Black & Decker 2015 Annual Report Download - page 112

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Following is a summary of the warranty liability activity for the years ended January 2, 2016, January 3, 2015, and
December 28, 2013:
(Millions of Dollars) 2015 2014 2013
Balance beginning of period.................................................................. $ 109.6 $ 121.1 $ 123.2
Warranties and guarantees issued.......................................................... 91.8 98.0 92.9
Liability assumed from acquisitions...................................................... —— 0.1
Warranty payments and currency.......................................................... (96.0)(109.5)(95.1)
Balance end of period............................................................................ $ 105.4 $ 109.6 $ 121.1
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.
In connection with the 2010 merger with Black & Decker, 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 ("PRP"). Other matters involve current and former manufacturing
facilities.
The Environmental Protection Agency (“EPA”) has asserted claims in federal court in Rhode Island against certain current and
former affiliates of Black & Decker related to environmental contamination found at the Centredale Manor Restoration Project
Superfund ("Centredale") 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 alleges that Black & Decker
and certain of its current and former affiliates are liable for site clean-up costs under the Comprehensive Environmental
Response, Compensation, and Liability Act ("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. Black & Decker and certain of its
current and former affiliates contest the EPA's allegation that they are responsible for the contamination, and have asserted
contribution claims, counterclaims and cross-claims against a number of other PRPs, including the federal government as well
as insurance carriers. The EPA released its Record of Decision ("ROD") in September 2012, which identified and described the
EPA's selected remedial alternative for the site. Black & Decker and certain of its current and former affiliates are contesting
the EPA's selection of the remedial alternative set forth in the ROD, on the grounds that the EPA's actions were arbitrary and
capricious and otherwise not in accordance with law, and have proposed other equally-protective, more cost-effective
alternatives. On June 10, 2014, the EPA issued an Administrative Order under Sec. 106 of CERCLA, instructing Emhart
Industries, Inc. and Black & Decker to perform the remediation of Centredale pursuant to the ROD. Black & Decker and
Emhart Industries, Inc. dispute the factual, legal and scientific bases cited by the EPA for such an Order and have provided the
EPA with numerous good-faith bases for Black & Decker’s and Emhart Industries, Inc.’s declination to comply with the Order
at this time. Black & Decker and Emhart Industries, Inc. continue to vigorously litigate the issue of their liability for
environmental conditions at the Centredale site, including the completion of the Phase 1 trial in late July, 2015. The Court in
this initial phase of trial found that dioxin contamination at the Centredale site was not “divisible”, and that Emhart was jointly
and severally liable for dioxin contamination at the Site. The next two phases of trial will address whether the EPA’s proposed
remedy for the Site is “arbitrary and capricious”, and if necessary, the allocation of liability to other parties who may have
contributed to contamination of the Site with dioxins, PCB’s and other contaminants of concern. The Company's estimated
remediation costs related to the 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 PRPs who have
reached settlement agreements with the EPA), which the Company considers to be probable and reasonably estimable, range
from approximately $68.1 million to $139.7 million, with no amount within that range representing a more likely outcome until
such time as the litigation is resolved through judgment or compromise. The Company’s reserve for this environmental
remediation matter of $68.1 million reflects the fact that the EPA considers Metro-Atlantic, Inc. to be a primary source of
contamination at the site. As the specific nature of the environmental remediation activities that may be mandated by the EPA
at this site have not yet been finally determined through the on-going litigation, the ultimate remedial costs associated with the
site may vary from the amount accrued by the Company at January 2, 2016.