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 ~~October~~April 1, ~~2022~~2023


☐			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.


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

100 Washington Boulevard, 6th Floor, Stamford, CT 06902

(Principal Executive Office)

Telephone Number: (914) 641-2000

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 $1.00 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 ~~November 1, 2022,~~May 2, 2023, there were ~~82.7~~82.4 million shares of Common Stock (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 . Income Taxes	11		Note 5 . Income Taxes	9
		Note 6 . Earnings Per Share Data	12		Note 6 . Earnings Per Share Data	10
		Note 7 . Receivables, Net	12		Note 7 . Receivables and Allowance for Credit Losses	10
		Note 8 . Inventories	13		Note 8 . Inventories	11
		Note 9 . Other Current and Non-Current Assets	13		Note 9 . Other Current and Non-Current Assets	12
		Note 1 0 . Plant, Property and Equipment, Net	14		Note 1 0 . Plant, Property and Equipment, Net	12
		Note 1 1 . Goodwill and Other Intangible Assets, Net	14		Note 1 1 . Goodwill and Other Intangible Assets, Net	13
		Note 1 2 . Accrued Liabilities and Other Non-Current Liabilities	16		Note 1 2 . Accrued and Other Current and Non-Current Liabilities	14
		Note 1 3 . Debt	16		Note 1 3 . Debt	15
		Note 1 4 . Postretirement Benefit Plans	18
		Note 15. Long-Term Incentive Employee Compensation	19		Note 14. Long-Term Incentive Employee Compensation	16
		Note 16. Capital Stock	19		Note 15. Capital Stock	16
		Note 17. Accumulated Other Comprehensive Loss	20		Note 16. Accumulated Other Comprehensive Loss	17
		Note 18. Commitments and Contingencies	20		Note 17. Commitments and Contingencies	17
		Note 19. Derivative Financial Instruments	22		Note 18. Derivative Financial Instruments	18
		Note 20. Acquisitions and Investments	23		Note 19. Acquisitions	19

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	20
		Discussion of Financial Results	27		Discussion of Financial Results	23
		Liquidity	31		Liquidity	26
		Key Performance Indicators and Non-GAAP Measures	34		Key Performance Indicators and Non-GAAP Measures	29
		Recent Accounting Pronouncements	37		Recent Accounting Pronouncements	32
		Critical Accounting Estimates	37		Critical Accounting Estimates	32
3.	3.	Quantitative and Qualitative Disclosures about Market Risk	37	3.	Quantitative and Qualitative Disclosures about Market Risk	32
4.	4.	Controls and Procedures	37	4.	Controls and Procedures	32
PART II – OTHER INFORMATION	PART II – OTHER INFORMATION			PART II – OTHER INFORMATION
1.	1.	Legal Proceedings	38	1.	Legal Proceedings	33
1A.	1A.	Risk Factors	38	1A.	Risk Factors	33
2.	2.	Unregistered Sales of Equity Securities and Use of Proceeds	38	2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
3.	3.	Defaults Upon Senior Securities	38	3.	Defaults Upon Senior Securities	33
4.	4.	Mine Safety Disclosures	39	4.	Mine Safety Disclosures	33
5.	5.	Other Information	39	5.	Other Information	34
6.	6.	Exhibits	40	6.	Exhibits	35
		Signature	41		Signature	36

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.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 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, 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:

•volatility in raw material prices and our suppliers’ ability to meet quality and delivery requirements;

•uncertain global economic and capital markets conditions, which have been influenced by the COVID-19 pandemic, the Russia-Ukraine war, inflation, uncertainty regarding the U.S. federal government’s debt limit, changes in monetary policies, the threat of a possible global economic recession, trade disputes between the U.S. and its trading partners, political and social unrest, instability in the global banking system and the availability and fluctuations in prices of energy and commodities, including steel, oil, copper and tin;

•impacts on our business stemming from the COVID-19 pandemic, including from government-mandated site closures, employee illness and absenteeism, and continued supply chain disruptions and raw material shortages, which ~~has~~have resulted in increased costs and reduced availability of key commodities and other necessary services;

•uncertain global economic and capital markets conditions, which have been influenced by the COVID-19 pandemic, the Russia-Ukraine war, rising inflation, changes in monetary policies, the threat of a possible global economic recession, trade disputes between the U.S. and its trading partners, political and social unrest, and the availability and fluctuations in prices of energy and commodities, including steel, oil, copper, and tin;our inability to hire or retain key personnel;

•~~volatility~~fluctuations in ~~raw material prices~~foreign currency exchange rates and the impact of such fluctuations on our ~~suppliers’ ability to meet quality~~revenues, customer demand for our products and ~~delivery requirements;~~on our hedging arrangements;

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

•fluctuations in ~~foreign currency exchange~~interest rates and the impact of such fluctuations on customer ~~demand for our products and on our hedging arrangements;~~

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

•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;~~

•the risk of cybersecurity breaches or failure of any information systems used by the Company, including any flaws in the implementation of any enterprise resource planning systems;

•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;~~

•markets, including the ~~impacts on our business from Russia’s war with Ukraine,~~imposition of tariffs and ~~the global response to it;~~trade sanctions;

•fluctuations in demand or customers’ levels of capital investment and maintenance expenditures, especially in the energy, chemical and mining ~~markets, or changes in~~markets;

•the impacts on our ~~customers’ anticipated production schedules, especially in~~business from Russia’s war with Ukraine, and the ~~commercial aerospace market;~~global response to it;

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

•risk of liabilities from past divestitures and spin-offs;

•failure of portfolio management strategies, including cost-saving initiatives, to 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, including as a result of the passage of the Inflation Reduction Act of 2022 and other possible tax reform legislation in the U.S. and other 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 other applicable anti-corruption legislation), export controls and trade ~~sanctions, including tariffs;~~sanctions;

•risk of product liability claims and litigation; and

•changes in laws relating to the use and transfer of personal and 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, ~~2021~~2022 (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				Nine Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
For the Three Months Ended										For the Three Months Ended	April 1, 2023		April 2, 2022
Revenue	Revenue	$	753.6	$	689.6	$	2,213.1	$	2,079.6	Revenue	$	797.9	$	726.2
Cost of revenue	Cost of revenue	520.2		467.6		1,539.1		1,404.0		Cost of revenue	536.0		507.8
Gross profit	Gross profit	233.4		222.0		674.0		675.6		Gross profit	261.9		218.4
General and administrative expenses	General and administrative expenses	47.5		60.4		164.9		176.4		General and administrative expenses	68.3		60.4
Sales and marketing expenses	Sales and marketing expenses	39.5		37.4		118.3		112.4		Sales and marketing expenses	42.9		38.4
Research and development expenses	Research and development expenses	24.4		22.5		73.7		70.0		Research and development expenses	26.4		25.0
Asbestos-related benefit, net		—		—		—		(74.4)

Operating income	Operating income	122.0		101.7		317.1		391.2		Operating income	124.3		94.6
Interest and non-operating expense (income), net	Interest and non-operating expense (income), net	2.3		0.5		2.6		(4.3)		Interest and non-operating expense (income), net	3.5		(0.2)
Income from continuing operations before income tax expense		119.7		101.2		314.5		395.5
Income before income tax expense										Income before income tax expense	120.8		94.8
Income tax expense	Income tax expense	16.4		14.1		59.9		182.7		Income tax expense	20.1		19.5
Income from continuing operations		103.3		87.1		254.6		212.8
(Loss) income from discontinued operations, net of tax (expense) benefit of $(0.1), $0.5, $0.3, and $0.5, respectively		(0.1)		0.9		(1.3)		0.9

Net income	Net income	103.2		88.0		253.3		213.7		Net income	100.7		75.3
Less: Income attributable to noncontrolling interests	Less: Income attributable to noncontrolling interests	0.8		0.5		1.5		1.0		Less: Income attributable to noncontrolling interests	0.7		0.5
Net income attributable to ITT Inc.	Net income attributable to ITT Inc.	$	102.4	$	87.5	$	251.8	$	212.7	Net income attributable to ITT Inc.	$	100.0	$	74.8

Amounts attributable to ITT Inc.:
Income from continuing operations		$	102.5	$	86.6	$	253.1	$	211.8
(Loss) income from discontinued operations, net of tax		(0.1)		0.9		(1.3)		0.9
Net income attributable to ITT Inc.		$	102.4	$	87.5	$	251.8	$	212.7

Earnings (loss) per share attributable to ITT Inc.:
Basic:
Continuing operations		$	1.24	$	1.01	$	3.03	$	2.46
Discontinued operations		—		0.01		(0.02)		0.01
Net income		$	1.24	$	1.02	$	3.01	$	2.47
Diluted:
Continuing operations		$	1.23	$	1.00	$	3.02	$	2.45
Discontinued operations		—		0.01		(0.02)		0.01
Net income		$	1.23	$	1.01	$	3.00	$	2.46

Earnings per share attributable to ITT Inc.:										Earnings per share attributable to ITT Inc.:

Basic										Basic	$	1.21	$	0.88

Diluted										Diluted	$	1.20	$	0.88

Weighted average common shares – basic	Weighted average common shares – basic	82.7		85.9		83.6		86.1		Weighted average common shares – basic	82.6		84.8
Weighted average common shares – diluted	Weighted average common shares – diluted	83.0		86.3		83.9		86.6		Weighted average common shares – diluted	83.0		85.2

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

ITT Inc. | Q1 2023 Form 10-Q | 1

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

(IN MILLIONS)

Three Months Ended Nine Months Ended
October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
Net income $ 103.2 $ 88.0 $ 253.3 $ 213.7
Other comprehensive (loss):
Net foreign currency translation adjustment (44.6) (21.5) (127.1) (43.1)
Net change in postretirement benefit plans, net of tax expense of $3.4, $0.8, $3.1 and $0.6, respectively 11.4 3.1 10.9 3.1
Other comprehensive (loss) (33.2) (18.4) (116.2) (40.0)
Comprehensive income 70.0 69.6 137.1 173.7
Less: Comprehensive income attributable to noncontrolling interests 0.8 0.5 1.5 1.0
Comprehensive income attributable to ITT Inc. $ 69.2 $ 69.1 $ 135.6 $ 172.7
Disclosure of reclassification adjustments to postretirement benefit plans:
Reclassification adjustments:
Amortization of prior service benefit, net of tax expense of $(0.3), $(0.2), $(0.9) and $(0.8), respectively $ (1.1) $ (0.7) $ (3.0) $ (2.6)
Amortization of net actuarial loss, net of tax benefit of $0.1, $0.1, $0.4 and $0.5, respectively 0.7 0.9 2.1 2.8
Other adjustments:
Net actuarial gain, net of tax expense of $1.8, $0.9, $1.8 and $0.9, respectively 5.7 2.9 5.7 2.9
Prior service credit, net of tax expense of $1.9, $0.0, $1.9, and $0.0, respectively $ 6.1 $ — $ 6.1 $ —
Net change in postretirement benefit plans, net of tax $ 11.4 $ 3.1 $ 10.9 $ 3.1



For the Three Months Ended	April 1, 2023		April 2, 2022
Net income	$	100.7	$	75.3
Other comprehensive income (loss):
Net foreign currency translation adjustment	6.0		(11.7)
Net change in postretirement benefit plans, net of tax impacts of $1.8 and $0.2, respectively	0.4		(0.3)

Other comprehensive income (loss)	6.4		(12.0)
Comprehensive income	107.1		63.3
Less: Comprehensive income attributable to noncontrolling interests	0.7		0.5
Comprehensive income attributable to ITT Inc.	$	106.4	$	62.8

Disclosure of reclassification adjustments to postretirement benefit plans:
Amortization of prior service benefit, net of tax expense of $0.3 and $0.3, respectively	$	(1.2)	$	(1.0)
Amortization of net actuarial loss, net of tax benefit of $0.0 and $0.1, respectively	0.1		0.7
Other adjustments to postretirement benefit plans:
Deferred tax asset valuation allowance reversal	1.5		—

Net change in postretirement benefit plans, net of tax	$	0.4	$	(0.3)

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

ITT Inc. | Q1 2023 Form 10-Q | 2

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)


As of the Period Ended	As of the Period Ended	October 1, 2022		December 31, 2021		As of the Period Ended	April 1, 2023		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	514.5	$	647.5	Cash and cash equivalents	$	462.0	$	561.2
Receivables, net	Receivables, net	628.9		555.1		Receivables, net	669.9		628.8
Inventories	Inventories	525.1		430.9		Inventories	567.6		533.9
Other current assets	Other current assets	117.1		88.6		Other current assets	98.8		112.9
Total current assets	Total current assets	1,785.6		1,722.1		Total current assets	1,798.3		1,836.8
Non-current assets:	Non-current assets:					Non-current assets:
Plant, property and equipment, net	Plant, property and equipment, net	491.5		509.1		Plant, property and equipment, net	528.0		526.8
Goodwill	Goodwill	947.6		924.3		Goodwill	968.1		964.8
Other intangible assets, net	Other intangible assets, net	116.3		85.7		Other intangible assets, net	107.5		112.8
Other non-current assets	Other non-current assets	349.2		324.2		Other non-current assets	365.9		339.1
Total non-current assets	Total non-current assets	1,904.6		1,843.3		Total non-current assets	1,969.5		1,943.5
Total assets	Total assets	$	3,690.2	$	3,565.4	Total assets	$	3,767.8	$	3,780.3
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	$	541.4	$	197.6	Commercial paper and current maturities of long-term debt	$	384.1	$	451.0
Accounts payable	Accounts payable	390.7		373.4		Accounts payable	397.3		401.1
Accrued liabilities		337.0		357.3
Accrued and other current liabilities						Accrued and other current liabilities	340.0		333.4
Total current liabilities	Total current liabilities	1,269.1		928.3		Total current liabilities	1,121.4		1,185.5
Non-current liabilities:	Non-current liabilities:					Non-current liabilities:
Postretirement benefits	Postretirement benefits	170.2		199.9		Postretirement benefits	137.6		137.2
Other non-current liabilities	Other non-current liabilities	185.4		206.5		Other non-current liabilities	199.6		200.2
Total non-current liabilities	Total non-current liabilities	355.6		406.4		Total non-current liabilities	337.2		337.4
Total liabilities	Total liabilities	1,624.7		1,334.7		Total liabilities	1,458.6		1,522.9
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 – 82.7 shares and 85.5 shares, respectively		82.7		85.5
Issued and outstanding – 82.4 shares and 82.7 shares, respectively						Issued and outstanding – 82.4 shares and 82.7 shares, respectively	82.4		82.7
Retained earnings	Retained earnings	2,411.8		2,461.6		Retained earnings	2,554.7		2,509.7
Total accumulated other comprehensive loss	Total accumulated other comprehensive loss	(437.5)		(321.3)		Total accumulated other comprehensive loss	(337.9)		(344.3)
Total ITT Inc. shareholders’ equity	Total ITT Inc. shareholders’ equity	2,057.0		2,225.8		Total ITT Inc. shareholders’ equity	2,299.2		2,248.1
Noncontrolling interests	Noncontrolling interests	8.5		4.9		Noncontrolling interests	10.0		9.3
Total shareholders’ equity	Total shareholders’ equity	2,065.5		2,230.7		Total shareholders’ equity	2,309.2		2,257.4
Total liabilities and shareholders’ equity	Total liabilities and shareholders’ equity	$	3,690.2	$	3,565.4	Total liabilities and shareholders’ equity	$	3,767.8	$	3,780.3

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

ITT Inc. | Q1 2023 Form 10-Q | 3

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(IN MILLIONS)


