Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013
or
o
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: 1-5672
ITT CORPORATION
State of Indiana
 
13-5158950
(State or Other Jurisdiction
of Incorporation or Organization)
 
(I.R.S. Employer
Identification Number)
1133 Westchester Avenue, White Plains, NY 10604
(Principal Executive Office)
Telephone Number: (914) 641-2000
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 and (2) has been subject to such filing requirements for the past 90 days.  Yes   þ     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   þ     No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer   þ
Accelerated filer   o
Non-accelerated filer   o
Smaller reporting company   o
 
  (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   o     No   þ
As of July 23, 2013 , there were outstanding 90.3 million shares of common stock ($1 par value per share) of the registrant.
 


Table of Contents

TABLE OF CONTENTS
ITEM
   
PAGE
PART I – FINANCIAL INFORMATION
1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2.
 
 
 
 
 
 
 
3.
4.
 
PART II – OTHER INFORMATION
 
1.
1A.
2.
3.
4.
5.
6.
 
 

Table of Contents

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 (the Act). These forward-looking statements include statements that describe our business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. Whenever used, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” and other terms of similar meaning are intended to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed in, or implied 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, there can be no assurance that the expectation or belief will result or will be achieved or accomplished. More information on factors that could cause actual results or events to differ materially from those anticipated in included from time to time in our reports filed with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2012 , particularly under the caption “Risk Factors.”
The forward-looking statements included in this disclosure speak only as of the date of this report. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. See Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2012 for further discussion pertaining to known and unknown risk affecting the Company.

WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You can inspect, read and copy these reports, proxy statements and other information at the SEC's Public Reference Room, which is located at 100 F Street, N.E., Washington, D.C. 20549. You can obtain information regarding the operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website at www.sec.gov that makes available reports, proxy statements and other information regarding issuers that file electronically.
We make available free of charge at http://www.itt.com (in the “Investors” section) copies of materials we file with, or furnish to, the SEC. By referring to our corporate website, www.itt.com, we do not incorporate such website or its contents into this Quarterly Report on Form 10-Q.


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ITT CORPORATION AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS
CONSOLIDATED CONDENSED INCOME STATEMENTS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
2013
 
2012
Revenue
$
609.2

 
$
557.9

 
$
1,217.4

 
$
1,126.0

Costs of revenue
411.4

 
387.5

 
829.1

 
785.4

Gross profit
197.8

 
170.4

 
388.3

 
340.6

Sales and marketing expenses
57.5

 
45.8

 
109.3

 
92.9

General and administrative expenses
66.6

 
41.3

 
135.7

 
99.0

Research and development expenses
16.4

 
16.6

 
32.8

 
32.7

Asbestos-related costs, net
15.9

 
9.7

 
31.9

 
22.3

Operating income
41.4

 
57.0

 
78.6

 
93.7

Interest and non-operating expenses, net
2.2

 
3.4

 
4.9

 
5.0

Income from continuing operations before income tax expense
39.2

 
53.6

 
73.7

 
88.7

Income tax expense
14.4

 
37.4

 
29.4

 
62.0

Income from continuing operations
24.8

 
16.2

 
44.3

 
26.7

Income (loss) from discontinued operations, including tax expense (benefit) of $0.3, ($1.2), $(0.2) and $0, respectively
1.1

 
0.6

 
2.8

 
(6.7
)
Net income
25.9

 
16.8

 
47.1

 
20.0

Less: Income attributable to noncontrolling interests
0.1

 
—

 
0.5

 
—

Net income attributable to ITT Corporation
$
25.8

 
$
16.8

 
$
46.6

 
$
20.0

Amounts attributable to ITT Corporation:
 
 
 
 
 
 
 
Income from continuing operations, net of tax
$
24.7

 
$
16.2

 
$
43.8

 
$
26.7

Income (loss) from discontinued operations, net of tax
1.1

 
0.6

 
2.8

 
(6.7
)
Net income
$
25.8

 
$
16.8

 
$
46.6

 
$
20.0

Earnings (loss) per share attributable to ITT Corporation:
 
 
 
 
 
 
 
Basic:
 
 
 
 
 
 
 
Continuing operations
$
0.27

 
$
0.17

 
$
0.48

 
$
0.29

Discontinued operations
0.02

 
0.01

 
0.03

 
(0.08
)
Net income
$
0.29

 
$
0.18

 
$
0.51

 
$
0.21

Diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.27

 
$
0.17

 
$
0.47

 
$
0.28

Discontinued operations
0.01

 
0.01

 
0.03

 
(0.07
)
Net income
$
0.28

 
$
0.18

 
$
0.50

 
$
0.21

Weighted average common shares – basic
90.4

 
92.8

 
91.2

 
93.4

Weighted average common shares – diluted
91.6

 
93.9

 
92.4

 
94.7

Cash dividends declared per common share
$
0.10

 
$
0.091

 
$
0.20

 
$
0.182

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above income statements.

1
ITT CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(IN MILLIONS)
 
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
2013
 
2012
Net income
$
25.9

 
$
16.8

 
$
47.1

 
$
20.0

Other comprehensive income (loss):
 
 
 
 
 
 
 
Net foreign currency translation adjustment
0.8

 
(45.4
)
 
(25.2
)
 
(15.4
)
Net change in postretirement benefit plans, net of tax impacts (a)
3.1

 
2.9

 
5.9

 
14.4

Other comprehensive income (loss)
3.9

 
(42.5
)
 
(19.3
)
 
(1.0
)
Comprehensive income (loss)
29.8

 
(25.7
)
 
27.8

 
19.0

Less: Comprehensive income attributable to noncontrolling interests
0.1

 
—

 
0.5

 
—

Comprehensive income (loss) attributable to ITT Corporation
$
29.7

 
$
(25.7
)
 
$
27.3

 
$
19.0

Disclosure of reclassification and other adjustments to postretirement benefit plans
 
 
 
 
 
 
 
Reclassification adjustments:
 
 
 
 
 
 
 
Amortization of prior service costs, net of tax (a)
$
0.1

 
$
0.2

 
$
0.2

 
$
0.4

Amortization of net actuarial loss, net of tax (a)
3.0

 
2.7

 
6.7

 
5.2

Unrealized change in net actuarial loss, net of tax (a)
—

 
—

 
(1.0
)
 
9.2

Unrealized change from foreign currency translation
—

 
—

 
—

 
(0.4
)
Net change in postretirement benefit plans, net of tax
$
3.1

 
$
2.9

 
$
5.9

 
$
14.4

(a)
Other comprehensive income (loss) related to changes in postretirement benefit plans did not result in a tax impact for any period presented.
The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above statements of comprehensive income.

2
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ITT CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
 
June 30,
2013
 
December 31,
2012
 
(Unaudited)
 
 
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
517.7

 
$
544.5

Receivables, net
499.3

 
440.3

Inventories, net
308.5

 
304.2

Other current assets
245.1

 
251.4

Total current assets
1,570.6

 
1,540.4

Plant, property and equipment, net
367.4

 
373.1

Goodwill
646.3

 
651.4

Other intangible assets, net
110.9

 
123.3

Asbestos-related assets
493.4

 
525.3

Other non-current assets
177.2

 
172.6

Total non-current assets
1,795.2

 
1,845.7

Total assets
$
3,365.8

 
$
3,386.1

Liabilities and Shareholders’ Equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
364.1

 
$
347.0

Accrued and other current liabilities
477.4

 
458.3

Total current liabilities
841.5

 
805.3

Asbestos-related liabilities
1,243.3

 
1,255.0

Postretirement benefits
329.9

 
330.3

Other non-current liabilities
290.6

 
292.3

Total non-current liabilities
1,863.8

 
1,877.6

Total liabilities
2,705.3

 
2,682.9

Shareholders’ equity:
 
 
 
Common stock:
 
 
 
Authorized – 250.0 shares, $1 par value per share (104.0 shares issued (a) )

 
 
 
Outstanding – 90.3 shares and 92.1 shares, respectively (a)
90.3

 
91.9

Retained earnings
872.6

 
898.8

Total accumulated other comprehensive loss
(306.8
)
 
(287.5
)
Total ITT Corporation shareholders' equity
656.1

 
703.2

Noncontrolling interests
4.4

 
—

Total shareholders’ equity
660.5

 
703.2

Total liabilities and shareholders’ equity
$
3,365.8

 
$
3,386.1

(a)
Shares issued and outstanding include unvested restricted common stock of 0.2 at December 31, 2012 . Shares issued and outstanding do not included any unvested restricted common stock as of June 30, 2013.
The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above balance sheets.

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ITT CORPORATION AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN MILLIONS)
 
For the Six Months Ended June 30
2013
 
2012
Operating Activities
 
 
 
Net income
$
47.1

 
$
20.0

Less: Income (loss) from discontinued operations
2.8

 
(6.7
)
Less: Income attributable to noncontrolling interests
0.5

 
—

Income from continuing operations attributable to ITT Corporation
43.8

 
26.7

Adjustments to income from continuing operations:
 
 
 
Depreciation and amortization
44.6

 
32.8

Stock-based compensation
6.2

 
5.8

Asbestos-related costs, net
31.9

 
22.3

Asbestos-related payments, net
(11.7
)
 
(16.3
)
Contributions to pension plans
(1.7
)
 
(32.8
)
Changes in assets and liabilities:
 
 
 
Change in receivables
(64.2
)
 
(60.2
)
Change in inventories
(18.2
)
 
(8.8
)
Change in accounts payable
15.4

 
4.7

Change in accrued expenses
(5.0
)
 
(39.2
)
Change in accrued and deferred income taxes
17.3

 
134.3

Other, net
10.4

 
32.7

Net Cash – Operating activities
68.8

 
102.0

Investing Activities
 
 
 
Capital expenditures
(36.8
)
 
(29.6
)
Purchases of investments
(47.8
)
 
—

Maturities of investments
49.9

 
—

Other, net
1.1

 
1.0

Net Cash – Investing activities
(33.6
)
 
(28.6
)
Financing Activities
 
 
 
Short-term debt, net
27.3

 
37.8

Long-term debt, repaid
(5.5
)
 
(0.2
)
Repurchase of common stock
(87.9
)
 
(76.8
)
Issuance of common stock
21.9

 
35.7

Dividends paid
(9.3
)
 
(17.2
)
Excess tax benefit from equity compensation activity
3.7

 
3.6

Other, net
(1.3
)
 
2.7

Net Cash – Financing activities
(51.1
)
 
(14.4
)
Exchange rate effects on cash and cash equivalents
(7.2
)
 
(10.3
)
Discontinued operations
 
 
 
Operating activities
(3.7
)
 
1.6

Investing activities
—

 
(0.1
)
Financing activities
—

 
(1.0
)
Net Cash – Discontinued operations
(3.7
)
 
0.5

Net change in cash and cash equivalents
(26.8
)
 
49.2

Cash and cash equivalents – beginning of year
544.5

 
689.9

Cash and cash equivalents – end of period
$
517.7

 
$
739.1

Supplemental Disclosures of Cash Flow Information
 
 
 
Cash paid (received) during the year for:
 
 
 
Interest paid, net of interest received
$
0.4

 
$
0.7

Income taxes, net of refunds received
$
5.0

 
$
(89.5
)
The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above statements of cash flows.

4
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CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
(IN MILLIONS)
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
2013
 
2012
Common Stock
 
 
 
 
 
 
 
Common stock, beginning balance
$
91.2

 
$
93.4

 
$
91.9

 
$
93.1

Activity from stock incentive plans
0.5

 
—

 
1.6

 
2.5

Share repurchases
(1.4
)
 
(1.2
)
 
(3.2
)
 
(3.4
)
Common stock, ending balance
90.3

 
92.2

 
90.3

 
92.2

Retained Earnings
 

 
 

 
 

 
 

Retained earnings, beginning balance
882.2

 
839.6

 
898.8

 
852.6

Net income attributable to ITT Corporation
25.8

 
16.8

 
46.6

 
20.0

Dividends declared
(9.1
)
 
(8.2
)
 
(18.4
)
 
(17.2
)
Activity from stock incentive plans
12.0

 
4.0

 
30.3

 
45.8

Share repurchases
(38.3
)
 
(24.4
)
 
(84.7
)
 
(73.4
)
Adjustments to distribution of Exelis and Xylem
—

 
22.7

 
—

 
22.7

Retained earnings, ending balance
872.6

 
850.5

 
872.6

 
850.5

Accumulated Other Comprehensive Loss
 

 
 

 
 

 
 

Postretirement benefit plans, beginning balance
(192.7
)
 
(141.7
)
 
(195.5
)
 
(153.2
)
Net change in postretirement benefit plans
3.1

 
2.9

 
5.9

 
14.4

Postretirement benefit plans, ending balance
(189.6
)
 
(138.8
)
 
(189.6
)
 
(138.8
)
Cumulative translation adjustment, beginning balance
(117.7
)
 
(66.4
)
 
(91.7
)
 
(96.4
)
Net cumulative translation adjustment
0.8

 
(45.4
)
 
(25.2
)
 
(15.4
)
Cumulative translation adjustment, ending balance
(116.9
)
 
(111.8
)
 
(116.9
)
 
(111.8
)
Unrealized loss on investment securities, beginning balance
(0.3
)
 
(1.3
)
 
(0.3
)
 
(1.3
)
Unrealized loss on investment securities, ending balance
(0.3
)
 
(1.3
)
 
(0.3
)
 
(1.3
)
Total accumulated other comprehensive loss
(306.8
)
 
(251.9
)
 
(306.8
)
 
(251.9
)
Noncontrolling interests
 

 
 

 
 

 
 

Noncontrolling interests, beginning balance
4.3

 
—

 
—

 
—

Reclassification of noncontrolling interest
—

 
—

 
3.9

 
—

Income attributable to noncontrolling interest
0.1

 
—

 
0.5

 
—

Noncontrolling interests, ending balance
4.4

 
—

 
4.4

 
—

Total Shareholders' Equity
 

 
 

 
 

 
 

Total shareholders' equity, beginning balance
667.0

 
723.6

 
703.2

 
694.8

Net change in common stock
(0.9
)
 
(1.2
)
 
(1.6
)
 
(0.9
)
Net change in retained earnings
(9.6
)
 
10.9

 
(26.2
)
 
(2.1
)
Net change in accumulated other comprehensive loss
3.9

 
(42.5
)
 
(19.3
)
 
(1.0
)
Net change in noncontrolling interests
0.1

 
—

 
4.4

 
—

Total shareholders' equity, ending balance
$
660.5

 
$
690.8

 
$
660.5

 
$
690.8

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of the above statements of changes in shareholders' equity.

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ITT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS AND SHARE AMOUNTS IN MILLIONS, UNLESS OTHERWISE STATED)
NOTE 1
DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business
ITT Corporation is a diversified manufacturer of highly engineered critical components and customized technology solutions for the energy, transportation, and industrial markets. Unless the context otherwise indicates, references herein to “ITT,” “the Company,” and such words as “we,” “us,” and “our” include ITT Corporation and its subsidiaries. ITT operates through four segments: Industrial Process, consisting of industrial pumping and complementary equipment; Motion Technologies, consisting of friction and shock & vibration equipment; Interconnect Solutions, consisting of electronic connectors; and Control Technologies, consisting of fluid handling, motion control and vibration and shock isolation products. Financial information for our segments is presented in Note 18, “Segment Information.”
Basis of Presentation
The unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and, in the opinion of management, reflect all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations, and cash flows for the periods presented. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) have been condensed or omitted pursuant to such SEC rules. We believe that the disclosures made are adequate to make the information presented not misleading. We consistently applied the accounting policies described in ITT's 2012 Annual Report on Form 10-K ( 2012 Annual Report) in preparing these unaudited financial statements. Certain prior year amounts have been reclassified to conform to the current year presentation, as described within these Notes to the Consolidated Condensed Financial Statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in our 2012 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, asbestos-related liabilities and recoveries from insurers, 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 recoveries from insurers, allowance for doubtful accounts and inventory valuation. Actual results could differ from these estimates.
ITT's quarterly financial periods end on the Saturday closest to the last day of the calendar quarter, except for the last quarterly period of the fiscal year, which ends on December 31st. For ease of presentation, the quarterly financial statements included herein are described as ending on the last day of the calendar quarter.
NOTE 2
RECENT ACCOUNTING PRONOUNCEMENTS
Accounting Pronouncements Not Yet Adopted
In July 2013, the Financial Accounting Standards Board (FASB) issued guidance eliminating diversity in practice surrounding the presentation of unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The new guidance requires entities to net an unrecognized tax benefit with a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward if the carryforward would be used to settle additional tax due upon disallowance of a tax position. The amendment is effective for fiscal periods beginning after December   15, 2013 with early adoption permitted. The adoption of this amendment is not expected to have a material effect on ITT's financial statements.
In March 2013, the FASB clarified that, when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity, the parent is required to release any related cumulative translation adjustment into net income. The cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or

6
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group of assets had resided. The FASB also clarified that if a business combination is achieved in stages related to a previously held equity method investment (step-acquisition) that is a foreign entity, the amount of accumulated other comprehensive income that is reclassified and included in the calculation of gain or loss as of the acquisition date shall include any foreign currency translation adjustment related to that previously held investment. The amendments are effective prospectively for fiscal years beginning after December 15, 2013, with early adoption permitted. While we do not expect a material impact on ITT's financial statements upon adoption, the effects on future periods will depend upon the nature and significance of future transactions subject to the amendments.
In February 2013, the FASB issued guidance requiring an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date as the amount the entity agreed to pay for the arrangement between them and the other entities that are also obligated to the liability and any additional amount the entity expects to pay on behalf of the other entities. The amendments are effective for fiscal periods (and interim reporting periods within those years) beginning after December 15, 2013. While we do not expect a material impact on ITT's financial statements upon adoption, the effects on future periods will depend upon the nature and significance of future transactions subject to the amendments.
NOTE 3
ACQUISITIONS
On November 28, 2012, we acquired all issued and outstanding stock of the privately held Joh. Heinr. Bornemann GmbH (Bornemann) for a final purchase price of $ 192.5 , net of cash acquired. The allocation of the purchase price is based on the fair value of assets acquired, liabilities assumed and non-controlling interests in Bornemann as of November 28, 2012 . Our assessment of fair value is preliminary, and may be adjusted for information that is currently not available to us, primarily related to the valuation of environmental liabilities, deferred tax matters, and residual goodwill. We expect to obtain the information necessary to finalize the fair value of the net assets acquired at the acquisition date during the measurement period (up to one year from the acquisition date). Changes to the preliminary estimates of the fair value of the net assets acquired during the measurement period will be recorded as adjustments to those assets and liabilities with a corresponding adjustment to goodwill.
Our financial statements include the results of operations and cash flows from Bornemann prospectively from the acquisition date. Pro forma results of operations have not been presented because the acquisition was not deemed material at the acquisition date.
NOTE 4
DISCONTINUED OPERATIONS
Income from discontinued operations was $1.1 and $2.8 for the three and six month periods ended June 30, 2013 , respectively, primarily due to reversal of warranty reserves and legal-related contingencies associated with previously disposed businesses.
On November 13, 2012, the Company completed the sale of its shape cutting product lines, including the Kaliburn and Burny brands as well as the web tension control products and custom engineered systems sold under the Cleveland Motion Controls brand (collectively referred to herein as the Shape Cutting Businesses). Subsequent to this divestiture, we do not have any significant continuing involvement in the operations of these businesses, nor do we expect significant continuing cash flows. Accordingly, the results of operations and cash flows of the Shape Cutting Businesses are reported as a discontinued operation in all periods presented. The table below provides the results of discontinued operations and certain transformation costs that were incurred in 2012 by ITT but qualified for classification within discontinued operations.
Three Months Ended June 30, 2012
 
