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Contingencies | 9 Months Ended
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Sep. 27, 2015
Contingencies |
Contingencies | NOTE 9 – Contingencies Certain processes in the manufacture of CTS’ current and past products create hazardous waste by-products as currently defined by federal and state laws and regulations. CTS has been notified by the U.S. Environmental Protection Agency (“EPA”), state environmental agencies and, in some cases, generator groups, that it is or may be a potentially responsible party regarding hazardous substances at several sites either owned, not owned, or operated by CTS. Some sites are Superfund sites such as in Asheville, North Carolina and Mountain View, California. Estimating our degree of responsibility for remediation is inherently difficult. CTS recognizes and accrues for an estimated remediation liability when it determines that such liability is probable and estimable. CTS accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations generally are recognized no later than completion of the remedial feasibility study. Accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. In addition to amounts accrued, remediation expenses are also paid as incurred. Recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is considered probable. As a result of this practice, to provide for certain remedial work expected to commence in 2016 relating to the Asheville site, CTS increased its accrual for remediation and monitoring reserves, as set forth in Note 8. This increased amount reflects the probable costs to remediate environmental conditions at the site for which costs can be reasonably estimated. Based on the current projection modeling of the most probable outcome, CTS recorded an additional non-recurring environmental charge of $14,541,000 in the third quarter of 2015. The charge recorded includes both the interim remediation proposed by CTS and accepted by the EPA and anticipated future remediation costs and monitoring for a final site-wide remediation. As assessments and cleanups proceed, the reserve may be adjusted based on progress made in determining the extent of remedial actions and related costs. In the opinion of management, based upon presently available information relating to all such matters, adequate provision for probable and estimable costs has been made. CTS cannot provide assurance that its ultimate environmental investigation and cleanup costs and liabilities will not exceed the amount of its current reserve. CTS manufactures accelerator pedals for a number of automobile manufacturers, including subsidiaries of Toyota Motor Corporation (“Toyota”). In January 2010, Toyota initiated a recall of a substantial number of vehicles in North America containing pedals manufactured by CTS. The recall expanded to include vehicles in Europe and Asia. The pedal recall and associated events have led to CTS being named as a co-defendant with Toyota in certain litigation in the United States and Canada. CTS is not aware of any legal actions filed in Asia or Europe against CTS at this time. In February 2010, CTS entered into an agreement with Toyota whereby Toyota agreed that it will indemnify, defend, and hold CTS harmless from, and the parties will cooperate in the defense of, third-party civil claims and actions that are filed or asserted in the United States or Canada and that arise from or relate to alleged incidents of unintended acceleration of Toyota and Lexus vehicles. The limited exceptions to indemnification restrict CTS’ share of any liability to amounts collectable from its insurers. Certain other claims are pending against CTS with respect to matters arising out of the ordinary conduct of CTS’ business. In the opinion of management, based upon past experience and presently available information, either adequate provision for anticipated costs has been reserved or the ultimate anticipated costs will not materially affect CTS’ consolidated financial position, results of operations, or cash flows.

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