For the Nine Months Ended		October 1, 2022		October 2, 2021
For the Three Months Ended						For the Three Months Ended	April 1, 2023		April 2, 2022
Operating Activities	Operating Activities					Operating Activities
Income from continuing operations attributable to ITT Inc.	Income from continuing operations attributable to ITT Inc.	$	253.1	$	211.8	Income from continuing operations attributable to ITT Inc.	$	100.0	$	74.8
Adjustments to income from continuing operations:	Adjustments to income from continuing operations:					Adjustments to income from continuing operations:
Depreciation and amortization	Depreciation and amortization	81.5		85.3		Depreciation and amortization	26.7		27.3
Equity-based compensation	Equity-based compensation	13.6		11.8		Equity-based compensation	4.7		3.7

Asbestos-related benefit, net		—		(74.4)

Other non-cash charges, net	Other non-cash charges, net	20.2		17.9		Other non-cash charges, net	7.5		10.2
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	(120.8)		(63.0)		Change in receivables	(34.7)		(70.7)
Change in inventories	Change in inventories	(111.3)		(62.6)		Change in inventories	(29.1)		(48.4)
Change in contract assets	Change in contract assets	(15.6)		0.6		Change in contract assets	(2.0)		(1.7)
Change in contract liabilities	Change in contract liabilities	24.4		(10.5)		Change in contract liabilities	2.9		11.8
Change in accounts payable	Change in accounts payable	54.0		48.1		Change in accounts payable	1.8		48.6
Change in accrued expenses	Change in accrued expenses	(30.6)		19.4		Change in accrued expenses	(10.8)		(42.5)
Change in income taxes	Change in income taxes	(12.1)		129.4		Change in income taxes	3.7		10.1
Other, net	Other, net	(41.2)		(43.7)		Other, net	(12.6)		(25.9)
Net Cash – Operating Activities	Net Cash – Operating Activities	115.2		(127.9)		Net Cash – Operating Activities	58.1		(2.7)
Investing Activities	Investing Activities					Investing Activities
Capital expenditures	Capital expenditures	(73.7)		(52.6)		Capital expenditures	(28.7)		(30.0)

Acquisitions, net of cash acquired		(146.9)		—
Payments to acquire interest in unconsolidated subsidiaries		(25.6)		—

Other, net	Other, net	1.4		(1.3)		Other, net	0.2		0.6
Net Cash – Investing Activities	Net Cash – Investing Activities	(244.8)		(53.9)		Net Cash – Investing Activities	(28.5)		(29.4)
Financing Activities	Financing Activities					Financing Activities
Commercial paper, net borrowings	Commercial paper, net borrowings	363.1		95.4		Commercial paper, net borrowings	(72.8)		290.7

Long-term debt, repayments		(1.1)		(1.3)

Share repurchases under repurchase plan	Share repurchases under repurchase plan	(245.6)		(100.7)		Share repurchases under repurchase plan	(30.0)		(163.9)
Payments for taxes related to net share settlement of stock incentive plans	Payments for taxes related to net share settlement of stock incentive plans	(8.5)		(11.0)		Payments for taxes related to net share settlement of stock incentive plans	(6.3)		(8.4)
Dividends paid	Dividends paid	(66.1)		(57.0)		Dividends paid	(24.2)		(22.4)
Other, net	Other, net	1.2		0.4		Other, net	0.4		0.6
Net Cash – Financing Activities	Net Cash – Financing Activities	43.0		(74.2)		Net Cash – Financing Activities	(132.9)		96.6
Exchange rate effects on cash and cash equivalents	Exchange rate effects on cash and cash equivalents	(46.3)		(18.5)		Exchange rate effects on cash and cash equivalents	4.3		(1.5)
Net cash – operating activities of discontinued operations	Net cash – operating activities of discontinued operations	(0.1)		0.7		Net cash – operating activities of discontinued operations	(0.1)		(0.1)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	(133.0)		(273.8)		Net change in cash and cash equivalents	(99.1)		62.9
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 $0.8 and $1.0, respectively)		$	515.3	$	586.8
Cash and cash equivalents – beginning of year (includes restricted cash of $0.7 and $0.8, respectively)						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 Period (includes restricted cash of $0.8 and $0.8, respectively)						Cash and Cash Equivalents – End of Period (includes restricted cash of $0.8 and $0.8, respectively)	$	462.8	$	711.2
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	$	5.7	$	3.3	Interest	$	4.2	$	0.5
Income taxes, net of refunds received	Income taxes, net of refunds received	$	63.5	$	50.2	Income taxes, net of refunds received	$	13.2	$	8.5

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

ITT Inc. | Q1 2023 Form 10-Q | 4

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

(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

As of and for the Three Months Ended
October 1, 2022
Common Stock Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shareholders' Equity
(Shares) (Dollars)
July 2, 2022 82.7 $ 82.7 $ 2,329.9 $ (404.3) $ 8.3 $ 2,016.6
Net income — — 102.4 — 0.8 103.2
Shares issued and activity from stock incentive plans — — 6.0 — — 6.0
Shares repurchased under repurchase plan — — (4.4) — — (4.4)
Shares withheld related to net share settlement of stock incentive plans — — (0.2) — — (0.2)
Dividends declared ($0.264 per share) — — (21.9) — — (21.9)
Dividends to noncontrolling interest — — — — (0.5) (0.5)
Total other comprehensive loss, net of tax — — — (33.2) — (33.2)
Other — — — — (0.1) (0.1)
October 1, 2022 82.7 $ 82.7 $ 2,411.8 $ (437.5) $ 8.5 $ 2,065.5
As of and for the Nine Months Ended
October 1, 2022
December 31, 2021 85.5 $ 85.5 $ 2,461.6 $ (321.3) $ 4.9 $ 2,230.7
Net income — — 251.8 — 1.5 253.3
Shares issued and activity from stock incentive plans 0.3 0.3 15.1 — — 15.4
Shares repurchased under repurchase plan (3.0) (3.0) (242.3) — — (245.3)
Shares withheld related to net share settlement of stock incentive plans (0.1) (0.1) (8.6) — — (8.7)
Dividends declared ($0.792 per share) — — (65.8) — — (65.8)
Dividends to noncontrolling interest — — — — (0.5) (0.5)
Purchase of noncontrolling interest — — — — 2.7 2.7
Total other comprehensive loss, net of tax — — — (116.2) — (116.2)
Other — — — — (0.1) (0.1)
October 1, 2022 82.7 $ 82.7 $ 2,411.8 $ (437.5) $ 8.5 $ 2,065.5


As of and for the Three Months Ended April 1, 2023	Common Stock			Retained Earnings		Accumulated Other Comprehensive Loss		Noncontrolling Interest		Total Shareholders' Equity
	(Shares)	(Dollars)














December 31, 2022	82.7	$	82.7	$	2,509.7	$	(344.3)	$	9.3	$	2,257.4
Net income	—	—		100.0		—		0.7		100.7
Shares issued and activity from stock incentive plans	0.2	0.2		4.9		—		—		5.1
Shares repurchased under repurchase plan	(0.4)	(0.4)		(29.6)		—		—		(30.0)
Shares withheld related to net share settlement of stock incentive plans	(0.1)	(0.1)		(6.2)		—		—		(6.3)
Dividends declared ($0.290 per share)	—	—		(24.1)		—		—		(24.1)


Total other comprehensive income, net of tax	—	—		—		6.4		—		6.4



April 1, 2023	82.4	$	82.4	$	2,554.7	$	(337.9)	$	10.0	$	2,309.2

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

~~(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)~~

As of and for the Three Months Ended
October 2, 2021
Common Stock Retained Earnings Accumulated Other Comprehensive Loss Noncontrolling Interest Total Shareholders' Equity
July 3, 2021 86.1 $ 86.1 $ 2,353.1 $ (301.0) $ 2.1 $ 2,140.3
Net income — — 87.5 — 0.5 88.0
Shares issued and activity from stock incentive plans 0.1 0.1 4.9 — — 5.0
Share repurchases under repurchase plan (0.6) (0.6) (49.4) — — (50.0)
Shares withheld related to net share settlement of stock incentive plans — — (0.3) — — (0.3)
Dividends declared ($0.22 per share) — — (19.0) — — (19.0)
Dividends to noncontrolling interest — — — — (0.4) (0.4)
Total other comprehensive income, net of tax — — — (18.4) — (18.4)
Other — — — — (0.2) (0.2)
October 2, 2021 85.6 $ 85.6 $ 2,376.8 $ (319.4) $ 2.0 $ 2,145.0
As of and for the Nine Months Ended
October 2, 2021
December 31, 2020 86.5 $ 86.5 $ 2,319.3 $ (279.4) $ 1.5 $ 2,127.9
Net income — — 212.7 — 1.0 213.7
Shares issued and activity from stock incentive plans 0.4 0.4 12.5 — — 12.9
Share repurchases under repurchase plan (1.2) (1.2) (98.8) — — (100.0)
Shares withheld related to net share settlement of stock incentive plans (0.1) (0.1) (11.6) — — (11.7)
Dividends declared ($0.66 per share) — — (57.3) — — (57.3)
Dividends to noncontrolling interest — — — — (0.4) (0.4)
Total other comprehensive loss, net of tax — — — (40.0) — (40.0)
Other — — — — (0.1) (0.1)
October 2, 2021 85.6 $ 85.6 $ 2,376.8 $ (319.4) $ 2.0 $ 2,145.0


As of and for the Three Months Ended April 2, 2022














December 31, 2021	85.5	$	85.5	$	2,461.6	$	(321.3)	$	4.9	$	2,230.7
Net income	—	—		74.8		—		0.5		75.3
Shares issued and activity from stock incentive plans	0.3	0.3		4.1		—		—		4.4
Share repurchased under repurchase plan	(2.1)	(2.1)		(175.7)		—		—		(177.8)
Shares withheld related to net share settlement of stock incentive plans	(0.1)	(0.1)		(8.3)		—		—		(8.4)
Dividends declared ($0.264 per share)	—	—		(21.9)		—		—		(21.9)


Total other comprehensive loss, net of tax	—	—		—		(12.0)		—		(12.0)

Other	—	—		—		—		(0.1)		(0.1)
April 2, 2022	83.6	$	83.6	$	2,334.6	$	(333.3)	$	5.3	$	2,090.2

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

6ITT Inc. | Q1 2023 Form 10-Q | 5

NOTES TO THE CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

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

NOTE 1

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business

ITT Inc. is a diversified manufacturer of highly engineered critical components and customized technology solutions for the transportation, industrial, and 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.

Business Combination

During the second quarter of 2022, we completed the acquisition of 100% of the privately held stock of Habonim Industrial Valves and Actuators Ltd. (Habonim), a 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 ~~20,~~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 18,~~ ~~Commitments and Contingencies, for further information.~~

Russia-Ukraine War

In February 2022, the United States and other leading nations announced targeted economic sanctions on Russia and certain Russian citizens in response to Russia’s war with Ukraine, which has increased regional instability and global economic and political uncertainty. ~~As described~~

During the three months ended April 1, 2023 and April 2, 2022, we recorded total pre-tax charges of $1.8 and $8.8, respectively, primarily related to accounts receivable and inventory write-downs due to closing our businesses in Russia. For further discussion of risks stemming from the Russia-Ukraine war, see Part I, Item IA, “Risk Factors” in our ~~2021~~2022 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 in 2021.

During the three and nine months ended October 1, 2022, we recorded total charges of $0.3 and $8.2, respectively, primarily related to inventory and accounts receivable write-downs to reflect the increased risks facing some of our customers that serve the regions impacted by the Russia-Ukraine war. If circumstances worsen, we may experience a further reduction in demand for our products. 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, although we cannot provide any assurance of the timeline for or the success of these alternatives. Such alternatives may cause us to incur additional costs, such as fixed asset impairments, severance and other expenses. For additional discussion of the risks related to the Russia-Ukraine war, see Part II, Item 1A, “~~Risk Factors” herein.~~2022.

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, ~~2021,~~2022, presented herein, has been derived from our audited balance sheet included in our Annual Report on Form 10-K (~~2021~~2022 Annual Report) for the year ended December 31, ~~2021,~~2022, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). We consistently applied the accounting policies described in the ~~2021~~2022 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 ~~2021~~2022 Annual Report.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Estimates are revised as additional information becomes available. Estimates and assumptions are used for, but not limited to, 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.

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. ITT’s ~~third~~first quarter for ~~2022~~2023 and ~~2021~~2022 ended on ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, respectively.

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

ITT Inc. | Q1 2023 Form 10-Q | 6

NOTE 2

RECENT ACCOUNTING PRONOUNCEMENTS

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

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): 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 Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), 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 acquisition date. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022. Early adoption is permitted. We have adopted and applied this guidance in 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.

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 three reportable segments are referred to as Motion Technologies, Industrial Process, and Connect & Control Technologies.

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

Industrial Process manufactures engineered fluid process equipment serving a diversified mix of customers in global industries such as chemical, 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 energy markets.

Assets of our reportable segments exclude general corporate assets, which principally consist of cash, investments, deferred taxes, and certain property, plant and equipment. These assets are included within Corporate and Other, which is described further below.

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~~including environmental liabilities, ~~and, 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. In addition, 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, deferred taxes, and certain property, plant and equipment.~~

8ITT Inc. | Q1 2023 Form 10-Q | 7

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

Revenue Operating Income Operating Margin
For the Three Months Ended October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
Motion Technologies $ 342.2 $ 332.3 $ 54.0 $ 53.6 15.8 % 16.1 %
Industrial Process 248.5 210.7 48.1 32.4 19.4 % 15.4 %
Connect & Control Technologies 163.2 147.1 30.3 25.2 18.6 % 17.1 %
Eliminations (0.3) (0.5) — — — —
Total segment results 753.6 689.6 132.4 111.2 17.6 % 16.1 %
Corporate and Other costs — — (10.4) (9.5) — —
Total $ 753.6 $ 689.6 $ 122.0 $ 101.7 16.2 % 14.7 %

Revenue Operating Income Operating Margin
For the Nine Months Ended October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
Motion Technologies $ 1,043.6 $ 1,045.0 $ 160.7 $ 194.3 15.4 % 18.6 %
Industrial Process 690.3 626.9 107.6 94.9 15.6 % 15.1 %
Connect & Control Technologies 481.0 408.9 84.2 54.9 17.5 % 13.4 %
Eliminations (1.8) (1.2) — — — —
Total segment results 2,213.1 2,079.6 352.5 344.1 15.9 % 16.5 %
Asbestos-related benefit, net(a)
— — — 74.4 — —
Other Corporate costs — — (35.4) (27.3) — —
Total Corporate and Other costs — — (35.4) 47.1 — —
Total $ 2,213.1 $ 2,079.6 $ 317.1 $ 391.2 14.3 % 18.8 %

~~(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 18,~~ ~~Commitments and Contingencies, for further information.~~


	Revenue				Operating Income				Operating Margin
For the Three Months Ended	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022
Motion Technologies	$	364.8	$	370.1	$	53.4	$	59.7	14.6	%	16.1	%
Industrial Process	266.5		202.2		55.3		20.4		20.8	%	10.1	%
Connect & Control Technologies	167.6		154.6		29.4		25.7		17.5	%	16.6	%
Eliminations	(1.0)		(0.7)		—		—		—		—
Total segment results	797.9		726.2		138.1		105.8		17.3	%	14.6	%

Corporate and Other	—		—		(13.8)		(11.2)		—		—

Total	$	797.9	$	726.2	$	124.3	$	94.6	15.6	%	13.0	%

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


As of and for the Nine Months Ended		Total Assets				Capital Expenditures				Depreciation & Amortization
		October 1, 2022		December 31, 2021		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
As of and for the Three Months Ended														As of and for the Three Months Ended	Total Assets				Capital Expenditures				Depreciation & Amortization
															April 1, 2023		December 31, 2022		April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022
Motion Technologies	Motion Technologies	$	1,298.9	$	1,272.8	$	52.6	$	42.1	$	45.5	$	47.8	Motion Technologies	$	1,337.2	$	1,311.9	$	20.2	$	22.8	$	15.8	$	15.8
Industrial Process	Industrial Process	1,192.2		1,030.0		7.4		4.1		19.0		16.7		Industrial Process	1,266.9		1,218.6		3.2		2.6		5.6		5.4
Connect & Control Technologies	Connect & Control Technologies	723.4		719.3		9.4		5.3		14.3		16.6		Connect & Control Technologies	764.6		751.6		4.8		2.5		4.7		5.4
Corporate and Other	Corporate and Other	475.7		543.3		4.3		1.1		2.7		4.2		Corporate and Other	399.1		498.2		0.5		2.1		0.6		0.7
Total	Total	$	3,690.2	$	3,565.4	$	73.7	$	52.6	$	81.5	$	85.3	Total	$	3,767.8	$	3,780.3	$	28.7	$	30.0	$	26.7	$	27.3

NOTE 4

REVENUE

The following tables present our revenue disaggregated by end market.


