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 July ~~3, 2021~~2, 2022


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


For the transition period from to

Commission File Number: 001-05672

ITT INC.


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

~~1133 Westchester Avenue, White Plains, NY 10604~~100 Washington Boulevard, 6th Floor, Stamford, CT 06902

(Principal Executive Office)

Telephone Number: (914) 641-2000

Former name, former address and former fiscal year, if changed since last report:

1133 Westchester Avenue, White Plains, NY 10604

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1$1.00 per share	ITT	New 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 (or for such shorter period that the registrant was required to file such reports), 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 (§232.405 of this chapter) 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 filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller 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 August ~~4, 2021,~~2, 2022, there were ~~86.1~~82.7 million shares of Common Stock ~~($1 par~~(par value $1.00 per share) of the issuer outstanding.

TABLE OF CONTENTS


ITEM	ITEM		PAGE	ITEM		PAGE
PART I – FINANCIAL INFORMATION	PART I – FINANCIAL INFORMATION			PART I – FINANCIAL INFORMATION
1.	1.	Financial Statements (unaudited)		1.	Financial Statements (unaudited)
					Consolidated Condensed Statements of Operations	1
		Consolidated Condensed Statements of Operations	1		Consolidated Condensed Statements of Comprehensive Income	2
		Consolidated Condensed Statements of Comprehensive Income	2		Consolidated Condensed Balance Sheets	3
		Consolidated Condensed Balance Sheets	3		Consolidated Condensed Statements of Cash Flows	4
		Consolidated Condensed Statements of Cash Flows	4		Consolidated Condensed Statements of Changes in Shareholders’ Equity	5
		Consolidated Condensed Statements of Changes in Shareholders’ Equity	5		Notes to Consolidated Condensed Financial Statements:
		Notes to Consolidated Condensed Financial Statements:			Note 1. Description of Business and Basis of Presentation	7
		Note 1. Description of Business and Basis of Presentation	6		Note 2. Recent Accounting Pronouncements	8
		Note 2. Recent Accounting Pronouncements	7		Note 3. Segment Information	8
		Note 3. Segment Information	7		Note 4. Revenue	10
		Note 4. Revenue	8
		Note 5. Restructuring Actions	10		Note 5 . Income Taxes	11
		Note 6. Income Taxes	11		Note 6 . Earnings Per Share Data	11
		Note 7. Earnings Per Share Data	12		Note 7 . Receivables, Net	12
		Note 8. Receivables, Net	12		Note 8 . Inventories, Net	12
		Note 9. Inventories, Net	13		Note 9 . Other Current and Non-Current Assets	13
		Note 10. Other Current and Non-Current Assets	13		Note 1 0 . Plant, Property and Equipment, Net	13
		Note 11. Plant, Property and Equipment, Net	14		Note 1 1 . Goodwill and Other Intangible Assets, Net	14
		Note 12. Goodwill and Other Intangible Assets, Net	14		Note 1 2 . Accrued Liabilities and Other Non-Current Liabilities	15
		Note 13. Accrued Liabilities and Other Non-Current Liabilities	15		Note 1 3 . Debt	15
		Note 14. Debt	16
		Note 15. Postretirement Benefit Plans	17		Note 14. Long-Term Incentive Employee Compensation	16
		Note 16. Long-Term Incentive Employee Compensation	18		Note 15. Capital Stock	17
		Note 17. Capital Stock	19		Note 16. Accumulated Other Comprehensive Loss	17
		Note 18. Accumulated Other Comprehensive Loss	19		Note 17. Commitments and Contingencies	18
		Note 19. Commitments and Contingencies	20		Note 18. Derivative Financial Instruments	19
		Note 20. Derivatives Financial Instruments	22		Note 19. Acquisitions and Investments	20

2.	2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
		Overview	24		Overview	21
		Discussion of Financial Results	26		Discussion of Financial Results	23
		Liquidity	30		Liquidity	27
		Key Performance Indicators and Non-GAAP Measures	32		Key Performance Indicators and Non-GAAP Measures	30
		Recent Accounting Pronouncements	36		Recent Accounting Pronouncements	33
		Critical Accounting Estimates	36		Critical Accounting Estimates	33
3.	3.	Quantitative and Qualitative Disclosures about Market Risk	36	3.	Quantitative and Qualitative Disclosures about Market Risk	33
4.	4.	Controls and Procedures	36	4.	Controls and Procedures	33
PART II – OTHER INFORMATION	PART II – OTHER INFORMATION			PART II – OTHER INFORMATION
1.	1.	Legal Proceedings	37	1.	Legal Proceedings	34
1A.	1A.	Risk Factors	37	1A.	Risk Factors	34
2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	37	2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
3.	3.	Defaults Upon Senior Securities	37	3.	Defaults Upon Senior Securities	35
4.	4.	Mine Safety Disclosures	37	4.	Mine Safety Disclosures	35
5.	5.	Other Information	38	5.	Other Information	35
6.	6.	Exhibits	38	6.	Exhibits	36
		Signature	39		Signature	37

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~~www.investors.itt.com 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 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 are located at ~~1133 Westchester Avenue, White Plains, New York 10604~~100 Washington Boulevard, 6th Floor, Stamford, CT 06902 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 represent only a belief regarding future events 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, by their nature, many are inherently unpredictable and outside of ITT’s control, 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~~we cannot provide any 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, ~~and the rise~~including:

◦variant strains of the ~~COVID-19 Delta variant,~~virus, as well as the timing, effectiveness and availability of, and people’s receptivity to, vaccines or other medical ~~remedies and people’s attitudes towards receiving them; including~~ remedies;

◦disruptions to our operations and demand for our products, increased costs, ~~disruption of~~continued supply chain disruptions, and other constraints in the availability of key commodities and other necessary ~~services,~~ services;

◦government-mandated site closures, employee illness, skilled labor shortages, the impact of potential travel restrictions, ~~and~~ stay-in-place restrictions, and vaccination requirements on our business and ~~workforce,~~ workforce; and

◦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 those due to COVID-19, trade disputes between the U.S. and its trading partners, the ~~new U.S. administration,~~impact of inflation, political and social unrest, and the availability and fluctuations in prices of steel, oil, copper, tin, and other commodities;

•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;

•failure to compete successfully and innovate in our markets;

•failure to protect our intellectual property rights or violations of the intellectual property rights of others;

•the extent to which there are quality problems with respect to manufacturing processes or finished goods;

•the risk of cybersecurity breaches;

•loss of or decrease in sales from our most significant customers;

•risks due to our operations and sales outside the U.S. and in emerging markets;

•the impacts on our business from Russia’s invasion of Ukraine, and the global response to it;

•fluctuations in foreign currency exchange rates and the impact of such fluctuations on our hedging arrangements;

•fluctuations in interest rates and the impact of such fluctuations on our cost of debt;

•fluctuations in demand or 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, especially in the commercial aerospace market;

•~~failure to manage the distribution of products and services effectively;~~

•the risk of material business interruptions, particularly at our manufacturing facilities;

•~~risks due to our operations~~risk of liabilities from past divestitures and ~~sales outside the U.S. and in emerging markets;~~

•~~the extent to which there are quality problems with respect to manufacturing processes or finished goods;~~

•~~loss of or decrease in sales from our most significant customers;~~

•~~fluctuations in foreign currency exchange rates;~~spin-offs;

•failure of portfolio management strategies, including cost-saving initiatives, to ~~compete successfully and innovate in our markets;~~meet expectations;

•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;

•fluctuations in our effective tax ~~rate;~~

•~~failure to protect our intellectual property rights or violations~~rate, including as a result of possible tax reform legislation in the ~~intellectual property rights of others;~~

•~~the risk of cybersecurity breaches;~~

•~~changes in laws relating to the use and transfer of personal~~U.S. and other ~~information;~~

•~~failure of portfolio management strategies, including cost-saving initiatives, to meet expectations;~~jurisdictions;

•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(or other applicable anti-corruption ~~legislation,~~legislation), export controls and trade sanctions, including tariffs;

•risk of product liability claims and litigation; and

•~~risk~~changes in laws relating to the use and transfer of ~~liabilities from past divestitures~~personal and ~~spin-offs.~~other information.

More information on factors that could cause actual results or events to differ materially from those anticipated is included in Part II, Item 1A, “Risk Factors” herein, as well as in our reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (particularly under the caption “Risk Factors”), our Quarterly Reports on Form 10-Q and in other documents we file from time to time with the SEC.

The forward-looking statements included in this Report speak only as of the date of this Report. We undertake no obligation (and expressly disclaim any obligation) to update any forward-looking statements, whether written or oral or 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 Ended				Six Months Ended					Three Months Ended				Six Months Ended
		July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020			July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Revenue	Revenue	$	691.6	$	514.7	$	1,390.0	$	1,178.0	Revenue	$	733.3	$	691.6	$	1,459.5	$	1,390.0
Costs of revenue		467.0		351.1		936.4		805.0
Cost of revenue										Cost of revenue	511.1		467.0		1,018.9		936.4
Gross profit	Gross profit	224.6		163.6		453.6		373.0		Gross profit	222.2		224.6		440.6		453.6
General and administrative expenses	General and administrative expenses	60.2		44.6		112.3		101.7		General and administrative expenses	57.0		60.3		117.4		116.0
Sales and marketing expenses	Sales and marketing expenses	38.3		35.7		75.0		77.3		Sales and marketing expenses	40.4		38.3		78.8		75.0
Research and development expenses	Research and development expenses	23.2		18.9		47.5		41.6		Research and development expenses	24.3		23.2		49.3		47.5
Asbestos-related (benefit) costs, net		(76.8)		16.0		(74.4)		(24.7)
Restructuring costs		0.1		27.9		3.7		31.0
Asset impairment charges		0		0		0		16.3
Asbestos-related benefit, net										Asbestos-related benefit, net	—		(76.8)		—		(74.4)

Operating income	Operating income	179.6		20.5		289.5		129.8		Operating income	100.5		179.6		195.1		289.5
Interest and non-operating (income) expenses, net		(3.5)		2.2		(4.8)		2.8
Interest and non-operating expense (income), net										Interest and non-operating expense (income), net	0.5		(3.5)		0.3		(4.8)
Income from continuing operations before income tax expense	Income from continuing operations before income tax expense	183.1		18.3		294.3		127.0		Income from continuing operations before income tax expense	100.0		183.1		194.8		294.3
Income tax expense (benefit)		143.9		(28.1)		168.6		(3.4)
Income tax expense										Income tax expense	24.0		143.9		43.5		168.6
Income from continuing operations	Income from continuing operations	39.2		46.4		125.7		130.4		Income from continuing operations	76.0		39.2		151.3		125.7
Income from discontinued operations, net of tax expense of $0.0, $0.3, $0.0, and $0.7, respectively		0		1.6		0		2.7
Loss from discontinued operations, net of tax benefit of $0.4, $0.0, $0.4, and $0.0, respectively										Loss from discontinued operations, net of tax benefit of $0.4, $0.0, $0.4, and $0.0, respectively	(1.2)		—		(1.2)		—
Net income	Net income	39.2		48.0		125.7		133.1		Net income	74.8		39.2		150.1		125.7
Less: Income attributable to noncontrolling interests	Less: Income attributable to noncontrolling interests	0.2		0		0.5		0.3		Less: Income attributable to noncontrolling interests	0.2		0.2		0.7		0.5
Net income attributable to ITT Inc.	Net income attributable to ITT Inc.	$	39.0	$	48.0	$	125.2	$	132.8	Net income attributable to ITT Inc.	$	74.6	$	39.0	$	149.4	$	125.2

Amounts attributable to ITT Inc.:	Amounts attributable to ITT Inc.:									Amounts attributable to ITT Inc.:
Income from continuing operations, net of tax		$	39.0	$	46.4	$	125.2	$	130.1
Income from discontinued operations, net of tax		0		1.6		0		2.7
Income from continuing operations										Income from continuing operations	$	75.8	$	39.0	$	150.6	$	125.2
Loss from discontinued operations, net of tax										Loss from discontinued operations, net of tax	(1.2)		—		(1.2)		—
Net income attributable to ITT Inc.	Net income attributable to ITT Inc.	$	39.0	$	48.0	$	125.2	$	132.8	Net income attributable to ITT Inc.	$	74.6	$	39.0	$	149.4	$	125.2

Earnings per share attributable to ITT Inc.:	Earnings per share attributable to ITT Inc.:									Earnings per share attributable to ITT Inc.:
Basic earnings per share:
Basic:										Basic:
Continuing operations	Continuing operations	$	0.45	$	0.54	$	1.45	$	1.50	Continuing operations	$	0.91	$	0.45	$	1.79	$	1.45
Discontinued operations	Discontinued operations	0		0.02		0		0.03		Discontinued operations	(0.01)		—		(0.01)		—
Net income	Net income	$	0.45	$	0.56	$	1.45	$	1.53	Net income	$	0.90	$	0.45	$	1.78	$	1.45
Diluted earnings per share:
Diluted:										Diluted:
Continuing operations	Continuing operations	$	0.45	$	0.53	$	1.44	$	1.49	Continuing operations	$	0.91	$	0.45	$	1.79	$	1.44
Discontinued operations	Discontinued operations	0		0.02		0		0.03		Discontinued operations	(0.02)		—		(0.02)		—
Net income	Net income	$	0.45	$	0.55	$	1.44	$	1.52	Net income	$	0.89	$	0.45	$	1.77	$	1.44

Weighted average common shares – basic	Weighted average common shares – basic	86.1		86.3		86.2		87.0		Weighted average common shares – basic	83.1		86.1		84.0		86.2
Weighted average common shares – diluted	Weighted average common shares – diluted	86.5		86.8		86.7		87.6		Weighted average common shares – diluted	83.4		86.5		84.3		86.7

The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the Statements of Operations.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(IN MILLIONS)


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020			July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Net income	Net income	$	39.2	$	48.0	$	125.7	$	133.1	Net income	$	74.8	$	39.2	$	150.1	$	125.7
Other comprehensive income (loss):
Other comprehensive (loss) income:										Other comprehensive (loss) income:
Net foreign currency translation adjustment	Net foreign currency translation adjustment	8.4		2.1		(21.6)		(49.2)		Net foreign currency translation adjustment	(70.8)		8.4		(82.5)		(21.6)
Net change in postretirement benefit plans, net of tax (expense) benefit of $(0.1), $0.3, $(0.2), and $0.6, respectively		0		0.9		0		1.8
Other comprehensive income (loss)		8.4		3.0		(21.6)		(47.4)
Net change in postretirement benefit plans, net of tax expense of $(0.2), $(0.1), $(0.3) and $(0.2), respectively										Net change in postretirement benefit plans, net of tax expense of $(0.2), $(0.1), $(0.3) and $(0.2), respectively	(0.2)		—		(0.5)		—

Other comprehensive (loss) income										Other comprehensive (loss) income	(71.0)		8.4		(83.0)		(21.6)
Comprehensive income	Comprehensive income	47.6		51.0		104.1		85.7		Comprehensive income	3.8		47.6		67.1		104.1
Less: Comprehensive income attributable to noncontrolling interests	Less: Comprehensive income attributable to noncontrolling interests	0.2		0		0.5		0.3		Less: Comprehensive income attributable to noncontrolling interests	0.2		0.2		0.7		0.5
Comprehensive income attributable to ITT Inc.	Comprehensive income attributable to ITT Inc.	$	47.4	$	51.0	$	103.6	$	85.4	Comprehensive income attributable to ITT Inc.	$	3.6	$	47.4	$	66.4	$	103.6
Disclosure of reclassification adjustments to postretirement benefit plans
Reclassification adjustments (see Note 15):
Disclosure of reclassification adjustments to postretirement benefit plans:										Disclosure of reclassification adjustments to postretirement benefit plans:
Reclassification adjustments:										Reclassification adjustments:
Amortization of prior service benefit, net of tax expense of $(0.3), $(0.3), $(0.6) and $(0.6), respectively	Amortization of prior service benefit, net of tax expense of $(0.3), $(0.3), $(0.6) and $(0.6), respectively	$	(0.9)	$	(1.0)	$	(1.9)	$	(1.9)	Amortization of prior service benefit, net of tax expense of $(0.3), $(0.3), $(0.6) and $(0.6), respectively	$	(0.9)	$	(0.9)	$	(1.9)	$	(1.9)
Amortization of net actuarial loss, net of tax benefit of $0.2, $0.6, $0.4 and $1.2, respectively		0.9		1.9		1.9		3.7

Amortization of net actuarial loss, net of tax benefit of $0.1, $0.2, $0.3 and $0.4, respectively										Amortization of net actuarial loss, net of tax benefit of $0.1, $0.2, $0.3 and $0.4, respectively	0.7		0.9		1.4		1.9

Net change in postretirement benefit plans, net of tax	Net change in postretirement benefit plans, net of tax	$	0	$	0.9	$	0	$	1.8	Net change in postretirement benefit plans, net of tax	$	(0.2)	$	—	$	(0.5)	$	—

The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the

Statements of Comprehensive Income.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)


		July 3, 2021		December 31, 2020
As of the Period Ended						As of the Period Ended	July 2, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	578.8	$	859.8	Cash and cash equivalents	$	525.7	$	647.5
Receivables, net	Receivables, net	553.4		507.5		Receivables, net	605.7		555.1
Inventories, net	Inventories, net	406.2		360.5		Inventories, net	535.2		430.9
Other current assets	Other current assets	88.8		189.5		Other current assets	109.8		88.6
Total current assets	Total current assets	1,627.2		1,917.3		Total current assets	1,776.4		1,722.1
Non-current assets:						Non-current assets:
Plant, property and equipment, net	Plant, property and equipment, net	502.7		525.1		Plant, property and equipment, net	501.2		509.1
Goodwill	Goodwill	936.3		944.8		Goodwill	963.8		924.3
Other intangible assets, net	Other intangible assets, net	95.8		106.4		Other intangible assets, net	121.7		85.7
Asbestos-related assets		0		353.7
Deferred income taxes		37.3		158.3
Other non-current assets	Other non-current assets	263.0		272.0		Other non-current assets	336.8		324.2
Total non-current assets	Total non-current assets	1,835.1		2,360.3		Total non-current assets	1,923.5		1,843.3
Total assets	Total assets	$	3,462.3	$	4,277.6	Total assets	$	3,699.9	$	3,565.4
Liabilities and Shareholders’ Equity	Liabilities and Shareholders’ Equity					Liabilities and Shareholders’ Equity
Current liabilities:	Current liabilities:					Current liabilities:
Commercial paper and current maturities of long-term debt	Commercial paper and current maturities of long-term debt	$	199.7	$	106.8	Commercial paper and current maturities of long-term debt	$	551.4	$	197.6
Accounts payable	Accounts payable	337.8		306.8		Accounts payable	418.1		373.4
Accrued liabilities	Accrued liabilities	362.5		457.4		Accrued liabilities	333.9		357.3
Total current liabilities	Total current liabilities	900.0		871.0		Total current liabilities	1,303.4		928.3
Asbestos-related liabilities		0		840.6
Non-current liabilities:						Non-current liabilities:
Postretirement benefits	Postretirement benefits	222.0		227.5		Postretirement benefits	190.9		199.9
Other non-current liabilities	Other non-current liabilities	200.0		210.6		Other non-current liabilities	189.0		206.5
Total non-current liabilities	Total non-current liabilities	422.0		1,278.7		Total non-current liabilities	379.9		406.4
Total liabilities	Total liabilities	1,322.0		2,149.7		Total liabilities	1,683.3		1,334.7
Shareholders’ equity:	Shareholders’ equity:					Shareholders’ equity:
Common stock:	Common stock:					Common stock:
Authorized – 250.0 shares, $1 par value per share	Authorized – 250.0 shares, $1 par value per share					Authorized – 250.0 shares, $1 par value per share
Issued and outstanding – 86.1 shares and 86.5 shares, respectively		86.1		86.5
Issued and outstanding – 82.7 shares and 85.5 shares, respectively						Issued and outstanding – 82.7 shares and 85.5 shares, respectively	82.7		85.5
Retained earnings	Retained earnings	2,353.1		2,319.3		Retained earnings	2,329.9		2,461.6
Total accumulated other comprehensive loss	Total accumulated other comprehensive loss	(301.0)		(279.4)		Total accumulated other comprehensive loss	(404.3)		(321.3)
Total ITT Inc. shareholders’ equity	Total ITT Inc. shareholders’ equity	2,138.2		2,126.4		Total ITT Inc. shareholders’ equity	2,008.3		2,225.8
Noncontrolling interests	Noncontrolling interests	2.1		1.5		Noncontrolling interests	8.3		4.9
Total shareholders’ equity	Total shareholders’ equity	2,140.3		2,127.9		Total shareholders’ equity	2,016.6		2,230.7
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	3,462.3	$	4,277.6	Total liabilities and shareholders’ equity	$	3,699.9	$	3,565.4

