UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 20192020
or
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 Indiana81-1197930
(State or Other Jurisdiction

of Incorporation or Organization)
(I.R.S. Employer

Identification Number)
1133 Westchester Avenue,, White Plains,, NY10604
(Principal Executive Office)
Telephone Number: (914)641-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $1 per shareITTNew York Stock Exchange
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).  Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company
Emerging growth 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.    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes      No  
As of July 31, 2019,29, 2020, there were 88.086.4 million shares of common stock ($1 par value per share) of the registrantissuer outstanding.




TABLE OF CONTENTS
ITEM
  
PAGE
PART I – FINANCIAL INFORMATION
1.
2.
3.
4.
PART II – OTHER INFORMATION
1.
1A.
2.
3.
4.
5.
6.

ITEM
  
PAGE
PART I – FINANCIAL INFORMATION
1. 
 
Consolidated Condensed Statements of Operations
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
   
2.
 
 
 
 
 
 
3.
4.
PART II – OTHER INFORMATION
1.
1A.
2.
3.
4.
5.
6.
 




WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the U.S. Securities and Exchange Commission (the SEC). The SEC maintains a website at www.sec.gov on which you may access our SEC filings. In addition, we make available free of charge at www.itt.com/investors copies of materials we file with, or furnish to, the SEC as soon as reasonably practical after we electronically file or furnish these reports, as well as other important information that we disclose from time to time. Information contained on our website, or that can be accessed through our website, does not constitute a part of this Report.Quarterly Report on Form 10-Q (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 isare located at 1133 Westchester Avenue, White Plains, NYNew York 10604 and the telephone number of this location is (914) 641-2000.
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 our business, future financial results and the industry in which we operate, and other legal, regulatory and economic developments. These forward-looking statements include, but are not limited to, future strategic plans and other statements that describe the company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future 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 occur or that anticipated results will be achieved or accomplished.
Among the factors that could cause our results to differ materially from those indicated by forward-looking statements are risks and uncertainties inherent in our business including, without limitation:
impacts on our business due to the COVID-19 pandemic, including disruptions to our operations and demand for our products, increased costs, disruption of supply chain and other constraints in the availability of key commodities and other necessary services, government-mandated site closures, employee illness or loss of key personnel, the impact of travel restrictions and stay-in-place restrictions on our business and workforce, customer and supplier bankruptcies, impacts to the global economy and financial markets, and liquidity challenges in accessing capital markets;
uncertain global economic and capital markets conditions, including due to COVID-19, trade disputes between the U.S. and its trading partners, and fluctuations in oil prices;
uncertainties regarding our exposure to pending and future asbestos claims and related liabilities and insurance recoveries;
risks due to our operations and sales outside the U.S. and in emerging markets;
fluctuations in foreign currency exchange rates;
fluctuations in customers’ levels of capital investment and maintenance expenditures, especially in the oil and gas, chemical, and mining markets, or changes in our customers’ anticipated production schedules, such as shifts in the production of Boeing’s 737 MAX;
failure to compete successfully in our markets;
the extent to which there are quality problems with respect to manufacturing processes or finished goods;
failure to integrate acquired businesses or achieve expected benefits from such acquisitions;
risks related to government contracting, including changes in levels of government spending and regulatory and contractual requirements applicable to sales to the U.S. government;
volatility in raw material prices and our suppliers’ ability to meet quality and delivery requirements;



failure to manage the distribution of products and services effectively;
loss of or decrease in sales from our most significant customers;
fluctuations in our effective tax rate;
failure to retain existing senior management, engineering and other key personnel and attract and retain new qualified personnel;
failure to protect our intellectual property rights or violations of the intellectual property rights of others;
the risk of material business interruptions, particularly at our manufacturing facilities;
the risk of cybersecurity breaches;
changes in laws relating to the use and transfer of personal and other information;
failure of portfolio management strategies, including cost-saving initiatives, to meet expectations;
changes in environmental laws or regulations, discovery of previously unknown or more extensive contamination, or the failure of a potentially responsible party to perform;
failure to comply with the U.S. Foreign Corrupt Practices Act or other applicable anti-corruption legislation, export controls and trade sanctions, including recently announced tariffs;
risk of product liability claims and litigation; and
risk of liabilities from past divestitures and spin-offs.
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 SEC, including our Annual Report on Form 10-K for the year ended December 31, 20182019 (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.




PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Three Months Six MonthsThree MonthsSix Months
For the Periods Ended June 302019 2018 2019 2018For the Periods Ended June 302020201920202019
Revenue$719.9
 $696.8
 $1,415.4
 $1,386.1
Revenue$514.7  $719.9  $1,178.0  $1,415.4  
Costs of revenue487.9
 470.8
 964.6
 935.9
Costs of revenue351.1  487.9  805.0  964.6  
Gross profit232.0
 226.0
 450.8
 450.2
Gross profit163.6  232.0  373.0  450.8  
General and administrative expenses65.7
 63.0
 117.6
 128.1
General and administrative expenses44.6  62.6  101.7  113.4  
Sales and marketing expenses42.7
 43.4
 82.9
 86.9
Sales and marketing expenses35.7  42.7  77.3  82.9  
Research and development expenses25.8
 25.8
 49.3
 50.5
Research and development expenses18.9  25.8  41.6  49.3  
Asbestos-related costs (benefit), net11.8
 13.5
 24.4
 (6.2)Asbestos-related costs (benefit), net16.0  11.8  (24.7) 24.4  
Restructuring costsRestructuring costs27.9  3.1  31.0  4.2  
Asset impairment chargesAsset impairment charges—  —  16.3  —  
Operating income86.0
 80.3
 176.6
 190.9
Operating income20.5  86.0  129.8  176.6  
Interest and non-operating (income) expenses, net(0.4) 1.5
 (0.9) 3.3
Interest and non-operating expenses (income), netInterest and non-operating expenses (income), net2.2  (0.4) 2.8  (0.9) 
Income from continuing operations before income tax expense86.4
 78.8
 177.5
 187.6
Income from continuing operations before income tax expense18.3  86.4  127.0  177.5  
Income tax expense19.3
 8.9
 39.0
 16.5
Income tax (benefit) expenseIncome tax (benefit) expense(28.1) 19.3  (3.4) 39.0  
Income from continuing operations67.1
 69.9
 138.5
 171.1
Income from continuing operations46.4  67.1  130.4  138.5  
(Loss) income from discontinued operations, net of tax benefit of $0.0, $0.1, $0.0 and $0.0, respectively(0.1) 
 (0.1) 0.1
Income (loss) from discontinued operations, net of tax expense of $0.3, $0.0, $0.7 and $0.0, respectivelyIncome (loss) from discontinued operations, net of tax expense of $0.3, $0.0, $0.7 and $0.0, respectively1.6  (0.1) 2.7  (0.1) 
Net income67.0
 69.9
 138.4
 171.2
Net income48.0  67.0  133.1  138.4  
Less: Income attributable to noncontrolling interests0.2
 0.2
 0.3
 0.3
Less: Income attributable to noncontrolling interests—  0.2  0.3  0.3  
Net income attributable to ITT Inc.$66.8
 $69.7
 $138.1
 $170.9
Net income attributable to ITT Inc.$48.0  $66.8  $132.8  $138.1  
Amounts attributable to ITT Inc.:       Amounts attributable to ITT Inc.:
Income from continuing operations, net of tax$66.9
 $69.7
 $138.2
 $170.8
Income from continuing operations, net of tax$46.4  $66.9  $130.1  $138.2  
(Loss) income from discontinued operations, net of tax(0.1) 
 (0.1) 0.1
Income from discontinued operations, net of taxIncome from discontinued operations, net of tax1.6  (0.1) 2.7  (0.1) 
Net income attributable to ITT Inc.$66.8
 $69.7
 $138.1
 $170.9
Net income attributable to ITT Inc.$48.0  $66.8  $132.8  $138.1  
Earnings per share attributable to ITT Inc.:       Earnings per share attributable to ITT Inc.:
Basic:       Basic:
Continuing operations$0.76
 $0.80
 $1.58
 $1.95
Continuing operations$0.54  $0.76  $1.50  $1.58  
Discontinued operationsDiscontinued operations0.02  —  0.03  —  
Net income$0.76
 $0.80
 $1.58
 $1.95
Net income$0.56  $0.76  $1.53  $1.58  
Diluted:       Diluted:
Continuing operations$0.75
 $0.79
 $1.56
 $1.93
Continuing operations$0.53  $0.75  $1.49  $1.56  
Discontinued operationsDiscontinued operations0.02  —  0.03  —  
Net income$0.75
 $0.79
 $1.56
 $1.93
Net income$0.55  $0.75  $1.52  $1.56  
       
Weighted average common shares – basic87.8
 87.5
 87.7
 87.8
Weighted average common shares – basic86.3  87.8  87.0  87.7  
Weighted average common shares – diluted88.7
 88.4
 88.6
 88.7
Weighted average common shares – diluted86.8  88.7  87.6  88.6  
The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the above statements of operations.
1


CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(IN MILLIONS) 
 Three MonthsSix Months
For the Periods Ended June 302020201920202019
Net income$48.0  $67.0  $133.1  $138.4  
Other comprehensive income (loss):
Net foreign currency translation adjustment2.1  5.3  (49.2) 2.9  
Net change in postretirement benefit plans, net of tax benefits of $0.3, $0.2, $0.6 and $0.4, respectively0.9  0.5  1.8  1.1  
Other comprehensive income (loss)3.0  5.8  (47.4) 4.0  
Comprehensive income51.0  72.8  85.7  142.4  
Less: Comprehensive income attributable to noncontrolling interests—  0.2  0.3  0.3  
Comprehensive income attributable to ITT Inc.$51.0  $72.6  $85.4  $142.1  
Disclosure of reclassification adjustments to postretirement benefit plans
Reclassification adjustments (see Note 15):
Amortization of prior service benefit, net of tax expense of $(0.3), $(0.2), $(0.6) and $(0.5), respectively$(1.0) $(0.9) $(1.9) $(1.7) 
Amortization of net actuarial loss, net of tax benefits of $0.6, $0.4, $1.2 and $0.9, respectively1.9  1.4  3.7  2.8  
Net change in postretirement benefit plans, net of tax$0.9  $0.5  $1.8  $1.1  
 Three Months Six Months
For the Periods Ended June 302019 2018 2019 2018
Net income$67.0
 $69.9
 $138.4
 $171.2
Other comprehensive income (loss):       
Net foreign currency translation adjustment5.3
 (47.1) 2.9
 (20.6)
Net change in postretirement benefit plans, net of tax benefits of $0.2, $0.4, $0.4 and $0.8, respectively0.5
 1.1
 1.1
 2.2
Other comprehensive income (loss)5.8
 (46.0) 4.0
 (18.4)
Comprehensive income72.8
 23.9
 142.4
 152.8
Less: Comprehensive income attributable to noncontrolling interests0.2
 0.2
 0.3
 0.3
Comprehensive income attributable to ITT Inc.$72.6
 $23.7
 $142.1
 $152.5
Disclosure of reclassification adjustments to postretirement benefit plans       
Reclassification adjustments (see Note 15):       
Amortization of prior service benefit, net of tax expense of $(0.2), $(0.3), $(0.5) and $(0.5), respectively$(0.9) $(0.8) $(1.7) $(1.7)
Amortization of net actuarial loss, net of tax benefits of $0.4, $0.7, $0.9 and $1.3, respectively1.4
 1.9
 2.8
 3.9
Net change in postretirement benefit plans, net of tax$0.5
 $1.1
 $1.1
 $2.2
The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the
statements of comprehensive income.
2


CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 
June 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents$819.1  $612.1  
Receivables, net463.2  578.4  
Inventories, net384.6  392.9  
Other current assets159.9  153.4  
Total current assets1,826.8  1,736.8  
Plant, property and equipment, net505.4  531.5  
Goodwill920.3  927.2  
Other intangible assets, net115.9  138.0  
Asbestos-related assets319.4  319.6  
Deferred income taxes161.4  138.1  
Other non-current assets302.1  316.5  
Total non-current assets2,324.5  2,370.9  
Total assets$4,151.3  $4,107.7  
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term debt and current maturities of long-term debt$247.5  $86.5  
Accounts payable271.0  332.4  
Accrued liabilities429.1  430.8  
Total current liabilities947.6  849.7  
Asbestos-related liabilities717.9  731.6  
Postretirement benefits212.9  213.9  
Other non-current liabilities217.9  234.7  
Total non-current liabilities1,148.7  1,180.2  
Total liabilities2,096.3  2,029.9  
Shareholders’ equity:
Common stock:
Authorized – 250.0 shares, $1 par value per share
Issued and outstanding – 86.3 shares and 87.8 shares, respectively86.3  87.8  
Retained earnings2,398.2  2,372.4  
Total accumulated other comprehensive loss(432.7) (385.3) 
Total ITT Inc. shareholders’ equity2,051.8  2,074.9  
Noncontrolling interests3.2  2.9  
Total shareholders’ equity2,055.0  2,077.8  
Total liabilities and shareholders’ equity$4,151.3  $4,107.7  
The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the above statements of comprehensive income.balance sheets.
3


CONSOLIDATED CONDENSED BALANCE SHEETSSTATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) MILLIONS)
 June 30,
2019
 December 31,
2018
Assets   
Current assets:   
Cash and cash equivalents$531.9
 $561.2
Receivables, net600.0
 540.0
Inventories, net421.4
 380.5
Other current assets149.1
 163.4
Total current assets1,702.4
 1,645.1
Plant, property and equipment, net534.1
 518.8
Goodwill931.0
 875.9
Other intangible assets, net128.1
 136.1
Asbestos-related assets287.5
 309.6
Deferred income taxes162.9
 164.5
Other non-current assets295.4
 196.8
Total non-current assets2,339.0
 2,201.7
Total assets$4,041.4
 $3,846.8
Liabilities and Shareholders’ Equity   
Current liabilities:   
Commercial paper and current maturities of long-term debt$149.4
 $116.2
Accounts payable347.4
 339.2
Accrued liabilities395.6
 416.7
Total current liabilities892.4
 872.1
Asbestos-related liabilities763.2
 775.1
Postretirement benefits204.0
 208.2
Other non-current liabilities244.4
 166.5
Total non-current liabilities1,211.6
 1,149.8
Total liabilities2,104.0
 2,021.9
Shareholders’ equity:   
Common stock:   
Authorized – 250.0 shares, $1 par value per share   
Issued and outstanding – 87.9 shares and 87.6 shares, respectively87.9
 87.6
Retained earnings2,218.8
 2,110.3
Total accumulated other comprehensive loss(371.5) (375.5)
Total ITT Inc. shareholders’ equity1,935.2
 1,822.4
Noncontrolling interests2.2
 2.5
Total shareholders’ equity1,937.4
 1,824.9
Total liabilities and shareholders’ equity$4,041.4
 $3,846.8

For the Six Months Ended June 3020202019
Operating Activities
Income from continuing operations attributable to ITT Inc.$130.1  $138.2  
Adjustments to income from continuing operations:
Depreciation and amortization54.5  53.0  
Equity-based compensation5.8  8.4  
Asbestos-related (benefit) costs, net(24.7) 24.4  
Asset impairment charges16.3  —  
Other non-cash charges, net23.5  15.6  
Asbestos-related payments, net(7.6) (15.8) 
Changes in assets and liabilities:
Change in receivables97.2  (52.9) 
Change in inventories2.0  (27.4) 
Change in accounts payable(62.3) 11.4  
Change in accrued expenses5.7  (28.1) 
Change in income taxes(17.5) 3.7  
Other, net(19.9) (29.4) 
Net Cash – Operating activities203.1  101.1  
Investing Activities
Capital expenditures(34.3) (45.8) 
Acquisitions, net of cash acquired(4.7) (87.3) 
Other, net1.9  0.8  
Net Cash – Investing activities(37.1) (132.3) 
Financing Activities
Commercial paper, net borrowings51.0  33.7  
Short-term revolving loans, borrowings495.8  —  
Short-term revolving loans, repayments(406.2) —  
Long-term debt, issued—  7.1  
Long-term debt, repayments(1.2) (2.0) 
Repurchase of common stock(83.7) (20.0) 
Proceeds from issuance of common stock0.1  8.3  
Dividends paid(14.6) (26.1) 
Other, net—  (0.6) 
Net Cash – Financing activities41.2  0.4  
Exchange rate effects on cash and cash equivalents(0.2) 0.6  
Net Cash – Operating activities of discontinued operations0.1  1.2  
Net change in cash and cash equivalents207.1  (29.0) 
Cash and cash equivalents – beginning of year (includes restricted cash of $0.8 and $1.0, respectively)612.9  562.2  
Cash and cash equivalents – end of period (includes restricted cash of $0.9 and $1.3, respectively)$820.0  $533.2  
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest$1.2  $1.7  
Income taxes, net of refunds received$10.7  $33.7  
The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the above balance sheets.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
For the Six Months Ended June 302019 2018
Operating Activities   
Income from continuing operations attributable to ITT Inc.$138.2
 $170.8
Adjustments to income from continuing operations:   
Depreciation and amortization53.0
 55.2
Equity-based compensation8.4
 10.2
Asbestos-related costs (benefit), net24.4
 (6.2)
Other non-cash charges, net15.3
 4.3
Asbestos-related payments, net(15.8) (30.8)
Changes in assets and liabilities:   
Change in receivables(52.9) (15.2)
Change in inventories(27.4) (22.8)
Change in accounts payable11.4
 (14.2)
Change in accrued expenses(28.1) (23.0)
Change in income taxes3.7
 (11.7)
Other, net(29.1) 2.7
Net Cash – Operating activities101.1
 119.3
Investing Activities   
Capital expenditures(45.8) (46.3)
Acquisitions, net of cash acquired(87.3) 
Other, net0.8
 0.9
Net Cash – Investing activities(132.3) (45.4)
Financing Activities   
Commercial paper, net borrowings (repayments)33.7
 (162.4)
Short-term revolving loans, borrowings
 246.5
Short-term revolving loans, repayments
 (23.5)
Long-term debt, issued7.1
 
Long-term debt, repayments(2.0) (1.9)
Repurchase of common stock(20.0) (55.4)
Proceeds from issuance of common stock8.3
 4.7
Dividends paid(26.1) (12.0)
Other, net(0.6) (0.1)
Net Cash – Financing activities0.4
 (4.1)
Exchange rate effects on cash and cash equivalents0.6
 (8.6)
Net Cash – Operating activities of discontinued operations1.2
 (1.4)
Net change in cash and cash equivalents(29.0) 59.8
Cash and cash equivalents – beginning of year (includes restricted cash of $1.0 and $1.2, respectively)562.2
 391.0
Cash and cash equivalents – end of period (includes restricted cash of $1.3 and $1.2, respectively)$533.2
 $450.8
Supplemental Disclosures of Cash Flow Information   
Cash paid during the year for:   
Interest$1.7
 $1.1
Income taxes, net of refunds received$33.7
 $23.2
The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the above statements of cash flows.
4


CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) 
Common StockRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal Shareholders' Equity
(Shares)(Dollars)
December 31, 201987.8  $87.8  $2,372.4  $(385.3) $2.9  $2,077.8  
Net income—  —  84.8  —  0.3  85.1  
Activity from stock incentive plans0.4  0.4  2.2  —  —  2.6  
Share repurchases(1.9) (1.9) (81.5) —  —  (83.4) 
Cumulative adjustment for accounting change—  —  (1.2) —  —  (1.2) 
Dividends declared ($0.169 per share)—  —  (14.9) —  —  (14.9) 
Total other comprehensive loss, net of tax—  —  —  (50.4) —  (50.4) 
March 31, 202086.3  $86.3  $2,361.8  $(435.7) $3.2  $2,015.6  
Net income—  —  48.0  —  —  48.0  
Activity from stock incentive plans—  —  3.3  —  —  3.3  
Share repurchases—  —  (0.3) —  —  (0.3) 
Dividends declared ($0.169 per share)—  —  (14.6) —  —  (14.6) 
Total other comprehensive income, net of tax—  —  —  3.0  —  3.0  
June 30, 202086.3  $86.3  $2,398.2  $(432.7) $3.2  $2,055.0  
 Common Stock Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shareholders' Equity
 (Shares) (Dollars)        
            
December 31, 201887.6
 $87.6
 $2,110.3
 $(375.5) $2.5
 $1,824.9
            
Net income
 
 71.3
 
 0.1
 71.4
Activity from stock incentive plans0.6
 0.6
 8.9
 
 
 9.5
Share repurchases(0.4) (0.4) (19.5) 
 
 (19.9)
Dividends declared ($0.147 per share)
 
 (12.9) 
 
 (12.9)
Total other comprehensive loss, net of tax
 
 
 (1.8) 
 (1.8)
Other
 
 
 
 0.1
 0.1
March 31, 201987.8
 $87.8
 $2,158.1
 $(377.3) $2.7
 $1,871.3
            
Net income
 
 66.8
 
 0.2
 67.0
Activity from stock incentive plans0.1
 0.1
 7.1
 
 
 7.2
Share repurchases
 
 (0.1) 
 
 (0.1)
Dividends declared ($0.147 per share)
 
 (13.1) 
 
 (13.1)
Dividend to noncontrolling interest
 
 
 
 (0.7) (0.7)
Total other comprehensive income, net of tax
 
 
 5.8
 
 5.8
June 30, 201987.9
 $87.9
 $2,218.8
 $(371.5) $2.2
 $1,937.4
            
 Common Stock Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shareholders' Equity
 (Shares) (Dollars)        
            
December 31, 201788.2
 $88.2
 $1,856.1
 $(348.2) $1.7
 $1,597.8
            
Net income
 
 101.2
 
 0.1
 101.3
Activity from stock incentive plans0.3
 0.3
 4.7
 
 
 5.0
Share repurchases(1.1) (1.1) (54.2) 
 
 (55.3)
Cumulative adjustment for accounting change
 
 (4.1) 
 
 (4.1)
Dividends declared ($0.134 per share)
 
 (11.9) 
 
 (11.9)
Total other comprehensive income, net of tax
 
 
 27.6
 
 27.6
Other
 
 
 
 0.1
 0.1
March 31, 201887.4
 $87.4
 $1,891.8
 $(320.6) $1.9
 $1,660.5
            
Net income
 
 69.7
 
 0.2
 69.9
Activity from stock incentive plans0.2
 0.2
 9.7
 
 
 9.9
Share repurchases
 
 (0.1) 
 
 (0.1)
Dividends declared ($0.134 per share)
 
 (11.8) 
 
 (11.8)
Total other comprehensive loss, net of tax
 
 
 (46.0) 
 (46.0)
Other
 
 
 
 (0.1) (0.1)
June 30, 201887.6
 $87.6
 $1,959.3
 $(366.6) $2.0
 $1,682.3

Common StockRetained EarningsAccumulated Other Comprehensive LossNoncontrolling InterestTotal Shareholders' Equity
(Shares)(Dollars)
December 31, 201887.6  $87.6  $2,110.3  $(375.5) $2.5  $1,824.9  
Net income—  —  71.3  —  0.1  71.4  
Activity from stock incentive plans0.6  0.6  8.9  —  —  9.5  
Share repurchases(0.4) (0.4) (19.5) —  —  (19.9) 
Dividends declared ($0.147 per share)—  —  (12.9) —  —  (12.9) 
Total other comprehensive loss, net of tax—  —  —  (1.8) —  (1.8) 
Other—  —  —  —  0.1  0.1  
March 31, 201987.8  $87.8  $2,158.1  $(377.3) $2.7  $1,871.3  
Net income—  —  66.8  —  0.2  67.0  
Activity from stock incentive plans0.1  0.1  7.1  —  —  7.2  
Share repurchases—  —  (0.1) —  —  (0.1) 
Dividends declared ($0.147 per share)—  —  (13.1) —  —  (13.1) 
Dividend to noncontrolling interest—  —  —  —  (0.7) (0.7) 
Total other comprehensive income, net of tax—  —  —  5.8  —  5.8  
June 30, 201987.9  $87.9  $2,218.8  $(371.5) $2.2  $1,937.4  
The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the above statements of changes in shareholders’ equity.
5


NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
(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 transportation, industrial, and 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 three segments: Motion Technologies, consisting of friction and shock and vibration equipment; Industrial Process, consisting of industrial flow equipment and services; and Connect & Control Technologies, consisting of electronic connectors, fluid handling, motion control, composite materials and noise and energy absorption products. Financial information for our segments is presented in Note 3, Segment Information.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) a pandemic, resulting in certain local government-mandated site closures. While most of our businesses have been deemed essential, we have experienced certain local government-mandated site closures. The Company continues to face certain risks resulting from COVID-19 including disruption of our operations due to decreased customer demand, temporary plant closures, and elevated hygiene standards to keep our employees safe, along with increased risk of customer or supplier bankruptcy and potential challenges in accessing capital markets. All of these may have a material adverse impact on the Company and there is uncertainty around the duration or severity of these impacts. Therefore, while we expect this matter to negatively impact our business, results of operations, and financial position, the extent of certain future impacts cannot be reasonably estimated at this time. Refer to the section titled “Impact of COVID-19 on our Business” within Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations for additional information.
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 known adjustments (which consist primarily of normal, recurring accruals, estimates and assumptions) necessary to presentstate fairly the financial position, results of operations, and cash flows for the periods presented. The Consolidated Condensed Balance Sheet as of December 31, 2018,2019, presented herein, has been derived from our audited balance sheet included in our Annual Report on Form 10-K ( (the 20182019 Annual Report)Report) for the year ended December 31, 20182019 but does not include all disclosures required by GAAP. We consistently applied the accounting policies described in the 20182019 Annual Report in preparing these unaudited financial statements, other than those related to new accounting standards adopted during the period. Refer to Note 2, Recent Accounting Pronouncements for further information. These financial statements should be read in conjunction with the financial statements and notes thereto included in our 20182019 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.available and may be impacted by the duration and severity of the pandemic. 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 and assets, allowance for doubtful accountscredit losses and inventory valuation. Actual results could differ from these estimates.
ITT’s quarterly financial periods end on the Saturday that is 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.
6


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 Recently Adopted
Leases (ASU 2016-02)
In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance which updated the accounting for leases in order to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. The new standard requires entities to recognize a liability for their lease obligations and a corresponding right-of-use asset, initially measured at the present value of the lease payments. Subsequent accounting depends on whether

the agreement is deemed to be a financing or operating lease. For operating leases, a lessee recognizes its total lease expense as an operating expense over the lease term. For financing leases, a lessee recognizes amortization of the right-of-use asset as an operating expense over the lease term separately from interest on the lease liability. The ASU requires that assets and liabilities be presented and disclosed separately and the liabilities must be classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The ASU was effective for the Company beginning on January 1, 2019, at which time we adopted the new standard using the modified retrospective approach as of the date of adoption. The Company elected to not reassess certain lease characteristics including whether expired or certain existing contracts contain leases, the lease classification prior to adoption, and initial direct costs. Upon adoption, we recognized a right-of-use asset of $80.0 (net of deferred rent of $3.4 previously included within Accrued liabilities and Other non-current liabilities) and a lease liability of $83.4 related to existing leases of real estate, vehicles, and other equipment that are classified as operating leases, and have terms greater than 12 months. The right-of-use asset is included within Other non-current assets and the lease liabilities are included within Accrued liabilities and Other non-current liabilities on the Consolidated Balance Sheet. A summary of the impact to our Consolidated Balance Sheet on January 1, 2019 is as follows:
 December 31,
2018
 Effect of Change January 1,
2019
Other non-current assets$196.8
 $80.0
 $276.8
Accrued liabilities416.7
 18.7
 435.4
Other non-current liabilities166.5
 61.3
 227.8

Targeted Improvements to Accounting for Hedging Activities (ASU 2017-12)
In August 2017, the FASB issued amended guidance that simplifies the requirements of hedge accounting. The ASU enables companies to more accurately present the economic effects of risk management activities in the financial statements. The guidance requires the presentation of all items that affect earnings in the same income statement line as the hedged item and is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with early adoption permitted. The Company adopted the provisions of ASU 2017-12 on January 1, 2019. The adoption did not result in an impact to our financial results since the Company did not have any derivatives outstanding at the time of adoption. As of June 30, 2019, the U.S. dollar equivalent notional value of the Company’s outstanding foreign currency forward contracts designated for hedge accounting was $9.1 and the fair value was nominal.
Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income (ASU 2018-02)
In February 2018, the FASB issued guidance related to the U.S. Tax Cuts and Jobs Act of 2017 (the Tax Act), which permits an optional reclassification of residual tax effects that are included within accumulated other comprehensive loss, to retained earnings. The reclassification represents the difference between the amount recorded in other comprehensive loss at the historical U.S. federal tax rate at the time the Tax Act became effective, and the amount that would have been recorded at the newly enacted rate. This guidance became effective during the first quarter of 2019, however we did not elect to make the optional reclassification.
Accounting Pronouncements Not Yet Adopted
Measurement of Credit Losses on Financial Instruments (ASU 2016-13)
In June 2016, the FASB issued updated guidance that requires entities to use a current expected credit loss model to measure credit-related impairments for financial instruments held at amortized cost, including trade receivables. The current expected credit loss model is based on relevant information about past events, including historical experience, current conditions at the date of measurement, and reasonable and supportable forecasts that affect collectability. Current expected credit losses, and subsequent adjustments, represent an estimate of lifetime expected credit losses that are recorded as an allowance deducted from the amortized cost of the financial instrument. The updated guidance also amends the other-than-temporary impairment model for available-for-sale debt securities by requiring the recognition of impairments for credit-related losses through an allowance and eliminating the length of time a security has been in an unrealized loss position as a consideration in the determination of whether a credit loss exists. The updated guidance iswas effective for the Company beginning on January 1, 2020 and will bewas adopted using a modified retrospective transition approach, resulting in an increase in our allowance for the provisionscredit losses related to applicationreceivables and contract assets. Refer to Note 8, Receivables, Net for additional information. The cumulative effect of the current expected credit loss modelchanges made to financial instruments and using a prospective transition approach for the provisionsour consolidated January 1, 2020 balance sheet related to credit losses on available-for-sale debt securities. The Companythe adoption of ASU 2016-13 is currently evaluating the effect of adoption on our financial statements.as follows:
December 31, 2019Cumulative Effect of AdoptionJanuary 1, 2020
Receivables, net$578.4  $(1.6) $576.8  
Other current assets153.4  (0.1) 153.3  
Deferred income taxes138.1  0.5  138.6  
Retained earnings2,372.4  (1.2) 2,371.2  

NOTE 3
SEGMENT INFORMATION
The Company’s segments are reported on the same basis used by our Chief Executive Officer, who is also our chief operating decision maker, for evaluating performance and for allocating resources. Our three3 reportable segments are referred to as: Motion Technologies, Industrial Process, and Connect & Control Technologies.
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.
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.
Connect & Control Technologies manufactures harsh-environment connector solutions, and critical energy absorption, and flow control components, and composite materials for the aerospace and defense, general industrial, medical, and 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 receivables, environmental-related assets, deferred taxes, and certain property, plant and equipment.
 Revenue Operating Income Operating Margin
For the Three Months Ended June 302019 2018 2019 2018 2019 2018
Motion Technologies$317.7
 $330.3
 $52.0
 $55.5
 16.4% 16.8%
Industrial Process232.6
 203.2
 26.0
 23.4
 11.2% 11.5%
Connect & Control Technologies170.2
 164.1
 29.6
 27.3
 17.4% 16.6%
Total segment results720.5
 697.6
 107.6
 106.2
 14.9% 15.2%
Asbestos-related costs, net
 
 (11.8) (13.5) 
 
Eliminations / Other corporate costs(0.6) (0.8) (9.8) (12.4) 
 
Total Eliminations / Corporate and Other costs(0.6) (0.8) (21.6) (25.9) 
 
Total$719.9
 $696.8
 $86.0
 $80.3
 11.9% 11.5%
            
            
 Revenue Operating Income Operating Margin
For the Six Months Ended June 302019 2018 2019 2018 2019 2018
Motion Technologies$632.9
 $672.5
 $112.9
 $117.4
 17.8% 17.5%
Industrial Process448.3
 393.0
 48.2
 40.3
 10.8% 10.3%
Connect & Control Technologies335.2
 322.0
 57.0
 50.3
 17.0% 15.6%
Total segment results1,416.4
 1,387.5
 218.1
 208.0
 15.4% 15.0%
Asbestos-related (costs) benefit, net
 
 (24.4) 6.2
 
 
Eliminations / Corporate and other costs(1.0) (1.4) (17.1) (23.3) 
 
Total Eliminations / Corporate and Other costs(1.0) (1.4) (41.5) (17.1) 
 
Total$1,415.4
 $1,386.1
 $176.6
 $190.9
 12.5% 13.8%
7




 RevenueOperating IncomeOperating Margin
For the Three Months Ended June 30202020192020201920202019
Motion Technologies$199.3  $317.7  $10.4  $52.0  5.2 %16.4 %
Industrial Process193.3  232.6  18.5  26.0  9.6 %11.2 %
Connect & Control Technologies122.9  170.2  8.4  29.6  6.8 %17.4 %
Total segment results515.5  720.5  37.3  107.6  7.2 %14.9 %
Asbestos-related costs, net—  —  (16.0) (11.8) —  —  
Eliminations / Other corporate costs(0.8) (0.6) (0.8) (9.8) —  —  
Total Eliminations / Corporate and Other costs(0.8) (0.6) (16.8) (21.6) —  —  
Total$514.7  $719.9  $20.5  $86.0  4.0 %11.9 %
 RevenueOperating IncomeOperating Margin
For the Six Months Ended June 30202020192020201920202019
Motion Technologies$497.2  $632.9  $63.5  $112.9  12.8 %17.8 %
Industrial Process420.6  448.3  27.4  48.2  6.5 %10.8 %
Connect & Control Technologies261.6  335.2  24.3  57.0  9.3 %17.0 %
Total segment results1,179.4  1,416.4  115.2  218.1  9.8 %15.4 %
Asbestos-related benefit (costs), net—  —  24.7  (24.4) —  —  
Eliminations / Other Corporate costs(1.4) (1.0) (10.1) (17.1) —  —  
Total Eliminations / Corporate and Other costs(1.4) (1.0) 14.6  (41.5) —  —  
Total$1,178.0  $1,415.4  $129.8  $176.6  11.0 %12.5 %
 Total AssetsCapital
Expenditures
Depreciation &
Amortization
As of and for the Six Months Ended June 302020
2019(a)
2020201920202019
Motion Technologies$1,097.5  $1,178.2  $22.9  $30.1  $29.2  $28.5  
Industrial Process1,031.9  1,137.8  4.4  5.6  12.3  12.6  
Connect & Control Technologies742.6  755.6  6.2  8.5  11.7  10.3  
Corporate and Other1,279.3  1,036.1  0.8  1.6  1.3  1.6  
Total$4,151.3  $4,107.7  $34.3  $45.8  $54.5  $53.0  
(a)Amounts reflect balances as of December 31, 2019.
 Total Assets 
Capital
Expenditures
 
Depreciation &
Amortization
For the Six Months Ended June 302019 
2018(a)
 2019 2018 2019 2018
Motion Technologies$1,215.0
 $1,147.2
 $30.1
 $40.0
 $28.5
 $28.7
Industrial Process1,137.6
 1,000.1
 5.6
 1.8
 12.6
 13.7
Connect & Control Technologies741.4
 694.0
 8.5
 4.3
 10.3
 10.7
Corporate and Other947.4
 1,005.5
 1.6
 0.2
 1.6
 2.1
Total$4,041.4
 $3,846.8
 $45.8
 $46.3
 $53.0
 $55.2
8


(a)Amounts reflect balances as of December 31, 2018.
NOTE 4
REVENUE
The following table represents our revenue disaggregated by end market for the three and six months ended June 30, 20192020 and 2018.2019.
For the Three Months Ended June 30, 2019Motion TechnologiesIndustrial ProcessConnect & Control TechnologiesEliminationsTotal
Automotive and rail $312.1
  $
  $
  $(0.1)  $312.0
 
Chemical and industrial pumps 
  168.7
  
  
  168.7
 
Aerospace and defense 2.8
  
  105.3
  
  108.1
 
Oil and gas 
  63.9
  10.1
  
  74.0
 
General industrial 2.8
  
  54.8
  (0.5)  57.1
 
Total $317.7
  $232.6
  $170.2
  $(0.6)  $719.9
 
                
For the Six Months Ended June 30, 2019     
Automotive and rail $622.1
  $
  $
  $(0.1)  $622.0
 
Chemical and industrial pumps 
  330.2
  
  
  330.2
 
Aerospace and defense 5.1
  
  204.8
  
  209.9
 
Oil and gas 
  118.1
  18.6
  
  136.7
 
General industrial 5.7
  
  111.8
  (0.9)  116.6
 
Total $632.9
  $448.3
  $335.2
  $(1.0)  $1,415.4
 

For the Three Months Ended June 30, 2020Motion TechnologiesIndustrial ProcessConnect & Control TechnologiesEliminationsTotal
Auto and rail$195.6  $—  $—  $—  $195.6  
Chemical and industrial pumps—  158.6  —  —  158.6  
Aerospace and defense1.6  —  64.6  —  66.2  
Oil and gas—  34.7  7.7  —  42.4  
General industrial2.1  —  50.6  (0.8) 51.9  
Total$199.3  $193.3  $122.9  $(0.8) $514.7  
For the Six Months Ended June 30, 2020
Auto and rail$488.0  $—  $—  $(0.1) $487.9  
Chemical and industrial pumps—  320.1  —  —  320.1  
Aerospace and defense4.5  —  150.7  —  155.2  
Oil and gas—  100.5  15.5  —  116.0  
General industrial4.7  —  95.4  (1.3) 98.8  
Total$497.2  $420.6  $261.6  $(1.4) $1,178.0  
For the Three Months Ended June 30, 2018Motion TechnologiesIndustrial ProcessConnect & Control TechnologiesEliminationsTotal
Automotive and rail $322.5
  $
  $
  $(0.1)  $322.4
 
Chemical and industrial pumps 
  153.2
  
  
  153.2
 
Aerospace and defense 2.7
  
  96.1
  
  98.8
 
Oil and gas 
  50.0
  10.1
  
  60.1
 
General industrial 5.1
  
  57.9
  (0.7)  62.3
 
Total $330.3
  $203.2
  $164.1
  $(0.8)  $696.8
 
                
For the Six Months Ended June 30, 2018     
Automotive and rail $661.1
  $
  $
  $(0.1)  $661.0
 