For the Three Months Ended October 1, 2022		Motion Technologies			Industrial Process			Connect & Control Technologies			Eliminations			Total
For the Three Months Ended April 1, 2023																	For the Three Months Ended April 1, 2023	Motion Technologies			Industrial Process			Connect & Control Technologies			Eliminations			Total

Auto and rail	Auto and rail		$	333.1		$	—		$	—		$	—		$	333.1	Auto and rail		$	356.0		$	—		$	—		$	—		$	356.0
Chemical and industrial pumps	Chemical and industrial pumps		—			187.9			—			—			187.9		Chemical and industrial pumps		—			218.0			—			—			218.0
Aerospace and defense																	Aerospace and defense		1.9			—			86.9			—			88.8
General industrial	General industrial		7.2			—			71.4			(0.3)			78.3		General industrial		6.9			—			70.5			(1.0)			76.4
Aerospace and defense			1.9			—			80.5			—			82.4
Energy	Energy		—			60.6			11.3			—			71.9		Energy		—			48.5			10.2			—			58.7
Total	Total		$	342.2		$	248.5		$	163.2		$	(0.3)		$	753.6	Total		$	364.8		$	266.5		$	167.6		$	(1.0)		$	797.9

For the Nine Months Ended October 1, 2022
Auto and rail			$	1,013.8		$	—		$	—		$	—		$	1,013.8
Chemical and industrial pumps			—			551.7			—			—			551.7
General industrial			23.9			—			215.6			(1.8)			237.7
Aerospace and defense			5.9			—			233.7			—			239.6
Energy			—			138.6			31.7			—			170.3
Total			$	1,043.6		$	690.3		$	481.0		$	(1.8)		$	2,213.1


For the Three Months Ended October 2, 2021

For the Three Months Ended April 2, 2022												For the Three Months Ended April 2, 2022
Auto and rail	Auto and rail	$	323.7	$	—	$	—	$	(0.1)	$	323.6	Auto and rail	$	360.4	$	—	$	—	$	—	$	360.4
Chemical and industrial pumps	Chemical and industrial pumps	—		164.6		—		—		164.6		Chemical and industrial pumps	—		167.2		—		—		167.2
Aerospace and defense												Aerospace and defense	1.5		—		74.9		—		76.4
General industrial	General industrial	7.1		—		69.8		(0.4)		76.5		General industrial	8.2		—		69.7		(0.7)		77.2
Aerospace and defense		1.5		—		67.3		—		68.8
Energy	Energy	—		46.1		10.0		—		56.1		Energy	—		35.0		10.0		—		45.0
Total	Total	$	332.3	$	210.7	$	147.1	$	(0.5)	$	689.6	Total	$	370.1	$	202.2	$	154.6	$	(0.7)	$	726.2

For the Nine Months Ended October 2, 2021
Auto and rail		$	1,021.9	$	—	$	—	$	(0.1)	$	1,021.8
Chemical and industrial pumps		—		492.0		—		—		492.0
General industrial		17.4		—		190.1		(1.1)		206.4
Aerospace and defense		5.7		—		191.4		—		197.1
Energy		—		134.9		27.4		—		162.3
Total		$	1,045.0	$	626.9	$	408.9	$	(1.2)	$	2,079.6

ITT Inc. | Q1 2023 Form 10-Q | 8

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 Sheets. 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 Sheets.

The following table represents our net contract assets and liabilities.


		October 1, 2022			December 31, 2021
As of the Period Ended								As of the Period Ended	April 1, 2023			December 31, 2022
Current contract assets, net	Current contract assets, net		$	33.1		$	20.6	Current contract assets, net		$	27.7		$	26.3
Non-current contract assets, net	Non-current contract assets, net		0.3			0.3		Non-current contract assets, net		1.9			1.2
Current contract liabilities	Current contract liabilities		(67.9)			(46.6)		Current contract liabilities		(73.7)			(70.2)
Non-current contract liabilities	Non-current contract liabilities		(4.4)			(4.4)		Non-current contract liabilities		(4.4)			(4.4)
Net contract liabilities	Net contract liabilities		$	(38.9)		$	(30.1)	Net contract liabilities		$	(48.5)		$	(47.1)

During the three ~~and nine~~ months ended ~~October~~April 1, ~~2022,~~2023, we recognized revenue of ~~$9.0 and $29.3, respectively,~~$20.9, related to contract liabilities as of December 31, ~~2021.~~2022. The aggregate amount of the transaction price allocated to unsatisfied or partially satisfied performance obligations as of ~~October~~April 1, ~~2022~~2023 was ~~$1,066.8.~~$1,140.7. Of this amount, we expect to recognize approximately ~~$480~~$810 to ~~$500~~$830 of revenue during the remainder of ~~2022.~~2023.

NOTE 5

INCOME TAXES

The following table summarizes our income tax expense and effective tax rate.


		Three Months Ended						Nine Months Ended
		October 1, 2022			October 2, 2021			October 1, 2022			October 2, 2021
For the Three Months Ended														For the Three Months Ended	April 1, 2023			April 2, 2022
Income tax expense	Income tax expense	$	16.4		$	14.1		$	59.9		$	182.7		Income tax expense	$	20.1		$	19.5
Effective tax rate	Effective tax rate	13.7		%	13.9		%	19.0		%	46.2		%	Effective tax rate	16.6		%	20.6		%

The effective tax rate (ETR) for the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 was lower than the prior year due to ~~the tax impact of the 2021 asbestos divestiture of $116.9 (see Note 18,~~ ~~Commitments and Contingencies, for further information). Additionally, the 2022 ETR included higher permanent~~ tax benefits ~~primarily related to research and development incentives~~of $16.3 in ~~both foreign and U.S. jurisdictions. The ETR during the three and nine months ended October 1, 2022 included a $1.7 benefit~~2023 from ~~the reversal of a~~ valuation allowance reversals on deferred tax assets in Germany due to a ~~net operating loss carryforward~~reorganization. ITT also recognized tax benefits of $4.9 as a result of filing an amended 2017 consolidated federal tax return. These tax benefits were partially offset by an expense of $14.1 relating to a tax audit in ~~Italy.~~Italy covering tax years 2016-2022.

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 China, Czechia, Germany, India, Italy, and the U.S. 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 $2$0.6 due to changes in audit status, expiration of statutes of limitations and other events.

11ITT Inc. | Q1 2023 Form 10-Q | 9

NOTE 6

EARNINGS PER SHARE DATA

The following table provides a reconciliation of the data used in the calculation of basic and diluted earnings per share from continuing operations attributable to ITT.


		Three Months Ended		Nine Months Ended
		October 1, 2022	October 2, 2021	October 1, 2022	October 2, 2021
For the Three Months Ended						For the Three Months Ended	April 1, 2023	April 2, 2022
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	82.7	85.9	83.6	86.1	Basic weighted average common shares outstanding	82.6	84.8
Add: Dilutive impact of outstanding equity awards	Add: Dilutive impact of outstanding equity awards	0.3	0.4	0.3	0.5	Add: Dilutive impact of outstanding equity awards	0.4	0.4
Diluted weighted average common shares outstanding	Diluted weighted average common shares outstanding	83.0	86.3	83.9	86.6	Diluted weighted average common shares outstanding	83.0	85.2

There were no0.2 and zero anti-dilutive shares related to equity stock unit awards excluded from the computation of diluted earnings per share for ~~any of~~ the ~~periods presented.~~three months ended April 1, 2023 and April 2, 2022, respectively.

NOTE 7

RECEIVABLES ~~NET~~AND ALLOWANCE FOR CREDIT LOSSES

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


As of the Period Ended	As of the Period Ended	October 1, 2022			December 31, 2021			As of the Period Ended	April 1, 2023			December 31, 2022
Trade accounts receivable	Trade accounts receivable		$	608.3		$	530.4	Trade accounts receivable		$	649.3		$	614.0
Notes receivable	Notes receivable		14.4			19.2		Notes receivable		18.8			8.2
Other	Other		19.1			17.5		Other		14.4			18.3
Receivables, gross	Receivables, gross		641.8			567.1		Receivables, gross		682.5			640.5
Less: Allowance for credit losses - receivables~~(a)~~	Less: Allowance for credit losses - receivables~~(a)~~		(12.9)			(12.0)		Less: Allowance for credit losses - receivables~~(a)~~		(12.6)			(11.7)
Receivables, net	Receivables, net		$	628.9		$	555.1	Receivables, net		$	669.9		$	628.8

The following table displays our allowance for credit losses for receivables and for contract ~~assets.~~assets, which are recorded within Receivables, net and Other current or non-current assets, respectively, within our Consolidated Condensed Balance Sheets.


As of the Period Ended	As of the Period Ended	October 1, 2022			December 31, 2021			As of the Period Ended	April 1, 2023			December 31, 2022
Allowance for credit losses - receivables~~(a)~~	Allowance for credit losses - receivables~~(a)~~		$	12.9		$	12.0	Allowance for credit losses - receivables~~(a)~~		$	12.6		$	11.7
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		$	13.4		$	12.5	Total allowance for credit losses		$	13.1		$	12.2

ITT Inc. | Q1 2023 Form 10-Q | 10

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


		October 1, 2022			October 2, 2021				April 1, 2023			April 2, 2022
Total allowance for credit losses - January 1	Total allowance for credit losses - January 1		$	12.5		$	15.6	Total allowance for credit losses - January 1		$	12.2		$	12.5

Charges (recoveries) to income(a)			2.5			(2.7)
Charges to income(a)								Charges to income(a)		1.2			3.8
Write-offs	Write-offs		(1.1)			(0.8)		Write-offs		(0.3)			(0.3)
Foreign currency and other	Foreign currency and other		(0.5)			(0.1)		Foreign currency and other		—			(0.1)
Total allowance for credit losses - ending balance	Total allowance for credit losses - ending balance		$	13.4		$	12.0	Total allowance for credit losses - ending balance		$	13.1		$	15.9

(a) ~~During the nine months ended October 1, 2022, we~~We recognized bad debt expense of ~~$1.2~~$0.9 and $3.0 relating to impacts stemming from the Russia-Ukraine ~~war.~~war during the three months ended April 1, 2023 and April 2, 2022, respectively. See Note 1, Description of Business and Basis of Presentation, for further information.

NOTE 8

INVENTORIES

The following table summarizes our inventories.

As of the Period Ended October 1,
2022 December 31,
2021
Finished goods $ 83.6 $ 73.0
Work in process 114.0 92.3
Raw materials(a)
327.5 265.6
Inventories(b)
$ 525.1 $ 430.9

(a) The increase in raw materials inventory from December 31, 2021 to October 1, 2022 was due to investments made to support sales growth and to mitigate continued supply chain disruptions, as well as from cost inflation.


As of the Period Ended	April 1, 2023			December 31, 2022
Raw materials		$	359.5		$	342.7
Work in process		109.9			104.6
Finished goods		98.2			86.6
Inventories(a)		$	567.6		$	533.9

~~(b) During the nine months ended October 1, 2022, we~~(a) We recorded inventory write-downs of ~~$5.6~~$0.2 and $5.4 related to inventories held by entities impacted by the Russia-Ukraine ~~war.~~war during the three months ended April 1, 2023 and April 2, 2022, respectively. See Note 1, Description of Business and Basis of Presentation, for further information.

Government Assistance (ASU 2021-10)

Since the start of the COVID-19 pandemic, energy prices have been increasing around the world, particularly in Europe. These increases have prompted governments to put in place measures to shield businesses and consumers from the direct impact of rising prices. These measures include granting subsidies to help offset the high energy prices.

ASU 2021-10 requires entities to provide information about the nature of transactions, related policies and effect of government grants on an entity’s financial statements. In particular, to qualify for an energy subsidy in Italy, a company must apply for and receive a certificate attesting that the company is an "energy and gas consuming company" (high energy consumption connected to the production cycle). The amount of subsidies granted is calculated based on a percentage of actual consumption, ranging from 25% to 45%. One of our Italian subsidiaries within our MT segment obtained this certificate and was granted energy subsidies from the Italian government beginning in April 2022. Based on the energy consumption, we recognized a benefit of $3.9 for the three months ended April 1, 2023. These energy subsidies are recorded within Costs of revenue in our Consolidated Statements of Operations. There was no other material government assistance received by the Company, or any of our subsidiaries, during the year.

ITT Inc. | Q1 2023 Form 10-Q | 11

NOTE 9

OTHER CURRENT AND NON-CURRENT ASSETS

The following table summarizes our other current and non-current assets.

As of the Period Ended October 1,
2022 December 31,
2021
Advance payments and other prepaid expenses $ 53.8 $ 44.1
Current contract assets, net 33.1 20.6
Prepaid income taxes 12.5 10.4
Other 17.7 13.5
Other current assets $ 117.1 $ 88.6
Other employee benefit-related assets $ 117.7 $ 118.4
Deferred income taxes 71.4 63.4
Operating lease right-of-use assets 67.4 78.0
Equity-method and other investments(a)
42.7 14.5
Capitalized software costs 12.9 16.7
Environmental-related assets 10.2 8.5
Other 26.9 24.7
Other non-current assets $ 349.2 $ 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 20,~~ ~~Acquisitions and Investments, for further information.~~


As of the Period Ended	April 1, 2023			December 31, 2022

Advance payments and other prepaid expenses		$	49.5		$	45.0
Current contract assets, net		27.7			26.3
Prepaid income taxes		7.0			25.1

Other		14.6			16.5
Other current assets		$	98.8		$	112.9
Other employee benefit-related assets		$	121.3		$	119.8
Deferred income taxes		80.9			54.7
Operating lease right-of-use assets		75.2			73.8
Equity-method and other investments		43.6			42.9
Capitalized software costs		11.6			12.4
Environmental-related assets		9.3			9.6
Other		24.0			25.9
Other non-current assets		$	365.9		$	339.1

NOTE 10

PLANT, PROPERTY AND EQUIPMENT, NET

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


		Useful life (in years)	October 1, 2022			December 31, 2021				Useful life (in years)	April 1, 2023			December 31, 2022
Machinery and equipment	Machinery and equipment	2 - 10		$	1,137.8		$	1,202.0	Machinery and equipment	2 - 10		$	1,250.2		$	1,208.3
Buildings and improvements	Buildings and improvements	5 - 40		266.1			265.5		Buildings and improvements	5 - 40		282.5			277.6
Furniture, fixtures and office equipment	Furniture, fixtures and office equipment	3 - 7		77.0			78.3		Furniture, fixtures and office equipment	3 - 7		82.0			80.5
Construction work in progress	Construction work in progress			83.7			62.8		Construction work in progress			70.4			86.9
Land and improvements	Land and improvements			29.0			32.5		Land and improvements			29.3			29.3
Other	Other			3.2			4.3		Other			3.0			3.3
Plant, property and equipment, gross	Plant, property and equipment, gross			1,596.8			1,645.4		Plant, property and equipment, gross			1,717.4			1,685.9
Less: Accumulated depreciation	Less: Accumulated depreciation			(1,105.3)			(1,136.3)		Less: Accumulated depreciation			(1,189.4)			(1,159.1)
Plant, property and equipment, net	Plant, property and equipment, net			$	491.5		$	509.1	Plant, property and equipment, net			$	528.0		$	526.8

Depreciation expense of ~~$19.4~~$20.7 and ~~$61.4, and $21.3 and $64.2~~$21.0 was recognized in the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, respectively.