Shape Cutting Businesses
 
Other (a)
 
Total
Revenue
 
$
9.6

 
$
—

 
$
9.6

Transformation costs
 
—

 
0.8

 
0.8

Earnings before income taxes
 
0.6

 
1.2

 
1.8

Income tax expense
 
0.3

 
0.9

 
1.2

Income from discontinued operations
 
0.3

 
0.3

 
0.6


7
Table of Contents

Six Months Ended June 30, 2012
 
Shape Cutting Businesses
 
Other (a)
 
Total
Revenue
 
$
18.4

 
$
—

 
$
18.4

Transformation costs
 
—

 
8.2

 
8.2

Earnings (loss) before income taxes
 
0.4

 
(7.1
)
 
(6.7
)
Income tax expense (benefit)
 
0.3

 
(0.3
)
 
—

Income (loss) from discontinued operations
 
0.1

 
(6.8
)
 
(6.7
)
(a)
Amounts presented in the “Other” column relate to various divested ITT businesses accounted for as discontinued operations in the year of divestiture for which legacy liabilities remain, as well as certain costs to create a revised organizational structure (referred to as transformation costs) following the spin-offs of Exelis Inc. and Xylem Inc. in the fourth quarter of 2011. Transformation costs included in discontinued operations provide no future benefit to the Company.
NOTE 5
INCOME TAXES
For the three months ended June 30, 2013 , the Company recognized income tax expense of $14.4 representing an effective tax rate of 36.7% compared to income tax expense of $37.4 , and an effective tax rate of 69.8% , for the three months ended June 30, 2012 . For the six months ended June 30, 2013 , the Company recognized income tax expense of $29.4 representing an effective tax rate of 39.9% compared to income tax expense of $62.0 , and an effective tax rate of 69.9% , for the six months ended June 30, 2012 .
The higher tax rates recorded during the three and six months ended June 30, 2012 were primarily attributable to the valuation allowance recorded in 2012 on existing U.S. current deferred tax assets. The Company continues to provide a full valuation allowance against all of its U.S. net deferred tax assets.
Despite income in 2012 and projected income in 2013, the Company continues to be in a three year cumulative loss position and will therefore continue to record a valuation allowance on all U.S. deferred tax assets and certain foreign net deferred tax assets primarily in Luxembourg, Germany and China. The cumulative loss position is considered a significant source of negative evidence and limits our ability to consider other subjective evidence such as our projections for future growth when assessing the need for a deferred tax valuation allowance.
The net amount of the tax liability for unrecognized tax benefits related to continuing operations may significantly change within the next 12 months due to changes in audit status, expiration of statutes of limitations and other events which could impact our determination of unrecognized tax benefits. Currently, we cannot reasonably estimate the amount by which our unrecognized tax benefits will change.

8
Table of Contents

NOTE 6
EARNINGS PER SHARE
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 Corporation for the three and six month periods ended June 30, 2013 and 2012 .
 
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
2013
 
2012
Net income from continuing operations attributable to ITT Corporation
$
24.7

 
$
16.2

 
$
43.8

 
$
26.7

Weighted average common shares outstanding
90.4

 
92.6

 
91.1

 
93.1

Add: Weighted average restricted stock awards outstanding (a)
—

 
0.2

 
0.1

 
0.3

Basic weighted average common shares outstanding
90.4

 
92.8

 
91.2

 
93.4

Add: Dilutive impact of stock options and restricted stock units
1.2

 
1.1

 
1.2

 
1.3

Diluted weighted average common shares outstanding
91.6

 
93.9

 
92.4

 
94.7

Basic earnings per share
$
0.27

 
$
0.17

 
$
0.48

 
$
0.29

Diluted earnings per share
$
0.27

 
$
0.17

 
$
0.47

 
$
0.28

(a)
Restricted stock awards containing rights to non-forfeitable dividends which participate in undistributed earnings with common shareholders are considered participating securities for purposes of computing earnings per share.
The following table provides the number of shares underlying stock options excluded from the computation of diluted earnings per share for the three and six month periods ended June 30, 2013 and 2012 because they were anti-dilutive.
 
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
2013
 
2012
Anti-dilutive stock options
0.4

 
2.0

 
0.2

 
1.9

Average exercise price
$
26.79

 
$
21.52

 
$
26.79

 
$
21.42

Year(s) of expiration
2023

 
 2014-2022

 
2023

 
 2014-2022

In addition, 0.2 of outstanding employee performance stock units were excluded from the computation of diluted earnings per share for the three and six month periods end June 30, 2013.
NOTE 7
RECEIVABLES, NET  
 
June 30,
2013
 
December 31,
2012
Trade accounts receivable
$
462.7

 
$
403.3

Notes receivable
4.3

 
5.6

Other
43.0

 
44.3

Receivables, gross
510.0

 
453.2

Allowance for doubtful accounts
(10.7
)
 
(12.9
)
Receivables, net
$
499.3

 
$
440.3

Receivables related to progress billings of $6.4 have been reclassified as of December 31, 2012 from the "Other" caption to the "Trade Accounts Receivable" caption to conform to the current period presentation.

9
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NOTE 8
INVENTORIES, NET  
 
June 30,
2013
 
December 31,
2012
Finished goods
$
68.0

 
$
64.1

Work in process
67.5

 
60.5

Raw materials
143.6

 
136.6

Total product inventory
279.1

 
261.2

Inventoried costs related to long-term contracts
100.0

 
91.7

Less – progress payments
(70.6
)
 
(48.7
)
Inventoried costs related to long-term contracts, net
29.4

 
43.0

Inventories, net
$
308.5

 
$
304.2

NOTE 9
OTHER CURRENT AND NON-CURRENT ASSETS  
 
June 30,
2013
 
December 31,
2012
Asbestos-related current assets
$
82.6

 
$
82.6

Prepaid income taxes
58.6

 
66.7

Short-term investments
36.1

 
38.2

Current deferred income taxes
20.6

 
19.9

Other
47.2

 
44.0

Other current assets
$
245.1

 
$
251.4

Other employee benefit-related assets
$
89.5

 
$
87.7

Non-current deferred income taxes
19.5

 
21.4

Capitalized software costs
15.7

 
13.4

Environmental-related assets
11.9

 
12.3

Equity method investments
8.6

 
8.6

Other
32.0

 
29.2

Other non-current assets
$
177.2

 
$
172.6

NOTE 10
PLANT, PROPERTY AND EQUIPMENT, NET  
 
June 30,
2013
 
December 31,
2012
Land and improvements
$
17.4

 
$
18.0

Buildings and improvements
185.6

 
184.6

Machinery and equipment
787.8

 
785.4

Furniture, fixtures and office equipment
70.7

 
69.9

Construction work in progress
48.6

 
43.7

Other
8.8

 
9.0

Plant, property and equipment, gross
1,118.9

 
1,110.6

Less – accumulated depreciation
(751.5
)
 
(737.5
)
Plant, property and equipment, net
$
367.4

 
$
373.1


Depreciation expense of $14.9 and $30.5 was recognized in the three and six month periods ended June 30, 2013 , respectively, and $13.3 and $26.1 for the three and six month periods ended June 30, 2012 , respectively.

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NOTE 11
GOODWILL AND OTHER INTANGIBLE ASSETS, NET
Goodwill
The following table provides a rollforward of the carrying amount of goodwill for the six months ended June 30, 2013 by segment.  
 
Industrial
Process
 
Motion
Technologies
 
Interconnect
Solutions
 
Control
Technologies
 
Total
Goodwill - December 31, 2012
$
345.5

 
$
47.8

 
$
73.0

 
$
185.1

 
$
651.4

Adjustments to purchase price allocations
(0.1
)
 
—

 
—

 
—

 
(0.1
)
Foreign currency
(3.8
)
 
(0.6
)
 
(0.6
)
 
—

 
(5.0
)
Goodwill - June 30, 2013
$
341.6

 
$
47.2

 
$
72.4

 
$
185.1

 
$
646.3

The purchase price allocation adjustment of $0.1 during the second quarter of 2013 is due to the receipt of $0.7 from the finalization of the Bornemann purchase price, partially offset by an adjustment to the fair value of certain environmental liabilities that existed at the acquisition date. As these amounts are not considered material, the adjustments were not retrospectively applied as if the accounting for the business combination had been completed at the acquisition date.
Other Intangible Assets, Net  
   
June 30, 2013
 
December 31, 2012
   
GROSS
CARRYING
AMOUNT
 
ACCUMULATED
AMORTIZATION
 
NET
INTANGIBLES
 
GROSS
CARRYING
AMOUNT
 
ACCUMULATED
AMORTIZATION
 
NET
INTANGIBLES
Customer relationships
$
84.1

 
$
(28.4
)
 
$
55.7

 
$
84.7

 
$
(25.1
)
 
$
59.6

Proprietary technology
29.3

 
(6.2
)
 
23.1

 
29.5

 
(4.9
)
 
24.6

Patents and other
15.8

 
(10.9
)
 
4.9

 
18.0

 
(6.3
)
 
11.7

Indefinite-lived intangibles
27.2

 
—

 
27.2

 
27.4

 
—

 
27.4

Other Intangible Assets
$
156.4

 
$
(45.5
)
 
$
110.9

 
$
159.6

 
$
(36.3
)
 
$
123.3

Amortization expense related to finite-lived intangible assets was $3.9 and $11.5 for the three and six month periods ended June 30, 2013 , respectively, and $1.7 and $3.6 for the three and six month periods ended June 30, 2012 , respectively.
Estimated amortization expense for the remaining six months of 2013 , each of the four succeeding years and thereafter is as follows:  
Remaining Remaining 2013
$
6.9

2014
11.7

2015
9.3

2016
9.2

2017
8.4

2018 and Thereafter
38.2

Total
$
83.7


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NOTE 12
ACCRUED AND OTHER CURRENT LIABILITIES AND OTHER NON-CURRENT LIABILITIES  
 
June 30,
2013
 
December 31,
2012
Compensation and other employee-related benefits
$
155.0

 
$
147.7

Asbestos-related liabilities
92.4

 
92.4

Customer-related liabilities
45.8

 
54.6

Short-term loans and current maturities of long-term debt
41.7

 
16.8

Accrued income taxes and other tax-related liabilities
46.0

 
32.4

Environmental liabilities and other legal matters
33.3

 
38.6

Accrued warranty costs
27.2

 
28.6

Other accrued liabilities
36.0

 
47.2

Accrued and other current liabilities
$
477.4

 
$
458.3

Deferred income taxes and other tax-related accruals
$
138.6

 
$
135.1

Environmental liabilities
84.0

 
84.9

Compensation and other employee-related benefits
39.1

 
41.3

Other
28.9

 
31.0

Other non-current liabilities
$
290.6

 
$
292.3

NOTE 13
DEBT
 
June 30,
2013
 
December 31,
2012
Commercial Paper
$
40.0

 
$
—

Short-term loans
—

 
12.7

Current maturities of long-term debt
1.2

 
3.6

Current capital leases
0.5

 
0.5

Short-term loans and current maturities of long-term debt
41.7

 
16.8

Non-current maturities of long-term debt
7.9

 
8.5

Non-current capital leases
1.7

 
1.6

Long-term debt and capital leases
9.6

 
10.1

Total debt and capital leases
$
51.3

 
$
26.9

During the six months ended June 30, 2013, we repaid $15.2 of short-term loans assumed in connection with the acquisition of Bornemann.

Commercial Paper
Our outstanding commercial paper as of June 30, 2013 had a weighted average interest rate of 0.44% and maturity terms less than one month from the date of issuance.

12
Table of Contents

NOTE 14
POSTRETIREMENT BENEFIT PLANS
The following tables provide the components of net periodic benefit cost for pension plans and other employee-related benefit plans for the three and six month periods ended June 30, 2013 and 2012 .
 
 
2013
 
2012
Three Months Ended June 30
Pension
 
Other
Benefits
 
Total
 
Pension
 
Other
Benefits
 
Total
Net periodic benefit cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
1.6

 
$
0.8

 
$
2.4

 
$
1.6

 
$
0.5

 
$
2.1

Interest cost
3.4

 
2.0

 
5.4

 
4.1

 
2.2

 
6.3

Expected return on plan assets
(4.9
)
 
(0.2
)
 
(5.1
)
 
(5.0
)
 
(0.2
)
 
(5.2
)
Amortization of prior service cost (benefit)
0.2

 
(0.1
)
 
0.1

 
0.2

 
—

 
0.2

Amortization of net actuarial loss
2.1

 
0.9

 
3.0

 
1.6

 
1.1

 
2.7

Net periodic benefit cost
$
2.4

 
$
3.4

 
$
5.8

 
$
2.5

 
$
3.6

 
$
6.1

 
2013
 
2012
Six Months Ended June 30
Pension
 
Other
Benefits
 
Total
 
Pension
 
Other
Benefits
 
Total
Net periodic benefit cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
3.4

 
$
1.5

 
$
4.9

 
$
2.9

 
$
1.1

 
$
4.0

Interest cost
7.0

 
4.1

 
11.1

 
7.7

 
4.5

 
12.2

Expected return on plan assets
(9.8
)
 
(0.3
)
 
(10.1
)
 
(9.1
)
 
(0.3
)
 
(9.4
)
Amortization of prior service cost (benefit)
0.4

 
(0.2
)
 
0.2

 
0.5

 
(0.1
)
 
0.4

Amortization of net actuarial loss
4.5

 
2.2

 
6.7

 
3.1

 
2.1

 
5.2

Net periodic benefit cost
$
5.5

 
$
7.3

 
$
12.8

 
$
5.1

 
$
7.3

 
$
12.4


During the three months ended June 30, 2013 and 2012, we made contributions to our global pension plans of $0.8 and $0.6 , respectively. During the six months ended June 30, 2013 and 2012 , we made contributions to our global pension plans of $1.7 and $32.8 , respectively. We do not expect to make material contributions to our global pension plans during the remainder of 2013 .
During the three months ended June 30, 2013 and 2012 , we amortized $3.1 and $2.9 , net of tax, respectively, from accumulated other comprehensive income into earnings related to prior service cost and net actuarial loss. Similarly, during the six months ended June 30, 2013 and 2012 , we amortized $6.9 and $5.6 , net of tax, into earnings, respectively. No other reclassifications from accumulated other comprehensive income to earnings were recognized during any of the presented periods.
NOTE 15
LONG-TERM INCENTIVE EMPLOYEE COMPENSATION
Prior to 2013, our long-term incentive plan (LTIP) was comprised of three components: non-qualified stock options (NQOs), restricted stock units (RSUs), and a total shareholder return award (TSR). We account for NQOs and RSUs as equity-based compensation awards while cash-settled TSR awards granted prior to 2013 are accounted for as liability-based awards.
TSR awards granted in the first quarter of 2013 will be settled in shares of ITT common stock. In addition, in the first quarter of 2013, a fourth component, a return on invested capital award (ROIC), which is also settled in shares of ITT common stock, was added to the LTIP. The 2013 ROIC and TSR awards were granted as Performance Stock Units and are accounted for as two distinct awards. We account for NQOs, RSUs, ROIC awards, and share-settled TSR awards granted in 2013 as equity-based compensation awards.

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Table of Contents

LTIP costs are primarily recorded within general and administrative expenses, and are reduced by an estimated forfeiture rate. The following table provides the components of these costs for the three and six months ended June 30, 2013 and 2012 .  
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
2013
 
2012
Share-based compensation expense, equity-based awards
$
3.2

 
$
3.0

 
$
6.2

 
$
5.8

Share-based compensation expense, liability-based awards
—

 
(0.2
)
 
0.9

 
0.4

Total share-based compensation expense in operating income
$
3.2

 
$
2.8

 
$
7.1

 
$
6.2

At June 30, 2013, there was $26.4 of estimated unrecognized compensation cost related to unvested equity-based awards that is expected to be recognized ratably over a weighted-average period of 2.3 years. Total estimated unrecognized compensation cost projected to be incurred for unvested liability-based awards as of June 30, 2013 was $3.6 ; this is expected to be recognized ratably over a weighted-average period of 2.0 years.
Year-to-Date 2013 LTIP Activity
The majority of our LTIP activity occurs during the first quarter of each year. On March 5, 2013, we granted the following LTIP awards as provided in the table below:
 
# of Awards Granted
Grant Date Fair Value
NQOs
0.4

$
6.62

RSUs
0.3

$
26.76

TSR
0.1

$
33.45

ROIC
0.1

$
25.56

The NQOs vest either on the completion of a three-year service period or annually in three equal installments, as determined by employee level, and have a ten-year expiration period. RSUs, TSR awards, and ROIC awards vest on the completion of a three-year service period.
During the six months ended June 30, 2013 and 2012, 1.3 and 2.2 stock options were exercised resulting in proceeds of $21.9 and $35.7 , respectively, and restrictions on 0.3 and 0.4 shares of restricted stock lapsed, respectively.
The fair value of each NQO grant was estimated on the date of grant using a binomial lattice pricing model that incorporates multiple and variable assumptions over time, including assumptions such as employee exercise patterns, stock price volatility and changes in dividends. The following table details the weighted average assumptions used to measure fair value and the resulting grant date fair value for the March 5, 2013 NQO grants.  
Dividend yield
1.5
%
Expected volatility
29.9
%
Expected life
6.4 years

Risk-free rates
1.1
%
Grant date fair value
$
6.62

Expected volatilities for option grants were based on a peer average of historical and implied volatility due to limited historical and implied volatility data for ITT following the October 2011 spin-offs. ITT uses historical data to estimate option exercise and employee termination behavior within the valuation model. Option characteristics, such as vesting terms, are considered separately for valuation purposes. The expected life represents an estimate of the period of time options are expected to remain outstanding. The expected life provided above represents the weighted average of options granted with differing vesting terms. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of option grant.
The fair value of RSUs corresponds to the closing price of ITT common stock on the date of grant.
The fair value of the ROIC awards was based on the closing price of ITT common stock on the date of grant less the present value of expected dividend payments during the vesting period. A dividend yield of 1.49% was assumed based on

14
Table of Contents

ITT's annualized dividend payment of $0.40 per share and the March 5, 2013 closing stock price of $26.76 . The fair value of the ROIC award is fixed on the grant date; however, a probability assessment is performed each reporting period to estimate the likelihood of achieving the ROIC targets and the amount of compensation to be recognized. The ROIC award payout is subject to a multiplier which includes a maximum and minimum payout.
The fair value of the TSR award was measured using a Monte Carlo simulation, measuring potential total shareholder return for ITT relative to the other companies in the S&P 400 Mid-Cap Capital Goods Index (the PSU Performance Group). The expected volatility of ITT's stock price was based on the historical volatility of a peer group while expected volatility for the other companies in the PSU Performance Group was based on their own stock price history. All volatility and correlation measures were based on three years of daily historical price data through March 5, 2013, corresponding to the three -year performance period of the award. The TSR award payout is subject to a multiplier which includes a maximum and minimum payout. As the grant date occurred after the beginning of the performance period, actual TSR performance between the beginning of the performance period (December 2012 average closing stock price) and the grant date was reflected in the valuation. A dividend yield of 1.49% was assumed based on ITT's annualized dividend payment of $0.40 per share and the March 5, 2013 closing stock price of $26.76
The fair value of TSR awards granted prior to 2013 is remeasured on a quarterly basis and corresponds to ITT's total shareholder return as compared to the total shareholder return of companies within the S&P 400 Mid-Cap Capital Goods Index, subject to a multiplier which includes a maximum and minimum payout. The relative performance ranking calculated is adjusted to reflect expected volatility over the remaining term of the award using a Monte Carlo simulation.
NOTE 16
CAPITAL STOCK
On October 27, 2006, a three -year $1 billion share repurchase program was approved by our Board of Directors. On December 16, 2008, the provisions of the share repurchase program were modified by our Board of Directors to replace the original three-year term with an indefinite term. We repurchased 1.4 and 1.1 shares of common stock for $39.6 and $24.6 during the three months ended June 30, 2013 and 2012, respectively, and 3.1 and 3.3 shares of common stock for $85.2 and $73.6 during the six months ended June 30, 2013 and 2012 , respectively. To date, under the 2006 Share Repurchase Program, the Company has repurchased 15.3 shares for $629.3 .
Separate from the 2006 Share Repurchase Program, the Company repurchased 0.1 shares and 0.1 shares for an aggregate price of $2.7 and $3.2 , during the six months ended June 30, 2013 and 2012 , respectively, in settlement of employee tax withholding obligations due upon the vesting of restricted stock or restricted stock units. Repurchases associated with employee tax withholding obligations were not significant during the three months ended June 30, 2013 and 2012.
NOTE 17
COMMITMENTS AND CONTINGENCIES
From time to time, we are involved in legal proceedings that are incidental to the operation of our businesses. Some of these proceedings allege damages relating to environmental exposures, intellectual property matters, copyright infringement, personal injury claims, employment and pension matters, government contract issues and commercial or contractual disputes, sometimes related to acquisitions or divestitures. We will continue to defend vigorously against all claims. 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 such legal proceedings will have any material adverse impact on our financial statements, unless otherwise noted below.
Asbestos Matters
Background
ITT, including its subsidiary Goulds Pumps, Inc., has been joined as a defendant with numerous other companies in product liability lawsuits alleging personal injury due to asbestos exposure. These claims generally allege that certain products sold by us or our subsidiaries prior to 1985 contained a part manufactured by a third party (e.g., a gasket) which contained asbestos. To the extent these third-party parts may have contained asbestos, it was encapsulated in the gasket (or other) material and was non-friable.