Chemical and industrial pumps 
  294.7
  
  
  294.7
 
Aerospace and defense 4.5
  
  183.7
  
  188.2
 
Oil and gas 
  98.3
  19.1
  
  117.4
 
General industrial 6.9
  
  119.2
  (1.3)  124.8
 
Total $672.5
  $393.0
  $322.0
  $(1.4)  $1,386.1
 


For the Three Months Ended June 30, 2019Motion TechnologiesIndustrial ProcessConnect & Control TechnologiesEliminationsTotal
Auto and rail$312.1  $—  $—  $(0.1) $312.0  
Chemical and industrial pumps—  168.7  —  —  168.7  
Aerospace and defense2.8  —  105.3  —  108.1  
Oil and gas—  63.9  10.1  —  74.0  
General industrial2.8  —  54.8  (0.5) 57.1  
Total$317.7  $232.6  $170.2  $(0.6) $719.9  
For the Six Months Ended June 30, 2019
Auto and rail$622.1  $—  $—  $(0.1) $622.0  
Chemical and industrial pumps—  330.2  —  —  330.2  
Aerospace and defense5.1  —  204.8  —  209.9  
Oil and gas—  118.1  18.6  —  136.7  
General industrial5.7  —  111.8  (0.9) 116.6  
Total$632.9  $448.3  $335.2  $(1.0) $1,415.4  
Contract Assets and Liabilities
Contract assets consist of unbilled amounts where revenue recognized exceeds customer billings.billings, net of allowances for credit losses. Contract liabilities consist of advance payments and billings in excess of revenue recognized. The following table represents our net contract assets and liabilities as of June 30, 20192020 and December 31, 2018.2019.
June 30,
2020
December 31,
2019
Change
Current contract assets, net$18.9  $18.0  5.0 %
Current contract liabilities(56.3) (57.4) (1.9)%
Net contract liabilities$(37.4) $(39.4) (5.1)%
 June 30,
2019
December 31,
2018
Change
Current contract assets $28.3
  $21.8
  29.8 % 
Non-current contract assets 
  0.7
  (100.0)% 
Current contract liabilities (55.8)  (61.0)  (8.5)% 
Net contract liabilities $(27.5)  $(38.5)  (28.6)% 
9


During the three and six months ended June 30, 2019,2020, we recognized revenue of $10.6$5.5 and $32.4,$38.3, respectively, related to contract liabilities as of December 31, 2018.
Remaining Performance Obligations
For contracts greater than one year, the2019. The aggregate amount of the transaction price allocated to unsatisfied or partially satisfied performance obligations as of June 30, 20192020 was $65.0.$814.2. Of this amount, we expect to recognize approximately $26$540 to $31$560 of revenue during 2019,2020 and the remainder in 2020.2021 and 2022.
NOTE 5
INCOME TAXESRESTRUCTURING ACTIONS
We have initiated various restructuring actions throughout our businesses during the past two years, including the 2020 Global Restructuring Plan. There were no other restructuring actions considered individually significant. The following table summarizes the total restructuring costs presented separately in our Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2020 and 2019.
Three MonthsSix Months
For the Periods Ended June 302020201920202019
Severance and other employee-related$27.8  $3.0  $30.9  $4.0  
Other0.1  0.1  0.1  0.2  
Total restructuring costs$27.9  $3.1  $31.0  $4.2  
By segment:
Motion Technologies$14.0  $3.1  $14.0  $3.8  
Industrial Process7.8  0.1  7.9  0.4  
Connect & Control Technologies5.2  (0.2) 6.7  (0.1) 
Corporate and Other0.9  0.1  2.4  0.1  
The following table displays a rollforward of the restructuring accruals, presented on our Consolidated Condensed Balance Sheet within accrued liabilities, for the six months ended June 30, 2020 and 2019.
20202019
Beginning balance - January 1$7.5  $6.6  
Restructuring costs31.7  4.7  
Reversal of prior accruals(0.7) (0.5) 
Cash payments(9.6) (5.6) 
Foreign exchange translation and other(0.2) (0.1) 
Ending balance - June 30$28.7  $5.1  
By accrual type:
Severance and other employee-related$28.3  $4.4  
Other0.4  0.7  
2020 Global Restructuring Plan
During 2020, the Company initiated an organizational-wide restructuring plan to reduce the overall cost structure of the Company primarily in response to an anticipated reduction in demand from the COVID-19 pandemic. As a result, the Company expects to incur cash restructuring charges of $55.6, principally related to involuntary severance costs, and expects these actions to be substantially complete in 2020. The table below summarizes the total expected restructuring costs and the total restructuring costs incurred to date by segment related to the 2020 Global Restructuring Plan.
 Three Months Six Months
For the Periods Ended June 302019 2018 Change 2019 2018 Change
Income tax expense$19.3
 $8.9
 116.9% $39.0
 $16.5
 136.4%
Effective tax rate22.3% 11.3% 1100bp
 22.0% 8.8% 1320bp
10


Expected CostsIncurred
to Date
Motion Technologies$16.8  $14.0  
Industrial Process25.3  8.3  
Connect & Control Technologies11.1  7.1  
Corporate and Other2.4  2.4  
Total$55.6  $31.8  
The higherfollowing table displays a rollforward of the restructuring accruals related to the 2020 Global Restructuring Plan:
Beginning balance - January 1$— 
Restructuring costs31.8 
Cash payments(5.8)
Foreign exchange translation and other0.1 
Ending balance - June 30$26.1 
NOTE 6
INCOME TAXES
Three MonthsSix Months
For the Periods Ended June 3020202019Change20202019Change
Income tax (benefit) expense$(28.1) $19.3  (245.6)%$(3.4) $39.0  (108.7)%
Effective tax rate(153.6)%22.3 %**(2.7)%22.0 %**
** Resulting basis point change not considered meaningful.
The lower effective tax rate during the second quarter and year-to-date periods of 20192020 was primarily due to an $11.3 reduction of a deferred tax liability in 2018 associated with unremitted foreign earnings. The higher effective tax rate during the year to date period is primarily due to tax benefits of $21.6$26.7 resulting from a recently completed internal reorganization in 2018 from German valuation allowance reversals onEurope. This reorganization resulted in a refined projection of future earnings, which will result in the realization of a portion of our deferred tax assetsassets. Additionally, in the second quarter of 2020, the Company completed the U.S. income tax audit for tax year 2016 resulting in $1.1 of previously unrecognized tax benefits.
The Company’s financial condition and results of operations have been and are expected to continue to be adversely affected by the COVID-19 pandemic and the governmental and market reactions to COVID-19. The impacts on earnings have already had, and will continue to have, an impact on the Company’s overall effective tax rate throughout the year.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. In the second quarter of 2020, the Company recognized a $4.5 reductionbenefit of $7.2 from the CARES Act. The benefit was recorded in operating income and was related to the provisional one-time tax charge associated withemployer portion of payroll taxes. Certain non-U.S. jurisdictions have enacted similar stimulus measures. We continue to monitor any effects that may result from the Tax Act.CARES Act or other similar legislation globally.
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 the Czech Republic, Germany, Hong Kong, India, Italy, Japan, Mexico, 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 of these 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 $14$15 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
11


result in changes in amounts attributable to the Company under its Tax Matters Agreement with Exelis Inc. and Xylem Inc. relating to the Company’s 2011 spin-off of those businesses.

NOTE 7

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 six months ended June 30, 20192020 and 2018.2019. 
 Three Months Six Months
For the Periods Ended June 302019 2018 2019 2018
Basic weighted average common shares outstanding87.8
 87.5
 87.7
 87.8
Add: Dilutive impact of outstanding equity awards0.9
 0.9
 0.9
 0.9
Diluted weighted average common shares outstanding88.7
 88.4
 88.6
 88.7

Three MonthsSix Months
For the Periods Ended June 302020201920202019
Basic weighted average common shares outstanding86.3  87.8  87.0  87.7  
Add: Dilutive impact of outstanding equity awards0.5  0.9  0.6  0.9  
Diluted weighted average common shares outstanding86.8  88.7  87.6  88.6  
There were no0 anti-dilutive shares underlying stock options excluded from the computation of diluted earnings per share for the three and six months ended June 30, 20192020 and 2018. During the three and six months ended June 30, 2018, 0.1 of outstanding performance stock awards were excluded from the computation of diluted earnings per share as the necessary performance conditions had not yet been satisfied.2019.
NOTE 78
RECEIVABLES, NET 
June 30,
2020
December 31,
2019
Trade accounts receivable$451.8  $562.3  
Notes receivable8.9  6.2  
Other22.4  21.2  
Receivables, gross483.1  589.7  
Less: Allowance for credit losses - receivables(19.9) (11.3) 
Receivables, net$463.2  $578.4  

June 30,
2019

December 31,
2018
Trade accounts receivable
$585.0



$531.7

Notes receivable
6.6



3.7

Other
20.5



22.9

Receivables, gross
612.1



558.3

Less: Allowance for doubtful accounts
(12.1)


(18.3)
Receivables, net
$600.0



$540.0

Allowance for Credit Losses
We determine our allowance for credit losses using a combination of factors to reduce our trade receivables and contract asset balances to the net amount expected to be collected. The allowance was based on a variety of factors including the length of time receivables were past due, macroeconomic trends and conditions, significant one-time events, historical experience, and expectations of future economic conditions. We also record an allowance for individual accounts when we become aware of specific customer circumstances, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position. The past due or delinquency status of a receivable is based on the contractual payment terms of the receivable. If circumstances related to the specific customer change, we adjust estimates of the recoverability of receivables as appropriate. Our allowance for credit losses for the six months ended June 30, 2020 includes our estimate of the impact of the COVID-19 pandemic and recent decline in the oil and gas market and will be adjusted in subsequent periods as circumstances develop and we gain better insight into the future impacts of the pandemic. We believe these events may impact our ability to collect from certain customers depending on the end market we serve and customer profile.
The following table displays our allowance for credit losses for receivables and contract assets.
June 30,
2020
December 31,
2019
Allowance for credit losses - receivables$19.9  $11.3  
Allowance for credit losses - contract assets0.1  1.5  
Total allowance for credit losses$20.0  $12.8  
12


The follow table displays a rollforward of the total allowance for credit losses for the six months ended June 30, 2020.
Total allowance for credit losses - January 1$12.8 
Impact of adoption of ASU 2016-13 (See Note 2)1.7 
Charges to income8.6 
Write-offs(3.0)
Foreign currency and other(0.1)
Total allowance for credit losses - June 30$20.0 
NOTE 89
INVENTORIES, NET 
 June 30,
2019
 December 31,
2018
Finished goods $68.3
   $64.2
 
Work in process 103.2
   83.1
 
Raw materials 249.9
   233.2
 
Inventories, net $421.4
   $380.5
 

June 30,
2020
December 31,
2019
Finished goods$58.6  $80.7  
Work in process84.4  83.9  
Raw materials241.6  228.3  
Inventories, net$384.6  $392.9  
Inventory related to long-term contracts of $45.7 as of December 31, 2018 has been reclassified to the respective inventory categories to conform with the current year presentation.

NOTE 910
OTHER CURRENT AND NON-CURRENT ASSETS 
June 30,
2020
December 31,
2019
Asbestos-related assets$85.9  $67.2  
Advance payments and other prepaid expenses36.7  45.4  
Current contract assets, net18.9  18.0  
Prepaid income taxes16.4  20.6  
Other2.0  2.2  
Other current assets$159.9  $153.4  
Other employee benefit-related assets$134.6  $133.6  
Operating lease right-of-use assets84.6  91.7  
Capitalized software costs26.4  30.1  
Environmental-related assets20.4  22.2  
Equity method investments10.3  9.8  
Other25.8  29.1  
Other non-current assets$302.1  $316.5  
 June 30,
2019
 December 31,
2018
Asbestos-related assets $67.1
   $67.1
 
Advance payments and other prepaid expenses 37.9
   44.5
 
Current contract assets 28.3
   21.8
 
Prepaid income taxes 13.5
   19.6
 
Other 2.3
   10.4
 
Other current assets $149.1
   $163.4
 
Other employee benefit-related assets $109.8
   $104.7
 
Operating lease right-of-use assets (see Note 2) 93.6
   
 
Capitalized software costs 32.3
   35.3
 
Environmental-related assets 23.6
   23.4
 
Equity method investments 8.8
   7.7
 
Other 27.3
   25.7
 
Other non-current assets $295.4
   $196.8
 
13


NOTE 1011
PLANT, PROPERTY AND EQUIPMENT, NET 
 
Useful life
(in years)
 June 30,
2019
 December 31,
2018
Machinery and equipment  2 - 10  $1,096.6
   $1,056.9
 
Buildings and improvements  5 - 40  284.1
   265.3
 
Furniture, fixtures and office equipment3 - 7  81.1
   69.1
 
Construction work in progress   65.0
   67.9
 
Land and improvements   29.7
   27.8
 
Other   10.3
   10.3
 
Plant, property and equipment, gross   1,566.8
   1,497.3
 
Less: Accumulated depreciation   (1,032.7)   (978.5) 
Plant, property and equipment, net   $534.1
   $518.8
 

Useful life
(in years)
June 30,
2020
December 31,
2019
Machinery and equipment  2 - 10$1,126.3  $1,128.9  
Buildings and improvements  5 - 40271.3  279.3  
Furniture, fixtures and office equipment3 - 778.1  79.8  
Construction work in progress48.9  48.8  
Land and improvements32.3  33.3  
Other4.9  10.5  
Plant, property and equipment, gross1,561.8  1,580.6  
Less: Accumulated depreciation(1,056.4) (1,049.1) 
Plant, property and equipment, net$505.4  $531.5  
Depreciation expense of $20.7 and $20.5, and $21.0,$41.2 and $40.7 and $41.7 was recognized in the three and six months ended June 30, 2020 and 2019, respectively.
During the first quarter of 2020, we recorded an impairment of $4.0 for a business within IP due to challenging economic conditions in the upstream oil and 2018, respectively.gas market combined with impacts associated with the COVID-19 pandemic. Long-lived assets of the business, with a carrying value of $14.0, primarily building and improvements, machinery and equipment, were reduced to their current estimated fair value of $10.0. Our current estimate of fair value, categorized within Level 3 of the fair value hierarchy, was determined based on a market approach estimating the net proceeds that would be received for the sale of the assets. Significant additional adverse changes to the economic environment and future cash flows of other businesses could cause us to record additional impairment charges in future periods, which may be material.
NOTE 1112
GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
The following table provides a rollforward of the carrying amount of goodwill for the six months ended June 30, 20192020 by segment. 
 Motion
Technologies
 
Industrial
Process
 
Connect & Control
Technologies
 Total
Goodwill - December 31, 2018 $294.5
   $315.8
   $265.6
  $875.9
Acquired 
   54.6
   
  54.6
Foreign exchange translation 0.1
   0.6
   (0.2)  0.5
Goodwill - June 30, 2019 $294.6
   $371.0
   $265.4
  $931.0


Motion
Technologies
Industrial
Process
Connect & Control
Technologies
Total
Goodwill - December 31, 2019$293.6  $354.1  $279.5  $927.2  
Adjustments to purchase price allocations—  (2.5) —  (2.5) 
Foreign exchange translation(1.4) (2.7) (0.3) (4.4) 
Goodwill - June 30, 2020$292.2  $348.9  $279.2  $920.3  
Goodwill acquiredAdjustments to purchase price allocations is related to our 2019 acquisition of Rheinhütte Pumpen Group (Rheinhütte) in the second quarter of 2019, and represents the preliminary calculation of 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 20, Acquisitions, for additional information.
14


Other Intangible Assets, Net 
Information regarding our other intangible assets is as follows:
June 30, 2020December 31, 2019
Gross
Carrying
Amount
Accumulated AmortizationNet IntangiblesGross
Carrying
Amount
Accumulated AmortizationNet Intangibles
Customer relationships$162.0  $(95.0) $67.0  $176.3  $(99.6) $76.7  
Proprietary technology46.0  (21.4) 24.6  58.4  (28.1) 30.3  
Patents and other10.5  (8.1) 2.4  21.8  (13.0) 8.8  
Finite-lived intangible total218.5  (124.5) 94.0  256.5  (140.7) 115.8  
Indefinite-lived intangibles21.9  —  21.9  22.2  —  22.2  
Other intangible assets$240.4  $(124.5) $115.9  $278.7  $(140.7) $138.0  
 June 30, 2019 December 31, 2018
 
Gross
Carrying
Amount
 Accumulated Amortization Net Intangibles 
Gross
Carrying
Amount
 Accumulated Amortization Net Intangibles
Customer relationships $164.2
   $(92.8)   $71.4
   $164.1
   $(86.2)   $77.9
 
Proprietary technology 53.6
   (27.2)   26.4
   53.7
   (25.6)   28.1
 
Patents and other 12.8
   (9.7)   3.1
   12.3
   (9.4)   2.9
 
Finite-lived intangible total 230.6
   (129.7)   100.9
   230.1
   (121.2)   108.9
 
Indefinite-lived intangibles 27.2
   
   27.2
   27.2
   
   27.2
 
Other intangible assets $257.8
   $(129.7)   $128.1
   $257.3
   $(121.2)   $136.1
 

As a result of the global COVID-19 pandemic combined with a decline in the upstream oil and gas market, during the first quarter of 2020, we determined that certain intangible assets within the IP segment including an indefinite-lived trademark, customer relationships and proprietary technology, would not be recoverable resulting in an impairment of $12.3. Significant additional adverse changes to the economic environment and future cash flows of other businesses could cause us to record additional impairment charges in future periods, which may be material. In addition, during the first quarter of 2020, we reclassified a trademark intangible asset with a net book value of $5, previously included within patents and other, to indefinite-lived intangibles as we have recently suspended our company re-branding project for the foreseeable future.
Amortization expense related to finite-lived intangible assets was $4.2 and $4.0, and $4.3,$9.0 and $8.0 and $8.9 for the three and six months ended June 30, 2020 and 2019, and 2018, respectively. Estimated amortization expense for each of the five succeeding years is as follows:
2020$8.6  
202116.3  
202216.2  
202314.4  
20249.1  
Thereafter29.4  
15


NOTE 1213
ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES 
 June 30,
2019
December 31,
2018
Compensation and other employee-related benefits $136.3
  $152.2
 
Contract liabilities and other customer-related liabilities 76.6
  82.2
 
Asbestos-related liability 72.6
  74.2
 
Accrued income taxes and other tax-related liabilities 25.7
  33.7
 
Operating lease liabilities (see Note 2) 19.3
  
 
Accrued warranty costs 16.2
  16.2
 
Environmental liabilities and other legal matters 15.0
  24.0
 
Other 33.9
  34.2
 
Accrued liabilities $395.6
  $416.7
 
Environmental liabilities $56.2
  $59.5
 
Operating lease liabilities (see Note 2) 78.5
  
 
Compensation and other employee-related benefits 35.1
  34.2
 
Deferred income taxes and other tax-related accruals 23.8
  25.0
 
Other 50.8
  47.8
 
Other non-current liabilities $244.4
  $166.5
 

June 30,
2020
December 31,
2019
Compensation and other employee-related benefits$127.2  $145.4  
Asbestos-related liability85.9  86.0  
Contract liabilities and other customer-related liabilities74.3  74.6  
Accrued restructuring costs28.7  7.5  
Accrued income taxes and other tax-related liabilities28.1  27.0  
Accrued warranty costs19.7  18.5  
Operating lease liabilities18.7  19.9  
Environmental liabilities and other legal matters16.5  17.9  
Other30.0  34.0  
Accrued liabilities$429.1  $430.8  
Operating lease liabilities$70.1  $76.0  
Environmental liabilities53.2  55.8  
Compensation and other employee-related benefits29.5  32.4  
Deferred income taxes and other tax-related liabilities23.1  24.0  
Other42.0  46.5  
Other non-current liabilities$217.9  $234.7  

NOTE 13
LEASES
The Company’s lease portfolio primarily relates to real estate, which may be used for manufacturing or non-manufacturing purposes, and contains lease terms generally ranging between one and 18 years. Our lease portfolio also includes vehicles and other equipment such as forklifts. Substantially all of our leases are classified as operating leases. For leases with terms greater than 12 months, we record a right-of-use asset and lease liability equal to the present value of the lease payments. In determining the discount rate used to measure the right-of-use asset and lease liability, we utilize the Company’s incremental borrowing rate and consider the term of the lease, as well as the geographic location of the leased asset.
Where options to renew a lease are available, they are included in the lease term and capitalized on the balance sheet to the extent there would be a significant economic penalty not to elect the option. Certain real estate leases are subject to periodic changes in an index or market rate. While lease liabilities are not remeasured as a result of changes to an index or rate, these changes are treated as variable lease payments and recognized in the period in which the obligation for those payments is incurred. Variable lease expense also includes property tax and property insurance costs.
For the three and six months ended June 30, 2019, operating lease costs were $6.7 and $12.3, respectively. Short-term lease costs, variable lease costs, and sublease income are not considered material.
Future operating lease payments under non-cancellable operating leases with an initial term in excess of 12 months as of June 30, 2019 are shown below.
2019$11.6
202019.5
202115.3
202212.6
202310.0
2024 and thereafter60.7
Total lease payments129.7
Less: amount of lease payments representing interest(31.9)
Present value of future lease payments$97.8
  
Short-term lease liability$19.3
Long-term lease liability78.5
Present value of future lease payments$97.8

Future minimum operating lease payments under non-cancellable operating leases with an initial term in excess of 12 months as of December 31, 2018 are shown below.
2019$22.2
202016.8
202112.6
202210.2
20238.1
2024 and thereafter46.4
Total minimum lease payments$116.3

Our lease portfolio has a weighted average remaining lease term of 13.8 years, and the weighted average discount rate is 3.2%. During the six months ended June 30, 2019, we recognized non-cash right-of-use assets of $22.8 for new leases entered into during the period, primarily related to the lease renewal of a key manufacturing site in our Connect & Control segment. Operating cash outflows from operating leases during the six months ended June 30, 2019 were $10.9.

