Black & Decker 2011 Annual Report Download - page 104

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Following is a summary of the warranty liability activity for the years ended December 31, 2011, January 1, 2011 and January 2,
2010:
(Millions of Dollars)
2011
2010
2009
Beginning balance………………………………………………………….
$ 119.0
$ 66.9
$ 65.6
Warranties and guarantees issued………………………………………….
96.5
88.5
18.5
Liability assumed in the Merger…………………………………………...
9.5
58.2
—
Warranty payments………………………………………………………...
(96.9) (92.8) (21.0)
Acquisitions and other……………………………………………………..
1.0
(1.8) 3.8
Ending balance…………………………………………………………..…
$ 129.1
$ 119.0
$ 66.9
S. CONTINGENCIES
The Company is involved in various legal proceedings relating to environmental issues, employment, product liability, workers’
compensation claims and other matters. The Company periodically reviews the status of these proceedings with both inside and
outside counsel, as well as an actuary for risk insurance. Management believes that the ultimate disposition of these matters will not
have a material adverse effect on operations or financial condition taken as a whole.
The amount recorded for identified contingent liabilities is based on estimates. Amounts recorded are reviewed periodically and
adjusted to reflect additional technical and legal information that becomes available. Actual costs to be incurred in future periods may
vary from the estimates, given the inherent uncertainties in evaluating certain exposures. Subject to the imprecision in estimating
future contingent liability costs, the Company does not expect that any sum it may have to pay in connection with these matters in
excess of the amounts recorded will have a materially adverse effect on its financial position, results of operations or liquidity.
In connection with the Merger, the Company assumed certain commitments and contingent liabilities. Black & Decker is a party to
litigation and administrative proceedings with respect to claims involving the discharge of hazardous substances into the environment.
Some of these assert claims for damages and liability for remedial investigations and clean-up costs with respect to sites that have
never been owned or operated by Black & Decker but at which Black & Decker has been identified as a potentially responsible party.
Other matters involve current and former manufacturing facilities.
The Environmental Protection Agency (“EPA”) and the Santa Ana Regional Water Quality Control Board have each initiated
administrative proceedings against Black & Decker and certain of its current or former affiliates alleging that Black & Decker and
numerous other defendants are responsible to investigate and remediate alleged groundwater contamination in and adjacent to a 160-
acre property located in Rialto, California. The EPA and the cities of Colton and Rialto, as well as Goodrich Corporation, also
initiated lawsuits against Black & Decker and certain of its former or current affiliates in the Federal District Court for California,
Central District alleging similar claims that Black & Decker is liable under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act, and state law for the discharge
or release of hazardous substances into the environment and the contamination caused by those alleged releases. The City of Colton
also has a companion case in California State court. The City of Riverside has a similar suit in California State Court with similar
claims and the same parties. Both of these cases are currently stayed for all purposes. Certain defendants in that case have cross-claims
against other defendants and have asserted claims against the State of California. The administrative proceedings and the lawsuits
generally allege that West Coast Loading Corporation (“WCLC”), a defunct company that operated in Rialto between 1952 and 1957,
and an as yet undefined number of other defendants are responsible for the release of perchlorate and solvents into the groundwater
basin, and that Black & Decker and certain of its current or former affiliates are liable as a “successor” of WCLC. The Company
believes that neither the facts nor the law support an allegation that Black & Decker is responsible for the contamination and is
vigorously contesting these claims.
The EPA has provided to Black & Decker and certain of its current and former affiliates a “Notice of Potential Liability” related to
environmental contamination found at the Centredale Manor Restoration Project Superfund site, located in North Providence, Rhode
Island. The EPA has discovered a variety of contaminants at the site, including but not limited to, dioxins, polychlorinated biphenyls,
and pesticides. The EPA alleged that Black & Decker and certain of its current and former affiliates are liable for site clean-up costs
under CERCLA as successors to the liability of Metro-Atlantic, Inc., a former operator at the site, and demanded reimbursement of the
EPA’s costs related to this site. The EPA released a Proposed Remedial Action Plan in October 2011, which identified and described
the EPA’s preferred remedial alternative for the site. The estimated remediation costs related to this Centredale site (including the
EPA’s past costs as well as costs of additional investigation, remediation, and related costs such as EPA’s oversight costs, less
escrowed funds contributed by primary potentially responsible parties (PRPs) who have reached settlement agreements with the EPA),
which the Company considers to be probable and reasonably estimable, range from approximately $67.5 million to $212.1 million,
with no amount within that range representing a more likely outcome until such time as the EPA completes its remedy selection
process for the site. The Company’s reserve for this environmental remediation matter of $67.5 million reflects the fact that the EPA