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Long-Term Incentive Employee Compensation (Tables)

12 Months Ended

Dec. 31, 2012

Long-Term Incentive Employee Compensation Costs

Long-term incentive employee compensation costs are primarily recorded within general and administrative expenses, and are reduced by an estimated forfeiture rate. These costs impacted our consolidated results of operations as follows:

		2012				2011				2010
Share-based compensation expense, equity-based awards		$	12.9			$	23.3			$	13.7
Share-based compensation expense, liability-based awards			1.9				2.1				(3.8	)
Total share-based compensation expense in operating income (loss)(a)			14.8				25.4				9.9
Tax benefit			5.4				8.5				3.1
Share-based compensation expense, net of tax		$	9.4			$	16.9			$	6.8

(a) Share-based compensation expense incurred during 2012 and 2011 includes $0.5 and $13.0, respectively, classified as a transformation cost in the Consolidated Income Statement related to the modification of equity awards.

Status of Stock Option and Restricted Stock Shares

A summary of the status of our NQOs as of December 31, 2012, 2011 and 2010 and changes during the years then ended is presented below.

		2012								2011								2010
STOCK OPTIONS		Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price				Shares				Weighted Average Exercise Price
Outstanding – January 1			8.0			$	16.70				3.7			$	85.08				4.0			$	80.58
Granted			0.4				22.80				0.3				115.36				0.4				106.60
Exercised			(3.8	)			15.35				(0.7	)			76.27				(0.6	)			62.90
Cancelled or expired			(0.3	)			17.21				(1.3	) (b)			92.76				(0.1	)			97.56
Outstanding on Distribution Date before Equitable Adjustment			–				–				2.0				88.52				–				–
Outstanding on Distribution Date after Equitable Adjustment			–				–				8.0				16.18				–				–
November/December 2011 Activity:
Granted			–				–				0.7				20.28				–				–
Exercised			–				–				(0.7	)			13.87				–				–
Outstanding – December 31			4.3			$	18.46				8.0			$	16.70				3.7			$	85.08
Options exercisable – December 31			2.9			$	17.10				6.3			$	16.03				3.0			$	83.72

(b) Includes 1.2 shares cancelled in connection with the Distribution of Exelis and Xylem, with a corresponding weighted average exercise price of $92.20.

Share-Based Compensation Summary of Stock Options

The following table summarizes information about ITT’s stock options at December 31, 2012:

		Options Outstanding																Options Exercisable
Range of Exercise Prices		Number				Weighted Average Remaining Contractual Life (in years)				Weighted Average Exercise Price				Aggregate Intrinsic Value				Number				Weighted Average Remaining Contractual Life (in years)				Weighted Average Exercise Price				Aggregate Intrinsic Value
$10-$15			1.4				1.6			$	13.30			$	14.5				1.4				1.6			$	13.30			$	14.5
$15-$20			0.9				3.8				19.85				3.4				0.7				2.8				19.82				2.7
$20-$26			2.0				6.3				21.52				3.9				0.8				4.1				21.51				1.6
			4.3				4.2			$	18.46			$	21.8				2.9				2.6			$	17.10			$	18.8

Weighted Average Assumptions

The following are weighted-average assumptions for 2012, 2011 and 2010:

		2012				November 7, 2011 Grants				2011 Grants Before Distribution				2010
Dividend yield			1.6	%			1.8	%			1.7	%			1.9	%
Expected volatility			34.1	%			39.3	%			24.7	%			27.1	%
Expected life (in years)			6.9				7.0				7.0				7.0
Risk-free rates			1.4	%			1.5	%			3.1	%			3.1	%
Weighted-average grant date fair value		$	6.71			$	6.97			$	29.70			$	29.00

Rollforward of Outstanding Restricted Stock

The table below provides a rollforward of outstanding RSUs and RSAs for each of the previous three years ended.

		2012								2011								2010
RESTRICTED STOCK		Shares				Weighted Average Grant Date Fair Value				Shares				Weighted Average Grant Date Fair Value				Shares				Weighted Average Grant Date Fair Value
Outstanding – January 1			1.4			$	18.55				0.9			$	89.70				0.8			$	88.72
Granted			0.4				22.56				0.3				115.18				0.3				106.50
Lapsed			(0.5	)			15.21				(0.3	)			99.53				(0.2	)			108.88
Cancelled			(0.1	)			20.58				(0.6	)(c)			95.30				–				89.50
Outstanding on Distribution Date before equitable adjustment			–				–				0.3				93.42				–				–
Outstanding on Distribution Date after equitable adjustment			–				–				1.0				17.94				–				–
November/December 2011 Activity:
Granted			–				–				0.4				20.27				–				–
Outstanding – December 31			1.2			$	21.06				1.4			$	18.55				0.9			$	89.62

(c) Includes 0.5 RS cancelled in connection with the Distribution of Exelis and Xylem, with a corresponding weighted average grant date fair value of $95.14.

Number of Outstanding Equity Settled RSUs, Cash Settled RSUs and RSAs

The table below provides the number of the outstanding equity settled RSUs, cash settled RSUs and RSAs as of December 31, 2012, 2011 and 2010.

		2012				2011				2010
Equity settled RSUs			0.9				0.8				0.1
Cash settled RSUs			0.1				0.1				0.1
RSAs			0.2				0.5				0.7

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