NOTE 14
DEBT
 June 30,
2019
 December 31,
2018
Commercial paper $148.0
   $114.4
 
Current maturities of long-term debt and finance leases 1.4
   1.8
 
Commercial paper and current maturities of long-term debt 149.4
   116.2
 
Long-term debt and finance leases 14.3
   8.8
 
Total debt and finance leases $163.7
   $125.0
 

June 30,
2020
December 31,
2019
Commercial paper$134.1  $84.2  
Short-term loans112.2  —  
Current maturities of long-term debt and finance leases1.2  2.3  
Short-term debt and current maturities of long-term debt247.5  86.5  
Long-term debt and finance leases12.8  12.9  
Total debt and finance leases$260.3  $99.4  
Commercial Paper
Commercial paper outstanding as of June 30, 20192020 was $134.1, consisting of $50.0 under the Company’s U.S. program and $84.1 under the Company’s Euro program. Weighted average interest rates were 0.80% and 0.36% under the U.S. and Euro programs, respectively, and had maturity terms of less than three months from the date of issuance. Commercial paper outstanding as of December 31, 20182019 was $84.2, and issued entirely through the Company’s euro program andEuro program. Commercial paper outstanding as of December 31, 2019 had an associated weighted average interest rate of 0.09%0.05% and 0.06%, respectively. The outstanding commercial paper for both periods had maturity terms less than three months from the date of issuance.
Short-term Loans
On November 25, 2014, we entered into a competitive advance and revolving credit facility agreement (the Revolving Credit Agreement) with a consortium of third party lenders including JPMorgan Chase Bank, N.A., as administrative agent, and Citibank, N.A., as syndication agent. During 2019, we extended the Revolving Credit Agreement maturity date to November 25, 2022. The Revolving Credit Agreement provides for an aggregate principal amount of up to $500 of (i) revolving extensions of credit (the revolving loans) outstanding at any time, (ii) competitive advance borrowing option which will be provided on an uncommitted competitive advance basis through an auction mechanism (the competitive advances), and (iii) letters of credit for a face amount up to $100 at any time outstanding. Subject to certain conditions, we are permitted to terminate permanently the total
16


commitments and reduce commitments in minimum amounts of $10. Borrowings under the credit facility are available in U.S. dollars, Euros or British pound sterling. We are permitted to request that lenders increase the commitments under the facility by up to $200 for a maximum aggregate principal amount of $700, however this is subject to certain conditions and therefore may not be available to us.
The interest rate per annum on the Revolving Credit Agreement is based on the LIBOR rate of the currency we borrow in, adjusted for statutory reserve requirements, plus a margin of 1.1%. As of June 30, 2020, we had $112.2 outstanding under the credit facility, with an associated weighted average interest rate of 1.1% that matures in two months. As of December 31, 2019, we had 0 outstanding obligations under the credit facility. There is also a 0.15% fee per annum applicable to the commitments under the Revolving Credit Agreement. The fees and margin are subject to adjustment should the Company’s credit ratings change.
The Revolving Credit Agreement contains customary affirmative and negative covenants that, among other things, will limit or restrict our ability to: incur additional debt or issue guarantees; create liens; enter into certain sale and lease-back transactions; merge or consolidate with another person; sell, transfer, lease or otherwise dispose of assets; liquidate or dissolve; and enter into restrictive covenants. Additionally, the Revolving Credit Agreement requires us not to permit the ratio of consolidated total indebtedness to consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) (leverage ratio) to exceed 3.00 to 1.00 at any time, or the ratio of consolidated EBITDA to consolidated interest expense (interest coverage ratio) to be less than 3.00 to 1.00. 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.
On April 29, 2020, we entered into two 364-day term revolving credit agreements totaling $200 (the Incremental Revolving Credit Agreements) which provide the Company with additional liquidity in excess of the Revolving Credit Agreement. Borrowings are available in U.S. dollars and the interest rate per annum is based on the LIBOR rate, adjusted for statutory reserve requirements, plus a margin of up to 1.55%. The Incremental Revolving Credit Agreements are subject to fees of up to 0.35% per annum. The fees and margin are subject to adjustment should the Company’s credit ratings change. All other key provisions of the Incremental Revolving Credit Agreements mirror those of the Revolving Credit Agreement described above, including all covenants. In addition, the Incremental Revolving Credit Agreements did not violate any negative covenants associated with the existing Revolving Credit Agreement. There were no outstanding borrowings under the Incremental Revolving Credit Agreements as of June 30, 2020.
As of June 30, 2020, our interest coverage ratio and leverage ratios associated with short-term loans were within the prescribed thresholds. Additionally, we currently expect to remain within the prescribed thresholds until maturity.
Refer to the Liquidity section within “Item“Part I. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for additional information on our overall funding and liquidity strategy.
NOTE 15
POSTRETIREMENT BENEFIT PLANS
The following table provides the components of net periodic benefit cost for pension plans and other employee-related benefit plans for the three and six months ended June 30, 20192020 and 2018.2019. 
 20202019
For the Three Months Ended June 30PensionOther
Benefits
TotalPensionOther
Benefits
Total
Service cost$0.3  $0.2  $0.5  $0.3  $0.1  $0.4  
Interest cost2.3  0.7  3.0  3.2  1.0  4.2  
Expected return on plan assets(2.1) —  (2.1) (3.4) —  (3.4) 
Amortization of prior service (benefit) cost—  (1.3) (1.3) 0.2  (1.3) (1.1) 
Amortization of net actuarial loss1.7  0.8  2.5  1.3  0.5  1.8  
Total net periodic benefit cost$2.2  $0.4  $2.6  $1.6  $0.3  $1.9  
 2019 2018
For the Three Months Ended June 30Pension 
Other
Benefits
 Total Pension 
Other
Benefits
 Total
Service cost $0.3
   $0.1
   $0.4
   $0.4
   $0.2
   $0.6
 
Interest cost 3.2
   1.0
   4.2
   2.8
   1.1
   3.9
 
Expected return on plan assets (3.4)   
   (3.4)   (3.4)   (0.1)   (3.5) 
Amortization of prior service cost (benefit) 0.2
   (1.3)   (1.1)   0.2
   (1.3)   (1.1) 
Amortization of net actuarial loss 1.3
   0.5
   1.8
   1.5
   1.1
   2.6
 
Total net periodic benefit cost $1.6
   $0.3
   $1.9
   $1.5
   $1.0
   $2.5
 
                        
 2019 2018
For the Six Months Ended June 30Pension Other
Benefits
 Total Pension Other
Benefits
 Total
Service cost $0.7
   $0.3
   $1.0
   $0.8
   $0.4
   $1.2
 
Interest cost 6.3
   2.0
   8.3
   5.6
   2.2
   7.8
 
Expected return on plan assets (7.2)   
   (7.2)   (6.8)   (0.2)   (7.0) 
Amortization of prior service cost (benefit) 0.4
   (2.6)   (2.2)   0.4
   (2.6)   (2.2) 
Amortization of net actuarial loss 2.6
   1.1
   3.7
   3.0
   2.2
   5.2
 
Total net periodic benefit cost $2.8
   $0.8
   $3.6
   $3.0
   $2.0
   $5.0
 
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 20202019
For the Six Months Ended June 30PensionOther
Benefits
TotalPensionOther
Benefits
Total
Service cost$0.6  $0.4  $1.0  $0.7  $0.3  $1.0  
Interest cost4.6  1.4  6.0  6.3  2.0  8.3  
Expected return on plan assets(4.3) —  (4.3) (7.2) —  (7.2) 
Amortization of prior service (benefit) cost—  (2.5) (2.5) 0.4  (2.6) (2.2) 
Amortization of net actuarial loss3.5  1.4  4.9  2.6  1.1  3.7  
Total net periodic benefit cost$4.4  $0.7  $5.1  $2.8  $0.8  $3.6  
We made contributions to our global postretirement plans of $7.1$4.2 and $6.8$7.1 during the six months ended June 30, 20192020 and 2018,2019, respectively. We expect to make contributions of approximately $7$8 to $9$10 during the remainder of 2019,2020, principally related to our other employee-related benefit plans.
Amortization from accumulated other comprehensive income into earnings related to prior service cost and net actuarial loss was $0.9 and $0.5, and $1.1,$1.8 and $1.1, and $2.2, net of tax, during the three and six months ended June 30, 20192020 and 2018,2019, respectively. No other reclassifications from accumulated other comprehensive income into earnings were recognized during any of the presented periods.
U.S. Qualified Pension Plan Termination

On February 19, 2020, the Company’s Board of Directors conditionally authorized the termination of our U.S. qualified pension plan by offering lump sum distributions to certain participants and transferring the plan’s remaining benefit obligations to an insurance company through one or more group annuity contracts. The current projected benefit obligation is $303.2. Ultimate plan termination is subject to certain considerations, including regulatory review, interest rates and annuity pricing. If we proceed with the termination of the plan, the transaction is expected to occur in the second half of 2020 and would be funded with plan assets, that were $326.1 as of the end of the second quarter. Any additional funding, if necessary, would be made with cash. Our investment strategy was updated in 2019 to reduce risk by increasing the asset allocation to 100% fixed income and cash. At the time such a transaction were to close, an insurance company (or companies) would assume responsibility for paying and administering pension benefits that had been an obligation of the plan to plan participants and their beneficiaries. Upon transfer of the pension obligation, we expect to recognize a non-cash pension settlement charge of approximately $130 to $140 before tax, which includes recognition of the remaining pension losses, currently recorded in accumulated other comprehensive loss, and derecognition of the net assets of the plan. As a result of the plan transfer, the amount of benefits to be received by participants will be protected by state guaranty associations.
NOTE 16
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 six months ended June 30, 20192020 and 2018.2019.
 Three Months Six Months
For the Periods Ended June 302019 2018 2019 2018
Equity-based awards$3.9
 $5.7
 $8.4
 $10.2
Liability-based awards0.7
 0.7
 1.4
 0.8
Total share-based compensation expense$4.6
 $6.4
 $9.8
 $11.0

Three MonthsSix Months
For the Periods Ended June 302020201920202019
Equity-based awards$3.3  $3.9  $5.8  $8.4  
Liability-based awards0.5  0.7  (0.1) 1.4  
Total share-based compensation expense$3.8  $4.6  $5.7  $9.8  
The decline in share-based compensation expense for equity-based awards was driven by performance stock units which are evaluated each quarter to determine the likelihood of achieving certain performance targets. The change in share-based compensation expense for liability-based awards is driven by the change in ITT’s stock price. At June 30, 2019,2020, there was $24.4$25.2 of total unrecognized compensation cost related to non-vested equity awards. This cost is expected to be recognized ratably over a weighted-average period of 2.12.0 years. Additionally, unrecognized compensation cost related to liability-based awards was $2.5,$1.6, which is expected to be recognized ratably over a weighted-average period of 1.72.0 years.
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Year-to-Date 20192020 LTIP Activity
The majority of our LTIP awards are granted during the first quarter of each year and vest on the completion of a three-year service period. During the six months ended June 30, 2019,2020, we granted the following LTIP awards as provided in the table below:
 # of Awards GrantedWeighted Average Grant Date Fair Value Per Share
Restricted stock units (RSUs)0.2 $58.35
 
Performance stock units (PSUs)0.1 $65.28
 

# of Awards GrantedWeighted Average Grant Date Fair Value Per Share
Restricted stock units (RSUs)0.2$59.51  
Performance stock units (PSUs)0.1$63.92  
During the six months ended June 30, 2019 and 2018, 0.3 and 0.22020 a nominal amount of non-qualified stock options were exercised resulting in proceeds of $8.3 and $4.7, respectively.$0.1. During the six months ended June 30, 2019, 0.3 of non-qualified stock options were exercised resulting in proceeds of $8.3. During the six months ended June 30, 2020 and 2018,2019, RSUs of 0.2 vested and were issued. During the six months ended June 30, 20192020 and 2018,2019, PSUs of 0.2 and 0.1 that vested on December 31, 20182019 and 2017,2018, respectively, were issued.
NOTE 17
CAPITAL STOCK
On October 27, 2006, our Board of Directors approved a three-year, $1 billion share repurchase program (the Share Repurchase Program) was approved by2006 Plan), which it modified in 2008 to make the Board of Directors.term indefinite. On December 16, 2008, the provisions of the Share Repurchase Program were modified byOctober 30, 2019, the Board of Directors to replaceapproved a new indefinite term $500 share repurchase program (the 2019 Plan). During the original three-year term with an indefinite term.first quarter of 2020, we completed the 2006 Plan and commenced repurchases under the 2019 Plan. During the six months ended June 30, 20192020 and 2018,2019, we repurchased and retired 0.21.7 and 1.00.2 shares of common stock for $10.5$73.2 and $50.0,$10.5, respectively, under this program. To date, the Company has repurchased 22.4these programs, including 1.4 shares for $919.9and $61.9 in 2020 under the Share Repurchase Program.2006 plan.
Separate from the Share Repurchase Program,share repurchase program, the Company repurchased 0.2 and 0.1 shares during the six months ended June 30, 20192020 and 2018,2019, respectively, for an aggregate price of $9.5$10.5 and $5.4,$9.5, respectively, in settlement of employee tax withholding obligations due upon the vesting of RSUs and PSUs.

NOTE 18
ACCUMULATED OTHER COMPREHENSIVE LOSS
Postretirement Benefit PlansCumulative Translation AdjustmentAccumulated Other Comprehensive Loss
December 31, 2019$(133.3) $(252.0) $(385.3) 
Net change during period0.9  (51.3) (50.4) 
March 31, 2020(132.4) (303.3) (435.7) 
Net change during period0.9  2.1  3.0  
June 30, 2020$(131.5) $(301.2) $(432.7) 
Postretirement Benefit PlansCumulative Translation AdjustmentAccumulated Other Comprehensive Loss
December 31, 2018$(131.6) $(243.9) $(375.5) 
Net change during period0.6  (2.4) (1.8) 
March 31, 2019$(131.0) $(246.3) $(377.3) 
Net change during period0.5  5.3  5.8  
June 30, 2019$(130.5) $(241.0) $(371.5) 
 Postretirement Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Loss
December 31, 2018$(131.6) $(243.9) $(375.5)
      
Net change during period0.6
 (2.4) (1.8)
March 31, 2019(131.0) (246.3) (377.3)
      
Net change during period0.5
 5.3
 5.8
June 30, 2019$(130.5) $(241.0) $(371.5)
      
 Postretirement Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Loss
December 31, 2017$(137.6) $(210.6) $(348.2)
      
Net change during period1.1
 26.5
 27.6
March 31, 2018(136.5) (184.1) (320.6)
      
Net change during period1.1
 (47.1) (46.0)
June 30, 2018$(135.4) $(231.2) $(366.6)
19


NOTE 19
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 asbestos and 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 and Goulds Pumps LLC, have been sued, along with many other 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 June 30, 2019,2020, there were approximately 24 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:
Pending claims – Beginning24
New claims2
Settlements(1(1))
Dismissals(1(1))
Pending claims – Ending24


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 a 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 variables and uncertainties inherent in the long-term projection of the Company’s asbestos exposures, while 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
20


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.
Settlement Agreements
The Company periodically enters into settlement agreements with insurers to settle responsibility for insurance claims. Under the terms of the settlements, the insurers agree to a payment or specified series of payments to a Qualified Settlement Fund for past costs and/or agree to provide coverage for certain future asbestos claims on specified terms and conditions. In March 2020, we finalized a settlement agreement with a group of insurers to settle responsibility for claims under certain insurance policies for a lump sum payment of $66.4, resulting in a benefit of $52.5. During June 2020, we entered into a settlement agreement with an insurer accelerating payments previously included in a buyout agreement, resulting in a loss of $4.2.
Asbestos-Related Costs (Benefit), Net
As part of our ongoing review of our net asbestos exposure, each quarter we assess the most recent qualitative and quantitative data available for the key inputs and assumptions, comparing the data to expectations on which the most recent annual liability and asset estimates were calculated. Based on this evaluation, the Company determined that no change in the estimate was warranted for the quarter ended June 30, 20192020 other than the incremental accrual to maintain a rolling 10-year forecast period.period and the settlement agreement described above.
The following table provides a rollforward of the estimated asbestos liability and related assets for the six months ended June 30, 20192020 and 2018.2019.
20202019
For the Six Months Ended June 30LiabilityAssetNetLiabilityAssetNet
Beginning balance$817.6  $386.8  $430.8  $849.3  $376.7  $472.6  
Asbestos provision(a)
28.9  5.3  23.6  30.6  6.2  24.4  
Insurance settlement agreements—  48.3  (48.3) —  —  —  
Net cash activity(a)
(42.7) (35.1) (7.6) (44.1) (28.3) (15.8) 
Ending balance$803.8  $405.3  $398.5  $835.8  $354.6  $481.2  
Current portion$85.9  $85.9  $72.6  $67.1  
Noncurrent portion$717.9  $319.4  $763.2  $287.5  
 2019 2018
For the Six Months Ended June 30Liability Asset Net Liability Asset Net
Beginning balance$849.3

$376.7

$472.6
 $877.2
 $368.7
 $508.5
Asbestos provision(a)
30.6

6.2

24.4
 32.0
 6.1
 25.9
Insurance settlement agreement
 
 
 
 32.1
 (32.1)
Net cash activity(a)
(44.1)
(28.3)
(15.8) (50.4) (19.6) (30.8)
Ending balance$835.8

$354.6

$481.2
 $858.8
 $387.3
 $471.5
Current portion$72.6

$67.1


 $77.2
 $64.7
  
Noncurrent portion$763.2

$287.5



 $781.6
 $322.6
  
(a)Includes certain administrative costs such as legal-related costs for insurance asset recoveries.

