%~~11.8%, ~~including~~which includes incremental revenue of ~~$126.4~~$36.0 from our ~~2015~~2017 acquisition of ~~Wolverine. Organic~~Axtone and unfavorable foreign currency translation impacts of $13.0. During the three and six months ended June 30, 2017, organic revenue increased ~~$73.5,~~$13.2 or ~~13.2%~~5.1%, and $37.8 or 7.3%, respectively. The growth in organic revenue was primarily driven by our friction materials business due to continued strength ~~within our Friction Technologies business as revenue grew 16% compared to prior year. The organic growth~~ in ~~revenue was driven~~the automotive OEM sales channel primarily byfrom market and share gains in ~~the OEM channel~~Europe and China and strength in aftermarket brake pads from an increase in dealer service activity. Wolverine contributed organic revenue

growth of approximately ~~22%, primarily due to global~~4% and 12% during the three and six months ended June 30, 2017 driven by share gains in sealing solutions across key geographies. Overall strength in friction materials and ~~OES which delivered 11% sales growth. Independent aftermarket sales also contributed growth of 3%. Sales from~~Wolverine were partially offset by declines in our KONI business ~~were flat as revenue growth of 7% in the automotive market was offset by a decline in the rail market activity.~~due to North American railway markets.

Orders for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~$59.3,~~$27.7 or ~~33.4%~~10.6%, including ~~additional~~incremental orders of ~~$40.6~~$20.2 from our 2017 acquisition of Wolverine. Orders for the nine months ended September 30, 2016 increased $202.1, or 36.0%, including additional orders of $126.8 from our acquisition of Wolverine. Organic orders increased $17.7, or 10.0%,Axtone and $75.1, or 13.4%, during the three and nine months ended September 30, 2016, respectively, primarily due to continued growth by our Friction Technologies business from global share gains on new automotive platforms that are entering production and an expanding customer base. For the three months ended September 30, 2016, KONI orders increased approximately 5% due to solid wins in the China and North America rail market as well as growth in aftermarket products for high performance cars. For the nine months ended September 30, 2016, KONI orders increased approximately 6% due to strength in the U.S. defense market related to an existing position on a U.S. military platform.

~~Interconnect Solutions~~

~~Revenue for the three and nine months ended September 30, 2016 decreased by $4.2, or 5.1%, and $13.2, or 5.4%, including favorable~~unfavorable foreign currency translation impacts of $1.0 and $1.4, respectively. Organic revenue for the three and nine months ended September 30, 2016 declined $5.2, or 6.3%, and $14.6, or 6.0%, respectively, primarily due to the year-over-year weakness in the global oil and gas market that drove lower demand for our upstream connectors. In addition, revenue from end-of-life non-strategic connector platforms declined $1.3 and $3.7 during the three and nine months ended September 30, 2016, respectively.

$5.3. Orders for the ~~three and nine~~six months ended ~~September~~June 30, ~~2016 decreased $11.4,~~2017 increased $49.6 or ~~13.7%, and $26.3, or 10.5%~~9.4%, including ~~favorable~~incremental orders of $32.5 from our 2017 acquisition of Axtone and unfavorable foreign currency translation impacts of ~~$0.8 and $1.2, respectively. Organic orders for~~$13.5. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 decreased $12.2,~~2017 organic orders grew $12.8 or ~~14.6%~~4.9%, and ~~$27.5,~~$30.6 or ~~11.0%~~5.8%, ~~respectively, as year-over-year weakness in the upstream oil and gas market drove declines of approximately 40%~~respectively. The organic order increase in both periods reflects continued strength in OEM auto brake pads in our friction materials business as well as ~~lower defense market order activity of~~Wolverine sealing solutions. KONI orders increased approximately ~~12% and 9%, respectively. In addition,~~10% during the ~~quarter-to-date comparison against the prior year reflects lower industrial order activity of approximately 20% primarily~~second quarter due to ~~softness~~strong order intake in China related to new products in the ~~U.S. heavy vehicle and off-road market this year and a difficult comparison to a single large prior year order. The year-to-date industrial order activity~~high speed rail market. During the first six months of 2017, KONI orders declined approximately 7% ~~and~~due to record prior year defense orders which were only partially offset by the ~~decline from end-of-life non-strategic connector platforms was approximately $3 or 14%.~~second quarter rail orders in China.

Connect & Control Technologies

Revenue for the three months ended ~~September~~June 30, ~~2016 increased $0.7,~~2017 decreased $3.9, or ~~1.0%~~2.5%, and organic revenue increased $0.4, or 0.6%, which reflects growth in energy absorption products of approximately 20%, aerospace aftermarket spares of approximately 30% and an increase in defense program shipments, which was offset by a difficult prior year commercial OEM comparison and a decline in our Enivate product line.

Revenue for the nine months ended September 30, 2016 increased $7.1, or 3.4%. Organic revenue increased $1.2, or 0.6%, which excludes the first quarter 2016 incremental benefit from our 2015 acquisition of Hartzell Aerospace of $8.8, as well as revenue of $3.4 from the 2015 period generated by an industrial motors product line that was divested in May 2015 and favorableincluding unfavorable foreign currency translation impacts of ~~$0.5. During~~$0.7. Revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017 increased $5.1, or 1.7%, including unfavorable foreign currency translation impacts of $1.5. The decline in revenue during the ~~increase~~second quarter of 2017 was primarily due to impacts from restrictions on the sales of certain military-specification connectors. Increased revenue from the heavy vehicle connectors in ~~organic~~China and Europe as well as electric vehicle connector wins helped to offset this impact during the second quarter and contributed to the modest revenue ~~was driven by higher defense program~~growth during six months ended June 30, 2017. In addition, positive market trends and ~~aerospace aftermarket shipments, partially offset by difficult prior year comparisons~~new product introductions provided sales growth in the oil and gas market of approximately 44% and 36% during the three and six months ended June 30, 2017, respectively. Revenues stemming from the commercial aerospace ~~OEM. Sales of industrial components~~market declined approximately 2% ~~primarily~~during the three months ended June 30, 2017 due to ~~general softness in global industrial and energy markets.~~lower wide body demand. For the first six months of 2017, commercial aerospace revenues were flat compared to the prior year.

Orders for the three months ended ~~September~~June 30, ~~2016~~2017 increased ~~by $5.0,~~$1.9, or ~~8.1%~~1.3%, including unfavorable foreign currency translation impacts of $0.8. Orders for the six months ended June 30, 2017 decreased $6.2, or 2.0% versus the prior year, including unfavorable foreign currency translation impacts of $1.6. Orders in both periods benefited from strong order intake for connectors for heavy vehicles in Asia and ~~organic orders increased $4.8, or 7.7%, primarily due to~~Europe as well as order growth of ~~16% in aerospace~~49% and ~~defense orders due to strong bookings in commercial aerospace OEM~~44% for connectors associated with the oil and ~~aftermarket, strong defense platform activity, and Hartzell environmental control system (ECS) platform ramp-ups. Organic order growth during the quarter~~gas market. This was partially offset by ~~weakness in industrial orders that~~order activity for commercial aerospace components which declined ~~13%~~approximately 10% during the second quarter of 2017 due to ~~energy market dynamics.~~

~~Orders for the nine months ended September 30, 2016 increased $18.2, or 8.5%. Organic~~large multi-year orders ~~for the nine months ended September 30, 2016 increased $9.0, or 4.2%, which excludes the incremental benefit from our 2015 acquisition of Hartzell Aerospace of $13.4, orders from~~in the prior year that did not repeat and program timing. During the six months ended June 30, 2017, commercial aerospace components declined 11%, fully offsetting order growth in other end markets.

On July 11, 2017, the U.S. Defense Logistics Agency, Land and Maritime (DLA) issued a notice that it has removed our connectors business from the Qualified Products List (QPL) with respect to six military-specification connector products. At the time of ~~$4.6 associated with~~this notice, these products had been subject to a previously-disclosed stop shipment/stop production order issued by DLA earlier this year. Annual sales of these military-specification connectors are estimated to range from $8 to $10 million. The Company will seek to restore its status on the ~~industrial product line sold~~QPL as expeditiously as possible but is unable to estimate how long this process will take. At this time, there is uncertainty whether there will be any further negative impacts to our revenue and results of operations related to the QPL removal.

