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Commitments and Contingencies | 3 Months Ended
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Mar. 31, 2014
Commitments and Contingencies [Abstract] |
Commitments and Contingencies |
Note 15. | Commitments and Contingencies
Asbestos In 1986, we acquired a brake business, which we subsequently sold in March 1998 and which is accounted for as a discontinued operation. When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by the seller of the acquired brake business. In accordance with the related purchase agreement, we agreed to assume the liabilities for all new claims filed on or after September 2001. Our ultimate exposure will depend upon the number of claims filed against us on or after September 2001 and the amounts paid for indemnity and defense thereof. At March 31, 2014, approximately 2,310 cases were outstanding for which we may be responsible for any related liabilities. Since inception in September 2001 through March 31, 2014, the amounts paid for settled claims are approximately $15.2 million. We acquired limited insurance coverage up to a fixed amount for defense and indemnity costs associated with certain asbestos-related claims and have exhausted all insurance coverage. In evaluating our potential asbestos-related liability, we have considered various factors including, among other things, an actuarial study of the asbestos related liabilities performed by an independent actuarial firm, our settlement amounts and whether there are any co-defendants, the jurisdiction in which lawsuits are filed, and the status and results of settlement discussions. As is our accounting policy, we consider the advice of actuarial consultants with experience in assessing asbestos-related liabilities to estimate our potential claim liability. The methodology used to project asbestos-related liabilities and costs in our actuarial study considered: (1) historical data available from publicly available studies; (2) an analysis of our recent claims history to estimate likely filing rates into the future; (3) an analysis of our currently pending claims; and (4) an analysis of our settlements to date in order to develop average settlement values. The most recent actuarial study was performed as of August 31, 2013. The updated study has estimated an undiscounted liability for settlement payments, excluding legal costs and any potential recovery from insurance carriers, ranging from $24.4 million to $37.4 million for the period through 2058. The change from the prior year study was a $2.7 million decrease for the low end of the range and a $4.1 million decrease for the high end of the range. The decrease in the estimated undiscounted liability from the prior year study at both the low end and high end of the range reflects our actual experience over the prior twelve months. Based on the information contained in the actuarial study and all other available information considered by us, we have concluded that no amount within the range of settlement payments was more likely than any other and, therefore, in assessing our asbestos liability we compare the low end of the range to our recorded liability to determine if an adjustment is required. Based upon the results of the August 31, 2013 actuarial study, no adjustment to the asbestos liability was recorded in our consolidated financial statements as the difference between our recorded liability and the liability in the actuarial report at the low end of the range was not material. Legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the updated study, to range from $27.4 million to $48.1 million for the period through 2058. We plan to perform an annual actuarial evaluation during the third quarter of each year for the foreseeable future. Given the uncertainties associated with projecting such matters into the future and other factors outside our control, we can give no assurance that additional provisions will not be required. We will continue to monitor the circumstances surrounding these potential liabilities in determining whether additional provisions may be necessary. At the present time, however, we do not believe that any additional provisions would be reasonably likely to have a material adverse effect on our liquidity or consolidated financial position. Other Litigation We are currently involved in various other legal claims and legal proceedings (some of which may involve substantial amounts), including claims related to one of our divestitures, commercial disputes, product liability, employment, and environmental. Although these legal claims and legal proceedings are subject to inherent uncertainties, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the ultimate outcome of these matters will not, either individually or in the aggregate, have a material adverse effect on our business, financial condition or results of operations. We may at any time determine that settling any of these matters is in our best interests, which settlement may include substantial payments. Although we cannot currently predict the specific amount of any liability that may ultimately arise with respect to any of these matters, we will record provisions when the liability is considered probable and reasonably estimable. Significant judgment is required in both the determination of probability and the determination as to whether an exposure can be reasonably estimated. As additional information becomes available, we reassess our potential liability related to these matters. Such revisions of the potential liabilities could have a material adverse effect on our business, financial condition or results of operations. Warranties We generally warrant our products against certain manufacturing and other defects. These product warranties are provided for specific periods of time of the product depending on the nature of the product. As of March 31, 2014 and 2013, we have accrued $20.4 million and $19.4 million, respectively, for estimated product warranty claims included in accrued customer returns. The accrued product warranty costs are based primarily on historical experience of actual warranty claims. The following table provides the changes in our product warranties (in thousands):
|  | Three Months Ended |
|  | March 31, |
|  | 2014 |  |  | 2013 |
Balance, beginning of period |  | $ | 18,041 |  |  | $ | 17,288 |
Liabilities accrued for current year sales |  |  | 19,191 |  |  |  | 18,356 |
Settlements of warranty claims |  |  | (16,858 | ) |  |  | (16,230 | )
Balance, end of period |  | $ | 20,374 |  |  | $ | 19,414 |
Note 16. | Subsequent Events
In April 2014, we formed a 50/50 joint venture with Gwo Yng Enterprise Co., Ltd., a China based manufacturer of air conditioning accumulators, filter driers, hose assemblies, and switches for the automotive aftermarket and OEM/OES markets. We acquired our 50% interest in the joint venture for $14 million in cash funded by our revolving credit facility. We anticipate that our investment in the joint venture will be accounted for using the equity method of accounting. In addition, in April 2014, we acquired certain assets and assumed certain liabilities of Annex Manufacturing, a privately held company, for approximately $11.5 million in cash funded by our revolving credit facility. Annex Manufacturing, located in Fort Worth, Texas, distributes a variety of temperature control products for the automotive aftermarket. Revenues generated from the acquired business were approximately $22 million for the year ended December 31, 2013, of which approximately 40% of the volume was sold to us. Due to the relatively short period of time from the date of acquisition to the issuance of the accompanying unaudited consolidated financial statements, the initial accounting for the acquisition, including our evaluation of the fair value for significant assets and liabilities, including goodwill and intangibles, is not complete.

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