(a)Includes certain administrative costs such as legal-related costs for insurance asset recoveries.
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.
21


The following table provides a rollforward of the estimated environmental liability for the six months endedJune 30, 20192020 and 2018.2019.
For the Six Months Ended June 3020202019
Environmental liability - beginning balance$61.9  $66.8  
Change in estimates for pre-existing accruals:
Continuing operations1.4  0.3  
Discontinued operations(1.6) —  
Payments(2.3) (3.6) 
Foreign currency(0.1) —  
Environmental liability - ending balance$59.3  $63.5  
For the Six Months Ended June 302019 2018
Environmental liability - beginning balance$66.8
 $73.9
Change in estimates for pre-existing accruals0.3
 3.3
Accruals added during the period for new matters
 2.0
Payments (a)
(3.6) (12.2)
Foreign currency
 0.1
Environmental liability - ending balance$63.5
 $67.1

(a)Includes cash payments of $7.9 for the six months ended June 30, 2018 related to the sale of a former operating location.
Environmental-related assets, representingincluding a qualified settlement fund (QSF) and estimated recoveries from insurance providers and other third parties, were $23.6$20.4 and $23.3$23.6 as of June 30, 20192020 and 2018,2019, respectively.
During June 2020, the environmental QSF was amended to cover remediation activities for additional sites. Prior to this amendment, there was $7.2 of deferred income representing the excess of assets in the QSF over the probable liabilities associated with the previously covered sites. As a result of the amendment, we recognized income of $7.2 during the quarter, including $1.3 related to discontinued operations.
We are currently involved with 3026 active environmental investigation and remediation sites. AtAs of June 30, 2019,2020, we have estimated the potential high-end liability range of environmental-related matters to be $110.5.$105.3.
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
In the second quarter of 2019, the Company settled a civil matter with the U.S. Department of Justice (DOJ) related to an investigation that began in 2015 involving certain connector products manufactured by the Company’s Connect & Control Technologies segment that are purchased or used by the U.S. government. The Company paid $11 to DOJ, acting on behalf of the U.S. government, to settle this matter and avoid the expense and uncertainty of litigation. The Company also received a related insurance recovery of $1.

NOTE 20
ACQUISITIONS
Rheinhütte Pumpen Group (Rheinhütte)
On April 30, 2019,, we completed the acquisition of 100% of the privately held stock of Rheinhütte for a purchase price of €81€82.5 euros, net of cash acquired. The transaction was funded from the Company’s cash and European commercial paper program. The purchase price is subject to change based on customary net working capital adjustments. Rheinhütte, with 2018 revenue of approximately €61.5 euros and approximately 430 employees, has manufacturing locations in Germany and Brazil. Rheinhütte is a designer and manufacturer of highly engineered pumps suited for harsh and corrosive environments for the industrial market. Rheinhütte is reported within the Industrial Process segment.
The purchase price for Rheinhütte was allocated to net tangible assets acquired and liabilities assumed based on their preliminary fair values as of April 30, 2019, with the excess of the purchase price of $54.6 recorded as goodwill. The primary areas of the purchase price allocation that are not yet finalized relate to the valuation of certain tangible and intangible assets, liabilities, income tax, and residual goodwill. We expect to obtain the information necessary to finalize the fair value of the net assets and liabilities during the measurement period, not to exceed one year from the acquisition date. Changes to the preliminary estimates of the fair value during the measurement period will be recorded as adjustments to those assets and liabilities with a corresponding adjustment to goodwill in the period they occur. The goodwill arising from this acquisition is not expected to be deductible for income tax purposes.
Preliminary Allocation of Purchase Price for Rheinhütte
Cash$4.7
Receivables9.7
Inventory13.3
Plant, property and equipment21.5
Goodwill54.6
Other assets3.2
Accounts payable and accrued liabilities(6.7)
Other liabilities(5.3)
Net assets acquired$95.0
Pro forma results of operations have not been presented because the acquisition was not deemed material at the acquisition date.
Matrix Composites, Inc. (Matrix)
On July 3, 2019,, we completed the acquisition of 100% of the privately held stock of Matrix for a purchase price of $29$25.8, net of cash acquired. The transaction was funded from the Company’s cash. The purchase price includes an earn-out of $3 and is subject to change based on customary net working capital adjustments. Matrix, a manufacturer of precision composite components within the aerospace and defense market, had 2018 revenue of approximately $12 with growth expected due to a ramp up in production on several next-generation aircraft engine platforms. Matrix has approximately 115 employees and will beis reported within the Connect & Control Technologies segment.
The final purchase prices for Rheinhütte and Matrix were allocated to net assets acquired and liabilities assumed based on their fair values as of the respective acquisition date, with the excess of the purchase price of $37.6 and $14.3 recorded as goodwill, respectively. Other intangibles identified for Rheinhütte include customer relationships, proprietary technology and trade names. Other intangibles assets for Matrix consist of customer relationships. The goodwill arising from these acquisitions is not expected to be deductible for income tax purposes.
22


Allocations of Purchase Price
RheinhütteMatrix
Cash$4.7  $0.5  
Receivables12.1  1.1  
Inventory15.2  1.8  
Plant, property and equipment19.9  2.9  
Goodwill37.6  14.3  
Other intangible assets15.2  8.5  
Other assets3.8  1.9  
Accounts payable and accrued liabilities(6.7) (2.0) 
Other liabilities(5.3) (2.7) 
Net assets acquired$96.5  $26.3  
Pro forma results of operations have not been presented because the acquisitions were not deemed material as of the acquisition dates.
23


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 transportation, industrial, and oil and gas markets. We manufacture components that are integral to the operation of equipment 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 centered on our engineering capabilities. Each business applies its technology and engineering expertise to solve our customers’ most pressing challenges. Our applied engineering provides a specialvaluable business fitrelationship with our customers given the critical nature of their applications. This in turn provides us with unique insight to our customers’ requirements and enables us to develop solutions to assist our customers to achieve their business goals. Our technology and customer intimacy together produce opportunities to capture recurring revenue streams, aftermarket opportunities and long-lived platforms from original equipment manufacturers (OEMs).
Our product and service offerings are organized into three segments: Motion Technologies, Industrial Process, 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 20182019 Annual Report within Part I, Item 1, “Description of Business”.
All comparisons included within Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to the comparable three and six months ended June 30, 2018,2019, unless stated otherwise.
DISCUSSION OF FINANCIAL RESULTSImpact of COVID-19 on our Business
ThreeOn March 11, 2020, the World Health Organization declared the coronavirus (“COVID-19”) outbreak to be a global pandemic. In response to this declaration and Six Months Ended June 30the rapid spread of COVID-19, governments throughout the world imposed varying degrees of restrictions on social and commercial activity to promote social distancing in an effort to slow the spread of the illness.
While most of our businesses are deemed essential, these restrictions have created many challenges for our business, and ITT has maintained cross functional global crisis management teams to respond to the changing conditions. In the face of this unprecedented challenge posed by the COVID-19 pandemic, we remain united in our focus on our three top priorities, the health of our people, the health of our business, and the health of our financials.
Health of our People
From the earliest signs of the outbreak, we have taken proactive, aggressive actions to protect the health and safety of our employees. We have created core crisis teams and enacted rigorous safety measures at all of our sites. Some of these measures include enhanced cleaning protocols, temperature checks, and distribution of personal protective equipment. We also redesigned employee workspaces to enable social distancing and required non-essential employees to work from home when appropriate. We will continue to be proactive in our response and will take all necessary actions to keep our people safe.
Health of our Business
We anticipate a difficult and uniquely challenging year in the markets we serve. While we do not yet know how long this pandemic will last or how it will impact customer demand for the remainder of the year, our ITT team continues to work closely with our customers and suppliers to support them and to minimize disruptions within our supply chain. We continue to work hard to generate value for our customers, striving to go above and beyond to be flexible and responsive to their needs.
Health of our Financials
ITT entered 2020 with a strong balance sheet and liquidity position, and as a result of COVID-19, we have taken many proactive measures in 2020 to enhance our liquidity and reduce costs to better navigate this uncertain environment and secure ITT’s future. Here are some of the liquidity and cost action highlights:
24


 Three Months Six Months
 20192018Change 20192018Change
Revenue$719.9
$696.8
3.3% $1,415.4
$1,386.1
2.1%
Gross profit232.0
226.0
2.7% 450.8
450.2
0.1%
Gross margin32.2%32.4%(20)bp 31.8%32.5%(70)bp
Operating expenses146.0
145.7
0.2% 274.2
259.3
5.7%
Operating expense to revenue ratio20.3%20.9%(60)bp 19.4%18.7%70bp
Operating income86.0
80.3
7.1% 176.6
190.9
(7.5%)
Operating margin11.9%11.5%40bp 12.5%13.8%(130)bp
Interest and non-operating (income) expenses, net(0.4)1.5
(126.7%) (0.9)3.3
(127.3%)
Income tax expense19.3
8.9
116.9% 39.0
16.5
136.4%
Effective tax rate22.3%11.3%1,100bp 22.0%8.8%1,320bp
Income from continuing operations attributable to ITT Inc.66.9
69.7
(4.0%) 138.2
170.8
(19.1%)
Net income attributable to ITT Inc.66.8
69.7
(4.2%) 138.1
170.9
(19.2%)
Strong available liquidity of $1.4 billion, including:

$819 cash on hand with $286 in the U.S.;
$388 available borrowing capacity on our $500 revolver; and
$200 undrawn under our new 364-Day Revolving Credit Agreements.

Implemented $160 of cost actions, reflecting a $25 increase since the first quarter. The $160 in actions include:
$80 of expected annualized pre-tax benefit from a $55 organizational-wide restructuring plan primarily focused on structural cost reductions which include global footprint optimization;
$35 of discretionary spending reductions and supply chain productivity;
$35 planned reduction in 2020 capital expenditures; and
$10 of savings from reduced compensation for Board of Directors, Chief Executive Officer and other executives, and suspension of the 401(k) match for certain U.S. employees.
We believe these actions have positioned us well to confront the pandemic. However, the ultimate 2020 impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy, which cannot be predicted at this time. See Part II, Item 1A, Risk Factors, for an additional discussion of risk related to COVID-19.
Executive Summary
InDuring the second quarter of 2019,2020, the COVID-19 pandemic had a dramatic impact on our customers and in the end markets we serve. Today’s ITT delivered top-line growth and increased operating margin despite an increasingly challenging economic environment. Our results reflect our continuedits set of resilient businesses, as well as its focus on operational excellenceexecution enabled us to generate strong cash flow and cost reduction actions, which will help us win share incontrol margin degradation. The health of our people, business, and financials continue to be our top priorities, as we continue to work hard to satisfy our customers, support each other, and successfully navigate this challenging period. The following table provides a summary of key global end markets and combat future market uncertainty.performance indicators for the second quarter of 2020.
Summary of Key Performance Indicators for the Second Quarter of 2019
RevenueOrders
Segment
Operating Income
Segment
Operating Margin
EPSOperating Cash Flow
$720$693$10814.9%$0.75$101
3% Increase7% Decrease1% Increase30bp Decrease5% Decrease15% Decrease
Organic RevenueOrganic OrdersAdjusted Segment Operating IncomeAdjusted Segment Operating MarginAdjusted
EPS
Adjusted Free Cash Flow
$735$706$11616.1%$0.93$82
5% Increase5% Decrease7% Increase60bp Increase13% Increase10% Decrease
Summary of Key Performance Indicators for the Second Quarter of 2020
RevenueSegment Operating IncomeSegment Operating MarginEPS
$515$377.2%$0.53
 29% Decrease 65% Decrease770bp Decrease 29% Decrease
Organic RevenueAdjusted Segment Operating IncomeAdjusted Segment Operating MarginAdjusted
EPS
$521$6512.6%$0.57
 28% Decrease 44% Decrease350bp Decrease 39% Decrease
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 a definition and reconciliations between GAAP and non-GAAP metrics.
Our second quarter 20192020 results include:
Revenue of $719.9 increased $23.1, or 3.3%. Excluding an$514.7 decreased $205.2 including $7.5 from our 2019 acquisitions and unfavorable foreign currencyexchange of $13.7. Organic revenue decreased 27.6%, mainly as a result of the negative global impact of $22.7COVID-19 which drove declines in transportation of 37% and revenueindustrial of $7.9 from our second quarter acquisition of Rheinhütte, organic revenue increased 5.4% driven by share gains and growth across all three segments. The strength of our diversified portfolio powered our growth as oil and gas grew 29%, industrial grew 5%, and transportation grew 3%7%.
Orders of $692.8 decreased $48.9, or 6.6%. Excluding unfavorable foreign currency of $23.0, and orders of $10.2 from the Rheinhütte acquisition, organic orders decreased 4.9% driven mainly by a 27% decline in oil and gas due to project delays and a large prior year upstream oil and gas pump project. Industrial orders declined 6% on project and short-cycle demand weakness. Transportation orders were flat as 39% growth in rail was offset by global automotive.
OperatingSegment operating income of $86.0 increased $5.7, or 7.1%, driven by a reduction in corporate$37.3 declined $70.3, which included higher restructuring costs of $4.3 as well as$24.0. Adjusted segment operating income growth of $1.4, or 1.3%. The increase indeclined $51.0, and adjusted segment operating income was drivenmargin declined 350 basis points, reflecting reduced volume from weaker demand and disruption caused by sales volume leverage, continued productivity and supply chain initiatives, and cost containment actions. These wereCOVID-19, partially offset by higher commodity costssavings from restructuring, productivity and tariffs, as well as strategic investments, unfavorable product mix and $7 of foreign currency impacts. Segment operating income was additionally impacted by $6 of acquisition, restructuring, and legal costs.cost actions.
Income from continuing operations of $0.75$0.53 per diluted share decreased $0.04, primarily$0.22, due to favorable prior year tax items,a decline in segment operating income including higher restructuring costs, partially offset by improvements in operatingan income tax benefit, and a reduction in interest and non-operating expense.corporate costs. Adjusted income from continuing operations was $0.93$0.57 per diluted share, reflecting a $0.11, or 13.4% increase$0.36 decrease from the prior year.
Cash flow from operations for the year to date period was $203.1, an increase of 100.9% over the prior year, due to proactive working capital management which also drove favorable timing of cash collections
25


from customers, a decline in income tax payments, lower asbestos payments, and a reduction in incentive compensation.
In terms of capital deployment, we declared dividends of $14.6 that were paid on July 1, 2020 immediately following the close of the second quarter.
2020 Outlook
The COVID-19 pandemic has created an unprecedented downturn in Julydemand across the global end markets we completedserve. The full extent of the acquisitiondecline and the timing of Matrix Composites Inc. (Matrix),the recovery is unknown. Since the beginning of the pandemic, demand for automotive components has declined as automakers significantly reduced production of new vehicles. Similarly, demand for aerospace components has been impacted by an unprecedented reduction in commercial air traffic. As the COVID-19 pandemic persists, we expect these trends to continue. Separately, we have been further impacted by the production stoppage of the Boeing 737 MAX and the timing of the production restart is still unknown at this time. Lastly, significant declines in oil and gas prices have resulted in a manufacturerreduction of precision composites incustomer capital expenditures and maintenance spending.
Given these uncertainties, we have continued to take proactive measures to align our production with the aerospacedemand of our customers and defense market, with growthhave initiated a global restructuring plan which is expected from a ramp up in production on several next-generation aircraft engine platforms. This recent acquisitionto deliver annual savings of $80. These actions, coupled with Rheinhütteproductivity and other cost reduction strategies will help to mitigate some of these financial impacts. We also may experience negative impacts to our operating cash flows due to lower segment operating income and may experience delays in April, illustratecustomer collections of receivables. For the disciplined, close-to-core, and strategic acquisitions thatremainder of 2020, we will continueremain laser focused on our top three priorities to make going forward. Additionally, we are investing in a new plating line at CCT that will improve leadnavigate through these challenging times and reduce input costs,position us for the future.
DISCUSSION OF FINANCIAL RESULTS
Three and we continue to make progress in the development of the ITT Smart Pad.Six Months Ended June 30
 Three MonthsSix Months
20202019Change20202019Change
Revenue$514.7  $719.9  (28.5)%$1,178.0  $1,415.4  (16.8)%
Gross profit163.6  232.0  (29.5)%373.0  450.8  (17.3)%
Gross margin31.8 %32.2 %(40)bp31.7 %31.8 %(10)bp
Operating expenses143.1  146.0  (2.0)%243.2  274.2  (11.3)%
Operating expense to revenue ratio27.8 %20.3 %750 bp20.6 %19.4 %120 bp
Operating income20.5  86.0  (76.2)%129.8  176.6  (26.5)%
Operating margin4.0 %11.9 %(790)bp11.0 %12.5 %(150)bp
Interest and non-operating expenses (income), net2.2  (0.4) (650.0)%2.8  (0.9) (411.1)%
Income tax (benefit) expense(28.1) 19.3  (245.6)%(3.4) 39.0  (108.7)%
Effective tax rate(153.6)%22.3 %**(2.7)%22.0 %**
Income from continuing operations attributable to ITT Inc.46.4  66.9  (30.6)%130.1  138.2  (5.9)%
Net income attributable to ITT Inc.48.0  66.8  (28.1)%132.8  138.1  (3.8)%
** Resulting basis point change not considered meaningful.

26


REVENUE
The following tables illustrate ourthe revenue derived from each of our segments for the three and six months ended June 30, 20192020 and 2018.2019.
For the Three Months Ended June 3020202019Change
Organic Decline(a)
Motion Technologies$199.3  $317.7  (37.3)%(34.7)%
Industrial Process193.3  232.6  (16.9)%(16.6)%
Connect & Control Technologies122.9  170.2  (27.8)%(29.3)%
Eliminations(0.8) (0.6) 
Total Revenue$514.7  $719.9  (28.5)%(27.6)%
For the Six Months Ended June 30
Motion Technologies$497.2  $632.9  (21.4)%(18.9)%
Industrial Process420.6  448.3  (6.2)%(8.2)%
Connect & Control Technologies261.6  335.2  (22.0)%(23.4)%
Eliminations(1.4) (1.0) 
Total Revenue$1,178.0  $1,415.4  (16.8)%(16.7)%
For the Three Months Ended June 302019 2018 Change 
Organic Growth(a)
Motion Technologies$317.7
 $330.3
 (3.8)% 1.3%
Industrial Process232.6
 203.2
 14.5 % 12.6%
Connect & Control Technologies170.2
 164.1
 3.7 % 4.8%
Eliminations(0.6) (0.8)    
Total Revenue$719.9
 $696.8
 3.3 % 5.4%
        
        
For the Six Months Ended June 30       
Motion Technologies$632.9
 $672.5
 (5.9)% %
Industrial Process448.3
 393.0
 14.1 % 14.1%
Connect & Control Technologies335.2
 322.0
 4.1 % 5.4%
Eliminations(1.0) (1.4)    
Total Revenue$1,415.4
 $1,386.1
 2.1 % 5.2%
ORDERS
The following tables illustrate our orders derived from each(a)See the section titled “Key Performance Indicators and Non-GAAP Measures” for a definition and reconciliation of our segments for the three and six months ended June 30, 2019 and 2018.
For the Three Months Ended June 302019 2018 Change 
Organic Growth (Decline)(a)
Motion Technologies$311.9
 $327.6
 (4.8)% 0.3 %
Industrial Process212.7
 237.4
 (10.4)% (12.8)%
Connect & Control Technologies169.5
 177.2
 (4.3)% (3.3)%
Eliminations(1.3) (0.5)    
Total Orders$692.8
 $741.7
 (6.6)% (4.9)%
        
        
For the Six Months Ended June 30       
Motion Technologies$643.4
 $697.5
 (7.8)% (1.7)%
Industrial Process431.7
 447.5
 (3.5)% (3.8)%
Connect & Control Technologies358.6
 359.0
 (0.1)% 1.2 %
Eliminations(2.0) (1.1)    
Total Orders$1,431.7
 $1,502.9
 (4.7)% (1.7)%
(a)
See the section titled “Key Performance Indicators and Non-GAAP Measures” for a definition and reconciliation of organic revenue and organic orders.organic revenue.
Motion Technologies (MT)
MT revenue for the three and six months ended June 30, 20192020 decreased $12.6, or 3.8%,$118.4 and $39.6, or 5.9%,$135.7, respectively. Excluding the impact of foreign currency translation of $16.8$8.0 and $39.3$15.8 for the three and six months ended June 30, 2019, respectively,2020, organic revenue increased $4.2declined $110.4 and $119.9, respectively. Sales from Friction declined 42% and 23%, respectively, during the second quarter and was flat for the year to date period. The performance was driven by strength in global rail as well as Friction OEM share gains which significantly outpaced the global auto market, offset by a decline in our Wolverine business. KONI & Axtone sales grew 16% and 13%, for the three and six month periods respectively, on strength in rail in Europe. Frictiondriven by weak automotive sales increased 1% in both periods due to market share gains in North America, Europe and China which helped offset contractionas a result of COVID-19. In addition, weakness in the global autoautomotive market negatively impacted Wolverine as well resulting in a decline in sales of 38% and lower aftermarket activity. Wolverine21%, respectively. KONI & Axtone sales decreased 16% in both periods due to weakness in global auto markets9% and customer share loss.


