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ITT Reports 2016 Fourth-Quarter and Full-Year Results, 2017 Guidance
[February 14, 2017]

ITT Reports 2016 Fourth-Quarter and Full-Year Results, 2017 Guidance

ITT Inc. (NYSE: ITT) today reported 2016 fourth-quarter and full-year financial results that reflected a strong strategic focus on key long-term growth drivers including operational execution, market expansion and effective capital deployment, while effectively managing through the challenging market environment across several of the company's end markets. The company also provided 2017 guidance.

"While we continued to face a difficult external environment across several of our key markets during 2016, we maintained our collective focus on addressing those challenges while advancing our essential long-term growth plans," said ITT CEO and President Denise Ramos. "Throughout 2016, we proactively restructured our operations, drove cost controls and improved productivity and efficiency, which helped us mitigate some of the unfavorable impact from our markets. At the same time, we drove a number of strategic actions that will position us well for long-term value creation.

"To continue to drive value, we accelerated our structural reset of our Industrial Process business to optimize and align the business and its cost structure to current market conditions and to better propel the business in the long-term. In the transportation end market, we continued to gain market share and expand geographically as we grew revenue approximately 20 percent. We also significantly advanced our global automotive brake pad strategy to evolve from a regional to a global supplier while diversifying our customer base and increasing volume across platforms that drive stronger future aftermarket growth.

"In addition, we continued to deploy our capital in balanced and effective ways to both position us for long-term success and to return value to shareowners. We made organic investments to expand our global friction business and in January 2017, acquired Axtone Railway Components to further position us in the railway market. In addition, we returned about $114 million to shareholders by executing $70 million of share repurchases and increasing our quarterly dividend. We also implemented a new holding company structure to advance our legacy liability management strategy.

"As we look ahead to 2017, we are mindful that we will continue to face a challenging environment. As such, we will build on our strong foundation and accelerate our progress in driving world-class operational capabilities with the creation of our new Chief Operating Officer structure under Luca Savi. As always, we will continue to manage those areas over which we have control and drive enhanced long-term value for shareowners."

On a GAAP basis, the company delivered revenue of $2.4 billion in 2016, reflecting a 3 percent decline that included an incremental $132 million from acquisitions, partially offset by an unfavorable $32 million foreign exchange impact. GAAP segment operating income decreased 16 percent, primarily reflecting lower volumes at Industrial Process and higher restructuring and realignment charges. Full-year GAAP EPS decreased to $2.02, compared with $3.44 in the prior year, primarily reflecting the decline in segment operating income, a $66 million lower benefit from asbestos-related matters and a $13 million pension settlement charge related to our pension de-risking strategies.

On an adjusted basis, full-year organic revenue (defined as total revenue excluding foreign exchange, acquisition and divestiture impacts) decreased 7 percent as strong growth in global automotive brake pads was offset by significant declines in oil and gas and mining projects as well as weakness in chemical and industrial pumps.

Adjusted operating income decreased 12 percent as solid net operating productivity, restructuring benefits and the positive impact of the strategic acquisition of Wolverine Advanced Materials were more than offset by lower pump volumes and the unfavorable impact of foreign exchange and pricing pressures. Excluding foreign exchange, adjusted segment operating income was down 9 percent.

2016 adjusted EPS, which excludes special items, decreased 9 percent to $2.32, as lower corporate costs associated with improved efficiency and cost containment actions were offset by lower segment operating income, the negative impacts of foreign exchange and a higher tax rate. Adjusted EPS, excluding the negative impact from foreign exchange, decreased 5 percent.

2016 Fourth-Quarter Results

On a GAAP basis, the company delivered revenue of $588 million in the fourth quarter, reflecting a 12 percent decline that included a 2 percent negative impact from foreign exchange. GAAP segment operating income decreased 12 percent, primarily reflecting lower Industrial Process volumes, as well as the prior-year reversal of a customer-related liability and a 2016 pension settlement charge, which were partially offset by lower restructuring, realignment and acquisition-related costs. Fourth-quarter GAAP EPS decreased to $0.27, compared with $0.40 in the prior year, primarily due to a decline in segment operating income and prior-year asbestos and environmental insurance favorability, partially offset by lower tax expense.

