ITT 8-K

Itt Inc. (ITT)

8-K 2023-11-02 For: 2023-11-01

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Indiana	001-05672	81-1197930
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

	100 Washington Boulevard
	6th Floor
	Stamford, Connecticut 06902
	(Principal Executive Office)
	Telephone Number: (914) 641-2000

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1 per share	ITT	New York Stock Exchange

Exhibit No.		Description
99.1		Press Release issued by ITT Inc., dated November 2, 2023

99.2		Press Release issued by ITT Inc., dated November 1, 2023

104		Cover Page Interactive Data File (embedded within the Inline XBRL Document)

	ITT Inc.
	(Registrant)

November 2, 2023	By:	/s/ Lori B. Marino
		Name:	Lori B. Marino
		Title:	Senior Vice President, General Counsel and Corporate Secretary
			(Authorized Officer of Registrant)

	Q3 2023			Q3 2022			Change
Revenue	$	822.1		$	753.6		9.1	%
Organic Growth							5.4	%
Segment Operating Income	$	157.3		$	132.4		18.8	%
Segment Operating Margin		19.1	%		17.6	%	150	bps
Adjusted Segment Operating Income	$	159.7		$	136.8		16.7	%
Adjusted Segment Operating Margin		19.4	%		18.2	%	120	bps
Earnings Per Share	$	1.34		$	1.23		8.9	%
Adjusted Earnings Per Share	$	1.37		$	1.20		14.2	%
Operating Cash Flow	$	169.8		$	61.0		178.4	%
Free Cash Flow	$	147.6		$	34.8		324.1	%
Note: all results unaudited; dollars in millions except for per share amounts

ITT 8-K

ITT Reports 2023 Third Quarter Earnings Per Share (EPS) of $1.34, Adjusted EPS of $1.37

Contacts

ITT to Acquire Svanehøj, Leading Provider of Customized Critical Liquid and Cryogenic Pumps for Liquefied Gas Applications

Contacts

		Revenue				Operating Income
		Q3 2023		Reported Increase	Organic Growth	Q3 2023		Reported Increase	Adjusted Increase
	Motion Technologies	$	359.5	5.1 %	0.6 %	$	59.4	10.0 %	12.8 %
	Industrial Process		279.8	12.6 %	10.9 %		64.7	34.5 %	24.4 %
	Connect & Control Technologies		184.0	12.7 %	7.7 %		33.2	9.6 %	10.6 %
	Total Segment Results		822.1	9.1 %	5.4 %		157.3	18.8 %	16.7 %
Note: all results unaudited; excludes intercompany eliminations of $1.2; comparisons to Q3 2022

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

	Three Months Ended				Nine Months Ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
Revenue	$	822.1	$	753.6	$	2,453.9	$	2,213.1
Cost of revenue		542.7		520.2		1,632.6		1,539.1
Gross profit		279.4		233.4		821.3		674.0
General and administrative expenses		66.9		47.5		203.6		164.9
Sales and marketing expenses		44.4		39.5		131.2		118.3
Research and development expenses		25.0		24.4		77.1		73.7
Operating income		143.1		122.0		409.4		317.1
Interest and non-operating expense, net		1.4		2.3		7.4		2.6
Income from continuing operations before income tax expense		141.7		119.7		402.0		314.5
Income tax expense		29.9		16.4		80.6		59.9
Income from continuing operations		111.8		103.3		321.4		254.6
Loss from discontinued operations, net of tax benefit of $0.0, $(0.1), $0.0 and $0.3, respectively		-		(0.1)		-		(1.3)
Net income		111.8		103.2		321.4		253.3
Less: Income attributable to noncontrolling interests		1.0		0.8		2.4		1.5
Net income attributable to ITT Inc.	$	110.8	$	102.4	$	319.0	$	251.8

Amounts attributable to ITT Inc.:
Income from continuing operations	$	110.8	$	102.5	$	319.0	$	253.1
Loss from discontinued operations, net of tax		-		(0.1)		-		(1.3)
Net income attributable to ITT Inc.	$	110.8	$	102.4	$	319.0	$	251.8

Earnings (loss) per share attributable to ITT Inc.:
Basic:
Continuing operations	$	1.35	$	1.24	$	3.87	$	3.03
Discontinued operations		-		-		-		(0.02)
Net income	$	1.35	$	1.24	$	3.87	$	3.01
Diluted:
Continuing operations	$	1.34	$	1.23	$	3.86	$	3.02
Discontinued operations		-		-		-		(0.02)
Net income	$	1.34	$	1.23	$	3.86	$	3.00

