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COMMITMENTS AND CONTINGENCIES | 6 Months Ended
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Jul. 02, 2022
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 business. Historically, these proceedings have alleged damages relating to asbestos and 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 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 existing legal proceedings will have a material adverse impact on our financial statements, unless otherwise noted below. Asbestos Divestiture Prior to the divestiture described below, former subsidiaries of ITT, including ITT LLC and Goulds Pumps LLC, which are wholly owned subsidiaries of InTelCo Management LLC (InTelCo), had been sued along with many other companies in product liability lawsuits alleging personal injury due to purported asbestos exposure. On June 30, 2021, the Company entered into a Membership Interest Purchase Agreement (the Purchase Agreement) with Sapphire TopCo, Inc. (Buyer), a wholly owned subsidiary of Delticus HoldCo, L.P., which is a portfolio company of the private equity firm, Warburg Pincus LLC. Under the Purchase Agreement, the Company transferred 100% of the equity interests of InTelCo to the Buyer, effective as of July 1, 2021, along with a cash contribution from the Company to InTelCo of $398. As InTelCo was the obligor for the Company's asbestos-related liabilities and policyholder of the related insurance assets through its subsidiaries ITT LLC and Goulds Pumps LLC, the rights and obligations related to these items transferred upon the sale. In addition, pursuant to the Purchase Agreement, the Buyer and InTelCo have indemnified the Company and its affiliates for legacy asbestos-related liabilities and other product liabilities, and the Company has indemnified InTelCo and its affiliates for all other historical liabilities of InTelCo. This indemnification is not subject to any cap or time limitation. In connection with the sale, the Company and its Board of Directors received a solvency opinion from an independent advisory firm that InTelCo was solvent and adequately capitalized after giving effect to the transaction. Following the completion of the transfer, the Company no longer has any obligation with respect to pending and future asbestos claims. As such, all associated asbestos-related assets and liabilities are no longer reported on the Company’s consolidated balance sheet. The transaction resulted in a pre-tax gain of $88.8. Additionally, the Company recorded tax expense as a result of the reversal of previously recorded deferred tax assets of $116.9, resulting in an after-tax loss of $28.1 recorded in the second quarter of 2021. The following table summarizes our total pre-tax net asbestos-related (benefit).
| Three Months Ended |  | Six Months Ended
| July 2, 2022 |  | July 3, 2021 |  | July 2, 2022 |  | July 3, 2021
Asbestos provision(a) | $ | — |  |  | $ | 12.0 |  |  | $ | — |  |  | $ | 14.4 |
Gain on divestiture before income tax | — |  |  | (88.8) |  |  | — |  |  | (88.8) |
Asbestos-related benefit, net | $ | — |  |  | $ | (76.8) |  |  | $ | — |  |  | $ | (74.4) |
(a)Includes certain administrative costs such as legal-related costs for insurance asset recoveries and transaction costs related to the divestiture of the entity holding legacy asbestos-related assets and liabilities.
Environmental Matters 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 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 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 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 our estimated environmental liability.
For the Six Months Ended | July 2, 2022 |  | July 3, 2021
Environmental liability - beginning balance | $ | 54.1 |  |  | $ | 58.3 |
Change in estimates for pre-existing accruals: |  |  |
Continuing operations | — |  |  | 0.1 |
Discontinued operations(a) | 5.4 |  |  | (0.1) |
Accruals added during the period for new matters | 0.1 |  |  | 1.0 |
Payments | (2.7) |  |  | (6.7) |
Foreign currency | (0.3) |  |  | (0.1) |
Environmental liability - ending balance | $ | 56.6 |  |  | $ | 52.5 |
(a) During the six months ended July 2, 2022, we increased the estimated environmental liability for a former site of ITT by $5.4 and recognized an insurance-related asset of $4.3. The resulting net pre-tax expense of $1.1 has been presented as a loss from discontinued operations within the Consolidated Condensed Statements of Operations. Environmental-related assets, including a Qualified Settlement Fund and estimated recoveries from insurance providers and other third parties, were $14.5 and $12.1 as of July 2, 2022 and July 3, 2021, respectively. We are currently involved with 27 active environmental investigation and remediation sites. As of July 2, 2022, we have estimated the potential high-end liability of environmental-related matters to be $100. 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.

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