On an adjusted basis, organic revenue declined 10 percent as strong growth in global automotive brake pads was offset by significant oil and gas and mining declines as well as weakness in chemical and industrial pumps. Adjusted operating income declined 16 percent reflecting solid net operating productivity, including restructuring benefits, and favorable foreign exchange benefits that were more than offset by lower pump volumes in the Industrial Process business, pricing pressures and prior-year post-retirement related benefits. Adjusted EPS decreased 17 percent to $0.48 as the positive impacts of a lower share count and $0.02 of favorable foreign exchange were offset by lower segment operating income and a higher tax rate.

2016 Fourth-Quarter Business Segment Results

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

Industrial Process designs and manufactures industrial pumps and valves for the chemical and industrial, oil and gas, and mining markets.

  • Total revenue decreased 29 percent to $212 million, with organic revenue down 28 percent. Both measures reflect the impact of challenging conditions in the oil and gas, mining, and chemical and industrial markets on our projects, short-cycle pumps and aftermarket businesses. Total revenue also includes the impact of unfavorable foreign exchange.
  • GAAP operating income decreased 69 percent to $14 million, and adjusted segment operating income decreased 55 percent to $18 million. Both measures primarily reflect significantly lower volumes across key end markets and project pricing pressures, which were partially offset by improving operational execution, incremental restructuring savings and the positive impact of foreign exchange. GAAP results also include favorable adjustments in 2015 to reserves established in purchase accounting for a prior acquisition and a pension settlement charge in 2016.

Motion Technologies designs and manufactures braking technologies, shock absorbers and specialized sealing solutions for the automotive and rail markets.

  • Total revenue increased 8 percent to $228 million, and organic revenue increased 10 percent. Both measures reflect significant share gains and market growth in global automotive brake pads with Original Equipment Manufacturers and strength in seals and shims at Wolverine. Total revenue also includes the impact of unfavorable foreign exchange.
  • GAAP operating income increased 73 percent to $27 million, and adjusted segment operating income increased 6 percent to $28 million. Both increases reflect higher volumes and benefits from productivity actions, which were partially offset by pricing pressures. GAAP results also reflect the impact of higher prior-year acquisition-related costs.

Interconnect Solutions designs and manufactures connectors and interconnects for the transportation and industrial, aerospace and defense, and oil and gas markets.

  • Total and organic revenue decreased 6 percent to $80 million. Both decreases reflect significant declines in global oil and gas market activity and aerospace and defense weakness.
  • GAAP operating income increased 41 percent to $7 million and adjusted segment operating income increased 38 percent to $7 million. Both measures reflect improved operational performance in our North American operating locations and net operating productivity and incremental restructuring savings, which were offset by prior-year post-retirement related benefits.

Control Technologies designs and manufactures products including fuel management, actuation, and noise and energy absorption components for the aerospace and industrial markets, as well as aerospace environmental control system components.

  • Total and organic revenue decreased 2 percent to $70 million, primarily reflecting declines in aerospace and defense that were offset by stable industrial volumes.
  • GAAP operating income increased to $12 million and adjusted segment operating income increased 78 percent to $14 million, reflecting prior-year expenses related to a legal settlement and strategic investments in new programs, as well as net operating productivity and restructuring benefits, partially offset by unfavorable impacts related to volume and mix. GAAP results also reflect lower restructuring costs.

2017 Guidance

The company announced 2017 guidance with total revenue expected to be in the range of down 2 percent to up 2 percent and GAAP EPS expected to be in the range of $1.45 to $1.75.

From a revenue perspective, global friction share gains and positive impacts from the acquisition of Axtone are expected to be offset by lower pump volumes, pricing pressures and the negative impacts of foreign exchange. Adjusted EPS is expected to be in the range of $2.18 to $2.48 per share, which is flat at the midpoint and up 1 percent excluding the impact of foreign exchange compared to 2016.

The company plans to continue to return capital to shareowners through increasing its quarterly dividend by 3 percent to $0.128 per share and targeting up to $65 million of share repurchases, which will be based on various factors.

Investor Call Today

ITT's senior management will host a conference call for investors today at 9 a.m. ET to review performance and answer questions. The briefing can be monitored live via webcast at the following address on the company's Web site: www.itt.com/investors and will be available on the website from two hours after the webcast until Friday, Feb. 28, 2017, at midnight.

For a reconciliation of GAAP to non-GAAP results, please click here.

All references to EPS are defined as diluted earnings per share from continuing operations.

About ITT

ITT is a diversified leading manufacturer of highly engineered critical components and customized technology solutions for the energy, transportation and industrial markets. Building on its heritage of innovation, ITT partners with its customers to deliver enduring solutions to the key industries that underpin our modern way of life. ITT is headquartered in White Plains, N.Y., with employees in more than 35 countries and sales in a total of approximately 125 countries. The company generated 2016 revenues of $2.4 billion. For more information, visit www.itt.com.