Weighted average common shares – basic		82.1		82.7		82.4		83.6
Weighted average common shares – diluted		82.5		83.0		82.7		83.9

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
	September 30, 2023		December 31, 2022
As of the Period Ended
Assets
Current assets:
Cash and cash equivalents	$	430.8	$	561.2
Receivables, net		674.0		628.8
Inventories		574.3		533.9
Other current assets		102.4		112.9
Total current assets		1,781.5		1,836.8
Non-current assets:
Plant, property and equipment, net		523.2		526.8
Goodwill		1,001.1		964.8
Other intangible assets, net		123.0		112.8
Other non-current assets		373.5		339.1
Total non-current assets		2,020.8		1,943.5
Total assets	$	3,802.3	$	3,780.3
Liabilities and Shareholders’ Equity
Current liabilities:
Commercial paper and current maturities of long-term debt	$	245.4	$	451.0
Accounts payable		408.1		401.1
Accrued and other current liabilities		390.5		333.4
Total current liabilities		1,044.0		1,185.5
Non-current liabilities:
Postretirement benefits		132.0		137.2
Other non-current liabilities		207.1		200.2
Total non-current liabilities		339.1		337.4
Total liabilities		1,383.1		1,522.9
Shareholders’ equity:
Common stock:
Authorized – 250.0 shares, $1 par value per share
Issued and outstanding – 82.1 shares and 82.7 shares, respectively		82.1		82.7
Retained earnings		2,705.8		2,509.7
Accumulated other comprehensive loss:
Postretirement benefit plans		3.8		3.6
Cumulative translation adjustments		(382.6)		(347.9)
Total accumulated other comprehensive loss		(378.8)		(344.3)
Total ITT Inc. shareholders’ equity		2,409.1		2,248.1
Noncontrolling interests		10.1		9.3
Total shareholders’ equity		2,419.2		2,257.4
Total liabilities and shareholders’ equity	$	3,802.3	$	3,780.3

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)

For the Nine Months Ended	September 30, 2023		October 1, 2022
Operating Activities
Income from continuing operations attributable to ITT Inc.	$	319.0	$	253.1
Adjustments to income from continuing operations:
Depreciation and amortization		82.8		81.5
Equity-based compensation		15.1		13.6
Gain on sale of business		(7.2)		-
Other non-cash charges, net		22.5		20.2
Changes in assets and liabilities:
Change in receivables		(54.7)		(120.8)
Change in inventories		(40.9)		(111.3)
Change in contract assets		0.5		(15.6)
Change in contract liabilities		11.1		24.4
Change in accounts payable		16.5		54.0
Change in accrued expenses		29.4		(30.6)
Change in income taxes		(2.1)		(12.1)
Other, net		(24.4)		(41.2)
Net Cash – Operating Activities		367.6		115.2
Investing Activities
Capital expenditures		(68.5)		(73.7)
Proceeds from sale of business		10.5		-
Acquisitions, net of cash acquired		(79.3)		(146.9)
Payments to acquire interest in unconsolidated subsidiaries		(1.4)		(25.6)
Other, net		(3.3)		1.4
Net Cash – Investing Activities		(142.0)		(244.8)
Financing Activities
Commercial paper, net borrowings		(204.3)		363.1
Share repurchases under repurchase plan		(60.0)		(245.6)
Payments for taxes related to net share settlement of stock incentive plans		(6.7)		(8.5)
Dividends paid		(71.9)		(66.1)
Other, net		(2.3)		0.1
Net Cash – Financing Activities		(345.2)		43.0
Exchange rate effects on cash and cash equivalents		(10.4)		(46.3)
Net cash – operating activities of discontinued operations		(0.2)		(0.1)
Net change in cash and cash equivalents		(130.2)		(133.0)
Cash and cash equivalents – beginning of year (includes restricted cash of $0.7 and $0.8, respectively)		561.9		648.3
Cash and Cash Equivalents – end of year (includes restricted cash of $0.9 and $0.8, respectively)	$	431.7	$	515.3
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest	$	12.3	$	5.7
Income taxes, net of refunds received	$	72.0	$	63.5