The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the Balance Sheets.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN MILLIONS)


		Six Months Ended
		July 3, 2021		June 27, 2020
For the Six Months Ended						For the Six Months Ended	July 2, 2022		July 3, 2021
Operating Activities	Operating Activities					Operating Activities
Income from continuing operations attributable to ITT Inc.	Income from continuing operations attributable to ITT Inc.	$	125.2	$	130.1	Income from continuing operations attributable to ITT Inc.	$	150.6	$	125.2
Adjustments to income from continuing operations:	Adjustments to income from continuing operations:					Adjustments to income from continuing operations:
Depreciation and amortization	Depreciation and amortization	57.2		54.5		Depreciation and amortization	55.3		57.2
Equity-based compensation	Equity-based compensation	7.4		5.8		Equity-based compensation	8.7		7.4

Asbestos-related benefit, net		(74.4)		(24.7)
Asset impairment charges		0		16.3
Asbestos-related costs (benefit), net						Asbestos-related costs (benefit), net	—		(74.4)

Other non-cash charges, net	Other non-cash charges, net	11.2		23.5		Other non-cash charges, net	17.3		11.2
Asbestos-related payments, net		(4.5)		(7.6)
Divestiture of asbestos-related assets and liabilities	Divestiture of asbestos-related assets and liabilities	(398.0)		0		Divestiture of asbestos-related assets and liabilities	—		(398.0)
Changes in assets and liabilities:	Changes in assets and liabilities:					Changes in assets and liabilities:
Change in receivables	Change in receivables	(51.6)		97.2		Change in receivables	(77.6)		(51.6)
Change in inventories	Change in inventories	(50.8)		2.0		Change in inventories	(106.5)		(50.8)

Change in contract assets						Change in contract assets	(10.9)		4.0
Change in contract liabilities						Change in contract liabilities	18.7		(11.6)
Change in accounts payable	Change in accounts payable	32.1		(62.3)		Change in accounts payable	65.3		32.1
Change in accrued expenses	Change in accrued expenses	12.9		5.7		Change in accrued expenses	(33.0)		20.5
Change in income taxes	Change in income taxes	123.1		(17.5)		Change in income taxes	(3.5)		123.1
Other, net	Other, net	(21.4)		(19.9)		Other, net	(30.2)		(25.9)
Net Cash – Operating Activities	Net Cash – Operating Activities	(231.6)		203.1		Net Cash – Operating Activities	54.2		(231.6)
Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures	(35.1)		(34.3)		Capital expenditures	(47.5)		(35.1)

Acquisitions, net of cash acquired						Acquisitions, net of cash acquired	(146.9)		—
Payments to acquire interest in unconsolidated subsidiaries						Payments to acquire interest in unconsolidated subsidiaries	(25.1)		—

Other, net	Other, net	0.4		(2.8)		Other, net	1.1		0.4
Net Cash – Investing Activities	Net Cash – Investing Activities	(34.7)		(37.1)		Net Cash – Investing Activities	(218.4)		(34.7)
Financing Activities	Financing Activities					Financing Activities
Commercial paper, net borrowings	Commercial paper, net borrowings	95.4		51.0		Commercial paper, net borrowings	364.6		95.4
Short-term revolving loans, borrowings		0		495.8
Short-term revolving loans, repayments		0		(406.2)

Long-term debt, repayments	Long-term debt, repayments	(1.3)		(1.2)		Long-term debt, repayments	(1.1)		(1.3)
Repurchase of common stock		(61.4)		(83.7)

Share repurchases under repurchase plan						Share repurchases under repurchase plan	(240.9)		(50.4)
Share repurchases from net settlement of employee stock incentive plans						Share repurchases from net settlement of employee stock incentive plans	(8.5)		(11.0)
Dividends paid	Dividends paid	(38.1)		(14.6)		Dividends paid	(44.3)		(38.1)
Other, net	Other, net	0.3		0.1		Other, net	0.7		0.3
Net Cash – Financing Activities	Net Cash – Financing Activities	(5.1)		41.2		Net Cash – Financing Activities	70.5		(5.1)
Exchange rate effects on cash and cash equivalents	Exchange rate effects on cash and cash equivalents	(9.2)		(0.2)		Exchange rate effects on cash and cash equivalents	(28.1)		(9.2)
Net cash – operating activities of discontinued operations	Net cash – operating activities of discontinued operations	(0.2)		0.1		Net cash – operating activities of discontinued operations	—		(0.2)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(280.8)		207.1		Net change in cash and cash equivalents	(121.8)		(280.8)
Cash and cash equivalents – beginning of year (includes restricted cash of $0.8 and $0.8, respectively)	Cash and cash equivalents – beginning of year (includes restricted cash of $0.8 and $0.8, respectively)	860.6		612.9		Cash and cash equivalents – beginning of year (includes restricted cash of $0.8 and $0.8, respectively)	648.3		860.6
Cash and Cash Equivalents – End of Period (includes restricted cash of $1.0 and $0.9, respectively)		$	579.8	$	820.0
Cash and Cash Equivalents – End of Period (includes restricted cash of $0.8 and $1.0, respectively)						Cash and Cash Equivalents – End of Period (includes restricted cash of $0.8 and $1.0, respectively)	$	526.5	$	579.8
Supplemental Disclosures of Cash Flow Information	Supplemental Disclosures of Cash Flow Information					Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:	Cash paid during the year for:					Cash paid during the year for:
Interest	Interest	$	0.7	$	1.2	Interest	$	2.6	$	0.7
Income taxes, net of refunds received	Income taxes, net of refunds received	$	42.3	$	10.7	Income taxes, net of refunds received	$	45.2	$	42.3

The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the Statements of Cash Flows.

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

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

As of and for the Three Months Ended
July 3, 2021
Common Stock Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shareholders' Equity
(Shares) (Dollars)
April 3, 2021 86.1 $ 86.1 $ 2,329.4 $ (309.4) $ 1.8 $ 2,107.9
Net income — 0 39.0 0 0.2 39.2
Activity from stock incentive plans 0 0 4.4 0 0 4.4
Share repurchases 0 0 (0.4) 0 0 (0.4)
Dividends declared ($0.22 per share) — 0 (19.3) 0 0 (19.3)
Total other comprehensive income, net of tax — 0 0 8.4 0 8.4
Other — — — — 0.1 0.1
July 3, 2021 86.1 $ 86.1 $ 2,353.1 $ (301.0) $ 2.1 $ 2,140.3


As of and for the Three Months Ended July 2, 2022	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Shareholders' Equity
	(Shares)	(Dollars)
April 2, 2022	83.6	83.6		$	2,334.6	$	(333.3)	$	5.3	$	2,090.2
Net income	—	—		74.6		—		0.2		74.8
Shares issued and activity from stock incentive plans	—	—		5.0		—		—		5.0
Share repurchases under repurchase plan	(0.9)	(0.9)		(62.1)		—		—		(63.0)
Share repurchases from net settlement of employee stock incentive plans	—	—		(0.1)		—		—		(0.1)
Dividends declared ($0.264 per share)	—	—		(22.0)		—		—		(22.0)

Purchase of noncontrolling interest	—	—		—		—		2.7		2.7
Total other comprehensive loss, net of tax	—	—		—		(71.0)		—		(71.0)

Other	—	—		(0.1)		—		0.1		—
July 2, 2022	82.7	$	82.7	$	2,329.9	$	(404.3)	$	8.3	$	2,016.6

As of and for the Six Months Ended July 2, 2022
December 31, 2021	85.5	$	85.5	$	2,461.6	$	(321.3)	$	4.9	$	2,230.7
Net income	—	—		149.4		—		0.7		150.1
Shares issued and activity from stock incentive plans	0.3	0.3		9.1		—		—		9.4
Share repurchases under repurchase plan	(3.0)	(3.0)		(237.9)		—		—		(240.9)
Share repurchases from net settlement of employee stock incentive plans	(0.1)	(0.1)		(8.4)		—		—		(8.5)
Dividends declared ($0.528 per share)	—	—		(43.9)		—		—		(43.9)

Purchase of noncontrolling interest	—	—		—		—		2.7		2.7
Total other comprehensive loss, net of tax	—	—		—		(83.0)		—		(83.0)



July 2, 2022	82.7	$	82.7	$	2,329.9	$	(404.3)	$	8.3	$	2,016.6

As of and for the Six Months Ended
July 3, 2021
(Shares) (Dollars)
December 31, 2020 86.5 $ 86.5 $ 2,319.3 $ (279.4) $ 1.5 $ 2,127.9
Net income — 0 125.2 0 0.5 125.7
Activity from stock incentive plans 0.3 0.3 7.6 0 0 7.9
Share repurchases (0.7) (0.7) (60.7) 0 0 (61.4)
Dividends declared ($0.44 per share) — 0 (38.3) 0 0 (38.3)
Total other comprehensive loss, net of tax — 0 0 (21.6) 0 (21.6)
Other — — — — 0.1 0.1
July 3, 2021 86.1 $ 86.1 $ 2,353.1 $ (301.0) $ 2.1 $ 2,140.3

As of and for the Three Months Ended
June 27, 2020
(Shares) (Dollars)
March 28, 2020 86.3 $ 86.3 $ 2,361.8 $ (435.7) $ 3.2 $ 2,015.6
Net income — 0 48.0 0 0 48.0
Activity from stock incentive plans 0 0 3.3 0 0 3.3
Share repurchases 0 0 (0.3) 0 0 (0.3)
Dividends declared ($0.169 per share) — 0 (14.6) 0 0 (14.6)
Total other comprehensive income, net of tax — 0 0 3.0 0 3.0
June 27, 2020 86.3 $ 86.3 $ 2,398.2 $ (432.7) $ 3.2 $ 2,055.0

As of and for the Six Months Ended
June 27, 2020
(Shares) (Dollars)
December 31, 2019 87.8 $ 87.8 $ 2,372.4 $ (385.3) $ 2.9 $ 2,077.8
Net income — 0 132.8 0 0.3 133.1
Activity from stock incentive plans 0.4 0.4 5.5 0 0 5.9
Share repurchases (1.9) (1.9) (81.8) 0 0 (83.7)
Cumulative adjustment for accounting change — — (1.2) — — (1.2)
Dividends declared ($0.338 per share) — 0 (29.5) 0 0 (29.5)
Total other comprehensive loss, net of tax — 0 0 (47.4) 0 (47.4)
June 27, 2020 86.3 $ 86.3 $ 2,398.2 $ (432.7) $ 3.2 $ 2,055.0

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED) (CONTINUED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)


As of and for the Three Months Ended July 3, 2021	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Shareholders' Equity
April 3, 2021	86.1	$	86.1	$	2,329.4	$	(309.4)	$	1.8	$	2,107.9
Net income	—	—		39.0		—		0.2		39.2
Shares issued and activity from stock incentive plans	—	—		4.4		—		—		4.4

Share repurchases from net settlement of employee stock incentive plans	—	—		(0.4)		—		—		(0.4)
Dividends declared ($0.22 per share)	—	—		(19.3)		—		—		(19.3)


Total other comprehensive income, net of tax	—	—		—		8.4		—		8.4

Other	—	—		—		—		0.1		0.1
July 3, 2021	86.1	$	86.1	$	2,353.1	$	(301.0)	$	2.1	$	2,140.3

As of and for the Six Months Ended July 3, 2021
December 31, 2020	86.5	$	86.5	$	2,319.3	$	(279.4)	$	1.5	$	2,127.9
Net income	—	—		125.2		—		0.5		125.7
Shares issued and activity from stock incentive plans	0.3	0.3		7.6		—		—		7.9
Share repurchases under repurchase plan	(0.6)	(0.6)		(49.4)		—		—		(50.0)
Share repurchases from net settlement of employee stock incentive plans	(0.1)	(0.1)		(11.3)		—		—		(11.4)
Dividends declared ($0.44 per share)	—	—		(38.3)		—		—		(38.3)


Total other comprehensive loss, net of tax	—	—		—		(21.6)		—		(21.6)

Other	—	—		—		—		0.1		0.1
July 3, 2021	86.1	$	86.1	$	2,353.1	$	(301.0)	$	2.1	$	2,140.3

The accompanying Notes to the Consolidated Condensed Financial Statements are an integral part of the Statements of Changes in Shareholders’ Equity.

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 energy 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 reportable segments: Motion Technologies (MT), consisting of friction and shock and vibration equipment; Industrial Process (IP), consisting of industrial flow equipment and services; and Connect & Control Technologies (CCT), 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,~~Business Combination

During the ~~World Health Organization declared~~second quarter of 2022, we completed the ~~outbreak~~acquisition of 100% of the ~~novel coronavirus (COVID-19)~~privately held stock of Habonim Industrial Valves and Actuators Ltd. (Habonim), a ~~pandemic, resulting~~leading provider of industrial valves and actuators for the gas distribution (including liquified natural gas), biotech, and harsh application service sectors, for a purchase price of $139.9. Habonim reported 2021 annual sales of $44. Habonim’s results are reported within the Industrial Process segment beginning in the second quarter of 2022. Refer to Note 19, Acquisitions and Investments for detailed information.

Divestiture of InTelCo Management LLC (InTelCo)

Effective July 1, 2021, the Company divested InTelCo, the entity holding asbestos-related assets and liabilities, to a third-party. See Note 17, Commitments and Contingencies, for further information.

Russia-Ukraine Conflict

In February 2022, the United States announced targeted economic sanctions on Russia and certain ~~local government-mandated site closures. While most~~Russian citizens in response to Russia’s invasion of Ukraine. As described in Part I, Item IA, “Risk Factors” in our 2021 Annual Report for the fiscal year ended December 31, 2021, our business may be sensitive to global economic conditions, which can be negatively impacted by instability in the geopolitical environment. Our annual sales directly to customers in Russia and Ukraine were approximately $38 for 2021.

During the six months ended July 2, 2022, we recorded total charges of $8.0, primarily related to inventory and accounts receivable reserves, to reflect the current macroeconomic conditions impacting some of our ~~businesses were deemed essential,~~customers that sell or supply into this region. If circumstances worsen, we ~~experienced disruption~~may experience a further reduction in demand and incur additional charges, including potential fixed asset impairments, severance and other reserves. We are currently exploring alternatives for our operations due to decreased customer demand, temporary plant closures, and elevated safety standards to keep our employees safe. The Company continues to face certain risks and uncertainties resulting from COVID-19, including the severityin Russia, which could include a sale, disposition or wind down of operations, or a ~~resurgence~~combination of ~~COVID-19 or new strains~~these alternatives, although there cannot be any assurance of the ~~virus, as well as the speed~~timeline for or success of ~~distribution~~these alternatives. For additional discussion of the ~~COVID-19 vaccines and people’s attitudes towards receiving~~risks related to the ~~vaccines. Due to these uncertainties, the severity and extent of future impacts from COVID-19 or any new strains of the virus cannot be reasonably estimated at this time.~~Russia-Ukraine conflict, see Part II, Item 1A, “Risk Factors” herein.

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 state fairly the financial position, results of operations, and cash flows for the periods presented. The Consolidated Condensed Balance Sheet as of December 31, ~~2020,~~2021, presented herein, has been derived from our audited balance sheet included in our Annual Report on Form 10-K (~~2020~~2021 Annual Report) for the year ended December 31, ~~2020~~2021, but does not include all disclosures required by ~~GAAP.~~accounting principles generally accepted in the United States (GAAP). We consistently applied the accounting policies described in the ~~2020~~2021 Annual Report in preparing these unaudited financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in our ~~2020~~2021 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 and may be impacted by the duration and severity of the COVID-19 pandemic.~~available. Estimates and assumptions are used for, but not limited to, 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 credit losses and inventory valuation. Actual results could differ from these estimates.

Effective July 1 2021, the Company divested the entity holding asbestos-related assets and liabilities to a third-party. As a result of the transaction, all associated asbestos-related assets and liabilities were removed from the Company’s consolidated balance sheet, other than current liabilities for certain transaction costs. See Note 19, ~~Commitments and Contingencies, for further information.~~

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.~~31st. ITT’s second quarter for ~~2021~~2022 and ~~2020~~2021 ended on July 2, 2022 and July 3, 2021, ~~and June 27, 2020, respectively, and were both thirteen week periods.~~respectively.

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

NOTE 2

RECENT ACCOUNTING PRONOUNCEMENTS

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

~~Recent Accounting Pronouncements Not Yet Adopted:~~

In ~~March 2020 and January~~October 2021, the FASB issued ASU ~~2020-04,~~ 2021-08~~Reference Rate Reform~~, Business Combinations (Topic ~~848)~~805): ~~Facilitation~~Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquiror on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the previous guidance, such assets and liabilities were recognized by the acquiror at fair value as of the ~~Effects of Reference Rate Reformon Financial Reporting~~acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. We have adopted and ~~ASU 2021-01,~~ ~~Reference Rate Reform (Topic 848): Scope~~, respectively. Together, the ASUs provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance was effective beginning on March 12, 2020, and the Company may elect to apply the amendments prospectively through December 31, 2022. We do not expectapplied this guidance toin connection with the Habonim acquisition. The adoption of this guidance did not have a significant impact on our operating results, financial position, or cash ~~flows; however, we will continue to monitor the potential impact, if adopted.~~flows.

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 3 reportable segments are referred to ~~as:~~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,~~energy, 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, critical energy absorption, flow control components, and composite materials for the aerospace and defense, general industrial, medical, and ~~oil and gas~~energy markets.

Corporate and Other consists of corporate office expenses including compensation, benefits, occupancy, depreciation, certain acquisition- and investment-related due diligence, and other administrative costs, as well as charges related to certain matters, such as ~~asbestos~~environmental liabilities, and, ~~environmental liabilities,~~for 2021, asbestos-related impacts, that are managed at a corporate level and are not included in segment results when evaluating performance or allocating resources. Corporate and Other also includes research and development-related expenses associated with a subsidiary that does not constitute a reportable segment. Assets of the segments exclude general corporate assets, which principally consist of cash, investments, ~~asbestos-related receivables,~~ deferred taxes, and certain property, plant and equipment.

Revenue Operating Income Operating Margin
For the Three Months Ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Motion Technologies $ 343.6 $ 199.3 $ 64.7 $ 10.4 18.8 % 5.2 %
Industrial Process 213.9 193.3 31.5 18.5 14.7 % 9.6 %
Connect & Control Technologies 134.5 122.9 17.9 8.4 13.3 % 6.8 %
Eliminations (0.4) (0.8) — — 0 0
Total segment results 691.6 514.7 114.1 37.3 16.5 % 7.2 %
Asbestos-related benefit (costs), net(a)
0 0 76.8 (16.0) 0 0
Other Corporate costs — — (11.3) (0.8) 0 0
Total Corporate and other benefit (costs) 0 0 65.5 (16.8) 0 0
Total $ 691.6 $ 514.7 $ 179.6 $ 20.5 26.0 % 4.0 %

The following table presents our revenue, operating income, and operating margin for each segment.



	Revenue				Operating Income				Operating Margin
For the Three Months Ended	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Motion Technologies	$	331.3	$	343.6	$	47.0	$	64.7	14.2	%	18.8	%
Industrial Process	239.6		213.9		39.1		31.5		16.3	%	14.7	%
Connect & Control Technologies	163.2		134.5		28.2		17.9		17.3	%	13.3	%
Eliminations	(0.8)		(0.4)		—		—		—		—
Total segment results	733.3		691.6		114.3		114.1		15.6	%	16.5	%
Asbestos-related benefit, net(a)	—		—		—		76.8		—		—
Other Corporate costs	—		—		(13.8)		(11.3)		—		—
Total Corporate and other costs	—		—		(13.8)		65.5		—		—
Total	$	733.3	$	691.6	$	100.5	$	179.6	13.7	%	26.0	%


	Revenue				Operating Income				Operating Margin
For the Six Months Ended	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Motion Technologies	$	701.4	$	712.7	$	106.7	$	140.7	15.2	%	19.7	%
Industrial Process	441.8		416.2		59.5		62.5		13.5	%	15.0	%
Connect & Control Technologies	317.8		261.8		53.9		29.7		17.0	%	11.3	%
Eliminations	(1.5)		(0.7)		—		—		—		—
Total segment results	1,459.5		1,390.0		220.1		232.9		15.1	%	16.8	%
Asbestos-related benefit, net(a)	—		—		—		74.4		—		—
Other Corporate costs	—		—		(25.0)		(17.8)		—		—
Total Corporate and other costs	—		—		(25.0)		56.6		—		—
Total	$	1,459.5	$	1,390.0	$	195.1	$	289.5	13.4	%	20.8	%

(a)The 2021 period includes a pre-tax gain of $88.8 resulting from the divestiture of the entity holding asbestos-related assets and liabilities. See Note ~~19,~~17, Commitments and Contingencies, for further information.