Safe Harbor Statement

This release contains "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our business, future financial results and the industry in which we operate, and other legal, regulatory and economic developments. These forward-looking statements include, but are not limited to, future strategic plans and other statements that describe the company's business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance.

We use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "future," "may," "will," "could," "should," "potential," "continue," "guidance" and other similar expressions to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such forward-looking statements.

Where in any forward-looking statement we express an expectation or belief as to future results or events, such expectation or belief is based on current plans and expectations of our management, expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that the expectation or belief will occur or that anticipated results will be achieved or accomplished. More information on factors that could cause actual results or events to differ materially from those anticipated is included in the Risk Factors section of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents filed from time to time with the Securities and Exchange Commission.

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



ITT INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED INCOME STATEMENTS
(In millions, except per share)
(Unaudited)
                     
 
 
Three Months Twelve Months
For the Periods Ended December 31       2016     2015 2016     2015
Revenue $   588.4 $   666.8 $   2,405.4 $   2,485.6
  Costs of revenue           415.0           465.5             1,647.2           1,676.5  
Gross Profit           173.4           201.3             758.2           809.1  
General and administrative expenses 71.9 71.5 274.1 258.3
Sales and marketing expenses 41.3 44.0 170.0 183.2
Research and development expenses 21.9 23.7 80.8 78.9
  Asbestos-related costs (benefit), net           14.7           8.3             (25.6 )         (91.4 )
Operating Income 23.6 53.8 258.9 380.1
  Interest and non-operating (income) expenses, net           (1.0 )         0.3             0.5           (2.2 )
Income from continuing operations before income tax expense 24.6 53.5 258.4 382.3
  Income tax expense           0.7           17.1             76.0           70.1  
Income from continuing operations 23.9 36.4 182.4 312.2
  Income from discontinued operations, net of tax           2.2           0.1             4.2           39.4  
Net income           26.1           36.5             186.6           351.6  
  Less: Income (loss) attributable to noncontrolling interests           0.3           (0.2 )           0.5           (0.2 )
Net Income attributable to ITT Inc.       $   25.8       $   36.7         $   186.1       $   351.8  
Amounts attributable to ITT Inc.:
Income from continuing operations, net of tax $ 23.6 $ 36.6 $ 181.9 $ 312.4
  Income from discontinued operations, net of tax           2.2           0.1             4.2           39.4  
  Net income attributable to ITT Inc.       $   25.8       $   36.7         $   186.1       $   351.8  
 
Earnings per share attributable to ITT Inc.:
Basic earnings per share:
Continuing operations $ 0.27 $ 0.40 $ 2.04 $ 3.48
  Discontinued operations           0.02           0.01             0.05           0.44  
Net income $ 0.29 $ 0.41 $ 2.09 $ 3.92
 
Diluted earnings per share:
Continuing operations $ 0.27 $ 0.40 $ 2.02 $ 3.44
  Discontinued operations           0.02           0.01             0.05           0.44  
Net income $ 0.29 $ 0.41 $ 2.07 $ 3.88
 
Weighted average common shares - basic 88.3 89.5 89.2 89.8
Weighted average common shares - diluted 88.9 90.5 89.9 90.7
 

 
ITT INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
               
 
 
December 31, December 31,
            2016       2015
(Unaudited)
Assets
Current Assets:
Cash and cash equivalents $   460.7 $   415.7
Receivables, net 523.9 584.9
Inventories, net 295.2 292.7
    Other current assets           122.0           204.4
Total current assets           1,401.8           1,497.7
Plant, property and equipment, net 464.5 443.5
Goodwill 774.7 778.3
Other intangible assets, net 160.3 187.2
Asbestos-related assets 314.6 337.5
Deferred income taxes 297.4 326.1
    Other non-current assets           188.4           153.3
Total non-current assets           2,199.9           2,225.9
Total assets       $   3,601.7       $   3,723.6
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term loans and current maturities of long-term debt $ 214.3 $ 245.7
Accounts payable 301.7 314.7
    Accrued liabilities           350.2           392.7
Total current liabilities           866.2           953.1
Asbestos-related liabilities 877.5 954.8
Postretirement benefits 248.6 260.4
    Other non-current liabilities           181.0           189.9
Total non-current liabilities           1,307.1           1,405.1
Total liabilities       $   2,173.3       $   2,358.2
Total ITT Inc. shareholders' equity 1,426.4 1,362.1
    Noncontrolling interests           2.0           3.3
    Total shareholders' equity           1,428.4           1,365.4
Total liabilities and shareholders' equity       $   3,601.7       $   3,723.6
 