15
Table of Contents

As of June 30, 2013 , there were 77 thousand pending claims against ITT, including Goulds Pumps, filed in various state and federal courts alleging injury as a result of exposure to asbestos. Activity related to these asserted asbestos claims during the period was as follows:  
For the Six Months Ended June 30 (in thousands)
2013
 
2012
Pending claims – Beginning
96

 
105

New claims
2

 
2

Settlements (a)
(2
)
 
—

Dismissals (b)
(19
)
 
(11
)
Pending claims – Ending
77

 
96

Pending inactive claims (b)
18

 
29

Pending active claims
59

 
67

(a)
Settled claims for the six months ended June 30, 2012 rounded to less than one thousand.
(b)
Approximately eleven thousand claims dismissed during both six months ended June 30, 2013 and 2012 were filed in Mississippi and considered inactive. Inactive claims represent pending claims in Mississippi filed prior to 2004, which have been excluded from our asbestos measurement as we believe these claims have little to no value.
Frequently, plaintiffs are unable to identify any ITT or Goulds Pumps product as a source of asbestos exposure. In addition, 18 thousand claims pending against the Company have been placed on inactive dockets (including in Mississippi) because the plaintiffs cannot demonstrate a significant compensable loss. Our experience to date is that a substantial portion of resolved claims are dismissed without any payment from the Company. Management believes that a large majority of the pending claims have little or no value. In addition, because claims are sometimes dismissed in large groups, the average cost per resolved claim, as well as the number of open claims, can fluctuate significantly from period to period. ITT expects more asbestos-related suits will be filed in the future, and ITT will aggressively defend or seek a reasonable resolution, as appropriate.
Asbestos litigation is a unique form of litigation. Frequently, the plaintiff sues a large number of defendants and does not state a specific claim amount. After filing of the complaint, the plaintiff engages defendants in settlement negotiations to establish a settlement value based on certain criteria, including the number of defendants in the case. Rarely do the plaintiffs seek to collect all damages from one defendant. Rather, they seek to spread the liability, and thus the payments, among many defendants. As a result, the Company is unable to estimate the maximum potential exposure to pending claims and claims estimated to be filed over the next 10 years.
Estimating our exposure to pending asbestos claims and those that may be filed in the future is subject to significant uncertainty and risk as there are multiple variables that can affect the timing, severity, quality, quantity and resolution of claims. We record a corresponding asbestos-related asset that represents our best estimate of probable recoveries from insurers for the estimated asbestos liabilities. Any predictions with respect to the variables impacting the estimate of the asbestos liability and related asset are subject to even greater uncertainty as the projection period lengthens. In light of the uncertainties and variables inherent in the long-term projection of the Company's asbestos exposures, although it is probable that the Company will incur additional costs for asbestos claims filed beyond the next 10 years which could be material to the financial statements, we do not believe there is a reasonable basis for estimating those costs at this time.
The asbestos liability and related receivables reflect management's best estimate of future events. However, future events affecting the key factors and other variables for either the asbestos liability or the related receivables could cause actual costs or recoveries to be materially higher or lower than currently estimated. Due to these uncertainties, as well as our inability to reasonably estimate any additional asbestos liability for claims which may be filed beyond the next 10 years, it is not possible to predict the ultimate cost of resolving all pending and unasserted asbestos claims. We believe it is possible that future events affecting the key factors and other variables within the next 10 years, as well as the cost of asbestos claims filed beyond the next 10 years, net of expected recoveries, could have a material adverse effect on our financial position, results of operations and cash flows.

16
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Income Statement Charges
In the third quarter, we conduct an annual study with the assistance of outside consultants to review and update the underlying assumptions used in our asbestos liability and related asset estimates. During this study, the underlying assumptions are updated based on our actual experience since our last annual study, a reassessment of the appropriate reference period of years of experience used in determining each assumption and our expectations regarding future conditions, including inflation. As part of our ongoing review of our net asbestos exposure, each quarter we assess the most recent qualitative and quantitative data available for the key inputs and assumptions, comparing the data to the expectations on which the most recent annual liability and asset estimates were based. Based on this evaluation, the Company determined that no change in the estimate was warranted for the period ended June 30, 2013 other than the incremental accrual to maintain a rolling 10-year forecast period. The net asbestos charges for the three months ended June 30, 2013 and 2012 was $15.9 and $9.7 , respectively. The net asbestos charges for the six months ended June 30, 2013 and 2012 was $31.9 and $22.3 , respectively.
Changes in Financial Position
The Company's estimated asbestos exposure, net of expected recoveries, for the resolution of all pending claims and claims estimated to be filed in the next 10 years was $ 759.7 and $ 739.5 as of June 30, 2013 and December 31, 2012, respectively. The following table provides a rollforward of the estimated asbestos liability and related assets for the six months ended June 30, 2013.
 
Liability
Asset
Net
Balance as of December 31, 2012
$
1,347.4

$
607.9

$
739.5

Asbestos provision
39.0

7.1

31.9

Net cash activity
(50.7
)
(39.0
)
(11.7
)
Balance as of June 30, 2013
$
1,335.7

$
576.0

$
759.7

Current portion
$
92.4

$
82.6

 
Noncurrent portion
$
1,243.3

$
493.4

 
Environmental
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 and/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 and/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 and/or remediation. These sites include instances where we have been identified as a potentially responsible party under federal and state environmental laws and regulations.
The following table provides a rollforward of the estimated environmental liability and related assets for the six months ended June 30, 2013 .  
 
Liability
 
Asset
 
Net
Environmental liability - December 31, 2012
$
96.1

 
$
12.3

 
$
83.8

Change in estimates for pre-existing accruals:
 
 
 
 
 
Continuing operations
3.7

 
(0.2
)
 
3.9

Discontinued operations
1.3

 
—

 
1.3

Accruals added during the period for new matters
0.4

 
—

 
0.4

Net cash activity
(5.6
)
 
(0.2
)
 
(5.4
)
Environmental liability - June 30, 2013
$
95.9

 
$
11.9

 
$
84.0



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The following table illustrates the reasonably possible range of estimated liability, and number of active sites for environmental matters, at June 30, 2013 .  
Low-end estimate
$
76.7

High end estimate
$
165.7

Number of active environmental investigation and remediation sites
62

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.
Other Matters
The Company is involved in coverage litigation with various insurers seeking recovery of costs incurred in connection with certain environmental and product liabilities. In a suit filed in 1991, ITT Corporation, et al. v. Pacific Indemnity Corporation et al, Sup. Ct., Los Angeles County, we are seeking recovery of costs related to environmental losses. Discovery, procedural matters, changes in California law, and various appeals have prolonged this case. For several years, the case was on appeal before the California Court of Appeals from a decision by the California Superior Court dismissing certain claims made by ITT. In 2011, ITT filed a Motion for Summary Judgment on Pacific Indemnity’s obligation to pay defense costs. That motion is currently pending before the court and the Company is continuing to engage the defendants in settlement negotiations.
On February 13, 2003, we commenced an action, Cannon Electric, Inc. v. Affiliated FM Ins. Co., Sup. Ct., Los Angeles County, seeking recovery of costs related to asbestos product liability losses described above. During this coverage litigation, we entered into coverage-in-place settlement agreements with ACE, Wausau and Utica Mutual dated April 2004, September 2004, and February 2007, respectively. These agreements provide specific coverage for the Company’s legacy asbestos liabilities. In the first quarter of 2012, Goulds Pumps resolved its claims against Fireman’s Fund and Continental Casualty. In January 2012, ITT and Goulds Pumps filed a putative class action against Travelers Casualty and Surety Company (ITT Corporation and Goulds Pumps, Inc., v. Travelers Casualty and Surety Company (f/k/a Aetna Casualty and Surety Company)), alleging that Travelers is unilaterally reinterpreting language contained in older Aetna policies so as to avoid paying on asbestos claims. We continue to negotiate settlement agreements with other insurers, where appropriate.
NOTE 18
SEGMENT INFORMATION
The Company's segments are reported on the same basis used internally for evaluating performance and for allocating resources. Our four reportable segments are referred to as: Industrial Process, Motion Technologies, Interconnect Solutions and Control Technologies.
Industrial Process manufactures engineered fluid process equipment serving a diversified mix of customers in global infrastructure industries such as oil & gas, mining, power generation, chemical and other process markets and is an aftermarket service provider.
Motion Technologies manufactures brake pads, shock absorbers and damping technologies for the global automotive, truck, trailer and public bus and rail transportation markets.
Interconnect Solutions manufactures a wide range of highly specialized connector products that make it possible to transfer signal and power in various electronic devices that are utilized in the aerospace, industrial, defense and oil & gas markets.
Control Technologies manufactures specialized equipment, including actuators, valves, switches, vibration isolation devices, custom-energy absorption equipment, and regulators for the aerospace, defense and industrial markets.
Corporate and Other consists of corporate office expenses including compensation, benefits, occupancy, depreciation, and other administrative costs, as well as charges related to certain matters, such as asbestos and environmental liabilities, that are managed at a corporate level and are not included in segment results when evaluating performance or allocating resources. Assets of the segments exclude general corporate assets, which principally consist of cash, investments, asbestos-related receivables and certain property, plant and equipment.


18
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Revenue
 
Operating Income
 
Operating Margin
Three Months Ended June 30
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Industrial Process
$
268.7

 
$
233.0

 
$
28.1

 
$
27.7

 
10.5
%
 
11.9
%
Motion Technologies
171.4

 
155.1

 
23.3

 
20.2

 
13.6
%
 
13.0
%
Interconnect Solutions
100.3

 
99.9

 
6.7

 
5.5

 
6.7
%
 
5.5
%
Control Technologies
70.2

 
71.5

 
15.4

 
13.8

 
21.9
%
 
19.3
%
Total segment results
$
610.6

 
$
559.5

 
$
73.5

 
$
67.2

 
12.1
%
 
12.0
%
Asbestos-related costs, net
—

 
—

 
(15.9
)
 
(9.7
)
 
—

 
—

Eliminations / Other corporate costs
(1.4
)
 
(1.6
)
 
(16.2
)
 
(0.5
)
 
—

 
—

Total Eliminations / Corporate and Other costs
$
(1.4
)
 
$
(1.6
)
 
$
(32.1
)
 
$
(10.2
)
 
—

 
—

Total
$
609.2

 
$
557.9

 
$
41.4

 
$
57.0

 
6.8
%
 
10.2
%
 
Revenue
 
Operating Income
 
Operating Margin
Six Months Ended June 30
2013
 
2012
 
2013
 
2012
 
2013
 
2012
Industrial Process
$
525.5

 
$
459.3

 
$
50.6

 
$
49.5

 
9.6
%
 
10.8
%
Motion Technologies
364.6

 
335.3

 
56.3

 
47.5

 
15.4
%
 
14.2
%
Interconnect Solutions
191.1

 
192.8

 
5.4

 
7.4

 
2.8
%
 
3.8
%
Control Technologies
138.8

 
141.6

 
29.8

 
27.0

 
21.5
%
 
19.1
%
Total segment results
$
1,220.0

 
$
1,129.0

 
$
142.1

 
$
131.4

 
11.7
%
 
11.7
%
Asbestos-related costs, net
—

 
—

 
(31.9
)
 
(22.3
)
 
—

 
—

Eliminations / Other corporate costs
(2.6
)
 
(3.0
)
 
(31.6
)
 
(15.4
)
 
—

 
—

Total Eliminations / Corporate and Other costs
$
(2.6
)
 
$
(3.0
)
 
$
(63.5
)
 
$
(37.7
)
 
—

 
—

Total
$
1,217.4

 
$
1,126.0

 
$
78.6

 
$
93.7

 
6.5
%
 
8.3
%
 
Total Assets
 
Capital
Expenditures
 
Depreciation &
Amortization
Six Months Ended June 30
2013
 
2012(a)
 
2013
 
2012
 
2013
 
2012
Industrial Process
$
1,051.3

 
$
1,044.8

 
$
19.8

 
$
8.5

 
$
17.4

 
$
7.0

Motion Technologies
430.7

 
405.6

 
7.5

 
15.1

 
14.5

 
13.2

Interconnect Solutions
363.6

 
362.6

 
4.3

 
3.1

 
4.9

 
4.9

Control Technologies
351.1

 
347.0

 
1.6

 
2.2

 
4.8

 
4.6

Corporate and Other
1,169.1

 
1,226.1

 
3.6

 
0.7

 
3.0

 
3.1

Total
$
3,365.8

 
$
3,386.1

 
$
36.8

 
$
29.6

 
$
44.6

 
$
32.8

(a)
Amounts reflect balances as of December 31, 2012 .
Assets of $56.0 and $14.9 as of December 31, 2012 have been reclassified from Motion Technologies and Control Technologies, respectively, to Corporate and Other related to the elimination of investments in ITT subsidiaries.

19
Table of Contents



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 is a diversified manufacturer of highly engineered critical components and customized technology solutions for growing industrial markets. Building on its heritage of innovation, ITT partners with its customers to deliver enduring solutions to the key industries that underpin our modern way of life. We manufacture components that are integral to the operation of systems and manufacturing processes in the energy, transportation and industrial markets. Our products provide enabling 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. Each business applies technology and engineering expertise to solve our customers' most pressing challenges. Our applied engineering aptitude provides a superior business fit with our customers given the critical nature of their applications. This in turn provides us with a unique insight to our customer's requirements and enables us to develop solutions to assist our customers achieve their business goals. Our technology and customer intimacy in tandem produce opportunities to capture recurring revenue streams, aftermarket opportunities, and long-lived original equipment manufacturer (OEM) platforms.
Our product and service offerings are organized into four segments: Industrial Process, Motion Technologies, Interconnect Solutions, and Control Technologies. Our segments generally operate within niche positions in large, attractive markets where specialized engineered solutions are required to support large industrial and transportation customer needs.
Industrial Process manufactures engineered fluid process equipment serving a diversified mix of customers in global infrastructure industries such as oil & gas, mining, power generation, chemical and other process markets and is an aftermarket service provider.
Motion Technologies manufactures brake pads, shock absorbers and damping technologies for the global automotive, truck, trailer and public bus and rail transportation markets.
Interconnect Solutions manufactures a wide range of highly specialized connector products that make it possible to transfer signal and power in various electronic devices that are utilized in aerospace, industrial, defense and oil & gas markets.
Control Technologies manufactures specialized equipment, including actuators, valves, switches, vibration isolation devices, custom-energy absorption equipment, and regulators for the aerospace, defense and industrial markets.
Executive Summary
During the second quarter of 2013, we delivered revenue growth of 9.2% and organic revenue growth of 2.0% . The organic revenue growth was primarily driven by share gains in the automotive brake pad markets in China and Western Europe and by global sales of oil and gas pumps. Offsetting this growth were declines from pump equipment destined for the mining market and baseline pumps for the industrial markets. Total ITT orders expanded 13.3%, reflecting organic order growth of 7.8% as well as benefits from our acquisition of Bornemann. The organic order growth during the quarter included increases at each segment and was primarily driven by an increase in global automotive and strong oil & gas market order activity. While we are encouraged by these order indicators, we remain cautious about the rate and timing of key market recoveries in the second half of 2013.
Consolidated operating income was $41.4 for the quarter, representing a $15.6 or 27.4% decrease from the prior year, as net savings of approximately $16.0 from our Value Based Lean Six Sigma (VBLSS or Lean Transformation), sourcing, and restructuring initiatives were more than offset by higher corporate costs, primarily related to the establishment of an insurance-related asset on environmental exposures during the second quarter of 2012 and lower environmental insurance recoveries during the second quarter of 2013, as well as higher asbestos-related costs due to the collection of an insurance receivable during 2012 that was previously reserved.
Income from continuing operations attributable to ITT Corporation during the second quarter of 2013 was 24.7 million or $0.27 per diluted share, reflecting an increase of $0.10 per diluted share from the prior year. Adjusted income from continuing operations, a non-GAAP measure, was $0.51 for the second quarter of 2013, reflecting an increase

20
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of $0.02, or 4.1%, compared to the prior year amount. See the “Key Performance Indicators and Non-GAAP Measures” section included within Management's Discussion and Analysis for a reconciliation of the adjusted non-GAAP measures.
During the second quarter of 2013, we deployed capital into the new Industrial Process facility in South Korea and, to a lesser extent, the expansion of our Seneca Falls, New York facility which is anticipated to be completed mid-2014. We also returned $39.6 of cash to shareholders via the repurchase of 1.4 shares of ITT common stock and dividend payments of $9.3 .
The new South Korea oil & gas production facility is anticipated to begin production in the third quarter of this year and will play a key role in advancing our energy strategy by becoming our Energy Center of Excellence for the Eastern Hemisphere. We have also committed to expanding our Seneca Falls, New York facility, which is our Energy Center of Manufacturing and R&D Excellence for the Western Hemisphere, and includes an expansion of our research and development and testing capabilities, along with adding capacity and leaning out the existing facility to accommodate larger, more complex industrial pumps and to meet the growing demands of our customers.
We continue to focus on our Lean transformation initiative and have begun implementing plans to reduce waste and streamline operations. We are still in the early stages of our 5-year Lean transformation initiative but we are already seeing benefits. The VBLSS initiative has provided significant net cost savings and has driven improvement on numerous key performance indicators. One such indicator, on-time delivery which helps us deliver a premier customer experience, has improved at a majority of our businesses during the year. At ITT, we are extending the lean concept far beyond manufacturing to deliver a differentiated value to our customers by improving service and responsiveness on the front end. We have also engaged in sourcing initiatives that have delivered supply chain savings that exceeded our expectations and reflect the increased leverage our global strategic sourcing council has provided.
We are also focused on accelerating the turnaround efforts in certain businesses and we are implementing restructuring actions accordingly. Interconnect Solutions is one of those turnaround businesses, for which we have taken a very holistic approach to deliver sustainable performance enhancements to our customers. We have focused on the front end and better coordination of connecting our engineering, marketing and sales directly with our key strategic channel partners and customers. We are also working to better align the manufacturing and overhead cost structure with the future strategy of the business. We are dedicated to reclaiming our leading position with our customers by providing innovative, high quality, reliable, highly engineered harsh environment connectors when the customer needs them. As a result of this focus, our Interconnect Solutions business is delivering preliminary benefits that have expanded their gross and operating margins by 250 basis points and 120 basis points, respectively, from the second quarter of 2012. In addition, this quarter marks the first quarter in nearly two years that Interconnect Solutions has exceeded the $100 million revenue mark, and it is the third consecutive quarter of sequential order growth.
During the second quarter of 2013, our focus on the premier customer experience drove wins on key strategic contracts including placement on new auto platforms in Europe, North America, and China. Other key quarterly wins include:
n
Multi-year contracts in the commercial aerospace and fuel system component markets
n
Global oil & gas and chemical market pump contracts
n
Wins in the medical and defense connector markets
We expect that the drivers of our growth throughout 2013 will continue to be oil & gas, chemical, and industrial pumps as well as share gains in automotive. We also expect growth in emerging markets again this year; however, mining and defense are expected to continue to be headwinds against the prior year. These expectations are consistent with our expectation at the beginning of year.
Further details related to these results are contained in the Discussion of Financial Results section.