Orders for2%, respectively, during the three and six months ended June 30, 2019 decreased $15.7, or 4.8%,month periods primarily driven by weakness in rail within Asia and $54.1, or 7.8%. Excluding unfavorable foreign currency translation impacts of $16.6 and $42.1, respectively, organic orders increased $0.9, or 0.3%, duringNorth America, partially offset by growth in Europe in the second quarter of 2019, but decreased $12.0, or 1.7%, during the six months ended June 30, 2019. Excluding a prior year Russian rail order of $14, MT year-to-date organic orders increased $2.0, or 0.3%. In 2019, global rail market share gains were partially offset by weakness in our Wolverine business.2020.
Industrial Process (IP)
IP revenue for the three and six months ended June 30, 2019 increased $29.4, or 14.5%,2020 decreased $39.3 and $55.3, or 14.1%,$27.7, respectively, which included incremental revenue of $7.9$4.7 and $18.6, respectively, from our second quarter2019 acquisition of Rheinhütte, and an unfavorable foreign currency translation impactimpacts of $4.2$5.4 and $8.0,$9.4, respectively. Organic revenue fordecreased $38.6 and $36.9, respectively, primarily driven by pump projects. Revenue from pump projects during the three and six months ended June 30, 2019 increased $25.7, or 12.6%,month periods declined 50% and $55.4, or 14.1%27%, respectively, driven by growth in pump projects and aftermarket parts and service.
During the three and six months ended June 30, 2019, revenue from pump projects increased 51% and 49%, respectively, driven by strengthdue to large prior year deliveries in the chemical and oil and gas markets primarily within North America and Asia. Withinmarkets. Revenue from our short-cycle business revenue from aftermarket partsdecreased 4% and service increased 11% and 10% for2%, respectively, during the three and six month periods, ended June 30, 2019, respectively,primarily due to higher demand in the Middle East within the oil and gas and chemical markets. During the second quarter of 2019, growth in aftermarket was partially offset by an 8%a 20% decline in revenueindustrial valves. Revenue from baseline pumps.
Orders for the threeaftermarket parts and six months ended June 30, 2019 decreased $24.7, or 10.4%, and $15.8, or 3.5%, which included incremental orders of $10.2 from our second quarter acquisition of Rheinhütte, and an unfavorable foreign currency translation impact of $4.5 and $9.2, respectively. Organic orders decreased $30.4, or 12.8%, and $16.8, or 3.8%, respectively, for the three and six months ended June 30, 2019 due to pump project declines of 35% and 14%, respectively, driven by project delays and difficult comparisons to the prior year in the oil and gas and petrochemical markets. Orders from our short-cycle businessservice declined 1% during the second quarter, decreased 5% due mainlybut increased 2% for the six month period compared to weakness in valves. For the year-to-date period orders from our short-cycle business were flat as softness in valve orders was offset by aftermarket parts and service in North America and the Middle East.prior year.
The level of order and shipment activity related to project pumpsat IP can vary significantly from period to period due to pump projects which may impact year-over-year comparisons. IP’s backlogare highly engineered, customized to customer needs, and have longer lead times. Total orders during the six months ended June 30, 2020 were $421.2, a decrease of 2.4%, compared to prior year. Backlog as of June 30, 20192020 was $425.3,$390.7, a decrease of $18.9,$4.7, or 4.3%1.2%, compared to December 31, 2018.2019.
Connect & Control Technologies (CCT)
CCT revenue for the three and six months ended June 30, 2019 increased $6.1, or 3.7%,2020 decreased $47.3 and $13.2, or 4.1%, respectively,$73.6, which included anrevenue of $2.8 and $5.8, respectively, from our 2019 acquisition of Matrix, and unfavorable foreign currency translation impactimpacts of $1.7$0.3 and $4.1,$0.9, respectively. Organic revenue for the threedeclined $49.8 and six months ended June 30, 2019 increased $7.8, or 4.8%, and $17.3, or 5.4%, respectively,$78.5, primarily driven by increases of 21% and 15%, respectively, in commercial aerospace from strength in components and connectors. This was partially offset by a decline in revenue from defense components due to prior year programs. In addition, revenue grew 1% in both periods in the industrial market.
Orders for the three months ended June 30, 2019, decreased $7.7, or 4.3%, which included an unfavorable foreign currency translation impact of $1.9. Organic orders decreased $5.8, or 3.3%, due to a 6% decline in orders from the industrial market on weak components and electric vehicle connectors, as well as an 18% decline in the oil and gas market due to a difficult prior year comparison reflecting lower 2019 oil prices. Aerospace and defense orders decreased 1% during the second quarter of 2019 due to timing of rotorcraft and commercial aerospace components, offset by higher environmental control systems and aftermarket.
Orders for the six months ended June 30, 2019 were relatively flat compared to the prior year, which included an unfavorable foreign currency translation impact of $4.7. Organic orders increased $4.3, or 1.2%, due to a 5% increasedeclines in the aerospace and defense market of 41% and 30%, respectively. The decrease in aerospace and defense was driven by several project winsa decline in North America forglobal commercial air traffic due to COVID-19 and reduced production levels of Boeing’s 737 MAX, as well as unfavorable timing of defense connectors and components. This growth was partially offset by order declines in industrial and oil and gas markets of 4% and 9%, respectively.
On July 11, 2017, the U.S. Defense Logistics Agency, Land and Maritime (DLA) issued a notice that it had removed certain of our military-specification connector productsprograms. Revenue from the Qualified Products List (QPL).  Annualindustrial market decreased 7% during the three month period primarily due to weak component sales of these military-specification connectors were estimated to range from $8 to $10 prior toand declined 12% during the removal of these products from the QPL. The Company is making progress as the status of certain of these products has been restored on the QPLsix month period driven by temporary plant closures in Europe and we expect that the majority of these products will be restored by the end of 2019.China and distributor destocking.
27


GROSS PROFIT
Gross profit for the three months ended June 30, 2020 and 2019 was $163.6 and 2018 was $232.0, and $226.0,respectively, reflecting a gross margin of 32.2%31.8% and 32.4%32.2%, respectively. Gross profit for the six months ended June 30, 2020 and 2019 was $373.0 and 2018 was $450.8, and $450.2,respectively, reflecting a gross margin of 31.8%31.7% and 32.5%31.8%, respectively. The declinesdecrease in gross margin wereprofit was primarily driven by unfavorable sales volumes due to higher commodity costs and tariffs, unfavorable foreign currency and product mix. These werelower demand as a result of the COVID-19 pandemic, partially offset by sales volume leverage and price, as well as manufacturing and supply chain and productivity improvements, across all segments.restructuring benefits, and lower tariffs.
OTHER
Tariffs
In 2018, the U.S. government announced tariffs on certain imported goods, and began renegotiating existing trade terms with China, Europe and other countries. These tariffs have negatively impacted the price of certain parts and materials we utilize to manufacture finished products we sell. Since announced, we have been managing the impacts of these tariffs and will attempt to mitigate the impact of higher input costs through pricing and supply chain actions, efficient utilization of our global manufacturing footprint, and supplier negotiations and diversification strategies. Tariffs and related impacts remain highly uncertain due to the current dynamic landscape and ongoing negotiations. Therefore, we are unable to estimate the ultimate outcome tariffs will have on our results of operations, financial position and cash flows.

OPERATING EXPENSES
 Three MonthsSix Months
For the Periods Ended June 3020202019Change20202019Change
General and administrative expenses$44.6  $62.6  (28.8)%$101.7  $113.4  (10.3)%
Sales and marketing expenses35.7  42.7  (16.4)%77.3  82.9  (6.8)%
Research and development expenses18.9  25.8  (26.7)%41.6  49.3  (15.6)%
Asbestos-related costs (benefit), net16.0  11.8  35.6 %(24.7) 24.4  (201.2)%
Restructuring costs27.9  3.1  800.0 %31.0  4.2  638.1 %
Asset impairment charges—  —  — %16.3  —  **
Total operating expenses$143.1  $146.0  (2.0)%$243.2  $274.2  (11.3)%
Total Operating Expenses By Segment:
Motion Technologies$43.6  $44.2  (1.4)%$79.8  $80.0  (0.2)%
Industrial Process50.8  46.7  8.8 %113.6  86.4  31.5 %
Connect & Control Technologies31.7  33.5  (5.4)%64.3  66.3  (3.0)%
Corporate & Other17.0  21.6  (21.3)%(14.5) 41.5  (134.9)%
 Three Months Six Months
For the Periods Ended June 302019 2018 Change 2019 2018 Change
General and administrative expenses$65.7
 $63.0
 4.3 % $117.6
 $128.1
 (8.2)%
Sales and marketing expenses42.7
 43.4
 (1.6)% 82.9
 86.9
 (4.6)%
Research and development expenses25.8
 25.8
  % 49.3
 50.5
 (2.4)%
Asbestos-related costs (benefit), net11.8
 13.5
 (12.6)% 24.4
 (6.2) 493.5 %
Total operating expenses$146.0
 $145.7
 0.2 % $274.2
 $259.3
 5.7 %
Total Operating Expenses By Segment:           
Motion Technologies$44.2
 $45.7
 (3.3)% $80.0
 $91.3
 (12.4)%
Industrial Process46.7
 40.4
 15.6 % 86.4
 83.2
 3.8 %
Connect & Control Technologies33.5
 33.6
 (0.3)% 66.3
 67.6
 (1.9)%
Corporate & Other21.6
 26.0
 (16.9)% 41.5
 17.2
 141.3 %
** Resulting percentage change not considered meaningful.
General and administrative (G&A) expenses for the three months ended June 30, 2019 increased $2.7. The increase during the period was from higher restructuring costs of $2 as well as an increase in acquisition-related costs of $2.8 primarily from the acquisition of Rheinhütte which was partially offset by benefits from cost reduction actions. General and administrative expenses for the six months ended June 30, 2020 decreased $18.0 and $11.7, which includes incremental costs of $0.8 and $3.0, respectively, from our 2019 acquisitions of Rheinhütte and Matrix. Excluding these acquisitions, G&A expenses decreased $10.5.$18.8 and $14.7, respectively, due to a decline in environmental costs of $4.3 and $4.0, primarily resulting from the recognition of a benefit related to insurance recoveries. In addition, toincentive compensation costs declined $3.2 and $5.5, for the items mentioned above, thethree and six month period includes additional Europeanperiods, respectively, and the prior year included government investment incentives of $5$3.0. Furthermore, we benefited from cost actions across all segments, which included savings from professional services of $4.6 and a reduction$4.1. These items were partially offset by an increase in legalbad debt expense of $3.1 and environmental costs.$4.3, respectively, for the three and six month periods.
Sales and marketing expenses for the three and six months ended June 30, 20192020 decreased $0.7$7.0 and $4.0,$5.6, respectively, due to a reduction in marketingwhich included incremental costs of $2.3$1.1 and $4.7$4.3, respectively, from our 2019 acquisitions of Rheinhütte and favorable foreign currency impact of $0.9Matrix. Excluding these acquisitions, sales and $2.2, respectively. These items were partially offsetmarketing expenses decreased $8.1 and $9.9, respectively, primarily driven by higher commission costs.cost actions across all segments.
Research and development expenses for the three months ended June 30, 2019 were flat and decreased $1.2, during the six months ended June 30, 2019.
Asbestos-related costs decreased $1.7, and increased $30.6, during the three and six months ended June 30, 2019,2020 decreased across all segments for a total reduction of $6.9 and $7.7, respectively. The change
Asbestos-related costs increased $4.2 during the three months ended June 30, 2020 due to a settlement agreement with an insurer to accelerate payments previously included in a buyout agreement, resulting in a loss of $4.2. Asbestos-related costs for the six months ended June 30, 2019 was2020 decreased $49.1 primarily due to a $32.1 benefit from an insurance$66.4 settlement recordedagreement with a group of insurers in the first quarter of 2018.2020. See Note 19, Commitments and Contingencies, to the Consolidated Condensed Financial Statements for further information.
Restructuring costs increased $24.8 and $26.8 during the three and six months ended June 30, 2020, respectively, due to actions taken under the Company’s 2020 Global Restructuring Plan. See Note 5, Restructuring Actions, to the Consolidated Condensed Financial Statements for further information.
Asset impairment charges during the six months ended June 30, 2020 are related to a business within IP that primarily serves the global upstream oil and gas market. See Note 11, Plant, Property and Equipment, net, and Note 12, Goodwill and Other intangible assets, net, to the Consolidated Condensed Financial Statements for
28


further information. Significant additional adverse changes to the economic environment and future cash flows of other businesses could cause us to record additional impairment charges in future periods, which may be material.

OPERATING INCOME
 Three MonthsSix Months
For the Periods Ended June 3020202019Change20202019Change
Motion Technologies$10.4  $52.0  (80.0)%$63.5  $112.9  (43.8)%
Industrial Process18.5  26.0  (28.8)%27.4  48.2  (43.2)%
Connect & Control Technologies8.4  29.6  (71.6)%24.3  57.0  (57.4)%
Segment operating income37.3  107.6  (65.3)%115.2  218.1  (47.2)%
Asbestos-related (costs) benefit, net(16.0) (11.8) (35.6)%24.7  (24.4) 201.2 %
Other corporate costs(0.8) (9.8) 91.8 %(10.1) (17.1) 40.9 %
Total corporate(16.8) (21.6) (22.2)%14.6  (41.5) (135.2)%
Total operating income$20.5  $86.0  (76.2)%$129.8  $176.6  (26.5)%
Operating margin:
Motion Technologies5.2 %16.4 %(1,120)bp12.8 %17.8 %(500)bp
Industrial Process9.6 %11.2 %(160)bp6.5 %10.8 %(430)bp
Connect & Control Technologies6.8 %17.4 %(1,060)bp9.3 %17.0 %(770)bp
Segment operating margin7.2 %14.9 %(770)bp9.8 %15.4 %(560)bp
Consolidated operating margin4.0 %11.9 %(790)bp11.0 %12.5 %(150)bp
 Three Months Six Months
For the Periods Ended June 302019 2018 Change 2019 2018 Change
Motion Technologies$52.0
 $55.5
 (6.3)% $112.9
 $117.4
 (3.8)%
Industrial Process26.0
 23.4
 11.1 % 48.2
 40.3
 19.6 %
Connect & Control Technologies29.6
 27.3
 8.4 % 57.0
 50.3
 13.3 %
Segment operating income107.6
 106.2
 1.3 % 218.1
 208.0
 4.9 %
Asbestos-related (costs) benefit, net(11.8) (13.5) 12.6 % (24.4) 6.2
 (493.5)%
Other corporate costs(9.8) (12.4) 21.0 % (17.1) (23.3) 26.6 %
Total corporate and asbestos-related costs(21.6) (25.9) 16.6 % (41.5) (17.1) (142.7)%
Total operating income$86.0
 $80.3
 7.1 % $176.6
 $190.9
 (7.5)%
Operating margin:           
Motion Technologies16.4% 16.8% (40)bp 17.8% 17.5% 30bp
Industrial Process11.2% 11.5% (30)bp 10.8% 10.3% 50bp
Connect & Control Technologies17.4% 16.6% 80bp 17.0% 15.6% 140bp
Segment operating margin14.9% 15.2% (30)bp 15.4% 15.0% 40bp
Consolidated operating margin11.9% 11.5% 40bp 12.5% 13.8% (130)bp
** Resulting percentage change not considered meaningful.
MT operating income for the three and six months ended June 30, 20192020 decreased $3.5, or 6.3%,$41.6 and $49.4, respectively, and had a margin decline of 401,120 basis points. Operating income for the six months ended June 30, 2019 decreased $4.5, or 3.8%,points and had a margin improvement of 30500 basis points.points, respectively. The decrease in operating income for both periods was primarily driven by higher commodityunfavorable sales volume of $44 and $47 due to a decline in automotive production resulting from COVID-19, an increase in restructuring costs of $10.9 and tariffs as well as$10.2 and unfavorable foreign currency impact. This was partially offset by improvementsexchange. The six month period also included investment incentives received in operatingthe prior year of $3. Partially offsetting the decline for the three and supply chainsix month periods were net savings from productivity which provided a benefitand restructuring actions of $9 and $19,$15, respectively, for the quarter and year-to-date periods. In addition, the six months ended June 30, 2019 benefited from European investment incentives of $5.a reduction in tariffs.
IP operating income for the three and six months ended June 30, 2019 increased $2.6, or 11.1%,2020 decreased $7.5 and $20.8, respectively, and had a margin decline of 30160 basis points. Operating income for the six months ended June 30, 2019 increased $7.9, or 19.6%,points and had a margin improvement of 50430 basis points.points, respectively. The increasedecline in operating income in bothduring the three and six month periods was primarily driven by lower sales volumes of $15 in both periods, an increase in restructuring costs of $7.7 and $7.5, and an incremental bad debt reserve of $4.1 recognized in the second quarter. Additionally, the six month period includes asset impairments of $16.3 related to a benefitbusiness that primarily serves the global upstream oil and gas market and unfavorable foreign currency impacts of $12 and $23, respectively, from favorable volume, benefits from productivity and supply chain actions, and pricing. This was$3. These items were partially offset by tariffs, higherfavorable pricing and mix, savings from supply chain, productivity and restructuring actions, and a reduction in acquisition costs and unfavorable sales mix.costs. The second quarter also included benefits of $3 from the CARES Act.
CCT operating income for the three months ended June 30, 2019 increased $2.3, or 8.4%, and had a margin improvement of 80 basis points. CCT operating income for the six months ended June 30, 2019 increased $6.7, or 13.3%,2020 decreased $21.2 and $32.7, respectively, and had a margin improvementdecline of 1401,060 basis points.points and 770 basis points, respectively. The increasedecline in operating income during the three and six month periods was primarily driven by lower sales volume leverage which providedvolumes of $25 and $41 mainly due to the negative impact of COVID-19 on global commercial air traffic and an increase in restructuring costs of $5.4 and $6.8, respectively. These items were partially offset by benefits from productivity, supply chain, and restructuring actions, as well as a second quarter benefit of $2 and $7, respectively, and improvements in operating and supply chain productivity. This was partially offset by unfavorable commodity costs, strategic investments and mix.from the CARES Act.
Other corporate costs for the three and six months ended June 30, 20192020 decreased $2.6, or 21.0%,$9.0 and $6.2, or 26.6%,$7.0, respectively, comparedprimarily reflecting a benefit of $5.9 from the recognition of an environmental benefit related to the prior year. The decrease was primarily driveninsurance recoveries, lower incentive compensation costs of $1.5 and $3.6, respectively, and benefits from cost actions. These items were partially offset by cost reduction actions, as well as lower legalan increase in restructuring costs of $0.8 and environmental costs.$2.3, respectively, and unfavorable foreign currency impacts of $2 in both periods.