 
ITT INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
           
For the Twelve Months Ended December 31       2016       2015
Operating Activities
Net income $   186.6 $   351.6
Less: Income from discontinued operations 4.2 39.4
Less: Income (loss) attributable to noncontrolling interests           0.5             (0.2 )
Income from continuing operations attributable to ITT Inc. 181.9 312.4
Adjustments to income from continuing operations:
Depreciation and amortization 102.0 90.0
Equity-based compensation 12.6 15.7
Asbestos-related (benefit), net (25.6 ) (91.4 )
Asbestos-related payments, net (31.5 ) (24.6 )
Deferred income taxes 20.9 25.6
Contributions to postretirement plans (19.0 ) (18.6 )
Changes in assets and liabilities:
Change in receivables 22.5 (72.0 )
Change in inventories (7.2 ) 31.5
Change in accounts payable 0.7 11.0
Change in accrued expenses (27.4 ) (45.8 )
Change in accrued income taxes (5.7 ) (7.4 )
Other, net           16.5             3.3  
Net Cash - Operating activities           240.7             229.7  
Investing Activities
Capital expenditures (111.4 ) (86.7 )
Acquisitions, net of cash acquired (8.8 ) (351.0 )
Purchases of investments (60.6 ) (140.1 )
Maturities of investments 123.5 78.5
Proceeds from sale of businesses and other assets 3.0 9.5
Proceeds from insurance recovery - 4.2
Other, net           (0.1 )           0.1  
Net Cash - Investing activities           (54.4 )           (485.5 )
Financing Activities
Commercial paper, net borrowings 19.0 94.5
Short-term revolving loans, borrowings 27.7 200.0
Short-term revolving loans, repayments (78.3 ) (50.0 )
Long-term debt, repaid (1.1 ) (3.6 )
Repurchase of common stock (77.8 ) (84.0 )
Proceeds from issuance of common stock 12.3 6.2
Dividends Paid (44.6 ) (42.8 )
Excess tax benefit from equity compensation activity 3.2 3.4
Other, net           (2.3 )           (3.3 )
Net Cash - Financing activities           (141.9 )           120.4  
Exchange rate effects on cash and cash equivalents (11.4 ) (31.6 )
Net Cash - Operating activities of discontinued operations           12.0             (1.3 )
Net change in cash and cash equivalents 45.0 (168.3 )
Cash and cash equivalents - beginning of year           415.7             584.0  
Cash and cash equivalents - end of period       $   460.7         $   415.7  
 

 

Key Performance Indicators and Non-GAAP Measures

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

Organic Revenues and Organic Orders are defined as revenues and orders, excluding the impacts of foreign currency fluctuations, acquisitions and divestitures. Divestitures include sales of portions of our business that did not meet the criteria for presentation as a discontinued operation. The period-over-period change resulting from foreign currency fluctuations is estimated using a fixed exchange rate for both the current and prior periods. Management believes that reporting organic revenue and organic orders provides useful information to investors by helping identify underlying trends in our business and facilitating easier comparisons of our revenue performance with prior and future periods and to our peers.

Adjusted Operating Income, Adjusted Segment Operating Income and Adjusted Segment Operating Margin are defined as total operating income and segment operating income, adjusted to exclude special items that include, but are not limited to, asbestos-related costs, restructuring costs, realignment costs, certain asset impairment charges, certain acquisitions-related expenses, and other unusual or infrequent operating items. Special items represent significant charges or credits that impact the current results, which management views as unrelated to the Company's ongoing operations and performance. Adjusted segment operating margin is defined as adjusted segment operating income divided by total revenue. We believe that adjusted segment operating income is useful to investors and other users of our financial statements in evaluating ongoing operating profitability, as well as in evaluating operating performance in relation to our competitors.

Adjusted Income from Continuing Operations, Adjusted EPS and Adjusted EPS Guidance are defined as income from continuing operations attributable to ITT Inc. and income from continuing operations attributable to ITT Inc. per diluted share, adjusted to exclude special items that include, but are not limited to, asbestos-related costs, restructuring costs, realignment costs, certain asset impairment charges, certain acquisition-related expenses, income tax settlements or adjustments, and other unusual and infrequent non-operating items. Special items represent significant charges or credits, on an after-tax basis, that impact current results, which management views as unrelated to the Company's ongoing operations and performance. We believe that adjusted income from continuing operations is useful to investors and other users of our financial statements in evaluating ongoing operating profitability, as well as in evaluating operating performance in relation to our competitors.