ITT Inc. | Q1 2023 Form 10-Q | 12

NOTE 11

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

The following table provides a rollforward of the carrying amount of goodwill by segment.

Motion
Technologies Industrial
Process Connect & Control
Technologies Total
Goodwill - December 31, 2021 $ 292.3 $ 352.4 $ 279.6 $ 924.3
Acquired — 67.9 0.3 68.2
Foreign exchange translation (10.8) (30.8) (3.3) (44.9)
Goodwill - October 1, 2022 $ 281.5 $ 389.5 $ 276.6 $ 947.6


	Motion Technologies			Industrial Process			Connect & Control Technologies			Total
Goodwill - December 31, 2022		$	287.7		$	398.7		$	278.4	$	964.8



Foreign exchange translation		1.3			1.7			0.3		3.3
Goodwill - April 1, 2023		$	289.0		$	400.4		$	278.7	$	968.1

Goodwill acquired is related to our acquisitions of Habonim and a product line from Clippard Instrument Laboratory, Inc. (Clippard) in the second quarter of 2022, and represents the preliminary calculation of the excess purchase price over the net assets acquired. The valuations of Habonim and Clippard are pending completion. Upon completion, goodwill acquired will be adjusted based on the final fair values of the net assets acquired. Refer to Note 20, ~~Acquisitions and Investments, for further information.~~

Other Intangible Assets, Net

The following table summarizes our other intangible assets, net of accumulated amortization.


		October 1, 2022									December 31, 2021										April 1, 2023									December 31, 2022
		Gross Carrying Amount			Accumulated Amortization			Net Intangibles			Gross Carrying Amount			Accumulated Amortization			Net Intangibles				Gross Carrying Amount			Accumulated Amortization			Net Intangibles			Gross Carrying Amount			Accumulated Amortization			Net Intangibles
Customer relationships	Customer relationships		$	189.8		$	(122.9)		$	66.9		$	162.1		$	(113.7)		$	48.4	Customer relationships		$	191.2		$	(130.7)		$	60.5		$	191.5		$	(127.1)		$	64.4
Proprietary technology	Proprietary technology		58.4			(29.3)			29.1			46.1			(26.9)			19.2		Proprietary technology		59.2			(32.1)			27.1			59.2			(30.8)			28.4
Patents and other	Patents and other		17.2			(15.5)			1.7			15.7			(14.0)			1.7		Patents and other		17.6			(16.7)			0.9			17.6			(16.6)			1.0
Finite-lived intangible total	Finite-lived intangible total		265.4			(167.7)			97.7			223.9			(154.6)			69.3		Finite-lived intangible total		268.0			(179.5)			88.5			268.3			(174.5)			93.8
Indefinite-lived intangibles	Indefinite-lived intangibles		18.6			—			18.6			16.4			—			16.4		Indefinite-lived intangibles		19.0			—			19.0			19.0			—			19.0
Other intangible assets	Other intangible assets		$	284.0		$	(167.7)		$	116.3		$	240.3		$	(154.6)		$	85.7	Other intangible assets		$	287.0		$	(179.5)		$	107.5		$	287.3		$	(174.5)		$	112.8

Amortization expense related to finite-lived intangible assets was ~~$5.3 and $15.3, and~~ $4.7 and ~~$14.7~~$4.2 for the three ~~and nine~~ months ended ~~October~~April 1, 2023 and April 2, 2022, ~~and October 2, 2021,~~ respectively.

The preliminary fair values of intangible assets acquired in connection with the purchase of Habonim mainly include $33.0 of customer relationships with a useful life of 15 years, $8.8 of developed technology with a useful life of 20 years, $2.3 of customer backlog with a useful life of 9 months, and $3.1 for a trade name with an indefinite life. Refer to Note 20, ~~Acquisitions and Investments, for further information.~~

Separately, we acquired proprietary technology and customer relationships with preliminary fair values of $5.5 and $0.5, respectively, both with a useful life of 10 years, in connection with the purchase of the Clippard product line in the second quarter of 2022. Refer to Note 20, ~~Acquisitions and Investments, for further information.~~

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

Remaining of 2022 6.7
2023 19.4
2024 14.0
2025 13.2
2026 9.4
2027 8.1
Thereafter 26.9

15ITT Inc. | Q1 2023 Form 10-Q | 13

NOTE 12

ACCRUED ~~LIABILITIES~~ AND OTHER CURRENT AND NON-CURRENT LIABILITIES

The following table summarizes our accrued liabilities and other non-current liabilities.


		October 1, 2022			December 31, 2021
As of the Period Ended								As of the Period Ended	April 1, 2023			December 31, 2022
Compensation and other employee-related benefits	Compensation and other employee-related benefits		$	129.3		$	155.2	Compensation and other employee-related benefits		$	118.6		$	134.4
Contract liabilities and other customer-related liabilities	Contract liabilities and other customer-related liabilities		89.3			69.1		Contract liabilities and other customer-related liabilities		99.1			92.2
Accrued income taxes and other tax-related liabilities	Accrued income taxes and other tax-related liabilities		35.3			33.6		Accrued income taxes and other tax-related liabilities		37.1			27.1
Operating lease liabilities	Operating lease liabilities		17.3			20.1		Operating lease liabilities		19.5			19.0
Accrued warranty costs	Accrued warranty costs		14.2			17.7		Accrued warranty costs		13.5			14.3
Environmental liabilities and other legal matters	Environmental liabilities and other legal matters		8.9			13.5		Environmental liabilities and other legal matters		5.5			5.7
Accrued restructuring costs	Accrued restructuring costs		4.8			11.0		Accrued restructuring costs		3.2			3.9
Other	Other		37.9			37.1		Other		43.5			36.8
Accrued liabilities			$	337.0		$	357.3
Accrued and other current liabilities								Accrued and other current liabilities		$	340.0		$	333.4
Operating lease liabilities	Operating lease liabilities		$	54.4		$	64.0	Operating lease liabilities		$	60.0		$	58.9
Environmental liabilities	Environmental liabilities		51.8			50.1		Environmental liabilities		51.6			53.1
Deferred income taxes and other tax-related liabilities								Deferred income taxes and other tax-related liabilities		32.5			31.1
Compensation and other employee-related benefits	Compensation and other employee-related benefits		24.2			29.2		Compensation and other employee-related benefits		25.1			25.0
Deferred income taxes and other tax-related liabilities			21.2			29.0
Non-current maturities of long-term debt	Non-current maturities of long-term debt		8.2			9.9		Non-current maturities of long-term debt		7.9			7.7
Other	Other		25.6			24.3		Other		22.5			24.4
Other non-current liabilities	Other non-current liabilities		$	185.4		$	206.5	Other non-current liabilities		$	199.6		$	200.2

ITT Inc. | Q1 2023 Form 10-Q | 14

NOTE 13

DEBT

The following table summarizes our outstanding debt obligations.


		October 1, 2022			December 31, 2021
As of the Period Ended								As of the Period Ended	April 1, 2023			December 31, 2022
Commercial paper~~(a)~~	Commercial paper~~(a)~~		$	536.2		$	195.4	Commercial paper~~(a)~~		$	381.4		$	448.3
Current maturities of long-term debt and finance leases								Current maturities of long-term debt and finance leases		2.2			2.2
Other short-term notes payable	Other short-term notes payable		3.2			—		Other short-term notes payable		0.5			0.5
Current maturities of long-term debt and finance leases			2.0			2.2
Commercial paper and current maturities of long-term debt	Commercial paper and current maturities of long-term debt		541.4			197.6		Commercial paper and current maturities of long-term debt		384.1			451.0
Non-current maturities of long-term debt(a)	Non-current maturities of long-term debt(a)		8.2			9.9		Non-current maturities of long-term debt(a)		7.9			7.7
Total debt and finance leases	Total debt and finance leases		$	549.6		$	207.5	Total debt and finance leases		$	392.0		$	458.7

(a) ~~The increase in commercial paper outstanding from December 31, 2021 to October 1, 2022 was~~Our long-term debt is primarily related to ~~funding our share repurchase activity and our acquisition of Habonim. See Note 20,~~ ~~Acquisitions and Investments, for further information.~~

outstanding Italian government loans.

Commercial Paper

The following table presents our outstanding commercial paper borrowings and associated weighted average interest rates as of ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021.~~2022.


		October 1, 2022				December 31, 2021
As of the Period Ended										As of the Period Ended	April 1, 2023				December 31, 2022
Commercial Paper Outstanding - U.S. Program	Commercial Paper Outstanding - U.S. Program		$	399.5			$	150.0		Commercial Paper Outstanding - U.S. Program		$	30.0			$	299.2
Commercial Paper Outstanding - Euro Program	Commercial Paper Outstanding - Euro Program		136.7				45.4			Commercial Paper Outstanding - Euro Program		351.4				149.1
Total Commercial Paper Outstanding	Total Commercial Paper Outstanding		$	536.2			195.4			Total Commercial Paper Outstanding		$	381.4			448.3
Weighted Average Interest Rate - U.S. Program	Weighted Average Interest Rate - U.S. Program		3.08		%		0.28		%	Weighted Average Interest Rate - U.S. Program		5.13		%		4.92		%
Weighted Average Interest Rate - Euro Program	Weighted Average Interest Rate - Euro Program		0.98		%		(0.47)		%	Weighted Average Interest Rate - Euro Program		3.05		%		2.31		%

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

Short-term Loans

On August 5, 2021, we entered into a 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). Upon its effectiveness, this agreement replaced our existing $500 revolving credit facility due November 2022 (the 2014 Revolving Credit 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 ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, 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.

ITT Inc. | Q1 2023 Form 10-Q | 15

As of ~~October~~April 1, ~~2022,~~2023, all financial covenants (e.g., leverage ratio) associated with the 2021 Revolving Credit Agreement were within the prescribed thresholds.

NOTE 14

~~POSTRETIREMENT BENEFIT PLANS~~

~~The following tables summarize the components of net periodic benefit cost for pension plans and other employee-related benefit plans.~~

October 1, 2022 October 2, 2021
For the Three Months Ended Pension Other
Benefits Total Pension Other
Benefits Total
Service cost $ 0.4 $ 0.1 $ 0.5 $ 0.4 $ 0.2 $ 0.6
Interest cost 0.3 0.6 0.9 0.3 0.4 0.7
Amortization of prior service benefit — (1.5) (1.5) — (0.9) (0.9)
Amortization of net actuarial loss 0.4 0.4 0.8 0.5 0.5 1.0
Total net periodic benefit cost (benefit) $ 1.1 $ (0.4) $ 0.7 $ 1.2 $ 0.2 $ 1.4

October 1, 2022 October 2, 2021
For the Nine Months Ended Pension Other
Benefits Total Pension Other
Benefits Total
Service cost $ 1.0 $ 0.5 $ 1.5 $ 1.1 $ 0.6 $ 1.7
Interest cost 1.0 1.6 2.6 0.8 1.3 2.1
Amortization of prior service benefit — (4.0) (4.0) — (3.4) (3.4)
Amortization of net actuarial loss 1.1 1.4 2.5 1.5 1.8 3.3
Total net periodic benefit cost (benefit) $ 3.1 $ (0.5) $ 2.6 $ 3.4 $ 0.3 $ 3.7

We made contributions to our global postretirement plans of $8.7 and $8.1 during the nine months ended October 1, 2022 and October 2, 2021, respectively. We expect to make contributions of approximately $3 to $4 during the remainder of 2022, principally related to our other employee-related benefit plans.

Amortization from accumulated other comprehensive income into earnings related to postretirement benefit plans, net of tax, was a net benefit of $0.4 and $0.9 during the three and nine months ended October 1, 2022, respectively, and a net expense of $0.2 and $0.2 during the three and nine months ended October 2, 2021, respectively. No other reclassifications from accumulated other comprehensive income into earnings were recognized during any of the presented periods.

~~Other Postretirement Employee Benefit (OPEB) Plan Amendment and Remeasurement~~

On July 31, 2022, management approved changes to a postretirement medical plan, covering certain unionized employees and retirees within our IP business. These changes closed the plan to new hires and, beginning in 2023, plan participants will receive a fixed contribution into a Health Reimbursement account. In accordance with ASC 715, ~~Compensation - Retirement Benefits~~, we performed an interim remeasurement of the plan, including remeasuring the projected benefit obligation and the net periodic benefit cost, as of the effective date of the plan amendment. In addition to the impact of the plan changes, as part of the remeasurement, the discount rate assumption was updated from 2.7% to 4.5% to reflect the yield curve at the time of remeasurement. The remeasurement resulted in a decrease of $16.9 in our projected benefit obligation, which was reflected within non-current liabilities in our Consolidated Condensed Balance Sheets. In addition, the remeasurement resulted in a pre-tax prior service credit of $8.1 and an actuarial gain of $8.8, which were reflected in other comprehensive income and will be recognized into net income over approximately 10 years. The current period impact of the remeasurement on our Consolidated Condensed Statements of Operations was not material. Beginning in 2023, we expect annual benefit payments to decrease by approximately $1.

~~NOTE 15~~

LONG-TERM INCENTIVE EMPLOYEE COMPENSATION

Our long-term incentive plan (LTIP) costs are primarily recorded within general and administrative expenses in our Consolidated Condensed Statements of Operations. The following table summarizes our LTIP costs.


		Three Months Ended				Nine Months Ended
		October 1, 2022		October 2, 2021		October 1, 2022		October 2, 2021
For the Three Months Ended										For the Three Months Ended	April 1, 2023		April 2, 2022
Equity-based awards	Equity-based awards	$	4.8	$	4.4	$	13.6	$	11.8	Equity-based awards	$	4.7	$	3.7
Liability-based awards	Liability-based awards	0.2		0.2		0.8		1.3		Liability-based awards	0.8		0.6
Total share-based compensation expense	Total share-based compensation expense	$	5.0	$	4.6	$	14.4	$	13.1	Total share-based compensation expense	$	5.5	$	4.3

~~At October~~As of April 1, ~~2022,~~2023, there was ~~$26.9~~$42.4 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~~2.2 years. Additionally, unrecognized compensation cost related to liability-based awards was ~~$1.4,~~$2.2, which is expected to be recognized ratably over a weighted-average period of ~~2.2~~2.5 years.

Year-to-Date ~~2022~~2023 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 equally each year or at the completion of the three-year service period. During the ~~nine~~three months ended ~~October~~April 1, ~~2022,~~2023, we granted the following LTIP awards as provided in the table below:


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

Restricted stock units (RSUs)	Restricted stock units (RSUs)	0.2		$	78.45	Restricted stock units (RSUs)	0.1		$	93.31
Performance stock units (PSUs)	Performance stock units (PSUs)	0.1		$	78.90	Performance stock units (PSUs)	0.1		$	112.31

During the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, a nominal amount of non-qualified stock options were exercised resulting in proceeds of ~~$1.8~~$0.4 and ~~$1.1,~~$0.7, respectively. During the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, RSUs of 0.1 and 0.1, respectively, vested and were issued. During the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, PSUs of 0.1 and ~~0.2~~0.1 that vested on December 31, ~~2021~~2022 and ~~2020,~~2021, respectively, were issued.

