Graco 2009 Annual Report Download - page 81

Newell Rubbermaid Inc. 2009 Annual Report
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FOOTNOTE 20
LITIGATION AND CONTINGENCIES
The Company is involved in legal proceedings in the ordinary course of its business. These proceedings include claims for damages arising out of use of the
Company’s products, allegations of infringement of intellectual property, commercial disputes and employment matters, as well as environmental matters.
Some of the legal proceedings include claims for punitive as well as compensatory damages, and certain proceedings may purport to be class actions.
The Company, using current product sales data and historical trends, actuarially calculates the estimate of its exposure for product liability. As a result
of the most recent analysis, the Company has product liability reserves of $47.3 million as of December 31, 2009. The Company is insured for product liability
claims for amounts in excess of established deductibles and accrues for the estimated liability as described up to the limits of the deductibles. All other claims
and lawsuits are handled on a case-by-case basis.
In July 2007, the Company acquired all of the outstanding equity interests of PSI Systems, Inc. (“Endicia”), provider of Endicia Internet Postage. Endicia is
party to a lawsuit against it alleging patent infringement which was filed on November 22, 2006 in the U.S. District Court for the Central District of California.
In this case, Stamps.com seeks unspecified damages, attorneys’ fees and injunctive relief in order to prevent Endicia from continuing to engage in activities
that are alleged to infringe on Stamps.com’s patents.
As of December 31, 2009, 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, 2009 ranged between $10.7 million and
$26.9 million. As of December 31, 2009, the Company had a reserve equal to $15.5 million for such environmental response costs in the aggregate, which
is included in other accrued liabilities and other noncurrent liabilities in the Consolidated Balance Sheets. 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 four long-term (30 year) operations and maintenance CERCLA matters which are estimated at their present value of $9.9 million by
applying a 5% discount rate to undiscounted obligations of $17.1 million.
Because of the uncertainties associated with environmental investigations and response activities, the possibility that the Company could be identified as a
PRP at sites identified in the future that require the incurrence of environmental response costs and the possibility that sites acquired in business combinations
may require environmental response costs, actual costs to be incurred by the Company may vary from the Company’s estimates.
The City of Sao Paulo’s Green and Environmental Office (the “Sao Paulo G&E Office”) is seeking fines of up to approximately $4 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.
Although management of the Company cannot predict the ultimate outcome of these legal proceedings with certainty, it believes that the ultimate resolution
of the Company’s legal proceedings, including any amounts it may be required to pay in excess of amounts reserved, will not have a material effect on the Company’s
consolidated financial statements.
In the normal course of business and as part of its acquisition and divestiture strategy, the Company may provide certain representations and indemnifications
related to legal, environmental, product liability, tax or other types of issues. Based on the nature of these representations and indemnifications, it is not possible
to predict the maximum potential payments under all of these agreements due to the conditional nature of the Company’s obligations and the unique facts and
circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements did not have a material effect on the
Company’s business, financial condition or results of operations.
As of December 31, 2009, the Company had $59.4 million in standby letters of credit primarily related to the Company’s self-insurance programs, including
workers’ compensation, product liability and medical.