ITT INC

NOTE 11

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Goodwill

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

(a)Goodwill acquired for our CCT segment is related to our acquisition of Micro-mode representing the calculation of the excess purchase price over the net assets acquired.

(b)During the fourth quarter of 2023, we completed the sale of our Matrix business, which was previously included within our CCT segment.

(c)Goodwill acquired for our IP and CCT segments is related to our acquisitions of Svanehøj and kSARIA, respectively, representing the calculation of the excess purchase price over the net assets acquired.

(d)During the third quarter of 2024, we completed the sale of our Wolverine business, which was previously included within our MT segment.

See Note 21, Acquisitions, Investments, and Divestitures, for further information.

Goodwill acquired represents the preliminary calculation of the excess purchase price over the net assets acquired. During the year ended December 31, 2024, goodwill acquired is related to our acquisition of Svanehøj and kSARIA. The valuation of Svanehøj was finalized and kSARIA is pending completion. Upon completion, goodwill acquired will be adjusted based on the final fair values of the net assets acquired. Refer to Note 21, Acquisitions, Investments, and Divestitures, for further information.

Other Intangible Assets, Net

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

(a)During the second quarter of 2024, we completed the sale of our Wolverine business, which was previously included within our MT segment. Indefinite-lived intangibles with a net book value of $7.0 were written off as part of the divestiture. See Note 21, Acquisitions, Investments, and Divestitures, for further information.

The fair values of intangible assets acquired in connection with the purchase of Svanehøj and kSARIA consist of the following:

(a)Other intangible assets for kSARIA reflect favorable lease intangibles.

Customer relationships, proprietary technology and trademarks and other intangible assets are amortized over weighted average lives of approximately 13.6 years,14.4 years and 7.1 years, respectively. Indefinite-lived intangibles primarily consist of brands and trademarks.

Amortization expense related to intangible assets for 2024, 2023 and 2022 was $42.1, $19.1, and $20.8, respectively. Estimated amortization expense for each of the five succeeding years and thereafter is as follows:

NOTE 12

ACCOUNTS PAYABLE, ACCRUED LIABILITIES AND OTHER NON-CURRENT LIABILITIES

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

Supply Chain Financing

The Company has supply chain financing ("SCF") programs in place under which participating suppliers may elect to obtain payment from an intermediary. The Company confirms the validity of invoices from participating suppliers and agrees to pay the intermediary an amount based on invoice totals. The majority of amounts payable under these programs are due within 90 to 180 days and are considered commercially reasonable. There are no assets pledged as security or other forms of guarantees provided for the committed payments.

The following table displays a rollforward of our supply chain financing obligations which is included within Accounts payable in our Consolidated Balance Sheets.

NOTE 13

LEASES

The Company’s lease portfolio primarily relates to real estate, which may be used for manufacturing or non-manufacturing purposes (e.g., office space), and contains lease terms generally ranging between one and 24 years. Our lease portfolio also includes vehicles and equipment. Substantially all of our leases are classified as operating leases.

Lease costs associated with fixed payments related to the Company's operating leases were $31.4, $30.2, and $26.6 for the years ended December 31, 2024, 2023 and 2022, respectively. Short-term lease costs, variable lease costs, and sublease income related to our operating leases, as well as total lease costs related to our finance leases, were not material for the years ended December 31, 2024, 2023 and 2022.

The following table displays our future lease obligations related to non-cancellable operating leases with an initial term in excess of 12 months as of December 31, 2024.

(a)Includes $22.6 of current operating lease liabilities recorded within Accrued and other current liabilities and $73.7 of non-current operating lease liabilities recorded within Other non-current liabilities in our Consolidated Balance Sheets.

The following table includes other supplemental information regarding our operating leases.

(a)Included within Other, net in our Consolidated Statements of Cash Flows.

(b)We use a discount rate for each lease based on an estimated incremental borrowing rate over a similar term as the lease, as the discount rate implicit in each lease cannot be readily determined.

NOTE 14

DEBT

The following table summarizes our outstanding debt obligations.