NOTE 1615

CAPITAL STOCK

On October 30, 2019, the Board of Directors approved an indefinite term $500 open-market share repurchase program (the 2019 Plan). During the three ~~and nine~~ months ended ~~October~~April 1, 2023 and April 2, 2022, the Company repurchased and retired ~~0.1~~0.4 and ~~3.0~~2.1 shares of common stock for ~~$4.4~~$30.0 and ~~$245.3, respectively. During the three and nine months ended October 2, 2021, the Company repurchased and retired 0.5 and 1.1 shares of common stock for $50.0 and $100.0,~~$177.8, respectively.

Separate from the open-market share repurchase program, the Company withholds shares of common stock in settlement of employee tax withholding obligations due upon the vesting of equity-based compensation awards. During the three ~~and nine~~ months ended ~~October~~April 1, 2023 and April 2, 2022, the Company withheld ~~a nominal amount~~0.1 and 0.1 shares of common stock for ~~$0.2~~$6.3 and ~~$8.7, respectively. During the three and nine months ended October 2, 2021, the Company withheld 0.1 and 0.2 shares of common stock for $0.3 and $11.7,~~$8.4, respectively.

19ITT Inc. | Q1 2023 Form 10-Q | 16

NOTE 1716

ACCUMULATED OTHER COMPREHENSIVE LOSS

The following tables summarize the changes within each component of accumulated other comprehensive loss.

As of and for the Three Months Ended October 1, 2022 Postretirement Benefit Plans Cumulative Translation Adjustment Accumulated Other Comprehensive Loss
July 2, 2022 $ (41.3) $ (363.0) $ (404.3)
Net change in postretirement benefit plans, net of tax 11.4 — 11.4
Net foreign currency translation adjustment — (44.6) (44.6)
October 1, 2022 $ (29.9) $ (407.6) $ (437.5)

As of and for the Three Months Ended April 1, 2023

Postretirement Benefit Plans

Cumulative Translation Adjustment

Accumulated Other Comprehensive Loss

As of and for the Nine Months Ended October 1, 2022
December 31, 2021 $ (40.8) $ (280.5) $ (321.3)
Net change in postretirement benefit plans, net of tax 10.9 — 10.9
Net foreign currency translation adjustment — (127.1) (127.1)
October 1, 2022 $ (29.9) $ (407.6) $ (437.5)




December 31, 2022	$	3.6	$	(347.9)	$	(344.3)
Net change in postretirement benefit plans, net of tax	0.4		—		0.4
Net foreign currency translation adjustment	—		6.0		6.0
April 1, 2023	$	4.0	$	(341.9)	$	(337.9)

As of and for the Three Months Ended October 2, 2021
July 3, 2021 $ (55.9) $ (245.1) $ (301.0)
Net change in postretirement benefit plans, net of tax 3.1 — 3.1
Net foreign currency translation adjustment — (21.5) (21.5)
October 2, 2021 $ (52.8) $ (266.6) $ (319.4)

As of and for the Three Months Ended April 2, 2022

As of and for the Nine Months Ended October 2, 2021
December 31, 2020 $ (55.9) $ (223.5) $ (279.4)
Net change in postretirement benefit plans, net of tax 3.1 — 3.1
Net foreign currency translation adjustment — (43.1) (43.1)
October 2, 2021 $ (52.8) $ (266.6) $ (319.4)




December 31, 2021	$	(40.8)	$	(280.5)	$	(321.3)
Net change in postretirement benefit plans, net of tax	(0.3)		—		(0.3)
Net foreign currency translation adjustment	—		(11.7)		(11.7)
April 2, 2022	$	(41.1)	$	(292.2)	$	(333.3)

NOTE 1817

COMMITMENTS AND CONTINGENCIES

From time to time, we are involved in ~~legal~~litigation, claims, government inquiries, investigations and proceedings, ~~that are incidental~~including but not limited to ~~the operation of our business. Historically, these proceedings have alleged damages~~those relating to ~~asbestos and~~ environmental exposures, intellectual property matters, ~~copyright infringement,~~ personal injury claims, product liabilities, regulatory matters, commercial and government contract issues, 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.~~ securities matters.

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 ~~existing~~such legal proceedings will have aany material adverse impact on our financial statements, unless otherwise noted below.

~~Asbestos Divestiture~~

~~Prior~~ However, there can be no assurance that an adverse outcome in any of the proceedings described below will not result in material fines, penalties or damages, changes to the divestiture described below, former subsidiaries of ITT, including ITT LLC and Goulds Pumps LLC, 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.

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, all associated asbestos-related assets and liabilities are no longer reported within the Company’s Consolidated Condensed Balance Sheets. 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-taxbusiness practices, loss of ~~$28.1 recorded in the second quarter of 2021. The following table summarizes~~(or litigation with) customers or a material adverse effect on our ~~total pre-tax net asbestos-related (benefit).~~

~~Three Months Ended~~

~~Nine Months Ended~~

~~October 1, 2022~~

~~October 2, 2021~~

~~October 1, 2022~~

~~October 2, 2021~~

~~Asbestos provision(a)~~

—

~~14.4~~

~~Gain on divestiture before income tax~~

—

~~(88.8)~~

~~Asbestos-related benefit, net~~

—

~~(74.4)~~

~~(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 legacy asbestos-related assets and liabilities.

financial statements.

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.

ITT Inc. | Q1 2023 Form 10-Q | 17

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

For the Nine Months Ended October 1, 2022 October 2, 2021
Environmental liability - beginning balance $ 54.1 $ 58.3
Change in estimates for pre-existing accruals:
Continuing operations — —
Discontinued operations(a)
5.4 (0.1)
Accruals added during the period for new matters 0.2 1.0
Payments (3.4) (7.2)
Foreign currency (0.5) (0.2)
Environmental liability - ending balance $ 55.8 $ 51.8


	April 1, 2023		April 2, 2022
Environmental liability - beginning balance	$	57.1	$	54.1

Change in estimates for pre-existing accruals	0.4		—


Payments	(2.0)		(1.9)
Foreign currency	0.1		(0.1)
Environmental liability - ending balance	$	55.6	$	52.1

(a) During the nine months ended October 1, 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 Consolidated Condensed Statements of Operations.

Environmental-related assets, including a Qualified Settlement Fund and estimated recoveries from insurance providers and other third parties, were ~~$14.6~~$13.3 and ~~$12.9~~$12.1 as of ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, respectively.

~~We are currently involved with 28~~The following table illustrates the reasonably possible high range of estimated liability and number of active sites or environmental ~~investigation and remediation sites. As of October 1, 2022, we have estimated the potential high-end liability of environmental-related matters to be $98.~~matters.


As of the Period Ended	April 1, 2023		April 2, 2022
High-end estimate of environmental liability	$	90.7	$	89.4
Number of open environmental matters	27		26

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 1918

DERIVATIVE FINANCIAL INSTRUMENTS

The Company is exposed to various market risks relating to its ongoing business operations. From time to time, we use derivative financial instruments to mitigate our exposure to certain of these risks, including foreign exchange rate and commodity price fluctuations. By using derivatives, the Company is further exposed to credit risk. Our exposure to credit risk includes the counterparty’s failure to fulfill its financial obligations under the terms of the derivative contract. The Company attempts to minimize its exposure by avoiding concentration risk among its counterparties and by entering into transactions with creditworthy counterparties.

Foreign Currency Derivative Contracts

The Company enters into foreign currency forward or option contracts to mitigate foreign currency risk associated with transacting with international customers, suppliers, and subsidiaries. The notional amounts and fair values of our outstanding foreign currency derivative contracts, which are recorded within ~~other~~Other current assets in our Consolidated Condensed Balance Sheets, were as follows:


As of the Period Ended	As of the Period Ended	October 1, 2022			December 31, 2021			As of the Period Ended	April 1, 2023			December 31, 2022
Notional amount (U.S. dollar equivalent)	Notional amount (U.S. dollar equivalent)		$	50.7		$	24.2	Notional amount (U.S. dollar equivalent)		$	138.6		$	136.5
Fair value of foreign currency derivative contracts(a)	Fair value of foreign currency derivative contracts(a)		$	6.4		$	1.9	Fair value of foreign currency derivative contracts(a)		$	1.4		$	1.7

(a) Our foreign currency derivative contracts are classified within Level 2 of the fair value hierarchy because these contracts are not actively traded and the valuation inputs are based on market observable data of similar instruments.

Gains or losses arising from changes in fair value of our foreign currency derivative contracts are recorded within ~~general~~General and administrative expenses in our Consolidated Condensed Statements of Operations, and were as follows:

Three Months Ended Nine Months Ended
October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
Gains (losses) on foreign currency derivative contracts(b)
$ 1.8 $ (1.1) $ 7.3 $ (3.3)

ITT Inc. | Q1 2023 Form 10-Q | 18



For the Three Months Ended	April 1, 2023		April 2, 2022
(Loss) gain on foreign currency derivative contracts(b)	$	(1.1)	$	2.3

(b) None of our derivative contracts were designated as hedging instruments under ASC 815 - Derivatives & Hedging.

The cash flow impact upon settlement of our foreign currency derivative contracts is included in operating activities in our Consolidated Condensed Statements of Cash Flows. During the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, net cash ~~inflows/(outflows)~~inflows from foreign currency derivative contracts were ~~$2.1~~$5.5 and ~~($3.6),~~$2.3, respectively.

~~Commodity Call Option Contracts~~

The Company enters into call option contracts to mitigate our exposure to adverse commodity price fluctuations. As of October 1, 2022, the notional amount and fair value of outstanding commodity call option contracts were not material. There were no outstanding commodity call option contracts as of December 31, 2021. Gains and losses arising from changes in fair value of commodity call option contracts during the three and nine months ended October 1, 2022 and October 2, 2021, respectively, were not material.

NOTE 2019

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. Beginning in the second quarter of 2022, Habonim’s results are reported within ~~the Industrial Process~~our IP segment.

The ~~primary areas~~assets acquired and liabilities assumed were recorded at fair value. As of April 1, 2023, allocation of the purchase price ~~allocations that are not yet finalized relate to the valuation of certain tangible~~was complete 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 goodwillis presented in the ~~period they occur. The goodwill arising from these acquisitions is not expected to be deductible for income tax purposes.~~table below.


~~Preliminary~~Final Allocation of Purchase Price	~~Fair Value~~
Receivables	$	10.2
Inventory	17.8
Plant, property and equipment	16.1
Goodwill	~~67.9~~62.9
Other intangible assets	47.2
Other assets	4.2
Accounts payable and accrued liabilities	(8.7)
Other liabilities	~~(12.1)~~(7.1)
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~~Subsequent Event

On May 2, 2023, we completed the acquisition of Micro-Mode Products, Inc. (Micro-Mode) for a purchase price of approximately $80. Micro-Mode is a specialty designer and manufacturer of high-bandwidth Radio Frequency (RF) connectors for harsh environment defense and space applications. Micro-Mode has a single manufacturing site near San Diego, California and generated approximately $26 in ~~CRP Technology and CRP USA (CRP)~~

~~During~~sales in 2022. Micro-Mode’s results will be reported within our CCT segment beginning in 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.

2023.

23ITT Inc. | Q1 2023 Form 10-Q | 19

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 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 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 ~~2021~~2022 Annual Report within Part I, Item 1, “Description of Business.”

All comparisons included within Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to the comparable three ~~and nine~~ months ended ~~October~~April 2, ~~2021,~~2022, unless stated otherwise.

Macroeconomic Conditions

During ~~2022,~~the first quarter of 2023, there has been continued uncertainty in the global ~~macroeconomic conditions. These conditions have~~economy, which has been, and will continue to be, influenced by a number of external factors, including, but not limited to, the Russia-Ukraine war, the COVID-19 pandemic, labor shortages, supply chain disruptions, rising inflation, changes to monetary and fiscal policies by central banks and governments around the world, and the erosion of foreign currencies relative to the U.S. dollar. These itemswhich are described ~~further~~ below.

Current global macroeconomic conditions may lead to decreased demand for our products, increased costs, and reduced margins. Future impacts on our business and financial results as a result of these conditions are not estimable at this time, and depend, in part, on the extent to which these conditions improve or worsen, which remains uncertain. For additional discussion of the risks related to general macroeconomic conditions, see Part I, Item IA, “Risk Factors” in our ~~2021 Annual Report~~.

Russia-Ukraine War

During the three and nine months ended October 1, 2022, we recorded total charges of $0.3 and $8.2, respectively, primarily related to inventory and account receivable write-downs to reflect the increased risks facing some of our customers that serve the regions impacted by the Russia-Ukraine war. If the war worsens, we could experience a further reduction in demand for our products. 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, although we cannot provide any assurance of the timeline for or the success of these alternatives. Such alternatives may cause us to incur additional costs, such as fixed asset impairments, severance and other

~~expenses. For additional discussion of the risks related to the Russia-Ukraine war, see Part II, Item 1A, “Risk Factors” herein.~~2022.

COVID-19 Pandemic

The Company continues to actively monitor the ongoing impacts of COVID-19. During 2022, certain of our businesses experienced high levels of employee illness and absenteeism resulting from regional COVID-19 outbreaks and government-mandated workplace safety measures, which has led to us incurring additional costs. Some governments around the world, including China, have instituted COVID-19 lockdowns that led to further absenteeism, global supply chain challenges, and temporary negative impacts on demand in some of our end-markets, such as passenger vehicles. We continue to be proactive in responding to the challenges posed by COVID-19 to protect the health and safety of our employees and to continue delivering to our customers. Challenges resulting from ~~continued supply chain issues caused by~~the COVID-19 ~~and outbreaks of COVID-19, including variant strains of the virus and hesitancy related to vaccines and boosters,~~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 IA, “Risk Factors” in our ~~2021~~2022 Annual Report.

Inflationary Pressures

Since 2020, the cost of energy and of raw materials we use in our production processes, including commodities such as steel, oil, copper, and tin, have significantly increased. The rising prices are mainly a result of reduced supply caused by supply chain disruptions primarily as a result of the COVID-19 pandemic and the Russia-Ukraine war. ~~These factors have contributed to congested shipping ports around the world and higher inbound and outbound freight costs to meet customer demand.~~

~~The manufacturing industry is also currently experiencing a skilled labor shortage, which has created difficulties in attracting and retaining factory employees and has resulted in higher labor costs.~~

ITT Inc. | Q1 2023 Form 10-Q | 20

During 2022, central banks around the world have been raising interest rates to counter inflation. Rising interest rates have increased our cost of debt and may adversely impact consumer behavior, including demand for our products. These conditions have contributed to a strengthening of the U.S. dollar relative to foreign currencies, which has resulted in unfavorable foreign currency translation impacts.

Furthermore, in ~~October~~November 2022, the Organization of the Petroleum Exporting Countries (“OPEC”) ~~announced plans to cut~~began cutting production of oil ~~beginning in November~~ by two million barrels per day, ~~which represents approximately 2% of~~and, in April 2023, OPEC announced that it plans to further cut daily ~~global output.~~production by over one million barrels beginning in May 2023. These daily production cuts are expected to last through 2023. While any future impacts are uncertain, such changes are expected to exacerbate inflationary pressures on energy, which could result in increased costs and reduced demand for our products.

Beginning in 2022, central banks around the world have been raising interest rates to counter inflation. Rising interest rates have increased our cost of debt and have contributed to instability in the global banking system, which may adversely impact consumer behavior, including demand for our products.