The following table presents our total assets, capital expenditures, and depreciation & amortization expense for each segment.


As of and for the Six Months Ended	Total Assets				Capital Expenditures				Depreciation & Amortization
	July 2, 2022		December 31, 2021		July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Motion Technologies	$	1,311.3	$	1,272.8	$	34.7	$	27.8	$	31.0	$	31.8
Industrial Process	1,215.3		1,030.0		4.9		2.7		12.6		11.1
Connect & Control Technologies	725.2		719.3		4.2		3.9		9.7		11.3
Corporate and Other	448.1		543.3		3.7		0.7		2.0		3.0
Total	$	3,699.9	$	3,565.4	$	47.5	$	35.1	$	55.3	$	57.2

Revenue Operating Income Operating Margin
For the Six Months Ended July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Motion Technologies $ 712.7 $ 497.2 $ 140.7 $ 63.5 19.7 % 12.8 %
Industrial Process 416.2 420.6 62.5 27.4 15.0 % 6.5 %
Connect & Control Technologies 261.8 261.6 29.7 24.3 11.3 % 9.3 %
Eliminations (0.7) (1.4) — — 0 0
Total segment results 1,390.0 1,178.0 232.9 115.2 16.8 % 9.8 %
Asbestos-related benefit, net(a)
0 0 74.4 24.7 0 0
Other Corporate costs (17.8) (10.1) 0 0
Total Corporate and other benefit 0 0 56.6 14.6 0 0
Total $ 1,390.0 $ 1,178.0 $ 289.5 $ 129.8 20.8 % 11.0 %

~~(a)The 2021 period includes a pre-tax gain of $88.8 resulting from the divestiture of the entity holding asbestos-related assets and liabilities. See Note 19,~~ ~~Commitments and Contingencies, for further information.~~

As of and for the Six Months Ended Total Assets Capital
Expenditures Depreciation &
Amortization
July 3, 2021 December 31, 2020 July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Motion Technologies $ 1,284.7 $ 1,202.3 $ 27.8 $ 22.9 $ 31.8 $ 29.2
Industrial Process 1,013.5 1,069.6 2.7 4.4 11.1 12.3
Connect & Control Technologies 717.1 720.5 3.9 6.2 11.3 11.7
Corporate(b)
447.0 1,285.2 0.7 0.8 3.0 1.3
Total $ 3,462.3 $ 4,277.6 $ 35.1 $ 34.3 $ 57.2 $ 54.5

~~(b)~~The decrease in Corporate total assets as of July 3, 2021 is due to the divestiture of the entity holding asbestos-related assets and liabilities and the cash contribution to fund the divestiture. See Note 19, ~~Commitments and Contingencies, for further information.~~

NOTE 4

REVENUE

The following ~~table represents~~tables present our revenue disaggregated by end ~~market for the three and six months ended July 3, 2021 and June 27, 2020.~~market.


For the Three Months Ended July 3, 2021		Motion Technologies			Industrial Process			Connect & Control Technologies			Eliminations			Total
For the Three Months Ended July 2, 2022																	For the Three Months Ended July 2, 2022	Motion Technologies			Industrial Process			Connect & Control Technologies			Eliminations			Total
Auto and rail	Auto and rail		$	334.2		$	0		$	0		$	0		$	334.2	Auto and rail		$	320.3		$	—		$	—		$	—		$	320.3
Chemical and industrial pumps	Chemical and industrial pumps		0			167.7			0			0			167.7		Chemical and industrial pumps		—			196.6			—			—			196.6
General industrial																	General industrial		8.5			—			74.5			(0.8)			82.2
Aerospace and defense	Aerospace and defense		2.6			0			63.9			0			66.5		Aerospace and defense		2.5			—			78.3			—			80.8
Oil and gas			0			46.2			8.9			0			55.1
General industrial			6.8			0			61.7			(0.4)			68.1
Energy																	Energy		—			43.0			10.4			—			53.4
Total	Total		$	343.6		$	213.9		$	134.5		$	(0.4)		$	691.6	Total		$	331.3		$	239.6		$	163.2		$	(0.8)		$	733.3

For the Six Months Ended July 2, 2022																	For the Six Months Ended July 2, 2022
Auto and rail																	Auto and rail		$	680.7		$	—		$	—		$	—		$	680.7
Chemical and industrial pumps																	Chemical and industrial pumps		—			363.8			—			—			363.8
General industrial																	General industrial		16.7			—			144.2			(1.5)			159.4
Aerospace and defense																	Aerospace and defense		4.0			—			153.2			—			157.2
Energy																	Energy		—			78.0			20.4			—			98.4
Total																	Total		$	701.4		$	441.8		$	317.8		$	(1.5)		$	1,459.5

For the Six Months Ended July 3, 2021 Motion Technologies Industrial Process Connect & Control Technologies Eliminations Total
Auto and rail $ 698.2 $ 0 $ 0 $ 0 $ 698.2
Chemical and industrial pumps 0 327.4 0 0 327.4
Aerospace and defense 4.2 0 124.1 0 128.3
Oil and gas 0 88.8 17.4 0 106.2
General industrial 10.3 0 120.3 (0.7) 129.9
Total $ 712.7 $ 416.2 $ 261.8 $ (0.7) $ 1,390.0

For the Three Months Ended June 27, 2020 Motion Technologies Industrial Process Connect & Control Technologies Eliminations Total
Auto and rail $ 195.6 $ 0 $ 0 $ 0 $ 195.6
Chemical and industrial pumps 0 158.6 0 0 158.6
Aerospace and defense 1.6 0 64.6 0 66.2
Oil and gas 0 34.7 7.7 0 42.4
General industrial 2.1 0 50.6 (0.8) 51.9
Total $ 199.3 $ 193.3 $ 122.9 $ (0.8) $ 514.7


For the Six Months Ended June 27, 2020		Motion Technologies			Industrial Process			Connect & Control Technologies			Eliminations			Total

For the Three Months Ended July 3, 2021																	For the Three Months Ended July 3, 2021
Auto and rail	Auto and rail		$	488.0		$	0		$	0		$	(0.1)		$	487.9	Auto and rail	$	334.2	$	—	$	—	$	—	$	334.2
Chemical and industrial pumps	Chemical and industrial pumps		0			320.1			0			0			320.1		Chemical and industrial pumps	—		167.7		—		—		167.7
General industrial																	General industrial	6.8		—		61.7		(0.4)		68.1
Aerospace and defense	Aerospace and defense		4.5			0			150.7			0			155.2		Aerospace and defense	2.6		—		63.9		—		66.5
Oil and gas			0			100.5			15.5			0			116.0
General industrial			4.7			0			95.4			(1.3)			98.8
Energy																	Energy	—		46.2		8.9		—		55.1
Total	Total		$	497.2		$	420.6		$	261.6		$	(1.4)		$	1,178.0	Total	$	343.6	$	213.9	$	134.5	$	(0.4)	$	691.6

For the Six Months Ended July 3, 2021																	For the Six Months Ended July 3, 2021
Auto and rail																	Auto and rail	$	698.2	$	—	$	—	$	—	$	698.2
Chemical and industrial pumps																	Chemical and industrial pumps	—		327.4		—		—		327.4
General industrial																	General industrial	10.3		—		120.3		(0.7)		129.9
Aerospace and defense																	Aerospace and defense	4.2		—		124.1		—		128.3
Energy																	Energy	—		88.8		17.4		—		106.2
Total																	Total	$	712.7	$	416.2	$	261.8	$	(0.7)	$	1,390.0

Contract Assets and Liabilities

Contract assets consist of unbilled amounts where revenue recognized exceeds customer billings, net of allowances for credit losses. Contract assets are included in other current assets and other non-current assets in our Consolidated Condensed Balance Sheet. Contract liabilities consist of advance customer payments and billings in excess of revenue recognized. Contract liabilities are included in accrued liabilities and other non-current liabilities in our Consolidated Condensed Balance Sheet.

The following table represents our net contract assets and ~~liabilities as of July 3, 2021 and December 31, 2020.~~liabilities.


		July 3, 2021			December 31, 2020			July 2, 2022		December 31, 2021
Current contract assets, net	Current contract assets, net		$	14.4		$	19.1		Current contract assets, net	$	30.1	$	20.6
Non-current contract assets, net	Non-current contract assets, net		0.3			0			Non-current contract assets, net	0.3		0.3
Current contract liabilities	Current contract liabilities		(39.5)			(56.2)			Current contract liabilities	(64.5)		(46.6)
Non-current contract liabilities	Non-current contract liabilities		(4.4)			(0.1)			Non-current contract liabilities	(4.4)		(4.4)
Net contract liabilities	Net contract liabilities		$	(29.2)		$	(37.2)		Net contract liabilities	$	(38.5)	$	(30.1)

During the three and six months ended July ~~3, 2021,~~2, 2022, we recognized revenue of ~~$15.8~~$7.3 and ~~$37.7,~~$20.3, respectively, related to contract liabilities as of December 31, ~~2020.~~2021. The aggregate amount of the transaction price allocated to unsatisfied or partially satisfied performance obligations as of July ~~3, 2021~~2, 2022 was ~~$832.4.~~$1,055.5. Of this amount, we expect to recognize approximately ~~$560~~$740 to ~~$580~~$760 of revenue during the remainder of ~~2021.~~2022.

NOTE 5

~~RESTRUCTURING ACTIONS~~INCOME TAXES

We have initiated various restructuring actions throughout our businesses during the past two years, including the 2020 Global Restructuring Plan described below. 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~~income tax expense and effective tax rate.


	Three Months Ended						Six Months Ended
	July 2, 2022			July 3, 2021			July 2, 2022			July 3, 2021
Income tax expense	$	24.0		$	143.9		$	43.5		$	168.6
Effective tax rate	24.0		%	78.6		%	22.3		%	57.3		%

The effective tax rate (ETR) for the three and six months ended July ~~3, 2021 and June 27, 2020.~~

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Severance and other employee-related $ 0 $ 27.8 $ 2.4 $ 30.9
Asset write-offs 0 0 0.6 0
Other 0.1 0.1 0.7 0.1
Total restructuring costs $ 0.1 $ 27.9 $ 3.7 $ 31.0
By segment:
Motion Technologies $ 0 $ 14.0 $ 0 $ 14.0
Industrial Process 0 7.8 0.9 7.9
Connect & Control Technologies 0.1 5.2 2.5 6.7
Corporate and Other 0 0.9 0.3 2.4

~~The following table displays a rollforward~~2, 2022 was lower than the prior year due to the tax impact of the ~~restructuring accruals, presented on our Consolidated Condensed Balance Sheet within accrued liabilities, for the six months ended July 3,~~ 2021 ~~and June 27, 2020.~~

July 3, 2021 June 27, 2020
Beginning balance - January 1 $ 19.1 $ 7.5
Restructuring costs 4.4 31.7
Reversal of prior accruals (0.7) (0.7)
Cash payments (7.2) (9.6)
Asset write-offs (0.6) 0
Foreign exchange translation and other (0.5) (0.2)
Ending balance $ 14.5 $ 28.7
By accrual type:
Severance and other employee-related $ 14.3 $ 28.3
Other 0.2 0.4

~~2020 Global Restructuring Plan~~

During 2020, we initiated an organizational-wide restructuring plan to reduce the overall cost structure of the Company primarily in response to a reduction in demand from the COVID-19 pandemic. Through July 3, 2021, we have recognized restructuring charges of $45.1, including $43.8 in 2020, which are primarily related to involuntary severance costs. We expect to incur additional restructuring charges of approximately $3 during the remainder of 2021 to complete this action. Cash payments during the six months ended July 3, 2021 were $6.5. The restructuring liability as of July 3, 2021 was $10.6, which we expect to be substantially paid during 2021, and is presented on our Consolidated Condensed Balance Sheet within accrued liabilities.

~~NOTE 6~~

~~INCOME TAXES~~

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Income tax expense (benefit) $ 143.9 $ (28.1) $ 168.6 $ (3.4)
Effective tax rate 78.6 % (153.6) % 57.3 % (2.7) %

~~The higher effective tax rate for the three and six months ended July 3, 2021 resulted from the Company recording tax expense on the reversal of previously recorded deferred tax assets~~asbestos divestiture of $116.9 ~~resulting from the Company’s divestiture of the entity holding asbestos-related assets and liabilities~~ (see Note ~~19,~~17, Commitments and Contingencies, for further information). ~~In addition,~~Additionally, the ~~effective tax rate for the three and six months ended June 27, 2020 was lower due to~~2022 ETR included higher permanent tax benefits, of $26.7 resulting from an internal restructuring in Europe. This reorganization resulted in a refined projection of future earnings, which will result in the realization of a portion of our deferred tax assets.

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA), a $1.9 trillion COVID-19 stimulus legislation to accelerate the United States' recovery from the economic and health effects of the COVID-19 pandemic. ARPA builds upon many of the measures in the Coronavirus Aid, Relief, and Economic Security Act from March 2020 (the 2020 CARES Act) and the Consolidated Appropriations Act from December 2020. The Act extends the employee retention credit through the end of 2021 and maintains the credit per employee per quarter initially included in the Consolidated Appropriations Act. During the three and six months ended July 3, 2021, the Company recognized a benefit of $1.7 and $4.1 from the employee retention credit, and recognized a benefit of $7.2 during the second quarter of 2020. The benefit was recorded in operating income andprimarily related to ~~the employer 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 ARPA~~research and ~~2020 CARES Act or other similar legislation globally.~~development incentives in both foreign and U.S. jurisdictions.

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,~~Czechia, Germany, ~~Hong Kong,~~ India, Italy, and 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 decrease by approximately ~~$16~~$2 due to changes in audit status, expiration of statutes of limitations and other events. In addition, the settlement of any future examinations relating to the 2011 and prior tax years could result in changes in amounts attributable to the Company under its Tax Matters Agreement with Exelis Inc. and Xylem Inc. relating to the Company’s 2011 spin-off of those businesses.

NOTE 76

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 July 3, 2021 and June 27, 2020.~~ITT.


		Three Months Ended		Six Months Ended			Three Months Ended		Six Months Ended
		July 3, 2021	June 27, 2020	July 3, 2021	June 27, 2020		July 2, 2022	July 3, 2021	July 2, 2022	July 3, 2021
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	86.1	86.3	86.2	87.0	Basic weighted average common shares outstanding	83.1	86.1	84.0	86.2
Add: Dilutive impact of outstanding equity awards	Add: Dilutive impact of outstanding equity awards	0.4	0.5	0.5	0.6	Add: Dilutive impact of outstanding equity awards	0.3	0.4	0.3	0.5
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	86.5	86.8	86.7	87.6	Diluted weighted average common shares outstanding	83.4	86.5	84.3	86.7

Anti-dilutive shares(a)						Anti-dilutive shares(a)	0.2	—	—	0.1

~~For the three and six months ended July 3, 2021, there were 0.0 and 0.1, respectively, of anti-dilutive~~(a) Anti-dilutive shares related to equity stock unit awards excluded from the computation of diluted earnings per share. ~~For the three and six months ended June 27, 2020, there were 0.2 and 0.2, respectively, of anti-dilutive shares.~~

NOTE 87

RECEIVABLES, NET

July 3,
2021 December 31,
2020
Trade accounts receivable $ 533.8 $ 492.5
Notes receivable 15.5 11.0
Other 16.9 19.1
Receivables, gross 566.2 522.6
Less: Allowance for credit losses - receivables (12.8) (15.1)
Receivables, net $ 553.4 $ 507.5

The following table summarizes our receivables and associated allowance for credit losses.


	July 2, 2022			December 31, 2021
Trade accounts receivable		$	595.5		$	530.4
Notes receivable		13.0			19.2
Other		13.6			17.5
Receivables, gross		622.1			567.1
Less: Allowance for credit losses - receivables(a)		(16.4)			(12.0)
Receivables, net		$	605.7		$	555.1

The following table displays our allowance for credit losses for receivables and contract ~~assets as of July 3, 2021 and December 31, 2020.~~assets.


		July 3, 2021			December 31, 2020				July 2, 2022			December 31, 2021
Allowance for credit losses - receivables(a)	Allowance for credit losses - receivables(a)		$	12.8		$	15.1	Allowance for credit losses - receivables(a)		$	16.4		$	12.0
Allowance for credit losses - contract assets	Allowance for credit losses - contract assets		0.5			0.5		Allowance for credit losses - contract assets		0.5			0.5
Total allowance for credit losses	Total allowance for credit losses		$	13.3		$	15.6	Total allowance for credit losses		$	16.9		$	12.5

The following table displays a rollforward of ~~the~~our total allowance for credit ~~losses for~~losses.



	July 2, 2022			July 3, 2021
Total allowance for credit losses - January 1		$	12.5		$	15.6

Charges (recoveries) to income(a)		4.7			(1.7)
Write-offs		(0.4)			(0.7)
Foreign currency and other		0.1			0.1
Total allowance for credit losses - ending balance		$	16.9		$	13.3

(a) During the six months ended July 3,2, 2022, we recognized bad debt expense of $1.9 to reflect the current macroeconomic conditions impacting some of our customers in light of the Russia-Ukraine conflict. See Note 1, Description of Business and Basis of Presentation, for further information.

NOTE 8

INVENTORIES, NET

The following table summarizes our net inventories.


	July 2, 2022			December 31, 2021
Finished goods		$	93.3		$	73.0
Work in process		111.3			92.3
Raw materials(a)		330.6			265.6
Inventories, net(b)		$	535.2		$	430.9

(a) The increase in raw materials inventory from December 31, 2021 to July 2, 2022 was to support sales growth and ~~June 27, 2020.~~mitigate continued supply chain disruptions.

July 3,
2021 June 27,
2020
Total allowance for credit losses - January 1 $ 15.6 $ 12.8
Impact of adoption of ASU 2016-13 0 1.7
(Recoveries) charges to income (1.7) 8.6
Write-offs (0.7) (3.0)
Foreign currency and other 0.1 (0.1)
Total allowance for credit losses - ending balance $ 13.3 $ 20.0
(b) During the six months ended July 2, 2022, we recorded inventory reserves of $5.7 related to inventories held by entities impacted by the Russia-Ukraine conflict. See Note 1, Description of Business and Basis of Presentation, for further information.

NOTE 9

~~INVENTORIES, NET~~

July 3,
2021 December 31,
2020
Finished goods $ 75.2 $ 63.1
Work in process 82.5 77.5
Raw materials 248.5 219.9
Inventories, net $ 406.2 $ 360.5

~~NOTE 10~~

OTHER CURRENT AND NON-CURRENT ASSETS

July 3,
2021 December 31,
2020
Advance payments and other prepaid expenses $ 43.3 $ 39.6
Prepaid income taxes 23.3 29.0
Current contract assets, net 14.4 19.1
Asbestos-related assets (see Note 19)
0 91.0
Other 7.8 10.8
Other current assets $ 88.8 $ 189.5
Other employee benefit-related assets $ 116.5 $ 113.9
Operating lease right-of-use assets 80.0 87.3
Capitalized software costs 20.4 23.9
Equity method investments 12.4 11.7
Environmental-related assets 8.1 10.6
Other 25.6 24.6
Other non-current assets $ 263.0 $ 272.0
The following table summarizes our other current and non-current assets.


	July 2, 2022			December 31, 2021

Advance payments and other prepaid expenses		$	50.3		$	44.1
Current contract assets, net		30.1			20.6
Prepaid income taxes		9.2			10.4

Other		20.2			13.5
Other current assets		$	109.8		$	88.6
Other employee benefit-related assets		$	117.4		$	118.4
Operating lease right-of-use assets		71.2			78.0
Deferred income taxes		58.8			63.4
Equity-method and other investments(a)		41.1			14.5
Capitalized software costs		14.1			16.7
Environmental-related assets		10.5			8.5
Other		23.7			24.7
Other non-current assets		$	336.8		$	324.2

(a) During the second quarter of 2022, we purchased minority investments in CRP Technology Srl and CRP USA LLC (collectively "CRP") for $23.0. Refer to Note 19, Acquisitions and Investments, for further information.