29


INTEREST AND NON-OPERATING INCOME AND EXPENSES, NET
Three Months Six MonthsThree MonthsSix Months
For the Periods Ended June 302019 2018 Change 2019 2018 ChangeFor the Periods Ended June 3020202019Change20202019Change
Interest and non-operating (income) expenses, net$(0.4) $1.5
 (126.7)% $(0.9) $3.3
 (127.3)%
Interest and non-operating expenses (income), netInterest and non-operating expenses (income), net$2.2  $(0.4) (650.0)%$2.8  $(0.9) (411.1)%
The change during the three and six months ended June 30, 20192020 was due to favorablean increase in pension-related expense, higher interest ratesexpense from an increase in outstanding borrowings, and a decline in interest returns on commercial paper borrowings, additional interest income earned on time deposits,cash and lower pension-related expense.money market investments.
U.S. Qualified Pension Plan Termination

On February 19, 2020, the Company’s Board of Directors conditionally authorized the termination of our U.S. qualified pension plan by offering lump sum distributions to certain participants and transferring the plan’s remaining benefit obligations to an insurance company through one or more group annuity contracts. If we proceed with the termination of the plan, the transaction is expected to occur in the second half of 2020 and would result in a non-cash pension settlement charge of approximately $130 to $140 before tax, which includes recognition of the remaining pension losses currently recorded in accumulated other comprehensive loss, and derecognition of the net assets of the plan.
INCOME TAX EXPENSE
Three MonthsSix Months
For the Periods Ended June 3020202019Change20202019Change
Income tax (benefit) expense$(28.1) $19.3  (245.6)%$(3.4) $39.0  (108.7)%
Effective tax rate(153.6)%22.3 %**(2.7)%22.0 %**
 Three Months Six Months
For the Periods Ended June 302019 2018 Change 2019 2018 Change
Income tax expense$19.3
 $8.9
 116.9% $39.0
 $16.5
 136.4%
Effective tax rate22.3% 11.3% 1,100bp 22.0% 8.8% 1,320bp
** Resulting basis point change not considered meaningful.
The higherlower effective tax rate during the second quarter and year-to-date periods of 20192020 was primarily due to an $11.3 reduction of a deferred tax liability in 2018 associated with unremitted foreign earnings. The higher effective tax rate during the year to date period is primarily due to tax benefits of $21.6$26.7 resulting from a recently completed internal reorganization in 2018 from German valuation allowance reversals onEurope. This reorganization resulted in a refined projection of future earnings, which will result in the realization of a portion of our deferred tax assetsassets. Additionally, in the second quarter of 2020, the Company completed the U.S. income tax audit for tax year 2016 resulting in $1.1 of previously unrecognized tax benefits.
The Company’s financial condition and results of operations have been and are expected to continue to be adversely affected by the COVID-19 pandemic and the governmental and market reactions to COVID-19. The impacts on earnings have already had, and will continue to have, an impact on the Company’s overall effective tax rate throughout the year.
The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) was enacted March 27, 2020. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. In the second quarter of 2020, the Company recognized a $4.5 reductionbenefit of $7.2 from the CARES Act. The benefit was recorded in operating income and was related to the provisional one-time tax charge associated with the Tax Act.
The Company operates in various taxemployer portion of payroll taxes. Certain non-U.S. jurisdictions and is subjecthave enacted similar stimulus measures. We continue to examination by tax authorities in these jurisdictions. The Company is currently under examination in several jurisdictions including the Czech Republic, Germany, Hong Kong, India, Italy, Japan, Mexico, 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 of these uncertainties, the ultimate resolutionmonitor any effects that 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 $14 due to changes in audit status, expiration of statutes of limitations andCARES Act or 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 Tax Matters Agreement with Exelis Inc. and Xylem Inc. relating to the Company’s 2011 spin-off of those businesses.similar legislation globally.
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. Significant factors that affect our overall management of liquidity include our cash flow from operations, credit ratings, the availability of commercial paper, access to bank lines of credit, term loans, and the ability to attract long-term capital on satisfactory terms. We expectassess 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 funddo so.
30


As a result of the COVID-19 global pandemic, we continue to anticipate future unfavorable impacts to our cash flow from operations, which is the primary source of funding for our ongoing working capital capital expenditures, dividendsneeds. These negative impacts include, but are not limited to, lower revenues and financing requirements through cash flowsorders from operationscustomer delays, missed or late deliveries due to disruptions in our global supply chain, delayed supplier deliveries, or the inability to procure supplier inputs at reasonable prices or at all, and cash on hand,customer bankruptcies or by accessing the U.S. or Europeandelays in customer receivable collections. We are unable to predict how long these negative impacts will last, therefore we have taken proactive measures to provide access to additional liquidity. On April 29, 2020, we secured two 364-day revolving credit agreements totaling $200 to supplement our existing $500 Revolving Credit Agreement and commercial paper markets orprograms. As of June 30, 2020, we had $587.8 available to us under our Revolving Credit Agreement.revolving credit agreements. We also continue to take a proactive approach to preserve cash by renegotiating contracts with vendors where possible, applying aggressive cost savings measures to limit discretionary spending, and implementing actions to reduce our cost structure. The Company also continues to evaluate the various global governmental programs instituted in response to COVID-19, including the CARES Act in the U.S., to further maximize our liquidity. The CARES Act and various global programs in the jurisdictions in which we operate generally provide for deferrals of tax payments, employee retention credits, workforce incentives, as well as incentive financing programs backed by governmental agencies. As of June 30, 2020, we have not incurred any borrowings under governmental loan programs.
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. We plan to continue to transfer cash between certain international subsidiaries and the U.S. and other international subsidiaries when it is cost effective to do so. The passage of the U.S. Tax Cuts and Jobs Act providesof 2017 (Tax Act) in 2017 provided greater flexibility around our global cash management strategy related to the amount and timing of transfers, and we will continue to support growth and expansion in markets outside of the U.S. through the development of products, increased capital spending, and potential foreign acquisitions. During the year ended December 31, 2018 we had netNet cash distributions from foreign countries to the U.S. of $318.1. We did not have any distributions from foreign countries to the U.S. during the six months ended June 30, 2019.2020 was $426.8. During the year ended December 31, 2019, we had net cash distributions from foreign countries to the U.S. of $11.4. The timing and amount of any additional future distributions remains under evaluation.evaluation based on our jurisdictional cash needs.
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. ThroughIn the second quarter of 2019,2020, we declared dividends of $0.147$0.169 per share for shareholders of record on March 11, 2019 and June 10, 2019, which were paid on March 29, 2019 and June 28, 2019. The15, 2020. Dividends declared in 2020 of $29.5 was a 13.5% increase from dividends declared in 2019.
During the first and second quarter of 2019 were a 9.7% increase from2020, we completed our $1 billion share repurchase plan approved in 2006 and commenced repurchases under the first and second quarter of 2018.
$500 share repurchase plan approved in 2019. During the six months ended June 30, 20192020 and 2018,2019, we repurchased and retired 0.21.7 and 1.00.2 shares of common stock for $10.5$73.2 and $50.0,$10.5, respectively, under our $1 billion share repurchase program. To date, under the program,plans. Separate from our share repurchase plans, the Company has repurchased 22.40.2 shares during both the six months ended June 30, 2020 and 2019, respectively, for $919.9.an aggregate price of $10.5 and $9.5, respectively, in settlement of employee tax withholding obligations due upon the vesting of RSUs and PSUs. All repurchased shares are canceled immediately following the repurchases.

Significant factors that affect our overall management of liquidity include our credit ratings, the availability of commercial paper, access to 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
WeWhen available and economically feasible, we have access toaccessed the commercial paper market through programs in place in the U.S. and Europe to supplement 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 commercialfunding. Commercial paper program by adjusting the level of commercial paper borrowingsoutstanding as opportunities to deploy additional capital arise and it is cost effective to do so. As of June 30, 2019, we2020 was $134.1, consisting of $50.0 under the Company’s U.S. program and $84.1 under the Company’s Euro program. Weighted average interest rates were 0.80% and 0.36% under the U.S. and euro programs, respectively, and had outstanding commercial papermaturity terms of $148.0 through our European program, a portionless than three months from the date of which was used to acquire Rheinhütte. The average outstanding commercial paper balance during the six months ended June 30, 2019 was $129.2. There have been no other material changes that have impacted our funding and liquidity capabilities since December issuance.
31 2018.


Revolving Credit AgreementAgreements
Our $500 revolving credit agreement (the Revolving Credit Agreement) provides for increases of up to $200 for a possible maximum total of $700 in aggregate principal amount, at the request of the Companyamount. These increased commitments are subject to certain conditions and with the consent of the institutions providing such increased commitments.therefore may not be available to us. 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. As of June 30, 2020, outstanding borrowings under the Revolving Credit Agreement were $112.2 as of June 30, 2020 with a weighted average interest rate of 1.1% and varying maturity dates all within six months or less. The provisions of the Revolving Credit Agreement require that we maintain an interest coverage ratio, as defined therein, of at least 3.0 and a leverage ratio, as defined therein, of not more than 3.0. Our interest coverage ratio and leverage ratio were within the prescribed thresholds as of June 30, 2019, and there were no outstanding borrowings under our Revolving Credit Agreement. In the event of a ratings downgrade 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 Revolving Credit Agreement. The Revolving Credit Agreement matures in November 2021.2022.
On April 29, 2020, we entered into two 364-day revolving credit agreements totaling $200 (the Incremental Revolving Credit Agreements) which provide the Company with additional liquidity in excess of the Revolving Credit Agreement. The interest rate per annum is based on the LIBOR rate, adjusted for statutory reserve requirements, plus a margin of up to 1.55%. The provisions of the Incremental Revolving Credit Agreements mirror those of the Revolving Credit Agreement, including all covenants. In addition, the Incremental Revolving Credit Agreements did not violate any negative covenants associated with the existing Revolving Credit Agreement. There were no outstanding borrowings under the Incremental Revolving Credit Agreements as of the date of this Report.
As of June 30, 2020, our interest coverage ratio and leverage ratios associated with our revolving credit agreements were within the prescribed thresholds. Additionally, we currently expect to remain within the prescribed thresholds until maturity.
See Note 14, Debt, to the Consolidated Condensed Financial Statements for further information.
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 six months ended June 30, 20192020 and 2018.2019. 
For the Six Months Ended June 302019 2018For the Six Months Ended June 3020202019
Operating activities$101.1
 $119.3
Operating activities$203.1  $101.1  
Investing activities(132.3) (45.4)Investing activities(37.1) (132.3) 
Financing activities0.4
 (4.1)Financing activities41.2  0.4  
Foreign exchange0.6
 (8.6)Foreign exchange(0.2) 0.6  
Total net cash flow (used in) provided by continuing operations(30.2) 61.2
Net cash provided by (used) in discontinued operations1.2
 (1.4)
Total net cash provided by (used in) continuing operationsTotal net cash provided by (used in) continuing operations207.0  (30.2) 
Net cash provided by discontinued operationsNet cash provided by discontinued operations0.1  1.2  
Net change in cash and cash equivalents$(29.0) $59.8
Net change in cash and cash equivalents$207.1  $(29.0) 
Operating Activities
The decreaseincrease in net cash provided by operating activities was primarily due to $19.0proactive working capital management, which also drove favorable timing of cash collections from customers. Also contributing to the increase was a decline in proceeds received in 2018 from an environmental insurance-related settlement. Excludingincome taxes paid of $23.0 primarily due to the settlement proceeds, net cash from operating activities was flat. Segment operating income improvements as well as lower asbestos and environmental payments were offset by higher incomedeferral of tax payments as a result of $10.5the CARES Act, lower asbestos-related payments of $8.2, and timing of trade receivable collections.a reduction in incentive compensation payments. In addition, the Company’s 2019 settlement of $11 for a civil matter with the DOJ in the second quarter of 2019 was partially offset by proceeds received of $9 received during the first quarter ofin 2019 from an intellectual property settlement.
As a result of the COVID-19 global pandemic, we may experience a negative impact to our working capital in future periods related to the challenging global economic environment. Collecting from customers will become increasingly difficult the longer the COVID-19 pandemic continues.
32


Investing Activities
The increasedecrease in net cash used in investing activities was driven by payments of $87.3 in 2019 related to our acquisition of Rheinhütte for $87.3and a decline in capital expenditures of $11.5.
As a result of the second quarterCOVID-19 global pandemic, we have implemented various cost savings and cash preservation measures. As a result, we expect a reduction in capital expenditures of $35 in 2020, compared to 2019.

Financing Activities
The changeincrease in net cash from financing activities was driven by an increase in net borrowings of $100.6 under our Revolving Credit Agreement and commercial paper programs, along with a decline in dividends paid of $11.5 due to timing. These were partially offset by an increase in repurchases of ITT common stock of $35.4, partially offset by a decrease in net borrowings of $19.9 and an increase in dividends paid of $14.1.$63.7.
Discontinued Operations
The change in net cash used infrom discontinued operations was primarily driven by a tax-related reimbursement of $1.8 from a former subsidiary and lower payments for environmental remediation activities.in 2019.
Asbestos
Based on the estimated undiscounted asbestos liability as of June 30, 20192020 for claims filed or estimated to be filed over the next 10 years, we have estimated that we will be able to recover approximately 42%50% 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 10th year of our estimate, our insurance recoveries are currently projected to be approximately 21%30%. 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 June 30, 2019.2020.
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 2032.
Although asbestos cash outflows can vary significantly from year to year, our current net cash outflows for defense and indemnity, net of tax benefits, are projected to average $20$10 to $30$20 over the next five years and increase to an average of approximately $35 to $45 per year over the remainder of the projection period as certain insurance coverage is exhausted. Net cash outflows for defense and indemnity, net of tax, averaged $21$20 over the past three annual periods. Total net asbestos cash outflows also include certain administrative costs, such as legal-related costs for insurance recovery strategies not included in the defense and indemnity projections.
In light of the variables and uncertainties inherent in the long-term projection of the Company’s asbestos exposures and potential recoveries, while 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 2029.2030.
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.
33


KEY PERFORMANCE INDICATORS AND NON-GAAP MEASURES
Management reviews a variety of key performance indicators including revenue, segment operating income and margins, earnings per share, order growth, and backlog, some of which are non-GAAP financial measures.calculated other than in accordance with accounting principles generally accepted in the United States of America (GAAP). In addition, we consider certain other 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 otherSome of these metrics, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (GAAP)GAAP and should not be considered a substitute for measures determined in accordance with GAAP.
We consider the following non-GAAP measures whichto be key performance indicators. These measures may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:companies.
“Organic revenue” and “organic orders” areis defined as revenue, and orders, excluding the impacts of foreign currency fluctuations, acquisitions, and divestitures. Divestitures include sales of portions of our businessdivestitures 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. ReconciliationsA reconciliation of revenue to organic revenue and orders for the three and six months ended June 30, 2019 are2020 is provided below.
Three Months Ended June 30Motion TechnologiesIndustrial
Process
Connect & Control
Technologies
EliminationsTotal
ITT
2020 Revenue$199.3  $193.3  $122.9  $(0.8) $514.7  
Acquisitions—  (4.7) (2.8) —  (7.5) 
Foreign currency translation8.0  5.4  0.3  —  13.7  
2020 Organic revenue$207.3  $194.0  $120.4  $(0.8) $520.9  
2019 Revenue$317.7  $232.6  $170.2  $(0.6) $719.9  
Organic (decline) growth(110.4) (38.6) (49.8) (0.2) (199.0) 
Percentage change(34.7)%(16.6)%(29.3)%(27.6)%
Six Months Ended June 30
2020 Revenue$497.2  $420.6  $261.6  $(1.4) $1,178.0  
Acquisitions—  (18.6) (5.8) —  (24.4) 
Foreign currency translation15.8  9.4  0.9  —  26.1  
2020 Organic revenue$513.0  $411.4  $256.7  $(1.4) $1,179.7  
2019 Revenue$632.9  $448.3  $335.2  $(1.0) $1,415.4  
Organic (decline) growth(119.9) (36.9) (78.5) (0.4) (235.7) 
Percentage change(18.9)%(8.2)%(23.4)%(16.7)%
Three Months Ended June 30Motion TechnologiesIndustrial
Process
Connect & Control
Technologies
Eliminations
Total
ITT
2019 Revenue $317.7
  $232.6
  $170.2
  $(0.6)  $719.9
Acquisitions 
  (7.9)  
  
  (7.9)
Foreign currency translation 16.8
  4.2
  1.7
  
  22.7
2019 Organic revenue $334.5
  $228.9
  $171.9
  $(0.6)  $734.7
2018 Revenue $330.3
  $203.2
  $164.1
  $(0.8)  $696.8
Organic growth 4.2
  25.7
  7.8
  0.2
  37.9
Percentage change 1.3 %  12.6%  4.8%     5.4%
               
               
Six Months Ended June 30
2019 Revenue $632.9
  $448.3
  $335.2
  $(1.0)  $1,415.4
Acquisitions 
  (7.9)  
  
  (7.9)
Foreign currency translation 39.3
  8.0
  4.1
  (0.1)  51.3
2019 Organic revenue $672.2
  $448.4
  $339.3
  $(1.1)  $1,458.8
2018 Revenue $672.5
  $393.0
  $322.0
  $(1.4)  $1,386.1
Organic growth (0.3)  55.4
  17.3
  0.3
  72.7
Percentage change  %  14.1%  5.4%     5.2%

Three Months Ended June 30Motion
Technologies
Industrial
Process
Connect & Control
Technologies
Eliminations
Total
ITT
2019 Orders $311.9
  $212.7
  $169.5
  $(1.3)  $692.8
Acquisitions 
  (10.2)  
  
  (10.2)
Foreign currency translation 16.6
  4.5
  1.9
  
  23.0
2019 Organic orders $328.5
  $207.0
  $171.4
  $(1.3)  $705.6
2018 Orders $327.6
  $237.4
  $177.2
  $(0.5)  $741.7
Organic growth 0.9
  (30.4)  (5.8)  (0.8)  (36.1)
Percentage change 0.3 %  (12.8)%  (3.3)%     (4.9)%
               
               
Six Months Ended June 30
2019 Orders $643.4
  $431.7
  $358.6
  $(2.0)  $1,431.7
Acquisitions 
  (10.2)  
  