The manufacturing industry continues to experience a skilled labor shortage, which has created difficulties in attracting and retaining factory employees and has resulted in higher labor costs.

These ~~events~~global macroeconomic conditions have ~~had~~contributed to a strengthening of the U.S. dollar relative to foreign currencies, which has created volatility in our reported results stemming from unfavorable foreign currency translation impacts.

Global macroeconomic conditions have led and may continue leading to ~~have a significant impact on~~decreased demand for our ~~business~~products, increased costs, and ~~financial results.~~reduced operating margins. We have been able to offset most of these negative impacts through pricing actions and productivity savings, which we continue to pursue. Future impacts on our business and financial results as a result of these conditions are not estimable at this time, and depend, in part, on the extent to which these conditions improve or worsen, which remains uncertain. For additional discussion of the risks related to global macroeconomic conditions, see Part I, Item IA, “Risk Factors” in our 2022 Annual Report.

25ITT Inc. | Q1 2023 Form 10-Q | 21

EXECUTIVE SUMMARY

The following table provides a summary of key performance indicators for the ~~third~~first quarter of ~~2022~~2023 as compared to the ~~third~~first quarter of ~~2021.~~2022.

Summary of Key Performance Indicators for the Third Quarter of 2022
Revenue Segment Operating Income Segment Operating Margin EPS
$754 $132 17.6% $1.23
9% Increase 19% Increase 150bp Increase 23% Increase
Organic Revenue Adjusted Segment Operating Income Adjusted Segment Operating Margin Adjusted EPS
$793 $137 18.2% $1.20
15% Increase 18% Increase 140bp Increase 21% Increase



Revenue	Segment Operating Income	Segment Operating Margin	EPS
$798	$138	17.3%	$1.20
10% Increase	31% Increase	270bp Increase	36% Increase
Organic Revenue	Adjusted Segment Operating Income	Adjusted Segment Operating Margin	Adjusted EPS
$801	$140	17.5%	$1.17
10% Increase	20% Increase	150bp Increase	21% 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 ~~third~~first quarter ~~2022~~2023 results are summarized below:

•Revenue of ~~$753.6~~$797.9 increased by ~~$64.0~~$71.7 due to ~~strong growth~~higher sales volume and pricing actions, particularly within in IP’s short-cycle ~~business,~~and pump projects businesses and CCT’s ~~connectors and~~ components ~~and MT’s Friction~~ business. In addition, revenue from the acquisition of Habonim contributed ~~$15.3~~$15.0 to total revenue growth. The increase was partially offset by unfavorable foreign currency impacts of ~~$54.3.~~$17.9.

•Segment operating income of ~~$132.4, including~~$138.1, increased by $32.3 despite unfavorable foreign currency impacts of ~~$5.0, increased by $21.2.~~$4.7. The increase was due to ~~improved price recovery,~~pricing actions, productivity savings, and higher sales volume. In addition, the current period benefited by $7.0 from lower charges related to the Russia-Ukraine war and by $3.6 from the acquisition of Habonim. The increase in segment operating income was partially offset by higher raw material, labor and overhead costs stemming from continued supply chain challenges and cost inflation.

•Income from continuing operations was ~~$1.23~~$1.20 per diluted share, an increase of ~~$0.23~~$0.32 as compared to the prior year, primarily due to higher segment operating income, ~~despite unfavorable foreign currency translation impacts and higher cost of debt,~~ as discussed above. Adjusted income from continuing operations was ~~$1.20~~$1.17 per diluted share, an increase of ~~$0.21~~$0.20 as compared to the prior year.

~~This~~During the first quarter of 2023, we ~~invested $26.2~~repurchased 0.4 shares of common stock on ~~capital expenditures and~~the open market for $30. In addition, we declared a dividend of ~~$0.264~~$0.290 per share, which was a ~~20%~~10% increase from the quarterly dividend of ~~$0.22~~$0.264 in ~~2021.~~2022.

26ITT Inc. | Q1 2023 Form 10-Q | 22

DISCUSSION OF FINANCIAL RESULTS


		Three Months Ended								Nine Months Ended
		October 1, 2022			October 2, 2021			Change		October 1, 2022			October 2, 2021			Change
For the Three Months Ended																		For the Three Months Ended	April 1, 2023			April 2, 2022			Change
Revenue	Revenue	$	753.6		$	689.6		9.3	%	$	2,213.1		$	2,079.6		6.4	%	Revenue	$	797.9		$	726.2		9.9	%
Gross profit	Gross profit	233.4			222.0			5.1	%	674.0			675.6			(0.2)	%	Gross profit	261.9			218.4			19.9	%
Gross margin		31.0		%	32.2		%	(120)	bp	30.5		%	32.5		%	(200)	bp
Operating expenses(a)		111.4			120.3			(7.4)	%	356.9			284.4			25.5	%
Operating expense to revenue ratio		14.8		%	17.4		%	(260)	bp	16.1		%	13.7		%	240	bp
Operating income(a)		122.0			101.7			20.0	%	317.1			391.2			(18.9)	%
Operating margin		16.2		%	14.7		%	150	bp	14.3		%	18.8		%	(450)	bp
Operating expenses																		Operating expenses	137.6			123.8			11.1	%
Operating income																		Operating income	124.3			94.6			31.4	%
Interest and non-operating expenses (income), net	Interest and non-operating expenses (income), net	2.3			0.5			360.0	%	2.6			(4.3)			(160.5)	%	Interest and non-operating expenses (income), net	3.5			(0.2)			NM
Income tax expense	Income tax expense	16.4			14.1			16.3	%	59.9			182.7			(67.2)%		Income tax expense	20.1			19.5			3.1	%

Net income attributable to ITT Inc.																		Net income attributable to ITT Inc.	100.0			74.8			33.7	%

Gross margin																		Gross margin	32.8		%	30.1		%	270	bp
Operating expense to revenue ratio																		Operating expense to revenue ratio	17.2		%	17.0		%	20	bp
Operating margin																		Operating margin	15.6		%	13.0		%	260	bp
Effective tax rate	Effective tax rate	13.7		%	13.9		%	(20)	bp	19.0		%	46.2		%	(2,720)	bp	Effective tax rate	16.6		%	20.6		%	(400)	bp
Income from continuing operations attributable to ITT Inc.		102.5			86.6			18.4	%	253.1			211.8			19.5	%
Net income attributable to ITT Inc.		102.4			87.5			17.0	%	251.8			212.7			18.4	%

~~(a) Operating expenses and operating income for the nine months ended October 2, 2021 include the impact of the divestiture of the entity holding asbestos-related assets and liabilities. See~~ ~~Operating Expenses~~ ~~section below for further information.~~NM = Not meaningful

REVENUE

The following table illustrates the revenue derived from each of our segments.


For the Three Months Ended	For the Three Months Ended	October 1, 2022		October 2, 2021		Change		Organic Growth(a)		For the Three Months Ended	April 1, 2023		April 2, 2022		Change		Organic Growth(a)

Motion Technologies	Motion Technologies	$	342.2	$	332.3	3.0	%	14.9	%	Motion Technologies	$	364.8	$	370.1	(1.4)	%	2.2	%
Industrial Process	Industrial Process	248.5		210.7		17.9	%	14.6	%	Industrial Process	266.5		202.2		31.8	%	25.5	%
Connect & Control Technologies	Connect & Control Technologies	163.2		147.1		10.9	%	15.4	%	Connect & Control Technologies	167.6		154.6		8.4	%	9.8	%
Eliminations	Eliminations	(0.3)		(0.5)						Eliminations	(1.0)		(0.7)
Total Revenue	Total Revenue	$	753.6	$	689.6	9.3	%	14.9	%	Total Revenue	$	797.9	$	726.2	9.9	%	10.3	%

For the Nine Months Ended		October 1, 2022		October 2, 2021		Change		Organic Growth(a)
Motion Technologies		$	1,043.6	$	1,045.0	(0.1)	%	7.7	%
Industrial Process		690.3		626.9		10.1	%	8.3	%
Connect & Control Technologies		481.0		408.9		17.6	%	20.9	%
Eliminations		(1.8)		(1.2)
Total Revenue		$	2,213.1	$	2,079.6	6.4	%	10.5	%

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

Motion Technologies

MT revenue ~~increased $9.9 and~~ decreased ~~$1.4~~$5.3 for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022, respectively.~~2023, primarily driven by unfavorable foreign currency translation of $13.6 and the impact of the Russia-Ukraine war. The decrease was partially offset by pricing actions. Excluding the impact of unfavorable foreign currency translation, ~~of $39.6 and $82.1, which was~~organic revenue grew $8.3 driven by a 3% increase in our Friction business due to ~~continued strengthening of the U.S. dollar as explained above, organic revenue increased $49.5 and $80.7, respectively. The increase for the three- and nine-month periods was~~strong OEM performance, partially offset by a 7% decrease in our Wolverine business primarily due to ~~growth in Friction of 22% and 11%, respectively, driven by strong OEM demand. In addition, Wolverine sales grew by 5% and 10%, respectively, due to continued strength~~a decline in sealing materials.

In March 2023, our Friction business signed a 10-year agreement, effective on January 1, 2024, for the supply of ITT aftermarket brake pads to Continental AG. The agreement is expected to generate over $1 billion in revenue over the term of the agreement.

In 2023, automotive OEMs began aggressively cutting prices on electric vehicles (EVs), including in China, the United States, and Europe, to drive consumer demand, which resulted in other OEMs also cutting prices on EVs in order to remain competitive. These price cuts could lead to a reshaping of the automotive industry, including, but not limited to, faster consumer adoption of EVs, reduced demand for traditional automobiles, and consolidation if smaller automotive manufacturers are no longer able to compete. At this time, any future impacts on our businesses and financial results as a result of these price cuts are uncertain.

Since the start of the COVID-19 pandemic in 2020, the automotive industry 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 adversely impacted. ~~There are indications that semiconductor capacity will soon begin to free up in some end markets. As semiconductors become more accessible, we~~We expect that OEMs will begin to expand ~~production. However,~~production once

ITT Inc. | Q1 2023 Form 10-Q | 23

semiconductors become more accessible. Until then, our future sales growth remains uncertain and depends, in part, on the timing and extent to which ~~global macroeconomic conditions improve or worsen, as discussed above.~~the semiconductor supply shortage improves.

Industrial Process

IP revenue for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 increased ~~$37.8~~$64.3, primarily driven by higher sales volume, pricing actions, and ~~$63.4, respectively. Excluding revenue from~~ the ~~second-quarter~~ acquisition of Habonim in the second quarter of ~~$15.3 and $30.8, respectively, and~~2022, which contributed revenue of $15.0. The increase was partially offset by unfavorable foreign currency translation of ~~$8.2~~$2.2. Excluding Habonim and ~~$19.2, respectively,~~the impact of unfavorable foreign currency translation, organic revenue increased by ~~$30.7 and $51.8. The increase for the three- and nine-month periods was primarily~~$51.5 driven by ~~growth~~a 22% increase in ~~the~~our short-cycle business ~~of 28% and 15%, respectively, particularly~~primarily due to growth within the chemical and ~~general~~ industrial ~~markets.~~pumps market. In addition, ~~the three-month period saw an increase in~~ pump project ~~revenue of 17%,~~sales increased by 44% primarily due to ~~strength~~growth within the energy ~~market. Growth in the nine-month period was partially offset by a decline in pump project revenue of 15%, primarily within the chemical~~ market.

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 three months ended ~~October~~April 1, ~~2022~~2023 were ~~$271.9,~~$327.3, an increase of ~~12%~~26% versus the comparable prior year period. Backlog as of ~~October~~April 1, ~~2022~~2023 was ~~$592.4,~~$640.7, an increase of ~~$148.0,~~$60.7, or ~~33%~~11%, as compared to December 31, ~~2021.~~2022. Our backlog represents firm orders that have been received, acknowledged, and entered into our production systems.

Connect & Control Technologies

CCT revenue for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 increased ~~$16.1~~$13.0, primarily driven by higher sales volume and ~~$72.1, respectively, which included~~pricing actions. The increase was partially offset by unfavorable foreign currency translation ~~impacts~~ of ~~$6.6 and $13.5. Organic~~$2.1. Excluding the impact of foreign currency translation, organic revenue increased ~~$22.7 and $85.6, respectively, primarily~~$15.1 driven by growth in ~~connectors~~component and connector sales of ~~12%~~15% and ~~23%~~6%, respectively, particularly ~~within the general industrial and aerospace and defense markets. Additionally, component revenues grew by 25% and 19%, respectively, due to strength~~ within the aerospace and defense markets.

GROSS PROFIT

Gross profit for the three months ended ~~October~~April 1, 2023 and April 2, 2022 was $261.9 and ~~October 2, 2021 was $233.4 and $222.0,~~$218.4, respectively, reflecting a gross margin of ~~31.0%~~32.8% and ~~32.2%~~30.1%. The increase in gross profit during the three-month period was primarily driven by improved price recovery, productivity savings, and higher sales volume. The increase was partially offset by an increase in raw material, energy, labor, and shipping costs, as well as additional costs related to the COVID-19 pandemic, as discussed above. The contraction in gross margin during the three-month period was similarly driven by the increase in costs.

Gross profit for the nine months ended October 1, 2022 and October 2, 2021 was $674.0 and $675.6, respectively, reflecting a gross margin of 30.5% and 32.5%. The decrease in gross profit and gross margin was primarily driven by an increase in ~~costs, discussed~~revenue, as described above, ~~which~~and productivity savings. In addition, the current period benefited from lower charges related to the Russia-Ukraine war. The increase in gross profit was partially offset by ~~improved price recovery, productivity savings,~~increases in raw material, labor and ~~higher sales volume.~~overhead costs, which were driven by inflationary pressures as discussed above. See section titled, “Macroeconomic C on ditions”, for further information.

28ITT Inc. | Q1 2023 Form 10-Q | 24

OPERATING EXPENSES

The following table summarizes our operating expenses, including by segment.


		Three Months Ended						Nine Months Ended
		October 1, 2022		October 2, 2021		Change		October 1, 2022		October 2, 2021		Change
For the Three Months Ended														For the Three Months Ended	April 1, 2023		April 2, 2022		Change
General and administrative expenses	General and administrative expenses	$	47.5	$	60.4	(21.4)	%	$	164.9	$	176.4	(6.5)	%	General and administrative expenses	$	68.3	$	60.4	13.1	%
Sales and marketing expenses	Sales and marketing expenses	39.5		37.4		5.6	%	118.3		112.4		5.2	%	Sales and marketing expenses	42.9		38.4		11.7	%
Research and development expenses	Research and development expenses	24.4		22.5		8.4	%	73.7		70.0		5.3	%	Research and development expenses	26.4		25.0		5.6	%
Asbestos-related (benefit), net		—		—		—	%	—		(74.4)		(100.0)	%

Total operating expenses	Total operating expenses	$	111.4	$	120.3	(7.4)	%	$	356.9	$	284.4	25.5	%	Total operating expenses	$	137.6	$	123.8	11.1	%
Total operating expenses by segment:	Total operating expenses by segment:													Total operating expenses by segment:
Motion Technologies	Motion Technologies	$	31.0	$	43.5	(28.7)	%	$	104.9	$	126.5	(17.1)	%	Motion Technologies	$	43.8	$	41.2	6.3	%
Industrial Process	Industrial Process	39.5		38.7		2.1	%	126.4		114.7		10.2	%	Industrial Process	48.6		40.9		18.8	%
Connect & Control Technologies	Connect & Control Technologies	30.3		28.6		5.9	%	90.1		90.3		(0.2)	%	Connect & Control Technologies	31.4		30.6		2.6	%
Corporate & Other	Corporate & Other	10.6		9.5		11.6	%	35.5		(47.1)		(175.4)	%	Corporate & Other	13.8		11.1		24.3	%

General and administrative (G&A) expenses ~~decreased $12.9 and $11.5~~increased $7.9 for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022, respectively.~~2023. The ~~decrease in both periods~~increase was driven by ~~favorable~~higher incentive-based compensation, higher G&A expenses related to Habonim, which was acquired in the second quarter of 2022, and unfavorable foreign currency ~~impacts and lower incentive-based compensation and restructuring costs,~~hedging impacts. The increase was partially offset by ~~higher strategic investment-related costs~~lower bad debt expense primarily related to the Russia-Ukraine war and lower corporate-owned life insurance investment gains. The decrease for the three-month period was also partially offset by higher environmental costs, while the decrease for the nine-month period was also partially offset by higher bad debt expense.strategic M&A-related costs.