GROSS PROFIT

Gross profit for the three months ended June 30, 2017 and 2016 was $204.4 and $205.6 reflecting a gross margin of 32.4% and 32.8%, respectively. Gross profit for the six months ended June 30, 2017 and 2016 was $406.7 and $400.9, reflecting a gross margin of 32.4% and 32.5%, respectively. The decline in ~~May 2015 and favorable foreign currency translation of $0.4. The increase in organic orders~~gross margin was ~~primarily~~ driven by ~~a 38% increase~~unfavorable automotive and aerospace pricing impacts, an unfavorable change in ~~defense orders primarily~~sales mix, increased direct material costs due to ~~platform awards received in the first quarter of 2016 which are expected to provide a benefit for multiple years, as well as approximately 9% growth in aerospace aftermarket. The growth in orders was~~higher commodity prices impacting our Motion Technologies segment, and impacts from certain military-specification connectors. These items were only partially offset by lower ~~industrial order intake~~labor costs as a result of ~~approximately 6%, mainly due to challenging energy market dynamics.~~restructuring benefits from our structural cost reset at our Industrial Process segment and operational improvements at our Connect & Control Technologies segment.

OPERATING EXPENSES


	Three Months								Nine Months								Three Months						Six Months
For the Periods Ended September 30	2016			2015			Change		2016			2015			Change
For the Periods Ended June 30																	2017		2016		Change		2017		2016		Change
General and administrative expenses	$	59.2		$	60.2		(1.7	)%	$	202.2		$	186.8		8.2	%	$	65.3	$	74.0	(11.8	)%	$	131.5	$	143.0	(8.0	)%
Sales and marketing expenses	39.4			43.1			(8.6	)%	128.7			139.2			(7.5	)%	43.9		46.0		(4.6	)%	87.0		89.3		(2.6	)%
Research and development expenses	18.6			18.0			3.3	%	58.9			55.2			6.7	%	22.6		21.1		7.1	%	45.1		40.3		11.9	%
Asbestos-related benefit, net	(68.1		)	(30.3		)	124.8	%	(40.3		)	(99.7		)	(59.6	)%
Asbestos-related costs, net																	14.9		15.0		(0.7	)%	29.8		27.8		7.2	%
Total operating expenses	$	49.1		$	91.0		(46.0	)%	$	349.5		$	281.5		24.2	%	$	146.7	$	156.1	(6.0	)%	$	293.4	$	300.4	(2.3	)%
Total Operating Expenses By Segment:
Industrial Process	$	51.2		$	49.0		4.5	%	$	167.9		$	170.6		(1.6	)%	$	41.5	$	62.6	(33.7	)%	$	87.3	$	116.7	(25.2	)%
Motion Technologies	33.3			24.1			38.2	%	102.1			65.0			57.1	%	41.0		36.9		11.1	%	81.8		68.8		18.9	%
Interconnect Solutions	18.3			22.3			(17.9	)%	56.5			71.3			(20.8	)%
Control Technologies	14.2			14.7			(3.4	)%	47.2			45.3			4.2	%
Connect & Control Technologies																	41.3		34.2		20.8	%	78.5		71.2		10.3	%
Corporate & Other	(67.9		)	(19.1		)	255.5	%	(24.2		)	(70.7		)	(65.8	)%	22.9		22.4		2.2	%	45.8		43.7		4.8	%

General and administrative (G&A) expenses for the three and six months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$1.0,~~$8.7, or ~~1.7%~~11.8% and $11.5, or 8.0%, ~~while~~respectively. The decline in G&A expenses ~~for~~was primarily due to lower restructuring costs of $12.6 and $15.5 in the ~~nine months ended September 30, 2016 increased $15.4, or 8.2%. The year-over-year comparison for both~~three and six month periods, respectively, as well as incremental savings from our past restructuring actions, a prior year trade name impairment of $4.1, and income of $3.8 related to an amendment to our environmental QSF in the second quarter of 2017. These items were partially offset by unfavorable foreign currency impacts of approximately $6 and $4, respectively, and higher incentive compensation of $3.7 and $6.1, respectively. In addition, the quarter and year-to-date periods ~~were unfavorably impacted by~~of 2017 include a $5 legal accrual and incremental costs ~~from~~related to our recently acquired Axtone business of $2.0 and $3.8 for the ~~2015 acquisition~~three and six month periods, respectively.

Sales and marketing expenses for the three and six months ended June 30, 2017 decreased $2.1, or 4.6% and $2.3, or 2.6%, respectively, as lower commissions and personnel costs at Industrial Process were offset by higher costs at Motion Technologies, including incremental costs related to Axtone of ~~Wolverine of $5.1~~$0.8 and ~~$14.6, higher~~$1.5, respectively for the three and six months ended June 30, 2017.

Research and development expenses for the three and six months ended June 30, 2017 increased $1.5, or 7.1% and $4.8, or 11.9%, respectively, primarily due to increased product development activities at Motion Technologies.

Asbestos-related costs, net, were flat during the three months ended June 30, 2017. Asbestos-related costs, net, increased $2.0, or 7.2% during the six months ended June 30, 2017 due to favorable prior year adjustments, including a reduction in estimated defense costs which was offset by a net reduction in expected recoveries due to insurance settlements in the prior year. See Note 17, Commitments and Contingencies, to the Consolidated Condensed Financial Statements for further information.

OPERATING INCOME



	Three Months								Six Months
For the Periods Ended June 30	2017			2016			Change		2017			2016			Change
Industrial Process	$	14.8		$	6.3		134.9	%	$	22.1		$	15.3		44.4	%
Motion Technologies	52.1			48.9			6.5	%	107.0			99.6			7.4	%
Connect & Control Technologies	13.7			16.8			(18.5	)%	30.0			29.2			2.7	%
Segment operating income	80.6			72.0			11.9	%	159.1			144.1			10.4	%
Asbestos-related costs, net	(14.9		)	(15.0		)	(0.7	)%	(29.8		)	(27.8		)	7.2	%
Other corporate costs	(8.0		)	(7.5		)	(6.7	)%	(16.0		)	(15.8		)	(1.3	)%
Total corporate and other benefit	(22.9		)	(22.5		)	1.8	%	(45.8		)	(43.6		)	(5.0	)%
Total operating income	$	57.7		$	49.5		16.6	%	$	113.3		$	100.5		12.7	%
Operating margin:
Industrial Process	7.7		%	2.9		%	480	bp	5.8		%	3.6		%	220	bp
Motion Technologies	18.0		%	18.8		%	(80	)bp	18.5		%	19.3		%	(80	)bp
Connect & Control Technologies	9.2		%	10.9		%	(170	)bp	9.9		%	9.8		%	10	bp
Segment operating margin	12.8		%	11.5		%	130	bp	12.7		%	11.7		%	100	bp
Consolidated operating margin	9.1		%	7.9		%	120	bp	9.0		%	8.1		%	90	bp

Industrial Process operating income for the three and six months ended June 30, 2017 increased $8.5, or 134.9% and $6.8, or 44.4%, respectively. The increase in operating income compared to prior year is primarily driven by lower restructuring costs of ~~$2.2~~$13.4 and $6.0, and unfavorable foreign currency impacts of $3.7 and $7.9, respectively. Conversely, both periods were favorably impacted by lower employee compensation-related costs of $4.4 and $10.0 and lower legal and acquisition-related costs. G&A costs for the nine months ended September 30, 2016 were also impacted by$15.3, respectively, as well as a trade name impairment of $4.1 recorded in the second quarter of ~~2016 in our Industrial Process segment as the result~~2016. Unfavorable impacts from volume and mix of ~~challenging conditions experienced within the upstream oil~~approximately $12 and ~~gas market. In addition, a favorable warranty resolution of $5.0 from the prior year further contributed to the year-over year increase in G&A expenses during the nine months ended September 30, 2016.~~

Sales and marketing expenses for the three and nine months ended September 30, 2016 decreased $3.7, or 8.6% and $10.5, or 7.5%, respectively, primarily reflecting focused cost reductions at Industrial Process due to lower headcount$22, as well as a decrease in commission expense and other variable costs during both periods, partially offset by incremental sales and marketing costs of $1.2 and $3.7, respectively, related to our fourth quarter 2015 acquisition of Wolverine.