21
Table of Contents

DISCUSSION OF FINANCIAL RESULTS
Three and Six Months Ended June 30  
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
Change
 
2013
 
2012
 
Change
Revenue
$
609.2

 
$
557.9

 
9.2%
 
$
1,217.4

 
$
1,126.0

 
8.1%
Gross profit
197.8

 
170.4

 
16.1%
 
388.3

 
340.6

 
14.0%
Gross margin
32.5
%
 
30.5
%
 
200bp
 
31.9
%
 
30.2
%
 
170bp
Operating expenses
156.4

 
113.4

 
37.9%
 
309.7

 
246.9

 
25.4%
Expense to revenue ratio
25.7
%
 
20.3
%
 
540bp
 
25.4
%
 
21.9
%
 
350bp
Operating income
41.4

 
57.0

 
(27.4%)
 
78.6

 
93.7

 
(16.1%)
Operating margin
6.8
%
 
10.2
%
 
(340)bp
 
6.5
%
 
8.3
%
 
(180)bp
Interest and non-operating (income) expenses, net
2.2

 
3.4

 
(35.3%)
 
4.9

 
5.0

 
(2.0%)
Income tax expense
14.4

 
37.4

 
(61.5%)
 
29.4

 
62.0

 
(52.6%)
Effective tax rate
36.7
%
 
69.8
%
 
(3,310)bp
 
39.9
%
 
69.9
%
 
(3,000)bp
Income from continuing operations attributable to ITT Corporation
24.7

 
16.2

 
52.5%
 
43.8

 
26.7

 
64.0%
Income (loss) from discontinued operations, net of tax
1.1

 
0.6

 
83.3%
 
2.8

 
(6.7
)
 
(141.8%)
Net income attributable to ITT Corporation
25.8

 
16.8

 
53.6%
 
46.6

 
20.0

 
133.0%
REVENUE
Revenue for the three and six months ended June 30, 2013 increased $51.3 or 9.2% and $91.4 or 8.1% , respectively, over the prior year, primarily driven by our fourth quarter 2012 acquisition of Bornemann which provided $38.4 and $68.7, respectively, reported within our Industrial Process segment. In addition, we experienced growth of $16.3 or 10.5% and $29.3 or 8.7% from our Motion Technologies segment, primarily reflecting year-over-year volume growth due to our expanded global brake pad market share. The following tables illustrate the year-over-year revenue results from each of our business segments for the three and six months ended June 30, 2013 and 2012 . See below for further discussion of year-over-year revenue activity at the segment level.  
For the Three Months Ended June 30
2013
 
2012
 
Change
 
Organic
Growth
Industrial Process
$
268.7

 
$
233.0

 
15.3
 %
 
(1.4
)%
Motion Technologies
171.4

 
155.1

 
10.5
 %
 
9.0
 %
Interconnect Solutions
100.3

 
99.9

 
0.4
 %
 
1.4
 %
Control Technologies
70.2

 
71.5

 
(1.8
)%
 
(1.4
)%
Eliminations
(1.4
)
 
(1.6
)
 
(12.5
)%
 
12.5
 %
Revenue
$
609.2

 
$
557.9

 
9.2
 %
 
2.0
 %
For the Six Months Ended June 30
2013
 
2012
 
Change
 
Organic
Growth
Industrial Process
$
525.5

 
$
459.3

 
14.4
 %
 
(0.7
)%
Motion Technologies
364.6

 
335.3

 
8.7
 %
 
7.8
 %
Interconnect Solutions
191.1

 
192.8

 
(0.9
)%
 
—
 %
Control Technologies
138.8

 
141.6

 
(2.0
)%
 
(1.6
)%
Eliminations
(2.6
)
 
(3.0
)
 
(13.3
)%
 
13.3
 %
Revenue
$
1,217.4

 
$
1,126.0

 
8.1
 %
 
1.9
 %

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Table of Contents

The following tables illustrate revenue generated within a country or region for the three and six months ended June 30, 2013 and 2012 , and the corresponding percentage change as reported and on an organic growth basis.  
For the Three Months Ended June 30
2013
 
2012
 
As Reported
Change
 
Organic Growth
United States
$
222.9

 
$
219.5

 
1.5
 %
 
(0.9
)%
Germany
56.3

 
47.9

 
17.5
 %
 
9.7
 %
France
36.9

 
31.2

 
18.3
 %
 
14.6
 %
Other developed markets
108.3

 
95.8

 
13.0
 %
 
2.9
 %
Total developed markets
424.4

 
394.4

 
7.6
 %
 
2.6
 %
South and Central America (a)
52.6

 
51.9

 
1.3
 %
 
(24.0
)%
Eastern Europe and Russia
34.5

 
23.5

 
46.8
 %
 
35.7
 %
Middle East and Africa
29.8

 
31.5

 
(5.4
)%
 
(11.4
)%
China and Hong Kong
32.1

 
28.0

 
14.6
 %
 
10.1
 %
Other emerging markets
35.8

 
28.6

 
25.2
 %
 
20.9
 %
Total emerging markets
184.8

 
163.5

 
13.0
 %
 
0.7
 %
Revenue
$
609.2

 
$
557.9

 
9.2
 %
 
2.0
 %
 
For the Six Months Ended June 30
2013
 
2012
 
As Reported Change
 
Organic Growth
United States
$
433.7

 
$
431.0

 
0.6
 %
 
(1.1
)%
Germany
131.7

 
117.1

 
12.5
 %
 
4.0
 %
France
73.6

 
64.6

 
13.9
 %
 
11.5
 %
Other developed markets
224.8

 
197.7

 
13.7
 %
 
3.3
 %
Total developed markets
863.8

 
810.4

 
6.6
 %
 
1.7
 %
South and Central America (a)
97.4

 
101.2

 
(3.8
)%
 
(19.0
)%
Eastern Europe and Russia
64.3

 
52.2

 
23.2
 %
 
15.9
 %
Middle East and Africa
63.2

 
56.4

 
12.1
 %
 
2.5
 %
China and Hong Kong
60.1

 
52.9

 
13.6
 %
 
6.7
 %
Other emerging markets
68.6

 
52.9

 
29.7
 %
 
24.6
 %
Total emerging markets
353.6

 
315.6

 
12.0
 %
 
2.3
 %
Revenue
$
1,217.4

 
$
1,126.0

 
8.1
 %
 
1.9
 %
(a)
Includes Mexico

Industrial Process
Industrial Process revenue for the three and six months ended June 30, 2013 increased $35.7 or 15.3% and $66.2 or 14.4% year-over-year, respectively, primarily related to our fourth quarter 2012 acquisition of Bornemann. This acquisition provided $38.4 and $68.7 of revenue during the respective periods of 2013. Organic revenue decreased 1.4% and 0.7% , respectively, during the three and six months ended June 30, 2013 compared to the prior year, primarily due to lower year-over-year sales of baseline pumps and lower mining-related project shipments, which were partially offset by an increase in aftermarket sales of approximately 2.9% and 2.8% during the respective periods of 2013. On an end-market and regional basis, we experienced organic revenue growth of approximately 40.0% and 36.0% in the oil & gas market for the three and six month periods, respectively, primarily in North America and Asia Pacific; this was, however, offset by lower activity in the mining market globally and the North American general industrial market.
Organic order activity for the three months ended June 30, 2013 increased 7.8% primarily due to solid project orders partially offset by weaker baseline business in North America and lower activity for industrial valves for the mining market. Organic order activity for the six months ended June 30, 2013 increased 4.4% primarily due to an increase in parts orders and increased project business globally, partially offset by lower baseline business orders in North America. Backlog as of June 30, 2013 was $634.4 reflecting an increase of $55.5 or 9.6%.

23
Table of Contents

Motion Technologies
Motion Technologies revenue for the three and six months ended June 30, 2013 increased $16.3 or 10.5% and $29.3 or 8.7% , respectively, compared to the prior year period, primarily due to strong growth in OEM automotive pad volume in China. In addition, we experienced year-over-year growth in France and Germany for both 2013 periods as a result of our increasing number of platform positions with many of the European automakers. This growth was partially offset by automotive price degradation and lower revenue in the rail market due to the temporary postponement of various rail infrastructure projects in China.
Interconnect Solutions
Interconnect Solutions revenue for the three months ended June 30, 2013 increased by $0.4 or 0.4% , compared to the prior year, due to growth in certain U.S. defense programs and industrial market gains in Europe and North America that were partially offset by a decline in revenue from the oil & gas market due to two significant prior year shipments totaling $2.7 that did not repeat in 2013.
Interconnect Solutions revenue for the six months ended June 30, 2013 declined $1.7 or 0.9% year-over-year due to a $1.7 unfavorable impact from foreign currency fluctuations, and was flat on an organic revenue basis. The 2013 year-to-date results reflect growth of $3.0 or 8.7% in the U.S. defense market and $2.0 or 4.5% in the general industrial market offset by a decline in the transportation market of $3.0 or 15.9% and in the communication market of $2.6 or 9.6%.
Control Technologies
Control Technologies revenue for the three and six months ended June 30, 2013 decreased by $1.3 or 1.8% and $2.8 or 2.0% , respectively, compared to the prior year periods. The year-over-year results for the three and six months ended June 30, 2013 reflect growth in our commercial aviation product applications of $4.0 and $8.9, respectively, partially offset by a $1.7 and $3.2 decline in defense product applications impacted by the sequestration. Revenue from industrial product applications declined approximately $1.4 and $3.8, respectively, driven by the completion of a $1.0 order during the second quarter of 2012 that was not repeated and weakness in Europe due to economic conditions. In addition, the 2013 revenue results declined by $1.6 and $3.5, respectively, due to an actuator retrofit program that is nearing its end of life.
GROSS PROFIT
Gross profit for the three and six months ended June 30, 2013 was $197.8 and $388.3 , an increase of $27.4 and $47.7 , respectively, primarily from net savings related to sourcing and VBLSS initiatives and the contributions from our Bornemann acquisition. In addition, increased sales volume provided a benefit of approximately $5.3 and $9.1, respectively, which was partially offset by an unfavorable change in sales mix. The table below provides gross profit and gross margin by segment for the three and six months ended June 30, 2013 and 2012 .  
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
Change
 
2013
 
2012
 
Change
Industrial Process
$
90.5

 
$
72.8

 
24.3
%
 
$
172.3

 
$
141.3

 
21.9
%
Motion Technologies
44.5

 
38.0

 
17.1
%
 
97.1

 
85.9

 
13.0
%
Interconnect Solutions
33.2

 
30.6

 
8.5
%
 
61.2

 
57.1

 
7.2
%
Control Technologies
29.2

 
28.8

 
1.4
%
 
57.0

 
55.6

 
2.5
%
Corporate and Other
0.4

 
0.2

 
100.0
%
 
0.7

 
0.7

 
—
%
Total gross profit
$
197.8

 
$
170.4

 
16.1
%
 
$
388.3

 
$
340.6

 
14.0
%
Gross margin:
 
 
 
 
 
 
 
 
 
 
 
Industrial Process
33.7
%
 
31.2
%
 
250
bp
 
32.8
%
 
30.8
%
 
200
bp
Motion Technologies
26.0
%
 
24.5
%
 
150
bp
 
26.6
%
 
25.6
%
 
100
bp
Interconnect Solutions
33.1
%
 
30.6
%
 
250
bp
 
32.0
%
 
29.6
%
 
240
bp
Control Technologies
41.6
%
 
40.3
%
 
130
bp
 
41.1
%
 
39.3
%
 
180
bp
Consolidated
32.5
%
 
30.5
%
 
200
bp
 
31.9
%
 
30.2
%
 
170
bp

24
Table of Contents

OPERATING EXPENSES
Operating expenses for the three and six months ended June 30, 2013 increased $43.0 and $62.8 , respectively, from the comparable prior year periods, primarily driven by an increase in costs from the Bornemann business and higher corporate costs. The following table provides further information by expense type, as well as a breakdown of operating expense by segment.  
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
Change
 
2013
 
2012
 
Change
Sales and marketing expenses
$
57.5

 
$
45.8

 
25.5
 %
 
$
109.3

 
$
92.9

 
17.7
 %
General and administrative expenses
66.6

 
41.3

 
61.3
 %
 
135.7

 
99.0

 
37.1
 %
Research and development expenses
16.4

 
16.6

 
(1.2
)%
 
32.8

 
32.7

 
0.3
 %
Asbestos-related costs, net
15.9

 
9.7

 
63.9
 %
 
31.9

 
22.3

 
43.0
 %
Total operating expenses
$
156.4

 
$
113.4

 
37.9
 %
 
$
309.7

 
$
246.9

 
25.4
 %
By Segment:
 
 
 
 
 
 
 
 
 
 
 
Industrial Process
$
62.4

 
$
45.1

 
38.4
 %
 
$
121.7

 
$
91.8

 
32.6
 %
Motion Technologies
21.2

 
17.8

 
19.1
 %
 
40.8

 
38.4

 
6.2
 %
Interconnect Solutions
26.5

 
25.1

 
5.6
 %
 
55.8

 
49.7

 
12.3
 %
Control Technologies
13.8

 
15.0

 
(8.0
)%
 
27.2

 
28.6

 
(4.9
)%
Corporate & Other
32.5

 
10.4

 
212.5
 %
 
64.2

 
38.4

 
67.2
 %
Sales and marketing expenses for the three and six months ended June 30, 2013 increased $11.7 and $16.4 , respectively, primarily due to costs from the Bornemann business.
General and administrative (G&A) expenses for the three and six months ended June 30, 2013 increased $25.3 and $36.7 , respectively. The increase in G&A expenses for the three and six month periods is primarily due to lower prior year corporate G&A costs in 2012 due largely to the recognition of an insurance-related asset on environmental exposures and higher environmental insurance recoveries. In addition, we incurred additional restructuring costs of $2.0 and $7.3 , respectively, primarily at Motion Technologies and Interconnect Solutions. Increased costs incurred to reposition the organization (repositioning costs) were offset by a decline in costs to create the revised organization structure (transformation costs) following the 2011 spin-offs of Exelis Inc. and Xylem Inc. The repositioning costs primarily consist of advisory fees, costs to exit transition services agreements, IT infrastructure modifications, and other actions.
During the three and six months ended June 30, 2013 , repositioning costs of $7.0 and $10.9 , respectively, were recognized within G&A expenses. The Company expects to incur additional repositioning costs of approximately $13.0 to $23.0 during the remainder of 2013 and a total of approximately $10.0 thereafter. Cash outflows for these repositioning actions are expected to be approximately $20.0 to $30.0 during the remainder of 2013 and a total of approximately $10.0 thereafter.
Asbestos-Related Costs, Net
During the three and six months ended June 30, 2013 , we recognized net asbestos related costs of $15.9 and $31.9 , respectively, reflecting an increase of $6.2 and $9.6 compared to the same prior year periods. The increase in costs for the quarter-to-date period reflects a prior year collection of a receivable of $5.8 from certain insolvent insurers that was previously reserved. The year-over-year increase for the six month period also reflects a $3.6 benefit recognized from an agreement-in-principle reached with an insurer during the first quarter of 2012. As part of our annual asbestos measurement process, the underlying assumptions used to estimate asbestos liabilities and potential recoveries are estimated based on our experience since our last detailed review, the appropriate reference period of years of experience used in determining each assumption is reassessed, and our expectations regarding future conditions are evaluated. The net asbestos-related costs primarily reflect the recognition of incremental asbestos liabilities and related asbestos assets to maintain our rolling 10-year projection of unasserted claims.
See Note 17, “Commitments and Contingencies,” in our Notes to the Consolidated Condensed Financial Statements for further information on our asbestos-related liabilities and assets.

