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Commitments and Contingencies
 12 Months Ended
Dec. 31, 2011
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

Note 12 — Commitments and Contingencies

Lease Commitments

Total rental expense for the years ended December 31, 2011, 2010 and 2009 amounted to $0.8 million, $1.4 million and $1.3 million, respectively. In 2011 the Company entered into a 10 year build-to-suit lease for the new McCook Facility which expires in June 2022 and includes total future minimum lease payments of $14.8 million.

The Company also entered into an 11 year operating lease for the new headquarters which expires in March 2023 and includes total future minimum lease payments of $12.2 million.

 

The Company’s future minimum lease commitments, principally for facilities and equipment, as of December 31, 2011, were as follows:

 

      September 30,       September 30,       September 30,  

Year ended

December 31,

   Operating
Leases		     Build-to-suit
Lease (1)		     Capital
Leases		  
       

2012

   $ 1,170     $ 623     $ 237  

2013

     1,214       1,264       102  

2014

     1,048       1,302       77  

2015

     1,001       1,342       —    

2016

     1,044       1,382       —    

Thereafter

     7,505       8,887       —    
   

 

 

    

 

 

    

 

 

  

Total

   $ 12,982     $ 14,800     $ 416  
   

 

 

    

 

 

          

Less: Interest portion

                     (61 ) 
                   

 

 

  

Liability

                   $ 355  
                   

 

 

  

 

(1)

Relates to the McCook, Illinois distribution center lease under construction.

Litigation, regulatory and tax matters

The Company is involved in legal actions that arise in the ordinary course of business. It is the opinion of management that the resolution of any currently pending litigation will not have a material adverse effect on the Company’s financial position or results of operations.

One of the Company’s subsidiaries, Drummond American LLC (“Drummond”) is under an employment tax examination for the years 2007 and 2008 of the long-standing treatment of its sales representatives as independent contractors. In January 2012, the Company has received a Notice of Proposed Adjustment in the amount of $9.5 million, including penalties, from the IRS challenging Drummond’s position that the sales representatives were independent contractors. Although the Company intends to vigorously defend its position for the treatment of its sales representatives as independent contractors the Company established a liability of $1.2 million as its best estimate of the cost to resolve this matter. An unfavorable outcome of this matter could have a material adverse effect on the Company’s business, financial condition and results of operation.

In August 2008, the Company entered into a Deferred Prosecution Agreement (“DPA”) with the U.S. Attorney’s Office in connection with representatives of the Company improperly providing gifts or awards to purchasing agents through the Company’s customer loyalty programs. Pursuant to the DPA, the Company agreed to a $30.0 million penalty. The Company paid $10.0 million in 2010 and 2009 in accordance with this agreement which expired in 2011.

The Company has identified that it had shipped a limited number of products in violation of certain state environmental regulations. The Company reported its findings to appropriate regulatory agencies. The Company also recalled a limited number of products and is working with state regulators to take appropriate remedial actions to comply with these environmental regulations. At December 31, 2011, the Company had accrued $0.2 million for penalties and expenses related to environmental matters and at this time, the Company cannot determine if any further expenses may be incurred.

The Company has identified certain services and benefits that were not properly reported on information returns with respect to its independent sales representatives. The Company has notified the Internal Revenue Service Employment Tax Division and has established procedures to improve proper information reporting practices. At this time, the Company cannot determine if further actions may result from this review. The Company established a liability of $0.1 million as its best estimate of the cost to resolve this matter.