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 calculated on a non-GAAP basis. 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 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, respectively, as revenue and orders, 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. We believe that reporting organic revenue and organic orders provides useful information to investors by helping identify underlying trends in our business and facilitating comparisons of our revenue performance with prior and future periods and to our peers.
Adjusted Operating Income and Adjusted Segment Operating Income are defined, respectively, as total operating income and segment operating income, adjusted to exclude special items that include, but are not limited to, restructuring, certain asset impairment charges, certain acquisition-related impacts, and unusual or infrequent operating items. 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 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.
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, restructuring, certain asset impairment charges, certain acquisition-related impacts, income tax settlements or adjustments, and unusual or infrequent items. 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.
Free Cash Flow is defined as net cash provided by operating activities less capital expenditures. Free Cash Flow Margin is defined as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin provides useful information to investors as it provides insight into a 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 / Orders
Third Quarter 2023 & 2022
(In Millions)
(all amounts unaudited)

	(As Reported - GAAP)							(As Adjusted - Organic)

	(A)		(B)		(C)			(D)		(E)		(F) = A-D-E		(G) =C-D-E		(H) = G / B
					$ Change		% Change					Revenue /		$ Change		% Change
					2023 vs. 2022		2023 vs. 2022	Acquisitions		FX Impact		Orders		Adj. 2023 vs. 2022		Adj. 2023 vs. 2022
	Q3 2023		Q3 2022		2023 vs. 2022		2023 vs. 2022	Q3 2023		Q3 2023		Q3 2023		Adj. 2023 vs. 2022		Adj. 2023 vs. 2022

Revenue
ITT Inc.	$	822.1	$	753.6	$	68.5	9.1%	$	6.0	$	21.6	$	794.5	$	40.9	5.4%

Motion Technologies		359.5		342.2		17.3	5.1%		-		15.3		344.2		2.0	0.6%
Industrial Process		279.8		248.5		31.3	12.6%		-		4.1		275.7		27.2	10.9%
Connect & Control Technologies		184.0		163.2		20.8	12.7%		6.0		2.2		175.8		12.6	7.7%



Orders
ITT Inc.	$	824.1	$	780.9	$	43.2	5.5%	$	4.9	$	22.3	$	796.9	$	16.0	2.0%

Motion Technologies		366.6		342.3		24.3	7.1%		-		15.6		351.0		8.7	2.5%
Industrial Process		270.8		271.9		(1.1)	(0.4%)		-		4.7		266.1		(5.8)	(2.1%)
Connect & Control Technologies		187.4		167.4		20.0	11.9%		4.9		2.0		180.5		13.1	7.8%

Note: Excludes intercompany eliminations
Immaterial differences due to rounding

ITT Inc. Non-GAAP Reconciliation
Reported vs Adjusted Segment Operating Income & Segment Operating Margin
Third Quarter 2023 & 2022
(In Millions)
(all amounts unaudited)

	Q3 2023		Q3 2023			Q3 2023		Q3 2022		Q3 2022			Q3 2022		% Change		% Change
	As Reported		Special Items			As Adjusted		As Reported		Special Items			As Adjusted		As Reported 2023 vs. 2022		As Adjusted 2023 vs. 2022

Revenue:
Motion Technologies	$	359.5				$	359.5	$	342.2				$	342.2	5.1%		5.1%
Industrial Process		279.8					279.8		248.5					248.5	12.6%		12.6%
Connect & Control Technologies		184.0					184.0		163.2					163.2	12.7%		12.7%
Intersegment eliminations		(1.2)					(1.2)		(0.3)					(0.3)
Total Revenue	$	822.1				$	822.1	$	753.6				$	753.6	9.1%		9.1%

Operating Margin:
Motion Technologies		16.5%		50	BP		17.0%		15.8%		-	BP		15.8%	70	BP	120	BP
Industrial Process		23.1%		20	BP		23.3%		19.4%		170	BP		21.1%	370	BP	220	BP
Connect & Control Technologies		18.0%		20	BP		18.2%		18.6%		-	BP		18.6%	(60)	BP	(40)	BP
Total Operating Segments		19.1%		30	BP		19.4%		17.6%		60	BP		18.2%	150	BP	120	BP


Operating Income:
Motion Technologies	$	59.4	$	1.6		$	61.0	$	54.0	$	0.1		$	54.1	10.0%		12.8%
Industrial Process		64.7		0.5			65.2		48.1		4.3			52.4	34.5%		24.4%
Connect & Control Technologies		33.2		0.3			33.5		30.3		-			30.3	9.6%		10.6%
Total Segment Operating Income	$	157.3	$	2.4		$	159.7	$	132.4	$	4.4		$	136.8	18.8%		16.7%

Note: Immaterial differences due to rounding.

