ITT INC

LIQUIDITY AND CAPITAL RESOURCES

Funding and Liquidity Strategy

We monitor our funding needs and execute strategies to meet overall liquidity requirements, including the management of our capital structure, on both a short- and long-term basis. Significant factors that affect our overall management of liquidity include our cash flow from operations, credit ratings, the availability of commercial paper, access to bank lines of credit, term loans, and the ability to attract long-term capital on satisfactory terms. We assess these factors along with current market conditions on a continuous basis, and as a result, may alter the mix of our short- and long-term financing when it is advantageous to do so. We expect to have enough liquidity to fund operations for at least the next 12 months and beyond.

We manage our worldwide cash requirements considering available funds among the many subsidiaries through which we conduct business and the cost effectiveness with which those funds can be accessed. We 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 six months ended June 29, 2024, we had net cash distributions from foreign countries to the U.S. of $87.9. During the year ended December 31, 2023, we had net cash distributions from foreign countries to the U.S. of $357.5. 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, several 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 second quarter of 2024, we declared a dividend of $0.319 per share for shareholders of record on June 3, 2024, which was a 10% increase from the quarterly dividends of $0.29 that were declared in 2023. Dividend payments during the six months ended June 29, 2024 amounted to $52.6.

From time to time, the Company may repurchase shares of its stock on the open market. The timing of any repurchases and the actual number of shares repurchased depends on a variety of factors, including remaining authorization under existing Board-approved share repurchase programs, the Company’s stock price, restrictions under the Company’s debt obligations, other uses for capital, the dilutive impact of shares issued during the period related to the Company’s long-term incentive plans, impacts on the value of remaining shares, and market and economic conditions. During the six months ended June 29, 2024, we spent $79.0 on open-market share repurchases under our share repurchase programs. During the six months ended July 1, 2023, we spent $60.0 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. to supplement cash flows generated internally and to provide additional short-term funding.

The following table presents our outstanding commercial paper borrowings.

From December 31, 2023 to June 29, 2024, we increased our borrowings under the U.S. commercial paper program to partially finance the acquisition of Svanehøj. See Note 13, 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 June 29, 2024 and December 31, 2023, we had no outstanding borrowings under the 2021 Revolving Credit Agreement. See Note 13, Debt, to the Consolidated Condensed Financial Statements for further information.

Term Loan

On January 12, 2024, ITT Italia S.r.l. (ITT Italia), an indirect wholly owned subsidiary of ITT, entered into a facility agreement (the ITT Italia Credit Agreement), among the Company, as a guarantor, ITT Italia, as borrower, and BNP Paribas, Italian Branch, as bookrunner, sole underwriter and global coordinator, mandated lead arranger and agent.

The ITT Italia Credit Agreement has an initial maturity of three years and provides for term loan borrowings in an aggregate principal amount of €300 million (or $328.9), €275 million (or $301.5) of which have been used to finance the Company’s acquisition of Svanehøj, which closed on January 19, 2024. Total outstanding borrowings under the facility were €175 million, or $187.2, as of June 29, 2024. See Note 13, Debt, to the Consolidated Condensed Financial Statements for further information.

On July 22, 2024, the Company completed the sale of its Wolverine business to an unrelated third party for approximately $171. Proceeds from the sale are expected to be used to pay down the outstanding balance on the ITT Italia Credit Agreement.

Subsequent Event

On July 30, 2024, the Company entered into a definitive agreement to acquire kSARIA Parent, Inc., the parent corporation of kSARIA Holding Corporation (kSARIA) for a purchase price of approximately $475, subject to customary closing adjustments. The acquisition is expected to close during the third quarter of 2024. In order to finance the acquisition of kSARIA, the Company expects to borrow under a new term loan credit facility in the third quarter of 2024.

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

Operating Activities

The increase in net cash from operating activities of $17.7 was primarily due to an increase in segment operating income and improved inventory management, which was partially offset by higher incentive compensation payments in the current period.

Investing Activities

The decrease in net cash from investing activities of $340.8 was mainly driven by the acquisition of Svanehøj. Refer to Note 18, Acquisitions and Divestitures, to the Consolidated Condensed Financial Statements for further information.

Financing Activities

The increase in net cash from financing activities of $390.1 was mainly driven by an increase in commercial paper borrowings and long-term debt to finance the acquisition of Svanehøj. Refer to Note 13, Debt, to the Consolidated Condensed Financial Statements for further information. The increase was partially offset by an increase in open-market share repurchase activity. Refer to Note 15, Capital Stock, to the Consolidated Condensed Financial Statements for further information.