EX-99.2
4
exhibit992proformaunaudite.htm
EX-99.2
Document
EXHIBIT 99.2
Unaudited Pro Forma Consolidated Condensed Financial Statements
Introduction
On June 30, 2021, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") with Sapphire TopCo, Inc. ("Buyer") under which the Company transferred 100% of the equity interests of InTelCo Management LLC ("InTelCo") to the Buyer (the "Sale") effective as of 12:01am on July 1, 2021. In connection with the Sale, the Company contributed approximately $398 million of cash to InTelCo. Because subsidiaries of InTelCo are the obligors for the Company's asbestos-related liabilities and policyholders of related insurance assets, the rights and obligations related to these items transferred upon completion of the Sale. In addition, pursuant to the Purchase Agreement, Buyer and InTelCo indemnify the Company and its affiliates for asbestos-related liabilities and other product liabilities as more specifically described in the Purchase Agreement. This indemnification obligation with respect to Asbestos-Related Liabilities (as such term is defined in the Purchase Agreement) is not subject to any cap or time limitation. Following the completion of the transfer, the Company no longer has any obligation with respect to previously recorded asbestos-related liabilities or rights with respect to the related insurance assets. As such, effective as of closing, InTelCo has been deconsolidated from the financial results of the Company.
The unaudited pro forma financial information was prepared utilizing our historical financial data derived from the interim consolidated financial statements included in our Quarterly Report on Form 10-Q for the period ended April 3, 2021, which was filed with the Securities and Exchange Commission on May 7, 2021, and from the audited consolidated financial statements for the year ended December 31, 2020 included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on February 19, 2021. The pro forma adjustments are described in the notes to the unaudited pro forma information and are based upon available information and assumptions that we believe are reasonable.
The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of what our financial performance and financial position would have been had the transaction been completed on the dates assumed, nor is such unaudited pro forma financial information necessarily indicative of the results to be expected in any future period.
EXHIBIT 99.2
ITT INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS)
April 3, 2021
As Reported
InTelCo
Divestiture
(a)
Other
Adjustments
(b)
April 3, 2021
Pro Forma
Assets
Current assets:
Cash and cash equivalents
$
780.2
$
(398.0)
$
150.0
$
532.2
Receivables, net
546.3
546.3
Inventories, net
374.7
374.7
Other current assets
190.8
(91.0)
99.8
Total current assets
1,892.0
(489.0)
150.0
1,553.0
Plant, property and equipment, net
501.2
501.2
Goodwill
933.4
933.4
Other intangible assets, net
100.3
100.3
Asbestos-related assets
330.8
(330.8)
-
Deferred income taxes
156.3
(116.7)
39.6
Other non-current assets
265.7
265.7
Total non-current assets
2,287.7
(447.5)
1,840.2
Total assets
$
4,179.7
$
(936.5)
$
150.0
$
3,393.2
Liabilities and Shareholders' Equity
Current liabilities:
Commercial paper and current maturities of long-term debt
$
61.2
$
150.0
$
211.2
Accounts payable
327.0
(0.1)
326.9
Accrued liabilities
438.3
(91.3)
347.0
Total current liabilities
826.5
(91.4)
150.0
885.1
Asbestos-related liabilities
818.3
(818.3)
-
Postretirement benefits
222.8
222.8
Other non-current liabilities
204.2
204.2
Total non-current liabilities
1,245.3
(818.3)
427.0
Total liabilities
$
2,071.8
$
(909.7)
$
150.0
$
1,312.1
Total ITT Inc. shareholders' equity
2,106.1
(26.8)
2,079.3
Noncontrolling interests
1.8
1.8
Total shareholders' equity
2,107.9
(26.8)
2,081.1
Total liabilities and shareholders' equity
$
4,179.7
$
(936.5)
$
150.0
$
3,393.2
EXHIBIT 99.2
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended
April 3, 2021
Twelve Months Ended
December 31, 2020
As Reported
InTelCo Divestiture (c)
Pro Forma
As Reported
InTelCo Divestiture (c)
Pro Forma
Revenue
$
698.4
$
698.4
$
2,477.8
$
2,477.8
Costs of revenue
469.4
469.4
1,695.6
1,695.6
Gross profit
229.0
229.0
782.2
782.2
General and administrative expenses
52.1
52.1
200.7
200.7
Sales and marketing expenses
36.7
36.7
146.5
146.5
Research and development expenses
24.3
24.3
84.9
84.9
Asbestos-related costs (benefit), net
2.4
(2.4)
-
66.3
(94.9)
(28.6)
Other operating expenses
3.6
3.6
57.3
57.3
Operating income
109.9
2.4
112.3
226.5
94.9
321.4
Interest and non-operating (income) expenses, net
(1.3)
0.1
(1.2)
141.3
0.3
141.6
Income from continuing operations before income tax expense
111.2
2.3
113.5
85.2
94.6
179.8
Income tax expense
24.7
0.5
25.2
15.3
118.8
134.1
Less: Income attributable to noncontrolling interests
0.3
0.3
1.4
1.4
Income from continuing operations, net of tax attributable to ITT Inc.