Research and development (R&D) expenses for the three and nine months ended September 30, 2016 increased $0.6, or 3.3%, and $3.7, or 6.7%, respectively, primarily reflecting incremental costs of $0.3 and $3.3 related to our acquisition of Wolverine in 2015. In addition, increased product development activities at Motion Technologies were offset by lower R&D spending at Control Technologies during both periods due to the progress made on the development of a major aerospace program.

In the third quarter of 2016, we recognized a net asbestos-related benefit of $68.1 compared to a $30.3 benefit in the prior year, primarily due to a higher benefit from our annual asbestos remeasurement from favorable experience in dismissal rates and settlement values. The lower asbestos-related benefit during the nine months ended September 30, 2016 was driven by a $100.7 benefit recognized during the second quarter of 2015, reflecting a new single firm strategy and streamlined case management to assist in reducing asbestos related defense costs. This was partially offset by the higher benefit we recorded in the third quarter of 2016 in relation to the annual asbestos remeasurement. See Note 17, Commitments and Contingencies, to the Consolidated Condensed Financial Statements for further information.

~~OPERATING INCOME~~

Three Months Nine Months
For the Periods Ended September 30 2016 2015 Change 2016 2015 Change
Industrial Process $ 4.3
$ 34.0
(87.4 )% $ 19.6
$ 95.9
(79.6 )%
Motion Technologies 45.2
33.0
37.0 % 144.8
111.0
30.5 %
Interconnect Solutions 5.8
3.6
61.1 % 12.6
7.6
65.8 %
Control Technologies 11.6
14.0
(17.1 )% 34.0
40.5
(16.0 )%
Segment operating income 66.9
84.6
(20.9 )% 211.0
255.0
(17.3 )%
Asbestos-related benefit, net 68.1
30.3
124.8 % 40.3
99.7
(59.6 )%
Other corporate costs (0.2 ) (11.0 ) 98.2 % (16.0 ) (28.4 ) 43.7 %
Total corporate and other benefit 67.9
19.3
251.8 % 24.3
71.3
65.9 %
Total operating income $ 134.8
$ 103.9
29.7 % $ 235.3
$ 326.3
(27.9 )%
Operating margin:
Industrial Process 2.2 % 12.6 % (1,040 )bp 3.2 % 11.8 % (860 )bp
Motion Technologies 18.9 % 18.3 % 60 bp 19.2 % 20.0 % (80 )bp
Interconnect Solutions 7.4 % 4.3 % 310 bp 5.5 % 3.1 % 240 bp
Control Technologies 16.5 % 20.1 % (360 )bp 15.7 % 19.3 % (360 )bp
Segment operating margin 11.5 % 14.1 % (260 )bp 11.6 % 14.0 % (240 )bp
Consolidated operating margin 23.2 % 17.3 % 590 bp 12.9 % 17.9 % (500 )bp

Industrial Process operating income for the three and nine months ended September 30, 2016 decreased $29.7, or 87.4%, and $76.3, or 79.6%, respectively. The decline primarily resulted from lower sales volumes and unfavorable pricing that impacted operating income by approximately $37 and $92 for the quarter and year-to-date periods, respectively. In addition, results were adversely impacted by lower profitability of $5 related tocost overruns associated with certain complex pump projects ~~as well as~~were almost fully offset by net savings of approximately $8 and $19 due to past restructuring activities, productivity, and sourcing initiatives. In addition, operating income was impacted by higher ~~restructuring~~incentive-based compensation costs of ~~$2.3~~$2.9 and ~~$9.3 during the three and nine months ended September 30, 2016, respectively,~~$5.1 and unfavorable foreign currency ~~impacts~~fluctuations of ~~approximately $5~~$0.8 and $12, respectively. The nine months ended September 30, 2016, was also impacted by a trade name impairment of $4.1 recorded during the second quarter of 2016 as the result of challenging conditions experienced within the upstream oil and gas market. In addition, a favorable warranty resolution in 2015 of $5.0 contributed to the unfavorable comparison during the nine months ended September 30, 2016. Incremental savings from restructuring actions and productivity, sourcing and cost control initiatives helped offset these unfavorable impacts by approximately $20 and $56, for the three and nine months ended September 30, 2016,$2.1, respectively.

Motion Technologies operating income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 increased ~~$12.2,~~$3.2, or ~~37.0%,~~6.5% and ~~$33.8,~~$7.4, or ~~30.5%, respectively.~~7.4%. The increase in operating income was primarily driven by higher sales volume and favorable sales mix, which provided a benefit of approximately $9$10 and ~~$39 during the three~~$19, respectively, and ~~nine months ended September 30, 2016, respectively, but was~~incremental savings from productivity initiatives. These items were partially offset by unfavorable ~~pricing. Net savings from productivity, sourcing~~pricing, higher material and ~~cost control initiatives provided a benefit of approximately $6~~labor costs, and ~~$17, respectively.~~incremental investments to support recent long-term global automotive platform wins. In addition, ~~during the three~~unfavorable foreign currency fluctuations impacted operating income by $4.7 and ~~nine months ended September 30, 2016, the 2015~~$6.5 and our acquisition of ~~Wolverine~~Axtone provided an incremental ~~benefit of $3.7 and $13.4~~increase to operating income ~~but unfavorably impacted operating margin by approximately 180~~of $2.4 and ~~140 basis points,~~$3.6, respectively.

Interconnect Solutions operating income for the three and nine months ended September 30, 2016 increased $2.2 and $5.0, respectively, as the negative impact of lower volume and unfavorable pricing of approximately $3 and $8 for both periods was offset by lower restructuring costs of $1 and $6 and incremental savings of $2 and $8, respectively, from previous restructuring actions. Shipment delays and other incremental costs related to the operational disruptions from the relocation of certain North American operations experienced during 2015 and the first half of 2016 had an unfavorable impact for the nine month period comparison, but began to see operational improvements in the third quarter of 2016. In addition, the quarter and year-to-date periods of 2016 benefited from favorable foreign currency impacts of approximately $1 and $2, respectively, and net savings from productivity initiatives of approximately $1 and $2, respectively, but were partially offset by higher postretirement-related costs of $1 and $3, respectively.

Connect & Control Technologies operating income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 decreased ~~$2.4,~~$3.1, or ~~17.1%~~18.5%, and ~~$6.5,~~increased $0.8, or ~~16.0%~~2.7%, ~~respectively, primarily~~respectively. Both periods include unfavorable impacts related to ~~incremental costs associated with the relocation~~certain military-specification connectors and ~~consolidation of certain operations to an existing lower-cost facility of $1.3 and $3.4, respectively. In addition,~~ a ~~favorable prior year adjustment of employee-based incentive costs and timing of prior year investment spending further contributed to the year-over-year decrease in both periods. These items~~$5 legal accrual. Offsetting these unfavorable impacts were ~~partially offset by~~ net savings from ~~restructuring,~~ productivity and sourcing initiatives, primarily at our North American Connector facility, savings of approximately $1$2 and $5 ~~during~~from past restructuring activities and favorable sales volumes of approximately $3 and $7. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, unfavorable sales mix and pricing impacted operating income by $1 and $4, respectively.