Adjusted Free Cash Flow is defined as net cash provided by operating activities less capital expenditures, adjusted for cash payments for restructuring costs, realignment actions, net asbestos cash flows and other significant items that impact current results which management views as unrelated to the Company's ongoing operations and performance. Due to other financial obligations and commitments, including asbestos, the entire free cash flow may not be available for discretionary purposes. We believe that adjusted free cash flow provides useful information to investors as it provides insight into the primary cash flow metric used by management to monitor and evaluate cash flows generated by our operations.

 
ITT Inc. Non-GAAP Reconciliation
Reported vs. Organic Revenue / Order Growth
Fourth Quarter 2016 & 2015
(In Millions)
                                                     
(As Reported - GAAP) (As Adjusted - Organic)
                       
(A) (B) (C) (D) (E) = B-C-D (F) = E / A
Change % Change

Acquisition /
Divestitures

FX Impact Change % Change
3M 2016 3M 2015 2016 vs. 2015 2016 vs. 2015 3M 2016 3M 2016 Adj. 2016 vs. 2015 Adj. 2016 vs. 2015
 
Revenues
ITT Inc. - Consolidated 588.4 666.8 (78.4 ) (11.8 %) - (9.3 ) (69.1 ) (10.4 %)
 
Industrial Process 212.1 300.1 (88.0 ) (29.3 %) - (4.7 ) (83.3 ) (27.8 %)
Motion Technologies 228.1 211.7 16.4 7.7 % - (4.6 ) 21.0 9.9 %
Interconnect Solutions 79.8 85.1 (5.3 ) (6.2 %) - 0.1 (5.4 ) (6.3 %)
Control Technologies 69.8 71.1 (1.3 ) (1.8 %) - - (1.3 ) (1.8 %)
 
 

Orders

 
Total Segment Orders 572.0 606.3 (34.3 ) (5.7 %) - (8.1 ) (26.2 ) (4.3 %)
 
Industrial Process 191.7 233.7 (42.0 ) (18.0 %) - (3.4 ) (38.6 ) (16.5 %)
Motion Technologies 235.0 218.7 16.3 7.5 % - (4.7 ) 21.0 9.6 %
Interconnect Solutions 86.2 74.7 11.5 15.4 % - 0.1 11.4 15.3 %
Control Technologies 60.6 80.2 (19.6 ) (24.4 %) - - (19.6 ) (24.4 %)
 
 
Note: Excludes intercompany eliminations
Immaterial differences due to rounding
 

 
ITT Inc. Non-GAAP Reconciliation
Reported vs. Organic Revenue / Order Growth
Full Year 2016 & 2015
(In Millions)
                                                   
(As Reported - GAAP) (As Adjusted - Organic)
                       
(A) (B) (C) (D) (E) = B-C-D (F) = E / A
Change % Change

Acquisition /
Divestitures

FX Impact Change % Change
12M 2016 12M 2015 2016 vs. 2015 2016 vs. 2015

 

12M 2016 12M 2016 Adj. 2016 vs. 2015 Adj. 2016 vs. 2015
 

Revenues

ITT Inc. - Consolidated 2,405.4 2,485.6 (80.2 ) (3.2 %) 131.8 (31.5 ) (180.5 ) (7.3 %)
 
Industrial Process 830.1 1,113.8 (283.7 ) (25.5 %) - (28.7 ) (255.0 ) (22.9 %)
Motion Technologies 983.4 767.2 216.2 28.2 % 126.4 (4.7 ) 94.5 12.3 %
Interconnect Solutions 309.6 328.1 (18.5 ) (5.6 %) - 1.5 (20.0 ) (6.1 %)
Control Technologies 287.0 281.2 5.8 2.1 % 5.4 0.5 (0.1 ) 0.0 %
 
 

Orders

 
Total Segment Orders 2,374.8 2,330.6 44.2 1.9 % 135.6 (26.5 ) (64.9 ) (2.8 %)
 