$
86.2
$
1.8
$
88.0
$
68.5
$
(24.2)
$
44.3
Earnings per share from continuing operations attributable to ITT Inc.:
Basic earnings per share
$
1.00
$
0.02
$
1.02
$
0.79
$
(0.28)
$
0.51
Diluted earnings per share
$
0.99
$
0.02
$
1.01
$
0.78
$
(0.27)
$
0.51
Weighted average common shares - basic
86.3
86.3
86.3
86.7
86.7
86.7
Weighted average common shares - diluted
86.9
86.9
86.9
87.3
87.3
87.3
EXHIBIT 99.2
Notes to Unaudited Pro Forma Consolidated Condensed Financial Information
(Millions of Dollars)
Note 1. Basis of Presentation
The pro forma consolidated condensed balance sheet and statements of operations have been derived from the historical consolidated condensed balance sheet and statements of operations of ITT Inc. as adjusted to give effect to the sale of InTelCo. The pro forma consolidated condensed balance sheet gives effect to the sale as if it occurred on April 3, 2021, which was the last day of ITT Inc.'s 2021 first fiscal quarter. The pro forma consolidated condensed statements of operations for the three months ended April 3, 2021 and the year ended December 31, 2020 give effect to the sale as if it occurred on January 1, 2020.
Note 2. Sale Transaction
Pursuant to the sale agreement, ITT Inc. contributed $398 to the InTelCo entities and 100% of the equity interests of InTelCo were transferred to the Buyer, and Buyer and InTelCo indemnify ITT for all asbestos-related and other product liabilities. Following the completion of the transfer, the Company no longer has any obligation with respect to previously recorded asbestos-related liabilities or rights with respect to the related insurance assets. As such, effective as of closing, InTelCo has been deconsolidated from the financial results of the Company as we no longer maintain control of the entity.
The transaction was partially funded with $150 in borrowings under our U.S. commercial paper program at a weighted average interest rate of 21 basis points.
Note 3. Pro Forma Adjustments
(a) Represents adjustments to reflect the disposition of the asbestos-related assets and liabilities of InTelCo associated with the transaction described above, including deferred tax assets, for $398 in cash. The net decrease to shareholders' equity of $26.8 represents the estimated after-tax loss on the disposition of InTelCo as if it occurred on April 3, 2021.
(b) The transaction was partially funded with commercial paper borrowings, with a weighted average interest rate of 21 basis points at the time of the transaction. This adjustment reflects the borrowings as if they occurred on April 3, 2021.
(c) Represents adjustments to eliminate the operating results of InTelCo and other administrative expenses related to the management of asbestos liabilities. The year ended December 31, 2020 includes a non-recurring pre-tax gain of $28.6 and non-recurring income tax expense of $101.5 had the sale occurred on January 1, 2020. Additionally, an adjustment is made for incremental interest expense assuming the commercial paper borrowings of $150 with a weighted average interest rate of 21 basis points were outstanding during the periods presented. The tax effect was calculated using the statutory rates in effect during the periods presented.