Sales and marketing expenses increased ~~$2.1 and $5.9 respectively~~$4.5 for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022,~~2023, primarily driven by ~~temporary spending controls in place during~~higher costs to support higher sales activity as well as the ~~prior year three- and nine- month periods in response to the COVID-19 pandemic that were discontinued in 2022.~~acquisition of Habonim.

Research and development expenses increased ~~$1.9 and $3.7 respectively~~$1.4 for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022,~~2023, due to continued strategic investments in innovation and new product development to drive future growth.

Asbestos-related matters during the nine months ended October 2, 2021 resulted in a net benefit of $74.4 due to a pre-tax gain of $88.8 stemming from the divestiture of the entity holding asbestos-related assets and liabilities in the second quarter of 2021. See Note 18, ~~Commitments and Contingencies, for further information.~~

OPERATING INCOME

The following table summarizes our operating income and margin by segment.


		Three Months Ended								Nine Months Ended
		October 1, 2022			October 2, 2021			Change		October 1, 2022			October 2, 2021			Change
For the Three Months Ended																		For the Three Months Ended	April 1, 2023			April 2, 2022			Change
Motion Technologies	Motion Technologies	$	54.0		$	53.6		0.7	%	$	160.7		$	194.3		(17.3)	%	Motion Technologies	$	53.4		$	59.7		(10.6)	%
Industrial Process	Industrial Process	48.1			32.4			48.5	%	107.6			94.9			13.4	%	Industrial Process	55.3			20.4			171.1	%
Connect & Control Technologies	Connect & Control Technologies	30.3			25.2			20.2	%	84.2			54.9			53.4	%	Connect & Control Technologies	29.4			25.7			14.4	%
Segment operating income	Segment operating income	132.4			111.2			19.1	%	352.5			344.1			2.4	%	Segment operating income	138.1			105.8			30.5	%
Asbestos-related benefit, net		—			—			—	%	—			74.4			(100.0)	%
Other corporate costs		(10.4)			(9.5)			9.5	%	(35.4)			(27.3)			29.7	%
Total corporate and other costs, net		(10.4)			(9.5)			9.5	%	(35.4)			47.1			(175.2)	%

Corporate and Other																		Corporate and Other	(13.8)			(11.2)			23.2	%

Total operating income	Total operating income	$	122.0		$	101.7		20.0	%	$	317.1		$	391.2		(18.9)	%	Total operating income	$	124.3		$	94.6		31.4	%
Operating margin:	Operating margin:																	Operating margin:
Motion Technologies	Motion Technologies	15.8		%	16.1		%	(30)	bp	15.4		%	18.6		%	(320)	bp	Motion Technologies	14.6		%	16.1		%	(150)	bp
Industrial Process	Industrial Process	19.4		%	15.4		%	400	bp	15.6		%	15.1		%	50	bp	Industrial Process	20.8		%	10.1		%	1,070	bp
Connect & Control Technologies	Connect & Control Technologies	18.6		%	17.1		%	150	bp	17.5		%	13.4		%	410	bp	Connect & Control Technologies	17.5		%	16.6		%	90	bp
Segment operating margin	Segment operating margin	17.6		%	16.1		%	150	bp	15.9		%	16.5		%	(60)	bp	Segment operating margin	17.3		%	14.6		%	270	bp
Consolidated operating margin	Consolidated operating margin	16.2		%	14.7		%	150	bp	14.3		%	18.8		%	(450)	bp	Consolidated operating margin	15.6		%	13.0		%	260	bp

MT operating income ~~increased $0.4 and~~ decreased ~~$33.6 during~~$6.3 for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022, respectively. The increase for the three-month period was~~2023 primarily due to ~~improved price recovery, productivity savings,~~higher labor and ~~higher volume, which was offset by higher raw material~~overhead costs, and unfavorable sales mix and foreign currency impacts. The decrease ~~for~~in operating income was partially offset by productivity savings and pricing actions. In addition, the ~~nine-month~~prior period ~~was primarily due to higher raw material and overhead costs, as well as write-downs~~included $4.2 of ~~inventory and accounts receivables of $3.2~~charges related to the Russia-Ukraine ~~war. The decline~~war as compared to $0.3 in the ~~nine-month period was partially offset by improved price recovery and productivity savings.~~current period.

IP operating income ~~during~~for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022~~2023 increased ~~$15.7~~$34.9 primarily driven by higher revenue, as discussed above, and ~~$12.7, respectively.~~productivity savings. In addition, the prior period included $4.6 of charges related to the Russia-Ukraine war as compared to $1.5 in the current period. The increase ~~for both periods was mainly driven by improved price recovery, productivity savings, and higher volume. The increase~~in operating income was partially offset by higher raw material, labor and overhead costs, and unfavorable foreign ~~exchange impacts. The nine-month period also included write-downs of $5.0 in connection with the Russia-Ukraine war.~~

CCT operating income during the three and nine months ended October 1, 2022 increased $5.1 and $29.3, respectively. The increase for both periods was driven by productivity savings, improved price recovery, and higher sales volume, partially offset by unfavorable raw material costs, sales mix, and foreign currency impacts.

Other corporate costs during the three and nine months ended October 1, 2022 increased $0.9 and $8.1, respectively. The increase in the three-month period was primarily driven by lower corporate-owned life insurance (COLI) investment gains. The increase in the nine-month period was primarily driven by higher strategic investment-related costs, lower COLI investment gains, and a $1.7 asset impairment related to the relocation of the Company’s corporate headquarters.

30ITT Inc. | Q1 2023 Form 10-Q | 25

CCT operating income for the three months ended April 1, 2023 increased $3.7 primarily driven by higher revenue, as discussed above, and productivity savings. The increase in operating income was partially offset by higher raw material, labor and overhead costs.

Other corporate costs for the three months ended April 1, 2023 increased $2.6 primarily driven by higher incentive-based compensation costs, partially offset by lower strategic M&A-related costs.

INTEREST AND NON-OPERATING ~~EXPENSES AND INCOME,~~EXPENSE (INCOME), NET

The following table summarizes our ~~net~~ interest and non-operating ~~expenses~~expense (income)., net.

Three Months Ended Nine Months Ended
October 1, 2022 October 2, 2021 Change October 1, 2022 October 2, 2021 Change
Interest and non-operating expense (income), net $ 2.3 $ 0.5 360.0 % $ 2.6 $ (4.3) (160.5) %



For the Three Months Ended	April 1, 2023		April 2, 2022		Change
Interest expense	$	6.7	$	0.9	644.4	%
Interest income	(2.6)		(0.9)		188.9	%
Miscellaneous income, net	(0.8)		(0.7)		14.3	%
Non-operating postretirement costs, net	0.2		0.5		(60.0)	%
Interest and non-operating expense (income), net	$	3.5	$	(0.2)	NM

NM = Not meaningful

The increase in interest and non-operating ~~expenses~~expense (income), net for the three ~~and nine~~ months ended ~~October~~April 1, ~~2022 is~~2023 was primarily ~~due to~~driven by higher interest expense associated with ~~greater outstanding~~higher weighted average interest rates on our commercial paper borrowings and a ~~higher average interest rate. The prior year nine-month period also included~~settlement from a ~~gain of $3.4 from~~tax audit in Italy as discussed in the ~~final pricing adjustment related to the termination of our U.S. qualified pension plan.~~income tax expense section below.

INCOME TAX EXPENSE

The following table summarizes our income tax expense and effective tax rate.


		Three Months Ended								Nine Months Ended
		October 1, 2022			October 2, 2021			Change		October 1, 2022			October 2, 2021			Change
For the Three Months Ended																		For the Three Months Ended	April 1, 2023			April 2, 2022			Change
Income tax expense	Income tax expense	$	16.4		$	14.1		16.3%		$	59.9		$	182.7		(67.2)%		Income tax expense	$	20.1		$	19.5		3.1	%
Effective tax rate	Effective tax rate	13.7		%	13.9		%	(20)	bp	19.0		%	46.2		%	(2,720)	bp	Effective tax rate	16.6		%	20.6		%	(400)	bp

We are closely monitoring the potential changes in tax laws resulting from the Organization for Economic Cooperation and Development’s ~~(“OECD”)~~(OECD) multi-jurisdictional plan of action to address base erosion and profit shifting, which could adversely impact our effective tax rate.

~~Recent U.S. Tax Legislation~~

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law. The Inflation Reduction Act includes a new corporate alternative minimum tax (the “Corporate AMT”) of 15% on the adjusted financial statement income (“AFSI”) of corporations with average AFSI exceeding $1.0 billion over a three-year period. The Corporate AMT is effective for the Company beginning in 2023. Based on our evaluation of the AFSI threshold, we do not believe the Corporate AMT would be immediately applicable to the Company, but the Corporate AMT may have potential impacts on our future U.S. tax expense, cash taxes, and effective tax rate. Additionally, the Inflation Reduction Act imposes a 1% excise tax on the fair market value of net stock repurchases made after December 31, 2022. The impact of this provision will be dependent on the extent of share repurchases made in future periods.

See Note 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.

ITT Inc. | Q1 2023 Form 10-Q | 26

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 support our growth and 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 transfer cash between certain international subsidiaries and the U.S. when it is cost effective to do so. During the year ended December 31, ~~2021, we had net cash distributions from foreign countries to the U.S. of $116.9. During the nine months ended October 1,~~ 2022, we had net cash distributions from foreign countries to the U.S. of ~~$44.6.~~$74.0. During the three months ended April 1, 2023, we had net cash distributions from foreign countries to the U.S. of $294.1. The timing and amount of any additional future distributions will be evaluated based on our jurisdictional cash needs.

The amount and timing of dividends payable on our common stock are within the sole discretion of our Board of Directors and will be based on, and affected by, a number of factors, including our financial position and results of operations, available cash, expected capital spending plans, prevailing business conditions and other factors the Board of Directors deems relevant. Therefore, we cannot provide any assurance as to what level of dividends, if any, will be paid in the future. In the ~~third~~first quarter of ~~2022,~~2023, we declared a dividend of ~~$0.264~~$0.290 per share for shareholders of record on ~~September 2, 2022,~~March 9, 2023, which was a ~~20%~~10% increase from the quarterly dividends declared of ~~$0.22~~$0.264 in ~~2021.~~2022. Dividend payments during the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 amounted to ~~$66.1.~~$24.2.

During the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and ~~October~~April 2, ~~2021,~~2022, we spent ~~$245.6~~$30.0 and ~~$100.7,~~$177.8, respectively, on open-market share repurchases under our share repurchase programs. All repurchased shares are retired immediately following the repurchases. See Part II, Item 2, Unregistered Sales of Equity Securities and Use of Proceeds, for additional information.

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.

The following table presents our outstanding commercial paper borrowings.


		October 1, 2022		December 31, 2021			April 1, 2023		December 31, 2022
Commercial Paper Outstanding - U.S. Program	Commercial Paper Outstanding - U.S. Program	$	399.5	$	150.0	Commercial Paper Outstanding - U.S. Program	$	30.0	$	299.2
Commercial Paper Outstanding - Euro Program	Commercial Paper Outstanding - Euro Program	136.7		45.4		Commercial Paper Outstanding - Euro Program	351.4		149.1
Total Commercial Paper Outstanding	Total Commercial Paper Outstanding	$	536.2	195.4		Total Commercial Paper Outstanding	$	381.4	448.3

~~The increase in~~From December 31, 2022 to April 1, 2023, we substantially reduced our borrowings under the U.S. commercial paper ~~outstanding from December 31, 2021~~program and increased our borrowings under the Euro program to ~~October 1, 2022 was primarily related to share repurchase activity and~~reduce our cost of debt given the ~~Habonim acquisition.~~lower interest rates under the Euro program. See Note ~~20,~~13, ~~Acquisitions and Investments~~Debt, to the 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 Agreement

On August 5, 2021, we entered into a 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). 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. As of ~~October~~April 1, ~~2022~~2023 and December 31, ~~2021,~~2022, we had no outstanding borrowings under the 2021 Revolving Credit Agreement. See Note 13, Debt, to the Consolidated Condensed Financial Statements for further information.

ITT Inc. | Q1 2023 Form 10-Q | 27

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~~provided by or used in operating, investing, and financing activities from continuing operations, as well as net cash from discontinued operations.


For the Nine Months Ended		October 1, 2022		October 2, 2021
For the Three Months Ended						For the Three Months Ended	April 1, 2023		April 2, 2022
Operating activities	Operating activities	$	115.2	$	(127.9)	Operating activities	$	58.1	$	(2.7)
Investing activities	Investing activities	(244.8)		(53.9)		Investing activities	(28.5)		(29.4)
Financing activities	Financing activities	43.0		(74.2)		Financing activities	(132.9)		96.6
Foreign exchange	Foreign exchange	(46.3)		(18.5)		Foreign exchange	4.3		(1.5)
Total net cash used in continuing operations		(132.9)		(274.5)
Net cash used in discontinued operations		(0.1)		0.7
Total net cash from continuing operations						Total net cash from continuing operations	(99.0)		63.0
Net cash from discontinued operations						Net cash from discontinued operations	(0.1)		(0.1)
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	(133.0)	$	(273.8)	Net change in cash and cash equivalents	$	(99.1)	$	62.9

Operating Activities

The increase in net cash from operating activities of ~~$243.1~~$60.8 was primarily due to an increase in segment operating income, lower incentive-based compensation payments related to the prior year, ~~payment of $398.0 to fund the asbestos-related divestiture. This was partially offset by increased~~and favorable year-over-year net working capital ~~investments~~impacts primarily due to ~~support sales growth and mitigate continued supply chain disruptions, and the~~ timing of accounts receivable ~~collections.~~collection and improved inventory management.

Investing Activities

The ~~increase in~~ net cash used in investing activities remained consistent with the previous year and was ~~primarily~~mainly driven by our ~~acquisition of Habonim of $139.9 and investment in CRP of $23.0. Refer to Note 20,~~ ~~Acquisitions and Investments, for further information. In addition,~~ capital ~~expenditures increased by $21.1 over the prior year.~~expenditures.

Financing Activities

The ~~increase~~decrease in net cash from financing activities of ~~$117.2~~$229.5 was due to ~~an increase~~a decrease of $363.5 in ~~net~~cash flows related to commercial paper, ~~borrowings of $267.7,~~ partially offset by ~~an increase~~a decrease of $133.9 in open-market repurchases of ITT common ~~stock of $144.9.~~

~~Foreign Exchange~~stock.

The decrease in net cash related to foreign exchange is due to unfavorable foreign currency translation impacts resulting from the strengthening of the U.S. dollar relative to foreign currencies. Refer to Part I, Item 3, ~~Quantitative and Qualitative Disclosures about Market Risk, for further information.~~

33ITT Inc. | Q1 2023 Form 10-Q | 28

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 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. 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.

The following tables include a reconciliation of revenue to organic revenue by segment.