25
Table of Contents

OPERATING INCOME
Operating income for the three and six months ended June 30, 2013 decreased $15.6 and $15.1 reflecting an operating margin decline of 340 basis points and 180 basis points , respectively. The following table illustrates the 2013 and 2012 operating income results of our segments, including operating margin results.  
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
Change
 
2013
 
2012
 
Change
Industrial Process
$
28.1

 
$
27.7

 
1.4%
 
$
50.6

 
$
49.5

 
2.2%
Motion Technologies
23.3

 
20.2

 
15.3%
 
56.3

 
47.5

 
18.5%
Interconnect Solutions
6.7

 
5.5

 
21.8%
 
5.4

 
7.4

 
(27.0)%
Control Technologies
15.4

 
13.8

 
11.6%
 
29.8

 
27.0

 
10.4%
Segment operating income
73.5

 
67.2

 
9.4%
 
142.1

 
131.4

 
8.1%
Asbestos-related costs, net
(15.9
)
 
(9.7
)
 
63.9%
 
(31.9
)
 
(22.3
)
 
43.0%
Other corporate costs
(16.2
)
 
(0.5
)
 
3,140.0%
 
(31.6
)
 
(15.4
)
 
105.2%
Total corporate and other costs
(32.1
)
 
(10.2
)
 
214.7%
 
(63.5
)
 
(37.7
)
 
68.4%
Total operating income
$
41.4

 
$
57.0

 
(27.4)%
 
$
78.6

 
$
93.7

 
(16.1)%
Operating margin:
 
 
 
 
 
 
 
 
 
 
 
Industrial Process
10.5
%
 
11.9
%
 
(140)bp
 
9.6
%
 
10.8
%
 
(120)bp
Motion Technologies
13.6
%
 
13.0
%
 
60bp
 
15.4
%
 
14.2
%
 
120bp
Interconnect Solutions
6.7
%
 
5.5
%
 
120bp
 
2.8
%
 
3.8
%
 
(100)bp
Control Technologies
21.9
%
 
19.3
%
 
260bp
 
21.5
%
 
19.1
%
 
240bp
Segment operating margin
12.1
%
 
12.0
%
 
10bp
 
11.7
%
 
11.7
%
 
—
Consolidated
6.8
%
 
10.2
%
 
(340)bp
 
6.5
%
 
8.3
%
 
(180)bp
Industrial Process
Industrial Process operating income for the three months ended June 30, 2013 increased $0.4 while operating margin declined 140 basis points to 10.5% as net savings from sourcing and VBLSS cost reduction initiatives were offset by unfavorable sales mix associated with the reduction in North American baseline business and a $1.7 increase in strategic investment costs primarily related to an aftermarket expansion initiative. Additionally, during the second quarter of 2013, we recognized an inventory provision due to an order cancellation as well as higher intangible asset amortization expenses related to the Bornemann acquisition.
Industrial Process operating income for the six months ended June 30, 2013 increased $1.1 or 2.2% , while operating margin declined 120 basis points to 9.6% , as favorability from VBLSS and sourcing cost reduction initiatives were partially offset by an $8.0 increase in amortization expense related to intangible assets acquired during the Bornemann acquisition. The results of the Bornemann business, excluding intangible amortization costs, provided an operating income benefit of $3.8, but was dilutive to Industrial Process operating margin by 90 basis points compared to the prior year.
Motion Technologies
Motion Technologies operating income for the three months ended June 30, 2013 increased $3.1 , resulting in a 60 basis point improvement in operating margin. The increase in operating income and margin was primarily due to higher sales volumes providing an increase of $5.7 and net savings from VBLSS, sourcing and restructuring initiatives, which provided an approximate $4.8 improvement to operating income. These benefits were partially offset by a $3.5 decline from automotive price degradation and unfavorable product mix as well as an increase in restructuring costs of $2.1 related to actions taken at our KONI business.
Motion Technologies operating income for the six months ended June 30, 2013 increased $8.8 resulting in a 120 basis point improvement in operating margin. The increase in operating income and margin was primarily due to higher sales volumes providing an increase of $10.8 and net savings from VBLSS, sourcing and restructuring initiatives, which provided an approximate improvement of $6.2 to operating income. These benefits were partially offset by a $3.8 decline from automotive price degradation and higher restructuring costs of $2.5 related to actions taken at our KONI business.

26
Table of Contents

Interconnect Solutions
Interconnect Solutions operating income increased $1.2 for the three months ended June 30, 2013 , resulting in operating income of $6.7 and a 120 basis point improvement in operating margin. The increase in operating income and operating margin was primarily due to net saving from VBLSS, sourcing and restructuring initiatives that provided a benefit of approximately $5.0 partially offset by an unfavorable change in product mix of $3.1 and foreign currency impacts of $0.9.
Interconnect Solutions operating income declined $2.0 for the six months ended June 30, 2013 , resulting in operating income of $5.4 and a 100 basis point decline in operating margin. The decline in operating income was primarily due to the recognition of $5.0 of additional restructuring costs and an unfavorable change in product mix of $4.9 that had a combined impact to operating margin of approximately 500 basis points. The restructuring actions taken during the period primarily relate to employee separations and are intended to better align the manufacturing and overhead cost structure with the future strategy of the business. In addition, operating income was impacted by unfavorable foreign currency fluctuations resulting in a $0.9 decrease to operating income and 40 basis point decline to operating margin. Operating income was favorably impacted by net saving from VBLSS, sourcing and restructuring initiatives that provided benefits of approximately $9.8 or 510 basis points.
Control Technologies
Control Technologies operating income for the three months ended June 30, 2013 increased $1.6 , reflecting a 260 basis point improvement in operating margin. The year-over-year increase was primarily driven by net cost reductions from VBLSS, sourcing, and pricing initiatives of approximately $3.5. The benefit of these items was partially offset by an unfavorable change in sales mix of $1.4 and lower sales volumes of $0.8.
Control Technologies operating income for the six months ended June 30, 2013 increased $2.8, reflecting a 240 basis point improvement in operating margin. The year-over-year increase was primarily driven by net cost reductions from VBLSS, sourcing, and pricing initiatives of approximately $6.8. Operating income and margin also benefited from lower R&D and restructuring related expenses of $0.4 and $0.7, respectively. The benefit of these items to operating income was partially offset by an unfavorable change in sales mix of $3.3 and lower sales volumes of $1.6.
Other Corporate Costs
Other corporate costs increased $15.7 and $16.2 during the three and six months ended June 30, 2013 , respectively, compared to the same prior year periods, primarily due to the recognition of an insurance-related asset on environmental exposures during the second quarter of 2012, lower environmental insurance recoveries and higher repositioning costs, partially offset by lower transformation costs.
INCOME TAX EXPENSE
For the three months ended June 30, 2013 , the Company recognized income tax expense of $14.4 , representing an effective tax rate of 36.7% compared to income tax expense of $37.4 , and an effective tax rate of 69.8% , for the three months ended June 30, 2012 . For the six months ended June 30, 2013 , the Company recognized income tax expense of $29.4 representing an effective tax rate of 39.9% compared to income tax expense of $62.0 , and an effective tax rate of 69.9% for the six months ended June 30, 2012 . The higher tax rates recorded in 2012 were primarily attributable to the valuation allowance recorded in 2012 on existing U.S. current deferred tax assets. The Company continues to provide a full valuation allowance against all of its U.S. net deferred tax assets.
Despite income in 2012 and projected income in 2013, the Company continues to be in a three year cumulative loss position and will therefore continue to record a valuation allowance on all U.S. deferred tax assets and certain foreign net deferred tax assets primarily Luxembourg, Germany and China. The cumulative loss position is considered a significant source of negative evidence and limits our ability to consider other subjective evidence such as our projections for future growth when assessing the need for a deferred tax valuation allowance. Our cumulative loss position will continue to change as a result of historical and current earnings performance. This change among other factors, may cause us to reduce our valuation allowance on deferred tax assets in the foreseeable future. Any adjustment to our valuation allowance would impact our income tax expense in the period our evaluation changes.
The net amount of the tax liability for unrecognized tax benefits related to continuing operations may significantly change within the next 12 months due to changes in audit status, expiration of statutes of limitations and other events which could impact our determination of unrecognized tax benefits. Currently, we cannot reasonably estimate the amount by which our unrecognized tax benefits will change.

27
Table of Contents

INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF TAX
Income from discontinued operations increased by $0.5 and $9.5 for the three and six months ended June 30, 2013 , respectively, over the same prior year periods. The $9.5 increase for the year-to-date period was primarily due to $7.4 of transformation costs incurred during 2012.
LIQUIDITY
Funding and Liquidity Strategy
Our funding needs are monitored and strategies are executed to meet overall liquidity requirements, including the management of our capital structure on both a short- and long-term basis. We expect to fund our ongoing working capital, dividends, capital expenditures and financing requirements through cash flows from operations and cash on hand or by accessing the commercial paper market. If our access to the commercial paper market were adversely affected, we believe that alternative sources of liquidity, including our 2011 Revolving Credit Agreement, described below, would be sufficient to meet our short-term funding requirements.
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 continue to look for opportunities to access cash balances in excess of local operating requirements to meet global liquidity needs in a cost-efficient manner. A majority of our cash and cash equivalents is held by our international subsidiaries. We have and may continue to transfer cash between certain international subsidiaries and the U.S. and other international subsidiaries when it is cost effective to do so. Our intent is generally to indefinitely reinvest these funds outside of the U.S. consistent with our overall intention to support growth and expand in markets outside the U.S. through the development of products, increasing non-U.S. capital spending, and potentially acquiring foreign businesses. However, we have determined that certain undistributed foreign earnings generated in Luxembourg, Japan, and South Korea are no longer considered to be permanently reinvested outside of the U.S. Net distributions of foreign earnings from these countries totaled $28.2 million for the three and six months ended June 30, 2013. The timing and amount of future remittances, if any, remains under evaluation.
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 deems relevant. Therefore, there can be no assurance as to what level of dividends, if any, will be paid in the future. In the second quarter of 2013 , we declared a dividend of $0.10 per share for shareholders of record on May 24, 2013 which was paid on July 1, 2013.
Significant factors that affect our overall management of liquidity include our credit ratings, the adequacy of commercial paper and supporting bank lines of credit, 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 access the commercial paper market to supplement the cash flows generated internally to provide additional short-term funding for strategic investments and other funding requirements. We manage our short-term liquidity through the use of our commercial paper program by adjusting the level of commercial paper borrowings as opportunities to deploy additional capital arise and it is cost effective to do so. As of June 30, 2013 , we had an outstanding commercial paper balance of $40.0 and averaged an outstanding balance of $71.8 during the second quarter. There have been no material changes that have impacted our funding and liquidity capabilities since December 31, 2012 .

28
Table of Contents

Credit Facilities
On October 25, 2011 we entered into a four-year revolving $500 credit agreement (the 2011 Revolving Credit Agreement). The 2011 Revolving Credit Agreement is intended to provide access to additional liquidity and be a source of funding for the commercial paper program, if needed. Our policy is to maintain unused committed bank lines of credit in an amount greater than outstanding commercial paper balances. The interest rate for borrowings under the 2011 Revolving Credit Agreement is generally based on the London Interbank Offered Rate (LIBOR), plus a spread, which reflects our debt rating. The provisions of the 2011 Revolving Credit Agreement require that we maintain an interest coverage ratio, as defined, of at least 3.0 times and a leverage ratio, as defined, of not more than 3.0 times. At June 30, 2013 , we had no amounts outstanding under the 2011 Revolving Credit Agreement and our interest coverage ratio and leverage ratio were within the prescribed thresholds.
Asbestos
Based on the estimated undiscounted asbestos liability as of June 30, 2013 for claims filed or estimated to be filed over the next 10 years, we have estimated that we will be able to recover 43% of the asbestos indemnity and defense costs from our insurers. Actual insurance reimbursements will vary from period to period and the anticipated recovery rate is expected to decline over time due to gaps in our insurance coverage, reflecting uninsured periods, the insolvency of certain insurers, prior settlements with our insurers, and our expectation that certain insurance policies will exhaust within the next 10 years. In the tenth year of our estimate, our insurance recoveries are currently projected to be 24%. Additionally, future recovery rates may be impacted by other factors, such as future insurance settlements, insolvencies, and judicial determinations relevant to our coverage program, which are difficult to predict and subject to a high degree of uncertainty.
Further, there is uncertainty in estimating when cash payments related to the recorded asbestos liability will be fully expended and such cash payments will continue for a number of years beyond the next 10 years due to the significant proportion of future claims included in the estimated asbestos liability and the delay between the date a claim is filed and when it is resolved. Subject to these inherent uncertainties, it is expected that cash payments related to pending claims and claims to be filed in the next 10 years, will extend through approximately 2028.
Annual net cash outflows, net of tax benefits, are projected to average $10 to $20 over the next five years, as compared to an annual average of $9.0 over the past three years, and increase to an average of approximately $35 to $45, over the remainder of the projection period.
In light of the uncertainties and variables inherent in the long-term projection of the Company's asbestos exposures and potential recoveries, although it is probable that the Company will incur additional costs for asbestos claims filed beyond the next 10 years, we do not believe there is a reasonable basis for estimating the number of future claims, the nature of future claims, or the cost to resolve future claims for years beyond the next 10 years at this time. Accordingly, no liability or related asset has been recorded for any costs that may be incurred for claims asserted subsequent to 2023.
Due to these uncertainties, as well as our inability to reasonably estimate any additional asbestos liability for claims which may be filed beyond the next 10 years, it is not possible to predict the ultimate outcome of the cost of resolving the pending and estimated unasserted asbestos claims. We believe it is possible that the future events affecting the key factors and other variables within the next 10 years, as well as the cost of asbestos claims filed beyond the next 10 years, net of expected recoveries, could have a material adverse effect on our financial statements.

29
Table of Contents

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 operating, investing, and financing activities from continuing operations, as well as net cash derived from discontinued operations, for the six months ended June 30, 2013 and 2012 .  
For the Six Months Ended June 30
2013
 
2012
Operating activities
$
68.8

 
$
102.0

Investing activities
(33.6
)
 
(28.6
)
Financing activities
(51.1
)
 
(14.4
)
Foreign exchange
(7.2
)
 
(10.3
)
Total net cash flow from continuing operations
(23.1
)
 
48.7

Net cash from discontinued operations
(3.7
)
 
0.5

Net change in cash and cash equivalents
$
(26.8
)
 
$
49.2

Net cash of $68.8 was provided by operating activities for the six months ended June 30, 2013 , representing a decrease of $33.2 from the prior year. The decrease in operating cash flow was primarily attributable to net income tax refunds of $89.5 received during the first half of the 2012 compared to net income tax payments of $5.0 during the first half of 2013, which was partially offset by lower year-over-year pension plan contributions of $31.1 and a decline in transformation-related payments of $35.3 .
Net cash used in investing activities increased by $5.0 in the six months ended June 30, 2013 as compared to 2012 primarily due to higher capital expenditures of $7.2 primarily associated with the construction of a new Industrial Process production facility in South Korea, offset by a net $2.1 proceeds from investment securities.
Net cash used in financing activities increased by $36.7 in the six months ended June 30, 2013 as compared to the prior year primarily due to lower net short-term debt borrowings of $10.5 , a $13.7 decline in proceeds associated with employee stock issuance activity (net of excess tax benefits) as well as an $11.1 increase in share repurchases, partially offset by a favorable comparison of $7.9 related to the timing of dividend payments.
Key Performance Indicators and Non-GAAP Measures
Management reviews key performance indicators including revenue, segment operating income and margins, earnings per share, orders growth, and backlog, among others. 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, dividends, acquisitions and share repurchases. These metrics, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (GAAP) and should not be considered a substitute for measures determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:  
n
“organic revenue” and “organic orders” are defined as revenue and orders, excluding the impact of foreign currency fluctuations and contributions from acquisitions and divestitures made during the previous twelve months. Orders are defined as firm orders that have been received, acknowledged and entered into our production systems. Divestitures include sales of insignificant portions of our business that did not meet the criteria for presentation as a discontinued operation. The period-over-period change resulting from foreign currency fluctuations assumes translation at a constant exchange rate for the current and prior periods.

30
Table of Contents

A reconciliation of the year over year change in revenue, including amounts attributable to organic growth, acquisitions and divestitures, and foreign currency, for the three and six months ended June 30, 2013 , is provided below.  
Three Months Ended June 30
Industrial
Process
 
Motion
Technologies
 
Interconnect
Solutions
 
Control
Technologies
 
Eliminations
 
Total
ITT
 
% Change
2012 Revenue
$
233.0

 
$
155.1

 
$
99.9

 
$
71.5

 
$
(1.6
)
 
$
557.9

 
 
Organic growth
(3.3
)
 
14.0

 
1.4

 
(1.0
)
 
0.2

 
11.3

 
2.0
%
Acquisitions/(divestitures), net
38.4

 
—

 
—

 
—

 
—

 
38.4

 
6.9
%
Foreign currency translation
0.6

 
2.3

 
(1.0
)
 
(0.3
)
 
—

 
1.6

 
0.3
%
Total change in revenue
35.7

 
16.3

 
0.4

 
(1.3
)
 
0.2

 
51.3

 
9.2
%
2013 Revenue
$
268.7

 
$
171.4

 
$
100.3

 
$
70.2

 
$
(1.4
)
 
$
609.2

 
 
Six Months Ended June 30
Industrial
Process
 
Motion
Technologies
 
Interconnect
Solutions
 
Control
Technologies
 
Eliminations
 
Total
ITT
 
% Change
2012 Revenue
$
459.3

 
$
335.3

 
$
192.8

 
$
141.6

 
$
(3.0
)
 
$
1,126.0

 
 
Organic growth
(3.3
)
 
26.1

 
—

 
(2.3
)
 
0.4

 
20.9

 
1.9
%
Acquisitions/(divestitures), net
68.7

 
—

 
—

 
—

 
—

 
68.7

 
6.1
%
Foreign currency translation
0.8

 
3.2

 
(1.7
)
 
(0.5
)
 
—

 
1.8

 
0.1
%
Total change in revenue
66.2

 
29.3

 
(1.7
)
 
(2.8
)
 
0.4

 
91.4

 
8.1
%
2013 Revenue
$
525.5

 
$
364.6

 
$
191.1

 
$
138.8

 
$
(2.6
)
 
$
1,217.4

 
 
n
“adjusted income from continuing operations” and “adjusted income from continuing operations per diluted share” are defined as income from continuing operations attributable to ITT Corporation and income from continuing operations attributable to ITT Corporation per diluted share, adjusted to exclude special items that include, but are not limited to, asbestos-related costs, transformation costs, repositioning costs, restructuring and asset impairment charges, acquisition-related expenses, income tax settlements or adjustments, and other unusual or infrequent non-operating items. Special items represent significant charges or credits, on an after-tax basis, that impact current results, but may not be related to the Company's ongoing operations and performance. A reconciliation of adjusted income from continuing operations, including adjusted earnings per diluted share, is provided below.
 
Three Months
 
Six Months
For the Periods Ended June 30
2013
 
2012
 
2013
 
2012
Income from continuing operations attributable to ITT Corporation
$
24.7

 
$
16.2

 
$
43.8

 
$
26.7

Net asbestos-related charges, net of tax
10.4

 
5.9

 
20.8

 
13.6

Repositioning costs, net of tax
4.6

 
1.4

 
7.1

 
1.4

Tax-related special items (a)
3.2

 
23.2

 
9.5

 
38.2

Restructuring and asset impairment charges, net of tax
2.3

 
0.9

 
4.8

 
1.2

Acquisition-related expenses, net of tax
1.5

 
—

 
4.5

 
—

Transformation costs, net of tax
0.3

 
2.8

 
0.8

 
6.1

Environmental insurance-related asset, net of tax
—

 
(4.1
)
 
—

 
(4.1
)
Adjusted income from continuing operations
$
47.0

 
$
46.3

 
$
91.3

 
$
83.1

Income from continuing operations attributable to ITT Corporation per diluted share
$
0.27

 
$
0.17

 
$
0.47

 
$
0.28

Adjusted income from continuing operations per diluted share
$
0.51

 
$
0.49

 
$
0.99

 
$
0.88

The special items presented above include an aggregate net tax benefit of $9.9, $3.9, $21.4 and $10.3, respectively, in the 2013 and 2012 periods as presented.