Industrial Process 779.1 936.7 (157.6 ) (16.8 %) - (23.6 ) (134.0 ) (14.3 %)
Motion Technologies 998.4 780.0 218.4 28.0 % 126.8 (4.5 ) 96.1 12.3 %
Interconnect Solutions 309.5 324.3 (14.8 ) (4.6 %) - 1.3 (16.1 ) (5.0 %)
Control Technologies 292.9 294.3 (1.4 ) (0.5 %) 8.8 0.4 (10.6 ) (3.6 %)
 
 
Note: Excludes intercompany eliminations
Immaterial differences due to rounding
 

 
ITT Inc. Non-GAAP Reconciliation
Reported vs Adjusted Segment Operating Income & Operating Margin
Fourth Quarter 2016 & 2015
(In Millions)
                             
3M 2016 3M 2016 3M 2016 3M 2015 3M 2015 3M 2015 % Change % Change
As Reported Special Items As Adjusted As Reported Special Items As Adjusted

As Reported
2016 vs. 2015

As Adjusted
2016 vs. 2015

 
Revenue:
Industrial Process 212.1 212.1 300.1 300.1 (29.3%) (29.3%)
Motion Technologies 228.1 228.1 211.7 211.7 7.7% 7.7%
Interconnect Solutions 79.8 79.8 85.1 85.1 (6.2%) (6.2%)
Control Technologies 69.8 69.8 71.1 71.1 (1.8%) (1.8%)
Intersegment eliminations (1.4) (1.4) (1.2) (1.2)    
Total Revenue 588.4 588.4 666.8 666.8 (11.8%) (11.8%)
 
Operating Margin:
Industrial Process 6.6% 180 BP 8.4% 15.1% (180) BP 13.3% (850) BP (490) BP
Motion Technologies 11.7% 60 BP 12.3% 7.3% 520 BP 12.5% 440 BP (20) BP
Interconnect Solutions 8.1% 20 BP 8.3% 5.4% 20 BP 5.6% 270 BP 270 BP
Control Technologies 17.3% 230 BP 19.6% 2.7% 810 BP 10.8% 1,460 BP 880 BP
Total Operating Segments 10.0% 130 BP 11.3% 10.1% 170 BP 11.8% (10) BP (50) BP
 
 
Income (loss):
Industrial Process 13.9 4.0 17.9 45.3 (5.5) 39.8 (69.3%) (55.0%)
Motion Technologies 26.6 1.5 28.1 15.4 11.0 26.4 72.7% 6.4%
Interconnect Solutions 6.5 0.1 6.6 4.6 0.2 4.8 41.3% 37.5%
Control Technologies 12.1 1.6 13.7 1.9 5.8 7.7 536.8% 77.9%
Total Segment Operating Income 59.1 7.2 66.3 67.2 11.5 78.7 (12.1%) (15.8%)
 
 
Note: Immaterial differences due to rounding.
 
Special items include, but are not limited to, restructuring and realignment costs, certain asset impairment charges, acquisition-related expenses,
and other unusual or infrequent operating items.
 

 
ITT Inc. Non-GAAP Reconciliation
Reported vs Adjusted Segment Operating Income & Operating Margin
Full Year 2016 & 2015
(In Millions)
                             
12M 2016 12M 2016 12M 2016 12M 2015 12M 2015 12M 2015 % Change % Change

As Reported

Special Items

As Adjusted As Reported Special Items As Adjusted

As Reported
2016 vs. 2015

As Adjusted 2016
vs. 2015

 
Revenue:
Industrial Process 830.1 830.1 1,113.8 1,113.8 (25.5%) (25.5%)
Motion Technologies 983.4 983.4 767.2 767.2 28.2% 28.2%
Interconnect Solutions 309.6 309.6 328.1 328.1 (5.6%) (5.6%)
Control Technologies 287.0 287.0 281.2 281.2 2.1% 2.1%
Intersegment eliminations (4.7) (4.7) (4.7) (4.7)    
Total Revenue 2,405.4 2,405.4 2,485.6 2,485.6 (3.2%) (3.2%)
 
Operating Margin:
Industrial Process 4.0% 340 BP 7.4% 12.7% 40 BP 13.1% (870) BP (570) BP
Motion Technologies 17.4% 70 BP 18.1% 16.5% 170 BP 18.2% 90 BP (10) BP
Interconnect Solutions 6.2% - BP 6.2% 3.7% 210 BP 5.8% 250 BP 40 BP
Control Technologies 16.1% 250 BP 18.6% 15.1% 260 BP 17.7% 100 BP 90 BP
Total Operating Segments 11.2% 180 BP 13.0% 13.0% 130 BP 14.3% (180) BP (130) BP
 