NOTE 10

PLANT, PROPERTY AND EQUIPMENT, NET

The following table summarizes our property, plant, and equipment, net of accumulated depreciation.


	Useful life (in years)	July 2, 2022			December 31, 2021
Machinery and equipment	2 - 10		$	1,171.1		$	1,202.0
Buildings and improvements	5 - 40		280.7			265.5
Furniture, fixtures and office equipment	3 - 7		81.7			78.3
Construction work in progress			71.2			62.8
Land and improvements			30.5			32.5
Other			3.1			4.3
Plant, property and equipment, gross			1,638.3			1,645.4
Less: Accumulated depreciation			(1,137.1)			(1,136.3)
Plant, property and equipment, net			$	501.2		$	509.1

Depreciation expense of $21.0 and $42.0, and $21.5 and $42.9 was recognized in the three and six months ended July 2, 2022 and July 3, 2021, respectively.

NOTE 11

~~PLANT, PROPERTY AND EQUIPMENT, NET~~

Useful life
(in years) July 3,
2021 December 31,
2020
Machinery and equipment 2 - 10 $ 1,207.3 $ 1,205.7
Buildings and improvements 5 - 40 270.5 273.9
Furniture, fixtures and office equipment 3 - 7 81.1 82.0
Construction work in progress 40.2 44.7
Land and improvements 33.7 34.6
Other 4.9 5.0
Plant, property and equipment, gross 1,637.7 1,645.9
Less: Accumulated depreciation (1,135.0) (1,120.8)
Plant, property and equipment, net $ 502.7 $ 525.1

~~Depreciation expense of $21.5 and $20.7, and $42.9 and $41.2 was recognized in the three and six months ended July 3, 2021 and June 27, 2020, 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 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. The 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 or future cash flows of our businesses could cause us to record additional impairment charges in future periods, which may be material.

~~NOTE 12~~

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following table provides a rollforward of the carrying amount of goodwill ~~for the six months ended July 3, 2021~~ by segment.

Motion
Technologies Industrial
Process Connect & Control
Technologies Total
Goodwill - December 31, 2020 $ 298.1 $ 365.4 $ 281.3 $ 944.8
Foreign exchange translation (2.4) (5.4) (0.7) (8.5)
Goodwill - July 3, 2021 $ 295.7 $ 360.0 $ 280.6 $ 936.3


	Motion Technologies			Industrial Process			Connect & Control Technologies			Total
Goodwill - December 31, 2021		$	292.3		$	352.4		$	279.6	$	924.3
Acquired		—			68.7			—		68.7


Foreign exchange translation		(6.5)			(20.7)			(2.0)		(29.2)
Goodwill - July 2, 2022		$	285.8		$	400.4		$	277.6	$	963.8

Goodwill acquired is related to our acquisition of Habonim in the second quarter of 2022 and represents the preliminary calculation of the excess purchase price over the net assets acquired, the valuation of which is pending completion. Upon completion, goodwill acquired will be adjusted to reflect the final fair value of the net assets acquired. Refer to Note 19, Acquisitions and Investments, for further information.

Other Intangible Assets, Net

~~Information regarding~~The following table summarizes our other intangible assets, ~~is as follows:~~net of accumulated amortization.

July 3, 2021 December 31, 2020
Gross
Carrying
Amount Accumulated Amortization Net Intangibles Gross
Carrying
Amount Accumulated Amortization Net Intangibles
Customer relationships $ 162.9 $ (107.9) $ 55.0 $ 163.3 $ (101.7) $ 61.6
Proprietary technology 46.4 (25.2) 21.2 46.7 (23.4) 23.3
Patents and other 16.2 (13.2) 3.0 16.2 (11.5) 4.7
Finite-lived intangible total 225.5 (146.3) 79.2 226.2 (136.6) 89.6
Indefinite-lived intangibles 16.6 — 16.6 16.8 — 16.8
Other intangible assets $ 242.1 $ (146.3) $ 95.8 $ 243.0 $ (136.6) $ 106.4

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 or future cash flows of our businesses could cause us to record additional impairment charges in future periods, which may be material.


	July 2, 2022									December 31, 2021
	Gross Carrying Amount			Accumulated Amortization			Net Intangibles			Gross Carrying Amount			Accumulated Amortization			Net Intangibles
Customer relationships		$	190.6		$	(120.0)		$	70.6		$	162.1		$	(113.7)		$	48.4
Proprietary technology		58.9			(28.5)			30.4			46.1			(26.9)			19.2
Patents and other		17.3			(14.8)			2.5			15.7			(14.0)			1.7
Finite-lived intangible total		266.8			(163.3)			103.5			223.9			(154.6)			69.3
Indefinite-lived intangibles		18.2			—			18.2			16.4			—			16.4
Other intangible assets		$	285.0		$	(163.3)		$	121.7		$	240.3		$	(154.6)		$	85.7

Amortization expense related to finite-lived intangible assets was ~~$4.9 and $4.2,~~$5.8 and $10.0, and ~~$9.0~~$4.9 and $10.0 for the three and six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ respectively.

The preliminary fair value of intangible assets acquired in connection with the purchase of Habonim mainly includes $33.1 of customer relationships with a useful life of 15 years, $8.1 of developed technology with a useful life of 20 years, $2.1 of customer backlog with a useful life of 9 months, and $2.3 for a trade name with an indefinite life. Refer to Note 19, Acquisitions and Investments, for further information.

Separately, during the second quarter of 2022, we acquired proprietary technology with a preliminary value of $6.2 and a useful life of 10 years, in connection with the purchase of a product line within our CCT segment. Refer to Note 19, Acquisitions and Investments, for further information.

Estimated amortization expense for each of the five succeeding years and thereafter is as follows:


Remaining of 2022			10.9
2023			19.5
2024			14.1
2025			13.3
2026			9.5
2027			8.2
Thereafter			28.0

NOTE 1312

ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES

July 3,
2021 December 31,
2020
Compensation and other employee-related benefits $ 142.4 $ 137.3
Contract liabilities and other customer-related liabilities 60.2 73.7
Accrued income taxes and other tax-related liabilities 36.8 36.9
Accrued warranty costs 23.6 23.1
Operating lease liabilities 19.3 19.8
Environmental liabilities and other legal matters 14.8 19.1
Accrued restructuring costs 14.5 19.1
Asbestos-related liabilities(a)
10.4 91.4
Other 40.5 37.0
Accrued liabilities $ 362.5 $ 457.4
Operating lease liabilities $ 65.8 $ 72.4
Environmental liabilities 48.3 50.1
Compensation and other employee-related benefits 27.4 29.4
Deferred income taxes and other tax-related liabilities 12.0 11.9
Non-current maturities of long-term debt 11.4 13.0
Other 35.1 33.8
Other non-current liabilities $ 200.0 $ 210.6
The following table summarizes our accrued liabilities and other non-current liabilities.


	July 2, 2022			December 31, 2021
Compensation and other employee-related benefits		$	127.1		$	155.2
Contract liabilities and other customer-related liabilities		86.8			69.1
Accrued income taxes and other tax-related liabilities		32.7			33.6
Operating lease liabilities		18.8			20.1
Accrued warranty costs		15.5			17.7
Environmental liabilities and other legal matters		9.5			13.5
Accrued restructuring costs		5.4			11.0
Other		38.1			37.1
Accrued liabilities		$	333.9		$	357.3
Operating lease liabilities		$	56.7		$	64.0
Environmental liabilities		52.6			50.1
Compensation and other employee-related benefits		25.7			29.2
Deferred income taxes and other tax-related liabilities		20.9			29.0
Non-current maturities of long-term debt		8.7			9.9
Other		24.4			24.3
Other non-current liabilities		$	189.0		$	206.5

NOTE 13

DEBT

The following table summarizes our outstanding debt obligations.


	July 2, 2022			December 31, 2021
Commercial paper(a)		$	544.9		$	195.4
Other short-term notes payable		4.3			—
Current maturities of long-term debt and finance leases		2.2			2.2
Commercial paper and current maturities of long-term debt		551.4			197.6
Non-current maturities of long-term debt		8.7			9.9
Total debt and finance leases		$	560.1		$	207.5

(a)~~As of~~ The increase in commercial paper outstanding from December 31, 2021 to July ~~3, 2021, the current liability represents transaction costs~~2, 2022 was primarily related to ~~the divestiture~~funding our share repurchase activity and our acquisition of ~~the entity holding asbestos-related assets and liabilities.~~Habonim. See Note 19, ~~Commitments~~Acquisitions and ~~Contingencies~~Investments, for further information.

~~NOTE 14~~

~~DEBT~~

July 3,
2021 December 31,
2020
Commercial paper $ 197.4 $ 104.3
Current maturities of long-term debt and finance leases 2.3 2.5
Commercial paper and current maturities of long-term debt 199.7 106.8
Non-current maturities of long-term debt 11.4 13.0
Total debt and finance leases $ 211.1 $ 119.8

Commercial Paper

~~Commercial~~The following table presents our outstanding commercial paper ~~outstanding of $197.4~~borrowings and associated weighted average interest rates as of July ~~3, 2021 was issued through both the Company’s U.S.~~2, 2022 and Euro programs. Commercial paper outstanding under the U.S. program was $150.0, with a weighted average interest rate of 0.21%. Commercial paper outstanding under the Euro program was $47.4, with a weighted average negative interest rate of (0.44)%. Commercial paper outstanding of $104.3 as of December 31, ~~2020 was issued entirely under the Company’s Euro program and had a weighted average negative interest rate of (0.06)%.~~ 2021.


	July 2, 2022				December 31, 2021
Commercial Paper Outstanding - U.S. Program		$	399.7			$	150.0
Commercial Paper Outstanding - Euro Program		145.2				45.4
Total Commercial Paper Outstanding		$	544.9			195.4
Weighted Average Interest Rate - U.S. Program		2.01		%		0.28		%
Weighted Average Interest Rate - Euro Program		(0.06)		%		(0.47)		%

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,~~August 5, 2021, we entered into a ~~competitive advance and~~ revolving credit facility agreement (the 2014 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 2014 Revolving Credit Agreement maturity date to November 25, 2022. The 2014 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 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 July 3, 2021 and December 31, 2020, we had 0 outstanding obligations under the credit facility. There is a 0.15% fee per annum applicable to the commitments under the 2014 Revolving Credit Agreement. The fees and margin are subject to adjustment should the Company’s credit ratings change.

The 2014 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 2014 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.

~~As of July 3, 2021, our interest coverage ratio and leverage ratios associated with short-term loans were within the prescribed thresholds.~~

On April 29, 2020, we entered into two 364-day term revolving credit agreements totaling $200 (the Incremental Revolving Credit Agreements) which provided the Company with additional liquidity in excess of the Revolving Credit Agreement. The credit agreements expired in April 2021 and we did not renew the

agreements. Borrowings were available in U.S. dollars and the interest rate per annum was based on the LIBOR rate, adjusted for statutory reserve requirements, plus a margin of up to 1.55%. The Incremental Revolving Credit Agreements were subject to fees of up to 0.35% per annum. The fees and margin were subject to adjustment should the Company’s credit ratings change. All other key provisions of the Incremental Revolving Credit Agreements mirrored 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.

~~Subsequent Event~~

~~On August 5, 2021, we refinanced our revolving credit facility agreement to replace the 2014 Revolving Credit Agreement~~ with a syndicate of third party lenders including Bank of America, N.A., as administrative agent (the 2021 Revolving Credit Agreement). ~~The~~Upon its effectiveness, this agreement replaced our existing $500 revolving credit facility due November 2022 (the 2014 Revolving Credit ~~Agreement was terminated on August 5, 2021.~~Agreement). The 2021 Revolving Credit Agreement matures in August 2026 and provides for an aggregate principal amount of up to $700. The 2021 Revolving Credit Agreement provides for a potential increase of commitment of up to $350 for a possible maximum of $1,050 in aggregate commitments at the request of the Company and with the consent of the institutions providing such increase of commitments.

The interest rate per annum on the 2021 Revolving Credit Agreement is based on the LIBOR rate of the currency we borrow in, plus a margin of 1.1%, with applicable benchmark replacement rates for the currencies available when LIBOR is phased out as a result of the impending reference rate reform. As of July 2, 2022 and December 31, 2021, we had no outstanding borrowings under the 2021 Revolving Credit Agreement. There is a 0.15% fee per annum applicable to the commitments under the 2021 Revolving Credit Agreement. The margin and fees are subject to adjustment should the Company’s credit ratings change.

The 2021 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 certain liens; merge or consolidate with another person; sell, transfer, lease or otherwise dispose of assets; liquidate or dissolve; and enter into restrictive covenants. Additionally, the 2021 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 3.50 to 1.00, with a qualified acquisition step up immediately following such qualified acquisition of 4.00 to 1.00 for four quarters, 3.75 to 1.00 for two quarters thereafter, and returning to 3.50 to 1.00 thereafter.

~~The interest rate per annum on~~As of July 2, 2022, all financial covenants (e.g., leverage ratio) associated with the 2021 Revolving Credit Agreement ~~is based on~~were within the LIBOR rate of the currency we borrow in, plus a margin of 1.1%, with applicable benchmark replacement rates for the currencies available when LIBOR is phased out as a result of the impending reference rate reform. There is a 0.15% fee per annum applicable to the commitments under the 2021 Revolving Credit Agreement. The margin and fees are subject to adjustment should the Company’s credit ratings change.prescribed thresholds.

NOTE 15

~~POSTRETIREMENT BENEFIT PLANS~~

In the fourth quarter of 2020, the Company terminated its U.S. qualified pension plan by purchasing a group annuity contract from MassMutual Life Insurance Company (MassMutual), which fully assumed the responsibility for paying and administering pension benefits to approximately five thousand plan participants and their beneficiaries. In connection with the plan termination, the Company settled all future obligations under the plan by providing lump sum payments to eligible participants who elected to receive them, and by transferring the remaining projected benefit obligation to the insurance company. The termination was initially funded with plan assets of approximately $320 and cash of $8.4. During the second quarter of 2021, the funding was finalized, resulting in income of $3.4 presented within the interest and non-operating (income) expenses line in the Consolidated Statements of Operations.

~~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 July 3, 2021 and June 27, 2020.~~

July 3, 2021 June 27, 2020
For the Three Months Ended Pension Other
Benefits Total Pension Other
Benefits Total
Service cost $ 0.3 $ 0.2 $ 0.5 $ 0.3 $ 0.2 $ 0.5
Interest cost 0.3 0.4 0.7 2.3 0.7 3.0
Expected return on plan assets 0 0 0 (2.1) 0 (2.1)
Amortization of prior service benefit 0 (1.2) (1.2) 0 (1.3) (1.3)
Amortization of net actuarial loss 0.5 0.6 1.1 1.7 0.8 2.5
Total net periodic benefit cost $ 1.1 $ 0 $ 1.1 $ 2.2 $ 0.4 $ 2.6

July 3, 2021 June 27, 2020
For the Six Months Ended Pension Other
Benefits Total Pension Other
Benefits Total
Service cost $ 0.7 $ 0.4 $ 1.1 $ 0.6 $ 0.4 $ 1.0
Interest cost 0.5 0.9 1.4 4.6 1.4 6.0
Expected return on plan assets 0 0 0 (4.3) 0 (4.3)
Amortization of prior service benefit 0 (2.5) (2.5) 0 (2.5) (2.5)
Amortization of net actuarial loss 1.0 1.3 2.3 3.5 1.4 4.9
Total net periodic benefit cost $ 2.2 $ 0.1 $ 2.3 $ 4.4 $ 0.7 $ 5.1

We made contributions to our global postretirement plans of $5.5 and $4.2 during the six months ended July 3, 2021 and June 27, 2020, respectively. We expect to make contributions of approximately $7 to $11 during the remainder of 2021, principally related to our other employee-related benefit plans.

Amortization from accumulated other comprehensive income into earnings related to prior service benefit and net actuarial loss was $0.0 and $0.9, and $0.0 and $1.8, net of tax, during the three and six months ended July 3, 2021 and June 27, 2020, respectively. No other reclassifications from accumulated other comprehensive income into earnings were recognized during any of the presented periods.

~~NOTE 16~~14

LONG-TERM INCENTIVE EMPLOYEE COMPENSATION

Our long-term incentive plan (LTIP) costs are primarily recorded within general and administrative ~~expenses.~~expenses in our Consolidated Condensed Statements of Operations. The following table ~~provides the components of~~summarizes our LTIP ~~costs for the three and six months ended July 3, 2021 and June 27, 2020.~~costs.


		Three Months Ended				Six Months Ended					Three Months Ended				Six Months Ended
		July 3, 2021		June 27, 2020		July 3, 2021		June 27, 2020			July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Equity-based awards	Equity-based awards	$	4.2	$	3.3	$	7.4	$	5.8	Equity-based awards	$	5.0	$	4.2	$	8.7	$	7.4
Liability-based awards	Liability-based awards	0.2		0.5		1.1		(0.1)		Liability-based awards	0.1		0.2		0.7		1.1
Total share-based compensation expense	Total share-based compensation expense	$	4.4	$	3.8	$	8.5	$	5.7	Total share-based compensation expense	$	5.1	$	4.4	$	9.4	$	8.5

The change in share-based compensation expense for equity-based awards was primarily driven by 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 July ~~3, 2021,~~2, 2022, there was ~~$28.3~~$32.4 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 ~~1.9~~2.0 years. Additionally, unrecognized compensation cost related to liability-based awards was ~~$2.0,~~$1.5, which is expected to

be recognized ratably over a weighted-average period of ~~2.2~~2.4 years.

Year-to-Date ~~2021~~2022 LTIP Activity

The majority of our LTIP awards are granted during the first quarter of each year and have three-year service periods. These awards either vest onequally each year or at the completion of athe three-year service period. During the six months ended July ~~3, 2021,~~2, 2022, we granted the following LTIP awards as provided in the table below:

# of Awards Granted Weighted Average Grant Date Fair Value Per Share
Restricted stock units (RSUs) 0.1 $ 85.07
Performance stock units (PSUs) 0.1 $ 84.27


	# of Awards Granted	Weighted Average Grant Date Fair Value Per Share

Restricted stock units (RSUs)	0.2		$	78.54
Performance stock units (PSUs)	0.1		$	79.72

During the six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ a nominal amount of non-qualified stock options were exercised resulting in proceeds of ~~$0.5~~$0.7 and ~~$0.1,~~$0.5, respectively. During the six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ RSUs of 0.1 and ~~0.2,~~0.1, respectively, vested and were issued. During the six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ PSUs of 0.1 and 0.2 that vested on December 31, ~~2020~~2021 and ~~2019,~~2020, respectively, were issued.

NOTE 1715

CAPITAL STOCK

~~On October 27, 2006, our Board of Directors approved a three-year, $1,000 share repurchase program (the 2006 Plan), which it modified in 2008 to make the term indefinite.~~ On October 30, 2019, the Board of Directors approved ~~a new~~an indefinite term $500 open-market share repurchase program (the 2019 Plan). During the ~~first quarter of 2020, we completed the 2006 Plan and commenced repurchases under the 2019 Plan. During the~~ six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020, we~~the Company repurchased and retired ~~0.6~~3.0 and ~~1.7~~0.6 shares of common stock for ~~$50.0~~$240.9 and ~~$73.2,~~$50.0, respectively, under ~~these programs, including 1.4 shares and $61.9 in 2020, which fully exhausted~~ the ~~2006~~2019 Plan.

Separate from the open-market share repurchase program, the Company ~~repurchased 0.1 and 0.2~~repurchases shares ~~during the six months ended July 3, 2021 and June 27, 2020, respectively, for an aggregate amount~~ of ~~$11.4 and $10.5, respectively,~~common stock in settlement of employee tax withholding obligations due upon the vesting of ~~RSUs~~equity-based compensation awards. During the six months ended July 2, 2022 and ~~PSUs.~~July 3, 2021, the Company repurchased 0.1 shares and 0.1 shares of common stock for $8.5 and $11.4, respectively, in connection with the net settlement of employee LTIP awards.

NOTE 1816

ACCUMULATED OTHER COMPREHENSIVE LOSS

As of and for the Three Months Ended July 3, 2021 Postretirement Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Loss
April 3, 2021 (55.9) (253.5) (309.4)
Net foreign currency translation adjustment — 8.4 8.4
July 3, 2021 $ (55.9) $ (245.1) $ (301.0)
The following tables summarize the changes within each component of accumulated other comprehensive loss.

