2016 Q4 Form 10-Q Financial Statement

#000021622816000144 Filed on November 04, 2016

View on sec.gov

Income Statement

Concept 2016 Q4 2016 Q3 2015 Q3
Revenue $588.4M $581.7M $601.9M
YoY Change -11.76% -3.36% -8.4%
Cost Of Revenue $412.3M $397.8M $407.0M
YoY Change -11.43% -2.26% -6.91%
Gross Profit $176.1M $183.9M $194.9M
YoY Change -12.52% -5.64% -11.37%
Gross Profit Margin 29.93% 31.61% 32.38%
Selling, General & Admin $96.90M $98.60M $103.3M
YoY Change -11.34% -4.55% -15.74%
% of Gross Profit 55.03% 53.62% 53.0%
Research & Development $21.60M $18.60M $18.00M
YoY Change -8.86% 3.33% -10.45%
% of Gross Profit 12.27% 10.11% 9.24%
Depreciation & Amortization $25.50M $18.10M $16.40M
YoY Change -5.2% 10.37% -11.35%
% of Gross Profit 14.48% 9.84% 8.41%
Operating Expenses $118.5M $117.2M $121.3M
YoY Change -10.9% -3.38% -15.0%
Operating Profit $57.60M $134.8M $103.9M
YoY Change -15.67% 29.74% -13.2%
Interest Expense -$16.70M -$300.0K $4.000M
YoY Change 5466.67% -107.5% -671.43%
% of Operating Profit -28.99% -0.22% 3.85%
Other Income/Expense, Net -$300.0K $4.000M
YoY Change -107.5% -671.43%
Pretax Income $24.60M $134.5M $107.9M
YoY Change -54.02% 24.65% -9.33%
Income Tax $700.0K $46.10M $11.40M
% Of Pretax Income 2.85% 34.28% 10.57%
Net Earnings $25.80M $90.10M $130.7M
YoY Change -29.7% -31.06% 62.76%
Net Earnings / Revenue 4.38% 15.49% 21.71%
Basic Earnings Per Share $1.01 $1.46
Diluted Earnings Per Share $289.9K $1.00 $1.45
COMMON SHARES
Basic Shares Outstanding 88.20M shares 89.20M shares 89.40M shares
Diluted Shares Outstanding 89.70M shares 90.30M shares

Balance Sheet

Concept 2016 Q4 2016 Q3 2015 Q3
SHORT-TERM ASSETS
Cash & Short-Term Investments $461.0M $491.0M $515.0M
YoY Change -4.16% -4.66% -12.71%
Cash & Equivalents $460.7M $475.8M $504.9M
Short-Term Investments $0.00 $15.00M $10.00M
Other Short-Term Assets $122.0M $139.7M $198.7M
YoY Change -40.31% -29.69% -34.85%
Inventory $295.2M $305.1M $299.7M
Prepaid Expenses
Receivables $498.0M $550.0M $521.0M
Other Receivables $26.00M $45.00M $47.00M
Total Short-Term Assets $1.402B $1.516B $1.571B
YoY Change -6.4% -3.52% -8.1%
LONG-TERM ASSETS
Property, Plant & Equipment $464.5M $450.3M $414.4M
YoY Change 4.74% 8.66% -4.34%
Goodwill $774.7M $784.8M $622.7M
YoY Change -0.46% 26.03% -3.16%
Intangibles $160.3M $166.4M $106.6M
YoY Change -14.37% 56.1% 11.62%
Long-Term Investments $5.600M
YoY Change 0.0%
Other Assets $188.4M $186.3M $148.6M
YoY Change 22.9% 25.37% 1.78%
Total Long-Term Assets $2.200B $2.202B $1.907B
YoY Change -1.17% 15.45% -4.5%
TOTAL ASSETS
Total Short-Term Assets $1.402B $1.516B $1.571B
Total Long-Term Assets $2.200B $2.202B $1.907B
Total Assets $3.602B $3.718B $3.478B
YoY Change -3.27% 6.88% -6.16%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $301.7M $304.4M $291.9M
YoY Change -4.13% 4.28% -11.73%
Accrued Expenses $350.2M $382.6M $414.8M
YoY Change -10.82% -7.76% -14.4%
Deferred Revenue
YoY Change
Short-Term Debt $214.3M $100.0M $11.00M
YoY Change -12.78% 809.09%
Long-Term Debt Due $600.0K $900.0K
YoY Change -14.29%
Total Short-Term Liabilities $866.2M $938.9M $717.2M
YoY Change -9.12% 30.91% -12.03%
LONG-TERM LIABILITIES
Long-Term Debt $1.800M $0.00 $0.00
YoY Change -21.74% -100.0%
Other Long-Term Liabilities $181.0M $190.2M $194.2M
YoY Change -4.69% -2.06% -27.02%
Total Long-Term Liabilities $1.307B $1.321B $1.394B
YoY Change -6.97% -5.25% -12.3%
TOTAL LIABILITIES
Total Short-Term Liabilities $866.2M $938.9M $717.2M
Total Long-Term Liabilities $1.307B $1.321B $1.394B
Total Liabilities $2.173B $2.260B $2.111B
YoY Change -7.84% 7.03% -12.21%
SHAREHOLDERS EQUITY
Retained Earnings $1.789B $1.771B $1.665B
YoY Change 5.45% 6.36% 14.89%
Common Stock $88.40M $88.30M $89.50M
YoY Change -1.23% -1.34% -2.29%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $1.426B $1.456B $1.363B
YoY Change
Total Liabilities & Shareholders Equity $3.602B $3.718B $3.478B
YoY Change -3.27% 6.88% -6.16%