 
Income (loss):
Industrial Process 33.5 28.0 61.5 141.2 4.7 145.9 (76.3%) (57.8%)
Motion Technologies 171.4 6.7 178.1 126.4 13.1 139.5 35.6% 27.7%
Interconnect Solutions 19.1 0.1 19.2 12.2 6.7 18.9 56.6% 1.6%
Control Technologies 46.1 7.4 53.5 42.4 7.5 49.9 8.7% 7.2%
Total Segment Operating Income 270.1 42.2 312.3 322.2 32.0 354.2 (16.2%) (11.8%)
 
 
Note: Immaterial differences due to rounding.
 
Special items include, but are not limited to, restructuring and realignment costs, certain asset impairment charges, acquisition-related expenses,
and other unusual or infrequent operating items.
 

 
ITT Inc. Non-GAAP Reconciliation
Reported vs. Adjusted Income from Continuing Operations & Adjusted EPS
Fourth Quarter 2016 & 2015
(In Millions, except per share amounts)
                         
Q4 2016 Non-GAAP Q4 2016 Q4 2015 Non-GAAP Q4 2015 2016 vs. 2015 2016 vs. 2015
As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted As Adjusted As Adjusted
 
 
Segment Operating Income 59.1 7.2 #A 66.3 67.2 11.5 #A 78.7
 
Corporate (Expense) (35.5) 27.2 #B (8.3) (13.4) 6.3 #B (7.1)
           
Operating Income 23.6 34.4 58.0 53.8 17.8 71.6
 
Interest Income (Expense) 1.3 (0.5) #C 0.8 0.2 (1.0) #C (0.8)
Other Income (Expense) (0.3) - (0.3) (0.5) - (0.5)
           
Income from Continuing Operations before Tax 24.6 33.9 58.5 53.5 16.8 70.3
 
Income Tax (Expense) (0.7) (14.9) #D (15.6) (17.1) (0.7) #D (17.8)
           
Income from Continuing Operations 23.9 19.0 42.9 36.4 16.1 52.5
 
Less: Non Controlling Interest 0.3 - 0.3 (0.2) - (0.2)
           
Income from Continuing Operations - ITT Inc. 23.6 19.0 42.6 36.6 16.1 52.7
           
EPS from Continuing Operations 0.27 0.21 0.48 0.40 0.18 0.58 (0.10) (17.2%)
 
 
Note: Amounts may not calculate due to rounding.
 
#A - 2016 includes restructuring and realignment costs ($2.3M); acquisition related costs ($1.5M) and pension settlement costs ($3.4M).

#A - 2015 includes restructuring and realignment costs ($7.0M), and net acquisition related costs ($4.5M).

 
#B - 2016 includes restructuring costs ($1.3M), certain costs associated with sale of excess property ($1.9M), pension settlement costs ($9.3M) and asbestos related expense ($14.7M).
#B - 2015 includes income of ($3.2M) related to an environmental insurance receivable offset by ($1.2M) franchise tax audit and net asbestos related expense of ($8.3M).
Note: ($8.3M) net asbestos related expense includes adjustment to maintain 10 year accrual ($16.0M), and ($7.7M) favorable settlement agreement.
 

#C - Interest income for a change in uncertain tax position for both 2016 & 2015.

 
#D - 2016 includes various tax-related special items, including net tax benefit on valuation allowance changes, tax true-ups, and changes in uncertain tax positions ($0.7M),
net tax benefit of foreign earnings ($1.3M), in addition to the tax benefit of other operating special items ($12.2M).
#D - 2015 includes various tax-related special items including tax expense related to change in valuation allowance ($7.2M) and tax on undistributed foreign earnings ($3.4M), offset
by the tax benefit of other operating special items ($9.9M).
 

 
ITT Inc. Non-GAAP Reconciliation
Reported vs. Adjusted Income from Continuing Operations & Adjusted EPS
Full Year 2016 & 2015
(In Millions, except per share amounts)
                          Percent Change
12M 2016 Non-GAAP 12M 2016 12M 2015 Non-GAAP 12M 2015 2016 vs. 2015 2016 vs. 2015
As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted As Adjusted As Adjusted
 
 
Segment Operating Income 270.1 42.2 #A 312.3 322.2 32.0 #A 354.2
 
Corporate (Expense) (11.2) (11.7) #B (22.9) 57.9 (93.0) #B (35.1)
           