As of and for the Six Months Ended July 3, 2021
December 31, 2020 $ (55.9) $ (223.5) $ (279.4)
Net foreign currency translation adjustment — (21.6) (21.6)
July 3, 2021 $ (55.9) $ (245.1) $ (301.0)


As of and for the Three Months Ended July 2, 2022	Postretirement Benefit Plans		Cumulative Translation Adjustment		Accumulated Other Comprehensive Loss
April 2, 2022	$	(41.1)	$	(292.2)	$	(333.3)
Net change in postretirement benefit plans, net of tax	(0.2)		—		(0.2)
Net foreign currency translation adjustment	—		(70.8)		(70.8)
July 2, 2022	$	(41.3)	$	(363.0)	$	(404.3)

As of and for the Three Months Ended June 27, 2020
March 28, 2020 (132.4) (303.3) (435.7)
Net change in postretirement benefit plans, net of tax 0.9 — 0.9
Net foreign currency translation adjustment — 2.1 2.1
June 27, 2020 $ (131.5) $ (301.2) $ (432.7)

As of and for the Six Months Ended June 27, 2020
December 31, 2019 $ (133.3) $ (252.0) $ (385.3)
Net change in postretirement benefit plans, net of tax 1.8 — 1.8
Net foreign currency translation adjustment — (49.2) (49.2)
June 27, 2020 $ (131.5) $ (301.2) $ (432.7)



As of and for the Six Months Ended July 2, 2022
December 31, 2021	$	(40.8)	$	(280.5)	$	(321.3)
Net change in postretirement benefit plans, net of tax	(0.5)		—		(0.5)
Net foreign currency translation adjustment	—		(82.5)		(82.5)
July 2, 2022	$	(41.3)	$	(363.0)	$	(404.3)

1917


As of and for the Three Months Ended July 3, 2021
April 3, 2021	$	(55.9)	$	(253.5)	$	(309.4)

Net foreign currency translation adjustment	—		8.4		8.4
July 3, 2021	$	(55.9)	$	(245.1)	$	(301.0)



As of and for the Six Months Ended July 3, 2021	Postretirement Benefit Plans		Cumulative Translation Adjustment		Accumulated Other Comprehensive Loss
December 31, 2020	$	(55.9)	$	(223.5)	$	(279.4)

Net foreign currency translation adjustment	—		(21.6)		(21.6)
July 3, 2021	$	(55.9)	$	(245.1)	$	(301.0)

NOTE 1917

COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in legal proceedings that are incidental to the operation of our business. Historically, these proceedings have alleged 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~~existing legal proceedings will have a material adverse impact on our financial statements, unless otherwise noted below.

Asbestos ~~Matters~~Divestiture

Prior to the divestiture described below, former subsidiaries of ITT, including ITT LLC and Goulds Pumps LLC, ~~have~~which are wholly owned subsidiaries of InTelCo Management LLC (InTelCo), had been sued along with many other companies in product liability lawsuits alleging personal injury due to purported asbestos exposure. ~~These claims generally allege that certain products sold by these entities or their 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. ITT LLC and Goulds Pumps LLC are wholly owned subsidiaries of InTelCo Management LLC (InTelCo), a former subsidiary of ITT.

On June 30, 2021, the Company entered into a Membership Interest Purchase Agreement (the Purchase Agreement) with Sapphire TopCo, Inc. (Buyer), a wholly owned subsidiary of Delticus HoldCo, L.P., which is a portfolio company of the private equity firm, Warburg Pincus LLC. Under the Purchase Agreement, the Company transferred 100% of the equity interests of InTelCo to the Buyer, effective as of July 1, 2021, along with a cash contribution from the Company to InTelCo of $398. As InTelCo was the obligor for the Company's asbestos-related liabilities and policyholder of the related insurance assets through its subsidiaries ITT LLC and Goulds Pumps LLC, the rights and obligations related to these items transferred upon the sale. In addition, pursuant to the Purchase Agreement, the Buyer and InTelCo have indemnified the Company and its affiliates for legacy asbestos-related liabilities and other product liabilities, and the Company has indemnified InTelCo and its affiliates for all other historical liabilities of InTelCo. This indemnification is not subject to any cap or time limitation. In connection with the sale, the Company and its Board of Directors received a solvency opinion from an independent advisory firm that InTelCo was solvent and adequately capitalized after giving effect to the transaction.

Following the completion of the transfer, the Company no longer has any obligation with respect to pending and future asbestos claims. As such, ~~InTelco has been deconsolidated from the financial results of the Company as we no longer maintain control of the entity. Therefore,~~ all associated asbestos-related assets and liabilities are no longer reported on the Company’s consolidated balance sheet. The transaction resulted in a pre-tax gain of $88.8. Additionally, the Company recorded tax expense as a result of the reversal of previously recorded deferred tax assets of $116.9, resulting in an after-tax loss of $28.1 recorded in the second quarter of 2021.

The following ~~is a summary of the impacts of the divestiture:~~table summarizes our total pre-tax net asbestos-related (benefit).


~~Cash and cash equivalents~~	$	~~(398.0)~~
~~Current asbestos-related assets~~	~~(91.0)~~
~~Long-term asbestos-related assets~~	~~(310.4)~~
~~Accrued liabilities~~	~~91.2~~
~~Long-term asbestos-related liabilities~~	~~797.0~~
~~Gain on divestiture of asbestos-related assets and liabilities before income tax~~	$	~~88.8~~
~~Less: income tax expense~~	~~116.9~~
~~Loss on divestiture of asbestos-related assets and liabilities, net of tax~~	$	~~(28.1)~~

~~Asbestos-Related Costs (Benefit), Net~~


	Three Months Ended				Six Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Asbestos provision(a)	$	—	$	12.0	$	—	$	14.4
Gain on divestiture before income tax	—		(88.8)		—		(88.8)


Asbestos-related benefit, net	$	—	$	(76.8)	$	—	$	(74.4)

2018

Prior to the divestiture of the entity holding asbestos-related assets and liabilities, the Company recognized an estimated asbestos liability for pending claims and claims expected to be filed in the future, including legal fees. In the third quarter of 2020, we extended the measurement period over which we estimate the asbestos liability to include pending claims and claims estimated to be filed through 2052, including legal fees, reflecting the full time period over which we expected claims to be filed against us. Previous estimates included pending claims and claims expected to be filed over the next 10 years. Additionally, prior to the divestiture of the entity holding asbestos-related assets and liabilities, the Company recorded an asbestos-related asset composed of probable insurance recoveries. The table below summarizes the total net asbestos charges (benefits) for the three and six months ended July 3, 2021 and June 27, 2020.

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Asbestos provision(a)
$ 12.0 $ 11.8 $ 14.4 $ 23.6
Gain on divestiture before income tax (88.8) 0 (88.8) 0
Insurance settlement agreements(b)
0 4.2 0 (48.3)
Asbestos-related (benefit) costs, net $ (76.8) $ 16.0 $ (74.4) $ (24.7)

(a)Includes certain administrative costs such as legal-related costs for insurance asset recoveries and transaction costs related to the divestiture of the entity holding asbestos-related assets and liabilities. The asbestos provision for the three and six months ended June 27, 2020 includes amounts to maintain a rolling 10-year provision prior to the transition to a full horizon estimate.

~~(b)~~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.

~~The following table provides a rollforward of the estimated asbestos liability and related assets for the six months ended July 3, 2021 and June 27, 2020.~~

July 3, 2021 June 27, 2020
For the Six Months Ended Liability Asset Net Liability Asset Net
Beginning balance $ 932.0 $ 444.7 $ 487.3 $ 817.6 $ 386.8 $ 430.8
Asbestos provision(a)
13.4 (1.0) 14.4 28.9 5.3 23.6
Insurance settlement agreements(b)
0 0 0 0 48.3 (48.3)
Net cash activity(a)
(46.8) (42.3) (4.5) (42.7) (35.1) (7.6)
Divestiture of asbestos-related assets and liabilities (888.2) (401.4) (486.8) — — —
Ending balance $ 10.4 $ 0 $ 10.4 $ 803.8 $ 405.3 $ 398.5
Current portion(c)
$ 10.4 $ 0 $ 85.9 $ 85.9
Noncurrent portion $ 0 $ 0 $ 717.9 $ 319.4

~~(c)As of July 3, 2021, the current liability represents transaction costs related to the divestiture of the entity holding~~legacy asbestos-related assets and liabilities.

Environmental Matters

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

The following table provides a rollforward of our estimated environmental liability.


For the Six Months Ended	July 2, 2022		July 3, 2021
Environmental liability - beginning balance	$	54.1	$	58.3
Change in estimates for pre-existing accruals:
Continuing operations	—		0.1
Discontinued operations(a)	5.4		(0.1)
Accruals added during the period for new matters	0.1		1.0
Payments	(2.7)		(6.7)
Foreign currency	(0.3)		(0.1)
Environmental liability - ending balance	$	56.6	$	52.5

(a) During the six months ended July 2, 2022, we increased the estimated environmental liability for a former site of ITT by $5.4 and recognized an insurance-related asset of $4.3. The resulting net pre-tax expense of $1.1 has been presented as a loss from discontinued operations within the ~~six months ended July 3, 2021 and June 27, 2020.~~

For the Six Months Ended July 3, 2021 June 27, 2020
Environmental liability - beginning balance $ 58.3 $ 61.9
Change in estimates for pre-existing accruals:
Continuing operations 0.1 1.4
Discontinued operations (0.1) (1.6)
Accruals added during the period for new matters 1.0 0
Payments (6.7) (2.3)
Foreign currency (0.1) (0.1)
Environmental liability - ending balance $ 52.5 $ 59.3
Consolidated Condensed Statements of Operations.

Environmental-related assets, including a Qualified Settlement Fund and estimated recoveries from insurance providers and other third parties, were ~~$12.1~~$14.5 and ~~$20.4~~$12.1 as of July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ respectively.

We are currently involved with 27 active environmental investigation and remediation sites. As of July ~~3, 2021,~~2, 2022, we have estimated the potential high-end liability ~~range~~ of environmental-related matters to be ~~$91.8.~~$100.

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.

NOTE 2018

DERIVATIVE FINANCIAL INSTRUMENTS

From time to time, the Company may use derivative financial instruments, primarily foreign currency forward and option contracts, to mitigate exposure from foreign currency exchange rate fluctuations as it pertains to receipts from customers, payments to suppliers and intercompany transactions; as well as from commodity price fluctuations. We record derivatives at their fair value as either an asset or liability. For derivatives not designated as hedges, adjustments to reflect changes in the fair value of our derivatives are included in earnings. For cash flow hedges that qualify and are designated for hedge accounting, the effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive loss and subsequently recognized in earnings when the hedged transaction affects earnings. Any ineffective portion is recognized immediately in earnings. As of July 3, 2021 and December 31, 2020, no derivatives were designated as hedges. Derivative contracts involve the risk of non-performance by the counterparty. The fair value of our foreign currency contracts are determined using the net position of the contracts and the applicable spot rates and forward rates as of the reporting date.

~~As of July 3, 2021,~~2, 2022, the U.S. dollar equivalent notional value of our outstanding foreign currency forward and option contracts, which are denominated in euros, was ~~$100.5~~$107.1 and the fair value was ~~$2.2,~~$7.8, recorded within other current assets. ~~There were no derivative contracts outstanding as~~As of December 31, ~~2020.~~2021, the U.S. dollar equivalent notional value of our outstanding foreign currency forward and option contracts was $24.2 and the fair value was $1.9. During the three and six months ended July ~~3, 2021,~~2, 2022, we recognized ~~losses~~gains related to foreign currency derivatives not designated as hedges of ~~$0.8~~$3.3 and ~~$2.2,~~$5.6, respectively, within general and administrative expenses. During the three and six months ended ~~June 27, 2020,~~July 3, 2021, we recognized a ~~gain of $0.3 and a~~ loss of ~~$3.8,~~$0.8 and $2.2, respectively.

From time to time, we enter into call option contracts to mitigate exposure to commodity price fluctuations. As of July ~~3, 2021,~~2, 2022, call option contracts were nominal. There were no call option contracts outstanding as of December 31, ~~2020.~~2021.

We utilize market approaches to estimate the fair value of our derivative instruments by discounting anticipated future cash flows derived from the derivative’s contractual terms and observable foreign exchange

rates. The fair values of the derivatives summarized above are determined based on Level 2 inputs in the fair value hierarchy.

NOTE 19

ACQUISITIONS AND INVESTMENTS

Acquisition of Habonim Industrial Valves and Actuators Ltd (Habonim)

On April 4, 2022, we completed the acquisition of 100% of the privately held stock of Habonim for a purchase price of $139.9. Habonim is a designer and manufacturer of valves, valve automation and actuation for the gas distribution (including liquified natural gas), biotech and harsh application service sectors. Habonim sells directly to original equipment manufacturers and integrators for customized solutions. Habonim has operations in Israel, the U.S., and the Netherlands, reported annual sales of $44 in 2021, and has a workforce of approximately 200 employees. Habonim’s results are reported within the Industrial Process segment beginning in the second quarter of 2022.

The primary areas of the purchase price allocations that are not yet finalized relate to the valuation of certain tangible and intangible assets, liabilities, income tax, and residual goodwill, which represents the excess of the purchase price over the fair value of the net tangible and other intangible assets acquired. 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 these acquisitions is not expected to be deductible for income tax purposes.


Preliminary Allocation of Purchase Price	Habonim
Receivables	$	10.2
Inventory	18.2
Plant, property and equipment	16.1
Goodwill	68.7
Other intangible assets	45.7
Other assets	4.2
Accounts payable and accrued liabilities	(8.7)
Other liabilities	(11.8)
Noncontrolling interest	(2.7)
Net assets acquired	$	139.9

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

Investments in CRP Technology and CRP USA (CRP)

During the second quarter of 2022, we purchased a minority investment of 46% in CRP Technology Srl and 33% in CRP USA LLC (collectively "CRP") for $23.0. CRP is a manufacturer of reinforced composite materials for 3D printing for the aerospace, defense, premium automotive, and motorsports industries. CRP's Windform® high-performance materials enable engineers to develop complex, customized designs while providing lightweight and exceptionally durable products. The CRP investments are accounted for as equity method investments.

Other

During the second quarter of 2022, we purchased all production assets and proprietary technology related to an energy absorption product line for high-cycle applications in industrial automation. The product line was acquired for $7.0 from Clippard Instrument Laboratory, Inc., which is a U.S. manufacturer of electronic and pneumatic components. These assets are included within the CCT segment.

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 energy markets. We manufacture components that are integral to the operation of systems and manufacturing processes in these key markets. Our products ~~provide enabling~~enable 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 valuable business relationship 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 in achieving 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 reportable segments: Motion Technologies (MT), Industrial Process (IP), and Connect & Control Technologies (CCT). See Note 3, Segment Information, in this Report for a summary description of each segment. Additional information is also available in our ~~2020~~2021 Annual Report within Part I, Item 1, “Description of ~~Business”.~~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 27, 2020,~~July 3, 2021, unless stated otherwise.

Russia-Ukraine Conflict:

In February 2022, the United States announced targeted economic sanctions on Russia and certain Russian citizens in response to Russia’s invasion of Ukraine. As described in Part I, Item IA, “Risk Factors” in our 2021 Annual Report for the fiscal year ended December 31, 2021, our business may be sensitive to global economic conditions, which can be negatively impacted by instability in the geopolitical environment. Our annual sales directly to customers in Russia and Ukraine were approximately $38 for 2021. At the start of the conflict, annual sales to customers in Russia and Ukraine, including sales to customers selling or supplying to Russia or Ukraine, were expected to be approximately $60 for 2022. In addition, this year we expect an indirect sales impact of approximately $25 stemming from a reduction in supply of auto components made in Ukraine.

During the six months ended July 2, 2022, we recorded total charges of $8.0, primarily related to inventory and account receivable reserves to reflect the current macroeconomic conditions impacting some of our customers that sell or supply into this region. If circumstances worsen, we may experience a further reduction in demand and could incur additional charges, including potential fixed asset impairments, severance and other expenses. We are currently exploring alternatives for our operations in Russia, which could include a sale, disposition or wind down of operations, or a combination of these alternatives, although there cannot be any assurance of the timeline for or success of these alternatives. For additional discussion of the risks related to the Russia-Ukraine conflict, see Part II, Item 1A, “Risk Factors” herein.

COVID-19 Update:

The Company continues to ~~respond~~be proactive in responding to ~~and recover from~~ the challenges stemming from the COVID-19 pandemic, including managing significant market headwinds, supply chain disruptions and reduced availability of skilled labor. We are continuing to actively monitor the situation, including the current rise of the COVID-19 Delta variant, to assess the impact on our businesses and operations. In addition,pandemic. As a result, we ~~continue to work closely with our suppliers to minimize disruptions within our supply chain and~~have been able to continue ~~to deliver high quality products~~delivering to our customers.

Future impacts of COVID-19 on our business and ~~financials~~financial results remain uncertain and will be dependent on the ~~severity~~effect and duration of ~~a resurgence of COVID-19 or~~ variant strains of the ~~virus, including~~virus. As a result of these variants, certain countries around the ~~Delta variant,~~world in which we operate, such as China, have reinstituted restrictive measures that were previously implemented to curtail the ~~effectiveness of vaccines and people’s attitudes towards receiving them, and the overall duration~~spread of the ~~pandemic. See~~virus. Continued challenges resulting from the COVID-19 pandemic have adversely impacted, and may continue to adversely impact, our business and financial results. For additional discussion of risks related to COVID-19, see Part I, Item ~~1A,~~IA, “Risk Factors”~~, of~~ in our ~~2020~~2021 Annual Report~~, for an additional discussion of risk related to COVID-19.~~

2421

Executive Summary

~~During the second quarter of 2021, we grew our revenue and expanded our margins across all three segments.~~ The following table provides a summary of key performance indicators for the second quarter of ~~2021~~2022 as compared to the second quarter of ~~2020.~~2021.

Summary of Key Performance Indicators for the Second Quarter of 2021
Revenue Segment Operating Income Segment Operating Margin EPS
$692 $114 16.5% $0.45
34% Increase 206% Increase 930bp Increase 15% Decrease
Organic Revenue Adjusted Segment Operating Income Adjusted Segment Operating Margin Adjusted
EPS
$666 $114 16.5% $0.94
29% Increase 77% Increase 390bp Increase 65% Increase


Summary of Key Performance Indicators for the Second Quarter of 2022
Revenue	Segment Operating Income	Segment Operating Margin	EPS
$733	$114	15.6%	$0.91
6% Increase	Flat	-90bp Decrease	102% Increase
Organic Revenue	Adjusted Segment Operating Income	Adjusted Segment Operating Margin	Adjusted EPS
$758	$117	15.9%	$0.98
10% Increase	2% Increase	-60bp Decrease	4% Increase

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 definitions and reconciliations between GAAP and non-GAAP metrics.

Our second quarter ~~2021~~2022 results include:

•Revenue of ~~$691.6~~$733.3 increased $176.9, including favorable foreign exchange of $25.2. Organic revenue improved 29.5% primarily as a result of strong top-line growth from our Motion Technologies segment, which significantly outperformed the global automotive market. We also saw top line growth from our Industrial Process business driven by ~~pump projects and our CCT business~~$41.7 due to ~~strength~~strong growth in ~~connector sales.~~CCT’s connectors and components, IP’s short-cycle business, and MT’s Friction business. In addition, revenue from the acquisition of Habonim contributed growth of 2.2%. The increase was partially offset by unfavorable foreign currency impacts of $40.5 and reduced volumes stemming from the Russia-Ukraine conflict.

•Segment operating income of $114.3, including favorable foreign currency impacts of $2.6, was ~~$114.1, an increase of $76.8 over the prior year primarily driven~~flat. Higher raw material and overhead costs stemming from continued supply chain challenges and inflation were offset by ~~benefits from~~pricing actions, productivity savings, and higher sales volume and prior year restructuring costs related to the 2020 Global Restructuring Plan. In addition, we realized benefits from net productivity and prior year cost actions. These items were partially offset by prior year actions to reduce discretionary spending, higher raw materials costs, and strategic growth investments.volume.