EX - 99 . 2 4 exhibit992proformaunaudite . htm EX - 99 . 2 Document EXHIBIT 99 . 2 Unaudited Pro Forma Consolidated Condensed Financial Statements Introduction On June 30 , 2021 , the Company entered into a Membership Interest Purchase Agreement ( the " Purchase Agreement " ) with Sapphire TopCo , Inc . ( " Buyer " ) under which the Company transferred 100 % of the equity interests of InTelCo Management LLC ( " InTelCo " ) to the Buyer ( the " Sale " ) effective as of 12 : 01 am on July 1 , 2021 . In connection with the Sale , the Company contributed approximately $ 398 million of cash to InTelCo . Because subsidiaries of InTelCo are the obligors for the Company 's asbestos - related liabilities and policyholders of related insurance assets , the rights and obligations related to these items transferred upon completion of the Sale . In addition , pursuant to the Purchase Agreement , Buyer and InTelCo indemnify the Company and its affiliates for asbestos - related liabilities and other product liabilities as more specifically described in the Purchase Agreement . This indemnification obligation with respect to Asbestos - Related Liabilities ( as such term is defined in the Purchase Agreement ) is not subject to any cap or time limitation . Following the completion of the transfer , the Company no longer has any obligation with respect to previously recorded asbestos - related liabilities or rights with respect to the related insurance assets . As such , effective as of closing , InTelCo has been deconsolidated from the financial results of the Company . The unaudited pro forma financial information was prepared utilizing our historical financial data derived from the interim consolidated financial statements included in our Quarterly Report on Form 10 - Q for the period ended April 3 , 2021 , which was filed with the Securities and Exchange Commission on May 7 , 2021 , and from the audited consolidated financial statements for the year ended December 31 , 2020 included in our Annual Report on Form 10 - K , which was filed with the Securities and Exchange Commission on February 19 , 2021 . The pro forma adjustments are described in the notes to the unaudited pro forma information and are based upon available information and assumptions that we believe are reasonable . The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of what our financial performance and financial position would have been had the transaction been completed on the dates assumed , nor is such unaudited pro forma financial information necessarily indicative of the results to be expected in any future period . EXHIBIT 99 . 2 ITT INC . AND SUBSIDIARIES UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS ( IN MILLIONS ) April 3 , 2021 As Reported InTelCo Divestiture ( a ) Other Adjustments ( b ) April 3 , 2021 Pro Forma Assets Current assets : Cash and cash equivalents $ 780 . 2 $ ( 398 . 0 ) $ 150 . 0 $ 532 . 2 Receivables , net 546 . 3 546 . 3 Inventories , net 374 . 7 374 . 7 Other current assets 190 . 8 ( 91 . 0 ) 99 . 8 Total current assets 1,892 . 0 ( 489 . 0 ) 150 . 0 1,553 . 0 Plant , property and equipment , net 501 . 2 501 . 2 Goodwill 933 . 4 933 . 4 Other intangible assets , net 100 . 3 100 . 3 Asbestos - related assets 330 . 8 ( 330 . 8 ) - Deferred income taxes 156 . 3 ( 116 . 7 ) 39 . 6 Other non - current assets 265 . 7 265 . 7 Total non - current assets 2,287 . 7 ( 447 . 5 ) 1,840 . 2 Total assets $ 4,179 . 7 $ ( 936 . 5 ) $ 150 . 0 $ 3,393 . 2 Liabilities and Shareholders ' Equity Current liabilities : Commercial paper and current maturities of long - term debt $ 61 . 2 $ 150 . 0 $ 211 . 2 Accounts payable 327 . 0 ( 0 . 1 ) 326 . 9 Accrued liabilities 438 . 3 ( 91 . 3 ) 347 . 0 Total current liabilities 826 . 5 ( 91 . 4 ) 150 . 0 885 . 1 Asbestos - related liabilities 818 . 3 ( 818 . 3 ) - Post retirement benefits 222 . 8 222 . 8 Other non - current liabilities 204 . 2 204 . 2 Total non - current liabilities 1,245 . 3 ( 818 . 3 ) 427 . 0 Total liabilities $ 2,071 . 8 $ ( 909 . 7 ) $ 150 . 0 $ 1,312 . 1 Total ITT Inc . shareholders ' equity 2,106 . 1 ( 26 . 8 ) 2,079 . 3 Non controlling interests 1 . 8 1 . 8 Total shareholders ' equity 2,107 . 9 ( 26 . 8 ) 2,081 . 1 Total liabilities and shareholders ' equity $ 4,179 . 7 $ ( 936 . 5 ) $ 150 . 0 $ 3,393 . 2 EXHIBIT 99 . 2 UNAUDITED PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ( IN MILLIONS , EXCEPT PER SHARE AMOUNTS ) Three Months Ended April 3 , 2021 Twelve Months Ended December 31 , 2020 As Reported InTelCo Divestiture ( c ) Pro Forma As Reported InTelCo Divestiture ( c ) Pro Forma Revenue $ 698 . 4 $ 698 . 4 $ 2,477 . 8 $ 2,477 . 8 Costs of revenue 469 . 4 469 . 4 1,695 . 6 1,695 . 6 Gross profit 229 . 