Cashflow Statement

Concept 2016 Q4 2016 Q3 2015 Q3
OPERATING ACTIVITIES
Net Income $25.80M $90.10M $130.7M
YoY Change -29.7% -31.06% 62.76%
Depreciation, Depletion And Amortization $25.50M $18.10M $16.40M
YoY Change -5.2% 10.37% -11.35%
Cash From Operating Activities $100.7M $73.80M $59.20M
YoY Change 22.8% 24.66% 25.96%
INVESTING ACTIVITIES
Capital Expenditures -$43.30M -$22.00M -$18.20M
YoY Change 92.44% 20.88% -36.59%
Acquisitions
YoY Change
Other Investing Activities $11.40M -$3.700M $47.00M
YoY Change -103.24% -107.87% 63.19%
Cash From Investing Activities -$31.90M -$25.70M $28.80M
YoY Change -91.47% -189.24% 28700.0%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -63.50M -10.60M -70.60M
YoY Change -130.15% -84.99% 82.43%
NET CHANGE
Cash From Operating Activities 100.7M 73.80M 59.20M
Cash From Investing Activities -31.90M -25.70M 28.80M
Cash From Financing Activities -63.50M -10.60M -70.60M
Net Change In Cash 5.300M 37.50M 17.40M
YoY Change -106.5% 115.52% 107.14%
FREE CASH FLOW
Cash From Operating Activities $100.7M $73.80M $59.20M
Capital Expenditures -$43.30M -$22.00M -$18.20M
Free Cash Flow $144.0M $95.80M $77.40M
YoY Change 37.8% 23.77% 2.25%