Three Months Ended October 1, 2022		Motion Technologies				Industrial Process				Connect & Control Technologies				Eliminations			Total ITT
2022 Revenue			$	342.2			$	248.5			$	163.2			$	(0.3)		$	753.6
Three Months Ended April 1, 2023																					Three Months Ended April 1, 2023	Motion Technologies				Industrial Process				Connect & Control Technologies				Eliminations			Total ITT

2023 Revenue																					2023 Revenue		$	364.8			$	266.5			$	167.6			$	(1.0)		$	797.9
Acquisitions	Acquisitions		—				(15.3)				—				—			(15.3)			Acquisitions		—				(15.0)				—				—			(15.0)
Foreign currency translation	Foreign currency translation		39.6				8.2				6.6				(0.1)			54.3			Foreign currency translation		13.6				2.2				2.1				—			17.9
2022 Organic revenue			$	381.8			$	241.4			$	169.8			$	(0.4)		$	792.6
2021 Revenue			$	332.3			$	210.7			$	147.1			$	(0.5)		$	689.6
2023 Organic revenue																					2023 Organic revenue		$	378.4			$	253.7			$	169.7			$	(1.0)		$	800.8
2022 Revenue																					2022 Revenue		$	370.1			$	202.2			$	154.6			$	(0.7)		$	726.2
Organic growth	Organic growth		49.5				30.7				22.7				0.1			103.0			Organic growth		$	8.3			$	51.5			$	15.1			$	(0.3)		$	74.6
Percentage change	Percentage change		14.9		%		14.6		%		15.4		%					14.9		%	Percentage change		2.2		%		25.5		%		9.8		%					10.3		%

Nine Months Ended October 1, 2022
2022 Revenue			$	1,043.6			$	690.3			$	481.0			$	(1.8)		$	2,213.1
Acquisitions			—				(30.8)				—				—			(30.8)
Foreign currency translation			82.1				19.2				13.5				(0.1)			114.7
2022 Organic revenue			$	1,125.7			$	678.7			$	494.5			$	(1.9)		$	2,297.0
2021 Revenue			$	1,045.0			$	626.9			$	408.9			$	(1.2)		$	2,079.6
Organic growth			80.7				51.8				85.6				(0.7)			217.4
Percentage change			7.7		%		8.3		%		20.9		%					10.5		%

34ITT Inc. | Q1 2023 Form 10-Q | 29

•“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, restructuring, ~~severance,~~ certain asset impairment charges, certain acquisition-related impacts and unusual or infrequent operating ~~items and, for 2021, asbestos-related impacts.~~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 that these financial measures are useful to investors and other users of our financial statements in evaluating ongoing operating profitability, as well as evaluating operating performance in relation to our competitors.

The following tables include a reconciliation of operating income to adjusted operating income by segment.


Three Months Ended October 1, 2022		Motion Technologies				Industrial Process				Connect & Control Technologies				Total Segment				Corporate			Total ITT
Three Months Ended April 1, 2023																									Three Months Ended April 1, 2023	Motion Technologies				Industrial Process				Connect & Control Technologies				Total Segment				Corporate			Total ITT

Operating income	Operating income		$	54.0			$	48.1			$	30.3			$	132.4			$	(10.4)		$	122.0		Operating income		$	53.4			$	55.3			$	29.4			$	138.1			$	(13.8)		$	124.3
Impacts related to Russia-Ukraine war																									Impacts related to Russia-Ukraine war		0.3				1.5				—				1.8				—			1.8
Restructuring costs	Restructuring costs		0.7				0.4				—				1.1				(0.1)			1.0			Restructuring costs		0.3				(0.1)				0.1				0.3				—			0.3

Impacts related to Russia-Ukraine war			(0.5)				0.7				—				0.2				—			0.2
Acquisition-related expenses			—				3.1				—				3.1				0.5			3.6

Other(a)	Other(a)		(0.1)				0.1				—				—				0.2			0.2			Other(a)		—				—				(0.2)				(0.2)				—			(0.2)
Adjusted operating income	Adjusted operating income		$	54.1			$	52.4			$	30.3			$	136.8			$	(9.8)		$	127.0		Adjusted operating income		$	54.0			$	56.7			$	29.3			$	140.0			$	(13.8)		$	126.2

Operating margin																									Operating margin		14.6		%		20.8		%		17.5		%		17.3		%					15.6		%
Adjusted operating margin	Adjusted operating margin		15.8		%		21.1		%		18.6		%		18.2		%					16.9		%	Adjusted operating margin		14.8		%		21.3		%		17.5		%		17.5		%					15.8		%

Nine Months Ended October 1, 2022
Operating income			$	160.7			$	107.6			$	84.2			$	352.5			$	(35.4)		$	317.1
Restructuring costs			2.2				1.4				—				3.6				(0.1)			3.5
Asset impairment			—				—				—				—				1.7			1.7
Impacts related to Russia-Ukraine war			3.2				5.0				—				8.2				—			8.2
Acquisition-related expenses			—				3.2				—				3.2				0.5			3.7
Other(a)			1.0				1.2				—				2.2				1.4			3.6
Adjusted operating income			$	167.1			$	118.4			$	84.2			$	369.7			$	(31.9)		$	337.8

Adjusted operating margin			16.0		%		17.2		%		17.5		%		16.7		%					15.3		%


Three Months Ended October 2, 2021
Operating income		$	53.6		$	32.4		$	25.2		$	111.2		$	(9.5)	$	101.7

Restructuring costs		4.1			0.5			(0.1)			4.5			—		4.5
Three Months Ended April 2, 2022																			Three Months Ended April 2, 2022

Other(a)		—			—			—			—			0.6		0.6
Adjusted operating income		$	57.7		$	32.9		$	25.1		$	115.7		$	(8.9)	$	106.8

Adjusted operating margin		17.4		%	15.6		%	17.1		%	16.8		%			15.5		%

Nine Months Ended October 2, 2021

Operating income	Operating income	$	194.3		$	94.9		$	54.9		$	344.1		$	47.1	$	391.2		Operating income	$	59.7		$	20.4		$	25.7		$	105.8		$	(11.2)	$	94.6
Asbestos-related benefit, net(b)		—			—			—			—			(74.4)		(74.4)
Impacts related to Russia-Ukraine war																			Impacts related to Russia-Ukraine war	4.2			4.6			—			8.8			—		8.8
Restructuring costs	Restructuring costs	4.1			1.4			2.4			7.9			0.3		8.2			Restructuring costs	—			0.2			0.1			0.3			—		0.3

Other~~(a)~~(b)	Other~~(a)~~(b)	—			—			—			—			2.3		2.3			Other~~(a)~~(b)	0.9			0.6			—			1.5			0.9		2.4
Adjusted operating income	Adjusted operating income	$	198.4		$	96.3		$	57.3		$	352.0		$	(24.7)	$	327.3		Adjusted operating income	$	64.8		$	25.8		$	25.8		$	116.4		$	(10.3)	$	106.1

Operating margin																			Operating margin	16.1		%	10.1		%	16.6		%	14.6		%			13.0		%
Adjusted operating margin	Adjusted operating margin	19.0		%	15.4		%	14.0		%	16.9		%			15.7		%	Adjusted operating margin	17.5		%	12.8		%	16.7		%	16.0		%			14.6		%

(a)Includes acquisition-related benefits.

(b)Includes severance charges and accelerated amortization of an intangible asset.

~~(b)~~

~~Includes a gain resulting from the divestiture of the entity holding asbestos-related assets and liabilities. See Note 18,~~

~~Commitments and Contingencies~~

~~, for further information.~~

35ITT Inc. | Q1 2023 Form 10-Q | 30

•“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, ~~severance,~~ certain asset impairment charges, certain acquisition-related impacts, income tax settlements or adjustments and unusual or infrequent ~~items and, for 2021, asbestos-related impacts.~~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~~(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.

The following table includes reconciliations of income from continuing operations to adjusted income from continuing operations.

Three Months Ended Nine Months Ended
October 1, 2022 October 2, 2021 October 1, 2022 October 2, 2021
Income from continuing operations attributable to ITT Inc. $ 102.5 $ 86.6 $ 253.1 $ 211.8
Tax-related special items(a)
(6.8) (4.7) (4.9) 2.9
Restructuring costs, net of tax benefit of $(0.3), $(1.5), $(1.0) and $(2.1) respectively 0.7 3.0 2.5 6.1
Asset impairment charges, net of tax benefit of $0.0, $0.0, $(0.4) and $0.0, respectively — — 1.3 —
Impacts related to Russia-Ukraine war, net of tax benefit of $0.0, $0.0, $(1.7) and $0.0, respectively 0.2 — 6.5 —
Net asbestos-related costs, net of tax expense of $0.0, $0.0, $0.0 and $113.5 respectively(b)
— — — 39.1
Acquisition-related costs, net of tax benefit of $(0.7), $0.0, $(0.8) and $0.0, respectively 2.9 — 2.9 —
Other special items, net of tax benefit of $(0.1), $(0.1), $(0.9) and $0.3 respectively(c)
0.1 0.5 2.7 (0.8)
Adjusted income from continuing operations $ 99.6 $ 85.4 $ 264.1 $ 259.1
Income from continuing operations attributable to ITT Inc. per diluted share (EPS) $ 1.23 $ 1.00 $ 3.02 $ 2.45
Adjusted EPS $ 1.20 $ 0.99 $ 3.15 $ 2.99



For the Three Months Ended	April 1, 2023		April 2, 2022
Income from continuing operations attributable to ITT Inc.	$	100.0	$	74.8
Tax-related special items(a)	(6.1)		(1.2)
Impacts related to Russia-Ukraine war, net of tax expense (benefit) of $0.5 and $(1.7), respectively	2.3		7.1
Restructuring costs, net of tax benefit of $(0.1) and $(0.1) respectively	0.2		0.2




Other special items, net of tax benefit of $(0.3) and $(0.4) respectively(b)	0.9		2.0
Adjusted income from continuing operations	$	97.3	$	82.9
Income from continuing operations attributable to ITT Inc. per diluted share (EPS)	$	1.20	$	0.88
Adjusted EPS	$	1.17	$	0.97

(a)~~Tax-related~~2023 tax-related special items primarily reflect benefits from valuation allowance reversals ($17.6) and the amendment of our federal tax return ($4.9), partially offset by a settlement related to a tax audit in Italy ($14.1) and tax on future distribution of foreign earnings ~~impacts~~($2.6). 2022 tax-related special items primarily reflect a benefit from valuation ~~allowances, and~~allowance reversals ($2.8), partially offset by tax on future distribution of foreign earnings ($1.7).

(b)2023 other special items primarily consist of interest charges related to the ~~write-down~~settlement of a tax ~~receivable.~~

~~(b)See Note 18,~~ ~~Commitments and Contingencies, for further information.~~

~~(c)Other~~audit in Italy. 2022 other special items ~~for the quarterly and year-to-date periods~~primarily consist of ~~2022 primarily reflect employee~~ severance expense. 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.costs.

36ITT Inc. | Q1 2023 Form 10-Q | 31

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 ~~2021~~2022 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 ~~2021~~2022 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 ~~2021~~2022 Annual Report. As mentioned therein, due to our operations and sales outside of the U.S., we are subject to inherent business and market risks including movements in foreign exchange rates. During 2022, there has been a rapid strengthening of the U.S. dollar against foreign currencies, including the euro and the Chinese renminbi, which has adversely impacted our financial results. See Part I, Item 2, ~~Management's Discussion and Analysis of Financial Condition and Results of Operations, for further information.~~ See Note ~~19,~~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.

37ITT Inc. | Q1 2023 Form 10-Q | 32

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 ~~18,~~17, Commitments and Contingencies, to the Consolidated Condensed Financial Statements.

ITEM 1A. RISK FACTORS

Reference is made to the risk factors set forth in Part I, Item 1A, “Risk Factors”, of our ~~2021~~2022 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 war with Ukraine, and the global response to it, could adversely impact our financial results.~~

Beginning in February 2022, the U.S. government and other nations imposed significant restrictions on most companies’ ability to do business in Russia as a result of Russia’s war with Ukraine. It is not possible to predict the broader or longer-term consequences of this war, which could include further sanctions, embargoes, regional instability and geopolitical shifts which could have further adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets. Furthermore, such events have the potential to adversely impact the availability of commodities and energy, increase commodity and energy 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 costs, risks, and adverse impacts from these new challenges. War-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 Russia-Ukraine war. During the nine months ended October 1, 2022, we suspended our operations in Russia and recorded charges of $8.2 primarily related to inventory and bad debt reserves. We estimate a negative revenue impact of $85 for 2022 related to a reduction in sales stemming from the Russia-Ukraine war. Continuation of, or an escalation in, the war, or expansion of economic disruption, 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.report.

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

On October 30, 2019, the Board of Directors approved an indefinite term $500 share repurchase program (the 2019 Plan). Share repurchase activity during the three months ended ~~October~~April 1, ~~2022~~2023 is shown in the table below.

Purchases of equity securities by the issuer and affiliated purchasers

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
(IN MILLIONS)
7/3/2022 - 7/30/2022 68,629 $ 66.34 66,579 $ 138.8
8/1/2022 - 8/27/2022 392 $ 75.81 — $ 138.8
8/28/2022 - 10/1/2022 294 $ 74.08 — $ 138.8


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 (IN MILLIONS)
1/1/2023 - 1/28/2023	1,637		$	86.56		—		$	138.8
1/29/2023 - 2/25/2023	21		$	92.11		—		$	138.8
2/26/2023 - 4/1/2023	432,915		$	83.53		366,737		$	108.8

(1)Includes shares withheld in settlement of employee tax withholding obligations due upon the vesting of restricted stock unit and performance stock unit awards. Amounts are in whole numbers.

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

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITT Inc. | Q1 2023 Form 10-Q | 33

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 ~~October~~April 1, ~~2022,~~2023, however, Bornemann did pay fees of approximately €5€2 thousand euros during the ~~nine~~three months ended ~~October~~April 1, ~~2022~~2023 and approximately ~~€10~~€7 thousand euros during ~~2021~~2022 to the German financial institution which is maintaining the Bond.

39ITT Inc. | Q1 2023 Form 10-Q | 34

ITEM 6. EXHIBITS


EXHIBIT NUMBER						DESCRIPTION

~~(10.1)~~						~~Annual Compensation of 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 ~~October~~April 1, ~~2022,~~2023, 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 ~~October~~April 1, ~~2022,~~2023, formatted in Inline XBRL (included in Exhibit 101).

40ITT Inc. | Q1 2023 Form 10-Q | 35

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/ ~~Emmanuel Caprais~~CHERYL DE MESA GRAZIANO
						~~Emmanuel Caprais~~Cheryl de Mesa Graziano
						Vice President and Chief ~~Financial~~Accounting Officer
						(Principal Accounting Officer)

~~November 3, 2022~~May 4, 2023

41ITT Inc. | Q1 2023 Form 10-Q | 36


Remaining of 2022			6.7
2023			19.4
2024			14.0
2025			13.2
2026			9.4
2027			8.1
Thereafter			26.9


As of and for the Three Months Ended October 2, 2021
July 3, 2021	$	(55.9)	$	(245.1)	$	(301.0)
Net change in postretirement benefit plans, net of tax	3.1		—		3.1
Net foreign currency translation adjustment	—		(21.5)		(21.5)
October 2, 2021	$	(52.8)	$	(266.6)	$	(319.4)



As of and for the Nine Months Ended October 2, 2021
December 31, 2020	$	(55.9)	$	(223.5)	$	(279.4)
Net change in postretirement benefit plans, net of tax	3.1		—		3.1
Net foreign currency translation adjustment	—		(43.1)		(43.1)
October 2, 2021	$	(52.8)	$	(266.6)	$	(319.4)