•Income from continuing operations of ~~$0.45~~$0.91 per diluted share ~~decreased $0.08 versus last~~increased $0.46 as compared to the prior year ~~as higher segment operating income was more than offset by a $28.1~~of $0.45 per share, due to an asbestos-related after-tax loss onof $37.2 primarily related to the divestiture of the entity holding asbestos-related assets and liabilities ~~during the quarter, a prior year income tax benefit of $28.1, and an increase~~ in ~~corporate and environmental costs of $10.5.~~2021. Adjusted income from continuing operations ~~which excludes the impact from the sale of asbestos,~~ was ~~$0.94~~$0.98 per diluted share, an ~~improvement~~increase of ~~$0.37.~~$0.04 as compared to the prior year.

In terms of capital deployment, during the second quarter of ~~2021~~2022, we ~~paid $398.0 to fund~~completed the ~~divestiture~~acquisition of ~~the entity holding asbestos-related assets and liabilities. This transaction, along with our successful U.S. pension plan termination executed in October 2020, positions us favorably~~Habonim for ~~future growth and capital flexibility. In addition, we paid dividends~~a purchase price of ~~$19.0, which represents a 30% increase as compared to~~$139.9. Also during the second quarter, we repurchased 0.9 shares of ~~2020.~~common stock on the open-market for $63.0 and declared a dividend of $0.264 per share, which was a 20% increase from the quarterly dividend of $0.22 in 2021.

2522

DISCUSSION OF FINANCIAL RESULTS

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 Change July 3, 2021 June 27, 2020 Change
Revenue $ 691.6 $ 514.7 34.4 % $ 1,390.0 $ 1,178.0 18.0 %
Gross profit 224.6 163.6 37.3 % 453.6 373.0 21.6 %
Gross margin 32.5 % 31.8 % 70 bp 32.6 % 31.7 % 90 bp
Operating expenses(a)
45.0 143.1 (68.6) % 164.1 243.2 (32.5) %
Operating expense to revenue ratio 6.5 % 27.8 % (2,130) bp 11.8 % 20.6 % (880) bp
Operating income(a)
179.6 20.5 776.1 % 289.5 129.8 123.0 %
Operating margin 26.0 % 4.0 % 2,200 bp 20.8 % 11.0 % 980 bp
Interest and non-operating (income) expenses, net (3.5) 2.2 (259.1) % (4.8) 2.8 (271.4) %
Income tax expense (benefit) 143.9 (28.1) (612.1) % 168.6 (3.4) **
Effective tax rate 78.6 % (153.6) % ** 57.3 % (2.7) % 6,000 bp
Income from continuing operations attributable to ITT Inc. 39.0 46.4 (15.9) % 125.2 130.1 (3.8) %
Net income attributable to ITT Inc. 39.0 48.0 (18.8) % 125.2 132.8 (5.7) %

** Resulting percentage or basis point change not considered meaningful.


	Three Months Ended								Six Months Ended
	July 2, 2022			July 3, 2021			Change		July 2, 2022			July 3, 2021			Change
Revenue	$	733.3		$	691.6		6.0	%	$	1,459.5		$	1,390.0		5.0	%
Gross profit	222.2			224.6			(1.1)	%	440.6			453.6			(2.9)	%
Gross margin	30.3		%	32.5		%	(220)	bp	30.2		%	32.6		%	(240)	bp
Operating expenses(a)	121.7			45.0			170.4	%	245.5			164.1			49.6	%
Operating expense to revenue ratio	16.6		%	6.5		%	1,010	bp	16.8		%	11.8		%	500	bp
Operating income(a)	100.5			179.6			(44.0)	%	195.1			289.5			(32.6)	%
Operating margin	13.7		%	26.0		%	(1,230)	bp	13.4		%	20.8		%	(740)	bp
Interest and non-operating expenses (income), net	0.5			(3.5)			(114.3)	%	0.3			(4.8)			(106.3)	%
Income tax expense	24.0			143.9			(83.3)	%	43.5			168.6			(74.2)%
Effective tax rate	24.0		%	78.6		%	(5,460)	bp	22.3		%	57.3		%	(3,500)	bp
Income from continuing operations attributable to ITT Inc.	75.8			39.0			94.4	%	150.6			125.2			20.3	%
Net income attributable to ITT Inc.	74.6			39.0			91.3	%	149.4			125.2			19.3	%

(a) Operating expenses and operating income for the three and six months ended July 3, 2021 include the impact of the divestiture of the entity holding asbestos-related assets and liabilities. See Operating Expenses section below for further information.

REVENUE

The following table illustrates the revenue derived from each of our ~~segments for the three and six months ended July 3, 2021 and June 27, 2020.~~segments.


For the Three Months Ended	For the Three Months Ended	July 3, 2021		June 27, 2020		Change		Organic Growth (Decline)(a)		For the Three Months Ended	July 2, 2022		July 3, 2021		Change		Organic Growth(a)
Motion Technologies	Motion Technologies	$	343.6	$	199.3	72.4	%	63.6	%	Motion Technologies	$	331.3	$	343.6	(3.6)	%	4.7	%
Industrial Process	Industrial Process	213.9		193.3		10.7	%	7.7	%	Industrial Process	239.6		213.9		12.0	%	8.1	%
Connect & Control Technologies	Connect & Control Technologies	134.5		122.9		9.4	%	8.0	%	Connect & Control Technologies	163.2		134.5		21.3	%	24.8	%
Eliminations	Eliminations	(0.4)		(0.8)						Eliminations	(0.8)		(0.4)
Total Revenue	Total Revenue	$	691.6	$	514.7	34.4	%	29.5	%	Total Revenue	$	733.3	$	691.6	6.0	%	9.6	%

For the Six Months Ended	For the Six Months Ended	July 3, 2021		June 27, 2020		Change		Organic Growth (Decline)(a)		For the Six Months Ended	July 2, 2022		July 3, 2021		Change		Organic Growth(a)
Motion Technologies	Motion Technologies	$	712.7	$	497.2	43.3	%	35.7	%	Motion Technologies	$	701.4	$	712.7	(1.6)	%	4.4	%
Industrial Process	Industrial Process	416.2		420.6		(1.0)	%	(3.1)	%	Industrial Process	441.8		416.2		6.2	%	5.1	%
Connect & Control Technologies	Connect & Control Technologies	261.8		261.6		0.1	%	(1.4)	%	Connect & Control Technologies	317.8		261.8		21.4	%	24.0	%
Eliminations	Eliminations	(0.7)		(1.4)						Eliminations	(1.5)		(0.7)
Total Revenue	Total Revenue	$	1,390.0	$	1,178.0	18.0	%	13.7	%	Total Revenue	$	1,459.5	$	1,390.0	5.0	%	8.2	%

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

Motion Technologies ~~(MT)~~

MT revenue for the three and six months ended July ~~3, 2021 increased $144.3~~2, 2022 decreased $12.3 and ~~$215.5,~~$11.3, respectively. Excluding the impact of ~~favorable~~unfavorable foreign currency translation of ~~$17.5~~$28.6 and ~~$37.8 for the three and six months ended July 3, 2021,~~$42.5, organic revenue increased ~~$126.8~~$16.3 and ~~$177.7,~~$31.2, respectively. ~~Sales from our Friction~~

~~business grew 83%~~The increase for the three- and ~~43%, respectively, during the three and six month~~six-month periods driven by a strong automotive recovery and significant outperformance versus global automotive production rates. Wolverine sales improved 58% and 29%, respectively, during the three and six month periodswas primarily due to growth in ~~sealings and OE shims. KONI & Axtone sales increased 4%~~Friction of 6% and 5%, respectively, ~~during the three~~driven by strength in aftermarket. In addition, Wolverine increased 20% and ~~six month periods, primarily~~12%, respectively, due to ~~strength in automotive, partially offset by a decline in rail.~~higher sales of sealing materials.

The automotive industry ~~is currently experiencing~~has been, and continues to be, impacted by a global semiconductor supply shortage. This shortage has created supply chain disruptions for our automotive OEM customers, resulting in

temporary declines in production. As a result, demand for our OEM brake pads and parts has been and may continue to be adversely affected until the shortage is resolved. While this shortage has had and may continue to have a negative impact on revenue, we continue to significantly outperform global automotive production rates which has resulted in our ability to grow revenue versus prior year and 2019.

Industrial Process ~~(IP)~~

IP revenue ~~increased $20.6~~ for the three ~~months ended July 3, 2021,~~ and ~~decreased $4.4 for the~~ six months ended July ~~3, 2021. Both periods included favorable~~2, 2022 increased $25.7 and $25.6, respectively. Excluding revenue of $15.5 from the acquisition of Habonim and unfavorable foreign currency translation ~~impacts~~ of ~~$5.8~~$7.1 and ~~$8.6, respectively. Organic~~$11.0, respectively, organic revenue increased by ~~$14.8 during~~$17.3 and $21.1. The increase for the ~~three month period,~~three- and six-month periods was primarily driven by growth in ~~pump projects~~the short-cycle business of ~~52%~~19% and 16%, respectively, due to strength inwithin the ~~oil and gas, chemical, and~~ general industrial and chemical markets. ~~This~~The increase in both periods was partially offset by a decline in ~~service revenue.~~

~~Organic revenue for~~pump project sales of 27% and 29%, respectively, primarily within the ~~six month period decreased by $13.0, primarily driven by declines in our short-cycle business of 8% due to decreases in service revenue~~energy and ~~baseline pumps. This decline was partially offset by growth in pump projects of 18%.~~chemical markets.

The level of order and shipment activity at IP can vary significantly from period to period due to pump projects which are highly engineered, customized to customer needs, and have longer lead times. Total orders during the ~~six~~three months ended July ~~3, 2021~~2, 2022 were ~~$446.7,~~$298.8, an increase of ~~6.1%~~29% as compared to July 3, 2021. Backlog as of July 2, 2022 was $576.4, an increase of $132.0, or 30%, as compared to the prior year period. ~~Backlog as of July 3, 2021 was $383.9, an increase of $16.5, or 4.5%, as compared to December 31, 2020.~~ Our backlog represents firm orders that have been received, acknowledged, and entered into our production systems.

Connect & Control Technologies ~~(CCT)~~

CCT revenue for the three and six months ended July ~~3, 2021~~2, 2022 increased ~~$11.6~~$28.7 and ~~$0.2,~~$56.0, respectively, which included ~~favorable~~unfavorable foreign currency translation impacts of ~~$1.8~~$4.7 and ~~$3.8, respectively.~~$6.9. Organic revenue increased ~~$9.8 during the three month period~~$33.4 and $62.9, respectively, primarily driven by ~~increases~~growth in connector sales of ~~17%~~31% and 30%, respectively, particularly within the general industrial and aerospace and defense markets. Additionally, component sales grew by 14% and 16%, respectively, with ~~particular~~ strength ~~in the industrial market. This was partially offset by declines~~ in the aerospace and defense ~~market of 2% for the quarter.~~markets.

Organic revenue decreased $3.6 during the six month period primarily driven by declines in the aerospace and defense market of 16% due to continued challenges in the commercial aerospace market resulting from the COVID-19 pandemic. This was partially offset by a 19% increase in connector sales within the industrial market. Recently, there has been an increase in commercial air travel and production levels by OEMs; however, due to high levels of OEM inventory, we do not expect to see a significant improvement in sales until early 2022.

GROSS PROFIT

Gross profit for the three months ended July 2, 2022 and July 3, 2021 was $222.2 and ~~June 27, 2020 was~~ $224.6, ~~and $163.6,~~ respectively, reflecting a gross margin of ~~32.5%~~30.3% and ~~31.8%, respectively.~~32.5%. Gross profit for the six months ended July 2, 2022 and July 3, 2021 was $440.6 and ~~June 27, 2020 was~~ $453.6, ~~and $373.0,~~ respectively, reflecting a gross margin of ~~32.6%~~30.2% and ~~31.7%, respectively.~~32.6%. The ~~increase~~decrease in gross profit was primarily driven by ~~higher sales volume~~significant increases in raw material, shipping, and ~~net productivity savings, including the benefit of cost actions executed in 2020.~~labor costs, as discussed further below. These items were partially offset by ~~an increase in raw material prices, primarily driven by the supply of steel, copper,~~pricing actions, productivity savings, and ~~tin.~~ higher sales volume.

Since 2020, the cost of raw materials we use in our production processes, including commodities such as steel, ~~used in~~oil, copper, and tin, has significantly increased. Accordingly, gross profit and operating income within our ~~production processes has increased.~~businesses have been and may continue to be negatively impacted. The rising prices are mainly a result of increased demand ~~fueled~~coupled with reduced supply caused by ~~economic recovery from~~supply chain disruptions primarily as a result of the COVID-19 pandemic ~~as well as lower~~and the Russia-Ukraine conflict. Raw materials inflation and supply ~~since global production capacity was cut in 2020. The~~chain constraints may continue to unfavorably impact ~~of higher commodity prices on~~ our financial results during the ~~second quarter~~remainder of 2021 was partially mitigated by fixed-price supply contracts with suppliers. The expiration of these fixed-price contracts, potential continued raw materials inflation, and supply constraints are expected to2022. We have ~~an increasingly unfavorable impact on our second half financial results. We expect to be~~been able to offset some of this impact through ~~price increases~~pricing actions and ~~net~~ productivity ~~savings.~~savings, which we continue to pursue.

During 2021 and 2022, worldwide supply chain challenges exacerbated by the COVID-19 pandemic and the rising demand for physical goods have created upward pressure on shipping costs globally. These supply chain disruptions have contributed to congested shipping ports around the world, causing shipping delays and, in many cases, additional costs to be incurred in order to meet customer demand. As a result of these external pressures, our shipping costs, including for inbound and outbound freight, have increased, which has negatively impacted our gross profit. Continued supply chain and shipping challenges could have a material impact on our future financial results.

The manufacturing industry is also currently experiencing a skilled labor shortage. This shortage has created difficulties for the Company in attracting and retaining factory employees and in meeting customer demand, ~~and~~resulting in ~~managing the~~additional labor ~~costs of our factory workers.~~costs. Accordingly, our revenue, gross profit, and operating expenses at each of our businesses have been and may continue to be negatively impacted ~~if we~~as a result of difficulties in fulfilling customer orders and increased labor costs.

Certain of our businesses have experienced high levels of employee absenteeism resulting from regional COVID-19 outbreaks and government mandated workplace safety measures. Some governments around the world, including China, have instituted COVID-19 lockdowns that are ~~unable~~expected to ~~timely fulfill~~lead to further absenteeism, global supply chain challenges, and, potentially, temporary negative impacts on demand in some of our ~~customer orders; or if~~end-markets, such as passenger vehicles. As a result of these circumstances, our ~~labor costs, including costs~~financial results have been, and may continue to be, negatively impacted. For additional information regarding risks related to ~~attracting and retaining skilled workers, increase substantially in order to meet~~COVID-19, see Part I, Item 1A, “Risk Factors,” of our ~~customer demand. At this time, we do not expect this shortage to have a material impact on our financial results.~~2021 Annual Report.

OPERATING EXPENSES

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 Change July 3, 2021 June 27, 2020 Change
General and administrative expenses $ 60.2 $ 44.6 35.0 % $ 112.3 $ 101.7 10.4 %
Sales and marketing expenses 38.3 35.7 7.3 % 75.0 77.3 (3.0) %
Research and development expenses 23.2 18.9 22.8 % 47.5 41.6 14.2 %
Asbestos-related (benefit) costs, net (76.8) 16.0 (580.0) % (74.4) (24.7) (201.2) %
Restructuring costs 0.1 27.9 (99.6) % 3.7 31.0 (88.1) %
Asset impairment charges — — — % — 16.3 **
Total operating expenses $ 45.0 $ 143.1 (68.6) % $ 164.1 $ 243.2 (32.5) %
Total Operating Expenses By Segment:
Motion Technologies $ 41.4 $ 43.6 (5.0) % $ 83.0 $ 79.8 4.0 %
Industrial Process 39.7 50.8 (21.9) % 76.0 113.6 (33.1) %
Connect & Control Technologies 29.4 31.7 (7.3) % 61.7 64.3 (4.0) %
Corporate & Other (65.5) 17.0 (485.3) % (56.6) (14.5) (290.3) %
The following table summarizes our operating expenses, including by segment.

** Resulting percentage change not considered meaningful.


	Three Months Ended						Six Months Ended
	July 2, 2022		July 3, 2021		Change		July 2, 2022		July 3, 2021		Change
General and administrative expenses	$	57.0	$	60.3	(5.5)	%	$	117.4	$	116.0	1.2	%
Sales and marketing expenses	40.4		38.3		5.5	%	78.8		75.0		5.1	%
Research and development expenses	24.3		23.2		4.7	%	49.3		47.5		3.8	%
Asbestos-related (benefit), net	—		(76.8)		(100.0)	%	—		(74.4)		(100.0)	%


Total operating expenses	$	121.7	$	45.0	170.4	%	$	245.5	$	164.1	49.6	%
Total operating expenses by segment:
Motion Technologies	$	32.7	$	41.4	(21.0)	%	$	73.9	$	83.0	(11.0)	%
Industrial Process	46.0		39.7		15.9	%	86.9		76.0		14.3	%
Connect & Control Technologies	29.2		29.4		(0.7)	%	59.8		61.7		(3.1)	%
Corporate & Other	13.8		(65.5)		(121.1)	%	24.9		(56.6)		(144.0)	%

General and administrative (G&A) expenses decreased $3.3 and increased $1.4 for the three and six months ended July ~~3, 2021 increased $15.6 and $10.6,~~2, 2022, respectively. The increase was primarily due to higher incentive-based compensation as well as prior year actions taken in response to the COVID-19 pandemic. Prior year actions included a temporary reduction in executive compensation and suspension of select 401(k) benefits for certain U.S. employees that have since been reinstated. Last year, we also benefited from higher employee retention credits for the three and six month periods, in connection with the 2020 CARES Act. In addition, environmental costsdecrease in the ~~current year were higher~~three-month period was driven by ~~$5.3 and $5.0, respectively, primarily due to prior year insurance-related recoveries. The increase was~~favorable foreign currency impacts, partially offset by ~~a decline~~higher bad debt. The increase in the six-month period was driven by higher bad debt ~~expense.~~and strategic investment-related costs and lower corporate-owned life insurance investment gains, partially offset by favorable foreign currency impacts.

Sales and marketing expenses increased ~~$2.6 for the three months ended July 3, 2021 primarily driven by prior year benefits from discretionary spending reductions~~$2.1 and temporary personnel cost actions taken in response to the COVID-19 pandemic. Sales and marketing expenses decreased $2.3 for the six months ended July 3, 2021 reflecting net year-to-date savings from our cost actions initiated during the second quarter of 2020.

~~Research and development expenses~~$3.8 respectively for the three and six months ended July 2, 2022, primarily driven by temporary spending controls in place during the six months ended July 3, 2021 taken in response to the COVID-19 pandemic.

Research and development expenses increased ~~$4.3~~$1.1 and ~~$5.9,~~$1.8 respectively for the three and six months ended July 2, 2022, due to ~~our~~ continued ~~focus on~~ strategic investments in innovation and new product development to drive future growth.

Asbestos-related matters during 2021 resulted in a net benefit of $76.8 and $74.4 for the three and six months ended, ~~July 3, 2021,~~ respectively, due to the recognition of a pre-tax gain of $88.8 from the divestiture of the entity holding asbestos-related assets and ~~liabilities. Asbestos-related matters for~~liabilities in the ~~six months ended June 27, 2020 benefited from a $52.5 insurance settlement gain.~~second quarter of 2021. See Note ~~19,~~17, Commitments and Contingencies, ~~to the Consolidated Condensed Financial Statements~~ for further information.