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us-gaap Comprehensive Income Net Of Tax Including Portion Attributable To Noncontrolling Interest
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us-gaap Cost Of Revenue
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us-gaap Defined Benefit Plan Amortization Of Gains Losses
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us-gaap Defined Benefit Plan Amortization Of Prior Service Cost Credit
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us-gaap Defined Benefit Plan Amortization Of Prior Service Cost Credit
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us-gaap Defined Benefit Plan Contributions By Employer
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8200000 USD
us-gaap Defined Benefit Plan Contributions By Employer
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5300000 USD
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15900000 USD
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13800000 USD
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2900000 USD
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8000000 USD
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1700000 USD
us-gaap Defined Benefit Plan Service Cost
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4700000 USD
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1700000 USD
us-gaap Defined Benefit Plan Service Cost
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4600000 USD
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us-gaap Depreciation
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50400000 USD
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18100000 USD
us-gaap Depreciation
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55500000 USD
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63100000 USD
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1100000 USD
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1.78
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9000000 USD
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us-gaap Effective Income Tax Rate Continuing Operations
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0.161
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us-gaap Effective Income Tax Rate Continuing Operations
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3200000 USD
us-gaap Excess Tax Benefit From Share Based Compensation Financing Activities
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3400000 USD
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64600000 USD
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80000000 USD
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219200000 USD
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us-gaap Gross Profit
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us-gaap Gross Profit
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4100000 USD
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107900000 USD
us-gaap Income Loss From Continuing Operations Before Income Taxes Minority Interest And Income Loss From Equity Method Investments
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134500000 USD
us-gaap Income Loss From Continuing Operations Before Income Taxes Minority Interest And Income Loss From Equity Method Investments
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us-gaap Income Loss From Continuing Operations Including Portion Attributable To Noncontrolling Interest
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us-gaap Income Loss From Continuing Operations Including Portion Attributable To Noncontrolling Interest
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158500000 USD
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us-gaap Income Loss From Discontinued Operations Net Of Tax Attributable To Reporting Entity
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1800000 USD
us-gaap Income Loss From Discontinued Operations Net Of Tax Attributable To Reporting Entity
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us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
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us-gaap Income Loss From Discontinued Operations Net Of Tax Per Diluted Share
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us-gaap Income Loss From Discontinued Operations Net Of Tax Per Diluted Share
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us-gaap Income Tax Expense Benefit
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24700000 USD
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37200000 USD
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6300000 USD
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77200000 USD
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13900000 USD
CY2015Q3 us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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900000 shares
us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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900000 shares
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500000 shares
us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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700000 shares
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27200000 USD
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44900000 USD
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43000000 USD
CY2016Q3 us-gaap Inventory For Long Term Contracts Or Programs
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44900000 USD
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CY2016Q3 us-gaap Inventory Net
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305100000 USD
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162900000 USD
CY2016Q3 us-gaap Inventory Raw Materials And Supplies
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171800000 USD
CY2015Q4 us-gaap Inventory Work In Process
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56000000 USD
CY2016Q3 us-gaap Inventory Work In Process
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65000000 USD
CY2015Q4 us-gaap Land
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CY2016Q3 us-gaap Land
Land
30000000 USD
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CY2016Q3 us-gaap Liabilities
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2259900000 USD
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CY2016Q3 us-gaap Liabilities And Stockholders Equity
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3717600000 USD
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953100000 USD
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1405100000 USD
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1321000000 USD
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2800000 USD
CY2016Q3 us-gaap Long Term Debt And Capital Lease Obligations
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2300000 USD
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1200000 USD
CY2016Q3 us-gaap Long Term Debt Current
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900000 USD
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961200000 USD
CY2015Q4 us-gaap Loss Contingency Accrual Carrying Value Noncurrent
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954800000 USD