(a)
Tax-related special items for the three and six months ended June 30, 2013 and 2012 primarily relate to the recognition of a valuation allowance on deferred tax assets. See Note 5, “Income Taxes” to our Consolidated Condensed Financial Statements for further information.

31
Table of Contents

n
“adjusted free cash flow” is defined as net cash provided by operating activities less capital expenditures, cash payments for transformation costs, repositioning costs, net asbestos cash flows and other significant items that impact current results which management believes are not related to our ongoing operations and performance. Due to other financial obligations and commitments, the entire free cash flow may not be available for discretionary purposes. A reconciliation of adjusted free cash flow is provided below.
Six Months Ended June 30
2013
 
2012
Net cash provided by operating activities
$
68.8

 
$
102.0

Capital expenditures (a)
(35.6
)
 
(27.7
)
Transformation cash payments
5.0

 
40.3

Net asbestos cash flows
11.7

 
16.3

Discretionary pension contribution, net of tax
—

 
11.8

Repositioning cash payments
11.4

 
0.9

Adjusted free cash flow
$
61.3

 
$
143.6

 
(a)
Capital expenditures represent capital expenditures as reported in the Consolidated Condensed Statement of Cash Flows, less capital expenditures associated with transformation and repositioning activities. Capital expenditures associated with transformation and repositioning activities were $1.2 and $1.9 during the six months ended June 30, 2013 and 2012 , respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 2 to the Consolidated Condensed Financial Statements for information on recent accounting pronouncements.
CRITICAL ACCOUNTING ESTIMATES
The preparation of ITT'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. ITT 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 in the 2012 Annual Report describes the critical accounting estimates that are used in preparation of the Consolidated Condensed Financial Statements. Actual results in these areas could differ from management's estimates. There have been no significant changes concerning ITT's critical accounting estimates as described in our 2012 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 2012 Annual Report. However, we provide the following as an update to our 10-K disclosure related to the highly inflationary economy of Venezuela:
Effective January 1, 2010, Venezuela was determined to be a highly inflationary economy and we changed the functional currency of our operations in Venezuela to the U.S dollar. On February 8, 2013, Venezuela announced a devaluation of the Bolivar which resulted in our recognition of a $1.2 remeasurement charge. We estimate that an additional adverse movement of a hypothetical 10% in the Venezuelan Bolivar would result in a further remeasurement impact to operating income of approximately $1.0.
ITEM 4.
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 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 are effective.
There have been no changes in our internal control over financial reporting during the last fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

32
Table of Contents

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 businesses. Some of these proceedings allege damages relating to personal injury claims, environmental exposures, intellectual property matters, commercial or contractual disputes, sometimes related to acquisitions or divestitures, and employment and pension matters. We will continue to defend vigorously against all claims. See information provided below and Note 17 to the Consolidated Condensed Financial Statements for further information.
Asbestos Proceedings
ITT, including its subsidiary Goulds Pumps, Inc., has been joined as a defendant with numerous other companies in product liability lawsuits alleging personal injury due to asbestos exposure. These claims allege that certain of our products sold prior to 1985 contained a part manufactured by a third party (e.g., a gasket) which contained asbestos. To the extent these third-party parts may have contained asbestos, it was encapsulated in the gasket (or other) material and was non-friable. Frequently, the plaintiffs are unable to identify any ITT or Goulds Pump product as a source of asbestos exposure. In addition, a large majority of claims pending against the Company have been placed on inactive dockets because the plaintiff cannot demonstrate a significant compensable loss. Our experience to date is that a substantial portion of resolved claims have been dismissed without payment by the Company.
We record a liability for pending asbestos claims and asbestos claims estimated to be filed over the next 10 years. While it is probable that we will incur additional costs for future claims to be filed against the Company, a liability for potential future claims beyond the next 10 years is not reasonably estimable due to a number of factors. As of June 30, 2013 , we have recorded an undiscounted asbestos-related liability for pending claims and unasserted claims estimated to be filed over the next 10 years of $1,335.7 , including expected legal fees, and an associated asset of $576.0 which represents estimated recoveries from insurers, resulting in a net asbestos exposure of $759.7 .  
ITEM 1A.
RISK FACTORS
There has been no material change in the information concerning risk factors as disclosed in our 2012 Annual Report.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(IN MILLIONS)
PERIOD
TOTAL
NUMBER
OF SHARES
PURCHASED
 
AVERAGE
PRICE
PAID
PER SHARE(1)
 
TOTAL
NUMBER
OF SHARES
PURCHASED AS
PART OF
PUBLICLY
ANNOUNCED
PLANS OR
PROGRAMS(2)
 
MAXIMUM
DOLLAR
VALUE OF
SHARES THAT
MAY YET BE
PURCHASED
UNDER THE
PLANS OR
PROGRAMS(2)
4/1/2013 - 4/30/2013
1.4

 
$
27.54

 
1.4

 
$
370.7

5/1/2013 - 5/31/2013
—

 
—

 
—

 
$
370.7

6/1/2013 - 6/30/2013
—

 
—

 
—

 
$
370.7

(1)
Average price paid per share is calculated on a settlement basis and includes commissions.
(2)
On October 27, 2006, a three-year $1 billion share repurchase program (2006 Share Repurchase Program) was approved by our Board of Directors. On December 16, 2008, the provisions of the share repurchase program were modified by our Board of Directors to replace the original three-year term with an indefinite term. As of June 30, 2013 , we had repurchased 15.3 shares for $629.3, including commissions, under the 2006 Share Repurchase Program. The program is consistent with our capital allocation process, which has centered on those investments necessary to grow our businesses organically and through acquisitions, while also providing cash returns to shareholders. Our strategy for cash flow utilization is to invest in our business, execute strategic acquisitions, pay dividends and repurchase common stock.

33
Table of Contents

Item 3.
DEFAULTS UPON SENIOR SECURITIES
None.
 
Item 4.
MINE SAFETY DISCLOSURES
Not applicable.
 
Item 5.
OTHER INFORMATION
None.
 
Item 6.
EXHIBITS
(a) See the Exhibit Index for a list of exhibits filed herewith.

34
Table of Contents

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 Corporation
 
 
 

 
(Registrant)
 
 
 
By:
 
/s/    J ANICE  M. K LETTNER        
 
 
Janice M. Klettner
 
 
Vice President and Chief Accounting Officer
 
 
(Principal accounting officer)
August 1, 2013


35
Table of Contents

EXHIBIT INDEX
 
EXHIBIT
NUMBER
  
DESCRIPTION
  
LOCATION
 
 
 
10.1

 
First Amendment to the Benefits and Compensation Matters Agreement
 
Filed herewith.
 
 
 
 
 
10.2
*
 
ITT Corporation Annual Incentive Plan For Executive Officers (amended and restated as of January 1, 2013)

 
Filed herewith.
 
 
 
 
 
10.3
*
 
ITT Corporation Special Senior Executive Severance Pay Plan (amended and restated as of October 31, 2011)

 
Filed herewith.
 
 
 
 
 
(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
  
Filed herewith.
 
 
 
(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
  
Filed herewith.
 
 
 
(32.1
)
  
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  
This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
 
 
 
(32.2
)
  
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  
This Exhibit is intended to be furnished in accordance with Regulation S-K Item 601(b) (32) (ii) and shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference.
 
 
 
(101
)
  
The following materials from ITT Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Condensed Income Statements, (ii) Consolidated Condensed Statements of Comprehensive Income, (iii) Consolidated Condensed Balance Sheets, (iv) Consolidated Condensed Statements of Cash Flows and (v) Notes to Consolidated Condensed Financial Statements
  
Submitted electronically with this report.
 
  
 
  
 
* Management compensatory plan

36

EXHIBIT 10.1

FIRST AMENDMENT TO
BENEFITS AND COMPENSATION MATTERS AGREEMENT

This FIRST AMENDMENT TO THE BENEFITS AND COMPENSATION MATTERS AGREEMENT (“ Amendment ”) is made and entered as of May 9, 2012, among ITT Corporation, an Indiana corporation (“ ITT ”), Xylem Inc., an Indiana corporation (“ Water ”) and Exelis Inc., an Indiana corporation (“ Defense ”) (ITT, Water and Defense are referred to herein each individually as a “ Party ”, and collectively as the “ Parties ”).

WHEREAS, ITT, Water and Defense are parties to that certain Benefits and Compensation Matters Agreement dated as of October 25, 2011 (the “ Agreement ”);

WHEREAS, the Parties desire to amend the Agreement in accordance with Section 18(j) of the Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

1.
Defined Terms . Defined terms used without definition in this Amendment have the meanings ascribed to them in the Agreement.

2.
Amendment to Section 3(b)(ii) . Section 3(b)(ii) of the Agreement is hereby deleted in its entirety and replaced with the following:

“(ii)
Adoption of US Qualified DB Plan . Effective as of January 1, 2012, Water shall adopt Xylem Pension Plan for Bargaining Unit Employees, Auburn, New York, which will have terms similar in all material respects to the ITT Pension Plan for Bargaining Unit Employees, Seneca Falls, New York maintained by ITT and identified as Item 16 on Schedule 3(a)(i). ITT shall retain accrued benefits associated with Water Employees who participated in the ITT Pension Plan for Bargaining Unit Employees, Seneca Falls, New York maintained by ITT and identified as Item 16 on Schedule 3(a)(i) accrued prior to the Distribution Date. Water shall assume accrued benefits associated with Water Employees who participated in the ITT Pension Plan for Bargaining Unit Employees, Seneca Falls, New York maintained by ITT identified as Item 16 on Schedule 3(a)(i) accrued on and following the Distribution Date.”

3.
Amendment to Section 3(d)(iv) . Section 3(d)(iv) of the Agreement is hereby amended by deleting “as Items 8,” and replacing it with “as Items 7,”.

4.
Amendment to Section 3(d) . Section 3(d) of the Agreement is hereby amended by the addition of new subparagraph (viii) as follows:

“(viii)
Adoption of Non-US DB Plans . (A) Effective on the Distribution Date, ITT shall adopt New ITT Industries Management GmbH (Germany) plan, which will have terms similar in all material respects to the ITT Industries Management GmbH (Germany) plan maintained by ITT Industries Management GmbH and identified as Item 41 on Schedule 3(a)(iii). As soon as practicable on or after the Distribution Date, Water shall transfer to ITT the assets and liabilities associated with ITT Employees who participated in ITT Industries Management GmbH (Germany) plan identified as Item 41 on Schedule 3(a)(iii). Such assets will be transferred in kind to the maximum extent practicable. The plan actuary for such plan will be responsible for determining the appropriate amount of assets and liabilities to be allocated per employee transferred, in each case in accordance with applicable law.

(B) Effective on the Distribution Date, ITT shall adopt New ITT Industries Management GmbH (Germany) plan, which will have terms similar in all material respects to the ITT Industries Management GmbH (Germany) plan maintained by ITT Industries Management GmbH and identified as Item 43 on Schedule 3(a)(iii). As soon as practicable on or after the Distribution Date, Water shall transfer to ITT the assets and liabilities associated with ITT Employees who participated in ITT Industries Management GmbH (Germany) plan identified as Item 43 on Schedule 3(a)(iii). Such assets will be transferred in kind to the maximum extent practicable. The plan actuary for such plan will be




responsible for determining the appropriate amount of assets and liabilities to be allocated per employee transferred, in each case in accordance with applicable law.”

5.
Amendment to Section 7(a) . Section 7(a) of the Agreement is hereby amended by the addition of new subparagraph (vi) as follows:

“(vi)
ITT hereby agrees that with respect to the ITT Stock Plan identified as Item 7 on Schedule 7(a), it will continue to pay the costs of administering the plan for a period not to exceed the fifth anniversary of the Distribution Date; provided that ITT continues to use Capita Share Plan Services Ltd (or its successor) to administer the ITT Stock Plan identified as Item 6 on Schedule 7(a). Prior to replacing Capita Share Plan Services Ltd (or its successor) as administrator to the ITT Stock Plan identified as Item 6 on Schedule 7(a), ITT will notify Water of such change and Water will then be responsible for paying the costs of administering the ITT Stock Plan identified as Item 7 on Schedule 7(a).”

6. Amendments to Schedules .

a.
A new Schedule 3(a)(iii) is hereby attached to the Agreement in the form of Schedule 3(a)(iii) attached hereto.

b.
A new Schedule 4(a)(i) is hereby attached to the Agreement in the form of Schedule 4(a)(i) attached hereto.

7.
Effect of Amendment . This Amendment is hereby incorporated into and made a part of the Agreement. Except as amended by this Amendment, all terms and provisions of the Agreement shall continue and remain in full force and effect and binding upon the parties thereto.

8.
Binding Effect . This Amendment shall be binding in all respects and inure to the benefit of the successors and permitted assigns of the Parties.

9.
Governing Law . This Amendment shall be governed by and construed in accordance with the Laws, but not the Laws governing conflicts of Laws (other than Sections 5-1401 and 5-1402 of the New York General Obligations Law), of the State of New York.

10.
Counterparts . This Amendment may be executed in more than one counterpart, all of which shall be considered one and the same agreement, and shall become effective when one or more such counterparts have been signed by each of the Parties and delivered to the other Parties.







[SIGNATURE PAGES FOLLOW]







IN WITNESS WHEREOF, the Parties have duly executed and entered into this Amendment as of the date first above written.


ITT CORPORATION


By: ______________________________
Name: Aris C. Chicles
Title: Executive Vice President


EXELIS INC.


By: ________________________________
Named: Ann D. Davidson
Title: Senior Vice President, Chief Legal Officer & Corporate Secretary


XYLEM INC.


By: ________________________________
Named: Frank R. Jimenez
Title: Senior Vice President, General Counsel & Corporate Secretary






Schedule 3(a)(iii): List of Non-US Defined Benefit Plans
The Non-US DB Plans consist of the Defense Non-US DB Plans, the ITT Non-US DB Plans and the Water Non-US DB Plans.

Defense Non-US DB Plans
1.
None
ITT Non-US DB Plans
2.
325- ITT Belgium - Cannon (Belgium)
3.
Gratuity Benefit Program (India) [Xylem to replicate]
4.
128- Cannon GmbH (Germany) [Unfunded]
5.
378- Cannon GmbH (Germany) [Unfunded]
6.
340- Cannon Japan (Japan) [Unfunded]
7.
735- Industries Management GmbH, Bad Camberg and former Fechenheim (Germany) [Unfunded] (liabilities for active employees as of May 20, 2011)
8.
Salary Sacrifice e.V Plan – ITTG (Germany)
8A. 126- DITTHA GmbH. Kempen (Germany) [Unfunded]
8B. 369- Industries Management GmbH, Ebernhahn (Division KONI) (Germany) (liabilities for active employees as of May 20, 2011)
8C. 738- DITTHA GmbH, Kempen (Germany) [Unfunded]

Water Non-US DB Plans
9.
323- ITT Belgium - ITT Industries (Belgium)
10.
324- ITT Belgium Pension Plan (Belgium)
11.
166- Pension Plan for Union Employees of ITT Automotive, a division of ITT Industries of Canada Ltd. [Electrical Systems, North America] (Canada)
12.
200- Pension Plan for Hourly Employees of ITT Residential & Commercial Water (R&CW), a Division of ITT Industries of Canada L.P (Canada)
13.
203- Pension Plan for Hourly Employees of ITT Automotive, a division of ITT Industries of Canada Ltd. [Structural Systems and Components, North America (Toronto Stamping Plant)] (Canada)
14.
205- ITT Industries Canadian Pension Plan for Salaried Employees (Canada)
15.
350- ITT Canadian Excess Benefit Plan - Unregistered (Canada)
16.
209- Pension Plan for Hourly Employees of ITT Fabri-Valve, a Division of ITT Industries of Canada Ltd. (Canada)
17.
221- Pension Plan for Union Employees of Ontario Malleable Iron Company Limited (Canada)
18.
223- Pension Plan for Union Employees of ITT Cannon, a Division of ITT Industries of Canada Ltd.(Canada)
19.
744- Pension Plan of ITT Water & Wastewater, a Division of ITT Industries of Canada L.P.(Canada)
20.
369- Industries Management GmbH, Ebernhahn (Division KONI) (Germany) (solely for liabilities for inactive employees as of May 20, 2011)
21.
756- Flygt Ireland (Ireland)
22.
186- ITT Industries General Pension Plan (UK)
23.
189- ITT Industries Pension Plan for UK Expatriates (UK)
24.
190- Godwin Pumps Limited Pension Scheme (UK)
25.
125- Industriebeteiligungsgesellschaft mbH (Germany) [Unfunded]
26.
DELETED
27.
DELETED
28.
366- Industries Management GmbH, Ebernhahn (Division KONI) (Germany) [Unfunded]
29.
111- ITT Flygt Pumpen GmbH, Langenhagen, jetzt ITT Water & Wastewater (Germany) [Unfunded]
30.
DELETED
31.
116- ITT Industriebeteiligungsgesellschaft mbH (Germany) [Unfunded]
32.
755- ITT Water & Wastewater, Herford (Germany) [Unfunded]
33.
760- Jabsco GmbH (Germany) [Unfunded]
34.
761- ebro Electronic GmbH & Co. KG (Germany) [Unfunded]
35.
762- SI Analytics GmbH Mainz Deferred Comp (Germany) [Unfunded]




36.
763- SI-FAS Pension Valuation (Germany) [Unfunded]
37.
764- WTW FAS Pension Plan (Germany) [Unfunded]
38.
765- ebro Electronics Instruments GmbH Ingolstadt Pension Plan (Germany) [Unfunded]
39.
370- Industries Management GmbH, former Regelungstechnik (Germany) [Unfunded]
40.
720- Industries Management GmbH, former Regelungstechnik (Germany) [Unfunded]
41.
731- Industries Management GmbH (Germany) [Unfunded] [ITT to replicate]
42.
732- Industries Management GmbH (Germany) [Unfunded]
43.
734- Industries Management GmbH (Germany) [Unfunded] [ITT to replicate]
44.
736- Industries Management GmbH, Bad Camberg and former Fechenheim (Germany) [Unfunded]
45.
713- Flygt S.p.a. Flygt Italy Plan (Italy) [Unfunded]
46.
766- ADIN Pension 28229 NOK (Norway) [Unfunded]
47.
767- ADI Storebrand 27835 NOK (Norway) [Unfunded]
48.
768- Storebrand 25000 NOK (Norway) [Unfunded]
49.
118- Grindex AB (Sweden) [Unfunded]
50.
120- Water & Wastewater AB General Pension Plan (ITP-Plan) (Sweden) [Unfunded]
51.
121- Water & Wastewater AB Individual Contracts (Not FPG/PRI) (Sweden) [Unfunded]
52.
754- Industries Holding AB General Pension Plan (ITP-Plan) (Sweden) [Unfunded]
53.
735- Industries Management GmbH, Bad Camberg and former Fechenheim (Germany) [Unfunded] (solely for liabilities for inactive employees as of May 20, 2011)





Schedule 4(a)(i): List of US Qualified Defined Contribution Plans
The US Qualified DC Plans consist of the Defense US Qualified DC Plans, the ITT US Qualified DC Plans and the Water US Qualified DC Plans.

