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Company Transformation | 12 Months Ended
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Dec. 31, 2011
Company Transformation [Abstract] |
Company Transformation | NOTE 3 Company Transformation NOTE 3 Company Transformation As mentioned in Note 1, on October 31, 2011, the Company completed the legal and structural separation of Exelis and Xylem from the Company into two independent, publicly traded companies via a tax-free Distribution to shareholders. The Distribution was made pursuant to a Distribution Agreement, dated October 25, 2011, among ITT, Exelis and Xylem (the Distribution Agreement). With the completion of these separations, the Company disposed of its water-related businesses and Defense segment in their entirety and ceased to consolidate their financial position and results of operations in its consolidated financial statements. Accordingly, the Company has presented the financial position and results of operations of its former water-related businesses and Defense segment as discontinued operations in the consolidated financial statements for all periods presented. See Note 4, “Discontinued Operations,” for additional information. The water-related businesses include the Water & Wastewater division, including its analytical instrumentation component, and the Residential & Commercial Water division previously reported within the Fluid Technology segment, as well as the Flow Control division that was previously reported within the Motion & Flow segment. The Industrial Process division, which was previously reported within the Fluid Technology segment, was not included in the Distribution and is now reported as a segment of ITT. During 2011, we recognized pre-tax expenses of $636 in connection with activities taken to complete the Distribution and to create the revised organizational structure (referred to herein as Transformation costs). We have presented $396 of the pre-tax transformation costs within income from continuing operations and $240 within income from discontinued operations. Amounts presented within discontinued operations are costs directly related to the Distribution and provide no future benefit to the Company. The components of transformation costs incurred during 2011 are presented below.
|  | Continuing Operations |  | Discontinued Operations |  | Total
Loss on extinguishment of debt (see Note 16) |  |  | $ | 297 |  |  |  | $ | – |  |  |  | $ | 297 |
Advisory fees |  |  |  | – |  |  |  |  | 139 |  |  |  |  | 139 |
Non-cash asset impairment(a) |  |  |  | 57 |  |  |  |  | 8 |  |  |  |  | 65 |
IT costs |  |  |  | – |  |  |  |  | 46 |  |  |  |  | 46 |
Employee retention and other compensation costs(b) |  |  |  | 37 |  |  |  |  | 20 |  |  |  |  | 57 |
Lease termination and other real estate costs |  |  |  | 4 |  |  |  |  | 10 |  |  |  |  | 14 |
Other costs |  |  |  | 1 |  |  |  |  | 17 |  |  |  |  | 18 |
Transformation costs before income tax expense |  |  |  | 396 |  |  |  |  | 240 |  |  |  |  | 636 |
Tax-related separation costs |  |  |  | 4 |  |  |  |  | 7 |  |  |  |  | 11 |
Tax benefit |  |  |  | (143 | ) |  |  |  | (74 | ) |  |  |  | (217 | )
Total transformation costs, net of tax benefit |  |  | $ | 257 |  |  |  | $ | 173 |  |  |  | $ | 430 |
(a) | Includes a $55 million non-cash impairment charge related to a decision to discontinue development of an information technology consolidation initiative.
(b) | Includes $17 of compensation costs recognized within continuing operations in connection with the retirement of Steven R. Loranger, our former Chairman, President and Chief Executive Officer in October 2011.
The table included below provides a rollforward of the accrual for Transformation costs for the year ended 2011.
Transformation accrual – January 1 |  |  | $ | 2 |
Charges for actions during the period: |  |  |  |  |
Continuing operations |  |  |  | 396 |
Discontinued operations |  |  |  | 240 |
Cash payments |  |  |  | (559 | )
Asset impairment and other non-cash charges, net |  |  |  | (45 | )
Transformation accrual – December 31 |  |  | $ | 34 |

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