Restructuring costs decreased $27.8 and $27.3, respectively, during the three and six months ended July 3, 2021. Restructuring costs recorded during the prior year were primarily related to cost actions taken as part of our 2020 Global Restructuring Plan, which is an organizational-wide restructuring plan to reduce the overall cost structure of the Company in response to a reduction in demand from the COVID-19 pandemic. See Note 5, ~~Restructuring Actions, to the Consolidated Condensed Financial Statements for further information.~~

~~Asset impairment charges for the six months ended June 27, 2020 were 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 further information.~~

OPERATING INCOME

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 Change July 3, 2021 June 27, 2020 Change
Motion Technologies $ 64.7 $ 10.4 522.1 % $ 140.7 $ 63.5 121.6 %
Industrial Process 31.5 18.5 70.3 % 62.5 27.4 128.1 %
Connect & Control Technologies 17.9 8.4 113.1 % 29.7 24.3 22.2 %
Segment operating income 114.1 37.3 205.9 % 232.9 115.2 102.2 %
Asbestos-related benefit (costs), net 76.8 (16.0) ** 74.4 24.7 201.2 %
Other corporate costs (11.3) (0.8) ** (17.8) (10.1) 76.2 %
Total corporate and other benefit (costs), net 65.5 (16.8) ** 56.6 14.6 287.7 %
Total operating income $ 179.6 $ 20.5 776.1 % $ 289.5 $ 129.8 123.0 %
Operating margin:
Motion Technologies 18.8 % 5.2 % 1,360 bp 19.7 % 12.8 % 690 bp
Industrial Process 14.7 % 9.6 % 510 bp 15.0 % 6.5 % 850 bp
Connect & Control Technologies 13.3 % 6.8 % 650 bp 11.3 % 9.3 % 200 bp
Segment operating margin 16.5 % 7.2 % 930 bp 16.8 % 9.8 % 700 bp
Consolidated operating margin 26.0 % 4.0 % 2,200 bp 20.8 % 11.0 % 980 bp
The following table summarizes our operating income and margin by segment.

** Resulting percentage change not considered meaningful.


	Three Months Ended								Six Months Ended
	July 2, 2022			July 3, 2021			Change		July 2, 2022			July 3, 2021			Change
Motion Technologies	$	47.0		$	64.7		(27.4)	%	$	106.7		$	140.7		(24.2)	%
Industrial Process	39.1			31.5			24.1	%	59.5			62.5			(4.8)	%
Connect & Control Technologies	28.2			17.9			57.5	%	53.9			29.7			81.5	%
Segment operating income	114.3			114.1			0.2	%	220.1			232.9			(5.5)	%
Asbestos-related benefit, net	—			76.8			(100.0)	%	—			74.4			(100.0)	%
Other corporate costs	(13.8)			(11.3)			22.1	%	(25.0)			(17.8)			40.4	%
Total corporate and other costs, net	(13.8)			65.5			(121.1)	%	(25.0)			56.6			(144.2)	%
Total operating income	$	100.5		$	179.6		(44.0)	%	$	195.1		$	289.5		(32.6)	%
Operating margin:
Motion Technologies	14.2		%	18.8		%	(460)	bp	15.2		%	19.7		%	(450)	bp
Industrial Process	16.3		%	14.7		%	160	bp	13.5		%	15.0		%	(150)	bp
Connect & Control Technologies	17.3		%	13.3		%	400	bp	17.0		%	11.3		%	570	bp
Segment operating margin	15.6		%	16.5		%	(90)	bp	15.1		%	16.8		%	(170)	bp
Consolidated operating margin	13.7		%	26.0		%	(1,230)	bp	13.4		%	20.8		%	(740)	bp

MT operating income for the three and six months ended July ~~3, 2021 increased $54.3~~2, 2022 decreased $17.7 and ~~$77.2, respectively,~~$34.0, respectively. The decrease for both periods was primarily ~~driven by~~due to significantly higher ~~sales volume~~raw material costs. The six-month period also included inventory and accounts receivable reserves of ~~$52.9 and $76.4 and prior year restructuring costs of $14.0~~$3.7 related to the ~~2020 Global Restructuring Plan. In addition, we benefited from net productivity and prior year cost actions, along with favorable foreign exchange of $2.7 and $6.1. Operating income growth~~Russia-Ukraine conflict. The decline in both periods was partially offset by ~~unfavorable raw material costs~~pricing actions and ~~strategic growth investments.~~productivity savings.

IP operating income for the three and six months ended July ~~3, 2021~~2, 2022 increased ~~$13.0~~$7.6 and ~~$35.1, respectively,~~decreased $3.0, respectively. The increase for the three-month period was mainly driven by productivity savings, pricing actions, and favorable sales mix, partially offset by higher ~~prior year restructuring~~raw material costs. The decrease for the six-month period was mainly driven by significantly higher raw material costs, as well as reserves of $4.3 related to inventory and accounts receivable in connection with the ~~2020 Global Restructuring Plan. In addition, we benefited from net~~Russia-Ukraine conflict, which was partially offset by productivity savings, ~~from prior year cost~~pricing actions, and a decline in bad debt expense. Second quarter volume benefits were offset by unfavorable product mix due to higher pump project sales. The prior year six month period also includes an asset impairment expense of $16.3 related to a business that mainly serves the global upstream oil and gas market.favorable sales mix.

CCT operating income for the three and six months ended July ~~3, 2021~~2, 2022 increased ~~$9.5~~$10.3 and ~~$5.4, respectively,~~$24.2, respectively. The increase for both periods was driven by ~~prior year restructuring~~productivity savings, volume and pricing actions, partially offset by unfavorable raw material costs ~~related to the 2020 Global Restructuring Plan, as well as net productivity~~ and ~~savings from prior year cost actions.~~

sales mix.

Other corporate costs for the three and six months ended July ~~3, 2021~~2, 2022 increased ~~$10.5~~$2.5 and ~~$7.7, respectively. The increase for both periods was~~$7.2, primarily driven by ~~unfavorable environmental-related costs~~lower corporate-owned life insurance investment gains, a $1.7 asset impairment related to the relocation of ~~$5.3 and $5.0, respectively, associated with prior year insurance-related recoveries, higher personnel costs driven by performance-based incentive compensation,~~the Company’s corporate headquarters, as well as ~~prior year actions taken~~an increase in response to the COVID-19 pandemic. Prior year actions included a temporary reduction in executive compensation and suspension of select 401(k) benefits that have since been reinstated. These items were partially offset by a decrease in restructuring expense.strategic investment-related costs.

INTEREST AND NON-OPERATING EXPENSES AND INCOME, NET

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 Change July 3, 2021 June 27, 2020 Change
Interest and non-operating (income) expenses, net $ (3.5) $ 2.2 (259.1) % $ (4.8) $ 2.8 (271.4) %
The following table summarizes our net interest and non-operating expenses (income).


	Three Months Ended						Six Months Ended
	July 2, 2022		July 3, 2021		Change		July 2, 2022		July 3, 2021		Change
Interest and non-operating expense (income), net	$	0.5	$	(3.5)	(114.3)	%	$	0.3	$	(4.8)	(106.3)	%

The ~~change~~increase in interest and non-operating expenses for the three and six months ended July ~~3, 2021 was~~2, 2022 is primarily due to a prior year gain of $3.4 ~~gain~~ from the final pricing adjustment related to the termination of our U.S. qualified pension ~~plan. We also benefited from~~plan, as well as higher interest expense associated with greater outstanding commercial paper borrowings and a ~~decline in postretirement-related costs mainly resulting from the plan termination.~~higher average interest rate.

INCOME TAX EXPENSE


	Three Months Ended								Six Months Ended
	July 2, 2022			July 3, 2021			Change		July 2, 2022			July 3, 2021			Change
Income tax expense	$	24.0		$	143.9		(83.3)%		$	43.5		$	168.6		(74.2)%
Effective tax rate	24.0		%	78.6		%	(5,460)	bp	22.3		%	57.3		%	(3,500)	bp

The ~~higher effective tax rate~~ETR for the three and six months ended July 3,2, 2022 was lower than the prior year due to the tax impact of the 2021 ~~resulted from the Company recording tax expense on the reversal of previously recorded deferred tax assets~~asbestos divestiture of $116.9 ~~resulting from the Company’s divestiture of the entity holding asbestos-related assets and liabilities~~ (see Note ~~19,~~17, Commitments and Contingencies, for further information). ~~In addition,~~Additionally, the 2022 ETR included higher permanent tax benefits, primarily related to research and development incentives in both foreign and U.S. jurisdictions.

We are closely monitoring the potential passage of new U.S. tax legislation, which could result in substantial changes to the current U.S. tax system, including changes to the statutory corporate tax rate. Further, changes in tax laws resulting from the Organization for Economic Cooperation and Development’s (“OECD”) multi-jurisdictional plan of action to address base erosion and profit shifting could adversely impact our effective tax ~~rate for~~rate. As the ~~three and six months ended June 27, 2020 was lower due to~~effects of a change in U.S. tax ~~benefits of $26.7 resulting from an internal restructuring in Europe. This reorganization resulted in a refined projection of future earnings, which will result~~law must be recognized in the ~~realization of a portion of~~period in which the new legislation is enacted, should new legislation be signed into law, our ~~deferred tax assets.~~financial results could be materially impacted.

See Note 6,5, Income Taxes, to the Consolidated Condensed Financial Statements for further information.

LIQUIDITY AND CAPITAL RESOURCES

Funding and Liquidity Strategy

We monitor our funding needs 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 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. We expect to have enough liquidity to fund operations for at least the next 12 months and beyond.

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~~support our growth and ~~continue to~~expansion in markets outside of the U.S. through the enhancement of existing products and development of new products, increased capital spending, and potential foreign acquisitions. We 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. when it is cost effective to do so. ~~We will also 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 ~~six months~~year ended ~~July 3,~~December 31, 2021, we had net cash distributions from foreign countries to the U.S. of ~~$44.3.~~$116.9. During the ~~year~~six months ended ~~December 31, 2020,~~July 2, 2022, we had net

cash distributions from foreign countries to the U.S. of ~~$498.2.~~$3.5. The timing and amount of any additional future distributions ~~remains under evaluation~~will be evaluated based on our jurisdictional cash needs.

The Company also continues to evaluate the various global governmental programs instituted in response to COVID-19, including the American Rescue Plan Act of 2021 (ARPA). ARPA builds upon many of the measures in the CARES Act from March 2020 and the Consolidated Appropriations Act from December 2020. ARPA and various global programs in the jurisdictions in which we operate generally provide for employee retention credits, workforce incentives, and incentive financing programs backed by governmental agencies. During the three and six months ended July 3, 2021, the Company recognized a benefit of $1.7 and $4.1 from the employee retention credit, and recognized a benefit of $7.2 during the second quarter of 2020. The benefit was recorded in operating income and related to the employer portion of payroll taxes. Certain non-U.S. jurisdictions have enacted similar stimulus measures. As of July 3, 2021, we have not incurred any borrowings under governmental loan programs. We continue to monitor any effects that may result from the ARPA and 2020 CARES Act or other similar legislation globally.

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~~we cannot provide any assurance as to what level of dividends, if any, will be paid in the future. In the second quarter of ~~2021,~~2022, we declared a dividend of ~~$0.22~~$0.264 per share for shareholders of record on June ~~21, 2021,~~17, 2022, which was a ~~30%~~20% increase from the quarterly dividends declared of $0.22 in ~~2020.~~2021. Dividend payments ~~for~~during the six months ended July ~~3, 2021~~2, 2022 amounted to ~~$38.1.~~$44.3.

~~During the first quarter of 2020, we completed our $1,000 share repurchase plan approved in 2006 and commenced repurchases under the $500 share repurchase plan approved in 2019.~~ During the six months ended July 2, 2022 and July 3, 2021, ~~and June 27, 2020,~~ we repurchased and retired ~~0.6~~3.0 and ~~1.7~~0.6 shares of common stock for ~~$50.0~~$240.9 and ~~$73.2,~~$50.0, respectively, under our share repurchase plans. Separate from our share repurchase plans, the Company repurchased 0.1 and 0.2 shares during the six months ended July 3, 2021 and June 27, 2020, respectively, for an aggregate price of $11.4 and $10.5, respectively,In addition, in settlement of employee tax withholding obligations due upon the vesting of RSUs and ~~PSUs.~~PSUs, the Company repurchased 0.1 shares and 0.1 shares for an aggregate price of $8.5 and $11.4, respectively, during the six

months ended July 2, 2022 and July 3, 2021. All repurchased shares are ~~canceled~~retired immediately following the repurchases.

Commercial Paper

When available and economically feasible, we have accessed 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. ~~Commercial~~

The following table presents our outstanding commercial paper borrowings.


	July 2, 2022		December 31, 2021
Commercial Paper Outstanding - U.S. Program	$	399.7	$	150.0
Commercial Paper Outstanding - Euro Program	145.2		45.4
Total Commercial Paper Outstanding	$	544.9	195.4

The increase in commercial paper outstanding from December 31, 2021 to July 2, 2022 was primarily related to funding our share repurchase activity and acquisition of $197.4 as of July 3, 2021 was issued through both the Company’s U.S. and Euro programs. Commercial paper outstanding under the U.S. program was $150.0, with a weighted average interest rate of 0.21%, and was used to partially fund the divestiture of the entity holding asbestos-related assets and liabilities (seeHabonim. See Note 19, ~~Commitments~~Acquisitions and ~~Contingencies~~Investments~~). Commercial paper outstanding under~~, to the Euro program was $47.4, with a weighted average negative interest rate of (0.44)%. Commercial paper outstanding of $104.3 as of December 31, 2020 was issued entirely under the Company’s Euro program and had a weighted average negative interest rate of (0.06)%. Consolidated Condensed Financial Statements for further information.

All outstanding commercial paper for both periods had maturity terms of less than three months from the date of issuance.

Revolving Credit ~~Agreements~~Agreement

We had maintained access to a $500 competitive advance and revolving credit facility under agreement with a consortium of third party lenders (the 2014 Revolving Credit Agreement). As of July 3, 2021 and December 31, 2020, we had no outstanding borrowings under the 2014 Revolving Credit Agreement. InOn August 5, 2021, we entered into a ~~new Revolving Credit Agreement~~revolving credit facility agreement with a syndicate of third party lenders including Bank of America, N.A., as administrative agent (the 2021 Revolving Credit Agreement) ~~to replace the 2014 Revolving Credit Agreement, which was to mature in November 2022 and was terminated on August 5, 2021.~~. The 2021 Revolving Credit Agreement matures in August 2026 and provides for an aggregate principal amount of up to $700 of (i) revolving extensions of credit (the revolving loans) outstanding at any time, and (ii) letters of credit for a face amount of up to $100 at any time outstanding. Subject to certain conditions, we are permitted to terminate permanently the total commitments and reduce commitments by a minimum aggregate amount of $10 or any whole multiple of $1 in excess thereof. Borrowings under the credit facility are available in U.S. dollars, Euros, British pound sterling or any other currency that may be requested by us, subject to the approval of the administrative agent and each lender. We are permitted to request that lenders increase the commitments under the facility by up to $350 for a maximum aggregate principal amount of $1,050; however, this is subject to certain conditions and therefore may not be available to us.

~~On April 29, 2020,~~ As of July 2, 2022 and December 31, 2021, we ~~entered into two 364-day revolving credit agreements totaling $200 (the Incremental Revolving Credit Agreements) which provided~~had no outstanding borrowings under the ~~Company with additional liquidity in excess of the 2014~~2021 Revolving Credit Agreement. ~~The Incremental Revolving Credit Agreements expired in April 2021 and we did not renew the agreements.~~

See Note ~~14,~~13, 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 or used in operating, investing, and financing activities from continuing operations, as well as net cash from discontinued ~~operations, for the six months ended July 3, 2021 and June 27, 2020.~~operations.


For the Six Months Ended	For the Six Months Ended	July 3, 2021		June 27, 2020		For the Six Months Ended	July 2, 2022		July 3, 2021
Operating activities	Operating activities	$	(231.6)	$	203.1	Operating activities	$	54.2	$	(231.6)
Investing activities	Investing activities	(34.7)		(37.1)		Investing activities	(218.4)		(34.7)
Financing activities	Financing activities	(5.1)		41.2		Financing activities	70.5		(5.1)
Foreign exchange	Foreign exchange	(9.2)		(0.2)		Foreign exchange	(28.1)		(9.2)
Total net cash (used in) provided by continuing operations		(280.6)		207.0
Net cash (used in) provided by discontinued operations		(0.2)		0.1
Net change in cash and cash equivalents		$	(280.8)	$	207.1
Total net cash used in continuing operations						Total net cash used in continuing operations	(121.8)		(280.6)

Operating Activities

The ~~decrease~~increase in net cash from operating activities of ~~$434.7~~$285.8 was primarily due to ~~cash paid~~the prior year payment of $398.0 ~~during the second quarter of 2021~~ to fund the ~~divestiture of the entity holding~~ asbestos-related ~~assets and liabilities and higher income tax payments of $31.6. In addition, we made investments in~~divestiture. This was partially offset by increased working capital investments to support sales ~~growth. These items were partially offset by an increase in segment operating income.~~growth and mitigate continued supply chain disruptions, and the timing of accounts receivable collections.

Investing Activities

The ~~decrease~~increase in net cash used in investing activities was driven by ~~a prior year payment of $4.7 related to~~ our ~~2019~~ acquisition of ~~Rheinhütte. Capital~~Habonim for a purchase price of $139.9 and investment in CRP for $23.0. Refer to Note 19, Acquisitions and Investments, for further information. In addition, capital expenditures ~~were $35.1 and $34.3 for~~increased by $12.4 over the ~~six months ended 2021 and 2020, respectively.~~prior year.

Financing Activities

The ~~decrease~~increase in net cash from financing activities of ~~$46.3~~$75.6 was ~~primarily driven by prior year revolver borrowings, net of repayments, of $89.6 and an increase in dividends paid of $23.5. These items were partially offset by~~due to an increase in net commercial paper borrowings of ~~$44.4 and a decline~~$269.2, partially offset by an increase in open-market repurchases of ITT common stock of ~~$22.3.~~

$190.5.

3229

KEY PERFORMANCE INDICATORS AND NON-GAAP MEASURES

Management reviews a variety of key performance indicators including revenue, segment operating income and margins, and earnings per share, some of which are calculated ~~other than in accordance~~ with accounting principles other than those generally accepted in the United States of America (GAAP). In addition, we consider certain measures to be useful to management and investors when evaluating our operating performance for the periods presented. These measures provide a tool for evaluating our ongoing operations and management of assets from period to period. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including, but not limited to, acquisitions, dividends, and share repurchases. Some of these metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for measures determined in accordance with GAAP. We consider the following non-GAAP measures to be key performance indicators. These measures may not be comparable to similarly titled measures reported by other companies.

•“Organic revenue” is defined as revenue, excluding the impacts of foreign currency fluctuations and acquisitions. 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~~We believe that reporting organic revenue provides useful information to investors by facilitating comparisons of our revenue performance with prior and future periods and to our peers.

AThe following tables include a reconciliation of revenue to organic revenue ~~for the three and six months ended July 3, 2021 is provided below.~~by segment.


Three Months Ended July 3		Motion Technologies				Industrial Process				Connect & Control Technologies				Eliminations			Total ITT
Three Months Ended July 2, 2022																					Three Months Ended July 2, 2022	Motion Technologies				Industrial Process				Connect & Control Technologies				Eliminations			Total ITT
2022 Revenue																					2022 Revenue		$	331.3			$	239.6			$	163.2			$	(0.8)		$	733.3
Acquisitions																					Acquisitions		—				(15.5)				—				—			(15.5)
Foreign currency translation																					Foreign currency translation		28.6				7.1				4.7				0.1			40.5
2022 Organic revenue																					2022 Organic revenue		$	359.9			$	231.2			$	167.9			$	(0.7)		$	758.3
2021 Revenue	2021 Revenue		$	343.6			$	213.9			$	134.5			$	(0.4)		$	691.6		2021 Revenue		$	343.6			$	213.9			$	134.5			$	(0.4)		$	691.6

Foreign currency translation			(17.5)				(5.8)				(1.8)				(0.1)			(25.2)
2021 Organic revenue			$	326.1			$	208.1			$	132.7			$	(0.5)		$	666.4
2020 Revenue			$	199.3			$	193.3			$	122.9			$	(0.8)		$	514.7
Organic growth	Organic growth		126.8				14.8				9.8				0.3			151.7			Organic growth		16.3				17.3				33.4				(0.3)			66.7
Percentage change	Percentage change		63.6		%		7.7		%		8.0		%					29.5		%	Percentage change		4.7		%		8.1		%		24.8		%					9.6		%

Six Months Ended July 3
Six Months Ended July 2, 2022																					Six Months Ended July 2, 2022
2022 Revenue																					2022 Revenue		$	701.4			$	441.8			$	317.8			$	(1.5)		$	1,459.5
Acquisitions																					Acquisitions		—				(15.5)				—				—			(15.5)
Foreign currency translation																					Foreign currency translation		42.5				11.0				6.9				—			60.4
2022 Organic revenue																					2022 Organic revenue		$	743.9			$	437.3			$	324.7			$	(1.5)		$	1,504.4
2021 Revenue	2021 Revenue		$	712.7			$	416.2			$	261.8			$	(0.7)		$	1,390.0		2021 Revenue		$	712.7			$	416.2			$	261.8			$	(0.7)		$	1,390.0

Foreign currency translation			(37.8)				(8.6)				(3.8)				—			(50.2)
2021 Organic revenue			$	674.9			$	407.6			$	258.0			$	(0.7)		$	1,339.8
2020 Revenue			$	497.2			$	420.6			$	261.6			$	(1.4)		$	1,178.0
Organic growth (decline)			177.7				(13.0)				(3.6)				0.7			161.8
Organic growth																					Organic growth		31.2				21.1				62.9				(0.8)			114.4
Percentage change	Percentage change		35.7		%		(3.1)		%		(1.4)		%					13.7		%	Percentage change		4.4		%		5.1		%		24.0		%					8.2		%

3330

•“Adjusted operating income” and “Adjusted segment operating income” are defined as operating income, adjusted to exclude special items that include, but are not limited to, ~~asbestos-related impacts,~~ restructuring, severance, certain asset impairment charges, certain acquisition-related impacts, ~~and~~ unusual or infrequent operating ~~items.~~items and, for 2021, asbestos-related impacts. Special items represent 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” are defined as adjusted operating income or adjusted segment operating income, respectively, divided by revenue. We believe that these 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.