Special items include, but are not limited to, restructuring costs, acquisition-related expenses, and other unusual or infrequent items.

ITT Inc. Non-GAAP Reconciliation
Reported vs. Adjusted Income from Continuing Operations & Adjusted EPS
Third Quarter 2023 & 2022
(In Millions, except per share amounts)
(all amounts unaudited)

	Q3 2023					Q3 2023		Q3 2022					Q3 2022		$ Change		% Change
	As Reported		Non-GAAP Adjustments			As Adjusted		As Reported		Non-GAAP Adjustments			As Adjusted		As Adjusted 2023 vs. 2022		As Adjusted 2023 vs. 2022

Segment operating income	$	157.3	$	2.4	#A	$	159.7	$	132.4	$	4.4	#A	$	136.8
Corporate and other (income) costs		(14.2)		-			(14.2)		(10.4)		0.6	#B		(9.8)
Operating income		143.1		2.4			145.5		122.0		5.0			127.0		18.5	14.6%
Operating margin		17.4%					17.7%		16.2%					16.9%

Interest income (expense), net		(2.3)		-			(2.3)		(2.4)		-			(2.4)
Other income (expense), net		0.9		-			0.9		0.1		-			0.1
Income from continuing operations before tax		141.7		2.4			144.1		119.7		5.0			124.7

Income tax expense		(29.9)		(0.2)	#C		(30.1)		(16.4)		(7.9)	#C		(24.3)
Income from continuing operations		111.8		2.2			114.0		103.3		(2.9)			100.4

Less: Income attributable to noncontrolling interests		1.0		-			1.0		0.8		-			0.8
Income from continuing operations - ITT Inc.	$	110.8	$	2.2		$	113.0	$	102.5	$	(2.9)		$	99.6

EPS from continuing operations	$	1.34	$	0.03		$	1.37	$	1.23	$	(0.03)		$	1.20	$	0.17	14.2%

Note: Amounts may not calculate due to rounding.
Per share amounts are based on diluted weighted average common shares outstanding.

#A - 2023 includes restructuring costs ($1.9M) and impacts due to the suspension of business in Russia ($0.5M).
#A - 2022 includes restructuring costs ($1.1M), acquisition-related expenses ($3.1M), and other costs ($0.2M).

#B - 2022 includes acquisition-related expenses ($0.5M) and other costs ($0.1M).

#C - 2023 includes the net tax benefit of special items #A ($0.5M) and a net tax expense for other tax-related special charges ($0.3M).
#C - 2022 includes the net tax benefit of special items #A and #B ($1.1M), tax benefit on future distribution of foreign earnings ($7.8M), and other tax-related special items.

ITT Inc. Non-GAAP Reconciliation
Free Cash Flow and Free Cash Flow Margin
Three and Nine Months Ended 2023 & 2022
(In Millions)
(all amounts unaudited)

	Q3 2023		Q3 2022			9M 2023		9M 2022

Net Cash - Operating Activities	$	169.8	$	61.0	$	367.6	$	115.2

Less: Capital expenditures		22.2		26.2		68.5		73.7

Free Cash Flow	$	147.6	$	34.8	$	299.1	$	41.5

Revenue	$	822.1	$	753.6	$	2,453.9	$	2,213.1


Free Cash Flow Margin		18.0%		4.6%		12.2%		1.9%

ITT Inc. Non-GAAP Reconciliation
GAAP vs. Adjusted EPS Guidance
Full Year 2023
(Per share amounts)
(all amounts unaudited)

	2023 Full-Year Guidance
	Low		High

EPS from Continuing Operations - GAAP	$	5.05	$	5.11

Estimated restructuring, net of tax		0.08		0.08

Other special items, net of tax		0.03		0.03

Other tax special Items		(0.01)		(0.01)

EPS from Continuing Operations - Adjusted	$	5.15	$	5.21

Note:		The Company has provided forward-looking non-GAAP financial measures for organic revenue growth and adjusted segment operating margin. It is not possible, without unreasonable efforts, to estimate the impacts of foreign currency fluctuations, acquisitions and certain other special items that may occur in 2023 as these items are inherently uncertain and difficult to predict. As a result, the Company is unable to quantify certain amounts that would be included in a reconciliation of organic revenue growth and adjusted segment operating margin to the most directly comparable GAAP financial measures without unreasonable efforts and accordingly has not provided reconciliations for these forward looking non-GAAP financial measures.