CY2016Q3 us-gaap Loss Contingency Accrual Carrying Value Noncurrent
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875700000 USD
CY2015Q4 us-gaap Machinery And Equipment Gross
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909300000 USD
CY2016Q3 us-gaap Machinery And Equipment Gross
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CY2015Q4 us-gaap Minority Interest
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CY2016Q3 us-gaap Minority Interest
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us-gaap Net Cash Provided By Used In Discontinued Operations
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us-gaap Net Cash Provided By Used In Discontinued Operations
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5300000 USD
us-gaap Net Cash Provided By Used In Financing Activities Continuing Operations
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us-gaap Net Cash Provided By Used In Financing Activities Continuing Operations
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us-gaap Net Cash Provided By Used In Investing Activities Continuing Operations
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us-gaap Net Cash Provided By Used In Investing Activities Continuing Operations
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us-gaap Net Cash Provided By Used In Operating Activities Continuing Operations
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147100000 USD
us-gaap Net Cash Provided By Used In Operating Activities Continuing Operations
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146700000 USD
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us-gaap Net Income Loss
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315100000 USD
CY2016Q3 us-gaap Net Income Loss
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90100000 USD
us-gaap Net Income Loss
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160300000 USD
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us-gaap Net Income Loss Attributable To Noncontrolling Interest
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0 USD
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100000 USD
us-gaap Net Income Loss Attributable To Noncontrolling Interest
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200000 USD
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4000000 USD
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4 Segment
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103900000 USD
us-gaap Operating Income Loss
OperatingIncomeLoss
326300000 USD
CY2016Q3 us-gaap Operating Income Loss
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134800000 USD
us-gaap Operating Income Loss
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235300000 USD
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51500000 USD
CY2016Q3 us-gaap Other Accrued Liabilities Current
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52600000 USD
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37800000 USD
CY2016Q3 us-gaap Other Accrued Liabilities Noncurrent
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65900000 USD
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204400000 USD
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21400000 USD
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us-gaap Other Comprehensive Income Defined Benefit Plans Tax Portion Attributable To Parent
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us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Net Of Tax
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-4600000 USD
CY2016Q3 us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Net Of Tax
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-800000 USD
us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Net Of Tax
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us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Tax
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CY2016Q3 us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Tax
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us-gaap Other Comprehensive Income Loss Foreign Currency Transaction And Translation Adjustment Net Of Tax
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us-gaap Other Comprehensive Income Loss Pension And Other Postretirement Benefit Plans Adjustment Net Of Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Tax
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CY2016Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans Net Of Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans Net Of Tax
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us-gaap Proceeds From Short Term Debt
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us-gaap Proceeds From Stock Options Exercised
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us-gaap Repayments Of Long Term Debt
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us-gaap Repayments Of Long Term Debt
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us-gaap Repayments Of Short Term Debt
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us-gaap Research And Development Expense
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us-gaap Research And Development Expense
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us-gaap Restructuring And Related Cost Incurred Cost
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17800000 USD
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us-gaap Restructuring And Related Cost Incurred Cost
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us-gaap Restructuring Reserve Translation Adjustment
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0 USD
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us-gaap Selling And Marketing Expense
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us-gaap Selling And Marketing Expense
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us-gaap Share Based Compensation Arrangement By Share Based Payment Award Equity Instruments Other Than Options Vested In Period
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CY2016Q3 us-gaap Significant Change In Unrecognized Tax Benefits Is Reasonably Possible Amount Of Unrecorded Benefit
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CY2015Q4 us-gaap Stockholders Equity Including Portion Attributable To Noncontrolling Interest
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CY2016Q3 us-gaap Stockholders Equity Including Portion Attributable To Noncontrolling Interest
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us-gaap Subsequent Events Date
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2016-11-03
CY2016Q3 us-gaap Tax Adjustments Settlements And Unusual Provisions
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us-gaap Treasury Stock Shares Retired
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CY2015Q3 us-gaap Weighted Average Number Of Diluted Shares Outstanding
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us-gaap Weighted Average Number Of Diluted Shares Outstanding
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90800000 shares
CY2016Q3 us-gaap Weighted Average Number Of Diluted Shares Outstanding
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us-gaap Weighted Average Number Of Diluted Shares Outstanding