Other corporate costs for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016 declined by $10.8,~~2017 increased $0.5, or ~~98.2%,~~6.7% and ~~$12.4,~~$0.2, or 43.7%, respectively. The decrease in other corporate costs is primarily due to lower employee incentive-based costs during the three and nine months ended September 30, 2016 of $6.2 and $9.0, respectively, as well as lower1.3% reflecting higher environmental costs of $1.5 and $0.9, respectively, disposal costs associated with a pending sale of excess property and ~~$1.4, and various cost containment actions. The quarter-to-date period benefited from~~ a ~~$2 insurance recovery~~benefit recorded in the second quarter of ~~previously incurred legal costs.~~

~~INTEREST AND NON-OPERATING INCOME AND EXPENSES, NET~~

~~During the three and nine months ended September 30,~~ 2016 the Company recognized interest and non-operating expenses, net of $0.3 and $1.5, respectively, compared to interest and non-operating income, net of $4.0 and $2.5 during the three and nine months ended September 30, 2015. The unfavorable year-over-year change is principally related to ~~interest~~insurance. These items were offset by income of ~~$3.4 recognized during the third quarter of 2015 on prepaid taxes and a $1.6 receivable with Exelis and Xylem, both of which relate~~$3.8 related to an amendment to the ~~settlement of the 2009-2011 U.S. income tax audit.~~environmental QSF.

INCOME TAX EXPENSE

For the three months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recognized income tax expense of ~~$46.1~~$10.6 and ~~$11.4~~$17.5 and had an effective tax rate of ~~34.3%~~18.1% and ~~10.6%~~35%, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, the Company recognized income tax expense of ~~$75.3~~$19.7 and ~~$53~~$29.2 and had an effective tax rate of ~~32.2%~~17.4% and ~~16.1%~~29.4%, respectively. The ~~higher effective tax rate in 2016 is primarily driven by an increase in the deferred tax liability on foreign earnings which are not considered indefinitely reinvested, whereas the~~ lower effective tax rate in ~~2015 was~~2017 is primarily ~~driven by the settlement of~~due to a ~~U.S. income tax audit and the release of the~~change in valuation allowance, excess share-based compensation deduction due to the adoption of ASU 2016-09, and a tax rate change on ~~certain net~~Korea deferred tax ~~assets in China due~~assets. Refer to ~~positive income in recent years. The~~Note 2, Recent Accounting Pronouncements, for further information on ASU 2016-09. In addition, the Company continues to benefit from a larger mix of earnings in non-U.S. jurisdictions with favorable tax rates.

~~INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX~~

For the three and nine months ended September 30, 2016, the Company recognized income from discontinued operations of $1.8 and $2.0, respectively, due to a favorable resolution of certain legacy liabilities in the third quarter of 2016. During the three and nine months ended September 30, 2015, the Company recognized income from discontinued operations of $34.2 and $39.3, respectively, principally relatedXylem Inc. relating to the ~~settlement~~Company's 2011 spin-off of the 2009-2011 U.S. income tax audit during the third quarter of 2015. This included a tax benefit of $38.3 from the recognition of previously unrecognized tax positions, related net interest income of $3.2, and a $13.2 receivable due from Exelis and Xylem, partially offset by net tax expense of $17.4 from unfavorable audit adjustments.those businesses.

LIQUIDITY

Funding and Liquidity Strategy

We monitor our funding needs and design and execute strategies to meet overall liquidity requirements, including the management of our capital structure, on both a short- and long-term basis. We expect to fund our ongoing working capital, capital expenditures, dividends and financing requirements through cash flows from operations and cash on hand or by accessing the commercial paper market. If our access to the commercial paper market were adversely affected, we believe that alternative sources of liquidity, including our Revolving Credit Agreement, described below, would be sufficient to meet our short-term funding requirements.

We manage our worldwide cash requirements considering available funds among the many subsidiaries through which we conduct business and the cost effectiveness with which those funds can be accessed. We have identified and continue to look for opportunities to access cash balances in excess of local operating requirements to meet our global liquidity needs in a cost-efficient manner. A majority of our cash and cash equivalents is held by our international subsidiaries. We have transferred, and plan to continue to, transfer cash between certain international subsidiaries and the U.S. and between other international subsidiaries when it is cost effective to do so. Our intent is generally to indefinitely reinvest these funds outside of the U.S. consistent with our overall intention to support growth and expand in markets outside the U.S. through the development of products, increased non-U.S. capital spending and potentially the acquisition of foreign businesses. However, we have determined that certain undistributed foreign earnings generated in Luxembourg, Netherlands, Japan, Hong Kong, and South Korea should not be considered permanently reinvested outside of the U.S. Cash distributions from foreign countries amounted to ~~$67.0 and $235.0 as of September~~$111.8 for the six months ended June 30, ~~2016 and~~2017. Cash distributions from foreign countries amounted to $100.0 for the year ended December 31, ~~2015, respectively.~~2016. The timing and amount of additional future ~~remittances,~~distributions, if any, remains under evaluation.

The amount and timing of dividends payable on our common stock are within the sole discretion of our Board of Directors and will be based on, and affected by, a number of factors, including our financial position and results of operations, available cash, expected capital spending plans, prevailing business conditions and other factors the Board of Directors deems relevant. Therefore, there can be no assurance as to what level of dividends, if any, will be paid in the future. In the ~~third~~second quarter of ~~2016,~~2017, we declared a dividend of ~~$0.124~~$0.128 per share for shareholders of record on ~~September 9, 2016,~~June 12, 2017, which was paid on ~~October~~July 3, ~~2016.~~2017. The dividend declared in the ~~third~~second quarter of ~~2016~~2017 is a ~~4.8%~~3.2% increase from the prior year.

During ~~the nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015,~~2016, we repurchased ~~1.9~~0.8 and ~~2.0~~0.6 shares of common stock for ~~$66.6~~$30.0 and ~~$80.0,~~$20.0, respectively, under our $1 billion share repurchase program. To date, under the program, the Company has repurchased ~~20.3~~21.2 shares for ~~$825.9.~~$859.4.

Significant factors that affect our overall management of liquidity include our credit ratings, the adequacy of commercial paper and supporting bank lines of credit, and the ability to attract long-term capital on satisfactory terms. We assess these factors along with current market conditions on a continuous basis, and as a result, may alter the mix of our short- and long-term financing when it is advantageous to do so.

Commercial Paper

We access the commercial paper market to supplement the cash flows generated internally and to provide additional short-term funding for strategic investments and other funding requirements. We manage our short-term liquidity through the use of our commercial paper program by adjusting the level of commercial paper borrowings as opportunities to deploy additional capital arise and it is cost effective to do so. As of ~~September~~June 30, ~~2016,~~2017, we had an outstanding commercial paper balance of ~~$151.0.~~$123.0. The average outstanding commercial paper balance during the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 was ~~$117.9.~~$125.7. There have been no ~~other~~ material changes that have impacted our funding and liquidity capabilities since December 31, ~~2015.~~

2016.

Credit Facilities

Our ~~five-year~~ revolving $500 credit agreement (the Revolving Credit Agreement) provides for increases ~~in principal~~ of up to $200 for a possible maximum total of $700 in aggregate principal amount, at the request of the Company and with the consent of the institutions providing such increased commitments. The Revolving Credit Agreement is intended to provide access to additional liquidity and be a source of alternate funding to the commercial paper program, if needed. Our policy is to maintain unused committed bank lines of credit in an amount greater than outstanding commercial paper balances. The provisions of the Revolving Credit Agreement require that we maintain an interest coverage ratio, as defined, ~~in such agreement,~~ of at least 3.0 ~~times~~ and a leverage ratio, as defined, ~~in such agreement,~~ of not more than ~~3.0 times.~~3.0. At ~~September~~June 30, ~~2016,~~2017, we had ~~$100.0~~$79.9 outstanding under the Revolving Credit Agreement. As of ~~September~~June 30, ~~2016,~~2017, our interest coverage ratio and leverage ratio were within the prescribed thresholds. In the event of certain ratings downgrades of the Company, to a level below investment grade, the direct and indirect significant U.S. subsidiaries of the Company would be required to guarantee the obligations under the credit facility. The Revolving Credit Agreement matures in November ~~2019.~~2021.

Sources and Uses of Liquidity

Our principal source of liquidity is our cash flow generated from operating activities, which provides us with the ability to meet the majority of our short-term funding requirements. The following table summarizes net cash derived from operating, investing, and financing activities from continuing operations, as well as net cash from discontinued operations, for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015.~~2016.


