Graco 2012 Annual Report Download - page 103

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judgment, and on June 15, 2011, the U.S. Court of Appeals for the Federal Circuit affirmed that judgment. Stamps.com’s petition
for a rehearing before the Federal Circuit panel was denied and Stamps.com has no further right of appeal. A separate case, in
which Endicia and Stamps.com each claimed infringement of different patents, was settled during March 2012 without payment
by either the Company or Stamps.com.
The City of Sao Paulo’s Green and Environmental Office (the “Sao Paulo G&E Office”) is seeking fines of up to approximately
$4.0 million related to alleged improper storage of hazardous materials at the Company’s tool manufacturing facility located in
Sao Paulo, Brazil. The Company has obtained a stay of enforcement of a notice of fine due October 1, 2009 issued by the Sao
Paulo G&E Office. The Company plans to continue to contest the fines.
The Company (through two of its affiliates) has been involved in litigation originally filed in June 2008 in the U.S. District Court
for the Western District of North Carolina with Worthington Industries, Inc. (“Worthington”) over breach of a supply contract and
price increases levied by Worthington after having wrongfully terminated the contract prior to its expiration. In February 2010, a
jury determined that Worthington: (a) breached the supply agreement; (b) illegally traded upon the goodwill of the Company; and
(c) committed deceptive trade practices in violation of relevant laws. The jury awarded damages of $13.0 million to the Company,
and the Company was subsequently awarded an additional $2.8 million in pre-judgment interest and attorneys’ fees. In conjunction
with the sale of the Company’s hand torch and solder business to Worthington, the parties agreed to settle all claims. See Footnote
2 for further details.
Environmental Matters
As of December 31, 2012, the Company was involved in various matters concerning federal and state environmental laws and
regulations, including matters in which the Company has been identified by the U.S. Environmental Protection Agency and certain
state environmental agencies as a potentially responsible party (“PRP”) at contaminated sites under the Federal Comprehensive
Environmental Response, Compensation and Liability Act (“CERCLA”) and equivalent state laws.
In assessing its environmental response costs, the Company has considered several factors, including the extent of the Company’s
volumetric contribution at each site relative to that of other PRPs; the kind of waste; the terms of existing cost sharing and other
applicable agreements; the financial ability of other PRPs to share in the payment of requisite costs; the Company’s prior experience
with similar sites; environmental studies and cost estimates available to the Company; the effects of inflation on cost estimates;
and the extent to which the Company’s, and other parties’, status as PRPs is disputed.
The Company’s estimate of environmental response costs associated with these matters as of December 31, 2012 ranged between
$21.9 million and $25.4 million. As of December 31, 2012, the Company had a reserve of $22.3 million for such environmental
remediation and response costs in the aggregate, which is included in other accrued liabilities and other noncurrent liabilities in
the Consolidated Balance Sheet. No insurance recovery was taken into account in determining the Company’s cost estimates or
reserve, nor do the Company’s cost estimates or reserves reflect any discounting for present value purposes, except with respect
to certain long-term operations and maintenance CERCLA matters, which are estimated at their present value of $16.9 million by
applying a 5% discount rate to undiscounted obligations of $25.1 million.
Two of the Company's subsidiaries, Goody Products, Inc. and Berol Corporation (the “Company Parties”), are among over 300
entities named by Maxus Energy Corporation (“Maxus”) and Tierra Solutions, Inc. (“Tierra”) as third-party defendants in New
Jersey Department of Environmental Protection, et al. (collectively “DEP”) v. Occidental Chemical Corporation, et al., pending
in the Superior Court of New Jersey, Law Division - Essex County. Through the third-party complaint, Maxus and Tierra allege
that releases from two facilities formerly operated by the Company Parties contributed to contamination in the Passaic River and
other bodies of water and seek contribution for certain clean-up and removal costs, as well as other damages for which they may
be found liable to DEP.
In addition, U.S. EPA has issued General Notice Letters (“GNLs”) to over 100 entities, including the Company and Berol
Corporation, alleging that they are PRPs at the Diamond Alkali Superfund Site, which includes a 17-mile stretch of the Lower
Passaic River and its tributaries. 72 of the GNL recipients, including the Company on behalf of itself and the Company Parties,
have taken over the performance of the remedial investigation and feasibility study (“RI/FS”) for the Lower Passaic River. U.S.
EPA continues to evaluate remedial options, the scope and cost of which have yet to be determined. U.S. EPA has also indicated
that it will seek to have the PRPs fund the remedy. The site is also subject to a Natural Resource Damage Assessment.
Given the uncertainties pertaining to this matter, including that the litigation and RI/FS are ongoing, the ultimate remediation has
not yet been determined, the parties have not agreed upon a final allocation for the investigation and any remediation, and the
extent to which the Company Parties may be held liable or responsible is not yet known–it is not possible for the Company to
estimate its ultimate liability related to this matter. Based on currently known facts and circumstances, the Company does not
believe that this matter is reasonably likely to have a material impact on the Company's results of operations because the Company
Parties' facilities are not alleged to have discharged the contaminants which are of the greatest concern in the river sediments, and