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CY2015Q3 us-gaap Weighted Average Number Of Shares Outstanding Basic
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us-gaap Weighted Average Number Of Shares Outstanding Basic
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CY2016Q3 us-gaap Weighted Average Number Of Shares Outstanding Basic
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us-gaap Weighted Average Number Of Shares Outstanding Basic
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us-gaap Basis Of Accounting
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-top:12px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;font-weight:bold;">Basis of Presentation</font></div><div style="line-height:120%;padding-top:8px;text-align:justify;text-indent:16px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The unaudited consolidated condensed financial statements have been prepared pursuant to the rules and regulations of the SEC and, in the opinion of management, reflect all 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 Annual Report on Form&#160;10-K for the year ended December 31, </font><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:none;">2015</font><font style="font-family:Arial;font-size:10pt;"> (</font><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:none;">2015</font><font style="font-family:Arial;font-size:10pt;"> Annual Report) in preparing these unaudited financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in our </font><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:none;">2015</font><font style="font-family:Arial;font-size:10pt;"> Annual Report. </font></div><div style="line-height:120%;padding-top:8px;text-align:justify;text-indent:16px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">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, allowance for doubtful accounts and inventory valuation. Actual results could differ from these estimates. </font></div><div style="line-height:120%;padding-top:8px;text-align:justify;text-indent:16px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">ITT's quarterly financial periods end on the Saturday that is generally 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. </font></div></div>
us-gaap Description Of New Accounting Pronouncements Not Yet Adopted
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;padding-top:12px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Accounting Pronouncements Not Yet Adopted</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:8px;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In March 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-09 to simplify several aspects of the accounting for employee share-based payment transactions standard, including the classification of excess tax benefits and deficiencies and the accounting for employee forfeitures. The guidance is effective for the Company beginning in the first quarter of 2017. The updates to the accounting standard include the following:</font></div><table cellpadding="0" cellspacing="0" style="padding-bottom:8px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:42px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Excess tax benefits and deficiencies will no longer be recognized as a change in additional paid-in-capital in the equity section of the balance sheet, instead they are to be recognized in the income statement as a tax expense or benefit. In the statement of cash flows, excess tax benefits and deficiencies will no longer be classified as a financing activity, instead they will be classified as an operating activity. </font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-bottom:8px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:42px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Entities will have the option to continue to reduce share-based compensation expense during the vesting period of outstanding awards for estimated future employee forfeitures or they may elect to recognize the impact of forfeitures as they actually occur.</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="padding-bottom:8px;font-family:Times New Roman; font-size:10pt;"><tr><td style="width:42px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The ASU also provides new guidance to other areas of the standard including minimum statutory tax withholding rules and the calculation of diluted common shares outstanding. </font></div></td></tr></table><div style="line-height:120%;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The updates are to be applied using a modified retrospective approach as a cumulative adjustment to retained earnings. Early adoption is permitted. We have yet to finalize the evaluation of the potential impact of this ASU on our financial statements, however we do not expect these changes to have a material impact.</font></div><div style="line-height:120%;padding-top:16px;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In February 2016, the FASB issued ASU 2016-02 impacting the accounting for leases intending to increase transparency and comparability of organizations by requiring balance sheet presentation of leased assets and increased financial statement disclosure of leasing arrangements. The revised standard will require entities to recognize a liability for its lease obligations and a corresponding asset representing the right to use the underlying asset over the lease term. Lease obligations are to be measured at the present value of lease payments and accounted for using the effective interest method. The accounting for the leased asset will differ slightly depending on whether the agreement is deemed to be a financing or operating lease. For finance leases, the leased asset is depreciated on a straight-line basis and recorded separately from the interest expense in the income statement resulting in higher expense in the earlier part of the lease term. For operating leases, the depreciation and interest expense components are combined, recognized evenly over the term of the lease, and presented as a reduction to operating income. The ASU requires that assets and liabilities be presented or disclosed separately and classified appropriately as current and noncurrent. The ASU further requires additional disclosure of certain qualitative and quantitative information related to lease agreements. The new standard is effective for the Company beginning in the first quarter 2019 and early adoption is permitted. We are currently evaluating the impact of these amendments on our financial statements.</font></div><div style="line-height:120%;padding-bottom:8px;padding-top:16px;text-align:justify;text-indent:24px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">In May 2014, the FASB issued ASU 2014-09 amending the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity&#8217;s contracts with customers. The new guidance will be effective for the Company beginning in its first quarter of 2018. The amendments may be applied retrospectively to each prior period presented or with the cumulative effect recognized as of the date of initial application. We are currently evaluating the impact of these amendments and the transition alternatives on our financial statements.</font></div></div>

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