(a)The increase in commercial paper outstanding from December 31, 2023 to December 31, 2024 was primarily related to acquisition activity that was partially financed using commercial paper, and timing of repayments. Note 21, Acquisitions, Investments, and Divestitures, for additional information.

(b)Long-term debt is primarily related to a term loan that the Company entered into in September 2024 in connection with the acquisition of kSARIA. See additional details in section titled, “U.S. Term Loan”, below.

Commercial Paper

The following table presents our outstanding commercial paper borrowings and associated weighted average interest rates.

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

U.S. Term Loan

On September 12, 2024, the Company entered into a credit agreement (the kSARIA Credit Agreement) among the Company, as borrower, each lender from time to time party thereto, and U.S. Bank National Association, as the administrative agent, sole lead arranger and sole bookrunner.

The kSARIA Credit Agreement has a maturity of three years (September 2027) and provides for a term loan of $464.0, which had been borrowed and was used to finance the Company’s acquisition of kSARIA on September 12, 2024. Debt issuance costs were $0.9 and will be amortized over the term of the debt. During 2024, repayments of the U.S. Term Loan totaled $235.0.

Borrowings under the kSARIA Credit Agreement bear interest at an annual rate equal to, at the Company’s option, either (i) term secured overnight financing rate (Term SOFR) (subject to a 0.10% “credit spread adjustment”) plus a margin ranging from 0.875% to 1.500%, or (ii) an alternate base rate plus a margin ranging from 0.0% to 0.5%, with the applicable margin determined by reference to the Company’s debt ratings set forth in the kSARIA Credit Agreement. The annual interest rate as of December 31, 2024 was 5.41%. The loans under the kSARIA Credit Agreement may be prepaid by the Company at any time, in whole or in part, without penalty or premium, subject to certain conditions.

The kSARIA Credit Agreement contains customary affirmative and negative covenants, as well as financial covenants (e.g., leverage ratio), that are similar to those contained in our 2021 Revolving Credit Agreement, as described below. As of December 31, 2024, all financial covenants (e.g., leverage ratio) associated with the kSARIA Credit Agreement were within the prescribed thresholds.

The following table provides the future maturities related to the outstanding balance as of December 31, 2024.

Italian Term Loan

On January 12, 2024, ITT Italia S.r.l. (ITT Italia), an indirect wholly owned subsidiary of the Company, 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 had an initial maturity of three years (January 2027) and provided for term loan borrowings in an aggregate principal amount of €300 (or $328.9), €275 (or $301.5) of which had been borrowed and were used to finance the Company’s acquisition of Svanehøj, which closed on January 19, 2024. During the third quarter of 2024, ITT Italia repaid €175, representing the remaining outstanding balance on the ITT Italia Credit Agreement. During 2024, repayments of the facility agreement totaled €275. Debt issuance costs totaled $1.8, which were fully amortized during 2024.

The interest rate per annum on the ITT Italia Credit Agreement was based on the EURIBOR rate for Euros, plus a margin of 1.00%.

Other Long-term Debt

Our other long-term debt is primarily related to outstanding Italian government loans maturing in June 2027 and September 2029, which carries a weighted average fixed interest rate of 0.85% and requires annual principal and interest payments of approximately $1.0 on average, through maturity.

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). 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.

On May 10, 2023, we entered into the First Amendment (the Amendment) to the Company’s 2021 Revolving Credit Agreement. In connection with the phase out of LIBOR as a reference interest rate, the Amendment replaced LIBOR as a benchmark for United States Dollar revolving borrowings with the term secured overnight financing rate (Term SOFR), and replaced LIBOR as a benchmark for Euro swing line borrowings with the euro overnight short-term rate (ESTR). The Amendment did not have a significant impact on the Company’s consolidated financial statements.

Since the Amendment, the interest rate per annum on the 2021 Revolving Credit Agreement is based on the Term SOFR rate of the currency we borrow in, plus a margin of 1.00%. There is a 0.125% 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. As of December 31, 2024 and December 31, 2023, we had no outstanding obligations under the current or former revolving credit facility.

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.

As of December 31, 2024, all financial covenants (e.g., leverage ratio) associated with the 2021 Revolving Credit Agreement were within the prescribed thresholds.