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COMMITMENTS AND CONTINGENCIES | 6 Months Ended
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Jun. 30, 2015
Commitments and Contingencies Disclosure [Abstract] |
COMMITMENTS AND CONTINGENCIES | 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 employee benefit matters, government contract issues and commercial or contractual disputes and acquisitions or divestitures. We will continue to aggressively defend all such 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 a material adverse impact on our financial statements, unless otherwise noted below. Asbestos Matters ITT, including its subsidiary Goulds Pumps, Inc., has been sued, along with many 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. As of June 30, 2015, there were 43 thousand pending active 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) | 2015 |  | 2014
Pending claims – Beginning | 62 |  |  | 79 |
New claims | 2 |  |  | 2 |
Settlements | (1 | ) |  | (2 | )
Dismissals | (8 | ) |  | (10 | )
Pending claims – Ending | 55 |  |  | 69 |
Pending inactive claims(a) | 12 |  |  | 18 |
Pending active claims | 43 |  |  | 51 |
(a) | Inactive claims represent pending claims in Mississippi filed in 2004 or prior, which have been excluded from our asbestos measurement because the plaintiffs cannot demonstrate a significant compensable loss. As such, management believes these claims have little-to-no value. There were one thousand inactive claims dismissed or settled during the six months ended June 30, 2015. There were no inactive claims dismissed or settled during the six months ended June 30, 2014.
Frequently, plaintiffs are unable to identify any ITT or Goulds Pumps product as a source of asbestos exposure. Our experience to date is that a majority 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 can fluctuate significantly from period to period. ITT expects more asbestos-related suits will be filed in the future, and ITT will continue to 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 of this and other factors, 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. 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 additional costs may be material, 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 statements. Income Statement Costs / Benefit During the second quarter of 2015, the Company changed its asbestos defense strategy and retained a single firm to defend the Company in all asbestos litigation. This long-term strategy will streamline the Company’s management of cases and significantly reduce defense costs. Our agreement with the defense firm is currently limited to a certain set of claims and the remaining claims are expected to be transitioned to the firm within the next four years. Based on the terms of the agreement, the Company adjusted its asbestos liability and related assets and recognized a net benefit of $100.7 during the three months ended June 30, 2015 for the revised estimate of the cost to defend pending claims and claims expected to be filed over the next 10 years. Additionally, 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 additional change in the estimate was warranted for the three months ended June 30, 2015 other than the incremental accrual to maintain a rolling 10-year forecast period and the defense cost adjustment discussed above. The net asbestos charge to maintain a rolling 10-year forecast period was $15.9 for both the three months ended June 30, 2015 and 2014. 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 $670.9 and $746.8 as of June 30, 2015 and December 31, 2014, respectively. The following table provides a rollforward of the estimated asbestos liability and related assets for the six months ended June 30, 2015.
| Liability |  | Asset |  | Net
Balance as of December 31, 2014 | $ | 1,223.2 |  |  | $ | 476.4 |  |  | $ | 746.8 |
Asbestos provision | 36.6 |  |  | 5.3 |  |  | 31.3 |
Defense cost adjustment | (124.2 | ) |  | (23.5 | ) |  | (100.7 | )
Net cash activity | (30.4 | ) |  | (23.9 | ) |  | (6.5 | )
Balance as of June 30, 2015 | $ | 1,105.2 |  |  | $ | 434.3 |  |  | $ | 670.9 |
Current portion | $ | 105.7 |  |  | $ | 102.4 |  |  |
Noncurrent portion | $ | 999.5 |  |  | $ | 331.9 |  |  |  |
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, 2015.
| Liability |  | Asset |  | Net
Balance as of December 31, 2014 | $ | 89.9 |  |  | $ | 7.7 |  |  | $ | 82.2 |
Change in estimates for pre-existing accruals |  |  |  |  |
Continuing operations | 1.1 |  |  | 0.3 |  |  | 0.8 |
Discontinued operations | (2.8 | ) |  | (0.9 | ) |  | (1.9 | )
Net cash activity | (7.2 | ) |  | (0.3 | ) |  | (6.9 | )
Foreign currency | (0.3 | ) |  | — |  |  | (0.3 | )
Balance as of June 30, 2015 | $ | 80.7 |  |  | $ | 6.8 |  |  | $ | 73.9 |
We are currently involved with 52 active environmental investigation and remediation sites. At June 30, 2015, we have estimated the potential high-end liability range of environmental-related matters to be $140. 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 has received a civil subpoena from the Department of Defense, Office of the Inspector General requesting documents pertaining to certain products manufactured by the Company’s Interconnect Solutions segment that are purchased or used by the U.S. government. The Company is cooperating with the request. The inquiry is in the early stages and the Company is unable to estimate the timing or outcome of the matter.

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