For the Nine Months Ended September 30	2016			2015
For the Six Months Ended June 30							2017			2016
Operating activities	$	146.7		$	147.1		$	92.7		$	71.6
Investing activities	(22.5		)	(111.4		)	(164.5		)	3.2
Financing activities	(78.4		)	(90.2		)	(47.9		)	(67.8		)
Foreign exchange	9.0			(23.9		)	15.2			4.0
Total net cash flow from continuing operations	54.8			(78.4		)	(104.5		)	11.0
Net cash from discontinued operations	5.3			(0.7		)	(0.9		)	6.6
Net change in cash and cash equivalents	$	60.1		$	(79.1	)	$	(105.4	)	$	17.6

Net cash provided by operating activities was ~~$146.7~~$92.7 for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 compared to ~~$147.1~~$71.6 for the ~~nine~~six months ended ~~September~~June 30, ~~2015.~~2016. The change in net cash provided by operating activities primarily reflects ~~a decrease~~higher incentive compensation payments in ~~segment operating income of approximately $26, after adjustments for non-cash charges, such~~the prior year as depreciation and amortization. In addition, we had higher net income tax payments of $12.5, additional asbestos payments of $9.3, higher postretirement contributions of $3.7, and higher restructuring payments of $3.2. However improvementswell as favorable changes in working capital, ~~balances compared to the nine month period ended September 30, 2015,~~ primarily accounts receivable due to focused accounts receivable past due collections ~~were able~~and inventory management. This was partially offset by an increase in asbestos payments of $19.2 due to ~~offset the additional cash usages noted above.~~higher indemnity payments and timing of insurance recoveries as well as higher income tax payments of $6.7.

Net cash used by investing activities was ~~$22.5~~$164.5 for the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, compared to ~~a $111.4 net use~~$3.2 of cash provided by investing activities during the same prior year period. The year-over-year ~~decrease~~increase reflects the ~~prior year~~ purchase of ~~Hartzell~~Axtone for ~~$53.5,~~$113.7 (net of cash acquired), as well as higher ~~maturities~~capital expenditures which increased $7.2 primarily due to capacity expansion projects in support of ~~short-term~~global automotive friction growth. In addition, the 2016 result included $48.1 of cash provided by the maturity of investments (net of purchases) of $57.8 during 2016. Capital expenditures increased slightly year-over-year with spending in both years focused on capacity expansion projects and system upgrades. In addition, during the second quarter of 2015 we sold a product line within our Control Technologies segment resulting in proceeds of $8.9..

Net cash used by financing activities was ~~$78.4~~$47.9 reflecting a decrease of ~~$11.8~~$19.9 for the ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 primarily due to ~~lower~~a $17.6 decrease in net borrowings and a $10.9 reduction due to the timing of our first half 2017 quarterly dividend payments. This was partially offset by a $5.3 increase in repurchases of ITT common stock as part of ~~$13.0. Net repayments on amounts outstanding under~~ our ~~revolving credit facility~~Share Repurchase Plan and lower proceeds of ~~$50.6 were partially offset by net borrowings of $46.0 under our commercial paper program.~~$2.3 from employee stock option exercises.

Net cash used by discontinued operations was $0.9 for the six months ended June 30, 2017 compared to net cash provided by discontinued ~~operations was $5.3~~operation for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2016 of $6.6. The ~~increase~~change of ~~$6.0~~$7.5 is primarily driven by ~~$9.2 received during~~a cash payment in the ~~second quarter of 2016~~prior year from Xylem Inc. related to the Tax Matters Agreement.

Asbestos

Based on the estimated undiscounted asbestos liability as of ~~September~~June 30, ~~2016~~2017 for claims filed or estimated to be filed over the next 10 years, we have estimated that we will be able to recover approximately ~~41%~~39% of the asbestos indemnity and defense costs from our insurers. Actual insurance reimbursements may vary significantly from period to period and the anticipated recovery rate is expected to decline over time due to gaps in our insurance coverage, reflecting uninsured periods, the insolvency of certain insurers, prior settlements with our insurers and our expectation that certain insurance policies will exhaust within the next 10 years. In the ~~tenth~~10th year of our estimate, our insurance recoveries are currently projected to be approximately 15%. Additionally, future recovery rates may be impacted by other factors, such as future insurance settlements, insolvencies and judicial determinations relevant to our coverage program, which are difficult to predict and subject to a high degree of uncertainty.

While there are overall limits on the aggregate amount of insurance available to the Company with respect to asbestos claims, with respect to certain coverage, those overall limits were not reached by the estimated liability recorded by the Company at ~~September~~June 30, ~~2016.~~2017.

Further, there is uncertainty in estimating when cash payments related to the recorded asbestos liability will be fully expended and such cash payments will continue for a number of years beyond the next 10 years due to the significant proportion of future claims included in the estimated asbestos liability and the delay between the date a claim is filed and when it is resolved. Subject to these inherent uncertainties, it is expected that cash payments related to pending claims and claims to be filed in the next 10 years will extend through approximately 2030.

Although asbestos cash outflows can vary significantly from year to year, our current net cash outflows, net of tax benefits, are projected to average $15 to $25 over the next five years, as compared to an average of ~~$12~~$13 over the past three ~~annual periods,~~years, and increase to an average of approximately $30 to $40 per year over the remainder of the projection period.

In light of the ~~uncertainties~~variables and ~~variables~~uncertainties inherent in the long-term projection of the Company's asbestos exposures and potential recoveries, although it is probable that the Company will incur additional costs for asbestos claims filed beyond the next 10 years, we do not believe that there is a reasonable basis for estimating the number of future claims, the nature of future claims, or the cost to resolve future claims for years beyond the next 10 years at this time. Accordingly, no liability or related asset has been recorded for any costs that may be incurred for claims asserted subsequent to ~~2026.~~2027.

Due to these uncertainties, as well as our inability to reasonably estimate any additional asbestos liability for claims that may be filed beyond the next 10 years, it is difficult to predict the ultimate outcome of the cost of resolving the pending and estimated unasserted asbestos claims. We believe it is possible that the future events affecting the key factors and other variables within the next 10 years, as well as the cost of asbestos claims filed beyond the next 10 years, net of expected recoveries, could have a material adverse effect on our financial statements.

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.~~some of which are non-GAAP financial measures. 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 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. Reconciliations of organic revenue for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 are provided below.


Three Months Ended September 30	Industrial Process				Motion Technologies				Interconnect Solutions				Control Technologies				Eliminations				Total ITT
2016 Revenue		$	195.0			$	238.7			$	78.6			$	70.5			$	(1.1	)		$	581.7
Three Months Ended June 30																									Industrial Process				Motion Technologies				Connect & Control Technologies				Eliminations				Total ITT
2017 Revenue																										$	192.3			$	290.1			$	149.6			$	(1.1	)		$	630.9
(Acquisitions)/divestitures, net		—				(40.1		)		—				—				—				(40.1		)		—				(22.0		)		—				—				(22.0		)
Foreign currency translation		5.0				(0.5		)		(1.0		)		(0.3		)		(0.1		)		3.1				0.2				4.7				0.7				—				5.6
2016 Organic revenue		$	200.0			$	198.1			$	77.6			$	70.2			$	(1.2	)		$	544.7
2017 Organic revenue																										$	192.5			$	272.8			$	150.3			$	(1.1	)		$	614.5

2015 Revenue		$	270.6			$	179.9			$	82.8			$	69.8			$	(1.2	)		$	601.9
2016 Revenue																										$	214.2			$	259.6			$	153.5			$	(1.1	)		$	626.2
Organic (decline) growth		(26.1		)%		10.1		%		(6.3		)%		0.6		%						(9.5		)%		(10.1		)%		5.1		%		(2.1		)%						(1.9		)%
Nine Months Ended September 30
2016 Revenue		$	618.0			$	755.3			$	229.8			$	217.2			$	(3.3	)		$	1,817.0