  (10.2)
Foreign currency translation 42.1
  9.2
  4.7
  
  56.0
2019 Organic orders $685.5
  $430.7
  $363.3
  $(2.0)  $1,477.5
2018 Orders $697.5
  $447.5
  $359.0
  $(1.1)  $1,502.9
Organic growth (12.0)  (16.8)  4.3
  (0.9)  (25.4)
Percentage change (1.7)%  (3.8)%  1.2 %     (1.7)%
“Adjusted operating income” and “Adjusted segment operating income” isare defined as operating income, adjusted to exclude special items that include, but are not limited to, asbestos-related impacts, restructuring, costs, realignment, costs, certain asset impairment charges, certain acquisition-related expenses,impacts, and 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. “Adjusted operating margin” and “Adjusted segment operating margin” isare defined as adjusted operating income or adjusted segment operating income divided by revenue. We believe that adjusted segment operating income and marginthese financial measures are useful to investors and other users of our financial statements in evaluating ongoing operating profitability, as well as in evaluating operating performance in relation to our competitors.
Reconciliations
34


A reconciliation of segment operating income to adjusted segment operating income for the three and six months ended June 30, 2020 and 2019 and 2018 areis provided below.
Three Months Ended June 30, 2020Motion
Technologies
Industrial
Process
Connect & Control
Technologies
Total
Segment
CorporateTotal ITT
Operating income$10.4  $18.5  $8.4  $37.3  $(16.8) $20.5  
Asbestos-related costs, net—  —  —  —  16.0  16.0  
Restructuring costs14.0  7.8  5.2  27.0  0.9  27.9  
Acquisition-related expenses—  0.2  0.1  0.3  —  0.3  
Realignment costs and other—  —  —  —  (0.6) (0.6) 
Adjusted operating income (loss)$24.4  $26.5  $13.7  $64.6  $(0.5) $64.1  
Adjusted operating margin12.2 %13.7 %11.1 %12.6 %12.5 %
Six Months Ended June 30, 2020
Operating income$63.5  $27.4  $24.3  $115.2  $14.6  $129.8  
Asbestos-related benefit, net—  —  —  —  (24.7) (24.7) 
Asset impairment charges(b)
—  16.3  —  16.3  —  16.3  
Restructuring costs14.0  7.9  6.7  28.6  2.4  31.0  
Acquisition-related expenses—  0.5  0.2  0.7  —  0.7  
Realignment costs and other—  —  —  —  (0.3) (0.3) 
Adjusted operating income (loss)$77.5  $52.1  $31.2  $160.8  $(8.0) $152.8  
Adjusted operating margin15.6 %12.4 %11.9 %13.7 %13.0 %
Three Months Ended June 30, 2019Motion
Technologies
Industrial
Process
Connect & Control
Technologies
Total
Segment
Segment operating income $52.0

$26.0

$29.6

$107.6
Restructuring costs 3.1

0.1
 (0.2)
3.0
Acquisition-related expenses 
 2.9
 0.8
 3.7
Realignment costs and other(a)
 1.3
 
 
 1.3
Adjusted segment operating income $56.4

$29.0

$30.2

$115.6
Adjusted segment operating margin 17.8% 12.5% 17.7% 16.1%
         
Six Months Ended June 30, 2019
Segment operating income $112.9
 $48.2
 $57.0
 $218.1
Restructuring costs 3.8
 0.4
 (0.1) 4.1
Acquisition-related expenses 
 2.9
 0.8
 3.7
Realignment costs and other(a)
 1.3
 0.5
 0.3
 2.1
Adjusted segment operating income $118.0
 $52.0
 $58.0
 $228.0
Adjusted segment operating margin 18.6% 11.6% 17.3% 16.1%
(a)Realignment costs and other includes costs associated with a legal matter at MT, a management reorganization at IP, as well as costs associated with a resolved DOJ civil matter at CCT.

Three Months Ended June 30, 2019Motion
Technologies
Industrial
Process
Connect & Control
Technologies
Total
Segment
CorporateTotal ITT
Operating income$52.0  $26.0  $29.6  $107.6  $(21.6) $86.0  
Asbestos-related costs, net—  —  —  —  11.8  11.8  
Restructuring costs3.1  0.1  (0.2) 3.0  0.1  3.1  
Acquisition-related expenses—  2.9  0.8  3.7  —  3.7  
Realignment costs and other(a)
1.3  —  —  1.3  —  1.3  
Adjusted operating income (loss)$56.4  $29.0  $30.2  $115.6  $(9.7) $105.9  
Adjusted operating margin17.8 %12.5 %17.7 %16.1 %14.7 %
Six Months Ended June 30, 2019
Operating income$112.9  $48.2  $57.0  $218.1  $(41.5) $176.6  
Asbestos-related costs, net—  —  —  —  24.4  24.4  
Restructuring costs3.8  0.4  (0.1) 4.1  0.1  4.2  
Acquisition-related expenses—  2.9  0.8  3.7  —  3.7  
Realignment costs and other(a)
1.3  0.5  0.3  2.1  (0.3) 1.8  
Adjusted operating income (loss)$118.0  $52.0  $58.0  $228.0  $(17.3) $210.7  
Adjusted operating margin18.6 %11.6 %17.3 %16.1 %14.9 %
(a)Realignment and other in 2019 include costs associated with a legal matter at MT, a management reorganization at IP, as well as costs associated with a resolved DOJ civil matter at CCT.
Three Months Ended June 30, 2018Motion
Technologies
Industrial
Process
Connect & Control
Technologies
Total
Segment
Segment operating income $55.5
 $23.4
 $27.3
 $106.2
Restructuring costs 0.9
 (0.1) 0.4
 1.2
Acquisition-related expenses 0.9
 
 
 0.9
Adjusted segment operating income $57.3
 $23.3
 $27.7
 $108.3
Adjusted segment operating margin 17.3% 11.5% 16.9% 15.5%
         
Six Months Ended June 30, 2018
Segment operating income $117.4
 $40.3
 $50.3
 $208.0
Restructuring costs 1.3
 
 0.8
 2.1
Acquisition-related expenses 1.5
 
 
 1.5
Adjusted segment operating income $120.2
 $40.3
 $51.1
 $211.6
Adjusted segment operating margin 17.9% 10.3% 15.9% 15.3%
(b)Asset impairment charges in 2020 are related to a business within IP that primarily serves the global upstream oil and gas market.
“Adjusted income from continuing operations” is defined as income from continuing operations attributable to ITT Inc. adjusted to exclude special items that include, but are not limited to, asbestos-related costs,impacts, restructuring, costs, realignment, costs, certain asset impairment charges, pension termination and settlement impacts, certain acquisition-related expenses,impacts, income tax settlements or adjustments, and unusual or infrequent items. Special items represent significant charges or credits, on an after-tax basis, that impact current results, which management views as unrelated to the Company’s ongoing operations and performance. The after-tax basis of each special item is determined using the jurisdictional tax rate of where the expense or benefit occurred. “Adjusted income from continuing operations per diluted share” (Adjusted EPS) is defined as adjusted income from continuing operations divided by diluted weighted average common shares outstanding. We believe that adjusted income from continuing operations and adjusted income from continuing operations per diluted shareEPS are useful to
35


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 income from continuing operations to adjusted income from continuing operations, including adjusted income from continuing operations per diluted share, for the three and six months ended June 30, 20192020 and 20182019 is provided below.
 Three MonthsSix Months
For the Periods Ended June 302020201920202019
Income from continuing operations attributable to ITT Inc.$46.4  $66.9  $130.1  $138.2  
Net asbestos-related costs (benefit), net of tax (benefit) expense of ($3.5), ($2.7) $5.4 and $(5.7), respectively12.5  9.1  (19.3) 18.7  
Asset impairment charges, net of tax benefit of $0.0, $0.0, $0.1 and $0.0, respectively(a)
—  —  16.2  —  
Restructuring costs, net of tax benefit of $6.8, $0.9, $7.6 and $1.2, respectively21.1  2.2  23.4  3.0  
Acquisition-related costs, net of tax benefit of $0.0, $0.9 $0.0, and $0.9 respectively0.3  2.8  0.7  2.8  
Tax-related special items(b)
(31.2) 0.6  (33.2) (0.5) 
Realignment costs and other, net of tax benefit of $0.2, $0.2, $0.6 and $0.3, respectively(c)
0.6  1.1  1.9  1.5  
Adjusted income from continuing operations$49.7  $82.7  $119.8  $163.7  
Income from continuing operations attributable to ITT Inc. per diluted share (EPS)$0.53  $0.75  $1.49  $1.56  
Adjusted EPS$0.57  $0.93  $1.37  $1.85  
 Three Months Six Months
For the Periods Ended June 302019 2018 2019 2018
Income from continuing operations attributable to ITT Inc.$66.9
 $69.7
 $138.2
 $170.8
Net asbestos-related costs (benefit) net of tax (benefit) expense of $(2.7),($3.1), $(5.7) and $1.5, respectively9.1
 10.4
 18.7
 (4.7)
Tax-related special items(a)
0.6
 (9.0) (0.5) (27.2)
Restructuring costs, net of tax benefit of $0.9, $0.2 $1.2, and $0.4, respectively2.2
 1.0
 3.0
 1.7
Realignment (benefit) costs, net of tax expense (benefit) of $0.0, $0.1, ($0.1), and $0.1, respectively
 (0.2) 0.5
 (0.2)
Expense (income) related to sale of a former operating location, net of tax expense of $0.1, $0.0, $0.1, and $0.0, respectively0.1
 
 (0.3) (0.2)
Acquisition-related costs, net of tax benefit of $0.9, $0.3, $0.9 and $0.4, respectively2.8
 0.6
 2.8
 1.1
Other unusual or infrequent items, net of tax benefit of $0.3, $0.0, $0.3 and $0.0, respectively(b)
1.0
 (0.1) 1.3
 (0.1)
Adjusted income from continuing operations$82.7
 $72.4
 $163.7
 $141.2
Income from continuing operations attributable to ITT Inc. per diluted share$0.75
 $0.79
 $1.56
 $1.93
Adjusted income from continuing operations per diluted share$0.93
 $0.82
 $1.85
 $1.59
(a)Asset impairment charges in 2020 are related to a business within IP that primarily serves the global upstream oil and gas market.
(a)Tax-related special items during the three and six months ended June 30, 2019 primarily relate to the favorable valuation allowance impacts,
(b)Tax-related special items in 2020 and 2019 include the release of a valuation allowance. Tax-related special items in 2019 also include excess tax benefits related to stock compensation, partially offset by tax expense on undistributed foreign earnings. Tax-related special items during the second quarter of 2018 primarily relate to a tax benefit on undistributed foreign earnings. Tax-related special items during the six months ended June 30, 2018 are due to favorable valuation allowance impacts on deferred tax assets in Germany and adjustments to our provisional tax estimate associated with the Tax Act.

(b)Other unusual or infrequent items in 2019 include a legal matter at MT and costs associated with a resolved DOJ civil matter.
“Adjusted free cash flow” is defined as net cash provided by operating activities less capital expenditures, adjusted for cash payments for restructuringtax expense on undistributed foreign earnings.
(c)Realignment costs realignment actions, net asbestos cash flows and other significant items that impact current results whichin 2020 include costs associated with the termination of U.S. Qualified pension plan at Corporate. Realignment costs and other in 2019 primarily relate to costs associated with a legal matter at MT, a management viewsreorganization at IP, as unrelated to the Company’s ongoing operations and performance. Due to other financial obligations and commitments, including asbestos expenses, the entire adjusted free cash flow may not be available for discretionary purposes. “Adjusted free cash flow conversion” is definedwell as adjusted free cash flow divided by adjusted income from continuing operations. We believe that adjusted free cash flow and adjusted free cash flow conversion provide useful information to investors because they are the additional cash flow metrics used by management to monitor and evaluate cash flows generated by our operations.costs associated with a resolved DOJ civil matter at CCT.
A reconciliation of adjusted free cash flow, including adjusted free cash flow conversion for the six months ended June 30, 2019 and 2018 is provided below.
36
For the Six Months Ended June 302019 2018
Net cash provided by operating activities$101.1
 $119.3
Capital expenditures(45.8) (46.3)
Net asbestos cash flows15.8
 30.8
Insurance settlement agreement
 (16.9)
Restructuring cash payments5.5
 4.2
Legal settlements, net4.0
 
Acquisition and other1.5
 (0.1)
Adjusted free cash flow$82.1
 $91.0
Adjusted free cash flow conversion50.2% 64.4%



RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2,Recent Accounting Pronouncements, 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 20182019 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 20182019 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 20182019 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 Securities Exchange Act of 1934 (the Exchange Act) as of the end of the period covered by this report.Report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this report,Report, the Company’s disclosure controls and procedures were 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. In addition, we have not experienced any material impact to our internal controls over financial reporting despite the fact that many of our employees continue to work remotely during the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.
37


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 asbestos and 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 19, Commitments and 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, ITT LLC and Goulds Pumps LLC, 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’s 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’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 variables and uncertainties inherent in the long-term projection of the Company’s asbestos exposures and potential recoveries. As of June 30, 2019,2020, we have recorded an undiscounted asbestos-related liability for pending claims and unasserted claims estimated to be filed over the next 10 years of $835.8,$803.8, including expected legal fees, and an associated asset of $354.6$405.3 which represents estimated recoveries from insurers, resulting in a net asbestos exposure of $481.2.$398.5.
Environmental
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.
Other Matters
38
The Company received a civil subpoena from the Department of Defense, Office of the Inspector General, in the second quarter of 2015 as part of an investigation led by the Civil Division of the U.S. Department of Justice (DOJ). The subpoena and related investigation involved certain connector products manufactured by the Company’s Connect & Control Technologies segment that are purchased or used by the U.S. government. In the second quarter of 2019, the Company settled this matter with the DOJ, acting on behalf of the U.S. government, and paid $11 to avoid the expense and uncertainty of litigation. As part of the settlement, the Company made no admission of wrongdoing. During the second quarter of 2019, the Company also received an insurance recovery of $1 related to this matter.


ITEM 1A. RISK FACTORS
Reference is made to the risk factors set forth in Part I, Item 1A, “Risk Factors,” of our 20182019 Annual Report, which are incorporated by reference herein. There have been no material changes with regard to the risk factors disclosed in such report.report, other than those noted below.
Our financial condition and results of operations may be adversely affected by the COVID-19 pandemic and the governmental and market reactions to COVID-19.
The pandemic outbreak of COVID-19 has surfaced in nearly all regions around the world. The COVID-19 pandemic and the resulting measures by federal, state and local governments to contain the outbreak have caused, and continue to cause, significant disruptions in our businesses and in global markets where we operate. These disruptions may have a material adverse effect on our financial condition and results of operations due to, among other potential events and circumstances, the occurrence of the following:
partial or full closure of our offices or manufacturing facilities, either voluntarily or in response to government mandates, including as a result of an outbreak of COVID-19 that directly affects our workforce;
lower production capacity and labor productivity due to employee illness, loss of key personnel, increased absenteeism, inability to travel, or the implementation of government mandated or voluntary preventative measures such as reductions in operating hours;
reduced sales related to decreased customer demand and spending, order push-outs, order cancellations or unfavorable pricing dynamics;
missed or late deliveries due to disruptions in our global supply chain, delayed supplier deliveries, or the inability to procure supplier inputs at reasonable prices or at all;
delays in collections or an inability to collect on customer receivables;
customer or supplier bankruptcy;
liquidity challenges including an inability to pay suppliers and vendors;
difficulty accessing capital markets;
increasing indebtedness due to our need to increase borrowing to fund operations during a period of reduced revenue; and
delays in capital investments or research and development.
At this time, we cannot predict the duration or magnitude of the COVID-19 pandemic, the various governmental containment measures or the resulting disruptions to our markets and our business. The longer the pandemic continues, the more likely that the foregoing risks will be realized and that other negative impacts on our business will occur, including some that we are not currently able to predict.
Our business is impacted by our customers’ levels of capital investment and maintenance expenditures, particularly in the oil and gas, chemical, and mining markets.
Demand for certain industrial products and services depends on the level of capital investment and planned maintenance expenditures of our customers. Our customers’ levels of capital expenditures depend, in turn, on general economic conditions, availability of credit, economic conditions within their respective industries and expectations of future market behavior. Additionally, volatility in commodity prices can negatively affect the level of these activities and can result in postponement of capital spending decisions or the delay or cancellation of existing orders. The ability of our customers to finance capital investment and maintenance may also be affected by factors independent of the conditions in their industries, such as the condition of global credit and capital markets.
The businesses of many of our customers, particularly those in the oil and gas, chemical, and mining industries, which represented approximately 10%, 9%, and 3%, respectively, of our 2019 revenue, are to varying degrees cyclical and have experienced, and may in the future experience, periodic downturns of varying severity. For example, the volatility of the oil and gas market has generally been dependent upon the prevailing view of future gas and oil prices, which are influenced by numerous supply and demand factors, including availability and cost of capital, global and domestic economic conditions, environmental regulations, policies of OPEC countries and Russia, and other factors. Actions taken by Saudi Arabia and Russia and the COVID-19 pandemic have caused a worldwide oversupply in oil and gas, resulting in significant reductions in oil and gas prices. Our customers in these industries, particularly those whose demand for our products and services is primarily profit-driven, historically have tended to delay large capital projects, including expensive maintenance and upgrades, during economic downturns. Additionally, fluctuating energy demand forecasts and commodity pricing and other macroeconomic factors may cause our customers to be more conservative in their capital planning, which could reduce demand for our products and services. Reduced demand for our products and
39


services could result in the delay or cancellation of existing orders or lead to excess manufacturing capacity, which unfavorably impacts our absorption of fixed manufacturing costs. This reduced demand may also erode average selling prices in our industry. These factors could have a material adverse effect on our business, results of operations and financial condition.
Additionally, some of our customers may choose to postpone capital investment and maintenance, even during favorable conditions in their industries or markets, which could lead to the delay or cancellation of orders. Despite these favorable conditions, the general health of global credit and capital markets and our customers’ ability to access such markets may significantly impact investments in large capital projects, as well as necessary maintenance and upgrades. In addition, the liquidity and financial position of our customers, which are typically directly linked to the economies in which they operate, could impact capital investment decisions and their ability to pay in full and/or on a timely basis. Any of these factors, whether individually or in the aggregate, could have a material adverse effect on our customers and, in turn, our business, results of operations and financial condition.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Purchases of equity securities by the issuer and affiliated purchasers
We did not make any open-market share repurchases of our common stock during the quarter ended June 30, 2019.2020. We routinely receive shares of our common stock as payment for the withholding of taxes due on vested restricted stock awards from stock-based compensation program participants.
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 by the Office of Foreign Assets Control (the General License). 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 €2.2 euros and €1.5 euros, respectively. Prior to its acquisition by ITT, Bornemann issued a performance bond to its Iranian customer in the amount of €1.3 euros (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 June 30, 2019,2020, however, Bornemann did pay fees of approximately €5 thousand euros during the six months ended June 30, 20192020 and approximately €11 thousand euros during 20182019 to the German financial institution which is maintaining the Bond.


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ITEM 6. EXHIBITS
EXHIBIT NUMBER
DESCRIPTION
EXHIBIT NUMBER(31.1)
DESCRIPTION
(10.1)*
(10.2)*
(10.3)*
(31.1)
(31.2)
(32.1)
(32.2)
(101)The following materials from ITT Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019,2020, formatted in iXBRLInline XBRL (Inline Extensible Business Reporting Language): (i) Consolidated Condensed 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, and (vii) Cover Page
(104)The cover page from the Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL (included in Exhibit 101).
* Management compensatory plan
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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.
ITT Inc.
(Registrant)
(Registrant)
By:
By:/s/ John Capela
John Capela
Chief Accounting Officer
(Principal accounting officer)Accounting Officer)
August 2, 2019

July 31, 2020
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