Defense US Qualified DC Plans
1.
100- ITT Salaried Investment and Savings Plan     
2.
178- ITT Avionics Division & ITT Aerospace/Communications Division Bargaining Unit Savings Plan    
3.
209- ITT Night Vision Savings Plan for Hourly Employees    
4.
227- ITT Electronic Systems Savings Plan for Hourly Employees
5.
013- ITT Systems Corporation Retirement/Savings Plan
6.
235- ITT Systems Corporation Pacific Missile Range Facility Savings Plan for Hourly Employees    
7.
ITT Research Systems Inc. Employees’ Savings Plan     
8.
237- ITT Advanced Engineering and Sciences Professional Benefits Employees’ Savings Plan     
9.
003- EDO Corporation Employee Investment Plan
10.
200- ITT Gilfillan Savings Plan for Hourly Employees    

ITT US Qualified DC Plans
11.
193- ITT Aerospace Controls Savings Plan for Hourly Employees
12.
196- ITT Cannon Savings Plan for Hourly Employees    
13.
216- ITT Engineered Valves - Lancaster Savings Plan for Hourly Employees    
14.
009- Goulds Pumps, Inc. Retirement Savings and Investment Plan [Xylem to replicate]     
15.
201- ITT Conoflow Savings Plan for Hourly Employees    
16.
215- ITT Engineered Valves - Fabri Savings Plan for Hourly Emp. At Amory, MS    
17.
225- ITT Engineered Valves CA Pure Flo Solutions Group Savings Plan for Hourly Employees    
18.
236- ITT BIW Connector Systems Employees Savings Plan    
19.
010- Procast And Goulds Pump Service Center Employee Savings Plan
20.
240- Pure-Flo Precision Savings Plan for Hourly Employees    
21.
239- ITT Koni Friction Products Savings Plan for Hourly Employees    
22.
238- ITT Control Technologies Savings Plan for Hourly Employees
23.
DELETED
24.
DELETED

Water US Qualified DC Plans
25.
002- ITT Rule Savings Plan for Hourly Employees
26.
203- ITT Bell & Gossett Savings Plan for Hourly Employees    
27.
226- ITT Heat Transfer Savings Plan for Hourly Employees    
28.
231- ITT Hydro Air Savings Plan for Hourly Employees    
29.
241- Flojet Corporation 401(k) Plan    
30.
001- F.B. Leopold Co., Inc. Savings Plan for Hourly Employees    
31.
001- F.B. Leopold Company, Inc. Retirement Savings Plan
32.
001- Laing Thermotech, Inc. 401(k) Profit Sharing Plan    
33.
Godwin Pumps of America, Inc. Profit Sharing Plan and Trust
34.
Evolutionary Concepts Profit Sharing Plan (YE 6/30/2010)
35.
ECI/Alcon 401(k) Plan




        

EXHIBIT 10.2
ITT Corporation Annual Incentive Plan For Executive Officers
(amended and restated as of January 1, 2013)
1.    Purpose
The purpose of this ITT Corporation Annual Incentive Plan for Executive Officers (the “Incentive Plan”) is to provide incentive compensation in the form of a cash award to executive officers of ITT Corporation (the “Company”) for achieving specific pre-established performance objectives and to continue to motivate participating executive officers to achieve their business goals, while tying a portion of their compensation to measures affecting shareholder value. The Incentive Plan seeks to enable the Company to continue to be competitive in its ability to attract and retain executive officers of the highest caliber.
It is intended that compensation payable under the Incentive Plan will qualify as “performance-based compensation,” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”) and regulations promulgated thereunder, if such qualification is desired.
2.    Plan Administration
The Compensation and Personnel Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company, as constituted by the Board from time to time, shall be comprised completely of “outside directors” as defined under Section 162(m) of the Code.
The Committee shall have full power and authority to administer, construe and interpret the provisions of the Incentive Plan and to adopt and amend administrative rules and regulations, agreements, guidelines and instruments for the administration of the Incentive Plan and for the conduct of its business as the Committee considers appropriate.
Except with respect to matters which under Section 162(m) of the Code are required to be determined in the sole and absolute discretion of the Committee, the Committee shall have full power, to the extent permitted by law, to delegate its authority to any officer or employee of the Company to administer and interpret the procedural aspects of the Incentive Plan, subject to the terms of the Incentive Plan, including adopting and enforcing rules to decide procedural and administrative issues.
The Committee may rely on opinions, reports or statements of officers or employees of the Company and of counsel to the Company (inside or retained counsel), public accountants and other professional or expert persons.
The Board reserves the right to amend or terminate the Incentive Plan in whole or in part at any time; provided, however, that except as necessary to maintain an outstanding incentive award’s qualification as performance-based compensation under Section 162(m) of the Code (“Performance-Based Compensation”), no amendments shall adversely affect or impair the rights of any participant that have previously accrued hereunder, without the written consent of the participant. Unless otherwise prohibited by applicable law, any amendment required to cause an incentive award to qualify as Performance-Based Compensation may be made by the Committee. No amendment to the Incentive Plan may be made to alter the class of individuals who are eligible to participate in the Incentive Plan, the performance criteria specified in Section 4 hereof or the maximum incentive award payable to any participant without shareholder approval unless shareholder approval of the amendment is not required in order for incentive awards paid to participants to constitute Performance-Based Compensation.
No member of the Committee shall be liable for any action taken or omitted to be taken or for any determination made by him or her in good faith with respect to the Incentive Plan, and the Company shall indemnify and hold harmless each member of the Committee against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any act or omission in connection with the administration or interpretation of the Incentive Plan, unless arising out of such person’s own fraud or bad faith.
3.    Eligible Executives
Executive officers of the Company and its subsidiaries, as defined by the Securities Exchange Act of 1934, Rule 3b-7, as that definition may be amended from time to time, shall be eligible to participate in the Incentive Plan. The Committee shall select from all eligible executive officers, those to whom incentive awards shall be granted under the Incentive Plan.
4.    Plan Year, Performance Periods, Performance Measures and Performance Targets
Each fiscal year of the Incentive Plan (the “Plan Year”) shall begin on January 1 and end on December 31. The performance period (the “Performance Period”) with respect to which incentive awards may be payable under the Incentive Plan shall be the Plan Year unless the Committee designates one or more different Performance Periods.
The Committee shall establish the performance measures (the “Performance Measures”) to be used which may include, one or more of the following criteria: (i) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per share; (v) book value per share; (vi) return on shareholders’ equity; (vii) expense management; (viii) return on investment; (ix) improvements in capital structure; (x) profitability of an identifiable business unit or product; (xi) profit margins; (xii) stock price; (xiii) market share; (xiv) revenues or sales (including organic revenue); (xv) costs; (xvi) cash flow; (xvii) working capital (xviii) return on assets; (xix) total shareholder return; (xx) return on invested or total capital and (xxi) economic value added.
In addition, to the extent consistent with Section 162(m) of the Code, Performance Measures may be based upon other objectives such as negotiating transactions or sales, implementation of Company policy, development of long-term business goals or strategic plans, negotiation of significant corporate transactions, meeting specified market penetration goals, productivity measures, geographic business expansion goals, cost targets, customer satisfaction or employee satisfaction goals, goals relating to merger synergies, management of employment practices and employee benefits, or supervision of litigation and information technology, and goals relating to acquisitions or divestitures of subsidiaries and/or other affiliates or joint ventures; provided however, that the measurement of any such Performance Measures must be objectively determinable.
All Performance Measures shall be objectively determinable and, to the extent they are expressed in standard accounting terms, shall be according to generally accepted accounting principles as in existence on the date on which the applicable Performance Period is established and without regard to any changes in such principles after such date (unless the modification of a Performance Measure to take into account such a change is pre-established in writing at the time the Performance Measures are established in writing by the Committee and/or the modification would not affect the ability of the incentive award to qualify as Performance-Based Compensation).
Notwithstanding the foregoing, incentive awards that are not intended to qualify as Performance-Based Compensation may be based on the Performance Measures described above or such other measures as the Committee may determine.
The Committee shall establish the performance targets (the “Performance Targets”) to be achieved which shall be based on one or more Performance Measures relating to the Company as a whole or to the specific businesses of the Company, subsidiaries, operating groups, or operating units, as determined by the Committee. Performance Targets may be established on such terms as the Committee may determine, in its discretion, including in absolute terms, as a goal relative to performance in prior periods, or as a goal compared to the performance of one or more comparable companies or an index covering multiple companies. The Committee also shall establish with respect to each incentive award an objective formula to be used in calculating the amount of incentive award each participant shall be eligible to receive. There may be a sliding scale of payment dependent upon the percentage levels of achievement of Performance Targets.
The Performance Measures and Performance Targets, which may be different with respect to each participant and each Performance Period, must be set forth in writing by the Committee within the first ninety (90) days of the applicable Performance Period or, if sooner, prior to the time when 25 percent of the relevant Performance Period has elapsed.
5.    Certification of Performance Targets and Calculation of Incentive Awards
After the end of each Performance Period, and prior to the payment for such Performance Period, the Committee must certify in writing the degree to which the Performance Targets for the Performance Period were achieved, including the specific target objective or objectives and the satisfaction of any other material terms of the incentive award. The Committee shall calculate the amount of each participant’s incentive award for such Performance Period based upon the Performance Measures and Performance Targets for such participant. In establishing Performance Targets and Performance Measures and in calculating the degree of achievement thereof, the Committee may ignore extraordinary items, property transactions, changes in accounting standards and losses or gains arising from discontinued operations. The Committee shall have no authority or discretion to increase the amount of any participant’s incentive award as so determined to the extent such incentive award is intended to qualify as Performance-Based Compensation, but it may reduce the amount or totally eliminate any such incentive award if it determines in its absolute and sole discretion that such action is appropriate in order to reflect the participant’s performance or unanticipated factors during the Performance Period. The Committee shall have the authority to increase or decrease the amount of an incentive award to the extent the incentive award is not intended to qualify as Performance-Based Compensation.
The maximum payment that may be made with respect to incentive awards under the Plan to any participant in any one calendar year shall be $8,000,000.
6.    Payment of Awards
Approved incentive awards shall be payable by the Company in cash to each participant, or to the participant’s estate in the event of the participant’s death, as soon as practicable (and in any event no later than 2-1/2 months) after the end of each Performance Period. No incentive award that is intended to qualify as Performance-Based Compensation may be paid under the Incentive Plan until the Committee has certified in writing that the relevant Performance Targets were achieved. If a participant is not an employee on the last day of the Performance Period, the Committee shall have sole discretion to determine what portion, if any, the participant shall be entitled to receive with respect to any award for the Performance Period. The Committee shall have the authority to adopt appropriate rules and regulations for the administration of the Incentive Plan in such termination cases.
The Company retains the right to deduct from any incentive awards paid under the Incentive Plan any Federal, state, local or foreign taxes required by law to be withheld with respect to such payment.
Notwithstanding the above, no incentive awards shall be paid under the Incentive Plan unless the Incentive Plan is approved by the requisite shareholders of the Company.
7.    Other Terms and Conditions
Any award made under this Incentive Plan shall be subject to the discretion of the Committee. No person shall have any legal claim to be granted an award under the Incentive Plan and the Committee shall have no obligation to treat participants uniformly. Except as may be otherwise required by law, incentive awards under the Incentive Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary. Incentive awards granted under the Incentive Plan shall be payable from the general assets of the Company, and no participant shall have any claim with respect to any specific assets of the Company.
Nothing contained in the Incentive Plan shall give any participant the right to continue in the employment of the Company or affect the right of the Company to terminate the employment of a participant.
8.    Acceleration Event.
An “Acceleration Event” shall occur if (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Act”) disclosing that any person (within the meaning of Section 13(d) of the Act), other than the Company or a subsidiary of the Company or any employee benefit plan sponsored by the Company or a subsidiary of the Company, is the beneficial owner directly or indirectly of twenty percent (20%) or more of the outstanding Common Stock $1 par value, of the Company (the “Stock”); (ii) any person (within the meaning of Section 13(d) of the Act), other than the Company or a subsidiary of the Company, or any employee benefit plan sponsored by the Company or a subsidiary of the Company, shall purchase shares pursuant to a tender offer or exchange offer to acquire any Stock (or securities convertible into Stock) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of twenty percent (20%) or more of the outstanding Stock (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Stock); (iii) the consummation of (A) any consolidation, business combination or merger involving the Company, other than a consolidation, business combination or merger involving the Company in which holders of Stock immediately prior to the consolidation, business combination or merger (x) hold fifty percent (50%) or more of the combined voting power of the Company (or the corporation resulting from the merger or consolidation or the parent of such corporation) after the merger and (y) have the same proportionate ownership of common stock of the Company (or the corporation resulting from the merger or consolidation or the parent of such corporation), relative to other holders of Stock immediately prior to the merger, business combination or consolidation, immediately after the merger as immediately before, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of the Company, (iv) there shall have been a change in a majority of the members of the Board within a 12-month period unless the election or nomination for election by the Company’s stockholders of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who (x) were directors at the beginning of such 12-month period or (y) whose nomination for election or election as directors was recommended or approved by a majority of the directors who were directors at the beginning of such 12-month period or (v) any person (within the meaning of Section 13(d) of the Act) (other than the Company or any subsidiary of the Company or any employee benefit plan (or related trust) sponsored by the Company or a subsidiary of the Company) becomes the beneficial owner (as such term is defined in Rule 13d-3 under the Act) of twenty percent (20%) or more of the Stock.
Upon the occurrence of such Acceleration Event, the Performance Measures for each Performance Period with respect to which incentive awards may be payable under the Incentive Plan shall be deemed to be achieved at the greater of (i) the Performance Target established for such Performance Measures or (ii) the Company’s actual achievement of such Performance Measures as of the Acceleration Event. Payment of the incentive awards, for the full year, will be made to each participant, in cash, within five (5) business days following such Acceleration Event.
9.    Miscellaneous.
The Incentive Plan, as amended and restated, shall be effective as of January 1, 2013 subject to the approval of the requisite shareholders of the Company. Once approved, the Incentive Plan shall remain in effect unless/until terminated by the Board; provided, however, that if an Acceleration Event has occurred no amendment or termination shall impair the rights of any participant with respect to any prior award.
This Incentive Plan shall be construed and governed in accordance with the laws of the State of New York.

        
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EXHIBIT 10.3
ITT Corporation
Special Senior Executive Severance Pay Plan
(amended and restated as of October 31, 2011)

1.
Purpose
The purpose of this ITT Corporation Special Senior Executive Severance Pay Plan (“Plan”) is to assist in occupational transition by providing Severance Benefits, as defined herein, for employees covered by this Plan whose employment is terminated under conditions set forth in this Plan.
2.
Covered Employees
Covered employees under this Plan (“Special Severance Executives”) are active full-time, regular salaried employees of ITT Corporation, (“ITT”) and of any subsidiary company (“ITT Subsidiary”) (collectively or individually as the context requires “Company”) (including Special Severance Executives who are short term disabled as of a Potential Acceleration Event within the meaning of the Company’s short term disability plans) (other than Special Severance Executives on periodic severance as of a Potential Acceleration Event) who are in Band A or B or were in Band A or B at any time within the two year period immediately preceding an Acceleration Event and such other employees of the Company who shall be designated as covered employees in Band A or B under the Plan by the Compensation and Personnel Committee of ITT’s Board of Directors.
“Bands A and B” shall have the meaning given such terms under the executive classification system of the ITT Human Resources Department as in effect immediately preceding an Acceleration Event. After the occurrence of an Acceleration Event, the terms “ITT”, “ITT Subsidiary” and “Company” as used herein shall also include, respectively and as the context requires, any successor company to ITT or any successor company to any ITT Subsidiary and any affiliate of any such successor company.
3.
Definitions
An “Acceleration Event” shall occur if (i) a report on Schedule 13D shall be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Securities Exchange Act of 1934 (the “Act”) disclosing that any person (within the meaning of Section 13(d) of the Act), other than ITT or a subsidiary of ITT or any employee benefit plan sponsored by ITT or a subsidiary of ITT, is the beneficial owner directly or indirectly of twenty percent (20%) or more of the outstanding Common Stock $1 par value, of ITT (the “Stock”); (ii) any person (within the meaning of Section 13(d) of the Act), other than ITT or a subsidiary of ITT, or any employee benefit plan sponsored by ITT or a subsidiary of ITT, shall purchase shares pursuant to a tender offer or exchange offer to acquire any Stock of ITT (or securities convertible into Stock) for cash, securities or any other consideration, provided that after consummation of the offer, the person in question is the beneficial owner (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of twenty percent (20%) or more of the outstanding Stock of ITT (calculated as provided in paragraph (d) of Rule 13d-3 under the Act in the case of rights to acquire Stock); (iii) the consummation of (A) any consolidation, business combination or merger involving ITT, other than a consolidation, business combination or merger involving ITT in which holders of Stock immediately prior to the consolidation, business combination or merger (x) hold fifty percent (50%) or more of the combined voting power of ITT (or the corporation resulting from the merger or consolidation or the parent of such corporation) after the merger and (y) have the same proportionate ownership of common stock of ITT (or the corporation resulting from the merger or consolidation or the parent of such corporation), relative to other holders of Stock immediately prior to the merger, business combination or consolidation, immediately after the merger as immediately before, or (B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of ITT, (iv) there shall have been a change in a majority of the members of the Board of Directors of ITT within a 12-month period unless the election or nomination for election by ITT’ stockholders of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who (x) were directors at the beginning of such 12-month period or (y) whose nomination for election or election as directors was recommended or approved by a majority of the directors who were directors at the beginning of such 12-month period or (v) any person (within the meaning of Section 13(d) of the Act) (other than ITT or any subsidiary of ITT or any employee benefit plan (or related trust) sponsored by ITT or a subsidiary of ITT) becomes the beneficial owner (as such term is defined in Rule 13d-3 under the Act) of twenty percent (20%) or more of the Stock.
“Cause” shall mean action by the Special Severance Executive involving willful malfeasance or gross negligence or the Special Severance Executive’s failure to act involving material nonfeasance that would tend to have a materially adverse effect on the Company. No act or omission on the part of the Special Severance Executive shall be considered “willful” unless