Six Months Ended June 30
2017 Revenue																										$	378.4			$	577.4			$	302.9			$	(2.0	)		$	1,256.7
(Acquisitions)/divestitures, net		—				(126.4		)		—				(5.4		)		—				(131.8		)		—				(36.0		)		—				—				(36.0		)
Foreign currency translation		24.0				0.1				(1.4		)		(0.5		)		—				22.2				0.2				13.0				1.5				—				14.7
2016 Organic revenue		$	642.0			$	629.0			$	228.4			$	211.3			$	(3.3	)		$	1,707.4
2017 Organic revenue																										$	378.6			$	554.4			$	304.4			$	(2.0	)		$	1,235.4

2015 Revenue		$	813.7			$	555.5			$	243.0			$	210.1			$	(3.5	)		$	1,818.8
2016 Revenue																										$	423.0			$	516.6			$	297.8			$	(2.1	)		$	1,235.3
Organic (decline) growth		(21.1		)%		13.2		%		(6.0		)%		0.6		%						(6.1		)%		(10.5		)%		7.3		%		2.2		%						—		%

Reconciliations of organic orders for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 are provided below:


Three Months Ended September 30	Industrial Process				Motion Technologies				Interconnect Solutions				Control Technologies				Eliminations				Total ITT
2016 Orders		$	198.9			$	236.8			$	72.1			$	67.1			$	(1.5	)		$	573.4
Three Months Ended June 30																									Industrial Process				Motion Technologies				Connect & Control Technologies				Eliminations				Total ITT
2017 Orders																										$	190.3			$	288.9			$	147.8			$	(0.7	)		$	626.3
(Acquisitions)/divestitures, net		—				(40.6		)		—				—				—				(40.6		)		—				(20.2		)		—				—				(20.2		)
Foreign currency translation		2.0				(1.0		)		(0.8		)		(0.2		)		0.1				0.1				0.4				5.3				0.8				—				6.5
2016 Organic orders		$	200.9			$	195.2			$	71.3			$	66.9			$	(1.4	)		$	532.9
2017 Organic orders																										$	190.7			$	274.0			$	148.6			$	(0.7	)		$	612.6

2015 Orders		$	208.9			$	177.5			$	83.5			$	62.1			$	(1.6	)		$	530.4
2016 Orders																										$	199.7			$	261.2			$	145.9			$	(0.9	)		$	605.9
Organic (decline) growth		(3.8		)%		10.0		%		(14.6		)%		7.7		%						0.5		%		(4.5		)%		4.9		%		1.9		%						1.1		%
Nine Months Ended September 30
2016 Orders		$	587.4			$	763.4			$	223.3			$	232.3			$	(3.6	)		$	1,802.8

Six Months Ended June 30
2017 Orders																										$	412.2			$	576.2			$	310.2			$	(1.7	)		$	1,296.9
(Acquisitions)/divestitures, net		—				(126.8		)		—				(8.8		)		—				(135.6		)		—				(32.5		)		—				—				(32.5		)
Foreign currency translation		20.2				(0.2		)		(1.2		)		(0.4		)		—				18.4				0.3				13.5				1.6				—				15.4
2016 Organic orders		$	607.6			$	636.4			$	222.1			$	223.1			$	(3.6	)		$	1,685.6
2017 Organic orders																										$	412.5			$	557.2			$	311.8			$	(1.7	)		$	1,279.8

2015 Orders		$	703.0			$	561.3			$	249.6			$	214.1			$	(3.7	)		$	1,724.3
Organic (decline) growth		(13.6		)%		13.4		%		(11.0		)%		4.2		%						(2.2		)%
2016 Orders																										$	388.5			$	526.6			$	316.4			$	(2.1	)		$	1,229.4
Organic growth (decline)																										6.2		%		5.8		%		(1.5		)%						4.1		%

"adjusted segment operating income" is defined as operating income, adjusted to exclude special items that include, but are not limited to, restructuring ~~and~~costs, realignment costs, certain asset impairment charges, ~~repositioning costs,~~ certain acquisition-related expenses, and other unusual or infrequent operating items. Special items represent significant charges or credits that impact current results, which management views as unrelated to the Company's ongoing operations and performance. 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.

Reconciliations of segment operating income to adjusted segment operating income for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 and ~~2015~~2016 are provided below.


Three Months Ended September 30, 2016	Industrial Process			Motion Technologies			Interconnect Solutions			Control Technologies			Total Segment
Three Months Ended June 30, 2017																Industrial Process				Motion Technologies			Connect & Control Technologies			Total Segment
Segment operating income		$	4.3		$	45.2		$	5.8		$	11.6		$	66.9		$	14.8			$	52.1		$	13.7		$	80.6
Restructuring costs		2.9			1.1			—			—			4.0			0.4				0.6			0.7			1.7
Other		—			0.6			—			1.3			1.9
Acquisition-related expenses																	—				0.1			—			0.1
Realignment costs and other^(a)																	(0.3		)		—			6.2			5.9
Adjusted segment operating income		$	7.2		$	46.9		$	5.8		$	12.9		$	72.8		$	14.9			$	52.8		$	20.6		$	88.3
Nine Months Ended September 30, 2016
Six Months Ended June 30, 2017
Segment operating income		$	19.6		$	144.8		$	12.6		$	34.0		$	211.0		$	22.1			$	107.0		$	30.0		$	159.1
Restructuring costs		19.9			2.5			—			0.9			23.3			1.7				0.8			1.2			3.7
Other^(a)		4.1			2.7			—			4.9			11.7
Acquisition-related expenses																	—				0.8			—			0.8
Realignment costs and other^(a)																	1.1				—			7.3			8.4
Adjusted segment operating income		$	43.6		$	150.0		$	12.6		$	39.8		$	246.0		$	24.9			$	108.6		$	38.5		$	172.0



Three Months Ended June 30, 2016	Industrial Process			Motion Technologies				Connect & Control Technologies			Total Segment
Segment operating income		$	6.3		$	48.9			$	16.8		$	72.0
Restructuring costs		13.8			—				—			13.8
Acquisition-related expenses		—			1.2				0.1			1.3
Realignment costs and other^(a)		4.1			(0.1		)		1.1			5.1
Adjusted segment operating income		$	24.2		$	50.0			$	18.0		$	92.2
Six Months Ended June 30, 2016
Segment operating income		$	15.3		$	99.6			$	29.2		$	144.1
Restructuring costs		17.0			1.4				0.9			19.3
Acquisition-related expenses		—			2.2				1.5			3.7
Realignment costs and other^(a)		4.1			(0.1		)		2.1			6.1
Adjusted segment operating income		$	36.4		$	103.1			$	33.7		$	173.2

(a)

~~The adjustments for Other items~~Primarily reflects realignment costs associated with an action to move certain production lines in our Connect & Control Technologies segment in 2017 and 2016, a legal accrual of $5.0 in 2017 in our Connect & Control Technologies segment, and costs associated with a management reorganization at our Industrial Process segment during the first quarter of 2017. In 2016, ~~primarily reflect~~ an impairment of $4.1 was recorded ~~in the second quarter~~ at our Industrial Process segment for trade names as a result of the downturn in the upstream oil and gas ~~market as well as realignment and acquisition-related costs in other segments.~~market.

Three Months Ended September 30, 2015 Industrial
Process Motion
Technologies Interconnect
Solutions Control
Technologies Total
Segment
Segment operating income $ 34.0
$ 33.0
$ 3.6
$ 14.0
$ 84.6
Restructuring costs 0.6
—
0.9
0.3
1.8
Other 1.3
2.1
0.1
0.4
3.9
Adjusted segment operating income $ 35.9
$ 35.1
$ 4.6
$ 14.7
$ 90.3
Nine Months Ended September 30, 2015
Segment operating income $ 95.9
$ 111.0
$ 7.6
$ 40.5
$ 255.0
Restructuring costs 10.6
—
6.2
0.8
17.6
Other (0.4 ) 2.1
0.3
0.9
2.9
Adjusted segment operating income $ 106.1
$ 113.1
$ 14.1
$ 42.2
$ 275.5

"adjusted income from continuing operations" and "adjusted income from continuing operations per diluted share" 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~~restructuring costs, ~~restructuring and~~ realignment costs, certain asset impairment charges, certain acquisition-related expenses, income tax settlements or adjustments, and other unusual or 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.