0 229 . 0 782 . 2 782 . 2 General and administrative expenses 52 . 1 52 . 1 200 . 7 200 . 7 Sales and marketing expenses 36 . 7 36 . 7 146 . 5 146 . 5 Research and development expenses 24 . 3 24 . 3 84 . 9 84 . 9 Asbestos - related costs ( benefit ) , net 2 . 4 ( 2 . 4 ) - 66 . 3 ( 94 . 9 ) ( 28 . 6 ) Other operating expenses 3 . 6 3 . 6 57 . 3 57 . 3 Operating income 109 . 9 2 . 4 112 . 3 226 . 5 94 . 9 321 . 4 Interest and non - operating ( income ) expenses , net ( 1 . 3 ) 0 . 1 ( 1 . 2 ) 141 . 3 0 . 3 141 . 6 Income from continuing operations before income tax expense 111 . 2 2 . 3 113 . 5 85 . 2 94 . 6 179 . 8 Income tax expense 24 . 7 0 . 5 25 . 2 15 . 3 118 . 8 134 . 1 Less : Income attributable to non controlling interests 0 . 3 0 . 3 1 . 4 1 . 4 Income from continuing operations , net of tax attributable to ITT Inc . $ 86 . 2 $ 1 . 8 $ 88 . 0 $ 68 . 5 $ ( 24 . 2 ) $ 44 . 3 Earnings per share from continuing operations attributable to ITT Inc . : Basic earnings per share $ 1 . 00 $ 0 . 02 $ 1 . 02 $ 0 . 79 $ ( 0 . 28 ) $ 0 . 51 Diluted earnings per share $ 0 . 99 $ 0 . 02 $ 1 . 01 $ 0 . 78 $ ( 0 . 27 ) $ 0 . 51 Weighted average common shares - basic 86 . 3 86 . 3 86 . 3 86 . 7 86 . 7 86 . 7 Weighted average common shares - diluted 86 . 9 86 . 9 86 . 9 87 . 3 87 . 3 87 . 3 EXHIBIT 99 . 2 Notes to Unaudited Pro Forma Consolidated Condensed Financial Information ( Millions of Dollars ) Note 1 . Basis of Presentation The pro forma consolidated condensed balance sheet and statements of operations have been derived from the historical consolidated condensed balance sheet and statements of operations of ITT Inc . as adjusted to give effect to the sale of InTelCo . The pro forma consolidated condensed balance sheet gives effect to the sale as if it occurred on April 3 , 2021 , which was the last day of ITT Inc . 's 2021 first fiscal quarter . The pro forma consolidated condensed statements of operations for the three months ended April 3 , 2021 and the year ended December 31 , 2020 give effect to the sale as if it occurred on January 1 , 2020 . Note 2 . Sale Transaction Pursuant to the sale agreement , ITT Inc . contributed $ 398 to the InTelCo entities and 100 % of the equity interests of InTelCo were transferred to the Buyer , and Buyer and InTelCo indemnify ITT for all asbestos - related and other product liabilities . Following the completion of the transfer , the Company no longer has any obligation with respect to previously recorded asbestos - related liabilities or rights with respect to the related insurance assets . As such , effective as of closing , InTelCo has been deconsolidated from the financial results of the Company as we no longer maintain control of the entity . The transaction was partially funded with $ 150 in borrowings under our U . S . commercial paper program at a weighted average interest rate of 21 basis points . Note 3 . Pro Forma Adjustments ( a ) Represents adjustments to reflect the disposition of the asbestos - related assets and liabilities of InTelCo associated with the transaction described above , including deferred tax assets , for $ 398 in cash . The net decrease to shareholders ' equity of $ 26.8 represents the estimated after - tax loss on the disposition of InTelCo as if it occurred on April 3 , 2021 . ( b ) The transaction was partially funded with commercial paper borrowings , with a weighted average interest rate of 21 basis points at the time of the transaction . This adjustment reflects the borrowings as if they occurred on April 3 , 2021 . ( c ) Represents adjustments to eliminate the operating results of InTelCo and other administrative expenses related to the management of asbestos liabilities . The year ended December 31 , 2020 includes a non - recurring pre - tax gain of $ 28.6 and non - recurring income tax expense of $ 101.5 had the sale occurred on January 1 , 2020 . Additionally , an adjustment is made for incremental interest expense assuming the commercial paper borrowings of $ 150 with a weighted average interest rate of 21 basis points were outstanding during the periods presented . The tax effect was calculated using the statutory rates in effect during the periods presented .
O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O B-Parties.BUYING_COMPANY I-Parties.BUYING_COMPANY I-Parties.BUYING_COMPANY I-Parties.BUYING_COMPANY I-Parties.BUYING_COMPANY O O O O O O O O O O O O O O O O O B-Parties.ACQUIRED_COMPANY I-Parties.ACQUIRED_COMPANY I-Parties.ACQUIRED_COMPANY O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O B-Parties.ACQUIRED_COMPANY O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O B-Parties.ACQUIRED_COMPANY O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O O