Operating Income 258.9 30.5 289.4 380.1 (61.0) 319.1
 
Interest Income (Expense) 0.8 (3.4) #C (2.6) 2.5 (5.2) #C (2.7)
Other Income (Expense) (1.3) - (1.3) (0.3) (1.6) #D (1.9)
           
Income from Continuing Operations before Tax 258.4 27.1 285.5 382.3 (67.8) 314.5
 
Income Tax (Expense) (76.0) (0.9) #E (76.9) (70.1) (12.9) #E (83.0)
           
Income from Continuing Operations 182.4 26.2 208.6 312.2 (80.7) 231.5
 
Less: Non Controlling Interest 0.5 - 0.5 (0.2) - (0.2)
           
Income from Continuing Operations - ITT Inc. 181.9 26.2 208.1 312.4 (80.7) 231.7
           
EPS from Continuing Operations 2.02 0.30 2.32 3.44 (0.89) 2.55 (0.23) (9.0%)
 
 
Note: Amounts may not calculate due to rounding.
 
#A - 2016 includes restructuring and realignment costs ($28.9M); acquisition related costs ($5.8M); impairment of trade name ($4.1M) and pension settlement costs ($3.4M).
#A - 2015 includes restructuring and realignment costs ($26.2M), net acquistion related costs ($7.8M), and contract loss in Venezuela ($2.0M).
 
#B - 2016 includes restructuring costs ($1.8M), certain costs associated primarily with sale of excess property ($2.8M), pension settlement costs ($9.3M); asbestos related income ($25.6M).
Note: ($25.6M) net asbestos related income includes adjustment to maintain 10 year accrual ($59.0M), remeasurement income ($81.8M) and insurance settlements ($2.8M).
#B - 2015 income includes repositioning and restructuring costs ($0.4M), franchise tax audit ($1.2M) offset by income of ($3.2M) related to an environmental insurance receivable and net asbestos related income of ($91.4M).
Note: ($91.4M) net asbestos related income includes ($100.7M) for favorable defense counsel realignment and ($44.8M) for the annual measurement,
($8.9M) for a favorable settlement agreement and ($63.0M) asbestos related expense.
 

#C - Interest income for a change in uncertain tax position for both 2016 & 2015.

 
#D - 2015 Other income related to recognition of receivable entitled under the Tax Matters Agreement.
 
#E - 2016 includes various tax-related special items including tax expense of foreign earnings ($24.7M), tax benefit for changes in uncertain tax positions and
tax true-ups ($18.5M), in addition to the tax benefit of other operating special items ($6.8M).
#E - 2015 includes various tax-related special items including tax benefit related to change in uncertain tax positions ($15.1M), audit settlements ($7.0M), release of valuation allowance ($7.3M), tax benefit
resulting from decrease in tax liability for undistributed foreign earnings ($7.4M), offset by the tax expense of other operating special items ($24.3M).
 

 

ITT Inc. Non-GAAP Reconciliation

Net Cash - Operating Activities vs. Adjusted Free Cash Flow Conversion

Full Year 2016 & 2015

(In Millions)

           
12M 2016   12M 2015  
 
Net Cash - Operating Activities 240.7 229.7
 
Capital Expenditures 111.4 86.7
   
Free Cash Flow 129.3   143.0  
 
Realignment Related Cash Payments, including Capex 4.5 2.9
Restructuring Cash Payments 30.3 24.4
Asbestos Cash Payments, net 31.5 24.6
Discretionary Pension Contributions, net of tax 4.9   4.7  
Adjusted Free Cash Flow 200.5   199.6  
 
 
Income from Continuing Operations - ITT Inc. 181.9 312.4
 
Special Items 26.2 (80.7 )
 
Income from Continuing Operations - ITT Inc., Excluding    
Special Items 208.1   231.7  
 
 
Adjusted Free Cash Flow Conversion 96.3 % 86.1 %
 

 
ITT Inc. Non-GAAP Reconciliation
GAAP vs. Adjusted EPS Guidance
Full Year 2017
 
2017 Full-Year Guidance
Low High
 
EPS from Continuing Operations - GAAP $ 1.45 $ 1.75
 
Estimated Asbestos Related Costs, Net of Tax   0.41   0.41
 
$ 1.86 $ 2.16
 
Estimated Restructuring, Realignment and Other Costs, Net of Tax 0.25 0.25
 
Acquisition Related Costs, Net of Tax 0.07 0.07
 
   
EPS from Continuing Operations - Adjusted $ 2.18 $ 2.48


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