A reconciliation of adjusted income from continuing operations, including adjusted income from continuing operations per diluted share, is provided below.

Three Months Nine Months
For the Periods Ended September 30 2016 2015 2016 2015
Income from continuing operations attributable to ITT Inc. $ 88.3
$ 96.5
$ 158.3
$ 275.8
Net asbestos-related benefit, net of tax (expense) of $(25.2), $(11.2), $(14.9) and $(36.9), respectively (42.9 ) (19.1 ) (25.4 ) (62.8 )
Restructuring costs, net of tax benefit of $3.3, $0.4, $6.3 and $3.0, respectively 0.7
1.4
17.5
14.8
Tax-related special items^(a)
5.1
(21.2 ) 8.6
(46.4 )
Other special items, net of tax benefit (expense) of $1.3, $(0.4), $3.2 and $(0.3), respectively^(b)
0.8
(0.7 ) 6.5
(2.4 )
Adjusted income from continuing operations attributable to ITT Inc. $ 52.0
$ 56.9
$ 165.5
$ 179.0
Income from continuing operations attributable to ITT Inc. per diluted share $ 0.98
$ 1.07
$ 1.76
$ 3.04
Adjusted income from continuing operations attributable to ITT Inc. per diluted share $ 0.58
$ 0.63
$ 1.84
$ 1.97



	Three Months					Six Months
For the Periods Ended June 30	2017			2016		2017			2016
Income from continuing operations attributable to ITT Inc.	$	47.9		$	32.3	$	94.0		$	70.0
Net asbestos-related costs, net of tax benefit of $5.5, $5.6, $11.0 and $10.3, respectively	9.4			9.4		18.8			17.5
Restructuring costs, net of tax benefit of $0.4, $1.6, $1.3 and $3.0, respectively	1.3			12.7		3.0			16.8
Realignment costs, net of tax benefit of $1.0, $0.0, $2.7 and $0.7, respectively^(a)	1.9			1.3		4.8			1.5
Tax-related special items^(b)	(3.2		)	2.2		(6.3		)	3.5
Acquisition-related costs, net of tax benefit of $0.0, $0.8, $0.3, and $1.3, respectively	0.1			0.5		0.5			2.4
Other unusual or infrequent items, net of tax expense of $1.4, $0.1, $1.4 and $0.1, respectively^(c)	0.5			1.8		0.5			1.8
Adjusted income from continuing operations attributable to ITT Inc.	$	57.9		$	60.2	$	115.3		$	113.5
Income from continuing operations attributable to ITT Inc. per diluted share	$	0.54		$	0.36	$	1.05		$	0.78
Adjusted income from continuing operations attributable to ITT Inc. per diluted share	$	0.65		$	0.67	$	1.29		$	1.26


(a)	Realignment costs include 2017 costs associated with the pending sale of excess property, costs associated with a management reorganization at our Industrial Process segment in the first quarter of 2017 and costs associated with an action to move certain production lines in our Connect & Control Technologies segment in both 2017 and 2016.

(b)

Tax-related special items for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016~~2017 primarily relate to ~~distributions~~a tax benefit on undistributed foreign earnings and tax benefits on uncertain tax positions offset by tax expense related to the distribution of foreign ~~earnings offset by a benefit for previously unrecognized tax positions.~~earnings. Tax-related special items for the three and ~~nine~~six months ended ~~September~~June 30, ~~2015~~2016 primarily due to tax expense related to ~~a tax benefit for previously unrecognized tax positions, the settlement~~distributions of ~~the U.S. income tax audit and the tax impact of a change in the valuation allowance assessment.~~foreign earnings.

~~(b)~~(c)

Other ~~special~~unusual or infrequent items in 2017 primarily consist of a legal accrual of $5.0, income of $3.8 related to an amendment to the environmental QSF and interest income from the reversal of uncertain tax positions taken in prior years. Other unusual or infrequent items in 2016 primarily ~~relates to~~consist of an impairment of $4.1 recorded in ~~the second quarter~~2016 at our Industrial Process segment for trade names as a result of the downturn in the upstream oil and gas market ~~and realignment and integration costs associated with our 2015 acquisitions of Hartzell and Wolverine, partially~~ offset by interest income from the reversal of ~~interest accruals related to~~ uncertain tax positions taken in prior years.

"adjusted free cash flow" is defined as net cash provided by operating activities less capital expenditures, adjusted for cash payments for restructuring ~~and~~costs, 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. A reconciliation of adjusted free cash flow is provided below.


For the Nine Months Ended September 30	2016			2015
For the Six Months Ended June 30							2017			2016
Net cash provided by operating activities	$	146.7		$	147.1		$	92.7		$	71.6
Capital expenditures^(c)	(68.1		)	(63.8		)	(53.3		)	(46.1		)
Restructuring cash payments	22.7			19.5			8.8			15.5
Net asbestos cash flows	24.5			15.2			30.7			11.5
Realignment and other cash payments	4.2			2.4
Other cash payments^(a)							6.2			2.2
Adjusted free cash flow	$	130.0		$	120.4		$	85.1		$	54.7


~~(c)~~(a)	~~Capital expenditures for the nine months ended September 30,2015 reflect a reduction of $0.4~~Other cash payments during 2017 primarily relate to costs associated with ~~repositioning activities related to~~ the ~~2011 spin-off.~~ pending sale of excess property.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to the Consolidated Condensed Financial Statements for information on recent accounting pronouncements.

CRITICAL ACCOUNTING ESTIMATES

The preparation of ITT's financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. ITT believes the most complex and sensitive judgments, because of their significance to the Consolidated Condensed Financial Statements, result primarily from the need to make estimates about the effects of matters that are inherently uncertain. Management's Discussion and Analysis of Financial Condition and Results of Operations in the ~~2015~~2016 Annual Report describes the critical accounting estimates that are used in the preparation of the Consolidated Condensed Financial Statements. Actual results in these areas could differ from management's estimates. There have been no significant changes concerning ITT's critical accounting estimates as described in our ~~2015~~2016 Annual Report.



ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no material change in the information concerning market risk as stated in our ~~2015~~2016 Annual Report.



ITEM 4.	CONTROLS AND PROCEDURES

The Chief Executive Officer and Chief Financial Officer of the Company have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION



ITEM 1.	LEGAL PROCEEDINGS

From time to time, we are involved in legal proceedings that are incidental to the operation of our businesses. Some of these proceedings allege damages relating to environmental exposures, intellectual property matters, copyright infringement, personal injury claims, employment and employee benefit matters, government contract issues and commercial or contractual disputes and acquisitions or divestitures. Descriptions of certain legal proceedings to which the Company is a party are contained in Note 17, ~~"Commitments~~Commitments and ~~Contingencies"~~Contingencies to the Consolidated Condensed Financial Statements included in Part I, Item 1 of this Report and are incorporated by reference herein. Such descriptions include the following recent developments:

Asbestos Proceedings

Subsidiaries of ITT, ~~including~~ ITT LLC and Goulds Pumps LLC, ~~have been~~are joined as a defendant with numerous other companies in product liability lawsuits alleging personal injury due to asbestos exposure. These claims allege that certain of their products sold prior to 1985 contained a part manufactured by a third party (e.g., a gasket) which contained asbestos. To the extent these third-party parts may have contained asbestos, it was encapsulated in the gasket (or other) material and was non-friable. Frequently, the plaintiffs are unable to identify any ITT LLC or Goulds Pumps LLC products as a source of asbestos exposure. In addition, a large majority of claims pending against the Company subsidiaries have been placed on inactive dockets because the plaintiff cannot demonstrate a significant compensable loss. Our experience to date is that a substantial portion of resolved claims have been dismissed without payment by the ~~Company~~Company's subsidiaries.