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it is done or omitted in bad faith or without reasonable belief that the action or omission was in the best interests of the Company.
“Good Reason” shall mean (i) without the Special Severance Executive’s express written consent and excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or its affiliates within 30 days after receipt of notice thereof given by the Special Severance Executive, (A) a reduction in the Special Severance Executive’s annual base compensation (whether or not deferred), (B) the assignment to the Special Severance Executive of any duties inconsistent in any material respect with the Special Severance Executive’s position (including status, offices, titles and reporting requirements), authority, duties or responsibilities, or (C) any other action by the Company or its affiliates which results in a material diminution in such position, authority, duties or responsibilities; (ii) without the Special Severance Executive’s express written consent, the Company’s requiring the Special Severance Executive’s work location to be other than within twenty-five (25) miles of the location where such Special Severance Executive was principally working immediately prior to the Acceleration Event; or (iii) any failure by the Company to obtain the express written assumption of this Plan from any successor to the Company; provided that “Good Reason” shall cease to exist for an event on the 90th day following the later of its occurrence or the Special Severance Executive’s knowledge thereof, unless the Special Severance Executive has given the Company notice thereof prior to such date.
“Potential Acceleration Event” shall mean any execution of an agreement, the commencement of a tender offer or any other transaction or event that if consummated would result in an Acceleration Event.
4.
Severance Benefits Upon Termination of Employment
If, a Special Severance Executive’s employment with the Company is terminated due to a Qualifying Termination, he or she shall receive the severance benefits set forth in Section 5 hereof (“Severance Benefits”). For purposes hereof, (i) a “Qualifying Termination” shall mean a termination of a Special Severance Executive’s employment with the Company either (x) by the Company without Cause (A) within the two (2) year period commencing on the date of the occurrence of an Acceleration Event or (B) prior to the occurrence of an Acceleration Event and either (1) following the public announcement of the transaction or event which ultimately results in such Acceleration Event or (2) at the request of a party to, or participant in, the transaction or event which ultimately results in an Acceleration Event; or (y) by a Special Severance Executive for Good Reason within the two (2) year period commencing with the date of the occurrence of an Acceleration Event and (ii) a determination by a Special Severance Executive that he or she has “Good Reason” hereunder shall be final and binding on the parties hereto unless the Company can establish by a preponderance of the evidence that “Good Reason” does not exist.
5.
Severance Benefits
Band A Benefits
Severance Benefits for Special Severance Executives (i) in Band A at the time of a Qualifying Termination or at any time during the two (2) year period immediately preceding the Acceleration Event or (ii) designated as a covered employee in Band A in accordance with Section 2 hereof:
•    Accrued Rights − The Special Severance Executive’s base salary through the date of termination of employment, any annual bonus earned but unpaid as of the date of termination for any previously completed fiscal year, reimbursement for any unreimbursed business expenses properly incurred by the Special Severance Executive in accordance with Company policy prior to the date of the Special Severance Executive’s termination of employment and such employee benefits, if any, as to which the Special Severance Executive may be entitled under the employee benefit plans of the Company, including without limitation, the payment of any accrued or unused vacation under the Company’s vacation policy.
•    Severance Pay − The sum of (x) three (3) times the current annual base salary rate paid (whether or not deferred) to the Special Severance Executive at the time of the Special Severance Executive’s termination of employment, and (y) three (3) times the current annual bonus paid or awarded (whether or not deferred) to the Special Severance Executive in respect of either (i) an Acceleration Event or (ii) the Special Severance Executive’s termination of employment.
•    Benefits and Perquisites
> Continued health and life insurance benefits for a three (3) year period following the Special Severance Executive’s termination of employment at the same cost to the Special Severance Executive, and at the same coverage levels, as provided to the Special Severance Executive (and the Special Severance Executive’s eligible dependents) immediately prior to his or her termination of employment.

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> Payment of a lump sum amount (“Pension Lump Sum Amount”) equal to the difference between (i) the total lump sum value of the Special Severance Executive’s pension benefit under the ITT Salaried Retirement Plan and, as applicable, Excess Pension Plan IA, Excess Pension Plan IB and/or Excess Pension Plan II of the Company or any successor plan; provided that the benefits under such successor plan is no less favorable than the benefits under the plans set forth herein (or corresponding pension arrangements outside the United States) (“Pension Plans”) as of the Special Severance Executive’s termination of employment and (ii) the total lump sum value of the Special Severance Executive’s pension benefit under the Pension Plans after crediting an additional three (3) years of age and three (3) years of eligibility and benefit service to the Special Severance Executive and applying the highest annual base salary rate and highest bonus determined above under “Severance Pay” with respect to each of the additional three (3) years of service so credited for purposes of determining Final Average Compensation under the Pension Plans. The above total lump sum values shall be determined in the manner provided in the Excess Pension Plans of the Company for determination of lump sum benefits upon the occurrence of an Acceleration Event, as defined in said Plans. This provision shall apply to any Special Severance Executive having a pension benefit under any of the Pension Plans as of the Special Severance Executive’s termination of employment. An example of the calculation of benefits set forth in this paragraph is set forth on Schedule A.
> Crediting of an additional three (3) years of age and three (3) years of eligibility service for purposes of the Company’s retiree health and retiree life insurance benefits. This provision shall apply to any Special Severance Executives covered under such benefits any time during the three (3) year period immediately preceding the Special Severance Executive’s termination of employment.
> Payment of a lump sum amount (“Savings Plan Lump Sum Amount”) equal to three (3) times the following amount: the highest annual base salary rate determined above under “Severance Pay” times the highest percentage rate of Company Contributions (not to exceed three and one-half percent (3 1/2%) with respect to the Special Severance Executive under the ITT Investment and Savings Plan for Salaried Employees and/or the ITT Excess Savings Plan (or corresponding savings plan arrangements outside the United States) (“Savings Plans”) (including matching contributions and floor contributions) at any time during the three (3) year period immediately preceding the Special Severance Executive’s termination of employment or the three (3) year period immediately preceding the Acceleration Event. This provision shall apply to any Special Severance Executive who is a member of any of the Savings Plans at any time during such three (3) year period.
•    Outplacement — Outplacement services for one (1) year.
Band B Benefits
Severance Benefits for Special Severance Executives (i) in Band B at the time of a Qualifying Termination or at any time during the two (2) year period immediately preceding the Acceleration Event or (ii) designated as a covered employee in Band B in accordance with Section 2 hereof; provided, that a Special Severance Executive who is in Band B at the time of a Qualifying Termination but was in Band A anytime during the two (2) year period immediately preceding the Acceleration Event shall be entitled to Severance Benefits as a Special Severance Executive in Band A and shall not be entitled to the Severance Benefits set forth below:
•    Accrued Rights - The Special Severance Executive’s base salary through the date of termination of employment, any annual bonus earned but unpaid as of the date of termination for any previously completed fiscal year, reimbursement for any unreimbursed business expenses properly incurred by the Special Severance Executive in accordance with Company policy prior to the date of the Special Severance Executive’s termination of employment and such employee benefits, if any, as to which the Special Severance Executive may be entitled under the employee benefit plans of the Company, including without limitation, the payment of any accrued or unused vacation under the Company’s vacation policy.
•    Severance Pay — The sum of (x) two (2) times the current annual base salary rate paid (whether or not deferred) to the Special Severance Executive at the Special Severance Executive’s termination of employment, and (y) two (2) times the current annual bonus paid or awarded (whether or not deferred) to the Special Severance Executive in respect of either (i) an Acceleration Event or (ii) the Special Severance Executive’s termination of employment.
•    Benefits and Perquisites
> Continued health and life insurance benefits for a two year period following the Special Severance Executive’s termination of employment at the same cost to the Special Severance Executive, and at the same coverage levels, as provided to the Special Severance Executive (and the Special Severance Executive’s eligible dependents) immediately prior to his or her termination of employment.

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> Payment of a lump sum amount (“Pension Lump Sum Amount”) equal to the difference between (i) the total lump sum value of the Special Severance Executive’s pension benefit under the ITT Salaried Retirement Plan and, as applicable, Excess Pension Plan IA, Excess Pension Plan IB and/or Excess Pension Plan II of the Company or any successor plan; provided that the benefits under such successor plan is no less favorable than the benefits under the plans set forth herein (or corresponding pension arrangements outside the United States) (“Pension Plans”) as of the Special Severance Executive’s termination of employment and (ii) the total lump sum value of the Special Severance Executive’s pension benefit under the Pension Plans after crediting an additional two (2) years of age and two (2) years of eligibility and benefit service to the Special Severance Executive and applying the highest annual base salary rate and highest bonus determined above under “Severance Pay” with respect to each of the additional two (2) years of service so credited for purposes of determining Final Average Compensation under the Pension Plans. The above total lump sum values shall be determined in the manner provided in the Excess Pension Plans of the Company for determination of lump sum benefits upon the occurrence of an Acceleration Event, as defined in said Plans. This provision shall apply to any Special Severance Executive having a pension benefit under any of the Pension Plans as of the Special Severance Executive’s termination of employment. An example of the calculation of benefits set forth in this paragraph is set forth on Schedule A.
> Crediting of an additional two (2) years of age and two (2) years of eligibility service for purposes of the Company’s retiree health and retiree life insurance benefits. This provision shall apply to any Special Severance Executives covered under such benefits any time during the three (3) year period immediately preceding the Special Severance Executive’s termination of employment.
> Payment of a lump sum amount (“Savings Plan Lump Sum Amount”) equal to two (2) times the following amount: the highest annual base salary rate determined above under “Severance Pay” times the highest percentage rate of Company Contributions (not to exceed three and one-half percent (3 1/2%)) with respect to the Special Severance Executive under the ITT Investment and Savings Plan for Salaried Employees and/or the ITT Excess Savings Plan (or corresponding savings plan arrangements outside the United States) (“Savings Plans”) (including matching contributions and floor contributions) at any time during either the three (3) year period immediately preceding the Special Severance Executive’s termination of employment or the three (3) year period immediately preceding the Acceleration Event. This provision shall apply to any Special Severance Executive who is a member of any of the Savings Plans at any time during such three (3) year period.
•    Outplacement – Outplacement services for one year.
General
With respect to the provision of benefits described above during the above described respective three and two year periods, if, for any reason at any time the Company is unable to treat the Special Severance Executive as being eligible for ongoing participation in any Company employee benefit plans or perquisites in existence immediately prior to the termination of employment of the Special Severance Executive, and if, as a result thereof, the Special Severance Executive does not receive a benefit or perquisite or receives a reduced benefit or perquisite, the Company shall provide such benefits or perquisites by making available equivalent benefits or perquisites from other sources in a manner consistent with Section 15 below.
6.
Form of Payment of Severance Pay and Lump Sum Payments
Severance Pay shall be paid in cash, in non-discounted equal periodic installment payments corresponding to the frequency and duration of the severance payments that the Special Severance Executive would have been entitled to receive from the Company as a normal severance benefit in the absence of the occurrence of an Acceleration Event. The Pension Lump Sum Amount and the Savings Plan Lump Sum Amount shall be paid in cash within thirty (30) calendar days after the date the employment of the Special Severance Executive terminates.
7.
Termination of Employment — Other
The Severance Benefits shall only be payable upon a Special Severance Executive’s termination of employment due to a Qualifying Termination; provided, that if, following the occurrence of an Acceleration Event, a Special Severance Executive is terminated due to the Special Severance Executive’s death or disability (as defined in the long-term disability plan in which the Special Severance Executive is entitled to participate (whether or not the Special Severance Executive voluntarily participates in such plan)) and, at the time of such termination, the Special Severance Executive had grounds to resign with Good Reason, such termination of employment shall be deemed to be a Qualifying Termination.
8.
Administration of Plan

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This Plan shall be administered by ITT, who shall have the exclusive right to interpret this Plan, adopt any rules and regulations for carrying out this Plan as may be appropriate and decide any and all matters arising under this Plan, including but not limited to the right to determine appeals. Subject to applicable Federal and state law, all interpretations and decisions by ITT shall be final, conclusive and binding on all parties affected thereby.
Notwithstanding the preceding paragraph, following an Acceleration Event, any controversy or claim arising out of or relating to this Plan, or the breach thereof, shall be settled by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules and the entire cost thereof shall be borne by the Company. The location of the arbitration proceedings shall be reasonably acceptable to the Special Severance Executive. Judgment on the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The Company shall pay all legal fees, costs of litigation, prejudgment interest, and other expenses which are incurred in good faith by the Special Severance Executive as a result of the Company’s refusal to provide any of the Severance Benefits to which the Special Severance Executive becomes entitled under this Plan, or as a result of the Company’s (or any third party’s) contesting the validity, enforceability, or interpretation of this Plan, or as a result of any conflict between the Special Severance Executive and the Company pertaining to this Plan. The Company shall pay such fees and expenses from the general assets of the Company.
9.
Termination or Amendment
ITT may terminate or amend this Plan (“Plan Change”) at any time except, that following the occurrence of (i) an Acceleration Event or (ii) a Potential Acceleration Event, no Plan Change that would adversely affect any Special Severance Executive may be made without the prior written consent of such Special Severance Executive affected thereby; provided, however, that (ii) above shall cease to apply if such Potential Acceleration Event does not result in the occurrence of an Acceleration Event.
10.
Offset
Any Severance Benefits provided to a Special Severance Executive under this Plan shall be offset in a manner consistent with Section 15 by reducing (x) any Severance Pay hereunder by any severance pay, salary continuation pay, termination pay or similar pay or allowance and (y) any other Severance Benefits hereunder by corresponding employee benefits, perquisites or outplacement services, which the Special Severance Executive receives or is entitled to receive, (i) under the ITT Corporation Senior Executive Severance Pay Plan; (ii) pursuant to any other Company policy, practice, program or arrangement; (iii) pursuant to any Company employment agreement or other agreement with the Company; or (iv) by virtue of any law, custom or practice excluding, however, any unemployment compensation in the United States, unless the Special Severance Executive voluntarily expressly waives (which the Special Severance Executive shall have the exclusive right to do) in writing any such respective entitlement.
11.
Excise Tax
In the event that it shall be determined that any Payment would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, then the aggregate of all Payments shall be reduced so that the Present Value of the aggregate of all Payments does not exceed the Safe Harbor Amount; provided, however, that no such reduction shall be effected, if the Net After-tax Benefit to Special Severance Executive of receiving all of the Payments exceeds the Net After-tax Benefit to Special Severance Executive resulting from having such Payments so reduced. In the event a reduction is required pursuant hereto, the order of reduction shall be first all cash payments on a pro rata basis, then any equity compensation on a pro rata basis, and lastly medical and dental coverage.
For purposes of this Section 11, the following terms have the following meanings:
(i) “Net After-tax Benefit” shall mean the Present Value of a Payment net of all federal state and local income, employment and excise taxes imposed on Special Severance Executive with respect thereto, determined by applying the highest marginal rate(s) applicable to an individual for Special Severance Executive’s taxable year in which the Change in Control occurs.
(ii) “Payment” means any payment or distribution or provision of benefits by the Company to or for the benefit of Special Severance Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any reductions required by this Section 11.
(iii) “Present Value” shall mean such value determined in accordance with Section 280G(d)(4) of the Code.

6

(iv) “Safe Harbor Amount” shall be an amount expressed in Present Value which maximizes the aggregate Present Value of Payments without causing any Payment to be subject to excise tax under Section 4999 of the Code or the deduction limitation of Section 280G of the Code.
All determinations required to be made under this Section 11, including whether and when a reduction is required and the amount of such reduction and the assumptions to be utilized in arriving at such determination, shall be made by a nationally recognized accounting firm mutually agreed to by the Special Severance Executive and the Company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and the Special Severance Executive within ten (10) business days of the receipt of notice from the Special Severance Executive that there has been a Payment, or such earlier time as is requested by the Company; provided that for purposes of determining the amount of any reduction, the Special Severance Executive shall be deemed to pay federal income tax at the highest marginal rates applicable to individuals in the calendar year in which any such determination of the amount of the reduction is to be made and deemed to pay state and local income taxes at the highest effective rates applicable to individuals in the state or locality of the Special Severance Executive’s residence or place of employment, whichever is higher, in the calendar year in which such determination is to be made.
All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines that no excise tax is payable by the Special Severance Executive, it shall so indicate to the Special Severance Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and the Special Severance Executive.
12.
Miscellaneous
The Special Severance Executive shall not be entitled to any notice of termination or pay in lieu thereof.
Severance Benefits under this Plan are paid entirely by the Company from its general assets.
This Plan is not a contract of employment, does not guarantee the Special Severance Executive employment for any specified period and does not limit the right of the Company to terminate the employment of the Special Severance Executive at any time.
If a Special Severance Executive should die while any amount is still payable to the Special Severance Executive hereunder had the Special Severance Executive continued to live, all such amounts shall be paid in accordance with this Plan to the Special Severance Executive’s designated heirs or, in the absence of such designation, to the Special Severance Executive’s estate.
The numbered section headings contained in this Plan are included solely for convenience of reference and shall not in any way affect the meaning of any provision of this Plan.
If, for any reason, any one or more of the provisions or part of a provision contained in this Plan shall be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Plan not held so invalid, illegal or unenforceable, and each other provision or part of a provision shall to the full extent consistent with law remain in full force and effect.
The Plan shall be governed by and construed in accordance with the laws of the State of New York without regard to the conflicts of laws provisions thereof.
The Plan shall be binding on all successors and assigns of the ITT and a Special Severance Executive.
13.
Notices
Any notice and all other communication provided for in this Plan shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier or three (3) days after it has been mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
If to the Company:

ITT Corporation
1133 Westchester Avenue

7

White Plains, New York 10604 Attention: General Counsel


If to Special Severance Executive:

To the most recent address of Special Severance Executive set forth in the personnel records of ITT.
14.
Adoption Date
This Plan was initially adopted by ITT on March 10, 1997 (“Adoption Date”) and does not apply to any termination of employment which occurred or which was communicated to the Special Severance Executive prior to the Adoption Date.
15.
Section 409A
This Plan is intended to comply with Section 409A of the Code and will be interpreted in a manner intended to comply with Section 409A of the Code. Notwithstanding anything herein to the contrary, (i) if at the time of the Special Severance Executive’s termination of employment with the Company the Special Severance Executive is a “specified employee” as defined in Section 409A of the Code (and any related regulations or other pronouncements thereunder) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to the Special Severance Executive) until the date that is six months following the Special Severance Executive’s termination of employment with the Company (or the earliest date as is permitted under Section 409A of the Code), at which point all payments deferred pursuant to this Section 15 shall be paid to the Special Severance Executive in a lump sum and (ii) if any other payments of money or other benefits due hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Company, that does not cause such an accelerated or additional tax. To the extent any reimbursements or in-kind benefits due under this Plan constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). Each payment made under this Plan shall be designated as a “separate payment” within the meaning of Section 409A of the Code. The Company shall consult with Special Severance Executives in good faith regarding the implementation of the provisions of this section; provided that neither the Company nor any of its employees or representatives shall have any liability to Special Severance Executives with respect thereto.



EXHIBIT 31.1
CERTIFICATION OF DENISE L. RAMOS PURSUANT TO SEC. 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Denise L. Ramos, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 of ITT Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/ S /    D ENISE  L. R AMOS        
Denise L. Ramos
Chief Executive Officer and President
Date: August 1, 2013




EXHIBIT 31.2
CERTIFICATION OF THOMAS M. SCALERA PURSUANT TO SEC. 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas M. Scalera, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 of ITT Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/ S /    T HOMAS  M. S CALERA        
Thomas M. Scalera
Senior Vice President and
Chief Financial Officer
Date: August 1, 2013




EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ITT Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Denise L. Ramos, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/ S /    D ENISE  L. R AMOS        
Denise L. Ramos
Chief Executive Officer and President
August 1, 2013
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.




EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of ITT Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas M. Scalera, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/ S /    T HOMAS  M. S CALERA        
Thomas M. Scalera
Senior Vice President and
Chief Financial Officer
August 1, 2013
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.