AThe following tables include a reconciliation of operating income to adjusted operating income ~~for the three and six months ended July 3, 2021 and June 27, 2020 is provided below.~~by segment.

Three Months Ended July 3, 2021 Motion
Technologies Industrial
Process Connect & Control
Technologies Total
Segment Corporate Total ITT
Operating income $ 64.7 $ 31.5 $ 17.9 $ 114.1 $ 65.5 $ 179.6
Asbestos-related benefit, net(a)
— — — — (76.8) (76.8)
Restructuring costs — — 0.1 0.1 — 0.1
Other(b)
— — — — 0.6 0.6
Adjusted operating income (loss) $ 64.7 $ 31.5 $ 18.0 $ 114.2 $ (10.7) $ 103.5
Adjusted operating margin 18.8 % 14.7 % 13.4 % 16.5 % 15.0 %
Six Months Ended July 3, 2021
Operating income $ 140.7 $ 62.5 $ 29.7 $ 232.9 $ 56.6 $ 289.5
Asbestos-related benefit, net(a)
— — — — (74.4) (74.4)
Restructuring costs — 0.9 2.5 3.4 0.3 3.7
Other(b)
— — — — 1.7 1.7
Adjusted operating income (loss) $ 140.7 $ 63.4 $ 32.2 $ 236.3 $ (15.8) $ 220.5
Adjusted operating margin 19.7 % 15.2 % 12.3 % 17.0 % 15.9 %


Three Months Ended July 2, 2022	Motion Technologies				Industrial Process				Connect & Control Technologies				Total Segment				Corporate			Total ITT
Operating income		$	47.0			$	39.1			$	28.2			$	114.3			$	(13.8)		$	100.5
Restructuring costs		1.5				0.8				(0.1)				2.2				—			2.2
Asset impairment		—				—				—				—				1.7			1.7
Impacts related to Russia-Ukraine conflict		(0.5)				(0.3)				—				(0.8)				—			(0.8)

Other(a)		0.2				0.6				—				0.8				0.3			1.1
Adjusted operating income		$	48.2			$	40.2			$	28.1			$	116.5			$	(11.8)		$	104.7

Adjusted operating margin		14.5		%		16.8		%		17.2		%		15.9		%					14.3		%

Six Months Ended July 2, 2022
Operating income		$	106.7			$	59.5			$	53.9			$	220.1			$	(25.0)		$	195.1
Restructuring costs		1.5				1.0				—				2.5				—			2.5
Asset impairment		—				—				—				—				1.7			1.7
Impacts related to Russia-Ukraine conflict		3.7				4.3				—				8.0				—			8.0

Other(a)		1.1				1.2				—				2.3				1.2			3.5
Adjusted operating income		$	113.0			$	66.0			$	53.9			$	232.9			$	(22.1)		$	210.8

Adjusted operating margin		16.1		%		14.9		%		17.0		%		16.0		%					14.4		%

Three Months Ended June 27, 2020 Motion
Technologies Industrial
Process Connect & Control
Technologies Total
Segment Corporate Total ITT
Operating income (loss) $ 10.4 $ 18.5 $ 8.4 $ 37.3 $ (16.8) $ 20.5
Restructuring costs 14.0 7.8 5.2 27.0 0.9 27.9
Asbestos-related costs, net(a)
— — — — 16.0 16.0
Other(c)
— 0.2 0.1 0.3 (0.6) (0.3)
Adjusted operating income (loss) $ 24.4 $ 26.5 $ 13.7 $ 64.6 $ (0.5) $ 64.1
Adjusted operating margin 12.2 % 13.7 % 11.1 % 12.6 % 12.5 %
Six Months Ended June 27, 2020
Operating income $ 63.5 $ 27.4 $ 24.3 $ 115.2 $ 14.6 $ 129.8
Restructuring costs 14.0 7.9 6.7 28.6 2.4 31.0
Asbestos-related benefit, net(a)
— — — — (24.7) (24.7)
Asset impairment charges(d)
— 16.3 — 16.3 — 16.3
Other(c)
— 0.5 0.2 0.7 (0.3) 0.4
Adjusted operating income (loss) $ 77.5 $ 52.1 $ 31.2 $ 160.8 $ (8.0) $ 152.8
Adjusted operating margin 15.6 % 12.4 % 11.9 % 13.7 % 13.0 %


Three Months Ended July 3, 2021
Operating income	$	64.7		$	31.5		$	17.9		$	114.1		$	65.5	$	179.6
Asbestos-related costs, net(b)	—			—			—			—			(76.8)		(76.8)
Restructuring costs	—			—			0.1			0.1			—		0.1


Other(a)	—			—			—			—			0.6		0.6
Adjusted operating income	$	64.7		$	31.5		$	18.0		$	114.2		$	(10.7)	$	103.5

Adjusted operating margin	18.8		%	14.7		%	13.4		%	16.5		%			15.0		%

Six Months Ended July 3, 2021
Operating income	$	140.7		$	62.5		$	29.7		$	232.9		$	56.6	$	289.5
Asbestos-related costs, net(b)	—			—			—			—			(74.4)		(74.4)
Restructuring costs	—			0.9			2.5			3.4			0.3		3.7


Other(a)	—			—			—			—			1.7		1.7
Adjusted operating income	$	140.7		$	63.4		$	32.2		$	236.3		$	(15.8)	$	220.5

Adjusted operating margin	19.7		%	15.2		%	12.3		%	17.0		%			15.9		%

(a)Includes severance charges, accelerated amortization of an intangible asset, and integration-related costs.

(b)Includes a gain resulting from the divestiture of the entity holding asbestos-related assets and liabilities. See Note ~~19,~~17, Commitments and Contingencies, for further information.

~~(b)Includes accelerated amortization of an intangible asset.~~

~~(c)Primarily includes acquisition-related costs and a gain on sale of excess property.~~

~~(d)Asset impairment charges are related to a business within IP that primarily serves the global upstream oil and gas market.~~

3431

•“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 impacts,~~ restructuring, severance, certain asset impairment charges, ~~pension termination and settlement impacts,~~ certain acquisition-related impacts, income tax settlements or adjustments, ~~and~~ unusual or infrequent ~~items.~~items and, for 2021, asbestos-related impacts. Special items represent 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 EPS 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.

~~A reconciliation~~The following table includes reconciliations of income from continuing operations to adjusted income from continuing ~~operations, for the three and six months ended July 3, 2021 and June 27, 2020 is provided below.~~operations.

Three Months Ended Six Months Ended
July 3, 2021 June 27, 2020 July 3, 2021 June 27, 2020
Income from continuing operations attributable to ITT Inc. $ 39.0 $ 46.4 $ 125.2 $ 130.1
Net asbestos-related costs (benefit), net of tax expense (benefit) of $114.0, ($3.5), $113.5 and $5.4, respectively(a)
37.2 12.5 39.1 (19.3)
Tax-related special items(b)
7.6 (31.2) 7.6 (33.2)
Restructuring costs, net of tax benefit of $0.1, $6.8, $0.6 and $7.6, respectively — 21.1 3.1 23.4
Asset impairment charges, net of tax benefit of $0.0, $0.0, $0.0 and $0.1, respectively(c)
— — — 16.2
Other, net of tax expense (benefit) of $0.7, ($0.2), $0.4 and ($0.6), respectively(d)
(2.1) 0.9 (1.3) 2.6
Adjusted income from continuing operations $ 81.7 $ 49.7 $ 173.7 $ 119.8
Income from continuing operations attributable to ITT Inc. per diluted share (EPS) $ 0.45 $ 0.53 $ 1.44 $ 1.49
Adjusted EPS $ 0.94 $ 0.57 $ 2.00 $ 1.37


	Three Months Ended				Six Months Ended
	July 2, 2022		July 3, 2021		July 2, 2022		July 3, 2021
Income from continuing operations attributable to ITT Inc.	$	75.8	$	39.0	$	150.6	$	125.2
Tax-related special items(a)	3.1		7.6		1.9		7.6
Restructuring costs, net of tax benefit of $(0.6), $(0.1), $(0.7) and $(0.6) respectively	1.6		—		1.8		3.1
Asset impairment charges, net of tax benefit of $(0.4), $0.0, $(0.4) and $0.0, respectively	1.3		—		1.3		—
Impacts related to Russia-Ukraine conflict, net of tax benefit of $0.0, $0.0, $(1.7) and $0.0, respectively	(0.8)		—		6.3		—
Net asbestos-related costs, net of tax expense of $0.0, $114.0, $0.0 and $113.5 respectively(b)	—		37.2		—		39.1


Other special items, net of tax benefit of $(0.5), $0.7, $(0.9) and $0.4 respectively(c)	0.6		(2.1)		2.6		(1.3)
Adjusted income from continuing operations	$	81.6	$	81.7	$	164.5	$	173.7
Income from continuing operations attributable to ITT Inc. per diluted share (EPS)	$	0.91	$	0.45	$	1.79	$	1.44
Adjusted EPS	$	0.98	$	0.94	$	1.95	$	2.00

(a)Tax-related special items primarily reflect tax on future distribution of foreign earnings, impacts from valuation allowances, and the write-down of a tax receivable.

(b)See Note ~~19,~~17, Commitments and Contingencies, for further information.

~~(b)~~(c)~~Tax-related~~Other special items for the quarterly and year-to-date periods of 2022 primarily reflect ~~the impacts of valuation allowances.~~

~~(c)Asset impairment charges are related to a business within IP that primarily serves the global upstream oil~~employee severance expense and ~~gas market.~~

~~(d)~~integration-related costs. Other special items for the quarterly and year-to-date periods of 2021 include a benefit from finalization of the U.S. Qualified pension plan termination funding and accelerated amortization of an intangible asset. ~~Other special items for the quarterly and year-to-date periods of 2020 primarily include costs associated with the termination of U.S. Qualified pension plan.~~

3532

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 the Company’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. The Company 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 ~~2020~~2021 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 material changes concerning the Company’s critical accounting estimates as described in our ~~2020~~2021 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 ~~2020~~2021 Annual Report. See Note ~~20,~~18, Derivative Financial Instruments, to the Consolidated Condensed Financial Statements for information on the Company’s use of derivative financial instruments to mitigate exposure from foreign currency exchange rate fluctuations and commodity price fluctuations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure 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. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the period covered by this Report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. ~~We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.~~

3633

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 business. For a discussion of legal proceedings, see Note ~~19,~~17, Commitments and Contingencies to the Consolidated Condensed Financial Statements.

~~As described in Note 19,~~ ~~Commitments and Contingencies~~, on July 1, 2021, we completed the divestiture of InTelCo Management LLC (InTelCo), a former subsidiary which held our asbestos-related assets and liabilities. In connection with the divestiture, we contributed approximately $398 to InTelCo. Pursuant to the purchase agreement, the buyer and InTelCo agreed to indemnify the Company and its affiliates for all asbestos-related and other product liabilities, while the Company agreed to indemnify InTelCo and its affiliates for all other historical liabilities of InTelCo, which includes any losses with respect to release of, or exposure to, hazardous materials. These indemnification obligations are not subject to any cap or time limitation. As a result of the divestiture, we believe we have resolved our involvement in material legal proceedings related to asbestos exposure.

ITEM 1A. RISK FACTORS

Reference is made to the risk factors set forth in Part I, Item 1A, “Risk Factors”, of our ~~2020~~2021 Annual Report, which are incorporated by reference herein. There have been no material changes with regard to the risk factors disclosed in such report, other than as noted below.

Russia’s invasion of Ukraine, and the global response to it, could adversely impact our ~~risk factor regarding exposure~~financial results.

Beginning in February 2022, the U.S. government and other nations imposed significant restrictions on most companies’ ability to ~~legacy asbestos claims~~do business in Russia as a result of Russia’s invasion of Ukraine. It is not possible to predict the broader or longer-term consequences of this conflict, which could include further sanctions, embargoes, regional instability and ~~related assets, liabilities~~geopolitical shifts which could have further adverse effects on macroeconomic conditions, security conditions, currency exchange rates and ~~cash flows that no longer applies~~financial markets. Furthermore, such events have the potential to adversely impact the ~~Company after~~availability of commodities and energy, increase commodity prices, and exacerbate global inflationary pressures. Such geopolitical instability and uncertainty has had and could continue to have a negative impact on our ability to sell to, ship products to, collect payments from, and support customers in certain regions based on trade restrictions, embargoes and export control law restrictions. Logistics restrictions, including closures of air space, could increase the ~~divestiture~~costs, risks, and adverse impacts from these new challenges. Conflict-related inflationary pressures could further reduce our gross margins as a result of rising input costs. We may also be the subject of increased cyber-attacks as a result of the ~~entity holding asbestos-related assets~~Russia-Ukraine conflict. During the six months ended July 2, 2022, we suspended our operations in Russia and ~~liabilities as discussed~~recorded charges of $8.0 primarily related to inventory and bad debt reserves. Annual sales to customers selling or supplying products to Russia or Ukraine, and reduced production of auto components made in ~~Note 19,~~ ~~Commitments and Contingencies~~Ukraine, were expected to be approximately $60 to $85 during 2022. toA significant escalation or expansion of economic disruption or the ~~Consolidated Condensed Financial Statements.~~conflict’s current scope could have a material adverse effect on our business, financial condition, and results of operations. We are currently exploring alternatives for our operations in Russia, which could include a sale, disposition or wind down, or a combination of these alternatives, although we cannot provide any assurance of the timeline for or success of these alternatives.

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

~~Purchases of equity securities by the issuer and affiliated purchasers~~

On October 30, 2019, the Board of Directors approved an indefinite term $500 share repurchase program (the 2019 Plan).We intend to utilize the 2019 Plan in a manner that is consistent with our capital allocation process, which has centered on those investments necessary to grow our businesses organically and through acquisition, while also providing cash returns to shareholders.

Purchases of equity securities by the issuer and affiliated purchasers


(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) PERIOD	TOTAL NUMBER OF SHARES PURCHASED(1)	AVERAGE PRICE PAID PER SHARE(2)			TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS		APPROXIMATE DOLLAR VALUE OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS
4/3/2022 - 4/30/2022	0.1		$	76.73		0.1		$	195.0
5/1/2022 - 5/28/2022	0.7		$	70.88		0.7		$	145.0
5/29/2022 - 7/2/2022	0.1		$	64.57		0.1		$	143.2

(1)Includes shares purchased in settlement of employee tax withholding obligations due upon the vesting of RSUs and PSUs.

~~We did not make any~~(2)Average price paid per share ~~repurchases of our common stock during the quarter ended July 3, 2021. We routinely receive shares of our common stock as payment for the withholding of taxes due~~is calculated on ~~vested restricted stock awards from stock-based compensation program participants. As of July 3, 2021, approximately $438.7 remains available under the 2019 Plan.~~a settlement basis and includes commissions.

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 million euros and €1.5 million euros, respectively. Prior to its acquisition by ITT, Bornemann issued a performance bond to its Iranian customer in the amount of €1.3 million 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 July ~~3, 2021,~~2, 2022, however, Bornemann did pay fees of approximately €5€3 thousand euros during the six months ended July ~~3, 2021~~2, 2022 and approximately ~~€11~~€10 thousand euros during ~~2020~~2021 to the German financial institution which is maintaining the Bond.

ITEM 6. EXHIBITS


EXHIBIT NUMBER						DESCRIPTION

~~(2.1)~~						Membership Interest Purchase Agreement, dated as of June 30, 2021, among ITT Inc., InTelCo Management LLC, and Sapphire TopCo, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K filed July 1, 2021)*

(10.1)						~~Credit~~RSU Agreement ~~dated August 5, 2021 among ITT Inc. and Other Parties Signatory Thereto~~- 2022 Non -Employee Directors

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

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

(32.1)						Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(32.2)						Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(101)						The following materials from ITT Inc.’s Quarterly Report on Form 10-Q for the quarter ended July ~~3, 2021,~~2, 2022, formatted in Inline 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, (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 July ~~3, 2021,~~2, 2022, formatted in Inline XBRL (included in Exhibit 101).

*Schedules to this Exhibit were omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish to the Securities and Exchange Commission a copy of such schedules and exhibits, or any section thereof, upon request.Management compensatory plan

3836

SIGNATURE

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



						ITT Inc.

						(Registrant)

By:						/s/ John Capela
						John Capela
						Chief Accounting Officer
						(Principal Accounting Officer)

August ~~6, 2021~~4, 2022

3937


	July 3, 2021		June 27, 2020
Beginning balance - January 1	$	19.1	$	7.5
Restructuring costs	4.4		31.7
Reversal of prior accruals	(0.7)		(0.7)
Cash payments	(7.2)		(9.6)
Asset write-offs	(0.6)		0
Foreign exchange translation and other	(0.5)		(0.2)
Ending balance	$	14.5	$	28.7
By accrual type:
Severance and other employee-related	$	14.3	$	28.3
Other	0.2		0.4



	July 3, 2021			June 27, 2020
Total allowance for credit losses - January 1		$	15.6		$	12.8
Impact of adoption of ASU 2016-13		0			1.7
(Recoveries) charges to income		(1.7)			8.6
Write-offs		(0.7)			(3.0)
Foreign currency and other		0.1			(0.1)
Total allowance for credit losses - ending balance		$	13.3		$	20.0


As of and for the Three Months Ended June 27, 2020
March 28, 2020	(132.4)		(303.3)		(435.7)
Net change in postretirement benefit plans, net of tax	0.9		—		0.9
Net foreign currency translation adjustment	—		2.1		2.1
June 27, 2020	$	(131.5)	$	(301.2)	$	(432.7)


As of and for the Six Months Ended June 27, 2020
December 31, 2019	$	(133.3)	$	(252.0)	$	(385.3)
Net change in postretirement benefit plans, net of tax	1.8		—		1.8
Net foreign currency translation adjustment	—		(49.2)		(49.2)
June 27, 2020	$	(131.5)	$	(301.2)	$	(432.7)


Three Months Ended June 27, 2020	Motion Technologies				Industrial Process				Connect & Control Technologies				Total Segment				Corporate			Total ITT
Operating income (loss)		$	10.4			$	18.5			$	8.4			$	37.3			$	(16.8)		$	20.5
Restructuring costs		14.0				7.8				5.2				27.0				0.9			27.9
Asbestos-related costs, net(a)		—				—				—				—				16.0			16.0


Other(c)		—				0.2				0.1				0.3				(0.6)			(0.3)
Adjusted operating income (loss)		$	24.4			$	26.5			$	13.7			$	64.6			$	(0.5)		$	64.1

Adjusted operating margin		12.2		%		13.7		%		11.1		%		12.6		%					12.5		%

Six Months Ended June 27, 2020
Operating income		$	63.5			$	27.4			$	24.3			$	115.2			$	14.6		$	129.8
Restructuring costs		14.0				7.9				6.7				28.6				2.4			31.0
Asbestos-related benefit, net(a)		—				—				—				—				(24.7)			(24.7)
Asset impairment charges(d)		—				16.3				—				16.3				—			16.3

Other(c)		—				0.5				0.2				0.7				(0.3)			0.4
Adjusted operating income (loss)		$	77.5			$	52.1			$	31.2			$	160.8			$	(8.0)		$	152.8

Adjusted operating margin		15.6		%		12.4		%		11.9		%		13.7		%					13.0		%