We record a liability for pending asbestos claims and asbestos claims estimated to be filed over the next 10 years. While it is probable that we will incur additional costs for future claims to be filed against the Company, a liability for potential future claims beyond the next 10 years is not reasonably estimable due to the ~~uncertainties~~variables and ~~variables~~uncertainties inherent in the long-term projection of the Company's asbestos exposures and potential recoveries. As of ~~September~~June 30, ~~2016,~~2017, we have recorded an undiscounted asbestos-related liability for pending claims and unasserted claims estimated to be filed over the next 10 years of ~~$951.8,~~$942.6, including expected legal fees, and an associated asset of ~~$385.8~~$369.8 which represents estimated recoveries from insurers, resulting in a net asbestos exposure of ~~$566.0.~~$572.8.

Environmental

Other Matters

The Company ~~is responding to~~received a civil subpoena from the Department of Defense, Office of the Inspector General, ~~which was issued~~ in the second quarter of 2015 as part of an investigation being led by the Civil Division of the U.S. Department of ~~Justice.~~Justice (DOJ). The subpoena and related investigation involve certain connector products manufactured by the Company’s ~~Interconnect Solutions~~Connect & Control Technologies segment that are purchased or used by the U.S. government. The Company is cooperating with the government and has produced documents responsive to DOJ’s request under the subpoena. Based on its current analysis following discussions with DOJ to resolve this matter, the Company has accrued$5 as its current best estimate of the minimum amount of probable loss. It is reasonably possible that any actual loss may be higher than this amount, but at this time management is unable to estimate a range of potential loss in excess of the ~~timing or outcome of this matter.~~amount accrued.



ITEM 1A.	RISK FACTORS

Reference is made to the risk factors set forth in Part I, Item 1A, "Risk Factors," of our ~~2015~~2016 Annual Report, which are incorporated by reference herein. There ~~has~~have been no material changes with regard to the risk factors disclosed in such report.



ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Purchases of equity securities by the issuer and affiliated purchasers

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

PERIOD
TOTAL
NUMBER
OF SHARES
PURCHASED
AVERAGE
PRICE
PAID
PER SHARE⁽¹⁾
TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS⁽²⁾
MAXIMUM DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS⁽²⁾
7/1/2016 - 7/31/2016 —
—
—
$ 220.7

8/1/2016 - 8/31/2016 0.5
$ 34.60
0.5
$ 201.8

9/1/2016 - 9/30/2016 0.8
$ 35.13
0.8
$ 174.1



(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) PERIOD	TOTAL NUMBER OF SHARES PURCHASED	AVERAGE PRICE PAID PER SHARE⁽¹⁾			TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS⁽²⁾		MAXIMUM DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS⁽²⁾
4/1/2017 - 4/30/2017	—		—			—		$	170.6
5/1/2017 - 5/31/2017	0.3		$	38.92		0.3		$	158.1
6/1/2017 - 6/30/2017	0.5		$	38.33		0.5		$	140.6


(1)	Average price paid per share is calculated on a settlement basis and includes commissions.

(2)

On October 27, 2006, our Board of Directors approved a three-year $1 billion Share Repurchase Program. On December 16, 2008, our Board of Directors modified the provisions of the Share Repurchase Program to replace the original three-year term with an indefinite term. As of ~~September~~June 30, ~~2016,~~2017, we had repurchased ~~20.3~~21.2 shares for ~~$825.9,~~$859.4, including commissions, under the Share Repurchase Program. The program is consistent with our capital allocation process, which has centered on those investments necessary to grow our businesses organically and through acquisitions, while also providing cash returns to shareholders. Our strategy for cash flow utilization is to invest in our business, execute strategic acquisitions, pay dividends and repurchase common stock.



ITEM 3.	DEFAULTS UPON SENIOR SECURITIES

None.



ITEM 4.	MINE SAFETY DISCLOSURES

Not applicable.



ITEM 5.	OTHER INFORMATION

Disclosure pursuant to Section 219 of the Iran Threat Reduction & Syria Human Rights Act (ITRA)

This disclosure is made pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012 which added subsection (r) to Section 13 of the Exchange Act (Section 13(r)). Section 13(r) requires an issuer to disclose in its annual or quarterly reports whether it or any of its affiliates have knowingly engaged in certain activities, transactions or dealings relating to Iran. Disclosure of such activities, transactions or dealings is required even when conducted outside the United States by non-U.S. persons in compliance with applicable law, and whether or not such activities are sanctionable under U.S. law.

In its 2012 Annual Report, ITT described its acquisition of all the shares of Joh. Heinr. Bornemann GmbH (Bornemann) in November 2012, as well as certain activities of Bornemann in Iran and the wind down of those activities in accordance with a General License issued on December 26, 2012 (the General License) by the Office of Foreign Assets Control. As permitted by the General License, on or before March 8, 2013, Bornemann completed the wind-down activities and ceased all activities in Iran. As required to be disclosed by Section 13(r), the gross revenues and operating income to Bornemann from its Iranian activities subsequent to its acquisition by ITT were Euros 2.2 million and Euros 1.5 million, respectively. Prior to its acquisition by ITT, Bornemann issued a performance bond to its Iranian customer in the amount of Euros 1.3 million (the Bond). Bornemann requested that the Bond be canceled prior to March 8, 2013; however, the former customer refused this request and as a result the Bond remains outstanding. Bornemann did not receive gross revenues or operating income, or pay interest, with respect to the Bond in any subsequent periods through ~~September~~June 30, ~~2016,~~2017, however, Bornemann did pay fees in ~~2015~~2016 of approximately Euros 11 ~~thousand and fees to date in 2016 of approximately Euros 8~~ thousand to the German financial institution which is maintaining the Bond.



ITEM 6.	EXHIBITS

(a) See the Exhibit Index for a list of exhibits filed herewith.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.




		ITT Inc.

		(Registrant)

By:		/S/S/ STEVEN C. GIULIANO
		Steven C. Giuliano
		Vice President and Chief Accounting Officer
		(Principal accounting officer)

~~November~~August 4, ~~2016~~2017

EXHIBIT INDEX



EXHIBIT NUMBER	DESCRIPTION	LOCATION

(10.1)*	~~Non-Employee Director Compensation Summary~~	~~Filed herewith.~~

(31.1)	Certification pursuant to Rule 13a-14(a)/15d-14 (a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

(31.2)	Certification pursuant to Rule 13a-14(a)/15d-14 (a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith.

(32.1)	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.

(32.2)	Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.

(101)	The following materials from ITT Inc.’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2016,~~2017, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Condensed ~~Income~~ Statements of Operations, (ii) Consolidated Condensed Statements of Comprehensive Income, (iii) Consolidated Condensed Balance Sheets, (iv) Consolidated Condensed Statements of Cash Flows, (v) Consolidated Condensed Statements of Changes in Shareholders' Equity, and (vi) Notes to Consolidated Condensed Financial Statements	Submitted electronically with this report.

* Management compensatory plan

4137



	# of Awards Granted	Weighted Average Grant Date Fair Value Per Share
Non-qualified stock options (NQOs)	0.4		$	9.16
Restricted stock units (RSUs)	0.3		$	33.28
Performance stock units (PSUs)	0.2		$	33.27



Three Months Ended September 30, 2015	Industrial Process				Motion Technologies			Interconnect Solutions			Control Technologies			Total Segment
Segment operating income		$	34.0			$	33.0		$	3.6		$	14.0		$	84.6
Restructuring costs		0.6				—			0.9			0.3			1.8
Other		1.3				2.1			0.1			0.4			3.9
Adjusted segment operating income		$	35.9			$	35.1		$	4.6		$	14.7		$	90.3
Nine Months Ended September 30, 2015
Segment operating income		$	95.9			$	111.0		$	7.6		$	40.5		$	255.0
Restructuring costs		10.6				—			6.2			0.8			17.6
Other		(0.4		)		2.1			0.3			0.9			2.9
Adjusted segment operating income		$	106.1			$	113.1		$	14.1		$	42.2		$	275.5

# of Awards Granted

Weighted Average Grant Date Fair Value Per Share

Restricted stock units (RSUs)

Performance stock units (PSUs)